Total’s Segments: How Have Falling Oil Prices Affected Dynamics?

Total (TOT), an integrated energy major, has three main segments: upstream, refining and chemicals, and marketing and services.

Changing oil prices have changed segment dynamics for Total. Net adjusted operating earnings from the upstream segment fell steeply, by 53%, from 4Q14 to $0.75 billion in 4Q15. The upstream segment, which contributed 56% of the net adjusted operating income in 4Q14, contributed 31% in 4Q15. This is on the back of falling crude oil prices. Brent prices, which averaged $77 per barrel in 4Q14, slipped down to $44 per barrel in 4Q15.

The situation is similar for TOT’s peers ExxonMobil (XOM) and Royal Dutch Shell (RDS.A), which witnessed a steep fall in their upstream earnings in the fourth quarter of 2015. BP (BP) and Chevron (CVX) also reported losses in their upstream segments in 4Q15. The iShares US Energy ETF (IYE) has a 47% exposure to integrated energy sector stocks.

The refining and chemicals segment witnessed a marginal rise in its net adjusted operating income in 4Q15. The segment’s operating income rose by 5% over 4Q14 to $1 billion in 4Q15. Plus, the segment’s contribution to the total net adjusted operating income rose from 33% in 4Q14 to 42% in 4Q15. The refining and chemicals segment was a primary contributor to the 4Q15 earnings.

The marketing and services segment’s net adjusted operating income surged. From 4Q14, the segment’s income almost doubled, reaching $0.53 billion in 4Q15. The marketing segment’s contribution to total net adjusted operating income rose from 9% in 4Q14 to 22% in 4Q15.

This shows that the fall in crude oil prices altered segment dynamics for TOT. Overall net adjusted operating earnings fell from $2.9 billion in 4Q14 to $2.4 billion in 4Q15. However, the refining and chemicals and marketing and services segments have notably resisted the decline. Amid the falling oil prices, these segments have been earnings saviors for TOT.