2022: a banner year for TotalEnergies’profit with LNG as a trump card for further growth

France’s energy giant TotalEnergies has increased its annual profits in 2022 on the back of elevated energy prices, higher LNG sales and a ramp-up of hydrocarbon production. The French player plans to leverage and strengthen its position in Europe by pursuing further growth in liquefied natural gas (LNG) projects.

The global energy crisis in 2022 led to higher energy prices, tight supply and increased demand for oil and gas production, which enabled energy companies to bolster their profits, as confirmed by the quarterly and annual results provided by BP, Shell, Chevron and ExxonMobil. These oil majors posted all-time-high profits of $27.7 billion, $39.9 billion, $35.5 billion and $55.7 billion, respectively.

TotalEnergies revealed on Wednesday, 8 February 2023, that it recorded a net income of $3.3 billion in the fourth quarter of 2022 – including the $4.1 billion impairment related to the deconsolidation of Novatek at year-end 2022 – compared to a net income of $9.9 billion in the third quarter of 2022 and $5.8 billion in the fourth quarter of 2021. The firm also disclosed a net income of $20.5 billion for the full-year 2022 – including nearly $15 billion in provisions related to Russia for an adjusted net income of $36.2 billion – compared to $16 billion for the full-year 2021.

Patrick Pouyanné, CEO of TotalEnergies, commented: “While down from the previous quarter highs due to uncertainties about the demand outlook, fourth quarter oil and gas prices, as well as refining margins, remained strong in supply-constrained markets.” Pouyanné further added that TotalEnergies reaped the benefits from “this favourable environment as well as the increase in its hydrocarbon production (+5 per cent) and LNG sales (+22 per cent), thanks to its unique position in Europe.”

The French giant’s adjusted net operating income was $7.6 billion in 4Q 2022, compared to $10.3 billion in 3Q 2022 and $10.4 billion in 4Q 2021. TotalEnergies posted an adjusted EBITDA of $16 billion for the fourth quarter of 2022 and $71.6 billion for the full-year 2022. Furthermore, the company’s cash flow from operations was $5.6 billion in 4Q 2022, compared with $17.8 billion in 3Q 2022 and $30.7 billion in 4Q 2021. The cash flow from operations for full-year 2022 was $47.4 billion, up 56 per cent compared to 2021.

In line with this, the iGRP – integrated Gas, Renewables & Power – segment reported an adjusted net operating income of $2.9 billion this quarter, up 5 per cent year-on-year, mainly due to the growing contribution of the Integrated Power business. The firm’s iGRP operating cash flow before working capital changes was $3.1 billion, up 28 per cent year-on-year, mainly due to the performance of the Integrated LNG business, which benefited from higher prices and the growing contribution of the Integrated Power business.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

The iGRP’s adjusted net operating income for full-year 2022 was $12.1 billion, up 95 per cent year-on-year, thanks to its integrated LNG portfolio, in particular its regasification capacity in Europe, which positioned it to capture the benefit of the favourable pricing environment, and thanks to the growth of the Integrated Power business, while the iGRP operating cash flow before working capital changes was $10.8 billion in 2022, up 76 per cent year-on-year, for the same reasons.

Pouyanné underscored that the firm “took full advantage of its global LNG portfolio. The Integrated Power activity (covering the electricity and renewables business) generated $1 billion of cash flow over the year, with the production of 33 TWh up 57 per cent, and nearly 17 GW of gross renewable capacity installed at the end of 2022.”

In a bid to ensure a better understanding of the growth strategy of LNG and electricity/renewables, TotalEnergies’ board of directors decided that iGRP’s results will separately report the contributions of the Integrated LNG and Integrated Power activities from the first quarter of 2023.

On the other hand, TotalEnergies’ CEO explained that the firm’s Exploration & Production segment posted an adjusted net operating income of $3.5 billion and cash flow of $5.0 billion in the fourth quarter, “raising its strong full-year contribution to the company’s cash flow to $26 billion in 2022. Two new discoveries, in Cyprus and Brazil, add to the discoveries already made in Namibia and Suriname in 2022.”

In pursuit of implementing its strategy to invest in low-cost and low-emission oil projects, TotalEnergies approved a final investment decision (FID) last month for the Lapa South-West oil development project located in the Santos Basin, 300 km off the coast of Brazil. In addition, the French player announced its entry to the Agua Marinha offshore exploration block in Brazil and launched exploration activities on Block 9 in Lebanon.

“In line with the policy announced in September 2022, TotalEnergies implemented a balanced cash allocation in 2022, between shareholders (37.2 per cent payout), investments ($16.3 billion or 36 per cent of cash flow, including $4 billion in low-carbon energies), and deleveraging (reducing net debt by $12.2 billion, or 27 per cent of cash flow) to end 2022 with gearing of 7 per cent,” added Pouyanné.

TotalEnergies’ CEO underlined that governments also “benefited from more than $33 billion in taxes worldwide, more than double the amount in 2021, mostly paid to producing countries.” Regarding the firm’s decarbonization efforts, the French player inked a memorandum of understanding with Holcim for a pilot project to decarbonise a cement plant in Belgium and obtained two permits for CO2 storage in the North Sea, Denmark.

The hydrocarbon production was 2,812 thousand barrels of oil equivalent per day (kboe/d) in the fourth quarter of 2022, down by 5 per cent on a quarter-on-quarter basis, benefiting from projects ramp-up at Mero 1 in Brazil, Ikike in Nigeria, resumption of production from Kashagan in Kazakhstan, lower planned maintenance – notably on Ichthys in Australia – and despite the disposal of Termokarstovoye in Russia.

Moreover, the hydrocarbon production was 2,765 kboe/d in 2022, down 2 per cent year-on-year. This is comprised of +3 per cent due to start-ups and ramp-ups, notably CLOV Phase 2 and Zinia Phase 2 in Angola, Mero 1 in Brazil and Ikike in Nigeria; and +2 per cent due to the increase in OPEC+ production quotas.

Additionally, this includes a -3 per cent portfolio effect, notably related to the end of the operating licenses for Qatargas 1 and Bongkot North in Thailand, as well as the effective withdrawal from Myanmar, the exit from Termokarstovoye and Kharyaga in Russia, partially offset by the entry into the Sépia and Atapu producing fields in Brazil; -1 per cent due to security-related production cuts in Libya and Nigeria; -1 per cent due to price effect; and -2 per cent due to the natural decline of the fields.

The LNG production in 4Q 2022 was 4.4 Mt, up 10 per cent from the previous quarter, benefiting from a full quarter of production from Ichthys LNG in Australia after planned maintenance in the third quarter. However, production declined by 2 per cent over the year, despite the restart of Snøhvit in Norway, in the second quarter, due to the end of the Qatargas 1 operating license and supply issues at Nigeria LNG. The firm’s total LNG sales were up 22 per cent in the quarter and 15 per cent in the year, supported by strong LNG demand in Europe.

TotalEnergies’ adjusted net operating income for Integrated LNG was $11.2 billion in 2022, double the $5.6 billion contribution in 2021, as the integrated LNG portfolio, in particular, its regasification capacity in Europe was well-positioned to capture the benefit of the favourable pricing environment. The company’s cash flow from Integrated LNG was $9.8 billion in 2022, up nearly 80 per cent from the $5.5 billion contribution in 2021, for the same reason.

Meanwhile, gross installed renewable power generation capacity reached 16.8 GW at year-end 2022, up 6.5 GW year-on-year, including nearly 4 GW from the acquisition of 50 per cent of Clearway Energy Group in the United States and 0.8 GW from the start-up of the Al Kharsaah photovoltaic project in Qatar. Net electricity generation stood at 9.4 TWh in the quarter and 33.2 TWh in 2022, up 57 per cent year-on-year, thanks to higher utilisation rates of flexible power plants (CCGT) as well as a 53 per cent increase in generation from renewable sources.

The French player’s adjusted net operating income of Integrated Power was $1.0 billion in 2022, up nearly 60 per cent from the $0.6 billion contribution in 2021, driven by growth in power generation, while its cash flow from Integrated Power was $1.0 billion in 2022, up nearly 50 per cent from the $0.7 billion contribution in 2021, for the same reason.

Regarding its outlook for 2023, TotalEnergies points out that oil prices are moving between $80-90/b at the start of 2023 in an uncertain environment, where the recovery of China could counterbalance the possible worldwide economic slowdown, thus, global demand is expected to rise in 2023 to more than 100 Mb/d.

In this context, the French player outlines that OPEC+ countries have shown their willingness to keep prices above $80/b. Refining margins in Europe, particularly for distillates, are expected to remain supported by the effects of the European embargo on Russian petroleum products from 5 February 2023.

The company claims that the tensions, which left their mark on European gas prices in 2022, are expected to continue into 2023, as the limited growth in global LNG production is supposed to meet both higher European LNG demand to replace Russian gas received in 2022 and higher Chinese LNG demand. In 2023, TotalEnergies expects net investments of $16-18 billion, including $5 billion dedicated to low-carbon energies.

TotalEnergies expects its hydrocarbon production to increase by approximately 2 per cent to 2.5 Mboe/d in 2023, driven by three start-ups planned for the year: Block 10 in Oman, Mero 2 in Brazil, and Absheron in Azerbaijan. Continuing its growth momentum in LNG, the oil major is putting the wheels into motion to strengthen its position in Europe in 2023 with the commissioning of two floating regasification terminals, the first of which, located in Lubmin, Germany, is already operational.

Having generated $1 billion in cash flow in 2022, the firm predicts that its Integrated Power business will continue to grow in 2023 with power generation expected to reach more than 40 TWh, a 30 per cent increase year-on-year, benefiting from the full integration of Total Eren, leading to a comparable rise in cash flow.

Multiple NGOs and environmental activists have expressed their outrage at the record profits that oil and gas companies made in 2022 due to the cost of living crisis and inflation. Just like other oil majors, TotalEnergies is on the receiving end of such criticism.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

While commenting on the annual profit TotalEnergies posted for 2022, Global Witness – an international NGO, says that this is enough to pay all of the EU’s military and financial aid to Ukraine, as well as all aid from individual EU Member States, including France.

The NGO notes that the French oil major’s profits for the fourth quarter of 2022 added to a banner year for the company, which saw “a 100 per cent jump in profits compared to 2021.” Global Witness claims that these profits have been caused by high oil and gas prices, largely driven by Russia’s invasion of Ukraine.

The NGO further outlined that TotalEnergies dragged its feet rather than pulling out of its Russian operations, committing to withdraw in December 2022 “after its Russian operations were accused of supplying the Russian military. Last month, a French legal complaint against Total for complicity in war crimes was dismissed, although lawyers for the complainants have pledged to appeal.”

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Global Witness believes that the EU and its Member States have rightly provided significant aid to Ukraine – €31.5 billion in 2022 alone –  which included €15.6 billion in military, financial and other emergency assistance from the EU and another €15.9 billion directly from the EU countries like France. 

Jonathan Noronha-Gant, Global Witness, Senior Campaigner, remarked: “The generosity of European taxpayers vs. the avarice of Total – could the contrast be any more stark? Total’s record-breaking profits will leave a bitter taste for many across Europe struggling with energy poverty.

“Everyone across France can see a direct line between Total’s profits and the misery of people across Ukraine and across the continent. It is time the French government took action and Total was made to pay its fair share.”