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Total Announces First Quarter 2020 Results

Source: www.gulfoilandgas.com 5/5/2020, Location: Europe

Total's Board of Directors met on May 4, 2020, to approve the Group’s first quarter 2020 financial statements. On this occasion, Chairman and CEO Patrick Pouyanné said:

'Total’s Board of Directors would like to begin by thanking all those mobilized to face Covid-19, particularly the Group’s employees, who, while complying with health regulations, are maintaining the production, processing and distribution of products that consumers need.

The Group is facing exceptional circumstances: the Covid-19 health crisis, which is affecting the world economy and creating major uncertainties, and the oil market crisis, with the sharp drop in oil prices since March.

In an environment where prices fell by more than 30% on average during the first quarter, the Group’s cash flow decreased by 31% year-on-year to $4.5 billion, and adjusted net income was down 35% this quarter to $1.8 billion. Return on equity stood at 9.8% and Total maintained its financial strength with gearing at 21%.

In response to these crises, the Group announced an immediate action plan on March 23. The Group now anticipates 2020 production between 2.95 and 3 Mboe/d, a reduction of at least 5% from 2020 forecasts, reflecting the voluntary curtailmentmeasures in Canada, the exceptional quotas announced by OPEC+, lower local demand for gas and the situation in Libya. In the Downstream, plant utilization rates and sales have been on average 50% below normal since mid-March, with uncertainty about the timing of a return to normal.

In this context, the action plan should be strengthened:

- Net investments further reduced to less than $14 billion for the year, a decrease of nearly 25% compared to the $18 billion announced in February 2020. Investments in low-carbon electricity will be maintained between $1.5 and $2 billion.

- Operating cost reduction increased to more than $1 billion, plus savings of more than $1 billion on energy costs.

- The Group strengthened its liquidity position in April by issuing $3 billion in bonds and drawing $6 billion in credit lines. In addition, in a 30 $/b environment, the Group anticipates an improvement in its working capital position of $1 billion by year-end 2020 compared to year-end 2019.

In this specific context, considering the solid fundamentals of Total – low breakeven and gearing – the Board of Directors decided to set the 2020 first interim dividend at €0.66 per share, stable compared to the 2019 first interim dividend, and to propose at the Annual Shareholders’ Meeting to put in place the option to receive the final 2019 dividend in shares, given that the Group bought back $0.55 billion of shares at the beginning of the year when prices were around $60/b.

While responsibly taking on the short-term challenges, the Group continues to implement its medium and long-term strategy. From this perspective, the announcement of a new climate ambition for the Group that aims at carbon neutrality by 2050 in Europe and in the world in step with society, is in line with Total’s reinforced strategy to become a broad-energy company. Concrete steps were taken in the first quarter to implement this strategy by accessing nearly 6 GW of renewable capacity, including solar (India, Qatar, Spain, France) and wind (France, UK). The countercyclical acquisition of Tullow’s interests in Uganda is also part of the strategy to access low-cost barrels of oil.'

Taking into account the difficult environment facing the Group and the savings that all Total’s teams have to make, Chairman and CEO Patrick Pouyanné proposed to reduce his fixed salary by 25% for the remainder of 2020,including the month of May. Considering the anticipated evolution of the economic criteria for the variable portion, Patrick Pouyanné’s total remuneration will decrease by more than 30% in 2020 compared to 2019. The members of the board also decided to give up 25% of their attendance fees starting fromthe Annual Shareholders’ Meeting. The members of the Executive Committee wished to join in these measures by reducing their fixed salaries by 10% for the remainder of the 2020 year.

First quarter 2020 results

Pressured by the collapse of demand linked to Covid-19, oil prices fell sharply during March to an average of 50 $/b in the first quarter, down 21% year-on-year. Gas prices in Europe also fell sharply, down more than 50% year-on-year. In an environment of prices falling by more than 30% on average compared to the first quarter 2019, the Group’s cash flow decreased by 31% to $4.5 billion. Adjusted net income decreased by 35 % to $1.8 billionthis quarter and return on equity stood at 9.8% with gearing at 21%.

Leading the Group’s low-carbon ambition, the iGRP segment generated $0.9 billion of cash flow, an increase of 40% year-on-year thanks to a growth in LNG sales of nearly 30% and to the resilience of the sales price of its LNG production. In low-carbon electricity, the Group is accelerating growth by entering into renewable projects with gross i nstalled capacity of more than 6 GW, particularly in India, Qatar and Spain.

In the first quarter, Upstream production grew by 5% year-on-year, driven by ramp-ups on projects, such as Culzean in the UK, Johan Sverdrup in Norway and Yamal in Russia. Impacted by lower prices, Exploration & Production cash flow was $2.6 billion, down 39% year-on-year. Notably Exploration & Production made two discoveries in Surinam.

Downstream cash flow was $1.1 billion, down 37% year-on-year. In Europe, refining margins decreased by 20% and throughput volumes were down about 30% due to lower demand. Petrochemicals were resilient, benefiting from the fall in raw material prices. Retail network sales were down 10% year-on-year due to the impact of the Covid-19 crisis.

Highlights

- Asset sale program ongoing with disposal of downstream gas in France, Exploration & Production in Brunei,and Marketing in Sierra Leone and Liberia

Counter-cyclical acquisition of Tullow’s interest in the Lake Albert project in Uganda

Acquisition of 50% of 2 GW gross capacity portfolio of solar power plants in India as part of a 50/50 JV with the Adani Group

Agreement to build a large-scale solar power plant (800 MWp) in Qatar

Entry into solar market in Spain with the acquisition of 2 GW portfolio of projects

Acquisition in France of Global Wind Power France, which holds a 1 GW gross capacity portfolio of projects

Entry into first floating offshore wind project in the UK

Launched in Dunkirk the largest battery power storage project (25 MW) for France’s power grid

Launched a pilot plant in Europe to start producing EV batteries from 2023 at the highest technological levelin terms of energy performance

In Exploration, made two significant oil discoveries on Block 58 in Surinam plus a new condensate gas discovery in the UK North Sea

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