French energy giant TotalEnergies has announced a 22% decline in first-quarter earnings compared to the previous year.
Despite higher refining margins partially offsetting the steep decline in natural gas profits, adjusted net income for the quarter came in at $5.1 billion, slightly exceeding analysts’ consensus estimates compiled by the London Stock Exchange Group (LSEG).
According to Reuters, the significant drop in natural gas prices in Europe, down 45% over the past year due to mild winter weather and reduced concerns over supplies, heavily impacted TotalEnergies’ earnings.
Additionally, reduced market volatility led to fewer trading opportunities, although the company managed to mitigate some of the impact through improved refining margins.
Cash flow from operations decreased to $2.2 billion compared to $5.1 billion in the same period last year.
Hydrocarbon production remained relatively stable at 2.46 million barrels of oil equivalent per day, with new liquefied natural gas (LNG) projects in Brazil and Nigeria offsetting the sale of Canadian oil sands assets in late 2023.
TotalEnergies anticipates a recovery in natural gas profits over the winter of 2024-2025, driven by increased demand in Asia and limited new LNG capacity. It expects a winter gas price above $11/Mbtu, compared to the current European price range of $8-10/Mbtu.
While refining margins were robust at the beginning of 2024, TotalEnergies noted that higher oil prices, currently around $90 per barrel, are reducing profitability in refining heading into the second quarter.
This trend is expected to persist due to geopolitical tensions and decisions by OPEC+ countries to restrict production through quotas.
The company confirmed its plans to initiate $2 billion in share buybacks in the second quarter, signaling its commitment to returning value to shareholders amidst challenging market conditions.
