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(Sharecast News) - French energy major TotalEnergies has said it expects production levels to remain unchanged in the first quarter despite having to temporarily pause operations across the Persian Gulf due to the Iran war, with the company expecting a bumper reporting period as oil prices surged.
In a trading update on Thursday, the company said that results from the exploration and production arms are "expected to rise significantly, fully reflecting the sensitivity to the increase of the average liquids price". The average liquids price has risen by $12.4 a barrel over the first three months of the year alone.
Results have also been helped by the accretive contribution from new projects, which has kept overall production in line with the fourth quarter, offsetting lost output from shutdowns across Qatar, Iraq and UAE offshore.
Operations there remain shut as a result of the US-Iran conflict, accounting for 15% of lost oil and gas output for the company. Last week, Iranian missiles had damaged its joint-owned Satorp refinery in Saudi Arabia, also causing it to shut down.
According to TotalEnergies, in a typical energy market environment where Brent crude trades between $70-80 a barrel, a $10 positive swing in the price would equate to a $2.3bn positive impact on adjusted net operating income.
Brent briefly rocketed to the $120 mark following the start of the US-Israeli bombardment of Iran at the end of February, though has come down to the $95-96 level in recent days on hopes that a peace deal between Tehran and Washington can be secured before the current ceasefire agreement ends.
LNG results and cash flow are also expected to rise significantly as a result of a 10% LNG production increase and "strong trading activities benefiting from market volatility", the firm said.
However, it added that working capital needs rose by an additional $5bn in the first quarter, $2.5bn-3.0bn of which is related to the "seasonality of the business" and the remainder due to the impact of higher hydrocarbon prices on inventories.
TotalEnergies shares were down 0.2% a 76.52 by 1342 BST.
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