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TOTAL (TOT) Expands Operation in Kazakhstan's Dunga Project

Zacks Equity Research

TOTAL S.A. TOT and its partners have approved the Phase 3 development of the onshore Dunga field in the Mangystau Region of western Kazakhstan. Courtesy of the approval, new wells will be added to the existing infrastructure and the processing plant will be upgraded to enhance its capacity by 10% to 20,000 barrels of oil per day by 2022. This will add production of more than 70 million barrels of reserves.

Notably, this development work will need $300 million investment. The approval by the Government of the Republic of Kazakhstan of a 15-year extension of the Production Sharing Agreement (PSA) has made the development work possible. PSA for the field was originally signed in 1994 and due to expire in 2024. TOTAL operates the Dunga field with a 60% interest and its partners hold 20% interest each.

TOTAL’s Long-Term Goal

TOTAL continues to increase hydrocarbon production volumes, thanks to low-cost productive assets spread across the globe and the startup of projects at regular intervals. To produce affordable oil and gas, the company has carefully managed costs through a number of far-reaching initiatives, enabling it to constantly optimize its portfolio and invest in highly competitive projects.

At present, ten projects are lined up and are in different stages of completion. Contribution from these startups will help the company to achieve its target of 5% increase in production by 2022.  Since natural gas is being utilized on a larger scale across the globe due to its clean burning nature, TOTAL plans to ramp up gas production over the long term. Gas production could account for 60% of its hydrocarbon production by 2035, in turn limiting harmful methane emissions generated by gas production.

Another oil and gas company, Devon Energy Corporation DVN has undertaken an initiative to further lower methane emissions in U.S. oil and natural gas production operations. Methane gas has the potential to do greater damage to the environment, as it has the capacity to trap heat more than 80 times than carbon dioxide in the first 20 years after it escapes into the atmosphere from the drilling wells. (Read more:Devon Energy Sets New Target to Cut Methane Emissions)

TOTAL’s Position Among Super Majors

TOTAL operates in an elite group of super majors, which exposes it to tough competition. The company has to compete with the likes of ExxonMobil XOM and Royal Dutch Shell RDS.A, among others, for acquiring assets and licenses for the exploration and production of oil and natural gas, and sale of manufactured products based on crude and refined oil.

In addition to production of hydrocarbons, TOTAL is seriously focused on the development of alternate sources of energy and lending assistance in lowering global emission. This in a way allows it to explore and benefit from an area that is not taken up so seriously by other supermajors.

Price Performance

Shares of the company have underperformed its industry on a year-to-date basis.


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