TOTAL Advances Divestment Goal, Plans to Sell $400M Assets
In view of the $5-billion non-core asset divestment plan, TOTAL S.A. TOT has decided to sell assets worth $400 million situated in Brunei, Sierra Leone and Liberia. The divestment of non-core assets in Exploration-Production (Brunei) and Marketing & Services (Sierra Leone and Liberia) will help the company maintain its high-grade assets portfolio amid the economic crisis induced by the COVID-19 outbreak.
After receiving approval from competent authority, the company has closed the sale of its 86.95% interest in Offshore Block CA 1 in Brunei to Royal Dutch Shell Plc RDS.A. Apart from TOTAL, Murphy Oil MUR and Petronas were the operators in the block, holding 8.05% and 5% interest, respectively. The company has signed an agreement to sell marketing and services businesses in Liberia and Sierra Leone to Conex Oil & Gas Holdings Ltd.
Factors Impacting the Oil and Gas Industry
The novel coronavirus has spread globally and forced governments across the globe to introduce different degrees of lockdown, which has adversely impacted transportation, manufacturing and commercial activities, in turn lowering the demand for crude oil and its prices.
Amid the low global demand for crude oil, Saudi Arabia and Russia continue to pump more crude in an already oversupplied market. Due to these developments, crude oil prices have declined 59.1% year to date.
The steep decline in the crude oil prices and no indication of any immediate improvement are adversely impacting the prospects of all companies operating in the oil and gas space. If the prices of the commodity do not improve, the highly levered oil and gas companies will find it very difficult to sustain in the long run.
How are Oil Companies Fighting Against the Crisis?
Such unprecedented drop in crude oil prices have forced majority of the oil and gas companies to lower capital expenditure to preserve liquidity. The companies are also delaying their scheduled drilling programs and cutting down production. TOTAL has lowered its 2020 capital expenditure guidance by nearly 20% to less than $15 billion.
Another energy major ExxonMobil XOM has decided to cut planned 2020 capital spending by 30% to preserve liquidity. ExxonMobil’s capital investment for 2020 are now expected to be nearly $23 billion, down from the previously announced $33 billion.
Price Performance
TOTAL has outperformed the industry in the year-to-date period.
Zacks Rank
TOTAL currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
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Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
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