Total May Look to North Sea, Africa for $20 Billion in Sales
The French producer said it’s targeting $15 billion to $20 billion in divestitures from 2012 to 2014, and the sales could also include refineries and pipelines. Candidates have been identified and most will come from the exploration and production division, Chief Executive Officer Christophe de Margerie said yesterday, declining to name specific assets.
Total is following BP Plc (BP/) and others in stepping up sales as oil prices hold above $100 a barrel, creating a stronger market for producing assets. De Margerie can use the cash raised to invest in more lucrative projects and drilling for new fields as the company aims to pump 3 million barrels a day of oil and gas in 2017.
“The disposal target is achievable,” said Stuart Joyner, an analyst at Investec Securities Ltd. in London. “They have non-core assets in the North Sea and in peripheral areas close to their big fields in Africa and Latin America. By doing this, they’ll increase the quality of the portfolio on a profit-per- barrel basis.”
The company has outperformed larger European competitors this year, gaining 3 percent in Paris. Royal Dutch Shell Plc (RDSA), the region’s biggest oil company, has dropped 1.5 percent in Amsterdam, while London-traded BP is down 3.2 percent. Total rose 0.5 percent to 40.74 euros today.
Total’s latest asset-sale target, announced during an annual investor conference in London, compares with $15 billion of “finalized” sales in 2010 and 2011, according to figures given in February. A portion of these came from the divestment of shares in French drugs-maker Sanofi.
BP set a target for $30 billion of asset sales to shore up its balance sheet following the 2010 Macondo oil spill off the southern U.S. It later raised that goal to $38 billion by the end of 2013 and has completed about $32 billion of disposals so far, including the sale of Gulf of Mexico deepwater fields for $5.6 billion this month.
Other companies have followed suit. Shell sold about $12 billion in assets in the 18 months to July, while Exxon Mobil Corp. (XOM) boosted second-quarter net income by $7.5 billion with gains from divestitures and tax-related items.
“It seems like a good time to sell things,” said Iain Reid, an analyst at Jefferies in London. “BP led the way on this one, it’s opened the eyes of the other majors. Total has marginal stuff in the North Sea, and then they might look at North or West Africa.”
Total has quickened the pace of deals in recent years as part of a policy to “actively manage” its portfolio of exploration acreage, refineries and pipelines around the world. The Paris-based company agreed last year to sell its stake in the Norwegian Gassled pipeline system, while de Margerie has said he’s studying selling the TIGF network in southern France. It also sold a stake in a Spanish oil refiner and tried to sell the Lindsey refinery in the U.K.
“They definitely will have another look at selling the Lindsey refinery,” according to Investec’s Joyner. “The bounce in refining margins will help, but I’m not sure the market for European refining assets is that robust.”
One focus of the sales plan could be the specialty chemicals division, on which Total executives were quizzed yesterday. These assets include adhesives brand Bostik, rubber- based products maker Hutchinson, as well as Atotech, a business supplying solutions for metal coatings such as chrome.
Total executives are cautious when discussing possible sales of factories or refineries in France following a battle with the government and workers to shut its Dunkirk plant. Protests over the plan to shut the refinery threatened nationwide fuel shortages and resulted in the company having to promise the government it wouldn’t close another one for five years.
To reach the latest target, Total can’t sell $20 billion of assets in the downstream business alone, de Margerie said. Asset sales have become “part of our strategy,” he said.
The oil company said yesterday it expects to increase output by an average of 3 percent a year from 2011 to 2015, compared with an earlier goal of 2.5 percent. It was also the first time Total had given a longer-term target, saying production will reach about 3 million barrels of oil equivalent a day in 2017.
The outlook for cash flow gives the company scope to increase dividend payments and invest in production, de Margerie said. In addition to reorganizing its portfolio, the explorer has pledged to be “bolder” in the search for hydrocarbons.
“I feel better today with the new strategy, the new mood brought to the company, than a few years ago,” de Margerie said. “I’m not scared of the result.”
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