TotalEnergies(TTE) - 2023 Q2 - Quarterly Report

Operating and Financial Review This section details TotalEnergies' financial and operational performance for 1H 2023, highlighting key figures, segment results, and future outlook Key Financial and Operating Figures TotalEnergies reported significant declines in 1H 2023 net income and adjusted EBITDA due to lower commodity prices 1H 2023 Key Financial Metrics (vs 1H 2022) | Metric | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Sales (M$) | 118,874 | 143,380 | -17% | | Net Income (TotalEnergies share, M$) | 9,645 | 10,636 | -9% | | Adjusted EBITDA (M$) | 25,272 | 36,161 | -30% | | Adjusted Net Operating Income (M$) | 12,575 | 19,958 | -37% | | Fully-diluted EPS ($) | 3.86 | 4.02 | -4% | | Cash Flow from Operating Activities (M$) | 15,033 | 23,901 | -37% | | Net Investments (M$) | 11,011 | 7,798 | +41% | 1H 2023 Commodity Price Environment (vs 1H 2022) | Indicator | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Brent ($/b) | 79.7 | 107.9 | -26% | | Henry Hub ($/Mbtu) | 2.5 | 6.1 | -58% | | NBP ($/Mbtu) | 13.3 | 27.2 | -51% | | JKM ($/Mbtu) | 13.7 | 29.1 | -53% | | Average LNG Price ($/Mbtu) | 11.59 | 13.77 | -16% | - Hydrocarbon production for 1H23 was 2,498 kboe/d, a 10% decrease from 1H22, but increased by 2% year-over-year excluding Novatek[18] - Scope 1+2 GHG emissions from operated facilities decreased by 6% in 1H23, driven by reduced gas-fired power plant usage and lower flaring[12][13] Analysis of Business Segment Results Performance is analyzed across five new segments, with most showing reduced earnings except for Integrated Power's growth - TotalEnergies implemented a new reporting structure effective January 1, 2023, with five business segments to enhance visibility, particularly for Integrated LNG and Integrated Power[27][28] - Adjusted financial indicators are used to measure performance, excluding inventory valuation effects, fair value changes, and special items for better economic comparison[21][26] Exploration & Production Adjusted net operating income for 1H23 decreased by 49% due to lower oil and gas prices, despite stable production excluding Novatek E&P Financial and Production Highlights (1H 2023 vs 1H 2022) | Metric | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 5,002 | 9,734 | -49% | | Net Investments (M$) | 6,672 | 5,840 | +14% | | Hydrocarbon Production (kboe/d) | 2,047 | 2,314 | -12% | | Production excl. Novatek (kboe/d) | 2,047 | 2,040 | 0% | - The 49% decline in 1H23 adjusted net operating income was primarily attributed to lower oil and gas prices[34] Integrated LNG Adjusted net operating income fell 36% in 1H23, driven by lower LNG prices, while net investments significantly increased Integrated LNG Financial and Sales Highlights (1H 2023 vs 1H 2022) | Metric | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 3,402 | 5,348 | -36% | | Net Investments (M$) | 1,743 | 54 | x32.3 | | Overall LNG Sales (Mt) | 22.0 | 24.9 | -12% | - The decline in adjusted net operating income was mainly due to lower spot and forward LNG prices, and unrepeated exceptional trading results from Q1 2022[40] - Hydrocarbon production for LNG, excluding Novatek, increased by 8% in 1H23, driven by improved security in Nigeria and the restart of Snøhvit[36] Integrated Power This segment achieved strong growth in 1H23, with adjusted net operating income more than tripling, supported by renewable capacity expansion Integrated Power Financial and Capacity Highlights (1H 2023 vs 1H 2022) | Metric | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 820 | 258 | x3.2 | | Net Investments (M$) | 1,807 | 1,128 | +60% | | Gross Installed Renewable Capacity (GW) | 19.0 | 11.6 | +63% | | Net Power Production (TWh) | 16.6 | 15.2 | +9% | - Q2 2023 adjusted net operating income was $450 million, up 22% quarter-on-quarter, due to the integrated electricity portfolio's performance[44] Refining & Chemicals Adjusted net operating income decreased by 32% in 1H23, primarily due to lower European refining margins and reduced polymer production Refining & Chemicals Financial and Throughput Highlights (1H 2023 vs 1H 2022) | Metric | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 2,622 | 3,880 | -32% | | Total Refinery Throughput (kb/d) | 1,437 | 1,448 | -1% | | Polymers Production (kt) | 2,074 | 2,461 | -16% | - The decline in earnings reflects lower refining margins in Europe, impacted by Chinese exports and the reorganization of Russian flows[56] Marketing & Services Adjusted net operating income remained stable in 1H23 despite a 6% decline in petroleum product sales Marketing & Services Financial and Sales Highlights (1H 2023 vs 1H 2022) | Metric | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 729 | 738 | -1% | | Petroleum Product Sales (kb/d) | 1,379 | 1,464 | -6% | - The segment's operating cash flow (DACF) increased 16% year-over-year to $1.2 billion in 1H23, as 2022 was negatively impacted by tax effects on inventory valuation[66] Consolidated Company Results Q2 2023 adjusted net income significantly declined due to lower gas prices and refining margins, alongside substantial share buybacks - Adjusted net income for Q2 2023 was $4,956 million, compared to $9,796 million in Q2 2022, primarily due to lower gas prices and refining margins[67] - TotalEnergies repurchased 32.8 million shares for $2 billion in Q2 2023 and 65.0 million shares for $4 billion in 1H 2023 as part of its shareholder return policy[68] - Net cash flow for 1H 2023 was $7,095 million, a 58% decrease from $17,061 million in 1H 2022, reflecting decreased cash flow and increased net investments[79] Profitability Metrics The company maintained strong profitability in the trailing twelve months ending June 30, 2023, with ROE at 25.2% and ROACE at 22.4% Profitability Ratios (Trailing Twelve Months) | Metric | As of June 30, 2023 | As of March 31, 2023 | As of June 30, 2022 | | :--- | :--- | :--- | :--- | | Return on Equity (ROE) | 25.2% | 29.7% | 27.1% | | Return on Average Capital Employed (ROACE) | 22.4% | 25.4% | 23.1% | Annual 2023 Sensitivities Earnings and cash flow are highly sensitive to commodity price fluctuations, with liquids prices having the largest impact Estimated Annual Impact of Market Changes | Factor | Change | Impact on Adjusted Net Operating Income (B$) | Impact on Cash Flow from Operations (B$) | | :--- | :--- | :--- | :--- | | Average liquids price | +/- $10/b | +/- 2.5 | +/- 3.0 | | European gas price | +/- $2/Mbtu | +/- 0.4 | +/- 0.4 | | European refining VCM | +/- $10/t | +/- 0.4 | +/- 0.5 | Summary and Outlook TotalEnergies forecasts stable Q3 2023 hydrocarbon production and confirms its full-year investment guidance, including low-carbon energy allocation - The company forecasts Q3 2023 hydrocarbon production to be around 2.5 Mboe/d, supported by the start-up of the Absheron field in Azerbaijan[83] - The average LNG selling price is anticipated to be between $9 and $10/Mbtu in Q3 2023[83] - Full-year 2023 net investment guidance is confirmed at $16 to $18 billion, including $5 billion for low-carbon energy projects[84] Supplementary Financial Information This section provides detailed operational data, non-GAAP reconciliations, and capital structure metrics Operating Information by Segment Detailed operational data shows 1H23 hydrocarbon production led by MENA, and significant growth in Integrated Power's renewable capacity 1H 2023 Hydrocarbon Production by Region (kboe/d) | Region | 1H 2023 | 1H 2022 | Change | | :--- | :--- | :--- | :--- | | Europe | 559 | 933 | -40% | | Africa | 488 | 479 | +2% | | Middle East & North Africa | 743 | 675 | +10% | | Americas | 442 | 403 | +10% | | Asia-Pacific | 266 | 301 | -12% | | Total | 2,498 | 2,791 | -10% | Q2 2023 Installed Renewable Power Gross Capacity by Region (GW) | Region | Solar | Onshore Wind | Offshore Wind | Other | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | North America | 3.5 | 2.1 | 0.0 | 0.1 | 5.6 | | India | 5.1 | 0.4 | 0.0 | 0.0 | 5.5 | | Rest of Europe | 0.2 | 1.1 | 0.8 | 0.0 | 2.1 | | France | 0.8 | 0.6 | 0.0 | 0.1 | 1.6 | | Asia-Pacific | 1.4 | 0.0 | 0.1 | 0.0 | 1.5 | | Total | 12.5 | 5.2 | 1.0 | 0.3 | 19.0 | Reconciliation of Non-GAAP Measures This section reconciles non-GAAP financial metrics like adjusted net income and EBITDA to their IFRS equivalents - For 1H23, total adjustments affecting net income were $(1,852) million, including a $(771) million after-tax inventory effect, $(545) million from fair value changes, and $(536) million in special items, primarily impairments[96] Reconciliation of Net Income to Adjusted EBITDA (1H 2023) | Item | Amount (M$) | | :--- | :--- | | Net income - TotalEnergies share | 9,645 | | Less: adjustment items | 1,852 | | Adjusted net income | 11,497 | | Add: non-controlling interests | 135 | | Add: income taxes | 6,805 | | Add: D&A and impairments | 6,176 | | Add: net financial interest | 659 | | Adjusted EBITDA | 25,272 | Reconciliation of Cash Flow from Operations (1H 2023) | Item | Amount (M$) | | :--- | :--- | | Cash flow from operating activities (M$) | 15,033 | | Less: (Increase) decrease in working capital (M$) | (2,269) | | Less: Inventory effect & other (M$) | (792) | | Operating cash flow before working capital changes (M$) | 18,106 | Gearing and ROACE The company's gearing ratio slightly increased to 11.1% as of June 30, 2023, with ROACE at 22.4% for the trailing twelve months Gearing Ratio | Date | Net Debt (M$) | Shareholders' Equity (M$) | Gearing Ratio | Gearing (incl. leases) | | :--- | :--- | :--- | :--- | :--- | | June 30, 2023 | 14,536 | 116,452 | 11.1% | 16.3% | | March 31, 2023 | 15,350 | 118,444 | 11.5% | 16.5% | | June 30, 2022 | 12,972 | 119,997 | 9.8% | 14.9% | ROACE by Segment (TTM ended June 30, 2023) | Segment | ROACE | | :--- | :--- | | Exploration & Production | 18.4% | | Integrated LNG | 24.2% | | Integrated Power | 10.1% | | Refining & Chemicals | 68.5% | | Marketing & Services | 18.9% | | Company Total | 22.4% | Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated income statement, balance sheet, and cash flow statement Consolidated Statement of Income 1H 2023 revenues from sales and consolidated net income both decreased compared to the prior year Consolidated Income Statement Summary (1H 2023 vs 1H 2022) | Metric (M$) | 1H 2023 | 1H 2022 | | :--- | :--- | :--- | | Revenues from sales | 109,767 | 134,395 | | Consolidated net income | 9,783 | 10,855 | | Net income (TotalEnergies share) | 9,645 | 10,636 | | Fully-diluted EPS ($) | 3.86 | 4.02 | Consolidated Balance Sheet As of June 30, 2023, total assets and shareholders' equity decreased compared to the prior year Balance Sheet Summary (as of June 30, 2023) | Item (M$) | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Total Assets | 281,019 | 333,406 | | Cash and cash equivalents | 25,572 | 32,848 | | Total shareholders' equity | 116,452 | 119,997 | | Non-current financial debt | 40,427 | 46,868 | | Total liabilities & shareholders' equity | 281,019 | 333,406 | Consolidated Statement of Cash Flow 1H 2023 saw a significant decrease in operating cash flow and an increase in investing activities, leading to a net cash decrease Consolidated Cash Flow Summary (1H 2023 vs 1H 2022) | Item (M$) | 1H 2023 | 1H 2022 | | :--- | :--- | :--- | | Cash flow from operating activities | 15,033 | 23,901 | | Cash flow used in investing activities | (10,835) | (7,360) | | Cash flow from (used in) financing activities | (11,849) | (3,585) | | Net increase (decrease) in cash | (7,651) | 12,956 | Notes to the Consolidated Financial Statements This section details significant changes in company structure, shareholder equity, and contingent liabilities Changes in Company Structure TotalEnergies completed key acquisitions in upstream and LNG, while also announcing divestments of Canadian oil sands and retail networks - Acquired a 20% interest in the SARB and Umm Lulu offshore concession in the UAE from CEPSA, effective January 1, 2023[153][156] - Finalized the acquisition of a 25% interest in a joint venture with QatarEnergy, holding a 25% stake in the 32 Mtpa NFE LNG project[157] - Announced the sale of its Canadian oil sands assets, including a 50% interest in the Surmont asset to ConocoPhillips, for approximately US$3 billion plus potential additional payments[160][162] Shareholders' Equity The company confirmed a €3.81 total dividend for FY2022 and set interim dividends for FY2023 at €0.74 per share - The total dividend for fiscal year 2022 was set at €3.81 per share, comprising a €2.81 ordinary dividend and a €1.00 exceptional dividend[197] - The Board of Directors has set the first and second interim dividends for fiscal year 2023 at €0.74 per share each[198][199] Other Risks and Contingent Liabilities Operations in Yemen and Mozambique remain suspended, and the company faces ongoing climate-related legal challenges - Operations at Yemen LNG and Mozambique LNG remain under force majeure due to persistent security concerns in those regions[210][211] - The company is facing several climate-related legal disputes in France and the U.S., considering all such actions to be unfounded[212][215] Subsequent Events Post-quarter, TotalEnergies finalized the acquisition of all remaining shares of Total Eren for approximately €1.5 billion - On July 24, 2023, the company finalized the acquisition of all remaining shares of Total Eren Holding and Total Eren SA for a net investment of around €1.5 billion[216]