TotalEnergies Q3 2026 Earnings Call Transcript

TotalEnergies (NYSE:TTE) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://totalenergies.com/investors/results

Summary

TotalEnergies reported strong financial performance with an adjusted net income of $9.1 billion for Q3 2026, reflecting a 50% increase from Q2, driven by high commodity prices and operational efficiency.

The company’s integrated business model and geographical diversification allowed it to mitigate geopolitical impacts, notably in the Middle East, and leverage high refining margins and LNG prices.

TotalEnergies anticipates cash flow for 2026 to surpass $42 billion, potentially reaching $43 billion, supporting dividend growth and share buybacks, with a commitment to return 40% of cash flow to shareholders.

Operational highlights include a 3% increase in oil and gas production, record refining margins, and significant LNG trading performance, with plans to maintain strong production and refining throughput.

Management emphasized strategic investments in LNG and upstream projects, maintaining low-cost operations, and geographic diversification as key strengths for future growth and resilience.

Full Transcript

OPERATOR

Ladies and gentlemen, welcome to the TotalEnergies third quarter 2026 results conference call. I now hand over to Patrick Pouyanne, Chairman and CEO, and Jean-Pierre, CFO, who will lead you through this call. So, sir, please go ahead.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Hello everybody. Good afternoon or good morning wherever you are. It’s the third quarter result, not the first one just to begin. So it’s a live intervention, live speech, as Jean-Pierre will show you in a moment. TotalEnergies has demonstrated once again in this quarter its capacity to achieve an outstanding operational performance and to deliver a very strong set of results and cash flow, clearly reflecting the ability of the company to fully capture high prices.

I would say all is green. Not only the different market indicators, but also the operational performance. And I must praise all our teams around the world that delivered these results. And I could add that all has been as well, not only for the third quarter, but also for the first month of this fourth quarter and probably for the rest of the year. Market conditions have been indeed very supportive for all commodities that we are selling. The oil prices started the quarter at $80 per barrel on the hopes of a lasting ceasefire signed between the US and Iran, the MOU signed between the US and Iran and finally rose again at levels above 100, $110 per barrel and the dated Brent being today at $121 per barrel.

As a result of the broadening of the conflict to Bab el-Mandeb Strait and Saudi Arabia and reflecting the persistent volatility of the situation in the region, the petroleum product prices, diesel, gasoline, have increased in a larger and unprecedented way as a consequence of massive disruption to the refined product logistics chain, triggered not only by the conflict in the Middle East, but also by the unavailability of some Russian refining capacities due to the efficiency of the Ukrainian attacks.

And so refining margins have reached historical records in Europe and in the rest of the world. Gas and energy prices in Europe and Asia started to rally this quarter as countries have started replenishing their inventories in view of winter concerns consumption. This rally consequentially pushed electricity prices up in some European countries where gas reflects the marginal cost of production of electricity. But beyond these favorable market conditions, these strong sets of results highlights the strategic strength of TotalEnergies, the integration and the geographical diversification of the company.

I explained during our last CMD in New York that these two differentiating factors, together with our leading position being a low cost producer, make TotalEnergies best position to capture value from market disruptions. First, this quarter we were able to fully leverage our integrated business model to capture margins in the oil value chain. Integration has never been so relevant. We have been able to capture oil prices from our growing upstream activities. We are taking full advantage of our midstream and trading capabilities to bring crude oil into our refineries and capture record high refining margins. This reflects highly valuable integration.

The Downstream has delivered the best quarter ever for an exceptional combination of record line margin and strong throughput increase as all our refineries are running up at full speed and SATORP is now back at nominal capacity since the end of the third quarter and we anticipate of course same level of refining treatments in the fourth quarter in the gas and LNG value chain. Our energy and gas traders were able this quarter to capture benefits of their long position on gas which is now proving to be a winning position as gas prices have been rallying during first quarter.

With Europe attracting more LNG volumes right now and the TTF currently at around or above $30 per million BTU, LNG is still going up and we anticipate strong results as well for gas trading in Q4 and not only for gas trading for LNG trading more globally. Second, our geographic diversification allowed us to mitigate the impacts of the Middle East crisis on our productions. The impact of the crisis in the Middle East on TotalEnergies’ overall production was reduced to around 5% over the quarter on average, which was in the low range of the guidance provided last quarter. Still, the company was able to grow oil and gas production by more than 3% quarter to quarter supported by the ramp up of projects launched in 2025 located mainly outside the Middle East excluding Middle East impact, the Production growth even exceeds 4% year on year, clearly affecting our diversification in upstream growth.

By the way, importantly as well as we explained during the last CMD during this quarter we took a certain number of final investment decisions. Cronos in Cyprus, EMA in Nigeria, Umm Shaif Gas Cap in Abu Dhabi and Absheron in phase two in Azerbaijan and now all the projects contributing to achieving the upstream production growth target of more than 3% per year by 2030 are in execution phase in integrated LNG with geographic diversification we are producing LNG in 11 countries and as well the length of our LNG portfolio allowed us this quarter to compensate the effects of Q volumes loss and not declare any force majeure to our LNG customers which today is making TotalEnergies very popular in Asia.

At Gas Tech, Asian buyers were lining up at our booth to negotiate long term contracts by the way, this result was also possible because we had a large LNG fleet tanker available at a cheap cost, which means that this, I would say no force majeure had no impact in fact on our costs, on our global costs, and we delivered that very efficiently to our customers. We also achieved some key milestones this quarter. Establishing our LNG marketing JV with Kumul Petroleum, the National Oil Company in PNG for 2.4 million tonnes per year and the signature of a Naftech LNG agreement of 1.5 million tonnes per year, strengthening the diversification of our LNG portfolio towards fast growing Asian markets. So I would say that the geographic diversification, but some we are considering some time ago as a weakness because being deemed to explore globally is considered today as a strength for your customers and a strong edge against geopolitical risks.

Finally, and not very importantly, our operational performance across all business areas has been excellent again this quarter, I would say once again so refinery or refineries at full capacity, optimizing utilization resulted in an increase of nearly 10% of our refining throughput this quarter, enabling the company to fully capture record high refining margins in Europe, but also in the US and in the rest of the world, in particular Saudi Arabia.

The company once again demonstrating its leadership to control costs with operating costs of $4.70 per barrel anchored strongly below $5 per barrel. By the way, this is the results of the cash saving program we launched in 25 in view of a bearish year 26. But the program is still live today and delivering the power business also saw an increase of more than 20% in net production this quarter, taking of course full benefits from the integration of the assets from RGV with eph, Integrated Power is again well on track and will be net cash positive in 2017 given the company’s strong operational and financial results delivered by each business segment this quarter.

Given the sustained high prices the full year 2026, cash flow is now expected to be above $42 billion and maybe around even reaching $43 billion. Supporting dividend growth while anchoring gearing below 10%, it’s already 9% but will be lower by the end of the year. In this context, and in line with the objective and the commitment of returning 40% of cash flow to shareholders, the Board of Directors has taken following decisions. First, we confirmed the third interim dividend and €0.90 per share of up 5.9% compared to 25.

Second, the board authorized share buybacks of $2.5 billion in the fourth quarter and also $2.5 billion share buybacks in the first quarter. The board finally asked me to tell you that it reiterates its commitment to return 40% of cash flow to shareholders and that if necessary it might adjust upwards of final dividend to meet the 40% return. I will now hand over to Jean Pierre to go through the details of the third quarter financials.

Jean-Pierre Sbraire (Chief Financial Officer)

Thank you, Patrick. So I will start by commenting on the price environment for the first quarter. 26 versus the second quarter we capture high prices across most commodities. Brent and liquid price remain elevated and increased throughout the quarter with a prolonged impact of the Middle East conflicts. Brent averaged $97 per barrel during the third quarter versus $104 per barrel in the second quarter, down $7 per barrel, while the average liquid price was $87 per barrel.

Liquid selling price continued to reflect an elevated freight cost and decreased by $4.5 per barrel compared to the second quarter. TTF averaged $21.5 per million BTU, up 38%. Price of $15.6 per million BTU driven by low inventories and the upcoming winter season demands. Our average LNG price increased by 20% to $12.3 per million BTU, reflecting the lag effects embedded in our contract pricing formulas and the increase in spot gas prices. But also the European refining margin, which include costs of natural gas, CO2 and freight costs, increased to an historically high level of $33 per barrel on average over the quarter, 2.5 times higher than the last quarter, supported by an unprecedented combination of unavailability of Russian refining capacity, the disruption of the supply from the Middle East and global inventories at historical lows.

In this high price environment, TotalEnergies leveraged its integrated business model and geographical diversification to deliver very strong financial results, underpinned by the outcoming operational performance of all businesses and the company’s ability to capture value upside in disruptions, we reported indeed adjusted net income of $9.1 billion in the third quarter, increasing by more than 50% compared to the second quarter and cash flow of $12.3 billion.

TotalEnergies has delivered strong profitability this quarter with return on Equity at 19.6% and ROACE at 17.4%. Let me now highlight four key takeaways from the quarter. Upstream delivered production growth up more than 3% quarter to quarter, notably due to the lower impact from the Middle East conflicts. Downstream achieved record high quarterly results with cash flow increasing by almost $2 billion compared with the previous quarter, underpinned by all our well-functioning refineries. This allowed the company to fully capture historically high refining margins in Europe and worldwide.

Oil trading activities also outperformed at a level comparable with the two previous quarters. Integrated LNG delivered very strong results, more than doubling compared to the previous quarter, reflecting the 20% increase in average LNG price and the outperformance of LNG and gas trading activities in the bull markets. Integrated power cash flow generation continued to increase this quarter, supported by full quarter contribution from TTEP ROG joint venture with EPH.

Let’s now dive into each of the business segments, starting with hydrocarbons. Third quarter hydrocarbons production was 2.47 million barrel of oil equivalent per day. On a year-on-year basis, excluding the impact of the Middle East conflicts, production would be up by more than 4%, supported by the start-ups and ramp-ups of the project launched since the beginning of 25 and benefiting from gradual return to normal oil operation in the Middle East over the quarter.

The impact on production from the conflict in the Middle East is limited to around 5%, which is in the low range of the guidance given last quarter, the guidance being 5 to 10%. Looking forward, we expect to maintain strong momentum with hydrocarbons production in the fourth quarter, excluding the Middle East impact expected to grow by more than 3% year on year, in line with the annual guidance. At present, we observe the impact of the Middle East below 5%, mostly coming from limited export from LNG volumes through the Strait of Hormuz, but we know that the situation remains volatile.

Turning now to quarterly results for E&P, the segments generated an adjusted net operating income of two $3.2 billion in this quarter and a cash flow of $5.4 billion, reflecting production growth and sensitivity to declining oil price and rising gas prices quarter to quarter. On the cost side, as mentioned by Patrick, we continue to lead low-cost operation with an average OPEX per barrel of 4.7, below our guidance of less than $5 per barrel of oil equivalent.

On Integrated LNG, the LNG production decreased by 7% quarter to quarter, mainly due to planned maintenance, notably on Angola LNG and Ichthys. LNG adjusted net operating income was $1.9 billion and CFFO was $1.7 billion, underpinned by a 20% increase of average LNG prices and, in contrast with the second quarter, positively impacted by the outperformance of LNG and gas trading activities in the bull markets. Given the ongoing conflict in the Strait of Hormuz and seasonality of the month.

Given the evolution of oil and gas prices in recent months and the lag effect on pricing formula, the company anticipates an average LNG selling price above $14 per minute BTU for the fourth quarter. 26 Turning now to Integrated Power, over the first nine months of 2026, net power generation increased to 44.3 terawatt-hours, up 25% year on year, driven by the growth of integrated power generation portfolio, notably the commissioning of new renewable capacities and the contribution of TTEP’s assets in line with expectations. TotalEnergies is therefore on track to reach its annual objective in integrated power business to generate more than 60 over the year, and cash flow from operations was up 7% quarter to quarter at nearly $0.8 billion, supported by the contribution from TTEP assets over a full quarter.

Moving to Downstream, during the third quarter, Refining & Chemicals achieved record results driven by refinery throughputs of nearly 10% of the quarter, underpinned by all refineries well functioning in Europe and in the United States, For Artur and the progressive return of the SATORP refinery in Saudi Arabia to its nominal capacity successfully reached at the end of the quarter. Refining & Chemicals adjusted net operating income was up to $3.6 billion and cash flow was up to $3.9 billion, demonstrating the segment’s ability to capture historically high refining margin in Europe and worldwide.

Meanwhile, oil trading activities continue to outperform. Marketing & Services delivered solid results, with adjusted net operating income of nearly $0.5 billion and cash flow of nearly $0.7 billion in the third quarter, reflecting higher unit margins that more than offset lower volumes. Let me re-emphasize the strong CFFO generated by the company over the quarter of $12.3 billion, up 25% compared to last quarter. Net investments remained disciplined at $3.3 billion in the third quarter, in line with the annual guidance of a full-year 2026 net investment of $15 billion. The company delivered an attractive shareholder return this quarter totaling $3.7 billion, including dividends of 2.2 and share buyback of $1.5 billion. At the same time, the company reduced its net debt, underpinned by a free cash flow after payment of dividends of more than $6 billion and a positive working cap contribution of $3.1 billion during the fourth quarter.

This reduction of the working cap notably driven by the increase in tax eligibility related to higher prices and an increase in suppliers payable related to the increased shipping costs. As a result, the gearing improved by 4 percentage points to reach 9.1%, already below the 10% level we guide at CMD for N26. To conclude, the integrated model and geographical diversification of TotalEnergies continues to demonstrate the company’s exceptional ability to produce and deliver reliable energy and to capture higher prices and higher margin, with a growing cash flow that supports growing the dividend, deleveraging the company, investing to deliver accretive growth by 2030 and beyond, and increasing share buybacks for our shareholders to $2.5 billion per quarter in the first quarter and in the first quarter. 27 With that, Patrick and I are available for your question. Operator, please open the line for questions.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Please kindly mute any audio resources while asking a question. If you wish to cancel your request, please press star 2. Once again, please press star 1 if you wish to ask a question. The first question is from Lydia Rainworth from Berkeley. Please go ahead.

Lydia Rainworth (Analyst at Barclays)

Thank you and good afternoon to both of you and I really appreciate the call. Two questions if I could. Firstly, just coming back to Patrick, what you said on the potential for the final dividend to be adjusted upwards, are you thinking special dividend on that one? And then secondly, I know it’s only a month since we had the capital markets day, but I did want to come back to the upstream growth ambitions to 2035 because there has been a lot of discussions about the resources that need to be added.

And I know the ability to add resources at a competitive cost has always been a strength of TotalEnergies. And you’ve given us a lot of visibility on the plans for 2035. But the gap that you have, is that an unusual gap this far out or are you better positioned than you would expect or slightly weaker? I just want to get a sense of the urgency in which you might want to add resources or whether it’s something that you’re relaxed about. Thanks.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Okay, the second question is not related to third quarter results versus CMD. But just to clarify, we have no urgency at all. To be clear, I think what we told you at the CMD is that we have already in 20 until 2035 we see a plateau of 3 million barrel level per day. It’s quite unusual for an oil and gas company to have zero decline during five years. And we gave you the list of the projects which are already there. So from this strong basis, announcing potential growth of 2 to 3% is not, I would say, there is nothing spectacular.

Of course, 2% it will be easier than 3%. Just a normal, I would say, and we are demonstrating our ability in the last 10 years either through exploration or through access to DAOs to, I would say, deliver this growth. So it’s just a continuity, so we have no urgency. And secondly, I would say just wait. Maybe Monday morning you will have a beginning of the answer to that. We’ll make some announcements about access to DROs. You will see that we continue to be active on this matter. It’s a permanent, I would say, I think strength for TotalEnergies. Since 2015, we had consistently looked to, I would say, book reserves, either 1P, 2P. And I think it’s a strength of the company. So that’s just a question of trust.

So we are very good. We are, yes. And I would say, are you better positioned than usual? The answer is yes, because we have already visibility of zero decline until 2035, from 2030 to 2035. So thank you, Elia, for the question. I hope I clarified. Maybe my English is not good enough. The question I just mentioned to you: look, we committed to 40%. Okay? If you take $42 billion, 40% with $8 billion of buyback plus $8.6 billion dividend. It’s okay if we are not at $42 billion, but we are at $43 billion.

And I mentioned that figure during my speech. Then there is a lack somewhere of, let’s say, $400 million, let’s say $500. So the question for the Board is just what I told you. The Board asked me to tell you that, in that case, when we will decide the final dividend in February, in fact, we have a normal final dividend, but we’ll consider, I would say, an uplift of the final dividend, and $400 or $500 million represents $0.20 per dividend per share.

In fact, we have 2.5 billion shares. We might consider, in order to meet the commitment, to put, I would say—I don’t know if you call it special—an uplift dividend on the final dividend, and we pay it together with the final dividend. That’s the way that we want to respect the commitment. Honestly, we will all be happy if we reach $43 billion rather than $42. But that’s, I would say, what I’m adding today. So first, some of you told us we were conservative on the $40 billion at the CMD. I’m not sure, honestly; we learn month after month. But today, maybe we are late, we say $42 and maybe even $43. And then we are committed to 40%. That’s what you need to understand.

Elia

Amazing. Thank you.

OPERATOR

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

Biraj Borkhataria (Analyst at RBC Capital Markets)

Hi, thanks for taking my question. Just two, please. The first one is on Integrated Gas. You had a really strong result and obviously you flagged the long gas position with the CMD and the commentary around that. I was wondering how we should think about the flow-through into the fourth quarter and so the exceptional elements and the reversal in the third quarter, and how should you think about the earnings sustaining at this level into the fourth quarter?

And then second question is just on Uganda. Can you get a quick update ahead of the startup and sort of commissioning activities and where we are now and risk factors and so on. Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

So on LNG, I told you during my speech, I think I gave you a good indication of what could be what we anticipate. In fact, our position, you know, you’ve seen that TTF continues to go up, $33 per million Btu. And so we anticipate, I would say—I was looking to exactly what I just told you a few minutes ago. I just told you that, with Europe attracting more LNG volumes right now and TTF currently around or above $30 per million Btu, LNG is still going up, and we anticipate strong results as well as for gas trading in Q4, which means you should expect the performance in the same range for Q4.

That’s part of why, when I’m trying to anticipate, I would say, the global cash flow for the year, there is today a range of 42–43. I would add as well that we put in the forecast, we announced that the energy price would be above $14 per— in fact, it was based on an assumption on TTF, I think around 25 or 27. At 33, we are more next to 15 than 14, I would say. So I see only potentially, I would say, some upsides on the LNG business in the fourth quarter.

That’s what I could comment on this one. On Uganda, I think there are two different things. We have, of course, the pipeline, which is progressing well because the intent is to start up Kingfisher, the offshore production, this year. And so that is, of course, to start up Kingfisher, we need the vehicle to be fully commissioned. So we are up to 95%, I think, or something like that. And as I said during the CMD, on Tilenga, we expect to start up during the first half, I think, of 2027 because, as I explained, we had some delays on some equipment coming through the Strait of Hormuz.

So we have a six-month delay. But all the teams are today working hard in order to deliver this production by first start. That’s what I can tell you on your two topics.

Biraj Borkhataria (Analyst at RBC Capital Markets)

Thank you.

OPERATOR

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

Jason Gableman (Analyst at TD Cowen)

Yeah, hey, thanks for taking my questions, Patrick. You know, you commented at the CMD a month ago about potential appetite for US shale acquisitions, and we’ve had investors asking about those comments since then. Prior to the event, you previously said you were interested in shale gas rather than shale oil. So I was hoping you could clarify if you want to grow your oil business in the United States and if it involves shale. And I’ll ask my second question now as well. You know, the other focus from investors that we’ve heard is on the uncertainty in France. I was hoping you could talk through Total’s earnings exposure directly to France, potential risks of new taxes the government can impose on Total and then any thoughts around impact on cost of capital given what’s going on in the country. Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Okay, thank you for the two questions, which will help me to clarify the first one. Let me be clear. Our M&A is countercyclical. I’m not sure that acquiring any oil production in the world today would be countercyclical when you see the price of oil. So no panic. Secondly, we always said in the US that our priority is on gas, natural gas. You know, we have a big LNG position, want to integrate the value chain. By the way, today natural gas is quite low and it’s more quantity-critical, I would say.

But there are also some liquids with gas. That’s all my comments, you know, so I like gas. I like the liquids as well. There is no position of the liquid. So that’s a priority. Today we said that we were targeting something like 1 bcfd. We want to continue to grow in the LNG in the US, so 1–1.5–2 bcfd would be for us a good target. So keep that in mind. My comments have been a bit extrapolated. I just continue to think that liquid is good as well as gas, that’s all.

And the US is a good area of investment for TotalEnergies. We are, I would say, compared to ops, not weaker. With a less exposed to the US and—speak back exposure—we have a larger buy base of U.S. investors. So the Board is pushing, supportive of moves in the US if we have the opportunity. But again, as I said also today, it’s more—we have a strong base of growth today. So it’s not to grow, it’s more to, in another position, to be hedged. So it’s a question of finding reasonable, reasonable access to resource.

We have done already three JVs, natural gas. We continue to work as well on this mode of continue to develop the gas position. We’ll have some news in few months on that. France. Good question. So first, I repeat to all of you, the French state is not a shareholder of TotalEnergies. I spent my roadshows re-explaining that to all of investors. So maybe you could help me, all of us, all of you, by explaining that there is no direct interest of French state in TotalEnergies. There is no golden share, there is no say. We are a publicly listed company which is managed independently. First comment. Second comment. We are a global company, largely international company.

I think our results of cash flow, let’s say, and capital employed—around 7%—is located in France, to give you a round figure. I don’t know if it’s 6, 7, 8, depends on the years. So it’s not a French company; it’s headquartered in France and we are proud of that. Like all the French people, we have grown on that basis. I think it’s even sometimes a strong advantage in some parts of the world. Geopolitically, we are the only non-Anglo-Saxon major oil and gas company.

So it has some value as well. So I would say that’s the second point. Third, on taxation. If you had listened yesterday to the debate of the Parliament, it was a lot about taxation of TotalEnergies. The government has pushed back all the amendments. None of them has been adopted. And because why? Because again, I repeat, we took this initiative in the country to put a ceiling on the gasoline and diesel price for the customers. We have been very clear with all that if they were taxing us, then we will, of course, give up this ceiling.

And I think today government, rightly, I think, also consider that what we bring as protection to the customers is largely worth, I would say, politically, the addition that would be a taxation. By the way, you probably noticed that France did not sign the letter to the EU Commission to ask for a special taxation of oil and gas companies. Of course, politics is politics, but that’s the situation. And I’m convinced that our direct action to customers in France was the right move that we’ve done.

Of course, I know it’s bold, it’s innovative, but it’s a way to preserve and, by the way, we have the benefit of it in terms of image with our customers. I’m sure you have asked questions. The cost of this protection is, of course, more expensive today because with the diesel and gasoline going up, it costs me more—it’s around, I would say by end October, around $500 million, more or less. And we anticipate that’s easy. But I remind you that in 2022 we paid more taxes, by the way, for French people and French auditors.

The good news is that because we have good French business this year—refining in France are running well—we should pay around €500 million of corporate tax. So if I’m adding both, it’s an exceptional contribution to the country of €1 billion, I would say, which I think is quite sizable with a direct impact to customers. So that’s my comments. Again, we don’t control politics, but we do our best in order to explain that today, and I think it is more and more perceived that TotalEnergies is an asset for the country and should be as well considered by that by the different leaderships.

Jason Gableman (Analyst at TD Cowen)

Great, thanks for the answers, Patrick.

OPERATOR

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

Martijn Rats (Analyst at Morgan Stanley)

Yeah, hi. Hello. Two questions from my side as well. I just wanted to come back to the CFFO figure of 42 to 43 billion because if you look at where commodity prices are dated, Brent is 120, TTF nearly 100 yesterday, refining margins pretty darn good. If the comment is also that trading in the fourth quarter will once again be strong, it wouldn’t be beyond the wit of man that the fourth quarter would be even higher than that. Which then raises the question whether this 42 to 43 sort of indication either just embeds some conservatism because, okay, these prices are on the screen now, but they might change, or whether there might perhaps be some working capital outflow or some payments that we might be overlooking that might be sort of a bit unusual in the fourth quarter. I presume it’s the former rather than the latter, but I wanted to raise the question nonetheless whether there might be anything in the fourth quarter that we should be aware of from a cash perspective.

And the second question I wanted to ask relates to the hybrids. There is about 1.7 billion in the net debt from the 1.5 billion euros hybrid that you called. And I was wondering what your approach to hybrids now is. Would you expect the hybrid to be refinanced with another hybrid? Or is this hybrid now called and that’s sort of the end of it? Can you perhaps give some clarity on that and also how that is impacting the various line items in the balance sheet?

Maybe some detail on that because that can be quite tricky to figure out.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

First. No, I think I said cash flow from operations will be above 42, might be around 43. So with that. Honestly, Martin, I don’t know if you know—and whoever knows on the planet—what the US President will decide after the midterms in the Middle East. I don’t know. Nobody knows, in fact. So There was an article in the Wall Street Journal, but it could be a short conflict. I don’t know. We’ll see. So what will be the impact on the market? Honestly, today it’s quite… I mean, I’m somewhat amazed. In the spring, everybody in the forward curve, all the markets were behaving as if the war would end by summertime. I don’t know where it was written. The forwards were lower. Today everybody believes, the market believes, the war will stay for long.

I don’t know. So honestly, by giving you, I would say, a guidance of about 42 and around 43, I think we are probably right in the ballpark. If it’s more, again, the commitment of the Board is that if it was 43.5, for example, you will get back the 40% of the additional cash flow reflected in the final dividend. That’s what I can tell you. There is no way—no. The second point: when we speak about cash flow from operations, there is no impact on working capital. Honestly, on the fourth quarter, that’s true that this quarter it’s quite unusual. We had, I would say, an inflow, quite a big inflow in the third quarter. Generally in the fourth quarter we explain to you why we anticipate, but it’s very difficult, to be honest, to anticipate working capital movements with this, because with the price of oil, which has an impact on all the inventories, et cetera—where will the company… where will the price of Brent be at the end of the year? I don’t know. Today I would say we anticipate a plus one, minus one—I mean a neutral position—on the fourth quarter, under the control of Jean-Pierre. And we don’t have any unusual cash items that we anticipate for the fourth quarter. So again, I would be happy to have been wrong, but I think we give you a good guidance today. And if we are wrong because we make more cash flow, that will not be bad for our investors, because again we will return 40%.

The hybrids. The hybrids—it’s a typical topic for Jean-Pierre, who is an expert in hybrids, so I will give him the floor to explain. But today, in fact…

Jean-Pierre Sbraire (Chief Financial Officer)

Yeah, that’s true. We have a hybrid maturing in October, with an effect in our balance sheet at end of September for €1.5 billion, or $1.7 billion. Year after year we decrease the hybrid stock. We’ll see in the future the strategy that we will follow on that topic.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

No, but I think the important—Jean-Pierre is a fan of the hybrid because of the cost of the hybrids. So the question for us: at 3%, you know, today if we issue a bond, it’s about 3.3 to 3.5%.

Jean-Pierre Sbraire (Chief Financial Officer)

So why should we get rid of these hybrids at 3%? Of course, the question will be—and it’s a good question—linked to what will be the perspective of the interest rate, at which price could we refinance, these agreed or not. But again, and it’s linked to the low gearing position, if we continue to have some cash flow, of course this could impact the way we manage the different sources of, I would say, treasury for the company. This is one of them. There are also, as you know, some standards—discussions regularly with rating agencies—at which point do we consider that hybrids are equity and at which point they become a debt. So that’s part of the debate. Again, for me on this topic, I would say to you: what is the most important for my CEO is what is the cost of the debt. This is a cost for me, for the company. This is our cash. Is it called a hybrid or is it called a bond? I don’t see much difference from my office.

So that’s the policy that we are following on this topic. So to add the detail of the impact on the balance sheet, I think before explaining that, Martin, I will need Jean-Pierre and Arno to explain. It will take a little time, you know, so I recognize that. Okay, thank you.

OPERATOR

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

Christopher Coupland (Analyst at Bank of America)

Thank you very much. Patrick, I’m going to keep it to one question on your outlook regarding Europe’s gas prices and the market that we now enter into, given we have heating season and you have, I guess, more insight than we have into what’s happening at Yamal. Do you think, with the reroutings going on in 2027, that Yamal can maintain its utilization, or do you think there will be a net loss of LNG volumes because it’ll be harder to send tankers around the world if Europe’s no longer taking it?

Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

I think you have the answer in your question because, as you know, first on the outlook of European gas prices, I would say it’s quite clear that we are entering a dangerous period. We have seen the price reach, as anticipated by the way, €100 per megawatt-hour. So it becomes a strong political signal. It’s clear that unfortunately winter season is the peak season, but Qatar has restarted some LNG production and exports. But today, in September–October, you had more or less around—from Qatar or from Abu Dhabi, by the way, because both countries are producing—only 25% of the normal LNG tanker flow going through the Strait of Hormuz compared to pre-war. So only 25—that means that you have quite a big volume missing. Knowing amount is more or less 6, 7, 8 million tons—7 million tonnes. If you are at 25, you have a lack of LNG and this LNG would be useful. So that’s true.

There is stress and today you have, I would say, a competition again between Europe and Asia to get the remaining LNG flowing to Europe, and Europeans are ready to pay for that. Yamal: as you know, from January 27, first of all, Yamal LNG will not come to Europe anymore, to the EU, by the sanction regime. Yamal was representing in fact more or less 15 million tonnes, I think, to Europe in ’26 or ’25—15. The rest of the production of Yamal, which is around 19 or 20 if I remember, is going to China, to Asia—fundamentally to China. As you also know, there has been an amendment to the sanctions in July in which there is a Dynagas, which is an EU shipowner of LNG tankers, authorized to ship some LNG from Yamal outside of the EU.

That means that this fleet is limited—it’s a limited LNG fleet—and of course there is an impact. Where will the LNG go? If it goes to the Mediterranean Sea, there is not much difference with the EU. If it has to go to India, of course it’s a longer trip. If it goes to China, it’s an even longer trip. On our side, historically we had—I don’t want to make—5 million tons of LNG offtake with Yamal. There is 1 million tonnes which is in fact not possible because of the sanctions, for different reasons, which is not eligible. So we have four, and when we do the math today we think that we might offtake between 3, maybe 4—let’s say 3 million tonnes. It will depend again on where this LNG will go. So I just described for TotalEnergies, just to explain to you, but I don’t have the full picture of Yamal, to be honest, because we have limited today our interest only to what can be done according to the EU sanctions.

But yes, the answer to you is yes, there will be an impact. The EU was a natural destination for the LNG tankers just because of optimizing the shipping freight in fact and the shipping costs. So the fact that it does not come to the EU definitely from January 27th will have an impact on the capacity of the plant to export its full volumes. I don’t have a clear vision as well, to be honest, about the relationship today between Yamal and the Chinese offtakers, because this is also the other part of the equation.

So that’s my comment on this one.

Christopher Coupland (Analyst at Bank of America)

Thank you.

OPERATOR

The next question is from Michele Della Vigna of Goldman Sachs. Please go ahead.

Michele Della Vigna (Analyst at Goldman Sachs)

Thank you, and congratulations on the strong quarter. Two things I wanted to ask. First, in a quarter of unprecedented freight rates, I was wondering if you could tell us a little bit how you think about your current tanker portfolio: how much is on long-term rates versus spot, and how this impacts your realizations and trading capabilities. And then finally, we’ve seen a big increase in appetite for long-term LNG contracts, with customers trying to diversify away from Hormuz.

I was wondering if that is leading to an improvement in the pricing. I would think recently the oil-linked contracts have been around 12.5% oil slope—if we’re seeing any improvement on that. Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Two questions, thank you. First, freight rates. I think it’s a new topic—I never had a question since I am CEO about freight rates. Suddenly they become popular. Different comments on this one. First, you probably noticed that liquids realizations—there was a difference between the third quarter and the second quarter of $6 per barrel. The $6 per barrel represents more or less this additional, which is in fact, in our portfolio, quite limited because our policy—today we have some medium- and long-term charters which represent more than 40% of the equity that we offtake.

Why is 40% a good figure? Because, as you know, our average taxation rate on upstream is around 45%. So 40% means that we are somewhere trying to neutralize the impacts on our equity crude oil of variable freight. The second comment is that our charters with medium and long term are really with fixed rates. We don’t sign within TotalEnergies charters which are linked to, I would say, a spot market. We don’t just reserve a capacity; we have a capacity, we have the tanker plus a freight. And of course our traders during this quarter—and I think next quarter—are benefiting today from making this fleet available, which of course is giving some positive results to their value chain.

So that’s, I would say, the second strength of the position. It’s impacting, I would say, positively trading capabilities. And then of course, for the rest of their business, they are also negotiating—it’s their job—access to third-party tankers. One of the successes of the third quarter, which I think will move on in the fourth quarter, is that they have been able to have access to some tankers going inside the Strait of Hormuz, offtaking in particular some Iraqi crude oil and then exiting, and then making this trade generate some positive results.

So that’s our philosophy on freight rates. And I think there is a difference between different companies, because some competitors have some charters linked to the spot market for freights, which is not our case. When we charter, we charter on fixed rates. Yes, second question. It’s true, but again, as I mentioned during my speech at Gastech, we had a long queue of customers coming to us. Clearly there is a trend in Asia, I would say, to try to escape from the volatility of the JKM. You know, JKM is not very popular. It was the case in ’22. They tended to forget in ’24–’25; today again this volatility clearly for these economies is not good. So they are coming back to ask for a link to Brent and of course in such an environment there is a trend for some of them to move from 12, 12.5.

The improvement is not—as well, I would say—you don’t reach today higher than 12.5%, but again it’s negotiation, so it depends where you are, of course where the LNG is procured. We are just commercializing the Papua LNG volumes—2.4 million tonnes with Kumul—and we have some good results from this perspective which help the profitability of Papua LNG.

Michele Della Vigna (Analyst at Goldman Sachs)

Thank you, Patrick.

OPERATOR

The next question is from Alastair Syme from Citi, please go ahead.

Alastair Syme (Analyst at Citi)

Thank you. Hi Patrick.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

I’ve been blunt. During the CMD, I told you I will not invest in new refineries. I maintain that position. I think it’s quite exceptional. Of course it encourages us to maybe consider maintaining these capacities. And that’s the whole thought. Biofuels, honestly, it’s a complex economy. It’s a regulated economy. So there might be some pockets. But we have to be careful about the way that the regulation will evolve. There is in some countries a trend to more biofuels.

But you know, in Europe there is always a debate between food and biofuel which is continuously impacting the development of that business. So I’m a little… We have been opportunistic. We will start up the Grandpuits biorefinery in this quarter so we’ll have access to more HVO. HVO seems to become a more popular fuel in Europe. There has been a deal between France and Germany about the new, I think light vehicles regulation where the French have accepted that a vehicle, an ICE vehicle which would be supplied by 100% HVO would be acceptable.

So we don’t know for which volume because it’s a matter of volume. But there is something happening there. All that is regulated. We need of course to be sure that the regulation will not change again in a few years in our environment today. What we’ve done fundamentally was to maintain, reduce the European exposure because of the trend. This is a question mark that we maintain outside. We have developed our platforms in Port Arthur and we have developed it by integration of petrochemical. We have this big refinery of SATORP, which we complement by Amiral. I think it was the right strategy to go where the energy is cheap. In fact, for me, you make refineries… it’s better to go where energy is cheap.

That’s very simple. I would say we will not change our strategy. Our strategy is fundamentally oil and gas upstream. It’s integration and maintaining, I would say, downstream as a cash cow. And I think today it’s a super cash cow. So that’s good for us, and continuing to invest in integrated power which has a good momentum by the way today in both sides of the Atlantic, US and Europe with all this AI activity. So I would say I don’t see an inflection on the rest.

Having said that, the question will be again to consider that these midstream assets have a value, an opportunistic value, and then taking decisions to shut down might be more tricky than it was before. So that I would say is the strategic conclusion, but we will review and maybe my answer will be different if I see three years in a row of $20 per barrel of refining margin. For the time being I’m happy with what happened. I think the refining margin in Europe will remain quite good, quite strong during 1H27 because we will embark the consequence of the crisis, low inventories.

Beyond, it’s very difficult to say what will happen and honestly that’s one of the most complex questions for us: what assumption do we take on refining margin for 2027 for the budget. So don’t ask me because it will depend on the mood in December/January.

OPERATOR

The next question is from Matt Lofting from J.P. Morgan, please go ahead.

Matt Lofting (Analyst at J.P. Morgan)

Thanks everybody for taking the questions. I’ll just ask one on capital allocation. Given the strength of position that this year’s cash flow and deleveraging creates for TotalEnergies, do you see any further opportunities, outside of the comments that you just made on refining, to accelerate the strategy through incremental organic investment which can further enhance the business’s cash flow leverage to price whilst also helping France and Europe solve for energy security, and if so in what areas of the businesses could some of those opportunities sit?

Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Honestly, I think for us first, no. We have a strategy, we have a plan. We will not become procyclical because suddenly we have more cash. That’s the beginning of the mistake, or the short-term mistake. So fundamentally yes, there is a… I would say yes on the point. But we are, as I said during the CMD, of course today making infill wells to produce more oil in Angola, in Nigeria. There are opportunities. We will review their budget soon. If they are asking $500 million or $300, I will not say no stupidly because it’s a short-term delivery.

So of course this is, for me, the short-cycle capex that we can easily arbitrate. I think one of the lessons on the question is, of course, looking to do we need to have, for example, where I’m ready to consider to have more, we say, working capital is maybe more LNG charter. If we need to be long on the midstream assets, I would say that’s a possibility. Chartering not to be perfectly efficient but to have some margins in order to be able to capture the volatility. That’s one of the lessons. I would say investing in some pipeline in the Middle East because this is part of the security of supply and so giving value to our own assets.

But I agree, to invest in Europe for energy security in fossil fuels I will need to see a different bible at the European Parliament. To be honest, I’m not sure we are still there. So honestly, let’s not jump suddenly in that direction. I just mentioned that we could maintain our business today, and that’s true. To grow in fossil fuels in Europe, I would need to hear a different narrative from the European political leaders. And I’m not sure they are still there.

But again we work with them on that. But our investments for TotalEnergies, honestly, when we contribute to security of supply of Europe, is more when we invest outside of Europe: investing in US energy, investing in Boise on oil, investing in Mozambique energy. That’s contributive to the security of supply of the continent. I think it’s more our DNA. We have been created 100 years ago on this, I think, assumption and I think this is what we do. That’s my comment.

Matt Lofting (Analyst at J.P. Morgan)

Very good, very clear.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Thank you. So discipline on capital allocation is a key word. Okay.

OPERATOR

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

Kim Fustier (Analyst at HSBC)

Hi, good afternoon. Thanks for taking my questions. I had two, please. You’ve just referred to potentially participating in pipeline routes through Abu Dhabi, Iraq and Syria. What would you need to see in terms of utilization, tariffs and contractual protection for these investments in new export infrastructure to earn an adequate return, especially if this capacity might be valuable only during periods of disruption? And then secondly, given the very high cost of moving crude long distances, have you sort of changed your crude sourcing or refinery optimization to reduce freight exposure? And does your integrated trading system allow you to protect your realized refining margins better than, say, regional or local refiners can? Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

First question, we are discussing. We are discussing today on different schemes. We are participating to two projects. So I cannot today, I would say, answer precisely. There are negotiations. So I cannot enter into commercial discussions today with you. Again, I think at the end of the day the right word is that we need to be sure that the upstream revenue is not moving to the midstream one. So it’s a question of balancing the position between the upstream and the midstream.

And I think that’s the question. The question of protection again, yes, I know all that. But this is being discussed and when we have better clarity on it, I will come back to you. Today it’s premature to comment on that and I don’t want to interfere today with any discussion. The second one, it’s a permanent optimization of the crude slate of refineries. It’s part of the permanent job of what we call refining optimizer working very closely with the traders. We have in fact an organization in Geneva around the same desk where we have the refining optimizer just next to the— And they permanently look to the different slates. And you know, when we lost the Russian oil, we had to find other slates for refineries. And today of course it’s an optimization which integrates obviously the cost of shipping.

That’s part of it. You know, before it was, I would say, cost of shipping was 5% of the cost of Brent, I would say $2 per barrel. Today we speak about $25 per barrel. So of course this is part of the equation to optimize the supply of the refinery. Of course, if you can have access to some barrels from Norway, it’s more efficient than from longer distance. But this is why I think fundamentally, I repeat, our model is very efficient integration at the end in our results, as you notice, refining and chemicals.

And this is the reason why we integrate in one segment refinery and trading. Because this is, for me, it’s up to us to decide what is the price. What I want them to do is not to have a fight between traders and refiners, but to optimize the supplies of the refineries which of course has a value for our traders. By the way, just to clarify for you, in our European refining margin—but I’m sure you know about it—it’s not a pure difference of petroleum products minus crude oil. It integrates in the European refining margin the cost of the freight, the cost of natural gas and the cost of CO2. That’s why when you see $50 in the US where, of course, natural gas is very cheap, energy is cheap, there is no CO2 and the freight is limited to pipelines. Today Port Arthur is benefiting more from $50 per barrel and not from $25 per barrel.

So the indicator is taking into account this long-distance impact. But again, we optimize and we change the crude slate according to what is the best mix. Of course we also optimize considering the slate of the products. If you want to make more diesel, we select crude oil which is able to deliver more diesel or jet fuel than gasoline. That’s also part of the equation. By the way, it’s a very interesting job for young people to optimize permanently. The refining optimizer—maybe, Kim, you should be invited by one of them. During one day you will see what they do. You will have more interest. We will recruit you to do that. Thank you.

Kim Fustier (Analyst at HSBC)

Thank you.

OPERATOR

The next question is from Doug Leggate from Bank of America. Please go ahead.

Doug Leggate (Analyst at Bank of America)

Thank you. Good morning everyone. Patrick, I wonder if I could take two quick ones. First, your gearing is now under 10%. How much lower are you prepared to allow that to go? I assume deploying windfall cash flow to the balance sheet is still a good idea. And then my follow up is—I can go back to a question from earlier regarding the post-2030 visibility. Really simple question: with what you know today from the portfolio, what’s the most likely way to fill the gap to growth? Is it exploration, new project entries or M&A? Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

The second question is quite easy. We look to our performance in the last 10 years. It’s DRO. Access to your project is really the easiest one. In particular, if you are able to make some direct discussions where we have been quite good at. So that’s… I would say when you look to that, exploration is also part of it. I would say 25% M&A, it’s another topic, a different approach, you know, and it’s not when we speak, when I mentioned the 2% to 3%, we didn’t add big M&A in here, to be clear with you.

Just to clarify, you know, the largest M&A we’ve done in E&P was Maersk Oil, historically, for $8 billion. So when I mentioned the 2% to 3%, don’t interpret that as an announcement of a big M&A. If there was a big M&A, it would be on the top, you know, so the base would be higher. So that’s not what we had in mind. It was fundamentally, I would say, 70% DRO, 75% DRO, 25% exploration actually done during the last 10 years. First one, it’s a good question. I had several times this question. Suddenly, it’s a good two… I mean, there is a point there which is also… It’s quite a complex equation because you could look at it from a financial point of view. There is a point today where, I mean, as long as the interest rates are low and that we delever debt. If we pay 4% for the debt and we have a yield of 5%, I don’t know why we would go to 0%, you know. There is a point where we see a financial balance.

Then you could also say, which is in fact also shared — that’s why the Board is inclined to be a very strong balance sheet. We have a world of crisis. We don’t know where we will go today. It’s a crisis which is pushing price up. You could have another crisis like we had in 2020, price would go down. And so to have a very strong balance sheet will allow us to swallow these crises. Now our two US peers in 2015 were in the positive part. It helped them a lot.

I think the journey of these two companies was quite different from ’15 to ’25 to the journey of the European majors, partly because of that. So that’s… we are still… I will be happy to face — really I think to face tough questions practically. Maybe it could come. We’ll have to continue to evaluate the pros and cons and to say where we go. But there is no taboo there — no taboo, but to be pragmatic in the way to, again, manage the cash — the global cash of the company.

Knowing that I noticed that some of you count the leases, etc. So we need to look at all the equation as well, you know. So some of you have reported that we are not yet under 10. We had 14. So to be under 10, for some of you I need to be under 6, if I understand correctly this morning. So maybe my objective would be to be under 6 so that I will stop these comments that we are not at 10 but at 14. So we’ll… I can work on that. Maybe it’s easier as a first target.

No, I told you, I answered to that. I mean I’ve been clear. We tested there is a value if you announce it in advance, or in fact what we are just doing today by telling you we can put a small top-up on the final dividend which would be 40% of the difference of cash flow. To meet the 40% I gave you an equation today. I told you today that 40% of the cash flow minus $8 billion of buyback which we have, minus $8.6 billion of dividend, will be the base of this, I would say, top-up of the final dividend.

That’s the way we work on it. But again, what I will notice — we were clear at the CMD, and my investor team has done a roadshow with all the investors — that a large majority, not all of them of course, but I see 80% or 85% were more in favor of buybacks than a special dividend. Because the special dividend, we need to put a formula. Consider that today with the 40% of cash flow we have a sort of formula. But we could also match it directly with the buyback. So it’s… I don’t want to…

The buyback is a normal way to match the 40% this year because we are, I would say, running because of the positive or high results. We’ll do it by putting a top-up on the final dividend.

OPERATOR

The next question is from Mark Wilson from Jefferies. Please go ahead.

Mark Wilson (Analyst at Jefferies)

Okay, thank you. Just two points. Patrick, maybe you could clarify on — you spoke before about some LNG moving out of the Gulf. There have been reports of volumes getting back to pre-war levels in terms of oil from some reports. Could you give us your understanding of movement around the Straits today or in the last few weeks? I appreciate it’s volatile. That’s the first one. And then the second one is the Venus development we continue to wait for. Should we be expecting that in the very near future, and the moving parts — any movement on that long license extension agreement? Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

In Namibia, we are starting the drilling of the appraisal well this month. That’s the good news. Second, don’t listen to contractors but listen to the operator. And I think I said everything during the last CMD — that we are optimistic to reach the FID. Okay, first point today where we can say on flows through the Strait of Hormuz. In fact, globally you could say that there were 20 million barrels per day going from the region pre-war. You have 5–6 through Yanbu, you have 2 for Fujairah, and you have 10–12 — so that’s 20 million that are going to the market with different crudes. So we are around, for most amounts now, 12 million barrels of oil per day, which represents 6 tankers per night, more or less. 2 million barrels — a VLCC is 2 million. To be honest, it’s a new policy. The three NOCs have decided — Aramco, ADNOC, Kuwait — but also Qatar for crude… they have decided that they use their own tankers. Once they go through, they have attacks from… they are attacked by Iran, but they have decided that now they have to go through the Strait of Hormuz.

On LNG, it’s a little more tricky because LNG tankers are a little more sensitive in case of attack. Again, I mentioned — I said during my… just to… I think the previous question — but what we have observed today is that you have, let’s say, 25% of the flow in the last two months compared to pre-war. So around, I would say, 1.5–2 million tons compared to 8. I don’t know if it will go up or not. I think it’s a decision which is more complex because it’s more sensitive, you know.

An LNG tanker is a little… And the value is not exactly the same. So… but I would say decisions will be taken by the Qatari authorities, and we are following that.

Mark Wilson (Analyst at Jefferies)

Thank you. I’ll hand it over.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Henri, let’s move on to the next one.

OPERATOR

Yes, the next question is from Henri Patricot from UBS. Please go ahead.

Henri Patricot (Analyst at UBS)

Yes, hello everyone. Yes, one question from my side. Sticking to the Middle East and the Ratawi project in Iraq, can you give us an update on what you expect in terms of the production ramp-up from the project in the current environment? Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Well, we are moving up. We think we are targeting to move to… we are already producing — we are already producing more than 100,000 barrels per day. I think we are starting right now — I think last week, this week — we have started the first gas project, the first what we call GMP25. I think it’s 15… per day, if I remember well. And the full Phase One, which is supposed to reach 120,000 barrels per day, will be done by November. So we are really today ramping up on the oil side and on the gas.

So the first phase of Ratawi for me is done. And then we are working — we have mobilized, I would say, we have 3,000–4,000 people. I think I was in Iraq recently — 4,000 people in the field to build the full field, which will reach 110,000 barrels per day and per day of gas.

Henri Patricot (Analyst at UBS)

Thank you.

OPERATOR

The next question is from Bertrand Hodi, from Kepler Chevreux. Please go ahead.

Bertrand Hodi (Analyst at Kepler Cheuvreux)

Yes, hello. Thank you for taking my question. Two quick ones. You had an underlifting position in your UAE offshore production in Q2. I was wondering whether those underlifting positions have increased in Q3 and what was the impact on the E&P result and cash flow, and whether you can signal whether this will improve in Q4 or not. And the second question is, you mentioned that Qatar LNG exports is probably back to 25% in October, but I was wondering whether your train in Qatar has restarted or not.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

No, no. The second question is clearly no. The Qataris are doing that. They are big, they are commercializing most — in fact, as you know, most of the LNG is commercialized by Qatar LNG, in fact by Qatar… QatarEnergy, I would say, themselves. So I would say the supply contracts we have are in force majeure, and I think they are force majeure for long today. They prioritize obviously their own customers for what they can export, which is quite limited.

So no, we are continuing to ensure the supply of our own customers without the supply coming from the Gulf. But it’s okay — I think I commented on that before. Yes, there is an underlifting offshore UAE because it was difficult to go in the Gulf. We have done some liftings in the third quarter, but at the same time the production is back almost to normal level. So that means that, yes, we are in an underlifting position. To give the accounting impacts on an underlifting position, Bertrand, as I’m a little late — because I know that Wael wants to speak at 3:30 after me — I will ask you just to go to the experts of the accounting.

It’s not me, it’s Renaud and his team. Renaud is not an expert, but he has some people in his team which are good in accounting — sorry for that. So yes, we have an underlifting position. We try to minimize it. We do our best. But we are not the only one. I think all the IOCs are in this situation and we’ll catch up as quick as we can. But all that is not an easy task. We are not national companies with our own tankers to export. We have to pay insurance costs and all that.

Okay, thank you.

Bertrand Hodi (Analyst at Kepler Cheuvreux)

Thank you.

OPERATOR

The next question is from Fergus Niland from Rothschild and Co. Redburn. Please go ahead.

Fergus Niland (Analyst at Rothschild and Co. Redburn)

Yeah, hi there. Thanks very much for taking my questions. Just a couple of quick ones on iPower, if I might, please. It was good to see another strong cash flow ex working capital performance from iPower this quarter. I’m just curious what cash generation and asset sale proceeds you envisage in 4Q to finish 2026 free cash flow balanced, and how much of the 2027 positive cash flow target depends on further farm-downs. And then secondly, just on the return on capital employed improvements expected in iPower — when do you think we should expect to start seeing those coming through, given that it’s been a little weaker over the last couple of quarters?

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Okay, it’s a good question, because we have, in fact, in the fourth quarter, announced two important sell-downs to KKR for almost 2 gigawatts between Europe and the US, representing a global value of $3 billion. So it’s quite big. That means that we’ll get the impact. And by the way, I don’t have any questions, but I saw some comments on organic capex. In fact, again, our commitment is—I repeat—the commitment is $15 billion of net capex. This will be reached because we have, I would say, some proceeds of this farm-down during the third quarter.

It’s almost $1.5 billion. The impact on the capex is even a little higher because we spent money during the year, which will be recouped. And you have also a positive impact on the cash flow from operations. I think the target is around $800 million. I think for Integrated Power we were already almost at $800 million this quarter, and we should go up, because I think for the year the anticipated cash flow from Integrated Power—so full year—is running around $3 billion. You know we told you we might be balanced this year, and free cash flow—we are way more—the capex, net capex will be around $3 billion. I think the cash flows which are expected are $3 billion.

So you will see an improvement, which is also coming, of course, from the full effect of the JV in the accounts. So I would say yes, we are on the way to—again—2027 will be free cash flow positive, and Integrated Power will contribute to the dividend of the company. Okay,

OPERATOR

The next question is from Ahmed Ben Salem from Oddo BHF. Please go ahead.

Ahmed Ben Salem (Analyst at Oddo BHF)

Yeah, hi, thank you. Just one question on the geographical mix. So you have materially expanded your US offshore acreage with Chevron over the last 18 months. Is this opportunistic or part of a broader strategy to scale up in the US Gulf? And what is your long-term ambition for this basin? Thank you.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

Yes, thank you for the question. It’s a good question. In fact, you probably noticed that we have done some exploration, I would say, deal with Chevron. In fact, as you know, yes, we have an ambition to continue to grow in the Gulf of Mexico. Today all our assets are operated by Chevron at Tahiti, Jack, Anchor—there’s another, Ballymore—and we consider they are a very good partner for us there. We had made last year a first deal about exploration.

We increased it. By the way, it’s not just acquiring some acreage, it’s drilling, because we plan to drill the first prospect together in 2027. So for me, yes, it is part of the strategy. We like exploration, and honestly our partnership with Chevron in the Gulf of Mexico is a good fit, and I think I recently had the opportunity to discuss that with Mike, and we both agree that we continue. And on the other side, by the way, you probably noticed that we have announced some JV in exploration with them in Nigeria, for example, in Africa, where we are strong. So we try to combine our strengths in, I would say, foundation territories where we are good together.

And as we are both considering exploration as an engine for future growth, I think there is a good alignment between both companies. And so if we can do more, we’ll continue to do more. So that’s the idea. But equation again is completely there. Okay, thank you.

OPERATOR

The next question is from Jolie Pro Cic Zib. Please go ahead.

Jolie Pro Cic Zib

Thank you for taking my questions. It’s about German offshore wind. It looks like Germany is relaxing its stance over renegotiation of conditions to develop acreage there. You took large positions two, three years ago, and I was wondering what your willingness is there. Okay.

Patrick Pouyanne (Chairman of the Board and Chief Executive Officer)

I mean, honestly, there are contradicting news from Germany about what they want to do, what they don’t want to do. It is clear that today the merchant offshore wind in Germany is a challenge. To be honest, we are not the only one to explain that. Maybe we are optimistic, but it’s a challenge because, in fact, customers are not. Because first the costs are higher. I would also say that the connection times are longer. So the German government, which has a commitment to deliver some connections to the concession, does not fully fulfill its commitment.

So that’s a debate between our companies and the government. So we’ll see what they mean. On our side, I think we need to—we are evaluating the situation. We have different concessions. We have some which have been acquired at a cheap price on which we intend to continue to work; for the other ones we’ll have to evaluate the impact. At the end, the objective is to make, I would say, some affordable electricity for customers. So if it’s not affordable, I don’t know why we should invest. So that, I would say, is the condition of an investment by our side.

By the way, you will notice in our accounts for the fourth quarter or the third quarter we have made some write-offs on some of these concessions just to reflect the fact that today on some of them we don’t see how we could monetize them in a profitable way for us and for the customers. It’s not true for all the German concessions. So I will not be more explicit. That’s the way we consider this business. Thank you. Thank you to all of you. I think we have done. There is no more question. So in such case, I would like to thank you for listening. I know that you will all rush to the call from a competitor, which is a good friend as well. So I wish you the best. And I think our next meeting will be, in fact, together in February in London, where we’ll announce the results for the full year, the fourth quarter, and return to shareholders to meet the 40%.

Thank you,

OPERATOR

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.

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