ENI outlook revised to negative by Fitch
Fitch Ratings has revised Italy-based ENI SpA’s outlook to negative from stable and affirmed its long-term issuer default rating and senior unsecured rating at ‘A+’. Fitch says the outlook revision is due to continued production volatility in Libya and delays to the production ramp-up at the Kashagan oil field in Kazakhstan which are likely to hinder the performance of the company’s upstream strategy in 2014.
Fitch says operational difficulties in the company’s gas and power and refining and marketing divisions are negatively affecting financial results in 2013. It is Fitch’s view that an operational turnaround in these divisions may not be forthcoming before 2015, resulting in a delay to any positive financial contribution in the short- to medium-term.
As a result, Fitch expects negative free cash flow generation with deteriorating credit metrics under our forecast horizon. Fitch says ENI’s ratings reflect the company’s improved financial position following approximately $16bn of asset disposals since January 2012. Fitch expects disposal proceeds will be used to partially fund the company’s upstream development strategy. Fitch says ENI has ambitious plans to increase equity production by more than 4% CAGR over 2012-2016.
The upstream exploration and development (E&P) segment is the core of the company’s growth strategy and will receive 83% of total planned capex over 2013-2016 and 61% of total capital employed by 2016. Fitch believes that maintaining a strong balance sheet will be key to compensating for the company’s increased exposure to a more volatile E&P segment at the expense of a more stable regulated utility business. Story provided by StockMarketWire.com
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