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Analyst Blog

On April 4, we issued an updated research report on integrated oil and gas company TOTAL Inc. (TOT - Analyst Report). TOTAL stands to benefit from its global presence and its focus on adding natural gas assets to its portfolio. However, TOTAL is exposed to oil and gas prices, which are inherently volatile. Any sustained decline in prices could impact results.

TOTAL, a Zacks Rank #3 (Hold) stock, reported earnings of $1.48 per share in the fourth quarter, missing the Zacks Consensus Estimate by 3.9%.

TOTAL’s presence in over 130 countries, strong financial position and exposure to young, high-yield regions give it one of the best production growth profiles among the oil super majors. As a result, the company’s upstream assets have lower natural decline rates and longer production lives, which give TOTAL a significant competitive advantage over its peers.

In the last few years a major portion of TOTAL’s production came in from acquisitions. But an acquisition driven growth strategy runs its risk. An inability to acquire accretive assets can tell on TOTAL’s growth plans.

The company continues with its systematic investment plans to expand its global footprint. In 2014, TOTAL expects to spend $26 billion in organic investments to develop its  worldwide assets. Some of the development projects worth mentioning are GLNG and Ichthys in Australia, Surmont and Fort Hills in Canada, and the Ekofisk and Eldfisk areas in Norway.

TOTAL competes with the likes of ExxonMobil (XOM - Analyst Report), Chevron Corp. (CVX - Analyst Report) and BP plc (BP - Analyst Report) among others for acquiring assets and licenses for the exploration and production of oil and natural gas as well as for the sale of manufactured products based on crude and refined oil. Increasing competition can impact the company’s sales, finally eating into its margins and market share.

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