TotalEnergies, has generated cash flow of $6.8 billion as it unveiled its 2021, Q2 and H1 financial reports.
The figure is an increase of more than $1 billion compared to the previous quarter, and, by maintaining investment discipline, generated net cash flow of $3.2 billion this quarter, which covered the interim dividend of $2.1 billion and allowed continued debt reduction, with gearing falling to 18.5 per cent below the announced objective of 20 per cent.
The organic cash breakeven was below $25/b for the quarter.
The Board of Directors of TotalEnergies meeting on July 28, 2021, under the chairmanship of Chairman and Chief Executive Officer Patrick Pouyanné, approved the Company’s second quarter 2021 accounts. On this occasion, Patrick Pouyanné said: “In the second quarter, thanks to the progressive recovery of global demand and OPEC+ discipline, TotalEnergies benefited from oil and gas markets that were 13 per cent and 28 per cent higher respectively quarter to quarter.
In this context, TotalEnergies reported $3.5 billion of adjusted net income, a 15 per cent increase compared to the first quarter 2021 and above the level of the pre-crisis second quarter 2019 which had a comparable oil price environment, notably thanks to the action plans implemented during the crisis.
Given the strong second quarter results, the Board of Directors decided to distribute a second interim dividend for 2021, stable at € 0.66/share.
In addition, given the high hydrocarbon prices and gearing below 20 per cent in the respect of the strategy of TotalEnergies and consistent with the cash flow allocation scheme presented in February 2021, the Board of Directors decided to allocate up to 40 per cent of the additional cash flow generated above $60/b to share buybacks.
The iGRP segment confirmed its first quarter performance with adjusted net income and cash flow of around $900 million.
Growth in Renewables and Electricity continued with more than 500 MW of gross renewable power generation capacity commissioned in the quarter and the acquisition of a stake in a 640 MW offshore wind project under construction in Taiwan.
Exploration and Production fully leveraged the higher Brent price and, despite lower production in the second quarter, mainly due to planned maintenance, reported increases of about 10 per cent over the previous quarter in adjusted net operating income and cash flow to $2.2 billion and $4.3 billion, respectively.
Downstream delivered very good performance, thanks to the strength of its integrated model, which allowed it to benefit from very high margins in petrochemicals and the rebound of Marketing & Services results to pre-crisis results, despite depressed European refining margins. Downstream adjusted net operating income and cash flow increased by about 70% to $900 million and $1.5 billion, respectively.”
In a context of rebounding global demand for petroleum products, OPEC+ quotas in the first half 2021 contributed to a rapid drawdown of crude oil inventories, which fell below the average of the past five years. The price of oil has remained above $60/b since the beginning of February 2021 and broke through $70/b at the end of June. Recent OPEC+ decisions reinforce its collective discipline to adapt supply step by step to the growth in demand.
Given the outlook for OPEC+ quotas in the second half 2021, TotalEnergies anticipates its full-year 2021 hydrocarbon production to be around 2.85 Mboe/d. The start-up and ramp-up of new projects, including Zinia Phase 2 in Angola, North Russkoye in Russia and Iara in Brazil, will contribute to increased production in the second half 2021.
TotalEnergies anticipates that the higher oil prices observed in the first half 2021 will have a positive impact on its average realized price of LNG for the coming six months, given the lag effect on price formulas. It is expected to be more than $7.5/Mbtu in the third quarter 2021. In addition, gas markets in Asia and Europe are benefiting from the strong growth in demand linked to the global economic recovery.
TotalEnergies maintains discipline on expenses, with net investments expected to be between $12-13 billion in 2021, with half dedicated to future growth. For those growth investments, 50% will be dedicated to renewables and electricity.
In an environment of hydrocarbon prices that would remain in the second half of the year at the level of the first half ($65/b for Brent, $8/Mbtu for gas in Europe) and European refining margins of $10-15/t, TotalEnergies expects cash flow generation (DACF) of more than $25 billion in 2021 and a return on capital employed of more than 10 per cent.
In this favorable context, the Company confirms its priorities in terms of cash flow allocation: invest in profitable projects to implement TotalEnergies’ transformation strategy to a broad energy company, support the dividend through economic cycles, maintain a solid balance sheet and a minimum “A” long-term debt rating by sustainably anchoring the Company’s gearing below 20 per cent and share additional revenues with its shareholders through share buybacks in the event of high prices.