Call me a Fool, but I remain bullish on the prospects of oil companies, despite the price of oil dropping from $80 per barrel in July to around $60 per barrel currently. One of my favorite plays in this sector is Motley Fool Income Investor pick Total (NYSE:TOT), as the company boasts an above-average rate of production growth, has one of the best reserve replacement ratios among the major oils, and is attractively valued.

I'll grant you that certain sectors of the oil patch have gotten hit pretty hard -- independent refiners such as Valero (NYSE:VLO) and Frontier Oil (NYSE:FTO) have fallen an average 23% from their highs because of investor concern about shrinking refining margins -- but, in general, shares of oil companies have pretty much held their ground as the Amex Oil Index has only fallen some 5% over the same period.

While there are many reasons for this display of relative strength, I'll just list a few: Global spare production capacity remains extremely tight by historical standards; production rates continue to decline in key areas such as the North Sea and Russia; U.S. refining capacity is pretty much maxed out; concerns about Iran's nuclear program abound; and the violence in Nigeria -- with the resulting disruption of oil exports -- continues.

You get my drift .

That being said, I believe discretion is always the better part of valor -- at least in terms of investing -- and that it might be wise for investors to weight their energy holdings toward the major oil companies in the near term on account of their lower risk profiles, diversified earnings streams, and ability to pay ever-growing dividends.

With that in mind, let's take a closer look at Total.

Total S.A.*
Total is one of the top five integrated oil companies in the world in terms of production volume, proven reserves, and market capitalization.

Total focuses on three core businesses -- exploration and production, refining and marketing, and chemicals -- that generated sales of roughly $144 billion and operating income in excess of $29 billion in 2005. According to SEC rules, the company had 11.1 billion barrels of oil equivalent (BOE) of proven reserves as of Dec. 31, 2005 -- equal to 12.2 years of production, 38% of which has natural gas.

Total averaged roughly 2.5 million barrels a day of oil and gas production in 2005. Its refining capacity stood at 2.7 million barrels per day, and its marketing operations included close to 17,000 service stations, making it the No. 1 refiner/marketer in both Europe and Africa.

While I'm sure that you're enthralled by that scintillating recitation of facts, let's get to the heart of the matter, starting with Total's production growth prospects.

Production growth
Total has one of the best prospective production growth rates of the major oil companies -- a production rate expected to average approximately 4% from 2007 through 2010. In simple terms, Total stands to benefit from having more of its assets in lower-cost, more productive regions than its peers. As of year-end 2005, Total's production from Africa, the Middle East, and Asia stood at 67% of its total volume, while the mature, higher-cost regions of North America and the North Sea only contributed roughly 33%. In contrast, other majors such as ExxonMobil (NYSE:XOM) and BP (NYSE:BP) have roughly 50% of their production assets in these slower-growing regions.

Reserve replacement
Of course, production growth goes hand in hand with reserve replacement, and Total is sitting pretty in this area, too.

Stripping out the effect of price changes, Total reported a healthy replacement ratio of 120% in 2005, trailing BP's industry-leading 134% but nicely ahead of the 112% recorded by ExxonMobil. Total currently has 19 development projects under way that should come online by 2008, including the Dalia field (an estimated 1 billion barrels of reserves), which should commence production in December and grow to represent 4% of Total's production over the next six months. With such a strong pipeline, Total's reserve ratio should stay well above the industry average for the foreseeable future.

Shares of Total currently trade at roughly 10 times fiscal 2007 estimates, a slight discount to the average multiple afforded ExxonMobil and BP. Given the company's strong production growth, its excellent reserve replacement ratio, and the likelihood of increased dividend payouts (the interim dividend was just raised 16%), I believe that investors will like what they find when they drill into the company's prospects.

*Please note that for conversion purposes in terms of 2005 figures, 1 euro = $1.30.

Total SA has had a return of nearly 62% since it was recommended to Income Investor subscribers in 2003. Click here to learn more about investing in quality, dividend-paying companies.

Fool contributor Will Frankenhoff is enjoying his time writing for the Fool more than playing golf, reading The Financial Times, rooting for the Jints, or taking a nap. He welcomes your feedback. He does not own shares in any of the companies mentioned above. The Fool has a disclosure policy.