4th May 2007 10:20
Total S.A.04 May 2007 Paris, May 4, 2007 Total reports strong first quarter 2007 results Main results for the first quarter 2007(1) • Adjusted net income(2)-(3) 3.0 billion euros -11% 3.9 billion dollars -3% 1.31 euros per share -9% 1.72 dollars per share -1% Highlights since the start of the first quarter 2007 • Upstream production of 2,431 kboe/d in the first quarter 2007 • Dalia successfully reached 240 kb/d plateau in mid-April • OPEC reduction impact of -37 kb/d • Launching development of the Jura field as a satellite to Alwyn • Successful exploration • Promising discoveries and launching of development studies for Egina, a new pole in deep-offshore Nigeria • Two major discoveries near Moho Bilondo in deep-offshore Congo • Four new oil discoveries on ultra-deep offshore Block 32 and deep-offshore Block 14 in Angola • New exploration blocks in Indonesia, Australia, Alaska and the UK North Sea • Finalized negotiations to acquire interests in Blocks 15/06 and 17/06 in Angola The Board of Directors of Total, led by Chairman Thierry Desmarest, met on May3, 2007 to review the first quarter 2007 accounts. Commenting on the results,CEO Christophe de Margerie said: In the first quarter 2007, the average Brent oil price decreased by 6% comparedto the same quarter a year ago and gas prices fell sharply in the UK. TheDownstream and Chemicals segments benefited from strong demand while refinerythroughput was constrained by a number of maintenance shut-downs. In this context, the adjusted earnings per share expressed in dollars showedonly a limited decrease of 1% compared to the first quarter 2006 and an increaseof 12% compared to the fourth quarter 2006. Profitability at the businesssegment level remained strong at 28%. This performance, which is among the best in the industry, shows that Totalmanaged to maintain the quality of its portfolio and its investment and projectmanagement discipline while accelerating its growth effort and facing continuedpressure from rising costs. The successful ramp-up of the Dalia field in Angola, which is already at itsplateau, and the start-ups of Rosa in Angola and Dolphin in Qatar, planned forthe second and third quarters of this year, confirm that we are returning to aperiod of growth. Total is pursuing its strategy of profitable growth over the long term,supported by continued exploration success, improvements to its refining andpetrochemical facilities, and increased efforts in research and development tomeet the new challenges facing the energy industry and the environment. • Key figures and consolidated accounts of Total(4) in millions of euros, 1Q07 4Q06 1Q06 1Q07 vsexcept earnings per share and number of shares 1Q06Sales 37,043 36,433 38,103 -3%Adjusted operating income from business segments 5,729 5,454 6,688 -14%Adjusted net operating income from business 2,948 2,689 3,240 -9%segments • Upstream 1,961 1,885 2,400 -18% • Downstream 708 549 650 +9% • Chemicals 279 255 190 +47%Adjusted net income 2,992 2,737 3,376 -11%Adjusted fully-diluted earnings per share (euros) 1.31 1.20 1.45 -9%Fully-diluted weighted-average shares (millions) 2,280.9 2,288.1 2,335.8 -2% Net income (Group share) 3,049 2,225 3,683 -17% Investments 2,414 3,656 2,750 -12%Divestments (at selling price) 244 1,071 397 -39%Cash flow from operations 6,388 2,123 4,839 +32%Adjusted cash flow from operations 4,116 3,454 4,287 -4% • First quarter 2007 results > Operating income In the first quarter 2007, the average Brent price was 57.8 $/b, a decrease of6% compared to the first quarter 2006 and 3% compared to the fourth quarter2006. The European refining margin indicator (TRCV) averaged 33 $/t in the firstquarter 2007, an increase of 28% compared to the first quarter 2006 and 45%compared to the fourth quarter 2006. Petrochemical margins in Europe were higher relative to the first quarter 2006but slightly lower relative to the fourth quarter 2006. In the US, first quarter2007 margins were sharply lower compared to both periods. The euro/dollar exchange rate was 1.31 $/• compared to 1.20 $/• in the firstquarter 2006 and 1.29 $/• in the fourth quarter 2006. In this context, adjusted operating income from the business segments was 5,729million euros (M•), a 14% decrease compared to the first quarter 2006(5). Adjusted net operating income from the business segments was 2,948 M•, a 9%decrease compared to the first quarter 2006. The lower percentage decreaserelative to the decrease in operating income is mainly due to the Upstreamsegment, which has a higher effective tax rate, representing a smallerproportion of the results compared to a year ago. > Net income Adjusted net income was 2,992 M•, an 11% decrease compared to the first quarter2006. This excludes the after-tax inventory effect, special items, and theGroup's equity share of the amortization of intangibles related to theSanofi-Aventis merger. The after-tax inventory effect had a positive impact on net income of 133 M• inthe first quarter 2007 and of 280 M• in the first quarter 2006. There were no special items in the first quarter 2007. In the first quarter2006, special items had a positive impact on net income of 110 M• and werecomposed mainly of gains on the sale of Upstream assets in the US. The Group's share of the amortization of intangibles related to theSanofi-Aventis merger had an impact on net income of -76 M• in the first quarter2007 and -83 M• in the first quarter 2006. Reported net income was 3,049 M• compared to 3,683 M• in the first quarter 2006. The effective tax rate(6) for the Group was 54% in the first quarter 2007, adecrease compared to 55% in the first quarter 2006 and close to 57% in thefourth quarter 2006. In the first quarter 2007, the Group bought back 6 million of its shares for 306M•. The number of fully-diluted shares at March 31, 2007 was 2,278.1 millioncompared to 2,285.2 million at December 31, 2006 and 2,333.7 million at March31, 2006. Adjusted fully-diluted earnings per share, based on 2,280.9 millionfully-diluted weighted-average shares was 1.31 euros, a decrease of 9% comparedto the first quarter 2006, which is a smaller decrease than shown for adjustednet income due to the accretive effect of the share buybacks. Adjustedfully-diluted earnings per share, expressed in dollars, decreased by 1%. > Investments - divestments Investments were 2,414 M• (or 3,164 M$) in the first quarter 2007 compared to2,750 M• (or 3,306 M$) in the first quarter 2006. Divestments in the first quarter 2007 were 244 M• and included the sale ofUpstream assets among which Canyon Express and the Aconcagua field in the Gulfof Mexico. Divestments in the first quarter 2006 were 397 M•. Net investments in the first quarter 2007 were 2,844 M$ compared to 2,829 M$ inthe first quarter 2006. > Cash flow Cash flow from operations was 6,388 M•, an increase of 32% compared to the firstquarter 2006. This includes a 2,098 M• reduction in working capital in the firstquarter 2007, mainly due to a temporary increase in liabilities related to thetiming of payments for taxes on refined products and income. Adjusted cash flow from operations (cash flow from operations before changes inworking capital at replacement cost) decreased by 4% to 4,116 M•. Net cash flow (7) was 4,218 M• compared to 2,486 M• in the first quarter 2006. The net-debt-to-equity ratio was 23% at March 31, 2007 compared to 34% atDecember 31, 2006 and 26% at March 31, 2006(8). • Upstream > Liquids and gas price realizations* 1Q07 4Q06 1Q06 1Q07 vs 1Q06Brent ($/b) 57.8 59.6 61.8 -6%Average liquids price ($/b) 55.0 57.1 58.8 -6%Average gas price ($/MBtu) 5.69 6.16 6.16 -8% * consolidated subsidiaries, excluding fixed margin and buy-back contracts The decrease in Total's average realized price for liquids was in line with thedecrease in the Brent price. However, with the exception of the UK market, gasprice realizations were higher in the Group's main gas producing zones in thefirst quarter 2007 compared to the first quarter 2006. > Production Hydrocarbon production 1Q07 4Q06 1Q06 1Q07 vs 1Q06Combined production (kboe/d) 2,431 2,403 2,440 - • Liquids (kb/d) 1,551 1,513 1,560 -1% • Gas (Mcf/d) 4,781 4,989 4,795 - Hydrocarbon production was 2,431 thousand barrels of oil equivalent per day(kboe/d) in the first quarter 2007 compared to 2,440 kboe/d in the first quarter2006, mainly as a result of: • +3% due to the positive impact of new field start-ups, partially offset by normal declines on mature fields, • -1.5% due to OPEC reductions in Libya, Abu Dhabi and Venezuela, • -1% due to divestments and other portfolio changes, • -1% due to the impact of shut-downs in the Niger Delta because of security issues. Excluding the effects of portfolio changes and OPEC reductions, underlyingproduction growth was 2%. Compared to the fourth quarter 2006, production increased by 1.2%, mainly due toproduction ramp-up at the Dalia field. Excluding the impact of OPEC reductionsimposed by Venezuela on heavy-oil projects, the underlying growth was more than2%. There were no significant portfolio changes between the fourth quarter 2006and the first quarter 2007. > Results in millions of euros 1Q07 4Q06 1Q06 1Q07 vs 1Q06Adjusted operating income* 4,375 4,330 5,601 -22%Adjusted net operating income* 1,961 1,885 2,400 -18% • Income from equity affiliates 175 176 143 +22% Investments 1,989 2,638 2,081 -4%Divestments 173 523 353 -51%at selling priceCash flow 4,335 1,788 3,831 +13%Adjusted cash flow (M•) 2,966 2,371 3,266 -9% * detail of adjustment items shown in business segment information Adjusted net operating income for the Upstream segment was 1,961 M•, a decreaseof 18% compared to the first quarter 2006. Expressed in dollars, the decrease in adjusted net operating income for theUpstream segment was 11%, reflecting mainly the lower hydrocarbon prices and, toa lesser extent, the increase in production costs and exploration activity. The average Upstream segment tax rate was 60% in the first quarter 2007, stablecompared to the first quarter 2006. The increase in tax rates in the UK andVenezuela was offset by a favorable mix effect and by the impact of lowerhydrocarbon prices. The increase in income from equity affiliates reflects mainly the growth fromTrains 4 and 5 at Nigeria LNG. Compared to the fourth quarter 2006, adjusted net operating income for theUpstream segment expressed in dollars increased by 6%, essentially due to theincrease in production and the decrease in the effective tax rate. The return on average capital employed (ROACE(9)) for the Upstream segment was34% for the twelve months ended March 31, 2007 compared to 35% for the full year2006. The 2007 investment program for the Upstream segment is proceeding as planned. • Downstream > Refinery throughput and utilization rates* 1Q07 4Q06 1Q06 1Q07 vs 1Q06Total refinery throughput (kb/d) 2,421 2,435 2,421 - • France 988 971 899 +10% • Rest of Europe 1,167 1,210 1,217 -4% • Rest of world 266 254 305 -13%Utilization rates • Based on crude only 87% 86% 86% ns • Based on crude and other feedstock 90% 90% 89% ns * includes share of CEPSA The first quarter 2007 included three partial turnarounds: the distillation unitat Port Arthur and the catalytic crackers at the Donges and Antwerp refineries. The first quarter 2006 included a major turnaround for maintenance at theProvence refinery and a 3-week shutdown of the Flanders refinery. In the fourth quarter 2006, there was a major shut-down of the cracker at PortArthur. The utilization rate for the distillate hydro-cracker in Normandy, which startedup in 2006, was close to 90% on average in the first quarter 2007. > Resultsin millions of euros, 1Q07 4Q06 1Q06 1Q07 vsexcept European refining margin indicator 1Q06European refining margin 33.0 22.8 25.8 +28%indicator - TRCV ($/t) Adjusted operating income* (M•) 973 750 856 +14%Adjusted net operating income* (M•) 708 549 650 +9% • Income from equity affiliates 63 63 61 +3% Investments (M•) 244 703 321 -24%Divestments (M•) 22 275 13 +69% at selling priceCash flow (M•) 1,905 261 1,201 +59%Adjusted cash flow (M•) 1,039 844 831 +25% * detail of adjustment items shown in business segment information Adjusted net operating income for the Downstream segment was 708 M• in the firstquarter 2007 compared to 650 M• in the first quarter 2006, an increase of 9%.Expressed in dollars, the increase was 19%. This reflects mainly the strongerEuropean refining margins, which were fueled by higher gasoline prices in theAtlantic Basin in a context of heavy maintenance activity that limited availablesupplies. The Downstream also benefited from the start-up of the distillatehydro-cracker in Normandy as well as good performance from Marketing and ongoingproductivity programs. The Downstream segment ROACE for the twelve months ended March 31, 2007 was 25%compared to 23% for the full year 2006. • Chemicals > Resultsin millions of euros 1Q07 4Q06 1Q06 1Q07 vs 1Q06Sales 4,995 4,610 4,689 +7% • Base chemicals 3,151 2,891 2,863 +10% • Specialties 1,844 1,719 1,826 +1% Adjusted operating income* 381 374 231 +65%Adjusted net operating income* 279 255 190 +47% • Base chemicals 189 168 78 +142% • Specialties 93 82 103 -10% Investments 173 293 324 -47%Divestments 47 29 28 +68%at selling priceCash flow 107 725 (37) nsAdjusted cash flow 329 331 305 +8% * detail of adjustment items shown in business segment information Sales for the Chemicals segment increased by 7% to 4,995 M• in the first quarter2007 from 4,689 M• in the first quarter 2006. Adjusted net operating income for the Chemicals segment was 279 M•, an increaseof 47% compared to the first quarter 2006. Petrochemicals performed well, benefiting from higher cracker utilization ratesand more favorable market conditions in Europe than in the US, due to strongerdemand for polymers. The Chemicals segment ROACE for the twelve months ended March 31, 2007 wasnearly 14% compared to 13% for the full year 2006. • Summary and outlook The ROACE for the Group was 26% for the twelve months ended March 31, 2007,stable compared to the Group ROACE for the full year 2006. Return on equity for the same periods was 31% and 33%, respectively. Implementation of the investment program is proceeding as planned. The Group confirms its objective to maintain its net-debt-to-equity ratio ataround 25% to 30%. Pending approval at the shareholder's meeting on May 11, 2007, Total S.A. willpay the remaining 1 euro per share of the 2006 dividend(10) on May 18, 2007. Since the start of the second quarter 2007, oil prices have moved higher due tomarket concerns over global supplies and the impact of OPEC reductions onproduction. Refining margins have been on average higher than in the firstquarter. The Group's production growth is expected to be substantial in 2007, mainly dueto the start-up of Dalia, to be followed by Rosa and Dolphin; however, it shouldbe lower than 6%, because of the now lower-than-expected contributions fromAzerbaijan and Venezuela as well as the persistent uncertainties surrounding thesituation in Nigeria. The Group is confident of achieving its target of more than 5% production growthon average through 2010(11) and is continuing to improve visibility for thelonger term thanks to the satisfactory progress on Total-operated developmentprojects, continued exploration success, particularly in West Africa, andongoing negotiations to secure major new projects. To listen to the conference call with CFO Robert Castaigne and financialanalysts today at 15:00 (Paris time) please call +44 (0)161 601 89 18 in Europeor +1 866 793 42 77 in the US (access code : Total) or log on to the companywebsite www.total.com. For a replay, dial +44 (0)207 075 32 14 in Europe or 1866 828 22 61 in the US (code : 195703). The March 31, 2007 notes to the consolidated accounts are available on the Totalweb site (www.total.com). This document may contain forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of 1995 withrespect to the financial condition, results of operations, business, strategyand plans of Total. Such statements are based on a number of assumptions thatcould ultimately prove inaccurate, and are subject to a number of risk factors,including currency fluctuations, the price of petroleum products, the ability torealize cost reductions and operating efficiencies without unduly disruptingbusiness operations, environmental regulatory considerations and generaleconomic and business conditions. Total does not assume any obligation to updatepublicly any forward-looking statement, whether as a result of new information,future events or otherwise. Further information on factors which could affectthe company's financial results is provided in documents filed by the Group andits affiliates with the French Autorite des Marches Financiers and the USSecurities and Exchange Commission. The business segment information is presented in accordance with the Groupinternal reporting system used by the Chief operating decision maker to measureperformance and allocate resources internally. Due to their particular nature orsignificance, certain transactions qualified as "special items" are excludedfrom the business segment figures. In general, special items relate totransactions that are significant, infrequent or unusual. However, in certaininstances, certain transactions such as restructuring costs or assets disposals,which are not considered to be representative of normal course of business, maybe qualified as special items although they may have occurred within prior yearsor are likely to recur within following years. In accordance with IAS 2, the Group values inventories of crude oil andpetroleum products in the financial statements in accordance with the FIFO(First in, First out) method and other inventories using the weighted-averagecost method. However, in the note setting forth information by business segment,the Group continues to present the results for the Downstream segment accordingto the replacement cost method and those of the Chemicals segment according tothe LIFO (Last in, First out) method in order to ensure the comparability of theGroup's results with those of its main competitors, notably from North America.The inventory valuation effect is the difference between the results accordingto the FIFO method and the results according to the replacement cost or LIFOmethod. In this framework, performance measures such as adjusted operating income,adjusted net operating income and adjusted net income are defined as incomesusing replacement cost, adjusted for special items and excluding Total's equityshare of the amortization of intangibles related to the Sanofi-Aventis merger.They are meant to facilitate the analysis of the financial performance and thecomparison of income between periods. Operating information by segment First quarter 2007 • Upstream Combined liquids and gas production 1Q07 4Q06 1Q06 1Q07 vs 1Q06by region (kboe/d)Europe 746 752 778 -4%Africa 784 729 742 +6%North America 26 28 13 +100%Far East 256 258 253 +1%Middle East 402 416 411 -2%South America 206 211 236 -13%Rest of world 11 9 7 +57%Total production 2,431 2,403 2,440 - Liquids production by region (kb/d) 1Q07 4Q06 1Q06 1Q07 vs 1Q06Europe 373 371 378 -1%Africa 679 633 656 +4%North America 17 17 2 +750%Far East 30 28 29 +3%Middle East 341 353 357 -4%South America 102 103 131 -22%Rest of world 9 8 7 +29%Total production 1,551 1,513 1,560 -1% Gas production by region (Mcfd) 1Q07 4Q06 1Q06 1Q07 vs 1Q06Europe 2,019 2,073 2,172 -7%Africa 541 510 457 +18%North America 45 55 63 -29%Far East 1,260 1,417 1,238 +2%Middle East 326 334 284 +15%South America 580 598 579 -Rest of world 10 2 2 +400%Total production 4,781 4,989 4,795 - • Downstream Refined product sales by region (kb/d)* 1Q07 4Q06 1Q06 1Q07 vs 1Q06Europe 2,655 2,720 2,689 -1%Africa 333 343 319 +4%Americas 597 480 626 -5%Rest of world 221 185 230 -4%Total 3,806 3,728 3,864 -2% * includes trading and equity share of CEPSA Adjustment items • Adjustments to operating income from the business segments in millions of euros 1Q07 4Q06 1Q06Special items affecting operating income from the business - - (5)segments • Restructuring charges - 8 - • Impairments - (11) - • Other - 3 (5)Pre-tax inventory effect : FIFO vs. replacement cost 174 (389) 373 Total adjustments affecting operating income from the business 174 (389) 368segments • Adjustments to net income (Group share) in millions of euros 1Q07 4Q06 1Q06Special items affecting net income (Group share) - (18) 110 • Equity share of special items recorded by Sanofi-Aventis - (46) 2 • Gain on asset sales - 174 130 • Restructuring charges - (15) (15) • Impairments - (8) - • Other - (123) (7)Adjustment related to the Sanofi-Aventis merger* (76) (58) (83) (share of amortization of intangible assets)After-tax inventory effect : FIFO vs. replacement cost 133 (436) 280 Total adjustments to net income 57 (512) 307 * based on 13% participation in Sanofi-Aventis at 3/31/2007, 12/31/2006, and 3/31/2006 Net-debt-to-equity ratio in millions of euros 3/31/07 12/31/06 3/31/06Current borrowings 9,625 5,858 12,618Net current financial assets (10,918) (3,833) (10,598)Non-current financial debt 13,836 14,174 13,491Hedging instruments of non-current debt (291) (486) (453)Cash and cash equivalents (2,962) (2,493) (4,313)Net debt 9,290 13,220 10,745 Shareholders equity 42,866 40,321 43,170Estimated dividend payable (3,305) (2,258) (2,941)Minority interests 868 827 913Equity 40,429 38,890 41,142 Net-debt-to-equity ratio 23.0% 34.0% 26.1% Effective tax rates Effective tax rates * 1Q07 4Q06 1Q06Upstream 60.3% 62.1% 60.3%Group 54.0% 56.6% 55.5% * tax on adjusted net operating income / (adjusted net operating income - incomefrom affiliates, dividends received from investments, and impairments ofacquisition goodwill + tax on adjusted net operating income) 2007 Sensitivities* Scenario Change Impact on operating Impact on net income (e) operating income (e)•/$ 1.25 $/• +0.1 $ per • -2.2 B• -1.1 B• Brent 60 $/b +1 $/b +0.38 B• +0.15 B•European refining margin 30 $/t +1 $/t +0.09 B• +0.06 B•indicator TRCV * sensitivities revised once per year upon publication of the previous yearfourth quarter results Return on average capital employed • For the twelve months ended March 31, 2007 in millions of euros Upstream Downstream Chemicals ** Segments GroupAdjusted net operating income 8,270 2,842 973 12,085 12,855Capital employed at 3/31/06* 23,282 11,296 7,187 41,765 49,615Capital employed at 3/31/07* 24,808 11,442 7,129 43,379 50,773ROACE 34.4% 25.0% 13.6% 28.4% 25.6% * at replacement cost (excluding after-tax inventory effect) ** capital employed for Chemicals reduced for the Toulouse-AZF provision of 122M• pre-tax at 3/31/06 and 153 M• pre-tax at 3/31/07 and for the Arkema capitalemployed by 2,406 M• at 3/31/2006 • For the twelve months ended March 31, 2006 in millions of euros Upstream Downstream Chemicals** Segments GroupAdjusted net operating income 8,621 2,888 828 12,337 13,075Capital employed at 3/31/05* 17,877 8,735 6,603 33,215 39,703Capital employed at 3/31/06* 23,282 11,296 7,187 41,765 49,615ROACE 41.9% 28.8% 12.0% 32.9% 29.3% * at replacement cost (excluding after-tax inventory effect) ** capital employed for Chemicals reduced for the Toulouse-AZF provision of 100M• pre-tax at 3/31/05 and 122 M• pre-tax at 3/31/06 and for the Arkema capitalemployed by 2,204 M• at 3/31/05 and 2,406 M• at 3/31/2006 • For the full year 2006 in millions of euros Upstream Downstream Chemicals ** Segments GroupAdjusted net operating income 8,709 2,784 884 12,377 13,162Capital employed at 12/31/05* 23,522 11,421 6,885 41,828 49,341Capital employed at 12/31/06* 25,543 12,384 6,920 44,847 52,263ROACE 35.5% 23.4% 12.8% 28.6% 25.9% * at replacement cost (excluding after-tax inventory effect) ** capital employed for Chemicals reduced for the Toulouse-AZF provision of 133M• pre-tax at 12/31/05 and 176 M• pre-tax at 12/31/06 and for the Arkema capitalemployed by 2,235 M• at 12/31/2005 -------------------------- (1) percent changes are relative to the first quarter 2006. (2) adjusted net income = net income using replacement cost (Group share) adjusted for special items and excluding Total's share of amortization of intangibles related to the Sanofi-Aventis merger. First quarter net income (Group share) was 3,049 million euros. (3) dollar amounts represent euro amounts converted at the average exchange rate for the period (1.3106 $/• in the first quarter 2007, 1.2023 $/• in the first quarter 2006, 1.2887 $/• in the fourth quarter 2006). (4) adjusted income (adjusted operating income, adjusted net operating income and adjusted net income) is defined as income using replacement cost, adjusted for special items and excluding Total's equity share of amortization of intangibles related to the Sanofi-Aventis merger; adjusted cash flow from operations is defined as cash flow from operations before changes in working capital at replacement cost; adjustment items are listed on page 13; first quarter 2006 results, with the exception of net income, have been restated for the Arkema spin-off per IFRS. (5) there were no special items affecting operating income from the business segments in the first quarter 2007; in the first quarter 2006, special items were composed of a 5 M• charge related to the spin-off of Arkema. (6) defined as: (tax on adjusted net operating income) / (adjusted net operating income - income from equity affiliates, dividends received from investments and impairments of acquisition goodwill + tax on adjusted net operating income). (7) net cash flow = cash flow from operations + divestments - investments. (8) calculation shown on page 14. (9) calculated based on adjusted net operating income and average capital employed, using replacement cost, as shown on page 15. (10) including the interim dividend of 0.87 euros per share paid in November 2006, the 2006 dividend will be 1.87 euros per share. (11) based on Brent at 60 $/b in 2007 and 40 $/b thereafter. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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