European Big Oils and E&Ps: Refining and gas trading drive 3Q26 upside and stronger cash returns for European oils

Overview

This European oils 3Q26 preview argues that refining and gas-trading strength should create upside to earnings consensus, support larger shareholder distributions and accelerate balance-sheet repair. Goldman Sachs differentiates companies by refining sensitivity, gas exposure, project-led production growth, cash-flow potential and exposure to a Strait of Hormuz disruption.

Core views

Goldman Sachs expects record-high 3Q26 profits for its European oil coverage as refining and oil/LNG trading offset a softer crude-price and petrochemical backdrop. Its commodity-based barometer for EU Big Oils rises 74% quarter-on-quarter and 279% year-on-year, with refining results up 35% quarter-on-quarter. Refining margins increased 74% quarter-on-quarter and 279% year-on-year as product markets tightened and crack spreads strengthened; benchmark gas prices rose 26% quarter-on-quarter and 69% year-on-year, while power and carbon markets rose 43% and 40%, respectively. By contrast, crude spot prices fell 8% quarter-on-quarter, petrochemical prices declined 18% quarter-on-quarter and 5% year-on-year, and commodity volatility fell 11% quarter-on-quarter despite remaining 71% above 3Q25. The firm estimates that the commodity backdrop lifts aggregate EU Big Oil earnings by about $7.6 billion, or 13% quarter-on-quarter. Downstream earnings are expected to increase around $5.8 billion, or 35%, chiefly from a $6.8 billion refining-margin contribution, partly offset by $0.6 billion weaker petrochemical pricing and lower crude-linked benefits. Integrated Gas & Power earnings are expected to rise about $1.6 billion, or 17%, on stronger lagged crude realizations and gas-hub prices, partly offset by weaker time spreads. E&P earnings are broadly flat because a $2.7 billion hit from lower spot crude is offset by $1.7 billion stronger gas prices and $1.1 billion lagged crude realizations. Repsol is identified as the largest beneficiary, with estimated earnings up 67% quarter-on-quarter and 308% year-on-year; TotalEnergies follows at 63% and 147%, while BP rises 23% and 138% on leverage to gas, LNG and refining. Goldman Sachs updated its commodity assumptions after Middle East re-escalation and alignment with the forward curve. It now models Brent at $92/$86 per barrel for 2026/27, versus $91/$82 previously, and TTF at $18.9/$19.0 per mcf, versus $19.1/$18.7 previously. The resulting 3Q26 EPS estimates rise 1% on average and stand 16% above LSEG consensus. FY2026/27 EPS estimates rise 1%/6% on average and stand 12%/26% above consensus. Although adjusted 3Q26 net income for EU Big Oils is expected to decline 5% versus 2Q26, the firm sees the sector's earnings mix becoming more favorable for downstream and gas-related activities. A second core conclusion is that higher commodity assumptions and cash flow should translate into enhanced shareholder returns. Goldman Sachs estimates average EU Big Oil dividend yields of 4.3%/4.6% in 2026/27 and average buyback yields of 3.6%/4.1%, for total cash returns of 7.9%/8.7%. ENI and Repsol are projected to offer the highest 2026 returns at 11.5% and 10.6%, versus an approximately 8.0% sector average. For 2027, Repsol and ENI are estimated at 11.4% and 9.8%, with TotalEnergies and Shell at 9.0% and 8.8%, respectively, against an 8.7% sector average. The report expects several capital-return actions. TotalEnergies is modeled to lift 3Q26 buybacks from $1.5 billion to $2.5 billion and annual buybacks to $7 billion/$8 billion in 2026/27, up from a prior $6 billion assumption. Repsol and ENI are expected to increase buybacks around 3Q26 results; Goldman Sachs models €2 billion in both 2026 and 2027 for Repsol, up from €1.8 billion, and retains a €4 billion ENI buyback for 2026. Shell announced a $4.2 billion 3Q26 buyback, comprising its $3.0 billion standard program plus $1.2 billion carried over from a paused 1Q26 buyback. Equinor's $3 billion FY2026 buyback and $2-4 billion range-based framework from 2027 were already announced, while Galp maintains a €250 million 2026 buyback and raised its dividend per share 10% to €0.70. Balance-sheet repair is particularly important to the BP thesis. BP's net debt plus hybrids as a percentage of capital employed was 35.4% in 2025, around 12 percentage points above the EU Big Oils average. Goldman Sachs expects this to fall to 21% in 2026 and about 8% in 2027, broadly in line with the sector's 2027 average, after the sector average rose to 22.6% in 2025 and is projected to decline to 15%/8% in 2026/27. On that basis, the firm expects BP to exceed its deleveraging target and resume buybacks from 2H27, modeling $2 billion in 2027. Repsol is also expected to reach a net-cash position by end-2027, with net debt plus hybrids/capital employed at negative 2%. The report adds a medium-term growth analysis based on its Top Projects database. Galp is expected to lead European production growth through 2027, with 17% net-entitlement production growth from end-2025 driven by the Bacalhau start-up; the full build could reach 48% by 2033 with Venus and Mopane. Repsol is projected to show the largest uplift by 2030 at 27%, supported by Pikka, León-Castille, Venezuela, Perla and Raia. TotalEnergies is projected to grow 18% by 2030 through diversified, relatively de-risked projects including Tilenga/Kingfisher and GranMorgu. ENI, OMV, BP and Equinor are projected to grow 13%, 23%, 10% and 7%, respectively, with differing LNG, gas and oil project mixes. Repsol is expected to lead five-year operating-cash-flow uplift from Top Projects at 24% through 2030, while Shell is also seen as having a strong cash-flow growth profile from offshore oil and LNG project ramp-ups. On resource longevity, Goldman Sachs combines FAS 69 reserve disclosures with its forward-looking Top Projects model. TotalEnergies and ENI lead European peers on proved reserve life, while Galp and Repsol are expected to show strong future reserve replacement and Shell could improve substantially from a low base. ENI added 1.2 years of reserve life in 2025 to 10.5 years, placing it alongside ExxonMobil at 10.9 years and TotalEnergies at 10.8 years; this contrasts with an industry-wide 0.6-year decline. The firm notes that potential FIDs for Venus, LNG Canada Phase 2, Rovuma and Papua LNG could help Galp, Shell and ExxonMobil narrow the gap. Finally, the report assesses geopolitical and gas-price sensitivity. Var Energi and Harbour Energy are described as the preferred ways to capture winter TTF upside because 35%/40% of their production is exposed to TTF, respectively, or around 25% on a pure post-hedge basis. Goldman Sachs' commodities team sees December 2026 TTF above €100/MWh in a scenario of missing Persian Gulf LNG supply. In a Strait of Hormuz disruption, TotalEnergies and Exxon have the greatest upstream-production exposure, while OMV appears most exposed among European Big Oils at the EBIT level because of UAE, Iraq, ADNOC refining and Borouge exposure. Shell has Qatar-linked exposure, while Equinor, Galp and Repsol have no meaningful upstream exposure in Qatar, the UAE or Iraq.

Analysis framework

Goldman Sachs first updates oil and gas price assumptions and compares revised earnings estimates with LSEG consensus. It then uses a commodity-price barometer to translate changes in crude, gas hubs, refining cracks, product prices, volatility, foreign exchange and time spreads into segment earnings. The analysis links those earnings outcomes to buybacks, dividends and gearing, then differentiates companies through refining and gas sensitivity, project-led production and cash-flow growth, reserve-life analysis, valuation frameworks and Strait of Hormuz exposure.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Commodity-driven segment earnings barometer

  The report uses changes in crude, gas prices, refining cracks, product prices and volatility to estimate how commodity conditions affect upstream, integrated gas, refining and chemicals earnings.

• Other

  Ten-year linear commodity-factor model

  For each company segment, the firm calibrates a linear combination of commodity and market indicators over a ten-year horizon, using deviations from ten-year average inputs as positive or negative earnings signals.

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Sum-of-the-parts valuation for Galp

  Goldman Sachs values Galp by separately considering its businesses and asset base rather than applying one group-wide earnings multiple.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BP

  Expected to benefit materially from higher commodity prices, trading strength and deleveraging.

  Strengths

  Integrated US exposure, trading organization, deepwater, integrated gas and convenience businesses.

  Weaknesses

  2025 gearing was materially above EU Big Oil peers.

  Comparison

  Expected to close its balance-sheet gap with peers by 2027.

  Risks

  Lower oil and gas prices, weaker exploration, negative growth or capex surprises.

• ENI

  High expected shareholder-return provider with project and Global Gas & LNG support.

  Strengths

  Exploration success, disposals, project pipeline and Global Gas & LNG execution.

  Weaknesses

  Execution depends on project ramp-ups and downstream restructuring.

  Comparison

  Highest estimated 2026 shareholder return at 11.5%.

  Risks

  Lower oil prices or refining margins, Kashagan ramp-up issues and downstream restructuring failure.

• Repsol

  Largest expected beneficiary of the 3Q26 refining backdrop and a leading project-growth name.

  Strengths

  Highest refining exposure, capital discipline, asset disposals and low-carbon value creation.

  Weaknesses

  Earnings are sensitive to refining margins.

  Comparison

  Estimated earnings rise 67% QoQ and 308% YoY; 2026 shareholder return is estimated at 10.6%.

  Risks

  Lower oil prices or refining margins, and negative surprises to growth, capex or shareholder distributions.

• Galp

  Leader in production growth, resource life and project-driven optionality.

  Strengths

  Bacalhau-led growth, Namibia exploration optionality, strengthening balance sheet and low-carbon returns.

  Weaknesses

  Major project growth requires future execution.

  Comparison

  Expected to lead production growth to 2027 at 17%, with potential 48% growth by 2033.

  Risks

  Lower oil prices, weaker-than-expected exploration success, or negative growth and capex surprises.

• Shell

  Strong cash-flow-growth and capital-return profile supported by LNG, marketing and upstream projects.

  Strengths

  Leading global LNG and marketing businesses, capital discipline and cost savings.

  Weaknesses

  Lower refining upside prompted a reduction in the valuation multiple to 5.5x EV/DACF from 5.7x.

  Comparison

  Expected 2027 shareholder return of 8.8%; modeled at $16bn of buybacks in 2027.

  Risks

  Lower oil prices and refining margins, or negative growth and capex surprises.

• TotalEnergies

  Diversified beneficiary of LNG, power and refining strength with sizeable project growth.

  Strengths

  Diversified portfolio and relatively de-risked oil-growth pipeline.

  Weaknesses

  The report retains a Neutral rating.

  Comparison

  Estimated earnings rise 63% QoQ and 147% YoY; projected production growth is 18% by 2030.

  Risks

  Oil-price and refining-margin changes, project ramp-up issues and accelerated project development.

• Var Energi

  Levered exposure to winter European gas-price upside.

  Strengths

  High unhedged European gas exposure, exploration success and FID momentum.

  Weaknesses

  Cash flow is sensitive to oil and gas prices.

  Comparison

  Along with Harbour Energy, offers the highest cash returns among EU E&Ps in 2026E.

  Risks

  Lower oil and gas prices, weaker exploration, growth or capex surprises, and worsening shareholder remuneration.

• Harbour Energy

  Levered play on TTF upside and cash returns while deleveraging.

  Strengths

  High EU gas-price sensitivity, $250 million announced buyback and low 2.4x EV/DACF valuation.

  Weaknesses

  Dependent on gas prices and successful deleveraging.

  Comparison

  Around 40% of production is exposed to TTF before hedges.

  Risks

  Lower oil and gas prices, weaker exploration, negative growth surprises and refining-identity risks.

• Equinor

  Covered company with a Sell rating despite higher commodity-price assumptions.

  Strengths

  Brownfield and tie-back opportunities, Bacalhau and Raia growth projects.

  Weaknesses

  Johan Sverdrup decline and reduced visibility beyond 2028 until further FIDs.

  Comparison

  Expected production growth of 7% by 2030.

  Risks

  Higher-than-expected oil and gas prices, better-than-expected cost efficiency and production.

• OMV

  Covered company with elevated Strait of Hormuz exposure at the EBIT level.

  Strengths

  Neptun Deep supports gas-weighted production growth.

  Weaknesses

  Exposure through UAE, Iraq, ADNOC refining and Borouge.

  Comparison

  Expected production growth of 23% by 2030.

  Risks

  Higher oil prices, refining margins or exploration success, better cost efficiency, or value realization from asset sales and swaps.

Key data

• EU Big Oils barometer+74% QoQ / +279% YoY3Q26 commodity-based earnings indicator, supported by higher refining results.
• Aggregate EU Big Oil earnings+$7.6bn / +13% QoQDriven primarily by downstream and integrated gas and power earnings.
• Refining margins+74% QoQ / +279% YoYReflects tighter product markets and stronger crack spreads.
• 2026/27 EPS versus LSEG consensus+12% / +26%Goldman Sachs estimates for EU Big Oils and E&Ps.
• Brent assumptions$92/$86 per barrel for 2026/27Raised from $91/$82 per barrel.
• TTF assumptions$18.9/$19.0 per mcf for 2026/27Versus prior $19.1/$18.7 assumptions.
• EU Big Oils total shareholder return7.9% / 8.7% for 2026/27EAverage dividend plus buyback yield on Goldman Sachs estimates.
• BP gearing35.4% in 2025; 21%/8% in 2026/27ENet debt plus hybrids as a percentage of capital employed.

Impact & implications

The report argues that the 3Q26 commodity mix favors refiners and gas-trading businesses more than upstream and chemicals, creating earnings upside relative to consensus. Higher cash flow is expected to support buybacks and dividends while accelerating deleveraging, especially for BP. Repsol stands out on refining leverage and project-driven growth, while Var Energi and Harbour Energy offer the strongest leverage to a winter European gas-price upside scenario.

Risks

• Lower oil, gas or refining-margin outcomes than Goldman Sachs assumes could reduce earnings, cash returns and target-price support for several covered companies.
• Project delays, weaker exploration outcomes, cost inflation, capex overruns or slower ramp-ups could weaken production and cash-flow growth.
• A Strait of Hormuz disruption could affect companies with Qatar, UAE, Iraq, refining or petrochemical exposure, with OMV and TotalEnergies particularly exposed at the operating-profit level.
• For gas-levered E&Ps, lower European gas prices or more hedging than expected would reduce the upside case.

What to watch

• 3Q26 results for refining margins, gas and power trading performance, and management buyback announcements.
• Whether BP's deleveraging progresses sufficiently to support a buyback resumption from 2H27.
• TotalEnergies' capital-allocation and flagship-project update at its CMD, including Uganda, Suriname, Namibia, Papua and Mozambique.
• Winter TTF prices and the availability of Persian Gulf LNG supply.
• FID progress for Venus, Mopane, LNG Canada Phase 2, Rovuma, Papua LNG and other Top Projects.