Earlier this year, French oil company Total changed its name to Total Energy. During the summer, Total Energy boldly stated, “Energy is life. Energy is re-creating itself. Hydrocarbon-producing hydrocarbon giant is changing itself and becoming new energy.” This event made us think of both kesper (“What’s in a name?”) And green at the same time. In terms of financial analysis, looking at the new brand Total Energy (TTE) gives some insight into how long this new corporate transition will actually take.
TTE is a large company with a capital of $ 1852 billion, both debt and stock capital. As a result, it will take a lot of future investment in renewable energy to transform TTE into an oil and gas producer. Over the past few years, TTE has spent approximately $ 15-20 billion a year on capital expenditures, claiming approximately the same amount of annual discounts and sales costs. In other words, TTE has been spending enough money to easily back up its ever-declining backups. The company is still looking forward to spending $ 15 billion a year on capital, perhaps $ 3 billion to invest in renewable and other generation projects. (Compared to Inal, Italy’s utility, with a small capital, it plans to spend about $ 120 billion, $ 8 billion a year on renewable energy.)
If the TTE administration follows and spends only enough money on new reserves and the declining old stockpiles and plants (wells will soon dry up), TET’s current business is unlikely to be much larger in five years. Today. It may be a little different in the business mix, but not too big. (Of course, that investment could be more or less profitable, depending on oil prices and product mix.) However, these new, green businesses only add about 2% per year to their investment base. (An investment of $ 3 billion a year does not drive the needle at $ 185 billion on corporate behemoth.) That is, you may choose to maximize the new, “green” expected revenue streams and raise funds as soon as possible. That, of course, makes a profit, but makes it less attractive in the long run. TTE earns no more than 10-20% of these new businesses, unless our best estimate does not significantly change the cost of new projects, significantly lower oil and gas costs, or perhaps both.
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Overall, we are not sure what name Kspir will say about the name change, but spending $ 3 billion a year does not seem to be a green light. The problem for today’s energy investors is whether TTE’s new policies really make a difference. Despite huge and growing green energy investments, an investor who worries about oil and gas losses will not buy TTE because the latter does not look at the bean hill in terms of overall TTE trade. An investor looking for a game on oil and gas still does not buy TTE for its soft renewal.
Some companies are considering hiring, selling, or distributing oil, gas, and coal to other corporations in order to reduce the corporation’s carbon footprint. That greenhouse gas output will not be reduced but will simply hand over the problem to the owner who repeatedly refuses to do so. However, a full corporate disintegration between oil and gas and green investments could lead to a shift in the focus of various business ventures and reduce the pressure on voice-activists who are currently pushing large pensions and other major investors. We doubt that TTE plans to run the oil and gas business. So what is the purpose of these new projects if they remain too small for the overall corporate perspective in the future?
We believe that the TTE administration will argue that the new corporate direction will help reduce greenhouse gas emissions. This is literally true, although another company, specifically focused on these new businesses, probably made a lot of those same investments. As a result, TTE participation here may not differ slightly from the overall release picture. And there is no shortage of investors who want to invest in renewable energy. In fact, some have argued that renewables are becoming more and more economically attractive in order to appease investors, with the relatively recent influx of large oil companies. TTE can say that renewable investments are part of its strategy to reach zero emissions by 2050. But Tate says the real cuts will not be offset by the TTE or investment in new oil and gas production. TTE can also argue that renewals provide good and consistent returns, so why not invest? That is a better strategy than a bad investment.
Finally, many oil company executives want to feel that they are trying to help one of the biggest pollution problems of our time, regardless of their initial guilt. They also do not want to look and feel like trogloids. But at the same time, they do not seem to want to do anything that would require a major decision on oil and gas.
By Leonard S. Hayman and William I. Tils
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