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TotalEnergies SE Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company is on track to deliver its growth targets.
- The company has achieved a good achievement of 6 million tons of Brent-related contract with Asian buyers.
- The company has launched the Marsa LNG project in Oman and became a significant gas operator in Malaysia through the acquisition of 100% of SapuraOMV.
- The company has progressed in Namibia, where it is working towards sanctioning the first oil development.
- The company has increased its dividend by another 7% and the final dividend by 7.6%.
- The storage was high, which did not help the capacity and the price was lower, and lower volatility, which did not help gas trading to perform.
- The end of the Russian-Ukraine transit agreement to use the pipeline to import Russian gas is a factor that will contribute to tighten the markets.
- The company is facing another difficulty in Europe.
- The oil market is volatile.
- The company expects to improve its performance, with part of the improvement coming from the volumes being developed.
- The company expects to achieve its cash flow targets of having a cash flow from operation above 2.5%.
- The company expects to have a reliable and cheaper electricity by combining CCGT with batteries.
- The company expects people to fight for LNG due to the volatile spread between JKM and TTF.
- The company expects to reach $20 per barrel of development costs and minimize its greenhouse gas emissions to 15 kilograms of CO2 per barrel.
Q&A Highlights from TotalEnergies SE Earnings Call Q4 2024
- Analyst asked about the flexibility the company has in its LNG business to drive incremental cash flow in Integrated LNG.
- The company has flexibility in its LNG business to drive incremental cash flow in Integrated LNG, specifically in terms of the cargoes that are available to be diverted to the best market. The company has a supply that is largely coming from the US, and those US volumes can be diverted to Europe or Asia, depending on the best market. The company has the advantage of being a company portfolio and has re-gas capacity in Europe to welcome all the LNG.
- The company has flexibility in its LNG business to drive incremental cash flow in Integrated LNG, specifically in terms of the cargoes that are available to be diverted to the best market. The company has a supply that is largely coming from the US, and those US volumes can be diverted to Europe or Asia, depending on the best market. The company has the advantage of being a company portfolio and has re-gas capacity in Europe to welcome all the LNG.
- Analyst asked about the earnings evolution of trading and the company's ambitions in that business going forward.
- The trading business was very profitable in 2022, but it came down a lot in 2023. The company has been quite open about the gas trading, but on the oil trading, it has been a strong year, even higher than in 2022 and 2021. The company doesn't ask traders to take more risk, but they have a strong motivation to do better results, and they have a better pay if they do. The company has flexibility in its LNG business to drive incremental cash flow in Integrated LNG, specifically in terms of the cargoes that are available to be diverted to the best market.
- The trading business was very profitable in 2022, but it came down a lot in 2023. The company has been quite open about the gas trading, but on the oil trading, it has been a strong year, even higher than in 2022 and 2021. The company doesn't ask traders to take more risk, but they have a strong motivation to do better results, and they have a better pay if they do. The company has flexibility in its LNG business to drive incremental cash flow in Integrated LNG, specifically in terms of the cargoes that are available to be diverted to the best market.
- Analyst asked about the company's perspective on the data center market and the demand for clean firm power.
- Stéphane Michel, Chief Strategy and Sustainability Officer, explained that the company's business model is focused on the combination of renewable and flexible assets, and they strongly believe that the Clean Firm Power market is an attractive opportunity. They have sold 3.3 terawatt hours per year to different customers, including 25% to hyperscalers. They are also working on developing new business models to meet the demand for reliable electricity, including the integration of renewables, gas-fired power plants, and batteries.
- Stéphane Michel, Chief Strategy and Sustainability Officer, explained that the company's business model is focused on the combination of renewable and flexible assets, and they strongly believe that the Clean Firm Power market is an attractive opportunity. They have sold 3.3 terawatt hours per year to different customers, including 25% to hyperscalers. They are also working on developing new business models to meet the demand for reliable electricity, including the integration of renewables, gas-fired power plants, and batteries.
- Analyst asked about the company's approach to the US market and their plans for expanding their presence in Europe.
- Patrick Pouyanné, Chief Executive Officer, explained that the company's focus is on the US market, specifically in Texas, where they have a large presence. They are also exploring opportunities in Europe, notably in Germany, where they have tried to develop their presence. They are working on a strategy to preserve land for future data center development and to establish a grid connection to supply and withdraw power.
- Patrick Pouyanné, Chief Executive Officer, explained that the company's focus is on the US market, specifically in Texas, where they have a large presence. They are also exploring opportunities in Europe, notably in Germany, where they have tried to develop their presence. They are working on a strategy to preserve land for future data center development and to establish a grid connection to supply and withdraw power.
- Analyst asked about the company's M&A strategy and their plans for the Mozambique LNG project.
- Patrick Pouyanné, Chief Executive Officer, explained that the company does not need M&A at this time, as they have an organic growth strategy. They are focusing on recycling capital through the Integrated Power business, with a target of $2 billion in recycling per year. They are also working on developing new ideas for M&A opportunities in the Integrated Power business, with a focus on solar in Ireland and other regions. On the Mozambique LNG project, Pouyanné stated that there is a will of continuity from the government, and they are working to solve the credit export agency issue. He also noted that the project is on track to launch in 2029 or 2030.
- Patrick Pouyanné, Chief Executive Officer, explained that the company does not need M&A at this time, as they have an organic growth strategy. They are focusing on recycling capital through the Integrated Power business, with a target of $2 billion in recycling per year. They are also working on developing new ideas for M&A opportunities in the Integrated Power business, with a focus on solar in Ireland and other regions. On the Mozambique LNG project, Pouyanné stated that there is a will of continuity from the government, and they are working to solve the credit export agency issue. He also noted that the project is on track to launch in 2029 or 2030.
- Analyst asked about the possibility of TotalEnergies' management looking at more systematic processes to address the unexpected outage at their refineries.
- Patrick Pouyanné explained that while they are not planning to invest in many new refineries, they are looking into ways to improve their processes, such as sharing experience across different refineries and implementing better organization and management. He also mentioned that they are focused on delivering results and not overstretching their teams.
- Patrick Pouyanné explained that while they are not planning to invest in many new refineries, they are looking into ways to improve their processes, such as sharing experience across different refineries and implementing better organization and management. He also mentioned that they are focused on delivering results and not overstretching their teams.
- Analyst asked about the company's plan to recoup lost dividends and cash flows from existing assets.
- Patrick Pouyanné explained that they are working on a continuous listing of shares that will be traded on both the Paris and New York markets. He mentioned that they have found solutions to technical issues, such as taxation, and that they are now working on translating these solutions into legal documents. He also mentioned that they are working towards a 2025 timeline for the listing.
- Patrick Pouyanné explained that they are working on a continuous listing of shares that will be traded on both the Paris and New York markets. He mentioned that they have found solutions to technical issues, such as taxation, and that they are now working on translating these solutions into legal documents. He also mentioned that they are working towards a 2025 timeline for the listing.
- Analyst asked about the status of the Russia/Ukraine conflict and the impact on TotalEnergies' assets and dividends.
- Patrick Pouyanné mentioned that they have around $1 billion in assets in Russia, but that they have not received any dividends from Novatek for several years. He also mentioned that there is a funny law in Russia that could result in the loss of dividends if not taken within a certain time frame. He also mentioned that they are not planning to integrate any Russia-related figures into their 2025 plan and that they are focused on the 100-day plan of the new US administration.
- Patrick Pouyanné mentioned that they have around $1 billion in assets in Russia, but that they have not received any dividends from Novatek for several years. He also mentioned that there is a funny law in Russia that could result in the loss of dividends if not taken within a certain time frame. He also mentioned that they are not planning to integrate any Russia-related figures into their 2025 plan and that they are focused on the 100-day plan of the new US administration.
- Analyst asked about the possibility of Europe getting enough LNG capacity in the US and the impact on Russia's LNG exports.
- Patrick Pouyanné mentioned that there is a possibility that Europe could get enough LNG capacity in the US, but that it would depend on the timing and the availability of LNG. He also mentioned that the 100-day plan of the new US administration could have a significant impact on the energy sector and that TotalEnergies is focused on delivering results and not overstretching their teams.
- Patrick Pouyanné mentioned that there is a possibility that Europe could get enough LNG capacity in the US, but that it would depend on the timing and the availability of LNG. He also mentioned that the 100-day plan of the new US administration could have a significant impact on the energy sector and that TotalEnergies is focused on delivering results and not overstretching their teams.
- Analyst asked about the company's criteria for disposals, specifically regarding the company's position in Libya.
- Patrick Pouyanné, CEO of TotalEnergies, stated that the company is continuing to divest some assets, including Nigerian assets onshore, which will bring in $800-$900 million in cash. He also mentioned that the company has worked on different ways to combine fiscal losses with their tax bill in the UK, but has not been successful. He stated that the company is open to selling assets for $1 billion in tax savings, but that value is more important. He also mentioned that Libya has a lot of oil to be developed and that the company is working on improving the taxation rate in Libya.
- Patrick Pouyanné, CEO of TotalEnergies, stated that the company is continuing to divest some assets, including Nigerian assets onshore, which will bring in $800-$900 million in cash. He also mentioned that the company has worked on different ways to combine fiscal losses with their tax bill in the UK, but has not been successful. He stated that the company is open to selling assets for $1 billion in tax savings, but that value is more important. He also mentioned that Libya has a lot of oil to be developed and that the company is working on improving the taxation rate in Libya.
- Analyst asked about TotalEnergies' plans for adopting AI and its potential impact on cost reduction and efficiency improvement over the next two to three years.
- Patrick Pouyanné explained that TotalEnergies is establishing a specialized line reporting to Namita, the company's Chief Digital Officer, to focus on digital and AI tools. He believes that AI adoption can deliver significant improvements in efficiency, but it's not clear if it will deliver results quickly. The company is investing in making connections across the organization and developing AI models.
- Patrick Pouyanné explained that TotalEnergies is establishing a specialized line reporting to Namita, the company's Chief Digital Officer, to focus on digital and AI tools. He believes that AI adoption can deliver significant improvements in efficiency, but it's not clear if it will deliver results quickly. The company is investing in making connections across the organization and developing AI models.
- Analyst asked about TotalEnergies' plans for investing in the US Gulf of Mexico and its potential for exploration.
- Patrick Pouyanné confirmed that the company is interested in investing in the US Gulf of Mexico, but as a non-operator. He mentioned the two projects, Ballymore and Anchor, where TotalEnergies is contributing. He also mentioned that the company had to give up on one project five years ago due to profitability concerns. However, he believes that there is still potential for exploration in the US and the company is discussing potential partnerships.
- Patrick Pouyanné confirmed that the company is interested in investing in the US Gulf of Mexico, but as a non-operator. He mentioned the two projects, Ballymore and Anchor, where TotalEnergies is contributing. He also mentioned that the company had to give up on one project five years ago due to profitability concerns. However, he believes that there is still potential for exploration in the US and the company is discussing potential partnerships.
- Analyst asked about the impact of the Inflation Reduction Act (IRA) on TotalEnergies' investment in Clearway.
- Patrick Pouyanné explained that the IRA had a positive impact on TotalEnergies' investment in Clearway, which is a renewable energy company. He mentioned that the investment was made before the IRA and that the additional support provided by the IRA was a "big thanks" to the company. He also noted that the investment was in line with the company's expectations and that it was profitable.
- Patrick Pouyanné explained that the IRA had a positive impact on TotalEnergies' investment in Clearway, which is a renewable energy company. He mentioned that the investment was made before the IRA and that the additional support provided by the IRA was a "big thanks" to the company. He also noted that the investment was in line with the company's expectations and that it was profitable.
- Analyst asked about TotalEnergies' plans for investing in gas-fired power plants and batteries.
- Patrick Pouyanné reiterated that the company is interested in investing in gas-fired power plants and batteries, as they are profitable and meet the demand for electricity. He noted that the world is not only renewable and that integrated power is important. He also mentioned that the company has made investments in gas plants, which are profitable.
- Patrick Pouyanné reiterated that the company is interested in investing in gas-fired power plants and batteries, as they are profitable and meet the demand for electricity. He noted that the world is not only renewable and that integrated power is important. He also mentioned that the company has made investments in gas plants, which are profitable.
