TotalEnergies SE Q1 FY2024 earnings call

• TotalEnergies celebrated its 100th anniversary and highlighted its 2-pillar strategy: oil and gas (mainly LNG) and integrated power. In oil upstream, it achieved milestones such as starting up operations in Nigeria, Denmark, and Brazil; conducting a positive appraisal of the Venus oil discovery in Namibia; capturing new licenses in the Orange Basin; planning to sanction the Cameia project in Angola and take the FID in Suriname. In LNG, it benefited from low reverse trading, announced the FID of the Marsa LNG project in Oman, signed a contract with Sembcorp in Singapore, and acquired the rule of SapuraOMV in Malaysia. In integrated power, it had a fourth consecutive quarter of increasing adjusted net result income, closed the acquisition of 1.5 gigawatt CCGTs in Texas and the Kyon Energy acquisition in Germany, and increased the interim dividend by 7%.

Hydrocarbons

• Production: In the first quarter of 2024, production stood at 2.46 million barrels of oil equivalent per day, stable quarter-to-quarter and up 1.2% excluding Canada. Upstream production cost in the first quarter of 2024 was $4.6 per barrel. For the second quarter of 2024, production is expected to be between 2.4 million and 2.45 million barrels of oil equivalent per day. The full-year 2024 production guidance is 2.4 to 2.5 million barrels of oil equivalent per day, representing a 2% year-on-year growth excluding Canada.
• Exploration and Production: Exploration and production reported an adjusted net operating income of $2.6 billion and a cash flow of $4.5 billion.

Integrated LNG

• Hydrocarbon production for LNG saw a 6% quarter-to-quarter increase in the first quarter of 2024 due to higher availability in Australia, Qatar Energy LNG, and Nigeria. However, LNG sales decreased by 9% quarter-to-quarter in the first quarter of 2024 mainly due to lower demand in Europe and partial downtime in Freeport LNG in the U.S. Integrated LNG had an adjusted net operating income of $1.2 billion during the quarter and a cash flow of $1.3 billion. It is anticipated that TotalEnergies' average LNG selling price will be between $9 and $10 per MBtu in the second quarter of 2024.

Integrated Power

• The integrated power business continued its profitable growth trajectory with adjusted net operating income growing 16% quarter-to-quarter to over $600 million in the first quarter of 2024, supported by production growth in renewable and flexible generation. Cash flow from Integrated Power was $692 million in the first quarter of 2024 and is on track to achieve the target of $2.53 billion for the full year 2024. The return on average capital employed for the 12 months ending March 2024 reached 10%.

Downstream

• The refinery utilization rate in the first quarter of 2024 was stable at close to 80%. LNG contributed $960 million of adjusted net operating income in the first quarter of 2024, up 52% quarter-over-quarter. Free cash flow from operations excluding working cap evolutions was $1.3 billion, increasing double digits quarter-to-quarter. The second quarter of 2024 refining utilization rates are anticipated to increase to around 85%. Cash flow from operations in marketing and services increased 5% year-on-year to $480 million in the first quarter of 2024.

• Full-year 2024 production guidance: 2.4 to 2.5 million barrels of oil equivalent per day, a 2% year-on-year growth excluding Canada.
• Anticipated average LNG selling price in the second quarter of 2024: between $9 and $10 per MBtu.
• Integrated Power cash flow target for the full year 2024: $2.53 billion.
• Anticipated increase in second quarter of 2024 refining utilization rates: to around 85%.
• Board authorized an additional $2 billion of share buybacks for the second quarter of 2024.

• Volatility in oil and gas prices poses uncertainties. There is a potential for political temperature-related issues and windfall taxes or other regulations. The LNG market faces uncertainties with new capacities from the U.S. and Qatar potentially affecting prices. Projects in regions like Mozambique and Namibia face security and force majeure risks. Offshore wind projects encounter challenges due to cost and merchant pricing concerns.

Q: Regarding net working capital, net debt outlook, political temperature, windfall taxes, and U.S. listing of buybacks.

A: Patrick Pouyanne discussed European political temperature, oil price outlook, territorial tax principle, and considerations regarding U.S. listing.

Q: About Namibia's FID size, resource, and execution plans.

A: Patrick Pouyanne talked about Namibia's FID plans, resource dimension, and technical aspects while emphasizing profitability and fit with criteria.

Q: On Namibia execution, U.S. listing, and capital reallocation.

A: Patrick Pouyanne was confident in Namibia's FID execution, discussed the U.S. listing process, and stated there was no immediate reallocation of capital.

Q: On U.S. listing timeline and LNG market outlook.

A: Patrick Pouyanne said the U.S. listing process was expected to report to the Board by September and was positive on the LNG market for 2025-2026 with potential for oil-related contracts.

Q: Concerning buyback and SapuraOMV acquisition.

A: Patrick Pouyanne discussed the buyback base level and the rationale and benefits of the SapuraOMV acquisition.

Q: On offshore wind business and hydrogen tender.

A: Patrick Pouyanne spoke about challenges in offshore wind projects and the hydrogen tender with over 50 offers received.

Q: Regarding LNG EU sanctions and hydrogen tender.

A: Patrick Pouyanne said EU sanctions on Yamal LNG would be neutral or beneficial for TotalEnergies and the hydrogen tender had over 5 million tonnes offered.

Q: On portfolio projects and U.S. primary listing.

A: Patrick Pouyanne addressed Mozambique project and U.S. primary listing considerations.

Q: On U.S. LNG integration and LNG contracts.

A: Patrick Pouyanne talked about U.S. LNG integration targets and confidential LNG contract discussions.

Q: On Integrated Power in Spain and Namibia.

A: Patrick Pouyanne discussed Integrated Power in Spain and the potential of Namibia's basin.

Q: On U.S. offshore wind cancellation and LNG contract volume.

A: Patrick Pouyanne commented on U.S. offshore wind cancellation reasons and LNG contract volume being part of the strategy.

Q: On U.S. LNG asset acquisition and carbon story.

A: Patrick Pouyanne spoke about U.S. LNG asset acquisition and the carbon story being for both own operation emission reduction and third-party revenue.

Q: On Integrated Power cash flow and CapEx.

A: Patrick Pouyanne confirmed the Integrated Power cash flow target for the full year 2024 and the landing of CapEx during the year.