Peter Low

Peter Low from Rothschild & Co Redburn asked about the future production trajectory for the BPX business and the specific drivers behind the strong performance in the convenience and mobility segment.

Answer

CEO Murray Auchincloss stated that the strength in convenience and mobility was broad-based across all regions, driven by tight cost control, effective margin management, and value chain optimization. EVP Gordon Birrell reiterated the BPX strategy for 7% compound annual growth through 2030, noting that the business continues to improve on capital productivity metrics.

Peter Low from Rothschild & Co Redburn asked about the future production trajectory for BPX Energy now that its final delivery center is online, and sought to understand the source of the strong results in the convenience and mobility business.

Answer

CEO Murray Auchincloss explained that the convenience and mobility strength was broad-based across all geographic regions, driven by tight cost control, effective margin management, and value chain optimization. EVP - Production & Operations Gordon Birrell reaffirmed the BPX strategy of 7% CAGR to 650,000 barrels per day by 2030, highlighting strong recent growth and top-quartile capital productivity.

Peter Low from Redburn asked about the strategic attractiveness of recent upstream announcements, specifically the deal with ONGC in India and the Kirkuk redevelopment in Iraq, and the potential returns from these technical service-style contracts.

Answer

CEO Murray Auchincloss highlighted BP's strong track record in late-life field developments as the enabler for these opportunities. He described the ONGC deal as a capital-light services contract with attractive returns for both parties. For Kirkuk, he noted it's in final negotiations for a competitive PSA, leveraging BP's established in-country track record.

Peter Low asked about other upstream projects Shell is maturing that could potentially reach Final Investment Decision (FID) in the next 12 months, beyond the HI Gas project in Nigeria.

Answer

Shell CEO Wael Sawan identified several potential FIDs: one or two projects behind HI Gas to feed Nigeria LNG, Bonga North and potentially Bonga South West in Nigeria, a new hub like Gato do Mato in Brazil, opportunities to maximize production in Mero and Tupi, tiebacks to existing facilities in the Gulf of Mexico (e.g., Appomattox, Ursa, Mars), and localized FIDs in Oman. These projects collectively contribute to the goal of adding over a million barrels of oil equivalent per day by 2030 at sub-$35 breakevens.

Peter Low asked for examples of other upstream projects Shell is maturing that could reach FID in the next 12 months, following the HI Gas project in Nigeria.

Answer

Shell CEO Wael Sawan provided examples including additional projects to feed Nigeria LNG, new hubs like Gato do Mato in Brazil, opportunities to maximize production in Mero and Tupi, tie-backs to existing facilities in the Gulf of Mexico, and localized FIDs in Oman. He emphasized these contribute to the 1 million barrels plus oil equivalent per day funnel at sub-$35 breakevens.

Peter Low questioned why the Chemicals & Products division didn't see a more significant earnings improvement after divesting the heavily loss-making Singapore asset. He also asked if a seasonal working capital release is expected in the second half of the year, similar to prior years.

Answer

CFO Sinead Gorman explained that the Singapore divestment only closed one month into the quarter and that transaction settlement costs flowed through in Q2, so the full benefit will be more visible later in the year. Regarding working capital, she stated that its use is an active choice based on market opportunities and is therefore difficult to predict, rather than following a set seasonal pattern.

Peter Low asked why the Chemicals & Products division didn't see a larger earnings uplift after the Singapore divestment and inquired if a seasonal working capital release is expected in the second half of the year.

Answer

CFO Sinead Gorman explained that the full financial benefit of the Singapore divestment will be more visible in future quarters, as the deal closed during Q2 and involved settlement amounts. On working capital, she stated that its use is driven by market opportunities and is a conscious capital deployment choice, making seasonal trends difficult to predict.

Peter Low inquired about the flexibility within Shell's CapEx budget should the macro environment worsen and asked for the potential earnings improvement from the completed Singapore divestment.

Answer

Executive Sinead Gorman stated that while Shell has demonstrated the ability to reduce CapEx significantly, as seen during the COVID era, there is no current need to do so given the company's strong position and value opportunities. She quantified the impact of the loss-making Singapore divestment as improving earnings by 'several hundred million' on a full-year basis.

Peter Low of Redburn Atlantic asked what drove the stronger-than-expected results in the Marketing segment. He also inquired if the reduction in share count from buybacks would influence the Board's consideration of future dividend increases.

Answer

CFO Sinead Gorman attributed the strong Marketing results to robust premium volume sales toward the end of the quarter, along with standard inter-segment allocations during book closing. She clarified that the 4% annual dividend growth policy and the share buyback program are separate considerations. Share buybacks are viewed as a capital allocation tool to deliver value, and while the share price remains attractive, the company will continue to pursue them.

Peter Low asked about the Integrated Power segment's ROCE, which has been below 10%, and the steps to achieve the 12% target, as well as the base case for diverting Yamal LNG cargoes to alternative markets if the proposed EU ban on Russian LNG imports from 2027 proceeds.

Answer

Patrick Pouyanné, Chairman and CEO, explained that the 12% ROCE target for integrated power is a five-year journey, with current lower ROCE due to a large pipeline of non-productive projects that will become productive. He also cited rationalization and better asset use, focusing investments on major markets. Regarding the EU ban on Russian LNG, he stated that TotalEnergies is awaiting clarification on the new regulation's scope, as it's a fresh regulation, and lawyers are working to understand its implications for contractual commitments like Yamal cargoes.

Peter Low asked about the Integrated Power segment's Return on Capital Employed (ROCE), which has been below 10% for several quarters, inquiring about confidence in hitting the 12% target and the steps to achieve it. He also sought an update on the proposed EU ban on Russian LNG imports from 2027 and whether TotalEnergies still expects to divert Yamal cargoes to alternative markets.

Answer

Patrick Pouyanné, Chairman and CEO, clarified that the 12% ROCE target for Integrated Power is a five-year plan, not immediate, and will be achieved through converting a large pipeline of non-productive projects into productive assets, rationalization, and farm-downs. He stated that the new EU regulation on Russian LNG needs clarification, as its scope is currently unclear, and TotalEnergies' lawyers are working to understand the implications before confirming diversion plans, emphasizing the commitment to sanction compliance.

Peter Low questioned the Q3 cash tax paid, which appeared lower than expected, specifically asking if refunds in other regions explained the $3.8 billion total cash tax paid versus the $3.9 billion in NCS installments.

Answer

CFO Torgrim Reitan clarified that Q3 included two NCS tax installments, with three expected next quarter. He noted a timing effect due to falling prices, as taxes are still paid based on a higher price environment. Additionally, internationally, reported tax is often higher than paid tax, citing offsets in the U.K. (EPL, Rosebank investments) and the U.S. as contributing factors.

Peter Low from Rothschild & Co Redburn asked for clarification on Equinor's cash tax paid in the quarter, noting it was lower than expected at $3.8 billion despite two NCS installments totaling $3.9 billion, and inquired if refunds in other regions contributed to this discrepancy.

Answer

Torgrim Reitan, CFO, confirmed two tax installments in Q3 for Norway, with three expected in Q4. He explained that the reported tax is much higher than paid tax internationally, particularly in the U.K. due to the EPL and Rosebank investments offsetting tax, and also in the U.S., contributing to the lower cash tax paid.

Peter Low asked about the impact of the Empire Wind work stoppage on the CapEx budget for the year and inquired about the sources of potential CapEx flexibility in a lower commodity price scenario.

Answer

Torgrim Reitan, an Equinor executive, responded that it was too early to determine the CapEx implications of the Empire Wind halt, as the immediate priority is to clarify the situation. Regarding flexibility, he noted that while there is some in 2025, significant flexibility in the investment program opens up in 2026 and 2027, and discussions about how to use that flexibility are ongoing.

Peter Low asked for clarification on the moving parts of the annual CapEx guidance, noting that while overall guidance decreased, costs for some specific Norwegian projects had increased.

Answer

Executive Torgrim Reitan explained that while individual project costs fluctuate, the overall sanctioned portfolio remains fairly stable. He reiterated that the downward revision to the 2024 guidance was driven by broader factors like project phasing, currency effects, and adjustments in renewables, not a trend of project cost overruns.

Peter Low of Redburn Atlantic inquired about the specific issues causing delays at the Dogger Bank wind farm and requested a status update on upcoming major oil and gas projects like Johan Castberg and Bacalhau.

Answer

Executive Torgrim Reitan explained that the Dogger Bank delays, operated by SSE, were partly due to a very windy summer hindering installation, with full production now expected in H2 2024. He confirmed Johan Castberg is on track for Q4 2024 start-up and Bacalhau for first oil in 2025, with both projects progressing well. He also mentioned Rosebank, Rio, and Sparta as other major greenfield developments moving forward according to plan.

Peter Low from Rothschild & Co Redburn inquired about the drivers behind the year-over-year increase in unit OpEx costs in Norway and asked for information on any significant maintenance or turnarounds planned for the third quarter.

Answer

EVP & CFO Torgrim Reitan responded that while unit production costs on the NCS are viewed as stable quarter-on-quarter, the company is actively fighting inflation to keep overall costs flat for the year through efficiency gains and reduced spending. For Q3, he flagged an expected turnaround impact of approximately 45,000 barrels per day, similar to Q2, and noted the Hammerfest LNG facility is expected to return to production in August.

Peter Low from Rothschild & Co Redburn asked about the drivers behind the 10% year-over-year increase in unit OpEx costs in Norway and inquired about any significant maintenance planned for the third quarter.

Answer

EVP & CFO Torgrim Reitan responded that unit production costs on the NCS were stable quarter-on-quarter and reiterated the goal of keeping overall costs flat for the year through efficiency initiatives. He noted that Hammerfest LNG maintenance would continue into July but return to production in August. For Q3, he flagged an expected turnaround impact of around 45,000 barrels per day, on par with Q2.

Peter Low from Rothschild & Co questioned the drivers behind the lower-than-guided tax rate and its future trajectory. He also sought Eni's perspective on whether the recent surge in refining margins is transitory or structural.

Answer

CFO Francesco Gattei explained the lower tax rate is due to the business mix and the conversion of loss-making Italian assets to profitability, guiding expectations toward the lower end of the 50-55% range. Giuseppe Ricci, COO of Industrial Transformation, noted that refining margins increased in June/July due to low product storage and stress on gasoil supply, expecting this to persist for some months.

Peter Low from Redburn asked for the reason behind the lower-than-expected Q1 tax rate and the outlook for the full year. He also questioned the cause of the significant sequential decline in Q1 gas production.

Answer

Executive Francesco Gattei explained the low Q1 tax rate was due to a favorable profit mix from lower-taxed businesses like GGP and Plenitude, but he expects the full-year rate to rise towards 55% under a lower oil price scenario. Executive Guido Brusco attributed the gas production decline to lower entitlements and PSA effects in Libya, Indonesia, and Algeria, as well as M&A impacts in the U.S.

Peter Low requested an update on upstream production, including the timing of disposals and key project start-ups like Cassiopea and Baleine Phase 2, and asked if the 2026 biorefining capacity target is still valid given a project delay.

Answer

Executive Guido Brusco expressed confidence in reaching the upper end of production guidance, with Cassiopea starting in early August and Baleine Phase 2 by year-end. Enilive CEO Stefano Ballista clarified that to optimize technology and value, the biorefining capacity development has been slightly rephased, with the 3 million tonne target now expected to be reached 'within 2027' instead of by 2026.

Peter Low of Redburn Atlantic asked about the drivers behind Plenitude's strong Q1 EBITDA performance and whether it included any one-offs. He also inquired about the outlook for European biorefining margins for the remainder of the year.

Answer

Stefano Goberti, Head of Plenitude, stated that the strong Q1 results were driven by new renewable capacity and improved retail margins, with no one-off elements. Stefano Ballista of Enilive described 2024 as a transitional year for biorefining margins but expects an increase in the second half, supported by new mandates in Holland and a potential positive impact from an ongoing anti-dumping procedure.

Asked about capital allocation plans given the strong balance sheet and incoming cash from disposals, and requested clarification on the inventory valuation effect in the chemicals segment for Q4 and the full year 2023.

Answer

The company has headroom for both organic and inorganic investments to accelerate its strategy, including the potential Borealis-Borouge combination, while maintaining strict discipline on double-digit returns. Regarding inventory effects, it was clarified that the effect in Q4 was slightly positive, contrasting with the negative effect for the full year.