Half Year 2022 TotalEnergies SE Earnings Call

Ladies and gentlemen, welcome to the total energy second quarter and first half 2022 results conference call I now hand over to <unk>, CEO and jumped yeah, well, yeah, So who will lead you through this call gentlemen, Please go ahead.

Okay.

Hello, everyone, but six PNM, yeah, I'm happy to join you today for this call to come into our results together with.

So China is taking action to take the most out of the data the OIBDA and then months for energy companies.

I would also comment of course, the actions, we are taking to execute and deliver on the strategy and especially on the roadmap and jump here, we really use the reserves.

And then we go to the Q&A.

So of course, the monkeys, obviously there is support is the price of oil or the price of the European gas the price of LNG and the refining margins for this quarter your first time.

In 25 years in the industry, but I am observing such an Android months, where all segments of our company are benefiting at the same time, our strong prices on margin.

And but hopefully I will show you our ability to fully embrace the commodity price environment.

Frequently strengthening our balance sheet.

If you think of cash flow to record cash rules for quarter, and we are performing very well and using visa opportunity to accelerate our transformation and benefits our shareholders.

The tenant is easy as indeed fundamentally a commodity company and we recognize that we arent in the commodity price cycle.

On the supply side, the global system with <unk> over the coming year to develop additional spare production capacity for both corn and LNG and this implies medium term support for high prices on the demand side global demand is increasing as the economies continue to reopen bids.

<unk> is a potential slide into recession.

Because of inflation.

The Russia, Ukraine conflict and sanctions that push to refining margins for this quarter to the sky during second quarter, we have been reporting structure pretty quite choppy in July but still remain high.

We've obviously added a strong impact on gasoline prices at the pump for customers and in this context total energy has extended the sugar price reduction program forward and find its work in France.

At the end of the year.

We prefer indeed to share the benefits immediately and directly with our customers rather than to make ourselves with targets for additional taxation in this current environment.

Hey, Dmitry and as your prices and we should not forget these are cyclical. So we do not expect to be made that it took the cycle for the long term.

We have been for these type of cycles before and we are taking a balanced approach to best execute and deliver on our strategy to profitably grow the company for energy transportation.

Our first priority as you know is to invest in the company to prepare the future.

And in this period of strong cash flow generation as explained you in April .

The board is giving priority to accelerating the transformation potentially from Kansas to get good opportunities and this is what we are doing in the second quarter, we have announced three major.

New opportunities, which we can join our portfolio our entry into get the chance north field expansion for LNG.

The acquisition of a 50% stake in <unk>, the fifth largest <unk> player in the renewable energy.

And a new venture in India in partnership with <unk> for Green hydrogen production.

This.

Investments, we knew about as I said, we have managed to have access to renewable opportunities in very good conditions.

Because of the relationships and the strong positions we have developed in key growth areas.

We pursue acting opportunistically at a more tactical level whereby for example are moving two floating LNG regas terminals to France, and possibly Germany, where we are already maximizing our position as the largest and NGC gas provider in Europe .

We're also accelerating development of short cycle projects.

For example, in the debris to increase gas delivery to the European market from the North Sea, but also on the <unk> side for example in Angola, We Civil War infill wells on block 17 <unk> horizontal.

By the way Angola will be a showcase of our military energy strategy. As we are just sanctioning many different <unk> projects.

Through our projects each of 30000 Boe per day capacity plus free on block 17, and bigger and bigger than you are on block 17 zero six.

Firstly on extra city gas projects on the fields of Columba and Michael <unk> in order to feed Angola, LNG plans and deliver more LNG to Europe , and Asia and first solar pronounce 45 megawatts in partnership with Sonangol.

As a result of all these the acceleration of our transition I would say that we announced in last April .

First half Capex, we are close to 8 billion.

And we anticipate by the 2022 Capex will be in the range of $15 16 billion dollar will be next to the <unk> rather than the 15, depending on the timing of acquisition and asset sales or remind you that in March we gave guidance of $13 billion to $16 billion for the year 'twenty two 'twenty.

So the $16 billion next to $16 billion is in the range.

The answer to a question during the last quarter.

But get the LNG deal will contribute obviously to our future LNG roof and thanks to these new addition to our portfolio, we maintain all growth ambition in the LNG segment. Despite the decision not to invest any more any new projects in Russia.

A word on Russia as you have observed we implementing of supportive actions announced on March 22.

And we are exiting <unk> 40 from the old business, both production and trading with the recently negotiated exits of <unk> during the last quarter.

So that everything else is recorded in the second quarter accounts, a new $3 5 billion impairment related to the potential impact of international sanctions on the value of its stake in Nevada.

Russia represents about 5% of our capital employed and cash through and starting with the Investor Day in September we presented our strategic plan for total energies in future without taking workshop into account.

So on the <unk>, but we did shed some volume figures for example, or the production of 2022 would be $2 3 million barrel per day, but not the global financial performance no return to shareholders.

More details will be given to you at the end of September for strategy presentation.

Also a priority at the level of the board is we are increasing shareholder return to reflects <unk> months and strong cash flow generation.

So as <unk> Board approves the second interim dividend of <unk> 60 of Euro per share an increase of 5% supported by the underlying of switch or bolting on cash flow.

<unk> another tranche of share buybacks of $2 billion for the third quarter, which will represent.

Hopefully you've seen December since the fourth quarter of 2021 to the fields with <unk>.

<unk> 22, a global amount of 5% of our market cap, we shall be which would be good bikes was a chef who shares.

Can deduct from these guidance of $2 billion for the third quarter, the same rate, but in the second quarter, but doubling the rate of the first quarter of buybacks.

<unk> buybacks should reach at least 7 billion for the year 2022.

And I can come back on that on a very steep valuation basis.

Thank you on any of these enabled basis by the way as of today and he hasnt share prices competing particularly in light of the dividends we are being we never gets.

Now I will leave jump here presenting.

And it's quite a strong set of results it would be an easy exit signs for him today.

Let me just remind summarize what I just told you. Yes, we are clearly very positive and dynamic environment marked by elevated commodity prices.

<unk> for the medium term view as a company is demonstrating its capex to leverage such a presence even development.

In all the indicators in particular in terms of cash flow generation.

And we will act accordingly to maximize performance will strategy capacities and financial discipline to allocate capital to energy transformation to return value to shareholders and of course to maintain a strong balance sheet for the future.

<unk> the floor is yours, thank you Patrick.

So <unk> fixed income for the second quarter estimates was $5 7 billion, which takes into account the sky. The three points that can be in the government that Patrick mentioned.

Results were $9 8 billion.

9% from the first quarter.

Earnings per share were $3.

75.

By more than 10% with the benefits of diabetics.

Second quarter and first half results reflect the dramatic increase in oil and gas.

And LNG prices as well as record refining margins for the second quarter.

<unk> cash flow was $13 6 billion, an increase of 14% from the first quarter and doubled the level of the same quarter last year.

For the first half cash flow was $25 6 billion again, doubling the same period last year and strong enough to cover virtually 22, Capex plus dividends.

Illustrates the leverage that today.

As the low cost producer has to the strong commodity price environment in terms of free cash flow generation.

Well good afternoon.

Oil and gas production decreased by 100000 barrels oil equivalent per day to two 7 million in the second quarter two.

Two eight in the first quarter.

This is mainly due to higher plant maintenance and production cuts in Nigeria, and Libya that were partially offset by the entries into CPI type of fields in Brazil.

We expect plant turnarounds to be.

About 40000 Boes per day.

For the third quarter.

Second quarter production to be stable at the level of the second quarter, thanks to ramp ups from the new projects.

The downstream oil business, we finally reports.

One 6 million barrels per day, the second quarter and the edition rates increased to 88% we target the same high utilization rates for the third quarter.

Looking now at the results by segments.

Takeaway gas renewable and power is the growth engine of the company.

<unk> net operating income was $2 6 billion that I, just second quarter three times the level of the same quarter last year.

Excellent performance by down $500 million quarter to quarter, mainly due to a decrease from the exceptionally high contribution from gas LNG and <unk> in the first quarter.

Cash flow was $2 4 billion in the second quarter compared to seek to begin in the first quarter.

Important to point out that cash flow from operation in the second quarter, while slipping into.

Taking a reversal of the margin goal and working capital changes in the first quarter.

And then he says we're highly nine 7 million Tony the second quarter down from $13 3 million in the first quarter.

<unk> says that the <unk> weather record spud sales quarter.

The average selling price increased to $14 <unk> in the second quarter in line with our guidance and is expected to increase to more than <unk> in the third quarter, given the evolution of oil and gas prices and the lag effect on price formulas.

Both in stores when you will power generation capacity grew to 11 gigawatts at the end of the second quarter.

Favorable <unk> nine gigawatts in the new quarter, including 0.4 gigawatt, but really due to the startup or the first phase.

I guess, a solar project in Qatar.

Including the pipeline of development projects, our renewable portfolio has grown to more than 15 gigawatts of gross but what generation. So we are very confident that we can achieve our 2025 gross target of 13 five gigawatts.

E&P performing well in recent environments and contributed $4 7 billion of adjusted operating income in the second quarter, which corresponds to a return on average capital employed of more than 20%.

The past 12 months.

This quarter is a bit lower down 6% from the first quarter, mainly due to the lower production and being back to sanction under resort <unk> ethics.

Cash flow was $712 billion in the second quarter slightly below the very strong performance of the first quarter and reflecting the higher liquids price, which was partially offset by lower gas price realization and lower production volumes.

Downstream perform impressively as well.

Minder, the importance of integrated model generated $3 2 billion. After adjusting its operating income and $3 5 billion to our cash flow in the second quarter as it increased behind the refined product volumes to free capture record high <unk> in the context of reduced imports of Russian products.

Plus the exceptional result of treating two quarters in a row.

<unk> has been <unk>.

At the company level <unk> net operating income was $18 8 million ended up over the first half which represents the net.

And you had a return on capital employed of more than 25%.

Operating cash flow.

<unk> from.

$24 9 billion to that in this first half 'twenty, two or more than twice what way what we generated in the first half of <unk>.

Our next our net investment in the first half were $7 8 million thereof, we.

We're able to reduce net debt.

$4 1 billion dollar 215 billion at the end of June So our gearing is below 10% and in addition to paying for the <unk>. We bought back as Patrick mentioned already 2 billion of our shares during the second quarter as tenants.

The company financially stronger and better and.

Better than anyone can ever recall.

Why we do not expect these environment to last for a long ramp. There again is that we are using this time to fortify the balance sheet accelerated the transformation and return value to our shareholders.

On that point I think we're ready for the Q&A. Thanks Patrick.

So as of <unk>.

One.

Yes.

Okay.

Thank you ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question versus past.

On your telephone keypad and wait.

Name to be announced.

Please kindly mute any thoughts by asking a question comes from your request. Please press your Q.

Once again, please press star one.

If you wish to ask a question.

We have our first question from Mr. <unk> from J P. Morgan.

Good afternoon, and thank you for the questions first question I have is just around your Capex guide.

It seems to be sort of a long term targets, which you can be reached to top off.

Could you provide any guidance around.

How youre going to think about capital allocation in the medium term, particularly as it pertains to your <unk>.

Opex.

Profile, both in terms of the absolute level.

Given TFC whites take advantage this is Scott.

The advantage of counter cyclical investments, but that should come at.

At the risk of that needed higher guide going forward. So this is a hard ceiling is it soft ceiling.

And maybe some line.

Clear line of sight around around the medium term.

Also as it pertains to mix given there.

Great opportunities also within oil.

Should we see taking advantage that Jacobs as you have done exceptionally good deals.

Wholesale assets.

This links back to my question around the Capex and then the second question is around demand adjusted.

You mentioned that.

A recessionary risks.

As a result of inflation can you elaborate more on what you're seeing particularly.

Six to 12 months view on.

Demand dynamics, because it does feel as though this.

<unk> is being viewed as good as it gets around the risk premium associated with Russia as opposed to anything more structural because demand is clearly no.

Claire many people's minds. Thank you.

Thank you Kristian for two question first on the Capex you know in March we saw new 13 16 billion guidance for 2025.

That's true, but this year at the beginning of the year in February we said <unk>. We just use the guidance. We gave you to go to 15 16, <unk>, Hawaii, because obviously as I told in the speech I think we have decided to.

To accelerate on some opportunity as you know as I said, we just.

I mean, we have managed to make that deal on the renewables in the U S. On the <unk>, but we have also given disruptions who tried to accelerate short cycles I've given several examples of field in Angola for example.

Rozas Youre absorbing <unk>, so it's an opportunity to do it well two largest projects before by the way cost increase in the industry. So we benefit from a good environment today.

Also a question I can tell you. We have also given instructions because you know in an energy company and Mike as we spend a lot of energy. So the energy costs are increasing in the company. So I have asked the team to accelerate.

Some programs Capex program on energy efficiency, which by the way is a good forecast.

Really on the long term is also good for the emissions and also which is another soon so I'm very comfortable to add to that to see the company in such a number of months to spend this year makes some 16 billion rather than the initial 14 15 billion. So.

It's I think the capacity to react to the positive environment, having said that I am.

Keeping at least.

Stage and.

We'll give you more information in end of September the <unk>. The guidance. We gave you at 414 Sixteens for me.

<unk> is a reasonable guideline guidance for Capex.

That's the point on this belief that through I think you said you know we are very happy to have acquired the two oilfields in Brazil with <unk>, the Tulsa Pro's from well not many contenders by December we acquired that on the basis of $60 per borrower and since the beginning of May we received a total.

Or more to shareholders 40, 50000 Boe per day at 120 <unk>.

They are up about so again.

Are they ready to do other deals like this one to be clear develop opportunities I'm afraid when the price of oil is high but of course, it's more complex because the expectations might.

Might be higher, but so we'll be active split of capex.

At this stage I am remaining between my range around let's say, a $50 billion and around the oil 2025 around LNG.

25%, 25% with Huron, New energies I think is still valid.

Even if we go up to $16 billion.

Mortgage what you have in mind.

On the demand side. Your question is a tricky one because on one side, we see New York decrease of demand for them in that event, we will be opening after COVID-19. As you know we have seen in the jet fuel demand is quite strong addition is coming back in.

Not yet at the level of 2019. So there is still room for improvement we have seen in the last quarter, but China was closed and so the demand in China was weak but <unk>.

<unk> reopening and so you see some I see some room positive room for increasing demand for all at the same time raises question Mark about the financial markets I'll move it not so strong today.

Costar raising inflation inflation is rising again, so we could have a risk to see a recession.

Our macroeconomic expert, but you see what I'm reading in drilling in the U S. So this could have impact on the demand that we know but windows.

<unk>.

Those subsidiaries in particular in emerging countries I'll be burdened for governments and that impacts the demand I know you could have some we've seen a country I think it's key non cabot is more country, but other countries could put some 46 in order to control.

I'd say as a budget Buddha, which quickly which is by simply the <unk> oil prices gasoline prices, so that could be a negative let's say so all in all I think that.

I am positive I see some more positive trends on the demand of a negative but that is visa macroeconomic risks and you'll remember in 2008, when we had the financial crisis.

Awesome huge Michael causes the impacts on the demand was quite strong. So that's something having said that I'll repeat what I said I don't see as well on the supply side much room for improvement.

I think OPEC countries are almost at the maximum today.

<unk> overall geopolitical difficulties and you add the U S shale oil, where we are not the best expert, but the end is done but today.

In case of fiduciary is facing some shortage of workforces.

When our recruiters and so it's not so easy to increase quickly the predictions.

Thank you.

Thank you. The next question comes from Irene <unk> of Societe Generale. Please go ahead.

Thank you good afternoon.

Two questions. Please.

And congratulations on the strong results firstly.

The U K windfall profits tax and then I'll see can you say roughly.

What you would expect the cost to be for the toll and then secondly in the context of the six.

16 billion Capex.

Certainly does.

<unk> opportunities, which you're exploiting as you accelerate that transition.

<unk> also seen inflation starting to prepaid.

Oil and gas projects and also you'll renewables.

Sorry about that.

Thank you.

Thank you Randall the two questions on the second one noise such inflation, which is the <unk>.

Leading is a raise of four of our Capex guidance to next to <unk> fundamentally opportunity subside goals, but.

I cannot tell you inflation is very industry, we've seen some few rig rates going up but we have managed to find to have access to very acceptable relays and I would say on the project side, the only points, which where we see an increase of raw materials.

All materials like steel for example, and we.

We took the decision to lease and lead to postpone the older for steel.

<unk> for a big pipeline in Africa, because we consider but it was at the top of the market and we better to wait and see some decisions of the rule might be or above.

I cannot.

Some impact but it's.

That's the reason why.

It's why we have gave you 15.

<unk> hundred 60, <unk> be analyzed most of the reserves as you said of being opportunistic on some M&A activities, which are fitting with our strategy and accelerating short cycle capex.

On the on the on.

The UK side.

The evaluation, we have for this year is around $500 million.

The impact of these taxes, but.

If you can tell you that.

I'd say.

For me.

The cash basically which is in Europe today with the European gas price on the UK operation is also much higher of unexpected in our order forecast.

And.

I would say that the UK I would say I have been always quite <unk>.

<unk>.

They were lowering the tax Windsor partially alone.

They are quite active on the taxation side on both ways that we say a little warning went through.

Increasingly <unk>, so thats the type of.

Elements to we can give you but.

It will be absorbed in the.

And the cash flow that we're generating in the UK.

Thank you very much.

Thank you. The next question comes from Lee Darrin Peller from Barclays. Please go ahead.

Thank you and good afternoon.

Two questions if I could.

And if I can come back to the Capex side.

And as Youre spending more money.

David Thats being idled.

We define this as.

Second models and the like carbon space are you actually taking more risks I'd like to hear that things are little bit likely date.

In India.

Let's see how confident should be about the returns of that additional capex.

And then the second one if I come back to the.

Buybacks and the cash returns to shareholders.

Our next question comes from Sandy to this idea that balance between.

The additional capex.

Sure.

Stakeholders.

The share buybacks.

On.

Christmas exercise.

Over time, how much smoking Steven said that the shareholders' return.

Thanks.

Okay on the second question first.

Yes.

Capex guidance is.

So I'll ask the question of.

Medium and long term.

Profitability of our business model. So we know that insulin experience, we drew from the year 2010, 2015, but if we spent I would say the Capex then we Windsor low cycle will come back.

We have some difficulties in terms of profitability. So we look to the capex sort of sustainable or medium long term capex. So it could it could value. That's why we gave you a range for 2016 and today and so we adapted according to in the range that we gave you according to the circumstances and again ICR.

For shareholders, obviously, it's.

It's quite evaluate board, but we accelerated short cycle projects today when the price are very high. So I think it's quite feasible to be but we are and but to maintain I would say on the <unk>.

Long term.

Although he has only a board level of Capex.

So that's so the buyback is not AB rated against the Capex to be clear. The buyback is another question, which is what is a global return to shareholders.

Bruce when you have a huge I mean, I think you can see that we have generated almost 25 billion I've seen the of cash flow from operations on the first half.

The second half of the year is the same we would see it would be $15 billion outflow is much higher when does the <unk> $45 billion. We have in mind, we had in mind. So the question for US is of do we share the I would say.

Xtra.

Profits.

We'll get or wants to use this opportunity again to accelerate its transition and also to strengthen the balance sheet. So it is possible, but by the end of the year the depth the net depths will be not far from it.

Under 5%, but we see that as I explained you already as.

Giving us the opportunity.

Is the macro environment is changing you know when you think about.

Intel space raising.

You could see some valuation of more opportunities coming semester to be patients. So what we don't want to do we just to spend the money quickly, but these two to keep the capacity to act.

To continue to strengthen our business model.

So is the buyback level as I told you for the year, we started with 1 billion fulfill quarter, we wait to two <unk>.

So too will be maintained.

$7 billion for the year.

In mind, which we have in mind.

Sort of burden of I.

I would say is before dividends around a billion something around 15 billion.

A global return.

We'll monitor that according to what would be the reserves and the cash.

We generated for the signal to US this is a.

The way, we look at the two all events.

To come back to your question. The first question, which is low carbon Enzo returns I think again I repeat what I said you'd already on this matter.

And in fact as a low carbon energy is today when you look to field like biogas. When you have biogas and you said it that the European gas price, so generation and profitability is quite high.

And I think so anyway more sorry is fundamentally Zoe turn these two in the all business model as I explained last last March.

Not to cover or do not to cover these renewable projects by regulated prices you know, which are new I would say are we.

Done which could reach 10%.

After some farm downs is to keep part of these renewable productions.

To to sell them on the merchant market on the commodity price and again, if you make the math today with the electricity price we can observe in the in Europe , you would see that the profitability is much higher than the 10%, but we are.

We have already put as a minimum target so.

This gives us some comfort.

But when you look to visa.

Not only renewables and iron venue its renewable electricity value chain, you need to look to the award value chain and the way to manage not only the renewable production as part of your electricity production in <unk> electricity trading you can do in better ways Federal rising.

Visit excellence again, both of them on the market price on the spot prices and not only on the guaranteed price, which would limit your dividend. This is one example, one recently in the U K on the <unk>.

Also wind farms and <unk> offshore wind farm, we decided not to apply for a new CFO , new contractual diffluence, but to keep 30% of the production.

On the free market on the spot market and not to cover the world production as a guaranteed price because.

The auction price was around 36, 37 38 pounds.

Let me go with us and we consider but it was better to do and to keep the 30% of our predictions about horizon's asset in a bid to win the future.

Okay.

Thank you. The next question comes from Martijn rats from Morgan Stanley . Please go ahead.

Yeah, Hi, Thanks for taking my questions I've got two.

First of all I briefly wanted to ask about the dividend the dividend is up 5% year on year, but I was wondering if there is a case to be made that we should be starting to see that as a future trend rate of growth rather than just what it is for this year and the reason for asking is of course that the buyback is now sufficiently large to.

Actively allow the dividend to grow 5% a year.

By shrinking the share count would you see that 5% more of a trend rate going forward or is it still a bit of a sort of one off above trend rates sort of type of hike.

And the other one I wanted to ask perhaps.

A bit more macro and slightly less relate to the company, but you would be well suited to answer Mitch. So I wanted to ask it. Nonetheless, I was hoping you could say a few words upfront.

Do you expect will happen to the European diesel market and the reason I'm asking is that European diesel imports from Russia continue at about 700000 barrels a day or so it's about 10% of our European diesel consumption simply comes from Russian imports and they are all seaborne theyre fully subject CD embargo that kicks in in February in theory, they should all fall away.

Our estimates are European growth suited to ramp up diesel production can they do that with less gas being available can we imported from somewhere else. It seems there are an awful.

From a pension in that market and I was just hoping you could say a few words about it.

Thank you Martin for the two questions. The first one is clear to me, it's not a total one of the 5% increase.

Told you.

If I remember last September September 'twenty, one, but we anticipate a growth of our cash rose by 5% per year for the next five years in the meantime, there was a Russia, but as I will explain to you that in September we've although approaches today get <unk> and.

And you are very right as well because we make a buyback share.

Around 5% of our capital I would say for me the 5% is a guidance that we are willing to follow not only of the one off of next years. Following next year and potentially the next five years, we have room in our portfolio. This is why we said.

Growth of dividend must be supported by sustained.

Sustainable underlying.

CSA for roof I think so thank you for the question to clarify that.

For me the guidance that you can put in your in your model of 5% and if it's really true that despite Russia is the fact that we bought back 5% of our capital will obviously represented one year a 5% increase in visits we intend for me. When you bought back shares is somewhere the return to shareholder is effective only.

If you put it in your dividend.

So thats it.

Very good point on these orders Suraj I think when you somebody joins USA what is happening today on the European.

Margins I said to you, but this guy doing the second quarter <unk> was gasoline and diesel which went through the roof.

Gasoline as Fred is becoming to go down but the diesel one continue to remain.

I think there is a good reason for that is that fundamentally you know our European system does not produce enough resource fundamentally before.

Before they fly to the guests in fact natural gas.

Finding system Europe was mostly.

Designed to produce scheduled in the past we made some investments and that's enough to cover the diesel demand. So any true. It's why it seems has played on diesel is quite high because the market is anticipating some difficulties.

That's one of the concern by the way I can tell you among the governments of course, we will on all sides. We are looking towards why for example was a French government signed.

Last week, an agreement with Abu Dhabi.

To sort of a security of <unk> tons of supply of diesel and by the way that that energy trading arm will be the which is the company will be the.

The intermediate between Debbie and the France.

To ensure vis vis.

The supply of diesel so there is and I think the market is that in mind. So my view is that the refining margin will not stay at the skywave.

Second quarter will go down, but the diesel spread should support.

The future these.

This brand and its necessary because as you know.

Finally, you spent quite a lot of.

Energy and so the cost of energy in our refining as grown up from something by $5 per ton to $2025 per tonne. So.

Fortinet or if we want to be the refineries to continue to be utilized that almost 90% rate we need to add some support worldwide.

Because of the cost of energy refineries will be.

We'd be less utilized in EMEA. Our list utilized you have an impact on the surprises of market. So I think value of a support.

For visa refining margins because of the diesel.

<unk> and <unk>.

That's something that we have identified.

As a key a key element for in Europe .

Thank you very clear.

The next question is from Lucas Herrmann from BNP.

Thanks very much.

Just going back to the opportunities that you see on the chart.

Mr. Li.

The deals that we've seen certainly in renewable over the course of the last two three years generally paying 1 billion $2 billion they've been relatively modest when.

And when you look at the market at the present time can you see yourself doing something.

Just be great to scale, which I.

I think given the comments made today is obviously something that investors are pondering on.

Yes.

The first question.

Second.

Back to Russia, and refining your roles.

Within <unk>, our I presume that you've been benefiting from.

The price that you pay for your wells given the facility was obliged to run on it.

Any idea can you give us any indication of what the benefit has been equally with the plan to remove yourself from production remains in place by end of year I guess it starts to be given this aligns with the sanctions. Thanks Patrick.

Again on the first question you know my point of view My point of view is that.

Renewable assets.

I realize it's a very high to high multiples. So it's difficult to make some larger acquisitions I don't want to embark to.

There's no way for me to.

Pay too much for some assets.

It's not we have done as you said some few deals which were.

Directly negotiated with some companies because they see some added value of IV <unk> as a partner for example.

For example.

In the Delaware.

<unk> deal, we managed to do that deal because we are bringing additional value to clear away from the shareholders VIP toward the point of view, which is our trading capacity get most obvious renewable assets in.

<unk>.

In the U S. But also we are bringing some potential added value because we can make some corporate ppas that are large scale because we have.

All sorts of a stronger footprint. So this is what we are looking for.

Making large acquisitions and vet sales honestly, we should see before we can do vessel it would be not as large as you see we should see a large decrease of the value of these companies we could we before we could contemplate that.

So think of the one on low now right now <unk> be clear we have been we have.

Again to stop as we already.

One of the complex, which was feeding lineup from off net has been stopped as we announced by March 'twenty two so to the low night look more.

Supplied only Russian crude oil so it's a mix of digital motion corridor until December 2022 because the comps back to Iran. Sanctions will be applied from December <unk> 2022, So obviously and it is clear we will be on our roadmap. So that means that now will be will be.

Fed.

Bye.

Crude oil coming from the North sea for vehicle system.

Our net worth $5 92.

And we our discussions today.

Because we have two refineries retinoid now which are we'd have some share I would say this alternative.

So thats suppose better position and the position it is clear, but again, but.

We are not fundamentally.

I would say the more benefit we are doing this hugh.

A few months is not commensurate with the results of <unk>.

Although our refining business in refining business this year.

Benefited from refining and chemical segment has benefited I would say first again.

$145 per ton of average margin frankly.

That's our singular we'd have never seen that but it's beginning to decrease I think we ought to be more in the range of 81 140. So again my comments on the gathering spreads with chop sharply going down.

Its also a benefit I think it was mentioned by Nokia in the refining and chemical.

<unk> of Citi.

<unk> performance was an exceptional performance of the oil trading, but two quarters into the rule a little similar to what they've done.

In the second quarter of 2020, so you can consider that a 500 million bond.

Super four months of oil trading in these results.

Last quarter. It was a guest rating forward trading, but it's true, but you know in these type of very volatile market.

Australia and we are in the good direction of course can make and benefit of this.

As such I would say dislocations in the market I don't know if this will be repeated for the coming quarters because of the.

It's a question of volatility so.

Mark will normalize right, but again it does not.

Have a fundamental impact on the <unk>.

With us.

Thanks for answering.

The next question is from Brs.

Scott <unk> from RBC.

Hi, Thanks for taking thanks for taking my questions.

The first one is on Qatar.

Congratulations for being the first major to enter the expansion project.

Can you disclose the entry or payment structure for that project.

Whether that's included in the $16 billion.

Think about it.

And then the second question is on your Russian assets and particularly on the LNG side. So there was some articles recently around gas.

<unk> from potentially adding LNG to the gas rubles for gas scheme.

Can you just talk about if that was implemented how youre thinking about how that would impact.

Your operations.

Thank you.

Sorry, I didn't catch the second question sorry.

As far as it being <unk>.

First on NFC I cannot disclose it deals with the question was not at all there was no bonus at better value.

Emitted bonus in the Capex <unk> was fundamentally a fifth core.

Sure.

I would say that we have to do so we will have to pay to pay of course, the past cost because NSE is a projects, which I've already.

Started which had been sanctioned by <unk>.

<unk> one year ago, I think so there of course, we will have to recover all share of the past cost basis more is more additional business with very limited and then this payment will take place when we will close fundamentally to do so we are seeing some because we knew we had some antitrust.

Conditions precedent to follow up so I think I don't know if its so its part of the anticipation we have for 'twenty two.

While 2000, if we sold it.

It's linked to what I said in my speech I see I told you it will depend on acquisitions and sales planning is part of the uncertainty.

But we have four of these.

We I think we have put into our.

Forecast. The fact that we may ask we will have to pay these.

<unk> cost of energy.

Second question <unk> honestly.

I would tell you it would have.

If it's not the case today, it's not.

In Europe by the way, it's going to be project financing the OSM contracts.

We will apply exactly will behave exactly as the gas pipe.

Buyers are behaving today, which I understand is to us.

So you who accounted the ruble accounts into the same bank.

Too much so yuval accountants, who go to count.

So question with Hana.

I mean just.

We should have legal fall to your already good board early fans with them, but they don't see.

For me today by the way the discussion is that there, but I don't see some major impact on that.

Say that the impact of Juicy is on the project financing because this could have some.

Consequences globally so.

<unk>.

Baseload debate at this stage, but we lowered management.

Okay. Thank you.

The next question comes from Jeff <unk>.

Sure.

Hello. Thank you for taking my question two questions at ATC.

LNG.

In each one 2022, you delivered very strong LNG contribution despite having what would be.

Some hedges in place, especially on your <unk>.

Advantage.

I'll stay out of the U S.

Can you give us a color that youre hedging policies for <unk>.

2012.

<unk>.

LNG given that you are.

<unk>.

What I was trying to understand is that is Kevin to high spot LNG spot prices are sustained in 2023.

Can we expect a further improvement.

On your LNG marketing side any color would be helpful.

And the second question is more a very short term question is.

Can you quantify the impact of U S Freeport LNG outages.

In your Q C operation, you're at $2 2 million General takeaways from that project. So wondering if you had already pre sold or hedged.

Some of those volumes.

And what kind of <unk>.

The negative impact you expect in Q3 from outages.

Okay on the second one that you see you know we had to replace.

The.

The missing cargoes, because we have some customers some less so.

We have to ensure that customers. So there was two cargoes on the second quarter. We plan each cargo was missing for the next quarter.

Accordingly, and we don't know exactly I think Freeport is discipline.

Maybe we start by end of September we see according to OTB U S forces, obviously up to Hfcs.

Deepak good night.

So of course, we would have to replace these cargoes on the spot market. So it is a cost that is no.

It's already taking into account somewhere.

Partially.

It's not.

Again, we will look to use that excuse to tell you.

Lower volume in Q2.

Our teams of opportunities to offset we have a very large portfolio rough source of production so up to all energy teams to manage that and it's Bob by the way of our business model. We are <unk>, we are sourcing LNG intent and 10 different plants and so we must be able to manage this.

Type of hiccups, which led by the way for your questions about for hedging policies. You know because of this type of event could happen. We don't edge, obviously as you know our team solid hedging 100% of our capacity, we don't say, Japan or under this season for example, because.

We don't know what will be the future. So we are prudent.

But we are aging quite.

The sizable volume or overall.

Overall, I would say LNG.

LNG supplies.

So yes. The question of your first answer is positive, yes, 2020 will benefit from <unk>, which are put in place and there is a 43 month after month.

On a certain percentage of our portfolio.

So first question for this is the second question is on the short term negative impact with us to be absorbed in the global portfolio.

Many thanks Patrick.

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

Thank you good afternoon, just a few minor ones hopefully to Hoover up I just wanted to ask you whether you can give us a bit more detail how much the impact is in your Q2 results and how much you expect for the full year from offering to your French customers, a lower price at the pump.

And.

If you can be.

Explicit in terms of fundings versus working capital.

On a number of these government funded rebates that would be great.

Otherwise I just wanted to ask.

Effective tax rate has remained below 40%.

In this environment, obviously, the high contribution from downstream.

But I wonder.

Whats your thoughts are regarding upstream effective taxation.

Whether that is going to approach, 50% sooner or later.

In this price environment or not.

Lastly, if I may.

Just a quick one on the net working capital inflows that you've seen in the second quarter any indication of how much of that is sustainable you expect to be reversed in the second half would be would be fantastic.

Thank you.

Yes, I will take the question regarding the effective tax rates, which will well around 40%.

2009 to be precise.

The second quarter. So it's in line with the guidance we gave on it because this reflects.

2047, 48%.

Effective tax rate for an E&P scope.

It's close to 50%, reflecting the environment below that women with rapidly.

So for me, it's exactly what we what we what we have already said again remind you with the guidance we gave for the.

Group at $80 oil.

We gave for the group tax rate around 40%, reflecting the E&P tax rate around 40, 45%.

Looking GAAP, yes.

We caching.

More than 3 billion.

Looking at during the second quarter. The main driver is what I mentioned in my speech is that.

We are able to cash in more than $1 billion coming from.

Yeah.

About inks.

In Asia, we have our gas and electricity and the balance came from the debt in relation with the tax because of course in the high yield on the elements. We do not result in so of course, we will pay tax we think.

We pay more tax.

Coming coming months so too.

Behind these 3 billion caching for the second quarter.

On the pure discount I can refer to what the economy. So the friendship with them as I mentioned to the Parliament. He spoke about $500 million impact we sell 10 billion literally a year. If you take so youll make a guest bedroom volumes amid supply advisor discount.

<unk>.

This is before taxes.

Okay.

On a same question. Thank you.

The next question from Kim <unk> from HSBC.

Hi, Good afternoon, just two questions from me. Please firstly could you offer any comments on those sort of discussions you've had with the German government or German corporates on the proposed floating LNG project at London, Germany have you secured any long term offtake agreements from German Cal Fire's that helped to underpin the project and how we have.

Let's take the startup date first of December this year.

And then secondly is there anything that you've seen in the final Repower EU plan, whether that's on wind solar hydrogen or buying anything that would encourage total to make incremental low carbon investments in Europe .

Would not have made otherwise thank you.

Yes.

Hi, Tony.

On the on the German projects I think in fact, the reality. The project is fully in one day is a German promoter who identify the I would say.

I remember the name of the location, which is next to the North sea more on the pipeline lending area.

And.

They are proposing dislocation to bring or FSU and then to connect to connect application is quite good because its very near.

Connection to the five gas network of Germany, because it just think through the lending boom box and one is very easy to accumulate there is some complexity because of the.

The LNG tankers could not come to that although we should have a sort of short term system to take the LNG from the LNG tank guests to bring into Fsrus and data feeds. So we are developing that project the promoter via German promoter, which has diabetes project.

<unk> debt in connection with the German governments, who gives you a <unk>.

Having said that I think once you go value annuity.

If we bring some LNG invest fsrus will be put in.

Jim and I would say in the gas markets you will be in gas markets. So no question is no. We don't have a long term contract for beyond the terminal four customers German customers.

There is no problem to find some LNG to feedback.

As you know we have enough LNG in our portfolio.

Each of the gas prices in Europe are remaining at the level.

Obviously, our priority will be given to these FSA you feeling this.

Visibility with LNG. So we don't need I would say long term contract beyond because it's a floating unit and a floating unit.

No more market you can put it elsewhere.

Question of duration. So for me in the debate adviser, where Betsy get northern Europe , I'm very comfortable to bring truth in units because of <unk>.

If the market is moving because policymakers wants to change their policy around natural gas we can move it.

If you build an onshore we get to take us longer commitments and then it's not exactly for my point of view.

Same.

<unk> for us to invest onshore began.

Recruiting one.

It's an opportunistic move I would say.

As your question linked to Europe .

In Europe I think obviously you know you have I mentioned previously I think inefficient.

Biogas in Europe . So nobody has a good case, well biogas will be encouraged.

In Europe .

Developed biogas today, and you said it of the gas.

The oil and gas market price, it's quite a good investments and also there might be some segments, where Europe is look at the main question Europe for me the question of when.

We see access to the space and capacity to develop the projects acceptability.

Neighborhoods, and a lot of stakeholders or victim quite slow.

Turning to policy leaders with political leaders to say, we would accelerate but for the time being I don't see much acceleration I would say so that's the question. So yes, we will consider Europe .

Because youre hope again fundamentally it's a continent with a lack of energy.

We have a lack of energy like we see lack of natural gas like of <unk>.

This lack of energy so for me the future of Europe is a little like Japan, you know a security of supply will be there and so as a look or energies, but we can develop in Europe will benefit from the price of energy in Europe .

That's true for us on natural gas.

Well for electricity because all these transition is a quite a capex cost.

What's the related nuclear renewable and so fundamentally.

Fundamental trends for us in the European market for energy prices.

On the medium term is quite medium and long term user.

Elevated prices.

The next question is from Amy Wong from Credit Suisse.

Hi, Good afternoon couple of questions from me. Please the first one is on Papua LNG, you've launched a fee for the upstream facilities and I understand you have.

So then also move on to the liquefaction facility later this year my understanding though as the operator of PNG LNG has not yet moved and how much support if any are you dependent on.

<unk> LNG also simultaneously looking to modify to incorporate our plans for Papua LNG. So that's my first question.

My second question relates to a couple of smaller transactions you did but nonetheless important.

You've done a couple in the carbon sinks area.

Area, that's growing really quickly, but transparency and credibility on this market is a huge topic at the moment. So could you talk a bit about your strategy in the carbon space. Please.

Please thank you.

Okay.

Of course, it's very coordinated with the operator of PNG LNG vaccines, if you figure bandwidth externally as a shareholder of <unk>.

<unk> LNG so.

We decided a few years ago, but we need to leverage a potential synergies both of course in the meantime, there was a decision by PNG LNG to postpone their own additional train so but big seems a little more as a free trends became two trains for backhaul.

They are working on the what is the best possible scheme in order to be efficient and we are working closely with them. So they are on both sides by the way there are a lot of alignment because there is another company from P&G with joined but where LNG is Santos after the acquisition of <unk>. So you know.

So when we took together the decision to launch the feed on the upstream part of well.

I think these two partners are consistent in their will to also move forward. So seat for PNG LNG. The reality is that all I would say the wood recycling et cetera.

On the timeline to reach at the end of production. The upstream part is a little longer vanda downstream bolt and these projects over the six months difference that we see today.

Should be at the end all the booth pumps will be together in order to take this idea of receipt. So Ics.

Our goodwill from both parties to converge.

On the carbon sinks.

Yes, we are making some few new steps in Congo, and Gamble I think also in Peru recently I can tell you. It is not an easy one because yes, it's true, but we want to take a lot into account transfer IP capability. So all teams of specialists, we have 20 people working too big.

One.

Clear access which is that they invest in the high value carbon credits and we touch a lot of importance at our level, but we would not dare to make Eugene washing is really to make these projects.

Sustainable long term projects.

The OSM standouts I think the VR standouts will be exposed, which we follow very carefully and so thats why by the way. We don't we think back to develop such a very credible projects. It takes time.

We have a dedicated we are dedicating $100 million per year.

We are not convinced that we could spend much more because we know it's projects is really a project by itself and we're being a lot of stakeholders. So if you want more color on it to Amy I will encourage.

Mike.

Our team to connect you with all the add of Cabo in the all natural based solution.

It could give you orders sometimes multiple more details about this if youre interested.

I encourage all of our new <unk>.

They seem to connect you.

But you are concerned is very well taken into account in the week.

Investors.

Thanks, Paul I'll take you up on that offer thank you.

Thank you. The next question is from Paul Cheng from Scotia Bank.

Yeah.

Hey, Patrick.

Two question first I think you have mentioned <unk> two.

For two final lines.

This quarter again sort of named by year end.

Just wanted to see if there's an update on that.

Second question.

With rising fear of recession.

How's that.

Pat will again, thank you.

In terms of your next year planning for pace.

Balance sheet and capital return to shareholders.

So we are continuing to drill and progressing positively year.

News always is not an easy plan. So again I think we gave you.

The meeting point by the end of the year, So I'm, Steve I don't have more to give you an.

<unk>.

It is a lot of that on the show it to everybody to understand where we are so we find hydrocarbons that again, so question to be clear of finding.

Oil <unk> gas and of course gas, we don't flare, which is always the point of do we have otherwise the gas can re injected in the reservoir.

After these going on.

We will have clarity by the end of the year.

Potential development plans.

Okay.

Well, the best way to face a recession.

Is to have a strong balance sheet.

I would tell you that the wet my listen, but they're looking for and they fit still required. This in 2015 again in 2020.

To be clear up company with which we are doing de leveraging the company, giving is under 10% we plan to have it under 5%, which we had never been in such a situation moving total energy.

For me is the best guarantee to ensure the return to shareholders even for a recession.

We've done it with Covid, let's be very clear we were the only European measures to maintain the dividend for Covid.

By the way because before Covid end of 2019, all gearing was lower than 15%. So we accepted so gearing to go until about 2000 and its when we arrived because he went down two years. After when you. After so that's exactly what I strongly believe is the best protection for return to shareholders.

Schools are cycles and for evidence in recessions is a very strong balance sheet. So Mike submits a repeat my commitment to you join Mike Beech introductory speech I reminded you, but we never cut the dividend since 1991 I can tell you. It will be the same if we have a recession coming.

In 2020.

Thank you.

Okay.

Okay.

Our next question comes from Betsy <unk> from UBS.

Yes, I want to thank you for the update.

Questions from me the first one just on the Russian.

Russia and Thailand.

So I was wondering if you can.

Expand on why that was triggered this.

This quarter I know, you've got two to $3 5 billion.

And secondly on the gas prices.

We discussed that yet <unk>.

LNG price, but more broadly for the upstream this is concerning to us.

Could you see that you used at the beginning of the year.

Given database.

Okay.

Thank you Brian .

And we bought like U K windfall tax et cetera.

Would that be different for second half. Thank you.

And these levels.

Our worsening permitted to be clear, it's every quarter, we make some familiar to us.

The point is that <unk>.

Impairments were very clearly as we said that the first quarter linked to Arctic two so there was one project on which we are considering but the capacity to execute the project will be much more complex because of the sanction. So we made that decision.

It was clearly well.

And this one is really if you read the press release, we said that we have made.

Future evaluation of our participation in evaluation of Abbotts efficient.

As a shareholder in Allstate in Nevada.

And we concluded that we add according to accounting rules.

So we had to make and implement according to the calculation. So it's around with $3 5 billion dollar as you have noticed by the wind.

In the annex of the press release there was.

The same story will typically employed in Russia, we're going up by $2 billion, just because we had to apply the <unk> of June .

Sure.

So to elaborate.

Better for Russia in the one of its physical and much of it was the reevaluation of our capital and introduced have been quite funny to be honest I know the accounting rules, we have to follow that but.

At this time, where we wont have clearly.

Gradually.

Lowering our exposure to Russia, I think we've made all of these calculations. So it's a good earnings.

And we will continually be clear of course, it's a monitoring we closely monitor we've all.

And with the board, we closely monitor and you know taking all the news that we can.

Many news coming on the Russia, So it's our duty to lead you.

Quarter after quarter.

The situation of our Russian assets as I told you.

Speech in my speech and I think it was an important.

News today statements for you.

We will present to you end of September the strategy of total synergies, putting aside Russia. So because we have a normal growth in Russia, and our new projects. So we want you to consider the future of the talent as well.

<unk>, Russia.

What means but as I said that we'd be a volume impact, but not really any financial impact on performance and the return of shareholders will not be affected by the fact that we put the slide Russia in this presentation and we will extremely wide.

We think that we can continue and we have the opportunity as a portfolio to continue to see the future of that energy, even putting aside Russia for more perspective.

On the gas price Vivien so soft here I don't think its changed nothing changes we could ratio sensitivity in the press release.

The same what does change is limited.

Alright.

With those changes.

Great value.

And youll see the absolute value impacted our results.

And as it's growing sometimes from $20 to $50 to $50, it's volatile, but it's sort of all the type of goods.

What is changing as well I can tell you is that our long term assumption on European gas price and you will extend your vet in September of course is higher than before because.

Russian gas out of there with consistent but it's been set some limits of the European gas price is driven by the LNG price from the U S. I would say so but change also the perspective of the technologies that we are very well positioned with our portfolio on European gas as a producer in Norway, Denmark UK.

And also other LNG.

In quarter we.

We will benefit from vessels in future years.

Alright, thank you.

There is no further question.

So thank you for you attendance with score in the.

Very interesting question, which I think will help you to understand and better understand after signing the visa can continue to deliver strong reserves and strong return to our shareholders.

Over the cycle.

<unk> East and of course to be clear, we continue to monitor evaluate carefully board of directors in terms of.

In terms of.

Return the level of return to shareholders and I invite you of course to put on your agenda and inputs in days, which is the Investor day on September 28 will be in New York coming back to for the first time in several years.

Missing in presence together and I hope you will be able to join us from both sides of the Atlantic on the U S. A.

On the European continent, there in New York.

I think it will be done to be sure.

<unk>.

Well taken into account like <unk>, but I think it will be an important.

And we are happy to welcome you bet.

Thank you I wish you a very good summer vacation, maybe some of you are already in vacation, but.

Nice to attend the core for us.

Loan to long years, I cant unusual period, just aspiring to takes it played in <unk> to immediately EMEA, but.

But thank you for your attendance and for your support thank you.

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

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