TotalEnergies Sees Tough Oil Market Outlook as Debts Mount
(Bloomberg) -- TotalEnergies SE reported a big jump in net debt in the second quarter as the French energy major posted falling profit and pointed to an oil market that’s being hurt by slower economic growth.
Net debt rose 29% from the previous quarter to $25.9 billion and nearly doubled from a year earlier as the company raised spending including on acquisitions and working capital increased. Its adjusted net income dropped to $3.58 billion, a 23% decline from a year earlier, missing the average analyst estimate of $3.67 billion.
“In an unstable geopolitical and macroeconomic environment (tariff war), oil markets remain volatile,” Total said in its earnings statement Thursday. “The market is facing an abundant supply that is fueled by OPEC+’s decision to unwind some voluntary production cuts and weak demand that’s linked to the slowdown in global economic growth.”
Having lured investors with hefty payouts in recent boom years, Big Oil companies are now treading a fine line between investment, shareholder returns and mounting debt as oil prices come under pressure from global trade tensions and rising output by the Organization of the Petroleum Exporting Countries and its allies.
Total, the first oil major to report quarterly earnings, said it will maintain its target level for share buybacks of as much as $2 billion in the third quarter. However, it disclosed that it only repurchased $1.7 billion of shares in the three months through June, down $300 million from prior quarters.
The drop was because buybacks were slightly delayed and the company will make it up later as it remains committed to its quarterly target, assuming oil prices remain near $70 a barrel, Chief Executive Patrick Pouyanne said on a conference call. The company will benefit from a large reduction in working capital and divestments in the second half, he said.
The company’s shares fell as much as 3.7% and were trading at 51.62 euros, at 3:05 p.m. in Paris.
Net investments amounted to $11.6 billion in the first half notably due to $2.2 billion of net acquisitions of companies such as German renewable producer VSB. It will remain in the range of $17 billion to $17.5 billion in 2025, unchanged from previous plans, thanks to the disposal program planned for the second half, TotalEnergies said.
The company expects to cash in about $3.5 billion in divestments by the end of the year, ranging from oil assets in countries such as Argentina and Nigeria, and stakes in renewable assets located in the US, France and Greece, Pouyanne said.
Demand for US renewable assets are benefiting from a “scarcity effect” due to the administration’s plan to reduce support for solar and wind energy, he added. The slowdown in the firm’s renewable development in the US “will not be dramatic” if it properly secures subsidies for future projects in the coming months. Still, tariffs and supply chain issues may boost the cost of battery storage and solar developments.
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Total said oil and gas production rose more than 3% in the first half of the year thanks to production startups in the US and Brazil, in line with the company’s target for the full year. Production from its electricity division surged more than 20% from a year earlier.
The company confirmed the payment of the second interim dividend of 85 euro cents per share, an increase of about 7.6% from a year earlier.
Petrochemical production dropped in the second quarter due to planned maintenance on the Normandie facility in France and to weak demand in Europe. The company has scheduled maintenance at Antwerp, Port Arthur and HTC in the third quarter. Pouyanne said he expects performance at its Port Arthur refinery in Texas and Donges in France to improve by the end of the year.
Also in Total’s Outlook:
- Refining and petchems face structural overcapacity but have been helped by seasonal market
- Hydrocarbon production to grow over 3% year-on-year in third quarter
- Scheduled maintenance to reduce utilization to 80%–85% range.
(Updates with CEO comments on share buybacks, divestments and refining from sixth paragraph.)
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