- FINANCE, STRATEGY AND REPORTING
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“The Plan presented today confirms the strength and effectiveness of our strategy. In 2014 we undertook an industrial and financial transformation path which progressively enabled us to create value even in difficult scenarios, delivering security of supplies and environmental sustainability. We have been focussing our exploration and production strategy mainly on gas, leveraging our own production and diversifying our investments across different countries. This has enabled us to put in place our Plan aimed at replacing 20 billion cubic meters of Russian gas by 2025. We have been transforming our downstream platform and invested in technology to create and grow our transition businesses aiming at net zero Scope 1, 2 and 3 emissions. This enables us today to fully confirm our decarbonization targets despite the current energy security scenario and the need to respond to a strong demand for traditional sources. Today we can clearly outline how the Company will be in 2030: our Upstream operations will no longer produce net emissions; our hydrocarbon production will be composed mainly by gas; our biofuel capacity will exceed 5 million tonnes per year; our renewable energy capacity will be more than 15 GW. And our investments in the most revolutionary technology linked to the energy transition - the magnetic confinement fusion - will be about to result in the first industrial plant.
Finally, we have deeply strengthened the Company from a financial point of view through optimization and rationalization of expenditures, and this allows us today to present our strong financial goals: a significant CFFO generated both from our traditional activities and with the contribution of transition-related businesses; a satellite business model which allows us to enhance the value of our businesses while freeing up additional resources for investment in transition; and a very low debt level. Our financial robustness enables us today to create increasing value for our shareholders and to enhance the remuneration policy”
Claudio Descalzi, Eni CEO
Rome, 23 February 2023 – Claudio Descalzi, Chief Executive Officer of Eni, today presented the Company’s Strategic Plan for 2023-2026.
Eni’s strategy aims to meet each of the essential pillars of the energy trilemma, achieving environmental sustainability side-by-side with energy security and affordability. This means geographical and technological diversification of energy sources, creating a different energy mix while also maintaining a strong focus on value creation for shareholders.
The Company is pursuing these objectives by continuing:
Eni Natural Resources division will deliver superior returns, accretive growth and falling emissions, driven by the Company’s leading exploration and integrated fast-track projects.
Eni mid-stream gas has proved its resilience and will increasingly benefit from its re-shaped business with higher levels of equity gas supply.
Eni continues to meet the emissions reduction challenge in its own operations, building a new carbon capture business and integrating with its biorefining by developing its innovative agri-hub network.
During the plan Eni will approve a number of high quality FIDs including the A/E Structures in Libya, Hail & Ghasha and expansions of Lower Zakum in the UAE plus Côte d'Ivoire, Kazakhstan, Angola and possible new activities in the Eastern Mediterranean.
At the same time, in 2023, Eni will start-up the first phases of Baleine in Côte d'Ivoire and Congo LNG, start-ups in Egypt, UAE and Norway and the continuing development programme in Algeria, while in 2024 there will be start-ups in Italy, Egypt, Côte d'Ivoire Phase 2, Kazakhstan and Norway.
As result Eni expects a production growth CAGR of 3-4% over the 4-year plan period. By 2026 the Company will have added around 800,000 boed from start-ups and ramp-ups with high returns, short paybacks and leading unitary costs.
Eni will continue to focus on fast time to market projects leveraging on the high quality portfolio, confirmed by the low technical cost and high cash flow per barrel, at the top for the industry; Capex will be €6-6.5 billion on average per year during the plan period.
Eni continues to follow its dual exploration model, and it targets exploration with high levels of equity participation, in areas with existing activity and infrastructure such as North Africa, West Africa and the UAE – around 90% of its spend, supporting its track-record of leading value creation.
Eni will invest €2.1 billion over the next 4-year period, targeting 2.2 billion barrels of oil equivalent at around $1.50/boe of exploration cost, targeting 60% of discoveries to be gas.
The great attention on the Company’s value growth will also deliver a decrease in Eni’s Scope 1 & 2 net carbon footprint by 65% by 2025 versus 2018, on track to its 2030 net zero emission target.
In GGP, Eni confirms it will fully replace Russian gas volumes by 2025, leveraging the strong relationships with producing countries and its fast track development approach to ramp up volumes from Algeria, Egypt, Mozambique, Congo LNG, and Qatar.
Contractual LNG volumes are expected to exceed 18 MTPA by 2026 (9 MTPA in 2022).
Eni expects GGP to generate 4 year Ebit totalling above €4 billion, higher than in the previous plan, leveraging on a more diversified and flexible portfolio, and a larger equity component. This outcome incorporates Eni’s assumption of normalizing gas markets over the plan while the Company expects to generate an EBIT of between €1.7-€2.2bn in 2023.
CCS will contribute to cut Eni’s own net emissions and also to provide a solution for other hard to abate emitters beyond the energy sector. The Company has material projects under development using depleted reservoirs, existing infrastructures and well-defined economics. One of the most advanced, Hynet, based around Liverpool Bay, is on track to start-up in 2025 with an initial 4.5 million tonnes per year storage capacity. Ravenna Phase 1, recently brought into development, will start-up in early-2024. Eni is also advancing a second UK project, using its depleted Hewett field aimed at decarbonising the Bacton and Thames Estuary areas, potentially ready by 2027, and also pursuing opportunities in North Africa and the Middle East.
Eni continues the transformation of its legacy businesses and the growth in its new activities unlocking value and supporting its customers in reducing their emissions.
Refining and Marketing, having generated record results in 2022, is expected to continue to benefit from the structural improvements delivered with 2026 pro-forma EBIT of around €1.4billion, well above historic levels of profitability notwithstanding the Plan’s assumption of normalizing refining margins.
An important contributor to this better outlook is the growth of Eni Sustainable Mobility, incorporated at the beginning of this year, combining biorefining, biomethane and the sale of mobility products and targeted to evolve into a multi-service, multi-energy company, generating and unlocking new value.
Plenitude, Eni’s company which integrates renewables, energy solutions for customers and a widespread Electric Vehicle (EV) charging network, is maturing in its pipeline of Renewable projects and delivered its 2022 target of more than 2 GW of installed capacity.
Plenitude expects to deliver over 7GW of installed capacity by the end of 2026, and more than double its network of EV charging points to 30,000 by the end of the plan.
Having delivered its target of over €600 million in pro forma EBITDA in 2022, the Company expect to triple this figure to €1.8 billion by 2026. The integration of retail, with over 11 million customers by 2026, renewables and e-mobility has significant operational synergistic benefits while also providing diversification and financial resilience.
As Plenitude expands its offer of decarbonised products and services, its growth is expected to continue to be impressive and supported by a strong pipeline of over 11GW of projects and opportunities.
Versalis will move into sustainable profitability over the course of the Plan, thanks to the transformation to a structurally more sustainable and competitive business mix. It will continue its transformation into a fully specialized and sustainable chemical company by increasing its presence in end-user markets and building a leadership position in bio-based chemistry. The Company will look to grow in target markets with investments in its compounding platform and in new technologies. Versalis is developing complementary recycling processes, improving energy efficiency, and developing breakthrough technologies.
The innovation in Eni’s businesses demonstrates the benefit of placing Technology at the heart of the Company.
Eni’s commitment has resulted by more than 1,000 professionals, more than 400 projects and around 8,000 patents, actively managed for their strategic exploitation. Since 2014, Eni has also significantly enhanced its collaboration with leading universities, and created venture capital and venture builder vehicles to promote technology transfer, with a gross value creation of our proprietary technologies estimated at around €9 billion since 2014.
Eni Next, with its investment in CFS, the MIT spin-off, is accelerating the development of magnetic confinement fusion. SPARC, the experimental plant designed to generate net energy, is under construction, targeted for 2025 start-up and will be followed by the first industrial plant, called ARC, targeted for the early 2030s.
Eni’s financial strength enable the execution of its business strategy, provides flexibility across the cycle and delivers return to its investors.
Based on Eni’s scenario assumption:
Eni’s excellent financial results in 2022 came while contributing to the stability of energy supplies for its customers and progressing its decarbonization plan confirming the quality of the business the Company is building.
ENHANCED SHAREHOLDER REMUNERATION
Eni’s excellent financial and strategic progress provides scope to simplify and enhance the Company remuneration policy. An attractive shareholder distribution is a priority of the Company. Going forward Eni intends to distribute between 25%-30% of annual CFFO by way of a combination of dividend and share buyback. In upside scenarios, the Company expects to apply 35% of incremental CFFO to distribution and to be able, in the first instance, to use balance sheet, capex and timing flexibility in the event of downside.
Expected underlying performance improvement and the buyback also provides scope for the dividend to continue to rise in the coming years.
In line with the policy the 2023 annual dividend is raised to €0.94 per share, a 7% increase on 2022. Eni will continue to pay it in four equal quarterly instalments, in September 2023, November 2023, March 2024 and May 2024.
Considering Eni’s expectations for the scenario and the performance of the businesses, the Company will also launch a €2.2 billion share buyback in 2023, equivalent to around 4.5% of shares in issue at the current share price, following shareholder approval in May.
Applying the new remuneration policy at the scenario implies a return to shareholders over the Plan period of around 40% of the current market capitalization and a current total shareholder yield in 2023 of 11%.
ROBUST BALANCE SHEET AND FUNDING POSITION
Eni is financially robust and highly cash generative. Over the 4-year plan, based on our scenario, Eni will generate organic FCF before working capital at replacement scenario of more than € 32 billion that implies after shareholder distributions leverage will be in the range of 10-20% along the plan period.