TotalEnergies SE Ordinary Shares

Ladies and gentlemen, welcome to Total Energy's first quarter 2024 results conference call. I now hand you over to Mr. Patrick Poionnet, Chairman and CEO, and Jean-Pierre Sperre, CFO, who will lead you through this call. Sir, please go ahead.

Good morning and good afternoon, everyone, for this quarterly results session. I'm happy to welcome you together with Jean-Pierre We will go through all the details of these good or strong results in first quarter 2024. But before to do it, I would like to highlight the way we have implemented our two-pillar strategy during this quarter. And first, to recognize that the company celebrated its 100-year anniversary on March 28th. We have been celebrating this event all through the company in 120 countries where we are present. We have our company's ancestors who were really pioneers when they discovered oil in Iraq in 1927. And, of course, it was the opportunity, this anniversary, to pay tribute to the hundreds of thousands of pioneers who had followed them and were, in fact, the past and the present employees of the company. We have decided, by the way, that the signature of this industry will be pioneers for 100 years. So, but today, I would say, with the same pioneer spirit that we have decided in 2020 to embark in our journey in the energy transition and moving to total energy into an integrated multi-energy company with a clear and simple strategy anchored on two pillars. First, on oil and gas, mainly energy. with the objective to continue producing hydrocarbons in a responsible way, producing and growing hydrocarbons in a responsible way in order to answer the growing demand. And second, investing and developing integrated power, energy for the future, with the objective to become net cash positive by 2028. So this first quarter of 2024 is about advancing this strategy, I would say we are off to a great start on both pillars. We have achieved several milestones during this quarter, but I would like to end the line. First, on the oil upstream, we successfully started up some operated operations in Nigeria with AgpoWest and Tirago Development in Denmark, both of which are additive to our overall corporate cash margins, as well as Mero2 in Brazil, which started at the beginning of the year. We continue to have success on the exploration appraisal front. We've recently finished the positive appraisal of the Venus oil discovery in Namibia, and we are now working towards FID targeting end 2025 for the FID. We have also captured in these prolific orange basins some new licenses of INTRS on the South African side. We are making also, it's important to note, I told you it's a matter of execution or growth towards 2028, so we are also making good progress on some FIDs, which were planned for 2024. We will sanction this month of May the Camino project in Angola, 80,000 volts per day, operated by us with 40%. And we also plan in May to place the LLI orders for Suriname projects, and we confirm that we are envisage to take the FID before year-end 2024 in Suriname. Finally, I would like also to comment that we have done an interesting deal recently in Congo to increase our interest into a giant deepwater film ore and divest it at the same time from very mature assets. That's for oil. On the energy side, quite a big activity as well during the quarter. First, we begin to benefit from a low and re-up trading below $2 per million BTU to see some opportunities to integrate, further integrate our U.S. energy value chain upstream with the first acquisitions from Lewis Energy Groups of natural gas assets in the Eagle Ford, operated by a strong operator, EOG. Earlier this week, we announced the FID of the Marsa Energy Project in Le Mans. which is really setting a new low-carbon intensity standard for the next generation of energy plants, 3 kilograms of CO2 per barrel, fully electrified, and the electricity coming from renewable sources. And it's a very good example of TotalEnergies deploying its integrated multi-energy model in a country. Thanks to that strategy, we reached a new scale in Oman, combining LNG and renewables, or two pillars. So it's a good example, again, of what we can achieve by moving on the two pillars. On LNG, I would also insist that we continue to work with Asian buyers, which have some appetite for medium and long-term contracts. And I would say all linked long-term contracts, which is important, of course. In particular, for example, this quarter, we signed a contract with Simp Corp in Singapore, Beginning 2027, just perfect when we have more production. And to cover it, I would say, or to edge it with some all-linked contracts, that's the target. And there will be more to come as our teams are quite active on the Asian fronts, China, Japan, Korea. So we are working. Of course, it's important. We have a strong energy position, and we know we have some perspective to sign some all-linked energy contracts as part of our strategy. And lastly, I would also mention on the integrated gas part that we are acquiring the whole of Sapura OMV in Malaysia. This is a gas business related to net back of energy pricing with quite a good potential to increase. In fact, it's a prolific gas region with some potential to grow in the future. That's why we're very interested to acquire these assets. Then moving to the second pillar, integrated power, we have, again, fourth quarter in a row and increasing adjusted net result income, operating income, and Jean-Pierre will come back on it. As you've noticed, we have implemented, we are advanced implementation of the integrated strategy in Texas on the airport with acquisition, closing the acquisition of 1.5 gigawatt CCGTs, and that's good. The demand is growing in Texas. data centers, AI, we are right on the good market there. And also in Germany, which is another key market for us, we closed the Kion Energy Acquisition, which is a battery storage developer. So you will see for the results that the relevance of our strategy continues to be demonstrated quarter after quarter as a proof of concept that our differentiating model works. delivering strong results, which are fundamentals that allow us to grow our shareholder distribution in a sustainable way. We confirm again that we increased the interim dividend by 7% compared to last year, which I think will be appreciated by all our shareholders. And by the way, it's also this proof of concept starting to pay off, as we can observe the positive evolution of the share price recently. which is, in our view, in the view of the board, a signal that is being increasingly recognized by the market as a good one or the right one, and also evidenced by our leading total shareholder return. Finally, this value is not only shared with our shareholders, but also with the pioneers of total energies, and it's important, who are promoting employee shareholding plans, We are now in Europe the number one company in terms of amount of capital owned by employees, more than 11 billion euros, and a special grant of 100 shares to each of 100,000 employees has been decided by the board to celebrate our 100-year anniversary. So I don't know if we'll have $100 billion of results, Jean-Pierre, but not yet. So then with that, I'll turn it over to Jean-Pierre. That was a transition. to go through the detailed financials this first quarter.

Thank you. And good morning, good afternoon, everyone. As Patrick mentioned, our consistent strategy continues to deliver strong results, and we are well positioned to deliver on our 24 objectives of more energy, less emissions, and growing cash flow. Brand prices were flat quarter to quarter, down only 1% to 83 dollars per barrel, and the refining margin was strong. plus 36% quarter-to-quarter. But European gas prices declined by 35%, reflecting mild winter and high storage levels. In this context, Total Energy reported first quarter 2024 adjusted net income of $5.1 billion, only down 2% sequentially, and cash flow from operation, including working cap, of $8.2 billion. Profitability remains strong, with return on average capital employed of 16.5%, and we maintain discipline, confirming net investment guidance of $17 to $18 billion for 2024. Importantly, we continue to extend our track record of attractive shareholder distribution, with $2 billion of buybacks executing during the first quarter, and nearly a 7% increase year-on-year of the first interim dividend for 2024, which is now up 20% compared to pre-COVID level. Moving now to the business segment results and starting with hydrocarbons. Production was 2.46 million barrels of oil equivalent per day in the first quarter of 2024, stable quarter to quarter, and up 1.2%, excluding Canada. Production benefited from oil startups at scale, Merutu in Deep Offshore Brazil, and Agpo West in Nigeria, as well as 6% growth quarter-to-quarter in LNG production, which has upset the Canadian oil sands asset disposal that closed in the first quarter. Looking now forwards, production for Q2 2024 is expected to be between 2.4 and 2.45 million barrels of oil equivalent per day, and reflects planned maintenance that is partially compensated by ramp-ups, of Beirut in Brazil, and TIRA in Denmark. We reiterate full year 24 production guidance of 2.4, 2.5 million barrels of oil equivalent per day, which is 2% growth year-on-year, including Canada. Exploration and production reported adjusted net operating income of $2.6 billion, and cash flow of $4.5 billion. Also, we continue our leadership as a low-cost producer, with first quarter 24 upstream production cost at $4.6 per barrel. Moving now to integrated LNG. Hydrocarbons production for LNG was strong during the first quarter, up 6% quarter to quarter, thanks to higher availability, mainly Adictis in Australia and Qatar Energy LNG M2 in Qatar, as well as increased supply of LNG in Nigeria. First quarter LNG sales decreased by 9% quarter to quarter, partly due to lower demand in Europe, even mild winter and high inventories. Volumes also reflected partial downtime in three-port LNG in the U.S. this quarter. Integrated LNG adjusted net operating income was $1.2 billion during the quarter, reflecting lower LNG prices, sales, but also low volatility in the market. Cash flow totaled $1.3 billion, impacted by the timing of dividend payments from some of our equity affiliates. Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, we anticipate that total energy average energy selling price should be between $9 and $10 per annum in the second quarter of 2024. Now moving on our Integrated Power business segments. We are pleased to report that this business continues its profitable growth trajectory, with adjusted net operating income growing sequentially for the fourth quarter in a row as activity grows. Adjusted net operating income grew 16% quarter to quarter to more than $600 million, and was supported by production growth in both renewable and flexible generation. So flexible generation, as Patrick mentioned, now includes the 1.5 gigawatt CCGT acquisition in Texas, which closed during the quarter, and further enhanced our integrated position to provide clean, firm power in the attractive and growing ERCOT markets. Cash flow from integrated power was increased $692 million for the first quarter, on track to achieve our target of $2.53 billion of cash flow for the full year 2024. Finally, return on average capital employed for the 12-month ending end of March 2024 reached 10%. Moving to downstream, the refinery utilization rate for the first quarter 2024 was stable at close to 80%, with a restart of setup in Saudi Arabia, following a planned turnaround during the fourth quarter of 23, offsetting the impact of an unplanned shutdown at the Donge Refinery in France. ARC contributed $960 million adjusted net operating income in the first quarter of 24, up 52% quarter to quarter due to higher refining margins. ARC cash flow from operating From operations excluding working gap evolutions of $1.3 billion, also increased double digits quarter to quarter, although it was impacted by a timing effect in 10 billion payments from equity affiliates. Looking forward now, we anticipate that the Q2 24 refining utilization rate will increase to around 85% as the Dons refinery progressively restarts, and because there are no major turnarounds planned. On marketing and services, this quarter demonstrates the efficiency of the implementation of our value-over-volume selective strategy, with cash flow from operations increasing by 5% year-on-year to $480 million in the first quarter of 2024, despite a decrease in our sales of petroleum products. At the company level, we reported a working cap of $6 billion during the first quarter of 24. And the main components behind this figure are, first, the reversal of the exceptional working cap released of $2 billion in the first quarter of 23, we highlighted during our last earning call. Secondly, $1.5 billion in the first quarter of 24. related to the effect of higher oil and petroleum product price on inventories at the end of the first quarter of 24 compared to end of 23, and $2 billion of seasonal effect, $1 billion related to the seasonal effect on tax liability, and an additional $1 billion related to the seasonal effect on gas and power distribution activities. Dealing at the company level increased to around 10% at the end of the first quarter, compared to 5% at the end of last year. And the just described $6 billion working capital led to a 4% increase in gearing, and the decisions we made given the interest rate environment to exercise the call end of March on the 1.5 billion euro hybrid bonds resulted in an additional 1% increase in gearing. Therefore, we expect gearing to structurally range around 7% to 8%, as 2% to 3% of the current gain related to seasonality impact on working cap at the end of the quarter. Our consistent and balanced strategy is paying off, as Patrick mentioned, and the first quarter has positioned us for continued success in 2024. In this context, the Board of Directors of Total Energy decided the distribution of the first interim dividend of €0.79 per share for the fiscal year 24, representing an increase of close to 7% compared to 23, and authorized an additional $2 billion of share buybacks for the second quarter 24. And with that, I'll turn it over to Q&A.