Total acquires a 12.09% interest in NOVATEK Report

Deal Insight 02 March 2011

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Report summary

Total and NOVATEK have formed a strategic relationship that will boost Total's mid to long-term growth outlook, and give NOVATEK access to the Majors' global industry experience and know-how. The companies have signed 'Memoranda of Cooperation' covering two separate transactions: 1) Total will acquire a 12.08% stake in NOVATEK for US$4 billion, with plans to increase this to 19.40% within 36 months; 2) Total will gain a 20% stake in Yamal LNG - a proposed greenfield LNG ...

Executive summary
Transaction details
Upstream assets
- 1) Equity stake in NOVATEK
  - Technical resource base offers upside
Deal analysis
- Domestic gas pricing reform is a key valuation sensitivity
- Significant hurdles to a 2016 start-up
- Progress will require a politically backed shift in dynamics
Strategic rationale
- Total boosts near-term growth and further expands long-term opportunity set
  - Equity stake in NOVATEK provides Total with another production growth stream
  - Deal adds to Total's range of LNG growth options but lack of control is a concern
  - Total's appetite for above-ground risk appears undiminished
- NOVATEK
Oil & gas pricing and assumptions

Tables and charts

This report includes 8 images and tables including:

Deal analysis: Table 1
Deal analysis: Table 2
Oil & gas pricing and assumptions: Table 1

Oil & gas pricing and assumptions: Table 2
NOVATEK and Total Russian assets
Upstream assets: Table 1
Wood Mackenzie forecast of NOVATEK production, plus best-case Yamal LNG upside* (gross)
Impact of NOVATEK equity on Total production outlook and resource base *