TotalEnergies Forecasts Significant Q2 Profit Earnings

Oil major, TotalEnergies has predicted significant revenue earning in the second quarter as it expects ‌higher energy prices due to the Iran war.

However it expects liquefied natural gas income to drop down due to weak trading, an earnings snapshot published on Thursday showed.

TotalEnergies said hydrocarbon production was expected to reach nearly 2.4 million barrels of oil equivalent per day in the ‌second quarter.

Upstream ⁠earnings were seen rising by about $1 billion from the first quarter as production resumed in several Middle Eastern countries and increased in the United Arab Emirates.

The company now estimates the impact of the Iran war on upstream output at 210,000 barrels of oil equivalent per day, down from 360,000 boed flagged in the first quarter.

The U.S.-Israeli war on Iran which led to Iran effectively shutting the Strait of Hormuz disrupted global supplies and pushed crude oil and gas prices to multi-year highs, delivering a windfall for major energy companies.

Shell and BP flagged strong trading profits in the past week.

All TotalEnergies ⁠divisions are expected to improve except LNG, where earnings will be sharply lower because of what the company called “an underperformance in gas trading amid a broadly flat to declining European market”.

Analysts at JPMorgan called the trading statement “fundamentally fine” in an investor note, adding that UK peers fared better on LNG trading — but still said there were chances Total might hike its share buybacks to $2 billion from the previously stated $1.5 billion.

Global benchmark Brent crude prices hit multi-year highs and averaged around $97 per ⁠barrel during the April-to-June quarter, up 45% from $67 per barrel a year earlier.

Higher oil prices are expected to boost upstream earnings, although TotalEnergies said the benefit would be partly offset by accounting effects, reflecting that a significant share of increased Middle East production could ⁠not be exported because of disruption in the Strait of Hormuz.

Its integrated power division is expected to show a strong increase in cash flow following the closing in April of its deal with EPH that doubled Total’s portfolio of ⁠European gas plants.

In downstream operations, higher refining margins and strong oil trading are expected to drive a sharp increase in earnings from the first quarter, when Total already showed outsized war-related trading profits.

TotalEnergies reports second-quarter results on July 23.