Total halts Novatek stake bids after MH17
PARIS - Total has stopped buying shares in Russias Novatek the day of the downing of a Malaysia Airlines flight over Ukraine, but that it is still too early to gauge the impact of new sanctions against Russia, the French oil majors top revealed with its second quarter results yesterday.
Total is one of the top foreign investors but it faces a cloud over its future since the downing of the aircraft over Ukrainian territory held by pro-Russian rebels worsened the oil-rich countrys relations with the west and raised the threat of deeper sanctions by the EU and United States.
The oil firm forecast in April that Russia would become its biggest source of oil and gas output by 2020 thanks to its partnership with Novatek and their Yamal LNG project in Siberia.
We stopped buying shares in Novatek the day of the plane accident, considering all the uncertainties that this event could lead to, Chief Financial Officer Patrick de La Chevardiere told reporters in a conference call.
Flight MH17 was downed on July 17 by what Western countries say was a Russian-supplied missile, killing all 298 people on board.
We have not stopped operations on the Yamal project at this stage. We agreed with our partners to take stock of the situation at the end of August, he said during a presentation of the groups secondquarter results.
At end-June, Total owned 18 per cent of Novatek, which has seen one of its shareholders hit by US sanctions. Total had bought a 12 per cent stake in Russias second-largest natural gas producer for $4 billion in 2011 with an option to increase its holding to 19.4 per cent within three years.
De La Chevardiere said the group was not doing business with people on the US and EU sanction lists, although he said he had yet to see the EUs latest list of measures against Russian oil companies, banks and defense firms over Moscows support for rebels in eastern Ukraine, unveiled late on Tuesday.
We need more time to review the consequences of these sanctions. If these sanctions forbid us to work there, we will be forced to stop working, but we cant forget that Russia is a big oil country, De La Chevardiere said.
Russia accounted for about 9 per cent of the groups oil and gas output in 2013.
The $27 billion Arctic Yamal peninsula liquefied natural gas (LNG) project, which plans to export 16.5 million tonnes of LNG a year, also caused some headaches at French oil services firm Technip, which last week cut its margin target for its onshore/offshore unit for this year and next.
Total's London-based rival BP, which makes about a third of its crude oil output in Russia, also warned that further Western sanctions could harm its business there and its relationship with Russian state oil group Rosneft.
In the second quarter of the year, Total said its oil and gas production fell 10 per cent compared to the same quarter a year ago, to 2.054 million barrels of oil equivalent per day (boepd).
The main reasons were heavy maintenance, the deterioration of the security situation in Libya, and the loss of the ADCO concession in Abu Dhabi, which the emirate took over in January and is expected to reaward in 2015.
This year all the maintenance was concentrated on the second quarter, the CFO said, citing work in the North Sea, Nigeria and Thailand.
The same reasons impacted the groups net adjusted profit, which fell 12 per cent year- on- year to $ 3.15 billion, also hit by very weak refining margins, which were less than half the levels of a year ago in the three months to end-June.
We went through moments when margins were negative during the second quarter, we cut production to the technical minimum at some refineries because the more we produced the more we lost money, he said, declining to say which ones.
The CFO said output had hit a bottom, and was now expected to rise as projects such as Laggan-Tormore in the North Sea and Ofon Phase 2 in Nigeria came on stream in the second half of the year.
De La Chevardiere said he would give an update on the groups long-term pro- duction targets, 2.6 million boe/d in 2015 and 3 million boe/d in 2017, at the annual investor day conference in London in September.
But its clear that delays at Kashagan are not good news, he added, saying that the operator did not expect any restart of the giant Kazakh field before 2016.
De La Chevardiere also said Chinas Sinopec had notified Total that it would not buy its Usan field in Nigeria after all, a $2.5 billion deal for a stake in the OML 138 block that the French group had announced in November 2012.
I ignore their reasons. We have launched two days ago the process to find a bank to relaunch the sale process and find a new buyer, he said.
Total proposed a dividend of 0.61 euros per share for the second quarter. Revenue was up 2 per cent to $62.56billion.