TotalEnergies SE Ordinary Shares

Hello everybody, good afternoon or good morning for those who are in the US. And before Jean-Pierre will go through the details of the second quarter financial, I would like first to make some few opening comments. Starting obviously with the current conflict in the Middle East which has picked up again in the last few days and which is clearly impacting our markets and our operations and our perspectives. Although we are all hoping in mid-June that a resolution could be envisaged for the signature of EMOU and ceasefire between the US and Iran, the situation has remained, to say the least, extremely volatile, with the Strait of Hormuz being an intermittent battleground where the risk premium to navigate in these waters is increasingly high. Some are even beginning to consider but this could become a new normal with a straight opening on and off depending on the level of tensions between the parties. This unstable and chaotic environment has been prevailing for the second quarter but I would say the last 15 days in June where we have seen some quite interesting reactions of the market with crude oil going down very quickly but products going to the roof at the same time. We don't know how long this conflict will continue. We have no specific information. I don't know if anybody knows, by the way. But of course, for us, safety of our teams will remain our most priority. As Jean-Pierre will show you in a moment, we can say we have managed this quarter to deliver once again strong results and cash flows from both our strategic pillars. Thanks to the strong performance of the teams who managed to capture very favorable market conditions for many of the energies we are producing and selling, the oil prices rose about $100 per barrel, even if differentials have widened, while refining petrochemicals, biofuel margins, but also distribution margins were increased, with some even reaching historic levels. and Gas, LNG, Electricity were also at strong levels. Once again, TotalEnergies has demonstrated its capacity to capture its margins and high prices, leveraging the integrated and diversified business model along the value chains of Oil, Gas and Electricity. First, all upstream and downstream businesses have been performing very strongly at the same time. which is not so frequent since quite often one benefits from a supportive environment at the expense of the other. But currently both are capturing high prices and margins given the tensions on global demand for products. As we speak, integrated margins this morning are around $130 per barrel, brands of crude oil around $95 and margins at $35. ENP delivered a strong quarter in terms of productions, thanks to a solid 4% organic growth, higher than our forecast, coming from our rich and diversified portfolio of projects, which was planned, in particular from Brazil, US and Libya, but also, and I must say it was very good, from a strong operational performance, limiting, I would say, the unexpected results All of this allows us to partly compensate the production losses in the Middle East. ENP has been delivering once again this quarter a strong cash flow from operations. Despite as well, I would say, and there was a disturbance in the Middle East between the production reported and the capacity to lift these productions, which impacted because the lifting in the Gulf, of course, was very limited by access to the Strait of Hormuz. Looking forward on the Middle East situation, beginning of July, end of June, I would say the production was going up quite quickly and we had limitations, I would say only 5% of our global production, but this weekend, after the conflict came back, we were more back to 8-10% of limitations. Thank you very much. affected as per our guidance at 15% of our production. So we'll see what will happen for the next quarter. Refining and chemicals performed in an exceptional way, I must say, leveraging market conditions, managing well the tensions on supply of refined products to maximize capturing margins. So refiners have adjusted the way they use their plants in the second quarter to prioritize In particular, production of diesel and jet fuel, which we are offering higher margins. And also, by doing that, contributing to security of supply of France and Europe. This performance was achieved, although some of our facilities have been impacted by events outside of our control, like... The SATOP refinery in Sao Olivia, which was hit in mid-April, if I remember well, by some drones, and which has been used at around, which is back today at 70% of capacity and full capacity by end of the third quarter, is expecting. But also Port Arthur in the U.S. suffered, unfortunately in June, from a lightning strike during a tropical storm, and now is progressively coming back to normal production levels. Our crude oil and petroleum product trading activities have been very successful for the second quarter in a row with a strong performance and made another $500 million, I would say overperformance, on the top of our usual structural performance of $500 million. And last but not least on the downstream, marketing and services have reported the best ever quarter, driven by the positive impact of the seasonality in Europe but also Unit margins in particular on products like lubricants. After a strong outperformance in the first quarter, our gas trading activities results in the second quarter were not good and impacted by flat to declining European market conditions, Whereas our traders were positioned to see the more supportive European gas environment in line with supply-demand fundamental expectations. Our traders took a long position on gas, thinking being bullish on the market, which seems to be reasonable because many indications were pointing to gas prices increasing, as because of lower supply out of the Middle East and from Qatar, because European inventories were low, at less than 15%, below the five-year average. But these factors did not materialize during the second quarter. Even, in fact, prices have declined through the quarter, leading to, I would say, weaker or poor results from the trading business. The story is, however, not over. As you have probably seen, now gas prices in Europe are valid. and as we are lit there, traders are rightly stubborn since early July. Their gas trading results are following and will be back to some overperformance again. On our second pillar, electricity, there was multiple good news during this quarter. Integrated Power delivered one of its best quarters ever in terms of strong cash flow. In fact, the second best in 2024. Even in the absence of farm downs during this quarter, but it was supported by the closing of the transaction with EPH in April, one month earlier or one to two months earlier than expected, and the cash flow coming from EPH was as per the expectations. So, very strong deliveries on almost all fronts, but I would say gas trading for once, We have generated at the company level next to $10 billion this quarter, which has been allocated in a very consistent manner, as I have announced to you last April during the call for the first quarter. First, of course, we have deleveraging down to a green ratio of 13%. We show an improvement of 2.4 percentage points quarter to quarter, benefiting from a 3.3 billion reduction in net debt and also a 1.2 billion dollar working cap release. And second, of course, we have confirmed the increase of our interim quarterly dividend by 5.9% to 0.9 euro per share, which places Total Energies once again in the leading pack of the growing dividend companies. Along this quarter, our cash generation has also allowed us to sustain our production growth targets with disciplined capital investment of $3.4 billion, comforting our annual guidance of $15 billion, and also to increase, as announced, our buyback to $1.5 billion during the second quarter. And the Board has authorized us to maintain this buyback with another $1.5 billion for the third quarter. With all this good news, I now hand it over to Jean-Pierre, who has an easy work to go through the details of the second quarter financial results.

Thank you, Patrick. So I will start by commenting on the price environment in the second quarter of 2016 versus the first quarter. We captured high commodity prices, although gradually decreasing over the quarter. Brent averaged $104 per barrel during the second quarter versus $81 per barrel in the first quarter, meaning plus $23 per barrel, more than 25%. While average liquid price was up by $18 per barrel due to widened differential and a lifting schedule way towards the end of the quarter in a crude market which softened in June in the context of the ceasefire in the Middle East. CTF average $15.6 per million BTU versus $13.7 and our average LNG price increased by 20% at $10.2 per million BTU. Oil prices started to impact LNG prices with one to two months of lag effects according to LNG pricing formulas. Finally, the European refining margins increased by $13.5 per barrel In this price environment, the company reported very strong financial results, increasingly by almost 15% compared to the first quarter, with second quarter 26 cash flow of $9.8 billion and adjusted net income increasing to $6 billion. These results were possible because of the strong operational performance of all businesses, demonstrating the company's ability to fully capture the environment upsides. Upstream delivered an underlying accretive production growth of over 4% year-on-year, which is above the annual 3% guidance and partially offsetting the production loss in the Middle East. Downstream, a very good operational performance as explained by Patrick from our refineries, which have been deliberately geared towards maximizing distillate production to capture higher refining margins. An integrated power cash flow generation increased by 25% over the quarter, supported by a contribution of EPH assets in line with expectations since the closing of the transition at the end of April. Total energy generated this very strong result, the highest since the end of 2022, Despite two challenges, although production from the Middle East was higher than originally expected, a significant portion of this production could not be lifted during the quarter and is recognized in E&P results based on the crude price from end June, meaning less than $70 per barrel. Our gas trading underperformed after an overperformance in the first quarter because of the declining gas price for the quarter, as explained by Patrick. TotalEnergies has delivered strong profitability this quarter, with return on equity at 15.9% and a ROH close to 14%. Now moving to the business segment, starting with hydrocarbons. On production on a year-on-year basis, excluding the impact of the Middle East conflict, second quarter hydrocarbons production increased by more than 4%, above the guidance provided of 3%, The impact of the conflict in the Middle East is around 210,000 barrels of oil equivalent per day over the quarter, below the guidance communicated last quarter of 360. Due to the company's production ramp-up in offshore United Arab Emirates, and the restart of production in the other countries in the region during June. Although, physical lifting turned out to be in line with the guidance with an impact of 350,000 barrels of oil equivalent per day. Looking forward, we expect to maintain a strong momentum with oil and gas production in the first quarter, excluding the Middle East impact, expected to grow around 3% compared to the first quarter of 2025, in line with the annual growth guidance. Turning on the quarterly results and starting with EMP results, and the segments generated an adjusted net operating income of $3.2 billion this quarter, up by 25% quarter to quarter, capturing the increase in average liquid price of $17.9 per barrel over the quarter, and demonstrating the accretive new project contributing this quarter to the yearly production group. Similarly, cash flow reached $5.8 billion, up 27% quarter to quarter. On the cost side, very important as well, once again, we maintain our leadership with an average OPEX per barrel equivalent below $5 in the second quarter. On integrated LNG. The LNG production decreased by 10% quarter to quarter, mainly due to shut-in production in Qatar related to the Middle East conflict. But in contrast to the outperformance in the first quarter, this quarter, the second quarter, was impacted by the underperformance of gas trading activities in an overall flat or even bearish European market. Reflecting the significantly decreased adjusted net operating income, and the cash flow of the segment, quarter to quarter, of $0.8 billion. Given the evolution of oil and gas prices in recent months and the lag effects on pricing formula, the company anticipates an average energy selling price of above $11.5 per annum ETU for the third quarter of 26.

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