TotalEnergies SE Ordinary Shares

Ladies and gentlemen, welcome to the Total Energy's third quarter 2026 results conference call. At this time, all participants are in listen-only mode. After the speech, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. I must advise you that the conference will be recorded today, the 29th of October, 2026. Thank you for holding the conference. We'll start shortly. Thank you. Music Music Music Music Music Thank you. ¶¶ Thank you for watching! Music by Ben Thede Ladies and gentlemen, welcome to the Total Energy's First Quarter 2026 Results Conference. I now hand over to Patrick Pouyanne, Chairman and CEO, and Jean-Pierre Sbraire, CFO, who will lead you through this call. So, sir, please go ahead.

Hello everybody, good afternoon or good morning, wherever you are. It's the third quarter result, not the first one, just to begin. So it's a live intervention, live speech. As Jean-Pierre will show you in a moment, TotalEnergies has demonstrated once again in this quarter its capacity to achieve an outstanding operational performance and to deliver a very strong set of results and cash flow. clearly reflecting the ability of the company to fully capture high prices. I would say all is green, not only the different market indicators, but also the operational performance, and I must praise all our teams around the world that delivered these results. And I could add that all is green as well, not only for the third quarter, but also for the first month of this fourth quarter, and probably for the rest of the year. Market conditions have been indeed very supportive, for all commodities that we are selling, the oil prices, started the quarter at $80 per barrel on the hopes of a lasting CIS-5 signed between the US and Iran, the MOU signed between the US and Iran, and finally rose again at levels above $110 per barrel and the dated brand being today at $121 per barrel. As a result of the broadening of the conflict to Pamela Mandev's rate of Saudi Arabia, and reflecting the persistent volatility of the situation in the region. The petroleum product prices of diesel gasoline have increased in a larger and unprecedented way as a consequence of massive disruption to the refined products logistics chain, triggered not only by the conflict in the Middle East but also by the unavailability of some Russian refining capacities due to the efficiency of the Ukrainian attacks. and so refining margins have reached historical records in Europe and in the rest of the world. Gas and energy prices in Europe and Asia started to rally this quarter as countries have started replenishing their inventories in view of winter consumption. This rally consequently pushed electricity prices up in some European countries where gas reflects a marginal cost of production of electricity. But beyond these favorable market conditions, this strong set of results highlights The strategic strengths of TotalEnergies, the integration and the geographical diversification of the company. I explained during our last CMD in New York that these two differentiating factors, together with our leading position being a low-cost producer, make TotalEnergies' best position to capture value from market disruptions. First, this quarter, we were able to fully leverage our integrated business model to capture margins. In the whole value chain, Integration has never been so relevant. We have been able to capture all prices from our growing upstream activities. We are taking full advantage of our midstream and trading capabilities to bring crude oil into our refineries and capture record high refining margins. This reflects highly valuable integration. The downstream have delivered the best quota ever for an exceptional combination of A record high margin and strong throughput increase as all our refineries are running up at full speed and Statoop is now back at nominal capacity since the end of the third quarter. And we anticipate of course same level of refining treatments in the fourth quarter. In the gas and energy value chain, our energy and gas traders were able this quarter to capture benefits of their long position on gas, which is now moving to be a winning position as gas prices have been rallying during the first quarter. With Europe attracting more LNG volumes right now and the TTF currently at around or above $30 per million BTU, LNG is still going up and we anticipate strong results as well for gas trading in Q4. And not only for gas trading, for LNG trading more globally. Second, our geographic diversification allowed us to mitigate the impacts of the Middle East crisis on our productions. The impact of the crisis in the Middle East on total energy overall production was reduced to around 5% over the quarter on average, which was in the low range of the guidance provided last quarter. Still, the company was able to grow rolling gas production by more than 3% quarter to quarter, supported by the ramp-up of projects launched in 2025 located mainly outside the Middle East. Excluding Middle East impact, the production growth even exceeds 4% year-on-year, clearly affecting our diversification in upstream growth. By the way, importantly as well, as we explained during the last CMD, during this quarter we took a certain number of final investment decisions, Kronos in Cyprus, IMA in Nigeria, Umshite Gas Cap in Abu Dhabi, and Absheron Phase 2 in Azerbaijan. And now all the projects contributing to achieving the extreme production growth target of more than 3% per year by 2030 are in execution phase. In integrated LNG, with geographic diversification, we are producing LNG in 11 countries, and as well the length of LNG Thank you very much. I would say no force majeure had no impact, in fact, on our costs, on our global costs, and we delivered that very efficiently to our customers. We also achieved some key milestones this quarter, establishing our LNG marketing GV with Cumul Petroleum, the national company in P&G, for 2.4 million tonnes per year, and the signature of an off-tech LNG agreement of 1.5 million tonnes per year. Strengthening the diversification of our LNG portfolio towards fast-growing Asian markets. So, I would say that this geographic diversification that some were considering some times ago as a weakness because being deemed to explode globally is considered today as a strength by our customers and a strong edge against geopolitical risks. Finally, and not very importantly, our operational performance across all business areas has been excellent again this quarter, I would say once again. So, refining our refineries at full capacity, optimizing utilization resulted in an increase of nearly 10% of our refining throughput this quarter, enabling the company to fully capture record high refining margins in Europe, but also in the U.S. and in the rest of the world, in particular Saudi Arabia. The company, once again, demonstrating its leadership to control costs, with operating costs of $4.7 per barrel, anchored strongly below $5 per barrel. By the way, this is the results of the cash-saving program we launched in 25 in view of a bearish year 26, but the program is still live today and delivering. The power business also saw an increase of more than 20% in net production this quarter, taking, of course, full benefits from the integration of the assets from OGV with EPH. Integrated Power is, again, well on track and will be net cash positive in 2027. Given the company's strong operational and financial results delivered by its business segment, its quarter, given the sustained high prices, the full year 2026 cash flow is now expected to be above $42 billion and maybe around even reaching $43 billion, supporting dividend growth while anchoring gearing below 10%. It's already 9%, but will be lower by the end of the year. In this context, and in line with the objective and the commitment of returning 40% of cash flow to shareholders, The Board of Directors has taken following decisions. First, we confirmed the third interim dividend at 90 cents of euros per share, up 5.9%, 9% compared to 25. Second, with the Board-authorized share buybacks of $2.5 billion in the fourth quarter and also $2.5 billion share buybacks in the first quarter, The board finally asked me to tell you that it reiterates its commitment to return 40% of cash flow to shareholders and that, if necessary, it might adjust upwards the final dividend to meet the 40% return. I will now hand over to Jean-Pierre to go through the details of the third quarter financials.

Thank you, Patrick. So I will start by commenting on the price environment for the first quarter of 2016. We capture high prices across most commodities. Brandt and liquid price remain elevated and increased throughout the quarter with the prolonged impact of the Middle East conflict. Brandt averaged $97 per barrel during the third quarter versus $104 per barrel in the second quarter, down $7 per barrel, while the average liquid price was $87 per barrel. Liquid selling price continued to reflect an elevated thread cost and decreased by $4.5 per barrel compared to the second quarter. TTF averaged $21.5 per million BTU, up 38% since last quarter average price of $15.6 per million BTU, driven by low inventories and the upcoming winter season demands. Our average LNG price increased by 20% to $12.3 per million BTU, reflecting the lag effects embedded in our contract pricing formulas and the increase in spot gas prices. But also, the European refining margin, which includes costs of natural gas, CO2, and freight costs, increased to an historically high level of $33 per barrel on average over the quarter, 2.5 times higher than the last quarter, supported by an unprecedented combination of In this high-priced environment, Total Energy leveraged its integrated business model and geographical diversification to deliver very strong financial results underpinned by the upcoming operational performance of all businesses, and the company's ability to capture value upside in disruptions. We reported, indeed, adjusted net income of $9.1 billion in the third quarter, increasing by more than 50% compared to the second quarter, and cash flow of $12.3 billion. TotalEnergies has delivered strong profitability this quarter, with return on equity at 19.6% and ROE at 17.4%. Let me now highlight four key takeaways from the quarter. Upstream delivered production growth up more than 3% quarter to quarter, notably due to the lower impact from the Middle East conflicts. Downstream achieved record high quarterly results, with cash flow increasing by almost $2 billion compared with the previous quarter, underpinned by all our well-functioning refineries. This allowed the company to fully capture historical high refining margins in Europe and worldwide. Oil trading activities also outperformed at a level comparable with the two previous quarters. Integrated LNG delivered very strong results, more than doubling compared to the previous quarter, reflecting the 20% increase in average LNG price and the outperformance of LNG and gas trading activities in a bull market. Integrated power cash flow generation continue to increase this quarter, supported by full quarter contribution from TCEP, our joint venture with EPH. Let's now dive into each of the business segments, starting with hydrocarbons. Third quarter hydrocarbons production was 2.47 million barrels of oil equivalent per day, On a year-on-year basis, excluding the impact of the Middle East conflict, production would be up by more than 4%, supported by the start-ups and ramp-ups of the project launched since the beginning of 2025, and benefiting from gradual return to normal oil operations in the Middle East. Over the quarter, the impact on production from the conflict in the Middle East is limited to around 5%, which is in the low range of the guidance given last quarter, This guidance being 5 to 10%. Looking forward, we expect to maintain strong momentum with hydrocarbon production in the fourth quarter, excluding the Middle East impact, expected to grow by more than 3% year on year, in line with the annual guidance. At present, we observe the impact of the Middle East below 5%, mostly coming from limited export from LNG volumes through the Strait of Hormuz. But we know that the situation remains volatile. Turning now to quarterly results for E&P, the segment generated an adjusted net operating income of $3.2 billion in this quarter and a cash flow of $5.4 billion, reflecting production growth and sensitivity to declining oil prices and rising gas prices quarter to quarter. On the cost side, as mentioned by Patrick, we continue to lead low-cost operations with an average OPEX per barrel of 4.7, below our guidance of less than $5 per barrel of oil equipment. On integrated LNG, the LNG production decreased by 7% quarter to quarter, mainly due to planned maintenance, notably on Angola LNG and Ixtis LNG. Adjusting net operating income was $1.9 billion and CFFO was $1.7 billion, underpinned by a 20% increase of average LNG prices and, in contrast with the second quarter, positively impacted by the outperformance of LNG and gas trading activities in the bull market, given the ongoing conflict in the Strait of Hormuz and seasonality of demand. Given the evolution of oil and gas prices in recent months and the lag effect on pricing formula, The company anticipates an average energy selling price above $14 per million BTU for the first quarter 26. Turning now to integrated power. Over the first nine months of 26, net power generation increased to 44.3 TWh, up 25% year-on-year, driven by the growth of integrated power generation portfolios. Notably, the commissioning of new renewable capacities and the contribution of TTIP's assets in line with expectations. TotalEnergies is therefore on track to reach its annual objective in integrated power business to generate more than 60 TWh over the year. And cash flow from operations was up 7% quarter to quarter at nearly $0.8 billion, supported by the contribution from TT EPSX over a full quarter. Moving to downstream, during the third quarter, refining and chemicals achieved record results, driven by refinery throughputs of nearly 10% over the quarter, underpinned by all refineries well-functioning in Europe and in the United States, and the progressive return of the set-up refinery in Saudi Arabia to its nominal capacity. Successfully reached at the end of the quarter. Refining and chemical suggested net operating income was up to $3.6 billion and cash flow was up to $3.9 billion, demonstrating the segment's ability to capture historically high refining margins in Europe and worldwide. Meanwhile, all trading activities continue to outperform. Marketing and services deliver solid results with adjusted net operating income of nearly $0.5 billion and cash flow of nearly $0.7 billion in the third quarter, reflecting higher unit margins that more than offset lower volumes. Let me re-emphasize the strong CFFO generated by the company over the quarter of $12.3 billion, up 25% compared to last quarter. Net investment remained disciplined at $3.3 billion in the third quarter, in line with the annual guidance of a full year of 26 net investments of $15 billion. The company delivered an attractive shareholder return this quarter, totaling $3.7 billion, including dividends of 2.2 and share buyback of $1.5 billion. At the same time, the company reduced its net debt, underpinned by a free cash flow after payment of dividends of more than $6 billion and a positive working cap contribution of $3.1 billion during the third quarter. This reduction of the working cap notably driven by the increase in tax liability related to higher prices and an increase in suppliers payable related to the increased shipping costs. As a result, the gearing improved by 4 percentage points to reach 9.1%, already below the 10% level we guide at CMD for N26. To conclude, the integrated model and geographical diversification of total energy continues to demonstrate the company's exceptional ability to produce and deliver reliable energy and to capture higher prices and higher margins with a growing cash flow that supports growing the dividend, deleveraging the company, investing to deliver accretive growth by 2030 and beyond, and increasing share buybacks for our shareholders to $2.5 billion per quarter in the first quarter and in the first quarter, 27. With that, Patrick and I are available for your questions. Operator, please open the line for questions.