TotalEnergies SE ADR

This is our first report on European oil and gas major, TotalEnergies.  The company reported a disappointing set of results in the last quarter given the high volatility of its operating environment. Its results were particularly good on the LNG side thanks to the company’s integrated strategy and TotalEnergies was able to capture the benefits of the LNG price that was lifted by the spike in the prices of natural gas. Despite the increase in energy costs, European refining margins are among the highest that the company has ever viewed. The cash flow generation in the quarter is stronger than the management had projected. The hydrocarbon production of the company decreased because of planned maintenance, mainly during unplanned downturns and activities at Kashagan. In the quarter, the company closed the acquisition of 50% of Clearway Energy in the U.S. Due to good trading performance and strong distillate margin, the combined Downstream segment of the company generated an outstanding performance. We initiate coverage on the stock of TotalEnergies with a ‘Hold’ rating.