French company TotalEnergies expects its profits to rise in the second quarter of the year, supported by the surge in oil and gas prices due to the war between the United States, Israel, and Iran, despite an expected sharp decline in profits from the liquefied natural gas segment due to weak European demand.

The company said in an update on its financial performance published Thursday that the rise in energy prices from April to June boosted the performance of most of its activities, while the liquefied natural gas segment was the only exception due to weak trading operations in a European market characterized by stable or declining demand.

The war led to Iran's effective closure of the Strait of Hormuz, disrupting global energy supplies and pushing oil and gas prices to their highest levels in several years, providing significant gains for major energy companies.

Shell and BP had previously indicated last week that they achieved strong profits from trading activities, benefiting from market volatility.

Improved production in the Middle East

TotalEnergies stated that it expects its oil and gas production to reach approximately 2.4 million barrels of oil equivalent per day in the second quarter, with profits from exploration and production activities rising by about $1 billion compared to the first quarter, driven by the resumption of production in several Middle Eastern countries and increased production in the United Arab Emirates.

The company also lowered its estimate of the impact of the Iranian war on its production to 210,000 barrels of oil equivalent per day, compared to 360,000 barrels per day estimated in the first quarter, indicating a gradual improvement in production conditions.

Oil prices boost profits

The average price of Brent crude in the second quarter reached about $97 per barrel, up 45% compared to $67 per barrel in the same period last year.

The company said that higher oil prices would support profits from production activities, but part of these gains would be affected by accounting constraints, as a significant portion of the increase in Middle East production could not be exported due to disruptions in the Strait of Hormuz.

Decline in liquefied natural gas

In contrast, the company expects a sharp decline in profits from the liquefied natural gas segment, noting that gas trading performance fell short of expectations amid continued weak European demand.

Strength in refining and trading

TotalEnergies also expects a jump in profits from refining and oil trading activities, supported by higher refining margins and continued strength in trading operations, after already recording exceptional profits from these activities in the first quarter due to the war.

It also indicated that the integrated electricity segment will see a notable improvement in cash flows after completing the acquisition of a large portfolio of gas-fired power plants in Europe from EPH in April.

TotalEnergies is scheduled to announce its full second-quarter financial results on July 23.