4th May 2005 09:55
Total S.A.04 May 2005 May 4, 2005 Total First Quarter 2005 results: strong performance • +50% to 2.92 billion for adjusted net income in euros • +54% to 4.90 • for adjusted earnings per share in euros • +57% to 3.83 billion for adjusted net income expressed in dollars • +62% to 6.42 $ for adjusted earnings per share expressed in dollars - Results expressed in dollars(1)-(2) First quarter 2005Adjusted net income(3) 3.83 B$ +57% 6.42 $/share +62%Net income 4.21 B$ +61% - Results in euros2 First quarter 2005Adjusted net income3 2.92 B• +50% 4.90 •/share +54%Net income 3.21 B• +53% Paris, May 4, 2005 - The Board of Directors, chaired by CEO Thierry Desmarest,met on May 3, 2005 to review the first quarter 2005 results. Commenting on the results, Thierry Desmarest said : The first quarter 2005 market environment was very favorable for the oilindustry. Against a backdrop of persistently strong demand for oil and tensionover production capacity, oil prices rose again to record levels while refiningmargins remained high. At the same time, the positive trend observed at the endof 2004 in the Chemicals segment continued in petrochemicals, as well as forArkema. In this context, Total's adjusted net income increased by 50% to 2,919 millioneuros from 1,946 million euros in the first quarter 2004. Adjusted earnings per share rose to 4.90 euros, an increase of 54% compared tothe first quarter 2004. Expressed in dollars, the increase is 62%, which is thehighest percentage increase among the majors. This performance shows that the Group is able to benefit fully from the high oilprice environment in the Upstream as well as from the productivity programs thathave strengthened the Downstream and Chemicals. Furthermore, in terms of returnon average capital employed, Total's performance is the best in the industry. For the Upstream segment, the start of the year has been highlighted bysignificant progress in the negotiation for major projects, notably in Yemen andQatar, and by the approval of the plan to launch the development of the giantAkpo field in Nigeria. Total is actively pursuing its growth strategy, and ourinvestments expressed in dollars increased by 14% in the first quarter 2005compared to the first quarter 2005. • Total - consolidated accounts(4) Starting in the first quarter 2005, results for the Group, including data forprior periods, are presented in accordance with IFRS rules. in millions of euros 1Q05 1Q04 %Sales 31,739 26,975 +18%Adjusted operating income from business segments 5,456 3,576 +53%• Upstream 4,010 2,823 +42%• Downstream 891 553 +61%• Chemicals 555 200 +178%Adjusted net operating income from business 2,877 1,966 +46%segments Net income* 3,208 2,090 +53%Adjusted net income 2,919 1,946 +50%Adjusted earnings per share (euros) 4.90 3.18 +54% Investments 1,784 1,637 +9%Divestments 213 182 +17% at selling priceCash flow from operating activities 4,037 4,109 -2% * Group share l Number of sharesin millions 1Q05 1Q04 %Fully-diluted weighted-average shares 596.1 612.7 -3% • Market environment 1Q05 1Q04 %•/$ 1.31 1.25 -5%*Brent ($/b) 47.6 32.0 +49%European refining margins TRCV ($/t) 31.7 21.6 +47% * change in the dollar versus the euro • Adjustments to operating income from business segmentsin millions of euros 1Q05 1Q04Impact of special items on operating income - -• Restructuring charges - -• Impairments - -• Other - -Difference of FIFO vs. replacement cost 722 248 Total adjustments affecting operating income from business 722 248segments • Adjustments to net income (Group share)in millions of euros 1Q05 1Q04Impact of special items on net income (125) (17)• Equity share of special items recorded by (42) -Sanofi-Aventis• Gain/(loss) on asset sales - -• Restructuring charges and early retirements plans (83) (17)• Impairments - -• Other - -Adjustment related to the Sanofi-Aventis merger * (82) -(share of amortization of intangible assets)After-tax difference of FIFO vs. replacement cost 496 161 Total adjustments affecting net income 289 144 * based on 13% participation by Total in Sanofi-Aventis at March 31, 2005 • First quarter 2005 results > Operating income The oil market environment for the first quarter 2005 was marked by sharplyhigher oil prices and stronger refining margins compared to the first quarter2004. The average Brent price increased by 49% to 47.6 $/b. The TRCV Europeanrefining margin indicator averaged 31.7 $/t, an increase of 47% compared to thefirst quarter last year. In addition, petrochemical margins continued to increase, reaching an averagelevel higher than that of the first and fourth quarters in 2004. The impact of the improvement in the oil market and chemicals environment wasslightly offset by the 5% decline in the value of the dollar relative to theeuro. In this context, the adjusted operating income from business segments increasedby 53% to 5,456 million euros (M•) from 3,576 M• in the first quarter 2004. Adjusted net operating income from business segments increased by 46% to 2,877M• from 1,966 M• in the first quarter 2004. The lower percentage increase,relative to the increase in operating income, is due primarily to a highereffective tax rate in the first quarter 2005. > Net income Special items had a net negative impact of 125 M• in the first quarter 2005 and17 M• in the first quarter 2004. They are made up mainly of restructuringcharges in the Chemicals segment. Included in the first quarter 2005 equity income from affiliates is a netnegative accounting impact of 82 M• for the Total's equity share of amortizationof intangible assets related to the Sanofi-Aventis merger. Adjusted net income, which excludes an after-tax inventory valuation effect of496 M• in the first quarter 2005 and 161 M• in the first quarter 2004, increasedby 50% to 2,919 M• from 1,946 M• in the first quarter 2004. During the first quarter 2005, the Group bought back 4.87 million of its sharesfor 847 M•. The number of weighted-average shares at March 31, 2005 is 594.9million compared to 597.7 million at December 31, 2004. Adjusted earnings per share based on 596.1 million fully-dilutedweighted-average shares, increased by 54% to 4.90 euros from 3.18 euros in thefirst quarter 2004. Earnings per share increased at a higher rate than adjustednet income due to the accretive effect of the share buybacks. Net income rose to 3,208 M• from 2,090 M• in the first quarter 2004. > Cash flow Cash flow from operating activities was 4,037 M•, a decrease of 2% compared tothe first quarter 2004. Investments were 1,784 M• in the first quarter 2005 compared to 1,637 M• in thesame quarter last year. Divestments in the first quarter 2005 were 213 M•. Net cash flow(5) was 2,466 M•, or approximately 3.2 B$, compared to 2,654M• inthe first quarter 2004. The net-debt-to-equity ratio was 23.9% at March 31, 2005 compared to 30.7% atDecember 31, 2004 and 24.1% at March 31, 2004. • Upstream > Resultsin millions of euros 1Q05 1Q04 %Adjusted operating income* 4,010 2,823 +42%Adjusted net operating income* 1,808 1,399 +29% Investments 1,363 1,214 +12%Divestments 128 99 +29% at selling priceCash flow from operating activities 2,188 2,332 -6% * adjustment detail included in business segment information Adjusted operating income from the Upstream segment increased by 42% to 4,010 M•in the first quarter 2005 from 2,823 M• in the first quarter 2004. The Upstream segment benefited from higher hydrocarbon prices, more so forliquids than for gas, and from an above average ratio of sales to liquidsproduction. Adjusted net operating income from the Upstream rose to 1,808 M• in the firstquarter 2005, an increase of 29%. This increase, which is a smaller percentage increase than for the adjustedoperating income is due mainly to a higher effective tax rate in the firstquarter 2005 than in the same quarter last year. > ProductionHydrocarbon production 1Q05 1Q04 %Combined production (kboe/d) 2,562 2,633 -3%• Liquids (kb/d) 1,657 1,723 -4%• Gas (Mcfd) 4,945 4,951 - Hydrocarbon production was 2,562 thousand barrels per day (kboe/d) in the firstquarter 2005 versus 2,633 kboe/d in the first quarter 2004, a decrease of 2.7%. The decrease is due essentially to the negative impact of higher prices in thefirst quarter 2005 versus the first quarter 2004 on entitlement volumes fromproduction sharing and buy-back contracts ( price effect ), In addition, production shut-downs in the Gulf of Mexico following HurricaneIvan, affected first quarter 2005 volumes. The main facilities restartedproduction progressively from the end of March 2005. Excluding these impacts, production increased slightly, with growth from Libya,Indonesia, Angola, Nigeria, Venezuela and Qatar being largely offset by lowerproduction in the North Sea. > Liquids and gas price realizations(6)Liquids and gas price* 1Q05 1Q04 %Average liquids price ($/b) 44.1 31.0 +42%Average gas price ($/Mbtu) 4.40 3.70 +19% * consolidated subsidiaries, excluding fixed margin and buy-back contracts The average realized price for liquids reflects a smaller increase than for theBrent price primarily because of the wider light-heavy differential in pricingvarious grades of crude. The increase in the average realized gas price is duenotaby to higher European gas prices. > Recent highlights First quarter 2005 exploration successes included an extension of the Usandiscovery in Nigeria (Total-operated, 20%), securing a 49% interest in Block 4of Plataforma Deltana in Venezuela(7), and the acquisition of new explorationacreage, two deep-offshore blocks in Australia and two blocks in Mauritania. More recently, Total added a new exploration block in Cameroon. The first quarter 2005 highlights also included the start-up of the GrandAngostura field (Total 30%) offshore Trinidad and Tobago and the launching ofthe development of the Forvie North field (Total 100%) in the UK North Sea. Following the preemption process related to the sale of the BG stake in theNorth Caspian permit, Total signed an agreement to sell a 1.85% interest toKazMunaGas, the national oil company of the Republic of Kazakhstan. Once thissale is complete, Total will hold an 18.5 percent interest in the permit. In upstream LNG, significant progress was made on Yemen LNG (Total 42.9%) withthe signing of three LNG sales agreements covering almost all of the productioncapacity and the launching of calls for tenders on the development of theproject. On Qatargas II, Total signed an agreement to acquire 16.7% of train 2in the project and a purchase agreement for up to 5.2 million tons per year ofLNG over 25 years. In midstream LNG, the Hazira LNG regasification terminal (Total 26%) in Indiastarted commercial operations in April 2005. On May 2, 2005, Total announced the launching of the development of the offshoreNigerian Akpo field (Total-operated 24%). First production from Akpo is expectedat end-2008 with a plateau rate of 225 kboe/d, consisting of about 80% ofcondensates. • Downstream > Resultsin millions euros 1Q05 1Q04 %Adjusted operating income* 891 553 +61%Adjusted net operating income* 678 425 +60% Investments 217 240 -10%Divestments 45 43 +5% at selling priceCash flow from operating activities 1,689 1,724 -2% * adjustment detail included in business segment information Adjusted operating income from the Downstream segment increased by 61% to 891 M•from 553 M• in the first quarter 2004. The Downstream segment benefited from a favorable refining environment. Relativeto the first quarter of last year, refining margins were driven sharply higherin early 2005 by a combination of strong product demand, for distillates inEurope and for gasoline in the US, plus the wider light-heavy crude pricedifferential. The favorable impact of this trend was not fully reflected by the47% increase in the TRCV margin indicator. Downstream results also benefited from the improved operational performance ofthe refineries and from the positive effects of productivity programs. Adjusted net operating income from the Downstream increased by 60% to 678 M• inthe first quarter 2005 from 425 M• in the first quarter 2004. > Refinery throughputRefinery throughput (kb/d) 1Q05 1Q04 %Total refinery throughput* 2,626 2,493 +5%• France 1,049 1,034 +1%• Rest of Europe* 1,252 1,181 +6%• Rest of world 325 278 +17% * includes equity share in Cepsa Thanks to the strong operational performance of the refineries, throughput(crude and cracker feedstocks) reached a new record level of 2,626 kb/d in thefirst quarter 2005. The refining utilization rate based on crude input rose to95% from 92% in the first quarter 2004. A period of major turnarounds began atthe end of the first quarter 2005 that will involve Grandpuits and Milford Havenrefineries as well as partial turnarounds for the Normandy and Antwerprefineries. > Recent highlights Total reached an agreement with the Chinese authorities to form a joint venturewith Sinochem for the creation of a network of 200 service stations in northernChina, where the two companies are already partners in the Dalian refinery. Beginning in April 2005, Total began selling new high-performance fuels(gasoline and diesel) : TOTAL EXCELLIUM. Initially marketed in nearly 300stations, they will be distributed throughout the Total network by the end of2005. • Chemicals > Resultsin millions euros 1Q05 1Q04 %Sales 5,518 4,673 +18%• Base chemicals & polymers 2,587 1,922 +35%• Specialties 1,568 1,466 +7%• Arkema 1,360 1,278 +6%• Corporate Chemicals 3 7 -Adjusted operating income* 555 200 +178%• Base chemicals & polymers 352 69 x5,1• Specialties 116 119 -3%• Arkema 89 11 x8,1• Corporate Chemicals (2) 1 nsAdjusted net operating income* 391 142 +175% Investments 158 172 -8%Divestments 22 19 +16% at selling priceCash flow from operating activities 82 (72) ** ns * adjustment detail included in business segment information **includes disbursements related to the Toulouse-AZF reserve of 130 M• Sales for the Chemicals segment increased by 18% to 5,518 M• from 4,673 M• inthe first quarter 2004. Adjusted operating income increased sharply to 555 M• in the first quarter 2005from 200 M• in the first quarter 2004. This performance was due mainly to the strong increase in base chemicals whichbenefited from the rebound in petrochemical margins that began in the secondhalf of 2004. Specialties continued to perform well. Arkema's results increased sharply mainly due to improved market conditions andto the positive effects of self-help programs that are underway. In thechlorochemicals business unit, Arkema announced a restructuring program at thebeginning of the year. Adjusted net operating income from the Chemicals segment increased to 391 M• inthe first quarter 2005 from 142 M• in the first quarter 2004. > Recent highlights Samsung Total Petrochemicals launched a project to debottleneck the aromaticsplant in Daesan, South Korea which is expected to increase capacity by about25%. In April 2005, the project to build an ethane cracker at Ras Laffan in Qatar waslaunched. Total Petrochemicals holds a 22% net interest in this project throughQatofin subsidiary. • Summary and outlook The return on average capital employed (ROACE(8)) for Total for the period April1, 2004 to March 31, 2005 was 26%. Profitability increased in all businesssegments. The return on equity for the same period was 33%. The investment program is proceeding according to plan with the priority beingUpstream growth as well as increased expenditures for refining. Total bought back 1.45 million of its shares for 261 M• in April 2005, raisingthe total bought back since the beginning of the year to slightly more than 1%of the share capital. Since the beginning of the second quarter 2005, the oil market environment hasremained favorable with high oil prices and refining margins. Despitecompression in petrochemical margins, the Chemicals segment continues to benefitfrom a relatively favorable environment. To listen to the conference call with CFO Robert Castaigne and financialanalysts today at 15:00 (Paris time), please call +44 (0)20 7162 9919 fromEurope or +1 954 334 0340 from the US or access the call through company website www.total.com. For a replay, please dial +44 (0)20 7031 4064 from Europe or1 954 334 03 42 (access code: 658 039) from the US. The March 31, 2005 notes to the consolidated accounts are available on the Totalweb site (www.total.com). The interim accounts have been the subject of alimited review by the company's auditors. This document may containforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995 with respect to the financial condition, resultsof operations, business, strategy and plans of Total. Such statements are basedon a number of assumptions that could ultimately prove inaccurate, and aresubject to a number of risk factors, including currency fluctuations, the priceof petroleum products, the ability to realize cost reductions and operatingefficiencies without unduly disrupting business operations, environmentalregulatory considerations and general economic and business conditions. Totaldoes not assume any obligation to update publicly any forward-looking statement,whether as a result of new information, future events or otherwise. Furtherinformation on factors which could affect the company's financial results isprovided in documents filed by the Group and its affiliates with the FrenchAutorite des Marches Financiers and the US Securities 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 monitored atthe Group level and excluded from the business segment figures. In general,special items relate to transactions that are significant, infrequent orunusual. However, in certain instances, certain transactions such asrestructuring costs or assets disposals, which are not considered to berepresentative of normal course of business, may be qualified as special itemsalthough they may have occurred within prior years or are likely to recur withinfollowing 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 2005 • Upstream Combined production by region (kboe/d) 1Q05 1Q04 %Europe 830 891 -7%Africa 804 796 +1%North America 37 65 -43%Far East 256 244 +5%Middle East 394 419 -6%South America 232 210 +10%Rest of world 9 8 +13%Total 2,562 2,633 -3% Liquids production by region (kb/d) 1Q05 1Q04 %Europe 415 448 -7%Africa 720 723 -North America 6 16 -63%Far East 30 32 -6%Middle East 339 362 -6%South America 139 134 +4%Rest of world 8 8 -Total 1,657 1,723 -4% Gas production by region (Mcfd) 1Q05 1Q04 %Europe 2,258 2,413 -6%Africa 450 391 +15%North America 165 259 -36%Far East 1,257 1,179 +7%Middle East 296 302 -2%South America 517 407 +27%Rest of world 2 - nsTotal 4,945 4,951 - • Downstream Refined product sales by region (kb/d)* 1Q05 1Q04 % Europe 2,858 2,794 +2% Africa 318 280 +14% United States 591 580 +2%Rest of world 223 188 +19% Total 3,990 3,842 +4% * includes equity share in Cepsa and trading -------------------------- (1) dollar amounts represent euro accounts converted at the average •/$ exchangerate for the period (1.3113 $/• in the first quarter 2005 and 1.2497 $/• in thefirst quarter 2004) (2) percent changes are relative to first quarter 2004 (3) adjusted net income • net income using replacement cost, adjusted forspecial items and excluding Total's equity share of amortization of intangiblesrelated to the Sanofi-Aventis merger (4) adjusted income (adjusted operating income, adjusted net operating income,adjusted net income) are defined as income using replacement cost, adjusted forspecial items and excluding Total's equity share of amortization of intangiblesrelated to the Sanofi-Aventis merger (5) net cash flow = cash flow from operating activities + divestments -investments (6) average realized oil and gas prices will be posted on the Total web site(Finance-Main Indicators) around the middle of the month following the end ofeach quarter. (7) subject to approval by authorities (8) ROACE = adjusted net operating income divided by the average capitalemployed using replacement cost This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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