Eni: full year 2017 and fourth quarter results

_{(a) Non-GAAP measure. For further information see the paragraph "Non-GAAP measures" on page 18 of the Press Release on Full Year 2017 and fourth quarter results.
(b) Attributable to Eni's shareholders - 2016 results refer to continuing and discontinued operations.
(c) Non-GAAP measure. Net cash provided by operating activities before changes in working capital excluding inventory holding gains or losses and certain non-recurring items. For further information see page 15 of the Press Release on Full Year 2017 and fourth quarter results.
(d) For further information see page 15 of the Press Release on Full Year 2017 and fourth quarter results.
(e) Include capital contribution to equity accounted entities.}

Yesterday, Eni’s Board of Directors approved the Group results for the fourth quarter and the full year of 2017 (unaudited). Commenting on the results, Claudio Descalzi, CEO of Eni, remarked:

“We close 2017 with excellent results which underline how the process of intense change started in 2014 has transformed Eni into a company able to grow and create value even in difficult market conditions. In Upstream we beat our historical record of production having even reduced our development capex by 40% vs. the 2014 baseline, continued to record outstanding results from our exploration programme and started our most significant projects in record time, in particular the jewel in our crown, Zohr. In Mid-Downstream, Gas & Power returned to positive structural results a year ahead of schedule, while we achieved our best full year results in eight years for Refining & Marketing and record numbers in our Chemicals business Versalis. Consequently, our cash generation increased 50% compared with an increase in Brent of 22% and our cash-neutrality decreased to 57 $/bl. We also strengthened our capital structure, also through divestments over the course of the year. Looking to the future, we see excellent growth prospects for all of our businesses. However, growth must be sustainable and we will pursue it in a disciplined way with great respect for the possibility of the most difficult operating conditions. Nevertheless, should conditions be more favourable, we will be in a position to create substantial surplus value for our shareholders. On this basis, I will propose a dividend of €0.80 per share in 2017 to the Board of Directors, on March 15.”

Highlights

Exploration & Production

• Hydrocarbon production at record level:
  • reached 1.92 million boe/d in December 2017, marking an all-time high for Eni;
  • produced an average of 1.89 million boe/d in the fourth quarter, the highest quarterly production in the last seven years (up by 1.9%); FY production averaged 1.82 million boe/d (up by 3.2% y-o-y), its highest ever level. Excluding price effects at PSAs and OPEC cuts, production was up by 3.7% in the fourth quarter and by 5.3% for the FY 2017;
  • start-ups and ramp-ups additions: added 243 kboe/d on average over the FY, leveraging on Eni’s integrated model of exploration and development, designed to optimize new projects’ time-to-market (Zohr in Egypt, East-Hub in Angola, OCTP in Ghana, Jangkrik in Indonesia, all in 2017) and to accelerate fields ramp-up (as in the case of the Noroos project).
• Achieved production start-up at the super-giant Zohr gas field in record time-to-market: inless than two years from the FID and two and a half years from discovery.
• Exploration resources: discovered 1 billion boe of new resources, of which 800 million from in house exploration with a discovery cost of approximately 1 $/bbl. 
• Successfully completed the exploration campaign in Area 1, offshore Mexico: the appraisal of Tecoalli discovery, which followed that of Amoca and Miztòn, resulted in a rise in estimated hydrocarbons in place of the Area to 2 billion boe, of which approximately 90% oil.
• Renewed the exploration portfolio adding approximately 97,000 Km2 of new acreage:
  • obtained 50% of the mineral rights of the Isatay Block in the Kazakh Caspian Sea;
  • signed an exploration and production sharing agreement of Block 52, offshore Oman (Eni 85%);
  • acquired new exploration licenses in Morocco, Mexico, Cyprus, Côte d'Ivoire and Norway.
• Proved hydrocarbon reserves: 7 billion boe with an organic replacement ratio of 103%. Excluding the de-booking of a volume of PUD reserves to unproved in Venezuela due to the Country’s current outlook, the ratio increases to 151%.
• Dual Exploration Model success: Eni closed the divestment of a 25% stake in Area 4 in Mozambique to Exxon Mobil in the fourth quarter of 2017.
• E&P adjusted operating profit: €1.86 billion in the fourth quarter of 2017 (up by 33%); more than doubled y-o-y at €5.17 billion.

Gas & Power

• Structurally positive EBIT a year ahead of expectations thanks to business restructuring.
• Retail business: better performance in converting revenues into cash; growth in the customer base, excluding the impact of disposals.
• Portfolio rationalization: divested the retail activity in Belgium; signed a preliminary agreement to dispose of the gas distribution business in Hungary.
• G&P adjusted operating profit: €0.21 billion in the fourth quarter and in the full year of 2017, a substantial improvement both q-o-q (up by €0.29 billion) and y-o-y (up by €0.6 billion).

Refining & Marketing and Chemicals

• Refining breakeven margin below 4 $/barrel in the FY of 2017.
• Achieving value from our expertise: signed a licensing agreement with Sinopec, the largest refining company in the world, for the use of the EST conversion proprietary technology.
• International development of Versalis: started operations at the Lotte-Versalis Elastomers joint venture for the production of elastomers in South Korea.
• R&M adjusted operating profit: €77 million in the fourth quarter of 2017, up by 13% despite the partial downtime of the Sannazzaro refinery and a negative scenario. Best full year result in the last eight years at €532 million, up by 91% y-o-y.
• Record results in the Chemical business: adjusted operating profit of €37 million in the fourth quarter of 2017 (up by 400%) and €460 million in the FY 2017 (up by 51%).

Group results

• Strong increase in adjusted operating profit: up by 55% q-o-q to €1.99 billion; FY operating profit more than doubled to €5.79 billion (up by €3.48 billion).
• Adjusted net profit: more than doubled in the fourth quarter of 2017 to €0.98 billion; €2.41 billion in the full year of 2017 compared to a net loss in 2016.
• Net profit: €2.10 billion in the fourth quarter; €3.43 billion in the full year of 2017.
• Strong structural improvement in underlying cash generation¹ : €3.22 billion in the fourth quarter and €9.99 billion in the full year of 2017.
• Adjusted cash flow from operations before changes in working capital at replacement cost²: €2.42 billion in the fourth quarter and €9.26 billion in the full year of 2017.
• FY net capex: €7.6 billion¹, down by 18% y-o-y. Self-financing ratio of net capex at approximately 130%.
• Organic cash neutrality covering capex and dividend at a Brent price of 57$/bl; 39$/bl, factoring in proceeds from disposals.
• FY net disposals³: cashed in €3.8 billion, mainly relating to the Dual Exploration Model.
• Net debt: €10.92 billion.
• 2017 dividend proposal⁴: €0.80, of which €0.40 already paid as interim dividend.

¹ See note (d) in the table of page 1 of the attached pdf.
² See note (c) in the table of page 1 of the attached pdf.
³ See note (d) in the table of page 1 of the attached pdf.
⁴ The Board of Directors intends to submit a proposal for distributing a dividend of €0.80 per share (€0.80 in 2016) at the Annual Shareholders’ Meeting convened for May 10, 2018. Included in this annual payment is €0.40 per share paid as interim dividend in September 2017. The balance of €0.40 per share is payable to shareholders on May 23, 2018, the ex-dividend date being May 21, 2018.

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