(Oil Price) – The oil price decline over the past year has started to dent Big Oil’s earnings, which have slipped from the 2022 and 2023 highs. The persistently low oil prices at about $60 per barrel in the past months, compared to $100 in 2022 and $80 in 2023 and 2024, signal that part of the shareholder returns of the European oil majors may not be sustainable going forward.
Europe’s top oil firms may start sacrificing some of their payouts by announcing in the coming weeks cuts to their share buybacks amid the lower oil prices, analysts say.
Stronger U.S. Peers
The U.S. supermajors, ExxonMobil and Chevron, didn’t cut share repurchases when they announced fourth-quarter and full-year 2025 results last week. On the contrary, they reiterated the pace of buybacks through 2026, “assuming reasonable market conditions”.
However, Europe’s oil majors may have less room to maneuver with the lower oil prices as they are just now resetting strategies to focus back on oil and gas and slash investments in renewables. Even at the height of the Big Oil pivot to clean energy in 2020-2021, American firms never strayed from their targets to significantly boost oil production – thanks to the Permian basin and other high-margin assets such as Guyana and Kazakhstan.
European majors have long sought to bridge the valuation gap with the U.S. competitors, and buybacks, as part of shareholder returns, have been helping in this endeavor in recent years.
European Majors Face 10-25% Cuts to Buybacks
But with oil prices in the $60s for months, the pace of share repurchases announced at $80-$100 oil may not be sustainable for European firms to support.
This earnings season, BP, Shell, TotalEnergies, Equinor, and Eni could reduce buybacks by 10% to 25%, various analysts have told the Financial Times.
Some of the majors have warned they would report lower earnings for the fourth quarter compared to the third quarter amid low liquids prices, weaker trading results, and reduced chemicals margins.
France’s TotalEnergies expects higher oil and gas production and stronger refining margins in the fourth quarter to offset a drop of more than $10 per barrel in oil prices.
But the French supermajor signaled lower buybacks for the fourth quarter of 2025 and for 2026 as early as September 2025.
Back then, TotalEnergies said that its board had decided “to adjust the pace of share buybacks to hydrocarbon prices, refining and petrochemical margins and the $/€ exchange rate.”
The fourth-quarter 2025 buybacks were lowered to $1.5 billion from $2 billion, while the 2026 share buyback guidance is between $750 million and $1.5 billion per quarter for a Brent price between $60 and $70 per barrel and an exchange rate around $1.20 per euro.
“The Board of Directors also confirmed the priority given to preserving a strong balance sheet and retaining maneuverability by maintaining a gearing ratio below 20% in an uncertain economic and geopolitical environment,” TotalEnergies said in September.
Shell has said it expects to report this week that its chemicals and products division swung to a loss in the fourth quarter of 2025, on the back of a lower chemicals margin compared to the previous quarter. Refining, however, could boost Q4 earnings as margins rose at the end of last year.
Shell is expected to trim share repurchases to $3 billion per quarter, down from $3.5 billion, while still keeping within the range of its pledge to return 40-50% of cash flow in the form of dividends and buybacks, according to FT.
BP, for its part, expects to book up to $5 billion in impairments for the fourth quarter, mostly related to its energy transition businesses, while oil trading was weak and gas trading was average at the end of 2025.
HSBC expects Equinor to slash annual share repurchases to $2 billion in 2026, from $5 billion in 2025.
UBS expects the sector to cut payouts by 21%, while Barclays sees an average 25% cut to European oil firms’ buybacks.
“Overall, that is seen as a much better option than paying them out of debt,” Lydia Rainforth at Barclays told FT.
Buybacks will likely be the first casualty as oil and gas companies face a tougher balancing act in capital allocation strategies this year, WoodMac’s corporate research directors Tom Ellacott and Greig Aitken said in an outlook of corporate themes for 2026.
“Lower oil prices will force more structural cost reductions and cuts to buybacks. But the pressure will intensify to lay stronger foundations for next decade,” the analysts noted.
Oil companies will continue to redirect investments from low-carbon energy sources to the upstream, to position themselves for oil and gas resource and production growth over the next decade, now that peak oil demand is no longer seen as imminent.
“The bottom line is that oil and gas companies can’t do it all in 2026,” WoodMac’s analysts said.
“They must make critical capital allocation choices that will shape their competitive positioning for the next decade.”
By Tsvetana Paraskova for Oilprice.com
