5[ozgj0jb(lpo9f}]6r(e{61_media_dl_1.png Company reportsArticle content
(Bloomberg) — TotalEnergies SE is under mounting pressure to show it can sustain payouts and deliver returns from its push into low-carbon energy as debt climbs and shares lag behind peers.
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The French supermajor on Wednesday announced it was cutting its quarterly stock repurchase program to $1.5 billion from $2 billion and warned they could fall as low as $750 million next year.
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On Monday, Chief Executive Officer Patrick Pouyanné will meet investors and analysts in New York with a host of thorny questions to address: an underperformance of the firm’s shares against peers, as well as France’s CAC 40 index; ballooning debts; whether a refocus to oil and gas — like rival BP Plc is attempting — might be necessary. Even political chaos in France is on the agenda for some investors at home.
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At the same time, the 62-year-old CEO has poured capital into onshore and offshore wind, solar and batteries — so far without stellar returns. The shift appeals to some European investors but leaves others questioning profitability compared with its traditional hydrocarbon projects.
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“There’s been some disappointment on first-half cash flows, and hence on metrics like net debt,” said Pierre Alexis Dumont, chief investment officer at Sycomore Asset Management in Paris.
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There will also be pressure to give a timeline of oil and gas projects that will feed cash flow in coming years, progress on divestments and so-called farm-downs of up to 50% stakes in renewables assets.
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Wednesday’s decision to cut buybacks is designed to help TotalEnergies to contend with a net debt that about doubled to $26 billion in the 12 months through June, and a challenging outlook for the oil market, in which the International Energy Agency is anticipating a record supply-demand surplus next year. A glut in liquefied natural gas is also looming in a few years as Total and rivals are building new export facilities in the US, Qatar and elsewhere.
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“Without clear communication on profitability or capital discipline, its diversification is no longer reassuring investors, but instead making them nervous,” Isabelle Zhang, an analyst at AlphaValue, said in a note. “Without clear monetization of low-carbon investments or margin recovery in LNG and Downstream, the equity may increasingly be valued not as a ‘green premium,’ but as a conglomerate discount.”
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To curb borrowings, Pouyanné said in July that Total may divest $3.5 billion of assets by the end of the year. That would include new stake sales of solar and wind projects at various stages of development with a view to boosting the firm’s return on green investments. That’s as the firm has gone deeper into renewables than its European peers BP Plc and Shell Plc.