TotalEnergies Shares Rise as Firm See’s Increased Refining Margins

Paris-listed shares of oil major TotalEnergies (EPA:TTEF) are having a solid day, with an upwards move of 2.38% leading into the close. The rise follows the company’s announcement projecting an increase in its European refining margin marker to $25.90 per metric ton for the fourth quarter of 2023, up from $15.4 in the previous quarter. Despite this anticipated growth in refining margins, TotalEnergies noted that the overall environment for refining and chemical margins remains subdued.

TotalEnergies’ exploration and production unit is predicted to witness a decline in returns due to a $5 per barrel drop in oil prices. However, this impact is expected to be partially mitigated by a rise in gas realisations. In the integrated liquefied natural gas (LNG) sector, results are projected to improve, buoyed by a 6% increase in production. The company has stated that gas trading is rebounding to its Q4 2023 performance levels.

Challenges persist in the broader oil and gas sector, with companies such as Shell (LON: SHEL), Exxon Mobil (NYSE: XOM), and BP (LON: BP) issuing profit warnings amid sluggish natural gas demand. TotalEnergies, in particular, has been dealing with continued pressure on its refining and chemical margins—a weakness highlighted by analysts from RBC Capital Markets. Moreover, TotalEnergies’ net income has fallen for five consecutive quarters, with the latest data showing a 37% decrease in adjusted net earnings in the third quarter to $4.1 billion.

TotalEnergies' Chief Executive Patrick Pouyanne warned in October about “hard times” ahead for the industry, a sentiment that seems to be shared across the sector as firms navigate the combination of weak margins and fluctuating oil and gas prices.

While the projected increase in refining margins offers some optimism, the company and the industry continue to face notable challenges, requiring strategic adaptations to navigate the current market conditions.