Europe’s oil majors prepare to cut billions in shareholder payouts

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Europe’s biggest oil companies are poised to rein in billions of dollars of shareholder payouts in the coming weeks, signalling a turn to austerity as they brace for lower oil prices and move to protect their balance sheets. 

Shell, BP, TotalEnergies, Eni and Equinor are expected by analysts to collectively slow their shareholder distributions by 10-25 per cent when they report full-year results this month, all through reductions in stock buybacks.

The European majors have in recent years ploughed more than half their cash flow into repurchasing shares, shrinking the number in circulation and supporting their prices. The industry has reduced its share count by about a fifth since 2021, according to UBS.

But the strategy is coming under heavy strain. Oil prices fell by about a fifth last year and are forecast to weaken further in the first half of 2026, as rising supplies of crude create a surplus. Analysts said companies were likely to cut their buybacks rather than fund them through debt. 

“We are forecasting an average 25 per cent cut to the buybacks,” said Lydia Rainforth at Barclays. “Overall that is seen as a much better option than paying them out of debt.”

“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 the sector to reduce its shareholder distributions by 21 per cent. “That is not the case today.”

The pressure on European companies contrasts with the strength of their US rivals.

ExxonMobil and Chevron on Friday reported their lowest annual profits in four years, despite record levels of oil and gas production. But neither company signalled a pullback from their shareholder payouts this year and both have emphasised the strength of their balance sheets to ride out the downturn. 

Some European majors have already begun to reset expectations. Total has said it will reduce quarterly share repurchases by between $500mn and $1.25bn this year, assuming oil prices average $60-$70 a barrel.

Brent crude was trading close to $71 a barrel on Friday amid heightened geopolitical tensions in the Middle East.

Equinor, Norway’s state-controlled oil company, is expected to cut annual buybacks from $5bn in 2025 to $2bn in 2026, according to HSBC.

Shell, which has described spending 40-50 per cent of cash flow on dividends and buybacks as “sacrosanct”, is widely expected to trim its quarterly repurchases from $3.5bn to $3bn, a move that would keep it within that range, when it reports results on Thursday.

Boards will decide on the level of distributions shortly before companies report their results, and some analysts cautioned that a positive start to this year could yet persuade some to hold them at their current level.  

Nevertheless, Stone believes improved market valuations of European oil majors have weakened the case for aggressive buybacks. “The logic becomes less obvious when you are buying back your shares at a higher multiple,” he said.

He added that while some European majors had highlighted consistent shareholder returns as a way to narrow the valuation gap with US peers, they faced structural disadvantages given the deeper reserves and stronger growth prospects of their American rivals.

Christopher Kuplent, an analyst at Bank of America, said Europe’s oil companies were able to sustain payouts last year largely by leaning on their balance sheets or selling assets.

“I don’t think a company like Eni, having sold $8bn of assets last year, can do it again this year,” he said. “You can’t run away from the fundamentals.”

Expectations for fourth-quarter results have already been tempered by cautious trading statements, after which consensus profit forecasts fell by 12 per cent. Kuplent said the industry was heading into a difficult 2026 after spending much of last year cutting costs and trying to lift production.

“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.”