TotalEnergies SE — 2017 Form 20-F
Reporting period: Fiscal year ended December 31, 2017. Although the request specifies 2017 Q4, this filing is an annual report; it does not provide a complete standalone fourth-quarter income statement or cash-flow summary. Financial statements are prepared under IFRS. Amounts below are in U.S. dollars unless noted.
Financial performance and position
| Metric | 2017 | 2016 | Change |
|---|---|---|---|
| Revenue from sales | $149.1 billion | $127.9 billion | +17% |
| Net income attributable to the Group | $8.631 billion | $6.196 billion | +39% |
| Adjusted net income | $10.578 billion | $8.287 billion | +28% |
| Diluted earnings per share | $3.34 | $2.51 | +33% |
| Cash flow from operating activities | $22.319 billion | $16.521 billion | +35% |
| Total expenditures | $16.896 billion | $20.530 billion | -18% |
| Cash and cash equivalents at year-end | $33.185 billion | $24.597 billion | +$8.588 billion |
| Non-current financial debt | $41.340 billion | $43.067 billion | -$1.727 billion |
| Net-debt-to-equity ratio | 13.8% | 27.1% | Down 13.3 percentage points |
Adjusted net income is a non-IFRS measure. The filing reports $171.493 billion of 2017 non-Group sales in its operating review, versus $149.099 billion of revenue from sales in the selected IFRS financial data; these are differently defined measures and should not be treated as interchangeable.
Net cash flow, as defined by the company, was $9.499 billion, compared with negative $769 million in 2016. Return on equity exceeded 10%. The proposed dividend was €2.48 per share, subject to shareholder approval. The Group bought back no shares in 2017.
Material changes and operating drivers
- Brent averaged $54.2 per barrel in 2017, up from $43.7 in 2016. Higher realized hydrocarbon prices and 5% production growth supported earnings and operating cash flow.
- Exploration & Production adjusted net operating income rose 86% to $5.985 billion; production increased to 2.566 million barrels of oil equivalent per day.
- Refining & Chemicals adjusted net operating income declined 10% to $3.790 billion, despite a higher average European refining margin indicator. The company cited Hurricane Harvey, Antwerp modernization work, the Atotech sale and weaker trading results.
- Marketing & Services adjusted net operating income increased 8% to $1.676 billion. Gas, Renewables & Power adjusted net operating income increased 10% to $485 million.
- Cost savings reached $3.7 billion, exceeding the $3.5 billion target. Production costs fell to $5.4 per barrel of oil equivalent from $5.9 in 2016.
Liquidity, investment and debt
Organic investments were $14.395 billion, within the company’s stated $13–15 billion target. Cash flow used in investing activities was $11.632 billion; divestments were $5.264 billion. Cash flow from financing activities was negative $5.540 billion, compared with positive $3.532 billion in 2016, reflecting, among other factors, no repeat of the 2016 perpetual subordinated-note issuance and lower net non-current borrowing issuance.
Year-end shareholders’ equity was $114.037 billion. The company reported $11.478 billion of unused long-term confirmed credit lines and stated that working capital was sufficient for present requirements. S&P retained an A+ long-term credit rating and upgraded the outlook to stable.
Outlook, risks and unusual items
- For 2018, management targeted cost savings above $4 billion, production costs of $5.5 per barrel of oil equivalent, organic investments of about $14 billion and 6% Exploration & Production production growth. The company targeted a pre-dividend organic breakeven of $25 per barrel.
- Management expected the Downstream to generate about $7 billion of operating cash flow before working-capital changes at replacement cost in 2018, while noting weaker refining margins since December 2017. It also described a proposed three-year shareholder-return policy involving dividend increases and share buybacks.
- 2017 special items included impairments involving Fort Hills, Gladstone LNG and assets in Congo, partly offset by a gain on the Atotech sale. Adjustments reduced reported Group net income by $1.947 billion overall.
- Reported risks include volatile oil, gas and refining prices; foreign-exchange movements; production, reserves and project-cost uncertainty; regulation and taxation; political and security conditions; access to financing; and industrial accidents, labor disputes and hedging exposure.
- Off-balance-sheet guarantees included $8.5 billion for Ichthys LNG, $4.038 billion for Yamal LNG, $1.462 billion for Total Refining Saudi Arabia advances and $551 million for Yemen LNG. Management said these guarantees and other off-balance-sheet arrangements were not expected to have a material effect on the Group.
Investor verification points
- Review the incorporated 2017 Registration Document and audited IFRS statements for reconciliations of adjusted measures, working-capital effects and special items.
- Confirm the proposed €2.48 dividend’s shareholder approval and payment terms; the filing states approval was pending.
- Assess the timing, funding and integration of announced acquisitions, including Maersk Oil and Engie’s LNG business, and the Brazil asset transactions described as completed in early 2018.
- Examine project impairment assumptions, guarantees, purchase obligations and asset-retirement obligations against the detailed notes incorporated by reference.
- Consider the distinction between annual results and fourth-quarter performance: the filing gives a Q4 2017 ERMI of $35.5 per tonne, but not a full standalone Q4 financial-results set.