Eni Announce third quarter and nine months of 2016 results
In the third quarter of 2016, Eni reported an adjusted operating profit of €0.26 billion, down by €0.51 billion or 66% y-o-y. This decline reflected a weaker performance in the E&P segment (down by €0.28 billion or 30%) driven by the continuing downturn in commodity prices (the Brent benchmark was down by 9%; gas realizations down by 29%) and the production shutdown at the Val d’Agri profit centre, which was restarted by mid-August. These negative pressures were mitigated by production growth in other areas, efficiency gains and a reduced cost base.
The Refining & Marketing and Chemicals segment reported declining profitability (down by €0.16 billion or 48%) due to a less favourable refining and commodity environment y-o-y and competitive pressures, whose effects were partly counteracted by cost efficiencies and optimization gains. By contrast, the G&P segment cut operating losses by 20% compared to the third quarter of 2015, which was impacted by the make-up of gas volumes paid in advance to gas supplies.
In the quarter, the operating profit was affected by lower commodity prices and margins (down by €0.6 billion) and the Val d’Agri shutdown. These negatives were partly offset by production growth in other areas, cost efficiencies and a reduced cost base, mainly in the E&P segment, for €0.1 billion.
In the third quarter of 2016, the Group reported an adjusted net loss from continuing operations of €0.48 billion, compared to the adjusted net loss of €0.13 billion reported in the third quarter of 2015. This decline reflected a lower operating performance disclosed above, lower results from cost and equity-accounted investments (down by approximately €0.1 billion) and a lower than proportional reduction in the tax burden, driven by the Company’s reduced ability to recognize deferred tax assets on the basis of a muted outlook for future taxable earnings.
In the nine months of 2016, adjusted operating profit of €1.03 billion reflected a €2.8 billion reduction y-o-y (down by 73%) due to the same headwinds described in the quarterly disclosure.
Overall, the low oil price environment reduced the operating performance by €3.3 billion, while the Val d’Agri shutdown and negative non-recurring items in G&P weighted for €0.5 billion. By contrast, production growth in other areas, efficiency gains and a reduced cost base, mainly in the E&P segment, improved the performance by €1 billion. Adjusted net loss for the nine months of 2016 of €0.80 billion was down by €1.90 billion y-o-y.
Highlights and outlook
Resumed full production at the Val d’Agri and Goliat oilfields
Restarted the Kashagan field ahead of schedule with a current production of approximately 100 kboe/d. Ramp-up expected in the next months
Achieved the production start-up at all of the 6 large projects budgeted for 2016. New field start-ups and continuing production ramp-ups are expected to add approximately 280 kboe/d to the production level for FY2016
Hydrocarbon production at 1.71 million boe/d, up by 0.4% in the quarter (up by 0.5% in the nine months); excluding the Val d’Agri shutdown, portfolio transactions and price effects in PSAs, production rose by 2.2% (up by 1.6% in the nine months)
Eni reaffirms the guidance of a production level essentially in line y-o-y, despite the impact of Val d’Agri shutdown
Confirmed cost efficiency targets in the upstream segment with unit operating costs of 6.6 $/boe and unit DD&A1 of 10.4 $/boe in the nine months
Signed the long-term supply agreement relating to 3.3 mmtonnes/y of LNG which will be produced by the Coral South development in Mozambique
Exploration: successfully drilled the well 5 in the Southern section of the Zohr licence, confirming 30 TCF of gas in place.
Thanks to this result and the Great Nooros Area development in Egypt, new resource additions for FY2016 increased to 1 billion boe, more than doubling the original target
Capex optimization: for FY2016 Eni reaffirms a reduction in spending of approximately 20% vs 2015 at constant exchange rates
Organic cash coverage of capex confirmed at a Brent scenario of approximately 50 $/bl in 2016
Agreements in Egypt and Algeria for the development of renewable energy projects
Claudio Descalzi, Eni’s Chief Executive Officer, commented:
“This quarter has been characterized by the achievement of three fundamental goals towards strengthening our upstream portfolio: we have stabilized the production plateau at the Goliat oilfield, restarted operations from Kashagan and ramped up the Nooros field, the latter being testament to the success of our exploration strategy that supports a reduction in time-to-market.
These achievements, in addition to the resumption of operations at the Val d’Agri profit center, will help to increase our cash generation from the fourth quarter onwards, as we successfully continue our cost reduction programme in lifting and development activities. Furthermore, we have stepped up our efforts to achieve a record time-to-market at the Zohr project, while in Mozambique the signing of the Coral gas sale contract represents a key milestone towards commencing the project construction activities.
In the mid-downstream businesses, all of which were free cash flow positive despite of an unfavourable trading environment, we are continuing to progress our optimization plans, also starting the execution of our new plan of producing energy from renewable sources. Today we confirm the Group’s strategy and objectives, including the previously outlined disposal plan”
Source / More on: Eni: Results from continuing operations2
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