TotalEnergies SE (TTE) 2008 Q4 法說會逐字稿

Good evening or good afternoon.

Okay, good evening.

We are flexible in Total up to a point.

But welcome in this new place as far as I am concerned.

It looks great.

I have heard that it was convenient for a lot of you, so if that is the first result I am happy with it.

You have been hearing about our results this morning through different documents and (inaudible) relation in France, so if you don't mind I will just go through the presentation directly without restarting on the pitiful result we have had in 2008.

Definitely I would come back still on what are the plus and minus and why after such big results (technical difficulty) even if the future looks great, we definitely -- we have to live in a different environment.

So I start directly with what is the reason of the success of our strategy and why we believe that this strategy is the right one.

Coming back to what has been one of our favorite subjects is not the peak oil but the potential production capacities especially for oil.

Remember we have said that we consider 95 million barrels per day as probably a good target even if I was already seeing it would be challenging.

Definitely today we consider, especially because of today's prices, the lack of investment -- not Total, probably not big oil, but others -- that this target of 95 million barrels per day will be difficult to achieve.

And as far as we like to say things not only by words or with words but in using figures, we want to say that at this time we consider that we have to reduce this amount by probably something which is at least 4 million barrels per day.

It's coming from what?

It's is coming from the delay in the production of heavy oil in Canada, also the heavy oil in the Orinoco Belt, Venezuela.

That is roughly 1.5 and could be more in the future if we are not capable to develop this part of the world in a more convenient and efficient way.

Definitely the growth in Iraq and Iran will also be also delayed, but probably also not as high as expected.

We use for this roughly 1.3 million barrels per day and the base decline of our fields, not Total, but global bully globally is probably going to be accelerated by 1% which is an additional 1.2 million barrels per day.

So the message is they are probably not going to be for it, but definitely in the medium-term if we want to reach an additional level thanks to be demand recovery we have to be faced with the potential which will be not enough to face the demand.

And that is why we consider still that it will be a demand constrained by supply and not the opposite.

Even if at the present time it's definitely, it's the opposite and I come back to it, the present is probably based on very, very deep declining demand.

That is the first message.

Second is, well, as the oil is still in the hands of the same group of countries.

Definitely those countries have a huge potential but it will more and more depend from OPEC countries and that is kind of the signal they can at the same time increase production capacities but they can also reduce capacities.

And today that is something which we didn't see in the past when we were considering that oil producing countries were still investing even during a period of deflation of prices.

Nowadays, as far as they also are short of cash, they are starting to reduce their investment also in the oil segments, which mean that the famous theory of when you reduce production you still keep and increase the gap between potential capacities and demand.

That is a going to be different those days.

They will also have a declining capacity level.

And that is why quickly we might be faced with not enough production to satisfy the demand and our role is, as far as we can, continue to invest to get the benefit of higher prices in the near term.

So I have been taking you on, by definition, all the presentation but I have been using just 20 slides out of 39, 50%.

So I am on slide five.

That is why we have decided to continue to develop our activities especially in the upstream.

We need to keep the priority on the safety and environment for obvious reasons.

We need also to take the benefit of the existing environment, which is lower cost, definitely inflation being very weak those days to reduce our investments not in terms of volumes but in terms of global demand.

And that means also probably potential slots for new partnerships for eventually acquisition.

We have been doing some recently, small ones.

There is no rush.

The prices is probably to last a little bit longer than we expected it to be last year so there is a time to see what could be the opportunities for developing our activities with our partners.

So you have here a list of different I would say strategies.

Keep in mind that we will continue to give priority to safety and environment not only the environment in our installation but environment in terms of global warming.

Our commitments have to be [staying, valiant] including during those periods of problem of cash.

We don't have a cash problem.

It will be even more expensive if we don't do it because we believe in it; to have a stop-and-go investment policy in these areas.

Second, R&D.

We have a very strong I would say desire to not only keep our program intact but to increase it.

We announced $7.5 billion on five years, which means EUR1 billion per year on five years and that is definitely to be maintained.

At the top of it we are seeking -- and I will come back to this at the end because it's not definitely -- the copy is there for the company -- but we are seeking in developing even more some activities which are on the side of our core business such as (inaudible) and maybe one day nuclear.

But that is not to be politically correct, even if it helps.

It's because we believe that at the end of the day there will be not enough energy and on the long-term view thinking that a company like Total should be involved in those activities makes sense.

Slide number eight.

To come back on figures, but those figures are important to give you a view of what is not only the results of -- what are the results of 2008, but definitely that they have been different quarters.

The best one has been the third one.

Definitely the lowest one; the fourth with prices of oil going from $115 during the third quarter to $55 during the fourth.

What is interesting to see on that slide is that Total is resisting far better than our competitors in this environment.

We always had this in mind that something we have sometimes discussed with some of you.

We have had difficulties, for instance, during the third quarter to get the last what I call dollars per barrel.

It's true that during the third quarter our partners have been more I would say efficient in getting the full value of the price of oil.

It's absolutely true at the same time that when the price of oil declines Total is resisting better for probably the same reasons -- production sharing contracts, a good portfolio.

And definitely what we see here is this result.

So the reduction in profits is more important than quarter-to-quarter, I mean fourth versus the fourth of 2007.

But we have minus 38 when Exxon is minus 42, Chevron probably 6, Shell up 52 and BP 71.

So two messages you have here the real tendency in what will be our results.

But second, which is also important, we have in the low price of oil the good capacity not only to resist -- I will come back to it -- but to invest with additional profit for the Company even for projects which have still to be launched.

Moving to upstream, slide number 12.

Well, definitely 2008 has been the proof of the success of our strategy in upstream.

We have an increase in our net operating results up 30%, $16 billion.

Definitely that is going to be a reference to be beaten but certainly not in 2009 or 2010.

But it has been part of the beauty of getting the benefit of a long-term strategy.

It is also bringing some good things for a healthy financial situation.

A good balance sheet even if our production has been not exactly what we would have liked it to be, but still bringing cash and added value.

If you forget the price effect we have the production, underlying growth of plus 1% with a lot of new production.

We will have another I would say -- to use a word that my friend, Jean-Jacques, likes a bundle of new projects to come, which means nothing more than new projects like Yemen LNG.

But I come back to it.

But we also add to face and that is a message which is even more important here in the North Sea, especially when I see my friend (inaudible) in front of me, who is in charge of our operation in the UK.

Thanks we have been able to deliver new production.

Jura is one of the best example; on time, within budget, coming at the time when prices were so high that it's really a beautiful success.

Congratulations.

At the same we have aging fields, mature fields, which are difficult to operate and definitely we need to spend more efforts in that area so that we can continue to fully benefit of our new projects.

The good thing is also that the access to new resources is still at less than $2 per barrel.

Of course, it's access to resources.

Then you need to develop.

The costs of development are still very high, but should get the benefit of the reduction in cost 'thanks' to this crisis.

Reductions are there to be delivered with new projects using the crisis to reduce cost and getting opportunities as we have been doing with Synenco like UTS in the future or Madagascar in the heavy oil segments.

Reserve replacement next slide; slide number 13.

That is where the company has really its value, even if it's not only on proved reserves.

Proved reserves, we have increased it at a rate of 112 which is not knowing yet what our competitors will be doing.

It's better than definitely next year.

It gives us a chance to continue to grow in good conditions.

But to be very clear, I am not using the figures only to please.

If you take the price effect, it's 112 becomes 99.

And when you take the acquisitions, the 112 becomes 101 and the equivalent without the price effect, 88.

But it means reserves life of more than 12 years and even if it's not on this slide still having 2P, i.e.

probable reserves, above 20 years and resources of both, close to 45 years.

So definitely we are in the position to maintain the launching of our new projects.

That is the introduction first.

Slide 15, which is definitely something important in this new environment.

The cost structure of the Company -- definitely the cost per barrel is still at levels which give us all chances to deliver added value even with low price of oil.

That is very important for the near to long term.

It covers almost all of our, I would say, geographical zones.

Definitely, definitely it means that at the end of the day to go in really new long-term plateau developments that will be a little bit more different.

In the middle words again are not sufficient.

We want to reduce our cost, not only CapEx but OpEx.

We have decided to have a figure for this of $0.8 billion per year through renegotiations, optimization, and if necessary delayed operations.

What I mean by delayed operations is clearly we send the message to all of those working with us and for us that the period of time -- if necessary, we will take the time needed to make sure that we get the benefit of what we call lower cost.

Commodities have been falling; commodities are a large part of our cost.

There is no reason that we find those reductions in our new investments.

This message is not unfriendly; it's just to make sure that everybody understands that we have to share of the burden of the crisis.

I think the message has been heard, especially on the exploration side.

It's true that on exploration people are always scared that we might stop it if price or (inaudible) decrease.

It's not our intent but if that is what contractors want to believe that is good news.

And I can tell you they are already [adjusted] this and we have the reduction for instance in the rig prices that we have not yet in the rigs we are using for development.

Exploration is moving along.

I hope you are seeing it, but it's definitely the case in Africa.

The technical cost, as you can see, have been increasing significantly.

But I mean, that is a mix of different things including accounting.

If you want more explanation on this particular we will be able to answer to it afterwards.

Definitely we have seen that those technical costs will remained below the ones of our competitors.

It is important but it's also important that we try to cap them at this level for the next months and years to come.

And that the level in particular thanks to the real way we have to manage our operations, i.e.

we have to be adamant on keeping costs under control, development being developed on time, within budget.

And I would say I will come back to it when we talk about investment.

We think the new budget which are included I would say the decided reduction in costs without waiting to see the result of the bids.

So definitely it should help at the end of the day to reduce the breakeven and definitely also to still get good returns in a lower price environment.

So as I was saying this morning and you have heard, we have decided to keep our strong policy of investment, especially in the upstream.

Globally you will see our investment are globally the same than in 2008, but they are continuing to increase in the upstream and almost in all the same traditional sectors when Total proved to be successful.

If you take the last column of the CapEx you will see that it's 8% for exploration, so it's $1.7 billion but that is only 8%.

You have heavy oil at 5%, which is still small, which means that our developments are taking more time than what we expected.

LNG is still in the upper range with 13% and we continue to have our globally very successful story in the offshore -- deep offshore 23%, traditional offshore 41% and onshore 9%.

That is definitely what we need to achieve to keep the potential added value of the Company which will come from our upstream activities.

To take the example of what has been inflation and what we could get from I would say 2009, you have the year 2007 versus 2006 the combination of all of those different columns of different levels gives you roughly an inflation of 18%.

In 2008 versus 2007 only 2%, but still an increase and for 2009 we have an empty box.

But this empty box is below zero, which means definitely we are absolutely certain that we will get lower prices thanks to the different confidence of what are our investment definitely.

The most difficult part will be the subsea equipment, especially in the deep offshore for everything which linked with USL.

Definitely the technology is still high, the demand important.

It will be more difficult, but it's also the message for our project developers is just to be careful not to invent things which are not too easy to develop.

You know perfectly well because when you talk with our contractors they say one of the problems is if you would be asking us easier things to do, thanks, it will be probably cheaper.

Going to the Arctic Sea and elsewhere I don't think it's easy but certainly at the same time we could have in Total a better way to, for instance, do carbon copies of what has been done if it proved to be workable.

And I know it's not always easy because we ask at the same time to our engineers to be at the upper range of the highest technologies, but there is a time for everything.

Today it's only one way to help contractors to reduce their cost.

The next wave of major projects, it's the next slide, slide 17.

Well, you have on the first part of the slide which is the representation of what are the levels of the price of oil we need to make our new projects profitable.

Just be careful here or in those slides which are oil, very interesting.

They are to be looked at in details.

Here we are talking about pending, i.e.

new projects to be launched, so it doesn't take into account the existing one where we have definitely old costs and higher returns.

Here it means that for deep and ultra deep offshore we are still capable to develop projects on an economical basis at $40 per barrel.

Of course at $40 the return is not enough to cover all of what we want to develop in the long term.

But it means that even on $40, even if we don't believe that this level will remain, we can still find projects which are economical at that level.

Of course, it's more difficult for a project what we call with a long plateau just like, for instance, LNG or the heavy oil or whatever where we need higher prices and where the range is much more between $60 and $100.

And that is where we have more than ever to continue to fight against cost and definitely to think also that return is important but enrichment is important too.

So a good mix in our portfolio of those are projects being successful at $40 and ones who are deserving higher prices are both necessary for our long-term, which means that we will not wait to see higher prices to develop those long-term plateau projects.

We need them to have this continuity in the portfolio of our development.

So you have on the top all the projects which are going to be launched.

You have the list of the ones which have been decided in 2008, the ones which will be decided in 2009/2010.

There is a long list of projects; those projects will be done one after one.

You will see that on another slide.

Definitely the only risk is if we don't find the appropriate cost we might have to delay them until we find what we think is normal.

On the last part, just keep in mind when we are asked what is your flexibility on your investment?

Well, first, the intent is to do all of these investments.

If necessary there is one part which we could definitely delay if everything, which has not been yet decided, and you --as what we call the FIDs for the different colors, especially for 2009 and 2010, i.e.

the orange and brown.

It is orange and brown, or yellow and brown here.

Those two parts are the FIDs not decided so it represents 15% in 2009 and 29% in 2010.

So that is definitely a flexibility if needed.

For the time being, it's no change.

Exploration on the next slide, slide 18.

Exploration, which is still the main driver of our success of our profits; $1.7 billion of budget.

It's in fact roughly the equivalent amount of what has been spent in 2008, so this will be close to the budget of 2008.

We have already all the potential rigs and wells, i.e.

targets to be drilled.

But first just remember the figures; in 2008 we have been able to bring an additional 800 million barrels of resources.

A little bit less than the average which is more around 900 million, but still a good year.

And we definitely intend to continue on that basis.

The cost per barrel discovered has a little bit increased from what you have been used to in the old days, i.e.

nine years ago where we were closer to $1 per barrel.

Definitely it's now much more $2, $3.

It's not far of the $2 for the acquisition of new resources.

It's still definitely an extremely sound basis for getting access to additional profit through the development of those projects.

And we have on the right part of the slide we have been using the last discovery we have been doing and giving you the kind of rate of return it has been delivering to the company depending, of course, on the price of oil.

What is important, again, is most of those projects are still bringing an acceptable return even at $40, which means that everything on the top of it is additional rate of return, additional profit, additional cash for the Company.

Then we have made it clear that the difference between Europe, Africa, and Central Asia -- well, just to help you, but you are all experts.

Usually it's better in Europe because we are using existing hubs to develop those new discoveries.

The best example, again, being Jura or some new ones to come in the portfolio of the UK.

Life continues, on page 20.

The next major project to come on stream you know all of them, they have been discussed at different periods of their life.

It is good to see them coming on stream -- Akpo in Nigeria; Yemen LNG, in Yemen, of course; Tahiti in the Gulf of Mexico; Tombua Landana in Angola; and Qatargas II in Qatar.

All of those projects will be starting in 2009 and will be part of the additional production of the Company.

Again three messages.

Those projects will represent by 2010 including the increasing plateau, almost 400,000 barrels per day in 2010 which is an important amount.

It means technical costs still remaining under control even with the deep offshore, which you see on that part here at the dollars per barrel, and all of them, again, bringing additional cash.

But the important thing is on the IRR all of those projects are starting to have a good return at $40.

Some are even higher than the expected minimum return and definitely with catching an important part of the additional price when it comes up to as you can see $100 per barrel and above.

The traditional one which we usually give you and don't commence because we usually have to comment on them one by one.

It's our day-to-day program just making sure that all of those projects are living their lives, which means going from the study to the field then to the FID which means the decision to develop.

As you can see, you have all of the risk until 2009 when the project have just been presented to you and then the risk for all of the ones to come until 2016.

Of course, some of them are still not approved by definition but they are sufficiently advanced so that we can consider them as already being part of our medium-term portfolio.

What is important is we have to fight against a decline rate of roughly 4% per year; that is typical of all companies.

At 4% we are probably below our competitors, but it's a challenging figure.

Definitely the other message is what we are seeing in terms of delay in our Canadian operation will not hurt this list, but in any case that was something to come around the year 2016.

But it means that we believe for all of the industry you might suspect that most of the aerial projects in Canada will be delayed for the mix of logistic reasons, costs, and probably, too, environmental concerns.

If you see the beautiful diagram which has been done and signed by Jerome.

Jerome signed -- each time you see this [flute] that is Jerome.

We will see with Bertrand if he keeps the same thing, but think it's a good idea is give you the tendency and then you have to discuss with him and all of his colleagues what are behind the flute.

Flute means we know it will increase, but we don't know by how much.

On LNG I think it's important that we continue to highlight what is successful at the Company.

I decided to use only one slide.

Just to bear the concern of the industry is not only what is the future of LNG, the future of LNG is obvious, but it's much more today what will be the problem of the bubble which we have been talking about last year here.

This bubble was much more expected for 2010/2011 where with the prices and lower demand the bubble will come earlier.

Our first concern as being a big producer of LNG has been to make sure that we will have outlets for our productions which are coming from Qatar but also Yemen, etc.

The good news is we don't have any problem.

The bad news means that it's thanks to lower gas prices.

Those lower gas prices have been having a very clear impact on the production of what we call those unconventional gases in the US.

We were not quite sure when we discussed with some of you of where and at what price would be the limit.

Definitely when the price of the hub -- Henry Hub went below $6 and it's now below $5.

It has had the impact of just topping most of those rigs which will definitely let room for gas coming from LNG.

That is the good news.

The bad news it means that the bubble will remain for a period of time even if we see continuity in a request for more gas in the US.

That is not the case for oil but it's still the case for gas.

Especially with a price of that level it gives all the good reasons for the industry to switch from definitely oil to gas, but also from coal to gas.

At those levels it becomes extremely interesting and at the top much cleaner than what you could get from coal.

Even if the intent was to talk about the short-term, we still have good long-term.

We are still working on the new projects in Nigeria, in Australia, and why not one day in Iran.

We don't intend only to keep our existing projects.

I see your eyes moving when I talk about Iran.

You are right, but that has been always the success of the Company is to believe even if it takes time.

I know that Yemen is not Iran, but Yemen will be producing soon when it was considered not so long ago as totally irrealistic; the dream an impossible.

So I will not be surprised to see one day an LNG project in Iran.

What I wouldn't like to see is that this project is developed by somebody else.

But again we will have more time to discuss about this.

Downstream we are an integrated company; we intend to remain an integrated company even if I will come back on it.

We have all of our priorities on upstream.

It's more than a challenging near-term environment.

It's really not a good at all environment for refining and to a certain extent marketing.

By the way, marketing has been a very strong support of our profits in the downstream in 2008.

I know it's not always easy to say this at a time where you talk about consumers and everything, but we have certainly the worldwide outlets and that is part of the success of the Company.

But on the side of this definitely the refining will be suffering, even if for the time being the results are far higher than expected, but I am touching about January and February.

But at the same time we don't think it can last like this for too long.

We still have this problem of excess of gasoline versus diesel.

Definitely Total will have to restructure in a way it's portfolio to make sure that we have capacities which are aligned with the demand of our consumers and that we will not be forced because of an excess of gasoline to stop the production of our refinery.

It's probably much easier to adapt them, to develop more [DFS], i.e.

desulfurization units, and at the same time probably reconsidering the size of certain of our units to be more in line with what is requested to demand from our customers.

We have been using here -- we have to take risks in our industry in terms of demand.

We have seen that the demand for the first semester of the year will be probably of minus 2 million barrels today on a six-month basis.

You know that the IEA is still using -- even if they change their figure every month, they move from minus 0.8 to minus one but it's on an annual basis.

Annual, I don't know yet what it is.

Definitely today in terms of demand it's much more minus two.

We had this very clear when we see the OPEC reducing its production by 4 million even if it's a little bit less.

You have demand minus 2 where you have definitely to swallow what have been old barrels that have been, let's say, stopped being onshore or in ships.

But that is probably why you see the price of oil remaining at the relatively now stable price is we are and we see we are in a period where I would say one by one we are recapturing all of those stocks and then we will be really rebalanced.

Then we will see what it is.

The question mark in my opinion is not OPEC it's still what will be the real demand reduction in the months to come.

That is why we have to remain extremely conservative in the way we operate our global operations.

So more than ever we need to strengthen the performance of our downstream.

We have on this slide two different images.

One which is just to please ourselves is to say that as far as the downstream adjusted net operating income per refined barrel is concerned we are as good as Exxon.

I would like it would be the same for all of our activities, but sometimes we are challenging ourselves on cannot we do far better in refining?

The answer is, yes, but at the same time it proves that at a time it is sound.

Now it's sound because we are since many years, doing a lot of work to reduce our costs and increase our productivity.

It's what you see on the right part of the slide.

We are capable to beat inflation.

We have to do even more and definitely even if it is in small we will have one day to go to more restructuring that will be the only way to get an efficient sustainable downstream investment which will profit to the Company as a whole at its own level and also as being part of our strategy to bring to our partners all of our skills from upstream to downstream.

Chemicals it's probably even worse as far as we have already seen the impact of the crisis on our results.

The demand for the EMEA for ethylene has been declining for the first time since -- I was not there, but I am sure it's true -- 30 years.

I was there but not in this part of the activities.

That is very unusual and what is even more a concern even with a big drop in the NAFTA prices -- well, unfortunately the price of PE has been declining even more.

So not only we have a problem of demand but we have a problem of fill and definitely the mix of the two is not giving us good results.

On the top of it we have a concern with now the utilization rates of our crackers; that is part of the reason.

You know that below certain level it becomes difficult to keep the cracker in activity.

It's probably something below 80%.

Our concern is who is going to be the first to stop.

We know that there are three of our big competitors which are really at stake in those days.

Those are Dow Chemical, INEOS, and [Basole] definitely.

I don't know which is the one that will be the first to have to make a jump in this.

I hope it will not be through bankruptcy, but definitely for the time being there are too many crackers in operation to be facing the decreasing demand.

So more than ever on slide 33, we have to continue to be extremely aggressive in the way we handle our petrochemicals activities.

We are concentrating now most of those activities in a few numbers of platforms which are and will be more and more first class, (spoken in French).

I don't know how you say (spoken in French) in English.

Okay, one of the best in the three.

And keeping our activities outside offshore where you will one day see a big access to additional demand.

On the right part of the slide, you have all of our CapEx.

You see that we still are spending a lot of money for maintenance, keeping our investment in good shape.

The good thing is we can now take the benefit of reducing the investment program.

We have been spending quite a lot of money to get all of those investments as first-class investments.

Now we can definitely reduce the investment base for a period of time, except in places where like in Qatar and Nigeria, we will be able to have access to good feedstock like [Esane] and get the benefit of higher price of oil when it returns to better conditions.

But definitely for the time being, the results of the petrochemicals and the specialty chemicals are far below our expectations.

As you have seen, we have said that we want to keep and that is what will be done.

The downstream [will achieve] above double-digit which is above 12% that is definitely not the case in the petrochemical activities these days.

On the now perspective we go to slide 34 so I repeat it.

First is maintaining our CapEx program, $18 billion.

It's $1 billion for chemicals, $3 billion for downstream, and $14 billion for upstream as I said earlier.

Definitely it's more upstream than ever.

It's the same demand in 2008; 2008 has been a little bit below what has been budgeted.

The $18 billion is taking into account that we have already considered that we could reduce our investment program by what I call decision taken by the top, i.e.

we have told to our people that they have to reduce it, and that is now part of their commitment.

At the same time we hope that we will be able in keeping those investments we will also be able to reduce their size thanks to a far reduced cost.

And on the top definitely still taking the opportunities when they come of having operations just like the one we have been doing when we launched this bid on UTS Energy and Canada.

So it means 75% of our capital expenditures dedicated to upstream.

Slide 18 shows you even more at the results of this strategy, i.e.

more and more upstream.

And if you take the 2004 to 2009 period, it's a decline of our capital employed in the chemicals from 24% to 12% divided by 2.

We have, of course, in this -- the drop linked with the spin off of Arkema, but definitely still important results, yes?

And it's going to continue downstream from 28% to 24% and you have by definition the rest in upstream climbing from 48% to 64%.

64% in 2009 capital employed is should we invest 75 it means that it will, year after year, be even more upstream-oriented which is definitely our strategy.

The ROACE on our different activities.

I said jokingly this morning but I think it's less and less jokingly that the next time we will have probably to get Exxon out of the slide because it's always difficult to explain even if we think we know why.

But we are having very good profit in 2008, close to 28%; it's one of the best of the industry.

It's good definitely.

That will be different next year, but I mean still at rates which mean that each time we concentrate more to the upstream it will give a better ROACE for the group as a whole.

And that will be definitely the strategy which will continue in the future.

Slide 36 on the balance sheet.

I have been a little bit too long so I will read quickly on this.

Just keep the right part of the slide and see what is the capability of the Company for being flexible faced to an unknown environment for the short term.

But you have here all the elements to see what will be the sensitivities for a change in the Brent price or refining margin.

Even more important, you see what could be coming from divesting more of Sanofi-Aventis and what is the impact of an additional 5% in gearing, i.e.

we have all of what we need on the side of the profit coming from our operations to be able to commit ourselves on this strategy of maintaining our investment and maintaining our dividend policy.

And that is the strongest message.

We have said that we will be keeping a 25%, 30% gearing for the year 2009.

Remember it was 20%, 30%; the 20% is probably over for a period of time, but it means that we have all of the opportunities in the market and (inaudible) will be more than delighted to tell you of our recent beautiful emissions, i.e.

far better than others.

But definitely means that we will not wait to be needing of additional debt to raise funds just to make sure that we don't -- are, I will say, relying on banks for the time where we will be needing to increase our gearing.

So strong potential for value creation.

That will be my last slide, a slide that usually our shareholders like.

That is why we end with it and that is also pleasing Jerome.

So that is why it's going to be one of the last presentation of Jerome and that was in fact the reason to say this but I said last word afterwards.

So you have on this slide every thing you know already.

We have asked our Board yesterday to ask the annual general meeting an increase of 10% of our dividend at EUR2.28 per share.

I know that some would say -- pessimistic people are telling me that it is the same amount that -- the amount we have paid in November.

But, I mean, take it the way you want; it's 10% more than last year and that will give us a payout ratio of 37% which is also very close to the one of last year.

The good thing it give us all the goodwilling to keep this for the year to come and even more definitely we do give priority to dividends to return the money which is due to our shareholders.

We have decided to stop our buyback program and to keep on this policy dividend or dividend policy on a sustainable basis.

I will not comment what I have been commenting last time in that I still consider that this trend with such big dividends as such result the share is not higher, but definitely that is not part of my presentation.

It's part of your job and I will be looking at it carefully in the years to come.

But definitely it's a consistent strategy and we will maintain it.

It's based on investment discipline and very centralized and we will maintain it.

We will reduce our costs and we will ask our employees to be more than ever dedicated to the job.

We will definitely continue to have this diversified policy.

We think that more than ever being in different countries of the world helps you to get access to new business.

We will continue to be one of the best in profitability.

We don't intend to change our targets because of lower prices.

And definitely with a strong balance sheet starting from the end of 2008 we have, thanks to Patrick, everything in hand for still what looks for me a very good future, because we believe in higher price in the longer term.

We have everything in hand to go through this probably difficult period in which there is no reason that we cannot continue to find very good opportunities.

Thank you.

I just wanted to say a word for Jerome because it's probably his last appearance as being in charge of the -- what?

Of this beautiful job, i.e.

I can tell you that that is my thought.

I hope you share it.

That has been done with great talent by Jerome and all of his team.

I just wanted to take this opportunity -- not to thank the team, it's too early.

I still need you.

But, Jerome, thank you on behalf of the management of Total and then you will discuss this with your colleagues of this room.

Thank you.

Questions about the age of Jerome are not authorized.

(inaudible) You put 500 million in your pension fund in 2008 also within the fourth quarter, I think.

How much higher is this number likely to be in 2009?

And the second question, given the lack of the stability on this micro situation.

If in a year's time we have been hearing London and oil is $35 to $40 and you are hearing it gone up to [30]% that reduced your costs.

What changes?

How does Total's short-term strategy then adapt in a period of prolonged weakness to the extent of the bottom line?

Patrick, do you want to answer the first?

Yes, on the pension fund we -- this year what we said externalized to transfer to third party the liability of some (inaudible) up to 500 million and that is it.

To give an overall figure, we have about 7.5 billion of liabilities for pension in our balance sheet and about EUR6 billion of assets.

So the difference is already provided by 600 million, if I will remember.

So which is what is not provided yet is about EUR1 billion -- less EUR1 billion, about to EUR800 million and this now you know the mechanism with the (inaudible) so we have about 5, 10 years to provide for if necessary in the forthcoming years.

But the transfer of the liability was a one-off this year.

Next question.

No, sorry.

I think probably the best way would be to answer in remembering what I told you last year which was definitely not what happened.

I.e., we had same view on me macro which was probably better because I don't think that this reduction in production capacity is -- are good news, the opposite.

But at the same time it's true that you can be wrong in terms of short-term.

But for a company having a long-term view and when we decide today to have the project being developed it's for 2014, 2015.

So what (inaudible) the price in 2014?

It's true that we need the cash today to be able to sustain those investments.

So it's not a question of what will be the price in 2014, 2015.

Then I can tell you -- I can come back in London or wherever you want and see that the price will be higher, especially the prices, as you say, as I say, might be I would say more gutsy than what we expected it to be only three or four months ago.

So our only chance today is we have a strong balance sheet, as I showed you, all the flexibility we have with Sanofi, with our gearing, with reducing our cost to facing difficult days in 2009/2010.

Now of course if it goes to more then we have probably to restart thinking.

That would be in my view the worst case which means that we will have to cut investments and I assure you that we have the potential for this.

But for me it should be the last thing to do because definitely that's where you start losing money.

So it's very important that we make sure, that's why we need to be very cautious.

That's why the Company will be more than ever I would say centralized for all the decision-making process to make sure that we control all of our criteria for investing, for divesting, etc.

But for the time being, and especially as far as next year is concerned, I can tell you I'll be pleased to meet you again in London with probably the same scenario.

If the price of oil goes lower, doesn't change, it means that we will go higher.

My concern would be much more for the time being, to be very honest.

The [black] scenario is the economy remains gloomy, but because there's this lack of production capacity we start to see an increasing price of oil at a time where the economy is still not ready to swallow it.

Because that's something I didn't say which makes sense.

Today we don't like $40 or $44, but (inaudible) would like it, the world likes it and today we would be at $100.

I don't know what will be my problem and our problem.

It will be extremely difficult, so don't think it will be good news.

It will mean taxes.

It will mean problems of what are you doing to help the others, everything we don't like.

So today, to a certain extent, to have a price at this level for a period of time is probably not too bad.

If it lasts too long that's another problem and we will rediscuss it in two years time in London.

[Philip Benning] from HSBC.

Not all of your partners in the upstream around the world are as financially strong as you.

Have you come across circumstances where you want to spend and they either can't or don't want to?

And if that happens what would you do about it?

Well, (inaudible) all of our partners don't have the same strengths.

By the way, certain of partners have disappeared.

I was talking about those who were -- that said doing a lot of bad for the industry and not being serious.

But they were there and it was part of our concern.

By the way of not doing anymore, are you still scared about Chinese, about Russians, about those P.O.

boxes which were effectively being a strong concern to the energy companies.

Now yes, there will be a lack of investment and that's the reason why we are embarrassed because it's not a big company (inaudible) which will be able to cover all of this.

We don't want to carry the share of others, that's important because I mean at the same time we have to face our own investment we don't want to face the investment of others.

Is it giving opportunities for Total in terms of doing a bigger operation than UTS?

The answer is probably, yes, but it's too early.

I don't want to restart what has been done yesterday which means six months ago where (inaudible) might say that we will need more reserves not only through exploration but through acquisitions.

The result has been Total is going to buy, I don't know what -- that's not the case for the time being.

We need to be cautious about the medium, short term at the same time and that's a way to answer to the last question.

If this crisis lasts longer the opportunities will be bigger.

But at the same time, even if I know we never buy at the lowest and we never sell at the highest, there is still a potential for lower prices.

So at the same time, to keep our freedom in terms of liquidity and to be sure that we can do things when we want and when we see a brighter future for the oil price I think we have time.

Mark (inaudible), Merrill Lynch.

Over the years your investment policies -- were clearly oriented to growing your upstream exposure.

But you have shown that you're (inaudible) you are prepared to make a good investment in refining and in the downstream businesses when you think you can make money.

It seems to me that -- I mean you don't comment that there is possibly more opportunities to buy distressed companies or assets in the downstream area over the coming months.

Would you consider downstream M&A at some other part of your inorganic growth strategy?

Definitely not.

But [Drobel] is a good project, [blah, blah, blah], (inaudible).

If it is distressed it's because it's not good.

But the ones that are good are still not distressed and we consider Drobel a very good opportunity for the growth of Total for all the reasons we have already said.

But frankly it's not because it's cheap but it's good to buy.

And I have a new experience which is also, I can say it, we've been acquiring power plants in Argentina which were 50% less than the price of six months before.

Ultimately it's worth 50% more than the three months after.

So in fact the (inaudible) idea was to be in the electricity business in Argentina whatever the price.

It's Tim Whittaker, Barclays Capital.

In the last few years unit costs, capital and operating in the upstream, have doubled or even more than doubled.

You say you're targeting a $0.8 billion cost reduction in the upstream, but how much of that doubling of cost for the last few years do you think you could reclaim as costs come down in the service industry and with raw materials?

I think we would have to go on a step-by-step basis.

Today for instance if you take steel, steel represents roughly 14% of our cost.

If you are capable to reduce this by 50% you have already a 6% to 7% decrease which is tremendous.

The problem then we start seeing that steel is steel but it's not the same steel.

We will ask (inaudible) after this conference, he will tell you our contractors are good to tell you that it's steel but not steel.

And this quality of steel is not at all to be considered to be reduced.

But sincerely, this is obvious that all the (inaudible) price to be in our new cost.

But at the same time, the target number that we have is to say in 2006 we were roughly at $70, so being to their $40 we should have prices below this.

It's not true because in between we have been asking our contractors, we have asked ourselves to be more efficient, to increase [HFC] regulations to be more concerned about the environment, to be more efficient and that has a cost.

So you cannot go back to the time where in the price of oil was the same.

At the same time I consider that step-by-step, especially if the price of oil remains low, for the time being contractors, we are doing what we're doing.

To say ah, because I mean what I'm presenting they have it.

I believe in higher price of oil in the three, four years to come.

So why should we rush?

But where is the other problem because we will not wait and we will tell them we decrease or we delay.

But at the same time how long will it take?

I don't know.

I would say 20% to start with is a minimum and we might have to go to a further [decrease].

But I mean, I would prefer to do it through negotiations than through arm-twisting.

Remember the period of arm twisting in the '90s resulted in a bit of a disaster.

We have been killing so many contractors that part of the reason of the inflation we faced recently is the fact that we don't have enough competition, we don't have enough skills and we have to be careful not to restart this.

But at the same time we know that they are grooming or reducing their cost, they have to share it with us and definitely is going to be one of our first priorities for this first half of 2009, i.e., not only delaying projects, but opening discussions as we've already started and telling them okay, what can we get from this part, what can we do to help you to decrease your cost?

That's where I said let's maybe be a little bit less intelligent, try to have some carbon copy projects even if I know (inaudible).

But definitely there is room for win-win.

Today, as I said last year, and it's more valid than ever, there has been a lot of money lost which has not been for the benefit of contractors and not to the benefit of companies.

It's now time to find a solution and, again, it's probably more than EUR800 million.

It's Neil McMahon with Sanford Bernstein.

Two questions; just following on from your CapEx comment.

You seem to mention in the presentation about FPSO trends and steel trends, didn't mention much about drilling costs which are obviously a significant part of your profile going forward within your deep water development.

Maybe some comments on where you see drilling rates maybe for the next few years in the deep water?

And then secondly, on diesel -- if you look at your demand profiles for this year they look reasonably drastic and yet the diesel cracks are holding up pretty well.

How much of a concern is it to you in 2009 that if the diesel crack fails and drops dramatically that your downstream business and the earnings from that will drop dramatically?

If you go back to slide number 16 -- you have a split in the operating CapEx between the drilling cost, supervision and engineering.

So to help you, the construction and other is 20%, drilling 29%, supervision and engineering 14% and the equipment 37% out of which 14% or 13% for steel.

So it's obvious that we will not get the same reduction in all those areas and we start by steel because it's easy to say what is the cost.

By the way, they are using a lot of oil and gas; it's also easy to say it has been dropping.

So that's where we can probably make the quicker benefit.

Definitely drilling is the next.

Why?

Because there have been a lot of rigs already stopped.

The problem depends where and if you go to the (inaudible) where there is still strong demand and recently one of our competitors, we know exactly at which price he has been acquiring a long-term contract for a rig.

It's still very high and I've been discussing with the owner.

They are considering to reduce the cost but they will do it in a way just like most people doing now, seeing what is the real impact on the reduced demand.

So you can see the demand reducing [is even greater], otherwise being a high tech they will try to keep on.

For all of the rigs being onshore for very conventional there will be a huge drop and it's already starting.

And there you can find a reduction up to 50% already.

Now it's not -- those were having the most impact in our books, the ones [which are in Poland] is when we drill in Angola, Nigeria and those are still very high.

On exploration, as I told you, the (inaudible) for exploration, the fees are getting lower and lower and quickly so that they are worried that companies will start reducing their exploration program.

So again, it's to be taken one by one and to see one by one how we can make it.

But for the rigs it's definitely clear that today for a rig of first-class ultra deep water, it's above $700,000 per day which is definitely too high.

If I can take risk I hope you could reduce it to $500,000 after which it's going to be probably difficult.

But it's really to answer in two details and I should say for contractors 200 better in terms of a message.

But at the same time it's stupid to say things which we know cannot happen.

The technology in those new rigs is unbelievable and we need 50, we need also to have rigs which can be moved quickly.

We also need rigs we can drill quickly.

And we have to remember the cost of the rig is not only the per day fee, it's also the numbers of where you need to drill and if you can reduce by one month the well (inaudible) more impact than reducing the fees.

On the diesel, crack -- that's really a crack because today, as you know, it's exactly what is making the profit of refiners and especially, and by definition in Europe.

But when we see what has been done recently in terms of lower demand there's still such a lack in diesel that we cannot see, at least for the foreseeable future, how we could go to a point where the demand will be more and be a problem for doing what we have today at good margin.

The risk again is much more on the outlet for gasoline and if we cannot find ways to reduce the gasoline portion then the only chance is to reduce the production at the refinery and then we have a problem with the diesel too.

So that's why we are fighting on finding outlets for gasoline and that's where our trading division -- people are always thinking of traders as being just trying to make money on short-term and taking the benefit of the (inaudible) even if we can continue on this we like it.

But they also are quite good, for instance our desk in Geneva, they are extremely active on finding outlets for our extra gasoline surpluses.

And it's also the benefit of our (inaudible) large marketing outlet.

Total by itself has its own capacity for using gasoline, for instance in Africa where diesel is not a real trend at least for the time being.

So I'm not so -- I'm concerned about still the fact that the US might go even lower in their demand, but I'm not so scared since I see that we have the capacity for the time being to find outlets for this gasoline outside of the United States.

For the diesel crack it's not a problem.

For reforming, that's still a big concern.

Talking by the way at the present time is very good.

Surprise, surprise.

It's (inaudible).

You said earlier that OPEC cuts are actually coming into effect now.

Can you say that in fact you've seen, in terms of reductions in your own production in OPEC countries, how much you've built into your expectations for 2009 in terms of OPEC reductions?

And secondly, you mentioned partners in terms of a potential issue.

Can you talk about what you're seeing with the NOCs in terms of their ability to fund projects where they have a share?

And I'm thinking perhaps particularly of Gazprom with (inaudible).

Thanks.

Those meetings are always too long (inaudible).

(inaudible).

Do you have the answer?

We don't know today.

Definitely what is important to keep in mind is most of our OPEC productions are fixed margin which means very small, especially in the Emirates, and they are the best to respect the OPEC quotas.

So it has an impact on our production, but it will have a little impact on our bottom line.

The others are Nigeria and Venezuela.

Fortunately they find other ways to reduce their production without using the quota.

That is not good news but it's part of the problem we faced in 2008 and we still consider has to be faced in 2009, i.e.

linked with the insecurity in the [delta].

The questions will be much more on Libya, Angola where it's a little bit more than a fixed margin and where definitely it's going to have an impact on our profits.

For the time being it's not quite clear of exactly what will be their cut and what will be the impact on our production.

But I can tell you as far as when we will know we will make it official, there is a reason to keep this secret, it's to be known by everybody.

At the same time, even if it was not your question it's part of the answer, it's good news that they are committed to their production.

Because at the end of the day, as we try to prove it here, it's the main reason why the price of oil is still at $44 and not below was that OPEC can tell you it will be far below just for those who still have this concern about the existence of OPEP.

You had another one.

I knew you would be even more specific.

For the time being very clearly Gazprom has said that they will and want to keep Shtokman on the priority list and they've insisted and made the statement recently, I didn't ask for it, that Shtokman will not be delayed for questions of financing.

It's good news as far as exactly the views of Total and Statoil.

They've announced that the FID date will be delayed to early 2010 which was not a scoop, especially for those who have been traveling with us recently, that was already our internal forecast, but afterwards I cannot tell you more.

Russia, they don't have money but if they want they have money.

I.e.

Shtokman is a priority not because it's Shtokman, it's because they need additional oil and new gas to be developed and produced.

So until further notice we don't stop anything, we have (inaudible) over budget, we are starting to spend quite a lot of money for the (inaudible) basic engineering, the logistics, the place where the energy [prompt] is going to be installed.

So there is no sign of anything leaning towards a shortage of financing.

It's John Rigby from UBS.

Two questions.

The first centers on the balance sheet and it's about debt.

Do you carry most of your debt in US dollars?

If you don't or do has that changed over the last year or so?

It wasn't apparent to me looking at the account; there was a great deal of impact of FX differences this quarter, although dollar/euros clearly moved a lot.

And also related to the Sanofi stake, I've always worked under the assumption that your debt levels or target debt levels would actually start to fall if Sanofi was sold as you regarded Sanofi as (inaudible) financing or quite like cash I should say.

The second question -- that was a two-part first question -- the second question is to do with the FID process actually.

You've got quite a few very large projects, Shtokman being one of them I guess, coming up at the end of the year and I think we've already explored the fact that oil prices potentially could be still low at the end of the year.

Within Total what happens if you're forced to rethink or to delay?

Do you still warm stack that project and do you send it back?

If you stop it is there a period of time you essentially knock it back a year or two years because you've got to take people off the project and then bring it back on again?

So what I'm saying is if you say no, not right now is it automatically delayed by let's say a year or 18 months to two years just simply because you've demobilized people and you'll have to bring them back on the project late if that's clear?

It's very clear.

I'll (inaudible) you.

First can you start with the dollar/euro ratio?

(inaudible) our debt is today denominated in euro in floating rates.

The rest assuming it's made in January was a $1 billion fixed rate 10 years for 25%.

We will try and do more dollar-denominated fixed-rate bond issue and we will tap the market when the market will be open for that.

Just to give you an idea, another (inaudible) French company which I won't give you the name, (inaudible) the same time there was an issue at 6.5% when we issued at 4.25%.

So we (multiple speakers).

So we try to do it opportunistically I would say and we will do it over this year.

This year we will (inaudible) $5 billion to 6 billion maybe after (inaudible).

[Philipe] will answer because, I mean, he's a Board member so he may be embarrassed.

I'm not sure he would be embarrassed.

I hope not.

I mean, as you know, we've not only said, we have sold already (inaudible) of shares in 2008, roughly EUR1.1 billion and our strategy is to sell the remaining parts in roughly 3 years.

So to help you it's -- today's stock price it's almost EUR2.5 billion per year.

So our intent is to keep it like this, and no intention to speed up the process.

We don't want, as I told you last time, to impact the market, we still want to do this smoothly without hurting the share value (inaudible) has been successful.

Please take it as a joke, it is only, but I mean, when we use sell the stock price is increasing so -- but we will continue and we are continuing.

And as you've seen in our 2009 target is a EUR2.5 billion sale.

Now part of our flexibilities would be effectively to increase the sale of our Sanofi shares, then we will see how we do it.

Because definitely as far as we don't want to hurt the share value.

If we go at that level it will be difficult to do it in a way which is not hurting.

So we might have to consider other ways, but it's not at all something which we have in mind for the time being.

On your other question which is, as usual, very sensitive but professional -- of course we cannot just delay and delay and we cannot keep teams forever, even if we are quite good to wait if it's needed.

So we've been doing it for a different project.

For instance Dalia, even if it were forced to delay.

But I proved that when it's necessary it can be done.

So if we take the example of a project where the FID is to be decided, two reasons.

The first one is there is a big shock in the oil price where we see that the reason to be optimistic for the medium-term is not there.

Frankly as [fast] as money is concerned with the production being in 2014 plus, that's not our concern.

A concern would be if at that time we arrive with incapacity to have a project, the cost of the project which is sustainable with our long-term plan which is, as you know, still around $80 per barrel.

And that would be the reason to delay is to say this project is not economical, not because of the price of oil being $40 but because the price of oil is -- I'm sorry, the cost of the project is too high even with $80, and then it's part of life.

I mean if it's not economical we would not do it.

In that case it would be more than a delay.

I mean just to say that doesn't work and that's very aware but it can happen.

The third option would be that still because of very low price of oil we don't have sufficient cash, frankly that's not at all today something we foresee as a concern.

So the risk is the project not being economical based on normal conditions which are not $40 but much more around $80.

And as far as the project is not at a level of being sufficiently studied, I cannot give you the answer.

But it's much more the reason would be this project is not economical and we have to delay it, to restructure it, to rethink it, to make it smaller -- I don't know.

But definitely that would not be based on the fact that the price of oil is at this present time to low.

That will not be the reason for delaying a project like this.

And it's true the project has a cost if you delay it in keeping all the teams in place.

But we will do certainly our best efforts to ensure that before all the teams are in place we are sure that we can move, otherwise we would not do it.

As you know, the FID is taken before the teams are in place.

We have to make sure that we have the teams (inaudible), but they are not in place before we start to launch a project.

Does that -- may I suggest that we keep going (inaudible)?

(inaudible) the last one as usual, market?

(inaudible) MF Global.

Thank you for taking my question.

Let me -- just to follow up on that about project cost.

Back in September you said that tar sands wouldn't work, but were $90 a barrel.

In the slide today you show a broken line with downward arrows.

You've been talking about attacking potential cost deflation across the industry.

And given the fact that cost inflation was almost certainly the highest in tar sands projects in recent years, I think it's perhaps fair to assume that costs are going to fall the quickest, the furthest in tar sands.

So I just wondered if you could perhaps give us your best estimate of where that breakeven oil price could go to once the system reaches equilibrium?

Thank you.

On this slide, as you know, we have signals to say that the breakeven has to decrease with costs.

But to what level it's frankly too early to say.

But what I can tell you is we have totally and dramatically to change the way operating in this part of the world.

And that's sometimes a good thing with a crisis, it helps people to become intelligent before being clever.

I.e., just to think that you can be in this part of the world doing things by yourself, having your own upgrader, doing things just like if it was a small field in Arizona, but we're stupid.

We tried to make it clear to everybody, apparently we had to face a problem like [Shell] decided to stop the phase of his big project, that ourselves, we are facing concerns, as you know with [Chermont] which has not developed as quickly as we expected it to be in the past and that will be the same with [Jocelyn].

so (inaudible) is to think differently, is to see how we can have upgraders to be operated for different projects.

How we can in respecting the [lows], [diagnosing the lows] which say that you have to be stupid to be so-called in competition -- if the result of competition is higher prices I refuse this notion.

I think we have now to build between partners the best way to see how we can develop those fields in a way which is not hurting all of us and at the end of the day destroying the economy.

I don't know if you've heard about what's going on in Fort McMurray, but you see now people leaving, etc.

But it is the opposite of six months ago where we were short of skills.

So we go from too much to not enough.

I think we can do things and that's what we're doing.

That's part of our strategy with UTS and (inaudible) Canada is to think differently, but what we're doing with Conoco Philips too.

And that's going to be certainly the best way to reduce cost.

And thank you for this question.

I mean, it was good to take it at the end.

Because when we said that we want to see different ways of working between partners, that was not only partners in terms of producing countries, it was also partners in terms of classical partners.

And Canada is probably the example where the big oil, to prove that they can do it in a different way, otherwise it will be even more delayed than the 89 or whatever will be even less.

Because remember that in those figures we have in [capacities] -- we have the heavy oil (inaudible) and today we don't see them coming.

So we need to definitely do it a different way and that's already underway.

So for Total one of the reasons we go to this UTS project is to see how we can today not slow up but emphasize the capacity to develop a field which is probably easier to develop in relatively short term versus our other projects which we probably put more time to be developed.

So at the same time it's not only delaying, it's finding solutions like the (inaudible) development, not as a substitution but as a way to come quicker on production than with the traditional big mine reserves.

I don't know if you have read the Canadian authority has begun to be frightened by what's going on.

And they are rethinking of the full regime of [priorities] right now and because it went too far and the other projects (inaudible) so there is a rethinking of the full regime of (inaudible) which has been hitting very hard these economics of the projects.

It's true that first the main reason has been cost.

We remember when we were talking in this place on those projects they were four times cheaper than what we had seen last year.

So that's not only inflation.

So definitely we need to cut here the cost by 20% or by 30%, it's much more than this.

Thank you.