TotalEnergies SE (TTE) 2007 Q1 法說會逐字稿

Ladies and gentlemen, welcome to Total's conference call.

I now hand over to Mr.

Robert Castaigne, Chief Financial Officer.

Please, sir, go ahead.

Hello and thank you for calling in on a Friday.

I imagine that you are ready for a nice weekend.

By now you should have had a chance to go through our first-quarter results, so I will quickly review some key points, comment on the outlook, and then we can go to your questions.

The Brent price was $68 a barrel in the first-quarter 2007, which is a slight decrease both year-over-year and sequentially.

Our price realizations generally followed the same trend.

Oil prices have rebounded in the past weeks, and this is in line with our view that we have moved into a structural higher price range.

Refining margins in Europe were strong, increasing to $33 per tonne, and our downstream business managed to capture these stronger margins.

Petrochemicals did well in Europe.

So looking at the results year-on-year, there were no special items in the first-quarter 2007.

Our earnings in dollars were essentially stable, despite lower oil and gas prices and higher cost.

This is thanks mainly to better results from both the downstream and the chemicals.

The first-quarter adjusted net income was $3.9 billion or about 3% lower than the first-quarter 2006.

Our adjusted earnings per share was $1.72 or a slight decrease of 1% year-over-year.

Compared to our peers in Europe, we see these results as a good indicator of the strength of the Company.

It is true that downstream and chemicals benefited from better environment.

But equally important, there were positive impacts from our continuing growth and productivity programs.

The startup of the Normandy hydrocracker is one example of this.

Taken as a whole, this demonstrates the success of the integrated model.

Compared to the fourth quarter, our adjusted earnings per share in dollars increased by 12%, with better performance in all business segments, and ranks us amongst the best of the majors.

The effective tax rate, which includes the higher taxes in the UK and Venezuela, was 54% for the first quarter.

It was close to 57% in the fourth quarter of 2006, and the decrease can be explained almost equally by two effects.

First, a lower upstream tax rate thanks to the lower oil price and favorable mix effects.

Second, the reduction of the weight of the upstream relative to downstream and chemicals in the operating profit.

Our business segment ROACE for the 12 months ending March 31 was 28%, which is stable compared to last year and still amongst the best in the industry.

Our cash flow generation was very strong at $8.4 billion.

Adjusted for the change in working capital at replacement cost, cash flow was $5.4 billion, an increase of 5% compared to the first-quarter 2006 and an increase of 21% compared to the fourth quarter.

CapEx was $3.2 billion, which is consistent with our 2007 budget of $16 billion.

Overall, we are pleased with the performance of our businesses and with the progress we are making in terms of growing the Company.

Now I will quickly review the sales results by segment, starting with the upstream.

Adjusted net operating income expressed in dollars decreased by 11% compared to the first quarter of last year, reflecting primarily and in almost equal parts the lower oil and gas price realizations and the increased costs.

Compared to the fourth quarter, net operating income in dollars increased by 6%, with the effect of lower price realizations more than offset by the benefit of the gross higher sales to production ratio and lower taxes.

On the cost side we can see the ongoing impact of inflation in the result of a more active exploration program.

Despite these effects, our technical cost continued to be the lowest amongst the majors.

You may have seen, based on the 2006 FAS 69 data, that our competitive advantage in technical cost continued to grow last year.

We believe that our disciplined management and successful exploration program will allow us to continue to improve this advantage.

Production volumes were essentially flat compared to a year ago.

On a sequential basis, comparing the first-quarter 2007 to the fourth-quarter 2006, volumes increased by 1%.

Looking now at these figures in more detail, the main positive contribution to this growth was the Dalia field in Angola, which started up in mid-December and contributed close to 50,000 barrels per day to our first-quarter production.

Dalia reached its full capacity of 240,000 barrels per day in mid-April.

On the other side, in Nigeria significant production from the Delta region continues to be shut-in due to security issues.

This reduced our first-quarter volume by 65,000 barrels per day, or 25,000 barrels per day compared to a year ago.

OPEC reductions also had a negative impact of 37,000 barrels per day in the first quarter, about 1.5%.

This reflects the cuts imposed by Venezuela since January, as well as cuts in Abu Dhabi and Libya that took effect late last year.

These are split roughly 60/30/10.

So excluding OPEC reductions and portfolio effects, our production increased by 2% compared to both the first and the fourth quarter last year.

If we look now at 2007 more globally, we have several pluses and minuses compared to the situation we described in February.

On the plus side, Dalia is performing very well -- even better than expected.

This is a core of our 2007 production growth.

Also the North Sea, with some pluses and minuses of its own, is performing well, especially in the UK.

Looking at the coming months, our two largest startups for this year are on track, with Rosa expected to be onstream by the end of June, followed by Dolphin in December.

Finally we do not expect our maintenance program to be larger in 2007 than last year.

So this was for the plus side.

On the minus side, we have ongoing negotiations in Venezuela that will affect our production; but the terms are not known at this time.

Let me remind you that we have not included [any] -- as we said it -- any reduction of our stake in Sincor for Venezuela in the production forecast we made in February.

The situation in Nigeria is evolving, but is difficult to predict.

OPEC production so far this year has been larger than expected, closer to 1.5%, as I said, than to the 1% we assumed mainly due to Venezuela.

Having said that, obviously we get the benefit from the curtails through higher oil prices.

In terms of non-operated projects, there is some uncertainty there mainly with Shah Deniz in Azerbaijan.

This project will fall short of our expectations for the year.

Overall we are confident that the 2007 production growth will be substantial and that we will outperform most of our peers.

But as I think you have probably anticipated, in light of higher OPEC reductions, remaining uncertainties in Nigeria, and the delay in Azerbaijan, that we can no longer talk about a 6% target for 2007.

For the longer term we remain confident that we will grow by more than 5% per year on average through 2010.

The main projects that will drive this growth over the coming years have been launched and are on track and on budget.

For example, we recently announced that we approved the development of the Girassol in the UK North Sea, which is an excellent project, for 2008 startup.

Our track record in exploration was very strong last year.

The first quarter of 2007 has been as good, if not better, with about 10 discoveries.

10, mainly in Angola, Nigeria, and Congo.

By the way (inaudible) I think it is important to point out that our exploration program on the ultra-deep Block 32 continues to be very successful.

So we are very optimistic now about future development there.

We have a acquired new exploration acreage in Indonesia, Australia, Alaska, and Angola, where we will be the operator of Block 17/06 and a partner in Block 15/06.

Finally we continue to divest some mature assets in the US.

And finally, all this shows that we are continuing to maintain one of the most diversified and high-quality upstream portfolios in the industry.

For the downstream now, the TRCV refining margin indicator increased sharply to $33 in the first-quarter 2007 from $26 per tonne in the first-quarter 2006.

Partial turnarounds affected three of our refineries in the first quarter, compared to two partial shutdowns in the same quarter last year.

Despite this, our utilization rate remained stable at 90%, thanks to the reliability improvements we have made in our system.

The Normandy hydrocracker ramped up to a fully operational status during the first quarter and reached almost a 90% utilization rate.

On a full-year basis, given the current environment, it could contribute up to $200 million of additional operating cash flow to the Group.

Marketing has remained fairly stable despite increased product prices towards the end of the quarter and the mild winter conditions.

Once again, the results for our downstream segment were strong, with adjusted net income of $928 million showing an increase of 19% from the same quarter a year ago and 31% compared to the last quarter.

The outlook for refining is positive.

The TRCV margin indicator is presently higher than in the first quarter, averaging $39 per tonne in April and reaching a high of $68 per tonne this week.

As far as our refining system is concerned, I would say that we are very pleased, and we are very pleased with the way it is performing.

I should point out that we have five partial turnarounds scheduled for in the second quarter.

Looking at the downstream segment for the longer term, we are still working on the basic engineering for our Jubail refinery project in Saudi Arabia and for our third coker.

For the chemicals segment, first-quarter adjusted net operating income increased to $366 million, an improvement of 60% compared to a year ago and 11% compared to the fourth-quarter 2006.

For base chemicals, the first quarter was marked by growing demand in Europe, better cracking margins, and availability rates above 90%.

As a result, sales volumes for olefin were higher by about 5%.

Margins were also better in Asia compared to a year ago, and our Total-Samsung joint venture in Korea captured this benefit.

In all, the results of base chemicals increased by $150 million compared to last year.

Since the beginning of the second quarter in chemicals, demand has remained strong in Europe.

But margins, while still at good levels, are under pressure from rapidly increasing naphtha prices.

Now on the Corporate side, the net debt to equity ratio decreased from a relatively high level of 34% at the end of last year to a low level of 23% at the end of the first quarter.

Typically we like to reduce the gearing before we pay the dividend.

We have now a great deal of financial flexibility, and our ability to manage the level of gearing demonstrates this.

During the first quarter we bought back 6 million shares for $400 million.

This is a lower buyback rate than in the past.

It reflects mainly our decision to reduce the level of gearing during the first quarter.

Assuming the shareholders approved the dividend at next week's general meeting, we will pay the balance of 2006 dividend, which is EUR1.00 per share, on May 18.

In dollars, given the current exchange rates, the 2006 dividend represents an increase of 24% compared to the previous year, which is by far the highest among our peers.

We believe that raising the dividend is clearly the strongest signal that we can send to our shareholders about the confidence we have in the future of Total.

So let me say that we are very pleased with the way the Company is performing and with the growing visibility offered by our unique and diversified portfolio.

So we are confident that our strategy to pursue long-term profitable growth is working well.

That concludes my comments, so I am now ready for your questions.

(OPERATOR INSTRUCTIONS) Oswald Clint.

My first question relates to the divestment of Sanofi-Aventis.

Could you provide some guidance on whether you have started to sell down that equity investment, or indeed if you do intend to initiate it during the rest of '07?

Secondly perhaps if you could quantify the new production guidance for 2007; or even quantify the shortfall from Azerbaijan, and whether we are still looking at between the 5% and 6% production growth?

Thank you.

Okay.

Concerning our position in Sanofi, which by the way is worth something like $16 billion, you know that there is now litigation linked to the Plavix issue.

We are very confident, and quite frankly we would prefer to wait for the results of this judgment before doing something.

In addition to that, we think that EUR68 per share is a bit short.

That is why in fact we have decided not to proceed to any divestment in Sanofi shares up to now.

Clearly I confirm that this is not a core asset.

We will start divesting our stake progressively, in the opportunity when we think it will be a good timing and a good price to do it.

Concerning now the guidance that you were referring to in your question for 2007.

If we want to be a little bit more specific on the different issues, first, the OPEC quota.

When we mentioned the target of 6% we had in mind -- and we said it -- something like 1%.

Up to now for the first quarter we have 1.5%.

Secondly, Shah Deniz.

I think that impact of the delay in the ramping up of the production of Shah Deniz should be probably a little less than 1%, something between 0.5% to 1%.

Secondly -- or thirdly, the situation in Nigeria.

If some works have been started up again in order to resume some productions, it will take some time due to the situation of some plants.

Probably the assumption that we took at the beginning of the year for the restarting of our production -- of the production in Nigeria that was interrupted, shutdown, because of some difficulties with local community, probably appears to be a little too optimistic.

This will be another impact on our 2007 production.

I think that there are also some plusses, as I said in my introduction.

So globally speaking clearly I doubt that we will reach the 6% for the all reasons that I mentioned.

Quite frankly at this stage I prefer not to give any guidance.

But I think that I have already given to you some elements of information that should enable you to have a flavor about what we should be able to deliver.

Thank you.

So the next question?

(inaudible)

It's Irene Himona at BNP Paribas.

My first question concerns the share buyback.

You mentioned that the reason why it was so low was the decision to reduce the gearing in the first quarter.

Yes.

Could you clarify perhaps whether your targets may have shifted on that?

Or what should we expect over the rest of the year if gearing remains within your previously targeted range?

My second question concerns the comment you made on the upstream, where the sales, the production ratio was a bit higher than normal.

Could you perhaps quantify that effect for us?

Thank you.

Yes, concerning the share buyback, in fact we bought back about 6 million shares in order to reduce the gearing.

We must admit that in fact the level for CapEx for the first quarter has represented about 20%, 21% of our budget.

In addition to that, working capital decreased higher than we expected.

This is why in fact we had the good surprise to have 23% as a gearing.

It is something which is not of use to follow on a monthly basis.

So in the situation where we have now, especially if we continue to enjoy a good oil price, I think that we should be in a position to increase the share buyback for the remaining part of the year even without any divestment in Sanofi-Aventis.

If we have the possibility to do some divestment of Sanofi-Aventis shares, I think we should be able to increase even more the share buyback.

Concerning now the ratio concerning sales to production.

Concerning sales to production, we can say it's a ratio that varies month after month depending upon the level of our liftings compared to our share in production.

We can say globally speaking -- it is probably the best way to answer your question -- that this has had a positive impact for the quarter of $50 million after-tax.

It is something that varies month after month.

And $50 million pre-tax, it is by the way good order of magnitude of what could be the impact of this ratio.

It could be plus or minus depending upon our liftings.

Thanks very much.

We have a question from (inaudible).

Mr.

Gordon Gray, please go ahead.

It's Gordon Gray of JPMorgan.

Just a brief question as to whether you have any further progress or change in thoughts on a solution for upgrading your Canadian heavy oil assets?

Oh, it is something that we are studying carefully, as you can imagine.

I think that we have now probably a better view, at least for part of the solution.

But it is still a bit early to give you all the elements of the way we will upgrade our share in the production.

So I think that we have made some progress in the understanding of -- in preparing what should be for us the best solution.

The idea is clearly to build an upgrader, in upgrade in Alberta, with a capacity of something like 200,000 barrels per day.

This upgrader could be located in Edmonton where we have now a field.

This upgrader, the idea is to develop it in two phases in order to adapt our upgrading capacity to the evolution of our production.

Yes, we have acquired lands near Edmonton.

It is clear.

In fact it now we are clearly in the middle of our studies for this upgrader.

I [think] that in parallel we are still exploring some other downstream solution, such as a strategic partnership to convert heavy oil, to do that in the USA.

But we must admit that for this specific point we are still a lot of discussion but not a solution.

So I think we are well advanced concerning an upgrader in Alberta, in Edmonton.

For the other solution I think we are still some discussion but no solution.

From the sound of it you are obviously very comfortable with the economics of that upgrading move.

Comfortable?

I think it is too early to say that.

In fact too early as we are still at the beginning of our studies.

I must admit that given the time schedules (technical difficulty) remember the idea is to start the production of light oil at a big scale in 2013 and '14.

So there is still some time before I would say fixing a solution.

Sure.

Thanks very much.

Alastair Syme.

Good afternoon.

My question relates to your sort of published annual information rather than the quarter and just back on your point about the FAS 69 data.

Because what we saw was quite big cost inflation, particularly on the side of production costs, around 20%, 21%.

Can you give us some sort of granularity or visibility in 2007 on where you think those costs might go?

First of all, it is true that our technical costs increased by $1.50 per barrel, of which $0.40 was for exploration.

But if you look at the evolution of the others, I think two other major companies have technical costs that increased by $1.40 per barrel for the lowest; and the others have much bigger increases.

So if I take just the average, it has increased by something like $2.30 per barrel as our own technical costs increased by $1.50 per barrel.

In this $1.50, as I said, $0.40 was just due to this increase of the exploration expenses.

But quite frankly given the results that there has been in front of that, with 1.2 billion barrels this quarter, I think that there is nothing to say with this increase, besides that we have had some increase of the operating cost.

And progressively we see in the depreciation the past increases of our development cost.

Concerning 2007 quite frankly it is too early.

We are just in May.

It is something that we usually give once a year.

Clearly we will continue to have an increase of our cost.

But I think that given the appreciation that we have with -- in the past our finding and development costs, we should remain very, very competitive compared to the others for the technical costs in 2007.

This is a follow-up.

I can understand the cost inflation on the exploration and depreciation.

But on the operating cost side, what is driving that specifically?

Is it labor costs, or energy, or is there something else?

In 2006, especially in Africa, which is to a certain extent for us a euro zone, we had to readjust salaries that for some of them were frozen in the past.

This has had a significant impact.

In addition to that, by the way, there is also an exchange element that's part of our cost.

Not only the headquarter cost, but in some African countries, in Europe, and to a certain extent pound and Norwegian krone currencies that are something between dollars and euros.

Thank you very much, Robert.

Yes, just another point is that part of our costs are fixed costs that were not helped in 2006 as our production decreased a little.

So now as we have been able to recover a growth of our production, we should have, at least from this point of view, a positive element.

Sure.

Okay.

Neil Perry.

I wonder if I could ask you just for a bit more on the Nigerian situation.

Because obviously you have been held back by security concerns, but I understand the facilities are now in quite poor condition.

Can you tell us a little bit more about the situation there.

If the security situation stabilized now, how rapidly do you think you could bring back that production alongside Shell?

Then the second question is -- could you just give us an update on Pars LNG and the Saudi refinery?

Because I understand that both of those have cost issues, in terms of you have been shocked or resource holders have been shocked about the proposed scale of the costs of those developments.

Well, concerning Nigeria, the impact for us of the shutdown is a 65,000 barrels per day.

I think that, as I told you, some preliminary works have already started to resume production.

It has appeared that some tools were damaged.

Clearly it should take something like, let's say, six, seven months before starting the production at a good level.

So this is one of the [mains] that I underline when I try to explain why it will be difficult for us to reach the 6% that we announced before.

Concerning Pars LNG, it is clear -- and I think that this was mentioned by Christophe de Margerie -- that the preliminary cost after we have received some answers is clearly higher than we expected.

So we have now, in fact, to review all the answers of the tender that we launched before, and to see how we could try to reduce this investment in order to keep a good profitability.

I think that we cannot ignore the political situation in Iran.

But just on technical and economic issue, I think even it is fair to say that the studies are progressing well.

We have to review and to see how we could reduce the cost.

It is a cost essentially for Pars LNG.

Concerning Saudi refinery, I think we are now in the process of what we call the feed.

We will have to wait for the end of 2007, beginning of 2008, before having a good appreciation of the cost of this refinery.

I will just remind you that the profitability of this refinery is fundamentally linked to the differential of price between Arabian light and Arabian heavy.

When we looked at the first studies, it was a project that should have good economics with, let's say, $30 per barrel, which gives us some room to possible increases of the project compared to our previous views.

But we will have to see at the end of 2007 or beginning of 2008 if our last estimations of the cost of the project are finally consistent with the good economics and our views with the evolution of the oil price.

It is clear that we will launch this project only if we think that it will be a good project.

There is no doubt about that, and I think that Saudi are exactly on the same line as us.

Okay.

Thank you.

Tim Whittaker.

I have a question firstly about Angola Block 17.

I understand from the trade press that the bids that came in from the contractors were way above the budget for the project.

I want to understand whether inflation in deepwater projects, based on this one, is therefore continuing to be very strong; or whether it might have flattened off, which is what I previously had thought.

Secondly I wonder if you could tell us a little bit about what is happening in Atlantic Basin refining margins.

Flows of gasoline from Europe to the US seem to be low.

But my understanding in the first quarter was that margins in the US have been higher than in Europe.

So it may be I am not seeing there what is happening.

Maybe you could help us understand that.

Yes, it's true that (inaudible).

I will start with the last question.

Apparently it is true that the refining margins were even higher on the Atlantic Basin in the US than they were in Europe, despite the fact that in Europe they were still at a good level.

In fact, as a consequence of that we have seen, especially in the second part of the first quarter, pretty significant increase of the gasoline price.

As a consequence of that, there has been good flow of export of gasoline from Europe to the US.

By the way, now as I said we continue to have an exceptional refining margin in Europe.

I mentioned $68, $70 per tonne.

Part of that is clearly the consequence of the recent decrease in the oil price.

But part of that is also due to the beginning of the driving season in the US, and with clearly an additional impact on the exports of gasoline.

So that was for the situation of refining margins in the first quarter.

Now concerning now Angola and the situation of Pazflor.

It is true that project after project we continue to see increases of development cost.

Having said that, I think that we still have the feeling that we should be in a position to continue to be able -- in fact to continue to accept to launch the project that (inaudible).

But having said that, the room of maneuver has now shortened.

I just hope that there will be some limitation to these recent development increases.

You have to remind just for the deep offshore or ultradeep offshore we expect a rebalancing of the cost of drilling platforms taking place in 2008 or '09.

We have just to give you an example.

Accepted to launch the field of Usan in Nigeria; in fact it should be launched very soon and with I think acceptable economics, even after the recent cost increases.

So I think up to now with our economic criteria, we continue to be in a situation to justify to launch the development of all the projects that we have with us, even if we are a little bit at the limit.

But I think it is still okay.

So could you maybe say how much the most recently tendered projects' price increases have been, relative to, say, six or 12 months ago in percentage terms?

It is very difficult to say that, because all the projects are very different.

In fact I just noticed that we have now and we have had over the last month, I would say, a peak towards the cost of the drilling platform, which was in the past the main element for cost inflation.

I wouldn't want to say more and to be more specific, as in fact we have now several developments which are under negotiation.

So it is very difficult to say more in a discussion like that.

But clearly I think and I hope that we should be at a peak.

Okay.

Thank you.

(multiple speakers) for being no more precise, but it is difficult to say more.

Sure.

Okay.

So next question.

(inaudible) Smith.

Sorry.

Was that me?

Hello, Colin?

Just a question on Dolphin.

Can you say something about how that actually ramps up through the course of this year?

Also just comment this thing, I think a couple of things, seeing that Oman is expecting to get Dolphin gas a little bit later than it previously expected.

Oh, a little bit later?

Not really, as I think we have in mind starting up in summer with a plateau that should be reached somewhere in the first half of 2008.

The [gas-in] has been [consumed] for June.

So I think if there has been a delay compared to what we said, I don't know.

Six months or one year before, maybe it is one month.

But we are confident that the starting up should take place at the due date now.

Is summer 3Q or in 2Q?

Summer?

Summer is third quarter.

Summer starts June 21; so I think I would prefer to say third quarter.

Okay.

Thank you.

Edward Westlake.

It is Ed Westlake, Credit Suisse.

Maybe moving a little further ahead in '08, maybe just if you could run through the Yemen LNG, Akpo, and Tahiti, sort of expected start dates.

And just in the press release this morning, and as you mentioned very good discoveries, is there any possibility to talk about sort of rough scale in Congo and Block 32 at this point?

I must admit that I didn't read the communique this morning.

Concerning Yemen LNG, I think it is a development which is going extremely well.

We have been impressed by the way it is going, I think.

Remember that this is a development that was launched before the big cost increases.

So I think we are very satisfied with both the cost and the time schedule.

So that was for Yemen LNG.

Concerning Akpo, Akpo in fact we are on time for starting up at the end of 2008.

The last question was for some discoveries in the Congo.

I think it was just to say that two new oil discoveries have been made in the lowest part of the Moho-Bilondo permit, in which we have 53%, 54% and we are the operator.

It is not very far from the coast; I think like 70, 80 kilometers.

The water depth should be about 1,000 meters.

I think there is a good potential of reserves, but I think it is too early to say something; I turn to Jerome.

But we still have a good idea, but I think that we have to wait a little before disclosing some information concerning the level of reserves.

Well, thank you very much.

So, next question.

David Phillips.

It's David Phillips from HSBC.

A couple of questions.

Just going back to the deepwater West Africa, is there any comments you can give on the timetable you have in planning for the CLOV and Pazflor projects at the moment.

I know with these you have certain -- well, certainly for these types of projects you have reasons to prefer the new build floating production units not (multiple speakers).

Excuse me.

Could you please speak more slowly?

Yes, of course.

So just going to the West African side, the timetable for the CLOV and Pazflor projects.

Is there anything you can say on that?

And looking at your preference for the types of floating production units you use, I know you tend to prefer new builds for various reasons.

But might this change due to any cost pressures?

My second question, just a very simple one.

You mentioned right at the beginning about you are moving into a structural higher price range.

At what point might you raise your own economic hurdle price or basic level of oil price assumptions in your CapEx planning?

Thank you.

Well, (inaudible) now we still continue to take $40 per barrel for our economics.

I must say that last year this was largely sufficient.

I would say that most of our projects just require $30 or a little bit above $30 to have good economics.

Now I think that given new development costs, clearly most projects will require this $40 per barrel to have good economics.

And we cannot exclude that in some cases maybe we will have to require a little above $40 per barrel.

Clearly the idea is to continue to drive the disciplines that we have always had in the past.

Concerning Pazflor, the time schedule for Pazflor and CLOV is something like 2011 and 2013.

I think that you had a question concerning the schemes of development, with what could be some alternative to the FPSO, in order to reduce the cost.

I think quite frankly it is difficult for me to answer that question.

I don't have enough information.

I turn to Jerome to see if he has a better knowledge.

In fact you know the answer is probably very simple.

We are still on the FPS mode since we have developed several FPSOs in West Africa.

We are developing some reserves.

Therefore we are now on an industrialization scheme and industrialization trend.

(inaudible) you say we will produce FPSOs like Mercedes will produce cars?

Not yet, not yet.

Coming soon.

Okay.

No.

On just the --

I think clearly it could be, should be a possibility to reduce the cost of FPSOs.

Sure.

No, I just -- on the -- that's very kind to outline the production timetable for these two projects.

I just wondered if you had an indication as to when some of the tenders might go out for certain stages of the development?

Jerome?

No, I think it is too early to answer this question.

I think as Robert Castaigne told you earlier, we are still studying some of the schemes, still negotiating some of the projects that are about to be launched.

So we will keep you informed when we are at or about to launch them.

Okay.

Thank you.

Thank you.

So next question.

Robert Kessler.

I wanted to see if you could help me with accounting for the Rosa production.

On the one hand it would appear that the Girassol complex is already running relatively full and having already been debottlenecked; and so offsetting growth in Rosa would be offset by the decline at Girassol.

But on the other hand it would appear that Rosa has been ring-fenced for PSC purposes.

So your net entitlement might be higher on a percentage basis.

Can you quantify how much will be the net entitlement increase for Total?

Quite frankly I think apparently you have a good appreciation of the situation.

You probably know enough, and I would prefer not to make any further comment.

But please feel free to call Jerome if you want to have some more information.

More fundamentally, from an accounting point of view, is the depreciation for Rosa will still be made.

That is a unit of production.

Which means that as Rosa in fact will be the [jurolay] -- is it correct to say that?

-- of Girassol.

But it is clear that production of Rosa will depend on the evolution of Girassol.

But for the point that you specifically mentioned I would prefer that you call Jerome.

I will do.

Thank you, Robert.

Okay.

Thank you.

Jason Kenney.

It's Jason from ING.

$39 a tonne for the downstream refining margin in April, and reaching $68 a tonne.

Oh, yes, for a few days, yes?

Fantastic.

Fantastic, yes.

How sustainable is $68 a tonne for the foreseeable future?

It is clearly not sustainable (inaudible) what I imagine.

Having said that, remember I think that we have been always consistent; and for always, many years now, we say and I continue to say that -- for reasons I have already explained several times -- we continue to be optimistic for the evolution of the refining margins, for the level of the refining margins in Europe and in the Atlantic Basin for the next probably four or five years.

For reasons due to specification of the product; to the fact that there will be more and more additional needs for conversion; desulphurization for [the due].

Also there will be the evolution of the supply that will be more and more with crude with higher sulfur, crude that will be probably heavier than the crude from the Northeast.

In addition to that in Europe there will be a demand that will become more and more lighter with the reduction of the consumption of heavy fuel oil.

So for all that reason we are optimistic, given the refining tools that we have now in Europe, that we should remain with pretty good refining margins.

Clearly when I say pretty good it means above $30 per tonne.

We can live very well with that.

(inaudible) [restitution] is totally exceptional.

Great.

That is slightly more than I was probably looking for.

I was going to ask you if you could go a bit further and give us some indication as to how marketing margins are panning out in the second quarter; and also chemical margins in the second quarter as well.

Marketing margins?

Oh, I think they are pretty stable.

Pretty stable for the first quarter; and according to what I know, I think there has been no changes at least since the beginning of the second quarter, on average.

Concerning the petrochemicals, our petrochemicals in fact they are still at a good level as the petrochemical margins.

But probably at the beginning of the second quarter a little lower than they were on average during the first quarter, just because the increase of the naphtha prices.

This is for Europe.

In the US situation of petrochemicals, it is not as good as it is in Europe due essentially to the economic situation in the US.

Just have a look.

Yes, quite frankly I think I don't know now the results of April.

It is a little too early.

I will know them in Monday; so I don't have the level of the petrochemical margins in the US in April.

But globally the situation remains good, even if for petrochemical maybe it will not be as high as it was in the first quarter.

Okay.

Many thanks.

Have a good weekend.

Thank you.

Same for you.

So next question.

Neill Morton.

I had a hypothetical question on your Sanofi stake.

You talk about selling in due course; but the CEO of Sanofi seems to have a long-standing ambition to turn the company into a global pharmaceutical player.

So I guess the hypothetical question is -- if there were a big US deal, and if Sanofi were to launch an equity issue to help finance it, would Total support the deal by picking up your rights, and so maintain your current state, (inaudible) selling it then subsequently?

Or would you allow yourself to be diluted straightaway?

No, I will not make any comment.

The only comment is that we will support any deals proposed by Sanofi, if we have the feeling they are good for Sanofi.

This is a general comment and statement.

It is exactly -- we supported the creation of Aventis because I think that given the level of synergies it was totally justified.

Now we'll see if Sanofi will propose us a deal if we have the feeling that it is a good deal for the company or not.

If it is a good deal, we will support it.

That's all.

So effectively there could be more cash going into Sanofi before getting it back out again?

In fact we will have in mind essentially the situation of Sanofi and the quality of the deal for Sanofi.

At the end of the day if there is a good deal for Sanofi, at the end of the day it will be a good deal for Total.

Okay.

That's very clear.

Just one follow-up, really a clarification question.

You mentioned in your speech --

Just maybe to say something, a point that I missed.

It is clear that for us it is out of question that we put any cash in Sanofi.

It's clear.

I was thinking more of subscribing to a rights issue.

No.

Okay.

Okay that's fine.

Just to follow up on your earlier comments, you talked about a possible reduction in your equity stake in Sincor not being included in your full-year 2007 target.

Yes.

Does your 2010 target make an assumption about any possible reduction?

I think that first I will not be too specific as we are now in the negotiation.

The event is [real] enough.

So it is announced, a target of 60% for their interest.

As a consequence of that, our stake would be reduced from something like 47% to 30%, 31%.

The impact for us should be on a yearly basis something like 1%.

But we don't know, by the way, when we will manage to reach an agreement.

So I think it is impossible for us to tell you what could be the impact for the production in 2007.

But for the future, if we continue with this [line], we cannot exclude that we will have to accept, if it is in suitable conditions, a reduction of our stake by -- that will have an impact of 1%.

Okay.

That's fine.

Thank you very much.

It is clear that this 1% on one year, that would mean on [a wage] for the next four or five years something like -0.2% per year.

Absolutely.

Thank you.

Okay.

Thank you.

So next question.

Jon Wright.

Couple quick ones.

The first is, are you able to say whether the quite large refinery turnaround program that you have in the second quarter, we ought to be incorporating some effect into our forecast for that?

Or are you fully prepared for it and it is unlikely to hit your bottom line?

Also just to confirm something you indicate in your 20-F, that you expect 10 major turnarounds this year.

Can you just confirm that is the case?

The second question is another confirmation.

Is Surmont still a 3Q event, a startup?

Thanks.

Oh, I think that the impact on the throughput of the turnarounds that we will have in Q2 should be limited, especially compared to the production that we had in 2006.

And for the reasons that (inaudible) some turnarounds in the second quarter of 2006.

We must say that since the beginning of 2007 we have been able to increase significantly the reliability of our refining operations due to all the effort that we have made.

This is clearly one explanation of the good results that we had we have had for the first-quarter 2007.

Second, still just one -- oh, there is of course also the big contribution of the DHC that has recently reached its full capacity.

Of course that will help for the volumes and the results in second-quarter 2007.

Globally speaking, in fact we should have -- yes, I concede that we should have 10 partial turnarounds in 2007; and six for the first part of the year, first and second quarter.

So I think it will be spread over the year.

I think there was another question.

Surmont, yes.

What was your question for Surmont, please?

Just to confirm, I think you said in summer, which I take to mean 3Q.

Is that still--?

Still [okay], yes.

Absolutely.

Thank you.

Okay, so next question.

[Paul Spiran].

Just a quick question of how you see the future or long-term future of Cepsa within the Total empire.

How do you think that could or may not change?

Cepsa is a good company.

We have now something between 48% to 49%.

In fact the main issue is more on the side of the [bank] that has a significant stake.

(inaudible) don't think that the bank will want to remain for a very, very long time.

The issue is, if it is an issue, is that the share price of Cepsa is now extremely high.

It's something like EUR65, EUR66 per share which is, fortunately for the company, a good price.

The issue is that it is not easy to justify such a share price.

Also clearly we can feel now interest with this company.

But up to now we are very pleased with our position.

Given the situation as it is, we don't want to move, and we will not move.

Thank you very much.

The next question.

We have no further questions.

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I just would like to conclude this meeting and to thank you very, very much for being with us today, a Friday, just before a weekend that I hope we will be very good for everybody.

Thank you.

Ladies and gentlemen, the conference is now over.

Thank you all for attending.

You may now disconnect.