Eni’s profits halve in first quarter but remain ahead of forecasts

Share price increases in morning trading as company beats expectations and announces higher buyback target

Eni's chief executive Claudio Descalzi speaking during the opening ceremony of the commissioning of the new oil and gas field, exploited by Eni and its partner Petroci in Port-Bouet, Ivory Coast, last November.
Eni's chief executive Claudio Descalzi speaking during the opening ceremony of the commissioning of the new oil and gas field, exploited by Eni and its partner Petroci in Port-Bouet, Ivory Coast, last November.Photo: AFP/SCANPIX

Italian oil major Eni saw its profits almost halve in the first quarter against this time last year, but the results the company reported on Wednesday were ahead of analyst consensus.

Eni posted €1.58 billion ($1.69 billion) in adjusted net profit for the January-March period, or 49% down on the same period in 2023, the company showed in its latest financial update.

The decrease was related to a decline in natural gas prices in Europe as well as lower refining margins against last year, Eni said.

Still, the result was slightly higher than analyst expectations, which had estimated first-quarter adjusted net profit to come in at €1.56 billion.

Adjusted operating profit came in 9% above consensus, at €3.02 billion, but 35% down year-on-year.

Eni’s net profit for the period was 49% down year-on-year to €1.21 billion.

On Tuesday, the major announced it had reached an agreement to merge most of the upstream assets of its UK operations with UK independent Ithaca Energy.

Hydrocarbons production totalled 1.74 million barrels of oil equivalent per day in the quarter. This was 5% above last year, and again a touch ahead of analyst consensus, of 1.71 million boed.

The higher output was related to project ramp-ups in Ivory Coast and Mozambique, as well as the acquisition of Neptune Energy, which was concluded earlier this year.

Chief executive Claudio Descalzi said Eni had “accelerated … the transformation of our portfolio through different high value platforms of growth in both the legacy and transition businesses”.

“With the closing of the acquisition of Neptune Energy and the announced UK focused combination with Ithaca Energy in the upstream, we will reinforce our exposure to gas and to OECD countries,” Descalzi said.

The chief executive confirmed the company will increase the buyback programme of Eni shares for 2024 by 45% to €1.6 billion, from a previous target of €1.1 billion.

Eni’s stock was up by 1.17% this morning following the release of the results.

Biraj Borkhataria, head of global energy research at RBC Capital Markets commented on Tuesday: “The key drivers of the earnings beat were higher earnings from [Eni-controlled utility] Plenitude, as well as the ramp up in its renewable portfolio. Upstream volumes and earnings came in higher than expectations.”

Ahead of the results, RBC Capital Markets noted the Eni stock has been underperforming against the SXEP energy index (which includes all of the top European oil majors as well as retailers Neste and Orlen) this year so far. SXEP has grown 7% in 2024 to date, while Eni has dropped 2%.

Eni said its total capital expenditure for the year is projected at around €9 billion.

Upstream production guidance for the year was also confirmed at ranging between 1.69 and 1.71 million boed for the year, in line with what the company estimated at its recent capital markets day.

At the event in March, Descalzi said the company’s oil and gas production was expected to increase by up to 4% in the next four years through 2027, off the back of around €5 billion of annual spending in upstream projects in the same time frame. The investment total was around 20% lower than the previous four years.

Eni has a target to increase the share of gas in its upstream portfolio to more than 60% by 2030.

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Published 24 April 2024, 06:21Updated 24 April 2024, 07:38
EniClaudio DescalziGuido BruscoEuropeWestern Europe