TotalEnergies SE Ordinary Shares

Good morning and hello to everyone. Welcome to this conference call for the first quarter of 2022. Given the geopolitical turmoil and the market volatility, I am joining the call to talk about how we are navigating this environment and to answer your question from this perspective of management and the board. I am today with Jean-Pierre and he will present you the results after my initial remarks and then the Q&A. So to that point, it was a month ago, on February 24, that Russia invaded Ukraine, triggering violence and destruction that has killed thousands and displaced millions. TotalEnergies condemns this military aggression. And in response, we have outlined on March 22 our principles of conduct to manage our Russian-related activities, including our full support to current and future sanctions, whatever the consequences on our assets will be. Going beyond the sanctions, we have also announced our decision to stop the flow of capital to new projects in Russia, initiated a gradual suspension of our activities there while ensuring the safety of our staff. In doing so, we are exercising our duty of vigilance in line with our corporate responsibility. We have begun to end our activities related to Russian oil and petroleum products, We stopped spot trading transactions linked to Russian oil or natural gas. On March 22nd, we announced that given the uncertainty created by the technological and financial sanctions on the ability to carry out the Arctic LNG2 project currently under construction and the probable tightening with the forth-worsening conflict We had decided to no longer book a reserve for this project. Since then, on April 8th, new sanctions have effectively been adopted by European authorities, notably prohibiting export from European Union countries of goods and technologies for the use in the LNG-benefiting Russian companies. These new prohibitions constitute additional risks on the execution of the Arctic LNG2 project, and as a result, we decided to record in the accounts of Total Energy SE as of March 31, 2022, an improvement of $4.1 billion concerning notably Arctic LNG2. Our activity related to Russia is essentially, in fact, centered around LNG supply from Yamal LNG, which the EU has deemed necessary until now. And so until there is a change through possible sanctions, we will continue to honor our contractual obligations and protect the company from potential significant liabilities. For Russia, we also apply our principle of transparency. On March 24th, We communicate to you the 2021 results and cash related to Russian businesses. And today, you probably noticed in our press release that we have added a special table related to results, cash flows of our extreme assets, as well as to capital employed in Russia. Russia is material in terms of volume, but represents indeed only a very limited part of the generation of Revenues and cash flows. In the first quarter, Russia's extreme assets accounted for $300 million, or about 2.5% of our cash flow, mainly from Riemann and Engie, as there was no dividend from Novatec, and $1 billion, or about 10% of our net operating income. Capital employed is now less than $10 billion after the impairment, out of more $140 billion from the company. The consequences of Russia's actions are going beyond the Russian-related businesses and will have a significant impact on the global economy, potentially more serious than the COVID pandemic and related shutdowns. The immediate impact, of course, has been the significant disruptions to energy markets that pushed oil prices above $100 per barrel and gas prices in Europe and Asia to more than $30 per million BTU. Oil prices could remain high, particularly if additional production capacity from OPEC or U.S. unconventional fail to compensate for the potential loss of 2 to 3 million barrels per day of Russian crude production, plus a drop in refining capacities from Russia for petroleum products. Gas prices are likely to remain high and volatile as Europe seeks to rebuild inventories and reduce independence on Russian gas, which puts Europe into competition with Asia for LNG. But the most important big part is also the need for Europe to diversify its energy supply, which will be a massive effort over many years, and this will permanently alter the global supply chain for oil and even for more gas. It also created, of course, new opportunities for North Sea natural gas businesses as well as for LNG business, and our transition to electricity and renewables. To respond to this new situation, during this quarter, TotalEnergies mobilized its full capacities and leveraged its integrated midstream LNG business to saturate all our European regas capacities with a record 4.7 million tons of spot LNG purchases. In addition, we are mobilizing additional investments to support short-term gas production in the North Sea assets. Two rigs have been mobilized in Denmark for infill wells and well simulation. I remind you that TIRA redevelopment startup is planned by mid-2023. We have also the bottleneck of Kool-Aid asset by 10%. We are drilling in-field wells on Halloween, and we are taking actions to boost the production west of Shetlands by 10% by lowering pressures in some pipelines. And of course, we are supporting actions launched by Equinor in Norway. It's important, however, to recognize that oil and gas prices started to move higher in the second half of last year before the invasion of Ukraine. The post-COVID rebound in energy demand made it clear that supply-demand balance was already tight, even with China partially locked down, and then inventories were low. Years of underinvestment in new supply of oil and gas production and storage helped to create this situation, and there is no quick and easy fix for it. The industry needs to invest more, but I'm also convinced that our industry will avoid triggering the runaway cost inflation that marked the last commodity super cycle, as we will keep this lesson in mind. At Total Energy, we continue to invest with discipline. We just acquired deep offshore oil production in Brazil. We signed yesterday the Atapu and Sepia contract, and production will flow from today in our accounts. And I remember we acquired them last December on a very reasonable price deck of assumptions. And we have made promising oil discoveries in Suriname and Namibia. Plus, of course, we are moving forward with partners in North America to further expand our LNG business. Energy is a commodity, and commodity markets tend to move cyclically in and out of balance, usually accompanied by periods of uncertainty and high availability. The current geopolitical turmoil and market volatility illustrate the challenge that we describe as the energy triangle. We must stick to balance security of supply with affordability to the customer and impact on climate. Climate is an imperative, but other emphasizing any one of these three factors typically comes at the expense of the two others. In our case, oil and gas will continue to be a significant source of cash for the company. It will continue to fund our growth in low-carbon energies, which we will provide to our customers so that they have access to cleaner, more reliable, and affordable energy. At this point in the commodity cycle, high oil and gas prices are flowing into the company, generating strong results and cash flows, which is a completely reversal of our situation from just two years ago. In the first quarter, we generated free cash flow after investment, dividends, and buyback of $5.8 billion, and we were able to reduce our net debt so that the giving fell to 12.5%. Jean-Pierre will come back on the results in detail. Given the strong cash flow generations and the strong balance sheet, the board reviewed our cash flow cash allocation principles And Peerle reaffirmed its willingness to give priority to accelerate the company's transformation through counter-cycle opportunities. It is, however, in fact, a matter of patience. The Board confirms a 5% increase in the first interim 2022 dividend to €2.69 per share. And it authorized the company to buy back up to $3 billion of its shares in the first half, so an increase of $1 billion compared to the guidance for this first half, which was given in last February. $2 billion will be bought back in the second quarter, twice more than in the first quarter. We will maintain capital discipline as we look for opportunities to profitably grow the company, mainly, of course, in LNG and renewables and power, And we may, at the same time, move counter-psychically to divest some non-strategic oil in this favorable environment, particularly production that has high carbon intensity to further rebalance our energy mix. In particular, we will put for sale our 10% interest in the oil licenses of SPDC onshore Nigeria, as the disruptions by local communities are a source of great concerns not only for the operator but also for us as non-operator. We will keep, however, the onshore gas licenses of SPDC onshore Nigeria as they are critical to feed an LNG expansion. Expanding our integrated LNG activities along with our renewables and electricity business is central to our strategy And we plan to play an important role in Europe's plan to diversify its energy supply away from Russian gas. We have announced the expansion of our partnership with SEMPRA in North America. First, we launched this last month a feed of Cameroon LNG extension. I think it represents a 6.5 million ton additional capacity. And second, we extend our partnership to a new potential project in Mexico called Vista Pacifico. And third, we will develop together with SEMPRA some onshore renewables and offshore wind in California. TotalEGRG is investing around about 25% of its capex to develop renewable electricity and similar amounts to grow energy and what we call the new molecules. Both are critical to the energy transition. In certain times, we remain confident that DCP investment to support a multi-energy strategy will create long-term shareholder value. In 2022, this might be close to $15 billion inside the previous guidance of 2014-2015. A last word before I give the floor to Jean-Pierre about the preparation of our annual shareholders' meetings on May 26th. You probably noticed that we had a constructive dialogue with some shareholders and that after our sustainability and climate progress report 22 issued on March 24th, in line with our principle of transparency, we took some new commitment to extend the scope of our reporting to enable investors to fully assess the company's energy transition strategy. In particular, this report will be published each year and submitted to a yearly advisory vote. The Board has decided not to accept a resolution submitted by FollowV that it contravenes French legal rules, setting the prerogatives of the company's governance body. The Board is in charge of the strategy, not the AGM. but invited both supporting the proposed resolution to express their views, either through a verbal or written question, which will be addressed as a matter of priority at our next annual shareholder meeting. We are definitely open to a transparent and constructive dialogue with all our shareholders. And now I will turn it over to Jean-Pierre for a review of the results, and we'll come back to join you for the Q&A.

Thank you, Patrick. So reported IFRS net income for the first quarter of 2022 was $4.9 billion, which takes into account the $4.1 billion impairment related to our Russian exposure. So adjusted net income was $9 billion for this quarter, the highest quarterly result in the history of the company, up 32% from the previous quarter, mainly due to the 24% increase in our average realized oil price, as well as an 8% increase in our average realized gas price and strong results from our midstream and downstream activities. Adjusted earnings per share was $2.4 in the first quarter, a one-third increase from the fourth quarter. Debt adjusted cash flow was $12 billion, up 23% from the previous quarter, ahead of expectations. Patrick explain you how we allocate this strong cash flow. Going now through the results by segment. The Integrated Gas, Renewable and Power segment reported adjusted net operating income of more than $3 billion in the first quarter, up 11% from the previous quarter, and a threefold increase from a year ago. Thanks to its ability to capture higher energy prices, and leveraged strong performance from gas, LNG, and electricity trading activities. Operating cash flows before working capital changes was $2.6 billion, up 6% from the previous quarter, and 2.4 times higher than the first quarter last year. Cash flow from operations was $315 million, reflecting the increase in working capital linked to the seasonability and to the price effect on receivables for the gas and power supply business. LNG sales were 13.3 million tonnes in the first quarter, up 15% from the previous quarter, and more than 30% from a year ago. LNG sales from our equity production were stable at 4.4 million tonnes, So, the main driver was record-level third-party volumes sold on the spot market, notably in Europe, as Patrick mentioned. Our average price for energy in the first quarter remains strong at $13.6 per minimum ECU, and we anticipate that it will be above $14 per minimum ECU in the second quarter. Our ability to execute and deliver along the entire gas value chain including our midstream energy trading activities, have continued to outperform expectations. IDFP increased gross renewable power generation to 10.7 gigawatts at the end of the first quarter, up 400 million watts from the previous quarter, thanks in part to startups in India. Gross power generation capacity under development increased to nearly 2%. 25 gigawatts, mainly due to the award of concession for offshore wind farms, including 3 gigawatts off the cost of New York and New Jersey and 2 gigawatts off the cost of Scotland. Net electricity generation grew to 7.6 terawatt-hour in the first quarter, up 61% year-on-year, thanks to higher utilization from our CCGT power plants in a strong mountain environment, as well as continued growth in electricity generation from renewable sources. EBITDA from the renewable and electricity business was $175 million in the first quarter in the context of power price volatility and the mechanism for setting the regulated electricity sales tariffs in France. The ENP segments reported adjusted net operating income of $5 billion, up 42% from the previous quarter and 2.5 times higher than the same quarter last year, far above the increase in oil and gas prices, demonstrating strong leverage to the environment. Operating cash flow before working capital changes was $7.3 billion in the first quarter, up 28% from the previous quarter, and nearly doubled the same quarter last year, reflecting the higher commodity price environment. Operationally, the EMP segment's oil and gas production grew by 3% compared to the previous quarter and was stable compared to the year ago. Startups and ramp-ups of projects, mainly in Angola and Brazil, plus an increase in OPEC production quotas, offset the natural decline, the price effect, and other negative impacts, including the 25,000 barrels per day equivalent decrease in Nigeria, related to security concerns about SPDC, which we are considering for divestment, as Patrick explained. Looking ahead, including the startup of Meruan and our entry in Atapu and Sepia, We expect production in Brazil to grow by 30,000 barrels per day in the second quarter and then by 60,000 barrels per day in the fourth quarter. Our downstream activities generated $1.4 billion of adjusted net operating income in the first quarter, up 35% from the previous quarter, and 2.6 times higher than the same quarter a year ago. Operating cash flow before working cap changes was 1.9 billion, up 22% from the previous quarter, and more than two times higher than a year ago. The strong downstream performance was mainly due to higher distillate margins in Europe, in the context of reduced imports of Russian petroleum products, as well as outperformance of around 400 million compared to standard results in the quarter by our crude and products industries. Trading activities. Refinery throughput increased to 1.1 million barrels per day in the first quarter, reflecting demand recovery, particularly in the US and in Europe, and the restart of the distillation units at the Normandy refinery. Petrochemical production volumes were stable. Petroleum product sales were 1.4 million barrels per day equivalent in the first quarter, stable compared to a year ago, as the demand recovery in aviation was offset by lower sales in Asia due to pandemic lockdowns. At the company level, operating cash flows before working cap changes was $11.6 billion in the first quarter. This was a working capital build of $3.5 billion in the first quarter, mainly due to price effects on inventories, an increase in inventory levels to ensure the security of supply for refineries, and the seasonality of the gas and electricity business. This was partially offset by a $0.9 billion release of margin costs and $1.9 billion of receivable payables variation, including an increase in tax payables. Net investments were $2.9 billion in the first quarter, including $900 million for renewable and electricity, in line with the 22 targets of 25% of our capex for the full year. We are maintaining capital, discipline, and full-year capex may trend towards $15 billion, still inside the previous guidance of $14 to $15 billion, as Patrick mentioned. including the mobilization of additional investments to support short-term gas production in the North Sea and additional opportunities that may arrive in line with our strategy of transformation. We reduced net debt by $3.7 billion, which lowered the gearing ratio to 12.5% at the end of the first quarter, and we bought back $1 billion of our shares during the quarter. We reaffirmed the company's priority in terms of cash flow allocation in this context of higher oil and gas prices, investing in profitable projects to implement the strategy to transform Total Energy into a sustainable multi-energy company, linking dividend growth to structural cash flow growth, maintaining a strong balance sheet and a long-term debt rating with a minimum A-level by permanently anchoring during below 20%, and allocating a share of the surplus cash flow from high hydrocarbon prices to share by lives. That may conclude my remarks, and so we are ready with Patrick to begin the Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star 1 on your... Please kindly mute any audio sources while asking questions. If you wish to cancel your request, please press the hash key. Once again, please press star 1 if you wish to ask a question. And the first question comes from the line of Irene Jimona from Societe Generale. Please go ahead.

Thank you very much. Good morning and congratulations on these exceptional results. I have two questions, please. Firstly, on the actual results, refining and chemicals benefited from a rather low adjusted tax rate this quarter compared with norm and with last year. Was this a one-off and do you expect it to move back up again over the rest of the year? And then secondly... The balance sheet deal leveraging obviously continues, and arguably at the top of the cycle, this is quite normal to enable you to then withstand the eventual price downturn. But as you stated, Patrick, prices may well remain elevated for a bit longer. Do you see this rapid deal leveraging as creating options for you for large-scale M&A, particularly in new energies and low carbon? Thank you.

So we take the first question regarding the tax rate. So globally, that's true that globally, the company benefited from a lower tax rate due to the higher contribution of RMC. And I mentioned to you the other performance of the trading and it's part of the explanation.

Yeah, the trading benefits from a lower tax rate than the traditional activities. There is no one-off on the refining and petrochemicals part of the business. Considering your second question, I mean, the priority, as we said, I think we have been very clear with the board. I think everything I said, we consider that this might be an opportunity to accelerate the transition by accessing to some counter-cyclical businesses. I said in my speech you have to be patient. So, you know, I think we have demonstrated in the last six, seven years that we were able to capture this type of opportunities. Obviously, if we move, it will be primarily in either the LNG fields and or electricity and renewables. Will it be large-scale? I'm not a big fan of very large-scale M&A. You know, I think you can also... The matter is more about... Integration is important, and I think what we have done in the last seven years with, I would say, $8 and $10 billion, like we've done on Maersk Oil or on Mozambique and other co-assets, we're well done. So we'll see. Again, there is nothing specific in our mind, let's be clear, just the will from the board. to use part of these exceptional cash flows to accelerate our strategy in line with what we said before. But again, as you know, in that field of renewables in particular, as I said, often there is a big bubble, so patience will be of essence in order to create value, and it's not a matter of volume. For us, it's a matter of value. You've seen that we have announced a first recent deal in the US with Core Solar. There will be more to come in the coming months. Be patient. Thank you very much.

Thank you.

Thank you. Next question comes from the line of Christian Malek from JP Morgan. Please go ahead.

Hi, good morning and thanks for taking my questions. So two questions, please. First, regarding the exposure to Russia and the impact of your industrial strategy to grow energy, sorry, this may be slightly sensitive, but in a worst-case scenario where you have to pull out altogether, could you frame the impact and sort of just think just qualitatively the ability to grow your energy business and what would be the second and third-order impacts on your transition in light of this being a very important cash machine as well as an enabler to deliver more renewables. For example, would you need to raise more investments elsewhere? The second question, and I realize the way you frame this energy triangle of access, climate, and security, Patrick, it's interesting you're going to frame oil and gas investment as a key enabler in order to deliver on the other two, and a similar conclusion we came to in our energy study. But it does seem these three variables of different weightings, depending on the stakeholders involved, So assuming there is a super cycle that takes hold in the decade, should we expect you to raise capex in oil in order to take advantage and underwrite, you know, obviously the diversification across energy in the other parts of your business? Thank you.

Okay, the first one. Let me be clear. Russia exposure today to LNG, in fact, in our portfolio, it's Yamal LNG. Full point. Arctic LNG too, as we said, we've It would be difficult to believe that it can be built with these sanctions, and we will not provide more capital to this project. So Yamal is in fact, we have 20% of Yamal LNG, which represents around 4-5 million tons of LNG in our portfolio. Can we find other opportunities to replace these volumes? I think the answer is quite clear, yes. And we have already in our portfolio some assets to be developed. We just accelerated with our partners, Cameron and LNG. We have P&G. We have Mozambique. And be patient. We'll have maybe in two weeks some other news to explain to you how we will replace and ensure the growth for LNG in our portfolio. So I don't expect a disruption of our growth profile in LNG, even if we will add LNG. to fully exit Russia, which is not today, but which is a possible scenario. The impact on I would say on the volume part, you know, the impact will come fundamentally more on the gas ratio as we will lose the Novartek gas production. But as you know, it's not a lot of value. And so having said that, it's not a fundamental – when we speak about our transition strategy, it's fundamentally based on LNG more than on domestic gas. That has always been very clear in our strategy. the energy triangles. I think, let me be clear, It's a triangle, and I think a lot of European political leaders rediscover it. The climate is fundamental. We know all that. It's a question of, I would say, survival for the planet, according to the scientists. So there is no way to forget this one, and we are very clear. So it will not change fundamentally. It's not because suddenly we have a surge of oil and gas prices that will change our strategy. The strategy is fundamentally linked to a long-term energy markets evolution, which is that if we want to decarbonize, electricity is fundamental, as well as new molecules. Having said that, it's reinforced our views as well that on the next decade, 2020, 2030, we have announced that we will continue to decarbonize. to have a sort of stable oil production. But to make it stable, you know, as you know, with a decline of 3% to 4% per year, you need to invest. And we did not. renounce to invest in oil, look what we've done in Brazil. And by the way, we will benefit immediately from 22 from this increase of price of oil in Brazil. We are starting Miro 1. We include in our portfolio Sepia and Atapu. It will represent in the fourth quarter 60,000 barrels per day of additional oil. And with the fiscal terms of Brazil, it will be beneficial to the company. We have also launched the Uganda project. So, I mean, and we are looking, as you know, as well. We have signed a deal in Iraq last year, which is financed with this gas and oil. So, we will continue to look for all opportunities in order, because to maintain, again, on 10 years, a decline of 3%, 4%, you need to find ideas. I'm very pleased, as the CEO of the company, that our exploration teams are going back on the roadmap of success with Suriname and now with Namibia. Namibia, we need to, it's a promising discovery. I say promising because, you know, it's only one well. I've seen incredible numbers of newspapers. We need to drill the appraisal. We've decided to accelerate the appraisal well, August, September, and to test. And then we will be able to communicate larger. But If we are able to generate by ourselves all these old discoveries, let's be clear, it's part of the strategy, and we will develop them, and it's in line with what we have now. So all CapEx increase is linked to – it's no, my answer is no, but again, linked to opportunities we might find.

Just to be clear, Patrick, you're not going to raise all CapEx beyond what you've planned. I just want to make sure I understand. It's essentially part of the budget, but there's no plan to –

Or CapEx to present 50% of the CapEx, if I understand, if I remember correctly. And I think it's the right measure. Because, you know, there is one point on which we need to be super vigilant, and I will be vigilant, is the risk of inflation. And I don't want to enter into the mistakes we have done on the previous super cycles where inflation costs rise and because any barrels might be profitable, we'll begin to drill anything. So let's focus on short cycle projects. and let's continue to focus on our strategy for all which is accessing to low-cost barrels and I think we have been there are opportunities and if these opportunities are there we will seize them at the same time as I said in my speech it's also an opportunity for us to clean the portfolio all portfolio with the remaining high-cost barrels and I would say high-emitting barrels that we have in mature fields in the portfolio. When you have counter-cycle, you have to be counter-cyclical in both ways, you know, selling when the price is high and buying when the price is low. Thank you, sir.

Thank you. Next question comes from the line of Oswald Klein from Bernstein. Please go ahead.

Thank you very much, everyone. Just two as well, please. Firstly, just on LNG again. As I think about Cameron LNG, obviously, we know it's one of the cheapest built plants in the last decade. So you're going into feeds, you're going to engage with EPC contractors. There's going to be a scramble for LNG. You spoke just about inflation in the last cycle. So is there a rough sort of unit capex number you're thinking about here for this project, but also Also, the feedstock assumptions. Clearly, Henry Hub's a lot higher than it has been over the last five or six years. So any description you could talk would actually be interesting. And then secondly, we're waiting for peace in Ukraine, but it feels like the ceasefire in Yemen is actually holding up here. I know you've protected the plant pretty well in the last seven years during that particular war, but is there a probability you could place on a scenario where that plant Yemen LNG starts up in the next 12 to 24 months? Thank you.

Thank you Oswald for the second question. I forget it in my speech because I know we have been long to wait for any ceasefire in Yemen and We are not part at all of these political discussions and difficult discussions, but obviously the plant is preserved, let's be clear. I remind you it's a 7 billion ton plant. According to our assumptions, it would take six months to restart the plant, to remobilize and to have a full plant, so six months. So these 7 million tons might be available quite quickly if, again, but it's conditional to the C5. But it's one of the options, by the way. When we lost it, I remind you that the cash flow per year of Yemen for total energies was around $1 billion when we lost it in 2020. And so it was very material and it could replace easily part of the cash flows from Roshan. So that's, I think, one of the advantages. We have a very large portfolio up and down, but let's see. Cameron LNG cost advantage, now fundamentally, yes, it's an interesting project because it's a brownfield project. You know, there is no logistics at all, no jetty, no additional storage tanks. We have everything is there. It's a matter of building a new train. I would say, yes, of course, today we are more on LNG in the U.S., there are more, I would say, projects. So we might have some inflation, but fundamentally, the fundamentals are good. And we also, by the way, with the bottlenecks of first free trade, so we have an additional advantage in terms of profitability. So this is a very high trend. it's a good very good profitable project in terms of your second question is quite interesting and in fact it's back to integration for me and you know we we have this production in the barnet shares and i'm happy to have this production in barnet shells of shell gas because it's a way to cover part of the gas that we transform in the LNG plants, even if it's not the same molecules, but economically it works. And obviously, I think, I've always been convinced that the integration strategy, so it might be, maybe not today because the price is high, but on the medium term, I would say that the strategy where the more we develop in LNG in the U.S., the more we'll produce, we'll have to find access to asset gas in the gas, share gas in the U.S., will be part of the strategy in order to economically integrate this energy chain. So it's an answer to your question. I don't give you the assumption. I just give you the way to cope with this, I would say, volatility of the gas price in the US.

Very clear. Thank you. Thank you.

Thank you. Next question comes from the line of Michele de la Viña from Goldman Sachs. Please go ahead.

Patrick, Jean-Pierre, thank you and really congratulations. I wanted to ask two questions on your view on future returns in some of the renewable investments, because we're seeing strong conflicting forces. On one side, tremendous cost inflation, in some cases up to 30%, but on the other side, we're seeing higher power prices and also much higher volatility. And I was wondering, Compared with your view one year ago, do you see higher or lower return investment opportunities in that space? And has this changed your view of what's the right balance between PPAs and merchant on power? And then staying on low carbon, hydrogen is really at the forefront of repower EU, major upgrade to 2030 target, huge support. But I was wondering, is this really coming through a more attractive set of incentives? And do you see large-scale green hydrogen development in Europe actually showing improved profitability and support for the coming years? Thank you.

So, first question, I think it's an excellent question. I think during the March 24th presentation, we told you that, yes, we have the view that the power prices are going on, I would say, higher trends structurally because of intermittency, because of storage, because of all this system to ensure firm power is more costly. And it's not only a question of cost inflation of renewables. And this is why we have taken the decision that, I don't know, it's a rough idea, but we want to keep 30% of renewable assets open to the market to ensure the risk of volatility or balance sheet can support it. I think it can make the difference with others. And by the way, also it's a way to enhance potentially the profitability of these assets on the long term. So for me, it's clear, and this is, I would say, compared to what we said a few years ago, where we are entering in that field with the idea we need to secure. No, we are more, we have a better understanding. Of course, it needs some integration along the value chain. And renewable is only a production mean, you know. Then it's a matter if you want to make value on such a commodity, you need to be able to store, you need to be able to trade, you need to be able to to supply and liking all these commodities business. So today, it isn't even more. For me, it's not a bad news with inflation because it will cool down a little. Some of the, you know, some players were really in the tenders going to very, very low price that we are not on our side participating. We have not been successful. For example, in all the tenders in the Middle East, except one in Qatar. But the rest is we have not been successful because for us, everybody was anticipating, you know, deflation thanks to the new technology. It's a world where you input in your model, you anticipate. Today you have inflation. So my view is that it will... It's better, it's calming down this business, and so I'm optimistic about the policy to have good returns. And again, we continue to sanction projects with, as we say to you, more than an AOE of 10%, including by the fact that we might consider keeping and not only selling down some assets when they are quite good, and we have some in mind. Hydrogen in Europe, I will tell you, green hydrogen, my view is that I'm not fully convinced that it is in Europe that you have to produce the green hydrogen. For the time being, the incentives are not so high. There are some projects, but it's limited scale. We have one project that we will develop, which we have doubled the size, around 150 megawatts, but it's still small. If you really want to drive the green hydrogen price down, you need to invest at a very large scale. There again, be patient. We will announce soon a project in that field at a large scale. It will not be in Europe because fundamentally we think that green hydrogen is a matter of cost of electricity. And so we are looking to where we could locate very large scale with a very low cost of electricity on the long term in order to engage into this business. Thank you.

Thank you. Next question comes from the line of Lydia Rainforest from Barclays. Please go ahead.

Thank you. Good afternoon. Two questions, if I could. The first one, Patrick, can you just talk us through the thinking of the board in terms of the share repurchase level and how that changed versus February? And just any thoughts around what happened for the second half? And then, secondly, on Russia and the impairment, is that the start of a retreat from Russia? And, effectively, what would it take now in terms of Yamal to say, actually, this isn't working for Total anymore? And then, sorry, one final one, if I could. Just a comment on the diesel market, just given how tight those markets seem to be, and we've seen cracks move up very quickly. Thank you.

First, the share buyback, I will tell you, there is no surprise to you. There is no surprise. You should just believe what we said. We said that we will share the higher price, the benefits from higher hydrocarbon prices with the shareholders through buybacks. So it's clear that when you have a cash flow from operations of $11.6 billion, It's much higher compared to what we've done in the fourth quarter, which was $9 billion. So obviously, when we set the $2 billion buyback level for first half, It was not done on an assumption of 11.6. So you have $1 billion. It was not a mathematical exercise by the board. It was more the idea, and you can just remark, but it's a post-calculation. It was not done like that discussion, that $1 billion is 40% of the additional $2.5 billion of cash flow compared to Q4 cash flow. So I think that's logic. And we will continue to monitor that quarter after quarter at the board level. And we will not make a big announcement. I think it's also a matter to manage all the stakeholders on that matter. And again, but at the same time, the board is consistent and reaffirms its strategy to accelerate, if possible, the strategy of transition of the company as a priority. On the gradual suspension, you know, I think something is wrong sometimes in Russia. I never think we never stated We will stay in Russia. We just not stated that we will exit from Russia, which is a little different. And there are many reasons, as we explained in our principle of conduct of March 22. So we are looking... step after step about what the sanction might be. We are, the sanctions are, we try to even, and we take the conclusions on Arctic II, but obviously, and other assets. You have your suspensions, but the way you know it's that we have other activities. For example, we have in Russia a lubricant activity. It's not a big business, but we have a lack of additives. So we are suspending and not only suspending, yes, production will be stopped and more activity in lubricants, for example, will be stopped by the end of this month. That's another example in suspension. And we have other assets that we are looking around. On Novatec and Yamal, our position is clear. We have some contracts. We will honor these contracts. These contracts represent huge amounts of money. The volume of the 20-year LNG contract is huge. And so we'll have to honor the contract as long as sanctions allow us to do it. And if it's not possible, we'll take the actions as well. So, again... the Board of Directors of Total Energy has decided to face the Russian situation in a responsible way, and in particular to try to protect as much as we can the value of our assets for our shareholders' interest. And so we are monitoring that. But you can observe that we have no board as well, and no, I would say, hesitation to say we need to meet this impairment, we make the impairment, according to what is happening. The distillery cracks elevated also for diesel. Yes, it's clear. It's huge. I was looking this morning. I think we are about $200 per ton, I think. So I've never seen such a diesel crack. It's clear that sanctions on Russia for petroleum products will obviously impact this market because Europe is relying on diesel. Russian diesel, you know, we import from Russian diesel because the European refining system is more designed for gasoline than diesel. It's not new, it was before. So obviously the market is anticipating such a ban. For our activity and for refining businesses, of course, it's even more important that our refineries in Europe are all running It will be the case very soon. You know, we had, unfortunately, those were stopped, but now it's coming back to a stream after 1.5 years of voluntary stoppage. It's retired, so all the refineries will be run at full capacity for this second quarter very soon. So that's positive for the company.

Thank you. Next question comes from the line of Christopher Couplins from Bank of America. Please go ahead.

Thank you very much. Two quick questions from me as well, Patrick. Can you go a little bit more into detail and tell us what the missing parts are that are delaying Arctic 2 and your assessment of how long it would take to source these parts, circumventing sanctions that are now imposed? And the second question is a bit of a wider question. You used 70 Brent and $20 for your gas price assumption when you gave us a 2022 cash flow outlook earlier this year. And it looks like the $20 per MBTU, at least it looks like that to me, has now become more of a flaw than anything else, whereas at the time you said that might be a little bullish here relative to 70 Brent. Can you give us a little summary of your assessment following your introductory remarks around the price of energy security, particularly gas security, that Europe, you think, will have to pay in order to redirect volumes over the coming years as contracts with Gazprom expire? Thank you.

On Artic LNG2, the situation is the following one. In fact, there is a list of LNG technologies and critical elements which have been put on the list. I think Technip and other contractors are looking for all these lists to identify which critical elements might miss. You know, these sanctions will be in place from May 27. So in the meantime, I think Novatec is mobilizing with its contractors in order to be able to get as much as equipment they can and transferring the teams, if they can, in order to achieve, I would say, the first GBS1, if possible. We'll see what it is, if they can do that. I think it's a question more for Novatec and for the contractors which are involved in these projects in this activity, in particular Technip Energy and Becquerel's GE. On our side, we have decided to take a cautious approach in our accounts and to impair the value of Arctic2. On the economic assumptions, I think I'm not fully convinced that $20 per million BTU will remain, because this $20, because at the end, it's a question of competition between Europe and other markets. And what I have noticed in particular in this first quarter is that the demand for LNG from China has diminished quite a lot, around 10%, even more than 10%, and probably linked to these high prices. So there is, I think, on the LNG business, we must be careful because I see quite a big risk of demand destruction, in particular on the Asian side. You know where the demand is coming from, fundamentally. So there was an exceptional situation I would not take $20 as a flow for the long term in our economic macro assumptions. We are more around $8 to $10 per million BTU, but maybe I'm too cautious. For this year, it's quite clear that, yes, there's a good chance that we might end the average of the year by around $20. If we, in particular, if Russia begins to stop themselves on their side to To provide gas through pipeline, that means that in order to refill the gas storage for next winter, LNG will continue to have to flow to Europe. So LNG prices will probably be competing again with other parts of the world. And we'll see, and it's a good test for me, what will happen this summer. Because remember, last year, it was during summertime that the Asian gas went to the roof. because of a strong demand for climatization and also linked to the economic recovery. So I don't know what is exactly the situation today in China. There are a lot of uncertainties around these lockdowns linked to COVID. We are a little surprised, I think, today in the western side. But we'll see. China is coming back into the market because they need gas like last year. Of course, the price will not go down. It will remain quite high. On the longer term, you have to be careful, because high gas of energy is not only destroying demand in Asia, but might be really, I would say, might slow down, will slow down, in my view, the use of gas in Europe. And because it could accelerate the manufacturing industry in Europe, which was benefiting somewhere from the Russian gas, which was a low-cost gas, will not be able to resist if we provide them gas at $20 per million BTU. It's not possible. So that means that I think that some industries will begin to accelerate to electrify their supply in order to try to get a cheaper energy with long-term contracts. So I think I don't see if we could keep such $20 for the long term because the demand will, the customers will not take this type of prices. So it's why on our outlook for projects, we use more, we are given internal instruction to use $8 and $10. But again, by the way, it's enough to relaunch to, I would say, to some North Sea gas projects. which at $5 were stuck, were stranded, at $8, $10, have a profitability. We have a good example in our portfolio about the Quad 9 blowdown gas cap, which is a 1-TCF gas which was stranded and which today is coming, is revived. So I have asked the teams to look to these projects so we could make it, put it on stream. But we don't need $20 for this type of opportunity. So... That's my answer to your nice question, Chris.

Very clear, Patrick. I think 8 to 10 is already, as you say, enough and would simply be a very important message to recouple gas prices to Brent equivalent levels.

I fully agree. I fully agree. And by the way, in our commercial part of the LNG sales, we have given instruction to our LNG partners people not to try to go back to the famous 16 percent but to be reasonable because for me today the priority is to maintain a demand and it's an opportunity for us to sign long-term contracts but of course offering long-term long-term acceptable prices affordable prices it could help by the way to to launch additional lmg projects with this type of contracts okay great thank you thank you

Next question comes from the line of Bertrand Audet from Kepler-Chevreux. Please go ahead.

Yes, hello and thank you for taking my question and congratulations again for this very strong set of results as well as your transparencies on the ratio contribution this quarter. Two questions, if I may. So the first one is related to Namibia. There are external industry reports that suggest that your Venus discovery could potentially exceed 10 billion of recoverable oil reserves, making it the largest ever deep offshore discovery. I know it is early stage and you referred to it in your earlier remarks, but can you elaborate a bit more on this this potential massive find and share with us your initial thoughts on this discovery and any color on a potential fast track development that was the first question and on a second question on russia do you expect any dividend from novatec in 2022 hello first the first question i already answered and do you believe in stop reading newspapers you know just listen to me it's better

I think you see in your long history in the oil and gas industry, one world discovering 10 billion. I don't think it exists, but no, let's be serious about all that. All that are fantasy. But as I say, it's a promising discovery. Let's drill the appraisal well. Let's test the two worlds, and then we will come. And, you know, if really we have such levels, which I don't think – will be happy and you will be happy shareholders. So, but again, I think by the way, this figure is more referring to the Namibia province rather than just our license. But again, I don't want, don't entrain me, let's wait. It's a promising discovery, it's enough. Russia dividend, Novotek has approved, I think General Assembly of shareholders has approved dividend last week. We are shareholders, so these dividends will be available, I don't know when, in rubles somewhere. Could we, yes or no, transfer them to TotalEnergies? That's another question which depends not only on us, but, you know, on all the counter-sanctions from Russia. And so it's like the European sanctions which are moving targets. The counter-sanctions are also moving ones. So... By the way, honestly, it's not so big. It represents, I think, $250 million for total energies. So, again, this is not what will change the picture of total energies. That's why we are very transparent. But I don't know if we'll have access or if we will keep the rubble somewhere in an account in Russia.

Thank you. Maybe if I can squeeze one more on your impairment in Russia. You disclosed the book value of Arctic to $2.5 billion. Can you help me reconcile this figure with the $4.1 billion impairment you took in Q1?

No. You have the information which was transferred to you. We said notably, and I think if you look to the slide which was distributed in March 24, you could find a lot of the answer. Got it.

Thank you. Next question comes from the line of Alistair Singh from CT. Please go ahead.

Hi, Patrick. Jean-Pierre. A couple of questions just on sort of state of markets and negotiations. You've already touched on US LNG. I'm just intrigued to know whether economics are changing. You know, it used to be sort of Henry Hub plus a fee. Clearly, LNG developers see the same opportunity as you do out here. So just wondering if those negotiations are getting tougher. And then secondly, could you sort of explain how the market for acquisitions and renewables looks? I mean, you touched on the core solar deal. I'm just trying to understand if that's a competitive option and sort of how competitive these options are. Thank you.

As you know, for the second question, to be clear, of course, Solar was a deal which was a direct negotiation. And I have a very strong view on this market. And I say to our teams, stop looking and stop spending your time or losing your time on competitive options. because you have always in front of you, I would say, financial investors, which obviously do not have at all the same views on this type of asset. They have money with a negative return, so they are accepting returns which are too low. We are not in that field. So the only way for us to continue to build the portfolio, but of course, Solar is an excellent example. is to have a direct negotiation and to be able to convince, I would say, the promoter that partnering with TotalEnergies will give you more added value, and so that's why we convince. We have other, I would say, opportunities in our portfolio in which we work, and there again, be patient. You will understand what I just said in the coming weeks in which we work in different countries. On the first one, I don't know which opportunities you are thinking to. If it is a matter of taking, no. So your question is a little mysterious for me, so you have maybe something in mind. But on the contrary, I would say on the Cameron Energy, it helped to accelerate, I would say, the decisions process with all Chinese and Japanese partners. On this stuff at TIFICO, it's more of a no-fun. I don't know to which opportunity you refer, which might be impacted by these changes. Energy economy is changing.

I meant to the deals on the US Gulf Coast or Mexico. Is it still basically Henry Hub plus the fees? Are you still taking Henry Hub price risk?

Yes, it's linked to Henry Hub. If it is your question, the answer is yes. Thank you.

Thank you. Next question comes from the line of Peter Lowe from Redburn. Please go ahead.

Hi, thanks. The first question was just a clarification on the cash flow from Russia in 1Q that I guess relates to Yamal. Can you confirm that that has been repatriated from Russia? I appreciate it can change, but just to understand the current situation. And then secondly, you talked about your willingness to explore counter-cyclical opportunities to accelerate the transformation. Can you clarify, would that be outside the $13 billion to $15 billion net investment range you have previously given to 2025, or would you stick with that range and try to make disposals alongside any larger acquisitions you were to make? Thanks.

On the first one, it's clear. In fact, you have the figure. Most of the cash you receive this year is linked to Yamal energy. So it's the access to Yamal, no?

Yes, yes. It's cash is getting back to total energy. So the figures we get, I have that in my cash.

This is what we have. So it's in, yes, we get the cash. By the way, you know, the war only was declared in the second part of the quarter. But if the Yamal cash system works until now, The second question, the range is valid for 22. 14, 15 billion. We said 14, 15 billion dollars. So the answer to your question is yes, in fact. If we accelerate on one side, we might divest on the other side. Because again, we have, yes, the answer is yes.

Thank you.

Thank you. Next question comes from the line of Biraj Borkatalia from RBC. Please go ahead.

Hi, thanks for the presentation. I have two questions for you. The first one is on Cameron LNG and the de-bottlenecking there for the existing trains. Do you have an idea of what timeline that de-bottlenecking is supposed to be delivered on? And then the second question is just on Mozambique LNG. Do you have an update on activities there when you expect to restart and a view on startup and construction there? Thank you.

Thank you, Biraj. The plan is to make the field this year, to sanction next year in 23, and so it takes three years to build the train, so 26 from Cameroon LNG and the new train. On Mozambique LNG, you know, Maybe not you, but some of your colleagues asked me the question on March 24. There are not a lot of news. This is March 24 from today. So, as I said, there is an activity on the ground, not from us, but from the government of Mozambique and its allies to recover the security and then to bring back the population in peace, to have a normal life. These are the two conditions we agreed with the Mozambique government. My view is that all that will take at least 2022, and then what we plan on our side is to go back there. And as I said last time, we will restart those activities the day that I will myself be able to visit Afungi, Palma, and Mosimbata Praia, because if my security people told me not to go, I will not send any of my people or contractors to face a difficult situation. So I think it's a matter of, as I said before, there is good news on the ground and the security has much improved and there are less, much less, I would say, terrorist attacks. It's not yet fully recovered. I think the government of Mozambique communicated that they Their objective is to recover the security by June, middle of the year. But then we don't want to restart our activity surrounded by refugee camps. We want the situation to be stabilized because peace is going as well with, I would say, the stabilization of the local population and economic activities. on which we contribute, by the way, with others. But there are a number of positive signs for the people who are going. Some of my senior officers went there and got some reports. But it's a question of patience. And then once we will consider that the situation is really under control and pieces back, we'll be able to remobilize. And we know that it will take us more than six months to come back to, I would say, a stabilized construction level. So the opportunity is there. The progress is well, but it's not in our hands. It depends, again, on the actions of the Mozambique government and its allies.

On the first question, the question I was asking was for the 5% increase in the debottlenecking for the first three trains at Cameron LNG. What timeline would you expect to deliver that on?

I think technically it's linked to the building of the trains. I mean, it's 25, I think. 25 is the first debottlenecking. 25 for the first train. Sorry, I didn't catch it. The first debottlenecking for the first train is 25, and after each train will cost.

Okay, thank you very much.

Thank you. Next question comes from the line of Henry Patricot from UBS. Please go ahead.

Yes, everyone. Thank you for the update. One question on trading and a couple on downstream. The first one on trading is a very strong performance in the first quarter. We continue to see significant volatility in the second quarter. So I was wondering to what extent you think it can replicate the very strong performance of the first quarter and the second quarter in both gas energy trading and the RC trading. And secondly, you talked earlier about the risk of demand destruction for gas. And it was interesting to hear your views on the risk for oil demand at the current level of prices that we're seeing and whether you're starting to see weaker demand in your own network. And then finally, can you give us an update on the impact of the discounts at the pump and whether you would expect these to be extended? Thank you.

Yeah, trading. When we say it's exceptional, it's exceptional. That means that of course our traders are willing to do it regularly, but they are motivated directly and personally for that. But I would say on the whole trading, it was this quarter was as exceptional more or less than the second quarter in 2020. And so, again, this type of additional, what we dimension, let's say, $500 million extra cash is linked fundamentally to specific situation of volatility of the market when they are in the right sense, so it's okay. For the gas, what I observe is that, obviously, it's a second quarter in a row, but we have a strong result. visual activities there, and I think it's a matter also for teams to have teams that are positioned in particular on the LNG, you know, and gave us an advantage to be able to, I would say, get some good, strong results. So let's see if they can replicate it. I just want also to mention that we have also benefiting from good strong electricity trading and it's also the second quarter in the road so i think the reality is that i would say performance of trading is generally linked to volatility of the market uh they like volatility of course it's a matter to have a good analysis of what the market trends because it could be reverse you know so i will touch wood but that's where we observe On the demand destruction for... No, I think all is a little different, by the way. Honestly, in our networks today, no, we have seen an impact because of COVID still in the first quarter. I remind you that even in Europe, there was some COVID measures, and like in Asia today, in China. So I cannot link oil demand to oil price today. We do not see that. And I've seen, I read some statistics on the month of April where there is no real COVID impact. I cannot tell you that. So it seems that we come back to the levels of 2019 with a small plus. But so we don't observe it, even if it's not really in Europe that the impact might be strong. You know, when we remember the super cycle, it was more in emerging countries where then the government has subsidized and of course everything is expensive and so they begin to take actions in order to be more efficient and to my efficiency. So it's not exactly like gas. My remark was more on LNG because LNG is competing with coal. So you know it's a relative price of LNG to coal. When LNG is very expensive, I'm afraid that some Asian countries will come back to coal quite easily, you know, and which is not good for climate, but that's what will happen. On oil, the alternative is not so obvious, you know. It's a liquid, and so you don't know because oil is not for electricity. Oil is for transportation. So we don't have much. The impact on oil demand might come from the economic growth. That means this war, unfortunately, begins to really have some impact on some supply chains. And then we begin, and I'm not an expert, micro-expert, but when I'm reading the papers from AMF and some central banks, they begin to speak about even a growth which might be either low or negative. So you have a direct link between, I would say, all demand and macroeconomic environment. The discounts on PAMP. I think it's, for me, we have taken some decisions on this one to be voluntary, to make the voluntary discount because we think it's important and I think it's normal that we take care of our customers and it's a period where it's a matter of solidarity. We have, as you've seen, a very exceptional resource. And frankly, I prefer, and it's a discussion which good intelligence with the Governed French government, which prefers us to act by taking actions directly for customers. We've done it for gas. We've done it for gasoline rather than for taxis. And I perfectly agree with this philosophy. So probably, yes, we'll take some initiatives for the summer where people are driving a lot. there is an idea around discount on motorways, but we need to elaborate on this one before to go to announce it. So I think it's part of, I would say, again, it's a good way to share part of our profits directly with our customers.

Thank you.

Thank you. Next question comes from the line of Martin Ratz from Morgan Stanley. Please go ahead.

Yeah, thank you. All my questions have been answered. It's been very comprehensive. Thank you.

Thank you. Next question comes from the line of Jason Gabelman from Cohen. Please go ahead.

Hey, thanks for taking my questions. Two quick ones, because I agree the call's been quite comprehensive. The first on the Brazil payments for Sepia and Etapu. Are there any payments left after whatever you disclosed for 1Q, because it looks, at least on our numbers, a bit light, and I'm not sure if there's any additional payments coming for those PSCs for the rest of the year beyond what was booked for 1Q. And then, secondly, I was wondering if you have any update on your views on when the Cutter LNG project, when they can award those contracts to The teams like this is about as good as an environment as we'll get to fully sanction the project. So any update there would be helpful. Thanks.

Yeah, it would be helpful for me as well, you know. But I will let the Qatari authorities communicate on that. It's a competitive process. We are part, of course, of the parties. I'll let the Qatari authorities communicate in the process. and we are a long partner with them. So, of course, we are adamant to be able to contribute to these projects. On the first one, your question is the right question because we have... It's true that the bonus, there is an on-out, I think, linked to the oil price, but it's not, I would say... I don't think it will be paid immediately. It's on a yearly basis and some years the mechanism can be described to you by your teams if you want the details. So today, yes, we have paid, in fact, yesterday, in fact, all the initial bonuses which were presenting something like $2.5 billion, I think, has been paid. So the treasury of Jean-Pierre has been lowered yesterday. but he was worried to have too much money. So all that has been done because there was on the one side the bonus to the state and I would say the compensation to Petrobras, which was paid yesterday. So in our cash flows, I think you have in the first quarter the bonus to the state and the main part of the compensation to Petrobras was paid yesterday. And then on this part, there are some earn-outs linked to the old price, but which are coming, I think, not before beginning of next year because it's a yearly mechanism, if I remember well, which is triggering at $70 per barrel, if I remember the contract. So for this year, I think everything has been paid, and then we'll enjoy to get some production going, 30,000 barrels per day more or less as an average in second quarter, going to 60,000 by the end of the year, additional production. If it remains at $100 per barrel, it's positive for investment in terms of profitability.

Great. Thanks.

So I understand there are no more questions. And so I would like to thank all of you for attending this meeting, and we've been happy to answer all your questions. Obviously, we benefit from a very strong environment, but I'm really, as chairman and CEO, I'm very pleased that all the teams of TotalEnergies have been able, in all the segments, to capture this upside. Production was good, 2.85. higher than your consensus, so congratulations to the E&P teams. GRP, I think IGRP trading arms have performed again very well, and the result is even beating a record compared to the fourth quarter. On refining and chemicals, they come back from red to green in Europe, and I think there is more to come with the diesel crack, and all refinery running the second quarter will be probably better than the first one. And marketing and services is the stable. But this is suffering a little, of course, from all the upstream chains because when margins are strong in refining and price are high, the margins become to be squeezed on the marketing and services, but we have a high-quality asset. And so I think that our second quarter should be more or less in the same view, in the same or even a little better than what we just done. And as you have noticed, the Board of Total Energy is fully committed to continue to enhance the returns to shareholders as well as to implement a growth strategy in our transformation of the company. Thank you. Thank you.