Eni SpA (ENI), Italy’s biggest energy producer, will reduce refining volumes and battle to preserve its market share of natural-gas sales as demand weakens.
The company today reported a 2 percent gain in second- quarter adjusted profit to 1.46 billion euros ($1.8 billion), helped by a recovery in Libyan output. It also booked a 1.1 billion-euro charge on gas and refinery assets.
In Europe, “gas demand is projected to fall sharply as a consequence of the economic slowdown as well as a big drop in thermoelectric consumption,” Rome-based Eni said in a statement. “Refining margins are anticipated to remain at unprofitable levels.”
Gas demand in Europe will be hurt by high prices, slower economic growth and expansion in renewable sources of energy through 2017, the International Energy Agency forecast in June. Refining was depressed by shrinking price differentials and weak fuel demand.
“Although the European refining environment improved in the second quarter, Eni continued to be impacted by a low differential between light and heavy crudes and weak fuel demand,” Oswald Clint, an analyst at Sanford C. Bernstein & Co., wrote in an e-mailed report.
Eni, the largest oil producer in Africa, has restored operations in Libya following last year’s civil war. That helped to offset lost production in the North Sea and Nigeria, it said. Output is expected to grow about 10 percent this year from 2011, the company said.
The 1.1 billion-euro charge helped to reduce net income by 82 percent to 227 million euros. Eni’s refining and marketing division reported an adjusted operating loss of 144 million euros in the quarter.
Adjusted earnings missed the 1.5 billion-euro average estimate of 13 analysts surveyed by Bloomberg. Second-quarter output increased 11 percent to 1.65 million barrels of oil equivalent a day, while natural gas sales fell 4 percent to 20.2 billion cubic meters, Eni said.
Separately, Eni today announced a “new giant” gas discovery in the eastern part of Area 4 off the coast of Mozambique. The find at Mamba North East 2 increased the area’s resource potential to 70 trillion cubic feet of gas in place, Eni said. That’s enough to meet Italy’s supply needs for almost 30 years.
During the second quarter, Eni said it bought exploration interests “in promising areas” in Vietnam, Kenya and Indonesia, according to today’s statement.
The company’s stock, up 5 percent this year, may gain from its sale of shares in Italian gas distributor Snam SpA (SRG), ordered by Prime Minister Mario Monti to boost competition and reduce consumer prices.
The Italian company is also reducing its stake in Galp Energia SGPS SA (GALP), Portugal’s largest oil producer, and in July completed the disposal of 5 percent to Amorim Energia BV, a holding company controlled by Portuguese investor Americo Amorim. Eni now holds about 28 percent of Galp.
The sale of the Galp and Snam stakes will enable the company to reduce debt by about 20 billion euros by the end of the year, Chief Executive Officer Paolo Scaroni told investors.
Eni, which today declared an interim dividend of 54 euro cents, will “redefine” its payout policy next year, Scaroni said.
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