The first stop could be French giant Total (TOT).
The integrated oil giant already has history of doing business in the nation. Just before the sanctions hit, TOT was already heavily investing in Iran’s South Pars gas field. The major energy firm was beginning to redevelop the mature filed for enhanced oil recovery work and was setting new terminals to increase the South Pars’ export capacity. The South Pars’ is estimated to contain roughly 325 trillion cubic feet (Tcf) of natural gas.
Already, Total’s CEO Christophe de Margerie has hinted that the energy company has been receiving potential contract bids from Tehran to renter the nation and finish work in the field.
For TOT shareholders, the potential is great, despite the risks. Tapping such reserves should ultimately provide the integrated major with a boost to cash flows. In the meantime, TOT stock pays a hefty 5.5% dividend and only trades for a forward P/E of less than 9.
ENI has a strong presence in the Middle East — with operations in places like Lebanon and North Africa. More importantly, it has continued to operate those assets through various points of strife in the region. Given its focus on the Middle East, ENI could be one of the first integrated oil firms to bid on any new contracts coming out of Iran. And like TOT, E pays a juicy dividend with a 4.9% yield.
Meanwhile, SLB — which is technically a Dutch firm — is already the go-to service provider in the Middle East and continues to be tapped by state-owned energy firms for enhanced oil recovery work. Last quarter, international operations saw a huge bump, with Middle Eastern revenues rising by 5%. When Iran finally begins tapping its oil, SLB should be one of the first firms it calls to do the job.
The bottom line: While it’s a risky play, Iranian oil could be coming to an energy company near you. The trio of TOT, E, and SLB are the safest ways to play that potential.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.