Total: second quarter and first half 2016 results

Total’s Board of Directors met on 27 July 2016, to review the Group’s second quarter accounts. Commenting on the results, Chairman and CEO Patrick Pouyanné said:

“Although still volatile, the Brent price has recovered since the start of the year and averaged US$46 per barrel in the second quarter of 2016. Total captured the benefit of this rebound, and adjusted net income rose to US$2.2 billion in the second quarter of 2016, an increase of 33% compared to the first quarter of 2016. In the Upstream, production increased by more than 5% compared to the second quarter of 2015. Obtaining a 30% interest in the Al-Shaheen concession in Qatar for 25 years was amajor success, strengthening our presence in the Middle East on a giant field with a long plateau and low technical costs. In the Downstream, results and cash generation remained strong at the same level compared to the first quarter of 2016. The acquisition of retail and logistics assets in East Africa strengthens our position as the leader in Africa for Marketing & Services. Efforts to reduce operating costs are continuing to bear fruit and we will surpass the US$2.4 billion cost reduction target for this year. In the first half, organic investments were US$8.7 billion, and are expected to be US$18-19 billion for the year. As part of its ambition to become the responsible energy major, the Group expanded its portfolio with the acquisitions of Saft in the energy storage sector and Lampiris in gas and electricity distribution. The Group confirms the strength of its balance sheet with a net-debt-to-equity ratio stable at 30% at the end of June 2016.”

Highlights

• Obtained 30% interest in the giant Al-Shaheen field in Qatar for 25 years starting July 2017.
• Loading of first Angola LNG cargo following the plant restart.
• Took control of Saft in the energy storage sector following a successful tender offer.
• Acquired gas and electricity distributor Lampiris in Belgium.
• Acquired import terminals and retail network in Kenya, Uganda and Tanzania.
• Signed an agreement to supply 0.4 million tpy of LNG to Japan’s Chugoku for a period of 17 years.
• The new organisational structure includes the following appointments to the Executive Committee: Momar Nguer, President, Marketing & Services as of 15 April 2016; Namita Shah, Executive Vice President, People & Social Responsibility; Bernard Pinatel, President, Refining & Chemicals effective 1 September 2016. Philippe Sauquet becomes President, Gas, Renewables and Power and Executive Vice President, Strategy & Innovation.

Hydrocarbon production was 2424 000 boe/d in the second quarter of 2016, an increase of more than 5% compared to the second quarter of 2015, due to the following:

• +6% due to new project start ups and ramp ups, notably Laggan-Tormore, Vega Pleyade, Moho Phase 1b, Gladstone LNG and Termokarstovoye.
• -2% due to the security situation in Nigeria and forest fires in Canada.
• +1% due to the PSC price effect and performance, net of normal field decline.

In the first half of 2016, hydrocarbon production was 2452 000 boe/d, an increase of 4.5% compared to the first half of 2015, due to the following:

• +5% due to new project start ups and ramp ups, notably Laggan-Tormore, Vega Pleyade, Moho Phase 1b, Gladstone LNG and Termokarstovoye./li>
• -2% due to the security situation in Nigeria and Yemen, and forest fires in Canada./li>
• +2% due to the PSC price effect and performance, net of normal field decline.

Operating cash flow before working capital changes moved in line with the average hydrocarbon price and captured the benefit from cost reductions and production growth:

• In the second quarter of 2016, Upstream operating cash flow before working capital changes was US$2281 million, a decrease of 24% compared to the second quarter of 2015.
• In the first half 2016, Upstream operating cash flow before working capital changes was US$4112 million, a decrease of 31% compared to the first half of 2015.

Upstream adjusted net operating income was:

• US$1127 million in the second quarter of 2016, a decrease of 28% compared to the second quarter of 2015, essentially due to the decrease in the average hydrocarbon price, partially offset by the increase in production, decrease in operating costs and lower exploration expenses and taxes.
• US$1625 million in the first half of 2016, a decrease of 44% compared to the first half of 2015, for the same reasons.

Refinery throughput:

• Decreased by 10% in the second quarter of 2016 compared to the second quarter of 2015, due to outages in Europe and the United States.
• Decreased by 3% in the first half 2016 compared to the first half of 2015; strong operational performance in the first quarter was offset by outages in the second quarter.

The Group’s European refining margin indicator (ERMI) remained stable compared to the first quarter of 2016 but decreased by 35% compared to last year. The petrochemical environment remained favorable, supported by strong polymer demand. Refining & Chemicals adjusted net operating income was:

• US$1018 million in the second quarter of 2016, a decrease of only 25% compared to the second quarter of 2015, despite lower refining margins and throughput, thanks to strong operational performance of the Group’s major integrated platforms in Asia and the Middle East.
• US$2146 million in the first half of 2016, a decrease of 12% compared to the first half of 2015.

In the second quarter of 2016, petroleum product sales decreased by 2% compared to the second quarter of 2015, mainly due to the sale of Totalgaz and the marketing network in Turkey. Excluding this perimeter effect, retail network and land-based lubricant sales increased by 3.5%. In the first half of 2016, refined product sales decreased by 2% compared to the first half of 2015.

Marketing & Services adjusted net operating income was:

• US$378 million in the second quarter of 2016, a 50% increase compared to the first quarter 2016, reaching a level similar to the second quarter of 2015 despite the asset sales over the past year.
• US$630 million in the first half of 2016, a decrease of 16% compared to the first half of 2015.

Summary and outlook

The financial performance of the Group over the first half 2016 demonstrates the strength of its integrated model across a range of volatile prices. The Group was resilient in a weak environment at the start of the year and fully captured the benefit of the rebound in prices during the second quarter.

In the Upstream, the start up of Incahuasi in Bolivia and Kashagan in Kazakhstan are expected in the second half of the year, following the first-half start-ups of Laggan-Tormore in the United Kingdom, Vega Pleyade in Argentina and Angola LNG. Production growth is projected to be 4% for the year as a whole, after reaching 4.5% in the first half.

In the Downstream, refining margins were lower at the beginning of the third quarter, due to high inventorylevels. Reducing capacity at the Lindsey refinery and ending crude refining at La Mède refinery to convert it to a bio-refinery will be finalised in the second half of the year. The Group’s major integrated platforms are performing well and capturing the benefit of strong petrochemical margins, which are supported by polymer demand.

Total maintains strict discipline on costs and investments as part of its strategy to reduce the breakeven. In obtaining an interest in Al-Shaheen, it continues to add high quality, low cost assets to the portfolio. In addition, the Group continues to actively manage its portfolio by launching the sale process for Atotech, and confirms its objective to generate US$2 billion from net asset sales over the year.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.hydrocarbonengineering.com/refining/28072016/total-second-quarter-and-first-half-2016-results-3795/