Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TotalEnergies SE (TTE, Financial) reported strong financial performance with a second-quarter adjusted net income of $4.7 billion and a first-half total of close to $10 billion.
- The company generated $7.8 billion of cash flow during the second quarter and close to $16 billion for the first half of the year.
- TotalEnergies SE (TTE) maintained strong CapEx discipline and reiterated its 2024 net investment guidance of $17 billion to $18 billion.
- The company continues to build on its track record of attractive shareholder distribution with $2 billion buybacks executed during the second quarter and up to $2 billion authorized for the third quarter.
- TotalEnergies SE (TTE) has made significant progress in its Integrated Power business, achieving a return on capital employed (ROCE) above 10% this quarter.
Negative Points
- Refining margins continue to normalize with the European refining margin market down 37% quarter-to-quarter.
- LNG sales decreased by 18% quarter-over-quarter, notably due to lower spot purchases in the context of lower LNG demand in Europe.
- The company's utilization rates in refining improved but were still impacted by low diesel demand in Europe and market normalization following the disruption in Russian supply.
- Integrated LNG adjusted net operating income and cash flow were both $1.2 billion in the second quarter, reflecting a lower average LNG price and lower sales.
- The company faces inflationary pressures, with costs being 20% higher than the low point in 2020, impacting project economics.
Q & A Highlights
Q: Would you consider a special dividend for TotalEnergies' 100-year anniversary?
A: Patrick Pouyanne (CEO): We prefer to maintain and increase the regular dividend year after year and continue our buyback program rather than issuing a special dividend. The current environment, while good, is not exceptional enough to warrant a special dividend.
Q: Can you provide an update on the progress and potential cash flow impact of the Suriname project?
A: Patrick Pouyanne (CEO): We are targeting the first oil from Suriname by mid-2028. The project is progressing quickly, and we expect significant cash flow contributions starting in 2028. The development is expected to be highly profitable due to the financing structure.
Q: Are you comfortable with your current hedged gas exposure for LNG, or do you plan further acquisitions in the Lower 48?
A: Patrick Pouyanne (CEO): We do not have enough hedged gas exposure yet and are working on another deal to increase our exposure. We aim to ensure our LNG position remains resilient regardless of the price environment.
Q: How do you view the potential impact of French politics on TotalEnergies, particularly regarding windfall taxes or golden shares?
A: Patrick Pouyanne (CEO): We believe the impact will be minimal. The European Court of Justice ruled against golden shares in 2002, and any new measures would require significant investment from the French state. We continue to engage with the government to protect our interests.
Q: Can you elaborate on the competitiveness of opportunities in renewables, particularly in the recent German lease bid auction?
A: Patrick Pouyanne (CEO): We believe the bid was competitive and part of our strategy to create synergies with existing assets. The German power market's reliance on renewables and gas supports our integrated power model, which combines renewable sources with flexible assets like gas plants and batteries.
Q: What are your thoughts on Chinese oil demand development over the next few years?
A: Patrick Pouyanne (CEO): While there is a trend towards EVs and LNG trucks, we believe the overall oil demand in China will continue to grow at a reasonable rate. The economy remains active, and hybrid cars are also contributing to demand.
Q: Can you provide an update on the Mozambique LNG project and any potential cost escalations?
A: Patrick Pouyanne (CEO): We have settled cost issues with contractors and are progressing with the project. We are also working on regrouping finances and ensuring security. We expect to move forward by the end of the year.
Q: How do you view the demand for LNG in Asia, and are you comfortable adding more spot volumes to your portfolio?
A: Patrick Pouyanne (CEO): There is strong demand for LNG in Asia, particularly in India and China. We are actively negotiating new contracts and aim to convert a significant portion of our Henry Hub exposure to Brent-linked contracts to ensure resilience in a potentially softer market.
Q: Can you comment on the inflationary pressures you are seeing and their impact on your projects?
A: Patrick Pouyanne (CEO): We are experiencing some inflation, but it is manageable. We have taken innovative measures to control costs and are confident in our ability to deliver projects within our breakeven criteria.
Q: What is the impact of seasonality on your Integrated Power results, and are there other seasonal patterns we should be aware of?
A: Jean-Pierre Sbraire (CFO): The main driver is the lower use of CCGTs in summer compared to winter. We do not have enough long-term data to identify other seasonal patterns yet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
