Bank of America has picked out one European oil major as its preferred choice among the region's largest integrated producers, saying the market is underestimating the company's cash flow resilience even under a much lower oil price backdrop.
The company under the spotlight is TotalEnergies. Analyst Christopher Kuplent argued that TotalEnergies’ shares have underperformed peers amid what the bank regards as an overemphasis on cash flow risk. BofA contends that assessment is misplaced and that the stock is mispriced on multiple valuation measures.
The bank’s view follows a revision of its oil and gas outlook for 2026-27 by its commodities team, which raised forecasts to reflect the possibility of supply disruption tied to a shutdown of the Strait of Hormuz. As a result, BofA now projects Brent crude to average $77.50 per barrel in 2026 before easing to $65 in 2027. The bank also cautioned that a sustained disruption could produce sharp upward price moves - spike risks above $200 per barrel.
Higher forward price assumptions have materially increased BofA’s expectations for free cash flow across major oil companies. Kuplent highlighted that estimated 2026 breakeven prices for Europe’s large integrated oil companies have declined from roughly $65 a barrel to below $60, a change supported by firmer gas prices and improved refining margins.
Against that backdrop, BofA emphasized TotalEnergies’ valuation, describing it as offering a "mispriced" free cash flow yield. The bank quantified that yield at about 12% assuming an $80 per barrel Brent price, and roughly 9% if Brent trades at $60.
Equity performance in recent weeks has diverged across the sector. While shares of the large oil producers have risen on average by 14 percent in the period referenced by the bank, TotalEnergies’ stock gained only about 4 percent in March. BofA said the company’s organic expansion in oil, gas and power should underpin rising shareholder distributions even if oil prices settle lower.
BofA also noted that Equinor appears attractive in a scenario where oil and gas prices remain elevated for longer, a view the bank links to Equinor’s limited exposure to the Middle East.
Bottom line: BofA identifies TotalEnergies as its top pick among Europe’s major oil companies, citing a combination of lower breakeven economics across the sector and an attractive free cash flow yield for TotalEnergies even at $60 a barrel Brent. The bank’s broader commodity forecast revisions, driven by Strait of Hormuz disruption risk, lift free cash flow expectations industry-wide.