TotalEnergies Shares Dip Amid Falling Profits and Rising Debt

French oil giant TotalEnergies announced an 18 per cent decline in adjusted net income for the first quarter, reaching $4.2 billion, marginally below forecasts, as debt increased and earnings decreased in all business areas except liquefied natural gas. The outcomes, marginally under the $4.3 billion consensus estimate from an LSEG Refinitiv survey, caused a 4 per cent drop in shares during early trading, as investors appeared worried about the greater-than-anticipated increase in net debt, analysts at RBC and Jefferies noted. TotalEnergies stated that debt rose to $20.1 billion, increasing from $10.9 billion in the fourth quarter of 2024, primarily because of higher seasonal working capital requirements, which are expected to decline later this year.

The company additionally validated intentions for share repurchases totalling up to $2 billion in the second quarter, despite Brent crude prices dropping below $70 per barrel this month. Nonetheless, "even on a pre-working capital, organic basis, free cash flow amounted to $2.5 billion, which is inadequate to meet both dividends and buybacks," noted Jefferies analyst Giacomo Romeo in a statement. Last year, CEO Patrick Pouyanne informed investors that he was ready to take on debt to sustain dividends and share repurchases despite the decline in oil prices. Even with a 4 per cent increase in oil and gas production compared to last year, upstream profits declined by 6 per cent because of reduced oil prices.

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Earnings from TotalEnergies' refining and chemicals division decreased by 69 per cent compared to the same timeframe last year, which was marginally less than the company had indicated in a trading update earlier this month. The profit margins on converting oil into fuels in Europe have increased in the last six months, yet remain 59 per cent lower compared to a year ago, primarily because of low demand and fresh competition from refineries in Asia and Africa. Marketing and services revenues fell 6 per cent compared to the previous year, and were 34 per cent below the fourth quarter of 2024, a decline TotalEnergies linked to the business's seasonal nature.

Integrated LNG earnings increased by 6 per cent compared to last year, but were 10 per cent below the fourth quarter of 2024. This week, British peer BP announced a 48 per cent decline in profits due to weaker performance in refining and natural gas trading, while Portugal's Galp reported a 29 per cent decrease, attributing it to low refining margins and decreasing oil prices. In contrast to BP, Shell, and Equinor, TotalEnergies has remained committed to its approach of expanding its renewable energy investments while also developing its traditional oil and gas operations.