SHEL - TotalEnergies: Could Namibia Be Its Guyana Moment?
2024-06-21 07:04:12 ET
Summary
- TotalEnergies delivered a solid Q1 with lower sales and production levels offset by a decrease in costs and downstream profits.
- Recent discoveries in frontier regions Namibia and Suriname of ~5.8Bboe (of which 5.1Bboe in Namibia) are key to provide long-term growth optionality post-2030.
- I estimate the aggregated equity resource of ~2.7Bboe could boost liquids reserves by up to 23% and be worth ~$10.1B or 5% of current market cap.
- Rumored interest in Galp's offered 40% stake in 10Bboe/$20B Mopane discovery could further cement Total's position in the region.
- I adjust my price target to $75/sh on an aligned valuation methodology but remain Overweight with Total a top pick among global oils.
I first began covering French Oil & Gas supermajor TotalEnergies ( TTE ) in March when I called it a top pick among European oils. Key reasons for that were 1) Total's unique outlook among the European majors to actually increase production in the near and midterm, well supported by a 2) leading reserve depth. While I see current developments in Brazil, Uganda and Iraq as main drivers of management's 2-3% annual production growth target through the decade, stakes in frontier fields in Suriname and Namibia will be key to provide growth optionality post-2030. At currently ~5.8Bboe in oil-rich discovered resource (5.1Bboe of which in Namibia), I estimate those findings to potentially boost liquids reserves by up 23% and carry a current value of ~$10.1B (5% of Total's market cap). With Galp looking to sell a 40% stake in its giant 10Bboe/$20B Mopane discovery just north of Total's Namibia block, I see scope for the company to boost its already leading position in the basin as a higher valuation on shares and better debt capacity should provide an edge vs rival European bidders Equinor and Shell....
TotalEnergies: Could Namibia Be Its Guyana Moment?