TotalEnergies(TTE) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated $3.6 billion of cash flows in Q2 2020, a decrease of 50% compared to the same quarter last year, despite a 60% drop in Brent prices [11][30]. - Adjusted net income was reported at $126 million in Q2 2020, while reported net income was negative due to $8.1 billion in impairments [43]. - Gearing was maintained at around 23.6% after the first half of the year, reflecting the company's balance sheet strength [11][46]. Business Line Data and Key Metrics Changes - Upstream production averaged 2.85 million barrels of oil equivalent per day, a decrease of 4% compared to Q2 2019 [31]. - The Integrated Gas, Renewables & Power segment reported an average LNG price of $4.4 per million BTU, a decrease of 30% from the previous quarter [32]. - Downstream adjusted net operating income was $704 million, down 38% year-over-year, with cash flow from operations at $1.5 billion [41]. Market Data and Key Metrics Changes - Brent crude prices fell below $20 per barrel in April and averaged less than $30 per barrel for the quarter, with a recovery to over $40 per barrel since June [6][9]. - Natural gas prices in Europe and Asia dropped by 60% to historic lows during the quarter [6]. - The company anticipates production in the summer season to be the low point, expecting to average between 2.9 million to 2.95 million barrels of oil equivalent per day for the full year 2020 [32]. Company Strategy and Development Direction - The company is focused on maintaining a low breakeven portfolio, with organic breakeven close to $20 per barrel [12]. - A strategic shift towards renewable energy is evident, with plans to invest close to $2 billion in low-carbon electricity this year [17]. - The company aims to achieve net zero emissions by 2050 and is actively pursuing opportunities in low-carbon electricity and renewable projects [15][36]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the willingness of OPEC+ countries to maintain crude prices above $40 per barrel, which is crucial for market recovery [8]. - The company acknowledges the challenges posed by the COVID-19 pandemic but emphasizes resilience and the effectiveness of its integrated business model [11][12]. - Future oil demand is expected to recover, with management suggesting a potential rebound in prices by 2025 due to underinvestment in the hydrocarbon sector [22][73]. Other Important Information - The company recognized impairments of $2.6 billion linked to Canadian oil sands and Australian energy assets, totaling $8.1 billion in impairments for the quarter [23][25]. - The Board of Directors reaffirmed the sustainability of the dividend at €0.66 per share in a $40 per barrel Brent environment [14]. - The company has been active in M&A, acquiring interests in Uganda and completing the acquisition of Block 20, 21 in Angola [40]. Q&A Session Summary Question: Risk of stranded refining assets and long-term refining margins - Management acknowledged the oversupply in European refining and the commitment to climate neutrality by 2050, indicating a strategy to convert some refineries to biofuels [50][52]. Question: Guidance for full year tax expectations and working capital - The expected group tax rate is around 15% at crude prices of $30-$40 per barrel, with a focus on managing working capital effectively [56][62]. Question: Strategic direction for low-carbon business and visibility on growth - Management is working on providing a consolidated vision of the low-carbon business by September, emphasizing the importance of growing this segment [66][68]. Question: Oil price outlook and FIDs priorities - Management expressed a cautious but optimistic view on oil prices rebounding due to underinvestment, with key FIDs planned in Brazil and Uganda [72][76]. Question: Cash flow contribution from Downstream and refining margins - The Downstream segment is expected to generate cash flow between $5 billion to $6 billion for the year, despite low refining margins [85].