KEY POINTS
- TotalEnergies CEO to address investors about sustaining returns.
- Brent crude prices fall, pressuring oil and gas producers.
- Mozambique LNG project remains stalled due to legal issues.
Fresh off a flight from Suriname, TotalEnergies CEO Patrick Pouyanné is expected to tell investors in New York on Wednesday that the energy giant can maintain returns through 2030, despite falling prices, due to low-cost oil projects like its recent venture in the South American country.
Pouyanné to update investors on cross-listing and U.S. expansion
Pouyanné has also promised an update on the French company’s plans to cross-list shares in New York, where U.S. investors now make up the majority of shareholders. After years of investor pressure to shift towards green energy, TotalEnergies is now unabashedly concentrating on growing its core business, with its 24 gigawatts of installed renewable capacity surpassing the combined portfolios of Shell, BP, Equinor, and Eni.
According to a report by Reuters, Brent crude dropped below $70 per barrel from over $90 in April, prompting some analysts to lower share price forecasts for oil and gas producers and worry about potential slowdowns in dividend payouts and share buybacks. TotalEnergies, the only European major not to cut dividends during the COVID-19 crisis, will highlight projects launched this year in Angola, Brazil, and Suriname, which produce oil at low costs—in some cases under $20 per barrel—as proof 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,” HSBC analyst Kim Fustier said in a note ahead of the meeting.
TotalEnergies plans resilient returns despite oil price drop
TotalEnergies is also insulating itself from market fluctuations by signing long-term liquefied natural gas (LNG) sales agreements linked 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.
This position, projected to increase through 2030, could potentially become a liability as global gas prices decline in 2026 and 2027 due to the addition of more LNG export projects and as the European Union’s decarbonization policies create uncertainty about future demand in the region.
“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.
LNG strategy and Mozambique challenges loom for TotalEnergies
However, six long-term LNG contracts signed this year, totalling 4.65 million tons annually, ensure the company has customers paying above its costs for fuel beyond 2030. To balance the remaining volumes linked to the US Henry Hub benchmark, TotalEnergies has also acquired stakes in two upstream U.S. gas fields, securing access to cheaper volumes that can be sold profitably if Henry Hub prices rise.
These additions mean “they are still short over time, but (the gap is) getting smaller,” Borkhataria said.
Despite being under force majeure since 2021, TotalEnergies’ Mozambique LNG project continues to be a concern in annual growth estimates. Criminal investigations in France regarding TotalEnergies’ potential liability for deaths near the project are ongoing. The company has denied any wrongdoing.
