TotalEnergies 2023 financial results: squeezing out the last drop before big oil runs dry?

TotalEnergies (TTEF.PA) announced on Wednesday that its net adjusted income for the fourth quarter of 2023 declined to $5.2 billion, marking a 31% decrease compared to the corresponding period in the previous year. This downturn primarily resulted from lower oil prices and refining margins.

During the October-December period of 2023, the oil and gas group reported an adjusted EBITDA of $11.7 billion, reflecting a 27% decrease compared to the same timeframe in 2022. Additionally, TotalEnergies recorded a production of 2.483 million barrels per day, representing a 12% decline compared to the fourth quarter of 2022.

The company’s results come at a time of intense scrutiny for the big oil stocks, amid ongoing price shocks due to unrest in the Middle East, and the fact that the petrol price has mostly been tanking since December’s COP28 declaration to phase out fossil fuels in the medium term.

However, in addition to this, the company sent out a second press release simultaneously which announced a new dividend of €2.81 per share, a 7% increase year-on-year from 2022.

Comparison to Q3 2023

When compared to the company’s results in Q3 2023, the difference is stark. In October, the company reported a net income of $6.7 billion, up 63% year-on-year, and adjusted EBITDA of $13.1 billion.

Up until that point, the company had made $16.3 billion in 2023 thus far – 5% less than the same time period in 2022.

Total’s cash flow, however, was down 4% YoY and 41% less than at the start of the 2023 financial year.

Expectations ahead of earnings

Perhaps unsurprisingly, analysts did anticipate ahead of the earnings this morning that TotalEnergies would show revenues and earnings dropping by at least 2% each – but that the company would attempt to woo investors with a generous earnings per share (EPS) for their trouble.  

This largely kept with what happened this morning, meaning no nasty surprises for investors. However, the EPS was better than expected. Some were anticipating EPS of around $2.44 as some are expecting, this would mean an almost 18% lower EPS than 2022.

In terms of production, hopes were not high ahead of the earnings announcement. Market experts predicted that the company would announce numbers around 2.4 thousand barrels or equivalent (Mboe/d) per day in the fourth quarter, down marginally from Q3’s 2.5 Mboe/d.

The company’s hydrocarbon production, which Total has been working hard to ramp up in the face of waning oil prices, was expected to be between 2.4 and 2.5 Mboe/d too. TotalEnergies’ hydrocarbon production was 2,476 Mboe/d (kboe/d) in Q3.

The sustainability of fossil fuels

The central crux around earnings for big oil companies in this quarter is shareholders questioning whether or not fossil fuels are a good buy anymore. Investing is a notoriously long game and, with companies anticipating a worldwide phase-out of fossil fuels in just six years’ time, is it big oil really worth it?

After all, in its very own Energy Outlook report, TotalEnergies recommended in November 2023 that the world “decarbonise road transport and support the energy transition”, or risk a temperature increase of 1.8°C by the year 2100.

Current developments

Current goings-on in the Middle East are having an interesting effect on big oil companies. On the one hand, the previously flagging oil price is up a bit and shipping voyages are now costing up to 80% more, according to Reuters, yet because of this, many companies are trying wherever possible to use less fuel.

Besides this, recent developments at Total seem to suggest a company desperate to reinvent itself within the green revolution. Last week, the company announced that it would be buying a 50% stake in SapuraOMV, a Malaysian natural gas producing company.

Also, somewhat ironically, Upstream Online also reported recently that the company has made a fresh oil discovery off the coast of Namibia in Africa.

The question remains: will anyone be buying it?