TotalEnergies SE Ordinary Shares

Ladies and gentlemen, welcome to Total Energy's first quarter 2025 results conference call. I now hand over to Patrick Pouyanné, Chairman and CEO, and Jean-Pierre Sbraire, CFO, who will lead you through this call. Sir, please go ahead.

Good afternoon, everybody, or good morning, if you are connecting from the US. Before Jean-Pierre will go through the detail of the first quarter results, I would like just to make some few opening remarks. on what appears to be today a more challenging global environment and the ways that TotalEnergies intends to leverage our consistent strategy to deliver resilient results benefiting from our energy production growth and attractive shareholder returns. We have indeed entered into a period of heightened macroeconomics and geopolitical uncertainty. With, and this list is not exhaustive, current fragile negotiations on the Ukrainian-Russian conflicts, the new but fluid tariff policy enacted by the US, decision of OPEC Plus to unwound its voluntary production cuts. Even if the impacts are not yet fully appreciated and might evolve in the coming months, this moving context is creating uncertainties, notably on oil demand, along with volatility in the oil markets, oriented on the downside over the past few weeks, and also on costs for new projects in the U.S. because of tax impacts. In this quite, I would say, fluid and landscape, TotalEnergies has and will, I would say, continue as a unique strength that we have consistently built over the last 10 years, and our efforts are paying off. First, of course, and foremost, we have been strong and never gave up on oil and gas. We have built over the last 10 years one of the best low-cost, low-emissions oil and gas portfolios with more than 12 years of resource life, which today gives us substantial leverage for strong and accretive growth. but clearly differentiates us versus our peers. Delivering this growth is, of course, one way to protect our future cash flows. We are growing companies with two pillars, including the second pillar on electricity, which is not dependent on the oil price, which gives an additional resilience to our model. As you will see, with Jean-Pierre, this quarter, we developed robust year-on-year production growth on nearly 4% in oil and gas and 18% in electricity, which represents a unique total energy production growth of close to 5%. But we are also, at the same time, in control of our costs. Our capex first, because most of our capex have been engaged and are based on lump-sum EPC contracts that secure the level of the capex. But also on the OPEX size, we have maintained in the last year, despite the inflationary trends, our cost per barrel, or OPEX per barrel, is lower than $5 per barrel, and again, this quarter. And finally, we are benefiting, and our balance sheet remains strong. We are confident in our ability to achieve our growth objective for 2025 and keep figuring under control. Because we have confidence in our business model, the board has decided to maintain attractive shareholder research, despite the uncertain environment. The board first and foremost confirmed the first interim dividend, which was announced in February at 85 euros per share, which is a 7.6% increase compared to 24%. In dollar terms, I would say it's even more than that. It's more than 10% at the current exchange rate of 1.14. As you know, dividends is a first priority in our capital allocation framework and we'll continue to maintain and to grow these dividends in future years, even in these uncertain environments. Remember that we did not get the dividends during COVID period. After 12 quarters in a row of $2 billion more of share buybacks, the board has once again announced share buybacks of up to $2 billion for the second quarter, despite a softening price environment which went below $70 per barrel since the beginning of April and in an uncertain geopolitical and macroeconomic context. Just as we have done during over-volatile times, the board will continue to monitor the buyback on a quarterly basis, Within the guidance we gave to the market last September to maintain a $2 billion buyback in reasonable market conditions. And to conclude this introductory remarks, as you will see again today with our Q1 results, I think we are well equipped and well prepared to navigate in certain environments. We remain focused on delivering on our 2025 objectives and to maintain attractive shareholder returns. On that note, I will now turn to Jean-Pierre, who will go through the details of the first quarter results.

Thank you, Patrick. So my first comment will be on the price environment in the first quarter. That was globally similar to the environment we had in the fourth quarter of 24. So Brent was at $76 per barrel versus $75 per barrel in the fourth quarter. TTF, the European gas price, was $14.4 per million BTCU, up 6% compared to Q4. And the average energy price was $10 per million BTCU, down 4% compared to Q4. And the ERM, so our indicator for European refining margin, remained weak, averaging $29 per tonne over the quarter. So in this context, the company reported adjusted net income of $4.2 billion, and a CFO of $7 billion for the first quarter of 2025. Profitability remains robust, with return on capital employed for the 12 months ending in March at 13.2%. Furthermore, total energy continued its strong track record of attractive shareholder distribution, with $2 billion of buybacks executing during the first quarter and, as Patrick mentioned, a 7.6% year-on-year increase in the first interim dividend of 25 to 0.85 euro per share, which is up 20% versus pre-COVID level. Now moving to the business segment results and starting with hydrocarbons. 25 is off to a strong start. First quarter production was above the high end of the guidance range at 2.8%. 56 million barrels equivalent per day, representing nearly 4% growth year on year. Production benefited from continued wrap-up of projects in Brazil, in the United States, in Malaysia, in Argentina, and in Denmark. In addition, we continued to be successful at keeping operating costs at low level. It was $4.9 per barrel equivalent during the first quarter. Looking forward, second quarter production is expected to grow 2% to 3% year on year, reflecting more planned maintenance compared to the first quarter, which has an impact of around 50,000 variable equivalents per day. Given the strong 4% growth achieved in the first quarter, we reiterate full year 25 production growth guidance of more than 3% compared to 24%. Moving now to exploration and production. So the company continues to execute very well. ENP reported strong and growing results with adjusted net operating income of $2.5 billion and a cash flow of $4.3 billion in the first quarter, up 6% and 9% quarter to quarter, respectively. Cash flow benefited from accretive new low-cost and low-emission oil production, which generated roughly an additional $100 million of cash flow, above what the portfolio average would have delivered during the first quarter. We anticipate additional accretion throughout the year, with the Ballymore offshore field in the U.S. having achieved first oil earlier this month, and Meru4 in Brazil expected to be online in the third quarter, both of which are adding high margin barrels that will enhance the cash flow. Moving on to integrated LNG. LNG sales were stable at 10.6 million tons, and integrated LNG achieved adjusted net operating income of $1.3 billion, up 6% year-on-year and down 10% quarter-to-quarter, in line with the evolution of the average LNG price I've already commented. Compared to last quarter, cash flow of $1.2 billion was impacted by the timing effect of dividend payments from some equity affiliates. LNG trading continues to perform in line with expectations for 2025. Gas trading results were impacted by the unexpected downturn of European markets, following new elevated uncertainty on the evolution of the Russia-Ukraine conflict. Forward European markets expect gas prices to remain elevated in the second quarter 2025 in the context of inventory replenishment in Europe. Given the evolution of oil and gas prices in the recent months and the lag effect on price formulas, Total Energy anticipates its average energy selling price will be between $9 and $9.5 per million BTU in the second quarter of 2025. Poor integrated power now. First quarter adjusted net operating income was $500 million and cash flow was $600 million. As anticipated, these quarter results do not include any positive impact of farm-down, which are expected later in the year. Thus, it's a matter of timing, and it is driving a 1% temporary decrease in ROACHE to 9% this quarter, which is expected to reverse as farm-down will progress. Looking forward, the campaign is on track to achieve the annual cash flow guidance. Additionally, we are progressing on multiple fronts in the integrated power segment. TotalEnergy signed a premium clean-some-power contract with STMicroelectronics of 1.5 TWh over 15 years during the first quarter. In addition, the company further deployed its differentiated integrated power model in Germany with the launch of six new battery storage projects developed by Ikeon, the company that we acquired last year. during the first quarter, and the closing of the acquisition of the renewable developer, DSB, closed earlier this month. Turning now to downstream. In the context of weak resigning margins, together with declining petrochemicals and biofuel margins in Europe, downstream posted adjusted net operating income of $0.5 billion and a cash flow of $1.1 billion in the first quarter of 2025. Cash flow this quarter was impacted by several factors, first one being the usual seasonability in the market and services businesses, and the timing, in fact, of dividend payments from equity affiliates in refining and chemicals. But beyond that, the macro environment remains challenged, with refining, petrochemicals, and biofuel margins lower than our planning case, impacting cash flow by about $150 million. On operations, we encountered some issues at Donge Refinery and Port Arthur Refinery that negatively impacted cash flow by about $200 million. These issues at Port Arthur have been resolved and work continues at Donge Refinery. However, there are no systemic operational issues, and performance was strong at other sites such as Enverp or Loina. boosting the global refining utilization rate to 87% in the first quarter of 2025 from 82% in the first quarter. Let's move now to the company level. At the company level, net investment totaled $4.9 billion during the first quarter, and we reiterate full-year 2025 guidance in the range $17 to $17.5 billion. We reported a seasonal working cap build of $4.4 billion in this quarter. But I have to remind you that it's less than the $6 billion reported in the first quarter of 2024, and in line, in fact, with the $3.4 to $4.4 billion range reported in the first quarter of 2022 or 2023. The drivers of this quarter working cap yields are mainly, first, a $1 billion reversal of exceptional working cap items reported in the fourth quarter of 2024. Secondly, a $2 billion seasonal effect from gas and power distribution activities in Europe and related to advanced payments occurring in the first quarter of 2025. And third, the $1 billion impact from evolution of the business related to stocks, and sales increased at the end of the quarter. Lastly, the balance sheet remains strong. Gearing is at 14.3%, but as indicated earlier, the $4.4 billion working capital this quarter is highly seasonal. Excluding this impact of this seasonality, the normalized gearing would be 11%. Now Patrick and myself are available to answer your questions. So please open up the line.