2016 Strategy & Outlook

2016 Strategy & Outlook

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  Strategy & Outlook September2016
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  2016 Strategy &Outlook Keep improving efficiency and preparing the future Leveraging integrated business model Tackling short term challenges Positioning Total strongly for the medium term Creating long term shareholder value 2
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  2016 Strategy &Outlook Short term supply-demand and OECD inventories Mb/d Supply-demand outlook to 2020 Mb/d Industry investments reduced from 700 B$ in 2014 to 400 B$ in 2016 Continued volatility as oil market rebalances 3 3 4 4 5 88 95 Demand Supply 1H13 1H16 3.1 Bb Commercial stocks 50 100 5% decline New supply 5-10 Mb/d unidentified 20202015 ~20 ~25 2011-15 average: 2.7 Bb 3 Source IEA Source Total estimates
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  2016 Strategy &Outlook Gas supply-demand Bcm Gas prices $/Mbtu Overcapacity impacting short term gas prices Long term outlook for gas and LNG remains favorable 2,000 4,000 5 10 15 20 2013 Aug 2016 Asian spot NBP HH 3% Decline New supply +2% per year 20252020 to be sanctioned ~500 ~900 shale sanctioned 4 Revising outlook with lower prices Opportunity for robust Gas & LNG projects post 2020 Source Total estimates
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  ►  Being excellentat everything we can control ►  Safety, Delivery, Cost and Cash Tackling short-term challenges
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  2016 Strategy &Outlook 345 Safety, a core value Cornerstone of operational excellence Establishing one central and global HSE organization A powerful tool with 230 experienced staff to be even more effective across whole organization Continuing to improve safety and environmental performance in all segments consecutive days without a fatal accident 6
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  2016 Strategy &Outlook 2015-18 Opex reduction B$ Increasing Opex savings from 3 B$ to 4 B$ Locking in sustainable efficiencies Achieved 2015 2016 2017 Upstream Downstream Corporate 4 B$ 2018 >3 B$ 1.5 B$ >2.4 B$ 7
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  2016 Strategy &Outlook Service provider to business units Total Global Services, new source of efficiency Creating new economies of scale across the Group IT savings of 100 M$ already secured Increasing joint procurement from 2 B$ to 15 B$ per year Total Global Services Accounting Purchasing Facility management HR processes Training IT (2013) 8
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  2016 Strategy &Outlook 0 50 100 2006 2008 2010 2012 2014 20162016 2017-20 Capex, including resource renewal B$ Upstream costs, Brent price Base 100 in 2010, $/b Sustainable Capex level from 2017 Committed to strong Capex discipline <19 B$ 17-19 B$Previous guidance: $/b Source: IHS -30% Upstream Capital Cost Index (UCCI) Brent 18-19 B$ 15-17 B$ 9
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  2016 Strategy &Outlook 2.8 Reducing costs on Zinia 2 B$ Zinia 2: marginal deep offshore field made profitable Capturing deflation and simplifying design Simplifying subsea layout Taking advantage of market effect Optimizing project execution and drilling Improving fiscal terms ahead of FID 2016 Design Market effect Execution -50% 2014 2.8 B$ 1.4 B$ 10
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  2016 Strategy &Outlook 2014 2015 2016 2017 2020 2021+ Production Mboe/d Average growth of 5% per year 2014-20 Strong production growth 9 start-ups in 2015 4 projects already started up in 2016 >10 projects under construction ~50% of production from long plateau in 2020 Including Yemen LNG restarted by 2020 +5% per year 2014-20 >4% +1-2% per year post-2020 +9% 2.15 2.35 11
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  2016 Strategy &Outlook CFFO from Upstream start ups from 2015 B$ CFFO Downstream B$ Focusing on cash generation Operational excellence and project delivery 10 2017 2020 10 2012 2016 Maximizing value of existing assets Project delivery fueling Upstream CFFO ERMI ($/t) 36 35 60 60 +2.5 B$ >7 B$ Brent ($/b) 5.5 5.5NBP ($/Mbtu) 12
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  2016 Strategy &Outlook 4 Outperforming peers in first half 2016 Strong performance across all segments -50% -20% 10% -2.00% 5.00% Adjusted net income - B$ Return on Equity Cash flow from operations before working capital changes* Upstream production growth* * % change first half 2016 / 2015 Total, BP, Chevron, ExxonMobil, Shell / BG pro forma, based on public data 5% -2% 13
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  Positioning Total stronglyfor the medium term ►  Lowering breakeven of oil portfolio ►  Expanding along gas value chain ►  Capitalizing on customer-focused culture ►  Developing low-carbon energy business
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  2016 Strategy &Outlook Reducing exposure on high cost assetsAdding low cost assets Oil, positioning Upstream on low cost assets Managing the portfolio to reduce breakeven Al-Shaheen, 90 kb/d* Qatar, Total 30% Giant conventional offshore oil field ADCO, 160 kb/d* UAE, Total 10% Giant onshore oil fields Libra, >100 kb/d* Brazil, Total 20% Giant deep offshore oil field Fort Hills, 10% divested in 2015 Canada Oil sands Marginal fields North Sea, Africa Mature offshore oil fields 15 * Plateau production, Total share (SEC)
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  2016 Strategy &Outlook Restructuring Downstream baseBuilding on Downstream strength Oil, focusing Downstream on best-in-class assets Consolidating 7 B$ cash flow from operations and ROACE >20% Satorp Saudi Arabia, Total 37.5% World-class, delivering as expected Daesan South Korea, Total 50% New partnership enabling further development Egypt, Kenya, Tanzania, Uganda M&S leadership in Africa Highly accretive acquisitions in retail -20% European R&C capacity Achieved end-2016 Carling, La Mède, Lindsey restructuring Refocusing M&S European portfolio Developing in countries with strong market share Monetized Turkey, UK, Switzerland 16
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  2016 Strategy &Outlook Yamal LNG - Russia Total 20%, 130 kboe/d* Ichthys LNG - Australia Total 30%, 110 kboe/d* Growing integrated gas, Upstream Diversified portfolio of gas developments West of Shetlands - UK Total 60%, 50 kboe/d* Barnett - United States Total 100%**, 80 kboe/d* 17 * Plateau production, Total share (SEC) ** subject to preemption close out
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  2016 Strategy &Outlook Launching 1 Mt/y ethane side cracker at Port ArthurMarketing efforts to access new customers Growing integrated gas, Downstream Capturing margin along full value chain Developing LNG customer base Expanding B2B and B2C marketing 18 Expansion opportunity with low-cost gas feedstock
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  2016 Strategy &Outlook M&S growing retail and lubricants at 4% per year Capitalizing on customer-focused culture #2 in retail outside North America Number of retail stations, Total and peers* Retail market share in Africa Strong brand awareness25% 2012 2015 2020 Retail network Lubricants 30,000 >4 million clients per day >15,000 stations >10,000 shops Present in 130 countries * Total, BP, Chevron, ExxonMobil, Shell 19
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  2016 Strategy &Outlook Dedicated organization to grow gas and renewables ~5% of 2016 capital employed Developing a profitable segment in low-carbon business Developing downstream gas markets Building an integrated business in fast growing solar Energy storage, key to growing profitable renewables Adapting pace of growth to deliver profits 1 B$/y cash flow from operations by 2020 Gas and power marketing 0.5 B$ Energy efficiency services Solar 3 B$ Gas and power trading 1.5 B$ Energy storage 1 B$ 20
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  2016 Strategy &Outlook 5 Asset sales & acquisitions $B Implementing strategy through portfolio management Aligning asset base with ambition in oil, gas and renewables Monetizing non-core assets Maintaining strict discipline for acquisitions 2015 2016 2017 ADCO Novatek Saft GAPCO Lampiris Barnett Fort Hills FUKA Geosel Laggan Schwedt Turkey Atotech Kharyaga US infra- structure AcquisitionsAsset sales 21
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  2016 Strategy &Outlook Areas of focus to reduce CO2 emissions Bt CO2 Gradually decreasing the carbon intensity of our production mix Integrating 2°C roadmap into strategy Focusing on oil projects with low breakevens Prioritizing gas projects Exiting coal business Growing in renewables and low-carbon business 50 2015 2035 Renewable energies Energy efficiency Optimized energy mix Source: IEA (2015), Energy Technologies Perspectives 2015 Business as usual 2°C scenario 22
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  ►  To bethe most profitable European integrated major Creating shareholder value
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  2016 Strategy &Outlook Cash flow B$ Reducing cash breakeven 2016 cash flow breakeven at 60 $/b including 2 B$ net asset sales CFFO covering 2017 Capex (including resource renewal) and dividend cash-out at 55 $/b Ending discounted scrip dividend in 2017 with Brent at 60 $/b 30 60 60 ERMI ($/t) 25 25 NBP ($/MMbtu) 5.5 5.5 45 35 4.2 Net asset salesCFFO Brent ($/b) 50 $/b 2016 2017 2020 80 $/b 24
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  2016 Strategy &Outlook Net debt-to-equity ratio % Resilient to volatile price environment Priority to profitability and strong balance sheet Targeting ROE >10% at 60 $/b Long term gearing guidance of 20% Buyback scrip shares 2014 2015 June 2016 30% 99 $/bBrent 40 $/b52 $/b 25
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  2016 Strategy &Outlook 100 Total and peers share price with dividend reinvested and Brent Base 100, January 2013 Attractive return in a volatile market 5.8% dividend yield over past 12 months Brent Peers* Jan 2013 Aug 2016Jan 2014 Jan 2015 Jan 2016 * BP, Chevron, ExxonMobil, Shell 26
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  2016 Strategy &Outlook Keep improving efficiency and preparing the future Leveraging integrated business model Tackling short term challenges Positioning Total strongly for the medium term Creating long term shareholder value Committed to shareholder return 27
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  Exploration & Production
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  2016 Strategy &Outlook Operational excellence Profitability & cash Maximizing returns from existing assets Growing Upstream value Cost discipline 29
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  2016 Strategy &Outlook 85% 90% 95% 2014 2015 YTD 2016 2017 Production efficiency* – operated assets % Sustained efficiency gains across our operations Improving operational performance 10 West Africa deep offshore drilling Non-productive time % 13.4 16.0 17.8 2014 2015 2016 YTD -25%~4% 30 * Actual production divided by capacity
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  2016 Strategy &Outlook 10 2014 2015 2016 2018 Operating costs (ASC932) $/boe Operating costs (ASC932) for Total and peers $/boe Reinforcing competitive advantage on costs Further driving down E&P Opex 10 20 2010 2011 2012 2013 2014 2015 ~6 9.9 7.4 ~5 Shell Chevron BP ExxonMobil -50% 31
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  2016 Strategy &Outlook Consistently challenging our processes 2014-16 UK opex savings Systematic and disciplined approach delivering sustainable results Cementing a lean cost culture Setting global best practices •  Angola FPSOs joint operating model: -100 M$ Streamlining maintenance processes •  Less works contracted out: -100 M$ Structure costs •  Reorganization in Nigeria: -150 M$ Logistics •  From 12 to 6 helicopters in West Africa: -100 M$ >300 M$ Savings Field OperationsStructure Supply Chain 32
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  2016 Strategy &Outlook Examples of reductions achieved through renegotiation and new tenders Capturing further cost deflation in 2016 Marine logistics Seismic acquisition Well services Rigs Rotating equipment Subsea services Tubulars Operations & maintenance Engineering -60% -50% -40% -30% -20% -10% 0% Sept 2015 Sept 2016 33
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  2016 Strategy &Outlook >900 kboe/d from start-ups and sanctioned projects Delivering project start-ups Incahuasi Vega Pleyade West of Shetlands Martin Linge Kashagan Moho Tempa Rossa Egina Ofon Ph 2 Surmont 2 Yamal LNG Termokarstovoye Ichthys LNG West Franklin 2 Lianzi Libra EWT Fort Hills Angola LNG Kaombo 50-100 kboe/d <50 kboe/d >100 kboe/d 2015-2016 2017+ Dalia Ph1a Total share 34 Timimoun Gladstone LNG Eldfisk 2
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  2016 Strategy &Outlook Al Shaheen – redeveloping giant mature field Total 30%, Qatar 25-year concession effective mid-2017 300 kb/d, long plateau Low breakeven oil project, free cash flow positive from year one Maximizing oil recovery through reservoir expertise and technical know-how 35
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  2016 Strategy &Outlook Yamal – delivering worldclass LNG project Total 20%, Russia 16.5 Mt/y capacity, 3 LNG trains >95% of LNG committed Targeting start-up by end-2017 •  First train ~80% complete •  >90% of wells drilled for start-up >18 B$-equivalent project financing secured 36
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  2016 Strategy &Outlook Libra – unlocking deep offshore value Total 20%, Brazil 3-4 Bb resources in North West panel alone with excellent well productivity Start-up of 50 kb/d EWT vessel in 2017 Phased development with FID of first FPSO planned in 2017 37
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  2016 Strategy &Outlook Nairobi Tanga Lamu Hoima Kampala Kenya Uganda Tanzania Uganda – advancing giant onshore field Total 33% Agreement on export pipeline route through Tanzania 25-year production license awarded Moving toward FID, capturing deflation 38
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  Gas, Renewables &Power
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  2016 Strategy &Outlook Global power generation, source IEA TWh Gas, renewable and power markets becoming more integrated From gas to power 30,000 Gas becoming largest primary source of power Renewables growing by >10% per year New market trends •  Energy efficiency •  Distributed generation •  Smart energy Coal Oil Wind Nuclear Hydro Biofuels Gas Solar 2015 2030 2°C 1.5% CAGR 40
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  2016 Strategy &Outlook Building on a base of quality assets Developing a complementary portfolio ~5% of 2016 capital employed Global trading for gas and LNG Gas and power B2B marketing in Europe and Lampiris platform for B2C High quality SunPower platform Saft leadership in high technology batteries Energy efficiency services Gas and power marketing 0.5 B$ Solar 3 B$ 41 Gas and power trading 1.5 B$ Energy storage 1 B$
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  2016 Strategy &Outlook 40 80 Integrated gas portfolio Bcm/y Capturing full value chain margin Growing integrated gas portfolio Gas representing half of Group reserves Growing portfolio, developing new markets •  Signed 2 Mt/y long term LNG contracts in 2016 •  Offering more flexibility to customers •  Providing long term visibility for Upstream Expanding B2B and B2C marketing x2 Regas Gas marketing Gas production Liquefaction +50%x2 +70%+20% Gas & LNG trading 20202015 42
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  2016 Strategy &Outlook LNG new markets Mt/y Floating Storage Regasification Units (FSRU) World overview Unlocking new LNG demand Opening new markets 150 FSRUs enabling new LNG markets Successive waves of new demand Under constructionExisting Proposed 2010 2015 2020 2025 Southeast Asia Latin America Middle East Africa 43 Source Total estimates
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  2016 Strategy &Outlook Number of B2B sites suppliedGrowing presence in European B2B and B2C Expanding gas and power marketing Growing demand for combined offering 800,000 2012 2015 2020 >x7 DevelopingExisting B2C 44
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  2016 Strategy &Outlook Leading integrated player SunPower, a high quality platform in solar Solar cell and panel production Decentralized power generation Power plant design, construction and operation Wide range of products Supplying all market segments 748 MWp Solar Star World’s largest solar power plant 12% market share #2 in US residential Deploying 350-450 MW in 2016 Operating >1 GW 1.3 GW Solar modules produced in 2015 25% World record cell efficiency >1 GW in development 45
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  2016 Strategy &Outlook Saft 2015 cash flow allocation M$ Solid cash generation to boost future growth Energy storage, key to growing profitable renewables 100 years of history 850 M$ revenue in 2015 •  Leadership on >75% of revenue base •  9% invested in R&D, 3 main technologies Free cash flow available to increase investment Saft technology well positioned for Energy Storage Solutions 110 Cash in Cash out Capex Dividend and buybacks Other CFFO 46
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  2016 Strategy &Outlook 1 2016 2020 Cash flow from operations B$ Leveraging integrated portfolio to maximize value Adapting pace of growth to deliver profits Expanding downstream gas Building a profitable business in fast growing renewables 1 B$ CFFO per year by 2020 47
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  2016 Strategy &Outlook Disclaimer This document may contain forward-looking information on the Group (including objectives and trends), as well as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, notably with respect to the financial condition, results of operations, business, strategy and plans of TOTAL. These data do not represent forecasts within the meaning of European Regulation No. 809/2004. Such forward-looking information and statements included in this document are based on a number of economic data and assumptions made in a given economic, competitive and regulatory environment. They may prove to be inaccurate in the future, and are subject to a number of risk factors that could lead to a significant difference between actual results and those anticipated, including currency fluctuations, the price of petroleum products, the ability to realize cost reductions and operating efficiencies without unduly disrupting business operations, environmental regulatory considerations and general economic and business conditions. Certain financial information is based on estimates particularly in the assessment of the recoverable value of assets and potential impairments of assets relating thereto. Neither TOTAL nor any of its subsidiaries assumes any obligation to update publicly any forward-looking information or statement, objectives or trends contained in this document whether as a result of new information, future events or otherwise. Further information on factors, risks and uncertainties that could affect the Company’s financial results or the Group’s activities is provided in the most recent Registration Document filed by the Company with the French Autorité des Marchés Financiers and annual report on Form 20-F filed with the United States Securities and Exchange Commission (“SEC”). Financial information by business segment is reported in accordance with the internal reporting system and shows internal segment information that is used to manage and measure the performance of TOTAL. Performance indicators excluding the adjustment items, such as adjusted operating income, adjusted net operating income, and adjusted net income are meant to facilitate the analysis of the financial performance and the comparison of income between periods. These adjustment items include: (i) Special items Due to their unusual nature or particular significance, certain transactions qualified as "special items" are excluded from the business segment figures. In general, special items relate to transactions that are significant, infrequent or unusual. However, in certain instances, transactions such as restructuring costs or asset disposals, which are not considered to be representative of the normal course of business, may be qualified as special items although they may have occurred within prior years or are likely to occur again within the coming years. (ii) Inventory valuation effect The adjusted results of the Refining & Chemicals and Marketing & Services segments are presented according to the replacement cost method. This method is used to assess the segments’ performance and facilitate the comparability of the segments’ performance with those of its competitors. In the replacement cost method, which approximates the LIFO (Last-In, First-Out) method, the variation of inventory values in the statement of income is, depending on the nature of the inventory, determined using either the month-end price differentials between one period and another or the average prices of the period rather than the historical value. The inventory valuation effect is the difference between the results according to the FIFO (First-In, First-Out) and the replacement cost. (iii) Effect of changes in fair value The effect of changes in fair value presented as an adjustment item reflects for some transactions differences between internal measures of performance used by TOTAL’s management and the accounting for these transactions under IFRS. IFRS requires that trading inventories be recorded at their fair value using period-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 based on forward prices. Furthermore, TOTAL, in its trading activities, enters into storage contracts, which future effects are recorded at fair value in Group’s internal economic performance. IFRS precludes recognition of this fair value effect. The adjusted results (adjusted operating income, adjusted net operating income, adjusted net income) are defined as replacement cost results, adjusted for special items, excluding the effect of changes in fair value. Cautionary Note to U.S. Investors – The SEC permits oil and gas companies, in their filings with the SEC, to separately disclose proved, probable and possible reserves that a company has determined in accordance with SEC rules. We may use certain terms in this presentation, such as resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, File N° 1-10888, available from us at 2, Place Jean Millier – Arche Nord Coupole/Regnault - 92078 Paris-La Défense Cedex, France, or at our website: total.com. You can also obtain this form from the SEC by calling 1-800-SEC-0330 or on the SEC’s website: sec.gov. Slide 6: Safety figures as of September, 21, 2016. 48