Lydia Rainforth

Lydia Rainforth of Barclays questioned the profitability of the refining business, noting its low operating profit despite high uptime, and asked how quickly it could be improved. She also inquired about the decision to not have a Head of Strategy on the leadership team and how the company will ensure strategic agility.

Answer

Executive Murray Auchincloss explained that refining profitability was impacted by difficult margin environments in the Midwest and Rotterdam but is now rebounding. He reiterated the goal to improve profitability by $2 a barrel by 2027. Regarding the strategy role, he clarified that a Head of Strategy will still exist, reporting to the CFO, to ensure tight integration with planning, but the role will not be on his direct leadership team.

Lydia Rainforth of Barclays PLC asked for clarification on the 'strong cost margin ratio' mentioned in disclosures, how it's measured, and how it has changed, particularly for the trading business.

Answer

CFO Katherine Thomson explained that this ratio is central to the trading business, where variable costs like shipping are directly linked to margin delivery. She noted costs have risen due to increased shipping rates and LNG portfolio growth, but emphasized that targeting a reduction in these specific costs would be counterproductive to value creation. CEO Murray Auchincloss added that more detail would come at the Capital Markets Day.

Lydia Rainforth asked about Shell's progress and thinking on artificial intelligence (AI) deployment, its impact on the cost base, and Shell's view on global demand dynamics (oil glut vs. tightening), specifically how the buyback program fits into this uncertainty.

Answer

Shell CEO Wael Sawan highlighted AI's role in operational improvements (e.g., Olympus, Ursa platforms) and trading, noting ongoing learning and collaboration with hyperscalers. Regarding demand, he acknowledged headwinds for 2026 with potential oversupply, but maintained strong long-term conviction for crude and LNG. Sawan reiterated the 40-50% CFFO distribution target as sacrosanct, positioning the company to weather downturns.

Lydia Rainforth questioned how high Shell is willing to let its gearing level rise, given the long-standing quarterly buyback program. She also asked for details on the unplanned maintenance in the Chemicals segment and whether fixing its underperformance is proving more difficult than anticipated.

Answer

CEO Wael Sawan acknowledged the prolonged trough in the Chemicals market and stated he has instructed the team to take 'next level measures to stop the bleeding' and move toward free cash flow neutrality. CFO Sinead Gorman explained that gearing is a trade-off between value and risk, and she is comfortable with the current level as recent increases were from value-accretive activities. She affirmed the 40-50% CFFO distribution range is 'sacrosanct'.

Lydia Rainforth questioned how high Shell is willing to take its gearing level given the consistent buybacks, and asked about the challenges and progress in fixing the underperforming Chemicals business.

Answer

CEO Wael Sawan acknowledged the prolonged trough in Chemicals and stated he has instructed the team to take measures to "stop the bleeding" and move towards free cash flow neutrality. CFO Sinead Gorman described gearing as a value vs. risk trade-off, expressing comfort with the current level and affirming the 40-50% CFFO distribution target is "sacrosanct."

Lydia Rainforth asked what Shell's real-time data indicates about current demand for oil, products, and LNG, and questioned the progress on OpEx reduction and organizational simplification.

Answer

CEO Wael Sawan responded that demand data for oil products and LNG is holding up, with LNG supported by low European storage. He noted that the OpEx reduction program has strong momentum, with the organization now proactively generating cost-saving ideas, but emphasized that Shell is 'nowhere close to our potential' and there is more work to do on simplification.

Lydia Rainforth of Barclays PLC inquired about Shell's future strategy for value creation, asking if the company will maintain its consistent approach or pursue a more radical agenda. She also questioned the adequacy of organic gas reserves in Canada for LNG Canada following the debooking of Groundbirch.

Answer

Executive Wael Sawan affirmed the commitment to a consistent strategy focused on performance, discipline, and resilient cash generation, noting they are ahead of cost-reduction targets. Executive Sinead Gorman clarified that the Groundbirch debooking was a technical result of low AECO pricing and that Shell has a flexible sourcing strategy for LNG Canada, providing a natural hedge.

Lydia Rainforth from UBS inquired about Shell's performance one year after its Capital Markets Day, asking what has exceeded expectations and where more focus is needed. She also questioned the company's strategy for its strong balance sheet and free cash flow, particularly regarding future shareholder returns versus retaining cash.

Answer

CEO Wael Sawan highlighted significant progress on financial targets and a cultural shift towards performance and discipline, noting the focus on de-bureaucratizing the company. CFO Sinead Gorman emphasized that the strong balance sheet provides resilience and enables consistent, predictable shareholder distributions, noting that debt levels will naturally fluctuate with projects like LNG Canada coming online.

Lydia Rainforth asked about the current status of tax issues in France, particularly regarding proposed taxes on share buybacks, and sought clarification on TotalEnergies' expected cash flow growth relative to production growth for 2026.

Answer

Patrick Pouyanné, Chairman and CEO, addressed the 'fiscal creativity' in French Parliament, emphasizing that proposed super taxes on multinationals are likely unconstitutional and that TotalEnergies' global operations mean 90-95% of its cash flows are not from France. He reiterated expectations for over 3% production growth in 2026 and anticipated an accretive effect on cash flow from new production, with full details to be provided in February.

Lydia Rainforth asked for clarification on French tax issues, including headlines about tax on share buybacks, and sought an indication of how much more cash flow might grow than production for 2026.

Answer

Patrick Pouyanné, Chairman and CEO, addressed French fiscal creativity, stating that proposals like super taxes on multinationals are likely unconstitutional and TotalEnergies' global nature limits their impact. He noted that 2026 production growth is anticipated at least 3%, with accretive cash flow effects, and more precise figures will be provided in February.

Lydia Rainforth of Barclays asked about the potential impact and timeline of the digital and AI deployment with Emerson in the downstream business, and questioned the rationale for maintaining the $2 billion quarterly buyback given the high payout ratio.

Answer

Patrick Pouyanné, Chairman & CEO, detailed that the AI and digital initiatives are moving from 'words to action' to enhance asset value, not just cut costs, through real-time data platforms. Regarding the buyback, he explained the financial logic: the company's cost of debt (around 3.5%) is significantly lower than its dividend yield (around 6%), making buybacks a financially sound way to manage capital and support future dividend growth.

Lydia Rainforth asked for a breakdown of growth capital expenditure versus maintenance CapEx to understand the cost of TotalEnergies' production growth. She also inquired about the company's strategy for deploying its balance sheet for acquisitions in a weaker market.

Answer

CEO Patrick Pouyanné emphasized that the company is driven by value, and growth CapEx is directed at accretive projects that will not be cut. He noted that if spending reductions were necessary, they would come from areas like EV charging or CCS, not core oil and gas growth. Regarding acquisitions, Pouyanné explained the key trade-off is between buying back the company's own "cheap" shares and pursuing a significant, value-accretive acquisition. He stated that while being countercyclical is good, no such cheap acquisition opportunities are currently visible.

Lydia Rainforth of Barclays asked about the possibility of a special dividend for TotalEnergies' 100th anniversary and sought an outlook on refining margins and the slopes of new LNG contracts.

Answer

CEO Patrick Pouyanné stated that the company prefers to maintain its policy of increasing the ordinary dividend and executing buybacks over issuing a special dividend, as the current environment is good but not exceptional like in 2022. He noted that refining margins are normalizing back to pre-2022 levels but that marketing benefits in this environment. For LNG, he described the contract details as a commercial secret but confirmed the strategy of transforming Henry Hub-linked gas into Brent-linked sales is beneficial for cash flow.

Lydia Rainforth from Barclays followed up on the potential U.S. listing, asking about the timeline and potential obstacles. She also inquired about the company's outlook for the global LNG market.

Answer

CEO Patrick Pouyanné revealed he plans to report to the board on the U.S. listing by September, with the goal of providing easier share access for U.S. investors. On LNG, he projected a tight market for 2025-26, followed by new capacity from the U.S. and Qatar in 2027 that could lower prices but stimulate demand. He noted the company's strategy is to sign more oil-linked, medium-term contracts to manage price volatility.

Lydia Rainforth of Barclays inquired about the drivers behind the increased €3 billion cash management initiative and its potential for further savings. She also asked about the short and long-term advantages of Eni's diverse financing partners, including NOCs, traders, and private equity.

Answer

CEO Claudio Descalzi explained the cash initiative stems from organizational efficiency gains from the new satellite model, not from defensive needs. CFO Francesco Gattei added it involves optimizing financial cycles. Descalzi noted that diverse partners, like state companies in Indonesia or private funds for transition businesses, bring focus, speed, and local expertise, which is essential for rapid value delivery.

Lydia Rainforth of Barclays asked if Eni's significantly stronger balance sheet changes its response to market volatility and opens new opportunities. She also questioned if the company might consider leaning more on its balance sheet to increase share buybacks given the current share price.

Answer

Executive Francesco Gattei agreed that the strong balance sheet provides a unique advantage to manage volatility and maintain strategic execution without being forced into suboptimal decisions. Regarding the buyback, he reiterated the company's commitment to the announced policy, which will begin after shareholder approval, and acknowledged the logic of buying back at lower prices but could not pre-announce the execution pace.

Lydia Rainforth asked what factors would prevent the company from executing the potential €500 million additional buyback and how Eni manages its growing number of 'satellite' businesses while maintaining a cohesive company ethos.

Answer

Executive Claudio Descalzi stated that the delay in confirming the extra buyback is a matter of 'prudence and responsibility' to ensure capital allocation is finalized, expecting clarity in a couple of months. On the satellite model, CFO Francesco Gattei noted its proven success, while Descalzi emphasized that Eni adds value and maintains a strong link through proprietary technology, R&D, and skilled personnel, which is crucial for navigating the energy transition.

Lydia Rainforth from Barclays asked for a walkthrough of the steps being taken in 2024 to steer the Versalis chemicals business towards its goal of being EBITDA neutral by 2025. She also questioned if the Ithaca transaction would be a cash flow accretive event for Eni.

Answer

Adriano Alfani of Versalis described the transformation as a multi-year journey involving continuous cost reduction, specialization through acquisitions like Tecnofilm, and disciplined CapEx. Executive Francesco Gattei confirmed that the Ithaca transaction's dividend policy is partially accretive compared to Eni's standalone case and was already factored into the company's financial plan.

Lydia Rainforth asked how the balance sheet position compares to initial 2024 expectations and questioned the rationale for the Orsted investment, given its lack of near-term cash flow and long-term holding nature.

Answer

Executive Torgrim Reitan responded that the balance sheet is developing as expected, with price and working capital effects offsetting each other. He confirmed Equinor plans to be a long-term holder of Orsted shares, expressing confidence in the investment's long-term value creation despite the current lack of dividends.

Lydia Rainforth of Barclays questioned if Equinor might struggle to spend its low-carbon budget due to a lack of value-creating projects and sought clarity on the baseline for cash returns to shareholders beyond 2025, asking if the 2026 level should be seen as a minimum.

Answer

Executive Torgrim Reitan responded that low-carbon projects like Northern Lights and U.K. CCS are moving forward with appropriate returns, though the hydrogen space is less mature. Regarding cash returns, he reiterated the policy of a growing ordinary dividend and a standard share buyback, plus additional distributions to manage gearing. He deferred specific 2026 guidance to the next Capital Markets Day, emphasizing that competitive capital distribution is a key priority.