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TOTAL Issues Long-Term Outlook, Seeks to Raise Production

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TOTAL S.A. (TOT - Free Report) has provided a long-term outlook, aiming to increase production by an average of 6–7% per year between 2017 and 2020. The improvement will be primarily due to the commencement of major projects that are expected to add 700 thousand barrels of oil equivalents per day resulting in a 5% average growth in production from 2017 to 2022.

Other Plans

The global oil and gas major expects its annual organic capital expenditure to be in the range of $15–$17 billion in the 2017 to 2020 time period. In addition, the company aims to lower its annual operational expenses by $5 billion from 2014 levels, up from annual savings target of $3.7 billion set in 2017.

TOTAL is a cash flow generator and continues to reward the shareholders through payment of dividend and buyback of shares. Management has increased 2018 interim dividend by 3.2%, in line with its goal to increase dividend by 10% by 2020. The company will also purchase shares worth $1.5 billion in 2018 as part of its $5 billion share buyback plan for the 2018-2020 period.

New Reporting Segment From 2019

TOTAL integrates climate issues into its strategy and aims to reduce the carbon intensity of its energy sales by 15% from 2015 to 2030. It has already ventured into the alternate energy business by acquiring SunPower Corp. (SPWR - Free Report) , which is involved in some large-scale solar projects. TOTAL, in order to expand its operation in natural gas-driven vehicle business, acquired Dutch company PitPoint B.V. in 2017 and 25% stake in Clean Energy Fuels Corp. (CLNE - Free Report) this year.

TOTAL continues to concentrate on low breakeven oil projects, expand along the full gas value chain and develop a profitable low carbon electricity business. To represent this market in a better way, the company will create a new segment called Integrated Gas, Renewables and Power (iGRP).

The new segment will consolidate the current Gas, Renewable and Power perimeter as well as the Upstream and Midstream LNG assets currently reported in Exploration & Production.
 
Zacks Rank and A Key Pick

TOTAL currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Premier Oil PLC (PMOIY - Free Report) , carrying a Zacks Rank #2 (Buy). You can see   the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Earnings estimates of Premier Oil have moved up 38.1% to 29 cents in the past 60 days.

Shares of both Premier Oil and TOTAL have outperformed the broader industry’s growth in a year’s time.



Our View

The target set by the company looks promising and achievable. The higher production volumes from low cost fields and improving commodity prices will combine and propel TOTAL to new highs.
 
In addition, the ongoing strategic acquisitions of the company have helped it to expand footprint in low breakeven projects and improve profitability.

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