ii view: profit down at TotalEnergies but raises dividend

Fourth-quarter results to 31 December

• Adjusted net income down 36% to $5.2 billion
• Total 2023 dividend payment up 7.1% to €3.01 per share
• Fourth-quarter dividend payment of $0.79
• Overall 2023 share buyback of $9 billion
• Gearing of 5%, down from 12.3% at the end of Q3

Guidance:

• Expects to buyback a minimum of $8 billion of shares over 2024  

Chief executive Patrick Pouyanné said:

“In an uncertain environment, TotalEnergies’ balanced transition strategy, which combines growth in oil & gas, in particular Liquefied Natural Gas (LNG), and integrated power, delivered strong results in 2023, in line with its objectives.”   

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ii round-up:

French oil giant TotalEnergies SE (EURONEXT:TTE) today detailed profits marginally shy of City forecasts, but upped its dividend payment as well as outlining broadly in-line share buyback plans.

Fourth-quarter profit fell 36% from a year ago to $5.2 billion given a lower oil price, missing estimates of $5.3 billion. A total dividend payment of €3.01 per share for 2023 is up 7.1% versus 2022, with share buybacks of at least €2 billion per quarter now planned for 2024. 

Shares in France’s fourth-largest company by stock market value fell around 2% in European trading having been up almost 5% in 2023. That’s better than a 2% fall for rival BP (LSE:BP.) but below a 16.5% gain for the French CAC 40 index. 

Total operates in more than 130 countries but most of its exploration and production is located in West Africa, the Middle East, and the North Sea.

Group 2023 production rose 2%, helped along by a 9% increase in LNG production, with exploration successes coming in both Namibia and Nigeria. 

Operational costs reduced in 2023 following the sale of its Canadian oil sands assets, with relating cash aiding a fall in net debt to $6.3 billion from the prior quarter’s $16.7 billion. 

Broker UBS reiterated its ‘buy’ stance on the shares post the results. 

ii view:

Started in 1924, the group changed its name to TotalEnergies from Total in 2021. It operates across the businesses of Exploration & Production, Integrated Gas, Renewables & Power - including solar and offshore wind - as well as Refining & Chemicals, and Marketing & Services. Other geographical areas of operation include Brazil and LNG ops in Australia.  

For investors, the conflict in Gaza still has the potential to spread and disrupt operations across the wider Middle East. The volatility of energy prices in recent years from the lows of the pandemic to highs following the Russia’s invasion of Ukraine should not be overlooked. Tackling climate change remains a pressing issue for both the industry and governments globally, while the pricing of Total’s shares in euros also adds the additional risk of currency movements for UK investors.  

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On the upside, the company enjoys diversity of both business type and geography, with strong cashflows allowing a combination of investment, debt reduction and shareholder returns to be made. Net debt of $6.3 billion is comfortably below the $43.5 billion recently reported by rival Shell (LSE:SHEL), while a forecast dividend yield of just over 5% remains attractive. 

In all, and with the consensus analyst estimate of fair value at over €70 per share, TotalEnergies remains an option for UK investors wishing to diversify their portfolios with overseas exposure.

Positives: 

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

Negatives:

• Uncertain economic outlook
• Currency risks 

The average rating of stock market analysts:

Buy