TOTAL: Short Term Price Revision and Climate Ambition: Total Announces Exceptional 8 B$ Asset Impairments Including 7 B$ in C...
30 July 2020 - 2:55AM
UK Regulatory
TIDMTTA
For the calculation of impairment tests of its assets, Total
(Paris:FP) (LSE:TTA) (NYSE:TOT) set in 2019 a price scenario with a
2050 Brent price of 50$/b, in line with the "well below 2 degC"
scenario of the IEA. This scenario is described in the Universal
Registration Document (note 3 of Chapter 8).
Given the drop in the oil price in 2020, Total decided to revise
the price assumptions over the next years and selected the
following profile for the Brent price: 35$/b in 2020, 40$/b in
2021, 50$/b in 2022, 60$/b in 2023; gas prices have been adjusted
accordingly.
For the longer term, Total maintains its analysis that the
weakness of investments in the hydrocarbon sector since 2015
accentuated by the health and economic crisis of 2020 will result
by 2025 in insufficient worldwide production capacities and a
rebound in prices. Beyond 2030, given technological developments,
particularly in the transportation sector, Total anticipates oil
demand will have reached its peak and Brent prices should tend
toward the long-term price of 50$/b, in line with the IEA SDS
scenario.
The average Brent price over the period 2020-2050 thus stands at
56.8$(2020) /b.
As a result of this short-term price revision, Total recognizes
in the 2(nd) quarter 2020 an exceptional asset impairment charge of
2.6 B$, mainly on Canadian oil sands assets for 1.5 B$ and LNG
assets in Australia for 0.8 B$, both being giant projects with high
construction costs. These limited impacts (less than 2% of Total's
overall assets) reflect the strength of the Group's balance
sheet.
In addition, in line with its new Climate Ambition announced on
May 5, 2020, which aims at carbon neutrality, Total has reviewed
its oil assets that can be qualified as "stranded", meaning with
reserves beyond 20 years and high production costs, whose overall
reserves may therefore not be produced by 2050. The only projects
identified in this category are the Canadian oil sands projects
Fort Hills and Surmont.
For impairment calculations, Total's Board of Directors has
decided to take into account only proven reserves on these 2 assets
-- unlike general practice which considers so-called proven and
probable reserves. This leads to an additional exceptional asset
impairment of 5.5 B$. Consequently, Total will only take into
account for its proven and probable reserves in Canada the proved
reserves. And the proved and probable reserves life of the Group is
thus reduced from 19.0 to 18.5 years. In addition, Total will not
approve any new project of capacity increase on these Canadian oil
sands assets. Finally, still consistent with the Climate Ambition
announced on May 5, 2020, Total decided to withdraw from the
Canadian association CAPP considering the misalignment between
their public positions and the Group's ones.
Overall, the exceptional asset impairments that will therefore
be taken into account in the 2(nd) quarter of 2020 amount to 8.1
B$, including 7 B$ on Canadian oil sands assets alone, impacting
the gearing ratio of the Group by 1.3%.
About Total
Total is a broad energy Group, which produces and markets fuels,
natural gas and low-carbon electricity. Our 100,000 employees are
committed to better energy that is safer, more affordable, cleaner
and accessible to as many people as possible. Active in more than
130 countries, our ambition is to become the responsible energy
major.
* * * * *
Cautionary Note
This press release, from which no legal consequences may be
drawn, is for information purposes only. It contains information
that was privileged until its release. The entities in which TOTAL
S.A. directly or indirectly owns investments are separate legal
entities. TOTAL S.A. has no liability for their acts or omissions.
In this document, the terms "Total", "Total Group" and Group are
sometimes used for convenience. Likewise, the words "we", "us" and
"our" may also be used to refer to subsidiaries in general or to
those who work for them.
This document may contain forward-looking information and
statements that are based on a number of economic data and
assumptions made in a given economic, competitive and regulatory
environment. They may prove to be inaccurate in the future and are
subject to a number of risk factors. Neither TOTAL S.A. nor any of
its subsidiaries assumes any obligation to update publicly any
forward-looking information or statement, objectives or trends
contained in this document whether as a result of new information,
future events or otherwise.
Total Contacts
Media Relations: +33 1 47 44 46 99 l presse@total.com l
@TotalPress
Investor Relations: +44 (0)207 719 7962 l ir@total.com
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SOURCE: TOTAL
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