French integrated oil and gas producer TOTAL S.A. (TOT) recently announced the reorganization of its business segments, responding to the profound changes in its business and competitive environment. TOTAL is adding a new dimension to its strategy for developing industrial and commercial activities in its refining, marketing and chemicals operations.
TOTAL said the reorganization will result in the creation of two new divisions, namely Refining & Chemicals and Supply & Marketing, in place of the existing Downstream and Chemicals segments. The reorganization will realign the focus of its Downstream and Chemicals operations around two core competencies — production and marketing — in order to reinforce existing activities and strengthen prospects for growth.
The new Refining & Chemicals division will focus on production combining all of TOTAL’s refining and petrochemical operations, including specialty chemicals (Atotech, Bostik, Hutchinson) and fertilizers (GPN, Rosier). The division will be headquartered in Brussels and Paris. Senior management will be based in Brussels. By integrating its refining and petrochemical operations, which employ similar industrial processes, the company hopes to achieve two objectives.
Firstly, TOTAL expects to strengthen its production positions in Europe by increasing the value of products (raw materials, intermediates, etc.). This will be achieved by enhancing energy efficiency and reliability at production units, and working on logical growth plans. Secondly, the company expects to develop large-scale integrated projects to more effectively meet demand in growth markets. Further, the internal merger will help synergize operations, capabilities and R&D resources.
The new Supply & Marketing division will be dedicated to the global supply and marketing of petroleum products. In an environment that is increasingly competitive, the creation of a Supply & Marketing division will give shape to a more aggressive organization that is able to pursue selective growth in Western Europe’s mature markets and gain new positions in the growth markets of Africa, the Middle East, the Asia-Pacific region, and North and South America.
The proposed reorganization does not change TOTAL’s overall scope. The company said it will remain fully integrated, from oil and gas exploration to the manufacturing and sale of refined products and plastics.
The company expects to better capture all opportunities arising from its integrated business model. Additionally, this reorganization will give the company’s production and marketing activities a clearer vision, allowing them to improve their performance in mature markets and address specific challenges as they seek to expand, especially in growth markets. The company also notified that the reorganization will only be confined to organizational changes and will not entail employee outplacement or layoffs.
TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations across five continents.
TOTAL S.A. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. The company competes directly with BP Plc (BP).
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