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Total upbeat on value of Mozambique LNG assets

Area 1 operating stake part of company's $8.8 billion purchase of Anadarko's African holdings

Total chief executive Patrick Pouyanne this week defended the company's roughly $4 billion bid for an operating stake in Mozambique LNG, saying the purchase price compares favourably with other deals in the East African nation's nascent liquefied natural gas industry.

The French supermajor is set to become operator of the project in Mozambique's offshore Area 1 licence upon completion of a deal announced earlier this year to acquire Anadarko Petroleum’s African assets for a total of $8.8 billion.

Speaking after the company revealed a drop in second-quarter net profits, Poutanne said: “We will pay about $150 million per percentage of working interest for these assets — around $4 billion for 26.5%.”

He compared Total’s entry into Anadarko-operated Area 1 with previous stake sale-and-purchase agreements in Mozambique this decade.

Although he said the deal between ExxonMobil and Eni in Area 4 was done at $110 million per percentage of working interest, Pouyanne argued that the Area 1 project has been comparatively de-risked by Anadarko’s recent final investment decision on the first two-train development, whereas plans for Area 4 await sanction.

“On Area 1 — our licence — all transactions which took place between 2012 and 2014 — PTTEP-Cove Energy, ONGC-VideoCom, ONGC-Anadarko — took place at between $200 million and $260 million per percentage of working interest,” Pouyanne continued.

“So, I strongly argue that this transaction was done at attractive conditions.”

Pouyanne highlighted that a report from energy analysis company Wood Mackenzie on the price of it its Mozambique LNG stake “values only the first two trains”.

“Anyone that is using this alone is grossly undervaluing this one-of-a-kind asset,” he said.

The first phase development of Mozambique LNG involves two same-sized trains with combined capacity of 12.88 million tonnes per annum of LNG, with long-term offtake agreements already in place for 90% of that capacity.

Pouyanne said Anadarko’s African assets — including producing assets in Algeria and Ghana and exploration acreage off South Africa — will bring more than 3 billion barrels of resources at less than $3 per barrel.

Production of 100,000 barrels per day will rise to 160,000 bpd by early 2025, with the deal being free cash flow positive from day one — inclusive of Mozambique capital expenditure.

Total has set its sights on at least $5 billion of asset sales by the end of next year.

The divestment, which includes more than $3 billion of upstream assets, is “part of the necessary discipline linked to our capacity to be agile to seize opportunities,” Pouyanne said.

The company looks set to exit some countries where it has limited production, while also selling some downstream infrastructure and some stakes in renewable energy companies.

Pouyanne also said the company is likely to confirm in September its capital expenditure guidance of between $16 billion and $18 billion each year between 2019 and 2023. This would be organic capex plus acquisitions and minus asset sales.

Total booked consolidated net profit in the second quarter of $2.8 billion, down from $3.64 billion a year earlier. Revenues were relatively flat at $51.24 billion as against $52.54 billion.

Total production shot up 9% to 2.96 million barrels of oil equivalent per day from 2.72 million boepd, with liquids output up 3% and gas up 21%.

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