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TOTAL (TOT) Steps Down as Operator in Foz do Amazonas Basin

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TOTAL SE (TOT - Free Report) recently announced that it has informed its partners Petrobras (PBR - Free Report) and BP plc (BP - Free Report) about its decision to leave its position as operator in the five exploration blocks, located in the Foz do Amazonas Basin. The blocks are located 74 miles (124 km) offshore Brazil.

TOTAL is yet to come out with the reasons behind this step. However, the company was denied drilling in this environmentally sensitive area by the Brazilian environment regulator Ibama.

TOTAL has informed the National Agency of Petroleum, Natural Gas and Biofuels of this decision. It stated that it will continue to monitoring all regulatory processes on behalf of its partners until a new operator for the block is appointed.

These exploration blocks are referenced as FZA-M-57, FZA-M-86, FZA-M-88, FZA-M-125 and FZA-M-127. Exploration in these fields was opposed after coral reefs have been spotted in the areas the company was planning to drill.

Decision Will Impact Expansion Plan

At present nearly 12.5% of TOTAL’s oil production from Americas region comes from Brazilian holdings. TOTAL’s decision to resign from the role of operator in the Foz do Amazonas Basin in Brazil will definitely impact its expansion plan in Brazil.

In the recent past, TOTAL along with its partners, announced the start-up of the second Floating Production Storage and Offloading (“FPSO”) P-70 of the Lara cluster (Block BM-S-11A), located offshore Brazil. TOTAL and its partners in the Libra Consortium have taken the decision to launch the third phase of the Mero project (Libra block), located in deep offshore Brazil.

TOTAL’s Long-Term Plans

TOTAL is expanding its operation globally through organic means and acquisitions. It strives to be a net-zero carbon emission company by 2050 and has taken steps to achieve the same. TOTAL maintained its planned investment in the range of $1.5-$2 billion in low-carbon electricity generation and is working to expand the LNG portfolio globally.

Zacks Rank & A Key Pick

TOTAL currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Royal Dutch Shell (RDS.A - Free Report) , currently having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Royal Dutch Shell’s long-term earnings growth (three to five years) is currently pegged at 5% and it delivered positive surprise of 52.41%, on average, in the last four quarters. The Zacks Consensus Estimate for 2020 has moved up 21.4% in the past 60 days to $1.02 per share.

Price Performance

In the quarter to date (since Jun 30) period, TOTAL’s shares have outperformed the industry.


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