TotalEnergies SE (TTE) 2003 Q3 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen, and welcome to the Total conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a Q&A session and instructions will follow at that time. (OPERATOR INSTRUCTIONS).

Just to remind you all, this conference call is being recorded.

I would like now to handover to the Chairperson, Mr. Robert Castaigne.

Please begin your meeting, sir, and I will be standing by.

Thank you.

Good morning, or good afternoon, and I would like first to thank you for your interest in Total.

Today, we comment will briefly on the third-quarter results, the market environment in each business segments, and then I will take your questions.

On the whole, we had a strong third quarter, especially when expressed in dollar terms.

Excluding non-recurring items -- and I should mention that there were no special (indiscernible) in the third quarter, 2003 -- earnings per share were up by 13 percent in euro terms and by 30 percent in dollar terms for earnings per share.

Because of the significant decrease in the value of the U.S. dollar relative to the euro -- minus 13 percent -- the environment was net negative for our Q3 results in Europe.

The slight increase in the brand price, 5 percent, and the rebound in European refinery margins did not compensate for the weaker dollar and the poor Chemical environment.

So for Total, the increase in earnings per share can be attributed basically to three things -- the benefit of growth in (indiscernible) production, our ongoing service programs and the aggregate impact of our share buybacks.

Looking now at the results, operating income, excluding non-recurring items, increased by 4 percent to EUR2.9 billion in the third quarter, 2003.

Net income, excluding non-recurring items, increased by 7 percent to EUR1.71 billion in the third quarter of 2003 from EUR1.64 billion last year.

This higher percentage increase, relative to the operating income, is due to lower net interest expense and a higher contribution from equity affiliates.

Earnings per share increased by 13 percent, which takes into account the effect of the buyback.

As you know, we bought back 4.1 percent of our shares during the first nine months of 2003.

Given current regulations, we were close to the maximum amount of shares that we could hold in treasury -- 10 percent -- so the Board decided yesterday to (indiscernible) 30.1 million shares effective November 21 so we can carry on with our buyback program for the months to come.

Coming back to the results, cash flow generation was strong.

CapEx, expressed in dollars, increased by 3 percent.

This leaves us with a strong balance sheet.

The net debt-to-equity ratio at September 30, 2003 was 25.6 percent, compared to 27.1 percent at the end of June.

Now, I would like to touch on a few of the highlights for the quarter.

In the Upstream, production increased by 8 percent to 2.54 million barrels of oil equivalent per day.

This strong increase can be explained as follows -- plus 7 percent from underlying growth due to the starting ups and building ups of new fields (ph) as well as from less shutdowns in the North Sea than a year ago.

Plus 2 percent in addition to the 7 percent -- plus 2 percent from the OPEC (indiscernible) in Greece and then minus 1 percent from the negative impact on production sharing contracts and buyback contracts from higher oil prices.

Taking these elements into account, we (indiscernible) our production growth target of 5 percent for 2003 compared to 2002.

Now, Downstream -- operating income increased sharply to EUR340 million.

This was due to higher refining margins and throughputs, service programs and, to a lesser extent, slightly higher marketing margins.

For Chemicals, operating income fell to EUR102 million, due to the difficult environment, notably in Europe.

So, before concluding, I would like to tell you where we stand with regards to that other issue, (indiscernible).

Following the offer launched by Banco de -- (technical difficulty) -- late October, we said we considered the bank had acted in violation of the mutual agreements governing our relations in (indiscernible) since 1990.

In order to protect all of the many rights that we have in this situation and the interest of our shareholders, we signed an arbitration claim in the Netherlands and we are currently waiting for the outcome of this action.

As a separate issue, we intend to liquidate the holding company Somendos (ph) in order to clarify the positions of shareholders and to contribute to the transparency of the market.

We are currently working on this subject with the banks -- Banco de Santandel (ph).

Now, just a few concluding remarks -- our third-quarter 2003 results demonstrates Total's stability to deliver substantial organic production growth while at the same time performing very competitively in terms of profitability.

For the twelve months ended September 30th, our return on average capital employed for the Group was 18 percent, which compares favorably with our peers.

Also, we consume our 2003 targets for synergy (sic), productivity and (indiscernible) and production growth.

So thank you for your time.

Now, I'm ready for your questions.

Thank you, sir. (OPERATOR INSTRUCTIONS).

Alaister Sayeem (ph) from Merrill Lynch London.

Good afternoon, Robert.

I'm just trying to reconcile the moving parts on the Samsung joint venture in the quarter.

If I look at the cash flow, there's a 345 million outflow relating to acquisitions, which I'm guessing is Samsung.

Can you tell us if there's any more capital to be committed to that, in terms of acquisition spend, what the sort of working capital and debt contribution is, and if I can be so brave, to speculate what the income might have been for Samsung for the quarter?

Concerning the acquisition of Samsung, I remind you that the value of 50 percent was something like $750 million with 50 percent of that in equity and 50 percent of that in debt.

So, in fact, our share in the equity that we basically -- (technical difficulty) -- was something like $370 million, so something like EUR300 million.

Of course, in our balance sheet, we find the 50 percent of the debt of Samsung, but it's something that we have not paid for that and will have them in the framework of our consolidation.

Concerning the business of Samsung, we can say that now it's going very well, especially if we consider where we are in the cycle of petrochemicals.

I wouldn't want to be very precise as to what we can expect out of Samsung for the last quarter but clearly, this is totally in line with our expectation.

Now, I consider that we are happy with our investment in Samsung Petrochemicals.

Will you be willing to tell whether it was a positive earnings contribution in the quarter?

Yes, absolutely.

No doubt about that, yes.

David Klein (ph) from the BNP (ph) (indiscernible).

I've got two questions.

Firstly, on Chemicals, can you just give us an update on the restructuring of the division -- what's recently been taking place?

Secondly, in terms of the full-year, the full-year production target of 5 percent growth in the Upstream division -- obviously, to achieve that only requires relatively modest growth in the fourth quarter.

Is it reasonable for us assume that that 5 percent figure is now a conservative one?

I think the 5 percent figure is a good figure.

I tried to explain, a few minutes ago, -- (technical difficulty) -- total growth that we had for the first quarter.

We can say that we had 7 percent (indiscernible) growth, but in this 7 percent, there is about 1.5 percent that comes from the fact that last year, the third quarter -- the production of the third quarter was relatively low because we had many shutdowns.

That was not the case for the production of the fourth quarter, so I think I can say that we are comfortable for the fact that some growth that we are fixed for the year (sic), but I cannot give more, in fact.

The second question that you asked concerned the restructuring for Chemicals.

I think we still stick with our EUR260 million as for the consequence of all the restructuring that we are implementing.

I meant EUR250 million a year as a consequence of all the restructuring that we have been implementing in Chemicals, I would say, since 2001 more or less.

These restructurings are going well, and the issue is that, in fact, up to now, it's something that you have not seen within the results of (inaudible) we had to give back to the market all I would say the proceeds of this restructuring (indiscernible) more than what we were able to achieve.

But clearly, the restructuring -- we continue to restructure our Chemicals business, and I can say that this restructuring we are implementing satisfactorily.

Tyler Dann from BOA Securities, Houston.

Good afternoon, Mr. Castaigne.

I have some clarifying questions.

Firstly, in the cash flows, it looks as if there's a substantial excess booking of net income from your equity affiliates relative to the cash brought in.

Is that because the payment from the Toulouse plant is part of that line item?

The second question I have is related to the operational or maintenance shutdowns in the UK -- would you characterize the third quarter of last year as being higher than average shutdowns, or this year as being lower than average, or a mixture of the two?

Excuse me, for the first quarter or the third quarter?

third quarter.

Of last year?

Of last year, correct.

Yes, it was, in fact exceptionally, high, in fact -- the shutdowns (indiscernible) in the third quarter of last year in the North Sea.

This is why the production of the third quarter last year was relatively low, and it explains about 1.5 percent of the underlying growth that we can measure for the third quarter, 2003 compared to 2002.

Then you asked a question concerning the equity -- concerning what?

If you look at your cash flow statement, it looks as if the amount of -- the equity and income affiliate excess of or less than dividends received -- it looks as if your -- (multiple speakers).

No -- (Multiple Speakers) -- we are (indiscernible).

It's fair to say that we have had a relatively good increase of our equity income from affiliates, that it comes essentially from (indiscernible) that continue to grow very well, as well as from (indiscernible) as a result of our LNG operation in Nigeria.

Concerning what we spent in connection with Toulouse, I think from the third quarter, it was something like EUR302 million.

It's clear that this is a negative element of our cash flow from operating activities.

In order to have a better view of this cash flow on a recurring basis, it's clear that we should add the EUR302 million that we paid for the third quarter to the level of the cash flow from operating activities.

I just remind you that this payment of EUR302 million were, of course, covered by your provision, and this had no impact on our income.

I can add that after (indiscernible), our cash flow increased by something like -- what?

Like two percent, no?

Okay?

Charlie Gomer (ph) from CIC Securities Paris.

Two questions -- one on the impact of a change in the (indiscernible) tax regulation.

Most of your competitors accounted for (indiscernible) gained in the second quarter.

My understanding is that (indiscernible) third quarter was an impact.

The second question is on your reason for the decline in (indiscernible) production in your front quarter.

Is that entirely due to the impact of higher prices on PSCs (ph) and buybacks?

Okay, so concerning your first question, the answer is that there has been no impact in the third quarter concerning the production in the Middle East.

You are right to mention the production decreased by something like 8 percent.

This decrease is essentially due to a change in the calculation of our production entitlements in Syria.

That took place in 2003 but this adjustment was made at the level of the third quarter for the whole year, but this, in fact, had no impact on the profitability of our operations in Syria.

In fact, this production just concerns the tax (indiscernible) to which we are entitled.

So, no impact on the profitability, just a change in the tax (indiscernible).

Katarina Hansfield (ph) from CS London.

Hi, Robert.

Just two quick questions, if I may?

The first was, just the other expense that you reported in your P&L, I just wondered what that mostly what.

The second question was just about the tax rate, which at 48 percent seems quite higher.

I just wondered if there was anything else other than obviously a big contribution from E&P.

Okay.

Concerning the other expense, you are right to mention that there has been a change from EUR81 million in the third quarter of 2002 to something like minus EUR134 million for the third quarter of 2003.

This decrease is mainly due to two things.

First, less capital gain in the third quarter, 2003;

I remind you that, for the third quarter, 2002, we had EUR62 million of capital gains on the sale of (indiscernible) Santa de la Boucher (ph) that we sold.

Then we had this, quarter, the negative impact of some contractual (indiscernible) adjustment, so about minus EUR100 million before tax.

But we had a counterpart to that; we had some tax credits that were taken into account in the level of our taxes.

The second question concerns the tax rate, which is 48 percent, which I think is consistent with the weight of Upstream in our operating income, which is relatively high -- 87 percent.

You know that are tax rate for our Upstream activity is more than 50 percent -- something like 54, 55 percent.

So I think this is consistent with the structure of our operating profit by the (indiscernible) segment of activity.

Okay?

Elanna Himona (ph) from Morgan Stanley London.

Hello, Robert.

Two questions, if I may?

Firstly, on Chemicals, could you remind us of the impact of the disposal of paints in the numbers?

Secondly, in view of the very significant free cash flow generation -- (technical difficulty) -- share buybacks, could you also remind us of -- (technical difficulty) -- dividend policy, please?

Okay.

Well, concerning the impact of disposal of paints, it was something like minus 200 million euros before tax, and (indiscernible) something like plus 10 or EUR20 million after-tax.

The second question, (indiscernible) the impact was slightly positive for after-tax for this disposal of paints.

Concerning dividend policy, well it's clear that taking into account many things -- first, clearly, our policy to have, on average, over time a 50 percent payout to the fact that we have -- (technical difficulty) -- we have good proceeds last year we had a payout -- (technical difficulty) -- a payout of 45 percent.

It's clear that we continue to have an active policy and that we should be in a situation to increase, I would say, significantly our dividend that will be paid in 2004 relative to 2003.

I cannot anticipate other decisions; that is to be taken by the Board but clearly, we should be in a position to increase significantly our dividend.

I just (indiscernible) and of course, the dividend has to be approved at the end of the day by the shareholders meeting.

I just would like to remind you, but I'm sure that you are aware of that, that over the last three years, we've increased the dividend by 74 percent in euros and something like 110 percent in dollars.

Having said that, our payout is still -- was 44 percent.

Without the increase it should be -- I don't know -- something significantly lower, so there is room to increase it significantly.

Okay?

Edward Westlake (ph) from ABN Amro London.

Good afternoon.

Just a question -- I mean, you had very strong volume growth in the Upstream, but it does look as if your costs have gone up again.

Is this related, I guess, to startups, or are you still seeing increasing cost pressure?

No, I think I see where does your question come from.

In fact, we have reviewed our production costs for 2003, and I think that we should have an evolution of our costs in line with what we had in mind; that is to say, a slight, small increase.

No, we do not expect any significant change concerning our costs.

Maybe the point is that we had a production increase by 8 percent and at the same time, an increase of the operating profit by 2 percent.

It's clear that behind that there is a strong impact of the further decrease of the dollar versus the euro, which has more than offset the increase in the hydrocarbon prices.

Another point that deserves to be mentioned is that, amongst our production increases, some of them come from OPEC countries, especially Abu Dhabi, where I remind you we have fixed margin, which is significantly lower than those margins that we have in average on the other production.

Okay?

Neil Perry (ph) from UBS London.

Hi, Robert.

I wonder if you could talk about the CapEx levels.

The CapEx came in a little lower than I expected.

Could you just update us on where you think the CapEx will end the year?

Also, maybe you could just give us an indication of where you see CapEx for next year?

Maybe it's just easier to give us that number in dollars, given I expect you're probably reviewing your currency assumptions for next year (indiscernible) review anyway.

For the quarter, in fact, in dollars, our CapEx was about 3 percent compared to the third quarter of 2002.

I think, of course, we have to wait for the end of the year.

We shouldn't be far in dollars from what we (indiscernible) the budget.

I just would like to remind you that for the last quarter, we should register the acquisition of 3 percent of interest in cash again.

Next year, I think (indiscernible) pay something like $300 million.

For next year, think we should have -- in dollars -- again, we have to wait until the budget is approved and it's something we will communicate as we do usually at the beginning of next week -- we should be in the order of magnitude in dollars will be about the same as it was for 2003.

Robert, can I just ask a follow-up question on by Eileen's (ph) question of dividends?

You mentioned that you should be able to bear a substantial increase in the dividend this year.

The dividend that we will pay in 2004, yes.

Exactly, that you will pay in 2004 or 2003 -- the currency has obviously moved very heavily against you on that, so it's already pushed the dividend up in dollar terms.

Are you making that statement in euros?

You are happy to pay a dividend increase -- substantial dividend increase -- (multiple speakers).

Yes, for the dividend, I always speak in euros despite the fact that, as I mentioned, the increase was both in the euro and in dollars, but it's clear the dividends (indiscernible) the level of (indiscernible) income and this is in euros.

Neil McMahon (ph) from Sanford Bernstein London.

Just two questions -- first of all, could to give us an update on the Saudi gas exploration contract you've got?

Maybe talking about prices or any sort of contracts you have been able to develop there and sort of open that up a bit.

Secondly, could you tell us where you are in the progress to of seeing if you're going to report in U.S. dollars, going forward?

Concerning the second question to report in U.S. dollars, unfortunately, it's not possible under the French law.

But I must admit that, in some cases, it would be helpful for us to have the possibility to report in dollars.

But in order to be able to do that, we have to change the law.

So maybe we will see if later on it will be possible to have some flexibility on this point from the French government, but up to now, it's not possible.

The first question concerns the Saudi gas price.

In fact, you know that we have signed an agreement to enter Saudi Arabia (inaudible) permits -- an exploration permit.

This has been (indiscernible) association with Shell 40 percent of (indiscernible), Saudi Aramco and 30 percent for us. (indiscernible) it's only exploration, exploration of (indiscernible), which is supposed to have a good gas production, but it is clear that if we are able to find -- to make gas discoveries, this should be sold on the domestic market at a price that will have to be negotiated, but I think it's a bit too early to answer your question.

Dominique Battie (ph) from Cherveleux Paris (ph).

Good afternoon.

Following up on the question about the (indiscernible) evolution in the Upstream division, I was wondering if (inaudible) impact about the mix of production growth -- that is to say that the bulk of the growth was coming from gas instead of oil.

Did that have an impact -- (technical difficulty) -- evolution of the results of the Upstream division?

The answer is yes, but it's a point that I didn't mention because the impact was relatively small.

But you are right, I should have added that there has a small change of the mix -- oil and gas production -- in favor of gas.

I think the production for the third quarter is something like 65 percent for oil and 35 percent of gas instead of 68 percent and 32 percent for gas for the first quarter last year.

So it's true that it's another element that I should have mentioned.

Gas is usually less (indiscernible) than oil; it's another element of exploration that I could have given.

Thank you for that.

I guess another question regarding the Chemicals segment -- I was a little bit disappointed by the performance of the intermediates because, up to now, the intermediates had an average result of between 40 million and EUR50 million each quarter.

What happened during the third quarter?

So I was -- so I was!

But now it's clear that there has been a deterioration of the markets of, I would say, a lot of intermediates, especially in Europe, that took place especially in the third quarter.

This is the way I can explain the deterioration.

This was particularly true for technical polymers for (indiscernible) English (inaudible) something like that.

No, I think (indiscernible) this situation.

Clearly, this is another incentive for us to continue to implement our restructuring.

On the specific line of the situation evolved in Q4, or is it still the same depressed environment?

Oh, I think, up to now, we don't see any significant improvement in Chemicals.

We can expect maybe a small one in the U.S., as we have seen a few recoveries, especially at the level of the volumes.

Usually, it's a good first sign before seeing an improvement of the margins, but if it is -- (technical difficulty) -- it should be relatively small as an impact on the fourth-quarter results.

May I have a last question, please?

Regarding the basic Chemicals division, you managed to be above breakeven during the quarter, whereas you are making losses in the first quarter.

As I understood, the environment was worse in Q3 versus Q1.

Can we say that it is an impact of the Samsung joint venture, or is it maybe the product of gains you have made in the -- (multiple speakers)?

No, I think it's (indiscernible) the impact of Samsung.

It's clearly the impact of the productivity that we are implementing, no?

No, Samsung is going well, no doubt about that.

Okay?

Fred Laufeur (ph) from Bear Stearns New York.

Good afternoon, Robert.

I have two questions.

One, can you try to quantify for us the impact of the dollar decline on operating income in the quarter?

Secondly, can you to share with us the impact of self-help, ex-production gains?

That is to say, cost reductions?

Concerning the last question, I think, usually, we do not give this type of detail on a quarterly basis.

What I can say is that we continue to be in line with our target.

There is a balance between the growth on one side and synergy and productive on the other one.

I think that, on a quarterly basis, it's very difficult to say more.

Of course, I have precise figures in front of me but quite frankly, it's not very significant at the level of a quarter to give such detail.

Then you asked a question concerning the impact on the operating profit of the decrease of the dollar against the euro.

It's something like minus EUR390 million -- actually minus 400 million yet.

No, excuse me, it's a little more than that.

It's something like minus 450 in the round figure, minus EUR450 million in round figures.

That's year-over-year, right?

Year-over-year, the third quarter -- (Multiple Speakers).

(Multiple Speakers) -- compared to third quarter -- third quarter 2002 compared to third quarter 2003, yes.

JJ Traynor from Deutsche Bank London.

Good afternoon.

Could I ask you a couple questions about the exploration program?

I think, at the start of the year, you guided us to a higher spending on exploration this year, but I'm looking at the nine months exploration write-off, which looks like it's down.

That implies, originally, that you have had a pretty good year with the drill bit.

Could you hazard a guess as to how much preserve you expect to find through exploration this year?

Then I guess a second question more specifically about the Ackpo (ph) acreage in Deepwater Nigeria, what's the development timeline for the -- (technical difficulty) -- field?

I understand there are two wells drilling in that block at the moment.

Are you looking for oil, or are you looking for gas?

Concerning -- in fact (indiscernible) in fact, we continue to be very positive with (indiscernible) I think (indiscernible) this is an oil prospect.

Concerning the development times that we have in mind, I think, for the beginning of the production, we have in mind something like 2007.

The first question concerning the exploration, you know that we had a budget of $750 million for 2003.

I think we shouldn't be far from this figure at the end of the year.

Globally speaking, I think that, of course, we have to wait for the end of the year, but we can see already now that this 2003 year should be a good year in terms of costs of exploration, funding costs.

I'm thinking more about the volumes.

How much volume do you think you found so far this year -- (multiple speakers)?

You can make the division.

I know it's too early, it's too early, but I think if we spent $750 million with exploration costs of less than one, let's say .8.

I think it should be easy for you to find something in the range of one billion barrels.

But quite frankly, it's too early.

But this is the order of magnitude.

We have to wait for the end of the year, but up to now, I think 2003 up to now is a good year for exploration.

Just going back to my Ackpo (ph) question, I was trying to find out about the drilling activity in that acreage.

I understand that, right next to that block, there is a proposal for a floating LNG facility.

Do you think that -- (Multiple Speakers) -- gas reserve extends into your block?

I do not think so.

No, I cannot say more, as we are still -- let's see (inaudible).

Maybe there would be a bit of (indiscernible) to this production, but it should be -- it is essentially oil.

I think, again, we are very positive with the exploration in the Ackpo (ph) field and we are currently the options for the development of this field.

Again, now I cannot say more than what I said about Ackpo (ph).

Andrew Archer (ph) from Commerzbank London.

Good afternoon. (multiple speakers).

The question on the Downstream -- in terms of probability in the third quarter, appeared to decline quite sharply compared to the first half.

It's just that the quarter was a complicated one in terms of industry dynamics.

Could you walk through some of those issues and just indicate if any kind of contribution from self-help was playing a part in what you delivered?

Yes.

When I look at the analysis of the results of the Downstream, we move from something like EUR110 million for the third quarter 2002 to something like 340.

The impact of the environment was positive, but I would say a little less than EUR100 million, so the difference can be explained essentially by all that we did in terms of synergy, productivity.

Yes, there is another point -- is that we have to keep in mind is that we have had, this year, the benefit of the fact that, last year, we had a lot of shutdowns in the refining that we did not have this year, which explains (indiscernible) to the contribution of the environment, synergies and productivity.

It's a difference between these elements in order to reconcile the growth of our earnings in Downstream, quarter-to-quarter.

Okay?

Daniel (indiscernible) from (indiscernible) Paris.

Good afternoon.

I've got two questions on the (indiscernible) accounts.

First, on the financial line, it was surprisingly low this quarter compared to the second quarter -- (multiple speakers) -- not so different.

Of course it is a bit lower, but not so different.

The second question -- in terms of the operating profit of the Upstream division, it seems there has been more depreciation this quarter than the second quarter.

This cannot be fully explained by higher production and a higher dollar.

Is there some exceptional or particular -- (multiple speakers).

No, there is nothing exceptional.

No.

I think the DDNA (ph) per barrel in fact should be for us (indiscernible). (indiscernible).

We do not think that there has been nothing exceptional, and no, I cannot say more.

We should be in the range of something like 3.7 -- (technical difficulty) -- per barrel.

Concerning the interest expenses, that decrease from -- (technical difficulty) -- 27 -- (technical difficulty) -- mainly due to lower interest rates, and I would say the good management of the debt by the CFO.

We can expect us to recur in the fourth quarter?

(LAUGHTER).

We will see!

I think it was a good figure, clearly, yes?

It was a good figure.

Next question.

I have another question on your recent declaration on (indiscernible).

Do you hold an option to buy 4 percent from SCH (ph) at EUR7 per share?

What type of conditions attached to this option?

This is an option that we have in case of termination of our agreement, which is something that has to be now decided by the arbitration court.

What will the arbitration court decide?

I think there will be two decisions, one that will be taken very soon, probably before the end of the month of November.

That will be for (indiscernible) for, I would say, conservatory measures.

The second decision I would say merits, as we say in English, would be taken later on, probably in between six months to one year.

Okay?

Jason Kinney (ph) from ING Edinburgh (ph).

Good afternoon.

Specifically on gas production growth going forward, I wonder if you could give us your view of the level of gas volumes for Europe and Africa in Q4.

Am I right?

Do you expect a significant increase in Q4 gas output from the Middle East portfolio as well?

Quite frankly, I think that, (indiscernible) speaking, between now and 2005, we do not expect any significant changes.

With respect to our production oil and gas, I think we should more or less, year after year, remain with a split 65 percent for oil, 35 percent for gas because there will be some increases in both oil and gas productions.

I was actually looking to see what level of output we could expect for Europe and Africa in terms of gas, though, in Q4.

No, I think we do not give forecasts for that and certainly not with this type of detail.

Gerard Lucosie (ph) from Teasbury (ph) Capital London.

Just a quick question regarding Sepsa (ph), the situation.

What do you think will be the development next week, the level of the arbitration level?

I wouldn't want to anticipate on the decision that could be taken by the arbitrator.

Quite frankly, it wouldn't be correct and I think I will not comment on that.

I'm sorry, but it is something I cannot comment on.

Neil Morton (ph) from DRKW (ph) London.

Good afternoon.

Two questions, one on the Upstream, one on the Downstream.

In the Upstream, could you perhaps give us your average gas realization for Q3-on-Q3?

Secondly on the Downstream, your benchmark margin fell in Q3 relative to the second quarter of this year.

I also wondered whether the fire at the unit in Antwerp was perhaps impacting your realized margin versus the benchmark margin.

The answer is no for the second question.

Concerning the first question, the average gas price realization for the third quarter of 2003 is, or was, $3.04 per million Btu, which can be compared to the figure for last year, 2.6.

That is to say, we've had an increase by 17 percent, the biggest increase being, of course, in the U.S. with a 54 percent increase of the gas price. (multiple speakers).

(OPERATOR INSTRUCTIONS) Jeremy Elden from Lehman Brothers London.

Good afternoon, Robert.

One very simple question and then one slightly strategic one.

The simple one is, do I understand rightly from your earlier answer that the debt contained within Samsung will be proportionately consolidated on your balance sheet?

Yes, the answer is yes.

One of the reasons that you have delivered such good production growth recently is that you have sold less assets than quite a number of your competitors.

Do you see that as --?

I think the answer is yes.

Another answer that can be given is that our production in the States is a relatively very small and new, and I think that the (indiscernible) is due to the fact that most of our competitors have a significant part of their production which is in the States which is decreasing.

Your feeling is that the lower level of asset trading in your portfolio is really because of the nature of your portfolio -- younger assets, less stuff in decline?

Absolutely.

(indiscernible) from (indiscernible) Amsterdam.

Good afternoon.

Two questions -- (Multiple Speakers) -- utilization rate of your refinery.

Secondly, on the huge difference between the pre-tax and after-tax contribution of your paint division sales, could you explained that?

Thirdly, do I understand the Balal Iran fields -- you still derive oil from that, or has it finished altogether?

Are there any other new ventures in Iran upcoming?

Concerning the rate of utilization of our refining capacity for the third quarter, it was 94 percent, which is a significant increase compared what we had last year for the reasons that I have already mentioned.

Concerning the Balal (inaudible) in Iran, no, we're just at the level of the production.

Remember that, in the framework of the contract that we have in Iran, after usually we have developed the field like Balal, we transfer the operatorship to the National Arabian Oil Company, but I would say it's not the end; it's the beginning of the production.

I'm sorry, but I didn't catch your second question.

I think it was (indiscernible) for a colleague of mine with me.

So could you repeat your second question?

(technical difficulty) -- answer -- (technical difficulty) -- the paint division -- (technical difficulty) -- of 200 million but a pre-tax gain of 10 million, which is a huge difference.

(technical difficulty) -- (indiscernible) because, in fact, we had a tax credit that was due to the fact that the tax basis was relatively high.

This is why, in fact, at the end of the day, the impact was a positive impact of something like, I don't know, 10 to EUR20 million.

The tax basis was relatively high, no?

Matthew Lindstrom (ph) from Goldman Sachs London.

(Multiple Speakers).

Just a brief question on decline rates -- could you outline how much of the growth came from underlying growth, shutdowns, OPEC, etc.?

Could to quantify if any the impact of declines on your existing production on a year-on-year basis please (sic)?

If we are looking at the figures that we have in a long-term plan, it's something which is depending the year -- between 3 to 4 percent, which is a relatively small figure compared to our competitors.

The experience is being in line with that plan over the last 12 months?

Absolutely.

(OPERATOR INSTRUCTIONS).

Matt Pickering (ph) from Institutional Capital, Chicago.

Good afternoon.

I had one quick question.

I may have just missed this on the call but Robert, have you commented at all about the decline rates of production in the third quarter and your comfort level with the current decline rates?

Yes, I think it just -- the answer that I gave just one minute ago.

I estimated the decline rate to something between 3 to 4 percent a year.

I added that this is a relatively good figure compared to what we assumed the decline rate is or are for our competitors.

Okay.

I apologize for making you repeat that.

Thank you.

We appear to have no further questions at this time.

I will hand the conference back to you for any further remarks, sir.

I just would like to thank everybody for being with us this afternoon and for all the interest that you have for Total.

Thank you very much.

Ladies and gentlemen, thank you for your participation today.

This concludes today's conference.

You made now disconnect your lines.

Thank you.