Company Quick10K Filing
Total
20-F 2019-12-31 Filed 2020-03-20
20-F 2018-12-31 Filed 2019-03-20
20-F 2017-12-31 Filed 2018-03-16
20-F 2016-12-31 Filed 2017-03-17
20-F 2015-12-31 Filed 2016-03-16
20-F 2014-12-31 Filed 2015-03-26
20-F 2013-12-31 Filed 2014-03-27
20-F 2012-12-31 Filed 2013-03-28
20-F 2011-12-31 Filed 2012-03-26
20-F 2010-12-31 Filed 2011-03-28
20-F 2009-12-31 Filed 2010-04-01

TOT 20F Annual Report

Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 3
Item 3 - C. Risk Factors
Item 4. Information on The Company
Item 4 - A. History and Development
Item 4 - B.2. Upstream Segment
Item 4 - B.3. Refining & Chemicals Segment
Item 4 - B.4. Marketing & Services Segment
Item 4 - C. Property, Plant & Equipment
Item 4 - D. Organizational Structure
Item 4 - E. Other Matters - 1. Investments
Item 4 - E. Other Matters - 2. R&D
Item 4 - E. Other Matters - 3. Insurance and Risk Management
Item 4 - E. Other Matters - 4. Social, Environmental and Societal Information
Item 4 - E. Other Matters - 5. Iran and Syria
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 5 - Critical Accounting Policies
Item 5 - Results 2013-2015
Item 5 - Liquidity and Capital Resources
Item 5 - Guarantees and Other Off-Balance Sheet Arrangements
Item 5 - Contractual Obligations
Item 6 - A. Directors and Senior Management
Item 6. Directors, Senior Management and Employees
Item 6 - B. Compensation
Item 6 - C. Board Practices and Corporate Governance
Item 6 - D. Employees and Share Ownership
Item 7 - Major Shareholders and Related Party Transactions
Item 7. Major Shareholders and Related Party Transactions
Item 8 - Financial Information
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 10 - 1. Share Capital
Item 10 - 2. Memorandum and Articles of Association
Item 10 - 5. Taxation
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights Of
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions From The Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F. Change in Registrant's Certifying Accountant
Item 16G
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Item 17. Financial Statements
Item 18. Financial Statements
Item 19
Item 19. Exhibits
Note 1 - Notes To The Consolidated Financial Statements
Note 4 - Notes To The Consolidated Financial Statements
Note 10 - Notes To The Consolidated Financial Statements
Note 12 - Notes To The Consolidated Financial Statements
Note 17 - Notes To The Consolidated Financial Statements
Note 18 - Notes To The Consolidated Financial Statements
Note 19 - Notes To The Consolidated Financial Statements
Note 20 - Notes To The Consolidated Financial Statements
Note 23 - Notes To The Consolidated Financial Statements
Note 24 - Notes To The Consolidated Financial Statements
Note 25 - Notes To The Consolidated Financial Statements
Note 26 - Notes To The Consolidated Financial Statements
Note 28 - Notes To The Consolidated Financial Statements
Note 29 - Notes To The Consolidated Financial Statements
Note 30 - Notes To The Consolidated Financial Statements
Note 31 - Notes To The Consolidated Financial Statements
Note 35 - Notes To The Consolidated Financial Statements
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Total Earnings 2015-12-31

Balance SheetIncome StatementCash Flow

20-F 1 d83747d20f.htm 20-F 20-F

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form 20-F

 

 

(Mark One)

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

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.

(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    New York Stock Exchange*
American Depositary Shares    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’s classes of capital or common stock as of the close of the period covered by the annual report.

2,440,057,883 Shares, par value 2.50 each, as of December 31, 2015

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    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  þ

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  þ    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 Regulation S-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 a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  þ   Accelerated filer  ¨   Non-accelerated filer  ¨

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

Accounting Standards Board  þ

   Other   ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item17  ¨    Item 18   ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

 

 


TABLE OF CONTENTS

 

     Page  

CERTAIN TERMS

     i   

ABBREVIATIONS

     ii   

CONVERSION TABLE

     ii   

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     iii   

Item 1.

  

Identity of Directors, Senior Management and Advisers

     1   

Item 2.

  

Offer Statistics and Expected Timetable

     1   

Item 3.

  

Key Information

     1   
  

Selected Financial Data

     1   
  

Exchange Rate Information

     2   
  

Risk Factors

     2   

Item 4.

  

Information on the Company

     9   
  

History and Development

     9   
  

Business Overview

     10   
  

Other Matters

     44   

Item 4A.

  

Unresolved Staff Comments

     73   

Item 5.

  

Operating and Financial Review and Prospects

     73   

Item 6.

  

Directors, Senior Management and Employees

     84   
  

Directors and Senior Management

     84   
  

Compensation

     93   
  

Corporate Governance

     111   
  

Employees and Share Ownership

     124   

Item 7.

  

Major Shareholders and Related Party Transactions

     128   

Item 8.

  

Financial Information

     131   

Item 9.

  

The Offer and Listing

     134   

Item 10.

  

Additional Information

     135   

Item 11.

  

Quantitative and Qualitative Disclosures About Market Risk

     147   

Item 12.

  

Description of Securities Other than Equity Securities

     148   

Item 13.

  

Defaults, Dividend Arrearages and Delinquencies

     149   

Item 14.

  

Material Modifications to the Rights of Security Holders and Use of Proceeds

     149   

Item 15.

  

Controls and Procedures

     149   

Item 16A.

  

Audit Committee Financial Expert

     155   

Item 16B.

  

Code of Ethics

     155   

Item 16C.

  

Principal Accountant Fees and Services

     155   

Item 16D.

  

Exemptions from the Listing Standards for Audit Committees

     156   

Item 16E.

  

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

     156   

Item 16F.

  

Change in Registrant’s Certifying Accountant

     156   

Item 16G.

  

Corporate Governance

     157   

Item 16H.

  

Mine Safety Disclosure

     159   

Item 17.

  

Financial Statements

     159   

Item 18.

  

Financial Statements

     159   

Item 19.

  

Exhibits

     160   


Basis of presentation

Financial information included in this Annual Report is presented according to 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, 2015.

Statements regarding competitive position

Unless otherwise indicated, statements made in “Item 4. Information on the Company” 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.

Additional information

This Annual Report on Form 20-F reports information primarily regarding TOTAL’s business, operations and financial information relating to the fiscal year ended December 31, 2015. 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”). 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. Documents on Display”.

No material on the TOTAL website forms any part of this Annual Report on Form 20-F. References in this document to documents on the TOTAL website are included as an aid to their location and are not incorporated by reference into this document.

Certain terms

Unless the context indicates otherwise, the following terms have the meanings shown below:

 

“acreage”

The area, expressed in acres, over which TOTAL has interests in exploration or production.

 

“ADRs”

American Depositary Receipts evidencing ADSs.

 

“ADSs”

American Depositary Shares representing the shares of TOTAL S.A.

 

“association”/“consortium”/“joint venture”

Terms used to generally describe a project in which two or more entities participate. For the principles and methods of consolidation applicable to different types of joint arrangements according to IFRS, refer to Note 1 to the Consolidated Financial Statements.

 

“barrels”

Barrels of crude oil, condensates, NGL or bitumen.

 

“Company”

TOTAL S.A.

 

“condensates”

Condensates are a mixture of hydrocarbons that exist in a gaseous phase at original reservoir temperature and pressure, but that, when produced, exist in a liquid phase at surface temperature and pressure. Condensates are sometimes referred to as C5+.

 

“crude oil”

Crude oil is a mixture of compounds (mainly pentanes and heavier hydrocarbons) that exists in a liquid phase at original reservoir temperature and pressure and remains liquid at atmospheric pressure and ambient temperature. “Crude oil” or “oil” are sometimes used as generic terms to designate crude oil plus condensates plus NGL.

 

“Depositary”

JP Morgan Chase Bank, N.A.

 

“Depositary Agreement”

The depositary agreement pursuant to which ADSs are issued, a copy of which is attached as Exhibit (a) to the registration statement on Form F-6 (Reg. No. 333-199737) filed with the SEC on October 31, 2014.

 

“ERMI”

The ERMI (European Refining Margin Indicator) is a Group indicator intended to represent the refining margin after variable costs for a theoretical complex refinery located around Rotterdam in Northern Europe that processes a mix of crude oil and other inputs commonly supplied to this region to produce and market the main refined products at prevailing prices in the region.

 

“Group”

TOTAL S.A. and its subsidiaries and affiliates. The terms TOTAL and Group are used interchangeably.

 

“hydrocracker”

A refinery unit which uses a catalyst and extraordinarily high pressure, in the presence of surplus hydrogen, to shorten molecules.

 

“liquids”

Liquids consist of crude oil, bitumen, condensates and NGL.

 

“LNG”

Liquefied natural gas.

 

“LPG”

Liquefied petroleum gas is a mixture of hydrocarbons, the principal components of which are propane and butane, in a gaseous state at atmospheric pressure, but which is liquefied under moderate pressure and ambient temperature. LPG is included in NGL.

 

“NGL”

Natural gas liquids (NGL) are a mixture of light hydrocarbons that exist in the gaseous phase at atmospheric pressure and are recovered as liquids in gas processing plants; NGL include very light hydrocarbons (ethane, propane and butane).

 

2015 Form 20-F TOTAL S.A.   i


“oil and gas”

Generic term which includes all hydrocarbons (e.g., crude oil, condensates, NGL, bitumen and natural gas).

 

“project”

As used in this report, “project” may encompass different meanings, such as properties, agreements, investments, developments, phases, activities or components, each of which may also informally be described as a “project”. Such use is for convenience only and is not intended as a precise description of the term “project” as it relates to any specific governmental law or regulation.

 

“proved reserves”

Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The full definition of “proved reserves” that we are required to follow in presenting such information in our financial results and elsewhere in reports we file with the SEC is found in Rule 4-10 of Regulation S-X under the U.S. Securities Act of 1933, as amended (including as amended by the SEC “Modernization of Oil and Gas Reporting” Release No. 33-8995 of December 31, 2008) (“Rule 4-10”).

 

“proved developed reserves”

Proved developed oil and gas reserves are proved reserves that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. The full definition of “developed reserves” that we are required to follow in presenting such information in our financial results and elsewhere in reports we file with the SEC is found in Rule 4-10.

 

“proved undeveloped reserves”

Proved undeveloped oil and gas reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. The full definition of “undeveloped reserves” that we are required to follow in presenting such information in our financial results and elsewhere in reports we file with the SEC is found in Rule 4-10.

 

“steam cracker”

A petrochemical plant that turns naphtha and light hydrocarbons into ethylene, propylene, and other chemical raw materials.

 

“TOTAL”

TOTAL S.A. and its subsidiaries and affiliates. We use such term interchangeably with the term Group. When we refer to the parent holding company alone, we use the term TOTAL S.A. or the Company.

 

“trains”

Facilities for converting, liquefying, storing and off-loading natural gas.

 

“turnarounds”

Temporary shutdowns of facilities for maintenance, overhaul and upgrading.

Abbreviations

 

b

  = barrel   boe   = barrel of oil equivalent   cf   = cubic feet   GWh   = gigawatt-hour

t

  = metric ton   m3   = cubic meter   Btu   = British thermal unit   TWh   = terawatt-hour

/d

  = per day   /y   = per year   k   = thousand   Wp   = watt peak

M

  = million   B   = billion   W   = watt    

Conversion table

 

1 acre

   = 0.405 hectares   

1 b

   = 42 U.S. gallons   

1 boe

   = 1 b of crude oil    = 5,390 cf of gas in 2015(a) (5,400 cf in 2014 and 5,403 cf in 2013)

1 b/d of crude oil

   = approximately 50 t/y of crude oil   

1 Bcm/y

   = approximately 0.1 Bcf/d   

1 m3

   = 35.3147 cf   

1 kilometer

   = approximately 0.62 miles   

1 ton

   = 1 t    = 1,000 kilograms (approximately 2,205 pounds)

1 ton of oil

   = 1 t of oil    = approximately 7.5 b of oil (assuming a specific gravity of 37° API)

1 Mt of LNG

   = approximately 48 Mcf of gas   

1 Mt/y LNG

   = approximately 131 Mcf/d   

 

(a) 

Natural gas is converted to barrels of oil equivalent using a ratio of cubic feet of natural gas per one barrel. This ratio is based on the actual average equivalent energy content of TOTAL’s natural gas reserves during the applicable periods, and is subject to change. The tabular conversion rate is applicable to TOTAL’s natural gas reserves on a group-wide basis.

 

ii   TOTAL S.A. Form 20-F 2015


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. 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”, “expects”, “anticipates”, “intends”, “plans”, “targets”, “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.

You should understand that 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 results to differ materially from those expressed in such forward-looking statements, including:

 

   

material adverse changes in general economic conditions or in the markets served by TOTAL, including changes in the prices of oil, natural gas, refined products, petrochemical products and other chemicals;

   

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 possibility that other unpredictable events such as labor disputes or industrial accidents will adversely affect the business of TOTAL; and

   

the risk that TOTAL will inadequately hedge the price of crude oil or finished products.

For additional factors, you should read the information set forth under “Item 3 — C. Risk Factors”, “Item 4 — E. Other Matters”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

 

2015 Form 20-F TOTAL S.A.   iii


Items 1 - 3

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

 

 

A. SELECTED 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, 2015, 2014, 2013, 2012 and 2011. 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, 2012 and 2011 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 S.A., independent registered public accounting firms and the Company’s auditors, audited the historical consolidated 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 and the change of presentation currency for the year 2011. All such data should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere herein.

SELECTED CONSOLIDATED FINANCIAL DATA

 

(M$, except share and per share data)(a)    2015     2014      2013      2012      2011  

INCOME STATEMENT DATA

             

Revenues from sales

     143,421        212,018         227,969         234,216         231,830   

Net income, Group share

     5,087        4,244         11,228         13,648         17,400   

Earnings per share

     2.17        1.87         4.96         6.05         7.74   

Fully diluted earnings per share

     2.16        1.86         4.94         6.02         7.71   

CASH FLOW STATEMENT DATA

             

Cash flow from operating activities

     19,946        25,608         28,513         28,858         27,193   

Total expenditures

     28,033        30,509         34,431         29,475         34,161   

BALANCE SHEET DATA

             

Total assets

     224,484        229,798         239,223         225,886         211,793   

Non-current financial debt

     44,464        45,481         34,574         29,392         29,186   

Non-controlling interests

     2,915        3,201         3,138         1,689         1,749   

Shareholders’ equity — Group share

     92,494        90,330         100,241         93,969         86,667   

Common shares

     7,670        7,518         7,493         7,454         7,447   

DIVIDENDS

             

Dividend per share (euros)

     2.44 (b)      2.44         2.38         2.34         2.28   

Dividend per share (dollars)

     $2.67 (b)(c)      $2.93         $3.24         $3.05         $2.97   

COMMON SHARES(d)

             

Average number outstanding of common shares 2.50 par value (shares undiluted)

     2,295,037,940        2,272,859,512         2,264,349,795         2,255,801,563         2,247,479,529   

Average number outstanding of common shares 2.50 par value (shares diluted)

     2,304,435,542        2,281,004,151         2,271,543,658         2,266,635,745         2,256,951,403   

 

(a) 

Following the retrospective application of the accounting interpretation IFRIC 21 effective January 1, 2014, the information for 2013 has been restated; however, the impact on such restated results is not significant (for further information concerning this restatement, see the introduction to the Notes to the Consolidated Financial Statements included elsewhere herein).

(b) 

Subject to approval by the shareholders’ meeting on May 24, 2016.

(c) 

Estimated dividend in dollars includes the first quarterly interim ADR dividend of $0.69 paid in October 2015 and the second quarterly interim ADR dividend of $0.66 paid in January 2016, as well as the third quarterly interim ADR dividend of $0.66 payable in April 2016 and the proposed final interim ADR dividend of $0.66 payable in July 2016, both converted at a rate of $1.09/.

(d) 

The number of common shares shown has been used to calculate per share amounts.

 

2015 Form 20-F TOTAL S.A.   1


Item 3

 

 

 

B. EXCHANGE RATE INFORMATION

 

 

 

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 Form 20-F are expressed in U.S. dollars (“dollars” or “$”) or in euros (“euros” or “”). For the convenience of the reader, this Annual Report on Form 20-F presents certain translations into dollars of certain euro amounts ($1.30/1.00).

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

 

Year

   Average Rate  

2011

     1.3920   

2012

     1.2848   

2013

     1.3281   

2014

     1.3285   

2015

     1.1095   

The table below shows the high and low dollar/euro exchange rates for the four months ended December 31, 2015, and for the first months of 2016, based on the daily ECB reference exchange rates published during the relevant month expressed in dollars per 1.00.

DOLLAR/EURO EXCHANGE RATES

 

Period

   High      Low  

September 2015

     1.1419         1.1138   

October 2015

     1.1439         1.0930   

November 2015

     1.1032         1.0579   

December 2015

     1.0990         1.0600   

January 2016

     1.0920         1.0742   

February 2016

     1.1347         1.0884   

March 2016(a)

     1.1119         1.0856   

 

(a) 

Through March 14, 2016.

The ECB reference exchange rate on March 14, 2016 for the dollar against the euro was $1.1119/.

 

 

 

C. RISK FACTORS

 

 

 

The Group conducts its activities in an ever-changing environment and is exposed to risks that, if they were to occur, could have a material adverse effect on its business, financial condition, assets and liabilities, results or outlook.

The Group employs a continuous process of identifying and analyzing risks in order to determine those that could prevent it from achieving its objectives. This section presents the significant risks to which the Group believes it is exposed as of the date of this report. However, as of that date, the Group may not be aware of other risks that could, or other risks may not have been considered by the Group as being likely to, have a significant adverse impact on the Group, its business, financial condition, assets and liabilities, results or outlook. For additional information on these conditions, along with TOTAL’s approaches to managing certain of these risks, refer to “Item 4 — E. Other Matters”, “Item 5. Operating and Financial Review and Prospects”, “Item 11. Quantitative and Qualitative Disclosures About Market Risk” and “Item 15 — Controls and Procedures”.

The financial performance of TOTAL is sensitive to a number of market-related factors, the most significant being crude oil and natural gas prices, refining margins and exchange rates.

Generally, a decline in crude oil prices has a negative effect on the Group’s results due to a decrease in revenues from oil production. Conversely, a rise in crude oil prices increases revenues.

The year 2015 was marked by the continuing sharp fall in oil prices that started in the second half of 2014. For the year 2016, according to the scenarios retained, the Group estimates that a decrease of $10 per barrel in the price of Brent Crude would decrease annual adjusted net operating income by approximately $2 billion and cash flow from operations by approximately $2 billion. Conversely, an increase of $10 per barrel in the price of Brent Crude would increase annual adjusted net operating income by approximately $2 billion and cash flow from operations by approximately $2 billion.

The impact of changes in crude oil prices on downstream operations depends upon the speed at which the prices of finished products adjust to reflect these changes. The Group estimates that a decrease in its European Refining Margin Indicator (ERMI) of $10 per ton would decrease annual adjusted net operating income by approximately $0.5 billion and cash flow from operations by approximately $0.6 billion. Conversely, an increase in its ERMI of $10 per ton would increase annual adjusted net operating income by approximately $0.5 billion and cash flow from operations by approximately $0.6 billion.

 

 

 

(1) 

For the period 2011-2015, the averages of the ECB reference exchange rates expressed in dollars per 1.00 on the last business day of each month during the relevant year are as follows: 2011 — 1.40; 2012 —1.29; 2013 —1.33; 2014 — 1.32; and 2015 — 1.10.

 

2   TOTAL S.A. Form 20-F 2015


Item 3 - C. Risk Factors

 

 

All of the Group’s activities are, for various reasons and to varying degrees, sensitive to fluctuations in the dollar/euro exchange rate. The Group estimates that an increase of $0.10 per euro (weakening of the dollar versus the euro) would decrease adjusted net operating income by approximately $0.15 billion and cash flow

from operations by approximately $0.1 billion. Conversely, a decrease of $0.10 per euro (strengthening of the dollar versus the euro) would increase adjusted net operating income by approximately $0.15 billion and cash flow from operations by approximately $0.1 billion.

 

 

Market impact environment 2016(a)   

Scenario

retained

     Change      Estimated impact on adjusted
net operating income
     Estimated impact on cash
flow from operations
 

Brent

     50 $/b         -10 $/b         -2 B$         -2 B$   

European refining margin indicator (ERMI)

     35 $/t         -10 $/t         -0.5 B$         -0.6 B$   

$/

     1.0  $/         +0.1 $ per          -0.15 B$         -0.1 B$   

 

(a) 

Sensitivities revised once per year upon publication of the previous year’s fourth quarter results. Indicated sensitivities are approximate and based upon TOTAL’s current view of its 2016 portfolio. Results may differ significantly from the estimates implied by the application of these sensitivities. 85% of the impact of the $/ sensitivity on net adjusted operating income is attributable to the Refining & Chemicals segment.

 

In addition to the adverse effect on the Group’s revenues, margins and profitability, a prolonged period of low oil and natural gas prices could lead the Group to review its projects and the evaluation of its assets and oil and natural gas reserves.

Prices for oil and natural gas may fluctuate widely due to many factors over which TOTAL has no control. These factors include:

 

 

variations in global and regional supply of and demand for energy;

 

global and regional economic and political developments in resource-producing regions, particularly in the Middle East, Africa and South America;

 

the ability of the Organization of the Petroleum Exporting Countries (OPEC) and other producing nations to influence global production levels and prices;

 

prices of unconventional energies as well as evolving approaches for developing oil sands and shale oil, which may affect the Group’s realized prices, notably under its long-term gas sales contracts and asset valuations, particularly in North America;

 

cost and availability of new technology;

 

governmental regulations and actions;

 

global economic and financial market conditions;

 

war or other conflicts;

 

changes in demographics, including population growth rates and consumer preferences; and

 

adverse weather conditions that can disrupt supplies or interrupt operations of the Group’s facilities.

Low oil and natural gas prices over prolonged periods may reduce the economic viability of projects planned or in development, impact the Group’s asset sale program and reduce liquidity, thereby decreasing the Group’s ability to finance capital expenditures and/or causing it to cancel or postpone investment projects.

If TOTAL is unable to follow through with investment projects, the Group’s opportunities for future revenue and profitability growth would be reduced, which could materially impact the Group’s financial condition.

Prolonged periods of low oil and natural gas prices may reduce the Group’s reported reserves and/or result in impairment that could have a significant effect on the Group’s results in the period in which it occurs.

Conversely, in a high oil and gas price environment, the Group can experience significant increases in cost and government take, and,

under some production-sharing contracts, the Group’s production rights could be reduced. Higher prices can also reduce demand for the Group’s products.

The Group’s earnings from its Refining & Chemicals and Marketing & Services segments are primarily dependent upon the supply and demand for refined products and the associated margins on refined product sales, with the impact of changes in oil and gas prices on earnings on these segments being dependent upon the speed at which the prices of refined products adjust to reflect movements in oil and gas prices. In 2015, the negative effects of the decline of oil prices on the Group’s results were partially offset by the results of Refining & Chemicals, which were supported by high refining margins. In 2016, there can be no assurance that the refining margins will remain at such a high level.

The activities of Trading & Shipping (oil, gas and power trading and shipping activities) are particularly sensitive to market risk and more specifically to price risk as a consequence of the volatility of oil and gas prices, to liquidity risk (inability to buy or sell cargoes at market prices) and to counterparty risk (when a counterparty does not fulfill its contractual obligations). The Group uses various energy derivative instruments to adjust its exposure to price fluctuations of crude oil, refined products, natural gas, power and freight-rates. Although TOTAL believes it has established appropriate risk management procedures, large market fluctuations may adversely affect the activities and operating results of the Group.

Since the second half of 2014, oil prices have declined very significantly. For more detailed information on the impact of the sharp decline in oil prices on the Group’s 2015 results, financial condition (including impairments, significant reductions to capital expenditures and operating costs, and divestments completed under the Group’s asset sale program) and outlook, refer to “Item 5. Operating and Financial Review and Prospects”.

Certain financial risks are detailed in Note 31 to the Consolidated Financial Statements.

TOTAL is exposed to risks related to the safety and security of its operations.

The Group’s activities involve a wide range of operational risks, such as explosions, fires, accidents, equipment failures, leakage of toxic products, emissions or discharges into the air, water or soil, that can potentially cause death or injury, or impact natural resources and ecosystems.

 

 

2015 Form 20-F TOTAL S.A.   3


Item 3 - C. Risk Factors

 

The industrial event that could have the most significant impact is a major industrial accident (e.g., blow out, explosion, fire, leakage of highly toxic products resulting in the death or injury of one or several people and/or accidental pollution on a large-scale or at an environmentally sensitive site).

Acts of terrorism against the Group’s plants and sites, pipelines, and transportation and computer systems could also disrupt its business activities and could cause harm to people, the environment and property.

Certain activities of the Group face specific additional risks. TOTAL’s Upstream segment faces, notably, risks related to the physical characteristics of oil and gas fields, particularly during exploration operations that can cause blow outs, explosions and fires and harm the environment as well as lead to a disruption of the Group’s operations or reduce its production. In addition to the risks of explosions and fires, the activities of the Refining & Chemicals and Marketing & Services business segments entail risks related to the overall life cycle of the products manufactured, as well as the materials used. With regard to transportation, the likelihood of an operational accident depends not only on the hazardous nature of the products transported, but also on the volumes involved and the sensitivity of the regions through which they are transported (quality of infrastructure, population density, environmental considerations).

TOTAL’s workforce and the public are exposed to risks inherent to the Group’s operations (loss of life, injuries, property damage, environmental damage) that could result in regulatory action and legal liability against the Group’s entities and senior management as well as damage to the Group’s reputation. Like most industrial groups, TOTAL is affected by reports of occupational illnesses, particularly those caused by past exposure of Group employees to asbestos.

To manage the operational risks to which it is exposed, the Group maintains worldwide third-party liability insurance coverage for all its subsidiaries. TOTAL also has insurance to protect against the risk of damage to Group property and/or business interruption at its main refining and petrochemical sites. TOTAL’s insurance and risk management policies are described in “Item 4 — E. Other Matters — 3. Insurance and risk management”. However, the Group is not insured against all potential risks. In certain cases, such as a major environmental disaster, TOTAL’s liability may exceed the maximum coverage provided by its third-party liability insurance. The Group cannot guarantee that it will not suffer any uninsured loss and there can be no guarantee, particularly in the event of a major environmental disaster or industrial accident, that such loss would not have a material adverse effect on the Group.

Crisis management systems are necessary to effectively respond to emergencies, avoid potential disruptions to TOTAL’s business and operations and minimize impacts on third parties and the environment.

TOTAL has crisis management plans in place to deal with emergencies (refer to “Item 15 — Controls and Procedures”). However, these plans cannot exclude the risk that the Group’s business and operations may be severely disrupted in a crisis situation or ensure the absence of impacts on third parties or the environment. TOTAL has also implemented business continuity plans to continue or resume operations following a shutdown or incident. An inability to restore or replace critical capacity in a timely manner could prolong the impact of any disruption and could have a material adverse effect on the Group’s business and operations.

TOTAL is subject to increasingly stringent environmental, health and safety laws and regulations in numerous countries and may incur material related compliance costs.

The Group’s activities are subject to numerous laws and regulations pertaining to health, safety and the environment. In most countries where the Group operates, particularly in Europe and the United States, sites and products are subject to increasingly strict laws governing the protection of the environment (e.g., water, air, soil, noise, protection of nature, waste management, impact assessments), health (e.g., occupational safety, chemical product risk), and the safety of personnel and residents (e.g., major risk facilities).

Product quality and consumer protection are also subject to regulations. The Group’s entities ensure that their products meet applicable specifications and abide by all applicable consumer protection laws. Failure to do so could lead to personal injury, environmental harm and loss of customers, which could negatively impact the Group’s operating results, financial position and reputation.

TOTAL incurs, and will continue to incur, substantial expenditures to comply with increasingly complex laws and regulations aimed at protecting health, safety and the environment. Such expenditures could have a material adverse effect on the Group’s operating results and financial position.

As a further result of, notably, the introduction of new laws and regulations, the Group could also be compelled to curtail, modify or cease certain operations or implement temporary shutdowns of facilities, which could diminish the Group’s productivity and have a material adverse impact on its operating results.

Moreover, most of the Group’s activities will eventually, at site closure, require decommissioning followed by environmental remediation after operations are discontinued, due to compliance with applicable regulations. Costs related to such activities may materially exceed the Group’s provisions and adversely impact its operating results. With regard to the permanent shutdown of an activity, the Group’s environmental contingencies and asset retirement obligations are addressed in the “Asset retirement obligations” and “Provisions for environmental contingencies” sections of the Group’s Consolidated Balance Sheet (refer to Note 19 to the Consolidated Financial Statements). Future expenditures related to asset retirement obligations are accounted for in accordance with the accounting principles described in Note 1Q to the Consolidated Financial Statements.

Laws and regulations related to climate change may adversely affect the Group’s business.

Growing public concern in a number of countries over greenhouse gas (GHG) emissions and climate change, as well as a multiplication of stricter regulations in this area, could adversely affect the Group’s businesses, increase its operating costs and reduce its profitability.

The scientific community has established a link between climate change and increasing GHG emissions. The worldwide goal to limit global warming has led to the need to gradually reduce fossil fuel use notably through the diversification of the energy mix. The share of natural gas, the least GHG-emitting fossil energy source, represented nearly 50% of TOTAL’s production in 2015, compared to approximately 35% in 2005. The Group has ceased its coal production activities and is developing its renewable energy production activities in solar and biomass. Regulations designed to gradually limit fossil fuel use may, depending on the

 

 

4   TOTAL S.A. Form 20-F 2015


Item 3 - C. Risk Factors

 

GHG emission limits and time horizons set, negatively and significantly affect the development of the most emitting projects, as well as the economic value of some of the Group’s assets.

In Europe, the regulations concerning the market for CO2 emission allowances, the EU Emissions Trading System (EU-ETS), entered a third phase on January 1, 2013. This phase marks the end of the overall free allocation of emission allowances: certain emissions, such as those related to electricity production, no longer benefit from free allowances, while for others free allowances have been significantly reduced. Free allocations are now established based on the emission level of the top-performing plants (i.e., the least GHG-emitting) within the same sector (“top 10 benchmark”). Lower-performing plants must purchase, at market price, the necessary allowances to cover their emissions over these free allocations. The plants also need to indirectly bear the cost of allowances for all electricity consumed (including electricity generated internally at the facilities).

The European Commission’s decision to apply a “cross-sectoral correction factor” (CSCF) has reduced the total amount of free allocations for all sectors combined by an average of 11.6% over phase 3 (2013-2020). However, the revision in 2014 of the list of “sectors exposed to carbon leakage” confirmed that the refining sector in Europe is an exposed sector, which may continue to benefit from free allowances that partially cover its deficits.

In this context, the Group estimates that approximately 30% of its emissions subject to the EU-ETS will not be covered by free allowances during the 2013-2020 period. The financial risk related to the foreseeable purchase of CO2 emission allowances on the market should remain low for the Group during this period. At year-end 2015, the price of the EU allowances stood at approximately 8/t CO2 and may reach approximately 20/t(1) CO2 for 2020 due to the combined effects of backloading(2), having removed 900 Mt from phase 3 allowance auctions, and the establishment of a “market stability reserve” at the end of this phase.

The physical effects of climate change may adversely affect the Group’s business.

TOTAL’s businesses operate in varied locales where the potential physical impacts of climate change, including changes in weather patterns, are highly uncertain and may adversely impact the results of the Group’s operations.

Climate change potentially has multiple effects that could harm the Group’s operations. The increasing scarcity of water resources may negatively affect the Group’s operations in some regions of the world, high sea levels may harm certain coastal activities, and the multiplication of extreme weather events may damage offshore and onshore facilities. These climate risk factors are continually assessed in TOTAL’s management and risk management plans.

The Group believes that it is impossible to guarantee that the contingencies or liabilities related to the matters mentioned above will not have a material adverse impact in the future on its business, assets and liabilities, consolidated financial situation, cash flow or income.

Disruption to or breaches of TOTAL’s critical IT services or information security systems could adversely affect the Group’s operations.

The Group’s activities depend heavily on the reliability and security of its information technology (IT) systems. If the integrity of its IT

systems were compromised due to, for example, technical failure, cyber attack, computer intrusions and viruses, power or network outages or natural disasters, the Group’s activities and assets could sustain serious damage, material intellectual property could be divulged and, in some cases, personal injury, environmental harm and regulatory violations could occur, potentially having a material adverse effect on the Group’s financial condition, including its results.

The Group’s production growth and profitability depend on the delivery of its major development projects.

Growth of production and profitability of the Group rely heavily on the successful execution of its major development projects that are increasingly complex and capital-intensive. These major projects are subject to a number of challenges, including, in particular, those related to:

 

 

negotiations with partners, governments, suppliers, customers and others;

 

obtaining project financing;

 

controlling operating costs;

 

earning an adequate return in a low oil price environment;

 

adhering to projects schedules; and

 

the timely issuance or renewal of permits and licenses by government agencies.

Poor delivery of any major project that underpins production or production growth could adversely affect the Group’s financial performance.

The Group’s long-term profitability depends on cost-effective discovery, acquisition and development of economically viable new reserves; if the Group is unsuccessful, its operating results and financial condition would be materially and adversely affected.

A large portion of the Group’s revenues and operating results are derived from the sale of oil and gas that the Group extracts from underground reserves developed as part of its exploration and production activities. The development of oil and gas fields, the construction of facilities and the drilling of production or injection wells is capital intensive and requires advanced technology. Due to constantly changing market conditions and environmental challenges, cost projections can be uncertain. For the Upstream segment to continue to be profitable, the Group needs to replace its reserves with new proved reserves that can be developed and produced in an economically viable manner.

In addition, TOTAL’s ability to discover or acquire and develop new reserves successfully is uncertain and can be negatively affected by a number of factors, including:

 

 

the geological nature of oil and gas fields, notably unexpected drilling conditions including pressure or unexpected heterogeneities in geological formations;

 

the risk of dry holes or failure to find expected commercial quantities of hydrocarbons;

 

the inability of service companies to deliver on contracted services on time and on budget;

 

the inability of the Group’s partners to execute or finance projects in which the Group holds an interest;

 

equipment failures, fires, blow-outs or accidents;

 

the Group’s inability to develop or implement new technologies that enable access to previously inaccessible fields;

 

 

 

(1)

Company data.

(2)

Backloading: authorization given to the European Commission to intervene at its own discretion in the CO2 allowance auction calendar.

 

2015 Form 20-F TOTAL S.A.   5


Item 3 - C. Risk Factors

 

 

the Group’s inability to anticipate market changes in a timely manner;

 

adverse weather conditions;

 

compliance with both anticipated and unanticipated governmental requirements, including U.S. and EU regulations that may give a competitive advantage to companies not subject to such regulations;

 

shortages or delays in the availability or delivery of appropriate equipment;

 

industrial action;

 

competition from oil and gas companies for the acquisition and development of assets and licenses;

 

increased taxes and royalties, including retroactive claims; and

 

disputes related to property titles.

These factors could lead to cost overruns and could impair the Group’s ability to complete a development project or make production economical. Some of these factors may also affect the Group’s projects and facilities further down the oil and gas chain.

If TOTAL fails to develop new reserves cost-effectively in sufficient quantities to replace the Group’s reserves currently being developed, produced and marketed, the Group’s financial condition, including its results, would be materially and adversely affected.

The Group’s oil and gas reserves data are estimates only and subsequent downward adjustments are possible. If actual production from such reserves proves to be lower than current estimates indicate, the Group’s operating results and financial condition would be negatively impacted.

The Group’s proved reserves figures are estimates prepared in accordance with SEC rules. Proved reserves are those reserves which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically recoverable — from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Reserves are estimated by teams of qualified, experienced and trained geoscientists, petroleum engineers and project engineers, who rigorously review and analyze in detail all available geoscience and engineering data (e.g., seismic data, electrical logs, cores, fluids, pressures, flow rates, facilities parameters). This process involves making subjective judgments, including with respect to the estimate of hydrocarbons initially in place, initial production rates and recovery efficiency, based on available geological, technical and economic data. Consequently, estimates of reserves are not exact measurements and are subject to revision.

A variety of factors that are beyond the Group’s control could cause such estimates to be adjusted downward in the future, or cause the Group’s actual production to be lower than its currently reported proved reserves indicate. These main such factors include:

 

 

a decline in the price of oil or gas, making reserves no longer economically viable to exploit and therefore not classifiable as proved;

 

an increase in the price of oil or gas, which may reduce the reserves to which the Group is entitled under production sharing and risked service contracts and other contractual terms;

 

changes in tax rules and other government regulations that make reserves no longer economically viable to exploit; and

 

the actual production performance of the Group’s deposits.

The Group’s reserves estimates may therefore require substantial downward revisions should its subjective judgments prove not to have been conservative enough based on the available geoscience and engineering data, or the Group’s assumptions regarding factors or variables that are beyond its control prove to be incorrect over time. Any downward adjustment would indicate lower future production amounts, which could adversely affect the Group’s financial condition, including its results.

Many of the Group’s projects are conducted by equity affiliates or are operated by third parties. For these projects, the Group’s degree of control, as well as its ability to identify and manage risks, may be reduced.

A significant number of the Group’s projects is conducted by equity affiliates. In cases where the Group’s company is not the operator, such company may have limited influence over, and control of, the behavior, performance and costs of the partnership, its ability to manage risks may be limited and it may, nevertheless, be prosecuted by regulators or claimants in the event of an incident.

For additional information concerning equity affiliates, refer to Note 12 (“Equity affiliates: investments and loans”) to the Consolidated Financial Statements.

Additionally, the partners of the Group may not be able to meet their financial or other obligations to the projects, which may threaten the viability of a given project. These partners may also not have the financial capacity to fully indemnify the Group in the event of an incident.

Contracts signed by the Group’s entities may provide for indemnification obligations either by TOTAL in favor of the contractor or third parties or by the contractor or third parties in favor of TOTAL if, for example, an event occurs leading to death, personal injury or property or environmental damage.

With respect to joint ventures, contractual terms generally provide that the operator, whether an entity of the Group or a third party, assumes full liability for damages caused by its gross negligence or willful misconduct.

In the absence of the operator’s gross negligence or willful misconduct, other liabilities are generally borne by the joint venture and the cost thereof is assumed by the partners of the joint venture in proportion to their respective ownership interests.

With respect to third-party providers of goods and services, the amount and nature of the liability assumed by the third party depends on the context and may be limited by contract. With respect to their customers, the Group’s entities ensure that their products meet applicable specifications and abide by all applicable consumer protection laws. Failure to do so could lead to personal injury, environmental harm and loss of customers, which could negatively impact the Group’s financial condition and reputation.

 

 

6   TOTAL S.A. Form 20-F 2015


Item 3 - C. Risk Factors

 

TOTAL has significant production and reserves located in politically, economically and socially unstable areas, where the likelihood of material disruption of the Group’s operations is relatively high.

A significant portion of TOTAL’s oil and gas production and reserves is located in countries outside of the Organisation for Economic Co-operation and Development (OECD). In recent years, a number of these countries have experienced varying degrees of one or more of the following: economic instability, political volatility, civil war, violent conflict, social unrest, actions of terrorist groups and the application of international economic sanctions. Any of these conditions alone or in combination could disrupt the Group’s operations in any of these regions, causing substantial declines in production or revisions to reserves estimates. In Africa, which represented 29% of the Group’s 2015 combined liquids and gas production, certain of the countries in which the Group has production have recently suffered from some of these conditions, including Nigeria, which is one of the main contributing countries to the Group’s production of hydrocarbons, and Libya. The Middle East, which represented 21% of the Group’s 2015 combined liquids and gas production, has in recent years suffered increased political volatility in connection with violent conflict and social unrest, including Syria, where European Union (EU) and U.S. economic sanctions have prohibited TOTAL from producing oil and gas since 2011. In Yemen, the deterioration of security conditions in the vicinity of Balhaf have lead the company Yemen LNG, in which the Group holds a stake of 39.62%, to stop its commercial production and export of LNG and to declare force majeure to its various stakeholders. In South America, which represented 6% of the Group’s 2015, combined liquids and gas production, certain of the countries in which TOTAL has production have recently suffered from some of the above-mentioned conditions, including Argentina and Venezuela. In Russia, where, as of December 31, 2015, the Group held 19% of its proved reserves, members of the international community have, since July 2014, adopted economic sanctions against certain Russian persons and entities, including various entities operating in the financial, energy and defense sectors, in response to the situation in Ukraine (for additional information, refer to the risk factor on economic sanctions, below).

Furthermore, in addition to current production, TOTAL is also exploring for and developing new reserves in other regions of the world that are historically characterized by political, social and economic instability, such as the Caspian Sea region where TOTAL has large projects currently underway.

The occurrence and magnitude of incidents related to economic, social and political instability are unpredictable. It is possible that they could have a material adverse impact on the Group’s production and operations in the future and/or cause certain investors to reduce their holdings of TOTAL’s securities.

TOTAL, like other major international energy companies, has a geographically diverse portfolio of reserves and operational sites, which allows it to conduct its business and financial affairs so as to reduce its exposure to political and economic risks. However, there can be no assurance that such events will not have a material adverse impact on the Group.

Intervention by host country authorities can adversely effect the Group’s activities and its operating results.

TOTAL has significant exploration and production activities, and in some cases refining, marketing or chemicals operations, in countries whose governmental and regulatory framework is subject to unexpected change and where the enforcement of contractual rights is uncertain. The legal framework of TOTAL’s exploration

and production activities, established through concessions, licenses, permits and contracts granted by or entered into with a government entity, a state-owned company or, sometimes, private owners, is subject to risks of renegotiation that, in certain cases, can reduce or challenge the protections offered by the initial legal framework.

In addition, the Group’s exploration and production activities in such countries are often undertaken in conjunction with state-owned entities, for example as part of a joint venture where the state has a significant degree of control. In recent years, in various regions globally, TOTAL has observed governments and state-owned enterprises impose more stringent conditions on companies pursuing exploration and production activities in their respective countries, increasing the costs and uncertainties of the Group’s business operations, which is a trend TOTAL expects to continue.

Potential increasing intervention by governments in such countries can take a wide variety of forms, including:

 

 

the award or denial of exploration and production interests;

 

the imposition of specific drilling obligations;

 

price and/or production quota controls and export limits;

 

nationalization or expropriation of assets;

 

unilateral cancellation or modification of license or contract rights;

 

increases in taxes and royalties, including retroactive claims;

 

the renegotiation of contracts;

 

the imposition of increased local content requirements;

 

payment delays; and

 

currency exchange restrictions or currency devaluation.

Imposition of any of these factors by a host government where TOTAL has substantial operations, including exploration, could cause the Group to incur material costs or cause the Group’s production or value of the Group’s assets to decrease, which could potentially have a material adverse effect on its results.

For example, the Nigerian government has been contemplating new legislation to govern the petroleum industry which, if passed into law, could have an impact on the existing and future activities of the Group in that country through increased taxes and/or operating costs and could adversely affect financial returns from projects in that country.

The Group operates in a highly competitive environment. Its competitiveness could be adversely impacted if the Group’s level of innovation lagged behind its competitors.

TOTAL’s main competitors are comprised of national and international oil companies. The evolution of the energy sector has opened the door to new competitors and increased market price volatility.

TOTAL is subject to competition in the acquisition of assets and licenses for the exploration and production of oil and natural gas as well as for the sale of manufactured products based on crude and refined oil. In the gas sector, major producers increasingly compete in the downstream value chain with established distribution companies, including those that belong to the Group. Increased competitive pressure could have a significant negative effect on the prices, margins and market shares of the Group’s companies.

The pursuit of unconventional gas development, particularly in the United States, has contributed to falling market prices and a marked difference between spot and long-term contract prices. The competitiveness of long-term contracts indexed to oil prices could be affected if this discrepancy persists and if it should prove difficult to invoke price revision clauses.

 

 

2015 Form 20-F TOTAL S.A.   7


Item 3 - C. Risk Factors

 

The Group’s activities are carried out in a constantly changing environment with new products and technologies continuously emerging. The Group may not be able to anticipate these changes, identify and integrate technological developments in order to maintain its competitiveness, maintain a high level of performance and operational excellence, and best meet the needs and demands of its customers. The Group’s innovation policy requires significant investment, notably in R&D, of which the expected impact cannot be guaranteed.

Ethical misconduct or breaches of applicable laws by employees of the Group could expose TOTAL to criminal and civil penalties and be damaging to TOTAL’s reputation and shareholder value.

The Group’s Code of Conduct, which applies to all of its employees, defines TOTAL’s commitment to business integrity and compliance with all applicable legal requirements and high ethical standards. This commitment is supported by a “zero tolerance” principle. Ethical misconduct or non-compliance with applicable laws and regulations by TOTAL or any third party acting on its behalf could expose TOTAL and/or its employees to criminal and civil penalties and could be damaging to TOTAL’s reputation and shareholder value.

In addition, such misconduct or non-compliance may lead the competent authorities to impose other measures, such as the appointment of an independent monitor in charge of assessing the Group’s compliance and internal control procedures and, if need be, recommending improvements. For an overview of the settlements between TOTAL, the SEC and the Department of Justice (DoJ) providing for the appointment of an independent monitor, refer to “Item 4 — E. Other Matters — 4.3.7.1. Preventing corruption” and “Item 8 — 4. Legal or arbitration proceedings — Iran”.

With respect to competition laws, which apply to the Group’s companies in the vast majority of countries in which it does business, non-compliance may result in substantial fines and expose the Group and its employees to criminal sanctions and civil suits.

Generally, entities of the Group could potentially be subject to administrative, judicial or arbitration proceedings that could have a material adverse impact on the Group or its financial situation.

TOTAL has activities in certain countries targeted by economic sanctions. If the Group’s activities are not conducted in accordance with applicable laws and regulations, TOTAL could be sanctioned or otherwise penalized.

Various members of the international community have targeted certain countries, including Iran, Syria and Russia, with economic sanctions and other restrictive measures. U.S. and European restrictions relevant to the Group and certain disclosure concerning the Group’s limited activities or presence in certain targeted countries are outlined below and in “Item 4 — E. Other Matters — 5. Information concerning certain limited activities in Iran and Syria”, respectively.

TOTAL continues to closely monitor the possible impacts of international economic sanctions regimes on its activities. The Group does not believe that its activities in targeted countries are in violation of applicable international economic sanctions administered by the United States, the European Union (“EU”) and other members of the international community. However, the Group cannot assure that current or future regulations or developments related to economic sanctions will not have a negative impact on its business or reputation. A violation by the

Group of applicable laws or regulations could result in criminal, civil and/or material financial penalties.

 

-  

Restrictions against Iran

With respect to Iran, the United States has adopted a number of measures since 1996 that provide for the possible imposition of sanctions against non-U.S. companies engaged in certain activities in and with Iran. Pursuant to the Iran Sanctions Act (“ISA”), which has been amended and expanded on several occasions since 1996, including by the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”), the President of the United States is authorized to initiate an investigation into the activities of non-U.S. companies in Iran’s energy sector and to impose sanctions against persons found, amongst other activities, to have knowingly made investments of $20 million or more in Iran’s petroleum sector in any 12-month period. In May 1998, the U.S. government waived the application of ISA sanctions for TOTAL’s past investments in the South Pars gas field. This waiver, which has not been modified since it was granted, does not address any of TOTAL’s other activities in Iran. Excluding the investments made as part of the development of South Pars, TOTAL made investments in Iran in excess of $20 million in each of the years between 1996 and 2007.These investments are not sanctionable by the U.S. authorities pursuant to a determination made by the U.S. Department of State on September 30, 2010, under the “Special Rule” provision of ISA that allows it to avoid making a determination of sanctionability with respect to any party that provides certain assurances. The U.S. Department of State further indicated that, so long as TOTAL acts in accordance with its commitments, it will not be regarded as a company of concern for its past Iran-related activities. Since 2008, TOTAL’s position in Iran essentially has consisted of being reimbursed for its past investments as part of buyback contracts signed between 1995 and 1999 with respect to permits on which the Group is no longer the operator. Since 2011, TOTAL has had no production in Iran. Furthermore, since the applicability of the “Special Rule” to TOTAL was announced by the U.S. State Department, the United States imposed a number of additional restrictive measures targeting activities in Iran. TOTAL does not conduct activities that it believes would be sanctionable under these measures.

Many U.S. states have adopted legislation with respect to Iran requiring, in certain conditions, state pension funds to divest themselves of securities in any company with active business operations in Iran and state contracts not to be awarded to such companies. State regulators have adopted similar initiatives relating to investments by insurance companies. If TOTAL’s presence in Iran were determined to fall within the prohibited scope of these laws, and TOTAL were not to qualify for any available exemptions, certain U.S. institutions holding interests in TOTAL may be required to sell their interests. If significant, sales of securities resulting from such laws and/or regulatory initiatives could have an adverse effect on the prices of TOTAL’s securities.

The EU has also adopted sanctions regimes with regard to Iran, including a set of restrictive measures adopted in July and October 2010 that prohibited, among other things, the supply of key equipment and technology in the refining, liquefied natural gas (LNG), and oil and gas exploration and production sectors in Iran, as well as technical assistance, training and financial assistance in connection with such items. Extension of loans or credit to, acquisition of shares in, entry into joint ventures with or other participation in enterprises in Iran (or Iranian-owned enterprises outside of Iran) engaged in any of the targeted sectors also is prohibited. Moreover, with respect to restrictions on transfers of funds and on financial services, any transfer of at least 400,000

 

 

8   TOTAL S.A. Form 20-F 2015


Items 3 - 4

 

or equivalent to or from an Iranian individual or entity shall require a prior authorization of the competent authorities of the EU Member States. TOTAL conducts its activities in compliance with these EU measures. On January 23, 2012, the Council of the EU prohibited the purchase, import and transport of Iranian oil and petroleum and petrochemical products by European persons and by entities constituted under the laws of an EU Member State. Prior to that date, TOTAL had ceased these activities.

On July 14, 2015, the EU, the P5+1 countries (China, France, Russia, the United Kingdom, the United States and Germany) and Iran reached an agreement called the Joint Comprehensive Plan of Action (the “JCPOA”) regarding limits on Iran’s nuclear activities and relief under certain U.S., EU and UN sanctions regarding Iran. On January 16, 2016, in recognition of the International Atomic Energy Agency (“IAEA”) having verified that Iran has met its initial nuclear compliance commitments under the JCPOA, EU and UN and secondary U.S. (i.e., those covering non-U.S. persons) economic and financial sanctions were suspended, but they could be re-imposed if there is a dispute over Iran’s compliance with its nuclear commitments. TOTAL is closely monitoring developments in this regard.

 

-  

Restrictions against Syria

With respect to Syria, the EU adopted measures in May 2011 that prohibit the supply of certain equipment to this country, as well as certain financial and asset transactions with respect to a list of named individuals and entities. These measures apply to European persons and to entities constituted under the laws of an EU Member State. In September 2011, the EU adopted further measures, including, notably, a prohibition on the purchase, import or transportation from Syria of crude oil and petroleum products. Since early September 2011, the Group ceased to purchase hydrocarbons from Syria. On December 1, 2011, the EU extended sanctions against, among others, three state-owned Syrian oil firms, including General Petroleum Corporation, TOTAL’s co-contracting partner in the production sharing agreement signed in 1988 (Deir Ez Zor licence) and the Tabiyeh contract. The United States also has various measures regarding Syria. Since early December 2011, the Group has ceased its activities that contributed to oil and gas production in Syria.

 

-  

Restrictions against Russia

Since July 2014, members of the international community have adopted economic sanctions against certain Russian persons and entities, including various entities operating in the financial, energy and defense sectors, in response to the situation in Ukraine.

Among other things, the United States has adopted economic sanctions targeting OAO Novatek(1) (“Novatek”), as well as entities in which Novatek (individually or with other similarly targeted persons or entities collectively) owns an interest of at least 50%, including OAO Yamal LNG(2) (“Yamal LNG”). These sanctions prohibit U.S. persons from transacting in, providing financing for or otherwise dealing in debt issued by these entities after July 16, 2014 of greater than 90 days maturity. Consequently, the use of the U.S. dollar for such financing, including for Yamal LNG, is effectively prohibited.

As a result, the financing plan for the Yamal LNG project is being reviewed, and the project’s partners are engaged in efforts to develop a financing plan in compliance with the applicable regulations.

The economic sanctions initially adopted by the European Union in 2014 and subsequently extended do not materially affect TOTAL’s activities in Russia. TOTAL has been formally authorized to continue all its activities in Russia (in the Kharyaga field as operator, and in the Termokarstovoye field and Yamal project in which the Group holds interests) by the French government, which is the competent authority for granting authorization under the EU sanctions regime.

TOTAL’s activities in Russia are also not materially affected by restrictive measures adopted by the United States in August 2015 imposing export controls and restrictions relating to the export of certain goods, services, and technologies destined for projects located in Russia in the field of oil exploration.

With respect to the exploration project in the Bazhenov play (tight oil) in western Siberia, which has been suspended since 2014, TOTAL signed in July 2015 an agreement to transfer the exploration licenses it held in this play to OAO Lukoil. This agreement also sets out the conditions under which TOTAL and OAO Lukoil could potentially resume their joint activities in Russia. In January 2016, TOTAL signed an agreement to sell 50% of its interest in the Kharyaga field and transfer the operatorship to Zarubezhneft. After the sale, which is expected to be completed in 2016, TOTAL’s interest in the Kharyaga field will be 20%.

TOTAL continues to closely monitor the different international economic sanctions with respect to its activities in Russia.

As of December 31, 2015, the Group held 19% of its proved reserves in Russia.

 

 

ITEM 4. INFORMATION ON THE COMPANY

 

 

A. HISTORY AND DEVELOPMENT

 

 

 

TOTAL S.A., a French société anonyme (limited company) incorporated on March 28, 1924 is, together with its subsidiaries and affiliates, the world’s fourth largest publicly-traded integrated oil and gas company(3).

With operations in more than 130 countries, TOTAL is engaged in every sector of the oil industry, including upstream (hydrocarbon exploration, development and production) and downstream (refining, petrochemicals, specialty chemicals, trading and shipping

of crude oil and petroleum products and marketing). TOTAL also operates in the renewable energies and power generation sectors.

TOTAL began its Upstream operations in the Middle East in 1924. Since then, the Company has grown and expanded its operations worldwide. In early 1999, the Company acquired control of PetroFina S.A. and in early 2000 it acquired control of Elf Aquitaine. Since the repeal in 2002 of the decree of December 13, 1993 that established a golden share of Elf Aquitaine held by the

 

 

 

(1) 

A Russian company listed on stock exchanges in Moscow and London and in which the Group held an interest of 18.9% as of December 31, 2015.

(2) 

A company jointly owned by Novatek (60%), Total E&P Yamal (20%), and CNODC (20%), a subsidiary of China National Petroleum Corporation. Novatek’s investment in the company OAO Yamal LNG is to be reduced to 50.1% following an agreement signed in September 2015 for the entry of the Silk Road Fund (9.9%). This agreement is expected to be approved by the authorities in 2016.

(3) 

Based on market capitalization (in dollars) as of December 31, 2015.

 

2015 Form 20-F TOTAL S.A.   9


Item 4 - A. History and Development

 

French government, there are no longer any agreements or regulatory provisions governing shareholding relationships between TOTAL and the French government. Information on TOTAL S.A.’s shareholding structure is presented in “Item 7 — 1. Major shareholders”, below. For information concerning the Group’s principal capital expenditures and divestitures, see “Item 4 — E. Other Matters — 1. Investments”, “Item 5 — Results 2013-2015” and “Item 5 — Liquidity and Capital Resources”.

The Company’s corporate name is TOTAL S.A. Its registered office is 2, place Jean Millier, La Défense 6, 92400 Courbevoie, France. Its telephone number is +33 (0)1 47 44 45 46 and its Internet address is total.com. TOTAL S.A. is registered in France at the Nanterre Trade Register under the registration number 542 051 180. The length of the life of the Company is 99 years from March 22, 2000, unless it is dissolved or extended prior to such date.

 

 

 

B. BUSINESS OVERVIEW

 

 

 

The Group’s goal is to be a global energy company. TOTAL is a leading international oil and gas company, and is active in new energy sources, such as solar energy and biomass. To achieve this goal, TOTAL leverages its integrated business model, which enables it to capture synergies between the different business segments of the Group. TOTAL stands out due to its operational excellence, its technological expertise and its capacity to manage complex projects. The Group’s strategy is based on four main priorities:

 

 

driving profitable, sustainable growth in Exploration & Production’s hydrocarbon activities;

 

developing competitive, top-tier refining and petrochemical complexes;

 

responding to its customer needs by delivering innovative solutions and services that go beyond the supply of petroleum products; and

 

consolidating its leadership in solar energy and continuing to develop biomass in order to offer the most appropriate energy solutions.

This strategy incorporates the challenges of climate change using the International Energy Agency 2°C scenario (450 ppm) as a point

of reference. TOTAL’s challenge is to contribute to satisfying the demand for energy of the world’s growing population, while providing concrete solutions to limit the effects of climate change. To do so, the Group focuses its actions around several key points, including the development of gas and renewable energies.

At the core of TOTAL’s strategy is a strong belief that energy is vital, drives progress and must be made available to everyone. Energy is a precious resource that must be used wisely. The Group is helping to produce the energy that people around the planet need to live and thrive, while ensuring that its operations deliver economic, societal and environmental benefits. TOTAL is meeting this challenge with and for its employees, its stakeholders and local communities.

Beyond safety, the values of respect, responsibility and exemplary conduct underpin TOTAL’s Code of Conduct and accompany priority business principles in the realms of safety/security/health/the environment, integrity (preventing corruption, fraud and anti-competitive practices) and human rights. It is through strict adherence to these values and principles that TOTAL will be able to build strong and sustainable growth for the Group and its stakeholders and fulfill its motto: committed to better energy.

 

 

1. GEOGRAPHIC BREAKDOWN OF ACTIVITIES

 

 

 

TOTAL’s worldwide operations in 2014 were conducted through three business segments: Upstream, Refining & Chemicals and Marketing & Services. The table below gives information on the

geographic breakdown of TOTAL’s activities and is taken from Note 5 to the Consolidated Financial Statements included elsewhere herein.

 

 

(M$)    France      Rest of
Europe
     North
America
     Africa      Rest of
world
     Total  

2015

                 

Non-Group sales

     36,536         79,463         14,857         17,612         16,889         165,357   

Property, plant and equipment, intangible assets, net

     4,123         22,354         17,169         43,536         36,885         124,067   

Capital expenditures

     980         4,783         3,493         9,154         9,623         28,033   

2014

                 

Non-Group sales

     51,471         114,747         23,766         23,281         22,857         236,122   

Property, plant and equipment, intangible assets, net

     4,350         25,137         16,064         41,405         34,602         121,558   

Capital expenditures

     1,266         5,880         3,658         9,798         9,907         30,509   

2013

                 

Non-Group sales

     57,650         128,661         22,332         23,146         19,936         251,725   

Property, plant and equipment, intangible assets, net

     6,251         26,840         19,588         37,847         32,349         122,875   

Capital expenditures

     1,772         6,289         4,157         10,705         11,508         34,431   

 

2. UPSTREAM SEGMENT

 

 

TOTAL’s Upstream segment includes the activities of Exploration & Production and Gas. The Group has exploration and production activities in more than 50 countries and produces oil or gas in approximately 30 countries. Gas conducts activities downstream from production related to natural gas, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), as well as power generation and trading, and other activities.

 

10   TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

 

2.1. Exploration & Production

 

 

Exploration & Production’s mission is to discover and develop oil and gas fields in order to meet growing energy demand. Safety is a core value for that mission.

In an environment marked by the significant drop in hydrocarbon prices, Exploration & Production’s strategy is based on:

 

 

developing its operational excellence (reduction of operating costs and development costs and operational efficiency improvement) by drawing on its technological expertise and on innovation;

 

maintaining a leading position in the Group’s technical areas of excellence, such as deep offshore and LNG;

 

renewing reserves through exploration and access to already discovered but undeveloped resources.

This strategy aims at developing an oil and gas production model that is resilient (i.e., which can withstand a long period of low hydrocarbon prices), profitable and sustainable.

Additionally, Exploration & Production thrives to minimize the environmental impact of its activities.

In 2015, the Group’s production grew 9.4% compared to 2014. Exploration & Production is exiting a heavy investments phase, which peaked in 2013, and which is expected to lead to a production increase of 5% per year over the period of 2014-2019. The main growth levers include, on the one hand, the start-up of 20 major projects between 2015 and 2019 and, on the other hand, the improvement of the operational efficiency of the facilities. In 2015, nine projects were started up. After 2020, TOTAL’s objective for organic production growth of 1 to 2% is in line with worldwide growth in demand for hydrocarbons.

 

2.1.1. Exploration and development

TOTAL evaluates exploration opportunities based on a variety of geological, technical, political, economic (including taxes and license terms) environmental and societal factors.

The exploration strategy deployed since 2015 aims to prioritize drilling that creates value and resources. The Group expects more balanced exploration investments:

 

 

50% for core and emerging basins, where the presence of hydrocarbons is already proven;

 

25% for near-field exploration around operated assets; and

 

25% for high-potential frontier basins.

In April 2015, a new organization for the Group’s exploration activities, adapted to the new strategy, was implemented with a new senior exploration management team. The organizational changes are focused notably on strengthening regional basin mastery and technical excellence.

In 2015, exploration expenditure from all Exploration & Production subsidiaries stood at $1.9 billion (excluding exploration bonuses), which were made mainly in the United States, Iraq, Norway, Brazil, Papua New Guinea, Nigeria and the United Kingdom, compared to $2.6 billion in 2014 and $2.9 billion in 2013. The 2016 exploration budget is $1.5 billion.

Organic investments(1) from all Exploration & Production subsidiaries stood at $20.5 billion in 2015, compared to $23 billion in 2014 and $24 billion in 2013, and were mainly made in Angola, Nigeria, the Republic of the Congo, Norway, Canada, Australia, the United Kingdom, Russia, Kazakhstan, Indonesia, the United States and Argentina.

2.1.2. Reserves

The definitions used for proved, proved developed and proved undeveloped oil and gas reserves are in accordance with the United States Securities & Exchange Commission (SEC) Rule 4-10 of Regulation S-X as amended by the SEC Modernization of Oil and Gas Reporting release issued on December 31, 2008. Proved reserves are estimated using geological and engineering data to determine with reasonable certainty whether the crude oil or natural gas in known reservoirs is recoverable under existing regulatory, economic and operating conditions.

TOTAL’s oil and gas reserves are consolidated annually, taking into account, among other factors, levels of production, field reassessments, additional reserves from discoveries and acquisitions, disposal of reserves and other economic factors.

Unless otherwise indicated, any reference to TOTAL’s proved reserves, proved developed reserves, proved undeveloped reserves and production reflects the Group’s entire share of such reserves or such production. TOTAL’s worldwide proved reserves include the proved reserves of its consolidated subsidiaries as well as its proportionate share of the proved reserves of equity affiliates. The reserves estimation process involves making subjective judgments. Consequently, estimates of reserves are not exact measurements and are subject to revision under well-established control procedures.

The reserves booking process requires, among other things:

 

 

internal peer review of technical evaluations to ensure that the SEC definitions and guidance are followed; and

 

that management makes significant funding commitments towards the development of the reserves prior to booking.

For further information concerning the reserves and their evaluation process, see sections 1 and 2 of “Supplemental Oil and Gas Information (Unaudited)”.

 

 

Proved reserves for 2015, 2014 and 2013

In accordance with the amended Rule 4-10 of Regulation S-X, proved reserves at December 31 are calculated using a 12-month average price determined as the unweighted arithmetic average of the first-day-of-the-month price for each month of the relevant year unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. The reference prices for 2015, 2014 and 2013 were, respectively, $54.17/b, $101.27/b and $108.02/b for Brent crude.

As of December 31, 2015, TOTAL’s combined proved reserves of oil and gas were 11,580 Mboe (53% of which were proved developed reserves). Liquids (crude oil, condensates, natural gas liquids and bitumen) represented approximately 48% of these reserves and natural gas the remaining 52%. These reserves were located in Europe (mainly in Norway and the United Kingdom), Africa (mainly in Angola, Gabon, Nigeria and the Republic of the Congo), the Americas (mainly in Canada, Argentina, the United States and Venezuela), the Middle East (mainly in Qatar, the United Arab Emirates and Yemen), and Asia-Pacific (mainly in Australia), and in Kazakhstan and Russia.

Discoveries of new fields and extensions of existing fields brought an additional 2,762 Mboe to the Upstream segment’s proved reserves during the 3-year period ended December 31, 2015 (before deducting production and sales of reserves in place and adding any acquisitions of reserves in place during this period). The net level of reserve revisions during this 3-year period is

 

 

2015 Form 20-F TOTAL S.A.   11

 

(1) 

For Exploration & Production, organic investments include exploration investments, net development investments and net financial investments.


Item 4 - B.2. Upstream Segment

 

+244 Mboe, which was due to the overall positive revisions in field behaviors, a scope change in two projects in 2013, the impairment of two assets in Libya in 2015 due to the degradation of the security situation and to the positive impact of the decrease in hydrocarbon prices in 2015 that led to a reserves increase on fields with production sharing or service contracts and on Canadian bitumen fields (royalty effect), which was partially offset by the reserves decrease resulting from the suspension or cancellation due to economic reasons of capital expenditures associated with, or from shorter producing life of, certain producing fields.

As of December 31, 2014, TOTAL’s combined proved reserves of oil and gas were 11,523 Mboe (50% of which were proved developed reserves) compared to 11,526 Mboe (49% of which were proved developed reserves) as of December 31, 2013. Liquids (crude oil, condensates, natural gas liquids and bitumen) at year-end 2014 represented approximately 46% of these reserves and natural gas the remaining 54% and, at year-end 2013, approximately 47% of these reserves and natural gas the remaining 53%.

 

 

Sensitivity to oil and gas prices

Changes in the price used as a reference for the proved reserves estimation result in non-proportionate inverse changes in proved reserves associated with production sharing and risked service contracts (which together represent approximately 20% of TOTAL’s reserves as of December 31, 2015). Under such contracts, TOTAL is entitled to a portion of the production, the sale of which is meant to cover expenses incurred by the Group. As oil prices decrease, more barrels are necessary to cover the same amount of expenses. Moreover, the number of barrels recoverable under these contracts may vary according to criteria such as cumulative production, the rate of return on investment or the income-cumulative expenses ratio. This increase is partly offset by a reduction of the duration over which fields can be produced economically. However, the decrease in reserves due to this reduction is generally less than the increase in reserves under production sharing or risked service contracts due to such lower prices. As a result, lower prices usually lead to an increase in TOTAL’s reserves. In Canada, a decrease in the reference price per barrel used as a reference for estimating proved reserves leads to a decrease in the volume of royalties and, therefore, an increase of the proved reserves, and vice versa.

Lastly, for any type of contract, a significant decrease in the reference price of petroleum products that negatively impacts projects profitability may lead to a reduction of proved reserves.

 

2.1.3. Production

The average daily production of liquids and natural gas was 2,347 kboe/d in 2015 compared to 2,146 kboe/d in 2014 and 2,299 kboe/d in 2013. Liquids represented approximately 53% and natural gas approximately 47% of TOTAL’s overall production in 2015.

The tables on the following pages set forth TOTAL’s annual and average daily production of liquids and natural gas by geographic area and for each of the last three fiscal years.

Consistent with industry practice, TOTAL often holds a percentage interest in its fields rather than a 100% interest, with the balance being held by joint venture partners (which may include other international oil companies, state-owned oil companies or government entities). The Group’s entities may frequently act as operator (the party responsible for technical production) on acreage in which it holds an interest. Refer to the table

“Presentation of production activities by region” on the following pages for a presentation of the Group’s producing assets.

As in 2014 and 2013, substantially all of the liquids production from TOTAL’s Upstream segment in 2015 was marketed by the Trading & Shipping division of TOTAL’s Refining & Chemicals segment (refer to the table “Trading’s crude oil sales and supply and petroleum products sales” in “— 3.2.1. Trading & Shipping”, below).

 

2.1.4. Delivery commitments

The majority of TOTAL’s natural gas production is sold under long-term contracts. However, its North American production, and part of its production from the United Kingdom, the Netherlands and Norway, is sold on the spot market. The long-term contracts under which TOTAL sells its natural gas usually provide for a price related to, among other factors, average crude oil and other petroleum product prices, as well as, in some cases, a cost-of-living index. Though the price of natural gas tends to fluctuate in line with crude oil prices, a slight delay may occur before changes in crude oil prices are reflected in long-term natural gas prices.

Some of TOTAL’s long-term contracts, notably in Bolivia, Indonesia, Nigeria, Norway, Thailand and Qatar, specify the delivery of quantities of natural gas that may or may not be fixed and determinable. Such delivery commitments vary substantially, both in duration and scope, from contract to contract throughout the world. For example, in some cases, contracts require delivery of natural gas on an as-needed basis, and, in other cases, contracts call for the delivery of varied amounts of natural gas over different periods of time. Nevertheless, TOTAL estimates the fixed and determinable quantity of gas to be delivered over the period 2016-2018 to be 3,591 Bcf. The Group expects to satisfy most of these obligations through the production of its proved reserves of natural gas, with, if needed, additional sourcing from spot market purchases (refer to sections 1 and 2 of “Supplemental Oil and Gas Information (Unaudited)”).

 

2.1.5. Contractual framework of activities

Licenses, permits and contracts governing the Group’s ownership of oil and gas interests have terms that vary from country to country and are generally granted by or entered into with a government entity or a state-owned company and are sometimes entered into with private owners. These agreements usually take the form of concessions or production sharing contracts.

In the framework of oil concession agreements, the oil company owns the assets and the facilities and is entitled to the entire production. In exchange, the operating risks, costs and investments are the oil company’s responsibility and it agrees to remit to the relevant host country, usually the owner of the subsoil resources, a production-based royalty, income tax, and possibly other taxes that may apply under local tax legislation.

The production sharing contract (“PSC”) involves a more complex legal framework than the concession agreement: it defines the terms and conditions of production sharing and sets the rules governing the cooperation between the company or consortium in possession of the license and the host country, which is generally represented by a state-owned company. The latter can thus be involved in operating decisions, cost accounting and production allocation. The consortium agrees to undertake and finance all exploration, development and production activities at its own risk. In exchange, it is entitled to a portion of the production, known as “cost oil”, the sale of which is intended to cover its incurred expenses (capital and operating costs). The balance of production,

 

 

12   TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

known as “profit oil”, is then shared in varying proportions, between the company or consortium, on the one hand, and the host country or state-owned company, on the other hand.

Today, concession agreements and PSCs can coexist, sometimes in the same country or even on the same block. Even though there are other contractual models, TOTAL’s license portfolio is comprised mainly of concession agreements.

On most licenses, the partners and authorities of the host country, often assisted by international accounting firms, perform joint venture and PSC cost audits and ensure the observance of contractual obligations.

In some countries, TOTAL has also signed contracts called “risked service contracts”, which are similar to PSCs. However, the profit oil is replaced by a defined cash monetary remuneration, agreed by contract, which depends notably on field performance parameters such as the amount of barrels produced.

 

Oil and gas exploration and production activities are subject to authorization granted by public authorities (licenses), which are granted for specific and limited periods of time and include an obligation to relinquish a large portion, or the entire portion in case of failure, of the area covered by the license at the end of the exploration period.

TOTAL pays taxes on income generated from its oil and gas production and sales activities under its concessions, PSCs and risked service contracts, as provided for by local regulations. In addition, depending on the country, TOTAL’s production and sales activities may be subject to a number of other taxes, fees and withholdings, including special petroleum taxes and fees. The taxes imposed on oil and gas production and sales activities are generally substantially higher than those imposed on other industrial or commercial businesses.

 

 

2015 Form 20-F TOTAL S.A.   13


Item 4 - B.2. Upstream Segment

 

2.1.6. Production by region

The following table sets forth the Group’s annual liquids and natural gas production by region.

 

      2015      2014      2013  
      Liquids
Mb
     Natural
gas
Bcf
(b)
     Total
Mboe
     Liquids
Mb
     Natural
gas
Bcf
(b)
     Total
Mboe
     Liquids
Mb
     Natural
gas
Bcf
(b)
     Total
Mboe
 

Africa

     198         247         247         191        253         240        194         255        245   

Algeria

     3         35         9         2         29         7         2         30         8   

Angola

     86         18         90         70         20         73         64         23         68   

Gabon

     20         5         22         20         5         21         20         6         22   

Libya

     5                 5         10                 10         18                 18   

Nigeria

     54         178         89         57         187         94         58         187         95   

The Congo, Republic of

     30         11         32         32         13         35         32         10         34   

North America

     18         112         38         14         104         33         10         93         27   

Canada(a)

     5                 5         4                 4         5                 5   

United States

     13         112         33         10         104         28         5         93         22   

South America

     17         215         55         18         219         57         20         229         61   

Argentina

     3         129         26         3         134         27         5         134         28   

Bolivia

     1         49         10         1         51         11         1         47         10   

Trinidad & Tobago

                                                     1         19         4   

Venezuela

     13         37         19         14         34         19         13         29         18   

Asia-Pacific

     12         471         94         11         430         87         11         427         86   

Australia

             10         1                 8         1                 9         1   

Brunei

     1         23         5         1         24         5         1         22         5   

China

             22         4                 23         4                 17         3   

Indonesia

     8         247         54         7         217         47         6         221         48   

Myanmar

             56         7                 49         6                 47         6   

Thailand

     3         113         23         4         108         22         4         112         23   

CIS

     20         457         106         13         414         91         12         382         83   

Azerbaijan

                             1         22         5         2         30         7   

Russia

     20         457         106         12         393         86         10         352         76   

Europe

     60         424         137         60         397         133         61         449         143   

France

                                     3         1                 16         3   

Norway

     47         224         88         49         210         88         50         210         89   

The Netherlands

             58         10                 62         11                 71         13   

United Kingdom

     13         142         39         11         122         32         11         152         38   

Middle East

     128         283         179         70         396         143         118         422         196   

United Arab Emirates

     100         24         105         42         22         46         90         26         95   

Iraq

     7                 7         4                 4         3                 3   

Oman

     8         21         12         9         22         13         9         24         14   

Qatar

     12         209         49         12         203         48         13         204         50   

Yemen

     1         29         6         3         148         31         4         168         35   

Total production

     453         2,209         856         377         2,213         783         426         2,257         839   

Including share of equity affiliates

     81         667         204         73         726         208         119         714         251   

Angola

                                     4         1                 6         1   

Venezuela

     14         3         14         14         2         14         13         3         14   

United Arab Emirates

     39         18         43         40         19         43         88         22         92   

Oman

     8         21         12         8         22         12         8         24         13   

Qatar

     3         140         28         3         139         28         3         141         28   

Yemen

             29         5                 147         27                 167         31   

Russia

     17         456         102         9         392         83         7         351         72   

 

(a) 

The Group’s production in Canada consists of bitumen only. All of the Group’s bitumen production is in Canada.

(b) 

Including fuel gas (159 Bcf in 2015, 155 Bcf in 2014, 151 Bcf in 2013).

 

14   TOTAL S.A. Form 20-F 2015


Item 4 - B.2. Upstream Segment

 

The following table sets forth the Group’s average daily liquids and natural gas production by region.

 

      2015      2014      2013  
      Liquids
kb/d
     Natural
gas
Mcf/d
(b)
     Total
kboe/d
     Liquids
kb/d
     Natural
gas
Mcf/d
(b)
     Total
kboe/d
     Liquids
kb/d
     Natural
gas
Mcf/d
(b)
     Total
kboe/d
 

Africa

     542         677        678         522         693         657         531         699         670   

Algeria

     7         96        25         5         79         20         5         82         21   

Angola

     238         49        248         191         54         200         175         62         186   

Gabon

     55         15        59         55         14         58         55         16         59   

Libya

     14                 14         27                 27         50                 50   

Nigeria

     147         487        245         156         511         257         158         511         261   

The Congo, Republic of

     81         30        87         88         35         95         88         28         93   

North America

     48         308        103         39         285         90         28         256         73   

Canada(a)

     14                 14         12                 12         13                 13   

United States

     34         308        89         27         285         78         15         256         60   

South America

     47         588        152         50         599         157         54         627         166   

Argentina

     8         354        72         9         367         75         13         366         78   

Bolivia

     3         133        28         4         139         30         4         129         28   

Trinidad & Tobago

                                                     2         52         12   

Venezuela

     36         101        52         37         93         52         35         80         48   

Asia-Pacific

     34         1,290        258         30         1,178         238         30         1,170         235   

Australia

             28        4                 23         4                 25         4   

Brunei

     3         62        15         2         66         15         2         59         13   

China

             59        11                 63         12                 46         8   

Indonesia

     22         676        147         18         594         130         17         605         131   

Myanmar

             153        19                 135         17                 129         16   

Thailand

     9         312        62         10         297         60         11         306         63   

CIS

     54         1,252        290         36         1,135         249         32         1,046         227   

Azerbaijan

                             3         59         14         5         82         20   

Russia

     54         1,252        290         33         1,076         235         27         964         207   

Europe

     161         1,161        374         165         1,089         364         168         1,231         392   

France

                                     9         2         1         45         9   

Norway

     125         614        239         135         576         242         136         575         243   

The Netherlands

     1         158        28         1         171         31         1         195         35   

United Kingdom

     35         389        107         29         333         89         30         416         105   

Middle East

     351         778        492         192         1,084         391         324         1,155         536   

United Arab Emirates

     274         66        287         115         61         127         247         71         260   

Iraq

     18         1        18         12         1         12         7         1         7   

Oman

     25         58        36         24         61         36         24         66         37   

Qatar

     32         573        134         32         555         132         36         558         137   

Yemen

     2         80        17         9         406         84         10         459         95   

Total production

     1,237         6,054         2,347         1,034         6,063         2,146         1,167         6,184         2,299   

Including share of equity affiliates

     219         1,828        559         200         1,988         571         325         1,955         687   

Angola

                                     10         2                 16