Exploration remains an important growth driver for the company. Throughout the plan, Eni expects new discoveries of 2 billion boe at a competitive cost of 2.6$/b. In the first two years of the plan, activity will be focused on proven plays and near-field exploration in order to quickly complete the full appraisal of resource potential while benefiting from all the logistical advantages in the development and production start-up activities.
The hydrocarbon production growth target is equal to 3.5% per year in the 2015-2018 period, and will be achieved mainly through the start-up of 16 major projects and the ramp-up of those already started in 2014, with a total contribution in excess of 650kboed in 2018. These projects will have an average breakeven level of 45$/b, and will generate an additional cumulative operating cash flow of 19 billion euros in 2015-18.
Gas & Power’s restructuring plan, which has accelerated remarkably in 2014, will be completed in the four year plan. The plan will see:
The cumulative operating cash flow expected in the period 2015-18 will amount to 3 billion euros.
In order to address the structural weaknesses expected in Refining over the next four years, Eni will complete the transformation process of the R&M segment, bringing operating cash flow and adjusted EBIT to breakeven as early as 2015, through:
Overall, the planned actions will allow the company to reduce the breakeven adjusted margin in refining to approximately 3$/b at the end of the plan. In the 2015-18 period, it plans to achieve a total operating cash flow from R&M activities of over 1.5 bln euros.
Eni confirms its target to reach EBIT adjusted breakeven in 2016 by leveraging on:
The four year plan investment, focused on high value projects with accelerated returns, envisages a CAPEX of approximately €48 billion, representing a 17% reduction at constant foreign exchange rate versus the previous plan. Half of the investments are not finalised, allowing a high level of financial flexibility should the weak current market conditions persist. In terms of unitary operating costs (OPEX), in 2014 Eni maintained the oil industry’s lowest level at 8.3$/b. In the 2015-18 plan, a further decrease of about 7% versus the previous plan is expected. Cumulative G&A costs will be reduced by approximately 2 billion euros in the plan period.
Operating cash flow will fully cover investments in the 2015-16 period, considering an average oil price scenario at about 63$/b. In the period 2017-18, operating cash flow will increase by 40% due to the combined effect of industrial development actions in E&P, the restructuring of the mid-downstream business, the expected improvement in Brent prices foreseen at 85$/b.
A substantial contribution to cash flow will come from planned disposals, which will amount to 8 billion euros, 70% of which will take place within the first two years of the plan. About 50% will come from the dilution of stakes held in recent exploration discoveries, while maintaining the operatorship in line with Eni’s dual exploration model. The sale of the remaining shares in Snam and Galp will represent about 25%. The remaining 25% will come from the disposal of mature upstream and non-core mid-downstream assets.
The cumulative free cash flow expected in 2015-18 will be in excess of 16 bln euros.
In conclusion, the strategic transformation outlined in the plan will lead to a much more robust Eni, which will be able to face a period of lower oil prices while continuing to create value in a sustainable way.
Last updated on 25/03/15