London, 28 July, 2023, (Oilandgaspress) – Eni’s Board of Directors, chaired by Giuseppe Zafarana, yesterday approved the unaudited consolidated results for the second quarter and first half 2023.
Financial highlights of the second quarter of 2023;
Q2 2023 adjusted profit before tax of €3.7 bln was down 41% and represents a highly robust outcome given the 30% fall in crude oil prices and with gas price and refining margin down over 60%. Particularly, pro-forma adjusted EBIT including the operating margin of equity accounted entities was €4.2 bln vs. €7 bln in Q2 2022. This performance reflects resilient E&P earnings featuring growing production, another very strong contribution from GGP, plus contributions from Sustainable Mobility and Plenitude.
- E&P earned €2.1 bln of adjusted EBIT in Q2 2023, impacted by weaker realized prices and with year-on-year comparisons impacted by the deconsolidation of Azule. Including the contribution of JV/associates, proforma adjusted EBIT was €2.8 bln, down 52%, also impacted by a higher exploration charge. IH 2023 result was €4.9 bln (versus €9.3 bln in IH 2022). Production in the quarter was up 2% year-over-year
- GGP earned €1.1 bln of adjusted EBIT in Q2 2023, compared to around breakeven in the same period of 2022, resulting in a very good IH EBIT outcome of €2.5 bln. The Q2 result was mostly driven by specific benefits relating to contractual triggers, renegotiations and settlements related to previous periods that are a feature of the business. Additionally, in a market environment still characterized by some degree of volatility and arbitrage opportunities, the continued asset optimization and trading have also contributed to the quarterly performance.
- Eni Sustainable Mobility, operational as of January 1, 2023, delivered €0.20 bln of adjusted EBIT, little changed compared with Q2 2022 (€0.34 bln in IH 2023, up by 38%).
- Refining was impacted by SERM decreasing to $6.6/bbl in Q2 2023 ($17.2/bbl in Q2 2022) and reported a negative €0.05 bln of adjusted EBIT compared to a profit of €0.76 bln of Q2 2022 (a positive €0.08 bln in IH 2023). The performance was impacted by scenario conditions not fully captured by the SERM including lower leverage to natural gas price energy costs, crude differentials and turnaround activity at important upgrading refinery units.
- Plenitude & Power delivered solid results with €0.17 bln of adjusted EBIT (up 18% year-on-year; €0.35 bln, up 8% in IH 2023) supported by good results of the retail business and the ramp-up in the renewable installed capacity and production volumes, and optimizations in gas-fired power generation activities. Plenitude generated €0.47 bln of proforma adjusted EBITDA in IH 2023, rateably ahead of the yearly guidance of more than €0.7 bln partly as a result of seasonality.
- Versalis was negatively impacted by an exceptionally low demand across all business segments and competitive pressures of product streams from import resulting in an adjusted operating loss of €0.07 bln in Q2 2023 (a loss of €0.18 bln in IH 2023).
- Q2 2023 adjusted net profit attributable to Eni shareholders was €1.94 bln impacted by the weaker scenario, but significantly offset by underlying business performance. The Group adjusted tax rate, which did not include Italian extraordinary contributions, was under 50% despite inclusion of the UK energy profit levy. IH 2023 adjusted net profit attributable to Eni shareholders was €4.84 bln.
- In Q2 2023, Group adjusted operating cash flow before working capital at replacement cost was €4.2 bln, exceeding outflows related to organic capex of €2.6 bln and dividend payments (€0.7 bln). In IH 2023, adjusted cash flow was €9.5 bln resulting in an organic free cash flow of €3 bln.
- Portfolio activities in IH were around €1.2 bln and related to the first installment of the St. Bernard Bio-refinery in Chalmette, gas upstream assets in Algeria and renewable assets. IH dividend payments amounted to €1.5 bln and share buy-back of €0.4 bln.
- Eni’s Board of Directors approved the distribution of the first of the four tranches (resulting in a total annual dividend of €0.94) of the dividend for the fiscal year 2023 of €0.24 per share outstanding at the ex-dividend date as of September 18, 2023, payable on September 20, 2023, as resolved by the Shareholders’ Meeting of May 10, 2023.
- Net borrowings ex-IFRS 16 as of June 30, 2023, were €8.2 bln, and Group leverage stood at 0.15, versus 0.13 as of December 31, 2022.
- Following the authorization granted by the Shareholders Meeting on May 10, 2023, concerning €2.2 bln up to a maximum of €3.5 bln for the year, the 2023 buy-back program commenced at the end of May and through July 21, 2023, 45 mln shares have been purchased for a cash outlay of €588 mln.
Eni CEO Claudio Descalzi said:
“Eni has delivered excellent operating and financial results in Q2 ’23 despite a less supportive environment. This resilience is significant after having successfully captured upside in the previous stronger scenario. Furthermore, alongside the results delivery Eni has also made considerable steps forward in advancing strategy across the business. Q2 adjusted EBIT of €3.4 bln (€4.2 bln including the contribution proforma of our JV/associates) was underpinned by a solid and growing Upstream and another excellent result in GGP. The market scenario impacted our Refining and Chemicals results but Sustainable Mobility and Plenitude & Power continue to deliver earnings and capacity growth in line with plan despite volatile conditions. Adjusted cash flow was notable at €4.2 bln and well in excess of the capex funding requirements of €2.6 bln. In the first half of 2023, also taking into account working capital needs, we delivered about €3 bln of organic free cash flow, almost matching the entire full year 2023 dividend cash out. Actions in the strategic transformation of the company are already positively impacting our results and 2023 has seen further significant advances. Alongside expanding our biorefining capacity with the Chalmette JV and the Novamont green chemicals purchase, in June we announced the proposed acquisition of Neptune Energy. Neptune’s gas focused portfolio, geographic and operational complementarity with Eni and its low operating emissions profile is an exceptional fit with our strategic objectives yielding significant operating and financial upside. Our strategic initiatives will each contribute towards the very positive performance progression targeted in our plan. Considering our first half results and continuing business performance that drives raised guidance, we have a solid position from which to pay our first quarterly installment of the raised €0.94 per share 2023 dividend in September and continue our €2.2 bln buyback which commenced in May.’’
Acquisition of Neptune Energy Group Ltd “Neptune”
Eni and its associate Vår Energi ASA have signed a sale and purchase agreement to acquire Neptune, a leading independent exploration and production company with global, low emission, gas-oriented operations, which also retains several projects for CO2 capture. Eni will acquire an asset portfolio which features strong complementarity at both operational and strategic level with its own, strengthening the presence in key geographic areas, like UK, Algeria, Indonesia and Australia. Vår will consolidate its position in Norway. The deal with an enterprise value of $4.9 bln, of which $2.6 bln acquired by Eni and $2.3 bln by Vår, is expected to increase Eni production plateau by over 100 Kboe/d including its share of Vår, by adding cost-competitive, low-emission volumes that will underpin the Group strategy of growing its share of natural gas production and speeding up the transition, while at the same time enhancing security of energy supplies to Europe. The transaction whose economic effects are retroactive to January 1, 2023, is expected to close at the beginning of 2024 subject to the finalization of antitrust procedures and other customary conditions and will be immediately accretive to Eni’s earnings and cash flow also leveraging expected synergies of at least $0.5 bln.
Exploration & Production
During Q2 2023, the new resources added through exploration reached the total for the first half of the year of about 360 mln boe, driven mainly by the discoveries made off Egypt, Congo and Mexico.
- In April, the FPSO Firenze sailed out from Dubai to the Baleine field in Côte d’Ivoire. The FPSO to be renamed Baleine upon its mooring has been refurbished and upgraded to increase its processing capacity up to 15,000 bbl/d of oil and around 25 mmcf/d of associated gas.
- In June, Eni signed with Perenco the agreement for the sale of its participating interest in several production licences in Congo. The transaction value is approximately $300 mln. The closing is subject to the authorization of relevant local and regulatory authorities.
- In July, Eni acquired Chevron’s development and production assets in offshore Indonesia. The operation will ensure the fast track development of ongoing projects in the area and the integration with Neptune Energy assets. This acquisition is also in line with Eni’s energy transition strategy to increase the share of natural gas production to 60% by 2030. The closing of the transaction is subject to the customary governmental and regulatory approvals.
Global Gas & LNG Portfolio
In April, Eni and SPP, the Slovakia’s largest energy supplier, signed a Memorandum of Understanding (MoU) for a commercial cooperation in the gas and LNG sector, aimed at evaluating initiatives in the areas of trading and management of regasification and transportation capacities to secure and strengthen supplies of natural gas to the Slovak Republic.
- In April, Eni inaugurated the Congo LNG project, the country’s first natural gas liquefaction project and one of Eni’s core supply diversification initiatives. The project is expected to start-up before the end of the year and to reach an overall LNG production capacity of 3 mln tons per year (approximately 4.5 bln cubic meters/year) from 2025.
- In May, Eni offloaded the first LNG cargo from Egypt’s Damietta liquefaction plant into Snam’s new regasification terminal in Piombino, off Tuscany. This was followed the delivery of the first commercial cargo, from Algeria’s Betihoua plant, in July.
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