Ladies and gentlemen, thank you for standing by and welcome to Total's Q3 2019 Results Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer I must advise you that this conference is being recorded today, Wednesday, October 30, 2019. I would like now to turn the call over to Jean Pierre Preyre, Chief Financial Officer. Please go ahead, sir.
Thank you. This is Jean Pierre Sprayer. Total reported strong demonstrating the ability of our diversified portfolio to resist volatility in the markets, particularly in terms of strong cash flow generation. Debt adjusted cash flow was €7,400,000,000 a slight decrease of 2% compared to the same quarter last year. Despite the 18% drop in the average Brent price and a decrease of more than 50% for spot gas prices in Europe and Asia.
The resilience were due mainly to cash accretive volume growth of more than 8%, strong contributions from integrated gas and downstream and company wide efforts to cut costs and reduce the breakeven. Adjusted net income was $3,000,000,000 or $1.13 per share, down 23% compared to the same quarter last year, mainly due to the weaker environment, but also benefiting from the growth and the downstream resilience. Looking at the 1st 9 months compared to the same period last year. Debt adjusted cash flow increased by 6% to $21,100,000,000 Adjusted net income was $8,700,000,000 down 17%. OpEx was $5.3 per barrel in Q3, reducing the 2019 year to date OpEx to $5.5 per barrel, which is a decrease of 5% compared to OpEx of $5.8 per barrel for the 1st 9 months of last year.
With additional cost reduction of more than $500,000,000 this year, we raised the cumulative savings target to more than $4,700,000,000 for 2019 compared to our 20 14 base. Operationally, the group's production hit a new high of more than 3,000,000 barrels per oil equivalent per day in the Q3, and production growth should reach 9% for the full year. It was 8 point 7% by end September. Q3 benefited from the ramp ups of Ichthys, Yamal, Aegina, Carne Bousoul and Culian. You and Verdupa started up early, so we will benefit the Q1.
The portfolio and delivering sustainable cash flow growth. We completed the acquisition of Mozambique LNG in September, and we should close the remaining parts of Anadarko portfolio, Algeria and Guyana, in 2020. We sanctioned Arctic LNG 2 in Russia. We participate in our second Guiana discovery. So we have a good start in this promising new basin.
And we won a new high potential exploration license as operator in Presalt, Brazil. We maintained strict capital discipline in line with our commitment for return to shareholders. An example of this was the termination of our agreement to acquire part of TULO Stakes in Uganda as we disagreed on the tax treatment of the transaction. Also, we confirm that we will not participate in Brazil transfer outright as the underlying price deck for the bonus does not fit with our criteria. Looking at the results, the E and P segment generated cash flow from operations before working capital, which I will refer to hereafter as CFFO, of $4,500,000,000 in the Q3 2019, a decrease of 14% compared to the same quarter last year.
In a deteriorated environment, this performance reflects the resilience of this FFO, thanks to the higher cash flow generation from new project start ups and wrap ups. Adjusted net operating income in the Q3 was $1,700,000 down 20 9 9% from $2,400,000 in the same quarter last year, reflecting higher DD and A from new projects. The iGRP segment increased FFO by more than 50 percent to $800,000,000 Adjusted net operating income in the 3rd quarter was $600,000,000 compared to $700,000,000 in the Q3 last year, again reflecting the weaker environment. Year to date, IVF PCFFO increased by nearly $1,000,000,000 thanks mainly to the 55% increase in equity LNG sales, in particularly fueled by Yamal LNG and Ichthys. In the LNG business, in addition to the acquisition of Mozambique LNG and launching Arctic 2 LNG, Cameron Train 1 ramped up in the 3rd quarter, Train 2 and 3 are under construction and will start next year.
We took over Toshiba's 2,200,000 tonne LNG portfolio in July, which came with a cash inflow of $800,000,000 We announced the expansion of our strategic partnership with private conglomerate, Adanis, to develop access to fast growing gas and LNG markets in India. We signed a gas agreement in Benin that includes FSRU, floating LNG regas units. And we launched our 1st LNG bunker refueling vessel, which will operate in Northern Europe, supplying the next generation of container ships. In the Renewable business, we added 500 megawatts of new solar and onshore wind farms in France. We sanctioned our with solar panel.
This is part of our ongoing plan to solarize 5,000 service stations globally and part of a broader plan to leverage renewable energy at our facilities throughout the group. And we joined forces China. Turning to the Downstream. China. Turning to the Downstream.
CFFO for the combined Downstream was very strong at $2,000,000,000 in the Q3, an increase of 14% compared to a year ago. Adjusted net operating income for the 3rd quarter was stable compared to the same quarter a year ago at $1,400,000,000 In Europe, cracker margins again benefited from the supply limitation as a result of a heavy turnaround season. In the U. S, petchem margins benefited from lower feedstock prices, notably ethane but also LPG, with new supply coming online. The diversity of our downstream business units, including the countercyclical and noncyclical elements, is an important part of delivering sustainable performance.
Year to date, downstream sales FFO increased to $5,100,000,000 and is well positioned to reach close to $7,000,000,000 for the year. Refining and Chemicals generated CFO of $1,400,000,000 an increase of 17% compared to the Q3 2018, mainly thanks to higher petrochemical margins. Adjusted net operating income was $1,000,000,000 a slight increase compared to the Q3 last year. European refining margins, MVC, were $47.4 per tonne, stable compared to last year. Marketing and Services generated FFO of $600,000,000 an increase of 7%, notably due to higher margins in Africa and Europe.
Adjusted net operating income was $400,000,000 in the 3rd quarter, down 13 percent compared to last year. Year to date, CFFO increased by 10% to 1.8 $1,000,000,000 In terms of profitability, return on average capital employed for our best in class downstream was 25% for the past 12 months. At the corporate level, based on a rolling 12 month average, return on equity for the group was about 10% at 10.3% at the end of the 3rd 3rd quarter. Year to date debt adjusted cash flow for the group is €21,100,000,000 up 6% compared to last year. Net investments, including acquisition and asset sales, was $13,200,000,000 for the first and we expect the full year of 2019 to be less than $18,000,000,000 Net acquisition and asset sales for the 1st 9 months of 2019 was $4,100,000,000 This includes mainly $3,900,000,000 for the Mozambique LNG acquisition and the $800,000,000 that we received for taking over the Toshiba LNG portfolio.
LNG portfolio. Year to date, we have completed $1,600,000,000 of sales or about 30% of the 5,000,000,000 target. In addition, we have sold but not yet closed around EUR 1,000,000,000 of assets, including mature UK North assets, the Trapil Pipeline Network in France and the sale of a non operated block in Brunei. So we are well in the advanced The organic pre dividend breakeven is below €25 per barrel. Maintaining a strong balance excluding capitalized leases and 21% including them.
The closing of the Mozambique LNG acquisition added about 2.5% to gearing Investors Day is that we are accelerating dividend growth. Previously, our guidance was an increase of 10% over the 20 eighteen-twenty 20 period, and we have been growing the dividend at more than 3% per year. Given our outlook for strong cash flow growth of about EUR 1,000,000,000 per year over the 2020, 2025 periods, the board has decided to accelerate the dividend growth for the coming years with a guidance of 5% to 6% per year. In line with this, we confirmed that the 3rd interim dividend for 20 19 will increase by 6%. Buybacks through September was $1,150,000,000 Given the strong cash flow generation, we will end the year with 1.7 $5,000,000,000 of buybacks, exceeding our 2019 target of $1,500,000 and we'll complete $5,000,000,000 program next year.
Finally, we announced that we'll open a digital factory in Paris in early 2020 that will pool the talents of 300 engineers, data specialists and other experts to generate an estimated 1 point $5,000,000,000 per year in value by 2025 through increased revenues and reduced costs and investments. Summarizing the 3rd quarter results, Total's integrated model is working well and our efforts to reduce breakeven and high grade the portfolio are paying off. Despite weaker oil and gas prices this year, we increased cash flow generation from our diversified portfolio, benefiting mainly from integrated gas and downstream. We are on track to grow cash flow over the coming years. We are disciplined in our capital investments, including net acquisitions.
The balance sheet is strong and we are committed to returning value to our shareholders. That's it for my prepared remarks. And now we can go to the Q and A.
Thank you. Ladies and gentlemen, we will now begin the question and answer And the first question comes from the line of Lydia Rainforth from Barclays. Please ask your question.
Thank you and good afternoon Jean Pierre. Two questions if I could. The first one just come back to the asset sales and can you just walk me through why the Toshiba LNG part is included in asset sales? And just in terms of it seems to be odd given there is a liability associated with that. And then the second one was just around the low carbon business and highlighting the progress being made there.
Can you give us an indication of where the returns might be for across the different regions, whether it's trans Japan, China? Thank you.
Thank you, Lydia. Regarding Toshiba, so you know the deal. So we acquired the Toshiba LNG portfolio. It was in August this year. The rationale behind that is that, of course, for Toshiba Atoshiba saw negative value in this contract and decided to exit from this non core business.
They have paid us $800,000,000 for that. So in fact, it's an acquisition, but at the same time, we capture this $8,000,000 of cash for this portfolio. Since we received cash, obviously, in our cash flow statement, it's considered as a sale. The second question regarding low carbon. So you know and I think we are very we are transparent in September during the Investors Day.
A typical renewable project deliver an internal rate of return, I would say, 5% to 6%. And of course, it's not in line with our criteria to sanction projects. So to boost our equity in low carbon projects and particularly in solar farms or wind farm, We leverage projects. So typically, we use a debt to equity ratio 70%, 30%. It could be higher because, of course, at present time, money is very cheap.
So in some cases, we can achieve 80% or 80%, 20% debt to equity ratio. So that's the first step. And second, we farm down our shares and we keep more or less, 50% of the share. And so doing that, we can achieve NIIRF or equity above 15%. Low carbon business, in our view, includes LNG as well, of course.
It's and you know that growing along the gas value chain is a key priority for us.
And so that's helpful. Thanks very much.
Thank you. And the next question comes from the line of Biraj Borkhataria from RBC. Please ask your question.
Hi, thanks for taking my question. 2, please. The first one is on the buyback. The increase in the run rate is encouraging, but you obviously maintained your guidance as flat into 2020. I would have thought with growing production, you've got flat CapEx and then you have the benefits of IMO 2020, The 2020 buyback potential would be a little bit higher at least than 2019.
Could you just talk about how you're thinking about that run rate as you go into next year? And then the second question is on Guyana. You divested part of your stake in the block to QP 2 or 3 weeks ahead of the discovery. Could you just walk us through what drove that decision? Because presumably the well was either being drilled or had been drilled when that decision was made.
Thank you.
Okay. So first question regarding buyback. So in last year, we bought back the equivalent of $1,500,000,000 End of this year, in September, we bought back the equivalent of 1 point $15,000,000,000 And so we announced that we will buy $1,750,000,000 for the full year. So that means an additional $600,000,000 for the during the Q4. The strategy is very clear.
We will deliver the 20 18, 20, 20 2, €5,000,000,000 program that has been announced in February 2018. Beyond 2020, I think we will act according to our priority of cash allocation. So first, dividend growth of 5% to 6% per year. I think it was a main message from the Investor Day that we'll accelerate dividend growth. You know that before, our guidance was an increase over 10% over the period 2018, 2022, and we have been growing the dividend of more than 3% per year.
Now the board has decided to accelerate the dividend growth for the coming year with a guidance of 5% to 6%. As you mentioned, we the board has decided to implement this increase immediately. And so the 3rd interim dividend for this 3rd interim dividend, you will see this 6% growth. 2nd priority is to deliver the company. I think we are very clear that we want to maintain a very strong balance sheet, And gearing is key in our strategy, in our views.
And buyback, of course, we used to share extra revenues above $60 per value. Regarding your question on Qatar Petroleum and the far down to Cupe on Vienna. Total is a long term partner of Cupe in Qatar, and we support we therefore support their international development. You mentioned the Guyana wells. So at the time, the partnership or we decided to let Cupe Farm into some exploration, actually in Vienna but also in some other countries, so Kenya and Libya, the well was not drilled.
Thank you. We will now take our next question. The next question comes from the line of Oswald Klim from Bernstein. Please ask your question.
Hi, yes. Jean Pierre. Thank you. Just two small ones on the 3Q results. The 3rd party LNG sales were down sequentially quite a bit.
I just wonder what's going on with that line item or if there's any LNG cargoes you're not actually lifting at the moment. And similarly in affiliate earnings for Refining Chemicals and also Marketing and Services both down quite a chunk sequentially on year over year. If you could just talk to what's happening in those? And maybe just a follow-up to Guyana, that you have had 2 discoveries on the block recently. How are you thinking or how interesting is this block turning out to be from your perspective?
Thank you.
Okay. So regarding the Q3 results and first party LNG sales, yes, so that's true that the sales from equity production and third party purchases were down quarter to quarter, and it's clearly linked to less volumes of spots in our sales. I can say that there was a higher focus this quarter, so in Q3 quarter Q3 2019 on using our European regas capacity instead of selling on spot markets. And so you can you will see that on 9 months, the sales on Total are increasing by 75% compared to the same period last year. So second question regarding Downstream.
Yes. Okay. So the equity affiliate contribution to net operating income was around $520,000,000 this quarter. It's below last year. Last year, the same figure was on the same the equity affiliate contribution to net operating income was at $860,000,000 It's in relation to a weaker gas price environment, impacting Novatek in particular and on one side.
And on the other side, we faced lower availability in South Korea in our GV with Anwar. And in Satorp, our GV with Saudi Arabia in with Saudi Aramco, sorry, in Saudi Arabia. However, Q2Q, I would say, we are benefiting notably for Novatek and Yamal LNG. On exploration in Vienna, I will summarize by saying that it's a promising start in Vienna because we are successful in drilling 2 wells. So we are the 1st well.
So JPRO, it's high quality sandstone reservoir. The second well that has been drilled, Joe, it's a play opener. And so I would say that our explorators are very excited by these 2 wells. And we hope that in the coming years, with additional wells, we'll confirm that definitely Guyana is will contribute positively to our exploration results.
Thank you. And the next question comes from the line of Thomas Adolff from Credit Suisse. Please ask your question.
Good afternoon. A few questions for me, please. Just going into IGRP, you've seen a sequential improvement in earnings. Perhaps you can kind of talk about the moving parts in this division. What's driven the increase and how did the integrated gas business perform on a quarter to quarter basis?
Secondly, in refining and chemicals, there was a recovery in throughput in your refineries, but you still remain fairly low at 82 percent and you've highlighted there's been some maintenance at Normandim and some issues around Kaan plan for 2020? And perhaps finally, if I may, just coming back to your comment on shareholder distribution and again going back to the Management Day and the message on the Management Day. In 2021, assuming your macro scenario $60 Brent, are you likely to return 30% of cash flow to shareholder or 40% of cash flow to shareholders? Thank you.
Okay. So first, I have the question regarding Refinery. That's the situation in our French Refinery. So yes, so Grand Prix refinery was shut down end of February because of detection of a crude leak in the pipeline supplying the refinery. So now the Grand Fin refinery has restarted operation and the restart of operation occurred mid July.
Idea piece, the environment was weaker, obviously. We have low gas price we have we faced a low gas price environment. But at the same time, the CFO for this business segment increased by more than 50%, so 53% year on year at more than at almost $850,000,000 It's definitely due or it's the main driver for this increase is the cash generated by Yamal LNG and it is and with the ramp up of these two projects. If I consider the 1st 9 months, I think one of the main takeaway of our Q3 results is that we are able to increase the cash flow generated for AGRP by we are able, sorry, to deliver our cash flow around $1,000,000,000 driven again by this LNG business. And at the same time, the LNG production, as you noticed, was up by more than 55%.
Can I stop you, Dave? I mean, can you comment on 3Q versus 2Q? Because earnings
are up quarter on quarter
Yes. We have a higher contribution from Ichthys, but at the same time, for low carbon electricity as well, to answer to your question. The last question regarding the shareholder return in 2021. In February 2018, we announced how we'll allocate our cash flow, our CFO, our cash flow generated by operation. At that time, obviously, we are lagging our competitors.
It was in 20 17. And so it has been said we said with the Board that, of course, we needed to rejoin the pack, And we did catch up since there. And now, in 2018, we returned to our cash to our shareholders the equivalent of 38% of the CFO. Eventually, we'll get to the 40%. I remind you that with our guidance of 5% to 6% increase per year of dividends, we will increase the dividend by about $500,000,000 And at the same time, we will increase the cash, the FFO, by $1,000,000,000 So that means that we'll return more or less half of the added of the cash we will generate.
Our CEO, Patrick Pouillenet, who gave that indication of 30% CFFO was in July, but it was not a commitment. It's a medium term aspiration.
Okay, great. Thank you.
Thank you. And the next question comes from the line of Irene Himona from Societe Generale. Please ask your question.
Thank you. Good afternoon Jean Pierre. I had 3 questions please. Firstly, in the Q3, looking at Marketing and Services, NOB at EUR 413,000,000, I mean, it fell sequentially. And year on year, it fell about 13%.
I wonder if you can explain what drives that relative weakness. Secondly, tax rate in Q3, the tax rate in E and P, I thought looked quite low. Can you just remind us in a world of $60 Brent roughly what we can expect for E and P tax in the Q4 and into next year? And my final question, looking at the coupon payment on your hybrids, your perpetual subordinated notes, in Q3, that payment jumped about 77% sequentially from €74,000,000 to €131,000,000 In the 9 months, you paid about 17% more than a year ago. I know you issued some more hybrids during the year, but didn't think you issued 17% more.
So I wonder if you can again give us a sense of what the payment schedule for this is because clearly it impacts the EPS calculation. Thank you.
Okay. So first question regarding Marketing and Services. First of all, I think the net operating income year on year is more or less stable. It remained above $400,000,000 So that's the slight decrease is not very significant. And at the same time, if you look at the cash flow CFFO generated by Marketing and Services, you see that this cash flow increased by more than 7%.
So it's completely in line with the guidance we gave to increase Marketing and Services cash flow, more or less, by 100,000,000 Tax rate, yes, the effective tax rate for E and P in Q3 was more or less 4.40 percent and 39.7%, to be precise. It's in line with the weaker environment. In last year, in Q3 2018, the effective tax rate for E and P was 40%, 47%. So it's very difficult to comment tax rates on a quarterly basis, but it's in line with the figures we have in mind, to have more or less an E and P tax rate between 40% to 50% depending on the brine price in the range between 60 to 70. Hybrid, first, that's true that we refinanced a part of our portfolio.
It was in I think it was in March or in April this year. But we haven't increased the total amount of hybrid. It's a real financing. So we issue a new hybrid, but at the same time, we have decreased for the same amount the level of hybrid in our portfolio. So I would say the total level of hybrid is exactly the same.
I do not have the exact payment schedule in mind regarding the coupon. What I can mention is that in my view, I consider hybrid as being a very cheap equity. And the coupon overall, for all the different franchisees we have in our portfolio, the coupon are below 3% before tax. So that means that after tax, it's around 2%. I can something I will add something through the refinancing.
We're able, by the way, to reduce the coupon. It was a very, very successful refinancing.
Thank you very much.
Thank you. And the next question comes from the line of Jon Rigby from UBS. Please ask your question.
Yes. Excuse me. Hello. Hi. Two questions.
1 on the Downstream and then one on M and A. So on the Downstream, just to go back to Thomas' question, as you noted, the throughputs in the refining were running low, actually low year over year. We're obviously seeing a pickup into the year end IMO. So are you able to just talk about where you think I mean, should we be expecting by historical standards relatively high utilization rates and throughput through 4Q and into 2020 to take advantage of what might be a good opportunity. And just on that downstream, was there a decent or notable contribution from oil trading in the quarter?
Some of your peers have noted some benefits, and I guess that might be related to these changes that's on Downstream. On M and A, you obviously still got some outstanding payments to make around the Anadarko Africa transaction. So are you able to say kind of as of right now what you would be likely to pay? And let's say, if it were to be, we say, at $60 and you close it mid year next year, what the delta would be on the consideration that you would expect to pay?
So first of all, I will not change the tradition. So I will not comment on trading contribution in the results in Refining and Chemical results. Regarding so a question regarding IMO, I'm not sure if you have really understood your question. Could you elaborate a bit?
Yes. I mean, if you look at the refinery throughputs year over year, they're actually down. I mean, they're up sequentially, but throughputs are down. I'm just asking whether there's the plan to run the network hard through 4Q and into next year with the assumption that refining margins are helped out by IMO, so to make sure you get the full leverage for that?
You know that our refineries are ready for IMO. So regarding maintenance program for Q4, normally, we value the planned maintenance that will impact Q4. And our once again, our refinery all the investment has been done in our refineries. So we are ready to benefit from IMO next year. And of course, to be able to capture additional potential additional margins, so we will plan to run as much as possible in our refineries.
Once again, it's very difficult to have to anticipate the refining margins, but our objective is to be ready to be in a position to capture additional value. M and A, so you know we closed the Mozambique LNG acquisition. It was end of September. By the way, it was a very good achievement because we signed the SPA. We got it was August.
So we are in a position to close this part of the deal in less than 2 months. Once again, Mozambique we consider Mozambique LNG as the jewel in this acquisition. So we are more than happy to have been in a position to close this Mozambique part of the deal. Regarding the additional assets, so Algeria and Ghana, so we the discussions, I would say, with the authorities are still ongoing. And so we expect to be in a position to add the closing in 2020.
So late, we will the result of this discussion. We are by the way, we are, of course, familiar to these kind of discussions. When we acquired the Maersk portfolio, we had this type of discussion, in particular, in Algeria. So we see to and we expect to have the closing in 2020. Regarding the cash generated by these new assets, The cash flow that we anticipate at $60 per barrel is more or less $700,000,000 a year over 2020, 2025.
Okay. And you could expect that to be reduced off the consideration between the effective date and closing. Would that be fair to assume as we think about that?
Of course, the price will be adjusted according to the cash flow generated between 1st January 2019 and the date of closing. So it's a normal way of managing acquisition in E and P business.
Yes, great. Thank
you. Thank you. And the next question comes from the line of Jason Gammel from Jefferies. You can ask your question.
Thank you very much. Jean Pierre, I just wanted to come back to the strong production performance in 3Q. And you did make reference to the strong contribution that you had from the 5 big major capital projects that have recently started up. I was hoping you might be able to address how near plateau production or peak production each of those projects are? And then my second question in the LNG business, you made reference to start up of the 1st commercial the 1st stranded Cameron LNG or 1st commercial operations there.
I was hoping you might be able to address the attractiveness of exporting LNG from the U. S. Gulf Coast currently, given gas price environments as a general statement. And then how Total's regasification and shipping assets might help to enhance that profitability?
Okay. So for the 1st 9 months of this year, so the projection is up by almost 9%. So it's the figure is 8.7% compared to the same period in 2018. As I have already mentioned, the main contribution came from Yamal, LNG, from Ictis, but also from Tango, so our deep offshore asset in Angola with 2 FPSOs Edina, so deep offshore well asset, sorry, in Nigeria and of course, the contribution of all the Mercurial assets. So we confirmed we gave guidance of production growth of 9% this year.
So yes, we confirmed this guidance. Regarding the big projects, so if you have in mind Ity's or Yamal, I think for Ity's, the 2 trains, they started, plateau. Regarding Yamaha, as you know, the free trains started already. We are above the nominal capacity. And the 4th train is supposed to come on stream in the months, I think.
But it will contribute marginally to increase the production on Yamal LNG assets. Regarding the other assets, so Aegina and Cargo that I mentioned, as big contributors to production increase. The ramp up will continue, but we are, I would say, close to the plateau. Cameron and yes, in terms of ramp up, I could add that Johan Verdup came into production very Brazil that will contribute to our production in Q4.
Thank you. And the next question comes from the line of Lucas Herrmann from Exane. Please ask your question.
Thanks very much. Good afternoon, Jean Pierre. Brief question, if I might. It's just on associates and associate dividends moving forward. Clearly, an increasing proportion of your growth or net income growth is going to come from associates.
I just wondered whether you could give us any thoughts, guidance on how you see payout of that income progressing over the next short term and medium term? When will we move to a point where your equity associates are paying out in line with the contribution they're making towards your earnings? And can you give us any profile or idea of what the quarterly profile of pay you might anticipate or we should anticipate might be? Thank you.
That's true that in our portfolio, so the growth is coming from IGRP mainly and from its current with our strategy to develop LNG business. And Yarnal and Itis are big contributor in terms of cash flow growth through dividends. And of course, in the coming years, we will have Arctic 2 as well and the Mozambique LNV. So definitely, the portion of the result coming from Equity Affiliates will grow.
But it's how much how we should model the cash that comes from that? Because if I look at the numbers today, for example, there's a very large adjustment negative adjustment to cash from profits from associate that is not received as dividend. Part of that looks as to being the exceptional on Novatek. But
can you give us any steers? It's clear, when you compare the net operating results with the cash flow generated, you have to take into account the DD and A and the fact that on Ichthys on particular, given the level of CapEx that we have to spend to deliver the project, The performance in term of net operating result is not the same compared to the performance in term of cash. So it's very it's a bit difficult to reconcile net operating income with cash flow. Of course, our objective, I would say, globally, is to be in a position to generate as to accelerate or to maximize dividends we can get from Yamal and from Itis. And I can confirm to you that Yamal, for example, started to deliver a comfortable cash flow since the beginning of this year.
And when should we expect Ixis to start delivering dividends if it's not already?
I think, yes. You have to remember that Iqdis project, you have, in fact, you have to be aware of the structure of the project. So you have the upstream that is consolidated in our balance sheet. So you have direct access to the cash flow. And the upstream is a strong contributor to cash flow because, of course, this part is generating all the condensate production.
So you have direct access to this cash flow through the consolidation of the Upstream. So the Downstream, so it's Ichthys LNG, so it's another study. It's consolidated on an equity basis. So of course, the cash you generated from these assets is will come either from dividends or from reimbursement of shareholder loans. And by the way, given that the contracts are good, the contract was signed when the prices were high.
And so we have oil index contracts. So that's the main driver why we are very that we are comfortable. We think that definitely, Ity LNG will contribute to our cash flow generation in the coming years.
Super. Thank you.
Thank you. And the next question comes from the line of Christopher Kaplan from Bank of America. Please ask your question.
Finally, I found the mute button. Thank you, Jean Pierre. Just sorry, I think my line got disconnected a little earlier. So please apologize if that question has been asked already. But just wondered whether you can comment on the change in language regarding the full year production growth guidance from above 9% to now should reach 9%.
What's the reason behind that? Thank you.
No reason. So we are at 8.7%. Once again, in Q4, we'll benefit from Johan Verdot start up. We'll benefit from Yara 1 start up in Brazil. So there is no message, I would say, behind this wording.
And 9%, by the way, it's huge. We benefit from 8% last year, so it's 9% this year. And I can add that we are focusing on value rather than on volume.
Thank you. And the next question comes from the line of Bertrand Hodee from Kepler Cheuvreux. Please ask your question.
Good afternoon, Jean Pierre. One question on U. S. LNG. You are taking some volumes from Sabine Pass Train 5 right now.
You are taking some volumes from Camon LNG Train 1. You will get some volumes from Train 23. How can you mitigate, I would say, your contractual terms to make profit if those cargoes goes into Europe at current prices. That's probably also why I think Toshiba realized that we'll not be able to make any money on those contract and they pay a total $800,000,000 But just wanted to understand how you're going to mitigate the current environment probably in the next few years.
We believe that the U. S. Is well positioned to supply cheap LNG. And by the way, LNG is long term in our view. We are expanding our exposure.
That's true. We're having cash with Cameron. For example, Cameron Laney Train 1 started up in May. So we have 2 additional trains that are supposed to come on stream next year. And the takeover of Toshiba LNG portfolio will add the equivalent of 2,200,000 tons per year.
And we saw we see that LNG as competitive LNG supply. We have a very strong trading. It's definitely linked to the acquisition we made of ENGIE LNG portfolio. We have a global presence. We are producer in the main LNG hubs.
So once again, the case in the U. S, but also in Qatar, in Australia, in Russia and to just to give you the main hub. It's allowed us to make arbitrage between the different markets. At the same time, we have the capacity, the regas capacity in Europe. We definitely, we think that with the different position as a producer, as a trader, we will be able to capture all the value in this LNG portfolio.
To come back more specifically on your question regarding U. S. LNG, we are short Riyadh. Our purchases represent more or less 25%, but our sales around only 10%. And at the same time, we are long oil.
Our purchase represents 25% and our sales around 40%. So it's a way for us to mitigate the risk you mentioned.
Thank you.
Thank you. And the next question comes from the line of Henry Tarr from Berenberg. Please ask your question.
Hi there, thanks. Just a quick one on CapEx. So organic CapEx is running quite low through Q3. I guess we will see a tick higher in Q4, but it would need to be quite a bit higher probably to get us towards that $18,000,000,000 figure. So could you talk about how organic CapEx has come materially lowered this year?
And then perhaps, yes, what Q4 might look like from a CapEx perspective?
Thanks. The capital investment guidance we gave in September, of course, we will be in line with this guidance. I remind you that Capital Investment is organic CapEx, but at the same time, the net between acquisition and divestments. You're right, traditionally, and so it's I just had a look at this figure very recently, which was the case last year. The Q4 is higher than the previous quarter.
So in for the full year, for 2019, our CapEx should be in line with the guidance we gave in September, less than $18,000,000,000 taken into account once again the net M and A. And for the coming years, of course, we will remain in the guidance we gave between $16,000,000,000 to $18,000,000,000 per year.
Okay, great. And I guess, whilst I've got you just a quick other question on what's the potential for the gas partnership with Adani in India?
We try. Our objective is to position ourselves on growing market, and particularly for gas as far as gas is concerned. So definitely, India gas market, we see that as an opportunity. The country has set ambitious targets of increasing the share of natural gas in its energy mix. At present time, I think the portion of natural gas in the energy mix is around 7%.
And the objective of the government is to increase this portion to 15% by 2,030. So we want to be part of this growth. Last year, we announced a first deal with Adelie Group. So it's a private Indian group. And it was a DV of 5050 on LNG to acquire the participation in Daimler LNG and in Mundra LNG Regard Terminal.
We plan to develop LNG marketing in India but also in Bangladesh and the supply of the equivalent of 3,000,000 tonnes a year from our LNG portfolio. That's true that we recently announced to the reinforcement of this partnership. Our objective is to acquire 37.5 percent of equity in a company called Adenia Gas Limited. Will business is to market gas and develop infrastructure through local concessions. So this move, I would say, this JV with Adeni, the acquisition of this year in Adeni Gas Limited, once again, is very coherent with our objective to develop LNG on growing markets.
And definitely, India is part of this strategy.
Great. Thanks.
Thank you. And the next question comes from the line of Michel Galavina from Goldman Sachs. Please ask your question.
Jean Pierre, thank you for the presentation. I had one question left. Could you give us an update on your discussions for progressing Papua New Guinea and Uganda towards FID? Thank you.
Papua and Gurgaon, okay. Papua and ENGIE. So you know that last year, we signed what we call a gas agreement with authorities that gave the framework for the development and the fiscal term, the tax term for the development. Very recently, with the change in agreements, we had some discussions again with the authorities. And the gas agreement was, I would say, challenged at some point.
But now the government has announced, and I think it was in September this year, that they will honor the deal. So we are targeting FID for Papua Energy project in 2021. Regarding Uganda is the project, I would say, is technically mature. We are ready to launch. But we faced very recently some difficulties with the authority to close the deal we signed in it was in 2017, I think, with Tullow to acquire parts of Tullow stake in the project, given that we are not able to achieve an agreement on the tax treatment of the transaction.
We decided to terminate the transaction. It's a matter for us of discipline in allocating our CapEx. So we remain fully committed to move forward with the development that we see. And I think at present time, it's a bit too early to assess the extent of the to assess when the IFRS could be taken for that project.
Thank you.
Thank you. And the next question comes from the line of Christian Malek from JPMorgan. Please ask your question.
Hi, Jean Pierre. Thank you for taking my question. When I run the cash breakeven of Total for 2019 on a 9 month rolling basis, it's $66 a barrel post CapEx and dividend, which is an increase on a like for like basis versus the year ago, if my math is correct. Now I can understand this given the elevated CapEx in Mozambique and clearly you are paying a higher absolute dividend. However, what I struggle with is how cash breakevens fall meaningfully in line with the peer group if CapEx remains higher, which leads me to my question.
How do you plan to increase cash return over the medium term, say in the form of additional buyback with the current capital frame? And in this context, do you think disposals need to ramp up? And would it be fair to say that additional cash distribution over and above the $5,000,000,000 buyback beyond 2020 is now directly a function of increased disposals? And if you can elaborate where you think opportunities are in divestments, that would be great.
Regarding our asset sales, we mentioned a program of $5,000,000,000 of assets that will be sold over the period of 20 19, 2020. We're on track to deliver this program. By the way, end of September, we performed or we had $1,600,000,000 of assets sold. We very surprised by it was today, we mentioned that we were able to sell part of our Brunei assets to Shell, and so it will contribute to this program. So at the end of this year, we will have, more or less, performed 50% of the program.
So we do not need, I would say, to speed up or to accelerate on this program. Of course, it's a matter of we will continue to be opportunistic. So if we have some very attractive deals, why not entering into that deal? But once again, we do not need to accelerate this program. Our pre dividend breakeven is below $30 per barrel over the 1st 9 months.
You know that for us, maintaining this low breakeven in fee and it's part of our strategy. What can I add? We it is approved that we increase the dividend. So the with the new guidance, 5% to 6 percent. And you can do your math, starting from this pre dividend, organic breakeven, adding the CapEx, the M and A I mentioned to you and the dividend, more or less $8,000,000,000 a year before this 5% to 6% increase, yes, you can calculate your post dividend breakeven.
So just to be clear, I mean, on a post dividend view, assuming all else is equal, we should is it fair to say we should rule out additional buybacks over the medium term?
I was clear, I think, regarding our strategy beyond 2020, We will act according to the priority given on our cash allocation. The main message of the Investor Day once again was the acceleration of dividend growth. And for us, it's the demonstration that we are very confident in our capacity of delivering additional cash. Once again, having a strong balance sheet is key and is another priority, and having gearing below 20% is a priority. I have a very strong takeaway from Patrick Deschevardier, my predecessor.
So he told me in 2015, we enter into the downturn having a gearing above 30%. So I think at that time, it was 32%, 33%. I do not want to be in the same position. I want to keep my agility to act comfortably if we can see some opportunities. So that's why the balance sheet is the priority.
But at the same time, we are clear that the buyback will be used beyond 2020 to share extra revenues with our shareholders above $60 per barrel. And by the way, in 2019, we bought back the equivalent of $1,150,000,000 of our share end of September, and we'll accelerate the program over the Q4 with an additional $600,000,000 buybacks. And we are committed in delivering the €5,000,000,000 program announced in February 2018 over the 20 eighteen-twenty 20 period.
Guidance. And the next question comes from the line of Alastair Syme from Citi. Please ask your question.
Hi, Jean Pierre. I just have one question. Yesterday, one of the leading players in European wind stood up and admitted that essentially all their economic models are wrong. It feels very symptomatic of a market that's probably chased more and more aggressive assumptions in low carbon to make marginal economics work. So I just wanted to get your perspective.
Really the question as you look at the low carbon space and your ambition to grow, do you get a sense that there's still many people out there that have very low hurdle rate thresholds or aggressive assumptions to try and grow their businesses?
So I will not comment on BP, but I can tell you that It's not just not BP. Our economic models are right. But we are clear that we will allocate more or less 10% more than 10% or around 10% of our CapEx in the low carbon businesses in the coming years And wind farm, offshore and offshore are part of this strategy. And we will use for this capital light model. I have already commented how we leverage or we plan to leverage on this project to obtain, I would say, an acceptable profitability as far as our equity is concerned.
But wind farm, both for Encore and Offshore, they are part of our strategy.
Yes. Maybe just for reference, it wasn't BP, it was Orsted that sort of held up there as being one of the leading players in European wind.
We participated to the bid in Dunkirk offshoring very recently. By the way, we bought that. So we are not successful, but we are not disappointed, by the way, because if you are not successful, that means that the project could not fit with our economic material. So we see we are not in a hurry. We are sure that very profitable project that could meet our criteria will come in the coming years.
So we have to be patient.
Can I ask on something like Dunkirk? Are you close to being a winning bid, do you think? Or are you far away from where the market's at?
I will not comment on that. Okay.
Thank you.
Thank you. The next question comes from the line of Jason Gabelman from Cowen. Please ask your question.
Yes, thanks. I wanted to ask the equity affiliate dividend question a bit differently and specific to the LNG projects. Are the dividends that you receive from these projects once they're fully ramped, are they kind of on a straight line consistent basis? Or is there a phasing element because the projects have to pay down project level financing at the project level first? And then as that gets paid down, you get an increase in cash streams from the projects?
And then just two quick other questions. Firstly, on the other African assets that have to close, is there a point in time next year where if the assets don't close, you can walk away from the deal? And is that something you would be looking to do? And then just on the financials, there was a large ForEx impact this quarter. I think it was over $1,000,000,000 Can you just talk to what that was related to and if that's expected to persist or reverse going forward?
Thanks.
Okay. So regarding Equity AFFE and Dividends, I think each project is different from I think each project is different. It's depending the project financing. But in most of the cases, you're allowed to pay dividend. Of course, at the same time, you reimburse the debt.
So it depends on the documentation, in fact. Regarding free turn assets of Anadarko, I'm not sure to really understand your question. What do you mean?
If the yes, If the asset sales don't close in 2020 because there's some reason they're being held up maybe on the regulatory side in Ghana or Algeria. Are you able to walk away from buying those assets given kind of the crown jewel of the Mozambique part of the sale are already closed? And if you do have the ability to walk away from buying those assets, is that something you would be willing to do?
As I mentioned already, so the discussion with Alunarian and the Ghanaian Authority are still ongoing. So I cannot anticipate the outcome of the discussion even if, of course, we are optimistic. So let's wait and see. We continue to expect this closing in 2020. But of course, I cannot preempt the decision from the authorities.
So late, wait and see. Once again, in our view, the jewel of the Anadarko asset, it was Mozambique LNG. And so the deal was closed. So it's a very, very good achievement for us. The Viforin exchange effect in Q3, you mean for the result or for the cash flow?
Yes, on the cash flow.
On the cash flow, the main impact is, in fact, for our dividends, because you know that our dividend is denominated in euro. So of course, depending on the parity between euro and dollar, the amount in dollar could change. I could add that for the result itself, the sensitivity to the euro dollar is very limited. And so by the way, you had all the sensitivities in our documents, but it's very once again, it's very, very low.
Sorry, is that the dividend payment from past periods or in future because there was no dividend outflow for 3Q?
Sorry? You
said the ForEx impact was related to the dividend, but there was no dividend outflow in 3Q. So I'm wondering if that's related to a past period dividend outflow or future period.
In Q3, there was no dividend, but we by the way, we cleared the situation. And in the coming quarter, you will have one payment per quarter.
Okay. Thanks.
That was the last question. So perhaps to summarize our results, I would say that once again, this quarter during this quarter, we demonstrated that our strategy to reduce the breakeven and to upgrade the portfolio for long term sustainability worked well. The project we have in hand provide clear visibility on strong cash flow growth for the coming years. And based on this, we are confident that we can create value for our shareholders. Thank you for your time and attention.
That does conclude our conference for today. Thank you for participating. You may all disconnect.