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 2nd wave of the COVID-nineteen pandemic in Europe and are not yet over with the first wave in the United States. So let's move to the results. Total reported Q3 results that reflects the resilience of the portfolio and demonstrates again the group's ability to capture the benefits of improving oil prices and market conditions.
Adjusted net income rose to $848,000,000 or $0.29 per share. Debt adjusted cash flow, the RCF, increased to 4 point $3,000,000,000 Leveraging strict capital discipline, we strengthened the balance sheet and reduced gearing to 22%. And based on the strong fundamentals of the company, we confirmed the group's support for the dividend with the announcement of our 3rd interim distribution maintained at 0.66 euros per share. We saw mixed signs of recoveries in the 3rd quarter and we note in particular that volatility, particularly in oil prices, was lower than in the 2nd quarter. Brent rebounded from less than $30 per barrel in the 2nd quarter to more than $40 per barrel in the 3rd quarter, thanks mainly to OPEC plus 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 transitional, the case for the winter season. The group is continuing to execute and deliver on the strategy objectives presented since the start of the COVID crisis. We have kept the organic breakeven below $25 per barrel, reduce OpEx to $5 per barrel equivalent and we are on track to cut costs this year by more than 1,000,000,000 dollars objective.
In this environment, capital discipline is key and we are limiting CapEx to less than $13,000,000,000 this year, dollars 1,000,000,000 lower than previous guidance, while still continuing to invest $2,000,000,000 for our fast growing renewable power generation business. Operationally, oil and gas production decreased to 2,700,000 barrels per oil equivalent per day in the Q3. Mainly this reflects strong compliance with OPEC plus 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 plus compliance and the return of Libyan production only since October, we now anticipate full year 2020 production will average less than 2,900,000 barrels per oil equivalent per day.
Turning to the results by segment, IGRP Integrated Gas Renewable and Power segment reported 280 $5,000,000 of adjusted net operating income and close to $700,000,000 of cash flow in the 3rd quarter. This segment includes our integrated LNG business, as you know, where we are the 2nd largest player worldwide and well positioned to participate in the global energy transition. LNG sales volumes were 8,100,000 tonnes in the 3rd quarter, a 9% increase year on year, mainly due to growth in our trading activities. LNG prices averaged $3,600 per 1,000,000 metric, reflecting mainly the 3 to 6 months lag effect on oil linked contracts. But this effect is beginning to reverse and we anticipate a rebound in LNG prices to more than $4 per 1000000 in the 4th quarter.
We'll continue to grow our LNG business from 28,000,000 tonnes of sales through the 1st 9 months of this year to 50,000,000 tonnes 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 gigawatts, nearly doubled compared to a year ago. And worldwide electricity production increased by more than 40% in the 4th 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 0.3 gigawatt portfolio of solar projects in Spain plus agreements to develop more than 2 gigawatts of floating offshore wind in South Korea and France.
We also announced that we have signed a 6 terawatt hour 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 refine value to the business as it becomes more material. As you know, we have the objective to grow renewable power generation to 35 gigawatts of gross installed capacity by 2025.
We already have about 24 gigawatts in our portfolio, 5 gigawatts installed, 4 gigawatts in construction and 15 gigawatts under development. Installed capacity of 5.1 gigawatts at end of September is fully covered by PPAs. And out of the capacity in construction or under development, we'd say 20 gigawatts, 9 gigawatts 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 Total into a broad energy company, so I will not go into more details here.
Let's turn to E and P. Our conventional oil and gas segment generated adjusted net operating income of $800,000,000 and more importantly, I think carried the group with cash flow generation of more than $2,600,000,000 in the 3rd quarter. Average realized liquid 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 800,000,000 tonnes quarter to quarter, thanks to our resilient E and P portfolio and our sensitivity to oil prices.
The Downstream faced a more challenging environment in the 3rd quarter with refining margins in Europe negative on average for the quarter and a less exceptionally favorable environment for trading activity than in the Q2. Recall we mentioned that trading generated an exceptional surplus of around 5 $100,000,000 of cash in Q2 due to huge volatility. The 3rd quarter was in fact very stable with Brent remaining in the range between $40 $45 per barrel. Faced with operating losses, we reduced our refinery utilization rates to 57% in the 3rd quarter from 59% in the 2nd 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 Q3 from 80 4% in the 2nd quarter.
Marketing rebounded from the 2nd quarter low, generating more than $400,000,000 of adjusted net income net operating income, well above the pre COVID Q3 last week of last month of last year, sorry, as lockdowns were lifted in Europe and in Asia. Downstream as a whole generated $373,000,000 of adjusted net operating income and close to $1,000,000,000 of cash flow. With a low level of investment required, the Downstream has provided 2 $400,000,000 of free cash flow to the group over the 1st 9 months of the year. The trailing 12 months royalty 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 Linseil refinery in the UK and in September the conversion of the Grand Prix refinery to a 0 OI platform producing renewable diesel and bioplastics.
This further streamlines our refining footprint and builds on the successful conversion of Lameth into biorefineries. These are steps towards achieving our net zero climate ambitions that have the added benefits of improving the long term profitability and resilience of our downstream. And finally, at the group level, in the 3rd quarter net investments were $1,900,000,000 bringing the total for the 1st 9 months to $8,500,000,000 We anticipate that our net investment will be lower than $13,000,000,000 this year and because of uncertainty will be prudent for 2021 budget and CapEx should be limited to less than $12,000,000,000 Despite this difficult environment and mainly due to our capital discipline, Total generated positive net cash flow of $1,900,000,000 in the Q1 and $2,700,000,000 in the 1st 9 months. Although the 3rd quarter was more stable than the Q2, the overall market environment remains a sentence and the way for world will depend on the speed of the recovery in global demand affected by the COVID 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 $40 per barrel brand 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 underinvestments have set the stage for a more constructive supplydemand balance. Our priority is to generate a level of cash flow that allow us to continue to invest in profitable projects, support the dividend and maintain a strong balance sheet. And of course, we'll continue to concentrate on the things we control safety, operational excellence, cost reduction and cash generation. And now I'm ready to go to the Q and A.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. And your first question comes from the line of Irene Mouna of Societe Generale. 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 and Chemicals, Jean Pierre, there was a EUR 290,000,000 asset impairment. Was it one particular one specific asset?
Or if you can talk about it, 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 2nd and third quarter. And I wonder what is driving that. Is it Novatek perhaps?
And finally, in M and 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. So good afternoon, Irene. Yes, you're right. The impairment we recorded this quarter are linked to the R and C segment, Refining and Chemicals. And it's 2 assets and only I would say 2 assets.
So it's Lince Refinery, Loire Refinery and Grand Prix. So given that we announced that we divest our participation, our lower refinery, we have to write off the assets. And the same for Grand Prix, we have to impair the assets that will be discontinued, that will not be used by the bio refinery that we will build in Grand Prix. So that's the DKK290 million you mentioned. So the 2 impairments are 2 this impairment and 2 assets.
Yes, the lower LNG prices, so you're right. And it's mainly linked to the performance of our Russian LNG assets and particularly Yamal LNG. And on MS volumes, it's clear that demand has dropped during the Q1 and the second quarter massively in the road transport, in air transport of course as well, sea freight. And of course, we have to we suffered from a slowdown in the industrial activities as well. We saw at that time retail sales down to almost minus 70% in France and between 30% to 40% in Germany and in the Netherlands.
And during the lockdown period, of course, customers try to take advantage of the low fuel price to replenish their fuel tanks at home. And so we witnessed high sales on our B2B segment. Now moving to the Q3. So we observed a rebound with sales, particularly in Asia, where sales resurge RPD. 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 expectation. And of course, the aviation will strongly be affected in the Q3 and is anticipated to this trend is anticipated to continue in the Q4. So all in all, we are seeing sales more or less stabilized minus 10% compared to 19 level. And on top of that, of course, we benefited from higher margins because inventories were built at lower cost. So all in all, it's rational behind the fact that with a bit less lead volumes and benefiting from higher margins, we are able to deliver this performance during the Q3.
Thank you very much, Jean Pierre.
Thank you. And your next question comes from the line of John Rigby of UBS. Please go ahead.
Thank you. Hi, Jean Pierre. Hi.
Just it strikes me that I
just wonder whether you could just offer your observations on this is that you are making 2 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 were expecting this year and is going down again next year. And yet you are, and I think quite rationally, setting out a case for why markets will tighten and pricing will improve. So isn't this exactly the right time to be kind of focusing on trying to get your projects out the door and through given, let's say, is a 3 to 4 year time lag. I get that there is a clearly liquidity financing balance sheet issue.
But 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? And 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. So it's very important. So our main projects are not impacted by this level of CapEx. And on top of that, we are very clear that we will continue to invest more or less $2,000,000,000 per year on our Renewable and Electricity segment. So 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 $13,000,000,000 this year. As we mentioned during the last Investor Day, we are cautious regarding the prices the price deck for next year. And we built our budget using a $12,000,000,000 amount for net CapEx for the next year. But you noticed, John, that between 202220 25, assuming a recovery in oil prices, we announced a range between €13,000,000,000 to €16,000,000,000 dollars Once again, we have in our portfolio 2 main projects under construction, so mainly Arctic 2 and Mozambique LNG. And 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. And 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. And
as you bring as and when
you bring back CapEx and presumably there is some sort of view and positioning taken on the ability to sort of have some flexibility as you bring it back on because clearly, as everybody has learned, visibility is low. So would we expect you to bring back CapEx fairly cautiously in the initial stages of any recovery?
It's a matter of environment. But again, this €12,000,000,000 or this €13,000,000,000 this year is clearly linked to the current price environment. The €12,000,000,000 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. So $12,000,000,000 $20,000,000,000 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 $13,000,000,000 $16,000,000,000 per year.
Right, got it. Thanks.
That's true, the flexible CapEx, we are flexible both ways. So you can they can be back on budget rapidly if Brent increased, of course. That's the beauty of this short cycle project. And you know that in our portfolio, we have more or less the equivalent of 1,000,000,000 barrels of short cycle projects. So 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,
again. Thank you. And 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 is 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 Q3. So can you just say why cash flow was so resilient relative to earnings this quarter? And is there any material power related cash flow contribution showing up within that number?
And then secondly, I think you mentioned underinvestment in supply longer term and how that might set up for a bit of a price recovery. But what I find interesting is your just your natural decline rate at 3%, I think for the last 6 or 7 quarters, it's been pretty stable at minus 3%, which is remarkable in a year like 2020 with pressures on your short term CapEx and things like logistics. So is that a real measured number? Or is that kind of backed out or an implied number from some of the other moving parts please? Thank you.
Yes. So regarding the IGRP performance, so the result and the cash generation. Yes, so the cash flow, the IGRP CFFO for the Q1 was down more or less by 1 third compared to last quarter. It was of course negatively impacted by the prices, by VLNG prices, but also by lower dividends coming from equity affiliates. And on the opposite, if you look at the net operating income, the equity contribution improved in the Q3, the answer I made to Uyghurian before, linked to the relatively good performance of the Russian assets and Yamal in particular.
And this has no impact on dividends. So that's rational behind the move you noticed on the CFO compared to the net adjusted income. And so the second
question Your Sorry? I'm sorry. Yes, just your natural decline rates of minus 3%, which is almost unchanged every quarter.
Yes. Yes, yes, because we benefit from 50% more or less of portfolio coming from LNG fields and fields in the Middle East in particular, in Abu Dhabi or in yes, in the Middle East. So all in all, if you measure the math, you have 50% of our portfolio benefiting from more or less a 0 decline and 50% with, I would say, a standard or normal decline of 6% to 7%. So all in all, so you made the math, it leads to the 3% global decline for our production. And you're right, it's remarkably stable quarter after quarter.
Understood. Thank you.
Thank you.
Thank you. And your next question comes from the line of Lydia Rainforth of Barclays. Please go ahead.
Thanks and 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 is still about the total level of debt.
And then 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? And just a little bit more detail on how big you think that market can actually be for carbon neutral LNG? And then very quickly, just a quick one. Can you just give me what you're thinking about the utilization rates for refining for the Q4?
Thanks.
Okay. Gearing. Yes. So you noted that we are able to reduce our gearing by almost 2% in the 3rd quarter compared to the 2nd quarter, because we are more or less at 24% in the 2nd quarter. We are below 22% this quarter.
It's the production, the translation of the fact that we are able to generate cash even after the payment of the dividend in Q4. We generated after dividend more than $1,000,000,000 of cash and of course it's lead to this gearing reduction. We as we are very consistent in saying that, yes, our objective is to have a gearing below 20%. So 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 $30,000,000,000 $16,000,000,000 of CapEx from 2022 to 2025, euros 12,000,000,000 in 2021.
After that, the dividend. So we reaffirm that the dividend is supported at $40 per barrel. And you notice that we confirm this quarter that, yes, the 3rd interim dividend will be maintained at €0.66 per share. And after that, very clearly, we put as a priority the fact that we want to maintain a very strong balance sheet. And in our mind, a strong balance sheet means a gearing below 20%.
And so that's why we mentioned that if by chance we are able to generate additional cash if the prices are above the $40 per barrel, we will first allocate this additional cash to deleveraging the company. The premium in relation with the carbon neutral LNG, honestly, I'm not so sure to have this answer. And 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 Q4, honestly, I have no crystal ball. I just noticed that the margin are a bit above $10 per tonne since the beginning of the quarter.
We'll monitor that very precisely. We have the utilization rates below 60% in Q3. And so the utilization will improve if margin improve. Of course, we will adjust utilization rates of our refineries to the level of margin. But honestly, given the level of demand and given the level of inventories, I'm sure that the refineries and perhaps I do not have to use this word, I'm sure, but it's likely that the margins will become will remain volatile and probably at a relatively low level.
And so 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. And your next question comes from the line of Bertrand Audet from Kepler Cheuvreux. Please go ahead.
Hi, thank you for taking my question. Hi, Jean Pierre. Two questions, if I may. The first one is, I was looking at the line equity income and other items and especially the line other items. And year to date, if I combine IGRP and Upstream, it's quite a big number.
It's above $600,000,000 whereas last year, for the full year 2020, it was around $70,000,000 Can you remind me of what's in there and what kind of revenues is located inside other items line? And 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. And can you share with us if Total is obviously, you have made the option, but if Total 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 sanctioned projects. Perhaps I think you have to switch up your micro because there is an echo. Okay.
I will. Sorry. So we are disciplined. So we sanction project only if the conditions are attractive. So you know the way we sanction project and the internal rate of return we use and the project we use to sanction project, which will be honestly the same for Caissem, there is no reason.
So we'll submit an offer only if terms are attractive. That's true that we have been in Qatar for a long time. We are stronger partners. And by the way, we are recently awarded, as you know, for solar farms of 800,000,000 watts. We know well the Qatar.
By the way, we have embedded second lease at the request of Cupich in this project, but we will go forward only if the conditions are attractive. So that's the main that's my answer. You could remember that exactly that was exactly what we did with the Tor project in Brazil. We decided not to go not to cement or not to make an offer given that the condition not good or did not meet our thresholds. And it will be exactly the same for Qatar.
So your question regarding the equity affiliate income, honestly, I'm a bit lost. So you mentioned
Maybe you want me to rephrase it? Or No, no. Just
So you mentioned the Equity Affiliates' contribution to the IGRP results?
No, no. In fact, when we look at your results, 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, to calculate what is these other items. And these other items to date is, if I combine IGRP and E and P, is above $600,000,000 So 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 $70,000,000 So that's a $500,000,000 difference.
The figure that I have in mind is the contribution globally at the level of the group of the equity affiliates. And so it's EUR 350,000,000 coming from Novatek participation, coming from Yamal, coming from our main LNG projects. And
So in fact, I was referring to $600,000,000 figure I was referring to was a 9 months figure. And in Q3, it's around $165,000,000 combined iGRP and E and 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, but the offers are due by year end.
Thank you, Jean Pierre. And sorry for the accounting question.
No, no. I will have
a look because I do not have all the details in front of me, but of course there is a rational answer to your question. Thank you.
Thank you. And 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 want to clarify on the net investment guidance, the less than EUR 13,000,000,000 this year. You did EUR 8.5 year to date. So 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? And then the second question is on Mozambique LNG. Could 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 on for the full year, so the $13,000,000,000 is clearly linked to the fact that you have a very good visibility on the Q4. Traditionally, the Q4 in terms of investments is a bit higher or a bit heavy than the previous quarters. And so it's the rationale behind this guidance, dollars 13,000,000,000 And once again, as I already mentioned, so we have the Mozambique LNG project, we have the Arctic 2 project, we have some Meru 1, Meru 2 project in Brazil, of course, as well. That contributes to the level of CapEx that will expand during the Q1. Mozambique, I think perhaps I haven't really understood your question, but the FID had been taken.
By the way, the Mozambique, the FID was taken before by Anadarko because at that time it was in I think it was in July last year. So it was before we acquired the assets through the Oxy and Aderco deal. So the project, what I can tell you is that the project is on track. Of course, we are monitoring the situation very closely. But yes, the project is on track.
And so the first as you know, we will we are building 2 trains that will come on stream by 2024 2025. And on top of that, I think it was in September, we confirmed that the project financing is in benefit for the benefit of all the partners in the Mauson Ville, but the FID is second.
Just to clarify on that, because you guys have FID ed it, obviously, the partners on the other side have kind of paused it. In terms of the kind of chasing the synergy point, is there 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 Exxon. And that's good that there could be onshore synergies with this project. LNG project, but we'll not slow down the project linked to the Rovimah LNG project, to be very clear.
Okay. Thank you.
Thank you. And your next question is from the line of Michele de la 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 whether what you think about the next generation of projects, Uganda, PNG, Costa Zulen, whether you think this is the right time to move ahead or perhaps wait a little bit longer?
And 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 we definitely we think and that's why we try to explain during the September Investor Day that the planet will continue to need oil in the coming years. And 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 2020, 2020, 2025. So we have to continue to invest on oil project.
But of course, very selectively, because part of the demand, the oil demand will plateau, I don't know exactly when, in 10 or 15 years' time from now. And so our Swat EV is very clear. We want to position ourselves on low cost oil assets and exactly the rationale we have in mind when we sanction projects. You mentioned perfectly fits within the strategy of low oil projects. We have other projects in mind, of course, or in our portfolio that could be sanctioned in the coming years.
We just sanctioned the Miho-three, 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 Uhu 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.
So we have to be patient to be sure that we will be able to leverage on the synergies between our project and the Exane 1. But we are quite confident that we'll be able to sanction that project in the coming years. And even that this project is once again a low cost LNG project, very well positioned to supply the Asian markets. So we try we continue our strategy. We want to sanction a project if it's definitely a low cost project.
And by the way, by doing so, we are able to lock in the current situation and the fact that the to capture, I would say, the deflation as far as contractors are concerned. So that's the rationale we have in mind. So we will continue with this strategy. And we have demonstrated over the last couple of years that it worked 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 2 areas on which we made some significant discovery very recently.
So 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, 3 wells have been drilled with 3 discoveries: Maraca, Saqapa and Cascadesi. At present time, we are drilling 4th well.
And you know that after this drilling, Total will become the operator of the area. So the way forward is very clear for us. A lot of hydrocarbons has been discovered. And so now we need some appraisals wells to clearly identify the level of reserves and to launch if possible development with an objective to start up production by 2025. And on South Africa, we announced it was last week or I think it's or even this week, you have to remember that we made a second discovery on the assets with the new well.
So definitely it's open I would say, a new world class play in South Africa. And 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 possible conditions for the gas commercialization. So that's what we have in mind for the coming months on both Suriname and South Africa.
Thank you.
Thank you. And your next question comes from the line of Christopher Kuplent from Bank of America. Please go ahead.
Thank you. Hello, Jean Pierre. 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 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? And 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 Total's strategy to stay away from mostly U.
S. Shale? Or in fact, do you feel tempted by the kind of consolidation that's happening without much share price premium being offered? Thank you.
On the CapEx cuts, once again, there is no significant delays on the progressing project linked to the COVID-nineteen. It's more a matter of playing with the flexibility we have and the short cycle assets. And so we do not anticipate a large impact on our project linked to the COVID effect at this stage. On UHL, we are business on which we cannot 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. So that's why we continue to think that it's not the right the most efficient way for us to allocate our capital.
Very clear. Thank you, Jean Pierre.
Thank you. And 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 3 questions, please. You've turned a bit cautious for next year, at least budgeting purposes, dollars 40 brand. And 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. And in the case also the rating agencies lower their price decks like yourself, what other measures would you consider to improve your credit metrics? And maybe linked to that, are you open to perhaps do another one off script offering like you've done this year? Or are you considering potentially selling some infrastructure type assets like many of your peers are doing and these should be fairly easy to sell these assets? Thank you very much.
Yes. Okay. So yes, you are cautious 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 and P used the price deck at $50 per barrel for 2020 or 2021 and I think the same $50 per barrel for 2022. But we 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 equity.
That's true that we have a negative perspective, but honestly it's the same for almost all our peers. If the prices that are remained 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.
So 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. So it's the best answer I can make to S and P or to Moody's regarding our credit rating. On the script, 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 3 dividends for the interim dividend. So it was not offered for the first, it has not been offered for the 2nd interim dividend.
You notice that of course, given the reason I mentioned to you, it was not offered for the further dividend. Honestly, at present time, if the prices remain at this level, we demonstrated that the $40 per barrel environment, we are resilient, we are able to generate cash. So we'll see in 2021 what the prices will be and if the prices will be significantly below $40 per barrel. But it's a decision of the General Assembly and that's a decision that the Board could do on the payment of the interim dividends. Yes.
And by the way, at the present time, sorry, yes, we have yield at 9%, even 10%. And so fleet with this level of yield will be very expensive. So that's of course what we have in mind at that time. And I think your last question regarding the infrastructure or potential infrastructure asset sales. Yes, that's true that in an environment we blow low prices, it could make sense to focus our M and A, our 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. So we will continue with this strategy if possible. And definitely, infrastructure assets, they are good candidates, I would say, to divestments in low price environment.
Perfect. So the bottom line is you'll do whatever it takes to protect the single A and the few flexibilities around that selling assets, etcetera. But The single A
No, we mentioned that in our in the way we allocate the cash, maintaining having a strong balance sheet with an objective of gearing below 20%. And the single A of course is a priority in the way we will allocate the cash.
Perfect. Thank you very much.
Thank you. And your next question comes from the line of Christian Malek of JPMorgan. Please go ahead.
Hi. Thanks for taking my questions. 2, if I may, Jean Pierre. First, in a scenario where OPEC doesn't reverse production outputs, it's a quite significant number around $100,000,000 And how will that impact your production outlook? And if you consider that as a little bit
of material Sorry, Christian, the line is very, very bad. And it's impossible Sorry, can you hear
me better now?
Yes, yes, it's better. Sorry, yes. Yes, go ahead. Hello? Yes.
Yes, sorry about that. Just a connection issue. In a scenario where OPEC doesn't increase production next year and it's about 1,900,000 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. And the second question is regarding CapEx and sort of your dividend priority.
I'm sorry to ask you directly, but to what extent is time an important factor as you think about your dividend and the fact that if we stay below $40 and you effectively have the money, how long would you wait to make a decision on whether you'd continue to deliver that dividend? Thank you.
Yes. So if I understand well your question regarding production, but we but the main rationale behind the declining production at total level in 20 21 in 2020, sorry, is directly linked with the OPEC quota. But by the way, of course, we were supportive of this quota because it helped to stabilize the prices above 40 per barrel. So I don't know what the decision will be during the next OPEC meeting. I'm sure that if the prices remains around for figure per barrel, the discipline will be maintained.
And so we can imagine that the impact on production will remain more or less the same as the current impact. And it's already embedded in the figures of the guidance we gave during the last Investors Day. So we mentioned we gave a profile between now and 2020 5 mentioning that the production will increase more or less by 2% on average per year between now 20 25. But we'd mentioned at the same time as well that this 2% will result from more stable relatively stable production over the period 2021, 2022 and that the increase will come later on with a startup of the offshore Brazilian projects, with a startup of RT2 and with a 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 Fortiva Per Barrel.
And that these dividend policies, I would say, well sized for an environment at $40 per barrel. And 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. And so all the teams, they are fully mobilized since the beginning of the crisis to implement the action plan we have decided very, very rapidly after the crisis. And I think the best illustration of that is that at $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 the gearing. Having said that, to be very clear, if the prices falls below $40 per barrel, we'll of course not overreact immediately.
So we did not overreact in the Q2 when the prices were below $30 per barrel. But if the prices stays below $40 per barrel, we will not overstretch the balance sheet.
Okay. And can you qualify what stay means? 3 months, 6 months, 9 months? Is there any way you can quantify that? Line?
It's a matter of perception rather than it's just mathematical. So but 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 no formula to say if during 1, 2, 3 months the price is below certain number. Of course, we have to make a decision. So it's a matter of perception as well of what the market could be.
Thank you very much.
Thank you. And your next question comes from the line of Paul Cheng of Scotiabank. Please go ahead.
Thank you. Good afternoon. Two questions, please. First, Sean Peir, can you talk about surname in terms of I mean, 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 Q3? And 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. So yes, on Fiorina, so I think I've already answered more or less to this question. So given that we have already drilled 3 wells and the 4th well is ongoing at present time. The objective is now through appraisal to confirm the level of resources and reserves and to sanction as soon as possible a project and 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 reserves as soon as possible.
We noticed or we listened to you by the way what we heard from the analysts and investors after the presentation we made in September. And so we as you can see in the press release, we make more disclosures regarding our Renewables business because now we gave the 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. And by the way, this could contribute to give more value to this business.
Okay. Thank you.
Thank you.
Thank you. And your next question comes from the line of Lucas Herman of Exane. Please go ahead.
Jean Pierre, hi. Nice to talk with you. Nice to have the opportunity. Glad you're well. A couple of questions or 2 or 3 questions, if I might.
But the first one is just when is a dividend reduction not a dividend reduction? Because I thought the dividend, the interim dividend Q3 last year was 0.68 per share, not 0.66. So just trying to understand what the annual payout is and how you think about it. And staying with dividends and perhaps to some degree going back to Christiane's question, when I look at what your European peers have done, BP Shell, admittedly by force and limited choice, they've restructured the 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 9 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. So 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 a 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 €0.66 per share compared in Q3 compared to Q2. That's true that if you compare the 3rd interim dividend this year with the 3rd interim dividend we served in 2019, it's EUR0.02 difference. But honestly, what you have not to forget is that in dollar there is a strong increase because with the stability in euro in dollar you have a 6% increase. So do
I now need to think Jean Pierre, do I now still 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 your question, sorry.
Do I now need to think about what the dividend is in dollar terms and try thinking about flat lining 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 euro. And so the dividend policy is denominated in euro. Just to mention that in USD, if you convert this level of dividend in dollar, our investors in USD will benefit from an increase. European
structure of payout, it makes less and less competitive strength also?
It depends how you see the you see this subject. We consider that once again we can support the dividend at $40 per barrel. So there is no way to reset the dividend policy at $40 per barrel. But on the opposite, that's true that with this level of dividend and the share price we have at the end of time, it leads to yield above 9%. So in our view, it should lead to a rating of the company rather than a drop decline or reduction in our dividends.
So that's by the way, the confusion of our CEO in September after the when we conclude the presentation with the business case we presented, with resilience we have demonstrated over the last couple of years with the fact that we can support the dividend at $40 per barrel. We anticipate that the share should be related and so that the current yield at 9%, 10% will be will go down in the coming 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 that I hear you. Jean Pierre, thank you very much for your answer and your tolerance.
Thank you. Thank you to you. So I think it was the last question.
It was the last question, sir. Please continue.
So thank you to everyone. And so once again, I hope that you will keep safe in this very challenging environment. And so have a nice weekend.