Why are we not investing in total?

Completed by Olivier Johanet, Balthazar Laporte

Responsible Finance has decided not to invest in the TOTAL share for 3 reasons  :


1 / The financial health of the company is very sensitive to oil prices.

Indeed, the correlation of the TOTAL SA share price over the last 5 years (2014 to 2018) with Brent prices is 88%. The first segment of the value chain, upstream, which covers exploration and production, has experienced tremendous appreciation in recent years. From 2016 to 2018, the turnover of this activity increased by 66% when the margin went from -2% to 30%! During the same period, the average price of a barrel increased by 63% ($ 43.7 in 2016 vs. $ 71.3 in 2018). The operational excellence of the company, which is real, contributes only to a limited extent to the increase in the margin.

The second segment of the value chain, downstream, is made up, in the first stage, of refining and petrochemicals. This activity is less sensitive than the first to the price of the barrel. However, over the same period, 2016 to 2018, turnover increased by almost 50%! The operating margin (6%) fell to 2%. This industrial activity of transformation of raw materials is in fact also affected by many factors such as price effects resulting from final demand, while stocks do not allow an immediate reduction in final prices after the fall in prices, and finally the weight of fixed costs (infrastructure, personnel costs, etc.)

TOTAL's third business, marketing and services including distribution, posted revenue growth (+ 42% from 2016 to 2018) somewhat less linked to the price of oil than other activities. The margin is however low (3%), in particular with regard to the distribution network (14,000 service stations) which is more of a constraint for the group.


2 / In the long term, oil prices strongly depend on demand, which is on a downward trend .

The organization of the offer, with in particular OPEC (Organization of Petroleum Exporting Countries with 14 countries for 43% of production and 72% of world reserves in 2017), contributes strongly, with geopolitical events, to variations in short term courses. In the long term, the variation in demand is driven by the health of the global economy. In the longer term, the evolution of the global energy mix works against oil.

In addition, each event gives rise to expectations of the players via the derivative markets. These speculative movements therefore amplify price volatility.


3 / TOTAL's investments in clean new energies are still limited.

Total's activity in low-carbon energies (including Liquefied Natural Gas - LNG) is growing, but its place in the group's turnover is still very limited since in 2018 it only represented 7%. , with a negative operating result for 3 years. A little less than 3/4 of the group's investments benefit production-exploration and petrochemicals and refining. The clean energy sector certainly saw a sharp increase in 2018 with the buyout of the LNG activities of Engie and Direct Énergie, but its contribution to the group's value creation is still insignificant, despite the significant communication effort of which he benefits.


In conclusion, this note, based on the synthetic analysis of the very abundant documentation relating to TOTAL written by the professionals of La Financière Responsable, shows that our work is well in line with the search for long-term management within the framework of sustainable development of the real economy. It also shows that our decisions do not depend on ideological injunctions or performance imperatives indexed on the major indices, but on our convictions and the mandate entrusted by our investor clients.

Completed on November 4, 2019 Olivier Johanet / Balthazar Laporte.

French version HERE