Final Results
Total S.A.
14 February 2007
Fourth quarter 2006 adjusted net income(1) of 2.74 billion euros
Full year 2006 adjusted net income of 12.6 billion euros
Investments of 14 billion dollars excluding acquisitions in 2006(2)
Proposed 2006 dividend of 1.87 euros per share,
an increase of 15% (+18% expressed in dollars(3))
Main results
• Fourth quarter 2006 adjusted net income(4) 2.74 billion euros -10%
3.53 billion dollars -3%
1.20 euros per share -8%
1.54 dollars per share -
• 2006 adjusted net income(5) 12.6 billion euros +5%
15.8 billion dollars +6%
5.44 euros per share +7%
6.83 dollars per share +8%
• 2006 net income5 11.8 billion euros -4%
Highlights since the start of the fourth quarter 2006
• Upstream production of 2,403 kboe/d in the fourth quarter 2006
• 5% increase compared to the third quarter 2006
• 2.5% decrease compared to the fourth quarter 2005
• Dalia field in Angola started producing and is ramping up as expected
• New exploration successes
• Discoveries in the United Kingdom, Angola, Indonesia and Thailand
• New permits in Australia, Gabon and Netherlands
• Launching development study for Egina in deep-offshore Nigeria
• Finalized participation in Qatargas II LNG project
• Divested power generation assets in Argentina
Paris, February 14, 2007 --- The Board of Directors of Total, led by Chairman
Thierry Desmarest, met on February 13, 2007 to review the consolidated accounts
for the fourth quarter 2006 and to close the consolidated and parent company
accounts.
Adjusted net income rose to 12,585 million euros (M€) in 2006, an increase of 5%
compared to 2005. Commenting on the results, Thierry Desmarest said :
'Conditions in the oil market remained globally favorable in 2006. Crude oil
prices, on average, increased relative to 2005, driven by robust demand and
sustained production capacity utilization rates. Refinery margins, while
significantly lower than in 2005, remained on average at satisfactory levels.
Earnings per share expressed in dollars increased by 8%, benefiting from the oil
environment, despite pressure from rising costs and the 5% decrease in
production. Profitability at the business segment level was 29%, reflecting the
company's portfolio quality and investment discipline.
Excluding acquisitions, the Group invested 14 billion dollars in 2006, more than
75% of that in the Upstream. The successful start-up of the Dalia field at
year-end confirmed the outlook for a return to a period of strong growth for
hydrocarbon production. Equally important, exploration success combined with our
entry into Brass LNG and Ichthys LNG allow us to further strengthen the
long-term growth potential for Total.
In 2006, the return to shareholders from both dividends and share buybacks
represented close to 6.5% of the end-2005 market capitalization. The spin-off of
Arkema represented an additional 1.5% return to shareholders. The proposal to
increase the 2006 dividend by 15% demonstrates the confidence of the Group in
its ability to pursue its profitable growth strategy.'
l Key figures and consolidated accounts of Total(6)
4Q06 3Q06 4Q05 4Q06 in millions of euros, 2006 2005 2006
vs except earnings per share and number of vs
4Q05 shares 2005
36,433 38,357 38,565 -6% Sales 153,802 137,607 +12%
5,454 6,352 6,368 -14% Adjusted operating income from business 25,166 23,468 +7%
segments
2,689 3,079 3,253 -17% Adjusted net operating income from 12,377 11,912 +4%
business segments
1,885 2,033 2,132 -12% = Upstream 8,709 8,029 +8%
549 798 799 -31% = Downstream 2,784 2,916 -5%
255 248 322 -21% = Chemicals 884 967 -9%
2,737 3,111 3,052 -10% Adjusted net income 12,585 12,003 +5%
1.20 1.35 1.30 -8% Adjusted fully-diluted earnings per 5.44 5.08 +7%
share (euros)(7)
2,288.1 2,302.3 2,345.9 -2% Fully-diluted weighted-average shares 2,312.3 2,362.0 -2%
(millions)7
2,225 2,419 2,341 -5% Net income (Group share) 11,768 12,273 -4%
3,656 2,667 3,799 -4% Investments 11,852 11,195 +6%
1,071 186 250 +328% Divestments 2,278 1,088 +109%
2,123 5,053 3,171 -33% Cash flow from operations 16,061 14,669 +9%
3,454 4,397 4,459 -23% Adjusted cash flow from operations 16,816 17,406 -3%
l Fourth quarter 2006 results
> Operating income
In the fourth quarter 2006, the average Brent price rose to 59.6 $/b, an
increase of 5% compared to the fourth quarter 2005 but a decrease of 14%
compared to the third quarter 2006. The TRCV European refining margin indicator
fell to 22.8 $/t on average over the fourth quarter, a decrease of 50% compared
to the fourth quarter 2005, during which margins were driven higher by
hurricanes in the Gulf of Mexico, and a decrease of 21% compared to the third
quarter 2006.
Petrochemical margins in Europe were higher in the fourth quarter 2006 than the
levels reached a year ago and in the preceding quarter.
The euro/dollar exchange rate was 1.29 $/€ in the fourth quarter 2006 compared
to 1.19 $/€ in the fourth quarter 2005 and 1.27 $/€ in the third quarter 2006.
In this context, the adjusted operating income from the business segments was
5,454 M€, a decrease of 14% compared to the fourth quarter 2005(8).
Adjusted net operating income from the business segments was 2,689 M€ compared
to 3,253 M€ in the fourth quarter 2005, a decrease of 17%.
This decrease, which is larger than the percentage decrease for operating
income, is due notably to the increase in the effective tax rate for the
Upstream segment between the two periods.
> Net income
Adjusted net income was 2,737 M€ compared to 3,052 M€ in the fourth quarter
2005. This excludes the after-tax inventory effect, special items and the
Group's equity share of the amortization of intangibles related to the
Sanofi-Aventis merger.
The after-tax inventory effect (FIFO vs. replacement cost) had a negative effect
of 436 M€ in the fourth quarter 2006 compared to a negative effect of 430 M€ in
the fourth quarter 2005.
Special items had a negative impact on net income of 18 M€ in the fourth quarter
2006 and were composed mainly, on one side of restructuring charges in the
Chemicals segment and the Group's share of special items recorded by
Sanofi-Aventis, and on the other side of gains on asset sales.
In the fourth quarter 2005, special items had a negative impact on net income of
193 M€ and were composed mainly of restructuring charges in the Chemicals
segment.
The Group's share of the amortization of intangibles related to the
Sanofi-Aventis merger had a negative impact on net income of 58 M€ in the fourth
quarter 2006 and 88 M€ in the fourth quarter 2005.
Reported net income was 2,225 M€ compared to 2,341 M€ in the fourth quarter
2005.
The effective tax rate(9) for the Group increased to 57% in the fourth quarter
2006 from 53% in the fourth quarter 2005, mainly due to the Upstream segment
representing a larger proportion of the results and having a higher effective
tax rate. The higher rate reflects mainly an increase in UK petroleum taxes and
the effect of higher oil and gas prices. The effective tax rate was 56% in the
third quarter 2006.
In the fourth quarter 2006, the Group bought back 13.9 million of its shares for
746 M€.
Adjusted fully-diluted earnings per share, based on 2,288.1 million
fully-diluted weighted-average shares, was 1.20 euros in the fourth quarter 2006
compared to 1.30 euros in the fourth quarter 2005, a decrease of 8%. Expressed
in dollars, the adjusted fully-diluted earnings per share were unchanged.
> Investments - divestments
Investments in the fourth quarter 2006 were 3,656 M€ (approximately 4.7 billion
dollars (B$)) compared to 3,799 M€ in the fourth quarter 2005. The fourth
quarter 2006 includes 302 M€ of acquisitions compared to 288 M€ in the fourth
quarter 2005.
Divestments in the fourth quarter 2006 were 1,071 M€ and included sales of
non-strategic financial assets.
> Cash flow
Cash flow from operations in the fourth quarter 2006 was 2,123 M€. The
accounting presentation for exploration costs directly charged to expense was
changed(10).
Adjusted cash flow from operations (cash flow from operations before changes in
working capital at replacement cost), was 3,454 M€, a decrease of 23%. Excluding
the change described above, adjusted cash flow from operations was 3,826 M€, a
14% decrease.
Net cash flow(11) was a negative 462 M€ compared to a negative 378 M€ in the
fourth quarter 2005.
l Full-year 2006 results
> Operating income
Compared to 2005, the average oil market environment in 2006 was marked by
higher oil prices (+19% for Brent to 65.1 $/b) and lower refining margins (-31%
for the TRCV European refining margin indicator to 28.9 $/t).
The environment for Chemicals is generally comparable for the two years.
The euro/dollar exchange rate was 1.26 $/€ in 2006 compared to 1.24 $/€ in 2005.
In this context, the adjusted operating income from the business segments rose
to 25,166 M€ in 2006, an increase of 7% compared to 2005.
Special items affecting operating income from the business segments had a
negative impact of 177 M€(12) in 2006 and a negative impact of 97 M€12 in 2005.
Adjusted net operating income from the business segments was 12,377 M€ in 2006
compared to 11,912 M€ in 2005, an increase of 4%. The lower percentage increase
relative to the increase in operating income is mainly a function of the
Upstream segment having a higher effective tax rate and representing a larger
proportion of the results in 2006 compared to 2005.
> Net income
Adjusted net income increased by 5% to 12,585 M€ from 12,003 M€ in 2005. This
excludes the after-tax inventory effect, special items, and the Group's equity
share of amortization of intangibles related to the Sanofi-Aventis merger.
The after-tax inventory effect (FIFO vs. replacement cost) had a negative impact
of 358 M€ in 2006 and a positive impact of 1,072 M€ in 2005.
Special items affecting net income had a negative impact of 150 M€ in 2006 and a
negative impact of 467 M€ in 200512.
The Group's equity share of amortization of intangibles related to the
Sanofi-Aventis merger had an impact on net income that was a negative 309 M€ in
2006 and a negative 335 M€ in 2005.
Reported net income was 11,768 M€ in 2006 compared to 12,273 M€ in 2005.
The effective tax rate for the Group was 56% in 2006 compared to 53% in 2005.
The higher rate was mainly due to the increase in UK petroleum tax, higher
hydrocarbon prices, and the larger share of the Upstream segment in the results.
In 2006, the Group bought back 75.9 million of its shares(13) for 3,975 M€. The
number of fully-diluted shares at December 31, 2006 was 2,285.2 million compared
to 2,344.1 million at December 31, 2005.
Adjusted fully-diluted earnings per share, based on 2,312.3 million
fully-diluted weighted-average shares rose to 5.44 euros in 2006 from 5.08 euros
in 2005, an increase of 7%, which is a higher percentage increase than shown for
the adjusted net income thanks to the accretive effect of the share buybacks.
> Investments - divestments
Investments were 11,852 M€ in 2006 compared to 11,195 M€ in 2005. Expressed in
dollars, investments increased by 7% to 14.9 B$(14).
Excluding acquisitions (Ichthys LNG, Tahiti...), investments were 13.9 B$ in
2006 compared to 12.1 B$ in 2005.
Divestments in 2006 were 2,278 M€ compared to 1,088 M€ in 2005 and include the
sale of Upstream assets in the US and in France as well as the reimbursement of
carried investments on Akpo in Nigeria and the sale of non-strategic assets.
Net investments (investments minus divestments) were 12 B$ in 2006, a decrease
of 4% compared to 2005.
> Cash flow
Cash flow from operations was 16,061 M€ in 2006.
Adjusted cash flow (cash flow from operations before changes in working capital
at replacement cost) was 16,816 M€, a decrease of 3% compared to 2005. Excluding
the change in accounting presentation for exploration costs directly charged to
expense, adjusted cash flow was 17,188 M€, a decrease of 1% compared to 2005.
Net cash flow was 6,487 M€ in 2006 compared to 4,562 M€ in 2005. Expressed in
dollars, net cash flow was 8.1 B$, an increase of 44%.
The net-debt-to-equity ratio was 34% at December 31, 2006 compared to 32% at
December 31, 2005(15).
l Analysis of segment results
Upstream
> Environment - liquids and gas price realizations*
4Q06 3Q06 4Q05 4Q06 2006 2005 2006
vs vs
4Q05 2005
59.6 69.5 56.9 +5% Brent ($/b) 65.1 54.5 +19%
57.1 65.4 54.5 +5% Average liquids price ($/b) 61.8 51.0 +21%
6.16 5.59 5.68 +8% Average gas price ($/Mbtu) 5.91 4.77 +24%
* consolidated subsidiaries, excluding fixed margin and buy-back contracts
The increase in Total's average liquids price was globally in line with the
increase in the Brent price for both the fourth quarter and full year
comparisons.
Total's average gas price increased by more than its liquids price, due to the
lag effect on long-term contracts for gas, mainly in Europe, and strong LNG
prices in Asia.
> Production
4Q06 3Q06 4Q05 4Q06 Hydrocarbon production 2006 2005 2006
vs vs
4Q05 2005
2,403 2,294 2,463 -2% Combined production (kboe/d) 2,356 2,489 -5%
1,513 1,485 1,592 -5% = Liquids (kb/d) 1,506 1,621 -7%
4,989 4,411 4,896 +2% = Gas (Mcfd) 4,674 4,780 -2%
Hydrocarbon production was 2,403 thousand barrels of oil equivalent per day
(kboe/d) in the fourth quarter 2006 compared to 2,463 kboe/d in the fourth
quarter 2005, a decrease of 2.5%, mainly as a result of :
• -1.5% due to the price effect(16),
• -1% due to changes in the portfolio, notably the divestment of onshore US
assets,
• -2% due to shut-downs in the Niger Delta area because of security issues,
• +2% due to the positive impact of new field start-ups, which was
partially offset by normal declines and reduced OPEC quotas.
For the full year 2006, hydrocarbon production was 2,356 kboe/d compared to
2,489 kboe/d in 2005, a decrease of 5% due to the following elements :
• -2% due to the price effect16,
• -1% due to changes in the portfolio,
• -2% due to shut-downs in the Niger Delta area because of security issues.
Excluding these items, the positive impact of new field start-ups was offset by
normal declines and shut-downs in the North Sea.
> Year-end 2006 reserves
Reserves at December 31 2006 2005 %
Hydrocarbon reserves (Mboe) 11,120 11,106 -
= Liquids (Mb) 6,471 6,592 -2%
= Gas (Bcf) 25,539 24,750 +3%
Proved reserves calculated according to SEC rules were 11,120 Mboe at December
31, 2006, representing close to 13 years of production at the current rate.
Based on proved reserves calculated according to SEC rules, the 2006 reserve
replacement rate(17) was 102% for the Group (consolidated subsidiaries and
equity affiliates). Excluding changes in the portfolio, it was 108%.
Excluding the impact of changing oil prices, (Brent constant at 40 $/b), the
Group's 3-year average reserve replacement rate would be 110% for the 2004-2006
period.
At year-end 2006, Total had a solid and diversified portfolio of proved plus
probable reserves representing 20.5 Bboe, or more than 23 years of production at
the current rate(18).
> Results
4Q06 3Q06 4Q05 4Q06 In millions of euros 2006 2005 2006
vs vs
4Q05 2005
4,330 5,000 5,000 -13% Adjusted operating income* 20,307 18,421 +10%
1,885 2,033 2,132 -12% Adjusted net operating income* 8,709 8,029 +8%
176 172 106 +66% • Income from equity affiliates 645 435 +48%
2,638 2,073 2,521 +5% Investments 9,001 8,111 +11%
523 80 141 +271% Divestments 1,458 692 +111%
at selling price
1,788 2,534 2,374 -25% Cash flow 11,524 10,111 +14%
* detail of adjustment items shown in business segment information
Adjusted net operating income for the Upstream segment was 1,885 M€ in the
fourth quarter 2006 compared to 2,132 M€ in the fourth quarter 2005, a decrease
of 12%.
The positive effect of higher oil and gas prices was more than offset by the
negative impacts of the depreciation of the dollar, higher exploration and
production expenses and higher taxes.
The average Upstream tax rate increased to 62% in the fourth quarter 2006 from
60% in the fourth quarter 2005, essentially due to the increase in the UK
petroleum taxes.
For the full year 2006, adjusted net operating income for the Upstream segment
was 8,709 M€ compared to 8,029 M€ in 2005, an increase of 8%.
The contribution of income from equity affiliates rose sharply, reflecting
mainly the growth in LNG activities, particularly the larger contribution from
trains 4 and 5 at Nigeria LNG.
Expressed in dollars, the 2006 adjusted net operating income for the Upstream
segment was 10.9 B$, an increase of 0.9 B$ compared to 2005, composed mainly of
the 2.5 B$ positive effect of higher hydrocarbon prices, which was partially
offset by the negative impact of lower production volumes and changes in the
portfolio (approx 0.6 B$), higher production costs (approx 0.5 B$, including 0.2
B$ for exploration) and the impact of changes in tax terms (approx 0.5 B$).
Technical costs (FAS 69, consolidated subsidiaries only) increased to 9.9 $/boe
in 2006 from 8.5 $/boe in 2005, mainly due to an increase in exploration (approx
+0.4 $/boe) and cost inflation.
The return on average capital employed (ROACE(19)) for the Upstream segment was
35% in 2006 compared to 40% in 2005. The decline was mainly due to an increase
in the level of capital employed for work-in-progress assets, which reflects the
sustained level of investments being made to fuel future growth.
Downstream
> Refinery throughput
4Q06 3Q06 4Q05 4Q06 Refinery throughput (kb/d) 2006 2005 2006
vs vs
4Q05 2005
2,435 2,533 2,420 +1% Total refinery throughput* 2,454 2,410 +2%
971 976 928 +5% = France 933 939 -1%
1,210 1,257 1,204 - = Rest of Europe* 1,224 1,158 +6%
254 300 288 -12% = Rest of world 297 313 -5%
* includes share of Cepsa
The refinery utilization rate based on crude oil processed was 86% in the fourth
quarter 2006 (90% based on crude oil and other inputs) compared to 89% in the
fourth quarter 2005 and 92% in the third quarter 2006.
In the fourth quarter 2006, crude throughput was temporarily reduced in response
to negative topping margins, and there was a major turnaround of the cracker at
the Port Arthur refinery.
The fourth quarter 2005 was affected by the aftermath of Hurricane Rita in the
US and a strike at the Normandy refinery.
> Results
4Q06 3Q06 4Q05 4Q06 In millions of euros 2006 2005 2006
vs except the TRCV refining margin indicator vs
4Q05 2005
22.8 28.7 45.5 -50% TRCV - European refining 28.9 41.6 -31%
margin indicator ($/t)
750 1,002 1,083 -31% Adjusted operating income* 3,644 3,899 -7%
549 798 799 -31% Adjusted net operating income* 2,784 2,916 -5%
63 62 70 -10% • Income from equity affiliates 269 280 -4%
703 383 710 -1% Investments 1,775 1,779 -
275 90 80 +244% Divestments 428 204 +110%
at selling price
261 1,180 211 +24% Cash flow 3,626 2,723 +33%
844 1,142 1,168 -28% Adjusted cash flow 3,904 3,688 +6%
* detail of adjustment items shown in business segment information
Adjusted net operating income for the Downstream segment was 549 M€ in the
fourth quarter 2006 compared to 799 M€ in the fourth quarter 2005, a decrease of
31%, mainly due to a collapse in distillation refining margins brought on by
exceptionally mild winter weather conditions.
For the full year 2006, adjusted net operating income for the Downstream segment
was 2,784 M€ compared to 2,916 M€ in 2005, a decrease of 5%.
Expressed in dollars, adjusted net operating income for the Downstream segment
was 3.5 B$, a decrease of 0.1 B$ compared to 2005. The decrease was due to a
weaker refining environment, partially offset by favorable market effects, which
had a negative impact estimated at 0.65 B$. Performance improvement contributed
0.3 B$ and volumes recuperated from losses in 2005 (strikes in France and
aftermath of Hurricane Rita in the US) added an estimated 0.25 B$.
The ROACE for the Downstream segment was 23% in 2006 compared to 28% in 2005.
The decrease is due notably to weaker refining margins.
Chemicals
> Results
Under IFRS rules for discontinued operations, the historical statements on
income and ROACE have been restated to exclude the contribution of Arkema.
4Q06 3Q06 4Q05 4Q06 In millions of euros 2006 2005 2006
vs vs
4Q05 2005
4,610 4,849 4,294 +7% Sales 19,113 16,765 +14%
2,891 3,135 2,641 +9% = Base chemicals 12,011 10,245 +17%
1,719 1,713 1,653 +4% = Specialties 7,101 6,520 +9%
374 350 285 +31% Adjusted operating income* 1,215 1,148 +6%
255 248 322** -21% Adjusted net operating income* 884 967** -9%
168 155 78 +115% • Base chemicals 486 447 +9%
82 87 84 -2% • Specialties 381 345 +10%
293 202 437 -33% Investments 995 1,115 -11%
29 4 29 - Divestments 128 59 +117%
at selling price
725 291 161 +350% Cash flow 972 946 +3%
331 329 164 +102% Adjusted cash flow 1,220 1,271 -4%
* detail of adjustment items shown in business segment information
** includes 151 M€ deferred tax credits related to Arkema activities
Sales for the Chemicals segment increased by 7% to 4,610 M€ in the fourth
quarter 2006 from 4,294 M€ in the fourth quarter 2005.
Adjusted net operating income for the Chemicals segment was 255 M€, a decrease
of 21% compared to the fourth quarter 2005. However, excluding the deferred tax
credits related to Arkema activities recorded in the fourth quarter 2005, it
increased by 49%.
In a context of solid market demand, European petrochemical margins benefited
from a decrease in naphtha prices.
Specialties continue to benefit from global economic growth and have performed
well.
For the full year 2006, adjusted net operating income for the Chemicals segment
decreased by 9% to 884 M€ from 967 M€ in 2005. However, excluding the deferred
tax credits related to Arkema activities, it increased by 8%. Expressed in
dollars, the corresponding 0.1 B$ increase reflects the positive effects of
growth and productivity programs.
The ROACE for the Chemicals segment was 13% in 2006 compared to 15% in 2005 (12%
in 2005 excluding the deferred tax credits related to Arkema).
l Total S.A. parent company accounts and proposed dividend
Net income for Total S.A., the parent company, was 5,252 M€ in 2006 compared to
4,143 M€ in 2005. After reviewing the accounts, the Board of Directors decided
to propose at the May 11, 2007 Annual Meeting a dividend of 1.87 euros per share
for 2006, an increase of 15% compared to the previous year.
The pay-out ratio for Total, based on adjusted net income, would be 34%.
Taking into account the interim dividend of 0.87 euros per share paid on
November 17, 2006, the remaining 1.00 euro per share will be paid on May 18,
2007.
l Summary and outlook
The ROACE for the Group was 26% in 2006 (29% for the business segments), at the
level of the best in the industry.
Return on equity was 33% in 2006 compared to 35% in 2005.
In the Upstream, Total intends to pursue its strategy of profitable organic
growth and increase hydrocarbon production by more than 5% per year on average
over the period 2006 to 2010(20), including production growth of 6% in 2007(21),
which takes into account a reduction of 1% for the estimated impact of OPEC
quotas. This growth will be particularly sensitive to the LNG activities, which
are expected to grow by 13% per year on average. Through 2010, Total's portfolio
of projects offers strong visibility, notably due to the number of exploration
successes in recent years and to major new projects in LNG and heavy oil.
In the Downstream, the Group is pursuing a strategy to upgrade its refining
system by adding conversion and desulphurization projects, as well as through
programs to modernize and improve the reliability of its units.
In petrochemicals, Total's objective is to continue to increase its polymers
production, particularly in Asia and the Middle East, while improving the
competitiveness of its operations in mature markets.
Implementing the Group's growth strategy depends on a sustained investment
program. The 2007 budget for investments is approximately 16 B$(22), 75% of it
for the Upstream.
The Group maintains its net-debt-to-equity ratio target at around 25% to 30%.
Total intends to pursue a dynamic dividend policy, in line with its strategy for
profitable growth over the long term. Cash flow remaining after investments and
the payment of the dividend will be available for share buybacks.
Highlights of 2007 should include the ramp up of production at Dalia in Angola
and the distillate hydrocracker at Normandy as well as the start-up of major
Upstream projects like Rosa in Angola and Dolphin in Qatar.
Since the beginning of 2007, the oil market environment has remained generally
favorable with oil and gas prices at relatively high levels and refining margins
in Europe comparable to the average level of 2006.
To listen to the presentation to financial analysts by Chairman Thierry
Desmarest and CEO Christophe de Margerie today at 11:00 (Paris time) please log
on to www.total.com or call +44 (0)161 601 8912 in Europe or +1 866 793 4277 in
the US (access code : Total). For a replay, please consult the website or call
+44 (0)207 075 3214 in Europe or 1 866 828 2261 in the US (code : 191 534).
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 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.
Cautionary Note to U.S. Investors - The United States Securities and Exchange
Commission permits oil and gas companies, in their filings with the SEC, to
disclose only proved reserves that a company has demonstrated by actual
production or conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. We use certain
terms in this presentation, such as 'proved and probable reserves', that the
SEC'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 Defense
6 - 92078 Paris la Defense cedex - France. You can also obtain this form from
the SEC by calling 1-800-SEC-0330.
Operating information by segment
Fourth quarter and full year 2006
l Upstream
4Q06 3Q06 4Q05 4Q06 Combined liquids and gas production by 2006 2005 2006
vs region (kboe/d) vs
4Q05 2005
752 674 759 -1% Europe 728 770 -5%
729 716 756 -4% Africa 720 776 -7%
28 17 33 -15% North America 16 41 -61%
258 250 247 +4% Far East 253 248 +2%
416 396 410 +1% Middle East 406 398 +2%
211 234 249 -15% South America 226 247 -9%
9 7 9 - Rest of world 7 9 -22%
2,403 2,294 2,463 -2% Total production 2,356 2,489 -5%
4Q06 3Q06 4Q05 4Q06 Liquids production by region (kb/d) 2006 2005 2006
vs vs
4Q05 2005
371 354 381 -3% Europe 365 390 -6%
633 620 678 -7% Africa 628 696 -10%
17 7 3 x5,7 North America 7 9 -22%
28 28 26 +8% Far East 29 29 -
353 345 359 -2% Middle East 351 346 +1%
103 124 137 -25% South America 119 143 -17%
8 7 8 - Rest of world 7 8 -13%
1,513 1,485 1,592 -5% Total production 1,506 1,621 -7%
4Q06 3Q06 4Q05 4Q06 Gas production by region (Mcfd) 2006 2005 2006
vs vs
4Q05 2005
2,073 1,738 2,048 +1% Europe 1,970 2,063 -5%
510 509 412 +24% Africa 486 422 +15%
55 48 156 -65% North America 50 174 -71%
1,417 1,240 1,366 +4% Far East 1,282 1,254 +2%
334 272 274 +22% Middle East 292 279 +5%
598 602 638 -6% South America 592 586 +1%
2 2 2 - Rest of world 2 2 -
4,989 4,411 4,896 +2% Total production 4,674 4,780 -2%
l Downstream
4Q06 3Q06 4Q05 4Q06 Refined product sales by region (kb/d)* 2006 2005 2006
vs vs
4Q05 2005
2,720 2,688 2,696 +1% Europe 2,690 2,649 +2%
343 353 337 +2% Africa 332 336 -1%
480 583 571 -16% Americas 573 623 -8%
185 147 208 -11% Rest of world 191 184 +4%
3,728 3,771 3,812 -2% Total 3,786 3,792 -
* includes trading and equity share of Cepsa
Adjustment items
l Adjustments to operating income from business segments
4Q06 3Q06 4Q05 in millions of euros 2006 2005
- (122) (86) Special items affecting operating income from business (177) (97)
segments
8 (10) (19) = Restructuring charges (25) (19)
(11) (50) (60) = Impairments (61) (71)
3 (62) (7) = Other (91) (7)
(389) (681) (914) Pre-tax inventory effect : FIFO vs. replacement cost (314) 1,265
(389) (803) (1,000) Total adjustments affecting operating income from (491) 1,168
business segments
l Adjustments to net income (Group share)
4Q06 3Q06 4Q05 in millions of euros 2006 2005
(18) (132) (193) Special items affecting net income (Group share) (150) (467)
(46) (2) (42) = Equity share of special items recorded by (81) (207)
Sanofi-Aventis
174 - - = Gain on asset sales 304 -
(15) (80) (40) = Restructuring charges (154) (130)
(8) (32) (207) = Impairments (40) (215)
(123) (18) 96 = Other (179) 85
(58) (82) (88) Adjustment related to the Sanofi-Aventis merger* (309) (335)
(share of amortization of intangible assets)
(436) (478) (430) After-tax inventory effect : FIFO vs. replacement cost (358) 1,072
(512) (692) (711) Total adjustments to net income (817) 270
* based on 13% participation in Sanofi-Aventis at 12/31/2006, 9/30/2006, and 12/
31/2005
Net-debt-to-equity ratio
in millions of euros 12/31/2006 09/30/2006 12/31/2005
Current borrowings 5,858 11,426 3,920
Net current financial instruments (3,833) (10,899) (301)
Non-current financial debt 14,174 12,994 13,793
Hedging instruments of non-current debt (486) (526) (477)
Cash and cash equivalents (2,493) (2,575) (4,318)
Net debt 13,220 10,420 12,617
Shareholders equity 40,321 41,761 40,645
Accrued dividend payable based on shares (2,258) (2,756) (2,006)
at the close of the period*
Minority interests 827 863 838
Equity 38,890 39,868 39,477
Net-debt-to-equity ratio 34.0% 26.1% 32.0%
* based on the distribution of the 2006 dividend of 1.87 euros per share of 2.5
€ of par value taking into account the interim amount of 1,977 M€ paid in
November 2006
Effective tax rates
4Q06 3Q06 4Q05 Effective tax rates* 2006 2005
62.1% 63.7% 60.4% Upstream 61.4% 59.4%
56.6% 55.6% 52.9% Group 55.7% 53.3%
* tax on adjusted net operating income / (adjusted net operating income - income
from affiliates, dividends received from investments, and impairments of
acquisition goodwill + tax on adjusted net operating income)
2007 Sensitivities*
Scenario Change Impact on operating Impact on net
income (e) operating income (e)
€/$ 1.25 $/€ +0.1 € par $ +2.2 B€ +1.1 B€
Brent 60 $/b +1 $/b +0.38 B€ +0.15 B€
TRCV - European refining 30 $/t +1 $/t +0.09 B€ +0.06 B€
margin indicator
* sensitivities revised once per year upon publication of the previous year
fourth quarter results
Return on average capital employed
l For the full year 2006
in millions of euros Upstream Downstream Chemicals** Segments Group
Adjusted net operating income 8,709 2,784 884 12,377 13,162
Capital employed 23,522 11,421 6,885 41,828 49,341
at December 31, 2005*
Capital employed 25,543 12,384 6,920 44,847 52,263
at December 31, 2006*
ROACE 35.5% 23.4% 12.8% 28.6% 25.9%
* at replacement cost (excluding after-tax inventory effect)
** capital employed for Chemicals reduced for Arkema by 2,235 M€ at 12/31/2005
and for the Toulouse-AZF provision of 133 M€ pre-tax at 12/31/2005 and 176 M€
pre-tax at 12/31/2006
l For the twelve months ended September 30, 2006
in millions of euros Upstream Downstream Chemicals** Segments Group
Adjusted net operating income 8,956 3,034 951 12,941 13,680
Capital employed 21,663 10,017 6,837 38,517 45,273
at September 30, 2005*
Capital employed 24,561 11,431 7,257 43,249 50,371
at September 30, 2006*
ROACE 38.8% 28.3% 13.5% 31.7% 28.6%
* at replacement cost (excluding after-tax inventory effect)
** capital employed for Chemicals reduced for Arkema by 2,268 M€ at 9/30/2005
and for the Toulouse-AZF provision of 45 M€ pre-tax at 9/30/2005 and 85 M€
pre-tax at 9/30/2006
l For the full year 2005
in millions of euros Upstream Downstream Chemicals** Segments Group
Adjusted net operating income 8,029 2,916 967 11,912 12,586
Capital employed 16,280 9,654 6,205 32,139 38,314
at December 31, 2004*
Capital employed 23,522 11 421 6,885 41,828 49,341
at December 31, 2005*
ROACE 40.3% 27.7% 14.8% 32.2% 28.7%
* at replacement cost (excluding after-tax inventory effect)
** capital employed for Chemicals reduced for Arkema by 2,058 M€ at 12/31/2004
and 2,235 M€ at 12/31/2005 and for the Toulouse-AZF provision of 110 M€ pre-tax
at 12/31/2004 and 133 M€ pre-tax at 12/31/2005
--------------------------
(1) adjusted net income = net income using replacement cost (Group share)
adjusted for special items and excluding Total's share of amortization of
intangibles related to the Sanofi-Aventis merger.
(2) dollar amounts represent euro amounts converted at the average €/$ exchange
rate for the period (1.2887 $/€ in the fourth quarter 2006, 1.1884 $/€ in the
fourth quarter 2005, 1.2743 $/€ in the third quarter 2006, 1.2556 $/€ for 2006,
and 1.2441 $/€ for 2005).
(3) based on 1€ = $1.25 on the payment date for the final dividend expressed in
dollars.
(4) percent changes are relative to the fourth quarter 2005.
(5) percent changes are relative to 2005.
(6) adjusted income is 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 ; adjusted cash flow from operations is
defined as cash flow from operations before changes in working capital at
replacement cost ; adjustment items are listed on page 16.
Reminder : under IFRS rules for discontinued operations, the historical
statements (4Q05 and 2005) of income with the exception of net income, have been
restated to exclude the contribution of Arkema.
(7) adjusted retroactively to take into account the 4-for-1 stock split
completed on May 18, 2006.
(8) special items affecting operating income from business segments in the
fourth quarter 2006 and the fourth quarter 2005 included restructuring charges
in the Chemicals segment.
(9) defined as : (tax on adjusted net operating income) / (adjusted net
operating income - income from equity affiliates, dividends received from
investments and impairments of acquisition goodwill + tax on adjusted net
operating income).
(10) effective in the fourth quarter 2006, and retroactively for the first three
quarters of 2006, some exploration costs directly charged to expense, mainly
geological and geophysical costs, are no longer added back in the calculation of
cash flow from operations. Cash flow used in investing activities has been
reduced by the same amount. The impact for 2006 was 372 M€. The entire
adjustment was reflected in the fourth quarter 2006 cash flow from operations.
(11) net cash flow = cash flow from operations + divestments - investments.
(12) details of these elements shown on page 16.
(13) excludes 2.3 million shares reserved for share grants as per the decision
of the Board on July 18, 2006.
(14) excluding the change in accounting presentation for exploration costs
directly charged to expense, the increase was 10%.
(15) calculations detailed on page 17.
(16) impact of hydrocarbon prices on entitlement volumes from production sharing
and buy-back contracts.
(17) change in reserves excluding production (revisions + discoveries,
extensions + acquisitions - divestments) / production for the period.
(18) limited to proved and probable reserves covered by E&P contracts on fields
that have been drilled and for which technical studies have demonstrated
economic development in a 40 $/b environment, including the portion of heavy oil
in the Joslyn field developed by mining.
(19) calculated based on adjusted net operating income and average capital
employed, using replacement cost, as shown on page 18.
(20) based on Brent at 60 $/b in 2007 and 40 $/b thereafter.
(21) excluding the effect of portfolio changes.
(22) excluding acquisitions and based on 1€ = 1.25 $.
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