TOTAL S.A. (TOT) is working on a plan to transform itself by 2017. TOTAL aims to lower its operating costs, concentrate more on upstream operations and effectively manage its asset portfolio.
Increase in Total Production
TOTAL operates on a global scale having assets in all the continents of the world. Currently, the company’s projects are at different stages of completion. TOTAL’s goal is to complete all these projects by 2017 and what is more important inside the budget.
Completion of these projects will boost total production by 600 thousand barrels of oil equivalent (kboe) per day, taking it to 2,800 kboe per day in 2017, from the present level.
Asset Divestment Continues
TOTAL continues to pursue its asset divestment strategy. In the period 2015-2017 the company plans to divest additional assets worth $10 billion. TOTAL has already reached its divestment target for 2012-2014. The company will utilize the net proceeds to make strategic acquisitions which are in sync with its long-term objectives.
Cost Savings Initiatives
The company implemented certain cost-saving initiatives which are directed to lower its operating cost by $2 billion per year by 2017. TOTAL expects the real benefit from these cost savings to show up from 2015.
To Sum Up
The above initiatives from this integrated oil and gas giant, in addition to the ongoing restructuring of the Refining & Chemicals business and the expansion of Marketing & Services in high growth areas will pave the way for incremental cash flow from operations. The aim is to generate $15 billion in free cash flow by 2017. The improvement in free cash flow will help the company to enhance shareholder value through share buybacks and increased dividend payments.
We believe that the initiatives undertaken by TOTAL will help it to remain competitive in a tough business environment with formidable integrated oil and gas operators like BP plc. (BP), Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) among others.
TOTAL S.A. currently sports a Zacks Rank #3 (Hold).
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