BP plc (ADR) (BP), Exxon Mobil Corporation (XOM): Will Big Oil Regret Abandoning Renewables?

The exception
French giant TOTAL S.A. (ADR) (NYSE:TOT) holds some surprises. The company owns a $1.7 billion majority stake in the solar manufacturer SunPower Corporation (NASDAQ:SPWR). Its stake is relatively small, as it works out to be a little more than 1% of Total’s market cap, but put it in the context of renewable investments by the oil industry and it is pretty significant.

While BP plc (ADR) (NYSE:BP) sold its renewable assets and Exxon Mobil Corporation (NYSE:XOM) has only made token investments in biofuels, TOTAL S.A. (ADR) (NYSE:TOT) decided to invest in SunPower Corporation (NASDAQ:SPWR) when solar’s future was very grim and China was putting great pricing pressure on the industry. SunPower has been able to differentiate its products through high efficiency panels and strong warranties.

TOTAL S.A. (ADR) (NYSE:TOT)’s capex still goes toward traditional projects like King Lear in Norway and its recent discovers in Uganda, but its decision to invest and stick with SunPower Corporation (NASDAQ:SPWR) shows that it has strong foresight.

In 2012, TOTAL S.A. (ADR) (NYSE:TOT)’s reserve replacement ratio was 93%. Even in the midst of new discoveries, Total still needs help to fight declining reserves. With an EBIT margin of 10.8%, Total is throwing off enough cash to pay its dividend and support new exploration, but in the coming decades its renewable investments may be critical to fight falling income from a falling reserve base.

Bottom line
TOTAL S.A. (ADR) (NYSE:TOT)’s billion-dollar investment in SunPower Corporation (NASDAQ:SPWR) shows that the company is willing and able to consider alternatives to traditional fossil fuels. Exxon Mobil Corporation (NYSE:XOM) and BP plc (ADR) (NYSE:BP) have both backed off of renewables, but they are stuck drilling in expensive ultra-deepwater fields, expensive oil sands or politically volatile nations. In the long run, Total’s willingness to put its money in renewables may prove to be one of the wisest choices it has made.

The article Will Big Oil Regret Abandoning Renewables? originally appeared on Fool.com.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends Total SA. (ADR). 

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