French oil giant Total announced Wednesday that it will reduce its capital expenditure for 2016 and 2017 due to low oil prices.
The oil company said in a statement that its capital expenditure will be trimmed down to between $20 to $21 billion 2016, and somewhere between $17 to $19 billion for 2017.
This amount was $23 to $24 billion in 2015, and $28 billion in 2013, according to the statement.
Total said it also plans to invest of around $500 million per year of capital expenditure to build profitable businesses in new energies.
In addition, the French giant said it is increasing its operational expenditure reduction target by 50 percent, from $2 billion to $3 billion.
By doing so, Total aims to raise its oil output. 'Production is planned to grow by an average of 6-7 percent per year between 2014 and 2017, and by an average of 5 percent per year between 2014 and 2019,' the statement read.
'Main drivers for production growth include 20 major start-ups -- eight of which are in 2015 -- and increasing production efficiency,' it added.
The company noted that it achieved a production increase of 11 percent year on year during the first half of 2015.
Due to low oil prices, which fell around 60 percent since mid-2014, from $115 per barrel in June 2014 to fluctuating around $47-$49 per barrel recently, many oil companies have reduced their expenditures and tried to increase their cash flows.
'Capital discipline, further operational expenditure reduction, and growing production will deliver improving cash flows,' Total said, adding free cash flow will cover its dividends by 2017 assuming that oil prices would average $60 per barrel.
By Ovunc Kutlu
Anadolu Agency
ovunc.kutlu@aa.com.tr