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TOTAL Expands in Central Asia

BP TOT

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Oil and gas major TOTAL S.A. (TOT - Analyst Report) entered into an agreement with Kulob Petroleum to acquire an interest in Bokhtar PSC in Tajikistan. Bokhtar PSC covers an area of 13,513.6 square miles (35,000 sq kilometers) and is situated on the eastern end of the Amu Darya Basin.

Per the agreement signed with Kulob Petroleum, a subsidiary of Tethys Petroleum, TOTAL will have a 33.33% stake in the area. Similarly, CNODC, a subsidiary of China National Petroleum Corp. (“CNPC”) and Kulob will hold a 33.33% interest each. Tethys Petroleum has already acquired seismic data of the region with first exploration expected to come up by the end of 2014.

TOTAL has been operating in Central Asia since 1990. Significant gas discoveries in the region have kindled TOTAL’s interest in the basin. TOTAL will also acquire another interest in the Tajikistani sector of the Amu Darya Basin and operate it jointly with CNPC. We believe TOTAL’s increasing presence in this high gas content region will help it to capitalize on the growing global use of natural gas.

The clean burning nature of natural gas and government regulation on usage of coal for production of power have to a great extent increased the importance of  the former. Natural gas is now touted to be the “new coal”. TOTAL has been producing gas and oil from its fields spread across the globe. This new acquisition will largely enhance its gas producing capabilities.

We believe the financial strength of TOTAL allows it to make strategic acquisitions and commercially develop its oil and gas fields. During the third quarter earnings release, the company confirmed the commercial viability of the Absheron gas discovery in Azerbaijan and new gas and condensate discovery in the King Lear prospect in the Norwegian North Sea.

TOTAL will gradually develop these prospects in the forthcoming years. Besides, the company also acquired exploration licenses in some other fields. We believe these upstream initiatives will definitely help to boost the total gas production of the company, which stood at 5,680 thousand cubic feet per day (Mcf/d) during the third quarter 2012.

TOTAL S.A. currently retains a short-term Zacks #3 Rank (Hold rating). Another global oil and gas operator, the British major BP Plc. (BP - Analyst Report) also retains a short-term Zacks #3 Rank.

France-based TOTAL 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 across five continents.

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