TotalEnergies SE Ordinary Shares

Hello, everybody. Good afternoon or good morning. I hope that all of you are well and staying safe. At the time, we are almost all of us back to Paris office, 75%, 80% of the staff, taking, of course, all the appropriate precautions, consistent with our safety culture. But it's good to be here again together. We are more innovative when we are collectively at the office. but in front of screens. And in the fields, all the business units are fully operational today. And that's, of course, our big priority, our main priority, keeping people safe, but at the same time maintaining all our business operational. I'm happy to welcome you this afternoon together with Jean-Pierre for his earning call. I'm joining you today because we felt important that in the These unprecedented times, the chairman and CEO of the company can directly give you the big picture of where the company stands, and Jean-Pierre will explain to you in detail all the Q2 results of resilience that have been, and before we go to the Q&A. So, during these quarters, I will not be very original. We faced some very exceptional circumstances, the worst since 2014. The COVID-related lockdown led to unprecedented global demand destruction, and this was made worse by the drop in oil and gas prices. The Brent fell by 60%, dipping below $20 per barrel in April and averaging less than $30 per barrel for the quarter, with high negative differentials between the Brent marker and the real crude prices, around $5 to $6 per barrel because of low demand. And the natural gas prices in Europe and Asia dropped by 60% to historic lows. Of course, the production restraint, mainly by OPEC plus countries, helped lead the way to a market recovery, but has seen rent come back to an average of more than $40 per barrel since the beginning of June. And I would say we are optimistic about the willingness of all these producing countries to take actions and maintain the quote price above $40, which is, in fact, a low floor for most of them, if not all. Of course, given our exposure to some of these countries, the impact of quotas in total was close to 100,000 barrels per day in the quarter, and so we have revised slightly our full-year production outlook to be in the 2.9 to 2.95 million barrels per day range because the discipline of OPEC Plus countries is stronger than ever. But again, that's good news for the market and for the crude price, and it is a matter of value over volume. In the downstream, refining margin collapsed at a very low, even negative, level during several weeks, and we had to limit the refining utilization rate under 60%. And marketing volumes fell by 30% in the quarter as an average. However, in Europe, we can give you some good news from Europe. Also since June, We have seen a rebound here in Europe, and activity in our marketing networks is back to, I would say, 90% of the pre-COVID levels. And our gas, electricity, business, and marketing are close to the pre-crisis levels. In face of all these extraordinary weak and volatile second quarter environment, I would say that the company has been quite resilient. During this quarter, we generated $3.6 billion of cash flows, and we reported positive adjusted debt income. And we preserved our balance sheet strength with a gearing of around 23.6% after this first half of the year. So what are the lessons that we can draw from this quarter for the group perspective? The first lesson is, there again, the value of the integrated business model. These resilient results are due in particular to the overperformance of trading activities around $500 million above the usual levels. So once again, we demonstrated the value of the integrated model. Upstream was impacted by price and lower production, refining by low demand, low margins, marketing by the low demand, but in the middle of the all-value chain, the trading business captured significant value from the high market volatility. That's the first lesson, and we must keep that in mind for thinking the future. The second lesson is is, of course, that we have the opportunity to demonstrate the reality of the low break-even portfolio and quality of the portfolio of total. The cash generation of $3.6 billion is implying an organic break-even close to $20 per barrel, so under the $25 per barrel. These results highlight the underlying strength of the portfolio. This is a benefit of following our strategy to focus on assets with low production costs And by the way, this quarter, we are at $5 per barrel. We reached the $5 per barrel with all the savings. And notably, the giant long plateau assets in the Middle East, which some could perceive as not giving some, I would say, increased returns when prices are high, but we are very resilient, and the contrary, when prices are lower. We also rely on an active portfolio management to continuously high-grade the portfolio and And the latest example being the announcement this morning of the divestment of our non-operated mature assets in Gabon, and beginning of the week, the sale and the divestment of the Lindsay Refinery in the UK. The third lesson is the effectiveness of our 2020 performance plan to control the spam. The fast and effective implementation of the action plan at the start of the crisis is is really the driving force behind the company-wide effort to maximize cash flow. Cap net investments will be maintained under $14 billion, and OPEC's savings of $1 billion are well underway. And efforts also to control working capital have given this quarter positive results. So the outcome is that the debt increase on this quarter has been limited to only $1.2 billion, with the payment of a stable quarterly dividend of 1.9 billion. The Board of Directors is comforted by this resilience and cash generation. And as I announced to you on May 5th, the Board maintains a second interim dividend of 66 cents of euro per share, the same level as the first interim dividend, and we will review the situation at the end of the third quarter. But equally important, the Board reaffirms the sustainability of this level of the dividend in a $40 per barrel brand environment, and as you know, we are above $40 per barrel since the beginning of June. The fourth lesson that I draw is that in such volatile environments, developing a portfolio of renewable long-term PPAs will not only contribute to to our strategy to become a broad energy company, but it also contributes to more stable results to our global business model. We may be recovering from this crisis, it's too soon to know, but in our business, we must always prepare for volatility, even exceptional volatility. And despite the short-term challenges, we are holding to our long-term strategy to invest in profitable growth, and this is why The group is implementing with confident resolve our new climate ambition to build a more diversified energy company with stronger positions in the low-carbon electricity sector. As you notice, during this quarter, we have been very active as well. We entered into the giant Seagreen Offshore Wind Project in the UK. I would just say in Scotland. And we acquired an integrated gas and electricity portfolio with 2.5 million customers in Spain, which includes gas-fired power generation. Globally, we will invest close to $2 billion this year, or about 15%, 1.5 of our capex, in low-carbon electricity to build the future. And our low-carbon electricity growth capacity has increased this quarter from 3 gigawatts to about 5 gigawatts, Thanks to our new Indian solar GV, we produced 2,900 gigawatts per hour during the quarter, and we sold more than 25 terawatts. The ambition being to be balanced between our own production and ourselves, and we will come back on this roadmap at our strategic presentation on September 30th. I would also underline that we are also preparing the future for our oil and gas businesses, The successes in exploration, and as you probably know, Woodmark has selected Total as the exploring company of the year. So I pay tribute to our explorers today. We have announced the nearby exploration success in Egypt, operated by ENI, with a potentially fast track to market gas discovery. And more importantly, maybe, we have also our explorations, exploring large deporter resources in Suriname with three discoveries, I would say with three significant discoveries in a row, and more to come. And we are also preparing to share our knowledge by some counter-psychological deals, like, of course, the one in Uganda, whereby acquiring the Tudor interest and putting us in charge of this process. We have relaunched all the calls for tender in Uganda for the next quarter to benefit from the depressing supply market, and we have the ambition to sanction the project as soon as possible. We have also this quarter finalized the acquisition of the Block 2021 in Angola, which is a development which will benefit from synergies with our large base of operations in Angola. As we announced yesterday, the dramatic change in the environment prompted the board to make a comprehensive review of the assets using a different price scenario for the next few years. We have been, I would say, quite stringent or pessimistic view or bearish view for $35 per barrel in 2020, $40 per barrel in 2021, then $50 in 2022, and $60 in 2023. We adjusted the gas prices accordingly. For the longer term, we maintain our analysis that the weakness of investments in the hydrocarbon sector since 2015, accentuated by the health and economic crisis of 2020, will result by 2025 in insufficient worldwide production capacity and potentially rebounding prices. Beyond 2030, given technological developments, and in particular the evolution of the transportation sector, we anticipate that oil demand might reach its peak and brand prices should tend towards a long-term price of $50 per barrel in line with the international energy agency below 2-degree scenario. As a result of this new price scenario, we recognize improvements of $2.6 billion, mainly linked to the Canadian oil sands for $1.5 billion and the Australian energy assets of $0.8 billion. These were, in fact, giant projects with very high production costs. You will notice that these 2.6 improvements due to the different new price scenarios are quite limited, less than 2% of the balance sheet, which demonstrates that, again, we have, I would say, a safe balance sheet. I would say that the board of directors has also decided, and maybe more important, which demonstrates our consistency and our willingness to implement So climate ambition that we announced on May 5th for our joint statement with the Climate 100 Plus Investors Initiative. In fact, we have decided to look to, and the board has made a review of the assets, to check which could be the stranded assets within our portfolio, keeping in mind our climate ambitions that I would look to 2050. Stranded assets, we gave them a definition where assets where we have more than 20 years of reserve life with high production costs, I would say, above $20 per barrel, 25. The only assets which have been qualified as stranded after this review were Forteels and Cermont in Canada, the two oil sands projects which remain in our portfolio. And this review resulted in a $5.5 billion additional impairment bringing the total impairment for the group of $8.1 billion. So I've given you, I think, the main elements of my introduction. I will turn over to Jean-Pierre. I would just like, finally, for his introductory comments, to commend all of the teams of Total for performing at such a high level during such a challenging period. And what I can tell you is why we are certainly more comfortable with a brand above $40 per barrel than we were when it was below $30. We'll continue with the same discipline, and I know that the teams will continue with the same discipline to execute and deliver on our four priorities, HSE, operational excellence, cost reduction, and cash flow generation. Now, Jean-Pierre, the floor is yours.

Thank you, Patrick. For the second quarter, Total resisted an exceptionally weak environment and reported positive adjusted net income. And I think more importantly, the cash generation was good, even better than expected. Indeed, we generated $3.6 billion of debt-adjusted cash flow, a decrease of 50% compared to the same quarter last year. Despite, as mentioned by Patrick, the 60% drop in Brent, as well as in European and Asian natural gas prices. Net debt increase was limited to $1.2 billion. This reflects the successful implementation of the action plan that Patrick mentioned that helped to drive the organic cash flow break-even to less than $25 per barrel in the second quarter. Let's look at the result by segment now. Operationally, the group upstream production in the second quarter was 2.85 million barrel oil equivalent per day. That means a decrease of 4% compared to the second quarter last year. New startups and ramp-ups, mainly Kulins in the UK, Johan Verhoef in Norway, Yara in Brazil, and Temparosa in Italy, were more than upset by reductions linked to OPEC Plus production discipline, notably in the Emirates, in Nigeria, in Angola, or in Kazakhstan, as well as the curtailment in Canada, disruption in Libya, and natural declines. As highlighted by Patrick, we fully support the production discipline, particularly by OPEC Plus, recognizing the positive effects it has on the oil price. Given this OPEC-less quota, as well as the situation in Libya, we now anticipate production in the summer season during the third quarter will be the low point. So we now expect to average between 2.9 and 2.95 million barrels of oil equivalent per day for the full year 2020. For the IJRP segment, Integrated Gas Renewable and Power segment, We reported an average LNG price of $4.4 per million BTU in the second quarter, a decrease of 30% compared to the previous quarter, and 23% compared to a year ago, mainly due to three factors. The long-term LNG contract price declined by 16% compared to the first quarter, reflecting the lower oil price, and given the time lag effect, we anticipate the low Also, in recent months, some of our long-term contract buyers exercised their contractual flexibility to reduce their outtakes. So the share of spot volumes in the sales mix was 35% in the second quarter, compared to 17.17% in the first quarter and 33.33% in the second quarter last year. I remind you that last year, the early Yamal LNG cargoes were sold on spots. And you know, spot prices were particularly low during this quarter, deflecting the weak environment. So impacted by the lower LNG prices, IJRP reported second quarter adjusted net operating income of something like $30-26 million, and cash flow from operation before working cap, the CFFO, close to $560 million. This demonstrates that our global integrated portfolio, including regard, including trading, was able to mitigate the weak second quarter environment. Going forward, the low oil prices observed during the first half will have an impact on LNG contract price in the second half of the year. At the same time, we also anticipate that third quarter contract LNG liftings will be harder hit, but deferral, than they were in the second quarter, by an estimate between 20 to 25 cargoes in the third quarter, compared to nine in the second quarter. So this will be likely a low point as well. However, during the fourth quarter, a number of deferred cargo will be lifted, and combined with normal seasonality and a possible improvement in brands, we can expect some recovery later in the year. Despite the volatility, we confirm our strategy for profitable growth in this segment for both LNG and low-carbon electricity, which is consistent with the energy transition and our climate ambitions. Mozambique LNG and Arctic LNG2 are underway, and Nigeria LNG27 has been affected. So our position as the second largest player in the LNG business is solid for the long run. Also, as part of our partnership in LNG with Sonatrac, we have agreed to renew and extend the agreement for LNG supply from Algeria. As Patrick said, expanding our integrated low-carbon electricity activity is key to our long-term strategy to more broadly diversify the group's energy offering and to achieve net zero ambition by 2050 together with societies. In the UK, in a move that changed the scale of our offshore wind activity, we acquired a 51% stake in the giant Sea Green One project. In Spain, we have become a key player in the integrated gas and low-carbon electricity market by acquiring 2 gigawatts of solar power generation capacity in the first quarter, and in the second quarter, by acquiring a portfolio of 2.5 billion B2C gas and power customers along with two CCGT representing nearly 850 megawatt capacity. Growth installed renewable power generation capacity rose to 5.1 gigawatts, essentially doubling in the second quarter compared to the previous quarter, thanks mainly to the acquisition mentioned by Pratik in India of 50% of the portfolio of more than 2 gigawatts from the ADNI group. And we have increased the number of gas and electricity customers in Europe as well during the quarter to nearly 6 million, up 7% compared to a year ago. These important steps allow us to confirm our goal of 25 gigawatts of gross capacity for low-carbon electricity by 2025. As part of our net zero ambition, we took the additional step of making the decision to join the Northern Light CCS project in Norway. Now moving to E&P. So this segment reported an adjusted net operating loss in the second quarter of $209 million, reflecting the drop in commodity prices and the impact of the lower volumes that were mentioned before. In line with the weaker environment, FFO, cash flow from operation, from E&P fell to $1.8 billion, but, of course, still the single largest cash flow contribution among all the segments, and more than enough to cover, by the way, its net investment of $1.4 billion in the second quarter. We are committed to profitably developing and upgrading the E&P portfolios, We'll give you some illustration. In the second quarter, we started up the second SPSO on Yara, the low break-even deep offshore field in Presol, Brazil. In terms of M&A, we have continued to move counter-cyclically and acquired true interest in the LAC Albert project in Uganda. We have completed the Angola Block 2021 acquisition announced last year. We closed the sale of Brunei Block CA1, and we announced recently today that we were successful in divesting our non-operated material assets in Gabon. Although we have implemented strict discipline in capital spending this year, we continue to explore with some success, notably in offshore Egypt or in Suriname. We made a third discovery, Kaskwasi, after Maka well in January and the discovery, Sapakara, in April. Turning now to downstream, adjusted net operating income was $704 million, down 38% compared to a year ago, and second quarter CFFO, cash flow from operation, was remarkably strong at $1.5 billion. The decrease was primarily due to weaker refining, driven by the 48% drop in the variable cost margin and the low 60% utilization rates. which resulted mainly from prolonged outstage at the Faison, the Normandie, the Grands Fleurs refineries in response to weak product demands. Marketing was weaker as well, with refined product sales volumes down by 30% due to the demand destruction during the lockdown. On the other side, our trading activities did very well in the volatile second quarter environment and overperformed by about $500 million, and at the same time, petrochemicals were resilient due to a higher utilization rate, as well as resilient margins this year. Downstream safe FO in the first half was $2.6 billion. High inventories levels continue to wait on refining margins and utilization rates. The recovery will largely depend on the speed and extent of the post-COVID global economic rebound. So our guidance of a range between $5 to $6 billion for the year can be reached. Finally, at the group level, our adjusted net income was $126 million in the second quarter, and reported net income was negative given the $8.1 billion impairments recorded this quarter. The effective tax rate for the group was negative 7% in the second quarter compared to 30% in the previous quarter, essentially due to the adjusted net operating loss in E&P with a high tax rate, which was not offset by the positive result in the downstream, which has a lower tax rate. Second quarter nest investments were $2.9 billion, including organic capex of $2.2 billion. For the first half, net investments were $6.5 billion, and our guidance for the full year in net investments of less than $13 billion. We confirm capital discipline is part of the action plan. We implemented the action plan at the start of the crisis, and since then, there is a strong company-wide effort to preserve cash flow this year. Notably, by saving $1 billion in operating expenses compared to last year, and I can tell you that in the second quarter, we reduced OPEC per barrel to $5 per barrel from $5.2 per barrel in the first quarter, as well as strictly controlling at all levels spending to keep a break-even low and maximize the cash flow. As part of the action plan, we also concentrate on turning working capital into a source of funds. And in the second quarter, we had a release of $0.4 billion of additional cash flow through working capital. For the final 2019 dividend payment, we offered, as you know, a script option that was subscribed at 62%. and this will reduce our third quarter cash outlay by about $1.2 billion. But as you know, the three dividends will not be possible for the next three interim 22 dividends. We were very active on increasing liquidity during the quarter, and as announced in May, we have improved our position by more than $30 billion, largely by securing $9 billion in long maturity bonds and more than $6 billion through syndicated loan agreements. We are net cash flow positive year to year, so we have preserved our balance sheet strength. And gearing was below 24% at the end of the second quarter, taking into account a 1.3% impact associated with the impairment we have recorded. To conclude, I would like to emphasize that our priority going forward is to deliver our action plan, generating a level of cash flow that allows us to continue investing in profitable projects. while preserving, at the same time, an attractive return to shareholders and a strong balance sheet. I think now we can move to the Q&A.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star and 1 on your telephone. And if you'd like to cancel the request, then it's the hash key. So once again, that's star and 1 to ask a question and the hash key to cancel. Your first question today is from the line of Irina Himona from Societe Generale. Please go ahead.

Thank you. Good afternoon, and congratulations on these numbers. I had two questions, please. First one for Patrick. Perhaps in relation to the board's review of stranded assets in the portfolio, I wonder if you can share with us your views on the risk of stranded refining assets and indeed refining margins long-term through the energy transition in relation to Total, but also in relation to the European industry in particular. And my second question for Jean-Pierre, in the second quarter, your upstream tax was, in fact, a little bit above the first quarter. I wonder if there is some guidance for full-year expectations on that front. And also, if you can please remind us of your full-year expectation for working capital. Thank you.

Okay, thank you, Irene, for your comments. Refining assets, I would say you have noticed that And you know our views about, and we have committed, I would say, to Europe climate neutrality by 2050. So we have to be consistent. And we know that in Europe, refining is, I would say, oversupply. We have noticed that we have divested one refinery this year, this week, at the Lindsay Refinery. It took us quite a long time to divest it. I would say that we are left with not so many assets. You know also that in our roadmap, and we'll come back on this roadmap by September, the strategy meeting, but in the roadmap, in the European roadmap, there is quite a strong willingness from the policymakers to develop biofuels, renewable fuels, I would say. biojet, biodiesel. We have made a first positive experience, in fact, in Lamed. The only positive refinery in France during the quarter is Lamed. It's no more a refinery, it's a biorefinery. And despite, you know, the specificity of the French market, which does not allow us to use palm oil, we have been able to make positive results. So this gives us, obviously, the willingness, and Bernard Pinate will come back on it, to develop a more aggressive strategy to develop the biobusiness, in particular by converting some European refinery to these biofuels. We have an advantage. It's not, from this perspective, not at all a stranded asset, on the contrary, because when you convert brownfield assets, you have, I would say, you spend $500 per ton to make in capex a biorefinery instead of for a greenfield project to make about $1,000 per ton. So, part again of our climate ambition, as we told, we want to decarbonize all assets by developing biofuels. So that's my answer to you. And so I'm not, we have reviewed these assets, but honestly, we are, the board is not ask some answers about refining assets from a stranded point of view. I'll let the floor to the complex second question to Jean-Pierre.

Thank you very much. The guidance for the tax rate for full year, of course, it depends on the crude price and the global environment. But I would say that at current level, around 30, 40 dollars per barrel, we could expect a group tax rate around 15%. and the contribution of E&P in that tax rate will be around 25-30%.

That's an average of $35 per barrel, I think, for the year. We are a little above today, and it's quite sensitive to the oil price, so be careful.

And for the working cap, it's a matter of prices as well, because you know the BFR is impacted particularly by the the stocks, but we are very satisfied to see during the second quarter that we managed to cash in more or less $400 million this year. So it's a cash-in. So I can tell you that we continue to monitor this working capital. All the teams are mobilized to limit the working cap. And we hope that if we maintain, if we are around the current level of prices, we could have a positive impact on the BFR for the full year. So, cash in.

Thank you very much.

I remind you that we stated in the Q1 in May that we have an objective of a release of $1 billion. At $35 billion. So, we are on this way. But it's clearly a priority and To be fully honest with you, we have put as an incentive to all the executives of the company working capital release before year end. So it seems to work, you know? So the focus on cash is strong in the company.

Thank you. Thank you. The next question is from the line of Michele Della Vigna from Goldman Sachs. Please go ahead.

Thank you. Patrick, Jean-Pierre, congratulations on strong results in a very difficult macro environment. I had one strategic question on the low-carbon business. Until now, it's made perfect sense to develop most of the businesses unconsolidated, associated with project financing, in this way limiting the capex and the corporate gearing. But I was wondering, at the time when investors are very focused on seeing this business gaining scale. And also with rising frameworks like the European Green Taxonomy that focus on revenue and capex exposure, perhaps wouldn't it be better to have a consolidated low-carbon business and show separately the debt, the capex, and the unlevered and levered returns, and in that way offer greater visibility on the growing scale of that business and on growth? the underlying economics.

So you have to be patient until September 30. No, but to be clear, we are working on it, obviously, and I will tell you why we'll do it. As you noticed, since the beginning of the year, we have made a lot of progress in terms of growing the portfolio. We have grown a project in India, a project in Scotland, projects in Qatar, projects in Spain. So we have today a much stronger visibility on what will be the development of this business, low-carbon electricity business, between today and 2025. And by September, we'll be able to provide you not only projects but a consolidated vision and financial figures. But like we are doing today in ENP, what is the target of production? What is the target of financial return? So, Michele, please wait a little for that. But it's clear, and I fully support your view. And we all notice that the market today is very keen and is giving a much better multiple to this type of businesses than, I would say, our heritage business. And so the only way to attract part of this multipolar company will be to give more visibility. But to do that, we need, of course, to grow it, to make it sensible. So this will be, I would say, one of the main objectives of our strategic presentation in September. We'll be to give you, I would say, more than a flavor, but to give you some insights on what is this new energy business for Total, this low-carbon electricity business. And so that you can be convinced that there is a – it's a growing business. It's a profitable growth, I would say. And, of course, as you said, of course, this is sustained by the capacity to make some project financing to leverage the financing. But we'll come back in detail. So I fully support your analysis. And we have – we are on the same, I would say – And by September 30th, you will have all that you want. Maybe not all. At least what we can deliver to you. Because, you know, we always keep a certain thing for us, you know. But honestly, the progress has been strong. And, in fact, we are clear. Jean-Pierre told you that we are on the roadmap of delivering these 25 gigawatt gross capacity. We can do more than that. And I mentioned that the ambition is at least to produce as much as we sell. So you can tell you, we'll give you a high production figure. It will become quite sensible in the company.

Thank you.

Thank you. The next question is from the line of Christian Malek from JP Morgan. Please go ahead.

Hi, thank you. And thanks for taking my question. Two questions, if I may. One regarding the oil price outlook. And clearly, the revisions are sort of prudent. And once I understand better, Patrick, how you see the macro backdrop, particularly with the comments around underinvestments in the supply and also just how that compares to where demand and the trajectory for demand. I know it's an impossible question, but it's clearly something that speaks to something you've been talking about and the analysis you've done. So just to guidance around what your views are on the supply outlook and that sort of segues into the second question specifically around how you plan for FIDs and the priorities around FIDs over the next 12 to 18 months if you are to sustain your production over the medium term how should we think about the priority around projects and particularly with the discoveries in Suriname thank you okay thank you Christian for these two questions

The first one is not fully impossible because I gave a sort of answer in our price scenario. We didn't, as you noticed, we have been very prudent, obviously, for the next three years, but we also kept in our scenario the average on the next 30 years is around 56.8, but we noticed that we kept part of the scenario we published by beginning of the year, which is between 25 and 30 rebounds, which could go up to $70 per barrel. Why? Because we had before this crisis, and I think, again, this crisis reinforced this feeling today, is that the supply will be damaged you know in oil business when you don't invest you have a natural decline of course in the last year this was offset by the increase of the shallow reproduction but the we can be wrong on it but we have the feeling that this crisis is uh pushing investors to have another view of the investments in the shale oil. You have a drop today from 13 million barrels per day to 11. Next year should be around 11 million barrels per day in our views. Of course, it could come back, but I think investors in shale oil will be more prudent. So that means that this effect could be less significant. efficient in the next years. And at the same time, as you notice, there is less and less FIDs. And so it came to the second question for most of the players. So it was not good before 2020, but the balance was coming from Shell Oil. I would say that today it's even worse, less FIDs and less shale oil could lead again to lack of oil production. Of course, there is a link to the demand, and that's back to the other question, which I noticed that today people are all obliged to stay beyond their screen, so they write a lot, a lot of stories about the demand has vanished forever. I don't think so it's right. I think yes, it's true, but I will not tell you if it's a V-shape, a W-shape. My traders gave me a good story. They told me it's a root square shape, you know, root square shape, which means that it could take, go back to 90%, and then it could be two years to go down to the back level, but to the level pre-COVID. But I'm convinced we'll come back to this level. On the longer term, beyond 2030, we could have some effects of technology, but I don't think it would come very quickly. And so from this perspective, we kept, we kept, and the board kept, because we had discussion at the board level, this vision of a price which could rebound by 2025. Again, putting a price is difficult, we have to make an assumption, but this is in our views, which lead us to that FIDs. And this is why, by the way, The strategy of Total is clearly to be a multi-energy company, which means less low-carbon electricity, but also oil and gas, not to make any mistakes. We want to grow, and we will grow, so we will update you by September about the profile growth between 2020 and 2025. Of course, we did not acquire Ghana and Algeria, so we have an impact, but we have some key projects, and to come to your question especially, The FIDs, key FIDs for us on which we work are in Brazil, Deepwater, Meru 3, I think this year, hope soon, and Meru 4. And in Uganda, of course, obviously, you know, we have a big stake in Uganda operating. We have solved a lot of issues in Uganda. We continue to work hard despite the COVID-19. by teleconference. We progress a lot on the pipeline and with Uganda, with Tanzania. And I hope that we could benefit on Uganda and a very good project if we get good costs with the crisis being there. And of course, don't forget that if the price comes back, the short cycle capex that we have cancelled this year, we have still the 1 billion barrels which are in the portfolio can be reactivated. So these ones could also fill the future growth of the production after time.

Sorry, can I just follow up very quickly, if I may, on the second point in that it's a tentative plan to hope for the best, plan for the worst. And in your dividend set at 40, it's hard not to ask this, but if oil does stay below 40 on a sustainable view, what are the tools you have in order to mitigate? Because it sounds more like a half-glass-full strategy on oil over the next three years.

No, but at $40, the dividend is sustainable, Again, look, this quota, I mean, then it's an arbitration among our capital expenditures. So we will arbitrate between the different projects. It will be a matter of value over volume, but the best project, like the one I mentioned, will be finance for sure, and we don't intend to. And if we have to arbitrate, we'll more arbitrate on the short cycle if we don't have the quick return. So, again, I cannot tell you more than that. That's what I just told you about the... The sustainability of the dividend is $40 per barrel. About Suriname, Christian, you have to, it's a matter of, let's be a little patient. You know, we have announced three discoveries. We are still making some logs. And as you notice, we are finding oil. We are finding some oil with gas, with light oil, with condensates. So, we are quite convinced that a development, at least one quick development, should be put in place. We are drilling a fourth exploration well on Kiskesi soon. After that, Total is becoming operator. It could be for us a new very high large oil province, which will concentrate a lot of the force of the company. But I want to have all the data before to give you more, I would say, figures about the capacity of all that. Thank you.

Thank you. The next question is from the line of Lydia Rainforth from Barclays. Please go ahead.

Thanks, and good afternoon to everyone. Two questions, please. The first one, Patrick, the moves that we've seen this quarter and this year, whether it's selling Lindsay, Gibbon, buying into Seagreen, they're all very consistent with the strategy that you set out, but it does seem to be moving very quickly. Has that change in strategy accelerated since the start of the year? Effectively, are you seeing more opportunities in low carbon relative to what you did at the start of the year? Actually, sorry, linked to that one. The stranded assets review, did the results surprise you from that? And then one last question, if I could. On the downstream, can you just give us an idea of where you expect the cash flow contribution to be? Because clearly, refining margins have been very weak over the last three months or so.

Okay, the last one is quite clear. I mean, the cash came quite, of course, obviously from the trading. You know, the trading business, when I tell you that... Trading has overperformed by around $500 million. You know, the beauty of trading is that when I give you a result, you can translate it in cash. So it's easy to do, and the tax rate is quite small. It's why, by the way, that we have a low tax rate globally. So can it be sustainable? What Jean-Pierre told you is that at the first half, despite the terrible second quarter, we have generated on the downstream $2.6 billion. so which gave you a guidance of five to six that means that if we double it uh you are in the range again it's very difficult that's true that the margins refining margins are very low but the marketing business as which i think is very low point by the second quarter so it's giving better cash since june more normal ones of course the trading cannot reiterate because it was linked with capture of strong performance was linked to very high volubility. And frankly, I hope we'll not have such a high volubility in the first, second half. So all in all, I'm confident with the guidance which was given to you by Jean-Pierre, and we'll see. The other asset, did the review surprise you on stranded assets? No, I mean, I will tell you. The main point was for us to be very comfortable to say, okay, we have made this statement in May of June. We want now to be clear and consistent with the climate strategy. So let's do the review. You know, when I had in the one-to-one road shows, people were asking me what about stranded assets. Immediately I was thinking to the old science, which was obvious to me. And by the way, this quarter we demonstrated it. Because we have curtailed the production on the oil sands, you know, and the production has been reduced to 35,000 barrels per day on Sunco this last month. Why? Because, in fact, the cost of production was much higher than the oil price. So I think... Again, if you think to the future, and so we made an asset-by-asset review to be sure that we are missing nothing, and long reserves and high production costs, we had only these ones in the portfolio. And I think, so the board said, okay, then let's do it. We had to find, I would say... an accountable way to do it, I mean, in terms of recognizing. So we decided to use only the proven reserves to make the test, which is a way to be consistent with figures which can be audited. And the auditors were very comfortable with the way to make this review and this impairment. And I think it's a vision that, in fact, what does it mean for us proven reserves? That means that by 2040, 2050, we think that if the oil demand is going down, then this type of assets, which are high on the cost-merit curve, could be stranded. And that means that what is happening today could become the new normal for the oil sands. So we did that and identified other ones. The others, which are not so – we don't have, by the way, the other long-term uh to all assets we are are in abu dhabi and you know in abu dhabi the cost of production is less than three dollars so we don't have at all the situation the first questions are about uh the strategy uh in uh in low carbon electricity i think yes you have seen not only press release you have seen uh assets moving you know it's not only press release these are real deals why did we accelerate i think first to be clear it is the result of uh two years and three years of putting in place the teams, identifying the opportunities, finding the right partners. You know, for example, India is a consequence of the partnership with Adani on the gas, and then we leverage that to go to renewables. We also made something strategically, which was, I would say, one year and a half ago to decide, okay, let's not concentrate on solar only, but let's look to other technologies. And clearly, I would tell you that maybe we made a mistake in the past, but it's better to recognize it but not to ignore it. Offshore wind is obviously fitting very well, I would say, in terms of capital intensity, production capacity as well. So we are very happy to have managed to convince SEC to become a partner in these giant projects. It's honestly for less than, around less than $100 million of entry cost. It's safe to us. Years of getting the permits and offshore wind can be very slow, you know, so I think it's a very efficient entry. So, yes, that's true. It's also, and as I said to Michele, I think, just before, this recognizes the fact that we are more and more comfortable in, I would say, approving the projects. We have a better and better strategy, and we'll be able, again, to show you more by September 30th. And it's consistent. As I would say, all that, if we were able also to make this statement on May 5th for climate ambition, is because we are clearly more comfortable with developing this multi-energy company that we want Total to become. So Total will become Total Energies, you know, with an S, and not only Total Oil.

Perfect. Thank you very much.

Thank you. The next question is from the line of Jason Gamble from Jefferies. Please go ahead.

Thanks very much, gentlemen. I just want to ask a couple questions on the LNG business. You mentioned deferring quite a few cargoes in the third quarter, and I'm curious right now where prices are at, if it's even profitable to lift LNG from the U.S. Gulf Coast. I know that your shipping fleet and regasification capacity could potentially have some benefit there. And then the second question is really more on the medium-term supply and demand balance. You talked a little about oil fundamentals moving forward. Could you maybe spend some time on the LNG market as well? I mean, obviously, spot prices are pretty bad right now, but you are investing in quite a bit of capacity for the middle of the decade. Yeah.

Yes, so concerning the deferred cargo, I mentioned to you that during the Q2, we decided to defer nine cargoes coming from the US and mainly from three ports, given the flexibility we have on the contracts. For the third quarter, we can imagine, we can anticipate that we will have more deferred cargo than in the second quarter, depending on course of the timeline in the formulas.

No, I think our trading team clearly are thinking to cancel around 30 cargoes from the U.S. The U.S., obviously, today is less profitable. It's very clear. It depends. You know, we had some deals like the one... It depends on the... which provenance it is. I mean, the deal we've done with Toshiba last year gave us a much lower dollar per million BTU of cost of production than some other ones. So we are betrayed. But clearly today, this US LNG is not very profitable. So that's the reality. Again, that's Today, short term, it does not change what we think fundamentally. Fundamentally, this energy business is a business that will continue to grow. If you don't make the energy transition in this planet shifting from coal to gas without growing energy market, and so that's the fundamental, and so we'll keep it. Having said that, coming back to your second question, I think first, This crisis has sometimes benefits, you know, and one of the benefits from this crisis is that I think there were many energy projects who were not far from being sanctioned. All of them are stalled, which is good because, you know, we were a little afraid by having too much supply by 23, 24, 25, 26. Today, what is happening is that we not have too much supply and all three projects, we have to know Arctic II, Mozambique LNG, and LNG 27, which will come into that window, will come at a time where we can expect, on the contrary, to have a much more balanced supply. market. And so we are, I think, even if today we suffer, in three, four years, we will benefit from this situation. I think this is a wake-up call for everybody, you know, what is just happening. You know, people were thinking that it was a business model of US energy, which is to make a sort of infrastructure business where you find people to To offtake the gas with no integration is a new way to make business. Obviously, I think the offtakers today will become more and more cautious. And it's back to what we think. We think that the right business model is to be integrated, integrated on the upstream, integrating on the midstream and downstream. Again, we are... As I said, you know, when we acquired the ENGIE portfolio, we were thinking that maybe part of that was being too much free gas capacities in Europe. Today, we have been quite happy to have all these free gas capacities, which give us a form of good results. So, we have, and again, to be, so the lesson is that when we are off-takers, we have to be integrated, and for example, in Cameroon, being an equity in Cameroon, give us an edge, in fact, from this perspective, because, yes, the offtake part today is suffering, but the shareholder of the plant is quite happy today. So, again, I think the lesson is let's continue to, it's part of, I think, LNG development and growth is really anchored in the strategy of the group.

Thanks very much.

Thank you. The next question is from the line of Thomas Adolf from Credit Suisse. Please go ahead.

Hi, good afternoon. A couple of questions, please. I mean, firstly, considering your comments on gas, and obviously also investing a lot in gas, call to gas switching driving growth, is Europe making a mistake with the Green Deal? I'd be interested to get your views on that. And then secondly, You talked about low carbon being high multiple, your legacy business, fossil fuel, oil and gas, currently being low multiple. But is it now getting interesting for you, considering your slightly more positive medium-term view on oil, to actually be more active in M&A and fossil fuel? Or are you just generally happy with what you already have in the portfolio? And if I may, finally, just on gearing, I know you do have a target or an ambition to be at around 20% pre or post IFRS 16. but is there a soft or hard ceiling for that ratio? Thank you.

Oh, good question. Now, Europe, obviously, I mean, I'm more optimistic. I think when you look and listen to the Green Deal, and in particular to Franz Timmermans, the vice president in charge of the Green Deal, I think he has understood, and the last speeches he has delivered on the hydrogen ambition, it was very interesting, because I think that Franz Timmermans has clearly understood and the Commission understands that you don't make a transition in Europe without natural gas. And people want to jump immediately to green hydrogen, and he explained that you have to go for blue hydrogen if you want to be efficient. So I think, and for most of the countries, and Germany in particular, natural gas is obviously the only way to move from coal to gas if you don't take nuclear. So I think I know that people in Europe tend to put all the hydrocarbons in the same basket, But I noticed since, and maybe because they want to put more money in all this Green Deal, but the political leaders are becoming more and more realistic about the space for natural gas in this transition. And you know, by the way, as I already said it, but among the good electricity business today, we have these gas-fired power plants, which are running at a very high level and which generate quite a good business. I think it would be a mistake, obviously, to answer your question if Europe was putting aside natural gas But I think it's not the case. Of course, they will ask us to, I would say, make the gas greener by injecting some biogas. And we are looking to develop a business in biogas to make it greener by injecting some hydrogen. But I think, and we should, why not? Of course, it's a matter, of course, of will the European customer be happy to pay more? But at the end, all that has to be paid by somebody, not by us. So I'm optimistic about the situation in Europe because it will be a question of facing the reality. Should we be more active on M&A and oil? You know, again, we are a multi-energy company strategy and compass oil and don't make any mistakes. who want to grow. So I'm not sure. I have no message today. Obviously, the fundamental for me is to be on oil with low cost, low cost oil. I mean, this is consistent. So if we had opportunities because, of course, the cycle is very low and that some people are desperate to have access to low cost oil, we will study . Of course, we will not do it. This is what we've done, I think, with TULO, renegotiating the deal. This is what we have done in Angola to access to 400 million barrels for, I would say, $400 million, so less than $1 per barrel. So again, the fundamental for me, it has to fit with the strategy of having access to assets with low cost of production. And so you could see us on this sale. The gearing, to be clear, nothing has changed. We said less than 20%. I think it's without IFRS because this target was set before the IFRS 16 on lease was put in place, so we didn't move it. So that's the objective. Today we are at 24%. I remind you, the allocation of capital we set before the crisis is still valid. It's for the capex of the company, the dividend. We keep the dividend. And then the gearing, the gearing. So clearly, one of the objectives, if we have more cash flows coming because of price rebound, we build to allocate that to lower the debt. And so I keep the 20% as a very strong move because, again, if today we are comfortable with this crisis to face the situation, to maintain the dividend, it's, of course, because we have a stronger balance sheet. So, yes, we move from 16 to 23. And so if I prefer to, the lesson is clear to me, allocation of cash, extra cash, if we have it in the coming years, will be primarily to come back under 20%. Do we have a very high ceiling? No. But obviously, there is a certain point that we need to be careful. Again, that will be a discussion for the board. But I'm, again, at $40 per barrel. You notice that this quarter, we have, I think, increased the debt by $1.2 billion. So it's the equivalent of a grant of around $44 per barrel. By the way, Lydia has calculated for me, and she's right. So that means that we are at $40. We said we can maintain the dividend. That means we are balanced, more or less, in terms of net cash post-dividend. So that's important, I would say. Thank you.

Thank you. The next question is from the line of Biraj Borkataria from RBC. Please go ahead.

Hi. Thanks for taking my questions. I wanted to touch base on chemicals following the impairment yesterday and your change of view on oil prices, but this has been a bit of a focus for Total, and you have a few growth projects there. So I was wondering if you could talk about over the last six months, has your long-term or medium-term view on the chemicals market changed in terms of attractiveness and how you think about mid-cycle margins for that business? And then the second question is on the comments you made on oil trading. I think you mentioned $400 million to $500 million this quarter. Just for a reference point, can you say what your oil trading business typically generates in an average year? Just to get a reference point for that. Thank you.

No, the oil trading is a secret, and I just gave you, but we've done $500 million more than usual, but you will not have the usual figure. So, sorry for the second question. You tried, but it's a good try, but it's not... I tried as well to answer you. Not to answer you. Chemicals. No, we have projects in chemicals, but petrochemicals. I mean, we have been always very clear and selective in the petrochemicals. We said primarily, and this is not a change, we want to invest in feedstock advantage projects, which means mainly on natural gas projects, because we want them to have an advantage on the feedstock compared to NAFTA. So, of course, in an environment where everything is low, the advantage for a nat gas cracker is less obvious than the NAFTA cracker. But the fundamental is that for me, is that even on the medium and long term, I see a disconnect between the oil and the gas price. So, that's where we are. So, we have not changed our views. We have a certain level of projects. You know, we are working, our cracker in the U.S. will start next year. It's an integrated, and the other fundamental petrochemical for us is that we are integrated between monomers and polymers. When we make a cracker, we want to have the polymer capacity coming together. Otherwise, you could fail. To answer to your question on medium-term view and long-term view, no, it does not change because we look to be, I would say, integrated margin between monomer and polymer. And so we have the U.S. coming, or we have our projects in Korea where we continue to grow and develop our Korean platforms together with China. with our Korean partner. And the other big project is the one in Saudi Arabia, with Saudi Aramco, Amiral, on which we progress. We will launch the feed by, I think, September. So we have progressed despite the COVID. It's a very big project. So all these projects are moving forward. There is also a project in Nigeria. So we don't change our view on it. I would say it's a selective growth. based on projects which really fit with the fundamental characteristics, advantage feedstock, and secondly, integration monomer and polymer. OK. Understood. Thanks.

Thank you. The next question is from the line of John Rigby from UBS. Please go ahead.

Thank you. Hi, guys. Can I ask two questions? First is on the impairment charges from yesterday and the discussion you had on the Canadian projects. I'm sort of intrigued by your methodology because it seems somewhat artificial. Are you saying that you don't think the 2P resource base will get produced out or you won't produce out the 2P resource base? Either way, given your reluctance to sanction any more as a non-op, wouldn't it be sensible just to sell out of these projects? And if that's the case, would you expect to realize a price that's above the carrying value on the balance sheet? Because presumably, when you come to negotiate a disposal, you want the buyer to pay for the 2P resources, I would have thought, or that would be some fraud. Question two, just on your working capital. Can you just confirm there's nothing funky going on? You're not sort of selling receivables. If you can bring the balances down, this is a structural benefit to the balance sheet going forward, not just a one-off in 2020. Thanks.

No, John, let's be clear. By the way, all impairment calculations are artificial, you know. So it's not the methodology that is, you know, the scenario, the price scenario has to be set by the board. And it's not, each company has its own scenario. So you have also the discounting rate, which can be, might be different. So, you know, I can't give you, I can't tell you this matter of implement. It's not, you don't find the answer and the methodology in a book, a precise one. First comment. The second one, regarding the way when we came to Canadian projects, I mean, again, it was a matter for the board to be consistent with the vision which we put in our, I would say, the climate ambition that we have a vision, maybe we can be wrong, obviously, that the oil demand will plateau and will decline. And then if it is the case, because we have a lot of oil on this planet, That means the pressure on the oil price by 2040, 2050 might be stronger like today. And then what will happen is that the assets with the highest production cost will be in trouble. So we made that review. We had a 2P profile of our assets. We are going until 2068, I think, one of them. And we said to ourselves, okay, if we don't believe by that, that will be based in today and 2068, But the price of oil will remain at a level which might be enough to produce all the assets. We have to make something. So then was a question of methodology. Of course, the 2P reserves, but you know, are proven and probable. They are not certain. Proven and probable means proven for 1P and probable for 2P minus 1P. And by the way, if you look to what are the SEC reserves, from some independence in the U.S., you take only the 1p, not the 2p, you know? So we said to the , okay, finding a way to translate this long-term price assumption and this long-term risk on these assets into a calculation. So there was a form of logic. to us to say, no, the 2p does not disappear. But again, there are probable ones. The 1p are certain. The profile is going, I would say, until 2040. So let's take the 1p, which were audited figures. So it's a matter then of finding the right accountable way to be everybody was comfortable to make the calculation. Is it more artificial than something else? It's a decision. At least it's less artificial than just putting a figure. The reconciliation that we've done as well, obviously, and that's an accounting rule, is what we are supposed to have in our books, a value of assets which makes sense compared to the market for what could be the sale of the value of these assets you want to sell them. And that's the second part of your question, which is sensible. And that was a check we've done. So at the end, we are left with a certain carrying capital employed on these assets, which when we compare to various valuations which were given to us by Woodmark, by banks, by, we use many, many calculations, you know, the last transactions we have done on many metrics, et cetera, we are at a level which is not zero, obviously, because it has a value, it has a value, and which is in our book. That's fine. So, and again, I think if we don't tell you, we never said that the 2p have disappeared, the 2p are there. we said that in our books, we're not taking into account the 2P to be consistent with the global impairment and ambition. That's all what we said. So, yes, it's a sort of approach which at least is transparent, clear, and I think that the buyer, obviously, if there is a buyer, will have a different view than us about the capacity of extracting value from these assets, and maybe in 2068 we'll be happy to produce these assets. For the time being, let's be clear, Total is just waiting to see the the pipelines in Canada, the TMX pipeline being built, then the value of the asset will be higher, and then if somebody has a good offer, we never say never, you know? But we are very patient on this one. Okay.

So working capital is... Working capital, yes, of course. Managing the working capital is key for us to preserve our cash, and as we mentioned during the call we had with you in May, we mentioned in the action plan that our target is to cash in $1 billion through a working cap at $35 per barrel end of this year. So for doing that, we use all the different tools we have and selling accounts receivable through programs with different banks, of course, is part of the way we manage the working cap. There is nothing bizarre. By the way, it's not this quarter.

It was done by the company for many years. Yes. So you do that on a regular basis? The president of refining and chemicals a few years ago has decided that it was a good time to be a little more innovative in this way because the burden on the capital employed was so high that we had some time to take... That's part of what the financial market with a zero interest rate credit is giving possibilities. So that's nothing miracle there. Nothing bizarre and honestly the cost is almost nothing. Everybody is happy there, the banks and us.

Thank you. The next question is from the line of Oswald Clint from Bernstein. Please go ahead.

Thank you. Two follow-ups, I guess. I'm just thinking about the big upstream pipeline of projects you had, Patrick, the 800,000 barrels a day and the 15% internal rate of return that you had at $50 oil. So you've obviously got a little bit of a square root going on with your oil price changes last night and going forward. So I'm just curious if you could give us a sense of how that number may have changed post the price resetting, please. Thank you. I mean, yeah, you talked about chemicals there, which was interesting. I was just curious. It's difficult for us to see chemicals, obviously, on a quarterly basis. But, you know, given your more balanced monomer polymer ratio and given your very high ethane input, I think it's well over 60 percent. But is your chemical business outperforming peers in the first six months of 2020? Is it possible to just to talk about that, please? Thank you.

On the second one, to be honest, I don't have all the PR figures. What I can tell you is that clearly the petrochemical business was very resilient. And in fact, there was not far to be in line with the budget session. We put budget figures we put last year, you know. So why in particular? Because in the polymer business, We benefited from more demand on all the health segments. Of course, we suffered from less demand from the car manufacturing businesses, but on the contrary, we had more demand on the other part. So, of course, we have to be prudent because we also observe that there is a weaker business today in the U.S. than in Europe. Europe has quite well resisted, and I would say our business Middle East business is also well resilient. So compared to OPs, I mean, it's difficult because honestly, none of us have really the same size of petrochemical business. You know, two of our competitors are the very large ones. We are, I would say, a medium-sized business, and some of us do not have any business. On the upstream pipeline of projects, I would say that There is no, I mean, the main influence between today and when we announced the 800,000 bulk per day of 18% is that I think in 15% we were taking into account, I think, the acquisition of Algeria and Ghana in this figure, which of course are not there in the profile today. Having said that, as you notice, Oswald, or scenario is coming back to $50 by 2023. And we told you that we sanctioned projects at $50 per barrel. So I'm sanctioning projects at $50 per barrel. The scenario that we just put to make implements is coming back to 50 plus from 2023. So I think there is no change. I mean, and what I hope is that the cost of the project will be lower, like Uganda, because so we could have a better IRR, even at 50, because we sanctioned at 50. So it does not change that outlook fundamentally. I would say the main impact today for us will be more on the LNG projects. Not on oil projects. On the LNG projects, you know, as I told you, we have already sanctioned three of them. Of course, these today, we are, I would say, more patient before to sanction a project like Papua LNG, but we have to work. We are not planning to sanction it very quickly, so we'll need to see probably one of the consequences for me in LNG. is that we will wait and we will ask and we will wait to get some long-term contracts. I think the new LNG projects will be more sanctioned with more long-term contracts with third-party customers like Mozambique LNG, by the way, and maybe less by a lot of spot contracts, people taking the risk. That could influence the FIDs in terms of timing of sanctioning the new LNG projects. In terms of price visibility, we were comfortable with $50 before. We are still comfortable with $50 today. Understood. Thank you.

Thank you. The next question is from the line of Christopher Coupland from Bank of America. Please go ahead.

Thank you very much. And Patrick, just two quick follow-ups. Firstly, on dividend, of course, we're going to wait for Q3 and hear whether you can tell us more then. but just wanted to ask a conceptual question. You used to refer to a 40% payout ratio of CFFO. Do you think that can be a model in the future rather than to highlight a progressive dividend policy? So maybe I'm too soon asking that question, but I'm going to ask it anyway. And secondly, you mentioned earlier, you obviously have made, you've grown your appetite for more offshore wind. So in terms of gross capacity, that's now a bit more than one gigawatt in your pipeline. Can you perhaps give us an indication how much offshore wind you think will play a role in your 25 gigawatt target for 2025? Thank you.

So yes, no, Chris, you are not too soon. You will never have the answer on your first question. Because there is one lesson for me is there is no way for Total to be trapped in any mathematical formula about the way to calculate the dividends, you know. But I think it's a mistake. I think we must keep a certain flexibility because it's not only a question of a short-term calculation. It's a short-term of confidence in the future and what is the vision of the company. and what is the vision and the trust we have in the capacity to deliver additional cash flows. And this is a way that I explained to you that in May, but the board of directors has had this long discussion about dividends. It is a matter of not being too overreactive because we have suddenly a drop in the oil price and a drop in the cash flow, and then I would apply a percentage of 40% or 40 or 60 and plus. I think it's not the right way to manage this. I think, and by the way, for the time being, I'm quite satisfied that we took time because price is coming up back to about $40. At about $40, again, we can maintain our dividend. And I think this capacity to build the trust with the shareholders is very important in our eyes. So I will not come back to this type of mathematical formula. That's not, I think, the best way to maintain, to to give the vision. The most important for us is to explain to you how we can continue to grow the cash flows in the future coming from oil and gas and electricity. We will try to do it in September. Offshore wind, okay, let's be, I mean, Again, there are opportunities. We are looking more and more again to that. We are in particular looking more specifically to floating offshore wind because we are early come over. We think there is a big potential. There are countries where they can have some very good incentives. We should be able to announce a new one by beginning of September and before end of August. So you will see other figures, other gigawatts of offshore wind coming into the picture. But I don't want to put, let me clear, a firm target for discipline. We have a pipeline of solar in Spain, of solar and wind in India, of offshore wind in others. I think if we begin to constrain all the system, what I can only tell you is that fundamentally we think that offshore wind is fitting very well with the business model of an oil and gas company because we can leverage some competencies from our offshore engineers which are today working in the industry because there is in outflowing capital and clear barrier and trans-barrier compared to solar. But it's also longer to develop a project. You know, it can take quite a lot of time to make the studies, to get maritime licenses, then to get all the connection licenses. So I think all that is... So we see there... a good field for an oil and gas company to go. We have been late to that. So now we try to find some potential, I would say, business to develop. But I think what I observe is that what part of the, and I should have answered that, explained that also to one of your question we had before, I think from Lydia, is that the fact that Total is investing more and more, we see more and more people looking to our doors to see if we could partner with them, and in particular offshore wind, we've seen, for example, we do not have the technology, we think that Total could bring this floating offshore wind technology and could be a good partner. So that's more, I would say, a trend, but no precise figure. Very clear. Thank you.

Thank you. The next question is from the line of Henry Tarr from Berenberg. Please go ahead.

Hi, and thanks for taking my question. Just had one on the growth in low carbon. I know you've talked a lot about that business today, but how do you see the most attractive way of growing in that business? So is organically the best way, or are you looking at M&A as well? If you look at M&A, Now, how do you assess the prices in that space? And I think you referenced earlier that the valuations there have definitely run quite hard. And then have you got all the expertise you need in the company today across those different areas? Or is there an area where you would like to add some expertise, whether it's offshore wind or somewhere else?

Okay, in M&A you have two different types. Something which I think is almost impossible for us is to buy an existing asset with a return of 5%. So buying, making M&As on existing producing assets I think there's almost no way, you know, and we are not an infrastructure fund or an insurance company. So, I mean, that competition we don't go. But in M&A, what we have done, like, for example, in Spain, and we have other projects on which we work, is to acquire some pipelines. You have development companies on the ground in many countries where people are developing, acquiring rights, connecting rights, land rights, and then they don't have the financial capacity to develop. Then Total is coming, and this M&A, I can tell you, few tens of millions of dollars. So it has nothing to see. And this makes sense because, in fact, it's a way to have a sort of non-organic business development teams. So we are doing that in Spain. We are looking to do that in another country, a big country where we are not very present, which is the U.S., because we want to, but then we will develop the projects together with the development team. So it's, I would say pipeline, acquiring some pipelines might be the right way to grow quicker. Internally, we have quite a lot of expertise today. with all the teams which we put together. So we are able in many areas to evaluate properly the quality of the files are good. And so because one plus one plus one plus one, we begin to acquire some, and we continue to recruit in that segment because we go. So I think we are, but again, it's more for me, the expertise would be a geographic exercise because like always in electricity and in this part, The regulations in Spain is not the same as in the U.S. So if you want to have teams and you want to develop a renewable business in the U.S., it's better to have some U.S. people in your teams rather than doing that from Madrid, you know, it will not work. So that's more of a, so this could lead us to make some, I would say small M&A, but big ones, no, because it makes no sense from a pure allocation of capital. And because as well, I think what we can use our balance sheet, you know, when TOTA is coming into a project and part of what we brought to SAC in Scotland is that we were able to to get access to a very low financing return. So when we put all that financial engineering in place, Total is quite efficient. We don't need to be listed as a green company to do it. We have our balance sheet, which is even better than all these green companies. Even if we can do green bonds in the future, which is a way to leverage all that. This is the objective of Jean-Pierre, you know.

That's great. Could I just ask a quick follow-up just on net acquisitions? So obviously there's a lot of moving parts in and out. Do you have a view on sort of where net acquisitions might come out for this year and next? Are you looking to be flat?

This year you have under $14 billion guidance for net investments. And so at the end of the year, you will do the math. That's great. Thank you.

Thank you. The next question is from a line of Martin Ratz from Morgan Stanley. Please go ahead.

Yeah, hello. I wanted to ask you the following. So when it comes to the number of customers that you now service in Europe, it starts to become sort of quite a lot. And I'm not quite sure, I've sort of lost count here, but it's either 8.5 million or 8.5 million plus the other sort of 2.5 million that you just acquired. And I was wondering what the attraction of that business is sort of going, going forward, where, how does it fit in the overall, um, in the overall picture? Um, this, and the second thing I wanted to ask you is about the returns on sea green. Um, look us sort of, you know, mostly been looking at oil for the last 10, 20 years, often find it quite a struggle to kind of really appreciate what kind of IRRs are available, um, in the new energy space. Uh, but clearly, um, you making this investment, um, of expresses a view at the same time also your oil price assumptions have come down so perhaps you could argue that perhaps the balance of returns in oil versus these renewable areas is moving and i was wondering how you currently compare these two areas from a purely from an ir perspective yeah okay the second question we said already last year

that fundamentally when we have accepted to sanction renewable projects on a target, on a double-digit IRR, which begins at 10. So it's more than 10. But this is down, this calculation is down on an equity basis, because obviously You have to use, you don't make these PPAs, long-term PPAs, are financeable. You can make some project financing, so you have the leverage. And so, by the way, I do not understand the debate which seems to appear in some of the papers that you should be listed as a green company to have access to low cost of capital. No, you don't need to do that, I can tell you. It's easy to have access to low cost of capital by project financing when you have a long-term PPA. And it's even a lower cost of capital. So that's the type of IRR. Why did we accept it? Because that's clear also that these type of projects do not give the volatility. When I'm investing in a project like this one, of course I'm taking the risk of the counterpart, which is the UK government for Seagreen. So if the UK government changes mind, I could be at risk. But otherwise, I have a contract for difference for 15 years. I know the figure. So I put it in the figure. So compared to the oil price, yes, I don't go to the high 15 or 20s. I don't have the, I would say, the upside, but I don't have the downside as well. So it's why I was saying this somewhere, this type of business is giving more stability if the business model of the company likes the marketing and services. And it's back to your first question. Why do we develop in electricity along the value chain because we believe in the integrated business model. Of course, we will. So we have some customers, yes, and they are giving, yes, it's a small margin per customer, but if you have millions of customers, it will grow. So it's like marketing business. It's very, very similar, in fact. But at the same time, of course, we want to grow, and one of the objectives we have is to produce as much but we will sell. I want an integrated business model. We will come back on that in September as well. Then, do we have an objective in millions of customers? We say more than 10. We are not far from that. It's more a matter of... Again, finding along this electron value chain, taking the money from producing, which will be volatile, beyond when you go to a gas-fired power plant, less on renewables, from trading, obviously, because you have a trading machine in the middle, which will agglomerate your renewable business, and then selling to customers. And again, at the end of the day, my view is that It's probably the business selling to electricity, gas, and electric power customers, which is the most similar to what we had in the company. It's not very different. All right. Thank you.

Thank you. The next question is from the line of Peter Lowe from Redburn. Please go ahead. Thank you.

Oh, hi. Thanks for taking my questions. The first was just another one on the criteria you used to determine which oil assets would be classified as stranded. Was that solely based on the production costs and reserve life, or did the fact that oil sounds a high carbon intensity form of production also factor into your decision? The second was just you mentioned that you were looking to thank Uganda as soon as possible to take advantage of the current contracting environment. How much deflation are you seeing in service costs, and are there any other projects you're looking to accelerate to try and take advantage of that?

No, I think we are clear about the stranded assets. It was based not on a, I would say, CO2 content criteria. It was fundamentally based on an economic approach, which was giving the vision that we have on the I would say a decreasing demand, a plateau in decreasing demand by 2050. And because climate change will be put into action and policies will come, then what could be the high-cost reserves which could be at stake? And we've done it like that. And of course, it has to be long reserves. So it was about 20 years of reserve, and I think about $25 per barrel. And so I think with that, of course, when... We made the, I would say when we made the calculations about the impermanence, we put into action our assumption of CO2 price, you know. So it had an impact on the impermanence levels because we said that we use $40 per ton and then we tested $100 per ton. So it can influence the impermanence. The result of the impermanence came as a, had embedded the CO2 pricing. But honestly, there is, I think, no mystery at the end that the stranded assets are the old SAMs. I mean, it's not a surprise to us. I mean, and again, that's true, but as well. So, okay, Uganda. We made the tender, so we'll see what will be the result. Yes, we want to cause deflation across the whole. I think what I can tell you is that before, last year, we had only two consortium bidding. This year, we are three or four, so a lot of people are looking to order, so more competition. We have introduced new competitors, by the way, Chinese ones as well. And so I hope that I think it's probably it will be one of the largest projects which will be sanctioned in the coming six or 12 months. So I think it attracts a lot of interest of the industry, you know, and so I'm optimistic. I think it's why we are pushing hard on it, and it's clearly a very high priority. So it will be a test about the appetite from the supply chain and the service industry to get access to these projects. But we have done it recently in Mozambique LNG. The project team had already worked on... I remember there was two tenders that came to us on the service for drilling services, and we did not approve the award of the contract of the executive committee levels. And we say to the team now, these tenders were done six months ago or nine months ago. The process has been long. So we don't award anything, and you will go back to the market in three months, and we'll see what you will get. And we've done it as well for – we've done it on all the tenders. We are a little unhappy, our friends of the projective of Mozambique Energy, but, you know, we've done it on the energy tankers, same story, and we got a decrease of 10% or 15%. So I think it's – But, okay, we suffer today from our revenues part, but we have to try to get the maximum benefit from the cost part. Thank you.

Thank you. The next question is from the line of Jason Gableman from Cowen. Please go ahead.

Yeah, hey, thanks for taking the call. First question just on the $40 Brent outlook and the ability to pay the dividend at $40 Brent. That also includes an assumption for gas prices and refining margins, both that are probably currently below whatever you're assuming longer term. So can you just discuss what you are assuming when you say you could sustain the dividend at $40 Brent, what those gas and refining, the gas price and refining margins are that you're including?

It's for the U.S., I think it's around $3, $2.8, if I remember. $2.8 to $3. And we have $2.7, exactly. For the Asian price, it's around $6. No, yeah, $6, I think. And I don't want to make a mistake. No, no, you show me something longer. And on European price, I think it's around $5. Something like that. Maybe I'm wrong on the Asian price. I have a doubt suddenly in my head. No, I think I'm not so wrong. I think it's wrong. It's $5 for Europe, I'm sure. $5 for Europe that we use. But again, and for the refining margin, I think it's around $35 per ton in MCV. So, I mean, but let's keep, you can keep in mind, keep in mind $40 brands. It's enough. So, because in fact, like, like why, why do I answer that? Because look, when, even if your rest is volatile, things that we, this company is an integrated one. And so, You have plus and minus coming from, I would say, from one part, but the other part is compensating. So I think what is happening this quarter is a good demonstration. So with a $40 per brand, which is driving, I would say, 75% or 80% of the revenues of the company, you have a good matrix of what we need.

Okay.

That's enough.

Yeah.

If I come back to you and the average price is 41 and I tell you I get the dividend, you can't kill me. Unless the dollar is at 1.6, you know, compared to Euro. Because there is another assumption which is more fundamental to the $40 brand is a Euro-dollar rate because you know our dividend is expressed in Euro. And so the Euro-dollar brand rate has obviously an impact. But again, at 1.15, at 1.2, at 1.25, we have no projects. So it's why I said 1.5, 1.6.

Got it. And then just a second question on oil price realizations. It seems like those have been trending lower, I think, the past few years. You realize something close to 90% of Brent on your oil price realizations. Last quarter, it was 88%. This quarter, it's 80%. Can you just discuss what's driving that and if you expect it to trend consistently at this 80% with lower oil prices, or if you expect it to move back towards 90%. Thanks.

We expect to come back to 90%. I think there is something which is clearly today. You know, when you have a very market which is very strange, it's not only a number of supply, but it's a very low demand. Clearly, the market like Brent might be overestimated because at the end, people have to sell their crude. You know, their Nigerian crude, their Guyana crude. We don't have that, unfortunately. Sorry. or Brazilian crude. And so at the end, you have a weaker demand, which put pressure on the competition in the market between the cargoes coming from Nigeria, from Angola, from Brazil, or from North Sea. And so what we observed, in fact, and it was well confirmed to us by the traders, which helped, by the way, some trading business around these differentials, is that when you have a market which is very strange today because it's not really a matter of oversupply but lower demand, you can have some impacts on the differential between your quote price that you want to sell and the market, the brand market or the WTI market. We don't expect that to happen. We think this trend is, I would say, just very linked to the huge drop of oil demand, the dramatic oil demand we have experienced. When the oil demand will come back to 90% of the previous normal, more normal way, I would say we should, the effect, we show some effect will disappear. And so we think that we should come back to the more traditional, I would say it's even above 90%. The 90% you observe in the first quarter was quite linked to the Canadian discount, you know, the famous oil sands, you know, we are, which have an impact despite, they have a lot of beauty, these ones. One of them is discounts while we are waiting for the pipelines. So honestly, I think you don't take the 80% as a normal. I mean, it's clearly linked to the specific market condition of this quarter.

Great. That's very clear. Thanks.

Thank you. The next question is from the line of Lucas Herman from Exxon. Please go ahead.

Patrick, thanks. Good afternoon. Two quick ones, if I might. I'm not sure how quick the second one is. But the first one, I'm just intrigued that the UAE and the project, the very large solar project that EDF was just a part of, I'm just intrigued as to whether you'd expressed an interest into that and any comments you might make around price and competition. And secondly, I just want to ask how your thoughts around hydrogen and integration into the electricity chain in your business have evolved over the course of the last six months. The commentary seems much more constructive when I read comments that you've made on the web. Observations, please. Thanks, Patrick.

Thank you, Lucas. You observe a lot what we are doing, I see. Of course, we compete on UAE. You know, we win Qatar, we lost in UAE. There is a certain limit. Honestly, these projects in the Middle East are big but hyper-competitive, I would say, and So profitability, again, I answered to Martin, I think, before, but there is a certain level under which we don't go. So we don't go under a certain level, and that's all. So we win in Qatar with that level. We did not win in Abu Dhabi, and EF win. That's life, I think. But honestly, I think if you want, there are other places. What I observe in the Middle East, they are offering... very large projects, so you make volumes. It's a little like oil, by the way. I can make a sort of parallel between the way the business is developed in the Middle East. In the oil business, you have very large fields with low margins, and in solar business, very large fields, but low business, low margins as well. So you have other places like India or Spain, which in terms of returns are better. We are competing and we'll continue to look to other countries. We participated as well to the tenders in Saudi Arabia. We did not win, but again, we'll see. Hydrogen, I think hydrogen clearly everybody I think is looking to that. It's not an easy topic because the question mark we all have today is of much capital allocation should we put into that. There is a very clear logic to me. But the bigger we will be in a renewable business, and so if we have more renewable capacity of production, then there is a certain logic to be to try to produce hydrogen simply because you have other capacities that you don't sell to your PPAs, which could be transformed in hydrogen. So there is a clear link between growing as a renewable producer and trying to make green hydrogen of the other capacity which is not sold for your PPAs. So that's an abuse link, which is, having said that, all that is then a question of economics, of at which price can you develop your green nitrogen. So we have this interest on this one. We are looking as well, of course, as hydrogen becoming a way to green the gas, natural gas, to inject hydrogen in the natural gas, because it's a storage, it's a carrier, I would say, an energy carrier in hydrogen. So this is the kind of object, which of course has an interest for Tata. We are a very large gas producer, gas seller. So we need to think to hydrogen in a way to, and I wouldn't be surprised, for example, that in Europe we could see some policies and regulations asking us to inject some percentage of hydrogen and biogas in the natural gas network. So to decarbonize the gas, I would say. So that's something on which we need to work. And of course, the last part will be hydrogen as a mobility carrier. On this one, we need to look more carefully. Clearly, you have the trains, maybe on the vessels, but all that will be a question mark, will be at which pace all these hydrogen economy will be developed. And it's why I'm thinking fundamentally that if we want to develop it, we'll do it for a low-cost hydrogen. I don't think we'll develop it with something which would be expensive. So, no, so we are working on it. We have a team, by the way. We have recruited a team. But I'm less advanced today, but we are on the low-carbon electricity renewables because we have less projects. So in our plans, we want to operate green hydrogen projects to supply one of our refineries with green hydrogen. We are working on it. And we are also working on a blue hydrogen project to capture some CO2 from SMR in one of our refineries and then to make a full chain having blue hydrogen and to to re-inject the CO2 in an offshore field. So we are working on two projects. I would say for the next five years, that's fundamentally where we want to allocate capital to be involved. And remember that as well, Total is one of the foundation shareholders of the H2 Mobility Network in Germany. And so, which is a country where today there is a stronger push in Europe for the hydrogen development. So it's good to be as well connected to Germany from this point of view. Okay. Thanks, Patrick. I'll leave it there.

Thank you. And the next question is from the line of Jason Kenny from Santander. Please go ahead.

Can you remind me of the carbon pricing assumptions that you're using, particularly in light of the Rethink on your oil and gas pricing. I'm just wondering if there's been a change in the carbon assumptions by 2025, 2030. It's $40 per ton.

$40.

And just flat real terms?

No, it's not. It's $100. No, it's $100 beyond 2030. I was answering to Jason between 2025 and 2030. It was a question of Jason, if I understand. And I think it's the old term.

Okay, thanks.

I'm sure it's the old term, by the way. I don't think. I'm sure. From 2025, if you want to know everything. Or from 2028. So $40 per term. And $100 per term beyond 2030. Okay. Jason, it was your last question?

Yeah, that's it from me. Thanks. Well done.

Okay. If you are satisfied, I'm fine.

Thank you. And there are no further questions, so I'll hand back to the speaker.

Good. So you are lucky because I didn't push the wrong button this time to stop the discussion like last time. So thank you for all your questions, and I think... I'm happy to have been involved with Jean-Pierre to answer to you, and thank you for your comments. We will have, as I told you, the next meeting that we will have with you is in end of September. We think that we'll have two sessions end of September. You have already been invited, I think, on the 30th of September. It will be the strategic session. It will be on one day. It will be in Paris or virtual, but if you can come to Paris for the European ones, you will be more than welcome. We will take all the precautions that we need to take to invite, of course, to have you with us. If you are there, we'll be able to have also a live discussion. We intend to have, I would say, that day I think we'll have a strategic presentation like our custom and probably some focused presentation in the afternoon on different topics, biofuels, and you will see. I mean, we are preparing that. And the day before, we are planning, and I think we'll be inviting Sue to have a sort of market views. You know, we have in February 2019, we presented you what we call the Total Energy Outlook. We have spent some time to, and in fact, I spent some time with the teams to develop our new vision. We have introduced a number of things, and we intend to present that virtually by a virtual presentation so that everybody can be connected on the afternoon of September 29th. It's not directly linked to the strategy of Total. It's a broader view of the market of the oil, natural gas, and electricity market. Of course, like we can have a a vision by 2030, 40, 50, so long-term vision. Of course, I think it's good for Total to develop and to share with you our own vision of the market. So Ella will lead that presentation on the afternoon of September 29, virtually, again, not in presence. But then September 30th, we'll have this strategic outlook. And so you will have more answers to all your questions. So I wish you a good holiday for the one who take. We are taking holidays because we are a little tired after six months of being closed in Paris and office is complex, you know. So happy day, happy holidays to all of you and stay safe and see you in September. Thank you.

Thank you.