Total Sees Production Increase in 1Q
Total posted highlights of its financial and operation results since the beginning of the first quarter 2010.
- First quarter 2010 Upstream production of 2,427 kboe/d, an increase of 4.5% compared to the first quarter 2009
- Started up Yemen LNG second liquefaction train
- Launched Surmont Phase 2 in Canada, Laggan and Tormore gas fields in the UK North Sea
- Acquired a 25% interest in Chesapeake’s Barnett Shale unconventional gas portfolio in Texas
- Drilled three discoveries in deep-offshore Angola blocks 17/06 and 15/06
- Added exploration opportunities with the acquisition of an interest in a concession in Kazakhstan in the exploration phase and obtained a permit to evaluate the unconventional gas potential in the south of France
- Divested Upstream assets in Norway, Valhall and Hod, and in the Gulf of Mexico, Virgo and Matterhorn
- Divested the Specialty chemicals consumer products unit Mapa Spontex
- Announced a project to re-purpose the Dunkirk site after halting refining activities
- Announced the merger of the Total’s refining and marketing assets in Italy with ERG to create a combined entity in which Total will have a 49% interest
- Filing of a public tender offer followed by a squeeze out for the outstanding Elf Aquitaine shares
The Board of Directors of Total, led by Chairman Thierry Desmarest, met on April 29, 2010 to review the Group's first quarter 2010 accounts. Adjusted net income was 2,296 million euros (M€), an increase of 9% compared to the first quarter 2009. Expressed in dollars, adjusted net income increased by 15%.
Commenting on the results, Christophe de Margerie said, "In the first quarter 2010, the Brent oil price increased by more than 70% compared to the first quarter 2009 and by 3% compared to the fourth quarter 2009. Natural gas prices have evolved far less favorably, under pressure from markets that remain oversupplied. The European refining margin indicator rebounded from the very weak level in the fourth quarter 2009, but the environment for refining remains difficult. Chemicals benefited from market conditions that were more favorable than in 2009. The dollar averaged 1.38 $/€.
In this context, adjusted net income rose to 3.2 billion dollars (B$) in the first quarter 2010, a 15% increase compared to the first quarter 2009. The first quarter 2010 confirms our return to production growth with an increase of 4.5% compared to the first quarter 2009, one of the best performance among the majors. In addition, Total has demonstrated in each of its business segments its ability to strengthen and adapt its portfolio. In the first quarter, the Group generated 3.6 B$ of net cash flow and ended the quarter with a net-debt-to-equity ratio of 21.5%.
These figures confirm the operational and financial strength of the Group and demonstrate its ability to pursue its policy for investment and dividend.
In the Upstream, the Group has accessed new resources thanks to exploration success in Angola and its acquisition of unconventional gas in the US. At the same time, Total has launched two new major projects – Surmont Phase 2 in Canada, and Laggan-Tormore in the UK North Sea. These projects, which will contribute to our medium-term production growth, have benefited from a sizable reduction in their cost and this has strengthened their profitability. In addition, the Group is optimizing its Upstream portfolio through the sale of mature assets in Norway and the U.S.
In the Downstream, the project to transform the Dunkirk site and the merger of its refining and marketing assets in Italy with Erg illustrates the will of the Group to adapt in a responsible manner to a more competitive environment marked by structurally lower market demand in OECD countries.
The Chemicals segment has benefited from the economic recovery since the start of the year thanks to its improved competitiveness in mature areas, production growth in emerging countries and development of more value-added products. In addition, the Group completed the sale of its consumer products Mapa Spontex unit in April.
Through these actions, Total continues to demonstrate its ability to act and to strengthen itself by anticipating changes in its environment, while maintaining a priority on safety and operational excellence, as well as innovation and consideration for social and environmental issues.
With higher profits and a strong balance sheet in the first quarter, we look confidently on the rest of 2010. With the benefit of growing production, we will remain committed to improving profitability and pursuing ongoing development."
First quarter 2010 results
In the first quarter 2010, the Brent oil price averaged 76.4 $/b, an increase of 72% compared to the first quarter 2009 and 3% compared to the fourth quarter 2009. The European refining margin indicator (ERMI) averaged 29.5 $/t in the first quarter 2010, a slight decrease from the first quarter 2009, but a sharp increase compared to the very weak fourth quarter 2009 average of 11.7 $/t. Chemicals benefited from an improved environment, particularly the Specialty chemicals, which benefited from a rebound in demand compared to the first quarter 2009.
The euro-dollar exchange rate averaged 1.38 $/€ in the first quarter 2010 compared to 1.30 $/€ in the first quarter 2009 and 1.48 $/€ in the fourth quarter 2009.
In this environment, the adjusted operating income from the business segments7 was 4,506 M€, an increase of 25% compared to the first quarter 2009. Expressed in dollars, the increase was 32%.
The effective tax rate8 for the business segments increased from 52% in the first quarter 2009 to 57% in the first quarter 2010, essentially due to an increase in the effective tax rate for the Upstream combined with an increase in the weight of the Upstream in the Group’s results. The average effective tax rate for the business segments was stable compared to the fourth quarter 2009.
Adjusted net operating income from the business segments was 2,283 M€ in the first quarter 2010 compared to 2,050 M€ in the first quarter 2009, an increase of 11%.
The smaller increase, relative to the increase in adjusted operating income, is essentially due to the higher effective tax rate between the two quarters.
Expressed in dollars, adjusted net operating income from the business segments was 3.2 B$, an increase of 18% compared to the first quarter 2009 and 3% compared to the fourth quarter 2009.
Adjusted net income was 2,296 M€ compared to 2,113 M€ in the first quarter 2009, an increase of 9%. Expressed in dollars, adjusted net income increased by 15%.
This excludes the after-tax inventory effect, special items, and the Group's equity share of adjustment items related to Sanofi-Aventis.
- The after-tax inventory effect had a positive impact on net income of 344 M€ in the first quarter 2010 and a positive impact of 327 M€ in the first quarter 2009.
- The Group's share of adjustment items related to Sanofi-Aventis had a negative impact on net income of 41 M€ in the first quarter 2010 and a negative impact on net income of 63 M€ in the first quarter 2009.
- Special items had a positive impact on net income of 14 M€ in the first quarter 2010 and a negative impact on net income of 87 M€ in the first quarter 2009.
Reported net income (Group share) was 2,613 M€ in the first quarter 2010 compared to 2,290 M€ in the first quarter 2009.
The effective tax rate8 for the Group was 57% in the first quarter 2010.
The Group did not buy back shares in the first quarter 2010. Adjusted fully-diluted earnings per share, based on 2,242.7 million fully-diluted weighted-average shares, was 1.02 euros compared to 0.95 euros in the first quarter 2009, an increase of 8%.
Expressed in dollars, adjusted fully-diluted earnings per share rose by 15% to $1.42.
Investments – divestments
Investments, excluding acquisitions and including net investments in equity affiliates and non-consolidated companies, were 2.4 B€ (3.4 B$) in the first quarter 2010 compared to 2.7 B€ (3.6 B$) in the first quarter 2009.
Acquisitions were 1.2 B€ in the first quarter 2010, comprised essentially of interests in the Barnett Shale and the Laggan Tormore blocks.
Asset sales in the first quarter 2010 were 965 M€, comprised essentially of Sanofi-Aventis shares.
Net investments10 were 2.7 B€ (3.7 B$) in the first quarter 2010 compared to 2.5 B€ (3.2 B$) in the first quarter 2009.
Cash flow from operating activities was 5,260 M€ in the first quarter 2010, an increase of 32% compared to the first quarter 2009. Adjusted cash flow from operations11 was 3,739 M€, an increase of 11%. Expressed in dollars, adjusted cash flow from operations was 5.2 B$, an increase of 18%. Net cash flow12 for the Group was 2,599 M€ compared to 1,531 M€ in the first quarter 2009, an increase of 70%. Expressed in dollars, net cash flow for the Group was 3.6 B$ in the first quarter 2010, an increase of 80% compared to the first quarter 2009. The net-debt-to-equity ratio was 21.5% on March 31, 2010 compared to 26.6% on December 31, 2009 and 19.1% on March 31, 2009.
Summary and outlook
The ROACE17 for the Group for the twelve months ended March 31, 2010, was 13%, essentially unchanged from the full year 2009. The annualized first quarter 2010 ROACE for the Group was 15%. Return on equity for the twelve months ended March 31, 2010, was 16%, the same level as the full year 2009.
Pending approval at the Annual Shareholders Meeting on May 21, 2010, TOTAL S.A. will pay on June 1, 2010, the remaining €1.14 per share18 of the 2009 dividend, which is equal in amount to the interim dividend paid in November 2009.
The full-year 2009 dividend is a total of €2.28 per share.In the Upstream segment, the production growth observed over the past quarters is expected to continue in 2010, fueled by the ramp-up of projects started in 2009 and the start-up of the second Yemen LNG train earlier this month.
To strengthen production growth in the medium term, the Group is pursuing the development of diversified and major projects, including Pazflor in Angola, Usan in Nigeria, Kashagan in Kazakhstan, and, since the beginning of this year, Surmont Phase 2 in Canada and Laggan-Tormore in the UK North Sea. The official launch of the CLOV project in Angola, already approved internally by Total, is expected very soon. In the framework of its strategy to access new resources, Total is pursuing an ongoing exploration program and evaluating opportunities for partnerships that leverage its operational and technical expertise.
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