Eni: first quarter 2018 results

Highlights

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%.

• 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.

• 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 2018

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.

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.