By Eric Sylvers
MILAN-- Eni SpA on Wednesday joined the ranks of giant energy
companies upended by falling crude prices, reporting a more than
$2.5 billion net loss in 2014's fourth quarter and slumping
revenues.
The Italian energy giant said it would nonetheless keep ramping
up production of oil in 2015, another sign that the world's
oversupply of petroleum won't recede quickly. Other oil companies
like Total SA and the Organization of the Petroleum Exporting
Countries have said they would maintain or increase production
despite crude prices that have fallen by half in recent months.
Eni Chief Executive Claudio Descalzi has said crude prices,
trading at about $61 a barrel in London on Wednesday morning,
remained comfortably above the company's break-even point of about
$40-$45 a barrel, the price at which its projects are
profitable.
But the oil-price collapse forced Eni to write down the value of
its oil and product inventories by EUR860 million ($981 million)
and book asset impairments and other after-tax charges of EUR1.94
billion. It also resulted in a 60% drop in fourth-quarter operating
profit at the company's exploration and production business.
Overall, that amounted to a net loss of EUR2.34 billion.
The mounting losses come as Eni has increasingly focused on its
core business of exploring for oil and gas, where it has one of the
best recent track records in the industry.
Eni has had particular success in prospecting in risky
countries, especially in Africa where it is the largest Western
producer of oil and gas. Eni last year said it would trim exposure
to Africa, where it has faced difficulties including in the last
few years in Libya, as it sells stakes in some of its recent finds
and rebalances toward more stable developed countries.
Eni on Wednesday didn't give any indication of how recent unrest
in Libya is affecting its business. Last month, Mr. Descalzi said
things were improving in Libya, though since then oil fields have
come under siege as the country's civil war intensifies and
militants with ties to Islamic State have taken advantage of the
power vacuum.
Eni last month--following in the footsteps of its bigger rivals
Royal Dutch Shell PLC, BP PLC and Chevron Corp.--said it would cut
capital expenditures by as much as 15% in a bid to make up for
lower revenue. Eni Wednesday repeated its plan to cut spending, but
didn't give details. All industry players are struggling to find a
response to lower oil prices with Exxon Mobil Corp. preserving cash
by reducing its spending on a share buyback program.
Many oil executives have said they are preparing for a sustained
period of low oil prices. After dropping by more than half between
June and January to below $50 a barrel, Brent, the global
benchmark, has since staged a modest rebound, though few analysts
expect it to reach $100 a barrel again soon.
Every $1 drop in the price of Brent leads to a loss for Eni of
about EUR300 million euros in operating profit over the span of a
year.
Eni said it would increase its dividend, paying EUR1.12 a share
for the year, 2 cents more than in 2013. The slight increase had
been expected by many analysts though the announcement nevertheless
led to a sigh of relief from investors who feared a cut. Investec
last month argued that a significant cut in the dividend had
already been priced into the stock's value.
The company's share price traded about 2.8% higher at EUR16.18
in Milan, helped by the dividend news and by operating profit
having beaten analysts' expectations.
Adjusted net profit, a closely watched figure that strips out
one-time items and the change in the value of the company's
inventories, dropped by two-thirds in the quarter to EUR464
million. A higher tax rate, lower results from some investments and
a large devaluation of stakes Eni holds in two companies to cover
outstanding convertible bonds contributed to the loss.
Production in the fourth quarter rose 4.5% to 1.65 million
barrels of oil and equivalent natural gas volumes a day. Eni said
it expects production in 2015 to go up as new projects come online
or are ramped up in Angola, Congo, the U.K., the U.S. and
Norway.
For the full year, Eni said net profit fell by 74% to EUR1.33
billion from EUR5.16 billion in 2013.
Write to Eric Sylvers at eric.sylvers@wsj.com
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