Total S.A. Offers An Integrated Energy Model

Integrating upstream production with downstream refining and chemicals helped buy-recommended Total (TOT) report solid results for the first quarter 2007 on May 4 that reinforce estimated net present value [NPV] of $80 a share.

At 28%, Total’s NPV is more concentrated on natural gas, all outside North America, than mega cap peers. Weighted natural gas reserves are widely diversified globally. Uptrends in long-term price for both natural gas and oil point to higher value for Total’s upstream business.

Downstream, 22% of NPV, benefits from the strengthening crack spread. An increase in the year over year refining margin balances the decrease in year over year oil price. The startup of the Normandy hydrocracker further demonstrates what Chief Financial Officer Robert Castaigne calls “the success of the integrated model.”

We favor Total stock at a full weighting in our illustrative energy portfolio concentrated on real assets that promise a high return providing clean fuel for global growth.

TOT 1-yr chart:


Originally published on May 4, 2007.

Comments

[Paul Meisel]

I am surprised that this stock hasn't gotten more attention -- only XOM and BP are bigger, it pays a good dividend, and the global diversification help with the weakening dollar.

Disclosure: Long TOT, switched from XOM and COP several months ago.

[East Coast]

Total has had a very nice run since beg of March. My concerns then were on corruption charges and potential public disapproval over the nat gas expansion into Iran, but it seems those have faded in the rearview.