Matthew Lofting

Matthew Lofting (JPMorgan Chase & Co.) asked for details on the key sources contributing to TotalEnergies' higher-margin barrels, which are bridging the $10 per barrel gap between 2026 and 2024, and inquired about the company's strategy for M&A in the U.S., specifically leveraging its U.S.-listed shares.

Answer

Patrick Pouyanné, Chairman and CEO of TotalEnergies, explained that higher-margin barrels primarily come from oil fields in the U.S. Gulf of Mexico and Brazil, replacing lower-margin barrels from regions like the North Sea. He confirmed the company's priority for U.S. upstream gas M&A, noting that U.S.-listed shares offer a fiscally advantageous currency for such deals.

Matthew Lofting asked for more details on the sources of TotalEnergies' higher-margin barrels, considering geological, fiscal, and asset size factors, which contribute to bridging the $10 per barrel gap between 2024 and 2026. He also inquired about the potential use of U.S.-listed shares as currency for future M&A in the U.S., given historical prudence on valuations.

Answer

Chairman and CEO Patrick Pouyanné clarified that high-margin barrels primarily come from oil fields in the U.S. Gulf of Mexico and Brazil, benefiting from favorable fiscal terms. He noted that these new barrels replace lower-margin production from areas like the North Sea or Nigeria. Regarding M&A, Pouyanné stated that the U.S. listing provides a currency for potential upstream gas acquisitions in the U.S., which are a clear priority, acknowledging that share-based deals can be fiscally advantageous compared to cash.

Matthew Lofting followed up on buybacks, asking how mechanically the company would revert to its 40%+ payout floor in a downturn. He also inquired about the reasons for recent substantial fluctuations in working capital.

Answer

CEO Patrick Pouyanné clarified there is no "mechanical" formula for adjusting buybacks; the Board appraises the total macro and geopolitical environment. He stressed the >40% payout is a floor, not a target. Regarding working capital, Pouyanné explained the fluctuations are driven by two main factors: structural fiscal reversals in countries like Norway and a predictable seasonal build in the gas and power marketing business, which always reverses over the course of the year.

Matthew Lofting of JPMorgan Chase & Co. inquired about the extent to which long-term growth objectives have been de-risked in recent months and whether strong LNG demand from China and India is seasonal or structural.

Answer

CEO Patrick Pouyanné stated he is more confident in delivering the 2-3% oil and gas growth target than he was last year, as most major projects (Brazil, Angola) have been sanctioned, with Suriname to follow. He sees LNG demand from India as structural, driven by government investment in gas infrastructure and industrial use. Chinese demand is currently more seasonal but could become more structural if policies like an expanded ETS are implemented, with growth driven by industry and transport rather than power.

Matthew Lofting asked for Equinor's reflections on the implications of Empire Wind's execution challenges, particularly regarding retaining a 100% equity stake, for best assessing risk management and risk-adjusted returns on future capital allocations, and if learnings are emerging for optimal project sizing.

Answer

President and CEO Anders Opedal acknowledged that retaining 100% equity in Empire Wind was unusual and that the political risk from the new administration was higher than anticipated, a trend seen in several countries. He stated that this experience prompts reflections on above-ground risk, the need for bipartisan support, and adapting learnings into future decision processes, suggesting a different approach to Empire Wind might have been taken in the past given these new political dynamics.

Matthew Lofting asked for Equinor's reflections on the implications of Empire Wind for risk management and risk-adjusted returns on future capital allocations, particularly regarding retaining a 100% equity stake and learnings for optimal project sizing.

Answer

CEO Anders Opedal acknowledged that retaining a 100% stake is unusual and that while the project was de-risked with higher strike prices and financing, the political risk with the new administration was higher than anticipated. He noted that energy investments are becoming increasingly politicized across several countries, prompting reflections on above-ground risk and the need for bipartisan support. He emphasized that these learnings will definitely be incorporated into future decision processes, suggesting that Equinor might have approached Empire Wind differently in the past given the unforeseen political changes.

Matthew Lofting from JPMorgan Chase & Co. asked for an expansion on the availability issue concerning the wind turbine installation vessel for Empire Wind, which was informed by Maersk, and any potential risks it poses to the project's future development progress into next year.

Answer

Torgrim Reitan, CFO, acknowledged Empire Wind's demanding year but stated that lost time has been caught up, with the project 55% complete and all monopiles installed. He explained the vessel issue is a dispute between Maersk and Sembcorp, with Maersk canceling the contract. Mr. Reitan assured that Equinor is working to resolve this, either by solving the dispute or finding other opportunities in the well-functioning market, and will provide updates.

Matthew Lofting asked for more details on the reported availability issue concerning an installation vessel for Empire Wind with MESC, and any potential risks it poses to the project's future development progress into next year.

Answer

CFO Torgrim Reitan acknowledged Empire Wind's demanding year, noting that lost time from a reversed stop-work order has been caught up, and the project is back on track, 55% complete with all monopiles installed. He explained the vessel issue is a dispute between Maersk and Sembcorp (the yard), with Maersk having canceled the contract for the nearly completed vessel. Equinor is actively working to resolve the situation or find alternative solutions, noting that the market for such vessels is well-functioning and other opportunities are available, though not without risk.

Matthew Lofting asked about the conditions or duration of the Empire Wind halt that would trigger a write-down of its $2.5 billion book value. He also inquired if the moderated trading conditions in the MMP segment were an industry-wide phenomenon or a temporary risk-off approach by Equinor.

Answer

Torgrim Reitan, an Equinor executive, stated that an impairment test for Empire Wind will be conducted for Q2 results, but it is too early to predict the outcome. On the trading environment, he suggested a general "risk off" sentiment across markets due to new types of geopolitical and trade risks, making it a difficult environment for all participants, not just Equinor.

Matthew Lofting asked if the Orsted investment signals a broader strategic shift toward a 'buy over build' approach for Equinor's low-carbon and renewables growth.

Answer

Executive Torgrim Reitan suggested this is part of a broader trend rather than a singular shift. He explained that the energy transition requires varied approaches to ownership and governance, pointing to past acquisitions like BeGreen and Danske Commodities as evidence of a more complex, flexible strategy.

Matthew Lofting of JPMorgan Chase & Co. pointed out that the first-half operating cash flow seemed light relative to the full-year guidance of $17.5 billion and asked how the company expects to bridge this gap in the second half, especially given heavier turnarounds.

Answer

Executive Torgrim Reitan explained that while pre-tax cash flow is relatively flat quarter-to-quarter, the timing of tax payments is the major driver of the second-half uplift. He noted that lower tax installments in H2 and the contribution from low-tax U.S. production will significantly boost after-tax cash flow, sufficiently covering the gap to meet the full-year guidance.

Matthew Lofting inquired about the direct impact of the U.S. tariff framework on Shell's business and whether the consistent outperformance in Upstream and Integrated Gas is sustainable.

Answer

CEO Wael Sawan stated that the direct impact of U.S. tariffs is currently seen as limited and manageable, with the company focused on mitigating supply chain effects. Executive Sinead Gorman attributed the strong performance in Integrated Gas and Upstream to the teams' focus on performance, discipline, and simplification, highlighting their ability to quickly restore operations after outages as a key driver of sustainable results.

Matthew Lofting of JPMorgan Chase & Co. questioned if the early achievement of cost-cutting goals suggests a larger-than-anticipated opportunity for margin enhancement. He also sought clarity on whether the noncash hedging losses in Integrated Gas were a one-off event.

Answer

Executive Wael Sawan confirmed that challenging existing paradigms has unlocked significant value faster than expected, with more potential remaining. Executive Sinead Gorman explained the Integrated Gas earnings impact was due to noncash legacy hedge contracts and anticipates similar noncash impacts to continue over the next three quarters as they roll off.

Matthew Lofting from JPMorgan Chase & Co. asked about the drivers behind the consistent earnings beat in the Integrated Gas and Upstream segments over the last four quarters. He also inquired about the strategic rationale for the Pavilion Energy acquisition and how it enhances Shell's LNG portfolio flexibility.

Answer

CEO Wael Sawan attributed the strong performance in Integrated Gas and Upstream to a culture of performance, focus on 'brilliant basics,' and improved operational delivery at key assets like Prelude and QGC. CFO Sinead Gorman explained that the Pavilion acquisition adds 6.4 MTPA of supply, helping to fill a near-term gap and support long-term growth targets, which is particularly attractive as the LNG market normalizes.

Matthew Lofting of JPMorgan Chase & Co. asked about oil and liquids trading, noting its recent 'average to weak' performance and inquiring what market conditions would be needed for a stronger contribution. He also sought clarity on the calibration of the $750 million Q1 buyback and how BP views its positioning within the 30-40% of CFFO distribution range for the full year.

Answer

Executive Murray Auchincloss explained that trading profitability is driven by a stable customer business, re-diversions during disruptions, and speculative trading. He noted that politically headline-driven events make trading difficult. Executive Katherine Thomson clarified that the buyback is framed by the 30-40% of operating cash flow target over time, not as a mechanical quarterly calculation. The Board considers performance, volatility, and the medium-term outlook when making its decision each quarter and will not guide forward.

Matthew Lofting of JPMorgan Chase & Co. requested a breakdown of the $5 billion structural cost reduction between divestments and underlying efficiencies, and asked whether reconsolidating Rosneft shares is a feasible scenario.

Answer

CFO Katherine Thomson declined to provide a specific breakdown of the cost reduction figure but confirmed it includes portfolio impacts. Regarding Rosneft, CEO Murray Auchincloss stated that the principal focus remains on divesting the stake, given international sanctions.

Matthew Lofting from JPMorgan Chase & Co. asked for a breakdown of the gross CapEx reduction between activity-related postponements and underlying efficiencies. He also inquired about any recent signs of margin improvement in the challenged Refining and Versalis (Chemicals) businesses.

Answer

Executive Francesco Gattei estimated that of a EUR 500-600 million CapEx reduction, roughly EUR 200-250 million is from postponements, with the rest from structural efficiencies and contingencies. For downstream, Executive Adriano Alfani noted a slight seasonal demand improvement for chemicals, while Executive Giuseppe Ricci expected a modest refining margin lift from the driving season, though the market remains stable.

Matthew Lofting asked what differentiated the GGP segment's strong performance in a less volatile market and whether its long-term baseline guidance of €800 million EBIT is now too conservative.

Answer

Executive Cristian Signoretto explained that while overall market volatility has decreased from crisis levels, it remains high enough to create trading opportunities. He specified that GGP capitalized on geographical price spreads, particularly leveraging its strong position in Italy, and the volatility between oil and gas hub prices to deliver its strong H1 results.

Matthew Lofting sought more detail on the Q2 weakness in the Gas & Power segment, asking if it was driven more by market dynamics or the Petrobrazi power plant downtime. He also questioned why OMV does not separately disclose financial results for its strong Retail and Commercial business, as some industry peers do.

Answer

CEO Alfred Stern acknowledged the feedback on splitting out Retail and Commercial results and said the company would reflect on it. He confirmed the scheduled power plant maintenance was completed. CFO Reinhard Florey added that the Gas East trading business is small, and Q2 results were impacted by increased gas storage requirements, a temporary effect expected to reverse in Q4. He noted the Gas West trading business performed successfully.

Matthew Lofting of JPMorgan Chase & Co. asked for clarification on the Q2 performance of the Gas & Power segment, specifically whether the trading contribution was weak beyond the cited legislative effects. He also questioned why OMV does not separately disclose the financial results for its strong-performing Retail and Commercial business, as some peers do.

Answer

CEO Alfred Stern acknowledged scheduled maintenance downtime impacted the Gas & Power segment in Q2. CFO Reinhard Florey added that the trading part in Gas East is traditionally small, and higher gas storage requirements in Q2 had a temporary negative effect that should reverse in Q4. Regarding disclosure, Mr. Stern acknowledged the strong contribution from Retail and Commercial and noted he would reflect on the feedback about separate reporting.

Inquired about the expected profile of polyolefin margins in H1 vs H2 2024 and the lead indicators for recovery. Also asked about OMV's preparedness for the potential end of Russian gas transit via Ukraine at the end of 2024.

Answer

The company expects a sideways development for polyolefin margins in 2024, with hopes for some recovery in the second half. Regarding gas, OMV has fully diversified its supply sources and secured necessary pipeline capacity, enabling it to supply all customers with non-Russian gas if the transit through Ukraine ceases.