TotalEnergies NYSE:TTE, a French energy company with oil production, refining, liquefied natural gas, and trading operations, reported a sharp increase in second-quarter earnings as disruptions linked to conflicts in the Middle East and the Russia-Ukraine war pushed crude oil and refined-product prices higher. Adjusted net income increased 68% from a year earlier to $6.03 billion, nearly matching analyst estimates that had been lowered after the company previously warned about weaker gas performance. TotalEnergies CEO Patrick Pouyanne said the company's integrated business model helped it benefit from the high-price environment and capture the increase in refining and petrochemical margins. The results suggest the company's broad exposure across production, refining, and trading may help offset weakness in individual operations during periods of energy-market disruption.
The strongest improvement came from refining and chemicals, where adjusted net operating income more than quadrupled from the previous year to $1.8 billion as TotalEnergies increased diesel and jet-fuel production. Its crude and petroleum-products trading operations also generated around $500 million of additional profit beyond normal performance, similar to the contribution recorded during the first quarter. These gains helped absorb lower refinery activity after an April attack damaged the Satorp refinery in Saudi Arabia, maintenance halted the Donges facility in France for roughly two months, and a tropical storm and lightning disrupted the Port Arthur plant in Texas during June. TotalEnergies expects refinery utilization to reach between 80% and 85% in the third quarter, while Satorp, which has operated at 70% of capacity since early May, is expected to return to full production by the end of the period. Exploration and production earnings also climbed 64% despite a 4% decline in oil and gas output, as growing production from projects in Brazil, the U.S., and Libya partly reduced the impact of Middle East disruptions.
The main weakness came from TotalEnergies' integrated liquefied natural gas business, where earnings declined 22% amid subdued conditions in the European market. Pouyanne said the unit underperformed a normal second quarter by less than $300 million after its trading operation took a bullish position while gas prices declined, although the renewed blockage of the Strait of Hormuz and a subsequent gas-price rally could support stronger third-quarter performance. TotalEnergies shares rose 2.5% in Paris trading by 3 p.m. local time, while the company announced a 0.90-per-share interim dividend, representing a 5.9% increase from the previous year, and plans to repurchase as much as $1.5 billion of stock during the third quarter. With benchmark Brent crude trading near $100 a barrel, Pouyanne said annual cash flow could reach between $35 billion and $40 billion if energy prices and refining margins remain elevated, potentially allowing TotalEnergies to reduce gearing from around 13% at the end of the second quarter to 10% as early as this year while continuing to target investor distributions of at least 40% of operating cash flow.