TOTAL to Sell Interest in Shah Deniz Field - Analyst Blog

International oil and gas major TOTAL S.A. TOT has decided to shed its 10% interest in the Shah Deniz field and the South Caucasus Pipeline in Azerbaijan to Turkish state-owned E&P company, TPAO. The transaction, subject to customary approval, will boost TOTAL's liquidity by $1.5 billion. TOTAL has a presence in this country for nearly two decades.

TOTAL acquired its stake in the BP plc BP operated Shah Deniz field in 1996. BP holds a major  28.83% interest while the other partners in the field are SOCAR with 16.67%, Statoil ASA STO with 15.5%, TOTAL, Lukoil, Nico with 10% each and TPAO with 9%. Following the transfer of TOTAL's interest, TPAO will become the second largest interest holder in the field.

The decision to monetize its interest in Shah Deniz does not mean TOTAL will exit Azerbaijan altogether. Post Shah Deniz, the company will concentrate on the offshore field of Absheron, a discovery made in 2011. TOTAL is the operator with a 40% interest and has plans to develop this field.

The long-term strategy of the company is to have a well spread out global production portfolio by adding as well as shedding assets. In 2013, the company acquired assets worth $4.5 billion and disposed assets amounting to $4.7 billion. Since 2012 the company has shed $16 billion of assets and has plans to divest $15–20 billion.

TOTAL also aims to enlarge its interest in joint assets. This initiative gives the company the right to have a bigger share of the profit pie. Recently, the company entered into a joint venture with Lukoil to explore and develop the tight oil potential of the Bazhenov play in Western Siberia. Total will hold 49% and Lukoil will have 51% of the project.

Management at TOTAL is active on cutting deals to pave the way for the best possible returns for its shareholders. The Bazhenov joint venture is expected to further strengthen its position in non-conventional hydrocarbons plays.

TOTAL currently has a Zacks Rank #3 (Hold). Investors interested in the oil and gas industry may consider stocks like OMV Aktiengesellschaft (OMVJF), which holds a Zacks Rank #2 (Buy).

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