TotalEnergies SE Ordinary Shares

Welcome to Total Energy's 2023 results and 2024 objectives presentation. We are today in London from the Tate Modern Art Museum. Thanks for coming today and I hope that you will enjoy the view on the city and Saint Paul. You can also follow us live on our website totalenergies.com. We will start today with a safety sequence with Bernard Pinatel, who is our president of refining and chemicals. And then we will have the presentation from Jean-Pierre and Patrick for around one hour. And then we'll move to the Q&A session, which should be finished around 11.30, 11.45. You will be able to ask questions from the room, and there is also a dial-in number that people can use to call. But without further delay, I invite Bernard to come on stage to launch the meeting. with the safety sequence. Bernard.

Thank you, Renaud. Good morning. Last year, we had to deplore two fatalities. As you know, these two tragic events remind us that our first duty, of course, is to make sure that everyone returns home safe every day. One fatality occurred in France in a retail station where a contractor, Isidore, passed away when performing some excavation work. The safety moment I've chosen this morning is about the second fatality, the one which occurred in the Zeeland refinery in the Netherlands. Of course, not just to describe what happened, but most importantly to share with you what we learned from this tragic event to improve our operations. On February 3rd, A contractor passed away while he was performing a catalyst unloading operation inside a reactor. His name was Thorsten. He was 50 years old. Changing a catalyst is a very sensitive operation as the catalyst is flammable in the presence of oxygen of air. So you must first inert the reactor with nitrogen before the intervention. The catalyst unloading operation is performed, as you see on the slide, by a team of three people led by a supervisor. First, there is a diver who is the one entering into the reactor, fully equipped, of course, including with a lifeline to be pulled out in case of emergency. The second one is a second diver who is ready to dive in case of emergency. And there is also a controller who monitors the level of nitrogen of air and keeps constant contact by radio and by video. And before entering into the reactor, of course, there is a video inspection to make sure that the situation is safe. At 11.15 on that day, the alarm was given by the personnel. And we learned that the diver was trapped by the collapse of some catalysts. Of course, the rescue team, reinforced by additional members fully equipped, tried in turn to pull him out of the reactor, which you may guess from the slide is 30 meters high. When the body went out, the team found that the diver had passed away. One thing is clear. We couldn't keep operating this way with a human entry into an inert atmosphere. even if it is the industry standard practice. So we immediately took three actions. Of course, we immediately stopped worldwide all similar operations in the company. Secondly, with our contractors, HSC specialists, technical experts, we reviewed alternative operating modes to avoid any human entry inside reactors for that kind of operation. And eventually, we identified and selected an alternative operating mode where you change the catalyst by water floating. What does that mean? It means that you fill the reactor with water, and then you empty it together with the catalyst. Of course, this is more costly because you cannot recover the catalyst to recycle it, and you have to dispose of the wastewater, but you will understand this is not really what is at stake. From February 2023, all replacements were performed without any entry. We carried out 21 replacements using water in 2023, and we will have another 14 on the first year of 2024. We also keep working on further improvements in terms of vessel modification, because you will understand that these vessels have now to support the additional weight of water. And of course, we are looking at the utilization of robots. And naturally, we have shared these new operating modes with our peers. So let me now switch after the safety moment to the overall company safety performance. At Total Energy, we keep repeating this message. Safety is more than a priority. It's a value. It's a core value. Of course, safety is a matter of culture. It's a matter of leadership. It's also a matter of permanent improvement. And to track it, we measure several leading indicators that you see on the slide in terms of occupational safety and in terms of prevention of technological risks. So on the left-hand side, in terms of occupational safety, you see that we track the total recordable injury rate and that this rate at 0.63. has been reduced over the last five years consistently, and that represents a reduction of close to 30%. Having an engine rate well below one is not a given, believe me, notably when you see the industry trend since 2020. So we have been able to consolidate our position as a frontrunner on this indicator in our industry. How did we do it? Some key initiatives, I would like to highlight one, which is our ability to engage our contractors with our teams to promote shared safety values. We have done it notably through what we call a program of joint safety tours between Total Energy Management and contractor partners. This tour coming, of course, in addition to the daily visits we do with our local team on the field. In 2023, we recorded 10,000 of such joint safety tours across the company. Regarding the prevention of major accident and accident pollution on the right-hand side, we are also progressing. Over the last five years, we have reduced the number of primary losses of containment you see on that side by 50%. And here again, we have been focusing on two main areas. Of course, first, this is a management of the technical integrity through our maintenance inspection program, but also through the implementation of digital tools to anticipate and prevent potential equipment failures. The second area of focus has been the implementation of what we call the safe operating principle, the SOPs, where we constantly train our operators on the basic rules to comply with, when they perform very standard operations. So, of course, to conclude, I just would like to say that we all know that safety is a daily battle, but that we are all committed to do our best to protect our people, the environment, and our assets. And now I hand over to Jean-Pierre.

Thank you, Bernard. So good morning, everyone. This year is a special year for Total Energy because Total Energy is celebrating in 2024 its 100th year's birthday. So the company was founded 100 years ago in Iraq. At that time, the name was Compagnie Française des Pétroles. And since that time, over time, the company has diversified, has adapted itself to deal with the environment, to deal with society, to deal with the markets. And it's, I think, with the same pioneer spirit that we used at that time in Iraq in oil exploration that we will build the energy system of the future. Indeed, over the last couple of years, we have engaged in a balanced energy transition strategy, as you know, anchored on two pillars. So oil and gas on one side, and mainly LNG, as you know, and on the other side, integrated power. On the oil and side business, Total Energy plans to responsibly grow its oil and gas production by 2% to 3% per year. predominantly from LNG, thanks to its rich, low-cost, low-emission portfolio. In the LNG business, we will leverage our top three global LNG integrated portfolio, with leading position in RIGAS in Europe, in U.S. exports, to develop a top-tier LNG pipeline, and Patrick will come back on that later. In integrated power business, the company is building a world-class cost-competitive portfolio, combining renewable, so solar, offshore wind, offshore winds, with flexible assets, CCGT and storage, to deliver clean, firm power to our customers. And as you know, with the objective to be positive net cash flow by 2028, with a ROHA at 12%. So let's move now to the figures. So this consistent two-pillar strategy has delivered, I think, strong results in 2023. In a robust environment, but softer price environment compared to the environment we benefited in 2022, we deliver, as you see here, an adjusted net income total energy share above $23 billion and an EFRS net income above $21 billion. In terms of profitability, we had a ROHC return on capital employed at 19% in 2023 and a return on equity, 20%. So that means that, once again, total energy in 2023 was the most profitable major. In terms of cash flow in 2023, we managed to deliver a cash flow at $36 billion with a strong contribution of all the different business segments. So ENP contributed to more than $18 billion, $18.5 billion. Integrated power, 7.3. Integrated energy, sorry, 7.3. Integrated power above $2 billion, 2.2. I will come back on that later. And downstream at $8.2 billion. On top of that, we benefited last year for a strong working cap release, so cash-in coming from our working cap, around $5 billion. But to be very transparent with you, some of this capital working cap variation came, includes $2 billion of exceptional fiscal debt variation that will disappear in 2024. So how this cash has been used, so this 36 plus this $5 billion of working cap has been used. So $16.8 billion has been devoted to capital investment. I will comment later on this figure. $16.5 billion has been contributed to our shareholder return with cash flow distribution, so payouts, above 40%. Indeed, payout increased from 37% in 2022 to 46% in 2023, and it consisted in a 7.1% increase in the ordinary dividend that we pay in 2023. plus $9 billion of buyback. Out of this $9 billion, I remind you that $1.5 billion are directly linked to the Canadian disposal assets. And the remaining part of the cash flow we generated last year contributed to continue to deleverage the company. We now net debt at $6 billion and leading to gearing end of last year at 5%. So now the scorecard for 2023. I think it's clear that we deliver on our objectives. So for upstream production, the production increased, excluding Novatec, by 2% to 2.48 million barrels per equivalent, with a strong contribution in terms of LNG energy production that grew by 9% in line with the objective we had on that topic. Refining has a slightly better than expected utilization rates at more than 80%. So we guide at 80%, and so the final figure was 81. In terms of renewable gross installed capacity, so this capacity grew by almost 6 gigawatts between 22 and 23, at more than 22 gigawatts at the end of the year. leading and contributing to produce more electricity. So it's an increase compared to last year by more than 80% at 19 terawatt hour, broadly in line with the objective we had. So now on the emission side, front, we reduced scope 1 and 2 from operated facilities to 34.6 million tons last year. with two main drivers. So first, we continue to be successful in our efforts in oil and gas businesses to reduce gas flaring. I give you the example that in Nigeria, for example, we completely stopped gas flaring at the end of 2023. And we are successful in developing energy efficiency projects. On top of that, in 2023, 2023 was a more normal year in terms of CCGT utilization rate. In 2022, for obvious reasons, we had a very strong utilization rate for CCGT. And so 2023, it's back to normal. And this contributes, of course, to lower the scope 1 and 2, 22 versus 23. Maintain for operated facilities were reduced by 47% compared to 2022, surpassing our reduction targets. And another very important key factor which translates into figure our transition strategy, it's the life cycle carbon intensity with a reduction compared to 2015 by 13%, with a target we posted at 12%. So more energy, less emission, but also growing cash flow. We exceeded our CFFO guidance by more than about $1 billion. The guidance restated using the same price deck as for 2023 was at $35 billion. And so the final figure, as I already mentioned, is at $36 billion. In terms of investments, we invested $16.8 billion last year within the guidance, and I will come back on that later. And safe FO payouts, already commented, above the 40% at 46%. CapEx. So we remained disciplined in our CapEx, in our investments, with a total of $16.8 billion in 2023. We were very active in 2003 on the M&A side with a very active portfolio management, allowing to continue to enhance, to upgrade our portfolio. Because in this figure, $16.8 billion, of course, you have it's a net between organic capex, around $18 billion, plus acquisition, so $6.4 billion of acquisition, and $7.7 billion of divestments. So this figure, this $6.4 billion acquisition. So on the oil and gas side, we have our entry for a 20% interest in Sarmolulu fields in Abu Dhabi. We have on the LNG side our effective entry in NFE and NFS in Qatar and in Rio Grande project in Texas for LNG. On the integrated power side, it's the acquisition of the remaining 70% stake in TotalRN, as well as our 34% stake in a joint venture with Casa dos Ventos, a renewable developer in Brazil. And as you know, the main divestments are our exit, our disposal of our Canadian assets with sales to Sancor and sales to Conoco, and the sale of our retail network in Germany to Alimentation Couchetard. So very strong portfolio management last year with strong figures. In 2023, in line with our balanced energy transition strategy, I remind you previously, we invested more or less the same amount of money in low-carbon molecules, so mainly integrated power, compared to what we did in oil. So it's the red part of the pie compared to the green part of the pie. Another way we can look at it is that we invested as much in integrated and low-carbon molecules as we did in new projects, in oil or in gas new projects. For integrated power, the figure was $5 billion in 23, progressing in particular in implementing our strategy in deregulated markets, particularly in the US and in Europe. So now moving to the highlights of 23 on our two pillars, all segments has been achievement and a strong performance last year in line with our strategy and objectives. In upstream and gas, our production reached 2.48 million barrels per oil equivalent per day, benefiting from a startup in January of the Block 10 in Oman, of Absheron in Azerbaijan in July, as well, as I already mentioned, our entry in Sabo Blue in Abu Dhabi, and our effective entry in the GGIP project in Iraq. the company completed the divestment of its Canadian oil assets in line with its strategy to focus on low breakeven assets. For downstream, We generated $8 billion of cash flow last year, and so we were able, this figure is a result of the fact that we were able to capture high refining margins that averaged $69 per ton last year. In 2023, we awarded EPC contracts for the Amiral project, 11 billion contracts. So it's our petrochemical integrated complex in Saudi Arabia with Sadia Amoko. That will come on stream in 2027. The company also announced the sale of some European retail networks to Alimentation Couchetard. So we completed the German portion before the closure, and the remaining parts, so in the Netherlands, in Belgium, and in Luxembourg, it was completed early January 2024. So we pursued our growing strategy in LNG, especially in the US, where we, once again, were the largest LNG exporter last year, with more than 10 million tons of capacity, and increased our future position to more than 15 million tons per year through our entry into the Rio Grande LNG project. And it's FID in July. We also reinforce our leading position in Europe with a startup of two additional FSREs, so one in Germany, one in France. In integrated power business segments, we pursue a profitable growth strategy with an additional six gigawatts of renewable capacity. And we are able to generate more than $2 billion of CFO, $2.2 billion, compared to something like one last year. That means that we are able to more than double the CFO generated by this activity over 2023. In 2023 as well, we accelerated the development of our integrated business model in two key deregulated markets, the U.S. on one side, with the announcement of an acquisition of three CCGTs for a 1.5 gigawatt capacity in Texas, and in Germany on the other side, announcing the acquisition of two German companies, one a top-tier renewable energy aggregator and a leading battery storage developer. So we have built our upstream portfolio through the years with a low cost and sustainable way, as illustrated, I think, by these two charts. So starting from the left. Let's go back to 2018. We have consistently reported the lowest upstream production costs among all the majors, which is, I think, a structural advantage and allows us to be resilient even in a low-price environment. Our upstream production cost averaged $5.5 per barrel in 2023. It was $5.1 per barrel in the fourth quarter, benefiting from the divestment of the high-cost Canadian assets. And that's why we targeted for this year a production cost at $5 per barrel. So our portfolio is a low-cost portfolio, but it's also built to last. And so it's an illustration of the second graph on the slide. We have, I think, demonstrated the same consistency with our reserve that we had with production costs, as shown in that chart. We continue to replace our reserves, maintaining a strong and steady proved reserve life index. of around 12 euros over the last five years. And this positioned us as the second among the majors. And in 2023, we achieved a strong reserves replacement ratio, well in excess of our production, so 141 percent, and a 2P, a Proof of Probable Reserve Life Index, at 18 euros. So now moving to the integrated LNG and integrated power segments, that's the two growth segments in our portfolio, that together contributed to almost $10 billion of cash flow in 2023. So we provide here some metrics comparing 2023 figures with 2021. For obvious reasons, 2022 was an exception earlier in relation with the crisis between Ukraine and the war between Ukraine and Russia. And so that's the main rationale behind the fact that we made this comparison in 2021 and 2023. So in 2023, integrated LNG generated $6.2 million net operating income, $7.3 million of CFFO. with all the metrics, in fact, growing compared to 2021, thanks to the growth to our portfolio, so 44 million ton sales in 2023, and benefiting for a higher LNG price environment. All in all, the integrated LNG profitability improved at 18% ROH in 2023. So for integrated power, adjusted net operating income was $1.9 billion last year, and CFFO, slightly above, $2.2 billion. So that means that the gap between the NOE and CFFO is directly linked to the fact that during the fourth quarter, we benefited from some dividends paid by some of our equity affiliates, mainly Clearway. So that means that the cash flow almost tripled between 2021 and 2023. And you see the production. It was 21 terawatt-hours in 2021, 43 in 2023, with power generation from renewable nearly tripling, seven in 2023, 19 in 2023. Roetje was at 10% in 2023, in line with our objectives. That was set last year. So the last slide is a benchmark of the total energy performance compared to our peers, using three main metrics, ROHHA, approved reserves life index, TSR, and sustainability rating. So thanks, I think, to the consistency of our strategy, the strength of our delivery, we are competitively positioned versus our peers. So once again, total energy, you see here on the slides, was the most profitable supermajor with a ROACH at 19% in 2023. On the reserve side, our approved reserves life index was 12 years, as I already mentioned, in 2023, which puts us number two among the majors. This is, I think, really a testimony to our continued success in exploration, resource development, and active M&A and selective M&A. On a different note, Total Energy has once again the best-in-class sustainability rating among the majors, a demonstration that it's possible to be the most profitable major on one side and to be a leader in the energy transition on the other side. And lastly, our five-year total shareholder return has averaged about 13% per year, ranking on par with our U.S. peers and outperforming, clearly, our U.K. peers by a wide margin. Our ability to set and execute a consistent strategy, sustain a rich portfolio of opportunities, maintain the dividend through the cycle, like during the COVID crisis in 2020, when overcut it, and more recently, significantly increasing shareholder distribution, have all contributed to our strong TSR. So in summary, to terminate on this section, 2023 was a strong year for total energy, another big step in terms of shareholder distribution and balance sheet strategy. And on this positive note, I think I will leave the floor to Patrick.