The company subject to various risk in many field such as economic, political, legal, social, industry, business and financial condition.
The long term profitability depends on cost effective discovery, acquisition and development of new reserves.
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The most important fact about Total: The average production in Qatar 74,000 barrels of oil equivalent per day in 2007 and they accept this number will rise dramatically, also they activities petrochemicals “in Total website”. Total in 2008 sold 20% of their stake in the Taoudenni Ta7 and Ta8 which is Mauritania to Qatar Petroleum International. In the 2009 they open Gas2 project for natural gas which consists of trains of 7.8 million tons per year and
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The price of natural gas and oil have fluctuated widely because of some factors without Total control, these factor are: Supply and demand for global regional and economic and political development in the global and regional resources producing regions, especially In the Middle East, Africa and South America also the ability of OPEC and producing countries to control and influence the level of production and prices and other thing which is effect on the price which is the cost and availability of new technology also the price of non-conventional energy and economic condition and the global financial market and the last one is changes in demographics, including population growth rate, and consumer preferences. Significant reductions in prices or extend the oil and natural gas, which would adversely affect the results reducing their profit for the year 2014.
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Financial information: to purpose the performance of the financial information better and clearer they change the currency from euro to U.S dollar but the parent company still using the euro as currency.
A decrease of 1.00 per barrel in the annual average price of Brent crude would affect in reducing the annual net income of the sector to the exploration and production of about 0.120,000 billion.
The shareholders: The shareholders in the total hold an important position, they have a share of capital and voting rights exceeds 5%. Before 2013 Total
Identify the potential risks which affect the company and manage these risks within its risk appetite;
It turns out that the market for natural gas is a very competitive one and that there is in fact a shortage in supply that is causing the price to increase. Natural gas must be drilled for and there are only a certain number of active companies that drill and they all have a set amount of capital. In the short run the supply of natural gas is very inelastic because they cannot just produce more gas. They would need
California has one of the highest gas prices in the United States (Laskoski, usnews.com). However, compared to many developed nations, United States has one of the cheapest gas prices (Hargreaves, CNNMoney.com). Discussion of the reasons gas prices fluctuate is a detailed matter which requires an overview, starting from the extraction of crude oil, chemical processes, regulations, taxes, and gas retail market. The factors that can affect the price at gas station can be categorized into three main categorize including crude commodity prices, technology regulation and taxes, and retail market. As crude oil is the base resource for the production of gasoline (also known as Gas or Petrol, not be confused with Petroleum) its price plays an important
From 2014, the crude oil price has dropped in a sudden since the global economic downturn, oversupply of crude oil and the appearance of new energy. Global economy fatigued, and thus the demand of crude oil was not strong,
According to Simon Flowers of Wood Mackenzie, an industry consultancy, says that “even at $30 a barrel, only 6% of global production fails to cover its operating costs”. It may be uneconomic to drill new deep water wells at prices under $60 a barrel, he says, but once they are built it may still make economic sense to keep them running at prices well below that (see chart 2). Such resilience is used by some to justify why they expect prices to remain “lower for longer” (The Oil Conundrum).
According to Domm (2013), the author of the first article, apart from the unrest in Egypt, several other factors such as a plunge in the inventories of domestic crude oil could drive up demand and in the end trigger an increase in the price of gas. In the opinion of the author, although the problems facing Egypt (and Libya) have affected supply
We can describe the risk by evaluation of Financial, Market , Technical and Management feasibility for our enterprise.
The satisfactory level of risk a company is prepared to acknowledge. An organization 's risk profile attempts to decide how the company 's willingness to take risk will influence its general decision-making methodology. The more the risk connected with any investment, the more
Financial risk is “the chance that the firm will be unable to cover its financial obligations” (Gitman, 2009, p. 229). The primary driver of financial risk is “the predictability of the firm’s operating cash flows and its fixed-cost financial obligations” (Gitman, 2009, p. 229). From the owner and managers’ perspective, the financial risk is a real concern during the first years of being in business.
An overall risk profile of the company based on current economic and industry issues that it may be facing.
Economist has analyzed the causes of decline in world oil prices. Typically, the price of oil is determined by demand and supply of the world market and forecast advance to invest in which level of demand depends on the level of economic activity and behavioral use of energy from humans. The oil price decline has a benefit for oil importers like China, India, Japan, Europe but unfortunately for oil exporters such as: Kuwait, Venezuela, Nigeria, and Iraq. Crude oil prices fell steadily in the past seems to be a result of two main factors being the levels of demand declining and a level of increased supplies (Economic, 2015)
The volatility of crude oil prices have been experienced since the end of the 20th century. The March 1999 spikes were experienced due to the restriction of crude oil production and cooperation among OPEC member states, the growth of oil demand in Asia that signified its recovery following the Asian financial crisis and decreased production from non-OPEC countries (Al-Abri, 2013). The world market reacted with a sharp rise in prices with the increase in crude oil going beyond 30USD/barrel in the last quarter of 2000 (Chen, Hamori and Kinkyo, 2014). OPEC countries tried to stabilize prices through the increase or reduction in production to a range of 22USD per barrel to 28USD per barrel (Ghosh and Kanjilal, 2014). The incident on September 2001 caused a deep reduction in crude oil prices, irrespective of earlier decreases in production by exporters that are non-OPEC and quota reduction by OPEC countries. After a short while, prices rose to 25USD per barrel with prices going beyond this in 2004 to about 40USD per barrel (Jimenez-Rodriguez, 2011).
The fall in oil prices in 2014 is a part of the volatility that the oil and gas sector normally face. This has caused a critical selection on investment decisions as well has keeping track on cost so as not to bring about an unwanted increase.
Oil has become the means of survival for both consumers and producers. Consequently, the fluctuations in the price of oil have become one of the greatest concerns in the economy. According to Branginskii, ‘the market of energy carriers, primarily oil, are a great threat to world economy. Lack of clarity with crude oil prices
Business risk is the possibility that a company will have lower than anticipated profits, or that it will experience a loss rather than a profit. Business risk is influenced by competition, economic climate, government regulation amongst others. A company with a higher business risk should choose a capital structure that has a lower debt ratio to ensure that it can meet its financial obligations at all times. The ratios used to evaluate business risk include the contribution margin ratio, operating leverage ratio, financial leverage ratio and total leverage ratio.