TotalEnergies expects oil, gas output to be flat in Q4; refining margins recover

TotalEnergies expects its oil and gas production to stay roughly flat in the last three months of the year at 2.4 million-2.45 million b/d, while keeping its refinery utilization high as margins recover, the French major said Oct. 31 in its latest quarterly results.

The hydrocarbon forecast, which came close to the high end of its guidance, was supported by the end of security-related disruptions in Libya that had led to shut-ins of 750,000 b/d at production fields in the country.

Moreover, TotalEnergies commissioned the 180,000 b/d Mero-3 oil field in Brazil, the 75,000 b/d oil field in the Gulf of Mexico and the 10 million cu m/d Fenix natural gas field in Argentina in the third quarter, aiding future oil and gas output, according to the company.

“In a volatile oil environment with sharply declining refining margins, TotalEnergies demonstrates [its] resilience,” CEO Patrick Pouyanné said.

Total oil and gas production reached 2.41 million b/d in Q3, down from 2.44 million b/d in Q2 and 2.48 million b/d in Q3 2023.

Oil output was nearly flat quarter on quarter at 1.32 million b/d, and gas output was at 1.09 million b/d of oil equivalent.

The company has made the final investment decision on the GranMorgu project in Suriname, which Pouyanné said will support TotalEnergies’ target of growing oil and gas output by 3%/year through 2030.

Refining business

TotalEnergies’ European refining margins averaged $15.40/mt in Q3 before recovering to close to $25/mt “in a context of modest global macroeconomic growth and geopolitical tensions in the Middle East,” according to the company’s earnings report.

The oil complex endured several rollercoaster rides throughout October, with Iran and Israel launching air strikes against each other. The price of Dated Brent crude rose from $71.975/b Sept. 27 to $81.20/b Oct. 7 before falling back to $73.185/b Oct. 30, according to data from S&P Global Commodity Insights.

However, TotalEnergies’ Q3 margins were still the lowest in nearly three years and down 66% from Q2, which marked the heaviest quarterly reduction in more than five years and back-to-back quarterly declines through 2024.

The weakness came amid a correction in oil product cracks from record highs of recent years following Russia’s invasion of Ukraine. Commodity Insights analysts said slowing European economic growth could further weigh on margins for middle distillates.

In an earnings call, Pouyanné suggested that the European refining sector could be facing overcapacity again, as some small refineries had stayed in business due to strong margins and new capability coming online in other regions, especially China.

“Industry demand in Europe is not very strong today, so that means we are back to the traditional cycle,” the CEO said. “When price margins were good, people stopped continuing to restructure.”

TotalEnergies’ total refinery throughput reached 1.54 million b/d globally in Q3, up 2% quarter on quarter due to the restart of the Donges refinery in France, according to TotalEnergies. Non-European throughput rose to 463,000 b/d in Q3 from 446,000 b/d in Q2.

The refinery utilization rate was 86% in Q3 and is anticipated to remain above 85% in Q4 despite planned maintenance at the company's Leuna refinery in October, TotalEnergies said.

As refining margins are still at a breakeven level of $25/b, the company plans to maintain refinery runs to recover fixed costs, according to Pouyanné.

“I'm not sure we are big enough to consider our self-cutting runs just to please our competitors,” the CEO said.

Gas business

TotalEnergies' LNG production in Q3 fell 7% quarter on quarter to 465,000 boe/d, mainly due to unplanned maintenance at the Ichthys project.

However, LNG sales rose 8% quarter on quarter to 9.5 million mt, as some buyers soaked up spot volumes ahead of the winter peak demand season.

TotalEnergies expects European gas prices to sit at $12-$13/MMBtu in Q4, underpinned by heating demand in colder months.

Platts, part of Commodity Insights, assessed the Dutch TTF day-ahead contract at $12.899/MMBtu in the Platts Market on Close assessment process Oct. 30.

Pouyanné said European gas prices will probably average around $12/MMBtu next year without new production capacity that “would suddenly change the fundamentals.”

TotalEnergies also anticipates its average LNG selling price to be around $10/MMBtu in Q4, up from $9.91/MMBtu in Q3.

Weaker profit

The company reported net profits of $2.29 billion in Q3, down 39% quarter on quarter and down more than half from $6.68 billion in the same period of last year, with weaker refining margins and lower oil prices.

Total sales for Q3 amounted to $52 billion, down from $53.7 billion in the previous quarter.

TotalEnergies confirmed net investment guidance of $17 billion-$18 billion in 2024. The company has planned annual net investment of $16 billion-$18 billion during 2025-2030, of which around $5 billion will be spent on low-carbon energies.

With a target of carbon neutrality by 2050, the company has planned to offset its residual Scope 1 and 2 emissions via nature-based carbon credits after 2030, and Pouyanné said countries should move ahead on establishing new carbon market rules at the upcoming 29th UN Climate Change Conference in Baku, Azerbaijan, next month.

“We'd like to see progress on the carbon credits [based on Article 6], because it's important in order to invest in this type of credit to have a strong framework validated by the UN,” Pouyanné said.