TotalEnergies SE Q2 FY2024 earnings call

Key Highlights

• Strategy Progress: Sanctioned major upstream projects in Angola (3 FPSOs) and LNG projects in Oman (Marsa LNG) and Nigeria (Ubeta gas). Made progress in integrated power with acquisitions in Texas, UK, and Germany; FID of Suriname Block 58 expected by end of 2024.
• Financials: Second quarter adjusted net income $4.7 billion, first half $10 billion; cash flow Q2 $7.8 billion, first half $16 billion; ROCE 16.6%; net investment guidance $17B-$18B; $2B buybacks in Q2, $2B authorized for Q3; interim dividend €0.79 per share, up 7% year-over-year.
• Business Segments: Hydrocarbons production strong with projects ramping up; Integrated LNG increasing structural resiliency; Integrated Power delivering profitable growth; Downstream margins normalizing as refining margins stabilize.

Hydrocarbons

• Production in Q2 2024 was 2.44 million barrels of oil equivalents per day, close to the high end of guidance. Adjusted net operating income was $2.7 billion and cash flow was $4.4 billion. Upstream OpEx per barrel was below $5 per barrel in Q2.
• Integrated LNG: LNG production increased 1% quarter-to-quarter, but sales decreased 18% quarter-to-quarter due to lower demand in Europe. Adjusted net operating income and cash flow were both $1.2 billion in Q2.
• Integrated Power: First half 2024 adjusted net operating income was $1.2 billion, up 36% year-over-year, cash flow $1.3 billion, and ROCE above 10% for the 12 months ending June 13.
• Downstream: Refining & Chemicals had adjusted net operating income $640 million and cash flow $1.9 billion; Marketing & Services had adjusted net operating income $380 million and cash flow $660 million.

Guidance

• Production: Q3 2024 production expected 2.4-2.49 million boe/day, with start-up of U.S. Gulf of Mexico project in Q3.
• LNG: Anticipate average LNG selling price ~$10 per million BTU in Q3 2024.
• Net Investment: Confirm $17B-$18B net investment guidance for 2024.

Risks

• Market Volatility: Impact on LNG pricing and sales due to fluctuating gas demand and prices.
• Regulatory Changes: Potential French political actions like windfall taxes or golden shares affecting the company.
• Project Execution: Uncertainties in Suriname and Mozambique project developments, including cost escalations and political uncertainties.

Q: Lydia Rainforth asks about a special dividend for Total's 100-year anniversary and LNG contract signings.

A: Jean-Pierre Sbraire responds that special dividends are not considered currently, focusing on regular dividends and buybacks; on LNG, commercialization is ongoing with multiple contracts signed.

Q: Doug Leggate inquires about Suriname progress and U.S. LNG hedging.

A: Jean-Pierre Sbraire states Suriname FID expected by end of 2024 with significant cash flow impact; ongoing work on additional U.S. LNG acquisitions.

Q: Irene Himona asks about marketing disposal impact and French political risks.

A: Patrick Pouyanné says marketing performance is inline when excluding Couche-Tard impact; French political risks are manageable as per European Court of Justice rulings.

Q: Biraj Borkhataria asks about Malaysia deal integration and Mozambique project updates.

A: Patrick Pouyanné discusses Malaysia deal integration into LNG value chain; Mozambique project progress ongoing with contractors, awaiting political clarity.

Q: Martijn Rats asks about European gas price guidance and U.S. listing.

A: Patrick Pouyanné explains European gas price guidance reflects seasonal factors; U.S. listing involves transforming ADRs to cross-list shares between Paris and New York.

Q: Michele Della Vigna asks about LNG demand appetite and spot volumes.

A: Patrick Pouyanné states strong demand for LNG with ongoing contract signings, comfortable with spot volumes given market softening expectations.

Q: Lucas Herrmann asks about BI redemptions and Chinese oil demand.

A: Jean-Pierre Sbraire discusses BI redemption flexibility; Patrick Pouyanné sees China's oil demand continuing with EV trends but not drastically affecting global demand.

Q: Alastair Syme asks about renewables competitiveness in Germany.

A: Patrick Pouyanné explains integrated approach in Germany combining renewables, flexible assets, and gas plants for clean firm power.

Q: Christopher Kuplent asks about green hydrogen and CapEx impact.

A: Patrick Pouyanné discusses green hydrogen strategies including tolling, investing, and purchasing; CapEx guidance remains $17B-$18B.

Q: Matt Lofting asks about growth proposition and LNG demand seasonality.

A: Patrick Pouyanné states strong progress on growth projects, Suriname key; LNG demand in India structural, China more seasonal.

Q: Henri Patricot asks about inflation and CapEx guidance.

A: Patrick Pouyanné says inflation managed, CapEx guidance $17B-$18B maintained.

Q: Paul Cheng asks about integrated power seasonality and Namibia project.

A: Jean-Pierre Sbraire explains integrated power seasonality due to gas plant usage; Patrick Pouyanné discusses Namibia project development progress.

Q: Bertrand Hodee asks about Suriname budget and LNG long-term targets.

A: Jean-Pierre Sbraire confirms Suriname FID on track with budget meeting criteria; LNG target to transform Henry Hub exposure to brand basis.

Q: Jean-Luc Romain asks about integrated power volatility capture and European gas plant usage.

A: Patrick Pouyanné explains integrated power plants in Texas used due to IT wave, counter-seasonal to Europe.

Q: Jason Gabelman asks about gearing level and E&P OpEx.

A: Patrick Pouyanné states gearing level not impacting distribution policy; E&P OpEx seasonal due to North Sea turnaround work.