Investors Pressure Total to Dump Nigeria Stake
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France’s Total SA (NYSE: TOT) has sold its 20% stake in a Nigerian offshore oilfield to Chinese state-run Sinopec for $2.5 billion.
This means Total has dumped its deep-water Usan production operation, with a 180,000 bpd production capacity and a 2 million barrel storage capacity. At the time of the sale announcement, however, the facility was only pumping about 130,000 bpd.
Usan had only opened in early 2012, so why dump it already? According to the French company, it’s raising cash for new ventures and it plans to dump up to $20 billion in assets through 2014.
However, so far, Total has sought to dump assets that are overly mature, and Usan only starting producing oil in February. This sale bucks the trend because Total was operating the Nigerian oil field from a minority position. The state-run Nigerian National Petroleum Corp. holds the concession on the field, with Chevron (NYSE: CVX) (30%), ExxonMobil (NYSE: XOM) (30%), Nexen Petroleum Nigeria Ltd. (20%) also owning shares.
Other assets Total has recently unloaded were “mature,” including its TIGF gas storage unit, and all of its assets in Cameroon to French group Perenco SA in 2010.
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The industry has shown a bit of skepticism recently over Total’s ability to finance its $20 billion investment plans by 2015 in order to renew its hydrocarbon resources. And divesting these assets is intended to dispel uncertainty.
It’s been a rough year for Total. Production setbacks as a result of a North Sea gas leak, pipeline sabotage in Yemen and conflict in Syria (where Total was the only operating Western oil company) and flooding in Nigeria have hindered the company’s outlook. And this year, output will likely be lower than last year.
For now, Total is targeting even riskier—but potentially more profitable—ventures, with its eye on Angola, Uganda and Azerbaijan. It is also keen to cut in on shale gas and oil sands, for which it will require a greater investment commitment due to the higher costs of extraction and production.
The Nigeria sale still requires the approval of the Nigerian authorities to go through.
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Nigeria produces around 2 million bpd.
China’s role in Nigeria has been interesting. Recently, it has gained a stronger foothold by offering loans to the country, and can be expected to bid on more oil blocks.
At the same time, the Nigerian government plays China off the West in order to force higher bids.
China’s Sinopec, in the meantime, is becoming a global power house, most recently acquiring a 49% stake in UK North Sea oil and gas assets (sold by Canada’s Talisman Energy) and stakes in Devon Energy’s drilling properties in the US.
This post was written by Jen Alic of Oilprice.com. oilprice has no positions in the stocks mentioned above. The Motley Fool owns shares of ExxonMobil. Motley Fool newsletter services recommend Chevron and Total SA. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!