COMPANY DESCRIPTION

Total is an international integrated oil and gas company. Co. engages all aspects of the petroleum industry, including Upstream operations (oil and gas exploration, development and production, and LNG (Liquefied Natural Gas)) and Downstream operations (refining, petrochemicals, specialty chemicals, marketing and marketing and trading and shipping of crude oil and petroleum products). In addition, Co. is engaged in the coal mining and power generation sectors. Co.'s worldwide operations are conducted through three business segments: Upstream, Refining & Chemicals, and Marketing & Services.

 

ECONOMIC MOAT

In our opinion TOT does not have an economic moat.  It relies on superior execution for success. Total is too high up the global cost curve and lacks meaningful exposure to high-quality U.S. shale resources or other cost competitive growth options. TOT’s downstream footprint is geographically disadvantaged and is far too exposed to Europe to be anything but a complete drag on creating value for the foreseeable future 

 

OUTLOOK

TOT is managing costs.  Lowering commitments to capital spending and  oil and gas exploration are a few actions taken.  Solid reserve replacement performance offers promise. Total replenished 100% of the oil and gas pumped in 2014. That suggests a bright future ahead, once price realizations perk up. Total's oil and gas reserves are the backbone of the company. Total return potential to 2018-2020 is bright as a result, and the company's strong finances. This stock is good fit for patient, conservative investors. The dividend is paid in euros, making for a weak U.S. translation these days.

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STRENGTHS

  • A strong market presence coupled with integrated operations

  • Strong R&D capabilities

  • Leadership position in refining and marketing 

WEAKNESSES

  • Litigations against TOTAL 

THREATS

  • Environmental regulations

  • Operational risks

  • Political instability 

OPPORTUNITIES

  • Focus on solar energy Establishment of Jubail Refining and Petrochemical Company

  • Strong project pipeline 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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