We have maintained our Neutral recommendation on oil and gas
major
TOTAL S.A.
(
TOT
). Aggressive drilling and a strong financial position open up
new opportunities for the company. On the other side of the coin,
global operations expose it to geo-political risks and
environmental hazards.
Why the Reiteration?
Third quarter 2012 earnings came in at $1.85 surpassing the Zacks
Consensus Estimate of $1.78. Total revenue at the end of
third-quarter 2012 was $62.37 billion as against $65.21 billion
in the third quarter of 2011. Over the past four quarters the
company has delivered an average surprise of 1.29%.
The company continued with its aggressive drilling and
exploration strategy. TOTAL leveraged its strong financial
position to make acquisitions and divested its less productive
assets during the quarter to become more competitive.
TOTAL operates in more than 130 countries which provides a stable
production stream, but also makes it vulnerable to exchange rate
fluctuation, political turmoil and change in policies from the
governments.
The incidents in the UK North Sea and Nigeria have taken a toll
on the total hydrocarbon production of the company. Hydrocarbon
production in the third quarter was 2,272 thousand barrels of oil
equivalents per day, down 2% from the prior-year comparable
period.
The new projects started by the company during the second half of
2012 is likely to have a positive impact on its production in the
forthcoming years. At the same time weak demand from Europe due
to the lingering debt crisis still remains a headwind.
Following the release of third quarter results, the Zacks
Consensus Estimate for 2012 has gone up by 3.4% to $6.95 per
share. Moreover, the Zacks Consensus Estimate of $7.02 per share
for 2013 has also gone by 1.03%.
Other Stocks to Consider
TOTAL presently retains a Zacks #4 Rank (Sell). Other large
companies operating in the oil & sector are
BP Plc.
(
BP
),
Chevron Corporation
(
CVX
) and
Exxon Mobil Corporation
(
XOM
). All these companies carry a Zacks #3 Rank (Hold).
BP PLC (BP): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis
Report
TOTAL FINA SA (TOT): Free Stock Analysis
Report
EXXON MOBIL CRP (XOM): Free Stock Analysis
Report
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