Total Energies

Though I've avoided the oil majors so far, Total Energies looks like the best of them.

Business

Excluding 2020, half to 2/3rds of their profits come from oil and gas production:

E&P includes gas production.  The "Gas" in "Gas, Renewables and Power" is midstream/upstream.

As I'm expecting higher oil prices, I want companies with high exposure to oil and gas production.  50-66% is a bit on the low side, but still OK

Reserves

I want to see reserves not depleting over time.  I also split reserves between oil and gas because oil is worth more (in BOEs):

Source: Total Energies' Universal Registration Documents. Search for "Proved Reserves for"

Looks good.

Geopolitical Risk

Their reserves and production are spread around the world:

Source: 2020 Universal Registration Document p68

30% of their gas in from Russia - there's a risk the Russians kick them out (for whatever reason), or they are forced to stop trading with them from US pressure if Russia invades Ukraine.  Even if France did not obey, Total would lose access to swift, and I don't think thats an option today.

Not much dependence on the Persian Gulf, which is always a potential warzone.

ESG Risk

This is the biggest long-term risk to the Oil Majors, and the hardest to predict.  I liked XOM and Chevron before minority shareholder activists Engine 1 added 3 members to XOM's board (1) (2).  Unfortunately the French Government no longer has a stake or golden share in Total, so I don't know if the same thing could happen to them.  I think the French Government have a lot more control over their corporates than the US does - more like Singapore or Norway.

Although Total has been investing more into renewable energy, 75% of their capex will still go to hydrocarbons with natural gas slowly replacing oil.  By 2030, they aim for a sales mix of 30% oil, 50% gas, 15% electricity and 5% biomass and hydrogen, with petroleum product sales decreasing by at least 30% over the period 2020-30.  

Their numbers seem realistic.  I like that they talk straight and are not pretending to be a non-petroleum company.

Valuation

At a share price of Euro 45, based on their annualised 9M21 results, its going for 9.4X earnings.  Valuations don't tell us much since they all depends on the oil price anyway.

The dividend yield is 5.8%, which is covered by their 1Q, 2Q and 3Q earnings (payout ratios of 60%, 94% and 41% respectively).  The dividend was maintained throughout 2020 (which I am not so keen on - I do not feel comfortable with a loss-making company paying dividends while pretending to be a bond).  They have no plans to raise dividends.

French witholding tax on dividends is 28% from 2020 onwards.  Singapore residents should pay only 15% (p13), but it depends on your broker and is probably too costly and time consuming.

Conclusion

This company is OK.  Its hard to find good oil producing companies, so I'll keep it on my watchlist.  The witholding tax is a killer.