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- Total kept the damage limited as its profit fell at a slower rate than the oil price.
- No real surprises here as one simply can’t expect a lower oil price to lead to higher revenues and profits.
- I’d be interested in Total if it dips again, unless I don’t like the strategy of the newly-appointed CEO.
Total: The Strategy Set By Christophe De Margerie To Continue
- TOT reported another solid quarter.
- The new CEO repeated the strategic targets of the group.
- After a period of heavy investment, TOT’s new projects should deliver a significant boost in both production and cash flow and in turn free cash flow.
Total: Story Remains One Of The Most Compelling In The European Sector
- 2014 was the low point for Total in terms of production and cash flow.
- The company is set to start a transformational period of three years where it will deliver significant growth in both production and cash flow.
- An elevated yield and urgency on part of management to improve results make TOT a compelling investment opportunity.
- Total is rumored to have hired Scotiabank to explore a sale of its 17% stake in the Tahiti oil field.
- This is unexpected, although Total had said before it is looking to divest more assets, so I shouldn’t be too surprised.
- The investment thesis doesn’t change for now, unless Total receives much more/less than anticipated.
Update: Total Starts Plan B In Its Exploration Efforts
- Total has convinced Murphy Oil’s Kevin McLachlan to join the company as VP Exploration.
- As the past few years were disastrous for the exploration division, something had to be done and a shake up isn’t really a surprise.
- The investment thesis remains unchanged, but I might change my opinion should Total buy some interesting projects to expand its portfolio.
- Total is in talks with Rubis to sell its 50% stake in the SARA refinery on Martinique.
- This could have been expected, as Total is looking to raise $10B by selling assets next year.
- As Total is a large conglomerate, the investment thesis would not be impacted by the sale of half a small refinery.
Update: Total Will Not Meet Its 2017 Production Target
- Total’s updated guidance is pointing in the direction of a 7% lower production rate, but it reiterates the free cash flow guidance.
- This was unexpected, as I was actually counting on the production increase towards 3 million barrels per day.
- The investment thesis should remain unchanged as long as the company will generate $15B per year in free cash flow.
- Total has received an offer to sell its adhesive subsidiary for $2.25B.
- This shouldn't come as a surprise, as Total has previously announced it was looking to divest some assets.
- The investment thesis doesn't change for now, but I'll have to have a closer look at the lower production expectations.
- French oil major Total has recently updated its cash flow and production outlook through 2017, which wasn't encouraging.
- The company's turnaround has been hit by project delays and asset sales.
- Is it time to give up on this company?
- Morgan Stanley analysts suggest that Total is the global “top pick” as it offers an attractive combination of free cash flow growth and dividend yield.
- The company described 2012-14 as a transition phase that will lead to a better phase during 2015-17 in which the company’s free cash flows are projected to increase.
- As a part of its transition phase, the company introduced a $15 billion to $20 billion asset sale program throughout 2012-14 anticipating an enhancement in free cash flows.
- The upstream projects would offer highly competitive returns and strengthen Total’s position as an industry leader in deep offshore and LNG.
- To enhance its operating cash flows, Total is also working on reducing its capital expenditures and cutting its operating costs.
- TOT has underperformed the wider European oil sector in the last few months.
- Weak cash flow numbers reported in 1H14 played a major role in this underperformance.
- However, 2Q14 was the low point for TOT both in terms of cash flow and production, and both are expected to improve from here on.
First Half Of 2014: Total S.A. Leading The Oil Giants
- Total's 2014 record is better than its peers.
- The dividend yield is attractive, and I believe distributions will grow.
- The company's mid-term outlook is promising.
- We pitch two companies from the oil and gas sector, Chevron and Total, against one another in the latest installment of our Head-To-Head series.
- The article focuses on the relative strengths and weaknesses of Chevron and Total based on business performance and sustainability/dividends/forecasts.
- It ends with discussion of the current valuations of the two companies, and details whether Chevron represents good relative value at current price levels.
Total SA's Ambitious Goals Are A Good News/Bad News Proposition
- Total SA has ambitious goals to increase production, trim spending, improve the downstream ops, and generate substantially better returns in the coming years.
- Total starts this plan with good reserves, solid production costs, and meaningful technical expertise, but a heavy reliance on complex projects does increase execution risks.
- A DCF-based valuation isn't so compelling, but Total scores more favorably on EV/EBITDA.
Total: Increasing Production Volumes And Cutting Costs
- Production volumes are expected to increase by 4% Y/Y.
- Capex at the same time is expected to fall by approximately 8% in 2014.
- Launched a new cost cutting program throughout the company.
Why Total Is Likely To Continue Outperforming Exxon And Chevron
- While capital expenses have greatly escalated for the oil companies in the last few years, Total seems to be better positioned than Exxon and Chevron.
- As Total provides detailed figures for its projected 30% increase in oil production by 2017 and its recent record is on track, it is likely to accomplish its goal.
- Based on Total's projection, we calculated that its earnings per share will increase by about 30% in 2017, which means a compounded annual return of 12% till 2017.
- Given the above and the great difficulties Exxon and Chevron are having in replenishing their oil reserves, Total is likely to continue outperforming Exxon and Chevron.
Total Is A Solid Income Investment After Year-End Results
Mon, Dec. 22, 3:23 PM
- S&P revises its outlook to negative for BP, Royal Dutch Shell (RDS.A, RDS.B) and Total (NYSE:TOT), as it cites “the dramatic deterioration in the oil price outlook” in forecasting still more negative free cash flow in 2015 extending possibly into 2016, given fairly inflexible capital expenditure and high dividends.
- S&P says debt and dividends for Europe's oil majors have increased 50%, leaving them less flexibility in dealing with a cash crunch; BP has an indicated dividend yield of 6.85%, followed by 5.7% for TOT and 5.25% for Shell.
- S&P also says it may cut the ratings on Eni (NYSE:E) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY).
Tue, Dec. 16, 9:11 AM
- Total (NYSE:TOT) says it will delay drilling for oil and gas off Bulgaria's Black Sea coast by at least six months until early 2016 following the fall in global oil prices.
- TOT, operator of the offshore 1-21 Han Asparuh block, says it has cancelled tenders for drilling services in a decision agreed with its partners in the block, Austria's OMV (OTC:OMVJF) and Spain's Repsol (OTCQX:REPYY, OTCPK:REPYF).
- The drilling of a deepwater well in the block is estimated to cost ~€300M ($376M).
Mon, Dec. 15, 5:49 PM
- Canadian heavy crude is trading below US$40/bbl for the first time in five years, just as a surge of 14 new oil sands projects with a combined capacity of more than 266K bbl/day are scheduled to start next year.
- Oil sands projects scheduled to start next year include ConocoPhillips (NYSE:COP) and Total’s (NYSE:TOT) joint 118K bbl/day Surmont project and the 40K bbl/day expansion of Cenovus Energy’s (NYSE:CVE) Foster Creek project.
- Analysts say while oil sands producers may curtail future development, most existing operations will not be shut and those under construction will go ahead because of the investments involved and potential harm to future output; profitability for all but the lowest-cost producers will be squeezed, as Canadian crude produced from oil sands is some of the world’s most expensive to produce.
Fri, Dec. 12, 12:27 PM
- China's Cnooc (CEO -0.9%) says the development of its $2B Kingfisher oil field in Uganda remains on course, and that on-site activity, including test drilling and construction of access routes to the 635M bbl field, are progressing well.
- Tumbling global crude prices have raised concerns that some projects in east Africa may be put on hold; the region accounted for ~25% of new oil and gas discoveries worldwide over the past four years.
- Cnooc co-owns the field with Tullow Oil (OTCPK:TUWLF, OTCPK:TUWOY) and Total (NYSE:TOT).
Thu, Dec. 11, 10:45 AM
- Investors in giant gas export terminals from Australia to Canada are facing the prospect of losing nearly $250B plowed into the projects during the past seven years, as weaker oil prices threaten to wipe out returns.
- Oil-linked pricing means LNG producers stand to get much less revenue than expected on delivery of their first shipments, and oil prices have fallen so low that U.S. shale gas producers with plans to export the usually cheaper fuel to Asia suddenly find themselves facing a much tougher competitive environment.
- LNG prices in Asia have sunk below $10/MMBtu, while most Australian LNG projects would need to sell the commodity for at least $12-$14 to break even; for example, the breakeven point for the $54B Gorgon project under construction by Chevron (NYSE:CVX), Exxon (NYSE:XOM) and Shell (RDS.A, RDS.B), is ~$17.7/MMBtu.
- Other relevant tickers: LNG, TOT, COP, CEO, FCG, GASL, OTCPK:BRGXF, OTCQX:BRGYY, OTCPK:STOSF
Wed, Dec. 10, 12:58 PM
- Energy stocks are slammed across the board as oil prices take another nosedive (I, II), with the losses heaviest on shares of small, U.S.-based oil and gas producers.
- “Financial leverage is being thrown out the window, and everything else is being purged as well,” says Simmons analyst Bill Herbert, who adds that cuts to production budgets in the coming year likely will mean more pain for oil service companies.
- Among the hardest-hit shares: TPLM -15.2%, CRK -12.4%, GDP -11.9%, NOG -9.5%, AREX -8.6%.
- Investors have been less quick to dump shares of integrated oil companies, but today they have been smacked too: XOM -2.8%, CVX -2.9%, COP -2.3%, BP -2%, RDS.A -2.2%, TOT -2.3%.
- Today's worst performers on the S&P 500 include OKE -8.2%, DNR -7.4%, NE -5.6%.
- Service companies also are down: SLB -2.6%, HAL -2.7%, WFT -6.6%, BHI -2%.
- ETFs: XLE, ERX, VDE, OIH, ERY, DIG, DUG, IYE, XES, IEZ, PXI, FENY, PXJ, RYE, FXN, DDG
Mon, Dec. 8, 3:15 PM
- Total (TOT -2.4%) agrees to sell its remaining 10.4% stake in Gaz Transport & Technigaz, the world's no. 1 maker of insulated hull linings for tankers that carry liquefied natural gas, to Singapore-based investment group Temasek.
- TOT reduced its holding in GTT from 30% during the latter's IPO in February; TOT says it will have raised more than $650M overall from the sale of the entire stake.
Mon, Dec. 8, 12:59 PM
- BP (BP -2.3%) is set to cut jobs as part of its latest restructuring efforts, and others are likely to follow suit with Brent now down ~40% since June.
- The ranks employed in the upstream operations of oil and gas companies have continued to rise in recent years, even as production has flatlined or started to fall; at BP, the number of upstream employees rose 17% during 2010-13, and the company's production per upstream employee was nearly a third lower in 2013 than in 2010.
- It is a similar story at other European energy firms: Upstream head count at Total (TOT -2.2%) rose 6% over the same period even as production per head dropped 17%, and Shell (RDS.A -2.6%) reported higher staff numbers after an accounting change while production per member of upstream staff has dropped nearly 20%.
Fri, Dec. 5, 4:30 AM
- Global oil and gas exploration projects worth more than $150B are likely to be put on hold next year as plunging oil prices render them uneconomic, shows data from Oslo-based research firm Rystad Energy.
- With rising costs of production and analysts forecasting oil to average $82.50 a barrel next year, around one third of the spending on a total of 800 oil and gas projects worth $500B, is unlikely to be approved.
- Related tickers: CVX, TOT, STO, BP, RDS.A
Wed, Dec. 3, 7:58 AM
- The plunge in oil prices has erased more than half of Tullow Oil’s (OTCPK:TUWLF, OTCPK:TUWOY) market value since June, and Bloomberg reports that management is now concerned the company could be vulnerable to a takeover approach by a larger oil and gas producer.
- Tullow offers “a significant operating position that would not look out of place in the portfolio of a larger company,” says Societe Generale's David Mirzai, adding that the drop in oil prices “would certainly make it a lot easier to win the investor base around than in previous years.”
- Total (NYSE:TOT), Cnooc (NYSE:CEO) and Exxon (NYSE:XOM) would be among logical bidders since they’ve expressed interest in African assets before, BMO says, adding that a buyer would not need to contend with obstacles such as a poison pill or dual-class stock structure.
Mon, Dec. 1, 11:58 AM
- Marathon Oil (MRO -1.7%) says it discovered significant amounts of oil and natural gas in the Kurdistan region of Iraq.
- A drillstem testing program at the Jisik-1 exploration well yielded a sustained flow rate of 6,100 bbl/day of oil, and multiple non-associated gas zones flowed at a combined rate of 10M-15M cf/day.
- MRO is operator of the Harir block with a 45% stake, while Total (TOT +0.4%) owns 35% and the Kurdistan Regional Government holds 20%.
Tue, Nov. 25, 1:01 PM
- Total (TOT -1.2%) will face trial in France over claims of corruption related to Iranian contracts dating from the 1990s and early 2000s, the Paris prosecutor’s office says.
- TOT agreed last year to pay $398M to settle U.S. criminal and civil allegations that it had paid ~$60M in bribes to win oil and gas contracts in Iran; at the time, the Paris prosecutor recommended that TOT and its now-deceased CEO Christophe de Margerie be brought to trial.
- The company is now facing trial in France for similar issues; TOT last year said it hoped the U.S. fine would draw a line under the issue and that it had “not committed any offense under applicable French law."
Mon, Nov. 24, 12:29 PM
- Societe Generale analysts believe there is a real possibility of even lower oil prices, and if that occurs the firm recommends “bottom fishing” in European oil majors.
- The sector offers more sustainable dividends than in the last oil price crash, as well as stronger balance sheets and liquidity, and reasonable valuations after the recent correction, the firm says, noting that in the 2009 crash, only the three supermajors in Europe - Royal Dutch Shell (RDS.A, RDS.B), BP and Total (NYSE:TOT) - maintained dividends unchanged, while the other six all cut them.
Fri, Nov. 21, 12:59 PM| Comment!
Thu, Nov. 20, 5:58 PM
- It’s time for the medium-term investor to start buying the biggest of big oil companies, HSBC says, as the market seems to have capitulated on the sector.
- HSBC views BP and Total (NYSE:TOT) as clearly the cheapest of the oil supermajors, with share price discounts to sum-of-the-parts valuation for BG Group (OTCPK:BRGXF, OTCQX:BRGYY), Statoil (NYSE:STO) and Repsol (OTCQX:REPYY, OTCPK:REPYF); Exxon Mobil (NYSE:XOM) still trades at small premium to the SoP valuation, and the firm likes Chevron (NYSE:CVX), which was penalized in its valuation by its ongoing capital intensity in 2017.
- The stocks also offer average prospective dividend yields of 5%-plus for 2015, and the dividends look robust as they are supported by strong balance sheets, more active asset disposal programs, and strong new project cash margins.
Thu, Nov. 20, 8:11 AM
- Royal Dutch Shell (RDS.A, RDS.B) says it has sold its stake in a set of oil wells and processing plants in Nigeria’s Niger Delta to locally owned Newcross Exploration for ~$600M.
- Shell says it sold its 30% stake in Oil Mining Lease 24, along with smaller shares owned by Total (NYSE:TOT) and Eni (NYSE:E).
- Shell has struggled in the area with oil theft and other security issues.
TOT vs. ETF Alternatives
Total SA is an integrated oil and gas company. It explores and develops oil and gas properties, liquefied natural gas, petrochemicals and specialty chemicals. It is also engaged in trading and shipping of crude oil and petroleum products.
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