ENI Profits Up 34% in Second Quarter

Eni has announced its group results for the second quarter of 2008 (unaudited). The Board has also approved the interimreport as of June 30, 2008, which will be published prior to August 2008, together with the independent auditor’s report. The most relevant information fromthe interim report is provided in this press release.

Paolo Scaroni, Chief Executive Officer, commented, "I am pleased to announce that Eni has delivered a record performance for the first half of 2008, due to high oil prices and to our success in generating industry leading production growth. The Company has continued to make progress in further strengthening our E&P portfolio, whilst expanding our G&P activities into Europe through the acquisition of Distrigaz. Our confidence in the Group's excellent outlook underpins my proposal to Eni’s Board on September 11, 2008 to pay an interim dividend of €0.65 per share."

Financial highlights

Second quarter of 2008

Adjusted operating profit was €5.61 billion, up 33.6% from the second quarter of 2007. This was due to the better operating performance of the Exploration & Production division, driven by higher realizations and production growth. Partly offsetting these was the euro's appreciation against the dollar (up 15.9%) and rising costs and amortization charges. The Petrochemical and Refining & Marketing divisions reported lower operating profit.

Adjusted net profit was up 4.4% to €2.32 billion,mainly as a result of the stronger operating performance that was partly offset by a higher tax rate on an adjusted basis (from 48.3% to 57.5%).

Capital expenditures for the quarter were up 62.3% from a year ago to €3.64 billionmainly related to continuing development activities of oil and gas reserves, exploration projects, and the upgrading of gas transportation infrastructures and Saipem rigs and offshore construction vessels.
 
Net cash generated by operating activities amounting to €5.19 billion and coupled with cash from divestments for €145 million was used to fund a part of financing needs associated with expenditures on capital and exploration projects (€3.64 billion), the payment of the balance dividend for the fiscal year 2007 (€2.55million) and the repurchase of 8 million own shares at a cost of €195million. Net borrowings in the quarter increased by €974 million to €16.56 billion.
 
First half of 2008
 
Adjusted operating profit for the first half was €11.51 billion, up 21.9% from a year ago, due to a better operating performance reported by the Exploration & Production division, partly offset by lower operating profit reported in the Petrochemical and Refining & Marketing divisions.
 
Adjusted net profit was up 9.6% to €5.37 billion, mainly as a result of the stronger operating performance, that
was partly offset by a higher tax rate on adjusted basis (from 47.4% to 52.4%).
 
Net cash generated by operating activities amounting to €9.95 billion and coupled with cash from divestments for €473 million was used to fund almost all financing needs associated with expenditures on capital and exploration projects (€6.76 billion), dividend payments (€2.55million), the completion of the acquisition of Burren Energy Plc (€1.7 billion) and the repurchase of 16.6million own shares at a cost of €388 million. At June 30, 2008 net borrowings amounted to €16.56 billion and increased by €238million from December 31, 2007. Foreign currency translation effects contributed to the reduction of net borrowings.
 
Return on Average Capital Employed (ROACE) (2) calculated on an adjusted basis for the twelve-month period ending June 30, 2008 was 19.8% (21.4% for the twelve-month period ending June 30, 2007).
 
Ratio of net borrowings to shareholders’ equity including minority interest -- leverage (2) -- was unchanged at
0.38 with respect to end of 2007.

Interim dividend for 2008

In light of the financial results achieved for the first half of 2008 and the projected full-year results, the CEO will
propose the distribution of an interim dividend for the fiscal year 2008 of €0.65 per share (€0.60 per share in
2007; up 8.3%) to the Board of Directors on September 11, 2008. The interim dividend is payable on September 25, 2008 to shareholders on the register on September 22, 2008.
 
Second quarter of 2008
 
Oil and natural gas production for the second quarter averaged 1.772mmboe/d, an increase of 2.1% compared with the second quarter of 2007 mainly due to the benefit of the assets acquired in 2007 and 2008 in the Gulf of Mexico, Congo and Turkmenistan (for an overall increase of 88 kboe/d), as well as continuing production ramp-up in Egypt, Angola, Pakistan and Venezuela. These improvements were partially offset by unplanned facility downtime in the United Kingdom and Australia, and mature field declines in Italy. Higher oil prices resulted in lower volume entitlements in Eni’s Production Sharing Agreements (PSAs) and similar contractual schemes, down approximately 100 kboe/d. When excluding the impact of lower entitlements in PSAs, production was up 8.1%.
 
Eni’s worldwide natural gas sales were 22.16 bcm, up 7.7% mainly driven by an increase in international sales that were up by 18.7% mainly reflecting organic growth achieved in European markets.
 
Oil and gas realizations in the quarter were up 58% driven by strength in Brent prices (up 76.5% from the
second quarter of 2007).
 
The trading environment favorably influenced natural gas marketing margins due to favorable trends in the
euro vs. the dollar exchange rate.
 
Refining results were affected by higher planned and unplanned downtime, the euro’s appreciation against
the dollar and rising refining utility costs, partly offset by an improved dollar-denominated trading environment. Marketing margins on wholesale markets also weakened.
 
First half of 2008
 
Oil and natural gas production for the first half of 2008 averaged 1.784 mmboe/d, an increase of 2.8% compared with the first half of 2007 mainly due to the benefit of the assets acquired in 2007 and 2008 in the Gulf of Mexico, Congo and Turkmenistan (for an overall increase of 103 kboe/d), as well as continuing production ramp-up in Egypt, Angola, Pakistan and Venezuela. These positives were partially offset by planned and unplanned facility downtime and technical issues in the North Sea, Nigeria and Australia, as well as mature field declines. Higher oil prices resulted in lower volume entitlements in Eni's PSAs and similar contractual schemes, down approximately 90 kboe/d. When excluding the impact of lower entitlements in PSAs, production was up 8.1%.
 
Eni’s worldwide natural gas sales were 53.07 bcm, up 8.6% driven by an increase in international sales that
were up by 20.1%mainly reflecting in addition to the higher seasonal sales recorded in the first quarter, organic growth achieved in European markets.
 
Oil and gas realizations in the first half of 2008 were up 52.4% driven by strength in Brent prices (up 72.5% from
the first half of 2007).

The trading environment unfavorably affected natural gas marketing margins.

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