Middle East conflict fuels oil prices! Refining and trading businesses drive Total's (TTE.US) Q2 net profit to rise by 68%

French energy giant Total (TTE.US) said that the rise in crude oil and refined product prices driven by conflicts in the Middle East offset the impact of declining profits in its natural gas business, leading to a significant increase in the company's second-quarter earnings. Total announced in a statement on Thursday that its adjusted net profit for the second quarter increased by 68% year-on-year to $6.03 billion. This performance is in line with analysts' expectations. Following Total's warning last week that its integrated gas business had significantly underperformed expectations, the market has lowered its profit outlook for the company. Shipping disruptions in the Strait of Hormuz and ongoing conflict between Russia and Ukraine are tightening fuel supplies, leading to a substantial increase in refining margins and driving profit growth for global energy giants. In addition, like its peers such as Shell (SHEL.US) and BP p.l.c. Sponsored ADR (BP.US), Total has a large energy trading division, which helps the company maintain operations in volatile markets and seize opportunities. Total CEO Patrick Pouyanne said in a statement, "Leveraging its integrated business model and diversified asset portfolio advantages in an environment where Middle East conflicts are keeping energy prices high, Total is performing well." In terms of upstream operations, the company's oil and gas production increased by over 4% year-on-year to 2.395 million barrels of oil equivalent per day. New projects in Brazil, the U.S., and Libya offset the supply disruption impact of the Middle East conflict. Additionally, refining, petrochemical, and energy trading businesses also drove strong growth in cash flow and operating profit. Data showed that the company's operating cash flow in the second quarter increased by 14% quarter-on-quarter to $9.8 billion. Total continues to advance strategic projects in the liquefied natural gas (LNG), flexible power, and renewable energy sectors, including the launch of the ECA LNG project in Mexico, new long-term LNG supply contracts in Asia, the Mirrny wind power project in Kazakhstan, and the CECEP Solar Energy investment project in the Philippines. Total will pay an interim dividend of 0.90 (approximately $1.03) per share to shareholders for the second quarter, a 5.9% increase from the same period last year. The company also plans to repurchase up to $1.5 billion worth of shares in the third quarter, consistent with the repurchase scale of the previous three quarters. In February this year, Total had stated that with oil prices staying between $60 and $70 per barrel, the company planned to repurchase $3 billion to $6 billion worth of shares this year. Despite the subsequent increase in crude oil prices above this level, the company reiterated its priority to use the additional profits to reduce company debt. By the end of the second quarter, Total's net debt-to-shareholders' equity ratio (net debt divided by shareholders' equity) excluding lease liabilities decreased to 13.1%, down from 15.5% at the end of March.