TotalEnergies’ earnings slide on lower gas profit
French energy giant TotalEnergies posted a 22% decline in first-quarter earnings due to a steep fall in profits from natural gas, while warning that rising crude oil prices could weigh on refining margins in coming months.
Adjusted net income for the three months to end-March came to $5.1bn, the company said on Friday, slightly above the $5bn in a consensus estimate of analysts forecasts compiled by LSEG.
Profits at oil and gas firms are still retreating from record levels in 2022, when prices spiked after Russia invaded Ukraine. Natural gas prices in Europe have tumbled 45% in the past year due to mild winter weather and easing worries over supplies.
Less volatility in the market also eroded trading opportunities, though Total managed to partially offset those lower earnings with better margins in refining.
Cash flow from operating activities came to $2.2bn versus $5.1bn a year earlier, the company said. Net debt jumped to $14.2bn from $6.3bn at the end of 2023.
The higher gearing is a “modest headwind”, said analysts at JPMorgan, adding the results were “fundamentally sound”.
The shares were up 0.6% in morning trade on Friday.
Hydrocarbon production was roughly stable versus the previous quarter at 2.46-million barrels of oil equivalent per day (mboed), but is forecast to drop to 2.40-2.45 mboed in the second quarter of the year due to planned maintenance.
Total expects natural gas profits to rise again over the winter of 2024-25 as demand recovers in Asia and as little new liquefied natural gas capacity comes online.
It forecast a winter gas price above $11/million British thermal units, versus a current European price of $8-$10.
But refining margins are set to fall, as higher oil prices of about $90 per barrel are making refining less profitable going into the second quarter, with the trend likely to continue due to geopolitical tensions and decisions by Opec+ countries to limit production via quotas.
The company also confirmed it plans $2bn in share buybacks in the second quarter and retained net investment guidance of $17bn-$18bn this year, with $5bn going to its growing Integrated Power business.
Total is investing in renewables alongside growing output of oil and gas, a strategy that has come under criticism in Europe.
CEO Patrick Pouyanne has said more interest in the firm from US investors could make “a case” for listing in New York, according to a Bloomberg report on Friday.
The company declined to comment on the report.