Yesterday, Eni’s Board of Directors approved the Group results for the first quarter of 2018 (unaudited). Commenting on the results, Claudio Descalzi, CEO of Eni, remarked:
“In the first quarter of 2018, Eni achieved excellent economic and financial results, over and above the rising price of oil. As the Brent price in euros rose 8% relative to the first quarter of 2017, Eni’s adjusted operating profit increased by 30%, while operational cash generation at replacement cost grew by 22%. These results were achieved primarily because of an increase in our hydrocarbon production, which produced a 47% increase in adjusted operating profit from E&P. In addition, the first quarter saw the continuation of the optimization of our asset portfolio with our entry into the United Arab Emirates, one of the most productive areas in the world, and the sale of a further 10% of the Zohr field in Egypt. The Mid-Downstream businesses also achieved important results in the quarter, despite a less favorable scenario compared to 2017. The divisions benefitted from the strengthening and development measures we have implemented over the past three years. In particular, LNG achieved significant results due to increased integration with other Group activities. On the basis of these results and the strategy announced in the 2018‐2021 plan, I confirm the objective of cash neutrality for 2018 at a Brent price of $55 per barrel.”
Exploration & Production
- Strong growth reported in hydrocarbon production:
up by 4% q-o-q at 1.87 million boe/d, in line with the FY 2018 guidance. Net of price effects in PSAs, the growth rate was 4.4%;
production start-ups and ramp-ups contributed 238 kboe/d.
- Acquired interests in the concessions Lower Zakum (5%) and Umm Shaif/Nasr (10%) currently producing off Abu Dhabi, granting Eni access to a Country with great mineral potential.
- Dual exploration model: agreed the divestment to Mubadala Petroleum, a UAE-based company, of a 10% stake in the Shorouk concession, offshore Egypt, where the super-giant Zohr gas field is located.
- Started up oil production at the Ochigufu field, in Block 15/06 off Angola, just eighteen months since the presentation of the development plan. The field’s production plateau will add 25,000 barrels to the current production levels of the Block 15/06.
- Indonesia: development plan of the Merakes gas field off Indonesia approved by the relevant authorities, leveraging synergies with nearby Jangkrik producing field.
- Gas discovery in Block 6 (Eni’s interest 50%, operator), offshore Cyprus; confirmed the extension of the “Zohr like” play.
- Awarded two Exploration and Production Agreements with the Republic of Lebanon covering Blocks 4 and 9 (Eni’s interest 40%), in deep offshore.
- Awarded rights to Block 28 (Eni’s interest 75%, operator) and Block 24 (Eni’s interest 65%, operator) located in the medium-deep waters of the Cuenca Salina Basin, Mexico.
- Algeria: strengthened the strategic partnership with Sonatrach to explore and develop new gas resources.
- Exploration & Production adjusted operating profit: €2.1 billion, up by 47% q-o-q. In the same period the Brent price in euro terms increased by 8%.
Gas & Power
- LNG sales: up by 35% to 2.7 bcm, also leveraging on the availability of upstream equity gas in Indonesia leveraging improved integration across businesses.
- Retail business: increased the customer base, excluding the impact of disposals.
- G&P adjusted operating profit: €0.3 billion, unchanged compared to the first quarter of 2017, when certain non-recurring gains were recorded.
Refining & Marketing and Chemicals
- Valorized the EST technology for the conversion of the heavy barrel: signed a licensing agreement with the Chinese company Zhejiang Petrochemicals.
- Strategic agreement signed by Versalis with Bridgestone for research and development of chemical products deriving from renewable raw materials.
- Refining & Marketing adjusted operating profit: €18 million, down by 73% q-o-q due to an unfavorable trading environment.
- Chemicals adjusted operating profit: €59 million, down by 52% q-o-q due to declining product margins compared to the previous reporting period, when margins benefitted from particularly favorable market trends.
- Adjusted operating profit: €2.38 billion, up by 30% q-o-q.
- Adjusted net profit: €0.98 billion, up by 31% q-o-q.
- Net profit: €0.95 billion.
- Strong cash flow from operations: €2.19 billion, up by 13% q-o-q.
- Cash flow from operations before changes in working capital at replacement cost at €3.17 billion, up by 22% q-o-q.
- Net capex: €1.78 billion1; self-financing ratio of net capex at approximately 123%.
- Net borrowings: €11.28 billion.
- Leverage: 0.23, unchanged compared to December 31, 2017.
Outlook 2018Exploration & Production
Hydrocarbon production: the Company has raised its initial growth forecast and now expects a 4% increase for the FY 2018 vs. 2017, equalling to a production level of about 1.9 million boe/d. This growth is expected to be driven by continuing production ramp-up of fields started up in 2017, particularly in Egypt, Indonesia and at the Kashagan field, new fields start-ups in Angola and Ghana, the plateau achievement at Goliat (Norway), as well as the contribution of the new venture in UAE. These increases are expected to be partly offset principally by mature field declines.
Gas & Power
Expecting a strengthening of profitability: projecting a FY adjusted operating profit of €0.3 billion, which will be underpinned by new initiatives to optimize the gas portfolio, improved performance at the power business and synergies in the LNG business from business integration with the upstream segment, as well as better results expected in the retail business.
Gas sales: expected to decline in line with an expected reduction in long-term contractual commitments both to procure and to supply gas. By 2018 year-end, expected an increase in LNG contracted volumes at approximately 6 million tons.
Expecting a refining break-even margin of approximately 3 $/barrel by the end of 2018, leveraging on further supply and plant optimizations.
Refining throughputs on own accounts expected to be flat compared to 2017, due to better performance at the Sannazzaro and Livorno refineries because of unplanned shutdowns in 2017, offset by reductions at the Taranto and Milazzo plants. Expected a higher refinery utilization rate.
Retail sales unchanged y-o-y.
Versalis: spreads of the main commodities vs. the feedstock are expected to normalize compared to the highs recorded in 2017 particularly in the butadiene and benzene markets. Sales volumes are expected to grow in all business lines driven by higher production volumes driven by fewer planned standstills and accidents.
Cash neutrality: funding of capex for the FY and the dividend is confirmed at a Brent price of approximately 55 $/bbl in 2018.
2018 FY Capex expected to be €7.7 billion.
(1) See details on page 1, footnote (e).