Kurt Wulff (McDep Associates) submits: Integrating upstream production with downstream refining and chemicals helped buy-recommended Total (NYSE: TOT - News) report solid results for the first quarter 2007 on May 4 that reinforce estimated net present value [NPV] of $80 a share.
At 28%, Total’s NPV is more concentrated on natural gas, all outside North America, than mega cap peers. Weighted natural gas reserves are widely diversified globally. Uptrends in long-term price for both natural gas and oil point to higher value for Total’s upstream business.
Downstream, 22% of NPV, benefits from the strengthening crack spread. An increase in the year over year refining margin balances the decrease in year over year oil price. The startup of the Normandy hydrocracker further demonstrates what Chief Financial Officer Robert Castaigne calls “the success of the integrated model.”
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