The TotalEnergies headquarters in the financial and business district of La Defense, near Paris, France, on Sept. 14, 2023.Gonzalo Fuentes/Reuters
French oil major TotalEnergies TTE-N expects its third-quarter downstream results to sharply decrease due to a 65 per cent drop in refining margins in Europe and elsewhere, the company said on Tuesday amid a drop in global oil prices.
TotalEnergies’ shares were around 4 per cent lower at 59.94 euros by 0940 GMT, moving broadly in line with peers.
The company’s European Refining Margin Marker stood at $15.4/t in the third quarter of the year, down from $44.9/t the previous quarter.
A drop in refining margins in recent months, a result of slowing global economic activity and new refineries coming online, is set to weigh on third-quarter earnings of the world’s top energy companies.
BP, Shell and Exxon Mobil this month issued similar warnings, as oil prices fell 17 per cent in the third quarter – the largest quarterly decline in a year – on worries about the global oil demand outlook.
Several analysts nonetheless flagged Total’s refining margin drop in particular as weaker than expected, with Oddo BHF analyst Ahmed Ben Salem calling the price drop a “collapse” and RBC analyst Biraj Borkhataria cutting his third-quarter net income estimate for the company by €480-million.
Total’s overall quarterly hydrocarbon production is expected to be at 2.4 million barrels of oil-equivalent per day (Mboe/d), at the lower end of guidance given in second-quarter results. The company cited security-related disruptions in Libya, where a dispute between rival governments caused oil field shutdowns, and an August outage at the Australian Ichthys LNG plant, in which Total holds a 30 per cent stake, which left the site running at half-capacity into October.
That loss of production was partly offset by ramping up the 180kb/d Mero 2 oil development in Brazil, where Total holds a 19.3 per cent stake.
Total’s average LNG price for the quarter was $9.91 per million British thermal units – having guided around $10/Mbtu at Q2 results – with integrated LNG results expected to be above $1-billion, versus $1.3-billion a year ago, due to lower market volatility and production.
Results for the Integrated Power division are expected to be broadly in line with the second quarter.
The company will release third-quarter results on Oct. 31.