Zacks_Analysts' Blog : TOTAL Grows Indonesian Footprint - Analyst Blog

Oil and gas producer TOTAL S.A. (TOT) has tied up with Talisman Energy Inc. (TLM) to jointly develop three deep-offshore exploration blocks in the Makassar Strait in Indonesia. Located in the offshore South Makassar Basin at water depths of 1,312 to 6,561 feet, the three blocks cover an area of 4,128 square miles. The three blocks are operated by Talisman.

As part of the deal, TOTAL has acquired stakes in Talisman’s production sharing contracts (PSC) related to the blocks. The company has gained a 50% interest in the Sageri PSC, with Talisman holding the remaining 50% interest; a 35% interest in the South Sageri PSC, alongside Talisman (35%) and PTTEP (30%); and a 20% interest in the Sadang PSC, alongside Talisman (40%) and PTTEP (40%).

These acquisitions contribute to TOTAL’s strategy to further expand its acreage in new exploration areas, namely in deep offshore. The company hopes to continue investing in Indonesia in line with the government of Indonesia's efforts to tap potential hydrocarbon reserves of the country.

Per the joint exploration plan the companies will acquire 2D and 3D seismic as well as drill two exploration wells in the region. The first exploration well is planned to be drilled in the Sageri block by the end of 2011.

TOTAL will make use of its deep-offshore experience in contributing to the Makassar Strait project. Further, the company expects to benefit from potential synergies of its existing operations in the area, if a discovery is made.

TOTAL is present in Indonesia through its affiliates, Total E&P Indonesie (upstream) and PT Total Oil Indonesia (downstream). The company’s presence in the country dates back to 1968, with operations concentrated in the Offshore Mahakam block in East Kalimantan. It is also the largest gas producing operator in Indonesia, which accounted for 7.5% of TOTAL’s production in 2010, amounting to 180,000 barrels of oil equivalent per day.

France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations across five continents.

TOTAL S.A. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. The company competes directly with BP Plc (BP).