TotalEnergies SE Ordinary Shares

Hello, everyone. Patrick Pouyanné here. I'm happy to join you today for this call to comment our results together with Jean-Pierre on how Total Energy is taking action to take the most out of the very favorable environment for energy companies. I will also comment, of course, the actions we are taking to execute and deliver on the strategy in such an environment. And Jean-Pierre will review the results, and then we'll go to the Q&A. So, of course, the environment is obviously very supportive, the price of oil, the price of European gas, the price of LNG, and the refining margins for this quarter. It is the first time in 25 years in the industry that I am observing such an environment where all segments of our company are benefiting at the same time of strong prices or margins. But as Jean-Pierre will show you, our ability to fully leverage the commodity price environment is significantly strengthening our balance sheet and increasing our cash flow to recall cash flows for a quarter. And we are performing very well and using this opportunity to accelerate our transformation and benefit our shareholders. TotalEnergies is indeed fundamentally a commodity company, and we recognize that we are high in the commodity price cycle. On the supply side, the global system will struggle over the coming year to develop additional spare production capacity for both oil and LNG, and this implies medium-term support for high prices. On the demand side, global demand is increasing as economies continue to reopen, but the threat is a potential slide into recession because of inflation. The Russia-Ukraine conflict and sanctions have pushed refining margins for this quarter to the sky during the second quarter. They have been falling sharply, quite sharply in July, but still remain high. This obviously has a strong impact on gasoline prices at the pump for customers, and in this context, Total Energy has extended the fuel price reduction program for its entire network in France through the end of the year. We prefer indeed to share the benefit immediately and directly with our customers rather than to make ourselves the target for additional taxation in this current environment. Ultimately, energy prices, and we should not forget it, are cyclical. So we do not expect to remain at the top of the cycle for the long term. We have been through this type of cycle before and we are taking a balanced approach to best execute and deliver on our strategy to profitably grow the company for energy transformation. Our first priority, as you know, is to invest in the company to prepare the future. And in this period of strong cash flow generation, as I explained to you in April, the board is giving priority to accelerating the transformation, potentially for kinds of cyclical opportunities, and this is what we are doing. In the second quarter, we have announced three major new opportunities which will join our portfolio, our entry into Qatar's giant Northfield expansion for LNG, the acquisition of a 50% stake in Clearways, the fifth largest US player in renewable energy, and a new venture in India in partnership with Adani for green hydrogen production. Investments with new opportunities, in a sense, we have managed to have access to these new opportunities in the very good conditions because of the relationships and the strong positions we have developed in key growth areas. We are also acting opportunistically at a more tactical level by, for example, moving two floating LNG rigas terminals to France and possibly Germany. where we are already maximizing our position as the largest energy gas provider in Europe. We also are accelerating development of short-cycle projects, for example, and notably to increase gas deliveries to the European market from the North Sea, but also on the old side, for example, in Angola, with several infill wells on Block 17 on Girasol and Rosa. By the way, Angola will be another showcase of our multi-energy strategy, as we are just sanctioning many different projects. Two oil projects, each of 30,000 by-product capacity, Club 3 on Block 17 and Begonia on Block 1706. The first non-associated gas projects on the fields of Kelumba and Mabukeiro in order to feed Angola LNG plants and deliver more LNG to Europe and Asia. and the first solar plant, 45 megawatts, in partnership with Sunangle. As a result of all this acceleration of our transition, I would say like we announced it in last April, our first half capex were close to 8 billion, and we now anticipate by the 2022 capex, will be in the range of $15, $16 billion, probably next to the $16, rather than the $15, depending on the timing of acquisition and asset sales. I remind you that in March, we gave a guidance of $13, $16 billion for the year 2022-2025. So the $16 billion, next to $16 billion, is in the range, as I answered to a question during the last call. The Qatar LNG deal will contribute, obviously, to our future LNG growth, and thanks to this new addition to our portfolio, we maintain our growth ambition in the LNG segment, despite the decision not to invest anymore in any new projects in Russia. A word on Russia. As you have observed, we implemented our principle of actions announced on March 22, and we are exiting fully from the old business, both production and trading with the recently negotiated exit of the Kyaga oil field during the last quarter. Total energies recorded in its second quarter account a new $3.5 billion improvement related to the potential impact of international sanctions on the value of its stake in Novotek. Russia represents about 5% of its capital employed in cash flow and starting with investor day in September, We'll present our strategic plans for total energy in future without taking Russia into account. Fundamentally, that will change some volume figures. For example, the production of 2022 will be 2.3 million barrels per day, but not the global financial performance nor the return to shareholders growth. More details will be given to you at the end of September for strategic presentation. Also, a priority at the level of the board is we are increasing shareholder return to reflect the current environment and strong cash flow generation. The third board approves the second interim debiment on 60 cents of euro per share, an increase of 5% supported by the underlying of structural growth in our cash flow. Plus, another tranche of share buybacks of $2 billion for the third quarter, which will represent globally since the fourth quarter 2021 to the third quarter 2022, a global amount of 5% of our market cap, which will be bought back through shares. You can deduct from this guidance of $2 billion for the third quarter, the same rate but in the second quarter, but doubling the rate of the first quarter buyback, but the buyback should reach at least $7 billion for the year 2022. And I can come back on that. On a relative valuation basis, frankly, on any reasonable basis, by the way, the total energy share price is compelling, particularly in light of the dividends we are paying. We never cut. Now, I will leave Jean-Pierre presenting, and he's quite happy, a strong set of results. It will be an easy exercise for him today. But let me just remind, summarize what I just told you. Yes, we are in a clearly very positive and dynamic environment marked by elevated commodity prices. This may persist for the medium term in our view. The company is demonstrating its capacity to leverage such a positive environment in all the indicators, in particular in terms of cash flow generation. And we will act accordingly to maximize performance with our strategic approaches and financial discipline, to allocate capital to energy transformation, to return value to shareholders, and, of course, to maintain strong balances for the future. Jean-Pierre, the floor is yours.

Thank you, Patrick. So reported IFRS state income for the second quarter of 2022 was $5.7 billion, which takes into account the $3.5 billion impairment that Patrick mentioned. Adjusted net results were $9.8 billion, up 9% from the first quarter. Earnings per share were $3.75, up by more than 10% with the benefit of buybacks. The second quarter and first half results reflect the dramatic increase in oil, gas, and LNG prices, as well as record refining margins over the second quarter. Debt-adjusted cash flow was $13.6 billion, an increase of 14% from the first quarter and double the level of the same quarter last year. For the first half, cash flow was $25.6 billion, again doubling the same period last year, and strong enough to cover the full year 22 capex plus dividends. This illustrates the leverage that Total Energy, as a low-cost producer, has to the strong commodity price environment in terms of free cash flow generation. Operationally, upstream oil and gas production decreased by 100,000 Barrels spoil equivalent per day to 2.7 million in the second quarter from 2.8 in the first quarter. This is mainly due to higher plant maintenance and production cuts in Nigeria and Libya that were partially offset by the entry into sepia and atapu fields in Brazil. We expect plant turnarounds to be about 40,000 barrels per day higher in the first quarter than in the second quarter, and production to be stable at the level of the second quarter thanks to ramp-ups from the new projects. In the downstream oil business, refinery throughput was 1.6 million barrels per day in the second quarter, and the utilization rate increased to 88%, which targets the same high utilization rate for the third quarter. Looking now at the results by segments. IGFP, Integrated Gas, Renewable and Power, is the growth engine of the company. Adjusted net operating income was $2.6 billion in the second quarter, three times the level of the same quarter last year. Excellent performance by down $500 million quarter to quarter, mainly due to decrease from the exceptional high contribution from gas, LNG and electricity trading in the first quarter. IGFC cash flow was $2.4 billion in the second quarter compared to $2.6 billion in the first quarter. Important to point out that cash flow from operation in the second quarter was $4 billion, reflecting a reversal of the margin call and working capital changes in the first quarter. LNG sales were 11.7 million tons in the second quarter, down from 13.3 million tons in the first quarter due to lower spot sales, but the 1Q was a record spot sales quota. The average energy selling price increased to $14 per million BTU in the second quarter, in line with our guidance, and is expected to increase to more than $15 per million BTU in the third quarter, given the evolution of oil and gas prices and the like effect on price formulas. Gross installed renewable power generation capacity grew to 11.6 gigawatts At the end of the second quarter, up 0.9 gigawatts in the quarter, including 0.4 gigawatts related to the startup of the first phase of the Alcacer Solar Project in Qatar. Including the pipeline of development projects, our renewable portfolio has grown to more than 15 gigawatts of gross power generation, so we are very confident that we can achieve our 2025 growth target of 35 gigawatts. E&P is performing well in this environment and contributed $4.7 billion of adjusted net operating income in the second quarter, which corresponds to a return on average capital employed of more than 20% over the past 12 months. This quarter is a bit lower, down 6% from the first quarter, mainly due to the lower production and impact of sanctions on the result of Russian assets. Cash flow was $7.4 billion in the second quarter, slightly above the very strong performance of the first quarter, and reflecting the higher liquid price, which was partially offset by lower gas price realization and lower production volumes. Downstream performed impressively as well, a reminder of the importance of the integrated model. generated $3.2 billion of adjusted net operating income and $3.5 billion of cash flow in the second quarter, as it increased refined product volumes to fully capture record-high margins in the context of reduced imports of Russian products. Plus, the exceptional result of trading, two quarters in a row, $500 million. At the company level, FST net operating income was $18.8 billion for the first half, which represents the annualized return on capital employed of more than 25%. Operating cash flow before working cap changed from $24.9 billion in the first half of 2022 to more than twice what we generated in the first half of the year. Our net investment in the first half were $7.8 billion. We are able to reduce net debt costs by $4.1 billion to $13 billion at the end of June, so our gearing is below 10%. And in addition to paying the dividends, we bought back, as Patrick mentioned already, $2 billion of our shares during the second quarter, as announced. The company is financially stronger and operationally performing better than anyone can ever recall. While we do not expect this environment to last for long run, the reality is that we are using this time to fortify the balance sheet, accelerate the transformation, and return value to our shareholders. And on that point, I think we are ready for the Q&A. So the floor is yours.

Thank you, ladies and gentlemen. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press 01 on your cell phone keypad and wait for your name to be announced. Please kindly mute any audio source while asking a question. If you wish to cancel your request, please press 02. Once again, please press 01 if you wish to ask a question. We have a first question from Christian Malik from JP Morgan.