Europe’s leading oil companies are getting ready to cut billions in shareholder payments over the next few weeks. This change hints at a more cautious approach as they anticipate lower oil prices and aim to maintain healthier financial positions.
Analysts predict that major firms like Shell, BP, TotalEnergies, Eni, and Equinor will likely reduce shareholder returns by 10-25% as they reveal their yearly results this month, mainly through smaller stock buybacks. In recent years, these companies have invested over half their cash flow into buying back shares, which has reduced the number of shares available and boosted their market prices. According to UBS, the oil industry has reduced its share count by about 20% since 2021.
However, this policy is facing challenges. Oil prices fell by nearly 20% last year and are expected to decline further in the first half of 2026 due to rising crude supplies. Analysts believe that, instead of taking on debt to support buybacks, firms will opt to reduce them. “We expect an average cut of about 25% in buybacks,” stated Lydia Rainforth at Barclays, emphasizing that this is a wiser choice than financing them with debt.
Josh Stone, an analyst at UBS, echoed this sentiment, noting that there was a strong case for buybacks when prices were low and balance sheets were stable. But that is not the current situation anymore.
In contrast to their European counterparts, U.S. oil giants like ExxonMobil and Chevron have reported significant profits despite fluctuations in oil prices, without indicating any intentions to cut shareholder payouts.
Some European firms are already adjusting their expectations. Total has mentioned plans to lower its quarterly buybacks between $500 million and $1.25 billion this year, depending on oil prices averaging between $60 and $70 per barrel. Currently, Brent crude is around $71 per barrel amidst ongoing tension in the Middle East.
Forecasts suggest that Equinor’s buybacks may drop from $5 billion in 2025 to $2 billion in 2026, while Shell is expected to reduce its quarterly buybacks from $3.5 billion to $3 billion to maintain its financial strategy.
Upcoming board meetings will decide on these payout levels right before results are released. Some analysts caution that if the market performs better this year, companies might hold their payouts steady.
Still, Stone pointed out that improved market valuations make aggressive buybacks less appealing. “The advantage of buying back shares weakens when prices are higher,” he said.
Christopher Kuplent from Bank of America noted that European oil firms were able to maintain their payouts last year mainly through asset sales and relying on their balance sheets, which might not be sustainable moving forward.
As fourth-quarter results approach, many forecasts have already been lowered by about 12%, positioning the industry for a challenging 2026. Kuplent remarked, “We hope for a soft landing, but many support systems are either worn out or weren’t reliable in the first place.”