ii view: income play TotalEnergies adds to green credentials

A dividend yield of over 4.5% and a further move to combat greenhouse gases. Buy, hold, or sell?

Wins a greenhouse gas storage assessment permit

Asia-Pacific senior vice-president Julien Pouget said:

“This promising greenhouse gas storage assessment permit is fully in line with our strategy to provide more energy with lower emissions, and our ambition to achieve net zero by 2050.”

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ii round-up:

French oil major TotalEnergies SE (EURONEXT:TTE) today detailed an opportunity to further enhance its climate change credentials.

In partnership with industry counterparts Woodside and INPEX, Total is to assess the opportunity to develop a major offshore greenhouse gas or carbon dioxide (CO2) storage or sequestration project off the northwest coast of Australia. 

Appraisal work will begin in 2023 and follows news the day before regarding its first power generation at Scotland’s largest offshore wind farm in partnership with the UK’s SSE (LSE:SSE). 

TotalEnergies share price drifted marginally lower in early UK trading, in line with major European rivals BP (LSE:BP.) and Shell (LSE:SHEL). Year-to-date, total shares have gained by around a fifth, similar to the gain in the oil price during 2022.

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TotalEnergies remains on track to achieve its ambition of developing storage capacity of 10 million metric tons of CO2 per year by 2030.

This latest potential Carbon Capture and Storage project, known as the Bonaparte assessment joint venture, compliments other industrial projects in both Norway and the Netherlands. 

Second-quarter results, announced back in late July, saw adjusted net income almost trebling from a year ago to $9.8 billion, buoyed by rising energy prices following Russia's invasion of Ukraine. 

ii view:

TotalEnergies is a global multi-energy company and one of France’s biggest companies by stock market value. Active in more than 130 countries, it employs more than 100,000 people. It is currently pursuing a strategy to become a broader greener energy company. As of the end of June, its gross renewable electricity generation installed capacity was close to 12 gigawatts as it continues to build on its objective to be among the world's top five producers of electricity from wind and solar energy.

For investors, concerns about a global recession now overshadow the demand outlook for commodities generally including the price of oil. Tackling climate change issues remains a pressing need for both the industry and governments globally, while the pricing of the shares in euros adds the additional risk of currency movements for UK investors. 

On the upside, the group’s green credentials continue to be enhanced. Higher oil and gas prices following Russia’s invasion of Ukraine have boosted profits. While a historic and forecast dividend yield of more than 4.5% offers attraction to income-oriented investors. In all, TotalEnergies looks to remain a feasible choice for those UK investors looking to diversify overseas given an already established existing share portfolio.

Positives: 

• Geographical diversity of operations
• Attractive dividend payment (not guaranteed)

Negatives:

• Uncertain economic outlook
• High competition in renewable energy 

The average rating of stock market analysts:

Buy