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Another energy giant warns of a production cut in Q2, but the refinery margin is weak.

AInvestTuesday, Jul 16, 2024 9:10 am ET
1min read

Following last week's profit warnings from Exxon Mobil (XOM.US) and BP (BP.US), TotalEnergies (TTE.US), which reports earnings on July 25, also issued a warning. The company expects its oil and gas production to reach the upper end of its forecast for the second quarter, while warning that a lower refining margin could hurt its current performance. At the time of writing, TotalEnergies was down 1.71 per cent at $67.95.

As Europe's second-largest oil and gas company, TotalEnergies expects its production to reach about 2.45m barrels of oil equivalent per day in the second quarter, slightly down from 2.46m boe/d in the first quarter. It also noted that a lower refining margin in Europe and the Middle East would affect downstream performance.

Despite the challenges, TotalEnergies' second-quarter performance is expected to be partially offset by higher refinery utilization and marketing performance. The company also expects its LNG performance to be roughly flat at about $1.22bn in the second quarter, while its power generation business is expected to generate about $500m in earnings, down from $611m in the first quarter.

Analysts at Jefferies said TotalEnergies' trading update "was broadly in line with expectations and should not materially change consensus."

TotalEnergies also announced an important partnership with SSE to create a new major player in the UK and Ireland for electric vehicle charging infrastructure. The move marks further expansion in the company's new energy business and shows its positive positioning for future energy transitions.

Despite some short-term challenges, TotalEnergies' earnings guidance and new partnership show the company's resilience and commitment to long-term development. By optimizing operational efficiencies and actively investing in new energy, TotalEnergies is steadily advancing its diversified and sustainable business.

Last week, Exxon Mobil and BP also issued warnings on lower refining margins.

Exxon Mobil warned that lower gas prices would hurt its upstream business in the second quarter, while refining margins would also fall sharply. The company said its refining margins would fall between $1.1bn and $1.5bn in the second quarter, down from $1.4bn in the first three months of the year, when the division made $1.4bn in profit.

BP expects to take $10bn to $20bn of impairments in the second quarter and warned that refining margins "significantly declined" and trading earnings are expected to be weak.

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