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TOTAL SA (NYSE:TTE)
Q3 2020 Earnings Call
Oct 30, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Total Third Quarter 2020 Results Conference Call hosted by Jean-Pierre Sbraire. [Operator Instructions]

I would now like to hand the conference over to Jean-Pierre Sbraire, Chief Financial Officer of Total. Please go ahead, sir.

Jean-Pierre Sbraire -- Chief Financial Officer

Thank you. Good morning or good afternoon. Let me start by saying that I hope that you are all doing well and keeping safe even more as we have entered the second wave of the COVID-19 pandemic in Europe and not yet over with the first wave in the United States. So, let's move to the results.

Total reported third quarter results that reflects the resilience of the portfolio and demonstrates, again, the Group's ability to capture the benefits of improving oil prices and market conditions. Adjusted net income rose to $848 million or $0.29 per share. Debt adjusted cash flow, DACF, increased to $4.3 billion. Leveraging strict capital discipline, we strengthened the balance sheets and reduced gearing to 22% and based on the strong fundamentals of the Company, we confirmed the Group's support for the dividend with an announcement of our third interim distribution, maintained at EUR0.66 per share.

We saw mixed signs of recoveries in the third quarter and we note in particular that volatility, particularly in oil prices, was lower than in the second quarter. Brent rebounded from less than $30 per barrel second quarter to more than $40 per barrel in the third quarter, thanks mainly to OPEC+ production discipline. Sales in our European marketing network came back to nearly pre-crisis levels. However, refining margin collapsed to negative levels during the quarter. Gas prices remained low, but we saw the modeling to higher levels in September in Europe and Asia and as it is traditionally the case for the winter season. The Group is continuing to execute and deliver on the strategy and objectives presented since the start of the COVID crisis. We have kept the organic breakeven below $25 per barrel, reduced opex to $5 per barrel equivalent and we are on track to cut costs this year by more than $1 billion of breakeven. In this environment, capital discipline is key and we are limiting capex to less than $13 billion this year, $1 billion lower than previous guidance, while still continuing to invest $2 billion for our fast-growing renewable power generation business.

Operationally, oil and gas production decreased to 2.7 million barrels of oil equivalent per day in the third quarter. Mainly, this reflects strong compliance with OPEC+ quotas as well as the voluntary reduction in Canada and disruption in Libya. To a lesser degree, there is also the net effect of seasonal maintenance, natural declines and asset sales, which were partially offset by ramp-ups on new projects. Based on the level of OPEC+ compliance and the return of Libyan production only since October, we now anticipate full year 2020 production will average less than 2.9 million barrels of oil equivalent per day.

Turning to the results by segment, iGRP, Integrated Gas, Renewables & Power segment reported $285 million of adjusted net operating income and close to $700 million of cash flow in the third quarter. This segment includes our integrated LNG business as you know where we are the second largest player worldwide and well positioned to participate in the global energy transition. LNG sales volumes were 8.1 million ton in the third quarter, a 9% increase year-on-year, mainly due to growth in our trading activities. LNG prices averaged $3.6 per million BTU, reflecting mainly the 3-month to 6-month lag effect on oil-linked contracts, but this effect is beginning to reverse and we anticipate a rebound in LNG prices to more than $4 per million BTU in the fourth quarter. We'll continue to grow our LNG business from 28 million ton of sales through the first nine months of this year to 50 million ton per year by 2025 from projects already in our portfolio or under construction. Our integrated electricity business is a fast-growing part of iGRP segment. Gross installed renewable power generation was 5.1 gigawatts, nearly doubled compared to a year ago and worldwide electricity production increased by more than 40% in the third quarter and we are continuing to expand the number of gas and power customers in our European network. We are accelerating the growth of our renewal power generation, notably, with the acquisition of 3.3 gigawatt portfolio of solar project in Spain plus agreements to develop more than 2 gigawatts of floating offshore wind in South Korea and France.

We also announced that we have signed 6 terawatt hour power purchase agreement, the largest corporate PPA to-date to cover over all of our electricity needs for the Group's industry oil sites in Europe by 2025 using solar sites in Spain that we will develop. Consistent with the acceleration of the growth in renewals, we have added disclosures for renewal business. We now report gross renewable capacities in operation and in development that benefit from long-term power purchase agreements. This should help the market find value to the business as it becomes more material. As you know, we have the ability to grow renewable power generation to 35 gigawatt of gross installed capacity by 2025. We already have about 24 gigawatts in our portfolio, 5 gigawatts installed, 4 gigawatts in construction and 15 gigawatts under developments. Installed capacity of 5.1 gigawatt adds at end of September is fully covered by PPAs. And out of the capacity in construction or under development, we'd say 20 gigawatts, 9 gigawatts are already covered by long-term PPAs.

We are capital disciplined in our project selection and confident that we can generate long-term double-digit profitability while growing stable cash flows in this business. At our Investor Day last month, we concentrated on the transition of Total into a broad energy company, so I will not go into more details here.

Let's turn to E&P. Our conventional oil and gas segment generated adjusted net operating income of $800 million and more importantly I think, carried the Group with cash flow generation of more than $2.6 billion in the third quarter. Average realized liquids price recovered to $40 per barrel, a 70% increase quarter-to-quarter, more than offsetting lower volumes and weaker natural gas realizations. We continue to put pressure on cost with opex at $5 per oil equivalent. Cash flow increased by more than 800 ton [Phonetic] quarter-to-quarter, thanks to our resilient E&P portfolio and our sensitivity to oil prices. The downstream faced a more challenging environment in the third quarter with refining margins in Europe negative on average for the quarter and less exceptionally favorable environment for trading activity than in the second quarter. Recall, we mentioned that trading generated an exceptional surplus of around $500 million of cash in Q2 due to usual activity. Third quarter was in fact very stable with Brent remaining in a range within $40 and $45 per barrel.

Faced with operating losses, we reduced our refinery utilization rates to 57% in the third quarter from 59% in the second quarter. Petrochemicals resisted well despite weaker margins quarter-to-quarter in Europe and in Asia as well as utilization rates that declined to 75% in the third quarter from 84% in the second quarter. Marketing rebounded from the second quarter low, generating more than $400 million of adjusted net income -- net operating income well above the pre-COVID third quarter of last year as lockdowns were lifted in Europe and in Asia.

Downstream as a whole generated $373 million of adjusted net operating income and close to $1 billion of cash flow. With a low level of investment required, the downstream has provided $2.4 billion of free cash flow to the Group over the first nine months of the year. The trailing 12 months quota share [Phonetic] for the downstream is 14%. Consistent with our outlook for oil product demand in Europe and the strong growth in the renewable diesel markets, we announced in July, the sale of the Lindsey refinery in the UK and in September, the conversion of the Grandpuits refinery to zero-oil platform, producing renewal diesel and bioplastics. This further streamlines our refining footprints and builds on the successful conversion of La Mede into biorefinery. These are steps toward achieving our net zero climate conditions that have added benefit of improving the long-term profitability and resilience of our downstream.

And finally, at the Group level in the third quarter net investments were $1.9 billion, bringing the total for the first nine months to $8.5 billion. We anticipate that our net investment will be lower by $13 billion this year and because of uncertainty, will be prudent for 2021 budgets and capex should be limited to less than $12 billion. Despite this difficult environment and mainly due to our capital discipline, Total generated positive net cash flow of $1.9 billion in the third quarter and $2.7 billion in the first nine months. Although the third quarter was more stable than the second quarter, the overall market environment remains uncertain and the wafer world will depend on the speeds of the recovery in global demand affected by the COVID pandemic. It is clear that heavy inventories of oil and refined product will have to be addressed before sustained rebound can take place. We are prudent about the coming years. So, we are using $40 per barrel Brent scenario as our base case. Longer term, we recognize that the growing world population will demand more energy of every type and the many years of under investments have set the stage for a more constructive supply demand balance. Our priority is to generate the level of cash flow that allow us to continue to invest in profitable projects, support the dividend and maintain a strong balance sheet. And of course, we'll continue to concentrate on the things we control; safety, operational excellence, cost reduction and cash generation.

And now, I'm ready to go to the Q&A.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] Your first question comes from the line of Irene Himona of Societe Generale. Please go ahead. Your line is open.

Irene Himona -- Societe Generale -- Analyst

Thank you very much. Good afternoon. My questions, well, I had a number of them. First of all in refining and chemicals, Jean-Pierre, there was a $290 million asset impairment. Was it one particular, one specific asset or if you can talk about it, it would be helpful. Secondly in IGRP, we had lower LNG prices, lower net income yet I noticed that your equity affiliates' profits in that division actually increased between second and third quarter. And I wonder what is driving that. Is it Novatek perhaps? And finally in M&S, volumes are obviously down quite materially. As you said, profit is higher now than a year ago. Can you talk about the changes to your product mix, perhaps which is driving this apparent margin expansion? Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Okay. So, good afternoon, Irene. Yes, you're right. The impairments we recorded this quarter are linked to the R&C segments, refining and chemicals. It's two assets and only I would say two assets. So it's nice Lindsey refinery, oil refinery, and Grandpuits. So, given that we announced that we divest our participation of oil refinery, we have to write off the assets and the same for Grandpuits. We have to impair the assets that will be discontinued, that will not be used by the biorefinery that we built in Grandpuits. So that is the $290 million you mentioned, so this impairment on two assets.

Yes, the lower LNG prices, so you're right, and it's mainly linked to the performance of our Russian energy assets and particularly Yamal LNG. And on M&S volumes, it's clear that the amount of growth during the first quarter and the second quarter massively in the road transport, in air transport of course as well, creates and of course, we have to -- we suffered from a slowdown in the industrial activities as well. We saw at that time, retail sales down to almost minus 70% in France and between 30% to 40% in Germany and in the Netherlands. And during the lockdown period, of course, customers tried to take advantage of the low fuel price to replenish their fuel tanks at home. And so, we witnessed high sales on our B2B segment.

Now moving to the third quarter, so we observed rebounds with sales, particularly in Asia -- with our sales, we sold rapidly. More or less retail sales are back to the pre-crisis levels in Western Europe, but we are still lagging in Africa and nonfuel activities are still below expectation. So -- and of course, the aviation will strongly be affected in the Q3 and is anticipated to -- this service trend is anticipated to continue in the fourth quarter. So all in all, we're seeing sales more stabilized -- minus 10% compared to 2019 levels. And on top of that, of course, we benefited from higher margins because inventories were built at lower cost. So all in all, it's rational behind the fact that we've a bit less volumes and benefiting from higher margins we're able to deliver this performance during the third quarter.

Irene Himona -- Societe Generale -- Analyst

Thank you very much, Jean-Pierre.

Operator

Thank you. And your next question comes from the line of Jon Rigby of UBS. Please go ahead.

Jon Rigby -- UBS -- Analyst

Thank you. Hi, Jean-Pierre.

Jean-Pierre Sbraire -- Chief Financial Officer

Hi.

Jon Rigby -- UBS -- Analyst

Hi. Just it strikes me that -- I just wonder whether you could just offer your observations on this is that you are making two statements that on the face of it are slightly contradictory. You're not the only ones actually is that, capex is coming in lower than you were expecting this year, and it's going down again next year and yet you are and I think quite rationally setting out a case for why markets will tighten and pricing will improve. So, isn't this exactly the right time to be kind of focusing on trying to get your projects out the door and through given, let's say, as a three-year to four-year time lag. I get that there is a daily liquidity, financing, balance sheet issue, but can you just sort of talked through how you're balancing those two objectives as to managing the short-term and trying to position yourself for the long-term, and this is what takes priority?

Jean-Pierre Sbraire -- Chief Financial Officer

It's clear that we use the flexibility we have in our portfolio, to preserve the cash if possible, but without jeopardizing the future, so, it's very important. So our main projects are not impacted by this level of capex. And on top of that, we are very clear that we will continue to invest more or less to $2 billion per year on our renewable and electricity segment. So we play on the flexibility, that's cool that now we announced that the capex-- the net capex -- so organic plus the net between acquisition and divestment will be below $13 billion for this year. As we mentioned during the last Investor Day, we are cautious regarding the prices for next year, and we will be build our budget using a $12 billion amount for net capex for the next year. But you noticed, John, that between 2022 and 2025, assuming a recovery in oil prices, we announced a range between $13 billion to $16 billion.

Once again, we have in our portfolio, two main projects under construction. So, mainly Arctic 2 and Mozambique LNG and these projects will not be affected by this level of capex. The project that will be affected is the short-term capex on which we can play on the flexibility. And given that the prices are not good, it's not necessarily the right time to sanction this project with a very, very, short plateau in terms of production.

Jon Rigby -- UBS -- Analyst

Right. And as and when you bring back capex, and presumably there is some sort of view and positioning taken on the ability to sort of have some flexibilities should bring it back on, because clearly, you know as everybody's learned visibility is low. So, would we expect you to bring back capex very cautiously in the initial stages of any recovery?

Jean-Pierre Sbraire -- Chief Financial Officer

It's a matter of environment. But again, these $12 billion, I mean, $13 billion this year is clearly linked to the current price environment, the $12 billion for next year, we are clear that it's linked to an essential, to the lack of visibility regarding the prices, and we need to be cautious. So $12 billion of capex next year, yes, you see the inspection [Phonetic] of this, the fact that we have no visibility on the prices next year. Beyond 2020 -- '21, once again, prices could rebound and that's why that rationale behind the fact that at that time, we have in mind capex guidance between $13 billion and $16 billion per year.

Jon Rigby -- UBS -- Analyst

Right. Got it.

Jean-Pierre Sbraire -- Chief Financial Officer

But, that's called the flexible capex, we are flexible both ways. So, you can -- we can be back here on budget, I believe, Brent increase, of course. That's the beauty of this short-cycle project and you know that in our portal we have more or less equivalent of 1 billion barrels of short-cycle projects. So, it could be a soul contribution in the future cash flow, if by chance we benefit from price rebound.

Jon Rigby -- UBS -- Analyst

Right. Perfect. Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Thank you, Jon.

Operator

Thank you. And your next question comes from the line of Oswald Clint from Bernstein. Please go ahead.

Oswald Clint -- Bernstein -- Analyst

Jean-Pierre, thank you. Just back on iGRP, just looking at your earnings down 50% year-over-year, but cash flows only down 5%. You mentioned volumes up 9%, but that's a lot of trading which I can imagine was particularly profitable in the third quarter. So, can you just say why cash flow was so resilient relative to earnings this quarter? And is there any material power-related cash flow contributions showing up within that number?

And then secondly, I think you mentioned underinvestment in supply longer term and how that might set up for a bit of a price recovery, but what I find interesting is your -- just your natural decline rate, 3%, I think, for the last six or seven quarters has been pretty stable at minus 3%, which is remarkable in the year like 2020 with pressures on your short-term capex and things like logistics. So, is that a real measured number? Or is that kind of backed out or an implied number from some of the other moving parts, please? Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Yes. So regarding the iGRP performance, so the result and the cash flow generation. Yes, so the cash flow, the CFFO, the iGRP's CFFO for the third quarter was down more or less by one-third compared to last quarter. It was, of course, negatively impacted by the prices, by the LNG prices, but also by lower dividend coming from equity affiliates. And on the opposite, if you look at the net operating income, the equity contribution improved in Q3, the answer I made to Irene before, linked to the relatively good performance of the Russian assets and Yamal, in particular. And they have no -- this has no impact on dividends. So that rationale behind the move you noticed on the CFO compared to the net adjusted income. Underinvestment -- and so the second question? [Speech Overlap] Sorry?

Oswald Clint -- Bernstein -- Analyst

I'm sorry. Yeah, just your natural decline rates of minus 3%, which is almost unchanged every quarter.

Jean-Pierre Sbraire -- Chief Financial Officer

Yes. Yeah, yeah because we benefit from 50% more or less our portfolio coming from LNG fields and fields in the Middle East, in particular or in Abu Dhabi, or in -- yes, in the Middle East. So all in all, if you make the math, you have 50% of our portfolio benefiting from more or less zero decline and 50% we've been -- I would say, a standard or normal decline of 6% to 7%. So all in all, so you made the math, it leads to this 3% global decline for our production. And you're right, it's remarkably stable quarter-after-quarter.

Oswald Clint -- Bernstein -- Analyst

Understood. Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Thank you.

Operator

Thank you. And your next question comes from the line of Lydia Rainforth of Barclays.

Lydia Rainforth -- Barclays -- Analyst

Thanks and good afternoon. A couple of questions, if I could. The first one, can you just come back to this idea of gearing and the debt levels. We have seen a number of other companies now moving to absolute debt levels of targets. I'm just wondering sort of how you would think is still about the Total level of debt? And then, the second question was just on the -- so, recently the idea of carbon-neutral LNG cargoes, I think the first one that you did this quarter. Are you actually getting a premium pricing on that? And just a little bit more detail on how big you think the market can actually be for carbon-neutral LNG? And then very quickly, just a quick one. Can you just give me what you're thinking about the utilization rates for refining for the fourth quarter? Thanks.

Jean-Pierre Sbraire -- Chief Financial Officer

Okay, gearing. Yes. So you noticed that we are able to reduce our gearing by almost 2% in the third quarter compared to the second quarter because we are more or less at 24% in the second quarter. We are below 22% this quarter, but it's the reduction, the translation of the fact that we are able to generate cash even after the payment of the dividend in Q4. We generated after dividend more than $1 billion of cash. And it's -- and of course, it's lead to this gearing reduction. As we were very consistent in saying that, yes, our objective is to have a gearing below 20%. So, you remember what we mentioned in September during the Investors Day. The priority, of course, to prepare the future is to allocate what I mentioned to Jon between $13 billion [Phonetic] and $16 billion of capex from 2022 to 2025, $12 billion in 2021.

After that the dividends. So, we confirmed that the dividend is supported at $40 per barrel. And you noticed that we confirmed this quarter, that yes, the referred interim dividend will be maintained at EUR0.66 per share. And after that very clearly, we would as a priority -- the fact that we want to maintain a very strong balance sheet and in our mind a strong balance sheet means gearing below 20%. And so, that's why we mentioned that -- you've mentioned we are able to generate additional cash if the prices are above $40 per barrel. We'll first allocate this additional cash to deliver in the company.

The premium innovation with carbon neutral energy -- honestly, I'm not so sure to have this answer and I will come back to you on the answer later on. The team will give you the answer.

The outlook for the refinery tradition on the fourth quarter. Honestly, I have no crystal ball. I just noticed that the margin albeit above $10 per ton, since the beginning of the quarter, we'll monitor that very, very precisely. We have the utilization rate below 60% in the Q3. And so, the utilization will improve, if margin improves, of course, we will adjust the utilization rates of our refineries to the level of margin. But honestly, given the level of demand and given the level of inventories, I'm sure that the refineries -- and perhaps, I don't have to use this word I'm sure, but it's likely that that the margins will become -- will remain volatile and probably at relatively low level. And so as a consequence, the utilization rates in our refineries will probably not be very different from the figures we have in the Q3.

Lydia Rainforth -- Barclays -- Analyst

Okay. Thank you.

Operator

Thank you. And your next question comes from the line of Bertrand Hodee from Kepler Cheuvreux. Please go ahead.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Hi, thank you for taking my question. Hi, Jean-Pierre.

Jean-Pierre Sbraire -- Chief Financial Officer

Hi, Bertrand.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Two question, if I may. The first one is, I was looking at the aligned equity and income and other items, and especially, the line other items. And year-to-date, if I combine iGRP and upstream, it's quite a big number, it's above $600 million, whereas last year for the full year 2020, it was around $70 million. Can you remind me of what's in there? And what kind of revenues is located inside other items line. And the second question is on LNG and on Qatar. Looks like Qatar is finally moving with its massive expansion, having awarded already some long lead items and can you share with us if Total is -- obviously you have made the option but if Total is still interested by participating in that expansion? And what are the conditions required for you to jump in if Qatar Petroleum takes final investment decision next year? Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

All right. I think the answer for Qatar is very easy. You know that we are disciplined. We demonstrated that over the last couple of years that we sanctioned projects only -- perhaps I think you have to switch off your mic now, because there is an echo, Bertrand.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Okay, I will. Sorry.

Jean-Pierre Sbraire -- Chief Financial Officer

So, we are disciplined. So, we sanction projects only if the conditions are attractive. So you know the way we sanction project and the internal right of return we use and the prices we use to sanction projects, so which will be, honestly, the same tomorrow for Qatar, there is no reason. So, we'll submit an offer only if terms are attractive. That's true that we have been in Qatar for a long time. We are stronger partners. By the way, we are recently awarded, as you know for solar farms of $800 million watts. We know well the Qatar. By the way, we have embedded secondly in -- at the request of QP in this project. But we will go forward only if the conditions are attractive. So, that's the main -- that's my answer. You can remember that exactly -- that's what exactly what we did with Atora project in Brazil, we decided not to go -- not to submit or not to make an offer given that the conditions were not good or did not meet our thresholds, and it will be exactly the same for Qatar. So, your question regarding the equity affiliate income. Honestly, I'm a bit lost.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

So, maybe you want me to rephrase it or -- yeah.

Jean-Pierre Sbraire -- Chief Financial Officer

So you mentioned the equity affiliates contribution to the iGRP results?

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

No, in fact, when we look at your results, in fact, you combine a line which is equity income loss and other items, OK? As you also disclose the equity affiliate separately, we are able to -- in fact, to calculate what is this other items. And this other items to date is, if I combine iGRP and E&P, is above $600 million. So that's a big number. And I was wondering what's in there in terms of contribution, knowing that last year, if I make the same calculation, is around $70 million. So, that's a $500 million difference.

Jean-Pierre Sbraire -- Chief Financial Officer

The figure I have in mind is the contribution globally at the level of the Group of the equity affiliates and so its $350 million coming from Novatek participation, coming from Yamal, coming from our main LNG project. And...

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

So in fact, I was referring -- the $600 million figure I was referring was a nine-month figure. And in Q3, it's around $165 million, combined iGRP and E&P for this other items line.

Jean-Pierre Sbraire -- Chief Financial Officer

Okay. It's a detailed question, and I will come back to you with the precise answer.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Okay. Fair enough. Can I just make a follow-up on Qatar?

Jean-Pierre Sbraire -- Chief Financial Officer

Yes.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

I think we're already aware of the condition. And is the binding process already started or not yet until the final cost of the project is done?

Jean-Pierre Sbraire -- Chief Financial Officer

I will not disclose to you all this information, but the offers are due by year-end.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Thank you, Jean-Pierre, and sorry for the accounting question.

Jean-Pierre Sbraire -- Chief Financial Officer

No, I will have a look because I do not have all the tables in front of me. But of course, there is a rational answer to your question.

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Thank you.

Operator

Thank you. And your next question comes from the line of Biraj Borkhataria of RBC. Please go ahead.

Biraj Borkhataria -- RBC -- Analyst

Hi. Thanks for taking my question. I had a couple for you. I just wanted to clarify on the net investment guidance, the less than $13 billion this year. You did $8.5 billion year-to-date. So I was wondering if I'm thinking about Q4, there's either a big step-up in organic spend or an acquisition due or you'll come in below guidance. Can you just unpack the moving parts there? And then the second question is on Mozambique LNG. Could we get an update on your expectations of when you expect to FID that? I understand in the short term, it's partly a function of affordability, but also maybe you can talk about what you're doing during the pause because I guess it gives you a chance to rework and retender? And how much more potential do you think there is on getting cost out of that project before FID? Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Well, the guidance we gave on for the full year -- for the $13 billion, it's clearly linked to the fact that we have a very good visibility on the Q4. Traditionally, the Q4 in terms of investment is a bit higher or a bit heavy than the previous quarters. And so, it's rational behind this guidance, $13 billion. And once again, as I already mentioned, so we have the Mozambique LNG project. We have the Arctic 2 project. We have some Mero 1, Mero 2 project in Brazil, of course, as well. That contributes to the level of capex that we will expand during the fourth quarter.

Mozambique, I think, perhaps I haven't really understood your question, but the FID has been taken. By the way, the Mozambique, the FID was taken before by Anadarko because at that time, it was in -- I think it was in July last year. So, it was before we acquired the assets through the OPC -- the OPC Anadarko deal. So the project, what I can tell you is that the project is on track. Of course, we are monitoring the situation very closely. But yes, the project is on track. And so the first, as you know, we are building two trains that will come on stream by 2024, 2025. And on top of that, I think it was in September, we confirm that the project financing is in place. We are able to secure an external debt of about $14 billion on that project for the benefits of all the partners in the Mozambique LNG. But the FID second?

Biraj Borkhataria -- RBC -- Analyst

Just to clarify on that because you guys have FID'd it. Obviously, the partners on the other side have kind of paused it. In terms of the kind of chasing the synergy point, are there other limitations to what you can do if you're working at different paces?

Jean-Pierre Sbraire -- Chief Financial Officer

No, I don't think so. The synergies you have in mind is probably the synergies with the projects operated by Exxon. And that's true as we could be onshore synergies with this project with Rovuma LNG project, but will not slow down the project linked to the Rovuma LNG project, to be very clear.

Biraj Borkhataria -- RBC -- Analyst

Okay. Thank you.

Operator

Thank you. And your next question is from the line of Michele Della Vigna from Goldman Sachs.

Michele Della Vigna -- Goldman Sachs -- Analyst

Thank you so much, Jean-Pierre. Two questions on your legacy oil and gas business. You've really been the only major oil and gas company to continue to FID major long-term projects like Mozambique, like Mero. I was wondering whether, what you think about the next-generation of projects, Uganda, PNG, Costa Azul and whether you think this is the right time to move ahead or perhaps wait a little bit longer? And then, a second question on your recent discoveries. You've announced some really excited results in Suriname and South Africa. I was wondering if perhaps you could quantify what you believe could be the total amount of resources there. Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Yes, you're right. We continue to sanction projects because we definitely we think, and that's why we try to explain during the September Investors Day that the planet will continue to need oil in the coming years. And even in the most challenging scenarios for an oil and gas producer, oil will continue to play a significant portion in the energy mix by 2024, 2025. So, we have to continue to invest on oil project. But of course, very selectively, because perhaps the demand -- the oil demand will plateau, I don't exactly when, in 10 or 15 years' time from now, and so our strategy is very clear, we want to position ourselves on low-cost oil assets. And exactly the rationale we have in mind when we sanctioned projects.

You mentioned that, yes, we have the objective to sanction the Uganda project before end of this year and it particularly fits within the strategy of low oil projects. We have other projects in mind, of course, or in our portfolio that could be sanctioned in the coming years. We just sanctioned the Mero 3, but we could sanction additional projects in Brazil as well in the coming years. We have some projects in Nigeria, very well positioned in terms of costs as well to sanction in the coming years. So Preowei E, Preowei A, we have the Owowo project, we have Ima project. You mentioned as well the Papua Guinea project. We are not in a hurry to sanction that project. You know the status of a discussion between Exxon and the authorities regarding their gas agreement. So, we have to be patient to be sure that we will be able to leverage on the synergies between our project and the Exxon one. But we are quite confident that we'll be able to sanction that project in the coming year. And given that this project is, once again, a low-cost LNG project, very well positioned to supply the Asian markets.

So we tried -- we continue with our strategy. We want to sanction a project if it's definitely a low-cost project. And by the way, by doing so, we are able to lock in the current situation and the fact that to capture, I would say, the deflation as far as contractors are concerned. So, that rationale we have in mind. So, we will continue with this strategy, and we have demonstrated over the last couple of years that it's worked well and it's the most efficient way to enhance our portfolio by doing so.

Exploration. Yes, Suriname and South Africa, yeah, that's one of the two area on which we made some significant discovery very recently. So Suriname, we entered into the asset, it was end of last year. We have a 50% stake in the project with Apache, having the 50% remaining. At present time, three wells has been drilled with three discoveries, Maka, Sapaka and Kwaskwasi. At present time, we are drilling a fourth well. And you know that after this drilling, Total will become the operator of the area. So the way forward is very clear for us. A lot of hydrocarbons has been discovered. And so now we need to -- some appraisal wells to clearly notify the level of reserves and to launch, if possible, development with an objective to start up production by 2025.

And on South Africa, we announced, it was last week or I think, or even this week and you have to remember that we made a second discovery on the assets with a new well. So definitely, it's open, I would say, a new world-class play in South Africa. And the way forward in South Africa will consist in evaluating, of course, the size of the discoveries, to make progress regarding the development studies and of course, engage discussion with the South African authorities regarding possible conditions for the gas commercialization. So, that's what we have in mind for the coming month on both Suriname and South Africa.

Michele Della Vigna -- Goldman Sachs -- Analyst

Thank you.

Operator

Thank you. And your next question comes from the line of Christopher Kuplent from Bank of America. Please go ahead.

Christopher Kuplent -- Bank of America -- Analyst

Thank you. Hello, Jean-Pierre, two quick questions, please. On the capex cut for this year, just wanted to understand whether you can identify specific projects that you are maybe forced to go a little bit more slowly on because of COVID restrictions and whether you can see from that capex cuts, any concerns about delays on those timelines that you talked about or whether you think it's mostly a matter of efficiency, and perhaps discretionary cuts?

Secondly, on a more broader level, just wanted to ask a cheeky question, whether you feel these days looking at what's happening in North America, whether you feel vindicated about Total's strategy to stay away from mostly U.S. shale or in fact, do you feel tempted by the kind of consolidation that's happening without much share price premium being offered? Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Well, on the capex cuts, once again, there is nothing, that is delays, on the progressing projects linked to the COVID-19. It's more a matter of playing with the flexibility we have and the short-cycle assets. And so, we do not anticipate large impacts on our project linked to the COVID effect at this stage. On U.S. shale, we are consistent, we haven't changed our mind. We think that it's a business on which we cannot -- we will not be able to leverage on synergies because we are not present in the U.S. on this type of business significatively. It's high breakeven assets and it's completely inconsistent with our strategy to have enough portfolio or low-cost assets. So, that's why we continue to think that it's not like the most efficient way for us to allocate our capital.

Christopher Kuplent -- Bank of America -- Analyst

Very clear. Thank you, Jean-Pierre.

Operator

Thank you. And your next question comes from the line of Thomas Adolff of Credit Suisse. Please go ahead.

Thomas Adolff -- Credit Suisse -- Analyst

Good afternoon. I do apologize. I've got three questions, please. You've turned a bit cautious for next year, at least for budgeting purposes, $40 Brent. I wonder as it relates to your credit metrics in a $40 world, whether you think next year, you'll be consistent with a single A? Obviously you're not for this year, and in the case, also the rating agencies lower their price decks like yourself, what are the measures which you consider to improve your credit metrics? Maybe linked to that, are you open to perhaps do another one-off script offering like you've done this year or are you considering potentially sending some infrastructure type assets like many of your peers are doing and these should be fairly easy to sell these assets? Thank you very much.

Jean-Pierre Sbraire -- Chief Financial Officer

Yes, OK. Yes, you are right for sure regarding the prices for next year and that's true that we built our budget using the $40 per barrel assumption. If I remember well, S&P use a price deck at $50 per barrel for 2021 and I think the same $50 per barrel for 2022. I notice that despite the drop in oil prices in March, April and the new price deck used by S&P and Moody's, by the way, we are able to keep our rating. That's true that we have a negative perspective, but honestly, it's the same for almost all our peers. If the prices remain at $40 per barrel, what will be the impact on our rating? Honestly, it's very difficult. It's not so easy to anticipate. It's not fully in my control. So, what I can tell you is that we try to demonstrate that we will continue to be disciplined. We will, by the way, continue to put pressure on costs, try to reduce the gearing. So, it's the best answer I can make to simply to Moody's regarding our credit rating.

On the scrips, you know the rules in -- for a French company. Given that this scrip dividend was not voted in June during the general assembly, we'll not offer the scrip dividend for the interim dividend. So therefore, it was not offered for the first, but it will -- it has not been offered for the second interim dividend. You notice that, of course, given the reason I mentioned to you, it was not offered for the third dividend. Honestly, at present time, if the prices remain at this level, we demonstrated that in the $40 per barrel environment, we are resilient. We are able to generate cash. So, we'll see in 2021 what the prices will be and if the prices will be significatively below $40 per barrel. But it's a decision of the general assembly and not a decision that the Board could do on the payment of the incurring dividend.

By the way [Speech Overlap] sorry, we have a yield at 9%, even 10%. And so a scrip with this level will be very expensive. So that's, of course, what we have in mind at the time. I think your last question regarding the infrastructure or potential infrastructure asset sales? Yes, that's true that in an environment with low prices, it could make sense to focus our M&A or divestments on infrastructure assets. We do not need to be an equity partner in infrastructure to benefit from the infrastructure. I'd say what we have demonstrated very recently with the divestments in infrastructure we made last year, so we will continue with this strategy if possible. And definitely infrastructure assets, they are good a candidate, I would say, to divestments in a low-price environment.

Thomas Adolff -- Credit Suisse -- Analyst

Perfect. So the bottom line is you'll do whatever it takes to protect the single A and the few flexibilities around that selling assets, etc. But the single A...

Jean-Pierre Sbraire -- Chief Financial Officer

No. We mentioned that in the way we allocate the cash, maintaining or having a strong balance sheet with an objective of gearing below 20%. And the single A, of course, is the priority in the way we will allocate the cash.

Thomas Adolff -- Credit Suisse -- Analyst

Perfect. Thank you very much.

Operator

And your next question comes from the line of Christyan Malek of JPMorgan.

Christyan Malek -- JPMorgan -- Analyst

All right. Thanks for taking my questions. Two, if I may, Jean-Pierre. First, in a scenario where OPEC doesn't reverse production outlets, so there's a quite significant number around 1.9 million barrels. How that impacts your production outlook and then if you consider [Speech Overlap].

Jean-Pierre Sbraire -- Chief Financial Officer

Christyan, sorry -- Christyan, the line is very, very bad. And it's impossible...

Christyan Malek -- JPMorgan -- Analyst

Sorry. Can you hear me better now?

Jean-Pierre Sbraire -- Chief Financial Officer

Yes. Yes, it's better. Sorry, yes. Yeah. Go ahead.

Christyan Malek -- JPMorgan -- Analyst

Hello?

Jean-Pierre Sbraire -- Chief Financial Officer

Yes?

Christyan Malek -- JPMorgan -- Analyst

Yes. Sorry about that, just a connection issue. In a scenario where OPEC doesn't increase production next year, and it's that 1.9 million barrels, would that be material to your production outlook and your guidance? I just want to get some color as to how that affects your thinking around targets for next year? And the second question is regarding capex and sort of your dividend priority. I'm sorry to ask it directly, but to what extent is time an important factor as you think about your dividend and the fact that if we stay below $40, you're effectively out of money. How long would you wait to make a decision on whether you'd continue to deliver that dividend? Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Yes. So if I understand well your question regarding production, the main rationale behind the declining production at Total level in 2021 -- I mean, 2020, sorry, is directly linked with the OPEC quota. But by the way, of course, we're supportive of this quota because it's helped to stabilize the prices above $40 per barrel. So I don't know what the decision will be during the next OPEC meeting. I'm sure that if the prices are -- remains around $40 per barrel, the discipline will be maintained. And so, we can imagine that the impact on production will remain more or less the same as the current impact. It's already embedded in the figures of the guidance we gave during the last Investor Day. So, we mentioned we have a profile between now and 2025, mentioning that the production will increase more or less by 2% on average per year between now and 2025. But we'd mentioned at the same time as well that this 2% will result from more stable, relatively stable production over period 2021, 2022. And that the increase will come later on with a start-up of the offshore Brazilian project, with the start-up of Arctic 2 and with the start-up of Mozambique LNG.

Regarding your question concerning the dividends, I think we were very clear during the last Investor Day that we can support the dividend at $40 per barrel. And that the dividend policy is, I would say, well-sized for an environment at $40 per barrel. Again, the rationale behind that is that we have strong fundamentals. We have demonstrated quarter after quarter that we are able to maintain a breakeven below $25 per barrel per organic breakeven. We put pressure on opex. We put pressure on capex. We continue to be disciplined. And so all the teams, they are fully mobilized since the beginning of the crisis to implement the action plan we have decided very rapidly after the crisis. I think the best illustration of that is that at $40 for oil, it was more or less the price we have this quarter. We are able to announce -- or the Board decided to confirm the level of dividend. And at the same time, we are able to reduce the gearing. Having said that, we're very clear, if the prices falls below $40 per barrel, we'll, of course, not overreact immediately. So, we did not overreact in the Q2 when the prices were below $30 per barrel, but if the price stays below $40 per barrel, we will not overstretch the balance sheets.

Christyan Malek -- JPMorgan -- Analyst

Okay. And can you quantify what stay means, is it three months, six months, nine months? Is there any way you can quantify that decline?

Jean-Pierre Sbraire -- Chief Financial Officer

It's a matter of perception rather than just mathematical, but again, you have to keep in mind that we are cautious people, but we have very strong fundamentals. We can play on our balance sheet, not over a very long time period, of course. But I will not give you, I know no formula to say if during one month, two months, three months, the price is below a certain number, of course, we have to make a decision. So it's a matter of perception as well of what the market could be.

Christyan Malek -- JPMorgan -- Analyst

Thank you very much.

Operator

Thank you. And your next question comes from the line of Paul Cheng of Scotiabank. Please go ahead.

Paul Cheng -- Scotiabank -- Analyst

Thank you. Good afternoon. Two questions, please. First, Jean-Pierre, can you talk about our strategy in terms of -- I mean there's a number of nice discovery. Is that going to be candidate for a fast-track development? What's the game plan there? Secondly, can you disclose what is the EBITDA or cash flow for your renewable and power business in the third quarter? And also, whether that you are concerned with the rising renewable power asset price in terms of your ability through acquisition to reach your target.

Jean-Pierre Sbraire -- Chief Financial Officer

Okay. So yes, on Suriname, I think I have already answered more or less to this question. So given that we have already drilled three wells and the fourth well is ongoing at present time, the objective is now a full appraisal to confirm the level of resources and the reserves and to sanction as soon as possible a project and possible fast track development. Of course, if we have sizable resources in Surinam, the objective for us will be to put on stream -- to put on production these resources, these reserves as soon as possible.

Concerning EBITDA, we noticed -- or we will listen to you, by the way, what we heard from the analysts and from investors after the presentation we made in September. And so we -- as you can see in the press release, we make more disclosures regarding our renewable business because now we gave a level of portfolio. We gave the level of capacities already benefiting from long-term PPA. Regarding the EBITDA, we'll see in the coming reports what we can do regarding EBITDA and if we can communicate on that metrics as well to give you more clarity on this business. And by the way, this could contribute to give more value to this business.

Paul Cheng -- Scotiabank -- Analyst

Okay. Thank you.

Jean-Pierre Sbraire -- Chief Financial Officer

Thank you.

Operator

Thank you. And your next question comes from the line of Lucas Herrmann of Exane. Please go ahead.

Lucas Herrmann -- Exane -- Analyst

Jean-Pierre, hi. Nice to talk with you as well as the opportunity. Glad you're well. A couple of questions or two or three questions, if I might. The first one is just when is the dividend reduction not a dividend reduction? Because I thought the dividend -- the interim dividend Q3 last year was EUR0.68 per share, not EUR0.66. So, just trying to understand what the annual payout is and how you think about it. And staying with dividends and perhaps to some degree going back to Christyan's question, when I look at what your European peers have done, BP/Shell admittedly by force and limited choice, they've restructured the payout policies to something which I think one could say is a lot more sensible given the transition and given the volatility that we've seen over the course of the last nine months in oil prices.

In short, they've moved to an absolute payout and to a buyback. You obviously haven't. Your shares yield a short 11% at the present time. The market is not giving you huge credit. Would it not just make much more sense through this period when others have done something similar and when there is so much uncertainty and when you're acknowledging the importance of your balance sheet to change the structure of your payouts, Jean-Pierre, such that you do use a fixed component, you do use a buyback component and you take advantage of the very depressed share price at the present time to buy an asset that today yields toward 11%, and which I think you feel probably offers exceptionally good value. Those are the two questions.

Jean-Pierre Sbraire -- Chief Financial Officer

The dividend is stable at EUR0.66 per share compared -- in Q3 compared to Q2. That's true that if you compare the third interim dividend this year with the third interim dividend we served in 2019, it's $0.02 difference. But honestly, what you have -- not to forget is that in dollar, there is a strong increase because with this stability in euro, in dollar you have a 6% increase.

Lucas Herrmann -- Exane -- Analyst

So do I now need to think -- Jean-Pierre, do I now need to think about your dividend in dollar terms then and adjust that mentally to consider what the euro number will be?

Jean-Pierre Sbraire -- Chief Financial Officer

Sorry, I haven't captured your question. Sorry.

Lucas Herrmann -- Exane -- Analyst

Do I now need to think about what the dividend is in dollar terms and try thinking about flat-lining that to think about what the euro declared will be?

Jean-Pierre Sbraire -- Chief Financial Officer

No. You know that given -- as a French company, we have to denominate our dividend in euro. And so, the dividend policy is denominated in euro. Just to mention that in USD, if you convert this level of dividend in dollar, our investors in USD will benefit from an increase. European...

Lucas Herrmann -- Exane -- Analyst

The structure payout, it makes less and less competitive strength or so...

Jean-Pierre Sbraire -- Chief Financial Officer

It depends how you see this object. We consider that. Once again, we can support the dividend at $40 per barrel. So there is no way to reset the dividend policy at $40 per barrel. But on the opposite, that's true that with this level of dividend and the share price we have at present time, it leads to yields above 9%. So in our view, it should lead to a rating of the company rather than a drop or a decline or reduction in our dividends. So that -- by the way, the conclusion of our CEO in September after the -- when he concluded the presentation. With the business case we presented with resilience we have demonstrated over the last couple of years with the fact that we can support the dividend at $40 per barrel. We anticipate that the share should be rated. And so that the current yields at 9%, 10%, will be -- will go down in the coming -- fully in the coming weeks or months.

Lucas Herrmann -- Exane -- Analyst

Okay. Thank you. I guess I'd just simply argue that it's not necessarily the best structural policy for a company heading toward transition and given the constraints and volatility in markets, but I hear you. Jean-Pierre, thank you very much for your answer and your tolerance.

Jean-Pierre Sbraire -- Chief Financial Officer

Thank you. Thank you to you. So, I think it was the last question?

Operator

It was the last question, sir. Please continue.

Jean-Pierre Sbraire -- Chief Financial Officer

So thank you to everyone. And so once again, I hope that you will keep safe in this very challenging environment. And so, have a nice weekend.

Operator

Thank you, sir. Ladies and gentlemen, that does conclude your conference call for today. Thank you for participating, and you may now disconnect.

Jean-Pierre Sbraire -- Chief Financial Officer

Thank you.

Duration: 73 minutes

Call participants:

Jean-Pierre Sbraire -- Chief Financial Officer

Irene Himona -- Societe Generale -- Analyst

Jon Rigby -- UBS -- Analyst

Oswald Clint -- Bernstein -- Analyst

Lydia Rainforth -- Barclays -- Analyst

Bertrand Hodee -- Kepler Cheuvreux -- Analyst

Biraj Borkhataria -- RBC -- Analyst

Michele Della Vigna -- Goldman Sachs -- Analyst

Christopher Kuplent -- Bank of America -- Analyst

Thomas Adolff -- Credit Suisse -- Analyst

Christyan Malek -- JPMorgan -- Analyst

Paul Cheng -- Scotiabank -- Analyst

Lucas Herrmann -- Exane -- Analyst

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