TotalEnergies Profit Jumps 68% as Wars Drive Refining Boom
(Bloomberg) -- TotalEnergies SE said second-quarter earnings surged as wars in Iran and Ukraine boosted prices for crude and refined products, offsetting a drop in profit from its gas business.
Adjusted net income jumped 68% from a year earlier to $6.03 billion, the French major said Thursday. That almost matched analyst estimates, which had been revised lower after Total previously flagged underperformance in gas.
Disruptions in the Strait of Hormuz and the conflict between Russia and Ukraine are tightening global fuel supplies, bolstering profits for the world’s top energy companies. Like European peers Shell Plc and BP Plc, TotalEnergies is a major oil refiner as well as a producer and runs a large trading desk, which has helped it navigate the market upheaval.
“In a high-price environment related to the Middle East conflict, TotalEnergies is leveraging its integrated model and portfolio diversification,” Chief Executive Officer Patrick Pouyanné said in a statement. The company managed to “fully capture the increase in refining and petrochemical margins.”
Adjusted net operating income from refining and chemicals more than quadrupled from a year earlier to $1.8 billion as the firm ramped up distillates production. That’s the biggest increase of any operating segment, the company said.
Crude and petroleum products trading — a part of that division — showed similar strength to the first quarter, it said.
Refinery Runs
That windfall helped offset a decline in refinery runs, with the Satorp refinery in Saudi Arabia damaged in an attack in April, the Donges plant in France halted for maintenance for about two months and the US Port Arthur facility shut down during a tropical storm in June.
The refinery utilization rate is expected to be between 80% and 85% in the third quarter, with Satorp, which has been operating at 70% of capacity since early May, returning to full output by the end of the period.
The energy giant also got a boost from its exploration and production business, where profit soared 64% from a year earlier even as oil and gas output fell 4% because of disruptions in the Middle East. The decline was mitigated by project ramp-ups in countries such as Brazil, the US and Libya.
Earnings from the integrated liquefied natural gas unit slumped 22%. The company had already said last week that results from the division would fall “significantly” amid a lackluster European market.
Dividend Payouts
Total shares traded up 2.8% in Paris trading as of 10:23 a.m. local time.
The company will pay an interim dividend of €0.90 ($1.03) a share, up 5.9% from a year earlier. It plans to repurchase as much as $1.5 billion of stock in the third quarter, in line with the previous three months. Back in February, Total said it would buy back $3 billion to $6 billion of its shares this year with oil at $60 to $70 a barrel.
Benchmark Brent crude is currently trading near $98 a barrel. The company has said it would aim to use extra profits to reduce debt.
Total’s gearing — the ratio of net debt to equity — fell near 13% at the end of the second quarter, excluding leases, from 15.5% at the end of March.
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