Screengrab of Chief Executive Patrick Pouyanne in a video message to his staff last week.
Photo: Total SAFrench energy giant Total SA will immediately cut expenditures, trim returns to shareholders and freeze recruitment as the company combats the ravages of an oil-price rout and a demand-sapping coronavirus pandemic, Chief Executive Patrick Pouyanne told staffers last week in a video message seen by The Wall Street Journal.
The austerity measures at the fourth largest Western oil company will amount to about $5 billion, Mr. Pouyanne said. Total also plans to borrow $4 billion to make up for an expected $9 billion shortfall created by lower oil prices.
The shortfall is roughly equivalent to the amount Total spends on dividend payments to shareholders, Mr. Pouyanne pointed out in the video.
The company declined to comment.
Oil companies are reeling after a double whammy from the coronavirus hitting global demand for crude while a Saudi-Russian price war creates excess supply. Oil prices have fallen by more than half since the beginning of the year to below $30 a barrel. Total’s share price has halved since the start of the year, in line with other major oil companies.
Earlier this month, Houston-based Occidental Petroleum Corp. slashed its spending by a third and cut its quarterly dividend, while Italy’s ENI SpA also cut spending and suspended its share buyback program.
Speaking via a video broadcast to staff on Thursday, Mr. Pouyanne said the actions were necessary given that oil demand is likely to fall by 6 million barrels a day—or 6%—in April. Combined with an expected increase in production from Saudi Arabia and other OPEC members, there would be an excess of oil supply in a lower demand market, he said.
The company has set up a “crisis cell” headed by Denis Favier, Senior Vice President, Security, and its executive committee have been communicating digitally, Paris-based Mr. Pouyanne said on the video.
Total is one of France’s largest private employers. The country has the seventh highest number of coronavirus cases globally as of Sunday, according to the Johns Hopkins University Coronavirus Resource Center. The French government has introduced strict measures to limit its population’s movements.
Total’s revised financial plan for 2020 is based on an oil price of $35 a barrel, down from its previous assumption of $60 a barrel, Mr. Pouyanne said. Benchmark Brent oil prices closed at $27.21 a barrel on Friday.
The company will focus its cuts on exploring for and producing oil and gas, where spending was reduced by $2.5 billion, while protecting the planned $1.5 billion to $2 billion investment in low-carbon electricity.
“I want us to continue developing digital and new energies, to safeguard our future,” said Mr. Pouyanne.
Other investment cuts included $300 million in gas, renewables and power, $300 million in refining and chemicals and $200 million in marketing and services. The firm also doubled its ambitions to reduce operating costs by $800 million, instead of the previous goal of $400 million.
By halting this year’s $2 billion share buyback program the company will save $1.5 billion.
Mr. Pouyanne reiterated Total’s commitment to the transition to lower-carbon energy, saying the firm would now target reducing its emissions to 20 million tons by 2025, from a previous aim of 40 million tons. Total’s carbon emissions from its operations were 46 million tons in 2015.
“The CO2 issue is not diminished by this focus on the short term,” said Mr. Pouyanne.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
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