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TOTAL S.A. (NYSE:TOT)

Q4 2012 Earnings Call

February 13, 2013 9:00 am ET

Executives

Christophe de Margerie – Chairman and Chief Executive Officer

Patrick de La Chevardière – Chief Financial Officer

Analysts

Peter Hutton – RBC Capital Markets

Iain Reid – Jefferies

Lydia Rainforth – Barclays Capital

Irene Himona – Societe Generale

Alexandra Vermesch – Exane BNP Paribas SA

Martijn P. Rats – Morgan Stanley & Co. International

Oswald Clint – Sanford Bernstein

Jon Rigby – UBS Ltd.

Lucas Herrmann – Deutsche Bank

Theepan Jothilingam – Nomura

Operator

Ladies and gentlemen, it's time to start now. Welcome to TOTAL 2012 Results and Outlook. I'd like to welcome also those of you who are joining us via webcast. A few reminders before we start in case of emergency you have two exit door in this room, on the left of the room, also back and a request for everyone, if you could keep your electronic device on silent mode. Today we'll have presentation that will be followed by a Q&A session. Again thank you for your attention. Welcome and Christophe, the floor is yours.

Christophe de Margerie

Before I start I mean, very pleased to be back in this room, if you remember we were there before and then the floor fell not unusual and he’s got and unfortunately we don't like when the sky falls on our head, certainly following the good work. Mr. Patrick

Patrick de La Chevardière

Okay, good afternoon, everyone. Thank you, Margerie, (inaudible) We presents our 2012 results and I will come back afterwards to summarize what we call the outlook, but first I will make some brief comments sort of introduction.

Compared to a year ago, the worldwide economic situation is improving and this creates a better environment for TOTAL. The market in terms of oil prices has been relatively stable and well above $100 per barrel for more than three years now. Looking at 2012, despite the unexpected challenges we faced in UK and in Algeria and in Yemen, the Group delivered strong and competitive results.

So I can say, I’m proud of our many accomplishments for the year. For example, in the upstream, we started up six new projects and made significant discoveries in Argentina, Norway, Nigeria, and in the Gulf of Mexico, I would say a plus.

In the downstream, our marketing activities remain robust. The Normandy upgrade was completed and we are on track with Jubail startup. We reduced our hearing, strengthened the balance sheet, and increased the dividend which helped to give us for 2012 the best TOTAL shareholders return of the super majors.

What are we doing now? Our past-forward is clear and we are focusing on execution. We are committed to delivery on time and in budgets, the portfolio of more than 20 high quality projects. We are moving fast with our $15 billion to $20 billion asset sale program. We have an exciting exploration program. We are restructuring the downstream and before passing the microphone to Patrick, I want to be clear that we are very enthusiastic about our near-term.

Production is set to increase. I’m pleased to announce that we are in the process of restarting Elgin in the coming days or weeks, I hope days. We are working on several giant exploration prospects, for example, Ivory Coast and Kenya are drilling, we supported in the last days and now soon Gabon. And we are on track to accelerate the growth of free cash flow to fund future growth and dividends.

We have improved our visibility for growth and we remain committed to be a safe and responsible world-class operator. It’s an exciting time at TOTAL. Now we have to prove it. Patrick, if you want to present the 2012 results, and I will follow with the outlook.

Patrick de La Chevardière

Good afternoon everyone. I’m quite pleased to actually strong set of results to talk about today, that’s why I am presenting the result without any concern.

Let’s talk first with Earth 16 environment. You know the priority of TOTAL is to be a responsible company. We made significant progress in the rate of injury starting 2006, we were down by 18% last year. Of course we had those big incidents in Elgin and Ibewa, but I think our response to this incidents were appropriate and efficient. We have incorporated lessons from those experiences in our safety culture. We have also improved our impact on emission, energy efficiency, and we limit our footprint on local environment. We believe that acting responsibly is a good for the business and good for the Company.

Few words about the environment, as you see 2012 environment was generally favorable to our business. The average oil price for 2012 was above $110 per barrel. This is partially due to the growth in oil demand of about 0.8 million barrel per day, despite the relative weak economic environment we were facing.

Natural gas price in Europe was about $9 per million Btu, $16 for Asia, goes out to two market where we are more clean, that’s why globally for both oil and gas, the environment was favorable to us.

The competitive performance for 2012, TOTAL 2012 adjusted net income was $16 billion. However you see that on the graph in yellow or orange, so don’t think performance is improving, we captured the margin given by the market. The upstream contribution is slightly lower due to partially a weaker volume due to a (inaudible) and also given disruption on the pipeline.

There were also an impact of pricing costs mainly [IRDDNA] on the new startup. If you compare Total to the major companies, you see that we do compare favorably the one on the left side is Shell, the other being Exxon, Chevron and BP. Basically what I like to say on this slide is that we were able to overcome the negative one-off events we had to face and that our stable performance was in fact very competitive in comparison to Zeus.

We are on track to execute our $15 billion to $20 billion divestment plan. We announced the Usan sale last year. We recently TIGF for €2.4 billion. The $15 billion asset sales is already close or well in progress.

At TOTAL, we completely integrate the divestments regarding to our strategy, all front are sensible and we will again invest the money for future growth. We had a solid cash flow generation, last year we basically fund our organic investment of $23.8 billion, a dividend of $6.8 billion, maintaining all-in-all giving at low level of 21%. We are pleased to report this strong cash flow inline with the previous year. We maintain our financial flexibility and we are preparing for future growth, results negatively impacting the balance sheet.

A word on production, we think initially that 2012 was a tough year particularly due to the Elgin-Franklin and Dunbar events. We also lost the production from Siberia. We had issues in pipeline in Yemen but in fact if you look at the right side of the slide we compared favorably in comparison to our competitors.

A word on exploration, we are continuing through our prospective upgrades, also we’re both on-shore and off-shore and established in frontier area. A few areas which was pointed out by Christophe is Ivory Coast, Kenya, the Gabon is not on the slide, but we will fill it this year. We had successful operation in Argentina. We made this is one of the third discovery we made, the discovery in the Gulf of Mexico is not flat to discovery. And then we have in our garden I would say discoveries in Nigeria and Norway. The drilling campaign we have scheduled for 2013 give very high potential for important discovery.

The reserve is key for us, this is what we own. Our full reserve base of 11.4 billion Boe it represents more than 13 years of position, the organic replacement phase was 100%. Replacing reserve organically it remain a key target for the Company. The fee average on to the right side of the slide all in reserve replacement for the last three years 2010 to 2012 was 136% quite high this include Novatek.

On the project you have the usual suspect that delivering the major project to achieve our targets this is what we are focused on today you are familiar with name I will point out CLOV, Laggan Tormore and Ichthys. CLOV and Laggan Tormore are example of two major offshore project that's where we have to operate though and hence we have to stay on time and on budget.

Both projects are two-fold complete and both are on schedule today. In fact, all the new staff that we need to achieve our 2015 division target is already producing a well advancing developments.

LNG continues to be an important part of our Upstream story. As this is representing 25% of the Upstream results today using 2007 are the basis with seasonal LNG production by 40% if you compare 2012 to 2007. And by 2016, 2017, we anticipate 17 million ton LNG capacity for the Group. Both 70% as you can see on the right side, 70% of our LNG is sold in Asia today. You remember, the LNG pipe in Asia is quite high, and about 50% of our LNG cargo currently liberated to Asia or to other destination.

Refining & Chemicals, the downstream restructuring is having a positive effect, despite volatility of the refining margin that you can see on the left side. The Refining & Chemicals segment increased net operating results in 2012 up to $1.8 billion, up to plus 48% in comparison to 2010, including margin capital as key to sustain a bit of performance for the Refining & chemical. The Refining & Chemicals segment is concentrating on major integrated platform to buy one of them, we are the 37.5% interested in these projects, it’s a $400,000 per day refinery. the pre-commissioning is about 40% today, so start-up is proceeding as planned and the ramp up to nominal capacity should be achieved by end of this year. Once Jubail is fully operational, lifted by end of the year. It will be one of the most modern and efficient refinery in the world able to capture the highest margin available in virtually all markets and all environments.

Marketing & Service, this includes network specialties and other businesses including Solar and New Energies. This segment contributed at to more than $1 billion of net operating income. This segment has a track record of delivering a stable swing of results and represents a valuable asset for the Group. A word about our exploration for the next 12 months, and then I will give the floor to Christophe. This is one of the most exciting part of the TOTAL story for 2013 with the high-potential exploration program that we are showing, Ivory Coast, Gabon, Angola, Kenya, Brazil, Argentina, French Vienna, Libya, Egypt, Australia and Indonesia.

This map shows the location of the Big Cat and Elephant size prospects we are targeting. We intend to drill more than 60 exploration wells this year. We increased the budget by 10% up to $2.8 billion, and 90% of the rig we need to drill are already under contract.

And this finishes my presentation. No, I have one more. About our net investment, our budget for this year is $22 billion of net investments, $28 billion organic, minus $6 billion of net asset sale, 80% of the budget is dedicated to upstream. It is important to point out that we have expanded the resource base in the past year and now we are relying on exploration to create future development opportunities.

We are confident of achieving this $6 billion net asset sales target, I mentioned to you that we announced Usan, we announced TIGF and also assets are currently under negotiation. Our strategy is to reinvest for future growth according to strict return criteria, which are based on conservative assumption of $80 a barrel for short plateau conventional project and $100 a barrel for long plateau projects.

Thank you.

Christophe de Margerie

Okay, thank you, Patrick. It’s good you ended with investment, because I would like to say that without investment there is no cash and no profit. And especially when those investments are well controlled and definitely profitable, while that is the way you build the future of dynamic company.

So the outlook; outlook I like to try to move to slide, so it means that when there is recent change, but finally is impact on the what we call fundamentals is limited. What is changing you know, new production of (inaudible) in U.S. given more production of shale gas, all of this is I think an impact of course, on the U.S. especially on North America as a whole. But globally at the world level, we still remain I would say not only under control, but with limited impact on our view of the long-term. You cannot have a vision, you cannot have a strategy as a group without having to tell your investors what are your views on price of energy.

Here, to make it short, Patrick told you that 2011, 2012 it was almost flat, average at $111 per barrel for oil. Today, we are $120. We definitely consider in TOTAL that to launch our projects to make budgets and plan is too high and we need to be more conservative, so we are still using the $100 per barrel and even less when we consider that Total might be short and maybe little bit more risky.

In that case, we use the $80 per barrel, but otherwise we don’t see any reason to change this forecast when we see the result of all of those changes on the fundamentals. Fundamentals are clear, lot of resources much more than we saw, which is good news for our energy sector, which is good news for the oil and gas companies. But at the same time, concern about having excess resources, having the capability to develop them and definitely the jeopardizes which is taking more and more importance in our business.

If you look at this, you see that the capacities remain almost at the same level. We still consider that by the year 2020, 2025, the not peak because there is more peak, thanks to all of those resources, but the capacity is available, we will stay probably a little bit below $100 per barrel, which means at the end, long-term use, long-term projects, but at the same time, still I would say a little available capacities to cover the needs of the additional demand if needed.

We consider that the split capacity today, which are somewhere below 5% and by the way it’s almost only Saudi Arabia, all other countries are producing at full speed. We see this for the year 2013 at around 4%, which is relatively low and historically low.

And with this and still, I would say a strong demand coming from the world population growing, while we definitely consider that is the best report for the price of oil, the way we see it today. If we had to have something on the top, the topic will be the cost of developing those resources and to move resources into reserve, is getting higher and higher, and we will know the best part of the explanation, it also gives us support to those relatively high level. We like also to make the topic to zoom on LNG, first because we always did it, so it would be surprising if we suddenly stop. On the top there is a lot of debate on what could be the price of LNG with those new exports coming from the U.S., well first question is to come.

I have been told recently that, why don't you buy HH Gas for exports, because there is still not yet any export. Now if it come that’s part of our assumption, but when you look at the need, on the right part of the slide, well you see that for the demand, the way we see it which is almost the double of, what we have today by the year 2013. There is still almost 50% of the projects, which have not yet been sanctioned. So it's good to say that there will be gas available but still need to be developed and you know that is not always the easiest thing to do. So we continue to invest, yes we will look for new opportunities on the same time we restrict the supply we are having on all of those high end projects, keeping our costs within budget and delivering on time. Today in order to production of LNG, the LNG business as a whole represents almost 25% of the result of our upstream.

Exciting pipeline of major start-ups, well I'll come back afterwards on our target for production growth. I know lot of you here and lot of you just concern about how they are going to deliver, or we're going to deliver those projects why they finish in 2012 over the introduction, but they are moving into I would say increased plateau.

2013, I mean all the projects we have here have been or will be starting in the recent months to come and the same for 2014, 2015 and 2016 all of this represent the 750,000 barrel per day of additional capacities, which in fact production for TOTAL, but our new production are going to come from.

On the top that in debate on are we sufficiently OECD and non-OECD while today we have from those new production 50% coming from OECD. When you look at the total production of TOTAL today is 45% OECD and 55% non-OECD and our reserves 2P reserves is almost 50-50. So with this definitely we're moving into a production, which will be 50-50 between OCD and non-OCD countries. What’s important is those projects are good sound, profitable projects all over the world and in all of our, I would say, skilled.

So with this, that’s why I started with the project and then I come to production and production targets, which is our commitment. We have announced last time when we have been discussing our strategy that our target for the year 2017 would be a production capacity target of 3 million barrels per day, which is a real challenge in a way. Today in 2012, we’ve been producing 2.3 million barrels per day, but it represents in fact, during the two period, 3% annual average growth of – during the period 2015 and then reaching with the remaining 2015, 2016 and 2017, the 3 million barrel per day target, of course, it’s not oil, it’s oil and gas, which means oil equivalent.

90% of the projects, which we are going to bring the 2017 production, now overly in production or underdevelopment, it was 75% last time when we discussed it and projects still remaining to be decided by these, one is in Angola and second one is Egina in Nigeria and should be starting north production now. But getting the approval, which are still needed, and at the same time, we continue to reduce our decline rates. We talk about 4% to 5%, now we are at 3% to 4%. 2012, I think the rate was well below 4%, 3.8%. So on track to achieve our targets, the same way for production, we did it for our investment. High quality Upstream project was that the continuity of the mess is delivered by Patrick. There is still a lot of say on the new project of TOTAL are not profitable enough there and definitely that’s down to one of our competitors. That’s not coming from TOTAL resources, I insist on this, this is coming from Wood Mackenzie and that’s where the figures are coming from.

So if you look at the rate of return, we are the best of the class in terms of NPV among the leaders, which is importantly that represent definitely large investment program, but under control, especially on a near basis. And what’s even more important, we still are moving on a very disciplined all those projects first at the time of the decision-making process and then in the way, we operate those fields.

So coincidentally, we don’t operate all of the fields, but even when we don’t operate, we are looking carefully at the way our partners are doing. So investing was discipline and expertise for profitable growth, that’s definitely the strategy of the Group, definitely as Patrick said it again in the Upstream first we use 80% of our investment. That will be the foundation for 2017 plus, because I mean that’s already on what we are working, on one side 2017 is already done, but at least it’s decided. I told you 90%. Here, as I told you about the expectation we have for 2013 in terms of exploration, exploration targets. Here we are thinking about risk exploration, the figure of $5 billion was non-risk, risk, which means that we have this percentage which is usually depending on what time we’re drilling, but between 15% and 30% of probability of success. That give us for the period after 2017, with the new accretion we have been taking potential of 6 billion barrels equivalent.

That will be definitely an important part, although the replacement of our reserves, production base than our resources. Our resources have been continuing to increase. Now, we are more than 45 years of resources, but again it’s true we have only resources. But our 2P has been also increasing the same way our 1P. What’s important is to continue to deliver our potential gross on where we have today what we call our production base, which is the deep offshore. Round field development like in the North Sea and satellites buybacks, which are important to bring, but because more fuels, more reserves connected with existing facilities and on an marginal basis, even if they are not huge figures in terms of size which we present a lot of cash and a lot of profits, and still keep what is needed for a company like TOTAL keeping this long-term plateau projects, which are making the cash and the sustainability of the company by fields LNG unconventional, oil sands in Canada that the long-term was if we can do it as represented in an acceptable way or sustainable way that’s differently also part of what will be the future of the energy industry and the one of TOTAL.

Not to talk only about Upstream, even if Upstream is the priority of our businesses. We decided that the beginning of 2012 to restructure our Downstream, especially to bring together Refining & Chemicals to get the benefit of what we call important industrial platforms. But even more to get the synergies and definitely pushing that definitely, these businesses are really very, very equivalent, especially when you compare the Refining business and Base Chemicals business.

When you talk about I mean Polymers, becomes a little bit different or at least what we’re doing today going forward in France, or Antwerp or in other places like Jubail, we always try to move more and more into integrated platforms, which means Refining and Chemicals. That slide I will not make it and I mean I think it’s better to be commented on a one-to-one, but just keep something in mind.

We said we have 6% ROACE in 2010 and we said that we will try to achieve the 13% ROACE in 2015 using the same environment or the one in 2010.

If you do this, we still keep the focus figures where we see the improvements of our profitability. This is what we call the new major projects on main platform, plus 1.5, then specialty chemicals plus 1%, the portfolio changes 2% and synergies and efficiency 2.5. That’s not new, what’s important is we are now producing it and showing it to you in the more transparent way what has been already achieved since 2010. What is to be achieved in 2013, that the light blue and what remains to be done, which is the white part.

So last part energy, you have full, some prefer that is already blue, difference is all blue as far as we are at 9, I will be not only surprised, but I will be sad, we prove that we still have to improve especially since on synergies and we follow this program, we should definitely get the 13% target down as we said by 2015. what is important again, is to see that it has been working and what was still considered as something new and the kind of challenge, moving together the refining and petro-chemical proved already to this access and we can say now after a little bit more than one-year of experience, it’s working as one group, what entities, just like it would have been always like this.

Let’s to move to report our investment strategy. Well, it’s a follow-up of 2012 and 2013, we have been using different period which now today we are the peer 2012, 2014 where we still are investing large amount keeping the investment net under control $22 billion. But at the same time, as we see it’s a benefit in 2015, 2017, our large cash flow is coming from the projects which will be on production at that time.

And you see, if you see the right part of the slide, that the – what we call the cash flow coming from operations is definitively covering much more than what we need to pay dividend. So then it will be to be discussed, on what will be the best way to use this extra cash, but what is important is it give us all the flexibility to pursue our competitive dividend growth, our strategy based on dividend and at the same times keeping our financial position, our balance sheet as strong as it can be which is the case today.

We noticed that our gearing at the end of 2012 is at 21%, 2.2% below the figure of 2011, and definitely on the top of this very low interest rates, I mean that will give us at the same time the flexibility and definitely the very low cost of financing. At the same time we are executing our $20 billion, $25 billion program, it’s clear today that we are moving much more to do the $25 billion, other 20. I would say that the 20 is not already in the pipeline, but almost this is considered for us, as been part of our strategy, strategy of the company is not plus/minus to be compared in different way, with the combination of the two. We have been successfully doing in Poland divestment recently, that will continue not only in 2013 but also in 2014 and '15 and probably more because as you know the intent in this strategy is not to reduce our investment even if it puts – it does but it's much more also to have a real, I would say wish to sell and buy assets when we consider that it should be sold because the market is giving it probably more value than we can and we don't see any long-term benefit in keeping them in our portfolio, which is mean making it a lively, I would say management of our investment and that we'll continue over the years.

So rebalancing our capital employed, well that's just a result of what has been our strategy during the past years, well two figures to keep in mind in 2007 we were at 50 of capital employee coming from upstream. In 2017 it will be 80 in 2012, 75; at the same time as we told you we have capital employed at 75 but investment at 80, that's why we moved to 80 in 2017 and what's important too and which is linked definitely, with the start off of our new projects, what we call the non-producing assets percentage is going back to the figure we had in 2007. So 22%, it’s at peak in 2012 at 35% and goes back to 22 in 2017. What is the right figure for this, I don’t know. In the past, we used to say it was between 20 and 25, that’s what we are at the same time, as you support them that we can explain to our investors, to our shareholders, why sometime it’s better to be with higher level and sometime with lower level. It also depends on opportunities and what is important again is to bring new project into production with cash and profits on the upstream capital employed, but that process will look on OCD, non-OCD.

We are in 2017 that 45% coming from OCD, 55% coming from non-OCD. At the same period, the result will be 50-50, so you see which is normal, but there is a link between the two, but again, I still think it’s more important than to be OCD or non-OCDs to be in countries where you feel you are confident to be in a position to respect your code of conduct, definitely be, I would say in a position to secure your people and your business and also to be almost certain that government will be keeping from long-term views on the way the tax companies. That’s always the message I’m delivering here in the UK, but I know the message has been already received by the chancellor. So strong financial position and dividend policy, while that's the result of the past years, moving from 27% in 2009 to 21% in 2012. We keep our targets between 20% and 30% is clear today that we are much more on the 20%, 25% level.

The net debt is by definition in line with what I'm saying. We have a good access to the capital markets, but we can just see what we've been doing, I would say, quite successful emissions in the recent past, especially on the U.S. domestic market, so if you did and even more good the sense of confidence and trust for the future.

You have the TOTAL shareholders return, we call that TS. On that one the (inaudible) of some of the slides you’ve seen, we have the name of the companies, little bit official fears, they are not published by TOTAL, so that the return is based on the mix of the yield and the value of the stock during the year. While, on 2012, TOTAL has been the first, okay, we can tell me in advance what about 2011 and what about, okay, but let's take it one by one in 2012, but it was and not referred, so let’s reduce for our shareholders. I’m talking with what we call (inaudible) in France while they know this figure and they are quite happy with it.

Well, of course we don't take into account the buyback shares program, I leave it as the debate for the one-to-one meetings, which is much more figures of even mentioning else. Here we are talking about cash directly to our shareholders with the – if we can improvement in the share value. So committed to operating in a responsible manner, well that’s as we told you not only communication, it’s really part of our strategy, it’s based on commitments vis-à-vis the population where we have to operate, is not always an easy subject. On the left part you have a lady who presenting a way which is famous in Myanmar. It proved that was something provocative. Our long-term strategy to say that it will be working is of course staying. Well, we were pleased to hear this directly from the mouth with the voice of the lady Noble Prize.

We have to make a note of this, the source of pride what I mean is true that if we can prove that its worth continuing developing our activities even when countries are entering into difficult period, we can make it in respecting people and being at the end respected. Respecting the environment is what we respect, that’s part of our commitment and to start with everything which is linked with (inaudible). So we have a lot of new commitments that you will see in our, what we call, SCR reports based on hearing, based on water and all concern about emissions and definitely the climate change.

Access to energy, well that’s our first commitment is to deliver energy to our clients, to the people of ours, is building our strategy and relationship on long-term partnership, that’s what we are doing in a lot of countries in Africa and Middle East, but also in Latin America, well I will say everywhere. We operate, we definitely try to be always in close operations with local companies, and local governments, office, when we can talk to them, and definitely which is important, and expected from any company, when you work somewhere is important that you’re part of the local development, local becoming more and more country and less and less only the local part surrounding your activities in a lot of countries, being recently in Africa, we are developing this new philosophy, new politics is to really go and help, what’s needed. One of the best example is those five schools, which we have been creating and developing in Angola, it’s not only good for you, for us it’s good for the country, but GM, we could also become one day employees of TOTAL.

So that means definitely a clear path forward we have to make these exploration strategy a success, but we told you, but only new acreage we took more than 60 wells in 2013, several wells have been already spotted, that’s to give results after the one of 2011 and 2012, and we might even see the possibility of being more active also on, how we could buy and sell acreages, which we have been taking quite often at 100% basis. There are source of commerce, the source of swaps, the source of making money and looking for the best, I would say future reserves, delivering the next generation of projects, while that’s the 2017 plus, already we have a large scope in front of us, I would say most of our teams are well under, I mean doing their job properly, but it takes time, we have now to prepare the longer-term, that’s underway, and without forgetting that we are an integrated company moving quickly on improving its profitability of all of our downstream. It is a case of marketing on refining and chemicals, we have to pursue this program of being ready to be faced with probable and move the petition, that is the reason why we need to start not only now, we need to continue and to be in a position where I mean including with the additional competition, we proved and we can prove that even if it is a small part of our capital employed, it can be the way to make money, and not at all, never forget most of the countries where we operate, we are asked to come as the global partner, and not only as a team, they’re looking for partners knowing on how to invest in petrochemicals and refining. It doesn’t mean that we will always say yes, but we can help and definitely looking it profitable, it’s a plus, never forget this especially when you want to answer it to new countries or to restart your investment in countries where they need the help to restart the development and the growth of countries which have been fought by wars like Iraq, like Libya, like some others, but again in a responsible and sustainable manner and giving priority to the security of our staff first.

That's the end of the outlook presentation after the presentation of 2012 and 2013 made by Patrick. And now we're ready, the two of us and if needed some other person in this room to answer your questions.

Question-and-Answer Session

Operator

We have Peter Hutton from RBC.

Peter Hutton – RBC Capital Markets

Just two quick questions…

Christophe de Margerie

Wait a moment. Ladies and gentlemen, for the Q&A, once given the go ahead by Christophe, I will ask you if you not mind to stand up to present yourself and please restrict yourself to one question in order to give the opportunity to your colleague to participate, okay? Sorry for that.

Operator

Sorry again, sorry. Peter Hutton from RBC.

Peter Hutton – RBC Capital Markets

And just a definitional questions on the cash flow guidance that you gave on page 25. Can I just check what exchange rate you are using, is it 1.3? Because when I'm looking at the average 2012 to 2014, it looks like about $28 billion average, so about $21.5 billion, 22 in euros, which it looks around flat from where you were in 2012 over the remaining two years in that period. So just questioning what the exchange rate is and also I note that last year was a $110 Brent and now you are using $100 Brent, what’s the kind of sensitivity of that extra $10 on Brent?

Patrick de La Chevardière

We use 1.3 euro/dollar exchange rate. For our project, we use two oil price scenario, the $80 per barrel scenario for short plateau, the $100 per barrel scenario for long plateau. That’s basically the main sensitivity we use to access our project. The sensitivity for $10 per barrel for our cash flow is $1.7 billion of cash flows.

Christophe de Margerie

On the top of the euro/dollar rates as a limited impact on our accounts question for the €1, what you know that our dollars accounts will be much more reflecting the situation of the company. The euro/dollar rates has an impact on refining and for all activities we saw in Europe, so it’s was mainly Downstream. But that said that in Upstream, the impact of the euro/dollar is really, really limited to, let’s say, except from taking the dollar into euro.

Patrick de La Chevardière

Yeah, one can ask that the Brent sensitivity in 3Q because of taxes.

Iain Reid – Jefferies

Hi, this is Iain Reid from Jefferies. Christophe, couple of questions please, you don’t talk much about the Canadian oil sands mining projects anymore, and also Uganda two projects, which are obviously got some challenges. Could you explain, where you think the challenges are from real point of view and what sort of volumes you are expecting from those two in your 2017 target? And kind of related question in Nigeria, Egina which is also been delayed in terms of FID, is that really a kind of project management issue or is there any influence of the PIB on your decision making there?

Christophe de Margerie

On Canada and Uganda I mean it’s not that I want to avoid it, we are working hard with this, because this is probably the easiest part of portfolio, not only in terms of environment, but also in terms of cost. So we have been as you know working largely with Suncor to see the synergies between all two groups and to in a way rejoin the development of Fort Hills and Joslyn that’s underway. As you probably know, there are discussions on what we should do or not do with the upgrade, we wanted to develop, which is reserve, but sometimes it’s important to take the time to keep your cost under control and to make sure that you are taking the right decision.

Things have changed when I said the globally the fundamentals have not changed, well they have changed in North America as I said and not only for the price of oil, WTI versus Brent, but also with the fact that bringing new additional condensate from States to Canada, it’s changing the probably the environment, and due to this some aspects have to be reviewed, but at the same time it’s still part of our production by 2017, so we have delayed it, it’s part of our also forecast, so it is already included, I mean the delay, but what’s important is to see the existing production moving along that’s the case of our project reserve ConocoPhillips and for the rest it will take a little bit of time, but when we talk about the potential development of long-term plateau after 2017, definitely you’ll find Canada, and I hope at that time, based on the system all way of developing those reserves, which as you know, today are at cost per barrel, which is not far off $90 per barrel. So it’s first making sure that we are not making any mistakes, but again, it’s part of our long-term reserves. So we will discuss it on a regular basis, but there is nothing to eye on that, you talked about Uganda too now?

Iain Reid – Jefferies

Yeah.

Christophe de Margerie

Well, on Uganda, it’s a little bit different, because it’s not heavy oil even it’s flexi, but that’s not the same, well the discussions today are much forward with the government, so everything is ready to start, but there is still discussing at the government level, and between the parliament and the government on what should be the development of a refinery, you know the subject, and we said very clearly to the authorities that if the outlook of the production of Uganda is refinery in land, I mean there will be no projects.

So I can’t be more transparent than to say if we cannot achieve to have a pipe to be able to export the production to the seas through Kenya or Tanzania, but most probably Kenya is project, I mean will be – I don’t know we might have to consider of what we do, no pipe, no project.

Today, we still are waiting for getting the approval of the pipe.

Unidentified Analyst

(Question Inaudible)

Christophe de Margerie

Sorry.

Unidentified Analyst

(Inaudible)

Christophe de Margerie

Egina. Well, Egina is going to be starting very soon. I mean the last question is on the tendering of the EPC contract between two Koreans company and I want to add – the sales is classical in our operation. We have now reached an agreement with the authorities, so the announcement of the FID is really a question of not much less. This could be first and then…

Lydia Rainforth – Barclays Capital

Thank you. Lydia Rainforth from Barclays. My question comes from cash flow, if I could. So if I just following up the earlier question on the cash flow level, it does looks like the average $32 billion to $33 billion you was talking about the 35% for pay that you are gaining quite a bit in cash flow from 2012 level, how comfortable are you that is actually achievable with the production levels that you have?

And then secondly just picking up, Christophe you said about being a dollar company, and which is around the dividend and that is not in euro terms, is there any consideration actually assessing that in dollar term?

Christophe de Margerie

I can answer with the cash flow, yes, we are comfortable with the cash flow break for 2012 to 2014. We show into that our net investment was maintained at $22 million level, and we will continue and maintain it. And as I was mentioning in my presentation, the sale of asset is definitely part of our program. The dividend and the value of course, is a further question.

Patrick de La Chevardière

This is – because it gives us a chance to talk for hours on something which we cannot predict, because I mean definitely the dividend is still and has to be assessed in euro, because we are a French company. So we have no right to say dollar dividend. And then it’s true that when you receive a dividend, you might have plus or minus depending on the euro dollar rate, so this is why we try to tell our investors we give you an advance date when, I mean you will be receiving your dividend in dollars.

You know, that it’s in euro, you know in advance the amount which will be paid by the company. So try to find solution if you want to avoid any chance risk to cover the dividend. But I have no way for the time being of telling you that we could make it a dollar dividend, it’s not legal. Sometime we try to improve things in making it in a quarterly basis. So it helps for the – I would say, U.S. investors or those who are using dollar, also out there, currency to predict everything, because it’s smaller amount and is definitely based on shorter than being just on a year basis.

But again I’m always very happy when I see that you receive more in dollars than you should because of the improvement of the euro, which is the case today. But it’s not the case, so for the time being no change we can escape from the euro dividend. But we like to do what we don’t do it anymore. I remember we used to say when it was good to say that the dividend will increase in safe through the dollar or euro rate. We are making as we see, it’s an important increase, we don’t do this anymore. So 3.5% increase in euro.

Irene Himona – Societe Generale

Thank you. Irene Himona of Societe Generale, Chris you referred to the 2017 target of 3 million barrels a day as a capacity target. Of course this is an industry where things like Yemen and [Gorgon] can undo happening. So I just wanted to clarify, is the 3% targeted growth to 2015 capacity or a production target, and if it is production growth, then what sort of capacity utilization, do you internally assume, in terms of contingencies? Thank you.

Christophe de Margerie

Thank you. It helps to give additional explanation. That’s why we’re splitting if I could say this. The period in 2015 and then 2017, the 3 million barrels per day capacity is 2017. So looking at all the pipeline of new project coming on stream and those projects are delivering the production. Those project are part of the investment if we are talking about today, and those are going to bring the additional cash to the Company.

Now it’s true that it’s difficult to predict what’s happening in Yemen, even if we think the situation is improving there. I mean recently two attack there have been stopped by the army before they had any damage on the pipe. So we hope that we’re now entering into a new era well cross fingers. But it’s definitely not part of the capacities as you can imagine.

For 2015 where we have this 3% increase that is based on production, now I mean if there is some major events stopping yet, it will be stopped, but the impact is not the same, but not bringing production from new projects. I would insist to say, what counts are those new projects because that those on which we are investing, so it’s important that they deliver the growth and value. But when we say and you know this I’ve been discussing this often with you that we first replaced our production which is roughly 900 million barrels equivalent per year. I mean that’s already new production. So the decline when we face it is with new production, new investment and new value.

So in fact the actual production doesn’t start from the level you had the year before, start including the decline and we are today capable to reduce the decline. Yes, the 3% average we believe in it. Now on the 3 million barrels per day in 2017 as I told you is the challenge. What I mean as far as we are working on existing new projects that’s what will be delivered and we are absolutely confident in bringing those projects on stream and on time.

Now although things which might happen in between well, I’d like to say that we are actively moved to predict or to make as an average of no, I will never do this. I don’t see this is good to say, we’ll have a percentage of problems on our fields and is part of our dividend plan difficulties with this.

Again we have said, when we have this fleet, this week has not change the reserves for the value of the Company has not change, the spend on the quarter have been really, I’m not what still by the way how those figures have been produced, but we stop the leak. We are now restarting the production, it will take a little time to go back to the previous level, but the reserves are still there.

So there is no reduced value certainly in terms of cash, to get in now, but on the long run the value Egina remains what it was and as you know, before this explosion happened we were at that time, we were announcing that reserve would be probably more than expected. Well, it's not the right time to say this anymore, let's restart and then we will re-discussed on what is the future of the additional reserves of Egina frankly.

Alexandra Vermesch – Exane BNP Paribas SA

Yes, Alexandra Vermesch from Exane BNP Paribas. Coming back to the cash flow on dividend question, even your 2015, 2017 target of cash flow of about $40 billion is quite a big difference between what your net investment is going to be, and what your cash flow is going to be. So what's your priority for that cash use, and probably as a follow-up is, what is the level of disposal that you're using in terms of getting to that net gain investment level?

Christophe de Margerie

You mean after 2017?

Alexandra Vermesch – Exane BNP Paribas SA

No your target is 2015, so . . .

Christophe de Margerie

Our priority today is – there is no priority, I mean the company has its long-term plan. We cannot change it every day, so we have our investment as you call them organic then divestment, that's investment based on which we are very strict, and we keep that at $22 billion, and that's the commitment of the Company and proved to be realistic, then we have our strategy on small policy on dividend, we increased the dividend by 3.5%. We have a payout, which is just below 44% in 2012, which gave us certain flexibility on the average on the long-term, which is 50%.

So the priority is to do everything, I mean I cannot say for everything is to pay dividend and not doing investment, definitely I mean if we do provide the Company, which means our shareholders with good projects, well, they got the return to pay additional dividend and when you see the period 2015, 2017, you see that there is an additional cash on the top of the $7 billion, which represent the level of the total dividend. What will be at that time, the usual those “Additional Cash Flow”, but I don’t like the word additional cash flow. It’s not additional is the cash flow available, so what you do is it, well you really reduce your gearing for your increased dividend or you do both, or you think about something nice, what I mean I cannot say even this, when he said, what is he having in mind, nothing at all or any growth for the time being absolutely enough to cover our pleasure to deliver growth in profitable way to those shareholders, but no priority, I could say in a way that the priority are first salaries, we need to pay your employees, especially the one of Patrick is very stingy, but we start joking on this.

Patrick de La Chevardière

I’ waiting to 16…

Christophe de Margerie

Let’s wait.

Unidentified Analyst

But seriously, I mean dividend and investment are the same priority, and I have to be leaving together, but I will tell you that I will pay dividend result investment and the opposite.

We have to prove that, we have the cash for delivering the two, and when you see the gearing at 21 at Franklin, I mean it’s difficult to consider that the Group is missing any concerns about it’s flexibility to cover, I mean even things which to that could be considered as in our view not doable, I’m talking about a full drop on oil price, maybe you never know, you cannot predict. We are in a world which is becoming more and more volatile, but at the same time, when you look at the assumptions, well it’s difficult also to see a certain people that are going to see that the barrel might be back one day at $75, I don’t know what, well for the time being it’s more than $110, it’s $120, we don’t take it as for granted, but at least where it is, so before looking about $75, let’s enjoy the $120 and be optimistic.

Martijn P. Rats – Morgan Stanley & Co. International

Hi, all, it’s Martijn Rats, Morgan Stanley. I just wanted to ask you brief two questions. In terms of the improvement in the guidance for operating cash flow that you are thinking at, what share of that is coming from the downstream, particularly with the Gabon refinery come on stream, is there anyway sort of giving an order of magnitude. I know that you have quantified the improvement and return on capital employed, but in terms of additional cash flow, something sort of an indication would be helpful. Second question I want to ask is about the macro outlook and where you have a bullish view on all our markets. At the same time over the last couple of months we’ve seen various forecasts at EIA, OPEC, the BP Energy outlook which at least maybe not between now and 2013, but at least over the next couple of years we're calling for a much more significant buildings fair capacity decline in OPEC. Between your internal forecast and those forecast, where would you see the difference that sort of gives you the confidence that’s fair capacity build will not happen or at least not to the same extent it is in Iraq or it is somewhere else, any comments to that would be much appreciated?

Christophe de Margerie

Well, I said that we are bullish because when we use 180 of the price is 120, if you call that bullish, I don’t know what it means, that’s the opposite and its the time where we deciding TOTAL to be even more drastic with our teams to say don't forget that 104 and don't be too much focusing on the price today because this might sustainable at that level. If the time where the price go to 120, okay, can I say bad luck, no, it's good luck, especially if work on 100, because it mean that all the 20 is additional cash, and that's what happened last year. Last year we had finally better results on cash because we have been getting the benefit to of the 111, which is not 100.

So we don’t say that we're bullish, now you hear so many things in the market which is normal, that was in levels and we have had this discussion. Saudi Aramco which is now one our best partner, we exchanged all information extremely good relationship. But we are surprised to hear that OPEC did not exist any more, but they are existing, because today the country which is making all the move is Saudi Arabia and they have been very well driving the problem we face with Iran. If they were not able to increase their production very quickly to face, in fact that the Iran dropped its exports by more than 1 million barrels per day, therefore it’s approximately would have been 200, and I don’t know we would be saying, is doing a 50, what I can tell you if Iran stop exporting, it will go up and that’s life.

When we talk about stray capacities, look at (inaudible) they are absolutely in line with what we say. For two reasons; first, they’ve been creating some kind of nervousness recently in raising their targets for production of coal. But instead of using the same 2013 year for the target, and we’re using 2020. So it’s very difficult to match the two, because they are one of 2020, one of 2030. Of course, they did that on purpose, because they don’t have the answer or they’ve increased by the little proportion of coal versus other sources of energy.

Why, because the price of coal is very low and what you said, but being bullish or not bullish. I don’t know what it is. One of the price of coal is so cheap in the U.S. I can go to Germany at the cheaper price of gas, people are using coal and not gas, and that’s not TOTAL, that’s the market forces.

So just to go back to these capacities available, we have and we will use it again the slide if we usually use for the – what we call the strategy meetings, which are taking place in September. We have the slide when we see the quick capacity with line, which is more optimistic and the line less optimistic. On the more optimistic, you have the efficiency, you have the additional production, which means that the 5% is moving to 6% or 7%, and then we use something, which is just delayed the projects sanctioned not to TOTAL, but the competitors by the six months, you lose more than 3% full capacities, I mean I think that people don’t have in mind, but talk about fundamentals just like if it was based on 6 billion, it’s behind operations, behind you have capacity to develop those fields, behind they have the cost of projects we have been talking of, behind this, you have a lot of delays in FIVs, behind this you have geopolitics triggering delay in approvals, and when you take all of this, it’s nothing to do with being pessimistic, optimistic is just being real.

And what I’m trying to do when I speak, being it doubles elsewhere. I speak as a man of the industry, and not choosing billions of reserves coming from I don’t know where I use the UK, I would say formula of dividing an acreage by reserves, and you find a production, that does never work in Saudi Arabia. I’ve been told many times that in Saudi Arabia we will be 20 billion barrels per day. I’ve treated almost of a liar, if not stupid, I mean now nobody says anymore it will be 20, nobody, but I’ve been hearing if what this 10 years, 20, 20, 20, now it’s 12, and we said it’s 12.

Iraq, even the Iraqi government decided recently for all of their projects one by one to reduce the production target. Business TOTAL, (inaudible) that’s what we want, that’s what it is, so nothing to do we have been bullish, it has been pragmatic, looking at figure being conservative in what we use to launch our new project, one 180 that we consider sound if we can get more, is good for us, if it will be less for a period of time, we have also flexibility to cover this kind of momentum. At the same time looking at the cost of projects, the cost of developing new barrels, the resistance will be certainly there. First and second of that, it was a the opposite of certain brilliant sprits, offer still exists, it's called Saudi Arabia.

Patrick de La Chevardière

Trying to answer your first question about cash flow coming from Downstream, in 2012 the cash flow from operation coming from Downstream was about $4 billion. By 2015 we would expect that to increase in the internal capital employee by up to 13%. We expect to increase the cash flow from operations by $2 billion to $3 billion. Just to give you a magnitude Dubai in 2012 of environment will generate about $800 million of cash flow per year.

Christophe de Margerie

To give you an additional vision I would say that for the Downstream, we are entering in a period where Downstream will be a source of cash for the rest of the Group. Sometimes we have a problem to explain that it’s not, because you have high levels of return that it means no cash. If you remember the old days of preferred during the 90's the Downstream has been financing the Upstream, thanks to the cash from Downstream, thanks to the depreciation, et cetera. So I mean what's happening to Jubail is a very good example. We have with Jubail is now (inaudible) and Port Arthur, in U.S. made most of what we have to do in terms of new investment. There are still investment to come probably if we can reach an acceptable agreement with all the parties involved in Antwerp, but most of our big investment is now behind us. Now, we want to get the benefit of the new organization and also the new project.

Oswald Clint – Sanford Bernstein

Hi, Oswald Clint, at Sanford Bernstein, question on exploration, out of the lot of acreages in the last couple of years and quite a lot of countries you’ve got a big reliance on exploration to fill the upwards of that, could you be a bit more specific and say how much oil and gas did you find last year in those four significant discoveries and is it enough and does it give the confidence in a reliance on almost greater exploration from here? Thank you.

Christophe de Margerie

That’s on the [Potex]. Well, I mean in 2012, we had not been drilling a lot of what we call new acreages. The real start is now on with Ivory Coast, with Kenya being announced yet, but soon to be announced to go. So that is part of what we call our new additional volunteer of increasing the exploration program. So we will see the result there. As I told you that it represent for 2013 5 billion barrels of oil equipment, what is the mix of the slate between oil and gas?

Patrick de La Chevardière

55 oil?

Christophe de Margerie

Okay, we have full of exploration. So 50-50 is not bad, 55-45 or more than bit on that. While again, if you remember in our production of gas, today we have 40% of that gas coming from all related formulas. So when you see the split between oil and gas in TOTAL in terms of production, you have to look at disposal in terms of what is the marketing of this gas, is it on local market, domestic prices or all related to the 40%. Jon?

Jon Rigby – UBS Ltd.

This is Jon Rigby from UBS. Can I – in the L base, you used to talk about technical costs, so I understand why you’ve dropped them, because it doesn’t really make sure what you’re doing, but I note that your depreciation charge in the Upstream is going to buy about 20% this year over the last year. So the two-part question.

So can you just explain what the moving parts of that is this year, is it just new projects coming on that dramatically change your DD&A and what would those be? And then second is, I know that your CapEx in the Upstream is now running at over three times your depreciation. So can we expect this sort of profound change in DD&A to impact earnings over that period of 2016, 2017 that you tend to refer to in the framework of cash flow? Thanks.

Christophe de Margerie

I will leave it to Patrick for talking that. First, on exploration, it’s true that in 2012, while we have been increasing the exploration being depreciated, and if I’m correct, it represents something like 500 additional DD&A dollars or charges, but I mean when you are more active on exploration, but it is no more that you have more charges as far as you're not always successful before you get the benefit of the new barrels, the first of the non-benefit of drilling more, so the unsuccessful part is being charged to your profit or loss. But I mean I don't consider further notice that it has been used, because the result of our strategy when increased the project from $2.2 billion to $2.8 billion, I mean that's part of the reason.

On the DD&A before Patrick answers, we have been not disclosing the technical cost this time. We will do it again in September. The reason was, we didn't get the figures of our competitors, so we have ours, we will have theirs, definitely you're right and seeing that they are depreciating for the DD&A reason, but we are totally certain that the case for everybody, but particularly you might say more now, but you will get the full presentation as you would all in September.

Patrick de La Chevardière

Yeah, you are right that DD&A increased the technical cost, which is about $23 per BOE include $2 per BOE increase in DD&A in 2012. We expect DD&A to increase by about 10% in 2015 and 10% to plateau.

Christophe de Margerie

The thing with the capital employed producing, non-producing.

Lucas Herrmann – Deutsche Bank

Thanks. This is Lucas Herrmann, Deutsche Bank. In a way it’s pulling on from John question. When we look at cash flow, we can see that your expectation is broadly a 50% or so increase in operation cash over the course of the – through the 2015, 2017 period. And now, if I was also asking what your expectations are for net income over the same period. Wherein I am trying to take the count of what’s actually going to be happening to depreciation and what’s going to be happening to the difference between tax paid and accounting tax. Could you give us some indication Patrick of how you see accounting profits for one of the best price or net income moving over similar period? Well is it that 50% improvement in cash?

Patrick de La Chevardière

Okay. Net income will go at a lower pace than the cash flow. The return on capital employee will increase beyond 2015, 2016, 2017 and as I was mentioning to you the net income will go at lower space because of the DD&A. But DD&A will plateau at 2015 and beyond.

Christophe de Margerie

Look at the slide it was high quality upstream projects. So you will see that our new project are getting, which is at the upper level, and that’s how you calculate your income at the end. But be careful it was technical cost. Technical cost cannot mean directly that you will have less profits, the difference where it is and by whom it’s spurred. And sometimes people will see that we have too many production sharing contracts, well because the production is showing contract, the technical cost is paid by the government. So instance in Angola if you have an increase in technical cost it will not have the direct income on your bottom line. It will have one of course, but less than which now directly $2 less is $2 after tax after splits between profit oil and between the different partners. So to offset this, the technical cost, you really have to look at it on the contract of contract basis. But I mean, that will not be solved, pessimistic to say that, of course I mean if you have higher technical costs, you cannot have a positive impact on your profits, but at the same time, it can be really reduced even some times missing, if it is part of a system where you recover all of the cost through cost cutting.

So again, look at it in the sales, that is the only way. I always say this is what I am presenting the different figures between TOTAL and our peers, because it’s good to say that we are usually below them and it’s good and we have to continue holding this stream definitely climbing, but again look at it on a case by case basis, because it’s very different when it happens in the North Sea or it happens in Angola and especially today with higher taxes, it’s not good for our today’s results, but then the impact of additional cost is also less important, because it’s globally paid by states and you really need to have a look at it like Norway, where in Norway we have 78% of tax rate marginal, you have had very high price of very high cost recently, huge inflation, but on the bottom line the impact has been relatively limited. Thanks to the system where you can start depreciating, at the time you start developing and not at the time you start producing. So one by one, you have to go straight and at the end, you will see that the impact is not as big as this.

Lucas Herrmann – Deutsche Bank

And Patrick, I am just going to come back to you on tax. I mean is there a build in the differential between accounting tax on the better price and tax paid as we move through this period of very heavy investment, must higher capital allowances on a significant benefit, one would expect it to your cash flow statement relative to your P&L.

Patrick de La Chevardière

The tax rate for the three month talking about remain both – if I have a look to the long-term plan, the tax rates will still remain stable at about 59% over the period. This is something I think opportunity.

Lucas Herrmann – Deutsche Bank

For 100.

Christophe de Margerie

For 100 will up about.

Patrick de La Chevardière

As it moves to 120, it will be more, but that’s a good news. I mean for the producers.

Lucas Herrmann – Deutsche Bank

It’s certainly more with West Frank. You’re clearly moving into a higher growth phase over the next few years, but one of your slide shows that the capital employed not in service, is falling back to more normal level by 2017. Is it fair to assume then that your growth rates will fall beyond that period? Thank you.

Patrick de La Chevardière

Well, you remember first that, I mean as of today we are pleased with organic investment, which are relatively high. It’s based on the play that we had at the time to make certain acquisition and to have decreased investments, which are linked to it, because we were a little bit concerned by a certain drop in our at a time, 1Q reserves. That’s not the case anymore. We made the necessary acquisitions, which were not really acquisitions, that’s what we call the DRO, which as you buy non-developed resources and you ask them to change into reserves and then into developing reserves and then into production. So that’s why today we are pleased with organic investment, which are today higher than they were and higher than it will be in the longer-term. Why because we will go back to a more sustainable development planning of our investment. And it doesn’t mean that we will stop investing after 2017. TOTAL still consider that it’s top angle policy, the worse you can do in the industry, it has always been hurting those following these strategy, because I mean when the price of oil or gas moves, it will move at the time we wish. So that’s the contributive on the criteria you use for launching your projects and then you will – then on the longer-term but more and more we will be talking on after 2017. Today we’re focusing on the first part, because that has been the concern of our investors, but cash flow are we capable to we are, we deliver and then definitely we will have to say a little bit more about the future of our industry for the year 2020 plus, which is I insist to more. But when you talk about exploration, that’s exactly what you’re doing, the exploration of today, it doesn’t mean production at the best. At the best before 2020 plus.

Christophe de Margerie

Just to add one point, if you look beyond 2017 you will have projects like Canada, or Italy and keep in mind that our capital end flows will basically double from today to 2017. So the overall amount of cash available is great and the big project I was mentioning to you, but it was beyond 2017 production and project.

Patrick de La Chevardière

And the last question. Sometimes it’s risky to be on the front line.

Jason D. Gammel – Macquarie

Thanks, Jason Gammel of Macquarie. Just a couple around the LNG portfolio, first of all the level of flexibility we maintained in the existing portfolio is clearly been beneficial in the current spot pricing environment in Asia. But given that we’re in a pretty tight market right now, are you strategically looking to put more term structure around the portfolio, while prices are high. Second part of the question is you would look to be going beyond the 17 million tons per annum that have target in 2017, if you will get the project list. Would you be able to put any priority around Shtokman, Yemen, Brass LNG and perhaps even expansion trend in the LNG, just which have the best economics or which you see most likely to move forward?

Christophe de Margerie

Well it's not the easiest point, I mean using Brass LNG and Shtokman, I'd like to know what it is frankly on Brass in Nigeria for those of you who don't know, is a big question mark. What I mean as Patrick said, it's after 2017, before no chance and again you know it's place which is not very secured, safe but it's a strong wish of today's president, but no decision have been taken yet, you know that one partner have decided to quit and we don't know would be replacing it, so I mean no dates for Brass – no dates for Shtokman, I don’t know if you read the press recently, but they said it was a typo or something has been published in Russia, so the stock ban will start introducing in 2013, okay, that was in newspapers. When we called them, they said, no, it’s a typo, its 2019, strange typo error just to give you my feeling on those two projects.

They are there, the results are there, they would be developed, but when it's impossible to say, but we don't having them for more than the longer term, it’s not part of our short-term or even medium-term target. The Yamal is different, the Yamal is really now moving, the (inaudible) is not yet taken, it should be taken before the year end and we got already a lot of good offshore to our requests. There are still a few missing as you know discussions with Gazprom (inaudible) sporting gas especially when it is LNG or if you know the subject you know things are moving in the right direction, which mean that the government ask Gazprom to discussion with Novatek and Yamal LNG and the country uses underway.

So when will it be sorted out difficult to say, but I am relatively optimistic of this project. On the topic there is a lot of potential, because what we are developing today are really one part of the existing reserves. So the good thing with Yamal if it starts in a good way its long-term positioning for TOTAL and Novatek and you have TOTAL as a partner in Yamal, but as a partner in Novatek will getting the benefit of the two. But for this LNG project long-term, that's what I said when I presented those slides of LNG and that’s why we are confident that, yes, so demand is there, yes, the resources are there, but before it will become really LNG available for the consumers, it will take a longer-term period.

So all of those thinking that – all of those projects we start and then LNG on the top coming from U.S. while again that the price will be decreasing below as I was seeing for oil production and oil development. You cannot say at the same time that the energy industry is facing problems to develop that project, but it will be all developed and then it will may crash on prices, that’s not the way we see it, so we remain extremely positive on LNG. So if we can look more, yes we will.

Christophe de Margerie

Okay, the next question.

Theepan Jothilingam – Nomura

Yeah. Thank you. Theepan Jothilingam from Nomura. Just a question coming back to disposals, but since your earnings numbers last year were very resilient, just going forward though, could you talk about perhaps the impact of the disposal program? So looking at the 2014 cash flow number relative to 2012? And then sort of a follow-up question to that, I guess is that if perhaps the impact on earnings from the current disposal program is relatively muted, if you were to pursue a disposal program, would that be more interest sort of cash generating assets or not?

Patrick de La Chevardière

Yeah. The impact on earning of the sale of assets, it’s already included in our forecast. If you take the example of CIGA, which will bring another whole enterprise value of €2.4 billion, TIGF provided an 20% return on capital employee of this regulated business is quite small. So all in all, the overall impact of asset sales program is not weak. The magnitude of it maybe $100 million in advocate something like this, either side.

Christophe de Margerie

As far as I told you, the most of the disposals we will be doing until 2014, it’s easy to say, how much it will represented in terms of reserves and production. It’s by definition limited, because we are targeting projects, which are I think a literal impact on production and reserves. But at the same time, it’s all including in our forecast, so could you say this because we cannot choose this as an excuse, if we cannot meet our targets to say, yes what we are selling, all that’s included and for what we present for instance the next to come. We already also have reserve part of this for, if we know the part of the 3 million.

So to be very clear, we will not use as an excuse except if we go to additional sales. but today in the $20 billion, $25 billion sales program, it’s all included in our targets and forecasts. And when you have our internal presentation, I don’t know if we do this for everybody, we have detailed explanation of what are the plus and what are the minus compared with our budgets and planning. We have something, which we called (inaudible) and that is with okay, we sold or we acquired something. So we are putting those category as independent from what we call organic production coming from existing developments.

Patrick de La Chevardière

We – to be precise enough we had no formal target of asset sale beyond 2015. We have no target but as I told you, not in terms of amounts but in terms of strategy.

Christophe de Margerie

I think the strategy which is to make your portfolio of assets moving will be continued. It makes sense to continue to not to keep in your portfolio assets when you consider that they don’t have real potential, but it will become more and more costly. And on the top, some people will make a better use of those assets that you’re offering when we sold in Cameroon, then nothing to do with balancing our cash. It was really based on, well Cameroon is a nice country. We stay in the marketing, but as far as oil reserves and production concern it can only be dropping. So companies will not having any concern about commitments on production. They continue to do it. For us it was becoming a burden, so disposal. And I think we need to continue to work on this, as been part of the way this company needs to be managed in a dynamic way, not to please but just because we consider that it is the best way to bring value to our shareholders, but without targets.

Okay, as it’s at the end of the session. So he must be right. Well thank you for paying the time with us. Thank you for your attention. We really think that TOTAL is moving ahead in full transparency, meeting our targets, our commitments, while I wanted to say something very clear. It’s important to meet your target vis-à-vis, your shareholders, investors, financial analysts. What if we are doing it is because we trust in it as a long time strategy.

So it’s not a strategy to please, it’s a strategy which has been supported, approved by the Board, that the management consider at the best opportunity to bring value to its shareholders and that the reason why we are committing ourselves to those targets. So of course we will answer always to your questions and especially to be as transparent as we have to be.

But at the same time, don’t think that we do this or that, because we have told this or that. We’ll listen to you at the same time it’s important that our long-term strategy has to be driven as a long-term strategy. So when we ask what do you change, we changed our habits. We changed our way of doing business, we changed the company organization, we have been reinforcing this moment from on using more skill that we were doing and moving our portfolio of assets and if you believe it being more. But at the end, we have strong ship order of as well as you think that price of energy will remain at level. We make it profitable, energy is the only thing which is on earth, which could the way to continue to grow in the world. So we consider that we are in one of the most fascinating industry with a huge potential, with a huge potential for additional technology or young engineers and with a very long-term bright future. So that’s the reason why we were pleased, today to offer you the result of 2012, which has been as Patrick said good and definitely we expect to redeliver this kind of news even better in the years to come. Thank you for your attention.

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