European Energy Majors' Profits Slump But Manage to Beat Forecasts on Oil-Price Strength — At a Glance

By Christian Moess Laursen

Nearly all major European oil-and-gas companies booked slumping profits in the first quarter amid weaker gas prices and refining margins. Still, many of the them did better than analysts expected as elevated oil prices boosted earnings through the quarter. For some, increased oil-and-gas production also shielded earnings from weaker natural-gas prices. Shell, Equinor, Galp and OMV all exceeded consensus by more than 20%, while BP and Neste were the only two to miss consensus forecasts.

-- Italy's Eni kicked off the reporting season with 1.58 billion euro ($1.70 billion) in adjusted net profit, slightly topping a company-compiled consensus forecast of EUR1.56 billion. This puts the Rome-based company on track to exceed its full-year earnings guidance as it works to increase upstream production, it said. However, the quarterly result was still a marked drop from the EUR2.91 billion it reported a year prior. Profit was driven partly by higher earnings from its Plenitude subsidiary, and as it produced 5% more hydrocarbons through the quarter. On the back of the result, it raised its full-year buyback by 45% to EUR1.6 billion. Shares closed down 1.8% on the day of the report.

-- Norwegian major Equinor adjusted operating income fell to $7.53 billion from $11.92 billion, but was still above the $7.20 billion forecast by a company-compiled consensus. This beat was driven by a 1.6% rise in production to 2.16 million barrels of oil-equivalent per day in the first quarter on a strong operational performance, including increased capacity and output and new wells coming onstream. Shares ended up 2.5% on the day.

-- Spain's Repsol beat consensus when it reported an adjusted income of EUR1.27 billion versus a forecast EUR1.19 billion, based on a company-provided survey, buoyed by strong oil prices and lower taxes in the quarter. However, a year prior it reported EUR1.89 billion in adjusted earnings. Its cash flow from operations of EUR1.36 billion beat consensus by 40%, according to Bank of America. Its production of oil and gas declined 2.9% through the quarter. Shares initially traded 2.1% lower when market opened on the day of the report, but ended unchanged at closing.

-- One of two European majors to miss market expectations, Finnish Neste booked a comparable net profit of EUR256 million, significantly below a forecast of EUR400 million. This was a 53% drop from a year prior and driven by a weaker renewable-diesel market as earnings from its renewable-products segment tumbled 42%. Following the result, the company said that president and chief executive Matti Lehmus will be stepping down in November. Shares fell 13% on the day of the results publication.

-- Paris-based TotalEnergies beat expectations with $5.72 billion in net profit versus $4.88 billion, up 3% on year, making it one of only two European majors to book rising profit in the quarter. The company primarily credited the result to elevated oil prices and refining margins, offsetting the impact from low natural-gas prices and a 2% decline in hydrocarbon production. TotalEnergies said it will buy back $2 billion shares on the back of the results. Shares closed 2.1% higher on the day.

-- Portugal's Galp Energia booked an underlying replacement-cost profit of EUR337 million, ahead of consensus' EUR262 million and 35% higher than a year earlier. It credited resilient levels of production from its upstream segment, although these fell slightly to 116,000 from 120,000 BOE a day, dragged by maintenance in its Brazilian operations. However, analysts paid most attention to Galp's commentary on its Namibia exploration, which it called a potential major commercial discovery after finding significant light-oil columns. It plans on drilling four appraisal wells early next year at the latest. Shares initially jumped 4.5% in early trading, but ultimately closed down 0.9% on the day of the results.

-- Austrian OMV's net income on a current-cost-of-supply basis of EUR696 million comfortably beat a consensus estimate of EUR572 million, thanks to better-than-expected results from its gas marketing & power and chemicals segments. Last year, it reported $1.025 billion. Its energy segment's operating result declined 26% to EUR1.05 billion due to substantially lower natural-gas prices and a fall in hydrocarbon production of around 6.8% to 352,000 BOE a day. Shares closed up 2.5% on the day.

-- British giant Shell exceeded expectations across the board, led by adjusted earnings at $7.73 billion--a 20% beat to expectations--, driven by stronger oil-and-gas trading and its liquefied natural-gas output hitting the top-end of the guided range. However, this was still a marked decline from last year's $9.65 billion. Shell produced 10% more oil and gas during the quarter, mainly due to the Prelude platform offshore Australia resuming operations. A strong chemicals result also boosted the earnings beat. Shell maintained its quarterly buyback at $3.5 billion. Shares finished the day 1.9% higher.

-- Rounding off the reporting season, BP missed expectations with an underlying replacement-cost profit of $2.72 billion versus consensus' $2.87 billion, making the British company and Neste the only two to perform worse than anticipated by market watchers. The result was dragged by lower prices for oil and gas sold, an outage at its biggest oil refinery and significantly weaker fuels margin. Meanwhile, the company managed to ramp up its output of hydrocarbons by 7.6% during the quarter. Shares closed 1.2% down.

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May 10, 2024 07:39 ET (11:39 GMT)

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