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TotalEnergies: Natural Gas Free-Fall Will Hurt 2023 Results

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Exterior position of nan office of nan lipid institution TotalEnergies, formerly known arsenic Total

HJBC

Introduction

France-based TotalEnergies SE (NYSE:TTE) released its fourth-quarter 2022 and FY22 results connected February 8, 2023.

Note: I person followed TTE quarterly since 2017. This caller article is simply a quarterly update of my article published connected August 18, 2022.

1 - 4Q22 and FY22 results snapshot

TotalEnergies reported a fourth-quarter 2022 adjusted nett income of $2.97 per share. It was good supra nan year-ago $2.55 realized past year. Earnings hit analysts' estimates.

The full revenues came successful astatine $68.58 billion, up 13.6% from $60.35 cardinal successful nan year-ago quarter. Substantial revenues were generated from higher liquids and state prices.

Fourth-quarter upstream balanced accumulation averaged 2,812K Boepd, down somewhat from 2,852K Boepd realized past year. The alteration was owed to nan higher planned attraction and nan earthy diminution of producing fields. Also, nan withdrawal from Myanmar, nan expiration of nan Qatargas 1 operating license, and security-related accumulation cuts successful Libya and Nigeria.

The accumulation of nan iGRP conception (Integrated Gas, Renewables, and Power) was 503K Boepd compared to 562K Boepd successful 4Q21.

2 - Investment Thesis

TotalEnergies SE is astir apt nan safest finance successful nan lipid assemblage erstwhile it comes to dividends. It is nan only European lipid awesome that had not reduced aliases trim dividends erstwhile nan lipid marketplace collapsed a fewer years back. Thus, it is simply a very appealing banal for dividend-oriented investors.

While TotalEnergies SE remains a ample lipid and state producer, it has besides shifted to renewables, representing a ample portion of its early business. Nearly one-third of its 2023 CapEx is allocated to renewable and "green energy generation."

However, lipid prices person retraced importantly from their caller high, and nan marketplace euphoria is now astir gone. Another beardown antagonistic for nan company's early 4th net is that earthy state has collapsed. European state prices are backmost to pre-war levels, and request is down. However, immoderate analysts proceed to beryllium connected nan bullish side.

Despite their caller steep decline, state prices successful Europe are still much than 4 times higher compared to nan mean complete nan past decade, Philipp Lausberg, argumentation expert astatine nan European Policy Centre, told CNN.

The effect connected gross will beryllium significant, and I americium not judge really positively nan marketplace could respond to a crisp diminution successful revenue. In short, 2023 is shaping up to beryllium a struggling twelvemonth for lipid supermajors, and it is simply a clip to return profits, successful my opinion.

Thus, it is basal to waste and acquisition short-term LIFO for astir 40%-50% of your TTE holding and support a semipermanent halfway position for a higher target. This dual strategy entitles you to return afloat advantage of nan lipid and state sector's precocious volatility and inherent cyclicity. It is what I urge successful my marketplace, "The Gold and Oil Corner."

3 - Stock performance

TotalEnergies has underperformed nan group, which includes Shell (SHEL), U.K.-based BP (BP), arsenic good arsenic US fields Chevron (CVX) and Exxon Mobil (XOM).

TotalEnergies SE is up 9% connected a one-year ground contempt a monolithic rally successful lipid prices.

ChartData by YCharts

TotalEnergies: Balance Sheet and Production history ending successful 4Q22: The Raw Numbers

Note: TTE is an American Deposit Receipt aliases ADR. The Foreign withholding taxes trim nan dividend paid to American investors is 12.8%. However, nan overseas taxation paid tin beryllium deducted from your income tax. Sometimes, your agent charges you 25%, but I judge it is simply a mistake. Ask your Financial Adviser astir your case.

TotalEnergies SE 4Q21 1Q22 2Q22 3Q22 4Q22
Total Revenues successful $ Billion 60.35 68.61 74.77 69.04 68.58
Total Revenues (minus excise tax) successful $ Billion 55.30 63.95 70.45 64.96 63.95
Net income successful $ Billion 5.84 4.94 5.69 6.63 3.26
EBITDA $ Billion 14.26 14.90 14.98 16.49 12.99
EPS diluted successful $/share 2.17 1.85 2.16 2.56 1.26
Cash from operating activities successful $ Billion 11.62 7.62 16.28 17.85 5.62
Capital Expenditures successful $ Billion 4.54 3.46 5.15 2.99 4.10
Free Cash Flow successful $ Billion 7.08 4.16 11.13 14.86 1.52
Total Cash $ Billion 33.66 38.69 40.71 47.63 41.77
Long-term Debt successful $ Billion 64.55 64.80 62.87 61.82 60.77
Dividend per stock successful €/sh (including taxation 12.8%)

0.66€

0.69€

0.69€

0.69€

0.69€ + 1.00€

Shares outstanding (diluted) successful Billion 2.690 2.644 2.611 2.588 2.510
Oil Production 4Q21 1Q22 2Q22 3Q22 4Q22
Oil Equivalent Production successful K Boepd 2,852 2,843 2,738 2,669 2,812
Americas Production successful K Boepd 363 386 420 449 442
Average value liquids $/Boe 79.8 90.1 102.9 93.6 80.6
Average state value $/Mbtu 11.38 12.27 11.01 16.83 12.74

Source: Company filings and Fun Trading

Note: More information (2015) is disposable for subscribers only.

Analysis: Balance expanse and accumulation discussion

1 - Total revenues were $68.582 cardinal (including excise tax) successful 4Q22

TotalEnergies Quarterly Revenues history

TTE Quarterly Revenue history (Fun Trading)

TotalEnergies' revenues came successful astatine $68.582 cardinal (including nan excise taxes) aliases $63.953 cardinal net, importantly up from nan $60.348 cardinal generated successful nan year-ago quarter. The institution indicated a profit of $1.26 per diluted share, and adjusted nett income was $7,951 cardinal successful 4Q22 compared to $6,825 cardinal successful 4Q21.

Net net were $3,264 million, down from $5,837 cardinal successful 4Q21. The nett operating income was $8,238 million, up 13% from nan year-ago play owed to higher commodity prices and refining margins.

A caller non-cash impairment of $4.1 cardinal related to nan company's Russian assets impacted nan fourth-quarter nett income.

TotalEnergies acquired assets worthy $292 cardinal and $5,872 cardinal for nan full-year 2022.

2 - Trailing 12-month free rate travel ("ttm") was $31.68 cardinal pinch $1.52 cardinal successful 4Q22

TotalEnergies Quarterly Free rate flow

TTE Quarterly Free rate travel history (Fun Trading)

Note: Generic free rate travel is rate from operations minus CapEx.

TotalEnergies trailing 12-month free rate travel is now $31.68 billion, pinch $1.52 cardinal realized for 4Q22.

Cash travel from operating activities astatine nan 4th quarter-end was $5,618 million, down 51.7% from nan year-ago period.

Finally, TotalEnergies bought backmost shares worthy $2 cardinal successful nan 4th fourth of 2022 and intends to bargain backmost $2 cardinal successful nan first 4th of 2023.

TTE paid a quarterly dividend of €0.69 per stock and a typical dividend of €1.00 per stock successful nan 4th fourth of 2022. It is simply a full of €3.76 for 2022.

Also, nan Board of Directors met connected February 7, 2023, and decided to propose to nan Shareholders’ Meeting connected May 26, 2023, nan distribution of an mean dividend of 2.81 €/share (Quarterly €0.7025) for nan fiscal twelvemonth 2022, versus 2.64 €/share for nan fiscal twelvemonth 2021, a 6.4% increase.

3 - Net indebtedness was $19 cardinal arsenic of nan extremity of December 2022

TotalEnergies Cash versus Debt

TTE Quarterly Cash versus Debt history (Fun Trading)

Cash and rate equivalents+ arsenic of December 31, 2022, were $41.772 cardinal compared pinch $30.386 cardinal successful 4Q21.

The debt-to-equity ratio is now 0.544, according to YCharts, and nan nett indebtedness to superior was down to 12.7% astatine quarter-end.

TTE indicates a nett indebtedness of $8.617 cardinal utilizing different method. I person done a much wide calculation from nan LT Debt, including existent minus full cash, which is simply a much comparable worth pinch different lipid majors.

4 - Details: TTE operates 4 different segments

Total operating income was $8.24 cardinal this quarter, up from $7.32 cardinal past year.

TotalEnergies Quarterly operating income per segment

TTE Quarterly Operating income 4Q21 versus 4Q22 (Fun Trading)

4.1 - Exploration & Production (Upstream)

The operating summation was $3,528 million, up importantly from $3,525 cardinal past year.

4.2 - Integrated Gas, Renewable, and Power

Operating income was $2,889 million, from $2,789 cardinal past year.

4.3 - Refining and Chemicals

Operating income was $1,487 cardinal from $553 cardinal successful nan year-ago quarter.

4.4 - Marketing and Services

Operating income was $334 million, down from $479 cardinal successful 4Q21.

5 - 2Q22 Oil Equivalent Production up to 2,812K Boepd from 2,852K Boepd past year.

5.1 - Oil balanced accumulation history

TotalEnergies Quarterly lipid balanced production

TTE Quarterly lipid balanced accumulation history (Fun Trading)

Total hydrocarbon accumulation during nan 4th fourth of 2022 averaged 2,812K Boepd, down somewhat from 2,852K Boepd successful nan aforesaid 4th nan erstwhile year.

Note: The full production, including iGRP (Integrated Gas, Renewables, and Power), was 3,374K Boepd.

This quarter's mean realized liquids prices were $80.6, up 11% from nan year-ago price. NG prices were $12.74, up from $11.38 per 1000 British thermal units past year.
Chart

TTE Quarterly liquids and NG prices history (Fun Trading)

Upstream output comes chiefly from Europe and nan Middle East. Total SE has a mini accumulation from nan Americas.

Chart

TTE Quarterly accumulation per region (Fun Trading)

For nan 4th quarter, liquids accumulation averaged 1,570K Boepd from 1,509K Boepd past year.

Quarterly state accumulation was 6,681K cf/d, down 9% from past twelvemonth owed to astir regions' little state output.

6 - 2023 Outlook

TotalEnergies expects 2023 hydrocarbon accumulation to summation by 2% to astir 2,500K boepd, chiefly owed to nan publication from 3 startups lined up to statesman cognition successful 2023. TotalEnergies expects a CapEx of $16 billion successful 2023, of which 32% will beryllium allocated to further strengthening renewable operations and electricity.

Technical Analysis and Commentary

chart

TTE TA Chart short-term (Fun Trading StockCharts)

Note: The floor plan is adjusted for nan dividend.

TTE forms an ascending triangle shape (short-term) pinch guidance astatine $64.8 and support astatine $60.8.

The ascending triangle is simply a bullish statement that usually forms during an uptrend arsenic a continuation pattern. There are instances erstwhile ascending triangles shape arsenic reversal patterns astatine nan extremity of a downtrend, but they are typically continuation patterns.

However, successful this case, I whitethorn adhd that TTE could yet break down owed to a speedy deterioration of lipid prices, particularly Natural state prices, which person collapsed successful nan past 3 months.

Chart

TTE 1-year floor plan Brent and NG (Fun Trading StockCharts)

Thus, nan trading strategy is to waste astir 40%-50% of your position LIFO betwixt $64.75 and $65.5 pinch imaginable higher guidance astatine $67 and hold for a retracement betwixt $61 and $59.75 pinch imaginable little support astatine $53.92.

Warning: The TA floor plan must beryllium updated often to beryllium relevant. It is what I americium doing successful my banal tracker. The floor plan supra has a imaginable validity of astir a week. Remember, nan TA floor plan is simply a instrumentality only to thief you adopt nan correct strategy. It is not a measurement to foresee nan future. No 1 and thing can.

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