The entire energy sector is going through a fierce sell-off due to the pandemic, in contrast to the rest of the market, which is hovering around its all-time highs. In such sell-offs, the solid companies are usually punished along with the weak ones. This is the case for Total (TOT), which has plunged 38% this year. Total is much more resilient than the other oil majors in the ongoing downturn and thus it will highly reward investors when the pandemic subsides.
Royal Dutch Shell (NYSE:RDS.A) (RDS.B) and BP (BP) have plunged much more than Total, to their 25-year lows, while Exxon Mobil (XOM) has plunged to its 17-year lows. Consequently, these oil majors may offer greater returns if the energy market recovers strongly from the pandemic. However, there are good reasons behind their significant underperformance compared to Total. The latter is much more resilient at the suppressed oil prices prevailing right now and hence it can endure the downturn much more readily than its peers. It is not accidental that Total is the only profitable oil major this year. As a result, if the downturn lasts longer than expected, Total will perform much better than its peers.
The coronavirus crisis has caused an unprecedented downturn in the energy sector. The global demand for oil products is expected to slump by 8.1 million barrels per day on average this year (~8%) before it rebounds by 7.0 million barrels per day next year. This contraction, which is the steepest in at least three decades, has resulted in suppressed oil prices and low refinery utilization rates. Consequently, Exxon Mobil, Chevron (CVX), BP and Royal Dutch Shell are all expected to post material losses this year.
The only bright exception is Total, which is expected to achieve earnings per share of $1.20