European Energy Giants Face Pressure on Shareholder Returns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4d ago
0mins
Source: CNBC
- Shareholder Return Risks: European energy giants face pressure to reduce shareholder returns due to falling crude prices, with Shell and TotalEnergies expected to report their lowest fourth-quarter profits in nearly five years, indicating a significant decline in industry profitability.
- Capital Expenditure Adjustments: Analysts suggest that energy companies may cut capital programs, particularly low-carbon projects, to navigate economic and geopolitical uncertainties, which could negatively impact long-term sustainability efforts.
- Buyback Plan Reductions: BP lowered its share buyback plan from $1.75 billion to $750 million in April, reflecting a conservative strategy in response to earnings that fell short of expectations, indicating weakened market confidence in shareholder returns.
- Profit Trend Changes: In 2022, the five largest Western oil companies reported nearly $200 billion in combined profits, but the current profit pressures starkly contrast with the “monster profits” seen a few years ago, highlighting the industry's volatile cycles.
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Analyst Views on BP
Wall Street analysts forecast BP stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for BP is 84.26 USD with a low forecast of 6.38 USD and a high forecast of 503.69 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
11 Analyst Rating
5 Buy
5 Hold
1 Sell
Moderate Buy
Current: 38.170
Low
6.38
Averages
84.26
High
503.69
Current: 38.170
Low
6.38
Averages
84.26
High
503.69
About BP
BP p.l.c. is a United Kingdom-based integrated energy company. The Company's segments include Gas & low carbon energy, Oil production & operations, Customers & products, and Other businesses & corporate. Its gas business includes regions with upstream activities that produce natural gas, integrated gas and power, and gas trading. Its low carbon business includes solar, offshore and onshore wind, hydrogen and carbon capture and storage and power trading. Oil production & operations segment comprises regions with upstream activities that predominantly produce crude oil, including bpx energy. Customers & products segment comprises its customer-focused businesses, which include convenience and retail fuels, electric vehicle charging, as well as Castrol, aviation and business to business and midstream. It also includes its products businesses, refining and oil trading, as well as its bioenergy businesses. Other businesses & corporate segment comprises technology and bp ventures.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Negotiation Breakdown: Negotiations that began on January 5 failed to reach a new agreement by the January 31 deadline, as BP rejected nearly all proposals, leaving workers anxious about job security and future terms.
- Union Leadership Statement: USW 7-1 President Eric Schultz stated that while workers are ready to strike, the union will continue to bargain in good faith, emphasizing the importance of unity in demanding a fair contract for all members.
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- Shareholder Return Risks: European energy giants face pressure to reduce shareholder returns due to falling crude prices, with Shell and TotalEnergies expected to report their lowest fourth-quarter profits in nearly five years, indicating a significant decline in industry profitability.
- Capital Expenditure Adjustments: Analysts suggest that energy companies may cut capital programs, particularly low-carbon projects, to navigate economic and geopolitical uncertainties, which could negatively impact long-term sustainability efforts.
- Buyback Plan Reductions: BP lowered its share buyback plan from $1.75 billion to $750 million in April, reflecting a conservative strategy in response to earnings that fell short of expectations, indicating weakened market confidence in shareholder returns.
- Profit Trend Changes: In 2022, the five largest Western oil companies reported nearly $200 billion in combined profits, but the current profit pressures starkly contrast with the “monster profits” seen a few years ago, highlighting the industry's volatile cycles.
See More
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- Strike Authorization Vote: Following unsuccessful negotiations with BP, 98% of the 800 workers represented by the local USW union voted to authorize a strike, reflecting strong dissatisfaction and a demand for a fair contract.
- Negotiation Breakdown: Negotiations that began on January 5 failed to reach a new agreement by the January 31 deadline, as BP rejected nearly all proposals, leaving workers anxious about job security and future terms.
- Union Leadership Statement: USW 7-1 President Eric Schultz stated that while workers are ready to strike, the union will continue to bargain in good faith, emphasizing the importance of unity in demanding a fair contract for all members.
- Refinery Impact: BP's Whiting refinery in Indiana, the largest in the U.S. Midwest with a capacity of 440,000 barrels per day, produces essential transportation fuels including gasoline, diesel, and jet fuel, and a strike could significantly disrupt fuel supply.
See More
BP Seeks Partner to Boost Kirkuk Oil Field Production
- Partner Search: BP is actively seeking a partner to enhance production at the Kirkuk oil field and share costs, with a process underway to identify potential investors, which will help alleviate BP's financial burden and improve project sustainability.
- Contract Context: The Kirkuk development contract signed last year is a key part of BP's efforts to boost earnings, with annual costs projected at approximately $1 billion over the 25-year contract period, significantly impacting BP's long-term financial performance.
- Middle East Strategy: The Middle East is one of BP's top-producing regions; in addition to Kirkuk, BP operates Iraq's largest oil field, Rumaila, in the south, further solidifying BP's market position in the region.
- Production Increase Plan: BP's plan to nearly double Kirkuk's production aligns with Iraq's ambition to raise its overall oil and gas output capacity to over 6 million barrels per day by 2029, highlighting BP's proactive role in the global energy market.
See More
Shell Reports Weakest Quarterly Profit in Five Years
- Quarterly Profit Decline: Shell reported adjusted earnings of $3.26 billion for Q4, missing analyst expectations of $3.53 billion, indicating significant profit pressure due to a weaker crude price environment and unfavorable tax adjustments, marking the lowest quarterly performance since Q1 2021.
- Weak Annual Performance: For the full year 2025, Shell's adjusted earnings were $18.5 billion, a notable decline from $23.72 billion the previous year, reflecting the challenges of the market environment and weakening profitability, which may impact future investment decisions.
- Shareholder Return Initiatives: The company announced a 4% increase in its dividend to $0.372 per share and initiated a $3.5 billion share buyback program, marking the 17th consecutive quarter of buybacks exceeding $3 billion, aimed at boosting shareholder confidence and stabilizing stock prices.
- Rising Debt Levels: As of the end of last year, Shell's net debt stood at $45.7 billion with a gearing ratio of 20.7%, an increase from $41.2 billion and 18.8% in Q3, indicating financial pressure amidst declining earnings.
See More
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- Earnings Beat: Shell has exceeded earnings expectations in five of the last eight quarters, notably reporting $5.4 billion in Q3 last year, surpassing the $5.1 billion forecast, highlighting its operational resilience amid falling oil prices.
- Share Buyback Program: The company has announced over $3 billion in share buybacks for 16 consecutive quarters, establishing itself as a best-in-class performer in capital discipline, despite the challenges posed by declining crude prices.
- Cost Control Targets: Shell raised its cost reduction target from $2-3 billion to $5-7 billion by 2028 and lowered its capital expenditure target from $22-25 billion to $20-22 billion, indicating a strong focus on maintaining financial health in a volatile market.
- Investment Enthusiasm in Nigeria: Shell's investments in Nigeria have reached $5 billion, including the Bonga North deepwater project and HI gas field, reflecting a strategic pivot towards the region that could enhance its global energy market position.
See More
Shareholder Activists Pressure BP to Reassess Investment Strategy
- Shareholder Pressure: A coalition of shareholder activists and pension funds is pressuring BP to justify its shift in investment from renewable energy to oil and gas projects, a move that fails to address the underlying causes of the company's poor performance.
- Proposal Context: The shareholder resolution, co-filed by U.K. and European pension funds along with the Australasian Centre for Corporate Responsibility, represents 0.42% of BP's share capital valued at over $400 million, indicating strong investor concern over the company's strategic direction.
- Funding Shift: A year ago, BP announced a
See More
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- Shareholder Return Risks: European energy giants face pressure to reduce shareholder returns due to falling crude prices, with Shell and TotalEnergies expected to report their lowest fourth-quarter profits in nearly five years, indicating a significant decline in industry profitability.
- Capital Expenditure Adjustments: Analysts suggest that energy companies may cut capital programs, particularly low-carbon projects, to navigate economic and geopolitical uncertainties, which could negatively impact long-term sustainability efforts.
- Buyback Plan Reductions: BP lowered its share buyback plan from $1.75 billion to $750 million in April, reflecting a conservative strategy in response to earnings that fell short of expectations, indicating weakened market confidence in shareholder returns.
- Profit Trend Changes: In 2022, the five largest Western oil companies reported nearly $200 billion in combined profits, but the current profit pressures starkly contrast with the “monster profits” seen a few years ago, highlighting the industry's volatile cycles.
See More
