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Renowned worldwide oil and natural gas exploration and production company, Total SA ( TOT - Analyst Report ) signed an agreement with the Bulgarian government for exploration prospects in the offshore Khan Asparuh Block in the Black Sea.
The company will be the major operator in the concerned play with 40% ownership. It has inked a deal with two other European companies -- Austria’s OMV Group and Spanish company Repsol S.A. -- to work on the permit with stakes of 30% each.
The Khan Asparuh Block stretches for 5490.37 square miles (14,220 sq. km) and is situated 49 miles (80 kilometers) offshore in the Black Sea with water depths in the range of 328 feet (100) meters to 656 feet (200) meters. The Khan Asparuh is a natural gas rich play and, according to preliminary estimates, it has an output capacity of 500 billion cubic feet (“Bcf”).
With increasing popularity of natural gas across the globe, especially in the US, we believe the current exploration contract in the Black Sea will accentuate Total’s growth prospects. A projected gradual rise in natural gas prices in the US markets will also boost Total’s top-line results.
Total periodically engages in strategic acquisitions to expand its global asset base and propel its growth momentum. Recently, Total’s Philippines subsidiary acquired a 75% stake in the offshore Block SC56 located in the Sulu Sea. The company also acquired a 35% interest in two exploration blocks, Harir and Safen, from Marathon Oil Corporation ( MRO - Analyst Report ) in Iraq.
The company’s decision to increase its interest in the Ichthys liquid natural gas ("LNG") project in Australia will enable it to reap substantial benefit from the increasing demand for LNG in Asia.
However, the stalemate in the European markets is expected to keep natural gas prices under leash. Besides, geo-political turmoil, unfavorable movement in currency and unplanned rig accidents could offset potential growth catalysts.
Overall, we believe the company’s aggressive exploration strategies and diversified operations will fetch lucrative returns in the future. This is reflected in its $2.5 billion exploration investment plan for 2012.
The Zacks Consensus Estimates for the third quarter and full-year 2012 currently stand at $1.70 per share and $6.75 per share, respectively.
Based in France, TOTAL SA is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations spanning five continents.
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