Eni Returns to Profit Amid Corruption Probe -- Update
March 01 2017 - 01:43PM
Dow Jones News
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)
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