TotalEnergies said on Oct. 15 that, driven by tight global refined product markets and rising energy prices, its third-quarter refining and downstream earnings are expected to reach exceptionally high levels.
The benchmark European refining margin averaged US$33.2 per barrel, nearly four times the US$8.4 per barrel recorded in the same period last year.
Meanwhile, refining throughput rose 10% quarter on quarter, which is expected to lift cash flow from the refining and chemicals business by about US$2 billion compared with the second quarter.
Amid the ongoing conflict in the Strait of Hormuz and expectations of stronger winter demand, earnings from the company's liquefied natural gas (LNG) business are also expected to grow significantly.
European refining margins nearly quadruple year on year, downstream cash flow surges
TotalEnergies said its benchmark European refining margin reached US$33.2 per barrel in the third quarter, up about 295% from US$8.4 a year earlier, reflecting a substantial widening of profit margins in refined product markets.
The company's refining throughput rose 10% quarter on quarter over the same period, allowing it to fully capture historically high refining margins in Europe and globally.
Driven by the combined increase in margins and throughput, TotalEnergies expects third-quarter cash flow from its refining and chemicals business to rise by about US$2 billion compared with the second quarter.
In addition, the company's oil trading business continued its strong performance from the previous two quarters, while the marketing and services business is also expected to maintain solid profitability.
Strait of Hormuz conflict pushes up gas prices, LNG earnings set for significant growth
TotalEnergies expects third-quarter integrated LNG business results to improve markedly.
The company said average LNG prices in the third quarter rose about 20% from the second quarter, while its natural gas and LNG trading business benefited from the price rally.
The ongoing conflict in the Strait of Hormuz and market expectations of higher winter natural gas demand were important factors driving the price increases.
On a year-on-year basis, TotalEnergies' average third-quarter LNG selling price reached US$12.28 per million British thermal units, up from US$8.91 a year earlier; the average natural gas price rose from US$5.50 to US$7.
Oil and gas output rebounds to 2.45 million to 2.5 million barrels per day, conflict impact on upstream production narrows
On the upstream side, TotalEnergies expects third-quarter oil and gas production to reach 2.45 million to 2.5 million barrels of oil equivalent per day, above the roughly 2.4 million barrels in the second quarter.
At present, the impact of the Middle East conflict on the company's overall production has narrowed to about 5%.
Excluding the related impact, third-quarter production is expected to rise more than 4% year on year, above the company's full-year growth guidance of about 3%.
On oil prices, Brent crude averaged US$97 per barrel in the third quarter, up about 40% from US$69.1 a year earlier, but below US$103.8 in the second quarter.
Over the same period, the company's average selling price for liquid oil and gas products rose from US$66.5 per barrel a year earlier to US$87.1.
Overall, TotalEnergies' third-quarter results are expected to be driven mainly by the sharp expansion in refining margins, higher refining throughput and improved natural gas trading gains.
Among these, the roughly US$2 billion quarter-on-quarter increase in cash flow from the refining and chemicals business is the most prominent financial change in this operational update.
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