Yes.
Chris Kuplent: Chris Kuplent from Bank of America. Patrick, congratulations on closing that drillship deal. I do think it’s quite a departure for the industry. Maybe you can give us a little bit of an insight what you are hearing from your partners in all those projects. Are you also frustrated that you think their capital discipline is waning a little bit, because I share your view, there isn’t a huge amount of competition out there in that part of the industry. And do you think others will follow in this step. How many more are you going to buy?
Patrick Pouyanné: It was a situation. But I think it’s true that it’s a breakthrough, including in the company, with the ID, but we know because this industry has – it’s a story of the ‘90s. In the ‘90s, it’s old story, but this industry, ‘90s the companies were owning ships. But then suddenly, the price went down, they were stuck with the rigs and blah, blah. And so they decided it’s not our business. In the meantime, we are not a $10 per barrel, we are $80, even at $50. What I have observed for the last 25 years in this industry is that the low bottom of the deepwater rigs is $200,000 per day. It could go up to $500,000, $600,000. Honestly, the cost of the rig is around $800 million. When you pay $500,000 per day, you pay the rig in 4 years, 5 years.
We have done this type of mistake from 2010 to 2015. I was super frustrated, to be honest. But we have paid the rigs, and in fact, fully, and in fact, at the end of the day. So, we are beginning against the same history, and so the only way is to edge our things. Why don’t we – we will not operate the rigs. That rigs will be operated by Vantage, so we wanted to have a partner, we will not operate. But we have 75, so at the end, we will receive the cost, and we will sell it. And to be clear, this rig will be sold to a partnership at a market rate. So, that’s a way, that’s the game. Should we follow, I know that I have announced that to some of – they look to us. I think it’s just nothing new. Putting $200 million in advance on the rig in order to secure a 10-year, etcetera, I see that, at the size of the scale of our operations, is nothing.
In fact, when you – okay, it’s innovative. I think, yes, my only point, I don’t want all my teams to be super excited, we own a rig, so it will be managed by Vantage, we know. But no, we don’t own, we don’t operate. And again – but it’s – we need to do something, we cannot just look, see the cost going up and complaining. So what can we do, so this action. It’s true that with Vantage, it was a company which was the financial stress, so we had a good discussion. But it’s more in our heads, but we need to be innovative sometimes. So, I am comfortable. Again, 1 is nothing compared to my 8 to 10, I could have 2 or 3. At certain point, I need to keep flexibility. But if I have other opportunities, I will look at it. So, it’s a question of opportunities.
But I mean it’s a lesson of the year 2010, 2015. We cannot just repeat the same mistake. We have some projects. But if the CapEx going up, why should be – I want to do the project, but I need to find ways to control my cost. And this is one way to hedge our drilling cost.
Chris Kuplent: Thank you. Can I have a quick second question, Patrick? You commented earlier that you don’t really see looseness in the global LNG pool before mid-2026. Is that close enough for your customers in Asia, in particular, that they are already telling you, you know what, I am not signing these Brent slopes, etcetera, there is plenty more to come in the latter half of the decade?
Patrick Pouyanné: No. In fact, no, because, in fact, they – what we observed is that when we marketed P&G, we had quite a number of offers, not at 14% Brent, and to be clear, but quite reasonable Brent, where we are ready to sign. We have signed some HOA. We consider they are good for the project on the long-term. So, today, they keep – they still have in mind what happened in ‘22. So, they see the shock of ‘22, make them think, okay, it’s maybe long-term, because in fact, to avoid this huge volatility, the only way is to make long-term. So, there is a long-term. And again, we have been approached by some Chinese LNG buyers, which are really keen to go in the longer term. I would say that from this perspective, what has been done in the U.S. on the temporary ban is helping the other projects in the world, because in fact, honestly, I am not suffering of it on our portfolio.
The problem of this type of move even is for electoral campaign, and we know the story behind it, is that it’s a question of trust in the capacity of the projects we deliver. And that’s not very good. So, it pushed these other buyers, these Asian buyers, not only to rely on the U.S. LNG, but to look to other locations, which is good for Mozambique tomorrow. You know we have 1 million tons, which have been – which will not be renewed by one of the buyer. We are – we TotalEnergies will take part of it, and we can sell that. So, it’s good for Qatar. It’s good for all these projects. So, I see that the long-term is still there, and that’s not disappeared. Despite the fact that, you are right, we could anticipate a certain lower price on the spot, they are willing to cover.
So, today it’s more than the way to think. Not only in China, it’s true in Japan, it’s true in Korea, so Asian buyers are there. Okay. We have people on the phone as well.
Renaud Lions: Yes. We have Jason. I think Jason Gabelman, who is online.
Patrick Pouyanné: They want to ask a question, we can take the question.
Renaud Lions: Yes. They woke up early.
Jason Gabelman: Yes. Can you guys hear me?
Renaud Lions: Yes.
Jason Gabelman: Alright. Great. I had two questions. First, I just wanted to clarify an earlier answer discussing net debt. I don’t know if you gave an actual gearing target, but it’s moved across the past number of years. So, just wondering if you could provide an updated gearing target moving forward? And then secondly, going back to LNG trading, it seems like the past few years you have benefited quite a bit from the spread in global gas prices versus Henry Hub gas prices just given your position in U.S. LNG. Are you able to kind of optimize global LNG flows to replicate kind of the upside you have seen from the U.S. to global gas price spreads as the market kind of expects that spread to tighten over the next few years? Thanks.
Patrick Pouyanné: Okay. No, we don’t express a gearing target. We are very comfortable with 5%. I think the CEO salary variable pay target is under 10%, if I remind, this is a dot, so you have an idea what I should control, is under 10%. I am very comfortable to go down to zero. I mean I am very comfortable. There is no problem. But it’s more, again, in terms of today at 5%, we have reached a very strong balance sheet. So, my CFO is comfortable. It does not show to go lower. So, the priority is more in the way we allocate the capital. First, to capital – the dividend, the capital expenditures and the return to shareholders with more than 40% of cash flows, I would say that’s the main commitment. So, no, we don’t have – less than 10% is okay, I think.
But we can go down to zero, no problem if we have zero debt, or even a positive treasury. Again, I am not sure – so I will go to Stephane to answer to the question, which is, if I understood, can we optimize the global LNG flows to replicate the upside we have seen in the past. So, explain again what you are doing with your portfolio.
Stephane Michel: So, as I have said, the portfolio is basically we have a long-term portfolio where we buy in rehab and fixed cost and we sell partly Brent, partly GKM and TTF. And then we have a global optimization with plenty of optionality in the portfolio. One of the big one being to be able to switch from Europe to Asia and from Asia to Europe. But you have as well plenty of other plays like the [indiscernible], the Contango, the arbitrage of timing, the possibility between Africa, LatAm and Asia, and so on. It’s clear that in ‘22, we have benefited from the spread increase between HH and GKM and TTF. And that going forward, we are going to less benefit from that. You have seen, because it’s partly already in the level of the edge, we have been able to realize, and Patrick mentioned it, that the difference of edge between ‘24 and ‘25 in terms of cash going to be $500 million, and that’s done.
As for the optionality of the portfolio, we are confident that we have plenty of ideas to continue to sustain the good performance we have done in the past, even if you noticed the…
Patrick Pouyanné: No. But again, ‘22 was absolutely exceptional. We don’t – and I don’t hope, by the way, to see again, $30 per million BTU. $50, it’s very detrimental for the demand in the market, you can destroy the market by this type of price. So, it’s why, so I am not willing to swim in. Okay, we benefit 1 year, but it’s a one-off, and I hope we will not come back. It’s not a normal market to see this type of prices, $200 per barrel for gas. That’s absolutely abnormal. But in fact, fundamentally, what the strong belief I have is that Eni will remain quite low. That’s why we built on the LNG in the U.S. because we have a huge amount of gas there. You have some domestic demand, but it’s – so you have, okay, it could go from 3 to 5.
But so the question is, how do you position the export market compared to Henry Hub, between the Brent and Henry Hub, and GKM and Henry Hub. So, that’s a way of optimizing the flow. To optimize the flows, by the way, what you need is LNG tankers, and we are growing our fleet. I think we are going to 30, more or less, we are targeting 30 LNG tankers or 20. So, growing our fleet helps us to optimize all these flows when the arbitrage is open between the U.S. and Asia, we can go to Asia. Of course, location of ECA in Mexico is good from this perspective, and we are looking to over activity. So, it’s a question of optimizing. The Panama channel from this perspective is more a problem for us than the Red Sea. Because the Red Sea, when you look at to Qatar to Europe through the Red Sea or through South Africa, it’s only four days of difference.
So, it’s not a big event. Four days, you can manage it. When you have to go from the Gulf of Mexico through the South America, to Argentina back, it’s 20 days of difference if you avoid. So, it’s a big impact on the cost and all the system is $0.5 per million BTU more or less. So, it has an impact on the arbitrage between Asia and Europe. But again, one of the big assets we have is not only the fleet, but it’s the gas in Europe. Because we have a lot of gas in Europe around 20 million tons per year, so we can easily make the arbitration between Europe and the rest of the world. That’s also important to optimize the flows. So, that’s our questions.
Renaud Lions: We can go, Giacomo.
Patrick Pouyanné: Welcome to Giacomo.
