TotalEnergies Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 26, 2023

There are 16 speakers on the call.

Operator

Hello, everyone. Good afternoon or good morning if you are in the U. S. So today, we will present with Jean Pierre our Q3 results, which once again demonstrates the relevance of our strategy. Indeed, our transition strategy is anchored on both pillars, as we explained to you last September, on oil and gas on one side, integrated our power on the other side and it allows us to fully leverage upside in supportive energy environments like the one we are experiencing today.

Operator

As explained in our total strategy and outlook presentation end of September, we have stayed the course. And this quarter illustrates all these strategies in motion in all our business segments. Oil and Gas, first, as you know, we have developed organically a deep portfolio of projects that are low cost and low emissions, which will offer a growth of production of 2% to 3% per year for the next 5 years. Thanks to this strategy, this quarter, we delivered a 5% increase of production compared to Q3 2022 as several new projects I've been put into production like Meru-one in Brazil, Apsilon in Azerbaijan, Block 10 in Oman or Ratawi in Iraq. And they are more than offsetting our natural decline of 3% per year.

Operator

The Downstream is also contributing to this Oil and Gas business, in particular thanks to our our capacity to combine an excellent utilization rate of our refineries with very robust refining margins. On the LNG side, the recent price volatility in our oil and gas market, spiking as much as 28% in a single day during the quarter, is the most obvious example of real time market's intention. We capture value along the entire value chain and maximize the margins on both our dominant U. S. And European positions.

Operator

We are the largest U. S. LNG exposures and we have reinforced this position this quarter with the sanction of Rio Grande LNG in Texas. And the largest, we are also the largest European regas capacity holders. And there again, we are enforcing this position this quarter with the commissioning of our 2nd FSRU in France after the one in Germany earlier this year.

Operator

The same integrated strategy you understood through our Integrated Power business, since the electricity market in Europe follows the gas market, as natural gas plus CO2 sets a marginal power price for many years to come. This market is again once I'm characterized by growing demand and constrained supply, which creates opportunities in the market. As Jean Pierre will explain you, Integrated Power achieved a new milestone this quarter with both adjusted net income and cash flow exceeding $500,000,000 We are well on our way to achieving our €2,000,000,000 cash target for the year in this business. We have announced this morning an interesting acquisition on the German market, which illustrates our integrated power strategy. Quadra is the 2nd largest aggregator of renewable energy in Germany with 9 gigawatts of virtual onshore wind farm and offers a very interesting platform from getting value out of a proven market dominated by Renewable without capital employed in the asset and so contribute to our profitability in this attractive market.

Operator

I will write up my introduction by just saying again the relevance of a balanced transition strategy between oil and gas on one side, integrated power on the other side has never been clearer. More energy, less emission, more cash flows. And this quarter illustrates this relevance with adjusted net income increased to dollars 6,500,000,000 and CFFO increased to $9,300,000,000 Total generated a $4,200,000,000 of free cash after net investments, based on the strength of these results and the trust in company's outlook, our Board I approved the 3rd interim dividend in up 7.25 percent year on year at €0.70 are €4 per share. Having said that, I'll turn it to Jean Pierre, who will give you more details through the solid Q3 financial results.

Speaker 1

Yes. Thank you, Patrick. So now moving on to the detailed financial results, starting with our first pillar, oil and gas, which is the cash engine of today. 3rd quarter hydrocarbon production was nearly 2,500,000 barrels of oil equivalent per day, Which is notably up 5% year on year as already mentioned by Patrick, thanks to the start up of several oil and gas projects. On oil, production benefited from new production for the first FPSO on Meru in Brazil, IKK in Nigeria and our entree in the Ratao oilfield in mid August in Iraq.

Speaker 1

Speaking of projects, Merutur should be online by the end of the year. Production also benefited from our entry in January into the Saab and Hulu concession in Abu Dhabi. On the gas side, production benefited from the start up of Blacktail in Oman and in Azerbaijan of the Apsharon fields. Although production was flat Quarter to quarter, exploration and production posted strong quarterly results with adjusted net income of $3,100,000,000 And CFFO of $5,200,000,000 The 34% increase in adjusted net operating income quarter to quarter was primarily driven by higher oil price and a lower effective tax rate, which is a result of 2 effects. First, it results from the lower taxation rates on new barrels, Brazil, Azerbaijan, Iraq, compared to declining historic levels barrels and its results also as a lower weight of North Sea barrels in the segment results For this quarter, operating costs decreased to $5.5 per barrel this quarter.

Speaker 1

For the integrated LNG segments, we continue to demonstrate our leadership as a top global LNG player. Integrated LNG production is up 18% year on year and stable quarter to quarter. LNG sales were down by 5% quarter to quarter due to decrease in spot traded volumes in a less volatile environment LNG price sales was down 3% quarter to quarter linked to a certain environment. However, after our results have landed last quarter from the historic high exceptional results experienced in 2022, integrated LNG maintained this quarter robust results with adjusted net operating income flat quarter to quarter at $1,300,000,000 and CFFO at $1,600,000,000 down 8% compared to previous quarter, in line with sales down by 5% and prices by 3%. Despite entering the winter period with high natural fuel gas inventories in Europe.

Speaker 1

In a tense market, gas prices remain at good levels and very we are reactive to production disruption as we have seen over the last several months. Given the evolution of oil and gas prices in recent months And the lag effect on price formulas, we anticipate that our average LNG selling price should be above $10 per million in the Q4 of 2023. For the combined Downstream, adjusted net operating income And CFFO increased sequentially to $1,800,000,000 and $2,200,000,000 respectively. Despite lower petrochemical results due to the European environment, our results reflect higher refining margins in Europe And a higher utilization rate during the Q3, which was supported by greater availability of our French refineries to be noticed for once. The utilization rates on processed crude increased quarter to quarter to 84% despite having an unplanned shutdown at the Paratore refinery in the U.

Speaker 1

S, for the Q4, the utilization rate should be above 80% it includes the restart of our year in mid November. Moving now to the second pillar. We continue to develop a profitable and differentiated integrated power model, building a world class cost competitive portfolio that combines renewable assets, are solar, offshore, wind, onshore wind and flexible assets such as TCGTs and storage to deliver clean firm power. As mentioned by Patrick, this quarter we achieved a milestone in Integrated Power business segments with adjusted net income and cash flow both exceeding $500,000,000 and we are well on our way to achieving our targets of generating $2,000,000,000 of cash flow in 2023, Having already generated close to $1,500,000,000 through the 1st 3 quarters, all the value chain contributed this quarter to this $500,000,000 results renewables, flexible assets and trading supply to customers as well. During the Q3, we also acquired 100 percent of Total Airline, which contributed to the growth of our electricity production and results.

Speaker 1

Early October, we signed a corporate PPA with Saint Gobain in the U. S. To supply clean power from our Danish field solar farm in Texas. The agreement is a good illustration of our strategy in Integrity Power as it includes an upside sharing mechanism Under which both companies share potential upside arising from spot market prices over the contract term. We recently achieved another milestone.

Speaker 1

Earlier this month, our Seagreen Offshore Wind Farm in Scotland became fully operational And he is running at the design capacity of more than 1 gigawatt. This project was delivered within budget, Only 5% per store volume and is Total Energy's biggest offshore wind farm globally. I'll wrap up with CapEx and shareholder returns. Year to date net investments as of the end of the Q3, totaled $16,100,000,000 As a reminder, we expect to receive cash proceeds from the sales of our Canadian assets and from the deal with Alimentation Couche Tard in the Q4. Therefore, we reiterate full year guidance of $16,000,000,000 to $17,000,000,000 of CapEx this year.

Speaker 1

Our balance sheet is strong. Our gearing slightly increased from 11.1% at the end of the second quarter to 12.3% at the end of the third quarter. That is mainly due to the consolidation in our accounts of Total Era Debt. Proceeds from disposals should bring gearing back below 8% by end of the year. Over the last 12 months, ROACE was 20.1% And return on equity was more than 22%.

Speaker 1

In September, we raised our annual payout guidance from 35%, 40% of cash flow to more than 40%. We're on track for 23% having paid out a cumulative 43% for the Q3. Our payout is a combination of ordinary dividends and buybacks, as we believe our stock despite having reached its historical high this quarter is still undervalued by the markets. We bought back $6,100,000,000 of stock through the Q3 and so we are well underway in executing our $9,000,000,000 buyback program for full year 2023, as the Board decided to allocate €1,500,000,000 of Canadian sale proceeds to this buyback program in 2023. This concludes my comments.

Speaker 1

And now we can move to the Q and A.

Speaker 2

Ladies and gentlemen, welcome to Total Energy's Q3 2023 results conference call. And we will now begin the question and answer session. I'll take your questions. One moment for the first question. The first question comes from Oswald Clint of Bernstein.

Speaker 2

Please go ahead,

Speaker 3

Thank you very much both of you. Two questions. The first one on the U. S. Offshore wind please, A tentative energy.

Speaker 3

It was a good press release this week, lots of information that's not normally presented For these types of deals. And it helps us kind of get to the returns, I think. With the 40% tax credit, we were getting to something like 13.5 Percent on an equity basis. And I just wondered if that was anywhere close to your own expectations for a project like that. And perhaps at this point, you could say how much of your $20,000,000,000 of capital employed in Integrated Power is currently in production?

Speaker 3

That's the first one. And secondly, I wanted to ask about geopolitical risk. You always have your finger on the pulse. And obviously, wanted to get a sense of how you're thinking about the portfolio risk at the moment, especially Middle Eastern exposure. And were there any Strategic changes or indeed M and A moves may be needed or may be considered if things were to worsen?

Speaker 3

Thank you.

Operator

Thank you, Oswald. Thank you for the comments. Yes, we as you know, the offflow wind industry sometimes is questioned. So in fact, these offflow in the by the way, in our portfolio, we had 2 good news, in fact, for me these last which and so we wanted to share. 1st, Sigreen in Scotland, we managed to make that project within 5% on the overall run cost, €4,000,000,000 So it's quite it demonstrates that and we have a good CFD on Sea Green, so we'll make money now from this point.

Operator

It's a mantra that you can execute the no show in projects when you are good team good project team within the budget and I would say not much delay, in fact, in that case, which, of course, are linked. So first comment. 2nd comment in New York, yes, that's true, but we are and I think the NICE said, even if we are not allowed to disclose what is the level of our price, they mentioned an average price of around $145 per megawatt hour nominal. And so you know you change the range compared to previous ones. And I think it is a lesson I explained you last time, but actually you need to have a to be pragmatic about what would be the cost and then you enter into a discussion.

Operator

In the U. S, in particular, this type of price plus the 40% IRA are giving us a good support. And honestly, you are quite good in your math, I would say, I would have answered to you 12 to 15. So you are quite good in your math. Congratulations.

Operator

So we can indeed develop a profitable, it's showing projects. We are based on equity. And one of the key, by the way, people might be surprised by the level of price announced by the State of New York, which is much higher than before. I can tell you one of the key has been to have among our partnership. As we announced, we have introduced in the partnership Corio, which is our worldwide partner, but also LS Power, which is a U.

Operator

S. Company, very well established in New York. And again, for me, there is a strong lesson. When you have a local partner well implemented, it helps a lot in these discussions with local authorities. We would have been alone in Total Energies in front of New York State.

Operator

I'm not sure we would have achieved the same results. So that comfort, my strong belief Renewable required to identify local partner. And by the way, LS Power is a very interesting partner for us in the future, including to develop maybe more business in the PGM area. So that's this one, so for offshore wind. On the geopolitical risk, our exposure, when you look to our portfolio, we have many countries, but there are 2 countries fundamentally which are contributing to the cash flow.

Operator

By the way, yes, to come back on the and the second question, capital employed out of $20,000,000,000 under production or in offshoring, I think it's less than $2,000,000,000 today probably, like 2,000,000,000 probably 10%. 10% of the our capital employed are in off flowing today out of the $20,000,000,000 of the Integrated Power business, just to give you an idea. And more or less you know in our prospective to 2,030, 10% is more or less what we expect from offshore

Speaker 4

wind, more or less.

Speaker 5

So

Operator

geopolitical risk, 2 countries for us to Turkey are Abu Dhabi and Qatar. In fact, when you reality where the cash flow is coming from today, we have over you have also Libya, which is out of Italy or to the area. And to be honest, in Abu Dhabi, the things that geopolitical risk is limited there. It's well controlled and TETA also, I would say. So I'm not so I really not when I think to what situation, which is a dramatic situation, I don't see too many, I would say, consequence for that.

Operator

Of course, we need to manage the situation to be fair in Iraq, of course, in Lebanon, but it was only exploration. And so and Egypt, I would say, our exposure is very limited in Egypt. So I'm not considering that it's an issue for TotalEnergies, maybe for others. So that's I would say where I'm there. M and A, who we think are if things are worsening, the price of oil will go up and then we'll have to see what we'll do, but there's no M and A move linked to that situation for me in that period.

Speaker 3

Super. Very clear. Thank you.

Speaker 2

The next question is from Alek Christian of JPMorgan. Please go ahead.

Speaker 5

Hi, good afternoon, gentlemen. Thank you for helping me ask the question. The only question I need would like to ask is just around your views around consolidation Jean Pierre in terms of what we're seeing in the U. S. How would you read 2 parts.

Speaker 5

1, their sort of opportunistic Chasing of growth in terms of volumes through their balance sheet as opposed to building organically? And then 2, Where does that position Total Energy in the upstream medium term, particularly if based on What they're doing, it suggests that they are looking for oil as well as backing the back end of the curve, so to speak. So do you feel like you have a little bit of FOMO? Or are You're very comfortable with your upstream growth. And I guess the question I'm asking is why don't you feel the need to do consolidation, particularly given you're building these 2 pillars And building it through scale.

Speaker 5

Thank you.

Operator

To me, Anes, as you know, we don't have any we are not a position in the U. S. I think I understand there might be consolidation in the U. S. Because it's quite a spread industry in the shale industry, so I have no comment, but it's not okay.

Operator

Historically, you make consolidations when you have low price of the barrel to gain synergies. That's the history of our industry. You are driven by a low price of barrel, you try to synergize. And scale, obviously, generates synergies. And so you are trying to but the story of our industry, we are not at all in bad situation today.

Operator

Price is buoyant. We are even at for most of us at the top of our historical value. So I would say that's not what I would look for, honestly. I don't say and for Total Synergies, we would not have diverse synergies in terms of operations are no in terms of costs. So I think that's not for us the type of things we are looking.

Operator

By the way, we have a quite a strong and deep we have a deep portfolio of projects in Orlingas. I think it was what we presented to you end of September. So I don't feel it's a necessity to add more on this one. Again, we mentioned that we might have to look to more shale gas in the U. S.

Operator

Feeding integration to the LNG, which we mentioned in September, but saw what I mentioned. So I observe this move. It means that my colleagues are thinking that the price of oil will go will remain high for Bouman. So I'm happy. That's what I can comment to you.

Operator

But for us, I think we have a clear strategy. We execute the strategy and let's be consistent.

Speaker 5

Thank you.

Speaker 2

The next question is from Lydia Rainforth of Barclays.

Speaker 6

Thank you and good afternoon. Two questions if I could. 1, just building up on the virtual power plant acquisition Jen from this morning. Can you just walk us through why that idea works in terms of virtual power plants? And just any indication on price on that?

Speaker 6

And then secondly, I think just in the this was clearly seeing a lot of volatility on the gas market. Could you just What you think might happen over the winter period for us?

Speaker 2

Thank you.

Operator

Okay. No, a virtual power plant, what is it? It's just integrated you can build assets, you can also aggregate some assets. I think it's the idea that this Quadra company has established us very strongly. We are number 2 in the German market.

Operator

We have been able to connect with 4,000 wind renewable developer in Germany, quite a large base, aggregating 9 gigawatts, which is a big volume, of course. With that, you can trade it or you can even if you have pricing it and you make EUR 2 megawatt hour margin out of it. It gave you access to something. You don't have any capital employed or most of it. It's quite an acquisition, I would say, of people with the know how and the knowledge.

Operator

There is no asset. So I can mention to you that the price that we acquired is around €200,000,000 €250,000,000 So it's not very expensive, but you have a lot of skills. You have access. It's a complement to our model. We have some assets, and we try to complement it with again low capital employed base in order to develop the business.

Operator

And gave us again, we explained you, in the integration, it's important to have sources of supply. And when you have customers, you may be intermediation, it gives you a more flexibility for a trading platform in Germany. Germany, again, is for us a very it's an interesting market. I repeat it. This is for us one of the key targets because it's really the mix will be renewable and gas plus EPS.

Operator

So that means quite a good price, a lot of potentials. So we are building step by step our position in Germany. And this one is interesting because we enter in a big way. Again, it's a number 2 of these markets and with a large base, 9 gigawatts, some PPA, some more short term. So I think it's an interesting way to progress in the integrated power strategy on this important market.

Operator

On the second one, volatility gas market for the winter, I don't know if it will be cold. Today, it's a little cold in Paris, to be honest, since the beginning of the week. Even if I hope it will not be too cold for the final of the rugby or rugby world cup tomorrow, best of the day after tomorrow. No, but more seriously, it's very volatile. It's clear.

Operator

The market is intention. I'll be clear. There is no margin in this market. So each time you have a hiccup, the strike in Australia, then you had the stoppage of the Tamar field in Israel, which was going to Egypt and back to LNG to Europe. Then you add, of course, this Baltic pipeline.

Operator

And so each time you have a pickup, proof, the market is taking almost 30%, 40% in the day. It's a bit full, but it's super attention. So we always said that for this winter, by the way, the full, the more around $16 per 1,000,000 BTU will still remain high. If yes, the storage are full, but we don't have enough storage in Europe to go through the winter, if the winter is cold. It's not only me.

Operator

It's repeated by the IEA recently. So in any event in these conditions is pushing is putting the price up. Knowing that you noticed as well that the Asian buyers are back in the LNG business. They are back. Today, the GKM is TTF plus $2 to $3 which means that in fact they are ready to buy.

Operator

And today most of the cargoes are going to Asia because the spot market is in favor of Asia. So you might have in this type of market more coal for LNG coming from Asia. So it put an additional tension on this LNG market. So let's see, okay, the weather will be important again. And again, if there is any it's clear that if you have like 1 year ago or 1 or 3 years ago, an event like in Freeport on one plant, this will be obviously immediately reflected in the gas market.

Operator

So that's why again generally we are wrong on the future, but this attention I'm sure there is the market gas market in the attention today.

Speaker 6

Thank you.

Speaker 2

The next question is from Michele Della Vigna of Goldman Sachs.

Speaker 7

Thank you very much. I wanted to ask 2 questions if possible. The first one is back to M and A, but thinking of it more countercyclically. Energy prices are quite high. A lot of companies are consolidating.

Speaker 7

I was wondering if this could actually be a good time to dispose of some of the E and P assets Maybe more marginal to your portfolio and maybe again going countercyclical in some of the energy transition assets that have substantially derated over the last year. And then remaining on the theme of CleanTech and Renewables, congratulation on the very consistent deliver of earnings of cash flow. I was wondering if you could perhaps unpack a little bit for us the $500,000,000 you make in integrated power per quarter between Renewable CCGTs and trading definitely highlighting the integrated nature of that business, but also perhaps helping us to Understand a bit more the scale of those different moving parts. Thank you.

Operator

Yes. On the second question, I think Jean Pierre It was coming from 3 segments, renewables, flexible asset utilities and trading and also marketing business, by the way. So the supply business to customers is also for the so consider that it's coming from all of them. So it's everything is contributed to this integrated power and in a positive way. So that's what I can just explain to you.

Operator

On the first question, it's clear that you know that a strong deliver, but in M and A, it's better to become cyclical than to be procyclical. That's very clear. That's for me in this business, the commodity business where you have cycles, I mean, you take the risk when you make acquisition at the top. So yes, you are right on E and P, but by the way, we've just done it. I remind you Michele that we just divested our Canadian sands assets it's the top of the market and we will receive $4,400,000,000 plus an extra now next year, dollars 400,000,000 So I'm happy.

Operator

It's a good value for these assets. And so we've done it. We've just done it. We have cleaned a lot of the portfolio in the last since 2015. We rotated a lot.

Operator

We have cleaned a lot, but that's not mean that I don't think we have a lot of wants. We might have, as I said, some quite let you know that some exposure which are high on some countries, like for example Nigeria, where we want to continue to invest. So we might be willing to use that environment to reshape the Nigeria portfolio. I'm not very the all onshore in Nigeria for me is many raise many issues about the type of assets, and it's a good environment to monetize then, if we find some buyers, of course. But part of things we could do, but we have clean, I would say, the portfolio in terms of most of the portfolio today are in the definition of low cost, low emissions, have been really the work has been done.

Operator

So it's more optimizing things in some countries where we could do. And I would prefer, for example, to be a higher stake when we are operator and maybe lower stake when we are non we feel non operated position to divest them, to reinforce, I would say, when we are operator in control of our future, I like to be more in control of our destiny rather than just being a non operated company, even if it's operated by a large peer. And then the other question, of course, that you mentioned is about the transition assets. Today, our priority and I think what we've done this morning with quite rightly illustrate is more as I explained to you in September to complement in some key markets through some targeted acquisitions, I mentioned the Iowa Texas, flexible assets in Texas, gas fired power plants will come one of these days. Or what we've done in Germany with this Quadra, we might look to rather than making a big acquisition because even if it's derated, it's still high.

Operator

So I think it could go even lower and lower. So and honestly, when you think, for example, to off flow in, I mean, I'm very happy to we build our set for portfolio with exactly the one in New York where we control what we do. We are a part of the year will be covered by CFD, part of it will be merchants. So that's better for us because, again, our strategy is not to acquire a portfolio of fully we secured renewable assets with no upside. It's not what we described to you.

Operator

So I think it's better to continue and to deliver our strategy the way we explained to you end of September.

Speaker 7

Thank you.

Speaker 2

The next question is from Irene Himona of Societe Generale.

Speaker 8

Thank you very much. Good afternoon. Two questions, please. You formed a new joint venture with Adani Green in India during the quarter. Earlier this year, when there was the Financial crisis with the Adani Group.

Speaker 8

I think you had said that you would likely slow down that Indian expansion and wait for the outcome. Can we presume that you're satisfied with that group's financial situation and therefore back to normal in terms of Total continuing to invest in Indian Renewables. And then the second question on chemicals where Obviously, it's a weak industry. Your 9 month volumes are down. When you look at the balance of new capacity versus this weak demand picture.

Speaker 8

What is your expectation for that business over the next year? Thank

Operator

you. Okay. On India, I think, again, what we said in the beginning of the year is that we wanted to have a clarity on the situation. We have engaged with Adeligroup. You have noticed that what we've done, in fact, for me, you should make a difference between we are shareholder of Adeligreen, not Adeligroup.

Operator

Adeligreen is a strong company with a large base of assets. The question for us is, how do we continue to contribute to the development of a TENIGRIN? We could do what we have elected is to do it through a GB between Adelizin and ourselves. So let's be clear, this is a venture we have direct access to the assets, which is fundamental. So it's not putting we didn't put more money in Adeligreen as a shareholder, but we I made it and we helped and we contribute to the development that we've been making access direct to the asset.

Operator

So for me, that's and then we've as a portfolio, we share part of this portfolio, the equivalent of 1.4 gigawatts together, but 50% of it being owned by TotalEnergies. So TotalEnergies is protected and I think it helps Orko to consolidate AladdinGrid to continue its growth, which is as a shareholder of AladdinGrid or interest. That's the first point. And we are, I would say, in the conditions in which we have discussed the deals are attractive in terms of metrics for TotalEnergies as a company. On the Chemicals in Europe, we know that Chemicals in Europe are clearly quite linked to GDP.

Operator

The GDP in Europe is softening more than that. So you have less demand in Europe. So like it's it was very good 2 years ago. Today, it's the reverse of it. So that's part of the value chain.

Operator

Our exposure to Europe in Chemicals is not so strong. I mean, they declare for us the Polymers part compared to the other part because in fact what we make more money on refining and on NAFTA. We make less money on the petrochemicals in Europe. All our strategy, by the way, is not to develop any new capacity in Europe, be clear, we did not announce, I think, since I am I have been in charge of refining and chemicals 12 years ago, I don't think you announced a single extra capacity in Chemicals of Total Energy in Europe. I think you have even more listened to either closing or selling some of them.

Operator

So I don't think it's best place to invest, to be clear. All the strategy in Chemical of TotalEnergies has been more either based on ChipFit stock either in the U. S. Or in Saudi Arabia with Amir. But Amyrale is targeting markets in China, India on the East.

Operator

So that's where the demand is. So I would say for TotalEnergies, in fact, it's more managing the historical portfolio in the best possible way. Again, when I'm looking today to my to our position in refining, petrochemicals and polymers in Europe, all that is quite positive today. That's why it contributes to a good return on capital employed. So that's what I could comment.

Operator

For next year, I don't expect much more. Okay?

Speaker 2

The next question is from Biraj Borkhataria of RBC.

Speaker 9

Hi, thanks for taking my questions. Two quick ones, please. The first one is on your debt profile. Could you just confirm what proportion of your gross debt is on sort of long term fixed interest rates? And then the second question is on the recent U.

Speaker 9

S. Win bid. There's a provision

Speaker 5

in the

Speaker 9

PPA that Just the it goes up with industry specific inflation. I was wondering what you assume inflation wise For that kind of project from here to FID? Thank you.

Speaker 1

Yes. Perhaps I will take the first question. More than 80% of our debt has been fixed a couple of years ago. So that means that we benefited on that portion from very low coupon, around 3%. So the remaining is flexible.

Operator

Clear answer. Second answer is quite clear. But we have between today and the FID, we have more only 3 years to work. So you will have inflation over the next 3 years. So it might be, I think, let's say, 5% to 10% probably in the 3 years, we'll see.

Operator

But again, there is a provision which I would say protect us until the FID event, of course, we'll take the risk of execution, but I think it's a fair protection, which is offered by the New York State to the investors. We were it's one of the elements of the bid and of the discussion negotiation we managed to obtain. So we are satisfied. Again, we'll see if it's higher than that, but we don't expect much more than that.

Speaker 9

Okay. Very clear. Thank you, both.

Speaker 2

The next question comes from Martin Ratz of Morgan Stanley.

Speaker 10

Yes. Hello. I just want to follow-up on the question that Brad just asked about the debt. Because interest rates continue to rise and rise and total bonds are not escaping that. Some of the longer term debt that you hold is now yielding 6%.

Speaker 10

And I was wondering, in addition to the mechanical impact that this may have on the interest expense every quarter, how this affects possibly sort of any investment decision making particularly in the new energy areas. I mean the question has been put to me, can we have an energy transition when U. S. Treasury yields the 10 year U. S.

Speaker 10

Treasury yields are 5% and it's kind of a sort of an intriguing one. Therefore, can I ask you how are these rising interest rates impacting your investment decision making? And also What are you seeing in others, particularly in sort of CapEx intensive areas like renewables? What's the impact that you're seeing?

Operator

The answer is quite clear. You transfer the interest rate to the customer. I will tell you, Jean. So the question is, does it affect the space of the transition? It might, but it's clear that it's against the idea that it can contribute maybe, by the way, to have a segment which will stop going price going down and down, but it has already an impact, in fact, I can tell you.

Operator

In fact, in the U. S, I take the U. S. As a good example, you have the IRA on one side, which has, but we also have the obligation to make projects with solar modules being manufactured in the U. S.

Operator

Has an impact on the cost of the project. So this cost of the project today, when we discuss and renegotiate by the way, we renegotiate PPAs with our customers, it has an impact on the high side. So today, you signed the last PPA we signed recently with Saint Gobain in the U. S. Is reflecting, let's be clear, higher cost of manufacturing in the U.

Operator

S. And higher interest rate because when we bid, we don't use a 3% our total energies for when we price a project in the in Weibo. As you know, we are pricing a higher one, which makes us more profitable. We compete with people. We have competitors which have, in fact, a higher cost of debt.

Operator

So we use their cost of debt and we will maybe we benefit from back to win the deals, but we keep the difference for us, in fact, as a company. So I would say, yes, you're right. It might affect the pace. But I think, we are back in a normal world. It's much better for the world economics to have a 5% interest rate well rather than a 0%.

Operator

I think, in particular, for our companies, oil and gas companies, with a strong balance sheet and cash delivery, I think it's we have it was for me the anomaly where during 5, 10 years having the 0% work after the 2,008 crisis was a week to absorb a bit and ban the COVID. But for me, it was more of the anomaly than the contrary. So I think for me, it's a new normal. We have to integrate it. It will have an impact probably, of course, on the competitor, which have a very we have more leverage than us.

Operator

And from this perspective, the strength of the balance sheet of TotalEnergies is an asset. And I think that's why we continue to part of the cash flow will continue to strengthen the balance sheet.

Speaker 10

Very clear. Thank you.

Speaker 2

The next question is from Lucas Herman of BNP Paribas.

Speaker 5

Yes. Thanks very much, gentlemen. A couple of straightforward ones, I think. Firstly, just on your reporting for the last as long as I can remember actually, 20 odd years, divisions may have changed, but your reporting method has always been consistent on a quarterly basis. And yet today, you've elected to alter it.

Speaker 5

I just wondered whether there was any particular reason that you're disclosing more around cash or other items with the things that you're trying to emphasize to us. And the second question, just staying with that, some of the adjustment items. In Integrated Power, I noticed that there's a €400,000,000 €420 odd 1,000,000 asset impairment provision charge taken this quarter. Just if you could provide some further detail on what that impairment concerns? That's it.

Speaker 10

Thank

Operator

you. On the second one, it's written. I think this business that we have impaired some of the goodwill when we made some acquisition linked to customers, in fact, because in fact when we made the acquisition of some of these smaller our small companies are worst part of the goodwill was allocated to the customer portfolio, but the customer portfolio has matured, which is quite high. So it's a certain point. When we reviewed the situation, which we do regularly with our auditors, we decided that this goodwill might be it would be it's better to interpret.

Operator

I mean I

Speaker 1

No, no, no, no, no. That's

Operator

exactly the case, yes. So that's what we've done.

Speaker 1

It's a normal review that we have to do and so we think that's, yes. Okay.

Operator

Then or it's again for the CFO, but I think to be clear and transparent with you, it's we had some exchange like other companies with the SEC, but the as you know, we are using non GAAP KPI, I would say, indicators. We have to reconcile the GAAP and the non GAAP. So it was quite a formal exchange during the last month. And Jean Pierre has spent some time, but honestly nothing fundamental. At the end of the day, we concluded with them, but they wanted to have a clear reconciliation between the GAAP and the non GAAP.

Operator

And so some of the tables has to be just complemented. I mean

Speaker 1

Some has to be removed and some has to be

Operator

cleaned up. So that's why we have that moving, that change, that changes. So it's honestly, we reviewed it with the Audit Committee and the Board, and there was nothing major. It's more formal. But I think they're all right.

Operator

We have a gap, and we need to give clarity between the IFRS, I would say, IFRS referential and what we use. So that's the reason why you have seen some moves. But it's thank you, Luca, because it demonstrates that you are very precise in reading all our reports, including all the pages and all the tables. So I recognize your long standing position following TotalEnergies. But I know you for almost 20 years.

Operator

So that's why you are right to support. But again, it's modernization in line with good practice, and we support

Speaker 5

it. Yes. Sadly, it's also modernization of the mold model as well, Patrick. So thank you. That's a lot of work, but there we go.

Speaker 5

Thank you very much.

Operator

Thank you, Luca.

Speaker 2

The next question, sir, is from Kim Fusier of HSBC.

Speaker 11

Hi, good afternoon and thank you for taking my questions. Firstly, I wondered if you could talk about the 3,500,000 ton SPA with Qatar Energy on LNG volumes. Some people have noticed that 27 year duration, and it seems like other off takers have signed shorter term contracts. And it also takes you well beyond 2,050. So I just wondered whether this was a requirement from Qatar Energy.

Speaker 11

And also the LNG will be delivered in France, I believe. Can you say whether there was a destination clause or whether you can redirect the volumes? Secondly, I wanted to ask a broader question on climate. I wondered if you could share your expectations of what Total and the broader oil Could potentially announce that COP28 next month. You've already got a target of reducing methane emissions by 80% By the end of this decade and that's Paris of mine.

Speaker 11

So could the ambition be to share your best practices on methane monitoring and emission reductions and encourage Are there oil companies to do the same? Thank you.

Operator

Good question. Thank you, Kim. The first one, no, we aren't alone. The 27 year duration, in fact is for all the LNG offtakers, all the partners of Northfield East and Northfield South, which were the last new ventures, we're asked to take their share of offtake on the 27 years. So we are not the only one.

Operator

All my colleagues and you will see by the way, I think they issued over Presque Isle is with or 2 Euro over European companies. It's only the German companies which are not part of the ventures of the developments which have managed which have decided to elect for 15 or 20 years. So that's up here. By the way, honestly, 26 plus 27, it makes 2,053, it's not so far beyond 2,050. And by the way, in our portfolio and in the net zero company that we described in our last Sustainable and Climate report about total energy in 2,050, you still see in the mix of our in our portfolio, we can be some LNG being there, even quite a large share of LNG.

Operator

It's a gas is there in the transition. So we have the operator. Will it go at the end to France or to Europe? I think yes. I think I don't see if you could manage again, a complex power, electricity markets in Europe with a lot of renewable without having flexible assets.

Operator

I'm not on that, I'm quite clear. So it's not France, by the way, who committed. It's total energy. So we are comfortable. And if we need to redirect part of this LNG to our country, I think, Kukatari and ourselves, if it's our interest, we'll do it.

Operator

So no in fact, these 27 years is aligned on the duration of the concession into which we enter on NFE and NFS. It's just a pure alignment between we invest. We take 3 years to invest and then we have 27 years remaining. Covers, in fact, the full concession, which is, I think, a 30 years concession. And I can tell you, we are very happy of the conditions in which we have I joined this NFE, NFS venture in Qatar.

Operator

So there, that's where. So can we redirect? Yes. If it is the interest of both parties, we will have in the agreement, we can redirect with Qatar agreement, it might be the case. Climate, Climate and Defense, yes, we have strong targets.

Operator

We are leading, it will say, recently, I can just confirm to you that we have entered into a major job. What Suttell and Joubert would like do in COP 28 is to have more national companies, in fact, joining the IOCs because TotalEnergies and the others, all, I would say, the OGCI companies, we are at the forefront of this fight. We have already set the target. On methane, my motto is near 0 machine by end of by 2,040, in fact. It's been stop flaring, stop venting and in particular, using technologies to detect fugitive emissions with drones, which we do in all our assets.

Operator

And we are just in the way to share these technologies with some national companies. And we are signing some agreements, which will be disclosed before COP, so we have signed 1 or 2 already, but it's we have to respect we will or we can't wish to announce them. So it will be done. So we are on the TotalEnergies committed in order to propose these technologies, measuring with, again, not only XL5, but with directly emissions to cover assets and not only from Total, but larger assets from national companies. So we promote this technology.

Operator

We do our job and we'll be able, I think, to announce I'm sure to announce some of these in some countries where we have also obviously, we are operating and we have good relationship with national companies, we will offer them and deploy this strategy. So we are doing our job on this perspective. And I think it's very important for the rural oil and gas industry to engage more national companies in these efforts.

Speaker 2

The next question comes from Alastair Syme of Citi.

Speaker 5

Thanks, Patrick. Any updates on Namibia you want to share? I know you updated at the recent Capital Markets Day, but you're right in the middle of your assessment. And So I guess how's the production test of Venus 1A looking? And then secondly, can you just the question Well, Deck, can you just remind us on the hybrids?

Speaker 5

I mean, they are perpetual, but I think as they start to be callable, the coupons change. So can you just talk a little bit about that mechanic, please?

Operator

Okay. Jean Pierre will come back on this hybrid explain you all the detail, what I know is that the cost of the IR rate is quite interesting. So let's jump here. We'll give you some details. In this world of, I would say, higher interest rate.

Operator

On the other side, in Namibia, no, we don't have any I can tell you that we started the Mangeeti well, which is a discovery in the exploration well. Sorry, not a discovery, it's exploration. The wells drilling has started 7 October, I think, beginning of the month. So it's on its way. So nothing to report today.

Operator

It takes 2, 3 months to drill. And the test on the second well on Venus, I just started the test will start this day, so this week. So sorry, but it did not our drilling operations did not follow our quarterly calls, so you will have to wait for more news. But again, as I said recently, let's be clear, we will develop we've finished discovery. There is a development.

Operator

So it's a matter for us now to try to assess the full size of it and then to find the right scheme of development, considering that there is quite a good iCGR. But again, it's optimizing the development that we are looking for the oil development again on business. So we'll come back with to you, I think, probably in February, when we'll have the annual results, we'll be able to disclose more information about it. And I think we'll have the results on both these wells and to have more clarity on Venus expansion. We plan to do a 3rd well after in the north, but we'll have a lot of data.

Operator

Okay. Hybrid?

Speaker 1

Hybrid, yes. That's true. We benefit from very competitive hybrid bond portfolio because on average, the is 2.3%, so very low, very, I would say, cheap equity. So the problem now is that, as mentioned by Patrick, the refinancing has become more expensive, 6% more or less for a maturity of 7 years. So we used the flexibility offered by S and P to be able to reduce by 10% the global portfolio without losing the equity treatments, we use this flexibility because in the Q2 we have 1 tranche maturing.

Speaker 1

So we decided not to refinance this one. So now we have to say, we have to see in the future how we can continue to lower this portfolio hybrid portfolio without losing the equity treatment.

Operator

So it's

Speaker 1

a split I have on my agenda for the coming months.

Operator

Fundamentally, we will use a 10% flexibility quarter after quarter or year after year in order to, at the end, I would say to illuminate. To respect, of course, the rules, but we'll do it year after year, considering the low yes, is it clear? So Jean Pierre, just to

Speaker 5

be clear, the bit that's callable, does the coupon change on that element or Stay the same.

Operator

No, it is stable.

Speaker 5

Yes. Okay. Thank you.

Speaker 2

The next question is from Henri Patricot of UBS.

Speaker 12

Yes, Henri Patricot over here. Thank you for the update. Two questions from my side. The first one, on the outlook for OE demand and refining margins, because we've seen quite a sharp drop In refining margins, over the past month, obviously, from a very high level. Just wondering if you're getting a bit more concern about the outlook for oil demand and refining margins at the moment?

Speaker 12

And secondly, I wanted to ask you about wind and at December on the European Wind Industry, we've seen the commission this week setting up more actions to support the European industry. I wanted to have your initial assessments of these actions and what will you see potentially better dynamics for European win and acceleration in win over here? Thank you.

Operator

Well, 2 general questions, complex one. Oil demand, oil demand in 2023 is strong, an increase of almost 2,000,000 barrels per day, mainly coming from China, by the way, 70 more than 2 thirds, 70% more from petrochemicals on one side and from as well Kerosene jet fuel, the our airline activity is back almost to double, not fully. So you still have, in fact, in 2024, some demand from the airlines in the world to come back. So we are not yet fully to be a label pre COVID on the jet fuel demand. So I don't see what you would stop, to be honest, because it's there is a call for move in this planet.

Operator

And secondly, I think the IEA has announced an additional 1,000,000 barrel of oil per day increase for next year. So I take this a point, I think all traders agree with it. So it's not 2, but it's 1. So continuing to see a demand increase. And again, by the way, what struck me is despite the doubts that some have on the Chinese economy, you said this year, we have plus 2% and again, 70% of it is coming from China.

Operator

So when China will come back, I read yesterday that the Chinese government is thinking to I make an incentive package, an macroeconomic incentive package raising more debt in order to give inputs to the economy. As we complain about the growth in China, but it's 5%, and it's not 1% or 2%. So I think I'm still a believer that Chinese growth will drive again growth. And in fact, when you look to by the way, on oil demand, I will give you a clue. It's not very complex.

Operator

You take the last 20 years, you look to the increase of the population of the world, plus 1.2%. You look to the increase of the oil demand. Until 2019, because we have a gap, it was exactly plus 1.2%. In fact, the old demand is not related to GDP, it's related to the growing population because it is a fundamental factor. It's why, by the way, transition will be complex.

Operator

A growing population, because this 1.2% 1% is still announced for the next 20 years. So 1% on the planet, it requires more energy, a better way of increasing their life standard and that's more energy. So that's so it's very aligned. You can see that. We will make a presentation soon on our Total Energy's outlook on November 13, and we will explain that again.

Operator

So that's the demand. Refining margin, refining margin is different. It depends on the market, supply and demand. We've seen them going to the roof during 1 or 2 months. During summertime, everything was under constraint.

Operator

I think you still have, honestly, in this downstream business, an impact on the ban of Russian products because all that has put Russian crude oil on one side. So the quality of the crude oil is different in the refining system. And also on the products, you have disorganized, I would say, as a transportation, transportation costs are more expensive. And so today what we face is that you see the gasoline demand the gasoline spread is down quite low, because again, the gasoline demand in Europe is, I think, impacted by the high price. You have an elasticity of the demand to the price.

Operator

So when in the Q3 you've seen $90 per barrel, dollars 95 per barrel plus a strong margin of refining, the customers, when price is high, they save energy. They reduce their consumption. So it is what we have observed. And so today, the gasoline demand is softening. So the the spread crack is softening.

Operator

But the diesel crack is still high, very high, dollars 30 because there, on this side, you have an impact of the fact that we have less heavier crude, so it's more expensive to produce years old. And so you had some warning, which I think I exaggerated from the IEA, but we might have a lack of diesel. We'll not have a lack of diesel for sure. You know why? Just because refiners are smart people.

Operator

When you have a strong crack on diesel and a low crack on gasoline, you adapt your refinery and you make more diesel and less gasoline. So it's quite easy business. And we have the flexibility. So today, our machines are running to make diesel. And so no fear, but a good benefit.

Operator

So yes, it has suffered, but I would say I would expect a margin around $70, dollars 80 per ton for the next month, it's a good bet. I would be surprised to see them coming back very low because, again, you have some inefficiencies in the system because of a Russian ban, not only on oil, but also on products. That creates some, I would say, increased costs. On the wind, yes, wind European Commission, and it's more the European Wind Manufacturing Industry, which is complaining, if I'm reading carefully, rather than the European Wind Development Industry. The developers are still willing to develop with lowest cost because that's a good question to the commission, I think.

Operator

Like on solar, do they want to protect the consumers by continuing to have access to the lowest possible cost of renewables or do we want to protect the manufacturing industries? That's the question. Until now, in the last 10 years, it was always the EU has favored consumers, in fact. And I've seen a call from the solar developers calling for not protecting them. So we'll see.

Operator

Again, for us, obviously, at the end of the day, in the U. S, when we are asked by the IRA to use U. S. Goods, we are using U. S.

Operator

Goods. In the offshore wind project in New York, we have made a deal with GE. We secured the price and the cost, by the way, of the turbines with GE, which we have built a new manufacturing plant in New York, creating local jobs, all that has a cost, but it has been integrated in the CFD, which has been accepted and agreed, negotiated. So I think so up to we will adapt ourselves. We are flexible.

Operator

That's why, by the way, we should not anticipate too early this type of CFDs is insurances. Because if you take the insurances too early, then as the environment is moving, you could be trapped in something which become less profitable. So it's because wind offshore wind is taking more time. I'll be excited about it. At the end of the day, I can confirm to you that I see more and more a goldwind Chinese wind farms being built in Europe and in the world.

Speaker 12

Thank you.

Speaker 2

The next question is from Bertrand Hodee of Kepler Cheuvreux.

Speaker 13

Yes. Hello. Thank you for taking my question. 2 very quick ones, if I may. The first one on Namibia.

Speaker 13

You Close at the first dual DST test. So on Venus was in line with expectation. Can you share a bit more color on that? You've hinted that If it was 5,000 barrels of polycrystalline per day, it was not good. It was 15,000, it was okay.

Speaker 13

So can you give us a bit of a color and whether it was above 15% or below 15%? That is Essentially my question. And then on U. S. Offshore wind in New York, can you disclose in dollar per megawatt What is your current CapEx estimate before any inflation provision?

Operator

No, I cannot fill your full XL5, right, Pierre Bertrand. Sorry to tell you that. I didn't know that 15 was a threshold. It depends from no, honestly, I think we told you the truth. It's in line with our expectation.

Operator

That means that it's in line with the assumptions we have taken to plan the development. So if it's in line, that means that we are happy. We introduce we get the data. They confirm the productivity at the production per well. And we know that with this level of production very well, we can make a profitable development.

Operator

So I don't want to comment more one test because we have plenty of test coming. And so let's continue the job and you will have to rely on what we say. But as we are listed companies, generally, we say the truth. And then on the second one, I think it's something it's something that I don't remember, to be honest. So dollar per megawatt RO before any CapEx provision.

Operator

We don't work like that. So we have a CapEx contingencies, this is the way we work. We work in offshore wind in the same way that in all areas on our side. We have an experience of offshore wind of projects offshore projects. And you know that when you make an offshore project, you don't stick with only the EPC contract, but you are taking some contingencies.

Operator

And when we communicate in Oil and Gas on the CapEx, we can't communicate always including contingencies because we perfectly know but in Oil and Gas, when you make a project, things will not be exactly the sigma of the EPC contracts. And this is one of the mistakes which is done in this industry by some of the competitors which believe that you make the EPC and you will execute rightly the EPC. And it's why today you have some EPC contractors, which are facing difficulties because they have huge pressure on them and they are obliged to announce losses. No, it's not a way. If the sustainability of this model business model like we've done in the oil and gas industry is to understand, but to make a project because your EPC contractors are also surviving and just surviving, making profits.

Operator

And that's why when we execute a project in Oil and Gas, we know that we have contingencies. I remember the first time our offshore wind developers came to the Executive Committee, where I mentioned it was 2% of provision. We were laughing. No, no, offshore, it's at least 10%, and we know that by experience. And I will tell you even that our experience in Sea Green in steady installing 100 wind turbines offshore is much more complex, but installing 1 big offshore oil platform.

Operator

So it's including provision and we make all our projections and negotiation with the right provision within our CapEx. Thank you.

Speaker 5

Thank you.

Speaker 2

The next question is from Paul Cheng of Scotiabank.

Speaker 4

Thank you. Good morning Good afternoon. Two questions. One is really short, maybe it's for John Paul. 3rd quarter, D and the effective tax rate, they call it round number 45%, seems a bit low even Taking into consideration of the lower contribution from North Sea, is there any one off benefit in tax in the quarter?

Speaker 4

And also more importantly that based on the current market condition, what is your expectation for the division effective tax rate in the 4th quarter? Second question, I think this is for Patrick. We have I've seen a pretty substantial reduction in the renewable diesel margin over the past several weeks and that the wind price in the U. S. Has been dropping and we have also seen the LCFS price we remain relatively low.

Speaker 4

Does this market condition in any shape or form impact your thinking of the investment in the alternative fuel by renewable diesel and SAF. Thank you.

Operator

In fact, as Jean Pierre told you the first question, it's not only the mix lower NOC is the fact and it's more important and we'll come back to you, I think, in February, that the new barrels that we are producing like in Brazil, like in Iraq, like I think there was another example in Europe

Speaker 1

In Azerbaijan.

Operator

In Azerbaijan, in fact, have a lower fiscal burden than the declining barrels from the North Sea. So it's interesting for you because that means that there is a trend in our portfolio with new barrels and higher margins or lower tax. To give you the real figure for Q4, I mean, it's premature. I cannot guess on that. As you know, we are making quarterly results.

Operator

And generally, the last quarter, you have some alignments. But to come back, is there any one or tax? So Jean Pierre, can you confirm

Speaker 1

the way? I see the 2 main factors in my speech. So once again, the weighted average high barrels versus high tax barrel versus low cost barrels And the fact that we are now more attractive by which

Operator

in our portfolio. So there was no one. On the second one, the U. S. Refining market and LTFS.

Operator

As you will notice as you probably noticed, Port Arthur was not really running in the Q3. We had an issue. So I've been we have more worked here, on restarting, you look forward after with this long haul and it will restart by mid November by taking care of the margins in the U. S. Because when the refinery is not working, there is no margin to capture.

Operator

So I think for me, from my I mean, I will dig. Thank you for the question. But I still see every day quite a high margin in the U. S, even if it's lower, again, like in Europe. We went to the roof.

Operator

It was around almost not far from $200 per ton, I think, which we never seen since I am in this company during 1 quarter, it's softening today, but it's softening remaining around $120,000,000 $150,000,000 So it's still very high. Does it affect Renewable Diesel and Staff? No. Because in fact, all these businesses today, they are regulated, in fact. They are somewhat regulated.

Operator

And somewhere in Europe, in particular, at the end, the staff price is more guided by the penalty that somebody will pay if he does not fill the mandate rather than the demand and supply because today, in fact, on the staff, the supply is short of the demand somewhere. So you're still running behind. So it's more the it's a regulated business somewhere. And as the penalties are quite high, it does not impact this directly as a business. In the U.

Operator

S, we don't make SAF today. So I'm not able to come back to you on this one. We plan to produce SAF in the future in Port Arthur, but we don't do it today. So I cannot help you to understand the niche market in the U. S.

Operator

Today specifically.

Speaker 4

All right. Thank you.

Speaker 2

The next question, sir, is from Jean Luc Romain of CIC Kit Solutions.

Speaker 8

Hi, good afternoon. Thank you for taking my question. It relates to your acquisition in Germany. I was wondering whether the electricity that you will purchase on medium term contracts Will it be accounted for in your power capacity or in your power sales? Or will that work?

Speaker 8

Will it be only an intermediary margin?

Operator

It will be a sale, but not a capacity. We don't own the capacity. We manage the capacity. As you know, we are honest people. So we don't invest in the capacity, but we have access to some capacities, which is a good thing.

Operator

And then we'll bring it sales because we are selling it for sure. We are selling it to customers. And we might have even I think in the portfolio, we have 2 gigawatts out of the 9 which are under medium, long term PPA. So that sales, which will be reported as sales, but not as capacities because we don't earn all the capacities. So that's the way it will work.

Operator

Like in LNG, you have some reporting in the sales and we don't report when we have it's like a big long term PPA, SPA that we have with the U. S. LNG Cheniere. We don't account for the capacity in our production because we don't produce it, but we account in the sales. Same mechanics, but parallel is the right one by the way.

Speaker 8

Thanks very much.

Speaker 2

The next question is from Jason Gabelman of TD Cowen.

Speaker 14

Hey, good afternoon. Just one follow-up on CapEx. I think you mentioned both the oil sands divestment and the sale to Couche Chart, we're closing 4Q, which implies about $6,000,000,000 Divestment proceeds coming in. And in light of that, it seems like reiterating the $16,000,000,000 to $17,000,000,000 CapEx range for 2023 would be a bit high. So I was hoping you just could square those 2.

Speaker 14

Thanks.

Operator

Well, no, it's not high. No, because it's not so high because we spend organically €5,000,000,000 to €5,000,000,000 €6,000,000,000 per quarter. We are today at the end of the quarter 2016. We spent €5,000,000,000 to €6,000,000,000 per quarter. We'll divest, but we have 1 or 2 acquisitions that I mentioned which are coming in the quarter as well.

Operator

So 2016, 2017 seems to be it's not 2016, 2018, by the way. We by 16, 17 this morning. So we I think the 16, 17 seems to be to us the right range. But we will explain you that in the annual quarter. So take it as it's I think we have a good view on where we should land.

Operator

All right. Thanks.

Speaker 2

The next question comes from Alessandro Pozzi of Mediobanca.

Speaker 15

Good afternoon. And just one question on the macro side and I guess in a way it's linked to the recent offtake agreement in Qatar. This week, the IEA has published the World Energy Outlook and they downgraded again the gas demand for 2,050. I think if you look at the APS, it's down 40% gas demand. I was wondering, is this versus 2022?

Speaker 15

Is this a concern for you blocking such long term contracts? Or do you think the IA remains far too bearish On gas demand?

Operator

No, I would tell you, I don't know who is right. It's just a matter of IA. It's a matter of positioning of your projects. In fact, for me, all that is driven by the position of in the cost period curve of investment in Qatar. In Qatar, you are 1st quartile.

Operator

So I can tell you, producing LNG in Qatar even by 2,050 will be more efficient than in many places around the planet. So even if there is a reduction of 40%, you still have 60%. And in the 60%, EBITDA will be perfectly positioned. So in fact, let's be clear, and this is the whole strategy of the company, to protect all our because you need to make long term investments in energy and in particular, but in so all, the philosophy of our portfolio is guided by low cost, 1st quartile assets because there, whatever will happen on the demand, either the demand will diminish as planned by VIA. We are protected.

Operator

You as investors are protected. There is no problem. So my question my answer to you is not is yes, there are uncertainty of the demand on oil, on the demand of gas, on the demand of electricity. The key driver of the world strategy is driven by the cost miracle and we are having 1st quartile projects. And I can demonstrate the Qatari projects among the best of the world, if not the best.

Operator

And everybody knows that because it's a huge gas field produced 50 meter water depth conventional with quite a high content of condensate, as you all know. So at the end, it makes this project very resilient. And even in 2,050, they will produce and even beyond because the IEA does not tell you there is no gas. There is still maybe 60%, maybe 70%, maybe 50%. We'll see.

Operator

But so that's our answer. There is no stranded asset in the portfolio of TotalEnergies.

Speaker 15

So you're happy for such a long term agreement on Qatar

Operator

The cost of maybe

Speaker 15

on some of the other projects you prefer maybe a shorter duration?

Operator

No, no, but you know, systematically, when we invest, we invest in oil projects or LNG projects in only if they are in low cost, less than $20 per barrel CapEx plus OpEx for oil. And for LNG, they must be 1st or second quarter also. That's a protection. And otherwise, we don't do it. We don't do it.

Operator

We just we have a large portfolio of LNG projects, and we select them if they are on the right side of the cost break, because this uncertainty of the demand we admitted, it's part of so the answer we give you is low cost.

Speaker 5

Thank you.

Speaker 2

There are no further questions registered. Back to you gentlemen for conclusion.

Operator

Thank you very much for your attendance. We will give you a next meeting point with you will be on February 7. We'll make the annual presentation in London in presence because we would like to meet you again. COVID is behind us. So it will be probably 7th February in the morning.

Operator

Renault will give you all the details. Thank you for your attendance. And as always, you are not surprised by Total Energy even in fact, we are surprised always positively. So we'll continue. Thank you.

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Earnings Conference Call
TotalEnergies Q3 2023
00:00 / 00:00