Falling Oil Prices Force TOTAL to Delay Bulgarian Exploration - Analyst Blog
Global oil and gas major TOTAL S.A. (TOT) has decided to delay its Bulgarian exploration plan due to sinking global oil prices. Oil prices have plummeted nearly 45% from the highs witnessed earlier this year.
TOTAL is the operator of the 1-21 Han Asparuh block, located off the coast of Bulgaria's Black Sea, with a 40% interest. The other two operators of this block are Austria’s OMV and Spain’s Repsol with stakes of 30% each.
TOTAL and its partners have decided to delay drilling in the block by at least six months from the earlier schedule. The company now expects to drill the first exploration well in this block in the first quarter of 2016.
TOTAL has operations in more than 130 countries across the globe and the falling oil price is having an adverse impact on its margins. The company has already undertaken cost saving initiatives to deal with the crisis. The decision to lower exploration expenditure by delaying its Bulgarian project is appreciable given the current circumstances.
The boom in shale oil production from North America and the Organization of the Petroleum Exporting Countries' ("OPEC") stance of maintaining its crude oil production target continue to put downward pressure on oil prices. In addition, global oil demand failed to see an uptick amid weakening economic growth, resulting in the supply glut.
Per the information provided by a Norwegian consultancy, Rystad Energy, oil and gas projects worth $150 billion will be put on hold worldwide in 2015, primarily due to falling prices.
TOTAL is not the only big oil company to trim expenditures for 2015. Another oil and gas major ConocoPhillips (COP) is cutting its capital budget for 2015 by 20% to $13.5 billion. The largest Canadian drilling contractor, Precision Drilling Corporation (PDS) said it will lower its capital expenditure for 2015 by 45% to $493 million.
TOTAL currently has a Zacks Rank #3 (Hold). YPF S.A. (YPF) is a better-ranked stock in the space holding a Zacks Rank #2 (Buy).
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