Bloomberg News

Eni Profit Drops 9.5% on Libya Outages, Lower Gas Demand

February 15, 2012

(Updates with Mozambique comments in sixth paragraph.)

Feb. 15 (Bloomberg) -- Eni SpA, Italy’s largest oil producer, reported a 9.5 percent decline in fourth-quarter profit as field closures in Libya cut output and natural-gas demand dropped.

Adjusted net income dropped to 1.54 billion euros ($2 billion) from 1.7 billion euros a year earlier, the Rome-based company said today in a statement. The profit was in line with analyst estimates of 1.52 billion euros.

The Libyan conflict that ousted Muammar Qaddafi shut down most oil and gas fields in the North African country last year, where the company is the largest producer. Earnings were also curbed by a loss from refining crude into fuels and lower gas sales on milder weather in Europe.

“We have rapidly restarted our Libyan operations,” Chief Executive Officer Paolo Scaroni said in the statement. “The difficult macro-economic situation in Italy and Europe has impacted our results.”

Output fell 14 percent to 1.68 million barrels of oil equivalent a day in the quarter. Full-year output was down 13 percent to 1.58 million barrels a day. Eni resumed operations in Libya in September, where it’s now pumping about 80 percent of the 280,000 barrels of oil equivalent a day it produced before the unrest.

‘Giant Discovery’

Separately, the company announced “a new giant natural-gas discovery” at the Mamba North 1 prospect, with 7.5 trillion cubic feet of gas resources off Mozambique in East Africa. The company in October made the Mamba South gas discovery, which holds about 20 trillion cubic feet of gas, making it “by far the most important operated finding ever made by Eni,” it said today.

Eni shares were little changed at 17.36 euros in Milan at 10:32 a.m. local time.

Eni gas sales fell 11 percent to 25.5 billion cubic meters as gas and power operating profit dropped 51 percent to 385 million euros in the fourth quarter. Refining margins, or profit from processing crude oil into fuels, “remained at unprofitable levels,” generating a loss of 271 million euros in the period.

The refining and marketing losses “were deeper than expected,” Jean-Charles Lacoste, an analyst at Credit Agricole Cheuvreux SA, wrote in an e-mailed report. “Management still sees a growth trajectory in production, boosted by the continuing ramp-up in Italy and Iraq and new field startups.”

Spending, Dividend

The company plans to invest about the same in 2012 as the 13.4 billion euros it spent in projects this year.

The board plans to increase the dividend for 2011 to 1.04 euro per share, up from 1 euro in 2010.

“The 2012 outlook to be a challenging one due to continuing signs of an economic slowdown, particularly in the Eurozone,” the company forecast, basing its budget on a $90 a barrel of Brent oil assumption. “Recovery perspectives look poor in the gas sector. Refining margins are anticipated to remain at unprofitable levels.”

In January, the Italian government agreed to force Eni to dispose of its 50 percent holding in Snam, which owns the nation’s natural-gas distribution network.

Eni has been in talks with Russia’s OAO Gazprom, the largest supplier of gas to Europe, to lower prices for the fuel. European importers buy about two-thirds of their gas under long- term contracts linked to oil, which is more expensive than gas on the energy equivalent.

“There was no news on the Snam disposal, but we expect Eni has kept some of its powder dry for its strategy update” on 15 March, Theepan Jothilingam, an analyst at Nomura Holdings Inc., wrote in an e-mailed report. The company may announce this year production guidance and discus the “progress on renegotiations with Gazprom” on an analyst call this afternoon.

Eni will hold a Webcast at 3 p.m. central European time.

--Editors: Will Kennedy, Randall Hackley

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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