TotalEnergies' Profit Drop: A Blend of Market Challenges and Strategic Moves

TotalEnergies, one of the world's leading oil and gas companies, reported a 21% drop in full-year profit for 2024, reflecting the impact of lower crude prices and weak refining margins. The French energy giant's adjusted net income for the year stood at $18.3 billion, down from $23.2 billion in 2023. Despite the decline, the results were in line with analysts' expectations.



The company's earnings were affected by a combination of factors, including lower oil prices, weak refining margins, and lower gas prices. In the second quarter of 2024, TotalEnergies reported a bigger-than-expected drop in profit due to lower gas prices and weaker refining margins in Europe and the Middle East, which more than offset gains in oil. This trend continued into the third quarter, with weak refining margins, lower LNG production, and declining oil prices leading to earnings below expectations.



To mitigate the impact of these challenges, TotalEnergies has implemented several strategic moves:

1. Share buybacks: Despite the drop in earnings, TotalEnergies is keeping its pace of share buybacks, announcing repurchases of $2 billion in the fourth quarter of 2024, in line with its target to reach a total of $8 billion buybacks throughout the year. This strategy helps to boost shareholder value and maintain investor confidence.
2. Net investment guidance: The company has confirmed its net investment guidance of $17 billion-$18 billion in 2024, indicating a continued focus on growth and expansion despite the challenging market conditions.
3. LNG and gas trading: TotalEnergies expects its fourth-quarter results to have benefited from higher LNG production and prices and stronger gas trading, which could help offset the lower oil prices and weak refining margins.
4. Cost-cutting and efficiency: Although not explicitly stated in the provided materials, TotalEnergies has likely been focusing on improving operational efficiency and reducing costs to maintain profitability.

TotalEnergies' investments in renewable energy and power generation have also contributed to its earnings. The Integrated Power segment, which includes generation, storage, electricity trading, and B2B-B2C distribution of gas and electricity, is expected to have generated between $500 and $600 million in the fourth quarter of 2024, resulting in annual cash flow that is in line with guidance of >$2.5 billion. This segment's performance is a significant contributor to TotalEnergies' overall earnings.

Looking ahead, these investments are expected to have a positive impact on future growth. The company has reiterated a plan to invest $17 billion to $18 billion in 2024, including $5 billion in its power business. This commitment to renewable energy and power generation is part of TotalEnergies' strategy to provide more sustainable energy solutions and adapt to the evolving energy landscape.

In summary, TotalEnergies' 21% drop in full-year profit reflects the impact of lower crude prices and weak refining margins. The company has responded to these challenges by maintaining its share buyback program, confirming its net investment guidance, and expecting benefits from LNG and gas trading in the fourth quarter. Additionally, TotalEnergies' investments in renewable energy and power generation have contributed to its earnings and are expected to drive future growth.