To The Moon

Lastly, we can analyze TotalEnergies’ share performance and expected performance. As per its forecasted EPS, figures are expected to grow at a rate of 8.70x in 2025, compared to a 5.83x rate in 2021. Similarly, the company’s dividends per share are also expected to increase, reaching 3.36x (vs 2.72x in 2021). As per cash flow per share, it is forecasted to grow by a 4.82-point basis, reaching 14.87x in 2025 compared to 2021. Lastly, the most notable increase relates to the book value per share. Indeed, the book value per share of a company indicates the performance of its stock relative to its market value. As TotalEnergies’ book value is expected to increase (54.87 in 2025 vs 36.64 in 2021), the stock is expected to be perceived as more valuable.

Figure 16

1. Risks and Mitigation

1. Risks

1. Protectionist Measures Affecting Free Trade and Economic Sanctions Regime

Against a backdrop of increased geopolitical tensions and risks of deglobalization and fragmentation between nations in the form of protectionist measures, trade tensions between certain countries restrict the free trade of goods and services, financial flows, and international transfers of labor or knowledge. These tensions, particularly when they require modifying the contractual framework of partnerships or the operating conditions of projects, are likely to hurt TotalEnergies’ business and operating income. If TotalEnergies were unable to manage the impacts of these commercial tensions appropriately, it would potentially incur significant increases

in costs for developing its projects, losing markets, and seeing its production or the value of its assets fall, which could adversely affect its financial situation.

Furthermore, economic sanction regimes, combined with export controls, can target those countries in which TotalEnergies operates and thus restrict certain types of financing or access to critical technologies, impose restrictions on the import, export, or re-export of several goods and services, and hinder TotalEnergies’ ability to continue its operations. In certain situations, the economic sanctions multiply without being necessarily coordinated at the international level. For example, in addition to hefty financial sanctions, the breaching of economic sanction regimes adopted by the United States may lead the authorities to impose measures that freeze companies out of the US market, such as a ban on using the US dollar, the currency in which most of TotalEnergies’ financings are denominated.

1. Increasing Regulation Around Energy Transition

COP 28, which took place in Dubai (United Arab Emirates) in December 2023, reaffirmed the objective to limit global warming and called on the Parties to accelerate the energy transition while underlining the challenges raised by the current geopolitical situation and the aspirations of the developing countries. Civil society, numerous stakeholders, and States are encouraging reductions in the consumption of carbon-based energy products and the establishment of an energy mix more geared towards low-carbon energies to meet the requirements of the fight against climate change, particularly given the objectives set by each State in the context of the Paris Agreement. However, the pace of change in the energy mix of countries must consider the needs and ability to adapt of the various energy consumers, who expect energy players to supply them with cost-effective and environmentally friendly energy. In this context, companies in the energy sector are led to deploy actions aiming at reducing their greenhouse gas emissions. They will also be able to help create solutions that reduce the CO2 emissions associated with the customer’s use of their energy products, as well as technologies and processes to capture, store, and reuse CO2. Consequently, they may be led to change the energy mix of the products they offer while at the same time having to manage the cost and the execution of projects supporting the energy transition.

Therefore, an insufficient ability to adapt to the pace of deployment of the energy transition, as well as an inadequate anticipation of the climate or sustainability regulations, of the evolution of the demand or of the energy cost to be effectively borne by the populations, could affect TotalEnergies’ outlook as well as its financial position (lower profitability, loss of operating rights, loss of revenues, increased funding difficulties), reputation or shareholder value. Indeed, increased pressure from stakeholders linked to climate issues relating to the company's oil and gas activities could lead to future climate-related legal actions against it. These actions could aim to suspend or prohibit oil and gas projects being considered or under development and equally target the challenges linked to greenhouse gas emissions from projects and other societal aspects. In a similar way to legal actions launched in France under Duty of Care against the company or launched against other companies in Europe, these legal actions could target the global emissions of the company and its stakeholders as well as the objectives set by the company for reducing its emissions, thereby obliging it to go beyond these objectives or even reduce its production of fossil fuels at a faster rate than envisaged in the current strategy. In both cases, these legal actions could impede the company from achieving its medium- and long-term objectives and its ability to finance the energy transition and achieve carbon neutrality by 2050.

1. The Effects of Climate Change and Extreme Events May Expose TotalEnergies to a Cost Increase and a Disturbance of the Continuity of its Activities

Climate change and extreme events (natural catastrophes, pandemics, etc.) potentially have multiple effects that could harm TotalEnergies’ operations. The increasing water scarcity could be detrimental to operations, rising sea levels could harm certain coastal activities, and the proliferation of extreme natural or weather events (such as floods, landslides, etc.) could damage onshore and offshore facilities and/or the associated logistical infrastructures. All these factors could increase the difficulties of operating and the costs of the facilities and adversely affect TotalEnergies' operating income. Moreover, climate change can expose TotalEnergies to an increase in its costs. For instance, more and more countries are likely to adopt carbon-pricing mechanisms to accelerate the transition to a low-carbon economy, which could hurt some of the company's activities and lead to a loss of competitiveness and a cost increase.

In Europe, TotalEnergies' industrial facilities participate in the CO2 emissions trading system (EU-ETS). The financial risk associated with purchasing these allowances on the market could increase following the system's reform that was approved in 2018. This emission allowance market entered its fourth phase in 2021. TotalEnergies estimates that approximately 30% of the emissions in the EU-free allowances will not cover ETS scope over the period from 2021 to 2030 (phase 4). At the end of 2022, these allowances were about €80/t CO2, and TotalEnergies estimates that this price could reach more than €100/t CO2 in phase 4. TotalEnergies considers a minimum CO2 price of $100/t (or the current price of a given country, if higher), and beyond 2028, this CO2 price is inflated by 2%/year. On the assumption that this CO2 price would be at $200/t, then inflated by 2%/year beyond 2028, i.e., an increase of $100/t compared to the base scenario from this date, TotalEnergies estimates a negative impact of 15% on the discounted present value of all the company’s assets (upstream and downstream).

1. Mitigation

1. Record Profits for TotalEnergies in 2022

In a context of strong market tensions in relation to, notably, the prohibition of crude oil or oil product imports from Russia, TotalEnergies’ refining margins have reached exceptionally high levels in 2022 despite the rise in energy costs. Nonetheless, the margins continue to be characterized by high volatility. Indeed, Russia's military aggression against Ukraine in February 2022 and its consequences have increased oil prices above $100/b, amplifying the bullish trend noted since the second Semester of 2021 about a lack of hydrocarbon investment. They have remained at high levels over the full fiscal year, notably supported by the decision of the OPEP+ countries to decrease the production quotas and the anticipation of the implementation of the European sanction on Russian oil since 5 December 2022.