TotalEnergies(US:TTE) Seeking Alpha·2024-06-18 08:06Core Viewpoint - TotalEnergies demonstrated strong financial performance in Q1, exceeding Wall Street expectations despite challenging market conditions, and is exploring a potential primary listing in the US to close valuation gaps with American peers [4][6][12]. Financial Performance - TotalEnergies reported an adjusted net income of $5.1 billion in Q1, slightly above the consensus estimate of $5 billion, despite a 43% decline in average gas prices [13]. - Cash flow from operations before working capital reached $8.2 billion, with operating cash flow at $2.2 billion for the quarter, leading to a net debt of $14.2 billion [13]. - The company’s exploration division achieved a core EBIT of $2.6 billion and cash flow of $4.5 billion, benefiting from low upstream production costs below $5 per barrel [14]. Production and Growth Outlook - TotalEnergies' total production has decreased by 18% since its peak in 2019, but there is a positive outlook for upstream production growth driven by LNG projects in North America, Qatar, and Mozambique [8]. - The company anticipates organic growth of 2% per year by 2030, supported by significant discoveries in Namibia [8]. Dividend and Share Buyback Strategy - TotalEnergies plans to increase its first interim dividend to €0.79 per share in 2024, a 7% increase from 2023, and has been authorized for a $2 billion share buyback in Q2 [16]. - The company expects to generate a cash flow from operations of $35 billion, allowing for at least an $8 billion buyback, with a distribution yield of 10% fully covered by an FCF yield above 11% [17]. Market Position and Valuation - The ongoing valuation gap between TotalEnergies and US peers like ExxonMobil and Chevron is highlighted, with the company’s P/E ratio expected to increase to $74 per share, supported by a potential US primary listing [4][17]. - The company’s management team and capital allocation priorities are viewed positively, contributing to its robust earnings potential [6][16].