TotalEnergies SE (NYSE:TTE) Q1 2024 Earnings Call Transcript

TotalEnergies SE (NYSE:TTE) Q1 2024 Earnings Call Transcript April 26, 2024

TotalEnergies SE beats earnings expectations. Reported EPS is $2.14, expectations were $2.06. TotalEnergies SE isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, welcome to TotalEnergies First Quarter 2024 Results Conference Call. [Operator Instructions]. I now hand you over to Mr. Patrick Pouyanne, Chairman and CEO; and Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead.

Patrick Pouyanne: Good morning, and good afternoon, everyone, for this quarterly result session. I’m happy to welcome you together with Jean-Pierre, who will go through all the details of these good, strong results in first quarter 2024. But before to do it, I would like to highlight the way we have implemented our 2-pillar strategy during this quarter. And first, to celebrate this — to recognize that the company celebrated its 100th year anniversary on March 28. We have been celebrating this event all through the company in 120 countries where we are present. We have company’s ancestors who are really pioneers when they discovered oil in Iraq in 1927. And of course, it was the opportunity this anniversary to pay tribute to hundreds of thousands of pioneers who had followed them and who are, in fact, the past and the present employees of the company.

And we have decided, by the way, by the signature of this anniversary, would be pioneers for 100 years. So — but today, I would say with the same pioneer spirit, that we have decided in 2020 to embark in our journey in the energy transition. And moving to TotalEnergies into an integrated, multi-energy company with a clear and simple strategy anchored on 2 pillars. First, on oil and gas, mainly LNG, with the objective to continue producing hydrocarbons in a responsible way — producing and growing hydrocarbons in a responsible way in order to answer the growing demand. And second, investing and developing integrated power energy for the future with objective to become net cash positive by 2028. So this first quarter 2024 is really — 2024 is about advancing this strategy.

I would say we are off to a great start on both pillars. We have achieved several milestones during this quarter that I would like to underline. First, on the oil upstream. We successfully started up some operated operations in Nigeria with Akpo West and the Tyra development in Denmark, both of which are additive to our overall corporate cash margins, as well as Mero 2 Brazil, which started at the beginning of the year. We continued to have success on the exploration appraisal front. We’ve recently finished a positive appraisal of the Venus oil discovery in Namibia, and we are now working towards FID targeting in 2025 for the FID. We have also captured in this prolific Orange Basin some new licenses of high interest on the South African side.

We are making — also it’s important — I told you it’s a matter of execution of growth towards 2028. So we are also making good progress on some FIDs, which were planned for 2024. We will sanction in this month of May as the Cameia project in Angola, 80,000 barrel per day, operated by us with 40%. And we also plan in May to first — to place the LLI orders for Suriname projects. And we confirm that we envisage to take the FID before year-end 2024 in Suriname. Finally, I would like to also comment that we’ve done an interesting deal recently in Congo to increase our interest into a giant deepwater field, Moho and divested at same time some very mature assets. That’s for oil. On the LNG side, quite a big activity as well during the quarter. First, we begin to benefit from a low reverse trading below $2 per million BTU to see some opportunities to integrate — to further integrate U.S. LNG value chain upstream with the first acquisitions from Lewis Energy Group’s upstream natural gas assets in the Eagle Ford, operated by a strong operator, EOG.

Earlier this week, we announced the FID of the Marsa LNG project in Oman, which is really setting a new low-carbon intensity standard for the next generation of LNG plants, 3 kilogram of CO2 per boe fully-electrified and the electricity coming from renewable sources. And it’s a very good example of TotalEnergies deploying its integrated multi-energy model in the country. Thanks to that strategy, we reached a new scale in Oman combining LNG and renewables or 2 pillars. So it’s a good example again of what we can achieve by moving on the 2 pillars. On LNG, I would also insist that we continue to work with Asian buyers, which have some appetite for medium- and long-term contracts. And I would say all linked long-term contracts, which is important, of course.

In particular, for example, this quarter, we signed a contract with Sembcorp in Singapore beginning 2027, just perfect when we have more production. And to cover it, I would say, or to hedge it with some oil-linked contracts. That’s the target. And there will be more to come as our teams are quite active on the Asian front: China, Japan, Korea. So we are working. Of course, it’s important. We have a strong LNG position, and we know we have some perspective to sign some oil-linked LNG contract is on part of our strategy. And lastly, I would also mention on the integrated gas part that we have — we are acquiring the rule of SapuraOMV in Malaysia. This is a gas business related to a netback of LNG pricing with quite a good potential to increase.

And in fact, it’s quite — it’s a prolific — Sarawak is a prolific gas region with some potential to grow in the future. That’s why we’re very interested to acquire these assets. Then moving to the second pillar, integrated power. We have again fourth time — fourth quarter in a row an increasing adjusted net result income — operating income, and Jean-Pierre will come back on it. As you noticed, we have implemented — we are advanced in the implementation of the integrated strategy in Texas on the aircraft with the acquisition — closing the acquisition of 1.5 gigawatt CCGTs. And — but good, the demand is growing in Texas, data centers, AI. We are right on the good market there. And also in Germany, which is another key market for us. We closed the Kyon Energy acquisition, which is a battery storage developer.

So you will see through the results that — or the relevance of our strategic continues to be demonstrated quarter after quarter as a proof of concept that our differentiated model works, delivering strong results, which are fundamentals that allow us to grow our shareholder distribution in a sustainable way. We confirm again that we increased the interim dividend by 7% compared to last year, which I think will be appreciated by all our shareholders. And by the way, it’s also this proof of concept starting to pay off as we kind of serve the positive evolution of the share price recently, which is on their view, in the view of the Board, a signal that the strategy is being increasingly recognized by the market as a good one or the right one and also evidenced by our leading total shareholder return.

Finally, this value is not only shared with our shareholders, but also with the pioneers of TotalEnergies, and it’s important for promoting employee shareholding plans. We are now in Europe the #1 company in terms of amount of capital owned by employees, more than EUR 11 billion, and a special grant of 100 shares to each — or 100,000 employees has been decided by the Board to celebrate our 100th year anniversary. So I don’t know if we have $100 billion of results, Jean-Pierre, but not yet. So then with that, I’ll turn it over to Jean-Pierre, that was the transition, to go through the detailed financials this first quarter.

Jean-Pierre Sbraire: Yes. Thank you, and good morning, good afternoon, everyone. So as Patrick mentioned, our consistent strategy continued to deliver strong results, and we are well positioned to deliver on our ’24 objectives of more energy, less emissions and growing cash flow. Brent prices were flat quarter-to-quarter, down only 1% to $83 per barrels and refining margins were strong, plus 36% quarter-to-quarter. Thus, European gas prices declined by 35%, reflecting a mild winter and high storage levels. In this context, TotalEnergies reported first quarter ’24 adjusted net income of $5.1 billion, only down 2% sequentially. And cash flow from operations, excluding working cap, of $8.2 billion. Profitability remains strong with return on average capital employed of 16.5%.

And we maintain discipline, confirming net investment guidance of $17 billion to $18 billion for ’24. Importantly, we continue to extend our track record of attractive shareholder distribution with $2 billion of buybacks executing during the first quarter and nearly a 7% increase year-on-year of the first interim dividend for ’24, which is now at 20% compared to pre-COVID level. Moving now to the business segment results and starting with hydrocarbons. Production was 2.46 million barrels of oil equivalent per day in the first quarter ’24, stable quarter-to-quarter and up 1.2% excluding Canada. Production benefited from oil start-ups at Mero 2 in deep offshore Brazil and Akpo West in Nigeria, as well as 6% growth quarter-to-quarter in LNG production, which has offset the Canadian oil sands asset disposal that closed in the fourth quarter.

Looking now forward. Production for Q2 ’24 is expected to be between 2.4 million and 2.45 million barrels of oil equivalent per day and reflects planned maintenance that is partially compensated by ramp-ups of Mero 2 in Brazil and Tyra in Denmark. We reiterate full year ’24 production guidance of 2.4 million, 2.5 million barrels of oil equivalent per day, which is 2% growth year-on-year, excluding Canada. Exploration and production reported adjusted net operating income of $2.6 billion and cash flow of $4.5 billion. Also, we continue our leadership as a low-cost producer with first quarter ’24 upstream production cost at $4.6 per barrel. Moving now to Integrated LNG. Hydrocarbon production for LNG was strong during the first quarter, up 6% quarter-to-quarter, thanks to higher availability, mainly additives in Australia and Qatar Energy, LNG and 2 in Qatar, as well as the increased supply of LNG in Nigeria.

However, first quarter LNG sales decreased by 9% quarter-to-quarter, primarily due to lower demand in Europe, given the mild winter and high inventories. Volumes also reflected partial downtime in Freeport LNG in the U.S. this quarter. Integrated LNG adjusted net operating income was $1.2 billion during the quarter, reflecting lower LNG prices sales, but also low volatility in the markets. Cash flow totaled $1.3 billion, impacted by the timing of dividend payments from some of our equity affiliates. Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, we anticipate that TotalEnergies average LNG selling price should be between $9 and $10 per MBtu during in the second quarter ’24. Now moving on our integrated power business segments.

We are pleased to report that this business continues its profitable growth trajectory with adjusted net operating income growing sequentially for the fourth quarter in Europe as activity grows. Adjusted net operating income grew 16% quarter-to-quarter to more than $600 million and was supported by production growth in both renewable and flexible generation. So flexible generation, as Patrick mentioned, now includes the 1.5 gigawatt CCGT acquisition in Texas, which closed during the quarter and further enhanced our integrated position to provide clean firm power in the attractive and growing ERCOT markets. Cash flow from Integrated Power was $692 million for the first quarter, on track to achieve our target of $2.53 billion of cash flow for the full year ’24.

Finally, return on average capital employed for the 12 months ending March ’24 reached 10%. Moving to Downstream. The refinery utilization rate for the first quarter of ’24 was stable at close to 80% with the restart of SATORP in Saudi Arabia, following a planned turnaround during the fourth quarter ’23, offsetting the impact of the unplanned shutdown at the Donges refinery in France. LNG contributed $960 million of adjusted net operating income in the first quarter of ’24, up 52% quarter-over-quarter due to higher refining margins. Free cash flow from operating — from operations excluding working cap evolutions of $1.3 billion also increased double digits quarter-to-quarter, although it was impacted by the timing effect in cash dividend payments from equity affiliates.

Looking forward now, we anticipate that the Q2 ’24 refining utilization rates will increase to around 85% as the Donges refinery progressively restarts and because there are no major turnaround plans. On marketing and services, this quarter demonstrates the efficiency of the implementation of our value-over-volume selective strategy with cash flow from operations increasing by 5% year-on-year to $480 million in the first quarter of ’24, despite the decrease in our sales of petroleum products. At the company level, we reported a working CapEx of $6 billion during the first quarter of ’24. And the main components behind Tierra, first, the reversal of the exceptional working cap release of $2 billion in the first quarter of ’23 we highlighted during our last earnings call.

Secondly, $1.5 billion related to the effects of higher oil and petroleum product price on inventories at the end of the first quarter ’24 compared to end of ’23. And $2 billion of seasonal effects, $1 billion related to the seasonal effect on tax liabilities and an additional $1 billion related to the seasonal effects on gas and power distribution activities. Gearing at the company level increased to around 10% at the end of the first quarter compared to 5% at the end of last year. And the just described $6 billion working capital led to a 4% increase in gearing. And the decision we made given the interest rate environment to exercise the cool end of March on the EUR 1.5 billion IB bonds resulted in an additional 1% increase in gearing. Therefore, we expect gearing to structurally range around 7% to 8% as 2% to 3% of the current gearing related to seasonality impact on working cap at the end of the quarter.

Our consistent and balanced strategy is paying off, as Patrick mentioned. And the first quarter has positioned us for continued success in ’24. In this context, the Board of Directors of TotalEnergies decided the distribution of our first interim dividends of EUR 0.79 per share for the fiscal year of ’24, representing an increase of close to 7% compared to ’23 and authorized an additional $2 billion of share buybacks for the second quarter ’24. And with that, I’ll turn it over to Q&A.

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Q&A Session

Operator: [Operator Instructions]. The first question is from Christopher Kuplent with Bank of America.

Christopher Kuplent: On net working capital and your net debt outlook. I think that removes already a few questions. But maybe a broader one, I wanted to just double check with you, Patrick, the political temperature and your assessment as we go into, not just AGM season, but the idea that petrol prices remain capped, there is talk about windfall taxes should they be expanded or not, whether there is a plan to tax buybacks what your thoughts are in terms of whether Europe has learned its lesson from the energy crisis that we’re in or whether it’s still a dangerous thing to make too much money as an oil and gas company. I’ll leave it there for you to go in whichever direction you would like.

Patrick Pouyanne: Okay. Thank you, Chris. For sure, European leaders, they don’t want to have again a crisis on energy crisis on the price. You can see that in Europe, not only you have the German farmers, the French farmers, who are complaining as soon as you try to lift or to increase some taxes on the tractors, fuel, fuel prices, so it’s not a good idea, but very clear. We see, by the way, a global political temperature where a lot of people are calling, I would say, for reform, not opposed, but less regulation linked to the green deal. And we could think that the next mandate of the European Commission might be more about execution than increasing targets and regulations. But the purpose for the price, obviously, European leaders can do nothing about it.

It’s more in the end. But I would say OPEC and OPEC+, which, by the way, today are probably countries are probably quite time with around $90 per barrel. We don’t want as well to go back too high above $100 because they don’t want to have some impact on customers. So clearly, the price was pushed up in the last month because of the crisis in the Middle East. But I don’t see the fundamental of the market. As we all know, there is not much inflows of new supply in the market. The demand continue to grow 1%, 1.2%. So my view is that we have — we can expect this price above $80, $80-plus in — for the year, I would say. So we are fine. But having said that, you never know, we have observed some volatility. Windfall tax, no, not windfall tax. But there is a principle involved.

We are in state of law and you have a territorial principle for taxes. That’s very anchored and most of the constitution. For France, it’s in 120 of 30 treaties with other countries. We tax the profits where we are — which we delivered in the same country, and we cannot beat double tax for the same profit. That’s a fundamental principle. So that’s — I’m not. So I don’t think it will come. The point is that, of course, the European politicians are looking to what has been done in the U.S. on the 1% of tax on the buybacks. So honestly, this is a music which could cross the Atlantic this year. Having said that, honestly, it will not change the buyback policy of TotalEnergies because again, the buyback policy is sharing additional profits with our shareholders.

And even if we have to pay 1% of EUR $8 billion, which makes $80 million. So I think it’s — we’ll absorb it. But we’ll not encourage them to do it, let’s be clear. But that is something. The depth in Europe have increased so people can — will look for some additional taxes. We should learn them if we can cut costs as well, but that’s not fair, honestly the way to look at it. So globally, I mean, honestly, I think from this perspective, I think there is a — you must make the difference between, I would say, all the statements during the European campaign and politicians and the reality of what is really executed.

Operator: The next question is from Irene Himona with Bernstein.

Irene Himona: Question on maybe, if I may. You said, Patrick, you’re working on an FID by year-end ’25. Can you say what the size of resource will be for that FID? And can you share with us post your successful appraisal, what have you encountered in terms of reservoir thickness, the gas cut flow rates, et cetera?

Patrick Pouyanne: Irene, you go to details, which we pay a lot of money to get this data, and I will not share them publicly or my colleagues because we still have quite exploration to be done. Now in fact, today, I will not answer by reserves, but I would answer. The reserves, it’s more a question for us of dimension, the dimension of the production per barrel per day. And it’s linked, in fact, like in Suriname, these type of FPSOs, they are the parameters, the key parameter will be the volume of gas, we need to recycle because there is a GOR. So we speak around, I would say, a development around between 150,000 barrels per day and 180,000. It has to be now firm up for there is more engineering studies. But all the data are there.

We have made the campaign so business now the priority is to go to production, I would say. And then, of course, Namibia for us, not only that. Because our neighbor has just announced a new discovery in the Southern part. Southern part, we have the equivalent prospect on our side. So we’ll drill it. So we are acquiring that seismic in order to make the acquisition. So for me, in Namibia, it’s the first development, and we see others coming behind. But let’s explore and as I said as well, we continue to acquire some acreage in particular on the Orange Basin. We have two good licenses — prospective licenses on the South African side, which we might drill in 2025 according to the, I would say, to the process of authorization, which is prevailing in South Africa.

So that’s where we are. So it’s a good news. We have — we will be probably the first to produce oil in Namibia. That’s the objective. So in this year, Namibia first development next year. That’s a good news, I think. And so to answer your technical questions. First, I don’t have the data, so I cannot share the secret. Second, to be honest, no. Again, I think if we launch — if we speak today about developments because data are good enough to make a profitable development, fitting with our criteria, which is, as you know, less than $20 per barrel of CapEx plus OpEx more, or less than $30 per barrel breakeven.

Operator: The next question is from Christyan Malek from JPMorgan.

Christyan Malek: Two questions. Just maybe just first on Namibia. I mean I was quite shocked how the scale of the resource in — has been increased in as far as the GAAP statement. And I say that because I’ve never seen such a massive move in sort of — in the way it’s been presented. But the question I have is, therefore, in the context of your execution plans and your discipline on spend and investments. How comfortable are you that as and when you do sanction the FID sort of if and when, that this will stay within your CapEx or envelope in terms of both cost per barrel and so on, given we’ve seen this movie before as far as Angola, when we had major discoveries and then sort of fast forward 2, 3 years, and it wasn’t as easy to get the volume online for a number of reasons.

So that’s my first question. Even if you have line of sight on that from now, that would be good. And the second question is, there’s a lot of debate around listings. And I sort of find that we can blame everything apart from the actual valuation and why the valuation is where it is relative to the U.S. But the question I have for you, Patrick, is electrons versus molecules. At what point do you potentially in a stronger macro environment, reemphasize your molecules and as far as either sort of rotating capital or investing more capital because as far as it sort of strikes me that the quantum of cash flows the U.S. majors can deliver versus Europeans. The main striking difference or the distinction is just the level of hydrocarbon as far as oil and the cash flows generated from that oil volume.

And I know energy transition is a whole other debate. But just purely on quantum of cash flow, is there anything that would make you reconsider a reallocation of capital?

Patrick Pouyanne: Okay. First, on the first question, I’m very comfortable to FID in Namibia, first FPSO and the second one. And it will be within the $18 billion of framework of capital per year. We can do it. It’s profitable. It’s not a problem. And obviously, our priority typically when we have good oil projects, we have fitting with your criteria, they will be sanctioned. There is no doubt to that. And that we never arbitrated against an oil project in the company, and that’s why we have — we expressed our strategy with 2 pillars. So first being oil and gas. The second one is, I mean, Integrated Power. But it’s clear. So no, I’m not afraid to have 1, 2 or 3 developments to be done in Namibia. I think what is good for our company will be good for the shareholders.

So if it’s good projects, we will sanction them. And we have some space. And we have been very agile in the company to arbitrate. And I prefer to have more options in my portfolio, but a constant strategy to arbitrate and then to give priority to some of them. We just demonstrated it with Marsa LNG. We postponed P&G because the costs were too high. We have sanctioned Marsa LNG and 80% share. It’s not big, but it’s profitable because the CapEx were in line with our expectations. So this is the type of options. And so I prefer to have too many options and to be selective on the most profitable ones because this will contribute to enhanced cash flow per barrel and so the cash flow per share, I would say. So that’s fundamentally what we do. So this one, I’m — and if there is more to come, we will capture it, to be clear.

By the way, you are right, but I never seen any way anybody in 25 years in the history to speak about 10 billion barrels with 1 well or 2 wells. But I mean, so but the media, the media aspect. So no, no side with 2 words, never, but we’ll see. Then on the stock leasing. Listen, by the way, when you — it’s nice to mention 1 of the U.S. companies because I was looking to the results, which have just been announced. They are exactly the same as us. So maybe it’s not a matter of molecules or electrons. It’s maybe — that’s why we have — I mentioned that we could. And as we have more and more U.S. shareholders thinking to have a clear listing in New York is obviously a move on which the Board asked me to look at it because it makes sense. So we’ll see what we can organize, but it’s going into the direction of growing U.S. shareholder base seems to be a nice — a normal thinking from a Board of Directors independently, by the way, of the domiciliation of the company in Europe.

That’s clear, but that’s the first one. I Don’t think — so the reallocation of capital, no, I don’t consider it. I think we prefer to stick and to be consistent with the strategy. I think it has a value in the energy field to have a consistent strategy and to — because we know it’s a long-term industry and if you don’t navigate and thinking. So the integrated power business, it continue to grow to deliver cash flows. We are on the road map to reach 12% and then to be net cash positive. So I don’t see why I should suddenly reallocate capital because oil — bowl of oil is higher. And again, it’s a matter of — I prefer to stick on our strategy to be selective in terms of projects, including hydrocarbon project, sticking on the — and the low — the cash breakeven of the company, I think it’s fundamental.

However, then suddenly, I think another race to volumes, which will not be positive. So I think it’s — we are generating as much dollars as one of the companies you mentioned. So we need to — that’s the reality. So it’s not a question, of course, of a portfolio. It’s a question fundamentally of finding — going to the shareholders who are willing to buy energy companies. There are more — yes?

Christyan Malek: I just meant over the medium term, there could be a bifurcation of cash flow. As their oil volumes grow and others don’t, that’s what I meant more in the context of if and when prices move higher and there’s more volume in oil, is the market starting to look so backwards for that in terms of valuing cash flow? That’s what I meant more in the medium.

Patrick Pouyanne: Okay. No, honestly, it will be a good problem if we have more cash flows because the price of oil is going higher, but I will not make the mistake to think that yes, it’s possible. The scenario you described is perfectly possible, Christyan. But at the same time, we should — don’t say again higher forever. That’s not true. I mean we know that it’s volatile. You know that when price of oil go up, then demands would low, and then exactly the typical thing. So we must not forget the sense of the history. Having said that, the best answer I tell you is that today, we have a very good — or not a good, super strong oil and gas business, which allow us to deliver the best return on capital employed among the majors despite the fact, I don’t like the word despite, but we are also investing in integrated power with a lower return.

So that means the best question is if we have a portfolio and an efficient oil and gas operations. The proof again this week — quarter is the cost per barrel — OpEx per barrel is $4.6 per barrel. So that’s — we protect you if the barrel is higher, we’ll make more cash flows for sure because we maintain and we continue to steer with breakeven. So — and it’s not only a matter of investment, it’s also a matter of portfolio, quality of the portfolio.

Operator: The next question is from Lydia Rainforth with Barclays.

Lydia Rainforth: Two questions, if I could. One just a follow-up on the U.S. listing. Patrick, I think you said that the Board has asked you to look at the moving listing. How long would that process take? And ultimately, sort of what would stop you from doing it at this point? And then the second question was on the LNG business. You talked earlier about the, I guess, having flexibility within the portfolio. I’m just wondering if you could talk us through what your outlook is at the moment on the LNG market? Because obviously, we’ve had some projects that have been delayed because of higher costs, but others that are coming in that are very competitive. So just your perspective on that market.

Patrick Pouyanne: Okay. On the first one, to be clear, there was a discussion of the Board — with the Board, clearly, on the matter of U.S. listing. We all agreed that we have to seriously look at it. And so we are working on it together with Jean-Pierre. And I plan to report to the Board by September, and then we’ll see pragmatic way forward, and we’ll come back to you. But we consider that and I had discussions, by the way, with a number of large shareholders in the U.S. about it. But today, in fact, we have ADR, which is not a real share. They come to buy shares on the Paris market. You have exchange rates. We have 2. And when I look to the behavior of the share during it every day. You have the Paris market, which is depicting the share until 3 p.m. And suddenly, you have a drop or a hype because New York is leading it.

And by the way, the share at the closing in Paris is just the value in New York at 12 p.m. So all that is not — and on the top of it, which is more important. Again, we have — it’s clear that in the energy and the oil and gas field, U.S. shareholders are buying the shares and European shareholders are not so buying the same way. So I think it’s also a recognition to the growing part of the shareholding. And so we must look at it because again, the Board is keen to understand, why? If there is — I’d say it’s a way to fill the gap that we see if we can get easily access to shares to U.S. shareholders. So that’s where we are, and we’ll keep you aware, don’t worry, but I think it was time to — the right time to mention it to our investors. On the LNG, the LNG, I will tell you, I’m positive for ’25, ’26 because you will not see much new capacities.

Of course, like you and all of us, we are not naive. We observed from ’27. I’ve not mentioned ’26 because some projects will be delayed. I’m sure it’s a big project. You will see new capacities coming on stream from the U.S. and from Qatar. So this will have an impact on some of the market. That’s clear. But ’25, ’26, the price would — could be tension since some of the plants, again, could have some difficulties, that’s possible. After that, okay, that will be good for the demand, it will rebound. So what we are trying — what we are doing together with the LNG teams is to sign some oil-related medium-term contract because the view that we have on this business is that the oil might remain like Christyan’s question suggested it, it might remain stronger.

So that’s what we can do. And again, by the way, I’m not afraid because generally, and it was very well demonstrated by one of our peers, when you have some low cycle in LNG, they are not very long because generally, the demand is very reactive. You have countries, clearly we’ve seen it this year in 2023. You’ve seen more China buyers coming back to the market at $8, $9, $10. Under $10, you see China. And you will see if it go up into $9, you will see India as well coming. So I think it’s positive for the demand. So — and that would be, by the way, something important in this business because somewhere with the events of ’22, customers are a little shy. There is energy, which went to the roof. That’s why, by the way, they are also interested themselves to sign more oil-related contract base because basically, more stability in that oil pricing, but in the gas market, which has been very volatile.

So I think — so again, maybe a lower price. Another comment on it because sometimes I’m surprised by some analysis, which are reported. LNG, one of the interest of LNG, like you’ve seen in the results of total energies when the price of gas is going down in Europe, we have some amortizer in the LNG pricing formula. It’s not — we are not a European gas seller, I would say. And so the impacts on our revenues, cash flows and results are much lower because the formula LNG are amortizing this for them. So again, we are — I’m not worried. I continue to believe that it’s a good business to invest because it’s a growing demand, because we need gas and energy to produce — to complement the intermittency of electricity. There is a primatization demand when — in the middle class in Asia.

So all that is driving, I would say, electricity demand. part might be covered by coal and renewables, but part also with gas. And you know a country like India is very interesting. They are building a real gas infrastructure with big clients around the country. City gas is being developed. And so it’s a reality we are investing, by the way, in this business there. It’s a reality. And I think that — so a lower price during 2, 3 years might — will be — would give a proof to that demand. And when the demand is installed, it’s difficult to stop because when gas becomes your fuel for your house. So that’s the perspective I see. But again, we are active in order to, I would say, edge not edge is not the right way, but to sign some medium-term contracts with oil-related terms.

Operator: The next question is from Martijn Rats with Morgan Stanley.

Martijn Rats: When oil prices are referred to as relatively stable, I find that a very sort of very interesting comment. But anyway, I have 2 questions that I wanted to ask. The first is a relatively simple one on the buyback and oil prices. We started the year, of course, with EUR 2 billion a quarter in buybacks. But I think it’s fair to say that oil prices have been surprising to the upside so far this year. So I was wondering if there is some move in the quarterly buyback perhaps later this year, if this oil price sticks and under what conditions we might see sort of their — the quarterly buyback much higher? I was hoping you could say a few words on what the prospect of that sort of might be? And then the other one is about the SapuraOMV sort of acquisition.

You bought 100% in sort of 2 tranches. I know it’s not as exciting as Namibia perhaps, but it’s not entirely small I was wondering if you could say a few words about the rationale of that transaction, what the attractions of the assets are, how it fits in the overall picture.