Total (TOT) has made some major energy investments since I last profiled it on Seeking Alpha in September. The stock also has moved up some 20% since then as well. Given its low valuation, high dividend and expanding energy exploration opportunities; I believe it still has significant long term upside.
Key Events since September for Total:
1. Total and Chesapeake Energy (CHK) entered into a shale JV based in Ohio. Total will take a 25% stake in the venture and has paid $700M up front to do so. It also has made a commitment to pay another $1.63B over up to 7 years to help cover capital spending in the venture. This gets Total into the rapidly expanding Utica shale reserves.
2. Inpex Corp. (1064.TO) and Total SA recently gave the green light to construction of one of Australia's most expensive energy projects, estimated by the pair to cost US$34 billion to build over the next five years. This is a bold bet on the continued needs to supply energy to fast growing Asia.
3. Total and Statoil (STO) are planning a $38.2B investment in the largest drilling campaign in the U.K.'s North Sea in over 15 years. The initiative will focus on 50 deposits with an estimated 2B barrels of oil, and will eventually account for nearly a third of the U.K.'s expected output by 2019.
Key value observations on TOT:
- It still is under analysts' price targets. The median analysts' price target on Total is $62. S&P has a "Buy" rating and a $73 price target on the stock.
- Even after its 20% run up since September, it still yields north of 5% and also has a low beta for an energy stock (.91).
- Total still is selling near the bottom of its five year valuation range based on P/B, P/CF and P/S.
- The stock is extremely cheap at around 7 times forward earnings and less than 5 times operating cash flow.
Disclosure: I am long TOT.
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