TotalEnergies SE reported a smaller-than-expected decline in first-quarter profit and delivered more generous returns to shareholders after announcing the sale of its carbon-intensive Canadian oil sands business to Suncor Energy Inc.
The French company is kicking off a Big Oil earnings season that is expected to deliver sizable cash flows despite a fall in energy prices from peaks reached last year following Russia’s invasion of Ukraine . So far, the companies have been using the profit bonanza to reward investors and pay down debt, leaving analysts speculating whether they could pivot to faster growth through big deals.
In fact, TotalEnergies agreed to sell assets to Suncor for C$5.5 billion ($4 billion) in cash, with the potential for additional payments of up to C$600 million depending on prices and production levels, according to a separate statement. The French company had initially planned to spin off a stake in these operations on the Toronto Stock Exchange.
Proceeds from this divestment could be used to increase returns for investors. TotalEnergies will allocate at least 40% of its cash flow from operations this year to shareholders, at the high end of the previously announced 35% to 40% range, according to the statement. This will be done through a share buyback or a special dividend.
The transaction, which may be completed by the end of the third quarter, is subject to regulatory approval and the partners of TotalEnergies EP Canada Ltd. they waive their pre-emptive rights.
TotalEnergies’ first-quarter adjusted net income fell to $6.54 billion, down 27% from a year earlier, the company said in Thursday’s statement. That beat analysts’ average estimate of $6.29 billion. Stronger refining margins in Europe, amid a ban on importing Russian oil products, mitigated a broader drop in energy prices and lower sales of liquefied natural gas.
TotalEnergies was trading down 0.7% at 9:22 a.m. in Paris on Thursday.
Refining margins are now shrinking as economic growth slows and supply routes are rearranged following the European embargo on Russian oil products, the French major said in its statement. But gas prices may recover in the second half as Europe rebuilds stocks ahead of winter and Chinese demand recovers.
The company reiterated that it will buy back $2 billion of its stock in the second quarter, after buying back the same amount in the first three months of the year. It also confirmed a 7.25% increase in its quarterly dividend for 2023.
Suncor’s announcement comes a month after Total agreed to sell gas stations in several European countries to Canadian convenience store operator Alimentation Couche-Tard Inc. for 3.1 billion euros ($3.3 billion).
The French major also spent nearly $3.3 billion in the first quarter to complete the purchase of stakes in a liquefied natural gas project in Qatar, oil fields in the Emirates and a Brazilian wind farm developer.
TotalEnergies maintained its capital investment plan of $16 billion to $18 billion this year, including $5 billion in low-carbon energy such as wind, solar and biomethane.
