TotalEnergies SE ADR(TTE) - 2023 Q3 - Quarterly Report

Operating and Financial Review and Prospects Key Figures TotalEnergies reported a 15% YoY sales decrease to $59.0 billion in Q3 2023, with adjusted net operating income down 34% to $6.8 billion, alongside a 5% rise in hydrocarbon production (excl. Novatek) and an 18% reduction in GHG emissions Q3 2023 and 9M 2023 Key Financial Figures (in millions of dollars) | | 3Q23 | 3Q22 | 3Q23 vs 3Q22 | 9M23 | 9M22 | 9M23 vs 9M22 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | 59,017 | 69,037 | -15% | 177,891 | 212,417 | -16% | | Net income (TotalEnergies share) | 6,676 | 6,626 | +1% | 16,321 | 17,262 | -5% | | Adjusted EBITDA | 13,062 | 19,420 | -33% | 38,334 | 55,581 | -31% | | Adjusted net operating income | 6,808 | 10,279 | -34% | 19,383 | 30,237 | -36% | | Cash flow from operating activities | 9,496 | 17,848 | -47% | 24,529 | 41,749 | -41% | | Net investments | 5,091 | 4,703 | +8% | 16,102 | 12,501 | +29% | Environment - Price Realizations | | 3Q23 | 3Q22 | 3Q23 vs 3Q22 | 9M23 | 9M22 | 9M23 vs 9M22 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Brent ($/b) | 86.7 | 100.8 | -14% | 82.1 | 105.5 | -22% | | Average price of liquids ($/b) | 78.9 | 93.6 | -16% | 74.9 | 95.4 | -22% | | Average price of gas ($/Mbtu) | 5.47 | 16.83 | -67% | 6.80 | 13.28 | -49% | | Average price of LNG ($/Mbtu) | 9.56 | 21.51 | -56% | 10.92 | 16.26 | -33% | - Scope 1+2 GHG emissions from operated facilities decreased by 18% YoY in Q3 2023, attributed to reduced flaring in Exploration & Production and lower utilization of gas-fired power plants in Europe[9][12] - Total hydrocarbon production was 2,476 thousand barrels of oil equivalent per day in Q3 2023, with production excluding Novatek increasing by 5% YoY due to portfolio additions and project ramp-ups[15][16][23] Analysis of Business Segment Results Effective January 1, 2023, TotalEnergies restructured its reporting into five business segments, utilizing adjusted financial indicators to measure performance by excluding special items and valuation effects - TotalEnergies' performance is measured using adjusted financial indicators like Adjusted Net Operating Income, which exclude special items, inventory valuation effects, and changes in fair value for trading activities[18][19][20] - As of January 1, 2023, the company implemented a new reporting structure with five business segments: Exploration-Production, Integrated LNG, Integrated Power, Refining & Chemicals, and Marketing & Services[27][30] Exploration & Production The Exploration & Production segment's adjusted net operating income was $3.14 billion in Q3 2023, down 26% YoY but up 34% QoQ, driven by higher oil prices and a favorable portfolio mix, with production (excl. Novatek) rising 3% YoY Exploration & Production Financial and Operational Highlights | Indicator | 3Q23 | 3Q22 | % Change | 9M23 | 9M22 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 3,138 | 4,217 | -26% | 8,140 | 13,951 | -42% | | Hydrocarbon Production (kboe/d) | 2,043 | 2,251 | -9% | 2,045 | 2,292 | -11% | | Production excl. Novatek (kboe/d) | 2,043 | 1,988 | +3% | 2,045 | 2,023 | +1.1% | | Organic Investments (M$) | 2,557 | 1,989 | +29% | 7,115 | 5,288 | +35% | - Adjusted net operating income increased 34% quarter-over-quarter to $3,138 million, primarily due to higher oil prices and a lower effective tax rate[36] Integrated LNG The Integrated LNG segment's adjusted net operating income was $1.34 billion in Q3 2023, a 61% YoY decrease primarily due to lower LNG prices and exceptional Q3 2022 trading results, despite an 18% YoY growth in hydrocarbon production (excl. Novatek) Integrated LNG Financial and Operational Highlights | Indicator | 3Q23 | 3Q22 | % Change | 9M23 | 9M22 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 1,342 | 3,413 | -61% | 4,744 | 8,761 | -46% | | Hydrocarbon Production for LNG (kboe/d) | 433 | 418 | +4% | 445 | 458 | -3% | | Overall LNG Sales (Mt) | 10.5 | 10.4 | - | 32.5 | 35.4 | -8% | | Organic Investments (M$) | 495 | 213 | x2.3 | 1,273 | 324 | x3.9 | - The 53% YoY decrease in adjusted net operating income (excluding Novatek) was primarily driven by lower LNG prices and exceptionally strong trading results in Q3 2022, partly mitigated by higher production[42] - Cash flow from operations excluding working capital (CFFO) was $1,648 million in Q3 2023, down 34% YoY (excluding Novatek), mainly due to lower LNG prices, partially offset by high margins captured in 2022[42] Integrated Power The Integrated Power segment's adjusted net operating income more than doubled to $506 million in Q3 2023, driven by a 2.3x YoY increase in renewables production and gross installed renewable capacity surpassing 20 GW Integrated Power Financial and Operational Highlights | Indicator | 3Q23 | 3Q22 | % Change | 9M23 | 9M22 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 506 | 236 | x2.1 | 1,326 | 494 | x2.7 | | Net Power Production (TWh) | 8.9 | 8.5 | +4% | 25.5 | 23.7 | +7% | | o/w Renewables Production (TWh) | 5.4 | 2.4 | x2.3 | 13.5 | 7.1 | +90% | | Gross Installed Renewable Capacity (GW) | 20.2 | 16.0 | +26% | 20.2 | 16.0 | +26% | - Net power production rose 7% quarter-over-quarter to 8.9 TWh, driven by growing renewable generation following the full integration of Total Eren and new solar project start-ups[45] - Adjusted net operating income for the first nine months of 2023 was $1,326 million, 2.7 times higher than the prior year, reflecting the success of its profitable Integrated Power model[50] Refining & Chemicals The Refining & Chemicals segment's adjusted net operating income was $1.40 billion in Q3 2023, down 28% YoY but up 39% QoQ, driven by higher European refining margins and an 84% utilization rate, despite a 7% YoY decrease in throughput Refining & Chemicals Financial and Operational Highlights | Indicator | 3Q23 | 3Q22 | % Change | 9M23 | 9M22 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 1,399 | 1,935 | -28% | 4,021 | 5,815 | -31% | | Total Refinery Throughput (kb/d) | 1,489 | 1,599 | -7% | 1,456 | 1,497 | -3% | | Refinery Utilization Rate | 84% | 88% | - | 81% | 84% | - | - Refinery throughput decreased 7% YoY in Q3 2023, primarily due to planned maintenance and unplanned shutdowns at the Port Arthur (US) and Antwerp (Belgium) refineries[54] - Adjusted net operating income rose 39% quarter-over-quarter, reflecting higher refining margins in Europe and an increased refinery utilization rate[58] Marketing & Services The Marketing & Services segment reported an adjusted net operating income of $423 million in Q3 2023, down 12% YoY, primarily due to a 6% YoY decrease in petroleum product sales from the Egypt divestment, partially offset by aviation sector recovery Marketing & Services Financial and Operational Highlights | Indicator | 3Q23 | 3Q22 | % Change | 9M23 | 9M22 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted Net Operating Income (M$) | 423 | 478 | -12% | 1,152 | 1,216 | -5% | | Petroleum Product Sales (kb/d) | 1,399 | 1,495 | -6% | 1,386 | 1,475 | -6% | - The 6% YoY decrease in petroleum product sales was mainly due to the portfolio effect from the disposal of 50% of the fuel distribution business in Egypt, partly offset by the recovery in aviation fuel demand[60] TotalEnergies Results In Q3 2023, TotalEnergies' net income remained stable at $6.7 billion, with adjusted net income at $6.5 billion, while the company repurchased $2.1 billion in shares and generated $9.3 billion in cash flow from operations - Adjusted net income was $6.5 billion in Q3 2023, up from $5.0 billion in Q2 2023, mainly due to higher oil prices and refining margins, with total adjustments of $223 million[65][66] - Shareholder returns in Q3 2023 included the repurchase of 33.9 million shares for $2.1 billion[66] - Key acquisitions in Q3 2023 totaled $2.0 billion, primarily for Total Eren and the Rio Grande LNG project, while divestments amounted to $1.2 billion[66] - Cash flow from operations excluding working capital (CFFO) was $9.3 billion in Q3 2023, down 20% YoY, resulting in a net cash flow of $4.2 billion after $5.1 billion in net investments[69][70] Profitability TotalEnergies' profitability metrics, while declining from prior year highs, remained strong with a Return on Equity (ROE) of 22.3% and a Return on Average Capital Employed (ROACE) of 20.1% for the twelve months ending September 30, 2023 Profitability Ratios (Twelve months ended) | In millions of dollars | Oct 1, 2022 - Sep 30, 2023 | Oct 1, 2021 - Sep 30, 2022 | | :--- | :--- | :--- | | Adjusted net income | 25,938 | 35,790 | | Return on equity (ROE) | 22.3% | 31.4% | | Adjusted net operating income | 27,351 | 37,239 | | Return on average capital employed (ROACE) | 20.1% | 27.2% | Annual 2023 Sensitivities The company's financial performance is sensitive to commodity price and exchange rate changes, with a $10 per barrel shift in average liquids price estimated to impact annual adjusted net operating income by $2.5 billion and cash flow from operations by $3.0 billion Annual 2023 Sensitivities | | Change | Estimated impact on adjusted net operating income | Estimated impact on cash flow from operations | | :--- | :--- | :--- | :--- | | Average liquids price | +/- 10$/b | +/- 2.5 B$ | +/- 3.0 B$ | | European gas price – NBP / TTF | +/- 2 $/Mbtu | +/- 0.4 B$ | +/- 0.4 B$ | | Dollar | +/- 0.1 $ per € | -/+ 0.1 B$ | ~0 B$ | Summary and Outlook For Q4 2023, TotalEnergies anticipates oil prices around $90/b and average LNG selling prices above $10/Mbtu, with hydrocarbon production projected between 2.4 and 2.5 Mboe/d, while confirming $16-$17 billion in net investment guidance - The company anticipates its average LNG selling price to be above $10 per Mbtu in Q4 2023, given the evolution of oil and gas prices and lag effects on price formulas[77] - Guidance for Q4 2023 includes hydrocarbon production expected between 2.4 and 2.5 million barrels of oil equivalent per day, reflecting the Canadian oil sands asset sale, and a refinery utilization rate above 80%[78] - The company confirms its 2023 net investment guidance of $16 billion to $17 billion, anticipating $4.1 billion in cash from Canadian asset divestments in Q4 2023, potentially lowering gearing below 8%[79] Financial Statements and Reconciliations This section provides detailed financial data, including segment operating information, non-GAAP reconciliations, and core consolidated financial statements, highlighting a 12.3% gearing ratio and a 42.7% payout ratio for the first nine months of 2023 Gearing Ratio as of September 30, 2023 | In millions of dollars | 09/30/2023 | | :--- | :--- | | Net debt (a) | 16,676 | | Shareholders' equity (b) | 118,424 | | Gearing = a / (a+b) | 12.3% | | Leases (c) | 8,277 | | Gearing including leases (a+c) / (a+b+c) | 17.4% | Payout Ratio | In millions of dollars | 9M23 | 9M22 | | :--- | :--- | :--- | | Dividend paid (a) | 5,648 | 5,630 | | Share buy-backs (b) | 6,082 | 4,979 | | CFFO (c) | 27,446 | 36,595 | | Payout ratio = (a+b) / c | 42.7% | 29.0% | Consolidated Statement of Income For the nine months ended September 30, 2023, TotalEnergies' revenues from sales decreased to $164.2 billion, with consolidated net income at $16.5 billion and fully-diluted earnings per share remaining stable at $6.57 Consolidated Statement of Income (9 Months Ended) | (M$) | 9 months 2023 | 9 months 2022 | | :--- | :--- | :--- | | Revenues from sales | 164,180 | 199,357 | | Consolidated net income | 16,473 | 17,603 | | Net income (TotalEnergies share) | 16,321 | 17,262 | | Fully-diluted earnings per share ($) | 6.57 | 6.57 | Consolidated Balance Sheet As of September 30, 2023, TotalEnergies reported total assets of $290.0 billion and total shareholders' equity of $118.4 billion, while net debt (excluding leases) increased to $16.7 billion due to share buybacks and dividends Consolidated Balance Sheet Highlights (in millions of dollars) | | Sep 30, 2023 | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | :--- | | Total Assets | 290,004 | 303,864 | 349,715 | | Total Liabilities | 171,580 | 189,294 | 229,043 | | Total Shareholders' Equity | 118,424 | 114,570 | 120,672 | | Cash and cash equivalents | 24,731 | 33,026 | 35,941 | Consolidated Statement of Cash Flow For the first nine months of 2023, cash flow from operating activities was $24.5 billion, decreasing from $41.7 billion in 2022, with $15.8 billion used in investing and $16.7 billion in financing activities, resulting in an $8.0 billion net decrease in cash Consolidated Statement of Cash Flow (9 Months Ended, in millions of dollars) | | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | | Cash flow from operating activities | 24,529 | 41,749 | | Cash flow used in investing activities | (15,822) | (11,435) | | Cash flow from (used in) financing activities | (16,691) | (12,699) | | Net increase (decrease) in cash | (7,984) | 17,615 | Notes to the Consolidated Financial Statements This section details the basis of financial statement preparation, significant structural changes including acquisitions and divestments, shareholder equity matters like share cancellations and dividends, and key risks such as geopolitical issues and climate-related litigation Changes in the Company structure%20Changes%20in%20the%20Company%20structure) During 2023, TotalEnergies made significant portfolio adjustments, including acquiring a 20% interest in SARB and Umm Lulu and fully acquiring Total Eren, while divesting its Surmont and Fort Hills oil sands assets and agreeing to sell retail networks in Germany and the Netherlands - Completed the acquisition of a 20% interest in the SARB and Umm Lulu offshore concession in the UAE in March 2023[154][151] - Completed the acquisition of the remaining shares of Total Eren in July 2023 for a net investment of €1,467 million, integrating its 3.5 GW of operational renewable assets[155] - Finalized the sale of its 50% interest in the Surmont oil sands asset to ConocoPhillips for C$4.03 billion and agreed to sell the Fort Hills asset to Suncor for C$1.47 billion[159][160] - Agreed to sell its retail networks in Germany and the Netherlands to Alimentation Couche-Tard, based on an enterprise value of €3.1 billion, with these assets classified as held for sale[163][164][165] Shareholders' equity%20Shareholders'%20equity) The company executed significant share cancellations in 2023, retiring over 214 million treasury shares, while the Board of Directors established a consistent quarterly interim dividend of €0.74 per share for 2023 - The Board of Directors decided to cancel 128.9 million treasury shares bought back in 2022 and an additional 86.0 million treasury shares bought back in 2023[188][189] 2023 Interim Dividend Schedule | Dividend 2023 | First interim | Second interim | Third interim | | :--- | :--- | :--- | :--- | | Amount | €0.74 | €0.74 | €0.74 | | Payment date | Oct 2, 2023 | Jan 12, 2024 | Apr 3, 2024 | Other risks and contingent liabilities%20Other%20risks%20and%20contingent%20liabilities) TotalEnergies faces material risks including suspended operations at Yemen LNG and Mozambique LNG due to geopolitical instability, and ongoing climate-related lawsuits in France and the US concerning its vigilance plan, communications, and historical GHG emissions - Operations remain suspended at the Yemen LNG plant (since 2015) and the Mozambique LNG project (since 2021) due to security issues, with force majeure declared at both sites[203][204] - The company is facing several climate-related legal challenges in France and the US, including lawsuits regarding its Vigilance Plan, alleged misleading environmental claims, and liability for historical GHG emissions, which TotalEnergies considers unfounded[205][206][208]