Total SA: A quiet and steady oil giant
With little fanfare, this blue-chip company churns out solid returns for conservative investors.
Total SA (TOT) is well diversified across geography, energy production, and production output. We rarely need to update our view on this French oil giant; since we bought it in 2012, it has just been a quiet and steady performer, returning more than 25%.
There are a lot of moving parts, and most of these moving parts depend on the current price of oil and natural gas. Little of what the company does flies under the radar.
Lately, though, Total deserves a shout-out: it raised its quarterly dividend to 78.6 cents per share and recently hit a 52-week high. Over the past 12 months, Total has outperformed primary competitors Exxon Mobil (XOM), Chevron (CVX) and BP (BP).
My investment thesis when I first recommended Total centered on its depressed share price due to an oil and gas spill it was struggling to contain in the North Sea.
Estimates at the time, which I believed were grossly exaggerated, had the spill costing Total billions of dollars. Costs to maintain and clean up the spill turned out to be far below the exaggerated estimates.
To be sure, the closure of the North Sea Elgin platform (as well as a few other minor disruptions in Africa) caused 2012 production to fall 2%. But new start-up operations will drive production higher by 3% annually through 2016.
Catalysts for long-term growth include a new major stake in promising deepwater oil fields off Angola and Nigeria. Total's involvement in promising LNG projects in Russia's Arctic and Angola will also help fuel the company's long-term growth.
I continue to recommend Total. Its 5.7% yield puts it near the top of all the integrated oil and gas giants. In addition, Total's upstream unit costs tend to be lower than its peers, while its reserves are generally younger.
Total is big and well vetted by energy analysts. It remains a safe dividend-paying investment that's a worthwhile addition to any conservative income portfolio.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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