TotalEnergies SE (TTE) 2023 Q1 法說會逐字稿

Ladies and gentlemen, welcome to TotalEnergies' First Quarter 2023 Results Conference Call. I now hand over to Patrick Pouyanné, CEO; and Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead.

Hello, everyone. Good morning or good afternoon, wherever you are. I'm here today together with Jean-Pierre will give you, I would say, a review of a very good quarter that we had on the first quarter of 2023. I just wanted as an introduction to comment of the news which came this morning around about the future of our Canadian assets. As you know, we explained that in September at our CMD, we are planning to organize the spin-off of our Canadian assets.

We went through the process and in the meantime because fundamentally, I think we are very serious about making this spin-off a reality. We attracted some unsolicited offers in the last months. And one of them has materialized, and I think the value which is quite attractive, CAD 5.5 billion cash plus $600 million of additional payments under certain conditions. The value which is fitting with the expectations of the initial quotation, which were given to us between CAD 5 million to CAD 6 billion. And of course, it's coming from Suncor, who knows very well 1 of our 2 assets. And Suncor will comment a little later in the day, his own view of the deal. For us, we are keeping the value. It's a straightforward, I would say, way to divest the assets as we are planning to do it straight away.

And so from the company and from the shareholders' point of view, the Board considered that it was this alternative was worth to be considered and approved yesterday to move forward with this transaction. Of course, the most important part of the discussion beyond comparing both alternatives was about the distribution to shareholders because, as you know, the spin-off was meant in fact, a distribution in kind of some shares of the NewCo. So we bought perfectly as that in mind. And the guidance that we have decided to give to our shareholders today is that last year, we put a higher guidance on the payout to shareholders of 35% to 40% of cash flow from operations, which were down in '22, 57%, there because we'll have, I would say, additional proceeds from this sale, the divestment, the guidance we give you today is at least 40%.

I mean, that means, by the way, I told you before, but there was no ceiling. The 35%, 40% was the range of target. Today, we told you that the Board decided that to increase or to enhance, I would say, for '23, this distribution to shareholders with at least 40%. So consider 40% plus, you have to get the plus something at least 40% of the cash flow from operations in 2023, which I think is a good news for our shareholders and which, of course, maintains the course of the company. You have noticed that in the first quarter, we maintained a buyback of $2 billion, like last year's last quarter. And the second quarter, we repeated the $2 billion. So I think it gives this guidance for the distribution to shareholders for 2023, at least 40% of our cash flow from operations should give you some comfort about the will of the Board to have, I would say, to maintain or to develop even an attractive return for our shareholders. So I will not be longer. I think I will give the floor to Jean-Pierre, who will be happy for the first time of as you know, today, we disclosed the integrated LNG and Integrated Power segment results for the first time. I told you during the last investment day, but we should -- we are targeting 10% in TotalEnergies. We are not 10%, but at 9.9%. So but it's, I think comforting some expectations about the investments we are doing in this integrated power segments. Jean-Pierre, the floor is yours.

Yes. Thank you Patrick. So 2023 is off to a good start. Once again, I think we demonstrate our ability to generate strong results even...

(technical difficulty)

Ladies and gentlemen, please hold the line. The conference will resume shortly.

Okay. So quarter-to-quarter, our brent went down 9% to $81 per barrel and European gas dropped by 50% to $16 per (inaudible). In this context, TotalEnergies reported first quarter '23 adjusted net income of $6.5 billion, a decrease of only 13% and a strong cash conversion with a debt adjusted cash flow DFF, close to $10 billion. We brent above $18 per barrel and European gas above $15 per millimeter, still high by historical standards. We are continuing to deliver excellent profitability with 25% HA in the first quarter. Commodity prices have been volatile, albeit still at high levels. Oil prices fell briefly below $175 per barrel in March, largely on fields on economic slowdown before rebounding in April on use of OPEC+ quota reductions. Refining margins are leasing down after several quarters of exceptionally high diesel cracks in the same context of fields of economic slowdown, high product inventories largely fueled by Chinese exports and the quicker-than-expected reorganization of Russian flows following the European embargo.

Gas prices fell due to mild weather. We expect prices to remain stable and still restoring the begins in the second half of the year. Future markets are anticipating prices next to $20 per million meter for this winter. For the first time, as announced, we are reporting integrated LNG and integrated power as independent segments. These 2 growing segments are, as you know, at the core of our transition strategy. The restated historical data for '21 full year and '22 quarters is available in the result price release. In terms of scale, integration and performance, we are unmatched among our peers in both ROVs activities. We are already widely recognized that having a very strong performing globally integrated LNG portfolio in that business, mainly through countercyclical acquisition, we have achieved our position as the largest lifter of low-cost U.S. LNG more than 10 million tonnes, and the largest regas provider in premium priced European markets, around 20 million tonnes after the recent start-up of the SSL in Germany.

Our unmatched access to the European market creates a competitive advantage for our trading operations and makes us more competitive as a partner in securing future resources. For example, our recent contract awards in Qatar. We launched this quarter the feeds for LNG, and this will contribute to the future growth of our portfolio with close to 2 million tonne equity production. Last year, with Freeport LNG sales of 48 million tonnes, this business generated $10 billion of cash flow. In the first quarter, sales were 11 million tonnes and cash flow was $2.1 billion. In the first quarter, '23, LNG sales were down 17% quarter-to-quarter and 13% year-on-year, reflecting mainly a decrease in spot sales due to lower LNG demand in Europe linked to the mild weather. Integrated LNG generated adjusted net operating income of $2.1 billion down only by 10% compared to the previous quarter, excluding rate, mainly due to lower prices. Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, we anticipate that our average LNG selling price might decrease by another 10%, 15% in the second quarter because of this time, like versus $13.3 per million to this quarter.

Operationally, we expect to benefit from the restart of Freeport LNG in our Q2 '23 LNG sales. And the 2 new segments, Integrated Power is the newer business activity in the company, mainly through the smart acquisition of early-stage development projects, we have grown this business to 18 gigawatts of gross installed renewable power generation, our 2 largest markets being Europe and the U.S. and we are solidly on track to reach 38 gigawatt by '25 and then 100 gigawatts by 2030. Our flexible power generation capacity and growing positions in energy storage are fully integrated into the business strategy, allowing our traders to maximize our performance. Developing power projects, generating electricity as well as integrating the trading and saving of power as we do other energy commodities is a natural expansion of our business.

Last year, we met power production of 33 terawatt hour. This business generated about $1 billion of cash flow. For the 12 months ended March 23, Integrated Power generated a ROACE of 9.9%, next to 10%, consistent with our stated objective to achieve double-digit profitability for this activity. Going into the details of the results of these new segments now. Renewable power generation capacity was 18 gigawatts at the end of this quarter, an increase of more than 1 gigawatts quarter-to-quarter, thanks to 0.6 gigawatts from the acquisition of Casa dos Ventos in Brazil and 0.3 gigawatts from the connection of the Seagreen Offshore Wind Farm in the U.K. For the integrated power results, the best reference for comparison is Q1 '22 seems like for the Marketing & Services business, the Gas & Power marketing business is seasonal. Net electricity generation was 8.4 terawatt hour in the first quarter, up 10% year-on-year due to growing electricity generation from renewal, offsetting the lower generation from flexible capacity in the context of lower demand.

Integrated Power positive adjusted net operating income of $170 million. This figure is significantly higher compared to the first quarter of '22 adjusted net operating income, which was negative at minus $82 million. Last year was heavily impacted by a huge increase of supply costs. This year, all segments have done better. Gas-fired power plants, renewable, supply and trading despite the negative impact of winter seasonality of supply in the power marketing business, higher cost of supply in winter versus a co-invoicing along the year for many customers. Now moving to the oil parts of our business. Operationally, our oil and gas production was 2.52 million barrels of oil equivalent per day, up 2% quarter-to-quarter, excluding Novatek. This includes the acquisition of a 20% interest in the SARB and Umm Lulu producing oil field in the Emirates, starting from mid-March. The production also benefits from new project contribution, notably the startup of gas production of blockchain in Oman and the ramp-up of (inaudible) phase 2 in Norway. Production for Q2 '23 is expected at around 2.5 million barrel equivalent per day. Exploration and Production reported adjusted net operating income of $2.7 billion, down 22% quarter-over-quarter, excluding Novatek due to lower oil and gas prices.

In the Downstream now, Refining & Chemicals contributed $1.6 billion of adjusted net operating income, up 9% quarter-to-quarter and 44% year-on-year despite the pension protests that were ongoing in France at the end of the quarter, thanks to the strong refining margins. Refinery utilization rate was at 78%. For Q2 '23, we expect the refining utilization rate to increase above 80%, given the end of strikes in France. Marketing and Services results are subleasing at a level of around $300 million of adjusted net operating income, $280 million for the first quarter 2-up 3% year-on-year despite sales being 6% lower. This demonstrates that our strategy of value over volume is working. Overall, at company level, successful pre-working cap was $9.6 billion in the first quarter, plus 5% quarter-on-quarter despite the lower price environment I already commented as the fourth quarter '22 was impacted by exceptional taxes, notably the $1.1 billion European solidarity contribution, mainly in N&C and E&P to a lesser extent. There was a $4.5 billion working cap build in this first quarter of '23. This is an exceptionally high build for the first quarter, mainly related to higher crude and petroleum product inventories on water, notably due to the impact of the pension low protest in France. This is an exceptional element which explains $1.4 billion of working cap build and will disappear next quarter.

Second factor is the seasonality of the gas and power marketing businesses, the gap between the seasonal cost of supply and the fixed monthly B2C clients payments. And of course, you have more traditional effects of lower prices on tax and trade payables that explain this working cap build in the first quarter '23. Note that part of this working cap builds will reverse in the next quarter, notably the higher inventories related to protest in France and the impact of seasonality for the Gas & Power Marketing business. Also, there was higher net investments in the first quarter at $6.4 billion, including $3.3 billion for acquisition, mainly the acquisition of a 20% interest in SABR and Umm Lulu acquisition, the payments relating to the acquisition of the stake in Northeast project in Qatar and the stake in the joint venture with Casa dos Ventos in Brazil. Our guidance for '23 net investments remained unchanged at $16 billion to $18 billion. Net investments include acquisitions and divestments. So the sales of our energy assets that Patrick commented for $4.1 billion, with the closing expected in Q3 should be counted in the envelope. The recently announced sale to Alimentation Couche-Tard for $3.1 billion is also expected to be closed by year-end. Encouraged by the strong first quarter results, the Board confirmed the 7.25% increase for the first interim dividend in '23 to EUR 0.74 per share as well as the repurchase of $2 billion of shares in the second quarter '23. And I think now we can go to the Q&A, Patrick.

(Operator Instructions) The first question is from Oswald Clint of Bernstein.

Yes, I'm happy to guess the plus on the 40%. And if I was to go up into the mid-40s, I guess the...

No, no, no.

No. But the range..

At least 40, plus this way. I think some of your colleagues have found what it means. So you can guess.

But I guess the question is, is the 40% a number we could think about when you have good divestments topping it up. And if not, we should think more around the 35%. And then just related to that, is there any Novatek dividends included here? I know Novatek declared a dividend last week. It's up quite materially. Does Total expect to get anything in 2023 in terms of the cash flow. And then the second one is just Mozambique LNG, lots of momentum, lots of discussion from the President recently. I think you're still hoping to secure some of the favorable cost terms, construction terms. Any update you could provide us on that side of it, please?

Okay. No. Oswald, we gave you a guidance 35, 40 telling you that it's neither certifies the floor, but there is nothing. And actually, we've done 37%. So that means that, in fact, it's not monitored by the specific figures. So it's not 35 certain time and 40 over time. The only point today, which makes a difference is that we have -- the Board announced spin off, so it was a dividend in kind. So we have a sort of form of commitment from the Board to our shareholders. And so the discussion that we -- as soon as we decided to take the route of direct sales, we are committed somewhere to have a reward to our shareholders. And so the decision yesterday was, at this stage, we don't know if it will go for buybacks or special dividends. Let's look to what will be at the beginning of the year. As the proceeds of the sales are not yet, I would say, in the treasury of Jean-Pierre. So let's close and let's take time to see where we go in the year, but the decision was it's an opportunity and a commitment link, I would say, to the decision of the spin-off of the sort of dividend in time. We translate that as we'll go beyond what was announced.

So at least 40%, at least 40% means 40% plus. And then, and so it will be then discussed either buyback or dividends. We have noticed but for the time being, we have maintained the buyback at $2 billion per quarter for the first 2 quarters, despite the fact that the environment has softened, we did not decrease it. So there might be a chance that we could maintain the $2 billion around along the year. And then I think if you make some math in your model, you will find something above 40%. Novatek, I don't know, again, you know my question. The question is -- and you have new permanent news coming from Russia. Yesterday, I've seen that the Russian authorities wanting to sanction more European Western companies. So I don't know. So it's difficult to answer to you. Yes, there was -- again, we are no more in the governance of Novatek. As you know, we are just -- we are out of that. It's no more consolidated in our accounts.

So yes, we have seen that there was a decision of a dividend. Can it go through up to the accounts of TotalEnergies, we'll see along the year. I cannot just tell you today. We have decided that Russia is -- we do not plan the future. We just monitor day after day, week after week and if it comes it comes, if it does not come. It's not in the plan, I would say. Mozambique LNG, that's a good question, update on the cost terms. You have understood that it's a last step before to restart. So some -- I commented recently that we need the contractors to be reasonable. Some of them are not. So we will repeat some of the packages because there is no way for us to accept some undue costs. We have paid what we had to pay because we stopped the project and we have to restart the project, but has an impact, obviously, the stop and restart. We don't see why we should pay more than that. And so that's where we progress. So I think when we will be ready, we'll come back to you on the -- but I think today, it's premature again because we are -- our team, the project team is working with the contractors with a view to be able to relaunch the project, but under the conditions that the costs are controlled. That's fundamental to us.

The next question is from Christopher Kuplent of Bank of America.

Patrick, I'm going to ask you probably the same question again, if you don't mind. I think what I've heard I'm looking for clarification is the decision before the disposal to Suncor was to basically give proceeds to shareholders directly? Is that the principle we should continue to talk about and to consider the $4 billion as effectively an add-on. And then we can run our CFFO payout numbers as long as we like. So that's my question, just looking for confirmation. And lastly, second question, slightly connected to that. You've done, as you've highlighted, more than $3 billion of acquisitions in the first quarter. You've announced disposals that go well beyond this, but if we accept that the $4 billion disposals ought to be distributed to shareholders, you're kind of running on an even number for the full year. And I appreciate you're not likely to give us a number, but I wonder how big the total ARN completion looms and whether you can confirm that, that is baked into your $16 billion to $18 billion guidance. That would be it.

Okay. No, Chris, I need to clarify. We never said that the $4 billion will go to -- back to shareholders. By the way, it was not the case in the spin-off still. If you remember correctly, sir, there is a I would say, an enterprise value of -- which was around CAD 5 million to CAD 6 billion let's say $4 billion to $5 billion, where this company would have a debt, which should have been left proceed for the company, then we were ready to spin off to keep 30% on all sides. So if you make your math, you are far for the $4 billion. And again, it's not the way we expressed it. We expressed it, and I can only repeat what we said, is that the decision of the Board is that -- and so by the way, second remark, proceed of sales does not impact the cash flow from operations, the cash flow from operations as it is stated in all the way we communicate and in our reserves and accounts do not integrate the cash from divestments. So we have an amount of cash flow from operations.

As you know perfectly, last year, we had $46 billion at $100 per barrel. At 80% I think, will be between $45 billion and $40 billion. So then probably more in this environment of the first quarter, this quarter, the cash flow from operation, I think, is something like $9.5 billion now. So if we have 4 quarters of $9.5 billion, it will make $38 billion. If you make 40% plus, you can find what will be the guidance of payout to shareholders you deduct the dividend, which is more or less between that according to the -- you have all the figures on the dividend. We have -- you can even calculate it for all the quarters. You had the last payment of EUR 0.74. The only unknown is the exchange rate, euro dollar. So that's -- and then you will find what could be the amount. The question for the Board was is it for full buyback shares? Or is it through share buyback or through special dividend, that will be discussed and we see along the year. The feeling on our side is that as we consider that the share of the company is low compared to some U.S. peers and there is room for improvement, increasing I mean, maintaining, not increase but maintaining a share buyback. It's probably a good investment and demonstrating the trust to our shareholders and to investors in the future of the company.

Your other questions, yes, there was some acquisition this year, but we cannot monitor quarter-by-quarter. There were also 2 big announcements of sales advancement, the divestments of the European network plus this Canadian divestment, so we have some proceeds. But to tell you, there is no secret. I think it was mentioned. Of course, is integrated in the $16 billion, $18 billion guidance and we don't change the guidance, neither one way and the other way because I'm not fully sure that all the proceeds, I think Canada should come this year because it's quite an easy process, in fact. But on the other side, the European network has more to do, in fact, on carting, et cetera. So everybody is working to close the deal before year-end, and both parties want to do it, but you know sometimes that's sensitive. So TotalEnergies has integrated and total I think in cash is something around EUR 1.5 billion to EUR 2 billion that I think we already mentioned that.

That's great. May I add one quick follow-up. Could you give us details around the carrying value of your Canadian assets that are to be sold?

What is the carrying value? You mean the capital employed in our balance sheet.

Yes.

It's around $5 billion. There will be a capital gain. I mean there will be a positive result in our account. But I would say it's an exceptional results. I mean from the control of my...

Yes, it will be treated as an adjustment in our accounts.

The next question is from Irene Himona of Societe Generale.

Two questions. First of all, on your E&P tax rate, please, which increased in the quarter. Can you remind us what is included in the first quarter in terms of upstream windfall taxes? And then at current price levels, what should we anticipate for that average E&P tax for the full year? And then secondly, you referred to the significant inflation in renewables. Could you possibly talk around inflationary pressures you're seeing in your upstream operations, please.

Sbraire, will take the first question regarding the tax rate?

So of course, the Q1 has been prepared the same way as the 2022 accounts. And at that time, I explained to you that the EPS we put tax profit in the U.K. is treated in the adjusted net income. So it impacts, it has an impact in the '22 tax rate. And of course, it has an impact in the Q1 2023 tax rates. And so the amounts representing with this in relation, we start is $0.4 billion, just to give you one figure. On the opposite, all the exceptional contribution in relation with the European decision to put in place an exceptional contribution in 2022 was treated in '22 as an exceptional element because it's an exceptional element. So of course, we continue with this treatment. So not impacting the tax rate in the first quarter of '23.

Cost inflation in upstream. I mean, again, it's I think, for timing of OpEx per barrel is at $5.5 per barrel. So in our operations, I do not see impact, which is by the way, a very good performance from the team. On the risk, yes, we know that there are risks for depots are more expensive, but we are benefiting on the fact that we had quite a number of long-term and medium-term contracts. So we have seen some impact that's limited. And then you have where we had some seen some inflation was more on the steel year. We registered by the way, we are right because they still went down again. So again, the question is more, I think that we are facing the will of some contractors to get some money back from, I would say, bad years. They look to our results, and so they want sort of share of the cake.

But again, it's a question of supply and demand from the at the end. There is no reason to accept to pay more. If your supply and demand is not stretched. And I think it's not stretched on many elements. This is why I was mentioning Mozambique. We will go to rebid when we had the feeling that the contractor which were awarded the contract, try to benefit from a situation. We are not in a hurry. And to go ahead to know where the market base is to go to tender. So this is what we will do on this project. But for me, and honestly, source of inflation last year, which were more of the steel and all that came down. We have observed it in our -- by the way, in our Uganda project, we were very, very right last year not to place the order for steel. I think we have saved a lot of money just to resist to the temptation. And so it's again, it's an arbitration for me between value and speed and it's a question of managing that. So I don't see much inflation today, even if we have which, by the way, is another good message to us which is simplifying the project, and that's good for everybody.

The next question is from Martijn Rats of Morgan Stanley.

I wanted to ask if you could set out a little bit the sort of the triggers or the drivers that would lead to the full payment in the disposal to Suncor. I noticed that the press release wasn't so all that clear about. But if you could say a few words about that, that will be helpful. And secondly, I wanted to ask if you could perhaps share some of your thoughts on the global LNG market. I noticed that on Thursday and Friday last week, Europe enjoyed all-time high LNG imports, which is, of course, a little bit surprising given that the price has been going lower and yet the LNG keeps coming. And it's sort of -- it doesn't look like Asian demand is sort of picking up all that much, at least looking at the data that we have access to, but perhaps in your business, you have earlier insights. So I was wondering if you're seeing anything in terms of an Asian demand pickup, for example.

Okay. The additional payments, yes, to be honest, it's quite nothing specific, I would say. It's there is a price threshold about which if we met it's a monthly payment, a monthly calculation is the price of WCS is reaching a certain level, then there is a multiplier effect by the dollar per barrel and depending also on the production, I would say of the field. So it's quite -- it's a classical CVR. What is good, I mean what is good from my point of view is that we have 5 years. So it's 60 months of, I would say, as you know there is a good chance to get some of it. Just to let you know a calculation, if we would have a 1 year like 2022, we would have got the full $600 million. That's important. Okay.

Okay. Interesting.

Interesting, yes. As I said, global energy market to be net base next year, we've seen at the beginning of the quarter some demand, even short-term demand picking up. On the price, it's clear that today the market is better so it's a good time to sign to try to sign some long-term contracts, and we are back to a better percentage of brent than in the last years. By the way, this is what we want to do on PNG LNG. Today, we are benefiting marketing of PNG LNG in this type of environment is a good timing for us, in fact. So we have a delay, but we benefit from that. And I think we are targeting to finalize some long-term sales contract to cover our share of PNG LNG. Then on the other side, on the global market, Europe was more softened than last year because the weather was mild in winter. The storage is limited in capacity. So when the storage are full, it's difficult to put more.

So if you have limited and it's a problem by the way for me for Europe is that we don't have a very large capacity of underground storage, in fact in Europe. So when, so that's why, by the way, we see that in the figures of TotalEnergies, there were less spot deals being done. There was another reason, by the way, about the pod but some strikes in France, the terminal in France, where in fact, shut down, not shutdown, but are not accessible from few almost a month. But otherwise, I would say, do we see today, if your question is more Chinese demand. It's not too clear to me, to be honest. There is more than last year, but are we back to the 2021 level of Chinese LNG demand, is not -- it's a little premature to answer you positively. So we are in between, I would say, at this stage '22 and '21 for this Asia demand. But more appetite for many players. And including, by the way, the Chinese players, you have seen that they have signed some long-term contracts with Qatar. It's going to because they are really willing to I think, to ensure the security of supply. China is importing 40% of natural gas. So it's a good opportunity and Qatar is benefiting of it, and we are working with them in order to try to secure on the long term the supply for natural gas. So it's good for LNG.

The next question is from Biraj Borkhataria from RBC.

So 2 questions on the upstream, please. The first one, just on Mozambique. I appreciate you're restarting there. On the other side, they were it seems like the operator was considering a second floating facility. I was just wondering from the Total point of view, is that something you've looked at or something you're considering? And then the second question is just could you just walk me through the kind of plans for 2023 for both Namibia and Suriname. And what are the next steps heading towards development?

No. I mean, honestly, when you have Mozambique LNG, huge reserves, the question for us is to develop a scheme where we can really have the potential to take the most of these reserves. And so the floating LNG concept, which is honestly not fully adapted. I think it was quite adapted as the first development because it was a part of the reservoir, which was not related to the big reservoir that we want to develop. But for us, honestly, in terms of allocation of capital, if I want to do LNG, I prefer to allocate capital for LNG to projects with a potential of upside because you make much more value with additional trains on a brownfield way than on the greenfield project. And the limitation for me on the floating LNG scheme that, in fact, you have the CapEx and then you cannot expand it. We cannot benefit from the additional reserves. So we have enough projects in our portfolio, LNG projects portfolio, not to allocate capital to floating LNG because we don't see the upside. And again, for me, LNG is a very good cash machine when you can add additional trends.

Namibia and Suriname. Namibia, we are drilling just now. So we have -- in fact, in '23, we will spend $300 million. We have 3 wells to be drilled. We have 2 rigs, 3 wells, 3 tests. So in fact, it's a critical year. We are just making a second accelerated exploration well, then we'll make an appraisal well of the first discovery and potentially another appraisal well, the second appraisal well, either on the first discovery or on the second discovery, if it's a discovery. So, and we'll test because it's fundamental. We have some good static, I would say, data last year, so very encouraging. This is why we have decided to commit almost half of our exploration budget in 2023. But we need the dynamic of the test results because when you are by 3,000 meter water depth, either if it's 15,000 barrels per day per well or 5,000, you don't have the same economics or same economy. So the plan is there. My view is that with all this data, we'll be in a position to have by the end of '23 maybe earlier, but end of '23 to have a good idea of what we have in hand and can we accelerate the time to market to develop the first discovery.

On Suriname, Suriname I think very -- the last appraisal well is just being drilled. So the good news is that we are trying to develop an oil pool. The difficulty in Suriname is that the oil-gas ratio is quite high, but so what we wanted to identify all pool with a lower CGR in order to be able to have an efficient development. It's a development which we combined 2 discoveries. The first 2 appraisal wells of these 2 discoveries have been positive. So today, it's a pool of around 500-plus million barrels of oil. We are waiting for the last oil well in order to reach (inaudible) And then it will be time to go to development, I would say, after these appraisal wells. We'll have again there a good vision in order to move forward to the next step. So this year, '23 for both Namibia and Suriname is very important because for us, it could be -- it will be the next wave of going to FID for growing our oil business in the coming -- in the future years.

The next question is from Michele Della Vigna of Goldman Sachs.

Hi Patrick and Jean-Pierre, congratulations on the strong results despite the deteriorating macro. I really had one question. We've seen a major shift in the renewable power strategies, both of the oil companies, some of whom are deemphasizing that investment, but also from the utilities who are more focused on financial delevering. And I'm wondering whether you're seeing signs that this shift is starting to restore better profitability, especially in wind but also in solar and perhaps opening up better opportunities for you as well?

It's -- I think it's a little premature. What will drive. It's clear that today, you had last year some higher costs from the supply chain. Then of course, you have the interest rates, which are going up. And it's a highly leveraged industry. So of course, if you want, at the end of the day to restore profitability, you have to put a price up, which is good, I think, for me, it might -- for players like us, it will create opportunity for sure. We've seen as well on some tenders to be honest, some price, which we are very aggressive in offshore range, which we will not understand which we are probably too low and you know what is behind. So there it's difficult to tell you, I would say, to have a clear and clear cut answer. I think this will come, we see higher prices in the negotiation of corporate PPAs in the U.S. clearly. People are more reasonable. And I think on both sides, by the way, the customers and the sellers because everybody, when you have a direct discussions with some industries or some customers, it's a way to restore profitability. So there is a good signal from this point of view. Sometimes in tenders, it's different record.

What we try to do, by the way, on the corporate PPA in order to restore part of the profitability as well to introduce not only a fixed price PPA for 15 years or 10 years, which honestly is not the best, but we introduce some elements of some merchant elements in order to share some upside, downside with the customer, which we like now in our model of TotalEnergies, and this environment gave us more capacity to propose this type of contract. So I think what is true to come back to you is that I think there is a feeling that the rate is more today not to volume, but to value. And it's a little like I think the shale oil industry in the past. So there are more players looking to profitability. Why we -- when we announced that we are targeting more than 10% for integrated power, I know that people have some doubts, but and again, it's integrated because of the full value chain, but I'm fully convinced that this will come. It's capital-intensive industry, and there is no way to just to think and when the money cost of the money was almost 0, you could find plenty of people ready to accept the low profitability when the price of the money is at 4%, 5%. You have to add some 4%, 5%, if you want to reach the same profitability. So I think all that will probably help us to restore the profitability and to move from, I would say, an infant industry, so a little more mature investment.

The next question is from Lydia Rainforth of Barclays.

Two questions, if I could. And I did want to come back to the Suncor divestment proceeds. Given that you've kept the net investment number the same, is this effect by giving you more acquisition capacity? I just wanted to check where we are on that? And then the second one was just coming back to the Integrated Power business. Obviously, you've given us lots of helpful data and kind of seeing that out. It has been very volatile. So when we're looking at that business, kind of what are the key things that you actually want us to think about from that side?

On the first one, I would say yes and no because again, in our view, when we put our budget for 2023, we plan the spin-off. We plan the spin-off and the company was TotalEnergies was planning to allocate part of a certain amount of debt, let's say, $2 billion, more or less to the spin-off. So this $2 billion were the proceeds which was integrated in our budget. So I would say -- so it does not change from the monthly the view we have of our guidance for CapEx, EUR 16 million to EUR 18 billion. So yes, of course, we have room for both, again, divestments and acquisitions. We knew that this year that we will have some, I would say, higher proceeds of divestments, but we have also look, we have already spent some money for acquisitions. We've done the Abu Dhabi deal. We've done the -- we will have to because we have some renewable deal, which were introduced and the Qatar, we might have this year -- by the way, it's not a question of acquisition as a question of past costs. But in 2023, we'll have NAV was delayed to January and we may have as well NAF.

So all that is integrated. And again, do not consider that the $4.5 billion of proceeds from Canada are extra, by the way we also committed today through our announcement that the payout will be increased. But part of these proceeds will go to shareholders like it was. So that I think the point on the first one. On the second one. Yes, it's volatile, okay. It's volatile, but going up. It's volatile going up. And the year '22 on the supply side, to be honest, like Jean-Pierre told you, was complex because you know these European governance, governments wanted to put some ceiling. So introducing in our accounts, the ceiling effects and when you have some supply, which are done on the spot created the quarter-by-quarter results were not, I would say, a smooth exercise last year. This year, I have the impression that we are more, I would say, in a stable environment, even if you still have some governments which are putting some different schemes, but it's more stable. And so I'm expecting more stability from this last year from this supply business. The renewable part is growing. So I'm expecting more in '23 than in '22.

And then part of what could be volatile is linked to the gas power plants, which were last year ran at a very high rate. This first quarter was good, but not as high as last year because of mild weather. So this is part of, I would say, volatile results. And so we'll see -- I mean we are at the beginning of a story, and we see quarter after quarter and to give you some more elements what Jean-Pierre and his teams have done and delivered to you. I think it's at the end of the press release. We've restated the year '21 and all the quarters of '22 in this segment. And then I think it's good, but you can engage with my IR team. They will be happy to give you more indications or maybe not, by the way, just to help you to see what they can explain you. But I think, by the way, the volatility, the answer will be more from growing and developing the business. It's a question of size of this business. But you have noticed that almost $400 million, I think $370 million is quite sizable. It's the results is even larger than the one of marketing and services. After 5 years of development, I think it's a good achievement. So we look to that positively and be a source of growth in the future cash flow.

The next question is from Lucas Herrmann of Exane.

Patrick, I wanted to ask you 2 questions on the LNG business. The first, there's clearly been increasing talk in Europe of banning or doing something to stop Russian LNG imports into Europe. I just wonder whether you could make some observations around what's your understanding interpretation and whether well, just your position on that. I'm a little confused actually as to whether you were obliged to take volumes into Europe to regasify through the original contract but anyway. And the second staying with LNG it goes back to Mozambique. And you have had an agreement or you have contracts signed for pretty much all of the offtake from Mozambique. How is that impacted if at all or how are those agreements impacted, if at all, as a consequence of pushout, redoing, retendering, et cetera, et cetera, and the delays that are clearly apparent for the offtakers. That was it.

The Mozambique LNG, I would say, LNG contracts have not been affected until now by all that. Those buyers are still maintaining all the, I think we did not reach any, I would say, a date where we will go to commit on something different. I think my view is you know that the buyers when you look to the different contracts, we have a good contract, but they are in the market. And so we are not, I would say, there is no impact at this stage of this delay on the LNG contract, access contracts. By the way, TotalEnergies, we have only today, one of the contracts was discussed or renegotiated, but TotalEnergies took some volumes, and we are ready to take more volumes of Mozambique LNG on our side. On the Russian imports, I would say, I'd like to know, we have some long-term contracts. Part of this long term are a destination close, which is Europe, to be clear. Most of them, by the way, out of the 5 million tonnes of long-term contracts that we have committed to I think at least 3 or 4 other destination close to Europe. There is also a fourth measure close, which means that if Europe decides to ban LNG imports, then we would exercise the fourth measure close and will stop importing LNG from Russia to Europe.

I have impression when I'm reading what is that, of course, there is a debate. The debate has rebounded, of course, first, because there is not much improvement on the situation on the wall, I would say. And second, because the European leaders think that today they have taken actions that may be banning Russia LNG is possible. It's not a unanimous position. Some countries are more concerned than others. What is being discussed today, if I understand correctly, the regulation, which is put on the table, which will go to the European Parliament, it could take time, in fact, because sanctions require unanimity and we not do full sanction. There is no unanimity in Brussels on that. But if it goes to the -- if I understand the position, it's more about trying to regulate the capacity of Russian players to, I would say, to book some regas capacities in Western Europe, future regas capacity. So if it is the case, it's not a ban. And by the way, it does not really affect -- it will not affect our position, to be clear. Then you know our position on that, we will respect all the sanctions and -- but at this stage, as you know, we have a long-term contract, it's a commitment. It's a huge contract, and we have no other way than expecting this long term, it's a take-or-pay contract. So if we don't take, we'll pay.

And again, in the balance of Europe, it was not neutral and last year it was something around 15 million tonnes, I think, more or less, which were importing from Russia to Europe. So again, we are monitoring that week after week, and we will execute. I remember you that we don't hedge all these LNG contracts because we perfectly know but maybe it could happen to us that we'll have to stop. And so there is no market position being taken on the LNG from Russia.

And sorry, just to go back to Mozambique and the volumes that you've now taken into portfolio, could you quantify the number?

Quantify what?

Quantify the amount of LNG that you effectively will take into your marketing.

At this stage, I think it's something like 0.7 million tonnes for TotalEnergies. But again, if some buyers won't told us that they prefer to withdraw, we are ready to take more -- so we are open to that. But some Japanese buyers are also ready to take more of Japan -- there is some appetite. Mozambique LNG is not only a huge reserve, it's well located. It's directly on the Indian Ocean as to go to. I think it's a good geographical position. So there is no, I'm not afraid about selling this Mozambique LNG. And again, the buyers did not exercise any close vis-a-vis the project.

The next question is from Matt Lofting of JPMorgan.

Two, if I could, please. First, on demand, Patrick, I think you talked LNG specifically earlier, but to the extent financial markets are putting something of a burden of proof on the resilience of global oil and energy demand more broadly here. Are there any areas or subsectors through Total's extensive global downstream business? Or are you seeing any early warning signs on the rate of change in demand manifesting? And then secondly, could you share any sense of the strength of contribution from the Oil & Products trading business within the first quarter refining and Chemicals result and perhaps how you see that trending going forward as the industry moves through the immediate effects of the embargo on Russian oil products?

Honestly, there is no, I mean, what we observed in Europe was, of course, some I would say, energy savings, energy efficiency effect last year, prices were very high. So I would say Europe has saved 15% of energy demand because of rates were so high, but a lot of industries. But also, by the way, B2C customers. I say some energy. We've done in a sort of -- we have allocated to our customers in France, a bonus if they were saving more than 5% of their electricity during winter time, we are ready to share with them part of the profit that we are gaining from the, I would say, forward supply.

And customers, more than 1 million customers, 1.2 million, 1.3 million customers had saved an average of 15%. By the way, it's more or less the same figure, but we have certain in the manufacturing side, I mean, on the industry side. So there were some impact on energy savings. Will it last? I think this is really -- I think it was really a reaction to the very high price. The gas price was almost $200 per barrel last year in Europe. So today, it has softened, and we begin to see some demand coming back, I would say. So I think there was -- is it shorter, it is fundamental and not clear.

Otherwise, no, I would say we don't see some softening of energy demand and the expectation from the own market are still high. On the second question about Russian ban, what is clear is there's been a surprise. The surprise has been that -- there are many effects on the ban. The big surprise that, in fact, the diesel from Russia was much quicker than expected. I think the markets were anticipated some impact on the diesel tracks, which are integrated probably. We've seen a lot of players making inventories of diesel before the ban. And in fact, the surprise of the coming months is that the diesel of Russia was quickly rerouted to Africa and South America, that was obvious because there were the 2 importing market, but also to the Middle East, where some producing countries, pressure to buy some diesel with a good discount and to sell that oil with no discount, which is, by the way, a good transfer of value. from Russia to some Middle East countries. That is a surprise, which means that, by the way, the diesel crack is happening, clearly, because there were high inventories. Now Russian is there. And the Chinese refineries are back full speed because also they benefit, by the way, from Russian with a discount.

So this way this cut on the Russian crude in diesel has so many effects on different parts of the world and some impact from the global markets. This is what we observed. Altering traders, they love volatility, there is a lot of volatility. And so I would say they have good results. But in fact, they have very good results almost every quarter. So I hope that they will continue. That's my comments.

Next question is from Kim Fustier of HSBC.

I've got 2, if I may. First one is, I appreciate that you don't comment on rumors, but I'm just curious to hear any thoughts that you can share on the attractiveness of corporate upstream M&A and particularly for producing assets, given that Total has recently been linked to a certain private E&P company. I guess another way of asking that question is, hypothetically, what would you need to see in order to pull the trigger on, let's say, a $5 billion deal in the upstream? And my second question is on Iraq. I just wondered if you could walk us through the updated Iraq integrated energy deal that was announced earlier this month. It seems to be a $10 billion headline investment. But just how is that CapEx going to be phased over the years?

Okay. Iraq, yes, that was a good news of the -- after my comments in London. I don't know if some people listen to my comments. But clearly, the government of Iraq confirms the world contract with no modification at all. So I would say sanctity of contract went through a change of government, it was for me fundamental. So that was, for me, more than a good news. And secondly, we reached an agreement on the way that participating interest could be allocated to an Iraqi party. You have seen that we will invite also for partners from Qatar Energy to join us. So that, I think it's a good setup. We are finalizing all the paperwork, but I think large $10 billion we spent fundamentally about among, let's say, 4 years, 4 years we need to -- because it's there pace. By the way, based in the way that the gas flaring, we have to build some trains to fare down the gas that will take 2 phase. And also on the old part, by the way, increasing the production will be done in 2 phases. So let's consider 4 years with a ramp up along the year. So that's the point .

On not a few M&A and I don't believe all rumors, people love to use our name. We have demonstrated, I think, in the past that we are able to make good deals when the price is good. So I think it's a price of acquisition. And second, I think it's a matter for me as well of synergies. Can you find some synergies in the acquisitions, which will deliver additional value. And the other point which, of course, is important for us is that -- I mean, does it make the reasonable portfolio according to our different position. So we are not trying to fill the gaps. We are more trying to be consistent with the strategy. So we'll see, so don't believe rumors.

The next question is from Amy Wong of Credit Suisse.

I have 2 of them, please. So one of them is just continuing along the lines of M&A strategy. You've made quite a few chunky, pretty large acquisitions this quarter, an interesting mix across E&P, power integrated gas. So can we take that as an indication of kind of how you're thinking along the lines in the near future? And then -- and as a follow-up to that, just think tying that with your Scope 1, 2, 3 emissions targets that you've talked about. And how are those targets to any degree, if any, at all, restricting the way you're looking at acquisitions at the moment? The need to comply with some of those '25, 2030 targets that you put out? Thank you.

The second question is easy. There is no constraint of absolute value. We have a commitment in particular, when we look to hydrocarbons. But any project, either by the way, organic one or acquisition must have an intensity scope 1 and 2 intensity of CO2 lower than the average of the company, the average company of 19. So it any project, any M&A should be -- should enhance the position in intensity. That's my question now. And then we manage and if it's good for the shareholders, it deliver value, we will manage the absolute objective is up to us to make the efforts on other projects. And I think we have demonstrated our capacity to have not only to acquire, but to divest some assets like we are doing today. By the way, the exit of the Canadian wholesale from that perspective, pure CO2 budget, I would say, are giving us some space in terms of CO2. But it's, again, don't consider that there is a direct. There is a link more for me when we are developing our strategy or integrated power strategy. It's very clear that this is clear that we want to be able to offer to our customers a more decarbonized I mean, lower range of products, oil, gas and some electricity, that's clear, but it is a strategy.

But by the way, the first question, we have demonstrated. I think this quarter is a perfect demonstration of the balance of our strategy. We can use M&A or organic development, either to go on oil back in Abu Dhabi because we have the opportunity to put in our portfolio, a very low cost, low CO2, by the way, asset. I think the cost of per barrel price per barrel of production is around $7, $8 per barrel. We paid a cost more or less of $4 per barrel. So it's fitting very well price per barrel. So it's fitting perfectly with the strategy. So oil is good when it's fitting with the strategy. We had the LNG in Qatar, which was -- I mean, the investments, which were the results of last year positioning. And again, it's LNG is clear, and we have some renewables. So we'll continue to, I would say, feed with organic or M&A, all the segments of the company. If there are good opportunities. So for me, a question when we look to M&A and again, it's not today, we have more looks recently to divestment and the merger of an acquisition, I would say. But it's we are looking to that. What is the value creation that we can get, not only by saying, but beyond, I would say, the initial acquisition payment, that's what we look at it.

The next question is from Paul Cheng of Scotia Bank.

Patrick just if you don't mind, I want to go back into the (inaudible) sales. Is that a competitive or that you get some offer, but now go out and put it as a result, as a competitive bid or that is put is coming in from other people? And have you looked at to break up the onset and sell you individually.

No, no, it's clear. I mean, they were -- I think everything is the statement. In the pace, you just have to read Paul. I think we said in the statement, we launched the spinoff. There was no bid of and we received unsolicitable and solicited offers. So several many. So several players, not only one. We did not look at them. We look at them only in the last month when they begin and the one of Santo begin to reach a level that we well comfortable enough to go to the Board and to say to the board, look, we have this offer, which, again, CAD 5.5 billion. And at the same time, as we're working hard and we're already -- I spent a week, last 2 weeks ago, I went to Toronto in order to meet some stock exchange management team, so we are working on. So we had a good view of what could be expected from one side per alternative. And then we have the alternative trade. Of course, we were to push it's our job to push the price up. But I think at the end of the day, again, I prefer Suncor to management to comment on their motivation to make the acquisition on their side or north side, again, we think through this process. without organizing a bid process, but just being very, I would say, determined to make the spinoff, we created an alternative opportunity. Like by the way, I met several shareholders after our last event in London and some of them were expecting possible outcome from this nature. So I mean it's that's what we can say. So that's what we've done.

Okay. And that in the past, a lot of time you guys comment on that, what is the trading result of the trading environment in the quarter. And you haven't mentioned anything in the first quarter. So we just assume trading result is more and less epic and nothing spectacular up in the...

You understand when it is spectacular, we warn you because in the trading statement. If we say nothing, as I said before, admit it's very good, but nothing spectacular.

The next question is from Henri Patricot of UBS.

Yes. Thanks for taking my question. Just one left for me. On we've seen some high targets from the EU in recent weeks and including this week on SAF. I was wondering when I look at your 2030 targets, you mentioned 10% market share with 1.5 million tonnes. Are these numbers? Could these numbers go up both for the overall market size and for your own capacity? Or do you see too much of a constraint when it comes to feedstocks?

No, I think yes, you're right, with 10%, but the volume was 2 million tonnes, which was a tiny target, 2 million tonnes. There is Europe on one side, there is a U.S. on the other side. No, I think we have a plan. We are working in order to develop different units, either in the U.S. where the high rate by the way, giving an interesting framework. So there is a plan to develop a project around both offer. And we have other plants in Europe, but we are looking to other opportunities to develop. It's an attractive market. Having said that, as you know, the constraint is more on the feedstock because you need to find, I would say, it's a secular economy. So you need to use a lighter waste or second generation. So today, the constraint is more in the feedstock, but we are I think our colleagues of people are reaching this target of 2 million tonnes per year by 2030, seems to be positive or maybe 1.5. I don't -- okay, we'll see, but don't worry. We are working on it.

The next question is from Giacomo Romeo of Jefferies.

Yes, thank you. First question is just trying to understand with the rationale that led you to increase position pay out as a result of the Canadian divestments rather than committing to a fixed payout. And the other question I have, it's more general -- and it's around the emerging legislation in France, and I'd like to hear your thoughts about the tightening investment criteria for Article 9 funds and explicitly to exclude explicitly investments in positive fuels , and just trying to understand whether you are any sort of involved in discussion with the government in trying to make any changes here. It's obviously Total in our screen is the most popular name and for Article 9 funds investments in oil and gas. I just trying to understand a little bit your thoughts here and whether you are engaged in discussion with the government?

Okay. On the first question, no, I think it's -- again, I explained why the Board. We plan the spin-off was announced to a shareholder. So that means that the there was a distribution of a dividend in kind, potentially to our shareholders. So it was a form of commitment. So we don't do the distribution in kind. So strongly, we had filling respect our word, and so it will be done through either I mean, distribution through the payout, a cash payout to whoever buybacks or special dividends, that's the point. So I think it's quite logic. And so we translated it at this stage because we prefer to observe what will happen during the year by giving you a guidance on the payout, a positive one. I think it's more than 40%, at least 40%. So I think it's positive. So I think that we demonstrated that the Board is clearly committed to the return of to shareholders like we said last year.

The second question, Article 9 such a debate. I'm not sure that exclusion will make the progress of the transition, in particular, because I'm convinced by players like TotalEnergies are very well positioned to reallocate part of our cash flows to accelerate this transition. If people want to exclude, they exclude the only argument I have for them is that you have different for company. You have the one who are in transition, which we can demonstrate. I'm not a big fan of taxonomy, to be honest, because all that is just classification. But I've observed that in some countries like Belgium, they make some caveats on the role stating. But if some companies are really serious about the transition, then it's -- they have to be considered. I'm more in favor, I would say, on a best-in-class philosophy than banning philosophy, which is what we repeat. I think it should be more encouraging. Then if it's not Article 9, will be Article 8 and I think -- but there are also, I would say, from and I'm not, I think, investor point of view might be willing to have a pure category of, I would say, very clean assets, okay?

But it's a question for me more of organizing the marketing to investors than really a question of regulation. And I think there is there a confusion to try to regulate the transition, to organize the transition through financial regulations. I'm not sure it's the best way to do it. Again, we are on our side. This does not affect our strategy, which is very clear and we maintain the growth.

The next question is from Jason Gabelman of TD Cowen.

I wanted to go back to M&A for a minute. Last year, at your Analyst Day, you talked about an interest in growing your U.S. LNG integrated gas footprint. And I'm wondering, as we try to figure out the use of proceeds from the oil and asset sale, if that's an area that looks attractive to you, either moving into the upstream gas further into upstream gas in the U.S. and/or partnering on an LNG project or 2 there? And then my second question is on Kazakhstan, some news out of there regarding a potential lawsuit related to recouping costs from the Kazakhstan project, which you have an interest in. I was wondering if you could provide some comments around that, where that lawsuit set to potential liabilities arising from that lawsuit?

On second question, I have no news more than what you learned. I mean it seems that the government at Kazakhstan wants to reopen all discussions. It's not the first time by the cost recovery from Kazakhstan. I think my thing is that the 5 IOCs are really united and so we'll face and we have a contract there again, and we will, of course, find in order to the contract be respected by all the parties. So that's my comments, I have no other view on it. On the first one, I mean, again, I don't consider because we divest, we are not so to spend the money tomorrow. I mean we are -- we can we can also -- I commented already, I think, last -- during our last investor meeting, that is true, but we have -- we are looking to see if we can more integrate those bias position, the U.S. position. The price of the area is quite low, but people are still dreaming of the price of last year. So let's be patient. Things are possible. You know our area of interest and notably, but I repeat it just before. It's good oil, it's LNG. It's also a renewable (inaudible). So we are looking to different opportunities in order to create value from the global portfolio.

Gentlemen, there are no more questions registered at this time.

Okay. So thank you very much, Jean-Pierre has given you all the figures. The results were good. Thank you to all the teams. And thank you for your questions. And see you soon to all of you.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.