Total eyes stable oil, gas output in 2021 after OPEC+ cuts hit Q4 production

Total expects to hold its oil and gas production flat in 2021, after OPEC+ cuts, field declines, and asset sales saw its output shrink 9% year on year in the fourth quarter, the French energy major said Feb. 9.

Reporting stronger than expected fourth-quarter earnings, Total said its production averaged 2.84 million b/d of oil equivalent in the period.

With production volumes in Libya now recovering, however, Total said it expects production to be stable this year compared with 2020, when it pumped an average of 2.87 million boe/d.

Underlining plans to accelerate its transformation into an integrated energy company, Total said it plans to change its name to TotalEnergies to reflect its ambition to transition to carbon neutrality.

“2020 represents a pivoting year for the group’s strategy with the announcement of its ambition to get to Net Zero, together with society,” Total’s CEO Patrick Pouyanne said in a statement. “The group affirms its plan to transform itself into a broad energy company to meet the dual challenge of the energy transition: more energy, less emissions.”

It said it plans to propose the new name to its shareholders at its annual general meeting on May 28.

Like many of its European rivals, Total has signaled a major boost in spending on renewable energy in the coming years as part of its strategy to shift to cleaner, lower-carbon fuels.

The company, which has said it expects global oil demand to peak in the 2030s, last September announced plans to grow its overall energy production by a third in the next decade, with half the growth coming from LNG and half from electricity, mainly renewables.

With a shift in focus to cleaner, low-carbon energy, however, it said it expects its oil product sales will be reduced by almost 30% in the same timeframe.

The company expects its energy sales mix to be 50% gases, 30% oil products, 5% biofuels and 15% electrons by 2030, compared with 55% oil products, 40% gas and 5% electrons in 2019.

Uncertain oil market
In the near term, Total said the global oil market outlook remains “uncertain” and dependent on the recovery of global demand, which is affected by the COVID-19 pandemic.

Citing the ongoing market uncertainties, Total said it expects net investments of $12 billion in 2021, down from nearly $13 billion in 2020, but up from previous guidance of “less than” $12 billion. It said a fifth of the spending will go to its renewables and electricity division this year.

Total said it continues to see profitable growth in LNG, with sales expected to increase by 10% in 2021 compared with 2020, notably due to the ramp-up of Cameron LNG in the US. Last year, its LNG sales rose by 12% thanks to the startup of three trains at Yamal LNG in Russia and Ichthys LNG in Australia and an increase in trading activity.

Downstream, Total said it sees European refining margins remaining “fragile”, with low demand for jet fuel weighing on the recovery of distillates.

“However, thanks to the resilience of marketing and services, the group expects downstream to contribute more than $5 billion of cash flow in 2021, assuming refining margins of $25/mt,” Total said.

Total, Europe’s biggest refiner, saw its average refining margin recover to positive territory during the fourth quarter after turning negative for the first time in more than a decade when demand for fuels collapsed due to coronavirus lockdowns.

Total’s “variable cost margin” for its European refineries averaged $4.60/mt, or about 63 cents/b, in the fourth quarter, compared with minus $2.70/mt in the previous quarter and down from $30.20/mt in the year-earlier period, it said.

Refinery throughput volumes fell by 16% in the quarter compared to 1.26 million b/d in the previous year, as fuel demand remained depressed due to the pandemic which led to the economic shutdown of its Donges refinery due to weak margins. Throughputs rose, however from 1.21 million b/d in the previous quarter.

Earnings beat
Total reported adjusted net earnings of $1.3 billion for the quarter, 59% lower than the year-ago period but up from $848 million in Q3 helped by stronger oil prices. The Q4 result beat consensus forecasts of $1.13 billion by about 15%, according to S&P Global Market Intelligence.

“The… results rebounded from the previous quarter in a context where oil prices stabilized above $40/b thanks to strong OPEC+ discipline, and where gas prices rose sharply in Europe and Asia, but where refining margins remained depressed, still affected by low demand and high inventories,” Pouyanne said.

For the year, Total posted an adjusted net income of $4.06 billion, down 66% on 2019, but supported by 26% lower capex, $1.1 billion in cost savings, and an organic cash breakeven of $26/b.
Source: Platts

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