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Wednesday, December 14, 2011 9:35:24 AM
The company is rather diverse with interests in LNG, LPG, gas and nuclear power generation, coal, solar, refining, shipping, and chemicals manufacturing to complement is dominant upstream activities. It operates in more than 130 countries and is one of the biggest producers of natural gas.
Most of the “easy” oil in the world has been produced, sold and consumed. Companies like TOTAL are forced to explore for oil in deeper water and in higher risk countries, and this trend will continue into the future. TOTAL has a number of operations in Africa as well as Iran and Russia, and has invested heavily in deep water, oil sands and LNG.
In the future, EPS growth will come predominantly from an increase in the price of oil (and the price of natural gas) as growth in production is getting harder and harder to come by. In the shorter term the price direction of oil is not clear. As Europe slides into a recession, demand for oil, at least from that region, will decline and the price of oil may drop as a result. But over the longer term it is hard to see the price of oil going anywhere but up. Oil production is becoming a more expensive exercise as time goes by, and new oil discoveries are mostly a lot smaller than the sort of discoveries enjoyed in the 20th century.
As with most resource companies, the larger the company the lower the cost to produce per unit volume. These economies of scale often make the bigger oil & gas producers more attractive an investment. That and their enormous cashflow. TOTAL has generated total Free Cash Flow over the last 5 years of over $87B versus total net earnings over the same period of $76B. Its net debt to equity is a very manageable 26%.
Quality Rating
Source: www.usastockvaluation.com
TOTAL achieves a poor quality rating predominantly due to lack of growth and declining profitability. Chevron (CVX), ConocoPhillips (COP) and Exxon Mobil (XOM) all have similar Quality Ratings to TOTAL.
Intrinsic Value
Source: www.usastockvaluation.com
Value Investing involves, at the basic level, the buying of high quality companies at a share-price that is at a meaningful discount to Intrinsic Value. Neither criterion is met with TOTAL, so Value Investors would likely not be interested in the stock.
The above graph indicates that TOTAL has lifted its game recently after a few years of declining performance. The future performance of TOTAL is heavily dependent on the price of oil – if the price of oil sky rockets as many predict it will over the next 5 or 10 years, so does the performance of TOTAL. If the oil price drops, stays the same or increases only slightly, TOTAL will struggle to achieve decent growth or profitability.
Conclusion
Investors who believe the price of oil over the longer term (10 years+) is going up will be interested in TOTAL due to its large amounts of proved oil and oil equivalents and its aggressive exploration and project development. The stock is paying a dividend yield of 2.7% on current prices. Value Investors will be keen to see a Margin of Safety prior to an investment, and as such will want to wait to see how things play out with the impending European recession.
Regards,
James Ranson
james@usastockvaluation.com
Recent TTE News
- March 28, 1924: TotalEnergies is 100! • Business Wire • 03/28/2024 08:33:00 AM
- 28 mars 1924 : TotalEnergies a 100 ans ! • Business Wire • 03/28/2024 08:33:00 AM
- Chine : TotalEnergies et SINOPEC s’associent pour produire du carburant aérien durable dans une raffinerie de SINOPEC • Business Wire • 03/26/2024 07:15:00 AM
- China: TotalEnergies and SINOPEC Join Forces to Produce Sustainable Jet Fuel at a SINOPEC's Refinery • Business Wire • 03/26/2024 07:15:00 AM
- TotalEnergies SE: Disclosure of Transactions in Own Shares • Business Wire • 03/25/2024 05:00:00 PM
- TotalEnergies SE : Déclaration des Transactions sur Actions Propres • Business Wire • 03/25/2024 05:00:00 PM
- France : TotalEnergies numéro 1 du dernier appel d’offres national de panneaux solaires sur toitures • Business Wire • 03/25/2024 12:28:00 PM
- France: TotalEnergies Ranks First in Latest National Tender for Rooftop Solar Projects • Business Wire • 03/25/2024 12:28:00 PM
- Danemark : TotalEnergies redémarre la production de gaz du complexe offshore de Tyra après un redéveloppement majeur • Business Wire • 03/22/2024 07:00:00 AM
- Denmark: TotalEnergies Restarts Gas Production at the Tyra Offshore Hub after a Major Redevelopment • Business Wire • 03/22/2024 07:00:00 AM
- Care Together by TotalEnergies : TotalEnergies renforce son socle commun de protection sociale pour l’ensemble de ses salariés à travers le monde • Business Wire • 03/21/2024 11:18:00 AM
- Care Together by TotalEnergies: TotalEnergies Strengthens Its Common Social Protection Base for All Employees Worldwide • Business Wire • 03/21/2024 11:18:00 AM
- Apple Pre-Market Drop Due to Antitrust Threats, Surprising Profit Boosts Micron Shares, and Latest Market Updates • IH Market News • 03/21/2024 11:17:26 AM
- TotalEnergies publie son rapport Sustainability & Climate – 2024 Progress Report qui sera soumis au vote consultatif des actionnaires à l’Assemblée Générale du 24 mai 2024 • Business Wire • 03/20/2024 03:13:00 PM
- TotalEnergies Publishes its Sustainability & Climate – 2024 Progress Report, which will be Submitted to a Consultative Vote at the 2024 Annual Shareholders’ Meeting • Business Wire • 03/20/2024 03:13:00 PM
- TotalEnergies SE: AVIS DE REMBOURSEMENT EN DATE DU 20 MARS 2024 • Business Wire • 03/20/2024 07:00:00 AM
- TotalEnergies SE: NOTICE OF REDEMPTION DATED 20 MARCH 2024 • Business Wire • 03/20/2024 07:00:00 AM
- TotalEnergies SE : Déclaration des Transactions sur Actions Propres • Business Wire • 03/18/2024 05:00:00 PM
- TotalEnergies SE: Disclosure of Transactions in Own Shares • Business Wire • 03/18/2024 05:00:00 PM
- e-gaz : TotalEnergies s’associe à de grandes entreprises internationales pour soutenir le développement de la filière industrielle • Business Wire • 03/18/2024 03:21:00 PM
- TotalEnergies Partners with Major International Companies to Support e-NG Development • Business Wire • 03/18/2024 03:21:00 PM
- United States: TotalEnergies Acquires Talos Low Carbon Solutions, a Pioneer in the Growing American Carbon Storage Industry • Business Wire • 03/18/2024 01:25:00 PM
- TotalEnergies acquiert Talos Low Carbon Solutions, un pionnier de l’industrie du stockage du carbone aux États-Unis • Business Wire • 03/18/2024 01:25:00 PM
- Production d’électricité solaire sur site : TotalEnergies dépasse 1,5 GW de PPA avec 600 clients B2B dans le monde • Business Wire • 03/18/2024 07:49:00 AM
- Onsite Solar Generation: TotalEnergies Surpasses 1.5 GW of PPAs with 600 B2B Customers Worldwide • Business Wire • 03/18/2024 07:49:00 AM
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