TotalEnergies expects higher second-quarter profit on war-related price rally

By America Hernandez

PARIS, July 16 (Reuters) - French oil major TotalEnergies expects higher energy prices due to the Iran war to lift its second-quarter profits, though liquefied natural gas income will be sharply down due to weak trading, an earnings snapshot published on Thursday showed.

The U.S.-Israeli war on Iran, which led to Iran effectively shutting the Strait of Hormuz, disrupted global supplies and pushed crude oil and gas prices to multi-year highs, delivering a windfall for major energy companies. Shell and BP flagged strong trading profits in the past week.

All TotalEnergies divisions are expected to improve except LNG, where earnings will be sharply lower because of what the company called "an underperformance in gas trading amid a broadly flat to declining European market".

Shares in TotalEnergies were down 1.9% at €69.28 at 0801 GMT, compared with a 0.7% decrease in the broader European energy market. Total is still up about 25% year-to-date.

Analysts at JPMorgan called the trading statement "fundamentally fine" in an investor note, adding that UK peers fared better on LNG trading — but still said there were chances Total might hike its share buybacks to $2 billion from the previously stated $1.5 billion.

SITUATION IN MIDDLE EAST IMPROVING

TotalEnergies said hydrocarbon production was expected to reach nearly 2.4 million barrels of oil equivalent per day in the second quarter.

Upstream earnings were seen rising by about $1 billion from the first quarter as production resumed in several Middle Eastern countries and increased in the United Arab Emirates.

The company now estimates the impact of the Iran war on upstream output at 210,000 barrels of oil equivalent per day, down from 360,000 boed flagged in the first quarter.

Global benchmark Brent crude prices hit multi-year highs and averaged around $97 per barrel during the April-to-June quarter, up 45% from $67 per barrel a year earlier.

Higher oil prices are expected to boost upstream earnings, although TotalEnergies said the benefit would be partly offset by accounting effects, reflecting that a significant share of increased Middle East production could not be exported because of disruption in the Strait of Hormuz.

Its integrated power division is expected to show a strong increase in cash flow following the closing in April of its deal with EPH that doubled Total's portfolio of European gas plants.

In downstream operations, higher refining margins and strong oil trading are expected to drive a sharp increase in earnings from the first quarter, when Total already showed outsized war-related trading profits.

TotalEnergies reports second-quarter results on July 23.

(Reporting by America Hernandez, Editing by Louise Heavens and Jan Harvey)