TotalEnergies(TTE) - 2022 Q2 - Quarterly Report

Operating and Financial Review and Prospects This section provides a comprehensive review of the company's financial performance and operational highlights Key Figures In the second quarter of 2022, TotalEnergies reported substantial year-over-year growth across key financial metrics, driven by a sharp increase in energy prices Q2 & 1H 2022 Key Financial Figures (in millions of dollars) | Indicator | 2Q22 | 1H22 | vs 1H21 | | :--- | :--- | :--- | :--- | | Sales | 74,774 | 143,380 | +58% | | Adjusted EBITDA | 18,737 | 36,161 | x2.1 | | Adjusted net operating income | 10,500 | 19,958 | x2.7 | | Net income (TotalEnergies share) | 5,692 | 10,636 | +92% | | Cash flow from operating activities | 16,284 | 23,901 | +82% | | Net investments | 4,895 | 7,798 | +9% | Q2 & 1H 2022 Environmental & Price Indicators | Indicator | 2Q22 | 1H22 | vs 1H21 | | :--- | :--- | :--- | :--- | | Brent ($/b) | 113.9 | 107.9 | +66% | | Average price of liquids ($/b) | 102.9 | 96.3 | +61% | | Average price of gas ($/Mbtu) | 11.01 | 11.65 | x2.8 | | Average price of LNG ($/Mbtu) | 13.96 | 13.77 | x2.2 | | VCM Refining Europe ($/t) | 145.7 | 101.0 | x13.3 | Q2 & 1H 2022 Hydrocarbon Production | Production (thousand barrels of oil equivalent per day) | 2Q22 | 1H22 | vs 1H21 | | :--- | :--- | :--- | :--- | | Total Hydrocarbon | 2,738 | 2,791 | -0.5% | | Oil (including bitumen) (thousand barrels per day) | 1,268 | 1,287 | +2% | | Gas (thousand barrels of oil equivalent per day) | 1,470 | 1,504 | -2% | - Hydrocarbon production in Q2 2022 was stable year-on-year but decreased by 4% compared to Q1 2022, primarily due to planned maintenance, production cuts in Nigeria and Libya, and the end of the Bongkot North license in Thailand[22] Analysis of Business Segment Results All business segments reported strong year-over-year growth in Q2 2022, driven by high energy prices and improved margins Integrated Gas, Renewables & Power (iGRP) The iGRP segment's adjusted net operating income nearly tripled year-over-year to $2.6 billion in Q2 2022, driven by higher LNG prices, strong performance in gas and electricity trading, and a growing contribution from renewables iGRP Q2 2022 Financial Results (in millions of dollars) | Indicator | 2Q22 | 2Q21 | Change | | :--- | :--- | :--- | :--- | | Adjusted net operating income | 2,555 | 891 | x2.9 | | Operating cash flow (DACF) | 2,360 | 904 | x2.6 | - Total LNG sales rose 11% YoY in Q2 2022 to 11.7 million tons, largely due to increased spot purchases to maximize the use of the Company's regasification capacity in Europe[32][34] - Gross installed renewable power generation capacity reached 11.6 GW at the end of Q2 2022, a 40% increase YoY, including a 0.9 GW increase over the quarter, partly from the Al Kharsaah solar project in Qatar[35][38] Exploration & Production (E&P) The E&P segment's adjusted net operating income more than doubled to $4.7 billion in Q2 2022 compared to Q2 2021, propelled by the sharp increase in oil and gas prices E&P Q2 2022 Financial Results (in millions of dollars) | Indicator | 2Q22 | 2Q21 | Change | | :--- | :--- | :--- | :--- | | Adjusted net operating income | 4,719 | 2,213 | x2.1 | | Operating cash flow (DACF) | 7,383 | 4,262 | +73% | - Compared to Q1 2022, adjusted net operating income fell by $296 million due to lower production and the impact of sanctions on Russian assets[45] Refining & Chemicals The Refining & Chemicals segment delivered exceptionally strong results, with adjusted net operating income surging 5.4 times year-over-year to $2.8 billion in Q2 2022 Refining & Chemicals Q2 2022 Financial Results (in millions of dollars) | Indicator | 2Q22 | 2Q21 | Change | | :--- | :--- | :--- | :--- | | Adjusted net operating income | 2,760 | 511 | x5.4 | | Operating cash flow (DACF) | 2,963 | 753 | x3.9 | - Total refinery throughput increased by 47% YoY to 1,575 thousand barrels per day, with the utilization rate rising to 88% from 58% in Q2 2021, reflecting a recovery in demand and the restart of several refineries[49][58] Marketing & Services The Marketing & Services segment reported a 12% year-over-year increase in adjusted net operating income to $466 million in Q2 2022 Marketing & Services Q2 2022 Financial Results (in millions of dollars) | Indicator | 2Q22 | 2Q21 | Change | | :--- | :--- | :--- | :--- | | Adjusted net operating income | 466 | 417 | +12% | | Operating cash flow (DACF) | 585 | 707 | -17% | - Sales of petroleum products were stable YoY, as the recovery in aviation and network activities worldwide compensated for lower sales to commercial and industrial customers, particularly in Europe[61] TotalEnergies Corporate Results Company-wide net income for Q2 2022 was $5.7 billion, a 2.6-fold increase YoY, while adjusted net income reached $9.8 billion Q2 & 1H 2022 Net Income (in millions of dollars) | Indicator | 2Q22 | 1H22 | vs 1H21 | | :--- | :--- | :--- | :--- | | Net income (TotalEnergies share) | 5,692 | 10,636 | +92% | | Adjusted net income | 9,796 | 18,773 | x2.9 | - A new impairment charge of $3.5 billion was recorded in Q2 2022, mainly related to the potential impact of international sanctions on the value of the company's Novatek stake[66] - The company repurchased 36.1 million shares for $2 billion in Q2 2022 as part of its shareholder return policy[67] - Net cash flow was $8.3 billion in Q2 2022, up from $3.2 billion in Q2 2021, reflecting a $6.9 billion increase in operating cash flow before working capital changes[75][81] Profitability Profitability metrics improved significantly over the twelve months ending June 30, 2022, reflecting the strong earnings environment Profitability Ratios (for twelve months ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Return on Equity (ROE) | 27.1% | 8.4% | | Return on Average Capital Employed (ROACE) | 23.1% | 7.2% | 2022 Sensitivities The company estimates that a +$10/b change in average liquids price would impact adjusted net operating income by +/-$2.7 billion and cash flow by +/-$3.2 billion 2022 Sensitivities (Estimated Annual Impact) | Variable | Change | Impact on Adj. Net Operating Income (billion dollars) | Impact on Cash Flow from Operations (billion dollars) | | :--- | :--- | :--- | :--- | | Average liquids price | +/- 10 $/b | +/- 2.7 | +/- 3.2 | | European gas price (NBP) | +/- 10 $/Mbtu | +/- 3.0 | +/- 3.0 | | VCM, European refining | +/- 10 $/t | +/- 0.4 | +/- 0.5 | Summary and Outlook TotalEnergies expects energy markets to remain fragile and prices to stay high, particularly for gas in Europe, while reinforcing its shareholder return policy - The company anticipates its average LNG selling price will be over $15/Mbtu in Q3 2022, though operations will be affected by the Freeport LNG plant outage[85] - Net investments for 2022 are expected to be around $16 billion, with a quarter dedicated to Renewables & Electricity[87] - The Board of Directors has reinforced its shareholder return policy, confirming a 5% dividend growth and a continuation of the share buyback program with $2 billion planned for Q3[88] Supplementary Information This section provides additional details on the company's Russian assets, operating information by segment, and financial reconciliations Results from Russian Assets The company's Russian upstream assets contributed $707 million to adjusted net operating income in Q2 2022, with total capital employed in Russia at $8.76 billion after impairment charges Financial Contribution from Russian Upstream Assets (million dollars) | Indicator | 2Q22 | 1H22 | | :--- | :--- | :--- | | Adjusted net operating income | 707 | 1,727 | | Operating cash flow before working capital changes | 857 | 1,144 | - Capital Employed by TotalEnergies in Russia was $8,760 million as of June 30, 2022, after a $3,513 million impairment and a $2,066 million revaluation due to ruble/dollar exchange rate changes[96] Operating Information by Segment This section provides detailed operational data, including hydrocarbon production by region and an extensive overview of the renewables portfolio Q2 2022 Combined Liquids and Gas Production by Region (thousand barrels of oil equivalent per day) | Region | 2Q22 | vs 2Q21 | | :--- | :--- | :--- | | Europe and Central Asia | 965 | -2% | | Africa | 460 | -14% | | Middle East and North Africa | 680 | +4% | | Americas | 420 | +11% | | Asia-Pacific | 213 | +8% | | Total | 2,738 | — | - The renewables portfolio shows a gross installed capacity of 11.6 GW, with 5.2 GW in construction and 33.9 GW in development as of Q2 2022, with solar representing the largest component[99] Reconciliations and Gearing This section reconciles reported net income to adjusted EBITDA and details adjustments for special items, while highlighting the company's improved net-debt-to-capital ratio - Total adjustments affecting net income in Q2 2022 were negative $4,104 million, driven by a $3,719 million impairment charge[104] Gearing Ratio | Date | Net-debt-to-capital ratio | | :--- | :--- | | June 30, 2022 | 9.8% | | March 31, 2022 | 12.5% | | June 30, 2021 | 18.5% | - Net investments in Q2 2022 were $4.9 billion, a 53% increase from the same period in 2021, driven by higher acquisitions[106] Consolidated Financial Statements This section presents the company's consolidated financial statements, including the statement of income, balance sheet, and cash flow Consolidated Statement of Income For the second quarter of 2022, TotalEnergies reported sales of $74.8 billion and a net income attributable to shareholders of $5.7 billion, representing a significant increase from Q2 2021 Consolidated Income Statement Highlights (million dollars) | Indicator | 2Q22 | 2Q21 | 1H22 | 1H21 | | :--- | :--- | :--- | :--- | :--- | | Sales | 74,774 | 47,049 | 143,380 | 90,786 | | Consolidated net income | 5,804 | 2,299 | 10,855 | 5,711 | | Net income (TotalEnergies share) | 5,692 | 2,206 | 10,636 | 5,550 | | Fully-diluted EPS ($) | 2.16 | 0.80 | 4.02 | 2.03 | Consolidated Balance Sheet As of June 30, 2022, TotalEnergies' balance sheet showed total assets of $333.4 billion, an increase from $272.7 billion a year prior, with total shareholders' equity growing to $120.0 billion Consolidated Balance Sheet Highlights (million dollars) | Indicator | June 30, 2022 | June 30, 2021 | | :--- | :--- | :--- | | Total assets | 333,406 | 272,707 | | Total liabilities | 213,409 | 162,131 | | Total shareholders' equity | 119,997 | 110,576 | | Cash and cash equivalents | 32,848 | 28,643 | Consolidated Statement of Cash Flow In Q2 2022, cash flow from operating activities was exceptionally strong at $16.3 billion, more than double the $7.6 billion generated in Q2 2021 Consolidated Cash Flow Highlights (million dollars) | Indicator | 2Q22 | 2Q21 | 1H22 | 1H21 | | :--- | :--- | :--- | :--- | :--- | | Cash flow from operating activities | 16,284 | 7,551 | 23,901 | 13,149 | | Cash flow used in investing activities | (4,982) | (3,104) | (7,360) | (7,288) | | Cash flow from (used in) financing activities | (8,571) | (6,298) | (3,585) | (8,157) | | Net increase (decrease) in cash | 2,731 | (1,851) | 12,956 | (2,296) | Notes to the Consolidated Financial Statements This section provides detailed notes explaining the basis of preparation, changes in company structure, shareholders' equity, and other risks and contingent liabilities Note 1: Basis of Preparation The interim financial statements were prepared in accordance with IFRS and IAS 34, with estimates and judgments significantly impacted by the Russia-Ukraine conflict - The financial statements are prepared in accordance with IFRS and IAS 34 for interim reporting[137][138] - As of June 30, 2022, TotalEnergies recorded a new $(3,513) million impairment charge related mainly to the potential impact of international sanctions on the value of its Novatek stake[143] Note 2: Changes in Company Structure During the first half of 2022, TotalEnergies expanded its renewables portfolio and finalized significant acquisitions in its E&P segment, while initiating withdrawal from the Yadana field in Myanmar - TotalEnergies, with partner EnBW, won a maritime lease in the New York Bight auction for $795 million to develop an offshore wind farm with at least 3 GW of capacity[147][148] - In April 2022, the company finalized the acquisition of interests in the Atapu and Sepia pre-salt oil fields in Brazil from Petrobras[151][152][153] - The company initiated the process of withdrawing from the Yadana field and MGTC in Myanmar, which became effective on July 20, 2022[149][150] Note 4: Shareholders' Equity The Board of Directors approved a 2021 final dividend of €0.66 per share and decided to increase the 2022 interim dividends by 5% to €0.69 per share 2022 Dividend Schedule | Dividend 2022 | First interim | Second interim | | :--- | :--- | :--- | | Amount | € 0.69 | € 0.69 | | Set date | April 27, 2022 | July 27, 2022 | | Payment date | October 3, 2022 | January 12, 2023 | - The Board of Directors decided to increase interim dividends for fiscal year 2022 by 5%, setting the first and second interim dividends at €0.69 per share[189][190] Note 7: Other Risks and Contingent Liabilities The company highlights ongoing risks and force majeure declarations in Yemen and Mozambique due to security issues, with the Russia-Ukraine conflict leading to significant impairments related to its Russian assets - Force majeure remains in effect for the Yemen LNG project (since 2015) and the Mozambique LNG project (since 2021) due to deteriorating security conditions[204][205] - Due to the Russia-Ukraine conflict and sanctions, TotalEnergies decided to no longer book proved reserves for the Arctic LNG 2 project[209] - The company recorded an impairment of $(4,095) million in Q1 2022 (notably for Arctic LNG 2) and a new impairment of $(3,513) million in Q2 2022 (mainly for its Novatek stake) due to the conflict and sanctions[211]