Total Develops Islay Gas Field - Analyst Blog

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) received the approval to develop the Islay gas fields -- situated in the northern North Sea, 440 kilometers north east of Aberdeen, Scotland -- from United Kingdom Department of Energy and Climate Change and the Norwegian Ministry of Petroleum & Energy. Total expects to start production from the field in the second half of 2011.

The Islay gas field was discovered in 2008 and lies under 120 meters of water with an estimated 17 million barrels of oil equivalent of gas and condensate reserve. Total S.A. owns the entire interest in Islay. Also, the company has sole ownership in Alwyn North, Dunbar, Grant, Ellon, Nuggets, Forvie North and Jura fields in the same region. Islay is 3 kilometers east of Jura and will be connected to Total’s Alwyn facility.

The company estimates peak gas production from the Islay gas field at 2.5 million cubic meters per day. The company plans to develop the offshore Islay gas field on UK Block 3/15 and Norway Blocks 29/6a and 29/6c.

With the upstream project Laggan-Tormore already having launched in first-quarter 2010 and gaining approval for developing the Islay gas field, the company expects to strengthen its foothold in the North Sea and in the United Kingdom Continental Shelf. Total S.A. is also vending mature assets in Norway and in the U.S. in an effort to optimize its upstream portfolio.

Total S.A. has been recording production growth over the past few quarters. The company expects to continue the trend based on the projects that began in 2009 and start-up of the second Yemen LNG train at the onset of second-quarter 2010. Major projects include Pazflor in Angola, Usan in Nigeria, Kashagan in Kazakhstan and Surmont Phase 2 in Canada. Combined production at Total during the first quarter of 2010 was 2,427 thousand barrels of oil equivalent, up 2% quarter over quarter.

The Zacks Consensus Estimate for second-quarter 2010 is earnings of $1.63 per share. For full-year 2010 and 2011, the Zacks Consensus Estimates are a respective $6.21 per share and $6.95 per share.

The constrained commodity environment at present remains a cause of concern for Total. Oil prices are expected to remain weak in the near term due to the moderation of global oil demand, particularly in China. The company also incurs a high level of capital spending. Hence, we maintain an Underperform recommendation on Total with a Zacks #4 Rank (Sell) on the stock.

Based in Courbevoie, France, Total S.A. is an integrated oil and gas company conducting operations worldwide.