Last week, I wrote an article entitled, "Total Set to Deliver Production and Free Cash Flow Growth." I wanted to follow up on that analysis with a second one (which will be published in two parts) that provides a much more in-depth look at some of the projects that will drive the company's future growth. One excellent further source for information about these growth projects is the company's 2012 Investor Day (PDF) presentation that was given in September of this year.
As I discussed in my previous article, Total (TOT) has the stated ambition and goal of increasing its daily average production to 3 million barrels of oil equivalent per day by 2017. Furthermore, the firm has both a game plan and the assets to achieve this. Total had an average daily production of 2,272 thousand barrels of oil equivalent per day in the third quarter of 2012. If the company achieves a production level of 3 million barrels of oil equivalent per day then it will have increased its production by 32%. This will take place over a period of five years. By growing its production, Total will grow its revenues, profits, and cash flows assuming that oil prices do not decline sufficiently to offset this increased production. The company's growth plans go beyond this timeframe, however. Total has a number of projects in various stages that provide growth opportunities beyond 2017.
One very promising growth asset that Total has is its presence in Angola's Kwanza Basin. I discussed the potential of the Kwanza Basin in a previous article. The Angolan Kwanza Basin is a potentially very rich pre-salt play located off of the Angolan coast that is analogous to the enormous pre-salt deposits located off of the coast of Brazil. In fact, the Brazilian pre-salt and the Angolan pre-salt are both part of the same geologic formation. Total has operator stakes in two Angolan pre-salt blocks and a partnership stake in one additional block.
Source: Total, S.A.
As the map shows, Total is the operator of Blocks 25 and 40 in the Kwanza Basin. The company also has a partner stake in Block 39. Statoil (STO) is the operator of that block and so Total should share in some of that company's opportunities in the block. Total has been performing 3D seismic acquisition studies on 26,424 square kilometers of this acreage over the last year and the company expects to complete that work this year. At that point, the company will embark on a major drilling program in 2013 and 2014 that will involve the drilling of at least four exploration wells. The drilling program may involve the drilling of even more wells. It is unlikely that the development of these pre-salt assets will provide any boost to Total's production in the near term but the already proven resource abundance of the Angolan pre-salt region will ensure that the development of this asset will prove quite valuable to Total and, by extension, its investors by early next decade.
Another one of Total's growth projects can be found nearby off of the coasts of Ghana and the Ivory Coast. Total has stakes in four blocks off of the Ivory Coast and is the operator of two of them. This acreage is very promising. Total believes that it could have the potential to discover billions of barrels of oil in this area.
Source: Total, S.A.
The company's convictions about the potential of this area are not unfounded. Total's leases are located in an area that has seen several large discoveries recently. For example, the Tweneboa and Jubilee discoveries are located right across the border in neighboring Ghana. Tweneboa, operated by Tullow Oil (TUWLF.PK), was confirmed as a major offshore discovery when the second well confirmed the presence of a 350 meter hydrocarbon column between the highest point of the first well and the lowest point of the second well. Tullow Oil's nearby Jubilee field, meanwhile, is estimated to contain between 370 million and 1.8 billion barrels. These are not the only two discoveries that have been made in the area either as the map above shows. These discoveries prove the promise of this acreage and Total may be announcing discoveries on it as the company's exploration projects proceed forward. Should the company make a discovery then it will begin to develop the field. However, the opportunities here are quite long-term due to the time required to develop an offshore oil field.
Total also has a 100% operator stake in the very promising Pelotas Basin located off the coast of Uruguay in South America. The basin is located in an ultra-deepwater region of the South Atlantic. Total describes the bidding process for this acreage as being highly competitive. This is one indicator of the potential of the Pelotas Basin. After all, there would not have been such competitive bidding if oil companies did not have reason to believe that this area has a very high probability of containing oil.
Source: Total, S.A.
Total is the first company to ever drill for oil in this Uruguayan play. The company began performing a 3D seismic acquisition of the area this year and will not begin drilling until 2014. Therefore, this is a much longer-term prospect as well. This play will not be online in time to contribute to Total's growth by 2017 but could contribute to growth beyond that (possibly beginning sometime around the beginning of the 2020s).
Total also has a 40% stake in the Khan Asparuh block located in the Black Sea off of the coast of Bulgaria. The company will be the operator for the drilling and development phases of this growth project. The Bulgarian government awarded exploration and development rigs to the region to a consortium consisting of Total, Repsol (REPYY.PK), and OMV (OMVJF.PK) back in August as part of an attempt to develop the country's untapped resources. The Bulgarian government also cited achieving energy independence and reducing energy prices as secondary goals. Total believes that it could have prospects in the region that are best described as "elephantine." Considering the success that neighboring Romania has seen with its Black Sea exploration program, Total may be correct here. The Khan Asparuh block is located approximately 80 km off of the coast of Bulgaria in the Black Sea. This is an ultra-deepwater block, with some sections of the block located under 2,000 meters of water.
Source: Total, S.A.
This is another project that is unlikely to contribute to short-term growth due to the time needed to develop the block. Total is currently in the 3D seismic acquisition preparation phase of the project. The company will be conducting the seismic acquisition throughout 2013 and 2014. The first exploration well in the block will be drilled early in 2015. The block will thus not be producing by 2017. However, the resource potential here gives Total growth opportunities beyond the five-year timeframe mentioned by Total's growth ambition.
In this article, we looked at a few promising opportunities that Total has in the offshore drilling environment. The next article in this series will take a look at a few of Total's promising onshore opportunities that could serve to grow the company going forward.
Disclosure: I am long STO.