Eni Rides Success of Zubair License, Perla Find Exiting 3Q
Eni has announced unaudited results for the third quarter and the first nine months of 2009.
- Adjusted operating profit: down 49.7% to €3.12 billion for the third quarter and down 46.7% to €9.42 billion for the first nine months of 2009
- Adjusted net profit: down 60.5% to €1.15 billion for the third quarter and down 53.6% to €3.81 billion for the first nine months of 2009
- Net profit: down 57.8% to €1.24 billion for the third quarter and down 59% to €3.98 billion for the first nine months of 2009
- Cash flow: €2.03 billion for the third quarter (€9.66 billion for the first nine months of 2009)
- Oil and natural gas production: down 4.9% to 1.68 million barrels per day for the third quarter (down 2.6% for the first nine months of 2009). When excluding OPEC cuts, the decrease was 3.5% and 1.1%, respectively
- Natural gas sales: up 11.7% to 22.52 billion cubic meters for the third quarter (up 2.9% for the first nine months of 2009)
- Made a large gas discovery offshore Venezuela
- Awarded license for the development of the giant Zubair field, one of the biggest oil properties in Iraq
Paolo Scaroni, Chief Executive Officer, commented, "Eni has delivered solid results in the quarter despite significantly reduced demand and lower hydrocarbons prices. The Company's recent achievements, including winning a licence to develop the giant Zubair oil field in Iraq and the large Perla gas discovery off the Venezuelan coast, mark decisive progress in our strategy to build leading positions in the world's fastest-growing production areas."
Adjusted Operating Profit
Adjusted operating profit for the quarter was €3.12 billion, down 49.7% from the third quarter of 2008. For the first nine months of 2009, adjusted operating profit was €9.42 billion, down 46.7% from a year ago. These results reflected the weaker operating performance of the Exploration & Production division which was impacted by sharply lower oil and gas prices. Also the downstream oil business posted significantly lower operating results due to unprofitable refining margins.
Adjusted Net Profit
Adjusted net profit for the quarter was €1.15 billion, down 60.5% and for the first nine months of 2009 was €3.81 billion, down 53.6%. These results reflected a weaker operating performance, lower results reported by equity-accounted entities and higher adjusted tax rate (up 3.4 percentage points in the quarter; up 0.9 percentage point in the first nine months of 2009).
Capital expenditure was €2.96 billion for the quarter and €9.8 billion for the first nine months of 2009 mainly related to continuing development of oil and gas reserves, the upgrading of gas transport infrastructure and the construction of rigs and offshore vessels in the Engineering & Construction segment.
In the quarter net cash generated by operating activities amounted to €2,034 million. Proceeds from disposals were €292 million mainly related to the first tranche of total cash consideration from the divestment to Gazprom of a 51% stake in OOO SeverEnergia being Eni's share €155 million. These inflows were used to fund part of the financing requirements associated with capital expenditure (€2,957 million) and the payment of the 2009 interim dividend (€1,811 million) to Eni shareholders. As a result, net borrowings 2 as of September 30, 2009 increased by €2,185 million from June 30, 2009.
In the first nine months of 2009 net cash generated by operating activities amounted to €9,655 million. Proceeds from disposals were €3,567 million mainly related to the divestment of a 20% interest in Gazprom Neft based on the call option agreement with Gazprom which yielded cash consideration of €3,070 million. Further cash proceeds related to the first tranche of total cash consideration on the divestment of a 51% stake in OOO SeverEnergia (€155 million) and the divestment of certain non strategic assets in the Exploration & Production division (€0.4 billion). Capital transactions mainly related to a share capital increase (€1,542 million) subscribed to by Snam Rete Gas minorities following restructuring of Eni's regulated gas businesses in Italy. These inflows were used to fund part of the financing requirements associated with capital expenditure (€9,801 million), the payment of Eni's dividends (€4,166 million, of which €1,811 million related to the 2009 interim dividend) and the completion of the Distrigas acquisition (€2,045 million). At September 30, 2009 net borrowings amounted to €20,540 million increasing by €2,164 million from December 31, 2008 (€18,376 million).
Exploration & Production
Oil and natural gas production for the third quarter 2009 amounted to 1,678 kboe/d, representing a decrease of 4.9% from the third quarter of 2008. For the first nine months of 2009, oil and natural gas production amounted to 1,730 kboe/d, representing a decrease of 2.6% from the first nine months of 2008. These declines were mainly due to OPEC production cuts, continuing security issues in Nigeria, lower production uplifts associated with weak European gas demand and mature field declines. These negatives were offset by a continuing production ramp-up in Congo, USA, Kazakhstan, Egypt and Venezuela, as well as positive price impacts reported in the Company's PSAs.
On October 13, 2009, following a successful first round bid, Eni led a consortium of international companies which was awarded a service contract to develop the Zubair giant oil field (Eni 40%) under a 20-year term with an option for further 5 years. The Eni working interest of 40% may be subject to fractional adjustments. The Zubair field currently produces 195 kboe/d and is expected to plateau at 1.13 mmboe/d following implementation of a field development plan within 2016.
A large gas discovery was made in the Perla field, located in the Cardon IV block (Eni 50%) in the Gulf of Venezuela, yielding during flow test 600,000 cubic meters per day (approximately 3,700 boe/d) during flow tests. The field has been estimated to contain a reserve potential of more than 160 billion cubic meters of gas (1 billion of barrels of oil equivalent).
On September 28, 2009, Eni acquired operatorship of the offshore exploration permits Cape Three Point and Cape Three Point South (Eni 47.2%), off the Ghanaian coast.
On August 12, 2009, Eni and Congo's Ministry of Petroleum signed a strategic partnership with the aim to develop the host country's oil reserves. Eni intends to deploy its comprehensive cooperation model in pursuing new ventures whereby the traditional oil business is integrated with sustainable development initiatives designed to support the host countries' population in achieving high social and economic standards.
On September 30, 2009, Eni was awarded the exploration licence of onshore Sukhpur block, following a competitive bid procedure. The Sukhpur block is located in proximity to the Eni-operated producing area of Bhit (Eni 40%), and significant operating synergies are expected in future development activities.
On September 23, 2009, Eni and its Italian partner Enel in the 60-40% owned joint-venture OOO SeverEnergia completed the divestment of the 51% stake in the venture to Gazprom for cash consideration of $1,566 million (Eni's share being $940 million) to be paid in two tranches, in line with the framework agreement signed in May 2009. On September 24, 2009 Eni collected the first tranche of the consideration corresponding to approximately 25% of the whole amount for €155 million (or $230 million at the EUR/USD exchange rate of 1.48 as of the transaction date). The second tranche of the consideration will be paid by March 2010 ($710 milion). A gain amounting to €100 million was recognized in the profit for the third quarter. The gain was associated with interest income at an annual rate of 9.4% accruing on the initial investment in the venture when it was acquired on April 4, 2007 based on the contractual arrangements between Eni and Gazprom.
SeverEnergia owns 100% of three Russian companies operating in the development of gas reserves in the Yamal Nenets region in Siberia. The parties are committed to producing first gas by June 2011 from the Samburskoye field targeting a production plateau of 150 kboe/d within two years from the start of production.
On October 19, 2009 Eni and its commercial partners in Turkey and Russia, working on the construction of the Samsum-Ceyhan pipeline, signed a Memorandum of Understanding committing to discuss the definition of the economic and contractual conditions for Russian companies to participate in the Samsun-Ceyhan Project in order to ensure the volume of crude that would guarantee the economic sustainability of the project. On the same occasion, representatives of the governments of Italy, Turkey and Russia reaffirmed their support to the project which will build a by-pass to facilitate safer transport across the Bosphorus and Dardanelles Straits as well as reducing the impact on the region's complex and delicate ecosystem.
In the latest months, we achieved a number of field start-ups:
- Blacktip (Eni 100%, operator) offshore Australia;
- North Bardawil (Eni 60%, operator) off the Egyptian coast;
- Tombua-Landana (Eni 20%) offshore Angola;
- Thunder Hawk (Eni 25%) in the Gulf of Mexico;
- Tyrihans (Eni 6.23%) offshore Norway;
- PY-1 (Eni 47.16%) offshore India.