Europe’s largest integrated oil companies could still hand investors double-digit total distribution yields next year, even if Brent crude averages just $65 per barrel, according to new analysis from Bernstein. The firm argues that, despite a turbulent 2025 for commodity markets, the sector’s cash-flow generation has stayed far more resilient than headline earnings suggest.
In a review of the first nine months of 2025, analyst Irene Himona said that oil majors maintained tight capital discipline and delivered almost stable levels of organic free cash flow, even as macro conditions softened. She highlighted that crude prices dropped 14.4% over the period and chemicals margins weakened, pressuring bottom-line results.
Adjusted earnings across the group fell by roughly 22%, weighed down by cheaper oil and underperformance in chemicals. Refining margins were broadly flat, while gas pricing improved modestly. Equinor (NYSE:EQNR), Shell (LSE:SHEL) and BP (NYSE:BP) underperformed peers, whereas Galp (EU:GALP) was the only company to post higher earnings, supported by stronger midstream gas trading profits.
Despite falling earnings, cash generation barely budged. The sector produced about $109 billion in funds from operations in the first three quarters—just 0.9% below last year—while capital expenditure dipped 1.2%. Organic free cash flow before working capital amounted to $50.4 billion, essentially flat year-on-year. Around $11 billion in asset sales helped fund a combined $53.4 billion in dividends and buybacks.
Himona noted that the rise in net debt was mostly linked to a $10 billion working-capital build, not weaker operating cash flow.
“On our $65/bbl 2026 Brent, the sector continues to offer an attractive double-digit total distribution yield,” she wrote, adding that these payouts appear well covered by operating performance.
The analyst also pushed back against what she sees as an overly bearish market view of 2026 crude balances. Bernstein argues that the International Energy Agency’s (IEA) supply-and-demand models include a large volume of ‘missing barrels’, which may ultimately be reclassified as demand—similar to revisions made earlier this year.
Himona highlighted that more than half of the IEA’s estimated 2025 surplus consists of these missing barrels, and any adjustment “would reduce the IEA’s projected surplus from 2.5mbd this year to a more reasonable 1.1mbd.”
Bernstein maintains a Neutral rating on the oil sector overall but sees strong appeal in selected names. TotalEnergies remains the firm’s top pick, with Outperform ratings also assigned to BP and Galp, while the remainder of its coverage universe stays at Market Perform.