Total (NYSE:TOT) plans to boost capital spending by 16.5% in 2012 as the company looks to generate low-single digit percentage production growth through 2016. This capital will be allocated to various development projects and on exploration prospects in the company's inventory. (To know more about oil and gas, read Oil And Gas Industry Primer.)

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

2012 Capital Budget
Total has set a $24 billion capital budget for 2012, with more than 80% dedicated to the company's upstream segment. The company spent an estimated $20.6 billion in 2011. These funds will be used to help meet the company's goal of growing production at an average annual rate of 2.5% from 2010 to 2015.

The company reported average daily production of 2.35 million barrels of oil equivalent (MMBOE) in 2011, down 1% from 2010. The company said that approximately 52% of this production was composed of crude oil and other liquids.

Pazflor
One of Total's major projects is the Pazflor development located offshore Angola. This project started production in August 2011 and has an estimated 590 million barrels of proven and probable reserves. The company expects the productive capacity of Pazflor to peak at 220,000 barrels per day. Other companies that have an ownership interest in the Pazflor development include Statoil (NYSE:STO), Exxon Mobil (NYSE:XOM) and BP (NYSE:BP) with 23.33, 20 and 16.67%, respectively.

Exploration
Total has budgeted $2.5 billion in 2012 for various exploration prospects across its portfolio. This is a substantial increase over the $2.1 billion spent in 2011. The company has dozens of prospects with the most promising in Bolivia, Norway, French Guiana, Southeast Asia and Angola.

2011 Exploration Success
Total reported several successful exploration wells in 2011, and plans to delineate these discoveries further in 2012. In French Guiana, the company was involved in the Zaedyus exploratory well drilled by operator Tullow Oil. Total has put a preliminary resource estimate on this prospect of 500 million to one billion BOE. Royal Dutch Shell (NYSE:RDS.A, RDS.B) is also involved here and owns a 45% share of this prospect. Tullow Oil plans to drill two more wells here in 2012.

Another major success in 2011 occurred in Bolivia, where Total reported the success of the Aquio-X1001 exploratory well. The company estimates that the potential natural gas and condensate resources here may exceed one billion BOE.

Total also reported exploratory success in the Azerbaijan area of the Caspian Sea. The company drilled the Absheron X-2 well and found 500 feet of net natural gas pay.

LNG Project
Total is also setting up the company for growth past 2015 and will generate some of this growth from the Ichthys liquefied natural gas (LNG) project in Australia. It owns 24% of this project, which is being developed in partnership with INPEX CORPORATION. Construction is expected to begin on this project in 2012, with the first production at the end of 2016.

The Bottom Line
Total's production decline in 2011 disappointed many investors and seemed to confirm that the major oil and gas companies are incapable of any growth. However, Total does have a significant inventory of development projects and exploration prospects that may yet generate the growth that investors yearn for. (For additional reading, check out A Guide To Investing In Oil Markets.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: WisdomTree SmallCap Earnings

    Discover the WisdomTree Small Cap Earnings ETF, a fund with a special focus on small-cap and micro-cap stocks with positive earnings.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares US Regional Banks

    Obtain information and analysis of the iShares US Regional Banks ETF for investors seeking particular exposure to regional bank stocks.
  10. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!