Proforma 1999 Results
Total Fina Elf.
29 March 2000
TotalFinaElf proforma 1999 Results
Net income excluding non-recurring items : 3.35 billion euros,
24% increase compared to proforma 1998
Net dividend raised to 2.35 euros per share (+17.5%)
The merger of TOTALFINA and Elf Aquitaine was approved by the European
Commission on February 9, 2000. On March 22, 2000, TOTALFINA, holding more than
95% of the Elf Aquitaine shares, changed its name to TOTAL FINA ELF S.A. and
expanded its board by adding 10 directors from Elf Aquitaine's Board.
The new TotalFinaElf Board of Directors, chaired by Thierry Desmarest, met on
March 28 to review the 1999 consolidated accounts of TOTALFINA and Elf Aquitaine
as well as the TotalFinaElf proforma accounts for 1997, 1998 and 1999. The Board
also reviewed and closed the accounts of the parent company.
TOTAL FINA ELF PROFORMA ACCOUNTS
The following information relates to TotalFinaElf. The proforma information is
unaudited and has been prepared in accordance with French accounting principles
based on Article 215 of the new accounting regulations related to consolidated
accounts.
Net income (Group share) excluding non-recurring items rose to 3,349 million
euros in 1999, a 24% increase as compared to 1998. Net income (Group share)
including non-recurring items(1) was 3,496 million euros, a 99% increase as
compared to 1998.
The 1999 environment was volatile. Oil prices surged to new highs, but refining
and petrochemicals margins fell off sharply. The average Brent crude oil price
increased by 42% to $18.0/b in 1999 from $12.7/b in 1998. TRCV(2) European
refining margins fell by 43% to $9.7/t in 1999 from $16.9/t in 1998. The dollar
rose by 4% against the euro, averaging 1.07 in 1999 for the euro/dollar exchange
rate.
(1) 1999 non-recurring items affecting net income: gains from asset sales (+ 1
132 M euros), FAS 121 (- 453 M euros), early retirement plans (- 31 M euros),
restructuring charges (- 295 M euros), and corporate charges (- 206 M euros).
(2) TRCV: Topping - Reforming - Cracking - Visbreaking
STRONG UPSTREAM PERFORMANCE
In the Upstream, TotalFinaElf's hydrocarbon production was 2,065 mboe/d in
1999(3), stable relative to 1998, including 1,468 mb/d of liquids and 3,355 Mcfd
of gas.
The combined proved reserves continued to grow rapidly, climbing 8.7% in 1999 to
10,455 million boe from 9,615 million boe in 1998. These reserves represent
nearly 14 years of production based on the current level of production.
The average reserve replacement rate(4) for 1997-1999 was 183%. Over the same
three-year period, the reserve replacement cost(4) improved, failing below
$4/boe versus $4.3/boe in the 1996-1998 period. Successful exploration results
drove finding costs for the 1997-1998 period down to a very competitive level of
approximately $0.8/boe.
In 1999, TotalFinaElf launched production from several new fields, offsetting
the normal decline of mature fields, and recorded some major discoveries:
In Europe, the first phase of the Aasgard field (TotalFinaElf 7.65%) started in
May 1999. A second phase is scheduled to start by year-end 2000.
In the Middle East, the Sirri E field (TotalFinaElf 60%) in Iran started
production in February 1999 and rose to a level of 90 mb/d by year end.
In Africa, production on the Kuito field (TotalFinaElf 20%) on Block 14 offshore
Angola was launched at year end. On Block 17 (TotalFinaElf 40%) in Angola,
development of the giant deep-water Girassol field is proceeding as planned with
first production expected in mid-2001. The high potential of this block was
confirmed by four new discoveries in 1999.
In Southeast Asia, gas production continued to grow in 1999 as the Peciko field
on the Mahakam Permit (TotalFinaElf 50%) started up in December. Production
from Peciko in 2000 will increase TotalFinaElf's share of the gas supplied to
the Bontang LNG facility to 60%, ranking the company as the largest gas producer
in Indonesia.
In South America, TotalFinaElf is present on four permits in southern Bolivia.
In 1999, the company made major gas discoveries on Block XX West (TotalFinaElf
41%), San Alberto (15%) and San Antonio (15%). The on-trend location of these
discoveries suggests that this may be one of largest gas fields in the Southern
Cone.
In the US, TotalFinaElf is building up its position in the Gulf of Mexico,
launching production from the Virgo field (TotalFinaElf 64%) in water depth of
350 meters. In addition, deep offshore exploration activity yielded discoveries
on the Morgus and Matterhorn prospects which are currently being evaluated.
Finally, in the Caspian Sea, the company announced very encouraging initial
results following its first exploration well on the Shah Deniz permit
(TotalFinaElf 10%) in Azerbaijan. Further appraisal will be required to
evaluate the size of the discovery.
STRONG RESILIENCE OF DOWNSTREAM RESULTS
The Downstream segment weathered a weak 1999 environment that was marked by a
sharp fall in refining margins.
(3) Based on the sum of data published by TotalFina and Elf Aquitaine
(4) Consolidated subsidiaries
Operating income for 1999, excluding non-recurring items, declined by 16.9% to
1,046 million euros as compared to 1998. The negative impact of low refining
margins was partially offset by productivity efforts pursued by both TotalFina
and Elf as well as the increase in throughput at the Leuna refinery.
The refining breakeven point was substantially reduced to $11/t in 1999. The
initial synergies stemming from the merger of TOTAL and PetroFina contributed to
this performance.
In Marketing, the Group successfully implemented the merger of TOTAL and
PetroFina, restructuring all of the subsidiary headquarters by consolidating
locations for each country to a single centralised site.
In Africa, where TotalFinaElf is the market leader, development continued with
new activities launched in several countries.
Finally, TotalFinaElf continued to expand its speciality products activities in
fast-growing markets, notably in China (LPG, lubricants), Vietnam (marketing,
LPG, lubricants), Cambodia (marketing) and Philippines (marketing, LPG).
CONTINUED GROWTH FOR CHEMICALS
Non-Group sales for the Chemicals segment rose by 6.8% to 17.4 billion euros in
1999 from 16.3 billion euros in 1998.
Operating income excluding non-recurring items decreased by 12.0% to 1,189
million euros from 1,351 million euros in 1998 due to a sharp decline in
petrochemical margins to a low point in the cycle at mid-year 1999. Cost
reduction and volume growth, both through internal and external means, combined
to limit the impact of lower petrochemical margins.
In 1999, TotalFinaElf sold its Inks business (Coates). This disposal is in
keeping with the Group's strategy to concentrate on high-return assets.
TotalFinaElf RESULTS
The following table presents the principal elements of TotalFinaElf's proforma
accounts :
1999 1998 Change
m E m E in %
Sales 75,035 61,810 +21.4%
Operating income from business 6,354 4,696 +35.3%
segments* (excluding non-recurring items)
Net income (Group share) 3,349 2,703 +23.9%
(excluding non-recurring items)
Earnings per share (in euros) 4.77 3.86 +23.6%
(excluding non-recurring items)
Cash flow 10,280 8,501 +20.9%
* - excluding health,
- 1999 non-recurring items affecting operating income: FAS 121 (- 343 M euros)
and restructuring costs (- 252 M euros)
- 1998 non-recurring items affecting operating income: FAS 121 (- 961 M
euros), charge for negative inventory effect (- 240 M euros) and other (- 185 M
euros).
OPERATING INCOME FROM BUSINESS SEGMENTS (excluding nonrecurring items)
1999 1998 Change
m E m E in %
Upstream 4,119 2,087 +97.4%
Downstream 1,046 1,258 -16.9%
Chemicals 1,189 1,351 -12.0%
Operating income from 6,354 4,696 +35.3%
business segments
1999 INVESTMENTS
Gross investments for the segments (excluding health) were 8.1 billion euros in
1999 as compared to 8.4 billion euros in 1998.
- More than 60% of the investments were allocated to the Upstream segment (5.1
billion euros).
- Downstream investments were stable at 1.3 billion euros.
- Chemical investments were 1.7 billion euros in 1999, slightly greater than in
1998.
Consolidated equity before dividend rose to 27.7 billion euros in 1999 as
compared to 25.3 billion euros in 1998.
The net-debt-to-equity ratio(5) of the Group rose to 49.7% at year-end 1999.
PARENT-COMPANY TOTAL FINA ELF S.A. ACCOUNTS AND PROPOSED DIVIDEND
The parent company TotalFinaElf reported 1999 earnings of 916 million euros. The
Board of TotalFinaElf, after closing the accounts, has decided to propose at the
May 25, 2000, General Assembly a dividend of 2.35 euros per share, representing
an increase of 17.5% from the previous year, to which will be added the avoir
fiscal (French tax credit) pursuant to the terms in force. The payment date for
the proposed dividend will be in June 2000.
OUTLOOK
In the Upstream segment, the proved reserves are well balanced across Europe,
Africa, the Middle East and the rest of the world. TotaFinaElf holds a
portfolio of large projects that should allow it to achieve its ambitious
objectives for both production growth and unit cost reduction. Production is
expected to grow to 2.8 million boe/d in 2005.
In the Downstream segment, the new Group has a competitive refining system and
marketing network. The realisation of synergies as well as the implementation
of a refining hub system should lead to further reductions in the breakeven
point for the Group's European refineries from $11/t in 1999 to $8/t in 2003.
TotalFinaElf is the largest marketer in Europe.
(5) (Debt - cash - marketable securities) / equity after dividend
The Chemicals segment is organised along three product lines :
- Petrochemicals and plastics
- Intermediates and performance polymers
- Specialties
Growth in this segment will be focused on high-return assets. Chemicals are
expected to provide positive net cash flow to the Group.
The first three months of 2000 have been marked by exceptionally high oil prices
as well as a strong dollar-euro exchange rate. Refining margins are slightly
improved over the 1999 average. Within this context, the performance of the
business segments, notably the Upstream, is progressing well.
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