OilVoice - Total Reports Fourth Quarter and Full Year Results

Total Reports Fourth Quarter and Full Year Results

Thursday, February 12, 2009

Fourth quarter 2008 Highlights

• Fourth quarter 2008 Upstream production of 2,354 kboe/d
• Restarted production on the Al Jurf field in Libya end of December 2008
• Launched project to increase capacity of OML 58 in Nigeria and new development phase for Bongkot North in Thailand
• Styrene production in Europe consolidated at Gonfreville plant with start-up of expanded world-class unit
• New discoveries on Moho Bilondo in Republic of Congo, on Etisong in Nigeria, in Brunei, and in Thailand
• Added exploration acreage including Block 70 in Yemen, three blocks in the UK North Sea and interests in deep-offshore Nigerian blocks OPL 279 and 285
• Signed agreement with Libyan national oil company to renew contracts on Blocks C17 and C137 and extended the Aguada Pichana and San Roque concessions until 2027 in Argentina
• Acquired a 50% interest in a shale oil research project in Colorado in the U.S.
• Acquired an interest in Konarka, a start-up company in the U.S. specializing in organic photovoltaic technology
• Consolidation of heavy oil positions by launching a public offer for the acquisition of UTS Energy in Canada

Commenting on the results, CEO Christophe de Margerie said:
“Unprecedented volatility marked the 2008 oil market environment. In the first part of the year, the price of Brent crude climbed rapidly toward 150 dollars per barrel ($/b). In the second part of the year, the global economy suffered a sharp slowdown which drove Brent down to a new low for the year of 35 $/b in December. On average, Brent was 97 $/b for the year and 55 $/b for the fourth quarter.

European refining margins were good on average for the year, supported by steady demand for diesel. Petrochemicals, at the end of the petroleum chain, were hurt in the first half of the year by the rapid increase in oil prices. In the second half of the year, petrochemicals benefited from a rebound in margins, but suffered from falling demand linked to the worldwide economic downturn.

Strong volatility also affected the dollar; it depreciated by 7% relative to the euro over the year but rose by 14% during the fourth quarter 2008.

In this environment, our adjusted net income for 2008 rose to a record high of more than 20 billion dollars, an increase of 22%. This performance was possible despite the 16% decline in the fourth quarter adjusted net income to 3.8 billion dollars. Nevertheless, Total demonstrated in the fourth quarter its strong resistance to a weaker environment and the benefit of its integrated strategy.

Total invested more than 18 billion dollars in 2008, a substantial increase compared to 2007, to further prepare the company for the long term. The Group reaffirms as its priorities the safety and reliability of its operations as well as the protection of the environment. In addition, the Company has committed to a number of long-term projects, notably the deep-offshore Usan field in Nigeria, the Jubail refinery in Saudi Arabia, some targeted acquisitions for heavy oil in North America and Madagascar and several projects in renewable energies.

By maintaining strict financial discipline regardless of the environment, Total was able to implement its investment program while delivering strong profitability, proposing a 10% increase in its 2008 dividend and strengthening its balance sheet. The net-debt-to-equity ratio was 23% at the end of 2008 compared to 27% at the end of 2007. In addition, Total has a high level of liquidity and intends to pursue its policy of progressively divesting non-strategic assets.

Given the nature of the business, Total is faced with many risks, particularly industrial and safety risks. The events of the past months in Nigeria, Libya and France are unfortunate reminders that we must redouble our efforts to be ever vigilant when the safety of our people and the protection of the environment are at stake.

Total begins 2009 confident that it can weather a major economic crisis without having to revise its capacity for investments to grow the company over the long term. Total is committed to maintain a balanced growth strategy for the benefit of its workforce, its shareholders and all of its other stakeholders.”

Upstream

In the fourth quarter 2008, hydrocarbon production was 2,354 thousand barrels of oil equivalent per day (kboe/d), a decrease of 4% compared to the fourth quarter 2007, mainly as a result of :
• -1% for the normal decline on existing fields, which was only partially offset by start-ups and ramp-ups of new major projects this quarter,
• -1% for the shutdown of the Al Jurf field in Libya from April to end of December 2008,
• -1% related to disruptions in Nigeria due to security issues,
• -1% for changes in the portfolio (mainly the contract renegotiations in Libya).

The negative impact of OPEC quota reductions was offset by a positive price effect.

For the full-year 2008, hydrocarbon production was 2,341 kboe/d, a decrease of 2% compared to 2007, mainly as a result of :
• +3.5% of growth from start-ups and ramp-ups of new major projects, including Dolphin, Rosa, Jura and Dalia, net of the normal decline on existing fields,
• -2.5% for unscheduled shutdowns, mainly on the Elgin Franklin field in February, the Bruce and Alwyn fields in the summer, and the Al Jurf field from April to the end of December 2008,
• -2% for the price effect 23,
• -1% for changes in the portfolio.

Underlying production growth in 2008, excluding the price effect and changes in the portfolio, was +1%.

2008 reserves
Proved reserves based on SEC rules (Brent at 36.55 $/b) were 10,458 Mboe at December 31, 2008. At the 2008 average rate of production, the reserve life is more than 12 years.

The 2008 reserve replacement rate based on SEC rules was 112%, excluding acquisitions and divestments. Including acquisitions and divestments, it was 101%.

At year-end 2008, Total had a solid and diversified portfolio of proved and probable reserves representing 20 Bboe, or more than a 20-year reserve life based on the 2008 average production rate, and resources representing more than a 40-year reserve life.

Adjusted net operating income for the Upstream segment was 1,995 M€ in the fourth quarter 2008 compared to 2,569 M€ in the fourth quarter 2007, a decrease of 22%.

Compared to the fourth quarter 2007, the increase in income from equity affiliates was mainly due to changing the method of consolidation for PetroCedeño in Venezuela effective December 31, 2007.

The effective tax rate for the Upstream segment was 57.4% in the fourth quarter 2008 compared to 61.7% in the third quarter 2008 and 61.3% in the fourth quarter 2007.

For the full-year 2008, adjusted net operating income for the Upstream segment was 10,724 M€ compared to 8,849 M€ in 2007, an increase of 21%.

Expressed in dollars, the 2008 adjusted net operating income for the Upstream segment was 15.8 B$, an increase of 3.6 B$ compared to 2007. The increase reflected essentially the impact of the more positive full-year 2008 environment.

The return on average capital employed (ROACE) for the Upstream segment was 35.9% in 2008 compared to 33.6% in 2007.