TotalEnergies SE Ordinary Shares

Hello, everyone. Patrick Pouyanné here. I'm happy to join you today for this call to comment our results together with Jean-Pierre on how Total Energy is taking action to take the most out of the very favorable environment for energy companies. I will also comment, of course, the actions we are taking to execute and deliver on the strategy in such an environment. And Jean-Pierre will review the results, and then we'll go to the Q&A. So, of course, the environment is obviously very supportive, the price of oil, the price of European gas, the price of LNG, and the refining margins for this quarter. It is the first time in 25 years in the industry that I am observing such an environment where all segments of our company are benefiting at the same time of strong prices or margins. But as Jean-Pierre will show you, our ability to fully leverage the commodity price environment is significantly strengthening our balance sheet and increasing our cash flow to recall cash flows for a quarter. And we are performing very well and using this opportunity to accelerate our transformation and benefit our shareholders. TotalEnergies is indeed fundamentally a commodity company, and we recognize that we are high in the commodity price cycle. On the supply side, the global system will struggle over the coming year to develop additional spare production capacity for both oil and LNG, and this implies medium-term support for high prices. On the demand side, global demand is increasing as economies continue to reopen, but the threat is a potential slide into recession because of inflation. The Russia-Ukraine conflict and sanctions have pushed refining margins for this quarter to the sky during the second quarter. They have been falling sharply, quite sharply in July, but still remain high. This obviously has a strong impact on gasoline prices at the pump for customers, and in this context, Total Energy has extended the fuel price reduction program for its entire network in France through the end of the year. We prefer indeed to share the benefit immediately and directly with our customers rather than to make ourselves the target for additional taxation in this current environment. Ultimately, energy prices, and we should not forget it, are cyclical. So we do not expect to remain at the top of the cycle for the long term. We have been through this type of cycle before and we are taking a balanced approach to best execute and deliver on our strategy to profitably grow the company for energy transformation. Our first priority, as you know, is to invest in the company to prepare the future. And in this period of strong cash flow generation, as I explained to you in April, the board is giving priority to accelerating the transformation, potentially for kinds of cyclical opportunities, and this is what we are doing. In the second quarter, we have announced three major new opportunities which will join our portfolio, our entry into Qatar's giant Northfield expansion for LNG, the acquisition of a 50% stake in Clearways, the fifth largest US player in renewable energy, and a new venture in India in partnership with Adani for green hydrogen production. Investments with new opportunities, in a sense, we have managed to have access to these new opportunities in the very good conditions because of the relationships and the strong positions we have developed in key growth areas. We are also acting opportunistically at a more tactical level by, for example, moving two floating LNG rigas terminals to France and possibly Germany. where we are already maximizing our position as the largest energy gas provider in Europe. We also are accelerating development of short-cycle projects, for example, and notably to increase gas deliveries to the European market from the North Sea, but also on the old side, for example, in Angola, with several infill wells on Block 17 on Girasol and Rosa. By the way, Angola will be another showcase of our multi-energy strategy, as we are just sanctioning many different projects. Two oil projects, each of 30,000 by-product capacity, Club 3 on Block 17 and Begonia on Block 1706. The first non-associated gas projects on the fields of Kelumba and Mabukeiro in order to feed Angola LNG plants and deliver more LNG to Europe and Asia. and the first solar plant, 45 megawatts, in partnership with Sunangle. As a result of all this acceleration of our transition, I would say like we announced it in last April, our first half capex were close to 8 billion, and we now anticipate by the 2022 capex, will be in the range of $15, $16 billion, probably next to the $16, rather than the $15, depending on the timing of acquisition and asset sales. I remind you that in March, we gave a guidance of $13, $16 billion for the year 2022-2025. So the $16 billion, next to $16 billion, is in the range, as I answered to a question during the last call. The Qatar LNG deal will contribute, obviously, to our future LNG growth, and thanks to this new addition to our portfolio, we maintain our growth ambition in the LNG segment, despite the decision not to invest anymore in any new projects in Russia. A word on Russia. As you have observed, we implemented our principle of actions announced on March 22, and we are exiting fully from the old business, both production and trading with the recently negotiated exit of the Kyaga oil field during the last quarter. Total energies recorded in its second quarter account a new $3.5 billion improvement related to the potential impact of international sanctions on the value of its stake in Novotek. Russia represents about 5% of its capital employed in cash flow and starting with investor day in September, We'll present our strategic plans for total energy in future without taking Russia into account. Fundamentally, that will change some volume figures. For example, the production of 2022 will be 2.3 million barrels per day, but not the global financial performance nor the return to shareholders growth. More details will be given to you at the end of September for strategic presentation. Also, a priority at the level of the board is we are increasing shareholder return to reflect the current environment and strong cash flow generation. The third board approves the second interim debiment on 60 cents of euro per share, an increase of 5% supported by the underlying of structural growth in our cash flow. Plus, another tranche of share buybacks of $2 billion for the third quarter, which will represent globally since the fourth quarter 2021 to the third quarter 2022, a global amount of 5% of our market cap, which will be bought back through shares. You can deduct from this guidance of $2 billion for the third quarter, the same rate but in the second quarter, but doubling the rate of the first quarter buyback, but the buyback should reach at least $7 billion for the year 2022. And I can come back on that. On a relative valuation basis, frankly, on any reasonable basis, by the way, the total energy share price is compelling, particularly in light of the dividends we are paying. We never cut. Now, I will leave Jean-Pierre presenting, and he's quite happy, a strong set of results. It will be an easy exercise for him today. But let me just remind, summarize what I just told you. Yes, we are in a clearly very positive and dynamic environment marked by elevated commodity prices. This may persist for the medium term in our view. The company is demonstrating its capacity to leverage such a positive environment in all the indicators, in particular in terms of cash flow generation. And we will act accordingly to maximize performance with our strategic approaches and financial discipline, to allocate capital to energy transformation, to return value to shareholders, and, of course, to maintain strong balances for the future. Jean-Pierre, the floor is yours.

Thank you, Patrick. So reported IFRS state income for the second quarter of 2022 was $5.7 billion, which takes into account the $3.5 billion impairment that Patrick mentioned. Adjusted net results were $9.8 billion, up 9% from the first quarter. Earnings per share were $3.75, up by more than 10% with the benefit of buybacks. The second quarter and first half results reflect the dramatic increase in oil, gas, and LNG prices, as well as record refining margins over the second quarter. Debt-adjusted cash flow was $13.6 billion, an increase of 14% from the first quarter and double the level of the same quarter last year. For the first half, cash flow was $25.6 billion, again doubling the same period last year, and strong enough to cover the full year 22 capex plus dividends. This illustrates the leverage that Total Energy, as a low-cost producer, has to the strong commodity price environment in terms of free cash flow generation. Operationally, upstream oil and gas production decreased by 100,000 Barrels spoil equivalent per day to 2.7 million in the second quarter from 2.8 in the first quarter. This is mainly due to higher plant maintenance and production cuts in Nigeria and Libya that were partially offset by the entry into sepia and atapu fields in Brazil. We expect plant turnarounds to be about 40,000 barrels per day higher in the first quarter than in the second quarter, and production to be stable at the level of the second quarter thanks to ramp-ups from the new projects. In the downstream oil business, refinery throughput was 1.6 million barrels per day in the second quarter, and the utilization rate increased to 88%, which targets the same high utilization rate for the third quarter. Looking now at the results by segments. IGFP, Integrated Gas, Renewable and Power, is the growth engine of the company. Adjusted net operating income was $2.6 billion in the second quarter, three times the level of the same quarter last year. Excellent performance by down $500 million quarter to quarter, mainly due to decrease from the exceptional high contribution from gas, LNG and electricity trading in the first quarter. IGFC cash flow was $2.4 billion in the second quarter compared to $2.6 billion in the first quarter. Important to point out that cash flow from operation in the second quarter was $4 billion, reflecting a reversal of the margin call and working capital changes in the first quarter. LNG sales were 11.7 million tons in the second quarter, down from 13.3 million tons in the first quarter due to lower spot sales, but the 1Q was a record spot sales quota. The average energy selling price increased to $14 per million BTU in the second quarter, in line with our guidance, and is expected to increase to more than $15 per million BTU in the third quarter, given the evolution of oil and gas prices and the like effect on price formulas. Gross installed renewable power generation capacity grew to 11.6 gigawatts At the end of the second quarter, up 0.9 gigawatts in the quarter, including 0.4 gigawatts related to the startup of the first phase of the Alcacer Solar Project in Qatar. Including the pipeline of development projects, our renewable portfolio has grown to more than 15 gigawatts of gross power generation, so we are very confident that we can achieve our 2025 growth target of 35 gigawatts. E&P is performing well in this environment and contributed $4.7 billion of adjusted net operating income in the second quarter, which corresponds to a return on average capital employed of more than 20% over the past 12 months. This quarter is a bit lower, down 6% from the first quarter, mainly due to the lower production and impact of sanctions on the result of Russian assets. Cash flow was $7.4 billion in the second quarter, slightly above the very strong performance of the first quarter, and reflecting the higher liquid price, which was partially offset by lower gas price realization and lower production volumes. Downstream performed impressively as well, a reminder of the importance of the integrated model. generated $3.2 billion of adjusted net operating income and $3.5 billion of cash flow in the second quarter, as it increased refined product volumes to fully capture record-high margins in the context of reduced imports of Russian products. Plus, the exceptional result of trading, two quarters in a row, $500 million. At the company level, FST net operating income was $18.8 billion for the first half, which represents the annualized return on capital employed of more than 25%. Operating cash flow before working cap changed from $24.9 billion in the first half of 2022 to more than twice what we generated in the first half of the year. Our net investment in the first half were $7.8 billion. We are able to reduce net debt costs by $4.1 billion to $13 billion at the end of June, so our gearing is below 10%. And in addition to paying the dividends, we bought back, as Patrick mentioned already, $2 billion of our shares during the second quarter, as announced. The company is financially stronger and operationally performing better than anyone can ever recall. While we do not expect this environment to last for long run, the reality is that we are using this time to fortify the balance sheet, accelerate the transformation, and return value to our shareholders. And on that point, I think we are ready for the Q&A. So the floor is yours.

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 01 on your cell phone keypad and wait for your name to be announced. Please kindly mute any audio source while asking a question. If you wish to cancel your request, please press 02. Once again, please press 01 if you wish to ask a question. We have a first question from Christian Malik from JP Morgan.

Good afternoon, gentlemen, and thank you for the questions. First question I have is just around your CapEx guide. It seems to be sort of a long-term target, which you've clearly reached the top of. Could you provide any guidance around how you're going to think about capitalization in the medium term, particularly if it pertains to your CapEx profile, both in terms of the absolute level You know, given you have to take advantage of counter cyclical investments, but that can come at the risk of an even higher guide going forward. So is it a hard ceiling? Is it a soft ceiling? And maybe some clearer line of sight around the medium term. And also as it pertains to the mix, given there are some great opportunities also within oil. Um, could we see taking advantage Patrick of, as you have done so exceptionally, uh, of good deals, be it for the wholesale assets, um, you know, which links back to my question around, uh, the CapEx. And then this, the second question is around demand. Um, and just sort of, uh, you mentioned the sort of recessionary risks, you know, uh, as a result of inflation, can you elaborate more on what you're seeing particularly, um, sort of a six or 12-month view on the demand dynamics because it does feel as though the sector is being viewed as as good as it gets around a risk premium associated with Russia as opposed to anything more structural because demand is clearly not clear in many people's minds. Thank you.

Okay, thank you, Christian, for the two questions. First, on the capex, you know, in March we told you $13, $16 billion as a guidance for 2022-2025. And that's true that this year, at the beginning of the year in February, we said 14-15. We just used the guidance we gave you to go to 15-16, close to 16. Why? Because obviously, as I told in the speech, I think we have decided to to accelerate on some opportunities. You know, as I said, we just closed and we have managed to make that deal on the renewables in the U.S. from ClearWave. But we have also given instructions to try to accelerate short cycles. I've given several examples of fields in Angola, for example. so it's an opportunity to do it well to launch this project before by the way cost increase in the industry so we benefit from a good environment today it's also a question i can tell you we have also given instructions because you know in an energy company in my case we spend a lot of energy so The energy costs are increasing in the company, so I have asked the team to accelerate some programs, CapEx program on energy efficiency, which, by the way, is good for costs. structurally on the long term is also good for the emissions, you know, so this is another source. So I'm very comfortable to see the company in such an environment to spend this year next to 16 billion rather than the initial 14, 15 billion. So it's, I think, the capacity to react to the positive environment having said that i'm keeping at these uh at this stage and uh we'll give you more information in end of september but the idea that the guidance we gave you at 14 16 for me is reasonable is a reasonable guidance guidance for capex uh that's the point on the split That's true, but like you said, you know, we are very happy to have acquired the two oil fields in Brazil, of Atacu and Cefia, of the Torso Press Farm. There are not many contenders by December. We acquired that on the basis of $60 per barrel, and since the beginning of May, we received... for almost a share of 40,000, 50,000 barrels per day at $120,000 a barrel. So I can tell you I'm ready to do other deals like this one, to be clear, without opportunities. I'm afraid when the price of oil is high that, of course, it's more complex because the expectations might be higher, but so we'll be active. A split of CapEx. At this stage, I'm remaining in my range around, let's say, 50 billion around oil, 20, 25 percent around energy, and 25 percent, 25, 30 around new energies. I think it's still valid even if we go up to 16 billion, but it's more or less what I have in mind. On the demand side, your question is a tricky one, because on one side, we see no real decrease of demand today. I mean, even with reopening after COVID, you know, we've seen the jet fuel demand is quite strong. Aviation is coming back, and it's not yet at the level of 2019, so there's still room for improvement. We have seen in the last quarter that China was closed, and so the demand in China was weak, but China is reopening. And so you see some – I see some room, positive room, for increasing demand for oil. At the same time, there is this question mark about – Financial markets are not so strong today. Interest rates are raising. Inflation is rising again. So we could have a risk to see a recession. I mean, I'm not a macroeconomic expert, but this is what I'm reading, including in the U.S. So this could have impact on the demand. And we know that when the price is high, you know, subsidies, in particular in emerging countries, are a big burden for governments. And that impacts demand. You know, you could have some, we've seen a country, I think it's Sri Lanka, but it's a small country, but other countries could put some policies in order to control the, I would say, the budget burden, which is by subsidizing oil prices, gasoline prices. So that could be a negative, I would say. So all in all, I think that I'm positive. I see some more positive trends on the demand than negative, but there is these macroeconomic risks. And you remember in 2008 when we had the financial crisis, the last huge macro crisis, the impact on the demand was quite strong. So that's something. Having said that, I repeat what I said. I don't see as well on the supply side much room for improvement. And I think OPEC countries are almost at the maximum today. You have Libya, you have Venezuela, but over geopolitical difficulties. And you have the U.S. shale oil, where we are not the best experts, but I understand that today, increase of production is facing some shortage of workforces on rig crews, and so it's not so easy to increase quickly the production.

Thank you.

Thank you. The next question comes from Irene Aimona, Societe Generale. Please go ahead.

Thank you. Good afternoon. I had two questions, please, and congratulations on these strong results. Firstly, with the UK windfall profits tax in the North Sea, can you say roughly what you would expect the cost to be for Total? And then secondly, in the context of the 16 billion CapEx, Aside of the new strategic opportunities which you're exploiting as you accelerate the transition, do you also see inflation starting to creep in, the new oil and gas projects, and also your renewables where you're constructing about 5 gigawatts? Thank you.

Thank you, Iran, for the two questions. On the second one, no, it's not inflation, which is leading the rise of our CapEx guidance to next 2016. It's fundamentally opportunities, short cycles, but I cannot tell you inflation is there in our industry. We've seen some few rig rates going up, but we have managed to find to have access to very acceptable rig rates. And I would say on the project side, the only points which we see an increase are raw materials, you know, raw materials like steel, for example. And we took the decision recently to postpone the order for steel for a big pipeline in Africa because we consider that it was at the top of the market and we better to wait and see some decisions. So the raw material part is kind of may have But it's not the reason why we have given you 15, 16, next to 16 billion dollars. It's more the results, as you said, of being opportunistic on some M&A activities which are fitting your strategy and accelerating short cycle capex. On the U.K. side, the evaluation we have for this year is around $500 million of impact of these taxes. But I can tell you that I would say, for me, the cash, by the way, which is generated today with the European gas price on the U.K. operation is also much higher than expected in all our forecasts. So it's And I would say that the U.K., I would say, have been always quite in the history. They were lowering the tax when the price were low, and they are quite active on the taxation side on both ways, I would say, lowering when it's low, increasing when it's high. So that's the type of elements that we can give you. But it will be absorbed in the cash flow that we are generating there in the U.K.,

Thank you very much.

Thank you. The next question comes from Lydia Rainfalls from Barclays. Please go ahead.

Thank you, and good afternoon, both. Two questions, if I could. The first one, and if I can come back to the capex side, as you're spending more money and the idea of being able to actually define business models in the low-carbon space, are you actually taking more risks? So I'm thinking about things a little bit like Clearway or in India. So effectively, how confident should we be about the returns of that additional capex? And then the second one, if I come back to the buybacks and the cash returns to shareholders, I know Patrick talked about this earlier, but this idea that balance between how you share the additional capex, the additional cash flow across stakeholders, be it

um the share buybacks the um and customers so i'm just trying to get that out just over time how much more can you do in terms of the shareholders returns thanks okay on the second question first uh let me clear the capex uh guidance is uh for us a question of uh medium and long term uh Profitability of our business model. So we know that, and it's an experience we drew from the year 2010, 2015, but if we overspend, I would say, the capex, then when the low cycle will come back, we have some true difficulties in terms of profitability. So we look to the capex in a sort of sustainable, medium, long-term capex. So it could vary. This is why we gave you a range for 2016. And today, and so we adapt it according to the range that we gave you, according to the circumstances. And again, I see poor shareholders. Obviously, it's quite valuable, but we accelerate short cycle projects today when the prices are very high. So I think it's quite reasonable to behave that way. And to maintain, I would say, on the medium-long term, the reasonable level of capex. So the buyback is not arbitrated against the capex, let's be clear. The buyback is another question, which is what is a global return to shareholders. Of course, when you have a huge, I mean, I think you can see that we have generated almost $25 billion, I think, of cash flow from operations on the first half. If the second half of the year is the same, we'll see it would be $15 billion. So it's much higher when the $30, $35 billion we had in mind. So the question for us is, how do we share the, I would say, extra profits? The board wants to use this opportunity again to accelerate transition and also to strengthen the balance sheet. So it's possible that by the end of the year, the debt, the net debt will be not far from... under 5%, but we see that, as I explained to you already, as giving us the opportunity. If the macro environment is changing, you know, when you think about interest rates raising, you could see some valuation of more opportunities coming. It's a matter to be patient. So what we don't want to do is just to spend the money quickly, but to give the capacity to act in order to continue to strengthen our business model. So the buyback level, as I told you, for the year, we started at $1 billion for per quarter. We raised to $2 billion. Now I told you that the $2 billion will be maintained. It will be at least $7 billion for the year. In mind, what we have in mind, if you are adding a sort of burden of, I would say, for dividends around $8 billion, it's something around $15 billion, I would say, of global return. And we'll monitor that according to what will be the results and the cash flow generated for the second half. This is the way we look at all of that. To come back to your question, the first question, which is low carbon and the returns, I think, again, I repeat what I said already on this question. And, in fact, the low carbon energy today, you know, when you look to fields like biogas, when you have biogas and you sell it at the European gas price, the generation and profitability is quite high, you know. And I think the renewable story is fundamentally, the return is to, and our business model, as I explained last March, is not to cover all, not to cover these renewable projects by regulated prices, you know, which are given you, I would say, a return which could reach 10% after some farm downs, is to keep part of these renewable productions in order to sell them on the merchant market as a commodity price. And again, if you make the math today with the electricity price we can observe in Europe, you would see that the profitability is much higher than the 10% that we have already put as a minimum target. So this gives us some comfort that when you look to this, it's not only renewable. and I explain you, it's renewable and electricity value chain. You need to look to the whole value chain and the way to manage not only the renewable production as part of your electricity production and more electricity trading you can do and valorizing these electrons, again, part of them on the market price, on the spot prices, and not only on the guaranteed price, which would limit your dividend. This is, for example, why Recently, in the UK, on the offshore wind farm, the Seagreen offshore wind farm, we decided not to apply for a new CFD, a new contract for difference, but to keep 30% of the production on the free market, on the spot market, and not to cover the whole production at a guaranteed price because... The auction price was around 36, 37, 38 pounds per megawatt hour, and we considered that there was better to do and to keep 30% of our production to valorize these assets in a better way in the future.

Thank you. The next question comes from Martin Ratz from Morgan Stanley. Please go ahead.

Yeah, hi. Thanks for taking my questions. I've got two. First of all, I briefly want to ask about the dividend. The dividend is up 5% year on year, but I was wondering if there is a case to be made that we should be starting to see that as a future trend rate of growth rather than just what it is for this year. And the reason for asking is, of course, that the buyback is now sufficiently large to effectively allow the dividend to grow 5% a year just by shrinking the share count. Would you see that 5% more as a trend rate going forward, or is it still a bit of a sort of one-off above trend rate sort of type of hike? And the other one I wanted to ask, perhaps a bit more macro and slightly less related to the company, but you'd be well suited to answer it, so I wanted to ask it nonetheless. I was hoping you could say a few words of what you expect will happen to the European diesel market. And the reason I'm asking it is that European diesel imports from Russia continue at about 700,000 barrels a day or so. It's about 10% of our European diesel consumption simply comes from Russian imports. And they are all seaborne. They're fully subject to the embargo that kicks in in February. And in theory, they should all fall away. In your estimate, are European refineries suited to ramp up diesel production? Can they do that with less gas being available? Can we import it from somewhere else? It seems there's an awful lot of tension in that market. And I was hoping you could say a few words about it.

Thank you, Martin, for the two questions. The first one is clear to me. It's not a total one-off, the 5% increase. We told you, if I remember, last September, in September 21, that we anticipate a growth of our cash flows by 5% per year for the next five years. In the meantime, there was a Russia hiccup, but as I will explain to you that in September, with other opportunities like Qatar, and you are very right as well, Because we make a buyback share of around 5% of our capital, I would say, for me, the 5% is a guidance that we are willing to follow not only as a one-off for the next year, following next year and potentially the next five years. We have room in our portfolio. This is why we said the growth of dividends must be supported by sustainable underlying CFFO growth, I think. So thank you for the question to clarify that. And for me, it's the guidance that you can put in your model, 5%. And it's really true that despite Russia, the fact that we bought back 5% of our capital will obviously represent one year of 5% increase. And this is the intent for me. When you bought back shares, somewhere the return to shareholder is effective only if you put it in your dividend the years after. So that's it. Very good point. On diesel, yes, you're right. I think when you – it's very interesting what is happening today on the European margins. I said to you that they were out of the sky during the second quarter, and strangely it was gasoline and diesel which went to the roof. The gasoline spread is beginning to go down, but the diesel one continues to remain high. And I think there is a good reason for that, is that fundamentally, you know, our European system does not produce enough diesel. Fundamentally, before the – it's like the gas, in fact, natural gas. The refining system in Europe was mostly diesel. the design to produce gasoline in the past we made some investments but not enough to cover the diesel demand so and it's true that's why i think the spread on diesel is quite high because the market is anticipating some difficulties uh that's one of the concerns by the way i can tell you among the government so of course we will on our side we are looking to and why for example why the french government signed last week an agreement with abu dhabi in order to have a sort of security of 300,000 tons of supply of diesel. And by the way, Total Energy Trading Arm will be the, I would say the company will be the the intermediates between Abu Dhabi and the French state to ensure this supply of diesel. So there is – and I think the market has that in mind. So my view is that the refining margin will not stay at the sky where we were in the second quarter. It will go down, but the diesel spread – should support in the future these projects. And it's necessary because, as you know, in a refinery, you spend quite a lot of energy. And so the cost of energy and refining has grown up from something like $5 per ton to $20, $25 per ton. So all in all, if you want these refineries to continue to be utilized at almost 90% rate, we need to have some support. Otherwise, because of the cost of energy, refineries will be less utilized. And if they are less utilized, you have an impact on the supply to the market. So I think there you have a support. for these refining margins because of the diesel position. And that's something that we have identified as a key element in Europe. Thank you. Very clear.

The next question is from Lucas Herman from BNP.

Thanks very much. Patrick, just going back to opportunities that you see in the chart to act opportunistically, The deals that we've seen, certainly in renewable over the course of the last two, three years, have generally been billion, two billion. They've been relatively modest. But when you look at the market at the present time, can you see yourself doing something of significantly greater scale, which I think, given the comments made today, is obviously something that investors are pondering on? That's the first question. And the second, just Back to Russia and refining urals. Within Leuner, I presume that you've been benefiting from, you know, the price that you pay for urals given the facility was obliged to run on it. Any idea, can you give us any indication what the benefit has been, but equally, you know, whether the plan to remove urals from production remains in place by end of year? I guess it's got to be given to lines of sanctions. Thanks, Patrice.

Again, on the first question, you know my point of view. My point of view is that renewable assets are today valorized at a very high, too high multiple, so it's difficult to make some large acquisitions. I don't want to embark to – there is no way for me to pay too much for some assets. So it's not – we have done, like you said, some few deals which were – directly negotiated with some companies because they see some added value of having TotalEnergies as a partner. For example, For example, in the Clearway deal, we managed to do that deal because we are bringing additional value to Clearway from the shareholder, GIP shareholder point of view, which is our trading capacity to get most of its renewable assets in the U.S., but also we are bringing some potential added value because we can make some corporate PPAs at a large scale because we have a strong footprint. So this is what we are looking for. Making large acquisitions in that field, honestly, we should see before we can do that. So it will be not as large as you think. We should see a large decrease of the value of these companies before we could contemplate that. So second one on Loina. Loina will be clear. We have been very clear. We have begun to stop, as we have already. One of the contracts which was feeding Loina from Wozniak has been stopped, as we announced by March 22. So today, Loina is not more supplied only with Russian crude oil. So it's a mix of very stiff Russian crude oil until December 2022, because the contract will run and the sanctions will be applied from December 5th, I think, 2022. So obviously, and it's clear we'll be on our roadmap. So that means that Loina will be fed by crude oil coming from the North Sea, probably Ecofeast and others. through a network timeline through Poland. And there are discussions today with Germany, because you have two refineries, VET and Loina, which we'd have to share, I would say, these alternative routes. So that's the position, and the position is clear. But again, that will not fundamentally... I would say the small benefit we have during these few months is not to commensurate with the results of... of our refining business. Refining business this year has benefited from the refining chemicals segment has benefited, I would say, first, again, $145 per ton of average margin, frankly, not a single, we have never seen that, but it's beginning to decrease. I think we are today more in the range of 80 than 140. So again, my comments on the gasoline spreads, which are sharply going down. There is also a benefit, I think it was mentioned by Jean-Pierre, in the refining and chemical profit of a very strong performance, I would say an exceptional performance of oil trading. But two quarters in a row, a little similar to what they've done in the second quarter 2020. So you can consider a $500 million there of a super performance of oil trading in these results. Last quarter, it was the gas trading, gas and power trading. But it's true that, you know, in this type of very volatile market, of traders, and we are in a good direction, of course, can make a benefit of these, of such, I would say, dislocations in the market. I don't know if it will be repeated for the coming quarters because it's a question of volatility. So, your remark on Luna is right, but again, it does not have a fundamental impact on the results. Thanks, Patrick.

The next question is from Viraj Okatara from RBC.

Hi, thanks for taking my questions. The first one is on Qatar. Congratulations for being the first major to enter the expansion project. Can you disclose the entry or payment structure for that project and just confirm whether that's included in the 16 billion CapEx budget? And then the second question is on your Russian assets, and particularly on the LNG side. So there were some articles recently around Gazprom potentially adding LNG to the rubles for gas scheme. Can you just talk about if that was implemented, how you're thinking about how that would impact your operations at Yamal? Thank you.

Sorry, I didn't catch the second question, Biraj. Sorry. Has the BING rubble used? Okay, the BING, the rubble. Okay, sorry. First, on NFE, I cannot disclose the terms, but let me be clear. The question was not at all, there was no bonus in that, a very limited bonus in the CAZAR deal. The CAZAR deal was fundamentally a fiscal issue. bid, I would say, that we have to do. So, we'll have to pay, of course, the past cost because NFE is a project which has already started, which has been sanctioned by Qatar Energy one year ago, I think. So, of course, we'll have to recover all share of the past cost. There is a small additional bonus, but very limited, And then, and this payment will take place when we will close fundamentally the deal. So there are, I think, some, because, you know, we have some antitrust conditions precedent to follow up. So I think, I don't know if it, so it's part of the anticipation we have for 22 or 23. So that is linked to what I said in my speech. I said, I told you it will depend on the acquisitions and sales planning process. It's part of the uncertainty that we have for this, that I think we have put into our forecast, the fact that we may have, we will have to pay this past cost of NFE. Second question, the ruble, honestly, I would tell you it would have... It's not the case today. It's still in Europe. By the way, it's linked to the project financing. There are some contracts. We will apply exactly, we will behave exactly as the gas pipe buyers are behaving today, which I understand is to have a euro account and a ruble account in the same bank and to match the euro account and the ruble account The question will depend who, I mean, it's a question of legal frontier, legal border, if I understand. But I don't see, I mean, for me, today, by the way, the discussion is not there, but I don't see some major impact on that. Having said that, the impact, obviously, is on the project financing, because this could have some consequences globally. There is no debate at this stage, but we will manage that.

Okay. Thank you.

The next question comes from Bertrand Ody from Keper Sherwood.

Hello. Thank you for taking my question. Two questions related to LNG, please. In H1 2022, you delivered very strong LNG contributions despite having already some hedges in place, especially on your advantage LNG off-take out of the U.S. Can you give us a color about your hedging policies for 2023 in LNG, given that you are structurally long? What I want... try to understand is that if current high spot LNG spot prices are sustained in 2023, can we expect a further improvement on your LNG marketing side? Any color would be helpful. And the second question is more a very short-term question is, can you quantify the impact of the U.S. report LNG outages? in your Q3 operation, your 2.2 million turn off takers from that project. So wondering if you had already pre-sold or hedged some of those volumes, and what kind of negative impact you expect in Q3 from that outage.

Thank you. Okay, on the second one, obviously, you know, we had to replace the the missing cargoes because we have some customers somewhere. So we have to ensure the customers. So there was two cargoes on the second quarter. We plan eight cargoes missing for the next quarter. According to, and we don't know exactly, I think Freeport is planning maybe to restart by end of September, which is according to, I think, the U.S. authorities, obviously, to HSU authorities, that's also to give a good night. So, of course, we will have to replace these cargoes on the spot market, which has a cost. But, you know, I will tell you, it's already taking into account somewhere in our results partially. And it will not be, again, we will not use that excuse to tell you that the results in Q3 are lower than in Q2. our teams have opportunities to offset. We have a very large portfolio, a large source of production, so up to our LNG teams to manage that, and it's part, by the way, of our business model. We are sourcing LNG in 10 different plants, and so we must be able to manage this type of hiccups. Which led, by the way, to your other questions about edging policies, you know, because this type of event could happen. We don't edge, obviously, as you know, our teams are not edging 1% of our capacity. We don't edge Yamal for an obvious reason, for example, because Yamal, we don't know what will be the future, so we are prudent. But we are edging quite a sizable volume of our, I would say, LNG supplies. And so, yes, the question of your first answer is positive. Yes, 2023 will benefit from edges which are put in place, I can tell you the policy, month after month on a certain percentage of our portfolio. So the first question is positive. The second question is on the short term, a negative impact that has to be absorbed in the global portfolio.

Many thanks, Patrice.

The next question is from Christopher Kaplan from Bank of America.

Thank you. Good afternoon. Just a few minor ones, hopefully, to hoover up. I just wanted to ask you whether you can give us a bit more detail how much the impact is in your Q2 results and how much you expect for the full year from offering to your French customers a lower price at the pump. And, you know, if you can be explicit in terms of earnings versus working capital on a number of these government-funded rebates, that would be great. Otherwise, just wanted to ask, your effective tax rate has remained below 40%. In this environment, obviously, the high contribution from downstream helps. But I wonder what your thoughts are regarding upstream effective taxation, whether that is going to approach 50% sooner or later in this price environment or not. And lastly, if I may, just a quick one on the networking capital inflows that you've seen in the second quarter. Any indication of how much of that is sustainable or you expect to be reversed in the second half would be fantastic. Thank you.

Yes, I will take the question regarding the effective tax rates. You're true. We're around 40%, 39% to be precise, over the second quarter. So it's in line with the guidance we gave, because this reflects 40%, 47%, 48% for effective tax rate for EMP. So it's close to 50% reflecting the environment above $100 per barrel. So, for me, it's exactly what we have already said. I can remind you what the guidance we gave for the group at Haiti de la Barbarie. We gave, for the group, a tax rate around 40%, reflecting an EMP tax rate around 45%. And regarding working cap, yes, we cashed in more than $3 billion of working cap during the second quarter. The main driver is what I mentioned in my speech. is that we are able to cash in more than $1 billion coming from margins in relation with our gas and electricity businesses, and the balance came from the debt in relation with the tax, because, of course, in a higher environment, we generate more results, and, of course, we will pay more tax in the coming months. So two main elements. behind this 3 billion cash-in for the second quarter.

On the fuel discount, I can refer to what the economy minister, the French economy minister, mentioned to the parliament. He spoke about 500 million euro impact. We sell 10 billion liters per year. So you make a guess about the volumes, you multiply it by the discount. This is before taxes.

Understood. Next question. Thank you.

The next question is from Kim from HSBC. Hi, good afternoon.

Just two questions for me, please. Firstly, could you offer any comments on the sort of discussions you've had with the German government or German corporates on the proposed floating LNG project at Lubmin in Germany? Have you secured any long-term off-take agreements from German gas buyers that help to underpin the project? And how realistic is the start of date to 1st of December this year? And then secondly, is there anything that you've seen in the final repower EU plan, whether that's on wind, solar, hydrogen or biomethane, that would encourage Total to make incremental low-carbon investments in Europe that you would not have made otherwise? Thank you.

I don't know. On the German project, I think, in fact, the reality of the project is the following one. There is a German promoter who have identified, I would say, I don't remember the name of the location, which is next to the North FIM-1 pipeline landing area. And they are proposing this location to bring all FSIU and then to connect. The location is quite good because it's very near connection to the pipe gas network of Germany because it's just next to the landing point, Dorset 1. It's very easy. to accommodate there is some complexity because the the the energy tankers could not come to that harbor we should have a sort of shuttle system to take the lng from the energy tankers to bring into the fsius and not to feed so we are developing that project the promoter the german promoter which has designed this project is developing that in connection with the german government to get the authorization Having said that, I think once you go there, you know, if we bring some energy in that FSIU, this will be put in the German, I would say, in the gas market, European gas markets. So, no, the question is, no, we don't have a long-term contract for beyond the terminal for customers, German customers. But there is no problem to find some energy to feed that FSIU. You know, we have enough energy in our portfolio. And if the gas prices in Europe are remaining at the level they are, obviously a priority will be given to this FSIU, to feeding this FSIU with energy. So we don't need, I would say, long-term contracts beyond, because it's a floating unit. If there is no more market, you can put it elsewhere. So it's a question of duration. So for me, in the debate, by the way, about free gas terminals in Europe, I'm very comfortable to bring floating units because, again, if the market is moving because policymakers want to change their policy around natural gas, we can move it. If you build an onshore free gas terminal, you take a longer commitment, and then it's not exactly, from my point of view, the same commitment for us to invest on shorely gas terminal than the floating one. It's an opportunistic move, I would say. The question linked to Europe and REN in Europe. I think, obviously, you know, you have, I mentioned previously, I think, in a question, for example, biogas in Europe. It's an obviously very good case where biogas will be encouraged. uh in europe and uh if you develop biogas today and you sell it at the gas a natural gas market price it's quite a good investment you know so there might be some segments where europe is located the main question in europe for me is a question of i would say access to the space and the capacity to develop the projects acceptability with the neighborhood you know a lot of stakeholders although it's quite slow I'm listening to policy leaders, political leaders who say we will accelerate, but for the time being, I don't see much acceleration, I would say. So that's the question. So, yes, we will consider Europe because Europe, again, fundamentally, it's a continent with a lack of energy. we have a lack of energy, like we see lack of natural gas, lack of diesel, lack of energy. So for me, the future of Europe is a little like Japan, you know, security of supply will be there. And so the local energies that we can develop in Europe will benefit from a higher price of energy in Europe. That's true for us for natural gas, and that's true as well for electricity, because all this transition has quite a capital cost. whatever it is, nuclear or renewable. And so fundamentally, the fundamental trend for us in the European market for energy prices is on the medium term is quite medium and long term is elevated prices.

The next question is from Amy Wong from Credit Suisse.

Hi, good afternoon. A couple of questions from me, please. The first one is on Papua LNG. You've launched a fee for the upstream facilities and understand you have plans to then also move on to the liquefaction facility later this year. My understanding, though, is the operator of PNG LNG has not yet moved. And how much support, if any, are you dependent on P&G LNG also simultaneously looking to modify to incorporate your plans for PAPA LNG. So that's my first question. My second question relates to a couple of smaller transactions you did, but nonetheless important. You've done a couple in the carbon sinks area. I mean, that's an area that's growing really quickly, but transparency and credibility on this market is a huge topic at the moment. So could you talk a bit about your strategy in the carbon sinks space, please. Thank you.

Okay, Papua LNG. Of course, it's very coordinated with the operator of PNG-LNG, with Exxon. If you remind well, Exxon is also a shareholder of Papua LNG. So we decided a few years ago that we need to leverage the potential synergies in both. Of course, in the meantime, there was a decision by PNG-LNG to postpone their own additional train. So that makes it a little more. The free trains became two trains for Papua LNG. Today, they are working on what is the best possible scheme in order to be efficient, and we are working closely with them. So, they are on both sides. By the way, there are a lot of alignment, because there is another company from P&G who joined Papua LNG. It's Santos, after the acquisition of AllServe. So, when we took together the decision to launch the feed on the upstream part of Papua, I think these two partners are consistent in their will to also move forward the feed for PNG, LNG. The reality is that on the timeline to reach at the end of production, the upstream part is a little longer than the downstream part in this project. So the six-month difference that we see today should be at the end, all the both parts will be together in order to take the FID, obviously. So I see there a goodwill from both parties to converge. On the carbon sinks, Yes, we are making some few new steps in Congo, in Gabon, I think also in Peru recently. I can tell you this is not an easy one because, yes, it's true, but we want to take a lot into account the transparency, credibility. So all teams of specialists, we have 20 people working together, have one goal. a clear axis which is that they invest in high value carbon credits and we see we attach a lot of importance at our level but we're not there to make a green washing it's really to make these projects sustainable long-term projects. There are some standards, I think the VIRA standards for the experts, which we follow very carefully. And so that's why, by the way, we think that to develop such very credible projects, it takes time. We are dedicating $100 million per year. We are not convinced that we could spend much more because, you know, each project is really a project by itself involving a lot of stakeholders. So if you want more color on it, Amy, I will encourage my IR team to connect you with the head of the carbon or natural base solution, Adrien Henry. He could give you more details about it if you are interested. And I encourage Renaud and his team to connect you. But your concern is very well taken into account in the way we invest.

Thanks. I'll take you up on that offer. Thank you.

Thank you. The next question is from Paul Cheng from Scotiabank.

Patrick, good afternoon. Two questions. First, I think you have mentioned previously you're trying to hope to finalize the first project in Suriname by year end. Just wanted to see if there's any update on that. Second question, with the rising fear of recession. How does that impact, or if they do, in terms of your next year planning for budget balance sheet and capital return to shareholders?

Well, Surinam, we are continuing to drill and progressing positively. Good news. Always not an easy plan. So again, I think we gave you a meeting point by the end of the year. So I'm still there. I don't have more to give you. Our partner has released a lot of data. I'm sure it helps everybody to understand where we are. So we find hydrocarbons. And again, it's a question, to be clear, of finding very oil, very gas. And of course, gas, we don't flare. This is obviously a point where, how do we valorize the gas? Can we inject it in the reservoirs? So there are studies going on. And we'll have clarity by the end of the year about our potential development plans. You know, the best way to face a recession is to have a strong balance sheet. I will tell you, that's my lesson that I learned for, and I faced several crises in 2015, again in 2020. So, to be clear, our company, with what we are doing, leveraging the company, gearing is under 10%, we plan to have it under 5%, which we have never been in such a situation with total energy. for me, is the best guarantee to ensure the return to shareholders, even for a recession. And you know, we've done it with COVID. Let's be very clear. We were the only European measures to maintain the dividend for COVID. By the way, because before COVID, end of 2019, all gearing was lower than 15%. So we accepted the gearing to go a little above 20. And we are right, because it went down two years after, one year after. So that's exactly what I strongly believe as the best protection for return to shareholders through the cycles and through events and recessions is a very strong balance sheet. So I repeat my commitment to you during my speech, introductory speech, I reminded you that we never cut the dividend since 1991. I can tell you it will be the same if we have a recession coming in 2023.

Thank you.

The next question comes from Henri Patricot from UBS.

Yes, everyone. Thanks for the update. A couple of questions for me. The first one is on the Russian impairment of $3.5 billion. So as long as you can expand on your why it was triggered this quarter, I know you got to $3.5 billion. And secondly, on the gas prices, and we discussed earlier the DLNG price, but more broadly for the upstream, is it still fair to use the sensitivity that you use at the beginning of the year? I'm moving past, like, the U.K. windfall tax, et cetera. Should that be different for the second half? Thank you. Thank you.

Our Russian employment, to be clear, is every quarter we make some test. The point is that the first impairments were very clearly, as we said, that the first quarter linked to Arctic II. So there was one project on which we were considering that the capacity to execute the project would be much more complex because of the sanctions. So we made that first decision. And it was clearly – well, and this one, if you read the press release, we say that we have made – a future valuation of our participation, an evaluation of our participation as a shareholder of our stake in Novatec. And we concluded that we had, according to our accounting rules, we had to make an improvement according to the calculation. So it's around 3.5 billion dollars. As you have noticed, by the way, in the annex of the press release, there was a A strange story, we are all capital employed in Russia. We're going up by 2 billion just because we had to apply at the 30th of June the ruble, euro rate or dollar rate. which were better for Russia than the one on 31st of March. There was a re-evaluation of a capital input, which has been quite funny, to be honest. I know the accounting rules, we have to follow them. But at a time where we clearly are gradually lowering our exposure to Russia, I think we made all these calculations. So it's attaining the... the rules. And we'll continue, let's be clear. Of course, it's monitoring. We closely monitor with our auditors and with the board. We closely monitor and, you know, taking all the news that we can. And there are many news coming on Russia, so it's our duty to give you quarter after quarter the situation of our Russian assets. As I told you, however, in our speech, in my speech, and I think it was an important... news today statement for you uh we will present to you end of september the strategy of total energies putting aside russia so that is because we have no more growth in russia no new projects so we want you to consider the future of total energy without russia uh what means that as i said There will be a volume impact, but not really any financial impact on performance. And the return of shareholders will not be affected by the fact that we put aside Russia in this presentation. And we will explain why we think that we can continue and we have the opportunities of portfolio to continue to see the future of total energy, even putting aside Russia from our perspective. On the gas price, the answer, Jean-Pierre, I don't think it changed.

No, nothing changed. We published the sensitivity in the press release.

What has changed is the absolute value. NDP has changed a lot. And you see the absolute value impact in the results. And as it's going sometimes from $20 to $50 down to $30, it's volatile, but it's volatile for good. What is changing as well, I can tell you, is that our long-term assumptions On European gas price, and we will explain you that in September, of course, it's higher than before because with Russian gas out of the European system, that means that fundamentally European gas price is driven by the LNG price from the U.S., I would say. So that has changed also the perspective of total energies, and as we are very well positioned with our portfolio on European gas, as a producer in Norway, Denmark, UK, and also as an energy gas importer, we will benefit from that for the future years. Thank you.

There is no further questions.

So thank you for your attendance to this call and very interesting questions, which I think will help you to understand and better understand how TotalEnergies can continue to deliver strong results and strong returns to our shareholders. whatever the cycle i low is and of course let's be clear we continue to monitor that very carefully board of directors in terms of uh in terms of uh return and level of return to shoulders and i invite you of course to put on your agenda an important date which is the investor day on september 28th will be in new york coming back to uh for the first time in several years to uh meeting in presence together and I hope you will be able to join us from both sides of the Atlantic on the US or in the European continent there in New York. Everything will be done to be sure that your health is well taken into account like all but I think it will be an important event and we are happy to welcome you there. Thank you. I wish you a very good summer vacation. Maybe some of you are already on vacation, but you were nice to attend the call. For us, after two long years, I can tell you, Jean-Pierre is just aspiring to take the plane in two hours. Immediately. Immediately. But thank you for your attendance and for your support.

Thank you.