The Shareholders’ Newsletter #62 - Spring 2020

Message by Patrick Pouyanné

MESSAGE

Now more than ever, in the face of this unprecedented crisis, your trust and your loyalty claim our commitment.

Patrick Pouyanné,
Chairman and Chief Executive Officer of Total

Dear Sir/Madam, dear Shareholder,

As I write these lines, many governments throughout the world, including the government of France, have enacted confinement measures to combat the coronavirus pandemic (Covid-19).

In my own name and on behalf of all employees of the Group I am keen to assure you of our solidarity in these unprecedented times. Total’s teams, in all the countries in which we operate, are mobilized to provide the energy that our customers so urgently need and, especially, to enable their essential travel.

In addition to this health crisis, there is an oil crisis, arising from the decrease of the demand due to the Covid-19 and also due to the disagreement between OPEC and Russia, in particular, and this has led to a sharp fall in the price per barrel of more than 50% in just a few weeks.

Since the last major drop in oil prices, in 2015-2016, the Group has strengthened its financial foundations in order to prepare for and withstand exceptionally volatile prices like those we are currently seeing. 

Our organic pre-dividend cash breakeven is currently less than $25 per barrel and our gearing at end-2019 is low, at 16.7%. We have also adopted the strict control of our costs and investments. Our production costs per barrel have fallen by 50% since 2014, to $5.4 in 2019. We have reduced the level of organic investment from $26.4 billion in 2014 to $13.4 billion in 2019, even as we continued to grow the company. At the end of 2019, Total was the most profitable of all the majors.

So, your Group is well equipped for this crisis. But we must react and adapt to the new oil prices. We are, therefore, immediately implementing an action plan, with the oil price on the order of $30 per barrel, based on the following three axes:

  • Organic investment cuts of more than $3 billion, ie. more than 20%, reducing 2020 net investments to less than $15 billion. These savings are mainly in the form of short-cycle flexible investments, which can be arbitrated contractually over a very short time period;
  • $800 million of savings in 2020 on operating costs compared to 2019, instead of the $300 million previously announced;
  • Suspension of the buyback program the company announced a $2 billion buyback for 2020 in a 60 $/b environment; it bought back $550 million in the first two months.

With these measures, we are confident in the Group’s capacity to weather the storm.

We must not lose sight of our long-term ambitions because of this crisis. Total is a major player in the current energy transition, and we will continue to diversify the Group’s energy mix pragmatically and sustainably, with the firm belief that the complementarity nature of energies is a source of synergies, value creation and technological progress. That’s the reason why we will maintain in 2020 our budget of investments in low-carbon electricity between $1.5 and $2 billion. 

Now more than ever, in the face of this unprecedented crisis, your trust and your loyalty claim our commitment.

Patrick Pouyanné