TotalEnergies (TTE) Q4 2023 Earnings Call Transcript

Transcript

Bernard Pinatel (President of Refining & Chemicals)

Thank you, Renaud. Good morning. Last year, we had to deplore two fatalities, as you know, and these two tragic events remind us that our first duty, of course, is to make sure that everyone returns home safe every day. One fatality occurred in France, in a retail station, where a contractor, Isidore, passed away when performing some excavation work. The safety moment I've chosen this morning is about the second fatality, the one which occurred, which occurred in the Zeeland refinery in the Netherlands. Of course, not to describe-- just to describe what happened, but most importantly, to share with you what we learned from this tragic event to improve our operations. On February 3rd, a contractor passed away while he was performing a catalyst unloading operation inside a reactor. His name was Torsten. He was 50 years old.

Changing a catalyst is a very sensitive operation, as the catalyst is flammable in the presence of oxygen, of air. So you must first inert the reactor with nitrogen before the intervention. The catalyst unloading operation is performed, as you see on the slide, by a team of three people, led by a supervisor. First, there is a diver, who is the one entering into the reactor, fully equipped, of course, including with a lifeline to be pulled out in case of emergency. The second one is a second diver, who is ready to dive in case of emergency, and there is also a controller who monitors the level of nitrogen, of air, and keeps constant contact by radio and by video. Before entering into the reactor, of course, there is a video inspection to make sure that the situation is safe.

At 11:15 on that day, the alarm was given by the personnel, and we learned that the diver was trapped by the collapse of some catalysts. Of course, the rescue team, reinforced by additional members, fully equipped, tried in turn to pull him out of the reactor, which you may guess from the slide, is 30-meter high. When the body went out, the team found that the diver had passed away. One thing is clear: we couldn't keep operating this way with a human entry into an inert atmosphere, even if it is the industry standard practice. So we immediately took three actions. Of course, we immediately stopped worldwide all similar operations in the company. Secondly, with our contractors, HSE specialists, technical experts, we reviewed alternative operating modes to avoid any entry, human entry inside reactors for that kind of operation.

Eventually, we identified and selected an alternative operating mode, where you change the catalyst by water flooding. What does that mean? It means that you fill the reactor with water, and then you empty it together with the catalyst. Of course, this is more costly because you cannot recover the catalyst to recycle it, and you have to dispose of the wastewater, but you will understand this is not really what is at stake. From February 2023, all replacements were performed without any entry. We carried out 21 replacements using water in 2023, and we will have another 14 on the first year of 2024. We also keep working on further improvements in terms of vessel modification, because you will understand that this vessel have now to support the additional weight of water. Of course, we are looking at the utilization of robots.

Naturally, we have shared these new operating modes with our peers. Let me now switch to the... After the safety moment, to the overall company safety performance. At TotalEnergies, we keep repeating this message: safety is more than a priority, it's a value. It's a core value. Of course, safety is a matter of culture, it's a matter of leadership. It's also a matter of permanent improvement. And to track it, we measure several leading indicators that you see on the slide in terms of occupational safety and in terms of prevention of technological risks. So on the left-hand side, in terms of occupational safety, you see that we track the total recordable injury rate and that this rate, at 0.63, has been reduced over the last five years consistently, and that represent a reduction of close to 30%.

Having an injury rate well below one is not a given, believe me, notably when you see the industry trend since 2020. So we have been able to consolidate our position as a front runner on this, on this indicator in our industry. How did we do it? Some key initiatives, I would like to highlight one, which, which is our ability to engage our contractors with our teams to promote shared safety values. We have done it notably through what we call a program of joint safety tours between TotalEnergies management and contractor partners. This tour coming, of course, in addition to the daily visits we do with our local team on the field. In 2023, we recorded 10,000 of such joint safety tours across the company.

Regarding the prevention of major accident and accident pollution on the right-hand side, we are also progressing. Over the last five years, we have reduced the number of primary losses of containment you see on that slide by 50%. And here again, we have been focusing on two main areas. Of course, first, this is the management of the technical integrity through our maintenance inspection program, but also through the implementation of digital tools to anticipate and prevent potential equipment failures. The second area of focus has been the implementation of what we call the Safe Operating Principle, the SOPs, where we constantly train our operators on the basic rules to comply with when they perform very standard operations.

Of course, to conclude, I just would like to say that we all know that safety is a daily battle, but that we are all committed to do our best to protect our people, the environment, and our assets. Now I hand over to Jean-Pierre.

Jean-Pierre Sbraire (CFO)

Thank you, Bernard. Good morning, everyone. This year is a special year for TotalEnergies, because TotalEnergies is celebrating in 2024 its 100 years birthday. The company was founded 100 years ago in Iraq. At that time, the name was Compagnie Française des Pétroles. Since that time, over time, the company has diversified, has adapted itself to deal with the environment, to deal with the society, to deal with the market. It's, I think, with the same pioneer spirit that we used at that time in Iraq in oil exploration that we will build the energy system of the future.

Indeed, over the last couple of years, we have engaged in a balanced energy transition strategy, as you know, anchored on two pillars: so oil and gas on one side, and mainly LNG, as you know, and on the other side, integrated power. On the oil and side business, TotalEnergies plans to responsibly grow its oil and gas production by 2%-3% per year, predominantly from LNG, thanks to its rich, low-cost, low-emission portfolio. In the LNG business, we will leverage our top-three global LNG integrated portfolio with leading position in regas in Europe, in US exports, to develop a top-tier LNG pipeline, and Patrick will come back on that later. In integrated power business, the company is building a world-class, cost-competitive portfolio, combining renewable, so solar, offshore wind, offshore winds, with flexible assets, CCGT and storage, to deliver clean, firm power to our customers.

And as you know, with the objective to be positive net cash flow by 2028, with ROACE at 12%. So let's move now to the figures. So this consistent two-pillar strategy has delivered, I think, strong result in 2023. In a robust environment, but softer price environment compared to the environment we benefited in 2022. We deliver, as you see here, a net, adjusted net income, TotalEnergies share above $23 billion and an IFRS net income above $21 billion. In terms of profitability, we had ROACE, return on capital employed, at 19% in 2023, and a return on equity, 20%. So that mean that once again, TotalEnergies in 2023 was the most profitable major.

In terms of cash flow, in 2023, we managed to deliver a cash flow at $36 billion, with a strong contribution of all the different business segments. So E&P contributed to more than $18 billion, $18.5 billion. Integrated power, $7.3 billion. Integrated energy, sorry, $7.3 billion. Integrated power, above $2 billion, $2.2 billion. I will come back on that later. And downstream, at $8.2 billion. On top of that, we benefited last year for a strong working capital release, so cash in coming from our working cap, around $5 billion. But to be very transparent with you, some of this capital working cap variation came, includes $2 billion of exceptional fiscal debt variation that will disappear in 2024. So how this cash has been used?

So this 36 plus this $5 billion of working cap has been used. $16.8 billion has been devoted to capital investment. I will comment later on this figure. $16.5 billion has been contributed to our shareholder return with a cash flow distribution, so payouts above 40%. Indeed, payouts increased from 37% in 2022 to 46% in 2023, and it consisted in a 7.1% increase in the ordinary dividend that we paid in 2023, plus $9 billion of buyback. Out of this $9 billion, I remind you that $1.5 billion is directly linked to the Canadian disposal assets.

And the remaining parts of the cash flow we generated last year contributed to continue to deleverage the company. We've now net debt at $6 billion and leading to a gearing end of last year at 5%. So now the scorecard for 2023. I think it's clear that we deliver on our objectives. So for upstream production, the production increased, excluding Novatek, by 2% to 2.48 million barrels oil equivalent. With a strong contribution in terms of LNG energy production that grew by 9%, in line with the objective we had on that topic. Refining has a slightly better than expected utilization rates at more than 80%.

So we guide at 80%, and so the final figure was 81. In terms of renewable gross installed capacity, so this capacity grew by almost 6 GW between 2022 and 2023, at more than 22 GW at the end of the year, leading and contributing to produce more electricity. So it's an increase compared to last year by more than 80% at 19 TWh, broadly in line with the objective we had. So now on the emissions front, we reduced Scope one and two from operated facilities to 34.6 million tonnes last year, with two main drivers. So first, we continue to be successful in our efforts in oil and gas businesses to reduce gas flaring.

I give you the example that, in Nigeria, for example, we completely stop gas flaring at the end of 2023, and we are successful in developing energy efficiency projects. On top of that, in 2023, in fact, 2023 was a more normal year in terms of CCGT utilization rates. In 2022, for obvious reason, we had a very strong utilization rate for CCGT, and so 2023, it's back to normal, and this contribute, of course, to lower the Scope one and two '22 versus '23. Methane for operated facilities were reduced by 47% compared to 2022, surpassing our reduction targets.

Another very important key factor which translates into figure our transition strategy, it's the lifecycle carbon intensity, with a reduction compared to 2015 by 13%, with a target we posted at 12%. So more energy, less emission, but also growing cash flow. We exceeded our CFFO guidance by more than by about $1 billion. The guidance restated using the same price deck as for 2023 was at $35 billion, and the final figure, as I already mentioned, is at $36 billion. In terms of investments, we invested $16.8 billion last year within the guidance, and I will come back on that later. CFFO payouts already commented above the 40%, at 46%. CapEx.

So we remained disciplined in our CapEx, in our investments, with a total of $16.8 billion in 2023. We were very active in the 2023 on the M&A side, with a very active portfolio management, allowing to continue to enhance, to to upgrade our portfolio. Because in this figure, $16.8 billion, of course, you have it's a net between organic CapEx, around $18 billion, plus acquisition, so $6.4 billion of acquisition, and $7.7 billion of divestments. So this figure, this, $6.4 billion acquisition, so on the oil and gas side, we have the, our entry, for a 20% interest in Umm Lulu fields in, in Abu Dhabi.

We have, on the LNG side, our effective entry in an NFE and NFS in Qatar and in Rio Grande project in Texas for LNG. On the integrated power side, it's the acquisition of the remaining 70% stake in Total Eren, as well our 34% stake in a joint venture with Casa dos Ventos, a renewable developer in Brazil. And as you know, the main divestments are our exit, our disposal of our Canadian assets, with sales to Suncor and the sale to Conoco, and our, the sale of our retail network in Germany to Alimentation Couche-Tard. So very strong portfolio management last year with strong figures.

In 2023, in line with our balanced energy transition strategy, I remind you, previously, we invested more or less the same amount of money in low-carbon molecules, so mainly integrated power, compared to what we did in oil. So it's the red parts of the pie compared to the green part of the pie. Another way we can look at it is that we invested as much in integrated and low-carbon molecules as we did in new projects, in oil or in gas, new projects. For integrated power, the figure was eight, was $5 billion in 2023, progressing in particular in implementing our strategy in deregulated markets, particularly in the U.S. and in Europe.

So now moving to the highlights of 2023 on our two pillars.

All segments has been achievement and a strong performance last year, in line with our strategy and objectives. In upstream and gas, our production reached 2.2448 million barrels oil equivalents per day, benefiting from a start up in January of the Block 10 in Oman of Absheron in Azerbaijan in July, as well as I already mentioned, our entry in Sarb and Umm Lulu in Abu Dhabi and our effective entry in the GGIP project in Iraq. The company completed the divestment of its Canadian oil assets, in line with its strategy to focus on low breakeven assets.

For downstream, we generated $8 billion of cash flow last year, and so we were able by this result is, or this figure is a result of the fact that we were able to capture high refining margins that averaged $69 per ton last year. In 2023, we awarded EPC contracts for the Amiral project, $11 billion contracts. So it's our petrochemical integrated complex in Saudi Arabia with Saudi Aramco that will come on stream in 2027. The company also announced the sale of some European retail network to Alimentation Couche-Tard. And so we completed the German portion before the closure and the remaining parts, so in the Netherlands, in Belgium, and in Luxembourg, it was completed early January 2024.

So we pursued our growing strategy in LNG, especially in the US, where we once again were the largest LNG exporter last year, with more than 10 million tons of capacity, and increased our future position to more than 15 million tons per year through our entry into the Rio Grande LNG project. And it's FID in July. We also reinforced our leading position in Europe, regas, with the start-up of two additional FSRU, so one in Germany, one in France, in Le Havre. In integrated power business segment, we pursue our profitable growth strategy with an additional 6 GW of renewable capacity, and we are able to generate more than $2 billion of CFFO, $2.2 billion, compared to something like $1 billion last year.

That means that we are able to more than double the CFFO generated by this activity over 2023. In 2023 as well, we accelerated the development of our integrated business model in two key deregulated markets. The U.S. on one side, with the announcement of an acquisition of three CCGTs for a 1.5 GW capacity in Texas, and in Germany, on the other side, announcing the acquisition of two German companies, one a top-tier renewable energy aggregator, and a leading battery storage developer. So we have built our upstream portfolio through the years with a low cost and sustainable way, as illustrated, I think, by these two charts. So starting from the left, we go back to 2018.

We have consistently reporting the lowest upstream production costs among all the majors, which is, I think, a structural advantage and allow us to be resilient even in a low price environment. Our upstream production cost average $5.5 per barrel in 2023. It was $5.1 per barrel during the fourth quarter, benefiting from the divestment of the high costs Canadian assets. That's why we targeted for this year production cost at $5 per barrel. So our portfolio is a low-cost portfolio, but it's also built to last, and so is the illustration of the second graph on the slide. We have, I think, demonstrated the same consistency with our reserve that we had with production costs, as shown in that chart.

We continue to replace our reserves, maintaining a strong and steady proved reserve life index of around 12 years over the last five years. This position us as the second among the majors. In 2023, we achieved a strong reserves replacement ratio, well in excess of our production, so 141%, and a proved probable reserve life index at 18 years. Now moving to the integrated LNG and integrated power segments. That the two growth segments in our portfolio, that together contributed to almost $10 billion of cash flow in 2023. We provide here some metrics comparing 2023 figures with 2021.

For obvious reason, 2022 was an exceptional year in relation with the crisis between Ukraine and the war between Ukraine and Russia. So that's the main rationale behind the fact that we made this comparison, 2021 and 2023. So in 2023, integrated LNG generated $6.2 million on net operating income, $7.3 million of CFFO. With all the metrics, in fact, growing compared to 2021, thanks to the growth to our portfolio, so 44 million ton sales in 2023, and benefiting from a higher LNG price environment. All in all, the integration, the integrated LNG profitability improved at 18% ROACE in 2023.

So for integrated power, adjusted net operating income was $1.9 billion last year, and CFFO slightly above $2.2 billion. So that means that the gap between the NOI and CFFO is directly linked to the fact that during the fourth quarter, we benefited from some dividends paid by some of our equity affiliates and mainly Clearway. So that means that the cash flow almost tripled between 2021 and 2023. And you see the production, it was 21 TWh in 2021, 33 in 2023, with a power generation from renewable nearly tripling at seven in 2023, 19 in 2023.

ROACE was at 10% in 2023, in line with our objectives that was set last year. So the last slide is a benchmark of the TotalEnergies performance compared to to our peers of using three main metrics: so ROACE, approved reserves life index, TSR, and sustainability rating. So thanks, I think, to the consistency of our strategy, the strength of our delivery, we are competitively positioned versus our peers. So once again, TotalEnergies, you see here on the slides, was the most profitable super major, with ROACE at 19% in 2023. On the reserve side, our approved reserves life index was 12 years, as I already mentioned, in 2023, which puts us number two among the majors.

This is, I think, really a testimony to our continued success in exploration, resource development, and active M&A and selective M&A. On a different note, TotalEnergies is once again the best-in-class sustainability rating among the major, a demonstration that it's possible to be the most profitable major on one side, and to be a leader in the energy transition on the other side. And lastly, our five years Total shareholder return has averaged about 13% per year, ranking on par with our US peers and outperforming, clearly, our UK peers by a wide margin.

Our ability to set and execute, and execute a consistent strategy, sustain a rich portfolio of opportunities, maintain the dividend through the cycle, like during the COVID crisis in 2020, when others cut it, and more recently, significantly increasing shareholder distribution, have all contributed to our strong TSR. So in summary, to terminate on this section, 2023 was a strong year for TotalEnergies. Another big step in terms of shareholder distribution and balance sheet strategy. On this positive note, I think I will leave the floor to Patrick.

Patrick Pouyanné (Chairman and CEO)

Good morning, everybody, for this event. I just, as always, I'm like to see that slide, because I think I should insist on the fact that we demonstrate, and I think it's because we are the most profitable, but we have the right to implement the energy transition strategy that we have decided, but it's feasible to remain at the top of profitability and to transition as well, and including to invest further our investments in electricity. And, but and also, by the way, and I think it's important, to keep a sustainable portfolio of oil and gas projects like we want to do. So it's an and strategy, it's oil and gas and low-carbon energy, in particular, electricity.

So, just this time, I will not repeat the strategy, but in fact, it's true that the best way to execute, to speak about strategy is to execute it. So 2023, I think Jean-Pierre showed you how we have executed it, and positively, and 2024 will maintain that strategy, and we will have no big news. You know, sometimes I think TotalEnergies is a little bothering you, but it's better to be consistent and to continue for continued success. So, and it's true that we have another way to demonstrate that, and I mentioned that one year and a half ago, and 2023, I've reinforced the message. In fact, we have a company which delivering much higher cash flows with the same brand than in the previous decade.

You know, as you can see on this chart, that the dot points of the last five years are quite well aligned, by the way, but the $1 billion per $1 per barrel is much higher in terms of accretion is more accretive than it was in the past. And I think that's the result of all the repositioning of the portfolio, of the oil and gas portfolio, what we call high-grading the portfolio. That's a reality, and we can see that, in fact, in the results. And I think it's one of the new TotalEnergies. TotalEnergies was perceived as a, as a defensive shares, I would say, which was, in fact, amortizing the low price of hydrocarbons.

But now, it's TotalEnergies is also benefiting from high oil prices, and that's why we can have a more aggressive distribution policy to our shareholders. At the same time, the result is, of course, because we have this high-grading of the portfolio, it's a break-even of the portfolio. It's there again, it's under 25. It was 22 in 2023, but it's one of the clear strong characteristics of our portfolio and the strategy. And all that has translated in something which is very new for us. It's a very low gearing, 5% gearing, so a net debt of around only $6 billion. And that offer, of course, a lot of capacity to engage in our growth strategy.

We want to grow our energy production by more than 5%, two to three on hydrocarbons and more on the electricity side. It's also offer us the capacity that the next cycles, to be able to maintain the strategy through cycles, and this is what I think shareholders should expect from a company like TotalEnergies. Just a few words about the market we'll face in 2024. 2023 was strong in terms of oil market, plus two, an increase of more than 2 million barrels of oil per day. Part of it was a recovery of the previous years, the COVID recovery, in particular in jet fuel, in aviation, and also in China, because in 2022, in fact, China was still under the impact of the COVID. They exited from COVID policies long later than other countries.

In fact, so 22 million was quite high. The IEA is announcing +1.2 for 2024. We share that view, which is people will comment it's lower, but in fact, it's normal. I would say it's back to normal. When you look to the increase of the oil demand from 2000 to 2023, the average is 1.2% per year. 1.2% per year, by the way, it is the average growth of the population of the planet. So there is direct link because population and oil demand. So it's back to normality. So some people will comment because China is lower. No, in fact, it's back to normality. There is nothing surprising, and in fact...

And so we don't see still, even if some people want, some guru want to see a deceleration of the oil growth. No, in fact, the reality is that we are back to directly the population growth. And that's one of the key challenge for the energy transition. On the supply side, that's true that we have some non-OPEC countries, particularly in the Americas. It's the U.S., it's Brazil, Guyana, which are bringing some new oil. The OPEC is managing that new supply and the demand. I would say they have done very well in 2023. In fact, more or less stabilizing the price around $80 per barrel. Today, probably the market is supported by the geopolitical tensions in the Middle East. That's true.

There is a more bearish thinking, but OPEC is still there, and I think the move of Saudi Arabia, but they are sitting there, sitting at 12 million barrels per day, is contributing to stabilizing this market as well. On the energy side, I would say, of course, we've seen with the high prices, a lower growth, but still 6% per year as an average from 2015 to 2023. I'm convinced we will see a good year in 2024 again, coming back. In particular, we see China has grown its imports by 11% in 2023 compared to 2022. Not yet at 71 million tons. They are not yet at the level where we were in 2021. They were at 81, so there is still room to grow. We see today the Chinese buyers quite aggressive.

You've seen them signing a number of long-term contracts. They still have to have a mandate to continue to sign some of them. We have also some discussion with some of these players to engage. So they are willing to diversify, by the way, their source of LNG. And I would not be surprised to see, in particular, when GKM is around $10 per million BTU like it is today, it's a good driver, and I would not be surprised to see China coming back to 80 million tons like they were in 2021, in 2024. At the same time, in the meantime, Europe has grown a lot, and from 65 to 113, 114, 2022, 113 imports of LNG, because we had to replace the Russian gas.

So that has been a big shock in the market, which is being absorbed. 2024, so we expect a better demand. In fact, the tension will remain because the LNG capacity increase is limited. There are not much new capacities coming on stream. We are identifying something like 8 million tons, and part of it being Arctic LNG 2, which will have a limited market, I would say. So in fact, you have a tension in the market, and if any of these plant has a problem, like we had Freeport two years ago, again, the tension will come back in the market. So there is not a message on LNG. Prices are lower, good for demand, in particular in Asia and China.

Limited additional supply in 2024, and in fact, I think this message will be repeated for 2025 as the same. It's only by mid-2026-2027 that really we'll see more supply coming on stream. So that's for the environment, which is globally positive for TotalEnergies. The key targets, you've seen the scorecard for 2023. So what are the key targets for 2024? On this summary slide summarize it. Upstream production 2.4-2.5 +2%, excluding Canada. I will come back on that. Production cost, it was mentioned, we will consolidate our advantage, $5 per barrel. LNG sales above 40 million tons. It's 30% equity, 40% long-term supplies, and 30% spot. So the spot, of course, could have a variation.

We will have a good utilization rate in refining because we have a lower program of turnarounds, so we are target 85%. The renewable cost installed capacity will continue to grow. We are on the pace of 6 GW per year since last year, and we intend to execute. I remind you that the key meeting, we have 35 in mind in 2025, so we will need to accelerate to 7 GW. But we are on the right pace, I would say, that we wanted to reach. And more importantly to us, because it will impact, of course, the results, it's electricity net production. I will come back on it, more than 45 TWh compared to 33 in 2023.

The emissions, we want them to continue to go down, so that's, the 38.8 seems to be a little high, but we-- I remind you that when we acquire gas-fired power plant in Texas, it will add some CO2, so it's a choice. The methane, it's a strong fight, leading the we are one of the leading company in this fight. Objective is 80% by 2030 reduction compared to 2020. The 50% we're supposed to be achieved in 2025, we are at -47, so we'll see if we have the ambition to reach it, 50%. It's not linear, because in fact, it's project by project, so you could... So for E&P, it's not linear, but 50% seems to, it's the ambition to reach it one year in advance.

Then the last indicator, for me, the most important one, is what we call the life cycle carbon intensity of our sales. In fact, there should be sales on that paper. Because, in fact, it's a way to translate the strategy, it's translating our sales to customer. It's recovering Scope one plus two plus three, and we have an objective to decarbonize, I would say, or to have low carbon energies to sell energies with a lower carbon content. Fundamentally, it's 25% by 2030. We are each year progressing. So this year it was -13%, next year, -14%, more or less 1% per year. It's linked, directly linked to the ... Of course, more we will sell electrons, so better it is. For the cash flow, I will come back.

$34 billion in $80 Brent, $10 per million. There's a mistake, it's $50 per ton and not $60 per ton, $34 billion. A net investments of $17-$18 billion, we'll come back on it, referred in integrated power and low carbon molecules, and a commitment we take, took to our shareholders more in September, more than 40% of cash flow payout. So that's the objective. So coming on the CapEx, on the CapEx side, you know, we have a rich portfolio of projects, either on hydrocarbons or LNG, and also on the integrated power side. So we want to grow our energy production by 5% between 2023 and 2028, and 2%-3% for hydrocarbon. So there you know, we need to invest to put this, to all these nice projects into production.

So we had a guidance of $16 billion-$18 billion for the five years. This 2024, we announced $17 billion-$18 billion. All segments benefiting from the $1 billion increase, I would say, which is, so we keep the discipline and a third in the integrated power and low carbon molecule, a third in new projects, oil and gas projects, oil and LNG projects, and a third in maintenance. So the guidance is, is the same, than what we announced in September. So what do we intend to do? On the oil side, we continue, the idea is to continue to deliver, to work to deliver all this growth and mid-term, midterm growth.

So we have there on this slide, a summary of our different actions, and, which are, of course, Nicolas' team's, I would say, focus on delivery. On the major projects, we have progressing, in particular in Brazil. You know, somewhere in our portfolio, Brazil is replacing Russia. In fact, when you look to in on-in E&P, we had Mero-2, which came on stream, the last day of the year. It's a Petrobras way to celebrate the new year. For me, it's the first year of 2024, first day of 2024, not the last day of 2022. It was one well, so we expect more production. But we are working on Mero-3, where Petrobras is planning to start it by end 2024. Then we have Mero-4, which is also in, in, on its way, which will be second half of 2025.

In the US, we are working with Chevron Baltimore. So that's the non-operated assets. For the operated ones, we have, of course, very important one is Uganda. In company share, it's almost 130,000 barrel per day, so it's a big impact. So we progress, and with the target is end 2025, so we should be, by end 2024, around 60% of progress, it has already been launched. And Ratawi, of course, our teams are on the ground. I visited them twice in the last quarter, where we have operations have been handed over to us, and we are executing the first phase of the project to grow the production from 60,000 barrel per day to 110,000 barrel per day.

So that's the first phase, then we will go to 200 and more than 200. At the same time, as you know, we work on the gas flaring and on the solar part. So that's, I would say, the major projects. We follow that carefully. We have in 2024 as well, quite a big, I would say, agenda on sanctioning new projects. In Brazil again, we are embarked—we have been successful in both tenders, so we are embarked to sanction Sépia 2 and Atapu 2, on which, Petrobras, I think, is making a joint, sort of joint tender. We are lucky to be on both sides. We have also Kaminho, which is a name which has been selected for the development on Block 31. It's a 80,000 barrels per day development on Block 31. We are operator.

We should be able to sanction that by middle of the year. We have the last, I would say, the last discussions. And on Block 58, that Suriname, this one has not yet a name. Maybe it's Krabdagu or I don't know. There are two discoveries. We have Krabdagu and the other one, Sapakara, maybe will give us a name. We, we are- it's not yet there. But this one, of course, is important because it's, it's one-- it's a 200,000 barrel per day project. We have 50% of it, so it's an important project. The objective being to sanction it before year-end 2024, and we are working on it.

All these, I remind you, the criteria to sanction projects, we assess the profitability at $50 per barrel, $100 per ton, and each project should respect two conditions. One, cost, or I would say economics, is less than $20 per barrel and less than $30 of breakeven after tax. And the other one is emissions, less than our portfolio average, and the portfolio average has low, is lower. It was 20 kg per barrel in 2020. The portfolio average emission intensity is 18. So the new criteria is less than 18 kg per barrel of CO2. And so we progress. It's a virtuous criteria, and this will be the case of the four projects which are just mentioned.

An innovation that we announced yesterday or today, I don't know, but this—we need to continue to work on the CapEx costs. Of course, you know, we face an environment which have more inflation, in particular in the drilling rigs for deepwater. We've seen the market moving from $200,000 per day to more than $400,000 per day. So we decided to take an innovative action, which is to acquire part of a rig, because to control the costs, in fact, for us, we've Vantage 75%. It's a way to hedge, in fact, our costs on drilling. The company will benefit from that. I can tell you the costs are not $400,000 per day. They are much lower than that. I know it's some people...

But we know we are using a fleet of 8-10 deepwater rigs per year, so to try to manage one, maybe it's only the first one of a fleet, but it's a way to hedge the cost because we cannot just accept that because of less competition, the costs are increasing, because the market is not really there. It's more less competition. So we have decided to move. I was frustrating during 15 years. I have realized one of my personal objective, not to let these guys taking plenty of money of us without participating or getting it. So yeah, it's a way to control the cost. In 2024, another comment I want to make, these are the new productions coming on stream, Mero-2, Tyra in Denmark, the development in Tyra, which we inherited from Maersk.

It's planned for end of March, beginning of April. Anchor in the US, with Chevron. It's an important comment, and we just announced a new production coming in the portfolio. Of course, we need to close it by end of the first half, probably. Gas in Malaysia, we are acquiring OMV's share in this field. We have quite a good potential to deploy beyond the asset. There are a lot of other opportunities in Malaysia. It's also a way for us to consolidate our partnership with Petronas, working there. All these additions, including the ones which have been put into production in 2023, when you look at them, which is Absheron, which is Sarb and Umm Lulu, Ratawi, Iraq as well. When you look to their cash flow per barrel, they are all accretive compared to our portfolio.

It's important. They have an average, I would say, of cash flow per barrel around $30 per barrel, compared to our portfolio, which is around $22. So it's again back to my comment, but we continue to high-grade the portfolio, and that's very pragmatic. It's true for acquisition and divestment, which we acquired in Sarb and Umm Lulu and Sapakara, but compared to what we divest, by the way, in Canada, make accretive part of the barrels that we produce. It's true as well for the organic part of the portfolio. So that's an important message, in particular, at a time where, in fact, the declining part of our portfolio, for example, in the North Sea and UK, have a much lower CFFO per barrel because of the taxation.

So we continue to high-grade the portfolio for business project. Exploration, it has been, for TotalEnergies, a successful story for the last year. We did not mention there Nigeria and Cotton or Cyprus, by the way, where we are confirming with ENI, we have 50% of its discoveries with ENI in Cyprus. We have gas in Cyprus, for sure, so we will find a way to have an efficient development process, and I think being partnered with ENI, who obviously has some capacities in the neighboring country, is a nice way to... And I love the fact that ENI is keen to go to shorten the time to market, so we're fully supportive on that, in particular, there in this part of the Mediterranean Sea.

Here, I insisted, I just mentioned Sapakara and Krabdagu, so I will not come back on Suriname. On Namibia, we continue to drill. So Mangetti, I can tell you, we find again some hydrocarbons in Mangetti. We find again the hydrocarbon level of Venus, so the extension to the north, as it was commented with one of my peers, and we share the data with our neighboring peer. We, in the different development appraisal wells and the test, very clearly, not a heterogeneous, it's not a homogeneous field. There are a lot of hydrocarbons, but we need to. There are some sweet spots in terms of productivity, permeability. There are some areas which have less good characteristics. I repeat that on all sides, we see a first development clearly in our hand. It's no question of optimizing.

We'll continue to drill. There are many debates in the company because everybody is excited. We have another exploration potential well on the south of Venus, called Kokerboom, and we can also continue to appraise what has been discovered. So, clearly, Namibia is on the top of our spendings in exploration and appraisal. We'll spend around 30% of our budget exploration appraisal in Namibia again in 2024, because we are there, continue to see what is the best way to develop that. LNG, the other part. So several message on this slide for 2024. First, the projects. We have quite a big portfolio of four projects in, fundamentally in the U.S., in Qatar.

In the US, in fact, in ECA Costa Azul is not in the US and Mexico, but it's gas coming from the US that we valorize. This project is progressing well. We should be able to produce by mid-2025. I think that's more or less the target we have with Sempra. For us, it's important, I remind you, because we have access to... We have only 16% of the project, but we have access to almost 55% of the production, huh? 1.7 million tons, very well located to go to Asia. We have North Field East as well in Qatar and North Field South, two large projects. It's 2 million tons for the first one, 1.5 million tons for the second one, for TotalEnergies. They are on his way. No, things have been sanctioned, and contractors are mobilized.

And then the last one is Rio Grande. We, I think, selected a good project, South Texas. We have good contractor, Bechtel, very committed. We have all the authorizations, so no problem of temporary ban. And so we are moving on. Of course, it's a quite a large project, so target is 2027, but it's on its way, and even a little in advance compared to the planning cost, the planning curve. Two other projects important, which we'll, on which we work, is Mozambique. So in Mozambique, we have, I think the security reports and human rights reports. Now, we have remobilizing the contractors, and I think we are not far from having everything set with them.

The last part is, you know, there is a large project financing, which was, I would say, put on hold when the events that came in 2021, and so we need now to. We are reactivating with all these financial institutions around the world, this project financing, and when all that will be done, we will start again the project. On Papua LNG, we are working as well on all the fronts, marketing, so project which is well perceived in Asia, but also the financing, because we need to put the financing in place and the EPC contracts, we work with contractors. So that's on LNG, so six projects, I would say, in parallel. A comment on the results that I want just to clarify, I know we had the question marks.

You know, 2023, somewhere, we benefited from the fact that we are hedging one year in advance part of our portfolio, except both, except Russia. So this was represent in the seven point three billion, I think, that were mentioned by Jean-Pierre, $500 million. So these five hundred were exceptional. We could not hedge at the same level for 2024 and 2023. Having said that, and you know, what we target is $7 billion, I would say, of cash flow from LNG, because we have a better, we have a growth, as we mentioned, 9% in the growth production in 2023, so we will benefit of it. So we should be around $7 billion, so we expect a stable, I would say, a cash flow coming from LNG.

We took an environment for this figure, which is a little lower than in 2023 on TTF, $10 instead of 13, just to as an average. Integrated power for 2024, we commented already the increase of capacity, +6 GW, the electricity generation, more than 45, 25 coming from renewables. And for the cash flow, we will continue with the ideas that we should grow to reach the net cash flow positive by 2028. We need to grow by $500 million per year, more or less. So the idea is that our objective is to be able to deliver $2.5 billion-$3 billion out of a portfolio of which will be by end of 2024, around $25 billion of capital employment, more or less $24 billion-$25 billion.

So that's a continued growth and all, businesses contributing to this increase. Of course, it's important to demonstrate the profitability and the 10% ROACE. The ambition is to grow it to 12% by 2028. Just a word about what we are building in Texas, which one of the announcements that we've done during the last quarter. Texas is a very interesting market because it's a growing market, growing population in Texas. People in the US are moving to Texas, so, and it's with quite a lot of imbalances and bottlenecks in the infrastructures, which create a lot of opportunities for renewables, but also for flexible generation. And in particular, it's quite, it's quite nice for us because it's during the summer that the spark spread in the US is very positive.

In Europe, in our portfolios, the gas plants are more in the winter, but instead of summer. And it could reach very high level. So even if the use of these gas plants is maybe only 30, a third of the year, so the cash, the profit generation can be very high, and we need to have these assets. We've done that in good conditions, in terms of accessing $600 million for 1.5 GW is a good price. A direct negotiation with a private equity firm, which allow us to have access to these capacities. And it's important because fundamentally, our customers, you know, corporate PPA, what they want to have is not only a green electricity, they want a firm electricity.

To deliver firm, if we don't have a firm power, if we don't have in our, in our portfolio some gas plants or flexible assets like batteries, we have also some batteries in Texas. We have already 300 MW in store. We continue to grow it. If we don't have these type of assets, it's difficult to make trading and to make offers which are competitive. So that's the whole objective that we are pursuing, and you will see us continuing to be very active on in Texas because it's a good market to develop, to deploy our integrated power strategy. On the downstream for 2024, we anticipate the markets to be a little lower than 2023. 2022, 2023 in refining has been quite a strong market, supported by the ban on Russian crude, the geopolitical tensions.

We see some ease in the markets on refining, coming back to something like $50-$60 per ton, which is still quite high compared to what we experienced in the year 2015, 2020. But probably I would see a softer environment in 2024. It's also true in petrochemicals, where clearly there is a lower demand. In Europe, we see the impact of the European economic crisis, the macro crisis, and in the US as well. So in Asia, it's still good, but so that impacts the margins on polymers. We were, I would say, during the first half or first three quarter of the year, quite preserved because of our position. Now we see the impact of these lower margins.

So that's why the $8 billion of cash flow we had in 2023 we performed in 2023, we think it could be around $7 billion in 2024 as a guidance. In refining and chemicals and marketing, because here in downstream, it covers the three segments. We are also working on the transition, in particular on the SAF market. We'll deliver, multiplied by two, our production in 2024. It's in line what we've our customers are expecting because the mandates begin to grow in some countries. And we don't have yet a big conversion of Grandpuits, which will bring 200,000 tons per year, but we are using part of HVO we have in La Mède in order to convert it in some SAF products to meet some expectations. It's a good business. And again, that's a transition.

Transition is also, of course, in the marketing part on the electric mobility. We have a strategy we explained you in September to concentrate most on our efforts, I would say, on EV hubs, on case prime locations, either on motorways, on urban locations. We have built, by the end of 2023, 350 hubs. We plan to have more than 600 in 2024. And this also focusing as well, these hubs on HPC, because the customers, they don't like this low charging. You know, it's maybe good in the streets of London or Paris, but honestly, if you want to really meet the real market for us is professional customers or I would say long-distance customers. They are ready to spend 15, maybe 25 minutes, but more, more, more.

So HPC, we have deployed already more than 1,000 HPC, and it will be more than 3,000. So rather than the number of charging points, for us, the real metrics is how many HPCs and hub, electric hubs do we deploy in Europe? That's a more... I think it makes more sense than just counting the number of charging points, because the profitability of, of each of them will not be the same at the end of the day and in terms of strategy. So that's what I could say. So I'm coming back to the share, to our shareholders, which is the most important, and the cash flow generation. So we anticipate in this environment, at $80 Brent, $10 TTF, and $50 European refining margin marker, we could answer some questions while we move this marker.

Around $34 billion is in line with the 36 we delivered. You make the math with the sensitivity, you are adding an additional growth of $500 million in power and $500 million in other businesses, and you will find $34 billion. So it's very in line with our, our, I would say, our strategic plan and roadmap. We'll invest $17 billion-$18 billion, so we have a free cash flow around $17 billion. And the board, in that context, has decided to continue to grow the dividend by 7%. So the remain is the final dividend will be EUR 0.79 per share instead of the quarterly interim dividend were 74. And this EUR 0.79 per share will be the next quarterly interim dividend, which the board will support.

So that's for the dividend, and so, this is, I will come back on it in one minute. And on the buyback, we have announced that we maintain $2 billion for the next quarter, and that $2 billion per quarter will remain the, which is the base of the, board discussion for the coming quarters and next quarters in this type of environment. And that's, I think, the next slide, which illustrate this, I would say, steady, strategy or steady, policy, I would say, as a shareholder distribution. We, the quarterly dividend, which were at EUR 0.66 during 2019, 2020, no decrease. 2021, we, we used our balance sheet. You can see it on the chart in the middle. The gearing ratio went up in 2020 because we decided to, to use our balance sheets.

We were in order to maintain this distribution policy has begin to grow in 2022, then 2023, 7%. Again, 7% of 2024, so an increase of 20% in the last three years. As you know, we did not decrease this quarterly dividend for more than 30 years. When I became CEO, it was 30 years, so today it's 40 years. So it's one of the heritage we maintain. The buyback, we are a little stubborn as well. We increased to two since the second quarter of 2022, so two, two, two, two, two, two. So you can continue two, two, two. But we increase it in last quarter because we decided to give back part of the Canadian divestment proceeds to the shareholder as a sort of exceptional.

But, so it's very, it's very consistent. By the way, as the number of shares diminish, I would say the buyback per share is growing, in fact, now, just to even if share is going up. And, just one comment about the dividend I didn't mention, the 7%. You know, we bought back in 2023, 5.8%-5.9% of our, I would say, of our shares. So for me, it's a basis. As I always said, you, to return to shareholders, you need to at least increase the dividend by what you bought back. So the 6% were, for me, secure just because we have added 1%, because there is a growth.

It was a discussion at the board, but 7%, because we've made 7%, it's consistent with what we could maintain on the long term. And so that's the last slide, because as I said, you know, we know we have a gap in the multiple with our US peers, but again, in terms of TSR, we are in the ballpark. Our ambition is to be able- is to continue to convince the market that we... the multiple of TotalEnergies should be higher. And that's why we continue to buy back, despite the fact that the share at EUR 60 per share is more or less not far from the historic high. But we strongly believe the strategy will deliver more value, and we demonstrate that we can do it while transitioning. And again, there is no contradiction.

And so, we hope to see that shareholder return to be translated in the company valuation in the coming months. And the last slide is to celebrate the 100 years, pioneers for 100 years. That's the logo, that's the slogan we have decided, the motto we have decided to select. I will not comment all the photo, only one. The first one in the top, in the left top corner is the first well in Iraq. By the way, in Ratawi, I visited Ratawi, and we discovered Ratawi. I discovered, but Ratawi is back, if you didn't know. It was discovered in 1938 by TotalEnergies teams, and the wells of discovery exist. The number one, I take a photo on it. Not this one in Kirkuk, because it's a little unsafe region today.

So, my advisor, my security guy told me, "Don't, don't go there," but in Ratawi, I was all right. So we are back to our roots. The photo in the left, bottom corner is Arzew in Algeria, part of our history. You have Tyra in Denmark. It's more recent history. You have Lapa in Brazil, more recent history as well. On the photo, the other ones, location is in France for two of them. And you have also these, small drones with a symbol of the technology of the technology-driven company and engineers, what we use for measuring methane around all our assets today. So thank you for your attention, and now we can answer to your question.

Who wants to start? Irene.

Irene Himona (Managing Director and Sector Head of Oil & Gas)

Thank you very much. Irene Himona, Société Générale. So, Patrick, you've built the integrated power portfolio through M&A. You've been very active on that. Your targets are for gross capacity. Would you contemplate something a little bit more radical or different, like bringing in a partner, selling down part of that portfolio, like some of your peers have done? And then secondly, on the buyback, the $2 billion quarterly buyback, your balance sheet is very ungeared now. If the environment were to deteriorate, and you know, we've had tremendous volatility in recent years, how far would you lean into the balance sheet to sustain that buyback? Thank you.

Patrick Pouyanné (Chairman and CEO)

Okay, first question. We do it, in fact, we don't have one partner, but, because it's not, some... But each asset, the policy is clear. We develop the assets when we are operator 100%, but at COD, we divest 50% of them because I prefer it's a question of management of risk. We have, I prefer to have two times 50%, but one time 100%. It's also a question of profitability. What is difficult is to find one partner for all the geographies. You know, you have some people who are financial partners, because we don't want to have too much people bothering our teams. You know, we like to have financial partners, they love it.

But it's not the same market when you are divesting 50% of an asset in Texas and when you go to Greece, so it's a different portfolio. Even if we reach a point where as we increase the group, the capacity by 6 GW, we have more gigawatts to farm down. So we will need to find a way to industrialize, I would say, the way we farm down. So otherwise, it's not an easy task, you know, if you go asset by asset. So for example, in 2024, I think we have 2 GW, something like that, in new assets or 1.2 GW in Texas. So we'll make a package and find the and by the way, it's better to farm down because then you have larger institutions which are interested.

When it's one asset, sometimes it's small, they don't want to spend too much time. So we try to do it like that. We have some assets as well. Greece is a different country, but we inherited from Total, or in South Iberia. So we need to be active on that and to find a way to industrialize it. It's not one partner, but again, that's very good. I prefer to have some partners as well in order to challenge us tomorrow in the way we, we... It's the same, I would say, philosophy that we had. You know, we've done one divestment. We announced in, on Seagreen, in offshore wind in Scotland, where PTTEP wanted to have experience in offshore wind. They like TotalEnergies. We. You've seen, I can tell you, the...

If you make the rate of return of the M&A activity, acquiring these 25% from SSE in 2020, and selling in 2023 to PTTEP, is more than 15% return. So you can make this type of activity. It's good because we don't want to be just. We want to share the risk between different assets, and we'll continue that philosophy. It's a very good question, and I think my, my message was positive. I think we have a good buy, and the slide is for purpose. The slide that I show you about the dividend, the gearing, and it's true that at 5% gearing, as we've done in 2020, the situation was much more critical in 2020 than today.

At 5% gearing, and when I mentioned that we announced $2 billion for the next quarter, but we, $2 billion is the basis for the coming quarters. I think it's also because I have in mind that we can use the balance sheet. And, unless the price going down again to something like less than $50, we can resist. Oh, that's true, but, for me, it was a discussion of the board, so we find in the press release, there is a positive message, but, we don't want to commit about $20 billion of buyback because we have no visibility. But fundamentally, the balance sheet give us quite a strong support to this policy and to be...

The word, important word is a steady policy, you know, and either on the dividend, 7%, 7%, or on the buyback. And so you could hear two, two, two for several quarters.

Moderator (participant)

We can go to this table as well. Gentlemen here.

Oswald Clint (Analyst)

Thank you very much, everyone. Oswald Clint at Bernstein. I wanted to ask on LNG, and I wanted to ask about appetite into your portfolio from new demand, from Biden's policy recently, from the Red Sea disruption. I think you answered that already by saying China is having some discussions with you, et cetera. So perhaps I'll change it to: are you, I mean, really leveraging, and I know Stephane is behind me, but leveraging the LNG trading and optimization piece? I mean, Shell, a couple of your peers this last quarter here in Europe, even in Texas, are now delivering gas and LNG trading profits on top. It doesn't look like you captured a lot. It looks like the others are a bit more aggressive, potentially a lot more capital financing is being allocated to trading, and it's coming through.

Perhaps your business is more tightly controlled. It's just to get your thoughts on, are you happy with that? Is there more you could do around the LNG optimization piece, please?

Patrick Pouyanné (Chairman and CEO)

I'm very happy with what we do. By the way, maybe when you look to our peers, this quarter is better. The previous quarter was not so good. So it's we are more consistent in the trading part, quarterly after quarterly. We know our policy, and Stephane can elaborate, but we have no we are, honestly, I think, we are doing a lot with that. It's at the core of the, the... We have we are managing 40 million tons, so of course, a part of it, and the number of spot deals which have been done is around 6 million tons. So again, it's quite active, and our traders are doing a lot around it. So, but I will deliver your message that they can do better. When I see their bonus, I think they have done well.

You can ask Jean-Pierre what he thinks about that. No, I think honestly, no, we are, we are not more. We are very active on that. It's completely in the business model of LNG trading. Again, we benefited from the fact we have this policy to hedge most of the portfolio one year in advance. It's true. So, but because we have quite an open position, and I think it's, so we benefited from that in 2023. Next year, $7 billion. Again, I think, one message of the slide, by the way, when you look to the improvement of what we were delivering in 2021 to 2023, it's quite a big improvement, and it's coming fundamentally, in particular, the European position. In Europe, we have access, we control, 16% of regas capacities.

We have added these two FSRUs, so it help us to trade around that. So maybe we make less noise when we have a good results, but we don't have any bad results in quarter. So I'm fine. No, we are fine.

Oswald Clint (Analyst)

Thank you. Maybe my second question is just on Iraq, 100 years.

... when you spoke about your new Iraqi project there, did you say it's also a $30 per barrel cash margin?

Patrick Pouyanné (Chairman and CEO)

It's much more than that.

Oswald Clint (Analyst)

Okay. Really, the bigger question was that my favorite chart is the one on cash flow relative to the oil price. Is there anything, as we look out for the next five years, that would be decreasing the slope of that with production sharing contracts, slopes, and LNG contracts?

Patrick Pouyanné (Chairman and CEO)

No, it's a good question. We have done it on the last two years. We can project it. I think it's a good, Olivier, which is behind the door there, he's expert of making this type of charts. He's a super good economist and engineer. No, no, but I take the point, but we can demonstrate that on the portfolio. Fundamentally, our new portfolio is much more accretive to develop about because we, we look to projects and we select the projects to, to find this, I would say, to improve not only-- we were perceived, as I said, as a resilient company. We want to have also the upside, and Iraq is one of them, by the way, where we have quite a good upside. But I take the point, and we can illustrate that maybe in our September next strategy. We had that slide.

It was too complex last time, so we need to prepare it in a better way. But this one, I think that we have, which has been imagined by your colleagues, as is a good illustration about this change of slope and which means a higher, I mean, upside that we capture from the brand.

Moderator (participant)

We can go, Michele, please, on, in that.

Speaker 15

Thank you. Congratulations on the strong results and being almost net debt-free. I wanted to ask two questions. The first one is more industry-wide. We are getting a lot of very conflicting messages on EV uptake across the world. On one side, it seems to be accelerating in China, but then it's decelerating in Europe and in the US as some of the more generous incentives roll off. What are you seeing on the ground, and does that in any way change your strategy in terms of EV charging? And then secondly, I wanted to ask you on LNG. You clearly hedge twelve-month forward your spot LNG exposure, but I was wondering, is there a way to quantify the sensitivity to spot LNG prices beyond that twelve month of hedging? Thank you.

Patrick Pouyanné (Chairman and CEO)

What is important in our portfolio is the difference between TTF and GKM. I think you can elaborate on that, Stephane. The second question, maybe you can answer, too. On the first one, that's one of the unknown, but we know, in fact, our strategy is centered on Europe, the EU, which has a clear plan, 2035, and in the EU, it's fundamentally the five, the core of the countries, France, Germany, Netherlands, the U.K., Spain, I mean. In the U.S., I agree that when you go to the U.S., you don't see a big move. And when you observe in the streets and don't see a huge move. So I'm more, we are more careful.

So we are more on the EV strategy, is more Europe, where there is a clear regulation plan, where we think that it will happen. Maybe not as quick as before, but as the government seems to be, even if they have less money, but they will be obliged. At the end, maybe not my problem, it's more the one of the car manufacturers. Maybe will be plenty of Chinese car, EV cars in the streets in Europe, that's the trend today, but it's, not my issue to me. So for us, EV equals Europe, where we have a clear, I would say, without regulations, without... I think honestly, this transition is not only a question of offer. If you don't have an incentive on the demand and a clear, I would say, a policy makers, policy, low chance that people will accept. You know, it's a revolution.

It's a strange revolution. You ask people to spend more money to get a car, to have the same function, but an ICE car. Why should they spend more money? Tell me. So we have to lower, they have to lower the cost of the cars and somewhere to be supported. So without policies, so I'm, you're right. China is a good, but China is using their own market in order to... But it's again, more for car manufacturing industry, the challenge to, to be, to bring all these cars to, to deploy their car manufacturing capacities on the, on the planet, in fact, which is what is happening, in fact, in particular in Europe. So for us, does it change? No fundamentally, but we will not deploy EV in Africa. You know, where we have retail today, it's Africa.

I will continue to develop our, I would say, traditional business in Africa. In Europe, you see that change, even if we are happy with the position in France. Again, as I commented, you know, we sold our retail station in Germany and the Netherlands to Couche-Tard because the financial proposal was, for us, quite a good one, so we had to, in a way, change. In terms of CapEx, it's a matter today of $150 million-$200 million per year, so it's not a huge commitment compared to what we spent. So Europe, yes, the rest, I will observe, just to go in your way. And what I'm observing is, again, let's see, depending on the policies, and particularly in the U.S., I have few doubts. Okay, another one? Yeah.

Stephane should answer. Sorry, Stephane. Yeah. Stephane, please answer.

Stéphane Michel (President of Gas, Renewables & Power)

Yeah, no, on your, on your question, so our LNG portfolio is globally a mix of long-term supply coming from our assets of third party and of long-term sales, mostly in Asia. So if we look at that, we purchase fixed cost and then reup, and we sell mostly Brent and TTF, GKM.

... and as we mentioned already in the past, globally, our portfolio is around 70%-80% more long-term Brent, and the rest is TTF GKM. By the way, as we do in electricity, where we try to find that 70% long-term fixed, so 30% merchant. And the last point, which is important, is the fact that we can sell either GKM or TTF, and because we have the flexibility to choose our index because of the supply logistics chain that we have with the regas capacity and the vessels.

Patrick Pouyanné (Chairman and CEO)

We arbitrate between both?

Stéphane Michel (President of Gas, Renewables & Power)

We arbitrate between both.

Patrick Pouyanné (Chairman and CEO)

Energy tankers.

Moderator (participant)

Martin go ahead, sorry.

Speaker 16

Yeah. Good morning. Two questions, if I may. First of all, a slightly technical modeling question, but, in terms of modeling the balance sheets for the next couple of quarters, I was wondering if you could say a few words about how much of the working capital that was sort of released in the fourth quarter will build up over the next couple of quarters? I think you said that some of it was sort of a bit of a one-off. And then, and secondly, I wanted to ask about refining.

'Cause I get the sort of $50-$60 a ton sort of base case, but I was wondering what your views were about sort of the risks around that, in the sense that if you do global refining analysis, you get to the conclusion, like, well, you know, market should soften a little bit. But then again, on the other end, like all the capacity that is being built is in the east, so the Atlantic basin is actually quite short product. And we have all the freight issues, and the freight issues support Atlantic basin refining margins. We stumble from disruption to disruption. All these refineries are old. It's cold weather, we have disruptions. It's hot weather, we have disruptions. Couldn't we end up in a situation where actually this turns out to be surprisingly tight, and the risks to that are actually to the upside?

Patrick Pouyanné (Chairman and CEO)

No, you are right to separate both. Having said that, and it's good if we have. We took an assumption of $50 per ton. If it's 80, I'm happy, yeah, you know, you have the sensitivity. I think it's for $500 million for $10 per ton. So, again, maybe we are a little cautious. We see some softening in the market because, again, the price, crude price remain high. But you're right, your fundamental analysis is true, that on the Atlantic basin, you have some bottlenecks in the system, the famous Jones Act in particular, and all these type of things, which helps the margins. But there is also an element of the Russian system, you know, in that which begins, the market begins to absorb it at a certain point.

So we have to be a little, maybe a little cautious about it, but, that's what we observe. So from the... I share your view, but up to which point can we quantify the upside? That's more complex. You know, that's, that's the difficulty. It's margins of different products. So, and again, the last year were also supported by the fact that, the jet fuel recovery was, the jet fuel margins were quite good, so this jet fuel recovery is down now. So we are more in a, I would say, a, a balance and normal growth. It's not this hike linked to the recovery that we had before. On the working capital, I would say $3 billion,

Jean-Pierre Sbraire (CFO)

But we still have a lot of things to do. Then, on the first one, in fact, we've done a lot in divestment. That's true. $4 billion, $4.5 billion from Canada, Couche-Tard, $7 billion, but we acquired a lot as well, huh? You should note it was a huge year, in fact, because Sarb and Umm Lulu plus Casa dos Ventos, plus-

Jean-Pierre Sbraire (CFO)

NFE, NFS.

Patrick Pouyanné (Chairman and CEO)

When you add NFE, NFS, when you add all of that, we divested $7 billion, we add $6 billion. I said to my teams, we, you don't... We have done a lot. In fact, we invested $17 billion, and when you acquire $6 billion and you divest $7 billion, it's at the end, we, we moved $30 billion of assets, which is an historic year.

And so it's quite an active... company is very active, and I think we will continue to do that, because if I want to migrate, I need also to, to finance it, you know. Now, and I'm stick. I've currently, I think one of the my big lesson is, the, the net CapEx investment, maximum 18 is a good metrics for us. It's a good metrics because you see the balance. All the balance, we generate 34, we, we invest 17, we deliver 16 to shortly.

It's a good balance. So one way is to continue to divest. Divestments will come, part of it, by the way, from what discussed about the farm down of renewables, because we, it's not a divestment, it's more we divest because we reinvest part of it. So, you know, when we have, at the end, $5 billion, it's, in fact, it's +$7 billion, -$2 billion, et cetera. So we have to, this machine of divestments has to be put in place, and that's one of the targets for Stephane's teams and in the year. But we have also some assets in the upstream. But it's no secret that in Nigeria, for example, these onshore assets are complex. We want to divest our share of SPDC, and we are looking to reshape the portfolio. So it's a permanent, for me, good philosophy to oblige ourselves.

We buy in Malaysia, where do we divest on the other side? By the way, in, you notice that in 2024, we'll benefit from the divestment to Couche-Tard to the Netherlands and Belgium, because we didn't sell it in 2023, but in 2024. So I think we are fine, and the level of activity should be around about $5 billion on one side, $5 billion on the other side, when I think to... And I think it's part of, the strategy is also to benefit from, to have- and we have the balance sheet to do that. Not to make big M&A, I'm not consolidator of Shell, Shell in the US. I'm not there, so but I can perfectly understand what our team, our peers have done, but we are not in that business.

But we can—we have the balance sheet in order to be active on both sides, but selling and divesting. That's the philosophy. That's, I would say, what I would say.

Moderator (participant)

Good. Lydia?

Lydia Rainforth (Analyst)

Thank you. It's Lydia Rainforth from Barclays, and that hundred-year milestone is a great chance to look forward and back as well. When you think about the structure of the industry, it has been remarkably stable for the last 20 years. How do you see it going forward? Because it does seem that we've got a lot more volatility, a lot more regionalization, and almost back to that chart, that of Olivier's of CFFO versus Brent, is the opportunity for that to kind of diverge more as we go forward? And then if I think basically a little bit looking back, this story around the safety side, there's obviously changes in processes that are being put in place. Do you think you can make those changes both quickly and safely, in terms of just the...

There's going to be more and more processes that need changing in a world where there's more digitalization?

Patrick Pouyanné (Chairman and CEO)

Okay. Safety. That's true, but it's a little frustrating to discover that you need to have a fatality to put into question. Honestly, this example is a good example. Myself, I'm a little frustrated, but it's because we have a fatality, that we take the topic and we say... And remember, I said, "You stop, and we find a way." And it was provocative from us at the top. Why are we obliged to put somebody in these reactors? The reality is that it's a whole industry is working like. It's the most efficient in term of cost because it's, it's shorter, and we had the feeling it's safe, but it's not safe. And I think, okay, it's a decision.

It's where safety is a value, but it means that maybe it's longer to go with the water and et cetera, but at least you have nobody inside the reactor. I feel myself much more comfortable. And it's good to see that we are sharing that, and our colleagues in the sense of big peers are thinking all on the same way with us. They want to... So that's true, but it's quite frustrating that we could have done that before. The reality, and I think at least what is positive, that we have reacted in a way which force our teams, because our initial reaction, we just know there is no other way. No, no, we told them, "If you give us a target, no human being inside these reactors, what do you do?"... they came with a solution.

Honestly, I'm not an expert on this type of technologies, and we say, "Okay, let's push on it." Yes, it's a little more costly because it takes a little more time, okay? It's an arbitration, but I feel more safer. So this is good, a good question, but maybe we should look to other processes where we expose people in this type of environment. And again, people, we think that it's, it's a question of putting in. It is a good element, so we think we share it because we need to look again to avoid any, I would say, unsafe situation we could avoid, even if it has a cost, but at the end, it's safety first.

So, thank you for the remark and, it's true that there is positive part we've done it, but we could have maybe done it before. On the first one, so, volatility of the structure of the industry, you mean the strategies or you mean, I'm not sure to have captured fully your question.

Lydia Rainforth (Analyst)

Just in terms of... So we've had. It's been relatively stable in terms of the structure of the industry, and now as we go forward for the next 20 years, it seems like there's a lot more volatility as we add in more renewables.

Patrick Pouyanné (Chairman and CEO)

You mean more M&A, more renewables, more-

Lydia Rainforth (Analyst)

More renewables, yeah. So, but just in terms of that chart of cash flow versus Brent, that kind of, that the point that Oz was making, that ultimately we're getting more, that do you end up having be able to break that successfully longer term, but that you continue to get more upside on that part?

Patrick Pouyanné (Chairman and CEO)

I think it's a question of, again, of continuing to have. If you keep in mind that your portfolio on the oil and gas will be, on one side, you break even, you maintain it, and that you look to what is the right assets in order to capture part of the upside, you can continue to build on it. I'm absolutely convinced there is opportunities to do that. If you keep that in mind as a real target, yes, you. It's a question of being focused on what do I want to achieve? Including, it's a case, it's always the same discussion between growth and value, and, you know, that's the arbitration.

We should not be suddenly obsessed by the 2% growth, even if we have declared 2% growth for two to three, because we have the portfolio to execute. Now, it's a matter of execution, including on the LNG part, where it's part of the keeping part of the upside, that's part of it. I agree with this. Do we see more divergences because of renewables? I would say it's another business. You see some strategies diverging. I think some other companies will come one day or the other to electricity. Even when you want to produce, you know, when you decide to produce your green molecules, the famous molecules, what is hydrogen when it's green? It's electricity. It's electricity.

So you have to manage this energy as a fundamental feedstock, even when you want to produce these e-methanol or e- whatever it is, e-fuels tomorrow. So I think it's part of... And from my this perspective, I think all the efforts we've done, we are doing to manage the cost of electricity, the process of producing the electricity, will help us tomorrow to go to this field of molecules, knowing that today the demand for this molecule is not big. You know, you were speaking about EVs. I could say the same about hydrogen, you know, there is a lot of enthusiasm in media. When you look to the reality of the demand, by the way, we've got 500,000 tons per year that we are putting on the market. It's quite a good success, by the way.

We have 50 offers. I'm not sure we need to qualify that, but we have seven times more. The volume which is offered is seven times more than what we are ready to buy. So we see the competition, the price now, because it's only a question of volume of price, and probably part of these offers are not completely in line. But we are optimistic that we could get some good, good, good products, including maybe investing in some of the project ourselves. We'll see the way it works. So I think it's a question of the demand there is. So, yes, there is some divergence, but honestly, we are very comfortable, and as long, and as I said, that we can remain at the top of profitability globally on the company, building the second pillar, this pillar on electricity, is okay.

I would be worried if I were a shareholder, suddenly I see a decrease of the profitability. That would be more a question mark. We are comfortable at the board with that.

Moderator (participant)

We can go that, Henry.

Speaker 17

Yes. The first question is on the dividend growth. You mentioned earlier, we've done a $2 billion buyback per quarter. You have this 5%-6% base growth and then an additional 1%. Could that additional 1% become larger in the future as you get more underlying cash flow growth, integrated power, integrated LNG, or are you more comfortable with the 7%?

Patrick Pouyanné (Chairman and CEO)

It will come larger if the share is going up. Because we are looking also to the yield. The yield is at 5.1%, which is on the top of the majors, and we are—it's linked. You know, you will say maybe the dividend growth will increase, will put the price up. It's a chicken and egg, that story. But no, we are honestly, well, there is room to do more, but we are comfortable because again, we want to—we prefer to increase the dividend in a way that we can secure it, even if the cycles go down. So 7%-8%, 1 cent, okay, it's—that's the type of discussion.

But prefer to have a steady policy of increasing the dividend several years in a row rather than suddenly go down, and so that's, that was the discussion, the philosophy. When we benchmark to our peers, we feel that, we felt that the 7% is quite on the good side. And again, I think the big news for TotalEnergies, what changed in our story, is that we have really enhanced the payout policy to shareholders. We were at 30% a few years ago, went down to more than 40. In fact, this year we are 45.

So this is a big change, and including and this is clearly anchored in the, in the mindset of the board today, that we need to monitor that because it's also part, I would say, of the energy transition strategy. We can execute it if we are profitable and if we return to shareholders a big, a higher share of that. Otherwise, people will tell us, "Why do you invest in this transition? Is it profitable?" Blah, blah. The fact that we remain very profitable and that we return to shareholder is a way as well to execute the strategy, the transition strategy we want to execute, and where we strongly believe we will deliver cash flows for the future for, for our shareholders. So that's the equation. There is no-- Somebody asked me, what is the mathematical formula? There is not a mathematical formula.

We are looking to what we think is the right balance.

Speaker 17

Understood. And then secondly, I wanted to follow up on a couple of LNG projects that you mentioned. Just firstly, on Mozambique LNG, if you can give an update on, you know, security situation and how quickly you think you could get back to construction there. And secondly, on Arctic LNG 2, I mean, how do you see that project ramping up, and what have you factored in for your, your-

Patrick Pouyanné (Chairman and CEO)

Well, Arctic LNG 2 is quite easy, yeah. It's under sanctions, so story is off, huh? I would say, be clear, I never... Honestly, I'm unfortunately, I mean, not surprised what was happening. We were very cautious in 2022 when we announced that we wrote off all that... So the project has moved on because these Novatek guys are quite incredible, and they are able to put into production a new train despite all the sanctions and et cetera. So in fact, in terms of engineering, it's quite a remarkable achievement. I'm not surprised because it was difficult with... The Europeans need to have this Yamal energy, these 20 million tons, but to add more Russian energy in the mix is a little politically complex, you know, to add more.

So I'm, I'm not super surprised on that. So that's where we are. So honestly, today, we are not more in the governance. We have put in force majeure, everything. So I cannot give you more information because we not, we are not there anymore. And of course, our trading team or, yeah, our LNG teams were in contact, but we have put force majeure because it's, that's the reality, you know. No way to expose the company to any type of secondary sanction, you know? That's, that's clear to me. So yeah, the process. On what I understand, just to share with you, is that they are willing to install the second train. The first train, for me, is on hold, which I understand, but the second train seems to move. Where is the market?

Not in Europe. So there is only one possible market. One or two. But it's not in our assets anymore. On Mozambique LNG, listen, I mean, we monitor permanently the situation on the ground. As you know, the Mozambique state is helped by another African state, mainly, namely Rwanda, to control the situation. Today, and more importantly to us, the civil population is back in the area. Life is back to normal, normality. There have been a few incidents recently, linked to the Gaza tensions, I would say, you know. We can observe in the planet that you have some Daesh cells which are being reactivated just to ... Not only there, in many, many countries. You know, you've seen some.

So that's unfortunate, but there is ... So we have to monitor that. But today, in fact, it's more to reactivate the contract. There is still some engineering to be done, so that's part. So construction, I hope it will come back by the middle of the year. We monitor that. Again, I, what I don't want to do is, to take a decision to bring back people, to be obliged to go, to get out again, because that will be too complex, you know, so. But again, today, the discussion with the ... We have progressed a lot with the suppliers, I mean, the different contractors, in a good way, I mean, including on the costs. You know, we've had some debates. They have listened to our messages.

Okay. But my second question is just on German power prices. I think when you did the auction last year, you sort of indicated a view that EUR 70-EUR 80 a megawatt hour. It's kind of where we've now pulled back to in Germany, you know, prices have pulled back a long way. But what's been remarkable is there's no real demand elasticity, like industrial demand is still really weak. Does that worry you that the-

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

... economy can't support these power prices?

Patrick Pouyanné (Chairman and CEO)

No, no, no, because again, Germany has decided that they exit from nuclear and they exit from coal. So the power price in Germany will be fundamentally driven on one side by these renewables, but also by fundamentally gas plus ETS. Don't forget the ETS. So the fundamental element, in fact, in the electricity economy in Europe is also the ETS price. And think to that, because at the end, the marginal price will be done by the ETS on the top of the gas. So when you are a country which decide that they will go from gas plus gas plants plus renewables, the price will remain a good price. So today, I think the forward curve in Europe today in 2025 is EUR 79 per megawatt-hour. Okay, that's okay.

We are fine with that. So I'm no, no, we are comfortable with developing this offshore wind in in Germany, and we will find customers who are ready to commit on the long term, because it's a question of, you know what the industries don't like is to is the volatility of the price. We were afraid, so it help us to consider that, when we said EUR 70-EUR 80 per megawatt hour to some of these industries, it's okay. We can find them. So I'm no, honestly, Germany, from this perspective, again, because of the choice of the policymakers, is, I think, one of a good market to take this type of bet, to keep some its wind offshore wind merchant in Germany, in Germany.

Moderator (participant)

Chris?

Patrick Pouyanné (Chairman and CEO)

But it's also a good market to have some batteries, because when people say we want 70% of renewables, if you don't have plenty of batteries everywhere, I can tell you it will be difficult. Yeah.

Chris Kuplent (Analyst)

Chris Kuplent from Bank of America. Patrick, congratulations on closing that drillship deal. I do think it's quite a departure for the industry,

Patrick Pouyanné (Chairman and CEO)

I know

Chris Kuplent (Analyst)

... maybe you can give us a little bit of an insight, what you're hearing from your partners in all those projects. Are you also frustrated that you think their capital discipline is waning a little bit? Because I share your view, there isn't a huge amount of competition out there in that part of the industry. And do you think others will follow in this step? How many more are you going to buy?

Patrick Pouyanné (Chairman and CEO)

You know, it was a situation, but I think it's true that it's a breakthrough, including in the company, but the idea, but we know because this industry was. It's a story of the 1990s. You know, in the 1990s, it's an old story, but the industry has changed. In the 1990s, the companies were owning ships, the drill ships, but then suddenly the price went down, they were stuck with the rigs and, blah, blah, and so they decided this, it's a, it's not our business. In the meantime, we are not, not at $10 per barrels, we are $80, even at $50. What I've observed for the last 25 years in this industry is that the low bottom of the deepwater rigs is $200,000 per day. It could go up to $500-$600.

Honestly, the rig cost of the rig is around $800 million. When you pay $500,000 per day, you pay the rig in four to five years. We have done this type of mistake from 2010 to 2015. I was super frustrated, to be honest, but we have paid the rigs, and in fact, fully, and in fact, at the end of the day... So we are beginning again the same history, you know, and so the only way is to hedge our things. We not operate the rig, the rig will be operated by Vantage, so we wanted to have a partner. We not operate, but we have 75, so at the end, we'll receive the cost and we'll sell it, and the beginning of this rig will be sold to a partnership at a market rate.

So that's the way, that's the game. Should we lower follow? I know that I have announced that to some of our-- they look to us. I think it's just nothing new. Putting $200 million in advance on a rig in order to secure 10 years, et cetera. I see that at the size of the scale of our operations, it's nothing. In fact, when you-- okay, it's innovative. I think, yes. My only point, I don't want all my teams to be super excited. We own a rig, so it will be managed by Vantage. But no, no, we don't own, we don't operate. And again, but it's- we need to do something. We cannot just look, see the cost going up and complaining. So what can we do?

This action, it's true that with Vantage, it was a company which was a financial stress, so we had a good discussion. But it's more in our head that we need to be innovative sometimes. So I'm comfortable, and again, 1 is nothing compared to my 8-10. I could have two or three. At certain point, I need to keep flexibility, but if I have other opportunities, I will look at it. So it's a question of opportunities, but I mean, it's a lesson of the year 2010, 2015. We cannot just repeat the same mistake. We have some projects, but if our CapEx going up, why should we...

I want to do the project, but I need to find ways to control my costs, and this is one way to hedge our drilling cost.

Chris Kuplent (Analyst)

Thank you. Can I add a quick second question, Patrick? You commented earlier that you don't really see looseness in the global LNG pool before mid-2026.

All right, great. I had two questions. First, I just wanted to clarify an earlier answer, discussing net debt. I don't know if you gave an actual gearing target, but it's moved, you know, across the past number of years. So I just wondering if you could provide an updated gearing target moving forward. And then secondly, going back to LNG trading, it seems like the past few years, you've benefited quite a bit from the spread in global gas prices versus Henry Hub gas prices, just given your position in US LNG.

Are you able to kind of optimize global LNG flows to replicate kind of the upside you've seen from the U.S. to global gas price spreads as the market kind of expects that spread to tighten over the next few years? Thanks.

Patrick Pouyanné (Chairman and CEO)

Okay. No, we don't express a gearing target. We are very comfortable with 5%. I think the CEO's variable pay target is under 10%. If I remind, this is a board, so you have an idea what I should control, is under 10. I'm very comfortable to go down to zero. I mean, I'm very comfortable. There's no problem. But it's more, again, in terms of today, at 5%, we have reached a very strong balance sheet, so my CFO is comfortable. He does not shout to go lower. So the priority is more in the way we allocate the capital, first to the dividend, the capital expenditures, and the return to shareholders with more than 40% of cash flows. I would say that's the main commitment. So no, we don't have a...

Less than 10% is okay, I think, but we can go down to zero, no problem, if we have zero debt or even a positive treasury. Again, I'm not sure to answer, so I will go to Stephane to answer to the question, which is, if I understood, can we optimize the global LNG flows to replicate the upside we've seen in the past? So explain again what you are doing with your portfolio.

Stéphane Michel (President of Gas, Renewables & Power)

So as I said, the portfolio is basically we have a long-term portfolio where we buy and rehab and fix cost, and we sell partly Brent, partly GKM and TTF. And then we have a global optimization with plenty of optionality in the portfolio. One of the big one being to be able to switch from Europe to Asia and from Asia to Europe. But you have as well plenty of other place, like the backwardation, the contango, the arbitrage of timing, the possibility between Africa, Latam and Asia, and so on. It's clear that in 2022, we have benefited from the spread increase between HH and GKM and TTF, and that going forward, we are going to less benefit from that.

You've seen, because it's partly already in the level of the hedge we have been able to realize, and Patrick mentioned it, that the difference of hedge between 2024 and 2023 in terms of cash going to be $500 million, and that's, that's done. As for the optionality of the portfolio, we are confident that we have plenty of ideas to continue to sustain the, the good performance we have done in in the past, even if

Patrick Pouyanné (Chairman and CEO)

No, but-

Stéphane Michel (President of Gas, Renewables & Power)

You notice that it's not enough.

Patrick Pouyanné (Chairman and CEO)

No, but again-

Stéphane Michel (President of Gas, Renewables & Power)

Voilà.

Patrick Pouyanné (Chairman and CEO)

2022 was absolutely exceptional. We don't and I don't hope, by the way, to see again $30 per million BTU or $50. It's very detrimental for the demand in the market. You can destroy the market by this type of price. So it's why... So I'm not willing to—I mean, okay, we benefited one year, but it's a one-off, and we, I hope will not come back. It's not a normal market to see this type of prices, $200 per barrel for gas. That's absolutely abnormal. But in fact, fundamentally, you know what? The strong belief I have is that Henry Hub will remain quite low. That's why we built on the LNG in the US, because you have a huge amount of gas there. You have some domestic demand, but it's...

So you have, okay, it could go from three to five, but— So the question is, how do you position the export market compared to Henry Hub, between the Brent and Henry Hub and JKM and Henry Hub? So that's a way to optimize the flows. To optimize the flows, by the way, what you need is energy tankers, and we are growing our fleet. I think we are going to 30, more or less... We are targeting 30 LNG tankers or 20?

Stéphane Michel (President of Gas, Renewables & Power)

Yes.

Patrick Pouyanné (Chairman and CEO)

Yeah. So-

Stéphane Michel (President of Gas, Renewables & Power)

Mm.

Patrick Pouyanné (Chairman and CEO)

Growing our fleet helps us to optimize all these flows. When the arbitrage is open between the US and Asia, we can go to Asia. Of course, the location of ECA in Mexico is good from this perspective, and we are looking to other activities, so it's a question of optimizing. The Panama Canal, from this perspective, is more a problem for us than the Red Sea. Because the Red Sea, when you go to Qatar to Europe through the Red Sea or through South Africa, it's only four days of difference, so it's not a big event. Four days, you can manage it. When you have to go from the Gulf of Mexico through the south of America, through Argentina and back, it's 20 days of difference if you avoid.

Hi. Thank you. I had a follow-up on hydrogen. I was wondering in which parts of the world you're seeing the most attractive bids on your 500,000-ton green hydrogen tender? And I seem to remember your comments in New York a few months ago were a lot less positive on hydrogen, back then. And then my second question is on short cycle upstream CapEx. I see it's $1.5 billion this year. Is it an increase on the previous run rate of about $1 billion, or is it about the same? And is there enough runway to continue with this level of short cycle activity going forward?

Patrick Pouyanné (Chairman and CEO)

Thank you for the second question, because I forgot to comment on it. Well, on this slide, there were four messages, so I forget one. So thank you. No, it's not an increase. We keep this flexibility. I mentioned 1.5-2. It's a good way either to arbitrate if we have to, if suddenly we have another COVID epidemic, which I don't hope, a pandemic, I don't hope. No, we have that. In fact, positively, it's more so. No, we just announced, I think, or it's tomorrow, we put into production Akpo West in Nigeria. It's typically the type of tieback which we have been able to do, deciding that one year ago, one year and a half ago, and to put it into production, benefiting from a high price.

So it's, I think, we have in our portfolio, either in Nigeria, Angola, but also in the North Sea, on Culzean, for example, and in Denmark. And also, by the way, we have some few share in our production in Argentina or in the U.S. We can make this type of short cycle. So we decided that we need to have $1.5 billion-$2 billion of short cycle every year in order, in case of, again, a crash, to be able to arbitrate. And also, today is more positive way to benefit from a good price. So we are very profitable. We are profitable at $50. Of course, when we launch Akpo West, this production at $80, profitability is very high.

So this is very important in the way we appreciate to keep this flexibility in our CapEx, that we mentioned in September. Now, on hydrogen, I mean, I'm still on the there. In fact, all that is linked to, where is the demand? The demand exists in Europe, and we are refiner in Europe because there is a policy, which is quite a complex one, where you have some ETS advantage from credits when you are, I would say, using green hydrogen in your, in your refined products. So as we are paying quite, high and it will an increase CO2 burden in Europe, you can find a way to, not only promote green hydrogen, but having some credit, so it makes things economically, viable. Again, it's completely linked to, this, framework, European framework.

Is there today a demand for green hydrogen as itself without this type of framework? No, the reality is no. So that's why you have more supply than demand. The question for us is today, I mentioned the volume. We'll see what will be the price at which we can be delivered, knowing that we don't want ammonia, we want hydrogen, which is a little... You have, you have to, to transform ammonia, but where does it come from? At the end of the day, my view is that it will mainly come from, local European producers. USA. There will be a mix. It's not so easy to, to manage all these... We'll see, because there are also, so there's some uncertainty because the regulation, for example, in the U.S., is not totally, completely approved.

Maybe-

Patrick Pouyanné (Chairman and CEO)

So look-

Bertrand Hodée (Analyst)

I can please a very small one. It's a follow-up on Nigeria, on Train Seven. Do you believe there will be enough gas? Or the other way to say that is that the plant will be delayed if there is no enough gas, and when do you anticipate Train Seven in Nigeria to start up?

Patrick Pouyanné (Chairman and CEO)

I think I answered to you in my previous answer. Okay. It's part of the story of the gas. There is a ... I said clearly to my colleagues and to Nigeria, it would be crazy to have a train with no gas. So I want the gas. But the gas is part of all these developments. And ... Okay, that's one of the complexities with that. We are working actively on this one.

Moderator (participant)

Okay, I think we are ... We covered everything?

Patrick Pouyanné (Chairman and CEO)

Yes. So it's exactly 11:45 A.M. I know that we have our Norwegian friends to this afternoon in London, but you will rush to listen to our ... No, no, but we are in good connections. You know, we have put our sequence before.

Earlier this morning, we asked you to come, you know, not, not to have any overlap, so we take care of you. So it's the two teams are connecting regularly in order to organize it for you. So thank you for your attendance this morning. Thank you for ... I think you know, honestly, as a conclusion, I would say, we have a clear strategy. We are consistent in terms of execution. We don't change. I think it's a clear message, and I think in this energy business, maybe because I'm there for 10 years and for some years, my lesson is, let's be stick on what you think, and including in the distribution policies, try to establish a clear framework rather than moving around permanently.

I think it took time to me to understand it, but now I'm there, and I'm sticking on it. So maybe for the hedge funds, it's not a lot of fun, but for long-term shareholders, it's a lot of fun. It's better. And we are more targeting these type of shareholders for making these companies a success. Thank you.

TotalEnergies - Q4 2023

Transcript

Bernard Pinatel (President of Refining & Chemicals)

Jean-Pierre Sbraire (CFO)

Patrick Pouyanné (Chairman and CEO)

Irene Himona (Managing Director and Sector Head of Oil & Gas)

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Oswald Clint (Analyst)

Patrick Pouyanné (Chairman and CEO)

Oswald Clint (Analyst)

Patrick Pouyanné (Chairman and CEO)

Oswald Clint (Analyst)

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Speaker 15

Patrick Pouyanné (Chairman and CEO)

Stéphane Michel (President of Gas, Renewables & Power)

Patrick Pouyanné (Chairman and CEO)

Stéphane Michel (President of Gas, Renewables & Power)

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Speaker 16

Patrick Pouyanné (Chairman and CEO)

Jean-Pierre Sbraire (CFO)

Patrick Pouyanné (Chairman and CEO)

Jean-Pierre Sbraire (CFO)

Patrick Pouyanné (Chairman and CEO)

Jean-Pierre Sbraire (CFO)

Patrick Pouyanné (Chairman and CEO)

Jean-Pierre Sbraire (CFO)

Patrick Pouyanné (Chairman and CEO)

Jean-Pierre Sbraire (CFO)

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Lucas Herrmann (Analyst)

Patrick Pouyanné (Chairman and CEO)

Lucas Herrmann (Analyst)

Patrick Pouyanné (Chairman and CEO)

Lucas Herrmann (Analyst)

Patrick Pouyanné (Chairman and CEO)

Lucas Herrmann (Analyst)

Patrick Pouyanné (Chairman and CEO)

Jean-Pierre Sbraire (CFO)

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Lydia Rainforth (Analyst)

Patrick Pouyanné (Chairman and CEO)

Lydia Rainforth (Analyst)

Patrick Pouyanné (Chairman and CEO)

Lydia Rainforth (Analyst)

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Speaker 17

Patrick Pouyanné (Chairman and CEO)

Speaker 17

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Alastair Syme (Analyst)

Patrick Pouyanné (Chairman and CEO)

Moderator (participant)

Patrick Pouyanné (Chairman and CEO)

Chris Kuplent (Analyst)

Patrick Pouyanné (Chairman and CEO)