Eni announcee its group results for the first quarter of 2010 (unaudited).
Paolo Scaroni, Chief Executive Officer, commented, "Eni delivered solid operating and financial results for the first quarter of 2010, in spite of ongoing market challenges. We continue investing to drive growth and efficiency as we maintain our focus on creating value for our shareholders."
Adjusted operating profit
Adjusted operating profit was $5.78 billion, up 15.4% from the first quarter of 2009. This was due to an excellent operating performance reported by the Exploration & Production division driven by increased oil prices and production growth. The Petrochemical division also improved versus a year ago as operating losses were cut in half. Theses positive trends were partially offset by reduced results reported by both the Refining & Marketing and the Gas & Power divisions.
Adjusted Net Profit
Adjusted net profit was $2.43 billion, up 3.6% compared with a year ago, as a better operating performance was partly absorbed by the negative impact associated with an increased adjusted tax rate (from 49% to 53%).
Capital expenditures for the quarter amounted to $3.71 billion mainly related to continuing development of oil and gas reserves, the construction of rigs and offshore vessels in the Engineering & Construction segment and the upgrading of gas transport infrastructure.
The main cash inflows for the quarter were net cash generated by operating activities amounting to $6.08 billion and proceeds from divestments of $974 million. These inflows were used to fund the financing requirements associated with capital expenditures ($3.71 billion) and to pay down finance debt. As of March 31, 2010 net borrowings amounted to $28.12 billion, representing a decrease of $2.67 billion from year end 2009, notwithstanding negative exchange rate translation differences (down approximately $494 million).
Return on Average Capital Employed (ROACE) calculated on an adjusted basis at March 31, 2010 was 9.1%. The ratio of net borrowings to shareholders’ equity including minority interest – leverage – decreased to 0.39 at March 31, 2010 from 0.46 as of December 31, 2009.
Operational Highlights and Trading Environment Fourth Quarter
Exploration & Production
The Perla 2 well, located in the Cardón IV Block, in the shallow waters of the Gulf of Venezuela, was successfully drilled. The results exceeded the initial resource estimation by 30% with potential for further improvements to be defined through the future wells. This result confirms Perla as a world-class gas discovery, one of the most significant in recent years, and the largest ever in Venezuela.
Two oil discoveries were made offshore in the 15/06 block (Eni 35%, operator) with the exploration wells Nzanza-1 e Cinguvu-1, which have been flowing at more than 1,600 and 6,400 barrels per day respectively.
As part of the transaction to divest a 51% stake in the joint-venture Eni-Enel OOO SeverEnergia to Gazprom, based on the call option exercised by the Russian company on September 24, 2009, Eni collected a second installment of the transaction by March 31, 2010. This amounted to $703 million (as converted at the EUR/USD exchange rate of 1.35 as of the transaction date, corresponding to approximately $710 million, approximately 75% of the whole amount).
Main production start-ups
In line with the Company’s production plans, production was started at the Annamaria B field (Eni 90% operator), located in the offshore section between Italy and Croatia, which flowed at approximately 28 mmcf/day. A production plateau of 42 mmcf/day (7,500 barrels of oil equivalent) is targeted. Other start-ups were achieved in Algeria, China and Congo.
In what remains an uncertain energy environment, Eni forecasts a modest improvement in global oil demand and a Brent price of $76/barrel in 2010. Gas demand in Europe and Italy is expected to recover gradually from the steep decline suffered in 2009, which mainly impacted the industrial and thermoelectric sectors at a time when new import capacity was coming on line. The Company faces a challenging refining environment, excluding any significant recovery in industry fundamentals, which will result in prolonged weakness in refinery margins.
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