On Thursday, TotalEnergies (NYSE:TTE) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

TotalEnergies reported strong financial results for Q2 2026, with cash flow of $9.8 billion and adjusted net income rising to $6 billion, driven by high commodity prices and strong operational performance.

The company managed a 4% organic production growth in E&P and achieved exceptional performance in refining and chemicals, despite geopolitical tensions affecting operations in the Middle East.

TotalEnergies increased its interim dividend by 5.9% and announced a $1.5 billion buyback for Q3, maintaining a focus on shareholder returns and a gearing ratio improvement to 13.1%.

Strategic initiatives included the start of LNG production at Energia Costa Azul in Mexico, ongoing developments in Namibia and Uganda, and progress on green hydrogen projects in Europe.

Management highlighted challenges such as the volatile market environment due to Middle East conflicts, affecting production and lifting capabilities, and underperformance in gas trading in Europe.

Future outlook involves maintaining strong production growth, managing geopolitical risks, and pursuing diversification in both hydrocarbon and renewable energy portfolios.

Full Transcript

OPERATOR

Ladies and gentlemen, welcome to TotalEnergies' second quarter and first half 2026 results conference call. I now hand over to Patrick Pouyanné, Chairman and CEO, and Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead.

Patrick Pouyanné — Chairman and Chief Executive Officer

Hello everybody. Good afternoon, or good morning for those who are in the US. Before Jean-Pierre goes through the details of the second quarter financials, I would like first to make a few opening comments, starting obviously with the current conflict in the Middle East, which has picked up again in the last few days and which is clearly impacting our markets, our operations, and our perspectives. Although we were all hoping in mid-June that a resolution could be envisaged through the signature of the MoU and a ceasefire between the US and Iran, the situation has remained, to say the least, extremely volatile, with the Strait of Hormuz being an intermittent battleground where the risk premium to navigate in these waters is increasingly high. Some are even beginning to consider that this could become a new normal, with the straits opening on and off depending on the level of tensions between the parties. This unstable and chaotic environment has been prevailing for the second quarter, but I would say the last 15 days in June, where we have seen some quite interesting reactions of the market with crude oil going down very quickly but products going through the roof at the same time.

We don't know how long this conflict will continue. We have no specific information. I don't know if anybody knows, by the way, but of course for us, safety of our teams will remain our utmost priority. As Jean-Pierre will show you in a moment, we can say we have managed this quarter to deliver once again strong results and cash flows from both our strategic pillars, thanks to the strong performance of the teams who managed to capture very favorable market conditions for many of the energies we are producing and selling.

The oil prices rose above $100 per barrel, even if differentials widened, while refining, petrochemicals, biofuel margins, but also distribution margins were increased, with some even reaching historic levels. And gas, LNG, electricity were also at strong levels. Once again, TotalEnergies is demonstrating its capacity to capture these margins and high prices, leveraging the integrated and diversified business model along the value chains of oil, gas, and electricity.

First, all upstream and downstream businesses have been performing very strongly at the same time, which is not so frequent, in fact, since quite often one benefits from a supportive environment at the expense of the other. But currently both are capturing high prices and margins given the tensions on global demand for products as we speak. Integrated margins this morning around $130 per barrel, Brent crude oil around $95, and margins at $35. E&P delivered a strong quarter in terms of production, thanks to a solid 4% organic growth, higher than our forecast, coming from our rich and diversified portfolio of projects, which was planned in particular from Brazil, US, and Libya. But also, and I must say it was very good, from a strong operational performance, limiting, I would say, the unexpected stoppage of the production. So it was a very good performance from an operational point of view. And all that allowed us to partly compensate the production losses in the Middle East. E&P has been delivering once again this quarter a strong cash flow from operations despite, as well, I would say, a difference in the Middle East between the production reported and the capacity to lift this production, which impacted because the lifting in the Gulf, of course, was really limited by access to the Strait of Hormuz. Looking forward on the Middle East situation, beginning of July, end of June, I would say the production was going up quite quickly and we had limitations, I would say, only 5% of our global production. But this weekend, after the conflict came back, we were more back to 8–10% of limitations. Difficult. I think we say 5 to 10% in our perspective. It will obviously depend on the way that the conflict will develop. And again it's not only production for us, also lifting, offloading the crude oil, which might be affected.

And when we look to what happened in the second quarter, the real offloading was in fact affected, as per our guidance, at 15% of our production. So we'll see what will happen for the next quarter. Refining and Chemicals performed in an exceptional way, I must say, leveraging market conditions, managing well the tensions on supply of refined products to maximize capturing margins. Refiners have adjusted the way they use their plants in the second quarter to prioritize in particular production of diesel and jet fuel, which were offering higher margins, and also by doing that contributing to security of supply of France and Europe.

This performance was achieved although some of our facilities have been impacted by events outside of our control, like the SATORP refinery in Saudi Arabia, which was hit in mid-April, if I remember well, by some drones and which has been used at around— which is back today at 70% of capacity, and full capacity by end of the third quarter is expected. But also Port Arthur in the US suffered, unfortunately, in June from a lightning strike during a tropical storm and now is progressively coming back to normal production levels.

Our crude oil and petroleum products trading activities have been very successful for the second quarter in a row with a strong performance and made another $500 million, I would say, overperformance on top of our usual performance of $500 million. And last but not least, the downstream Marketing & Services has reported the best ever quarter, driven by the positive impact of the seasonality in Europe but also higher, I would say, unit margins, in particular on products like lubricants.

After a strong outperformance in the first quarter, our gas trading activities' results in the second quarter were not, to be clear, and impacted by flat to declining European market conditions. Whereas our traders were positioned to see a more supportive European gas environment, in line with supply-demand fundamental expectations, our traders took a long position on gas, being bullish on the market, which seemed to be reasonable because many indications were pointing to gas prices increasing because of lower supply out of the Middle East and from Qatar, because European inventories were low, less than 15% below the five-year average.

But these factors did not materialize during the second quarter. Even, in fact, prices have declined for the quarter, leading to, I would say, weaker or poor results from the trading business. The story is not over, as you have probably seen: now gas prices in Europe have rallied and, as our traders are rightly stubborn, since early July their gas trading results are following and we'll be back to some overperformance again. On our second pillar, electricity, there was multiple good news during this quarter.

Integrated Power delivered one of its best quarters ever in terms of— with a strong cash flow, in fact the second best in 2024, even in the absence of farm-downs during this quarter. But it was supported by the closing of the transaction with EPH in April, one to two months earlier than expected, and the cash flow coming from EPH as per the expectations. So these strong deliveries on almost all fronts, but I would say gas trading for once, have generated at the company level next to $10 billion this quarter, which has been allocated in a very consistent manner as announced to you, as I've announced to you last April during the call for the first quarter. First, of course, we have deleveraged down to a gearing ratio of 13%, which shows an improvement of 2.4 percentage points quarter to quarter, benefiting from a $3.3 billion reduction in net debt and also $1.2 billion working capital. And second, of course, we have confirmed the increase of our interim quarterly dividend by 5.9% to €0.9 per share, which places TotalEnergies once again in the leading pack of the growing dividend companies along this quarter.

Our cash generation has also allowed us to sustain our production growth targets with disciplined capital investment of $3.4 billion, confirming our annual guidance of $15 billion, and also to increase, as announced, buybacks to $1.5 billion during the second quarter. And the Board has authorized us to maintain this buyback with another $1.5 billion for the third quarter. With all this good news, I now hand it over to Jean-Pierre, who has an easy work to go through the details of second quarter financial results.

Jean-Pierre Sbraire — Chief Financial Officer

Thank you, Patrick. So I will start by commenting on the price environment in the second quarter ’26 versus the first quarter. We captured high commodity prices, although gradually decreasing over the quarter. Brent averaged $104 per barrel during the second quarter versus $81 per barrel in the first quarter, meaning plus $23 per barrel, more than 25%, while average liquids price was up by $18 per barrel due to widened differentials and a lifting schedule weighted towards the end of the quarter.

In a crude market which softened in June in the context of the ceasefire in the Middle East, TTF averaged $15.6 per million BTU versus $13.7, and our average LNG price increased by 20% to $10.2 per million BTU. Oil prices started to impact LNG prices with one to two months of lag effect according to LNG pricing formulas. Finally, the European refining margins increased by $13.50 per barrel on average over the quarter. In this price environment, the company reported very strong financial results, increasing by almost 15% compared to the first quarter, with second quarter cash flow of $9.8 billion and adjusted net income increasing to $6 billion.

These results were possible because of the strong operational performance of all businesses, demonstrating the company's ability to fully capture the environment. Upstream delivered an underlying accretive production growth of over 4% year on year, which is above the annual 3% guidance and partially offsetting the production loss in the Middle East. Downstream had a very good operational performance, as explained by Patrick, from our refineries, which have been deliberately geared towards maximizing distillate production—diesel, jet fuel—to capture higher refining margins, and Integrated Power.

Cash flow generation increased by 25% over the quarter, supported by the contribution of EPH assets, in line with expectations since the closing of the transaction at the end of April. TotalEnergies generated these very strong results, the highest since the end of ’22, despite two challenges. Although production from the Middle East was higher than originally expected, a significant portion of this production could not be lifted during the quarter and is recognized in E&P results based on the crude price from end-June, meaning less than $70 per barrel.

Our gas trading underperformed after an overperformance in the first quarter because of the declining gas price for the quarter. As explained by Patrick, TotalEnergies has delivered strong profitability this quarter with return on equity at 15.9% and ROACE close to 14%. Now, moving to the business segments, starting with hydrocarbons production. On a year-on-year basis, excluding the impact of the Middle East conflict, second quarter hydrocarbons production increased by more than 4%, above the guidance provided of 3% for ’26, benefiting from the ramp-up of the projects started since the beginning of ’25 and from non-operational improved facility availability. The impact of the conflict in the Middle East is around 210,000 barrels of oil equivalent per day over the quarter, below the guidance communicated last quarter of 360, due to the company's production ramp-up in offshore United Arab Emirates and the restart of production in other countries in the region during June, although physical lifting turned out to be in line with the guidance, with an impact of 350,000 barrels of oil equivalent per day.

Looking forward, we expect to maintain strong momentum, with oil and gas production in the first quarter, excluding the Middle East impact, expected to grow around 3% compared to the third quarter ’25, in line with the annual growth guidance. Turning to the quarterly results and starting with E&P results, the segment generated an adjusted net operating income of $3.2 billion this quarter, up by 25% quarter to quarter, capturing the increase in average liquids price of $17.9 per barrel over the quarter and demonstrating the accretive new projects contributing this quarter to the yearly production growth.

Similarly, cash flow reached $5.8 billion, up 27% quarter to quarter. On the cost side, very important as well, once again we maintain our leadership with an average OPEX per barrel equivalent below $5 in the second quarter. In Integrated LNG, LNG production decreased by 10% quarter to quarter, mainly due to shut-in production in Qatar related to the Middle East conflicts. In contrast to the outperformance in the first quarter, the second quarter was impacted by the underperformance of gas trading activities in an overall flat or even bearish European market, reflecting the significantly decreased adjusted net operating income and cash flow of the segment quarter to quarter of $0.8 billion. Given the evolution of oil and gas prices in recent months and the lag effect on pricing formulas, the company anticipates an average LNG selling price of above $11.5 per MMBtu for the third quarter ’26. As we execute our consistent strategy in LNG, the main milestone of the quarter was the startup of Energia Costa Azul LNG plant on the Pacific coast of Mexico, strengthening the diversification of the LNG portfolio of the company towards the Asian markets.

TotalEnergies loaded the first cargo at ECA LNG and shipped it to the Asian market. The company pursued its strategy of signing long-term oil-indexed LNG contracts with new clients in China or in Japan. Turning now to Integrated Power, net power generation increased to 14.8 terawatt hours, up 28% year on year, driven by an increase of nearly 15% in generation from renewable sources, reflecting growth in installed capacity, and a 2 terawatt-hour increase in production from flexible gas-fired capacity, resulting notably from the completion of the transaction with EPH.

TotalEnergies is on track to reach its annual objective in Integrated Power, in particular to generate more than 60 terawatt hours over the year. Cash flow from operations was above $700 million, supported by the contribution again of EPH assets in line with expectations since the closing of the transaction. This quarter again, we provide more granularity in the Integrated Power financial performance with a split in cash flow between what we call production assets—meaning renewables and gas-fired power plants—and sales activity, B2B, B2C and retail.

The former contributed 60% of the cash flow and the latter contributed 40%. TTEP, the new venture with EPH, will continue providing its growing contribution to the company results throughout the year, in line with expectations, as TTEP has started contributing in the second quarter. We said in the first quarter that Integrated Power should benefit in 2026 from 10 terawatt of net power production, in line with the 15 TWh guidance given for a full year, and more than $500 million contribution to available cash flow.

Moving to Downstream, during the second quarter, Refining & Chemicals was able to fully capture the increasing refining and petrochemical margins, notably adapting the refinery run to produce more distillates. Overall for Refining & Chemicals, adjusted net operating income was up by $200 million quarter to quarter to $1.8 billion, and cash flow reached $2 billion. Marketing & Services delivered outstanding results, the best in at least 10 years, driven by the positive impact of the seasonality in Europe and the higher unit margin, as noted by Patrick, on lubricants.

Adjusted net operating income was up 21% year on year at $500 million, and cash flow close to $850 million, up 19% year on year. Moving to the company level and starting with working capital: working capital decreased by $1.2 billion during the second quarter, largely driven by the reversal of the first quarter build-up, with the lower hydrocarbon prices at the end of the second quarter compared to the end of the first quarter. The company has kept the course for capital expenditure, with net investments amounting to $3.4 billion in the second quarter, with a contribution of net disposals of $1.2 billion.

This, as explained by Patrick, comforts our guidance for full-year ’26 net investments level of $15 billion. As a result, the gearing improved by more than two points to reach 13.1% at the end of the quarter, reflecting a reduction in net debt of $3.3 billion. To conclude, once again this quarter the integrated model of TotalEnergies demonstrated its ability to capture higher prices and higher margins, with a growing cash flow to support the deleveraging of the company, our shareholder distribution with a clear priority to the dividend, and the capex to deliver our growth.

I think now we can 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 then 1 on your telephone and wait for your name to be announced. Please kindly mute any audio sources while asking a question. If you wish to cancel your request, please press the star then 0 key once again. Once again, please press star then 1 if you wish to ask a question. The first question is from Martin Ratz, Morgan Stanley.

Martin Ratz — Analyst, Morgan Stanley

Hi, hello. Two questions, if I may. I know there's an awful lot of attention of course on the Middle East, but I wanted to ask you a quick one about Namibia. It's still very important for Total. Where do you stand on the FID of Venus versus the completion of the transaction with Galp on Mopane? I was hoping you could say a few words about that. Then secondly, I wanted to ask you about the payout ratio for this year. The guidance more than 40%. I think we're sort of tracking below that so far.

Of course you see a volatile macro environment; it's perhaps no surprise. But the payout guidance, over which period should we expect that to be realized? Would you still expect to have more than 40% payouts over the year, or should that become a longer-term target?

Patrick Pouyanné — Chairman and Chief Executive Officer

Okay, thank you, Martin, for the first question. So that will be more precise. On the Galp transaction related to Mopane versus Venus, we have received, end of last week, the official approval of the Ministry of Energy of Namibia, and so we are just, in fact, finalizing the last paper to close the deal potentially tonight or tomorrow. We are just... So your question came at the right time. So that's important, of course, because this is the fact that we'll be on both developments as operator has a strong value for us in order to engage with the first FID on Venus.

I would say there are intense discussions as well. You know, we have a joint target between the government of Namibia and the consortium to sanction it by end of July. There are discussions progressing. We'll see if we can conclude in July or if we need to have a little more time. Technically, I think we have selected all contractors, so we are ready to take the FID, subject to finalizing discussions with the government of Namibia. There has been some progress, but there's still some progress to be done.

So again, generally it's at the last minute you can conclude. But we'll see if we can do it; otherwise we'll wait. But I would say I'm reasonably optimistic that all the parties—there is a joint interest, clearly—and in particular the Namibian authorities are fundamentally supportive to have a strong operator being able to capitalize on synergies between the projects. I remind you that now that Mopane has been approved and will be closed, the next step is to engage in the second half to appraise Mopane.

We have three wells in 27 and the FID will be taken in 28. So all that is we engage in a strong momentum and, clearly, for us, Namibia is becoming a very important help for future growth, not only to 2030, beyond 2030. Then on the other topics, yes, we are clear we are targeting 40% of payout. We have increased the buyback level and the dividend level between the first quarter and the second quarter. I don't know where we'll go, to be honest. You could say we have been...

There was a little cautiousness in the fact we have raised from $750 million to 1.5. We maintained the 1.5 for the next quarter because I can tell you that we were quite impressed also, when the MOU was signed in June, by the quick drop of the crude oil price down to $70. So it's difficult, honestly, to anticipate what will be the cash flow for the second half of the year. Of course, we will be globally above the guidance we gave. I gave, even to you end of April, I think I mentioned a cash flow guidance at $80 per barrel, $7 per refining margin, of 32 billion—obviously we will be higher than that.

Where will it land, between 35, 40? I mean, I don't know. It's difficult to guess. So we can make the math like you. If we were at $35 billion, there is a... I mean not a miss; there is a question of a little more around $1 billion to increase in the return to shareholders. $1 billion in the last quarter is there. We'll see. And there will be a debate at the board on the different ways we could imagine to execute it. But I think again my message to you is, first, it's a good topic because that means that we are generating more cash flows compared to the guidance we gave you in February.

So it's a matter of, we'd say, a rich company. It's a good topic. But the idea that we will target the 40% is really on a yearly basis. I remind you, by the way, that we have quite an advance if you want to make it in a multi-year case, as you suggested in your question. I think last year we were at 55%, the previous year around 50 or 53%. So if I make it on many multi-year—which is not the case, by the way, because we are simple guys, you know—but we are quite in advance compared to 40.

So again, consider that 40% guidance is guiding the board. And again the board is also, as I was explaining to you last quarter, looking, thanks to your support and your strong guidance last year at the same period of the year, to the gearing ratio, and going down to 10% is quite also an objective for the company and we might achieve it this year. So that's the equation of the capital distribution, I would say, for the board. And I think we will manage that as we've done regularly, respecting our different, I would say, stakeholders.

Martin Ratz — Analyst, Morgan Stanley

Great, thank you.

OPERATOR

Next question is from Michele Della Vigna, Goldman Sachs.

Michele Della Vigna — Analyst, Goldman Sachs

Thank you very much. I wanted to ask two questions. The first one is if you have an update on the two giant oil developments you're operating in Uganda and Suriname. The second one is more of a macro question. I was wondering if you have a view on China demand. We've seen a drop of about 5 million barrels per day in import since the beginning of the conflict. It's very difficult to unpick what is destocking, demand substitution, demand destruction.

I was just wondering if you had any view of how to think about it. Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

Okay, first question on Uganda. Okay. We are, I would say, in the last six months of development. We expect the crude oil production to start before the end of the year. I would say 27 will be the year where we reach the plateau. We have two developments. We have Tilenga on one side and the other one, the Kingfisher, I think is ready to start up by September, if my information is good. The pipeline is also ready by September. So we might start, in fact, in the next quarter, the production at a rate which, I think, was around 60,000 barrels per day.

And then Tilenga will come, ramping up, I would say, in 1H27. So full plateau for me is by mid-27. So this is where we are. And by the way, it's an opportunity for me, and we will follow that carefully. You know, of course, Uganda is affected today by a disease, Ebola. But if it was not the case, we think that we might organize, if it stops, a field trip with some of you—the ones who are brave to go to Uganda—in one year, in September 2027. So Uganda for me is now, to matter of fact, finalizing and turning the wells on.

On Suriname, things are moving very well. I would say we confirm that the production will start up by first half 28. That's where we are according to planning. It was our first quarter, maybe second quarter, but we are in first half 28. And the news of the construction, it has already progressed by 40%. We are at 40% advancement. The FPSO in its yard is building correctly. So, no, I would say this is more classical. You know, it's more complex to execute an onshore project than an offshore one.

So in Suriname we are in a project which, for TotalEnergies, is a deepwater project. We know how to execute them. Then China is very interesting demand. Of course, we have all been surprised when we discovered the statistics of May and in June, I would say, where, in fact, you are right, the refinery runs went down from 15.5 million barrels of oil per day in February to 12.5 in June. So clearly, with a policy which was firstly... First, I remind you that the Chinese authorities have decided very quickly to stop exporting products out of China, and they reduced the run rate of the refineries in China by 10%, down to 90%—I would say voluntary reduction. So it was more affecting the export. The domestic demand is difficult to say, but it's a domestic demand disruption. So I would not say that... It's also true probably that... So that's what we saw. What is sure is that we observe it seems that there are, I would say, turnarounds on Chinese refineries in July, August, and summertime. So we don't expect, in fact, much increase of this demand from China. It's true that when you look at that, you can consider that the system in China has quite an impact on the oil market.

And probably, you know, we were commenting in April the fact that the threat of a Hormuz blockade was representing 10 to 12 million barrels per day of the market. The Chinese by themselves, with their policy, have, I would say, absorbed 4 million barrels per day. If you add on that the US have released almost 2 million barrels per day of the SPR, they have solved—the two countries, I would say—have solved almost 60% of the problem. That's probably why, by the way, the price of oil went up to 120 but not so high.

So for the coming months, Michele, you can observe like me, but we are back to the blockade today. No vessels, no tankers are crossing the strait at all. So we are back to the situation. I know that the Chinese have announced that they will allow again some few refineries to export some few products. It was during, I would say, the quiet period at Hormuz. Today, we can imagine that again it might not be the case again with these events. So that's what I can comment.

So for sure, less exports, domestic demand destruction. Difficult to have data on this one.

Michele Della Vigna — Analyst, Goldman Sachs

Thank you.

OPERATOR

The next question is from Biraj Borkhataria, RBC.

Biraj Borkhataria — Analyst, RBC Capital Markets

Hi there. Thanks for taking my question. Just two on your LNG business. In June there were reports around a Russian decree to authorize a sale of 10% of Arctic LNG 2, I think related to the European sanctions. So I don't believe you have commented, but are you aware and are you planning to exit there? And related to that, are you any clearer on the sort of legal language around EU sanctions and what it means for Yamal at this point? I know I asked with full year results and it wasn't quite clear exactly what it would mean and there's been some conflicting reports.

So any color there would be helpful. Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

Thank you, Biraj, for your questions. I know that you have specific interest in Russian matters, for good reasons, by the way. So Arctic LNG 2, as you know—I remind you that we decided in 2022, it was very early in March, in the accounts of March 31st, 2022, shortly after the war—we recorded an impairment of $4.1 billion, which was, in fact, concerning notably Arctic LNG 2, full write-off. Secondly, that Arctic LNG 2 has been placed under sanctions by US authorities on November 23rd, and as a result, immediately we suspended procedures in accordance with existing contracts, and in consequence, in fact, all rights and obligations under these contracts related to Arctic LNG 2 have been suspended since November 23rd. In such a context, Novatek approached us indeed and initiated discussions for the transfer of our over 10% in Arctic LNG 2 to one of their own subsidiaries, Nordline. And this has been publicly authorized, as you noticed, by a special decision of the Russian presidency in June. In fact, given this context of Arctic LNG 2, we on our side consider that it's in the joint interest of TotalEnergies and Novatek to dispose of Arctic LNG 2 shares, which again were fully impaired in 2022.

We have notified our partners and lenders, and we expect the transfer process initiated by Novatek to be completed in the near term. So the Arctic LNG 2 chapter will be over for TotalEnergies in such a context. The second question—I would love to be able to answer to you, but we are waiting to see what is the legal language precisely. So, as you have, there was some press news this morning that there were intense discussions about the new sanctions package at Brussels, and among these different topics—and we are not part of everything, even if we try to understand; we are not in the room—there was a debate which came from, I would say, the Greek authorities, which were claiming that the Greek LNG tankers should be allowed to transport some LNG from Russia if it was to be offloaded outside of the EU. So that was basically the case, and it seems that there is a legal language, but again which could, in fact, have an impact on the Yamal LNG. Accordingly, what was said, and which could in fact allow, I would say, some transfer and purchase of Yamal LNG if we were using EU LNG tankers outside of the EU—again, a specific case.

So it's a little complex story, but that might have, yes, an impact on the fact that we—in fact, if it is the case, that means that TotalEnergies could not use a force majeure to say, like it was until now, because until now there could be, in fact, with the regulations which were in place, which were banning the LNG export to the EU. But there was a question mark—I made that comment, I think, in April to all of you, or in February, I remember—that we were questioning if there was a different interpretation of the European sanctions, that even an EU company could not purchase any Russian energy either for the EU or outside of the EU.

So it seems that the new language could, in fact, clarify it in a way that it could be done outside of the EU if we use some EU LNG tankers, which in fact would be that the interests of EU companies would be preserved independently of if it's outside of the EU. So again, I'm just commenting some verbal information. We have been in contact with different [parties], and I think the final resolution will be delivered probably tonight or tomorrow morning, drafting the last ones, and we'll see what will be the outcome.

Of course, we need to analyze it because we have a policy where we don't want to take any risk with sanctions. But my comment is that, if it is the case, again, I think the interests of EU companies will be preserved because, honestly, to let the Russian LNG be sold outside of the EU, not by EU companies but only by your competitors, was a little odd to all the EU companies involved. So let's see. That's what I can tell you, and we'll keep you aware, obviously, because it has some impact on our own business, and we'll keep you aware of the situation.

Biraj Borkhataria — Analyst, RBC Capital Markets

Thank you very much.

OPERATOR

The next question is from Douglas Leggate of Wolfe Research.

Douglas Leggate — Analyst, Wolfe Research

Thank you. Good afternoon, everybody. Patrick, I wonder if I could pick up on Martin's prior question about cash returns and the 40% and so on. I think we would all agree probably this is a bit of a windfall environment and maybe formulaic returns of capital—one could be forgiven if there was some flexibility there. My question is specifically around the hybrid bonds as opposed to the net debt target and whether you would consider these windfalls as an opportunity to perhaps address some of that longer-term financing as part of your capital structure.

That's my first question. I've got a follow-up on exploration, please.

Patrick Pouyanné — Chairman and Chief Executive Officer

I should give that to Jean-Pierre, but I know that I'm still—to be honest—you know, the hybrid bonds for me, it's a debt. It's a debt. It's not a debt, but it's a quasi-debt with a low interest rate compared to what we can issue in bonds. So I don't make a lot of difference between the different bonds that we have issued. So I would say it's around 11 billion euro of 3% coupon, so it's quite a cheap debt. So is it a priority to unwind all that? My answer will be clear: it's no, and it's no. And we have made some partial reimbursement, but it's not a priority. And again, we are more looking—I'm more looking—at the global cost over different bonds rather than this specific one.

Jean-Pierre Sbraire — Chief Financial Officer

Maybe, Patrick. It's highly dependent on the market. So if you consider it's cheap debt, there is no reason not to keep the hybrids in our portfolio. Of course, we are highly dependent on the conditions, as Patrick explained. So what is important for us is globally the cost of global debt—so senior bonds plus hybrids.

Douglas Leggate — Analyst, Wolfe Research

That's very clear, guys. Thank you. Yeah, my follow-up, Patrick, is very specific on exploration. So you hired Nicolas out of ENI and you have Mopane and Venus in Namibia. Back in 2016 Total drilled the only deepwater well in Uruguay, and ENI late last year farmed into Uruguay. It seems that activity there is picking up a bit. So my question is, when you roll all that together, does Total have any ambitions to move into Uruguay?

Patrick Pouyanné — Chairman and Chief Executive Officer

Okay. I mean, Doug, you will need to ask a question to Nicolas. To be honest, Nicolas did not come to my office to tell me we need absolutely to come back to Uruguay. To be clear, our own experience in Uruguay has been quite average, to be honest. And in fact it's a whole basin, because this basin, which was the Pelotas Basin, if I remember well—in fact we drilled in Uruguay. We also drilled on the other side in Brazil, which was not as well quite a success.

So we made two drillings in this deepwater basin there, which was honestly not very encouraging. So I have noticed that there were some companies last year which went back. Nicolas is quite excited by Namibia, by coming back on Suriname with OBL. So he has some opening other ideas, or other African countries. But again, I discuss with him through your intermediary, Doug, if he wants to come back through your voice. As the CEO, policy is quite clear.

We allocate $1 billion per year to exploration and appraisal. This is my commitment to Nicolas when we are in, and I told him it's up to you to decide. We will put the money; you have to share with us your convictions. But if it's your ideas, we follow that. By the way, when I was looking to potentially—not Mopane, but the Venus case—looking to the development, you know, a Venus development might generate quite a nice cash flow, paying many years of—or like Suriname, the Grand Mohu development will pay many years of exploration.

So we need to keep in mind that, in terms of cash generation, added value, exploration for me is a nice engine. But again, I trust Nicolas that he will bring to us ideas. I don't know if it's Uruguay or not, but until now it's not Uruguay.

Douglas Leggate — Analyst, Wolfe Research

Great, thanks so much, Patrick.

OPERATOR

The next question is from Christopher Copland, Bank of America.

Christopher Copland — Analyst, Bank of America

Thank you very much. Just two quick questions from me, Patrick. The info that you've given us on the positioning of your gas traders is very helpful. Can you maybe comment on whether their bullishness has extended into power and your merchant and spark spread position there, and what you expect on that side now that you've got access to the EPH portfolio? And the second question—as ever, I keep trying to get comments out of you on the state of the M&A market, but maybe now we have a specific example that you know more about than we do, which is the Danish deal, which I believe is entirely operated by yourself.

What do you think about this environment? You've made use of inorganic before. Is this an environment to sell or to buy? Any comment once again would be appreciated. Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

I commented on gas trading because gas trading has been, again, lower performance than oil trading. So just to tell you that now the position is, I would say, the winning one. On electricity, honestly, I don't have the visibility on that. Your question—of course, we have, as you know, the EPH deal is a deal where we are buying the assets, but we transform all assets in a tolling mode in order to have access to the electricity and in order to trade ourselves around this electricity.

In fact, today at this stage, all the assets have not been yet—all the tolling agreements have not yet been signed. So we are working on it. So I think the full potential of trading around the EPH is more for the fourth quarter than immediately, to be honest. But of course we are expecting from that some additional value. We have some objectives, and we were discussing that, by the way, with our trading electricity team last week during our five-year business plan.

So we have some objectives and we expect them to deliver. We are trading on two markets. There is the European market, one in which we are also trading in the US, which is a little more complex market, to be honest, because our position there is probably today still limited. So we will need to find ways to increase the position in the US if we want to be, I would say, profitable trading electricity in the US. In Europe we have quite a large portfolio today in different countries, so we have some expectations.

The US, I would say, is still work in progress, I would say, on this one. M&A market—yeah, I mean, I didn't have the time to analyze the price which was paid by Vår to acquire the BlueNord Energy. So I didn't. Maybe I will receive—probably I will receive a memo, but I was occupied by other matters these last few days. It seems for me the market today is more a seller market than a buyer market. You know, with the crude oil price we experience today, to make a deal, unless you have a big earn-out or schemes in which you will try to capture part of the potential upside, it's not a stable market.

So before this crisis, I think you could imagine deals were done around—to buy you around $70 per barrel. Today, to sell at $70 on my side, to be honest, I would not be a seller today on these assets, on your assets, because we would not like to lose some upsides.

Christopher Copland — Analyst, Bank of America

Great, much appreciated.

OPERATOR

Thank you. The next question is from Mark Wilson, Jefferies.

Mark Wilson — Analyst, Jefferies

Thank you. Regarding European projects, could I ask about the Cyprus project, Kronos Block 6, and what the expectations to move that one forward are, please? And then secondly on gas trading. Yes, I agree with others’ helpful comments, but you spoke to the European expectations for price moves there that didn't occur. Should we consider your gas trading business to be more of a regional-focused business rather than global? Obviously oil made material moves up and down and that enables that business.

But should we think of your gas trading business as being a more European, regional-focused one? Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

Now the thing, unfortunately—I know—we have a global gas trading. We are a big LNG player. I just mentioned that there are different markets: in the US, in Asia, of course. I just tried, in my comment, to tell you where we made the miss, and the miss was more on the European anticipation on the TTF, where I think we were around $15–$16. End of March we were around $17. Our teams were thinking it would go up to $19–$20, like it is going, by the way, today and in July, because we anticipated the impacts on the market both of the disruption from the Qatari production from the market and, I would say as well, the fact that the inventories in Europe have to be rebuilt. And in fact what happened is that the market probably considered that it was too anticipative to have a higher price—because expecting maybe the Qatari disruption to stop, which happened in June but came back in July—and that there was time to have higher, to grow the inventories. It's also true that the weather in Europe was quite, in fact, good in the second quarter. So it's just to try to give you the main—the one on which they took a position—which appeared, which were in fact reversed, which were not the right ones.

But it does not mean at all that we are not a global one. I would say on the other markets I didn't see any specific—we didn't see any, I would say, underperformance. I would say we only see it on the European position. That's why I mention it. But don't draw the conclusion. Kronos, thank you for this question. On Kronos, we are working on many FIDs. In fact, the end of July—and the good news, and I think I must pay tribute to Eni, the operator, because we have a big share, 50%, like the operator, Eni—we worked jointly, by the way, in the last six months to go to the FID.

And the good news is that we are working hard to, again like on Venus, finalize the FID by the end of July. It's a matter of—again there is a lot. Kronos, for everybody, is an interesting development where we produce gas in Cyprus and then we maximize existing infrastructures in terms of Capex because it's a subsea development. It will go to Zohr installations in Egypt to make the gas treatment and then to the Damietta LNG plant in Egypt. So you can imagine there was a number of intergovernmental agreements and agreements with third parties to use all these existing installations.

But it's being done, honestly, and I think we'll be able probably end of next week to announce that. And it's good, it's an interesting project because at the end, for TotalEnergies, we have access to 1.4 million tons of LNG in Egypt, just in front of the European market. So you can imagine that it's an interesting project from gas to LNG and for Cyprus as well. It's the first gas development in Cyprus and maybe this scheme will open the door. We open the way to overvaluezation.

So it has been a long journey, but I think we are there and we'll be happy to invest capital into Kronos projects.

OPERATOR

The next question is from Matt Lofting, JP Morgan.

Matt Lofting — Analyst, JP Morgan

Thank you for taking the questions. Two, if I could, please. I wanted to first ask you about full-year operating cash flows. I think, Patrick, you said earlier, understandably, that you'd expect to be probably above the 32 billion for the full year that you mentioned in April. Obviously the macro scenario is uncertain. So if we were to stick to the sort of the $80, 15 gas, and 7 refining that you used in April, where do you think full-year cash flows at that price deck would outturn on an underlying basis versus the 32 that you saw three months ago?

And then secondly, I wanted to ask you about refining and security of supply of feedstock. Is the company able to access the appropriate feedstocks for the system as you look into the coming months? And is there a scenario where additional measures could be required from that perspective, particularly if conflict in the Middle East persists? Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

Okay. On the first question, it's quite easy to answer. The 32—because we know what has been improved in the second quarter—would be raised to 34.5. That's why I mentioned $35 billion. I think in my answer to your colleague, the first question that I got. So 34.5–35 billion would be, in such an environment, I would say, you can get it as a guidance. Again, we'll see if we are at $80. Since the beginning of the year we were a little higher. We are more, on average, I think around $90.7 since the beginning, and the last 30 days were at 76.

So that's quite a spread, you know. So between 75 and 90 we'll see where we land. It's interesting—it's 13—but in this assumption, 34.5, and the current forward curve is a moving target, you know. It follows the spot ones. I don't have the figure, but I mentioned to you a range of 35 to 38–39 billion, if we are remaining. I think if we were having a second half as the first half, you double it, you find 38, you know. But it's more—it's a higher environment, not 80.

It's $90. It's $90. It's a refining margin of 15. So it's $90, 15, and TTF 15 as well, which was the average of the first half. If you replicate such an environment, you could imagine we should deliver around $38 billion instead of 35. So you have a range to where we could land. But I don't know, maybe it will be lower at the end. That's what I can tell you today. The second question: no, we have no problem of supplying feedstock to our refining system.

Not at all. We are producing a lot of oil in Brazil, a lot of oil in Africa. And so, in fact, our refinery—by the way, independently of almost, in fact, in terms of crude supply—you know, the Atlantic Basin, our European refineries, which are on the Atlantic Basin, are generally supplied by crude oil coming from the Atlantic. It's true that we like to have some sour crude coming from the Middle East to make more diesel, because it's the best crude to produce diesel.

There is a limited—but generally this, sorry, the sour crude from the Middle East is more going to Asian refineries, in fact, than to European ones. So no, we have no concern on our side to feed our refining system. The only concern I could have is more around SATORP in Saudi Arabia because, first, it has been hit, so I hope it will not be hit again, and so we don't have the full capacity. Secondly, SATORP production is, of course, stranded in the Gulf.

It has been quite well used by the Saudi system during the second quarter for domestic use because they had other refineries which were hit. So from this perspective, we are running it for the domestic market, but we see what could happen, what could happen if it's strong. So that's the situation, but no security of supply for feedstock for our system.

Matt Lofting — Analyst, JP Morgan

Super, thank you on both.

OPERATOR

The next question is from Lucas Herrmann, BNP Paribas.

Lucas Herrmann — Analyst, BNP Paribas

Yeah, thanks very much, Patrick. A little conceptual perhaps, but one of the things that I think most of us, or many of us, are struggling with—struggling with medium term at the moment—is, you know, the fragmentation or fracturing within OPEC, the UAE having departed, talking about, you know, an incremental quota or changing its quota. As you think forwards about your own position, the potential for Iranian barrels to come back, more UAE to be available, Iraqi flows perhaps be larger—where does discipline sit with what remains of the rest of OPEC?

How does that impact the way you think about allocation of capital to project? Does it change anything in terms of how you feel about the robustness of oil markets, particularly at the bottom of the cycle? And secondly, if I might—and maybe this is just one that I should leave, or we should leave, for the strategy day—is simply to ask whether, in light of the actions you've taken on MOPE, or around mopay, the addition of EPH, and the environment we're seeing in refining in particular at the moment that may be sustained, whether that's changed and altered your target of 20 billion or so of free cash by 2030 in the $70 world.

Patrick Pouyanné — Chairman and Chief Executive Officer

Okay, the first question is a good question for the investor presentation outlook in September, Lucas, where we speak more about strategy. But the first one honestly in terms of capital discipline, because of all what you described very rightly, it's very good to stick to that discipline to test all our projects at $50 per barrel because the answer yes, you can infer that today we are in a world of high prices, but we could go in a way where everybody would like to produce more and maybe, by the way, Saudi Arabia, like they've done in 2020, could do, why not myself?

I mean if everybody wants to produce, so we could do it again. If you remember what happened in 2020 when Saudi Arabia decided to close the market, I think some few people around them were quick to come back to more discipline. So it's a matter of discipline for us. Honestly, I continue to believe, and in the company we are continuing to test the $50. We plan the business process, five-year business plan. We plan it at $60. Yes, we test what happens at $80 or $70 like you mentioned.

But keeping the discipline and knowing that we are in a cyclical industry, I think it's just fundamental. So all these events that you mentioned I think are just confirming to me that we need to keep a discipline. That's what I would answer to you. And that means as well that you should not be surprised that when we speak in end of September about, I would say, capital net investments, capital investments, you hear figures which are more or less in line, which will be — not more or less — which will be in line with what we told you last year.

We do not suddenly increase our capex because we have on the short term higher environment. Does it change 2030? Not really, what you said, because Mopane first. The production of Mopane beyond 2030. Venus should start by end 2030. So I would say Beni’s Mopane — for me it is 2030, 2035. We are working on it. So there's no impact. EPH somewhere was part of already planned five-year business plan. We told you that we have just anticipated with EPH some of the capex we were willing to allocate to M&A in integrated power.

So it has been done. But it was, in fact, modeled. Even if EPH was not, I would say, the deal, it was in fact modeled in future cash flow by 2030. And balance and refining — frankly, I will not take it as granted. Maybe because I managed my business during three years, I'm a little more cautious on it. Today we have an incredible situation where both markets are positive in the same direction. That's true that on the products market you have no products coming out of the Strait of Hormuz.

The Russian situations with, I would say, themselves, they stop exporting diesel. And so you have Russian disruption. So you have a lot of impacts, I would say, which are pushing up the product price. I'm not sure. I don't think it will. Because if Strait of Hormuz remains on and off, as I read that some authorities said maybe it's a new normal. If it is the case, then we'll not be in the $50 per barrel environment. You know, we'll be elsewhere. Because to reinstall there is no low cycle with an on and off Strait of Hormuz production.

Of course we will need to — we are building and we are willing to — we are discussing today to invest in some of the pipeline projects which will allow to circumvent the Strait of Hormuz. So the balance of refining, I don't take it for granted for our planning by 2030. So we will come back to your question more precisely. But for me, in fact, what we have worked since we met last year in September ’25, we have confirmed, in fact — and we will come back to tell you — fundamentally all our targets we can confirm even strongly.

And so, yes, the increase of free cash generation that we announced, which was more than $10 billion — an increase of more than 10 — will be confirmed. And so far this is one of the first messages in September: the confirmation of that. The second one will be to give you more color on beyond 2030. Because, in fact, we are working now beyond 2030. So the company has two objectives: to deliver all the 2030 additional free cash. And we will do it. I can't tell you because — and we'll demonstrate why we are super confident. And you have some of the projects you mentioned. And then working as well to continue the story. Because the story of TotalEnergies growth does not stop in 2030.

OPERATOR

The next question is from Barclays.

UNKNOWN — Analyst, Barclays

Hey, good afternoon. Thanks for taking my questions. Two, please. The first one is on the Middle East. Patrick, we watched some of your recent interviews with French media. I think you talk a lot about the importance of building more export pipelines in the UAE as well as other countries. I wonder if you could elaborate your thinking around the Middle East situation and the TotalEnergies longer-term strategy in the area, please. And then the second question is on the Power segment.

You have built a successful power business and you achieved one of the best quarters as you mentioned earlier. Strategically, I wonder what's your next ambition for this business? Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

Okay. On the Middle East, it's quite obvious to me, you know, we are very well positioned in Abu Dhabi, for example, and we just announced two very big projects. By the way, despite this war, we have been quite active in Abu Dhabi to reinforce the partnership and position of TotalEnergies together with ADNOC or RXG or Masdar. You know, we have announced Masdar and all this renewable business in Asia. We have announced the Bab gas cap concession, which was an old dream for many people in the company to have access to the Bab gas cap.

So it's done. With our partners. By the way, it's interesting to know that when in 2015 we signed the Bab concession onshore, some people were skeptical. Ten years after, we delivered the additional value. And it's because we were in the place together with our partners that we managed to go along with ADNOC. And thank you, by the way, to the trust that the Emirati authorities have given into the existing consortium. And we have also announced the Umm Shaif gas cap.

We have FID, I would say yesterday — this week, in fact — we have FID together with ADNOC, and we have a 20% share in the Umm Shaif gas cap, which is also, by the way, not only gas, it's also liquids. And all these gas cap — by the way, gas projects, of course — but they are also quite good condensate projects. So it's liquids, but in liquids you need to have outlet, you know. And so it's clear to me, and Abu Dhabi has been very active, ADNOC has been very active, very reactive, and we need to double the pipeline to Fujairah in order not only to accommodate future growth but also to connect the offshore production.

I think ADNOC is offering to partners to look at the projects and we definitely will. We are looking to that very seriously. So that's one part. The other part of interest for us is Iraq because we have some production in Iraq. Iraq today we have only one way to export — almost not only one way, I'm exaggerating — but fundamentally it's Basra. So it's in the Gulf. So being able to contribute and to see — there are some projects which are being announced and being studied from Iraq to Syria — and TotalEnergies is keen to join the projects if possible or to develop some.

So I think it's obvious to me that if we want tomorrow to come back to you and to say we want to continue to invest — because it's cheap oil, which is true, and there is a lot of oil — we need to diversify our exit route. Otherwise we would not do a proper business case. So that's why we are clear and I think, by the way, for the countries themselves. And even I think if the conflicts were coming to an end quickly, we must absolutely keep that in mind and pursue the effort to have alternative routes for this oil.

Integrated Power — the next ambition is to reach the 2030 target. You know, it's not yet done. Today, this year, we'll reach 60 terawatt-hours. We will reach more than 100 terawatt-hours. I think the 100 terawatt-hours is probably the low assumption for production by 2030. More importantly, we want to generate a net cash flow from this business. We said next year it will be net cash flow positive. This year it might be, but I would like to do it in a normal capex environment.

And we want to join not only more than zero, but, I would say, in our famous free cash flow — more than $10 billion free cash flow target by 2030 — there was $2 billion coming from Integrated Power. So the target is to deliver these $2 billion and then beyond 2030 there are different options. But of course, you know, we might continue to grow the business. The question is at which pace, in fact, and that will depend as well on opportunities. But I think on this topic the board is very keen to really see the capacity of the company to deliver on our targets rather than planning big ambitions.

And then it's not a matter, I would say, of growth. It's a matter of value as well for the board and actually for all our investors. You have been supportive — not always, but today more supportive than before, by the way — to us to invest. I think we are right, because one of the lessons of the crisis, as you can observe in many countries, the new world is electrification. It's not green, by the way, it's electricity — electrification — domestic resource.

And it's also supported, of course, by all the data centers and AI growth. And we are right to continue to invest into this energy, which is a good complement to what we do, in particular on oil and gas. Electricity and the gas-to-power connection is obvious. So that's the ambition: to continue to develop it in some geographies, just to again frame the point completely, where we can develop the integrated model — where gas, renewables, customers, trading is possible.

In some few major European countries, the US — that will be the core, I would say, of our investments. If you add Brazil and India, I think you have the description. So we are, in fact, today — the next ambition — to be stronger in some markets where we can deliver the integration and the profitability.

UNKNOWN — Analyst, Barclays

Very helpful. Thanks, Patrick.

OPERATOR

The next question is from Kim Fustier, HSBC.

Kim Fustier — Analyst, HSBC

Hi, good afternoon. Thanks for taking my questions. I wanted to go back to the Middle East. The production impact came in below your original guidance, thanks to surprisingly fast ramp-ups in the UAE in June and maybe in Iraq as well. Now with tensions rising again in the past couple of weeks, could that progress reverse? So in other words, if the situation doesn't change from here, how soon could we see production shut-ins once again across the UAE and Iraq?

And then just staying with Iraq for a bit, just on the GGIP project, I think that Ratawi phase one was supposed to be starting up sometime this year. Could you give us an update on this project? And obviously, does the renewed regional escalation pose any risks to the timing of the oil ramp-up, but also the other parts of that project, including the associated gas and the seawater project? Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

Okay, thank you. So I mentioned that I gave you some information in my opening comments to tell you that I would say beginning of July, the production, I would say, was in July until July 8th. In fact, until the blockade came back, the production was going up and the impact on our production was even around 5% only. That means that the global production from the Middle East, if you consider that our base was around 650,000 barrels per day, was by that time 550, 550,000 barrels per day, because there was an increase in many assets.

In particular, of course, I would say the Abu Dhabi assets were almost back to normal production. Which demonstrates, by the way, that I remember the questions that I had during the month before the MoU. Is it quick to go back to the normal level? Yes, it's very quick. The wells in the Middle East are very easy to reopen and to produce. So Abu Dhabi was back; I would say even Qatar was not fully back, in fact on the LNG side, because there was a sort of ramping up cautiousness on this one.

And Iraq, even Ratawi was back to, I would say, half of the production. So the Iraqi part was a little more, I would say. But we were minimizing and we were ramping up quickly to come back to a normal level. Since July 8th, in fact, because of the situation, when I was looking at the situation beginning of this week again, the impact is more around the 8 to 9% I mentioned during my opening speech, because of course we cannot maintain such production if we cannot offtake.

It's not a matter of wells, it's a matter of offtake. And because again, when you produce at maximum, your tanks are full and then your system—it's also logistics which are constraining the production. So I would say that of course. And again, by the way, of course, the LNG plant of Qatargas 2 in Qatar, which was ramping up, has been shut down again. So you have some impacts. And today, as I told you, that's why to guess today, I would say, to be clear, the guidance I will give you: if we were like we were in the second quarter, we could imagine the production could be with an impact of 10%, but the offtake could be unfortunately higher.

And back to our initial guidance, when we gave you 15%, it was in fact in terms of physical offtake; it was 15% during the second quarter. Third quarter could be the same. But again, the lesson, the good news, is that if the Strait of Hormuz is open back again, then we'll be able to ramp up quickly. And then of course, it is a condition to bring tankers and to offtake the production. So all that is going together; that's what we face today. And we had some, during the few weeks of opening, we managed to get all our tankers out.

We managed to have some tankers in and out. By the way, in order to load, I think we managed to load three tankers during that period. But again now we are back to nil because it's not possible. So let's observe. The second question, Ratawi, I think there are different stories. The first phase that we are planning to start up, we were expecting the first half; of course we are delaying because there has been some impact. By the way, Ratawi cannot produce fully today and there has been some impact because of some equipment, etc. and so forth. But today we are, I would say, targeting end of third quarter. So September will be possible. We don't have some events under control. And then the other projects are progressing. All the projects have been launched and all the contracts have been awarded. We have people on the ground for the seawater project, for the associated gas project, for the second phase of Fatahi. By the way, we are working as well and we have good news in terms of productivity of the well switching, which we could have done the first phase one day.

But all that is just being impacted, I would say, in terms of execution because a lot of equipment—in fact because everybody spoke about crude oil transits and refined product transit, but there was also an impact on equipment, either one way or the other way. And we have transported a lot of equipment by road, but for the larger ones it's not easy to do, it's not possible. So that's the situation. So we are dedicated to projects with some impacts and today it's difficult to give you in terms of—of course, I could just tell you it's postponed by three months, what I just said.

Maybe we need to reassess a situation when we'll be back to a normal situation in the Gulf region.

OPERATOR

Thank you. The next question is from Henri Patricot, UBS. Mr. Patricot, we cannot hear you. Maybe the line is on mute. The next question is from Jason Gabelman, TD Cowen.

Jason Gabelman — Analyst, TD Cowen

Hey, good afternoon. Thanks for taking my questions. I wanted to ask the first one on the potential for windfall taxes, and given the recent backup in commodity prices, I'm wondering, Patrick, if your conversations with governments indicate any appetite to reinstitute windfall taxes.

Patrick Pouyanné — Chairman and Chief Executive Officer

Honestly, until now, in fact, most of the governments have taken some measures between 2010 and 2015, which are still there in many of our countries. We had one impact, limited—an impact now in Brazil where they have instated an export tax for four months, and there are today rumors that they could extend it, which has been declared as not constitutional. But it seems to be a legal fight around this export tax in Brazil. The UK scheme, you know, has been increased recently so they cannot more; Norwegian is okay. And honestly, in most of our PSCs, the reality is that there are some mechanisms, which you can observe when you look to the average tax rate of TotalEnergies between an environment at $60 or $50, where we are more or less at an average of 40%, and an environment of $90 or $80, we are more around 45–50%. There are some mechanisms within the PSCs, in fact, when the price is going up, so the governments are taking a bigger stake, and in fact it's normal because the way we negotiate ourselves, we try to protect the low cycle by giving up a little more on the high cycle.

That's the balance that we try to institute, to propose to the government. So this mechanism exists. And so we didn't face this type of conversation, to be honest, since the beginning of the crisis. So we are not there. And that's what I can tell you. So except Brazil, I don't have today in my head any other situation where we have some discussion. But again, because the mechanism exists already in many of our PSCs.

Jason Gabelman — Analyst, TD Cowen

Great, thanks for that. And my follow-up is I wanted to go back to the Yamal project for a minute and just understand, because you have kind of the interest in the liquefaction facility and then you're separately lifting volumes as well. And I'm trying to understand kind of what the cash flow split is between those two parts of the business, and also if you've been able to actually get cash distributions out of the Yamal facility itself over the past few

Patrick Pouyanné — Chairman and Chief Executive Officer

years. In fact, you are perfectly true. There are two different activities. One is Russian activity in Russia, which is the Yamal liquefaction plant where we are a shareholder for 20%. Some cash flows have been distributed. It's not an easy way to—because then we respect sanctions. So the question is distributed in Russia, and when does it flow to Europe? Because again, the sanctions in Europe have limited the capacity to transfer from Russia to Europe.

Some cash has come back to TotalEnergies, not the full of that. So this part is not, I can tell you, it's not in fact in the way we plan. We don't consider that; we just are cautious. It's not coming on a regular basis, or in fact it's from time to time we have some opening, but that's not a regular basis. And so some cash is somewhere, I would say in Russia, waiting for us. Then we have the other part, which is the lifting—European lifting, yes.

This one is out of Russia. It's a business where it's all a UK and Swiss entity, or UK entity I think, which is dealing with Russia with Russian contracts, on which the cash is out. So this one, of course we have directly access to the cash. The magnitude of this business is around, I would say, an average of $400 million. But again, it's going up and down, because the contracts are linked to the Brent. So it depends on the assumptions that you will take on the Brent.

Let's say $300–$400 million a year, that's a potential. So it's a contract part of the portfolio. It's not a major situation for TotalEnergies.

Jason Gabelman — Analyst, TD Cowen

Great, thanks for the answers.

OPERATOR

The next question is from Henri Patricot, UBS.

Henri Patricot — Analyst, UBS

Yes, hello, thank you for the update. Just one question. Coming back to capital allocation, last quarter you mentioned that you were evaluating options to accelerate short-cycle investments in upstream. Where are you on these options? It sounds like earlier automatically capex unchanged, or are they just not being considered anymore? Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

No, no, we have of course different subsidiaries that worked on it. There have been some proposals; we have approved some few, I think $100 or $300 million this year. So the guidance of 15—maybe it could be at the end 15.2, but I consider it's part of the global guidance, you know, that's not a real impact. And yes, this might have for next year. There is a little more because of course these types of actions are not only for immediate actions. I would say you have probably $500 million of capital allocation acceleration which would come next year. But again it will not change the global guidance we gave you last year, which was I think around $15 to $17 billion per year of capex. Then we said $14–$16; we stay around, in the future, $15–$16 billion, I would say, range. So yes, we have taken some actions and that will impact a little more 27 than 26.

Henri Patricot — Analyst, UBS

Thank you.

OPERATOR

The next question is from Bertrand Hodee, Kepler Cheuvreux.

Bertrand Hodee — Analyst, Kepler Cheuvreux

Yes, thank you for taking my question. I wanted to come back and to try to quantify the underperformance of the LNG trading in Q2. Integrated LNG net income was down $500 million Q2 while at the same time contribution from equity affiliates, which is my understanding mainly liquefaction, was up $300 million. That puts a Q-on-Q discrepancy at group level for integrated LNG excluding affiliates at around $800 million. This is what we should understand as a swing in the trading performance.

Patrick Pouyanné — Chairman and Chief Executive Officer

You are very good, Bertrand. We can add nothing to you. We are very transparent. In fact, we mentioned to you that there was an overperformance last quarter of around $500 million and your $800 million. So you have an underperformance reversed, not only from 500 but to less than 300 compared to a normal situation. So you merit a certain distinction.

Bertrand Hodee — Analyst, Kepler Cheuvreux

And the second question, probably on your comment that those long positions that did not work out in Q2 were now in positive territory. Is that a hint that we could be headed for an overperformance of LNG trading in Q3 by the same magnitude?

Patrick Pouyanné — Chairman and Chief Executive Officer

Exactly. But we are only in July, so maybe it could be larger, I don't know. Okay, okay, now be clear. Yes, it could be the same magnitude because these markets, when they are volatile, they are volatile. You know, when you take $5 per million BTU in 20 or 30 days—20 days—I can tell you these types of positions are making big downs. The question will be not only what the results are on July 22, but on September 30. So we'll come back, but it's possible.

Yes, we might come back to you with a good news of the same magnitude. I hope so. Thank you. Thank you for your support.

OPERATOR

The next question is from Fergus Neve, Rothschild and Cole Redburn.

UNKNOWN — Analyst

Yeah, hi there. Thank you very much for taking my questions. Just on the LNG growth pipeline, it was positive to see the ECA LNG project start up earlier this month. Could you provide a quick update of where the FID for Papua LNG stands today and also how the Mozambique project is progressing? And then secondly, just on the refining environment, I was wondering if you could comment at all on how your margin has looked so far in July. Thanks.

Patrick Pouyanné — Chairman and Chief Executive Officer

In July it looks very well. I can tell you the average margin on the last 30 days were at $31 per barrel for July. So it's looked very well. And I think July is probably around $35 per barrel. And it reached an historic record for me, which were more than 40, 44 I've seen one day. So today it's a little backtracking because again it's going up. In fact, I have one observation to make you. Since the Strait of Hormuz was again blocked, since July 9th, when you make the sum of crude oil and refining margin, you are almost at $130 day after day.

I mean I don't know if there is a trick, but probably so that's what I mentioned in my opening comments. So the first one on Papua LNG, we are working all together very closely with ExxonMobil, with Santos, with the government. Of course, the government has just launched the last part of the procedures, the local hearings. The objective is clearly to sanction all that before year-end. November, I think, is a target. But we are aligning the interests of all the partners in the interest of the projects.

And we are studying how we can maximize synergies today between Papua, PNG LNG in order to deliver the most efficient project to the government, but again in close cooperation with the government. So I'm happy to see that the different stakeholders all have the same objectives today. And okay, we need to put together some few. It's not an easy one, but I'm optimistic we could reach this sanction. We are all working for that and we are very aligned on that.

On Mozambique LNG projects. Okay. It has restarted, as you know, since January and today we are in fact increasing the mobilization of people on the ground. I think we are at 7,000 or 8,000 people. So the project is progressing. Let's be clear, we are facing some few difficulties because some of the equipment were in fact being built in Dubai and different yards in the Middle East. So we had to face some tough times to exit all these equipments. I think it's done now.

But we are progressing on and in fact today when we compare to the progress curve, we are almost at 45% of completion, but yet we have still a lot of things to build on the... to build there in Afungi and offshore. So that's on its way with the target being 29 for the first train. And we'll work on it.

UNKNOWN — Analyst

Brilliant. Thank you very much.

OPERATOR

The next question is from Jean‑Luc Romain, CIC CIB. Thank you for taking my question.

Jean‑Luc Romain — Analyst, CIC CIB

It relates to refining and your plan to introduce more green hydrogen in your system. Where are you with this and other regulations in Europe which are not going fast enough for you to progress on that?

Patrick Pouyanné — Chairman and Chief Executive Officer

Yes, the French one. No, but we are working on it. No, where are we? In fact, we have done the... No, we have nice offers. We could. As you know, the good news of the quarter is that the German Parliament has adopted its own regulation. So today we are very clear on the German part and possibly the part. So Leuna will be able to maximize the use of green hydrogen, so that's good news. You know, there was bad news on the Netherlands part, which has been adopted, but not in the maximum part.

So I think the Zhan refinery will be able to take 30% more or less of what we are planning to offtake. But again, if there is no fiscal support, we cannot do that. And then we are working today with the last two ones, which is the Belgian one where the drafts are not so positive, and the French ones where the drafts are positive. But the problem in the French system is that you need to go to the Parliament and to make fiscal reforms in the French Parliament is not an easy task for the government.

But we are working on it. And I think we'd like to have the definitive scheme and not an interim one, to be honest. Because of course if we commit for long-term contracts of 10, 15 years, we need to have a scheme which will give us, I would say, a certain level of comfort. It's a very technical matter, to be honest. It's one of the most complex topics I know, because to explain to a political leader the RED fleet and what it is to make a green hydrogen in Europe getting some support, this one is tough, to be honest.

But we have some momentum. So we are working on that. And not only ourselves, by the way. In France, of course, we are working hand in hand with Air Liquide, which is also interested to get these regulations progressing. But still again, for us to commit our long-term contracts, we need to have all these regulations being enacted. You know, it's the beauty of Europe. You think you've done the work because there is a directive in Brussels and then you take four years to implement it in each country.

And then, by the way, I'm afraid that I just discovered that there is a new directive which could again come back to the definition of green hydrogen, the RED IV, by some consultation. So to be honest, when you read that, you begin to be afraid because probably all that is coming from regulation. So it could be difficult. Okay, thank you very much.

OPERATOR

And the last question is from Ben Fallen.

Ben Fallen — Analyst

Hi Patrick. And thank you for taking my question. In the light of the recent escalation in the Middle East, has your view on geopolitical risk changed? Which region do you see as offering the most attractive risk‑adjusted investment opportunities over the coming years? And how might this influence your future capital allocation priorities? I know it's maybe for the CMD, but I think it's important. Thank you.

Patrick Pouyanné — Chairman and Chief Executive Officer

Yeah, thank you, Ahmed. But you know, we continue to consider the Middle East as an investable region, there is no doubt about it. It's a question, of course, and then at the end of the day, it's a question of risk and reward. Maybe the reward will have to be a little higher. But when I saw my US competitors rushing to Iraq during the last weekend — if I notice, there's a number of MoUs signed to develop thousands, hundreds of thousands of barrels — I don't know why these US companies suddenly would like to see lower geopolitical risk and ourselves, which have more, I would say, DNA in the region, would consider it as a higher one.

So we think it's a question of risk and reward. It's always policy. Again, it's back also to my comments about, I think, alternative rules exposed the oil to go to the market. But having said that, it's clear as well that the policy and strategy of TotalEnergies has been to diversify the portfolio. And that reinforced my strong belief. Diversification is of essence in this business. We have done it well in Brazil, in Africa, in new countries in Africa.

Of course, the US are also attractive to us, but we are building quite a big position in the US in terms of capital allocation for LNG and through Integrated Power. So we are fine. And so I understand the question, but at the end, you know, when you make oil and gas, you go where you find it. And if we discover oil and gas in Suriname and in Namibia, we are happy and that's true. But we don't find oil and gas in Europe, to answer your question. And by the way, we don't have the right to look for it.

So that's where we are. But for me, the answer to your question is fundamentally to maintain our strategy of diversification. And this is what we will present you in September. I think the events that we have faced in the last four months are demonstrating that this is the right one. And we have enabled, as I answer, to supply feedstock or to not to claim any force majeure for LNG customers, contrary to some competitors, because we have a diversified source of supply of LNG.

And from this perspective, building a position in Mozambique. But you know, look to the countries we are developing in the last three years: Suriname, Malaysia, Namibia. So we are continuing to diversify our stakes because that's the reality of our business. It's not only in 2026 that we discover that it has been the case for companies one or two years old. And I think it has been the case for long. So that's what I would answer to your...

OPERATOR

Gentlemen, that was the last question. I turn the conference back to you for any closing remarks.

Patrick Pouyanné — Chairman and Chief Executive Officer

Yes, thank you for your attendance today and for your support. I remind all of you that we have a Capital Market Day in New York City on the 28th of September. I think it is a Monday if I remember right. So Monday, 28th of September. Be all ready to attend the TotalEnergies Capital Market Day with more news to come because we continue to work during summertime. So thank you for your attendance and holidays to all of you.

OPERATOR

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

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