Interactive Investor

ii view: TotalEnergies details record profits and bigger dividend

8th February 2023 11:31

by Keith Bowman from interactive investor

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Investing in green energy, reducing debt and with a focus on shareholder returns. We assess prospects. 

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Full-year and fourth-quarter results to 31 December

  • Annual adjusted profit doubled to $36.2 billion (£30 billion)
  • Fourth-quarter adjusted profit up 11% to $7.6 billion (£6.3 billion)
  • Dividend up 7.25% from the previous quarter to €0.74 euros (£0.66)
  • Full-year dividend up 6.4% to €2.81 (£2.50)

Chief executive Patrick Pouyanné said:

“While down from the previous quarter highs due to uncertainties about the demand outlook, fourth quarter oil and gas prices as well as refining margins remained strong in supply-constrained markets.

“In line with the policy announced in September 2022, TotalEnergies implemented a balanced cash allocation in 2022, between shareholders pay-outs, investments, and deleveraging (reducing net debt by $12.2 billion) to end 2022 with gearing of 7%.”

ii round-up:

French oil giant TotalEnergies SE (EURONEXT:TTE) today detailed a doubling in annual adjusted profit to a record $36.2 billion as it benefits from higher energy prices following the war in Ukraine.

Fourth-quarter profit rose 11% to $7.6 billion (£6.3 billion), broadly in line with City expectations, with the CAC 40 index company announcing a new $2 billion share buyback for the first quarter of 2023 and a 7.25% increase in its quarterly dividend payment to €0.74 per share (£0.66).

TotalEnergies' share price retreated by more than 2% in European trading having come into this latest news up around 12% over the last year. That compares to a 2% gain for the wider CAC index and gains of more than a fifth for European rivals BP (LSE:BP.) and Shell (LSE:SHEL)

Accompanying TotalEnergies management comments flagged a potentially slowing world economy against the possible counterbalance of a recovery in China following its recent lifting of pandemic restrictions. 

Hydrocarbon production for the year ahead is expected to grow by around 2%, aided by start-ups in Oman, Brazil, and Azerbaijan. 

Net investments for 2023 of between $16-$18 billion, including $5 billion dedicated to low-carbon energies, are expected to be made, with shareholder returns targeting a 35% to 40% pay-out of operational cash flows. 

Broker UBS reiterated its ‘buy’ rating on the shares post the results. First quarter results are scheduled for 27 April. 

ii view:

TotalEnergies is a global multi-energy company and is one of France’s biggest companies by stock market value. Active in more than 130 countries, it employs more than 100,000 people with its core areas of production in West Africa, the Middle East and the North Sea. It operates through the divisional areas of Exploration & Production, Integrated Gas, Renewables & Power (including solar and on/offshore wind), Refining & Chemicals, and Marketing & Services. 

For investors, the uncertain economic outlook including continued interest rate rises may reduce energy demand going forward. Government taxes in many countries have already risen, with calls for further increases being made. 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, both business type and geographical diversity are enjoyed, with strong cashflows allowing a combination of investment, debt reduction and shareholder returns to be made. More than $33 billion in taxes globally was paid over 2022, more than double the figure for 2021, mostly to producing countries, while an estimated future dividend yield of over 5% is not to be ignored. 

For now, and with the consensus analyst forecast of fair value per share sat at over €65 per share, TotalEnergies looks worthy of consideration for those UK investors seeking to diversify overseas.

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

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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