Thank you very much and hello everyone. So we began the year with a strong set of 1st quarter results that demonstrate total ability to fully leverage the upside of an improving environment. Why Brent was up by 22% compared to Q1 2020. Total Q1 2021 adjusted net income jumped by about 70% to $3,000,000,000 or $1.1 per share. We are back on track and the $3,000,000,000 of adjusted net income is actually above the level of the pre crisis Q1 2019.
Despite a less favorable environment this year benefiting from the action plan delivered in 2020. Debt adjusted cash flow was very strong at $5,800,000,000 up by 1 third compared to a year ago. And gearing, you know 1, our key metrics, was brought back down to less than 20% by the end of the Q1, which is a top priority for us in terms of restoring sustainable financial flexibility. We have indeed recovered significantly difficult and uncertain 2020 environment when brands dipped below $20 per barrel and we have benefited from rebounding markets including Brent which averaged more than $60 per barrel in the Q1. However, to be clear, we credit mainly the Saudi led OpEx plus discipline for the current oil price.
We note that many parts of the global economy are still streaming with persistently weak demand for aviation fuel and lockdowns are still in effect in many areas. We remain prudently optimistic and focused on the fundamentals that got us through the crisis and contributed to the strong first quarter results. As a reminder, the key actions and lessons learned from 2020 are the following: First, discipline on costs. With more than $1,000,000,000 of cost reduction in 2020, we target an additional $500,000,000 of cost savings this year. Best in class production costs of $5.1 per barrel in 2020 with a target of $5 per barrel.
Within the context of developing a world class renewable power business, we managed CapEx down to $13,000,000,000 in 2020 and set a target between $12,000,000,000 $13,000,000,000 for 2021. And I will give you more details. We are continuing to high grade the portfolio and the organic breakeven was below $25 per barrel in the Q1 and this allow us to capture the upside of the stronger environment. Operationally, the Group's 1st quarter production was up slightly compared to previous quarter by 0.8 percent to 2,860,000 barrels per oil equivalent per day and still reflects the impact of OpEx plus quotas. This is in line with our guidance for stable production in 2021 compared to 2020.
Production benefited mainly from the progressive return of Libya as well as our process and ramp ups, including North Roscoe, Asia, Kilean in the UK, Jualverdrup in Norway and Yarl in Brazil, all largely offsetting the natural decline. Looking now at the operating segments, we are pleased with the performance of the IGRP segment, which set a new record high for adjusted net operating income in the Q1 of $1,000,000,000 and generated strong cash flow of more than $1,000,000,000 all who LNG prices were down compared to a year ago. IGRP posted very strong results, thanks to growing LNG sales and the positive contribution of renewables and electricity. The recent ramp up in oil prices will continue to have a positive impact on our LNG prices over the coming 6 months due to the lag effect on pricing formulas. Regarding the situation at our Mozambique LNG project, let me emphasize that security is our top priority.
We reported last month that the security situation near Palma was very serious. And considering the evolution of the security situation in the north of the Cabo del Gado province in Mozambique. Total decided to withdraw all Mozambique LNG project personnel from the Afunjit sites. We have declared 4th measure and we are managing the situation with contractors to minimize spending as long as we do not have clarity on the situation. We hope that the actions carried out by the government of Mozambique and its regional and international partners will enable the restoration of security and stabilized the Cabo Vergado province in a sustained manner.
Obviously, these events will impact the project schedule. And at this stage, we estimate the impact of at least a year of delay. As we have a large portfolio of LNG projects, we will give priority to Cameron LNG Extension and Papua LNG projects. Turning now to the renewables and electricity activity. We're continuing to accelerate growth in 2021, notably with the recent acquired 20% stake in Adani Green Energy Limited Company.
While increasing our level of disclosure. So you can see that our proportional share of EBITDA for this activity increased by about 40% year over year, close to $350,000,000 in the first quarter. Growth installed renewable power generation increased to 7.8 gigawatts from 3 gigawatts a year ago and net power production grew 4.7 terawatt hour from 3.2 terawattar over the same period. We are continuing to add to the portfolio, focusing on early stage acquisition opportunities. And in 2021, we will allocate more than 20% of our CapEx developing this activity.
In addition to the acquisition of 20% of Adeligreen Energy, the largest solar developer in the world and our 4th portfolio in the U. S. During the Q1. We won leases rights of 1.5 Gigawatts UK Offshore Wind Project and we found down our equity interest in more than 300 megawatts of renewable assets in France on the basis of a 600 $1,000,000,000 enterprise value at 100%, in line with our capital light model and also contributing to derisking the portfolio. Moving to our oil business, the E and P segment successfully leveraged the rebound in oil and gas prices and increased Q1 adjusted net operating income to $2,000,000,000 nearly triple the same quarter last year and cash flow to $3,800,000,000 up by about 50% compared to a year ago.
E and P continues to be the cash flow engine that is powering the group through the transition and into the future and Total clearly benefits from the leverage of on the oil price. With the signature of definitive agreements enabling to launch our Tillonga and Kingfisher upstream oil project and construction of East African crude oil pipeline in Uganda and Tanzania, the group is implementing a strategy to invest in resilient, low breakeven project that reduced the carbon intensity of its portfolio. Unlike the upstream, the downstream continued to face a tough environment, generating net adjusted operating income of $527,000,000 and cash flow of close to $900,000,000 European refining margins remain in the single digits, reflecting mainly the still depressed demand for aviation fuel, impacting the whole distillate market, but also the global level of demand, 13,000,000 barrels per day in the Q1 of 2021 versus 15,000,000 barrels per day in the Q1 of 2020. In contrast, petrochemical margins were strong, showing improvements year over year and quarter to quarter. Marketing results were resilient despite ongoing lockdowns that decreased volume by about 5%, mainly in Europe.
We started production of sustainable aviation fuel, SAF, at Lamed and our facility at Undal in France, early stage by demonstrating the group ability to transform and adjust to the changing environment across its different business units. Finally, at the group level, we generated $5,800,000,000 of cash flow, debt adjusted cash flow, in the Q1. So for now, we are back on track at precrisis levels. In the Q1, we also benefited from a working capital release of about $300,000,000 For the full year, If we maintain a hydrocarbon environment like the Q1, we rent around $60 per barrel, European gas around $6 per million and assuming European margins, refining margins around $10 to 15 dollars per tonne, then we would expect to generate around $24,000,000,000 of debt adjusted cash 1st quarter net investments, which include acquisition and asset sales, was $4,000,000,000 Our guidance for the year 2021 net investments is a range between $12,000,000,000 $13,000,000,000 which is split roughly as half for maintaining the existing business activities and half for sustainable growth. Our strategy to invest responsibly in profitable projects that reduce the carbon intensity of the portfolio and achieved the transformation of the group to a broad energy company.
To this end, half of the net investments will be allocated to maintain the group's activities and half for growth. Nearly 50% of these growth investments will be allocated to renewable and electricity. Our gearing was 19.5 percent at the end of the Q1, helped by the insurance of the hybrids to finance the renewable acquisition in India in Adanigreen. The current environment is allowing us to restore balance sheet strength faster than expected. We confirm that our priorities for cash flow allocation are to invest in growth and cash flow in the company, to support the dividend through the economic cycle and to maintain a strong balance sheet and a minimum long term single A debt rating with gearing sustainably anchored below 20%.
I remind you that at end of 2018, The gearing was about around 15%. And of course, 15% is better than 20% to face volatility. With a strong start to the year and confident in the fundamental of the group, the Board of Directors decided to distribute the first interim dividend of €0.66 per share. That means that the 1st interim dividend will be stable in euro. But considering the foreign exchange rates compared to a year ago.
This interim dividend represents an increase of about 9% in dollar. Overcoming the challenges of 2020 has made us a stronger company and the market rebound is allowing us to accelerate our transformation to TotalEnergies. At our shareholder meeting in May, we will propose the adoption of TotalEnergies as the new name of the company to mark our expansion into the Renewable Power Generation business on a worldwide scale, transforming the group into a broadly diversified energy company. And we will submit to the advisory vote of shareholders a resolution about our energy transition strategy towards carbon neutrality. This move demonstrates our commitment to the energy transition and to carbon neutrality that we have presented in a number of targets.
First, we reaffirm the clear ambition to get to net 0 emissions by 2,050 across our worldwide production and energy products used by our customers, Scope 1, Plus 2, Plus 3 together with society. Specific commitments are taken by 2,030, the next decade is key. Minus 40% net emissions on operated oil and gas operations worldwide by 2,030 compared to 2015 the date of the Paris agreement. Reduction in absolute terms of COP 3 worldwide emissions by 2,030 versus 2,015. We are the only ones among our peers having set an absolute figure of target, minus 20% carbon density reduction for energy products sold to our customer, Scope 3.
This is a more stringent target than the one announced previously. In Europe, 30% reduction of absolute emission by 2,030 extended to scope 1 plus 2 plus 3 versus 2015. Our climate ambitions are well as our sustainable development are embedded in the strategies of the group and like our name marked the beginning of a new phase in the development of the company. And now let's go to the Q and A.
Thank Your first question today is from the line of John Rigby from UBS. Please go ahead.
Thank you. Hi, Jean Pierre.
Hi, Jean Coutu.
Hi. Two questions, if I can. The first is on Your segmental earnings numbers, both your IGRP and your downstream numbers No, I should say, your Refining and Chemicals numbers have a couple of quite big moving parts in them that we can't see. I just wondered whether you were able to And characterize, particularly, I think, for Refining and Chemicals, some kind of split between The contribution from refining and the contribution from either both petchem and other chemicals operations just simply because I'm conscious that those two numbers are very widely different and actually the market probably ascribes very significant different values to them. And then if I can just talk on just IGRP, I take the point about renewables improvement sequentially, but it doesn't explain Even closely, the delta on the earnings.
And I'm guessing there's a contribution from trading in there. I'm I'm not expecting you to give me an exact number, but as we sort of think about the moving parts going to 2Q with rising LNG prices on a contract basis, but Presumably not the kind of windfall earnings you saw in 1Q. Are you able to sort of at least give us a little bit of color On that, please.
Okay. So, Bert, I will start with the second question regarding IGRP. You will not be surprised that we will not give you a detailed figure regarding the performance of trading. So I can confirm that given the volatility, We are able to and given our global footprint, the portfolio we have now in our hands, we are able to capture that were exceeding the market. I have in mind some record sales done by our trading in January in the U.
S. In the situation of a very cold winter. And so that's true that it's one of the driver of the high end performance this quarter. But you do not have to minimize the contribution of renewable and electricity contribution as well. We gave you the EBITDA of this segments, I would say, in the press release.
And so you have all the details, I think, in the appendix as well. So you will see that this segment alone contributes EBITDA more than between $300,000,000 $400,000,000 And so it starts being sizable, I would say. The second question regarding ARC. You have the right analysis. The performance of refineries and particularly in Europe were poor in during the Q1.
In the U. S, we are impacted by the Oregon as well. And so the margin, we are close to 0 in Europe. Honestly, summer should see some improvement. And so this improvement could come from the U.
S. And the recovery that seems to happen in this country in the coming months and and the exit from the pandemic will obviously help to restore the margin. Even we you have noticed that We continue to be very cautious regarding the margin. So we gave a guidance for the debt adjusted cash flow using, I would say, a conservative assumption, dollars 10 to $15 per tonne for our refining margins for the full year. On the opposite, Petrochem results were very good and because Petro margins were strong in Q1, showing improvement, by the way, year on year, year over year or Q to Q.
The volumes, the margins, they proved resilience through the pandemic, the COVID-nineteen crisis. Where the volumes remain robust for both PA and NPP. And it is clear that Some segments like food, packaging, medicals, protective equipment more than compensate the slowdown in other sectors such as automotive and then construction. So we continue to be optimistic regarding Petrochem. We benefit from integrated platforms as Fast Total is concerned.
And so we are well positioned to capture a possible continued market that for sure will continue to be very, very to continue to
be strong.
And performance of the trading, yes, I have already commented that.
So what's the just maybe if you
can just reverse it out a little bit.
What level
of refining margin would you expect To have to have to for that refining business to be breakeven, at least I can sort of gauge the relative sort of negative positive Contributions to the net result?
Well, it's different, of course, if you are dealing with integrated platforms or more isolated refineries. Once again, we are conservative and so we use this $10 to $15 per ton of assumption for Constitivo Building our guidance. It doesn't mean that, of course, it will be true. I would say that what has been done, so we will continue to do that if needed. So we have voluntary cuts the rent in some of our refineries.
So it was the case in Dons in particular to refinery in France. So we could continue with the same policy. And on the other side, you know perfectly that we have sold our U. K. Refinery in the U.
K. So that we have stub the operation in Grand Prix, so another refinery in France. And so the plan is, of course, to adapt our footprint to the market. That's what I can answer to you to this question and to adapt our model, our assets to the situation and to the current market. But once again, we can we are a bit more optimistic than before, given the recovery we in China, in Asia, more generally, in the U.
S, the fact that hopefully the vaccine We'll have to exit from the current situation. And by the way, the stocks globally, the stocks in the OCD countries, They are back to around, I think, 70 days. So it gives us some hope regarding this sector in the coming months or quarters.
Well,
I hope to contribute to aviation
That's clear. That's the situation for the airlines company and the aviation and the fact that we have to pull the key 0 into distillate at the present time. It's one of the reasons why the margins are so low. That's true.
Thank you.
So I don't know when this sector will come back to pre crisis level. I'm not so sure that it will take many, many quarters, I don't know. So we have to be patient and once again to be active and so to focus on what we control. And so obviously, it's difficult to control demand and to anticipate what could happen in the coming months.
Okay. Thank you.
Thank you. The next question is from the line of Oswald Clint from Sanford Bernstein. Please go ahead.
Jean Pierre, thank you so much. Just on CapEx, I mean, I had a €12,000,000,000 number in my head for this year. I think you talked about €12,000,000,000 to €13,000,000 potentially. Obviously, the 12% was at a lower oil price, but we're now going to minimize the CapEx in Mozambique So is there a CapEx pickup taking place somewhere else in the business relative to the plan? And the second question, I wanted to ask you about the Siemens Energy collaboration on reducing your CO2 around the LNG portfolio.
What's the time line on this initiative? Is it short term, longer term? Is it focused on greenfields? Or can you really retrofit Your brownfield LNG plants. And any emissions intensity numbers that you're kind of playing with at this point?
Thank you.
Okay. So regarding the CapEx, so that's true that we when we made our budget, we are not at $60 per barrel. And so the budget was done for the 2021 was done at $40 per barrel. So at that time, we mentioned the guidance for CapEx. So the global CapEx, organic CapEx plus the net between acquisition and session and the divestments at 12,000,000 Except in February during the New Year's Day, we mentioned that in better If the prices remain above this level, we can increase CapEx.
And so we gave a range between DKK 12,000,000,000 to DKK 13,000,000,000 Having said that, and it's clear it's now in the DNA of Total. We want to maintain the discipline on CapEx. So honestly, I don't know it's premature to evaluate the impact on Mozambique LNG project and first measure on globally the CapEx for the full year. But it doesn't mean that even if we save some CapEx that we will use this CapEx to increase significantly investments in E and P or in downstream. We want to keep the discipline.
We want to be selective. And once again, our priority is to invest in profitable projects that will contribute to the transition of Total into a broad energy company. Having said that, We have some flexibility. And particularly for the upstream segment, we have some flexibilities on short cycle investments that we can restart. I would say Part of this short cycle investment has been stopped or postponed last year in the middle of the crisis.
So it's possible for us to come back and to sanction this new mid cycle project. And we can allocate part of this additional CapEx of $12 to $13 to some renewable and electricity project, if it makes sense and that means that if we are profitable. So that's the main guidance the main guidance for us when we select when we have to select the different projects. On CMS agreement, I have to admit that I'm not very familiar with this agreement. So I suggest that you come back to the IRF teams and they will give you some more details regarding these agreements.
But it's clearly in our objective to lower or to reduce the CO2 emissions and it's part of this global strategy and once again, in the transformation of Total into Total Energy. So it's in this transformation.
Understood. Thank you, Jean Pierre.
Thank you. The next question is from the line of Paul Cheng from Scotiabank. Please go ahead.
Thank you. Two questions. 1, when I'm looking at your LNG and Renewable, The cash flow from operation excluding working capital changes versus the 4th quarter is relatively flat, While earning is up a lot. So wondering if you can maybe help us to bridge the gap and that why that there's Big difference on here. Secondly that the On the asset sales, with the farm down, is there any gain that you have reported in the segment?
Thank you.
So your question regarding the IDRP. So in short That's correct. Sorry?
That's correct.
Yes. In short, what I can tell you is that in the Q4, the results, the net operating income in the Q4 of 2020 last year, was negatively affected by non cash elements as mark to market elements or deferred tax elements. That's the main driver behind this that explains the phenomenon you pointed out. The second is the seasonality in dividends as well. So you do not have the same impact of our assets consolidated on an equity basis in the net operating income and in the cash flow, depending, of course, on the the seasonality of the dividends.
So that's the two main elements that explain this difference. But overall, what is more relevant is to compare the NOE increase year over year with cash flow relative to the year. And so you see that it's very current and very much in line. Asset sales, Yes, I think I'm not sure to have really understood your question, but of course the thumb down of our on our renewable assets. They are reported, of course, in IGRP segment.
It's key in our capital light model. It's what we explained. It's the best way for us to monetize as soon as the and soon as the COD is at COD is when the project starts to pocket to monetize significant part of the future results through the PPA signs. And it's another way for us to, by the way, to direct the project as well. So it's part of the model and of course it's reported into the IGRP segment for the result and for the investment as well.
Because when I mentioned when we say that we'll allocate more than 20% of CapEx to this segment, It's net CapEx, it's net investments. So it takes into account the divestments and This divestment are part of these figures as well. No, I understand that.
And I'm just asking that whether the farm down has resulted in any gain that we quoted in the Q1 in December?
I'm not sure to understand what you have in mind.
Well, when you farm down, Yes? That depends on the value you receive. Did you put any gain?
Yes.
Did you book any gain
in the Q1?
And if you do, can you share that how big are those Gain, you said a meaningful number?
But I gave you the fact that we found out 2 projects in France. So and I give you the enterprise value. So it's around $600,000,000 of enterprise value, 100%. And so the way we consider this found out is to found out 50% of the project. At the same time, as you know, we leverage the project.
And so the figures or the debt to equity The ratio you can use for your modernization is gearing between 70%, 80%. So that means that at COD. So we found down 50%. And so we've led project at 70%, 80%. And so all this Nickel is on, I would say, is included into IDRP results and cash flows and investments.
All right. Thanks.
By the way, I gave you a lot of figures regarding this turn down. This DKK600 1,000,000 on a 100 basis UE, it's for something like 3.40 Megawatts, I think, if I'm correct. So that means that If you consider that it's $1,000,000 of CapEx for 1 megawatt on this type of project, that means that we doubled more or less the value of the initial cash we used for developing this project through this rundown.
And it's
in line with the metrics we gave, I think, in February, because at that time we gave some additional example, 5 or 6 different far down that we that occurred over the last couple of years.
Thank you.
Thank you. The next question is from the line of Christian Malek from JPMorgan. Please go ahead.
Hi, good afternoon, Jean Pierre. Thank you. Let me ask a question. I've got 2, first on CapEx, but not necessarily CapEx in the context of the range, but more in the context of a broader point on whether you'll be able to demonstrate discipline on CapEx Over the medium term, I think one of the major concerns is that the free cash flow that you're generating isn't necessarily free because it's going to either pay down debt And then look to see high CapEx whether in oil or transition. So you've gone from 12 to 12 to 13 And that's admittedly at a $40 Brent.
I mean, if I were to belate the $60 where are we going on CapEx is basically the first question. The second, Please is on buybacks and cash return. You mentioned 15% is a comfortable gearing target. What sort of cash return frame would you consider? And within that Previously suspended buybacks, would you revisit if oil looks like you're turning to 70, is there a distribution of cash flow that's viewed as most appropriate in the medium term.
And I guess one of the things that I want to sort of nuance around that question is Cash flow or distribution relative to previous years, when you look at a yield basis, is only sitting around 20%. And so I wonder whether that's a sort of new norm the new norm for you on cash, particularly within the yield Or whether you would consider upside once you get to 15%. Thank you.
Okay. So regarding the cash flow allocation, so you know we are consistent in total. So perhaps I will repeat, Sorry for that what we said in February. What are our priority in terms of cash allocation at Total. So first, the CapEx and so it's linked to your first question.
So you have I gave the guidance for 2021. We gave a guidance between $13,000,000,000 to $16,000,000,000 for the year 2020 to 2025, assuming an environment between $50 to $60 per barrel. Why? Because once again we want to keep the discipline, invest only in profitable projects. So you know the metrics we use for sanctioning the project and the best way for us to be sure that we will continue to be resilient and profitable is to continue to be disciplined and to stick to these targets.
So for oil and for upstream project is 15% IRR at Citellar Fabry. You know that for Renewables and Power and Renewables in particular. It's a double digit, so more than 10% profitability for our equity. So that's the discipline we want to implement. And that's why, by the way, We are not able to spend money like that to capture additional assets or additional development in our renewable, if it makes no sense and it does not meet our criteria.
Having said that, the 2nd priority for cash flow allocation is supporting dividends through the economic cycles. I think that the decision made by the Board in the middle of the crisis, when prices were below $30 per barrel last year to maintain the dividend is a clear and strong commitment vis a vis the shareholders. So the decision was not to cut the dividend. So I repeat, I can confirm that the dividend is supported at $40 per barrel. And of course, we will maintain the dividend this year.
The first priority and it's key and it was very clear I think in our statement in February, we want to have a strong balance sheet and we want to keep long term grade age credit rating. And so the way to do that of course is to have low gearing. And so the objective for us is to anchor durably, I would say, the gearing below 20%. So we are already at this level, that's true. That we are at 19.5% end of March.
That's it's not a joke. We were at 15% in in end of 2018. And obviously, 15% is better than 20% is what I mentioned in my speech in my introduction. Why? Because it's we are in the commodity market and so we have to be ready for the next possible new downturn.
So having this strong balance sheet for us is key and is a key element in our cash flow allocation frame. So that means that and it was clear as well in February. We mentioned that buybacks We come only if oil prices will come or will stay above $60 per barrel and when gearing will be durably and durably I think is very important installed below 20%. So to be clear for 2021, We will maintain the dividend, so in euro. And so the other comment I made now at €1.2 per dollar compared to the 1.5% we had 1 year ago.
It means that it's a reasonable increase in dollar by dollar. So it's 8%, 9%, 10% increase in dollar when you translate the euro into dollar. And so maintaining this dividend in euro and that means that buybacks will come later.
Very clear. Thank you, Shankar.
Thank you. The next question is from the line of Biraj Ajbol Kataria from RBC. Please go ahead.
Hi, thanks for taking my questions. The first one was on Mozambique. Originally, the intention was, I guess, to have the 2 projects in there on the onshore in area, 1 area for to run along in sync. But I guess, The operator on the other side has deferred the project pre FID and now you've had to declare force majeure. So So I was just wondering, if you are able to get back in, you're likely to be ahead of the other operator and you'll be building infrastructure that Maybe it's joining the use for the 2 projects.
So is there an agreement already in place where the sort of the other block Partners compensate Total for any kind of early expenditures or is that still to be agreed? That would be my first question. And then the second question is on capital structure. As you've been doing as you've been growing your low carbon business, Most recently, you issued a hybrid, which looks like at very competitive rates. So I was just wondering how do you think about The overall capital structure of Total as you build business and the mixture of instruments like that versus just vanilla debt and equity?
Thank you.
So on Mozambique, honestly, at present time, we are it's not the priority to enter into discussions or to enter into agreements, the different agreements you have in mind. The priority is to maintain the site, to ensure the safety and the security of our employees, to minimize the costs with our contractors. So we see I mentioned to you that at present time we anticipate at least 1 year delay. So we see it's honestly, It's not a top priority on the agenda to discuss with this subject with the other operators. Hybrid bonds, we were very in January last year when this year, sorry, when we issued this €3,000,000,000 of hybrid to finance the 20% acquisition of FADELI and Alignin.
I consider hybrid as a long term component in my balance sheet. We will continue to be opportunistic. It's a very competitive way to finance renewable with a very with low cost with the capital with low cost capital. That's the strategy we have implemented. By the way, most of the in our NEBO project, The debt that you the project finance that you raised on renewables, it's on a non all cost basis.
So that means that you transfer the risk to the to Valener by doing that.
Okay, understood. Thank you.
Thank you. The next question is from the line of Lydia Rainforth from Barclays. Please go ahead.
Thanks and good afternoon Jean Pierre.
Two questions
if I could. And the first one is just can you just walk through the idea of the working
capital release in the quarter? I think obviously we've seen build from elsewhere. So just sort
of what you So release in the quarter. I think obviously we've seen builds from elsewhere. So just sort of what you expect around that working cap side going forward. And then the second one was just To come onto the renewables business again. If I think about the Adani, as I said, JV and this data, How do you think about managing the currency risk for that, so just given what we're seeing in terms of currency?
And then just linked to that, the offshore project The one that you entered this morning. It does talk about basically paying a consideration based on the share of pass costs. Normally, you see when you sold things down that you get a premium for whilst it's in development. I'm just wondering kind of what it is that in terms of that project that's been attractive?
Okay. So the first question regarding working capital. So it was we reported the cash in this quarter. The main driver behind this cash in was the timing of some tax elements. So in if I remember that well, so it was in Germany and Belgium for for Downstream and in Norway for Upstream.
And on the opposite, we have for the impact of the oil price or globally the hydrocarbons price increase that impacted obviously the stock values and customer credits. But all in all, it was a positive impact. On top of that, we continue of course to make some optimization, I would say, of our working capital. And I remind you that given that it works well end of last year, we continue or we decided at EXCOM level to continue to incentivize our managers to proactively, I would say, manage working capital. And so to be sure that they made all the actions to minimize the working capital when it's needed.
And so it's very difficult for me to give you colors regarding working cap in the coming quarter because the main certainty of course is the level of prices that impacted that will obviously impact the work cap. What I can confirm to you is that we will continue to be to mobilize our staff, our people to manage proactively this working capital subject. So the India, obviously, we took into account this currency risk in our economy. We decided to go into into the different project in Adani with Adani in India. So it's taken into account.
And And I can share with you that given the predictability of the cash flow coming from PPA in Renewable Businesses. We can consider forward hedging as well, but and it's under consideration at present time. So we'll see in the coming months the outcome of these studies. But once again, it's taken into account when we decided to go into that project. And it's It's embedded, I would say, in the fact that we sanctioned only they are able to deliver double digit profitability for our equity.
For the offshore agreement in Taiwan that we announced this morning. Obviously, it's the same as we will not give you all the details regarding the CapEx or the cost of the project. It's an opportunistic deal that we were able to sign now that we have, I would say, a lot of connections in this world, in this renewables. So now we know the people. We know the assets.
So we are able to move very quickly and to capture and to seize these opportunities. We have obviously a good PPA for these assets. So it's offshore, so the CapEx are not this when you compare to onshore wind. But all in all, the same answer for Ardeny. If we decided to go into that project, it's because it's Coherent, it's in line with double digit equity profitability, I mentioned to you, as thresholds.
And it was of course the way for us to be present in this Taiwan market, very active as far as offshore wind is concerned.
Right. Thank you.
Thank you. The next question is from the line of Thomas Adolff from Credit Suisse. Please go ahead.
Hi, good afternoon. Two questions for me as well, please. Just firstly going back to what you said earlier on. So for this year, Obviously, paying the dividend the next year. If oil is higher than 16, there might be a buyback.
But once the world is back to normal, Whenever that is, December, next summer. Pre COVID, you did have a Preference for progressive dividends. So how you think about the progressive dividend versus no, I'm going to do buybacks to bring down The cash dividend in the world has changed permanently. So that's first question. 2nd question, just going back to Mozambique On the force majeure, just to understand that precisely the force majeure is a global one.
So it includes All the EPC contracts, any contracts you have in upstream, but also the SPAs. And if it includes the SPAs, I was just wondering about the process. Once you want to go back to Construction activity, do you have to re contract all the volumes, I. E. Start from scratch?
Thank you.
Okay. So buyback, But the beauty, if I say it, it's obvious that buyback the beauty of buyback is the flexibility that we offer. When you at Total, when you announce an increase in dividends, of course, It's not to cut the dividend 2 or 4 quarters after the announcement. We want to be coherent. And honestly, once again, what we demonstrated last year.
And I will not comment on my peers, but it's easy to increase or to communicate on buybacks when you have cut your dividend by 1 third, 2 third in the middle of the crisis. So buyback, it's flexible once again. And we consider dividend as a long term piece in our financial policy. So I think I was very clear for 2021. We do not anticipate to increase the dividend.
And so if we have excess cash This year it will be allocated to continue to deleverage the company. And after that, next year, if the prices or if the environment is good, we could consider buyback. But at present time, honestly, it's premature to confirm or to enter into this mindset. On Mozambique LNG, first measure, so to be clear, what that we declared is the 4th measure for Total E&P Mozambique as the operator of the project. So it's a 4th measure vis a vis the GUE.
So now of course we are considering the cost measure declaration vis a vis the contractors or vis a vis the different gas buyers. We are entering into discussions. So honestly, it's premature for me to share the outcome of the discussion with you. On one side, the objective is to minimize the spending around the last couple of months. That's the main driver we have in mind at present time.
But let's wait and see the outcome of the discussion with the different stakeholders involved in this Mozambique LNG project. So on one side the contractor and the other side the LNG buyers.
Perfect. Thank you very much.
And of course you can imagine that we have a lot of different ASPA contract, so with different wording and different so we have to negotiate to discuss contract by contract with the different buyers.
Perfect. And
so the situation is very new. So Please give us some time to answer to your question.
Thank you.
Thank you. The next question is from the line of Jean Luc Romain from CMCIC Securities. Please go ahead.
Good afternoon. Middle East, I can make survey recently mentioned potential projects for Total in Iraq, could you while involving both gas and renewables, could you elaborate a little on that? Honestly, I will not comment on that. So you are correct, but I will not comment on ongoing discussions. Sorry for my answer.
Thank you.
But more generally speaking, We can when we discuss this kind of project, it's only if Once again, it's coherent with our strategy in terms of profitability, in terms of carbon footprint and the fact that perhaps in some cases you can have on one side an upstream project and coupled I would say with renewable projects. Of course, it makes sense, particularly in our ongoing transformation. But the questions on your outlook are ongoing, so I will not share with you more than that.
Thank you very much.
Thank you. The next question is from the line of Martin Ratz from Morgan Stanley. Please go ahead.
Hi, hello. I also have 2, if I may. I wanted to ask you about the EU taxonomy. It's a I find it somewhat of a tricky To be honest, so I recognize the question is a little broad. But I was wondering if you could say a few words what you think the EU taxonomy could mean For a company like TOTALEN and specifically with regards to the decision that we're all anticipating later on whether natural gas could come on the UK EU taxonomy.
Does that mean anything for Total? Maybe not in the short run, but if you could say a few things about that, that would be most helpful. And secondly, sort of a little bit building on the previous question. I actually sort of the quite sort of the same one about Iran, Because it does look like, negotiations around sort of JCPOA are getting tremendous momentum. And There is a realistic probability that some sort of unwind of sanctions might be sort of in parts.
And Total was, I think the only European major at least who had a project the last time the sanctions were reactivated. And I was wondering If TOTAL would be pursuing sort of reentering the country, if that was possible?
Okay. So 2 very different questions. So Yes. I really like that. Well, you know that We consider that gas is the energy on the transition.
So of course, it's a concern for us not to have natural gas considered, I would say, into the taxonomy. You know that natural gas and nuclear, they are meant to be addressed separately by end of 2021. We are not involved in nuclear, but of course, We are much concerned regarding the natural gas dossier. Having said that, Taxonomy and by the way, the comment we made to the commission and it was end of last year. So we see different subject or different problems in relation with The first one is natural gas.
But in terms of metal WD, we have a second issue. Most of the our transitioning activities, so new energies, renewable, see, they will be reported using an equity method. And you know that in taxonomy, you have to report The OpEx and the CapEx. And so if you are on an equity method, so that means that you do not generate a turnover or do not generate OpEx and even do not generate CapEx because most of the CapEx is financed through external debt. So it's one of the limits of That means that for players like Total, but it's not only for Total and most of the peers, they are exactly in the same situation.
That means that these efforts, I would say, towards low carbon businesses, Grenier, Uber and so on will not be captured through the current taxonomy rules. And the second or the third comment we made at that time, We commented I think in February or even in September 2020 the fact that We will use or we will to reduce the carbon footprint of our activity. We'll green the electricity supply for our assets. And so we have a plan to supply electricity produced by our solar farms in Spain to our European We will do exactly the same in the U. S.
Using some solar farms that we will develop in the coming years to supply green electricity to a part year. And so given that it's intra group flows, in fact, it will not be captured in the taxonomy current method. So it's honestly, it's a real concern for us. So the message that we try to convey to the commission is that the taxonomy is at present time very, very narrow and too narrow in fact because it does not reflect or it does not capture all the investments, all the efforts that a company like Total could do to our ambition to be net 0 by 2,050. That's what I can tell you regarding taxonomies.
And for Iran, What we need, we need long term, I would say, visibility on the sanctions to start considering coming back to IRAD. So honestly, it's not the case at present time. So and I'm not so sure it will be the case in the next in the very next future.
I can imagine. Well, anyway, that was very helpful.
Let's wait for further developments with the new U. S. Biden Administration. But once again, what we need is clarity and stability to be in a position to make a possible or to start considering a possible comeback to Iran. So it's not on the agenda at the same time.
And it's far from being the case.
Okay. Thank you.
Thank you. The next question is from the line of Christopher Kuplent from Bank of America. Please go ahead.
Thank you and good afternoon Jean Pierre. Just one quick follow-up on Renewables and I appreciate the U. K. Is a somewhat peculiar place to bid for U. K.
Offshore licenses and seabed. But could you give us a little bit of an insight, not looking for numbers in terms of your assumptions that you've taken for that winning bid earlier this year, whether it's power prices, do they come close to what you've currently disclosed in your PPAs, Whether it's CapEx assumptions, turbine sizes, whatever you can give us hints on that are the underlying assumptions for your bid. And my second question is a little bit wider, and it comes on the back of the recent industry risk reassessment by S and P. You've been active in the renewable space now for some time. What's your assessment so far?
Is your balance sheet a competitive strength Or is it actually holding you back relative to the competitors you are facing in the renewable world to sort of link that topic to the credit rating downgrade? Thank you.
Honestly, and the last UK bid, I will not share with you the assumption we used.
No,
I cannot give you the details, the CFD year to come. But no, Sorry, Chris. Well, the strategy is to as far as renewable and the electricity is concerned is to try to enter at early stage in projects. If we can enter into bilateral discussion rather than going into action, of course, it could be easier to attract profitable project. But if we decided to go into this UK offshore project, That means that given the recession we used for CapEx for all the you mentioned the turbine size and so on, is that we think that this project could deliver double digit equity profitability when it will come on stream.
S and P perspective, I will share with you my personal feeling regarding this subject. The value, the intrinsic value of our renewables in our portfolio is not properly valued by investor, but by the credit agencies as well. And so the formation of the group, the journey towards the carbon neutrality. This is not captured at all, I think, in S and P calculation. And so the fact that we are well positioned and that by the end of or by 2020 or 2020 will be probably in the top 5 in terms of Electricity, a producer, is not well taken into account into the credit agencies calculation.
Having said that, the fact that being I have a strong feeling that being a European company is a disadvantage. And so you know that they do not share all the details of the calculation. So it's very difficult for me to compare the retreatment done by S and P compared to the retreatment done by S and P for our peers. We are in on a regular basis in discussions. We changed with both S&P and Moody's.
But honestly, if I am optimistic, I will tell you that our investment case, our transition strategy that is already in motion and so perhaps a factor of differentiation compared to some of our peers that are better valued by S&P or by Moody's. That's in my mind, there are clear differentiating factors and that could lead to an improvement in our perception, I would say, by the credit agency in the coming months. That is not the case to be honest with you at present time. So our transition is not valued at all for me by SLP.
Yes. Thank you very much Jean Pierre. Just a quick follow-up. Would you say though that access to capital to invest in these renewable projects for you has not been a problem? Quite the contrary, I think some of the financing costs That you are exposed to look to me extremely attractive.
Yes. No, it's not a problem at all. So no problem. We issue this hybrid bond at a very attractive level, less than 2%, so it's very cheap capital. And in terms of more generally, when we go into a market for issuing bonds.
We have no problem. And so now we can access to a very long term maturity beyond 20 years at less than 3%. So it's I would not say that it's open bar, but it's very low cost financing. And so by the way, you see that in our 1st quarter results. You see that the cost the financial cost has been reduced dramatically year on year.
I thought it was a translation of this situation. And there is a reasonably strong appetite from banks to finance our project and particularly as you can imagine renewable projects. So no problem.
Yes. Thank you very much.
Thank you. And the next question is from the line of Bertrand Hodee from Kepler Cheuvreux. Please go ahead.
Yes. Hello, Jean Pierre. Two questions, if I may. First, congratulations for the very strong results. It's not every quarter that total beats Consensus on clean net income by 25%.
However, when I look at the cash flow, ex working capital, ex Inventory effect. It was a bit shy of my estimate. Can you whether any Cash collection headwinds in Q1? That is my first question. And then the second question Is on LNG, it's twofold.
Were you surprised first that Qatar Petroleum decided not to renew terms beyond end 2021 on Catargas 1, where you have where you had 10% stake. And then on the LNG market, you mentioned in your introduction with the remark that You will now concentrate on marketing, Papua LNG and Miron LNG expansion. But how do you see the market in terms of long term offtakers? Because There's a lot of new volumes yet to be marketed, Qatar, Northfield Expansion, Arctic 2, in a way also. So any color on that, I would say, long term uptakes New LNG project would be helpful.
Thank you.
Okay, Bertrand, a lot of questions. But you were a bit severe. I think we delivered very strong cash flow. Honestly, delivering cash flow in the Q1 2021, above $5,000,000,000 in in the environment of the Q1. So you have to take into account the fact that the margins were close to 0 at that time.
And so being able to deliver more or less the level of cash compared to the cash flow we generated 2 years ago in an environment better by more or less $2 per barrel as far as Brent is concerned, also better for gas, but also much better for refinery margin because at that time I think margins were above $30 It's I think it's a good performance, I would say. So You have to consider that on a quarterly basis, it's sometimes a bit difficult to reconsider the cash with net operating income, given what I mentioned to you previously, the timing issue in relation with the dividends and the fact that we are a reasonable part of our business in equity consolidated on an equity basis. For Qatar Gas, it's a decision of Cupe. So they asked in fact the IOC to concentrate on new developments and to the Northfield expansion project, when I think where I think Q3 thinks that The IOCs can bring highest value. So we have decided not to renew the Q1 licenses It's Life Business.
So does that mean that we have to accept that. So it's what I can share with you regarding this dossier Qatar Gasior. And for Papua New Guinea that's clear that considering the Mozambique LNG project situation. We'll give priority to Cameron LNG Extension and to Papua in LNG projects. And so we will focus on marketing the LNG sales.
These 2 projects are the and I mentioned you mentioned the Papua New Guinea project, which is a project well positioned in Asia to supply at competitive cost, I would say, Asian buyers. So We are quite optimistic that we'll be able to working very attractive SPA in the coming months. And what you are probably in mind is that in our strategy, in total strategy, we sanctioned projects when we are able to procure reasonable parts of the future gas sales because in most of the cases as well in LNG project, we use project finance to deliver the project as well.
Yes, yes. Because in fact that was a bit my concern because with all those volumes yet to be marketed. I was thinking that maybe it's the timing of trying to Papua and Cameron at the same time are in competition with Qatar could be problematic. But that's not your view?
No.
Okay. Thank you, Jean Pierre.
Thank you, Bertrand.
Thank you. The next question is from the line of Jason Gabelman from Cowen. Please go ahead.
Yes. Hey, thanks for taking my question. I guess I'll stick with the LNG discussion. So It sounds like because Mozambique is delayed and decided to move forward on these other projects. So I guess in that vein, How important is it to maintain scale and relative scale in the LNG, in terms of the business, as it expands, is that kind of something that you need to maintain to be competitive in the business?
And as such, are you pursuing now projects like Cameron expansion, which wasn't previously, I think, In kind of competitive returns part of your pre sanctioned projects, are you pursuing projects That maybe don't have as competitive returns in order to maintain that scale in the LNG business. That's the first question. And the second one is just 2nd. 1st, just given the strength that we've seen in margins, can you give any indication of how much Stronger you expect earnings within Chemicals to be this quarter versus Q1. And then more broadly, it seems like There have been a decent amount of announcements on chemical recycling technologies moving forward.
And I think you're pretty bullish on those technologies being used more wisely in the future. Is that becoming a technology that could be profitable to deploy in the near term? Or Do you still need to see more technology advancements and maybe some government support? Thanks.
Okay. So the line was not very good. So I'm not so sure to have captured all your All what you said, perhaps I will start with Petrochem. But So that we do not give a lot of details regarding Petrochem in our reporting. I confirm to you that it's the main driver behind the resilience, I would say, of the downstream sector in Q1.
Will Q2 be stronger than Q1. Honestly, it will remain at the same level. I will be more than happy. It's very difficult to what the prices could be, petrochem prices will be given that we are integrated. We can capture the rebound in the market.
So we are well positioned. Having said that, anticipating Q2 better than Q1, honestly, I cannot make this bet today. You mentioned I think the recycling technologies. So we have some project to recycle plastics. What has been announced in Grand Prix, the fact that we built a plan to recycle plastics is part of this our objective to be part of this business in the coming years because of course it will play growing role I think in the plastic industry in the coming years.
I'm not a specialist in terms of technologies used for recycling plastics, I have to admit. For LAV, yes, perhaps for sorry, something else came into my mind regarding this question recycling. We have some agreement to we are at present time a producer of bioplastic in Thailand, I think, with Corbjorn. And so we have the same We expand this type of agreement with Corbeon in France, also in France. And so we will be the producer of bioplastic on one side and we'll have some recycling capacity on the other side as well.
LNG, no, the fact that we have in Mozambique. The fact that, as I mentioned to you, there is a 1 year at least delay in this project. That means that The priority came back to Papua New Guinea, to Papua LNG project and Cameron extension. We will not sanction the project if the conditions are not good. But We are one of the major LNG player in the world, having the capacity of being a position to produce LNG in the main LNG hubs worldwide, having trading that are able to play between the different areas and to capture the discrepancy, I would say, between the different markets.
It's also a matter of size. So We see that when we acquired the ENGIE and ENGIE portfolio, it was a very, very significant movement and it's at that time that we were able to leverage a very efficient way our LNG position. So it's not volumes over value, it's with value over volumes that will drive our strategy. It's the case for LNG. It's the case of more globally for all our business at the time.
Thanks.
Thank you, Susan.
Thank you. The last question today is from the line of Jason Kenney from Santander. Please go ahead.
Thanks very much for the time. So I'm interested in the 8 gigawatt in hydrogen MoU that was signed last week in Australia, the Total, Aaron, it's a massive scale. I mean, potential major play in the hydrogen theme for the Total group. So Do you see CapEx in the next 3 to 4 years on that particular position? And if so, Is that already in your strategy guidance?
And then separately on hydrogen as well. I'm looking at technology for oxygen injection into oil reservoirs, in situ clean hydrogen production, where you leave carbon dioxide in the ground. And I'm wondering if you have any particular oil assets, old, mature, End of life, pre abandonment, sub economic stuff that you could maybe try this out on and if you've actually looked at that technology specifically.
Okay. So the first deal you mentioned, it's not directly Total. So The MoU was signed by Total Airline. So Total Airline is a 30% owned subsidiary of Total. Having said that, so I do not have all the details, to be honest, regarding this MOU.
My understanding is that at a very early stage. It's a pre feasibility study for this hydrogen project, so very early stage. CO2 injection potential, What I can share with you is that, of course, we're interested in hydrogen at Total. So we have some projects for on one side green hydrogen and the other side blue hydrogen. So I'm sure that in the coming months, perhaps in September or in February 2022.
We will be ready to share more with you regarding this the strategy regarding hydrogen at the time.
Okay. Thanks.
Okay. So I think Thank you. Thank you very much. Thank you for your attention. And so I hope that next time of course, I'm not too sure that the Pernodny will be over.
It's just a matter of weeks, but let's be optimistic. And I hope that we'll be soon in a position to have real exchange rate, I would say, not through screens or through phones. And it's only a matter of months now. So having said that, thank you very much and au revoir. Bye bye.