TotalEnergies to highlight its low-cost oil, long-term LNG sales to investors

Reuters

TotalEnergies to highlight its low-cost oil, long-term LNG sales to investors

Oct 1, 2024 at 2:35 pm GMT

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Four upstream mega-projects approved this year

Gas sales deals linked to oil, U.S. prices reduce risk

Renewables portfolio far exceeds that of peers

Update expected on cross-listing shares in New York

By America Hernandez

PARIS, Oct 1 -Fresh off a flight from Suriname, TotalEnergies' CEO is expected to tell investors in New York on Wednesday that the energy giant can maintain returns through 2030 despite falling prices, thanks to low-cost oil projects like its most recent in the South American country.

Patrick Pouyanne has also promised to provide an update on the French group's plans to cross-list shares in New York, as U.S. investors now account for the majority of shareholders.

After years of investor pressure to pivot towards green energy,

TotalEnergies TTEF.PA is now unapologetically focused on growing its legacy business - its 24 gigawatts of installed renewable capacity already far exceed the combined portfolios of peers Shell, BP, Equinor and Eni.

But this month, Brent crude dropped below $70 per barrel from over $90 in April, prompting some analysts to cut share price forecasts on oil and gas producers and worry the firms may have to slow dividend payouts and share buybacks.

TotalEnergies, the only European major not to cut dividends during the COVID crisis, will highlight projects launched this year in Angola, Brazil and Suriname, which produce oil at low cost - in some cases under $20 per barrel - as evidence it can continue to pay out through the downturn.

"We view Total's $8 billion annual buyback as more resilient than peers' and broadly sustainable at oil prices above $70 per barrel," said HSBC analyst Kim Fustier in a note ahead of the meeting.

TotalEnergies is also protecting itself from market fluctuations by signing long-term liquefied natural gas (LNG) sales agreements pegged to oil and U.S natural gas prices.

The company is the top exporter of U.S. gas, with about 10 million metric tons of U.S. LNG under contract.

That position - set to grow through 2030 - could become a liability as global gas prices fall in 2026 and 2027 when more LNG export projects come online, and as European Union decarbonization policies render future demand there uncertain.

"With the addition of Rio Grande, Costa Azul and the Cameron LNG expansion in its portfolio, its short position does look set to grow," RBC analyst Biraj Borkhataria said in a note last week, referring to a growing gap between TotalEnergies' supplies and confirmed buyers.

But six long-term LNG contracts signed this year totaling 4.65 million tons annually ensure the company has customers paying above its costs for its fuel beyond 2030.

To balance out the remaining volumes it takes at prices pegged to the U.S. Henry Hub benchmark, TotalEnergies also purchased stakes in two upstream U.S. gas fields, giving it access to cheaper volumes it can profitably sell should Henry Hub prices rise.

Those additions mean "they are still short over time, but (the gap is) getting smaller," Borkhataria told Reuters this week.

TotalEnergies' Mozambique LNG project, which is still included in company calculations on annual growth despite being frozen under force majeure since 2021, remains a worry.

Criminal complaints and investigations in France are ongoing on Total's possible liability for deaths near the project. Total has denied wrongdoing.

Reporting by America Hernandez
Editing by Mark Potter

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