Europe’s heavyweight energy companies enter a challenging earnings period, forced to tighten belts as falling crude prices threaten longstanding promises to investors.
Shareholder rewards, once a cornerstone of their appeal, now teeter amid predictions of sharply reduced revenues and cash flows. These firms have long relied on share buybacks and dividends to keep investors content through boom and bust.
A storm of oversupply and Brent crude forecasts under $60 a barrel into 2026 has intensified scrutiny on spending pledges. LSEG analysts project Britain’s Shell and France’s TotalEnergies to post their weakest fourth-quarter profits in nearly five years this month.
Europe’s energy giants operate in a “very difficult” market, set to announce lower quarterly profits and squeezed free cash flow, according to Atul Arya, vice president and chief energy strategist at S&P Global Energy.
“So, what will they do? The last thing they will do is cut dividends. They will reduce the buybacks if they have any buybacks and they may have to taper their capital programme,” Arya told CNBC by video call.
Trimming capital programmes would hit low-carbon projects first, while slashing exploration sends the wrong signal to shareholders. “They could maybe take some more debt if they still need cash, although I think most of them do not want to take that. They are all pretty highly leveraged,” he added.
Norway’s Equinor reports today, Shell tomorrow, and BP with TotalEnergies next week. Analysts expect 10-25% cuts to payouts, mainly via buybacks, after last year’s 20% oil price drop.
U.S. peers Exxon Mobil and Chevron beat Q4 expectations last Friday despite crude’s annual slump from oversupply. BP halved its buyback to $750 million in April after missing targets.
TotalEnergies said in September that it had decided to adjust the pace of its share buybacks “to face economic and geopolitical uncertainties and to retain room to manoeuvre.”
Maurizio Carulli, energy analyst at Quilter Cheviot, calls dividends “sacrosanct” to enforce capital discipline. Buybacks offer more flexibility in price troughs. “There is some uncertainty about how much companies will consider but it is quite clear that that is the direction,” Carulli told CNBC.
This pivots sharply from 2022, when the West’s top five oil firms banked nearly $200 billion in profits amid post-Ukraine fuel spikes. Flush with what UN Secretary-General António Guterres labelled “monster profits,” they lavished shareholders with bumper dividends and repurchases.