March 07, 2012
Integrated oil and gas company TOTAL S.A. (NYSE:TOT) has acquired a 40% interest in the Block 3 exploration license from Papua New Guinea based Oil Search Limited. This acquisition will allow TOTAL to operate an area of 2,954 square kilometers (1,140.5 sq miles) in the eastern part of Marib Basin in Yemen.
TOTAL will develop the project jointly with three other partners. The others to assist TOTAL in this project are Austrian energy company OMV, state-owned Yemen General Corporation for oil and gas and the Czech Republic’s MND.
We believe the acquisition of interest and subsequent plans of exploration in this basin are integral to TOTAL’s aggressive drilling strategy which has allowed the company to expand its worldwide reach. Prior to this project the company acquired licenses to jointly operate a few blocks in the Lake Albert region in Uganda.
Although the company is silent about the financial consideration involved in the acquisition of the license in Yemen, we believe its cash-rich position will enable it to make an outright purchase of the interest. TOTAL ended the financial year with €14.02 billion ($18.15 billion) in cash.
TOTOL has been operating in Yemen for the past 25 years and its production here has grown to 86,000 barrels of oil equivalent (boe) per day in 2011. TOTAL is also the largest share holder of Yemen LNG with a 39.62% interest. The current acquisition will further increase its yield from Yemen.
TOTAL has been working relentlessly to extend its operations in Africa as well as in the Middle East. These regions provide a substantial portion of the company’s total production. At the end of the fourth quarter, combined production from these two regions accounted for 52% of the total, which was 2,384 thousand barrels of oil equivalent (kboe) per day.
TOTAL has been targeting to increase its total production by 2.5% per year on an average between 2010 and 2015. However, in 2011, the company failed to reach the targeted production level that was static at prior-year levels. We believe the growth projects, expected to start in 2012, like Usan in Nigeria, Angola LNG and Bongkot South in Thailand, to name a few, will boost the oil major’s production.
TOTAL S.A. currently retains a Zacks # 3 Rank, which translates into a short-term Hold rating. The company competes with BP plc (NYSE:BP) and Exxon Mobil Corporation (NYSE:XOM).
France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations across five continents.