TotalEnergies widens capex budget

TotalEnergies has raised its investment budget for the next few years against the backdrop of high oil prices and strong refining margins.

The company now sees net investment — organic capital expenditure (capex) plus acquisition spending minus divestment proceeds — increasing to $14bn-18bn/yr in 2022-25. A year ago, the budget for the same period was a leaner $13bn-15bn/yr.

The additional spending will primarily be directed towards carbon-free energy sources and decarbonisation programmes. The company expects its wind and solar investments to exceed $4bn this year, $1bn more than last year. And it has set out a $1bn energy savings programme spanning 2023-24 designed to control energy consumption costs and reduce emissions.

This does not mean the company is neglecting its core oil and gas business, according to chief executive Patrick Pouyanne. "It's a balanced strategy," he said. "It's not only renewables, forget that."

TotalEnergies expects its oil production to be stable at 1.3mn-1.35mn b/d over 2022-27. The figure, which excludes condensate and associated natural gas liquids, is in line with output in the first half of this year. Concern over the impact of cost inflation is partly why the firm is not targeting growth in oil output. "I am more comfortable to say today, I will maintain my production and manage the cost, rather than to say, we have to do it [grow production]," Pouyanne said.

TotalEnergies plans to start up over 30 "short-cycle" oil and gas projects containing a combined 1.5bn bl of oil equivalent (boe) in 2023-26. Roughly 75pc of the 1.5bn boe is oil, and the average capex for these projects will sit below $4/boe. The firm expects the projects to generate over $1bn/yr from 2024, assuming a $50/bl oil price. In general, the firm intends to focus its oil and gas investment on projects that break even after tax at a $30/bl oil price.

Zero net debt

Pouyanne said he expects the company to be able to reduce its net debt to zero by the middle of next year, helped by capital discipline. The firm is not banking on high oil prices to grow its cash flow either. It expects underlying cash flow, excluding contributions from Russia, to be $4bn higher in 2027 than it was last year, assuming moderate energy price assumptions of $50/bl for oil and $8/mn Btu for European gas.

This cash flow growth will support higher dividends over the next five years, the company said. It is aiming to pay 35-40pc of its cash flow to shareholders, and it is maintaining the $7bn share buyback programme it announced in July.

By Ruxandra Iordache