UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
Form20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2016
OR
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________ |
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report |
Commission file number:1-10888
TOTAL S.A.SA.
(Exact Name of Registrant as Specified in Its Charter)
Republic of France
(Jurisdiction of Incorporation or Organization)
2, place Jean Millier
La Défense 6
92400 Courbevoie
France
(Address of Principal Executive Offices)
Patrick de La Chevardière
Chief Financial Officer
TOTAL S.A.
2, place Jean Millier
La Défense 6
92400 Courbevoie
France
Tel: +33 (0)1 47 44 45 46
Fax: +33 (0)1 47 44 49 44
(Name, Telephone, Email and/or Facsimile Number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Name of each exchange on which registered | |
Shares American Depositary Shares | New York Stock Exchange* | |
New York Stock Exchange |
* Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer’sissuer's classes of capital or common stock as of the close of the period covered by the annual report.
2,430,365,8622,640,602,007 Shares, par value€2.50 €2.50 each, as of December 31, 20162018
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).**
Yes ☐ No ☐
** This requirement is not currently applicable to the registrant.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule12b-2 of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer | Non-accelerated filer | ||
Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards*** provided pursuant to Section 13(a) of the Exchange Act.
*** The term "new or revised financial accounting standard"refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | International Financial Reporting Standards as issued by the International
| Other |
If “Other”"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☑
TABLE OF CONTENTS
References in this Annual Reportannual report on Form 20-F to pages and sections of the 20162018 Registration Document are references only to those pages and sections of TOTAL’s Registration Document for the year ended December 31, 20162018 attached in Exhibit 15.1 to this Form20-F. Other than as expressly provided herein, the 20162018 Registration Document is not incorporated herein by reference.
TOTAL’s Consolidated Financial Statements, which start onpage 205249 of the 20162018 Registration Document and are incorporated herein by reference, are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European Union (EU) as of December 31, 2016.2018.
In addition, this Annual Reportannual report on Form20-F and the 20162018 Registration Document contain certain measures that are not defined by generally accepted accounting principles (GAAP) such as IFRS. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance. We believe that presentation of this information, along with comparable GAAP measures, is useful to investors because it allows investors to understand the primary method used by management to evaluate performance on a meaningful basis. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Non-GAAP financial measures as reported by us may not be comparable with similarly titled amounts reported by other companies.
StatementsregardingStatements regarding competitive position
Unless otherwise indicated, statements made in “"Item 4. Information on the Companycompany”" referring to TOTAL’s competitive position are based on the Company’s estimates, and in some cases rely on a range of sources, including investment analysts’ reports, independent market studies and TOTAL’s internal assessments of market share based on publicly available information about the financial results and performance of market participants.
This Annual Reportannual report onForm 20-F reports information primarily regarding TOTAL’s business, operations and financial information relating to the fiscal year ended December 31, 2016.2018. For more recent updates regarding TOTAL, you may inspect any reports, statements or other information TOTAL files with the United States Securities and Exchange Commission (“SEC”("SEC"). All of TOTAL’s SEC filings made after December 31, 2001 are available to the public at the SEC website at http://www.sec.gov and from certain commercial document retrieval services. See also “"Item 10. — 8.- 10.8 Documents on display”".
No material on the TOTAL website forms any part of this Annual Reportannual report on Form20-F. References in this documentannual report on Form 20-F to documents on the TOTAL website are included as an aid to theirthe location of such documents and such documents are not incorporated by reference into this document.reference.
CertainCertain terms, abbreviations and conversion table
For the meanings of certain terms used in this document, as well as certain abbreviations and a conversion table, refer to the “Glossary”"Glossary" starting onpage 369423 of the 20162018 Registration Document, which is incorporated herein by reference.
Cautionary statement concerning forward-looking statements
TOTAL has made certain forward-looking statements in this document and in the documents referred to in, or incorporated by reference into, this Annual Report.annual report. Such statements are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the management of TOTAL and on the information currently available to such management. Forward-looking statements include information concerning forecasts, projections, anticipated synergies, and other information concerning possible or assumed future results of TOTAL, and may be preceded by, followed by, or otherwise include the words “believes”"believes", “expects”"expects", “anticipates”"anticipates", “intends”"intends", “plans”"plans", “targets”"targets", “estimates”"estimates" or similar expressions.
Forward-looking statements are not assurances of results or values. They involve risks, uncertainties and assumptions. TOTAL’s future results and share value may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond TOTAL’s ability to control or predict. Except for its ongoing obligations to disclose material information as required by applicable securities laws, TOTAL does not have any intention or obligation to update forward-looking statements after the distribution of this document, even if new information, future events or other circumstances have made them incorrect or misleading.
Various factors, certain of which are discussed elsewhere in this document and in the documents referred to in, or incorporated by reference into, this document, could affect the future results of TOTAL and could cause actual results to differ materially from those expressed in such forward-looking statements, including:
-changes in currency exchange rates and currency devaluations;
-the success and the economic efficiency of oil and natural gas exploration, development and production programs, including, without limitation, those that are not controlled and/or operated by TOTAL;
-uncertainties about estimates of changes in proven and potential reserves and the capabilities of production facilities;
-uncertainties about the ability to control unit costs in exploration, production, refining and marketing (including refining margins) and chemicals;
-changes in the current capital expenditure plans of TOTAL;
-the ability of TOTAL to realize anticipated cost savings, synergies and operating efficiencies;
-the financial resources of competitors;
-changes in laws and regulations, including tax and environmental laws and industrial safety regulations;
-the quality of future opportunities that may be presented to or pursued by TOTAL;
-the ability to generate cash flow or obtain financing to fund growth and the cost of such financing and liquidity conditions in the capital markets generally;
-the ability to obtain governmental or regulatory approvals;
-the ability to respond to challenges in international markets, including political or economic conditions (including national and international armed conflict) and trade and regulatory matters (including actual or proposed sanctions on companies that conduct business in certain countries);
-the ability to complete and integrate appropriate acquisitions, strategic alliances and joint ventures;
-changes in the political environment that adversely affect exploration, production licenses and contractual rights or impose minimum drilling obligations, price controls, nationalization or expropriation, and regulation of refining and marketing, chemicals and power generating activities;
-the risk that TOTAL will inadequately hedge the price of crude oil or finished products.
For additional factors, please read the information set forth under “refer to "Item 3. — 3.- 3.2 Risk Factorsfactors”", “"Item 5. Operating and Financial Reviewfinancial review and Prospectsprospects”" and “"Item 11. Quantitative and Qualitative Disclosures About Market Riskqualitative disclosures about market risk”".
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Identity of directors, senior management and advisers
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Offer statistics and expected timetable
Not applicable.
ITEM 3. KEY INFORMATION Key information
3.1Selected financial data |
The following table presents selected consolidated financial data for TOTAL on the basis of IFRS as issued by the IASB and IFRS as adopted by the EU for the years ended December 31, 2018, 2017, 2016, 2015 2014, 2013 and 2012.2014. Effective January 1, 2014, TOTAL changed the presentation currency of the Group’s Consolidated Financial Statements from the Euro to the US Dollar. Comparative 2013 and 2012 information in the table below has been restated. Following the retrospective application of the accounting interpretation IFRIC 21 effective January 1, 2014, the information for 2013 and 2012 has been restated; however, the impact on such restated results is not significant. ERNST & YOUNG Audit and KPMG Audit, a division of KPMG S.A., independent registered public accounting firms and the Company’s auditors, audited the historical consolidated financial statementsConsolidated Financial Statements of TOTAL for these periods from which the financial data presented below for such periods are derived, except for the application of IFRIC 21.derived. All such data should be read in conjunction with the Consolidated Financial Statements and the Notes thereto starting onpage 205249of the 20162018 Registration Document, which are incorporated herein by reference.
(M$, except share and per share data) | 2018 | 2017 | 2016 | 2015 | 2014 |
INCOME STATEMENT DATA | |||||
Revenues from sales | 184,106 | 149,099 | 127,925 | 143,421 | 212,018 |
Net income, Group share | 11,446 | 8,631 | 6,196 | 5,087 | 4,244 |
Earnings per share ($) | $4.27 | $3.36 | $2.52 | $2.17 | $1.87 |
Fully diluted earnings per share ($) | $4.24 | $3.34 | $2.51 | $2.16 | $1.86 |
CASH FLOW STATEMENT DATA | |||||
Cash flow from operating activities | 24,703 | 22,319 | 16,521 | 19,946 | 25,608 |
Total expenditures | 22,185 | 16,896 | 20,530 | 28,033 | 30,509 |
BALANCE SHEET DATA | |||||
Total assets | 256,762 | 242,631 | 230,978 | 224,484 | 229,798 |
Non-current financial debt | 40,129 | 41,340 | 43,067 | 44,464 | 45,481 |
Non-controlling interests | 2,474 | 2,481 | 2,894 | 2,915 | 3,201 |
Shareholders’ equity - Group share | 115,640 | 111,556 | 98,680 | 92,494 | 90,330 |
- Common shares | 8,227 | 7,882 | 7,604 | 7,670 | 7,518 |
DIVIDENDS | |||||
Dividend per share (€) | €2.56 (a) | €2.48 | €2.45 | €2.44 | €2.44 |
Dividend per share ($) | $2.94 (a) (b) | $2.96 | $2.61 | $2.67 | $2.93 |
COMMON SHARES (c) | |||||
Average number outstanding of common shares €2.50 par value (shares undiluted) | 2,607,456,934 | 2,481,802,636 | 2,379,182,155 | 2,295,037,940 | 2,272,859,512 |
Average number outstanding of common shares €2.50 par value (shares diluted) | 2,623,716,444 | 2,494,756,413 | 2,389,713,936 | 2,304,435,542 | 2,281,004,151 |
(a) Subject to approval by the shareholders’ meeting on May 29, 2019.
(M$, except share and per share data)(a) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
INCOME STATEMENT DATA | ||||||||||||||||||||
Revenues from sales | 127,925 | 143,421 | 212,018 | 227,969 | 234,216 | |||||||||||||||
Net income, Group share | 6,196 | 5,087 | 4,244 | 11,228 | 13,648 | |||||||||||||||
Earnings per share | 2.52 | 2.17 | 1.87 | 4.96 | 6.05 | |||||||||||||||
Fully diluted earnings per share | 2.51 | 2.16 | 1.86 | 4.94 | 6.02 | |||||||||||||||
CASH FLOW STATEMENT DATA | ||||||||||||||||||||
Cash flow from operating activities | 16,521 | 19,946 | 25,608 | 28,513 | 28,858 | |||||||||||||||
Total expenditures | 20,530 | 28,033 | 30,509 | 34,431 | 29,475 | |||||||||||||||
BALANCE SHEET DATA | ||||||||||||||||||||
Total assets | 230,978 | 224,484 | 229,798 | 239,223 | 225,886 | |||||||||||||||
Non-current financial debt | 43,067 | 44,464 | 45,481 | 34,574 | 29,392 | |||||||||||||||
Non-controlling interests | 2,894 | 2,915 | 3,201 | 3,138 | 1,689 | |||||||||||||||
Shareholders’ equity — Group share | 98,680 | 92,494 | 90,330 | 100,241 | 93,969 | |||||||||||||||
Common shares | 7,604 | 7,670 | 7,518 | 7,493 | 7,454 | |||||||||||||||
DIVIDENDS | ||||||||||||||||||||
Dividend per share (euros) | €2.45 | (b) | €2.44 | €2.44 | €2.38 | €2.34 | ||||||||||||||
Dividend per share (dollars) | $2.61 | (b)(c) | $2.67 | $2.93 | $3.24 | $3.05 | ||||||||||||||
COMMON SHARES(d) | ||||||||||||||||||||
Average number outstanding of common shares€2.50 par value (shares undiluted) | 2,379,182,155 | 2,295,037,940 | 2,272,859,512 | 2,264,349,795 | 2,255,801,563 | |||||||||||||||
Average number outstanding of common shares€2.50 par value (shares diluted) | 2,389,713,936 | 2,304,435,542 | 2,281,004,151 | 2,271,543,658 | 2,266,635,745 |
(b) Estimated dividend |
For information regarding the effects of currency fluctuations on TOTAL’s results, see “Item 5. Operating and Financial Review and Prospects”.
Most currency amounts in this Annual Report on Form20-F are expressed in U.S. dollars (“dollars” or “$”) or in euros (“euros” or “€ ”). For the convenience of the reader, this Annual Report on Form20-F presents certain translations into dollars of certain euro amounts ($1.10/€ 1.00).
The following table sets out the average dollar/euro exchange rates expressed in dollars per€1.00 for the years indicated, based on an average of the daily European Central Bank (“ECB”) reference exchange rate.(1) Such rates are used by TOTAL in preparation of its Consolidated Statement of Income and Consolidated Statement of Cash Flow in its Consolidated Financial Statements. No representation is made that the euro could have been converted into dollars at the rates shown or at any other rates for such periods or at such dates.
Dollar/euro exchange rates for the years provided | Average rate | ||||
2012 | 1.2848 | ||||
2013 | 1.3281 | ||||
2014 | 1.3285 | ||||
2015 | 1.1095 | ||||
2016 | 1.1069 |
The table below shows the high and low dollar/euro exchange rates for the four months ended December 31, 2016, and forincludes the first monthsquarterly interim ADR dividend of 2017, based on$0.74 paid in October 2018 and the daily ECB reference exchange rates published duringsecond quarterly interim ADR dividend of $0.74 paid in January 2019, as well as the relevant month expressedthird quarterly interim ADR dividend of $0.73 payable in dollars per€1.00.
Dollar/euro exchange rates for the periods provided | High | Low | ||||||
September 2016 | 1.1296 | 1.1146 | ||||||
October 2016 | 1.1236 | 1.0872 | ||||||
November 2016 | 1.1095 | 1.0548 | ||||||
December 2016 | 1.0762 | 1.0364 | ||||||
January 2017 | 1.0755 | 1.0385 | ||||||
February 2017 | 1.0808 | 1.0513 | ||||||
March 2017(a) | 1.0663 | 1.0514 |
The ECB reference exchangeApril 2019 and the proposed final interim ADR dividend of $0.73 payable in June 2019, both converted at a rate on March 14, 2017 for the dollar against the euro was $1.0631/of $1.15/€.
(c) The number of common shares shown has been used to calculate per share amounts.
Back to ContentsForm 20-F 2018 TOTAL 1 3.2Risk factors |
The Group and its businesses are subject to various risks relating to changing competitive, economic, political, legal, social, industry, business and financial conditions, including changes in such conditions. Point 1 (“3.1 ("Risk factors”factors") of chapter 43 of the 20162018 Registration Document (starting onpage 6274) is incorporated herein by reference.
For additional information on these conditions, along with TOTAL’s approaches to managing certain of these risks, please refer to “"Item 5. Operating and Financial Reviewfinancial review and Prospectsprospects”" and “"Item 11. Quantitative and Qualitative Disclosures About Market Riskqualitative disclosures about market risk”", as well as point 4 (“points 3.3 ("Internal control and risk management procedures”procedures") and 3.5 ("Vigilance Plan") of chapter 43 (starting on pages 86 and 93, respectively) of the 20162018 Registration Document, (starting onpage 76), which isare incorporated herein by reference.
ITEM 4. INFORMATION ON THE COMPANY Information on the company
The following information concerningproviding an integrated overview of the Group’s history and developmentGroup from the 20162018 Registration Document is incorporated herein by reference:
-presentation of the Group and its governance (point 1.1 of chapter 1, starting on page 4);
-the Group’s collective ambition and strategy (point 1.2 of chapter 1, on page 9);
-history, employees, integrated business model and geographic presence (point 1.3 of chapter 1, starting on page 10);
-an overview of the Group’s R&D, investment policy and sustainable development initiatives (point 1.5 of chapter 1, on page 23); and
-organizational structure (point 1.6 of chapter 1, starting on page 26).
The following information providing an overview of the Group’s businesses and activities from the 20162018 Registration Document is incorporated herein by reference:
-business overview for fiscal year 2018 (points 2.1 to 2.4 of chapter 2, starting on page 32);
-information concerning the Group’s principal capital expenditures and divestitures (point 2.5 of chapter 2, starting on page 68). See also "Item 5. Operating and financial review and prospects"; and
-geographical breakdown of the Group’s sales, property, plants and equipment, intangible assets and capital expenditures over the past three years (Note 4 to the Consolidated Financial Statements, on page 276).
The followingother mattersfollowing other information from the 20162018 Registration Document areis incorporated herein by reference:
-insurance policy (point 3.4 of chapter 3, starting on page 92);
-non-financial performance (points 5.1 to 5.11 of chapter 5, starting on page 179); and -investor relations (point 6.6 of chapter 6, starting on page 239). |
ITEM 4A. UNRESOLVED STAFF COMMENTS Unresolved staff comments
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS Operating and financial review and prospects
This section is the Company’s analysis of its financial performance and of significant trends that may affect its future performance. It should be read in conjunction with the Consolidated Financial Statements and the Notes thereto in the 20162018 Registration Document (starting onpage 205249), which are incorporated herein by reference. The Consolidated Financial Statements and the Notes thereto are prepared in accordance with IFRS as issued by the IASB and IFRS as adopted by the EU.
This section contains forward-looking statements that are subject to risks and uncertainties. For a list of important factors that could cause actual results to differ materially from those expressed in the forward-looking statements, see “Cautionary"Cautionary Statement Concerning Forward-Looking Statements”Statements" starting onpage i.
Critical accounting policies and standards applicable in the future
For an overview of TOTAL’s critical accounting policies, including policies involving management’s judgment and estimates and significant accounting policies applicable in the future, refer to the Introduction toand Note 1.2 ("Significant accounting policies applicable in the future") of the Notes to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 212pages 260) and 262, respectively), which is incorporated herein by reference.
5.1Overview |
TOTAL’s results are affected by a variety of factors, including changes in crude oil and natural gas prices as well as refining and marketing margins, which are all generally expressed in dollars, and changes in exchange rates, particularly the value of the euro compared to the dollar. Higher crude oil and natural gas prices generally have a positive effect on the income of TOTAL, since the Exploration & Production segment’s oil and gas business and Gas, Renewables & Power segment’s downstream gas business are positively impacted by the resulting increase in revenues. Lower crude oil and natural gas prices generally have a negative effect on the income of TOTAL, since its Upstream oil and gas business is negatively impacted by the resulting decrease in revenues realized from production. Higher crude oil and natural gas prices generally have a corresponding positivenegative effect. The effect of changes in crude oil prices on the activities of TOTAL’s Refining & Chemicals and Marketing & Services activitiessegments depends upon the speed at which the prices of refined petroleum products adjust to reflect such changes. TOTAL’s results are also significantly affected by the costs of its activities, in particular those related to exploration and production, and by the outcome of its strategic decisions with respect to cost reduction efforts. In addition,
TOTAL’s results are affected by general economic and political conditions and changes in governmental laws and regulations, as well as by the impact of decisions by OPEC on production levels. For more information, see “refer to "Item 3. — 3.- 3.2 Risk Factorsfactors” and “Item 4. — Other Matters”".
After fallingBenefiting from $100/b in 2014the rise of oil prices to $52/$71/b on average in 2015, Brent prices were highly2018 compared to $54/b in 2017, while remaining volatile, in 2016, fluctuating between $27/b and $58/b, with an average of $44/b for the year. In this difficult environment, the Group demonstrated its resilience by generatingreported adjusted net income of $13.6 billion in 2018, an increase of 28%, a return on average capital employed close to 12%, the highest profitability among the majors, dueand a pre-dividend breakeven below $30/b.
These excellent results reflect the strong growth of more than 8% for the Group’s hydrocarbon production, which reached a record level of 2.8 Mboe/d in 2018 and led to a 71% increase in Exploration & Production’s adjusted net operating income. The year was highlighted by the strengthstart-up of its integrated modelIchthys in Australia, Yamal LNG in Russia, deep-water projects Kaombo Norte in Angola and commitmentEgina in Nigeria, as well as the counter-cyclical acquisitions of its teams to reduceMaersk Oil and new offshore licenses in the breakeven.United Arab Emirates.
In this context, TOTAL’s net income (Group share) in 20162018 increased by 22%33% to $6,196 million from $5,087$11,446 million in 2015,2018 compared to $8,631 million in 2017, mainly due to higher hydrocarbon prices and growth of the Group’s production. Adjustments to net income (Group share), which include the after-tax inventory effect, special items and the impact of changes in fair value, had a lessnegative impact of $2,113 million in 2018. Excluding these items, as mentioned above, adjusted net income (Group share) increased by 28% to $13,559 million in 2018, compared to $10,578 million in 2017, in line with the contribution from the segments. For additional information, refer to "- 5.2 Group results 2016-2018" and "- 5.3 Business segment reporting", below.
In addition, the Group maintained its financial discipline. Net investments (1) were $15.6 billion in 2018, in line with its objective, and $4.2 billion in cost reduction was achieved. Debt adjusted cash flow (DACF) (2) was $26 billion in 2018, driven largely by the 31% increase in cash flow from Exploration & Production. The Group’s balance sheet was solid with a gearing (3) ratio of 15.5%, below the target limit of 20%.
The Group is continuing to expand along the value chain of integrated gas and low-carbon electricity. With its acquisition of Engie’s LNG assets TOTAL is the second largest publicly-traded player in the LNG business, and its position will be strengthened with the 2019 start-up of the Cameron LNG project. In addition, the Group accelerated its growth in low-carbon electricity, notably with the acquisition of Direct Énergie.
In an environment of lower European refining margins, the Downstream relied on the availability of its units and the diversity of its portfolio to generate $6.5 billion of cash flow and profitability of more than 25%. The Group is continuing to implement its strategy for growth in petrochemicals by launching projects in the United States, Saudi Arabia, South Korea and Algeria. TOTAL has also continued to expand Marketing & Services in fast-growing areas, notably in Mexico, Brazil and Angola.
Conforming to the shareholder return policy announced in February 2018, the Group increased the 2018 dividend by 3.2% and bought back $1.5 billion of its shares in 2018. Given the solid financial position, which is benefiting from growing cash flow, the Board of Directors confirmed the shareholder return policy for 2019. It plans to increase the interim dividend by 3.1% to 0.66 euros per share, end the scrip dividend option following the general assembly meeting, and continue the share buyback policy in the amount of $1.5 billion in a $60/b environment.
Outlook
Since the start of 2019, Brent has traded around $60/b in a context of oil supply and demand near the record-high level of 100 Mb/d. In a volatile environment, the Group is pursuing its strategy for integrated growth along the oil, gas and low-carbon electricity chains.
The Group has clear visibility on its 2019 cash flow, supported by the strong contribution of project start-ups in 2018 and recent acquisitions.
The Group maintains financial discipline to reduce its breakeven to remain profitable across a broader range of environments. In particular, it is targeting cost reductions of $4.7 billion, projected net investments of $15-16 billion in 2019 and an Opex target of $5.5/boe.
In Exploration & Production, production is expected to grow by more than 9% in 2019, thanks to the ramp-ups of Kaombo Norte, Egina and Ichthys plus the start-ups of Iara 1 in Brazil, Kaombo South in Angola, Culzean in the UK and Johan Sverdrup in Norway. Determined to take advantage of the favorable cost environment, the Group plans to launch projects in 2019, notably including Mero 2 in Brazil, Tilenga and Kingfisher in Uganda and Arctic LNG 2 in Russia.
The Group is pursuing its strategy for profitable growth along the integrated gas and low-carbon electricity chains. Effective 2019, the Group will report the new iGRP segment (integrated Gas, Renewables & Power) which combines the Gas, Renewables & Power segment with the upstream gas and LNG activities currently reported within the Exploration & Production segment.
Affected by an abundance of available products, European refining margins have been very volatile since the start of the year. In 2019, the Downstream will continue to rely on its diversified portfolio, notably its integrated Refining & Chemical platforms in the U.S. and Asia-Middle East as well as its non-cyclical Marketing & Services segment.
In this context, the Group is continuing to implement its shareholder return policy announced in February 2018, by increasing the dividend in 2019 by 3.1%, in line with the objective to increase the dividend by 10% over the 2018-20 period. Taking into account its strong financial position, the Group will eliminate the scrip dividend option from June 2019. Within the framework of its program to buy back $5 billion of shares over the 2018-20 period, the Group expects to buy back $1.5 billion of its shares in 2019 in a $60/b Brent environment (for additional information concerning the Group’s dividends and dividend policy, refer to point 6.2 of chapter 6 (starting on page 229) of the 2018 Registration Document, which is incorporated herein by reference).
(1) Net investments = gross investments - divestments - repayment of non-current loans - other operations with non-controlling interests.
(2) DACF= debt adjusted cash flow, is defined as cash flow from operating activities before changes in working capital at replacement cost, without financial charges.
(3) "Gearing" refers to the net-debt-to-capital-ratio. "Net-debt-to-capital-ratio"= net debt/ (net debt + shareholders’ equity). For additional information, refer to Note 15.1(E) ("Net-debt-to-capital ratio") to the Consolidated Financial Statements in the 2018 Registration Document (on page 325), which is incorporated herein by reference.
5.2 Group results 2016-2018
As of and for the year ended December 31, (M$, except per share data) | 2018 | 2017 | 2016 |
Non-Group sales | 209,363 | 171,493 | 149,743 |
Adjusted net operating income from business segments (a) | |||
- Exploration & Production | 10,210 | 5,985 | 3,217 |
- Gas, Renewables & Power | 756 | 485 | 439 |
- Refining & Chemicals | 3,379 | 3,790 | 4,195 |
- Marketing & Services | 1,652 | 1,676 | 1,559 |
Net income (loss) from equity affiliates | 3,170 | 2,015 | 2,214 |
Fully-diluted earnings per share ($) | 4.24 | 3.34 | 2.51 |
Fully-diluted weighted-average shares (millions) | 2,624 | 2,495 | 2,390 |
Net income (Group share) | 11,446 | 8,631 | 6,196 |
Gross investments (b) | 22,185 | 16,896 | 20,530 |
Divestments (c) | 7,239 | 5,264 | 2,877 |
Net investments (d) | 15,568 | 11,636 | 17,757 |
Organic investments (e) | 12,426 | 14,395 | 17,484 |
Resource acquisitions (f) | 4,493 | 714 | 780 |
Cash flow from operating activities | 24,703 | 22,319 | 16,521 |
Of which: | . | ||
- (increase)/decrease in working capital (g) | 769 | 827 | (1,119) |
- financial charges | (1,538) | (1,048) | (593) |
(a) Adjusted results are defined as income using replacement cost, adjusted for special items, excluding the impact of changes in fair value. See "- 5.3 Business segment reporting" below for further details.
(b) Including acquisitions and increases in non-current loans. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
(c) Including divestments and reimbursements of non-current loans.
(d) "Net investments" = gross investments - divestments - repayment of non-current loans - other operations with non-controlling interests. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
(e) "Organic investments" = net investments, excluding acquisitions, divestments and other operations with non-controlling interests. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
(f) "Resource acquisitions"= acquisition of a participating interest in an oil and gas mining property by way of an assignment of rights and obligations in the corresponding permit or license and related contracts, with a view to producing the recoverable oil and gas.
(g) The change in working capital as determined using the replacement cost method was $174 million in 2018, $1,184 million in 2017 and $(467) million in 2016. For information on the replacement cost method, refer to Note 3 ("Business segment information") to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference.
2018 vs. 2017
The Brent price rose to $71/b on average in 2018 from $54/b in 2017, while remaining volatile. In 2018, TOTAL’s average liquids price realization (1) increased by 28% to $64.2/b in 2018 from $50.2/b in 2017. TOTAL’s average gas price realization (2) increased by 17% to $4.78/Mbtu in 2018 from $4.08/Mbtu in 2017. The Group’s European Refining Margin Indicator ("ERMI") (3) decreased by 21% to $32.3/t on average in 2018 compared to $40.9/t in 2017, mainly due to rising crude oil prices.
The euro-dollar exchange rate averaged $1.1810/€ in 2018, compared to $1.1297/€ in 2017.
Non-Group sales were $209,363 million in 2018 compared to $171,493 million in 2017, an increase of 22% reflecting the increased hydrocarbon prices and Group production. Non-Group sales increased 30% for the Exploration & Production segment, 26% for the Gas, Renewables & Power segment, 22% for the Refining & Chemicals segment and 21% for the Marketing & Services segment.
Net income (Group share) in 2018 increased by 33% to $11,446 million in 2018 compared to $8,631 million in 2017, mainly due to higher hydrocarbon prices and growth of the Group’s production. Adjustments to net income (Group share), which include the after-tax inventory effect, special items and the impact of changes in fair value, had a negative impact of $2,113 million in 2018, mainly due to an inventory effect and an impairment on Ichthys related to the sale of a partial interest by the Group, as well as the impairment of production facilities by SunPower (4). For a detailed overview of adjustment items for 2018, refer to Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference. In 2017, adjustments to net income (Group share), which included special items of $(2,213) million and after-tax inventory valuation effect of $282 million, had a negative impact on net income (Group share) of special$1,947 million. Special items in 2016, with2017 included mainly an impairment of Fort Hills in Canada (following the Group demonstrating its resilience despiteoperator announcement of the 19% dropincrease of the project’s costs), Gladstone LNG in hydrocarbon prices. Adjustments to net income (Group share), which include special itemsAustralia and theafter-tax inventory valuation effect, hadassets in Congo, partially offset by a negative impactgain on the sale of $2,091 million in 2016.Atotech. Excluding these items, adjusted net income declinedincreased by 21%28% to $8,287$13,559 million in 20162018, compared to $10,518$10,578 million in 2015, primarily2017, in line with the contribution from the segments.
Income taxes in 2018 amounted to $6,516 million, 2.2 times higher than $3,029 million in 2017, due to the impactrelative weight and higher tax rates in the Exploration & Production segment in a higher hydrocarbon price environment.
(1) Consolidated subsidiaries, excluding fixed margins.
(2) Consolidated subsidiaries, excluding fixed margins.
(3) The ERMI is a Group indicator intended to represent the margin after variable costs for a hypothetical complex refinery located around Rotterdam in Northern Europe that processes a mix of lower Brentcrude oil and other inputs commonly supplied to this region to produce and market the main refined products at prevailing prices on Upstream results, partially offsetin this region. The indicator margin may not be representative of the actual margins achieved by the contribution from downstream activities. For additional information, referGroup in any period because of the Group’s particular refinery configurations, product mix effects or other company-specific operating conditions.
(4) As of December 31, 2018, TOTAL held an interest of 55.66% in SunPower, an American company listed on NASDAQ and based in California.
In 2018, the Company bought back 72,766,481 TOTAL shares on the market, i.e., 2.76% of the Company’s outstanding share capital as of December 31, 2018. See also "- — 2. Results 2014-20165.4.4 Shareholders’ equity”", below. In 2017, the Company did not buy back any shares.
Fully-diluted earnings per share was $4.24 in 2018 compared to $3.34 in 2017, an increase of 27%.
The Group’s resilience was supported by outstanding production growth overAsset sales completed were $5,172 million for the past two years (14.3%, including 4.5% in 2016). Infull-year 2018, comprised mainly of the Upstream, the Group strengthened its positionsale of a 4% interest in the Middle East by enteringIchthys project in Australia and the Al Shaheen fieldsale of the Group’s share of the LNG re-gas terminal at Dunkirk, as well as the sale of Joslyn in Qatar,Canada, Rabi in Gabon, the Martin Linge and Visund fields in Norway, an interest in Fort Hills in Canada, SunPower’s sale of its interest in 8point3, the marketing activities of TotalErg in Italy, the Marketing & Services network in Haiti, and the contribution of the Bayport polyethylene unit in the United States to the joint venture formed with Borealis and Nova in which TOTAL holds 50%. Asset sales were $4,239 million in 2017.
Acquisitions completed were $8,314 million for the full-year in 2018, including $4,493 million in resource acquisitions, comprised of the extension of licenses in Nigeria and the acquisition of shale gas assets. The Group is preparing future growth with the signinga network of major dealsservice stations in Brazil, with Petrobras, in Uganda and in Iran onas well as notably the giant South Pars 11 project. The Group renewed its reserves with a replacement rateacquisitions of 136% at constant prices and delivered promising exploration results, with two major discoveriesDirect Énergie, Engie’s LNG business, the increase in the United States (North Platte)share of Novatek to 19.4%, interests in the Iara and Nigeria (Owowo).Lapa fields in Brazil, two new 40-year offshore concessions in Abu Dhabi, which follow the previous Abu Dhabi Marine Areas Ltd (ADMA) offshore concession, and the acquisition of offshore assets from Cobalt in the Gulf of Mexico. Acquisitions were $1,476 million in 2017, including $714 million in resource acquisitions.
Despite lower refining margins,The Group’s cash flow from operating activities for the Downstreamfull-year 2018 was $24,703 million, an increase of 11% compared to $22,319 million for the full-year 2017. The change in working capital at replacement cost for the full-year 2018, which is the decrease in working capital of $769 million as determined in accordance with IFRS adjusted for the pre-tax inventory valuation effect of $(595) million, was $174 million compared to $1,184 million for the full-year 2017. Operating cash flow excluding the change in working capital at replacement cost for the full year 2018 was $24,529 million, an increase of 16% compared to $21,135 million for the full-year 2017. Operating cash flow excluding the change in working capital at replacement cost and excluding financial charges (DACF) for the full-year 2018 was $26,067 million, an increase of 18% compared to $22,183 million for the full-year 2017. The Group’s net cash flow(1) once again achieved its objectives and thereby demonstrated that its results are sustainable, withwas $8,961 million for the full-year 2018 compared to $9,499 million for the full-year 2017, due to an increase of $3,932 million in net investments partially offset by a $3,394 million increase in operating cash flow before changes in working capital changes at replacement cost(2) of $7 billioncapital.
See also "- 5.4 Liquidity and ROACE(3) above 30%Capital Resources", the highest among the majors. Results from the Refining & Chemicals segment were underpinned by the strong performance of its Asia and Middle East integrated platforms, while Marketing & Services results were driven by growth in retail and lubricants.below.
Financial discipline was successfully maintained across all business segments both for investments ($18.3 billion including resource acquisitions) and operating costs, with savings of $2.8 billion in2017 vs. 2016 exceeding the objective of $2.4 billion. Production costs were reduced to $5.9/boe in 2016, compared to $9.9/boe in 2014.
The $10 billion asset sale program is around 80% complete following the closing of the Atotech sale, and this contributedBrent price rose to the Group’s financial strength with anet-debt-to-equity ratio at 27%, lower than it was in 2014.
In this context, the Board of Directors proposed to increase the dividend, despite the volatility of hydrocarbon prices, to€2.45/share, corresponding to a fourth quarter dividend of€0.62/share, a 1.6% increase compared to the previous three quarterly dividends. This demonstrates the Board’s confidence in the strength of the Group’s results and balance sheet as well as its prospects for cash flow growth.
Brent increased following the announced production cuts agreed by OPEC andnon-OPEC countries, including Russia. However, inventory levels are high and prices are likely to remain volatile. In this context, the Group is continuing to cut costs with the objective of achieving $3.5 billion of cost savings in 2017 and bringing production costs down to $5.5/boe for the year. Investments are moving into the sustainable range needed to deliver profitable future growth and are expected to be between $16 billion and $17 billion in 2017 including resource acquisitions.
In the Upstream, production is set to grow by more than 4% in 2017, supporting the objective of increasing production on average by 5% per year from 2014 to 2020. As a result of this growth, the sensitivity of the portfolio to Brent increases to $2.5 billion(4) for a $10/b change in Brent in 2017. The Group plans to take advantage of the favorable cost environment by launching around 10 projects over the next 18 months and adding attractive resources to the portfolio.
In 2017, the Downstream is expected to continue generating stable operating cash flow before working capital changes at replacement cost of around $7 billion thanks to its diverse portfolio of activities. Refining & Chemicals’ performance has been strengthened by the restructuring and the segment will continue to benefit from the quality of its integrated platforms, notably in Antwerp, in the United States, in Asia and in the Middle East. The final investment decision to launch the Port Arthur side-cracker is expected to be made in 2017. The Marketing & Services segment is pursuing its cash generation growth strategy by leveraging its strong position in high-potential retail and lubricant markets.
In 2017, the Group expects its breakeven will continue to fall, reaching less than $40/bpre-dividend. Cash flow from operations is expected to cover investments and the cash portion of the dividend at $50/b. TOTAL confirms its medium-term objective to achieve anet-debt-to-equity ratio of 20%.
The Group is committed to maintaining attractive returns for its shareholders and will eliminate the discount on the scrip dividend with Brent at $60/b.
As of and for the year ended December 31, (M$, except per share data) | 2016 | 2015 | 2014 | |||||||||
Non-Group sales | 149,743 | 165,357 | 236,122 | |||||||||
Adjusted net operating income from business segments(a) | ||||||||||||
• Upstream | 3,633 | 4,774 | 10,504 | |||||||||
• Refining & Chemicals | 4,201 | 4,889 | 2,489 | |||||||||
• Marketing & Services | 1,586 | 1,699 | 1,254 | |||||||||
Equity in net income (loss) of affiliates | 2,214 | 2,361 | 2,662 | |||||||||
Fully-diluted earnings per share ($) | 2.51 | 2.16 | 1.86 | |||||||||
Fully-diluted weighted-average shares (millions) | 2,390 | 2,304 | 2,281 | |||||||||
Net income (Group share) | 6,196 | 5,087 | 4,244 | |||||||||
Gross investments(b) | 20,530 | 28,033 | 30,509 | |||||||||
Divestments | 2,877 | 7,584 | 6,190 | |||||||||
Net investments(c) | 17,757 | 20,360 | 24,140 | |||||||||
Organic investments(d) | 17,484 | 22,976 | 26,430 | |||||||||
Cash flow from operating activities | 16,521 | 19,946 | 25,608 | |||||||||
• Includes (increase)/decrease in working capital(e) | (1,119 | ) | 1,683 | 4,480 |
After falling from $100/b in 2014 to $52/$54/b on average in 2015, Brent prices were highly volatile2017 from $44/b in 2016 fluctuating between $27/b and $58/b, with an average of $44/b for the year.while remaining volatile. In 2016,2017, TOTAL’s average liquids price realization(1) decreased increased by 15%25% to $40.3/$50.2/b from $47.4/$40.3/b in 2015.2016. TOTAL’s average natural gas price realization for the Group’s consolidated subsidiaries decreased in 2016increased by 25%15% to $3.56/Mbtu from $4.75/$4.08/Mbtu in 2015. In the downstream, the2017 from $3.56/Mbtu in 2016. The Group’s European refining margin indicator (“ERMI”) was $34/ERMI increased to $40.9/t on average in 2017 compared to $34.1/t in 2016, a 30% decrease comparedan increase of 20% due to the high levels in 2015 ($48.5/t), in the context of highelevated petroleum stocks.product demand. In the fourth quarter of 2016,2017, the ERMI was $41.0/$35.5/t. ThePetrochemicals continued to benefit from a favorable environment for petrochemicals remained favorable.
The Euro remained stable in 2016albeit down compared to the US Dollar, with thea year ago.
The euro-dollar exchange rate averagingaveraged $1.13/€ in 2017 compared to $1.11/€ in 2016 and 2015.2016.
In this lessoverall more favorable environment,non-Group sales in 20162017 were $171,493 million compared to $149,743 million a decreasein 2016, an increase of 9% compared to $165,357 million for 2015. The decrease in15% reflecting the increased hydrocarbon prices and refining margins were partially offset by production growth and strong results for petrochemicals.Group production. Non-Group sales decreased 13%increased 11% for the UpstreamExploration & Production segment, 7%27% for the Gas, Renewables & Power segment, 15% for the Refining & Chemicals segment and 11%12% for the Marketing & Services segment.
Net income (Group share) in 20162017 increased by 22%39% to $8,631 million from $6,196 million from $5,087 million in 2015,2016, mainly due to higher hydrocarbon prices and growth of the Group’s production. In 2017, adjustments to net income (Group share), which included special items of $(2,213) million and after-tax inventory valuation effect of $282 million, had a less negative impact on net income (Group share) of $1,947 million. Special items included mainly an impairment of Fort Hills in 2016Canada (following the operator announcement of special items (as further discussed below)the increase of the project’s costs), withGladstone LNG in Australia and assets in Congo, partially offset by a gain on the Group demonstrating its resilience despite the 19% drop in hydrocarbon prices due to the strengthsale of its integrated model and commitment of its teams to reducing the breakeven.Atotech. In 2016, adjustments to net income (Group share), which included special items of $(2,567) million andafter-tax inventory valuation effect of $479 million, had a negative impact on net income (Group share) of $2,091 millionmillion. Special items in 2016. Special items2016 included impairments on Gladstone LNG in Australia, Angola LNG, and Laggan-Tormore in the United Kingdom, reflecting the decrease in gas price assumptions for the coming years. For a detailed overview of adjustment items for 2016, refer to Note 3 to the Consolidated Financial Statements in the 2016 Registration Document (starting onpage 215), which is incorporated herein by reference. In 2015, adjustment items, which included special items of $(4,675) million andafter-tax inventory valuation effect of $(747) million, had a negative impact on net income (Group share) of $5,431 million. Special items included impairments on Fort Hills in Canada and Gladstone LNG in Australia as well as in Libya, an adjustment to depreciation on Usan in Nigeria following the cancellation of the sale process and the impairment of exploration projects that will not be developed. Excluding these items, adjusted net income declinedin 2017 increased by 21%28% to $10,578 million compared to $8,287 million in 2016 compared to $10,518 million in 2015, primarily due to2016. The increase was the impactresult of lower Brent prices on Upstream results, partially offset by thea much higher contribution from downstream activities.Exploration & Production and the continued decrease in the Group’s breakeven.
Income taxes in 20162017 amounted to $3,029 million, 3.1 times higher than $970 million a decrease of 41% compared to $1,653 million in 2015,2016, due to the relative weight and lowerhigher tax rates in the UpstreamExploration & Production segment in a lowerhigher hydrocarbon price environment.
In 2017, the Company did not buy back any of its shares. In 2016, the Company bought back 100,331,268 TOTAL treasury shares owned by Group affiliates under the authorization granted by the shareholders at the meeting of May 24, 2016, which were subsequently canceled by the Company’s Board of Directors (for additional information, refer to point 3 (“Share buybacks”) of chapter 8 of the 2016 Registration Document (starting onpage 183), which is incorporated herein by reference). TOTAL bought back approximately 4.7 million of its own shares in 2015 (i.e., approximately 0.19% of the share capital as of December 31, 2015) under the authorization granted by the shareholders at the meeting of May 29, 2015. The number of fully-diluted shares at December 31, 2016, was 2,436 million compared to 2,336 million at December 31, 2015.Directors.
Fully-diluted earnings per share based on 2,390 million weighted-average shares, was $3.34 in 2017 compared to $2.51 in 2016, compared to $2.16 in 2015, an increase of 16%33%.
Asset sales completed in 2017 were $1,864$4,239 million, in 2016, mainlyessentially comprised of the sale of a 15%Atotech, mature assets in Gabon, Gina Krog in Norway, part of the interest in the Gina Krog fieldFort Hills project in Norway,Canada, the FUKA gasSPMR pipeline network in the North SeaFrance and the retail networkLPG activities in Turkey.Germany. Asset sales completed in 2016 were $5,968 million in 2015.$1,864 million.
Acquisitions completed in 2017 were $2,033$1,476 million, in 2016, including $780$714 million of resource acquisitions, mainly comprised of the additional 75% interestbonus related to the license for Elk-Antelope in the Barnett shale gas fieldPapua New Guinea, a marketing and logistics network in the United States, and the acquisitions of Saft, LampirisEast Africa and a retail network23% equity share in the Dominican Republic.Tellurian, Inc. Acquisitions completed in 2016 were $3,441$2,033 million, in 2015, including $2,808$780 million of resource acquisitions.
In addition, in early 2018, the Group finalized the acquisition of assets in Brazil from Petrobras for $1.95 billion as well as the sale of TotalErg in Italy for $415 million (including the B2B and the LPG businesses). Finally, in March 2018, TOTAL S.A. finalized the acquisition of Mærsk Oil in a share and debt transaction.
Cash(1) "Net cash flow"= cash flow from operating activities before working capital changes at replacement costs - net investments (including other transactions with non-controlling interests).
The Group’s cash flow from operating activities for the full-year 2017 was $22,319 million, an increase of 35% compared to $16,521 million in 2016, a decrease of 17% compared to $19,946 million in 2015, essentially due to the decrease in cash flow from operations as a result of lower hydrocarbon prices and refining margins.2016. The change in working capital as determined in accordance with IFRS was $(1,119) million in 2016, compared to $1,683 million in 2015. In 2016, the change in working capital at replacement cost for the full-year 2017, which is the difference between the changedecrease in working capital of $(1,119)$827 million andas determined in accordance with IFRS adjusted for the pre-tax inventory valuation effect of $652$357 million, was $(467)$1,184 million compared to $570$(467) million in 2015.2016. Operating cash flow in 2016 excluding the change in working capital at replacement cost(1) was $16,988 million, a decrease of 12% compared to $19,376 million in 2015.
See also “— 3. Liquidity and Capital Resources”, below.
Market conditions were less favorable in 2015 compared to 2014, with the average Brent price having decreased by 47% to $52.4/b in 2015 compared to $99.0/b in 2014. In 2015, TOTAL’s average liquids price realization decreased by 47% to $47.4/b from $89.4/b in 2014. TOTAL’s average natural gas price realization for the Group’s consolidated subsidiaries decreased in 2015 by 28% to $4.75/Mbtu from $6.57/Mbtu in 2014. In the downstream, the ERMI more than doubled to $48.5/t in 2015 compared to $18.7/t in 2014. In the fourth quarter of 2015, the ERMI was $38.1/t. Petrochemical margins in Europe increased in 2015 due to a strong demand for polymers and the decrease in raw material costs.
The Euro depreciated in 2015 compared to the US Dollar, with the euro-dollar exchange rate averaging $1.11/€ in 2015 compared to $1.33/€ in 2014.
In this context,non-Group sales in 2015 were $165,357 million, a decrease of 30% compared to $236,122 million for 2014, due mainly to the decrease of oil and gas prices, withnon-Group sales decreasing 28% for the Upstream segment, 33% for the Refining & Chemicals segment and 27% for the Marketing & Services segment.
Net income (Group share) in 2015 increased by 20% to $5,087 million from $4,244 million in 2014, mainly due to a less negative impact on net income (Group share) in 2015 of special items, with the strong performance of the Group’s integrated model and its cost reduction program being demonstrated despite the 47% drop in the Brent price. Adjustments to net income (Group share), which included special items of $(4,675) million andafter-tax inventory valuation effect of $(747) million, had a negative impact on net income (Group share) of $5,431 million in 2015. Special items included impairments on Fort Hills in Canada and Gladstone LNG in Australia as well as in Libya, an adjustment to depreciation on Usan in Nigeria following the cancellation of the sale process and the impairment of exploration projects that will not be developed. In 2014, adjustment items, which included special items of $(6,165) million andafter-tax inventory valuation effect of $(2,453) million, had a negative impact on net income (Group share) of $8,593 million. Special items included impairments of oil sands in Canada, unconventional gas notably in the United States, refining in Europe and certain other assets in the Upstream, which was partially offset by a gain on asset sales, including for the Group’s interests in Shah Deniz in Azerbaijan and GTT. Excluding these items, adjusted net income (Group share) declined by 18% to $10,518 million in 2015 compared to $12,837 million in 2014, primarily due to the impact of lower Brent prices on Upstream results, partially offset by a higher contribution from downstream activities.
Income taxes in 2015 amounted to $1,653 million, a decrease of 81% compared to $8,614 million in 2014, as a result of the decrease in taxable income and the Group’s lower tax rate.
TOTAL bought back in 2015 approximately 4.7 million of its own shares (i.e., approximately 0.19% of the share capital as of December 31, 2015) under the authorization granted by the shareholders at the meeting of May 29, 2015. The number of fully-diluted shares at December 31, 2015, was 2,336 million compared to 2,285 million at December 31, 2014.
Fully-diluted earnings per share, based on 2,304 million weighted-average shares, was $2.16 in 2015 compared to $1.86 in 2014, an increase of 16%.
Asset sales were $5,968 million in 2015, comprised mainly of the sales of Bostik, interests in onshore blocks in Nigeria, Totalgaz, the Schwedt Refinery, the Geosel oil storage facility, coal mining assets in South Africa and partial interests in Laggan-Tormore and Fort Hills. Asset sales were $4,650 million in 2014.
Acquisitions were $3,441 million in 2015, including $2,808 million of resource acquisitions, comprised mainly of the renewal of the ADCO license in the United Arab Emirates, the acquisition of a further 0.7% in the capital of Novatek in Russia bringing the Group participation to 18.9%, and the carry on the Utica gas and condensate field in the United States. Acquisitions were $2,539 million in 2014, including $1,765 million of resource acquisitions.
Cash flow from operating activities was $19,946 million in 2015, a decrease of 22% compared to $25,608 million in 2014, essentially due to the decrease in cash flow from operations in the context of a 47% lower Brent price. The change in working capital as determined in accordance with IFRS was $1,683 million in 2015, compared to $4,480 million in 2014. In 2015, the change in working capital at replacement cost, which is the difference between the change in working capital of $1,683 million and the pre-tax inventory valuation effect of $(1,113) million, was $570 million compared to $1,011 million in 2014. Operating cash flow in 2015 excluding the change in working capital at replacement cost for the full-year 2017 was $19,376$21,135 million, a decreasean increase of 21%24% compared to $24,597$16,988 million in 2014.2016. Operating cash flow for the full-year 2017 excluding the change in working capital at replacement cost and without financial charges (DACF) was $22,183 million, an increase of 26% compared to $17,581 million in 2016. The Group’s net cash flow was $9,499 million for the full-year 2017 compared to $(769) million in 2016, mainly due to the nearly $4 billion increase in operating cash flow before working capital changes, the decrease in net investments related to the $3 billion decrease in organic investments and the sale of Atotech.
See also “"- — 3.5.4 Liquidity and Capital Resources”", below.
5.3 Business segment reporting
The financial information for each business segment is reported on the same basis as that used internally by the chief operating decision-maker in assessing segment performance and the allocation of segment resources. Due to their particular nature or significance, certain transactions qualifying as “special items”"special items" are excluded from the business segment figures. In general, special items relate to transactions that are significant, infrequent or unusual. In certain instances, certain transactions such as restructuring costs or asset disposals, which are not considered to be representative of the normal course of business, may qualify as special items although they may have occurred in prior years or are likely to recur in following years.
In accordance with IAS 2, the Group values inventories of petroleum products in its financial statements according to theFirst-In,First-Out (FIFO) method and other inventories using the weighted-average cost method. Under the FIFO method, the cost of inventory is based on the historic cost of acquisition or manufacture rather than the current replacement cost. In volatile energy markets, this can have a significant distorting effect on the reported income. Accordingly, the adjusted results of the Refining & Chemicals and Marketing & Services segments are presented according to the replacement cost method in order to facilitate the comparability of the Group’s results with those of its competitors and to help illustrate the operating performance of these segments excluding the impact of oil price changes on the replacement of inventories. In the replacement cost method, which approximates theLast-In,First-Out (LIFO) method, the variation of inventory values in the statement of income is, depending on the nature of the inventory, determined using either themonth-end price differential between one
period and another or the average prices of the period. The inventory valuation effect is the difference between the results under the FIFO and replacement cost methods.
The effect of changes in fair value presented as an adjustment item reflects, for trading inventories and storage contracts, differences between internal measures of performance used by TOTAL’s management and the accounting for these transactions under IFRS, which requires that trading inventories be recorded at their fair value usingperiod-end spot prices. In order to best reflect the management of economic exposure through derivative transactions, internal indicators used to measure performance include valuations of trading inventories recorded at their fair value based on forward prices. Furthermore, TOTAL, in its trading activities, enters into storage contracts, the future effects of which are recorded at fair value in the Group’s internal economic performance. IFRS, by requiring accounting for storage contracts on an accrual basis, precludes recognition of this fair value effect.
The adjusted business segment results (adjusted operating income and adjusted net operating income) are defined as replacement cost results, adjusted for special items, excluding the effect of changes in fair value. For further information on the adjustments affecting operating income on asegment-by-segment basis, and for a reconciliation of segment figures to figures reported in the Company’s audited consolidated financial statements,Consolidated Financial Statements, see Note 3 to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 215265), which is incorporated herein by reference.
The Group measures performance at the segment level on the basis of adjusted net operating income. Net operating income comprises operating income of the relevant segment after deducting the amortization and the depreciation of intangible assets other than leasehold rights, translation adjustments and gains or losses on the sale of assets, as well as all other income and expenses related to capital employed (dividends fromnon-consolidated companies, income from equity affiliates and capitalized interest expenses) and after income taxes applicable to the above. The income and expenses not included in net operating income that are included in net income are interest expenses related to long-term liabilities net of interest earned on cash and cash equivalents, after applicable income taxes (net cost of net debt andnon-controlling interests). Adjusted net operating income excludes the effect of the adjustments (special items and the inventory valuation effect) described above. For further discussion of the calculation of net operating income and the calculation of return on average capital employed (ROACE(1)), see Note 3 to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 215265), which is incorporated herein by reference.
Environment — liquids and gas price realizations(a) | 2016 | 2015 | 2014 | |||||||||
Brent ($/b) | 43.7 | 52.4 | 99.0 | |||||||||
Average liquids price ($/b) | 40.3 | 47.4 | 89.4 | |||||||||
Average gas price ($/Mbtu) | 3.56 | 4.75 | 6.57 | |||||||||
Average hydrocarbons price ($/boe) | 31.9 | 39.2 | 66.2 |
Production | 2016 | 2015 | 2014 | |||||||||
Combined production (kboe/d) | 2,452 | 2,347 | 2,146 | |||||||||
• Liquids (kb/d) | 1,271 | 1,237 | 1,034 | |||||||||
• Gas (Mcf/d) | 6,447 | 6,054 | 6,063 |
Results (M$) | 2016 | 2015 | 2014 | |||||||||
Non-Group sales | 14,683 | 16,840 | 23,484 | |||||||||
Operating income(a) | (274 | ) | (2,941 | ) | 10,494 | |||||||
Equity in income (loss) of affiliates and other items | 1,489 | 2,019 | 4,302 | |||||||||
Effective tax rate(b) | 26.6% | 45.5% | 57.1% | |||||||||
Tax on net operating income | 363 | (294 | ) | (8,799 | ) | |||||||
Net operating income(a) | 1,578 | (1,216 | ) | 5,997 | ||||||||
Adjustments affecting net operating income | 2,055 | 5,990 | 4,507 | |||||||||
Adjusted net operating income(c) | 3,633 | 4,774 | 10,504 | |||||||||
Investments | 16,035 | 24,270 | 26,520 | |||||||||
Divestments | 2,331 | 3,215 | 5,764 | |||||||||
Organic investments | 14,316 | 20,508 | 22,959 | |||||||||
Cash flow from operating activities | 9,675 | 11,182 | 16,666 | |||||||||
ROACE | 3% | 5% | 11% |
2016 comparative information is restated at the segment level.
(1) "ROACE" = ratio of adjusted net operating income to average capital employed at replacement cost between the beginning and the end of the period.
5.3.1 Exploration & Production segment
Environment - liquids and gas price realizations (a) | 2018 | 2017 | 2016 |
Brent ($/b) | 71.3 | 54.2 | 43.7 |
Average liquids price ($/b) | 64.2 | 50.2 | 40.3 |
Average gas price ($/Mbtu) | 4.78 | 4.08 | 3.56 |
Average hydrocarbons price ($/boe) | 51.0 | 38.7 | 31.9 |
(a) Consolidated subsidiaries, excluding fixed margins.
Hydrocarbon production | 2018 | 2017 | 2016 |
Combined production (kboe/d) | 2,775 | 2,566 | 2,452 |
Oil (including bitumen) (kb/d) | 1,378 | 1,167 | 1,088 |
Gas (including Condensates and associated LPG) (kboe/d) | 1,397 | 1,399 | 1,364 |
Hydrocarbon production | 2018 | 2017 | 2016 |
Combined production (kboe/d) | 2,775 | 2,566 | 2,452 |
Liquids (kb/d) | 1,566 | 1,346 | 1,271 |
Gas (Mcf/d) | 6,599 | 6,662 | 6,447 |
Results (M$) | 2018 | 2017 | 2016 |
Non-Group sales | 10,989 | 8,477 | 7,629 |
Operating income (a) | 12,570 | 2,792 | (431) |
Net income (loss) from equity affiliates and other items | 2,686 | 1,546 | 1,375 |
Effective tax rate (b) | 46.5% | 41.2% | 27.7% |
Tax on net operating income | (6,068) | (2,233) | 401 |
Net operating income (a) | 9,188 | 2,105 | 1,345 |
Adjustments affecting net operating income | 1,022 | 3,880 | 1,872 |
Adjusted net operating income (c) | 10,210 | 5,985 | 3,217 |
- of which income from equity affiliates | 2,341 | 1,542 | 1,363 |
Gross investments (d) | 15,282 | 12,802 | 16,085 |
Divestments (e) | 4,952 | 1,918 | 2,187 |
Organic investments (f) | 9,186 | 11,310 | 14,464 |
ROACE | 9% | 6% | 3% |
(a) For the definitions of "operating income" and "net operating income", refer to Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference.
(b) "Effective tax rate" = tax on adjusted net operating income/(adjusted net operating income - income from equity affiliates - dividends received from investments - impairment of goodwill + tax on adjusted net operating income).
(c) Adjusted for special items. See Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference.
(d) Including acquisitions and increases in non-current loans. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
(e) Including divestments and reimbursements of non-current loans.
(f) "Organic investments" = net investments, excluding acquisitions, divestments and other operations with non-controlling interests. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
2018 vs. 20152017
MarketIn 2018, market conditions were lessmore favorable than in 2016 compared to 2015.2017. The average realized price of liquids decreasedincreased by 15%28% and the average realized gas pricesprice by 25%17%.
For the full-year 2016,2018, hydrocarbon production was 2,4522,775 kboe/d, an increase of 4.5%more than 8% compared to 2,347 kboe/d2,566 in 2015,2017, due to:
-+9% for start-ups and ramp-ups on new projects, notably Yamal LNG, Moho Nord, Fort Hills, Kashagan, Kaombo Norte and Ichthys.
-+3% portfolio effect. The addition of Maersk Oil, Al Shaheen in Qatar, Waha in Libya, Lapa and Iara in Brazil as well as the acquisition of an additional 0.5% of Novatek were partially offset by the expiration of the Mahakam permit at the end of 2017 and the sales of Visund in Norway and Rabi in Gabon.
--4% for natural field declines and PSC price effect (1).
(1) The "PSC price effect" refers to the following:impact of changing hydrocarbon prices on entitlement volumes from production sharing and buyback contracts. For example, as the price of oil or gas increases above certain pre-determined levels, TOTAL’s share of production generally decreases.
For a discussion of the Group’s proved reserves, refer to point 2.1.1.2 (“Reserves”2.1.3 ("Reserves") of chapter 2 of the 20162018 Registration Document (starting onpage 1034), which is incorporated herein by reference. See also point 1 (“9.1 ("Oil and gas information pursuant to FASBAccounting Standards Codification 932”932") of chapter 119 of the 20162018 Registration Document (starting onpage 308362), which is incorporated herein by reference, for additional information on proved reserves, including tables showing changes in proved reserves by region.
Non-Group sales for the Exploration & Production segment in 20162018 were $14,683$10,989 million compared to $16,840$8,477 million in 2015,2017, an increase of 30%.
The segment’s adjusted net operating income was $10,210 million in 2018, an increase of 71% compared to $5,985 million in 2017, due to the increase in hydrocarbon prices, despite a decrease of 13%.tax rate that increased in line with the increase in hydrocarbon prices, and strong production growth.
The effective tax rate increased from 41.2% in 2017 to 46.5% in 2018, in line with the increase in oil prices.
Adjusted net operating income for the Exploration & Production segment excludes special items. In 2018, the exclusion of special items had a positive impact on the segment’s adjusted net operating income of $1,022 million due to the impairment on Ichthys related to the sale of a partial interest by the Group and other assets mainly located in Algeria, Colombia and Congo (for additional information, refer to Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference). In 2017, the exclusion of special items had a positive impact on the segment’s adjusted net operating income of $3,880 million. Special items mainly included impairments of Fort Hills in Canada (following the operator announcement of the increase of the project��s costs), Gladstone LNG in Australia, assets in the Republic of the Congo and gas assets in the United Kingdom, as well as assets in the United States and Norway.
Technical costs (1) for consolidated affiliates, calculated in accordance with ASC 932 (2), continued decreasing to $18.9/boe in 2018, including $5.7/boe of production costs, compared to $19.5/boe in 2017, including $5.4/boe of production costs.
The segment’s cash flow from operating activities excluding financial charges for the full-year 2018 was $19,803 million, an increase of 54% compared to $12,821 million for the full-year 2017. Operating cash flow excluding the change in working capital at replacement cost and excluding financial charges for the full-year 2018 was $19,374 million, an increase of 31% compared to $14,753 million for the full-year 2017. Operating cash flow before working capital changes less organic investments for the full-year 2018 was $10,210 million compared to $5,985 million in 2017, an increase of 71%.
For information on the segment’s capital expenditures, refer to points 2.1.2 ("Exploration and development") (on page 34) and 2.5 ("Investments") (starting on page 68) of chapter 2 of the 2018 Registration Document, which are incorporated herein by reference. See also "- 5.4 Liquidity and Capital Resources", below.
In this context, the segment’s ROACE for the full-year 2018 was 9% compared to 6% for the full-year 2017.
2017 vs. 2016
In 2017, market conditions were more favorable than in 2016. The average realized price of liquids increased by 25% and the average realized gas price by 15%.
For the full-year 2017, hydrocarbon production was 2,566 thousand barrels of oil equivalent per day (kboe/d), an increase of 5% compared to 2,452 kboe/d in 2016, due to the following:
-+5% due to new start-ups and ramp-ups, notably Moho Nord, Kashagan, Edradour and Glenlivet, and Angola LNG;
-+2% portfolio effect, mainly due to taking over the giant Al Shaheen oil field concession in Qatar and acquiring an additional 75% interest in the Barnett shale in the United States, partially offset by the exit from the Upstreamsouthern sector in the Republic of the Congo and asset sales in Norway;
-+1% related to improved security conditions in Libya and Nigeria; and
--3% due to natural field decline, the PSC price effect and OPEC quotas.
Non-Group sales for the Exploration & Production segment was $3,633in 2017 were $8,477 million compared to $7,629 million in 2016, a decreasean increase of 24%11%.
The segment’s adjusted net operating income was $5,985 million in 2017, an increase of 86% compared to 2015. The$3,217 million in 2016, notably due to production growth, cost reductions and an increase in production combined with the decrease in operating costs as well as the loweroil and gas prices.
The effective tax rate partially offsetincreased from 27.7% in 2016 to 41.2% in 2017, in line with the impact of lowerrise in hydrocarbon prices.
Adjusted net operating income for the UpstreamExploration & Production segment excludes special items. The exclusion of special items had a positive impact on the segment’s adjusted net operating income in 2017 of $3,880 million. Special items mainly included impairments of Fort Hills in Canada (following the operator announcement of the increase of the project’s costs), Gladstone LNG in Australia, assets in the Republic of the Congo and gas assets in the United Kingdom, as well as assets in the United States and Norway. In 2016, the exclusion of $2,055 million, comprisedspecial items had a positive impact on the segment’s adjusted net operating income of $1,872 million. Special items mainly ofincluded impairments on Gladstone LNG in Australia, Angola LNG and Laggan-Tormore in the United Kingdom, reflecting the decrease in gas price assumptions for the coming years (for additional information,years.
Technical costs for consolidated affiliates, calculated in accordance with ASC 932 continued to fall, to $19.5/boe in 2017 compared to $20.4/boe in 2016. This decrease was mainly due to the reduction in production costs from $5.9/boe in 2016 to $5.4/boe in 2017.
The segment’s cash flow from operating activities excluding financial charges for the full-year 2017 was $12,821 million, an increase of 30% compared to $9,866 million in 2016. Operating cash flow for the full-year 2017 excluding the change in working capital at replacement cost and without financial charges was $14,753 million compared to $10,592 million in 2016, an increase of 39%.
In this context, the segment’s ROACE for the full-year 2017 was 6% compared to 3% for the full-year 2016.
(1) "Technical costs" = (Production costs ASC932 + exploration charges + depreciation, depletion and amortization and valuation allowances ASC 932)/ Production ASC932 of the year
(2) Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 932, Extractive industries - Oil and Gas.
5.3.2 Gas, Renewables & Power segment
Results (M$) | 2018 | 2017 | 2016 |
Non-Group sales | 16,136 | 12,854 | 10,124 |
Operating income (a) | (140) | (276) | (161) |
Net income (loss) from equity affiliates and other items | 318 | 31 | 71 |
Tax on net operating income | (173) | (140) | (4) |
Net operating income (a) | 5 | (385) | (94) |
Adjustments affecting net operating income | 751 | 870 | 533 |
Adjusted net operating income (b) | 756 | 485 | 439 |
Gross investments (c) | 3,539 | 797 | 1,221 |
Divestments (d) | 931 | 73 | 166 |
Organic investments (e) | 511 | 353 | 270 |
ROACE | 11% | 10% | 9% |
(a) For the definitions of "operating income" and "net operating income", refer to Note 3 to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 215265), which is incorporated herein by reference). In 2015, the exclusion of special items had a positive impact on the segment’s adjusted net operating income of $5,990 million, comprised mainly of impairments on Fort Hills in Canada and Gladstone LNG in Australia as well as in Libya, an adjustment to depreciation on Usan in Nigeria following the cancellation of the sale process and the impairment of exploration projects that will not be developed.
Technical costs(1) for consolidated subsidiaries, calculated in accordance with ASC 932(2), were reduced to $20.4/boe in 2016 compared to $23.0/boe in 2015. This decrease was essentially due to the reduction in operating costs from $7.4/boe in 2015 to $5.9/boe in 2016.
Cash flow from operating activities was $9,675 million in 2016, a decrease of 13% compared to $11,182 million in 2015. Operating cash flow in 2016 for the segment excluding the change in working capital at replacement cost of $(237) million ($3 million in 2015) was $9,912 million, a decrease of 11% compared to $11,179 million in 2015, essentially due to the decrease in hydrocarbon prices, partially offset by the increase in production and decrease in operating costs.
For information on the Upstream segment’s capital expenditures, refer to points 2.1.1.1 (“Exploration and development”) (onpage 10) and 3 (“Investments”) (starting onpage 42) of chapter 2 of the 2016 Registration Document, which are incorporated herein by reference. See also “— 3. Liquidity and Capital Resources”, below.
In this context, the segment’s ROACE for the full-year 2016 was 3% compared to 5% for the full-year 2015.
2015 vs. 2014
Market conditions were less favorable in 2015. The average realized price of liquids fell by 47% and the average realized price of gas by 28% compared to 2014.
For the full-year 2015, hydrocarbon production was 2,347 kboe/d, an increase of 9.4% compared to 2014, due to the following:
For a discussion of the Group’s proved reserves, refer to point 2.1.1.2 (“Reserves”) of chapter 2 of the 2016 Registration Document (starting onpage 10), which is incorporated herein by reference.
(b) Adjusted for special items. See also point 1 (“Oil and gas information pursuantNote 3 to FASB Accounting Standards Codification 932”) of chapter 11 of the 2016Consolidated Financial Statements in the 2018 Registration Document (starting onpage 308265), which is incorporated herein by reference, forreference.
(c) Including acquisitions and increases in non-current loans. For additional information on proved reserves, including tables showing changes in proved reservesinvestments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by region.reference.
(d) Including divestments and reimbursements of non-current loans.
(e) "Organic investments" = net investments, excluding acquisitions, divestments and other operations with non-controlling interests. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
2018 vs. 2017
Non-Group sales for the Gas, Renewables & Power segment in 20152018 were $16,840$16,136 million compared to $23,484$12,854 million in 2014, a decrease2017, an increase of 28%26%.
AdjustedThe segment’s adjusted net operating income from the Upstream segment was $4,774$756 million for the full-year 2015, a decrease of 55% compared to $10,504in 2018, 1.6 times higher than $485 million for 2014, essentiallyin 2017, notably due to the lower pricegood performance of hydrocarbons, partially offset by anLNG and gas/power trading activities. The acquisitions of Direct Énergie and the LNG business of Engie account for the increase in production, a decreaseinvestments to $3.5 billion in operating costs, and a lower effective tax rate.the full-year 2018, 4.4 times higher than $797 million in the full-year 2017.
Adjusted net operating income for the UpstreamGas, Renewables & Power segment excludes special items. The exclusion of special items had a positive impact on the segment’s adjusted net operating income in 20152018 of $5,990 million, comprised mainly of impairments on Fort Hills in Canada and Gladstone LNG in Australia as well as in Libya, an adjustment to depreciation on Usan in Nigeria following the cancellation of the sale process and$751 million. Special items included the impairment of exploration projects that will not be developed.production facilities by SunPower (for additional information, refer to Note 3(D) to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 275), which is incorporated herein by reference). In 2014,2017, the exclusion of special items had a positive impact on the segment’s adjusted net operating income of $4,507 million, comprised mainly of the impairment of the Group’s oil sands assets in Canada, its unconventional gas assets, notably in the United States, and certain other assets in the Upstream segment.$870 million.
Technical costs for consolidated subsidiaries, calculated in accordance with ASC 932, were $23.0/boe in 2015 compared to $28.3/boe in 2014. This reduction was essentially due to the execution of the Group’s program to reduce operating costs (which decreased from $9.9/boe in 2014 to $7.4/boe in 2015) and lower depreciation (portfolio effect).
CashThe segment’s cash flow from operating activities excluding financial charges for the full-year 2018 was $11,182$(670) million in 2015, a decrease of 33% compared to $16,666$1,055 million for the full-year 2017. The increase in 2014.working capital related to the consolidation of the acquisitions of Direct Énergie and the LNG business of Engie was mainly responsible for the negative cash flow from operations in the full-year 2018. Operating cash flow in 2015 for the segment excluding the change in working capital at replacement cost and excluding financial charges was $513 million for the full-year 2018, an increase of $3 million ($(2,001) million in 2014) was $11,179 million, a decrease of 40%74% compared to $18,667$294 million in 2014.for the full-year 2017.
For information on the Upstream segment’s capital expenditures,investments, refer to points 2.1.1.1 (“Exploration and development”) (onpage 10) and 3 (“Investments”) (starting onpage 42)point 2.5 of chapter 2 of the 20162018 Registration Document (starting on page 68), which areis incorporated herein by reference. See also “"- — 3.5.4 Liquidity and Capital Resources”", below.
In this context, the segment’s ROACE for the full-year 20152018 was 5%11% compared to 11%10% for the full-year 2014.full year 2017.
Refinery throughput and utilization rates(a) | 2016 | 2015 | 2014 | |||||||||
Total refinery throughput (kb/d) | 1,965 | 2,023 | 1,775 | |||||||||
• France | 669 | 674 | 639 | |||||||||
• Rest of Europe | 802 | 849 | 794 | |||||||||
• Rest of World | 494 | 500 | 342 | |||||||||
Utilization rates(b) | ||||||||||||
• Based on crude only | 85% | 86% | 77% | |||||||||
• Based on crude and other feedstock | 87% | 88% | 81% |
Results (M$, except ERMI) | 2016 | 2015 | 2014 | |||||||||
European refining margin indicator (“ERMI”) ($/t) | 34.1 | 48.5 | 18.7 | |||||||||
Non-Group sales | 65,632 | 70,623 | 106,124 | |||||||||
Operating income(a) | 5,000 | 4,544 | (1,691 | ) | ||||||||
Equity in income (loss) of affiliates and other items | 833 | 1,780 | 90 | |||||||||
Tax on net operating income | (1,245 | ) | (1,105 | ) | 391 | |||||||
Net operating income(a) | 4,588 | 5,219 | (1,210 | ) | ||||||||
Adjustments affecting net operating income | (387 | ) | (330 | ) | 3,699 | |||||||
Adjusted net operating income(b) | 4,201 | 4,889 | 2,489 | |||||||||
• Including specialty chemicals(c) | 581 | 496 | 629 | |||||||||
Investments | 1,849 | 1,843 | 2,022 | |||||||||
Divestments | 86 | 3,488 | 192 | |||||||||
Organic investments | 1,636 | 827 | 1,944 | |||||||||
Cash flow from operating activities | 4,587 | 6,432 | 6,302 | |||||||||
ROACE | 38% | 41% | 15% |
2016 vs. 2015
The ERMI averaged $34/t in 2016, a decrease of 30% compared to the high level of 2015, in the context of high petroleum product stocks. In the fourth quarter of 2016, the ERMI was $41.0/t. Refinery throughput for the full-year 2016 decreased by 3% compared to 2015, notably due to shutdowns in Europe and the United States in the second quarter and the sale of the Schwedt refinery in Germany.
Non-Group sales for the Gas, Renewables & Power segment in 20162017 were $65,632$12,854 million compared to $70,623$10,124 million in 2015, a decrease2016, an increase of 7%27%.
The segment’s adjusted net operating income was $4,201$485 million in 2017, an increase of 10% compared to $439 million in 2016.
Adjusted net operating income for the Gas, Renewables & Power segment excludes special items. The exclusion of special items had a positive impact on the segment’s adjusted net operating income in 2017 of $870 million. Special items included an impairment concerning SunPower (1) in the United States given the depressed economic environment of the solar activity. In 2016, the exclusion of special items had a positive impact on the segment’s adjusted net operating income of $533 million.
The segment’s cash flow from operating activities excluding financial charges for the full-year 2017 was $1,055 million, an increase of 79% compared to $589 million in 2016. Operating cash flow for the full-year 2017 excluding the change in working capital at replacement cost and without financial charges was $294 million compared to $176 million in 2016, an increase of 67%.
In this context, the segment’s ROACE for the full-year 2017 was 10% compared to 9% for the full year 2016.
(1) At December 31, 2017, TOTAL held an interest of 56.26% in SunPower, an American company listed on NASDAQ and based in California.
5.3.3 Refining & Chemicals segment
Refinery throughput and utilization rates (a) | 2018 | 2017 | 2016 |
Total refinery throughput (kb/d) | 1,852 | 1,827 | 1,965 |
- France | 610 | 624 | 669 |
- Rest of Europe | 755 | 767 | 802 |
- Rest of World | 487 | 436 | 494 |
Utilization rates based on crude only (b) | 88% | 88% | 85% |
(a) Includes share of TotalErg, and African refineries reported in the Marketing & Services segment.
(b) Based on distillation capacity at the beginning of the year.
Results (M$, except ERMI) | 2018 | 2017 | 2016 |
European refining margin indicator ("ERMI") ($/t) | 32.3 | 40.9 | 34.1 |
Non-Group sales | 92,025 | 75,505 | 65,632 |
Operating income (a) | 2,513 | 4,170 | 4,991 |
Equity in income (loss) of affiliates and other items | 782 | 2,979 | 779 |
Tax on net operating income | (445) | (944) | (1,244) |
Net operating income (a) | 2,850 | 6,205 | 4,526 |
Adjustments affecting net operating income | 529 | (2,415) | (331) |
Adjusted net operating income (b) | 3,379 | 3,790 | 4,195 |
Gross investments (c) | 1,781 | 1,734 | 1,861 |
Divestments (d) | 919 | 2,820 | 88 |
Organic investments (e) | 1,604 | 1,625 | 1,642 |
ROACE | 31% | 33% | 38% |
(a) For the definitions of "operating income" and "net operating income", refer to Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference.
(b) Adjusted for special items. See Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference.
(c) Including acquisitions and increases in non-current loans. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
(d) Including divestments and reimbursements of non-current loans.
(e) "Organic investments" = net investments, excluding acquisitions, divestments and other operations with non-controlling interests. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
2018 vs. 2017
Refinery throughput was stable in full-year 2018 compared to full-year 2017. Lower throughput in Europe linked to planned maintenance, notably at Antwerp during the second quarter, was offset by higher throughput outside Europe. The ERMI decreased to $32.3/t on average in 2018 compared to $40.9/t in 2017, a decrease of 14%21% mainly due to rising crude oil prices.
Non-Group sales for the Refining & Chemicals segment in 2018 were $92,025 million compared to 2015, essentially due$75,505 million in 2017, an increase of 22%.
The segment’s adjusted net operating income was resilient at $3,379 million for the full-year 2018, a decrease of 11% compared to the decrease$3,790 million in refining margins. Petrochemicals continued to generate good results, notably due to the strong contribution from the Group’s major integrated platforms in Asia and the Middle East.2017.
Adjusted net operating income for the Refining & Chemicals segment excludes any after-tax inventory valuation effect and special items. The exclusion of the inventory valuation effect had a positive impact on the segment’s adjusted net operating income in 2018 of $413 million compared to a negative impact of $298 million in 2017. The exclusion of special items had a positive impact on the segment’s adjusted net operating income in 2018 of $116 million, compared to a negative impact of $2,117 million in 2017.
The segment’s cash flow from operating activities excluding financial charges for the full-year 2018 was $4,308 million, a decrease of 42% compared to $7,411 million for the full-year 2017. Operating cash flow for the full-year 2018 excluding the change in working capital at replacement cost and excluding financial charges was $4,388 million compared to $4,728 million for the full-year 2017, a decrease of 7%.
For information on the segment’s investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference. See also "- 5.4 Liquidity and Capital Resources", below.
In this context, the segment’s ROACE for the full-year 2018 was 31% compared to 33% for the full year 2017.
2017 vs. 2016
Refinery throughput decreased by 7% for the full-year 2017 compared to 2016 as a result of the definitive ending of distillation capacity at La Mède (France) and Lindsey (UK) and the temporary shutdown due to Hurricane Harvey in the United States. The ERMI increased to $40.9/t on average in 2017 compared to $34.1/t in 2016, an increase of 20% due to elevated petroleum product demand. In the fourth quarter of 2017, the ERMI was $35.5/t. Petrochemicals continued to benefit from a favorable environment albeit down compared to a year ago.
Non-Group sales for the Refining & Chemicals segment in 2017 were $75,505 million compared to $65,632 million in 2016, an increase of 15%.
The segment’s adjusted net operating income was $3,790 million for the full-year 2017, a decrease of 10% compared to $4,195 million in 2016, notably due to the impact of Hurricane Harvey, the impact of modernization work on the Antwerp platform and the sale of Atotech in early 2017 as well as lower trading results due to the evolution of the market into backwardation (1).
Adjusted net operating income for the Refining & Chemicals segment excludes any after-tax inventory valuation effect and special items. The exclusion of the inventory valuation effect had a negative impact on the segment’s adjusted net operating income in 20162017 of $500$298 million compared to a positivenegative impact of $590$500 million in 2015.2016. The exclusion of special items had a positivenegative impact on the segment’s adjusted net operating income in 20162017 of $113 million compared to a negative impact in 2015 of $920$2,117 million, consisting essentially of gainsa gain on asset sales.the sale of Atotech, compared to a positive impact of $169 million in 2016.
CashThe segment’s cash flow from operating activities excluding financial charges for the full-year 2017 was $4,587$7,411 million, an increase of 62% compared to $4,584 million in 2016, a decrease of 29% compared to $6,432 million in 2015.2016. Operating cash flow in 2016 for the segmentfull-year 2017 excluding the change in working capital at replacement cost of $(291)and without financial charges was $4,728 million ($647compared to $4,873 million in 2015) was $4,878 million,2016, a decrease of 16% compared to $5,785 million in 2015.
For information on the Refining & Chemicals segment’s investments, refer to point 3 (“Investments”) of chapter 2 of the 2016 Registration Document (starting onpage 42), which is incorporated herein by reference. See also “— 3. Liquidity and Capital Resources”, below.3%.
In this context, the segment’s ROACE for the full-year 20162017 was 38%33% compared to 41%38% for the full year 2015.2016.
5.3.4 Marketing & Services segment
Petroleum product sales (a) (kb/d) | 2018 | 2017 | 2016 |
Total Marketing & Services sales | 1,801 | 1,779 | 1,793 |
- Europe | 1,001 | 1,049 | 1,093 |
- Rest of world | 800 | 730 | 700 |
(a) Excludes trading and bulk Refining sales, which are reported under the Refining & Chemicals segment; includes share of TotalErg.
Results (M$) | 2018 | 2017 | 2016 |
Non-Group sales | 90,206 | 74,634 | 66,351 |
Operating income (a) | 1,841 | 1,819 | 1,789 |
Equity in income (loss) of affiliates and other items | 307 | 497 | 170 |
Tax on net operating income | (532) | (561) | (541) |
Net operating income (a) | 1,616 | 1,755 | 1,418 |
Adjustments affecting net operating income | 36 | (79) | 141 |
Adjusted net operating income (b) | 1,652 | 1,676 | 1,559 |
Gross investments (c) | 1,458 | 1,457 | 1,245 |
Divestments (d) | 428 | 413 | 424 |
Organic investments (e) | 1,010 | 1,019 | 1,003 |
ROACE | 25% | 26% | 27% |
(a) For the definitions of "operating income" and "net operating income", refer to Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference.
2015(b) Adjusted for special items. See Note 3 to the Consolidated Financial Statements in the 2018 Registration Document (starting on page 265), which is incorporated herein by reference.
(c) Including acquisitions and increases in non-current loans. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
(d) Including divestments and reimbursements of non-current loans.
(e) "Organic investments" = net investments, excluding acquisitions, divestments and other operations with non-controlling interests. For additional information on investments, refer to point 2.5 of chapter 2 of the 2018 Registration Document (starting on page 68), which is incorporated herein by reference.
2018 vs. 20142017
In 2015, the segment benefited from a favorable environment, notably in Europe. The ERMI averaged $48.5/t in 20152018, petroleum product sales increased by 1% compared to $18.7/t2017. The sale of TotalErg in 2014, mainly due to strong demand for gasoline. InItaly was offset by higher sales in the fourth quarterrest of 2015, the ERMI was $38.1/t. Refinery throughput in 2015 increased by 14% to 2,023 kb/d compared to 1,775 kb/d in 2014. Actions to improve the availability in Europe resulted in a high utilization rate of 89%. The segment also benefited from theramp-up of SATORP in Saudi Arabia. Petrochemical margins in Europe increased in 2015 due to strong demand for polymers and the decrease in raw material costs.world.
Non-Group sales for the Marketing & Services segment in 20152018 were $70,623$90,206 million compared to $106,124$74,634 million in 2014, a decrease2017, an increase of 33%21%.
The segment’s adjusted net operating income was stable in 2015 was $4,8892018 at $1,652 million, twice the levela decrease of $2,4891% compared to $1,676 million in 2014, due to strong industrial performance during a period of high margins and cost reduction programs.2017.
Adjusted net operating income for the RefiningMarketing & ChemicalsServices segment excludes anyafter-tax inventory valuation effect and special items. The exclusion of the inventory valuation effect had a positive impact on the segment’s adjusted net operating income in 20152018 of $590$5 million compared to a positive impact of $2,114$3 million in 2014, for both periods essentially due to a reduction of stock.2017. The exclusion of special items had a negativepositive impact on the segment’s adjusted net operating income in 20152018 of $920$31 million consisting essentially of gains on asset sales, compared to a positivenegative impact of $1,585$82 million in 2014, consisting essentially of impairments of European refining assets.2017.
CashThe segment’s cash flow from operating activities excluding financial charges for the full-year 2018 was $6,432$2,759 million, in 2015, an increase of 2%24% compared to $6,302$2,221 million in 2014.2017. Operating cash flow in 2015 for the segmentfull-year 2018 excluding the change in working capital at replacement cost of $647and without financial charges was $2,156 million ($2,274compared to $2,242 million in 2014) was $5,785 million, an increase2017, a decrease of 44% compared to $4,028 million in 2014.4%.
For information on the RefiningMarketing & ChemicalsServices segment’s investments, refer to point 3 (“Investments”)2.5 of chapter 2 of the 20162018 Registration Document (starting onpage 6842), which is incorporated herein by reference. See also “"- — 3.5.4 Liquidity and Capital Resources”", below.
In this context, the segment’s ROACE for the full-year 20152018 was 41%25% compared to 15%26% for the full year 2014.2017.
(1) "Backwardation" is the price structure where the prompt price of an index is higher than the future price.
Petroleum product sales (kb/d)(a) | 2016 | 2015 | 2014 | |||||||||
Total Marketing & Services sales | 1,793 | 1,818 | 1,769 | |||||||||
• Europe | 1,093 | 1,092 | 1,100 | |||||||||
• Rest of world | 700 | 726 | 669 |
Results (M$) | 2016 | 2015 | 2014 | |||||||||
Non-Group sales | 69,421 | 77,887 | 106,509 | |||||||||
Operating income(a) | 1,461 | 1,758 | 1,158 | |||||||||
Equity in income (loss) of affiliates and other items | 84 | 297 | (140 | ) | ||||||||
Tax on net operating income | (506 | ) | (585 | ) | (344 | ) | ||||||
Net operating income(a) | 1,039 | 1,470 | 674 | |||||||||
Adjustments affecting net operating income | 547 | 229 | 580 | |||||||||
Adjusted net operating income(b) | 1,586 | 1,699 | 1,254 | |||||||||
• Including New Energies | 26 | 108 | 10 | |||||||||
Investments | 2,506 | 1,841 | 1,818 | |||||||||
Divestments | 446 | 856 | 163 | |||||||||
Organic investments | 1,432 | 1,569 | 1,424 | |||||||||
Cash flow from operating activities | 1,623 | 2,323 | 2,721 | |||||||||
ROACE | 18% | 20% | 13% |
20162017 vs. 20152016
In 2016, refined2017, petroleum product sales decreased slightlywere generally stable compared to 2015, essentially due to the saleprevious year, with a move toward Africa and Asia where the Group has strong growth. European sales were affected by the divestment of the retail networkmature LPG distribution activities in Turkey. Excluding portfolio effects, retail network sales increased by around 4%. Sales of land-based lubricants also increased by around 4%.Belgium and Germany.
Non-Group sales for the Marketing & Services segment in 20162017 were $69,421$74,634 million compared to $77,887$66,351 million in 2015,2016, an increase of 12%.
The Marketing & Services segment’s results continue to grow in a decreasecontext of 11%.
Adjustedstrong retail margins, notably in Africa. The segment’s adjusted net operating income in 2016 for the segment2017 was $1,586$1,676 million, an increase of 8% compared to $1,559 million in 2016, a decrease of 7% compared to 2015. Excluding New Energies, which benefited in 2015 from the delivery of the Quinto solar farm in the United States, adjusted net operating income was stable despite asset sales (retail network in Turkey).2016.
Adjusted net operating income for the Marketing & Services segment excludes anyafter-tax inventory valuation effect and special items. The exclusion of the inventory valuation effect had a positive impact on the segment’s adjusted net operating income in 20162017 of $13$3 million compared to a positive impact of $169$13 million in 2015.2016. The exclusion of special items had a positivenegative impact on the segment’s adjusted net operating income in 20162017 of $534$82 million including restructuring charges related to New Energies, compared to a positive impact of $60$128 million in 2015.2016.
CashThe segment’s cash flow from operating activities excluding financial charges for the full-year 2017 was $1,623$2,221 million, an increase of 21% compared to $1,833 million in 2016, a decrease of 30% compared to $2,323 million in 2015.2016. Operating cash flow in 2016 for the segmentfull-year 2017 excluding the change in working capital at replacement cost of $(208)and without financial charges was $2,242 million ($258compared to $1,966 million in 2015) was $1,831 million, a decrease2016, an increase of 11% compared to $2,065 million in 2015.
For information on the Marketing & Services segment’s investments, refer to point 3 (“Investments”) of chapter 2 of the 2016 Registration Document (starting onpage 42), which is incorporated herein by reference. See also “— 3. Liquidity and Capital Resources”, below.14%.
In this context, the segment’s ROACE for the full-year 20162017 was 18%26% compared to 20%27% for the full year 2015.2016.
2015 vs. 20145.4
The segment’s petroleum product sales were 1,818 kb/d in 2015 compared to 1,769 kb/d in 2014, an increase of 3%. In addition to strong growth in Africa, the sector benefited from its strategic repositioning in Europe and demand stimulated by lower prices.
Non-Group sales for the segment in 2015 were $77,887 million compared to $106,509 million in 2014, a decrease of 27%.
Adjusted net operating income in 2015 for the segment was $1,699 million compared to $1,254 million in 2014, an increase of 35% benefiting from an increase in sales and margins in a favorable environment, and the contribution of SunPower.
Adjusted net operating income for the Marketing & Services segment excludes anyafter-tax inventory valuation effect and special items. The exclusion of the inventory valuation effect had a positive impact on the segment’s adjusted net operating income in 2015 of $169 million compared to a positive impact of $384 million in 2014. The exclusion of special items had a positive impact on the segment’s adjusted net operating income in 2015 of $60 million compared to a positive impact of $196 million in 2014.
Cash flow from operating activities was $2,323 million in 2015, a decrease of 15% compared to $2,721 million in 2014. Operating cash flow in 2015 for the segment excluding the change in working capital at replacement cost of $258 million ($705 million in 2014) was $2,065 million, an increase of 2% compared to $2,016 million in 2014.
For information on the Marketing & Services segment’s investments, refer to point 3 (“Investments”) of chapter 2 of the 2016 Registration Document (starting onpage 42), which is incorporated herein by reference. See also “— 3. Liquidity and Capital Resources”, below.capital resources
In this context, the segment’s ROACE for the full-year 2015 was 20% compared to 13% for the full year 2014.
(M$) | 2016 | 2015 | 2014 | |||||||||
Cash flow from operating activities | 16,521 | 19,946 | 25,608 | |||||||||
Including (increase) decrease in working capital | (1,119 | ) | 1,683 | 4,480 | ||||||||
Cash flow used in investing activities | (17,653 | ) | (20,449 | ) | (24,319 | ) | ||||||
Total expenditures | (20,530 | ) | (28,033 | ) | (30,509 | ) | ||||||
Total divestments | 2,877 | 7,584 | 6,190 | |||||||||
Cash flow from financing activities | 3,532 | 1,060 | 5,909 | |||||||||
Net increase (decrease) in cash and cash equivalents | 2,400 | 577 | 7,198 | |||||||||
Effect of exchange rates | (1,072 | ) | (2,469 | ) | (2,217 | ) | ||||||
Cash and cash equivalents at the beginning of the period | 23,269 | 25,181 | 20,200 | |||||||||
Cash and cash equivalents at the end of the period | 24,597 | 23,269 | 25,181 |
(M$) | 2018 | 2017 | 2016 |
Cash flow from operating activities | 24,703 | 22,319 | 16,521 |
Including (increase) decrease in working capital | 769 | 827 | (1,119) |
Cash flow used in investing activities | (14,946) | (11,632) | (17,653) |
Total expenditures | (22,185) | (16,896) | (20,530) |
Total divestments | 7,239 | 5,264 | 2,877 |
Cash flow from financing activities | (13,925) | (5,540) | 3,532 |
Net increase (decrease) in cash and cash equivalents | (4,168) | 5,147 | 2,400 |
Effect of exchange rates | (1,110) | 3,441 | (1,072) |
Cash and cash equivalents at the beginning of the period | 33,185 | 24,597 | 23,269 |
Cash and cash equivalents at the end of the period | 27,907 | 33,185 | 24,597 |
TOTAL’s cash requirements for working capital, capital expenditures, acquisitions and dividend payments over the past three years were financed primarily by a combination of funds generated from operations, borrowings and divestments ofnon-core assets. In the current environment, TOTAL expects its external debt to be principally financed from the international debt capital markets. The Group continually monitors the balance between cash flow from operating activities and net expenditures. In the Company’s opinion, its working capital is sufficient for its present requirements.
5.4.1 Capital expenditures
The largest part of TOTAL’s capital expenditures in 20162018 of $22,185 million was made up of additions to intangible assets and property, plant and equipment (approximately 87%75%), with the remainder attributable to equity-method affiliates and to acquisitions of subsidiaries. In the UpstreamExploration & Production segment, as described in more detail under point 1.6 (“9.1.6 ("Cost incurred”incurred") of chapter 119 of the 20162018 Registration Document (onpage 321373), which is incorporated herein by reference, capital expenditures in 20162018 were principally development costs (approximately 90%68%, mainly for construction of new production facilities), exploration expenditures (successful or unsuccessful, approximately 4%) and acquisitions of proved and unproved properties (approximately 6%28%). In the Gas, Renewables & Power segment, approximately 80% of capital expenditures in 2018 were acquisitions, with the balance being related mainly to facilities investments. In the Refining & Chemicals segment, about 75%approximately 83% of capital expenditures in 20162018 were related to refining and petrochemical activities (essentially 50%71% for existing units including maintenance and major turnarounds and 50%29% for new construction), the balance being related mainly to Specialty Chemicals.Hutchinson. In the Marketing & Services segment, approximately 25% of capital expenditures in 2018 were split between marketing/retail activities (approximately 50%)acquisitions, with the balance being related to expenditures mainly in Europe and New Energies (approximately 50%). Africa.
For additional information on capital expenditures, please refer to the discussion above in “"- — 1.5.1 Overview”", "- 5.2 Group results 2016-2018" and “"- — 2. Results 2014-20165.3 Business segment reporting”", above, as well as points 1.5.2 ("A targeted investment policy") of chapter 1 (on page 23) and point 3 (“Investments”2.5 ("Investments") of chapter 2 (starting on page 68) of the 20162018 Registration Document, (starting onpage 42), which isare incorporated herein by reference.
5.4.2 Cash flow
Cash flow from operating activities in 20162018 was $16,521$24,703 million compared to $19,946$22,319 million in 20152017 and $25,608$16,521 million in 2014.2016. The $3,425increase of $2,384 million decrease in cash flow from operating activities from 20152017 to 20162018 was mainly due mainly to an increase in working capital requirements in 2016 of $1,119 million compared to a decrease of $1,683 million in 2015. The Group’s working capital requirement was affected by the effect of changes in oil and oil product prices. As IFRS rules require TOTAL to account for inventories of petroleum products according to the FIFO method, an increase in oil and oil products in 2016 compared to a decrease in 2015 generates, all other factors remaining equal, an increase in inventories, resulting in an increase in working capital requirements. In 2016, the Group’s working capital requirement increased by $1,119 million, due to increases in inventories and receivables partially offset by an increase in payables. The Group’s working capital requirement decreased by $1,683 million in 2015 and by $4,480 million in 2014, in both cases mainly due to reductions in inventory and receivables.net result.
Cash flow used in investing activities in 20162018 was $17,653$14,946 million compared to $20,449$11,632 million in 20152017 and $24,319$17,653 million in 2014.2016. The increase of $3,314 million from 2017 to 2018 was mainly due to higher expenditures on the portfolio of Exploration & Production and Gas, Renewables & Power segments. The decrease of $6,021 million from 20152016 to 20162017 was mainly due to lower expenditures on the Group’s portfolio of UpstreamExploration & Production projects and lowerhigher divestments mainly in the Refining & Chemicals segment which had a higher level of divestments in 2015 due to the sale of Bostik. The decrease from 2014 to 2015 was due to lower expenditures on the Group’s portfolio of Upstream projects, as various projects approached completion, and by the divestment of Bostik in the Refining & Chemicals segment, partly offset by the extension of the ADCO concession in Abu Dhabi.(principally Atotech). Total expenditures in 20162018 were $20,530$22,185 million compared to $28,033$16,896 million in 20152017 and $30,509$20,530 million in 2014.2016. During 2016, 78%2018, 69% of the expenditures were made by the UpstreamExploration & Production segment (as compared to 87%76% in 20152017 and 2014)78% in 2016), 9%16% by the Gas, Power & Renewables segment (as compared to 5% in 2017 and 6% in 2016), 8% by the Refining & Chemicals segment (compared to 7%10% in 20152017 and 2014)9% in 2016) and 13%7% by the Marketing & Services segment (compared to 9% in 2017 and 6% in 2015 and 2014)2016). The main source of funding for these expenditures has beenwas cash from operating activities and issuances ofnon-current debt and perpetual subordinated notes. debt. For additional information on expenditures, please refer to
the discussions in “"- — 1.5.1 Overview”", "- 5.2 Group results 2016-2018" and “"- — 2. Results 2014-20165.3 Business segment reporting”", above, and point 3 (“Investments”2.5 ("Investments") of chapter 2 of the 20162018 Registration Document (starting onpage 4268), which is incorporated herein by reference.
Divestments, based on selling price and net of cash sold, in 20162018 were $2,877$7,239 million compared to $7,584$5,264 million in 20152017 and $6,190$2,877 million in 2014.2016. In 2018, the Group’s principal divestments were assets sales of $5,172 million, consisting of the reasons set forth in "- 5.2 Group results 2016-2018" above. In 2017, the Group’s principal divestments were assets sales of $4,239 million, consisting mainly of sales of Atotech, interests in the Gina Krog field in Norway and in various mature assets in Gabon. In 2016, the Group’s principal divestments were asset sales of $1,864 million, consisting mainly of interests in the FUKA and SIRGE gas pipelines, and the St. Fergus gas terminal in the United Kingdom. In 2015, the Group’s principal divestments were asset sales of $5,968 million, consisting mainly of sales of Bostik, interests in onshore blocks in Nigeria, Totalgaz, the Schwedt refinery, the Géosel oil storage facility, coal mining assets in South Africa, and partial interests in Laggan-Tormore and Fort Hills. In 2014, the Group’s principal divestments were asset sales of $4,650 million, consisting mainly of sales in the Upstream segment in Azerbaijan, Angola and the United States.
Cash flow raised fromfrom/(used in) financing activities in 20162018 was $3,532$(13,925) million compared to $1,060$(5,540) million in 20152017 and $5,909$3,532 million in 2014.2016. The increasedecrease in cash flow from financing activities in 20162018 compared to 20152017 was primarily due to the variationbuyback of shares in 2018 ($(4,328) million in 2018 compared to $0 in 2017), the decrease in the net issuance of non-current debt ($649 million in 2018 compared to $2,277 million in 2017) and the decrease in current financial assets and liabilities ($1,396(797) million in 20162018 compared to $(5,517)an increase of $1,903 million in 2015), partially offset by the decrease in variation of current borrowings $(3,260) million in 2016 compared to $(597) million in 2015), the lower issuance of perpetual subordinated notes in 2016 ($4,711 million compared to $5,616 million in 2015) and the decrease in net issuance of2017).
non-current5.4.3 borrowings ($3,576 million in 2016 compared to $4,166 million in 2015).Indebtedness
The Company’snon-current financial debt atyear-end 2016 2018 was $43,067$40,129 million(1) compared to $44,464$41,340 million atyear-end 2015 2017 and $45,481$43,067 million atyear-end 2014. 2016. For further information on the Company’s level of borrowing and the type of financial instruments, including maturity profile of debt and currency and interest rate structure, see Note 15 ("Financial structure and financial costs") to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 270320), which is incorporated herein by reference. For further information on the Company’s treasury policies, including the use of instruments for hedging purposes and the currencies in which cash and cash equivalents are held, see “"Item 11. Quantitative and Qualitative Disclosures About Market Risk”".
On February 22, 2016, Standard & Poor’s downgraded TOTAL’s long term credit rating fromAA- to A+ with a negative outlook. The short term credit rating was also downgraded fromA-1+ toA-1. On April 8, 2016, Moody’s downgraded TOTAL’s long term credit rating from Aa1 to Aa3 with a stable outlook.
Cash and cash equivalents atyear-end 2016 2018 were $24,597$27,907 million compared to $23,269$33,185 million atyear-end 2015 2017 and $25,181$24,597 million at year-end 2016.
On April 25, 2018, Moody’s upgraded TOTAL’s outlook to positive, with a long term credit rating remaining Aa3.
year-end5.4.4 2014.Shareholders’ equity
Shareholders’ equity atyear-end 2016 2018 was $101,574$118,114 million compared to $95,409$114,037 million atyear-end 2015 2017 and $93,531$101,574 million atyear-end 2014. 2016. Changes in shareholders’ equity in 2018 were primarily due to the impacts of comprehensive income, dividend payments, the issuance of common shares and buy-back shares in the context of the shareholder return policy announced in February 2018. Changes in shareholders’ equity in 2017 were primarily due to the impacts of comprehensive income, dividend payments and the issuance of common shares. Changes in shareholders’ equity in 2016 were primarily due to the impacts of comprehensive income, dividend payments, the issuance of perpetual subordinated notes and the issuance of common shares. Changes in shareholders’ equity in 2015 were primarily due to
In 2018, the impacts of dividend payments,Company bought back 72,766,481 TOTAL shares on the issuance of perpetual subordinated notes and the issuance of common shares. Changes in shareholders’ equity in 2014 were primarily due to the impacts of dividend payments, variations in foreign exchange and impairments (for information concerning the impairments, refer to “—2. Results 2014-2016”market, i.e., above).
At the meeting held on December 15, 2016, and pursuant to the authorization of the Extraordinary Shareholders’ Meeting of May 11, 2012, the Board of Directors of TOTAL S.A. decided to cancel 100,331,268 treasury shares (i.e., 4.13%2.76% of the share capital as of December 31, 2016) that2018.
71,950,977 TOTAL S.A. hadshares were bought back for cancellation, including:
off-market-47,229,037 shares in order to cancel the dilution related to the shares issued for payment (i) of the second and third interim dividends and the final dividend for fiscal year 2017, as well as (ii) the first interim dividend for fiscal year 2018; and
-24,721,940 shares for $1.5 billion (2), following the Board’s decision to buy back shares of the Company up to an amount of $5 billion over the 2018-2020 period.
815,504 shares were bought back in order to cover the performance share plans approved by the Board of Directors on July 27, 2016, and July 26, 2017.
Finally, the Board of Directors of TOTAL S.A, at a meeting held on December 2016 from four12, 2018, decided, following the authorization of its 100% indirectly controlled subsidiaries. Following thisthe Extraordinary Shareholders’ Meeting on May 26, 2017, to cancel 44,590,699 treasury shares, including:
-28,445,840 shares issued, with no discount, in 2018 for payment of the second and third interim dividends, as well as the final dividend, for fiscal year 2017; and
-16,144,859 shares bought back pursuant to the shareholder return policy, up to an amount of $5 billion over the 2018-2020 period.
This transaction Group affiliates no longer hold any treasury shares. This buyback of shares had no impact on the consolidated financial statements of TOTAL S.A. For additional information, refer to point 3, the number of chapter 8 (“Share buybacks”) offully-diluted weighted-average shares or on the earnings per share.
In 2017, the Company did not buy back any shares.
As regards fiscal year 2016, Registration Document (starting onpage 183), which is incorporated herein by reference. In 2015, TOTAL S.A. bought back nearly 4.7 million of its own shares (i.e., 0.19% of the share capital as of December 31, 2015) under the previous authorization granted by the shareholders at the meeting of May 29, 2015. In 2014, TOTAL S.A. bought back nearly 4.4 million of its own shares (i.e., 0.18% of the share capital as of December 31, 2014) underfollowing the authorization granted by the shareholders at the meetingExtraordinary Shareholders’ Meeting of May 16, 2014.11, 2012, the Company’s Board of Directors decided to cancel 100,331,268 treasury shares that the Company had bought back off-market in December 2016, under the share buyback program authorized by the Shareholders’ Meeting on May 24, 2016, from four of its 100% indirectly controlled subsidiaries.
5.4.5 Net-debt-to-capital
As of December 31, 2016,2018, TOTAL’snet-debt-to-equity net-debt-to-capital ratio(1) (3) was 27.1%15.5% compared to 28.3%11.9% and 31.3%21.1% at year-ends 20152017 and 2014,2016, respectively. The decreaseincrease from 20142017 to 20152018 was mostly due to the issuanceincrease of perpetual subordinated notes.the net debt driven by the decrease in cash and cash equivalents and also by the increase of equity explained above.
As of December 31, 2016, TOTAL S.A.2018, the Company had $10,076$11,515 million of long-term confirmed lines of credit, of which $10,076$11,515 million were unused.
(1) Excludes net current and non-current financial debt of $(15) million as of December 31, 2018, related to assets classified in accordance with IFRS 5 "non-current assets held for sale and discontinued operations". None as of December 31, 2017.
(2) Or €1.2 billion at the average exchange rate for 2018. (3) For additional information, refer to Note 15.1(E) to the Consolidated Financial Statements in the 2018 Registration Document (on page 325), which is incorporated herein by reference. Back to ContentsForm 20-F 2018 TOTAL 13 5.5 Guarantees and other off-balance sheet arrangements |
As of December 31, 2016,2018, the guarantees provided by TOTAL S.A.the Company in connection with the financing of the Ichthys LNG project amounted to $7,800$9,425 million. As of December 31, 2017, the guarantees amounted to $8,500 million.
Guarantees given against borrowings also include the guarantee given by the Company in connection with the financing of the Yamal LNG project, which amounted to $3,875 million as of December 31, 2018, compared to $4,038 million as of December 31, 2017.
As of December 31, 2018, TOTAL S.A. has confirmed guarantees for Total Refining Saudi Arabia SAS shareholders’ advances for an amount of $1,462 million as in 2017.
As of December 31, 2018, the guarantee given in 2008 by TOTAL S.A. in connection with the financing of the Yemen LNG project for an amount ofamounts to $551 million and the guarantee givenas in 20162017.
As of December 31, 2018, guarantees provided by TOTAL S.A. in connection with the financing of the Yamal LNGBayport Polymers LLC project, for an amount of $3,147 million.
In 2015, TOTAL S.A. has confirmed and extended guarantees for TOTAL Refining SAUDI ARABIA SAS shareholders’ advances for an amount of $1,013 million. As of December 31, 2016, the guarantees amounted to $1,230$1,820 million.
These guarantees and other information on the Company’s commitments and contingencies are presented in Note 13 ("Off balance sheet commitments and lease contracts") to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 263312), which is incorporated herein by reference.
The Group does not currently consider that these guarantees, or any otheroff-balance sheet arrangements of TOTAL S.A. northe Company or any other members of the Group, have or are reasonably likely to have, currently or in the future, a material effect on the Group’s financial condition, changes in financial condition, revenues or expenses, results of operation, liquidity, capital expenditures or capital resources.
5.6 Contractual obligations
Payment due by period (M$) | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total |
Non-current debt obligations (a) | - | 9,156 | 9,916 | 18,712 | 37,784 |
Current portion of non-current debt obligations (b) | 5,027 | - | - | - | 5,027 |
Finance lease obligations (c) | 213 | 242 | 226 | 1,197 | 1,878 |
Asset retirement obligations (d) | 844 | 1,664 | 1,724 | 10,054 | 14,286 |
Operating lease obligations (c) | 1,644 | 2,249 | 1,442 | 3,795 | 9,130 |
- Purchase obligations (e) | 9,708 | 14,762 | 15,890 | 80,759 | 121,119 |
TOTAL | 17,436 | 28,073 | 29,198 | 114,517 | 189,224 |
(a) Non-current debt obligations are included in the items "Non-current financial debt" and "Hedging instruments of non-current financial debt" of the Consolidated Balance Sheet (refer to point 8.4 of chapter 8 of the 2018 Registration Document (on page 256), which is incorporated herein by reference). The figures in this table are net of the non-current portion of issue swaps and swaps hedging bonds, and exclude non-current finance lease obligations of $1,665 million.
(b) The current portion of non-current debt is included in the items "Current borrowings", "Current financial assets" and "Other current financial liabilities" of the Consolidated Balance Sheet. The figures in this table are net of the current portion of issue swaps and swaps hedging bonds and exclude the current portion of finance lease obligations of $213 million.
(c) Finance lease obligations and operating lease obligations: the Group leases real estate, retail stations, ships and other equipment through non-cancelable capital and operating leases. These amounts represent the future minimum lease payments on non-cancelable leases to which the Group is committed as of December 31, 2018, less the financial expense due on finance lease obligations for $934 million.
Payment due by period (M$) | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | |||||||||||||||
Non-current debt obligations(a) | — | 9,963 | 8,486 | 23,398 | 41,847 | |||||||||||||||
Current portion ofnon-current debt obligations(b) | 4,614 | — | — | — | 4,614 | |||||||||||||||
Finance lease obligations(c) | 8 | 59 | 44 | 208 | 319 | |||||||||||||||
Asset retirement obligations(d) | 685 | 1,325 | 944 | 9,711 | 12,665 | |||||||||||||||
Operating lease obligations(c) | 1,582 | 1,831 | 1,122 | 1,943 | 6,478 | |||||||||||||||
Purchase obligations(e) | 10,898 | 8,731 | 11,839 | 73,740 | 105,208 | |||||||||||||||
Total | 17,787 | 21,909 | 22,435 | 109,000 | 171,131 |
(d) The discounted present value of Exploration & Production asset retirement obligations, primarily asset removal costs at the completion date.
(e) Purchase obligations are obligations under contractual agreements to purchase goods or services, including capital projects. These obligations are enforceable and legally binding on TOTAL and specify all significant terms, including the amount and the timing of the payments. These obligations mainly include: hydrocarbon unconditional purchase contracts (except where an active, highly liquid market exists and when the hydrocarbons are expected to be re-sold shortly after purchase); reservation of transport capacities in pipelines; unconditional exploration works and development works in the Exploration & Production segment; and contracts for capital investment projects in the Refining & Chemicals segment. This disclosure does not include contractual exploration obligations with host states where a monetary value is not attributed and purchases of booking capacities in pipelines where the Group has a participation superior to the capacity used.
For additional information on the Group’s contractual obligations, seerefer to Note 13 to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 263312), which is incorporated herein by reference. The Group has other obligations in connection with pension plans whichthat are described in Note 10 ("Payroll, staff and employee benefits obligations") to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 254304), which is incorporated herein by reference. As these obligations are not contractually fixed as to timing and amount, they have not been included in this disclosure. Othernon-current liabilities, detailed in Note 12 ("Provisions and other non-current liabilities") to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 260310), which is incorporated herein by reference, are liabilities related to risks that are probable and amounts that can be reasonably estimated. However, no contractual agreements exist related to the settlement of such liabilities, and the timing of the settlement is not known.
Research and development |
For a discussion of the Group’s R&D policies and activities, refer to point 4 (“Research & Development”points 1.5.1 of chapter 1 (on page 23) and 2.6 of chapter 2 (starting on page 70) of the 20162018 Registration Document, (starting onpage 44), which isare incorporated herein by reference.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Directors, senior management and employees
The following information concerningdirectorsconcerning directors and senior management from the 20162018 Registration Document is incorporated herein by reference:
-composition of the Board of Directors (introduction and point 4.1.1 of chapter 4, starting on page 112); and
-information concerning the General Management (point 4.1.5 of chapter 4, starting on page 138).
The following information concerning compensation from the 20162018 Registration Document is incorporated herein by reference:
-approach to overall compensation (point 5.3.1.2 of chapter 5, starting on page 182); and
-compensation for the administration and management bodies (point 4.3 of chapter 4, starting on page 145).
The following information concerning boardBoard practices and corporate governance from the 20162018 Registration Document is incorporated herein by reference:
-practices of the Board of Directors (point 4.1.2 of chapter 4, starting on page 125);
-report of the Lead Independent Director on her mandate (point 4.1.3 of chapter 4, starting on page 137);
-evaluation of the functioning of the Board of Directors (point 4.1.4 of chapter 4, on page 138); and
-statement regarding corporate governance (point 4.2 of chapter 4, on page 145).
The following information concerningemployeesconcerning employees and share ownership from the 20162018 Registration Document is incorporated herein by reference:
-number and categories of employees (point 5.3.1.1 of chapter 5, starting on page 181);
-shares held by the administration and management bodies (point 4.1.6 of chapter 4, starting on page 143); and -employee shareholding (point 6.4.2 of chapter 6, on page 237). |
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS Major shareholders and related party transactions
The following information concerning shareholders from the 20162018 Registration Document is incorporated herein by reference:
-major shareholders (point 6.4.1 of chapter 6, starting on page 235); and
-shareholding structure (point 6.4.3 of chapter 6, on page 237).
The Group’s main transactions with related parties (principally all the investments carried under the equity method) and the balances receivable from and payable to them are shown in point 8.3 of Note 8 ("Equity affiliates, other investments and related parties") to the Consolidated Financial Statements in the 20162018 Registration Document (starting onpage 239294), which is incorporated herein by reference). In the ordinary course of its business, TOTAL enters into transactions with various organizations with which certain of its directors or executive officers may be associated, but no such transactions of a material or unusual nature have been entered into during the period commencing on January 1, 2014,2018, and ending on March 15, 2017.the date of this document.
ITEM 8. FINANCIAL INFORMATION Financial information
The following information from the 20162018 Registration Document is incorporated herein by reference:
-Consolidated Financial Statements and Notes thereto (chapter 8, starting on page 265);
-supplemental oil and gas information (points 9.1 and 9.2 of chapter 9, starting on page 362);
-report on payments made to governments (point 9.3 of chapter 9, starting on page 380);
-legal and arbitration proceedings (point 3.2 of chapter 3, starting on page 85); and
-dividend policy and other related information (point 6.2 of chapter 6, starting on page 229).
Except for certain events mentioned in “"Item 5. Operating and Financial Reviewfinancial review and Prospectsprospects” and", point 2 (“3.2 ("Legal and arbitration proceedings”proceedings") of chapter 43 (starting onpage 7385) and Note 17 (“("Post closing events”events") to the Consolidated Financial Statements (onpage 289339) of the 20162018 Registration Document, which are incorporated herein by reference, no significant changes to the Group’s financial or commercial situation have occurred since the date of the Company’s Consolidated Financial Statements.
Refer to “"Item 18. Financial Statementsstatements”" for the reports of the statutory auditors.
ITEM 9. THE OFFER AND LISTING The offer and listing
9.1Markets |
The principal trading markets for the Company’s shares are the following: Euronext Paris exchange in France(France) and the New York Stock Exchange (“NYSE”) in the("NYSE", United States.States). The shares are also listed on Euronext Brussels (Brussels) and the London Stock Exchange.Exchange (United Kingdom).
9.2Offer and listing details |
Provided below is certain information on trading on Euronext Paris and the New York Stock Exchange. For additional information on listing details and share performance, refer to point 1 (“6.1 ("Listing details”details") of chapter 86 of the 20162018 Registration Document (starting onpage 178226), which is incorporated herein by reference.
9.2.1 Trading on Euronext Paris
Official trading of listed securities on Euronext Paris, including the shares, is transacted through French investment service providers that are members of Euronext Paris and takes place continuously on each business day in Paris from 9:00 a.m. to 5:30 p.m. (Paris time), with a fixing of the closing price at 5:35 p.m. Euronext Paris may suspend or resume trading in a security listed on Euronext Paris if the quoted price of the security exceeds certain price limits defined by the regulations of Euronext Paris.
The markets of Euronext Paris settle and transfer ownership two trading days after a transaction (T+2). Highly liquid shares, including those of the Company, are eligible for deferred settlement (Service de Règlement Différé — - SRD). Payment and delivery for shares under the SRD occurs on the last trading day of each month. Use of the SRD service requires payment of a commission.
In France, the shares are included in the principal index published by Euronext Paris (the “CAC"CAC 40 Index”Index"). The CAC 40 Index is derived daily by comparing the total market capitalization of forty stocks traded on Euronext Paris to the total market capitalization of the stocks that made up the CAC 40 Index on December 31, 1987. Adjustments are made to allow for expansion of the sample due to new issues. The CAC 40 index indicates trends in the French stock market as a whole and is one of the most widely followed stock price indices in France. In the UK, the shares are listed in both the FTSE Eurotop 100 and FTSEurofirst 300100 index. As a result of the creation of Euronext, the shares are included in Euronext 100, the index representing Euronext’s blue chip companies based on market capitalization. The shares are also included in the Dow Jones Stoxx Europe 50 and Dow Jones Euro Stoxx 50, blue chip indices comprised of the fifty most highly capitalized and most actively traded equities throughout Europe and within the European Monetary Union, respectively. Since June 2000, the shares have been included in the Dow Jones Global Titans 50 Index which consists of fifty global companies selected based on market capitalization, book value, assets, revenue and earnings.
The table below sets forth,TOTAL’s ticker symbol for Euronext Paris is FP.
9.2.2 Trading on the periods indicated, the reported high and low quoted prices in euros for the currently outstanding shares on Euronext Paris.New York Stock Exchange
Price per share (€) | High | Low | ||||||
2012 | 42.970 | 33.420 | ||||||
2013 | 45.670 | 35.175 | ||||||
2014 | 54.710 | 38.250 | ||||||
2015 | 50.300 | 36.920 | ||||||
First Quarter | 48.600 | 39.345 | ||||||
Second Quarter | 50.300 | 43.285 | ||||||
Third Quarter | 46.500 | 36.920 | ||||||
Fourth Quarter | 47.400 | 40.255 | ||||||
2016 | 48.885 | 35.210 | ||||||
First Quarter | 43.430 | 35.210 | ||||||
Second Quarter | 45.225 | 38.065 | ||||||
Third Quarter | 44.955 | 40.530 | ||||||
September | 44.955 | 40.530 | ||||||
Fourth Quarter | 48.885 | 41.825 | ||||||
October | 44.840 | 42.160 | ||||||
November | 45.405 | 41.825 | ||||||
December | 48.885 | 44.110 | ||||||
2017 (through February 28) | 49.500 | 46.140 | ||||||
January | 49.500 | 46.385 | ||||||
February | 48.985 | 46.140 |
ADSs evidenced by ADRs have been listed on the NYSE since October 25, 1991. JPMORGAN CHASE BANK, N.A. serves as depositary with respect to the ADSs evidenced by ADRs traded on the NYSE. One ADS corresponds to one TOTAL share. The table below sets forth,
TOTAL’s ticker symbol for the periods indicated, the reported high and low prices quoted in dollars for the currently outstanding ADSs evidenced by ADRs on the NYSE.NYSE is TOT.
Price per ADR ($) | High | Low | ||||||
2012 | 57.06 | 41.75 | ||||||
2013 | 62.45 | 45.93 | ||||||
2014 | 74.220 | 48.433 | ||||||
2015 | 54.790 | 40.930 | ||||||
First Quarter | 55.860 | 46.610 | ||||||
Second Quarter | 54.790 | 48.530 | ||||||
Third Quarter | 50.870 | 40.930 | ||||||
Fourth Quarter | 52.340 | 44.190 | ||||||
2016 | 51.360 | 39.050 | ||||||
First Quarter | 48.000 | 39.050 | ||||||
Second Quarter | 51.300 | 43.550 | ||||||
Third Quarter | 50.210 | 45.355 | ||||||
September | 50.210 | 45.355 | ||||||
Fourth Quarter | 51.360 | 45.050 | ||||||
October | 49.105 | 47.410 | ||||||
November | 48.040 | 45.050 | ||||||
December | 51.360 | 47.380 | ||||||
2017 (through February 28) | 52.040 | 49.330 | ||||||
January | 52.040 | 49.567 | ||||||
February | 51.980 | 49.330 |
ITEM 10. ADDITIONAL INFORMATION Additional information
10.1Share capital |
The following information set forth in point 1 (“Share capital”) of chapter 9 (starting onpage 196) and point 3 (“Share buybacks”) of chapter 8 (starting onpage 183) offrom the 20162018 Registration Document is incorporated herein by reference.reference:
-information concerning the share capital (point 7.1 of chapter 7, starting on page 242);
-the use of delegations of authority and power granted to the Board of Directors with respect to share capital increases (point 4.4.2 of chapter 4, starting on page 170); -information on share buybacks (point 6.3 of chapter 6, starting on page 232); and -factors likely to have an impact in the event of a public offering (point 4.4.4 of chapter 4, starting on page 171). 10.2Memorandum and articles of association |
The following information set forth in point 2 (“Articles of incorporation and bylaws; other information”) of chapter 9 offrom the 20162018 Registration Document (starting onpage 198) is incorporated herein by reference.reference:
-information concerning the articles of incorporation and bylaws, and other information (point 7.2 of chapter 7, starting on page 244); and
-participation of shareholders at shareholders’ meetings (point 4.4.3 of chapter 4, on page 171). 10.3Material contracts |
There have been no material contracts (not entered into in the ordinary course of business) entered into by members of the Group since March 15, 2015.20, 2017.
10.4Exchange controls |
Under current French exchange control regulations, no limits exist on the amount of payments that TOTAL may remit to residents of the United States. Laws and regulations concerning foreign exchange controls do require, however, that an accredited intermediary must handle all payments or transfer of funds made by a French resident to a non-resident.
10.5 Taxation
10.5.1 General
This section generally summarizes the material U.S. federal income tax and French tax consequences of owning and disposing of shares or ADSs of TOTAL to U.S. Holders that hold their shares or ADSs as capital assets for tax purposes. A U.S. Holder is a beneficial owner of shares or ADSs that is (i) a citizen or resident of the United States for U.S. federal income tax purposes, (ii) a domestic corporation or other domestic entity treated as a corporation for U.S. federal income tax purposes, (iii) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if (1) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust.trust or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
This section does not address the Medicare tax on net investment income and does not apply to members of special classes of holders subject to special rules, including:including without limitation:
-broker-dealers;
-traders in securities that elect to use amark-to-market method of accounting for their securities holdings;
-tax-exempt organizations;
- organizations;
-insurance companies;
-U.S. pension funds;
-U.S. Regulated Investment Companies (RICs), Real Estate Investment Trusts (REITs), and Real Estate Mortgage Investment Conduits (REMICs);
-persons who are liable for the alternative minimum tax;
-persons that actually or constructively own 10% or more of the shares of TOTAL (by vote or value);
-persons who acquired the shares or ADS pursuant to the exercise of any employee share capitaloption or voting rights in TOTAL;
-persons that purchase or sell shares or ADSs as part of a wash sale for U.S. federal income tax purposes;
-persons that holdholding offsetting positions in respect of the shares or ADSs (including as part of a straddle, hedging, conversion or integrated transaction);
-persons subject to special tax accounting rules as a hedgingresult of any item of gross income with respect to the shares or conversion transaction; or
-U.S. expatriates; and
-persons whose functional currency is not the U.S. dollar.
If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. Partners of a partnership holding these shares or ADSs should consult their tax advisors as to the tax consequences of owning or disposing of shares or ADSs, as applicable.
Under French law, specific rules apply to trusts, in particular specific tax and filing requirements as well as modificationsrequirements; additionally, specific rules apply to wealth, estate and gift taxes as they apply to trusts. Given the complex nature of these rules and the fact that their application varies depending on the status of the trust, the grantor, the beneficiary and the assets held in the trust, the following summary does not address the tax treatment of ADSsshares or sharesADSs held in a trust. If ADSsshares or sharesADSs are held in trust, the grantor, trustee and beneficiary are urged to consult their own tax advisor regarding the specific tax consequences of acquiring, owning and disposing of ADSsshares or shares.ADSs.
In addition, the discussion below is limited to U.S. Holders that (i) are residents of the United States for purposes of the Treaty (as defined below), (ii) do not maintain a permanent establishment or fixed base in France to which the shares or ADSs are attributable and through which the respective U.S. Holders carry on, or have carried on, a business (or, if the holder is an individual, performs or has performed independent personal services), and (iii) are otherwise eligible for the benefits of the Treaty in respect of income and gain from the shares or ADSs (in particular, under the “Limitation"Limitation on Benefits”Benefits" provision of the Treaty). In addition, this section is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.
This section isThe discussions below of the material U.S. federal income tax consequences to U.S. Holders of owning and disposing of shares or ADSs of TOTAL are based on the Internal Revenue Code of 1986, as amended (“IRC”)(IRC), its legislative history, existingTreasury regulations promulgated thereunder and proposed regulations, published rulingsjudicial and court decisions,administrative interpretations thereof, all as in effect on the date hereof and with respectall of which are subject to change, which change could apply retroactively and could affect the tax consequences described below. The description of the material French tax consequences is based on the laws of the Republic of France and French tax regulations, all as currently in effect, as well as on the Convention Between the United States and the Republic of France for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital dated August 31, 1994, as amended (the “Treaty”"Treaty"). These laws, regulations and the Treaty are subject to change, possibly on a retroactive basis.
In general, and taking into account the earlier assumptions, for U.S. federal income tax purposes, a U.S. Holder of ADRs evidencing ADSs will be treated as the owner of the shares represented by those ADRs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to U.S. federal income tax. The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying security. Accordingly, the creditability of any French taxes and the availability of the reduced tax rate for any dividends received by certain non-corporate U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between the holders of the ADSs and TOTAL if as a result of such actions the U.S. Holders of the ADSs are not properly treated as beneficial owners of underlying shares.
This discussion is intended only as a descriptive summary and does not purport to be a complete analysis or listing of all potential tax effects of the ownership or disposition of the shares and ADSs and is not intended to substitute competent professional advice. Individual situations
of holders of shares and ADSs may vary from the description made below. The following summary does not address the French tax treatment applicable to dividends paid inso-called “Non "Non Cooperative Countries and Territories” (“NCCT”Territories" ("NCCT") within the meaning ofSection Article 238-0 A of the French Code général des impôts ("French Tax Code.Code") as such provision or list may be amended from time to time or replaced by any other provision or list having a similar purpose. It does not apply to dividends paid to persons established or domiciled in such a NCCT, or paid to a bank account opened in a financial institution located in such a NCCT, nor does it apply to capital gains realized by persons established or domiciled in such a NCCT. Furthermore, the following summary does not address the tax treatment applicable to temporary transfers and other similar transactions which could, under certain conditions, fall within the scope of the new anti-abuse measure set forth in Article 119 bis A of the French Tax Code with effect as from July 1, 2019.
Holders are urged to consult their own tax advisors regarding the U.S. federal, state and local, and the French and other tax consequences of owning and disposing shares or ADSs of TOTAL in their respective circumstances. In particular, a holder is encouraged to confirm with its advisor whether the holder is a U.S. Holder eligible for the benefits of the Treaty.
10.5.2 Taxation of dividends
French taxation
The term “dividends”"dividends" used in the following discussion means dividends within the meaning of the Treaty.
Dividends paid tonon-residents of France who are U.S. Holders are in principle subject to a French withholding tax at a rate of 30%, regardless of whether they are paid in cash, in shares or a mix of both. The French withholding tax is levied (i) at a rate of 12.8% for dividends paid to U.S. Holders who are individuals and (ii) at a rate of 30% (to be reduced and aligned on the standard corporate income tax rate set forth in the second paragraph of Article 219-I of the French Tax Code which is set at a rate of (x) 28% for fiscal years commencing on or after January 1, 2020, (y) 26.5% for fiscal years commencing on or after January 1, 2021 and (z) 25% for fiscal years commencing on or after January 1, 2022) for dividends paid to U.S. Holders that are legal entities (the "Legal Entities U.S. Holders") subject to more favorable provisions of the Treaty as described below and certain more favorable French domestic law provisions.
However, under the Treaty, a U.S. Holder is generally entitled to a reduced rate of French withholding tax of 15% with respect to dividends, provided that certain requirements are satisfied. This reduced rate is, in practice, only of interest to Legal Entities U.S. Holders subject to the withholding tax at a rate of 30%.
Administrative guidelines (Bulletin Officiel des Finances Publiques,BOI-INT-DG-20-20-20-20-20120912) (the “Administrative Guidelines”"Administrative Guidelines") set forth the conditions under which the reduced French withholding tax at the rate of 15% may be available. The immediate application of the reduced 15% rate is available to those U.S. Holders that may benefit from theso-called “simplified procedure” "simplified procedure" (within the meaning of the Administrative Guidelines).
Under the “simplified procedure”"simplified procedure", U.S. Holders may claim the immediate application of withholding tax at the rate of 15% on the dividends to be received by them, provided that:
(ii) the U.S. financial institution managing the U.S. Holder’s securities account provides the French paying agent with a list of the eligible U.S. Holders and other pieces of information set forth in the Administrative Guidelines. Furthermore, the financial institution managing the U.S. Holders’ securities account should certify that the U.S. Holder is, to the best of its knowledge, a United States resident within the meaning of the Treaty. These documents must be sent to the French paying agent within a time frame that will allow the French paying agent to file them no later than the end of the third month computed as from the end of the month of the dividend payment date.
Where the U.S. Holder’s identity and tax residence are known by the French paying agent, the latter may release such U.S. Holder from furnishing to (i) the financial institution managing its securities account, or (ii) as the case may be, the U.S. Internal Revenue Service (“IRS”("IRS"), the abovementioned certificate of residence, and apply the 15% withholding tax rate to dividends it pays to such U.S. Holder.
For a U.S. Holder that is not entitled to the “simplified procedure”"simplified procedure" and whose identity and tax residence are not known by the paying agent at the time of the payment, the 30% French withholding tax will be levied at the time the dividends are paid. Such U.S. Holder, however, may be entitled to a refund of the withholding tax in excess of the 15% rate under the “standard procedure”"standard procedure", as opposed to the “simplified procedure”"simplified procedure", provided that the U.S. Holder furnishes to the French paying agent an application for refund onforms No. 5000-FR and5001-FR (or any other relevant form to be issued by the French tax authorities) certified by the U.S. financial institution managing the U.S. Holder’s securities account (or, if not, by the competent U.S. tax authorities) before December 31 of the second year following the date of payment of the withholding tax at the 30% rate to the French tax authorities, according to the requirements provided by the Administrative Guidelines.
Copies offorms No. 5000-FR and5001-FR (or any other relevant form to be issued by the French tax authorities) as well as the form of the certificate of residence and the U.S. financial institution certification, together with instructions, are available from the IRS and the French tax authorities.
These forms, together with instructions, are to be provided by the Depositary to all U.S. Holders of ADRs registered with the Depositary. The Depositary is to use reasonable efforts to follow the procedures established by the French tax authorities for U.S. Holders to benefit from the immediate application of the 15% French withholding tax rate or, as the case may be, to recover the excess 15% French withholding tax initially withheld and deducted in respect of dividends distributed to them by TOTAL. To effect such benefit or recovery, the Depositary shall advise such U.S. Holder to return the relevant forms to it, properly completed and executed. Upon receipt of the relevant forms properly completed and executed by such U.S. Holder, the Depositary shall cause them to be filed with the appropriate French tax authorities, and upon receipt of any resulting remittance, the Depositary shall distribute to the U.S. Holder entitled thereto, as soon as practicable, the proceeds thereof in U.S. dollars.
The identity and address of the French paying agent are available from TOTAL.
In addition, subject to certain specific filing obligations, there is no withholding tax on dividend payments made by French companies to:
(i) non-French collective investment funds formed under foreign law and established in a Member State of the European Union or in another State or territory, such as the United States, that has entered with France into an administrative assistance agreement for the purpose of combating fraud and tax evasion, and which fulfill the two following conditions: (a) the fund raises capital among a number of investors for
the purpose of investing in accordance with a defined investment policy, in the interest of its investors, and (b) the fund has characteristics similar to those of collective investment funds organized under French law fulfilling the conditions set forth in Article 119-bis 2, 2 of the French Tax Code and the Administrative Guidelines Bulletin Officiel des Finances Publiques, BOI-RPPM-RCM-30-30-20-70-20170607 (i.e., among others, open-end mutual fund (OPCVM), open-end real estate fund (OPCI) and closed-end investment companies (SICAF)); and
(ii) companies whose effective place of management is, or which have a permanent establishment receiving the dividends, in a Member State of the European Union or in another State or territory that has entered with France into an administrative assistance agreement for the purpose of combating fraud and tax evasion, such as the United States, that are in a loss-making position and subject, at the time of the distribution, to insolvency proceedings similar to the one set out in Article L. 640-1 of the French Commercial Code (or where there is no such procedure available, in a situation of cessation of payments with recovery being manifestly impossible) and that meet the other conditions set out in Article 119 quinquies of the French Tax Code as specified by the Administrative Guidelines Bulletin Officiel des Finances Publiques, BOI-RPPM-RCM-30-30-20-80-20160406.
Collective investment funds and companies mentioned in (ii) above are urged to consult their own tax advisors to confirm whether they are eligible to such provisions and under which conditions.
U.S. taxation
For U.S. federal income tax purposes and subject to the passive foreign investment company rules discussed below, the gross amount of any dividend that a U.S. Holder must include in gross income equals the amount paid by TOTAL (i.e., the net distribution received plus any tax withheld therefrom) to the extent of the current andor accumulated earnings and profits of TOTAL (as determined for U.S. federal income tax purposes). Dividends paid to anon-corporate U.S. Holder that constitute qualified dividend income will be taxable to the holder at the preferential rates applicable to long-term capital gains provided that the shares or ADSs are held for more than sixty days during the121-day period beginning sixty days before theex-dividend date and the holder meets other holding period requirements. TOTAL believes that dividends paid by TOTAL with respect to its shares or ADSs will be qualified dividend income. The dividend will not be eligible for the dividends-received deduction allowed to a U.S. corporation under IRC Sectionsection 243. The dividend is taxableDistributions, if any, in excess of such current and accumulated earnings and profits as determined for U.S. federal income tax purposes will constitute a non-taxable return of capital to thea U.S. Holder when the holder,and will be applied against and reduce such U.S. Holder’s tax basis in the case ofsuch shares or ADS. To the Depositary,extent that such distributions are in excess of such basis, the case of ADSs, receives the dividend, actually or constructively.distributions will constitute capital gain. Because TOTAL does not currently maintain calculations of earnings and profits for U.S. federal income tax purposes, a U.S. Holder of shares or ADSs of TOTAL should expect to treat distributions with respect to the shares or ADSs as dividends.
Dividends paid to a non-corporate U.S. Holder that constitute "qualified dividend income" will be taxable to the holder at the preferential rates applicable to long-term capital gains provided (1) the Company is neither a passive foreign investment company nor treated as such with respect to the U.S. Holder for the taxable year in which the dividend was paid and the preceding taxable year and (2) certain holding period requirements are met. TOTAL believes that dividends paid by TOTAL with respect to its shares or ADSs will be qualified dividend income. The dividend is taxable to the U.S. Holder when the holder, in the case of shares, or the Depositary, in the case of ADSs, receives the dividend, actually or constructively.
The amount of any dividend distribution includible in the income of a U.S. Holder equals the U.S. dollar value of the euro payment made, determined at the spot euro/dollar exchange rate on the date the dividend distribution is includible in the U.S. Holder’s income, regardless of whether the payment is in fact converted into U.S. dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in the U.S. Holder’s income to the date the payment is converted into U.S. dollars will generally be treated as ordinary income or loss and, for foreign tax credit limitation purposes, from sources within the United States and will not be eligible for the special tax rate applicable to qualified dividend income.The U.S. federal income tax rules governing the availability and computation of foreign tax credits are complex. U.S. Holders should consult their own tax advisors concerning the implications of these rules in light of their particular circumstances.
Subject to certain conditions and limitations, U.S. Holders may elect to claim a credit against their U.S. federal income tax liability for the net amount of French taxes withheld in accordance with the Treaty and paid over to the French tax authorities will generally be eligible for credit against the U.S. Holder’s U.S. federal income tax liability.authorities. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. In addition, special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. To the extent a refund of the tax withheld is available to a U.S. Holder under French law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against such holder’s U.S. federal income tax liability.
For this purpose, dividends distributed by TOTAL will generally constitute “passive income”, or, in the case of certain U.S. Holders, “general income”, which are treated separately from one another"passive income" for purposes of computing the foreign tax credit allowable to the U.S. Holder. Alternatively, a U.S. Holder may claim all foreign taxes paid as an itemized deduction in lieu of claiming a foreign tax credit.
If a U.S. Holder has the option to receive a distribution in shares (or ADSs) instead of cash, the distribution of shares (or ADSs) will be taxable as if the holder had received an amount equal to the fair market value of the distributed shares (or ADSs), and such holder’s tax basis in the distributed shares (or ADSs) will be equal to such amount.
10.5.3 Taxation of disposition of shares
In general,Under French domestic law, a U.S. Holder will not be subject to French tax on any capital gain from the sale or exchange of the shares or ADSs or redemption of the underlying shares that the ADSs represent unless those shares or ADSs form partrepresent.
Pursuant to Article 235 ter ZD of a business property of a permanent establishment or fixed base that the U.S. Holder has in France. Special rules may apply to individuals who are residents of more than one country.
AFrench tax code, a financial transaction tax applies, under certain conditions, to the acquisition of shares of publicly traded companies registered in France having a market capitalization over€1 €1 billion on December 1st of the year preceding the acquisition. A list of the companies within the scope of the financial transaction tax for 20172019 is published in the French GuidelinesAdministrative guidelines Bulletin Officiel desFinances Publiques,BOI-ANNX-000467-20161220. BOI-ANNX-000467-20181217. TOTAL is included in this list.list, although it cannot be excluded that this list might be amended in the future. The tax also applies to the acquisition of ADRs evidencing ADSs. The financial transaction tax is due at a rate of 0.3% on the price paid to acquire the shares as from January 1, 2017.shares. The person or entity liable for the tax is generally the provider of investment services defined in Article L.321-1 of the French Monetary and Financial Code (prestataire de services d’investissement)d’investissement). Investment service providers providing equivalent services outside France are subject to the tax under the same terms and conditions. Taxable transactions are broadly construed but several exceptions may apply. In general,non-income taxes, such as this financial transaction tax, paid by a U.S. Holder are not eligible for a foreign tax credit for U.S. federal income tax purposes. U.S. Holders should consult their own tax advisors as to the tax consequences and creditability of such financial transaction tax.
For U.S. federal income tax purposes and subject to the passive foreign investment company rules discussed below, a U.S. Holder will generally will recognize capital gain or loss upon the sale or other disposition of shares or ADSs equal to the difference between the U.S. dollar value of the amount realized on the sale or dispositiondisposal and the holder’s tax basis, determined in U.S. dollars, in the shares or ADSs. The gain or loss will generally will be U.S. source gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period of the shares or ADSs is more than one year at the time of the disposition.disposal. Long-term capital gain of anon-corporate U.S. Holder is generally taxed at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is subject to limitation.
10.5.4 Passive foreign investment status
TOTAL believes that the shares orand ADSs are not treated as stock of a passive foreign investment company (“PFIC”)(PFIC) for U.S. federal income tax purposes, and TOTAL does not expect that it will be treated as a PFIC in the current or future taxable years. This conclusion is a factual determination that is made annually and thus is subject to uncertainty and change. In general, a non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. If TOTAL is treated as a PFIC, gain realized on the sale or other disposition of the shares or ADSs would in general not be treated as capital gain. Instead, unless a U.S. Holder elects to be taxed annually on amark-to-market basis with respect to the shares or ADSs, a U.S. Holder would be treated as if he or she had realized such gain and certain “excess distributions” ratably over the holding period for the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, in addition to an interest charge in respect of the tax attributable to each such year. With certain exceptions, a U.S. Holder’s shares or ADSs will be treated as stock in a PFIC if TOTAL were a PFIC at any time during such holder’s holding period in the shares or ADSs. Dividends paid will not be eligible for the preferential tax rates applicable to qualified dividend income if TOTAL is treated as a PFIC with respect to a U.S. Holder either in thefor any taxable year, the U.S. Holder generally would suffer adverse tax consequences, that may include having gains realized on the disposition of the distributionshares or ADSs treated as ordinary income rather than capital gain and being subject to punitive interest charges on the preceding taxable year, but instead willreceipt of certain distributions and on the proceeds of the sale or other disposition of the shares or ADSs. U.S. Holders would also be taxable at rates applicablesubject to ordinary income.information reporting requirements on an annual basis. U.S. Holders should consult their tax advisors about the potential application of the PFIC rules to shares or ADSs.
10.5.5 French estate and gift taxes
In general, a transfer of shares or ADSs by gift or by reason of the death of a U.S. Holder that would otherwise be subject to French gift or inheritance tax, respectively, will not be subject to such French tax by reason of the Convention between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Estates, Inheritances and Gifts, dated November 24, 1978, as amended, unless the donor or the transferor is domiciled in France at the time of making the gift, or at the time of histhe transferor’s death, or if the shares or ADSs were used in, or held for use in, the conduct of a business through a permanent establishment or a fixed base in France.
10.5.6 French wealth tax
As of January 1, 2018, the French wealth tax was abolished and a new real estate wealth tax was introduced. The French real estate wealth tax does not apply to a U.S. Holder (i) that is not an individual, or (ii) in the case of individuals, who are eligible forwhere the benefitsmembers of the Treaty and whotaxable household own, alone or with related persons, directly or indirectly, TOTAL shares which give right to less than 25%10% of TOTAL’s earnings.the share capital or the voting rights of TOTAL.
10.5.7 U.S. state and local taxes
In addition to U.S. federal income tax, U.S. Holders of shares or ADSs may be subject to U.S. state and local taxes with respect to their shares or ADSs. U.S. Holders should consult their own tax advisors.
10.6Dividends and paying agents |
The information set forth in point 2.2 (“6.2.2 ("Dividend payment”payment") of chapter 86 of the 20162018 Registration Document (onpage 182231) is incorporated herein by reference.
10.7
Statements by experts |
The independent third-party report of DeGolyer and MacNaughton, a petroleum engineering consulting firm with address at 5001 Spring Valley Road, Suite 800 East, Dallas, Texas 75244, is attached as Exhibit 15.3 to this Form20-F. This report providedprovides TOTAL estimates of proved crude oil, condensate and natural gas reserves, as of December 31, 2016,2018, of certain properties ownedattributable to or controlled by PAO NOVATEK. As evidenced by Exhibit 15.4 to thisForm 20-F, DeGolyer and MacNaughton has consented to the inclusion of their report in this Form 20-F.
20-F.10.8
Documents on display |
TOTAL files annual, periodic, and other reports and information with the Securities and Exchange Commission. You may inspect any reports, statements or other information TOTAL files with the United States Securities and Exchange Commission (“SEC”) at the SEC’s public reference rooms by calling the SEC for more information at1-800-SEC-0330. All of TOTAL’s SEC filings made after December 31, 2001 are available to the public at the SEC website at http://www.sec.gov and from certain commercial document retrieval services. You may also inspect any document the Company files with the SEC at the offices of The New York Stock Exchange, 20 Broad Street, New York, New York 10005.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and qualitative disclosures about market risk
Please refer to Notes 15.3 ("Financial risks management") (starting onpage 279330) and 16.2 (starting on("Oil and Gas market related risks management") (on page 288339) to the Consolidated Financial Statements in the 20162018 Registration Document, which are incorporated herein by reference, for a qualitative and quantitative discussion of the Group’s exposure to market risks. Please also refer to Notes 15.2 ("Fair value of financial instruments excluding commodity contracts") (starting onpage 274325) and 16 ("Financial instruments related to commodity contracts") (starting onpage 285336) to the Consolidated Financial Statements in the 20162018 Registration Document, which are incorporated herein by reference, for details of the different derivatives owned by the Group in these markets.
As part of its financing and cash management activities, the Group uses derivative instruments to manage its exposure to changes in interest rates and foreign exchange rates. These instruments are mainly interest rate and currency swaps. The Group may also occasionally use futures contracts and options. These operations and their accounting treatment are detailed in Notes 15.2 (starting onpage 274325) and 16 (starting onpage 285336) to the Consolidated Financial Statements in the 20162018 Registration Document, which are incorporated herein by reference.
The financial performance of TOTAL is sensitive to a number of factors; the most significant being oil and gas prices, generally expressed in dollars, and exchange rates, in particular that of the dollar versus the euro. Generally, a rise in the price of crude oil has a positive effect on earnings as a result of an increase in revenues from oil and gas production. Conversely, a decline in crude oil prices reduces revenues. The impact of changes in crude oil prices on the activities of the Refining & Chemicals and Marketing & Services segments depends upon the speed at which the prices of finished products adjust to reflect these changes. All of the Group’s activities are, to various degrees, sensitive to fluctuations in the dollar/euro exchange rate.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Description of securities other than equity securities
12.1American Depositary Receiptsdepositary receipts fees and charges
JPMORGAN CHASE BANK, N.A., as depositary for the TOTAL S.A. ADR program, collects its fees for delivery and surrender of ADRs directly from investors depositing shares or surrendering ADRs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may generally refuse to providefee-attracting services until its fees for those services are paid. A copy of the depositary agreement is attached as Exhibit (a) to the registration statement on Form F-6 (Reg. No. 333-199737) filed by the Company with the SEC on October 31, 2014.
Investors must pay: | For: | |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) |
| |
A fee equivalent to the fee that would be payable if securities distributed to the investor had been shares and the shares had been deposited for issuance of ADSs |
| |
Registration or transfer fees |
| |
Expenses of the depositary |
| |
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes |
| |
Any charges incurred by the depositary or its agents for servicing the deposited securities |
|
The depositary has agreed to provide the Company with payments concerning, among other things, expenses incurred by the Company for the establishment and maintenance of the ADR program that include, but are not limited to, exchange listing fees, annual meeting expenses, standardout-of-pocket maintenance costs for the ADRs (e.g., the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls), shareholder identification, investor relations activities or programs in North America, accounting fees (such as external audit fees incurred in connection with the Sarbanes-Oxley Act, the preparation of the Company’s Form20-F and paid to the FASB and the PCAOB), legal fees and other expenses incurred in connection with the preparation of regulatory filings and other documentation related to ongoing SEC, NYSE and U.S. securities law compliance. In certain instances, the depositary has agreed to make additional payments to the Company based on certain applicable performance indicators related to the ADR facility.
During the calendarfiscal year preceding March 1, 2017,ended December 31, 2018, the Company received net payments of approximately $6.6 million from the depositary.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES Defaults, dividend arrearages and delinquencies
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF
SECURITY HOLDERS AND USE OF PROCEEDS Material modifications to the rights of security holders and use of proceeds
None.
ITEM 15. CONTROLS AND PROCEDURES Controls and procedures
15.1Disclosure controls and procedures |
An evaluation was carried out under the supervision and with the participation of the Group’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness, as of the end of the period covered by this report, of the design and operation of
the Group’s disclosure controls and procedures, which are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, summarized and reported within specified time periods. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were
effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer,themselves, as appropriate to allow timely decisions regarding required disclosure.
15.2Management’s annual report on internal control over financial reporting |
The Group’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, the effectiveness of an internal control system may change over time.
Direct Énergie, Quadran and Global LNG, entities acquired in 2018, are excluded from the scope of the assessment of and conclusion on the effectiveness of internal control over financial reporting. These three entities represented respectively 1.34%, 0.50% and 2.15% of the Group’s total assets as of December 31, 2018 and 0.34%, 0.04% and 0.07% of the Group’s 2018 consolidated sales, which are included in the 2018 consolidated financial statements of the Group.
The Group’s management, including the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of internal control over financial reporting using the criteria set forth inInternal Control — - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”("COSO"). Based on the results of this evaluation, the Group’s management concluded that its internal control over financial reporting was effective as of December 31, 2016.2018.
The effectiveness of internal control over financial reporting as of December 31, 2016,2018, was audited by ERNST & YOUNG Audit and KPMG Audit, a division of KPMG S.A., independent registered public accounting firms, as stated in their report included in Item 18 of this Annual Report.annual report.
15.3Changes in internal control over financial reporting |
There were no changes in the Group’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that were reasonably likely to materially affect, the Group’s internal control over financial reporting.
15.4Internal control and risk management procedures |
For additional information, refer to point 4 (“Internal controlpoints 3.3 and risk management procedures”)3.5 of chapter 43 of the 20162018 Registration Document (starting onpage 76pages 86) and 93, respectively), which isare incorporated herein by reference.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT Audit committee financial expert
Ms. Marie-Christine Coisne-Roquette is the Audit Committee financial expert. She is an independent member of the Board of Directors in accordance with the NYSE listing standards applicable to TOTAL.
ITEM 16B. CODE OF ETHICS Code of ethics
At its meeting on October 27, 2016, the Board of Directors adopted a revised code of ethics that applies to its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and the financial and accounting officers for its principal activities. A copy of this code of ethics is included as an exhibit to this Annual Report.annual report.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES Principal accountant fees and services
16C.1Fees for accountants’ services |
The information set forth in point 4.4.5.2 of chapter 4 of the 2018 Registration Document (on page 172) is incorporated herein by reference.
During the fiscal years ended December 31, 2016 and 2015, fees for services provided by ERNST & YOUNG16C.2 Audit and KPMG Audit were as follows:
ERNST & YOUNG Audit fiscal year | KPMG Audit fiscal year | |||||||||||||||
(M$) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Audit Fees | 20.2 | 22.0 | 16.5 | 16.0 | ||||||||||||
Audit-Related Fees(a) | 5.0 | 1.1 | 4.5 | 4.8 | ||||||||||||
Legal, Tax, Labor Law Fees(b) | 6.1 | 3.3 | 2.4 | 3.0 | ||||||||||||
All Other Fees(c) | 0.5 | 0.5 | 0.1 | 0.3 | ||||||||||||
Total | 31.8 | 26.9 | 23.5 | 24.1 |
Committee pre-approval policy
The Audit Committee has adopted an Audit andNon-Audit ServicesPre-Approval Policy that sets forth the procedures and the conditions pursuant to which services proposed to be performed by the statutory auditors may bepre-approved and that are not prohibited by regulatory or other professional requirements. This policy provides for bothpre-approval of certain types of services through the use of an annual budget approved by the Audit Committee for these types of services and specialpre-approval of services by the Audit Committee on acase-by-case basis. The Audit Committee reviews on an annual basis the services provided by the statutory auditors. During 2016,2018, no audit-related fees, tax fees or othernon-audit fees were approved by the Audit Committee pursuant to the deminimis exception to thepre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule2-01 of RegulationS-X.
16C.3Auditor’s term of office |
French law provides that the statutory and alternate auditors are appointed for renewable 6 fiscal-year terms. The terms of office of the current statutory auditors and the alternate auditors will expire at the end of the Annual Shareholders’ Meeting called in 2022 to approve the financial statements for fiscal year 2021.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Exemptions from the listing standards for audit committees
None.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS16e. Purchases of equity securities by the issuer and affiliated purchasers
Period (in 2018) | Total Number Of Shares (Or Units) Purchased | Average Price Paid Per Share (Or Units) (€) | Total Number Of Shares (Or Units) Purchased, As Part Of Publicly Announced Plans Or Programs(a) | Maximum Number Of Shares (Or Units) That May Yet Be Purchased Under The Plans Or Programs(b) |
January | - | - | - | 245,240,915 |
February | 3,806,704 | 46.12 | 3,806,704 | 242,156,301 |
March | 6,013,784 | 46.57 | 6,013,784 | 245,334,772 |
April | 2,526,827 | 48.40 | 2,526,827 | 244,277,316 |
May | 3,052,902 | 52.81 | 3,052,902 | 242,215,739 |
June | 13,453,104 | 52.40 | 13,453,104 | 229,361,106 |
July | 4,203,193 | 53.32 | 4,203,193 | 229,245,637 |
August | 5,346,739 | 54.54 | 5,346,739 | 223,915,417 |
September | 3,825,608 | 54.31 | 3,825,608 | 220,111,990 |
October | 3,072,673 | 55.34 | 3,072,673 | 218,918,027 |
November | 17,575,126 | 50.16 | 17,575,126 | 201,344,111 |
December | 9,889,821 | 48.60 | 9,889,821 | 231,586,919 |
(a) The Annual Shareholders’ Meeting of June 1, 2018, canceled and superseded the previous resolution (for any unused portion) from the Annual Shareholders’ Meeting of May 26, 2017, authorizing the Board of Directors to trade in the Company’s own shares on the market for a period of 18 months within the framework of the stock purchase program. The maximum number of shares that may be purchased by virtue of this authorization or under the previous authorization may not exceed 10% of the total number of shares constituting the share capital, this amount being periodically adjusted to take into account operations modifying the share capital after each shareholders’ meeting. Under no circumstances may the total number of shares held by the Company, either directly or indirectly through its subsidiaries, exceed 10% of the share capital. This authorization will be renewed subject to the approval of the Annual Shareholders’ Meeting of May 29, 2019.
(b) Based on 10% of the Company’s share capital, and after deducting the shares held by the Company for cancellation and the shares held by the Company to cover the share subscription or purchase option plans and the performance share plans for Group employees.
Period | Total Number Of Shares (Or Purchased | Average Price Share (Or | Total Number Of As Part Of Publicly Programs(a) | Maximum Number Of Shares (Or Units) Yet Be Purchased Under The Plans Or Programs(b) | ||||||||||||
January 2016 | — | — | — | 131,432,881 | ||||||||||||
February 2016 | — | — | — | 131,433,756 | ||||||||||||
March 2016 | — | — | — | 131,436,470 | ||||||||||||
April 2016 | — | — | — | 133,915,736 | ||||||||||||
May 2016 | — | — | — | 133,917,941 | ||||||||||||
June 2016 | — | — | — | 136,360,049 | ||||||||||||
July 2016 | — | — | — | 139,415,875 | ||||||||||||
August 2016 | — | — | — | 139,422,212 | ||||||||||||
September 2016 | — | — | — | 139,482,313 | ||||||||||||
October 2016 | — | — | — | 142,037,884 | ||||||||||||
November 2016 | — | — | — | 142,059,395 | ||||||||||||
December 2016 | 100,331,268 | (c) | 47.495 | (d) | 100,331,268 | 232,448,764 | ||||||||||
January 2017 | — | — | — | 234,779,415 | ||||||||||||
February 2017 | — | — | — | 234,792,947 |
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Change in registrant’s certifying accountant
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE Corporate governance
This section presents a summary of significant differences between French corporate governance practices and the NYSE’s corporate governance standards, as required by section 303A.11 of the NYSE Listed Company Manual.
16G.1 Overview
The following paragraphs provide a brief, general summary of significant ways in which our corporate governance practices differ from those required by the listing standards of the New York Stock Exchange (“NYSE”("NYSE") for U.S. companies that have common stock listed on the NYSE. While our management believes that our corporate governance practices are similar in many respects to those of U.S. domestic NYSE listed companies and provide investors with protections that are comparable in many respects to those established by the NYSE Listed Company Manual, certain significant differences are described below.
The principal sources of corporate governance standards in France are the French Commercial Code (Code de commercecommerce)), the French Financial and Monetary Code (Code monétaire et financier)financier) and the regulations and recommendations provided by the French Financial Markets Authority (Autorité des marchés financiers, AMF), as well as a number of general recommendations and guidelines on corporate governance, most notably the Corporate Governance Code of Listed Corporations (the “AFEP-MEDEF Code”"AFEP-MEDEF Code") published by the two main French business confederations, theAssociation Française des Entreprises Privées (AFEP) and theMouvement des Entreprises de France (MEDEF), the latest version of which was published in November 2016.June 2018.
The AFEP-MEDEF Code includes, among other things, recommendations relating to the role and operation of the board of directors (creation, composition and evaluation of the board of directors and the audit, compensation and nominatingnominations committees) and the independence criteria for board members. Articles L. 820-1 820-1et seq. of the French Commercial Code prohibits statutory auditors from providing certainnon-audit services and defines certain criteria for the independence of statutory auditors. In France, the independence of statutory auditors is also monitored by an independent body, the High Council for Statutory Auditors statutory auditors (Haut Conseil du Commissariat aux Comptes)Comptes).
For an overview of certain of our corporate governance policies, seerefer to points 1.1 to 1.34.1 and 4.2 of chapter 54 of the 20162018 Registration Document (starting onpage 87112), which are incorporated herein by reference.
16G.2 Composition of Board of Directors; Independence
The NYSE listing standards provide that the board of directors of a U.S.-listed company must include a majority of independent directors and that the audit committee, the nominating/corporate governance committee and the compensation committee must be composed entirely of independent directors. A director qualifies as independent only if the board affirmatively determines that the director has no material relationship with the company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the company. Furthermore, as discussed below, the listing standards require additional procedures in regards to the independence of directors who sit on the compensation committee. In addition, the listing standards enumerate a number of relationships that preclude independence.
French law does not contain any independence requirement for the members of the board of directors of a French company, except for the audit committee, as described below. The AFEP-MEDEF Code recommends, however, that (i) at leastthe independent directors should account for half of the members of the board of directors be independent in companies that have a dispersed ownership structure and noof widely-held corporations without controlling shareholder,shareholders, and (ii) independent directors should account for at least a thirdone-third of theboard members of the board of directors be independent in companies that have a controlling shareholder.controlled companies. Members of the board representing employees and employee shareholders are not taken into account in calculating these percentages. The AFEP-MEDEF Code states that a director is independent when “he"he or she has no relationship of any kind whatsoever with the corporation, its group or the management that may interfere with his or her freedom of judgment.” Accordingly, an independent director is understood to be any non-executive director of the corporation or the group who has no particular bonds of interest (significant shareholder, employee, other) with them." The AFEP-MEDEF Code also enumerates specific criteria for determining independence, which are on the whole consistent with the goals of the NYSE listing standards, as recently amended, although the specific tests under the two standards may vary on some points.
As noted in the AFEP-MEDEF Code, "qualification as an independent director should be discussed by the appointments committee […] and decided on by the board on the occasion of the appointment of a director, and annually for all directors."
For an overview of the Company’s Board of Directors’ assessment of the independence of the Company’s Directors, including a description of the Board’s independence criteria, refer to point 1.1.34.1.1.4 of chapter 54 of the 20162018 Registration Document (on(starting on page 96121), which is incorporated herein by reference.
16G.3 Representation of women on corporate boards
The French Commercial Code provides for legally binding quotas to balance gender representation on boards of directors of French listed companies, requiring that each gender represent at least 40% following the first ordinary shareholders’ meeting held after January 1, 2017. Members of the board. Directors representing the employees are not taken into account in calculating these percentages. Effective January 1, 2017, whenthis percentage. When the board of directors consists of a maximum of eight members, the difference between the number of directors of each gender should not be higher than two. Any appointment of a director made in violation of these rules will be declared null and void and payment of the directors’ compensation will be suspended until the board composition is compliant with the required quota (the suspension of the directors’ compensation will also be disclosed in the management report). However, if a director whose appointment is null and void takes part in decisions of the board of directors, such decisions are not declared automatically null and void by virtue thereof. As of February 8, 2017,March 13, 2019, the Company’s Board of Directors had six male and six female members. Therefore, excluding the director representing employees in accordance with French law,(1), the proportion of women on the Board was 54.5%45.5%.
16G.4 Board committees
16G.4.1 Overview |
Overview
The NYSE listing standards require that a U.S.-listed company have an audit committee, a nominating/corporate governance committee and a compensation committee. Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Furthermore, the listing standards require that, in addition to the independence criteria referenced above under “Composition"Composition of Board of Directors; Independence”Independence", certain enumerated factors be taken into consideration when making a determination on the independence of directors on the compensation committee or when engaging advisors to the compensation committee.
With the exception of an audit committee, as described below, French law currently requires neither the establishment of board committees nor the adoption of written charters.
The AFEP-MEDEF Code recommends, however, that the board of directors sets up, in addition to the audit committee required by French law, a nominations committee and a compensation committee, indicating that the nominations and compensation committees may or may not be separate.committee. The AFEP-MEDEF Code also recommends that at leasttwo-thirds of the audit committee members and a majority of the members of each of the compensation committee and the nominations committee be independent directors, provideddirectors. It is recommended that the chairman of the compensation committee should be independent and that noneone of its members be an employee director. None of those three committees should include any executive director.Executive Officer (1).
TOTAL has established an Audit Committee, a Governance and Ethics Committee, a Compensation Committee and a StrategicStrategy & CSR Committee. As of February 8, 2017,March 13, 2019, the composition of these committeesCommittees was as follows:
-the Governance and
-the Compensation Committee had five members, 100% of whom have been deemed independent by the Board of Directors (according to point 14.1 of the AFEP-MEDEF Code, directors representing the employee shareholders and directors representing employees are not taken into account when determining this percentage); and
-the Strategy & CSR Committee had six members. With the exception of Mr. Pouyanné, who chairs the committee, and the director representing the employees (Mr. Blanc), all members of this committeeCommittee have been deemed independent by the Board of Directors.Directors (according to point 14.1 of the AFEP-MEDEF Code, directors representing the employee shareholders and directors representing employees are not taken into account when determining this percentage).
(1) As defined by the AFEP-MEDEF Code, Executive Officers "include the Chairman and Chief Executive Officer, the Deputy chief executive officer(s) of public limited companies with a Board of Directors, the Chairman and members of the Management Board in public limited companies having a Management Board and Supervisory Board and the statutory managers of partnerships limited by shares".
For a description of the scope of each committee’sCommittee’s activity and the independence assessment of each member, see points 1.2.4—1.2.7point 4.1.2.3 of chapter 54 of the 20162018 Registration Document (starting onpage 105132), which areis incorporated herein by reference.
The NYSE listing standards also require that the audit, nominating/corporate governance and compensation committees of a U.S.-listed company be vested with decision-making powers on certain matters. Under French law, however, those committees are advisory in nature and have no decision-making authority. Board committees are responsible for examining matters within the scope of their charter and making recommendations thereon to the board of directors. Under French law, the board of directors has the final decision-making authority.
16G.4.2Audit committeeCommittee
The NYSE listing standards contain detailed requirements for the audit committees of U.S.-listed companies. Some, but not all, of these requirements also apply tonon-U.S.-listed companies, such as TOTAL. French law and the AFEP-MEDEF Code share the NYSE listing standards’ goal of establishing a system for overseeing the company’s accounting process that is independent from management and that ensures auditor independence. As a result, they address similar topics, with some overlap.
Article L.823-19 of the French Commercial Code requires the board of directors of companies listed in France to establish an audit committee, at least one member of which must be an independent director and must be competent in finance, accounting or statutory audit
procedures. The AFEP-MEDEF Code provides that at leasttwo-thirds of the directors on the audit committee be independent and that the audit committee should not include any executive director.Executive Officer. Under NYSE rules, in the absence of an applicable exemption, audit committees are required to satisfy the independence requirements underRule 10A-3 of the Exchange Act. TOTAL’s Audit Committee consists of threefour directors, all of whom meet the independence requirements underRule 10A-3.
The duties of the Company’s Audit Committee, in line with French law and the AFEP-MEDEF Code, are described in point 1.2.44.1.2.3 of chapter 54 of the 20162018 Registration Document (starting onpage 105132), which is incorporated herein by reference. The Audit Committee regularly reports to the Board of Directors on the fulfillment of its tasks, the results of the financial statements certification process and the contribution of such process to guaranteeing the financial information’s integrity.
One structural difference between the legal status of the audit committee of a U.S.-listed company and that of a French-listed company concerns the degree of the committee’s involvement in managing the relationship between the company and the auditors. French law requires French companies that publish consolidated financial statements, such as TOTAL S.A., to have twoco-auditors. co-statutory auditors. While the NYSE listing standards require that the audit committee of a U.S.-listed company have direct responsibilityresponsability for the appointment, compensation, retention and oversight of the work of the auditor,auditor. French law provides that the election of theco-auditors co-statutory auditors is the sole responsibility of the shareholders duly convened at a shareholders’ meeting. In making their decision, the shareholders may rely on proposals submitted to them by the board of directors based on recommendations from the audit committee. The shareholders elect the statutory auditors for an audit period of six financial years. The statutory auditors may only be revoked by a court order and only on grounds of professional negligence or incapacity to perform their mission.
16G.5 Meetings of non-management directors
The NYSE listing standards require that thenon-management directors of a U.S.-listed company meet at regularly scheduled executive sessions without management. French law does not contain such a requirement. The AFEP-MEDEF Code recommends, however, thatnon-executive directors meet a meeting not attended by the Executive Officers be organized at least once a year without executive officers.year.
Since December 16, 2015, the rules of procedure of the Boardboard of Directorsdirectors provide that, with the agreement of the Governance and Ethics Committee, the Lead Independent Director may hold meetings of the directors who do not hold executive or salaried positions on the Board of Directors. He or she reports to the Board of Directors on the conclusions of such meetings.
In December 2016,2018, the Lead Independent Director held a meeting of thenon-executive andnon-salaried independent directors. She subsequently presented a summary of this meeting to the Board of Directors.
Thus, the Board of Directors’ practice is in line with the recommendation made in the AFEP-MEDEF Code.
16G.6 Shareholder approval of compensation
Pursuant to the provisions of the French Commercial Code, as amended, the compensation of the chairman of the board of directors, the chief executive officer and, as the case may be, the deputy chief executive officer(s) in French listed companies shall each year be submitted to the approval of their shareholders. Articles L. 225-37-2 and L. 225-100 of the French Commercial Code provide respectively for an ex ante vote and an ex post vote:
-ex ante vote: the shareholders shall each year approve the principles and criteria for determining, allocating and granting the fixed, variable and exceptional components making up the total compensation and the benefits of any kind, attributable to each of the abovementioned officers for the current fiscal year. In the event a resolution is rejected by the shareholders, the preceding already approved compensation policy for the concerned officer will be applicable; and
-ex post vote: the shareholders shall each year approve the fixed, variable and exceptional components of the aggregate compensation and benefit of any kinds due or attributable to each of the abovementioned officers for the preceding fiscal year. In the event a resolution is rejected by the shareholders, the variable and exceptional components of the compensation will not be paid to the relevant officer.
16G.7 Disclosure
The NYSE listing standards require U.S.-listed companies to adopt, and post on their websites, a set of corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation of the board. In addition, the chief executive officer of a U.S.-listed company must certify to the NYSE annually that he or she is not aware of any violations by the company of the NYSE’s corporate governance listing standards.
French law requires neither the adoption of such guidelines nor the provision of such certification. The AFEP-MEDEF Code recommends, however, that the Boardboard of Directorsdirectors of a French-listed company review its operation annually and perform a formal evaluation at least once every three years, under the leadership of the appointments or nominations committee or an independent director, with help fromassisted by an external consultant. TOTAL’s Board of Directors’ most recent formal evaluation took place in early 2016.2019. The AFEP-MEDEF Code also recommends
that shareholders be informed of these evaluations each year in the annual report. In addition,Article L. 225-37 of the French Commercial Code requires the chairmanboard of the Board of Directorsdirectors to submit an annual reportpresent to the shareholders a corporate governance report appended to the management report, notably describing the composition of the board and the balanced representation of men and women on the board, the preparation and organization of the board’sBoard’s work, as well as the internal controloffices and risk management procedures implementedpositions of each TOTAL Executive Officer and the compensation received by the company.each such officer. The AFEP-MEDEF Code also includes ethical rules concerning which directors are expected to comply.
16G.8 Code of business conduct and ethics
The NYSE listing standards require each U.S.-listed company to adopt, and post on its website, a code of business conduct and ethics for its directors, officers and employees. There were no similar requirements applicable under French law in 2016.Under Article 17 of Law n° 2016/1691 (“Sapin II”) of December 9, 2016, requires the top management (such as the Presidentchairman of the board or Chief Executive Officer)chief executive officer) of large French companies is required to adopt by June 1, 2017, a code of conduct proscribing the different types of behavior being likely to characterize acts of corruption, bribery or influence peddling, whichpeddling. This code shallmust be included in the rules of procedure of the company and be submitted to employee representatives. Under the SEC’s rules and regulations, all companies required to submit periodic reports to the SEC, including TOTAL, must disclose in their annual reports whether they have adopted a code of ethics for their principal executive officerofficers and senior financial officers. In addition, they must file a copy of the code with the SEC, post the text of the code on their website or undertake to provide a copy upon request to any person without charge. There is significant, though not complete, overlap between the code of ethics required by the NYSE listing standards and the code of ethics for senior financial officers required by the SEC’s rules. For a description of the code of ethics adopted by TOTAL, refer to point 43.3.2 of chapter 43 of the 20162018 Registration Document (starting onpage 7687), which is incorporated herein by reference, and “"Item 16B. Code of Ethicsethics”".
ITEM 16H. MINE SAFETY DISCLOSURE Mine safety disclosure
Not applicable.
ITEM 17. FINANCIAL STATEMENTS Financial statements
Not applicable.
ITEM 18. FINANCIAL STATEMENTS Financial statements
The Consolidated Financial Statements and Notes thereto included in the 20162018 Registration Document (starting onpage 205249) are incorporated herein by reference.
The reports of the statutory auditors, ERNST & YOUNG Audit and KPMG Audit, a division of KPMG S.A., are included in the following pages:
KPMG Audit
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TOTAL S.A.
Registered office: 2, place Jean Millier –- La Défense 6 –- 92400 Courbevoie –- France
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS ON THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 2016
TheTo the Board of Directors and Shareholders,
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of TOTAL S.A. and subsidiaries (“("the Company”Company") as of December 31, 2016, 20152018, 2017 and 2014, and2016, the related consolidated statements of income, comprehensive income, cash flows and changes in shareholders’ equity, for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2016, 2015 and 2014, and the consolidated results of its operations and its consolidated cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, "the consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with International Financial Reporting Standards as adopted by the European Union and in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2016,2018, based on criteria established in Internal Control –- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, (COSO), and our report dated March 15, 201713, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Paris LaBasis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are public accounting firms registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Paris-La Défense, March 15, 2017
13, 2019
KPMG Audit,
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/s/ JACQUES-FRANÇOIS LETHU | /s/ ERIC JACQUET | /s/ ERNST & YOUNG Audit | ||
Jacques-François Lethu | Eric Jacquet | ERNST & YOUNG Audit | ||
We or our predecessor firms have served as the Company's auditor since 1996. | We have served as the Company's auditor since 2004. |
KPMG Audit | ERNST & YOUNG Audit
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TOTAL S.A.
Registered office: 2, place Jean Millier –- La Défense 6 –- 92400 Courbevoie –- France
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS ON THE
INTERNAL CONTROL OVER FINANCIAL REPORTING
Year ended December 31, 2016
TheTo the Shareholders and Board of Directors, and Shareholders,
Opinion on Internal Control Over Financial Reporting
We have audited TOTAL S.A. and subsidiaries’ (“("the Company”Company") internal control over financial reporting as of December 31, 2016,2018, based on criteria established inInternalin Internal Control –- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include an evaluation of the internal control over financial reporting of the following entities acquired in 2018: Direct Énergie, Quadran and Global LNG. These three entities represented respectively 1.34%, 0.50% and 2.15% of the Group’s total assets as of December 31, 2018 and 0.34%, 0.04% and 0.07% of the Group’s 2018 consolidated sales, which are included in the 2018 consolidated financial statements of the Group.
Our audit of internal control over financial reporting of the Group also did not include an evaluation of the internal control over financial reporting of Direct Énergie, Quadran and Global LNG.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018, 2017 and 2016, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018 and the related notes (collectively, "the consolidated financial statements"), and our report dated March 13, 2019 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are public accounting firms registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2016, 2015 and 2014, and the related consolidated statements of income, comprehensive income, cash flows and changes in shareholders’ equity for each of the years in the three-year period ended December 31, 2016, and our report dated March 15, 2017 expressed an unqualified opinion on those consolidated financial statements.
Paris LaParis-La Défense, March 15, 2017
13, 2019
KPMG Audit,
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Jacques-François Lethu | Eric Jacquet | ERNST & YOUNG Audit |
The following documents are filed as part of this annual report:
1 | Bylaws (Statuts) of TOTAL S.A. (as amended through January | |
2 | The total amount of long-term debt securities authorized under any instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. We hereby agree to furnish to the SEC, upon its request, a copy of any instrument defining the rights of holders of long-term debt of the Company or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. | |
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8 | List of Subsidiaries (see Note 18 to the Consolidated Financial Statements included in the | |
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15.1 | ||
15.2 | Consent of ERNST & YOUNG Audit and of KPMG Audit, a division of KPMG S.A. | |
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101 | XBRL Document. |
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
TOTAL S.A.
By: /s/ PATRICK POUYANNÉ Name: Patrick Pouyanné | ||
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Date: March 17, 201720, 2019