THIRD QUARTER 2026 RESULTS - TOTALENERGIES SE

Explicit Guidance:

• Full-Year 2026 Cash Flow: Expected to be above $42 billion, with a potential upside to $43 billion (previously guided at $40 billion at CMD).
• Full-Year 2026 Net Investment: Maintained at $15 billion.
• Gearing Target: Anchored below 10% by the end of 2026 (currently at 9.1%); CEO indicates a desire to potentially reach 6% in the long term.
• Dividend & Shareholder Return:
  • Commitment to return 40% of cash flow to shareholders.
  • Q3 Dividend: Confirmed at €0.90 per share (up 9% vs. 2025).
  • Share Buybacks: Reiterated commitment of $2.5 billion in Q4 2026 and $2.5 billion in Q1 2027.
  • Uplift Mechanism: If full-year cash flow exceeds $42 billion (e.g., reaches $43 billion), the Board may apply an uplift to the final dividend in February 2027 to ensure the 40% target is met (estimated uplift of ~$400–500 million).
• Q4 2026 LNG Price Forecast: Anticipated average energy selling price above $14 per million BTU (based on TTF ~25–27, potentially closer to $15 if TTF reaches $33).
• Integrated Power: Net cash positive target maintained for 2027; 2026 annual generation target >60 TWh.
• Upstream Production Growth:
  • 2026-2035: Plateau of 3 million barrels of oil equivalent per day (mboe/d) through 2030, with growth of 2–3% per year anticipated from 2030 to 2035.
  • Q4 2026 Upstream Growth: Excluding Middle East impact, expected to grow >3% year-on-year.

Business-Segment Outlook:

• Downstream (Refining):
  • Refining throughput expected to remain at full capacity in Q4 2026 (Statoil at nominal capacity).
  • Refining Margins: European and global margins remain historically high; expected to remain strong in H1 2027 due to low inventories and crisis legacy.
  • Strategy: No investment in new refineries; focus on maintaining existing capacity and optimizing crude slates.
• Integrated LNG:
  • Strong Q4 2026 results anticipated, matching Q3 performance due to rising gas prices and trading outperformance.
  • Gas Trading: Long positions expected to remain profitable in Q4 2026 as TTF stays elevated ($30+/mBTU).
  • Portfolio Growth: Continued diversification into Asian markets; signed agreements for 2.4 mtpa (PNG) and 1.5 mtpa (Noftec).
• Integrated Power:
  • 2027 Outlook: Targeting $3 billion in cash flow (from operations) and net cash positive status.
  • Asset Sales: Proceeds from ~2 GW divestment (KKR) expected in Q4 2026 to balance free cash flow; impact on CapEx already factored in.
• Upstream (Hydrocarbons):
  • Production: Expecting continued growth momentum in Q4 2026; Middle East conflict impact expected to remain <5%.
  • New Projects: All projects contributing to the 2030 growth target are now in execution phase (Kronos Cyprus, IMMA Nigeria, Umshite Gas Cap Abu Dhabi, Absheron Phase 2).
  • Uganda: Kingfisher startup (onshore) targeted for 2026; East African Crude Oil Pipeline (EACOP) startup delayed by 6 months to H1 2027 due to equipment delays.
  • Ratawi (Iraq): Phase 1 (120,000 bpd oil) expected complete by November 2026; full field target 210,000 bpd oil and 3 Bcf/d gas.
  • Namibia: Venus FID optimism maintained; first open-water drilling in November 2026.
• Gas Trading: Anticipated strong results in Q4 2026 driven by seasonality and inventory replenishment in Europe.

Market and Competitive Outlook:

• Oil Prices: Brent averaged $97/bbl in Q3; current levels > $120/bbl (Dated Brent) driven by Middle East conflict volatility.
• Gas Prices: TTF averaged $21.5/mBTU in Q3, rising to $30–33/mBTU in Q4 2026. Europe's winter demand and low inventories supporting prices.
• LNG & Supply Chains:
  • Strait of Hormuz: LNG volumes reduced to ~25% of pre-war levels; crude oil flows ~12 mmb/d (down from ~20 mmb/d).
  • Yamal Impact: Sanctions will prevent Yamal LNG from supplying EU from January 1, 2027, reducing export capacity by ~15 mtpa; TotalEnergies expects to take 3 mtpa via limited routes.
  • Asian Demand: Strong competition for LNG volumes between Europe and Asia; shift towards long-term contracts linked to Brent rather than oil slope indexation (12.5% oil slope prevalent).
• Freight Rates: High freight costs factored into realized margins; TotalEnergies benefits from 40% of off-take covered by fixed-rate charters (vs. competitors with spot-linked charters).
• Refining Margins: European margins integrated costs of gas, CO2, and freight; US margins (Port Arthur) insulated from European gas/CO2 costs.

Macro / Industry Outlook:

• Geopolitics: Middle East conflict remains a primary driver of volatility; market pricing assumes prolonged conflict.
• Regulatory (France): No "golden share" or direct state ownership; government has not adopted special taxation measures to avoid disrupting price ceilings on fuel; company expects to pay ~€500M corporate tax + €500M in consumer protection costs.
• Regulatory (Germany): Offshore wind development challenged by relaxed government conditions and higher connection costs; some concessions written off due to lack of profitability.
• Interest Rates & Debt: Cost of hybrid instruments (~3%) considered favorable compared to standard bonds; strategy to maintain low debt levels to weather potential crises (e.g., price drops).

Strategic Initiatives:

• M&A & Exploration:
  • US Gas Priority: Focus on US natural gas (targeting 1–2 Bcf/d growth); counter-cyclical M&A strategy (avoiding high-price acquisition windows).
  • Gulf of Mexico: Continued exploration partnership with Chevron; planning to prospect together in 2027.
  • New Projects: Final Investment Decisions (FIDs) taken for Kronos (Cyprus), IMMA (Nigeria), Umshite Gas Cap (Abu Dhabi), Absheron Phase 2 (Azerbaijan).
• Capacity Expansion:
  • Upstream Growth: 3% annual growth target by 2030; 2-3% growth 2030–2035.
  • Biofuels: Commissioning of Grand Prix Bio Refinery in Q3 2026; monitoring HVO regulations (France/Germany vehicle rules).
• Midstream Investments: Potential investment in Middle East pipelines (Abu Dhabi, Iraq, Syria) to ensure security of supply, pending contractual protections and tariff structures.
• Divestments: Proceeds from 2 GW iPower sale to KKR expected in Q4 2026 to fund net cash positive status.

Risks and Headwinds to Outlook:

• Geopolitical Volatility: Conflict escalation or de-escalation in Middle East could drastically alter oil/gas prices and supply flows (Strait of Hormuz).
• Sanctions: EU sanctions on Yamal LNG (Jan 2027) limit export options and increase shipping costs/distance.
• Regulatory Uncertainty: Evolving French and German energy regulations (taxation, offshore wind subsidies, biofuel mandates) could impact project economics.
• Operational Disruptions: Underlifting positions in UAE (due to shipping/logistics issues); potential force majeure risks if conflicts intensify.
• Market Price Reversal: Current high prices (Brent $120+, TTF $30+) may not be sustainable; guidance assumes normalization or specific conflict durations.
• Working Capital: Unpredictable movements in Q4 2026 due to inventory valuation and supplier payables.

Management Tone on the Future:

• Confidence: High confidence in operational execution (low cost of $4.7/bbl, full capacity utilization) and integration as a value capture mechanism.
• Caution: Explicitly stated "no urgency" regarding resource additions for 2030–2035 targets; prefers organic growth and DROs over M&A.
• Shareholder Priority: Relentless focus on the 40% cash flow return commitment; willing to adjust final dividend to meet target if cash flow exceeds $42B.
• Strategic Discipline: Refusal to invest in new refineries; commitment to "counter-cyclical" M&A (no buying at peak prices); cautious approach to European fossil fuel expansion unless political narrative changes.
• Tone: Optimistic on Q4 2026 results and cash flow, but realistic about the volatility of the macro environment (Middle East conflict, price uncertainty).

Miscellaneous:

• Cost Control: Operating cost of $4.7/bbl (below $5 guidance) driven by 2025 cash-saving program.
• Share Count: ~2.5 billion shares outstanding.
• Gearing: Currently 9.1% (down 4 percentage points QoQ), expected to decline further.
• Hybrid Securities: $1.5 billion ($1.7B USD) maturing October 2026; strategy to maintain as long as cost (~3%) remains lower than refinancing options.