The global energy landscape is witnessing a resurgence in oil and gas production, with major players like Shell and TotalEnergies leading the charge in Nigeria, Africa’s top oil producer. According to a recent report from OilPrice.com, these supermajors are accelerating investments to significantly boost output by 2027, targeting key projects such as Shell’s Bonga North and TotalEnergies’ Ubeta fields. This move aligns with a broader global trend of increasing hydrocarbon production, driven by strong demand, low inventories, and favorable market conditions. But what does this mean for the financial statements of Shell and TotalEnergies, and how should investors interpret this strategic shift?
Nigeria: A Focal Point for Oil and Gas Expansion
Shell and TotalEnergies are ramping up their operations in Nigeria, a country that has struggled to meet its OPEC quota of 1.8 million barrels per day (bpd), averaging just 1.4 million bpd in Q1 2025 due to theft, vandalism, and stalled projects. Shell is advancing its $5 billion Bonga North deepwater oil and gas field, aiming for first oil by mid-2027, while TotalEnergies is targeting 70,000 bpd from its $550 million Ubeta gas field by the same year. Additionally, Shell is eyeing a final investment decision (FID) on the $8 billion Bonga Southwest-Aparo project, and TotalEnergies is planning an FID on the IMA gas field in 2026.
These projects are part of a broader push by Nigeria’s government to encourage collaboration among oil companies to boost output. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has been clamping down on oil theft and supporting increased production, creating a more favorable environment for supermajors to invest. This aligns with global trends, as evidenced by OPEC+’s decision to raise production by 548,000 bpd in August 2025, driven by low global oil stockpiles and robust demand. Similar production increases are occurring elsewhere, with ExxonMobil and Chevron signing $34 billion in energy deals with Indonesia and Iraq, lifting output by 80,000 bpd across three key fields.
Financial Implications for Shell and TotalEnergies
The increased focus on oil and gas production in Nigeria is poised to have significant impacts on the financial statements of Shell and TotalEnergies, with both opportunities and risks.
Revenue and EBITDA Growth
The Bonga North and Ubeta fields are expected to add substantial production capacity by 2027, boosting upstream revenues for both companies. For Shell, the Bonga North project could contribute significantly to its upstream segment, which accounted for $12.1 billion in adjusted earnings in 2024. TotalEnergies, with its Ubeta field producing 70,000 bpd, could see a similar uplift in its Exploration & Production segment, which generated €6.8 billion in adjusted EBITDA in 2024. Assuming Brent crude prices hover around $69-$70 per barrel (as forecast by the EIA for 2025), these projects could add hundreds of millions annually to top-line revenues once operational.
However, the ramp-up phase involves significant capital expenditures (CAPEX). Shell’s $5 billion investment in Bonga North and potential $8 billion for Bonga Southwest-Aparo will increase CAPEX, potentially straining free cash flow in the near term. TotalEnergies’ $550 million Ubeta project, while smaller, will also require upfront investment. Both companies may see elevated debt levels or reduced shareholder returns during this period, as funds are allocated to development.
Operating Costs and Margins
Nigeria’s operating environment presents challenges, including pipeline vandalism and security risks, which could elevate operating costs. Shell’s recent sale of its onshore Nigerian subsidiary (SPDC) indicates a strategic shift to deepwater assets like Bonga North, which typically have lower per-barrel operating costs but require significant upfront investment. TotalEnergies, with its focus on gas from Ubeta, may benefit from lower exposure to oil theft but will face costs associated with gas infrastructure development. If managed effectively, these projects could improve operating margins by leveraging economies of scale and modern technology.
Balance Sheet Considerations
The high CAPEX requirements could pressure balance sheets, particularly for Shell, which reported a net debt of $40.3 billion at the end of 2024. TotalEnergies, with a stronger balance sheet (net debt of €25.1 billion), may be better positioned to absorb these costs. However, both companies are likely to finance these projects through a mix of cash flows, debt, and potential asset divestitures, as seen with Shell’s SPDC sale. Investors should monitor debt-to-equity ratios and interest coverage metrics to assess financial health.
Risks to Financial Performance
Geopolitical risks, including potential U.S. tariffs and regional instability, could impact profitability. The OilPrice.com report notes that oil prices are sensitive to U.S. trade policies and Middle East tensions, which could depress Brent prices below $70. Additionally, Nigeria’s history of project delays and security issues poses execution risks, potentially leading to cost overruns or delayed cash flows. Shell’s Q2 2025 update already flagged weaker trading results and lower gas output due to maintenance and asset sales, suggesting near-term volatility.
Global Trend: A Shift Back to Hydrocarbons
The Nigerian projects reflect a broader global pivot toward oil and gas production. OPEC+’s aggressive production hikes, Saudi Aramco’s decision to sell crude to all buyers, and ExxonMobil’s gas discovery in Cyprus all point to a market prioritizing supply growth over price defense. This trend is driven by tight middle distillate inventories, Red Sea shipping disruptions, and strong demand, particularly in Asia, where China’s power consumption hit a record 1,465 GW in July 2025. The U.S. Department of Energy’s warning of rising blackout risks by 2030 further underscores the need for reliable baseload energy, bolstering the case for oil and gas.
For Shell and TotalEnergies, this shift aligns with their strategies to balance traditional energy with low-carbon investments. While both companies have committed to net-zero goals, the profitability of oil and gas projects in a high-demand environment makes them attractive. Shell’s acquisition of TotalEnergies’ 12.5% stake in the Bonga field and TotalEnergies’ focus on gas (a lower-carbon fuel) suggest a pragmatic approach to energy transition, prioritizing cash flow generation while maintaining green credentials.
Implications for Investors
For investors, the increased focus on Nigerian oil and gas production presents a mixed but compelling opportunity:
- Upside Potential: The Bonga North and Ubeta projects could drive long-term revenue and EBITDA growth, supporting dividend stability and potential share price appreciation. Shell’s current dividend yield of 4.1% and TotalEnergies’ 3.8% (as of Q2 2025) are attractive for income-focused investors, and successful project execution could enhance these payouts.
- Near-Term Risks: High CAPEX and geopolitical uncertainties may lead to volatility in stock prices. Shell’s weaker Q2 2025 trading results and TotalEnergies’ exposure to gas price fluctuations warrant caution. Investors should assess the companies’ ability to manage costs and deliver projects on time.
- Strategic Positioning: Both companies are well-positioned to capitalize on global demand for oil and gas, particularly in emerging markets. TotalEnergies’ diversified portfolio, including LNG and renewables, offers resilience, while Shell’s deepwater expertise strengthens its competitive edge in Nigeria.
- ESG Considerations: Investors focused on environmental, social, and governance (ESG) factors may view the pivot to oil and gas with skepticism. However, TotalEnergies’ emphasis on gas and Shell’s streamlined Nigerian operations mitigate some concerns, aligning with a pragmatic energy transition.
Conclusion
Shell and TotalEnergies’ push to boost oil and gas output in Nigeria is a microcosm of a global trend toward increased hydrocarbon production. While this strategy promises significant revenue growth and strengthens their positions in a high-demand market, it comes with substantial financial and operational risks. For investors, the key is to balance the long-term upside of these projects against near-term challenges, including CAPEX pressures and geopolitical uncertainties. As the world grapples with energy security and transition, Shell and TotalEnergies are betting on oil and gas to fuel their future—investors would be wise to keep a close eye on their progress.
It appears that the Trump administration is having a greater global impact than it may realize. Watch in the coming weeks to see if the Trump administration follows through with the declaration that the Obama-era ruling that CO2 is a pollutant is misguided and overturned. Investors around the world are demanding returns, and as subsidies dry up, they are shifting back to oil and gas. We have discussed this several times on the podcast, and ESG has had a positive impact on oil and gas exploration and production companies. They are committed to giving back returns to shareholders. This is crucial and ensures the continued flow of money into drilling programs. Drill baby Drill is not just a political slogan; it has become more like Drill baby Drill when fiscally responsible.
Sources: OilPrice.com, Shell Q2 2025 Update, TotalEnergies 2024 Annual Report, EIA Short-Term Energy Outlook, Posts on X
