Fuel prices at the Middle East conflict point! Refining and trading business helped Total (TTE.US) net profit soar 68% in Q2

The Zhitong Finance App learned that French energy giant TTE.US (TTE.US) said that due to the Middle East war driving up prices of crude oil and refined oil products, offsetting the impact of declining profits in the natural gas business, the company's profit increased sharply in the second quarter. Total said in a statement on Thursday that adjusted net profit for the second quarter increased 68% year over year to reach $6.03 billion. This result was largely in line with analysts' expectations. The market has lowered its profit expectations for the company after Total warned last week that its integrated natural gas business was suffering from trading performance that fell far short of expectations.

The blockage of shipping in the Strait of Hormuz and the ongoing conflict between Russia and Ukraine are leading to a tightening of fuel supply, and a sharp increase in refining profit margins has boosted the profit growth of global energy giants. Additionally, like peers including Shell (SHEL.US) and British Petroleum (BP.US), Total has a large energy trading division, a business that helps the company maintain operations and seize opportunities amidst intense market fluctuations.

Total CEO Patrick Puyane said in a statement: “In an environment where energy prices remain high due to the Middle East conflict, Total is taking advantage of its integrated business model and diversified asset portfolio.”

In terms of upstream business, the company's oil and gas production increased by more than 4% year on year, reaching 2.395 million barrels of oil equivalent per day. New projects in Brazil, the US, and Libya have been put into operation, offsetting the impact of supply disruptions caused by the Middle East conflict. At the same time, the refining, chemical, and energy trading businesses are also driving strong growth in cash flow and operating profits. According to the data, the company's operating cash flow in the second quarter increased 14% month-on-month to 9.8 billion US dollars.

The company continues to advance strategic projects in the fields of liquefied natural gas (LNG), flexible power, and renewable energy, including the launch of the ECA LNG project in Mexico, a new long-term LNG supply contract in Asia, the Mirny wind power project in Kazakhstan, and a solar investment project in the Philippines.

Total will pay shareholders an interim dividend for the second quarter of €0.90 (approximately US$1.03) per share, an increase of 5.9% over the same period last year. The company also plans to repurchase up to $1.5 billion of shares in the third quarter, in line with the size of the previous three quarters. In February of this year, Total said that with oil prices remaining at 60 to 70 US dollars per barrel, the company plans to buy back stocks worth 3 billion to 6 billion US dollars this year.

Although crude oil prices have since risen above this level, the company once again emphasized that it will prioritize the use of additional profits to reduce the company's debt. By the end of the second quarter, Total's net debt-to-equity ratio after excluding lease liabilities (that is, the ratio of net debt to shareholders' equity) fell to 13.1%, down from 15.5% at the end of March.