Total Takes $8.1 Billion Write-Down -- WSJ
By Sarah McFarlane
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 30, 2020).
French energy giant Total SA is writing down the value of its
oil-and-gas assets by $8.1 billion after lowering its oil-price
expectations in the wake of the coronavirus pandemic.
The company, one of the world's big five oil majors, said
Wednesday the charge mainly related to its Canadian oil-sand
assets, as well as to its liquefied-natural-gas assets in
The write-down comes a day before Total is expected to report a
fall in second-quarter profit and follows similar moves by Royal
Dutch Shell PLC and BP PLC, as the industry grapples with falling
demand and prices amid the pandemic.
Earlier this year, Total revised its financial plan for 2020
based on an oil price of $35 a barrel, down from a previous
assumption of $60 a barrel. Benchmark Brent oil traded Wednesday at
$44.15 a barrel.
Taking account of the lower forecast, Total said it was writing
down the value of the Canadian assets by $7 billion. The company
cited high production costs at its Fort Hills and Surmont projects
that may mean oil will be left in the ground. Total now thinks it
can maintain its current production levels for 18.5 years, rather
than 19 years.
Total also said it won't approve any new projects to increase
the production capacity of the Canadian assets.
Liquefied-natural-gas assets in Australia were responsible for a
further $800 million of the write-down, the company said.
The company said its gearing level, or net debt as a percentage
of total capital and debt, will rise by 1.3% because of the lower
asset values. In April Total's gearing was 25% including
Total's announcement comes at the outset of earnings season for
the world's top five oil companies. Second-quarter profits across
the industry are expected to show deep wounds after the pandemic
decimated energy demand.
Total and Shell are due to report Thursday, followed by Exxon
Mobil Corp. and Chevron Corp. on Friday. BP is scheduled to report
Oil companies quickly cut costs and curbed investments in March,
as oil demand plummeted, and prices followed. At the time, Total
suspended a $2 billion share-buyback program, cut expenditures and
introduced a hiring freeze to conserve cash.
Still, oil majors have avoided cutting dividend payouts to
shareholders, with the exception of Shell, which reduced its
dividend by two-thirds in April. Analysts aren't expecting Total to
cut its dividend when it reports Thursday.
Write to Sarah McFarlane at firstname.lastname@example.org
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July 30, 2020 02:47 ET (06:47 GMT)
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