1st Quarter Results
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 2005
Adjusted net income(3) 3.83 B$ +57%
6.42 $/share +62%
Net income 4.21 B$ +61%
- Results in euros2
First quarter 2005
Adjusted 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 oil
industry. Against a backdrop of persistently strong demand for oil and tension
over production capacity, oil prices rose again to record levels while refining
margins remained high. At the same time, the positive trend observed at the end
of 2004 in the Chemicals segment continued in petrochemicals, as well as for
Arkema.
In this context, Total's adjusted net income increased by 50% to 2,919 million
euros from 1,946 million euros in the first quarter 2004.
Adjusted earnings per share rose to 4.90 euros, an increase of 54% compared to
the first quarter 2004. Expressed in dollars, the increase is 62%, which is the
highest percentage increase among the majors.
This performance shows that the Group is able to benefit fully from the high oil
price environment in the Upstream as well as from the productivity programs that
have strengthened the Downstream and Chemicals. Furthermore, in terms of return
on average capital employed, Total's performance is the best in the industry.
For the Upstream segment, the start of the year has been highlighted by
significant progress in the negotiation for major projects, notably in Yemen and
Qatar, and by the approval of the plan to launch the development of the giant
Akpo field in Nigeria. Total is actively pursuing its growth strategy, and our
investments expressed in dollars increased by 14% in the first quarter 2005
compared to the first quarter 2005.
• Total - consolidated accounts(4)
Starting in the first quarter 2005, results for the Group, including data for
prior 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 price
Cash flow from operating activities 4,037 4,109 -2%
* Group share
l Number of shares
in 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 segments
in millions of euros 1Q05 1Q04
Impact 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 722 248
segments
• Adjustments to net income (Group share)
in millions of euros 1Q05 1Q04
Impact 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 sharply
higher oil prices and stronger refining margins compared to the first quarter
2004. The average Brent price increased by 49% to 47.6 $/b. The TRCV European
refining margin indicator averaged 31.7 $/t, an increase of 47% compared to the
first quarter last year.
In addition, petrochemical margins continued to increase, reaching an average
level higher than that of the first and fourth quarters in 2004.
The impact of the improvement in the oil market and chemicals environment was
slightly offset by the 5% decline in the value of the dollar relative to the
euro.
In this context, the adjusted operating income from business segments increased
by 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 2,877
M€ 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 higher
effective tax rate in the first quarter 2005.
> Net income
Special items had a net negative impact of 125 M€ in the first quarter 2005 and
17 M€ in the first quarter 2004. They are made up mainly of restructuring
charges in the Chemicals segment.
Included in the first quarter 2005 equity income from affiliates is a net
negative accounting impact of 82 M€ for the Total's equity share of amortization
of intangible assets related to the Sanofi-Aventis merger.
Adjusted net income, which excludes an after-tax inventory valuation effect of
496 M€ in the first quarter 2005 and 161 M€ in the first quarter 2004, increased
by 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 shares
for 847 M€. The number of weighted-average shares at March 31, 2005 is 594.9
million compared to 597.7 million at December 31, 2004.
Adjusted earnings per share based on 596.1 million fully-diluted
weighted-average shares, increased by 54% to 4.90 euros from 3.18 euros in the
first quarter 2004. Earnings per share increased at a higher rate than adjusted
net 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 to
the first quarter 2004.
Investments were 1,784 M€ in the first quarter 2005 compared to 1,637 M€ in the
same 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€ in
the first quarter 2004.
The net-debt-to-equity ratio was 23.9% at March 31, 2005 compared to 30.7% at
December 31, 2004 and 24.1% at March 31, 2004.
• Upstream
> Results
in 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 price
Cash 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 for
liquids than for gas, and from an above average ratio of sales to liquids
production.
Adjusted net operating income from the Upstream rose to 1,808 M€ in the first
quarter 2005, an increase of 29%.
This increase, which is a smaller percentage increase than for the adjusted
operating income is due mainly to a higher effective tax rate in the first
quarter 2005 than in the same quarter last year.
> Production
Hydrocarbon 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 first
quarter 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 the
first quarter 2005 versus the first quarter 2004 on entitlement volumes from
production sharing and buy-back contracts ( price effect ),
In addition, production shut-downs in the Gulf of Mexico following Hurricane
Ivan, affected first quarter 2005 volumes. The main facilities restarted
production 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 lower
production 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 the
Brent price primarily because of the wider light-heavy differential in pricing
various grades of crude. The increase in the average realized gas price is due
notaby to higher European gas prices.
> Recent highlights
First quarter 2005 exploration successes included an extension of the Usan
discovery in Nigeria (Total-operated, 20%), securing a 49% interest in Block 4
of Plataforma Deltana in Venezuela(7), and the acquisition of new exploration
acreage, 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 Grand
Angostura field (Total 30%) offshore Trinidad and Tobago and the launching of
the 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 the
North Caspian permit, Total signed an agreement to sell a 1.85% interest to
KazMunaGas, the national oil company of the Republic of Kazakhstan. Once this
sale 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%) with
the signing of three LNG sales agreements covering almost all of the production
capacity and the launching of calls for tenders on the development of the
project. On Qatargas II, Total signed an agreement to acquire 16.7% of train 2
in the project and a purchase agreement for up to 5.2 million tons per year of
LNG over 25 years.
In midstream LNG, the Hazira LNG regasification terminal (Total 26%) in India
started commercial operations in April 2005.
On May 2, 2005, Total announced the launching of the development of the offshore
Nigerian Akpo field (Total-operated 24%). First production from Akpo is expected
at end-2008 with a plateau rate of 225 kboe/d, consisting of about 80% of
condensates.
• Downstream
> Results
in 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 price
Cash 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. Relative
to the first quarter of last year, refining margins were driven sharply higher
in early 2005 by a combination of strong product demand, for distillates in
Europe and for gasoline in the US, plus the wider light-heavy crude price
differential. The favorable impact of this trend was not fully reflected by the
47% increase in the TRCV margin indicator.
Downstream results also benefited from the improved operational performance of
the refineries and from the positive effects of productivity programs.
Adjusted net operating income from the Downstream increased by 60% to 678 M€ in
the first quarter 2005 from 425 M€ in the first quarter 2004.
> Refinery throughput
Refinery 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 the
first quarter 2005. The refining utilization rate based on crude input rose to
95% from 92% in the first quarter 2004. A period of major turnarounds began at
the end of the first quarter 2005 that will involve Grandpuits and Milford Haven
refineries as well as partial turnarounds for the Normandy and Antwerp
refineries.
> Recent highlights
Total reached an agreement with the Chinese authorities to form a joint venture
with Sinochem for the creation of a network of 200 service stations in northern
China, 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 300
stations, they will be distributed throughout the Total network by the end of
2005.
• Chemicals
> Results
in 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 ns
Adjusted net operating income* 391 142 +175%
Investments 158 172 -8%
Divestments 22 19 +16%
at selling price
Cash 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€ in
the first quarter 2004.
Adjusted operating income increased sharply to 555 M€ in the first quarter 2005
from 200 M€ in the first quarter 2004.
This performance was due mainly to the strong increase in base chemicals which
benefited from the rebound in petrochemical margins that began in the second
half of 2004.
Specialties continued to perform well.
Arkema's results increased sharply mainly due to improved market conditions and
to the positive effects of self-help programs that are underway. In the
chlorochemicals business unit, Arkema announced a restructuring program at the
beginning of the year.
Adjusted net operating income from the Chemicals segment increased to 391 M€ in
the first quarter 2005 from 142 M€ in the first quarter 2004.
> Recent highlights
Samsung Total Petrochemicals launched a project to debottleneck the aromatics
plant in Daesan, South Korea which is expected to increase capacity by about
25%.
In April 2005, the project to build an ethane cracker at Ras Laffan in Qatar was
launched. Total Petrochemicals holds a 22% net interest in this project through
Qatofin subsidiary.
• Summary and outlook
The return on average capital employed (ROACE(8)) for Total for the period April
1, 2004 to March 31, 2005 was 26%. Profitability increased in all business
segments.
The return on equity for the same period was 33%.
The investment program is proceeding according to plan with the priority being
Upstream growth as well as increased expenditures for refining.
Total bought back 1.45 million of its shares for 261 M€ in April 2005, raising
the 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 has
remained favorable with high oil prices and refining margins. Despite
compression in petrochemical margins, the Chemicals segment continues to benefit
from a relatively favorable environment.
To listen to the conference call with CFO Robert Castaigne and financial
analysts today at 15:00 (Paris time), please call +44 (0)20 7162 9919 from
Europe or +1 954 334 0340 from the US or access the call through company web
site www.total.com. For a replay, please dial +44 (0)20 7031 4064 from Europe or
1 954 334 03 42 (access code: 658 039) from the US.
The March 31, 2005 notes to the consolidated accounts are available on the Total
web site (www.total.com). The interim accounts have been the subject of a
limited review by the company's auditors. This document may contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the financial condition, results
of operations, business, strategy and plans of Total. Such statements are based
on a number of assumptions that could ultimately prove inaccurate, and are
subject to a number of risk factors, including currency fluctuations, the price
of petroleum products, the ability to realize cost reductions and operating
efficiencies without unduly disrupting business operations, environmental
regulatory considerations and general economic and business conditions. Total
does not assume any obligation to update publicly any forward-looking statement,
whether as a result of new information, future events or otherwise. Further
information on factors which could affect the company's financial results is
provided in documents filed by the Group and its affiliates with the French
Autorite des Marches Financiers and the US Securities and Exchange Commission.
The business segment information is presented in accordance with the Group
internal reporting system used by the Chief operating decision maker to measure
performance and allocate resources internally. Due to their particular nature or
significance, certain transactions qualified as 'special items' are monitored at
the Group level and excluded from the business segment figures. In general,
special items relate to transactions that are significant, infrequent or
unusual. However, in certain instances, certain transactions such as
restructuring costs or assets disposals, which are not considered to be
representative of normal course of business, may be qualified as special items
although they may have occurred within prior years or are likely to recur within
following years.
In accordance with IAS 2, the Group values inventories of crude oil and
petroleum products in the financial statements in accordance with the FIFO
(First in, First out) method and other inventories using the weighted-average
cost method. However, in the note setting forth information by business segment,
the Group continues to present the results for the Downstream segment according
to the replacement cost method and those of the Chemicals segment according to
the LIFO (Last in, First out) method in order to ensure the comparability of the
Group's results with those of its main competitors, notably from North America.
The inventory valuation effect is the difference between the results according
to the FIFO method and the results according to the replacement cost or LIFO
method.
In this framework, performance measures such as adjusted operating income,
adjusted net operating income and adjusted net income are defined as incomes
using replacement cost, adjusted for special items and excluding Total's equity
share of the amortization of intangibles related to the Sanofi-Aventis merger.
They are meant to facilitate the analysis of the financial performance and the
comparison 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 - ns
Total 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 €/$ exchange
rate for the period (1.3113 $/€ in the first quarter 2005 and 1.2497 $/€ in the
first quarter 2004)
(2) percent changes are relative to first quarter 2004
(3) adjusted net income • net income using replacement cost, adjusted for
special items and excluding Total's equity share of amortization of intangibles
related 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 for
special items and excluding Total's equity share of amortization of intangibles
related 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 of
each quarter.
(7) subject to approval by authorities
(8) ROACE = adjusted net operating income divided by the average capital
employed using replacement cost
This information is provided by RNS
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