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TOTAL Inks $8.8B Deal With Occidental to Buy Anadarko's Assets

Zacks Equity Research

TOTAL S.A. TOT announced that it has entered into a binding agreement with Occidental Petroleum OXY to acquire Anadarko Petroleum Corporation’s APC assets in Africa (Algeria, Ghana, Mozambique and South Africa) for a consideration of $8.8 billion, in the event of a successful completion of Occidental’s ongoing bid for Anadarko.

How Will This Deal Aid TOTAL?

TOTAL has been very active in making strategic acquisitions to strengthen its position as an international oil company. In 2018, the company acquired assets worth $8,314 million to expand operations.

TOTAL already has operation in Africa, and its African operation is currently the second-largest contributor to total oil and gas production. In first-quarter 2019, Africa contributed 697 thousand barrels of oil equivalent per day (boe/d) or 23.7% to its total production of 2,946 thousand boe/d.

If this latest deal goes through, it will add Anadarko’s entire African assets to TOTAL’s existing asset base in Africa. Anadarko’s African assets represent nearly 1.2 billion barrels of oil equivalent (boe) of 2P reserves, of which 70% is gas. Since the demand for natural gas is increasing globally, TOTAL’s position in the continent will be further strengthened. Moreover, it will reap benefits from the rising demand of natural gas.

Incidentally, Anadarko produced 84,000 boe/d during the first quarter of 2019 from its international operation and the major chunk of the same resulted from its African operation. Hence, the said acquisition will boost TOTAL’s production volumes and complement its existing operations in the region.

TOTAL’s Long-Term Goal

As the demand for LNG is increasing at a rate of more than 10% per year, TOTAL is boosting its LNG exposure and has set a target of producing 40 million tons per year by 2020.

Anadarko’s assets include 2 billion boe of natural gas resources in Mozambique, which can surely assist TOTAL to meet the long-term LNG production target and further expand the same, given rising demand.

Price Performance

Shares of TOTAL have gained 3.5%, underperforming its industry’s 8.8% growth on a year-to-date basis.

Zacks Rank & Key Pick

TOTAL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock from the same space is Repsol SA REPYY, sporting a Zacks Rank #1. Its long-term EPS growth rate is pegged at 8.59%. The Zacks Consensus Estimate for 2019 and 2020 has moved up 0.5% and 9.9%, respectively, in the past 30 days.

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TOTAL S.A. (TOT) : Free Stock Analysis Report
Repsol SA (REPYY) : Free Stock Analysis Report
Anadarko Petroleum Corporation (APC) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
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