Following positive trends recorded in the oil market in June and July, Eni is assuming a gradual recovery in global consumption of hydrocarbons and power in the second half of the year, particularly in Eni’s reference markets. Eni expects a rebound in energy demand in 2021.
Eni has promptly reviewed the industrial plans to adapt the business to the crisis scenario caused by the COVID-19 pandemic, defining a set of actions and initiatives designed to strengthen liquidity and the robustness of the balance sheet, to preserve profitable operations and increase the portfolio resilience to the scenario, without impairing the Company's ability to grow as soon as macro-economic conditions improve, while accelerating its strategy to be a leader in the market supplying decarbonised products.
The review of the industrial plan and the Group strategy in the short-medium term foresees:
- Capex cuts of approximately €2.6 billion for 2020, approximately 35% lower than the initial capital budget; the new capex guidance for 2020 is €5.2 billion. Anticipated reductions of €2.4 billion in 2021, i.e. 30% lower than original plans. Capex revisions almost fully focused in the E&P segment.
- Expected production of 1.71–1.76 mboe/d in 2020 including OPEC+ cuts, in line with the earlier guidance, due to capex curtailments in response to the COVID-19 crisis, a lower global gas demand also impacted by the pandemic effects and finally extension of force majeure in Libya for the FY 2020.
- Implemented widespread initiatives to save approximately €1.4 billion of expenses in 2020; reductions of the same amount expected in 2021.
- At management’s assumption of an average Brent price of 40 $/bbl for the FY 2020, expected adjusted cash flow before working capital changes of €6.5 billion will enable the Company to fund the expected capex for 2020. Compared to the initial guidance of €11.5 billion at a Brent price of 60 $/barrel, the shortfall is attributable to lower Brent prices (for a total effect of -€4.5 billion) and COVID-19 impact (approximately -€1.7 billion), partly offset by opex savings and positive performance equal to €1.2 billion.
- Sensitivity of the cash flow to movements in crude oil prices: estimated approximately €170 million of cash flow variation for each one-dollar change in the Brent crude oil prices and commensurate changes in gas prices applicable to deviation in a range of 5-10 $/bbl from the base-case scenario, also assuming no further management’s initiatives and excluding effects on dividends from equity accounted entities.
- 2020 EBIT adjusted mid-downstream (G&P, R&M with pro-forma ADNOC and Versalis): €0.8 billion.
Eni is well equipped to withstand the downturn leveraging the resilience of its portfolio of conventional oil and gas properties with low break-even prices and a robust financial position: at June 30, 2020, the Company can count on a liquidity reserve of approximately €17.7 billion, consisting of cash of €6.5 billion, €6 billion of readily disposable securities, €0.5 billion of short term financing receivables and €4.7 billion of undrawn committed borrowing facilities.