Total S.A. Offers Diversification Away from Declining Dollar

Buy-recommended Total (TOT) offers unlevered appreciation potential of 15% to estimated net present value [NPV] of $100 a share along with diversification away from the declining U.S. currency. Stated in euros, first quarter results released today were close to expectations from three months ago with the exception that refining was lower as it was for the industry. The dollar equivalent would be 13% higher compared to a year ago as the U.S. currency has lost 1% a month in euro value in the past twelve months.

Looking ahead, projected volumes along with current futures prices promise a continuing high level of unlevered cash flow (Ebitda). Projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P) supports NPV. The latest annual report of oil and gas reserves includes 34% concentration in Africa, where French companies have had traditional strength.

Likely success in a shrewdly timed, half billion dollar offer outstanding for oil sands lease holder, Synenco, would add to the company’s Surmont and Joslyn projects in Canada. The strategy seems ratified by a continued uptrend for oil price.

Originally published on May 7, 2008.