TotalEnergies earnings fall in first quarter on lower gas prices

By America Hernandez

PARIS (Reuters) -French energy giant TotalEnergies posted a 22% decline in first-quarter earnings due to a steep decline 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 $5.1 billion, the company said on Friday, slightly above the $5 billion 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 last 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 $2.2 billion versus $5.1 billion a year earlier, the company said. Net debt jumped to $14.2 billion from $6.3 billion 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% as of 1001 GMT.

Hydrocarbon production was roughly stable versus the prior 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 winter 2024-2025 as demand recovers in Asia and as little new LNG capacity comes online.

It forecast a winter gas price above $11/Mbtu, versus a current European price between $8-10/Mbtu.

But refining margins are set to fall, as higher oil prices currently around $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 $2 billion in share buybacks in the second quarter, and retained net investment guidance of $17-$18 billion this year, with $5 billion 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 that more interest in the firm from U.S. investors could make “a case” for listing the company in New York, according to a Bloomberg report on Friday.

The company declined to comment on the report.

(Reporting by America Hernandez and Benjamin Mallet. Writing by Dominique Patton; editing by Jason Neely, Elaine Hardcastle)