TotalEnergies SE (TTEF.PA): 2Q26: Ongoing solid execution and weaker LNG trading likely to reverse in Q3; we remain Neutral on relative valuation

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TotalEnergies SE (TTEF.PA): 2Q26: Ongoing solid execution and weaker LNG trading likely to reverse in Q3; we remain Neutral on relative valuation

Goldman Sachs TotalEnergies SE (TTEF.PA)

US$3.3 bn qoq, supported by a working capital release of $1.2 bn (vs guidance of

c.$1-1.5bn). Leverage (GS def, incl. hybrids and leases) improved to 22.4% at end-2Q26

(from 25.2% in 1Q26; in line with GSe of 22.3%) but would remain above the sector

average of 18.7% on our estimates.

(4) Superior 2026-27 and long-term growth coming at the expense of limited capex

flexibility. Our proprietary Top Projects work suggests that TotalEnergies has the

longest reserve life in the sector and the strongest cash flow growth from new projects.

The company maintained its FY26 production growth guidance of +3% yoy, benefiting

from the ramp-up of 2025 start-ups and production start-ups in 2026, notably Lapa in

Brazil, Ratawi in Iraq, North Field East in Qatar, etc. In the Middle East, the impact of the

conflict is estimated at 5-10% of the company’s total production in 3Q26 due to the

ramp-up and gradual restart of production in the region. However, this is coming at the

expense of limited near-term capex flexibility (FY26 net capex maintained at US$15bn),

highlighting the importance of a strong balance sheet.

(5) The most advanced and profitable energy transition strategy among Big Oils, in

our view, with c.30% of capex defined as Green under the EU Green Taxonomy and

c.50% in 2030 on our estimates. The Integrated Power division continued its delivery in

2Q26 at US$533 mn, while fortifying the RES portfolio. We estimate the company has

generated US$32bn of value for its Low Carbon division (or 14% of EV), the 2nd highest

among Big Oils.

Given TotalEnergies’ 15% premium valuation (vs.