TotalEnergies to use oil cash to speed growth in LNG, renewables

French oil major TotalEnergies plans to use part of its cash bonanza generated from surging hydrocarbon prices to speed up investment in liquefied natural gas (LNG) projects and renewables.

“This might be an opportunity to accelerate the transition,” TotalEnergies Chief Executive Officer Patrick Pouyanne said on a call with analysts Thursday after the company reported its first-quarter profits rose threefold as oil and gas prices surged. “If we move, it will be primarily in either the LNG fields, and/or in electricity and renewables,” he said, referring to the company’s potential acquisitions.

European nations are trying to find alternative supplies to Russian oil and gas and accelerate the shift toward renewables as President Vladimir Putin’s invasion of Ukraine exacerbates the continent’s energy crisis. The war has fuelled concern over supply security across Europe after Moscow cut off gas supplies to Poland and Bulgaria for failing to comply with a new payment mechanism.

Everything on the Table

While soaring oil and gas prices are expected to boost Big Oil’s first-quarter profits, sanctions aimed at isolating Moscow are also halting development of LNG projects in Russia, muddying the outlook for future supplies.

“I’m not a very big fan of very large-scale acquisitions,” because integration is important, Pouyanne said. He added that the company’s multibillion purchases of A.P. Moller-Maersk A/S’s oil and gas unit, as well as some of Anadarko Petroleum Corp.’s Mozambique assets in recent years “were well done.”

The company is also using some of its first-quarter cash flow to reduce debt, increase shareholders returns, and make additional investments to support short-term gas production in the North Sea. TotalEnergies will spend near $15 billion this year — up from $13.3 billion in 2021 — a quarter of which will be invested in renewable energy and power projects.

The $15-billion spend for this year will be capped, Pouyanne said, meaning that any large acquisition would be offset by divestments.

“There is nothing specific in our mind, let’s be clear, just the will from the board to use part of these exceptional cash flows to accelerate our strategy,” Pouyanne said. “In renewables, there is a big bubble.”

Following this week’s acquisition of a solar farm developer in the US, TotalEnergies expects to participate in more M&A deals in the coming months, Pouyanne said. Beyond LNG projects in the US, Mozambique and Papua New Guinea, the company may outline its strategy for growth in the super-chilled fuel’s market amid sanctions on its Arctic LNG 2 project, he said.