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After Shell, Total has just announced an economic plan to deal with the plunge in prices, accelerated by the extension of the coronavirus. The French oil giant will, like its competitors, cut into its investments.
For the big oil companies, it is not only a question of organizing work to avoid the spread of the virus, but also of absorbing financial losses as quickly as possible. With oil that has gone in fifteen days from 6 dollars a barrel to 25, the French group Total will have to fill a hole of 9 billion dollars. This corresponds to half of the investments or all of the dividends paid to the shareholders.
Three levers will be used, detailed CEO Patrick Pouyanné in a video message to employees. Investments will be cut by $ 3 billion, to a cap of less than $ 15 billion. Total will stop buying back its shares, which will generate 1.5 billion more savings. And lower operating costs by $ 400 million. Recruitments are frozen until further notice.
Exxon project postponed in Mozambique
The French oil giant is of course not the only one to redo its accounts. The Anglo-Dutch giant Shell also cuts in its investments, reduced from 25 to 20 billion or less. The British BP, very present in the United States, could also reduce the airfoil by 20%, including in shale oils. American Chevron also announces spending cuts. Its American competitor ExxonMobil, when it had forecast an increase in investments by 2025, should postpone its liquefied natural gas project in Mozambique.
The 2014 crisis seems to be repeated for the oil companies. Such a brutal crisis if we consider the fall in prices. But which comes after the economic plans already led by the majors. At Total, emphasizes its CEO, investments are half as heavy as in 2014. Breakeven, that is to say the break-even point, is no longer at 100 dollars per barrel, but below 25 dollars, the current price level. The cost of producing a barrel is 5 dollars against 10 at the time. And the debt is twice lower, which allows the French oil giant to borrow to finish plugging the breach, even if it is huge.