Scope of the company
Total Energies SE (NYSE: TTE) is a global multi-energy company, which is engaged in reconnaissance, Prey, processing and sale of oil and gas, and also produces petrochemical products. Total Energies also operates in the renewable energy sector, VIE.
Basic facts about the company:
- Total has offices in 130 countries, and is currently the fourth largest multi-energy company in the world;
- it is one of the ten largest oil refining companies in the world;
- Total and its subsidiaries employ more than 98 thousands of people.
Total supplies raw materials to refineries, charters ships and trades in various derivatives markets. The company serves consumers in transport, automotive, Aerospace, energy, housing and manufacturing industries.
Total Energies conducts its main operations in Europe, Asia and the Pacific, Africa, in the Middle East, and in North and Central America. Total is headquartered in Courbevoie, in France.
Sales of TTE for 2021 Year by region
| Europe, except France | 42% |
| France | 21% |
| North America | 11% |
| Africa | 10% |
| The rest of the world | 16% |
42%
history of the company
Total was created in 1924 under the name Compagnie Française des Pétroles, initiated by Raymond Poincaré, then President of the Council of France. Poincaré appointed Ernest Mercier as the head of the company, entrusting it with the mission of making Total one of the largest players in the French oil market.
The activities of the Compagnie Française des Pétroles have developed rapidly, and c 1929 The company was listed on the stock exchange. Only in 1954 The Total brand was born. Since the mid-1980s, the company has opened its first gas stations in France.. At the same time, the company develops patronage and sponsorship activities., especially in motorsport and Formula 1.
With 1999 The Total Group continues its development after the acquisition of the Belgian company Petrofina, which gave rise to the Total Fina brand. A year later, the band acquired Elf Aquitaine., and in 2003 was renamed Total SA. Thanks to this merger, the company has established itself as one of the leading French groups in terms of turnover..
IN 2021 The Company delivered impressive financial results and achieved significant efficiency gains in key segments.
Revenue segments
| 2021 vs 2020 | Percentage of adjusted EBITDA for 2021 | |
|---|---|---|
| Oil refining and chemistry | ×3,3 | 48% |
| Marketing & Services | 44% | 6,5% |
| Gas and renewable energy sources | ×10,9 | 37% |
| Exploration and production | ×3,3 | 8,5% |
Rates of growth, billion dollars
| 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|
| Revenue | 184 | 176 | 119 | 184 |
| Revenue growth rate | 23,49% | −4,35% | −32,39% | 54,62% |
| Net profit | 11,4 | 11,2 | −7,2 | 16 |
| Operating profit | 18,3 | 16,6 | 4,1 | 23,3 |
The company's financial flows remained stable all the time, With the exception of the oil crisis 2020 of the year. On the other hand, thanks to the lifting of coronavirus restrictions and the recovery of the market, the increase in net and operating profit in 2021 year amounted to 43 And 40% respectively. The difference is all in 3% between these indicators means, that Total Energies does not incur additional transaction costs.
Valuation of the company by multipliers
| Capitalization | P / E | P / S | P / B | Total debt / capital | Total margin | |
|---|---|---|---|---|---|---|
| Total Energies | 132,63 billion | 8,60 | 0,7 | 1,23 | 0,58 | 8,72% |
| Industry average | — | 13,3 | 1,51 | 1,52 | 0,52 | 2,49% |
| Average company performance in history | — | 13,23 | 0,75 | 1,22 | 0,48 | 5,36% |
Current Total Energies multiples are below or well below industry average, As the company has built up debt as a result of falling oil prices in 2020 year, Besides, it has a considerable stake in Russian hydrocarbon production projects.
For example, Total Energies belongs to the order 19,4% shares of the Russian producer of liquefied natural gas "Novatek". At the moment, investors are looking at this negatively., as a company, maybe, will have to face a loss when withdrawing from these projects.
Financial Health, billion dollars
| 2019 | 2020 | 2021 | |
|---|---|---|---|
| Cash and cash equivalents | 31 | 36 | 34 |
| Total liabilities | 62 | 77 | 64 |
Despite the growth of debts in 2020 year, Total Energies' financial position is stable. She coped with the difficulties and was already in 2021 liabilities have been reduced. Now the debt multiplier / Total Energies' EBITDA is 1,59 against 2,43 by industry. Debts are confidently covered even with an increase in current costs for their servicing due to higher rates FED.
Market size and forecasts
Is planned, that the size of the global oil and gas exploration and production market in 2022 will be 5 trillion US dollars, it's on 27,5% more compared to 2021 year. The growth is mainly due to the fact that, that companies are rebuilding their operations and recovering from exposure to COVID-19.
Prospects and strengths of Total Energies
LNG market. Total Energies produces about 18 million tons of LNG per year. TO 2026 year the company plans to increase this figure to almost 30 million tons annually, and to 2030 expects it to be at the level of 40 million tons. The company's forecast for the price of JKM was approximately 432 $ per ton of LNG.
But in the end 2021 LNG prices soared to 2,5 thousand dollars per ton. Given that, that European consumers are in a hurry to get away from the supply of natural gas through pipes from the Russian Federation, LNG supplies from the United States and its own sources, such as Total Energies, will only increase. Assuming, that the company sells all of its annual products at these prices, This will result in a huge additional cash flow of more than 30 billion dollars.
Research and development in terms of business diversification. Total Energies improves its technology, to reduce carbon footprint and greenhouse gas emissions, and improve the efficiency of mining. The company increases capital expenditures to 14-15 billion dollars, wherein 50% costs will be used to increase capacities in terms of renewable energy sources to 16 gigawatt of total capacity.
Right now, this value is 10 Gigawatt, and to 2025 year the company aims to achieve 35 Gigawatt. This will allow it to enter the top five largest producers of renewable energy sources..
Share buybacks and dividends. If the average oil price in the 2022 will not fall below 80 $, which is almost guaranteed, taking into account the increase in demand and the fall in production in the Russian Federation, then the operating cash flow will be about 27,5 billion dollars. After deducting capital expenditures, there will be 13 billion dollars. Now the company's dividends, taking into account the growth on 5% will make up 2,77 € per share and cost in 8,3 billion dollars a year.
After all the payments, Total Energies is left with almost 5 billion. It means, that in the coming years, the company will have a lot of cash leverage to grow its dividend payments., increasing the share repurchase program or reducing debt. You don't need triple-digit oil prices to do that..
According to the company's statement, every increase in oil prices by 10 $ per barrel increases operating cash flow by 3,2 billion dollars.
Risks of Total Energies
Large share of participation in Russian hydrocarbon production projects. As mentioned above, The French company is one of the largest oil investors in Russia. It owns the following assets:
- Investments in 19,4% shares of the Russian company "Novatek". In the past, Total Energies has consolidated Novatek at market value.
- share 20,02% in the joint venture "Yamal LNG".
- 10% Arctic LNG-2 shares, production of which was planned to increase next year.
- 58,89% shares of JV Terneftegaz, engaged in onshore gas production in Siberia.
- 20% participation in the onshore Kharyaga oil field.
Total Energies also has other various stakes in renewable energy projects and chemical companies in Russia.. This is the main reason, for which the company's quotes refuse to grow at a faster pace in the current favorable conditions. Abroad, it now carries image risks., Besides, it is possible, that in the event of the sale of its assets in these projects, Total Energies will have to make a good discount to new buyers.
Sector cyclicality. Worth remembering, that companies like Total Energies operate in a cyclical sector. This means, that oil and LNG prices will not always be at such high levels. It is necessary to conduct a predictive assessment of the company.
Investments in a new renewable energy business will not pay off until 2030 of the year. Another risk of Total Energies is that, that the company invests significant sums in new business. With 2021 on 2026 year, the planned amount of such investments is 15 billion dollars. At the same time, the company does not expect positive free cash flow from them to 2030 of the year, demonstrating a long-term business plan, which may not be justified.
What's the bottom line?
Total Energies operates in five segments, income-generating. It's exploration and production.; gas, renewable energy and energy; oil refining and chemistry; Marketing & Services; corporate sector. The refining and chemicals segment is consistently the most profitable.
Given the trend towards the transition to renewable energy sources, current oil prices are unlikely to stay with us for a long time., despite the very long payback of green energy. But the company understands everything perfectly well and should take this into account - Total Energies seeks to diversify the business taking into account this trend..
Besides, Total Energies is also able to make the most of the current market conditions in the oil and LNG market., while having an attractive score on multipliers.
