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How Did Total’s Earnings Fare by Segment in Q4 2018?

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Total’s segmental analysis

Before we proceed with Total’s (TOT) fourth-quarter segmental outlook, let’s review the company’s previous quarter’s segmental performance.

Total’s overall operating earnings rose from $3.0 billion in the third quarter of 2017 to $4.6 billion in the third quarter of 2018.

Total’s exploration and production earnings almost doubled to $2.9 billion in the third quarter of 2018 due to a YoY (year-over-year) rise in its realizations and volumes. Brent oil rose 44% YoY to $75 per barrel in the quarter. Also, the company’s hydrocarbon production rose 9% YoY to 2.8 million barrels of oil equivalent per day.

Total’s peer Royal Dutch Shell’s (RDS.A) Upstream segment’s earnings tripled to $1.9 billion on an adjusted basis in the third quarter of 2018. BP’s (BP) Upstream segment’s adjusted EBIT rose 156% YoY to $4.0 billion in the quarter.

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Total’s gas, renewables, and power earnings rose 180% YoY to $272 million in the quarter due to its better performance in the liquefied natural gas space. However, Total’s refining and chemicals earnings fell 8% YoY to $938 million in the same period due to a contraction in its refining margin partly offset by better volumes. Total’s marketing and services earnings fell 6% YoY to $474 million.

Total’s fourth-quarter expectations

Total’s indicators suggest that average liquids prices fell marginally from $57.6 per barrel in the fourth quarter of 2017 to $57.2 per barrel in the fourth quarter of 2018. However, natural gas prices rose from $4.2 per MMbtu (million British thermal units) in the fourth quarter of 2017 to $4.9 per MMbtu in the fourth quarter of 2018. Thus, in the fourth quarter, Total’s exploration and production earnings could fall YoY led by lower liquids prices partly offset by higher natural gas prices.

Moreover, Total’s ERMI (European Refining Margin Indicator) has narrowed. The ERMI is an indicator of the refining margin in the regions in which Total operates. It fell from $35.5 per metric ton in the fourth quarter of 2017 to $29.1 per metric ton in the fourth quarter of 2018. This means Total’s refining margin could contract YoY in the fourth quarter, impacting Total’s refining earnings in the quarter.

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