TotalEnergies’ profit soars on high gas prices

French-headquartered energy giant TotalEnergies has strengthened its balance sheet and doubled its profit in the third quarter of 2022 on a year-on-year basis, driven by its LNG business and higher gas prices due to the Ukraine crisis.

TotalEnergies revealed on Thursday that it recorded a net income of $9.9 billion in the third quarter of 2022 compared to $9.8 billion in the second quarter of 2022 and $4.8 billion in the third quarter of 2021. The firm also disclosed a new impairment of $3.1 billion related to Russia.

Patrick Pouyanné, CEO of TotalEnergies, commented: “In a context marked by an average Brent price of 100 $/b and an increase in gas prices exacerbated by Russia’s military aggression in Ukraine, TotalEnergies leveraged its integrated model, particularly LNG, to generate results in line with previous quarters.”

The French giant’s business segments benefited from higher oil and gas prices in 3Q 2022 with an adjusted net operating income of $10.3 billion compared to $10.5 billion in 2Q 2022 and $5.4 billion in 3Q 2021.

In line with this, the iGRP – integrated Gas, Renewables & Power – segment reported record adjusted net operating income of $3.6 billion this quarter, up $1.1 billion from the second quarter, and cash flow of $2.7 billion, “driven by an average LNG selling price up more than 50 per cent compared to the previous quarter and by the strong performance of its trading activities.”

On the other hand, TotalEnergies’ CEO explained that the firm’s Exploration & Production segment posted an adjusted net operating income of $4.2 billion and cash flow of $6.4 billion, “despite a decrease in production this quarter, mainly due to unplanned shutdowns at Kashagan.”

Furthermore, the company’s cash flow from operations was $17.8 billion in 3Q 2022, compared with $16.3 billion in 2Q 2022 and $5.6 billion in 3Q 2021. Pouyanné explained that TotalEnergies “continued to implement its growth strategy by taking a stake in the North Field South LNG project in Qatar.”

In pursuit of implementing its strategy to invest in low-cost and low-emission oil projects, TotalEnergies started production at the Ikike field in Nigeria and launched the Begonia oil project in Angola and the Fenix project in Argentina. In addition, the company confirmed a significant gas discovery within a block operated by Eni in Cyprus where the French giant holds a 50 per cent stake.

“In this favourable environment, taking into account income and production taxes of $26 billion worldwide, the company is implementing a balanced value-sharing policy with an exceptional one-month-salary bonus in 2022 to all its employees worldwide and, as announced on September 28, its shareholder return policy targeting 35-40 per cent cash flow payout beginning in 2022,” highlighted Pouyanné.

The hydrocarbon production was 2,669 thousand barrels of oil equivalent per day (kboe/d) in the third quarter of 2022, down by 5 per cent on a year-on-year basis and 2.5 per cent compared to the previous quarter, mainly due to planned maintenance, notably at Ichthys, and unplanned shutdowns at Kashagan, partially offset by the entry into production fields of Sepia and Atapu and the ramp-up of Mero 1 in Brazil.

The LNG production in 3Q 2022 was down 6 per cent year-on-year, mainly due to the end of the Qatargas 1 operating license, planned maintenance on Ichthys LNG in Australia and the decrease in gas supply to NLNG in Nigeria for security reasons.

Moreover, gross installed renewable power generation capacity reached 16.0 GW at the end of the third quarter of 2022, up 4.4 GW from the previous quarter, including 3.8 GW related to the acquisition of 50 per cent of Clearway Energy Group in the United States and 160 MW related to the start-up of the Seagreen offshore wind farm in Scotland.

Regarding its outlook for the fourth quarter of 2022, TotalEnergies expects production to reach around 2.8 Mboe/d, due to a reduction in planned maintenance and the re-start of Kashagan production. The French player anticipates that its average LNG selling price for 4Q 2022 will be above $17/Mbtu and intends to continue accelerating its transformation strategy with net investments of around $16 billion in 2022, including $4 billion in decarbonised energies.

As the oil and gas markets are marked by “strong volatility,” despite anticipated slower global growth in 2023, TotalEnegies underlines that oil prices are supported notably by the OPEC+ decision to reduce production quotas by 2 Mb/d as well as by the implementation of the European ban on Russian oil effective from 5 December 2022.

Looking ahead, the French giant believes that gas prices will remain high, driven by the need to import LNG into Europe to replace Russian gas imports. Additionally, TotalEnergies expects refining margins – notably for distillates – to remain strong due to the ban on imports of Russian petroleum products into Europe, effective from February 2023.