Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TotalEnergies SE (TTE, Financial) reported a robust adjusted net income of $4.1 billion for the third quarter and $13.9 billion for the first nine months of 2024, demonstrating strong profitability.
- The company achieved first oil at the high-margin Encore project in the Gulf of Mexico and first gas at a semi-field offshore in Argentina, indicating successful project ramp-ups.
- TotalEnergies SE (TTE) maintained a low breakeven portfolio with exploration and production OpEx per barrel at $4.9, which is best in class.
- The company strengthened future cash flows by signing several medium-term LNG sales contracts in Asia, totaling 4 million tons.
- TotalEnergies SE (TTE) continues to deliver on its integrated power targets, with year-to-date adjusted net operating income up 21% and cash flow up 35% year on year.
Negative Points
- Refining margins in Europe fell by 66% quarter to quarter, below the company's breakeven level of $25 per ton, impacting profitability.
- The company's cash flow in the quarter was insufficient to cover CapEx, dividends, and buybacks, raising concerns about cash flow generation.
- TotalEnergies SE (TTE) faced unplanned shutdowns and security-related disruptions in Libya, affecting oil and gas production.
- The company reported a $1.1 billion negative adjustment to net income due to impairments linked to SunPower's bankruptcy and the exit from South African blocks.
- Integrated LNG adjusted net operating income was impacted by lower LNG production and a lack of market volatility, resulting in reduced cash flow.
Q & A Highlights
Q: The cash flow in the quarter was just under $7 billion, which isn't enough to cover CapEx, dividends, and buybacks. Is this a quarterly feature, or is cash flow lagging behind expectations? Also, what are your plans for Argentina?
A: There was a lag effect on some SMEs, particularly in LNG, affecting cash flow, but this should reverse. Regarding Argentina, we manage our assets cautiously, mainly producing gas. We have oil acreage but are evaluating investment options, contingent on the ability to repatriate dividends. - Patrick Pouyanné, Chairman and CEO
Q: Can you update us on the Uganda and Mozambique projects, and what are your expectations for COP 29?
A: Uganda is progressing as planned, with production expected by mid-2026. Mozambique's security situation has improved, and we are working on financing to restart the project. For COP 29, we hope for progress on carbon credit frameworks, but don't expect major new developments. - Patrick Pouyanné, Chairman and CEO
Q: How does the current cash flow generation compare to your expectations at the start of 2024, and what would trigger the activation of the $2 billion CapEx flexibility?
A: Year-to-date cash flow is around $23 billion, aligning with expectations. We anticipate ending the year around $30 billion. The $2 billion CapEx flexibility would only be considered if oil prices drop significantly, below $60 per barrel. - Patrick Pouyanné, Chairman and CEO
Q: With refining margins weak, do you see potential for improvement as new capacity comes online? Also, what are your views on the next wave of LNG capacity?
A: Refining margins are expected to stabilize around $35 per ton long-term. The next wave of LNG capacity is anticipated to start in 2027, with no significant additions expected in 2025. We foresee TTF prices averaging around $12 per million BTU in 2025. - Patrick Pouyanné, Chairman and CEO
Q: Can you provide more detail on the renewables market and the potential for corporate acquisitions similar to Equinor's stake in Orsted?
A: We recently exercised an option with RWE for offshore wind in Germany, which aligns with our strategy. We prefer organic growth and partnerships over minority stakes in competitors, as seen with our approach to Vivadeni. - Patrick Pouyanné, Chairman and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
