Eni made loss in 4Q but reduced net debt

Italy's Eni made a loss in the fourth quarter driven by impairments, but it managed to reduce its net debt after issuing hybrid bonds.

The company reported a loss of €725mn ($880mn) in October-December and $8.6bn for the whole of 2020, mainly a result of write-offs across all business segments except the low-carbon division.

In the upstream division, net charges amounted to €288mn in the fourth quarter and €2.2bn for the whole year. These were largely related to asset impairments in the first half of last year which were triggered by a downward revision to the company's oil price outlook.

Eni's upstream oil and gas production fell by 11pc from a year earlier to 1.71mn b/d of oil equivalent (boe/d) in the fourth quarter. The firm attributed the decline to "Covid-19 impacts, related Opec+ production cuts and lower gas demand, mainly in Egypt". Full-year output was down by 7pc at 1.73mn boe/d.

In the downstream, Eni's refinery runs averaged about 510,000 b/d in October-December, a 16pc fall from a year earlier. Full-year throughput averaged around 480,000 b/d, about 50,000 b/d lower than 2019.

The Standard Eni Refining Margin — which represents the benchmark for the level of profitability of Eni's refineries before fixed cash expenses —"reported unprofitable values" of $0.2/bl in October-December and $1.7/bl for the whole year, down by 95pc and 60pc from the respective year-earlier periods.

The decline was driven by "materially lower demand for fuels, which was hit by the pandemic crisis affecting economic activity and travel, against a backdrop of overcapacity, competitive pressure and high inventory levels", Eni said. The weak refining environment was exacerbated by a recovery in the cost of crude feedstock, and margins were also squeezed by narrowing spreads between sour and light sweet crudes, the firm said. Opec+ cuts reduced the availability of sour crudes and that "resulted in low margins at conversion plants", Eni said.

The company's net debt gearing — including leases — was 44pc at the end of December, compared with 54pc three months earlier, pushed down by the company issuing €3bn of hybrid bonds in the period. With hybrid bonds, the principal does not have to be repaid, which means they can be accounted for as equity rather than debt under international financial reporting standards.

Eni will present its updated strategy later today.

By Konstantin Rozhnov