Italy’s Eni posts first profit in 18 months on rising crude oil prices

Cuckoo James

01-Mar-2017

EniEni’s floating production and cylindrical storage unit (FPSO) ‘Goliat’ in Norway
Source: Eni

LONDON (ICIS)–Italy’s oil and gas major Eni posted in the last three months of 2016 its first quarterly profit in 18 months on the back of a rise in oil prices and the absence of hefty charges, the company said on Wednesday.

Eni posted a net profit of €340m in the fourth quarter of 2016, compared with a loss of €8.72bn in the fourth quarter of 2015 partly caused by a write down in the value of its oil inventories.

Fourth-quarter consolidated adjusted operating profit stood at €1.29bn, up by €640m from the fourth quarter of 2015.

Eni benefited from an uptick in crude oil prices after the agreement by OPEC and non-OPEC countries in the fourth quarter of 2016 to cut oil production by nearly 1.8m bbl/day.

Eni’s strong fourth-quarter production of 1.86m bbl/day also contributed to the company’s increasing profit, CEO Claudio Descalzi said.

For the full year of 2016, hydrocarbon production at ENI stood stable year on year at 1.76m bbl/day after increasing annually by over 10% – the highest growth rate since 2001.

The stable production in 2016 materialised in spite of a four-month and half shutdown at Val d’Agri field in the Southern Apennines for judicial investigation, which cost the company €200m. 

Exploration for oil and gas reserves continued as Eni discovered 1.1bn bbl of additional resources at a cost of $0.6/bbl.

“Exploration and long term organic growth are the engine of our strategy,” Descalzi, said, speaking of the company’s 2017-2020 strategy.

Descalzi said Eni’s business strategy had been transformed by focusing on upstream exploration for oil and gas, which accounts for approximately 60% of Eni’s invested capital.

Refinery break even margin had fallen in 2016 to $4.2/bbl, down from $5.2/bbl in 2015, according to CFO Massimo Mondazzi, who added the company is targeting a production growth rate of 3% in 2017-2020 and a refining margin which breaks even at $3/bbl from 2018.

Eni said going forward it would have a rich set of exploration opportunities because of 2-3bn in bbl equity resources, of which 55% is gas and 45% oil.

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