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BON VOYAGE TO BIG OIL BUYBACKS IN 2025?

Big Oil's bumper profits in recent years have translated into mega share buybacks, which peaked in 2024, and according to Bank of America analysts, they're going to take a hit in 2025.

Buybacks in the sector went from zero to $40 billion in just four years, BofA writes in a note, but cuts are ahead.

"On average, we expect 20% buyback cuts y/y. We see only Shell, TTE and EQNR buyback run-rates to stay intact into 2025."

BofA believes many of Europe's big oil names will struggle to compete with France's TotalEnergies, which they highlight is the only name in the sector committed to its buyback run-rate across 2025.

Overall, their buyback tracker shows that a slowdown is already in motion.

"...Europe's Big Oil buybacks accounted for 10% of average daily trading volume in 2024..

"..However, 4Q24 buyback run-rates already equate to a 8% q/q decline in activity."

So where are the cuts going to show up?

BofA sees 2025 cuts in buybacks where balance sheets are stretched already, mentioning BP, Repsol and ENI.

"Only Shell, TTE and Equinor buyback run-rates will in our view stay intact - and yet their shares all trade at attractive >10% cash yields," they write.

Instead, BofA thinks shareholders of Shell, TTE and Equinor can expect more than 6% cuts in their share count this year.

This would enhance "5-6% dividend yields and the outlook for more per share growth."

More will become clear in the coming weeks as European earnings season kicks off in earnest.

(Lucy Raitano)

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