Oil Majors Face Tough Earnings Season as Lower Crude Prices Threaten Shareholder Returns

European energy majors are bracing for a bruising earnings season as falling crude prices and a tougher operating environment squeeze profits and free cash flow. The pressure is intensifying concerns that shareholder returns — especially share buyback programs — could be scaled back as companies prioritize balance sheet strength and cost control.

Britain’s Shell and France’s TotalEnergies are both expected to post their weakest fourth-quarter profits in nearly five years, according to analyst consensus compiled by LSEG. The outlook highlights the difficult backdrop facing Europe’s oil and gas sector, where lower prices are eroding earnings momentum.

Industry analysts say dividends are likely to be protected, even as other levers are pulled. Atul Arya, vice president and chief energy strategist at S&P Global Energy, said companies are more likely to cut back on share buybacks or delay capital spending rather than reduce dividends, which remain a cornerstone of investor confidence. Any cuts to capital programs, however, are expected to disproportionately affect low-carbon and energy transition projects, as reducing traditional exploration spending could unsettle markets.

Norway’s Equinor is set to report earnings this week, followed closely by Shell. BP and TotalEnergies will report next week, adding further clarity on how Europe’s supermajors are responding to the downturn. In contrast, U.S. giants Exxon Mobil and Chevron recently delivered stronger-than-expected results, reinforcing a divergence between European and American energy firms.

Some European companies have already begun to adjust. BP sharply reduced its share buyback earlier this year after disappointing earnings, while TotalEnergies said it was moderating the pace of repurchases to preserve flexibility amid economic and geopolitical uncertainty. Analysts widely agree that buybacks are the easiest lever to pull, as they are more cyclical than dividends.

Dividends, by contrast, are often described as “sacrosanct.” Maurizio Carulli, energy and materials analyst at Quilter Cheviot, said dividends help enforce capital discipline and reassure long-term investors, whereas buybacks are more readily cut when conditions deteriorate. With oil prices under pressure, he said, companies are increasingly likely to rein in repurchases first.

The shift marks a stark change from the boom years following Russia’s invasion of Ukraine, when soaring energy prices delivered record profits and fueled massive shareholder payouts. Now, with crude prices lower and global demand uncertain, companies are being forced to choose between maintaining generous returns and protecting their balance sheets.

Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, said the trade-off leaves no easy answers. Cash-focused investors want payouts to continue, while value-focused investors favor stronger balance sheets. This earnings season, he said, will test how far Europe’s oil majors are willing to go to satisfy investors — and whether shareholder returns can remain intact if low prices persist.