Eni results for the third quarter and nine months of 2022

Eni's Board of Directors, chaired by Lucia Calvosa, yesterday approved the unaudited consolidated results for the third quarter and the nine months of 2022. Eni CEO Claudio Descalzi said:

“Against the backdrop of high volatility and uncertainty in markets, Eni continues to secure crucial energy supplies to our economies, while at the same time advancing its decarbonization strategy. We plan to replace at least 50% of Russian gas flows this winter, leveraging on our broad and diversified reserve base, our long-standing relationships with producing countries and our growing presence in LNG. In the quarter we further enhanced our position in the gas supply chain via our exploration activities, the upstream acquisition of bp assets in Algeria and, on the midstream side, the purchase of the Tango FLNG liquefaction vessel as part of the Congo gas valorization project.
Our decarbonization plans are reaching new milestones. By the end of the year our installed capacity of renewable energy in Plenitude will have doubled to more than 2 GW. Our Sustainable Mobility business is gaining momentum leveraging on an innovative model of vertical integration with our nascent agri-business to supply sustainable feedstock to our biorefineries. In E&P we have progressed our strategy of creating geographically focused vehicles that drive growth and returns, the latest being Azule, the newly established JV with bp to enhance our Angolan activities.
In the third quarter of 2022, despite a decline in crude oil prices and a rapid fall in refining margins, we have continued to deliver positive results, mainly thanks to the robust performance of our international businesses.
In the first nine months of 2022, we entirely covered our capex and cash return to shareholders and we were able to reduce our leverage to 0.11, around half the level of the end of last year.”


Financial highlights of the third quarter 2022

  • Group adjusted EBIT was €5.77 billion in the third quarter of 2022, in line with the previous quarter, despite weaker crude oil prices, sharply lower refining margins and unplanned production downtime and other issues, plus the reclassification of Azule Energy to associates. These effects were offset by continuing optimization initiatives and cost savings across all business lines.
  • E&P delivered €4.27 billion of adjusted EBIT in the third quarter of 2022, down 12% q-o-q due to lower hydrocarbon realizations and the reclassification of Azule Energy. Production in the third quarter of 2022 was 1.58 million boe/d, in line with the second quarter 2022, but down 7% y-o-y due to lower contributions from Kazakhstan, Nigeria, and Norway.
  • GGP registered an excellent performance in the third quarter of 2022, after breaking even in the second quarter. While gas prices were high, the market continued to be very challenging in terms of physical flows and volatility. In the quarter we were able to manage these market risks: first of all, we continued to ensure security of supply for our domestic customers satisfying their demand, and filling storage. In addition, thanks to a relentless asset optimization and contract renegotiations, leveraging the diversity and flexibility of our overall gas and LNG portfolio, we delivered an adjusted EBIT of €1.08 billion.
  • Third quarter performance of R&M with an adjusted EBIT of €0.71 billion was an outstanding result, considering the magnitude of the fall in the benchmark SERM margin (down 80% sequentially), and was secured by output optimization, efficiency measures to address utilities costs, higher plant utilization rates and driving season’s strong performance.
  • The chemical business of Versalis reported a negative result of €177 million in the third quarter, impacted by high energy costs on the back of weak demand trends.
  • Plenitude reported an adjusted EBIT of €16 million in the third quarter of 2022 in line with the seasonal trends of the business and lower than the third quarter of 2021 due to unfavorable market trends, while gas-fired power reported a higher adjusted EBIT of €156 million.
  • Group adjusted net profit in the third quarter of 2022 was €3.73 billion (€10.81 billion in the nine months of 2022), in line with the previous quarter (up by €8.2 billion in the nine months) reflecting a strong underlying performance and better results in our equity-accounted entities. The Group adjusted tax rate, not considering a one-time Italian windfall taxation reported as special item, has stabilized at around 40%, driven by a better geographical mix of pre-tax profits, particularly in E&P.
  • With respect to the nine months 2022 reported net profit of €13.26 billion, the Italian operations incurred a net loss of about €1 billion mainly due to the accrued windfall tax for the energy sector.
  • In the third quarter of 2022, the Group adjusted cash flow before working capital at replacement cost was €5.47 billion. In the first nine months of 2022, it reached €16.27 billion, doubling y-o-y. After funding organic capex of €5.5 billion, up 35% y-o-y in the nine months due to a stronger US dollar and planned post-lockdown activity, the Group realized an organic FCF of €9.3 billion to cover working capital requirements and shareholders’ cash returns.
  • Dividend distribution: in September, Eni paid the first quarterly instalment of the 2022 dividend of €0.22 per share, amounting to €751 million. Second equal instalment is due to be paid on November 23rd.
  • Buy-back program: based on the revised share repurchase program of €2.4 billion approved by the BoD in July and due to be executed through April 2023, from the start of the program at the end of May through October 21, 2022, 142 million shares have been purchased, for a cash outlay of €1,663 million.
  • Net borrowings ex-IFRS 16 as of September 30, 2022, were €6.4 billion, down by €2.54 billion compared to December 31, 2021, and Group leverage stood at 0.11, versus 0.20 as of December 31, 2021.

Main business developments

Exploration & Production

  • In the nine months of 2022 added around 630 million boe of new resources to the reserve base continuing to deliver outstanding exploration performance. Discoveries were made close to existing assets and facilities as part of our fast-track development model: in Algeria, in the Berkine North basin, in Angola Block 15/06 in particular with the incremental result of the appraisal well Ndungu-2, in Abu Dhabi with the well XF-002 and in Ghana with Aprokuma-1X well. In addition, findings in the Meleiha concessions, in Egypt’s Western Desert, as well as in Algeria Berkine North, have already been tied to existing production facilities. In July, we announced the successful drilling of the Baleine 1X well in Block CI-802, offshore the Ivory Coast. This was the second discovery on the Baleine structure and allowed an increase in estimated hydrocarbons in place to 2.5 billion barrels of oil and 3.3 Tcf of associated gas. In August we announced the Cronos-1 well discovery, in Block 6 offshore Cyprus, where preliminary estimates indicate about 2.5 Tcf of gas in place.
  • In July, reached the final investment decision (FID) by New Gas Consortium for the development of the Quiluma and Maboqueiro associated gas fields in Angola, with expected start-up in 2026.
  • In July, signed with Sonatrach, Oxy and TotalEnergies a new Production Sharing Contract (PSC) for Blocks 404 and 208 located in the Berkine basin in Algeria.
  • In August, Azule Energy, the equally-owned joint venture between bp and Eni started operations. Azule Energy combines both companies’ Angolan upstream, LNG and solar businesses and is Angola’s largest independent oil and gas producer. Azule is a further example of Eni’s distinctive satellite model designed to unlock value.
  • In August, acquired the Tango FLNG floating liquefaction vessel, which will be deployed at the natural gas development project in the Marine XII block, Republic of Congo, in line with Eni's strategy to leverage gas equity resources. The vessel has production capacity of approximately 0.6 million tons/year of LNG (about 1 billion standard cubic meters/year).
  • In September, opportunities have been evaluated with ADNOC to increase natural gas production accelerating the time-to-market of large gas projects like the Ghasha project, which is estimated to hold significant recoverable reserves and is expected to produce more than 1.5 bcf/day. Fast-track development options were considered for the recent significant gas discovery offshore Abu Dhabi, in the Block 2 (Eni’s interest 70%).
  • In September, signed a preliminary agreement to purchase bp’s assets in Algeria including the two gas-producing concessions “In Amenas” and “In Salah” (Eni’s interest 45.89% and 33.15%, respectively). The deal will enhance Eni’s position in the natural gas business, contributing to cover Europe’s energy needs.
  • In October, started production at two gas fields within the new Berkine South contract in Algeria, just six months after the contract was awarded, through an accelerated development.

Refining & Marketing and Chemicals

  • In July, Versalis, Eni's chemical company, agreed terms with Forever Plast to acquire a license to build a plant for the mechanical recycling of waste plastic, capable of recycling 50 ktonnes/year of polymers. The expected start-up is in 2024 and the plant will be located in Porto Marghera contributing to the gradual reconversion of this industrial hub.
  • In October, a first cargo of vegetable oil, produced at Eni’s Makueni agri-hub in Kenya, to be used as feedstock for biofuels has been shipped to Gela’s biorefinery. The vegetable oil is obtained processing castor, croton, and cotton seeds. The initial production of 2,500 tons expected in 2022 is going to scale up rapidly to 20,000 tons in 2023. This project marks the start of Eni’s innovative model of agri-business vertically integrated with its biorefineries, supplying sustainable feedstock not competing with the food supply chain and capable of making a significant contribution to local development and the circular economy. This model will be replicated in other African countries, long-term partners of Eni.
  • In October, completed the phase-out of palm oil as feedstock supply for Eni’s biorefineries, fully replaced with sustainable raw materials.

Plenitude and Power

  • In September, the European Climate, Infrastructure and Environment Executive Agency (CINEA) has selected a project of Be Charge, the Plenitude integrated operator for electric mobility, to build one of the largest high-speed charging networks in Europe for EVs along key European transport corridors (TEN-T) and at parking areas and in major cities by 2025.
  • In September, Plenitude entered a new partnership with Infrastrutture SpA to develop solar and wind power projects in Italy and Spain by acquiring a 65% stake in Hergo Renewables SpA, a company that holds a portfolio of projects in the two countries with a total capacity of approximately 1.5 GW.
  • In October, Plenitude inaugurated the 104.5 MW El Monte wind farm, located in the Spanish region Castilla La Mancha, built in collaboration with the strategic partner Azora Capital. The plant will produce about 300 GWh/year, equivalent to the domestic consumption of 100,000 households.
  • Following the agreement with HitecVision to boost the Norwegian joint venture Vårgrønn, in October Plenitude finalized the disposal of its 20% interest in the Dogger Bank offshore wind project in the UK to Vårgrønn. Following the deal, HitecVision increases its Vårgrønn ownership share from 30.4% to 35% through cash contribution.

Decarbonization & Sustainability

  • In July, signed a new €6 billion five-year Sustainability-Linked revolving credit line, linked to two targets of Eni "Sustainability-Linked Financing Framework" updated in May 2022. The new facility will increase the Group financial flexibility, further strengthening its solid liquidity position, and is consistent with Eni's goal of fully integrating its financing with its decarbonization strategy.
  • In July, Eni was awarded the Energy Intelligence’s Energy Innovation Award, in recognition of its energy transition readiness and acceleration on low-carbon investments. Eni was highly ranked in terms of emission reduction targets, portfolio resilience and transformation of its business model.
  • In September, Eni UK applied for carbon storage license for the Hewett depleted field in the UK Southern North Sea, for the development of a CCS project aimed at decarbonising the Bacton and Thames Estuary area. To support this application, Eni UK announces the set-up of the Bacton Thames Net Zero initiative with the aim to decarbonise and to unlock new greener growth opportunities for energy-intensive industrial businesses in the South-East of UK, supporting the country’s decarbonisation strategy.
  • In October, launched a feasibility study on a biorefinery to be built in Livorno. The project contemplates three plants for the manufacturing of hydrogenated biofuels: a biogenic feedstock pre-treatment unit, a 500,000 ton/year Ecofining™ plant and a plant for the production of hydrogen from methane gas.
  • In October, two projects by Eni and Enel Green Power to develop green hydrogen were appointed as beneficiaries of public funding approved under IPCEI Hy2Use, a project of common European interest aimed at supporting research, innovation, and construction of related infrastructure along the hydrogen value chain. South Italy Green Hydrogen, the joint venture set up to move forward with the development of the projects, will be the beneficiary of the funding. One of the projects will be implemented at the biorefinery in Gela, Sicily, where a 20 MW electrolyzer will be installed. The other will be near Eni’s refinery in Taranto, in the Apulia region, with a 10 MW electrolyzer. Both will use PEM (polymer electrolyte membrane) technology.
  • In October, Commonwealth Fusion Systems, of which Eni is the main shareholder, was selected after a competitive tender process by the UK Atomic Energy Authority to support work on the magnetic confinement system for the UKAEA’s Spherical Tokomak for Energy Production.
  • In the quarter Eni was ranked first out of 30 companies in the European oil & gas sector by Moody’s ESG Solutions due to its advanced capabilities in managing ESG risks. Eni’s ESG score improved and remains in the Advanced category.

Outlook 2022

The Company is issuing the following updated operational and financial guidance for the full year based on information available to date, management’s judgement of potential risks and uncertainties and assuming no material disruptions of Russian gas flows from our scenario:

  • E&P: hydrocarbon production is expected at 1.63 million boe/d, in line with previous guidance of 1.67 million boe/d once adjusted for worsening force majeure impact mainly related to Nigeria, lower contribution from Kazakhstan due to unplanned events in Kashagan as well as for lower production from Norway; guidance is at the Company’s updated price deck of 100 $/bbl.
  • E&P: around 750 million boe of new exploration resources are expected to be discovered in 2022.
  • GGP: updated guidance of adjusted full year EBIT higher than €1.8 billion, incorporates the performance of the third quarter driven by the high volatility and the fourth quarter expectation impacted by lower imported Russian volumes than previously assumed.
  • Plenitude & Power: reaffirming Plenitude’s EBITDA guidance, expected to be higher than €0.6 billion. We also confirm guidance of more than 2 GW of installed renewable generation capacity by year-end.
  • Downstream: adjusted EBIT (Versalis and pro-forma R&M with ADNOC) is raised to €2.5 billion vs previous guidance of €1.8-2.0 billion.
  • Our main price sensitivities foresee a variation of €130 million in free cash flow for each one-dollar change in the price of Brent crude oil and around €700 million for a 5 USD/cent movement in the USD/EUR cross rate vs our new assumption of 1.05 USD/EUR for 2022 and considering 100 $/bbl Brent price.
  • Adjusted cash flow before working capital at replacement cost is now expected to be €20 billion at 100$ per barrel of Brent crude oil, vs our previous guidance of €20 billion at 105 $/bbl.
  • Organic capex is seen at €8.3 billion, in line with previous guidance.
  • Buyback: the program of €2.4 billion is expected to be completed by year end.
  • 2022 leverage ante IFRS 16 is seen at 0.15 at our price assumption.

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

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