• Adjusted net profit up 13.8% to €3.05 billion.
• Net profit up 28.3% to €3.32 billion.
• Cash flow: €4.76 billion.
• Oil and natural gas production up 3.6% to 1.796 million barrels per day.
• Natural gas sales up 9.3% to 30.91 billion cubic meters.
Eni, the international oil and gas company, announces its group results for the first quarter 20081 (unaudited).
Paolo Scaroni, Chief Executive Officer, commented:
"Eni has delivered an excellent set of results, driven by a strong underlying performance and higher oil prices.
The results were achieved despite the impact of adverse currency movements and an unfavorable trading environment in our downstream activities. We are delivering on our strategic objectives, generating value from our 2007 acquisitions and remain focused on continued improvement in all our businesses."
Financial highlights
– Adjusted operating profit was €5.91 billion, up 12.5% from the first quarter of 2007 and due to an improved operating performance reported by the Exploration & Production division. This was underpinned by higher realizations and production growth. Partly offsetting this was the euro's appreciation against the dollar (up 14.5%) and rising costs. The Petrochemical, Gas & Power and Refining & Marketing divisions reported lower operating profit due to an unfavorable trading environment.
– Adjusted net profit was up 13.8% to €3.05 billion, mainly as a result of the stronger operating performance.
– Capital expenditures for the quarter were up 54.9% from a year ago to €3.12 billion mainly related to continuing development activities of oil and gas reserves, exploration projects, and the upgrading of gas transportation infrastructures and Saipem rigs and offshore construction vessels.
– Net cash generated by operating activities amounted to €4.76 billion and coupled with cash from divestments for €0.3 billion was used to fund expenditures on capital and exploratory projects (€3.12 billion), the completion of the acquisition of Burren Energy Plc (€1.7 billion) and the repurchase of 8.7 million own shares at a cost of €193 million. At March 31, 2008 net borrowings amounted to €15.59 billion, having decreased by €736 million from December 31, 2007, also due to foreign currency translation effects.
– Return on Average Capital Employed (ROACE) calculated on an adjusted basis for the twelve-month period ending March 31, 2008 was 20.3% (22.7% for the twelve-month period ending March 31, 2007).
– Leverage, the ratio of net borrowings to shareholders' equity including minority interest, decreased to 0.35 from 0.38 at the end of 2007.
Operational highlights
– Oil and natural gas production for the first quarter averaged 1.796 mmboe/d, an increase of 3.6% compared with the first quarter of 2007 mainly due to the benefit of the assets acquired in 2007 in the Gulf of Mexico and Congo, as well as of Burren Energy from January 1, 2008 (for an overall increase of 118 kboe/d). Start-ups in Egypt and Angola, and field performance in Kazakhstan also supported production growth. These positives were partially offset by planned and unplanned facility downtime in the North Sea and Nigeria and mature field declines. Higher oil prices resulted in lower volume entitlements of approximately 78 kboe/d in Eni's Production Sharing Agreements (PSAs) and similar contractual schemes. Excluding the impact of lower entitlements in PSAs, production was up by over 8%.
– Eni's worldwide natural gas sales were 30.91 bcm, up 9.3% and driven by higher seasonal sales and growth achieved in international sales.
– Oil and gas realizations in the quarter were up 45.5%, driven by strength in Brent prices (up 67.8% from the first quarter 2007).
– Natural gas marketing margins decreased slightly from a year ago due to an unfavorable trading environment reflecting indexation mechanisms of purchase/selling prices in sales to the Italian market.
– Realized refining margins decreased from a year ago due to the euro's appreciation against the dollar and rising refining utility costs.
Outlook for 2008
The outlook for Eni in 2008 remains positive, with key business trends for the year as follows:
- Production of liquids and natural gas is forecast to be greater than in 2007 (actual oil and gas production averaged 1,736 mmboe/d in 2007) also in a high oil price environment. Management expects a full-year production level in excess of 1.8 mmboe/d assuming Eni's original planning scenario for Brent prices at $64/bl.
Additional production flowing from assets acquired in 2007 in the Gulf of Mexico and Congo, Burren Energy assets from the start of the year, as well as field start-ups in Angola, Egypt, Venezuela, Congo, and the USA will sustain production performance against expected mature field declines.
- Worldwide natural gas sales are expected to increase by approximately 4% over 2007 (actual sales volumes in 2007 were 98.96 bcm) driven by strong seasonal sales in the quarter and international growth. The increase expected to be achieved in international sales will be driven by growth in a number of markets in the Rest of Europe, mainly in France, Iberian Peninsula and Turkey, and in the LNG business.
- Refinery throughputs are expected to be unchanged from 2007 (actual throughputs in 2007 were 37.15 mmtonnes). Higher throughputs are forecast at the Ceska Refinerska as a result of the acquisition of an increased stake in 2007. This improvement will be partly offset by an expected decrease in Italy due to facility downtime at the Venice refinery.
- Retail sales of refined products are expected to increase by approximately 2% from 2007 level (11.8 mmtonnes were the comparable volumes achieved in 2007, which exclude volumes marketed in the Iberian Peninsula in 2007) driven by higher sales in Europe due to the full contribution of assets acquired in 2007 in Central-Eastern Europe.
In 2008, management expects to spend approximately €13.3 billion on capital expenditures, up 25% from 2007 (€10.59 billion in 2007). Major increases are expected in the development of oil and natural gas reserves, upgrading of construction vessels and rigs, and of natural gas transport infrastructures.
On the basis of planned cash outflows to fund capital expenditures, the completion of the acquisition of Burren Energy, and shareholders remuneration, management expects the Group's leverage to achieve a level in line with 0.38 as reported in 2007, assuming the revised Eni's scenario for Brent prices at 88 $/barrel for 2008 full-year and absent any further acquisition. Assuming also the exercise of the call options granted to Gazprom to purchase stakes in Eni's Russian assets (these include a 20% interest in OAO Gazprom Neft and a 51% interest in three gas companies), management's expects the Group's leverage to come in below the level reported in 2007.