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Financial news, results and Strategic Plan

Eni: fourth quarter and full year 2015 results

26 February 2016 - 7:37 AM CET
 
  • Robust cash generation: operating cash flow1-2 of €4.01 billion in Q4 2015 (€12.19 billion in FY2015) in spite of sharply lower oil prices (Brent down 43% to $44 per barrel in the Q4, down 47% to $53 per barrel in FY2015) down by 12% y-o-y (down by 15% in FY2015)
  • Reduced the target oil price under which full-year capex are funded by operating cash flow: down to $50 per barrel in 2015 vs. our previous guidance of $63 per barrel for the period 2015-2016
  • Finalized Saipem transaction by divesting a 12.5% stake to FSI, the pro-quota subscription of the investee’s capital increase and the reimbursement of intercompany financing receivables
  • Efficiency gains and cost rephasing exceeded our expectations: capex reduced by 17% (vs. an initial guidance of 14%); Opex per boe reduced by 13% (vs. an initial guidance of 7%); G&A down €0.6 billion (vs. an initial guidance of €0.5 billion)
  • Hydrocarbon production growth: up 14% to 1.88 million boe/d in Q4 2015, the highest level in 5 years; up 10% (vs. an initial guidance of +5%) to 1.76 million boe/d for the FY2015
  • Exploration activities in the year added 1.4 bboe of fresh resources (vs. an initial guidance of 0.5 bboe), at an average cost of 0.7 $/barrel, also boosted by the supergiant Zohr discovery off Egypt
  • Organic reserve replacement ratio: 148% (135% on average since 2010)
  • R&M: positive adjusted EBIT3 and FCF4 in 2015 achieved earlier than  forecast  of  our strategic plan
  • G&P: 2015 adjusted EBIT almost at break-even in line with our guidance
  • Confirmed a dividend of €0.85 per share for FY2015

 

Results

  • Continuing operations:
    • standalone adjusted EBIT: down 64% in Q4 2015 to €0.86 billion; down 64% in the FY2015 to €4.1 billion;
    • standalone adjusted earnings: a loss of €0.20 billion in Q4 2015; a profit of €0.34 billion in the FY2015 (down 91%);
    • reported earnings: a loss of €6.89 billion in Q4 2015; a loss of €7.79 billion in FY2015 due to asset impairments driven by the oil scenario adopted by Eni
  • Group net earnings: a loss of €8.46 billion in Q4 2015; a loss of €8.82 billion in FY2015
  • Net borrowings: €16.86 billion at year-end; leverage at 0.31. Pro-forma effects of Saipem transaction at December 31, 2015: net debt down by €4.8 billion, leverage at 0.22.

 

"In 2015, Eni achieved remarkable results in its transformation process, which will see the group become even more focused on its core oil&gas business, and even better organized to compete in a low energy price environment as reflected in the Eni scenario which is aligned with a conservative market consensus. The complex deconsolidation of Saipem has been completed in four months providing Eni with net proceeds of €4.8 billion. Our efforts to rationalize costs have achieved better than expected results, and enabled us to self-finance capex in 2015 at 50$/bbl, $13/bbl less  than  expected  a  year  ago.  These  actions  of  efficiency, however, have not affected Eni’s impressive level of growth in the market, in the short or the medium term. In E&P, production grew by 10%. Both our exploration resources and our proven reserves, recorded high growth, demonstrating the quality of our portfolio of assets. In the G&P and R&M businesses, consolidation has continued, with the G&P’s results in line with expectations and R&M’s results beating expectations. In 2016, similar to the previous year, we are continuing Eni’s transformation process with the goal of making the group even stronger and better able to operate in difficult external conditions, enabling us to maintain solid growth expectations. Based on these results, I will propose to the Board of Directors on 17 March the distribution of a final dividend of € 0.4 per share" commented Claudio Descalzi, Eni’s Chief Executive Officer.

Highlight
Fourth QuarterThird QuarterFourth Quarter% Ch.
IV Q. 15
vs. IV Q. 14
SUMMARY GROUP RESULTS (a)      (€ million) Full year

 

20142015201520142015% Ch.
    

Continuing operations:

   

2,304

215

979

(57.5)

Adjusted operating profit (loss) (b)

10,447

3,794

(63.7)

250

(748)

(379)

..

Adjusted net profit (loss) (b)

2,200

(696)

..

(2,294)

(1,425)

(6,891)

..

Net profit (loss)

101

(7,793)

..

(0.64)

(0.40)

(1.91)

..

- per share (€) (c)

0.03

(2.16)

..

(1.60)

(0.89)

(4.18)

 

- per ADR ($) (c) (d)

0.08

(4.80)

..

(2,384)

(952)

(8,460)

..

Net profit (loss)

1,291

(8,821)

..

(0.66)

(0.26)

(2.35)

..

- per share (€) (c)

0.36

(2.45)

..

(1.65)

(0.58)

(5.15)

..

- per ADR ($) (c) (d)

0.96

(5.44)

..

    

Results of continuing operations on standalone basis (b)

   

2,358

432

857

(63.7)

Adjusted operating profit (loss)

11,442

4,103

(64.1)

525

(429)

(200)

..

Adjusted net profit (loss)

3,854

336

(91.3)

73.0

..

..

 

Tax rate (%)

65.3

93,0

 

4,548

1,698

4,007

(11.9)

Net cash provided by operating activities

14,387

12,189

(15.3)

(a) Attributable to Eni's shareholders.
(b)Non-GAAP measures. For a detailed explanation and reconciliation of standalone adjusted results and cash flow which exclude as usual the items “profit/loss on stock”and extraordinary gains and losses (special items), while they reinstate the effects relating the elimination of gains and losses on intercompany transactions with discontinued operations see pages 25 and subsequent.
(c) Fully diluted. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented.
(d) One ADR (American Depositary Receipt) is equal to two Eni ordinary shares.

Continuing and Discontinued operations
Eni’s preliminary results for the Q4 and FY2015 have been prepared in addition to the consolidated basis, stating separately continuing operations from discontinued operations, the latter accounted for in accordance to IFRS 5.

Discontinued operations comprise:

  • The E&C operating segment which is managed by Eni’s subsidiary Saipem SpA. On January 22, 2016, there was the closing of the preliminary agreements signed on October 27, 2015 with the Fondo Strategico Italiano (FSI). Those include the sale of a 12.5% stake plus one share of the share capital of Saipem to FSI and the concurrent enter into force of the shareholder agreement with Eni, which was intended to establish joint control over the former Eni subsidiary. Therefore effective for the full year, Saipem assets and liabilities, revenues and expenses and cash flow have been classified as discontinued operations. In addition as provided by IFRS5, Eni’s net assets in Saipem have been aligned to the lower of their carrying amount and fair value given by the share price at the reporting date.
  • The chemical segment managed by Eni’s wholly-owned subsidiary Versalis SpA. As of the reporting date, negotiations were underway to define an agreement with an industrial partner who, by acquiring a controlling stake of Versalis, would support Eni in implementing the industrial plan designed to upgrade this business. Therefore, effective for the full year, likewise Saipem, Versalis assets and liabilities, revenues and expenses and cash flow have been classified as discontinued operations. In addition, Eni’s net assets in Versalis have been aligned to the lower of their carrying amount and their fair value based on the transaction that is underway.


Consequently, in this press release the review of the financial performance of the Q4 and FY 2015 mainly focuses on the results of the continuing operations. In this regard, taking into consideration that gains and losses pertaining to the discontinued operations include according to the accounting provided by IFRS 5 only those resulting from transactions with third parties, the results of the continuing operations do not fully illustrate the underlying performance given the elimination of gains and losses on intercompany transactions with the discontinued operations. The same is true for the performance of the discontinued operations. The bigger the intercompany transactions, the larger that sort of misrepresentation.

In particular, the accounting of the E&C segment as discontinued operations according to IFRS 5 criteria yields a benefit to the continuing operations due to the elimination of the costs incurred towards Saipem for the execution of contract works commissioned by Eni’s Group companies for maintenance and construction of assets (plants and other infrastructures). On the contrary, the accounting of the chemical segment as discontinued operations affects the results of the continuing operations due to the elimination of revenues relating to the supply of oil-based petrochemical feedstock and other plant utilities to Versalis, mainly from the Group’s R&M segment.

Because of this, throughout this press release management has presented measures of the underlying performance of the continuing operations on a standalone basis by reinstating the effects of the elimination of intercompany transactions.  These performance measures by excluding gains and losses of the discontinued operations earned from both third parties and the Group’s continuing operations, actually determine the derecognition of the two disposal group. These measures are: standalone adjusted operating profit, standalone adjusted net profit and standalone cash flow from operations.

 

Standalone adjusted results
In the Q4 2015, standalone adjusted operating profit from continuing operations was €0.86 billion, down by 64% from Q4 2014. This reflected a lower contribution from the E&P segment (down by €1.17 billion, or 58%) driven by the impact of sharply lower oil prices (down by approximately 43%), partly offset by production growth, cost efficiencies and the depreciation of the euro against the dollar (down 12.3%). The G&P and R&M segments reported positive adjusted operating profit, albeit lower than in Q4 2014 (down by an overall amount of €0.2 billion) due to the negative oil price environment and, in the case of G&P, the unfavourable outcome of commercial arbitration.

Overall, despite production growth and efficiency gains of €0.7 billion, the low oil price environment had a fundamentally negative effect on the operating performance in Q4 down by €1.9 billion net of currency differences, while lower onetime effects associated with gas contract renegotiations negatively affected operating profit by €0.3 billion.

For the FY 2015, standalone adjusted operating profit from continuing operations was €4.1 billion and it was down by €7.34 billion or 64% y-o-y. The decrease was driven mainly by the upstream segment which reported sharply lower results (down €7.44 billion, or 64%) due to falling commodity prices, with an impact of €8.8 billion net of currency differences, partially offset by production growth and efficiency and optimization gains of €2.2 billion, while lower onetime effects associated with gas contract renegotiations negatively affected operating profit by €0.7 billion.

In Q4 2015, standalone adjusted net loss from continuing operations was €0.20 billion, down by €0.73 billion from the adjusted net profit of €0.53 billion reported in Q4 2014. The drivers were a decline in operating profit and a higher tax rate. This latter was due to the E&P tax rate, which was negatively affected by: i) the recognition of a major part of the positive pre-tax results in PSA contracts, which, although more resilient in a low-price environment, nonetheless bear higher-than-average rates of tax; ii) a higher incidence of non-deductible expenses on the pre-tax profit that has been lowered by the scenario.

Standalone adjusted net profit from continuing operations in the FY 2015 amounted to €0.34 billion, down by €3.52 billion y-o-y, or 91%, due to the same factors mentioned above. The consolidated tax rate increased by 28 percentage points y-o-y to 93%.

Excluding the impact of the higher incidence on pre-tax profit of certain non-deductible expenses in E&P, where this incidence is expected to prospectively come down due to the effect of lower amortization charges going forward as a result of the impairment losses recorded in 2015 driven by the price outlook, and also restating the Group operating profit in accordance with the successful-effort-method accounting of exploration expenses, net of impaired exploration projects, the Group tax rate has been re-determined in 79% and 63% for the FY2015 and FY2014, respectively.  

 

Standalone cash flow
The standalone cash flow from operating activities from continuing operations came in at €12.19 billion in the FY2015 benefiting from the positive effect of working capital. Non-recurring effects of the working capital positively influenced cash flow by approximately €2.2 billion. Proceeds from disposals were €2.26 billion and comprised the almost entirety available-for-sale shareholding in Snam due to the exercise of the conversion right from bondholders (€0.91 billion), the disposal of an available-for-sale interest in Galp (€0.66 billion), as well as non-strategic assets mainly in the Exploration & Production segment. These inflows funded a fair amount of the financial requirements for the dividend payments to Eni shareholders (€3.46 billion, of which €1.44 billion related to the interim dividend 2015), capital expenditure for the year (€10.78 billion) and other changes related to capital expenditure (€1.35 billion). As of December 31, 2015, net borrowings6 increased by €3.18 billion to €16.86 billion compared to December 31 2014, driven by the dividend payments, cash absorbed by the discontinued operations and currency translation effects as well as by the reclassification of Saipem net cash in the discontinued operations.

Compared to September 30, 2015, net borrowings decreased by €1.55 billion due to cash flow from operating activities pertaining to continuing operations (€4.01 billion), cash from discontinued operations (€0.50 billion) and cash proceeds from the disposal of Eni’s interests in Snam and Galp, which were partly offset by capital expenditure for the period and currency translation effects as well as by the reclassification of Saipem net cash in the discontinued operations.

As of December 31, 2015, the ratio of net borrowings to shareholders’ equity including non-controlling interest – leverage7 – increased to 0.31, compared to 0.22 as of December 31, 2014. This increase was due to greater net borrowings and a reduction in total equity, which was impacted by the result of the year and dividend payments, partly offset by a sizable appreciation of the US dollar against the euro in the translation of the financial statements of Eni’s subsidiaries that use the US dollar as functional currency, ultimately resulting in an equity gain. The US dollar was up by 10.3% compared to the closing of the previous reporting period at December 31, 2014 and December 31, 2015. The effects of the Saipem transaction yielded a 9-points reduction in leverage to 0.22, calculated on a pro-forma basis on the financial position as of December 31, 2015.

 

Dividend 2015
The Board of Directors intends to submit a proposal for distributing a dividend of €0.80 per share8 (€1.12 in 2014) at the Annual Shareholders’ Meeting. Included in this annual payment is €0.40 per share which was paid as interim dividend in September 2015. The balance of €0.40 per share is payable to shareholders on May 25, 2016, the ex-dividend date being May 23, 2016.

 

Business developments
Eni has finalized a strategic oil agreement in Egypt, which provides investment of up to $5 billion (at 100%) to develop the Country’s oil and gas reserves in future years. Eni has also agreed on new terms for ongoing oil contracts, with the economic effects retroactive to January 1, 2015. Set new measures to reduce overdue amounts of trade receivables relating to hydrocarbon supplies to Egyptian state-owned companies.

In February 2016, Egyptian authorities sanctioned the development plan of the Zohr discovery, where production start-up is expected by end of 2017.

In February 2016, Mozambique authorities sanctioned the development of the first development phase of Coral, targeting to put into production 140 bcm of gas.

Eni signed a preliminary agreement with KazMunayGas to acquire 50% of the mineral rights in the Isatay block in the Caspian Sea.

Eni signed an agreement to supply 1.4 mmtonnes/y of LNG from the Eni-operated Jangkrik field (Eni’s interest 55%) to the Indonesian state-run company PT Pertamina, effective in 2017. The agreement will support the development of the Jangkrik field.

In Ghana, Eni sanctioned the final investment decision for the integrated Offshore Cape Three Points (OCTP) oil and gas project (Eni 47.22%, operator). The first oil is expected in 2017.

In Angola, Eni signed a three-year extension of the exploration period of the Block 15/06, where the first oil from the West Hub development operated project was achieved at the end of 2014.

Eni entered Mexico’s upstream sector by signing the Production Sharing Contract as operator (Eni’s interest 100%) of Block 1 to develop the oilfields of Amoca, Miztón e Tecoalli. These fields, located in the Gulf of Mexico shallow waters, are estimated to hold 800 million barrels of oil and 14 billion cubic meters of gas in place. The delineation campaign of the fields will be submitted to the Mexican authorities in the first quarter of 2016. This campaign foresees the drilling of four wells in order to define a combined and fast track development plan.

In Mozambique, following the signing of the Unitization and Unit Operating Agreement (UUOA) and in full agreement with all the concessionaries of the projects, a unitization was set out for the development of the natural gas reservoirs straddling Areas 4 (operated by Eni East Africa) and 1 (operated by Anadarko) in the Rovuma Basin, offshore Mozambique. In accordance with the UUOA, the development of the straddling reservoirs will be carried out at an early stage in a separated but coordinated way by the two operators, until 24 Tcf of natural gas reserves are developed (12 Tcf of natural gas from each Area). Future developments will be jointly pursued by Area 4 and Area 1 concessionaires. The Final Investment Decision relating the Mamba field in Eni’s operating Area is expected in 2017.

Eni renewed the exploration rights portfolio with the acquisition of approximately 20,000 square kilometers net of new acreage mainly in Egypt (Southwest Melehia in the Western Desert, Karawan and North Leil), Myanmar (two  offshore blocks), Norway (three licences), the United Kingdom (7 offshore licences) and Mexico (Area 1).

In 2015 exploration activities added 1.4 bboe to the Company’s reserve backlog at a cost of $0.7 per barrel (compared to a target of 500 million boe). In addition to the supergiant Zohr success, the main discoveries were made: i) in the prospect Nkala Marine in the Marine XII block in Congo; ii) in Egypt, with a gas and condensates discovery in the Noroos prospect in the West Abu Madi licence, which has entered production in just two months and the Melehia West Deep discovery in the Western Egyptian Desert; iii) in Libya, in the contractual area D with a gas and condensates discovery; iv) in Indonesia, in the Merakes field.

As planned, Eni achieved the start-up of 10 major new fields, of which the most significant were:

  • The giant Perla gas field offshore Venezuela, retaining a potential of up to 17 Tcf of gas in place (or 3.1 billion boe). A production plateau of approximately 1,200 mmcf/d is expected by 2020. Gas is sold to the national oil and gas company PDVSA under a Gas Sales Agreement running until 2036;
  • The Cinguvu field, part of the West Hub Development project in Block 15/06 offshore Angola. In addition, early in 2016 the third Mpungi satellite field came on stream achieving an overall plateau of 100 kboe/d;
  • Nené Marine in Congo in early production, just 8 months after obtaining authorization and sixteen months following the discovery;
  • The Kizomba project off Angola, Lucius and Hadrian off the United States in the Gulf of Mexico, Nooros in Egypt and West Franklin phase 2 in the United Kingdom.

 

Other developments
Eni completed the sale of a residual 4% interest in Galp with proceeds of €325 million at a price of €9.81 per share. The transaction was carried out through an accelerated book-building procedure aimed at institutional investors.

Eni received reimbursement of the bonds exchangeable into ordinary shares of Snam, through the receipt of approximately 288 million shares equal to approximately 8.22% of the share capital of the company. Eni holds a residual interest of the 0.03% of Snam share capital.

Eni’s place on the Dow Jones Sustainability World Index was confirmed for the ninth consecutive year. The index features companies that are characterized by their excellent performance in all the fields of sustainability.

Eni’s inclusion was also confirmed for the ninth consecutive year on the FTSE4Good, one of the world’s most prestigious corporate social responsibility stock-market indexes. This reflects Eni’s excellent performance in environmental sustainability, respect for human rights, corporate governance, transparency and relationship with stakeholders.

 

Outlook
The global macroeconomic outlook for 2016 is characterized by a number of risks and uncertainties, mainly due to the continued slowdown in China’s industrial activity, the Eurozone and other commodity-exporting countries. After hitting multi-year lows of below $30 per barrel, the price of crude oil is expected to continue to be weak due to structural imbalances in the marketplace driven by oversupply and renewed uncertainties surrounding the pace of future energy demand in the medium and long term.

Based on this macroeconomic outlook, Eni’s management has revised downwards its pricing assumptions of the Brent crude oil marker utilized in each of the periods of the Company’s strategic plan 2016-2019: particularly the long-term reference price has been reduced to 65 dollar-a-barrel, down from the 90-dollar case utilized in the previous planning assumptions. In order to cope with the anticipated negative impact of the scenario on the E&P results from operations and cash flow, management is planning to increase efforts to optimize capex and reduce operating costs by exploiting the deflationary pressure induced by the fall in crude oil prices. In the G&P sector, management anticipates a challenging environment pressured by weak demand growth and oversupplies. The Company confirms its strategy to renegotiate long-term supply contracts in order to align the supply terms with market conditions, as well as boost profitability in its high-value businesses (LNG, gas retail and trading). In the R&M sector management expects still profitable refining margin, although lower than in 2015. In this context, business strategies will be focused on the optimization of refinery processes and costs as well as on the enhancement of results in marketing.

Management’s forecasts for the Group’s production and sale metrics are explained below:

- Hydrocarbons production: management expects production to be flat y-o-y due to the expected start-up of new fields, particularly in Norway, Egypt, Angola, Kazakhstan and the United States, and the ramp-up of  fields started in 2015 to offset decline at mature fields;

- Natural gas sales: against the backdrop of weak demand and strong competition, management expects gas sales to be slightly down y-o-y in line with an expected reduction of the contractual minimum take of long-term supply contracts. Management plans to retain its market share in the large customers and retail segments also increasing the value of the existing customer base by developing innovative commercial propositions, by integrating services to the supply of the commodity and by optimizing operations and commercial activities;

- Refinery intake on own account; refinery intake are expected flat y-o-y excluding the effect of the disposal of Eni’s refining capacity in CRC refinery in Czech Republic finalized on April 30, 2015;

- Refined products sales in Italy and in the rest of Europe: against the backdrop of weak demand growth and strong competition, management expects to consolidate volume and market share in the Italian retail market also increasing the value of the existing customer base by leveraging our offer differentiation, innovation in products and services as well as efficiency in logistic and commercial activities.

In 2016 management expects to carry out a number of initiatives intended to reduce capital spending by 20% y-o-y on a constant exchange rate basis by re-phasing and rescheduling capital projects, being increasingly selective with exploration plays and renegotiating contracts for the supply of capital goods in order to cope with the slump in crude oil prices. Those initiatives are expected to have a limited impact on our plans to grow production in the short and medium term. Management forecasts that capex will be 100%-funded by cash flow from operations under a 50 dollar-a-barrel scenario. Operating costs per boe is expected to be reduced by 11% y-o-y.

The Group’s leverage is projected to be below the 0.30 threshold thanks to the closing of the Saipem transaction, optimization of the underlying performance and portfolio management, which are expected to reduce the impact of the oil and gas prices.

On March 18, 2016, Eni is hosting a strategy presentation to outline the Company’s strategy and targets for the 2016-2019 plan, as well as the current economic and financial outlook.

In this press release on the Group consolidated accounts for the fourth quarter and the full year 2015, results and cash flow are presented for the fourth and third quarter of 2015, for the fourth quarter of 2015 and for the full year 2015 and 2014. Information on liquidity and capital resources relates to the period ending as of December 31, September 30, 2015, and December 31, 2014. Except for the adjusted results on a standalone basis, statements presented in this press release are comparable with those presented in the management’s disclosure section of the Company’s annual report and interim report. Accounts set forth herein have been prepared in accordance with the evaluation and recognition criteria set by the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure set forth in Article 6 of the European Regulation (CE) No. 1606/2002 of the European Parliament and European Council of July 19, 2002. These criteria are unchanged from the 2014 annual report on form 20-F filed with the US SEC on April 2, 2015, and the Interim Consolidated Financial Statements as of June 30, 2015, which investors are urged to read.

In this press release illustrating Eni’s preliminary results for Q4 and FY2015, the two operating segments E&C and Chemical have been classified as discontinued operations based on the guidelines of IFRS 5, because at the reporting date there was the firm commitment of the management to recover their carrying amounts through a sale transaction and it was highly probable that a sale transaction would be consummated in a short-time frame.

The comparative reporting periods of this press release have been restated consistently.

The Saipem transaction was finalized on January 22, 2016, with the closing of the sale of a 12.5% stake in the entity to the Fondo Strategico Italiano (FSI) and the concurrent enter into force of the shareholder agreement between the parties intended to establish joint control over the former subsidiary. Saipem is due to be derecognized from Eni’s consolidated accounts effective January 1, 2016.

Negotiations are underway with an industrial partner who has showed interest in acquiring a controlling stake of Versalis, the 100%-owned Eni subsidiary, which manages the Group chemical business, thus supporting Eni in implementing the industrial plan designed to upgrade the business.

Because Eni is exiting two major lines of business, the mentioned disposal groups have been represented and accounted for as discontinued operations. Based on this accounting, gains and losses pertaining to the discontinued operations include only those earned form transactions with third parties, while gains and losses on intercompany transactions have continued being eliminated because both Saipem and Versalis were fully consolidated subsidiaries at the 2015 reporting date. The accounting of the discontinued operations entails that in presence of large intercompany transactions, the results of the continuing operations do not fully illustrate the underlying performance given the elimination of gains and losses on intercompany transactions with the discontinued operations. Regarding Saipem, the cost incurred by the entity for the supply of capital goods and maintenance services to Eni’s group companies are eliminated upon consolidation. Regarding Versalis, the revenues earned by the Group operating companies, mainly in the R&M segment, for the supply of oil-based chemical feedstock are eliminated upon consolidation.

Furthermore, Saipem ceased recognizing depreciation charges form the classification date (November 1, 2015; Versalis was classified as discontinued operations at the reporting date). The carrying amounts of goodwill and other non-current assets at both disposal groups were adjusted to take into account the alignment of the two disposal groups net assets to their fair values at the reporting date, given by the market price for Saipem and the fair value based on the transaction that is underway for Versalis.

 

New segmental reporting of Eni
Effective January 1, 2015, Eni’s segment information was modified to align Eni’s reportable segments to certain changes in the organization and in profit accountability defined by Eni’s top management. The main changes adopted compared to the previous setup of the segment information related to:

  • Results of the oil and products trading activities and related risk management activities were transferred to the Gas & Power segment, consistently with the new organizational setup. In previous reporting periods, results of those activities were reported within the Refining & Marketing segment as part of a reporting structure which highlighted results for each stream of commodities;
  • R&M and Chemicals operating segments are now combined into a single reportable segment because a single manager is accountable for both the two segments and they show similar long-term economic performance;
  • The previous reporting segments “Corporate and financial companies” and “Other activities” have been combined being residual components of the Group.

 

The comparative reporting periods have been restated consequently (see tables below) and to reflect the representation of discontinued operations. In particular, Versalis’ results have been reclassified from the “R&M and Chemical” reporting segment and accounted as discontinued operations together with the E&C business.

AS REPORTED
(€ million)E&PG&PR&MVersalisE&CCorporate and financial companiesOther activitiesImpact of unrealized intragroup profit eliminationGROUP

IV Quarter 2014

         

Net sales from operations

6,401

7,935

12,928

1,195

3,398

399

27

(5,592)

26,691

Operating profit (loss)

1,473

(115)

(1,387)

(298)

(423)

(34)

(100)

321

(563)

Adjusted operating profit (loss)

2,032

108

195

(66)

31

(61)

(48)

132

2,323

Full year 2014

         

Net sales from operations

28,488

28,250

56,153

5,284

12,873

1,378

78

(22,657)

109,847

Operating profit (loss)

10,766

186

(2,229)

(704)

18

(246)

(272)

398

7,917

Adjusted operating profit (loss)

11,551

310

(208)

(346)

479

(265)

(178)

231

11,574

Assets directly attributable

68,113

16,603

12,993

3,059

14,210

1,042

258

(486)

115,792

 

AS RESTATED
(€ million)E&PG&PR&MCorporate and other activitiesChemicalsE&C>Impact of unrealized intragroup profit eliminationGROUPDiscontinued operationsContinuing operations

IV Quarter 2014

          

Net sales from operations

6,401

18,182

5,593

420

1,195

3,398

(8,498)

26,691

(4,091)

22,600

Operating profit (loss)

1,473

(114)

(1,388)

(134)

(298)

(423)

321

(563)

657

94

Adjusted operating profit (loss)

2,032

92

211

(109)

(66)

31

132

2,323

(19)

2,304

Full year 2014

          

Net sales from operations

28,488

73,434

24,330

1,429

5,284

12,873

(35,991)

109,847

(16,660)

93,187

Operating profit (loss)

10,766

64

(2,107)

(518)

(704)

18

398

7,917

(332)

7,585

Adjusted operating profit (loss)

11,551

168

(65)

(443)

(347)

479

231

11,574

(1,127)

10,447

Assets directly attributable

68,113

19,342

10,254

1,300

3,059

14,210

(486)

115,792

  

Non-GAAP financial measures and other performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided by recommendation CESR/05-178b.

Eni’s Chief Financial and Risk Management Officer, Massimo Mondazzi, in his position as manager responsible for the preparation of the Company’s financial reports, certifies that data and information disclosed in this press release correspond to the Company’s evidence and accounting books and records, pursuant to rule 154-bis paragraph 2 of Legislative Decree No. 58/1998.

 

Other information
Article No. 36 of Italian regulatory exchanges (Consob Resolution No. 16191/2007 and subsequent amendments).

Continuing listing standards about issuers that control subsidiaries incorporated or regulated in accordance with laws of extra-EU Countries.

Certain provisions have been enacted to regulate continuing Italian listing standards of issuers controlling subsidiaries that are incorporated or regulated in accordance with laws of extra-EU Countries, also having a material impact on the consolidated financial statements of the parent company. Regarding the aforementioned provisions, as of December 31, 2015, Eni’s subsidiaries - Burren Energy (Bermuda) Ltd, Eni Congo SA, Eni Norge AS, Eni Petroleum Co Inc, NAOC-Nigerian Agip Oil Co Ltd, Nigerian Agip Exploration Ltd, Burren Energy (Congo) Ltd, Eni Finance USA Inc, Eni Trading & Shipping Inc and Eni Canada Holding Ltd – fall within the scope of the new continuing listing standards. Eni has already adopted adequate procedures to ensure full compliance with the new regulations.

 

Disclaimer
This press release, in particular the statements under the section “Outlook”, contains certain forward-looking statements particularly those regarding capital expenditure, development and management of oil and gas resources, dividends, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sales growth, new markets and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the timing of bringing new fields on stream; management’s ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply; demand and pricing; operational issues; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; development and use of new technology; changes in public expectations and other changes in business conditions; the actions of competitors and other factors discussed elsewhere in this document. Due to the seasonality in demand for natural gas and certain refined products and the changes in a number of external factors affecting Eni’s operations, such as prices and margins of hydrocarbons and refined products, Eni’s results from operations and changes in net borrowings for the fourth quarter of the year cannot be extrapolated on an annual basis.

The all sources reserve replacement ratio disclosed elsewhere in this press release is calculated as ratio of changes in proved reserves for the year resulting from revisions of previously reported reserves, improved recovery, extensions, discoveries and sales or purchases of minerals in place, to production for the year. A ratio higher than 100% indicates that more proved reserves were added than produced in a year. The Reserve Replacement Ratio is a measure used by management to indicate the extent to which production is replaced by proved oil and gas reserves. The Reserve Replacement Ratio is not an indicator of future production because the ultimate development and production of reserves is subject to a number of risks and uncertainties. These include the risks associated with the successful completion of large-scale projects, including addressing ongoing regulatory issues and completion of infrastructure, as well as changes in oil and gas prices, political risks and geological and other environmental risks.

 

The full version of the Press Release is available in PDF format.

 

1In this press release adjusted results from continuing operations exclude as usual the items "profit/loss on stock" and extraordinary gains and losses (special items), while they reinstate the effects relating to the elimination of gains and losses on intercompany transactions with sectors which are in the disposal phase, E&C and Chemical, represented as discontinued operations under the IFRS5. A corresponding alternative performance measure has been presented for the cash flow from operating activities. For further information, see “Disclaimer” on page 7.
2Net cash provided by operating activities of continuing operations on a standalone basis
3Operating profit.
4Free cash flow: net cash provided by operating activities plus proceeds from disposals less capex.
5An interim dividend of €0.4 per share was paid in September 2015
6
Information on net borrowings composition is furnished on page 32.
7
Non-GAAP financial measures disclosed throughout this press release are accompanied by explanatory notes and tables to help investors gain a full understanding of said measures in line with guidance provided for by CESR Recommendation No. 2005-178b. See page 32 for leverage.
8
Dividends are not entitled to tax credit and, depending on the receiver, are subject to a withholding tax on distribution or are partially cumulated to the receiver’s taxable income.

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