TOTAL S.A. (TOT - Free Report) has started production from the Egina Field, located offshore Nigeria. This field will increase the company’s total output from Africa by 200,000 barrels of oil per day. The project has been completed 10% below the budget stated initially, with TOTAL saving nearly $1 billion in capital investments.
In addition to this new startup, the kick-start of Train 3 of the Yamal LNG project, the Tempa Rossa oilfield in Italy and the second Train at Ichthys LNG in Australia will help the company to achieve its production growth target of 6-7% over the 2017-2020 time period.
Significant Boost in African Production
At the end of third-quarter 2018, Africa contributed 676 thousand barrels of oil equivalent per day (kboed/d) to the company’s total production of 2,804 kboe/d. The addition of the new projects will increase TOTAL’s African output by another 200 kboe/d, reflecting a significant jump from previous production levels.
However, the ongoing downward revision in global oil prices is a concern. The new oil supplies are expected to surpass demand, creating continued downward pressure on oil prices and resulting in lower profitability of these oil majors.
TOTAL has a pipeline of major projects to be sanctioned by 2020, which will lead to 700 kboe/d of production, thus contributing to 5% average growth from 2017 to 2022. In addition, the company aims to invest $15-$17 billion per year over the 2017-2020 time frame, in order to complete its ongoing capital projects.
TOTAL’s strong cash-flow generating capacity enabled management of the company to increase its shareholders’ value through hiking its annual dividend rate by 10% within the 2018-2020 time frame. It also plans to buy back shares worth $5 billion in the same time frame. During the first nine months of 2018, the company repurchased 16.1 million shares worth $1 billion to increase the value of its shareholders.
In the past six months, TOTAL’s shares have declined 15.8%, wider than its industry’s decline of 15.2%.
Zacks Rank & Key Picks
TOTAL currently has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks from the same sector are Unit Corporation (UNT - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Phillips 66 Partners LP (PSXP - Free Report) and RGC Resources Inc. (RGCO - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Unit Corporation, Phillips 66 and RGC Resources reported positive earnings surprise of 21.25%, 6.03% and 87.64%, respectively, in the last reported quarter.
The Zacks Consensus Estimate for 2019 earnings for Unit Corporation, Phillips 66 and RGC Resources has moved up 11.7%, 2.8% and 0.9%, respectively, in the past 60 days.
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