TotalEnergies stepped up share buybacks despite a $4.1bn impairment linked to a sanctions-hit Russian project as surging oil and gas prices boosted first-quarter earnings.
The French group said on Thursday it would buy back up to $3bn of its shares in the first half of 2022, up from a previous $2bn target, and confirmed an interim dividend increase of 5 per cent to €0.69 per share.
Total has come under scrutiny over its presence in Russia since Moscow’s invasion of Ukraine and has yet to detail how it might fully exit its various holdings, although it has said it will halt all new investments in the country and phase out oil and diesel purchases.
It booked the $4.1bn charge citing “uncertainty created by the technological and financial sanctions on the ability to carry out the Arctic LNG 2 project currently under construction and their probable tightening with the worsening conflict”.
Like rivals from Spain’s Repsol to Britain’s Shell, which has said it will write down as much as $5bn linked to its Russian exit, Total has benefited as already elevated oil and gas prices have soared since Russia’s invasion of Ukraine. It said its trading activities in gas, liquefied natural gas and electricity had performed particularly well in the three months to March.
The group said it expected its average LNG selling prices to stay high in the second quarter, with gas prices close to historic highs this year, and that it was “mobilising additional investments to support short-term gas production in the North Sea”.
Quarterly net income came in at $4.9bn, up nearly 50 per cent on the same period a year earlier, despite the hit from Russia. On an adjusted basis it tripled year on year to $9bn, beating analysts’ expectations.
Shares were up close to 2 per cent in early trading on Thursday.
“We were not expecting TotalEnergies to raise its buyback today, given potential political/social pressures on companies doing so under the current circumstances,” analysts at RBC Capital Markets said in a note, adding that they expected the stock to do well in the near term.
Total’s Russian investments include the 10 per cent stake in the Arctic LNG 2 project, a 20 per cent holding in the Yamal LNG plant that partly supplies Europe and a 19.4 per cent stake in independent gas producer Novatek. It has said it sees no way of selling out of these developments for now without enriching Russian investors under sanctions.
Total is still rolling out some oil projects and is pushing gas as a transition option to a less carbon-intensive energy mix, although it is also investing heavily in rolling out its renewable energy and electricity businesses. It acquired 4 gigawatts of solar power and energy storage projects in the US this week.
Some investors have scrutinised the company’s record on climate change, however, questioning whether it was going far enough in its 2030 emissions-reduction targets. Total, which has said it will publish clearer goals and details of its progress every year, will give shareholders an advisory vote on its latest 2022 climate report at an annual meeting on May 25.