Eni’s profits, specifically those of the Exploration & Production sector, depend to a significant extent on the trends in oil and gas prices.
Eni's results of operations and cash flow, mainly in the Exploration & Production Division, are greatly influenced by trends in oil and gas prices. Generally speaking, an increase in oil prices positively impact Eni's consolidated operating result; vice versa in case of a decline in oil prices. The same applies to gas prices.
Volatile oil prices impact the performance of the Company's business units in different ways.
Volatile oil prices represent an uncertainty factor in view of achieving the Company's operating targets of production growth and reserve replacement due to the relevant amount of Production Sharing Agreements in Eni's portfolio. Under such contracts, the Company is entitled to receive a portion of the production, the sale of which should cover expenditures incurred and earn the Company a share of profit. Accordingly, the higher the reference prices for crude oil used to determine production and reserve entitlements, the lower the number of barrels to cover the same dollar amounts hence the amounts of booked production and reserves; and vice versa.
The Company currently estimates that production entitlements in its PSAs decrease on average by approximately 1,000 bbl/d for a $1 increase in oil prices.
|Sensitivity*||Adjusted EBIT (€ mln)||Net Income Adjusted (€ mln)||Free Cash Flow (€ mln)|
|Brent (+1 $/bl)||+310||+175||+205|
|Standard Eni Refining Margin (+1 $/bl)||+160||+115||+160|
|$/€ Exchange Rate (+0.05 $/€)||-310||-120||-200|
*Sensitivity 2018. Sensitivity is applicable for limited variations of prices.
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