UBS Names BP, TotalEnergies, and Vår Energi as Top European Energy Picks

UBS has identified BP, TotalEnergies, and Vår Energi as its top investment picks in the European energy sector, according to a recent Equity Compass report. The Swiss bank's selections favor companies demonstrating strong shareholder returns and financial discipline while balancing traditional oil and gas operations with strategic market positioning.

Majors Praised for Value and Profitability

UBS highlighted two of the sector's super-majors, BP and TotalEnergies, for their distinct strategic advantages. The bank noted that both companies produce approximately 2.4 million barrels of oil equivalent per day.

• BP was selected for its renewed focus on core oil and gas operations, debt reduction, and improved capital efficiency. According to UBS, BP is the lowest-valued international oil and gas major and offers the highest dividend yield in its peer group. The bank also believes BP offers the most oil price leverage among majors due to its higher financial leverage.
• TotalEnergies was praised for having the highest through-cycle profitability among the five major oil companies. UBS pointed to the French firm's position as the number two global producer of liquefied natural gas (LNG) and its low financial gearing. The bank also noted its well-diversified income profile and commitment to returning cash to shareholders via dividends and buybacks.

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Vår Energi Tapped for High Yield

The Norwegian-focused producer Vår Energi completes UBS's list of top picks. The company, which is nearly 60% owned by Eni, was singled out for its attractive shareholder returns and efficient operations.

UBS pointed to Vår Energi's indicated dividend yield of close to 10% and its low unit-cost base as key components of the investment case. The bank also views the recent BlueNord acquisition, which expands its operations into Denmark, as a positive catalyst that will deliver valuable synergies.