Total suffered its first net loss in five years in the second quarter due to the plunge in crude prices triggered by the coronavirus pandemic, the French oil company said Thursday.
The $8.4 billion loss included $8.1 in writedowns in asset values due to the drop in oil prices, in particular for its oil sands investments in Canada where production costs are high.
But its adjusted net income — a measure that excludes changes in the value of its stocks of oil and exceptional items — remained positive. At $130 million, it was down 96 per cent from the same period last year, however.
“During the second quarter, the Group faced exceptional circumstances: the COVID-19 health crisis with its impact on the global economy and the oil market crisis,” said the company’s chief executive Patrick Pouyanne in a statement.
The lockdowns imposed in many countries to slow the spread of the coronavirus triggered a massive drop in demand for oil, causing prices to plunge.
While crude prices have recovered somewhat as economic activity resumes, oil companies are reporting massive losses as lower prices make it difficult to operate profitably and accounting rules force them to take huge charges to the value of their assets.
Total’s output slid four per cent to 2.85 million barrels per day of oil equivalent.
For 2020, it now forecasts an average daily output between 2.9 and 2.95 million barrels per day, a slight reduction from earlier guidance.
The company’s board of directors decided to maintain an interim quarterly dividend of $0.66 per share, reaffirmed its sustainability at $40 per barrel oil and said that the breakeven point on its energy assets is below $25 per barrel.
The main international oil contract, Brent, was trading at $43.47 on Thursday.
In response to the loss and volatile situation, Total said it aims to cut operating costs by $1 billion and keep investments below $14 billion this year.
However, it reaffirmed ambitions to diversify, including by investing in a giant offshore wind project off Britain and acquiring more residential gas and electricity customers in Spain.