Total Hires New Exploration Chief After Oil Finds Prove Elusive

Total Hires New Exploration Chief

Total SA (FP) said it plans to overhaul exploration after an almost four-year push by Europe’s second-biggest oil company for big new finds was “unsuccessful.”

Total hired Kevin McLachlan as new head of exploration, charged with reassessing the company’s drilling strategy, Chief Executive Officer Christophe de Margerie told analysts at an investor day in London. McLachlan comes from Murphy Oil Corp.

“We need a complete reassessment of what happened” to avoid more “disappointment,” de Margerie said.

Total unveiled in early 2011 plans to be bolder by drilling in areas considered riskier that had a chance of reaping bigger rewards. The company, based outside Paris, spent more than $10 billion as it sought finds that would help boost production.

“We have been more successful in acquiring new discoveries than making them,” Chief Financial Officer Patrick de La Chevardiere told journalists today.

Total today also announced cuts in production targets for the next three years and a drive to reduce costs and sell more assets. The company hasn’t decided whether the exploration budget will be decreased next year, de Margerie said.

Exploration spending this year was stable at $2.8 billion for 60 wells compared with 2013. The figures were $2.5 billion in 2012 and $2 billion the prior year. Total today highlighted 11 key wells planned for 2015 including off Angola, Brazil and in the Gulf of Mexico.

Tullow Oil

While peers have struck resources off Africa, Europe and the Americas, Total has mostly been forced to pursue acquisitions and alliances to access new reserves. The company bought a stake in Tullow Oil Plc’s discoveries in Uganda and forged an exploration venture with smaller competitor Cobalt International Energy Inc. in the Gulf of Mexico.

While Eni SpA (ENI) and Statoil (STL) have had finds off Africa and the Americas, respectively, Total reported empty wells in the Gulf of Mexico and off French Guiana. The company instead has won an auction for Brazil’s Libra field in October and bought a stake in gas discoveries in Papua New Guinea in December.

“Frankly the results have been disappointing,” Arnaud Breuillac, head of exploration and production, told analysts today. “There have been small discoveries but we haven’t been able to find the elephant that we’ve been looking for.”

Total will be looking to McLachlan to “reorientate” the company’s exploration strategy, Breuillac said.

Pump Prices in U.S. Fall to Lowest Since February

Gasoline prices at U.S. pumps may decline further from a seven-month low as falling crude costs and less stringent fuel regulations boost supply, according to Lundberg Survey Inc.

The average price of regular gasoline slid 8.9 cents in the two weeks ended Sept. 19 to $3.3741 a gallon, the lowest since Feb. 7, according to the survey, which is based on information obtained at about 2,500 filling stations. Prices are 14.66 cents lower than a year ago and may drop by a few more cents, the Camarillo, California-based researcher said.

U.S. crude prices have dropped by more than $10 a barrel since reaching this year’s peak in June. Refineries ran at 93 percent of capacity in the week ended Sept. 12, the most for this time of year since 2006, taking advantage of rising oil production from shale formations. Ethanol futures have dropped by half since early April, encouraging blenders to mix more of the biofuel into gasoline.

“In this period, oil prices did migrate a little further South,” Trilby Lundberg, the president of Lundberg Survey, said in a telephone interview. “Plus, U.S. refiners slashed their wholesale gasoline prices and were aided in this by lower cost winter blend formulations affecting most of the country and a crash in ethanol prices.”

Retail gasoline is the lowest for the time of year since 2010 as refiners take advantage of cheap, domestic crude to run at the highest rates in eight years.

Refinery Rates

Plants processed 16.3 million barrels of oil a day in the week ended Sept. 12, a seasonal record in Energy Information Administration records dating back to 1989. Refinery inputs reached an all-time high of 16.6 million barrels a day in July.

West Texas Intermediate crude, the U.S. benchmark priced in Cushing, Oklahoma, dropped 88 cents, or 0.9 percent, to $92.41 a barrel on the New York Mercantile Exchange in the two weeks to Sept. 19 and fell 89 cents to settle at $91.52 today. Prices touched $107.73 a barrel June 20.

“Lower crude oil prices have been the main input over these 13 weeks of pump price-cutting,” Lundberg said. “However, in the latest two weeks, the crude oil price declines were not as dramatic as it had been.”

The higher production is coming as consumption declines seasonally after the end of summer, typically the peak demand period. Over the past four weeks, the amount of fuel supplied to the market was 8.98 million barrels a day, up 0.4 percent from a year earlier and down from 9.2 million at the end of May.

Ethanol Drops

October ethanol futures were trading at $1.635 a gallon on the Chicago Board of Trade, after the front-month contract touched $3.578 April 1. Ethanol can make up as much as 10 percent of a barrel of gasoline.

The highest price for gasoline in the lower 48 states among the markets surveyed was in San Francisco, at $3.79 a gallon, Lundberg said. The lowest was in Jackson, Mississippi, where customers paid an average $3.03 a gallon. Regular gasoline averaged $3.58 a gallon on Long Island, New York, and $3.70 in Los Angeles.

Gasoline futures on the Nymex climbed 2.8 cents, or 1.1 percent, to $2.6114 a gallon in the two weeks ended Sept. 19.

Gasoline stockpiles fell 1.64 million barrels, or 0.8 percent, in the seven days ended Sept. 12 to 210.7 million, EIA data show. Demand over the four weeks ended Sept. 12 slipped 0.2 percent to 8.98 million barrels a day, the lowest since July.