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TOTAL Provides Long-Term Outlook, Aims to Hike Production

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The global oil and gas major TOTAL S.A.TOT provided a long-term outlook, aiming to increase production by an average of 6-7% per year between 2014 and 2017 and by an average of 5% per year between 2014 and 2019. Thanks to 20 major startups across the globe, 8 of which are scheduled this year, the company is on course to achieve its production goals. TOTAL achieved an 11% year-over-year increase production in the first half of 2015.

The company also aims to lower its organic capital expenditure from $23-24 billion planned for 2015 to $20-21 billion in 2016, before settling down to to a sustainable level of $17-19 billion from 2017 onward. The planned capital expenditure reduction is not going to impact the scheduled startups.

Due to the ongoing softness in oil prices , TOTAL has made plans to lower its operating expenses, which will definitely boost margins. The cost reduction program that started in 2014 was further emphasized in Feb 2015 with a targeted saving of $1.2 billion in 2015. Having already achieved 66% of the savings for the year by the first half, TOTAL has decided to step up cost reduction by 50% to $3 billion from the $2 billion planned for 2017.

TOTAL continues to sell non-core assets and utilize the proceeds to add assets which are in line with its long-term growth objectives. The company has a target of divesting assets worth $10 billion in the 2015 to 2017 time frame.

In the long run, the company aims to invest 75% of its planned capital expenditure in its upstream operations and the remaining in its downstream business.

TOTAL has already ventured into the alternate energy business by acquiring SunPower Corp. SPWR , which is involved in some large-scale solar projects. To further augment its presence in the renewable space, the company decided to invest $500 million per year in new energies. Alternate energy sources are expected to contribute increasingly to power generation in the coming decades.

Finally, the company also plans to continue with its R&D investments, aiming to increase it by 3% per year. These investments will help in new product development and expand the customer base. In addition, innovative ways of drilling in deep seas will help the company to lower expenses and boost production from deep offshore fields.

The targets set by this Zacks Rank #3 (Hold) stock looks promising amid ongoing weakness in oil and gas prices. However, some better-ranked stocks in the oil and gas space are Braskem S.A. BAK and Carrizo Oil & Gas Inc. CRZO , both sporting a Zacks Rank #1 (Strong Buy).

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TOTAL FINA SA (TOT): Free Stock Analysis Report

BRASKEM SA (BAK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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