TOTAL French Refineries Resuming Work Post Labor Strike

France-based integrated global oil and gas company, TOTAL S.A. (TO:TOT) announced yesterday that its refineries in France are gradually resuming normal operation. Operations at these refineries were halted by protest from labor unions against reforms in labor laws. TOTAL has the largest refining capacity in France and operates five out of the eight refineries there.

TOTAL’s French Refineries

The five refineries in Grandpuits, La Mede, Donges, Feyzin and Normandy refined 756,000 barrels per day during the first quarter of 2016, which was nearly 36% of the total refinery throughput volumes of the company.

During 2015, the company made a plan to transform and upgrade its two refineries in La Mede and Donges. The motive behind the upgrade plan was to make these refineries capable of meeting the changing demand dynamics and securing the long-term performance of the company.

What Led to the Labor Strike?

The French government wanted to reform the existing labor laws of the country, with an objective of lowering the unemployment rate, which has reached almost 10%. However, the hardline labor union of France, CGT, believes it will make hiring and firing easier for the employers and will be against the best interest of existing employees. The labor strike has also touched the garbage management and state railway companies of France, which is yet to die down completely.

The Positive Fallout

The majority of TOTAL’s employees in its Grandpuits, Donges, Feyzin and Normandy refineries have voted against the ongoing strike and are wanting to resume work. TOTAL said that its Grandpuits and La Mede refineries have started normal operations while the other three refineries are yet to resume normal activities due to unrest among a small section of workers.

Exxon Mobil (NYSE:XOM) also operates two refineries in France having a combined capacity of 352,000 barrels per day. Normal operations in its two plants were impacted by the strike but were not completely brought to a halt. Reports are that operations are gradually getting back to normalcy.

This will undoubtedly bring cheer to the French government, as it is all set to host Euro 2016 from today. Millions of football fans will have to travel to different stadiums across the nation. The congestion of cars at gas stations would have made it difficult for the supporters to reach their destinations without hassle.

Global Picture

Amid the rebalancing in the commodity market, oil prices are gradually appreciating from record lows. The decline in existing oil reserves will see an increase in demand for the refiners. TOTAL with its well spread refineries across the globe is well equipped to gain from this surge in demand.

Zacks Rank

TOTAL currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same space are Braskem S.A. (NYSE:BAK) and PetroChina Co. Ltd. (NYSE:PTR) , both sporting a Zacks Rank #1(Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

PETROCHINA ADR (PTR): Free Stock Analysis Report

TOTAL FINA SA (TOT): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

BRASKEM SA (BAK): Free Stock Analysis Report

Original post

Zacks Investment Research