TotalEnergies : Strategy and Outlook by Patrick Pouyanné, Chairman and CEO (pdf - 207 KB)

Address by Patrick Pouyanné

Annual Shareholders' Meeting of May 28, 2021

Ladies and Gentlemen,

Fellow Shareholders,

Hello everyone,

I hope that many of you are able to follow this Annual Shareholders' Meeting live via our website.

As you can imagine, I would have preferred to have us all meet in one place, so we could share this high point of the year together, but preserving everyone's health has justifiably taken precedence, so once again we are holding this meeting remotely.

We have, however, taken steps to give you a voice via an open platform that has logged more than 500 of your questions since Monday, and so we have been able to maintain, as much as we can, the dialogue between shareholders and the company, a dialogue that is all the more vital given that this year's meeting is an especially important one.

In fact, I might even call it "historic", because it marks our collective desire to invent a new Total, a broad energy company and a major player in the energy transition, whose strategy will be reflected in its very name, the name of your company, TotalEnergies, in one word with two capital letters, the T of Total and the E of Energies, and a plural with an S, and-as you'll see today-a new image to go with that new name.

I would like to go beyond simply presenting our achievements in 2020 in the extraordinary context of the pandemic and its economic repercussions, and describe how 2020 was a milestone year for Total, with the decision taken by your Board to turn Total into a broad energy company whose purpose is to tackle a twofold challenge: meet the energy needs of a growing world population that legitimately aspires to a higher quality of life, and at the same time reduce global warming.

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That requires that we reinvent energy-that we reinvent the way we produce energy but also the way we consume energy in order to achieve carbon neutrality by 2050, together with society.

Total has the resources, the scale, and above all the skills of its 100,000 employees on which to draw in order to successfully play its role in the energy revolution now underway. It truly is a revolution, because it amounts to a change of scale. Because if, collectively, we choose carbon neutrality for our planet by 2050, all of us will need to take action.

But first, as is traditional at an Annual Shareholders' Meeting, I would like to look back on 2020 and its results, which demonstrated once again Total's resilience and its very solid fundamentals.

The year was marked by a major public health crisis that remains with us in 2021, one that radically altered the way we live and work, destabilized economies around the world and propelled us into a situation that no one had foreseen.

Our primary responsibility is, as far as possible, to minimize its impact on our employees, our customers, our suppliers and our shareholders. Therefore, in addition to protecting our employees worldwide-which was our top priority-we have strived to ensure business continuity in order to serve our customers by supplying them with vital energy products, and to maintain ties with our partners.

I am extremely proud of the unceasing work by our teams, who have successfully maintained all of our operations worldwide, at our platforms, at our production facilities and in our retail networks.

Despite the pandemic and the need to reduce spending in the light of the collapse in oil and gas prices, we decided to have faith in ourselves, to address this crisis on our own, without burdening public-sector budgets, since we did not apply for government aid.

We also decided to protect jobs by opting not to proceed with layoffs, unlike all our main competitors in the oil industry. On the contrary: we made the deliberate decision to rally our entire workforce behind the major challenge represented by the energy transition.

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Last year, at our Annual Shareholders' Meeting at the end of May, I had the opportunity to present you the action plan that we had initiated from March 2020, aimed at reducing our expenses and selected investments while preserving Total's future and its growth. At the time, two crises were playing out simultaneously, the pandemic and the collapse in oil and gas prices: the price of oil fell below $20/barrel during the second quarter of 2020, and refining margins dropped to historic lows, where they still remain.

In that especially difficult environment, thanks to some exceptionally good fundamentals-a strong balance sheet, a portfolio that has been fundamentally restructured since 2015 to focus on assets that offer a breakeven below $30/barrel, the lowest production costs in the industry at $5/barrel, and an integrated business model spanning energy production, conversion and distribution-your Group proved its resilience, generating cash flow of nearly $18 billion in 2020. Production stood at 2.9 million barrels of oil equivalent per day, a 5% drop from the previous year to comply with the production quotas adopted by the OPEC+ countries. And I should tell you that we were almost glad to be reducing production, given the positive impact of those OPEC+ decisions on the rise in oil and gas prices.

Net income, adjusted for exceptional items, came to $4.1 billion- certainly a sharp fall from 2019, but a show of resilience, thanks in particular to the action plan we were firm in implementing. The breakeven point, meaning the price of oil at which we can fund our organic capex projects, stood at $26/barrel in 2020.

In accordance with our climate ambition, to which I'll return, we booked exceptional asset impairments totaling more than $10 billion, resulting in a net accounting loss of $7.2 billion. Those write-downs followed a review of our portfolio of oil and gas assets with reserves extending beyond 2050 coupled with high production costs. They primarily involved the Canadian oil sands, where the Group has decided it will no longer invest in any new project.

But the consequent accounting result shouldn't take away from the positive operational performance and the fact that your Group's financial fundamentals are solid. And the first quarter of 2021 has just given us proof of that, with adjusted net income recovering strongly to $3 billion over just one quarter, because the Group is taking full advantage of

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rising prices for oil and gas and its growth strategy in LNG, Renewables and Electricity.

So the outlook is brightening, with first-quarter results in 2021 that exceed those in the first quarter of 2019, thanks in particular to the action plan implemented in 2020, but also to the results in the LNG/Renewables/Electricity sector, which posted adjusted net operating income of $1 billion for the first time in its history.

So we are emerging from this crisis with a net debt-to-equity ratio that, as of the end of the first quarter, has fallen below the 20% mark, and a breakeven point below $25/barrel.

In addition-as I'm sure you, my fellow shareholders, will have noticed- our efforts to navigate this crisis did not prompt us to propose a reduction in the dividend. That decision was deliberated over for some time, and the Board of Directors moved to maintain the dividend in contrast to the decisions by our main European competitors.

More than anything else, maintaining the dividend represents a very strong show of confidence on the part of your Board. Confidence in your Company's fundamentals, which allowed it to refrain from making any hasty decisions but, instead, keep a steady hand on the tiller, quarter after quarter, as oil and gas prices gradually resumed an upward trend. Because we are convinced, at the Board of Directors, that a commodities business such as Total-if it is well managed-should be able to negotiate exceptionally volatile periods without changing course, and without causing the dividend to fluctuate as prices.

And it's a show of confidence in you, our shareholders, because at a juncture when the Group is choosing to embark on a strategic transformation, it is essential, in the eyes of your Board, to retain your trust.

That trust is justified by the high yield-I might even say excessively high yield-of your share, 6-7%; but your Board hopes that the transformation we are launching will lead to a revaluation of the share price-but without abandoning our long-standing commitment, since, as a reminder, your Company's dividend has not fallen since 1982, nearly forty years ago.

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I would also like to thank the new shareholders who joined us this year, since the number of individual shareholders rose from 450,000 to 550,000 in one year. I think they appreciate the return they receive on our share, and I'm confident that others will join them, since your Board takes a very positive view of the development of individual shareholders, and also employee shareholders. Yesterday we published the results of the new annual capital increase reserved for employees, which demonstrate the very strong commitment by Total employees and their confidence in the company.

Therefore, on the very strong foundations I've just described, your Board has decided to embark on a transformation into a broad energy company, with the ambition of being a major player in the energy transition and becoming one of the five leading producers of renewable energies by 2030. To become, you might say, a "green energy major." We have the means to do it.

In fact, that transformation process began shortly after the signing of the Paris Agreement, in early 2016, with the publication of our first climate accord and the creation of a business segment devoted to electricity and gas. But 2020 was truly a milestone year.

First of all, in May, we stated our ambition to get to net zero carbon by 2050, together with society, an ambition I presented to you at our last Annual Shareholders' Meeting.

Then, in September, we articulated and presented to our shareholders that ambition, of a decade-long strategy for transforming Total into a broad energy company.

And now, today, in 2021, we are renaming ourselves TotalEnergies in order to anchor that new strategy in our very name.

We are going to transform ourselves, by reducing our sales of petroleum products by more than 30% over the next ten years and by drawing on two growth drivers: liquefied natural gas and renewable power.

And we have strong ambitions for growth, since we want to produce more energy, a third more energy over the next decade. That means an increase from 17 PJ/day to 23 PJ/day-a new metric you'll need to get

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