Oil major Total maintains dividend, shares jump

Anglo-Dutch rival Royal Dutch Shell cut its dividend for the first time since World War Two last month, prompting fears that other oil majors would follow suit.

But on Tuesday Total committed to keeping its first interim dividend stable at 0.66 euros per share.

The announcement came as it posted a 35% decline in adjusted net income for the first three months of the year, to €1.78bn, after the price of Brent crude tumbled 21% to $50 per barrel and the price of NBP European gas slumped 51% to $3.1mbtu. The fall in net income was better than analysts had expected, however.

First-quarter cash flow decreased 31% year-on-year to $4.5bn.

Patrick Pouyanné, Total’s chairman and chief executive, said: “The group is facing exceptional circumstances: the Covid-19 health crisis, which is affecting the world economy and creating major uncertainties, and the oil market crisis, with the sharp drop in oil prices since March.

“The group now anticipates 2020 production between 2.95 and 3 mboe/d, a reduction of at least 5% from 2020 forecasts, reflecting the voluntary curtailment measures in Canada, the exceptional quotas announced by Opec+, lower local demand for gas, and the situation in Libya.

“In downstream, plant utilisation rates and sales have been on average 50% below normal since mid-March, with uncertainty about the timing of a return to normal.”

However, Pouyanné said that despite this, Total’s fundamentals remained “solid”, and the board had therefore decided to maintain the dividend. Since the crisis began, Total has reduced net investments by nearly 25% to less than $14bn for the year, cut operating costs by more than $1bn, and last month looked to boost liquidity by issuing $3bn of bonds.

Investors welcome the decision to maintain the dividend, and by 1100 BST, Total’s shares were trading 5% higher at €32.14.

David Madden, market analyst at CMC Markets, said: “In light of the severe fall in the oil price recently, some traders were speculating the company might trim its cash payout as a way of conserving funds.

“Before all the upheaval in the underlying oil market, Total had planned to grow its dividend, but the plunge in energy prices prompted the company to reconsider its policy. In the current climate, an unchanged dividend is seen as optimistic.”

Oil prices have been under intense pressure this year, initially because of a price war between oil cartel Opec and its sometime ally Russia, which lead to a supply glut. A ceasefire meant production curbs were eventually introduced, but by then the Covid-19 pandemic had seen global demand slump. Last month, the price West Texas Intermediate for May delivery plunged into negative territory, as storage started to run out.