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TOTAL (TOT) to Increase Footprint in U.S. Gulf of Mexico

Zacks Equity Research

TOTAL S.A. TOT announced plans to invest in the development of two projects located in deepwater U.S. Gulf of Mexico. Both the Anchor and North Platte fields require the use of high-pressure 20,000-pounds-per-square-inch (20 kpsi) technologies developed over the last few years.

The Anchor field will be operated by Chevron Corporation CVX with a 62.86% interest and the rest 37.14% will be owned by TOTAL. The North Platte field will be operated by TOTAL with a 60% working interest and rest will be owned by Equinor.

Expected Production Volumes
The Anchor field is expected to produce first oil in 2024, and its production capacity will be 75,000 barrels of crude oil and 28 million cubic feet of gas per day. The North Platte field’s oil production is expected to be 75,000 barrels per day at the plateau level.

These new startups will assist TOTAL to reach long-term production growth targets. The company is presently aiming to increase production by an average of 5% per year between 2018 and 2021. After a stable period between 2022 and 2023, growth will resume at more than 3% per year.

TOTAL’s U.S. Volumes to Rise

Hydrocarbon production during the first nine months of 2019 averaged 2,981 thousand barrels of oil equivalent per day (kboe/d), up 9% from the year-ago period. The current American assets of TOTAL contributed 12.2% to the total output in the aforesaid period.

Its existing assets in the United States and new ventures will contribute toward the increase in total production volumes in the United States. Incidentally, TOTAL holds working interests in 109 exploration licenses in the United States.

TOTAL’s Long-Term Plans

TOTAL’s long-term plans are in sync with the global transition toward clean energy usage. It expects natural gas and liquefied natural gas (LNG) to play a major role in this transition. The company expects to increase LNG sales to 50 million tons per year by 2025 from the present level.

TOTAL already has a strong presence in the entire value chain of the LNG business. In addition, the company is expanding renewable power generation through its subsidiary SunPower Corporation SPWR. The firm recognizes that the Paris Agreement is a major step in the fight against climate change. It also supports the development of carbon capture, utilization and storage that is aimed by the Paris Agreement. This is essential to achieve carbon neutrality by the second half of the century.

Price Performance

Year to date, TOTAL’s shares have outperformed its industry.

Zacks Rank & Key Pick

TOTAL currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Sasol Ltd. SSL. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Sasol’s long-term (three to five years) earnings growth is pegged at 4.5%. The Zacks Consensus Estimate for fiscal 2020 has moved up 11.9% in the past 60 days to $2.81 per share.

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