TotalEnergies to lay out plans with fate of Russian assets in focus

The French energy giant holds stakes in Novatek and several Russian Arctic natural gas projects.

By Benjamin Mallet, Reuters - September 26, 2022
The TotalEnergies logo sits on the company’s headquarter skyscraper in the La Defense business district in Paris, France on March 24, 2022. (Benoit Tessier / Reuters File Photo)

PARIS — French oil and gas major TotalEnergies is expected to lay out its strategy for a possible future without Russia at an investor presentation this week, with shareholders also hoping the group will increase the amount of money it plans to return to them.

Unlike London-based rivals BP and Shell, the French group has held on to several investments in Russia, including minority stakes in Russia’s Novatek, Yamal LNG and Arctic LNG 2.

But the French firm, which will make its presentation in New York on Wednesday, has said it will not invest in new projects in Russia and will phase out purchases of Russian oil by the end of 2022.

Despite record profits, its shares have barely risen this year, compared to rises of around 20 percent for Shell and BP.

Analysts attribute that to uncertainty over what the company will do with its Russian assets and the hit from a possible European Union windfall tax for energy groups that have benefited from soaring energy prices.

TotalEnergies Chief Executive Patrick Pouyanne has said such a tax could cost his company more than 1 billion euros ($969 million).

The French firm has set aside $7.6 billion this year to cover for potential losses due to Western sanctions on Russia.

Russia accounted for around 5 percent of the company’s employed capital — or around $7 billion — and contributed around $1.2 billion to its cashflow in the first half of this year.

The group is betting on growing demand for liquefied natural gas as Europe scrambles to replace Russian supplies. But stopping new investment in Russia will undermine the firm’s goal of lifting LNG production by 30 percent by 2025, analysts say.

The Arctic LNG 2 facility in Russia was expected to start operations in 2023 but the project is now on hold.

Jefferies analysts forecast TotalEnergies will only increase production by 14 percent in 2026 and may have to roll-over its current LNG output targets to 2027, based on the end to new Russian investments and a likely delay to an LNG project in Mozambique.

Analysts at Cowen also see a delay in achieving the company’s goal of increasing cashflow by $5 billion between 2021 and 2026. It expects that target to be reached in 2027.

As it looks to diversify away from Russia, the group said on Saturday it would invest $1.5 billion in a LNG facility in Qatar.

Investors also want to know whether TotalEnergies will increase a planned $2 billion share buyback in the fourth quarter, stick to its pledge to raise its dividend by 5 percent and switch to paying dividends in U.S. dollars rather than euros.