BP's new CEO recently gave a flashy presentation on its plan to set a course to "net zero" by 2050. Compared to BP's promises however, French supermajor Total (TOT) already has in place a very strongly positioned portfolio to meet the energy transition. Total's portfolio is similar to Shell's, except it has a lower cost base and a higher dividend yield. Total's deal with Adani gas last year gives it a very strong exposure to the growing gas market in India. This deal compliments Total's existing long held renewables and battery investments. As an energy stock, Total's investment case is very strong.
2019 Results
At the company's recent 2019 results presentation, aside from a dramatic video of an equipment failure at an oil rig offshore Angola - seemed to be a good metaphor for the challenges facing the industry now and, in the future - management focused on two areas that The Global Investor believes will dominate the debate for the energy sector. These issues are the modernization of the existing business through the deployment of digital techniques, and how a low carbon business can be grown profitably at scale.
Regarding digital, Total is still in the early stages meaning there's potential upside to its current $1.5bn productivity ambition. In terms of low carbon, Total is already making £300m of cashflow from its clean businesses and that's very encouraging and shows why Total is in the lead. Total's early entry into clean energy is paying off and delivering better than expected results.
Most institutional investors need exposure to the energy sector, for benchmarking reasons, but with environmental, social and governance demands growing every day in the markets, investors are dumping oil & gas exposures as much as they can, as shown by the fact that energy was the worst performing stock market sector in 2019. Total's renewables business
