TotalEnergies SE Ordinary Shares

Ladies and gentlemen, welcome to the Total Energy's third quarter 2024 results conference call. I now hand over to Patrick Pouyanné, Chairman and CEO of Jean-Pierre Sbraire CFO, who will lead you through this call. So, please go ahead.

Good morning, good afternoon everyone. Patrick Pouyanné here together with Jean-Pierre. Nice to be with you again after seeing you many of you in person that are invested in New York area this month. I just spent the last three weeks in road shows. I would like just to share with you that we got the constructive feedback from the investors on balance strategy and the level of understanding of our growth profile on both pillars, oil and gas, With the quality and depth of our extreme portfolio on one side, but also on the other side, the integrated power is now, I would say, better understood on both sides of the Atlantic. As discussed at the Inverse today, the clarity, consistency of our strategy must remain our priority. Discipline on cost, keeping a low break-even portfolio. And a strong balance sheet supporting attractive shareholder returns are fundamental principles which allow the company to be resilient through the cycles, especially when we are entering into an increasingly volatile and uncertain environment like what we have seen during this third quarter. I will not be longer, and I will hand over to Jean-Pierre to discuss the details of the three-quarter financials. which I think are proving also the resiliency of our integrated model in a challenging environment for both oil and refining margins. And then we'll be happy to answer to your question during the Q&A.

Thank you, Patrick, and good morning, good afternoon, everyone. This quarter, we faced a more challenging environment with refining margins sharply deteriorated, with the European refining margin marker down by 66% quarter to quarter, lower than our break-even at $25 per ton. Regarding the upstream environment, Brent decreased by 5% quarter-to-quarter to average $80 per barrel, while the company's average LNG price decreased by 6%. In this context, the company reported adjusted net income of $4.1 billion on the quarter and of $13.9 billion over the first nine months of the year. Profitability remained robust. We returned an average capital employed for the 12 months ending end of September at 14.6%. Moving now to the business segment, starting with the first pillar of our balance strategy, the hydrocarbons. First, regarding oil and gas production. During the third quarter, production was 2.41 million barrels of oil equivalent per day, within the guidance range of 2.4, 2.45 million barrels per oil equivalent per day. We continue to see good performance from project ramp-ups, mainly Merutu in Brazil, which partially offset unplanned shutdowns in Ictis Energy and security-related disruption in Libya. In addition, during the third quarter, we achieved first oil at the high-margin encore project in the Gulf of Mexico in the U.S., and first gas at the Phoenix field offshore in Argentina. We expect production for the fourth quarter of 2024 to be between 2.4 and 2.45 million barrels of oil equivalent per day, benefiting from the end of security-related disruption in Libya and yesterday's startup of the Meru Free project in Brazil that compensates for several plant shutdowns during the fourth quarter of 2024. Exploration and production performance continues to be strong. We've reported adjusted net operating income of $2.5 billion, stable cash flow of $4.3 billion, and an attractive return on capital employed of 15.6%. On the project side, earlier this month, the company and its partners sanctioned Grand Morgue projects, a large 220,000 barrels per day SPSO located offshore Suriname, with estimated recoverable oil reserves of more than 750 million barrels. This low-cost, low-emission development was sanctioned one year only after the end of the Brazil, and is designed to accommodate future time opportunities to extend the production plateau. Grand Morgue is a company fixed major oil and gas FID of 24, all of which de-risk your medium-term production growth objective of 3% per year through 2030, which ultimately translates into growing shareholder distributions. Exploration and production AC 932 OPEX per barrel equivalents remain best-in-class at $4.9 per barrel for the first nine months, 24, compared to our objective to be below $5 per barrel. Moving to integrated energy. First, on the results. Hydrocarbon production for LNG decreased 7% quarter to quarter, primarily linked to unplanned maintenance on interest energy. On the other hand, LNG sales increased by 8% quarter to quarter in the context of seasonal inventory replenishment. Integrated energy adjusted net operating income was $1.1 billion in the third quarter. Results primarily reflect lower LNG production, And in addition, gas trading did not fully benefit from markets characterized by low volatility. Cash flow was $0.9 billion due to the timing effect in dividend payments from some equity affiliates of around $200 million. Looking forward, given the evolution of oil and gas prices in the recent months and the lag effects on price formulas, Total Energy anticipates that its average LNG selling price should be around $10 per million BTU in the fourth quarter 2024, slightly higher than the $9.9 per million BTU in the third quarter. During the third quarter, Total Energy strengthens future cash flows by signing several medium-term sales contracts in Asia, bringing Total AGM LNG contracts signed year-to-year to 4 million tons. In addition, we enhanced integration along the gas value chain by supplying low-cost upstream dry gas supply in the Eagle Falls in Texas. Moving now to integrated power. As a result, the company continues to deliver on its targets. For the third quarter, adjusted net operating income remains close to $0.5 billion and cash flow above $0.6 billion. Year-to-date Adjusted net operating income totaled $1.6 billion, up 21% year-on-year, and cash flow totaled $1.95 billion, up 35%, and in line with annual guidance of more than $2.5 billion, contributing to the resiliency of the company. In addition, we have extended our track record of returns. We returned average capital employed for the 12 months ending end of September, close to 10%. TotalEnergy achieved several milestones during the third quarter, first one being the startup of two giant solar farms in the U.S. with battery storage in the fast-growing haircut market in Texas, where we already have all the necessary building blocks that define our differentiated integrated model. We closed on a strategic CPVT acquisition located in the deregulated UK markets that complements our existing intermittent renewable assets. And lastly, we strengthened our partnership in both India with ADENI and in Germany and in the Netherlands with RWE in offshore wind. In downstream, third quarter adjusted net operating income totaled $0.6 billion and cash flow totaled $1.2 billion. with marketing and trading activities partially compensating for the very sharp decrease in global refining margins in Europe, down 66% sequentially, and the rest of the world. In refining and chemicals, the company's European refining markets fell to $15 per ton in Q3 due to normalization of trade flows after the Russian ban and ample supply related to recent capacity increases. Currently, it is close to $25 per ton. This indicator, $15 per ton, is lower than our break-even at $25 per ton, and we suffered as well with some incidents in some of our refineries. For the fourth quarter of 2024, the company anticipates refining utilization rates will remain above 85%, with a turnaround planned at Lerner Refinery in October. Marketing and services results remain strong for the third quarter, with adjusted net operating income of $0.4 billion and cash flow of $0.6 billion. At the company level, and to wrap up, in the third quarter, we reported $1.1 billion of negative adjustment to net income related to impairments, these impairments being linked to two events, The first one, the Chapter 11 bankruptcy filing of SunPower in the U.S., and the exit on blocks 11B, 12B, and 567 in South Africa. After the BILT reported in the first quarter, the first working capital release was reported during the second quarter, and a new release of $0.4 billion was reported this quarter. And we anticipate that working capital will continue to reverse in the first quarter. A new release of $2 billion is anticipated for the first quarter, 2024. As I was saying in the introduction, profitability remains robust. We return on average capital employed at 14.6%. Capital discipline is strong. We confirm 24 net investment guidance of $16 to $18 billion. Lastly, we continue our track record of strong shareholder distribution. Buybacks are consistent with the company set to execute yet another $2 billion in the first quarter, in line with the objective of $8 billion for the full year 2024. Dividend growth is healthy, with the third interim dividend up nearly 7% compared to 2023, and up 20% compared to pre-COVID levels. We stop here, and we've With that, Patrick and I are available to answer your questions.