Despite the fall in gas and oil prices, it is still very profitable to invest in the hydrocarbon majors. In any case, this is the message that TotalEnergies wants to send, determined to further promote its group and to attract the Anglo-Saxons, who now hold more than 50% of the capital. And this, while still spending astronomical sums on share buybacks – more, in fact, than for its investments in renewable energies.
In fact, the company will repurchase a total of $8 billion in shares in 2024, we learned this Wednesday during the presentation of its strategy from New York, where CEO Patrick Pouyanné plans to ‘establish a stock exchange listing in addition to Paris. Or 5% of the capital, with a rate of return of cash flows to the shareholder greater than 45%. A level above, therefore, the announced objective of 40%.
TotalEnergies even plans to “ pursue » this measure in 2025, by carrying out share buybacks « at a rate of 2 billion dollars per quarter » if indeed the “ market conditions » be « reasonable “. To generate cashthe company also plans to increase hydrocarbon production: while it had previously expected growth in fossil fuels between 2% and 3%, the course was set this Wednesday at more than 3% from 2025.
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Increase the market value of each security
But what does this practice of share buybacks consist of? Concretely, by acquiring its own titles and then destroying them, TotalEnergies makes it possible to reduce their number. Which mechanically increases the market value of each remaining share. A way, therefore, of pampering investors, who thereby benefit from a higher dividend.
However, the stock market reacted timidly to the multinational’s announcements: while the stock jumped by almost 4% at the start of the day, it declined slightly from the start of the presentation to investors, at 3:30 p.m., going from 61 at 60 euros. A sign that this one hasn’t quite convinced? “ With growth of 2.24% during the day, this remains a good performance, despite the slowdown observed in the afternoon », However, believes Ahmed Ben Salem, Oil&Gas analyst at Oddo BHF.
“Difficult” to oppose a tax on share buybacks
One thing is certain: TotalEnergies’ Anglo-Saxon competitors are adopting a similar strategy of pampering investors. Starting with the American ExxonMobil, which bought back $18 billion worth of shares in 2023, and intends to increase the rate to $20 billion per year until 2025. In all, Exxon and Chevron — which between them represent 7% of global oil and gas production — even returned nearly $60 billion to their shareholders in 2023!
But this practice remains controversial, since it would artificially inflate the stock price of companies. Many observers, as well as the unions of these companies, believe that this money should instead be devoted to investments, job creation and salary increases. In France, the government is currently working on a tax on share buybacks to replenish state coffers, as already exists in the United States. “ Difficile » to oppose it, Patrick Pouyanné responded on Wednesday. According to him, the debate on the taxation of share buybacks would have the effect of “ basis of discussion » a level close to the 1% rate currently applied in the United States.
Furthermore, the CEO added that “ the magnitude » profit tax « is quite limited » for TotalEnergies, which makes most of its profits abroad. “ So I don’t expect there to be much impact for us “, he stressed.
What about the energy transition?
In total, the company will therefore spend more on its share buybacks than on its investments in low-carbon energies. Indeed, these should reach 5 billion dollars per year between 2025 and 2030 out of the 16 to 18 billion that will be committed across all sectors over the period. Above all, the group retains the possibility of reducing them to “only” 3 billion dollars in the event of a very unfavorable price context.
“Last year, TotalEnergies bought back more than 9 billion euros of its own shares and invested some 5 billion euros in renewable energies. This may raise some questions, not on the principle, but on the scale of such a program,” said Olivier de Guerre, president of Phitrust, during an interview with La Tribune on April 11.
« There is a right balance to find. Low-carbon energies remain much less profitable, so the company cannot move faster without increasing its debt. », Estimates a sector analyst.
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