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Total to Use Asset-Sale Proceeds for Dividend, Rules Out M&A

Total SA (FP), the French energy company selling assets in France and Nigeria, will use the proceeds to pay dividends and develop oil and gas ventures as it rules out acquisitions.

“No more acquisitions, we have plenty of reserves to develop,” Chief Executive Officer Christophe de Margerie said today at a press conference in Paris. “We are full of resources for the long term.”

Total’s focus will be on payouts to shareholders, part of a “strong dividend policy,” while investment to develop its 40 years’ worth of resources will “grow the company,” he said. Total kept the third-quarter dividend unchanged at 59 euro cents (77 U.S. cents) a share when it reported earnings in October.

The French oil company follows BP Plc (BP/) and other energy producers in expanding asset sales to bolster cash flow while shifting the focus of investment. Project development will center on the company’s more lucrative ventures, while exploration drilling may help it achieve a production target of 3 million barrels of oil and gas a day in 2017.

In recent years, Paris-based Total has embarked on riskier exploration in frontier areas such as Ivory Coast, Kenya and the so-called pre-salt geological layers off Angola. To develop current and future projects, de Margerie has pushed ahead with what the company has called “active” portfolio management.

Nigeria Disposal

As part of portfolio changes, Total has agreed to sell a 20 percent stake in a field off Nigeria to China Petrochemical Corp. (1314) in a $2.5 billion deal announced last month. It’s also selling a network of gas pipelines and storage facilities in southwestern France that may fetch about 2.5 billion euros.

“We need to be more aggressive in the way we buy and sell,” de Margerie said today. Total has suffered from “too much of a tendency to keep everything. We can also sell.”

The company plans to complete $15 billion to $20 billion of divestments from 2012 to 2014. Most will come from the exploration and production division, the CEO has said.

The explorer is investing in projects from shale drilling in the U.S. and Argentina to oil sands in Canada, a refinery in the Middle East and offshore gas projects in Australia, where de Margerie said costs are soaring.

“Years ago it was considered paradise on earth and everybody was telling you to go to Australia,” he said. “Now suddenly it’s hell, due to prices, costs.”

Australian Gas

The company is a partner in the Inpex Corp.-led Ichthys liquefied natural gas project in northern Australia and owns a stake in the $18.5 billion Gladstone venture operated by Santos Ltd. (STO) in the northeastern state of Queensland. The projects are among seven LNG ventures under development in the country.

While Australia has more than $180 billion of LNG projects going ahead and may surpass Qatar as the largest exporter of the fuel by 2020, the industry faces increasing supply competition from North America and rising construction expenses.

“Costs in Australia have always been higher than elsewhere,” de Margerie said. “The boom in costs we have seen recently is becoming too high.”

While Total doesn’t see further overruns in budgets for Ichthys and Gladstone, “we have to be careful,” he said.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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