TotalEnergies (LSE:TTE) said it expects improved second-quarter earnings as higher oil and gas prices, driven by the conflict involving Iran, supported its upstream business. Despite the stronger outlook, the company’s shares fell after investors focused on weaker expectations for its integrated LNG division.
Higher energy prices boost earnings outlook
The conflict in Iran and the resulting disruption to global energy markets lifted crude oil and natural gas prices during the second quarter, providing a significant tailwind for the French energy group.
According to TotalEnergies, Brent crude averaged approximately US$103.80 per barrel during the quarter, up around 45% from roughly US$67 in the same period last year. The company also reported an average LNG price of US$10.20 per million British thermal units, while average gas prices reached US$5.55.
TotalEnergies said cash flow from its exploration and production business should “reflect this level of production while capturing the increase of the average liquids prices,” adding around US$1 billion compared with the first quarter.
LNG business disappoints investors
Although the company expects stronger downstream and integrated power results, it warned that its integrated LNG division is likely to deliver weaker performance.
Integrated LNG cash flow and earnings are expected to “decrease significantly,” reflecting weaker gas trading activity against a broadly flat to declining European market.
JPMorgan described the trading update as “fundamentally solid,” but said it was unlikely to generate the same earnings upgrades recently seen at rivals Shell and BP. The bank highlighted softer-than-expected LNG performance compared with the British energy majors.
Production and balance sheet remain on track
Hydrocarbon production is expected to total almost 2.4 million barrels of oil equivalent per day during the quarter.
The company estimated that the conflict in the Middle East reduced production by around 210,000 barrels of oil equivalent per day, less severe than the 360,000 barrels previously anticipated.
Net investment remains on course to meet TotalEnergies’ annual guidance of US$15 billion. The group also expects its gearing ratio to improve by around two percentage points by the end of the second quarter, while working capital is forecast to decline by between US$1 billion and US$1.5 billion.
TotalEnergies is scheduled to publish its full second-quarter results on 23 July.
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