Subdued natural gas prices and lower European demand between April and June dinged Paris-based TotalEnergies SE during the second quarter.
The lack of momentum in natural gas prices, combined with reduced demand for LNG, led to a sharper decline in profits than anticipated. The integrated major was the first of its peer group to issue quarterly results.
The company, one of the world’s top gas traders, said liquefied natural gas sales slipped in the second quarter by 20% year/year to 8.8 million tons (Mt). Sales from equity production and third-party LNG purchases declined by 24% to average 7.6 Mt.
“Given the lower seasonal demand in Europe, European gas prices are expected to be between $8 and $10/MMBtu in the third quarter,” management said. “However, in a context of supply tensions, Asian LNG prices are above $12, supported by higher demand, notably in China and India.
“Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, TotalEnergies anticipates that its average LNG selling price should be around $10 in the third quarter.”
Freeport Blues?
The hit in LNG sales followed similar results during the first quarter. In April, the company said LNG revenue between January and March had fallen because of lower European demand – and because of an unplanned outage at the Freeport LNG export project on the upper Texas coast.
Freeport has suffered additional operational issues since then, most notably traced to Beryl, a Category 1 hurricane that stormed ashore in early July near the facility.
However, natural gas prices didn’t benefit TotalEnergies either during the period. The average realized natural gas price was $5.05 during 2Q2024, off 16% from a year ago. Realized LNG prices fell by 5% to average $9.32.
Results posted for the Integrated Gas unit outlined how pricing impacted the bottom line, as “lower LNG demand in Europe” led to a 13% retreat.
Still, worldwide natural gas production rose by 7% from a year ago to average 5.25 Bcf/d. Hydrocarbon production for LNG also was up, rising 14% to 2.3 Bcf/d.
TotalEnergie’s gas output was higher in every region in which it operates.
In the Americas, gas production climbed 9% to 1.06 Bcf/d. European gas production rose 9%, while output in the Middle East/North Africa was 8% higher. Asia-Pacific volumes increased by 4%.
Stronger In 3Q?
Third quarter hydrocarbon production “is expected to be between 2.4 million boe/d and 2.45 million boe/d,” management said. “Start-up of Anchor, in the U.S. Gulf of Mexico (GOM), is expected in the third quarter.” Anchor is a deepwater project underway by Chevron Corp.
TotalEnergies also made some key investments during the latest period, with substantial funding poured into Texas.
[In the Eye of the Storm: North American LNG project developers continue to grapple with the Biden administration's pause on non-FTA permits. Has the pause given impetus to other projects? How are Mexico LNG projects advancing? Tune in to hear from LNG industry analyst Sergio Chapa in the latest episode of NGI's Hub & Flow.]
The company acquired a 20% stake in the Dorado natural gas play in the Eagle Ford Shale in South Texas. It also invested in a carbon capture project in the GOM, as well as in three natural gas-fired power plants in the state.
CEO Patrick Pouyanné earlier this year said, “We lost Russia, but gained Texas, which is an energy El Dorado for us.” TotalEnergies had pulled out of Russia following the invasion of Ukraine.
Overall, oil and gas production dipped by 1% sequentially to 2.4 million boe/d. The drag followed planned maintenance, as TotalEnergies had previously guided for quarterly output closer to 2.45 million boe/d.
Bottom line results were cushioned in part because of elevated crude oil prices, leading to a solid 14% gain for the upstream arm. The average realized price for liquids was $81/bbl, compared with $72 in the year-ago period.
Net profit fell almost 7% year/year in the second quarter to $3.8 billion ($1.61/share) from $4.1 billion ($1.65). Sales declined by 4.5% to around $54 billion.
