Eni swings to 1Q profit on higher oil, gas prices

Italy's Eni swung to a profit of €856mn ($1.04bn) in the first quarter, up from a loss of €2.93bn a year earlier, as stronger oil and gas prices offset a decline in production.

"The first quarter of 2021 has been significantly impacted by ongoing national lockdowns, however despite this Eni has achieved significantly improved results, most notably driven by E&P [Exploration & Production] and the chemicals business," chief executive Claudio Descalzi said. "With the pandemic situation gradually improving, and a broadening economic recovery looking more likely, we have been able to improve our outlook for the coming months, forecasting free cash flow generation in 2021 of more than €3bn under a Brent scenario of $60/bl."

Eni's upstream oil and gas production fell by 5pc from a year earlier to 1.7mn b/d of oil equivalent (boe/d) in January-March on reduced spending to develop reserves. This was partly offset by increased gas production in Egypt on higher demand, Eni said. First-quarter production was in line with the firm's full-year guidance of 1.7mn boe/d, which assumes a 35,000 boe/d impact from Opec+ cuts through the year and a 2021 budget for organic capital expenditure (capex) of €6bn.

Eni's refining business continued to feel the effects of lower fuel demand across Europe in the first quarter, with the Covid-19 pandemic resulting in additional lockdowns and delays in the recovery to air traffic. The Standard Eni Refining Margin — which represents the benchmark for the level of profitability of Eni's refineries before fixed cash expenses — was in negative territory at -$0.6/bl in January-March, compared with $3.6/bl a year earlier. Refinery runs averaged around 6.4mn t (521,000 b/d) in January-March, a 6pc rise from a year earlier, with lower throughput in Italy more than offset by higher runs elsewhere.

The firm said it expects to be able to generate enough cash flow to cover organic capex and its "floor dividend" of €0.36/share at a $51/bl Brent crude price this year. It will reassess its outlook for oil prices in July to establish whether to complement the floor divided with an additional "variable dividend" and resume share buybacks. Eni introduced an oil-price linked dividend policy last year.

"In this environment, we will continue implementing our decarbonization and energy transition strategy, maintaining a strong focus on the robustness of the balance sheet and targeting a competitive distribution policy to our shareholders," Descalzi said.

Separately, Eni announced today that it will consider selling a minority stake in a new retail and renewable energy business or listing it on a stock exchange through an initial public offering (IPO). The firm will evaluate the options under consideration in 2022. The business, which will be created through the merger of Eni's retail and renewable energy activities, aims to develop 5GW of renewable generation capacity by 2025.

By Rowena Edwards