TotalEnergies SE Ordinary Shares

Ladies and gentlemen, welcome to Total Energy's first quarter 2023 results conference call. I now hand over to Patrick Pouyanné, CEO, and Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead.

Hello, everyone. Good morning or good afternoon, wherever you are. I'm here today together with Jean-Pierre who will give you a I would say a review of the very good quarter that we had on the first quarter of 2023. I just wanted as an introduction to comment the other news which came this morning around about the future of our Canadian assets. As you know, we explained that in September at our CMD, we are planning to organize a spin-off of our Canadian assets. We went through the process, and in the meantime, because fundamentally I think we are very serious about making this spin-off a reality, we attracted some unsolicited offers in the last month. And one of them has materialized, and I think it's a value which is quite attractive, $5.5 billion Canadian dollar cash plus $600 million of additional payment under certain conditions, a value which is fitting with the expectations of the initial quotation, which were given to us between $5 billion to $6 billion Canadian dollar. And, of course, it's coming from Suncor, who knows very well one of our two assets. And Suncor will comment a little later in the day his own view of the deal. For us, so it's fitting the value. It's straightforward, I would say, way to diverse the assets as we are planning to do it straight away. And so from the company and from the shareholders' point of view, the board considered that it was these alternatives was worth to be considered and approved yesterday to move forward with this transaction. Of course, the most important part of the discussion beyond these comparing both alternatives was about the distribution to shareholders because, as you know, a spinoff was meant, in fact, a distribution in kind of some shares of the NUCO. So we both perfectly have that in mind. And the guidance that we have decided to give to our shareholders is today is that last year, you know, we put higher guidance on the payout to shareholders of 35% to 40% of cash flow from operations, which we're down in 22%, 37%. There, because we love, I would say, additional proceeds from these sales, the divestment, The guidance we give you today is at least 40%. I mean, that means, by the way, I told you before, but there was no ceiling. The 35%, 40% was a range of targets. Today, we told you that the board decided to increase or to enhance, I would say, for 23, these distribution to shareholders with at least 40%. So consider 40% plus. You have to get the plus. at least 40% of the cash flow from operations in 2023, which I think is good news for all shareholders and which, of course, maintains the course of the company. You have noticed that On the first quarter, we maintained the buyback at $2 billion, like last year's last quarters. On the second quarter, we repeated the $2 billion. So I think it gives these guidance for the distribution to shareholders for 2023. At least 40% of our cash-per-form operations should give you some comfort about the will of the board to have, I would say, to maintain or to develop even an attractive return for shareholders. So I will not be longer. I think I will give the floor to Jean-Pierre, who will be happy for the first time. As you know, today we disclosed the integrated energy and integrated power segment results for the first time. I told you during the last investment day that we should We are targeting 10%. You know, in Petal Energies, we are not 10%, but 9.9%. But it's, I think, comforting some expectations about the investments we are doing in these integrated power segments. Jean-Pierre, the floor is yours.

Yes, thank you, Patrick. So 2023 is off to a good start. Once again, I think we demonstrate our ability to generate strong results,

Ladies and gentlemen, please hold the line. The conference will resume shortly.

Okay. So quarter-to-quarter Brent was down 9% to $81 per barrel, and European gas dropped by 50% to $16 per million BTU. In this context, Total Energy reported first quarter 2023 adjusted net income of $6.5 billion, a decrease of only 13%, and a strong cash conversion with a debt-adjusted cash flow, DRCF, close to $10 billion. With Brent above $18 per barrel and European gas above $15 per mmTU, still high by historical standards, we are continuing to deliver excellent profitability with 25% ROH in the first quarter. Commodity prices have been volatile, albeit still at high levels. Oil prices fell briefly below $17.5 per barrel in March, largely on fears of an economic slowdown, before rebounding in April on use on OPEC Plus quota reductions. Refining margins are easing down after several quarters of exceptionally high diesel cracks in the same context of fears of economic slowdown, high product inventories, largely fueled by Chinese exports, and the quicker-than-expected reorganization of Russian flows following the European embargo. Gas prices fell due to mild weather, We expect prices to remain stable and still restocking begins in the second half of the year. Future markets are anticipating prices next to $20 per million BTU for this winter. For the first time as announced, we are reporting integrated energy and integrated power as independent segments. These two growing segments are, as you know, at the core of our transition strategy. The restated historical data for 21 full year and 22 quarters is available in the result . In terms of scale, integration, and performance, we are unmatched among our peers in both of these activities. We are already widely recognized as having a very strong, performing, globally integrated LNG portfolio in that business. Mainly through acquisition, we have achieved our position as the largest lifter of low-cost U.S. energy, more than 10 million tons, and the largest regas provider in premium-priced European markets, around 20 million tons after the recent startup of the FSRU in Germany in Lublin. Our unmatched access to the European markets creates a competitive advantage for our trading operations and makes us more competitive as a partner in securing future resources. For example, our recent contract awards in Qatar. We launched this quarter the feed for Papua LNG, and this will contribute to the future growth of our portfolio with close to 2 million tons equity production. Last year, with LNG sales of 48 million tons, this business generated $10 billion of cash flow. In the first quarter, sales were 11 million tons and cash flow was $2.1 billion. In the first quarter of 2023, LNG sales were down 17% quarter to quarter and 13% year on year, reflecting mainly a decrease in spot sales due to lower LNG demand in Europe linked to the mild weather. Integrated LNG-generated adjusted net operating income of $2.1 billion was down only by 10% compared to the previous quarter, excluding Novatec, mainly due to lower prices. Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, we anticipate that the average LNG selling price might decrease by another 10-15% in the second quarter because of this time lag versus $13.3 per million BTU this quarter. Operationally, we expect benefits from the restart of Freeport LNG in our Q2-23 LNG cells. On the two new segments, integrative power is the newer business activity in the company. Mainly through the smart acquisition of early-stage development projects, we have grown this business to 18 gigawatts of gross installed renewable power generation, our two largest markets being Europe and the U.S., and we are solidly on track to reach 138 gigawatts by 2025 and then 100 gigawatts by 2030. Our flexible power generation capacity and growing positions in energy storage are fully integrated into the business strategy, allowing our traders to maximize our performance. Developing power projects, generating electricity, as well as integrating the trading and selling of power, as we do over energy commodities, is a natural expansion of our business. Last year, with net power production of 33 terawatt-hour, this business generated about $1 million of cash flow. For the 12 months ended March 23, Integrated Power generated a ROE of 9.9%, next to 10%, consistent with our stated objective to achieve double-digit profitability for this activity. Going into the details of the results of this new segment now. Premium ball power generation capacity was 18 gigawatts at the end of this quarter, an increase of more than 1 gigawatt quarter to quarter, thanks to 0.6 gigawatts from the acquisition of Casa dos Antos in Brazil, and 0.3 gigawatts from the connection of the Seagreen offshore wind farm in the UK. For the integrated power results, the best reference for comparison is Q122, since, like for the marketing and services business, the gas and power marketing business is seasonal. Net electricity generation was 8.4 TWh in the first quarter, up 10% year-on-year, due to growing electricity generation from renewal, offsetting the lower generation from flexible capacity in a context of lower demand. Integrated Power posted adjusted net operating income of $170 million. This figure is significantly higher compared to the first quarter of 2022 adjusted net operating income, which was negative at minus $82 million. Last year was heavily impacted by a huge increase of supply costs. This year, all segments have done better. Gas-fired power plants, renewable, supply and trading, despite the negative impact of winter seasonality of supply in the power marketing business. Higher cost of supply in winter versus equal invoicing along the year for many customers. Now moving to the oil parts of our business. Operationally, our oil and gas production was 2.52 million barrels of oil equivalent per day, up 2% quarter-to-quarter, excluding Novatec. This includes the acquisition of a 20% interest in the Sarbumlulu, already producing oil fields in the Emirates, starting from mid-March. The production also benefits from new project contributions, Notably, the startup of gas production of Block 10 in Oman and the ramp-up of Johan Verbruck FAS2 in Norway. Production for Q2 2023 is expected at around 2.5 million parole equivalent per day. Exploration and production reported adjusted net operating income of $2.7 billion, down 22% quarter to quarter, excluding Ovatec, due to lower oil and gas prices. In the downstream now, refining and chemicals contributed $1.6 billion of adjusted net operating income, up 9% quarter to quarter, and 44% year on year, despite the pension law protests that were ongoing in France at the end of the quarter, thanks to the strong refining margins. Refined utilization rate was at 78%. For Q2-23, We expect the refining utilization rates to increase above 80% given the end of strikes in France. Marketing and services results are stabilizing at a level around $300 million of adjusted net operating income, $280 million for the first quarter of 2023, up 3% year-on-year, despite sales being 6% lower. This demonstrates that our strategic value over volumes is working. Overall, at company level, CFFO pre-working cap was $9.6 billion in the first quarter, plus 5% quarter-on-quarter, despite the lower price environment I already commented, as the fourth quarter of 2022 was impacted by exceptional taxes, notably the $1.1 billion European Solidarity Contribution, mainly impacting FNC and ENP to a lesser extent. There was a $4.5 billion working cap built in this first quarter of 2023. This is an exceptionally high build for a first quarter, mainly related to higher crude and petroleum products inventories on water, notably due to the impacts of the pension law protests in France. This is an exceptional element which explains $1.4 billion of working cap built and will disappear next quarter. Second factor is the seasonality of the gas and power marketing businesses, the gap between the seasonal cost of supply and the fixed monthly B2C clients' payments. And, of course, you have more traditional effects of lower prices on tax and trade payables that explain this working cap built in the first quarter of 2023. Note that parts of this working cap built will reverse in the next quarter, Notably, the higher inventories related to protests in France and the impact of seasonality for the gas and power marketing business. Also, there was higher net investment in the first quarter at $6.4 billion, including $3.3 billion for acquisitions. mainly the acquisition of a 20% interest in Saab and Lulu concession, the payments relating to the acquisition of a stake in North East project in Qatar, and the stake in the joint venture with Casa dos Ventos in Brazil. Our guidance for 23 net investments remains unchanged at $16 to $18 billion. Net investments include acquisition and divestments, so the sales of our Canadian assets that Patrick commented for $4.1 billion, with a closing expected in Q3, should be counted in the envelope. The recently announced sale to Alimentacion Custard for $3.1 billion is also expected to be closed by June. Encouraged by the strong first quarter results, the Board confirmed a 7.25% increase for the first interim dividend in 2023, to 0.74 euro per share, as well as a repurchase of $2 billion of shares in the second quarter 23. And I think now we can go to the Q&A with Patrick. Thank you. And myself.

Ladies and gentlemen, this concludes the... Sorry. 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 telephone. and wait for your name to be announced. Please kindly mute any audio sources while asking a question. If you wish to cancel your request, please press the star and two. Once again, please press star one if you wish to ask a question. The first question is from Oswald Clint of Bernstein. Please go ahead.

Good afternoon, and thank you very much for the time. Yeah, I'm happy to guess the plus on the 40%, and if I was to go up into the mid-40s, I guess the issue is... No, no.

No, but the range becomes... At least 40, at least 40. Forget the plus. At least 40. I think some of your colleagues have found what it means, so you can guess it.

But I guess the question is, is the 40% a number we could think about when you have good divestments topping it up? And if not, we should think more around the 35%. And then just related to that, is there any Novatec dividends included here? I know Novatec declared a dividend last week. It's up quite materially. Do Total expect to get anything in 2023 in terms of their cash flow. And then the second one is just Mozambique LNG. Lots of momentum, lots of discussion from the president recently. I think you're still hoping to secure some of the favorable cost terms, construction terms. Any update you could provide us on that side of it, please? Thank you.

Okay. Now, Oswald, we gave you a guidance 3540 telling you that it's neither a 35 is the floor, but there is nothing. And lastly, we've done 37. So that means that, in fact, it's not monitored by a specific figure. So it's not 35 certain time and 40 other time. The only point today which makes a difference is that we have the board announced the spin-off, so it was a dividend in kind. So we had a sort of form of commitment from the board to our shareholders. And so the discussion that we, as soon as we decided to take the route of direct sales, We are committed somewhere to have a reward to our shoulders. And so the decision yesterday was, at this stage, we don't know if it will go for buybacks or special dividends. Let's look to what will be at the beginning of the year, as the proceeds of the sales are not yet, I would say, in the treasury of Jean-Pierre. So let's close and let's take time to see where we go in the year. But the decision was... It's an opportunity and commitment linked, I would say, to the decision of the spin-offs of the sort of dividend in kind. We translate that as we go beyond what was announced. So at least 40%. So at least 40% means 40% plus. And so it will be then discussed either buyback or dividend. We have noticed that for the time being we have maintained The buyback at $2 billion per quarter for the first two quarters, despite the fact that the environment has softened, we did not decrease it. So there might be a chance that we could maintain the $2 billion along the year. And then I think if you make some math in your model, you will find something above 40%. Novotek, I don't know. Again, you know my question. The question is, and you know you have news, permanent news coming from Russia. Yesterday I've seen that the Russian authorities wanted to sanction more European and Western companies. So, I don't know. So, it's difficult to answer to you. Yes, that was, again, we are no more in the governance of Novotek. As you know, we are out of that. It's no more consolidated in our accounts. So, yes, we have seen that there was a decision of a dividend. Can it go up to the accounts of total energies? We'll see along the year. I cannot just tell you today. We have decided that Russia, we do not plan the future. We just monitor day after day, week after week, month after month. If it comes, it comes. If it does not come, it's not in the plan, I would say. Mozambique LNG, that's a good question, update on the cost terms. You know, you have understood that it's the last step before to restart. So some, I commented recently that we need the contractors to be reasonable. Some of them are not, so we will rebate some of the packages because there is no way for us to accept some undue costs. We have paid what we had to pay because we stopped the project and we have to restart the project. That's an impact, obviously, to stop and restart. We don't know why we should pay more than that. And so that's where we progress. So I think when we'll be ready, we'll come back to you. But I think today is premature again because our project team is working with the contractors. with the view to be able to allow the project, but under the conditions that the costs are controlled. That's fundamental to us.

Excellent. Thank you.

The next question is from Christopher Coupland of Bank of America. Please go ahead.

Thank you very much. Patrick, I'm going to ask you probably the same question again, if you don't mind. What I've heard, looking for clarification, is the decision before the disposal to SEMCOR was to basically give proceeds to Shell directly. Is that the principle we should continue to talk about and to consider the $4 billion as effectively an add-on and then we can run our CFFO payout numbers as long as we like. So that's my question, just looking for confirmation. And lastly, second question, slightly connected to that. You've done, as you've highlighted, more than 3 billion of acquisitions in the first quarter. You've announced disposals that go well beyond this, but if we accept that the 4 billion disposals ought to be distributed to shareholders, you're kind of running on an even number for the full year And I appreciate you're not likely to give us a number, but I wonder how big the total ERN completion looms and whether you can confirm that that is baked into your 16 to 18 billion guidance. That would be it.

Thank you. Okay. Now, Chris, I need to clarify. We never said that the 4 billion will go back to shareholders. By the way, it was not the case in the spin-off scheme. If you remember correctly, there is an enterprise value which was around $5 to $6 billion, let's say $4 to $5 billion. This company would have a debt which would have been left for the company. Then we were ready to spin off to keep 30% on our side. So if you make your math, you are far from the $4 billion. And again, it's not the way we expressed it. We expressed it, and I can only repeat what we've said. It's that the decision of the board is that – and so, by the way, second remark, proceeds of sales does not impact the cash flow from operations. The cash flow from operations, as it is stated in all the way we communicate and in our results and accounts, do not integrate the cash from divestments. So we have an amount of cash flow from operations. And you know perfectly, last year we had $46 billion at $100 per barrel. At 80, I think we'll be between $35 and $40 billion. So then probably more. If this is under the first quarter, this quarter, the cash flow from operation, I think, is something like... 9.5 billion, no? So if we have four quarters of 9.5 billion, it will make 38 billion. If you make 40% plus, you can find what will be the guidance of payout to shareholders. You deduct the dividend, which is more or less according to the... You have all the figures of the dividend. You can even calculate it for all the quarters. You have the last payment of 0.74 euro. The only unknown is the exchange rate And then you will find what could be the amount. The question for the board was is it for full buyback shares or is it for share buyback or for special dividend. That will be discussed and we'll see along the year. The feeling on our side is that as we consider that the share of the company is low compared to some US peers and there is room for improvement. I mean, maintaining, not increasing, but maintaining your share buyback is probably a good investment and demonstrating the trust to our shareholders and to investors in the future of the company. Your favorite questions? Yes, there was some acquisition this year, but, you know, you cannot monitor quarter by quarter. There were also two big announcements of sales announcements, the divestments of the European network plus this Canadian divestment, so we are supposed to see it. But to Talleyrand, there is no secret. I think it was mentioned. Of course, to Talleyrand, you know, that is integrated in $16, $18 billion guidance, and we don't change the guidance, you know, neither on Huawei nor the other way. because I'm not fully sure that all the proceeds, I think Canada should come this year because it's quite an easy process in fact. But on the other side, the European network has more to do, in fact, on car routing, et cetera. So everybody is working to close the deal before year-end, and both parties want to do it. But, you know, sometimes there's uncertainty. So Total Iran is integrated, and Total Iran, I think, in cash is something around 1.5 to 2 billion, you know, dollars. I think we already mentioned that.

That's great. Thank you very much, Patrick, for the clarification. May I add one quick follow-up? Could you give us the details around the carrying value of your Canadian assets that are to be sold?

What is the carrying value? You mean the capital employed in our balance sheet?

Yes.

It's around $5 billion.

Perfect. Thank you.

And there will be a capital gain. I mean, there will be a positive result in our account, but, you know, I would say it's an exceptional result. Yes. I mean, I don't have the control of my CS.

Yes, it will be treated as an adjustment in our accounts. Okay. When it comes. Thanks.

The next question is from Irene Himona of Societe Generale. Please go ahead.

Thank you very much. Good afternoon. Two questions. First of all, on your EMP tax rate, please, which increased in the quarter, can you remind us what is included in the first quarter in terms of upstream windfall taxes and then At current price levels, what should we anticipate for that average EMP tax for the full year? And then secondly, you referred to the significant inflation in renewables. Could you possibly talk around inflationary pressures you're seeing in your upstream operations, please? Thank you.

So perhaps I will take the first question regarding the tax rate. So, of course, the Q1 has been prepared the same way as the 2022 accounts. At that time, I explained to you that the EPL, so a Willful Tax Proceeds in the UK, is treated in the adjusted net income. So, it impacts... It has an impact in the 2022 tax rate and, of course, it has an impact in the Q1 2023 tax rates. And so the amounts representing in relation with this tax is $0.4 billion, just to give you one figure. On the opposite, all the exceptional contribution in relation with the European decision to put in place an exceptional contribution in 2022 was repeated in 22 as an exceptional element because it's an exceptional element. So of course, we continue with this treatment. So not impacting the tax rate in the first quarter of 23.

Cost inflation? Cost inflation in the three?

I mean, again, it's, I think... For the time being, our OPEX per barrel is at $5.50 per barrel. So in our operations, I do not see impact, which is, by the way, very good performance from the team. On the rigs, yes, we know that there are rigs for deepwater rigs that are more expensive. But we are benefiting of the fact that we had quite a number of long-term and medium-term contracts. So we have seen some impact that is limited. And then where we had some inflation was more on the steel last year. We resisted. By the way, we arrived because the steel went down again. So again, the question is more, I think that we are facing the will of some contractors to get some money back from, I would say, bad years. They look to our results, and so they want a sort of share of the cake. But again, it's a question of supply and demand for me at the end. There is no reason to accept to pay more if the supply and demand is not stretched. And I think it's not stretched on many elements, which is why I was mentioning Mozambique. We will go to Ibid. when we had the feeling that the contractor which were awarded the contract tried to benefit from the situation. We are not in a hurry and to know where is the market, the best is to go to tender. So this is what we will do on this project. for me uh and honestly uh source of inflation last year with where more the steel and all that came down we have observed it in our by the way in our uganda projects we were very very right last year not to place the order for steel uh i think we have saved a lot of money just to resist to the temptation and uh so it's again it's an arbitration for me between the value and the and speed and all. It's a question of managing that. So I don't see much inflation today, even if we have to resist. Which, by the way, is another good message to our team, which is simplifying the projects. And that's good for everybody. Okay.

Thank you.

The next question is from Martin Rath of Morgan Stanley. Please go ahead.

Hi, hello. I wanted to ask if you could set out a little bit the triggers or the drivers that would lead to the full payment in the disposal to Suncor. I've noticed that the press release wasn't really all that clear, but if you could say a few words about that, that would be helpful. And secondly, I wanted to ask if you could perhaps share some of your thoughts on the global LNG market. I noticed that on Thursday and Friday last week, Europe enjoyed all-time high LNG imports, which is, of course, a little bit surprising given that the price has been going lower, and yet the LNG keeps coming. And it doesn't look like Asian demand is sort of picking up all that much, at least looking at the data that we have access to. But perhaps in your business, you have earlier insights. So I was wondering if you were seeing anything in terms of an Asian demand pickup, for example. Thank you.

Okay, the additional payments, yeah, to be honest, it's quite nothing. It's classic, I would say. There is a price threshold above which if we make a monthly payment, a monthly calculation, if the price of WCS is reaching a certain level, then There is a multiplier effect by the dollar per barrel, and depending also on the production, I would say, of the field. So it's quite a classical CVR. What is good, I mean, what is good from my point of view is that we have five years, so it's 60 months of, I would say, casino. So there is a good chance to get some of it. Just to let you know a calculation, if we would have one year like 2022, we would have got the full $600 million. That's the point. Okay. Okay? Interesting. Interesting, yeah. As I said, global energy market, to be honest, there is a mix. Yeah, we've seen at the beginning of the quarter some demand, even short-term demand picking up. On the price, it's clear that today the market is better. It's a good time to sign, to try to sign some long-term contracts, and we are back to a better percentage of rent than in the last year. By the way, this is what we want to do on P&G LNG. You know, today we are benefiting marketing of P&G LNG in this type of environment. It's a good timing for us, in fact, so we have a delay, but we benefit from that, and I think we are targeting to finalize from a long-term sales contract to cover a share of P&G LNG. Then on the other side, on the global market, Europe was more open than last year because the weather was mild in winter. The storage is limited in capacity, so when the storages are full, it's difficult to put more. So you have limited, and it's a problem, by the way, for me, for Europe, is that we don't have a very large capacity of underground storage, in fact, in Europe. So that's why, by the way, we see that in the figures of certain energies. There were less spot deals being done. There was another reason, by the way, about the spot deals. Some strikes in France, the terminal energy gas terminals in France were, in fact, shut down, not shut down, but were not accessible for a few, almost a month. But otherwise, I would say, do we see today, if your question is, more Chinese demand? It's not too clear to me, to be honest. There is more than last year, but are we back to the 2021 level of Chinese LNG demand? It's a little premature to answer you positively. So we are in between, I would say, at this stage, 22 and 21. But more appetite for many players, and including, by the way, the Chinese players. You have seen that they have signed some long-term contracts with Qatar. It's clearly because they are really willing to, I think, to ensure the security of supply. China is importing 40% of its natural gas. So it's a good opportunity, and Qatar is benefiting of it, and we are working with them in order to try to secure on the long term their supply for natural gas. So it's good for LNG. Wonderful. Thank you.

The next question is from Viraj Bortaria from RBC. Please go ahead.

Hi, thanks for taking my questions. So two questions on the upstream, please. The first one, just on Mozambique, I appreciate your restarting there. On the other side, it seems that the operator was considering a second floating facility. I was just wondering, from the total point of view, is that something you've looked at or something you're considering? And then the second question is just, could you just walk me through the kind of plans for 2023 for both Namibia and Suriname, and what are the next steps heading towards development? Thank you.

No, I mean, honestly, when you have Mozambique LNG, huge reserves. The question for us is to develop a scheme where we can really have the potential to to take the most of these reserves and so the floating energy concept, which is honestly not fully adapted. I think it was quite adapted to the first development because it was a part of the reservoir which was not related to the big reservoir that we want to develop. But for us, honestly, in terms of allocation of capital, if I want to do LNG, I prefer to allocate capital for LNG to projects with the potential of websites because you make much more value with additional trains on the brownfields way than on the greenfield project. And the limitation for me on the floating LNG scheme is that, in fact, you have the capex and then you cannot expand it. You cannot benefit from the additional reserves. So we have enough projects in our portfolio, LNG projects portfolio, not enough to allocate capital to floating energy because we don't see the upside. And again, for me, energy is a good cash machine when you can add additional trends. Namibia and Suriname. Namibia, we are drilling just now. So, you know, we have a – in fact, in 23 weeks, we spent $300 million. We have three wells to be drilled. We have two reefs. three wells, three tests. So, in fact, it's a critical year. We are just making a second X-ray explosion well. Then we'll make an appraisal well of the first discovery and potentially another appraisal well on the first discovery or on the second discovery, if it's a discovery. So I will test because it's fundamental. We have some good static, I would say, data last year, so very encouraging. It's why we have decided to commit almost half of our exploration budget in 2023 but we need the dynamic and the test results because you know when you are by 3000 meter with the depth either it's uh if it's 15 000 barcode per or 5,000, we don't have the same economics. So the plan is there. My view is that with all this data, we'll be in a position to have by the end of 2023, maybe earlier, but by the end of 2023, to have a good idea of what we have in hand and can we accelerate the time to market to develop the first discovery. On Suriname, I think the last appraisal well is just being drilled. The good news is that we are trying to develop an oil pool. Oil to gas ratio is quite high, but so what we want is to identify oil pool with a lower CGR in order to be able to have an efficient development. It's a development which we combine two discoveries. The first two appraisal wells of these two discoveries have been positive. So today, it's a pool of around 500 plus million barrels of oil. We are waiting for the last oil well in order to reach 650. And then it will be time to go to development, I would say, after these appraisal wells. We'd have, again, a good vision in order to move forward to the next step. So this year, 2023, for both... Namibia and Suriname is very important because for us it will be the next wave of going to FID for growing our oil business in the future years.

Thank you for the details.

The next question is from Michele De La Vigna of Goldman Sachs. Please go ahead.

Patrick and Jean-Pierre, congratulations on the strong results despite the deteriorating macro. I really had one question. We've seen a major shift in the renewable power strategies, both of the oil companies, some of whom are de-emphasizing their investment, but also from the utilities who are more focused on financial delivering. And I'm wondering whether you're seeing signs that this shift is starting to restore better profitability, especially in wind, but also in solar. and perhaps opening up better opportunities for you as well.

I think it's a little premature. It's clear that today you have some higher costs from the supply chain. Then, of course, you have the interest rates which are going up, and you know it's a highly leveraged industry. So, of course, if you want, at the end of the day, To restore profitability, you have to put the price up, which is good, I think. For me, for players like us, it will create opportunity for sure. We've seen as well on some tenders, to be honest, some price which were very aggressive in offshore wind, which we do not understand, which were probably too low. I don't know what is behind. So it's difficult to tell you, I would say, to have a clear-cut answer. I think this will come. We see higher prices in the negotiation of corporate PPAs in the U.S. clearly. people are more reasonable. And I think on both sides, by the way, the customers and the sellers, because everybody, when you have, you know, a direct discussion with some industries or some customers, it's a way to restore profitability. So there is good signal from this point of view. Sometimes in tenders, it's different. What we try to do, by the way, on the corporate PPA in order to restore part of the profitability is as well to introduce not only a fixed price PPA for 15 years or 10 years, which honestly is not the best, but to introduce some merchant elements in order to share some upside, downside with the customer, which we like, knowing our model of total energy. And this environment gave us more capacity to propose this type of contract. So I think what is true, to come back to you, is that I think there is a feeling that the rate is more today not to volume but to value. It's a little like, I think, the shale oil industry in the past, you know. So there are more players looking to profitability. It's why we... You know, when we announced that we are targeting more than 10% for integrated power, I know that people have some doubts, but... And again, it's integrated because of full value chain, but I'm fully convinced that... This will come. It's a capital-intensive industry, and there is no way just to think. You know, when the cost of the money was almost zero, you could find plenty of people ready to accept the low profitability. When the price of the money is at 4%, 5%, you have to add some 4%, 5% if you want to reach the same profitability. So I think all that will probably... help us to restore the profitability and to move from, I would say, an infant industry to a little more mature industry.

Thank you.

The next question is from Lydia Rainforth of Barclays. Please go ahead.

Thank you, and good afternoon. Two questions, if I could. And I did want to come back to the Suncor divestment process. Given that you've kept the net investment number the same, is this effectively giving you more acquisition capacity? I just want to double check where we are on that. And then the second one, which is coming back to the integrated power business, obviously you've given us lots of helpful data and splitting that out. It has been very volatile. So when we're looking at that business, what are the key things that you actually want us to think about from that side? Thanks.

On the first one, I would say yes and no, because again, in our view, when we put our budget for 2023, we planned the spin-off. We planned the spin-off, and the company, Total Energies, was planning to allocate part of a certain amount of debt, let's say $2 billion, more or less, to the spinoff, so these $2 billion were the proceeds which was integrated in our budget. So, I would say, so it does not change fundamentally the view we have of our guidance for CAPEX, $16 to $18 billion. So, yes, of course, we have room for both, again, divestment and acquisitions. We knew that this year that we will have some, I would say, higher proceeds of divestment, but we have also, look, we have already spent some money for acquisition. We've done the Abu Dhabi deal. We've done the, we will have the Taliban. We'll have, we have some renewable deal which were introduced and the Qatar. We might have this year, by the way, it's not a question of acquisition, it's also a question of past costs. But in 2023, we'll have NFE was delayed to January, and we might have as well NFS. So all that is integrated. And again, do not consider that the $4.5 billion of proceeds from Canada are extra. By the way, we also committed today for announcement that the payout will be increased. But part of these proceeds will go to shareholders, like it was yesterday. So that's, I think, the point on the first one. On the second one, yeah, it's volatile. Okay, it's volatile, but it's going up. The year 22, on the supply side, to be honest, like Jean-Pierre told you, was complex because, you know, all these European governments wanting to put some ceiling. So introducing in our account the ceiling effects and when you have some supply, which are done on the spot, created the quarter-by-quarter results were not, I would say... a smooth exercise last year. This year, I have the impression that we are more, I would say, in a stable environment, even if you still have some governments which are putting some different schemes, but it's more stable. And so I'm expecting more stability from last year, from this supply and supply business. The renewable part is growing, so I'm expecting more in 2023 than in 2022. And then part of what could be volatile is linked to the gas-fired power plants, which were last year run at a very high rate. This first quarter was good, but not as high as last year because of mild weather. So this is part of, you would say, a volatile result. We'll see. I mean, it's the beginning of a story. And we'll see quarter after quarter. And to give you some more elements, what Jean-Pierre and his teams have done and delivered to you, I think it's at the end of the press release. We restated the year 21 and all the quarters of 22. in this segment, and I think it's good that you can engage with my IR team. They will be happy to give you more indications, or maybe not, by the way, just to help you to see what they can explain to you. But I think, by the way, the volatility, the answer will be more from growing and developing the business. It's a question of size of this business. But you have noticed that almost... $400 million, I think, $370 million is quite sizable. The results is even larger than the one of marketing and services. After five years of development, I think it's a good achievement. So we look to that positively, and it will be a source of growth in the future. Cash for growth.

That's great. Thanks very much.

The next question is from Lucas Herman of Exxon. Please go ahead.

Yeah, thanks very much and thanks for the opportunity. Patrick, I wanted to ask you two questions on the LNG business. The first, there's clearly been increasing talk in Europe of, you know, banning or doing something to stop Russian LNG imports into Europe. I just wonder whether you could make some observations around what's your understanding, interpretation and whether, well, just your position on that. I'm a little confused actually as to whether you were obliged to take volumes into Europe to regasify through the original contract, but anyway. And the second thing with LNG is it goes back to Mozambique and you have heads of agreement or you have contracts signed for pretty much all of the offtake from Mozambique. How is that impacted if at all or how are those agreements impacted if at all as a consequence of, you know, push out, redoing feed, re-tendering, etc., etc.? ? and the delays that are clearly apparent for the off-takers. That was it, thank you.

The Mozambique energy contracts have not been affected until now. By all that, the buyers are still maintaining all the... I think we did not reach any, let's say, date where we would have to commit on something. I think my view is, you know, that the buyers, when you look to different contracts, we have good contracts, but they are in the market. And so we are not, I would say, there is no impact at this stage of this delay on the LNG contract, sales contract. By the way, total energies, we have only today, one of the contracts was discussed or negotiated, but total energies took some volumes, and we are ready to take more volumes of Mozambique LNG on our side. On the Russian imports, you know, I would say, like you know, we have some long-term contracts. Part of these long-term have a destination close, which is Europe, to be clear. Most of them, by the way, out of the 5 million tons of long-term contracts that we have committed to, I think at least three or four, if not four, have a destination close to Europe. There is also a fourth major close, which means that If Europe decides to ban LNG, Russian LNG imports, then we will exercise the fourth measure clause and we'll stop importing LNG from Russia to Europe. I have the impression when I'm reading what is it, of course, there is a debate. The debate has rebounded, of course, first because there is not much improvement on the situation of the war, I would say. And second, because the European leaders think that today they have taken actions and that maybe banning Russian energy imports is possible. It's not a unanimous position. Some countries are more concerned than others. What is being discussed today, if I understand correctly, the regulation which is put on the table, which will go to the European Parliament, so it could take time, in fact, because sanctions require unanimity, and we not go for sanctions. There is no unanimity in Brussels on that. But if I understand the position, it's more about trying to regulate the capacity of Russian players to... I would say to book some regas capacities in Western Europe, future regas capacities. So if it is the case, it's not a ban, and by the way, it does not really affect, it would not affect our position, to be clear. Then, you know our position on that. We respect all the sanctions and regulations. But at this stage, as you know, we have a long-term contract. It's a commitment. It's a huge contract. And we have no other way than respecting these long-term. It's a take-or-pay contract. So if we don't take, we'll pay. And again, in the balance of Europe, it was not neutral. And last year, it was something around 15 million tons, I think, more or less, which were imported from Russia to Europe. So again, we are monitoring that situation. week after week, and we will execute. I remember you that we don't edge all these LNG contracts because we perfectly know that maybe it could happen to us that we'd have to stop, and so there is no market position being taken on the LNG from Russia.

I'm sorry, just to go back to Mozambique and the volumes that you've now taken into portfolio, could you quantify the number?

Quantify what?

Quantify the amount of LNG that you effectively will take into your marketing business.

At this stage, I think it's something like 0.7 million tons of total energy. But again, if some buyers won't told us that they prefer to go, we are ready to take more. We are open to that. But some Japanese buyers are also ready to take more. all Japanese friends of Mitsui are also keen. So there is some appetite. You know Mozambique Energy is not only a huge reserve, it's well located. It's directly on the Indian Ocean. To go to some Asian countries, it's quite Indian players, by the way. So I think it's a good geographical position. So I'm not afraid about selling this Mozambique Energy. And again, the buyers did not exercise any clause vis-à-vis the project. Okay. Patrick, thank you.

The next question is from Matt Lofting of J.P. Morgan. Please go ahead.

Hi. Thanks for taking the questions, too, if I could please. First, on demand, Patrick, I think you talked to LNG specifically earlier, but to the extent financial markets are putting something of a burden of proof on the resilience of global oil and energy demand more broadly here. Are there any areas or subsectors through Total's extensive global downstream business where you're seeing any early warning signs on the rate of change in demand manifesting? And then secondly, could you share any sense of the strength of contribution from the oil and products trading business within the first quarter refining and chemicals result and perhaps how you see that trending going forward as the industry moves through the immediate effects of the embargo on Russian oil products. Thank you.

Honestly, there is no. I mean, what we observed in Europe was, of course, some, I would say, energy saving, energy efficiency effect last year. Prices were very high. So I would say Europe has saved 15% of energy demand because the prices were so high that a lot of industries, but also, by the way, B2C customers, you know, have saved some energy. We've done a sort of... We have allocated to our customers in France a bonus. If they were saving more than 5% of their electricity during wintertime, we are ready to share with them part of the profits that we are gaining from the forward supply. And our customers, more than 1 million customers, 1.2, 1.3 million customers, have saved an average of 15%. By the way, it's more or less the same figure that we observed on the manufacturing side, I mean, the industry side. So there were some impacts on energy saving. You know, I think it was really a reaction to the very high price. The gas price was almost $200 per bowl last year in Europe. So today it has softened, and we begin to see some demand coming back, I would say. So I think there was a – is it shorter? Is it fundamental? I'm not clear. Otherwise, no, I would say we don't see some softening of energy demand. The expectations from the oil market are still high. On the second question about Russian ban, what is clear, there has been a surprise. The surprise has been that really there are many effects on the ban. The big surprise is that, in fact, the diesel from Russia was re-routed much quicker than expected. You know, I think the markets were anticipating some impact on the diesel tracks, which were integrated probably. We've seen a lot of players making inventories of diesel before the ban. And, in fact, the surprise of the coming months is that the diesel of Russia was quickly rerouted to Africa and South America. That was obvious because there were the two importing markets, but also to the Middle East where some producing countries prefer to buy some diesel with a good discount and to sell their crude with no discount, which is, by the way, a good transfer of value from Russia to some Middle East countries. That is a surprise, which means that, by the way, the diesel track is softening, clearly, because there were high inventories. Now Russian diesel is there. And the Chinese refineries are back full speed, because also they benefit, by the way, from Russian crude with a discount. So these, I would say, these caps on the Russian crude and diesel have so many effects. on different parts of the world and some impacts on the global market. This is what we observe. All trading, you know, traders, they love volatility. There is a lot of volatility. And so I would say they have good results. But, in fact, they have very good results, almost every quarter. So I hope they will continue with my comments.

Very good. Thank you, Patrick.

The next question is from Kim Fustier of HSBC. Please go ahead.

Hi. Good afternoon, and thank you for taking my question. I've got two, if I may. The first one is I appreciate that you don't comment on rumors, but I'm just curious to hear any thoughts that you can share on the attractiveness of corporate upstream M&A, and particularly for producing assets, given that Total has recently been linked to a certain private E&P company. I guess another way of asking that question is hypothetically, What would you need to see in order to pull the trigger on, let's say, a $5 billion deal in the upstream? And my second question is on Iraq. I just wondered if you could walk us through the updated Iraq integrated energy deal that was announced earlier this month. It seems to be a $10 billion headline investment, but just how is that cap going to be phased over the years? Thank you.

Okay, Iraq, yes, that was good news after my comments in London. I don't know if some people listened to my comments, but clearly the government of Iraq confirmed the whole contract with no modification at all. I would say sanctity of contract went through chamber of government. It was for me fundamental. So that was for me more than a good news. And secondly, we reached an agreement on the way that participating interests could be allocated to an Iraqi party. You have seen that we will invite also our partners from Qatar Energy to join us. So that, I think, is a good setup. We are finalizing all the paperwork, but I think it's large. You know, the $10 billion will expand fundamentally among, let's say, four years. For four years, we need to – because they are phased, by the way, phased in the way that the gas-faring – You know, we have to build some trains to fair down the gas. That will take two phases. And also on the oil palm, by the way, increasing the production will be done in two phases. So let's consider four years with a ramp-up along the years. So that's the point. I don't believe all rumors, you know. People love to use our name. We have demonstrated, I think, in the past that we are able to make good deals when the price is good. So I think it's a price of acquisition. And second, I think it's a matter for me as well of synergies. Can you find some synergies in the acquisition, which will deliver additional value? And the other point, which of course is important for us, is how does it make, how can it fit with our portfolio? you know, according to our different positions. So we are not trying to fill the gaps, you know, Jelly. We are more trying to be consistent with the strategy. So we'll see. So don't believe all rumors.

The next question is from Amy Wong of Credit Suisse. Please go ahead.

Hi, good afternoon, and thanks for taking my questions. I have two of them, please. So one of them is just continuing along the lines of M&A strategy. You've made quite a few chunky, pretty large acquisitions this quarter, an interesting mix across E&P, power, integrated gas. So can we take that as an indication of kind of how you're thinking along the lines in the near future? And as a follow-up to that is just tying that with your scope one, two, three emissions targets that you've talked about. And how are those targets to any degree, if any at all, restricting the way you're looking at acquisitions at the moment, the need to comply with some of those 25, 20, 30 targets that you've put out? Thank you.

The second question is easy. There is no constraint of absolute value. We have a commitment, in particular when we look to hydrocarbons. than any project, either, by the way, organic one or acquisition, must have an intensity, scope one and two intensity of CO2 lower than the average of the company, the average of the company of 19. So any project, any M&A should enhance the position in intensity. That's my question mark. And then... We manage, and if it's good for the shareholder, it delivers value, we will manage the absolute objective. It's up to us to make the effort on other projects. And I think we have demonstrated our capacity to have not only to acquire, but to diversify some assets like we are doing today. By the way, the exit of the Canadian oil sands from that perspective, pure CO2 budget, I would say, are giving us some space. in terms of CO2. But again, don't consider that there is a link. More for me, when we are developing our integrated power strategy, it's very clear that we want to be able to offer to our customers I mean, lower range of products, oil, gas, and some electricity. That's clear that it is a strategy. But by the way, the first question, you know, we have demonstrated. I think this quarter is a perfect demonstration of the balance of our strategy. We can use M&A or organic development, either to grow in oil, like in Abu Dhabi, because we have the opportunity to put in our portfolio a very low cost, low CO2, by the way, asset. I think the cost per barrel is the price per barrel of production. It's around $7, $8 per barrel. We paid a cost more or less of $4 per barrel, so it's fitting very well – sorry, a price of $4 per barrel, so it's fitting perfectly well with the strategy. So oil is good when it's fitting the strategy. We had the LNG in Qatar, which was – I mean, the – the investments which were the results of last year's positioning, and again, it's LNG nuclear, and we have some renewables. So we'll continue to, I would say, feed with organic ore M&A, all the segments of the company, if there are good opportunities. So for me, the question, when we look to M&A, and again, it's not today, we have more looks recently to divestment than merger, than acquisition, I would say. But we are looking to that, what is the value creation that we can get, not only by paying, but beyond, I would say, the initial acquisition payment.

That's what we look at it.

The next question is from Paul Chang of Scotiabank. Please go ahead.

Thank you. Patrick, just if you don't mind, I want to go back into the OSM asset sales. Is that a competitive or that you get some unsolicited offer, but then you go out and put it as a result, put it as a competitive bid? or that is purely that is coming in from other people? And have you looked at to break up the asset and sell it individually?

No, no, it's clear. No, no, I mean, I think everything is a statement. The question is, you just have to read my report. I think we said in the statement, We launched the spin-off. There was no bid organized at all, and we received unsolicited, several unsolicited offers. So several means many. So several players, not only one. We did not look at them. We looked at them only in the last month when they began, and the one of Suncorp began to reach a level where we felt comfortable enough to go to the board and to say to the board, look, we have this offer, which again... 5.5 to 6 billion Canadian dollars and at the same time as we're working hard and we're already – I spent a week last – two weeks ago I went to Toronto in order to meet some stock exchange management team. So we are working hard. So we had a good view of what could be expected from one side.

We had an alternative.

We had an alternative and then we – the alternative – of course we were to push It's our job, you know, to push the price up, but I think at the end of the day, again, I prefer Senco to management to comment on their motivation to make the acquisition on their side. On our side, again, we think through this process. without organizing a big process, but just being very, I would say, determined to make the spin-off, which created an alternative opportunity. Like, by the way, I met several shareholders after our last event in London, and some of them were expecting a possible outcome from this nature. So, I mean, that's what we can say. So, that's what we've done.

Okay. And that in the past, a lot of times you guys comment on that what is the trading result or the trading environment in the quarter, and you haven't mentioned anything in the first quarter, so we just assume trading result is more or less average and nothing spectacular in the upside and downside in the first quarter.

Do you understand? When it is spectacular, we warn you, because in the swaying statement, if we say nothing, as I said before, it's very good, but nothing spectacular.

Very good. Thank you.

The next question is from Henri Patricot of UBS. Please go ahead.

Yes, everyone. Thank you for taking your question. Just one left for me. On biofuels, we've seen some high targets from the EU in recent weeks and including this week on SAF. I was wondering when I look at your 2030 target, you mentioned the 10% market share with 1.5 million tons. Are these numbers, could these numbers go up both for the overall market size and for your own capacity or do you see too much of a constraint when it comes to feedstocks?

No, I think, yes, you're right with 10%, but the volume was 2 million tons, which was, I think, your target, 2 million tons of stuff. There is Europe on one side. There is the U.S. on the other side. No, I think we have a plan. We are working in order to develop different units, either in the U.S., where the IRA is, by the way, giving... an interesting framework, so there is a plan to develop a project around Port Arthur. And we have other plans in Europe, like Grand Prix, like La Metz, but we are looking to other opportunities to develop. It's an attractive market. Having said that, as you know, the constraint is more on the feedstock because you need to find, I would say, the circular economy, so you need to use either waste or second generation. So today the constraint is more the . I think our colleagues, our people are reaching this target of 2 million tons per year by 2030 seems to be positive. No, it's not true? Or maybe 1.5. Okay, we'll see. But don't worry. We are working on it.

Thank you.

The next question is from Giacomo Romeo of Jefferies. Please go ahead.

Yes, thank you. First question is just trying to understand a little bit the rationale that led you to increase payout as a result of the Canadian divestments rather than committing to a fixed payout. The other question I have, it's more general, and it's around the emerging legislation in France, and I'd like to hear your thoughts about the tightening the investment criteria for Article 9 funds, and explicitly to exclude the investments in fossil fuels, and just trying to understand whether you are any sort of involved in discussion with the government in trying to make any changes here. It's obviously total in our screen is the most popular name for Article 9 funds investments in oil and gas. So just trying to understand a little bit your thoughts here and whether you are engaged in discussion with the government.

Okay, the first question, again, I explained why. We planned a spin-off. It was announced to a shareholder, so that means that there was a distribution of a dividend in kind potentially to a shareholder, so it was a form of commitment. So we don't do the distribution in kind. So strongly we had the feeling to respect our word, and so it will be done for either shareholders I mean, a distribution through the payout, the cash payout, to whoever buybacks or special dividends. That's the point. So I think it's quite logic. And so we translated it at this stage because we prefer to observe what will happen during the year. by giving you a guidance on the payout, a positive one. I think it's more than 40%, at least 40%. So I think it's positive. So I think that demonstrates that the board is really committed to the return of shareholders like we said last year. The second question, Article 9, you know, That's a debate. I'm not sure that exclusion will make the progress of the transition, in particular because I'm convinced that players like TotalEnergies are very well positioned to reallocate part of our cash flows to accelerate this transition. If people want to exclude, they exclude. The only argument I have for men is that you are different for a science-fueled company. You are the one who are in transition, which we can demonstrate. You know, I'm not a big fan of taxonomy, to be honest, because all that is just classification. But I've observed that in some countries, like Belgium, they make some caveats on the rules, stating that if some companies are really serious about the transition, then they have to be considered. I'm more in favor, I would say, of the best-in-class philosophy than the banning philosophy. This is what we repeat. I think it should be more encouraging. Then, if it's not Article 9, it will be Article 8, and I think... But there are also, I would say, from... I'm not... I think in this point of view, they might be willing to have a pure category of... I would say very clean assets. Okay, but it's a question for me more of organizing the marketing to investors than really a question of regulation. And I think there is very confusion to try to regulate the transition or to organize the transition through financial regulations. I'm not sure it's the best way to do it. Again, we are on our side. This does not affect our strategy, which is very clear, and we'll maintain the course.

The next question is from Jason Gabelman of TD Cowen. Please go ahead.

Hey, thanks for taking my question. I wanted to go back to M&A for a minute. Last year at your analyst day you talked about an interest in growing your U.S. LNG integrated gas footprint. And I'm wondering, as we try to figure out the use of proceeds from the oil sands asset sale, if that's an area that looks attractive to you, either moving into the upstream gas, further into upstream gas in the U.S., and or partnering on an LNG project or two there. And then my second question is on Kazakhstan. Some news out of there regarding a potential lawsuit related to recouping costs from the Kashagan project, which you have an interest in. I was wondering if you could provide some comments around that, where that lawsuit sits, potential liabilities arising from that lawsuit. Thanks.

The second question, I have no news more than what you learned. I mean, it seems that the government of Kazakhstan wants to reopen all discussions, you know. It's not the first time about the cost recovery from Kazakhstan. I think my feeling is that the five IOCs are really united And so we'll face and we have a contract there again. And we will, of course, fight in order to have the contract be respected by all the parties. So that's my only comment. No overview on it. On the first one, I mean, again, don't consider because we divert. We are considering to spend the money tomorrow. I mean, we can be – we can also – Well, I commented already, I think, during our last investor meeting that it's true, but we are looking to see if we can more integrate those various positions, the U.S. positions. The price of the Unreal is quite low, but people are still dreaming of the price of last year. So let's be patient. Things are possible. You know our area of interest, our area of interest, but I repeated it just before. It's good oil, it's LNG, it's also a renewable downstream, so we are looking to different opportunities in order to create value from the global portfolio.

Thanks.

Gentlemen, there are no more questions registered at this time.

Okay, so thank you very much. Jean-Pierre, I've given you all the figures. The results were good. Thank you to all the teams. And thank you for your questions. And see you soon to all of you.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.