TotalEnergies sheds Canadian oil sands, promises to reward shareholders

By America Hernandez

PARIS - Energy major TotalEnergies said on Thursday it had accepted an offer to sell its carbon-heavy Canadian oil sands operations to Suncor Energy for $4.1 billion, with potential additional payments of up to $450 million.

The company initially planned to spin off the business but said the sale to Suncor would be more straightforward and the price tag was comparable to its own valuations for a listing of the business.

Taking into account the sale, which should close by the end of the third quarter, it plans to distribute at least 40% of the cash flow generated this year to shareholders through a share buyback or special dividend.

TotalEnergies said its first-quarter adjusted net income fell 27% to $6.5 billion - in line with analyst expectations - due to lower energy prices.

GRAPHIC - TotalEnergies net income drops on falling oil prices TotalEnergies net income drops on falling oil prices

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It is sticking with plans for a share buyback of up to $2 billion in the second quarter, as it did in the first quarter. It also confirmed it expected net investments of $16-18 billion this year, including $5 billion for low-carbon energies.

After European refining capacity was hampered by French strikes in the first quarter, TotalEnergies anticipates its facilities will ramp back up above 80%.

Margins on refining diesel, however, will drop as Chinese exports increase and energy from Russia finds new buyers to replace the Western purchasers the country relied on until Moscow's invasion of Ukraine.

Unlike many peers, TotalEnergies has kept some of its investments in Russia. However, it booked $14.8 billion worth of impairments on its Russian holdings in 2022.

TotalEnergies said on Thursday it expects its gas production and sales to increase as projects start up in Oman and Norway, and as the Freeport liquefied natural gas export terminal in the United States comes back online.

TotalEnergies' share price was down around 1% in early trade, in line with falls across the sector and relatively weak oil prices.

Analysts said its results were positive, as was the sale of carbon intensive oil sands given investors' focus on lower carbon energy.

Biraj Borkhataria, head of European energy research at RBC Europe Ltd, said the surprise sale marked "a clean exit" and the expected cash distribution was "a positive signal".

(Reporting by America Hernandez and Benjamin Mallet, editing by Silvia Aloisi and Barbara Lewis)