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spk12: Good morning or good afternoon, everyone. Patrick Puyani speaking. So before Jean-Pierre will go through second quarter financials, I thought that mid-year would be a good time to check in on the progress that we have been making. I would say the great progress in just the last 10 months since we presented our strategy last September, Auto Investor Day in New York, or I would say Balanced Transition Strategy. which is anchored on two fundamental pillars, the oil and gas on one side, with a perspective of growth, and integrated power on the other side. And both pillars are driving the growth of the company. So during the last first semester and last quarter, beyond the excellent operational performance which was delivered on the oil and gas pillar, we have sanctioned several major upstream projects, But I would like to remind you, on the oil side, with the financial decisions on three large FPSOs, Camino in Angola, CPA2 and Atapu2, and both which are world-class, world-productivity projects with low technical operating costs, under $20 per barrel sanctioning criteria, Angola is under $30 per barrel break-even. So these are for three major oil projects, but we also have sanctions on the LNG side. Two important projects, the Marsa plant in Oman, Marsa LNG, which is a very ultra-low emissions plant, and the Obetagas project in Nigeria, which will supply Nigeria. So these projects will not only contribute to the objectives to grow our upstream by 2% to 3% per year in the next five years, but they will also boost the underlying free cash regeneration and ultimately shareholder distributions. On the second pillar, integrated polar, where we have reached quite a compelling ROACHE above 10% this quarter, and Jean-Pierre will come back on it, we have also made some strong progress towards deploying and completing our integrated power business model by acquiring flexible assets that allows us to extract maximum value from the renewable assets, in three key markets, in Texas, in the UK, and in Germany. We closed our CCGT deal in Texas and also announced the acquisition of a CCGT in the UK. Both of these markets, we know, have all building blocks, but define our integrated power model, renewable, flexible assets, and, of course, trading, and customers as well, in order to deliver clean, firm power, which prices at a premium level. compared to a green intermittent renewable power. We are also a quite flexible asset in Germany for our acquisition of Keyon Energy, a leading battery storage developer. And by the way, we just sanctioned the first 100 megawatt battery storage project developed by Keyon. These complements our leading position in offshore wind in that country, as well as the acquisition of Quadram, a renewable energy aggregator with a 9 gigawatt pipeline of aggregation to commercialize. So we are clearly, I would say, this first half in a strong execution mode of the strategy. So don't expect any change. There is, of course, still more to come. In particular, we have also announced recently that we made some changes important steps towards the FID of our Suriname Block 58 projects by the end of the year, which is, of course, a key milestone for us, our partners, and Suriname. And as a reminder, this is an operated 200,000-barrel oil development with more than 700 million barrels of estimated recoverable oil. We have achieved, as I said, key steps. including the agreements on the field development area with the authorities, but also securing all of the FPSO to be able to sanction the projects and should be, I would say, end of the first quarter, beginning of the fourth quarter. I'll wrap up my introduction by just saying that our balance strategy is so clearly in motion that we are pushing on all fronts. We are making progress delivering and executing our plan. which will allow us to reach our ambitious targets this year and delivering top-tier performance, but also preparing the future of the company. So we positioned the company to lead the pack, and we are determined to deliver to our shareholders our premium returns. And that's the program that I propose to show you at our next Investor Day, which will be here, will be in New York on October 2nd. that can put that date in your calendar. And so I look forward to meeting you there. But in the meantime, Jean-Pierre will give you all the details of the second quarter results, and I will be happy to answer your question today together with Jean-Pierre.
spk11: Thank you, Patrick. So let's move to the financials. So the crude market remained supportive in the second quarter, with bread slightly increasing by 2% quarter to quarter, to average 18%. while the company average LNG price decreased by 3%. In refining, margins continue to normalize, with our European refining margin marker down 37% quarter to quarter. In this context, Total Energy reported second quarter 24 adjusted net income of $4.7 billion, with the first half 24 totaling close to $10 billion. The company generated $7.8 billion cash flow during the second quarter of 2024 and close to $16 billion for the first half of the year. Importantly, profitability remained robust. We watched return on average capital employed of close to 17% at 16.6%. And we maintained strong CapEx discipline and reiterated 24 net investment guidance of $17 to $18 billion for the year. But last but not least, we continue to build on our strong track record of attractive shareholder distribution with $2 billion buybacks executed during the second quarter and up to $2 billion of buybacks authorized for the third quarter of 2024. Also, the Board has maintained the second interim dividend at $0.79 billion euro per share, which is nearly a 7% increase year over year and is 20% higher compared to pre-COVID levels. First half 24 shareholder payout stands at 45% of CFFO. Moving to the business segment, starting with hydrocarbons. So production was 2.44 million barrels per day in the second quarter of 24, close to the high end of the guidance range. We continue to see good performance from project startups and ramp-ups, including Meru2 in Brazil, AgpoWest in Nigeria, Block10 in Oman, Absheron in Azerbaijan, and multiple projects in Norway. Looking forward, production for the third quarter of 2024 is expected to be stable, between 2.4 and 2.49 million barrels per day. with the expected startup of the Anchor project in the U.S. Gulf of Mexico in the third quarter. Exploration and production continues to perform well, with reported adjusted net operating income of $2.7 billion and cash flow of $4.4 billion. The company maintains its cost leadership with upstream OPEX per barrel below $5 per barrel during the second quarter. In integrated LNG business, we continue to increase our structural resiliency by advancing commercialization of LNG through new medium-term brand-linked contracts with Asian buyers, having recently signed two contracts for a total of 1.3 million tons a year. Turning to the results now, hydrocarbon production for LNG increased 1% quarter to quarter, which includes entry into the Dorado upstream gas fields in the Eagle Ford Basin in the United States, and we progress on our objectives to increase upstream integration in the U.S. to further improve resiliency. LNG sales decreased by 18% quarter to quarter, notably due to lower spot purchase in a context of lower LNG demand in Europe. Integrated LNG adjusted net operating income and cash flow were both $1.2 billion in the second quarter. The results reflect a lower average LNG price and lower sales, as well as the impact of gas trading not fully benefiting in the continued low volatility environment. LNG trading continues to perform well. Given the evolution of oil and gas prices, In the recent months and the lag effect on price formula, we anticipate that our average LNG selling price should be around $10 per million BTU in the first quarter of 24, which is higher compared to the second quarter. Moving now to integrated power, as mentioned by Patrick, we recently enhanced our asset integration with several flexible capacity additions. Integrated power once again delivered profitable growth with first half 24 adjusted net operating income of $1.1 billion, up 36% compared to the first half of 23 due to activity growth. First half 24 cash flow totaled $1.3 billion, which is in line with the annual guidance of more than $2.5 billion. In addition, return of capital employed for the first 12 months and in June 2013 increased to about 10%. In downstream, refining and chemicals reported $640 million of adjusted net operating income and $1.9 billion of cash flow during the second quarter. Results reflect the sharp decrease in global refining margins since the end of the first which remained impacted by low diesel demand in Europe and market normalization following the disruption in Russian supply. The company's utilization rate improved to 84.5% from 79% in the first quarter of 2024, mainly due to lower planned maintenance, which partially compensated the decrease in refining margins. For the third quarter of 24, we anticipate that the refining utilization rates will benefit from the restarts of the Donge refinery in France and will average above 85%. Marketing and services benefited from the lower refining margins environments in the second quarter, with adjusted net operating income increasing to $380 million and cash flow increased by 38% sequentially to $660 million. At the company level, we have been, as usual, active in M&A on both sides, with $1.9 billion of divestments and $1.6 billion of acquisitions over the first half of 2024. Our net investment stands at $8.2 billion at mid-year, and we confirm our 24 net investment guidance of $17 to $18 billion. During the second quarter, we reported a $1.2 billion working cap release, and we anticipate that the working cap bills reported during the first quarter will continue to reverse over the coming quarters. Gearing was stable quarter to quarter and improved by nearly 1% year-on-year, at 10.2%, at the end of the second quarter, 24%. As a reminder, we continue to anticipate structural gearing of around 7% to 8%, all else being equal. During the quarter, Total Energy successfully issued center bonds on the U.S. market, totaling $4.25 billion. using conventional formats and privileging long maturity. The average maturity of this insurance was indeed 27 years. Indeed, the board of directors decided to return flexibility on the format of the bond insurance and to give priority to long maturity. Lastly, I'm pleased to announce that after the capital increased reserves for employees earlier this year, employee ownership in the company is now more than 8%. We also have strong support from our shareholders who supported all resolutions submitted to the vote at the recent Annual General Meeting. I will stop here and let the floor for the Q&A. Thank you.
spk05: 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 star two. Once again, please press star one if you wish to ask a question. The first question is from Lydia Rainforth of Barclays. Please go ahead. Thank you, Anne. Good afternoon.
spk09: Two questions, if I could. The first one, Patrick, I think it's obviously a 100-year anniversary for Total, and I know that you've kind of been very good at giving shares to the employees and things like that. Would you consider a special dividend for 100 years to celebrate for Total? And then the second one, actually, if I could just do more macro stuff at the moment, clearly, because there's a lot of moving parts as to the cash flows towards the end of the year. Can you just walk us through both where refining is and where you see that going? And then also on LNG, just where you're signing some of the slopes on the contracts. Thank you.
spk12: Okay. Good question, Lydia. Maybe I should give to you a special gift of one other share to ask the question, but I'm afraid that today we are not, as we already set up in our cash flow location, The privilege is dividend and buyback more than special dividend. We don't consider today we are in an exceptional environment as the one which we benefited in 2022. So it was exceptional. We are not there. It's a good environment, but not exceptional. So I would say sorry to disappoint you, but I'm afraid we prefer to continue to maintain to increase the dividend year after year and to have a good buyback program. Second, where do we go refining? Refining, I think it's clear that I think there is a form of... It benefited during the last two years of some imbalances in the market created by the Russian flows, which were distracted from Europe, from the US, from the normal flows. We have the feeling that now, in fact, the market has more or less restabilizing in this sort of normalization mode. from this perspective, even if we can observe that the U.S. are more and more chasing against all this great fleet of Russian oil. So it could have, again, some influence, you know. So that's one part. The other part is that the demand was lower this year than the last two years, in fact. So the inventories are not so exceptional, in fact. I expect that with the driving season during summertime, generally, there is more demand. So we could see... I would say, a better margin. Today it's quite low. And when I say quite low, in fact, it's back to what it was normal before all these exceptional years. So I think our refiners, now they have to come back to reality and to deliver good results with lower margins. But again, at the same time, it's true that we benefit from a good oil price. In fact, $84, $85 per barrel is good. And so you come back to... The traditional integration between, I would say, when the price of oil is low, the margins in the refining are lower. But generally, when it's the case, the marketing is benefiting of it. By the way, we've seen that during the last quarter. So I would say I think we are more going in the normalization of refining margins. And when we make a long-term plan, we are more on $35, $40 per ton than $70 or $80 per ton. So maybe because I was in charge of this segment, I know what is the reality from time to time. But again, this is typically the type of business which is you need to have your machine, your refineries running when the margin is good, and then you make the cash in, and then you need to be resilient when the margin is more normal. On the LNG, I would say, again, on the LNG, we negotiate quite a lot of new LNG contracts. because all the strategy of the company is to buy Anriab and to sell Brent. In fact, we are in the middle of that. It's difficult to answer to you because there are a lot of discussions around the world. I would say it's more commercial secret. But again, the transformation of Anriab to Brent is good for the cash flow of the company, including in the market. We can think that by the end of the decade, it will be a It's up in the market. So this is all the strategy of the company.
spk09: Brilliant. Thank you very much.
spk05: The next question is from Doug Legate of Wolf Research. Please go ahead.
spk16: Thank you. Good morning. Good afternoon, everyone. Thanks for having me on. Patrick and Jean-Pierre, I wonder if I could ask you about your Suriname progress My understanding is that when you laid out the strategy last year, Suriname did not have a meaningful contribution to your 2028 cash flow. But now you have an SPM fast-forward hull, and obviously things look like they're moving a little quicker. It seems to me that Suriname could be a meaningful step up in your cash flow in 2028. Full calendar year at current oil prices, probably around $4 billion. Can you give us some color... as to what you think the progress is?
spk12: That's true, but in fact, we have decided, as I said last year, that Suriname, we try to execute it in a quick mode, I would say, moving from the end of the appraisal by September last year to the FID. My objective is one year from appraisal to FID. All the teams are being mobilized, but we are using innovative approach, including using the design process of a good operator, which is developing projects next to Suriname, which first, they have a good design. So trying to build on this FESO, in fact, taking the design, which has been designed of Guyana, in fact, to apply it. And it's quite efficient. So we move forward quickly. And so that means that the first sort of Suriname is targeted by, I would say, somewhere in mid-28, beginning of Q1, beginning of 28. Good. So it could be quite significant. You know, to be clear, cash flow from Suriname, as you know, will be big because we have, in fact, financing almost full of it. So we'll benefit from the cash flows in a very large way. So the contribution of Suriname, not only to 28, but 29, 20, 30, 30, 31, 20, 32, will be important. That's why I'm insisting. By the way, I can tell you that in September, we will extend our or guidance up to 2030, because with the rich portfolio we have, we can extend it. And Suriname, of course, will be part of the good color we'll give to our perspectives by 2030.
spk16: That is very helpful. Can I ask a quick follow-up on a separate topic in the U.S.? After your Lewis Energy acquisition, are you now comfortable that you have enough hedged gas exposure for your LNG, or do you still intend to do further acquisitions in the World 48?
spk12: No, we don't have enough. We are clear. You know, we can make the math. We will take something like almost, we have 10 million tons. We have five in Rio Grande, so we need to increase. And by the way, I can tell you that we are working on another deal, so it will be step-by-step deals. It's not a big one, but we are working on another one, and We should have news as well for you, and we'll give more color to you by September as well. I think an important topic on which, for me, it's important is to show you how we, in fact, all these energy positions, on one part on the upstream, but on the other side, on the downstream, will be resilient, and the price environment will be. I think it's very important to demonstrate it, and we are acting on it. And on the upstream, there will be more to come, for sure.
spk16: Thank you so much, guys.
spk05: The next question is from Irene Himona of Bernstein. Please go ahead.
spk06: Thank you. Good afternoon. My first question is on marketing. In the second quarter, NOPAT declined about 16% year-on-year for a 2% lower sales volume. How should we think around the impact of your disposal to push start versus underlying performance. So what happens if we exclude the sold assets? And my second question, Patrick, French politics has been quite volatile recently and sovereign states can do a lot of things, impose windfall taxes, even golden shares. So I wanted to ask, is there something in particular that concerns you in terms of a potential action by the French state that might be against the company's interests? Thank you.
spk12: The first question is quite easy. In fact, it was more or less $20 million per month, so on a quarter it's $60 million. The impact of CUSHTA, the assets in Germany and the Netherlands and half of Belgium. So you can make the math, and in fact we managed in terms of cash flow more or less to... We are, okay, it's cash flow or it's net results. 20 million, what is it? It's net results, sorry, not cash flow, net results. So 20 million per month. So you can find that you are, it would be reduced to 3%, so it's in line, in fact. So globally, the marketing has, I would say, a very performance equivalent to the one of last year if you deduct this Kushta impact. Okay, first point. Thank you. And second one, honestly, the French politics, you know, I think first I would say that Total Energy is more stable, which is good. It's a stable company. Honestly, I think there is a lot of noise around all that. On the golden share, by the way, to be very clear on it, there was a judgment which was in 2002 by the European Court of Justice, which has obliged the French government, which previously had the golden share in Total Energy's equity, to to cancel it, because it was against a fundamental principle of free move of capital within the European Union. So it has been already judged, so I know that some politicians are speaking to thinking against about it. And by the way, with the present law in France, just to clarify with you, it would require at least the French state to invest 5% of shares in total energy, so I understand that they have better use of their money than investing billions in the company. So that's politics. But again, this is not the point. I think, as I told you before already, you could see ideas like the one in the U.S., by the way, which is taxation on buyback. The French politicians have all read that something is happening there. So sometimes it's a little difficult to argue for us again, even if we have done it. But again, we will engage with... whether the new government is. And that's, I think, again, I don't think you should consider it will fundamentally affect the interest of total energies.
spk06: Thank you, Patrick.
spk05: The next question is from Biraj Borkataria of RBC. Please go ahead.
spk01: Hi, thanks for taking my questions. My first one was on the... deal you did with OMB in Malaysia. I noticed that you listed that in the upstream bullets rather than integrated gas. But in the press release, you mentioned the deal would be an anchor for future growth in the country. Just wondering if there's any potential here to integrate yourselves into the LNG facility and whether that's being discussed. And if not, could you just talk a bit about your growth plans there and the strategic rationale for that deal? if you can't integrate into LNG. And then the second question is just, again, on projects and on LNG. So Mozambique, there was an article recently around potential cost escalations. Could you just give us an update on where we are and expected budget and what the next steps are from here? Thank you.
spk12: On Malaysia, no, I think maybe it will be fundamentally the gas sector Revenues from the license in Malaysia is an energy netback, just to be clear. So for me, it's integrated to the energy value chain, just to be clear. So it's a way that the gas price is settled. So first clarification. So the idea, of course, is to continue beyond it to have access to, and we are already in discussions with some other actors, players, including, by the way, Petronas, uh to beyond and they just started by the way the geron gas field which just started this week last week so it's a quite a large field it's producing 600 million stuff per day i think so we will have a nice share of it and so beyond it there is more opportunities to develop to develop and so we have some plans and of course at the end the more we can link that to the LNG world and to LNG pricing. This is the objective of the company. So we'll work on it. On Mozambique, I can tell you that everything has been settled with the contractors, so we are clear. We know where we are. In fact, it was more a matter, to be honest, of the cost of the, I would say, frozen period, which was to be absorbed and discussed. Because since 2020 to 2024, we have frozen some works. We have some equipment which were, I would say, kept in different locations. So all that has been discussed. All that is settled with them. And so we are on the way to move forward. And we will, as soon as we can update you, we will do it. But... The progress has been done in many directions, including on security. Now we try to regroup all the financial finances around the project. As you know as well, there are some presidential elections in Mozambique coming soon. And so, of course, for us it's important to have the confirmation that the new government The president will follow the same policy regarding these large projects, and so that's where we are. So, say, by the end of the year, we should clarify all that. We should be able to move forward.
spk01: Okay, thank you.
spk05: The next question is from Martin Ratz of Morgan Stanley. Please go ahead.
spk07: Yeah, hi, hello. I have two, if I may. My attention was drawn to the comments in the outlook statement where you talked about European gas prices in the range of $8 to $10 per MMBTU for the third quarter. And that struck me as somewhat of an unusual comment because I don't know total to call that often on near-term commodity prices. So from that perspective, it stood out. But it also stood out because it seems quite low. TTF is a little bit more than $10 per MMBTU at the moment. So I was wondering... If you could elaborate a bit on that expectation and broadly where it comes from and the drivers behind it. And then the second thing I wanted to ask is on the previous earnings call, we talked a lot, of course, about the potential to either move the listing to the US or maybe not for the full headquarters, but at least to move the main listing to the US and a quarter has passed. And I was wondering if you have an update on those thoughts.
spk12: Okay. Sorry to surprise you. Sometimes you tell me that we are a boring company, so today we try to make it. Honestly, there is no... We've seen when we made the statement, beginning of the year at $8, we move up to $10, $10.5. So to give you a range of $8 to $10 in summertime, there is nothing extraordinary because it's not the best season. The third quarter is not the peak of the demand, generally. And so as you know, the inventories, the storages in Europe are quite... We don't anticipate a big rebound unless there is an event. So that's, I think, giving you this guidance is more reflecting what happens since the beginning of the year. So it's a way to tell you. But again, when you say it's low, $8 is quite high compared to what we were experiencing before 2021. It was more, we had years at around $4 to $6 per million BTU. So $8 for a European gas price. Even today, it's $10.3 yesterday evening. is a good price, not only for us, including for all Norwegian operations and UK operations. So I would say it's good for us. It's okay. It's lower than what we had in 2022 and 2023, but we've made no miracle on that. That's clear. There has been a landing. And, nonetheless, the weather will come again cold next winter. We don't anticipate any point. Having said that, we could have other disruptions coming from other parts of the world because the main driver today will be if there is any tension in the energy supply because a plant could have a problem somewhere in the world, then this market is very volatile because we don't have much margins between the supply and the demand on the energy. So, sorry to have surprised you, Martin. On the U.S. listing, no, I mean, it's not... I clarified that in a French newspaper. Maybe it was in French, so we should translate it and distribute it to everybody, which I will ask Renaud and his team to do, because we clarify what we want to do. What we want to do is fundamentally to transform the ADRs in shares, in ordinary shares. That's all. And that means, at the end, and we want these shares to be cross-listed, I would say, if you want, between Paris and New York. That's fundamentally what I'd like to do. There is nothing else. So transforming the ADRs in shares. The ADRs, we made a test. We had questions with a quiz or questions to almost 40 long-term investors in the US. They see some positive, nothing negative, because some investors do not like the complexity of the ADRs in terms of back office, in terms of managing it. Some could investors could prefer to invest directly on the New York market and not going to the European market, Paris or London or Brussels. So that we do. So we are more in a technical, we are in a technical move. We progress, just to tell you, we progress positively until now. And Jean-Pierre and his teams will work on it. We will update you probably end of September. But technically, there is some technical matters between the different depository, in fact, firms between Europe, Europe on one side DTCC on the other side. And so we made progress and we'll be able to have a scheme. So it's fundamentally transforming the ADRs in shares. And so giving more liquidity to the shares, which the shares could be, in fact, acquired either in Paris or on the New York market. That's what we want to do. It will add the liquidity. And so we help. It will help attracting more U.S. investors. As you know, today we have a stronger flow of U.S. buyers than on the European side. That's what we want to do. Wonderful. That's crystal clear.
spk05: The next question is from Michele De La Vigna of Goldman Sachs. Please go ahead.
spk17: Thank you very much for the time. I've seen that you've been very active in adding more low-cost LNG supply to your portfolio in the last few months with Ruvaiz, with Marsa LNG. I'm wondering, you must be marketing these volumes to customers at the moment. How do you find the demand appetite for LNG? more LNG, and are you comfortable to add more spot volumes to your portfolio, especially if the market starts to become more supplied in 26, 27? Thank you.
spk12: Yeah, good question. Thank you, Michele. Clearly, we have been successful in the last month, and the answer to a previous question, our world strategy is to be able, in fact, to transform some gas, I would say gas volumes, into Brent volumes. And so we are active on the Asian markets. We have already announced 2 million tons of new LNG contracts in the beginning of the year to different, and there will be more to come. So you will see, I can tell you, more deals to be announced in the next month. We are quite active. As I said, as I said, you know, look, we have more or less 10 million tons today of U.S. LNG. which is linked to Henry Hub. We sell part of it on the Henry Hub formula, and we want the rest to be sold on the Brent formula, in fact. And the Brent formula, and so the answer to your first question, there is an appetite today from Asian buyers, and still at a good percentage. We don't, I would say, discount our energy. Why? Because I think the lesson of these Asian buyers is that they have been afraid about what happened in 22, 23. So even if they could anticipate that there would be a softening of the market by 27, 2030, they think for them it's better to edge part of their own, I would say, purchase linked to the brand. In fact, I think today there is more confidence in the buyer's side on the brand and the stability of the old market than on the LNG, GKM index, which is, by the way, don't have the same depth So I think this is why you have some appetite on different countries. There are more countries buying energy, in fact. China, Japan, and Korea, Taiwan, Vietnam, India. India has more appetite. So adding more sports, we have added already. We have added with Rio Grande. We took 5 billion tons. Marsa is smaller, it's 1 million tons, but this is the one where we want also to develop a local barging, I would say, market within the Gulf, with a specific market. And so, yes, we are comfortable, but I think I will tell you, Michele, what the objective we'll have at the end of September is to show you exactly what you said, how do we manage this potentially softening of the market from 27 to 2030, what is the remaining exposure from TotalEnergies. And you will realize that downstream, in fact, fundamentally, we will transform, and we are transforming Enreum into Brent. And I think this is good for our shareholders and for the future cash flows of the company.
spk17: Very clear. Thank you.
spk05: The next question is from Lucas Herman of BNP Paribas. Please go ahead.
spk13: Thanks very much for your time. Two if I might. One, the first is just to JP. Hybrids, you've redeemed a portion again this quarter. Can you just remind us what the redemption possibilities are going forward, what the timeframes are? Patrick, apologies, but a general question for you, just on your own thoughts on China and Chinese oil demand development to look at over the next few years. I guess it's been a fascination to see the extent to which gasoline demand is perhaps starting to come under pressure from EV. You've obviously had a fair amount of switching diesel into gas. LNG trucks, etc., etc., and demand increasingly feels as though it's coming from the chemicals industry and perhaps negating crude. But just your own thoughts and insights into how you see Chinese oil demand developing next few years. Thank you.
spk11: Yes, so concerning the IRA, so you're right, so we decided not to renew 1.5 billion euros in the second quarter because we use the flexibility offered by the credit rating agencies. If you can demonstrate that without renewing your hybrid, your rating, your credit is not affected, so you can use the flexibility. We see, because we have another 2.5 billion euros next year in our hybrid portfolio, so we have to discuss with the rating agencies to see what we can do. And so if we can, again, continue to lower the hybrid portfolio.
spk13: Thank you.
spk12: Okay. On the China, no. Having insights on the forecast of the Chinese markets, it's not so easy for when you are out. I would say I think we should not exaggerate as well what happens. I think my view is that the whole market for the time being, the whole demand globally, continue to be driven by China, even if India is part also is a growing country. I would take the assumption of 0.81% per year is a good assumption until we will see a real reverse. Does it affect China? I think we are today a little on the western side over, I would say, there's a little of China bashing, I would say, to try to say that the economy in China is slowing down. My view is that it's continuing to to be quite active. And it's true that you have there some more of the EV sales are impressive. But I was recently discussing with the CEO of the number five car manufacturer of the company. And when I asked you his figures, he was still at 20%, 30%. He's not at 70%. And in fact, it's a little like in Europe. There are EVs. There are also hybrid cars. And the hybrid cars are also because the customers, in fact, are are looking to the same issues wherever they are in China or in Europe. In fact, they want to have, I would say, a reliable car for most of the time. That's important to keep in mind. So, yes, there is a trend. That's true. We see also LNG becoming for trucks a new market. But fundamentally, I think for me, it will not affect quickly the oil market. So keeping 1% of demand both per year, I think, is reasonable. This is where we are more or less. That's what we think, what we take into account.
spk13: Okay. Thanks very much for the comment.
spk05: The next question is from Alistair Syme of Citigroup. Please go ahead.
spk15: Thank you, Patrick. Just one question. I just wanted to get your sense on competitiveness of opportunities in renewables. I know there was another German lease bid auction recently that you were one of the two bidders, the winning bidders, but it was quite strange. I think your German partner probably pulled out because they thought the auction had become too expensive. I get it. The markets always have a difference in opinion, but can you give us a sense of where that difference lies?
spk12: You know, if we made the bid, but if you think it's competitive, otherwise we don't do it, first comment. Second comment, in fact, when you look and you will understand what we've done in a few weeks, we are trying to just, I think one of my colleagues in Germany has made it public in an interview. In fact, fundamentally, we think that this block that we have acquired is just next to the one we acquired in the first round. So we want to make synergies of development in order to be more efficient. And so that's the objective. And this could go by the way that the fact that we restructure all the properties we have in offshore wind in Germany. So you will see the story coming later. But again, what we think fundamentally, and the German partner, by the way, is a nice partner, but we have announced yesterday that we went with him in the Netherlands, so probably the Netherlands are good and Germany. In fact, he has a different view because he has another past portfolio in Germany. So we are building the portfolio, not exactly the same approach. But if we do it, it's because, and it's linked to the German power market, in fact. Because in Germany, you know, German government has decided a policy with no nuclear exiting coal. So it's fundamentally renewable and gas energy. So the gas, the power price will be driven by the gas, in fact. And when you look to the perspective of the gas price in Europe, you can be optimistic on the electricity price in Germany. So that's part of the link that we want to do. And so that's why we are building today a fully integrated power portfolio in Germany. It's not only the offshore wind. And so you should never, and I know Alastair, it's difficult for me to convince you, but you will see why we are more profitable than others. You should not look to the renewable opportunity only. It doesn't work like that. A green intermittent electron has no value or little value. What is good is to have a clean, firm power for customers. That's what we do in Germany. Yes, we need some renewable sources to have the clean part, but we need to combine them with flexible assets, and flexible assets are batteries. Total Energy should participate. We'll find a way to have access to gas-fired power plants in Germany. Otherwise, my speech will not be consistent. And so I can announce you the next steps of what we want to develop. That's why also we bought this aggregator of renewables to give flexibility in trading the system. So the fundamental business model we have is not renewable. Renewable profitability, it is what it is, and you know it. But where you make money is when you combine these green electrons with the flexible assets, gas plants, and you deliver to the customer a clean, firm power. Then you increase a lot of value. So do you allocate this profit, this value, to the renewables or to the gas plants or to the batteries? I don't care. At the end, this is the integrated model. And this is what we deliver to you quarter after quarter, and we'll increase it. So that's the business plan. So it's not a matter only of opportunity of renewable. It's a matter of integration. And that's why today we have a return on capital employed above 10%. Renewable assets alone will not be there. I admit it. But it's not what we are looking to.
spk15: Okay. Well, I look forward to October. In the meantime, enjoy the Olympics.
spk12: And you need to listen to me a little more. Okay.
spk05: The next question is from Christopher Kaplan of Bank of America. Please go ahead.
spk14: Thank you very much. Let's see whether I've listened enough, Patrick. I'm sure. Can I come back to the topic of green hydrogen and that deal that you've just announced with RWE? Can you comment a little bit about the competitiveness of the industry today you were instrumental in trying to create a clean hydrogen market. And it seems that deal in the Netherlands suggests you feel you're better off creating the value chain yourself rather than buying it at currently available prices. So be interested to see what you feel you can give to us here. And if I may, go back to the US and ask you a little bit around the idea of M&A and how attractive or not you feel your current acquisition currency is if it's not cash in terms of being able to do deals. Is that one element behind, let's say, improving the currency that you have in New York? And if I can sneak in a third question, I would expect net debt to fall as the net working capital position drops into year-end. How much room do you give yourself to surprise us with what more than 40% of CFFO means in terms of shareholder distributions?
spk12: Thank you. On the last question, I think you have the answer. In the speech of Jean-Pierre, Jean-Pierre told you that we are confident we could come back to a gearing of 7-8%. That's in part of the working capital built during the first quarter, which will be released along the year. More than 40%. More than 40%. I confirm, more than 40%. I think you have the figure for this quarter. What is it? More than 40%. 45% today. The guidance will not be changed. But the delivery will be real. You will see it. First question, so again, I think it's more complex than that. We have different ways to provide green hydrogen to refineries, which again, because of the RFNBO regulation in Europe, creates an economic score to make an added value because you avoid the ETS on one side and you create an additional new product and these new products according to the ZERF-NBO regulation in Europe as an added value. The question is how much you pay for the hydrogen, obviously, green hydrogen. In fact, we are looking to both ways. There are different ways, by the way. In Normandy, in France, we have made a tolling of green electrons. It was a tolling agreement with Air Liquide. We told green electrons, we don't invest in the electrolyzer. They run it, and we toll it, so we have a tolling fee. and we will get the green hydrogen outside, out of the electrolyzer. That's the tolling one. We could have, as we explained, by the way, yesterday, we have again just made a deal with RWE to share, to invest offshore wind and assets, and to get 50% of the electrons in order to transform them into electrolyzers. It could be, it will be a local electrolyzer, either through tolling or We are looking to maybe part of it could be invest by ourselves in order to compare the different, because it's an infant industry. So we want to invest and to compare the different ways between tolling, investing, and that's where these electrons will go. And then you have a third route, which is just to purchase green electrons from abroad. And then it's a question purely of competition, market, and being the first mover, we announced a deal with our products. Being the first mover, from this perspective, I think gives us access to a good price. And so when one day, today, it's premature because all these discussions are moving on. But when we compare the different routes, and again, it's more or less equivalent, of course, the question of when you import, it's a question of competitiveness of your supplier. And they will take more risk, probably, because we are off-taking. But that's part of the discussion we have with some suppliers. So that's what I can tell you. At the end, all the deals we will sign will allow us to create value, not only to avoid the ETS, but on the top of it, to capture part of the added value of these RFNBO products, which are the results of European regulations. And again, this matches well with this question RFNBO framework, which is a sort of regulated economy which creates a bubble where you can develop some green hydrogen. I don't tell you through my demonstration that green hydrogen is cheap, but you can create an economic framework and some value for refineries and at least reducing the emissions and avoiding to pay these ETS. That's where we think about it. No, US M&A, you are too smart. No, no. We just want to improve the value of the shares for you. It's obvious not to make M&A directly. No, no, that's not the point. Again, as you know, we have a large and rich portfolio of projects. Why should we like to make more M&A with shares? So it's not the main driver. The main driver is fundamentally, as I answered previously, to transform the ADAs in shares because it could be attractive to some US investors to invest directly in New York, in our shares, and it's just giving more liquidity. And if it's more attractive, we could think that it could help not, I think, to fill the famous gap, but part of it. So that's contribution to, I would say, the TSR of the company, which is already one of the best, if not the best, it's a number one or two or one, I think, since December 23, December 24. So it's improving the TSR of TotalEnergies to be more attractive. That's the objective, fundamentally, of this move. Thanks very much, Patrick. Thank you.
spk05: The next question is from Matt Lofting of J.P. Morgan. Please go ahead.
spk00: Hi. Thanks for taking the questions. I'm too pleased if I could. First, just coming back to longer-term growth. proposition of the company. I think you highlighted earlier some of the strides that you've made during the first half of the year in advancing projects and strategic execution. If you think about in the context of oil and gas growth of 2%, 2% to 3% CAGR to 2080 or the 4% energy production growth to 2030, how significant has the de-risking of those objectives been through the last six, nine months and what sort of key projects apart from Suriname are outstanding for the second half of the year. And then secondly, I wanted to just come back on gas and LNG. I think in the press release this morning you called out sort of strength around sort of China and India from a demand perspective. To what degree does total energy see that strength as seasonal versus structural? Thank you.
spk12: Okay. On the first one, thank you for the question first. No, I think, again, we set this objective for the next five years in September 23 to 23%. We knew and we were very clear about the number of projects we had to sanction. And I think we've done a lot. I think most of the work has been done during the first six months. It's important because for us it's clear that it's a way to capture quickly the costs and not to see more inflation coming tomorrow. So it was a key priority. So we have the two projects in Brazil, the one in Angola. Suriname will come soon again. So I would say, and you had also part, I could add that on Iraq, we are also progressing, but the other one on which we progress quickly to go to the first phase of Iraq. So that's for you all. On the LNG, we postponed PNG, Papua LNG, because it was too expensive, so not be volume-driven. but we had the opportunity to sanction Master LNG to rebound, but we just joined the Rewise LNG projects for 10%. So all that being said, we have multiple options in the portfolio, and so I'm very confident to deliver this cash flow, but I'm even more confident in July 24 and September 23, because most of the work of sanction has been done, and so it's progressing. And again, I think in September and October, October 2nd, I said September, it's October 2nd in New York, Of course, it will be part of the presentation to update you on the progress to this objective of 2% to 3%, and even, again, to speak to you about after 2030, because we have a portfolio which is rich, and so we are confident about the growth we can deliver by this timeline. So that's the point. So, Suriname is a big one. Honestly, I think we are the main one to come in 2024, I think. And Iraq, Phase 1, going to 110,000, which is progressing very quickly as well. And, by the way, very well. So, the teams are doing an excellent job in Iraq. On the LNG India-China strength, I think you see something more fundamental in India. You see an industry demand in India, in fact, coming. The Indian government has really, I would say, invested in some gas infrastructure around the country. And you have more and more industries, not only refineries, but others who are going to come to energy and to gas. And I think it's a trend, even surprisingly, at a higher price than before 2021. In 2021, I think I answered some questions. They knew that in India, it's difficult to sell beyond $6, $7 per million BTU. In fact, we continue to develop the business at $9, $10 per million BTU. So I think there is a fundamental structural demand coming from India, and we are convinced that the Indian market will take the relay, I would say, from the traditional Korea, Japan, and even China. On China, probably it's more seasonal today, I think, is that. because they have already a lot of infrastructure. China is moving very quickly on these renewables, continue to increase its coal production. And again, the gas is more driven by transportation, like it was mentioned by Lucas, or by industries. So the gas demand, energy demand in China is not really driven by power today, because the power is mainly coal and renewables. But there are some decisions. The Chinese recently spoke again about their equivalent of ETS CO2 market, but today it's quite small and limited, but they want to expand it to all the industries. So this type of drivers could really have an impact. So we see more of the Chinese market growing thanks to industry and transportation more than power, in fact, of the energy. So honestly, I think today we have 400 million ton market. It will become 600 million ton market. But this 50% of demand increase will be absorbed quickly in four or five years. I think part of it today will already be being absorbed in Southeast Asia if we are not constrained by supply, in fact. Today we are because I remind you that we took 50 million tons from Asia to Europe, and since 2022, we did not increase really the energy production. It's quite stable. So this would be easy to go. So this growth will come, and you have also many more countries open to energy. We have Vietnam as a terminal. Philippines, we have a terminal. So in fact, in Southeast Asia, most of the countries will be able to to receive energy. So then, and if you can think that you will have a good supply, so price will soften, it would even incentivize the demand and accelerate the demand by the end of this decade. So I think, and it's not just seasonal, it's probably also structural.
spk00: Super, thanks very much.
spk05: The next question is from Henri Patricot of UBS. Please go ahead.
spk02: Yes, everyone, thank you for the update. Two questions, please. The first one, just going back on the cost, I was wondering if you can comment on the inflationary pressure that you're seeing. You mentioned PNG, LNG, where we saw a cost and then postponed the project. Is that quite specific, or are you seeing more poorly some inflationary pressure? And then secondly, just a quick question on the CAPEX guidance for the year. and whether we should still expect the cash outflows related to acquisitions to be offset by cash inflows from disposals this year.
spk12: Thank you. The first question. There is nothing to hide. There is an inflation in our industry compared to the low point where we were in 2020. Today, I would say we are 20% higher in most of the costs. But at 20%, we can manage it, and that's why we can sanction our projects like the ones we have done, even if we can also take some innovative measures like making a GV on a rig in order to manage these costs for the future. Having said that, Papua LNG probably has a form of specificity because it's an isolated project in, I would say, remote areas, not many projects in that part. So probably, as we said before, We consulted the traditional Western suppliers. They are not very interested. They have some limited resources. They think they could deliver more margins for them to make a project in the U.S. than in Papua. So what we are doing is looking to go to larger suppliers, in particular Asian ones, Indian, Chinese suppliers, So we could have, I think we should be able to come back to something more capex, which would be reasonable in this environment. But again, by the way, another point is that there was an inflation, but today it's more stabilizing, in fact, because, for example, in the rig market, in the drilling market, you begin the drilling contractors because they are facing also some supply chain equipment problems, so it does not improve. They tip some rigs which are not used, in fact. So in fact, they don't have the full value chain, the full supply chain ready to execute all what they would like to do. So yes, there is inflation, but we manage it. And we'll come back on that topic as well in the beginning of October. The second one, yes, we always gave a guidance of $17, $18 billion of net capex. And this will be, again, as Jean-Pierre told you, I will reiterate these guidelines. with guidance. And I would say last year for the five years business plan, we gave you $16, $18 billion. I remember mine well. And I would be surprised that we will not confirm $16, $18 billion on October 2nd.
spk02: Okay. CapExpoint, you should be also within that range. Okay. Thank you.
spk05: The next question is from Paul Chang of Scotiabank. Please go ahead.
spk18: Hi, good morning. Two questions, please. I think the first one is for John Pierre. In your press release, you said that the integrated power reserve was impacted by some seasonality, like in Europe, the electricity seasonal demand. Can you help us to understand that? How big is that impact? And maybe in general, what kind of other visible seasonal pattern we should expect in the integrated power business for you? Second question, I think this is for Patrick. Any update for Venus? Thank you.
spk11: The main driver behind my comment is in relation with the CCGT. that are least used in summer, for obvious reasons, compared to winter.
spk18: Can you quantify how big is that impact? And also, other than that, is there any other seasonal pattern in the other quarters that we should be aware of?
spk12: We are young in integrated power, so we don't have enough long history of results to answer precisely to your question. So we just... We have to explain why 500 is a little lower than the previous quarter. And when we looked at the figures, one of the main explanations was just that the gas power plant level of use in Europe was very low, less than 10%, compared to something around 40%. So that's one explanation. And the first explanation is this one. Namibia, I mean, on Venice, just to tell you, We have, again, finished the appraisal of Venus, so now we have some reserves. We are now working on the development scheme. As you know, we have been quite clear with you, it's positive. We have a lot of oil, but there is also some gas. So the question will be, can we find a way to develop this oil pool, managing the gas and, I would say, reinjection in an economic way? Because, of course, all that at the end needs to fit with our criteria of break-even less than $30 per bowl or cost less than $20. Our engineers are working on it. It's a little more complex to develop Venus than Kragbadu in Suriname, to be clear, because the gas quantity to manage is larger. But I think we have a key, it's a clear objective to the teams to deliver some value. And so we'll update you today on The agenda is again by end of 20, we are in mid to 24, by end of 25, to have a clarity probably before to say where we are with this development. So we are working on it.
spk18: Patrick, we know there's a lot of gas, as you mentioned, but other than that, is the geological structure is complex or that is rather straightforward? Let's say compared to Suriname or Guyana.
spk12: On Venus, I would say, I know the comments of one of my peers who said there is a lot of heterogeneity, difficult to find an oil pool. We have the oil pool. Of course, we have a core of the pool, which is a bit of quality, like always in all the fields that I know since I'm in the industry. And then you have the flanks of the pool, which are degraded quality, but it's always like that. But I think we have the pool. The question is more, again, the capacity management of the... So we have a pool of oil, which is big enough. to make a development, the question is to manage with acceptable costs all the gas which will come with the oil and to be able to inject it in good conditions. Knowing that we are, I remind you, by 3,000 meters water depth. So it's not, it's part of the challenge. The deeper it is, the more expensive it will be. So that's the link. So that's more. Now today for me, it's a question of commercialization. finding a way to make it profitable as per our criteria. But I think I'm always optimistic, but I'm optimistic. So we have the right oil pool.
spk18: Very good. Thank you.
spk05: The next question is from Bernard Odé. Bertrand, pardonnez-moi. Sorry. Odé of Capelaire-Chevreux. Please go ahead.
spk04: Thanks for taking my question. If I may, first on Suriname, can you confirm, and I suggest, I suppose your earlier comment points to an FIT for 2024, but do you believe you can achieve still the $9 billion budget you've earlier penciled last year? And the second question is on is on LNG. You've signed a 2 million ton long-term contract to Asian customers, but you have taken a lot of their commitment in the last, let's say, 15 months, including Rio Grande for 5 billion tons, QFC, QFS. And now, Ruwais, do you have a target in terms of volumes you would like to secure on the long-term basis for Asian customers?
spk12: On the Suriname part, we are in the process to make the FID, so I don't have today the figure. What I can tell you is at the end, it's this development. will be sanctioned because the cost capex plus opex will be lower than $20 per barrel. That's a strict criteria. We are committed to it. So we'll meet that target. And if I say you bet, it's because I'm optimistic that we will reach it. So that's a point. Secondly, on the energy, OK. You know, I described what we want to do. Fundamentally, we have some energy of exposure. Part of it, we can resell it as energy up. In particular, we have a good exposure. We have a good customer in South America, and they buy on an NREAP basis. So we thought NREAP to NREAP is fine for me. And then the rest of the NREAP, the objective is to be able to secure as much as we can on the brand basis and a medium-long term basis. We want to transform NREAP in brand. So if we reach 100% perfect, if we reach 80%, 80% is the minimum we want to reach on this conversion, just to be clear. Because as we analyze the market to soften by the end of the decade, we want to protect the company. It's not necessarily 15, 20 years. You know, it's a question. We could have a sort of five, seven years contract, which will help us to swallow a software market and then to rebound. So that's more the idea, fundamentally. And it's true that what is behind is that my view and our view is that the old market, because of OPEC position, is probably more stable than the gas market from this perspective of medium-long term. So we are more bullish on the oil and on the Brent, and I would say on some volatility we could have in these energy markets.
spk04: Very clear. Thank you.
spk12: We like the oil.
spk05: The next question is from Jean-Luc Romain of CIC Market Solutions. Please go ahead.
spk03: Thank you for taking my question. You have built an interesting value chain in integrated power in Texas, and in the last quarter there has been very big volatility and some very warm days. I was wondering how you can capture those. And the second question was, you explained this, your utilization rate for the European natural gas power plants was very low. How was it in the U.S.?
spk12: I think, on the contrary, we know that the gas-fired power plants that we have acquired, most of their use is when they need the climatization. It's the heating. It's heat. And the heat wave today in the U.S. has been very strong in the last month. And so I think the results of the first quarter will be even better. So I can tell you these gas plants are used at a very high rate today. So it was an excellent acquisition. And by the way, they are used as they are driving the price at a point where the price of electricity is quite good. So that's really, I think, the demonstration. And of course, we have some solar plants, we have some batteries, and also we can benefit with the batteries in the integration. So you will see the positive impact of these, I would say, flexible assets, I think even more in the third quarter. Because the second quarter, I think we closed the deal. We don't have a full quarter yet. And by the way, the heat wave did not come in April, but a little later in June, July, et cetera. So that's clear, but it was clear in the model that when we studied this acquisition that the summertime was the best part of the year. Which, by the way, is counter compared to the wintertime in Europe. There is a sort of counter seasonal effect between Texas and Europe from this gas pipeline point of view.
spk03: Thank you very much.
spk05: The last question is from Jason Gableman of TD Cohen. Please go ahead.
spk08: Hey, thanks for squeezing me in. I wanted to ask two questions. The first one is on the gearing level. It was stable quarter over quarter, and I know you discussed an expectation it's going to decline, but I'm wondering if it stays at this level for longer, or is there a level that it increases to that impacts the technology decisions around the distributions that you're paying out, specifically the buyback pace. And then my other question is just on the quarter, we saw EMP OPEX move a few hundred million dollars higher quarter over quarter, despite production being relatively flat. Was wondering what drove that, if that's structural or if that's a reverse next quarter.
spk12: Thanks. The OPEX of ENP, we are lower than $5 per barrel, and I think I will come back to you, I think. On the gearing, no, honestly, 10%, 8%, it has no impact on the decision on the buyback. Be clear. So 10% gearing or 8% gearing, it's not making a difference. The 8% is more like, again, we had a a working capital build, which was quite big. We know there are some fiscal and other matters behind it. So we know that along the year it will come back. So that's why Jean-Pierre told you 8%. Last year it was 6%, but the 5%, 6% was really exceptional from a very big working capital release, which is very exceptional. So for me, but again, from the board point of view, we don't make a difference from a buyback and return policy point of view, 8%, 10%, 12%, et cetera. I think the balance sheet is strong enough to maintain that policy. Is there a gearing level? More than 40%, it is what is driving us. More than 40%. Is there a gearing? No, there is no gearing limit.
spk08: Is there a gearing level? No. Okay. All right.
spk12: More than 40% payout. That's the objective.
spk08: Okay. Thanks.
spk12: Yeah, no, just I have the answer to Europex question more precisely. Yeah. My team wrote me on the paper that, in fact, it's linked to some seasonal. We have some turnaround, I think, in the UK and Denmark. We have some more work programs of seasonal effects in the North Sea, generally in the second quarter. That's the reason why. But no, honestly, there is no, don't see inflation. We'll be able to deliver less than $5 per barrel on OPEX between today and I can even commit that we'll maintain these OPEX $5 per barrel until the end of the decade. It's deeply rooted in the portfolio and in the projects in which we invest.
spk08: Great, thanks.
spk05: This was the last question. Back to you for any closing remarks you may have.
spk12: Well, thank you again. I think, again, this quarter, I think we have delivered our roadmap for the year. As I insisted, we have made a lot of progress on our strategy and the execution of our growth from 2023 to 2028. And we'll be able to demonstrate to you how the portfolio is growing, but also is resilient to the volatility. It's fundamentally the two drivers of strategy. It's resilient to the volatility of LNG, of inflation, of cost, etc. And so I wish that we will all meet you on October 2nd in New York in the morning so that we could have some good discussions and presentations. So thank you. I wish you all a good holiday and happy to meet you in New York.
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