Bank of America’s Top Pick#
Bank of America (BofA) has named TotalEnergies as its leading choice among major European oil companies. The bank believes that TotalEnergies' stock is undervalued, even if oil prices decline significantly.
Oil Price Forecasts#
Analyst Christopher Kuplent pointed out that even if Brent crude oil falls to $60 per barrel, TotalEnergies' share price has not performed as well as its competitors. This underperformance is attributed to perceived risks regarding cash flow, which BofA considers to be an overreaction.
BofA's commodities team has recently updated its oil and gas price forecasts for 2026-2027, anticipating that Brent will average $77.50 in 2026 before dropping to $65 in 2027. They also warned about potential price spikes exceeding $200 per barrel if there are significant disruptions in supply.
Strong Financial Position#
The bank's revised price expectations have led to increased forecasts for free cash flow across the oil sector. Kuplent noted that the breakeven prices for Europe’s major oil companies have decreased from around $65 to below $60 per barrel, thanks to stronger natural gas prices and improved refining margins.
In this context, TotalEnergies is highlighted for its attractive free cash flow yield of 12% at an $80 per barrel oil price and 9% at $60. Despite the average rise of 14% in Big Oil shares recently, TotalEnergies has only increased by 4% in March. BofA believes that the company's growth in oil, gas, and power will help maintain its payouts even in a lower price environment.
Other Notable Companies#
BofA also mentioned Equinor as a strong performer in a scenario where oil and gas prices remain elevated for an extended period, primarily due to its limited exposure to the Middle East.