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TotalEnergies to return more cash to shareholders as oil and gas output rise

FILE PHOTO: Logo of French oil and gas company TotalEnergies in La Defense

By Forrest Crellin and Benjamin Mallet

PARIS (Reuters) -French energy group TotalEnergies is to increase returns to shareholders and plans to raise its oil and gas production by 2 to 3% per year over the next five years.

The group said at an investor day that it expects to distribute about 44% of its cashflow to shareholders in 2023 and set a target of more than 40% beyond 2023.

Shareholder distributions of 44% of operating cashflow in 2023 and over 40% post-2023 are above some of its European peers including Shell, which just increased its payouts to 30-40% of operating cashflow.

The company will "continue to invest, continue to grow" oil and gas operations, TotalEnergies' CEO Patrick Pouyanne said.

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"This strategy will also offer the company the highest production growth by the end of the decade with a focus on energy market growth."

TotalEnergies shares were up 1.3% at 62.73 euros at 1419 GMT.

The French company has also been investing in renewables and low carbon energy and has a significantly higher wind and solar power generation capacity than rivals.

Shell aims to keep oil output steady up to 2030. BP early this year scaled back plans to cut oil output.

TotalEnergies announced positive results at an exploration well in Namibia, to be confirmed by another flow test, and said further appraisal wells and prospects would be drilled.

Analysts had said they were particularly keen to hear more about the French energy group's recent exploration activity offshore Namibia - which has no oil and gas output now but could become one of the top 15 oil producers by 2035.

"Both the increase in the buyback program this year as well as the higher payout ratio over the medium-term appear to be ahead of market expectations," Royal Bank of Canada analysts said.

They also said the fact that more initial work needed to be done on the Namibia project was seen as a disappointment, but overall the company's presentation was "slightly positive."

The group had previously flagged it could increase its payout to shareholders to more than 40% of cashflow - from a previous 35%-40% range. It made a profit of $36.2 billion in 2022.

TotalEnergies has rewarded investors with quarterly share buybacks of $2 billion since the third quarter of last year, and that is expected to continue.

It said on Wednesday that share buybacks should reach $9 billion in 2023, adding that it hoped for cashflow to be $10 billion higher in 2028 compared with 2021.

The company expects global energy consumption to have a compound growth rate of 4% to 2030, which it said should help to drive power prices, along with supply tensions.

It said it plans to spend $4 billion a year to grow its power generation capacity to 100 TWh by 2030, aiming to double its cashflow from its power business to $4 billion a year by 2028.

TotalEnergies said it would develop a top-tier pipeline of LNG projects, including in Qatar and Mozambique, saying it hoped to start LNG production in Mozambique in 2028.

(Reporting by Benjamin Mallet, Forrest Crellin, Sudip Kar-Gupta; additional reporting by Shadia Nasralla in London; Writing by Ingrid Melander; Editing by Emelia Sithole-Matarise and Jane Merriman)