TotalEnergies SE (TotalEnergies (TTE)) shares were slipping in Thursday's premarket session as investors digested the company's second-quarter trading update. The update painted a picture of higher oil prices lifting upstream cash flow, but weaker LNG trading and ongoing Middle East disruptions kept a lid on enthusiasm.

The French energy giant said it expects Q2 hydrocarbon production to hit nearly 2.4 million barrels of oil equivalent per day (boe/d), with organic growth on track with its 4% quarterly guidance. The Middle East conflict continues to bite, but the impact is easing: the company estimated the disruption at about 210,000 boe/d, down from 360,000 boe/d last quarter. That improvement came thanks to increased offshore production in the UAE and the restart of operations in other countries in the region during June.

But here's the nuance: a significant chunk of that production couldn't be lifted before the end of the quarter. It will be recognized in Exploration & Production results using end-June crude prices below $70 per barrel. That accounting quirk will partially offset the benefit from higher prices.

Cash Flow and Earnings Outlook

TotalEnergies expects Exploration & Production cash flow to increase by about $1 billion from the first quarter, supported by a $17.90-per-barrel sequential jump in average liquids prices. Exploration & Production earnings should also improve, though accounting effects tied to the unlifted production will eat into the gain.

Integrated LNG results are expected to decline significantly because of weaker gas trading performance in a flat-to-lower European market. On the brighter side, Integrated Power cash flow should rise sharply following the April 29 closing of the EPH transaction.

Downstream operations are looking stronger. TotalEnergies said downstream earnings and cash flow should improve significantly from Q1 as refining and petrochemical margins firmed up and oil trading remained robust. Marketing & Services is also expected to benefit from normal seasonal demand.

The company expects working capital to decline by $1 billion to $1.5 billion during the quarter, while the gearing ratio should improve by about two percentage points as quarterly net investments stay aligned with its full-year target of $15 billion.

Earnings Date and Analyst Views

TotalEnergies is scheduled to report second-quarter results on July 23. Wall Street expects earnings of $2.75 per share, up from $1.57 a year earlier. Analysts project revenue of $51.90 billion, compared with $49.63 billion in the prior-year period.

The stock trades at about 11.9 times earnings. Analysts have a consensus Hold rating with an average price target of $83. Recent analyst moves include:

• CICC initiated coverage with an Outperform rating on June 23.
• Scotiabank maintained a Sector Perform rating and raised its price target to $97 on April 22.
• Piper Sandler maintained a Neutral rating and increased its price target to $92 on March 12.

Price Action

TotalEnergies shares were down 2.04% at $78.71 during premarket trading on Thursday.