French oil major TotalEnergies higher energy prices due to the war in Iran are expected to lift its second quarter profits, though liquefied natural gas income will be sharply down due to weak trading on declining European demand, according to an earnings snapshot published on Thursday.
The U.S.-Israeli war on Iran, which led to Iran effectively shutting the Strait of Hormuz, disrupted global supplies and pushed crude oil and gas prices to multi-year highs, delivering a windfall for major energy companies.
Shell and BP flagged strong trading profits in the past week.
All divisions are expected to improve except LNG, where earnings will be sharply lower because of what the company called "an underperformance in gas trading amid a broadly flat to declining European market".
Shares in TotalEnergies were down 1.7% at €69.44 at 0717 GMT, compared with a 0.4% decrease in the broader Europe energy market.
Situation in Middle East Improving
TotalEnergies said hydrocarbon production was expected to reach nearly 2.4 million barrels of oil equivalent per day in the second quarter, with upstream earnings rising by about $1 billion from the first quarter as production resumed in several Middle Eastern countries and increased in the United Arab Emirates.
The company now estimates the impact of the Iran war on upstream output at 210,000 barrels of oil equivalent per day, down from 360,000 boed flagged in the first quarter.
Global benchmark Brent crude prices hit multi-year highs and averaged around $97 per barrel during the April-to-June quarter, up 45% from $67 per barrel a year earlier.
Higher oil prices are expected to boost upstream earnings, although TotalEnergies said the benefit would be partly offset by accounting effects reflecting that a significant share of increased Middle East production could not be exported because of disruption in the Strait of Hormuz.
Its integrated power division is expected to show a strong increase in cash flow following the closing in April of its transaction with EPH to acquire a large portfolio of operational gas-fired production plants across Europe.
In downstream operations, higher refining margins and strong oil trading are expected to drive a sharp increase in earnings from the first quarter, when Total already showed outsized war-related trading profits.
TotalEnergies reports second-quarter results on July 23.
(Reuters - Reporting by America Hernandez, Editing by Louise Heavens)