The shareholders' newsletter #66 - Summer 2021

Analysis & Outlook by Jean-Pierre Sbraire Group Chief Financial Officer

ANALYSIS & OUTLOOK

© Lutt Julien - Capa - TotalEnergies

The Integrated Gas, Renewables & Power segment has achieved an adjusted net operating income of 1 billion dollars its highest ever on record.

By Jean-Pierre Sbraire,
Chief Financial Officer

In the first quarter, the Company fully benefited from rising oil and gas prices, up 38% and 24% respectively compared to the 4th quarter 2020, and its strategy to grow
Liquefied Natural Gas (LNG) and Renewables and Electricity

The Company reported adjusted net income of $3 billion, above the pre-crisis first quarter of 2019, despite a less favorable environment by taking advantage of the action plans implemented during the crisis. Cash-flow (DACF*) increased to $5.8 billion and gearing already decreased to less than 20% in the first quarter of 2021. The Board of Directors confirms the objective of anchoring the Company's gearing sustainably below 20%. The organic cash break-even was less than $25 per barrel in the first quarter.

The Integrated Gas, Renewables & Power (iGRP) segment reported adjusted net operating income of $1 billion, the highest in its history, and generated cash-flow of more than 
$1 billion, thanks to growing LNG sales and the positive contribution from Renewables and Electricity. Over the past year, gross installed renewable power generation capacity grew from 3 GW to 7.8 GW, renewable power production more than doubled, net power production increased by more than 60% and the Company now has more than 5 million customers in France.

With an adjusted net operating income of $2 billion, Exploration & Production fully captured the higher oil price and provided a strong cash-flow contribution of $3.8 billion.

The improved Upstream environment contrasts with depressed European refining margins, down 80% from a year ago, reflecting weak demand for petroleum products.

Downstream adjusted net operating income was more than $500 million, supported by strong petrochemicals performance and resilient Marketing & Services. 

Faced with uncertainties in the environment, the Company maintains spending discipline with an operating cost savings target of $0.5 billion in 2021 and production costs close to $5 per barrel of oil equivalent. Net investments are expected to be between $12-13 billion in 2021, half to maintain the Company’s activities and half for growth. Nearly 50% of these growth investments will be allocated to renewables and electricity. 

In a 2021 hydrocarbon price environment maintained at the level of the first quarter (Brent at $60 per barrel, European gas at $6 per MBtu), and with European refining margins at $10-15 per ton, the Company would expect to generate cash flow (DACF*) on the order of $24 billion in 2021 and a return on capital employed of close to 10%. 

The Company confirms its priorities in terms of cashflow allocation: investing in profitable projects to implement its strategy to transform the Company into a broad-energy company, supporting the dividend through economic cycles, and maintaining a solid balance sheet with a minimum long-term “A” rating, by deleveraging to anchor the net debt-to-capital ratio sustainably below 20%.

*Debt-adjusted cash flow (DACF)

Net-debt-to-capital ratio

The net debt divided by (net debt + equity Shareholders’ equity + non-controlling interests). This ratio is used to compare the net financial debt of the company with its equity.