Total Touts 72% Increase in Net Profit

Total reported second quarter and first half 2010 accounts.

Adjusted net income for the second quarter 2010 was 2,961 million euros (M€), an increase of 72% compared to the second quarter 2009 and 29% compared to first quarter 2010. Expressed in dollars, the increases were 60% and 19%, respectively.

The Board of Directors approved the 2010 interim dividend of 1.14 €/share for payment in November5, at the same level as the interim and final dividend payments for 2009.

Highlights since the beginning of the second quarter 2010

  • Upstream production of 2,359 kboe/d in the second quarter 2010, an increase of 8% compared to the second quarter 2009
  • Started up Yemen LNG liquefaction Train II and Qatofin ethane cracker in Qatar
  • Launched development of the Islay field in the North Sea
  • New discoveries on deep-offshore Block 15/06 in Angola and OML 136 in Nigeria
  • Signed an agreement to acquire UTS and its 20% interest in the Fort Hills heavy oil project in Canada
  • Added exploration acreage through acquisition of interests in a block on the pre-salt area of the Santos Basin in Brazil, in two permits in the Arafura Sea in Indonesia, in Block 72 in Yemen and on the joint development zone between Nigeria, Sao Tomé and Principe
  • 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
  • Continued to develop the new energies portfolio through:
    • Equity investment and strategic partnership with Amyris for research and development to produce products from biomass
    • Construction launched in Abu Dhabi of the largest concentrated solar energy plant in the world
    • Equity investment in AE Polysilicon, a company which has developed advanced polysilicon production technology for solar panels

Commenting on the results, Christophe de Margerie said, "Our industry was marked by the accident in the second quarter on the Macondo well in the Gulf of Mexico. We are reminded once again that safety and the environment must remain our top priorities in this business. Total reacted immediately by launching a complete review of all its existing procedures and drilling operations, including the procedures to be implemented in the event of an accident. More generally, the Group is pursuing a particularly strict policy to put in place the necessary means to define and apply rigorous processes, by emphasizing the proper training and management of our teams.

"In the second quarter, the economic environment for our activities was globally favorable with Brent trading around 75 $/b, refining margins at slightly higher levels and improved Chemicals environment compared to the first quarter 2010. However, natural gas prices were still depressed.

"In this context, adjusted net income rose to $3.8 billion in the second quarter 2010, a 60% increase compared to the second quarter 2009 and a 19% increase compared to the first quarter 2010, which is at the level of the best among the majors. In euros, the increase in adjusted net income was 72% and 29%, respectively, due to the appreciation of the dollar this quarter.

"Cash flow from operations increased to 6.3 billion dollars, more than twice the level of the same quarter last year. As of June 30, 2010, the Group's net-debt-to-equity ratio was 23%.

"In addition to the generally favorable environment, these results reflect our strong operational performance and the growth in our activities. In particular, Upstream production grew by 8% compared to the second quarter 2009 and by 6% in the first half 2010 compared to the first half last year, essentially due to the ramp-ups on major projects started up in 2009.

"In addition, the Group continued to expand its asset portfolio: in the Upstream, the agreement with UTS should allow Total to acquire 20% of the Fort Hills project in Canada and reconfigure its heavy oil portfolio there. The Group also acquired several exploration permits in Brazil, Indonesia, Yemen and the joint development zone between Nigeria, Sao Tomé and Principe. In the Downstream and Chemicals, completing the financing for the Jubail refinery and starting up the Qatofin cracker in Qatar are new steps in progressively repositioning the portfolio, with projects that are particularly robust and oriented toward growing markets. In new energies, the Group expanded its portfolio notably through an equity interest and strategic partnership in biomass and by launching the construction of a concentrated solar energy plant in Abu Dhabi.

"Based on strong operational performance, a capacity to adapt to changes in the environment and a solid balance sheet, the Group approaches the second half of 2010 confidant in its outlook and its strategy for growth as an integrated major."

Operating income

In the second quarter 2010, the Brent price averaged 78.2 $/b, an increase of 32% compared to the second quarter 2009 and 2% compared to the first quarter 2010. The average natural gas price, however, remained depressed, increasing by only 2% compared to the second quarter 2009 and decreasing by 5% compared to the first quarter 2010. The European refining margin indicator (ERMI) averaged 31.2 $/t in the second quarter 2010, an increase of 82% compared to the second quarter 2009 and 6% compared to the first quarter 2010. The environment for petrochemicals and specialty chemicals showed a net improvement, reflecting continued demand growth since the second half of 2009.

The euro-dollar exchange rate averaged 1.27 $/€ in the second quarter 2010 compared to 1.36 $/€ in second quarter 2009 and 1.38 $/€ in the first quarter 2010.

In this environment, the adjusted operating income from the business segments was 5,461 M€, an increase of 79% compared to the second quarter 20099. Expressed in dollars, the increase was 67%.

The effective tax rate10 for the business segments was 54% in the second quarter 2010 compared to 56% in the second quarter 2009, essentially due to the larger relative contribution of Downstream and Chemicals to the results.

Adjusted net operating income from the business segments was 2,960 M€ compared to 1,678 M€ in the second quarter 2009, an increase of 76%.

Expressed in dollars, adjusted net operating income from the business segments was 3.8 billion dollars (B$), an increase of 64% compared to the second quarter 2009.

Net income

Adjusted net income was 2,961 M€ compared to 1,721 M€ in the second quarter 2009, an increase of 72%. Expressed in dollars, adjusted net income increased by 60%.

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 169 M€ in the second quarter 2010 and a positive impact of 788 M€ in the second quarter 2009.
  • Special items had a positive impact on net income of 11 M€ in the second quarter 2010 and a negative impact on net income of 221 M€11 in the second quarter 2009.
  • The Group's share of adjustment items related to Sanofi-Aventis had a negative impact on net income of 40 M€ in the second quarter 2010 and a negative impact on net income of 119 M€ in the second quarter 2009.

Net income (Group share) was 3,101 M€ compared to 2,169 M€ in the second quarter 2009.

The effective tax rate9 for the Group was 53% in the second quarter 2010.

The Group did not buy back shares in the second quarter 2010.

Adjusted fully-diluted earnings per share, based on 2,242.5 million fully-diluted weighted-average shares, was 1.32 euros compared to 0.77 euros in the second quarter 2009, an increase of 71%.

Expressed in dollars, adjusted fully-diluted earnings per share increased by 60% to 1.68 dollars.

First half 2010 results

Operating income

Compared to the first half 2009, the average Brent price increased by 50% to 77.3 $/b. The average natural gas price, however, decreased by 8%. The ERMI European refining margin indicator was 30.4 $/t compared to 23.8 $/t in the first half 2009. The environment for the petrochemicals and specialty chemicals improved significantly.

The euro-dollar exchange rate was 1.33 $/€, stable compared to the first half 2009.

In this context, the adjusted operating income from the business segments was 9,967 M€, an increase of 50% compared to the first half 200916.

The effective tax rate for the business segments was 55% in the first half 2010 compared to 54% in the first half 2009.

Adjusted net operating income from the business segments was 5,243 M€ compared to 3,728 M€ in the first half 2009, an increase of 41%.

This increase is lower than that of the adjusted operating income from the business segments essentially due to changes in other financial income and expenses and the effective tax rate.

Expressed in dollars, adjusted net operating income from the business segments increased by 40%.

Net income

Adjusted net income increased by 37% to 5,257 M€ from 3,834 M€ in the first half 2009. Expressed in dollars, adjusted net income increased by 36%.

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 513 M€ in the first half 2010 and a positive impact of 1,115 M€ in the first half 2009.
  • Special items had a positive impact on net income of 25 M€ in the first half 2010 and a negative impact on net income of 308 M€ in the first half 200917.
  • The Group's share of adjustment items related to Sanofi-Aventis had a negative impact on net income of 81 M€ in the first half 2010 and a negative impact on net income of 182 M€ in the first half 2009.

Net income (Group share) was 5,714 M€ compared to 4,459 M€ in the first half 2009.

The Group did not buy back shares in the first half 2010. On June 30, 2010, there were 2,243.6 million fully-diluted shares compared to 2,235.5 on June 30, 2009.

Adjusted fully-diluted earnings per share, based on 2,242.6 million weighted-average shares was 2.34 euros compared to 1.72 euros in the first half 2009, an increase of 36%.

Expressed in dollars, adjusted fully-diluted earnings per share was 3.11 compared to 2.29 in the first half 2009, an increase of 36%.

Cash flow

Cash flow from operations was 10,202 M€, an increase of 72% compared to the first half 2009.

Adjusted cash flow from operations20 was 8,989 M€, an increase of 36%. Expressed in dollars, adjusted cash flow from operations was 11.9 B$, an increase of 35%.

The Group's net cash flow21 was 4,945 M€ compared to 694 M€ in the first half 2009. Expressed in dollars, net cash flow was 6.6 B$ in the first half 2010.

The net-debt-to-equity ratio was 22.7% on June 30, 2010 compared to 21.5% on March 31, 2010 and 24.7% on June 30, 200922, in line with the Group's objectives.

Analysis of business segment results

Adjusted net operating income for the Upstream segment in the second quarter 2010 was 2,203 M€ compared to 1,451 M€ in the second quarter 2009, an increase of 52%.

Expressed in dollars, adjusted net operating income for the Upstream segment was 2.8 B$, an increase of 42% compared to the second quarter 2009, reflecting essentially the increase in both production and hydrocarbon prices.

The effective tax rate for the Upstream segment was 58%, compared to 60% in the first quarter 2010. The effective tax rate for the Upstream segment was 58% in the second quarter 2009.

Adjusted net operating income for the Upstream segment in the first half 2010 was 4,174 M€ compared to 2,933 M€ in the first half 2009, an increase of 42%.

Expressed in dollars, adjusted net operating income for the Upstream segment was 5.5 B$, an increase of 42% compared to the first half 2009, reflecting essentially the increase in both production and hydrocarbon prices.

The return on average capital employed (ROACE24) for the Upstream segment for the twelve months ended June 30, 2010 was 19% compared to 18% for the twelve months ended March 31, 2010 and the full year 2009.

The annualized second quarter 2010 ROACE for the Upstream segment was 21%.

Downstream

Second quarter 2010 refinery throughput decreased by 2% compared to the second quarter 2009 but increased by 7% compared to the first quarter 2010.

Scheduled turnarounds in the second quarter 2010 affected the Rome and Lindsey refineries. Despite the Dunkirk refinery and a distillation unit at the Normandy refinery being stopped throughout the second quarter 2010, the improved reliability of the refineries and the relatively low level of scheduled turnarounds led to an increase in the utilization rate based on crude and other feedstock to 83% in the second quarter 2010 compared to 77% in the first quarter 2010 and 84% in the second quarter 2009.

In the first half 2010, refinery throughput decreased by 6% compared to the first half 2009, reflecting essentially the Dunkirk refinery and a distillation unit at the Normandy refinery being stopped.

Results

The European refinery indicator averaged 31.2 $/t in the second quarter 2010, nearly double the 17.1 $/t average in the second quarter 2009.

Adjusted net operating income from the Downstream segment was 483 M€ in the second quarter 2010, compared to 156 M€ in the second quarter 2009.

Expressed in dollars, adjusted net operating income for the Downstream segment was 614 M$ compared to 213 M$ in the second quarter 2009, thanks to the strong performance of the refineries in an environment that was much more favorable than in the previous year.

Adjusted net operating income from the Downstream segment was 638 M€ in the first half 2010, a decrease of 16% compared to the first half 2009.

Expressed in dollars, adjusted net operating income for the Downstream segment was 846 M$, a decrease of 16% compared to the first half 2009 despite the improvement in refining margins. The decrease reflects essentially the less favorable conditions for supply optimization in 2010.

The ROACE25 for the Downstream segment for the twelve months ended June 30, 2010 was 6% compared to 4% for the twelve months ended March 31, 2010 and 7% for the full year 2009.

The annualized second quarter 2010 ROACE for the Downstream segment was 12%.

Chemicals

In the second quarter 2010, petrochemical margins showed a net improvement over the second quarter 2009, driven by stronger margins in the Atlantic basin.

Sales for the Chemical segment were 4.6 B€.

Adjusted net operating income from the Chemicals segment increased to 274 M€ in the second quarter 2010 from 71 M€ in the second quarter 2009 due to the improved petrochemicals and specialties environment and the benefits realized through cost reduction.

In the first half 2010, adjusted net operating income from the Chemicals segment was 431 M€ compared to 39 M€ in the first half 2009. The increase resulted from the improvement in market conditions in 2010 as well as from the cost reduction efforts implemented over the course of the past years and the effective positioning of the Group's Specialty chemicals during the recovery from the crisis.

The ROACE26 of the Chemical segment for the twelve months ended June 30, 2010 was 9% compared to 6% for the twelve months ended March 31, 2010 and 4% for the full year 2009.

The annualized second quarter 2010 ROACE for the Chemicals segment was 15%.

The ROACE for the Group for the twelve months ended June 30, 2010, was 14%, compared to 13% for the twelve months ended March 31, 2010 and the full year 2009. The annualized second quarter 2010 ROACE for the Group was 18%.

Return on equity for the twelve months ended June 30, 2010, was 17%.

Total will pay a 2010 interim dividend of 1.14 € per share27 on November 17, 201028.

Investments excluding acquisitions for 2010 are expected to be in line with the 2010 budget level of 18 B$.

The Group maintains its net-debt-to-equity objective range of 25-30% for year-end 2010.

As of June 30, 2010, the Group's equity interest in Sanofi-Aventis, following progressive sales of the shares, was 5.7%. Effective July 1, 2010, Sanofi-Aventis will no longer be accounted for as an equity affiliate but will instead be treated as a financial asset available for sale in the line Other investments of the balance sheet. In the second quarter 2010, Sanofi-Aventis contributed 141 M€ to adjusted net operating income and its portion of the adjustment items was a negative 40 M€.

Since the third quarter 2010 began, oil prices have traded around 75 $/b, but European refining margins have pulled back sharply from the second quarter level. The environment for the Chemicals has remained globally comparable to that of the second quarter.

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