15th Feb 2006 09:16
Total S.A.15 February 2006 Total reports sharply higher 2005 results • +31% to 12.0 billion for adjusted net income(1) in euros• +35% to 20.33 for adjusted earnings per share in euros Investments increased by 26% in 2005 to 11.2 billion euros Solid reserve replacement rate(2) of 120% in 2005 Proposed 2005 dividend of 6.48(3) euros per share, a 20% increase • Results expressed in dollars(4)-(5)4th Quarter 2005 Full year 20053.63 B$ +6% Adjusted net income1 14.93 B$ +31%6.18 $/share +8% 25.29 $/share +35% 2.78 B$ -43% Net income 15.3 B$ +13% • Results in euros54th Quarter 2005 Full year 20053.05 B• +16% Adjusted net income 1 12.00 B• +31%5.20 •/share +18% 20.33 •/share +35% 2.34 B• -37% Net income 12.3 B• +13% Paris, February 15, 2006 - The Board of Directors of Total, chaired by CEOThierry Desmarest, met on February 14, 2006 to review the fourth quarter 2005results and to close the 2005 consolidated and parent company accounts. Adjusted net income increased by 31% to 12,003 million euros (M•) compared to2004. Commenting on the results, Thierry Desmarest said : Market conditions were favorable for the oil industry in 2005. In a context ofcontinued demand growth, the tension on production capacity, aggravated by theeffect of hurricanes in the Gulf of Mexico, raised oil prices and refiningmargins to high levels. Total's adjusted earnings per share increased by 35%, reflecting its ability tobenefit from the stronger market environment, despite inflationary pressure fromservice companies. Total's performance ranks among the best of the majors interms of the increase in adjusted earnings per share and in terms of return oncapital employed, which rose to 27% in 2005. Continued exploration success, the launching of Yemen LNG and the acquisition ofDeer Creek in Canada, among other things, have allowed us to increase the levelof proved and probable reserves to 20 billion equivalent barrels at the end of2005, which represents close to 22 years of production at the current rate. The Group invested 13.9 billion dollars in 2005, a 26% increase compared to2004. This represents a significant level of activity that we expect willcontinue at comparable levels from now through 2010 and should allow us mainlyto increase production by close to 4% per year on average over the 2005-2010period. It should also allow us to upgrade our refining system in Europe and theUS to adapt to changes in the supply-demand balance as well as expand ourpetrochemical activities in Asia. • Total - consolidated accounts(6)4Q05 4Q04 % in millions of euros 2005 2004 %39,942 33,598 +19% Sales 143,168 121,998 +17%6,330 5,110 +24% Adjusted operating income from business 23,669 17,217 +37% segments5,000 3,428 +46% = Upstream 18,421 12,844 +43%1,083 1,213 -11% = Downstream 3,899 3,235 +21%247 469 -47% = Chemicals 1,349 1,138 +19%3,095 2,543 +22% Net adjusted operating income from 11,902 8,957 +33% business segments 2,341 3,731 -37% Net income (Group share) 12,273 10,868 +13%3,052 2,635 +16% Adjusted net income 12,003 9,131 +31%5.20 4.39 +18% Earnings per share (euros) 20.33 15.05 +35% 3,799 3,329 +14% Investments 11,195 8,904 +26%250 654 -62% Divestments 1,088 1,192 -9% at selling price3,171 3,822 -17% Cash flow from operations 14,669 14,662 - • Number of shares4Q05 4Q04 % In millions 2005 2004 %586.5 600.2 -2% Fully-diluted weighted-average shares 590.5 606.6 -3% • Market environment4Q05 4Q04 % 2005 2004 %1.19 1.30 +9%* US$ ($/•) 1.24 1.24 -56.9 44.0 +29% Brent ($/b) 54.5 38.3 +42%45.5 42.4 +7% European refining margins TRCV ($/t) 41.6 32.8 +27% *change in the dollar versus the euro • Adjustments to operating income from business segments4Q05 4Q04 in millions of euros 2005 2004(400) (901) Impact of special items on operating income from (420) (901) business segments(26) (119) • Restructuring charges (26) (119)(238) (681) • Impairments (249) (681)(136) (101) • Other (145) (101)(914) (419) Pre-tax difference of FIFO vs. Replacement cost 1,265 719 (1,314) (1,320) Total adjustments affecting operating income from 845 (182) business segments • Adjustments to net income (Group share)4Q05 4Q04 in millions of euros 2005 2004(193) 1,490 Impact of special items on net income (Group share) (467) 1 345(42) 2,399 • Equity share of special items recorded by (207) 2,399 Sanofi-Aventis (includes the gain on dilution from the 2004 merger)- 53 • Gain on asset sales - 53(40) (100) • Restructuring charges (130) (143)(207) (772) • Impairments (215) (772)96 (90) • Other 85 (192)(88) (113) Adjustment related to the Sanofi-Aventis merger* (335) (113) (share of amortization of intangible assets)(430) (281) After-tax difference of FIFO vs. Replacement cost 1,072 505 (711) 1,096 Total adjustments affecting net income 270 1,737 * based on 13% participation in Sanofi-Aventis at year-end 2004 and 2005 Fourth quarter 2005 results > Operating income Compared to the fourth quarter 2004, the fourth quarter 2005 oil marketenvironment had sharply higher oil prices (Brent +29% to 56.9 $/b) as well as amore moderate increase in refining margins (TRCV European margins +7% to 45.5 $/t). European petrochemical margins recovered from their third quarter lows butremained below the level of the fourth quarter 2004. In this context, the adjusted operating income from business segments increasedby 24% to 6,330 M• in the fourth quarter 2005 from 5,110 M• in the fourthquarter 2004. Special items had a negative impact of 400 M• on the fourth quarter 2005operating income from business segments, primarily due to restructuring charges,impairments and provisions for environmental liabilities in the Chemicalssegment, of which 300 M• is related to Arkema. In the fourth quarter 2004, special items affecting operating income from thebusiness segments had a negative impact of 901 M•, consisting mainly ofimpairments of assets in the vinyl products and polyethylene activities inEurope. Adjusted net operating income from the business segments increased by 22% to3,095 M• from 2,543 M• in the fourth quarter 2004. > Net income Adjusted net income, which excludes notably the after-tax inventory effect of-430 M• in the fourth quarter 2005 and -281 M• in the fourth quarter 2004,increased by 16% to 3,052 M• in the fourth quarter 2005 from 2,635 M• in thefourth quarter 2004. The lower percentage increase in adjusted net income, relative to the increasein net adjusted operating income from the business segments, includes the effectof higher net cost of net debt and charges related to a stock offer reserved foremployees(7). Special items had a negative impact of 193 M• on the fourth quarter 2005. Theyincluded the after-tax effects of provisions, restructuring charges andimpairments in the Chemicals segment, and -42 M• for Total's equity share ofspecial items taken by Sanofi-Aventis. In the fourth quarter 2004, special items had a net positive impact of 1,490 M•.They included primarily the gain on dilution related to the merger of Sanofi andAventis, partially offset by negative impacts from the after-tax effect ofspecial items affecting operating income and by impairments in the Upstream andChemicals segments. Net income(8) was 2,341 M• compared to 3,731 M• in the fourth quarter 2004. In the fourth quarter 2005, the Group bought back 2.63 million of its shares for558 M•. Adjusted earnings per share, based on 586.5 million fully-dilutedweighted-average shares, rose to 5.20 euros in the fourth quarter 2005 from 4.39euros in the fourth quarter 2004, an increase of 18%, which is a higherpercentage increase than for the adjusted net income thanks to the accretiveeffect of share buybacks in 2005. > Investments Investments rose to 3,799 M• from 3,329 M• in the fourth quarter 2004. Thefourth quarter 2005 includes the acquisition of the remaining 18% of Deer Creekfollowing the acquisition of 82% in the third quarter 2005. Divestments in the fourth quarter 2005 were 250 M•. > Cash flow Cash flow from operating activities was 3,171 M• compared to 3,822 M• in thefourth quarter 2004. Excluding changes in working capital adjusted for thepre-tax FIFO inventory effect, it increased by 18% to 4,459 M•. Net cash flow(9) was -378 M• compared to 1,147 M• in the fourth quarter 2004. • Full-year 2005 results Consolidated sales increased by 17% to 143,168 M• in 2005 from 121,998 M• in2004. > Operating income Compared to 2004, the 2005 oil market environment was marked by strong increasesin the oil price (+42% for Brent to 54.5 $/b) and refining margins (+27% forEuropean TRCV margins to 41.6 $/t). The environment for Chemicals was generallymore favorable in 2005 than in 2004. In this context, adjusted operating income from the business segments increasedby 37% to 23,669 M• from 17,217 M• in 2004. Special items affecting operating income from the business segments had anegative impact of 420 M•(10) in 2005 compared to a negative impact of 901 M€10in 2004. Adjusted net operating income from the business segments rose by 33% to 11,902M• from 8,957 M• in 2004. The lower percentage increase relative to the increasein operating income was due primarily to a higher effective tax rate in 2005. Expressed in dollars, the increase in adjusted net operating income from 2004 to2005 was 3.7 B$ and can be analyzed as follows : • + 4.0 B$ related to the stronger oil, gas and Chemicals environments, • - 0.25 B$ related to the effect of Gulf of Mexico hurricanes on the threesegments. The contribution of self-help programs was offset by higher costs in theUpstream and strikes in France. > Net income Adjusted net income, which excludes after-tax inventory effects of 1,072 M• in2005 and 505 M• in 2004, increased by 31% to 12,003 M• in 2005 from 9,131 M• in2004. Special items had a negative impact of 467 M€10 on 2005 net income and apositive impact of 1,345 M€10 on 2004 net income. Reported net income(11) rose to 12,273 M• from 10,868 M• in 2004. In 2005, the Group bought back 18.3 million shares(12), or nearly 3% of itscapital, for 3,486 M•. In January 2006, the Group bought back 1.9 million sharesfor 421 M•. At December 31, 2005 the number of fully-diluted shares was 586.0 millioncompared to 597.7 million a year earlier, representing a decrease of about 2%. Adjusted earnings per share, based on 590.5 million fully-dilutedweighted-average shares, rose to 20.33 euros in 2005 from 15.05 euros in 2004,an increase of 35%, which is a higher percentage increase than shown for theadjusted net income thanks to the accretive impact of the share buybacks. > Investments In 2005, investments rose to 11,195 M• from 8,904 M• in 2004. Expressed indollars, investments rose to 13.9 B$, a 26% increase compared to 2004, andincluded 1.8 B$ for targeted acquisitions, mainly Deer Creek in Canada for 1.4B$. Divestments in 2005 were 1,088 M• and included the sale of 1.85% of Kashagan toKazMunaiGas and Total's interest in Humber Power, the UK power generationcompany. > Cash flow Cash flow from operating activities rose to 14,669 M• from 14,662 M• in 2004.Excluding changes in working capital adjusted for the pre-tax FIFO inventoryeffect, cash flow increased by 23% to 17,406 M•. Net cash flow for the Group was 4,562 M• in 2005 compared to 6,950 M• in 2004. The net-debt-to-equity ratio was 32% at December 31, 2005 compared to 25.6% atSeptember 30, 2005 and 30.7% at December 31, 2004(13). • Analysis of segment results Upstream > Results4Q05 4Q04 % in millions of euros 2005 2004 %5,000 3,428 +46% Adjusted operating income* 18,421 12,844 +43%2,132 1,405 +52% Adjusted net operating income* 8,029 5,859 +37% 2,521 2,269 +11% Investments 8,111 6,202 +31%141 322 -56% Divestments 692 637 +9% at selling price2,374 3,099 -23% Cash flow from operating activities 10,111 10,347 -2% * adjustment detail included in the business segment information Adjusted operating income from the Upstream segment increased by 46% to 5,000 M•in the fourth quarter 2005 from 3,428 M• in the same period of 2004. The increase reflects essentially the benefits of higher hydrocarbon prices, forboth liquids and gas, and the 9% appreciation of the dollar versus the euro,which were slightly offset by the impact of a decrease in production. Adjusted net operating income for the Upstream segment rose to 2,132 M• in thefourth quarter 2005, an increase of 52%. The higher percentage increase relativeto the change in operating income reflects primarily the increase in equityincome from affiliates while the effective tax rate was little changed acrossthe two periods. The 23% decrease in cash flow from Upstream operating activities reflected inpart an increase in working capital in the fourth quarter 2005 that was due tothe effect of sharply higher prices on gas marketing activities. Excludingchanges in working capital, Upstream cash flow increased by 22%. For the full year 2005, adjusted net operating income from the Upstream segmentincreased by 37% to 8,029 M• from 5,859 M• in 2004. Expressed in dollars, the increase in adjusted net operating income from theUpstream segment was 2.7 B$. The estimated 3 B$ benefit from the stronger oiland gas market environment was partially offset by the estimated -0.2 B$ impactof lower production, excluding the price effect, that was essentially due tohurricanes in the Gulf of Mexico, and by other factors, including higher costs,estimated at -0.1 B$. Technical costs (FAS 69 consolidated subsidiaries only) were 8.5 $/boe in 2005compared to 8.0 $/boe in 2004. > Production4Q05 4Q04 % Hydrocarbon production 2005 2004 %2,463 2,628 -6% Combined production (kboe/d) 2,489 2,585 -4%1,592 1,684 -5% = Liquids (kb/b) 1,621 1,695 -4%4,896 5,323 -8% = Gas (Mcfd) 4,780 4,894 -2% Hydrocarbon production was 2,463 thousand equivalent barrels per day (kboe/d) inthe fourth quarter 2005 compared to 2,628 kboe/d in the fourth quarter 2004,representing a decline of 6%. About half of this decline is due to the negative impact on entitlement volumeslinked to higher prices in the fourth quarter 2005 versus the fourth quarter2004 ( price effect ). Excluding the price effect, production was lower mainly due to shutdowns in theNorth Sea, France and Congo. Progressive start-ups of Ekofisk Area Growth inNorway and Bonga in Nigeria made only a small contribution to fourth quarter2005 production. For the full year, production declined by 3.7% in 2005 compared to 2004. Adjusted for the price effect and excluding the impact of the hurricanes in theGulf of Mexico, the Group's hydrocarbon production remained stable in 2005. Production growth mainly from Venezuela, Libya, Indonesia, Trinidad andArgentina were offset by decreases in the North Sea (notably due to thedecommissioning of Frigg) and Syria. > Liquids and gas price realizations4Q05 4Q04 % Liquids and gas price* 2005 2004 %54.5 40.6 +34% Average liquids price ($/b) 51.0 36.3 +40% 5.68 4.24 +34% Average gas price ($/Mbtu) 4.77 3.74 +28% *consolidated subsidiaries, excluding fixed margin and buy-back contracts The average realized liquids price increased by 34% in the fourth quarter 2005compared to the fourth quarter 2004, while the benchmark Brent price rose by29%. The stronger increase in Total's liquids price was due primarily to theincreased contribution of the Sincor upgrader in Venezuela, which wasdebottlenecked in the fourth quarter 2004. For the year 2005, the increase in the average realized price for liquids wasglobally in line with the increase in the price of Brent, reflecting the highquality and price sensitivity of Total's liquids production. Realized gas pricesincreased in all producing areas, gradually benefiting from the positive effectsof high crude oil prices on long-term gas contracts, notably in Europe. > Year-end 2005 reservesReserves at December 31 2005 2004 %Hydrocarbon reserves (Mboe) 11,106 11,148 -= Liquids (Mb) 6,592 7,003 -6%= Gas (Bcf) 24,750 22,785 +9% Proved reserves, calculated according to SEC rules, were 11,106 Mboe at December31, 2005, representing 12.2 years of production at the current rate. Usingyear-end prices (Brent at 58.2 $/b), as required by the SEC, for the calculationhad a negative impact on proved reserves estimated at 0.2 Bboe. The reserve replacement rate(14) for the 2003-2005 period, based on SEC rules,was 97% for the Group (consolidated subsidiaries and equity affiliates). For2005, the rate was 95%. Excluding the impact of changing prices (Brent constant at 40 $/b), the Group'sreserve replacement rate would be 118% for the 2003-2005 period and 120% for2005. At year-end 2005, Total had a solid and diversified portfolio of proved andprobable reserves representing 20 Bboe, or close to 22 years of production atthe current rate(15). > Highlights since the start of the fourth quarter 2005 Total continued to expand its acreage by securing an exploration block in Libyaand four offshore licenses in the Norwegian North Sea. Notable exploration successes included two discoveries in one month on Libya'sBlock NC-186 (Total 24%), an oil discovery in Yemen in the East ShabwaDevelopment Area (Total-operated, 28.6%), and in the ultra-deep Angolan offshorea successful confirmation of the Gengibre discovery on Block 32 (Total-operated,30%). The recent announcement of the fifth discovery, Mostarda-1, adds to thepotential of Block 32. Total recently agreed to take a 50% interest in the Victoria discovery on thePL211 license in Norway and, at the same time, to reduce its interest inTyrihans on the PL073 license from 26.51% to 21.51%. Several projects started up recently : the first wells on the Ekofisk AreaGrowth project (Total 39.9%, 100 kboe/d plateau) and Kristin (Total 6%, 220 kboe/d plateau) in Norway, Bonga (Total 12.5%, more than 200 kb/d plateau) inNigeria, Forvie North (Total 100%, 20 kboe/d plateau) in the UK, and the Belizefield, the first step in developing BBLT on Block 14 (Total 20%, 200 kb/dplateau) in Angola. Total has repositioned its US portfolio. In December 2005, Total sold itsinterests in four onshore fields in South Texas that represented about 100 Mcfdof production in exchange for a 17% interest in the Tahiti field in the deepGulf of Mexico. The Tahiti field is expected to start up in 2008 and reach aplateau of 125 kb/d and 70 Mcfd. More recently, Total announced the sale of itsremaining onshore fields in East Texas and Mississippi. Total finalized the acquisition of the remaining shares of Deer Creek, whichowns 84% of the Joslyn field in the Athabasca region of Canada. Downstream > Results4Q05 4Q04 % in millions of euros 2005 2004 %1,083 1,213 -11% Adjusted operating income* 3,899 3,235 +21%799 838 -5% Net adjusted operating income* 2,916 2,331 +25% 710 724 -2% Investments 1,779 1,675 +6%80 73 +10% Divestments 204 200 +2% at selling price211 260 -19% Cash flow from operating activities 2,723 3,269 -17% * adjustment detail included in the business segment information Adjusted operating income from the Downstream segment in the fourth quarter 2005was 1,083 M•, a decrease of 11% compared to the fourth quarter 2004. The environment for refining was volatile in the fourth quarter 2005, withmargins spiking to historic highs in October in the wake of the Gulf of Mexicohurricanes but then falling sharply afterwards. European TRCV margins wereslightly higher in the fourth quarter 2005 than in the fourth quarter 2004. In addition, the combination of the hurricane-related shutdown of the PortArthur refinery and the strike at Normandy while margins were very high had astrong negative impact on results. Downstream results benefited from ongoing self-help programs. Adjusted net operating income from the Downstream segment was 799 M• in thefourth quarter 2005 compared to 838 M• in the fourth quarter 2004, a decrease of5%. Cash flow from Downstream operating activities suffered due a sharp increase inworking capital in the fourth quarter 2005. For the full year 2005, adjusted net operating income from the Downstreamsegment rose to 2,916 M• from 2,331 M• in 2004, an increase of 25%. Expressed in dollars, the increase in adjusted net operating income from theDownstream segment was 0.7 B$. The stronger Downstream environment had apositive impact estimated at 0.8 B$. Self-help programs contributed about 0.15B$ but this contribution was more than offset by an estimated -0.25 B$ for thecombined impact of strikes in France and Hurricane Rita in the US. > Refinery throughput4Q05 4Q04 % Refinery throughput (kb/d) 2005 2004 %2,420 2,485 -3% Total refinery throughput* 2,410 2,496 -3%928 951 -2% (S) France 939 995 -6%1,204 1,202 - (S) Rest of Europe* 1,158 1,188 -3%288 332 -13% (S) Rest of world 313 313 - *includes share of Cepsa Refinery throughput was 2,420 kb/d in the fourth quarter 2005, a 3% decreasecompared to the fourth quarter 2004. The refinery utilization rate was 89%. The decrease was due essentially to the impacts of the strike at the Normandyrefinery and the shutdown of the Port Arthur refinery after Hurricane Rita. For the full year 2005, refinery throughput declined by 3% to 2,410 kb/d from2,496 kb/d in 2004. The refinery utilization rate was 88% in 2005. Excluding theimpacts of the strikes in France and Hurricane Rita in the US, the refineryutilization rate was 91% in 2005, 1% below the rate for 2004 due to a largerprogram of major turnarounds. There are fewer major turnarounds scheduled for 2006. > Highlights since the start of the fourth quarter 2005 Total finalized the agreements to sell its 18% interest in the Reichstettrefinery in France and to increase its share in the Rome refinery in Italy.Total's interest in the Rome refinery has been increased to 71.9%. On December 11, 2005, explosions occurred at the Buncefield fuel depot in theUK, the cause of which are still undetermined. Chemicals > Results4Q05 4Q04 % in millions of euros 2005 2004 %5,671 5,245 +8% Sales 22,326 20,042 +11%2,641 2,429 +9% = Base chemicals 10,245 8,864 +16%1,653 1,534 +8% = Specialties 6,520 6,015 +8%1,377 1,280 +8% = Arkema 5,561 5,156 +8% - 2 ns = Corporate Chemicals - 7 ns247 469 -47% Adjusted operating income* 1,349 1,138 +19%100 275 -64% = Base chemicals 579 505 +15%144 120 +20% = Specialties 548 499 +10%17 74 -77% = Arkema 233 119 +96%(14) - ns = Corporate Chemicals (11) 15 ns164 300 -45% Net adjusted operating income* 957 767 +25% 437 304 +44% Investments 1,115 949 +17%29 54 -46% Divestments 59 122 -52% at selling price161 338 -52% Cash flow from operating activities* 946 600 +58% * * adjustment detail included in the business segment information ** includes disbursements related to the Toulouse-AZF reserve of 77 M• in 2005and 316 M• in 2004 Adjusted operating income decreased by 47% to 247 M• in the fourth quarter 2005from 469 M• in the fourth quarter 2004. Fourth quarter 2005 petrochemical margins in Europe were below the level of thefourth quarter 2004 but above the level of the third quarter 2005. In additionto the margin effect, operating income for the Base chemicals sector werenegatively affected by the shutdowns of the Port Arthur steamcracker (related tohurricanes) and the Gonfreville cracker (related to its 5-year turnaround). Specialties performed well. Arkema's results include the negative impact of charges related to thepreparation of the spin-off, which is planned for the first half 2006. Adjusted net operating income from the Chemicals segment was 164 M• in thefourth quarter 2005 compared to 300 M• for the fourth quarter 2004. For the full year 2005, adjusted net operating income from the Chemicals segmentrose to 957 M• from 767 M• in 2004, an increase of 25%. > Highlights since the start of the fourth Quarter 2005 Samsung-Total Petrochemicals (Total 50%) launched a major project to expand itssite in Daesan, South Korea, by 2008 that will increase the capacity of itscracker to 850 kt/y (+30%) and add production capacity for styrene andpolypropylene. Bostik, a Total subsidiary specializing in adhesives, acquired two companies,Laybond (United Kingdom) and Global Brands (Philippines) to strengthen itsmarket share. Arkema continued to reorganize in advance of the planned spin-off with aneffective date of May 18, 2006. • Total S.A. parent company accounts, proposed dividend and stock split The parent company, Total S.A., reported net earnings of 4,143 M• in 2005compared to 3,443 M• in 2004. The Board of Directors, after closing theaccounts, decided to propose at the May 12, 2006 Annual Meeting a dividend of6.48 euros per share for 2005, a 20% increase compared to 2004. The pay-out ratio for Total in 2005, based on adjusted net income, would be 32%. Taking into account the interim dividend of 3 euros per share paid on November24, 2005, the remaining 3.48 euros of the 2005 dividend will be paid on May 18,2006. The Board of Directors intends to propose at the May 12, 2006 Annual Meeting afour-for-one stock split for the 10 euro nominal value shares, effective May 18,2006. Contingent upon splitting the Total shares, the company will split itsAmerican Depositary Receipts (ADRs) two-for-one, such that one ADR will thencorrespond to one share. • Summary and outlook The return on average capital employed (ROACE(16)) for the Group was 27% in 2005(30% for the business segments), at the level of the best in the industry.Profitability increased in 2005 for all business segments(17) : • Upstream ROACE increased to 40% from 36% in 2004. • Downstream ROACE increased to 28% from 25%. • Chemicals ROACE increased to 11% from 9%. Excluding Arkema, itincreased to 12% in 2005 from 11% in 2004. Return on equity rose to 35% in 2005 from 33% in 2004. In the Upstream, Total is pursuing a strategy of profitable growth that shouldtranslate into production growth of close to 4% per year on average between 2005and 2010(18). This growth will be particularly significant in Africa, where thegrowth rate is expected to be 7% per year on average through 201018. Beyond 2010the portfolio of projects offers strong visibility, notably thanks to continuedexploration success over the past years and to new giant gas and heavy oilprojects. In the Downstream, the contribution of new conversion and desulphurizationprojects combined with ongoing productivity programs should allow the segment toachieve a ROACE of 20% by 2010 and increase cash flow from operating activitiesby 0.9 B• per year in an environment of 25 $/t(19) European refining margins(TRCV). In petrochemicals, Total's objective is to continue to increase its polymersproduction, particularly in Asia and the Middle East while reducing its fixedcost per unit. The Chemicals segment continues to target a ROACE of 12% atmid-cycle by 2010. As for renewable energies, in a new step forward in the wind energy business,Total has been selected to build the largest onshore wind farm project in Francein the Aveyron region. The 90 MW project is expected to start up in 2008. Inaddition, the Group expects a five-fold increase in the production of itsphotovoltaic cells and plans to build a new solar panel factory in Toulouse. Implementing the Group's growth strategy depends on a sustained investmentprogram. Using a •/$ exchange rate of 1.20, the 2006 Capex budget is about 13.5B$, including 10 B$ for the Upstream segment(20). Over the period 2006-2010investments should remain relatively stable. The net-debt-to-equity ratio for the Group is targeted to remain at around 25%to 30%. Total intends to pursue a dynamic dividend policy. Cash flow remaining afterinvestments and the payment of the dividend will be available for sharebuybacks. The 2006-2007 period will be notable for the size and number of major Upstreamproject start-ups, including among them Dalia, BBLT and Rosa in Angola, Dolphinin Qatar, Surmont and Joslyn in Canada as well as the start-up of thehydrocracker at the Normandy refinery. The contribution of these start-ups willbe significant by the end of 2006. During 2006, Total expects to rebalance its Chemicals portfolio by spinning offArkema, which is one of the proposals shareholders will vote on at the May 12Annual Meeting. Since the start of 2006, the oil market environment has remained globallyfavorable, with high oil and gas prices but with European refining marginssignificantly below fourth quarter 2005 levels. To listen to an English translation the presentation to financial analysts byCEO Thierry Desmarest and senior management today at 11:00 (Paris time) pleasevisit the Group's website www.total.com or call +44 (0) 207 162 0025 in Europeor 1 334 323 6201 in the United States (code:Total). For a replay, access thewebsite or call +44 207 031 4064 in Europe or 1 954 355 0342 (code: 690023).There will be a presentation in English to analysts in London tomorrow at12:30 (London time) that can be accessed using the same call-in numbers. This document may contain forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995 with respect to the financialcondition, results of operations, business, strategy and plans of Total. Suchstatements are based on a number of assumptions that could ultimately proveinaccurate, and are subject to a number of risk factors, including currencyfluctuations, the price of petroleum products, the ability to realize costreductions and operating efficiencies without unduly disrupting businessoperations, environmental regulatory considerations and general economic andbusiness conditions. Total does not assume any obligation to update publicly anyforward-looking statement, whether as a result of new information, future eventsor otherwise. Further information on factors which could affect the company'sfinancial results is provided in documents filed by the Group and its affiliateswith the French Autorite des Marches Financiers and the US Securities andExchange 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. Cautionary Note to U.S. Investors - The United States Securities and ExchangeCommission permits oil and gas companies, in their filings with the SEC, todisclose only proved reserves that a company has demonstrated by actualproduction or conclusive formation tests to be economically and legallyproducible under existing economic and operating conditions. We use certainterms in this presentation, such as "proved and probable reserves", that theSEC's guidelines strictly prohibit us from including in filings with the SEC.U.S. Investors are urged to consider closely the disclosure in our Form 20F,File Ndegrees 1-10888, available from us at 2, place de la Coupole - La Defense6 - 92078 Paris la Defense cedex - France. You can also obtain this form fromthe SEC by calling 1-800-SEC-0330. Operating information by segment Fourth quarter and full-year 2005 • Upstream 4T05 4T04 % Combined production by region (kboe/ 2005 2004 % d)759 858 -12% Europe 770 832 -7%756 840 -10% Africa 776 813 -5%33 37 -11% North America 41 61 -33%247 255 -3% Far East 248 245 +1%410 442 -7% Middle East 398 412 -3%249 187 +33% South America 247 213 +16%9 9 - Rest of world 9 9 -2,463 2,628 -6% Total 2,489 2,585 -4% 4Q05 4Q04 % Liquids production by region (kb/d) 2005 2004 %381 442 -14% Europe 390 424 -8%678 720 -6% Africa 696 730 -5%3 2 +50% North America 9 16 -44%26 29 -10% Far East 29 31 -6%359 382 -6% Middle East 346 357 -3%137 100 +37% South America 143 128 +12%8 9 -11% Rest of world 8 9 -11%1,592 1,684 -5% Total 1,621 1,695 -4% 4Q05 4Q04 % Gas production by region (Mcfd) 2005 2004 %2,048 2,267 -10% Europe 2,063 2,218 -7%412 640 -36% Africa 422 444 -5%156 181 -14% North America 174 241 -28%1,366 1,394 -2% Far East 1,254 1,224 +2%274 324 -15% Middle East 279 293 -5%638 517 +23% South America 586 474 +24%2 - ns Rest of world 2 - Ns4,896 5,323 -8% Production totale 4,780 4,894 -2% • Downstream 4Q05 4Q04 % Refined product sales by region (kb/ 2005 2004 % d)*2,912 2,555 +14% Europe 2,742 2,693 +2%337 339 -1% Africa 336 306 +10%571 559 +2% Americas 623 605 +3%208 189 +10% Rest of world 184 167 +10%4,028 3,642 +11% Total* 3,885 3,771 +3% • includes equity share in Cepsa and trading 2006 Sensitivities Scenario Change Impact on operating Impact on net results(e) operating results(e)•/$ 1.20 $/• +0.1 • per $ +1.6 B• +0.8 B• Brent 40-50 $/b +1 $/b +0.41 B• +0.17 B•European refining 25 $/t +1 $/t +0.09 B• +0.06 B•margins TRCV Net-debt-to-equity ratio in millions of euros 12/31/2005 9/30/2005 12/31/2004Current borrowings 3,920 12,856 3,614Net Current financial instruments (301) (806) (134)Non-current financial debt 13,793 13,377 11,289Hedging instruments of non-current debt (477) (599) (1,516)Cash and cash equivalents (4,318) (14,989) (3,860)Net debt 12,617 9,839 9,393 Shareholders' equity 40,645 39,725 31,608Accrued dividend payable* (2,006) (2,362) (1,778)MMPS - - 147Minority interests 838 1,015 663Equity 39,477 38,378 30,640 Net-debt-to-equity ratio 32.0% 25.6% 30.7% * theoretical distribution of a dividend equal to 6.48 •/share, less the interimdividend of 1,746 M• paid in November 2005 Return on average capital employed in 2005 in millions of euros Upstream Downstream Chemicals** Segments GroupAdjusted net operating income 8,029 2,916 957 11,902 12,576Capital employed 31/12/2004* 16,280 9,654 8,263 34,197 40,372Capital employed 31/12/2005* 23,522 11,421 9,120 44,063 51,576ROACE 40.3% 27.7% 11.0% 30.4% 27.4% * at replacement cost (excluding after-tax inventory effect) ** Capital employed for Chemicals reduced for the Toulouse-AZF reserve in theamount of 110 M• pre-tax at 12/31/2004 and 133 M• pre-tax at 12/31/2005 Return on average capital employed in 2004 in millions of euros Upstream Downstream Chemicals ** Segments GroupAdjusted net operating income 5,859 2,331 767 8,957 9,520Capital employed 31/12/2003* 16,596 9,055 8,714 34,365 38,313Capital employed 31/12/2004* 16,280 9,654 8,263 34,197 40,372ROACE 35.6% 24.9% 9.0% 26.1% 24.2% * at replacement cost ** Capital employed for Chemicals reduced for the Toulouse-AZF reserve in theamount of 276 M• pre-tax at 12/31/2003 and 110 M• pre-tax at 12/31/2004 -------------------------- (1) adjusted net income = net income using replacement cost (Group share)adjusted for special items and excluding Total's share of amortization ofintangibles related to the Sanofi-Aventis merger (2) reserve replacement rate for the Group (consolidated subsidiaries and equityaffiliates), excluding the impact of changing prices and based on a 40 $/bscenario (3) including the interim dividend of 3 euros per share paid on November 24,2005 (4) dollar amounts represent euro amounts converted at the average •/$ exchangerate for the period (1.1884 dollars per euro in the fourth quarter 2005, 1.2977in the fourth quarter 2004, 1.2441 for 2005 and 1.2439 for 2004) (5) percent changes are relative to the same period in 2004 (6) adjusted income (adjusted operating income, adjusted net operating income,adjusted net income) is defined as income using replacement cost, adjusted forspecial items and excluding Total's equity share of amortization of intangiblesrelated to the Sanofi-Aventis merger (7) as required under IFRS (8) reported net income includes special items, after-tax inventory valuationeffects and Total's equity share of the amortization of intangibles related tothe Sanofi-Aventis merger (9) net cash flow = cash flow from operating activities + divestments -investments (10) special items are shown in the table on page 3 (11) reported net income includes special items, the after-tax inventoryvaluation effects and Total's equity share of the amortization of intangiblesrelated to the Sanofi-Aventis merger (12) including 0.57 million shares which are reserved for share grants as perthe decision of the Board on July 19, 2005 (13) details of the calculation are available on page 17 (14) change in reserves excluding production (i.e. revisions + discoveries,extensions + acquisitions - sales) / production for the period (15) limited to proved and probable reserves covered by E&P contracts on fieldsthat have been drilled and for which technical studies have demonstratedeconomic development in a 40 $/b Brent environment, including the portion ofheavy oil in the Joslyn field developed by mining (16) adjusted net operating income divided by average replacement cost capitalemployed (17) details of the calculation are available on page 18 (18) based on 40 $/b Brent (19) approx. average TRCV over the past five years (20) excluding acquisitions This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
TTA.L