JPMorgan backs Eni and Saipem for H2 strength, stays cautious on Equinor

Investing.com -- JPMorgan reaffirmed its Overweight ratings on Eni (BIT:ENI) and Saipem (BIT:SPMI), highlighting strong momentum through year-end, while staying Underweight on Equinor (OL:EQNR) due to concerns over cash flow and gearing.

Analyst Matthew Lofting said Eni’s portfolio has performed well since the first-half (H1) update, with production trending toward the upper end of guidance and gas spreads providing a seasonal boost.

He pointed to disposal-led deleveraging, with €5 billion in proceeds expected over the next year, and reiterated that a €1.5 billion buyback is a firm floor.

“In our view, this makes a competitive baseline 10.6% cash yield incrementally attractive,” Lofting wrote.

The upcoming completion of the Asia upstream joint venture with Petronas was seen as a key milestone, potentially self-funding growth of more than 300,000 barrels of oil equivalent per day.

"We took away that the portfolio has performed well since H1 reporting. This positions Eni to demonstrate strong momentum through year-end on multiple fronts including higher H2 E&P production, materially de-risking full-year GGP guidance by end-3Q, and deleveraging," said Lofting. 

Saipem was also backed following signs of progress on legacy projects. Lofting noted that the restart of Mozambique LNG appears increasingly close, which should add backlog and remove a long-standing overhang on the shares.

The company expects order intake to accelerate in the second half, with nearly €20 billion in bids submitted and results pending on €7 billion of tenders from the first half.

“This should provide a strong foundation for 2026 orders, with the company positioning its €53bn bid pipeline as resilient to oil price movements given that only around 21% is linked to upstream oil projects,” the analyst said.

Saipem expects to stay on track with its 2025–28 plan, targeting €2 billion in EBITDA by 2028.

The company sees gains coming from better margins in Offshore Engineering & Construction due to recent contracts signed under more favorable terms, and from narrowing the performance gap in Onshore E&C as older, less profitable projects wind down.

Equinor, by contrast, remains challenged despite reiterating its full-year targets and distribution focus.

JPMorgan estimates that at $65 Brent, total 2026 distributions could fall 30% to $6 billion, with buybacks cut to $2 billion.

Lofting warned that payouts “still screen as partially unfunded by organic free cash flow (FCF) under guided capex.”

He also said that share price performance remains “more pro-cyclical to strength in Equinor’s EU gas key value driver,” leaving the stock highly exposed to commodity swings.

Beyond these, JPMorgan reiterated Overweight ratings on Shell (LON:SHEL) and TotalEnergies (EPA:TTEF), citing operational resilience and deleveraging, while also staying constructive on Repsol (BME:REP) for its diesel-driven refining advantage.

Galp Energia (ELI:GALP) was kept at Neutral with Namibia partnerships in focus, and OMV AG (VIE:OMVV) and Neste (HE:NESTE) remain Underweight and Neutral respectively, reflecting persistent challenges in chemicals and renewables.