TotalEnergies' Profit Drops More Than Expected in Third Quarter Amid Sharp Drop in Refining Margins

TotalEnergies SE reported a bigger-than-expected drop in profit for the third quarter as refining margins and oil prices fell.

(Bloomberg) — TotalEnergies SE reported a bigger-than-expected drop in profit for the third quarter as refining margins and oil prices fell.

Following a period of unusually high oil and gas prices in recent years, earnings at the French energy giant and its peers are now normalizing as weak economic growth in Europe and China undermines demand. That’s putting pressure on the balance sheets of these companies, which have been rewarding investors with hefty payouts.

TotalEnergies’ adjusted net income was $4.07 billion in the quarter, down from $6.45 billion a year earlier, it said Thursday. Analysts had expected profit of $4.27 billion.

The results reflect the “very sharp decrease in refining margins in Europe and the rest of the world,” Chief Executive Officer Patrick Pouyanne said in a statement. He also said gas trading hasn’t been “fully benefiting from markets characterized by low volatility.”

The shares sank as much as 2.8% at the open, and traded down 2.2% as of 9:24 a.m. in Paris.

TotalEnergies plans to buy back $2 billion of its shares in the fourth quarter. Earlier this month, the firm pledged to continue that quarterly pace “assuming reasonable market conditions” as it raises oil and gas output. European rival Shell Plc also said Thursday it was maintaining the momentum of buybacks.

TotalEnergies’ net debt expanded to $17.6 billion at the end of the third quarter from $16.7 billion a year earlier.

Despite weak oil-processing margins during the period — with the so-called European Refining Marker averaging $15 a ton — TotalEnergies pointed to a subsequent rebound to near $25 a ton. The company expects its refinery utilization rate to remain above 85% in the last three months of the year. 

Hydrocarbon output fell 1% from the second quarter to 2.41 million barrels of oil equivalent a day as outages at the Ichthys liquefied natural gas plant in Australia and disruptions in Libya offset the boost from a ramp-up in Brazil. Oil and gas production may rise slightly in the fourth quarter, TotalEnergies said.

(Updates with CEO comment in fourth paragraph, shares in fifth.)