Soaring oil prices and unrest in Iraq marked 2004 as another year of economic uncertainty for many businesses. But one industry had a boom year: oil. Total, the world’s fourth-largest oil and natural gas company, was hardly left out in the cold. Despite a strong euro, Total saw profits rise 39 percent in the third quarter of 2004 and a steady climb in its share price thanks to record crude prices. The firm even announced it would pay its first-ever interim dividend of €2.40 a share in November.
With results like these, it might seem as if the IR team at the French oil giant had an easy ride last year. But, even in boom times, communicating with oil investors is tricky. More than any other industry, the oil business is inextricably tied to politics, economics and ecology. From the war in Iraq to an oil tanker spill, any bit of news can send an oil company’s share price into a tailspin.
For example, an outburst of violence in Ivory Coast in November drove financial analysts and private shareholders alike to phone the IR team with a barrage of difficult questions: What will happen to Total’s activities in the war-torn country? Will it affect the share price? What are the plans going forward in the region?
‘What makes the oil industry different is our link to so many different countries with specific geo-political environments and fluctuations in crude prices,’ explains Jerome Schmitt, Total’s chief IRO. ‘Any change in the macroeconomic environment could make analysts and investors worry if they haven’t seen a situation like this before.’
A winning combination
Each year, the award-winning Total IR team lays out its financial results in the context of the prevailing geo-political environment. ‘Investors need to understand the environment we operate in and how it will evolve in the coming year,’ notes Schmitt. Instead of rushing to respond to each news flash, the team prefers to spend time throughout the year explaining the company’s tried and tested methods for dealing with unexpected shocks and bumps in the oil industry.
Total’s 15-person team – which has been headed up by Schmitt since September 2004, when former IRO Ladislas Paszkiewicz moved to a new position within the company – doesn’t get results all by itself. ‘Total’s management places a strong importance on maintaining a close relationship with investors, with, in particular, roadshows held twice a year and management’s participation in numerous seminars across the world,’ says Schmitt. ‘That certainly makes our job easier.’
With operations in 130 countries and over 110,000 employees, Total covers all aspects of the oil and gas chain, from exploration and production to trading, transport, refining and marketing. The company’s IR department is split into two divisions: institutional investor relations and a shareholder relations team that focuses on the company’s 540,000 retail holders. The institutional team is the larger component, with eight people based in Paris and three based in New York. The smaller shareholder relations team, made up of three employees and headed by Valerie Laugier, is based solely in Paris.
Under Paszkiewicz, Total’s IR team won commendations from financial analysts for clear and timely presentations, accessibility and quick responses to questions. While Schmitt admits he is just finding his bearings, he is quick to stress that he values the input of all his team members, many of whom have worked in the IR department longer than he has.
Face-to-face value
One third of Total’s institutional investors hail from the US and the UK, another third from France and the rest are scattered across Europe and Asia. ‘We are always looking for new stable investors and we don’t favor any specific nationality,’ observes Schmitt. Institutional investors account for 89 percent of all shareholders, a further 7 percent are individual shareholders, and employees hold 4 percent of the company.
To attract new investors, Total goes on the road twice a year. The first roadshow follows the full-year results in February; the second, in September, is more focused on strategy and performance. During each roadshow, the team visits the US, the UK and other European countries. Total’s CFO, Robert Castaigne, as well as CEO Thierry Desmarest, often accompany the IR team on these roadshows, says Schmitt, who prides himself on cultivating one-on-one relationships with analysts and market players. When asked to recommend an analyst covering the group, Schmitt is reluctant. ‘I don’t play favorites,’ he maintains. ‘I respect the opinion of all our analysts.’
Total also highly values its individual shareholder base and Schmitt is keen to increase the firm’s 7 percent of individual holdings in coming years. In 2004 the three-person shareholder relations team set out to establish contact with all 540,000 individual investors for the first time. Until last year, the thrice-yearly shareholder journal was sent only to the 100,000 shareholders that hold more than 100 shares.
‘We found we didn’t have enough visibility among all of our shareholders and were communicating regularly only with about 17 percent of them,’ explains Laugier. In reaching out to everyone, Laugier and her team have had an exceptionally busy year, receiving over 50,000 calls, e-mails and letters from shareholders. To manage all of these contacts, the department beefed up its web site and adopted a back-end customer relationship management software system last year. ‘Now when people call the 800 number, we can look at the computer and know whether they have already contacted us and what they asked about,’ adds Laugier.
However, retail shareholder contact can be frustrating: Laugier says the hardest part of her job is explaining a very complex business model to an essentially non-savvy crowd. ‘To understand what L’Oreal does is easy, but to make a refinery seem interesting and understandable is tough, ‘ she explains. Part of her job is to ‘translate’ all of the press releases sent to financial analysts into jargon-free documents for individual shareholders. ‘We always try to give the same messages to individual shareholders that we give to financial analysts, but we have to adapt our responses to their level of understanding,’ she points out.
Most of Total’s individual shareholders have held their shares for five to ten years, so it’s little wonder Total is keen to boost this loyal shareholder base. To encourage existing investors to buy more shares, the group holds events such as visits to refineries and training days to explain the basics behind the oil industry and Total’s balance sheet.
Four or five times a year the group also sponsors meetings between individual shareholders and senior management. Those who hold more than 30 shares can join the shareholder club, which gives additional fidelity points at Total gas stations and free entrance to art exhibits sponsored by the company.
In 2005 the oil industry is once more set to absorb the shocks that come its way. A potential dive in crude prices, escalating problems in the Middle East and an accelerating debate about renewable energy and ecological oil exploration could all come Total’s way this year but, whatever the result, Total’s quick-thinking investor relations team is ready to tackle the problems.
‘No one knows what will happen in 2005,’ says Schmitt. ‘All we know is that the environment is going to evolve. Our job is to remain consistent and deliver messages aligned with the management strategy – as I believe we have done in the last few years.’
