TotalEnergies Improved Strategy Pays Off, Accelerates Transition
TotalEnergies' Board of Directors has reviewed the company's outlook in the context of changing energy markets due to the energy transition.
The Board of Directors noted the relevance of TotalEnergy’s balanced multi-energy strategy in light of the developments in the oil, gas, and electricity markets.
Thanks to refocusing the portfolio of oil and gas assets and projects on a low cost – less than $20 per barrel, a strong growth strategy in LNG to position itself among the top 3 worldwide, and the accelerated development into electricity, mainly renewable to reach the top 5 worldwide, the company is in a very favorable position to benefit from the evolution of energy markets.
With a breakeven anchored below $25 per barrel, TotalEnergies is a much more profitable company today than it was 10 years ago. Namely, at the same oil equivalent price, it generates an additional $15 billion of cash flow and can take full advantage of favorable environments. It is currently positioned to both accelerate its transformation strategy and offer an attractive return to the shareholder policy.
Also, TotalEnergies expects underlying cash flow (excluding Russia) to grow by $4 billion over the coming 5 years using moderate energy price assumptions of $50 per barrel for oil and $8 per Mbtu for European gas, knowing that it would generate an additional cash flow of more than $3 billion for every $10 per barrel increase in the price of oil. This structural cash flow growth will support dividend growth over the next 5 years.
In this context, the Board of Directors has adopted a cash flow allocation strategy for the coming years. It provides for the allocation of 35-40 percent of cash flow to shareholders through the cycles while accelerating the company's transformation strategy with net investments increasing to $14-18 billion per year over 2022-25.
This increase will be dedicated in priority to the development of carbon-free energies and carbon footprint reduction programs which will represent about a third. Investments in solar and wind will exceed $4 billion in 2022 (compared to $3 billion in 2021) and a $1 billion energy savings program will be deployed globally in 2023-24 to control the cost of energy consumed and accelerate the reduction of emissions.
The remaining two-thirds will be dedicated to, on one hand growing LNG, and on the other developing low-cost, low-emission oil projects to meet demand.
Confident in TotalEnergies' ability to ensure profitable and sustainable growth in the coming years and seeking to share with its shareholders the company's results in this context of high prices, the Board of Directors has decided to allocate through the cycles 35-40 percent of cash flow to shareholders and maintain the $7 billion share buyback program for the year 2022. The return to shareholders should therefore represent between 35 and 40 percent of cash flow as of 2022.
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