TOTAL S.A. (TOT - Free Report) , with its South Korean joint venture partner Hanwha, is going to invest more than $300 million to increase production of polyethylene capacity in its site located in Daesan, South Korea. The investment will be directed through the 50/50 joint venture company — Hanwha Total Petrochemical. The investment will increase production of the unit by nearly 50% to 1.1 million tons by end of 2019.
How This Investment Helps?
The usage of polyethylene is rising across the globe for the production of wide range of plastic materials used in construction, packaging, grocery bags and containers to hold various kinds of liquids. Per a research report by IHS Markit, the annual global demand for polyethylene will increase to 113 million tons in 2021 from the current levels of 92 million tons in 2017.
Asian countries are expected to drive the global demand for polyethylene, with China being the major consumer of polyethylene-based products. The decision to expand production on Daesan plant seems to be quite logical as it will help the joint venture company to capitalize on the expected increase in polyethylene usage.
The Daesan site has contributed $1 billion in 2016 and the fresh investment will allow Hanwha Total Petrochemical to utilize the state-of-the-art Advanced Double Loop technology licensed by Total and Chevron Phillips Chemical Company. This technology will enable the production of a wide range of high-end specialty polyethylene. As a result, the company will be able to capture margin along the full ethylene-polyethylene value chain.
Diverse Source of Revenues
TOTAL, apart from concentrating of oil and gas business, is also investing in other areas to diversify its revenue stream. The company has already expanded its foot print in the alternate energy industry through the acquisition of SunPower Corporation (SPWR - Free Report) .
TOTAL is also working to develop Bioenergies a renewable, storable energy source that can provide solution to the increasing global energy requirements.
Acquisitions Boosting TOTAL
TOTAL announced that it has entered into a definite agreement to acquire 100% stake in Maersk Oil & Gas A/S (Maersk Oil) in a share and debt deal. This acquisition will allow TOTAL to combine Maersk Oil’s high-quality assets spread globally with its existing assets.
This deal will further strengthen its position in the industry and create tougher competition for the super majors like Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) .
The stock has gained 10.2% in a year, outperforming the Zacks International Oil and Gas industry’s rally of 2.9%.
The outperformance was due to TOTAL’s strong production portfolio, initiative to lower operating costs, reduce debts and start new projects, which will boost its performance.
TOTAL currently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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