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TotalEnergies (TOT) Expands LNG Operation Via Acquisition

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TotalEnergies announced that it has entered into an agreement to acquire 10% of Arctic Transshipment LLC from Novatek. The acquisition will further expand TotalEnergies’ footprint in the global LNG space. Arctic Transshipment owns and will operate two liquefied natural gas (LNG) transshipment terminals being built in the Murmansk and Kamchatka regions of Russia.

Benefits From Acquisition

These terminals will provide export logistics services, including to the Arctic LNG 2 project under construction, and will each initially include a 360,000 m3 floating storage unit and two ship-to-ship transfer kits.  

TotalEnergies holds a 20% stake in Yamal LNG and 10% in Arctic LNG 2, a project currently under construction and on track to deliver its first LNG cargo in 2023. Acquisition of interest in these terminals is a strategic move by TotalEnergies, and an important step in the advancement and consolidation of the Arctic LNG 2 project. Moreover, these terminals will contribute to safe and sustainable export of cargoes from its existing and developing Yamal projects.

TotalEnergies’ Presence in Global LNG Market

TotalEnergies is among the largest global LNG operators, and has been expanding LNG footprint through organic means, acquisitions, mergers, partnerships as well as collaborations. Increasing awareness about lowering emissions is boosting LNG demand across the globe. TotalEnergies, with its wide presence in the LNG market, is benefiting from the rising demand and trying to lower emissions from the production process. The company targets to produce 50 million metric tons per annum (mtpa) of LNG by 2025.

TotalEnergies’ LNG sales for 2020 were up 12% year over year, courtesy of the start-up of three trains at Cameron LNG in the United States, ramp up of Yamal LNG in Russia and Ichthys LNG in Australia as well as increase in trading activities.

It anticipates that the increase in oil prices during first-quarter 2021 will have a positive impact on average LNG price in the next six months. Given its presence in the entire LNG value chain, TotalEnergies will gain from the increase in LNG prices.

Focus on Clean Energy

Increasing emphasis on emission reduction and generation of more electricity from clean alternate sources of energy is becoming popular on a global scale. Usage of natural gas and renewable sources of energy is likely to increase on a global scale.

Oil and gas major BP p.l.c. (BP - Free Report) intends to boost low-carbon spending to $5 billion per annum by 2030, plans to add more renewable power generation capacity in its portfolio and reduces carbon emissions. Royal Dutch Shell plc targets to reach zero emission by 2050, and continues to expand the renewable portfolio by acquisition and collaboration with operators having focus on clean energy generation.

Zacks Rank & Key Pick

TotalEnergies currently has a Zacks Rank #3 (Hold). Another top-ranked stock from the same industry is PetroChina Company Limited , currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetroChina’s long-term (three to five years) earnings growth is projected at 40.1%. The Zacks Consensus Estimate for 2021 EPS has moved up 67.7% to $5.40 per share in the past 60 days.

Price Performance

In the past 12 months, shares of TotalEnergies have outperformed the industry.

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