Ladies and gentlemen, thank you for standing by and welcome to the Total First Quarter 2021 Results Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today.

I would now like to hand the conference over to Mr. Jean-Pierre Sbraire, CFO of Total. Please go ahead, sir..

Thank you very much, and hello, everyone. So we began the year with a strong set of first quarter results that demonstrate Total ability to fully leverage the upside of an improving environment. While brent was up by 22% compared to Q1 '20, Total first quarter of 2021 adjusted net income jumped by about 70% to 3 billion or $1.1 per share.

We are back on track and this $3 billion of adjusted net income is actually above the level of the pre-crisis first quarter 2019, despite a less favorable environment this year, benefiting from the action plan delivered in 2020. Debt-adjusted cash flow was very strong at $5.8 billion, up by one-third compared to a year ago.

And gearing, you know one of our key metrics, was brought back down to less than 20% by the end of the first quarter, which is a top priority for us in terms of restoring sustainable financial flexibility.

We have indeed recovered significantly from a difficult and uncertain 2020 environment when brent dipped below $20 per barrel and we have benefited from rebuilding markets, including brent which averaged more than $60 per barrel in the first quarter. However, to be clear, we credit mainly the Saudi led OpEx discipline for the current oil price.

We note that many parts of the global economy are still screaming with persistently weak demand for aviation fuel and lockdowns are still in effect in many areas. We remain prudently optimistic and focus on the fundamentals that got us through the crisis and contributed to the strong first quarter results.

As a reminder, the key actions and lessons learned from 2020 are the following. First, discipline on cost. With more than 1 billion of cost reduction in 2020, we target an additional $0.5 billion of cost saving this year. Best-in-class production costs of $5.1 per barrel in 2020 with a target of $5 per barrel.

Within the context of developing a world class renewable power business, we managed CapEx down to $13 billion in 2020 and set the target between 12 and $13 billion for 2021 and I will give you more details on this later. We are continuing to high-grade the portfolio and the organic breakeven was below $25 per barrel in the first quarter.

And this allows us to capture the upside of the stronger environment. Operationally, the group's first quarter production was up slightly compared to previous quarter by 0.8% to 2.86 million barrels per oil equivalent per day and still reflect the impact of OPEC Plus quotas.

This is in line with our guidance for stable production in 2021 compared to 2020. Production benefited mainly from progressive return of Libya as well as our project assets and ramp ups, including North Russkoye in Russia, Culzean in the UK, Johan Sverdrup in Norway and Iara in Brazil, all lovely offsetting the natural decline.

Looking now at the operating segments, we are pleased with the performance of the iGRP segments, which set a new record high for adjusted net operating income in the first quarter of $1 billion and generated strong cash flow of more than $1 billion. Overall LNG priced were down compared to a year ago.

iGRP posted very strong results, thank to growing LNG sales and the positive contribution of renewables and electricity. The recent ramp up in oil prices will continue to have a positive impact on our LNG prices over the coming six months due to the lag effect on pricing formulas.

Regarding the situation at our Mozambique LNG project, let me emphasize that security is our top priority. We reported last month that the security situation around Palma was very serious.

And considering the evolution of the security situation, in the north of the Cabo Delgado programs in Mozambique, Total decided to withdraw all Mozambique LNG Project personnels from the LNG site.

We have declared this first measure and we are managing the situation with contractors to minimize spending, as long as we do not have clarity on the situation.

We hope that the actions carried out by the government of Mozambique, and its regional and international partners will enable the restoration of security and stabilize the Cabo Delgado problems in a sustained manner. Obviously, these events will impact the project and at this stage, we estimate the impact of at least a year of delay.

As we have a large portfolio of LNG project, we will give priority to Cameroon energy extension and Papua LNG projects. Turning now to the renewables and electricity activity, while continuing to accelerate growth in 2021, notably with the recent acquired 20% stake in Adani Green Energy limited company.

We are increasing our level of disclosure, so you can see that our proportional share of EBITDA for these activities increased by about 40% year-over-year, close to $350 million is the first quarter.

Gross installed renewable power generation increased to 7.8 gigawatts from 3 gigawatts a year ago and net power production grew to 4.7 terawatt hour from 3.2 terawatt hour over the same period. We're continuing to add to the portfolio focusing on early-stage acquisition opportunities.

And in 2021, we will allocate more than 20% of our CapEx developing this activity.

In addition to the acquisition of 20% of Adani Green Energy, the largest solar sort of developer in the world, and our 4 gigawatts of portfolio in the US during the last quarter, we won right of 1.5 gigawatts UK offshore wind project and we found out our equity interest in more than 300 megawatts of renewable assets in France on the basis of a $600 billion enterprise value at 100% in line with our capital like model and also contributing to de-risking the portfolio.

Moving to our oil business, the E&P segments successfully leveraged the rebound in oil and gas prices and increased first quarter adjusted net operating income to $2 billion nearly triple the same quarter last year, and cash flow to 3.8 billion up by about 50% compared to a year ago.

E&P continues to be the cash flow engine that is powering the group through the transition and into the future and Total clearly benefits from the leverage of the oil price.

We had signature of definitive agreements enabling to launch of Tilenga and Kingfisher upstream oil project and construction of East African crude oil pipeline in Uganda and Tanzania. The group is implementing the strategy to invest in resilience, low breakeven project that reduce the carbon intensity of its portfolio.

Unlike the upstream, the downstream continue to face a tough environments, generating net adjusted operating income of $527 million and the cash flow of close to $900 million.

European refining margins remain in the single digits, reflecting mainly the still depressed demand for aviation fuel impacting the whole distillate market, but also the global level of demand, 13 million barrels per day in the first quarter of 2021 versus 15 million barrels per day in the first quarter of 2020.

In contrast, petrochemical margins were strong, showing improvement year-over-year and quarter-to-quarter. Marketing results were resilient, despite ongoing lock downs that decreased volume by about 5%, mainly in Europe. We started production of sustainable aviation fuel at La Mede and our facility at Oudalle in France.

Early stage but demonstrating the group ability to transform and adjust to the changing environment, the growth is different to business units. Finally, at the group level, we generated $5.8 billion of cash flow, debt adjusted cash flow in the first quarter. So for now, we are back on track at pre-crisis levels.

In the first quarter, we also benefited from the working capital raise of about $0.3 billion.

For the full year, if we maintain hydrocarbon environment like the first quarter, we rent around $50 per barrel, European gas are on $6 per million BTU and assuming European margins, refining margins, around 10 to $15 per ton then we would expect to generate around $24 billion of debt adjusted cash.

First quarter on his net investments, which include acquisition and asset sales was $4 billion. Our guidance for the year 2021 net investments is ranged between 12 and $15 billion, with the split roughly as half for maintaining the existing business activities and half for sustainable growth.

Our strategy is to invest responsibly in profitable projects that reduce the carbon intensity of the portfolio and actually the transformation of the group to abroad energy company. To the extend, half of the net investment will be allocated to maintain the group's activities and half for growth.

Nearly 50% of this growth investments will be allocated to renewable and electricity. Our net gearing [ph] was 19.5% at the end of the first quarter helped by the issuance of the hybrids to finance renewable acquisition in India in Adani Green. The current environment is allowing us to restore balance sheet strength faster than expected.

We confirm that our priorities for cash flow allocation are to invest in growing and transforming the company, to support the dividend through the economic cycle and to maintain a strong balance sheet and minimum long-term single a debt rating. We're gearing systematically anchored below 20%.

I remind you that at the end of 2018 the gearing was about round 15% and of course 15% is better than 20% to face volatility.

We had a start to the year and confident in the fundamental of the group, the board of directors decided to distribute the first interim dividends of 0.66 euro per share, that means that the first interim dividend will be stable in Europe but considering the foreign exchange rates compared to a year ago, this interim dividends represent an increase of about 9%.

Overcoming the challenges of 2020 has made us a stronger company and the market rebound is allowing us to accelerate our transformation to TotalEnergies.

At our shareholder meeting in May, we propose the adoption of TotalEnergies as the new name of the company to mark our expansion into the renewable power generation business on a worldwide scale, transforming the group into a body diversified energy company and we will submit three to the Advisory Board of shareholders a resolution about our energy transition strategy towards carbon neutrality.

This move demonstrates our commitment to the energy transition and to carbon neutrality that we have presented in a number of targets. First, we reaffirm the clear ambition to get to net zero emissions by 2050 across our worldwide production and energy products used by our customer group one plus two plus three, together with society.

Specific commitments are taken by 2030, the next decade, it is minus 40% net emissions on operated oil and gas operations worldwide by 2030 compared to 2015, the date of the Paris agreements; reduction in absolute terms of carbon worldwide emissions by 2030 versus 2015. We're the only ones among our peers having set an absolute figure of target.

Minus 20% carbon intensity reduction for any of the products sold to our customer. This is a more stringent target that the one announced previously. In Europe 30% reduction with absolute emission by 2030 extended to scope one plus two plus three versus 2015.

Our climate ambitions are well over a sustainable development embedded in the strategies of the group, like our name, mark the beginning of a new phase in the development of the company. And now, let's go to the Q&A..

Thank you. [Operator Instructions] Your first question today is from the line of Jon Rigby from UBS. Please go ahead..

Thank you. Hi, Jean-Pierre..

Hi, Jon..

Hi. Two questions if I can.

The first is on your segmental earnings numbers, both your IGRP and your downstream numbers, or I should say you're refining and chemicals numbers have a couple of quite big moving parts in them that we can't see, I just wondered whether you were able to sort of characterize particularly I think, for refining and chemicals, some kind of split between the contribution in refining and the contribution from either both pet-cam and other chemicals operations.

So simply because I'm conscious of those two numbers are very widely different. And actually, the market probably ascribes very significant different values to them.

And then if I'm just talking on just IGRP, I take the point about the renewables improvements sequentially, but it doesn't explain even closely the delta on the earnings, and I'm guessing there's a contribution from trading in there. I'm not expecting you to give me an exact number.

But as we sort of think about the moving parts going to 2Q with rising LNG prices on a contract basis, but presumably not the kind of windfall earnings, you'd actually saw in 1Q, you're able to sort of at least, give us a little bit of color on that, please..

Okay. So perhaps I will start with the second question regarding IGRP. You will not be surprised that we will not give you the detailed figure regarding the performance of our trading.

But I can confirm that given the volatility, we are able to and given our global footprint, the portfolio we have now in our hands, we are able to capture the volatility in the market. I have in mind some - recall the sales done by our trading engine in January in the US in the situation of a very good winter.

So that's true that it's one of the drivers of our performance service quarter. But you do not have to minimize the contribution of the renewable and electricity contribution as well. We give you the EBITDA of this segment, I would say in the press release and so you have all the details, I think, in the in the annex, in the appendix as well.

And so, you will see that this segment alone contribute - has an EBITDA of more than three - between $300 and $400 million. And so it's - it starts being sizable, I would say. So the second question regarding refineries. You are you have the right analysis. The performance of refineries and particularly in Europe were poor during the first quarter.

In the US, we weren't impacted by the [indiscernible] and so the margin was close to zero in Europe.

Honestly, summer should see some improvement and so this improvement could come from the US and the recovery that seems to happen in this country in the coming year - in the coming months and exits from the continent [ph] will obviously help to restore the market, even we noted that we continue to be very cautious regarding the margin.

So we gave a guidance for the debt adjusted cash flow using, I would say, a conservative assumption 10 to 15 for our refinery margins for the full year. On the opposite, petrochem results were very good because margins were restored in Q1 showing improvement by the way, year-over-year or Q-to-Q.

The volumes, the margins, they put resilience through the economy because of the COVID-19 crisis. The volumes remain robust for both PA and NPP and it is clear that some segments like your food packaging, medicals, protective equipments more than compensate the slowdown in other sectors such as automotive and construction.

So we continue to be optimistic regarding petrochem. We benefit from integrated platforms as fast as Total is concerned. And so we are well positioned to capture possible market that for sure we continue to be very favorable to continue to be strong. And therefore most of the trading, yes, I have already commented that..

So, just maybe we can just reverse it out a little bit.

What level of refining margin would you expect to have to have for refining business to be breakeven, at least second sort of gauge, the relative sort of negative, positive contributions to the net result?.

Well, it is different, of course, if you're dealing with integrated platforms or more integrated refineries, once again, we are conservatives and so we will extend to a $15 per ton of assumption for building our guidance. It doesn't mean that of course, it will be true. I would say that what has been done and so we will continue to do that if needed.

So we have voluntary cuts in rents in terms of our refineries, so it was the case in [indiscernible] refinery in pause. So we could continue with the same policy and on the other side, you know perfectly that we have sold our UK refinery in the UK so that we have stopped the operation in the country, so another refinery in pause.

And so the plan is of course to adapt our footprint to the market. That's what I can answer to you to this question and to adapt our model or our assets to the situation and to the current market.

But once again, we can - we are a bit more optimistic than before, given the recovery we see in China, in Asia more generally, in the US, the fact that hopefully the vaccine will help to exit from the current situation. And by the way, the stocks globally, the stocks in OCG countries, they are back to around I think 70 days.

So it gives us some hope regarding the service sector in the upcoming mouth or quarters..

But I hope to contribute to aviation demand over the summer..

Yes. That's clear. That's the situation for the airlines company and the aviation and the fact that we had to pull the [indiscernible] into the distillate at present time, it's one of the reasons why the margins are low..

Thank you..

I don't know when this sector will come back to pre-crisis level and also sure that it will take many, many, many quarters, I don't know. So we have to be patient and once again to be very clear and so to focus on what we control, so obviously it is difficult to control demand and to anticipate what could happen in the coming months..

Okay, thank you..

Thank you. The next question is from the line of Oswald Clint from Sanford C. Bernstein. Please go ahead..

Jean-Pierre, thank you so much. Just on CapEx, I mean, I had a 12 billion number in my head for this year, I think you talked about 12 to 13, potentially, obviously, the 12 was at a lower oil price. But we're now going to minimize the CapEx in Mozambique as well for the rest of the year.

So is there is there a CapEx pickup taking place somewhere else in the business relative to the plan? And the second question, I wanted to ask you about the Siemens energy collaboration on reducing your co2 around the LNG portfolio.

What's the timeline on this initiative? Is it short term, longer term? Is it focused on green fields or can you really retrofit your Brownfield LNG plants and any emissions intensity numbers that you're kind of playing with at this point? Thank you..

Okay, so regarding the CapEx, so that's true that we - when we have made our budget, we're not at $60 per barrel and so the budget was done for the 2021, it was done at $40 per barrel. So at that time, we mentioned the guidance for CapEx, so the global CapEx, so organic CapEx presented between acquisition and session and divestments at $12 billion.

In February, during the Investor Day, we mentioned that, in better or EBIT prices remain above this base level, we can increase CapEx and so we gave range between 12 to 13 billion. Having said that, and it's - clearly, it's now in the DNA of Total. We want to maintain the discipline on CapEx.

So honestly, I don't know it's premature to evaluate the impact on Mozambique LNG project and plus measure globally the CapEx for the full year, that interesting that even if we saved some CapEx that we will use this CapEx to increase significantly investments in E&P or in downstream.

We want to keep the discipline; we want to be selective and once again our priority is to invest in profitable projects that will contribute to the transition of Total into ordinary [ph] company.

Having said that, we have some flexibility and particularly for the upstream segments, we have some flexibilities on short cycle investments that we can restart, they would say it - part of the short cycle investment has been stopped or postponed last year in the middle of the crisis.

So it's possible for us to come back and to sanction this new [indiscernible] cycle project.

And we can allocate back to this additional CapEx over and there are two renewable and electricity project, if it makes sense and that means that if we are profitable, so that's the main guidance for us when we select - when we have to select the different projects.

On CMS agreement, I have to admit that I'm not very familiar with this agreement, so I suggest that you come back to the IR teams and they will give you some more details regarding this agreement.

But I think it's clearly in our objective to lower or to reduce the co2 emissions and it's part of this global strategy and once again in the transformation of Total in TotalEnergies, so it is one step in this transformation..

Understood. Thank you, Jean-Pierre..

Thank you. The next question is from the line of Paul Cheng from Scotiabank. Please go ahead..

Thank you. Two questions, one, when I'm looking at your LNG and renewable, the cash flow from operations, excluding working capital changes versus the fourth quarter is relatively flat while earning is up a lot. So, wondering if you can maybe help us to bridge the gap and that why that there's a big difference on here.

Secondly, that the - on the asset sales, with the farm down, do you see any gains that you have reporting in the segment? Thank you.

So your question regarding the IGRP..

That's correct..

Sorry..

That's correct..

Yeah. In short, what I can tell you is that in the first quarter of the results, the net operating income in the first quarter of 2020 last year was negatively affected by non-cash elements, such as the macro market elements or deferred tax elements, that's the main driver behind this that explain the phenomenon you pointed out.

The second is the seasonality in dividends as well. So you do not have the same impact of our assets consolidated on an equity basis in the net operating income and in the cash flow, depending of course of the seasonality of the dividend. So that's the two main elements that explain this difference.

But overall what is more relevant is to compare the NOE increase year-over-year with cash flow generated year-over-year and so you will see that it is very current and very much inline.

Asset sales, yes, I think - I am not sure I've really understood your question but of course the countdown of our renewable assets, they are all reported, of course in IGRP segment it is again our capital like model, that is what I explained, is the best way for us to monetize as soon as the production - as soon as the [indiscernible] project starts to buckets to monetize significant part of the future results and for the PPA sides.

And it is another way for us to - by the way to drive the project as well.

So it is part of the model and of course it is reported into the IGRP segment for the result that is what for the investment was done because when I mentioned when we say that we will allocate more than 20% of CapEx to the segments, it is net CapEx, it is net investments so it takes into account the divestments and this divestments are part of this figure as well..

No, I understand that. No, I understand that.

I'm just asking that whether the farm down has resulted in any gain that we caught it in the first quarter in this segment?.

I'm not sure to understand what you have in mind..

When your farm down depends on the value you we see, did you book any gain in the first quarter? And if you do, can you share that how big are those gains? Is it a meaningful number?.

I gave you the fact that we funded two projects in France and I gave you the price value, so it is around $600 million enterprise value, 100%. And so the way we consider this funding is to fund 50% of the project.

But at the same time, as you know, we leverage our projects and so the figure of the - the debt-to-equity ratio you can use for your amortization is gearing between 70%, 80%. So that means that activity so we funded 50% and so we leveraged the project at 70%, 80%.

And so all this mechanism, I will say, is included into IGRP results and the cash flows and investments..

Alright. Thank you..

Anyway I gave a lot of figures regarding this funding. This $600 million on a 100 basis for EV is for something like 340 megawatts, I think, if I am correct.

So that means like if you consider that it is $1 million of CapEx for one megawatts on this type of project that means that we double more or less the value of the initial cash we use for developing this project through this funding.

And it is in line with the metrics we gave, I think, in February because at that time we gave some additional example five or six different funding that occurred over the last couple of years..

Thank you..

Thank you. The next question is from the line of Christyan Malek from J.P. Morgan. Please go ahead..

Hi, good afternoon Jean-Pierre. Thank you for letting me ask the question. I've got two. First on CapEx, but not necessarily CapEx in the context of the range but more in the context of a broader point on whether you'll be able to demonstrate discipline on CapEx over the medium term.

I think one of the major concerns is that the free cash flow that you're generating isn't necessarily free, because it's going to either pay down debt, and then look to see how CapEx will transition. So you've gone from 12 to 13 and that's admittedly at a $40 brent.

I mean, if I extrapolate to 60, where are we going on CapEx is basically the first question. The second, please is on buybacks and cash return. You mentioned 50% as a comfortable gearing target.

What sort of cash return frame would you consider and within that previously suspended buybacks would you revisit before - it looks like it's at 70, is there a distribution of cash flow that's viewed as most appropriate over the medium term? And I guess, one of the things that I want to sort of you want to run my question is, cash flow distribution relative to previous years, when you look at a yield basis is only sitting around 20%.

And so I wonder, whether that's a sort of new norm for you on cash, particularly with the yield or whether you would consider upside once you get to 15%. Thank you..

Okay. So, regarding the cash flow allocation, so you know we are consistent in Total, so, perhaps I will repeat. Sorry for that, what we said in February. What are the operating terms of cash allocation at Total? So first on CapEx, so it is linked to your first question.

I gave the guidance for 2021, we gave a guidance between 13 to $16 billion for the year 2020 to 2025 assuming the environment between $50 to $60 per barrel, why? Because once again we want to keep the discipline, invest only in profitable project.

So you know the metrics we use for transforming the project and the best way for us to be sure that we will continue to be resilient and profitable is to continue to be disciplined and to stick to this targets. So for oil and for upstream projects, it is 15% [indiscernible] per barrel.

You know that renewable and power, renewable in particular, it is a double digit, so more than 10% profitability for our equity.

So that is the discipline we want to implement and that is why by the way we are not able to spend money like that to capture additional assets, additional development in renewable if it makes no sense and it does not meet our criteria. Having said that, the second priority for cash flow allocation is supporting dividends through the economic cycles.

I think that the decision made by the board in the middle of the crisis when the prices were below $30 per barrel last year to maintain the dividend is clear and strong commitment vis-à-vis the shareholders, so the decision was to get the dividend.

So I repeat, I can confirm that the dividend is supported at $40 per barrel and of course we will maintain the dividend this year.

The third priority basically and it was very clear, I think, in our statement in February, we want to have a strong balance and sheet and want to keep long-term grade A-ish credit rating and so the best way to do that, of course is to have low gearing and so [indiscernible] for us is to anchor durably, I would say, the gearing below 20%.

So we are already at this level, that is true but we are at 19.5% end of March. That is not a joke. We were at 15% in end of 2018 and obviously, a 15% is better than 20% is what I mentioned in my speech in my introduction. Why? Because we are in the commodity market and so we have to be ready for the next possible new addendum.

So having a strong balance sheet for us is key and is a key element in our cash flow allocation frame. So that means that it was well in February. We mentioned that buybacks will come only if oil prices will stay above $60 per barrel and when gearing will be durable, and durable I think is very important, installed below 20%.

So to be clear, for 2021, we will maintain the dividend in Euro, and so it is a document I may now at 1.2 euro per quarter compared to the 1.1 we had one year ago.

It means that it is reasonable increase in dollar, so it is 8%, 9%, 10% increase in there when you translate the Euro into dollar, so maintaining the dividend in Euro and that means that buybacks will come later..

Very clear. Thank you, Jean-Pierre..

Thank you. The next question is from the line of Biraj Borkhataria from RBC. Please go ahead..

Hi, thanks for taking my questions. The first one was on Mozambique. Originally the intention was to have the two projects in there on the onshore area to run along in sync. But I guess the operator on the other side has deferred the project pre-FID and now you've had to declare force majeure.

So I was just wondering, if you are able to get back in, you're likely to be ahead of the other operator and you'll be building infrastructure that maybe is during the years for the two projects.

So is there an agreement already in place where the sort of the other block partners compensate Total for any kind of early expenditures or is that still to be agreed? That'd be my first question.

And then the second question is on capital structure, as you've been doing - as you've been growing your low carbon business, most recently, you issued a hybrid, which looks like a very competitive rate.

So I'm just wondering, how do you think about the overall capital structure of Total, as you build this business and the mixture of instruments like that, versus just vanilla debt and equity. Thank you..

On Mozambique, honestly, at present time we - it is not the priority to enter into discussion or to enter into agreement rather the different agreements you have in mind. The priority is to maintain the sites, to ensure the safety and the security of our employees, to minimize the cost, we have contractors.

So we see, I mentioned to you that at present time we anticipate at least when you are delayed - delay, so indeed, honestly it is not the top priority on the agenda to discuss with the subject with our PL or with other operators.

Hybrid bonds, you know we were very opportunistic in January last year when - this year, sorry, when we issued this 3 billion Euro of hybrids to finance the 20% acquisition of Adani Green. I consider hybrid as the long-term component in my balance sheet.

We will continue to be opportunistic, it is very competitive way to finance renewable with low cost capital. That is the strategy we have implemented.

By the way most of the in renewable project, the debt that you - the project finance that you raise on renewable, it is under normal cost basis, so that means that you transfer the risk to the lenders by doing that..

Okay, I understood. Thank you..

Thank you. The next question is from the line of Lydia Rainforth from Barclays. Please go ahead.

Thanks and good afternoon Jean-Pierre..

Good afternoon..

Three questions if I could. And the first one is just can you just walk through the ideas of working capital release in the quarter, obviously, we have seen it build but just sort of what you expect around that working cap side going forward.

And then the second one was just to come on to the renewable business again, if I think about the Adani associated JV, your stake there, how do you think about managing the currency risk for that, just given what we're seeing in terms of currency? And then just linked to that the offshore projects in Taiwan that you entered this morning, it does talk about basically paying a consideration based on the share of past costs.

Normally when you've sold things down that you get a premium for whilst it's in development. I was just wondering kind of what it is that in terms of that project has been attractive for you. Thanks..

Okay, so the first question regarding working capital. So it was we thought we reported the cashing this quarter, the main driver this cashing was the timing of some tax elements. So, if I remember, it is what in Germany and Belgium for downstream and in Norway for upstream.

And on the opposite, we have of course the impact of the oil prices globally the hydrocarbons price increase that impacted obviously the stock values and customer credit. But all in all, it was a positive impact.

On top of that, we continue of course to make some optimization I would say of our working capital and I remind you that given that it was well end of last year, we continue or we decided at some level to continue to incentivize our managers to proactively, I would say, manage working capital and so to be sure that we made all the actions to minimize the working capital when it is needed.

And so it is very difficult for me to give you color regarding working cap in the coming quarter because the main uncertainty of course is the level of prices that impacted - that will obviously impact the work cap.

What I can confirm to you is that we will continue to be - to mobilize our staff, our people to manage proactively this working capital subject. So in India, obviously we took into this currency risk in our economics when we decided to go into a different project in Adani, with Adani in India. So it is taken into accounts.

And I can share with you that given the predictability of the cash coming from PPA in the renewable businesses, we can consider forward hedging as well but - and it is under consideration at the present time. So we will see in the coming months the outcome of these studies.

But once again, it is taken in account when we decided to go into that project and it is embedded, I would say, in the fact that we sanction project only if they are able to deliver double digit profitability.

For the offshore agreement in Taiwan that we announced this morning, honestly it is the same as we will not give you all the details regarding the CapEx or the cost of the project. It is an opportunistic deal that we are able to sign.

Now that we have, I would say, lot of connections in this world, in [indiscernible] so now we know the people, we know the assets so we are able to move very quickly and to capture and to seize these opportunities. We have obviously a good PPA for these assets.

So, to restructure, so the CapEx are the same of course when you compare two onshore, offshore wind but all in all the same answer as for Adani. If we decided to go into the project, it is because it is coherence it is in line with double digit equity profitability, I mentioned to you as thresholds.

And it was of course the way for us to be present in this Taiwan market, very active as far as offshore wind is concerned..

Great. Thank you..

Thank you. The next question is from the line of Thomas Adolff from Credit Suisse. Please go ahead..

Good afternoon. Two questions for me as well please. Just firstly going back to what you said earlier on. So for this year, obviously, you are paying the dividend and the next year if oil is higher than 60, there might be a buyback.

But once the world is back to normal, whenever that is, you know, this summer or next summer, pre-COVID you did have a preference for progressive dividend. So how you think about the progressive dividend versus, no, I'm going to do buybacks to bring down the cash dividend burden, the world has changed permanently. So that's first question.

Second question just going back to Mozambique on the force majeure, just understand that precisely the force majeure is a global one so it includes all the EPC contracts, any contracts you have in upstream but also the SPAs and if it includes the SPAs, I was just wondering about the process, once you want to go back to construction activity, do you have to re-contract all the volumes or you start from scratch.

Thank you.

Okay. So buy back. The beauty is I would say it - it is obvious that buyback, the beauty of buyback is the flexibility that we offer. At Total when you have announced increasing dividends, of course it is not to procure the dividends two or four quarter after the announcements.

We want to be current and honestly it is once again what we demonstrated last year and I will not comment on my peers, but it is easy to increase or to communicate on buyback when you have cut your dividend by one-third or two-third in the middle of the crisis.

So buyback is flexible, once again, and we consider dividend as a long-term piece in our financial policy.

So I think I was very clear for 2021, we do not anticipate to increase our dividends until if we have the excess cash this year, it will be allocated to continue to deliver it to the company and after that, next year, if the prices - if the environment is good, we could consider buyback.

But at the present time, honestly, it is premature to confirm or to enter into this mindset. On Mozambique LNG force majeure, so to be clear, what has been declared is the force majeure for Total E&P Mozambique as the operator of the project. So it is force majeure of vis-à-vis [indiscernible].

And so now of course we are considering the force majeure declaration vis-à-vis the contractors or the vis-à-vis the different gas buyers. We are entering into discussion, so honestly it is premature for me to share the outcome of the discussion with you.

On one side, you're looking [ph] to minimize the spending around the last couple of months that is the main driver we have in mind at present time. But let's wait and see the outcome of the discussion with different stakeholders for involving this Mozambique LNG project, on one side the contractor and on the other side the LNG buyers..

Perfect, thank you very much..

And of course, you can imagine that we have a lot of different contracts SPA contract with different wording and different - so we have to negotiate to discuss contract by contract with the different buyers. And so until the situation is renewed, so please give us some time to answer to your question..

Thank you..

Thank you. The next question is from the line of Jean-Luc Romain from CM-CIC Securities. Please go ahead..

Good afternoon. Middle East economic survey recently mentioned potential projects for the Total in Iraq.

Could you elaborate - one involving both gas and renewable, could you elaborate a little bit?.

Well, yeah, we will not comment on that. So you're correct but I will not comment on ongoing discussions. Sorry for my answer..

Thank you..

But marginally speaking, we can - when we discuss these kind of projects, it's only, if once again, it's coherent with our strategy in terms of profitability, in terms of carbon footprint.

And the fact that perhaps, in some cases, you can have on one side upstream project and a couple do I would say we don't enable project of course, it makes sense, particularly in our ongoing transformation, but discussions are like ongoing, so I will not share with you more than more than that..

Thank you very much..

Thank you. The next question is from the line of Martijn Rats from Morgan Stanley. Please go ahead..

Hi, hello, I also have two, if I may. I wanted to ask you about the EU taxonomy. It's a - I find it somewhat of a tricky topic to be honest. So I recognize the question is a little broad.

But I was wondering if you could say a few words, what you think the EU taxonomy could mean for a company like Total? And specifically, with regards to the decision that we're all anticipating later this year, whether natural gas could come on the UK EU taxonomy? Does that mean anything for Total, maybe not in the short run, but if you could say a few things about that will be most helpful.

And secondly, sort of a little bit building on the previous question, I actually said like the quite sort of the same one about Iran, because it does look like negotiation around [indiscernible] are getting tremendous momentum. And there is a realistic probability that some sort of unwind of sanctions might be sort of in the cards.

And Total was, I think, the only European major at least who had a project, the last time the sanctions were reactivated and I was wondering, if the Total would be would be pursuing sort of re-entering the country if that was possible..

Okay. So two very different questions..

Yeah, I realize that..

You know that we consider that gas is nearly on the transition. So of course, it's a concern for us not to have natural gas considered, I would say, into the taxonomy. You know that natural gas and nuclear, they are meant to be addressed separately by the end of 2021.

We are not involved in nuclear, but of course, we are much concerned regarding the natural gas dossier. Having said that, taxonomy - by the way the comments we made to the commission, and it was the end of last year. So, we see different subjects or different problems in relation with this taxonomy.

So, the first one is natural gas, but in terms of methodology, we have a second issue. Most of our traditional activities, so, the new energies, renewable, electricity, they are - they will be reported using an equity method and you know that in taxonomy you have to report the OpEx and the CapEx.

And so, if you are on an equity method, so that means that you do not generate turnover or generate OpEx and even if you do not generate CapEx because most of the CapEx is financed through external debt.

So it's one of the limits of the taxonomy that means that for players like Total, but it's not only for Total and most of the players they are exactly in the same situation. That means that these efforts, I would say, towards low carbon businesses, renewable and so on, will not be captured through the current taxonomy rules.

And the second or the third comment we made at that time, we commented I think in February or even in September 2020 that we'll use - we will reduce the carbon footprint of our activity, we will green the electricity supply for our assets.

And so, we have planned to supply electricity produced by our solar farms in Spain to our European refineries, we will do exactly the same in the US using some farms that we will develop in the coming years to supply green electricity to plants.

And so given that it had opened - it had closed, in fact, it will not be captured in the taxonomy, current methods. So honestly, it's a real concern for us.

So the message that we try to convey to the commission is that the taxonomy is very, very narrow and too narrow, in fact, because it does not reflect or it does not capture all your investments, all the efforts that company like to tell could do to meet our mission to be your net zero by 2050. That's what I can tell you regarding taxonomy.

And for Iran, honestly, what we need, we need long term, I would say visibility on the sanctions to start considering coming back to Iran, so honestly it is not the case at present time and I'm not too sure it will be the case in the very next future..

No, I can imagine. That was very helpful..

Let's wait for further developments with the newer US Biden administration. But once again, what we need is clarity and stability to be in a position to make possible or start considering a possible come back to Iran. So it's not on the agenda for some time and it was a tough one being the case..

Okay, thank you..

Thank you. The next question is from the line of Christopher Kuplent from Bank of America. Please go ahead..

Thank you and good afternoon, Jean-Pierre. Just one quick follow up on renewables and I appreciate the UK is a somewhat peculiar place to bid for UK offshore licenses and sea beds.

But could you give us a little bit of an insight, not looking for numbers, in terms of your assumptions that you've taken for that winning bid earlier this year? Whether it's power prices, do they come close to what you've currently disclosed in your PPAs? Whether it's CapEx assumptions, turbine sizes, whatever you can give us hints on the underlying assumptions for your bid.

And my second question is a little bit wider. And it comes on the back of the recent industry risk reassessment by S&P.

You've been active in the renewable space now for some time, what's your assessment so far? Is your balance sheet a competitive strength or is it actually holding you back relative to the competitors you are facing in the renewable world to sort of link that topic to the credit rating downgrade? Thank you..

Honestly, on the last UK business, I will not share with you all the assumptions we used. No, I cannot give you the details, which have the year to come - but no, sorry Chris. The strategy is to - as far as renewable and the equity is concerned is to try to enter at early stage in projects.

If we can enter into bilateral discussion rather than going into a turn, of course it could be to attract profitable project but if we decided to go into this UK offshore project, that means that, given we are [indiscernible] used for CapEx for all the [indiscernible] is that we think that this project could deliver double-digit equity profitability when it will come on stream..

Okay. Thank you..

S&P perspective, my - I will share with you my personal feeling regarding this subject. The value, intrinsic value of our renewable in our portfolio is not properly valued by investors, but by the federal agencies as well.

And so, the transformation of the group, the journey towards carbon neutrality, this is not captured at all, I think, in S&P calculation. And so, the fact that we are well positioned and that, by end of or by 2040, we will be probably in the top five in terms of electricity producer is not well taken into account into the credit agencies calculation.

Having said that, besides that being - I have a strong feeling that being a European company is a disadvantage and so you know that they do not share all the details of the calculation. So it's very difficult for me to compare the retreatment done by S&P compared to the retreatment done by S&P for our peers.

We are in on a regular basis in discussion so we will change with both S&P and Moody's. But honestly, if I am optimistic, I will tell you that our investment case, our transition strategy, that is already in motion and so perhaps its factor of differentiation compared to some of our peers that are better or valued by S&P or by Moody's.

That, in my mind, there are clear differentiating factors and that could lead to an improvement in our perception, I would say, by the credit agencies in the coming months, but it's not the case, to be honest, reviewed at present time..

Got that. Thank you..

Our acquisition strategy is not valued, at all, for me, by S&P..

Yeah, thank you very much, Jean-Pierre. Just as a quick follow up, would you say though, that access to capital to invest in these renewable projects for you, it has not been a problem. Quite the contrary, I think some of the financing costs that you are exposed to look to me extremely attractive..

Well, yes, no, it's not a problem at all, so no problem. We are sure this hybrid bond is at very attractive level like 2%. So it's really cheap capital and in terms of modeling, when we go into markets for issuing bonds, we have no problem and so now we can access to very long-term maturity beyond 20 years at less than 3%.

So it's - I will not say that you've opened up, that is very low cost financing and so by the way, you see that in our first quarter results, you see that the financial cost has been reduced dramatically year-on-year until the translation of this situation and there is reasonably strong appetite from banks to finance our project and particularly, as you can imagine, renewable project, so, no problem..

Yeah, thank you very much, Jean-Pierre..

Thank you. And the next question is from the line of Bertrand Hodee from Kepler Cheuvreux. Please go ahead..

Yes, hello. Hello, Jean-Pierre. Two questions, if I may. First, congratulation for the very strong result, it is not every quarter is that Total beats consensus on key net income by 25%. However when I look at the cash flow, ex-working capital, ex-inventory effect, it was a bit shy of my estimate.

Can you - were there any cash collection headwinds in Q1? That is my first question. And then the second question is on LNG. It is twofold.

Were you surprised first that Qatar Petroleum decided not to renew terms beyond the end 2021 on Qatargas 1 where you have - where you had 10% stake? And then on the LNG market, you mentioned in your introduction remark that you will not concentrate on marketing Papua LNG and Cameroon LNG expansion, but how do you see the market in terms of long term of takers, because there's a lot of new volumes yet to be marketed.

Qatar [indiscernible] expansion, Arctic two in a way also. So any color on that, I would say long term of takes new LNG project would be helpful. Thank you..

Okay. Whole lot of questions, but you were a bit severe. I think we delivered a very strong cash flow. Honestly, delivering cash flow in Q1 '21 above $5 million in the environment of the first quarter, so you have to take into account that the margins were close to zero at the time.

And so being able to deliver more or less the same level of cash flow compared to the cash flow we generated two years ago in an environment better where you are more or less [indiscernible] was better for gas, that's is better for refinery margin because at that time I think margins were above $30, I think it is good performance, I would say.

So, you have to consider that on a quarterly basis it is sometimes a bit difficult to reconfigure the cash flow with net operating income given what I mentioned to you previously, the timing issue in relation with the dividends and the fact that we have enabled part of our business in equity consolidation on an equity basis.

For Qatargas, it is a decision of keeping, so they asked you - in fact whether you seek to concentrate on new developments and to the north field expansion project where I think that there you see can bring highest value, so we have decided not to renew the Q1 licenses, where it is the life of the business.

Doesn't mean that - so that we have to accept that, so it is what I can share with you regarding this losing Qatargas. And for Papua New Guinea, that is clear that is considering the Mozambique LNG project situation we will give priority to Cabo LNG extension and to Papua LNG project. And so we will focus on marketing the LNG sales.

These two projects are, as I mentioned, you mentioned the Papua New Guinea project, which is a project well positioned in Asia to supply at competitive cost, but also, we are quite optimistic that we will be to lock in very attractive SBA in the coming months.

And what you have probably in mind, is that in our strategy? In Total strategy we sanction project when we are able to secure a reasonable part of the future gas sales to - because in most of the cases as well, in LNG project, we use project finance to deliver project as well..

Yes, yeah, because in fact, that was a bit my concern because with all those volumes, yet to be to be marketed, I was thinking that maybe, it's the timing of trying to market Papua and Cameroon at the same time or in competition with Qatar could be problematic. But that's not your view..

No..

Okay. Thank you. Thank you, Jean-Pierre..

Thank you, Bertrand..

Thank you. The next question is from the line of Jason Gabelman from Cowen. Please go ahead..

Yeah. Hey, thanks for taking my question.

I got one with the LNG discussion, so it sounds like because Mozambique is delayed and you decided to move forward on these other projects, so I guess, in that vein, how important is it to maintain scale and - relative scale in the LNG industry as it expands? Is that kind of something that you need to maintain to be competitive in the business? And as such, are you pursuing now projects like Cameroon expansion, which wasn't previously, I think, in kind of competitive returns part of your pre-sanction projects? Are you pursuing projects that maybe don't have as competitive returns in order to maintain that scale in the LNG business? That's the first question.

And the second one is just on petchems, first, just given the strength that we've seen in margins, can you give any indication of how much stronger you expect earnings within chemicals to be this quarter versus first quarter? And then more broadly, it seems like there have been a decent amount of announcements on chemical recycling technologies moving forward.

And I think you're pretty bullish on those technologies being used more widely in the future? Is that becoming a technology that could be profitable to deploy in the near term or do you still need to see more technology advancements and maybe some government support? Thanks..

The line was not very good. So I'm not so sure to have captured all your - all what you said. So probably will start with petrochem, well, also that we don't give lot of details regarding petrochem in our reporting, I can tell you that it is the main driver behind the resilience, I would say of the downstream sector in Q1.

Will Q2 be stronger than Q1, honestly it will remain at the same level, I will be more than happy - very difficult to anticipate what the prices could be, the petrochem prices will be, given that we are integrated. We can capture the rebound in the markets. We are well position.

Having said that, anticipating Q2 better than Q1, honestly, I cannot make this sort of bet today. You mentioned I think the recycling technologies. So, we have some project to recycle plastics.

What has been announced that company has decided we will build plant to recycle plastics is part of this - our objective to part of this business in the coming years because of course it will play growing role, I think in the plastic industry in the coming years. I am not specialist in terms of technologies for recycling plastics, I have to admit.

For LNG, yeah perhaps for - sorry something else came into my mind regarding this question of recycling.

We have some agreements - we have at present time produce of bioplastics in Thailand, I think with Corbion and so we have the same - we expand these types of agreements, we've got Corbion [indiscernible] country and so we'll be the producer of the bioplastics on one side and we will have some recycling capacity on the other side as well.

LNG, no, as a matter of fact, that we have resource manager in Mozambique, that as I mentioned due to one year IT delay in this project that means that the priority came back to Papua New Guinea - to Papua LNG project and Cameroon extension.

We just sanctioned the project, each of the condition are good but we are one of the major LNG players in the world.

Having the capacity of being a position to produce LNG in the LNG hubs worldwide, having a trading that are able to play between the different areas and to capture the discrepancy, I would say, between the different markets, it is also a matter of our size.

So we see that when we acquired the NG and NG portfolio, it was a very significant movement and it is at that time that we are able to leverage very efficient way our LNG position.

So it is not volumes value, it is always value of our volumes that will drive our strategy, it is the came with LNGs, it is case more globally for all our business at the time..

Thanks..

Thank you. The last question today is from the line of Jason Kenney from Santander. Please go ahead..

Well, thanks very much for the time. So I'm interested in the 8 gigawatt green hydrogen MOU that was signed last week in Australia for Total Eren. It's a massive scale, I mean, potential major play in the hydrogen theme for the Total group.

Do you see CapEx in the next three to four years on that particular position? And if so, is that already in your strategy, guidance? And then separately on hydrogen as well, I'm looking at a technology for oxygen injection into oil reservoirs in situ clean hydrogen production, where you leave carbon dioxide in the ground.

And I'm wondering if you have any particular oil assets, old mature, end of life, pre-abandonment, sub economic stuff that you could maybe try this out on? And if you've actually looked at that technology specifically..

Okay, so the first deal you mentioned, it is not likely Total, so the MOU was signed by Total Eren. So Total Eren is a 30% owned subsidiary of Total. Having said that, so I do not have all the details, to be honest, regarding this MOU. My understanding is that it is at a very early stage.

It's pre-feasibility study for the hydrogen project, so very, very early stage. co2 injection - what I can share with you is that of course, we're interested in hydrogen at Total. So we have some projects for on one side green hydrogen and the other blue hydrogen.

So I am sure that in the coming months, perhaps in September or in February 2022, we'll be ready to share more with you regarding this strategy regarding hydrogen at that time..

Okay, thanks..

Okay, so thank you. Thank you very much. Thank you for your attention.

And so I hope that next time while of course, I'm not so sure that the [indiscernible] will be over, right it's just a matter of weeks, but let's be optimistic and I hope that we will be soon in a position to have real activity, I would say, and not through screens or through phones and it's only a matter of months now.

So having said that, thank you very much, and bye, bye..

Thank you. That does conclude the conference for today. Thank you for participating and you may now disconnect..