Turning the tabs off for Total: investor day overshadowed by market caution
Energy giant Total held its investor day yesterday in a bid to reassure shareholders about its capital expenditure. The company doubled down on fossil fuels, but many large investors remain unconvinced
During the New York event, the French energy major announced a $1bn cut to annual capital spending. This amounts to a reduction of $15bn–$17bn in net capex guidance by 2030, aimed at easing market concerns about mounting debt and falling oil prices.
A global decline in oil prices since 2022, combined with higher interest rates, has created increasing challenges for Total. The company’s long-term debt rose by 11.9% year on year.
The group now plans to cut costs while increasing oil, gas and electricity production by 4% per year over the next five years. At the same time, it aims to halve Scope 1 and 2 emissions in the oil and gas sector compared with 2015 levels.
Earlier in the day, the company said it planned to raise $950m from selling its 50% stake in a North American solar portfolio to US private equity firm KKR.
Over the next five years, Total expects to boost oil and gas output by 30% while scaling back its renewables ambitions. “The fundamentals of the oil market are positive,” chief executive Patrick Pouyanné told investors. “From the demand side, there is a slower shift to low-carbon alternatives because customers are prioritising affordability,” he said, concluding: “We are quite bullish on the oil market,” and predicting prices would settle between $65 and $70 per barrel.
Concern about Total’s ‘dual expansion’
However, this outlook is more optimistic than futures pricing, which currently sits at $66 per barrel, and well above the US Energy Information Administration’s forecast of $51. In an investor briefing, Accela Research cautioned that Total’s ‘dual expansion’ strategy of pursuing both hydrocarbons and low carbon appears increasingly unsustainable.
Markets also appeared sceptical, with Total’s share price falling 2% after the event.
Accela noted that Total has softened its clean energy ambition by changing its 100GW renewables target into a 100GW power target, which now includes gas generation.
“While the company’s low-carbon ambition still sits above peers, the softening of the 100GW renewables target, a heavy pipeline of post-FID oil and gas projects, and a commitment to shareholder returns of more than 40% of CFFO ‘regardless of energy prices’ clarifies the hierarchy of priorities: distributions first, oil and gas spend is largely locked in, while low-carbon spend serves as the balancer,” analysts Rohan Bowater and Axel Dalman wrote.
“This reinforces our concern that Total’s ‘dual expansion’ risks locking in long-lived fossil assets and rising Scope 3 emissions, without a clear plan to bring them down. The risk is compounded by a weak commodity price outlook that could weigh on Total’s transition ambition, given the apparent lack of flexibility elsewhere in the business,” they added.
Investor divergence
Investors are increasingly divided on how to approach the company. Large managers that reject complete divestment from fossil fuels continue to view Total as relatively progressive compared with some peers. According to Market Screener, Amundi Asset Management remains the largest shareholder with a 9.6% stake, while OFI Investment Asset Management and the Swedish AP funds are also significant holders.
At the same time, a growing number of asset owners and managers have announced commitments to divest from Total, citing concerns about Paris alignment. Morningstar research shows that Total is among the firms most affected by a new ESMA rule requiring funds labelled as climate or sustainable to apply Paris-Aligned Benchmarks to at least 80% of their portfolios. Hortense Bioy, head of sustainable investing research at Morningstar UK, said this requirement has led many funds to drop Total.
Among those to commit to divestment are APB, Akademiker, Australian Ethical, CDPQ, Ircantec and the Ireland Strategic Investment Fund, according to campaign group Reclaim Finance. Asset managers have also begun to follow suit: Cardano pledged to divest from Total over its involvement in the EACOP oil pipeline in Uganda, which has been linked to human rights violations and environmental damage, while Nordea confirmed a ban on new bond and equity purchases for similar reasons.
Others are pursuing a hybrid approach. French insurers CNP Assurances, MACIF and MAIF, along with boutique manager Mandarine Gestion, have excluded new investments in Total but continue to hold existing assets to retain voting power against fossil fuel expansion plans.
