Italy's Eni Posts Loss on Weak Oil Price -- 2nd Update
July 29 2016 - 9:12AM
Dow Jones News
By Eric Sylvers
Eni SpA swung to a loss in the second quarter as the low price
of crude oil led to a steep drop in revenue, while the forced
shutdown of a domestic oil field in southern Italy resulted in a
drop in production.
Like BP PLC, Royal Dutch Shell PLC and other rivals that have
reported weaker earnings in the second quarter, Eni continues to
search for ways to confront the drop in oil prices. In March, the
Italian company promised EUR13 billion ($14.40 billion) in cost
cuts and assets sales by 2019. The cost cuts are mostly to come
from renegotiating supplier contracts, while the assets sales will
be of stakes in recently discovered oil and gas fields.
Eni, which is 30%-owned by the Italian government, is looking to
sell stakes in several large oil and gas projects, including one
off the coast of Mozambique. Eni expects to announce that sale,
which could net the company about EUR3 billion, before the end of
the year. Exxon Mobil Corp. is in advanced talks to buy a stake in
the Mozambique project, people familiar with the negotiations have
said.
Brent crude, the global benchmark, averaged $46 a barrel in the
second quarter. While that was about a third better than the first
quarter, it was still down sharply from the $62 barrel achieved in
the second quarter of last year. On Friday Brent traded at about
$43 a barrel with many analysts expecting the price to remain under
pressure in coming months as concerns grow that there is an
oversupply in part due to a resurgence of U.S. shale oil.
Chief Executive Claudio Descalzi in an interview said he sees
crude oil averaging $40-$45 for the rest of this year and $50-$55
in 2017.
Eni is ensnared in a legal dispute in the Italian region of
Basilicata where prosecutors forced the shutdown of the Val d'Agri
complex pending an investigation into illegal waste trafficking.
The shutdown is costing Eni about 60,000 barrels of oil a day.
Royal Dutch Shell also has a stake in the oil field.
Val d'Agri, which has been shut down since April as prosecutors
investigate, should be restarted by the end of next month.
"It's in the hands of the prosecutors, but I think we will be up
and running in Val d'Agri in the coming weeks and anyway by the end
of August," Mr. Descalzi said.
Hydrocarbon production fell 2.2% in the quarter to 1.73 million
barrels of oil equivalent a day though Eni confirmed guidance for
full-year production to be in line with 2015 as it ramps up new
projects. In the first half, production was up 0.5%.
The company repeated it can pay out its current yearly
dividend--80 euro cents a share--without resorting to debt or
unplanned asset sales if oil stays around $50 a barrel. Eni pays
out its dividend in two tranches and Friday, as expected, said it
would pay an interim dividend of 40 cents a share.
The net loss from continuing operations was EUR446 million in
the second quarter compared with a profit of EUR498 million in the
same period a year earlier. Revenue plunged by a third to EUR13.42
billion.
Write to Eric Sylvers at eric.sylvers@wsj.com
(END) Dow Jones Newswires
July 29, 2016 08:57 ET (12:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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