By Eric Sylvers
MILAN-- Eni SpA on Wednesday joined the ranks of large energy
companies upended by falling crude prices, reporting a more than
$2.5 billion net loss in the fourth quarter of 2014.
The Italian oil and gas company said it would ramp up oil
production in 2015, another sign that the world's oversupply of
petroleum won't recede quickly. Other oil companies such as 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.
Crude prices, trading at about $61 a barrel in London on
Wednesday, remain 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 has 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, while
revenue fell 10% in the quarter to EUR26.83 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 past
few years in Libya, as it sells stakes in some of its recent finds
and rebalances toward more stable developed countries.
Chief Executive Claudio Descalzi said Wednesday on a call with
analysts that Eni is producing about 300,000 barrels a day in Libya
compared with about 240,000 a day last year. 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 has evacuated all of its nonlocal personnel
from its sites in Libya except for those working on offshore
platforms.
"We are constantly monitoring the situation (in Libya), which
remains very volatile," Mr. Descalzi said.
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.
Industry participants 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 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 euro cents more than in 2013. The slight increase
had been expected by many analysts, though some investors had
feared a cut.
The company's share price, helped by the dividend news and by
operating profit having beaten analysts' expectations, rose 3.4% in
Milan to close at EUR16.25.
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 decline.
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 rise 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 74% to EUR1.33
billion from EUR5.16 billion in 2013.
Write to Eric Sylvers at eric.sylvers@wsj.com
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