Exploration&Production

• Exploration: continuing strong exploration track record. Discovered 1.1 billion boe of additional resources at a cost of 0.6 $/boe. Additions to the Company’s resources backlog were 3.4 billion boe in the last three years, at a cost of 1 $/boe. Promising new prospects to be drilled in future years. Our dual exploration model proved to be successful (sale of 40% of Zohr).
• Reserve replacement: organic reserve replacement ratio surged to 193% in 2016, the best ever performance in Eni's history, contributing to a 150% average in the last three years. The 2016 reserve replacement ratio confirmed to be very robust at 139% also considering the 40% sale of Zohr on a pro forma basis. At year end, hydrocarbon proved reserve were 7.49 billion boe with a life index of 11.6 years (10.7 years in 2015).
• Hydrocarbons production: 1.76 million boe/d in the year, in line with 2015, in spite of the Val d’Agri shutdown. In 2017, expected production growth to a record of 1.84 million boe/d (up by 4.5%) leveraging on the development of our portfolio of projects.

Economic and financial results

• Cash flow: FY normalized cash flow from operations up to €8.3 billion¹ covering the 90% of 2016 capex, reduced to €8.7 billion from €9.2 billion, when excluding the reinbursement related to Zohr disposal (€0.5 billion). All mid-downstream businesses cash positive in the year.
• Capex optimization Improved prospects of organic production growth over the next four years notwithstanding a 19% capex reduction y-o-y.
• E&P efficiency: Opex efficiency above expectations at 6.2 $/boe compared to 7.2 $/boe in 2015.
• Leverage: notwithstanding two years of Brent price downturn, Eni confirmed a solid financial structure with a leverage of 0.28, as of December 31, 2016, lower than management target of 0.3. This reflected an excellent cash flow from operations, capex optimization and disposals of assets.
• Disposals: defined in the year disposals for a total consideration of €2.6 billion, 40% of the 2016-2019 four-year target announced in March 2016 (€7 billion).
• Adjusted results: adjusted operating profit: €2.32 billion, down by €2.2 billion (or -48%) due to the commodity price environment with a negative effect of €3.3 billion, while the four-month and a half shutdown of operations in Val d’Agri and lower non-recurring gains in G&P weighted for €0.6 billion. By contrast, efficiency gains and a reduced cost base, mainly in the E&P segment, improved the performance by €1.7 billion. Adjusted net result: a loss of €0.34 billion.
• Dividend: the Company's robust results and strong fundamentals underpin a dividend distribution of €0.8 per share of which €0.4 per share paid as interim dividend in September 2016. Reaffirmed a progressive remuneration policy going forward in line with an expected improvement in the commodity scenario and in our financial performance.

Projects

E&P projects: progressed construction activities at our development projects expected to come on stream in 2017 (Jangkrik - Indonesia, OCTP oil - Ghana and Zohr - Egypt). In Februray 2017, started-up the East Hub project in Angola, five months earlier than scheduled. These projects, together with the ramp-up of 2016 new production from Kashagan and Goliat, will strongly contribute to the cash generation in 2017 and following years. In three years, projects break-even reduced leveraging on the exploration strategy, driven by the target of cost optimization in develop resources in production, effective development model and operating costs reduction.
Goliat: start-up of Goliat field (Eni operator 65%) in the Barents Sea. Reached the production target of 100 kboe/d (65 kboe/d net to Eni).
Kashagan: restarted Kashagan field with the completion of the replacement of the damaged pipelines. Production capacity is expected to reach 370 kbbl/d in 2017.
Nooros: reached a production plateau of 85.5 kboe/d net to Eni from the Nooros field located in Egypt. This record-setting production level was reached in just 13 months after the discovery in July 2015 and ahead of schedule. With the drilling of additional development wells, the field is expected to reach a maximum production capacity of about 160 kboe/d in 2017. Nooros is an important achievement by Eni’s “near-field” exploration strategy, aimed at unlocking the presence of additional exploration potential located in proximity to existing infrastructures.
Zohr: sanctioned by the Egyptian Authorities the development plan of the Zohr discovery, where production start-up is expected by the end of 2017. Completed the drilling of wells and successfully performed the production test, which confirmed the mineral potential of the discovery.
Mozambique: authorities approved the development of the first development phase of Coral, targeting production of 5 tcf of gas. The Area 4 partners (Eni East Africa, joint operation between Eni and CNPC, Galp, Kogas and ENH) and BP signed a binding agreement for the sale, over a 20-year period, of approximately 3.3 million tons of LNG per annum (corresponding to about 5 bcm), which will be produced at the Coral South Floating facility.In March 2017, ExxonMobil and Eni signed a sale and purchase agreement to acquire a 25% indirect interest in the Area 4 block, offshore Mozambique. The agreed terms include a cash price of approximately $2.8 billion. The completion of the deal is subject to satisfaction of certain conditions precedent, including clearance from Mozambican and other regulatory authorities.

Safety

In 2016, Eni launched “Eni in Safety”, the new communication and training program, aimed to publicize among the company’s levels the lesson learnt connected to near misses and injuries. This initiative and other investments in safety permits to reduce of 21% the total recordable injury rate of work force (down by 11% for employees and down by 25% for contractors), confirming the positive trend reported in the last years.

Environment

• Decarbonization strategy: Eni’s committement in fighting climate change has been recognized by CDP - Carbon Disclosure Project - through its annual assessment, which included Eni, unique among the Oil&Gas majors, in Climate A List 2016. The list includes the companies which are mainly distinguishing in climate change initiatives. The decarbonization strategy is also enhanced in the Oil and Gas Climate Initiative (OGCI), by the investment of $1 billion over the next ten years to develop and accelerate the commercial diffusion of new low-emissions technologies. Eni's strategy for climate change has been recognized by the Transition Pathway Initiative (TPI). This initiative promoted by thirteen major international investors of primary importance, is finalized to include the climatic issues in the investment decisions of the listed companies. TPI has rated Eni at the highest level. Furthermore, Eni was confirmed for the tenth consecutive year in the FTSE4Good index.Planned start-ups, 2016 ramp-ups.
• Renewable energies: defined renewable energy projects in Italy and certain Eni's countries of operations. The "Project Italy" targets the development of projects in the area of renewable energy (energy production mainly addressed for own consumption) leveraging on the industrial property areas with a total capacity of about 220 MWP. Outside Italy, Eni signed agreements for the development of new projects for the production of renewable energy, mainly in Algeria, Tunisia and Ghana.
• GHG emissions: GHG emissions for 2016 declined by 3.5% compared to 2015. This trend reflected lower emissions from combustion (down by 0.9 million tonnes), reduced methane emissions (down by 0.3 million tonnes) leveraging on initiatives to contain fugitive emissions as well as energy efficiency projects. The trend of GHG emission index compared to operated gross hydrocarbon of the upstream segment remains positive with a reductions of 9%.
• Oil spills due to operations: Oil spills due to operations higher than one barrel (88% related to E&P segment) declined by 29% compared to 2015, the Refining & Marketing and Chemicals segment reported a significant improvement, down by 69%, the overall volume spilled decreased to 134 barrels in 2016 from 427 barrels in 2015. In Nigeria, activities are underway to replace certain cases covering holes caused by sabotages, which are a potential weakness.

Territory

• Gela: Eni's commitment continued in 2016 on the activities defined in the Memorandum of Understanding signed in 2014, in accordance of the agreements with the Ministry for Economic Development and other Authorities. In April, obtained the permissions from the Authorities, Green Refinery project started, representing a milestone of the Protocol. Gela is the first cross and integrated project in Italy, in which Eni is committed to build a new industrial program in synergy with the local stakeholders.
• School-work alternation projects: in 2016 Eni signed a memorandum of understanding with the the Ministry of Education and the Ministry of Labour for the realization of initiatives involving Italian students of upper secondary schools, in order to promote the full integration between business and educational institutions.The Protocol is structured on the institutes of the school-work alternation and first-level apprenticeships.

School-work alternation projects

In 2016 Eni signed a memorandum of understanding with the the Ministry of Education and the Ministry of Labour for the realization of initiatives involving Italian students of upper secondary schools, in order to promote the full integration between business and educational institutions.The Protocol is structured on the institutes of the school-work alternation and first-level apprenticeships.

Notes

¹ Normalized figure excluding the negative effect of Val d’Agri shutdown (€0.2 billion), a reclassification of certain receivables for investing activities to trading receivables (€0.3 billion) while including pro-forma effects of Zohr operation on working capital (€0.1 billion).