TotalEnergies Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 7, 2024

There are 17 speakers on the call.

Operator

Thank you, Renaud. Good morning. Last year, we had to deploy 2 fatalities. As you know, and these two tragic events remind us that our first duty, of course, is to make sure that everyone returns home safe every day. 1 fatality occurred in France in a retail station where our contractor, Isidore, passed away when performing some excavation work.

Operator

The safety moment I've chosen this morning is about second fatality, the one which occurred in the Zealand refinery in the Netherlands, of course, not to describe just to describe what happened, but most importantly, to share with you what we learned from this tragic event to improve our operations. On February 3, a contractor passed away while he was performing a catalyst and loading operation inside the reactor. His name was Thorsten. He was 50 years old. Changing a catalyst is a very sensitive operation as the catalyst is flammable in the presence of oxygen of air.

Operator

So you must first inert the reactor with nitrogen before the intervention. The catalyst and loading operation is performed, as you see on the slide by a team of 3 people led by a supervisor. First, there is a diver who is the one entering into the reactor, fully equipped, of course, including with a lifeline to be pulled out in case of emergency. The second one is a second diver who is ready to dive in case of emergency. And there is also a controller who monitors the level of nitrogen of air and keeps constant contact by radio and by video.

Operator

And before entering into the reactor, of course, there is a video inspection to make sure that the situation is safe. At 11:15 on that day, the alarm was given by the personnel, and we learned that the diver was trapped by the collapse of some catalysts. Of course, the rescue team reinforced by additional members fully equipped, tried in turn to pull him out of the reactor, which you may guess from the slide, is 30 meter high. When the body went out, the team found that the diver had passed away. One fear is clear.

Operator

We couldn't keep operating this way with a human entry into an inert atmosphere, even if it is the industry standard practice. So we immediately took 3 actions. Of course, we immediately stopped worldwide all similar operations in the company. Secondly, with our contractors, HSE, specialists, technical experts, we reviewed alternative operating modes to avoid any entry human entry inside reactors for that kind of operation. And eventually, we identified and selected an alternative operating mode where you change the catalyst by water flooding.

Operator

What does that mean? It means that you fill they're reactive with water, and then you empty together with a catalyst. Of course, this is more costly because you cannot recover the catalyst to recycle it, and you have to dispose of the wastewater, but you will understand this is not really what is at stake. From February 2023, all replacements were performed without any entry. We carried out 21 replacement using water in 2023, and we will have another 14 on the 1st year of 2024.

Operator

We also keep working on further improvements in terms of vessel modification because you will understand that this vessel have now to support the additional weight of water. And of course, we are looking at utilization of robots. And naturally, we have shared these new operating modes with our peers. So let me now switch to the after the safety moment to the overall company safety performance. At Total Energy, we keep repeating this message.

Operator

Safety is more than a priority is a value, it's a core value. Of course, safety is a matter of culture, is a matter of leadership. It's also a matter of permanent improvement. And to track it, we measure several leading indicators that you see on the slide in terms of occupational safety and in terms of prevention of technological risks. So on the left hand side, in terms of occupational safety, you see that we track the total recordable injury rate and that this rate at 0.63 has been reduced over the last 5 years consistently, and that represent a reduction of close to 30%.

Operator

Having an injury rate well below 1 is not a given, believe me, notably when you see the industry trend since 2020. So we have been able to consolidate our position as a frontrunner on this indicator in our industry. How did we do it. Some key initiatives, I would like to highlight 1, which is our ability to engage our contractors with our teams to promote shared safety values. We have done it notably through what we call a program of joint safety tours between Total Energy Management and Contractor Partners.

Operator

These 2 are coming, of course, in addition to the daily visits we do with our local team on the field. In 2023, we recorded 10,000 of such joint safety tours across the company. Regarding the prevention of major accident and accident pollution on the right hand side, we're also progressing. Over the last 5 years, we have reduced the number of primary losses of containment you see on the site by 50%. And here again, we have been focusing on 2 main areas.

Operator

Of course, 1st, this is the management of the technical integrity through our maintenance friction program, but also through the implementation of digital tools to anticipate and prevent potential equipment failures. The second area of focus has been the implementation of what we call the safe operating principle, the SOPs, where we constantly train our operators on the basic rules to comply with when they perform very standard operations. So of course, to conclude, I just would like to say that we all know that safety is a daily battle, that we are all committed to do our best to protect our people, the environment and our assets. And now I hand over to

Speaker 1

Jean Pierre. [SPEAKER JEAN PIERRE ANDRE DE CHALENDAR:]

Speaker 2

Thank you, Bernard. So good morning, everyone. This year is a special year for TotalEnergies because TotalEnergies is celebrating in 2024, its 100 years birthday. So the company was founded, so, 100 years ago in Iraq. At that time, the name was company Francezepetrol.

Speaker 2

And since that time over time, the company has diversified, has adapted itself to deal with the environment, to deal with the society, to deal with the market. And it's, I think, with the same pioneer spirit that we used at that time in Iraq in oil exploration that we will build the energy system of the future. Indeed, over the last couple of years, we have engaged in a balanced energy transition strategy, as you know, anchored on 2 pillars. So oil and gas on one side and mainly LNG, as you know, and on the other side, integrated power. On the island side business, Total Energy plans to responsibly grow it's oil and gas production by 2% to 3% per year, predominantly from LNG, thanks to its rich, low cost, low emission portfolio.

Speaker 2

In the LNG business, we will leverage our top 3 global LNG integrated portfolio with leading position in regards in Europe, in U. S. Exports to develop a top tier LNG pipeline, and Patrick will come back on that later. In Integrated Power Business, the company is building a world class cost competitive portfolio combining renewable, so solar, offshore wind, offshore winds we have flexible assets, CCGT and storage, to deliver clean firm power to our customers. And as you know, with the objective to be positive net cash flow by 2028 with ROACE at 12%.

Speaker 2

So let's move now to the figures. So this consistent 2 pillar strategy has delivered, I think, strong results in 2023 in a robust environment, but softer price environment compared to the environment we benefited in 2022. We deliver, as you see here, a net adjusted net income, total energy share above $23,000,000,000 and an EFRF net income above $21,000,000,000 In terms of profitability, we had ROACE return on capital employed at 19% in 2023 and return on equity 20%. So that means that once again, total energy in 2023 was the most profitable major. In terms of cash flow, in 2023, we managed to deliver our cash flow at $36,000,000,000 with a strong contribution of all the different business segments.

Speaker 2

So E and P contributed to more than $18,000,000,000 $18,500,000,000 integrated power 7.3 integrated energy, sorry, 7.3 integrated power above $2,000,000,000 $2,200,000,000 I will come back on that later, and downstream at $8,200,000,000 On top of that, we benefited last year for strong working cap release. So cash in coming from our working cap around $5,000,000,000 But to be very transparent with you, some of this capital working cap variation CAME includes $2,000,000,000 of exceptional fiscal debt variation that will disappear in 2024. So how this cash has been used? So this $36,000,000,000 plus this $5,000,000,000 of working cap has been used. So $16,800,000,000 has been devoted to capital investment.

Speaker 2

I will comment later on this figure. $16,500,000,000 has been contributed to our shareholder return with cash flow distributions or payouts above 40%. Indeed, payouts increased from 37% in 2022 to 46% in 2023. And it's consisted in 7.1% increase in the ordinary dividend that we pay in 2023, plus $9,000,000,000 of buyback out of this $9,000,000,000 I remind you that $1,500,000,000 are directly linked to the Canadian disposal assets. And the remaining parts of the cash flow we generated last year contributed to continue to deleverage the company.

Speaker 2

We now net debt at $6,000,000,000 and leading to gearing end of last year at 5%. So now the scorecard for 2023. I think it's clear that we deliver on our objectives. So for Upstream production, the production increased, excluding Novatek by 2% to 2,480,000,000 barrels per hour equivalent. We have a strong contribution in terms of LNG production that grew by 9%, in line with the objective we had on that topic.

Speaker 2

Refining has a slightly better than expected utilization rates at more than 80%. So we guide at 80%. And so the final figure was 81. In terms of renewable growth installed capacity, so this capacity grew by almost 6 gigawatts between 2022 and 2023 at more than 22 gigawatts at the end of the year, leading and contributing to produce more electricity. So it's an increase compared to last year by more than 80% at 19 terawatt hour, broadly in line with the objective we had.

Speaker 2

So now on the emission side front, we reduced scope 1 and 2 from operated facilities to 34,600,000 tonne last year we have 2 main drivers. So first, we continue to be successful in our efforts in oil and gas businesses to reduce gas flaring. I give you the example that in Nigeria, for example, we completely stopped gas clearing at the end of 2023. And we are successful in developing energy efficiency projects. On top of that, in 2023, That 2023 was a more normal year in terms of CCGT utilization rates in 2022 for obvious reasons.

Speaker 2

We had a very strong addition rate for CCGT and so 2023 is back to normal. And this contribute, of course, to lower the scope 1 and 2022 versus 2023. Maintain for our operated facilities were reduced by 47% compared to 2022, surpassing our reduction targets. And another very important key factor, which translates into figure our transition strategy, it's the life cycle carbon intensity with a reduction compared to 2015 by 13% with a target we posted at 12%. So more energy, less emission, but also growing cash flow.

Speaker 2

We exceeded our CFFO guidance by more than by about $1,000,000,000 The guidance restated using the same price as for 2023 was at $35,000,000,000 And so the final figure, as I already mentioned, is at $36,000,000,000 in terms of investments, we invested the $16,800,000,000 last year within the guidance, And I will come back on that later. And CFFO payout already commented above the 40% at 46%. CapEx. So we remain disciplined in our CapEx, in our investments, with a total of $16,800,000,000 in 2023. We were very active in 2023 on the M and A side we have a very active portfolio management allowing to continue to enhance to high grade our portfolio.

Speaker 2

Because in this figure, dollars 16,800,000,000 of course, you had it's a net between organic CapEx around $18,000,000,000 plus acquisition, so $6,400,000,000 of acquisition and $7,700,000,000 of divestments. So this figure, this $6,400,000,000 acquisition. So on the Oil and Gas side, we have our entry for a 20% interest in Saba Mulu fields in Abu Dhabi. We have, on the LNG side, our effective entry in NFO and FS in Qatar and in Rio Grande project in Texas for LNG. On the integrated power side, it's the acquisition of the remaining 70% stake in Total RN as well our 34% stake in a joint venture with Casa Do Santos, a renewable developer in Brazil.

Speaker 2

And as you know, the main divestments are our exit, our disposal of our Canadian assets with sales to Cenkor and sales to Conoco and the sale of our retail network in Germany to Alimentacion Couche Tard. So very strong portfolio management last year with strong figures. In 2023, in line with our balanced energy transition strategy, I remind you previously. We invested more or less the same amount of money in low carbon molecules, so mainly integrated power, compared to what we did in oil. So it's the red parts of the pie compared to the red to the green parts of the pie.

Speaker 2

Another way we can look at it is that we invested as much in integrated and low carbon molecules as we did in new projects, in oil or in gas, new projects. For Integrated Power, the figure was $8,000,000,000 in 2023. Progressing, in particular, in implementing our strategy in the regulated markets, particularly in the U. S. And in Europe.

Speaker 2

So now moving to the highlights of 20 3 on our 2 pillars, all segments has been achievement and a strong performance last year, in line with our strategy and objectives. In Upstream and Gas, our production reached 2.48, sorry, 1,000,000 barrels per oil equivalent per day, benefiting from the startup in January of the block ten in Oman, of Apsharon in Azerbaijan in July as well, as already mentioned, our entry in Sarbo Blue in Abu Dhabi and our effective entry in the GDiP project in Iraq. The company completed the divestment of its Canadian oil assets in line with strategy to focus on low breakeven assets. For Downstream, we generated $8,000,000,000 of cash flow last year. And so we kept we were able by this result is or this figure is a result of the fact that we were able to capture high refining margins that averaged $69 per tonne last year.

Speaker 2

In 2023, we awarded EPC contracts for the AMRL project, EUR 11,000,000,000 contracts. So it's our petrochemical integrated complex in Saudi Arabia with Saudi Aramco that will come on stream in 2027. The company also announced the sale of some European retail network to Alimentation Coustard. And so we completed the German portion before the closure and the remaining parts, so in the Netherlands, in Belgium and in Luxembourg, it was completed early Jan 2024. So we pursued our growing strategy in LNG, especially in the U.

Speaker 2

S, where we once again we are the largest LNG exporter last year with more than 10,000,000 tonne of capacity and increased our future position to more than 15,000,000 tonnes per year through our entry into the Rio Grande LNG project. And its FID in July. We also reinforced our leading position in Europe with regards with a start up of 2 additional FSRU, so one in Germany, 1 in France in London. In Integrated Power Business segment, we pursue our profitable growth strategy with an additional 6 gigawatts of renewable capacity. And we are able to generate more than $2,000,000,000 of with CFO, dollars 2,200,000,000 compared to 1 something like 1 last year.

Speaker 2

That means that we are able to more than double the CFO generated by this activity over 2023. In 2023 as well, we accelerated the development or integrated business model in 2 key dergulating markets, the U. S. On one side, with the announcement of an acquisition of 3 CCGTs for 1.5 gigawatts capacity in Texas and in Germany, on the other side, announcing the acquisition of 2 German companies, 1, a top tier renewable energy aggregator and a leading battery storage developer. So we have built our upstream portfolio through the years with low cost in sustainable way, as illustrated, I think, by these two charts.

Speaker 2

So starting from the left, we go back to 2018. We are consistently reporting the lowest upstream production costs among all the majors, which is, I think, a structural advantage and all us to be resilient even in a low price environment. Our upstream production cost averaged $5.5 per barrel in 2023. It was $5.1 per barrel during in the Q4, benefiting from the divestments of the high costs Canadian assets. And that's why we targeted for this year production cost at $5 per barrel.

Speaker 2

So our portfolio is a low cost portfolio, but it's also built to last. And so it's illustration of the second graph on the slide. We have, I think, demonstrated the same consistency with our reserve that we had with production costs, as shown in that chart, we continue to replace our reserves, maintaining a strong and steady proved reserve life index of around 12 years over the last 5 years. And this position us as the 2nd among the majors. And in 2023, we achieved a strong reserves replacement ratio, well in excess of our production, so 141 percent.

Speaker 2

And a 2P, a proved probable with the Life Index at 18 years. So now moving to the Integrated LNG and Integrated Power segments. That's the 2 growth segments in our portfolio. That together contributed to almost $10,000,000,000 of cash flow in 2023. So we provide here some metrics comparing 2023 figures with 2021, for obvious reason, 2022 was an exceptional year in relation with the crisis between Ukraine and the war between Ukraine and Russia.

Speaker 2

And so that's my rationale behind the fact that we made this comparison in 2021 and 2023. So in 2023, integrated LNG generated $6,200,000 net operating income, $7,300,000 of CFFO, with all the metrics, in fact, growing compared to 2021, thanks to the growth to our portfolio, so 44,000,000 tonne sales in 20 or 2023 and benefiting for a higher LNG price environment. All in all, the integration the integrated LNG profitability improved at 18% OACE in 2023. So for Integrated Power, adjusted net operating income was $1,900,000,000 last year and CFFO slightly above $2,200,000,000 So that means that the gap between the NOE and CFFO is directly linked to the fact that during the Q4, we benefited from some dividends paid by some of our equity affiliates are mainly Clearway. So that means that the cash flow almost tripled between 2021 2023.

Speaker 2

And you see the production, it was 21 terawater in 2021, 30, 33 in 2023, with power generation from renewable nearly tripling 7% in 2023, 2019, in 2023. ROACE was at 10% in 2023, in line with our objectives that was set last year. So the last slide is a benchmark of Total Energy performance compared to our peers using 3 main metrics, so YJ, approved reserves Life Index, TSR and sustainability rating. So thanks, I think, to the consistency of our strategy, the strength of our delivery, we are competitively positioned versus our peers. So once again, Total Energy, you see here on the slides was the most profitable supermajor with the watch at 19% in 2023.

Speaker 2

On the reserve side, our proved reserves Life Index was 12 years, as I already mentioned, in 2023, which puts us number 2 among the majors. This is, I think, really a testimony to our continued success in exploration, resource development and active M and A and selective M and A. On the different note, Total Energy has once again the best in class statistics rating among the major, a demonstration that it's possible to be the most profitable major on one side and to be a leader in the energy transition on the other side. And lastly, our 5 years total shareholder return has averaged about 13% per year, ranking on par with our U. S.

Speaker 2

Peers and outperforming clearly our UK peers by a wide margin. Our ability to set and execute a consistent strategy, sustain a rich portfolio of opportunities, maintain the dividend through the cycle, like during the COVID crisis in 2020, when over cut it and more recently, significantly increasing shareholder distribution have all contributed to our strong TSL. So in summary, to terminate on this section, 2023 was a strong year for Total Energy, another big step in terms of shareholder distribution and balance sheet strategy. And on this positive note, I think I will leave the floor to Patrick.

Speaker 1

Good morning, everybody, for this event. I just as always, I'd like to see that slide because I think I should insist on the fact that we demonstrate. And I think it's because we are the most profitable, but we have the right to implement the energy transition strategy that we have decided. But it's feasible to remain at the top of profitability and to transition as well and including to invest a third of our investments in electricity. And also, by the way, and I it's important to keep a sustainable portfolio of oil and gas projects like we want to do.

Speaker 1

So it's an end strategy, it's oil and gas and low carbon energy, in particular, electricity. So just this time, I will not repeat the strategy, but in fact, it's true that the best way to execute to speak about strategy is to execute it. So 2023, I think Jean Pierre showed you we have executed it positively and 2024 will maintain that strategy and we'll have no big news. Sometimes I think total energy is a little bothering you, but it's better to be consistent and to for continued success. So and it's true that we have another way to demonstrate that and I mentioned that 1 year and a half ago N23 have reinforced the message.

Speaker 1

In fact, we have a company which delivering much higher cash flows with the same Brent than in the previous decade. You can see on this chart that the dot points of the last 5 years are quite well aligned by the way, but the $1,000,000,000 per barrel is much higher in terms of is more accretive than it was in the past. And I think that's the result of all the repositioning of the portfolio, the oil and gas portfolio, what we call high grading the portfolio, that's a reality. And we can see that, in fact, in the results, as and I think it's one of the new TotalEnergies. TotalEnergies was perceived as a defensive shares, I would say, which was, in fact, amortizing the low price of hydrocarbons, but now it's a total energy, it's also benefiting from high oil prices.

Speaker 1

And that's why we can have a more aggressive distribution policy to our shareholders. At the same time, the result is, of course, because we have the high grading of the portfolio, it's a breakeven of the portfolio. It's there again, it's under 25, it was 22 in 2023, but it's one of the clear, strong characteristics of our portfolio and the strategy. And all that has translated in something which is very new for us. It's a very low gearing, 5% gearing.

Speaker 1

So, a net debt of around only $6,000,000,000 And that's of course, a lot of capacity to engage in our growth strategy, 5 more 5 we want to grow our energy production by more than 5% 2 to 3 on hydrocarbons and more on the electricity side. It also offers us the capacity that the next cycles to be able to maintain the strategy through cycles, and this is what I think shareholders should expect from a company like TotalEnergies. Just few words about the market we'll face in 2024. 2023 was strong in terms of oil market, plus to an increase of more than 2,000,000 barrels of oil per day. Part of it was a recovery of the previous year, the COVID recovery, in particular in jet fuel in aviation and also in China because in 2022, in fact, China was still under the impact of the COVID, we exited from COVID policies long later than other countries.

Speaker 1

And in fact, so €2,000,000 was quite high. The IA is announcing plus 1.2 for 24, we share that view, which is people will comment it's lower, but in fact, it's normal. I would say it's back to normal. When you look to the increase of the oil demand from 2000 to 2023, the average is 1.2% per year. 1.2% per year, by the way, it is average growth of the population of the planet.

Speaker 1

So there is direct link because population and oil demand. So it's back to normality. So some people will comment because China is lower. No, in fact, it's back to normality. There is nothing surprising.

Speaker 1

And in fact and so we don't see still even if some people want some guru want to see a deceleration of the overall growth. No, in fact, the reality is that we are back to directing repopulation growth. And that's one of the key challenge for the energy transition. On the supply side, that's true that we have some non OPEC country, in particular in the Americas, it's the U. S, it's Brazil, Guyana, which are bringing some new oil.

Speaker 1

The OPEC is managing that new supply and demand, I would say, they have done very well in 2023, in fact, more or less stabilizing the price around $80 per barrel. Today, probably the market is supported by the geopolitical tensions in the Middle East. That's true. There is a more bearish thinking. But OPEC is still there, and I think the move of Saudi Arabia, but they are ceiling of 12,000,000 barrels per day is contributing to stabilizing this market as well.

Speaker 1

On the LNG side, I would say, of course, we've seen with the high prices a lower growth, but still 6% per year as an average 2015 to 2023. I'm convinced we will see a good year in 2024 again coming back. In particular, we see China. China grew has grown its imports by 11% in 2023 compared to 2022. Not yet at 71,000,000 tonnes.

Speaker 1

We are not yet at the level we were there in T1, we were at 81. So there is still room to grow. We see today the Chinese buyers quite aggressive. You've seen them signing a number of long term contracts, they still have to have a mandate to continue to sign. Some of them, we have also some discussion with some of these players to engage.

Speaker 1

So, they are willing to diversify, by the way, they are their source of LNG. And I would not be surprised to see, in particular, when GKM is around $10 per 1,000,000 BTU like it is today is a good driver. And I will not be surprised to see China coming back to 80,000,000 tonnes like they were in 2021, in 2024. At the same time, in the meantime, Europe has grown a lot and from 65 to 113, 114, 22, 113 imports of LNG because we had to replace the Russian gas. So that has been a big shock in the market, which is being absorbed.

Speaker 1

24,000,000,000 so we don't we expect a better demand. In fact, the tension will remain because LNG capacity increase is limited. There are not much new capacities coming on stream. We are identifying something like 8,000,000 tonnes, and part of it being Arctic 2, which will have a limited market, I would say. So in fact, you have a tension in the market.

Speaker 1

And if any of this plant has a problem, like we had 3 port 2 years ago, again, attention will be come back in the market. So there is not a message on LNG. Price are lower, good for demand, in particular, in Asia and China, limited additional supply, 24%. And in fact, I think this message will be repeated for 2025 as the same. It's only by mid-twenty six-twenty seven that really we'll see more supply coming on stream.

Speaker 1

So that's for the environment which is globally positive for Total Energy. The key targets, you've seen the scorecard for 20 3. So what are the key targets for 2024 and this summer? So let's summarize it. Upstream production, 2.4%, 2.5%, plus 2% excluding Canada.

Speaker 1

I will come back on that. Production costs, it was mentioned we will consolidate our advantage $5 per barrel. LNG sales above 40,000,000 tonnes. It's 30% equity, 40% long term supplies and 30% spot. So the spot of good value have a variation.

Speaker 1

We'll have a good utilization rate in refining because we have a lower program of turnarounds. So we are target 85%. The renewable cost installed capacity will continue to grow. We are on the pace of 6 gigawatt per year since last year, and we intend to execute. I remind you that the key meeting, we have 35 in mind in 20 5, so we will need to accelerate to 7 gigawatt.

Speaker 1

But we are on the right pace, I would say, that we wanted to reach. And more importantly to us, because it will impact, of course, the results. It's electricity net production. I will come back on it more than 45 terawatt hour compared to 33 in 2023. The emissions, we want them to continue to go down.

Speaker 1

So that's the 38.8 seems to be a little high, but I remind you that when we acquire gas our pipe oil plant in Texas, it will add some CO2. So it's a choice. The methane, it's a strong fight, leading the we are one of the leading company in this fight. Objective is 80%, but 2,030 reduction compared to 2020. The 50% was supposed to be achieved in 2025.

Speaker 1

We are at minus 47%. So we'll see if we have the ambition to reach it 50%. It's not linear because, in fact, it's project by project. So you could so for E and P, it's not linear, but 50% seems to it's the ambition to reach it 1 year in advance. And then the last indicator for me is the most important one.

Speaker 1

It's what we call the life cycle carbon intensity of our sales. In fact, there should be sales on that paper because in fact it's a way to translate strategy. It's translating ourselves to customer. It's recovering scope 1, plus 2, plus 3. And we have an objective to decarbonize, I would say, or to have low carbon energies in to sell energies with a lower carbon content fundamentally, it's 25% by 2,030.

Speaker 1

We are each year progressing. So this year, it was minus 13%, next year, minus 14%, more or less 1% per year. We will it's linked directly linked to the of course, more we will sell electrons, so better it is. For the cash flow, I will come back $34,000,000,000 in $80 Brent and dollar per menu, it's very a mistake, it's $50 per ton and not $60 per ton, dollars 34,000,000,000 net investments of €17,000,000,000 €18,000,000,000 we'll come back on it, preferred in integrated power and low carbon molecules and the commitment we took to our shareholders more in September, more than 40% of cash flow payout. So that's the objective.

Speaker 1

So coming on the CapEx side, we have a rich portfolio of projects either on hydrocarbons, oil LNG and also on the integrated power side. So we want to grow our energy production by 5% between 2023 percent 2028 percent and 2% to 3% for hydrocarbon. So there is no we need to invest to put this to all these nice projects into production. So we had a guidance of $16,000,000,000,000 $18,000,000,000 $1,000,000,000 for the 5 years, this $24,000,000,000 to $18,000,000,000 all segments benefiting from €1,000,000,000 increase, I would say, which is so we keep the discipline. And a third in the integrated power and low carbon molecule, a third in new projects, oil and gas projects, oil and LNG projects and a third in maintenance.

Speaker 1

So the guidance is the same than what we announced in September. So what do we intend to do? On the oil side, we continue the idea is to continue to deliver to work to deliver all this growth and midterm growth. So we have there on this slide a summary of our different actions and which are, of course, Nicolas teams, I would say, focused on delivery. On the major projects, we are progressing, in particular in Brazil.

Speaker 1

Somewhere in our portfolio, Brazil is replacing Russia, in fact, when you look to in E and P. We had Mero 2, which came on stream the last day of the year. It's Petrobras way to celebrate the New Year. For me, it's the 1st year of 2024 1st day of 2024, not the last day of 2022. It was 1 well.

Speaker 1

So we expect more production. But we are working on Meru Fries where Petrobras is planning to start up by end 2024. Then we have Meru 4, which is also in on its way, which will be second half of twenty twenty five. And then in the U. S, we are working with Chevron Ballymore.

Speaker 1

So that's a non operated asset. For the operated ones, we have, of course, very important ones is Uganda. In company share, it's almost 130,000 barrels per day. So it's a big impact. So we progress and with the target is end 2025.

Speaker 1

So we should be by end 2024 around 60% of progress. It has already been launched. And Ratawi, of course, our teams are on the ground. I visited them 2 times, twice in the last quarter in where we have operations have been handed over to us, and we are executing the 1st phase of the project to grow the production from 60,000 barrels per day to 110,000 barrels per day. So that's the first phase.

Speaker 1

Then we will go to 200 and more than 200. At the same time, as you know, we work on the gas flaring and on the solar part. So that's, I would say, the major projects. We follow that carefully. We have in 2024 as well quite a big, I would say, agenda on sanctioning new projects.

Speaker 1

In Brazil, again, we are embarked we have been successful in both TOR. So we are embarked to sanction Sepia 2 and Ataputu, on which Petrobras, I think, is making a joint sort of joint tender. We are lucky to be on both sides. We have also Camino, which is the name which has been selected for the development on Block 20, it's 80,000 barrel per day development on Block 20. We are operator.

Speaker 1

We should be able to sanction that by middle of the year. We have the last I would say the last discussions. And on Block 58 at Suriname, this one has not yet a name. Maybe it's Crac Badu or I don't there are 2 discoveries. We have Trac Baidu and the other one.

Speaker 1

Saipacala maybe will give us a name. We are it's not yet there. But this one, of course, is important because it's 1, it's a 200,000 barrel per day project. We have 50% of it. So it's an important project.

Speaker 1

The objective being to sanction it before year end 20 24, and we are working on it. All these, I remind you, the criteria to sanction projects. We assess the profitability at the dollar per barrel, dollars 100 per tonne. And each project should respect 2 conditions: 1, cost I would say, economics is less than $20 per barrel, less than $30 of breakeven after tax. And the other one is emissions, less than our portfolio average.

Speaker 1

And the portfolio average is lower. It was 20 kilogram per barrel in 2020. The portfolio average emission intensity is 18. So the new criteria is less than 18 kilogram per barrel of CO2. And so we progress.

Speaker 1

It's a virtuous criteria. And this will be the case of the 4 projects, which are just mentioned. An innovation that we announced yesterday or today, I don't know, we need to continue to work on the CapEx costs, of course, we face an environment which have more inflation. In particular, in the drilling rigs for deepwater, we've seen the market moving from $200,000 per day to more than $400,000 per day. So we decided to take an innovative action, which is to acquired part of a rig because to control the cost, in fact, for us, with Vantage, 75%.

Speaker 1

It's a way to hedge, in fact, our costs ongoing. The company will benefit from that. I can tell you the costs are not 400,000 barrels per day. They are much lower than that. I know it's some people, but we know we are using a fleet of 8 to 10 deepwater rigs per year.

Speaker 1

So to try to manage 1, maybe it's only the first one of the fleet. But it's a way to hedge the cost because we cannot just accept that because of less competition, the costs are increasing because the market is not really there. It's more less competition. So we have decided to move. I was frustrating during 15 years.

Speaker 1

I have realized one of my personal objective, not to let these guys taking plenty of many of us without participating or getting it. So yes, it's a way to control the cost. In 'twenty four, another comment I want to make. These are the new productions coming on Shrimp, MERO2, Tura in Denmark, the redevelopment in Tura that we inherited from Maersk. It's planned for end of March, beginning of April.

Speaker 1

Enco in the U. S, with Chevron, it's important comment. And we just announced a new production coming in the portfolio, of course, we need to close it by end of the first half probably. Gas in Malaysia, we are acquiring OMV share on this field with quite a good potential to deploy beyond the asset. There are a lot of there are other opportunities in Malaysia, it's also a way for us to consolidate our partnership with Petronas working there.

Speaker 1

All these additions, including the ones which have been put into production in 2023, when you look at them, which is Apsilon, which is Sarboom, Lulu, Iraq, Iraq as well. When you look to their cash flow per barrel, they are all accretive compared to per portfolio. And so and it's important. They have an average, I would say, of cash flow per barrel around $30 per barrel compared to our portfolio, which is around 22%. So it's again back to my comment, but we continue to high grade the portfolio, and that's very pragmatic.

Speaker 1

It's true for acquisition and divestment. What we acquired in Sarboom, Lulu and Sapura, but compared to what we diversed, by the way, in Canada, make accretive part of the barrels that we produce, it's true as well for the organic part of the portfolio. So that's an important message. In particular, at a time where, in fact, the declining part of our portfolio, for example, in the North Sea and UK, have a low much lower CFFO per barrel because of the taxation. So we continue to high grade the portfolio for these new projects.

Speaker 1

Exploration, it has been for TotalEnergies a successful story for the last year. We did not mention there Nigeria and Kothorn or Cyprus, by the way, where we are confirming with E and I. We have 50% of these discoveries with E and I in Cyprus. We have gas in Cyprus for sure. So we will find a way to have an efficient development process.

Speaker 1

And I I think being partner with ENI will obviously have some capacities in the neighboring countries, a nice way to and I love the fact that ENI is keen to go to shorten the time to market. So we're fully supportive on that, in particular in this part of the Mediterranean Sea. Here I insisted I just mentioned Saka Paraasov and Krak Badu, so I will not come back on Suriname. On Namibia, we continue to drill to so Mangete, I can tell you, is we find again some hydrocarbons in Mangete. We find again the hydrocarbon level of Venus, so the extension to the north, as it was commented with the mind of my peers and we share the data with our neighboring peer.

Speaker 1

We, in the different appraisal wells and the test, there is clearly not an heterogeneous it's not homogeneous field. There are a lot of hydrocarbons, but we need to there are some sweet spots in terms of productivity, permeability. There are some areas which have less good characteristics. I repeat that on our side, we see a first development clearly in our hand. It's no question of optimizing.

Speaker 1

We'll continue to dwell. There are many debates in the company because everybody is excited. We have another exploration potential well on the south of Venus called Coker Boone and we can also continue to appraise what has been discovered. So clearly, Namibia is on the top of our spending in exploration and appraisal. We'll spend around 30% of our budget exploration and appraisal in Namibia, again in 2020 for because we are there continue to see what is the best way to develop that.

Speaker 1

LNG, the other part. So several message on this slide for 24. First, the projects. We have quite a big portfolio of 4 projects fundamentally in the U. S.

Speaker 1

And Qatar, in the U. S, in fact, in Asia, Costa Azul, it's not in the U. S. In Mexico, but it's gas coming from the U. S.

Speaker 1

That we valorize. This project is progressing well. We should be able to produce by mid-twenty 25. I think that's more or less the target we have with Sempra. For us, it's important, I remind you, because we have access to we have only 16% of the project, but we have access to almost 55% of the production, 1,700,000 tonnes, very well located to go to Asia.

Speaker 1

We have Northfield East as well in Qatar and Northfield South, 2 large projects, it's 2,000,000 tonnes for the first one, 1,500,000 tonnes for the second one for Total Energies. They are on this way. No, things have been sanctioned and contractors are mobilized. And then the last one is Rio Grande. We, I think, selected a good project.

Speaker 1

It's South Texas. We have good contractor, Bechtel, very committed. We have all the authorizations, so no problem of temporary ban. And so we are moving on. Of course, it's quite a large project.

Speaker 1

So target is 27, but it's on its way and even a little in advance compared to the planning curve. 2 of our projects important, which will on which we work is Mozambique. So in Mozambique, we have, I think the security reports and human rights reports, now we are remobilizing the contractors. And I think we are not far from having everything set with them. The last part is we have a large project financing, which was, I would say, put on hold when the events came in 2021.

Speaker 1

And so we need now to we are reactivating with all these financial institutions around the world, this project financing and when all that will be done, we will start again the project. On Papua LNG, we are working as well on all the France marketing, so project which is well perceived in Asia, but also the financing because we need to put the financing in place and the EPC contracts, we work with contractors. So that's NNG. So 6 projects, I would say, in parallel. A comment on the results that I want just to clarify.

Speaker 1

I know we had remarks, 2023 somewhere, we benefited from the fact that we are hedging 1 year in advance part of our portfolio, except both except Russia. So so this was represent in the €7,300,000,000 I think that we have mentioned by Jean Pierre, dollars 500,000,000 So these €500,000,000 were exceptional. We could not age at the same level for 2024 and 2023. Having said that, and what we target is $7,000,000,000 I would say, of cash flow from LNG because we have a better we have a growth, as we mentioned, 9% in the growth production in 2023, so we will benefit of it. So we should be around €7,000,000,000 So we expect a stable, I would say, cash flow coming from LNG.

Speaker 1

We took an environment for this figure, which is a little lower than in $23 and TTF, dollars 10 instead of $13 just to as an average. Integrated power for 2024, we commented already the increase of capacity, plus 6 gigawatts. The 3 city generation, more than 45, 25 coming from renewables. And for the cash flow, we we'll continue with the ideas that we should grow to reach the net cash flow positive by 20.28. We need to grow by $500,000,000 per year, more or less.

Speaker 1

So the idea is that our objective is to be able to deliver €2,500,000,000 to €3,000,000,000 out of the portfolio of which will be by end of 2024 around $25,000,000,000 of cash flow capital employed, more is 24,000,000,000, 25,000,000,000 so that's continued growth and all businesses contributing to this increase. Of course, it's important to demonstrate the profitability. And so 10% ROACE, the ambition is to grow it to 12% by 20 28. Just a word about what we are building in Texas with one of the announcements that we've done during the last quarter. Texas is a very interesting market because it's a growing market, growing population in Texas.

Speaker 1

People in the U. S. Are moving to Texas. So and it's with quite a lot of imbalances and bottlenecks in the infrastructures, which create a lot of opportunities for renewables, but also for flexible generation. In particular, it's quite nice for us because it's during the summer, but the spark spread in the U.

Speaker 1

S. Is very positive in Europe, in our portfolio, the gas plants are more in the winter by in terms of summer. And it could reach very high level. So even if the use of these gas plants is mainly only 30, 30 a third of the year, so the cash profit generation can be very high. We need to have these assets.

Speaker 1

We've done that in good conditions in terms of accessing $600,000,000 for 1.5 gigawatt is a good price, a direct negotiation with a private equity firm, which allow us to have access to these capacities. And it's important because fundamentally, our customers, corporate PPA, what they want to have is not only a green electricity, they want a firm electricity. And to deliver firm, if we don't have a firm power, if we don't have in our portfolio some gas plants or flexible assets like batteries, we have also some batteries in Texas. We have already 300 megawatts installed, we continue to grow it. If we don't have these type of assets, it's difficult for to make trading and to make offers which are competitive.

Speaker 1

So that's the whole objective that we are pursuing. And you will see us continuing to be very active in Texas because it's a good market to develop to deploy our integrated power strategy. On the downstream for 2024, we anticipate the markets to be a little lower than 2023 2022, 2023 in refining has been quite a strong market supported by the ban on Russian crude, the geopolitical tensions, we see some ease in the markets on refining coming back to something like $50, dollars 60 per tonne, which is still quite high compared to what we experienced in the year 2015, 2020, but probably, I would see a softer environment in 2024. It's also true in petrochemicals, where clearly there is a lower demand in Europe, we see the impact of the European economic crisis, the macro crisis and in the U. S.

Speaker 1

As well. So in Asia, it's still good. But So that impacts the margins on polymers. We were, I would say, during the first half or first three quarters of the year, quite reserved because of our position. Now we see the impact of these lower margins.

Speaker 1

So that's why we the €8,000,000,000 of cash flow we had in we performed in 2023. We think this book could be around €7,000,000,000 in 2024 as a guidance. In the refining and chemicals and marketing, which goes here in Downstream, we cover the 3 segments. We are also working on the transition, in particular, on the SAF market, we'll deliver multiplied by 2 our production in 2024. It's in line what we've our customers are expecting because the mandates begin to grow in some countries.

Speaker 1

And we don't have yet a big conversion of Grand Prix, which will bring 200,000 tonnes per year, but we are using part of the HVO we have in Lamed in order to convert it in some soft products to meet some expectations, it's a good business. And again, that's a transition. Transition is also, of course, in the marketing part on the electric modulability. We have a strategy we explained to you in September to concentrate most on our efforts, I would say, on EV hubs, on scarce prime locations, either on motorways, on urban locations, we have built by the end of 2023, 300, 350 hubs. We plan to have more than 600 in 24.

Speaker 1

And this also focusing as well, it is up on HPC because the customers, they don't like this low it's maybe good in the suites of London or Paris. But honestly, if you want to really meet the real market for us is professional customers or I would say long distance customers, they are ready to spend 15, maybe 25 minutes, but more. So HPC, we have deployed already more than 1,000 HPC and it will be more than 3,000. So rather than the number of charging points, for us, the real metrics is how many HPCs and electric hubs do we deploy in Europe. That's a more I think it makes more sense by just counting the number of charging points because the profitability of each of them will not be the same at the end of the day and in terms of strategy.

Speaker 1

So that's what I could say. So I'm coming back to our shareholders which is the most important and the cash flow generation. So we anticipate in this environment at $80 Brent, dollars 10 TTF and $50 European refining margin marker, we could answer some questions while we move this market, around $34,000,000,000 is in line with the $36,000,000 we delivered. You make the math with sensitivity, you are adding an additional growth of 500 in Power and 500 in other businesses and you will find 34. So it's very in line with our I would say our strategic plan and road map will invest 2017, 2018.

Speaker 1

So we have a free cash flow around €17,000,000,000 the board, in that context, has decided to continue to grow the dividend by 7%. Those remain is the final dividend will be €0.79 per share instead of the quarterly interim dividend were €0.74 And this €0.79 per share will be the next quarterly interim dividend, which the board will support. So that's for the dividend. And so this is I will come back on it in 1 minute. And on the buyback, we have announced that we'll maintain €2,000,000,000 for the next quarter and that €2,000,000,000 per quarter will remains which is a base of the board discussion for the coming quarters and next quarters in this type of environment.

Speaker 1

And that's, I think, the next slide, which illustrates this, I would say, steady strategy or steady policy, I would say, as a shareholder distribution. We the quarterly dividend, which were at EUR 66,000,000 during 2019, 2020, no decrease, EUR 2021. We used our balance sheet. You can see it on the chart in the middle. The gearing ratio went up in 2020 because we decided to use our balance sheet in order to maintain this distribution policy, has begin to grow in 2022, then 23%, 7%, again 7% of 24%.

Speaker 1

So an increase of 20% in the last 3 years. And that's as you know, we did not decrease this quarterly dividend for more than I was when I became CEO, it was 30 years. So today, it's 40 years. And so it's one of the heritage we maintain. And the buyback, we are a little stubborn as well.

Speaker 1

We increased to 2% since the Q2 of 'twenty two percent. So 2% to 2% to 2% and so you can continue to 22. But we increased it in last quarter because we decided to give back part of the Canadian divestment proceeds to the shareholder as a sort of exceptional. But so it's very consistent. By the way, as the number of shares diminish, I would say the buyback per share is growing, in fact, even if share is going up.

Speaker 1

And just one comment about the dividend I didn't mention, the 7%. We bought back in 20 3, 5.8%, 5.9% of our, I would say, of our shares. So for me, it's a basis. As I always said, to return to shareholders, you need to at least increase the dividend by what you brought back. So the 6% were for me secured just because we have added 1% because there is a growth.

Speaker 1

It was a discussion at the board, but 7% because we've made 7% is consistent with what we could maintain on the long term. And so that's the last slide because as I said, we know we have a gap in the multiple with our U. S. Peers. But again, in terms of TSR, we are in the ballpark.

Speaker 1

Our ambition to be able is to continue to convince the market that we the multiple of total energy should be higher. That's why we continue to buy back despite the fact that the share at €60 per share is more or less not far from the historic eye, but we strongly believe the strategy will deliver more value. And we demonstrate that we can do it while transitioning. And again, there is no contradiction. And so we hope to see that shareholder return to be translated in the company valuation in the coming months.

Speaker 1

And the last slide is to celebrate the one of the years Pioneers for 100 years, that's the slogan we have decided the motto we have decided to select. I will not comment all the photo, only one. First one in the top in the left top corner is the first well in Iraq. By the way, in Ratawi, I visited Ratawi and we discovered Ratawi. I discovered that Ratawi is back, I don't know.

Speaker 1

It was discovered in 1938 by Total Energy the teams and that there exists the wealth of discovery exists. Number 1, I will take a photo on it. Not this one in Kiekou because it's a little unsafe region today. So my advisor, my security guys, I mean, don't go there. But in Rata, we have all right.

Speaker 1

So we are back to our roots. The photo in the left bottom corner is Arzu in Algeria, part of our history. You have Tiara in Denmark. It's more recent history. You have Lapa in Brazil, more recent history as well.

Speaker 1

On the photo, the other ones location it is in France for 2 of them. And you have also these small drones with a symbol of the technology that we of the technology driven company and engineers that we use for measuring methane around all our assets today. So So thank you for your attention. And now we can answer to your question. Who wants to start.

Operator

Irene.

Speaker 3

Thank you very much. Irene Himona, Societe Generale. So Patrick, you've built The integrated power portfolio through M and A, you've been very active on that. Your targets are for gross capacity. Would you contemplate something a little bit more radical or different, like bringing in a partner, selling down part of that portfolio, like some of your peers have done?

Speaker 3

And then secondly, on the buyback, the €2,000,000,000 quarterly buyback, Your balance sheet is very ungeared now. If the environment were to deteriorate, and we've had tremendous volatility in recent years, How far would you lean into the balance sheet to sustain that buyback? Thank you.

Speaker 1

Okay. First question, we do it, In fact, we don't have one partner, but because it's not some but each asset, the policy is clear. We develop the assets when we are operator, 1 Percent, but at COD, we divest 50% of them because I prefer it's a question of management of risk. I prefer to have 2 times 50%, but 1 time 100%. It's also a question of profitability.

Speaker 1

What is difficult is to find 1 partner for all the geographies. You have some people who are in financial partners, because we don't want to have too much people bothering our teams. We like to have financial partners. They love it. But it's not the same market when you are divesting 50% of an asset in Texas and when you go to Greece.

Speaker 1

So it's different portfolio. Even if we reach a point where as we increase the globe, the capacity by 6 gigawatts, we have more gigawatts to farm down. So we will need to find a way to industrialize, I would say the way we farm down. So the one is quite not an easy task if you go asset by asset. So for example, in 2024, I think we have 2 gigawatts, something like that in new assets or 1.2 gigawatts in Texas.

Speaker 1

So we'll make a package And find and by the way, it's better to farm down because then you have larger institutions which are in 2 assets. When it's one asset, sometimes it's small. They don't want to spend too much time. So we try to do it like that. We have some assets as well.

Speaker 1

Greece is a different country, but we inherited from Total Iran or in South Arabia. So We need to be active on that and to find a way to industrialize it. It's not one partner, but again, that's very good. I prefer to have some partners as well in order to challenge us tomorrow in the way we it's the same, I would say, philosophy that we had. We've done one divestment we announced in on Sea Green, in offshore wind in Scotland, where PTTEP wanted to have experience in offshore wind.

Speaker 1

They like Total Energies. We you've seen, I can tell you, if you make the rate of return of the M and A activity acquiring these 25% from SSE in 2020 and selling in 2023 to PTTEP is more than 15% return. So you can make this type of activity. It's good because we don't want to be just we want to share the risk between different assets, and we'll continue that philosophy. It's a very good question.

Speaker 1

I think my message was positive. I think we have a good plan. The slide is for purpose. The slide that I show you about dividends, gearing and it's true that at 5% gearing, as we've done in 2020, the situation was much more critical in 2020 than today At 5% gearing. And when I mentioned that we announced €2,000,000,000 for the next quarter, but we are €2,000,000,000 is the basis for the coming quarters.

Speaker 1

I think it's also because I have in mind that we can use the balance sheet. And unless the price going down again to something less than $50 we can resist. So that's true. But for me, it was a discussion at the Board. So we find in the press release, there is a positive message that we don't want to commit about $20,000,000,000 of buyback because we have no visibility.

Speaker 1

But fundamentally, the balance sheet give us quite a strong support to this policy and to be the word important word is a steady policy, and either on the dividend, 7%, 7% or on the buyback and so you could hear 2, 2, 2 for several quarters. We can go this table, Oswald. Gentleman here.

Speaker 4

Thank you very much, everyone. Oswald, Clinton, Bernstein. I wanted to ask on LNG and I wanted to ask about appetite Into your portfolio from new demand, from Biden's policy recently from the Red Sea disruption. I think you answered that already by saying China It's having some discussions with you, etcetera. So perhaps I'll change it to, are you I mean, really leveraging and I know Stefan is behind me, but Leveraging the LNG trading and optimization piece.

Speaker 4

I mean, Shell, a couple of your peers this last quarter here in Europe, even in Texas are now delivering gas and LNG trading profits on top. It doesn't look like you captured a lot. It looks like the others are a bit more aggressive, potentially a lot more capital, financing is being allocated to trading And it's coming through. So perhaps your business is more tightly controlled. It's just to get your thoughts on, are you happy with that?

Speaker 4

Is there more you could do Around the LNG optimization piece, please.

Speaker 1

I'm very happy with what we do. And by the way, maybe when you look to our peers this quarter is better. The previous quarter was not so good. So we are more consistent in the trading part, quarterly after quarterly. We know our policy and safe and calibrate, but we have no we are honestly, I think we are doing a lot with that.

Speaker 1

It's at the core of the I think we are doing a lot with that. It's at the core of the we are managing 40,000,000 tons. So of course, a part of it and the number of spot deals which have been done is around 6,000,000 tons. So again, it's quite active, and our traders are doing a lot around it. So But I will deliver your message where they can do better.

Speaker 1

When I see their bonus, I think they have done well. You can ask Jean Pierre what he thinks about that. No, I think honestly, no, we are not more. We are very active, and that is completely in the business model of LNG trading. Again, we benefited from the fact we have this policy to hedge most of the portfolio 1 year in Elvat, it's true.

Speaker 1

So but because we have quite an open position, and I think it's So we benefited from that in 2023. Next year, €7,000,000,000 Again, I think one message of the size, by the way, when you look to the improvement of what we were delivering in 2021 to 2023 is quite a big improvement and it's coming fundamentally, in particular, the European position. Europe, we have access. We control 16% of our gas capacities. We have added these 2 FSRUs.

Speaker 1

So it helps us to trade around that. So maybe we make less noise when we have good results, but we don't have any bad results in quarter. So I'm fine. Now we are fine.

Speaker 4

Thank you. And maybe my second question is just on Iraq 100 years. When you spoke about your new Iraqi project there, did you say it's Also a $30 per barrel cash margin.

Speaker 1

It's much more than that.

Speaker 4

Okay. And really the bigger question was that my favorite chart is the one on cash flow relative to the oil price. Is there anything as we look out for the next 5 years that would be Decreasing the slope of that with production sharing contracts, slopes in LNG contracts.

Speaker 1

It's a good question. We have done it in the last 2 years. We can project it. I think it's a good Olivier, which is behind the door there, is an expert of making this type of charts. He's a super good economist and engineer.

Speaker 1

No, no, but I take the point, but we can demonstrate that on the portfolio. Fundamentally, our new portfolio is much more accretive to the Rapa Wall because we look to projects and we select the projects to find this, I would say, to improve not only we were perceived, as I as a resilient company, we want to have also the upside. And Iraq is one of them, by the way, where we have quite a good upside. But I take the point and we can illustrate that maybe in September next strategy. We had that slide.

Speaker 1

It was too complex last time, so we need to prepare it in a better way. But this one, I think, that we had which has been imagine by your colleagues is a good illustration about this change of throughput, which means higher, I mean, upside that we capture from the brand. We can go, Michele, please.

Speaker 5

Thank you. Congratulations on the strong results and being almost net debt free. I wanted to ask 2 questions. The first one It's more industry wide. We are getting a lot of very conflicting messages on EV uptake across the world.

Speaker 5

On one side, it seems To be accelerating in China, but then it's decelerating in Europe and in the U. S. As some of the more generous incentives roll off. That What are you seeing on the ground? And does that in any way change your strategy in terms of EV charging?

Speaker 5

And then secondly, I wanted to ask you on LNG. You clearly hedge 12 month forward your spot LNG exposure. But I was wondering, is there a way to quantify the sensitivity to spot LNG prices beyond that 12 month of hedging? Thank you.

Speaker 1

What is important in our portfolio is the difference between TTF and GKM, I think. You can elaborate on that, Stefan. The second question, maybe you can answer too. On the first one, That's one of the unknown. But we know, in fact, our strategy is centered on Europe, the EU, which has a clear plan, 2,035.

Speaker 1

And in the EU, it's fundamentally the 5 core of the countries, France, Germany, Netherlands, U. K, Spain, I mean. In the U. S, I agree, but when you go to the U. S, you don't see a big move.

Speaker 1

When you observe in the streets and don't see a huge move. So I'm more we are more careful. So we are more on the EV strategy. It's more Europe, Well, there is a clear regulation plan where we think that it will happen, maybe not as quick as before, but as the government seems to be even if they have less money, but they will be obliged. At the end, maybe it's not my problem.

Speaker 1

It's more the one of the car manufacturers. Maybe there will be plenty of Chinese car EV cars in the suites in Europe. That's a trend today, but it's not my issue to me. So for us, EV equals Europe, where we have a clear, I would say, without regulations, without I think honestly, this transition is not only a question of offer. If you don't have an incentive on the demand and you clear, I would say policymakers, policy low chance that people will accept.

Speaker 1

It's a revolution. It's a strange revolution. You ask people to spend more money to get a car to have the same function, but a IC car. Why should they spend more money? Tell me.

Speaker 1

So we have to lower they have to lower the cost of the cars and somewhere to be supported. So we've got policies. So are you all right? China is good, but China is using their own market in order to but it's again more for car manufacturing industry, the challenge To bring all these cars to deploy their manufacturing capacities on the planet, in fact, which is what is happening, in fact, in particular in Europe. So for us, does it change?

Speaker 1

No, fundamentally. But we will not deploy EV in Africa. Where we have Retail today, it's Africa. I will continue to develop our, I would say, traditional business in Africa. In Europe, you see that change, even if we are happy with the position in France, again, as I commented, we sold our retail station in Germany and The Netherlands to Couche Tard because the financial proposal was for us quite a good one.

Speaker 1

So we had to, in a way, to change. In terms of CapEx, it's a matter today of $150,000,000 to $200,000,000 per year. So it's not a huge commitment compared to what we spent. So Europe, yes, the rest I will observe just to go in your way. And what I'm observing is, again, let's see, depending on the policies.

Speaker 1

And particularly in the U. S, I have few doubts. Okay. Another one? Yes.

Speaker 1

Stephane should answer. Sorry, Stephane. Stephane, please answer.

Speaker 6

Yes. Now on your question, so our LNG portfolio is globally a mix of long term supply coming from our assets of 3rd party and of long term sales, mostly in Asia. So if we look at that, we purchase Fixed cost and then rehab, and we sell mostly Brent and TTF decay. And as we mentioned already in the past, globally, our portfolio is around 70%, 80% more long term Brent and the rest TTFGKM. By the way, as we do in electricity, where we try to find that 70% long term fixed 30% merchant.

Speaker 6

And the last point, which is important, is the fact that we can sell either GKM or TTF. And because we have the flexibility to choose our index because of the supply logistics chain that we have With the regas capacity and the vessels.

Speaker 1

So we arbitrate between both.

Speaker 6

So we arbitrate between both.

Speaker 1

Energy tankers. Martin, go ahead.

Speaker 7

Yes. Good morning. Two questions, if I may. First of all, a slightly technical modeling question. But in terms of modeling the balance sheets for the next couple of quarters, I was wondering if you could say a few words about how much of the working capital that was sort of released in the Q4 will build up over the next couple of quarters?

Speaker 7

I think you said that some of it was sort of a bit of a one off. And then secondly, I wanted to ask about refining, because I get the sort of $50 to $60 a tonne sort of base case. But I was wondering what your views were about sort of the risks around that, in the sense that if you do global refining analysis, you get to the conclusion, market should soften a little bit. But then again, on the other hand, like all the capacity that is being built is in the East. So the Atlantic Basin is actually quite short product.

Speaker 7

We have all the freight issues and the freight issues support Atlantic Basin refining margins. We stumble from disruption to disruption. All these refineries are old. It's cold weather we have disruptions. It's hot weather we have disruptions.

Speaker 7

Couldn't we end up in a situation where actually this turns out to be surprisingly tight and the risks today are actually to the upside.

Speaker 1

No, you are right to separate both. Avi said that. And it's good if we have we took an assumption of $50 per ton. If it's 80, I'm happy. You have the sensitivity.

Speaker 1

I think it's $400,000,000 $500,000,000 or $10 per tonne. So again, maybe we are a little cautious. We see some softening in the market Because, again, the price crude price remain high. But you're right, your fundamental analysis is true, but on the Atlantic Basin, you have some bottlenecks in the system, the famous Jones Act in particular and all these type of things, which helps the margins. But there is also an element of the Russian system in that which begins the market begins to absorb it at a certain point.

Speaker 1

So we have to be a little cautious about it, but that's what we observe. So fundamentally I share your view, but up to which point can we quantify the upside that's more complex. That's a difficulty. It's margins of different products. So and again, the last year were also supported by the fact that So jet fuel recovery was so jet fuel margins were quite good.

Speaker 1

So this jet fuel recovery is down now. So we are more in a, I would say, balance and normal growth is not this hike linked to the recovery that we had before. On the working capital, I would say SEK 3,000,000,000 or less. Something like that, yes. Yes, something like that, I think.

Speaker 1

Because honestly, I will tell you, the story is the following. We had Last year, we had a release of €3,000,000,000 because of margin calls. So we are expecting to see the €3,000,000,000 being recovered. We struggle during the year to see them. They came in the last quarter.

Speaker 1

We had more than that. The last quarter was a bit around globally €5,000,000,000 But out of the 5, 2 are clearly exceptional. It's linked to the taxation we should pay on this Couche Tard deal, capital gain tax that we didn't we need to pay it and it's linked to part of the exceptional taxes that which we have put in Europe on refining. I don't know if you know these war taxes, which has built a taxation, which will be paid, in fact, in also our EUR 2,000,000,000, EUR 2,000,000,000 of extra working capital. I don't consider them as the EUR 3,000,000,000 came and go back and forth.

Speaker 1

So we could expect them to be released again during the year and coming back by the end of the year. That's the anticipation. And

Speaker 2

of course, we will continue to put pressure And our manager

Speaker 1

to maintain

Speaker 2

the working capital as well as possible because

Speaker 1

The storage management over there, we want to come back. You want us to give us back our €3,000,000,000 They gave us €5,000,000,000 So almost 6, so I'm Don't put too much pressure, so that's good. No, but it's so there is a little exceptional there, but EUR 2,000,000,000 I'd say,

Speaker 6

EUR 2,000,000,000,

Speaker 1

okay, Which makes one point of gearing, I would say. If you want to translate it in compared to what you said, we have €2,000,000,000 which came at the end of the year, which could disappear. But I hope the year can also be executed in a good way and we'll have again some cash flow, which will consolidate to strengthen the balance sheet. We can go there. Lucas?

Speaker 8

Thanks very much. Lucas Herman, BNP Exane. 2, if I might, as well. The first was just on divestments and whether you've got last year was a very large year for divestments. There's a lot going on in the business in terms of organic investment now as you build up in LNG, you start to build more aggressively at high grading the upstream, obviously integrated power.

Speaker 8

So I just wondered what you're thinking in terms of scale of divestments this year, absolute figure as you move towards that net €17,000,000,000 to €18,000,000,000 And the second question, Patrick, I guess, is a little more personal. It's a big year for Centenary, the total, it's also quite a big year for you in some respects and that this is year 10. And I'm conscious of amongst all the assets, etcetera, this company has, you're also a very large asset. The question is really how you're thinking about your own life cycle progression. I know Thierry Demireil was CEO for 12 years.

Speaker 8

We hope you're with us for a lot longer. But just thoughts on where you're at, Patrick

Speaker 1

Thierry was 15 years.

Speaker 8

Including the chair. I thought it was 12 CEO and 15 Chairman. But

Speaker 1

on this personal note, I said to the board, as long as they are firm, I will continue the job. As long as you consider that I'm positive for the company. The Board has decided to ask me to continue to renew my mandate. It has been announced in September for next 3 years, so I will continue. And again, I think I'm committed to the company.

Speaker 1

I think what we do is We have a very clear strategy. I'm happy to execute it. I'm part of this it's not only me, but all the executive committee, which is executing that. So I'm there. I will continue to be in the landscape of this company for many years.

Speaker 1

Okay. And but we still have a lot of things to do. Then on the first one, In fact, we've done a lot in divestments. That's true, €4,000,000,000 €4,500,000,000 from Canada, Couche Tard, €7,000,000,000 But we acquired a lot as well. You should note.

Speaker 1

It was a huge year, in fact, because Sao Moulino plus Casasos Ventures plus when you add NFE and FS, when you add all of that, we divested EUR 7,000,000,000 we are at EUR 6,000,000,000. I said to my teams, we have done a lot. In fact, we invested EUR 17,000,000,000. And when you acquire 6 and you divest 7, it's at the end we moved $30,000,000,000 of assets, which is a historic year. And so it's quite an active company.

Speaker 1

It's very active. And I think we will continue to do that because if I want to high grade, I need also to finance it. And I'm stick I've concrete I think one of the my big lesson is the net CapEx investment maximum 2018 is a good metric for us. And so one way is to continue to divest. Divestments will come part of it, by the way, from what discussed about the farm down of renewables because we it's not a divestment, it's more we divest because we reinvest part of it.

Speaker 1

So when we have at the end €5,000,000,000 it's in fact, it's plus 7%, minus 2%, etcetera. So we have to this machine of divestments has to be put in place, and that's one of the target for Stephane team send in the year. But we have also some assets in the Upstream. It's no secret in Nigeria, for example, these onshore assets are complex. We want to divest our share of SPDC, and we are looking to reshape the portfolio.

Speaker 1

So it's a permanent, for me, good philosophy to oblige ourselves. We buy in Malaysia, we do we divest on the other side. By the way, in you notice that in 2024 will benefit from the divestment to Couche Tard to the Netherlands and Belgium because we didn't sell it in 2023, but in 20 24. So I think we are fine. And the level of activity should be around about €5,000,000,000 on one side, €5,000,000,000 on the other side when I think to and I think it's part of the strategy is also to benefit from and we have the balance sheet to do that.

Speaker 1

Not to make big M and A. I'm not consolidator of shale in the U. S. But there. So but I can perfectly understand what our peers have done, but we are not in that business.

Speaker 1

But we can we have the balance sheet in order to be, I would say, to be active on both sides, both selling and divesting. That's the philosophy. That's, I would say, what I would say. Good. Lydia?

Speaker 9

Thank you. It's Lydia Rainforth from Barclays. And that 100 year milestone is a great chance to look forward and back as well. When you think about the structure of the industry, it's been it has been remarkably stable for the next for the last 20 years. How do you see it going forward?

Speaker 9

Because it does seem that we've got A lot more volatility, a lot more regionalization. And almost back to that chart of Olivier's of CFO versus Brent, is there opportunity for that to sort of diverge more as we go forward? And then if I think basically a little bit looking back, this story around the safety side, there's obviously changes in processes that are being put in place. Do you think you can make those changes both quickly and safely, as in terms of just the there's going to be more and more processes that need changing in a world where there's more digitalization?

Speaker 1

Okay. Safety, That's true, but it's a little frustrating to discover that you need to have a fatality to put into question. I'm honestly, this example is a good example. Myself, I'm a little frustrated, but it's because we have a fatality when we take the topic and we say I remember I said you stop and we find a way and it was provocative from us at the top. Why are we obliged to put somebody in these reactors?

Speaker 1

The reality is that it's a whole industry is working. It's the most efficient in term of cost because it's shorter. And we have the feeling it's safe, but it's not safe. And I think, okay, it's a decision. It's where our safety is a value.

Speaker 1

That means that maybe it's longer to go with the water and Etcetera. But at least you have nobody inside the reactor. I feel, Marcel, much more comfortable. And it's good to see that we are sharing that. And our colleagues, in the sense of big peers, are thinking on the same way than us.

Speaker 1

They want to so that's true, but it's quite frustrating that we could have done that before. The reality and I think at least what is positive that we have reacted in a way which forced our teams because of initial reaction, but it was no, there is no other way. No, no. We told them if you give us a target, no human being inside these reactors, what do you do? They came with a solution.

Speaker 1

Honestly, I'm not an expert on these type of technologies and we say, okay, let's push on it. Yes, it's a little more costly because it takes a little more time, okay? So an arbitration, But I feel more safer. So this is good question, but maybe we should look to other processes where we expose people in this type of environment. And again, people, we think that it's a question of putting in it's a good element.

Speaker 1

So we think we share it because we need to look again to avoid any, I would say, unsafe situation we could avoid even if it has a cost. But at the end, it's safety first. So So thank you for the remark. And it's true that there is positive part we've done it, but we could have maybe done it before. On the first one, so the volatility of the structure of the industry, you mean the strategies or you mean I I'm sure to have captured fully accordingly.

Speaker 9

Just in terms of obviously, we've had it's been relatively stable in terms of the structure of the industry. And now as we go forward for the next 20 years, it Seems like there's a lot more volatility as we add in more renewables.

Speaker 1

You need more M and A, more renewables.

Speaker 9

More renewables, yes. So but just in terms of that chart of cash flow versus Brent, That kind of that the point that Oz was making that ultimately we're getting more that do you end up having be able to break that successfully longer term, that you continue to get more upside on that part?

Speaker 1

I think it's a question of, again, of continuing to if you keep in mind that your portfolio of the oil and gas will be, on one side, you look breakeven, you maintain it and that you look to what is the right assets in order to capture part of the upside, you can continue to build on it. I'm absolutely convinced opportunities to do that. If you keep that in mind as a real target, yes, it's a question of being focused on what do I want to achieve, including it's a case, it's always the same discussion between growth and value. And that's the arbitration. We should not be suddenly By the 2% growth, even if we have declared 2% growth for 2% to 3%, because we have the portfolio to execute.

Speaker 1

Now it's a matter of execution, Including on the LNG part, where it's part of the keeping part of the upside, that's part of it. I agree with this. Do we see more diversions because of renewables? I would say it's another business. You see some strategies diverging.

Speaker 1

I think some other companies will come one day or the other to electricity. Even when you want to produce when you decide to produce Your green molecules, the famous molecules, what is hydrogen when it's green? It's electricity. It's electricity. So You have to manage this energy as a fundamental feedstock even when you want to produce this E methanol or E whatever it is, it fuels tomorrow.

Speaker 1

So I think it's part of and from my this perspective, I think all the efforts we've done, we are doing to be To manage the cost of electricity is a process of producing electricity will help us tomorrow to go to this field of molecules, knowing that today the demand for this molecule is not big. You were speaking about EVs. I could say the same about hydrogen. There is a lot of enthusiasm in media when you look to the reality of the demand by the way, we got $500,000 a ton per year that we are putting on the market. It's It's quite a good success, by the way.

Speaker 1

We have 50 offers. I'm not sure we will need to qualify that. But we have 7 times more of the volume which is offered is 7 times more than what we are ready to buy. So we'll see the competition in the price now because that's only a question of volume of price and probably part of these offers are not completely in line. But we are optimistic that we could get some good products, including maybe investing in some of the projects ourselves.

Speaker 1

We'll see the way it works. So I think it's a question the demand there is so yes, there is some divergence. But honestly, we are very comfortable. And As long and as I said that we can remain at the top of profitability globally on the company, building the 2nd pillar, this pillar on electricity it is okay. I would be worried if I were shareholders.

Speaker 1

Suddenly, I see a decrease of the profitability. That would be more questionable. We are comfortable at the board with that. We can go that, Henri.

Speaker 10

The first question is on the dividend growth. You mentioned earlier we've done $2,000,000,000 buyback per quarter. You have this 5%, 6% base growth and then an additional 1%. Could that additional 1% become larger in the future as you get more underlying Cash flow growth, integrated power, integrated LNG, are you more comfortable with the 7%

Speaker 1

It will come larger if the share is going up Because we are looking also to the yield. The yield is at 5.1%, which is on the top of the majors. And we are it's linked. You will say maybe the dividend growth will include we'll put the price up. It's chicken and egg, but sorry.

Speaker 1

But No, we are honestly, there is room to do more, but we are comfortable because, again, we want to we prefer to increase the dividend in a way we can secure it even if the cycles go down. So 7%, 8%, 1¢ okay, that's the type of discussion. But we prefer to have a steady policy of increasing the dividend several years in a row rather than suddenly go down. And so that's what the discussion of philosophy. When we benchmark to our peers, we felt that the 7% is quite on the good side.

Speaker 1

And again, we have I think the big news for TotalEnergies, what changed in our history is that we have really enhanced The payout policy to shareholders, we were at 30% a few years ago, went down to up more than 40%. In fact, this year, we're at 45%. So this is a big change and including and this is clearly anchored in the mindset of the board today, but we need to monitor that Because it's also part, I would say, of the energy transition strategy. We can execute it if we are profitable and if we return to shareholders a big a higher share of that. Otherwise, people will tell us why do you invest in this transition?

Speaker 1

Is it profitable? The fact that we remained very profitable and that we return to shareholder is a way as well to execute the strategy, the transition strategy we want to execute and where we strongly believe we will deliver cash flows for the future for our shareholders. So that's the equation. There is no somebody asked me why it's a mathematical formula. There is not a mathematical whole formula, there is not a mathematical formula.

Speaker 1

We are looking to what we think is the right balance.

Speaker 10

And secondly, I wanted to follow-up on a couple of LNG projects that you mentioned. Just firstly, on Mozambique LNG, if you can give an update on security situation and how quickly you think you could get back to construction there? And secondly, on Arctic LNG 2, I mean, how do you see that project ramping up? And what have you factored in for your

Speaker 1

Arctic LNG 2 is quite easy. It's under sanctions. So story is off. I would say, I'll be clear. I never honestly, unfortunately, I mean, not surprised What was happening?

Speaker 1

We were very cautious in 2022 when we announced that we are written off all that. It will So project has been has moved on because these Novatek guys are quite incredible. We are able To put into production a new trend despite all the sanctions and etcetera. So in fact, in terms of engineering, it's quite a economic market achievement. I'm not surprised because it was difficult with the Europeans need to have this Yamal LNG, this 20,000,000 tonnes.

Speaker 1

But to add more Russian LNG in the mix is a little politically complex to add more. So I'm not super surprised on that. So that's where we are. So honestly, today we are not more in the governance. We have no we have put in force measure everything.

Speaker 1

So I cannot give you more information because we are not There anymore. And of course, our trading team or LNG teams were in contact, but we have put forth measure because it's That's the reality. No way to expose a company to any type of secondary sanction. That's clear to me. So we are in the process.

Speaker 1

On what I understand, just to share with you, is that they are willing to install the 2nd train. The 3rd train for me is on hold, Which I understand, but the second trend seems to move. Where is the market? Not in Europe. Sorry, there is only one possible market, 1 or 2.

Speaker 1

But it's not in our assets anymore. On Mozambique LNG, listen, I mean, we have made we make we monitor permanently the situation on the ground. As you know, there are some of the Mozambique state is helped by another African state, mainly Rwanda, to control situation today. And more importantly to us, the civil population is back in the area. Life is back to normality.

Speaker 1

There have been few incidents recently linked to the Gaza tensions, I would say. We can observe in the planet, that you have some DASH sales which are being reactivated just to not only there in many countries. You've seen some. So that's unfortunate, but there is a link. So we have to monitor that.

Speaker 1

But today, in fact, it's more to reactivate the contract. There is still some engineering to be done, so that's part. So construction, I hope it will come back by middle of the year. We monitor that again. What I don't want to do is To take a decision to bring back people, to be obliged to go to get out again because that will be too complex.

Speaker 1

So but again, today, the discussion with We have progressed a lot with the suppliers, I mean, the different contractors in a good way, I mean, including on the cost. We had some debates. We have listened to our messages. They want to reactivate it. But now the final point again is to put back it's Jean Pierre work that we help him on the so global financing.

Speaker 1

It was a big financing cap that we need to reactivate. We are working on it. It should come in the coming months. Okay? Alastair, on the side.

Speaker 11

It's Alastair Syme with Citi. Patrick, are you More or less optimistic on Namibia than you were last September. I mean, I guess you're putting a third of your exploration budget in, so I'm guessing you're optimistic, but

Speaker 1

No, I said the same, I told you. I think I'm completely optimistic.

Speaker 11

But I kind of had the impression

Speaker 1

I'm more optimistic than my colleague.

Speaker 11

Right.

Speaker 1

Because we don't have the same license.

Speaker 11

But what does Mangetti do? I was under the impression that would add another Resource base.

Speaker 1

No, it's we find back the Venus horizon, I can say, so it's adding additional resource, it's not huge.

Speaker 11

And the DST results that you had?

Speaker 1

We don't have the DST yet.

Speaker 11

The 2 Venus wells,

Speaker 1

But on Venus, again, we had one very good DST. The second one, but again, it's the location of the well, is it perfect? It demonstrates some heterogeneity. That's why we need to find to be sure that when we develop, we develop and we locate the FPSO on the right spot, not to be too far from the sweet spots we want to develop. It will be a little like Suriname.

Speaker 1

It will be a combination of different sweet spots. So the location where you put because then you have the length of your pipelines, the subsea system. So if you want to minimize the cost of the subsystem, you have to locate properly to appraise in order to be at the optimum for location.

Speaker 11

Okay. But bigger than Suriname?

Speaker 1

Wait and see.

Speaker 11

Okay. My second question is just on German power prices. I think when you did the auction last year, you sort of indicated a view that €70,000,000 to €80,000,000 a megawatt hour is kind of where we've now pulled back to in Germany. Prices have Pull back a long way. But what's been remarkable is there's no real demand elasticity, like industrial demand is still really weak.

Speaker 11

Does that worry you that the economy can't support these power prices?

Speaker 1

No, no, no. Because again, Germany has decided that they exit from nuclear and they exit from coal. So the power price in Germany will be fundamentally driven on one side by these renewables, but also by fundamentally gas plus ETS. Don't forget the ETS. So the fundamental element, in fact, in the electricity economy in Europe is also the ETS price.

Speaker 1

It's linked to that because at the end, the marginal price will be done by the ETS on the top of the gap. So in when you are a country which decide that they will go from gas plus gas plants plus renewables, the price will remain a good price. So today, I think the forward curve in Europe today In 'twenty five, it's €79 per megawatt hour. Okay, that's okay. We are fine with that.

Speaker 1

So I'm no, no, we are comfortable with Developing this offshore wind in Germany. And we will find customers who are ready to commit on the long term because it's a question of what the industries don't like is to It's a volatility of the price. We were afraid. So it helped us to consider that when we said €70 to €80 per To some of these industries, it's okay. We can find them.

Speaker 1

So I'm no, unless it's Germany from this perspective, again, because of the choice of the policy makers, Is, I think, one of the good market to take this type of bet to keep some wind offshore wind merchant in Germany. Chris? But it's also a good market to have some batteries Because when people say we want 70% of renewables, if you don't have plenty of batteries everywhere, I can tell you it will be difficult.

Speaker 12

Chris Kuplent from Bank of America. Patrick, congratulations on closing that drillship deal. I do think it's quite a departure For the industry, maybe you can give us a little bit of an insight what you're hearing from your partners in all those projects. Are you also frustrated that you think their capital discipline is waning a little bit? Because I share your view, there isn't a huge amount of competition out there in that part of the industry.

Speaker 12

And do you think others will follow in this step? How many more are you going to buy?

Speaker 1

No, it was a situation. But I think it's true that it's a breakthrough, including in the company, but the idea that we know because this industry was It's a story of the 1990s. In the 1990s, it's an old story, but in this case, in the 1990s, the companies were owning ships, the drilling ships. But then suddenly the price went down. They were stuck with the rigs and blah, blah.

Speaker 1

And so they decided it's a start of business. In the meantime, we are not a $10 per barrel. We are $80, even at $50. What I have observed for the last 25 years in this industry is that The low bottom of the deepwater rigs is $200,000 per day. It could go up to 500, 600.

Speaker 1

Honestly, the cost of the rig is around $800,000,000 When you pay $500,000 per day, you pay the rig in 4, 5 years. We have done this type of mistake from 2010 to 2015, I was super frustrated, to be honest. But we have paid the rigs and in fact fully and in fact at the end of the day So we are beginning again the same history. And so the only way is to hedge our things. Why don't we we'll not operate Zurich.

Speaker 1

Zurich will be operated by Vantage. So we wanted to have a partner, we not operate. But we have 75. So at the end, we'll receive the cost and we'll sell it. And to be clear, this rig will it's all to a partnership at a market rate.

Speaker 1

So that's the way. That's the game. We'll over follow. I know that I have announced that to some of they look to us. I think it's just nothing new, putting $200,000,000 in advance on a rig in order to secure 10 years, etcetera.

Speaker 1

I see that at the size of the scale of our operations, it's nothing. In fact, when you okay, it's innovative. I think, yes, my My only point, I don't want all my teams to be super excited. We own a rig, so it will be managed by Vantage. But no, but and no, we don't own.

Speaker 1

We don't operate. And again, but it's we need to do something. We cannot just look, see the cost going up and complaining. So what can we do? So this action, it's true that we Vantage.

Speaker 1

It was a company which was a financial stress, so we had a good discussion. But it's more in our head that we need to be innovative sometimes. So I'm comfortable. Again, 1 is nothing compared to my 8 to 10. I could have 2 or 3.

Speaker 1

At certain point, I need to keep flexibility. But if I have other opportunities, I will look at it. So it's a question of opportunities. But I mean, it's a lesson of the year 2010, 2015. We cannot just repeat the same mistake.

Speaker 1

We have some projects, but if CapEx going up, why should I mean I want to do the project, but I need to find ways to control my costs. And this is one way to hedge our drilling cost.

Speaker 12

Thank you. Can I add a quick second question, Patrick? You commented earlier that you don't really see looseness in the global LNG pool before mid-twenty 26. Is that close enough for your customers in Asia, in particular, that they're already telling you, you know what, I'm not signing these Brent Slopes, etcetera. There's plenty more to come in the latter half of the decade.

Speaker 1

No, in fact, no, because in fact, they what we observe is that when we marketed P and G, we had quite a number of offers, not at 14% brand, and to be clear, but quite reasonable brand We are ready to sign. We have signed some HOA. We consider they are good for the project on the long term. So today, they keep they still have in mind what happened in 2022. So they see the shock of 2022, make them think, okay, it's maybe long term because, in fact, to avoid this huge volatility, the only way is to make long term.

Speaker 1

So, there is a long term. And again, we have been approached by some Chinese LNG buyers, which I'm really keen to go in the longer term. I would say that from Bouygues perspective, what has been done in the U. S. On the temporary ban it's helping the other projects in the world.

Speaker 1

Because in fact, honestly, I'm not suffering of it on our portfolio. The problem of this type of move even is for electoral campaign, and we know the story behind it, is that it's a question of trust in the capacity of the projects to deliver, and that's not very good. So it pushed these other buyers, these Asian buyers, not only to rely On the U. S. LNG, but to look to other locations, which is good for Mozambique tomorrow.

Speaker 1

We have 1,000,000 tons, Which will not be renewed by 1 of the buyer. We are with Total Energies, we'll take part of it and we can sell that. So it's good for Qatar. It's good for all these projects. Sure.

Speaker 1

I see that the long term is still there and does not disappear. Despite the fact that you are right, we could anticipate a certain lower price on the spot, they are willing to cover. So today, it's more than the way to think.

Speaker 12

Thank you.

Speaker 1

Not only in China, it's true In Japan, it's true in Korea, so Asian buyers are there. Okay. We have people on the phone as well. Yes. We have Jason, I think, Jason Gabelman, who is on online If they want to ask question, we can take the question.

Speaker 1

Yes. They woke up early.

Speaker 13

Yes. Can you guys hear me?

Speaker 1

Yes.

Speaker 13

All right, great. I had two questions. First, I just wanted to clarify an earlier answer Discussing net debt, I don't know if you gave an actual gearing target, but it's moved across the past number of years. So So just wondering if you could provide an updated gearing target moving forward. And then secondly, going back to LNG Trading, It seems like the past few years you've benefited quite a bit from the spread in global gas prices versus Henry Hub gas prices, just given your position in U.

Speaker 13

S. LNG, are you able to kind of optimize global LNG flows to replicate kind of the upside you've seen from the U. S. To global gas price spreads as the market kind of expects that spread to tighten over the next few years? Thanks.

Speaker 1

Okay. No, we don't express a gearing target. We are very comfortable with 5%. I think the CEO's salary variable pay target is under 10 If I remind, this is a board, so you have an idea what I should control is under 10. I'm very comfortable to go down to 0.

Speaker 1

I mean, I'm very comfortable. There's no problem. But it's more, again, in terms of today, at 5%, we have reached a very strong balance sheet. So my CFO is comfortable. He does not Shout to go lower.

Speaker 1

So the priority is more in the way we allocate the capital, first to Capital expenditures, the dividend, the capital expenditures and the return to shareholders with more than 40% of cash flows. I would say that's the main commitment. So No, we don't have less than 10% is okay, I think. But we can go down to 0, no problem, if we have 0 debt Or even a positive treasury. Again, I'm not sure So I will go to Stephane to answer to the question, which is, if I understood, can we optimize the global LNG flows to replicate the upside we've seen in the past.

Speaker 1

So explain again what you are doing with your portfolio.

Speaker 6

So as I say, the portfolio is basically we have a long term portfolio where we buy and discussed and we sell partly brand, partly GKM and TTF. And then we have a global optimization with plenty of optionality here in the portfolio, one of the big one being to be able to switch from Europe to Asia and from Asia to Europe. But you have as well plenty of other plays like the backwards, the contango, the arbitrage of timing, the possibility between Africa, LatAm and Asia and so on. It's clear that in 2022, we have benefited from the spread increase between HH and GKM and TTF. And that going forward, we are going to less benefit from that.

Speaker 6

You've seen because it's partly already in the level of the edge we have been able to realize, and Patrick mentioned it, that the difference of age between 2024 and 20 20 In terms of cash going to be USD 500,000,000 and that's done. As for the optionality of the portfolio, We are confident that we have plenty of ideas to continue to sustain the good performance we have done in In the past, even if you notice that it's not enough.

Speaker 1

No, but again, 2022 was absolutely We don't and I don't hope, by the way, to see again $30 per million DT or $50, it's very detrimental for the demand in the market. You can't destroy the market by this type of price. So it's why so I'm not willing to I mean, okay, we benefit 1 year, but it's a one off and I hope we'll not come back. It's not a normal market to this type of price is $200 per barrel for gas. That's absolutely abnormal.

Speaker 1

But in fact, fundamentally, what the strong belief I have is that NREA will remain quite low. That's why we built on the LNG in the U. S. Because you have a huge amount of gas there. You have some domestic demand, but it's so you have okay, it could go from 3 to 5.

Speaker 1

But So the question is how do you position the export market compared to Henriab between the Brent and Henriab and GKM and Henriab. So That's a way of optimizing the flows. To optimize the flows, by the way, what you need is energy tankers and we are growing our fleet. I think we are going to 30, more or less. We are targeting 30 LNG tankers or 20.

Speaker 6

Yes.

Speaker 1

Yes. So growing our fleet help just to optimize all these flows, when the arbitrage is open between the U. S. And Asia, we can go to Asia. Of course, the location of ECA in Mexico is good from this perspective and we are looking to over activity.

Speaker 1

So it's a question of optimizing. The Panama channel from this perspective is more a problem for us than the Red Sea because the Red Sea, when you look Qatar to Europe through the Red Sea or through South Africa, it's only 4 days of difference. So it's not a big event. 4 days, you can manage it. When you have to go from the Gulf of Mexico through the Southern South America, through Argentina are back, It's 20 days of difference, if you avoid.

Speaker 1

So it's big impact on the cost and all the system is $500 per 1,000,000 BTU more or less. So it has an impact on the arbitrage between Asia and Europe. But again, one of the big asset we have is not only the fleet, but it's the regas in Europe because we have a lot of regas in Europe, around 20,000,000 tonne per year. So we can easily make the arbitration between Europe And the rest of the world, that's also important to optimize the flows. So that's all questions.

Speaker 1

We can go, Giacomo. Welcome to Giacomo.

Speaker 14

Thank you. Patrick, sorry for asking this question. It comes every meeting. You've added to your position in terms of, if you want, gas in the U. S.

Speaker 14

With the CGT deal. You have talked in the past that you have been looking at increasing your upstream position there. Maybe can you talk about the market you're seeing for deals on gas assets, what type of assets you're looking in terms of plays and whether that's one of the acquisition we could see in 2024.

Speaker 1

No, we'll be clear, but it's not necessary. 1, it could be several. So you will see soon 1, small one. It could be a sum of small assets. The question for me is the M and A it's good if you buy at a good price, cheap price.

Speaker 1

That's all. So we have time. I need the gas by 27. I don't need the gas tomorrow morning. So we are building.

Speaker 1

No, it's part of it. We are clear. We want to hedge our LNG position in the U. S. With more upstream gas.

Speaker 1

So we are there are opportunities, but don't expect us to make a giant acquisition. We are shy people in the U. S, Please only bore

Speaker 14

people. Just one on cost inflation. You talked about rigs. Can you perhaps talk of other areas where you're seeing cost inflation. And perhaps related to that, there have been headlines suggesting you're seeing some cost increases in Uganda with relating to the pipeline.

Speaker 14

So perhaps, just if you can talk about what you're seeing there?

Speaker 1

No, this one, we observed it in 2020 it was when was it? The teams wanted to order for steel and I refused to pay. 22, remember, the teams came to us with a huge increase on the steel, Which was in March or April. I say no panic, relax. Yes, we'll be late.

Speaker 1

I say okay, we'll be late. No, we'll not be late because we have other events, By the way, in this project. And in fact, at the end, we put the order on the steel, I think, beginning of 2023, and it was a very reasonable price. So Sometimes it's just a question of arbitration between the planning and the cost. And so and that's true that sometimes our project managers, they have a clear they want to be within the planning.

Speaker 1

I told them no, within the planning, within the budget. It's both. So sometimes it's just a question for the management to okay, to arbitrate between both. And again, if on some of the project we have observed today, we have a debate on some of them what I mentioned, we want to sanction CP2, Watapu2, Suriname and Camino, we need to if we have to delay 1, we'll delay 1. But on So in that, I can tell you, we are trying to work on an innovative solution.

Speaker 1

By the way, looking carefully to what our big friend in Guyana is doing benefit from their own way to develop fields. So we try to transfer part of their way to manage some of the leased FPSO in order to be efficient on the cost. So the cost for me are fundamental. What we should not be is replicating some mistake we've done in 20 Then by being driven more than volume than value, so managing the cost. And so you have to look to different options.

Speaker 1

Our teams love to operate. We want to operate, but does it mean we owned all the lease. There are alternatives in the market which have been developed. So it's not because we are at $80 we should forget that. So we are working on it very clearly.

Speaker 1

So if I have to choose, sometimes I will prefer to delay. The oil will not disappear. If I need to delay a project, we can wait a little. Kim?

Speaker 15

Hi. Thank you. I had a follow-up on hydrogen. I was wondering in which parts of the world you're seeing the most attractive bids On your 500,000 tonne green hydrogen tender. And I seem to remember your comments in New York a few months ago were a lot less positive on hydrogen back then.

Speaker 15

And then my second question is on short cycle upstream CapEx. I see it's $1,500,000,000 this year. Is it an increase on the previous run rate of about $1,000,000,000 or that About the same. And is there enough runway to continue with this level of short cycle activity going forward?

Speaker 1

Thank you for the second question because I forget to comment it. On this slide, there were 4 message, Sure, I forget one. So thank you. No, we no, it's not an increase. We keep this flexibility.

Speaker 1

I mentioned 1.5 to 2. It's a good way I were to arbitrate if we have to with the suddenly we have another COVID epidemic, which I don't hope, a pandemic, I don't hope. No, we have that. In fact, positively, it's more no, we just announced, I think, or it's tomorrow of the year. We put into production Agpa West in Nigeria, it typically is a type of tieback that we have been able to do deciding that 1 year ago, 1 year and a half ago and to put it into production, benefiting from a high price.

Speaker 1

So it's I think we have in our portfolio either in Nigeria, Angola, but also in the North Sea on Culhane, for example, on Alvdan in Denmark. And also, by the way, we have some few share in our production in Argentina, in the U. S, we can make this type of short cycle. So we decided that we need to have €1,500,000,000 to €2,000,000,000 of short cycle every year in order in case of, again, cash to be able to arbitrate and also today is more positive way to benefit from a good price. So they are very profitable.

Speaker 1

They are profitable at $50 Of course, when we launch AGCO West, this production at $80 profitability is very high. So this is very important in the way we appreciate to keep this flexibility in our CapEx that we mentioned in September. No, on hydrogen, don't I mean, I'm still on the there. In fact, all that is linked to where is the demand? The demand exists in Europe and we are refiner in Europe because there is a policy which is quite a complex one where you have some ETS advantage from credits when you are, I would say, using green hydrogen in your refined products.

Speaker 1

So as we are paying quite high and it's an increased CO2 burden in Europe, you can find a way to not only promote with hydrogen, but having some credit. So it makes things economically viable. Again, it's completely linked to this framework, European framework. Is there today a demand for green hydrogen as itself without this type of framework, no, the reality is no. So that's why you have more supply than demand.

Speaker 1

So question for us Today, I mentioned the volume. We'll see what will be the price at which we can be delivered, knowing that we don't want ammonia, we want hydrogen, which is a little you have a you have to transform ammonia where does it come from? At the end of the day, my view is that it will mainly come from local European producers, you will see. There will be a mix. It's not so easy to manage all these.

Speaker 1

We'll see because there are also, so there's some uncertainty because the regulation, for example, in the U. S. It's not truly completely approved. So is a green hydrogen produced in the U. S.

Speaker 1

Exactly acceptable in the green as a green hydrogen in Europe? There is a regulatory debate Yes. That's one of the debate. We also know that there are some big plans being built in the Middle East. So for me, it's a good Way to see at which price they can deliver these volumes to Europe.

Speaker 1

So we cannot say you more because as we have received all of this, we are working on it. It will take 6 months probably to better qualify them, but we are working actively. And you have different type of producers. You have the large hydrogen producers, but you have also a lot of developers. So we are looking to that and we will give you more information.

Speaker 1

I know a lot of people are looking to our tender to better understand where is the market, So we'll give more information when we'll have them. We'll not get it at $3 per kilogram. But under 6, it will be okay. We'll see if they find the challenge. Okay.

Speaker 1

Maybe one of the last one, Bertrand?

Speaker 16

Yes. Bertrand ODD, Kepler Cheuvreux. I have 2 small questions left. Can you update us on the progress you're making on your Oman LNG Bankering project and how this project is innovative. If I remember well, it is fully electrified.

Speaker 16

And the second question is on Shell SPDC exit in Nigeria. I haven't seen any press release from Total following that decision. I assume that you will exit as well. Can we assume it is under the same terms? Or is there other negotiations that needs To be done for Total to Total Energy is

Speaker 1

to No, no. We are on the same way. We want to keep the control of the we had the difficulty to be the oil part we want to exhibit. We have the gas. Gas resource needs to be Are very important for the expansion of LNG.

Speaker 1

So we need to find a way to be sure that the gas is developed. So I think the shell scheme, which is in fact create a sort of SPV for the gas, where we'll keep the economic price, but the cost as well is a good scheme. The difficulty came that SPDC is a company, it's super complex to carve out. The idea initially was to carve out the gas license. It's super complex in the Nigerian system.

Speaker 1

So we have to be more innovative to do that. But fundamentally, the exit is clear. And we'll be able probably to announce soon what we do. But we are aligned with the same view than Shell to try to maintain an SPV on the gas. And it's aligned with the NNPC, I would say GMD, they won't.

Speaker 1

And again, it's consistent. We cannot launch a new train in LNG and not taking care of the upstream gas and relying on others, we will never manage that because in the Nigerian system, most of the value is in the downstream, not in the upstream. This is where today we have some disconnect with some of our partners. But we are aligned on this fundamentally because producing this oil in the The Tangier Delta is not in line with our HSE policies. It's real difficulty.

Speaker 1

So we have some buyers, but we want to put that in order. And we were waiting to see we wanted to respect Shell first before to move ourselves. We've in connection with Nigeria and authorities because at the end, we need their approval. So I went to Nigeria and to Lagos. We discussed and we want to do that in, I would say, in partnership, not aggressively.

Speaker 1

If you are aggressive, they can stop you. We have the right or not, then it's a mess. So we want to do that in good intelligence with the Nigerian authorities. Oman LNG, you are the one who follow us very carefully. It's a decision we have to take in 2024, do we proceed or not.

Speaker 1

The reality is that we have that option, of course, and which is good and attractive option. But Oman has other plans as well to develop another train on Oman LNG. So there is a debate of allocation of the gas today. We will do that as well in connection with the Omani authorities.

Speaker 16

Maybe you can please a very small one. It's a follow-up on Nigeria on Train 7. Do you believe there will be enough gas? Or the other way to say that is that the plant will be delayed if there is no End of gas and when do you anticipate Train 7 in Nigeria to start up?

Speaker 1

I think I answered to you in my previous answer. Okay. It's part of the story of the gas. There is I said clearly to my colleagues and to Nigeria, it would be crazy to have a train with no gas. So I want a gas.

Speaker 1

But the gas is part of all these developments. And okay, that's one of the complexities. We are working actively on this one. Okay. I think we are We covered everything?

Speaker 1

Yes. So it's exactly 11:45. I know that we have Our Norwegian friends this afternoon in London, that you will rush to listen to our no, no, but we are in good connections. We have put our Sequans before earlier this morning we asked you to come not to have any overlap. So we take care of you.

Speaker 1

So it's the 2 teams are connecting regularly in order to organize it for you. So thank you for your attendance this morning. Thank you for I think, you know, honestly, as a conclusion, I would say, we have a clear strategy. We are consistent in terms of execution. We don't change.

Speaker 1

I think it's a clear message. And I think in this energy business, maybe because I'm there for 10 years and for some years, My lesson is let's be stick on what you think and including in the distribution policies, try to establish a clear framework rather than moving around permanently, I think it took time for me to understand it, but now I'm there and I'm sticking on it. So maybe for the hedge fund, it's not a lot of fun, but for long term shareholders, it's a lot of fun. It's better. And we are more targeting these type of shareholders for making these companies a success.

Speaker 1

Thank you.

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Key Takeaways

  • Following two tragic fatalities in 2023, TotalEnergies declared safety a core value, halted all human reactor entries worldwide, and switched to a water‐flooding catalyst‐replacement method to eliminate in-reactor interventions.
  • In 2023 the company posted an adjusted net income of $23 billion, achieved a ROACE of 19%, generated $36 billion of net cash flow, returned 46% to shareholders, and reduced net debt to €6 billion (5% gearing).
  • TotalEnergies’ balanced energy transition strategy is built on two pillars—responsible oil & gas production (2–3% annual growth) and integrated power (22 GW of renewables)—with capital spending split equally between hydrocarbons and low-carbon projects.
  • The LNG portfolio grew 9% to 44 Mt of sales, generating €7.3 billion of CFFO, while integrated power capacity rose by 6 GW to 22 GW, delivering €2.2 billion of CFFO and nearly doubling electricity output to 33 TWh.
  • For 2024 TotalEnergies guides to ~€34 billion of net cash flow, €17 billion of CapEx, a 7% dividend increase to €0.79/share, €2 billion quarterly buybacks, and further emissions cuts (scope 1 & 2 down 3%, methane down 50% by 2030).
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Earnings Conference Call
TotalEnergies Q4 2023
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