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February 15, 2013 1:21 pm
Eni said its fourth-quarter profit fell 3.6 per cent to €1.52bn as a strong performance in its oil exploration and production business was offset by a high tax charge.
Oil and gas output rose 7 per cent to 1.7m barrels a day, driven by a recovery in the Italian company’s Libyan operations. It said production would also grow this year, with the start-up of its huge Kashagan field in Kazakhstan.
Eni said its adjusted operating profit was €4.96bn, up 17 per cent on a year ago, but adjusted net profit fell to €1.52bn. Eni said the drop reflected in part the sale of its stake in gas distribution utility Snam – excluding the Snam contribution, profit would have been up 9 per cent.
Eni’s shares rose more than 2 per cent on Friday to close at €17.69.
In a statement, chief executive Paolo Scaroni said 2012 was a “record year” for exploration at Eni where discovered resources were “about six times yearly production” thanks to big finds in Mozambique, west Africa, the Barents Sea and Indonesia. The company reported reserve replacement of 147 per cent, much higher than its peers in the industry.
But analysts noted that Eni’s better than expected performance in its core exploration and production business was dragged down by weak results in the downstream, reflecting the economic downturn in Italy.
Eni said its natural gas sales fell 1.5 per cent in the quarter, and it reported €2.9bn of impairments in its gas and power, and refining and marketing divisions – a figure Citi analysts said represented 15 per cent of the capital employed in these businesses. Eni said the writedown was “driven by a reduced profitability outlook on the back of the ongoing European downturn”.
It said management expected “continued weak conditions in the European gas, refining and marketing of fuels and chemicals sectors. Demand for energy commodities is anticipated to remain sluggish due to the economic stagnation”.
Citi noted that Eni’s once-profitable retail marketing business had become lossmaking in 2012, in part due to an intense price war in the Italian market.
Eni said its capital expenditure would be flat this year at about €13bn, making it one of the few majors not to be increasing capital investment. The company has been improving its balance sheet through the disposal of its stakes in Snam and Galp, the Portuguese energy company. It proposed a 2012 dividend of €1.08 a share, up from €1.04 the previous year.
Stuart Joyner, of Investec, said Eni’s dividend yield was “attractive and sustainable” at just over 6 per cent versus a peer average of about 5 per cent – “but is effectively supported by debt and/or asset sales”. He said: “We remain sceptics on the strategy.”
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