Integrated oil and gas company TOTAL S.A. (TOT) expanded its presence in Australia by acquiring additional interest in the Ichthys liquefied natural gas ("LNG") project from its Japanese partner INPEX CORPORATION.
The new 6% interest will increase TOTAL’s share in this LNG project to 30%. Although the company has kept the financial consideration confidential, we believe TOTAL will leverage its strong financial position to consummate the acquisition. Cash and cash equivalents as of March 31, 2012, were a healthy $17.78 billion (€13.33 billion).
In January 2012, TOTAL and INPEX made a joint investment of $34 billion to develop the Ichthys LNG project in Australia. We believe the increasing demand for LNG in Asia has led TOTAL to increase its stake in Ichthys.
This Ichthys project will develop reserves of approximately 3 billion barrels of oil equivalent , including around 500 million barrels of condensate and is expected to start commercial production in the second half of 2016. The construction on this project began during the second quarter of 2012.
The operators were successful in securing a 15-year contract for the estimated 8.4 million tons of annual production from this project. The increase in TOTAL’s share in the project will not impact the LNG offtake agreements.
TOTAL has been an active operator in the LNG market and its first quarter 2012 LNG sales of 3.24 metric tons surpassed 3.11 metric tons sold in the preceding quarter. TOTAL’s LNG projects are spread out across the globe. It has also entered into long-term re-gasification capacity agreements in three continents, namely North America, Europe and Asia.
The re-gasification capacity will allow the company to capitalize on the increasing use of natural gas worldwide. TOTAL will purchase 0.9 million tons per year of LNG from the Ichthys project and utilize its re-gasification terminal to reconvert the same to natural gas and cater to the increasing demand of natural gas in Asia.
With more and more LNG projects coming into operation, the gas production capability of the company has increased in tandem. In the first quarter of 2012, the total gas produced was 6,226 thousand cubic feet per day (Mcf/d) versus 5,880 Mcf/d in the year-ago quarter. The addition of Sulige in China and Angola LNG this year will further enhance the production capabilities of the company.
TOTAL S.A. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Both BP plc. (BP) and Exxon Mobil Corporation (XOM), peers of TOTAL, have extensive global portfolios of oil and gas assets.
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 spanning five continents.
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