<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 20-F
<TABLE>
<S> <C>
(MARK ONE)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-14672
</TABLE>
PETROFINA
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
N/A KINGDOM OF BELGIUM
(Translation of registrant's name into (Jurisdiction of incorporation or
English) organization)
</TABLE>
52 RUE DE L'INDUSTRIE
B-1040 BRUSSELS, BELGIUM
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the
Act: None
Securities registered or to be registered pursuant to Section 12(g) of the
Act:
TITLE OF EACH CLASS
Ordinary Voting Shares*
American Depositary Shares each representing
one-tenth of one Ordinary Voting Share
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act: None
The number of outstanding shares of each of the issuer's classes of capital
or common stock as of the close of December 31, 1999 was: 23,541,786 Ordinary
Voting Shares, including 27,573 American Depositary Shares (as evidenced by
American Depositary Receipts) each representing one-tenth of one Ordinary Voting
Share, of which 23,248,844 shares are owned by TotalFinaElf, the parent company
of PetroFina.
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 [X] No [ ]
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 [ ] Item 18 [X]
---------------
* Not for trading, but only in connection with the registration of American
Depositary Shares, pursuant to the requirements of the Securities and Exchange
Commission.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
EXCHANGE RATES.......................................................... 3
ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES
LAWS.................................................................. 4
GLOSSARY................................................................ 5
ABBREVIATIONS........................................................... 6
CONVERSION TABLE........................................................ 6
PART I
Item 1. Description of Business..................................... 7
Item 2. Description of Property..................................... 26
Item 3. Legal Proceedings........................................... 26
Item 4. Control of Registrant....................................... 26
Item 5. Nature of Trading Market.................................... 27
Item 6. Exchange Controls and Other Limitations Affecting Security
Holders..................................................... 30
Item 7. Taxation.................................................... 30
Item 8. Selected Consolidated Financial Data........................ 34
Item 9. Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 36
Item 9A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 52
Item 10. Directors and Officers of Registrant........................ 54
Item 11. Compensation of Directors and Officers...................... 56
Item 12. Options to Purchase Securities from Registrant or
Subsidiaries................................................ 56
Item 13. Interest of Management in Certain Transactions.............. 57
PART II
Item 14. Description of Securities to be Registered.................. 57
PART III
Item 15. Defaults upon Senior Securities............................. 57
Item 16. Changes in Securities and Changes in Security for Registered
Securities.................................................. 57
PART IV
Item 17. Financial Statements........................................ 57
Item 18. Financial Statements........................................ 57
Item 19. Financial Statements and Exhibits........................... 58
</TABLE>
2
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IN THIS ANNUAL REPORT, (I) REFERENCES TO THE "COMPANY" ARE TO PETROFINA
S.A., AND (II) REFERENCES TO "PETROFINA" OR THE "GROUP" ARE TO THE COMPANY AND
ITS CONSOLIDATED SUBSIDIARIES AND DOES NOT INCLUDE TOTAL FINA ELF S.A. FOR
DEFINITIONS OF OTHER TERMS USED HEREIN, SEE THE GLOSSARY BELOW.
The Company has prepared its consolidated financial statements in
accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). For
more information, see Note 2 to the Consolidated Financial Statements in Item
18.
PetroFina's financial statements were previously presented in Belgian
francs (BEF). A Belgian Royal Decree dated December 15, 1998 permitted Belgian
companies to restate financial statements in Euro ("Euro" or "EUR"). Financial
statement amounts for the fiscal year ending December 31, 1999 have been
prepared in Euro. All comparative financial statement amounts for fiscal years
ending prior to January 1, 1999 in this Annual Report have been restated in Euro
based on the January 1, 1999 conversion rate of 1 Belgian franc = 0.02479 Euro
(1 Euro = BEF 40.3399). PetroFina's comparative financial statements in Euro
depict the same trends as would have been presented if the Group had continued
to present its financial statements in Belgian francs. PetroFina's comparative
financial statements will not be comparable to the financial statements of other
companies reporting in Euro that have restated amounts from a currency other
than Belgian francs.
EXCHANGE RATES
Most currency amounts in this Annual Report are expressed in Euro or in
United States dollars ("dollars" or "US$"). Solely for the reader's convenience,
this Annual Report contains translations of certain Euro amounts into dollars.
These translations should not be considered representations that the Euro
amounts actually represent such dollar amounts or could be converted into
dollars at specified rates.
The Euro became the common currency of the European Monetary Union adopted
by 11 member states on January 1, 1999. It is a single currency shared by the
participating member states of Belgium, Germany, Spain, France, Ireland, Italy,
Luxembourg, the Netherlands, Austria, Portugal and Finland. As of January 1,
1999 the European Central Bank has the power to direct monetary policy of the
participating member states, including money supply and official interest rates
for the Euro. During a three-year transition period ending January 1, 2002, the
Belgian franc, along with other legal currencies, will remain legal tender,
although conversion rates between currencies will be computed based on the Euro
rate established by the European Central Bank. See Item 9. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
more information.
Beginning on January 4, 1999, the Federal Reserve Bank of New York began
reporting the Euro/dollar exchange rate in place of the individual currencies of
the participating European Monetary Union members. Unless otherwise stated, the
convenience translations herein have been made at US$1.0070 per Euro, the noon
buying rate in New York City for cable transfers in Euro as certified for
customs purposes by The Federal Reserve Bank of New York (the "Noon Buying
Rate") on December 31, 1999.
3
<PAGE> 4
DOLLAR/EURO EXCHANGE RATES
The table below sets forth, for the periods and dates indicated, certain
information concerning the exchange rate of dollar per Euro based on the Noon
Buying Rate. For periods prior to January 1, 1999, the table arrives at the
Euro/ dollar exchange rate by converting historical Noon Buying Rates based on
the January 1, 1999 conversion rate of 1 Belgian franc = 0.02479 Euro (1 Euro =
BEF 40.3399). Such rates were not used by the Company in the preparation of its
consolidated financial statements included herein.
<TABLE>
<CAPTION>
AT END AVERAGE
YEAR OF PERIOD RATE(1) HIGH LOW
---- --------- ------- ------ ------
(DOLLAR PER EURO)
<S> <C> <C> <C> <C>
1994................................................. 1.2666 1.2161 1.3127 1.1042
1995................................................. 1.3708 1.3772 1.4438 1.2629
1996................................................. 1.2721 1.3004 1.3674 1.2500
1997................................................. 1.0879 1.1237 1.2702 1.0392
1998................................................. 1.1740 1.1116 1.2154 1.0478
1999................................................. 1.0070 1.0654 1.1906 0.9986
2000 (through May 31, 2000).......................... 0.9328 0.9478 1.0335 0.8891
</TABLE>
---------------
(1) The average of the exchange rates on the last business day of each full
month during the relevant period.
On June 28, 2000, the Noon Buying Rate was 1.0589 Euro per dollar
(US$0.9444 per Euro).
Fluctuations in the exchange rate will affect the dollar equivalent of the
Euro price of PetroFina Shares on the Brussels Stock Exchange and, as a result,
are likely to affect the market price of PetroFina ADSs in the United States.
Such fluctuations would also affect the dollar amounts received by holders of
the PetroFina ADSs on conversion by the Depositary (as defined below) of cash
dividends paid in Euro on the PetroFina Shares underlying the PetroFina ADSs.
For information regarding the effects of currency fluctuations on PetroFina's
results, see "Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES LAWS
PetroFina is a Belgian corporation (societe anonyme/naamloze vennootschap).
Most of its officers and directors and some of its counsel and accountants named
in this Annual Report are not subject to the jurisdiction of the United States
because they are neither citizens nor residents of the United States.
Substantially all of the assets of these persons and a substantial portion of
the assets of PetroFina and its subsidiaries are located outside the United
States. As a result, it may not be possible for you to bring a lawsuit in the
United States against these persons.
If you were able to bring a lawsuit in the United States against these
persons, it might not be possible for you to enforce any judgments you were able
to obtain. PetroFina's internal counsel has advised PetroFina that Belgian
courts will not automatically enforce judgments of U.S. federal or state courts
that are based on U.S. federal securities laws against PetroFina, its non-U.S.
subsidiaries, controlling persons, directors, officers or experts named in this
Annual Report. Under Belgian law, actions for enforcement of judgments of courts
of the United States will be successful only if the Belgian court confirms the
substantive correctness of the U.S. court's judgment and is satisfied that the
judgement (a) is not contrary to Belgian public policy or law, (b) did not
violate the rights of the defendant and (c) is not subject to further appeal
under U.S. law. The Belgian court must also be satisfied as to the authenticity
of the text of the U.S. court's judgment.
4
<PAGE> 5
GLOSSARY
Unless the context indicates otherwise, the following terms have the
meanings shown below:
"acreage" The total area, expressed in acres, over which
PetroFina has interests in exploration or
production. "Net acreage" is PetroFina's interest,
expressed in acres, in the relevant exploration or
production area.
"aromatics" Organic compounds, such as benzene, which contain
one or more unsaturated cyclic structures with
delocalized electrons.
"ADRs" American Depositary Receipts evidencing PetroFina
ADSs.
"barrels" or "bbls" Barrels of crude oil, including condensate and
natural gas liquids.
"catalytic cracking" A process by which hydrocarbon molecules are broken
down (cracked) into lighter fractions by the action
of a catalyst.
"condensate" Light hydrocarbon substances produced with natural
gas which condense into liquid at normal
temperatures and pressures associated with surface
production equipment.
"conversion" Transformation of heavy fractions into light ones.
The term "deep conversion" refers to one such
process used for heavy fuel oils.
"crude oil" Crude oil, including condensate and natural gas
liquids.
"desulphuration" A generic name given to processes used to eliminate
or reduce various degrees of sulphur in petroleum
products.
"distillation" A process by which liquids are separated or refined
by vaporization followed by condensation.
"LPG" Liquefied petroleum gas.
"PetroFina ADSs" American Depositary Shares representing the
PetroFina Shares. Each PetroFina ADS represents
one-tenth of one PetroFina Share.
"PetroFina Shares" Ordinary voting shares of PetroFina S.A.
"proved reserves" Proved oil and gas reserves are the estimated
quantities of crude oil, natural gas and natural
gas liquids which geological and engineering data
demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs
under existing economic and operating conditions.
"proved developed reserves" Proved developed oil and gas reserves are reserves
that can be expected to be recovered through
existing wells with existing equipment and
operating methods. Additional oil and gas expected
to be obtained through the application of fluid
injection or other improved recovery techniques for
supplementing natural forces and mechanisms of
primary recovery are included as "proved developed
reserves" only after testing by a pilot project or
after the operation of an installed program has
confirmed through production response that
increased recovery will be achieved.
"proved undeveloped
reserves" Proved undeveloped oil and gas reserves are
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, but does not include reserves
attributable to any acreage for which an
application of fluid injection or other improved
recovery technique is contemplated, unless such
techniques have been proved effective by actual
tests in the area and in the same reservoir.
"steam cracking" A process by which hydrocarbon molecules are split
(cracked) into lighter fractions by steam.
"stream day" A day when a refinery is in operation.
5
<PAGE> 6
ABBREVIATIONS
<TABLE>
<S> <C> <C> <C>
bbl...... barrel /d per day
cf....... cubic feet /y per year
boe...... barrels of oil equivalent m thousand
t........ ton M million
bpsd..... barrels per stream day B billion
</TABLE>
CONVERSION TABLE
<TABLE>
<S> <C> <C>
1 barrel............................. = 42 U.S. gallons
1 barrel of oil equivalent........... = 1 barrel of crude oil = 6,000 cubic feet of
gas(1)
1 barrel of crude oil per day........ = approximately 50 tonnes of
crude oil (33 API) per year
1 cubic meter........................ = 35,315 cubic feet
1 kilometer.......................... = approximately 0.62 miles
1 square kilometer................... = 247.1 acres
1 tonne.............................. = 1 metric ton = 1,000 kilograms
(approximately 2,203
pounds)
1 tonne of crude oil................. = 1 metric ton of crude oil = approximately 7.3
barrels of crude oil
(assuming a specific
gravity of 33 degrees
API (American Petroleum
Institute))
</TABLE>
---------------
(1) Natural gas is converted to barrels of oil equivalent using an
industry-accepted ratio of cubic feet of actual gas per barrel.
6
<PAGE> 7
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
PetroFina is an international integrated oil and gas company active in all
sectors of the petroleum industry: exploration and production, refining,
marketing of refined petroleum products, petrochemicals and paints.
Headquartered in Brussels (Belgium), the Group has a global presence and employs
approximately 12,380 people. The Company was founded in 1920 and was combined
with Total SA in July 1999.
On December 1, 1998, Total SA entered into definitive agreements to acquire
PetroFina shares from the five largest PetroFina shareholders owning in the
aggregate approximately 41% of PetroFina's outstanding shares. That transaction
was closed on March 31, 1999, after the receipt of certain regulatory clearances
and the approval of Total SA's shareholders on January 14, 1999. On May 6, 1999,
Total SA commenced exchange offers in Belgium and the U.S. for all remaining
PetroFina shares, American depositary shares and warrants. As a result of the
exchange offers, Total SA acquired additional PetroFina shares raising its
ownership to 98.76% of PetroFina's share capital. As required by Belgian law,
the Belgian exchange offer was reopened on the same terms to permit tenders of
PetroFina shares in July 1999. As required by Belgian law, the Belgian exchange
offer will be reopened on the same terms to permit tenders of PetroFina shares
obtained upon the exercise of employee warrants in July 2000.
As a result of these transactions, Total SA's name was changed to "Total
Fina S.A.," effective as of June 14, 1999.
After these transactions, Total Fina S.A. obtained the delisting of the
PetroFina shares from all the exchanges where they were listed with the
exception of the Brussels, Frankfurt and Paris stock exchanges.
In March 2000, Total Fina SA changed its name to "Total Fina Elf SA"
following its business combination with Elf Aquitaine. References in this Annual
Report on Form 20-F to Total, TotalFina or TotalFinaElf should be understood as
references to the same company.
PetroFina's operations are historically organized into four principal
business segments: (1) Upstream (exploration, development and production of
crude oil and natural gas and marketing of natural gas), (2) Downstream
(refining, supply and trading and marketing), (3) Chemicals and (4) Paints.
Upstream. PetroFina pursued exploration, development and production of
crude oil and natural gas in 10 countries for most of 1999. Petrofina sold its
interests in its upstream businesses in the United States, Canada and Italy
countries to its parent company, TotalFinaElf in December 1999 as part of a
corporate reorganization. In addition, in the second quarter of 2000, PetroFina
entered into an agreement to sell its upstream business in Congo to a third
party. Following that sale, PetroFina will have interests in upstream businesses
in six countries.
In 1999, the Group's average daily production was 205,100 barrels of oil
equivalent per day. PetroFina estimates that the Group's consolidated proved
reserves at December 31, 1999 were 595 million barrels of oil equivalent
(excluding the United States, Canada and Italy). Crude oil represented 79% and
natural gas represented 21% of these reserves. PetroFina's reserves are located
principally in the North Sea (Norway and United Kingdom). PetroFina's Upstream
strategy is to either maintain its Upstream assets or, sell them to its parent
company, TotalFinaElf, when in the best interests of the consolidated group, or
sell them to unaffiliated third parties. Over the course of the second half of
1999, management and oversight of Petrofina's upstream assets has become
integrated with TotalFinaElf's management of upstream assets and managed on a
group-wide basis.
Downstream. PetroFina engages in refining crude oil into motor fuels
(gasoline, diesel, jet fuels), kerosene, heating oil, other fuels, base
chemicals and feedstocks for chemical production through six refineries in
Europe, the United States and Angola. PetroFina sold its two United States
refineries and its Rome, Italy refinery to its parent company, TotalFinaElf, as
part of a corporate restructuring. As of January 1, 1999, the Group's share of
the refineries' aggregate installed refining capacity was approximately 758,000
barrels per day. Following the sale of the three refineries, as of January 1,
2000, this capacity was approximately 440,000 barrels per day. Through December
1999, PetroFina's marketing operations included a network of approximately 6,000
service stations in Europe and the United States, marketing petroleum products
under the brand name "FINA." In December 1999, PetroFina sold its United States
network and a significant portion of its European network to TotalFina,
following which PetroFina maintains approximately 765 service stations.
PetroFina's supply and trading divisions are also engaged in wholesale trading
of crude oil and petroleum products. PetroFina's Downstream strategy following
its divestiture of U.S. assets is to focus on its Belgian and Luxembourg
activities. PetroFina plans to sell its
7
<PAGE> 8
non-strategic assets either to TotalFinaElf, when in the interests of the
consolidated group, or to unaffiliated third parties.
Chemicals. PetroFina produces monomers (ethylene, propylene and styrene),
polyolefins (polypropylene and high-density polyethylene), styrene polymers and
copolymers (polystyrene and thermoplastic elastomers) for industrial use, as
well as oleochemicals. In 1999, PetroFina produced 2,116 thousand tonnes of
monomers and 2,713 thousand tonnes of polymers. The Group has chemical plants at
Antwerp, Feluy, Ghent and Oelegem in Belgium and, through December 1999 (at
which time they were sold to TotalFinaElf), at La Porte (Texas), Carville
(Louisiana) and Bayport (Texas) in the United States.
Paints. PetroFina owns the Sigma Coatings Group ("Sigma"), which is the
fifth largest producer of decorative paints in Europe based on sales. Sigma also
produces industrial, anti-corrosion and marine paints. In 1999, Sigma Coatings
Group combined its operational management with Kalon -- an affiliate of
TotalFinaElf) in order to increase operational efficiencies. Sigma and Kalon
each remain wholly owned by PetroFina and TotalFinaElf, respectively, however,
taken together, Sigma and Kalon would create the second largest decorative paint
group in Europe.
BUSINESS COMBINATION OF TOTALFINAELF AND PETROFINA
In order to realize business synergies expected as a result of the
foregoing transactions, TotalFinaElf and PetroFina created an Integration
Committee to combine the PetroFina businesses into the TotalFinaElf Group,
simplify the structure of the new Group, merge the management and operational
teams, unlock synergies and integrate the operations and administrations
including the information systems. The goal of each transaction was the
optimization of accounting, financial and regulatory constraints differing from
one country to another.
Following the Committee's analyses and recommendations, the following
restructuring occurred in 1999:
- May 1999: Business lease contract, leasing the Fina France business to
Total Raffinage Distribution. Under this contract, all the commercial
operations of Fina France and its subsidiaries were leased to Total
Raffinage Distribution S.A. The Fina France business includes
service-stations, credit card businesses, trading of petroleum products,
lubricants and other businesses. Fina France remains a subsidiary of
PetroFina, and it will continue to own the assets and the customer
goodwill and will receive a fixed annual rental payment. In connection
with this transaction all the employees of Fina France were transferred
to the payroll of Total Raffinage Distribution S.A.
- August 1999: Business lease contract, leasing the Fina Deutschland
business to Total Deutschland. This contract contains terms similar to
the Fina France lease, and covers similar businesses.
- September 1999: Sale of Fina Nederland (includes both network and
non-network retail stations, lubricants, aviation and other businesses)
to Total Nederland.
- October 1999: sale of Fina Aviation Chemical (Switzerland) (includes
aviation, lubricants and chemicals businesses) to Air Total Suisse.
- November 1999: merger of Total Belgique Luxembourg (includes both
network and non-network retail stations, lubricants and other
businesses) with and into TotalFina Belgium (formerly known as Fina
Europe).
- November 1999: sale of Fina Portuguesa (lubricants) to Total Portugal.
- November 1999: sale of Fina Iberica (includes both network and
non-network retail stations, lubricants and other businesses) to Total
Espagne.
- December 1999: sale of Fina Italiana (includes Upstream and Downstream
businesses (refining with a stake of 57.5% in the Rome Refinery and
marketing with network and non-network retail stations, lubricants and
other businesses) to Total Italie.
- December 1999: sale of American PetroFina Holding Company (a wholly
owned U.S. holding company which, through its subsidiaries, engages in
crude oil and natural gas exploration and production and natural gas
marketing; petroleum products refining, supply and transportation, and
marketing; and chemicals manufacturing and marketing) to TotalFina
Gestion.
- December 1999: sale of Fina Nederlandse Antillen NV to a wholly owned
subsidiary of TotalFina S.A. (Fina Nederlandse Antillen was a wholly
owned holding company, which, through its subsidiary Brittany Insurance
Company Ltd, insured or reinsured risks of subsidiaries of PetroFina
S.A. During 1999 all PetroFina Group insurance policies were transferred
to an existing insurance subsidiary of
8
<PAGE> 9
TotalFina S.A. and the unexpired 1999 reinsurance program was terminated.
The run off of a third party book of general reinsurance business with
the international markets remains within a subsidiary of Fina Nederlandse
Antillen; including excess liability risks such as environmental and
health hazard exposures).
- December 1999: sale of Fina Resources Inc (a wholly owned Canadian
subsidiary of PetroFina S.A. holding various upstream assets located in
Alberta and British Columbia) to Total Fina S.A.
Thus far in fiscal 2000, the following transactions have been approved and
are underway:
- March 2000: TotalFina Belgium S.A. transferred to Total Oil Holdings Ltd
the totality of the Fina Plc shares which it holds. Fina Plc is a
marketing company in the United Kingdom. Fina Plc also is the parent
company of a group in which are performed all the PetroFina activities
in the United Kingdom. Fina Plc holds, inter alia, the shares of Fina
Petroleum Development Ltd (a UK North Sea upstream company) and also 50%
of the shares of Lindsey Oil Refinery Ltd.
- March 2000: the Board of Directors of PetroFina approved the sale of
SOCOREP and FINAREP to PERENCO (RDC) S.A. FINAREP, a wholly owned
subsidiary of PetroFina S.A., is the owner of a 54.55% undivided working
interest in a onshore crude oil production concession in the Democratic
Republic of Congo, located along the coastline between Cabinda and the
Angolan frontier. SOCOREP is the holder of the registered mining title.
The closing is expected to occur in June 2000.
- Second quarter 2000: The shares of Compagnie Europeenne d'Assurances
Industrielles S.A. (Belgian insurance company) were sold to an
unaffiliated third party.
All transactions were executed at fair market value, determined by
investment appraisers. In addition, at the request of the Board of Directors of
Petrofina SA, fairness opinions were obtained from the same experts for certain
transactions. In connection with these restructuring transactions, a number of
business are being managed and operated in an integrated fashion with
TotalFinaElf. PetroFina expects to continue to implement the restructuring
activity over the next several years.
UPSTREAM
OVERVIEW OF UPSTREAM ACTIVITIES
The Upstream segment includes all activities associated with the
exploration, development and production of PetroFina's oil and gas interests,
which are presently located in six countries (excluding Congo), as well as the
Group's natural gas marketing operations. Following the restructuring with
TotalFinaElf and the termination of exploration activities in certain
non-strategic areas, the Group focuses its Upstream activities in existing
operations in the North Sea and Angola.
As of December 31, 1999, PetroFina had approximately 9,946 square
kilometers of net exploration acreage. Consistent with industry practice,
PetroFina often holds a percentage interest in its acreage, with the balance
held by other joint venture partners (which generally include other oil
companies, state oil companies or government entities). Contractual arrangements
between co-venturers generally are governed by an operating agreement, which
provides for costs, entitlements to production and liabilities to be shared
according to percentage interests, and for one co-venturer to be appointed
operator to conduct operations under the overall supervision and control of an
operating committee consisting of a representative of each co-venturer. While
operating agreements generally provide for liabilities to be borne by the
co-venturers according to their respective percentage interests, licenses from
the relevant government authority generally provide that the co-venturers are
jointly and severally liable for their obligations to that government authority
under the applicable license. These obligations generally include the removal or
decommissioning of installations upon the cessation of operations. PetroFina has
interests in producing acreage in eight countries and currently acts as an
operator in eight countries. See "Upstream Activities by Geographic Region"
below for descriptions of the Group's principal producing fields.
9
<PAGE> 10
The table below shows the Group's Upstream activities by country during
1999. The footnotes to the table indicate activities sold to third parties or to
TotalFinaElf in the restructuring.
<TABLE>
<CAPTION>
EXPLORATION PRODUCTION OPERATOR
----------- ---------- --------
<S> <C> <C> <C>
EUROPE:
Italy(1).................................................. X X x
Norway.................................................... X X x
United Kingdom............................................ X X x
NORTH AND SOUTH AMERICA:
United States(1).......................................... X X x
Canada(1)................................................. X X
AFRICA:
Angola.................................................... X X x
Libya..................................................... X X x
Democratic Republic of Congo (formerly Zaire)(2).......... X x
ASIA:
Vietnam................................................... X x
Azerbaijan................................................ X
</TABLE>
---------------
(1) PetroFina transferred its United States, Canadian and Italian upstream
businesses to its parent company, TotalFinaElf, in December, 1999 as part of
a corporate reorganization.
(2) In March 2000, PetroFina entered an agreement to sell its upstream business
in the Democratic Republic of Congo.
The table below sets forth selected financial data for PetroFina's Upstream
segment for each of the periods indicated. These figures include the
contribution from the United States, Canadian and Italian Upstream businesses.
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS SIX MONTHS AGGREGATE YEAR DECEMBER 31,
ENDING JUNE 30, ENDING DEC. 31, ENDED DEC. 31, -------------
1999 1999 1999 1998 1997
--------------- --------------- -------------- ----- -----
(IN MILLIONS OF EURO EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total operating revenue............ 899 662 1,561 2,192 2,188
Inter-segment sales................ (294) 20 (274) (587) (900)
Operating revenues to
non-affiliates................... 605 682 1,287 1,605 1,288
Operating income................... 130 150 280 294 627
</TABLE>
EXPLORATION
PetroFina's total capital expenditures for exploration activities amounted
to EUR 50 million, EUR 97 million and EUR 113.4 million, for the years ended
1999, 1998 and 1997, respectively. In 1999, PetroFina participated in 16
exploratory wells, relinquished or sold 10,830 square kilometers, and held 9,946
square kilometers in its portfolio of net exploration acreage at year end.
Approximately one-third of the completed wells either discovered new potential
reserves of crude oil or natural gas or upgraded existing discoveries. The
acreage removed in 1999 from net exploration acreage was either transferred to
its parent company TotalFinaElf or relinquished where appraisals indicated a low
probability of commercial reserves.
DEVELOPMENT
The development stage occurs after completion of exploration and appraisal
and prior to hydrocarbon production and involves the development of production
facilities including platforms and pipelines. For offshore reserves the
development stage can involve substantial expenditures and time, especially in
areas without existing production infrastructure. PetroFina invested EUR 297
million, EUR 436.6 million and EUR 456.7 million, for the years ended 1999, 1998
and 1997, respectively, for development and production facilities.
PetroFina's current activities include new development projects in the
North Sea and Angola, as well as redevelopment of producing facilities in the
North Sea and onshore Africa.
The two most significant new development projects currently underway are:
(1) the water injection project on the Eldfisk field in the Greater Ekofisk Area
in the Norwegian sector of the North Sea and (2) the offshore development
project of the Girassol field in the deep waters offshore Angola (production
start-up expected in 2001). Future Upstream development will focus only in these
two regions.
10
<PAGE> 11
PetroFina's largest and most productive Upstream asset, the Ekofisk complex
in the Norwegian sector of the North Sea, has been completely redeveloped at a
cost of US $2.63 billion. PetroFina's share of the cost was approximately US
$750 million. Production through the new installations started in August 1998,
and PetroFina's share of the production from the Ekofisk complex now reaches an
approximate rate of 95,000 barrels of oil and 120 million cubic feet per day.
For additional information regarding this redevelopment project, see "Upstream
Activities by Geographic Region -- Europe" below.
PRODUCTION
The Group's net production in 1999 was 47 million barrels of oil and 150
billion cubic feet of gas, which corresponds to an average daily production of
205,100 barrels of oil equivalent per day. This production is about 9% lower
than in 1998. Europe is the most significant production area, contributing 86%
of total oil production and 54% of total gas production, or 73% of combined
production. In 1999 the United States contributed 21% of the Group's aggregate
combined production, and the balance came from Africa.
The following table shows PetroFina's net production for each of the years
indicated by hydrocarbon type and country:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
OIL GAS OIL GAS OIL GAS
-------- ------- -------- ------- -------- -------
(MBBL/D) (MCF/D) (MBBL/D) (MCF/D) (MBBL/D) (MCF/D)
<S> <C> <C> <C> <C> <C> <C>
EUROPE
Italy(1).............................. -- 8 -- 8 -- 8
Norway................................ 83 105 86 174 93 252
United Kingdom........................ 27 108 33 130 36 102
NORTH AMERICA
Canada(1)............................. -- 4 -- 6 -- 5
United States(1)...................... 9 186 11 195 11 205
AFRICA
Libya................................. 1 -- 1 -- -- --
Democratic Republic of Congo (formerly
Zaire)(2).......................... 3 -- 3 -- 3 --
--- --- --- --- --- ---
Consolidated Total...................... 123 411 134 513 143 572
EQUITY COMPANIES
Angola................................ 5 -- 6 -- 5 --
--- --- --- --- --- ---
Total.............................. 128 411 140 513 148 572
=== === === === === ===
</TABLE>
---------------
(1) PetroFina transferred its United States, Canadian and Italian upstream
businesses to its parent company, TotalFinaElf, in December, 1999 as part of
a corporate reorganization.
(2) In March, 2000, PetroFina entered an agreement to sell its upstream business
in the Democratic Republic of Congo.
Approximately 43% of the Group's crude oil production is sold to the
Downstream segment, which refines the production. The refined products are
either used by the Chemicals segment, sold through the Group's wholesale and
retail petroleum marketing activities or sold through the Group's supply and
trading activities. The rest of the Group's oil and gas production is sold to
third parties. See "Downstream."
RESERVES
At December 31, 1999, the Group's consolidated combined net proved crude
oil and natural gas reserves were approximately 595 million barrels of oil
equivalent, approximately 79% of which were oil. 91% of the proved reserves are
located in Europe and 9% in Africa (The United States and Canada being excluded
at December 31, 1999).
11
<PAGE> 12
The table below sets forth PetroFina's estimated worldwide consolidated net
proved reserves as of the dates indicated (including both developed and
undeveloped reserves).
<TABLE>
<CAPTION>
NET PROVED RESERVES AT DECEMBER 31,
----------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
CHANGE FROM CHANGE FROM CHANGE FROM
1999 1998 1998 1997 1997 1996 1996
---- ----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Crude Oil (Mbbl).................. 473 (27) 648 11.1 583 3.7 562
Natural Gas (Bcf)................. 735 (45) 1,336 (15.9) 1,588 (8.8) 1,742
Combined(1) (Mboe)................ 595 (32) 871 2.7 848 (0.6) 853
</TABLE>
---------------
(1) See "Conversion Table" for the ratio used to convert cubic feet of natural
gas to boe.
PetroFina's internal petroleum reservoir engineers estimate proved reserves
using geological and engineering data to determine whether the crude oil or
natural gas in known reservoirs is reasonably certain to be recoverable under
existing economic and operating conditions. This process involves making
subjective judgments. Consequently, measures of reserves are not precise and are
subject to revision. PetroFina's oil and gas reserves are reviewed annually to
take into account, among other things, production levels, field reviews, the
addition of new reserves from discoveries and acquisitions, disposals of
reserves and economic factors. PetroFina's worldwide net proved reserves shown
above exclude the net proved reserves of its non-consolidated company in Angola,
in which PetroFina's proportionate share represented 14.4 million barrels of oil
as of December 31, 1999, 21.8 million barrels of oil as of December 31, 1998 and
24.4 million barrels of oil as of December 31, 1997. For further information
concerning PetroFina's net proved reserves at December 31, 1999, 1998 and 1997.
See "Item 18. Financial Statements -- Supplemental Oil and Gas Information
(Unaudited)."
PetroFina's net proved reserves of crude oil and natural gas (calculated on
an oil equivalent basis) have remained stable over the two years ended December
31, 1998. Over the three-year period from 1997 to 1999, reserve additions were
approximately 128 million barrels of oil equivalent, replacing 53% of
production, before deducting sales of reserves in place during this period. In
1999, PetroFina's net proved reserves were reduced by the transfer of the United
States, Canadian and Italian upstream businesses to its parent company,
TotalFinaElf, and due to technical revisions in the UK, Norway and Congo. New
proved reserves were recorded due to successful exploration activities in Angola
(block 17).
NATURAL GAS MARKETING
The Natural Gas Marketing division markets the Group's United States
natural gas production, as well as third-party produced gas.
UPSTREAM ACTIVITIES BY GEOGRAPHIC REGION
Europe
In NORWAY, the Group holds an interest in 10 offshore licenses and acts as
operator in block 24/9.
The Group has a 28.5% interest in the Ekofisk, Eldfisk and Embla fields and
a 24.9% interest in the Tor field. PetroFina's proved reserves in Norway as of
December 31, 1999 were 475 million barrels of oil equivalent. Total production
in 1999 from these fields net to PetroFina was 30.4 million barrels of crude oil
and 38.3 billion cubic feet of natural gas.
The redevelopment of the Ekofisk complex, known as Ekofisk II, included two
major new platforms, a drilling and production platform and a platform for
processing and transportation of oil and gas. While enhancing long-term safety,
this investment allows extended incremental recovery and a significant reduction
in operating costs. In connection with this redevelopment, the government of
Norway extended PetroFina's operating license from 2011 to 2028. No further
royalties are due to the government of Norway since Ekofisk II became
operational in October 1998. However, in exchange for its contribution of 5% of
the redevelopment costs, the government of Norway earns 5% of the production
starting from January 1, 1999, and PetroFina's interest decreased at that point
from 30% to 28.5%.
The Ekofisk partners have decided to close certain smaller, substantially
depleted fields like West Ekofisk, Cod, Edda, Albuskjell and Tommeliten rather
than connecting them to Ekofisk II. A plan for decommissioning these obsolete
platforms and wells was submitted to the Norwegian authorities in October 1999,
and the Group expects to receive approval to proceed in 2001.
12
<PAGE> 13
Enhanced recovery techniques, such as water injection and gas injection,
are very important for the Ekofisk field and injection facilities have been
installed for the Eldfisk field (which started up in February 2000) and
evaluated for the Tor field. In the Ekofisk field, for instance, the enhanced
recovery program is expected to result in an additional recovery over the life
of the field for the Ekofisk partners of more than 1 billion barrels of oil
equivalent.
Oil produced at Ekofisk and its satellite fields is transported by pipeline
to Teesside in the United Kingdom where it is processed. The natural gas is
transported by pipeline to Emden in northern Germany where it is sold to a
consortium of European buyers. The Group holds interests in the oil pipeline
(28.4%), the gas pipeline and the gas processing plant in Emden (Germany)
(12.9%), and the liquid processing facilities in Teesside (United Kingdom)
(23.75%).
In the UNITED KINGDOM ("U.K."), the Group has interests in 74 offshore
blocks, and is the operator in 21 of them. Twelve of these blocks are located in
the area west of the Shetland Islands and 12 others are in the Atlantic Margin
Tranches 21 and 30 (PetroFina operates six of them).
In the U.K., the Group has an active program of continual portfolio
consolidation. In April 2000, it commenced a divestiture program for certain of
its Southern North Sea gas producing assets in the UKCS, mainly in the Hewett
Area (18.57%), although so sales have been completed to date.
The Group's total net oil production in the U.K. for 1999 was 9.9 million
barrels. During December 1999, net oil production was approximately 25,000
barrels per day, primarily from the three T-block fields (i.e., Toni, Tiffany
and Thelma) and the Alba field. PetroFina has a 30% interest in T-block, which
produced at a combined field production rate of 40,000 barrels per day in late
1999. At the same time, the Alba field, in which PetroFina holds a 12.65%
interest, produced at a field rate of 70,000 barrels per day.
The Group's gas production in the U.K. totaled 39.3 billion cubic feet in
1999.
In ITALY, the Group held interests in 33 onshore and six offshore licenses
and was operator of 11 of them. In December 1999, PetroFina sold its interests
in its upstream assets in Italy and transferred its operator's license to its
parent company, TotalFinaElf, as part of a group restructuring.
North and South America
In the UNITED STATES ("U.S."), the Group's holdings included interests in
63 blocks in the Gulf of Mexico (more than 50 of which are deep water blocks),
and the Group was the operator in 6 of them. The Group also had interests in
four blocks offshore California and 79 blocks in Alaska (PetroFina was operator
in 15 blocks). The Group held additional onshore interests in 14 states.
In December 1999, PetroFina sold its interests in its upstream assets in
the U.S. to its parent company, TotalFinaElf, as part of a group restructuring.
Prior to the transfer, the Group's U.S. exploration activities increased
steadily from 1995 after an extensive portfolio consolidation program caused
drilling activity to slow in 1994. In 1999, 1998 and 1997 exploration
expenditures in the U.S. amounted to EUR 28.6 million, EUR 30.2 million, and EUR
50.8 million, respectively. The Group participated in 6, 49, and 50 exploratory
wells, respectively, during these three years. Since 1992, discoveries in the
United States contributed 130 million barrels of oil equivalent to PetroFina's
portfolio of proved reserves, however proved reserves from U.S. upstream assets
are no longer consolidated within PetroFina due to the sale of these assets to
TotalFinaElf.
Prior to the transfer, PetroFina's total net production in 1999 in the
United States was 3.2 million barrels of oil and 68 billion cubic feet of gas.
Onshore the Group concentrated its exploration efforts in Texas, Louisiana,
and Mississippi, where several discoveries were made, such as in the Doxology
Field in South Texas and Maben in North Louisiana.
All assets in West Texas and New Mexico were sold to an unaffiliated third
party in mid-1999.
Offshore Louisiana, in the Gulf of Mexico, the Group concentrated on deep
water prospects. It held a 30.5% interest in the Mississippi Canyon block 441
field which has produced gas and condensates since 1992. The Group owned a 4.95%
working interest in the Genesis field (Green Canyon blocks), the development of
which was finished late 1998 with production start-up of oil and gas in February
1999
In CANADA, PetroFina produced approximately 4 million cubic feet of natural
gas per day through its participation in two discoveries. The Group also
participated in exploration activities in western Canada.
13
<PAGE> 14
In December 1999, PetroFina sold its interests in its upstream assets in
Canada to its parent company, TotalFinaElf, as part of a group restructuring.
Africa
In ANGOLA, PetroFina is the operator in fields located in the onshore Congo
basin. Its share of oil production from these fields in 1999 totaled 1.7 million
barrels. Production was affected in December 1999 due to security reasons in the
Quinguila area. The average daily production operated by PetroFina was
approximately 16,000 barrels at year end. The oil from the Congo basin is
exported through an offshore, third-party-operated terminal. PetroFina's
interest in Upstream activities in Angola is reflected in the Consolidated
Financial Statements according to the equity method of accounting. See "Item 18.
Financial Statements."
Offshore Angola, the Group has a 5% interest in a joint venture formed for
the exploration and appraisal of Block 17. Following the discoveries of
Girassol, Dalia, Rosa and Lirio, the exploration results in 1999 were successful
with the discovery of Tulipa, Cravo and Orquidea. The development of Girassol is
ongoing and first oil is expected in 2001. Studies are carried out on the Dalia
field in order to select the development concept by year end 2000. Studies are
also carried out on the various discoveries in order to optimise a development
scheme.
In 1998, PetroFina was awarded the operatorship in Angola offshore deep
water block 19 with a 30% interest. In 1999, the 3D seismic was performed and
interpretation is ongoing. The spud of the first well is anticipated in the
second quarter of 2001. The Group has also been awarded the operatorship of the
onshore concession Cabinda South in which it holds a 45% interest, however the
block is under force majeure for security reasons.
In the DEMOCRATIC REPUBLIC OF CONGO (formerly Zaire), the Group is the
operator with a 54.5% interest in three coastal onshore licenses. Its share of
the oil produced from six different fields remained stable at about 1 million
barrels in 1999. A five-year redevelopment plan involving these fields started
at the end of 1997. In March 2000 the Board of Directors of PetroFina approved
the entering into of an agreement with an unaffiliated third party for the sale
of these assets.
The Group was an operator with a 60% interest in three licenses of the
Sirte oil basin in LIBYA, where it has drilled ten wells. These wells have
resulted in two small discoveries, which were evaluated through an extended
production test that started in December 1997 and which run until July 1999. As
a consequence of the results of the test it was decided to render all the
permits in 1999.
East Asia
In VIETNAM, the Group is the operator, with a 70% interest, of offshore
blocks 46, 50 and 51. Since 1996, seven wells drilled in these blocks have made
hydrocarbon discoveries. During 1997, a three-dimensional seismic survey was
conducted in order to determine the potential of these discoveries and
development feasibility studies were started. One of the discovery wells
confirmed that the Bunga Kekwa field, in which production started in 1997,
stretches into block 46. Bunga Kekwa is located in the zone that is jointly
managed by Vietnam and Malaysia. PetroFina is currently evaluating the field.
Central Asia
PetroFina has a 5% interest in a block offshore AZERBAIJAN covering the
Lenkoran and Talysh structures in the Caspian Sea. First drilling is expected in
the year 2000.
DOWNSTREAM
OVERVIEW OF DOWNSTREAM ACTIVITIES
The Downstream segment includes PetroFina's crude oil refining, supply and
trading, and wholesale and retail petroleum products marketing activities.
With respect to refining, PetroFina's strategy is to be an efficient
operator of individual refineries with the flexibility to adapt to different
crude and feedstock supplies in order to enable it to meet changing market
requirements. PetroFina's supply and trading activity is focused on obtaining
both (1) crude oil and other raw materials needed for the Group's refinery
operations and (2) refined petroleum products to meet the needs of the Group's
marketing activities. The marketing activities focus on wholesale and retail
sales of refined petroleum products and lubricants, primarily in Europe and the
United States.
14
<PAGE> 15
The table below sets forth selected financial data for PetroFina's
Downstream segment for each of the periods indicated.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SIX MONTHS SIX MONTHS AGGREGATE YEAR DECEMBER 31,
ENDING JUNE 30, ENDING DEC. 31, ENDED DEC. 31, -------------------
1999 1999 1999 1998 1997
--------------- --------------- -------------- -------- --------
(IN MILLIONS OF EURO EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total operating revenue........... 6,549 8,090 14,639 13,087 14,178
Inter-segment sales............... (168) (409) (577) (346) (420)
----- ----- ------ ------ ------
Operating revenues to
non-affiliates.................. 6,381 7,681 14,062 12,741 13,758
Operating income.................. 108 284 392 162 298
</TABLE>
REFINING
During 1999, Petrofina owned and operated six refineries, in which the
Group's aggregate share of the total installed crude processing capacity was
37.5 million tonnes per year (758,000 bpsd): (1) Fina Raffinaderij Antwerpen
("FRA") in Antwerp (Belgium), (2) Lindsey Oil Refinery ("LOR") (PetroFina
interest 50%) in Killingholme (U.K.), (3) the Port Arthur Refinery in Texas
(U.S.), (4) the Big Spring Refinery in Texas (U.S.), (5) Raffineria di Roma
("RdR") (PetroFina interest 57.5%) in Rome (Italy) and (6) the Luanda Refinery
in Angola. In addition, the Group has access to refining capacity in France
through various processing contracts.
Petrofina sold its interests in the Port Arthur, Big Spring and Rome
refineries to its parent company TotalFinaElf in December 1999 as part of a
corporate reorganization, but still owns FRA, LOR and Luanda.
In refining, the Group's objectives are (1) to enhance refining flexibility
by optimizing the production of gasolines, middle distillates and chemical
feedstocks compared to heavy fuel oil, (2) to improve energy efficiency and (3)
to increase the integration of PetroFina's refineries with its chemical plants.
Fulfillment of these objectives will help the Group meet the growing demand for
high value-added products and for products which conform to more stringent
environmental standards.
The refining industry has suffered from continuing erosion of refining
margins during the 1990s. Technological improvements in plant efficiency and
expectations for future product demand have led to an imbalance in the market
between capacity and product demand. While the eventual market effect of the
structural oversupply is expected to be the closure of less efficient plants,
the short-term effect is continued adverse pressure on the sector's
profitability. At the same time, the refining industry requires ongoing capital
investments to enable it to meet future product specifications, especially those
related to environmental regulatory developments.
To counteract the industry conditions described above and to achieve its
strategy, the Group has sought to optimize the size and efficiency of its
refining and lubricating oil blending plants and its retail stations, while
maintaining regional balance between refined product supply and retail station
demand. In addition, the Group intends to continue to upgrade the capacity of
its two remaining refining units in Europe. Over the three-year period ended
December 31, 1999, the Group invested EUR 265 million in its refineries.
The table below sets forth PetroFina's share of the daily crude oil
refining capacities of the Group's refineries.
<TABLE>
<CAPTION>
GROUP'S SHARE OF DAILY CRUDE OIL
REFINERY CAPACITY AT
---------------------------------
JANUARY 1, 1999 JANUARY 1, 2000
--------------- ---------------
(IN BPSD)(1)
<S> <C> <C>
FRA......................................... 320 312
LOR(2)...................................... 105 103
Port Arthur(3).............................. 183 --
Big Spring(3)............................... 60 --
RdR(3)(4)................................... 49 --
--- ---
CONSOLIDATED TOTAL.......................... 717 415
EQUITY COMPANIES
Luanda(3)................................. 41 25
--- ---
TOTAL....................................... 758 440
=== ===
</TABLE>
---------------
(1) In the case of refineries that are not wholly owned by the Group, the
indicated capacity represents the Group's proportionate share of the total
refining capacity of the refinery.
15
<PAGE> 16
(2) PetroFina interest 50%.
(3) These refineries were sold in December 1999 to TotalFinaElf group entities.
(4) PetroFina interest 57.5%.
(5) This refinery is owned and operated by a non-consolidated subsidiary.
The table below sets forth, for the years indicated, the amount of crude
oil processed for PetroFina's account at the Group's refineries (excluding the
Luanda refinery but including the three refineries sold).
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- ----
<S> <C> <C> <C>
Actual throughput (Mt/y)........................ 33.6 34.34 32.9
Utilization..................................... 93.34% 95.4% 97.3%
Total installed capacity (Mt/y)................. 36 36 35.8
</TABLE>
Europe
PetroFina's European refining units are considered industry leaders in
terms of flexibility of access to market through pipeline facilities and captive
local consumption, as well as to the sea and convenient shipping facilities, and
conversion ratings (the ability to produce value-added products) having one of
the highest conversion to distillation ratios in Europe (40%, compared to an
industry average of 32%). The high desulphuration capacity of middle distillates
and fuel oils allowed the Group to comply with the European Union's year 2000
sulphur specification for diesel and fuel oils without major additional
investments. The MTBE units (defined below) at FRA and LOR, the TAME unit
(defined below) at LOR and the catalytic reforming unit with a continuous
catalyst regeneration system at FRA give the Group the ability to supply
directly the whole of its European retail network's demand for high octane
unleaded gasoline.
Antwerp. FRA is the Group's largest refinery, accounting for over 42% of
the Group's total crude distillation capacity, and is the fourth largest
refinery in Western Europe (based on throughput capacity).
FRA has an installed atmospheric distillation capacity of 16 million tonnes
of crude oil per year with associated vacuum distillation capacity for the
treatment of residue feedstocks and the capacity to process condensate in other
downsteam units. It has two catalytic crackers with a total capacity of 4.5
million tonnes per year whose capacity has increased by approximately 10% over
the last ten years and whose conversion of heavy fractions into light products
has increased by approximately 5% over the past ten years. It also has a
visbreaker (a cracking process plant which, at moderate temperatures, reduces
the viscosity of heavy petroleum fractions) with a capacity of 2.5 million
tonnes per year; product desulphuration units and sulphur recovery plants; an
MTBE (Methyl-Tertiary-Butyl-Ether) unit with capacity of 180,000 tonnes per
year; a jet fuel treatment unit with capacity of 680,000 tonnes per year; and a
propylene fractionation unit able to produce 200,000 tonnes of chemical grade
propylene per year. An alkylation unit, which has a capacity of 270,000 tonnes
per year, as well as a catalytic reforming unit with a continuous catalytic
regeneration section, which has a capacity of 2.3 million tonnes per year,
permits the manufacture of several grades of unleaded gasoline in the European
Union ("EU") in response to increasingly stringent environmental specifications.
Since 1994, FRA has been equipped with a deep conversion facility with a
capacity of 4 million tonnes per year. This facility enables FRA to produce,
after desulphuration, a high quality product slate from "poorer" quality crudes,
making it one of the most modern and efficient refineries in Europe.
By December 99, FRA started a unit to increase its production of aromatics
(including xylene) to 800,000 tonnes per year, with a corresponding decrease in
gasoline production. PetroFina invested approximately EUR 99 million in this
unit. PetroFina has signed a long-term supply agreement with Amoco under which
Amoco will purchase xylene produced at FRA.
The Group signed a contract with Electrabel, the Belgian electricity
company, in January 1998, to build a 126 megawatt cogeneration unit at FRA,
which is fully operational since November 1999.
Lindsey Oil Refinery. The Group owns a 50% interest in LOR at Killingholme
in the northeast of England, which has an installed atmospheric distillation
capacity of 10 million tonnes per year with associated vacuum distillation units
which can also treat imported residue feedstocks. LOR has a catalytic cracker
(which was upgraded recently to increase gasoline production and conversion and
to meet anticipated environmental regulations) with a capacity of 2.5 million
tonnes per year; two semi-regenerative catalytic reforming units with a total
capacity of 1.4 million tonnes per year; a visbreaker with a capacity of 1.6
million tonnes per year, and desulphuration units and sulphur recovery plants.
It also has a kerosene treatment unit with a capacity of 780,000 tonnes of jet
fuel per year; a kerosene dearomatization unit with a capacity of 140,000 tonnes
per year;
16
<PAGE> 17
and a bitumen production unit with a capacity of 600,000 tonnes per year. The
refinery also has a catalytic polymerization unit, with a feedstock capacity of
120,000 tonnes per year, that transforms light olefins from the cracker into
gasoline, as well as two propylene fractionating units, with a capacity of
160,000 tonnes per year and an alkylation unit (equipped with a
hydroisomerization feedstock preparation section) with a capacity of 250,000
tonnes per year. The refinery has an MTBE unit with a capacity of 100,000 tonnes
per year and a TAME (Tertiary-Amyl-Methyl-Ether) unit with a capacity of 50,000
tonnes per year.
Since 1992, the Group has completed capital projects involving system
automation for managing oil products, finished product loading and catalytic
cracking capacity increases. In addition, in a joint venture with a major
electric utility company, in November 1996, the Group completed the installation
of a 40 megawatt cogeneration unit to produce electricity and steam to supply
LOR's own needs, while leaving a substantial proportion of electricity for sale.
The cogeneration unit reduces the refinery's energy costs in an environmentally
sensitive manner.
Rome. In Italy, Petrofina sold its interests in the Rome refinery to its
parent company TotalFinaElf in December 1999 as part of a corporate
reorganization. Prior to the sale, the Group owned a 57.5% interest in RdR, a
refinery near Rome. The refinery had an installed atmospheric distillation
capacity of 4.0 million tonnes per year and a vacuum distillation unit with a
capacity of 630,000 tonnes per year. RdR has a visbreaker with a capacity of 1.7
million tonnes per year, distillate desulphuration units and a sulphur plant for
liquid sulphur recovery. It is equipped with a semi-regenerative catalytic
reformer unit with a capacity of 600,000 tonnes per year, a kerosene treatment
unit with a capacity to produce 530,000 tonnes of jet fuel per year and an
isomerization unit with a capacity of 240,000 tonnes per year.
A new benzene saturation unit was commissioned in November 1997.
United States
Port Arthur. Petrofina sold its interests in the Port Arthur refinery to
its parent company TotalFinaElf in December 1999 as part of a corporate
reorganization. The Port Arthur refinery, on the Texas Gulf coast, has an
installed atmospheric distillation capacity of 8.8 million tonnes per year with
associated vacuum distillation capacity. Since 1991, it has had a catalytic
cracking unit with a capacity of 3.3 million tonnes per year. In the 1980s an
upgrading program reduced the output of lower value heavy residues to 8% and
allowed the production of unleaded gasoline following the installation of a
reforming unit with a continuous regeneration system. In addition, this program
included a vacuum bottom deasphalting unit with a capacity of 1.0 million tonnes
per year and a desulphuration unit for heavy cracker feedstock with a capacity
of 1.4 million tonnes per year. The Port Arthur refinery also has a 36-megawatt
cogeneration unit which supplies most of the refinery's electricity and steam
requirements. This cogeneration unit, which was installed in 1988, substantially
reduced the plant's operating costs. The refinery also has distillate
desulphuration units with associated sulphur recovery plants and an alkylation
unit with a capacity of 210,000 tonnes per year. The complex includes a unit for
the extraction of aromatics from gasoline, which supplies half of the benzene
feedstock requirements of the Group's petrochemical plants in the United States,
and an isomerization unit with a capacity of 373,000 tonnes per year.
Big Spring. Petrofina sold its interests in the Big Spring refinery to its
parent company TotalFinaElf in December 1999 as part of a corporate
reorganization. The Big Spring refinery, in Howard County, Texas, has an
installed atmospheric distillation capacity of 2.9 million tonnes per year and
an associated vacuum distillation unit; a catalytic cracker with a capacity of
1.2 million tonnes per year; an alkylation unit with a capacity of 195,000
tonnes per year; a solvent deasphalting unit with a capacity of 560,000 tonnes
per year; and desulphuration with associated sulphur recovery units.
This refinery also has a semi-regenerative catalytic reformer unit with a
capacity of 850,000 tonnes per year and an aromatic extraction unit for benzene
recovery, with a capacity of 30,000 tonnes of benzene per year. In 1996, the
fluid catalytic cracking unit was upgraded which increased the conversion
capacity by 7%. The refinery is linked by a third-party pipeline network to the
major regional markets that are served by the refinery: El Paso (Texas),
Albuquerque (New Mexico) and Tucson (Arizona).
Africa
Luanda. The Group owns the only refinery in Angola, which is in Luanda. It
has an installed atmospheric distillation capacity of 2 million tonnes per year,
a semi-regenerative catalytic reformer with a capacity of 100,000 tonnes per
year and a vacuum unit with a capacity of 140,000 tonnes per year. The Group's
activities at the Luanda refinery are conducted by a non-consolidated subsidiary
of the Company. The prices of refined
17
<PAGE> 18
products are fixed by the government so that the Group obtains a specified
return on its capital invested in the refinery.
SUPPLY AND TRADING
The Group's supply and trading activities are focused principally on the
supply of its refineries, as well as its marketing entities. Its supply
departments are active in both physical and, to a limited extent, futures
markets.
Spot and term crude oil and feedstocks supply contracts cover the quantity
and quality requirements of PetroFina's refineries in excess of feedstock
supplied by the Group's Upstream activity. Exchange agreements allow the Group
to ensure the security and the optimization of the supply of petroleum products
to its various marketing organizations. Like most other oil companies, the Group
uses hedging tools to moderate its exposure to short-term fluctuations in crude
and products prices. See "Item 9A. Quantitative and Qualitative Disclosures
About Market Risk."
The supply and trading division's activities include the trading of
significant amounts of refined petroleum products (including the trading of
liquefied petroleum gas) on the international markets, mainly in Europe and in
the United States. It also manages the supply of the feedstocks required by Fina
Antwerp Olefins petrochemical complex.
Over the course of the second half of 1999, management and oversight of
PetroFina's trading and supply activities has become integrated with
TotalFinaElf's management of its trading and supply activities, in order to
increase operational efficiencies and manage on a group-wide basis except for
the supply activities relating to the Antwerp refinery. All intra group trading
and supply activity is conducted on an arm's length basis.
The table below sets forth selected information with respect to the Group's
sales and supply of crude oil (produced by PetroFina and by third parties) for
each of the years indicated.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(IN THOUSANDS OF TONNES)
<S> <C> <C> <C>
PETROFINA CRUDE PROCESSED IN PETROFINA REFINING SYSTEM:
Europe(1)................................................. 2,735 4,701 5,399
United States(2).......................................... 0 0 0
------ ------ ------
Total.................................................. 2,735 4,701 5,399
PETROFINA CRUDE SOLD TO THIRD PARTIES:
Europe(1)................................................. 2,618 1,461 869
United States(2).......................................... 444 469 507
------ ------ ------
Total.................................................. 3,062 1,930 1,376
THIRD-PARTY CRUDE PURCHASED AND PROCESSED IN PETROFINA
REFINING SYSTEM:
Europe(1)................................................. 19,858 18,661 16,717
United States(2).......................................... 10,318 10,893 9,569
------ ------ ------
Total.................................................. 30,176 29,554 26,286
THIRD-PARTY CRUDE PURCHASED AND RESOLD TO THIRD PARTIES:
Europe(1)................................................. 570 788 703
United States(2).......................................... 5,166 8,659 5,730
------ ------ ------
Total.................................................. 5,736 9,447 6,433
</TABLE>
---------------
(1) Europe includes Europe and the rest of the world, other than the United
States.
(2) Commencing December 1999, the PetroFina Group's trading activities in
respect of its previously held U.S. and Italian upstream and refinery
operations have ceased due to the transfer of such activities to the parent
company, TotalFinaElf.
For additional information, see "Item 9A. Quantitative and Qualitative
Disclosures About Market Risk."
MARKETING
PetroFina markets refined petroleum products (such as gasoline, diesel,
heating oil, and industrial, aviation and marine fuels, as well as bitumen) and
lubricants throughout the world under the brand name FINA. In 1999, the Group's
sales volume of refined products and lubricants amounted to 35 million tonnes.
18
<PAGE> 19
The table below sets forth by geographic area the Group's sales of refined
petroleum products and lubricants for the periods indicated.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(IN THOUSANDS OF TONNES)
<S> <C> <C> <C>
Europe...................................................... 21,819 27,231 26,161
United States............................................... 13,148 12,615 12,540
------ ------ ------
Total....................................................... 34,967 39,846 38,701
====== ====== ======
</TABLE>
PetroFina's marketing activities are divided into two sectors: retail and
commercial. The retail activities are those carried out mainly through its
network in Europe and the United States. The commercial or wholesale activities
are bulk sales to both distributors and direct consumers, which include the
aviation and marine markets as well as the sale of heating and industrial oils.
As already in the past, the Group is improving the efficiency of its retail
network by reducing its operating costs and upgrading the quality of its
network. Operating costs are being reduced on a per unit sold basis through
consolidation of the existing retail network to focus on fewer, but higher
volume, service stations. Total brand is used on some of our service stations.
The Group produces lubricant products at its blending plant located in
Belgium. These products are sold in more than 50 countries. Continuous product
innovation is necessary in this highly competitive market because of consumer
demand for environmentally acceptable products, the increasing efficiency of
engines and the technical development of industrial plants. The Group's strategy
is to concentrate on selected market segments for which PetroFina has developed
an expertise, such as special vehicle dealers and transport companies, which use
automotive oils, and the steel industry, paper mills and building materials
industry, which use industrial lubricants.
PetroFina sponsors FINA racing teams that participate at various European
and U.S. car races and use Fina fuel and high performance lubricants.
Europe
In Europe, the FINA retail network owned by Petrofina previously extended
through Belgium, England, France, Germany, Italy, Luxembourg, the Netherlands,
Norway and Spain. Due to a corporate reorganization of activities with its
parent company TotalFinaElf, a significant part of this network has been
transferred to TotalFinaElf.
The table below sets forth the number of FINA service stations in Europe by
country for the last three years as well as the transfers effected in 1999.
<TABLE>
<CAPTION>
NUMBER OF STATIONS AT DECEMBER 31,
-----------------------------------
1999 1998 1997
------------- ------- -------
<S> <C> <C> <C>
Belgium..................................................... 728(4) 501 523
France...................................................... Business(2) 435 437
transferred
Germany..................................................... Business(2) 371 398
transferred
Italy....................................................... Sold(3) 1,354 1,394
Luxembourg.................................................. 37(4) 18 18
The Netherlands............................................. Sold(3) 196 192
Norway(1)................................................... Sold(3) 185 180
Spain....................................................... Sold(3) 80 68
United Kingdom.............................................. Business(2) 402 424
transferred
----------- ----- -----
Total..................................................... 765 3,542 3,634
=========== ===== =====
</TABLE>
---------------
(1) In March 1999, PetroFina sold its Norwegian Downstream business to an
unrelated third party and used the proceeds to acquire a portfolio of
service stations in the Netherlands.
19
<PAGE> 20
(2) The business is now operated by a TotalFinaElf subsidiary under a business
lease arrangement under which Petrofina retains ownership and receives lease
payments. Franchise agreements with stations bearing the Fina brand have
been transferred to TotalFinaElf group entities.
(3) The subsidiary was sold to a TotalFinaElf subsidiary.
(4) Business done by the TotalFinaElf subsidiary in the specified country has
been sold to the PetroFina subsidiary.
The table below sets forth the number of stations in Europe owned by the
Group, FINA-branded distributor stations and the total number of stations over
the three years indicated.
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Group-owned stations........................................ 217 1,762 1,826
FINA-branded distributor stations........................... 548 1,780 1,808
----- ----- -----
Total stations............................................ 765 3,542 3,634
===== ===== =====
</TABLE>
At the end of 1994, PetroFina launched the Eurotrafic card, an
international electronic payment system aimed at corporate customers. The card,
which is accepted in 4,500 service stations in 13 European countries, provides
fleet management services, such as VAT (value added tax) recovery, toll payments
and roadside assistance. Loyalty cards aimed at both business and private
customers are also being developed by PetroFina's marketing subsidiaries.
In its home country, Belgium, PetroFina has a retail market share of
approximately 15%.
A new lubricants blending and packaging plant at Ertvelde (Belgium) with a
capacity of 120,000 tonnes per year, serves as the Group's logistical center for
the northern European market. In January 1998, the Group sold its blending plant
at Duisburg (Germany), which allows PetroFina to concentrate its lubricants'
production at Ertvelde (Belgium) and achieve important economies of scale.
United States
Petrofina sold its U.S. marketing activities to its parent company
TotalFinaElf in December 1999 as part of a corporate reorganization. Prior to
this transfer, in the United States, marketing activities had been divided into
two geographical business units since 1994 with the aim of reducing costs,
increasing productivity and improving customer service. The U.S. marketing focus
is to enable the maximization of PetroFina's refinery utilization through both
FINA branded and unbranded fuel sales.
The table below sets forth the number of stations in the United States
owned by the Group, the number of FINA-branded distributor stations and the
total number of stations as of the end of each of the three years indicated.
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Group-owned stations........................................ 0 0 53
FINA-branded distributor stations........................... 1,682 2,375 2,606
----- ----- -----
Total stations............................................ 1,682 2,375 2,659
===== ===== =====
</TABLE>
The Southeastern Business Unit manages supply and marketing activities in,
and east of, the Dallas/ Ft. Worth area in Texas and throughout the Gulf States
region, including the Port Arthur refinery. The Southwestern Business Unit
manages marketing activities west of Ft. Worth, Texas (principally, West Texas
and New Mexico) and includes crude gathering operations and the Big Spring
refinery.
CHEMICALS
PetroFina's Chemicals segment produces and markets petrochemicals (base
chemicals, monomers, polymers) and oleochemicals. The Group conducts a wide
range of chemical activities at five plants in Europe and, until transferred to
its parent company, TotalFinaElf in December 1999, five plants in the United
States. The European plants, which are close to large markets, have access to
some of the world's largest harbors and best transportation networks (pipelines,
rivers, channels, railways and highways). These logistical advantages enable
PetroFina to deliver high-quality products at low cost. Over the last three
years, PetroFina has invested an aggregate of approximately EUR 798 million in
its chemical monomer and polymer production facilities.
PetroFina's customers use petrochemicals to manufacture such things as
flexible and rigid packaging, fibers for carpets, specialty films, wire and
cable. Through its research and development activities, PetroFina is extending
the Group's range of products and services, utilizing a customer-driven
approach.
20
<PAGE> 21
The Chemicals segment's strategy for growth is based on three principles:
(1) extensive integration from crude oil to polymers; (2) use of large plants to
maximize efficiency; and (3) developing differentiated products, while remaining
a low-cost producer. Where appropriate, this strategy has been pursued through
joint ventures.
The table below sets forth selected financial data for the Chemicals
segment for each of the years indicated.
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED
SIX MONTHS SIX MONTHS AGGREGATE YEAR DECEMBER 31,
ENDING JUNE 30, ENDING DEC. 31, ENDED DEC. 31, -------------
1999 1999 1999 1998 1997
--------------- --------------- -------------- ----- -----
(IN MILLIONS OF EURO EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total operating revenue............ 1,009 1,640 2,649 1,982 2,312
Inter-segment sales................ (46) (63) (109) (101) (127)
----- ----- ----- ----- -----
Operating revenues to
non-affiliates................... 963 1,577 2,540 1,881 2,185
Operating income................... 218 29 247 184 259
</TABLE>
The table below shows the Group's year-end petrochemical production
capacity at the dates indicated.
<TABLE>
<CAPTION>
CAPACITY AT DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(IN THOUSANDS OF TONNES)
<S> <C> <C> <C>
EUROPE
Ethylene.................................................... 780 780 680
Propylene................................................... 610 610 610
Aromatics................................................... 210 200 200
High density polyethylene................................... 545 500 450
Elastomers.................................................. 85 80 80
Polypropylene............................................... 430 420 400
UNITED STATES(1)
Propylene................................................... 500 500 270
Aromatics................................................... 615 615 580
Styrene..................................................... 480 480 480
Polystyrene................................................. 500 500 465
Polypropylene............................................... 1,000 1,000 700
High density polyethylene................................... 400 385 191
</TABLE>
---------------
(1) PetroFina transferred its United States chemicals activities to TotalFinaElf
in December 1999.
EUROPE
The Group's European chemical activities are carried out in five plants in
Belgium located at Antwerp (two plants), Feluy, Ertvelde and Oelegem. These
plants, which are operated by Company subsidiaries and a joint venture, produce
a variety of monomers, polymers, base chemicals and oleochemicals.
Petrochemicals
Consistent with the segment's strategy, PetroFina's petrochemical plants
are integrated with its refineries. More than 40% of the feedstocks used in its
European plants are supplied from internal sources, and the refineries are able
to use return streams of various by-products, including hydrogen, from the
chemical plants.
The Group's European chemical products are marketed through a "FINA
Chemicals" branded organization supported by offices throughout Western Europe,
Poland, Russia and Asia. This organization works closely with the plants and the
Group's research and development center in Feluy to better respond to customer
needs.
Antwerp. The Group's petrochemical activities in Antwerp are carried out
at two plants close to FRA, its Antwerp refinery. These plants are operated by
the Company's subsidiary Fina Chemicals Antwerp and a joint venture in which the
Group has a 65% interest, Fina Antwerp Olefins ("FAO"). The Group's refining and
petrochemical center in Antwerp (Belgium), one of the world's largest, benefits
from its location in a geographical area that must import significant quantities
of base chemicals to meet local demand. Feedstocks produced at FRA are converted
to monomers such as ethylene and propylene at FAO.
FAO operates three steam crackers with a capacity of 1.2 million tonnes of
ethylene per year, which represents more than 5% of total installed capacity in
Western Europe. FAO is connected by pipeline network to
21
<PAGE> 22
more than 40% of the Western European ethylene market. It also operates a 20,000
tonne capacity ethylene storage terminal. The Group is studying further
expansions of ethylene production to be implemented over the coming years to
meet its captive and long-term customers' needs.
FAO also has a production capacity of 590,000 tonnes per year of chemical
grade propylene. This propylene, together with propylene from FRA, can be
transported by pipeline to various customers or to the Group for the production
of polypropylene, or stored in FAO's 10,000 tonne capacity propylene storage
terminal. Ethylene and other monomers from FAO are converted at the nearby Fina
Chemicals Antwerp facilities and at Fina Chemicals Feluy into high-density
polyethylene and thermoplastic elastomers.
FAO also produces aromatics, cyclohexane and other by-products which are
sold to the market or used by the adjacent refineries. A large aromatic
extraction unit, fed by FRA, LOR and FAO with a capacity of 550,000 tonnes
xylene and 250,000 tonnes benzene will start up in early 2000.
Fina Chemicals Antwerp operates several high- and medium-density
polyethylene production lines in Antwerp and Feluy with a combined total
capacity as of December 31, 1999, of 545,000 tonnes per year, a 50,000 tonne per
year increase over 1998, representing about 10% of the total installed capacity
in Europe. Ethylene monomer is received directly, via pipeline, from Fina
Antwerp Olefins securing supply and feedstock efficiencies for the Group.
Antwerp's unique location, with its excellent port facilities, access to
pipelines and transportation networks and its location in a large and dense
industrial area enable it to serve customers competitively with higher
value-added products on a global basis. The Group's polyethylene sales are
focused on a few applications where it can supply competitive products and
services, such as pipes, blow molding, specialty films, and wires and cables for
the construction, packaging and automotive industries. It has developed a
metallocene catalyst technology which enables it to produce at the industrial
scale medium-density grades for film applications, and it has other grades under
development.
Fina Chemicals Antwerp also operates a thermoplastic elastomer plant with a
capacity of 80,000 tonnes per year. The main applications are bitumen
modification for roofing and road applications, footwear, additives and plastic
modifications such as transparent food packaging. The Group is able to supply
these high value-added products competitively because of the plant's size and
its ability, through its technology, to use cheaper feedstocks.
Feluy. In March 1995, Fina Chemicals Feluy became a wholly owned
subsidiary of the Company as a result of the acquisition of the remaining 50%
interest from its former joint venture partner. Fina Chemicals Feluy owns a
polypropylene (homopolymer and propylene-ethylene copolymer) plant with two
production lines at Feluy which has a capacity of 430,000 tonnes per year, which
represents about 5% of total installed capacity in Europe. The Group is building
a third polypropylene production line at this plant with a capacity of 380,000
tonnes/year. In addition, in 1991 it built a High Density Polyethylene ("HDPE")
line with a capacity of 150,000 tonnes per year. The plant is supplied with
ethylene and propylene by two pipelines directly linked to the Group's chemical
facilities in Antwerp. PetroFina has fully utilized its capacity at this plant
for several years. Polypropylene is a widely used raw material for the
manufacture of many commonly used fibers, films, extrusion and injection
applications and thermoformed products, such as garden furniture and containers.
The Group's sales of polypropylene are focused on those applications in which it
can supply high-quality products and services and reach higher market share. It
is also developing partnerships with global customers that can be supplied from
its U.S. plants.
Oleochemicals
Ertvelde and Oelegem. PetroFina produces oleochemicals (fatty acids, fatty
alcohols and glycerin and their derivatives such as esters, amines and
stearates) at its plants at Ertvelde near the port of Ghent and at Oelegem near
Antwerp.
The Group's Ertvelde and Oelegem plants have a combined production capacity
of 275,000 tonnes per year of fatty acids, fatty alcohols, glycerin, esters and
other derivatives. Oleochemicals, which are produced from renewable raw
materials, such as vegetable oils and animal fats, have a wide range of
applications including personal care products, detergents, cosmetics,
lubricants, drilling muds, plastic additives and pharmaceuticals. PetroFina's
fatty acids capacity is about 16% of the total effective capacity in Western
Europe. In 1999, the Group sold its nitrogen derivatives business. The Group's
most recent developments include a range of high performance and biodegradable
grades, which are well positioned to benefit from the increasing demand for both
high performance and environmentally friendly products.
22
<PAGE> 23
UNITED STATES
Through December 1999, all of the Group's chemicals activities in the
United States took place in four sites located along the coast of the Gulf of
Mexico. Each of these plants produces either monomers or polymers. Petrofina
sold its U.S. chemicals activities to its parent company TotalFinaElf in
December 1999 as part of a corporate reorganization.
Carville. At Carville (Louisiana) the Group has a fully integrated
polystyrene production through a 50% interest in the adjacent Cos-mar monomer
plant. The Group's plants in Carville reflect the Group's strategy of achieving
economies of scale through integration and through the use of large-scale
facilities.
The Cos-mar monomer plant is the world's largest styrene plant of its type.
The plant provides the Carville plant with styrene for polystyrene production.
In turn, benzene from the Port Arthur refinery is used as a feedstock to produce
styrene. The Cos-mar plant recently was upgraded to increase its production
capacity to 960,000 tonnes per year. As in the past years, it operated at full
capacity. The Group is in the process of developing a new technology for monomer
production at the Cos-mar plant, which has the potential to lower both its
capital and operating costs.
The Carville polystyrene plant is the world's largest single-site,
high-impact and crystal polystyrene plant with a capacity of 500,000 tonnes per
year. All the Group's U.S. polystyrene production is now concentrated in
Carville with four production lines, which are based on proprietary technology.
The most recent line began production in August 1996 and increased the Group's
annual capacity by 115,000 tonnes.
La Porte. The La Porte plant, located near Houston, Texas, is the world's
largest single-site polypropylene production plant, on the basis of capacity.
Major raw materials are supplied through six pipelines connected to various
refineries, steam crackers and propylene splitters. The plant produces bulk
homopolymers and random copolymers from nine lines utilizing the Group's
proprietary technology. The plant's total polypropylene capacity is 1,000,000
tonnes per year. A ninth line with block co-polymer capability came on-line in
1998, to increase, with other minor debottleneckings, total capacity to its
present level. Its current capacity represents approximately 13% of total
installed capacity in the United States. As in the past years, the plant
operated at maximum capacity in 1999.
The Group has a one-third interest in a joint venture that owns and
operates a splitter plant at Mont Belvieu, Texas. The splitter upgrades
propylene from refinery grade into polymer grade in order to supply the La Porte
plant. Following the introduction of a third splitter in 1998, the Group doubled
its polymer grade propylene capacity to reach 455 tonnes per year.
Bayport. The Bayport plant, in Texas, produces HDPE-grade polyethylene.
The Group acquired the plant in 1992, and its capacity has increased from
160,000 to 200,000 tonnes per year during the past five years. A second line was
built at the Bayport plant which became operational in the fall of 1998 and
increased the site's annual capacity by an additional 200,000 tonnes. This new
line uses the same technology as that which is currently used at the Feluy and
Antwerp plants, and provides the Group with additional commercial synergies with
its European polyethylene production.
Port Arthur. In 1997, the Group signed a letter of intent with BASF
Aktiengesellschaft ("BASF") to build the world's largest liquid steam cracker
(the "Steam Cracker Joint Venture") adjacent to the Group's refinery located in
Port Arthur, Texas which will produce, after metathesis, 860,000 tonnes of
ethylene and 860,000 tonnes of propylene annually. On May 8, 1998, the Board of
Directors of the Company and the Board of Directors of BASF approved the Steam
Cracker Joint Venture. The building is presently underway.
PAINTS
The Sigma Coatings Group ("Sigma"), which is wholly owned by the Company,
consists of several companies that produce and sell paints and protective
coatings. Sigma has three principal divisions: decorative paints, marine and
anti-corrosion paints and industrial coatings.
Sigma's headquarters are in Uithoorn near Amsterdam (the Netherlands), and
it is active principally in Belgium, Denmark, France, Germany, Italy, the
Netherlands, Saudi Arabia, the U.K., Far East and the U.S. The Sigma plants are
located in the Netherlands (Amsterdam, Uithoorn, Den Bosch, Brummen), Belgium
(Manage, Deurne), Germany (Bochum), France (Valdoie), Saudi Arabia (Damman), the
U.K. (Buckingham, Deeside), China (Kunshan) and the U.S. (Harvey, Louisiana).
23
<PAGE> 24
The table below sets forth selected financial information for the Paints
segment for each of the years indicated.
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED
SIX MONTHS SIX MONTHS AGGREGATE YEAR DECEMBER 31,
ENDING JUNE 30, ENDING DEC. 31, ENDED DEC. 31, -------------
1999 1999 1999 1998 1997
--------------- --------------- -------------- ----- -----
(IN MILLIONS OF EUR EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total operating revenue.............. 394 362 756 780 780
Inter-segment sales.................. 0 0 0 0 0
--- --- --- --- ---
Operating revenues to
non-affiliates..................... 394 362 756 780 780
Operating income..................... 34 1 35 45 40
</TABLE>
Sigma's decorative paints are sold principally under the SIGMA, HISTOR,
RAMBO and GAUTHIER brand names. Decorative paints, which account for
approximately 51% of Sigma's revenues, are sold primarily in Europe. Sigma is
one of the two largest producers of decorative paints in the Netherlands, the
second largest in Belgium and the fifth largest in Western Europe (in each case
based on sales). In addition, the Group has a 20% interest in the largest
producer of decorative paints in Saudi Arabia and is responsible for the
management of that company, which markets the SIGMA brand.
Sigma markets its marine paints worldwide and its anti-corrosion paints
primarily in Europe, Far East and in the United States. Sales of marine and
anti-corrosion paints account for almost 26% of Sigma's revenues. Sigma is the
fifth largest producer of marine paints in the world based on sales.
Industrial coatings account for approximately 16% of Sigma's revenues, and
are marketed primarily in Europe. Sigma has a strong market share in coil
coatings.
In mid-1999, Sigma Coatings Group combined its operational management with
Kalon (an affiliate of TotalFinaElf) in order to increase operational
efficiencies. Sigma and Kalon each remain wholly owned by PetroFina and
TotalFinaElf, respectively, however, taken together, Sigma and Kalon would
create the second largest decorative paint group in Europe.
RESEARCH AND DEVELOPMENT
In 1999, the Group's research and development expenses were EUR 78 million
compared to EUR 78 million in 1998 and EUR 80 million in 1997.
PetroFina conducts most of its research and development activities in its
three research centers located at Feluy (Belgium), La Porte (Texas) and
Amsterdam (the Netherlands). The Texas research and these research centers aim
to improve the production processes in the Group's refineries and chemical and
paints plants, as well as to develop new, more development activities were
transferred in December 1999 to TotalFinaElf. In recent years, research
developments have resulted in advances in the areas of desulphuration, special
fuels, lubricants, polymers, oleochemicals and paints.
PetroFina's research center at Feluy brings together on one site the
Group's main research and development activities in Europe, namely in refining,
catalysts, plastics, oleochemicals, fuels and lubricants. This centralization
enhances the coordination and integration of the research activities. The Feluy
research center is adjacent to one of PetroFina's major chemical manufacturing
plants, which enables the Group to integrate its research with operations. In
the United States, research and development activities covering the Group's
processes and products are consolidated in a research center located on-site at
the Group's La Porte chemical plant. The third research center is located in
Amsterdam where it is physically integrated with the Paints segment's main
production facility. This center specializes in paints and cooperates closely
with the Feluy research center.
OTHER MATTERS
COMPETITIVE, POLITICAL AND ECONOMIC FACTORS
There is strong competition both within the oil industry and with other
industries in supplying the energy needs of industry and consumers. The oil
industry is also particularly subject to regulation and intervention by
governments throughout the world in such matters as the award of exploration and
production interests; the imposition of specific drilling obligations;
environmental protection controls; price controls and transfer pricing
restrictions; control over the development, production rate and abandonment of a
field; restrictions, requirements
24
<PAGE> 25
or sanctions imposed on companies and their products and services, because of,
or with respect to, ownership, affiliations or operations in certain foreign
countries; and, possibly, nationalization, expropriation or cancellation of
contract rights. The oil industry is also subject to the payment of royalties
and taxation, which tend to be high compared with those payable in respect of
other commercial activities. Some of the Group's oil reserves are located in
countries outside Western Europe, certain of which individually may be
considered politically and economically unstable. Reserves recovery and the
related operations are subject to certain risks, including the establishment of
export limits, the renegotiation of contracts, the nationalization or
renationalization of assets, other risks relating to changes in local government
regimes and policies and resulting changes in business customs and practice,
payment delays, currency exchange restrictions and losses and impairment of
operations due to actions of insurgent groups. PetroFina attempts to conduct its
business and financial affairs in order to protect against such political and
economic risks.
Although oil prices are primarily subject to international supply and
demand, political developments and the outcome of meetings at the Organization
of Petroleum Exporting Countries can also affect world oil supply and oil
prices. Crude oil and petroleum products have proven to be deflationary in
nature over the long-term and consequently the industry is faced with continuous
pressure to control costs to protect profitability. Crude oil prices are
generally denominated in dollars while sales of the Group's refined products are
denominated in a variety of currencies. PetroFina is, therefore, subject to the
risks of fluctuations in exchange rates and crude oil prices. It attempts to
limit its short-term risks in these areas by engaging in hedging and similar
activities in the currency and oil commodity markets. The introduction of the
Euro has eliminated exchange rate risks within the member states of the EU
participating in the European Monetary Union. For additional information, see
"Item 9A. Quantitative and Qualitative Disclosures About Market Risk."
REGULATION OF UPSTREAM ACTIVITIES
PetroFina's exploration and production activities are conducted in a number
of different countries and are therefore subject to a broad range of legislation
and regulations. These cover virtually all aspects of exploration and production
activities, including matters such as land tenure, production rates, royalties,
pricing, environmental protection, export, taxes and foreign exchange. The terms
and conditions of the leases, licenses and contracts vary from country to
country. Outside the United States, these leases, licenses and contracts are
generally granted by or entered into with a government entity or state company,
while in the United States they are generally entered into with private property
owners. These arrangements usually take the form of licenses or production
sharing agreements.
Licenses (or concessions) give the holder the exclusive right to explore
for and exploit a commercial discovery. Under a license, the holder bears the
risks of exploration, development, and production activities and provides the
financing for these operations. A license holder is generally required to pay
production taxes or royalties, which may be in cash or in kind. In certain
cases, the government entity or state company may acquire a participation in the
concession.
Production sharing agreements entered into with a government entity or
state company generally obligate the Group and its partners to provide all the
financing and bear the risk of exploration and production activities in exchange
for a share of the production remaining after royalties, if any. In some
instances, a fixed or variable percentage of this production is reserved for the
recovery of the Group's cost (cost oil) and the remainder (profit oil) is shared
with the government entity or state company on a fixed or volume-dependent
basis. The right of the Group to recover cost oil is limited in certain cases by
a requirement that the cost oil not exceed a maximum percentage of production.
This right is also limited in certain cases by a requirement that PetroFina's
costs be amortized over a specific period of time. In other cases, the
government entity or state company will participate in the rights and
obligations of PetroFina and will share in the costs of development and
production. Such participation can be across the venture or be on a per field
basis.
In certain countries, separate licenses are required for exploration and
production activities and, in certain cases, production licenses are limited to
a portion of the area covered by the exploration license. Both exploration and
production licenses are generally for specific periods of time. The term of the
Group's licenses and the extent to which these licenses may be renewed vary from
area to area.
The Group is required in certain countries to relinquish a portion of the
acreage covered by a license as a condition to obtaining a renewal of the
license. The Group may also be required in certain countries to relinquish
acreage (or to surrender a license) under other circumstances. These
circumstances, which vary by area, may include the failure to obtain a
production license within a specified period of time or the failure to have a
field development plan approved within a specified period of time. PetroFina
believes that these requirements have not materially affected its operations.
25
<PAGE> 26
In general, the Group is required to pay income tax on income generated
from production activities (whether under a license or production sharing
agreement). In addition, depending on the area, the Group's production
activities may be subject to a range of other taxes, levies and assessments,
including special petroleum taxes.
ENVIRONMENTAL MATTERS
The Group's operations are subject to laws and regulations of the EU,
Belgium, (and of the United States through 1999) and other countries in which it
conducts activities relating to the protection of the environment. These laws
and regulations, which change frequently, address the general impact of
industrial operations on the environment, as well as focus specifically on
certain activities, including emissions and toxic waste disposal. Environmental
violations may result in civil, criminal and tort liabilities.
Environmental factors are an important consideration in planning, designing
and operating all PetroFina facilities. A General Manager is responsible for the
coordination and implementation of environmental policies for the Company and
its subsidiaries. Each of the Company's subsidiaries conducts significant
programs to ensure that operations are carried out in an environmentally
acceptable manner. In 1999, 1998 and 1997 the Group spent over EUR 74.4 million,
EUR 54 million and EUR 37 million, respectively, on environmental programs that
included improving or constructing aromatics extraction unit and hydrogen plants
at its refineries in order to comply with new EU fuel specifications,
construction of vapor recovery units at major depots, loading facilities and
service stations to meet EU requirements, as well as site restorations and
remediation activities.
Due to the nature of its business, environmental laws increasingly impact
PetroFina's operations and make some risk of environmental costs and liabilities
inherent to its business, as it is for other companies engaged in the same field
of activities. Although PetroFina's management is not aware of any conditions
that would result in a liability material to the Group as a whole, under
existing environmental laws there can be no assurance that such liabilities will
not be incurred. For additional information regarding environmental matters.
UNCERTAINTY INHERENT IN INDUSTRY
Oil and gas exploration and production, as well as PetroFina's refining and
chemical operations, require high levels of investment and have particular
economic risks and opportunities. These activities are subject to natural
hazards and other uncertainties, including those relative to the physical
characteristics of oil and gas fields, refineries and chemical plants.
LICENSING AND PROPRIETARY TECHNOLOGY
Licensing of PetroFina's proprietary technology relating to polystyrene,
thermoplastic elastomers, paints, dewaxing of diesel fuel and propylene
purification has increased significantly and now extends to countries such as
China, Japan, Taiwan, Korea and Saudi Arabia. Some countries, such as China, do
not protect a company's intellectual property to the same extent as the laws of
the U.S. or European countries.
EMPLOYEE MATTERS
At the end of 1999, the Group had approximately 12,380 employees. In recent
years, there have been no significant strikes or work stoppages. Information
regarding the Group's pension and benefit plans is contained in Note 19 of the
Consolidated Financial Statements included in "Item 18. Financial Statements."
ITEM 2. DESCRIPTION OF PROPERTY
See "Item 1. Description of Business" for a description of PetroFina's
principal plants and its reserves and sources of crude oil and natural gas.
ITEM 3. LEGAL PROCEEDINGS
PetroFina is involved in a number of legal proceedings incidental to the
normal conduct of its business. It does not believe that liabilities relating to
such proceedings are likely to be, in the aggregate, material to its
consolidated financial condition.
ITEM 4. CONTROL OF REGISTRANT
On December 1, 1998, five of PetroFina's largest shareholders, Electrafina
SA, Compagnie Nationale a Portefeuille, S.A. (Fibelpar), Tractebel N.V.,
Electrabel N.V. and Fortis AG (collectively, the "Contributing Shareholders"),
announced their intention to exchange all their PetroFina Shares, which then
represented
26
<PAGE> 27
approximately 41% of the outstanding PetroFina Shares, for shares of Total S.A.
("Total"). As a result of this transaction, 9,614,190 PetroFina shares were
exchanged for 43,263,855 shares of Total ( in the exchange ratio of 2 PetroFina
shares for 9 Total shares).
Total later launched a public exchange offer to acquire all the PetroFina
outstanding ordinary shares and ADSs and all the outstanding warrants (see "Item
5 -- Nature of Trading Market -- PetroFina Warrants") it did not already own.
This offer enabled Belgian and U.S. Petrofina shareholders to exchange their
shares from May 6 to June 4, 1999, in the exchange ratio of 2 PetroFina shares
for 9 Total shares. Following this offer, 12,516,106 PetroFina shares (including
PetroFina ADSs that were tendered in the Offer) were exchanged for 56,322,477
shares of Total, and 3,851,400 PetroFina Warrants were exchanged for 3,199,634
Total Warrants.
During the reopening of the public exchange offer from June 11 to July 2,
1999, 1,038,192 PetroFina shares (including those shares underlying ADSs) were
exchanged for 4,671,864 shares of Total Fina S.A., and 289,100 PetroFina
Warrants were exchanged for 234,171 TotalFina Warrants.
The public exchange offer was reopened again at the same exchange ratio
from June 30 to July 28, 1999, as a result of which 80,356 Petrofina shares were
exchanged for 361,602 new shares of Total Fina.
As a result, as of December 31, 1999 and as of May 31, 2000, Total Fina
held 98.76 % of the outstanding PetroFina shares.
As disclosed in Total's exchange offer documentation in 1999, Total Fina
Elf S.A. shall launch a new reopening of the offer (at the same exchange ratio),
from June 30 to July 28, 2000, to acquire the PetroFina shares which may be
issued by the exercise on June 30, 2000, of the 30,302 remaining PetroFina
employee warrants.
The Company has set forth the number and percentages of PetroFina Shares
owned by each person known by the Company to own beneficially more than 10% of
oustanding PetroFina Shares as of May 31, 2000.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF PETROFINA SHARES
SHAREHOLDER PETROFINA SHARES AND VOTING POWER
----------- ---------------- ----------------
<S> <C> <C>
Total Fina Elf S.A......................................... 23,248,844 98,8%
</TABLE>
In 1989, PetroFina entered into an agreement with its former shareholders
Groupe Bruxelles Lambert S.A., and Societe Generale de Belgique S.A. and their
respective affiliates, in order to support its long-term strategy. This
Agreement was terminated on the effective date of the exchange by the
Contributing Shareholders of their PetroFina shares for Total shares.
The Company believes that its officers and directors as a group own
approximately 25 PetroFina shares and an aggregate of approximately 1,830
PetroFina Employee Warrants.
ITEM 5. NATURE OF TRADING MARKET
MARKET FOR PETROFINA SHARES
The principal trading market for the Company's ordinary shares ("the
PetroFina Shares") is the Brussels Stock Exchange ("BSE") in Belgium where the
PetroFina Shares are listed on the cash settlement market (marche au comptant).
As a result of the exchange offers by Total, as disclosed in Total's exchange
offer documentation, Total requested the delisting of the PetroFina shares from
the Brussels exchange on June 10, 1999. However, the BSE determined to transfer
the PetroFina shares from the Forward Market to the cash settlement market of
Brussels, with the mention "temporarily quoted" as of July 13, 1999. The
PetroFina shares were also delisted from the London Stock Exchange on December
24, 1999, from the Swiss Stock Exchange on December 27, 1999, and from the
Amsterdam Stock Exchange on January 21, 2000. The PetroFina shares are still
listed on the stock exchanges of Paris and Frankfurt. In Frankfurt an
application for de-listing is being reviewed by the market authorities.
On June, 1999, PetroFina was delisted from international indices such as
the MSCI (June 4,1999), FT/S&P World Index (June 15, 1999) and replaced by
TotalFina in the Dow Jones Eurostoxx 50 (June 16, 1999), which is a
capitalization weighted index of 50 leading publicly traded companies in the
European Monetary Union zone. On June 14,1999, PetroFina was also delisted from
the Bel 20 Index (which is a broad based index of 20 of Belgium's significant,
publicly traded companies) and PetroFina was delisted from the FTSE Eurotop 100
(which is composed of 100 large capitalization heavily traded European stocks).
27
<PAGE> 28
The table below sets forth, for the periods indicated, the reported high
and low closing prices in Euro for the PetroFina Shares on the BSE:
<TABLE>
<CAPTION>
PRICE PER
PETROFINA SHARE*
(EURO)
----------------
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter........................................ 317.3 249.1
Second Quarter....................................... 347.1 286.9
Third Quarter........................................ 386.7 326.0
Fourth Quarter....................................... 374.3 309.9
1998
First Quarter........................................ 356.4 310.5
Second Quarter....................................... 386.1 338.4
Third Quarter........................................ 396.6 285.1
Fourth Quarter....................................... 445.0 277.0
1999
First Quarter........................................ 518.0 381.0
Second Quarter....................................... 598.0 492.5
Third Quarter........................................ 596.5 315.0
Fourth Quarter....................................... 401.0 325.0
2000
First Quarter........................................ 483.0 366.0
</TABLE>
---------------
* Amounts rounded to the nearest tenth.
As of January 1, 1999, PetroFina Shares began trading in Euro. The table
above converted the historical trading prices prior to January 1, 1999, from
Belgian Francs to Euro based on January 1 exchange rate of 1 BEF = 0.02479 Euro.
Official trading on the BSE is carried out using a fully-computerized order
matching system, the NTS (New Trading System). The First Market is composed of
the Forward Market and the Cash Settlement Market. Securities are listed either
on the Forward Market, which contains the largest and most liquid domestic and
foreign securities, or on the Cash Settlement Market, which generally contains
small and mid-cap companies. On the Cash Settlement Market, where PetroFina
shares are listed, depending on the liquidity of the security in question,
transactions take place with a single fixing at 2:00 p.m., Brussels time, for 60
minutes, or with a double fixing at 11:15 a.m. and 3:15 p.m., Brussels time for
45 minutes each. The PetroFina Shares are currently traded with the double
fixing method on the Cash Settlement Market.
There are three authorities in Belgium for the securities market. First:
the Market Authority, which replaced the former Market Commission and is the
authority responsible for enforcement. Secondly: the Disciplinary Committee
which is responsible for sanctioning members and transmitting insider trading
violations to the courts. Thirdly: the Banking and Finance Commission which is
in charge of second tier supervision, and ensuring proper execution of the
procedures created by the market authority.
Transactions can be effected only by members of the BSE. Members include
credit or financial institutions, brokerage firms and members of other EU stock
exchanges.
TRADING IN THE UNITED STATES
The Petrofina ADSs began trading on the NYSE on September 3, 1997 and were
delisted on June 10, 1999. Each PetroFina ADS represents one-tenth (0.1) of one
PetroFina Share. As of December 31, 1999, 27,573 PetroFina ADSs remained
outstanding (representing 0.01% of the outstanding PetroFina Shares), held by 8
registered PetroFina ADS holders. 27,473 PetroFina ADSs were held by 7 U.S.
residents. As of March 31, 2000 27,378 PetroFina ADSs remained outstanding
(representing 0.01% of the outstanding PetroFina Shares), held by 6 registered
holders. All such Petrofina ADSs were held by U.S. residents. In addition, 532
registered PetroFina Shares (representing 0.002% of the outstanding PetroFina
Shares) are held by U.S. residents.
28
<PAGE> 29
PETROFINA ADSS
The table below sets forth, for the period indicated, the reported high and
low quotations in dollars for the PetroFina ADSs during the periods in which
they traded in the OTC market and the high and low closing sale prices for the
PetroFina ADSs after September 3, 1997. The fourth quarter of 1997 represents
the first full quarter of trading on the NYSE.
<TABLE>
<CAPTION>
PRICE PER ADS
(US$)
--------------
HIGH LOW
----- -----
<S> <C> <C>
1997
First Quarter........................................ 35.50 31.25
Second Quarter....................................... 36.63 33.25
Third Quarter........................................ 39.38(1) 36.50(1)
39.50(2) 36.31(2)
Fourth Quarter....................................... 42.00 35.75
1998
First Quarter........................................ 38.00 33.38
Second Quarter....................................... 42.38 36.00
Third Quarter........................................ 43.00 34.38
Fourth Quarter....................................... 49.25 34.50
1999
First Quarter........................................ 54.38 45.25
Second Quarter(3).................................... 61.88 52.81
</TABLE>
---------------
(1) Reflects trading prior to the NYSE listing on September 3, 1997.
(2) Reflects trading on the NYSE from September 3, 1997 through September 30,
1997.
(3) The PetroFina ADSs were delisted from NYSE on June 10, 1999. Delisting was
due to failure to satisfy certain listing standards. Since that time, the
Company is not aware of any trading activity in the United States.
PETROFINA WARRANTS
The table below sets forth, for the periods indicated, the reported high
and low closing prices in dollars for the Company's U.S. Warrants to purchase
PetroFina shares (the "PetroFina Warrants") on the NYSE. The PetroFina Warrants
began trading on NYSE on August 8, 1998, and were delisted on June 10, 1999. On
August 5, 1998, the Company issued 4,451,060 PetroFina Warrants as part of the
consideration offered in connection with the acquisition of Fina, Inc. Each
PetroFina Warrant may be exercised to purchase nine-tenths (0.9) of one
PetroFina ADS. The PetroFina Warrants are exercisable at any time until the
close of business August 5, 2003 and have an exercise price of U.S.$42.25 per
PetroFina ADS. Thus, a holder of 10 PetroFina Warrants may purchase nine
PetroFina ADSs for an aggregate purchase price of U.S.$380.25.
As a result of the public exchange offers made by Total for PetroFina
Shares and Warrants, 4,140,500 PetroFina Warrants were exchanged for 3,353,805
U.S. TotalFina Warrants (TotalFina issued warrants to holders of PetroFina
Warrants during the 1999 exchange offers. The TotalFina Warrants contain
substantially the same provisions as the PetroFina warrants, and are exercisable
at a price of U.S.$46.94 per warrant to purchase one TotalFina ADS). As of May
31, 2000, Total Fina Elf S.A. held 4,140,500 Petrofina Warrants and the
remaining 291,806 Petrofina Warrants were held by other holders.
<TABLE>
<CAPTION>
PRICE PER
PETROFINA WARRANT
(US$)
-----------------
HIGH LOW
------ ------
<S> <C> <C>
1998
Third Quarter(1).................................... 5.00 3.13
Fourth Quarter...................................... 9.56 2.31
1999
First Quarter....................................... 14.00 7.50
Second Quarter(2)................................... 20.25 13.25
</TABLE>
---------------
(1) The PetroFina Warrants began trading on NYSE on August 8, 1998.
(2) The PetroFina Warrants were delisted from NYSE on June 10, 1999. Delisting
was due to failure to satisfy certain listing standards. Since that time,
the Company is not aware of any trading activity in the United States.
29
<PAGE> 30
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
EXCHANGE CONTROLS
Belgian exchange control regulations impose no limitations on the amount of
cash payments that may be remitted by the Company to residents of the United
States. However, when there is a transfer of funds by the Company an obligation
to notify the Institut belgo/Luxembourgeois du change/Belgisch-Luxemburgs
Wisselinstituut arises. If the transfer of funds is handled by Belgian financial
institutions, that institution will give the required notification. In addition,
the Company has arranged with a number of European and U.S. financial
institutions, including the Depositary, to handle such payments or transfers of
funds and make the required notification.
OWNERSHIP OF PETROFINA SHARES BY NON-BELGIAN PERSONS
Under Belgian law, if an individual or a company intends to acquire the
joint or exclusive control of the Company through one or more transactions
relating to the PetroFina Shares, the acquiror must notify the CBF of the
contemplated transaction at least five days before its completion. If the price
of the contemplated transfer includes a control premium, the acquiror must offer
to all other shareholders of the Company to be acquired the opportunity to sell
their PetroFina Shares at the highest price offered by the acquiror for
PetroFina Shares during the 12 months preceding the acquisition of control of
the Company. The acquiror must give the other shareholders this opportunity
within 30 days after its acquisition of control either (i) in the form of a
public takeover bid or (ii) pursuant to an undertaking to support the stock
price of the acquired company on the relevant stock exchange.
Public takeover bids must be made for all the outstanding voting securities
of the Company. Prior to making a bid, a bidder must issue a prospectus which is
approved by the CBF. In case of a public takeover bid, the European Commission
must approve the transaction, if (i) the combined worldwide turnover of both the
bidder and the Company to be acquired exceed EUR 2,500 million, (ii) the
combined turnover of the bidder and the Company to be acquired in at least three
EU member states exceed EUR 100 million, (iii) the turnover of each of the
bidder and the Company to be acquired from each of such three EU member states
exceed EUR 25 million and (iv) the total community-wide turnover of the bidder
and the Company to be acquired individually exceed EUR 100 million.
Public takeover bids are subject to the supervision of the CBF. If the CBF
determines that a takeover bid is contrary to the interests of the stockholders
of the Company, it may suspend the takeover bid for a maximum of 72 hours and
request the President of the Commercial Court in the district of the Company's
registered office (Brussels) to prohibit the bid and suspend the exercise of the
rights attached to any PetroFina Shares that were acquired in connection
therewith.
Under Belgian law, a company must notify the Minister for Economic Affairs,
the Minister of Finances, as well as the relevant Secretary of State for
regional Economy prior to any transaction which will transfer more than
one-third of the capital of a company that is located in Belgium and has equity
("fonds propres/eigen vermogen") in excess of EUR 2.5 million.
ITEM 7. TAXATION
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS RELATING TO PETROFINA ADSS
The following discussion summarizes the material U.S. federal income tax
consequences to U.S. Holders of the ownership, disposition or exercise of
PetroFina ADSs. The discussion considers only U.S. Holders that own PetroFina
ADSs as capital assets within the meaning of Code Section 1221.
The following discussion is based on current provisions of the Code,
current and proposed Treasury Regulations promulgated thereunder, administrative
and judicial interpretations as of the date hereof, and the U.S.-Belgium Income
Tax Convention that entered into force October 13, 1972 as amended through the
Supplementary Protocol, signed on December 31, 1987 (the "Treaty"), all of which
are subject to change, possibly on a retroactive basis.
Except to the extent discussed below, the discussion does not consider the
U.S. tax consequences to a Non-U.S. Holder. This discussion of U.S. federal
income tax consequences does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a holder of PetroFina
ADSs, nor does it address the effect of any applicable foreign, state, local or
other tax laws. Further, the discussion does not consider holders that are
subject to special tax treatment, including dealers in securities, financial
institutions, insurance companies, tax-exempt organizations, persons subject to
the alternative minimum tax, current or prior holders
30
<PAGE> 31
(directly or indirectly) of 10% or more of the voting shares of the Company,
holders of securities held as part of a "straddle," "hedge" or "conversion
transaction," or U.S. Holders whose "functional currency" (within the meaning of
Section 985(b) of the Code) is not the dollar. EACH HOLDER OF PETROFINA ADSs
SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF
OWNING, DISPOSING AND EXERCISING OF PETROFINA ADSs.
In addition, this summary does not address the U.S. federal income tax
consequences were the Company determined to be a passive foreign investment
company ("PFIC") for U.S. federal income tax purposes. Generally, a PFIC is a
foreign corporation that has passive income that equals or exceeds 75% of its
total gross income or passive assets that represent at least 50% of its total
assets by fair market value. The Company does not believe it is currently, and
does not expect to become, a PFIC. U.S. Holders should consult their own tax
advisors concerning the U.S. federal income tax consequences of holding
PetroFina ADSs if the Company were considered to be a PFIC.
U.S. Holders
As used herein, a "U.S. Holder" of a PetroFina ADS means an individual that
is a citizen or resident of the U.S. (including certain former citizens and
former long time residents), a corporation, partnership or other entity created
or organized in or under the laws of the U.S. or any political subdivision
thereof, an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or a trust if (i) a U.S. court is able to
exercise primary supervision over the administration of the trust and (ii) one
or more U.S. persons have the authority to control all substantial decisions of
the trust. A "Non-U.S. Holder" is a holder that is not a U.S. Holder.
Ownership of PetroFina ADSs. In general, for U.S. federal income tax
purposes U.S. Holders of PetroFina ADSs will be treated as the owners of the
underlying PetroFina Shares. Distributions on PetroFina ADSs will constitute
dividends for U.S. federal income tax purposes to the extent of current and
accumulated earnings and profits of the Company as determined under U.S. federal
income tax principles. The dollar value of such dividends will be includible in
the gross income of a U.S. Holder as ordinary income on the day on which the
dividends are received by the Depositary, without reduction for any Belgian
taxes withheld at source, and will not be eligible for the dividends received
deduction allowed to corporations under Section 243 of the Code. For purposes of
determining the dollar value of any distributions to a U.S. Holder,
distributions paid in Belgian francs will be converted into a dollar amount
calculated by reference to the exchange rate in effect on the day they are
received by the Depositary. U.S. Holders should consult their own tax advisors
regarding the treatment of foreign currency gain or loss, if any, on any Belgian
francs received which are not converted into dollars on the day the Belgian
francs are received by the Custodian.
To the extent, if any, that a U.S. Holder receives a distribution on
PetroFina ADSs that would otherwise constitute a dividend for U.S. federal
income tax purposes but that exceeds current and accumulated earnings and
profits of the Company, such distribution will be treated first as a non-taxable
return of capital reducing the U.S. Holder's basis in the PetroFina ADSs. Any
such distribution in excess of the U.S. Holder's basis in the PetroFina ADSs
will be treated as a capital gain.
Generally, U.S. Holders will have the option of claiming the amount of any
Belgian income taxes withheld on a dividend distribution to them as either a
deduction from gross income or, subject to the limitations described below, as a
dollar-for-dollar credit against their U.S. federal income tax liability. A
deduction or foreign tax credit will not be available with respect to Belgian
income taxes that may be refunded to a U.S. Holder pursuant to the Treaty. A
U.S. Holder that elects to deduct Belgian income taxes from gross income may do
so only for a taxable year in which the U.S. Holder claims a federal income tax
deduction with respect to all foreign income taxes. Individuals who do not claim
itemized deductions, but instead utilize the standard deduction, may not claim
the amount of the Belgian income taxes in respect of distributions on the
PetroFina ADSs as a deduction from their gross income, but such amount may be
claimed as a credit against the individual's U.S. federal income tax liability.
The amount of Belgian income taxes for which U.S. Holders may claim a credit in
any year is subject to certain complex limitations and restrictions, which must
be determined on an individual basis by each U.S. Holder. The limitations set
out in the Code include, among others, new holding period requirements enacted
pursuant to the Taxpayer Relief Act of 1997 and rules under which foreign tax
credits allowable with respect to specific classes of income cannot exceed the
U.S. federal income taxes otherwise payable with respect to each class of
income. Dividends paid by the Company generally will be foreign source "passive
income" (or, in the case of certain holders, "financial services income") for
U.S. foreign tax credit purposes. Foreign income taxes exceeding the credit
limitation for the year of payment or accrual of such tax can be carried back
for two taxable years and forward for five taxable years, in order to reduce
U.S. federal income taxes subject to a credit limitation
31
<PAGE> 32
applicable in each of such years. Other restrictions on the foreign tax credit
include a limitation which generally prevents use of the credit in any taxable
year to reduce liability for U.S. individual and corporate alternative minimum
tax by more than 90%. Holders should consult their tax advisors regarding
limitations on the foreign tax credit, including the new holding period
requirements referenced above.
Disposition of PetroFina ADSs. Upon the sale, exchange or other
disposition of PetroFina ADSs, a U.S. Holder generally will recognize capital
gain or loss in an amount equal to the difference between such U.S. Holder's
adjusted tax basis in the PetroFina ADSs and the amount realized on the
disposition. Such capital loss generally will be long-term capital gain or loss
if the holding period of PetroFina ADSs exceeds one year at the time of the
disposition. Certain non-corporate taxpayers (including individuals) are
eligible for preferential rates of taxation on long-term capital gain. The
deductibility of capital losses is subject to limitations.
Gain or loss realized by a U.S. Holder on a sale, exchange or other
disposition of PetroFina ADSs generally will be treated as U.S. source income or
loss for U.S. foreign tax credit purposes.
Non-U.S. Holders
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on dividends paid by PetroFina with respect to PetroFina ADSs unless such income
is effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the U.S. and such Non-U.S. Holder is not otherwise eligible for
applicable treaty benefits. A Non-U.S. Holder of PetroFina ADSs will not be
subject to U.S. federal income tax on gain from the sale or other disposition of
PetroFina ADSs unless (i) such gain is effectively connected with the conduct by
the Non-U.S. Holder of a trade or business in the United States and such
Non-U.S. Holder is not otherwise eligible for applicable treaty benefits or (ii)
in the case of gain realized by an individual Non-U.S. Holder, the Non-U.S.
Holder is present in the United States for 183 days or more in the taxable year
of the sale and certain other conditions are satisfied.
U.S. Information Reporting and Backup Withholding
Under certain circumstances, the Internal Revenue Service requires
"information reporting" and "backup withholding" at a rate of 31% with respect
to payments of dividends on PetroFina ADSs and the proceeds of disposition of
PetroFina ADSs. Information reporting generally applies to U.S. Holders. A U.S.
Holder will be subject to backup withholding at a rate of 31% on payments of
dividends on PetroFina ADSs or the proceeds of disposition of PetroFina ADSs
only if the U.S. Holder (i) fails to provide a TIN on a properly completed Form
W-9, (ii) furnishes an incorrect TIN, (iii) is notified by the Internal Revenue
Service that the U.S. Holder has failed to properly report payment of dividends
or interest, or (iv) fails, under certain circumstances, to certify, under
penalties of perjury, that it has furnished a correct TIN. Information and
backup withholding will not apply with respect to payments made to certain
exempt recipients, such as corporations and tax exempt organizations.
The payment of the proceeds of a Non-U.S. Holder's disposition of PetroFina
ADSs or the payment of dividends on PetroFina ADSs to or through the U.S. office
of a broker or through a non-U.S. branch of a U.S. broker generally will be
subject to information reporting and backup withholding at a rate of 31% unless
the holder either certifies its status as a Non-U.S. Holder under penalties of
perjury or otherwise establishes an exemption. As a result of recently issued
Treasury regulations, consequently, Non-U.S. Holders may be required, if they
have not done so already, to provide new information and certifications in order
to avoid information reporting and backup withholding with respect to such
payments. The payment of the proceeds of the disposition by a Non-U.S. Holder of
PetroFina ADSs or the payment of dividends on PetroFina ADSs to or through a
non-U.S. office of a non-U.S. broker will not be subject to backup withholding
or information reporting unless the non-U.S. broker has certain U.S.
relationships.
Any amounts withheld under the backup withholding rules from a payment to
either a U.S. or a Non-U.S. Holder will be refunded (or credited against the
holder's U.S. federal income tax liability, if any) provided that the required
information is furnished to the Internal Revenue Service.
CERTAIN BELGIAN INCOME TAX CONSIDERATIONS OF HOLDING AND DISPOSING OF PETROFINA
ADSS
The following discussion summarizes the material Belgian income tax
consequences to U.S. persons, and to other non-residents of Belgium who do not
have a permanent establishment in Belgium, of the ownership, disposition or
exercise of PetroFina ADSs.
32
<PAGE> 33
Dividends -- U.S. Holder
In general, under Belgian law, the Belgian tax imposed on a dividend paid
to a non-resident that does not have a "permanent establishment" in Belgium will
be limited to the amount of the withholding tax, the current rate of which is
25%. This dividend withholding tax may be subject to reduction, however,
pursuant to income tax treaties that Belgium has entered into with other
countries. Pursuant to the Treaty, dividends paid by the Company to a U.S.
Holder that does not have a "permanent establishment" in Belgium generally will
be subject to a Belgian withholding tax at a reduced rate of 15%. Such
withholding is reduced, however, to 5% in the case of a corporation which owns
directly at least 10% of the Company's voting stock. Whether a Non-U.S. Holder
who is not a Belgian resident qualifies for a reduced rate of Belgian
withholding tax will depend upon whether such Non-U.S. Holder is a citizen or
resident of, or organized under the laws of, a country that has an income tax
treaty with Belgium that provides for a reduced rate of withholding tax and
whether the holder otherwise satisfies any conditions in the treaty necessary to
be eligible for the reduced rate of withholding tax.
Although there are exceptions, in general, the full Belgian withholding tax
must be withheld by the Company (that is, the amount of withholding upon the
payment of the dividend is not reduced to reflect the Treaty rate), and the U.S.
Holder may make a claim for reimbursement for amounts withheld in excess of the
Treaty rate. The reimbursement form can be obtained from the Bureau Central de
Taxation Bruxelles-Etranger, Place Jean Jacobs, 10, B-1000 Brussels, upon
presentment of a form stamped by the U.S. Internal Revenue Service and the
document proving cashing of the dividend. The relevant form may be obtained from
the Depositary or Parent "Service a l'actionnaire," 52 Rue de l'Industrie,
B-1040 Brussels (Tel. +32-2-288.99.45/ Fax +32-2-288.35.95). If the Forms 61.66
(U.S. IRS Certificate of Residence) and 276 (Belgian Ministry of Finance) are
properly completed and sent to the Depositary three working days prior to the
dividend payment date, the beneficial owner of the dividend will obtain the
reduced withholding tax rate at source. Prospective holders should consult their
own tax advisors as to whether they qualify for reduced withholding upon the
payment of dividends, and as to the procedural requirements for obtaining
reduced withholding upon the payment of dividends or for making claims for
reimbursement.
Under Belgian tax law the rate of the withholding tax can be reduced to 0%
in the case of dividends paid by a Belgian corporation to certain U.S.
organizations that are not engaged in any activity of a lucrative nature and are
exempt from United States federal income tax. For instance, organizations either
constituted and operated exclusively to administer or provide pension,
retirement or other employee benefits or operated exclusively for religious,
charitable, scientific, educational or public purposes may qualify for the 0%
withholding tax rate. To benefit from this reduced rate, the qualified U.S.
Holders should sign a specific form, available by request from the "Service a
l'actionnaire" or included in the annual report, and send it back either to the
Depositary three working days before the dividend payment date to obtain the
reduced withholding tax rate at source or to the "Directeur regional des
contributions, Bruxelles II-societes, avenue Louise 233-245, B-1050 Bruxelles"
to be refunded the excess withholding tax.
Dividends -- Non-U.S. Holder
As discussed above, Belgian tax law generally imposes a 25% withholding tax
on a dividend paid to a nonresident that does not have a "permanent
establishment" in Belgium. Whether a Non-U.S. Holder who is not a Belgian
resident qualifies for a reduced rate of Belgian withholding tax will depend
upon whether it is a resident of, or organized under the laws of, a country that
has an income tax treaty with Belgium that provides for a reduced rate of
withholding tax and whether the holder otherwise satisfies any conditions in the
treaty necessary to be eligible for the reduced rate of withholding tax.
Non-U.S. Holders entitled to a reduced withholding tax under a treaty may make
claim for reimbursements for overwithheld amounts. Reimbursement forms can be
obtained from the address listed in the discussion of "-- Dividends -- U.S.
Holders" above.
Capital Gains
U.S. persons and other non-residents of Belgium who do not have a permanent
establishment in Belgium will not be subject to Belgian income tax on the sale
or other disposition of PetroFina ADSs. Individual non-residents of Belgium with
a permanent establishment in Belgium will be subject to Belgian taxation on the
disposition of PetroFina ADSs, and such shareholders should consult their tax
advisors about the tax consequences to them of disposing of PetroFina ADSs.
33
<PAGE> 34
ITEM 8. SELECTED CONSOLIDATED FINANCIAL DATA
The following financial information with respect to the five years ended
December 31, 1999 has been derived from the Company's audited consolidated
financial statements; the audited consolidated financial statements for the
years ended December 31, 1999, 1998 1997, 1996 and 1995 have been prepared in
accordance with US GAAP. The Company for the four years ended December 31, 1998
and the period from January 1st, 1999 through June 30th, 1999 prior to the
combination with TOTAL is herein referred to as "Predecessor" and the Company
for the period from July 1st, 1999 through December 31st, 1999 after the
combination with TOTAL is referred to as "Successor". The financial information
has been prepared on a going concern with identification of the periods before
and after the effective date of the combination. Under the columns
"Predecessor", financial information of the period from January 1, 1999 to June
30, 1999 as well as for the years ending December 31, 1998 and 1997 is presented
in consistency with the accounting practice of PetroFina used before the
combination with TotalFina. Under the columns "Successor", financial information
as of December 31, 1999 and for the period from July 1st, 1999 to December 31,
1999 is presented in accordance with the US accounting principles used by the
TotalFina Group and with effect of push-down of purchase price in application of
the purchase method of accounting. The balances and the results of operations of
the pre-acquisition period are therefore not comparative to those of the
post-acquisition period.
PETROFINA S.A. AND SUBSIDIARIES
SUMMARY OF FINANCIAL AND OPERATING DATA
(IN EURO MILLION, EXCEPT PER SHARE DATA AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
U.S. GAAP
SIX MONTHS SIX MONTHS AGGREGATE FOR THE YEAR ENDED AND AT DECEMBER 31,
ENDED JUNE 30, ENDED DEC. 31, YEAR PREDECESSOR
PREDECESSOR SUCCESSOR ENDED DEC. 31, -------------------------------------------------
1999 1999 1999 1998 1997 1996 1995
-------------- -------------- -------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL
Operating Revenue........ 8,395 10,347 18,742 17,093 18,057 15,459 13,850
Depreciation, depletion
and amortization....... 343 622 965 731 712 589 559
Exploration costs........ 31 14 45 67 108 75 104
Operating Income......... 445 452 897 683 1,161 976 763
Net earnings............. 243 194 437 466 547 395 293
Net basic earnings per
share.................. 10.36 8.26 18.61 19.89 23.42 17.00 12.62
Diluted net earnings per
share.................. 10.29 8.25 18.55 19.88 23.42 17.00 12.52
Cash dividends per
share.................. 11.40 10.00 21.40 11.40 9.92 8.73 7.93
Cash dividends per share
(US$)(1)............... 13.39 10.72 24.11 12.50 11.44 11.07 10.83
Capital expenditures..... 411 500 911 1,256 1,082 822 740
Long term obligations.... N/A 411 411 1,609 1,487 1,223 1,109
Total assets............. N/A 16,336 16,336 9,635 10,005 9,092 8,277
Stockholders' equity..... N/A 11,391 11,391 3,981 3,865 3,347 3,051
Average Shares
outstanding............ 23,460,095 23,492,970 23,476,532 23,440,102 23,350,612 23,252,764 23,252,414
OPERATIONS
Crude oil, condensate,
and natural gas liquids
produced (in million
barrels of oil
equivalent)............ N/A N/A 47.0 49.1 52.2 49.3 50.7
Natural gas produced (in
billion cubic feet).... N/A N/A 149.9 187.4 208.9 210.7 204.0
Refinery throughput crude
oil (thousands barrels
per day)............... N/A N/A 680.6 695.6 669.0 645.3 597.8
Major chemicals and
plastics produced (in
thousand tonnes)....... N/A N/A 5,153 4,253 4,070 3,774 3,460
Employees (average for
the year).............. N/A N/A 12,380 14,489 14,675 13,588 13,653
</TABLE>
---------------
(1) Based on the Noon Buying Rate on the first day dividends are available for
payment. See "Exchange Rates."
34
<PAGE> 35
DIVIDENDS
PetroFina has paid dividends on the PetroFina Shares in each year for at
least the past 50 years. Future dividends will depend on the Company's earnings,
financial condition and other factors. The payment and amount of dividends are
subject to the recommendation of the Board of Directors and declaration by the
Company's shareholders at the annual ordinary general shareholders' meeting. The
Company's Articles of Association provide that the Board of Directors may pay an
interim dividend as an advance against the annual dividend.
Dividends paid to holders of PetroFina ADSs will be subject to a charge by
the Depositary for any expenses incurred by the Depositary in the conversion of
Euro to dollars. For a summary of certain United States federal and Belgian tax
consequences to holders of PetroFina Shares and PetroFina ADSs, see "Item 7.
Taxation."
The table below sets forth for the years indicated, the amount of dividends
paid per PetroFina Share.
<TABLE>
<CAPTION>
DIVIDEND PER DIVIDEND PER DIVIDEND PER
PETROFINA PETROFINA PETROFINA
SHARE SHARE ADS
------------ ------------ ------------
(EURO) (US$)(1) (US$)(1)
<S> <C> <C> <C>
1994................................................ 6.94 8.22 0.940(3)
1995................................................ 7.93 10.83 1.075
1996................................................ 9.73 11.07 1.12
1997................................................ 9.92 11.44 1.14
1998................................................ 11.40 12.50 1.25
1999 (first half)................................... 11.40 13.39 1.34
1999 (second half).................................. 10.00 10.72 1.07
2000................................................ 2.48 2.31 0.23
</TABLE>
---------------
(1) Based on the Noon Buying Rate on the first day dividends are available for
payment. See "Exchange Rates."
(2) Dividend paid by the Depositary per PetroFina ADS.
(3) Includes $0.129 paid to holders of Petrofina ADSs in connection with a
rights offering to holders of PetroFina Shares.
In January 1999, the Company paid a dividend of Euro 11.40 per PetroFina
Share in respect of the Company's 1998 earnings. Based on the Noon Buying Rate
on January 13, 1999, the dollar equivalent of this dividend was US$1.34. On
January 13, 1999, the Depositary paid a gross dividend of US$1.34 per PetroFina
ADS to all holders of PetroFina ADSs as of January 13th, 1999.
In September 1999 the Company paid an interim dividend of Euro 10.00 per
PetroFina share in respect of the Company's 1999 earnings. Based on the Noon
Buying rate on October 1st 1999, the dollar equivalent of this interim dividend
was US$10.72. On October 1st 1999, the depositary paid a gross interim dividend
of US$1,07 per PetroFina ADS to all holders of PetroFina ADSs as of October 1st
1999.
In May 2000 the Company paid the balance of the dividend (saldo) of Euros
2.48 per PetroFina share in respect of the Company's 1999 earnings. Based on the
Noon Buying rate on May 26, 2000, the dollar equivalent of this dividend saldo
was US$2.31. On May 26, 2000, the Depositary paid a gross dividend of US$0.23
per PetroFina ADS to all holders of PetroFina ADSs as of May 26, 2000.
35
<PAGE> 36
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
On December 1, 1998, Total SA entered into definitive agreements to acquire
PetroFina shares from the five largest PetroFina shareholders owning in the
aggregate approximately 41% of PetroFina's outstanding shares. That transaction
was closed on March 31, 1999, after the receipt of certain regulatory clearances
and the approval of Total SA's shareholders on January 14, 1999. On May 6, 1999,
Total SA commenced exchange offers in Belgium and the U.S. for all remaining
PetroFina shares, American depositary shares and warrants. As a result of the
exchange offers, Total SA acquired additional PetroFina shares raising its
ownership to 98.76% of PetroFina's share capital. As required by Belgian law,
the Belgian exchange offer was reopened on the same terms to permit tenders of
PetroFina shares in July 1999. As required by Belgian law, the Belgian exchange
offer will be reopened on the same terms to permit tenders of PetroFina shares
obtained upon the exercise of employee warrants in July 2000. obtained upon the
exercise of employee warrants in July 1999 and July 2000.
In order to realize business synergies expected as a result of the
foregoing transactions, TotalFinaElf and PetroFina created an Integration
Committee to combine the PetroFina businesses into the TotalFinaElf group,
simplify the structure of the new Group, merge the management and operational
teams, unlock synergies and integrate the operations and administrations
including the information systems. As a result, a number of PetroFina's
businesses were transferred to TotalFinaElf. (See "Item 1 "Description of
Business -- Overview -- Business Combination of TotalFinaElf and PetroFina").
The information in this section should be read in conjunction with the
information contained in the consolidated financial statements and related notes
included in "Item 18. Financial Statements." The consolidated financial
statements for the years ended December 31, 1999, 1998 and 1997 have been
prepared in accordance with U.S. GAAP. See also "Item 8. Selected Consolidated
Financial Data."
The Group financial statements were previously presented in Belgian francs.
A Belgian Royal Decree dated December 15, 1998 permits Belgian companies to
restate financial statements and notes in Euro. All 1999 financial statements
have been prepared in Euro. All 1998 and 1997 and comparative financial
statements in this Annual Report have been restated in Euro based on the rate of
40.3399 BEF per Euro effective January 1, 1999. PetroFina's financial statements
as reported in Euro for periods prior to 1999 depict the same trends as would
have been presented if the Company had continued to present its financial
statements in Belgian francs. The historical results of a non-Belgian company
would be restated in Euro based upon the January 1, 1999 exchange ratio between
its legal currency and the Euro, effectively "fixing" the historical exchange
rate between the Belgian franc and other legal currency. Thus, the results of
Belgian and non-Belgian companies restating in Euro would not be comparable
because it is likely the actual exchange ratio between the two currencies
differed materially from the implied exchange ratio.
This Annual Report contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements appear in a number of places in this Annual Report including, without
limitation, under "Item 1. Description of Business," "Item 9. Management's
Discussion and Analysis of Financial Condition and Results of Operations," "Item
9A. Quantitative and Qualitative Disclosures About Market Risk" and information
related to the impact of the European Monetary Union issues contain
forward-looking statements. PetroFina's business is subject to risks and
uncertainties beyond PetroFina's control. All subsequent written and oral
forward-looking statements attributable to PetroFina and persons acting on its
behalf are qualified in their entirety by the cautionary statements contained in
this section and elsewhere in this Annual Report. Forward-looking statements
include information in the Annual Report where statements are preceded by,
followed by or include the words "projects," "estimates," "believes," "expects,"
"assumes," "anticipates" or similar expressions. For such statements, PetroFina
claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
The following important factors, together with others that appear with the
forward-looking statements, and the business transfers by PetroFina to its
parent company, TotalFinaElf, will likely affect the Group's actual results and
will likely cause the Group's actual consolidated results to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Group, including information in this Annual Report. PetroFina's operating
results are generally affected by a variety of factors, including movements in
crude oil prices and refining and chemical margins and currency exchange rates.
Higher crude oil prices generally have a positive effect on operating income of
the Group, as its Upstream oil and gas business benefits from the resulting
increase in prices realized from production. Lower crude oil prices generally
have a corresponding negative effect. The effect of changes in crude oil prices
on PetroFina's Downstream activities depends upon the
36
<PAGE> 37
speed at which the prices of refined petroleum products adjust to reflect such
changes. Fluctuations of the Euro against other currencies, especially the
dollar, can have significant effects on PetroFina's consolidated financial
statements. Prices for crude oil are normally set in dollars. Chemical products
are generally priced in local currency but based, in Europe, on Euro benchmark
prices. Generally, the Group's operating income is improved by a strengthening
of the dollar against the Euro. In addition, the effects of translation of local
currency financial statements of PetroFina's non-Belgian subsidiaries can
influence comparative results of operations. See also "Item 9A. Quantitative and
Qualitative Disclosures About Market Risk."
RESULTS OF OPERATIONS
The following table sets forth certain financial data for the Group for the
years indicated.
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR PREDECESSOR
--------------- --------------- -------------------
FOR THE YEARS ENDED
SIX MONTHS SIX MONTHS AGGREGATE YEAR DECEMBER 31,
ENDING JUNE 30, ENDING DEC. 31, ENDED DEC. 31, -------------------
1999 1999 1999 1998 1997
--------------- --------------- -------------- -------- --------
(IN EUR MILLION EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED DATA
Operating Revenue including
Duties and Excise Taxes...... 8,364 10,342 18,706 17,049 18,023
Earnings from Investments,
Equity Interests............. 31 5 36 44 34
------ ------ ------- ------- -------
Total Revenue................ 8,395 10,347 18,742 17,093 18,057
------ ------ ------- ------- -------
Cost of Products Sold.......... (6,329) (7,474) (13,803) (13,094) (13,630)
Other Operating Costs(*)....... (841) (1,407) (2,248) (1,712) (1,669)
Sales, General & Administrative
Costs........................ (406) (378) (784) (806) (777)
Depreciation, Depletion &
Amortization................. (343) (622) (965) (731) (712)
Exploration Costs.............. (31) (14) (45) (67) (108)
------ ------ ------- ------- -------
Operating Income............... 445 452 897 683 1,161
Interest and Net Financial
Items........................ (88) (92) (180) (79) (114)
------ ------ ------- ------- -------
Income Before Taxes and
Minority Interests........... 357 360 717 604 1,047
Income Taxes................... (114) (166) (280) (132) (484)
Minority Interest.............. 0 0 0 (6) (16)
------ ------ ------- ------- -------
Net Income..................... 243 194 437 466 547
====== ====== ======= ======= =======
Basic Earnings per Share....... 10.36 8.26 18.61 19.89 23.42
Diluted Earnings per Share..... 10.29 8.25 18.55 19.88 23.42
</TABLE>
---------------
(*) Cost of Products Sold includes Duties and Excise Taxes.
All the amounts for periods ending prior to January 1, 1999 were restated in
Euros
based on the January 1, 1999 rate (40.3399 BEF per Euro).
37
<PAGE> 38
SEGMENT DATA
<TABLE>
<CAPTION>
UPSTREAM DOWNSTREAM CHEMICALS PAINTS OTHER CONSOLIDATED
-------- ---------- --------- ------ ------ ------------
(IN EUR MILLION)
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDING JUNE 30, 1999
Operating Revenue.................... 899 6,549 1,009 394 21 8,872
Inter-segment Sales.................. (294) (168) (46) 0 0 (508)
Operating Revenue from Non
Affiliates......................... 605 6,381 963 394 21 8,364
Operating Income (Loss).............. 130 108 218 34 (45) 445
Capital Expenditures................. 163 201 30 9 8 411
SIX MONTHS ENDING DEC. 31, 1999
Operating Revenue.................... 662 8,090 1,640 362 86 10,840
Inter-segment Sales.................. 20 (409) (63) 0 (46) (498)
Operating Revenue from Non
Affiliates......................... 682 7,681 1,577 362 40 10,342
Operating Income (Loss).............. 150 284 29 1 (12) 452
Capital Expenditures................. 184 28 268 8 12 500
AGGREGATE YEAR ENDING DEC. 31, 1999
Operating Revenue.................... 1,561 14,639 2,649 756 107 19,712
Inter-segment Sales.................. (274) (577) (109) 0 (46) (1,006)
Operating Revenue from Non
Affiliates......................... 1,287 14,062 2,540 756 61 18,706
Operating Income (Loss).............. 280 392 247 35 (57) 897
Capital Expenditures................. 347 229 298 17 20 911
1998
Operating Revenue.................... 2,192 13,086 1,982 780 42 18,082
Inter-segment Sales.................. (587) (345) (101) (1,033)
Operating Revenue from Non
Affiliates......................... 1,605 12,741 1,881 780 42 17,049
Operating Income (Loss).............. 294 162 184 45 (2) 683
Capital Expenditures................. 534 281 277 38 126 1,256
1997
Operating Revenue.................... 2,188 14,178 2,312 780 12 19,470
Inter-segment Sales.................. (900) (420) (127) (1,447)
Operating Revenue from Non
Affiliates......................... 1,288 13,758 2,185 780 12 18,023
Operating Income (Loss).............. 627 298 259 40 (63) 1,161
Capital Expenditures................. 571 250 223 25 13 1,082
</TABLE>
GROUP RESULTS 1999 VS 1998
In 1999, consolidated net income was EUR 437 million compared to EUR 466
million in 1998, a decrease of 6.2% and operating revenues including duties and
excise taxes was EUR 18.7 billion compared to EUR 17.0 billion.
Group consolidated net income was influenced by:
- The negative impacts of lower European refining margins and lower
petrochemical margins,
- Expenses of EUR 109 million net of tax effects related to the
harmonization of accounting principles with TotalFinaElf's,
- Restructuring charges related to the combination with Total of EUR 16
million net of tax effects,
- Net loss on the sale of all Upstream assets in West Texas and New Mexico
in the United States of EUR 18 million after-tax.
Operating income increased from EUR 683 million in 1998 to EUR 897 in 1999,
reflecting:
- The positive impact of higher crude oil price on the Upstream segment,
with an average price of Brent crude oil rising by 42% to $18/b in 1998,
- Ongoing breakeven reduction and productivity programs on the Downstream
segment, more than offsetting the 43% decline in European refining
margins to $9.7/t in 1999 from $16.9/t in 1998.
38
<PAGE> 39
- Good manufacturing and marketing performance of the Chemicals segment in
a weak environment, compensating the decline in petrochemicals margins.
Basic earnings per share were EUR 18.61 compared to EUR 19.89 in 1998.
Consolidated Cash Flow, defined as consolidated net income adjusted for
depreciation and other current year non-cash provisions to net income, increased
to EUR 1,550 million in 1999 from EUR 1,425 million in 1998.
UPSTREAM: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
EUROPE(1) NORTH AMERICA
------------------------------------ ------------------------------------
SIX MONTHS SIX MONTHS AGGREGATE SIX MONTHS SIX MONTHS AGGREGATE
ENDING ENDING YEAR ENDED ENDING ENDING YEAR ENDED
JUNE 30, DEC. 31, DEC. 31, JUNE 30, DEC. 31, DEC. 31,
---------- ---------- ---------- ---------- ---------- ----------
1999 1999
------------------------------------ ------------------------------------
(IN EUR MILLION, EXCEPT NUMBER OF EMPLOYEES, PRODUCTION AND RESERVES)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue(2)..... 381 534 915 518 128 646
Equity in Net Income of
Non Consolidated
Investees............... 11 11 22 0 0 0
--- ----- ----- --- ---- ----
Total Revenue........... 392 545 937 518 128 646
Operating Expense,
Excluding Depreciation
and Exploration
Expense................. (170) (226) (396) (451) (25) (476)
Depreciation, Depletion
and Amortization........ (85) (109) (194) (43) (149) (192)
Exploration Expense...... (23) (10) (33) (8) (4) (12)
Operating Income
(loss).................. 114 200 314 16 (50) (34)
--- ----- ----- --- ---- ----
Capital Expenditures..... 121 121 242 42 63 105
Total Assets............. N/A 2,175 2,175 N/A 0 0
--- ----- ----- --- ---- ----
Crude Oil Production (in
million barrels)(3)..... 43.8 3.2
Natural Gas Production
(in Bcf)................ 80.5 69.4
Proved Oil Reserves (in
million barrels)(3)..... 472.7 --
Proved Gas Reserves (in
Bcf).................... 735.0 --
Total Proved Reserves (in
million barrels of oil
equivalent)(3)(4)....... 595.0
===== ====
Average Number of
Employees............... 221 376
===== ====
<CAPTION>
NORTH NORTH
EUROPE(1) AMERICA EUROPE(1) AMERICA
--------- ------- --------- -------
1998 1997
------------------- -------------------
(IN EUR MILLION, EXCEPT NUMBER OF
EMPLOYEES, PRODUCTION AND RESERVES)
<S> <C> <C> <C> <C>
Operating Revenue(2)..... 910 1,282 1,216 972
Equity in Net Income of
Non Consolidated
Investees............... 15 1 17 2
----- ------ ----- -----
Total Revenue........... 925 1,283 1,233 974
Operating Expense,
Excluding Depreciation
and Exploration
Expense................. (377) (1,152) (394) (787)
Depreciation, Depletion
and Amortization........ (242) (76) (205) (86)
Exploration Expense...... (52) (15) (55) (53)
Operating Income
(loss).................. 254 40 579 48
----- ------ ----- -----
Capital Expenditures..... 367 167 378 193
Total Assets............. 1,585 803 1,620 752
----- ------ ----- -----
Crude Oil Production (in
million barrels)(3)..... 45.1 4.0 48.2 4.0
Natural Gas Production
(in Bcf)................ 113.9 73.5 132.3 76.6
Proved Oil Reserves (in
million barrels)(3)..... 576.9 71.5 510.3 72.6
Proved Gas Reserves (in
Bcf).................... 930.3 405.6 1,188 400.3
Total Proved Reserves (in
million barrels of oil
equivalent)(3)(4)....... 732.0 139.1 708.3 139.3
===== ====== ===== =====
Average Number of
Employees............... 322 394 345 493
===== ====== ===== =====
</TABLE>
---------------
(1) Europe includes Europe and the rest of the world other than North America.
(2) Includes inter-segment revenue.
(3) Excluding equity affiliates.
(4) 1 barrel of oil equivalent = 1 barrel of crude oil = 6000 cubic feet of gas.
OPERATING REVENUE
Operating revenue in 1999 was EUR 1.6 billion, down 27% from EUR 2.2
billion in 1998.
In Europe, revenue of EUR 915 million were comparable to 1998. The
reduction of crude oil and natural gas production because of production shutdown
at the Ekofisk field at the beginning of 1999 was offset by the increase of the
average price of crude oil which rose by 42% to $18 per barrel of the Brent. In
certain cases, contracts for the sale of natural gas determine the gas price by
reference to, among other factors, crude oil prices. In those cases, the higher
crude oil prices had a positive impact on PetroFina's realized gas price;
however, in certain cases, the effect is delayed under the timing and terms of
the contract, resulting in a negative gas price lag for 1999.
In North America, operating revenue decreased by 48% to EUR 646 million.
The sale of all assets in West Texas and New Mexico to an unaffiliated third
party in mid 1999 and the reduction in natural gas trading volumes resulted in a
decrease of operating revenue of EUR 596 million.
39
<PAGE> 40
OPERATING INCOME
Upstream operating income was EUR 280 million in 1999 compared to EUR 294
million, a 5% reduction.
In Europe, 1999 operating income was EUR 314 million, a 23% increase over
1998. Higher crude oil price is the main factor for the increase as the unit
depletion rate (unit of production method) stabilized.
Exploration expenses were reduced from EUR 52 million in 1998 to EUR 33
million in 1999.
In North America, operating income was a negative EUR 34 million compared
to a positive EUR 40 million operating income in 1998. PetroFina incurred a
capital loss on the sale of its assets in West Texas and New Mexico to an
unaffiliated third party.
In December 1999, PetroFina sold its interest in its upstream assets in
North America and Italy to its parent company, TotalFinaElf, as part of a group
restructuring.
DOWNSTREAM: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
EUROPE(1) NORTH AMERICA
------------------------------------ ------------------------------------
SIX MONTHS SIX MONTHS AGGREGATE SIX MONTHS SIX MONTHS AGGREGATE
ENDING ENDING YEAR ENDED ENDING ENDING YEAR ENDED
JUNE 30, DEC. 31, DEC. 31, JUNE 30, DEC. 31, DEC. 31,
---------- ---------- ---------- ---------- ---------- ----------
1999 1999
------------------------------------ ------------------------------------
(IN EUR MILLION, EXCEPT NUMBER OF EMPLOYEES, REFINING THROUGHPUT AND
PRODUCTS SOLD)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue(2)...... 5,534 6,673 12,207 1,015 1,417 2,432
Equity in Net Income of
Non-Consolidated
Investees................ 5 5 10 (1) (1) (2)
------ ------ ------- ------ ------ ------
Total Revenue............ 5,539 6,678 12,217 1,014 1,416 2,430
Operating Expense,
Excluding Depreciation... (5,375) (6,315) (11,690) (940) (1,356) (2,296)
Depreciation, Depletion
and Amortization......... (102) (102) (204) (28) (38) (66)
Operating Income (Loss)... 62 261 323 46 22 68
Capital Expenditures...... 133 83 216 68 (55) 13
Total Assets............. N/A 3,518 3,518 N/A 0 0
Refining Throughput (in
thousand bbls per day)... -- -- 460.5 -- -- 220.0
Refined Products Sold (in
thousand tons)........... -- -- 21,819 -- -- 13,148
Average Number of
Employees................ 5,107 230
<CAPTION>
NORTH NORTH
EUROPE(1) AMERICA EUROPE(1) AMERICA
--------- ------- --------- -------
1998 1997
------------------- -------------------
(IN EUR MILLION, EXCEPT NUMBER OF
EMPLOYEES, REFINING THROUGHPUT AND
PRODUCTS SOLD)
<S> <C> <C> <C> <C>
Operating Revenue(2)...... 10,977 2,109 11,468 2,710
Equity in Net Income of
Non-Consolidated
Investees................ 16 -- 18 --
------- ------ ------- ------
Total Revenue............ 10,993 2,109 11,486 2,710
Operating Expense,
Excluding Depreciation... (10,610) (2,071) (11,038) (2,591)
Depreciation, Depletion
and Amortization......... (202) (57) (214) (55)
Operating Income (Loss)... 181 (19) 234 64
Capital Expenditures...... 207 74 208 42
Total Assets............. 3,288 1,021 3,605 1,230
Refining Throughput (in
thousand bbls per day)... 474.5 221.1 445.3 223.7
Refined Products Sold (in
thousand tons)........... 27,231 12,615 26,161 12,540
Average Number of
Employees................ 5,656 1,205 5,452 1,233
</TABLE>
---------------
(1) Europe includes Europe and the rest of the world other than North America.
(2) Includes inter-segment revenue.
OPERATING REVENUE
Downstream operating revenue in 1999 was EUR 14,639 million compared to EUR
13,086 in 1998, an increase of 12%. The increase in revenues resulted primarily
from increase in petroleum product prices and secondarily by exchange rate
fluctuations.
The average product price quotations in North West Europe increased by 72%
for gasoline, 74% for diesel and 73% for fuels.
Sales volume for petroleum products decreased by 12% on average as a result
of the disposal of assets to TotalFinaElf subsidiaries.
In Europe, operating revenues increased from EUR 10,977 million in 1998 to
EUR 12,207 in 1999, an increase of 11%.
In North America, operating revenue was EUR 2,432 million in 1999, an
increase of EUR 323 million from 1998. Sales quantities increased by 4% and
resulted in improved revenues of EUR 84 million. Currency exchange rates
increased revenue by EUR 93 million.
40
<PAGE> 41
OPERATING INCOME
Downstream operating income was EUR 391 million in 1999 compared to EUR 162
million in 1998. In 1998, inventories were written down by EUR 209 million. This
amount was written back in 1999.
Refining throughput reached the level of 464,300 barrels per day in 1999, a
decrease of 2.1% over 1998. Industry refining margins in North West Europe
dropped from $2.45 per barrel in 1998 to $1.40 per barrel in 1999. In December
1999, PetroFina sold three of its six refineries to its parent company,
TotalFinaElf, as part of a group restructuring.
Marketing income was negatively affected by significant drop in margin in
United Kingdom due to increased competition. In December 1999, PetroFina sold or
leased its European marketing activities (except for its Belgian and Luxembourg
marketing business) to its parent company, TotalFinaElf, as part of a group
restructuring.
In North America, operating income was EUR 68 million compared to an
operating loss of EUR 19 in 1998 impacted by a write-down on inventory of EUR 53
million. Refining margin on the US market dropped by 20% from 1998 to 1999. The
reduction in the group's refining margin in its Port Arthur refinery (sold in
December 1999 to TotalFinaElf) was limited to 15% due to optimization of
process.
CHEMICALS: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
NORTH
EUROPE(1) AMERICA
------------------------------------ ------------------------------------
SIX MONTHS SIX MONTHS AGGREGATE SIX MONTHS SIX MONTHS AGGREGATE
ENDING ENDING YEAR ENDED ENDING ENDING YEAR ENDED
JUNE 30, DEC. 31, DEC. 31, JUNE 30, DEC. 31, DEC. 31,
---------- ---------- ---------- ---------- ---------- ----------
1999 1999
------------------------------------ ------------------------------------
(IN EUR MILLION, EXCEPT NUMBER OF EMPLOYEES AND VOLUMES PRODUCED)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue(2)..... 539 886 1,425 470 754 1,224
Equity in Net Income
(Loss) of Non
Consolidated
Investees............... 0 1 1 0 0 (1)
--- ---- ------ ---- ---- -----
Total Revenue........... 539 887 1,426 470 753 1,223
Operating Expense,
Excluding
Depreciation............ (378) (881) (1,259) (349) (640) (988)
Depreciation, Depletion
and Amortization........ (38) (36) (74) (26) (55) (81)
Operating Income......... 123 (30) 93 95 59 154
=== ==== ====== ==== ==== =====
Capital Expenditures..... 24 93 117 6 175 181
Total Assets............ N/A 836 836 N/A 0 0
=== ==== ====== ==== ==== =====
Monomers Production (in
thousand tons).......... 1,781 335
Polymers Production (in
thousand tons).......... 939 1,774
====== =====
Average Number of
Employees............... 1,815 875
====== =====
<CAPTION>
NORTH NORTH
EUROPE(1) AMERICA EUROPE(1) AMERICA
--------- ------- --------- -------
1998 1997
------------------- -------------------
(IN EUR MILLION, EXCEPT NUMBER OF EMPLOYEES AND VOLUMES PRODUCED)
<S> <C> <C> <C> <C>
Operating Revenue(2)..... 1,189 793 1,381 931
Equity in Net Income
(Loss) of Non
Consolidated
Investees............... 1 (1) (4) (1)
----- ----- ------ -----
Total Revenue........... 1,190 792 1,377 930
Operating Expense,
Excluding
Depreciation............ (994) (693) (1,146) (792)
Depreciation, Depletion
and Amortization........ (77) (34) (80) (30)
Operating Income......... 119 65 151 108
===== ===== ====== =====
Capital Expenditures..... 87 190 80 143
Total Assets............ 909 861 930 766
===== ===== ====== =====
Monomers Production (in
thousand tons).......... 1,279 761 1,241 659
Polymers Production (in
thousand tons).......... 910 1,303 899 1,271
===== ===== ====== =====
Average Number of
Employees............... 1,886 872 1,920 913
===== ===== ====== =====
</TABLE>
---------------
(1) Europe includes Europe and the rest of the world other than North America.
(2) Includes inter-segment revenue.
OPERATING REVENUE
Operating revenue in 1999 was EUR 2,649 million compared with EUR 1,982
million in 1998. This 33% variation was caused by the increase in sales prices
resulting from the surge in petroleum product prices, the increase of quantities
sold and the appreciation of the dollar against the Euro. New production record
was reached in polymers with an increase of 35%.
Operating revenues in Europe increased from 1998 by EUR 236 million to EUR
1,425 million in 1999. In monomers, ethylene and propylene sales price increased
by 3% and 8% respectively while polymers sales price decreased by 3%. Sales
volumes in polymers increased by 10%.
In North America operating revenues increased by 54% in 1999 to EUR 1,224
million, reflecting an increase of quantities sold of 21% and the appreciation
of dollar rate against EUR of 4%.
41
<PAGE> 42
OPERATING INCOME
Petrochemicals operating income was EUR 247 million in 1999 compared with
EUR 184 million in 1998. Excluding write-downs and losses on inventory of EUR 54
million in 1998 and reversal of write-downs of the same amount in 1999,
operating income was EUR 193 million in 1999 compared with EUR 238 million in
1998. Good manufacturing and marketing performance in a weak environment
compensated the decline in margins.
In Europe, excluding write-downs in 1998 and write-offs in 1999, operating
income was EUR 124 million in 1999 compared to EUR 131 million in 1998. The
decline in operating income was largely in the monomers business. The industry's
stream cracker margins fall from EUR 84.3 per ton in 1998 to EUR 58.0 per ton in
1999. The naphtha price increased by 35% while ethylene and propylene prices
increased only by 3% and 8% respectively. In polymers the margins decreased by
13% in 1999 compared to 1998.
In North America, excluding write-downs in 1998 and write-offs in 1999,
operating income was EUR 112 million in 1999 compared to EUR 107 million in
1998. In December 1999, PetroFina sold its North American chemicals business to
its parent company, TotalFinaElf, as part of a group restructuring.
In base chemicals, operating result decrease by 35% including a lower
propylene and aromatics margins and start-up expenses (EUR 3.5 million)
associated with the steam cracker project only partially offset by record
propylene sales volumes and higher aromatics volumes.
Styrenics operating results in 1999 were stable compared to 1998. A higher
styrene margin and higher styrene and polystyrene sales volumes were offset by
lower polystyrene margins.
Polypropylene operating results were down 50% from prior year. Lower
margins due to delays in passing through raw material price increase in an
extremely competitive market. This margin reduction was partially offset by
record production volumes up to 35% and record sales volumes which were up 32.5%
to 876,000 tons.
Polyethylene operating results were up to 150% from prior year. A record
production volume which increased 117%, record sales volumes which increased by
105% and cost efficiencies reflecting the economy of scale from the Bayport 2
expansion explains this performance.
PAINTS: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
1999
----------------------------------------
SIX MONTHS SIX MONTHS AGGREGATE
ENDING ENDING YEAR
JUNE 30, DEC. 31, ENDED DEC. 31, 1998 1997
---------- ---------- -------------- ----- -----
(IN EUR MILLION EXCEPT NUMBER OF EMPLOYEES)
<S> <C> <C> <C> <C> <C>
Operating Revenue(1)...................... 394 362 756 780 780
Equity in Net Income of Non Consolidated
Investees............................... -- -- -- -- 1
Total Revenue........................... 394 362 756 780 781
Operating Expense, Excluding
Depreciation............................ (349) (342) (691) (713) (718)
Depreciation, Depletion and
Amortization............................ (11) (19) (30) (22) (23)
Operating Income.......................... 34 1 35 45 40
Capital Expenditures...................... 9 8 16 38 25
Total Assets............................ N/A 861 861 501 488
Average Number of Employees............... N/A 3,760 3,627 3,822
</TABLE>
---------------
(1) Includes inter-segment revenue.
OPERATING REVENUE
In 1999, Paints operating revenue was EUR 756 million, which was 3% lower
as 1998 revenue. In decorative paints, sales improved in almost all countries
where the Company is active. France was performing very well.
The marine and anti-corrosion coatings business has suffered from the Asian
crisis and the lower market due to low freight tariffs in the marine market. The
operating revenues decreased by 5%. The operating revenue decreased especially
in the USA and the Netherlands.
The industrial paints business unit could not keep the high performance of
last year. In February 1999 the commercial transport business was sold to PPG,
due to this effect the revenue declined of 3.5% although it generated a gain of
EUR 13 million. On a constant parameter the operating revenue was only 93% of
last year, due to problems with some products in Germany.
42
<PAGE> 43
OPERATING INCOME
Excluding the gain on disposal of the commercial transport business to PPG
operating results were lower than in 1998 due to the lower sales in the marine,
anti corrosion and industrial coatings business. The decorative business has
improved their operating income in various countries due to higher sales and
higher efficiencies in the factory.
43
<PAGE> 44
GROUP RESULTS 1998 VS 1997
In 1998, consolidated net income was EUR 466 million (BEF 18.8 billion)
compared to EUR 547 million (BEF 22.1 billion) in 1997, a decrease of 15%.
Group consolidated net income was unfavorably influenced by:
- Decreases in petroleum and petrochemical product prices which caused not
only a reduction in operating results but also losses and write-downs on
inventories of EUR 208 million (BEF 8.4 billion) after tax;
- Accelerated depreciation in accordance with SFAS 121 (Impairment of
Long-Lived Assets) of EUR 45 million (BEF 1.8 billion) net of tax
effects;
- Provisions for an important change in estimate for dismantlement costs
and site restoration on the Maureen field in the North Sea (U.K.) of EUR
15 million (BEF 0.6 billion) net of tax effects; and
- Early retirement costs and other charges of EUR 15 million (BEF 0.6
billion) after tax.
These charges were partially offset by gains on asset disposals of EUR 74
million (BEF 3.0 billion) after-tax and by other revenue of EUR 41 million (BEF
1.7 billion) related to refunds of excess insurance premiums and by the
recognition of tax loss carryforwards on U.S. subsidiaries for an amount of EUR
55 million (BEF 2.2 billion). After taking into account these changes for the
same period, PetroFina's share of earnings on a replacement cost basis increased
to EUR 573 million (BEF 23.1 billion) in 1998 from EUR 568 million (BEF 22.9
billion) in 1997. The replacement cost basis method calculates the cost of
products sold using the average quoted market prices for raw materials for the
month in which the sale occurred.
Operating income excluding these items decreased from EUR 1,227 million in
1997 to EUR 910 in 1998. This decrease, largely in the Upstream segment which
was down EUR 310 million, was adversely influenced by a drop in crude oil price
of about 33%, a reduction in U.S. natural gas price of 20% and production
decreases of 8% primarily resulting from technical problems associated with the
start-up of Ekofisk II in the North Sea.
The Group's consolidated operating revenue in 1998 was EUR 17 billion, a
decrease of EUR 974 million, or 5%, from 1997. A EUR 2.8 billion decrease
related to sales prices was partially offset by increases of EUR 1.1 billion
resulting from higher sales volume and EUR 137 million resulting from the
appreciation of the dollar and other European currencies against the Belgian
franc. Financial charges decreased by EUR 35 million (BEF 1.4 billion) due to an
increase of EUR 15 million in capitalized interest, EUR 10 million in gain on
marketable securities held by insurance affiliates and increases in exchange
rate gains of EUR 15 million.
The decrease in Upstream operating income resulted in lower taxes by EUR
237 million (BEF 9.6 billion). As a result, a lower proportion of Group earnings
before tax are attributable to Norwegian production activities. Norwegian
production activities carry a higher tax burden due to specific petroleum tax
legislation in Norway.
Basic earnings per share were EUR 19.89 in 1998 compared to EUR 23.42 in
1997.
Consolidated Cash Flow, defined as consolidated net income adjusted for
depreciation and other current year non-cash provisions to net income, increased
to EUR 1,425 million (BEF 57.5 billion) in 1998 from EUR 1,417 million (BEF 57.2
billion) in 1997.
44
<PAGE> 45
UPSTREAM: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- ---------------------- ----------------------
NORTH NORTH NORTH
EUROPE(1) AMERICA EUROPE(1) AMERICA EUROPE(1) AMERICA
---------- -------- ---------- -------- ---------- --------
(IN EUR MILLION, EXCEPT NUMBER OF EMPLOYEES, PRODUCTION AND RESERVES)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue(2)............... 910 1,282 1,216 972 1,040 577
Equity in Net Income of Non
Consolidated Investees........... 15 1 17 2 22 --
----- ------ ------- ----- ------- -----
Total Revenue.................... 925 1,283 1,233 974 1,062 577
Operating Expense, Excluding
Depreciation and Exploration
Expense.......................... (353) (1,136) (370) (771) (263) (433)
Depreciation, Depletion and
Amortization..................... (242) (76) (205) (86) (164) (57)
Exploration Expense................ (52) (15) (55) (53) (44) (31)
Other Operating Expense............ (24) (16) (24) (16) (46) (2)
----- ------ ------- ----- ------- -----
Operating Income (loss)............ 254 40 579 48 545 54
----- ------ ------- ----- ------- -----
Capital Expenditures............... 367 167 378 193 321 125
Total Assets....................... 1,585 803 1,620 752 1,430 563
----- ------ ------- ----- ------- -----
Crude Oil Production (in million
barrels)(3)...................... 45.1 4.0 48.2 4.0 45.3 4.0
Natural Gas Production (in Bcf).... 113.9 73.5 132.3 76.6 151.9 58.8
Proved Oil Reserves (in million
barrels)(3)...................... 576.9 71.5 510.3 72.6 485.0 77.3
Proved Gas Reserves (in Bcf)....... 930.3 405.6 1,188.0 400.3 1,349.2 392.8
Total Proved Reserves (in million
barrels of oil
equivalent)(3)(4)............. 732.0 139.1 708.3 139.3 709.9 142.8
----- ------ ------- ----- ------- -----
Average Number of Employees........ 322 394 345 493 372 453
===== ====== ======= ===== ======= =====
</TABLE>
---------------
(1) Europe includes Europe and the rest of the world other than North America.
(2) Includes inter-segment revenue.
(3) Excluding equity affiliates.
(4) 1 barrel of oil equivalent = 1 barrel of crude oil = 6000 cubic feet of gas.
OPERATING REVENUE
Operating revenue in 1998 was EUR 2.2 billion, a figure comparable to 1997.
The maintenance of sales revenues is explained by:
- Increases in natural gas marketing volumes primarily in the U.S. (535
billion cubic feet in 1998 compared to 310 billion cubic feet in 1997)
that resulted in a rise in operating revenue of EUR 323 million;
- Capital gains on assets sold and other items which generated additional
revenues of EUR 62 million and
- Appreciation of the dollar against the Belgian franc that resulted in an
increase in operating revenues of EUR 15 million.
These revenue increases were totally offset by the effect of the decline in
the price of crude oil and natural gas of EUR 316 million and by production
volume decreases of EUR 93 million.
In Europe, operating revenue decreased by EUR 306 million to EUR 910
million in 1998. The reduction of crude oil and natural gas production of 6.2
million barrels of oil equivalent caused a decrease in revenues of EUR 75
million. The weakening in the price of crude oil by $6.30 per barrel to $12.66
per barrel resulted in a reduction in operating revenues by EUR 249 million. The
decrease in natural gas marketing volumes was accompanied by a reduction in
operating revenue of EUR 15 million.
These reductions in operating revenue were partially offset by EUR 12
million related to exchange rate variations and by a gain of EUR 21 million from
the renegotiation of natural gas contract prices on the Audrey field in the
North Sea (U.K.).
Crude oil production was 123,600 barrels per day down from 132,000 barrels
per day in 1997. The production shutdown associated with the start-up of the new
Ekofisk II complex and consequent technical
45
<PAGE> 46
problems resulted in production declines of 7,000 barrels per day in Norway. In
the United Kingdom, natural field production declines were partially offset by
full year production of the Armada field, brought into production in 1997 (down
3,000 barrels per day).
Natural gas production was 312 million cubic feet per day compared to 362
million cubic feet per day in 1997. The Norwegian production decrease, 78
million cubic feet per day, was due to, as with the crude oil situation,
technical problems related to the start-up of Ekofisk II. This was partially
offset by higher North Sea production from the Armada field in the U.K.
In North America, operating revenue increased by 32% to EUR 1,282 million.
An increase in natural gas trading volumes of 221 billion cubic feet
resulted in an increase to operating revenue of EUR 338 million. The decrease in
crude oil price of $6.50 per barrel to $11.80 per barrel and in natural gas of
$0.20 per thousand cubic feet to $2.46 per thousand cubic feet resulted in a
reduction in operating revenues of EUR 57 million. Gains on assets sold
increased to EUR 41 million.
OPERATING INCOME
Upstream operating income was EUR 294 million in 1998 compared to EUR 627
million in 1997, a reduction of 53%.
In Europe, 1998 operating income was EUR 254 million, down 56% from EUR 579
million in 1997. Operating expenses decreased due to lower third party gas sales
partially offset by an increase in provision for dismantlement costs and site
restoration on the Maureen field.
The unit depletion rate (unit of production method) was $3.05 per barrel in
1998 compared with $3.06 per barrel in 1997. The crude oil price decrease
resulted in an impairment write-down of EUR 87 million on capitalized costs of
North Sea fields in the U.K. In 1997, a decrease in recoverable reserves from
the Ann and Alison fields resulted in an impairment write-down of EUR 12
million. Lifting cost was $4.20 per barrel in 1998 compared to $4.14 per barrel
in 1997.
Exploration expenses were comparable to last year at EUR 52 million and EUR
55 million for 1998 and 1997, respectively.
In North America, operating income was EUR 40 million in 1998 compared to
EUR 48 million in 1997.
The unit depletion rate (unit of production method) decreased to $4.93 per
barrel in 1998 from $5.51 per barrel in 1997 due to asset sales and the
development of new, lower-cost fields. Lifting costs were $3.68 per barrel in
1998 compared to $3.58 per barrel in 1997. Exploration expenses decreased from
EUR 53 in 1997 to EUR 15 million in 1998 due to lower dry hole costs.
On a global basis, in 1998, PetroFina participated in 21 exploration wells
compared to 27 wells in 1997. Approximately 48% of the wells drilled resulted in
additional potential reserves. PetroFina's interest in exploration drilling
represented 41.0% in 1998 compared to 40.4% in 1997.
The drilling program in 1998 resulted in additions to reserves of 97
million barrels of oil equivalent, thereby allowing 121% of production to be
replaced.
46
<PAGE> 47
DOWNSTREAM: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -------------------
NORTH NORTH NORTH
EUROPE(1) AMERICA EUROPE(1) AMERICA EUROPE(1) AMERICA
--------- ------- --------- ------- --------- -------
(IN EUR MILLION, EXCEPT NUMBER OF EMPLOYEES,
REFINING THROUGHPUT AND PRODUCTS SOLD)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue(2)....................... 10,977 2,109 11,468 2,710 9,989 2,315
Equity in Net Income of Non-Consolidated
Investees................................ 16 -- 18 -- 20 --
------- ------ ------- ------ ------ ------
Total Revenue............................ 10,993 2,109 11,486 2,710 10,009 2,315
Operating Expense, Excluding
Depreciation............................. (10,551) (2,037) (10,977) (2,562) (9,613) (2,254)
Depreciation, Depletion and Amortization... (202) (57) (214) (55) (180) (46)
Other Operating Expense.................... (59) (34) (61) (29) (75) (27)
======= ====== ======= ====== ====== ======
Operating Income (Loss).................... 181 (19) 234 64 141 (12)
======= ====== ======= ====== ====== ======
Capital Expenditures....................... 207 74 208 42 164 58
Total Assets............................. 3,288 1,021 3,605 1,230 3,514 1,070
======= ====== ======= ====== ====== ======
Refining Throughput (in thousand bbls per
day)..................................... 474.5 221.1 445.3 223.7 440.6 204.7
Refined Products Sold (in thousand tons)... 27,231 12,615 26,161 12,540 25,278 12,016
======= ====== ======= ====== ====== ======
Average Number of Employees................ 5,656 1,205 5,452 1,233 4,475 1,161
======= ====== ======= ====== ====== ======
</TABLE>
---------------
(1) Europe includes Europe and the rest of the world other than North America.
(2) Includes inter-segment revenue.
(3) Includes capital gains on sales of assets of EUR 24 million.
OPERATING REVENUE
Downstream operating revenue in 1998 was EUR 13,086 million compared to EUR
14,178 million in 1997, a decrease of 8%. The decrease in revenues resulted
primarily from reductions in petroleum product prices of approximately EUR 2,344
million. This was partially offset by excise tax increases of EUR 474 million,
exchange rate fluctuations of EUR 95 million and gains on asset sales of EUR 42
million. Increases in product sales volumes contributed EUR 657 million.
The average petroleum product price decreased by 26% for gasoline, 31% for
gasoil and 27% for fuels. Sales volumes for lubricants and non-fuel products
increased by 13%. Sales volumes for petroleum products increased by 3% on
average, and network sales improved by 6.4%.
In Europe, operating revenues decreased by EUR 491 million to EUR 10,977
million, a reduction of 4%.
Sales revenue decreased by EUR 586 million for petroleum products. Product
price reductions resulted in a decrease of EUR 1,165 million, partially offset
by excise taxes of EUR 474 million. Higher sales volumes contributed EUR 806
million. In addition, currency exchange rate fluctuations improved operating
revenue by EUR 69 million.
Revenues from lubricants and shop products improved by EUR 58 million. Gain
from the partial sale of African subsidiaries and the sale of a lubricants plant
in Germany and other assets resulted in increased revenue of EUR 31 million.
In North America, operating revenue was EUR 2,109 million, a decrease of
EUR 601 million from 1997. Sales quantities increased by 4% and resulted in
improved revenues by EUR 98 million. However, price decreases resulted in lower
revenues of EUR 736 million. Currency exchange rate fluctuations decreased
revenues by EUR 37 million.
OPERATING INCOME
Downstream operating income was EUR 162 million in 1998 compared to EUR 298
million in 1997. Excluding write-downs and losses on inventory of EUR 209
million and gains on asset disposals of EUR 37 million, operating income was EUR
335 million, an improvement of 12% over 1997.
47
<PAGE> 48
In Europe, operating income was EUR 181 million. Excluding write-downs and
losses on inventory of EUR 156 million and gains on asset disposals of EUR 37
million, operating income was EUR 300 million, an improvement of 28% over 1997.
Refining throughput reached a record level of 474,500 barrels per day in
1998, an increase of 6.6% over 1997. In 1998, throughput improvement, crude
optimization and reduction of operating expenses improved refining operating
income by 6% compared to 1997 while industry refining margins in Northwest
Europe improved 2% from $2.40 per barrel to $2.45 per barrel in 1998. Marketing
operating income improved in all countries. Network sales increased by 6.4%
while the market grew at only 2.4% on average. In the framework of customer
service, the Group resumed increasing the number of directly managed sales
outlets. The reduction in management fees and the increase in non-fuel shop
margins more than offset the resulting increase in personnel expenses.
In North America, operating losses were EUR 19 million compared to an
operating profit of EUR 64 million in 1997. Excluding write-downs and losses on
inventory of EUR 53 million and a loss on an asset disposal of EUR 1 million,
operating income was EUR 35 million, a decline of 41% from 1997. 1998 was
characterized by a drop in refining margins. Industry refining margins decreased
from $3.80 per barrel in 1997 to $3.00 per barrel in 1998. The Group's reduction
in refining margin was limited to $0.50 per barrel due to optimization of the
U.S. refineries.
CHEMICALS: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
NORTH NORTH NORTH
EUROPE(1) AMERICA EUROPE(1) AMERICA EUROPE(1) AMERICA
---------- -------- ---------- -------- ---------- --------
(IN EUR MILLION, EXCEPT NUMBER OF EMPLOYEES AND VOLUMES PRODUCED)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue(2)............... 1,189 793 1,381 931 1,154 789
Equity in Net Income (Loss) of Non
Consolidated Investees........... 1 (1) (4) (1) (1)
----- ----- ----- ----- ----- -----
Total Revenue.................... 1,190 792 1,377 930 1,154 788
Operating Expense, Excluding
Depreciation..................... (981) (679) (1,133) (780) (965) (575)
Depreciation, Depletion and
Amortization..................... (77) (34) (80) (30) (74) (25)
Other Operating Expense............ (13) (14) (13) (12) (11) (11)
===== ===== ===== ===== ===== =====
Operating Income................... 119 65 151 108 104 177
===== ===== ===== ===== ===== =====
Capital Expenditures............... 87 190 80 143 48 43
Total Assets..................... 909 861 930 766 885 557
===== ===== ===== ===== ===== =====
Monomers Production (in thousand
tons)............................ 1,279 761 1,241 659 1,123 610
Polymers Production (in thousand
tons)............................ 910 1,303 899 1,271 880 1,161
===== ===== ===== ===== ===== =====
Average Number of Employees...... 1,886 872 1,920 913 1,876 932
===== ===== ===== ===== ===== =====
</TABLE>
---------------
(1) Europe includes Europe and the rest of the world other than North America.
(2) Includes inter-segment revenue.
OPERATING REVENUE
Operating revenue in 1998 was EUR 1,982 million compared with EUR 2,312
million in 1997. This decline of 14% was primarily caused by decreases in sales
prices, resulting from overcapacity in certain markets (notably Asia) and by the
drop in petroleum product prices. New production records were reached in both
monomers and polymers with increases of 1% and 2%, respectively. Operating
revenues in Europe decreased from 1997 by EUR 192 million to EUR 1,189 million
in 1998. In monomers, ethylene and propylene sales prices decreased by 19% and
32%, respectively, while polymer sales prices dropped 12% on average. Sales
volumes were comparable to those in 1997.
In North America, operating revenue decreased by 15% in 1998 to EUR 793
million, reflecting a decrease across the board of all product categories. Sales
volumes increased by 0.5% for all products while sales prices declined 18% on
average.
48
<PAGE> 49
OPERATING INCOME
Chemicals operating income was EUR 184 million. Excluding write-downs and
losses on inventory of EUR 54 million, operating income was EUR 238 million in
1998 compared to EUR 259 million in 1997. Good manufacturing and marketing
performance in a weak economic environment limited the decline in operating
income to 8% compared to 1997. In Europe, excluding write-downs and losses on
inventory, operating income was EUR 131 million in 1998 compared to EUR 151
million in 1997. The decline in operating income was largely in the monomers
business. The industry's steam cracker margins fell from EUR 89.2 per tonne in
1997 to EUR 84.3 per tonne in 1998. The decline in naptha prices of 29%
partially offset the drop in ethylene and propylene prices. Globally, polymer
margins were stable in 1998 compared with 1997.
In North America, excluding write-downs and losses on inventory, operating
income was EUR 107 million in 1998, comparable to 1997. Styrene prices continued
to fall during 1998; however margins improved an average of 20% in 1998 due to a
reduction in raw material costs. Margins improved an average 20% in 1998 while
polyethylene and polypropylene margins declined 16% and 13%, respectively
primarily as a result of decreasing sales prices.
In December 1998, a new polymer line came into production, increasing the
annual capacity of the La Porte plant to 1 million tonnes. In addition, a new
production unit started up at the Bayport plant in October 1998 doubling its
annual polyethylene capacity to 385,000 tonnes.
PAINTS: REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(IN EUR MILLION EXCEPT
NUMBER OF EMPLOYEES)
<S> <C> <C> <C>
Operating Revenue(1)........................................ 780 780 730
Equity in Net Income of Non Consolidated Investees.......... -- 1 1
----- ----- -----
Total Revenue............................................. 780 781 731
Operating Expense, Excluding Depreciation................... (700) (705) (662)
Depreciation, Depletion and Amortization.................... (22) (23) (21)
Other Operating Expense..................................... (13) (13) (18)
----- ----- -----
Operating Income............................................ 45 40 30
===== ===== =====
Capital Expenditures........................................ 38 25 29
Total Assets.............................................. 501 488 464
===== ===== =====
Average Number of Employees................................. 3,627 3,822 3,878
===== ===== =====
</TABLE>
---------------
(1) Includes inter-segment revenue.
OPERATING REVENUE
In 1998, Paints operating revenue was EUR 780 million, which was
substantially the same as 1997 revenue. In decorative paints, results improved
primarily in France and the Benelux countries. The sale of the U.K. branch
resulted in a revenue decline of 3.5%, although it generated a gain on asset
disposal of EUR 2.2 million.
The marine and anti-corrosion coatings business withstood the Asian crisis
with operating revenues increasing 3% in a market undergoing restructuring.
Strong sales increases in the U.S., Italy and Korea also increased operating
revenue.
Operating revenue of the industrial paints business also reached new
records with an increase of approximately 8%, mainly in Belgium.
OPERATING INCOME
Excluding the gain on disposal of the decorative paint business in the U.K.
of EUR 2.2 million in 1998 and costs associated with the closure of factories in
Germany and Denmark of EUR 3.0 million in 1997, operating results were EUR 43
million in 1998, which was substantially the same as 1997.
IMPACT OF INFLATION AND CHANGING PRICES
The Group's operations are not seasonal but are sensitive to crude oil and
natural gas pricing, margins between crude oil and refined products, and
chemicals margins. These factors are beyond the Group's ability to
49
<PAGE> 50
influence and are the result of global market developments. In the past, crude
oil, natural gas and product prices have fluctuated in response to market and
political forces. Oil and natural gas prices are also influenced by regional
factors such as regional supply, alternative fuel costs, and weather. See also
"Risk Management and Financial Instruments."
The general rate of inflation in most major countries where the Group
operates has been relatively low in recent years. Associated impacts on
operating costs have been countered by cost reductions from productivity
improvements. Inflation has not been a factor influencing production and product
pricing. Inflation does affect the cost of acquiring replacement property,
plants and equipment. The replacement cost of property, plants and equipment is
generally greater than the historical cost as a result of inflation. To a
certain degree, the effect of inflation on replacement costs is countered by
cost reductions due to improved technologies and applied knowledge.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
PetroFina defines "Cash Flow," for purposes of its Belgian financial
reporting, as consolidated net income adjusted for depreciation and other
current year provisions to net income. Because "Cash Flow" as so defined
excludes the effect of changing working capital items, it is different from Cash
Flow provided by operating activities as reported in the Consolidated Statements
of Cash Flows. See "Item 18. Financial Statements -- Consolidated Statements of
Cash Flows."
Cash Flow amounted to EUR 1,550 million (aggregate), EUR 1,425 million and
EUR 1,417 million in 1999, 1998 and 1997, respectively.
Cash provided by operating activities was EUR 1,025 million, EUR 1,094
million and EUR 1,337 million in 1999, 1998 and 1997, respectively. Cash flow
from operating activities totaled EUR 1,025 million in 1999, down EUR 65 million
from 1998. Major sources of funds were net income of EUR 437 million and
non-cash provisions including depreciation and depletion of EUR 781 million. The
decrease in 1999 cash flow from operations compared to 1998 is the result of
lower earnings and increased working capital requirements.
Capital expenditures, which include investment in affiliates and
exploration expenses, amounted to EUR 911 million, EUR 1,256 million and EUR
1,082 million in 1999, 1998 and 1997, respectively.
Total debt decreased EUR 947 million to EUR 1,511 million in 1999. The
proceeds of the sale of consolidated subsidiaries to Total were used by
Petrofina to reimburse a portion of its long term debt. As of December 31, 1999,
the Group had available long-term committed and unused credit facilities
totaling approximately EUR 1.1 billion.
PetroFina believes that cash provided by operations together with available
liquidity from existing facilities will be sufficient to fund the Group's
planned capital expenditures, working capital requirements, debt and interest
repayments and dividends for the foreseeable future.
Net cash used in financing activities was EUR 297 million, EUR 27 million
and EUR 273 million in 1999, 1998 and 1997, respectively. Dividend payments
amounted to EUR 503 million, EUR 267 million and EUR 231 million in 1999, 1998
and 1997, respectively.
Consolidated shareholders' equity was EUR 11,391 million, EUR 3,981 million
and EUR 3,865 million at the end of 1999, 1998 and 1997, respectively. This
significant increase in 1999 is due to the effects of the push down of the
purchase accounting of Total and of the transfers of subsidiaries with
TotalFinaElf. PetroFina has a net cash excess over finance debt position which
is comparable to 10% of the stockholders' equity at the end of 1999. The Group's
ratio of interest bearing debt to equity was 60% at the end of 1998 and 53% at
the end of 1997.
CAPITAL AND EXPLORATION EXPENDITURES
Capital and exploration expenditures for 1999 amounted to EUR 911 million
compared to EUR 1,256 million for 1998 and to EUR 1,082 million for 1997. These
expenditures included capitalized interest of EUR 21 million for 1999 of EUR 55
million in 1998 and EUR 40 million in 1997, respectively. Of the 1999
capitalized interest amount, EUR 10 million related to Upstream.
Upstream capital and exploration expenditure totaled EUR 347 million in
1999, EUR 534 million in 1998 and EUR 571 million in 1997. European capital and
exploration expenditure amounted to EUR 242 million compared to EUR 367 million
in 1998 while North American expenditure amounted to EUR 105 million and
50
<PAGE> 51
EUR 167 million in 1999 and 1998, respectively. The largest expenditures related
to the Ekofisk re-development, which was completed during 1998, while EUR 34
million and EUR 136 million were spent for various field development activities
in the U.K. and North America, respectively. The remainder was principally
incurred in exploration activities. Of the total exploration expenditure of EUR
50 million in 1999, EUR 45 million was expensed. Due to PetroFina's sale of its
North American and Italian upstream business assets to its parent company,
TotalFinaElf, Upstream capital expenditures are expected to be generally lower
in future periods.
Downstream capital expenditures in 1999 totaled EUR 229 million compared to
EUR 281 million in 1998. The amounts reflected an increase in expenditures
devoted to the extension and enhancement of the Group's marketing network in
Europe. Due to PetroFina's sale of three refineries and the sale or lease of
most of its European marketing activities to its parent company, TotalFinaElf,
Downstream capital expenditures are expected to be generally lower in future
periods.
Chemicals capital expenditures in 1999 totaled EUR 298 million compared to
EUR 277 million in 1998. Polymer production expansion programs, particularly in
North America, totaled EUR 180 million in 1998. Due to PetroFina's sale of its
North American chemicals business to its parent company, TotalFinaElf, Chemicals
capital expenditures are expected to be generally lower in future periods.
YEAR 2000
No significant failure has been detected within PetroFina or associated
third parties as a result of the changeover to the year 2000.
EUROPEAN MONETARY UNION
On January 1, 1999, eleven participating member nations of the EU adopted
the Euro as their official legal currency. Fixed conversion rates were
established between the Euro and the existing national currencies. PetroFina is
a supporter of the rapid adoption of the single European currency. The Group
started to transact business in Euro with customers, suppliers, shareholders,
banks and the capital markets as necessary during the transition period
beginning January 1, 1999, and the Group converted its business systems to Euro
during 1999. The deadline for conversion to the Euro is January 1, 2002. The
Group has significant manufacturing and marketing in the participating countries
and anticipates that there will be increased efficiencies from the introduction
of the Euro, although no estimate has been made and there can be no assurance as
to such efficiencies. PetroFina adopted the Euro as its reporting currency on
December 31, 1998. The Group does not expect that the introduction of the Euro
will have a material impact on financial condition, liquidity or results of
operations.
ENVIRONMENTAL COSTS
PetroFina is engaged in industrial operations that are subject to
environmental risks. In this context, the Group is subject to changing
environmental laws and regulations which may in the future require the Group to
meet more stringent emissions standards or take remediation actions for
contaminated sites.
The Group has accrued EUR 298 million as of December 31, 1999 related to
the estimated costs of site restorations and remediation activities. Accruals
are established when the Group determines that events have occurred which
require remediation under existing laws and regulations related to plants or
other facilities, currently owned or previously disposed. Due to inherent
uncertainties of the estimation process and the background of changing laws and
regulations, it is reasonably possible that provisions will be subject to
revision. In addition, new conditions related to PetroFina's operations that
would require future expenditures could be discovered. The amount of such future
costs is not determinable due to the unknown existence and extent of corrective
actions that may be necessary.
The Group's recent major capital expenditure programs in its Downstream and
Chemicals segments over the past 7 years have been carried out with due
consideration to the requirements of existing and expected legal and regulatory
environmental developments regarding air and water emissions as well as
compliance with the EU's Stage I vapor recovery requirements at major depots,
loading facilities and service stations.
The Stage II vapor recovery requirements would place stringent obligations
at all petrol service stations (within the EU). In certain countries, where the
majority of the Group's European retail operations are located, legislation has
already been adopted requiring compliance of all newly built and certain
categories of existing stations.
51
<PAGE> 52
The Group's new service station building programs and station rebuilding
programs have been designed to enable the stations to comply with future Stage
II requirements with minimal additional costs or to provide current compliance
where necessary.
At certain older stations, the cost of Stage II compliance is not
considered justifiable. Current and future legislation will result in closure of
a number of stations for the Group as well as for most of its competitors. The
Group has assessed the implication of current legislation and the potential
impact of implementation in those countries not yet concerned. The Group
believes that the measures do not affect the Group's competitive market
position, nor do they materially affect the Group's consolidated financial
position, results of operations or cash flows.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 133, "Accounting for derivative Instruments and Hedging Activities. SFAS No.
133 establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. The Company has not assessed the impact on its financial position,
results of operations or cash flows of adopting SFAS No. 133. The Company will
be required to implement SFAS No. 133, as amended by SFAS No. 137 for its fiscal
year ending December 31, 2001.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL INSTRUMENTS
INTEREST RATE SENSITIVITY
The table below provides information about PetroFina's financial
instruments that are sensitive to interest rate changes. These include long term
debt. As of December 31, 1999, there is no interest rate swap in the entities
belonging to the consolidation scope.
For long term debt, the table presents principal cash flows and the average
interest rates related to these cash flows per expected maturity date, after
currency swap effects. Weighted average variable rates are based on implied
forward rates of the yield curve on December 31, 1999. The information is
presented in EUR equivalent, which is PetroFina's reporting currency. Cash flows
are denominated in various currencies, as indicated in parentheses.
EXPECTED MATURITY DATE ON DECEMBER 31, 1999
<TABLE>
<CAPTION>
TOTAL
NOMINAL FAIR
2000 2001 2002 2003 2004 THEREAFTER VALUE VALUE
---- ---- ---- ---- ---- ---------- ------- -----
(EUR EQUIVALENT IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Debt
-- Fixed Rate (US$)...................... 5 6 5 13 13 31 73 84
Average Interest Rate.................... 8.3% 8.3% 8.6% 9.1% 9.1% 8.6%
-- Fixed Rate (EUR)...................... 233 5 -- -- -- 1 239 250
Average Interest Rate.................... 8.9% 6.2% -- -- -- 4.3%
-- Fixed Rate (GBP)...................... 1 1 -- -- -- -- 2 2
Average Interest Rate.................... 10.5% 10.5% -- -- -- --
-- Variable Rate (US$)................... 6 -- -- -- -- 19 25 25
Average Interest Rate.................... 6.3% -- -- -- 4.7%
-- Variable Rate (NOK)................... 30 32 33 33 33 167 328 329
Average Interest Rate.................... 6.1% 6.1% 6.1% 6.1% 6.1% 6.1%
-- Variable Rate (EUR)................... 2 2 2 2 2 10 20 20
Average Interest Rate.................... 3.2% 4.5% 5.0% 5.2% 5.1% 4.8%
-- Variable Rate (Others)................ -- -- -- 1 -- -- 1 1
Average Interest Rate.................... -- -- -- 0.5% -- --
---- ---- ---- ---- ---- ---- --- ---
-- Total Long Term Debt (including
current portion of long term debt)..... 277 46 40 49 48 228 688 711
==== ==== ==== ==== ==== ==== === ===
</TABLE>
The table above summarizes PetroFina's long term debt after currency swap
effects which convert 4 million equivalent EUR of Spanish peseta denominated
debt into USD denominated debt and 328 million equivalent
52
<PAGE> 53
EUR of USD denominated debt into NOK denominated debt. The other category
includes debts denominated in JPY.
As of December 31, 1999, the Group has no interest rate swap position any
longer. Most interest rate swaps disclosed in December 31, 1998 financial
statements were booked in APH accounts; as of December 31, 1999, this subsidiary
no longer belongs to the consolidation scope.
PetroFina tries to use the most cost-effective means to fund the Group's
operating and capital needs. Fixed or variable debt will be borrowed in various
currencies. To manage risk arising from fluctuations in interest rates and
currency exchange rates, and therefore maintain the efficient debt mix,
PetroFina utilizes currency and interest rate swaps when needed.
Approximately 45% of PetroFina's long term debt is fixed rate debt. The
main currencies of denomination of this fixed long term debt, after currency
swaps, are Belgian franc (shown above as EUR) and United States dollars.
Approximately 23% of the fixed long term debt is denominated in USD, 14% of the
long term debt is USD debt and 7% of the variable rate debt is also denominated
in USD.
Due to the current currency mix of PetroFina's debt, the Group is exposed
to changes in short term US interest rates. However, it is widely believed that
this does not pose a significant risk as a substantial portion of the Group's
cash flows are generated by dollar-related activities, which are positively
correlated to the changes in short term U.S. interest rates.
EXCHANGE RATE SENSITIVITY
The table below provides information concerning PetroFina's financial
instruments by functional currency. This information is presented in EUR
equivalent. Information on instruments that are sensitive to foreign currency
exchange rates are thereby summarized, including debt denominated in currencies
other than the company's reporting currency and currency swap agreements.
Principal cash flows from debt obligations are presented by expected maturity
dates with their related weighted average interest rates.
EXPECTED MATURITY DATE
<TABLE>
<CAPTION>
TOTAL
NOMINAL FAIR
2000 2001 2002 2003 2004 THEREAFTER VALUE VALUE
---- ---- ---- ---- ---- ---------- ------- -----
(EUR EQUIVALENT IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
On-balance Sheet Financial Instruments:
-- Fixed Rate (US$)............................... 3.2 3.3 3.3 13.1 13.1 29.5 65.5 76.6
-- Average Interest Rate.......................... 9.1% 9.1% 9.1% 9.1% 9.1% 9.1%
</TABLE>
The Group will normally enter into currency swaps to manage its exposure to
adverse movements in exchange rates on its foreign currency denominated debt.
Neither the currency swaps nor the related foreign currency denominated
debt instruments have been included in the above tables when such swaps
effectively eliminate the foreign currency exposure in the cash flows of the
related foreign currency denominated debt instrument. As a result, the total
nominal value and fair value of the above currency swaps will vary slightly from
the derivative instruments disclosures in the audited financial statements.
PetroFina also enters into foreign exchange forward contracts to manage its
exposure to fluctuations in foreign currency denominated receivables and
payables. Most of these contracts mature within three months.
Management believes that these financial instruments do not subject
PetroFina to material risk due to foreign exchange movements because gains or
losses on these contracts will offset gains or losses on the assets, liabilities
and transactions being hedged. See Note 14 to the Consolidated Financial
Statements.
COMMODITY PRICE SENSITIVITY
PetroFina also enters into crude oil and refined products futures, swaps
and forward contracts to minimize short term price risks related to the supply
and sale of these products, respectively. At December 31, 1999, the fair value
of these commodity derivative instruments was EUR 9 million.
The value of these contracts is sensitive to changes in commodity prices.
If the price of the underlying commodities changes, it would have the same
effect on the fair value of the Group's commodity derivative instruments. Based
on an undiscounted cash flow approach, decreasing the forward rates of these
commodities by
53
<PAGE> 54
10% would increase the fair value of these instruments by EUR 17 million, while
increasing the forward rates by 10% would decrease the fair value of these
instruments by EUR 17 million. Given that there is no economic basis for
predicting the magnitude of the change that will occur, the Company has assumed
a 10% positive and negative change. This evaluation of the sensitivity of the
Group towards commodity price risk does not take into account the physical
positions which are hedged by these derivative contracts.
The level of derivative commodity instruments is immaterial to the Group's
actual level of transactions. Therefore the changes in fair values noted above
would not have a material effect on the Group's results of operations or
financial position, when also taking into account the impact of a change of the
price of the underlying commodities on the physical positions being hedged.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
BOARD OF DIRECTORS
Following the acquisition of Petrofina by Total, and the sale of a number
of businesses to Total, the Board of Directors of Petrofina has been
substantially reorganized.
Set forth below for each director of the Company as of May 12th, 2000, are
his name, position with the Company, the date as of which he initially commenced
serving as a director, the date his current term as a director expires and his
citizenship. All directors listed below are citizens of France, except for
Messrs A. Frere, F. Cornelis, E. Davignon and G. Frere (Belgium). Mr. de Rudder
and Mr. Samyn are citizens of both Belgium and France.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME POSITION SINCE EXPIRES
---- -------- -------- -------
<S> <C> <C> <C>
Baron Albert Frere....................... Chairman 1986 2002
Mr. Francois Cornelis.................... Vice Chairman and Managing Director 1986 2002
Viscount Etienne Davignon................ Vice-Chairman 1990 2002
Mr. Jean-Paul Vettier.................... Managing Director 1999 2002
Mr. Guy Bizot............................ Director 1999 2002
Mr. Robert Castaigne..................... Director 1999 2002
Mr. Christophe de Margerie............... Director 1999 2002
Mr. Thierry de Rudder.................... Director 1990 2002
Mr. Georges Dupasquier................... Director 1999 2002
Mr. Gerald Frere......................... Director 1999 2002
Mr. Jean-Jacques Guilbaud................ Director 1999 2002
Baron Paul Janssen....................... Director 1987 2002
Mr. Gilles Samyn......................... Director 1990 2002
Mr. Jean-Pierre Seeuws................... Director 1999 2002
Mr. Daniel Valot......................... Director 1999 2002
</TABLE>
Mr. A. Frere and G. Frere are father and son.
Baron Albert Frere is Chairman and Managing Director of Groupe Bruxelles
Lambert S.A. He is also Chairman of the Boards of Directors of Electrafina S.A.,
Erbe S.A., and Frere-Bourgeois S.A.; Vice President of COBEPA S.A.; and
Vice-Chairman and Managing Director of Pargesa Holding S.A. He is also a
director of CLT-UF and L.V.M.H. He is a member of the Supervisory Board of Suez
Lyonnaise des Eaux S.A. and M6 and an honorary member of the Council of Regents
of the Banque Nationale de Belgique. He was elected a director of the Company in
1986 and Chairman in 1990.
Mr. Francois Cornelis was elected a director in 1986, Managing Director and
Chief Executive Officer of PetroFina in 1990 and Vice-Chairman in 1991. He
graduated from the University of Louvain with a degree in mechanical engineering
in 1973 and joined PetroFina in the same year. He has held a number of positions
in various areas within the Group, including in the United Kingdom, the United
States and Belgium. In March 1984 he became Assistant General Manager attached
to the Chairman. He serves as Chairman to several Group subsidiaries. He is a
member of the European Advisory Board of the NYSE.
Viscount Etienne Davignon is the Executive Chairman of Societe Generale de
Belgique S.A. He is a director of various companies both within and outside the
Societe Generale de Belgique group of companies. He has been active in public
affairs, in particular in the Belgian Ministry of Foreign Affairs, as the first
president of the International Energy Agency and as vice-president of the
European Commission. He was elected a director and Vice-Chairman of the Company
in 1990.
54
<PAGE> 55
Mr. Jean-Paul Vettier held several positions within Rhone-Poulenc from 1970
until 1986 when he became General Manager, Chemicals. In 1987, he became General
Manager, Petrochemicals, of CDF Chimie (later Orkem) and member of the Executive
Committee. He joined Total in 1990, as Deputy General Manager of Total Raffinage
Distribution. He became Chairman and Chief Executive Officer of Total Raffinage
Distribution in 1993. He is a member of the Executive Committee (COMEX) of the
Group TotalFinaElf since then. In 1999, he was appointed Managing Director and
Chief Executive Officer, Refining Marketing.
Mr. Guy Bizot held several positions within Total since he joined the
Company in 1955, in France and abroad (mainly Italy and Australia). His last
position was member of the Management Committee (CODIR) of Total S.A. from 1990
to 1995. He was elected a director of the Company in 1999.
Mr. Robert Castaigne joined Total in 1972. He held several positions within
Total. He is a member of the Executive Committee (COMEX) and Chief Financial
Financer of the Group TotalFinaElf since 1994. He is a director of a large
number of companies in France and abroad, within and outside the Group
TotalFinaElf, amongst which Cogema, Compagnie Generale de Geophysique, Eramet
and Sanofi-Synthelabo. He was elected a director of the Company in 1999.
Mr. Christophe de Margerie, a graduate of the Ecole Superieure de Commerce
de Paris, has spent most of his career at Total. In 1974, he joined Total the
Corporate Finance Division of the Total Group where he was successively in
charge of the Budget Department and of the Affiliates Department, and became in
1987 Group Treasury; in May 1990, he joined Total Trading and Middle East as
Senior Vice President Finance. In March 1992, he was appointed Executive Vice
President Total Trading and Middle East, heading up the Middle East division,
and a Member of the Group Management Committee. In June 1995, he became
President Total Middle-East. He was appointed Executive Vice President of
TotalFina, President of the Exploration and Production Division and Member of
the Group Executive Committee in May 1999 and is presently Executive Vice
President of the Exploration and Production Division of TotalFinaElf. He was
elected a director of the Company in 1999.
Mr. Thierry de Rudder is Managing Director of Groupe Bruxelles Lambert S.A.
and Electrafina. He is also a member of the Board of Directors of Audiofina
(Luxembourg), CLT-UFA (Luxembourg), Compagnie Nationale a Portefeuille S.A.,
Imerys (France), Lasmo plc (United Kingdom), Rhodia (France), Societe Generale
de Belgique S.A., Total Fina Elf S.A. and Tractebel. He was elected a director
of the Company in 1990.
Mr. Georges Dupasquier is graduated from Ecole Polytechnique and holds a
Master of Science in Industrial Administration from Carnegie Mellon University.
After having worked within the Groupe Mobil Oil, he joined Total Raffinage
Distribution in 1993, where he became General Manager, Specialities and member
of the Executive Committee until 1999. He was elected a director of the Company
in 1999.
Mr. Gerald Frere is Chairman of the Executive Committee and Managing
Director of Groupe Bruxelles Lambert S.A.. He is Chairman the Board of Directors
of Compagnie Nationale a Portefeuille S.A. In addition, he is Managing Director
of Frere-Bourgeois S.A. as well as a Member of the Board of Directors and of the
Management Committee of Pargesa Holding S.A. (Geneva). He is member of the Board
of several companies and holds also the position of Director of the National
Bank of Belgium. He was elected a director of the Company in 1999.
Mr. Jean-Jacques Guilbaud joined Total in 1981 as Company Lawyer
specialized in labour laws, becoming responsible for Labour Relationship in
1985. After having been Assistant Manager of the Refinery in Normandy (1994) and
Assistant Manager, Human Resources in 1996, he is now President Human Resources
and Corporate Communications and member of the Management Committee (CODIR) of
the Group TotalFinaElf. He was elected a director of the Company in 1999.
Baron Paul Janssen is the Chairman of Janssen Research Foundation
Worldwide. He is the author of a number of scientific publications and the owner
of a large number of patents. He was elected a director of the Company in 1987.
Mr. Gilles Samyn is Managing Director of Frere-Bourgeois, Compagnie
Nationale a Portefeuille S.A. and Erbe S.A. He is a member of the Executive
Committee of Pargesa and Groupe Bruxelles Lambert, and a Director of other
companies including Imerys and Audiofina (CLT-UFA). He is the Chairman of the
Board of various companies including Transcor. He was elected a director of the
Company in 1990.
Mr. Jean-Pierre Seeuws was graduated from Ecole Polytechnique. He held
several positions within Rhone-Poulenc and Orkem before joining Total in 1990 as
Deputy General Manager, Chemicals. In 1995, he was appointed General Manager,
Chemicals and a member of the Executive Committee (COMEX) of the Group Total.
Chairman of Hutchinson in 1996, he is now General Manager, Chemicals for the US.
He was elected a director of the Company in 1999.
55
<PAGE> 56
Mr. Daniel Valot is Chairman and Chief Executive Officer of Technip.
Graduated from the Ecole Nationale d'Administration, he joined Total in 1981. He
was successively Managing Director of Total South East Asia, Deputy Finance
Manager of Total Group, Finance Manager of Total Chemical Division,
Vice-President Strategic Planning Division of Total Group, Chairman and Chief
Executive Officer of Total Petroleum North America. In 1995, he was appointed
President of Total Exploration Production and a member of the Group Total
Executive Committee before leaving Total in 1999 to take his present position.
He was elected a director of the Company in 1999.
In accordance with Belgian law governing a societe anonyme/naamloze
vennootschap, the Company's affairs are managed by its Board of Directors (the
"Board"). Responsibility for management of the Company's daily affairs has been
conferred by the Board to its Managing Directors, General Managers and Secretary
General, acting and making decisions in pairs.
Under Parent's Articles, the Board consists of not less than 7, nor more
than 20, members. The Board is presently composed of 15 members. Shareholders of
the Company entitled to vote at ordinary general shareholders' meetings elect
the directors.
The Company's Articles currently provide that each director elected by the
shareholders may serve for a term not to exceed six years. Directors need not be
Belgian nationals, and there is no limitation on the number of terms that a
director may serve. Under Belgian law, the Board has full executive authority to
manage the affairs of the Company in the Company's interest. Pursuant to the
Company's Articles, the Board has the power to perform all acts necessary or
useful to achieve the corporate purpose, except for those reserved by law to the
general shareholders' meeting. In addition to reviewing and monitoring the
Company's business, the powers generally held by the Board include the oversight
of the Company's year-end and semi-annual accounts, the presentation of the
year-end accounts to the shareholders and the convening of general shareholders'
meetings. Under Belgian law, directors may be liable for damages to the Company
in case of improper performance of their duties. They may be liable for damages
to the Company and to third parties for infringement of the Articles or the
Belgian company law or tortuous conduct. Under certain circumstances, directors
may also be criminally liable.
EXECUTIVE OFFICERS
The Company's current executive officers and the first date as of which he
served as an executive officer are set forth below.
<TABLE>
<CAPTION>
EXECUTIVE
NAME POSITION OFFICER SINCE
---- -------- -------------
<S> <C> <C>
Francois Cornelis............................ Vice-Chairman & Managing Director -- 1984
Chemicals
Jean-Paul Vettier............................ Managing Director -- Refining & Marketing 1999
Axel de Broqueville.......................... General Manager -- Petrochemicals 1985
Wayne Brenckle............................... General Manager -- Refining 1990
Quentin de Borrekens......................... General Manager -- Polypropylene 1999
Alain Champeaux.............................. General Manager -- Marketing 1999
Francois de Ligniville....................... General Manager -- Financial Controller 1999
Refining Marketing
Jacques Denis................................ Financial Controller -- Chemicals 2000
Luc Sterckx.................................. General Manager -- Oleochemicals 2000
Alfred Mean.................................. Financial Manager 1999
Philippe Marchandise......................... Secretary to the Board 2000
</TABLE>
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
For the year ended December 31, 1999, the aggregate amount paid by the
Company for compensation of its directors and executive officers as a group
(approximately 20 persons) for services in all capacities was approximately EUR
5.0 million.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
Under Belgian law, shareholders of the Company have preferential
subscription rights, in proportion to the number of PetroFina Shares held by
them, in respect of issues of new PetroFina Shares for cash by the Company. This
preferential subscription right, however, may be either limited or removed by a
resolution passed at a general
56
<PAGE> 57
meeting of shareholders. At the general meeting of shareholders on May 10, 1996,
the Board was authorized, for a period of five years (expiring on June 22, 2001)
to limit or remove the preferential subscription rights in connection with an
increase in the Company's subscribed capital of up to EUR 372 million (BEF 15
billion) (8,055,054 PetroFina Shares). Such permission may be renewed, through a
vote at a general meeting of shareholders. The Board has removed the
preferential subscription rights with respect to the issuance of the PetroFina
Warrants and the issuance of PetroFina ADSs upon exercise of the PetroFina
Warrants.
On May 29, 1997, the Company issued warrants ("Employee Warrants") to
purchase 150,000 PetroFina Shares to its employees, including its executive
officers. The Employee Warrants have an exercise price of EUR 309.87 per
PetroFina Share and will expire on June 30, 2000. On June 30, 1998, 39,340
Employee Warrants were exercised. No Employee Warrants will be issued to any
director who is not also an executive officer of the Company. On June 30, 1999,
80,358 Employee Warrants were exercised. Thus, since the issuance, 119,698
Employee Warrants have been exercised.
On August 5, 1998, the Company issued 4,451,060 PetroFina Warrants as part
of the consideration offered in connection with the consummation of its
acquisition of Fina, Inc. Each PetroFina Warrant may be exercised to purchase
nine-tenths (0.9) of one PetroFina ADS. The PetroFina Warrants are exercisable
at any time prior to the close of business on August 5, 2003 and have an
exercise price of U.S.$42.25 per PetroFina ADS. Thus, a holder of 10 PetroFina
Warrants may purchase nine PetroFina ADSs for an aggregate purchase price of
U.S.$380.25.
As a result of the public exchange offers made by Total for PetroFina
Shares and Warrants, 4,140,500 PetroFina Warrants were exchanged for 3,353,805
U.S. TotalFina Warrants. (TotalFina issued warrants to holders of PetroFina
Warrants during the 1999 exchange offers. The TotalFina Warrants contain
substantially the same provisions as the PetroFina warrants, and are exercisable
at a price of U.S.$46.94 per warrant to purchase one TotalFina ADS). As of May
31, 2000, TotalFinaElf S.A. held 4,140,500 PetroFina Warrants and the remaining
291,806 PetroFina Warrants were held by other holders.
Other than the Employee Warrants and the PetroFina Warrants, there are no
outstanding options or warrants to acquire PetroFina Shares.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Neither any executive officer or director of the Company, nor any associate
of any such person is indebted to the Company or any of its subsidiaries.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Not applicable.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES
Not applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS
Not applicable.
ITEM 18. FINANCIAL STATEMENTS
See pages F-1 through F-41, incorporated herein by reference.
57
<PAGE> 58
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Reports of Independent Auditors............................. F-1
Consolidated Balance Sheets at December 31, 1999, 1998 and
1997...................................................... F-8
Consolidated Statements of Income for the six months ended
December 31, 1999 and June 30, 1999 and for the Years
Ended December 31, 1998 and 1997.......................... F-9
Consolidated Statements of Cash Flows for the six months
ended December 31, 1999 and June 30, 1999 and for the
Years Ended December 31, 1998 and 1997.................... F-10
Consolidated Statements of Changes in Shareholders'
Equity.................................................... F-11
Consolidated Statements of Comprehensive Income for the six
months ended December 31, 1999 and June 30, 1999 and for
the years ended December 31, 1998 and 1997................ F-12
Notes to Consolidated Financial Statements.................. F-13
Report of Independent Auditors on Schedule.................. S-1
Financial Statement Schedule................................ S-3
</TABLE>
(B) EXHIBITS
<TABLE>
<S> <C>
1. Consent of Arthur Andersen Reviseurs d'Entreprises
2. Consent of Deloitte & Touche Reviseurs d'Entreprises
3. Consent of Klynveld Peat Marwick Goerdeler Reviseurs
d'Entreprises
4. Consent of Klynveld Peat Marwick Goerdeler Reviseurs
d'Entreprises
5. Consent of KPMG Accountants N.V.
6. Consent of KPMG LLP
7. Consent of KPMG
</TABLE>
58
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 12 the Securities Exchange Act of
1934 as amended, the registrant certifies that it meets all of the requirements
for filing on Form 20-F and has duly caused this annual report to be signed on
its behalf by the undersigned, thereunder duly authorized.
PETROFINA
By: /s/ FRANCOIS CORNELIS
------------------------------------
Name: Francois Cornelis
Title: Vice Chairman and Managing
Director
By: /s/ PHILIPPE MARCHANDISE
------------------------------------
Name: Philippe Marchandise
Title: Secretary to the Board
Date: June 30, 2000
59
<PAGE> 60
LOGO
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
PetroFina S.A.:
We have audited the accompanying consolidated balance sheet of PetroFina
S.A. (a Belgian company) and subsidiaries (the Company) as of December 31, 1999,
and the related consolidated statements of income, comprehensive income, changes
in shareholders' equity and cash flows for the period from January 1, 1999 to
June 30, 1999 and the period from July 1, 1999 to December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, based on our audit, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of PetroFina S.A. and subsidiaries as of December 31, 1999, and the
results of its operations and its cash flows for the period from January 1, 1999
to June 30, 1999 and the period from July 1, 1999 to December 31, 1999 in
conformity with generally accepted accounting principles in the United States of
America.
As discussed in Notes 1 and 2 to the financial statements, Total S.A.
acquired additional PetroFina shares raising its ownership to 98.76% at June 30,
1999, in a business combination accounted for as a purchase. As a result of the
acquisition, the financial information for the period after the acquisition is
presented on a different cost basis than that for the period before the
acquisition and, therefore, is not comparable.
ARTHUR ANDERSEN
Reviseurs d'Entreprises
/s/ GUY WYGAERTS
------------------------------------------------------
Guy Wygaerts
April 7, 2000
Brussels, Belgium
F-1
<PAGE> 61
LOGO
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of
PetroFina S.A.
We have audited the accompanying consolidated balance sheets of PetroFina
S.A. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, shareholders' equity, comprehensive income
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the financial statements of certain subsidiaries which statements
reflect total assets constituting 16.8% and 45.0%, respectively, of consolidated
total assets at December 31, 1998 and 1997, and total revenues constituting
10.6% and 33.9%, respectively of consolidated total revenues for the years then
ended. Those financial statements were audited by other auditors whose reports
have been furnished to us, and our opinion, insofar as it relates to the amounts
included for such subsidiaries, before conversion to generally accepted
accounting principles in the United States, is based solely on the reports of
such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits (which include the conversion
to generally accepted accounting principles in the United States) and the
reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
such consolidated financial statements present fairly, in all material respects,
the financial position of PetroFina at December 31, 1998 and 1997 and the
results of its operations and cash flows for the years then ended in conformity
with generally accepted accounting principles in the United States.
/s/ MICHEL DENAYER
------------------------------------------------------
Michel Denayer
Deloitte & Touche Reviseurs d'Entreprises scc
Brussels, Belgium
March 23, 1999
F-2
<PAGE> 62
LOGO
INDEPENDENT AUDITORS REPORT
To the Directors of
Fina Europe NV
We have audited the balance sheets of Fina Europe NV (a 99.9 percent
subsidiary of PetroFina S.A.) as of 31 December 1998 and 1997 and related
statements of income for each of the two years in the period ended December 31,
1998 (not presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether these financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fina Europe N.V. at December
31, 1998 and 1997, and the results of its operations for the years then ended in
conformity with generally accepted accounting principles in Belgium.
Antwerp, Belgium
March 22, 1999
Klynveld Peat Marwick Goerdeler Reviseurs d'Entreprises
Represented by
/s/ L. RUYSEN
------------------------------------------------------
L. Ruysen
F-3
<PAGE> 63
LOGO
INDEPENDENT AUDITORS REPORT
To the Directors of Fina Raffinaderij Antwerpen NV
We have audited the balance sheets of Fina Raffinaderij Antwerpen NV (a
99.9 percent subsidiary of PetroFina S.A.) as of December 31 1998 and 1997 and
related statements of income for the years then ended (not presented separately
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether these financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fina Raffinaderij Antwerpen
N.V. at December 31, 1998 and 1997, and the results of its operations for the
years then ended in conformity with generally accepted accounting principles in
Belgium.
Antwerp, Belgium
March 22, 1999
Klynveld Peat Marwick Goerdeler Reviseurs d'Entreprises
Represented by
/s/ L. RUYSEN
------------------------------------------------------
L. Ruysen
F-4
<PAGE> 64
LOGO
INDEPENDENT AUDITORS' REPORT
To the Directors of PetroFina S.A.
We have audited the balance sheets of Sigma Coatings B.V. (a wholly-owned
subsidiary of PetroFina S.A.) as of December 31, 1998 and 1997 and the related
statements of income for each of two years in the period ended December 31, 1998
(not presently separately herein). These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sigma Coatings B.V. as of
December 31, 1998 and 1997, and the results of its operations for each of the
two years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles in the Netherlands.
The Hague, the Netherlands,
March 23, 1999
/s/ KPMG ACCOUNTANTS NV
------------------------------------------------------
Ref: J.F.C. van Everdingen
F-5
<PAGE> 65
LOGO
INDEPENDENT AUDITORS' REPORT
The Board of Directors Petrofina S.A.
We have audited the accompanying consolidated balance sheets of Petrofina
Delaware, Incorporated and subsidiaries (a wholly-owned subsidiary of PetroFina
S.A.) as of December 31, 1997, and the related consolidated statements of
earnings, stockholder's equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Petrofina
Delaware, Incorporated and subsidiaries as of December 31, 1997, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles in the United States.
/s/ KPMG LLP
------------------------------------------------------
Dallas, Texas
January 26, 1998
F-6
<PAGE> 66
LOGO
INDEPENDENT AUDITORS' REPORT
To the Directors of
PetroFina S.A.
We have audited the balance sheets of Brittany Insurance Company Ltd. (a
wholly-owned subsidiary of PetroFina S.A.) as of December 31, 1998 and 1997 and
related statements of income and cash flows for each of the years in the
two-year period ended December 31, 1998 (not presented separately herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brittany Insurance Company
Ltd. at December 31, 1998 and 1997 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles in the United States.
/s/ KPMG
------------------------------------------------------
Chartered Accountants
Hamilton, Bermuda
March 22, 1999
F-7
<PAGE> 67
PETROFINA
CONSOLIDATED BALANCE SHEETS
(IN EUR MILLION)
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR (NOTE 2)
(NOTE 2) ----------------
------------ AS OF
AS OF DECEMBER 31,
DECEMBER 31, ----------------
1999 1998 1997
------------ ------ ------
<S> <C> <C> <C>
FIXED ASSETS
Intangible Assets........................................... 245 65 56
Goodwill.................................................... 5,898 88 1
Tangible Assets............................................. 4,068 5,738 5,829
Financial Assets............................................ 138 213 171
Other Assets................................................ 297 320 291
------ ------ ------
10,646 6,424 6,348
CURRENT ASSETS
Stocks...................................................... 932 978 1,278
Trade Debtors............................................... 1,861 1,581 1,823
Other Debtors............................................... 196 407 301
Marketable Securities....................................... -- 179 165
Cash and Cash Equivalents................................... 2,701 66 90
------ ------ ------
5,690 3,211 3,657
Total Assets................................................ 16,336 9,635 10,005
====== ====== ======
CREDITORS AMOUNTS FALLING DUE WITHIN ONE YEAR
Finance Debt................................................ 1,100 849 748
Trade Creditors............................................. 1,345 1,102 1,306
Other Creditors............................................. 539 874 1,138
------ ------ ------
2,984 2,825 3,192
CREDITORS AMOUNTS FALLING DUE AFTER ONE YEAR
Finance Debt................................................ 411 1,609 1,487
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred Taxation........................................... 877 560 658
Other Provisions............................................ 672 658 633
------ ------ ------
1,960 2,827 2,778
Minority Interest........................................... 1 2 170
SHAREHOLDERS' EQUITY
Subscribed Capital (EUR 46.16 par value, shares issued and
outstanding: 1999 -- 23,541,786, 1998 -- 23,459,774, 1997
-- 23,420,432,)........................................... 1,087 1,083 1,081
Share Premium............................................... 10,446 676 647
Retained Earnings........................................... (41) 2,870 2,671
Accumulated Other Comprehensive Income...................... (101) (648) (534)
------ ------ ------
11,391 3,981 3,865
Total Liabilities and Shareholders' Equity.................. 16,336 9,635 10,005
====== ====== ======
</TABLE>
- The consolidated financial statements have been prepared in Belgian Francs
and translated into Euros using the fixed exchange rate of E 1.00 = BEF
40.3399 applicable since January 1, 1999. (See Note 2)
- The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 68
PETROFINA
CONSOLIDATED STATEMENTS OF INCOME
(IN EUR MILLION, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR (NOTE 2)
(NOTE 2) -------------------------------------
------------ PERIOD FROM
PERIOD FROM JANUARY 1, FOR THE
JULY 1, 1999 1999 YEARS ENDED
THROUGH THROUGH DECEMBER 31,
DECEMBER 31, JUNE 30, -----------------------
1999 1999 1998 1997
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Operating Revenue including Duties and Excise
Taxes......................................... 10,342 8,364 17,049 18,023
Earnings from Investments, Equity Interests..... 5 31 44 34
---------- ---------- ---------- ----------
Total Revenue................................... 10,347 8,395 17,093 18,057
Cost of Products Sold........................... (5,405) (3,142) (6,817) (7,828)
Other Operating Costs........................... (1,407) (841) (1,712) (1,669)
Duties and Excise Taxes......................... (2,069) (3,187) (6,277) (5,802)
Sales, General and Administrative Costs......... (378) (406) (806) (777)
Depreciation, Depletion and Amortization........ (622) (343) (731) (712)
Exploration Costs............................... (14) (31) (67) (108)
---------- ---------- ---------- ----------
OPERATING INCOME................................ 452 445 683 1,161
Interest Expense................................ (111) (106) (152) (141)
Other Financial Income, Net..................... 19 18 73 27
---------- ---------- ---------- ----------
Income before Taxes and Minority Interests...... 360 357 604 1,047
Current Income Tax.............................. (121) (80) (181) (417)
Deferred Income Tax............................. (45) (34) 49 (67)
Minority Interest............................... 0 0 (6) (16)
---------- ---------- ---------- ----------
NET INCOME...................................... 194 243 466 547
========== ========== ========== ==========
Basic Earnings per Share........................ 8.26 10.36 19.89 23.42
Diluted Earnings per Share...................... 8.25 10.29 19.88 23.42
Weighted average number of Shares used to
calculate (Basic)............................. 23,492,970 23,460,095 23,440,102 23,350,612
Weighted average number of Shares used to
calculate (Diluted)........................... 23,509,206 23,615,476 23,453,053 23,350,612
</TABLE>
- The consolidated financial statements have been prepared in Belgian Francs
and translated into Euros using the fixed exchange rate of E 1.00 = BEF
40.3399 applicable since January 1, 1999. (See Note 2)
- The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 69
PETROFINA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN EUR MILLION)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(NOTE 2) (NOTE 2)
------------ ---------------------------------
PERIOD FROM PERIOD FROM
JULY 1, 1999 JANUARY 1, 1999 YEAR ENDED
THROUGH THROUGH DECEMBER 31,
DECEMBER 31, JUNE 30, ---------------
1999 1999 1998 1997
------------ --------------- ------ ------
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income.......................................... 194 243 466 547
Minority Interest................................... -- -- 6 16
Adjustments to Reconcile Net Earnings to Net Cash
Provided by Operating Activities:
Depreciation, Depletion, and Amortization
(including exploration costs)(1)............... 709 374 798 802
Provisions for Liabilities and Charges............ (132) 54 (11) (29)
Provisions for Losses on Trade Debtors and
Stocks......................................... 160 (130) 215 14
Deferred Income Taxes............................. 44 34 (49) 67
------ ------ ------ ------
CASH FLOW........................................... 975 575 1,425 1,417
Equity in Net Income of Affiliated Companies, net
of Dividend Received........................... 22 5 (18) (6)
Gain on Sales of Assets........................... (5) (26) (72) (12)
Changes in Working Capital:
-- Trade Debtors............................... (798) 172 157 (13)
-- Stocks...................................... (452) (102) 61 (25)
-- Trade Creditors............................. 613 13 (164) 78
-- Other Creditors............................. (234) 112 (206) (94)
-- Other....................................... 135 20 (89) (8)
------ ------ ------ ------
Net Cash Provided by Operating Activities...... 256 769 1,094 1,337
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditure Including Exploration
Expenses(1)....................................... (437) (404) (1,235) (1,072)
Proceeds from Sales of Assets....................... 2,677 129 166 39
Investments in Affiliates........................... (63) (7) (21) (10)
------ ------ ------ ------
Net Cash (Used in) provided by Investing
Activities................................... 2,177 (282) (1,090) (1,043)
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to Long Term Debt......................... 58 1 403 435
Payments of Long Term Debt.......................... (64) (59) (226) (234)
Net Change in Short Term Notes Payable.............. 273 (28) 206 (282)
Warrant Exercise Proceeds........................... 25 0 31 52
Minority Interest................................... -- -- (167) --
Dividend Paid to the Minority Interest.............. -- -- (7) (13)
Dividend Paid....................................... (235) (268) (267) (231)
------ ------ ------ ------
Net Cash (Used in) provided by Financing
Activities................................... 57 (354) (27) (273)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... 2,490 133 (23) 21
Cash and Cash Equivalents at Beginning of the
period............................................ 206 66 90 68
Cash and Cash Equivalents at End of the period...... 2,701 206 66 90
Effect of Exchange Rate Changes..................... 5 7 (1) 1
------ ------ ------ ------
Net Increase (Decrease) in Cash and Cash
Equivalents....................................... 2,490 133 (23) 21
Income Taxes Paid................................... (152) (171) (331) (453)
Interest Paid....................................... (72) (100) (166) (170)
</TABLE>
---------------
(1) Includes cash exploration expenses of EUR 22 million in the First Semester
1999 ("Period from January 1, 1999 through June 30, 1999"), EUR 22 million
in the Second Semester 1999 ("Period from July 1, 1999 through December 31,
1999"), EUR 52 million in 1998 and EUR 73 million in 1997
- The consolidated financial statements have been prepared in Belgian Francs
and translated into Euros using the fixed exchange rate of E 1.00 = BEF
40.3399 applicable since January 1, 1999. (See Note 2)
- The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE> 70
PETROFINA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN EUR MILLION EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
ORDINARY SHARES ISSUED ACCUMULATED
----------------------- OTHER TOTAL
SUBSCRIBED SHARE RETAINED COMPREHENSIVE SHAREHOLDERS'
NUMBER CAPITAL PREMIUM EARNINGS INCOME EQUITY
---------- ---------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1996.................... 23,252,863 1,073 603 2,355 (684) 3,347
Warrants Exercised........................... 167,569 8 44 52
Net Income 1997.............................. 547 547
Dividend Declared and Paid
(EUR 9.92 Per Share)....................... (231) (231)
Foreign Currency Translation................. 150 150
---------- ----- ------ ------ ---- ------
BALANCE DECEMBER 31, 1997.................... 23,420,432 1,081 647 2,671 (534) 3,865
Warrants Exercised........................... 39,342 2 29 31
Net Income 1998.............................. 466 466
Dividend Declared and Paid
(EUR 11.40 Per Share)...................... (267) (267)
Foreign Currency Translation................. (107) (107)
Minimum Pension Liability Adjustment......... (7) (7)
---------- ----- ------ ------ ---- ------
BALANCE DECEMBER 31, 1998.................... 23,459,774 1,083 676 2,870 (648) 3,981
---------- ----- ------ ------ ---- ------
Warrants Exercised........................... 716 1 1
Net income of period January 1st/June 30th,
1999....................................... 243 243
Dividend Declared and Paid
(EUR 11.40 Per Share)...................... (267) (267)
Foreign Currency Translation................. 128 128
Minimum Pension Liability Adjustment.........
---------- ----- ------ ------ ---- ------
BALANCE JUNE 30TH, 1999 (PREDECESSOR)........ 23,460,490 1,083 677 2,846 (520) 4,086
---------- ----- ------ ------ ---- ------
Push down of effects of the purchase
accounting adjustments..................... 9,298 (2,846) 520 6,972
---------- ----- ------ ------ ---- ------
BALANCE JULY 1ST, 1999 (SUCCESSOR)........... 23,460,490 1,083 9,975 0 0 11,058
---------- ----- ------ ------ ---- ------
Warrants Exercised........................... 81,296 4 21 25
Net income of period July 1st/December 31st,
1999....................................... 194 194
Dividend Declared and Paid
(EUR 11.40 Per Share)...................... (235) (235)
Foreign Currency Translation................. (101) (101)
Minimum Pension Liability Adjustment.........
Effect of transfers of subsidiaries inside
TotalFina.................................. 450 450
---------- ----- ------ ------ ---- ------
BALANCE DECEMBER 31ST, 1999 (SUCCESSOR)...... 23,541,786 1,087 10,446 (41) (101) 11,391
========== ===== ====== ====== ==== ======
</TABLE>
The subscribed capital and share premium of PetroFina S.A. constitutes the
non distributable portion of Shareholders' Equity and is not available for
dividend purposes. Included in Shareholders' Equity for the Group are retained
earnings of certain subsidiary companies, under current debt covenants or
companies' acts, amounting to EUR 946 million that are not currently available
for dividend distribution within the Group at December 31, 1999.
The company has issued and outstanding 23,460,490 shares as of June 30,
1999 with aggregate subscribed capital of EUR 1,082,795,643 (EUR 46,16 per
share). The Company has issued and outstanding 23,541,786 shares as of December
31, 1999 with aggregate subscribed capital of E 1,086,548,085.
By decision of the Company's Shareholders, the Company's Board of Directors
is authorized to increase statutory capital by EUR 362,3 million (representing
7,848,226 shares).
The authorization is valid for a five-year period and available for renewal
at the end of the five year term. (Maturity 2001)
The Extraordinary General Meeting of January 4, 1999 approved the payment
of a dividend of EUR for 11.40 per share (BEF 460, USD 1.339 per ADS). This
dividend was payable January 13, 1999. An interim dividend of EUR 10 per share
was paid on October 1st, 1999.
The consolidated financial statements have been prepared in Belgian Francs
and translated into euros using the fixed exchange rate of E 1.00 = BEF 40.3399
applicable since January 1, 1999 (see Note 2).
The accompanying notes are an integral part of these consolidated
statements.
F-11
<PAGE> 71
PETROFINA
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN EUR MILLION)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(NOTE 2) (NOTE 2)
-------------- ---------------------------------
PERIOD FROM PERIOD FROM FOR THE YEARS
JULY 1, 1999 JANUARY 1, 1999 ENDED
THROUGH THROUGH DECEMBER 31,
DECEMBER 31ST, JUNE 30, --------------
1999 1999 1998 1997
-------------- --------------- ----- -----
<S> <C> <C> <C> <C>
Net Income...................................... 194 243 466 547
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments...... (101) 128 (107) 150
Minimum pension liability adjustments......... -- -- (7) --
---- --- ---- ----
Other comprehensive income (loss)............. (101) 128 (114) 150
COMPREHENSIVE INCOME............................ 93 371 352 697
</TABLE>
The consolidated financial statements have been prepared in Belgian Francs
and translated into Euros using the fixed exchange rate of E 1.00 = BEF 40.3399
applicable since January 1, 1999 (See Note 2).
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 72
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) DESCRIPTION OF BUSINESS, ORGANIZATION AND EFFECTS OF THE ACQUISITION BY
TOTALFINAELF
Petrofina S.A. ("PetroFina" or "the Group" or "the Company") is an
international integrated oil and gas company active in all sectors of the
petroleum industry: exploration and production, refining, marketing of refined
petroleum products, petrochemicals and paints. PetroFina's operations are
organized into four principal business segments: (1) Upstream (exploration,
development and production of crude oil and natural gas and marketing of natural
gas), (2) Downstream (refining, supply and trading and marketing), (3) Chemicals
and (4) Paints.
On December 1, 1998, Total SA ("Total") entered into definitive agreements
to acquire shares from five of PetroFina's largest shareholders aggregating 41%
of PetroFina's outstanding shares. Total SA, together with its subsidiaries and
affiliates, is a major international integrated oil and gas company based in
France and with operations in more than 100 countries in all segments of the
petroleum industry and specialty chemical products for industrial and consumer
use (rubber-based and automotive products, resins, inks, paints and adhesives).
Total SA also has interests in coal mining and the nuclear power, co-generation
and electricity sector. The transactions launched on December 1, 1998 were
completed on March 31, 1999, after the receipt of certain regulatory clearances
and the approval of Total's shareholders on January 14, 1999. On May 6, 1999,
Total commenced public exchange offers in Belgium and in the United States of
America for all remaining Petrofina shares, American depositary shares and
warrants. As a result of the public exchange offers, Total SA acquired
additional PetroFina shares raising its ownership to 98.76% of PetroFina's share
at the end of the first semester 1999. The effective control of PetroFina by
Total SA for accounting purposes is deemed therefore effective July 1, 1999.
After these transactions, the effective combination with Total group could
take place. Total SA's name was changed into "Total Fina SA", effective June 14,
1999. TotalFina obtained the delisting of the PetroFina shares from all the
exchanges where they were listed with the exception of the Brussels, Frankfurt
and Paris Stock exchanges. In March 2000, Total Fina SA changed its name to
"Total Fina Elf SA" following its business combination with Elf Aquitaine.
References in this Annual Report on Form 20F to Total, TotalFina or TotalFinaElf
should be understood as references to the same company.
In order to realize business synergies expected as a result of the
transactions described in this note, Total and PetroFina created an integration
committee to combine the PetroFina businesses into the TotalFina group, simplify
the structure of the new group, merge the management and operational teams,
unlock synergies and integrate the operations and administrations including the
information systems. Following the Committee's analyses and recommendations,
some operations, realized at fair market value, occurred in 1999:
- Business lease contract, leasing the Fina France business (service
stations, credit card businesses, trading of petroleum products,
lubricants and other businesses) to Total Raffinage Distribution, the
refining and marketing subsidiary of Total SA in France. Fina France
remains a subsidiary of PetroFina and will continue to own assets and
the customer goodwill receiving a fixed annual rental payment.
- Business lease contract, leasing Fina Deutschland business to Total
Deutschland, the German subsidiary of Total SA. This contract covers
similar businesses and offers similar conditions to the one of Fina
France.
- Acquisition of Total Belgique Luxembourg, the marketing subsidiary of
Total SA in Belgium and Luxembourg by PetroFina, merger of this
subsidiary with Fina Europe, marketing subsidiary of PetroFina into
TotalFina Belgium.
- Sale of Fina Nederland (and its owned affiliates) to Total Nederland and
merger of the two entities into TotalFina Nederland
- Sale of Fina Aviation Chemical (Suisse) to Air Total Suisse
- Sale of Fina Portuguesa to Total Portugal
- Sale of Fina Iberica and its owned affiliates to Total Espagne
- Sale of Fina Italiana and its attached subsidiaries to Total Italia
- Sale of American Petrofina Holding Company, owning the US affiliates of
Petrofina to Total America, Inc.
- Sale of all insurance affiliates of the PetroFina Group to the Total's
shareholding structure.
- Sale of Fina Resources to TotalFina SA.
F-13
<PAGE> 73
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements present the financial
position, results of operations and cash flows of PetroFina S.A. and its
consolidated subsidiaries (the "Group" or "PetroFina") and have been prepared in
accordance with generally accepted accounting principles in the United States of
America ("US GAAP").
The combination of PetroFina with Total SA, for US GAAP, was accounted for
under the purchase method of accounting, with all of the purchase accounting
adjustments "pushed-down" to the consolidated financial statements of PetroFina.
Due to the fact that the effective control was obtained only in June 1999, a new
basis of accounting is considered to take place on July 1st, 1999. According to
the purchase method of accounting, the purchase price was allocated to the
underlying assets and liabilities based upon their estimated fair values and the
excess to goodwill after harmonization of accounting principles used with those
of Total SA.
The nature of the adjustments have been the following:
-- harmonization of accounting principles in particular on inventory
valuation
-- push-down of restructuring costs related to the combination of the two
groups
-- restatement of the value of identifiable tangible and intangible assets
to their fair market value at the effective date of the combination
-- recognition of goodwill for the excess purchase price
The global amount related to the effect of all these adjustments has been
recorded in the shareholders' equity with effective date July 1st, 1999.
The financial statements have been prepared on a going concern with
identification of the periods before and after the effective date of the
combination. Under the columns "Predecessor", financial statements of the period
from January 1, 1999 to June 30, 1999 as well as for the years ending December
31, 1998 and 1997 are presented in consistency with the accounting practices of
PetroFina used before the combination with TotalFina. Under the columns
"Successor", financial statements as of December 31, 1999 and for the period
from July 1st, 1999 to December 31, 1999 are presented in accordance with the US
accounting principles used by the TotalFina and with effect of push-down of
purchase price in application of the purchase method of accounting. The balances
and the results of operations of the pre-acquisition period are therefore not
comparative to those of the post-acquisition period.
PetroFina's financial statements were previously presented in Belgian
francs. A Belgian Royal Decree dated December 15, 1998 permits Belgian companies
to restate financial statements in Euro (EUR). All amounts presented are in EUR
million unless otherwise indicated. All current year and comparative financial
statement amounts in this Annual Report have been restated in Euro based on the
January 1, 1999 conversion rate of 1 Belgian franc = 0.02479 Euro (1 Euro = BEF
40.3399). PetroFina's comparative financial statements in Euro depict the same
trends as would have been presented if the Group had continued to present its
financial statements in Belgian francs. PetroFina's financial statements will
not be comparable to the financial statements of other companies reporting in
Euro that have restated amounts from a currency other than Belgian francs.
Following Belgian accounting laws, the Group is obliged to prepare its
financial statements in accordance with Belgian accounting principles. Following
article 8 of the Royal Decree dated 1st September 1986 concerning annual
financial statements and consolidated financial statements, the Belgian
Commission on Banking and Finance (la Commission Bancaire et Financiere)
authorized PetroFina to depart from article 6 of the previous mentioned Royal
Decree. This departure allows PetroFina to prepare and publish the financial
statements under US GAAP.
BASIS OF CONSOLIDATION
Subsidiaries in which the Group's holdings exceed 50% are consolidated in
the financial statements, unless effective control is limited due to contractual
provisions or governmental restrictions. The Group consolidates
F-14
<PAGE> 74
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
certain jointly controlled entities in accordance with the proportionate
consolidation method. Under U.S. GAAP these companies should be accounted for
under the equity method (see note 22). All material intercompany transactions
are eliminated in consolidation.
The equity method of accounting is used for investments in which the
investment provides the Group with the ability to exercise significant influence
over the operating and financial policies of the investee company. In the
absence of other evidence, such influence is presumed to exist for investments
in companies in which the Group's direct or indirect ownership is between 20%
and 50% of total voting rights. Under the equity method, the Group's share of
profits and losses of associated companies is included in the consolidated
income statement and the carrying value of the Group's investment is adjusted.
The cost method of accounting is used for investments in which the Group's
ownership is less than 20% or for investees where the Group is unable to
exercise significant influence.
A full list of consolidated companies is available from the Public
Relations and Communication Department of PetroFina S.A., rue de l'Industrie 52,
B-1040 Brussels.
Within the context of the combination of Total and PetroFina groups, some
subsidiaries owned by PetroFina were sold/acquired between the PetroFina and the
TotalFina's shareholding structure. The sale of these subsidiaries which have
been sold by PetroFina to Total has occurred at the end of the year 1999. In the
financial statements these companies are consolidated in the profit and loss and
cash flows for the period but are excluded from the year end balance sheet.
The sale and acquisition of the subsidiaries are realized within the
context of the combination of Total and PetroFina and therefore between parties
under common control. No gains or losses are therefore recognized on these
transactions which correspond indirectly to capital contributions between parent
company and subsidiaries. These effects are included in the shareholders' equity
of Petrofina.
RECLASSIFICATION
1999's presentation has been adapted to the level of information available
within TotalFina and 1998 and 1997's financial statements have been reclassified
accordingly. Certain amounts in the 1997 and 1998 financial statements have been
reclassified to conform to the 1999 presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at the exchange rate on the date
of origin. Monetary assets and liabilities denominated in a foreign currency are
revalued at each balance sheet date for the effect of exchange rate changes
between the date of origin and settlement date. The resulting gains and losses
on revaluation are recorded in the consolidated income statement as other
financial income or expense.
TRANSLATION TO REPORTING CURRENCY
The income statements of foreign subsidiaries are translated into BEF at
the average rate of exchange prevailing during the year and translated in Euros
based on the rate of January 1st, 1999 (40.3399 BEF per Euro). Balance sheets
are translated at the exchange rate at the balance sheet date. Differences
arising on the translation of financial statements of foreign subsidiaries are
recorded in shareholders' equity as foreign currency translation.
Exchange rate differences attributable to loans and forward exchange
agreements in foreign currencies that are designated as a hedge of the net
assets of a foreign subsidiary are recorded directly to shareholders' equity,
together with the corresponding translation difference on the hedged net assets.
F-15
<PAGE> 75
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
DERIVATIVE FINANCIAL INSTRUMENTS
PetroFina manages risk arising from fluctuations in interest rates and
currency exchange rates by using derivative financial instruments, and risks
from fluctuations in the price of crude oil, refined products, and natural gas
by using derivative commodity instruments. PetroFina does not enter into
derivative instruments for speculative trading purposes.
PetroFina's derivative financial instruments can include interest rate
swaps, currency swaps, and foreign exchange forward contracts. The interest rate
swaps are accounted for under the accrual basis of accounting. The foreign
exchange forward contracts and currency swaps are recorded at cost and adjusted
for changes in the spot exchange rates at the reporting date. With respect to
derivative commodity instruments, PetroFina currently enters into crude oil and
refined product futures and forwards and natural gas futures.
Interest rate swap agreements are used by PetroFina to manage its interest
costs and reduce interest rate risk by managing the overall mix of fixed and
floating rate debt. PetroFina is able to modify the interest characteristics of
its debt portfolio (fixed versus floating rate basis). Interest differentials
are recorded on an accrual basis as an adjustment to interest expense and
interest payable.
Currency swaps and foreign exchange forward contracts are used by PetroFina
to manage funding costs and its exposure to fluctuations in foreign currency
denominated receivables and payables. This activity is intended to protect
PetroFina cash flows from adverse short term fluctuations in foreign currencies.
Gains and losses attributable to these contracts resulting from changes in
exchange rates are accrued in other current receivables/liabilities and
recognized as an adjustment to other financial income and expense in the period
in which the change occurs.
Crude oil and refined products futures and forwards are used to minimize
price risks related to the supply and sale of these products, respectively. Any
realized or unrealized changes in fair value are accrued in other current
receivables/liabilities and recognized as a component of operating expenses in
the period in which the change occurs.
Natural gas futures are used to hedge designated equity production. Gains
and losses on these qualifying hedges are deferred and included in the
measurement of the related transaction, in the month of production.
Derivative instruments are either exchange-traded or with counterparties of
high credit quality. Therefore the risk of nonperformance by the counterparties
is considered to be negligible.
CASH AND CASH EQUIVALENTS
The Group considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
MARKETABLE SECURITIES
The Group's investments in marketable securities are classified as
"trading" and are recorded at fair value. Changes in fair value, both unrealized
gains and unrealized losses, are recognized in each period's income statement.
STOCKS
Inventories are valued at the lower of cost or net realizable value. For
the period referred to as "Predecessor", crude feedstock, finished petroleum
products and chemical products inventories are valued according to the LIFO
method (last in/first out). All other inventories are valued at the lower of
average cost (which approximates cost on a first in/first out basis) or net
realizable value. The costs of finished products include raw material costs,
direct costs and related production overhead costs but exclude any interest
charges. Net realizable value is defined as the estimated selling price (in the
normal course of business) of an inventory item less the costs of completion and
selling expenses.
For the period referred to as "Successor", inventories are valued in
accordance with TotalFina's US accounting principles, i.e. according to the FIFO
method (first in, first out), for crude oil and refined products inventories and
according to weighted average basis for other inventories.
F-16
<PAGE> 76
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
TANGIBLE ASSETS
Cost
PetroFina follows the "successful efforts" method of accounting for the
cost of oil and gas exploration and production operations.
Lease acquisition costs related to properties held for oil, gas and mineral
exploration and production are capitalized when incurred. Unproved properties
with acquisition costs which are individually significant are assessed on a
property-by-property basis, and a loss is recognized, by provision of a
valuation allowance, when the assessment indicates an impairment in value.
Unproved properties with acquisition costs which are not individually
significant are generally aggregated and the portion of such costs estimated to
be non productive, based on historical experience, is amortized on an average
holding period basis.
Exploratory costs, excluding the costs of exploratory wells, are charged to
expense as incurred. Costs of drilling exploratory wells, including
stratigraphic test wells, are capitalized pending determination whether the
wells have found proved reserves which justify commercial development. If such
reserves are not found within one year or the Group has not commenced or
committed to additional drilling, the drilling costs are charged to exploration
expenses. All development costs related to proved oil and gas reserves are
capitalized. Interest is capitalized as a component of the cost of construction
for development projects in progress. Normal maintenance and repairs are charged
to expense as incurred. Renewals, improvements and major repairs that extend the
useful life or productivity of PP&E are capitalized and the assets replaced, if
any, are retired.
Impairment and Depreciation
For purposes of determining and recognizing impairment of long-lived
assets, the applicable carrying value is evaluated against the undiscounted
projection of net future pre-tax cash flows. The applicable grouping of assets
are based on the lowest practicable levels of identifiable cash flows,
consistent with the manner in which those assets are managed. If an impairment
exists, the carrying value is adjusted to the estimated fair value.
Assets to be disposed of are carried at the lower of amortized cost or fair
value less cost to sell.
The capitalized costs related to producing activities, including tangible
and intangible costs, are amortized by field on the unit-of-production basis by
applying the ratio of produced oil and gas during the period to beginning of the
period proved developed oil and gas reserves. Estimated future restoration and
abandonment costs are accrued each period based on the associated
unit-of-production rate.
Depreciation of Property, Plant and Equipment related to facilities other
than producing properties is provided using the straight-line method, over the
asset's estimated useful life. Typical useful lives of facilities are as
follows:
<TABLE>
<S> <C>
-- machinery & equipment......................... 10 to 20 years
-- buildings..................................... 20 years
-- other......................................... 3 to 5 years
</TABLE>
Due to purchase accounting applied as a result of the combination, some
tangible assets have been accordingly restated to reflect their fair market
value at the effective date of the acquisition, i.e on July 1st , 1999. Under
the new basis of accounting, depreciation is calculated on the associated
unit-of-production rate for the upstream assets and on the straight-line method
based on the asset's estimated useful life for the other segments of activities.
INTANGIBLE ASSETS
Intangible assets primarily consist of goodwill, patents, trademarks,
licenses and capitalized software development costs for internal use. Intangible
assets are depreciated over their estimated economic life, ranging from 5 years
to 20 years.
The combination between Total SA and PetroFina has been accounted for under
the purchase method of accounting and all adjustments have been pushed-down into
the financial statements of PetroFina. Some
F-17
<PAGE> 77
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
identified intangible assets have been restated to reflect their fair market
value at July 1st, 1999. Depreciation is calculated on a straight line method
based on the asset's estimated useful life.
The excess goodwill related to the acquisition by Total of PetroFina is
also pushed-down into the financial statements of PetroFina and is amortized
over 30 years beginning July 1, 1999.
ENVIRONMENTAL EXPENDITURES
The estimated future costs for known environmental remediation requirements
are accrued when it is probable that a liability has been incurred and the
amount of remediation costs can be reasonably estimated. These amounts are the
undiscounted, future estimated costs under existing regulatory requirements and
using existing technology. Other environmental expenditures, principally
maintenance or preventive in nature, are recorded when expended and are expensed
or capitalized as appropriate.
INCOME TAXES
Income taxes are accounted for pursuant to the liability method. Under the
liability method, deferred tax assets and liabilities are measured as the tax
effected value of differences between the carrying values of assets and
liabilities for financial reporting and their tax basis. Deferred income tax
expense is the change during the year in the deferred tax assets and
liabilities. Effects of changes in tax laws and tax rates are recognized at the
date the tax law changes are enacted. Deferred taxes are not provided on
undistributed earnings of most subsidiaries as such earnings are deemed to be
indefinitely reinvested. A valuation allowance is recorded when necessary to
reduce deferred tax assets to the amount that is more likely than not to be
realized.
REVENUE RECOGNITION
Oil and gas sales are inclusive of production royalties paid in cash. Crude
oil and petroleum products trading activities are recorded in Sales and Costs of
sales when physical delivery takes place. Exchanges of crude oil and petroleum
products involving other oil companies are excluded from sales.
The Group uses the entitlement method for recording natural gas sales
revenues. Under the entitlement method, revenue is based on the Group's net
working interest in field production. Deliveries of natural gas in excess of the
company's working interest are recorded as liabilities while under-deliveries
are recorded as assets. Such differences are temporary in nature and have been
insignificant.
EARNINGS PER SHARE
Earnings per share has been calculated on the basis of net income divided
by the weighted average number of shares of common stock outstanding during each
period. When dilutive, stock warrants are included in dilutive earnings per
share.
COMPREHENSIVE LOSS
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for the reporting and display of comprehensive
income and its components in general purpose financial statements for the six
month periods ended December 31, 1999 and June 30, 1999 and the years ended
December 31, 1998 and 1997. This standard defines comprehensive income as the
changes in equity of an enterprise except those resulting from shareholder
transactions. Components of comprehensive income are detailed on the
Consolidated Statements of Comprehensive Income.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," SFAS
No. 133 establishes methods of accounting for derivative financial instruments
and hedging activities related to those instruments as well as other hedging
activities. The Company has not assessed the impact on its financial position,
results of operations or cash flows of adopting SFAS No. 133. The Company will
be required to implement SFAS No. 133, as amended by SFAS No. 137 for its fiscal
year ending December 31, 2001.
F-18
<PAGE> 78
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(3) SEGMENT DATA
The Group is a fully integrated energy company. The Group's principal lines
of business are crude oil and natural gas exploration and production and natural
gas marketing ("Upstream"), petroleum products refining, supply and
transportation and marketing ("Downstream"), chemicals manufacturing and
marketing ("Chemicals") and paint manufacturing and marketing ("Paints"). The
Group sells refined products in both the wholesale and retail markets. Natural
gas is sold primarily to marketers. Chemical products are primarily sold to
manufacturers of fiber, film, packaging and consumable products. Raw materials
are readily available and the Group is not dependent upon a single or limited
number of suppliers.
The majority of the Group inter-segment transactions are priced at market.
F-19
<PAGE> 79
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(IN EUR MILLION)
Information regarding the Group's industry and geographic segments are as
follows:
<TABLE>
<CAPTION>
PERIOD FROM JULY 1ST TO DECEMBER 31, 1999 (SUCCESSOR)
-----------------------------------------------------------------
UPSTREAM DOWNSTREAM CHEMICALS PAINTS OTHER CONSOLIDATED
-------- ---------- --------- ------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
EUROPE(1)
Operating Revenue............... 534 6,673 886 362 68 8,523
Inter-segment................... (15) (287) (43) 0 (46) (391)
Operating Revenue from Non
Affiliates................... 519 6,386 843 362 22 8,132
Equity in Net Income of Affiliated
Companies....................... 11 5 1 0 (11) 6
Operating Income.................. 200 261 (30) 1 (50) 382
Identifiable Assets............... 2,175 3,518 836 861 8,946 16,336
Depreciation, Depletion and
Amortization.................... (109) (102) (36) (19) (119) (385)
Exploration Expenses.............. (10) 0 0 0 0 (10)
Capital Expenditures.............. 121 83 93 8 9 314
NORTH AMERICA
Operating Revenue............... 128 1,417 754 0 18 2,317
Inter-segment................... 35 (122) (20) 0 0 (107)
Operating Revenue from Non
Affiliates................... 163 1,295 734 0 18 2,210
Equity in Net Income/(Loss) of
Affiliated Companies............ 0 (1) 0 0 0 (1)
Operating Income/(Loss)........... (50) 22 59 0 38 69
Identifiable Assets............... 0 0 0 0 0 0
Depreciation, Depletion and
Amortization.................... (149) (38) (55) 0 5 (237)
Exploration Expenses.............. (4) 0 0 0 0 (4)
Capital Expenditures.............. 63 (55) 175 0 3 186
CONSOLIDATED
Operating Revenue............... 662 8,090 1,640 362 86 10,840
Inter-segment................... 20 (409) (63) 0 (46) (498)
Operating Revenue from Non
Affiliates................... 682 7,681 1,577 362 40 10,342
Equity in Net Income of Affiliated
Companies....................... 11 4 1 0 (11) 5
Operating Income/(Loss)........... 150 284 29 1 (12) 452
Identifiable Assets............... 2,175 3,518 836 861 8,946 16,336
Depreciation, Depletion and
Amortization.................... (258) (140) (91) (19) (114) (622)
Exploration Expenses.............. (14) 0 0 0 0 (14)
Capital Expenditures.............. 184 28 268 8 12 500
</TABLE>
---------------
(1) Europe includes Europe and other parts of the world outside North America
for Upstream, Downstream and Other segments. Other parts of the world
represent less than 1% of the operating revenues, profit, and total assets
of the respective segment.
F-20
<PAGE> 80
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(IN EUR MILLION)
Information regarding the Group's industry and geographic segments are as
follows:
<TABLE>
<CAPTION>
PERIOD FROM JANUARY 1ST, TO JUNE 30, 1999 (PREDECESSOR)
-----------------------------------------------------------------
UPSTREAM DOWNSTREAM CHEMICALS PAINTS OTHER CONSOLIDATED
-------- ---------- --------- ------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
EUROPE(1)
Operating Revenue................ 381 5,534 539 394 20 6,868
Inter-segment.................... (225) (144) (35) 0 0 (404)
Operating Revenue from Non
Affiliates.................... 156 5,390 504 394 20 6,464
Equity in Net Income of Affiliated
Companies........................ 11 5 0 0 16 32
Operating Income................... 114 62 123 34 (19) 314
Depreciation, Depletion and
Amortization..................... (85) (102) (38) (11) (5) (241)
Exploration Expenses............... (23) (23)
Capital Expenditures............... 121 133 24 9 4 291
NORTH AMERICA
Operating Revenue................ 518 1,015 470 0 1 2,004
Inter-segment.................... (69) (24) (11) 0 0 (104)
Operating Revenue from Non
Affiliates.................... 449 991 459 0 1 1,900
Equity in Net Income/(Loss) of
Affiliated Companies............. 0 (1) 0 0 0 (1)
Operating Income/(Loss)............ 16 46 95 0 (26) 131
Depreciation, Depletion and
Amortization..................... (43) (28) (26) 0 (5) (102)
Exploration Expenses............... (8) (8)
Capital Expenditures............... 42 68 6 0 4 120
CONSOLIDATED
Operating Revenue................ 899 6,549 1,009 394 21 8,872
Inter-segment.................... (294) (168) (46) 0 0 (508)
Operating Revenue from Non
Affiliates.................... 605 6,381 963 394 21 8,364
Equity in Net Income of Affiliated
Companies........................ 11 4 0 0 16 31
Operating Income/(Loss)............ 130 108 218 34 (45) 445
Depreciation, Depletion and
Amortization..................... (128) (130) (64) (11) (10) (343)
Exploration Expenses............... (31) (31)
Capital Expenditures............... 163 201 30 9 8 411
</TABLE>
---------------
(1) Europe includes Europe and other parts of the world outside North America
for Upstream, Downstream and Other segments. Other parts of the world
represent less than 1% of the operating revenues, profit, and total assets
of the respective segment.
F-21
<PAGE> 81
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(IN EUR MILLION)
Information regarding the Group's industry and geographic segments are as
follows:
<TABLE>
<CAPTION>
PREDECESSOR 1998
-----------------------------------------------------------------
UPSTREAM DOWNSTREAM CHEMICALS PAINTS OTHER CONSOLIDATED
-------- ---------- --------- ------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
EUROPE(1)
Operating Revenue................ 910 10,977 1,189 780 42 13,898
Inter-segment.................... (471) (286) (87) -- -- (844)
Operating Revenue from Non
Affiliates.................... 439 10,691 1,102 780 42 13,054
Equity in Net Income of Affiliated
Companies........................ 15 16 1 -- 11 43
Operating Income................... 254 181 119 45 22 621
Identifiable Assets................ 1,585 3,288 909 501 494 6,777
Depreciation, Depletion and
Amortization..................... (242) (202) (77) (22) (11) (554)
Exploration Expenses............... (52) -- -- -- -- (52)
Capital Expenditures............... 367 207 87 38 21 720
NORTH AMERICA
Operating Revenue................ 1,282 2,109 793 -- -- 4,184
Inter-segment.................... (116) (59) (14) -- -- (189)
Operating Revenue from Non
Affiliates.................... 1,166 2,050 779 -- -- 3,995
Equity in Net Income/(Loss) of
Affiliated Companies............. 1 -- (1) -- 1 1
Operating Income/(Loss)............ 40 (19) 65 -- (24) 62
Identifiable Assets................ 803 1,021 861 -- 173 2,858
Depreciation, Depletion and
Amortization..................... (76) (57) (34) -- (10) (177)
Exploration Expenses............... (15) -- -- -- -- (15)
Capital Expenditures............... 167 74 190 -- 105 536
CONSOLIDATED
Operating Revenue................ 2,192 13,086 1,982 780 42 18,082
Inter-segment.................... (587) (345) (101) -- -- (1,033)
Operating Revenue from Non
Affiliates.................... 1,605 12,741 1,881 780 42 17,049
Equity in Net Income of Affiliated
Companies........................ 16 16 -- -- 12 44
Operating Income/(Loss)............ 294 162 184 45 (2) 683
Identifiable Assets................ 2,388 4,309 1,770 501 667 9,635
Depreciation, Depletion and
Amortization..................... (318) (259) (111) (22) (21) (731)
Exploration Expenses............... (67) -- -- -- -- (67)
Capital Expenditures............... 534 281 277 38 126 1,256
</TABLE>
---------------
(1) Europe includes Europe and other parts of the world outside North America
for Upstream, Downstream and Other segments. Other parts of the world
represent less than 1% of the operating revenues, profit, and total assets
of the respective segment.
F-22
<PAGE> 82
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(IN EUR MILLION)
<TABLE>
<CAPTION>
PREDECESSOR 1997
-----------------------------------------------------------------
UPSTREAM DOWNSTREAM CHEMICALS PAINTS OTHER CONSOLIDATED
-------- ---------- --------- ------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
EUROPE(1)
Operating Revenue................ 1,216 11,468 1,381 780 11 14,856
Inter-segment.................... (737) (330) (112) -- -- (1,179)
Operating Revenue from Non
Affiliates.................... 479 11,138 1,269 780 11 13,677
Equity in Net Income (Loss) of
Affiliated Companies............. 17 18 (4) 1 1 33
Operating Income/(Loss)............ 579 234 151 40 (41) 963
Identifiable Assets................ 1,620 3,605 930 488 421 7,064
Depreciation, Depletion and
Amortization..................... (205) (214) (80) (23) (12) (534)
Exploration Expenses............... (55) -- -- -- -- (55)
Capital Expenditures............... 378 208 80 25 6 697
NORTH AMERICA
Operating Revenue................ 972 2,710 931 -- 1 4,614
Inter-segment.................... (163) (90) (15) -- -- (268)
Operating Revenue from Non
Affiliates.................... 809 2,620 916 -- 1 4,346
Equity in Net Income (Loss) of
Affiliated Companies............. 2 -- (1) -- -- 1
Operating Income/(Loss)............ 48 64 108 -- (22) 198
Identifiable Assets................ 752 1,230 766 -- 193 2,941
Depreciation, Depletion and
Amortization..................... (86) (55) (30) -- (7) (178)
Exploration Expenses............... (53) -- -- -- -- (53)
Capital Expenditures............... 193 42 143 7 385
CONSOLIDATED
Operating Revenue................ 2,188 14,178 2,312 780 12 19,470
Inter-segment.................... (900) (420) (127) -- -- (1,447)
Operating Revenue from Non
Affiliates.................... 1,288 13,758 2,185 780 12 18,023
Equity in Net Income (Loss) of
Affiliated Companies............. 19 18 (5) 1 1 34
Operating Income/(Loss)............ 627 298 259 40 (63) 1,161
Identifiable Assets................ 2,372 4,835 1,696 488 614 10,005
Depreciation, Depletion and
Amortization..................... (291) (269) (110) (23) (19) (712)
Exploration Expenses............... (108) -- -- -- -- (108)
Capital Expenditures............... 571 250 223 25 13 1,082
</TABLE>
---------------
(1) Europe includes Europe and other parts of the world outside North America
for Upstream, Downstream and Other segments. Other parts of the world
represent less than 1% of the operating revenues, profit, and total assets
of the respective segment.
(4) RESEARCH AND DEVELOPMENT COSTS
Research and development costs incurred and expensed amounted to EUR 78
million in 1999, EUR 78 million in 1998 and EUR 80 million in 1997.
F-23
<PAGE> 83
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(5) INTANGIBLE ASSETS AND GOODWILL
A summary of intangible assets and goodwill follows:
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR ----------------
------------ AS OF
AS OF DECEMBER 31,
DECEMBER 31, ----------------
1999 1998 1997
------------ ------ ------
<S> <C> <C> <C>
Patents & licenses......................................... 29 71 68
Customer goodwill.......................................... 60 66 62
Other intangible assets.................................... 290 83 95
------ ------ ------
379 220 225
Accumulated amortization................................... (134) (155) (169)
------ ------ ------
245 65 56
GOODWILL(1)................................................ 6,010 156 68
Accumulated amortization................................... (112) (68) (67)
------ ------ ------
5,898 88 1
====== ====== ======
</TABLE>
---------------
(1) In 1999, this line includes the goodwill recognized in the purchase method
of accounting related to the acquisition by Total of PetroFina.
(6) TANGIBLE ASSETS
A summary of tangible assets follows:
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR ----------------
------------ AS OF
AS OF DECEMBER 31,
DECEMBER 31, ----------------
1999 1998 1997
------------ ------ ------
<S> <C> <C> <C>
Land & buildings........................................... 288 1,105 1,194
Plant & equipment.......................................... 7,283 6,332 6,004
Proved oil & gas properties................................ 1,157 4,578 4,175
Unproved oil & gas properties.............................. 42 406 444
Other tangible assets...................................... 887 314 323
Assets under construction.................................. 633 337 827
------ ------ ------
10,290 13,072 12,967
Accumulated depreciation, depletion and amortization....... (6,222) (7,334) (7,138)
------ ------ ------
4,068 5,738 5,829
====== ====== ======
</TABLE>
Capitalized interest included in capital expenditures amounted to EUR 21
million in 1999, to EUR 55 million in 1998 and to EUR 40 million in 1997
(7) FINANCIAL ASSETS
A summary of financial assets follows:
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR -------------
------------ AS OF
AS OF DECEMBER 31,
DECEMBER 31, -------------
1999 1998 1997
------------ ---- -----
<S> <C> <C> <C>
Companies accounted for under equity method................. 95 165 130
Other companies............................................. 43 41 33
Loans....................................................... -- 7 8
--- --- ---
138 213 171
=== === ===
</TABLE>
F-24
<PAGE> 84
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(8) OTHER ASSETS
A summary of Other Assets follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
Deferred tax assets, net.................................... 73 56 38
Other long term receivables................................. 224 264 253
----- ----- -----
297 320 291
===== ===== =====
</TABLE>
(9) STOCKS
A summary of Stocks follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
-- Petroleum products....................................... 600 445 701
-- Chemicals products and paints............................ 260 370 407
-- Other products and materials............................. 72 163 170
----- ----- -----
932 978 1,278
===== ===== =====
</TABLE>
The carrying value of petroleum and chemical products inventories is
accounted for using the LIFO method in 1998 and 1997 and is accounted for the
FIFO method in 1999 (in accordance with method used by TotalFina for US GAAP
presentation).
(10) TRADE DEBTORS
A summary of Trade Debtors follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
Trade debtors............................................... 1,914 1,651 1,892
Write-downs on debtors...................................... (53) (70) (69)
----- ----- -----
1,861 1,581 1,823
===== ===== =====
</TABLE>
(11) OTHER DEBTORS
A summary of Other Debtors follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
Taxes and withholding taxes to be recovered................. 46 95 57
Deferred tax assets, net.................................... 13 39 71
Prepayments and accrued income.............................. 29 88 78
Others...................................................... 108 185 95
----- ----- -----
196 407 301
===== ===== =====
</TABLE>
F-25
<PAGE> 85
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(12) OTHER CREDITORS
A summary of Other Creditors follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
Excises duties and taxes.................................... 298 435 636
Salary and social benefits.................................. 65 83 91
Accrued expenses and deferred income........................ 52 143 138
Other Creditors............................................. 124 213 273
----- ----- -----
539 874 1,138
===== ===== =====
</TABLE>
(13) CURRENT AND LONG TERM FINANCIAL DEBT
A summary of Current and Long Term Financial Debt follows:
SHORT TERM BORROWINGS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
Bank Obligations............................................ 823 433 597
Commercial Paper............................................ 0 343 39
----- ----- -----
823 776 636
Current portion of Long Term Debt........................... 277 73 112
----- ----- -----
1,100 849 748
===== ===== =====
</TABLE>
Weighted average interest rates on outstanding borrowings at December 31,
1999, 1998 and 1997 were 6.2%, 6.0% and 6.3%, respectively.
LONG TERM BORROWINGS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
Bonds and Notes (rates from 4.2% to 9.0% maturing through
2000)..................................................... 233 514 580
Bank Obligations (rates from 0% to 10.7% maturing through
2012)..................................................... 454 1,159 985
Capital Lease Obligations................................... 1 9 34
----- ----- -----
688 1,682 1,599
Less current portion........................................ (277) (73) (112)
----- ----- -----
411 1,609 1,487
===== ===== =====
</TABLE>
The decrease of long term borrowings is mainly due to the sale of American
PetroFina Holding Company.
F-26
<PAGE> 86
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
LONG TERM BORROWINGS BY CURRENCY
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ --------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, --------------
1999 1998 1997
------------ ----- -----
<S> <C> <C> <C>
Excludes the effects of currency swap transactions
US Dollars.................................................. 428 1,329 1,220
EUR......................................................... 258 339 343
Other currencies............................................ 2 14 36
----- ----- -----
688 1,682 1,599
===== ===== =====
</TABLE>
As of December 31, 1999 the Group had committed and unused credit
facilities with various banks in various currencies totaling EUR 1,138 million.
Commitment fees associated with these credit facilities range from 0.07% to
0.20% on undrawn amounts.
Fixed and variable rate debt is borrowed in the most cost-effective means
to manage risk arising from fluctuations in interests rates.
The aggregate maturities of long term borrowings are as follows: 2000 EUR
277 million -- 2001 EUR 46 million -- 2002 EUR 40 million -- 2003 EUR 49 million
-- 2004 EUR 48 million and later EUR 228 million.
No material amounts of current or long term debt are collateralized with
assets of the Group.
(14) FINANCIAL INSTRUMENTS
Amounts related to PetroFina's financial instruments were as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------------ ---------------------------------------
AS OF DECEMBER 31, AS OF DECEMBER 31, AS OF DECEMBER 31,
1999 1998 1997
------------------ ------------------ ------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET FINANCIAL INSTRUMENTS:
Marketable securities.................... -- -- 179 179 165 165
Long term debt........................... 688 711 1,682 1,726 1,599 1,641
DERIVATIVE INSTRUMENTS:
Interest rate swaps...................... -- -- (7) (29) (5) (19)
Long term currency swaps................. -- (2) (1) (3) (2) (3)
Short term forward foreign exchange
contracts.............................. -- 3 1 1 3 3
Commodity contracts...................... -- 9 6 6 -- --
</TABLE>
As of December 31, 1999, the Group has no interest rate swap position. The
interest rate swaps disclosed in the December 31, 1998 financial statements were
booked in PetroFina's US subsidiary; as of December 31, 1999, this subsidiary is
no longer included in the consolidation scope.
For the periods ended December 31, 1999, 1998 and 1997, PetroFina had
forward foreign exchange buy contracts and short term currency swaps of EUR 426
million, EUR 667 million and EUR 1,220 million respectively, principally
denominated in US dollar, Norwegian krone and British pound, and sell contracts
of EUR 422 million, EUR 668 million and EUR 1,220 million respectively,
principally denominated in Norwegian krone, British pound and Euro.
Also for the periods ended December 31, 1999, 1998 and 1997, the Company
had crude oil and refined products futures, forward buy contracts and fixed
price buying swaps for notional amounts of EUR 56 million, EUR 117 million and
EUR 37 million, respectively; and fixed price selling swaps and forward sell
contracts of notional amounts of EUR 237 million, EUR 85 million and EUR 57
million, respectively. These contracts are recorded at fair value.
F-27
<PAGE> 87
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
The carrying value of cash and cash equivalents, accounts receivable, and
accounts payable approximated their fair values due to the short term maturities
of these instruments. The estimated fair values of other financial instruments,
including debt and risk management instruments summarized above, have been
determined using available market information and valuation methodologies,
primarily discounted cash flow analysis.
(15) INCOME TAXES
Current tax expense for 1999, 1998 and 1997 was EUR 201 million, EUR 181
million and EUR 417 million, respectively. Deferred tax expense for 1999, 1998
and 1997 was EUR 79 million, EUR (49) million and EUR 67 million, respectively.
The components of deferred income tax expense for each year were as
follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------------- -----------------------------------
FOR THE YEAR
FOR THE PERIOD FOR THE PERIOD ENDED
FROM JULY 1ST, FROM JANUARY 1ST, DECEMBER 31,
TO DECEMBER 31, TO JUNE 30TH, --------------
1999 1999 1998 1997
--------------- ----------------- ----- -----
<S> <C> <C> <C> <C>
Deferred tax expense, excluding items
below..................................... (17) 56 (83) 86
Benefits of tax loss carryforwards.......... 40 6 31 25
Effect of foreign tax rate changes.......... -- -- 1 (31)
Net change in valuation allowance........... 22 (28) 2 (13)
----- ----- ----- -----
Deferred income tax expense................. 45 34 (49) 67
===== ===== ===== =====
</TABLE>
Actual total income tax expense differs from the expected income tax
expense using the Belgian statutory income tax rate as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------------- -----------------------------------
FOR THE YEAR
FOR THE PERIOD FOR THE PERIOD ENDED
FROM JULY 1ST FROM JANUARY 1ST, DECEMBER 31,
TO DECEMBER 31, TO JUNE 30TH, --------------
1999 1999 1998 1997
--------------- ----------------- ----- -----
<S> <C> <C> <C> <C>
Income before tax and minority interest..... 360 357 604 1,047
Expected income tax at statutory tax rate of
40.17%.................................... 147 143 243 421
-- foreign tax rate differences............. 77 15 72 171
-- uplift benefit(1)........................ (13) (1) (45) (28)
-- non deductible expenses.................. 13 2 11 25
-- tax free income.......................... (78) (22) (69) (55)
-- change in valuation allowance............ 22 (28) 2 (13)
-- effect of foreign tax rate changes(2).... -- -- 1 (31)
-- capital losses........................... 1 (1) (68) --
-- other.................................... (3) 6 (15) (6)
----- ----- ----- -----
Total income tax expense.................... 166 114 132 484
===== ===== ===== =====
</TABLE>
---------------
(1) Uplift is a special deduction allowed against revenues from oil and gas
activities on the Norwegian continental shelf.
(2) Effect primarily of tax rates reduction in the U.K. and in Italy in 1997.
F-28
<PAGE> 88
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
The deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ ---------------
AS OF
AS OF DECEMBER 31,
DECEMBER 31, ---------------
1999 1998 1997
------------ ----- ------
<S> <C> <C> <C>
Deferred income tax assets:
-- tax loss carryforwards................................. 100 210 205
-- deferred uplift(1)..................................... 63 60 58
-- provisions and accrued liabilities..................... 103 102 52
-- investment deductions.................................. 11 12 9
-- AMT credits(2)......................................... 0 174 118
-- other.................................................. 74 24 13
Valuation allowance......................................... (64) (159) (169)
------ ----- ------
Net deferred income tax assets.............................. 287 423 286
Deferred income tax liabilities:
-- PP&E related(3)........................................ (619) (777) (736)
-- untaxed reserves....................................... (459) (116) (125)
------ ----- ------
Total deferred income tax liabilities....................... (1078) (893) (861)
------ ----- ------
Net deferred income tax liability........................... (791) (470) (575)
</TABLE>
---------------
(1) Uplift is a special deduction allowed against revenues from oil and gas
activities on the Norwegian continental shelf.
(2) AMT credits relate to the alternative minimum tax system in the United
States and are credit carryforwards available to reduce future regular
income taxes.
(3) Primarily related to depreciation and depletion rate differences.
At the end of 1999, PetroFina had tax loss carryforwards of EUR 273 million
primarily in Belgium, France, Germany and the UK. Carryforward amounts (which
are not rate effected) expire as follows:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1999
------------
<S> <C>
2000....................................................... 16
2001....................................................... 64
2002....................................................... 2
2003....................................................... 0
After 2003................................................. 1
Without expiration......................................... 190
---
273
===
</TABLE>
(16) STATEMENT OF INCOME
A) PERSONNEL COSTS
<TABLE>
<CAPTION>
PROPORTIONAL
FULL CONSOLIDATION CONSOLIDATION TOTAL
------------------------ ------------------------ ------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------ ------ ------ ------
(NUMBER OF EMPLOYEES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Personnel employed (average)
Employees........................... 8,105 9,327 9,837 768 702 725 8,873 10,029 10,562
Management.......................... 3,276 4,166 3,878 235 294 235 3,511 4,460 4,113
------ ------ ------ ------ ------ ------ ------ ------ ------
11,381 13,493 13,715 1,003 996 960 12,384 14,489 14,675
(IN EUR MILLION)
2. Personnel costs
Salaries & social benefits(1)....... 718 721 704 60 59 62 778 780 766
</TABLE>
F-29
<PAGE> 89
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
B) INTEREST EXPENSES
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------------- ---------------------------------
FOR THE
FOR THE PERIOD FOR THE PERIOD YEAR ENDED
FROM JULY 1ST, FROM JANUARY 1ST, DECEMBER 31,
TO DECEMBER 31, TO JUNE 30TH, -------------
1999 1999 1998 1997
--------------- ----------------- ----- -----
<S> <C> <C> <C> <C>
Interest expense and other financial costs........ (123) (115) (207) (181)
Capitalized interest relating to assets under
construction.................................... 12 9 55 40
---- ---- ---- ----
(111) (106) (152) (141)
==== ==== ==== ====
</TABLE>
C) OTHER FINANCIAL INCOME
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------------- ---------------------------------
FOR THE
FOR THE PERIOD FOR THE PERIOD YEAR ENDED
FROM JULY 1ST, FROM JANUARY 1ST, DECEMBER 31,
TO DECEMBER 31, TO JUNE 30TH, -------------
1999 1999 1998 1997
--------------- ----------------- ----- -----
<S> <C> <C> <C> <C>
Financial income................................. 28 31 65 37
Exchange rate gain (loss), net................... (9) (13) 8 (10)
---- ---- ---- ----
19 18 73 27
==== ==== ==== ====
</TABLE>
(17) COMMITMENTS
LEASE EXPENSE
PetroFina occupies certain marketing and production facilities and uses
certain equipment under leasing arrangements. Total rental expense incurred was
EUR 15 million for the first Semester 1999 and EUR 15 million for the second
Semester 1999, EUR 139 million and EUR 134 million for 1998 and 1997,
respectively. Future minimum rental commitments as at December 31, 1999, under
operating leases having non cancelable lease terms in excess of one year are
detailed in the following schedule. Sublease rentals, contingent rentals, and
capital lease obligations are not significant.
<TABLE>
<S> <C>
2000........................................................ 21
2001........................................................ 18
2002........................................................ 16
2003........................................................ 15
2004........................................................ 11
Thereafter.................................................. 47
</TABLE>
The Group has contractual commitments to spend approximately EUR 80 million
related to construction in progress at various locations at December 31, 1999.
The Group provided various bank guarantees to both third parties and
non-consolidated companies for EUR 30 million at December 31, 1999. The fair
value is not readily determinable for these guarantees. The Group receives and
grants certain customs guarantees with third parties. Guarantees granted amount
to EUR 431 million at December 31, 1999.
(18) CONTINGENCIES
In its normal course of business, PetroFina is involved in various legal,
fiscal and environmental proceedings. Management is of the opinion that the
result of these proceedings will not have a material impact on the Group's
financial position or results of operations.
The Group is subject to legislation regarding environmental laws and
regulations. This legislation regulates the discharge of materials into the
environment and may require the Group to incur future obligations to investigate
the effects of the release or disposal of certain petroleum, chemical and
mineral substances at various
F-30
<PAGE> 90
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
sites; to remediate or restore these sites; to compensate others for damage to
property and natural resources and for remediation and restoration costs.
At December 31, 1999, 1998 and 1997, the Group's accrued environmental
liabilities include EUR 213 million, EUR 152 million and EUR 108 million
respectively, for dismantlement and removal costs primarily related to the
Group's interests in worldwide offshore production facilities. These costs are
accrued by the Group on the units-of-production method.
At December 31, 1999, 1998 and 1997, the Group's recorded accrued
liabilities for environmental remediation efforts were EUR 298 million, EUR 261
million and EUR 237 million respectively. At December 31, 1998 and 1997, accrued
environmental costs include EUR 15 million and EUR 17 million respectively, for
remediation sites in the United States where the Group has been named as a
Potentially Responsible Party under United States Superfund legislation.
The Group has determined these liabilities based on judgments made as to
the extent of and mechanisms for environmental remediation and the current
levels of costs for equipment and services. While there are certain assumptions
inherent in this process and changes to such assumptions could produce ranges in
the amount of expected remediation costs, it is PetroFina's belief that the
amounts accrued and disclosed represent the most probable amount. The likelihood
of material losses in excess of recorded amounts at known remediation sites is
remote.
(19) EMPLOYEE BENEFIT PLANS
PENSION PLANS AND OTHER THAN PENSION BENEFITS
In accordance with the laws and practices of each country, the Company
participates in employee benefits pension plans offering death and disability,
retirement and special termination benefits. Those plans provide benefits of
various types from flat currency amounts per year of service to final pay plans
integrated with social security and multi-employer plans.
Most of pension plans are funded with investments made in various
instruments such as insurance contracts and securities. There are no significant
investments in the Company's shares.
For defined contribution plans and multi-employer plans, expenses
correspond to the contributions paid. For defined benefit pension plans,
accruals and prepaid expenses are determined using the projected unit credit
method.
Special termination benefits are recorded on an accrual basis at the time
the offer is accepted by the employees or their representatives.
F-31
<PAGE> 91
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
Disclosures, presented in accordance with SFAS 132, are as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS
--------------------------
1999 1998 1997
------ ------ ------
(IN MILLION OF EUROS)
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit Obligation at beginning of year..................... 971 943 765
Service cost................................................ 33 32 30
Interest cost............................................... 53 62 60
Plan participants contributions............................. 7 5 5
Amendments.................................................. 0 7 1
Acquisitions................................................ 0 0 0
Disposals................................................... (288) 0 0
Curtailments................................................ 0 (7) 0
Actuarial loss (gain)....................................... 37 7 61
Benefits paid............................................... (49) (47) (42)
Others (foreign currency translation)....................... 72 (31) 63
------ ------ ------
BENEFIT OBLIGATION AT END OF YEAR........................... 836 971 943
CHANGE IN PLAN ASSETS
FAIR VALUE OF PLAN ASSETS AT BEGINNING OF YEAR.............. (1,065) (1,060) (859)
Actual return on plan assets................................ (75) (80) (141)
Company contributions....................................... (2) (20) (12)
Plan participants contributions............................. (7) (5) (5)
Disposal.................................................... 355 0 0
Curtailments................................................ 0 9 0
Benefits paid............................................... 43 47 42
Others (foreign currency translation)....................... (101) 44 (85)
------ ------ ------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR.................... (852) (1,065) (1,060)
FUNDED STATUS OF THE PLAN................................... (16) (94) (117)
Unrecognized actuarial loss................................. 0 29 22
Unrecognized actuarial prior service cost................... 0 (10) 20
Unrecognized actuarial transition obligation................ 0 36 45
------ ------ ------
ACCRUED/(PREPAID) BENEFIT COST.............................. (16) (39) (30)
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligation
in excess of plan assets were EUR 367 million, EUR 312 million and EUR 200
million, respectively, as of December 31, 1999.
F-32
<PAGE> 92
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
OTHER BENEFITS
--------------------------
1999 1998 1997
------ ------ ------
(IN MILLION OF EUROS)
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit Obligation at beginning of year..................... 56 59 48
Service cost................................................ 3 1 1
Interest cost............................................... 4 4 4
Plan participants contributions............................. 0 1 1
Disposals................................................... (69) 0 0
Actuarial loss (gain)....................................... 0 (2) 2
Benefits paid............................................... (2) (4) (4)
Others (foreign currency translation)....................... 9 (3) 7
------ ------ ------
BENEFIT OBLIGATION AT END OF YEAR........................... 1 56 59
====== ====== ======
FUNDED STATUS OF THE PLAN................................... 1 56 59
Unrecognized actuarial loss................................. 0 0 (1)
Unrecognized actuarial prior service cost................... 0 0 0
Unrecognized actuarial transition obligation................ 0 0 0
------ ------ ------
ACCRUED BENEFIT COST........................................ 1 56 58
====== ====== ======
</TABLE>
AMOUNTS RECOGNIZED IN THE BALANCE SHEETS CONSIST OF:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------- --------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
(IN MILLION OF EUROS)
<S> <C> <C> <C> <C> <C> <C>
Accrued benefit cost........................... 170 114 98 1 56 58
Prepaid benefit cost........................... (186) (139) (126)
Other Comprehensive income(a).................. (7)
Intangible assets(a)........................... (7) (2)
---- ---- ---- ---- ---- ----
NET AMOUNT RECOGNIZED.......................... (16) (39) (30) 1 56 58
==== ==== ==== ==== ==== ====
</TABLE>
---------------
(a) The benefit liability accrued has to be the minimum between the accumulated
benefit obligation net of fair value of plan assets and the net amount
recognized.
COMPONENTS OF NET PERIODIC COST
Net periodic cost was as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS
----------------------------------------------
PERIOD FROM PERIOD FROM FOR THE
JULY 1, 1999 JANUARY 1, 1999 YEARS ENDED
THROUGH THROUGH DECEMBER 31,
DECEMBER 31, JUNE 30, -------------
1999 1999 1998 1997
------------ --------------- ----- -----
(IN MILLION OF EUROS)
<S> <C> <C> <C> <C>
Service cost....................................... 15 17 32 30
Expected interest cost............................. 27 29 62 60
Expected return on plan assets..................... (40) (40) (84) (79)
Amortization of unrecognized prior service cost.... 0 1 (1)
Amortization of actuarial net loss (gain).......... 1 0 (7)
Amortization of net transition obligation.......... (2) (7) (7)
----- ----- ----- -----
NET PERIODIC BENEFIT COST.......................... 2 5 4 (4)
===== ===== ===== =====
</TABLE>
F-33
<PAGE> 93
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
PENSION BENEFITS
--------------------------------------------------
PERIOD FROM PERIOD FROM FOR THE
JULY 1, 1999 JANUARY 1, 1999 YEARS ENDED
THROUGH THROUGH DECEMBER 31,
DECEMBER 31, DECEMBER 31, -------------
1999 1999 1998 1997
---------------- --------------- ----- -----
(IN MILLION OF EUROS)
<S> <C> <C> <C> <C>
Service cost................................... 1 1 1 1
Expected interest cost......................... 2 2 4 4
----- ----- ----- -----
NET PERIODIC BENEFIT COST...................... 3 3 5 5
===== ===== ===== =====
</TABLE>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------- --------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Discount rate.............................. 5.2% 7.1% 7.4% 6.9% 7.3% 7.8%
Expected return on plan assets............. 7.8% 8.4% 8.7%
</TABLE>
Regarding the other benefits plans, a one-percentage-point change in
assumed health care cost trend rates would have no significant effects.
(20) OTHER PROVISIONS
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR ------------
------------ AS OF
AS OF DECEMBER 31,
DECEMBER 31, ------------
1999 1998 1997
------------ ---- ----
<S> <C> <C> <C>
Provisions for site restoration............................. 298 261 237
Pensions and similar commitments............................ 213 220 202
Other....................................................... 161 177 194
----- --- ---
672 658 633
</TABLE>
(21) COMMON STOCK AND WARRANTS
PetroFina had issued and outstanding 23,541,786, 23,459,774 and 23,420,432
ordinary shares as at December 31, 1999, 1998 and 1997 respectively. The average
number of shares used to calculate basic earnings per share was 23,460,095 for
the 1st semester and 23,492,970 for the second semester 1999, 23,440,102 and
23,350,612 for 1998 and 1997 respectively. For the 1st and 2nd semester 1999,
the average number of shares used to calculate diluted earnings per share was
23,615,476 and 23,509,206 respectively.
In June 1997, the Company issued for its personnel a debenture loan with
warrants.
The loan of 9.3 million EUR is composed of 75,000 bonds worth 123.95 EUR
each, to which are attached 150,000 warrants. Each warrant grants the holder the
right to purchase one PetroFina share at 309.87 EUR per share on the following
dates: June 30th 1998, 1999 and 2000. The maturity date of the debenture loan is
set to be June 30, 2000, to the extent that warrants have not been exercised
before. The Board of Directors approved 150,000 additional shares for issuance
at its May 1997 meeting.
As allowed by Statement of Financial Accounting Standards 123, "Accounting
for Stock-Based Compensation," the Group does not recognize compensation expense
on the grant of warrants. If compensation expense had been determined based upon
the fair value of the warrants on the date of the grant, the Group's net income
and earnings per share on both a basic and diluted basis would have been reduced
by EUR 6 million, or EUR 0.24 per share in 1997. The weighted average fair value
of PetroFina warrants issued in 1997 was EUR 36.93. There were no warrants or
options issued to employees in 1999 or 1998. The fair value of each warrant was
estimated on the date of grant using a Black-Scholes pricing model for
European-type warrants with the following assumptions for 1997: risk free rate
of 4.0% (3-year Belgian Government bond yield), expected life of 3 years,
volatility of 17% and a dividend yield of 2.8%
F-34
<PAGE> 94
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
AVERAGE EXERCISE AVERAGE EXERCISE AVERAGE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- ------- --------
(EUR) (EUR) (EUR)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year...... 110,660 309.87 150,000 309.87 -- --
Granted............................... -- -- -- -- 150,000 309.87
Exercised............................. (80,358) 309.87 (39,340) 309.87 -- --
Expired/Cancelled..................... -- -- -- -- -- --
------- ------ ------- ------ ------- ------
Outstanding at end of year............ 30,302 309.87 110,660 309.87 150,000 309.87
======= ====== ======= ====== ======= ======
Exercisable at end of year............ 30,302 309.87 110,660 309.87 150,000 309.87
======= ====== ======= ====== ======= ======
</TABLE>
PetroFina issued 4,451,060 warrants in conjunction with the merger of Fina,
Inc. during August 1998. Each warrant entitles the holder to purchase
nine-tenths (0.9) of one ordinary voting share of PetroFina for an exercise
price of US$42.25 per PetroFina ADS. The warrants are exercisable for a period
of five years from issuance.
(22) INVESTMENTS IN JOINT VENTURES
The Group consolidates certain jointly owned companies in accordance with
proportional consolidation principles, which under U.S. GAAP would be accounted
for under the equity method. The aggregate effect of applying the equity methods
of accounting would be a decrease in the Group's total assets of EUR 345 million
in 1999, EUR 44 million in 1998 and EUR 35 million in 1997.
This difference in accounting has no effect on shareholders' equity or net
income. These jointly owned companies represent two industrial facilities, two
smaller plants, and one marketing company. All the above companies operate in
either the Group's Downstream or Chemical segments.
PetroFina's proportionate interests in the joint ventures, included in the
Group's consolidated financial statements, are as follows:
<TABLE>
<CAPTION>
PREDECESSOR
SUCCESSOR --------------------------------------
----------------- FOR THE YEAR
PERIOD FROM PERIOD FROM ENDED
JULY 1ST, THROUGH JANUARY 1ST, THROUGH DECEMBER 31,
DECEMBER 31, JUNE 30TH, --------------
1999 1999 1998 1997
----------------- -------------------- ----- -----
<S> <C> <C> <C> <C>
Current assets........................... 28 N/A 85 107
Noncurrent assets........................ 343 N/A 450 463
Current liabilities...................... (118) N/A (174) (190)
Noncurrent liabilities................... (156) N/A (314) (307)
Operating revenues....................... 196 120 310 323
Operating income......................... (3) 8 23 20
Net gain(loss)........................... (2) 1 6 2
Cash flows provided by/used in:
Operating activities................... 36 10 70 93
Financing activities................... (31) 2 (42) (32)
Investing activities................... (18) (12) (101) (90)
</TABLE>
(23) RELATED PARTY TRANSACTIONS
The Group accounts for certain companies following the equity method of
accounting. The Group's investment in these companies is included in Financial
assets. The equity affiliates are primarily engaged in exploration, production,
refining, distribution and marketing of crude oil, petroleum products and paints
in the United Kingdom, France, Holland, the United States and Angola.
Accounts and Notes Receivable in the Consolidated Balance Sheet include EUR
372 million, EUR 42 million and EUR 7 million at December 31, 1999, 1998 and
1997, respectively, of amounts due from equity affiliates. Accounts Payable
include EUR 476 million, EUR 46 million and EUR 27 million at
F-35
<PAGE> 95
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
December 31, 1999, 1998 and 1997, respectively, of amounts due to related
parties. Sales to related parties were EUR 5 million for the first Semester
1999, EUR 1,707 million for the second Semester 1999, EUR 2 million for 1998 and
EUR 3 million for 1997. Sales prices are determined on arms-length principles.
The 1999 figures shown for the 2nd semester 1999 include the transactions with
the companies of the TotalFina Group which do not belong to the Petrofina Group.
(24) FINANCIAL RELATIONS WITH DIRECTORS AND MANAGERS
Salaries attributed to staff in charge of daily management (four executive
directors with permanent functions and eight general managers) as well as the
managers of the main subsidiaries amounted in 1999 to EUR 4.7 million.
Bonuses allocated to directors and to the eight general managers amounted
in 1999 to EUR 1.0 million.
(25) OIL AND GAS RESERVES PER GEOGRAPHIC AREA (UNAUDITED)
The following table presents the Company's estimate of its proved oil and
gas reserves, for each foreign geographic area in which significant reserves are
located. The proved reserve estimates have been prepared by the Company's
internal petroleum reservoir engineers. Proved reserves are the estimated
quantities of crude oil, natural gas and natural gas liquids which geological
and engineering data demonstrate to be reasonably certain of recovery in future
years from known reservoirs under existing economic and operating conditions.
Estimates are expected to change as future information becomes available.
CRUDE OIL (INCLUDING CONDENSATES AND NGL) (UNAUDITED)
<TABLE>
<CAPTION>
EUROPE
AND REST OF NORTH EQUITY
THE WORLD AMERICA AFFILIATES TOTAL
----------- ------- ---------- -----
(IN MILLION BARRELS)
<S> <C> <C> <C> <C>
PROVED DEVELOPED AND UNDEVELOPED RESERVES
At December 31, 1996................................. 485.0 77.3 25.8 588.1
----- ----- ---- -----
Production of the year............................. (48.2) (4.0) (1.7) (53.9)
Sales of minerals in place......................... -- (3.8) -- (3.8)
Purchases of minerals in place..................... -- 0.5 -- 0.5
Extensions and discoveries......................... 15.7 3.3 -- 19.0
Revisions of previous estimates.................... 3.2 (0.7) 0.3 2.8
Improved recovery(1)............................... 54.5 -- -- 54.5
----- ----- ---- -----
At December 31, 1997................................. 510.2 72.6 24.4 607.2
----- ----- ---- -----
Production of the year............................. (45.1) (4.0) (2.0) (51.1)
Sales of minerals in place......................... -- (1.0) -- (1.0)
Purchases of minerals in place..................... 9.7 0.3 -- 10.0
Extensions and discoveries......................... 73.4 2.4 -- 75.8
Revisions of previous estimates.................... 28.7 1.2 (0.5) 29.4
----- ----- ---- -----
At December 31, 1998................................. 576.9 71.5 21.9 670.3
----- ----- ---- -----
Production of the year............................. (41.8) (3.2) (1.7) (46.7)
Sales of minerals in place......................... (43.5) (38.0) -- (81.5)
Purchases of minerals in place..................... -- -- -- --
Extensions and discoveries......................... 26.5 1.8 -- 28.3
Revisions of previous estimates.................... (45.4) (32.1) (5.8) (83.3)
----- ----- ---- -----
At December 31, 1999................................. 472.7 -- 14.4 487.1
===== ===== ==== =====
PROVED DEVELOPED RESERVES
At December 31, 1997................................. 352.1 18.0 24.3 394.4
At December 31, 1998................................. 375.4 19.0 21.8 416.2
At December 31, 1999................................. 434.5 -- 14.4 448.9
</TABLE>
---------------
(1) In 1997, the amounts for improved recovery included 35 million barrels for
the water injection program for Eldfisk and 19.5 million barrels for the
redevelopment of Congolese fields.
F-36
<PAGE> 96
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
NATURAL GAS (UNAUDITED)
<TABLE>
<CAPTION>
EUROPE
AND REST OF NORTH EQUITY
THE WORLD AMERICA AFFILIATES TOTAL
----------- ------- ---------- -------
(IN BILLION OF CUBIC FEET)
<S> <C> <C> <C> <C>
PROVED DEVELOPED AND UNDEVELOPED RESERVES
At December 31, 1996............................... 1,349.2 392.8 -- 1,742.0
------- ------ ----- -------
Production of the year........................... (132.3) (76.6) -- (208.9)
Sales of minerals in place....................... -- (3.7) -- (3.7)
Purchases of minerals in place................... -- 0.2 -- 0.2
Extensions and discoveries....................... 6.4 88.4 -- 94.8
Revisions of previous estimates.................. (77.9) (0.8) -- (78.7)
Improved recovery(1)............................. 42.6 -- -- 42.6
------- ------ ----- -------
At December 31, 1997............................... 1,188.0 400.3 -- 1,588.3
------- ------ ----- -------
Production of the year........................... (113.9) (73.5) -- (187.4)
Sales of minerals in place....................... -- (35.7) -- (35.7)
Purchases of minerals in place................... 2.6 1.1 -- 3.7
Extensions and discoveries....................... 14.5 114.2 -- 128.7
Revisions of previous estimates.................. (160.9) (0.8) -- (161.7)
------- ------ ----- -------
At December 31, 1998............................... 930.3 405.6 -- 1,335.9
------- ------ ----- -------
Production of the year........................... (80.5) (69.4) -- (149.9)
Sales of minerals in place....................... (26.1) (344.3) -- (370.4)
Purchases of minerals in place................... -- -- -- --
Extensions and discoveries....................... -- 109.3 -- 109.3
Revisions of previous estimates.................. (88.7) (101.2) -- (189.9)
------- ------ ----- -------
At December 31, 1999............................... 735.0 -- -- 735.0
------- ------ ----- -------
PROVED DEVELOPED RESERVES
At December 31, 1997............................... 916.3 260.1 -- 1,176.4
At December 31, 1998............................... 710.5 232.2 -- 942.7
At December 31, 1999............................... 735.0 -- -- 735.0
</TABLE>
---------------
(1) In 1997, the amounts for improved recovery included 42.4 billion cubic feet
for the water injection program for Eldfisk.
F-37
<PAGE> 97
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES (UNAUDITED)
The following table presents the results of operations for oil and gas
producing activities for the three years ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------- ----------------------------- -----------------------------
EUROPE EUROPE EUROPE
AND REST OF NORTH AND REST OF NORTH AND REST OF NORTH
THE WORLD AMERICA TOTAL THE WORLD AMERICA TOTAL THE WORLD AMERICA TOTAL
----------- ------- ----- ----------- ------- ----- ----------- ------- -----
(IN EUR MILLION)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Sales and other operating
revenues...................... 668 49 717 346 83 429 403 88 491
Transfers....................... 240 154 394 471 116 587 737 150 887
Operating Costs................... (352) (67) (419) (298) (63) (361) (324) (56) (380)
Exploration Expenses.............. (28) (10) (38) (52) (15) (67) (55) (53) (108)
Depreciation, Depletion and
Amortization.................... (208) (201) (409) (242) (76) (318) (205) (86) (291)
---- ---- ---- ---- ---- ---- ---- ---- ----
Income Before Taxes............... 320 (75) 245 225 45 270 556 43 599
Income Tax Expenses............... (229) 30 (199) (157) (21) (178) (396) (14) (410)
---- ---- ---- ---- ---- ---- ---- ---- ----
Results of Operations from
Producing Activities (Excluding
Interest Costs)................. 91 (45) 46 68 24 92 160 29 189
==== ==== ==== ==== ==== ==== ==== ==== ====
Group's Share of Equity Method
Investees' Results of Operations
for Producing Activities........ 2 -- 2 15 1 16 17 2 19
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
COSTS INCURRED ON OIL & GAS PROPERTIES (UNAUDITED)
A summary of costs incurred in oil and gas property acquisition,
exploration and development activities, (both capitalized and charged to
expense) for the periods noted follows:
<TABLE>
<CAPTION>
EUROPE
AND REST OF NORTH
THE WORLD AMERICA TOTAL
----------- ------- -----
(IN EUR MILLION)
<S> <C> <C> <C>
1999
Acquisition of unproved properties.......................... 3 (2) 1
Acquisition of proved properties............................ -- -- --
Exploration costs........................................... 39 16 55
Development costs........................................... 201 87 288
--- --- ---
TOTAL..................................................... 243 101 344
=== === ===
1998
Acquisition of unproved properties.......................... -- 10 10
Acquisition of proved properties............................ 9 1 10
Exploration costs........................................... 75 32 107
Development costs........................................... 292 134 426
--- --- ---
TOTAL..................................................... 376 177 553
=== === ===
1997
Acquisition of unproved properties.......................... 2 12 14
Exploration costs........................................... 70 36 106
Development costs........................................... 315 153 468
--- --- ---
TOTAL..................................................... 387 201 588
=== === ===
</TABLE>
The Group's share of equity affiliates' costs incurred for property
acquisition, exploration and development was EUR 1 million in 1999, EUR 4
million in 1998 and EUR 1 million in 1997.
F-38
<PAGE> 98
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
SUPPLEMENTAL OIL & GAS DATA -- CAPITALIZED COSTS (UNAUDITED)
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ------------------------------ ------------------------------
EUROPE EUROPE EUROPE
AND REST OF NORTH AND REST OF NORTH AND REST OF NORTH
THE WORLD AMERICA TOTAL THE WORLD AMERICA TOTAL THE WORLD AMERICA TOTAL
----------- ------- ------ ----------- ------- ------ ----------- ------- ------
(IN EUR MILLION)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proved Oil and Gas
Properties................... 4,443 -- 4,443 3,495 1,083 4,578 3,135 1,040 4,175
Unproved Oil and Gas
Properties................... 42 -- 42 294 112 406 307 137 444
Support facilities and other... 336 -- 336 177 152 329 557 200 757
------ ------ ------ ------ ------ ------ ------ ------ ------
4,821 -- 4,821 3,966 1,347 5,313 3,999 1,377 5,376
------ ------ ------ ------ ------ ------ ------ ------ ------
Less Accumulated Depreciation
Depletion, Amortization and
Impairment................... (3,032) -- (3,032) (2,526) (739) (3,265) (2,510) (771) (3,281)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net capitalized costs.......... 1,789 -- 1,789 1,440 608 2,048 1,489 606 2,095
------ ------ ------ ------ ------ ------ ------ ------ ------
Share of Net Capitalized Costs
of Equity Affiliates......... 18 20 27
</TABLE>
F-39
<PAGE> 99
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES
THEREIN RELATING TO PROVED OIL AND GAS RESERVES (UNAUDITED)
The following table, which presents a standardized measure of discounted
future net cash flows and changes therein relating to proved oil and gas
reserves, is presented pursuant to United States Statement of Financial
Accounting Standards No. 69. In computing this data, assumptions other than
those required by the Financial Accounting Standards Board could produce
different results. Accordingly, the data should not be considered as
representative of the fair market value of the Company's proved oil and gas
reserves.
Future cash inflows were computed by applying year end realized prices for
oil and gas production to estimated year end quantities of proved reserves.
Future price changes were considered only to the extent provided by contractual
agreements in existence at the date of computation.
Future development and production costs are computed by estimating the
expenditures to be incurred in developing and producing the proved oil and gas
reserves, at the end of the year, based on year end costs. Future income tax
expenses were computed by applying the year end statutory tax rate adjusted for
tax credits, less the tax basis of the properties involved. The impact of
changes in the year end taxes on future pre-tax net cash flows relating to
proved oil and gas reserves is considered to the extent that these changes are
legislated. The standardized measure of discounted future cash flows represents
the present value of estimated future net cash flows using a discount rate of
10%.
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ------------------------------ ------------------------------
EUROPE EUROPE EUROPE
AND REST OF NORTH AND REST OF NORTH AND REST OF NORTH
THE WORLD AMERICA TOTAL THE WORLD AMERICA TOTAL THE WORLD AMERICA TOTAL
----------- ------- ------ ----------- ------- ------ ----------- ------- ------
(IN EUR MILLION)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Future cash inflows............ 12,665 -- 12,665 7,211 1,247 8,458 10,376 1,666 12,042
Future production and
development costs............ (4,443) -- (4,443) (4,189) (525) (4,714) (4,661) (707) (5,368)
Future income tax expenses..... (5,591) -- (5,591) (1,657) (130) (1,787) (3,423) (204) (3,627)
FUTURE NET CASH FLOWS.......... 2,631 -- 2,631 1,365 592 1,957 2,292 755 3,047
------ ------ ------ ------ ------ ------ ------ ------ ------
10% annual discount for
estimated timing of cash
flows........................ (847) -- (847) (457) (243) (700) (833) (289) (1,122)
------ ------ ------ ------ ------ ------ ------ ------ ------
Standardized measure of
discounted future net cash
flows........................ 1,784 -- 1,784 908 349 1,257 1,459 466 1,925
------ ------ ------ ------ ------ ------ ------ ------ ------
Enterprise's share of equity
method investee's
standardized measure of
discounted future net cash
flows........................ 41 -- 41 17 -- 17 36 -- 36
</TABLE>
F-40
<PAGE> 100
PETROFINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
CHANGE IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(IN EUR MILLION)
<S> <C> <C> <C>
STANDARDIZED MEASURE (beginning of year).................... 1,257 1,925 2,195
Change in sales prices related to future production......... 3,992 (1,527) (1,500)
Change in estimated future lifting and development costs.... (75) 12 (262)
Sales and transfers of oil and gas produced during the
period,
net of production costs................................... (691) (664) (1,019)
Extensions, discoveries and improved recovery, less related
costs..................................................... (92) 330 437
Revisions in previously estimated quantities................ (2) (304) (286)
Previously estimated development costs incurred during the
period.................................................... 248 435 398
Sales of minerals in place.................................. (683) (31) (24)
Purchases of minerals in place.............................. -- 10 3
Accretion of discount....................................... 262 377 557
Net change in income taxes(*)............................... (2,408) 813 1,241
Exchange effect............................................. (24) (119) 185
------ ------ ------
STANDARDIZED MEASURE (END OF YEAR).......................... 1,784 1,257 1,925
====== ====== ======
</TABLE>
---------------
(*) A significant portion of the Group's production is located on the Norwegian
continental shelf. These activities carry a higher tax burden due to
specific petroleum tax legislation enacted in Norway.
F-41
<PAGE> 101
LOGO
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE
To the Shareholders and the Board of Directors of
PetroFina S.A.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of PetroFina, S.A. and its subsidiaries
(together "the Company") as of December 31, 1999 included in the Form 20-F, and
have issued our report thereon dated April 7, 2000.
The accompanying schedule, the consolidated valuation and qualifying
accounts, is the responsibility of the Company's management and is presented for
purpose of complying with the Securities and Exchange Commission's rules and
regulations and is not part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements as of December 31, 1999, and in our opinion, fairly states,
in all material respects, the financial data required to be set forth therein in
relation to the basic financial statements as of December 31, 1999, taken as a
whole.
ARTHUR ANDERSEN
Reviseurs d'Entreprises
---------------------------------------------------------
Guy Wygaerts
April 7, 2000
Brussels, Belgium
S-1
<PAGE> 102
LOGO
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE II
To the Shareholders and the Board of Directors of
PetroFina S.A.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of PetroFina S.A. and its subsidiaries
(together "the Company") included in the Form 20-F for the years ended December
31, 1998 and 1997, and have issued our report hereon dated March 23, 1999.
This schedule is the responsibility of the Company's management and is
presented for purpose of complying with the Securities and Exchange Commission's
rules and regulations and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements, and in our opinion, fairly states, in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
April 7, 2000
Brussels, Belgium
Deloitte & Touche, Reviseurs d'Entreprises
S-2
<PAGE> 103
SCHEDULE II
PETROFINA
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
BALANCE AT CHARGED BALANCE AT
BEGINNING TO COSTS END OF
OF PERIOD AND EXPENSES DEDUCTIONS(1) PERIOD
---------- ------------ ------------- ----------
(IN EUR MILLION)
<S> <C> <C> <C> <C>
December 31, 1997
-- allowance for doubtful receivables....... 70 5 (6) 69
-- inventory valuation reserve.............. 13 9 (9) 13
December 31, 1998
-- allowance for doubtful receivables....... 69 7 (6) 70
-- inventory valuation reserve.............. 13 208 -- 221
December 31, 1999
-- allowance for doubtful receivables....... 70 20 (37) 53
-- inventory valuation reserve.............. 221 30 (215) 37
</TABLE>
---------------
(1) Utilization and monetary adjustments and variations in scope of consolidated
companies.
S-3
<PAGE> 104
EXHIBIT INDEX
EXHIBITS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Exhibit 23.1 Consent of Arthur Andersen Reviseurs d'Entreprises.......... E-2
Exhibit 23.2 Consent of Deloitte & Touche Reviseurs d'Entreprise......... E-3
Exhibit 23.3 Consent of Klynveld Peat Marwick Goerdeler Reviseurs E-4
d'Entreprises...............................................
Exhibit 23.4 Consent of Klynveld Peat Marwick Goerdeler Reviseurs E-5
d'Entreprises...............................................
Exhibit 23.5 Consent of KPMG Accountants N.V............................. E-6
Exhibit 23.6 Consent of KPMG LLP......................................... E-7
Exhibit 23.7 Consent of KPMG............................................. E-8
</TABLE>
E-1
