TotalEnergies SE (TTE) 2010 Q4 法說會逐字稿

I don't know if I should say good evening or afternoon or good morning for those in the States.

Again, we are pleased to present to you not only our 2010 results but also our forecast and understanding in the way the Company is going to run in the medium and long-term.

And the way we consider it, it is best to get access to the additional profits coming from oil and gas prices -- to start with oil and then gas in the longer-term, in our profits and return to shareholders.

But apparently, I mean, it's almost in London time for a drink.

I will keep you until it is possible, but I know we are also using Internet, and let's do it.

So we decided as how we want to be more flexible, more returning to growth, I will start and then Patrick de la Chevardiere, our CFO, will talk to you about results, and I will restart -- and takeover with the outlook.

So first, new dynamic strategy.

It is not a strategy which is becoming more dynamic, it is implementation.

We are definitely keeping the almost understanding that we are a long-term Company, the cycles are long, we need to invest, make money.

At the same time, and then we are getting the benefit of what you have been sending as messages -- some which we understand and use, some which we consider as not being part of the long-term strategy, and which we keep for a long-term strategy.

So first and not the least, for the exploration.

It is true that are we have probably been a little bit, I would say, sitting on our successes and it was time to go to more frontier plays, more I would say new ideas.

And that is why we came to it, because we are a good Company doing profits and being able to take risks.

So, bolder exploration strategy, it's not only words, its first moving to -- we come back on it to $2.1 billion capital investment.

It's also moving to new avenues like Guiana, back to Brunei, back to Azerbaijan, Absheron, but you will see the least.

Second, we strongly believe in our long-term strategy of hubs, partnerships, and that's why we are still moving on two new quote, unquote hubs -- Canada, which can be considered as not new, but you'll see it.

It is totally new.

A new partner, Suncor.

New fields, quicker to be developed, quicker to get access to new production and reserves, and at the end, more efficient.

Capital growth means also accelerating asset sales.

And what we mean by this is, not just selling for selling.

We have a good balance sheet.

We have a strong discipline on investment, but it's true that at the time we can sell assets at a high price, and you can also have access to new reserves at a very cheap price, it's probably better to find the solution where you don't sell because you don't believe in oil prices.

We sell because we can sell mature companies, mature fields who are not strategic ones, like what we did in Angola with Block 31, or selling our Cameroon activities or Valhall in Norway.

And on the other side, get access to longer-term reserves undeveloped like Gladstone in Australia, like maybe one day soon Uganda and some others.

But for doing this, it is true that it's the right way, and thanks for the message.

Yes, we can sell some of our assets, still keeping our strong understanding that we believe in higher price of energy, so we have no reason to sell just for selling.

Implementing the plan to reduce European refining capacity, but I remember when we discussed the same place not so long ago.

I'm talking about, I mean, will we be able to close the Dunkirk refinery?

I know that some of you were skeptical, to say the least.

It's done, in a proper way, because it was needed.

We did it because we had to do that.

Our Downstream activities.

Both Refining and Chemicals to the demand, and especially in OECD, especially in Europe where we are most exposed.

And definitely faced to a declining market.

Also we will come back to it.

And at the end, because it's not anymore what some people call greenwashing, we more and more consider that we need to get involved in the real science, in new energies projects, not as just a simple player just trying to try to compete with the Chinese or Indians, which is impossible and certainly not profitable; but to find ways to participate to something which is important, bringing new energies which are needed to just fill the gap between potential offer and potential demand.

We continue, and we see more and more some kind of a common understanding on, there will be not enough [good sized] energies to cover the demand.

There will be a lot of reserves available, but not easy to develop soon.

At the same time, we need to be part of those trying to make it also doable to develop solar, biomass, biofuels, and if possible too, one day, nuclear when it becomes profitable and acceptable.

But it's not just for image, it's a real business plan.

At the same time it represents a very small part of our investments in the year to come.

So you have on one part of the slide our investments for the 2010, where we spent in dollar terms almost $21 billion.

But net after the sale of assets, $15.9 billion, $16 billion, which is lower than our business plan.

On what is still part of the picture to start with, and having been in Davosfor the first time, I was surprised to see first, I mean Davos has been changing totally.

If we don't pay attention to it, we become more and more Chinese/Indian.

Not anymore what we call in France "people" -- sorry for this, and no publicity, but Sharon Stone was not present.

But there was a lot of people coming from China, India, Africa -- coming and willing to discuss with us on what in the future, how can we share it, what is to be done?

And especially, what can we do with companies like Total?

So that was frankly a strong play, an interesting moment, and especially on this relationship with the acceptability of our operations.

And it was raised by most [serious] chairmen who say, I mean, if you want to continue to work in this business, you have to do it a different way.

So it's not anymore pleading, it's not anymore image, it's not any more communication.

It's survival in a good sense.

It is do it or quit.

And I must say that we totally support this.

Why?

Because for one simple reason, we operate in countries where the need from Total and others, more than just we produce, we sell and we quit.

So definitely, this will be more and more part of our business plan, not as being an addition, but being part of what we're doing, to be a good operating company.

Before all of this of course, priority to safety and industrial risk management.

We had to learn -- we had to learn from what happened in Macondo, not as being to challenge one company, but just to say, look at what can happen if something like this occurs here.

I mean that we can be close to more than big problems, and if we don't do it because we believe in it, we are just going to do it because we know what it means.

Whatever you do you can't be the best everywhere.

If you make mistakes, I guess, you can't just leave the Company.

So definitely even if we aren't in the Gulf of Mexico, even if we think we're doing better in the North Sea, and especially in the Gulf of Guinea, we still have to be very strict on improving our safety regulations, our rules.

And that's why we have decided to restart promoting -- because, I mean we had started, but we thought promoting our culture of safety was what we called "the 12 golden rules".

It's an example, but a strong example, of the commitment of the management on additional security, even if the Company has been quite good in improving its results for the past years in decreasing our, what we call the recordable injury rate, by 16% between 2009 and 2010.

But definitely, more than ever, Total will be extraordinarily adamant to be the Company aiming for operational excellence.

I cannot find a better word than the word which is on this slide.

But that was the introduction, and I will now let Patrick de la Chevardiere, our CFO, to tell you about our results, and I will come back for the outlook.

Good evening.

I will try --during those 10 slides to explain what we have done in the last year.

The adjusted net income increased by 26%, up to $13.6 billion, mostly driven by Upstream.

It's interesting to note that our net operating income from the segment increased by 33%, which shows that we are being able to capture the increase of the oil price.

And the net operating income goes up to $14 billion in 2010.

The return on average capital employed also benefit from the environment.

As the average ROACE is 17% and 21% for the upstream, you can see also a very strong rebound on the ROACE for chemical, thanks to the environment.

Another point I would like to stress out is, on the right-hand side of the slide is that every segment of the Company contributed positively to the cash flow of the Company, the net cash flows of the Company being $6 billion this year.

Next, so we have a strong cash flow funding our investment, and obviously the dividends that you need.

With $30 billion cash flow, $21.5 billion from operations basically, and the profit of the sales of about $5.7 billion, which funds the gross investment, the dividend and reduce the debt.

Our gearing, which was 26% at the end of 2009, was down to 22% at the end of 2010.

The dividend, $6.8 billion, is financed very easily.

So there is no concern about that.

And the balance sheet is as strong, as you can imagine with the gearing of 22%.

In 2010 we made a lot of things and sell various assets as we never did in the past.

On the upper-right side of this slide you see that we have sold assets for $4.6 billion, and acquired assets for about $4.7 billion.

This is the first year that we managed so deeply our portfolio.

The main acquisition we did was the Barnett Shale, with Chesapeake, was in Canada, the restructuring of our operations with Suncor.

We still have pending Uganda, which is depending on authorization to given by the authorities.

We sell assets on the other side.

We sell Resins, Mapa Spontex.

We're in the process of selling the Lindsey refinery.

It's a long process, I do acknowledge that, but it will be done.

And we entered also in the GLNG project in Australia.

We sold Valhall.

We sold Block 31 in Angola, all in aggregate making $4.7 billion of cash which was used to fund the acquisitions we did.

Upstream performance was obviously very good a recovery for Total that we posted 4.3% production growth.

The production for this year was 2.33 million barrels per day, driven mostly by LNG, plus 30%.

Other gas was up 6%, and liquids which were down by 3%.

Upstreamresults were increasing by 23%, the net operating income per barrell where the price of oil on average increased by 20%.

And as usual, I would say the technical costs of Total are the best in the industry.

This is a great advantage we have, and we will continue to maintain this advantage for the benefit of our operations.

We launched -- we have launched and down to 2011, six major projects in order to sustain our growth, and of course the profitability.

Surmont Phase 2 was launched in the beginning of 2010.

Then you have Laggan Tormore, CLOV, the Halfaya project in Iraq with CNPC being the operator.

West Franklin, and GLNG which I was just talking about, with Santos in Australia.

You see on the right hand side of the slide that those projects are extremely sensitive to the oil price.

That those six major projects will generate more net operating income than the average of our portfolio.

And just to give you figures, using the $80 per barrel scenario, the average of our portfolio in 2010 was generating $13 per barrel of net operating income.

Those six projects will generate $21 per barrel in the same environment.

We not only launched new projects, we also renewed DP, our exploration acreage.

We are more focusing and targeting big assets, big fields.

I will just point out a few ones Malaysia, Brunei, Angola, the pre-salt blocks that we acquired a few weeks ago.

The same in Brazil where we made a discovery with Shell being the operator.

So you see that we -- if we re-orient our exploration work toward bigger discoveries, and the potex the potential for our exploration assets increased by 33%, down to 2010.

This is one of the key reorientation of our strategies to target big discoveries.

The replacement rate was very good this year, as you see, including the acquisition, of course, of 124%.

If you exclude acquisition and use the same price as in 2009, you had replacement rate of 95%.

It's quite flat, but acquisition is part of the business.

And since we are quite confident that using this replacement trend having this replacement rate will contribute for us for future growth in the Company and in the production.

The reserve represents -- the 1P reserve represents more than 12 years of our production.

The 2P represents more than 20 years.

And both remain 12 and 20 years that have remained quite stable, time after time.

We had a strong contribution from LNG projects.

Sometimes I heard some of you telling me that LNG is not profitable; this is wrong.

We show 20% of our production coming from LNG.

This represents 25% of our adjusted net operating income.

And we increased our exposure definitely in this year and last year from LNG coming from Yemen, from Qatar, and also from the recovery in Nigerian LNG where the production wells were very low in 2009 and recovered in 2010.

Please trust us when we tell you that LNG is a profitable business.

And you see the figures -- 20% of the production represents 25% of the adjusted net operating income.

Some major changes in Downstream and Chemicals.

Refining, first, we closed Dunkirk asthis was stated by Christophe.

This was not obvious to some of you but we did it.

We modernized the Normandy refinery, in parallel of closing one of the units, the D9 unit.

We are in the process currently of starting the Port Arthur Coker.

And we are in the process of selling Lindsey Refinery.

I know this is a long process, it's a slow process, but it will be done.

In Marketing, we established a joint venture with ERG in Italy.

We are the third largest distributor now in Italy.

And we are in the process of selling the UK retail network.

It is more easy to sell than the Lindsey refinery, I have to say.

In the Petrochemical we started the Ras Laffan steam-cracker in Qatar, and we entered into joint venture for the coal-to-olefins project in China.

In the Specialty, we sold Mapa Spontex, which is -- and part of the resins division also -- for an approximate aggregate of $1.2 billion.

So we are divesting some non-core assets.

There was a rumor on the market that we were ready to sell all of them, and this is wrong; this is not true.

Some other Specialty Chemical's assets are currently not in the pipeline of sale today.

The European refining is facing difficult times.

We commit to reduce our capacity and to reduce our exposure to this European refining business.

We basically did it.

The last event to happen is the sale of Lindsey oil refinery.

If you compare on the left side of the slide, if you compare the capacity we had in 2006 and the capacity we now have handled this year, this will be a strong reduction from 2.3 million barrels per day down to 1.8 million barrels per day.

In the meantime we are in the process of decreasing the breakeven, I fully acknowledge that the write-off we did on our refining assets participates to that.

But this is not only the issue of writing down some assets, it is also the contribution of work done by our engineers, and in order to optimize our refineries in Europe.

And I think that's it.

I will leave the floor to Christophe for the outlook, for as you know, he has the vision.

Thank you, Patrick.

And I can tell you, I believe you when you say LNG is a good business for Total.

I strongly believe you.

But I mean, remember, sometimes you told me == don't be so rude with our friends.

I would have never have said they were wrong, I would have said they might be totally right -- be careful.

The outlook, let's go to the basics, environment, favorable medium to long-term environment.

We are on that slide the oil, natural gas and refining margin.

On oil, you know our whole story, which by the way has not been changing too much, even if the old peak oil are not supposed to used it anymore, but the day we might be a little bit short of capacities, is coming.

And when you look at this graph and the 2010-20 figures, you see that we are at 93 million barrels per day of production of liquids, which is not too far of the 95 million which we consider as probably in 2020/23.

It's difficult to say probably the day where we will be at 95, which is the way we see it today probably the maximum level of production available.

If you had to guess, the (inaudible) GTL, what we called the gain on processing, and biofuels, we achieve the 100 million, 101 million barrels per day, which is by the way becoming more and more the view of most of the energy players.

I hope, as I said this morning, that now that most people agree on this, [we] are not going to be wrong, but at the time we were the only one to say it, and still we feel that way.

It's very important to understand why the understanding of the market being always long and using all reasons to go long is because of this.

It's not only because of Egypt, it's not only because of I-don't-know-what -- or cold weather or whatever, it is just because the fundamentals are there.

And if you look at this in details, you will see that definitely the possibility to make it higher are becoming more and more difficult.

So be careful.

Today we are at 100 million.

It does not mean that we might not go backward.

It does not mean that it will be always climbing.

And to a certain extent I hope it will not be climbing too quickly.

It's a part of acceptability and what the market can accept at the pump, being Europe or in the States.

On the gas, you might tell me that why are you just talking about Europe and Asia?

Well, maybe because -- I mean, Total is much more, I would say, linked to it.

We are in Europe, we are in Asia, we are very little exposed in the United States.

Even if we believe in shale gas, as you know.

But if you look at just Europe we see the end of the bubble thanks to demand by somewhere around 2014-2015.

Why?

Because demand is growing.

And if you look at the way it works today, especially gas coming from Russia, gas coming from even LNG, it starts to be a concern if we don't find new ways to develop new LNG businesses.

So, are we too optimistic, too pessimistic?

It's difficult to say, but you see it already in the market that big gap between the HH price and the NBP price, thanks of course it's not yet 2015, 2014, but we see already that the European market is much more sensitive, willing to consider the risks of being longer short, even if probably today much more heat with the winter season than something else.

Don't forget also the cost of logistics.

Flexibility is also a concern.

You can not just bring ships from one place to another in two minutes' time.

And in our slides you see what has been the work done by the trading division of Total in the LNG business.

It's trying to move more and more ships from one place to another to get access to the best markets.

And in the end, not the last refining margin, even if on that slide you see 2015 that we have been only able to reduce (inaudible) the additional capacities from around 6 million barrels to 2 million barrels, it's 6 to 2, but coming from different places.

So the additional demand is not coming from definitely Europe and OECD, it is coming from Asia, which means if we really are capable of reducing our capacity to this level, it means that refining margin will regain activity, and that's the reason why we wouldn't want to reduce our exposure.

We still consider that this business is a good business for the Company, has been a really integrated business.

And as you certainly understand, we're working more and more on bringing new additional synergies between Refining, Marketing and Petrochemicals.

Objective for 2011-2012, I repeat what I have said to start with.

Priority to safety, priority to accessibility.

It's a must for our industry.

More and more we have to understand that with higher price we will have to find ways to make it acceptable.

It's not only easy to say -- you know it's not our fault.

First of all it's not under our control.

Refining margins are what they are, marketing margins are what they are.

Then depending on markets, it is linked with the euro-dollar rate, so it's not our fault.

That's not sufficient.

We have to find ways to help our clients to accept higher prices, because it is the way it will be.

And to consider it is not our role, consider it will be just swallowed, that's not the case.

So let's be not only prepared for it, let's be working on making this, acceptable.

And bringing something else in a exchange for this, most probably more concerned about environment, more concerned about the way our clients lean and the ways they can definitely, at the end, accept a higher price which will be at the end to be paid and suffered by them.

Startup of 10 large Upstream projects, I will come back to it.

That is long-term of the Company, launching of 12 other major Upstream projects, that's FIDs.

I will come back to it.

The rejuvenation of our exploration -- I like this word -- our portfolio, gives me a feeling of also being younger.

It's also part of our strategy and I will also come back on it.

Definitely we have to continue to work on adapting our Downstream activities, Refining and Petrochemicals to the market and demand.

It doesn't mean just decreasing, it means decreasing it (inaudible), making it more efficient and competitive where it's possible.

And definitely still looking for new opportunities, like in the Middle East, like in Qatar, like in Korea, like maybe one day in China, to make of this profitable activity an additional way for Total to grow and make additional profit, not only in one sector.

We strongly believe in Upstream, but not Upstream as the only, I would say, Company's activity.

And more than ever, pursue our active portfolio management.

We've been more active.

And this is true that some of you have been challenging us on this, and you were right.

At the same time, at a certain time we were just needing to be long to get the benefit of higher price.

That's what we did.

It's definitely true that the market today is giving a lot of value to producing assets, even declining portfolios.

If we can sell it and buy long-term assets at a cheaper price with long-term potential and using our skills -- which means selling, producing activities, and buying non-producing assets, definitely that's where the Company can not only make money but grow, and grow in a profitable way.

So the 10 projects out there.

The next wave starts mid-2011, which means we will have the full impact much more on 2012 then 2011.

That's why you see on the left part -- this is not new, I hope, to you -- but after strong growth in our production in 2010, we will have a period of calm, if I can use this word, in 2011, i.e., the same production level.

It still means that we have to find new production to cover the natural decline of our fields.

And definitely you see the restart of our production in 2012.

You have the list of the projects, and you know them.

They all are part of our, I would say, traditional business plan, except a few new ones.

And that's something which has been definitely considered as a priority for the E&P division is to be able to bring projects from projects to development, and then to production in a much quicker way.

That's part of what you've heard as being a change in the E&P division.

It's not only changing the names or changing the divisions, it is just making it more aggressive, most on exploration and from bringing FEED to production from the date you go to basic engineering to production.

So 2013, you see a strong, important new production 2017, which is by definition the reason of our commitment to new growth.

12 major projects 2011-2012.

Those are FIDs, so it's not new production.

You have the dates of production.

I will not go on them one by one.

But I mean it is a good mix of portfolio -- conventional, deep offshore, heavy oil, unconventional gas, and energy.

All of those projects are today well moving, definitely on time.

And the question mark On Shtokman will have to be lifted before the end of March when we decide on the FID.

And as you will remember, we have decided to split the FID, one part being gas pipe, one part being LNG, the LNG part being FID by the end of 2011.

Exploration budget increased to $2.1 billion.

So it's not only to go to more aggressive plays, but also increasing the investment base.

So between 2010 and 2011 it is moving from $1.8 billion to $2.1 billion.

If you go a little bit backward, which is not too long ago, five years ago, 2006 it was $1.5 billion.

We have a list of the different plays we are targeting.

Most are not only new plays, but definitely somewhat frontiers.

And if you ask me which are the ones which are the important one, I might say I don't know.

But if I start to say something still, Guyana, which has been just started drilling -- spud -- is underway.

Azerbaijan spud took place in January, and Brunei is in the next days or weeks.

So all the others are part of what we will be drilling in 2011, which means a large number of the wells, and I hope a large number of discoveries, including to please my British colleagues here, including the UK, which has been for the last past years not only number one of the class, or you just want us to continue.

Good luck!

Next, please.

That is the one you prefer, so we will not use it, because it's a challenging one on is it 4T, which means fourth term, fourth quarter and third quarter.

As you probably see, we don't say any more quarters, we say years, and then you have to find out where we are in the year.

But I mean, that's not the major thing.

The major thing is our reassuring commitment on 2% production growth from 2010 to 2015.

So it is at the same 2%, but we moved it from 2009 to 2010, and from 2010 to 2015.

We are not using the fact that we have been already doing 4% plus in 2010.

It means really new growth.

And definitely with the list of those projects, as you've seen before, we are quite comfortable on reaching this.

Is it challenging?

I don't know, but 2% increase in production when we see the average increase of oil demand by 1% in the years to come, it's a good number.

And definitely it is part of our wish to get additional production and operating income.

Downstream Chemicals -- Well Patrick has been almost covering this subject before.

In the way we had to achieve this target, the target is just as well easy to move from 9% rate of return ROACE in 2010, to 30% in 2015, so an additional 4% and doubling our cash flow.

That's not only doable, it's a strong commitment.

Of course it's linked with the environment.

And for this we are using the 2010 environment, which is almost equivalent to a midcycle environment.

But I mean with all which has been done, and is underway, to be more careful on safety, to be able to reduce our capacity and improve the breakeven levels, to definitely improve the competitiveness of our petrochemical activities and be more present in the Middle East and be more present in Asia, and still keeping our tools, our units in Europe in a good fit and competitive, we strongly believe that this goal is our goal.

And 13% in coal business, which is not -- definitely not in alignment with the environment of the upstream, is strongly considered by the Company and the management as a way not only to diversify our risk, but also to make good profit for our shareholders.

CapEx, $20 billion.

That's net of acquisitions.

Now, I don't know if we presented this slide with the projects still to be done.

I don't think I should use it.

But to make it short, we have in the $1 billion, which is in dotted line above the 20, so the 20 becomes 21, we have the difference between $4.5 billion of acquisitions already decided but not yet paid, and $3.5 billion of divestment already done but not already received.

And if you take this into account, which means not new potential new projects, that brings you to $21 billion, which is what we need definitely to continue to bring additional production, additional reserves and additional competition to our Downstream activities.

Financial flexibility increasing at 100.

We had a problem, as Patrick said, I mean, was it a strong message?

We mean that we believe that it's almost 100 that we are more -- no, it just means that we believe that what is important is that at 100 we can get better return and better potential for growth.

Today we are at 100, and it's very important that the contracts we are signing, and the contracts which we are preparing for the long term takes into account that at 100, and even more, we still continue to grab part of the additional price.

And it is not left to whoever consuming or producing countries.

So we have been very careful, and we have [done] so many of our slides to show that all of our new projects are bringing additional return with higher prices, and also bringing more returns than the average portfolio return that we have today.

We have the debt to equity ratio, the gearing.

Patrick has been telling you that we moved back from 26% to 22%.

We still give the 25%, 30% as being the bracket in which we have to stay to be keeping a strong balance sheet and strong capacity for the long term.

As you see, 2010, 22% -- we moved it for being between 25% and 30% in 2011.

Definitely it will depend on the environment.

It's what we will be seeing at $80.

It's probable that at more than $80 we will have a gearing better than this, and maybe we could think of having a higher dividend if our profits are getting higher.

But you have all the ways with this to calculate the sensitivity of our results on higher price of Brent, additional production, refining margin.

And of course at the end, the remaining sales of Sanofi-Aventis.

Presently we have -- I mean, the Board of Directors that took place yesterday decided to propose to the AGM of May to pay a dividend for the whole year of EUR2.28, which is the same amount than in 2010.

And don't forget, as I said this morning, that we start from now on to go to a quarterly dividend, with the first quarterly dividend being based on the first quarter of 2011.

With the first payment being paid in September 2011.

So which means a quicker cash to our shareholders, and also a way to be quicker to adapt the dividend to our profits and our forecast.

So the last conclusion, but business will never have a conclusion, definitely a priority to safety, reliability and responsibility.

That's not only Macondo, it is the only way to be capable to develop our activities in a sustainable way.

We need to make sure that all of the changes we are doing, and will be doing, are done for bringing additional value to the Company.

And we are absolutely certain we still have a lot of capabilities within the Company to add more value, even using the same assets.

Definitely we need to keep growing, and we are believing in this when you see the numbers of projects which are to be developed, entry into production, and decision of FIDs to be taken in the few years to come.

And at the end, that's not only to please Patrick, it's our strong belief.

Definitely we keep this same way of developing our business, the same consistency of discipline in our investment policy, and it definitely -- and that is the link between the two -- a strong policy of return to shareholders.

And just to make it a little thing, you remember why we decided not to be too arrogant in our policy in Iraq.

That's just because of this.

You cannot ask us to bring more value to the shareholders, to be more than $13 per barrel in profits per barrel, and go to projects which margin -- which are below $2.00, whatever the return could be.

It's very important to us just to be sure that we keep our industry and what it is, companies to be able to deliver growth in certain able way, taking more care of the environment, taking more care of the climate change, taking more care of our clients, and just being able to move in an environment which will have sometimes to suffer in increasing energy prices, and make it still acceptable and profitable to all of our stakeholders.

Thank you, and I'm ready for the questions, if it's not about time.

Do you think you have the capability to generate new conventional pole or hub to complement the (inaudible) business?

The two you've been developing at both unconventional, Canada in Australia, Do you think that your exploration has the capability, and the opportunity or access to actually generate something to stand as a new hub for you?

A good point.

I mean, you've seen that we don't consider unconventional oil and gas as exploration, even if we should.

Because I mean, it is not obvious because people said they are X billion barrels equivalent that it exists.

But forget this for a moment.

I am talking about what we are doing already in the UK, and definitely the Laggan Tormore area has been proving what we were expecting from it, not only the result of buying and selling, but also the success of new exploration wells on Alwyn its working still well.

Am I correct at this?

Good.

Yes, I'm correct.

But I hope it is correct.

And then, definitely moving into new areas.

Brunei is one part where we have been actually extremely successful in getting access to a large part of the new acreage which has been shared between the Brunei and Malaysia.

And I think we have been doing better than one of our competitors who has probably forget to sign at the right time.

But now we have a large portion of the working interest in probably what we consider one of the best potential areas for not only one discovery but a hub.

In Azerbaijan, we are drilling Absheron , which is a new license.

Definitely it's not the same target we are looking at.

It's not the same place, but I mean, again, it's exploration, but we look at it as an important, I would say, potential for not only one discovery but some of those.

Angola, pre-salt.

We had access to three new blocks.

It's not Brazil, it's Angola.

It might not be as good, but I mean, if you don't take risks, you will not get it.

It really looks like Brazil.

And also it's part of something which can become a new hub.

So I mean, I can give you, I guess, a lot of facts where you see that we are not just going in one part and say, take it or leave it, but also be ready to make it as a real potential for successful drilling.

And again, it is exploration.

It is true that we have been missing something which is very important is, you need to drill more than one or two frontier wells per year if you want to be successful.

And that has been normally where we see it.

It's underway.

Now I will tell you more when we will get the results of the wells.

That's good for

Two questions if I may.

The first one is on your Downstream business.

After selling the UK retail business, Lindsey and the refurbishment of Normandy, are you going to be happy that that rebalancing the portfolio enough, or do you think that you will need to do more in Europe?

That's one question.

And the second question is, you were hinting that if oil price stays where it is, your CapEx numbers, or what you're thinking, it may be increasing.

There is a way that we should be thinking about that, or what are the priorities of getting that extra cash from disposals or higher oil price?

On purpose I was going to be provocative.

Usually I'm waiting for -- and when do you increase the dividend?

So I prefer to start saying that if it goes the way we see it's going, that might be an opportunity.

But I will come back to it.

On the first question, I mean the first thing was to definitely making our targets and the commitments, reduce capacity by 500,000 barrels per day.

When, the Lindsey refinery is sold, this commitment is done.

Now it's true that it all depends on demand, but we don't see demand restarting to grow in Western Europe and in the States.

So definitely there will be need for additional [moves].

But I mean certainly we will not disclose what could be those targets.

And definitely it will depend on how much is the decline in demand, but also what are the opportunities.

It doesn't come over the day you want it (inaudible), always the time you think is the best time.

And at the same time you've got to be careful to what is the sensitivity of the production and States on this?

But definitely no [scoop].

And if we want to stay competitive, if we want to stay sustainable in this business, as we want, there will be a need for additional decrease of capacities in the years to come.

But at the same time we will keep respecting our commitments when and where we have been taking commitments.

As Patrick said, a lot of people were extremely question marked on are we going to be able to close Dunkirk?

It has been done.

And if we need to do more to make it sustainable and profitable, we will continue the same way.

On the dividend, I was a little bit on purpose trying to make you moving on, wow, there might be opportunity!

Okay, at the same time today, at $80 we have a pay out of 50%, which is the average of our strategical goals.

Today we will see what's going to be the future.

Our policy is just to make sure that each time the Company is improving, and keep being strongly, I would say, optimistic on its environment and its capacity to grow.

And definitely we will have our shareholders to take part of this growth and return.

And we would never give anything like X dollar per barrel plus equal X cents per euro or per dollar more.

That's not the way we do it.

Just that the message is if it goes better, the dividend will go better.

(inaudible) from RBC.

You've got a nice list of all the Upstream projects which support your 2% growth to 2015.

But missing on that list is Uganda -- even though it goes through 2018.

Does that mean that, I will say when if you signed that upside potential for your growth, or does it mean that when it is signed it might be after 2018?

Or does it mean that at this rate it might be 2018 by the time it is even signed?

Well, it means that on exploration we are using what we call PS -- probability of success.

We don't use this for projects like Uganda and others.

We could, we could say there is X percent chance that on 10 deals, two or three will be done.

So this one is not part of it.

But I mean there will be some others with no problems.

If it comes, it's additional.

But I mean, some might be also late, so it's better to keep it as potential.

But today, we cannot say when it will start for one simple reason.

We are very confident that it will be signed.

By the way, it has already been signed by Total and our two partners.

It is depending on now the state approval.

The state approval -- I mean, I don't like to sell anything before it is done, but I should have Total at more than chances to be in any kind of deal.

The thing is, we have been taking some delays, and I think you all know this.

The problem today is, we are too close of the license expiration date, and we need to renegotiate this, or to negotiate this before we sign the final agreement.

So it's just a question of time.

You are and we are during an election period, not the best time to sign deals.

But just be sure that I am very optimistic.

However I'm taking the risk of telling you that we strongly believe that it will be done.

But it's not part of the 2015, that's why it's not on the list.

It's not because it will be after, it's just not in.

(inaudible) within this outline you've given us targets on cash flow and returns.

Can I just ask, why in the Upstream, given that you've talked about the improving unit profitability, and would you consider actually giving us a cash flow target on a per barrel basisor a return on capital target?

Actually, I think rather than focusing purely on just the volume growth numbers.

It is a most complex answer, as you know.

Just start with, each time we decide a project, we do it with, as I said, strict dicipline.

Today it is $80, and we see the sensitivity at $100 and more, not only could we make it okay at $100, it's the only way to make it profitable.

But I mean, is this project sensitive to higher prices?

Are the contractual terms making it bringing more when it comes to higher levels?

The second thing is, technical costs.

We have one slide on technical costs and we've been able to match our target, which was $1.00 more versus 2009.

It is 1.2 -- I am a little bit sorry for this -- but as we will tell you, the E&P General Manager, that if you take into account the production which is not taking into account because of the price of oil was 3%, then exactly the technical costs will be $1.00 more.

Now, what is important is not this, is to keep this capability to keep our projects under control.

And it means that when we start the project, we would consider that the IRR will be sufficient to challenge your existing projects, and also making it part of the portfolio mix, making sure that if you have to accept lower return, we can have longer cash flow.

And you know that you are trying to get something more from me now for many years, but I cannot tell you the more than that the result of it is, we are developing projects which are all better than the existing ones at an average.

And second, that they all are bringing more cash when the price of oil is increasing.

Now, again, for the rest it is very difficult to say.

It's very much depending on when you start to drill or not.

And that's why that we are very careful on, as I was telling you, making sure that when we decide a project, we quickly start developing it and we quickly go Upstream before everything gets changed.

Because we are still in the world, and I maybe shouldn't say this, but which is not totally crystal-clear.

A lot of people were saying two years ago that they see the cost of projects declining.

Well, they've been probably little more optimistic than they should for one good reason -- there are a lot of projects still, and also a lot of additional requests in terms of security and environment, which are making them more expensive.

So, each time you can, do it.

And then, see the next.

What I mean, then how it works -- are we making a very, very sophisticated calculation?

Yes, of course we do, that's why we have Jean-Jacques Mosconi, which is our expert for this in terms of strategy.

But at the end it's just a result of what it is.

So, sorry for not being able to give you a better answer than, yes, we keep discipline, and that is the best thing.

Theepan Jothilingam, Morgan Stanley.

Just coming back to exploration, we've seen a modest increase this year.

I'm just wondering if you could give us a breakdown of, is that an increase in drilling or is it a combination of increase in drilling and seismic spend?

And then, do you see Total going forward being more aggressive as you see sort of the ready-to-drill part of that portfolio increase?

And then the second question is, just coming back to your comment on portfolio management, I assume that Total looks at portfolio management, and it's been looking at that for quite some time, and there has been a change in strategy.

When you look at the portfolio today, and I don't expect you to give explicit numbers, how much more opportunity is there to do some of the transactions that you executed last year?

Because I guess at some point there is a limit in the portfolio to what you want to sell.

So I was just sort of getting a sense as to how much more there could be do we expect a sort of similar level to last year, this year?

Thank you.

Well, on -- it's obvious that 2010 in terms of our exploration results it has not been the best year.

And at the same time, we've been able to cover our target, which is a mix of what we call subtype -- so, acquisition of undeveloped reserves and exploration.

And if you remember, when I said that we want to bring each year the equivalent of 1.4 million barrels, it was not only through exploration.

2010 is the result of the decision taken in 2005 -- I don't know when.

I probably wasn't in charge, by the way.

But today, what we are doing is working on new plays.

What I've been telling you about our portfolios for 2011.

So definitely, 2010 is over, and the result -- and when we produce it, you will see it is not bringing the 0.7 we would have liked to bring as an average.

But it is an average.

Now for the first year, since a long period of time, we have increased what we call our portfolio of expected resources.

And that's, as you know, something we don't disclose, but it's something we can say and be totally credible because those are based on real figures.

For the first time thanks to the new acreages, the new portfolio we've been entering into our business plan that we are able to see a chance, by definition, to get more results from exploration.

And it's true that was not the case in the past three years.

So there is no mystery and [not only luck], if you don't bring more capabilities to discover, you cannot get it.

But at the end, it's not only luck, it's probability.

And that's why we are much more optimistic today than we were last year.

Now again, you see the list, and it's difficult to say how many of those wells will be positive.

In terms of numbers of wells, we deliver this usually, but I don't have the figures for 2011, how many wells Jean Jacques, you remember?

No (inaudible).

It is much more than 40.

It is 70 wells.

Okay.

Are you talking about operating?

No, (inaudible) only wells.

(inaudible).

75 wells in 2011, which is a large number.

We have been drilling more than this.

But again, it's not only a question of numbers of wells.

It's true that it's not just (inaudible) when you move from 1.8 up to 2.1, the cost of wells, especially when you go deeper, and that's where the new plays are, that's where the frontiers are, that is where the risks are -- and that's where we have to go.

Anti-Salifar, so to be fair, it's deep by nature, but at the same time it's where we have to go.

So it's a mix of wells and additional costs based on the duration of wells.

But definitely it's an aggressive program.

And we definitely -- and today almost the same for 2012.

After, as you know, it becomes difficult to predict.

But 2011-2012 will be very strong period for exploration.

And then we will see if a new acceleration, aggressivity of the Company is working.

If not, we have to change the exploration plan.

Don't, don't [deliver] this message.

It's a good [bet].

(Inaudible question - microphone inaccessible).

Again, it also depends on -- you know, take Brunei.

I'm using it because I mean we strongly believe in Brunei, so I'm taking a big risk at this, which means if it is dry it will be more than an upset.

Not only for exploration, but I mean that's a place where we have been working on the geopolitical side.

We have been -- don't use my words, just a way, but we have been very much pushing Brunei to continue to defend our interests, even against Malaysia.

And we could do it, even if we were in Malaysia, but I mean we have been defending this because we were in itfirst, but also because we consider that it was, I would say, the most ethical way -- which was not to give everything to Malaysia.

Believe it or not, it's not only, only pure, I would say, return.

Now, we are in it.

We have been working for more than seven years to keep it back.

If you remember a time when we had the Malaysia ship coming and forcing us to quit the area, not so long ago.

So I mean, after all that fight from the top we cannot find something, we will have nothing to do with -- we're going to be extremely disappointed.

To give you an idea of, sometimes on those big plays, we have to find opportunities which are based on open or not open, access or not access.

There is a new debate on Arctic seas between Russia and Norway.

Are [we] going to move?

I don't know, and I will not tell you what we are doing because that is too sensitive.

But on the side of going into existing plays like Brazil, Angola, Nigeria, definitely if you want to be really active, you also have to find opportunities in places which are today not open.

Which can be opened if you just use your capabilities of partnership, of intelligence, and at the end, making it accessible when everybody thinks it's not.

So yes, I am definitely optimistic.

As far as now, we have a strong support from our teams to accept to be themselves more risk takers than they used to be, not only in management decisions, but also the decision of our teams to accept to take more risk, with our support.

I think the second question of Theepan to ask if we believe we can sell as much assets as we sold in 2010, and I think the answer is yes.

The answer is, we can do more.

But I mean, we only do it -- we will only do it if we can do it.

Sorry, if we have to do it.

So, with a gearing of that level we don't need it.

Now, if we have good opportunities, we will do it.

And we have a list of assets ready to be sold.

And it's true that it's not difficult to sell, but as far as difficult to buy, just like for the -- what's the word -- the real estate business, it is better to buy before you sell.

I think so.

Now for real estate, I don't know, but the oil and gas, yes.

(inaudible).

Can I ask two questions?

Firstly, you talked about costs earlier.

Do you want to give us a technical cost target?

Like, you told talked about a $1 per barrel increase last year, and kind of indicate whether that's -- if there is an increase happening in 2011, whether that is a cash cost or a depreciation cost?

and the second question is on Kashagan.

It's not on your list for Phase II in the next increase -- can you tell us what's going on in terms of the feed and the negotiations with the government, the plateau and costs, etc., because it seems to have stalled somewhat in terms of progression?

The first question is easier than the second one.

Even if there's a link between the two, by the way -- today, with what we see, it is probably going to be $1 more in 2011 versus -- sorry, yes, 2011 versus 2010.

So almost the same increase than in 2010.

Why?

Because, I mean, the costs are roughly moving in the same way.

So $1, which is $1, but it is today less than 100 versus 80.

So if we can be doing more than $1 out of $20, you have the answer.

It's a good -- sorry?

``` (inaudible - microphone inaccessible)

No, I'm talking about technical cost.

Globally technical costs we see increasing by $1 in 2011.

(inaudible) technical costs.

I would say (multiple speakers).

Sorry.

(inaudible - microphone inaccessible)

No, no, no, no, DD&A.

On Kashagan, I shouldn't say this, but we will say it.

I mean, maybe I need a lawyer or a crystal ball.

We are doing everything to move from Phase I to Phase II, Phase one is now underway and you know the dates.

Phase II, it's true that we will probably have to go through discussions with the state in terms of the costs because of the timing, even if legally speaking it's why we should not need lawyers.

It's all following the rights we have in the contract.

Now it is true that we have been always to be disappointed by the results of our works altogether, and definitely and then without just being a willing to say things which are not nice, but that's what it is.

And we are taking additional delay on this.

How long, how much, I cannot tell you, because it doesn't depend only on Total.

Now Phase I it is a priority, as we start quickly to bring cash and easing the project to be self-sufficient.

And also bringing cash to the state, it should certainly be part of making them happier and less concerned about the future.

I know it's not a clear answer.

Thank you.

Just back on exploration and Angola, I just -- that's a bit of a core area for yourselves, and you could say you are a [bit of a] master in that area.

Did you have any particular edge when you were bidding for these subsalt lines?

Did you get the blocks that you wanted to get?

Do you have any edge for the geology of the southern part of Angola?

I mean, I hope so, but I mean for this it really depends on our geologists.

I would not dare to tell them which block to take, even if at the end we have to discuss with them on how much can be spent in terms of numbers.

Because you know, it was a mix of different things to get access, but we have these three blocks.

It's done.

But definitely those three blocks were requested, you know you cannot get blocks you are not bidding for.

[Perhaps] there are some other ways, how?

I know it happens in other countries, so when (inaudible) it was clear, so we got three of the blocks we wanted.

Okay.

We challenged one block, we would have preferred another one, but at the end is still exploration.

So now we are quite happy with the result for Total.

And definitely it gives us a chance to enter into these pre-salt basins, which are -- I hate to say it is a Brazil-style, because at this point it's a little bit far away to be considered equivalent.

But if you look at the way the geologists are presenting it to us -- Patrick can confirm this -- it really looks like -- again, it is very deep below the sea level, but it's exactly the target and the permits we wanted to get was really part of this wish to be more active and more aggressive.

And just on the project (multiple speakers).

Totally different on Block 31 -- sorry, Block 31 is not pre-salt, it's subsalt.

Those are pre-salt.

Yes, just secondly, your project starting up in 2011 and 2012, how did they compare on operating income per barrel relative to your $13 and your $21 for new sanctioned projects you made last year?

We have the answer on one of those slides.

Nine?

Yes, you're talking about the six projects?

No, no, no, the ones -- those are sanctioned in '10.

I'm talking about (multiple speakers).

Oh, you mean that 12, the 12 new ones?

Yes.

Well, I don't have here the breakeven per project.

But this strategy -- and when we decide a project, so the FIDs are not yet taken, so I cannot answer it before it.

But I mean, if we decide to do it, it would be because it is, what we say, i.e., better than what we have.

But I mean, that's the rule, so I cannot give you the answer until we go to FID.

We know the capital costs and we take a decision to move ahead.

Those projects have not been by definition decided yet.

But I mean our policy is very straightforward -- it is not less than what we have.

Now, of course at $80.

Neill Morton, Berenberg.

There seems to be a concern in the stock market that, given flat production at least for 2011, a high cash on the balance sheet and the value locked up in Sanofi, and perhaps not least your share price performance, that Total is considering the large Upstream acquisition.

Could I invite you in this public forum to assuage those concerns?

Which means?

Which means -- deny it.

(laughter)

Well, flat production, I cannot deny.

And again, when you said 2% per year, we never said that there would be no flat years.

And the year 2011 has always been known by all of you as a flat year.

Even if it is better than we anticipated at the time thanks to certain acquisitions we have been doing.

So that's very clear.

Now, in terms of gearing and in terms of acquisitions, etc., we will certainly not change our limits, which means 25, 30, without something which will be sold of huge interest and strategical value that you will force us to do it by any means.

But otherwise, I can't deny that we will spend money for just increasing without respecting our discipline and our commitments on strong balance sheet and a strong financial discipline and the dividend policy.

Is this answering to your point?

Okay.

But it doesn't answer.

(laughter)

Just denying -- okay, I would prefer to deny them (inaudible).

(Inaudible question - microphone inaccessible).

No more denial?

Okay, thanks a lot for staying late.

And let's meet some other time for the first term, and beautiful results.

Thank you.