Francois de Beaupuy, Bloomberg News
EnergiesNet.com 04 27 2023
TotalEnergies SE reported a smaller-than-expected decline in first-quarter profit and offered more generous shareholder returns after announcing the sale of its carbon-intensive Canadian oil sands business to Suncor Energy Inc.
The French company kicks off a Big Oil earnings season that’s expected to deliver sizable cash flows despite the decline in energy prices from the highs reached last year following Russia’s invasion of Ukraine. So far, companies have been using the profit bonanza to reward investors and pay down debt, leaving analysts speculating about whether they could pivot to pursue faster growth through big deals.
In fact, TotalEnergies agreed to sell assets to Suncor for C$5.5 billion ($4 billion) in cash, with potential for additional payments up to C$600 million depending on prices and production levels, according to a separate statement. The French company had initially planned to spin off a stake in these operations on the Toronto Stock Exchange.
The proceeds of this divestment could be used to boost investor returns. TotalEnergies will allocate at least 40% of the cash flow from its operations this year to shareholders, at the high end of the previously announced 35% to 40% range, according to the statement. This will be done through share buybacks or a special dividend.
The transaction, which may be completed at the end of the third quarter, is subject to regulatory approval and TotalEnergies EP Canada Ltd.’s partners waiving pre-emption rights.
TotalEnergies’s first-quarter adjusted net income fell to $6.54 billion, down 27% from a year earlier, the company said in the statement on Thursday. That beat the average analyst estimate of $6.29 billion. Stronger refining margins in Europe, amid a ban on the import of Russian oil products, mitigated a broader decline in energy prices and lower sales of liquefied natural gas.
TotalEnergies was trading 0.7% lower at 9:22 a.m. in Paris Thursday.
Refining margins are now easing as economic growth slows and supply routes have been reorganized following the European embargo on Russian oil products, the French major said in its statement. But gas prices may rebound in the second half as Europe rebuilds stockpiles ahead of winter and Chinese demand recovers.
The company reiterated that it will buy back $2 billion of its shares in the second quarter, after repurchasing the same amount in the first three months of the year. It also confirmed a 7.25% increase in its quarterly dividend for 2023.
The Suncor announcement comes a month after Total agreed to sell gasoline stations in several European countries to Canadian convenience-store operator Alimentation Couche-Tard Inc. for €3.1 billion ($3.3 billion).
The French major has also spent almost $3.3 billion in the first quarter to complete the purchase of stakes in a liquefied natural gas project in Qatar, in oil fields in the Emirates, and in a Brazilian wind farm developer.
TotalEnergies maintained its plan for $16 billion to $18 billion of capital expenditure this year, including $5 billion in low-carbon energies such as wind, solar and bio-methane.
04 27 2023