Nov. 27 at 7:32 PM
UBS has named TotalEnergies, Galp, and Saipem as its top European energy picks for 2026, citing capital expenditure quality as a key differentiator. The bank expects a short-term oil surplus, with inventories rising about 2.6 million barrels per day in Q1 2026 before tightening in the second half, and projects Brent averaging
$64 per barrel for the year.
UBS notes that distribution policies should reflect investment quality rather than drive relative valuations. Capital spending quality varies significantly across companies, a factor not fully priced into stocks but likely to influence dividend capacity. European energy companies have cut the number of shares by 21% since 2021 via buybacks, now accounting for 52% of total distributions, though buybacks may become less prominent as EV/DACF multiples rise and balance sheets weaken.
Recent rating updates include upgrades for Eni and Neste to Buy (targets €18 and €20.5, respectively), TotalEnergies as a top pick (€62 target).
$TTE