Upstream Focus
TotalEnergies is set to emphasize the growth and longevity of its upstream segment during its investor day. The French major is confident in the potential of oil and gas to drive profitability. With successful exploration efforts, the company has added new oil projects and expanded its liquefied-natural-gas portfolio, including the Rio Grande project in Texas. Analysts at HSBC predict that TotalEnergies will raise its annual production growth guidance. Furthermore, the company has announced plans for a $9 billion oil project off the coast of Suriname. Analysts anticipate a significant focus on exploration activities off the coast of Namibia, which may lead to a major oil discovery.
Low-Carbon Strategy
Analysts suggest that TotalEnergies has the potential to enhance its low-carbon objectives in light of recent partnerships with European Energy and Adani Green Energy. However, investors are seeking greater clarity regarding the financial returns, particularly given the challenges in the supply chain and cost pressures impacting sectors like wind power, as stated by HSBC.
Shareholder Support for Climate Resolutions
HSBC’s analysis of oil majors’ Annual General Meetings (AGM) votes reveals a strong correlation between increased shareholder support for activist climate resolutions and a higher allocation of funds towards low-carbon endeavors. Kim Fustier, the head of European oil-and-gas research at HSBC, mentions in a note that this indicates TotalEnergies’ transition to renewables is driven, at least in part, by non-financial factors.
Shareholders Remuneration: A Profitable Strategy
According to analysts, the company is expected to uphold its payout policy, which involves distributing 35%-40% of cash flow from operations to shareholders. However, there is also the possibility of a significant increase of over 40% in 2024, provided that the macroeconomic outlook remains favorable.
Ensuring the best interests of shareholders, the distribution framework currently in place offers robust returns throughout different economic cycles. Moreover, it offers investors reasonable visibility, eliminating the need for any immediate alterations. In a research note, Biraj Borkhataria from RBC Capital Markets voiced confidence in this framework’s ability to provide satisfactory returns while maintaining stability.
As for buybacks, while a formal commitment may be postponed, there is a likelihood that the company will express its intention to sustain a regular buyback program of $8 billion per year until 2024.
Renumeration and Buyback: A Long-Term Commitment
Even though changes to the payout policy or buyback program are not urgently required, the company aims to keep shareholders informed and aligned with its long-term objectives.
Strategically managing its financial resources, the company has consistently allocated a significant portion of cash flow from operations to pay dividends to shareholders. By maintaining this practice, shareholders can expect consistent returns over time.
Additionally, the company has recognized the importance of buybacks in creating shareholder value. While a more formal buyback commitment may be deferred, the company intends to continue repurchasing shares at an annual rate of $8 billion until 2024.
Conclusion
In summary, the company’s focus on enhancing shareholder value remains steadfast. The existing payout policy effectively ensures healthy returns for shareholders, while providing investors with stability and predictability. Furthermore, the company aims to sustain its buyback program in order to further support shareholder interests.