Big Oils 1Q26 Wrap-up

EU Big Oils reported a strong 1Q26 with Free Cash Flow 14% above expectations, driven by exceptional oil trading results. The report highlights an impending shift toward a major capex upcycle to address long-term supply sustainability and shrinking reserves.

Key Takeaways

• 1.1Q26 sector Free Cash Flow was 14% above expectations ($29.7bn actual vs. $26.1bn expected), driven by strong operating cash flow and oil trading.
• 2.Oil and downstream trading earnings improved significantly (+194% QoQ), while LNG trading profits are expected to see more impact in 2Q due to pricing lags.
• 3.A major oil capex upcycle is anticipated starting in 2027, as sector reserve life has contracted 25% since 2013.

Table of Contents

• 1Q26 financials summary: Solid FCF generation but with significant working capital build; gearing broadly flat
• Across companies, we saw strong performance in Oil Trading and Downstream
• 1Q26 benefited from a strong oil trading environment for Big Oils
• Reinvestment remains structurally low vs, history and, unlike 2022, we expect higher profits to translate into higher capex
• Capital allocation: Reinvestment remains structurally low vs. history
• Unlike in 2022, we do not expect cash return to shareholders to increase materially despite higher profits
• On forwards, BP would close the Balance Sheet gap vs. peers by 2027E
• 2Q26 outlook: Focus on jet fuel margins
• Strait of Hormuz exposure for Big Oils
• Idiosyncratic growth through our Top Projects database, with GALP, Repsol and TotalEnergies leaders
• Galp maintains leadership on resource life together with TotalEnergies
• Re-imagining Big Oils: Entering the fourth year of Taxonomy alignment reporting
• Favoured names and 12-month price targets
• Estimates vs. consensus

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