France-based TotalEnergies SE (NYSE: TTE) released its fourth-quarter and full-year 2021 results on February 10, 2022.
CEO Patrick Pouyanné said in the conference call:
The key word for all of us will be to deliver, so delivery because, obviously, in such favorable environment, getting the most out of our assets is our key priority.
1 – 4Q21 and full-year results snapshot
TotalEnergies reported fourth-quarter 2021 adjusted earnings per share of $ 2.55 (€ 2.19) per share, beating analysts’ expectations. It was well above the year-ago $ 0.46 per share. The total revenues came in at $ 60.35 billion, up 59% from $ 37.94 billion made in the year-ago quarter.
Fourth-quarter upstream equivalent production averaged 2,852k Boepd, up 0.4% year-over-year. The increase was due to startups’ ramp-up of new projects.
2 – Investment Thesis
The investment thesis is the same quarter after quarter. TotalEnergies SE is one of my long-term oil investments especially adapted to savvy investors interested in a steady income through sizeable dividends. TotalEnergies SE is one rare European oil major that has paid a stable dividend even during the last oil painful crash.
However, oil stocks are challenging for long-term investment and, in general, underperform the broad market. TTE is down nearly 10% from its price ten years ago, whereas Exxon Mobil (XOM) is down 9%. It is a far cry from what you can get with the SPDR S&P 500 Trust ETF (SPY) is up 217%.
As I said in my previous article, this material’s long-term drawback is not necessarily detrimental. Instead, it can be an excellent opportunity for a savvy investor who chooses a suitable trading / investing strategy. The key is adaptation.
Thus, it is essential to trade short-term LIFO about 30% -40% of your TTE holding and keep a long-term core position for a higher target. This dual strategy entitles you to take full advantage of the very high volatility and inherent cyclicity present in the oil and gas sector.
You can not profit plainly without this simple dual trading strategy, and you often expose yourself to unnecessary risks.
3 – Stock performance
TotalEnergies SE is one of my selected long-term oil major stocks that I have followed on Seeking Alpha for years.
The group includes Shell (SHEL), Equinor (EQNR), UK-based BP (BP), as well as US majors Chevron (CVX) Exxon Mobil, and the large E&P ConocoPhillips (COP).
TotalEnergies SE has underperformed the group on a one-year basis despite a massive rally in oil prices. TTE is up only 4%.
4 – Dividend comparison – TTE pays a quarterly dividend of € 0.66 per share.
TotalEnergies: Balance Sheet and Production in 4Q21: The Raw Numbers
Note: TTE is an American Deposit Receipt or ADR. Foreign withholding taxes (12.8%) reduce the dividend paid to an American investor. However, the foreign tax paid can be deducted from your tax. Ask your Financial Adviser about your case.
|Total Revenues in $ Billion||37.94||43.73||47.05||54.73||60.35|
|Total Revenues (minus excise tax) in $ Billion||32.35||38.63||41.63||49.07||55.30|
|Net income in $ Billion||0.89||3.34||2.21||4.65||5.84|
|$ Billion EBITDA||5.35||8.99||7.70||11.26||14.26|
|EPS diluted in $ / share||0.31||1.23||0.80||1.71||2.17|
|Cash from operating activities in $ Billion||5.67||5.60||7.55||5.64||11.62|
|Capital Expenditures in $ Billion||3.83||2.41||2.68||2.72||4.54|
|Free Cash Flow in $ Billion||1.84||3.19||4.89||2.92||7.08|
|Total Cash $ Billion||35.78||34.89||33.05||32.88||33.66|
|Long-term Debt in $ Billion||77.30||73.01||69.31||67.28||64.55|
|Dividend per share in € / sh (including tax 12.8%)||
|Shares outstanding (diluted) in Billion||2,814||2,697||2,758||2,701||2,690|
|Oil Equivalent Production in K Boepd||2,841||2,863||2,747||2,814||2,852|
|Americas Production in K Boepd||382||376||378||372||363|
|Average price liquids $ / Boe||41.0||56.4||62.9||67.1||79.8|
|Average gas price $ / Mbtu||3.31||4.06||4.43||6.33||4.80|
Source: Company filings and Fun Trading
Note: More data (2015) are available for subscribers only.
Analysis: Balance sheet and production discussion
1 – Total revenues were $ 60.35 billion (including excise tax) in 4Q21
TotalEnergies’ revenues came in at $ 60.35 billion (including the excise taxes) or $ 55.30 billion net, up significantly from the $ 37.94 billion generated in the year-ago quarter.
Net earnings were $ 5,837 million, significantly up from $ 891 million in 4Q20. The company indicated a profit of $ 2.17 per diluted share.
In the fourth quarter of 2021, TotalEnergies SE acquired $ 288 million worth of assets and sold assets valued at $ 684 million. In 4Q21, TTE’s subsidiary acquired Blue Raven Solar in the USA, further growing renewable assets.
Below is a history of the cash flow from operations since 2015.
2 – Trailing-twelve-month free cash flow (“TTM”) was $ 18.07 billion with $ 7.08 billion in 4Q21
Note: Generic free cash flow is cash from operations minus CapEx.
The company pays about ~ $ 8.25 billion in dividends annually, primarily covered by free cash flow. The free cash flow generation will be sufficient to maintain the dividend at the actual level and potentially increase to € 68 later in 2022.
Note: France’s withholding rate on the dividend paid to US ADR holders is 12.8%, which reduces the dividend payment that US investors are receiving.
3 – Net debt was $ 30.89 billion as of the end of December 2021
Cash and cash equivalents + as of December 31, 2021, were $ 33.657 billion compared to $ 35.769 billion in the corresponding period of 2020. Net debt to capital was 20.1% at the end of 4Q21, down from 25.9% at 4Q20.
The debt-to-equity ratio is now 0.5777, according to YCharts and the net debt to capital was 22.1% at quarter-end, down from 26.1% last year.
4 – Details: TTE operates four different segments
Total operating income was $ 7,316 million this quarter, up from $ 1,824 million last year.
4. 1 – Exploration & Production
The operating gain was $ 3,525 million, up significantly from $ 1,068 million last year.
4.2 – Integrated Gas, Renewable, and Power
Operating income was $ 2,759 million, up significantly from $ 254 million last year.
4.3 – Refining and Chemicals
Operating income was $ 553 million from $ 170 million in the year-ago quarter.
4.4 – Marketing and Services
Operating income was $ 479 million, up 44.3% from $ 332 million in 3Q20
5 – 4Q21 Oil Equivalent Production up to 2,852K Boepd from 2,841K Boepd last year.
5.1 – Oil equivalent production history
Total hydrocarbon production during the fourth quarter of 2021 averaged 2,852K Boepd, up from 2,841K Boepd in the same quarter the previous year. This slight increase was due to startups, a ramp-up of projects, and an increase in OPEC production quotas.
This quarter’s average realized liquid prices were $ 72.6, up 77.1% from the year-ago price.
The realized gas prices increased from a year-ago quarter of $ 3.31 to $ 11.36 per thousand British thermal units in Q4. Realized LNG prices improved 168% from the prior-year quarter to $ 13.12 per thousand Btu from $ 6.59. Also, the fourth-quarter realized price for Brent was up 80% to $ 79.8 per barrel from $ 44.2 in the year-ago period.
Upstream output comes primarily from Europe and Central Asia. Total SE has a small production from the Americas.
For the fourth quarter, liquids production averaged 1,509K Boepd, up 2% from the year-ago period.
Quarterly gas production was 1,221 Boepd, down 1% year over year. The decrease was due to lower gas output from Africa and the Americas.
5.2 – 2022 Guidance
TotalEnergies foresees a 2% improvement in oil equivalent production from the 2021 level. The increase is due to new startups in Brazil and Mexico.
However, the sale of assets in 2021 and the exit of Myanmar will affect results. TotalEnergies plans to have more than 16 gigawatts of gross renewable capacity in operation for the renewable segment by year-end 2022.
It expects a CapEx of $ 3.5 billion to expand the Renewables & Electricity business.
Outlook: Oil and gas prices will be strong in the first half of 2022 as well as the realized prices of LNG are expected to be $ 12 per thousand Btu.
TotalEnergies’ CapEx is set to $ 14- $ 15 billion in 2022, with 50% assigned to growth and another 50% to maintain normal business activities.
5.3 Renewable by 2025: The goal is to deliver 35 GW
The company expects to be a significant player by 2025.
Technical Analysis and Commentary
Note: The chart is adjusted for the dividend.
TTE forms an ascending channel pattern (short-term) with resistance at $ 52.5 and support at $ 49.5. The trading strategy is to sell about 25% of your position LIFO between $ 51.85 and $ 52.5.
In general, ascending channels tend to be a little bearish, and I expect TTE to retrace between $ 48 and $ 47, where I see an excellent opportunity to accumulate again.
However, if oil prices stay firm, TTE could cross the resistance and retest $ 55, but I do not see it very likely.
Warning: The TA chart must be updated frequently to be relevant. It’s what I’m doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
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