oil prices remain low, causing significant discounts for Repsol and Galp
European Oil Companies Undervalued Amidst High Demand and Tight Supply
In the current market, oil demand remains high while supply is tight, leading to a surge in oil prices. Amidst this scenario, two key European oil companies, Repsol and Galp, appear undervalued, despite the weak euro and other challenges.
Repsol, a lesser-known Spanish oil company (WKN: 876 845), is priced as if an exchange rate increase to 1.20 dollars per euro and a simultaneous oil price drop to below 50 dollars per barrel were imminent. Despite showing strong financial health with a market cap of about €14.7 billion and recent earnings around €668 million, Repsol has a relatively low net profit margin of 1.35% and modest future growth prospects (rated 3/6) alongside a low valuation score (2/6) from Simply Wall St as of July 2025. Repsol is investing significantly in renewable energy and digitalization, signalling a strategic shift towards future growth drivers. However, European regulatory and decarbonization pressures may constrain its legacy hydrocarbon activities, potentially compressing margins despite high oil prices and weak euro benefits.
On the other hand, Galp, a Portuguese company (WKN: A0L B24), which sources its oil mainly from Africa and Brazil, offers a similarly high leverage. Galp reported a strong adjusted net profit of €373 million in Q2 2025, marking a 25% increase year-on-year, driven by increased hydrocarbon production and strong natural gas demand. Its Sines industrial complex remains central to its low-carbon expansion strategy, suggesting solid operational performance amid the energy transition, and the profit growth outpaces many peers in this quarter, highlighting underappreciated value in its stock despite the macroeconomic environment.
Neither company ranks among the very largest global oil and gas firms, which have market caps in the hundreds of billions, indicating their European regional scale may partly explain their valuation. Repsol’s stock price was around €12.97 in early August 2025 with a mixed analyst outlook, reflecting uncertainty about balancing legacy oil business pressures versus renewables growth.
The war in Ukraine and the embargo against Russia have worsened the oil supply situation, while more banks have refused to finance oil exploration due to environmental concerns. This dynamic has been further complicated by the weak euro, which adds to the undervaluation of European oil companies due to oil being traded in dollars. Major providers like Shell, Total, and BP are discounting a significant oil price drop in their stock prices.
In the analysis of stocks, Jörg Lang, who has been active in his role since 1988, sheds light on the valuation and financial dynamics of Repsol and Galp. His expertise lies in the topic of stocks, and he has been working as a columnist for an undisclosed period, with a significant focus on stocks since 1988.
In conclusion, both Repsol and Galp have undervalued equities despite supportive macro conditions of high oil prices and a weak euro, largely due to European regulatory challenges, transition risks, and market skepticism about growth trajectories. Their focus on renewable and low-carbon initiatives could unlock future value, but near-term profit margins and growth metrics are still relatively constrained or selectively strong, respectively.
In the current analysis by Jörg Lang, it is suggested that both Repsol and Galp, despite having undervalued equities, might hold untapped potential due to their focus on renewable and low-carbon initiatives. Regardless, their near-term profit margins and growth metrics remain relatively constrained for Repsol, while selectively strong for Galp.
In the broader financial landscape, European oil companies like Repsol and Galp are undervalued despite supportive macro conditions of high oil prices and a weak euro, primarily due to European regulatory challenges, transition risks, and market skepticism about growth trajectories.
