French energy behemoth TotalEnergies has disclosed a 22% drop in first-quarter earnings compared to the previous year. Despite higher refining margins partially offsetting losses, profits from natural gas plummeted significantly.
Decline in earnings
TotalEnergies’ adjusted net income for the first quarter, amounting to USD 5.1 billion, marked a decline of 22% from the corresponding period last year. This decrease is attributed to a substantial downturn in profits from natural gas.
Factors contributing to decline
The decline in earnings is primarily attributed to a significant drop in natural gas prices in Europe, plummeting by 45% over the past year due to factors such as mild winter weather and reduced supply concerns.
Impact of market stability
The reduced volatility in the natural gas market also affected TotalEnergies’ trading opportunities, albeit the company managed to mitigate some of the losses through improved refining margins.
Financial performance
TotalEnergies’ cash flow from operations stood at USD 2.2 billion for the first quarter, compared to USD 5.1 billion in the same period last year, indicating a notable decrease in operational liquidity.
Hydrocarbon production and projects
Despite the challenging market conditions, TotalEnergies maintained stable hydrocarbon production levels at 2.46 million barrels of oil equivalent per day. The startup of new liquefied natural gas (LNG) projects in Brazil and Nigeria helped offset losses from asset sales.
Outlook for natural gas profits
TotalEnergies anticipates resurgence in natural gas profits during the winter of 2024-2025, driven by increased demand in Asia and limited expansion of LNG capacity. It forecasts a winter gas price exceeding USD 11 per Mbtu.
Impact of oil prices on refining margins
While refining margins exhibited strength in early 2024, TotalEnergies noted that the current high oil prices, hovering around USD 90 per barrel, are dampening refining profitability for the second quarter. This trend is anticipated to persist due to geopolitical tensions and production constraints imposed by OPEC+ nations.
Share buyback plans
Amidst the financial challenges, TotalEnergies reaffirmed its commitment to shareholders by announcing plans for USD 2 billion in share buybacks during the second quarter, demonstrating confidence in its long-term financial stability and growth prospects.