EUR 850.00 For Business Accounts Only

Morningstar | Eni Reports Good 2Q 2018; Strong Exploration and Production Drive Results

Eni’s second quarter looked much like first-quarter 2018. Higher oil prices, paired with strong production growth, lifted adjusted operating profits in exploration and production but caused margins in the refining and chemicals segment to weaken. In total, adjusted operating profits increased to EUR 2.6 billion from EUR 1 billion last year, while adjusted net profits climbed to EUR 767 million from EUR 463 million. Cash flow generation remained strong in the second quarter, with adjusted net cash from operations of EUR 2.8 billion versus EUR 2.3 billion in the year-ago period. As a result, Eni confirmed its $55 per barrel of Brent cash break-even level for 2018 and plans to increase interim cash dividends by 3.75% to EUR 0.42 per share. Our fair value estimate and no-moat rating are unchanged.

Year over year, production grew 5.2% to 1,863 thousand barrels of oil equivalent per day, driven by ramp-ups, higher output from Kashagan and Val d’Agri, and newly acquired concessions, which more than offset PSA effects and natural declines of mature fields. Additionally, currency headwinds of 8% were more than counterbalanced by higher Brent prices (up 49% in dollar terms), lifting adjusted net profit for the exploration and production segment to EUR 1,084 million from EUR 561 million last year. Lower relative prices of products versus higher feedstock costs resulted in a weaker refining margin of $4.1/barrel compared with the year-ago period. Adjusted net profit for refining, marketing, and chemicals fell to EUR 19 million versus EUR 226 million last year. In its gas and power segment, Eni now expects 9 million (previously 6 million) tonnes per year of LNG contracted volumes to be added by year-end, which should support cash generation and falls in line with our expectation of a structurally strengthening segment.