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Total’s Business Segments: Refining and Chemicals Boost Earnings

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Dec. 4 2020, Updated 10:52 a.m. ET

Total’s business segments: Upstream earnings plunged

Changing oil prices have changed the segment dynamics within Total (TOT). The Upstream segment, which contributed 48% of the net adjusted operating earnings in 1Q15, contributed 27% in 1Q16. Net adjusted operating earnings from the Upstream segment fell steeply by 63% over 1Q15 to $0.49 billion in 1Q16 due to lower crude oil prices.

The fall was partially offset by increased hydrocarbon production and reduced operating and exploration costs. Brent prices, which averaged $54 per barrel in 1Q15, slipped down to $34 per barrel in 1Q16.

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Total’s business segments: Downstream earnings rose

On the other hand, the Refining and Chemical segment’s operating income rose by 3% over 1Q15 to $1.1 billion in 1Q16. The rise in Total’s downstream earnings in 1Q16 was due to stronger petrochemical margins and higher refinery utilization rates partly offset by a weaker refining margins. Total’s ERMI (European refining margin indicator) fell by 25% over 1Q15 to $35 per metric ton in 1Q16.

TOT’s marketing and services’ net adjusted operating income fell by 21% over 1Q15 to $252 million in 1Q16. This was led by declines in sales of petroleum products.

While Total’s (TOT) overall net adjusted operating earnings fell from $2.8 billion in 1Q15 to $1.9 billion in 1Q16, its Refining and Chemical segment has notably resisted the decline.

Total’s peers’ segmental performance

TOT’s peers have also seen their segment dynamics change. The Upstream segments of Suncor Energy (SU) and Royal Dutch Shell (RDS.A) reported losses in 1Q16. Also, ExxonMobil Corporation’s (XOM) Upstream segment, which contributed 58% of the total earnings in 1Q15, turned into a loss-making segment in 1Q16.

If you’re looking for broad-based exposure to energy sector stocks, you can consider the Energy Select Sector SPDR ETF (XLE).

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