Total, Partners Launch Third Phase Of Mero Oil Project In Brazil

French energy company Total SA and its partners announced Monday that they have rolled out the third phase of the Mero deep offshore oil project located off the coast of Brazil.

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Total (TOT) said that the Mero 3 floating production storage and offloading vessel (FPSO), which will have a liquid treatment capacity of 180,000 barrels per day, is expected to start operating by 2024. The Mero field is located 180 kilometers off the coast of Rio de Janeiro, in the prolific pre-salt area of the Santos Basin.

The move comes after the decision to develop the Mero 1 vessel, which is expected to start operating in 2021 and the Mero 2 vessel slated to begin operating in 2023. Both of which have a liquid processing capacity of 180,000 barrels per day.

“The decision to launch Mero 3 marks a new milestone in the large-scale development of the vast oil resources of the Mero field – estimated at 3 to 4 billion barrels. It is in line with Total’s growth strategy in Brazil’s deep-offshore, based on giant projects enabling production at competitive cost, resilient in the face of oil price volatility,” said Arnaud Breuillac, Total’s President of Exploration & Production. “The Mero project will contribute to the group’s production from 2020 onwards, and we are targeting a production of 150,000 barrels per day in Brazil by 2025.”

The Mero field has been in pre-production since 2017 with the 50,000-barrel-per-day Pioneiro de Libra FPSO. The Libra consortium is operated by Petrobras (40%) as part of an international partnership including Total (20%), Shell Brasil (20%), CNOOC Limited (10%) and CNPC (10%).

Total has been present in Brazil for over 40 years and has more than 3,000 employees in the country. The energy company, which produces and markets fuels, natural gas and low-carbone electricity, has 100,000 employees and is active in more than 130 countries.

Shares in Total have been hard hit dropping 29% so far this year as the coronavirus pandemic pushed oil prices down, while energy demand is weak. Looking ahead, the $49.14 average analyst price target forecasts 24% upside potential in the shares in the next 12 months.

Piper Sandler analyst Ryan Todd today raised the stock’s price target to $50 (27% upside potential) from $47 and maintained a Buy rating.

Overall, Wall Street analysts share Todd’s bullish outlook on the stock. The Strong Buy consensus rating shows 6 Buy ratings versus 1 Hold rating. (See Total’s stock analysis on TipRanks)