Eni Profits Grow 53% in Third Quarter 2008

Eni announced its group results for the third quarter and the first ninemonths of 2008. Highlights include:

  • Adjusted net profit: up 52.7% to €2.89 billion for the third quarter and up 21.6% to €8.26 billion for the first nine months of 2008.
  • Net profit: up 37.0% to €2.94 billion for the third quarter and up 38.5% to €9.70 billion for the first nine months of 2008.
  • Cash flow: up 70.3% to €5.73 billion for the third quarter (up 20.2% to €15.68 billio for the first nine months of 2008).
  • Oil and natural gas production for the third quarter: up 6.3% to 1.76 million barrels per day; up 10% excluding the PSA impact (up 3.9% for the first nine months of 2008; up 8% excluding the PSA impact).
Operational Highlights
 
Oil and natural gas production for the third quarter amounted to 1,764 kboe/d, representing an increase of 6.3% from the third quarter of 2007. This improvement reflected contribution from Burren assets that were acquired in Congo and Turkmenistan early in 2008 (for an overall increase of 24 kboe/d), and continuing production ramp-up in Angola, Congo, Egypt, Pakistan and Venezuela. Production growth was also boosted by lower facility downtime particularly in the UK where the CATS pipeline was halted for an accident occurred in the third quarter of 2007.
 
These improvements were partially offset by hurricane disruptions in the Gulf of Mexico (down 25 kboe/d) and mature field declines in Norway and Italy. Higher oil prices resulted in lower volume entitlements in Eni's Production Sharing Agreements (PSAs) and similar contractual schemes, down 60 kboe/d. When excluding the impact of lower entitlements in PSAs, production was up approximately 10%.
 
Eni's worldwide natural gas sales were 20.17 bcm, down 0.8% as lower sales volumes were reported in Italy, partly offset by higher international sales that were up 3.6%,mainly as a result of organic growth achieved in European markets.
 
Oil and gas realizations for the quarter were up 47.1% driven by strength in Brent prices (up 53.3% from the third quarter of 2007).
 
First nine months of 2008
 
Oil and natural gas production for the first nine months of 2008 was 1,777 kboe/d, representing an increase of 3.9% compared with the first nine months of 2007. This improvement was mainly driven by the benefit of the assets acquired in 2007 and 2008 in the Gulf of Mexico, Congo and Turkmenistan (up 73 kboe/d), as well as continuing production ramp-up in Angola, Egypt, Pakistan and Venezuela. These positives were partially offset by mature field declines, as well as planned and unplanned facility downtime in the North Sea and hurricane related impacts in the Gulf of Mexico. Higher oil prices resulted in lower volume entitlements in Eni's PSAs and
similar contractual schemes, down approximately 70 kboe/d. When excluding the impact of lower entitlements in PSAs, production was up approximately 8%.
 
Portfolio developments
 
On October 30, 2008, following authorization from the European Commission, Eni closed the acquisition of a 57.243% interest in Distrigaz SA from the French company Suez-Tractebel for a cash consideration of €2.74 billion. Eni will launch a tender offer to acquire the minority stake in Distrigaz SA, as soon as authorization from Belgian authorities is granted. On the same occasion, Eni signed agreements with Suez to dispose of certain Eni assets as part of the Company's asset portfolio optimization. The disposed assets include Eni's network of low-pressure pipelines serving the consumer area of Rome and interests in a number of Eni's upstream assets. In addition, certain long-term supply contracts of electricity, gas and LNG have been agreed upon.
 
Finalized an agreement to acquire all the common shares of First Calgary Petroleum Ltd, a Canadian oil and gas company with exploration and development activities in Algeria. The acquisition values the fully diluted share capital of First Calgary at approximately CAN $923million. Production start up at First Calgary's fields is expected in 2011 with a projected plateau of approximately 30,000 boe/d net to Eni by 2012. The transaction is expected to close late in 2008.
 
On October 1, 2008, Eni divested the entire share capital of subsidiary Agip España to Galp Energia SGPS SA, following the exercise of a call option in October 2007 pursuant to agreements among Galp's shareholders. The divested asset includes 371 service stations located in the Iberian Peninsula, as well as wholesale marketing activities of oil products.
 
Awarded 5 new exploration licenses in Keathley Canyon, Gulf of Mexico, following an international bid procedure. The transaction is subject to approval from local authorities.
 
Signed a partnership agreement with Papua New Guinea for the exploration of oil and gas and identification of opportunities to develop the Country's resources.
 
Signed a strategic agreement with Petroleos de Venezuela, S.A. (PDVSA) for the exploration and development of two offshore Venezuelan fields through gas resources to be processed in an LNG project.
 
Started-up production at the Saxi and Batuque fields offshore Angola, following the start-up of Mondo in the first quarter, as part of the large Kizomba C development project. The Saxi and Batuque fields are expected to plateau at approximately 100 kboe/d (18 kboe/d net to Eni).
 
Signed a Memorandum of Understanding with Sonangol for the definition of an integrated model of cooperation and development. The agreement covers onshore development activities and construction of facilities in Angola designed tomonetize flaring gas.
 
Continued exploration success:
  • offshore Sicily (Italy), the new gas Argo 2 discovery (Eni 60%) was made, yielding approximately 6mmcf/d of gas in test production;
  • (ii) offshore Angola, the oil discovery Ngoma-1 was achieved in the operated Block 15/06 (Eni 35%).
In 2008, management expects to spend approximately €14.4 billion on capital expenditures up 36% from2007 (€10.59 billion in 2007). Major increases are expected in the development of oil and natural gas reserves, the upgrading of construction vessels and rigs, and the upgrading of natural gas transport infrastructures.
 
On the basis of planned cash outflows to fund capital expenditures, the acquisitions of Distrigaz and First Calgary, and shareholders remuneration, as well as proceeds from asset sales, management expects the Group's leverage to achieve a slightly lower level compared with 0.38 as reported in 2007. The projection is based on the Company's scenario for Brent prices at $100 per barrel for the full year.
 
The Company relies on cash flows from operating activities and proceeds from asset sales to support its liquidity requirements. The Company expects that these sources of liquidity will be adequate to meet its funding requirements associated with its capital-spending program, cash returns to shareholders, and required debt re-payments.
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