3rd Quarter Results
Total Fina Elf.
19 November 2002
www.totalfinaelf.com
TotalFinaElf Reports Third Quarter and
Nine Months 2002 Results
Third Quarter 2002, excluding non-recurring items
• Net income: 1.60 billion euros, down 9%
• Earnings per share: 2.40 euros, down 6%
• Earnings per share: 2.35 dollars, 4% increase
14% increase in hydrocarbon production
First Nine Months 2002, excluding non-recurring items
• Net income: 4.65 billion euros, down 24%
• Earnings per share: 6.94 euros, down 20%
• Earnings per share: 6.46 dollars, down 18%
11% increase in hydrocarbon production
Paris - November 19, 2002 - The Board of Directors of TotalFinaElf, chaired by
CEO Thierry Desmarest met to review the unaudited third quarter 2002 results.
Commenting on the results, Thierry Desmarest said:
'During the third quarter 2002, TotalFinaElf was able to maintain earnings per
share, excluding non-recurring items, at 2.40 euros, near the level of the third
quarter 2001 despite a weaker dollar and lower refining and marketing margins,
which were only partially offset by higher hydrocarbon prices. When we express
our results in dollars to be comparable to our peers, TotalFinaElf is the only
major to show an increase in its earnings per share excluding non-recurring
items (...)
This performance is due largely to our own internal efforts. Hydrocarbon
production rose by 14% in the third quarter 2002 versus the same quarter last
year. Strict financial discipline and substantial share buy-backs also
contributed to this performance.'
Consolidated accounts TotalFinaElf
3Q02 3Q01 % millions of euros 9m 02 9m 01 %
25,423 25,946 -2% Sales 75,642 81,629 -7%
2,824 3,088 -9% Operating income from business 8,101 10,615 -24%
segments (excluding non-recurring items)
1,525 1,773 -14% Net operating income from business 4,407 6,200 -29%
segments (excluding non-recurring items)
1,600 1,761 -9% Net income (Group share) 4,651 6,094 -24%
excluding non-recurring items
1,637 2,299 -29% Net income (Group share) 4,569 7,006 -35%
2.40 2.55 -6% Earnings per share (euros) 6.94 8.72 -20%
excluding non-recurring items
2,125 2,647 -20% Investments 6,334 7,467 -15%
464 2,178 -79% Divestments 1,513 5,293 -71%
at selling price
3,465 3,810 -9% Cash flow from operating activities 8,773 10,894 -19%
Non-recurring Item*
3Q02 3Q01 millions of euros 9m 02 9m 01
Impact of non-recurring items on operating income
(8) - Restructuring charges (24) -
(1) - Impairments (22) -
76 - Other 67 -
67 - Total 21 -
Impact of non-recurring items on net income
62 597 Gain on asset sales 339 971
1 - Toulouse plant impact (148) -
Restructuring charges and
(1) (40) early retirement plans (77) (40)
(1) - Impairments (15) -
(24) (19) Other (181)* (19)
37 538 Total (82) 912
*includes 151 M€ Impact in 2Q02 accounts related to UK tax changes
Number of shares
3Q02 3Q01 % millions 9m 02 9m 01 %
Fully-diluted weighted-
667.9 690.8 -3% average shares 669.7 698.7 -4%
Oil market environment
3Q02 3Q01 % 9m 02 9m 01 %
0.98 0.89 -9%* €/$ 0.93 0.90 -3%*
27.0 25.3 +7% Brent ($/b) 24.4 26.1 -7%
8.6 12.9 -33% European refining 5.3 15.6 -66%
margin TRCV ($/t)
* change in the dollar versus the euro
Third Quarter 2002 Results
For the third quarter 2002, the average Brent oil price rose by 7% to $27.0/b
from $25.3/b a year ago. However, the other parameters reflected weaker market
conditions relative to a year ago. The dollar depreciated sharply against the
euro, with the exchange rate averaging $0.98 per euro in the third quarter 2002
versus $0.89 per euro in the third quarter 2001. The European refining margin
fell to $8.6/t in the third quarter 2002 from $l2.9/t in the third quarter 2001.
Growth, synergies and productivity programs were able to partially offset the
negative impact of the environment. The beneficial impact of the self-help
programs was reduced by the impact of an unusually high level of refinery
maintenance operations.
Within this context, operating income from the business segments, excluding
non-recurring items, fell by 9% to 2,824 million euros in the third quarter 2002
from 3,088 million euros In the third quarter 2001.
Third quarter 2002 non-recurring items had a positive impact on operating income
of 67 million euros.
Net operating income from the business segments excluding non-recurring items
declined by 14% to 1,525 million euros in the third quarter 2002 from 1,773
million euros in the third quarter 2001. The larger percentage decrease in net
operating income versus operating income is due primarily to the larger share in
operating income of the more heavily taxed Upstream segment.
Net income excluding non-recurring items fell by 9% to 1,600 million euros in
the third quarter 2002 from 1,761 million euros in the same period last year.
Relative to the percentage decline in net operating income, the smaller decline
in net income is due primarily to the lower cost of net debt.
Earnings per share excluding non-recurring items, based on 667.9 million
fully-diluted weighted-average shares in the third quarter 2002, showed a
limited decline of only 6% to 2.40 euros from 2.55 euros per share in the third
quarter 2001 thanks to the Group's share buy-backs.
During the third quarter 2002, TotalFinaElf bought back 8.59 million of its
shares (1) for 1.20 billion euros. At September 30, 2002, the number of
fully-diluted shares was 665.2 million.
Reported net income declined to 1,637 million euros in the third quarter 2002
from 2,299 million euros in the same period of 2001. Non-recurring items had a
positive impact of 37 million euros in the third quarter 2002 versus a positive
impact of 538 million euros on third quarter 2001 net income. Non-recurring
items in the third quarter 2002 were composed primarily of gains on asset sales.
The Group's net-debt-to-equity ratio was 25.9% at September 30, 2002 compared
with 28.2% at June 30, 2002.
Upstream
Upstream operating income excluding non-recurring items rose by 9% to 2,448
million euros in the third quarter 2002 from 2,247 million euros in the third
quarter 2001. The increase was driven primarily by strong production growth.
Higher oil prices were more than offset by the negative gas price lag effect and
the weaker dollar.
Net operating income excluding non-recurring items from the Upstream segment was
slightly lower at 1,185 million euros in the third quarter 2002 compared to
1,199 million euros in the third quarter 2001, primarily due to the inclusion of
gains on asset sales completed in the third quarter 2001 and the impact of
higher UK North Sea taxes in the third quarter 2002.
Hydrocarbon production rose by 13.7% to 2,351 thousand barrels of oil equivalent
per day (kboe/d) in the third quarter 2002 from 2,068 kboe/d in the third
quarter 2001.
Production growth was driven primarily by a number of start-ups occurring since
the third quarter 2001, including Girassol in Angola, the Sincor upgrader in
Venezuela, South Pars in Iran, Nuggets and Huldra in the North Sea and Deir Ez
Zor gas in Syria, as well as by the ramp up in production at the Elgln-Franklin
fields in the UK North Sea.
In Europe, highlights of the third quarter 2002 included approval by the
Norwegian authorities for the development of the Skirne and Byggve gas and
condensate fields located on block PL 102. The Otter field in the UK North Sea
started production in October 2002, less than two years after approval of its
development plan.
In the CIS, TotalFinaElf confirmed its acquisition of a 5% share in the BTC
pipeline project that will link Baku, Azerbaijan to Ceyhan, Turkey. In October,
a discovery was made on the Kalamkas structure in the Kazakh section of the
Caspian Sea, 80 kilometers southwest of the Kashagan field.
In Africa, the Group obtained a new exploration permit in Algeria on the
Timimoun Basin.
In the Gulf of Mexico, the TotalFinaElf-operated Aconcagua field started
production; it is one of three gas fields that use the new deep-water Canyon
Express pipeline which is also operated by the Group.
(1)Includes 0.87 million shares used to cover stock option program
In the area of renewable energies, the Group obtained the necessary permits in
September to launch a 12-megawatt wind energy project at its Dunkirk refinery.
3Q02 3Q01 % Upstream - Key Figures 9m 02 9m 01 %
2,351 2,068 +14% Hydrocarbon production (kboe/d) 2,379 2,151 +11%
1,604 1,370 +17% *Liquids (kb/d) 1,580 1,423 +11%
4,102 3,811 +8% *Gas (Mcfd) 4,382 3,981 +10*
2,448 2,247 +9% Operating income (M€) 6,789 7,405 -8%
excluding non-recurring items
1,185 1,199 -1% Net operating income (M€) 3,452 3,935 -12%
excluding non-recurring items
1,430 1,939 -26% Investments (M€) 4,629 5,286 -12%
141 392 -64% Divestments (M€) 470 772 -39%
at selling price
2,214 1,925 +15% Cash flow from operating 5,611 6,115 -9%
activities (M€)
Downstream
Downstream operating income excluding non-recurring items fell by 83% to 107
million euros in the third quarter 2002 from 616 million euros in the third
quarter 2001.
The decrease in operating income was due to the sharp deterioration in the
Downstream environment which was exacerbated by the impact of a major turnaround
program for maintenance on some of the company's refineries.
The main elements of changes in the environment were:
• strong deterioration of European refining margins;
• a declining dollar relative to the euro;
• lower marketing margins In Europe;
• a more difficult environment for specialties, notably aviation fuel,
and for heating oil;
• lower shipping rates.
Refinery throughput fell by 7% to 2,331 kb/d in the third quarter 2002 from
2,495 kb/d in the third quarter 2001, due primarily to major turn-arounds for
maintenance, safety and product-specification upgrades, which were particularly
heavy during the third quarter 2002. Turn-arounds have affected the company's
Normandy (France) and Leuna (Germany) refineries. In addition, the Natref
refinery in South Africa, in which the Group has a 36% interest, was shut down
for de-bottlenecking operations.
Substantial turn-arounds are expected to continue into the fourth quarter 2002.
Self-help programs have only partially compensated for the impact of a weaker
environment and the refinery turn-arounds.
Net operating income excluding non-recurring items declined by 72%, to 134
million euros in the third quarter 2002 from 475 million euros in the third
quarter 2001. Relative to the percentage decline in operating income, the
smaller decline in net operating income is due primarily to the stable
contribution of equity affiliates.
TotalFinaElf signed an agreement with Agip and Galp that involved the sale of
the TOTAL-branded network in Spain and the acquisition of service stations in
Portugal and Italy. As a result, TotalFinaElf will increase its market share in
Portugal from 2% to 6% and in Italy from 6% to 7%. In August, the Group sold its
service station network in Switzerland.
3Q02 3Q01 % Downstream - Key Figures 9m 02 9m 01 %
2,331 2,495 -7% Refinery throughput* 2,394 2,491 -4%
107 616 -83% Operating income (M€) 680 2,376 -71%
excluding non-recurring items
134 475 -72% Net operating income (M€) 602 1,840 -67%
excluding non-recurring items
287 320 -10% Investments (M€) 647 824 -21%
87 43 +102% Divestments (M€) 169 1,025 -84%
at selling price
Cash flow from
249 300 -17% operating activities (M€) 1,635 2,157 -24%
* Including share of Cepsa
Chemicals
Sales in the Chemicals segment decreased by 1% to 4,825 million euros in the
third quarter 2002 from 4,865 million euros in the third quarter 2001.
Operating income excluding non-recurring items increased by 20% to 269 million
euros in the third quarter 2002 from 225 million euros in the third quarter
2001, primarily due to better performance from the Specialties. The rebound in
petrochemical margins seen at the beginning of the third quarter 2002 did not
last
Net operating income excluding non-recurring items more than doubled to 206
million euros in the third quarter 2002 from 99 million euros in the third
quarter 2001.
The main highlight of the third quarter 2002 was the purchase of Enichem's 10%
share in the Qatar-based Qapco Company, which raised TotalFinaElf's interest to
20% and makes it the only partner with the national oil company, Qatar
Petroleum. Qapco produces 525 kt/y of ethylene that is used largely as feedstock
for its polyethylene units.
In October 2002, TotalFinaElf announced that it had agreed on a proposal to sell
its SigmaKalon paints activities to Bain Capital. The proposed sale is
consistent with plans announced in 2000 to reposition and re-focus the Chemicals
segment.
3Q02 3Q01 % Chemicals - key figures (M€) 9m 02 9m 01 %
4,825 4,865 -1% Sales 14,730 15,353 -4%
269 225 +20% Operating income 632 834 -24%
excluding non-recurring items
206 99 +108% Net operating income 353 425 -17%
excluding non-recurring items
326 337 -3% Investments 866 1,083 -20%
62 204 -70% Divestments at 103 316 -67%
selling price
Cash flow from operating
379 211 +80% activities 417 891 -53%
Nine Months 2002 Results
All of the oil market parameters reflected weaker conditions in the first nine
months of 2002 than in the same period of 2001. The average Brent oil price fell
by 7% to $24.4/b in the first nine months of 2002 from $26.1/b in the first nine
months of 2001. The European refining margin fell sharply to $5.3/t in the first
nine months of 2002 from $l5.6/t in the same period last year. The dollar
depreciated by 3% relative to the euro, with the exchange rate averaging $0.93
per euro in the first nine months of 2002 compared with $0.90 per euro in the
first nine months of 2001.
Within this context, operating income from the business segments excluding non-
recurring items declined by 24% to 8,101 million euros in the first nine months
of 2002 from 10,615 million euros in the first nine months of 2001. Non-
recurring items had a net positive impact of 21 million euros in the first nine
months of 2002.
Net operating income from the business segments excluding non-recurring items
fell by 29% to 4,407 million euros in the first nine months of 2002 from 6,200
million euros in the first nine months of 2001.
Net income excluding non-recurring items fell by 24% to 4,651 million euros in
the first nine months of 2002 from 6,094 million euros in the first nine months
of 2001.
Earnings per share excluding non-recurring items, based on 669.7 million
fully-diluted weighted-average shares for the first nine months of 2002,
decreased to 6.94 euros from 8.72 euros in the first nine months of 2001, a
limited decline of 20% that reflects the positive impact of the Group's buy-back
program.
During the first nine months of 2002, TotalFinaElf bought back 13.58 million of
its shares (2) for 1.99 billion euros.
Reported net income was 4,569 million euros in the first nine months of 2002
compared with 7,006 million euros in the first nine months of 2001. These
results include non-recurring items which had a negative impact of 82 million
euros on the first nine months of 2002 and a positive impact of 912 million
euros for the same period in 2001. The 2002 non-recurring items that had a
positive impact were composed primarily of gains on sales of financial
participations; those that were negative included primarily the deferred tax
impact of the change in UK tax laws, an increase in the provision related to the
explosion at the Toulouse fertilizer plant, and restructuring charges in the
Downstream and Chemicals segments.
Hydrocarbon production rose by 10.6% to 2,379 kboe/d in the first nine months of
2002 from 2,151 kboe/d in the first nine months of 2001.
Taking into account poor Downstream market conditions, particularly in the first
part of the year, and the high number of refinery turn-arounds, refinery
throughput declined by 4% to 2,394 kb/d for the first nine months of 2002 from
2,491 kb/d for the same period last year.
Chemical sales declined by 4% for the first nine months of 2002 versus the same
period in 2001 to 14,730 million euros.
(2) Includes 2.91 million shares used to cover stock option program
Cancellation of Outstanding Shares
The Board of Directors approved the cancellation of 23,443,245 shares thus
reducing share capital to 6,852,769,280 euros represented by 685,276,928 shares
with a par value of 10 euros per share. The cancellation of these shares will
allow the Group to continue to buy back its shares in the future.
Summary & Outlook
For the first nine months of 2002, investments were 6,334 million euros, with
Upstream accounting for 73% of the total.
Divestments in the first nine months of 2002, at selling price, were 1,513
million euros, being comprised primarily of sales of financial participations
and non-strategic assets.
Free cash flow(3)in the first nine months of 2002 was 3,952 million euros.
The buy-back program target of 2.5% of the shares over the full-year 2002 was
achieved by October. From January through October 2002, TotalFinaElf bought back
17.92 million (4) of its own shares for 2.59 billion euros.
Since the start of the fourth quarter 2002, the European refining margin has
improved significantly while the average Brent oil price has declined and the
dollar weakened slightly against the euro.
The September 30, 2002 Interim financial statements are available on the
TotalFinaElf website. These financial statements are unaudited. This document
may contain forward-looking statements within the meaning of the Private
Securities Litigatlon Reform Act of 1995 with respect to the financial
condition, results of operations, business, strategy and plans of the
TotalFinaElf Group. 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. The financial information contained in this
document has been prepared in accordance with French GAAP, and certain elements
would differ materially upon reconciliation to US GAAP. The TotalFinaElf Group
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
Commission des Operations de Bourse and the US Securities and Exchange
Commission.
To access the conference call with Robert Castaigne, CFO of TotalFinaElf, today
at 5:30 p.m (Paris time), please dial +44 (0) 208 240 8241 from Europe or
1-303-713-7929 from the US (access code: TotalFinaElf). For a replay, please
dial +44 (0) 208 288 4459 (access code: 122 032) from Europe or 1-703-736-7336
(access code: 122 032) from the US.
(3) free cash flow - cash flow from operating activities + divestments
- Investments
(4) includes 2.91 million shares used to cover stock option program
Operating Information by Segment
Third Quarter and First Nine Months 2002
Upstream
Combined liquids and gas production by region
3Q02 3Q01 % in kboe/d 9 m 02 9 m 01 %
777 680 + 14% Europe 851 728 + 17%
650 598 + 9% Africa 664 614 + 8%
41 48 - 15% North America 42 49 - 14%
219 214 + 2% Far East 220 223 - 1%
474 381 + 24% Middle East 425 389 + 9%
186 142 + 31% South America 172 142 + 21%
4 5 - Rest of world 5 6 -
2,351 2,068 + 14% Total production 2,379 2,151 + 11%
Liquids production by region
3Q02 3Q01 % in kb/d 9 m 02 9 m 01 %
437 391 + 12% Europe 454 401 + 13%
585 525 + 11% Africa 595 545 + 9%
4 6 - North America 5 7 -
22 27 - 19% Far East 23 27 - 15%
427 331 + 29% Middle East 382 347 + 10%
125 85 + 47% South America 116 90 + 29%
4 5 - Rest of world 5 6 -
1,604 1,370 + 17% Total production 1,580 1,423 + 11%
Gas production by region
3Q02 3Q01 % in Mcfd 9 m 02 9 m 01 %
1,865 1,556 + 20% Europe 2,163 1,766 + 22%
345 385 - 10% Africa 369 361 + 2%
196 219 - 11% North America 198 223 - 11%
1,129 1,076 + 5% Far East 1,126 1,123 -
238 254 - 6% Middle East 223 220 + 1%
329 321 + 2% South America 303 288 + 5%
- - - Rest of world - - -
4,102 3,811 + 8% Total production 4,382 3,981 + 10%
Downstream
Refinery throughput by region
3Q02 3Q01 % in kb/d 9 m 02 9 m 01 %
922 1,029 + 10% France 917 1,030 - 11%
1,159 1,204 - 4% Rest of Europe 1,195 1,186 + 1%
250 262 - 5% Rest of world 282 275 + 3%
2,331 2,495 - 7% Total throughput* 2,394 2,491 - 4%
* includes share of Cepsa
Chemicals
3Q02 3Q01 % Chemicals - key figures 9 m 02 9 m 01 %
(B€)
4.82 4.86 - 1% Chemical Sales 14.73 15.35 - 4%
1.98 1.90 + 4% •Base chemicals
& polymers 5.77 6.03 - 4%
0.92 1.00 - 8% •Intermediates &
performance polymers 2.93 3.26 - 10%
1.92 1.94 - 1% •Specialities 6.00 6.02 -
- 0.02 - •Corporate - Chemicals 0.03 0.04 -
0.27 0.22 + 23% Operating Income* 0.63 0.83 -24%
0.06 0.06 - •Base chemicals & polymers - 0.18 -
0.06 0.06 - •Intermediates &
performance polymers 0.24 0.29 -17%
0.17 0.12 +42% •Specialities 0.47 0.41 +15%
(0.02) (0.02) - •Corporate - Chemicals (0.08) (0.05) -
* excluding non-recurring items
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