LNG to drive TotalEnergies’ growth

French energy giant TotalEnergies said it plans to increase its production by 30% before 2030, with half of this growth coming mainly from renewables-powered electricity and half from LNG.

The company’s sales mix would evolve to 30% oil, 50% gas, 15% electricity and 5% biomass and hydrogen by 2030, TotalEnergies said on Tuesday after revealing its new corporate strategy.

Also, petroleum product sales will decrease by at least 30% over the period 2020-30.

TotalEnergies said it would maintain discipline on its investment program, which will be $13-15 billion per year for 2022-25 and would allocate 50% of these investments to growing its activities and 50% to maintaining the base of its activities.

In addition, the firm would dedicate 50% of the growth investments to the development of new energies, mainly renewables and electricity, and the other 50% to natural gas, essentially LNG.

TotalEnergies added it is “fully engaged” toward its ambition to get to net zero by 2050 together with society.

Production to grow on LNG

Upstream production should grow by about 3% per year by 2026, driven by LNG which should grow by 6% per year, according to TotalEnergies.

The company’s oil production will reach its peak during the decade before declining.

Over 2022-26, E&P will generate more than $5 billion per year of free cash flow at $50/b, with additional cash flow of $3.2 billion for a $10/b increase in Brent and $0.6 billion for a $1/Mbtu increase in European and Asian gas indexes.

In downstream, TotalEnergies will continue its policy of adapting its industrial and marketing facilities to anticipate the decline in petroleum product demand, particularly in Europe, with the objective of aligning its refining capacities and petroleum product sales to the level of its oil production by 2030.

LNG production to rise 30% by 2025

In a LNG market growing on average 5-7% per year at a global scale, TotalEnergies’ LNG production is expected to increase by 30% by 2025 and sales to reach 50 Mt/y, equivalent to 10% of the world market at that time, the firm said.

The diversification of LNG outlets would allow continued value creation from global scale and arbitrage. Accelerating decarbonization of the LNG chain, with a focus on reducing methane emission, is a priority with the ambition of reducing full-chain intensity by 20% by 2030, it said.

Furthermore, TotalEnergies will scale up biogas, targeting 2 TWh/y production by 2025 and has the ambition to develop in clean hydrogen.

Scaling up renewables and electricity businesses

TotalEnergies’ ambition is to become one of the world’s top 5 renewable power producers with an objective of 100 GW gross installed capacity by 2030, taking advantage notably of its global footprint.

The company confirmed its objective of 35 GW by 2025 with more than 10 GW in operation by end-2021 that will grow by around 6 GW per year from 2022 to 2025.

Moreover, the company plans to develop a significant integrated position in deregulated markets while growing production in regulated markets, targeting more than 50 TWh of net production by 2025, generating $3.5 billion of EBITDA.

Cahs flow growth and share purchase

In a constant $50/b environment, TotalEnergies anticipates cash flow growth of $5 billion between 2021 and 2026: this cash flow growth will come notably from renewables and electricity for $1.5 billion and LNG for $1.5 billion, the two pillars of its growth.

The firm said it would maintain discipline on cost with an objective to deliver more than $1 billion of additional cost savings by 2023 compared to 2020.

This increased revenues and discipline will improve return on equity above 12% in a 50 $/b environment by 2025.

Also, this sustainable cash flow growth, given the investment discipline, would support dividend growth over the next years, according to TotalEnergies.

In addition, in accordance with the announced policy of allocating up to 40% of the surplus cash generated above $60/b to buybacks and considering the actual high prices of oil and gas, TotalEnergies plans to buy back $1.5 billion of its shares in the fourth quarter 2021, it said.

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