TotalEnergies SE said its LNG sales slipped in the first quarter as a result of lower spot volumes linked to a decline in European demand during a mild winter.
The company, a major global liquefied natural gas player, reported selling 11 million tons of the super-chilled fuel during the period, down 13% sequentially and 17% year/year.
The drop in sales and lower commodity prices across the board dented operating income for TotalEnergies’ Integrated LNG segment, which fell 25% year/year to $2.1 billion. Management also attributed the decline to “exceptional trading results” in 1Q2022, when global natural gas prices started a meteoric rise as Europe scrambled to replace supplies cut off by Russia after the invasion of Ukraine.
As the market stabilized, TotalEnergies’ average LNG price fell 2% year/year to $13.27/MMBtu in the first quarter. That was down 11% sequentially.
A warm winter and ample LNG deliveries left European inventories this year to exit the heating season at their highest levels in over a decade. Storage is currently filled to 59% of capacity, compared to the five-year average of 32%. That is expected to weigh on injection demand for part of the year.
LNG remains a strong performer for the company, so much so that it began reporting separate results for the segment and its power generation operations this quarter. Management said earlier this year that each would be a “pillar” of the company’s growth going forward.
Management expects the company’s average LNG sales price to be $10-12 next quarter, weighed down by the drop in commodity prices and the lag effect of prices linked to oil in some contract formulas.
“Given the high inventory levels at the end of winter, European and Asian gas prices are expected to remain stable in the second quarter before rebounding in the second half of 2023, driven by restocking gas in Europe before winter and the demand recovery in China, in a context of limited LNG production growth,” management said it its outlook for the period.
Management added that second quarter LNG sales should benefit from the restart of the Freeport LNG export terminal on the upper Texas coast, where the company has long-term volumes under contract. Freeport was cleared by regulators in March to restart its final liquefaction train, more than eight months after it was knocked offline by an explosion.
CEO Patrick Pouyanné also said Thursday after the company reported first quarter results that plans to restart work on the Mozambique LNG project have been slowed down by disputes with contractors over costs. The company has a 26.5% stake in the project.
Pouyanné said cost discussions are among the final hurdles for restarting the 12.9 mmty project. Work was suspended in 2021 amid rising insurgent attacks and violence in the region. Since then, global infrastructure project costs have risen due to inflationary pressures.
The company also commissioned a report to examine the humanitarian situation in the region that it previously said would be needed before moving ahead. The report was due at the end of February.
In other segments, TotalEnergies reported hydrocarbon production of 2.5 million boe/d during the first quarter, up 1% year/year.
Installed renewable energy capacity also increased to 18 GW from 10.7 GW in the year-ago period as the company continues to acquire assets across the world and bring online new projects. Overall, power generation was up 10% year/year.
TotalEnergies reported first quarter net income of $5.6 billion ($2.23/share), compared to net income of $5 billion ($1.87) in the year-ago period.
