Bank of America: European oil majors’ cash flow returns to highs, with winter gas and buybacks the next focus

How strong was third-quarter cash flow?

Among European oil majors that have reported results, combined third-quarter net profit was 34.67 billion dollars, up 31% quarter on quarter and 12% above Visible Alpha market consensus. Organic operating cash flow was 58.54 billion dollars, up 25% quarter on quarter and 7% above consensus. Bank of America said a comparable cash flow performance last occurred in 2022.
The strength was not uniform across businesses: TotalEnergies’ refining and chemicals business provided support, while marketing and lower corporate costs offset some weakness in exploration and production and integrated liquefied natural gas. At Repsol, upstream and customer businesses exceeded expectations, while the industrial business fell short.
Neste’s comparable third-quarter EBITDA was 1.56 billion euros, above the 1.18 billion euros consensus collected by the company. However, the budget for its Rotterdam expansion rose from 2.5 billion euros to 3 billion euros, and startup was delayed until late 2027 or early 2028. Bank of America also cut its 2027 EBITDA forecast for the company by 8%.

European natural gas inventories are at about 75% of capacity, 8 percentage points below 83% at the same time last year. Bank of America believes low inventories, winter heating demand and an impending decline in Russian liquefied natural gas imports will together support gas prices.
Bank of America forecasts European natural gas prices of 33 dollars per million British thermal units this winter, about 10% above forward prices for the fourth quarter of 2026 and the first quarter of 2027. Spot prices had already approached that level before the heating season began.
The bank maintained buy ratings on Equinor and Harbour Energy, viewing them as the most sensitive to gas prices. Under Bank of America’s gas price assumptions, Equinor’s fourth-quarter operating cash flow could exceed market consensus by more than 50%.

Eni, Shell and Repsol increased their fourth-quarter buyback plans after reporting third-quarter results. Bank of America noted that these oil majors’ fourth-quarter buyback commitments account for about 40% of their full-year 2026 cash shareholder returns. Repsol’s figure is nearly 70%, the highest concentration of returns.
Shell increased its fourth-quarter buyback to 5 billion dollars, above the Visible Alpha consensus of 3.3 billion dollars, but gave no further clarity on cash returns in 2027. TotalEnergies extended its quarterly 2.5 billion dollars buyback from the fourth quarter of 2026 through the first quarter of 2027.
Higher buybacks also affect balance sheets: Bank of America expects net debt at Eni and Repsol to rise again in the fourth quarter. By its estimates, after shareholder distributions, working capital and inorganic capital expenditure, the two companies will have fourth-quarter free cash flow shortfalls of approximately 2.38 billion euros and 41 million euros, respectively.

After making minor forecast adjustments, Bank of America’s 2026 estimates for aggregate industry net profit and organic operating cash flow remain each 6% above market consensus. Its total forecast for full-year organic operating cash flow was broadly unchanged, with increases for OMV and Neste offset by a reduction for Eni.
Based on Bank of America’s sum-of-the-parts valuations, current share prices imply an average long-term Brent oil price of about 80 dollars per barrel. The bank forecasts that European oil majors’ average organic free cash flow yield will fall from about 15% in 2026 to about 10% in 2027.
Bank of America raised its Shell price target from 3600 pence to 3950 pence on stronger third-quarter cash flow, but maintained its neutral rating. It also maintained underperform ratings on Repsol, OMV and Neste, which have relatively high exposure to refining and chemicals.