Total Share Discussion Threads

[maywillow] 19/12/2017 09:01

France’s Total to launch large-scale development of Libra project off Brazil

Written by Collin Eaton for the Houston Chronicle - 19/12/2017 6:00 am

Total makes move for Libra.
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The French oil company Total has decided to launch the first large-scale development of its Libra project in the deep ocean waters off Brazil, in the prolific Santos Basin, the company said Monday.

Total plans to dispatch a floating production storage and offloading unit to the Northwestern part of the pre-salt oil basin, where the company and its partners believe they can pump oil for less than $20 a barrel in technical costs.
That FPSO, called the Mero 1, would have an oil-production capacity of 150,000 barrels a day, and is expected to come online in 2021. Total believes the Libra consortium, which includes Petrobras and Shell, could add three more FPSOs in the region to produce some 600,000 barrels a day.

Total and its partners began pumping oil from a smaller FPSO last month, producing some 50,000 barrels a day, part of an effort to see how the field performs and to generate early revenue, it said. The project is about 112 miles from Brazil.

[waldron] 18/12/2017 19:25

Non-intrusive inspection brings benefits to UK offshore
12/18/2017

Offshore staff

ABERDEEN, UK – The Oil & Gas Technology Centre and ABB have conducted a survey into the application of non-intrusive technology at fields on the UK continental shelf (UKCS).

Responses suggest the potential to increase production and to lower maintenance costs, with benefits totalling up to £242 million/yr ($323 million/yr).

According to the Centre, most North Sea operators employ intrusive inspection techniques to assess the condition of their process vessels and tanks and to ensure safe operations.

However, this entails shutting down the platform and personnel entering the vessel to perform a manual inspection, leading to significant lost production.

In addition, having people entering a confined space can be hazardous.

Recent advances in non-intrusive inspection (NII) technology make it possible to assess the internal condition of a vessel without a shutdown or sending personnel inside the vessel.

Other findings from the survey are:

Use of NII on the UKCS is limited, with some operators currently making no use of the available technology.
Potentially, up to 80% of vessels could be examined non-intrusively, without the need for a shutdown.
Improved safety with up to 80% fewer confined space entries required, and a corresponding reduction in the number of line breaks and subsequent leak tests.
A 33% reduction in turnaround durations have been achieved using NII.
Overall cost savings of up to 80% compared to inspections that involve entry into a vessel.

The Centre has collaborated with Total E&P UK to conduct early field trials of NII technologies on North Sea facilities. The aim of the project is to identify ways of reducing confined space entries and cost, while at the same time helping to maximize economic recovery.

Rebecca Allison, Asset Integrity Solution Centre Manager at the Oil & Gas Technology Centre, said: “One of our key objectives is to eliminate vessel entry for inspection by 2026 and NII is critical to delivering this…

“We hope this survey and recent field trials will help break down the barriers to implementing NII and spark a technology transformation in offshore inspection techniques.”

Troy Stewart, Head of ABB Service, Oil, Gas & Chemicals in the UK, added: “Onshore process industries have reaped the benefits of NII for many years, but uptake in UK North Sea has been slow…

“The survey is the first step in changing the mind-set on vessel entry by increasing the adoption of NII in the UKCS.”

12/18/2017

[waldron] 18/12/2017 18:22

Official: Danish company eyes Iran oil project
Danish company Maersk Oil, a subsidiary of French Total, eyes cooperation in development of an offshore Iranian oil project in the Persian Gulf, according to the chief executive officer of Pars Oil and Gas Company.

"Maersk is likely to sign the second IPC deal within two months," Mohammad Meshkinfam said, referring to Tehran's new framework to develop its oil and gas fields, dubbed as Iran Petroleum Contract (IPC), ISNA reported on Monday.

Maersk Oil has held talks on taking over the crude oil layer of South Pars, a giant gas deposit where its new parent company Total holds a multibillion stake.

The $7.5-billion buyout of Maersk Oil by Total in August complicated Iran's yearlong negotiations with the Danish company, but "measures have been taken not to face any problem from the merger", Meshkinfam said.

The deal will strengthen Total's position in Iran's energy market which became the first major Western oil company to return to Iran after the lifting of sanctions last year.

The world's fourth-largest oil company has agreed to develop an offshore phase of South Pars in a $5-billion deal.

The partnership with Maersk is aimed at catching up with Qatar, which started developing the oil layer of the joint field in 1991. The Arab country has drilled more than 300 wells with the help of international oil giants, having extracted more than 1 billion barrels in the last 25 years.



"For eight years, we fell behind Qatar in production from South Pars, but we are now even," said the POGC chief.

Iran aims to stabilize production from the share price oil layer at the current production level of around 25,000 barrels per day, and gradually boost output to 55,000-60,000 bpd. Officials say that Maersk can help increase output to 150,000 barrels per day.

The oil layer is located 130 kilometers off the Persian Gulf coast and contains an estimated seven billion barrels of oil in place. Iran began production from the share price oil layer in March.

Officials say due to the layer's complicated geological structure, advanced horizontal drilling technology is required to tap into the resources, which necessitates cooperation with Maersk.

Maersk produces oil from the Danish and UK sections of the North Sea, Qatar, Algeria and Kazakhstan. It supports global oil and gas production by providing modern drilling services to oil companies globally.

Iran plans to raise gas production to 1.3 billion cubic meters a day from more than 800 mcm/d in five years, counting big on its mega South Pars project that accounts for more than two-thirds of its gas supply.

[florenceorbis] 18/12/2017 12:38

937/5000
TOTAL: Consolidation can continue
TEC the 18/12/2017 at 08:10
0
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TOTAL: Consolidation can continue

SYNTHESIS

The MACD is positive but below its signal line. The current dynamics is interrupted. In the event that the MACD becomes negative, the decline in prices could continue. The value of the RSI is less than 50: this confirms the weakness of the courses. Stochastic indicators do not give clear signals for the coming days. The traded volumes are below average volumes over the last 10 days.

MOVEMENTS AND LEVELS

The bullish movement seems to be stopped. The stock is below its 50-day moving average at 47.07 EUR. The first support is 45.92 EUR, then 45.23 EUR and the resistance is 48.66 EUR, then 49.35 EUR.
Last class: 46.51
Support: 45.92 / 45.23
Resistance: 48.66 / 49.35
Short term opinion: neutral
Medium term opinion: neutral

[florenceorbis] 18/12/2017 11:23

France's Total SA (FP.FR) said Monday that it has taken a final investment decision to progress to the next stage of development in its deep offshore Libra project in Brazil.

Total said it plans to deploy a floating production, storage and offloading unit, or FPSO, with a production capacity of 150,000 barrels of oil a day at the project, which is located around 180 kilometers off the coast of Rio de Janeiro.

"We have worked with Petrobras [Petroleo Brasileiro SA (PBR)], the operator, and our partners to secure technical costs below 20 dollars per barrel," said Arnaud Breuillac, Total's president for exploration & production.

The company has been producing oil at the Libra project since November via a 50,000 barrel a day FPSO to appraise the field and generate early revenue, according to Total.

In the long term, Total expects to add three further vessels to reach a total production volume of 600,000 barrels a day, the company said.

Petrobras leads the Libra consortium and holds a 40% stake in the venture, while Total and Royal Dutch Shell PLC (RDSA.LN) each hold 20%. China's CNPC and CNOOC Ltd. (0883.HK) both hold 10% stakes.



Write to Nathan Allen at [e-mail]



(END) Dow Jones Newswires

December 18, 2017 05:57 ET (10:57 GMT)

[the grumpy old men] 15/12/2017 16:06

The biggest voices in oil disagree on 2018 outlook
By Grant Smith on 12/15/2017

LONDON (Bloomberg) -- The two most critical forecasts of global oil markets offer contrasting visions for 2018: one in which OPEC finally succeeds in clearing a supply glut, and another where that goal remains elusive.

In the estimation of the Organization of Petroleum Exporting Countries, production curbs by the cartel and its allies will finally eliminate the excess oil inventories that have depressed crude prices for more than three years. But in the view of the International Energy Agency (IEA), which advises consumers, that surplus will barely budge.

“Both cannot be right,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “Whichever way the pendulum swings will have a significant impact on the market.”

OPEC and Russia have eliminated almost two-thirds of a global glut this year as the former rivals jointly constrict their crude production to offset a boom in U.S. shale oil. At the heart of the clash between the 2018 forecasts is whether the alliance can deplete the rest of the overhang without triggering a new flood of American shale.

Late last year, OPEC and Russia set aside decades of rivalry and mistrust to end a slump in global oil markets that has battered their economies. Defying widespread skepticism, they cut oil supplies as promised, and resolved on Nov. 30 to persevere until the end of next year. Brent crude climbed this week to a two-year high above $65/bbl, although prices had slipped to $63.37 as of 11:32 a.m. in London.

Both the IEA and OPEC agree that the coalition’s cuts are working. The surplus oil inventories in developed nations -- OPEC’s main metric for gauging success -- fell to 111 MMbbl in October, from 291 million last November, according to the Paris-based IEA, established in 1974 in the wake of the Arab oil embargo.

Happy New Year?

Where they diverge is on what happens next. OPEC predicts the re-balancing will be complete by late next year as those stockpiles plunge by about 130 MMbbl in 2018. By contrast, the IEA sees inventories remaining steady as new supply growth surpasses gains in demand. It warned OPEC on Thursday that it may be deprived of a “Happy New Year.”

Although both institutions project that demand for OPEC crude will be about 32.3 MMbpd on average in the first half of 2018, their views drift apart as the year progresses. OPEC expects it will need to pump about 34 million barrels day in the second half, while the IEA sees a requirement of just 32.7 MMbpd.

“They live in the same world for the first half of 2018, but divorce into separate universes for the second half,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. “OPEC believes in strong growth of oil demand; the IEA believes in strong growth of non-OPEC supplies.”

Diverging views

While OPEC expects rival supplies to expand by 1 MMbpd next year, the IEA forecasts non-OPEC to grow by 1.6 MMbpd. The difference partly lies in their conflicting views of the supply source that unleashed the glut OPEC is now battling to clear: U.S. shale oil. OPEC boosted estimates for U.S. crude production this week and now sees an expansion of 720,000 bpd next year. Still, the IEA’s forecast is about 20% higher.

“The uncertainty surrounding shale oil production for next year has resulted in very differing views on the 2018 fundamental picture,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.

When OPEC officials invited a range of experts to brief them on the U.S. shale outlook days before their Nov. 30 meeting, they were dismayed by the divergence of opinions, people familiar with the matter said. One of those experts, veteran crude trader Andy Hall, cited the unpredictability of shale as one reason for shuttering his flagship hedge fund this summer.

Shale limits

Saudi Arabian Minister of Energy and Industry Khalid Al-Falih, speaking at the OPEC meeting in Vienna, rejected the IEA’s outlook for 2018 as excessively pessimistic.

There are signs that the U.S. shale boom is slowing. Drillers may have reached the limits in terms of cutting costs and boosting productivity, and investors are finally insisting that profits are shared out rather than funneled back into supply growth.

Yet analysts from Citigroup Inc. to Goldman Sachs Group Inc. and Commerzbank AG warn that OPEC continues to underestimate the magnitude of the shale revolution.

American producers are rushing to lock in revenues as U.S. crude approaches $60 a barrel, enabling them to finance a new wave of drilling, data compiled by Bloomberg New Energy Finance show.

“The U.S. alone can achieve almost all of the supply growth that OPEC forecasts globally in 2018,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. “So, without question, the IEA’s forecast is more convincing.”

[stephen2010] 14/12/2017 22:05

ALBA currently trading at 0.39p target price 6p making a nice 15 bagger. Please read the following:

MARKET CAP PUZZLE
❖ Alba (market cap £8.4m) is in a resources neighbourhood populated with listed
companies with much enhanced market capitalisations, such as UKOG.L (£134m) and
JAY.L (£172m). With either shared project interests or adjacent tenements to these
companies, Alba should trade at a much higher valuation than its current token value.
Like Bluejay, Alba owns 100% of its ilmenite project. Direct comparisons with UKOG
are also instructive. While both companies own other projects, UKOG’s 49.9% of Horse
Hill Developments Limited (HHDL), when compared to Alba’s 18.1% means that Alba
has approximately one third of the value of Horse Hill compared to UKOG but only
about 7% of the market capitalisation. Once the market recognises these disparities,
the room for growth in Alba’s share price is undeniable.

VALUATION RATIONALE - Our valuation in this First Equity Limited initiation note
uses a risked valuation approach for Alba’s two main projects, at Horse Hill and TBS. The
Horse Hill licences are valued using independent published technical data from
Schlumberger, Xodus and Nutech on the oil potential of the licences, along with our own
assumptions on recovery rates, oil discovery value, resource and development risks
factors. From this a risked value of $127m net to Alba on a ‘Base Case’ basis is derived
for Horse Hill.

Given the similar geology and economic potential of both TBS and Dundas, we have
adopted a risked closeology valuation approach, by computing an NPV for Dundas of
$223m and then applying a three-tiered risked probability calculation to arrive at a value
of $54.7m for TBS. Once Alba announce its JORC resource and exploration target at TBS
and Bluejay its Feasibility Study results, this number is likely to be revised upwards very
rapidly, possibly up to $200m, representing up to 7p per share in additional shareholder
value.

We compute a valuation of $185m (£139m) for Alba, equating to 6.0p per share, of which
4.1p is attributed to the stake in Horse Hill, 1.8p for TBS. Given this analysis and wealth
of valuation catalysts anticipated across the project portfolio in the coming months, we
recommend the shares as a ‘BUY, with a Target Price of 6.0p, representing a potential
15 times plus uplift from the current share price.

[waldron] 14/12/2017 21:48

Total, Eni, Novatek win first Lebanon offshore licenses
By Dana Khraiche on 12/14/2017

BEIRUT (Bloomberg) -- Lebanon granted its first offshore energy rights to a group comprising Total SA, Eni SpA and Novatek PJSC, joining a regional race to find and develop oil and natural gas wealth in the eastern Mediterranean after years of delay.

The cabinet awarded two licenses in its first offshore bidding round, allowing the companies to jointly explore Blocks 4 and 9, Wissam Chbat, a member of the Lebanese Petroleum Administration, said Thursday by phone. The group has one month to prepare legal, administrative and technical paperwork before signing production-sharing contracts with the government in January, Chbat said. Drilling is expected to begin in 2019, he said.

France’s Total, Italy’s Eni and Russia’s Novatek filed their bids to explore the two blocks in October -- the only proposals the government received. The licensing round has encountered setbacks since 2013 amid political disputes over block delineation and government paralysis, leaving Lebanon trailing Cyprus, Egypt and Israel in exploring the eastern Mediterranean. This year bidding was pushed back to give companies more time to understand a new tax law.

Israel dispute

Block 9 is one of three that lie in an area contested by Israel. Lebanon is working with the U.S. on resolving the dispute, according to Prime Minister Saad Hariri. Large gas reserves have been discovered in the eastern Mediterranean in recent years, including the giant Zohr deposit in Egyptian waters and the Leviathan and Tamar fields off the Israeli coast.

With a public debt amounting to around 150% of its GDP, according to the International Monetary Fund, and its economy weighed down by the cost of supporting 1.5 million refugees from Syria’s war, Lebanon is counting on revenue and taxes from discoveries to shore up its finances. That could help bolster fragile political breakthroughs this year in a nation once again caught in the middle of regional conflict.

It could, though, be some way off, said Carole Nakhle, director of London-based Crystol Energy.

“Experience shows that gas discoveries, particularly offshore, take time to be brought on stream. In Lebanon, this is more so because of lack of infrastructure,̶1; she said.

Seismic surveys show the country has at least 96 Tcf of gas and 850 MMbbl of oil, Gebran Bassil, who was then the country’s energy minister, said in 2013.

The government is also studying a bill on onshore energy rights as parliamentarians try to draft a law governing Lebanon’s first sovereign wealth fund, which would soak up revenue from oil and gas.

[maywillow] 13/12/2017 08:39

Total SA (FP.FR) said Tuesday that its board of directors has removed the discount offered for new shares to be issued as payment of the second interim dividend of the year, a move that sets the price for new shares at 46.55 euros ($54.86).

Shareholders have the option to receive the dividend in cash or in new shares of the company, it added.

The French energy group said the discount is the result of current oil prices--above $60 a barrel--and its performance in terms of cash-flow generation.

The ex-dividend date for the second interim dividend is set for Dec. 19, the company said.



Write to Marc Navarro Gonzalez at [e-mail]



(END) Dow Jones Newswires

December 12, 2017 13:22 ET (18:22 GMT)

[sarkasm] 12/12/2017 12:17

Total Eren set to build 70MW Indonesian site

12 December 2017 by David Weston , Be the first to comment

INDONESIA: The new renewables arm of oil and gas giant Total has signed a letter of intent with Indonesia's government-owned electricity provider to build a 70MW wind project on the island of Borneo.
UPC Renewables' 75MW Sidrap wind project is set to be the first large-scale onshore wind project in Indonesia
UPC Renewables' 75MW Sidrap wind project is set to be the first large-scale onshore wind project in Indonesia

The state-owned utility, PT Perusahaan Listrik Negara (PLN), signed the letter of intent witht developer Total Eren ahead of the One Planet Summit taking place in France, designed to "promote tangible means to achieve the Paris Agreement".

The 70MW Tanah Laut project will be build in Kalimantan, the Indonesian' part of the island of Borneo in south-east Asia.

Total Eren said its local subsidiary Pace Energy, has conducted a wind resource assessment of the proposed site over 20-months, which confirmed it was a "high-quality" project location.

GE's local subsidiary, GE Indonesia, will partner the project as technology supplier and has supported the project design and carried out the grid connection study, Total Eren said.

French conventional power player Total acquired a 23% stake in compatriot Eren RE in a €237.5 million deal in September. Under the terms of the deal, Total will have the option to take full control of Eren RE after five years.

Eren RE had roughly 650MW of wind, solar and hydro projects in operation or under construction across the world at the time of the acquisition.

[waldron] 12/12/2017 09:20

Sonangol, Chevron & Shell Join Tullow Oil and Total to Discuss Well Intervention in West Africa
Share Article

Eni Nigeria, Marathon Oil, Shell & Sonangol amongst offshore operators joined by leading well work experts at the Offshore Well Intervention Workshop West Coast of Africa on March 7-8:
News Image

We're delighted to see so much enthusiasm for this first time event - well intervention is key for West African operators and we look forward to promoting collaboration and innovative technology

ACCRA, Ghana (PRWEB UK) 12 December 2017

150+ senior well intervention experts will get together in March at the Mövenpick Ambassador Hotel in Accra to discuss their well intervention and P&A strategies in a bid to increase efficiencies and reduce the cost of both deepwater and shallow water projects.

Well intervention & completions experts Ihechi Ojukwu (Chevron Nigeria), Kelechi Victor (Nigerian Agip) & Ifeanyi Ugbor (Shell Nigeria) will speak alongside well engineering specialists including Andres Esono Ngui Obono (Marathon EG), Elike Mawuli (Tullow Oil) & Edward Kalu (Total Nigeria) to address some of the challenges companies are facing during workover, integrity and abandonment projects.

Key topics up for discussion include:

Well Intervention Economics: Examine how expanding the scope of work, multi-well campaigns and the availability of equipment can improve well intervention economics
Acid Stimulation: Hear how a scheduled program of well stimulation using coiled tubing or flexible pipe to bullhead acid can lead to optimized recovery with no downtime
Downhole Technology: Discover new section milling, fishing and retrieval tools as well as eline & CT services that enhance production while mitigating risk to your subsea formation
Late Life Management: As West African fields mature, discuss ways of optimizing late life production, ensuring integrity and preparing for P&A with an efficient end of life strategy
P&A: Study regional abandonment case histories to tackle challenges including annular pressure build up, cement placement, barrier validation and NORM contaminants

Other speaking organisations at the conference include Wild Well Control, Helix, Island Offshore, TechnipFMC, Oceaneering and many more…

To see a full breakdown of the agenda and speakers involved in the Offshore Well Intervention Workshop West Coast of Africa, download the conference brochure at

Sam Scarpa
Head of Conferences | Offshore Network Ltd.
t: [phone]| e: sscarpa(at)offsnet.com

[waldron] 12/12/2017 08:06

Total is on the Beehive field in Australia

Anthony Bondain, published on 12/12/2017 at 06:47
Total is on the Beehive field in Australia
Photo credit © Total Media

(Boursier.com) - Total and Santos have agreed to fully finance a 3D seismic survey for Melbana Energy, on the WA-488-P license, which contains the Beehive deposit, in the Australian offshore. In exchange, the French and Australian have an option exercisable together or individually to take an interest of 80% in the permit, one of the most promising sites in the country. If the option were exercised, Total and / or Santos would bear all development costs up to the first oil. In the event of a commercially exploitable discovery, Melbana would repay its share of financing using the cash flow generated. The preparation of the seismic study has started, with a planned start in mid-2018.

The information was revealed this morning in a statement from Melbana.

[waldron] 11/12/2017 08:25

Total SA (FP.FR) said Monday that its Hanwha Total Petrochemical 50/50 joint venture with Hanwha Group will invest $300 million to expand its integrated refining and petrochemicals platform in Daesan, South Korea.

The objective of the investment is to expand the joint venture's polymer production, Total said. With it, the site's polyethylene capacity will increase by more than 50% to 1.1 million tons a year by the end of 2019.

This additional production of polyethylene, the most widely used polymer, will fuel demand both in South Korea and China.

"After the expansion of the steam cracker announced earlier this year, this project will allow us to capture margins across the full value chain at this giant integrated platform", said Bernard Pinatel, Total's president of refining and chemicals.

Hanwha Total Petrochemical will use the advanced double loop technology licensed by Total and Chevron Phillips Chemical Company, it said, which will enable the production of a wide range of high-end specialty polyethylenes.

Daesan is one of Total's integrated platforms and a strategic asset for both shareholders, the company said. The site, which is comprised of a flexible condensate splitter, a competitive steam cracker and polymers, styrene and aromatics, generated a net result of nearly $1 billion in 2016.



Write to Marc Bisbal Arias at [e-mail]



(END) Dow Jones Newswires

December 11, 2017 02:50 ET (07:50 GMT)

[florenceorbis] 11/12/2017 08:04

TOTAL: Consolidation can continue
TEC on 11/12/2017 at 07:53
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TOTAL: Consolidation can continue

SYNTHESIS

The MACD is positive but below its signal line. The current dynamics is interrupted. In the event that the MACD becomes negative, the decline in prices could continue. The value of the RSI is less than 50: this confirms the weakness of the courses. Stochastic indicators do not give clear signals for the coming days. The traded volumes are below average volumes over the last 10 days.

MOVEMENTS AND LEVELS

After a high of 48.05 EUR, the stock corrects towards the 50-day moving average at 46.9 EUR: the behavior of the prices on this level will make it possible to envisage the continuation of the movement in the medium term. The first points of purchase (or short-term supports) are at 46.23 EUR and 45.31 EUR. Resistances are at 49.01 EUR and 49.48 EUR.
Last class: 47.03
Support: 46.23 / 45.31
Resistance: 49.01 / 49.48
Short term opinion: neutral
Medium term opinion: positive

[la forge] 10/12/2017 12:36

The Nest Egg Portfolio: Total's $5B + 5% Strategy Protects The Dividend
Dec. 10, 2017 6:35 AM ET|
1 comment|
About: TOTAL S.A. (TOT), Includes: ADRNY, AHODF, AMZN, BINCF, BINCY, BPOSF, BPOSY, BT, CEO, EURN, HDUGF, ING, KLPEF, MT, PBR, RDEIF, RDEIY, RDS.A, RDS.B, RIO, S, SCHW, STO, VOPKF, VOPKY
The Investment Doctor
The Investment Doctor
Long/short equity, value, debt, base metals
Marketplace
European Small-Cap Ideas
(5,754 followers)
Summary

Total reported excellent Q3 results, indicating the dividend is fully covered.

Q4 should be even better.

Ahold has shrugged off the fears surrounding the Amazon-Whole Foods Market deal.

This idea was discussed in more depth with members of my private investing community, European Small-Cap Ideas.
Introduction

After having discussed BT Group (BT) a few weeks ago to determine how sustainable its (generous) dividend is, in this week’s edition of the Nest Egg Portfolio I will have another look at Total (TOT) to determine how sustainable the dividend of this French integrated oil company is.

In case you missed the previous article, please click HERE, HERE and HERE to read it to make sure you’re fully up to speed!

All share prices mentioned in this article are the closing prices as of Wednesday (unless mentioned otherwise).

_____________________________________________________________

This article was first published at European Small-Cap Ideas, a Premium service by The Investment Doctor. See the end of the article for an important notice, as the subscription fee for European Small-Cap Ideas will increase from January 1 st on!

_____________________________________________________________
Portfolio update

Total’s E&P division now generates more operating income than the downstream segment

In the third quarter of 2017, Total was able to increase its total oil-equivalent production rate to 2.58 million barrels per day, an increase of more than 3% compared to the previous quarter, and an excellent 6% increase compared to the third quarter of last year.

The gas production actually decreased slightly (1%) on a QoQ basis, and the entire performance increase was due to exceptionally strong oil production results, where the output increased by approximately 94,000 barrels per day (+ 7.2%) thanks to a robust growth in the middle east (+20% QoQ) which is probably related to the startup of the Al-Shaheen oil field in Qatar.

And the third quarter actually was a really good one; Although the revenue increased by just 7.5% to $43B (compared to the $39.9B in Q2 2017), the net income increased by roughly 35% to $2.76B despite a much higher tax bill ($1.09B versus $472M in Q2 2017). Both the ‘refining & chemicals’ division (+292M operating income) and the ‘pure' exploration and production division (+$915M in operating cash flow).

But the main question now obviously is how this translates into a higher dividend coverage ratio. After all, it’s nice to get a dividend, but not if the company theoretically can’t afford the dividend.

Source: financial statements

If we would just look at the Q3 result, you’ll see the adjusted operating cash flow was approximately $5.42B after taking the working capital changes into consideration. The total capex bill in the third quarter was $3.1B, which results in an adjusted free cash flow of $2.32B, which is approximately $0.93 per share.

Using the current EUR/USD exchange rate of 1.16, this translates into a FCF/share of almost exactly 80 eurocents. As Total is paying a quarterly dividend of 0.62 EUR per share, it’s now pretty clear the dividend was fully covered based on the Q3 performance (with a coverage ratio of almost 129%), whilst Total was actually able to use the $522M in ‘excess’ free cash flow to strengthen its balance sheet.

Source: financial statements

This excellent performance in the third quarter obviously also has a positive impact on the YTD performance. If we would now run the same calculation based on the results of the first three quarters of the year, we would end up with an adjusted operating cash flow of $15.1B and a capex of $9.1B, resulting in a net free cash flow of $6B. A decent result, and sufficient to cover all three (normalized) dividend payments as the total cash requirement for 3 quarters would be 1.86 EUR per share, or $5.4-5.5B.

Whereas the dividend appeared to be just barely covered in the first semester, the excellent third quarter has increased the 9M dividend coverage ratio to 110%. As the oil price continued to increase in and throughout the fourth quarter, I dare to expect an even better free cash flow result which should take all uncertainties away.

Source: company presentation

As Total is also bringing the Yamal LNG project in Russia in production by the end of this year whilst it also expects the acquisition of Maersk Oil to be completed in the first quarter of 2018, the company seems to be very much on track to realize its ‘5+5’-plan. Total plans to incorporate $5B in savings by 2020, and increase the annual production rate by 5% until 2022. Both elements should help push the break-even price per barrel of oil from $30 to $20 by 2019, and that would be a huge achievement to ensure higher margins and increasing the dividend coverage ratio (and paving the way for dividend increases further down the road).

On top of that, production has started at the Libra oil field (offshore Brazil, 180 kilometers away from Rio de Janeiro) with an initial capacity of 50,000 barrels per day. The 5 joint venture partners (including Petrobras (PBR), Royal Dutch Shell (RDS.A) (RDS.B) and CNOOC (CEO) as well as CNPC) will soon decide on expanding the production capacity to 150,000 barrels per day. Total also sold its stakes in the Martin Linge field and the Garantiana discovery to Statoil (STO) for $1.45B. This sale will fund a part of the acquisition of Maersk Oil which will be completed soon. Once Maersk Oil will have been purchased, Total will remove the discount on its scrip dividend.

Source: company presentation

Long story short; Total’s dividend appears to be absolutely safe as the coverage ratio for FY 2017 will very likely exceed 120%. Dividend investors can sleep well at night – but don’t forget to make sure your paperwork to reduce the French dividend tax from 30% to 15% has been submitted!

Other additions/removals

I am selling 50 shares of Red Electrica Corporation at 19.07 EUR (Wednesday’s closing price) for a total net inflow of 934 EUR. The stock performed very well lately, and I’d like to ‘top up’ at a lower price (perhaps by writing a put option – see later). Besides this sale, there have been no changes in the portfolio. No positions were added or removed/reduced. I’m waiting for the December expiration date (see below) before initiating new positions or increasing the existing positions. I expect most of the written put options to expire worthless, which will pave the way to write new put options on companies I would really like to add to the portfolio.

Perhaps I need to make one shout-out here; Ahold (OTCQX:ADRNY) (OTCQX:AHODF) seems to have fought back against the negative perception after Amazon (AMZN) announced it was buying Whole Food Markets (WFM). Most investors thought this this would put a lot of pressure on Ahold’s supermarket chains in the USA, but these fears were exaggerated. The share price has now regained pretty much all of the ground it lost, as Ahold posted decent financial results and confirmed its share buyback program.

Source: finanzen.net

Incoming dividends

There haven’t been any dividend payments since the previous edition of the Nest Egg Portfolio. If I missed a dividend payment, please let me know in the comment section below, or per private message!
The current portfolio + updates

The expiration date for December options is next Friday, on December 15 th. As ArcelorMittal (MT), Klepierre (OTCPK:KLPEF), Red Electrica (OTC:RDEIF) (OTCPK:RDEIY) and Total (TOT) are trading above the strike prices, it’s very likely they will all expire ‘out of the money’. If that’s indeed the case, the coverage ratio will increase from 54% to 187%.

Should all options indeed expire worthless, we can pocket the total net option premiums of 391 EUR. This indeed isn’t an impressive amount, but it does represent a return of almost 0.4% on a 100,000 EUR portfolio in just a few months. The power of writing options!

That being said, the put options on BinckBank (OTC:BINCF) (OTC:BINCY) and Bpost (OTC:BPOSF) (OTCPK:BPOSY) will expire in the money. Should that happen, we’ll see a net cash inflow of 1,050 EUR (before transaction expenses) as the proceeds from selling Bpost at 24 EUR will be more than sufficient to cover the expenses related to the purchase of Binck stock. Binck enjoyed a pop recently (before coming back down to earth) after the company was tipped to be a buyout candidate. No names were mentioned, but Dutch banking and insurance company ING Groep (ING) would be the main candidate as simply buying Binck (and its existing clients) would be easier than rebuilding its own platform (interesting fact: in some of the countries Binck is active, it already uses ING Bank as its financial partner).. This isn’t the first time Binck is in the spotlights as back in 2010, Schwab (SCHW) also appeared to be interested in the discount broker when its market cap was almost three times higher.

December will be a busy option expiration month and once all the dust will have been settled, I will provide an update on the next steps as my fingers are itching to write more put options.
Updates / Other News from Europe

Back in November, I made a case for Vopak (OTCPK:VOPKF) (OTCPK:VOPKY) as a contrarian investment ( plagued by temporary headwinds), waiting for the contango on the oil market. As I explained in the article, Vopak’s business model is actually pretty good, but it fails to work in an oil market which is experiencing backwardation (why would someone want to store oil if it’s cheaper to buy futures for delivery in the future rather than taking delivery of oil right now and having to pay for storage? Once we’re back in a backwardation situation, Vopak should perform vey well as it’s continuing to invest in expanding its operations.

Elsewhere in the oil market, I thought Euronav (EURN) is a hold. The company remains cash flow positive, but the entire cash flow will be spent on a bunch of newbuilt vessels. The company’s management doesn’t appear to be positive about 2018, but with a young fleet and an experienced management team, Euronav would be (one of my) favorite(S) to gain exposure to the oil shipping sector.

Hunter Douglas (OTCPK:HDUGF) seems to be on track to quickly reduce its net debt position after its acquisitions in 2016 and 2017. The strong Euro isn’t helping, but the company should still be able to publish a very respectable amount of free cash flow. It generated $122M in free cash flow in the first nine months of the year, despite non-recurring charges and a higher-than-average total capital expenditure.

Seeking Alpha has now uploaded the Slideshow provided by Rio Tinto (RIO) at its Investor Seminar in Sydney earlier this week. It’s a very interesting read!

Contributor Fluidsdoc has provided his/her updated view on Royal Dutch Shell (RDS.A) (RDS.B), callingit a ‘Deep Water and LNG powerhouse’. I don’t disagree!
Conclusion

I’m glad to see Total was able to cover its dividend in the third quarter of this year, and I expect the company to perform even better in the current quarter as the (Brent) oil price is consistently trading above $60 per barrel. Total has always been a quality name in the integrated oil & gas sector, and I’m really impressed by its investment plans to increase the production rate. I’m convinced the company has a great future ahead.