Total SA (TOT) Q1 2023 Earnings Call Transcript

Total SA (NYSE: TOT) Q1 2023 earnings call dated Apr. 27, 2023

Corporate Participants:

Patrick Pouyanne — Chairman and Chief Executive Officer

Jean-Pierre Sbraire — Chief Financial Officer

Analysts:

Oswald Clint — Bernstein — Analyst

Christopher Kuplent — Bank of America — Analyst

Irene Himona — Societe Generale — Analyst

Martijn Rats — Morgan Stanley — Analyst

Biraj Borkhataria — RBC — Analyst

Michele della Vigna — Goldman Sachs — Analyst

Lydia Rainforth — Barclays — Analyst

Lucas Herrmann — Exane BNP Paribas — Analyst

Matt Lofting — J.P. Morgan — Analyst

Kim Fustier — HSBC — Analyst

Amy Wong — Credit Suisse — Analyst

Paul Cheng — Scotiabank — Analyst

Henri Patricot — UBS — Analyst

Giacomo Romeo — Jefferies — Analyst

Jason Gabelman — Cowen and Company — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to Total Energy’s First Quarter 2023 Results Conference Call.

I now hand over to Patrick Pouyanne, CEO; and Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead.

Patrick Pouyanne — Chairman and Chief Executive Officer

Hello everyone, good morning or good afternoon wherever you are. I’m here today together with Jean-Pierre who will give you, I would say a review of very good quarter that we had on the first quarter of 2023. I just wanted as an introduction to comment bit of the news which came this morning around about Total.

So the future of our Canadian assets, as you know, we explained that in September at our CMD. We are planning to organize a spin-off of our Canadian assets. We went through the process, and in the meantime because fundamentally I think we are very serious about making this spin-off a reality. We attracted some unsolicited offers in the last month. And one of them has materialized and I think at a value which is attractive CAD5.5 billion cash, plus $600 million of additional payments under certain conditions. The value which is fitting with the expectations of the initial quotation which were given to us between CAD5 billion to CAD6 billions.

And of course, it’s coming from SpinCo [Phonetic] who knows very well, one of the two assets. And SpinCo will commence a little later in the day on the view of the deal for use. So it’s fitting the value. It’s a straightforward, I would say way to divest the assets as we are planning to do it straight away. And from — so from the company and from the shareholders point of view, the Board considered, but it was these alternatives was worth to be considered and approved yesterday to move forward with this transaction.

Of course, the most important part of the discussion beyond the this — comparing both alternatives was about distribution to shareholders, because as you know, spinoff was meant, in fact, a distribution in kind of some shares of NewCo [Phonetic]. So we are both perfectly alert in mind and the guidance what we have decided to give to our shareholders today is that last year, you know, we put higher guidance on the payout to shareholders of 35% to 40% of cash flow from operations, which were down in ’22 to 37%. There because we’ll have, I would say additional proceeds from these sales, divestments, the guidance we gave you today is at least 40%. I mean that’s means, by the way, I told you before, but it was not — there was no ceiling, 35% and 40% was a range of targets.

Today, we told you that — so Board decided to increase to enhance, I would say for ’23, these distribution to shareholders with at least 40%. So consider 40% plus, you have to get plus for something, but at least 40% of the cash flow from operations in 2023, which I think is a good news for all shareholders, and which of course, maintains the course of the company. You have noticed that on the first quarter we maintained a buyback of $2 billion, like last year’s last quarter and the second quarter we are repeating the $2 billion. So I think it gives this guidance for the distribution to shareholders for 2023 of at least 40% of our cash flow from operations should give you some comfort, but the will of the Board to have, I would say and that to maintain or to develop even an attractive return for shareholders.

So I will not be longer. I think I will give the floor to Jean-Pierre, who will happy for the first time overall. As you know, today we disclosed the Integrated LNG and Integrated Power segment results for the first time. I told you during the last investment that we should — we are targeting 10% in certain energies. We are not 10%, but 9.9%. But its I think comforting. Some expectations about the investments we are doing in these Integrated Power segments.

Jean-Pierre, the floor is yours.

Jean-Pierre Sbraire — Chief Financial Officer

Yes, thank you, Patrick. So 2023 is up to a good start. Once again, I think we demonstrated our ability to generate strong results even [Technical Issues]

Operator

Ladies and gentlemen, please hold the line. The conference will resume shortly.

Jean-Pierre Sbraire — Chief Financial Officer

So quarter-to-quarter, Brent went down 9% to $81 per barrel and European gas dropped by 50% to $16 per million BTU. In this context, Total Energy reported first quarter of ’23 adjusted net income of $6.5 million, a decrease of only 15% and a strong cash conversion. We have a debt-adjusted cash flow, DACF, close to $10 billion. With Brent above $18 per barrel and European gas about $15 per million BTU, still high by historical standards. We’re continuing to deliver excellent profitability with 25% share in the first quarter.

Commodity prices have been volatile, albeit, still at high levels. Oil prices fell briefly below $17.5 per barrel in March, largely on fears of on economic slowdown, before rebounding in April, a news on OPEC plus quota reductions. Refining margins are easing down after several quarters of excessively high diesel price, in the same context of fears of economic slowdown, high product inventories, largely fueled by Chinese exports and the quicker than expected reorganization of Russian flows following the European embargo. Gas prices fell due to mild weather. We expect prices to remain stable and still restocking begins in the second half of the year. Future markets are anticipating prices next to $20 per million BTU for this winter.

For the first time as announced, we are reporting integrated LNG and integrated power as independent segments. These two green segments are, as you know, at the core of our transition strategy. The restated historical data for ’21 full year and ’22 quarters is available in the results press release.

In terms of skill, integration and performance, we are unmatched among our peers in both our business activities. We are already widely recognized as having the very strong performing global integrated LNG portfolio in that business. Mainly from countercyclical acquisition, we have achieved our position as the largest lifter of flow cost to US LNG, more than 10 million tonne and the larger three regas provider in premium-priced European markets, around 20 million tonnes after the recent startup of the FSRU in Germany.

Our unmatched access to the European markets creates a competitive advantage for our trading operations and makes us more competitive as a partner in securing future resources. For example, our recent contract awards in Qatar. We launched this quarter the FEEED for Papua LNG and this will contribute to the future growth of our portfolio with close to 2 million tonne equity production.

Last year with LNG sales of 48 million ton, this business generated $10 billion of cash flow. In first quarter sales were 11 million tonne and cash flow was $2.1 billion. In the first quarter of ’23, LNG sales were down 17% quarter-to-quarter and 15% year-on year with mainly the decrease in spot sales due to lower LNG demand in Europe, linked to the mild weather. Integrated LNG generated adjusted net operating income of $2.1 billion, down only by 10% compared to the previous quarter, excluding Novatek, mainly due to lower prices.

Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, we anticipate that average LNG selling price might decrease by another 10%, 13% in the second quarter because of this time lag versus $13.3 per million BTU in this quarter. Operationally, we expect to benefit from the restart of Freeport LNG in our Q2 ’23 LNG sales. On the two new segments, Integrated Power is the newer business activity in the company’s. Mainly through smart acquisition of early-stage development projects, we have grown the business to 18 gigawatts of gross installed renewable power generation, our two largest markets being Europe and the US. And we are solidly on-track to reach 58 gigawatt by ’25 and then 100 gigawatts by 2030.

Our flexible power generation capacity and growing positions in energy storage to are fully integrated into the business strategy, allowing our traders to maximize our performance. Developing power projects, generating electricity as well as integrating the trading and selling of power as we do of our energy commodities is a natural extension of our business. Last year, with net power production of 33 terawatt hours, this business generated about $1 million of cash. For the 12 months ended. March ’23, integrated power generated a whole share of 9.9%, negative 10%, consistent with our stated ability to achieve double-digit profitability for these activities.

Going into the details of the result of these new segments now. Renewable power generation capacity was 18 gigawatts at the end of this quarter, an increase of more than 1 gigawatts quarter-over quarter, thanks to 0.6 gigawatts from the acquisition of Casa dos Ventos in Brazil and 0.3 gigawatts from the connection of the Seagreen offshore windfarm in the UK.

For the integrated power results, the best reference for comparison is Q1 ’22, since like for the Marketing & Services business, the gas and power marketing business is seasonal. Net electricity generation was a 8.4 TWh in the first quarter, a 10% year-on year due to growing electricity generation from renewable, offsetting the lower generation from flexible capacity in a context of lower demands.

Integrated power posted adjusted net operating income of $170 million. This figure is significantly higher compared to the first quarter of ’22 adjusted net operating income, which was negative at minus $82 million. Last year was heavily impacted by a huge increase of supply costs. This year, all segments have done better, gas-fired power plants, renewable, supply and trading despite the negative impact of winter seasonality of supply in the power marketing business, higher cost of supply in winter versus this equal invoicing along the year for many customers.

Now moving to the oil part of our business. Operationally, our oil and gas production was 2.52 million barrels of oil equivalent per day, a 2% quarter-to-quarter excluding Novatek. This includes the acquisition of a 20% interest in SARB/Umm Lulu, already producing oil field in the Emirates, starting from mid March. The production also benefits from new project contribution, notably the start up of gas production of block 10 in Oman and Johan Sverdrup Phase 2 in Norway.

Production for Q2 ’23 is expected at around 2.5 million per oil equivalent per day. Exploration and Production reported adjusted net operating income of $2.7 billion, down 22% quarter-to-quarter, excluding Novatek, due to lower oil and gas prices. Refining and chemicals contributed $1.6 billion of adjusted net operating income, up 9% quarter-to-quarter and 44% year-on year despite the pension protest that were ongoing in France at the end of the quarter, thanks to the strong refining margins.

Refinery utilization rates was at 78%. For Q2 23, we expect refining utilization rate to increase about 80%, given the end of strike in France. Marketing and services results are stabilizing at a level around $300 million of adjusted net operating ability income, $280 million for the first quarter of ’23, up 50% year-on year despite sales being 6% lower. This demonstrates that our strategic value of our volumes is working.

Overall at Company level, working capital was $9.6 billion in the first quarter, plus 5% quarter-on-quarter despite the lower-price environment I already commented as the fourth quarter of ’22 was impacted by exceptional taxes, notably the $1.1 billion European subsidiary contribution, mainly [Indecipherable] to a lesser extent.

There was a $4.5 billion working cap builds in this first quarter of ’23. This is an exceptionally high builds for the first quarter, mainly related to higher crude and petroleum products inventory in winter, notably due to the impacts of the pension protest in France. This is an exceptional elements, which explained $1.4 billion of working cap bills and will disappear next quarter. Second factor is the seasonality of the gas and power marketing businesses, the gap between the seasonal cost of supply and the fixed monthly B2C clients payments. And of course, you have more traditional effects of lower prices on tax and sales that explain this working cap build in the first quarter of ’23.

Note, that part of this working cap builds will reverse in the next quarter. Notably, the higher inventories related to protest in France and the impact of seasonality for the gas and power marketing business. Also there was higher net investment in the first quarter $6.4 billion, including $3.3 billion for acquisition. Mainly, the acquisition of a 20% interest in SARB/Umm Lulu, the payments relating to the acquisition of a stake in North East project in Qatar and the stake in the joint venture of Casa dos Ventos in Brazil.

Our guidance for ’23 net investments remain unchanged at $16 billion to $18 billion. Net investment incomes acquisition and divestments. So the sales of our Canadian assets that Patrick commented for $4.1 billion, with the closing expected in Q3 should be complete. We recently announced sale to Alimentation Couche-Tard for $3.1 billion, is also expected to be closed.

Encouragement by the strong first quarter results, the Board confirmed a 7.25% increase for the first interim dividend in ’23, to EUR0.74 per share, as well as the repurchase of 2 billion of shares in the second quarter of ’23.

And I think now we can go to the Q&A.

Questions and Answers:

Operator

Thank you, ladies and gentlemen, we’ll now begin the question-and-answer session. [Operator Instructions] The first question is from Oswald Clint of Bernstein. Please go ahead.

Oswald Clint — Bernstein — Analyst

Good afternoon, and thank you very much for the time. Yeah, I’m happy to guess the plus on the 40%. And if I was to go up into the mid 40s, I guess the [Speech Overlap]

Patrick Pouyanne — Chairman and Chief Executive Officer

I think some of your colleagues have found what it means., s you can guess.

Oswald Clint — Bernstein — Analyst

But. I guess the question is, is the 40% a number we could think about when you have good divestments topping it up? And if not we should think more around the 35%. And then just related to that, is there any Novatek dividends included here? I know Novatek declared a dividend last week, it’s up quite materially. Do Total expect to get anything in 2023 in terms of the cash flow?

And then the second one is just — Mozambique LNG, lots of momentum, lots of discussion from the President recently. I think you are still hoping to secure some of the favorable cost terms, construction terms. Any update you could provide us on that side of it, please?. Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

Okay, no, Oswald. We gave you a guidance 35%, 40% [Indecipherable] And last year we’ve done 37%. So that means that in fact, it’s not monitored by specific figures. So it’s not 35% certain time and 40%. The only point today which makes a difference is that we have — so Board announced a spinoff. So it was a dividend in time. So we have sort of form of commitment from the Board to all shareholders. And so the discussion that we, as soon as we decided to take the route of a direct sales, we are committed somewhere to reward to our shoulders, and so the decision yesterday was — at this stage we don’t know if it will go for buybacks or special dividends. Let’s let’s look to what will be, we are the beginning of the year. As always, the proceeds of the sales are not yet, I would say in the treasury of Jean-Pierre. So, let’s close and let’s take time to see where we go into the year, but the decision was — it’s an opportunity and to commit on linked, I would say to the decision of the spinoff of the sort of dividend in time. We translate that as we go beyond what was announced, so at least 40%, or at least 40% means 40% Plus and then as — and so it will be then discussed, either buyback or dividends. We have noticed. But for the time-being we have maintained the buyback at $2 billion per quarter for the first quarter despite the fact that the environment has softened. We did not decrease it. So there might be a chance that we could maintain the $2 billion around along the year. And then. I think if you make some math in your model, you will find something above 40%.

Novatek, I don’t know, again, you know my questions. The question is and you know you have news — permanent news coming from Russia. Yesterday has seen that the Russian authorities wanted to sanction more European and Western companies. So it’s difficult to answer to you. Yes, that was — again, we are no more in the governance of Novatek. As you know, we are just — we are out of that. Its no more consolidated in our accounts. So yes, we have seen that there was a decision of the dividend. Can it go to add to the accounts of Total Energy, we’ll see along the year.

I cannot just tell you today. You know, we have decided. But Russia is a — we do not plan the future. We just monitor day after day, week after week, once at the top and if it comes it comes, if it does not come, its not in the plan I would say.

Mozambique LNG. That’s a good question update on the cost terms, you know you have industrial, but it’s the last step before to restart. So some — I commented recently that we need to have contractors [Indecipherable] Board. Some of them are not so we will rebid some of the packages because there is no way for us to accept some new costs. We are paid what we had to pay because we stopped the project and we have to restart the project, but at an impact obviously stop and restart. We don’t see why we should pay more than that. And so that’s where we pulled back. So I think when we will be ready, we’ll come back to you on the — but I think today it’s premature again because we are — our teams — our project team is working with the contractors with a view to be able to the larger projects that’s under the conditions that the costs are controlled. That’s fundamental to us.

Oswald Clint — Bernstein — Analyst

Excellent. Thank you.

Operator

The next question is from Christopher Kuplent of Bank of America. Please go ahead.

Christopher Kuplent — Bank of America — Analyst

Thank you very much. Patrick. I’m going to ask you, probably the same question again if you don’t mind. What I’ve heard — I’m looking for clarification. Is the decision before the disposal to Suncor was to basically give proceeds to shareholders directly. Is that the principle we should continue to talk about and to consider the $4 billion as effectively an add-on and then we can run our CFFO payout numbers as long as we like. So that’s my question, just looking for confirmation.

And lastly, second question slightly connected to that. You’ve done as you’ve highlighted more than $3 billion of acquisitions in the first quarter. You’ve announced disposals that go well beyond this, but if we accept that the $4 billion disposals were to be distributed to shareholders, you’re kind of running on an even number for the full year. And I appreciate you’re not likely to give us a number, but I wonder how big the Total arena completion looms and whether you can confirm that, that is baked into your $16 billion to $18 billion guidance? That would be it. Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

Okay, no. Chris, I need to clarify. We never said that the $4 billion will go back to shareholders. By the way, it was not the case in the spinoff. If you remember correctly. First, there is a — I would say an enterprise value which was around CAD5 billion to CAD6 billion– lets say $4 billion to $5 billion, where these company without the debt which would have been left proceeds for the company than we were ready spinoff to keep 30% on all sides. So if you make your math, you are far from the $4 billion. And again, it’s not the way we expressed it. We expressed it and I can only repeat what we said is that the decision of the Board is that — and so, by the way, the second remark, proceeds of sales does not impact the cash flow from operations. The cash flow from operations as it is basis in all the way we communicate and in our reserves on accounts do integrate the cash from divestments.

So we have an amount of cash flow from operations. And you know perfectly last year we had $46 billion at $100 per barrel. At $60, think will be between $55 billion and $40 billion. So then will be more– if this environment in the first quarter of this quarter, so cash flow from operation I think is something like $9.5 billion. So if we have four quarters of $9.5 billion it will make $58 billion. If you make 40% plus, you can find what will be the guidance of payouts to shareholders, we read out the dividend, which is more or less between that — according to be — we have all the figures on the dividend, where you can even take credit for all the quarters where he last payment of EUR0.74. The only unknown is exchange rates of euros/dollar. So that’s — and then you will find what could be the amount.

The question for the Board was this is for buyback shares or which through share buyback or through special dividends. That will be discussed and we’d see along the year. The fitting on all side is that as we consider about the share of the company is low compared to some US peers and there is room for improvements. Increasing — maintaining, not increasing, but maintaining the share buyback is probably a good investment and demonstrating the 12th for shareholders and to investors in the future of the company.

You favourite questions. Yes, there were some acquisitions this year, but we cannot monitor quarter-by-quarter. There were also two big announcements of divestment, the divestments of the European network plus Canadian divestments. So we have to proceed. So Total, here is no secret. I think — I think it was mentioned. Of course the [Indecipherable] and Novatek is integrated into $16 billion, $18 billion guidance, but we don’t change the guidance. Because I’m not fully sure that all the proceeds, I think in Canada should come this year because it’s quite an easy process, in fact.

But on the other side, the European network there is more to do, in fact [Indecipherable] Everybody is working to close the deal before year end and both parties wants to do it, but sometime sometimes its sensitive. So Total US is integrated Total I think in cash is something around $1.5 billion to $2 billion lower. I think we already mentioned that.

Christopher Kuplent — Bank of America — Analyst

That’s great. Thank you very much, Patrick, for the clarification. May I add one quick follow-up. Could you give us the details around the carrying value of your Canadian assets that are be sold?

Patrick Pouyanne — Chairman and Chief Executive Officer

It’s around $5 billion.

Christopher Kuplent — Bank of America — Analyst

Perfect. Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

And there will be a capital gain. I mean, there would be a positive results in our accounts, as you know it’s — I would say it’s an exceptional results. I mean I under the control of my [Speech Overlap]

Christopher Kuplent — Bank of America — Analyst

Thanks for.

Operator

The next question is from Irene Himona of Societe Generale. Please go ahead.

Irene Himona — Societe Generale — Analyst

Thank you very much. Good afternoon. Two questions. First of all on your E&P tax rate, please, which increased in the quarter. Can you remind us what is included in the first quarter in terms of upstream windfall taxes? And then at current price levels, what should we anticipate for that average E&P tax for the full year?

And then secondly, you referred to the significant inflation in renewables. Could you possibly talk around inflationary pressures you’re seeing in your Upstream operations, please? Thank you.

Jean-Pierre Sbraire — Chief Financial Officer

So Patrick will take the first question regarding the tax rate. So, of course, the Q1 has been prepared the same way as the 2022 accounts. At the time I explained to you that [Indecipherable] tax proceeds in UK is treated in adjusted net income. So it impacts. It has an impact into ’22 the tax tax rate. And of course, it has an impact in the Q1 2023 tax rate. And so the amounts we are presenting in addition with tax is $0.12 billion just to give you one figure.

On the opposite, all the exceptional contribution utilization with European this year and to put in place an exceptional contribution in 2022 was treated in ’22 as an exceptional element because it’s an exceptional element. So, of course we will continue with this treatments, not impacting the tax rate in the first quarter of ’23.

Patrick Pouyanne — Chairman and Chief Executive Officer

I mean again, it’s, I think for time being our opex per borrower $5.5 per barrel. So in our operations I do not see impacts, which is by the way very good performance from the team. On the rigs. Yes, we know there are the rigs for deep water rigs are more expensive, but we are benefiting of the fact that we had quite a number of long long and medium term contracts. So we are seeing some impact which is limited. And then you are the adds and where we had seen some inflation was more on the steel last year. We registered by the way, we are right, because the steel went down again.

So again the question is more, I think that we are facing the will of some contractors to get some money back from, I would say bad years. They look to our reserves and so they want sort of share of the cake, but against the question of supply-and-demand for me at the end. We’ve done to accept to pay more if the supply-and-demand is stretched and I think it’s not stretched on many elements. This is why I was mentioning Mozambique. We will go through the bid when we have the feeling that the contractor which were awarded the contract try to benefit from the situation. We are not in a hurry. And to go to where the market is to to tender. So this is what we will do on this project.

But for me and honestly source of the inflation last year which were more the steel and all that came down. We have observed it in our, by the way in Uganda projects. We were very — where we arrived last year and not to place the order for steel. I think we have saved a lots of money just to resist to the temptation. And so it’s again, it’s an arbitration for me between the value and speed and it’s a question of managing that. But so I don’t see much inflation today even if we have to visit, which by the way is another a good message to the team which is simplifying the projects and that’s good for all — for everybody.

Irene Himona — Societe Generale — Analyst

Thank you.

Operator

The next question is from Martijn Rats of Morgan Stanley. Please go ahead.

Martijn Rats — Morgan Stanley — Analyst

Hi, hello. I wanted to ask if you could set out a little bit the — sort of the triggers or the drivers that would lead to the the full payment in the disposal to Suncor? I’ve noticed that the press release wasn’t really sort of all that clear, but if you could say a few words about that, that would be — that would be helpful?

And secondly, I wanted to ask if you could perhaps share some of — some of your thoughts on the global LNG market. I noticed that on Thursday and Thursday and Friday last week Europe enjoyed all-time high LNG imports, which is of course a little bit surprising given that the price has been going lower and you the LNG keeps coming and it sort of — it doesn’t look like Asian demand is sort of picking up all that much, at least looking at the data that we have access to, but perhaps in your business you have earlier insights. So I was wondering if you’re seeing anything in terms of an Asian demand pickup, for example? Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

Okay, the payments, to be honest is quite nothing new classic I would say. There is a price threshold above which if we may have monthly payments or monthly calculation is the price of WCS is reaching a certain level when there is a multiplayer effect by the dollar per barrel. And depending also on the production, I would say out on the field. So it’s quite classical CVR. What is good, I mean what is good from my point-of-view is that we are five years. So it fix the amounts of I would say, as you know, it’s a good. There is a good chance to get some of it. Just to let you know a calculation. If we would have a one year o r like 2022, would have got the full $600 million. That’s the point.

Martijn Rats — Morgan Stanley — Analyst

Okay, interesting.

Patrick Pouyanne — Chairman and Chief Executive Officer

Interesting. Yeah. Global energy market today is developed mix, yes, we’ve seen at the beginning of the quarter some demand, even short-term demand picking-up. On the price is clear that today the market is better. It’s a good time to sign — to try to sign some long-term contracts and we are back to better percentage of brand than in the last year. By the way that is want to do on PNG-LNG. Today, we are benefiting marketing of PNG-LNG in this type of environment is a good timing for us in fact, so we had a delay, but benefit from that. And I think we are targeting to finalize some of long-term sales contract to cover our share of PNG-LNG.

Then on the other side on the global market, Europe was the most — was most open than last year because the weather was mild in winter, the storage is is limited in capacity. So, when the storage are full it is difficult to put more. So it should have limited, then it’s a problem for, by the way for me — for Europe, but we don’t have very large capacity of underground storage in fact in Europe. So that’s why, by the way, we see that in the figures Total Energy there were less put deals being done. There was another reason, by the way, it’s about disposals, but some strikes in France. So the terminal LNG, the gas terminals in France were in fact shutdown, but were not accessible for almost a month.

But otherwise I would say, do we see today if your question is more Chinese demand. It’s not too clear to me to be honest. There is more than last year. But are we back to the 2021 level of Chinese LNG demand. It looks it’s a little premature to answer you positively. So we are in between, I would say at this stage ’22 and ’21 for the Asia demand. But more appetite for many players and including by the way the Chinese players, you have seen but they have signed some long-term contracts which Qatar. It’s clearly because they are really willing to, I think to ensure the security of supply. China is importing 40% of natural gas. So it’s a good opportunity and Qatar is benefiting of it and we are working with them in order to try to secure on the long-term the supply for natural gas. So it’s good for LNG.

Martijn Rats — Morgan Stanley — Analyst

Wonderful. Thank you.

Operator

The next question is from Biraj Borkhataria from RBC. Please go ahead.

Biraj Borkhataria — RBC — Analyst

Hi, thanks for taking my questions. So two questions on the upstream, please. The first one just on Mozambique. I appreciate you’re restarting their. On the other side they were — it seems like the operator was considering a second floating facility. I was just wondering from the Total point-of-view, is that something you’ve looked at or something you’re considering?

And then the second question is just could you just walk me through the plan for 2023 for both Namibia in Suriname? And what are the next steps there heading towards development? Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

I mean, honestly when you have the Mozambique LNG, huge reserves. The question for us is to develop a scheme where we can really has the potential to take the most of these reserves. And so the floating LNG concept, which is honestly not fully adapted. I think it was quite and that is the a first development because it wasn’t part of [Indecipherable] which was not related to the [Indecipherable] develop. But for us, honestly in terms of education of capital, I want to do LNG. I prefer to allocate capital for LNG, to projects with potential of upsides because you make much more value with additional trends on the brownfields way and on the green field projects. And the limitation for me on the floating LNG scheme is that, in fact, we have the capex and then you cannot expand it. You cannot benefit from the additional reserves. So we have enough projects in our portfolio, LNG projects portfolio, not to allocate capital to floating LNG because we don’t see the upside and again for me LNG is a very good cash machine when you can add additional.

Let me go to Suriname, we are drilling just now. So, you know, we have — in fact in ’23 we spent $300 million. We have three wells to be drilled. We have two rigs. Few wells, three tests. So in fact, it’s a typical year. We are just making a second exploration well. Then we will make an appraisal of the first discovery and potentially an appraisal well and the second-half plays how well either on the third discovery or on the second discovery, if it’s a discovery.

So and will test because it’s fundamental. We have some good static, I would say, that’s last year. So very encouraging. That’s why we have decided to commit almost our exploration budget in 2020, ’23. But we need the dynamic and test results because you know when you are by year 3,000 [Indecipherable] or 5,000, you don’t have to say — its an economic. So the plan is there. My view is that we have all this data, we will be in a position to have by the end of ’23, maybe earlier, but either ’23 to have a a good idea of what we have in hand and can we accelerate the time-to-market to develop the first discovery.

On Suriname. Suriname, I think the last appraisal well is just being drilled. So the good news is that we are trying to in order to develop an oil pool. The difficult in Suriname is the oil to gas ratio is quite high, but so what we wanted to identify oil pool with a lower CAGR in order to be able to have an efficient development. It’s a development which we don’t find two discoveries. So first two appraisal wells of this two discoveries have been positive. So today it’s a pool of around 500 plus million-barrel of oil. We are waiting for the last oil well in order to reach 650. And then it will be time to go through the government, I would say after these appraisal wells, We have again there a good vision in order to move forward to the next step.

So this year ’23 for both, Namibia and Suriname is very important because for us it could be — it will be the next wave of going to FID for growing the oil business in coming — in the future years.

Biraj Borkhataria — RBC — Analyst

Thank you for the details.

Operator

The next question is from Michele della Vigna of Goldman Sachs. Please go ahead. Hi, Patrick, Jean-Pierre, congratulations on the strong results despite the deteriorating macro. I really had one question. We’ve seen a major shift in the renewable power strategies both of the oil companies, some of whom are de-emphasizing their investment, but also from the utilities who are more focused on financial delevering. And I’m wondering whether you’re seeing signs that this shift is starting to restore better profitability, especially in wind, but also in solar, and perhaps opening up a better opportunities for you as well?

Patrick Pouyanne — Chairman and Chief Executive Officer

I think it’s a little premature. What we drive. It’s clear that today we’ve — you had last year some higher cost from the supply-chain, then of course we have the interest rate which are going up, and you know it’s highly leverage industry. So, of course if you want at the end-of-the day to restore profitability, you have to put the price up, which is good I think. For me — for players like us it will create opportunity for sure.

We’ve seen as well on some tenders, to be honest, on price, which we are very aggressive in offshore wind, which we will not understand. Which we have probably too low, I don’t know what is behind. So it’s difficult to tell you, I would say to have clear fit answer. I think this will come. We see higher prices in the negotiation of corporate PPAs in the US clearly. People are more on the board and I think on both sides, by the way the customers and the sellers because everybody — when you have direct discussions with some industries or some customers, its a way to to absorb profitability. So there is good signal from this point-of-view.

Sometimes in tender it’s different. But what we try to do by the way on the corporate PPA in order to restore parts of the profitability as well to introduce not only a fixed-price PPA for 15 years or 10 years, which honestly is not the best, but to introduce some elements of some merchant elements in order to share some upside-downside with the customer, which we liked knowing our model of Total Energy and these environment gave us more capacity to propose this type of contracts.

So I think what is true to come back to you is that I think there is a feeling that the rate more today, not the volume, but provide in certain, it’s literally like think the shale oil industry in the past. So there are more players looking to profitability is why we. When we announced that we are targeting more than 10% for integrated power, I know that people have some doubts, but — and again it’s integrated because the full value chain, but I’m fully convinced that this will come, it’s capital-intensive industry and there is no way to just to think. And you know when the money — cost of the was almost zero, you could find plenty of people ready to accept the low profitability when the price of the money is 4%, 5%. You have to add some 4%, 5% if you want to reach the same profitability. So I think oil wells will probably help us to restore the profitability and to move from, I would say an infant industry to a little more mature industry.

Michele della Vigna — Goldman Sachs — Analyst

Thank you.

Operator

The next question is from Lydia Rainforth of Barclays. Please go ahead.

Lydia Rainforth — Barclays — Analyst

Thank you, and good afternoon. Two questions, if I could. And I did want to come back to the Suncor divestment proceeds. Given that you’ve kept the net investment number the same, is this has been giving you more acquisition capacity? I just wanted to double-check where we are on that.

And then the second one was just coming back to the integrated power business. Obviously, you’ve given us lots of helpful data and kind of splitting that out. It has been very volatile. So when we’re looking at that business, kind of what are the key things that you actually want us to think about from our side? Thanks.

Patrick Pouyanne — Chairman and Chief Executive Officer

On the first one I would say, yes and no, because again in our view when we put our budgets for 2023, we plan to spin-off. We plan to spin-off and the company was TotalEnergies was planning to allocate part of a certain amount of debt, let’s say $2 billion more or less to the spin-off. So this $2 million was a proceed which was integrated in our budget. So I would say, so it does not change from the monthly. The view we have of our guidance for capex of $16 billion to $18 billion. So yes, of course, we have room for both, again, divestments and and acquisitions.

We knew that this year, but we will have some, I would say higher proceeds of divestments. But we have also — look, we have already spent some money for acquisition. We’ve done the Abu Dhabi deal. We’ve done [Indecipherable] We have some renewable deal which were introduced and the Qatar. We bought our VGA. By the way its not the question of acquisition, its the whole question of past costs. But in 2023, we love NFC was delayed to January and we might have as well NFS. So all that is integrated. And again, do not consider that the $4.5 billion of proceeds from Canada are extra, but where we also committed today for announcement that the payout will be increased. But part of these proceeds will go to shareholders like it was. So that’s I think the point on the first one.

On the second one. Yeah, it’s volatile, okay. It’s volatile, but going up. So, volatile going up [Speech Overlap] year ’22 on the supply side, to be honest, like Jean-Pierre told you was complex because you know European governments wanting to put some ceiling. So introducing in our accounts the ceiling effects. And when you have some supply which are done on the spot created a quarter by quarter results. We are not, I would say a small [Indecipherable] last year. This year have the impression that we are more, I would say in a stable environment even if you see that some governments which are putting some different schemes that is more stable. And so I thinking more stability from this — but last year from this supply and — supply business [Indecipherable] is growing. So I’m expecting more in ’23 than ’22.

And then talk of what could be volatile is linked to the gas fired plants which were last year around very-high rates. This first quarter was good, but not as of last year because the mild weather. So this is part of, we would say volatile results. So we’ll see. I mean we are at the beginning of the story. And we will see quarter-after-quarter and to give you some more elements what Jean-Pierre and his teams have done and delivered to you. I think at the end-of-the press release we have restated the year ’21 and also equates to quarters of ’22 in this segment. And I think it’s a good that you can engage with my IR team where we will be happy to to give you more indications or maybe not by the way, just to help you to see what they can explain you.

But I think, by the way, the volatility, the answer will be more from growing and developing the business, it’s a question of size of this business, but we have noticed that almost $400 million, I think $370 is quite sizable and the the result is even larger than the one-off Marketing & Services. After five years of development I think it’s a good achievement. So we look to that positively. And it will be the source of growth in the future.

Lydia Rainforth — Barclays — Analyst

Okay. Thanks very much.

Operator

The next question is from Lucas Herrmann of Exane. Please go ahead.

Lucas Herrmann — Exane BNP Paribas — Analyst

Yeah. Thanks very much and thanks for the opportunity. Patrick, I wanted to ask you two questions on LNG business. The first — there is clearly been increasing talk in Europe as banning or doing something to stop Russian LNG imports into Europe, but I just wonder whether you could make some observations around what your understanding interpretation? And whether — just your position on that. I’m a little confused actually as to whether you were obliged to take volumes into Europe to re-gasify through the original contract. But anyway.

And the second, staying with LNG. Is it goes back to Mozambique, and you have agreement or you have contract signed for pretty much all of the offtake for Mozambique. How has that impacted if at all, how those agreements impacted if at all as a consequence of pushouts, redoing feed, retender, etc., etc? And the delays that clearly apparently off-takers. That was it. Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

The Mozambique LNG, I would say, LNG contracts have not been affected until now. The buyers are still maintaining all the share. I think we did not reach any date where we would have to commit on something. I think, as you know about the buyers when you look to the different process. We have good contract but they are in the market. And so we are not, I would say, no impacts at this stage of this delay on the LNG contracts. Bu the way, TotalEnergies, we have only today — one of the contract was discussed or negotiated, but TotalEnergies took some volumes and we are ready to take more volumes of Mozambique LNG on our side.

On the Russian imports. You know, we are I would say like no — we have some long-term contracts. Part of this long-term are destination close which is Europe, to be clear, most of them by the way, out of the 5 billion tonne of long-term contracts that we have committed to, I think at least feel for if not for other destination close to Europe. There is also a force majeure clause, which means with if Europe decides to ban LNG import, then we will exercise the force majeure clause. And we stopped importing LNG from Russia to Europe.

The impression when I’m reading, what is that, of course, there is a debate that has rebounded. Of course, first, because not much improvement on the situation on the war, I would say. And second, because the European leaders think that today they have taken actions and that maybe banning Russia LNG imports is possible, it’s not a unanimous position, some countries are more concerned than others.

What is being discussed today if I understand correctly that regulation, which is put on the table, which will go to the European Parliament, which could take time, in fact, because sanctions require unanimity as we not go for sanction. There is no unanimity in Brussels on that. But if it goes with — if I understand the position is more of that. Trying to regulate the capacity of Russian players to, I would say wanted to book. So we get capacities in Western Europe — future regas capacity.

So if it is a case, it’s not a ban. And by the way it does not really affect — do not affect our position, to be clear. Then you know our position on that. We respect all the sanctions. But at this stage, as you know, we have a long-term contract, is a commitment. It’s a huge contract and we have no wave and expecting this long-term to take off the contracts. So if we don’t take, we’ll pay. And again, this balance of Europe, which was not neutral. And last year it is what it was something around 15 million ton, seeing more or less importing from Russia to Europe.

So again, we are monitoring that week after week and we will — I remember you that we don’t pitch for these LNG contract because we perfectly know but maybe it could happen to us if we had to stop. And so there is no market position being taken on the LNG from Russia.

Lucas Herrmann — Exane BNP Paribas — Analyst

I’m sorry, just to go back to Mozambique and the volumes that you’ve now taken in to portfolio. Could you quantify the number?

Patrick Pouyanne — Chairman and Chief Executive Officer

Quantify what?

Lucas Herrmann — Exane BNP Paribas — Analyst

Quantify the amount of LNG that you effectively will take into your marketing budget.

Patrick Pouyanne — Chairman and Chief Executive Officer

At this stage I think its something like 0.7 million tonnes for Total Energy’s. But again if some buyers want orders that they prefer to draw, we are ready to take more. So we are open to that. But some Japanese are also ready to take more. Our Japanese friends of Mitsui are also keen. So there are some — there is some appetite. Mozambique LNG is not only huge reserve, it’s well-located. It’s directly on the Indian Ocean to go to some Asian countries, is quiet India players by the way. So I think it’s a good geographical position. I’m not I’m not afraid about start selling these Mozambique LNG. And again, the buyers will not exercise any close vis a vis a project.

Lucas Herrmann — Exane BNP Paribas — Analyst

Okay. Patrick, rhank you.

Operator

The next question is from Matt Lofting of J.P. Morgan. Please go ahead.

Matt Lofting — J.P. Morgan — Analyst

Hi, thanks for taking the questions. Two, if I could please. First, on demand, Patrick, I think you talked to LNG specifically earlier, but to the extent financial markets are putting something of a burden of proof on the resilience of global oil and energy demand more broadly here. Are there any areas or subsectors through Total’s extensive global downstream business where you seeing any early warning signs on the rate of change in-demand manifesting?

And then secondly, could you share any sense of the strength of contribution from the oil and products trading business within the first quarter, refining and chemicals results and perhaps how you see that trending going forward as the industry moves through the immediate effects of the embargo on Russian oil products? Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

There is no, I mean what we observed in Europe was of course some, I would say energy-saving, energy efficiency effect last year, price was very high. So I would say Europe has saved the 15% of energy demand because price were so high that a lot of industries, but also by the way B2C customers, you know, had saved some energy. We’ve done a sort of — we have allocated to our customers in France a bonus if they were saving more than 5% of their electricity during winter time. We are ready to share with them part of the profit that we are gaining from the, I would say forward supply. And I saw customers more than 1 million customer, 1.2 million, 1.3 million customers have saved an average of 15%. By the way it’s more or less the same figure, but we observed on the manufacturing side, I mean the industry side. So there were some impact on energy saving.

Week last, I think this is really — I think it was really a reaction to the very high price. The and gas price was almost $200 per barrel last year in Europe. So today it has softened and we begin to see some demand coming back, I would say. So I think there was a — it shows the fundamental and a clear. Otherwise, no, I would say, we don’t see some softening of energy demand. The expectation from your end-markets are still high.

On the second question about Russian ban. What is clear that there has been a surprise, a surprise as been but clearly, there are may effect on the ban. A big surprise, but in fact, the diesel from Russia was quicker than expected. You know I think the markets were anticipated that sudden impact on disease stocks which were integrated probably. We have seen a lot of players making inventories of diesel before the ban. And in fact, the surprise was mostly, but diesel of Russia was quickly de-routed to Africa and South America, but was obvious because they were the two importing market, but also to Middle East where some producing countries preferred to buy some diesel with good discount and to serve their pool with no discount, which is by the way a good value from Russia to some Middle East countries.

But is a surprise, which means that by the way disorder track is softening clearly because there are high inventories, now Russian diesel is there and the Chinese refineries back to full speed because also they benefit by the way from Russian crude with a discount. So these ban, I would say these cap on Russian crude and diesel are so many many effects on different parts of the world and some impact on the global markets. This is what we observe.

[Indecipherable] traders they love productivity. There is a lot of volatility. And so I would say they have good result, but in fact have very good results almost if every quarter, so hope they will continue. That’s my comment.

Matt Lofting — J.P. Morgan — Analyst

Very good. Thank you, Patrick.

Operator

The next question is from Kim Fustier of HSBC. Please go ahead.

Kim Fustier — HSBC — Analyst

Hi, good afternoon, and thank you for taking my questions. I’ve got two, if I may. The first one is, I appreciate that you don’t comment on rumors, but I’m just curious to hear any thoughts that you can share on the attractiveness of corporate upstream M&A and particularly for producing assets, given that Total has recently been linked to certain private E&P company? I guess another way of asking that question is, hypothetically what would you need to see in order to pull the trigger on, let’s say, a $5 billion deal in the upstream?

And my second question is on Iraq. I just wondered if you could walk us through the updated Iraq integrated energy deal that was announced earlier this month. It seems to be a $10 billion CAD headline investments, but just how is that capex going to be faced over the years? Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

Okay, you’re right. Yes, that was good news. After my comments in London, I don’t know if some people listen to my comments. But clearly the government of Iraq confirmed the whole contract with no modification at al. So I would say sanctity of contract went through change of government, which was only fundamental. So that was for me more than a good news. And secondly, we reached an agreement on the way that participating into it could be allocated to Iraqi party. You have seen that we will invite also partners from Qatar Energy to join us. So that’s. I think it’s a good setup. We are finalizing all the paper work with the basic clause.

They do it, you know, it’s been busy. We spent from the Mitsui but among them it take four years we need to [Indecipherable] by the way it plays in the way it pays in the way but the gas sharing — we have to build some trains to fair down the gas, but we’ll take two-phase and also on the old bond by the way, increasing the position will be done in two phases. So let’s go through the four years, we will ramp-up along the years. So that’s the point.

On M&A. Now don’t believe on rumors. People love to use our name, but we have demonstrated I think in the past that we are able to make good deals when the price is good. So think it’s a — the price of acquisition. And second I think it’s a matter for me as well of synergies. Can you find some synergies in the acquisitions, which will deliver additional value. And the other points, which of course is important for us is does the deal come — I mean., does it make [Indecipherable] according to our different position. So we are not trying to fill the gaps. You know, generally, we are more trying to be consistent wih the strategy. So we’ll see. So don’t believe on rumors.

Operator

The next question is from Amy Wong of Credit Suisse. Please go ahead.

Amy Wong — Credit Suisse — Analyst

Hi, good afternoon, and thanks for taking my questions. I have two of them, please. So one of them is this continuing along the lines of M&A strategy. You’ve made a quite a few chunky, pretty large acquisitions this quarter, an interesting mix across E&P, power, Integrated Gas. So can we take that as an indication of kind of how you’re thinking along the lines in the near future?

And as a follow-up to that is just tying that with your Scope 1, 2, 3 emissions targets that you’ve talked about. And how — how are those targets and to any degree, if any at all, restricting the way you’re looking at acquisitions at the moment? You have the need to comply with some of those ’25, 2030 targets that you put out. Thank you.

Patrick Pouyanne — Chairman and Chief Executive Officer

Difficult question isn’t. There is no constraint of absolute value, we have a commitments In particular, when we look to hydrocarbons than any project, hydro, by the way organic one or acquisition. Most are an intensity, the Scope 1 and 2 intensity of CO2, lower than the average of the company. The average of the 19. So any project, any M&A should be enhance the position in intensity, that’s my question mark. And then we manage. And if it’s good for the shareholder, it deliver value, we will manage the absolute objective. It’s up to us to make the efforts on other projects. And I think we have demonstrated our capacity to have — non only to acquire but to divest some assets like we are doing today.

By the way, the exit of the Canadian oil firm from that perspective and fuels CO2 budget, I would say are giving us some space in terms of. CO2. But it’s again, don’t consider a direct to like more for me when we are developing our strategy, our integrated power strategy is clear, but this is clear, but we want to be able to offer to customers more decarbonize. I mean, lower range of products, oil, gas and, but it’s clear that it is a strategy.

But by the way the first question. We have demonstrated, I think this quarter is a perfect demonstration of the balance of our strategy. We can use M&A or organic development either to grow in oil, like in Abu Dhabi because we have the opportunity to put in our portfolio a very low-cost, low CO2 asset. I think the cost of per barrel — the price per barrel production is around $7, $8 per barrel. We pay the cost more as $4 per barrel, which we think very well price — $4 per barrel which we think perfectly well is the strategy. So oil is good when it’s fitting the strategy.

We have the LNG in Qatar, which was, I mean the investments which was the results of last year positioning and again LNG is clear and we have some more renewables. So we’ll continue to, I would say organic all M&A, all these segments of the company if there are good opportunities. So for me my question when we look to M&A and again it’s not today, we are more look essentially to divestments when the merger of an acquisition I would say. But this, we are looking to, which is a value creation, but we can get, not only by paying but beyond, I would say the initial acquisition payment. That’s what we look at it.

Operator

The next question is from Paul Cheng of Scotiabank. Please go ahead.

Paul Cheng — Scotiabank — Analyst

All right. Thank you. Patrick, just, If you don’t mind. I want to go back into the only oil chain asset sales. It’s fairly competitive or that you get some unsolicited offers, but then you go out and put it as they — as a result that put you as a competitive bid, or that is purely that is coming in from other people? And have you looked at to break-up the assets and sell individually?

Patrick Pouyanne — Chairman and Chief Executive Officer

No-no, its clear. No-no, I mean, as we [Indecipherable] statement. And the question is, you just have to read my forward. I think we said in the statements we launched the spinoff. There was no bid organized at all and we received several more unsolicited offers for several players, not only one. We did not look at them. We look at them only in the last month when they begin as a one-off Suncor begin to reach a level where we felt comfortable enough to go to the Board and to face the Board. Look, we have this offer, which again CAD5.5 billion to CAD6 billion, and with the same time as we’re working all and we are ready.

I spent a week — last two weeks ago I went to Toronto in order to meet some [Indecipherable] management team. So we are working on. So we had a good view of what could be expected from one side [Speech Overlap] alternative freight, of course, we work to push. It’s our job to push price up. I think at the end-of-the day, again our preferred sense go to management to comment on their motivation to make the acquisition of this size, or no side again. We I think proved its process. We organizing a bid process, but just being very, I would say determined to make this spin-off which we see as an excellent opportunity. Would like, by the way, I met several shareholders at last event in London and some of them were expecting possible outcome from these nature. I mean, s that is that’s why we can say. So that’s what we’ve done.

Paul Cheng — Scotiabank — Analyst

Okay. And that in the past a lot of times you guys come in on that what is the trading we saw — what the trading environment in the quarter and you haven’t mentioned anything in the first quarter. So we so we just assume trading we saw more or less average and nothing spectacular [Speech Overlap]

Patrick Pouyanne — Chairman and Chief Executive Officer

Wen it is spectacular we warned you because in this trading statement. If we say nothing, as said before, but very good. But nothing spectacular.

Paul Cheng — Scotiabank — Analyst

Okay. Very good. Thank you.

Operator

The next question is from Henri Patricot of UBS. Please go ahead.

Henri Patricot — UBS — Analyst

Yes. Thank you for taking our question. Just one left for me on biofuels. We’ve seen some higher targets from you in recent weeks and including this week on SaaS. I was wondering, when. I look at your 2030 targets, you mentioned 10% market-share with 1.5 million tonnes. Are these numbers — could these numbers go up both for the durable for market size for your own capacity or do you see too much of a constraint when it comes to feedstocks?

Patrick Pouyanne — Chairman and Chief Executive Officer

Yes you are right [Indecipherable] the volume was 2 million tonnes, which was actually the target to me [Indecipherable] There is Europe on one side and there is the US on the the side. I think we have a plan. We’re working to develop different units, I go into the US, where the higher rate, by the way giving. And so within framework, so there is a plan to develop projects around both offer and we have other plants brands in Europe, like laminates which we are looking to other opportunities to develop. Its an attractive market.

Having said that, as you know, the constraint is more on the feedstock because you need to find, I would say the secular economy. So it need to be used as a waste or second-generation. So, today the constrain is more difficult, but we are thinking of offering the people and reaching this target of 2 million tonnes per year by 2030 seems to be the positive note or 1.5 some. I don’t, okay, we’ll see, but worry. We are working on it.

Henri Patricot — UBS — Analyst

Thank you.

Operator

The next question is from Giacomo Romeo of Jefferies. Please go ahead.

Giacomo Romeo — Jefferies — Analyst

Yes, thank you. First question is just trying to understand the rationale that led you to increase the payout as a result of the Canadian. Divestments rather than committing to fix payout. The other question I have, its more general and it’s around the emerging legislation in France. And I’d like to hear your thoughts about the tightening investment criteria for Article 9 funds and explicitly to exclude — explicitly investments in fossil fuels. And just trying to understand whether you are any sorts involved in discussion with the governments in trying to make any changes here? It’s obviously Total in our screen is the most popular name for Article 9 funds investments in oil and gas. So just trying to understand a little bit your thoughts here and whether you are engaged in discussions with the government?

Patrick Pouyanne — Chairman and Chief Executive Officer

Okay, the first question, no I think its, again I explained why the Board. We plan to spin-off. It was announced to our shareholders. So that means there was a distribution of a dividend in kind of [Indecipherable] So it was a form of commitment. So we don’t do the distribution in kind. So strongly we are feeling to respect over and so which will be done through either, I mean a distribution for the payout — the cash payouts to whoever buybacks or special dividends. But that’s the point. So I think it’s quite logic projects and so we translate it at this stage because we prefer to observe what will happen during the year by giving you a guidance on the payout positive one. I think it’s more than 40%, at least 40%. So I think it’s positive. I think that’s demonstrates that the Board is clearly committed to return to shareholders live we said last year.

The second question, Article 9. No — But to debate. I’m not sure what exclusion will make some progress on the transition in particular because I’m convinced, but player like TotalEnergies very well-positioned to reallocate part of our cash flows to accelerate this transition. If it wants to exclude, they exclude. The only argument I have [Indecipherable] company, you are the one we’re in transition, which we can demonstrate. I’m not a big fan of taxonomy, to be honest, because all that is just specification. But I have observed that in some countries like Belgium, they make some caveats on the whole thing. But if some companies are [Indecipherable] by the transition, then it’s — they have to be considered. I’m more in favor, I would say on investing trend philosophy by [Indecipherable] which is what repeats. I think it should be more encouraging.

When if its not Article 9 will Article 8 and I think that — there also I would say from –and I’m not a — I think investor point of view might be willing to have a pure read of I would say very clean. Assets, okay. But its a question for me more of organizing the marketing to investors, and really a question of degradation. And I think that is where a confusion to try to regulate the transition to organize the transition for financial regulation. I’m not sure it’s the best way to do it. But again, we are well on our side. This does not effect our strategy, which is very clear and we’ll maintain — we maintain [Indecipherable]

Operator

The next question is from Jason Gabelman of TD Cowen. Please go ahead.

Jason Gabelman — Cowen and Company — Analyst

Yeah, hi, thanks for taking my questions. I wanted to go back M&A for a minute. Last year at your Analyst Day you talked about an interest in growing your US LNG integrated gas footprint. And I’m wondering as we try to figure out the use of proceeds from the oil sands asset sale. If that scenario that looks attractive to you either moving into the upstream gas, further into upstream gas in the US and-or partnering on an LNG project or two there.

And then my second question is on Kazakhstan. Some news out there regarding a potential lawsuit related to recouping costs from the Kashagan Project, which you have an interest in. I was wondering if you could provide some comments around that, where that lawsuit, its potential liabilities arising from that lawsuit? Thanks.

Patrick Pouyanne — Chairman and Chief Executive Officer

One the second question I have no news more than what you learnt. It seems that the government of Kazakhstan wants to reopen old discussions, you know, it’s not the first time. But the cost recovery from Kazakhstan. I think my feeling is that five viruses are really United and so we’ll face and we have the contract again. We will of course find that the contract be respected by all the parties. So that’s my only comment and no view on it.

On the first one. I mean, again don’t consider because we divest, so need to spend the money tomorrow. I mean, we are — we can be so well. I commented already I think last — during the last Investor Meeting that is true, but we are looking to see if we can more integrate those various position, the US position and where it is quite low, but people are still dreaming of the price of last year and also lets be patient. Things are possible [Indecipherable] it’s good oil, its LNG, it’s [Indecipherable] So we are looking to different opportunities in order to trade value from the Board portfolio.

Jason Gabelman — Cowen and Company — Analyst

Thanks.

Operator

Gentlemen, there are no more questions registered at this time.

Patrick Pouyanne — Chairman and Chief Executive Officer

Okay, so thank you very much. [Indecipherable] the results were good. Thank you to all the teams, and thank you for your questions. And see you soon to al of you.

Operator

[Operator Closing Remarks]