TOTAL to Sell 4% Interest in Ichthys to Offset Cost Overruns

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TOTAL S.A . TOT announced that it has decided to sell 4% interest in the Ichthys liquefied natural gas ("LNG") project to its operating partner INPEX for $1.6 billion. This decision is subject to Australian regulatory approvals and will lower the company's stake in the Ichthys project to 26%.

The primary reason behind the decision to sell interest in Ichthys is to mitigate the impact of cost overruns. The final capital expenditure of the project is estimated to be $45 billion, up 12.5% from the estimates provided in 2017. The decision to sell 4% interest is to control its capital employed in Ichthys.

Importance of Ichthys

At full capacity, the Ichthys offshore facilities and the two-train onshore liquefaction plant will supply 8.9 million tons per year (Mt/y) of LNG and 1.65 Mt/y of liquefied petroleum gas (LPG), along with 100,000 barrels of condensate per day.

The demand for LNG is rising across the globe. Notably, a major portion of LNG produced from the Ichthys project is going to Japan. TOTAL's 26% interest in this project will boost its 2019 cash flow over the long term.


TOTAL has been working to expand its presence in the LNG market through acquisitions and partnerships, given the fact that demand for the clean burning fuel is rising across the globe. TOTAL's decision to acquire Engie's LNG portfolio for $1.5 billion will continue to support the company's LNG business.

Last month, TOTAL signed a Memorandum of Understanding with Sempra Energy SRE to cooperate in the development of North American liquefied natural gas (LNG) export projects.

Long-Term Plans

TOTAL is presently working to optimize its capital projects, and also concentrating on the proper execution of these projects, as well as lowering capital costs. The company plans to invest $16 billion in 2018 and in the range of $15-$17 billion in the 2019-2020 time period.

TOTAL's long-term outlook is likely to increase its upstream production by 6-7% per year on an average between 2017 and 2020.

The company also makes strategic acquisitions to expand its operations. The development of the company's asset portfolio through organic and inorganic means has resulted in the creation of strong production growth profiles.

Zacks Rank & Key Picks

TOTAL currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry are Eni Spa E , sporting a Zacks Rank #1 (Strong Buy), and Premier Oil PLC PMOIY , which carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here . Eni Spa and Premier Oil's earnings estimates for 2018 have moved up15.9% and 34.5%, respectively, in the past 60 days.

Shares of Eni Spa, Premier Oil and TOTAL have outperformed the broader industry in a year's time.

One Year Price Performance

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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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