The energy giant will resume a share buyback program of up to $1.5 billion in the second quarter. Geopolitical conflict in the Middle East is delivering a windfall for energy markets, with prices expected to remain elevated in the second quarter amid ongoing disruptions. Total SA has announced it will increase cash returns to shareholders.
The French energy major stated on Wednesday that, driven by war-induced higher oil prices which boosted profits and cash flow, it will restart buybacks of up to $1.5 billion in the second quarter ending in June. It also raised its interim dividend by nearly 6% to 0.90 euros (approximately $1.05) per share.
Higher oil prices, increased liquefied natural gas output, and a strong performance from its trading business contributed to the company's quarterly net profit doubling from the previous quarter to $5.81 billion. This exceeded the market consensus estimate of $5.21 billion.
Earlier this week, British peer BP also reported that its quarterly profit more than doubled year-on-year, buoyed by market volatility sparked by geopolitical conflict.
Due to the Middle East situation, Total SA has shut down facilities related to approximately 15% of its oil and gas production capacity. The company has suspended production at offshore blocks in Qatar, Iraq, and the UAE following attacks on regional energy infrastructure.
Total SA anticipates that energy prices will stay high in the second quarter.
The company stated that if a decision is made later to restart the idled Middle Eastern facilities, the process to resume production would take two to three months. Restarting operations is a complex and costly procedure with no quick timeline. The company has not disclosed a schedule for restarting production, noting that while ceasefires have been agreed upon, there is no clear endpoint for the hostilities.
Persistent supply disruptions, combined with the time lag between restarting and reaching full production, mean crude oil supplies from the Middle East are unlikely to return to normal quickly.
Total SA also indicated that liquefied natural gas prices are expected to remain high due to competition for cargoes between Asian and European markets.
Despite the production shutdowns in the Middle East, the company's overall output remained largely flat compared to the previous quarter, supported by the start-up of new projects in Brazil and Libya.
Performance in the refining segment improved, supporting downstream earnings. Refining margins were exceptionally strong in March, driven by the Middle East shutdowns and market imbalances, allowing refineries to capture significant profits.
During early European trading, Total SA's share price rose 0.4% to 78.60 euros.
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