Europe’s biggest oil companies are heading into earnings season under mounting financial pressure, with analysts forecasting sweeping cuts to shareholder payouts as crude prices slide and the industry’s capacity to absorb the pain runs thin.
Shell, BP, TotalEnergies, Eni and Equinor are collectively expected to reduce share buybacks by between 10 and 25 percent when they report full-year results in the coming weeks, according to analysts at Barclays, UBS and Bank of America.
The reductions would mark a significant retreat from the aggressive capital return programs that defined the sector’s post-pandemic recovery and helped prop up share prices through years of energy transition anxiety.
The shift reflects a harsher operating environment. Brent crude fell roughly 20 percent last year and is widely expected to weaken further in the first half of 2026, as a global supply surplus builds and demand growth disappoints. That combination is squeezing cash flows at exactly the moment when the financial cushions European majors leaned on, asset sales, balance sheet headroom, cost cuts, are becoming harder to deploy a second time.
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“We are forecasting an average 25 percent cut to the buybacks,†said Lydia Rainforth, an analyst at Barclays. “Overall, that is seen as a much better option than paying them off.â€
The buyback era Under Strain
Since 2021, the European oil sector has bought back roughly a fifth of its shares outstanding, according to UBS data, channelling more than half of operating cash flow into repurchases and dividends. The strategy succeeded in compressing share counts and flattering per-share earnings metrics, while sending a signal to investors that management teams believed their stocks were undervalued.
Those conditions no longer hold in the same way. Valuations have recovered, balance sheets have thinned, and with oil trading near $71 a barrel on Friday, a level that leaves limited room for error, sustaining buybacks through borrowing is no longer a palatable option for most boards.
“There was a very strong argument to prioritise buybacks when valuations were cheap, balance sheets healthy and the perceived risks around peak oil were growing,†said Josh Stone, an analyst at UBS, who expects sector-wide distributions to fall by 21 percent. “That is not the case today.â€
Stone added that the arithmetic of buybacks deteriorates as valuations improve. Repurchasing shares at elevated multiples delivers less value per dollar spent, a consideration that boards can no longer dismiss as oil revenues soften.
Company by Company
Some European majors have already moved to reset investor expectations ahead of formal results. TotalEnergies has said it will reduce quarterly repurchases by between $500 million and $1.25 billion this year, contingent on oil averaging $60 to $70 per barrel, a range that looks increasingly plausible given current market dynamics.
Equinor, the Norwegian state-controlled producer, faces some of the starkest adjustments. HSBC analysts expect the company to cut its annual buyback program from $5 billion in 2025 to just $2 billion in 2026, a reduction that reflects both lower oil prices and the company’s historically more conservative financial philosophy.
Shell is expected to trim its quarterly repurchases from $3.5 billion to $3 billion when it reports results on Thursday, a move that would keep the company within its self-described “sacrosanct†policy of returning 40 to 50 percent of cash flow to shareholders through dividends and buybacks combined. Whether that framing survives another year of lower prices is a question analysts are beginning to ask more openly.
For Eni, the constraints are more structural. The Italian major sold approximately $8 billion of assets last year to help fund distributions, a pace that Christopher Kuplent, an analyst at Bank of America, says is simply not repeatable. “You can’t run away from the fundamentals,†he said.
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The American Exception
The difficulties facing European producers stand in sharp contrast to the posture of their US counterparts. ExxonMobil and Chevron both reported their weakest annual profits in four years on Friday, yet neither company signalled any intention to scale back shareholder returns. Both have emphasised the depth of their balance sheets and the quality of their long-cycle asset portfolios as buffers against the downturn.
That divergence reinforces a structural argument that has dogged European majors for years: their US rivals simply have better rocks. Deeper reserves, stronger production growth trajectories and lower breakeven costs give American companies more flexibility to maintain payouts through commodity downturns without sacrificing financial discipline.
Kuplent captured the mood in the European sector bluntly. “We hope for a soft landing,†he said. “But a lot of the cushions you were leaning on have either been deflated or didn’t exist in the first place.â€
