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TotalEnergies SE reported another quarter of bumper oil trading after the Iran war upended crude markets, but warned of underperformance in its gas business.
The French major said earnings from oil trading “are expected to remain at the same strong level as in the first quarter,” reflecting the market upheaval caused by war in the Middle East. Results from its integrated liquefied natural gas unit, which account for roughly a fifth of the total, will likely fall “significantly” amid a lackluster European market.
The upbeat oil-trading guidance echoes that already provided by peers, indicating the largest Western oil companies are due for bumper earnings when they begin reporting results later this month. They’ve capitalized on crude prices that hit their highest point since Russia’s 2022 invasion of Ukraine, driven by conflict that slashed supplies through the Strait of Hormuz.
The weaker outlook for Total’s gas business appeared to overshadow that strength. European gas trading has slowed as heightened volatility has kept many market participants on the sidelines, while disruptions to LNG flows through the Persian Gulf have pushed prices high enough to discourage utilities from refilling storage, leaving inventories well below seasonal norms ahead of winter.
Total shares fell as much as 2.5% on Thursday before paring some of the losses, underperforming European competitors BP Plc and Shell Plc early in the session.
Still, analysts at Jefferies expect the weak integrated LNG result to be offset by strong performances in the downstream and elsewhere.
Results and cash flow from Total’s downstream business will rise “sharply,” the company said in a filing ahead of a full earnings statement in a week’s time. That reflects strengthening refining margins as disruptions in the Middle East and Russia tightened fuel supplies. Total said it had some refining capacity offline in the past three months due to heat and maintenance.
Results from the exploration and production division are expected to increase, too, even though Total reported an impact from the Iran conflict of around 210,000 barrels of oil equivalent a day, below guidance communicated in the previous quarter.
Cash flow from the integrated power business should “increase strongly,” supported by the acquisition of a 50% stake in a large portfolio of gas-fired power plants in western Europe at the end of April.
— With assistance from Francois de Beaupuy and Priscila Azevedo Rocha
(Updates with shares, analyst reaction and context from the fourth paragraph.)
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