... Hello, good afternoon, and welcome to everybody in the room to the thirty-ninth Barclays Energy and Power Conference here in New York. And I'm delighted that we have Patrick Pouyanné, who is chairman and CEO of TotalEnergies, joining us. And Patrick, I know it's a very, very busy time for you, so I very much appreciate you joining us on screen here. So welcome, and thank you.
Thank you, Lydia, for welcoming me. Sorry not to be with you, but, I'm co-chairing the Franco-German Summit today with, in Evian. I could not be in New York, so I don't have the capacity to be in two places at the same time, and I'm very happy to spend half an hour with you-
You can do many-
you and all the investors.
You can do many things, Patrick. I know, but two places is hard. But you will be here in New York, I think, on the twenty-ninth of September for your, for your capital markets update, so-
For sure, and live this time.
If I get into some of the things we want to talk about today, you've seen a lot of change in the past decade running TotalEnergies. As you think about what's to come going forward, what do you think is going to define success for an energy company in the next decade? I'm thinking about things like, does scale matter, for example. What defines success, do you think, for you, for an energy company over the next decade?
You know, it's energy is a long time, I would say, investment case, so you need first consistency in the strategy. That's a lesson. There are some fundamentals to execute a strategy in that field. As it's quite capital intensive, you need to have a strong balance sheet, and that's important, and I think TotalEnergies, with the size we have, we have a strong balance sheet, and the size is not a matter for me. We need to focus and to permanently manage your business by having a permanent eye on the break-even of your portfolio, the low cost. It's fundamental. On oil and gas, we know there will be some cycles. Today we are quite high. We know that we could have in the future some lower prices, so that's the situation, so that's the other point, which is fundamental.
There are some fundamentals in the energy. Then, you have the capacity to manage this transition, where it creates an uncertainty on the demand. I'm in the camp that, in fact, the transition will take longer than people think, because the customers want affordable energy, because they don't change like that an energy system. And so, that means that we need to think on both sides, the oil, the gas, but also thinking to transition. We made a choice in TotalEnergies, which is to develop a profitable, integrated power business, betting on the fact that electricity markets will grow. It's a way to balance and to begin to think to the transition in order to balance the portfolio. Thus, you had a question about.
asked me a question about if scale matters, and I think you referred to the fact that we see two companies larger than others today, at least in terms of capitalization. I think, you know, it's first for me, I'm strong on that, it's value over volume. You know, so volume is fine if you can create value. I think our two peers, they are consolidating the shale industry in the U.S., so they can, they have synergies, they can create that. But that's, I understand their business case, provided that, the other thing, that my lesson of ten years as CEO is that it's good to make an acquisition, M&A, if you make it countercyclically, at a cheap price.
I'm not fully convinced of that by this time, when the price of oil is high, but that's, that's their business, not mine. On my side, honestly, I think the balance sheet of TotalEnergies is strong. We have been able to generate a huge, high organic growth. I think we'll come back to that, more than 4% per year of energy, oil energy, 3% for oil and gas, so we have a portfolio. Our balance sheet is strong. We are exactly, we are consistent, we are a low-cost operator.
My view is that the size, at all levels of size, even if we are the fourth largest company and a little far from the first two, in terms of capitalization, and you can find other explanations, the U.S. against Europe, you know. I don't think it's a matter for me. It will not be driven my... Even if we can think about M&A, it will not. I don't feel the necessity to have a large acquisition just to cope with size.
There's a lot of points that you've made there, which we will pick up on throughout the segment. I'll come back to the very first point you made about a consistent strategy. When I think about the TotalEnergies strategy, you have set this out as having two pillars, the oil and gas and the integrated power business. Maybe a little bit more detail on why does that two-pillar approach matter to you?
I think first, the two pillars are not exactly the same size, huh? One is bigger than the other, including in terms of investment. Seventy-five percent of the investment is going to the first pillar, oil and gas, 25% to the integrated power. So we should remember. I think it's the approach that we have. I think for us it matters. Our energy, our strategy is answering the demand for customers today, which is primarily oil and gas, that's the energy of today. We are strong on that. It's our DNA, historically, and I think it's what is driven, or I would say, our profitability and our dividends and our return to shareholders. At the same time, we continue to develop, again, this pillar. We have a growth of 3% per year, and not only by 2030.
It's 3% in 2025, will be 3% in 2026. So a large portfolio, and I will- I think we'll come back. And then, at the same time, as I said, you asked me the question, what happens in the next ten years? I think it's good to begin to work and to build on a growing market, because electricity is a growing market, growing energy market, a market, an energy where we can also develop our skills of integration, going from production to customers, by through trading and all that. So there are a lot of opportunities.... and to build a business which will bring some- give some resilience as well to the company, because to be less cyclical, you know, it does not follow the same oil and gas cyclicality, so it will be resilient, it will contribute to the dividend.
So it's a way for us to prepare the future. And again, in this business of energy, you need to think long term. So there are two pillars, one big one, a smaller one, but a growing one, and at the end of the day, the objective being by 2030, we will be a company, an energy company, an integrated energy company, with 80% of oil and gas and 20% of electrons for customers. And by the way, there is a common point between both pillars, which is very important, is gas. Because in fact, when we speak about power, we speak, for me, and the way we approach with the board was, okay, look, it's a growing market, it's gas to power.
We know we produce gas, we make LNG, but it's also a way to add value to the gas to power, and we see that today, it's a booming market. It's not only a matter of renewables. I mean, renewables are part of the equation, but it's at the end, what the company, the customers want, they want a 24/7 reliable power. So this is a good combination for us of integration between the gas and providing electricity to customers.
Again, that consistency theme comes through. If I get into the portfolio itself, you've talked a number of times about, and particularly the oil and gas side, the ability to grow at 3% per year on the oil and gas side out to 2030. You do have some big projects here, whether it's Suriname, Brazil, Uganda, and then if I think about the gas side, Qatar, Nigeria. To me, I think it's always important when I'm talking to investors like that, that 3% volume growth should actually lead to faster cash flow growth, and I'm thinking 8%-10% a year, around that. What is making the barrels better that you're bringing on stream than the legacy barrels?
It should have been 25. We grow the production by 3%, the cash flow with 8%. Why? Because most of the growth is coming this year from oil fields in the Gulf of Mexico, I would say, with Ballymore and Anchor, which of course, you know, these barrels are a little more expensive, but with a good, low taxation, so very profitable. And also from Brazil, in fact, where we have managed to build a strong position at a time where competition was not there. What is changing fundamentally is that the policy of the company since 2015 and reaffirmed in 2020, we invest in projects which must match one criteria. It's either less than $20 per barrel, CapEx plus OpEx, or less than a breakeven lower than $30 per barrel. When you...
Each new project that you inject in your portfolio is fitting with what I just said. You lower the break-even, and of course, you have more room for higher margins. And it's fundamentally, it is a fundamental reason why we place more expensive barrels, because I remind you that in the year twenty ten, fifteen, when the price was over $100 per barrel, we are not controlling that parameter. Break-even was much higher. So we have, of course, rotate the portfolio, but also very, very disciplined on the choice of projects. You know, and for example, and we continue on it. You know, this year, I've divested some non-operated shares in two projects, one in Nigeria, Bonga, one in Brazil, Lapa, because it was not fitting with my criteria. And so I said, first, it was marginal for us. Second, why to do it?
I have a nice portfolio of a good opportunity, and you mentioned them. It's a reality when we say 3%, because in fact, 85% of my growth has been already sanctioned, is under development. And so, it's true that beyond what I just described, we have more growth in Brazil, we have fields in Angola, we have Suriname, of course, which will come and which will feed that growth. So many opportunities. To be honest with you, the 8%, be careful when you go to LNG and growth with natural gas projects, it's not exactly the same activity barrels, you know? But it's true what you said, the cash flow, free cash flow will grow quicker than the barrels.
That's what we will deliver to our shareholders as we plan to deliver an additional $10 billion of free cash flow at $70 by 2030. So it's a reality, and of course, this is why we can consider return to shareholders as very, very safe within TotalEnergies portfolio.
And those are two points that I will come back to, both on the free cash flow and the shareholder returns. But if I go first to, again, the portfolio as you think about building it into next decade, can you talk through your position in Namibia, both in terms of that final investment decision for your existing Venus project and really what else you might be looking at in the area, or kind of how you think about adding resources?
I think Namibia, so we have today in our hand a project called Venus. There is a lot of barrel, 700-800 million barrel volume. There is one difficulty, as we have already expressed, the permeability is low. So, that means that, in order to sweep oil, we need to re-inject the gas, but we limit the plateau of production to 150,000 barrels per day, which is quite interesting. Which means as well, that the production will be longer than on a typical deepwater project like in Suriname. You know, with this type of reserves, 800 million barrels, normally you make a plateau of 200-220, it will be longer.
That's why we are entering- we have entered into a discussion with the authorities to extend the license to, for a longer duration. I think today, the industry, I see that the contracting industry or suppliers are very excited by Namibia because they see that, new, country for oil as being potentially a good area for them to grow. So we are just working with them. We have interesting, I would say, very attractive offers which match with our budget, so it's good news. Now, again, it's a new country to all, so I engage also with the authorities, and you know when you are engaging with country which discover oil and gas. It takes sometimes a little time. We need two to then to make a tango, you know?
We see today our priority is to build the trust with the Namibian authorities in order to move forward. It will be the first project in Namibia. And of course, as you said, we are looking for more because there is an interest for us to find, if we can find synergies for development because it's just the beginning. The first mover generally is benefiting from some attractiveness, but we need to go beyond. We have exploration. We continue to explore on our license, on the work license. We have also the Orange Basin continuing in South Africa, and we intend to drill that next year. We still have one or two wells to do on our license there.
We look, obviously, Venus today is a priority, but it's clear that TotalEnergies is willing to use Venus as a base to try to move forward and to grow in Namibia, and we are looking to different opportunities to do it.
And that whole idea around, you touched a little bit on the exploration side there, and you talked about South Africa. And it brings me a little bit back to earlier when we were talking about value versus volume numbers. How do you think about resource additions from here? If you look around the globe, where are you most excited about where you have the TotalEnergies portfolio, and is there any way you'd need to add anything?
First, I would just remind that today Total has been good to maintain the quality of its portfolio and longevity of its portfolio. Our proven reserve ratio is more than 12 years, 12.4. There are only two major companies around 12 years, Exxon and I, so I'm very proud that we have kept able to cope with Exxon on this one, and our competitors are more around 8-9 years. So there is a big difference when we think to the next 10 years, and this has been the result, I would say, of two ways to build this portfolio. To be countercyclical on M&A, so to capture opportunities or, for example, in Brazil, where we managed to build at a time when nobody wanted to really look seriously to that, today it's growing, and then exploration.
I think it's important to maintain belief in exploration. We have a budget which is very consistent, $1 billion for exploration appraisal for the last 10 years, very maintaining and some good results. We discovered Suriname, we discovered Namibia, so I'm happy with the teams. We just we continue to bring new licenses. You know, we just announced a new license in Congo, in Nigeria, where there were no awards of licenses to any IOC for 10 years. We managed to get, and the Niger Delta is potentially prolific. We have also some. We are looking to Angola, as well, so all this West Africa, we have some interesting ones.
But so I believe we will continue, to be clear, to look to exploration as a source of adding value, because of course, it's risky, but when it's positive, it's the best way to create value in our oil and gas business. So we are on both. But again, for example, where I'm excited, I'm excited, you know, there is debate about Mozambique, but if we are fighting to restart Mozambique quickly, shortly, it's because the potential of Mozambique is not just the first phase. You have 300 TCF. There is a huge resource for the future and which to continue to develop in the future. But we have also built a position last year in Malaysia. People were, where is a big, quite a prolific basin, gas basin, with customers not far from that.
And we just announced in June that we, from the first hub that we acquired, we managed to get another, a second hub with Petronas, so which again four TCF of gas. So very for me, that's the way we want to build the future, and I'm excited. I think the quality of the portfolio of TotalEnergies is the diversity of it. You know, at the time where we have geopolitical uncertainties, I'm always, my answer is diversification, diversify your geographical footprint, and we have been able to do it both the U.S., Brazil, Africa, Middle East, and I think it's in this world, it's probably also of interest for shareholders.
So, but there are opportunities, and we begin, in fact, to build when we go to Mozambique, beyond Mozambique, Papua New Guinea, Malaysia, is to prepare not only 2030 but 2045. You know, it's we continue to think 10 years in advance. In fact, this is a way to ensure the future of the company in all these businesses.
And it's, it's fascinating what you're saying there, Patrick, because actually one of the things that I've admired around the TotalEnergies portfolio is that some projects will slow down, some will speed up, but you've actually always hit the targets that you set yourselves for that. So I'm actually going to move to the second pillar, within that, just for time, the integrated power. And my perspective is that TotalEnergies has been one of the best in this area in terms of how you've deployed capital and that consistent approach, and I've come back to that phrase consistency a lot. But the critical question, I think, still for everybody in this room and for investors listening, is the idea of can you make money in the business? And can you really achieve that 12% return on capital employed, target and ambition that you set out?
Of course, we want to make money. After five years, we are generating $2.5 billion per year. We make CapEx today at $4 billion. We are growing quicker than expected. And in fact, I can tell you that when we say to our investors, which will be net cash positive by 2028, I can confirm that the growth is 2028, and we will reach this return 11%-12% by 2028, 2030, 2041. And we see clear the roadmap in particular, because we are focusing more and more on what we said, integrated power. There are countries where we can deploy the full system, like Germany, like the UK, like the U.S., of course. And we'll put where it's, it's not only renewables. Forget, if it was only renewables, it would not be 12%.
To be clear, I don't have a magic tool, but I make money because we are able to deliver cash flows and returns, because fundamentally, we look at it, and again, the gas supplier, we need flexible assets. And it's a combination of all these production assets which allow us to go to customers to make proposals and to enhance the value, including, by the way, on the renewable business. You know, when you say renewables combined with batteries and gas power plants, you, when you sell what we call firm power to customers, you have a big added value compared to what would be a PPA as produced for renewable. So all that is the way we look at it.
I think we'll, we intend on the next, because I have many questions, we intend to give a little more insights on the way we make these cash flows coming from production assets. And you will see that it's quite split in 2025 between the production part and the downstream part. I mean, so it's really like for oil and gas, integration is creating the value, not thinking only of producing assets for renewable. So we are far from this model. So that's why now I'm confident, and again, you will see it will be net cash positive by 2028. It will begin to contribute to the dividend, because this is the objective.
But again, eight years for a new segment to contribute to the dividend, I will be happy if I'm contributing in eight years to my dividend, you know? So it's quite normal. I think we have a model, and again, why 12%? Because I was looking at the WACC of the major companies, both third and second quarter 2025. We are number one still-
Yeah.
At 12%. But I don't see that any, and we are today at $70, and a lot of my peers are under 12%, more between 10% and 12%. The point being, when people ask me, "Why do you invest in this business if I'm between 10% and 12%?" At 12%, it matches my $60 per barrel threshold for oil and gas, so, and it gives more resilience, no cyclicality. That's the logic of that. Again, it's energy. For me, it's also a way to continue on building strong position in gas. LNG, it's also a way to have a share for gas and to create value.
I think that point around, again, it's just only taking eight years to get to positive free cash flow is an important one to remember. You did mention there, I think where it leaves me, Patrick, is that TotalEnergies grows top line energy production at about 4% a year. Cash flow probably grows a little bit faster than that, and if anything, CapEx probably comes down from here a little bit. So where does that leave you in terms of free cash flow side? How are you thinking about free cash flow?
When I think about free cash flow, there will be two sources of free cash flow. And you are right, there will be some cost saving because the CapEx were probably at their top in 2025, will begin to go down, because we are also working today, as we anticipate, I would say, a softer price on oil and maybe on LNG, we need to manage that. So I see, yes, some lower CapEx for the future, so it will help us going down from 18 - 16. And then you have the growth of the cash flow, free cash flow coming from just the growth of the revenues, you know, of what I described.
So the free cash flow, again, should grow by $10 billion by 2030 at price, and so that's and it's growing. It begins to grow $1 billion in 2025, that will be 1, and then it will accelerate with the deliverability in particular, integrated power, which should consume I would say $1.5 billion, will become free cash positive. So you know, it's also an added, an addition to the trajectory. But I think on that, I invite investors to attend our twenty-ninth of September meeting in New York, that we have more color on that. I'm sure, and we'll try to give more color even on the shorter term, not only 2030.
And as always, I'll have more questions at that point as well, Patrick. But it probably brings me a little bit to the cash return side. And so really, we've outlined the strength of the portfolio. You've had a lot of spending options, but you've also promised to return at least 40% of cash flow from ops to shareholders, and 2025 is a higher number. And it's one of the questions that I debate quite a lot, but you've had a $2 billion a quarter buyback, which I think has been in place for three years now. And so there's an element which, just the way the short-term cash flow CapEx balance works, it is getting paid out of debt for now. So how do you think about that?
And given where your share price is, and I think it's, it's no secret that I think your share price should be higher than where it is now. But how do you think about returns to shareholders? So that's a long-winded discussion, but how do you think about it?
No, it's, but first, first point on this, I want to be clear. We are fully committed to all what is dividend.
Yeah.
To be clear, the dividend is 7% in total, no cut in fourteen years. Remember, in COVID, we went through. We have increased it by 7% per year in the last three years. It's dynamic. In fact, all the share buyback we done are transformed by growth with dividend. And as we anticipate free cash flow growth, as I just mentioned to you, we will anticipate on that by giving 7%. So that I can anybody, it's completely secured. I think the growth will be maintained, because at least the buyback story. So if we continue to buy back around 5%, we will increase by 5%. That's important. The 40% threshold you mentioned, in fact, is a big protection for shareholders, because and it's a big protection in terms of low price.
Because, in fact, even at $50, we will apply it. And at $50, that means that we will do, even continuing to make small buybacks at $50. But in fact, the reality is that our payout has been to return to shareholders, has been 50%-55% in 2023, 2024, and today in 2025. So we have, in fact, established a higher level. It's true that there is a debate today, and you are right, and because when I see the reaction of the market at the end of July, where suddenly our share was a little, I would say, punished because we increase our debt. The board will discuss that, of course, that matter. In fact, what is a question mark?
On one side, you have a cheap debt, I would say. My cost of debt is 3.5%. So is it a problem to borrow money, to return to shareholder, to be consistent when you have a cheap debt? On the other side, you have a gearing level where my cost of capital, I remind you, is more 6.5% than 3.5%, so the arbitration- and by the way, as you said, we consider the share is cheap. So it seems that it's logic somewhere to continue. On the other side, we've seen the reaction of the market, so there is a debate, which debate will come back about which gearing is acceptable. Is it fifteen? And by the way, the 18% we reach will go down because there is some working capital effects that I explained.
So I'm not worried about, but this, this is a debate, and, again, we'll, I think the board will, of course, is listening. To be clear, we listen to the market.
Yes.
We see the reaction. I think we'll have a strategic session before, of course, our session in New York, on which we will debate, and I cannot anticipate, but I and the debate will be back. I just gave you the two fundamentals.
Mm-hmm.
On one side, cheap price, low cost of debt, inclining to maintain, buyback, even if it's higher than the free cash flow. So we said it's on the board, so at $70, we maintain. We know the math, and to be clear, we knew that at $70, it, but it's $8 billion, much better $80 than $70, but we are ready to accept it.
Mm-hmm.
If the market is punishing us because of that, then we'll need to think about where we will land. But the debate, I think.
Mm-hmm.
It's an interesting point, where, of course-
Mm-hmm
... I'm ready to listen to all my shareholders and investors, to help us to go into, to have the right policy for the interest of everybody.
Mm-hmm. And I think you've talked a number of times today about actually that value and focusing on what matters to shareholders. It, it really comes across, and I think it is one of those that when I look at it, that sometimes the conversation ends up more about the cash flows than about the portfolio and the consistent portfolio that you, you built. I am very conscious of time, Patrick, and I very much enjoyed our time together and the discussion, but I personally see the energy sector as dominating the capital markets narrative for the next decade, how we deliver energy, where it thrives. But Patrick, I did want to invite your final thoughts on TotalEnergies prospects for the next twelve months, and sort of just the message you want to leave to investors here in the room and joining us online.
I think, as you said, perfectly well, our share is cheap, so I invite everybody to look at it. It's a good opportunity to enter into as a shareholder of TotalEnergies today because, of course, we will deliver growth. We'll deliver cash flows. We don't. I don't control the oil price, to be clear, or the refining margin. We do our best, which is to deliverability of our assets. I see that our integrated power is coming. I know that 2026 will continue to maintain the growth of 3%, that the cash flow will continue to grow as well. I mean, we have everything, but the dividend policy, as I explained, is completely secured and is really strong. I think it's really a nice entry point.
You have in front of you, it's a company with a clear strategy, a consistent one, and I would say, with a clear return for this year's shareholders. So I'm, I think, as you said, we have a—you have in front of you a company which has a, and I try to explain it through our discussion, a consistent strategy. The fundamentals are strong. Projects are low break even. The portfolio is globally well-balanced.
Mm-hmm.
And so I think we will attract. I know we are a European company, but sometimes... And we have European companies which have more U.S., more and more U.S. investors, but that's, I think, a good case. So continuing to attract U.S. investors is, for me, fundamental.
Patrick, that's brilliant, and as ever, thirty minutes is never enough time to talk to you. But I will look forward to joining you here in New York on the twenty-ninth of September for that deeper dive into the strategy. So Patrick, thank you very, very much.
Thank you, Lydia, for your invitation and this discussion.