By Eric Sylvers 

MILAN -- Eni SpA returned to profit in the fourth quarter and promised to continue asset sales and cost cuts, while its chief executive made his case for getting a new three-year term at the helm of the Italian oil-and-gas company.

Chief Executive Claudio Descalzi, whose current term comes due in April, struck an upbeat tone as he presented the company's four-year strategic plan that is based on crude oil being little changed this year before rising about 25% by 2020.

The Italian government owns 30% of Eni and appoints the CEO. There have been no indications yet on Mr. Descalzi's future.

While most financial analysts have lauded Mr. Descalzi's guidance of Eni through the steep drop in oil prices since 2014, the executive's future is in doubt because he has been ensnared in a corruption probe with Italian prosecutors seeking to send him to trial for his alleged role in a controversial Nigerian deal.

Mr. Descalzi denies any wrongdoing, and Eni's board has supported his bid for a new term as CEO, saying a company-commissioned investigation by an independent U.S. law firm into the allegations found the executive did nothing wrong. Prosecutors are also seeking a trial for other past and current Eni executives, all of whom have denied any wrongdoing.

Eni's success under Mr. Descalzi, most recently as CEO and previously as the head of the company's exploration and production unit, is underpinned by one of the industry's best track records in finding new sources of oil and gas. Turning a profit on new fields can take years, but Eni has been able to quickly monetize its exploration success by selling stakes to other companies, something Mr. Descalzi said he plans to continue.

"People were asking me in 2011, 2012, 2013 and every year since then if I can keep [the exploration success] going and every time I say this is my hope and focus," Mr. Descalzi told The Wall Street Journal.

Eni, Italy's largest company by market value, said it will pay a dividend of 80 euro cents ($0.84) on 2017 results, the same as the company is paying for 2016. That ensures a payout of about EUR3 billion for the Italian government, which is in a continual struggle to keep its deficit under control.

As part of its four-year plan, Eni will reduce capital expenditure this year by 18% compared with 2016. Following asset sales of EUR20 billion over the last four years, Eni is forecasting another EUR5 billion-EUR7 billion in disposals in the new plan.

"We have shown that we can deliver growth even while reducing capex," Mr. Descalzi said, noting that as one of the major achievements of his three years running the company.

Mr. Descalzi forecast that production of oil and gas would rise on average 3% a year through 2020.

Eni's net profit was EUR340 million in the three months to the end of December, compared with a loss of EUR8.45 billion in the same period of 2015, when Eni took a large charge to realign the value of its oil inventories to the drop in crude prices. The results beat analysts' expectations, pushing its shares up 3% to EUR14.96 each.

Like its peers, Eni profited from stronger crude prices toward the end of last year, but improved results in the fourth quarter didn't overcome a weak start to 2016 and the company posted a full-year loss of EUR1.46 billion, compared with a loss of almost EUR9 billion in 2015.

While the average price of Brent, the global benchmark, was 13% higher in the quarter compared with the same period of 2015, the full-year average price fell 17%.

Eni forecast crude will average about $55-$60 a barrel for the rest of 2017 before rising in coming years to reach $70 a barrel by 2020. Brent Wednesday traded at $56 a barrel.

Mr. Descalzi said Eni's overall business -- including all units and the cash it pays out in dividends -- breaks even with oil at $50 a barrel, while new oil and gas projects cover their costs with oil at $30 a barrel.

Write to Eric Sylvers at eric.sylvers@wsj.com

 

(END) Dow Jones Newswires

March 01, 2017 13:28 ET (18:28 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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