RBC Capital Markets has trimmed its earnings outlook for French energy giant TotalEnergies after a soft second-quarter trading update, pointing to a sharp slowdown in gas trading as the main drag. The investment bank now expects lower profits and cash flow from the company's integrated gas business through 2028, even as production levels exceeded expectations.
TotalEnergies, one of Europe's largest oil and gas companies, is scheduled to report its full second-quarter results on July 23. The update from RBC suggests investors should brace for a weaker quarter compared with the start of the year.
What the numbers show
RBC said TotalEnergies' average liquids price in the second quarter was about $91.6 per barrel, coming in below both the bank's own estimate and broader analyst forecasts. Natural gas prices also disappointed, adding to the pressure on the company's earnings.
More significantly, RBC expects profits and cash flow from TotalEnergies' integrated gas division to fall sharply from the first quarter. The reason: gas trading activity cooled after an unusually strong start to 2024. Trading results can be volatile from quarter to quarter, and the first quarter set a high bar that the second quarter could not match.
RBC cut its earnings forecasts for the 2026-2028 period as a result, though it did not specify the exact size of the reductions.
Production: the one bright spot
Not everything was negative. RBC described production as “the one bright spot” in the update, noting that TotalEnergies pumped roughly 2.4 million barrels of oil equivalent per day during the quarter. That figure ran ahead of expectations, suggesting the company's operational performance remains solid even as market conditions soften.
Higher production can help offset weaker prices to some extent, but it may not be enough to prevent a drop in overall earnings if commodity prices and trading margins continue to slide.
TotalEnergies is not alone in facing a mixed energy market. Across the sector, oil and gas companies have seen profits retreat from the record levels of 2022 and early 2023, as global supply concerns eased and prices normalized. The company's diversified business—spanning oil, gas, renewables, and trading—provides some cushion, but the trading arm has become an increasingly important profit driver in recent years.
What it means for investors
For everyday investors, the RBC downgrade is a reminder that energy company earnings can swing sharply from quarter to quarter, especially when trading profits are a major component. TotalEnergies' gas trading business had a stellar first quarter, but that strength was always unlikely to persist at the same level.
The key question now is whether the second-quarter weakness is a temporary blip or the start of a longer trend. Investors will get more clarity when TotalEnergies reports on July 23. The market will be watching for management's outlook on gas prices, trading margins, and production guidance for the rest of the year.
RBC's move also highlights the importance of looking beyond headline production numbers. While output beat expectations, the real story was the squeeze on profits from lower prices and weaker trading. That dynamic could affect other integrated energy companies as well, particularly those with large trading operations.
TotalEnergies shares have been under pressure in recent weeks, reflecting broader concerns about the energy sector's earnings trajectory. The company's diversified model—with investments in liquefied natural gas, renewables, and electricity—may offer some stability, but near-term sentiment will likely hinge on the July 23 report.
For context, European markets are entering a busy earnings period, with major companies like Ryanair, Novartis, SAP, and Volkswagen all reporting soon. The energy sector's performance will be a key part of the picture as investors assess the health of corporate profits across the region.
In the meantime, the RBC downgrade serves as a cautionary note: even strong production numbers cannot always compensate for weaker prices and trading results. Investors should keep an eye on commodity price trends and trading commentary when TotalEnergies releases its full second-quarter numbers later this month.
