Interesting to see how sustainability is reshaping investment priorities in the oil sector!
It's refreshing to see major oil companies like Shell and TotalEnergies being recognized for their focus on sustainability in today's market!
In a new research note released by Bank of America (BofA), European oil giants Shell, Equinor, and TotalEnergies were named as favorites among the major players in the oil market. The bank asserts that stock markets are increasingly focusing on sustainability rather than profit dynamics. This shift is creating new, possibly undervalued opportunities in the oil sector, placing an emphasis on the financial stability of companies like Shell and TotalEnergies in the face of changing market trends.
In recent months, there has been a noticeable separation between the stock price movements of European oil companies and the overall trends in oil prices. Analysts at Bank of America highlight that despite the decline in Brent oil prices, the stocks of major European oil corporations continue to show positive performance.
Since the beginning of 2025, Brent oil prices have dropped by 6%, which, in theory, should negatively impact oil company stock prices.
Stocks of major European oil majors, including Shell, Equinor, and TotalEnergies, have risen by approximately 10% during the same period.
In its research note, BofA emphasizes that the market continues to place importance on the sustainability of companies in an uncertain energy market environment. This leads to the risk of downward revisions of forecasts related to future cash flows for oil giants. Projections for the first quarter of 2025 are, in the view of analysts, likely to be lowered.
Key factors that could lead to revised forecasts include:
Weak free cash flow (FCF) generation coupled with the need to sell assets to reduce net debt.
The necessity for companies to strengthen their financial positions to maintain stability amid market instability.
Despite these potential negative forecasts, the bank maintains its preference for companies that have strong balance sheets and can effectively manage the risks associated with market fluctuations.
One of the most interesting aspects of the research note is the identification of Shell as the leading favorite among oil giants. Bank of America calls Shell the leader in terms of breakeven levels and resilience in volatile oil markets.
Shell has a breakeven price of $65 per barrel, significantly lower than the sector average, which exceeds $90 per barrel.
This makes the company more resilient to oil price fluctuations, a particularly important factor in the current market instability.
Moreover, BofA analysts point out that Shell has a strong balance sheet and has shown strong free cash flow results, making it an attractive option for long-term investors focused on stability and low operational risks.
In addition to Shell, the note also highlights two other companies—TotalEnergies and Equinor. BofA analysts emphasize that these companies offer the highest free cash flow yields among European oil giants.
The average free cash flow yield for Shell, TotalEnergies, and Equinor for the 2025 fiscal year is around 5%.
It is worth noting that such cash flow yield figures make these companies some of the most attractive in the oil sector, especially given the current market instability.
Special attention is given to Equinor in the research note, which has seen the largest upward revision of consensus forecasts since the beginning of the year. However, BofA analysts emphasize that the Norwegian giant still holds significant growth potential.
The analysis presented by Bank of America confirms the trend that stock markets for oil giants are increasingly valuing their sustainability, rather than just profit dynamics. In an environment of global economic instability, driven by both internal and external factors, companies with strong balance sheets and low breakeven points—such as Shell, TotalEnergies, and Equinor—may represent promising assets for investors looking for long-term and stable investments.
Nevertheless, oil giants still face several risks, including the need to improve free cash flow figures and manage debt obligations. How companies address these challenges will largely determine their future ability to adapt to the changing conditions of the global oil and gas market.
