Investing.com - Paris-listed shares in TotalEnergies (EPA:TTEF) were higher in mid-morning trading on Thursday after the French oil major said it expects its downstream operations to be bolstered by an uptick in European refining margins.
In a trading update, the company said its downstream results and cash flow for the fourth quarter are anticipated to reflect an increase in its European refining margin marker to $25.90 per metric ton. In the third quarter, the figure stood at $15.4.
However, the overall environment for refining and chemicals margins "remains weak", the firm flagged.
TotalEnergies added that returns at its exploration and production unit are projected to be impacted by a $5 per barrel decrease in oil prices, although it said this will be "partially compensated" by a rise in gas realizations.
Integrated liquefied natural gas results are also seen benefiting from a 6% increase in production, while gas trading is "back to the performance of the fourth quarter of 2023,", TotalEnergies noted.
Thursday's announcement comes after the group's net income has fallen for five consecutive quarters as it grapples with declining European refining margins and upstream outages. Adjusted net earnings in the third quarter dropped by 37% versus the year-ago period to $4.1 billion, a three-year low.
"The key area of weakness in results relates to the downstream, with refining and chemicals margins continuing to remain under pressure," analysts at RBC Capital Markets said. "This is a broader sector theme, but is likely to weigh on [TotalEnergies] earnings also."
Sluggish natural gas demand has led its peers like Shell (LON:SHEL), Exxon Mobil (NYSE:XOM) and BP PLC (LON:BP) (NYSE:BP) to recently issue profit warnings. It augured a continuation to a challenging period for the oil and gas sector, which has been hit by waning incomes stemming in part from normalizing energy prices following a spike in the wake of the outbreak of hostilities in Ukraine.
Speaking in October, Chief Executive Patrick Pouyanne told analysts that he thought "hard times" were ahead for the industry.
(Reuters contributed reporting.)