TotalEnergies Reports 22% Drop in Q1 Net Income, Recovery Expected

The French energy company, TotalEnergies, reported on Friday a 22% decrease in first-quarter profits primarily attributed to a significant decline in natural gas earnings. Moreover, it cautioned that the escalating crude oil prices might exert pressure on refining margins in the upcoming months. In the first three months of this year, TotalEnergies made $5.1 billion in adjusted net income, just a bit more than the $5 billion that experts expected. This dip in earnings contrasts with the high levels we saw in 2022 when oil prices went up because of the Ukraine situation. Meanwhile, natural gas prices in Europe dropped by 45% in the last year because winters were not as cold, and there weren’t as many worries about running out of gas.

TotalEnergies CEO Patrick Pouyanné said in a statement: “In a context of sustained oil prices and refining margins but softening gas prices, the company announced first-quarter 2024 adjusted net income of $5.1bn and cash flow of $8.2bn, in line with its ambitious 2024 objectives.”

Because the market wasn’t as unpredictable, Total had fewer chances to trade and make money. But they made up for some of this loss by making more profit from refining. However, their cash flow dropped to $2.2 billion from $5.1 billion last year. This caused their debt to jump from $6.3 billion to $14.2 billion by the end of 2023. According to analysts at JPMorgan, the increased debt poses a minor challenge, but they view the company’s performance as fundamentally robust. Total’s shares saw a 0.6% increase as of 1001 GMT. Hydrocarbon production remained relatively stable at 2.46 million barrels of oil equivalent per day (mboed) compared to the previous quarter but is projected to decline to 2.40-2.45 mboed in the second quarter due to scheduled maintenance.

Total anticipates a recovery in natural gas profits during the winter of 2024-2025 as demand rebounds in Asia and new LNG capacity remains limited. The company forecasts a winter gas price exceeding $11/Mbtu, contrasting with the current European price range of $8-10/Mbtu. However, refining margins are expected to decrease as higher oil prices, currently around $90 per barrel, reduce refining profitability entering the second quarter. This trend is likely to persist due to geopolitical tensions and production limits imposed by OPEC+ countries.

Total confirmed its plan to initiate $2 billion in share buybacks in the second quarter and maintained its net investment guidance of $17-$18 billion for the year, allocating $5 billion to its expanding Integrated Power segment. Despite criticism in Europe, Total continues to invest in renewables alongside its oil and gas operations. CEO Patrick Pouyanne hinted at a potential listing in New York, suggesting that increased interest from U.S. investors could support such a move.

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