Basking in oil above $100 a barrel, surging cash flows, and a debt-to-equity ratio below 20 percent, Total can carry on a spending spree that has helped it build stakes in energy ventures in Russia, Australia, Canada and Uganda.
“We have a very large financial flexibility,” Patrick de la Chevardiere told Reuters, saying Total had earmarked 21 billion euros ($29.81 billion) for deals and capital expenditure in 2011.
La Chevardiere said though that it was still premature to bump up its 50-percent payout policy, based on oil at $80 a barrel, as crude prices remained highly volatile as experienced last week when Brent lost $16 in four sessions.
“I still remember that oil was at $140 in June 2008 and at $34 in December 2008. We live in a world where commodities are extremely volatile so I am being cautious. I am not saying we will not raise the dividend, but today it is premature.”
Total, which has back-up credit lines of $9.8 billion in case another financial crisis closes the credit market spigots, is therefore targeting more deals to fuel an average annual increase of 2 percent in oil and gas output in 2010-15.
La Chevardiere said Total would wait until September to review output growth goals and include the 110,000-120,000 bpd a recent Russian deal has added to its books, as the group still lacks visibility on restarting Libyan operations.
Over the past two years, Total has spent $3.2 billion to build its presence in Canadian oil sands, nearly $1 billion for a 27.5 percent stake in Australia’s Gladstone liquefied natural gas project (LNG), and $1.5 billion for a 33 percent stake in Tullow Oil’s fields around Uganda’s Lake Albert.
Total, the only oil major that comes from an oil-and-gas-poor country, also agreed in March to pay $4 billion for a 12 percent stake in Russian gas company Novatek, with a view to raising that to 19.4 percent within three years.
This purchase will likely be followed by another deal, which la Chevardiere sees for the summer, to take a 20 percent stake in Novatek’s Yamal LNG project along with other partners that the Total executive declined to identify. “Our price is known but Novatek now has to get everyone behind our price,” said la Chevardiere, also shooting down the idea that Yamal could compete with another Arctic gas venture, Shtokman, that Total has joined.
“There are compatible... not competing. There is a clear need for LNG in the world and these two projects can perfectly find their place in the market,” he said.
Last month, Total offered to pay up to $1.4 billion for 60 percent of US solar company SunPower in one of the biggest moves ever by an oil group into the renewable sector.
The deal left some analysts wary about the logic of such a big investment in a non-core sector, a reaction la Chevardiere said was based on oil and gas specialists’ lack of knowledge about the solar industry.
Total will invest 5 billion euros in renewable energies by 2020, Chairman Christophe de Margerie told shareholders on Friday.
“SunPower was not expensive,” la Chevardiere said, estimating that the return on Total’s investment was in the double digits.
He also cast aside worries that the deal was ill-timed as SunPower faces stepped-up competition from rival Chinese solar companies, and uncertainty surrounding support schemes for renewable energy projects by European governments.
“What has hurt SunPower is the lack of access to financing to develop projects during the financial crisis,” la Chevardiere said, adding Total would bring its financial strength, global presence, and research and development to help SunPower expand.
He did not rule out that Total may eventually take full control of SunPower, but said that for now Total wanted to leave SunPower enough autonomy to keep its current management model.
