Thank you. Good morning or good afternoon. Let me start by saying that I hope that you are all doing well and keeping safe, even more as we have entered the second wave of the COVID-19 pandemic in Europe and are not yet over with the first wave in the U.S. Let's move to the results. Total reported third quarter results that reflects the resilience of the portfolio and demonstrates again the group ability to capture the benefits of improving oil prices and market conditions. Adjusted net income rose to $848 million, or $0.29 per share. Debt-adjusted cash flow, D ACF, increased to $4.3 billion. Leveraging strict capital discipline, we strengthened the balance sheet and reduced gearing to 22%.
Based on the strong fundamentals of the company, we confirmed the group's support for the dividend with the announcement of our third interim distribution maintained at EUR 0.66 per share. We saw mixed signs of recoveries in the third quarter, and we note in particular, that volatility, particularly in oil prices, was lower than in the second quarter. Brent rebounded from less than $30 a barrel in the second quarter to more than $40 a barrel in the third quarter, thanks mainly to OPEC+ production discipline. Sales in our European marketing network came back to nearly pre-crisis levels. However, refining margin collapsed to negative levels during the quarter. Gas prices remained low, but we saw them rebounding to higher levels in September in Europe and Asia, and as it is traditional, the case for the winter season.
The group is continuing to execute and deliver on the strategy and objectives presented since the start of the COVID-19 crisis. We have kept the organic breakeven below $25 per barrel, reduced OpEx to $5 per barrel equivalent, and we are on track to cut costs this year by more than $1 billion objectives. In this environment, capital discipline is key, and we are limiting CapEx to less than $13 billion this year, $1 billion lower than previous guidance, while still continuing to invest $2 billion for our fast-growing renewable power generation business. Operationally, oil and gas production decreased to 2.7 million barrels per oil equivalent per day in the third quarter. Mainly, this reflects strong compliance with OPEC+ quotas, as well as the voluntary reduction in Canada and disruptions in Libya.
To a lesser degree, there is also the net effect of seasonal maintenance, natural declines, and asset sales, which were partially offset by ramp-ups on new projects. Based on the level of OPEC+ compliance and the return of Libyan production only since October, we now anticipate full year 2020 production will average less than 2.9 million barrels per oil equivalent per day. Turning to the results by segment, iGRP, Integrated Gas, Renewables & Power segment, reported EUR 285 million of adjusted net operating income and close to EUR 700 million of cash flow in the third quarter. This segment includes our integrated LNG business, as you know, where we are the second largest player worldwide and well-positioned to participate in the global energy transition. LNG sales volumes were 8.1 million tons in the third quarter, a 9% increase year-on-year, mainly due to growth in our trading activities.
LNG prices averaged EUR 3.6 per million BTU, reflecting mainly the three to six-month lag effect on oil-linked contracts. This effect is beginning to reverse, and we anticipate a rebound in LNG prices to more than EUR 4 per million BTU in the fourth quarter. We'll continue to grow our LNG business from 28 million tons of sales through the first nine months of this year to 50 million tons per year by 2025 from projects already in our portfolio or under construction. Our integrated electricity business is a fast-growing part of the iGRP segment. Gross installed renewable power generation was 5.1 GW, nearly double compared to a year ago, and worldwide electricity production increased by more than 30% in the third quarter, and we are continuing to expand the number of gas and power customers in our European network.
We are accelerating the growth of our renewable power generation, notably with the acquisition of a 3.3-GW portfolio of solar projects in Spain, plus agreements to develop more than 2 GW of floating offshore wind in South Korea and France. We also announced that we have signed a 6 TW power purchase agreement. The largest corporate PPA to date to cover all of our electricity needs for the group's industrial sites in Europe by 2025 using solar assets in Spain that we will develop. Consistent with the acceleration of the growth in renewables, we have added disclosures for our renewable business. We now report gross renewables capacities in operation and in development that benefit from long-term power purchase agreements. This should help the market assign value to the business as it becomes more material.
As you know, we have the objective to grow renewable power generation to 35 GW of growth installed capacity by 2025. We already have about 24 GW in our portfolio, 5 GW installed, 4 GW in construction, and 15 GW under development. Installed capacity of 5.1 GW as at end of September is fully covered by PPAs. Out of the capacity in construction or under development, we say 20 GW, 9 GW are already covered by long-term PPAs. We are capital disciplined in our project selection and confident that we can generate long-term double-digit profitability while growing stable cash flows in this business. At our Investors Day last month, we concentrated on the transition of TotalEnergies into a broad energy company, so I will not go into more details here. Let's turn to E&P.
Our Conventional Oil and Gas segment generated adjusted net operating income of $800 million, and more importantly, I think, carried the group with cash flow generation of more than $2.6 billion in the third quarter. Average realized liquids price recovered to $40 per barrel, a 70% increase quarter-to-quarter, more than offsetting lower volumes and weaker natural gas realizations. We continue to put pressure on costs with OpEx at $5 per oil equivalent. Cash flow increased by more than $800 million quarter-to-quarter, thanks to our resilient E&P portfolio and our sensitivity to oil prices. The downstream faced a more challenging environment in the third quarter, with refining margins in Europe negative on average for the quarter and a less exceptionally favorable environment for trading activity than in the second quarter.
Recall, we mentioned that trading generated an exceptional surplus of around $500 million of cash in Q2 due to huge volatility. The third quarter was in fact very stable, with Brent remaining in a range between $40 and $45 a barrel. Faced with operating losses, we reduced our refinery utilization rates to 57% in the third quarter from 59% in the second quarter. Petrochemicals resisted well despite weaker margins quarter-to-quarter in Europe and in Asia, as well as utilization rates that declined to 75% in the third quarter from 84% in the second quarter. Marketing rebounded from the second quarter low, generating more than $400 million of adjusted net operating income, well above the pre-COVID-19 third quarter of last year, as lockdowns were lifted in Europe and in Asia.
Downstream as a whole generated EUR 373 million of adjusted net operating income and close to EUR 1 billion of cash flow. With a low level on investment required, the downstream has provided EUR 2.4 billion of free cash flow to the group over the first nine months of the year. The trailing 12 months ratio for the downstream is 14%. Consistent with our outlook for oil product demand in Europe and the strong growth in the renewable diesel market, we announced in July the sale of the Lindsey Oil Refinery in the U.K., and in September, the conversion of the Grandpuits refinery to a zero oil platform producing renewable diesel and bioplastics. This further streamlines our refining footprint and builds on the successful conversion of La Mède into a biorefinery.
These are steps toward achieving our net zero climate ambitions that have the added benefits of improving the long-term profitability and resilience of our downstream. Finally, at the group level, in the third quarter, net investments were EUR 1.9 billion, bringing the total for the first nine months to EUR 8.5 billion. We anticipate that our net investment will be lower than EUR 13 billion this year. Because of uncertainty, we will be prudent for 2021 budget and CapEx should be limited to less than EUR 12 billion. Despite this difficult environment, mainly due to our capital discipline, TotalEnergies generated positive net cash flow of EUR 1.9 billion in the third quarter and EUR 2.7 billion in the first nine months.
Although the third quarter was more stable than the second quarter, the overall market environment remains uncertain, and the way forward will depend on the speed of the recovery in global demand affected by the COVID-19 pandemic. It is clear that heavy inventories of oil and refined products will have to be addressed before a sustained rebound can take place. We are prudent about the coming years, so we are using a EUR 40 per barrel Brent scenario as our base case. Longer term, we recognize that the growing world population will demand more energy of every type, and the many years of underinvestment have set the stage for a more constructive supply-demand balance. Our priority is to generate a level of cash flow that allows us to continue to invest in profitable projects, support the dividend, and maintain a strong balance sheet.
Of course, we'll continue to concentrate on the things we control: safety, operational excellence, cost reduction, and cash generation. Now I'm ready to go to the Q&A.
Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. As a reminder, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. You can cancel your request at any time with the hash key. Once again, it is star one to ask a question. Your first question comes from the line of Irene Himona of Société Générale . Please go ahead. Your line is open.
Thank you very much. Good afternoon. My questions, well, I had a number of them. First of all, in Refining & Chemicals, Jean-Pierre, there was a EUR 290 million asset impairment. Was it one particular, one specific asset? If you can talk about it would be helpful. Secondly, in iGRP, we had lower LNG prices, lower net income, yet I noticed that your equity affiliates profit in that division actually increased between second and third quarter, and I wonder what is driving that. Is it Novatek, perhaps? Finally, in M&S, volumes are obviously down quite materially. As you said, profit is higher now than a year ago. Can you talk about the changes to your product mix, perhaps, which is driving this apparent margin expansion? Thank you.
Okay. Good afternoon, Irene. Yes, you're right. The impairment we recorded this quarter are linked to the R&C segment, Refining & Chemicals. It's two assets, and only, I would say, two assets. It's Lindsey Oil Refinery, LOR Refinery, and Grandpuits. Given that we announced that we divest our participation, our LOR Refinery, we have to write off the assets. The same for Grandpuits. We have to impair the assets that will be discontinued, that will not be used by the biorefinery that we built in Grandpuits. That's the EUR 290 million you mentioned. The two impairments on two assets. Yes, the lower LNG prices. You're right, it's mainly linked to the performance of our Russian LNG assets, and particularly Yamal LNG.
On M&S volumes, it's clear that demand has dropped during the first quarter and the second quarter massively in road transport, in air transport, of course, as well, sea freight, and of course, we suffered from a slowdown in the industrial activities as well. We saw at that time retail sales down to almost -70% in France and between 30%-40% in Germany and in the Netherlands. During the lockdown period, of course, customers tried to take advantage of the low fuel price to replenish their fuel tanks at home. We witnessed high sales on our B2B segment. Now, moving to the third quarter, we observed a rebound with sales, particularly in Asia, where sales resurged rapidly.
More or less, the retail sales are back to the pre-crisis levels in Western Europe, but we are still lagging in Africa, and non-fuel activities are still below expectations. Of course, the aviation will strongly be affected in the Q3 and this trend is anticipated to continue in the fourth quarter. All in all, we are seeing sales more or less stabilized, -10% compared to 2019 levels. On top of that, of course, we benefited from higher margins. Because the inventory were built at lower cost. All in all, it's rational behind the fact that with a bit less volumes and benefiting from higher margins, we are able to deliver this performance during the third quarter.
Thank you very much, Jean-Pierre.
Thank you. Your next question comes from the line of Jon Rigby of UBS. Please go ahead.
Thank you. Hi, Jean-Pierre.
Hi.
Hi. Just strikes me that, I just wonder whether you could just offer your observations on this, is that you are making two statements that, on the face of it, are slightly contradictory. You're not the only ones actually, is that, CapEx is coming in lower than you are expecting this year and is going down again next year. Yet you are, and I think quite rationally, setting out a case for why markets will tighten and pricing will improve. Isn't this exactly the right time to be focusing on trying to get your projects out the door and through given, let's say, as a three- to four-year time lag?
I get that there is a clearly liquidity financing balance sheet issue. Can you just sort of talk through how you're balancing those two objectives of sort of managing the short term and trying to position yourself for the long term? Is what takes priority?
It's clear that we use the flexibility we have in our portfolio, to preserve the cash if possible, but without jeopardizing the future. It's very important. Our main projects are not impacted by this level of CapEx. On top of that, we are very clear that we will continue to invest more or less EUR 2 billion per year on our renewable and electricity segments. We play on the flexibility. That's true that now we announced that the CapEx, the net CapEx, so organic plus the net between acquisition and divestment, will be below EUR 13 billion this year. As we mentioned during the last investor day, we are cautious regarding the prices, the price tag for next year. We've built our budget using a EUR 12 billion amount for net CapEx for the next year.
You noticed, Jon, that between 2022 and 2025, assuming a recovery in oil prices, we announced a range between EUR 13 billion-EUR 16 billion. Once again, we have in our portfolio, two main projects under construction, so mainly Arctic-2 and Mozambique LNG. This project will not be affected by this level of CapEx. The project that will be affected is the short-term CapEx, on which we can play on the flexibility. Given that the prices are not good, it's not necessarily the right time to sanction this project, with a very short plateau in terms of production.
Right. As and when you bring back CapEx, and presumably there is some sort of view and positioning taken on the ability to have some flexibility as you bring it back on, because clearly, as everybody's learned, visibility is low. Would we expect you to bring back CapEx fairly cautiously, in the initial stages of any recovery?
It's a matter of environment, no?
Yeah.
Again, this 12 or this EUR 13 billion this year is clearly linked to the current price environment. The EUR 12 billion for next year, we are clear that it's linked to an assumption, to a lack of visibility regarding the prices and we need to be cautious. EUR 12 billion of CapEx next year. Yes, it's the illustration of this, the fact that we have no visibility on the prices next year. Beyond 2021, once again, prices could rebound, and that's why the rationale behind the fact that at that time we have in mind CapEx guidance between 13 and EUR 16 billion per year.
Right. Got it. Thank you.
That's true, that flexible CapEx, we are flexible both ways. They can be back on budget rapidly if Brent increased, of course. You know that in our portfolio, we have more or less the equivalent of one billion barrels of short cycle projects. It could be a strong contribution in the future cash flow, if by chance, we benefit from price rebound.
Right. Perfect. Thank you.
Thank you, Jon.
Thank you. Your next question comes from the line of Oswald Clint from Bernstein. Please go ahead.
Jean-Pierre, thank you. Just back on iGRP. Just looking at your earnings down 50% year-over-year, but cash flow's only down 5%. You mentioned volumes up 9%, but that's a lot of trading, which I can't imagine was particularly profitable in the third quarter. Can you just say why cash flow was so resilient relative to earnings this quarter? Is there any material power-related cash flow contribution showing up within that number? Then secondly, I think you mentioned underinvestment in supply longer term and how that might set up for a bit of a price recovery. What I find interesting is just your natural decline rates, 3%. I think for the last six or seven quarters, it's been pretty stable at - 3%, which is remarkable in a year like 2020 with pressures on your short-term CapEx and things like logistics.
Is that a real measured number, or is that backed out, or an implied number from some of the other moving parts, please? Thank you.
Yes. Regarding the iGRP performance, the result and the cash flow generation. Yes. The cash flow, the iGRP CFFO, for the third quarter was down more or less by one third compared to last quarter. It was, of course, negatively impacted by the prices, by LNG prices, also by lower dividends coming from equity affiliates. On the opposite, if you look at the net operating income, the equity contribution improved in Q3. The answer I made to Irene before, linked to the relatively good performance of the Russian assets and Yamal in particular. This has no impact on dividends. That's the rationale behind the move you noticed on the CFFO compared to the net adjusted income. The second question?
Your.
Sorry?
I'm sorry. Yeah, just your natural decline rates of - 3%.
Yeah
Almost unchanged every quarter.
Yes. We benefit from 50% more or less of our portfolio coming from LNG fields and fields in the Middle East in particular, in Abu Dhabi or in the Middle East. All in all, if you make the math, you have 50% of the portfolio benefiting from more or less zero decline, and 50% with, I would say, standard or normal decline of 6%-7%. All in all, you make the math, it leads to a 3% global decline for our production. You're right, it's remarkably stable quarter -after- quarter.
Understood. Thank you.
Thank you.
Thank you. Your next question comes from the line of Lydia Rainforth of Barclays. Please go ahead.
Thanks. Good afternoon. A couple of questions, if I could. The first one, can you just come back to this idea of gearing and the debt levels? We have seen a number of other companies now moving to absolute debt levels as targets. I'm just wondering sort of how you would think still about the total level of debt. The second question was just on the, so recently the idea of carbon neutral LNG cargoes, I think the first one that you did this quarter. Are you actually getting a premium pricing on that? Just a little bit more detail on how big you think that market can actually be for carbon neutral LNG. Very quickly, just a quick one. Can you just give me what you're thinking about the utilization rates for refining for the fourth quarter? Thanks.
Okay. Gearing. Yes. You notice that we are able to reduce our gearing by almost 2% in the third quarter compared to the second quarter, because we are more or less at 24% in the second quarter. We are below 22% this quarter. It's the translation of the fact that we're able to generate cash even after the payment of the dividend in Q4. We generated, after dividend, more than EUR 1 billion of cash. Of course, it led to this gearing reduction. We were very consistent in saying that, yes, our objective is to have a gearing below 20%. You remember what we mentioned in September during the Investors Day. The priority, of course, to prepare the future is to allocate what I mentioned, to join between EUR 13 billion and EUR 16 billion of CapEx from 2022 to 2025, EUR 12 billion in 2021. After that, the dividend.
We reaffirmed that the dividend is supported at $40 per barrel. You notice that we confirmed this quarter that, yes, the third interim dividend will be maintained at EUR 0.66 per share. After that, very clearly, we put as a priority the fact that we want to maintain a very strong balance sheet. In our mind, a strong balance sheet means a gearing below 20%. That's why we mentioned that if by chance we're able to generate additional cash, if the prices are above $40 per barrel, we will first allocate this additional cash to de-leveraging the company. The premium in relation with the carbon neutral LNG, honestly, I'm not so sure to have this answer. I will come back to you on the answer later, or the team will give you the answer.
The outlook for the refinery utilization on the fourth quarter, honestly, I have no crystal ball. I just noticed that the margin a bit above EUR 10 per ton since the beginning of the quarter. We'll monitor that very precisely. We have a utilization rate below 60% in Q3. The utilization will improve, if margin improve. Of course, we'll adjust the utilization rates of our refineries to the level of margin. But honestly, given the level of demand and given the level of inventories, Perhaps, I do not have to use this word. I'm sure, but it's likely that the margins will remain volatile and probably at a relatively low level. As a consequence, the utilization rates in our refineries will probably not be very different from the figures we have in the Q3.
Perfect. Thank you.
Thank you. Your next question comes from the line of Bertrand Hodée from Kepler Cheuvreux. Please go ahead.
Hi. Thank you for taking my question. Hi, Jean-Pierre.
Hi, Bertrand.
Two question, if I may. The first one is, I was looking at the line equity in income and other items, and especially the line other items. Year to date, if I combine iGRP and Upstream, it's quite a big number. It's above EUR 600 million, whereas last year, for the full year 2020, was around EUR 70 million. Can you remind me of what's in there and what kind of revenues is located inside other items line? The second question is on LNG and on Qatar. It looks like Qatar is finally moving with its massive expansion, having awarded already some long lead items. Can you share with us if TotalEnergies is, obviously, you have many option, but if TotalEnergies is still interested by participating in that expansion, and what are the condition required for you to jump in if Qatar Petroleum take final investment decision next year?
Thank you.
I think the answer for Qatar is very easy. You know that we are disciplined. We demonstrated that over the last couple of years, that we sanction project only. Perhaps, I think you have to switch off your micro because there is an echo, Bertrand.
Okay, I will.
Sorry. We are disciplined, so we sanction project only if the conditions are attractive. You know the way we sanction project, and the internal rate of return we use and the price we use to sanction project, which will be honestly the same for Qatar. There is no reason. We'll submit an offer only if terms are attractive. That's clear. That's true that we have been in Qatar for a long time. We are stronger partners. By the way, we are recently awarded, as you know, for solar farms of 800 MW . We know well the Qatar. By the way, we have embedded secondees at the request of QP in this project. We will go forward only if the conditions are attractive. That's my answer. You could remember that was exactly what we did with Búzios project in Brazil.
We decided not to submit an offer, not to make an offer given that the conditions were not good or did not meet our thresholds, and it will be exactly the same for Qatar. Your question regarding the equity affiliate income. Honestly, I'm a bit lost. You mentioned.
Maybe you want me to rephrase it or?
No, no.
Yeah.
You mentioned the equity affiliates contribution to the iGRP results?
No. In fact, when we look at your result, in fact, you combine a line which is equity income loss and other items. Okay? As you also disclose the equity affiliate separately, we are able to, in fact, calculate what is this other items. These other items to date is, if I combine iGRP and E&P, is above EUR 600 million. That's a big number, and I was wondering what's in there in terms of contribution. Knowing that last year, if I make the same calculation, it's around EUR 70 million. That's a EUR 500 million difference.
Well, the figure that I have in mind is the contribution globally at the level of the group of the equity affiliates. It's EUR 350 million, coming from Novatek participation, coming from Yamal, coming from our main LNG projects.
In fact, the EUR 600 million figure I was referring to was a nine-month figure, and in Q3 it's around EUR 165 million, combined iGRP and E&P for this other items line.
Okay. It's a detailed question, and I will come back to you with the precise answer.
Okay, fair enough. Can I just make a follow-up on Qatar?
Yes.
Are you already aware of the condition, and is the binding process already started or not yet until the final cost of the project is known?
I will not disclose to you all this information. The offers are due by year-end.
Thank you, Jean-Pierre. Sorry for the accounting question.
No, I will have a look because I do not have all the tables in front of me.
I can.
Of course, there is a rational answer to your question.
Thank you.
Thank you. Your next question comes from the line of Biraj Borkhataria of RBC. Please go ahead.
Hi, thanks for taking my questions. I had a couple, please. I just wanted to clarify on the net investment guidance, the less than EUR 13 billion this year. You did EUR 8.5 year to date. I was wondering if I'm thinking about Q4, there's either a big step-up in organic spend or an acquisition due or you'll come in below guidance. Can you just unpick the moving parts there? The second question is on Mozambique LNG. Can we get an update on your expectations, or when you expect to FID that?
I understand, in the short term, it's partly a function of affordability, but also maybe you can talk about what you're doing during the pause, because I guess it gives you a chance to rework and retender and how much more potential do you think there is on getting costs out of that project before FID? Thank you.
Well, the guidance we gave for the full year of EUR 13 billion is clearly linked to the fact that we have a very good visibility on the Q4. Traditionally, the Q4 in terms of investment is a bit higher or a bit heavy than the previous quarters. It's rational behind this guidance, EUR 13 billion. Once again, as I already mentioned, we have the Mozambique LNG project, we have the Arctic-2 project, we have some Mero-1, Mero-2 project in Brazil of course, as well. That contributes to the level of CapEx that we will expand during the fourth quarter. Mozambique, I think, perhaps I haven't really understood your question, the FID has been taken. By the way, the Mozambique, the FID was taken before by Anadarko because at that time, I think it was in July last year.
It was before we acquired the assets through the Oxy and Anadarko deal. The project, what I can tell you is that the project is on track. Of course, we are monitoring the situation very closely. Yes, the project is on track. The first, as you know, we are building two trains that will come on stream by 2024, 2025. On top of that, I think it was in September, we confirmed that the project financing is in place. We were able to secure an external debt of about $14 billion on that project for the benefit of all the partners in the Mozambique LNG. The FID is taken.
Just to clarify on that, because if you guys have FID'd it, obviously the partners on the other side have kind of paused it. In terms of the kind of chasing the synergy point, are there limitations to what you can do, if you're working at different paces?
No, I don't think so. The synergies you have in mind is probably the synergies with the project operated by ExxonMobil. That's true that there could be onshore synergies with this project, with Rovuma LNG project. Will not slow down the project link to the Rovuma LNG project, to be very clear.
Okay. Thank you.
Thank you. Your next question is from the line of Michele Della Vigna from Goldman Sachs. Please go ahead.
Perfect. Thank you so much, Jean-Pierre. Two questions on your legacy oil and gas business. You've really been the only major oil and gas company to continue to FID major long-term projects like Mozambique, like Mero. I was wondering what you think about the next generation of projects, Uganda, PNG, Costa Azul, and whether you think this is the right time to move ahead or perhaps wait a little bit longer. Then a second question on your recent discoveries. You've announced some really exciting results in Suriname and South Africa. I was wondering if perhaps you could quantify what you believe could be the total amount of resources there. Thank you.
Yes, you're right. We continue to sanction project because definitely we think, and that's why we try to explain during the September Investors Day, that the planet will continue to need oil in the coming years. Even in the most challenging scenarios for an oil and gas producer, oil will continue to play a significant portion in the energy mix by 2024, 2025. We have to continue to invest on oil project, but of course, very selectively. Because perhaps the oil demand will plateau, I don't know exactly when, in 10 or 15 years time from now. Our strategy is very clear. We want to position ourselves on low cost oil assets. Exactly the rationale we have in mind when we sanction projects.
You mentioned that, yes, we have the objective to sanction Uganda project before end of this year, and it perfectly fits within the strategy of low oil projects. We have other projects in mind, of course, in our portfolio that could be sanctioned in the coming years. We just sanctioned the Mero-3, but we could sanction additional projects in Brazil as well in the coming years. We have some projects in Nigeria, very well-positioned in terms of costs as well to sanction in the coming year or so. Preowei, we have the Owowo project, we have the Ima project. You mentioned as well Papua New Guinea project. We are not in a hurry to sanction that project. You know the status of the discussion between Exxon and the authorities regarding their gas agreement.
We have to be patient to be sure that we will be able to leverage on the synergies between our project and the Exxon Mobil. We are quite confident that we will be able to sanction that project in the coming years. Even that this project is, once again, a low-cost LNG project, very well-positioned to supply the Asian markets. We continue our strategy. We want to sanction a project if it's definitely a low-cost project. By the way, by doing so, we are able to lock in the current situation and the fact to capture, I would say, the deflation, as far as contractors are concerned. That's the rationale we have in mind.
We will continue with this strategy, and we have demonstrated over the last couple of years that it works well, and it's the most efficient way to enhance our portfolio by doing so. Exploration. Yes, Suriname and South Africa. Yes, that's one of the two areas on which we made some significant discovery very recently. Suriname, we entered into the asset. It was end of last year. We have a 50% stake in the project with Apache having the 50 remaining percent. At present time, three wells has been drilled with three discoveries. Maka, Sapakara, and Kwaskwasi. At present time, we are drilling a fourth well, and you know that after this drilling, Total will become the operator of the area. The way forward is very clear for us. A lot of hydrocarbons has been discovered.
Now we need some appraisal wells to clearly identify the level of reserves. To launch, if possible, a development with an objective to start up production by 2025. On South Africa, we announced, it was last week, or I think, yes, or even this week, I don't remember, that we made a second discovery on the assets with a new well. Definitely, it's open, I would say, a new world-class play in South Africa. The way forward in South Africa will consist in evaluating, of course, the size of the discoveries to make progress regarding the development studies and, of course, engage discussion with the South African authorities regarding a possible condition for the gas commercialization. That's what we have in mind for the coming month on both Suriname and South Africa.
Thank you.
Thank you. Your next question comes from the line of Christopher Kuplent from Bank of America. Please go ahead.
Thank you. Hello, Jean-Pierre.
Hello.
Two quick questions, please. On the CapEx cuts for this year, just wanted to understand whether you can identify specific projects that you are maybe forced to go a little bit more slowly on because of COVID-19 restrictions, and whether you can see from that CapEx cut any concerns about delays on those timelines that you talked about, or whether you think it's mostly a matter of efficiency and perhaps discretionary cuts. Secondly, on a more broader level, just wanted to ask a cheeky question whether you feel these days, looking at what's happening in North America, whether you feel vindicated about TotalEnergies' strategy to stay away from mostly U.S. shale. In fact, do you feel tempted by the kind of consolidation that's happening without much share price premium being offered? Thank you.
Well, on the CapEx cuts, once again, there is no significant delays on the progressing projects linked to the COVID-19. It's more a matter of playing with the flexibility we have and the short cycle assets. We do not anticipate a large impact on our project linked to the COVID effect at this stage. On U.S. shale, we are consistent. We haven't changed our minds. We think that it's a business on which we will not be able to leverage on synergies because we are not present in the U.S. on this type of business significantly. It's high breakeven assets, and it's completely inconsistent with our strategy to have in our portfolio low-cost assets. That's why we continue to think that it's not the most efficient way for us to allocate our capitals.
Very clear. Thank you, Jean-Pierre.
Thank you. Your next question comes from the line of Thomas Adolff of Credit Suisse. Please go ahead.
Hi, good afternoon. I do apologize. I've got three questions, please.
Yes.
You've turned a bit cautious for next year, at least for budgeting purposes, $40 Brent. I wonder, as it relates to your credit metrics in a $40 world, whether you think next year you'll be consistent with a single A. Obviously, you're not for this year. In the case, also the rating agencies lower their price decks like yourself, what are the measures which you consider to improve your credit metrics? Maybe linked to that, are you open to perhaps do another one-off scrip offering like you've done this year, or are you considering potentially selling some infrastructure-type assets like many of your peers are doing? These should be fairly easy to sell these assets. Thank you very much.
Yes, okay. Yes, you are well conscious regarding the prices for next year, and that's true that we built our budget using the $40 per barrel assumption. If I remember well, S&P used a price deck at $50 per barrel for 2021 and I think the same $50 per barrel for 2022. I noticed that despite the drop in oil prices in March, April and the new price deck used by S&P and Moody's, by the way, we are able to keep our rating. That's true that we have a negative perspective, honestly, it's the same for almost all our peers. If the prices remains at $40 per barrel, what will be the impact on our rating? Honestly, it's very difficult. It's not so easy to anticipate. It's not fully in my control.
What I can tell you is that we try to demonstrate that we will continue to be disciplined, that we will, by the way, continue to put pressure on costs, try to reduce the gearing. It's the best answer I can make to S&P or to Moody's regarding our credit rating. On the scrips, you know the rules for a French company. Given that this scrip dividend was not voted in June during the general assembly. We will not offer the scrip dividend for the interim dividend. It was not offered for the first, it has not been offered for the second interim dividend. You will see that, of course, given the reason I mentioned to you, it was not offered for the further dividends. Honestly, at present time, if the prices remain at this level, we demonstrated that in the $40 per barrel environment, we are resilient.
We are able to generate cash. We'll see in 2021 what the prices will be, and if the prices will be significantly below $40 per barrel. It's a decision of the general assembly and not a decision that the board could do on the payment of the interim dividends.
Yeah.
By the way, at present time, sorry, we have a yield at nine, even 10%. A scrip with this level of yield will be very expensive. That's of course, what we have in mind at the time. I think your last question regarding the infrastructure or potential infrastructure asset sales. Yes, that's true that in an environment with low prices, it could make sense to focus our M&A or divestments on infrastructure assets. We do not need to be an equity partner in infrastructure to benefit from the infrastructure. I'd say what we have demonstrated very recently with the divestments in infrastructure we made last year. We will continue with this strategy if possible. Definitely infrastructure assets, they are a good candidate, I would say, to divestments in low price environments.
Perfect. The bottom line is you'll do whatever it takes to protect the single A and the few flexibilities around that, selling assets, et cetera.
Exactly.
The single A.
We mentioned that in the way we allocate the cash, maintaining, having a strong balance sheet, with an objective of gearing below 20% and a single A, of course, is a priority in the way we will allocate the cash.
Perfect. Thank you very much.
Thank you. Your next question comes from the line of Christyan Malek of J.P. Morgan. Please go ahead.
Hi. Thanks for taking my questions, two, if I may, Jean-Pierre. First, in a scenario where OPEC doesn't reverse production outputs, and it's a pretty significant number around 1.9 million barrels. How will that impact your production outlook? Would you consider that as a sort of material event?
Christyan, sorry. Christyan, the line is very, very bad. It's impossible for me.
Sorry, can you hear me better now?
Yes, it's better. Sorry. Yes. Yep. Go ahead.
Hello?
Yes.
Yeah, sorry about that. Just a connection issue. In a scenario where OPEC doesn't increase production next year, and it's about 1.9 million barrels, would that be material to your production outlook and your guidance? I just want to give some color as to how that affects your thinking around targets for next year. The second question is regarding CapEx and sort of your dividend priority. I'm sorry to ask it directly, but to what extent is time an important factor as you think about your dividend and the fact that if we stay below EUR 40 and you're effectively out the money, how long will you wait to make a decision on whether you'd continue to deliver that dividend? Thank you.
Yes. If I understand well your question regarding production. The main rationale behind the decline in production at TotalEnergies level in 2021 and 2023 is directly linked with the OPEC quota. By the way, of course, we were supportive of this quota because it helped to stabilize the prices above $40 per barrel. I don't know what the decision will be during the next OPEC meeting. I'm sure that if the prices remains around $40 per barrel, the discipline will be maintained. We can imagine that the impact on production will remain more or less the same as the current impact. It's already embedded in the figures of the guidance we gave during the last investors day. We gave a profile between now and 2025 mentioning that the production will increase more or less by 2% on average per year between now and 2025.
We mentioned at the same time as well that this 2% will result from more relatively stable production over a period of 2021, 2022, and that the increase will come later on with the startup of the offshore Brazilian projects, with the startup of Arctic LNG 2, and with the startup of Mozambique LNG. Regarding your question, concerning the dividends, I think we were very clear during the last investor day that we can support the dividend at the $40 per barrel, and that this dividend policy is, I would say, well-sized for an environment at $40 per barrel. Again, the rationale behind that is that we have strong fundamentals. We have demonstrated quarter after quarter that we are able to maintain the breakeven below $25 per barrel, pre-organic breakeven. We put pressure on OpEx. We put pressure on CapEx. We continue to be disciplined.
All the teams, they are fully mobilized to see the beginning of the crisis to implement the reaction plan we have decided very rapidly after the crisis. I think the best illustration of that is that at EUR 40 per barrel, it was more or less the price we have this quarter, we are able to announce, or the board decided to confirm the level of dividend, and at the same time, we are able to reduce again. Having said that, we are very clear. If the prices falls below EUR 40 per barrel, we'll of course not overreact immediately. We did not overreact in the Q2 when the prices were below EUR 30 per barrel. If the prices stays below EUR 40 per barrel, we will not overstretch the balance sheets.
Okay. Can you qualify what stay means? Is it three months, six months, nine months? Is there any way you can quantify that pattern of time?
It's a matter of perception rather than it's just mathematical. Once again, you have to keep in mind that we are cautious people, but we have very strong fundamentals. We can play on our balance sheet, not over a very long time period, of course, but I will not give you I know no formula to say if during one, two, three months, the price is below a certain number. Of course, we have to make a decision. It's a matter of perception as well of what the market could be.
Thank you very much.
Thank you. Your next question comes from the line of Paul Cheng of Scotiabank. Please go ahead.
Thank you. Good afternoon. Two questions, please. First, Jean-Pierre, can you talk about Suriname in terms of, there's a number of nice discovery. Is that going to be candidate for fast-track development? What's the game plan there? Secondly, can you disclose what is the EBITDA or cash flow for your renewable and power business in the third quarter? Also whether that you are concerned with the rising renewable power asset price in terms of your ability through acquisition to reach your target. Thank you.
Okay. Yes, on Suriname, so I think I've already answered more or less to these questions. Given that we have already drilled three wells and the fourth wells is ongoing at present time, the objective is now through appraisal to confirm the level of resources and the reserves and to sanction as soon as possible a project and a possible fast-track development. Of course, if we have sizable resources in Suriname, the objective for us will be to put on stream, to put on production these resources, these reserves as soon as possible. Concerning EBITDA, we noticed or we listened to you, by the way, what we heard from the analysts and from the investors after the presentation we made in September. As you can see in the press release, we make more disclosures regarding our renewable business because now we gave a level of portfolio.
We gave the level of capacities already benefiting from long-term PPA. Regarding the EBITDA, we'll see in the coming reports what we can do regarding EBITDA and if we can communicate on that metrics as well to give you more clarity on this business. By the way, this could contribute to give more value to this business.
Okay. Thank you.
Thank you.
Thank you. Your next question comes from the line of Lucas Herrmann of Exane. Please go ahead.
Jean-Pierre, hi. Nice to talk with you. Nice to have the opportunity.
Yes.
Glad you're well. A couple of questions or two or three questions, if I might. The first one is just when is a dividend reduction not a dividend reduction? I thought the interim dividend Q3 last year was EUR 0.68 per share, not EUR 0.66. Just trying to understand what the annual payout is and how you think about it. Staying with dividends, and perhaps to some degree, going back to Christyan's question, when I look at what your European peers have done, BP, Shell, admittedly by force and limited choice, they've restructured their payout policies to something which I think one could say is a lot more sensible given the transition and given the volatility that we've seen over the course of the last nine months in oil prices. In short, they've moved to an absolute payout and to a buyback. You obviously haven't.
Your shares yield a short 11% at the present time. The market's not giving you huge credit. Would it not just make much more sense through this period when others have done something similar, and when there is so much uncertainty, and when you're acknowledging the importance of your balance sheet, to change the structure of your payout, Jean-Pierre, such that you do use a fixed component, you do use a buyback component, and you take advantage of the very depressed share price at the present time to buy an asset that today yields towards 11%, and which I think you feel probably offers exceptionally good value? Those are the two questions.
Dividend is stable at EUR 0.66 per share in Q3 compared to Q2. If you compare the third interim dividend this year with the third interim dividend we served in 2019, it's EUR 0.02 difference. What you have not to forget is that in USD, there is a strong increase because with the stability in USD, you have a 6% increase between the two
Jean-Pierre, do I now need to think about your dividend in dollar terms then, and adjust that mentally to consider what the euro number will be?
Sorry, I haven't captured all your question. Sorry.
Do I now need to think about what the dividend is in dollar terms and try thinking about flatlining that to think about what the euro declared will be?
No. You know that given as a French company, we have to denominate our dividend in EUR, and so the dividend policy is denominated in EUR. Just to mention that in USD, if you convert this level of dividend in dollars, our investors in USD will benefit from an increase.
The structure of payouts, it makes less and less competitive strength or sense.
It depends how you see this subject. We consider that once a year, we can support the dividend at EUR 40 per barrel. There is no way to reset the dividend policy at EUR 40 per barrel. On the opposite, that's true that with this level of dividend and the share price we have at present time, it leads to a yield above 9%. In our view, it should lead to a rating of the company rather than a drop or decline or reduction in our dividends. That's, by the way, the conclusion of our CEO in September when he concluded the presentation.
With the business case we presented, with the resilience we have demonstrated over the last couple of years, with the fact that we can support this dividend at $40 per barrel, we anticipate that the share should be rated, and so that the current yield at 9%, 10% will go down hopefully in the coming weeks or months.
Okay, thank you. I guess I'd just simply argue that it's not necessarily the best structural policy for a company heading towards transition and given the constraints and volatility in markets, but I hear you. Jean-Pierre, thank you very much for your answer and your tolerance.
Thank you. Thank you to you. I think it was the last question.
It was the last question, sir. Please continue.
Thank you to everyone. Once again, I hope that you will keep safe in this very challenging environment. Have a nice weekend.