Total: Mozambique LNG Delayed a Year or More

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Total said investors should expect the start-up of its flagship Mozambique LNG project to be delayed by at least a year and potentially more after the French major declared force majeure on construction last week. The company plans to respond to the delay by accelerating work at its other LNG projects in Papua New Guinea and the US (LNGI Jan.29'20; LNGI Apr.23'21). Meanwhile, performance and growth of the company's renewable power business continues to accelerate, CFO Jean Pierre Sbraire told investors during a first-quarter earnings call. Mozambique Malaise Sbraire told investors that first LNG from the 13.1 million ton Mozambique LNG facility would be delayed by "at least" a year (LNGI Apr.26'21). It marked the first official update of the timeline from the company since it declared force majeure on Monday after a series of coordinated attacks by militants in the northern Cabo Delgado province. So far the force majeure declaration only applies to Total's contracts with companies helping to build the facility, Sbraire said. But Total has begun discussions that could ultimately affect its LNG sales and purchase agreements (SPAs). Total and its partners have contracts covering more than 11 million tons per year with a range of buyers, primarily in Asia. "You can imagine that we have a lot of different contracts, SPA contracts, with different wording," Sbraire said. "So we have to negotiate or to discuss contract by contract with the different buyers." Green Growth Total’s integrated gas, renewables and power group reported record net income and cash flow of more than $1 billion for the quarter, Sbraire said. Over the past year, the company has more than doubled its installed renewable power generation capacity to 7.8 gigawatts. This year, Total will allocate about 20% of its $12 billion-$13 billion capital spending budget to develop more renewable power. As part of that expansion, Total announced that it had acquired a 23% stake in a 640 megawatt wind farm under construction offshore of Taiwan that is due on line next year. Sbraire called the purchase "an opportunistic deal," saying it met the company’s returns threshold and offered "a way for [Total] to be present in the Taiwan market, which is very active as far as offshore wind is concerned." Buybacks Will Have to Wait Analysts pestered Total with questions about when it might restart its share repurchase program and the answer was definitive -- not this year. The company could see free cash flow hit $24 billion this year with oil prices at $60 and European gas at $6 per million Btu. But that excess cash flow will be directed to maintaining its dividend, funding its capital expenditure budget and paying down debt. "Why? Because we are in the commodity market and so we have to be ready for the next possible new downturn," Sbraire said. "So having this stronger balance sheet for us is key." Buybacks will only be restarted when oil prices "stay above $60 per barrel" and when the company's gearing is "durably" below 20%, he said. He reminded analysts that Total had maintained its dividend last year, while companies like BP and Royal Dutch Shell slashed theirs. "I will not comment on my peers, but it's easy to increase or to communicate on buybacks when you have cut your dividend by one-third, two-thirds in the middle of the crisis," he said. Noah Brenner, London Total Q1'21 Earnings Results ($ million) Q1'21 Q1'20 %Chg. Q4'20 Revenues $38,633 $38,577 0% $32,348 Operating Cash Flow 5,598 1,299 331 5,674 Net Income 3,344 34 9,735 891 Adjusted Income 3,003 1,781 69 1,304 Adjusted Earnings by Segment E&P 1,975 703 181 1,068 Integrated Gas, Renewables

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