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TOTAL Provides Outlook, Focuses on Developing LNG Portfolio

Zacks Equity Research

TOTAL S.A. TOT has provided a long-term outlook, 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 driven mainly by LNG project start-ups.

Courtesy of startups across the globe and strong production from existing assets, the company achieved a 9% year-over-year increase in output in first-half 2019.

Capital Outlay

Given the completion of major capital projects, execution of plans and proper management of expenses, TOTAL has lowered the projection for annual capital expenditure. The company aims to invest within $16-18 billion per year over the 2019-2023 time period, which will help it to meet production goals.

Focus on LNG

Globally, we can notice an energy translation, with more emphasis being given to produce electricity from clean sources. TOTAL 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 making strategic acquisitions and partnerships to further expand operations in the LNG business.

Increasing Dividend

Courtesy of its strong performance, the board of directors has decided to accelerate dividend growth by 5-6% per year over the long term.

Maintaining TOTAL’s breakeven below $30 per barrel and strong financial position to ensure a sustainable future will assist its management to increase dividend on an annual basis.

Petrochemical Business

The company is expanding footprint in the highly profitable petrochemical business. In addition to expanding operations in the United States, it has entered into partnerships in South Korea and Saudi Arabia to expand petrochemical operations as well as cater to rising global demand.

Price Performance

TOTAL’s shares have underperformed its industry in the past 12 months.

Zacks Rank

TOTAL currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the same sector are Crescent Point Energy Corp. CPG, Dril-Quip, Inc. DRQ and Pembina Pipeline Corporation PBA, each having a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Crescent Point Energy, Dril-Quip and Pembina Pipeline delivered average positive surprise of 235%, 48.9% and 28.1%, respectively, in the last four quarters.

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