Eni Beats Estimates as Libya Recovery Counters Gas Charges

Eni SpA (ENI)’s third-quarter profit beat analyst estimates as gains from recovering Libyan output after its civil war countered 909 million euros ($1.2 billion) in charges Italy’s largest oil company posted mainly from gas.

Adjusted net income increased to 1.82 billion euros from 1.80 billion euros a year earlier, the Rome-based company said today in a statement. The figure beat the 1.56 billion-euro average estimate of 14 analysts surveyed by Bloomberg.

“Management continues to expect unfavourable trading conditions to continue in the European gas sector,” said Dominique Patry, an analyst at Credit Agricole Cheuvreux SA. Libyan output “will help the company absorb the impact of project rescheduling at important fields.” The growth helps to counter a shutdown of the Elgin-Franklin platform off the U.K. and losses in Nigeria from sabotage and theft, Patry said.

Eni, planning to increase production about 3 percent a year through 2022, has been working to restore output in Libya after shutting operations during last year’s war. The company reported special charges on operating profit from continuing operations mainly from price revisions in long-term gas purchase contracts.

In September, Eni forecast a 604 million-euro charge on net income after arbitration with GasTerra BV over historical fuel supplies by the Dutch trading company from 2003 to 2006.

Higher Output

Output expanded 16 percent to 1.72 million barrels of oil equivalent a day, Eni said. It expects to pump about 240,000 barrels of oil a day in Libya this year and return to the pre- unrest level of about 285,000 barrels by the end of the next year, Chief Operating Officer Claudio Descalzi said Oct. 11. The company forecast production will increase this year.

Eni expects pumping at the Total SA-operated Elgin-Franklin fields to resume in the first quarter, Descalzi told investors on a conference call. It also expects extraction at the Zubair field in Iraq to rise to 350,000 barrels of oil equivalent next year, up from a current rate of about 250,000 barrels a day.

Output growth was “supported by the continued improvement of the Libyan output,” Chief Executive Officer Paolo Scaroni said in the statement. “Our excellent growth prospects will be further fuelled by our portfolio of development projects and our extraordinary success in exploration activities.”

Benchmark Brent crude futures fell 2.4 percent in the third quarter from a year ago as slowing global growth curbed demand.

Galp Energia SGPS SA (GALP), Portugal’s largest oil producer, said yesterday that third-quarter profit climbed 58 percent to 98 million euros on higher output from its Brazilian projects.

Selling Stake

Eni is selling down its 28 percent stake in Galp.

“We have received quite recently a lot of interest from many financial institutions” in the Galp stake, Chief Financial Officer Alessandro Bernini told investors. “Based on these demonstrations of interest a market transaction could be easily realized very soon. But since the benchmark is the prevailing market price today, this doesn’t satisfy our minimal expectation.”

In October, Eni completed a sale of 30 percent of Italian gas distributor Snam SpA (SRG) to state lender Cassa Depositi e Prestiti for about 3.5 billion euros. In the last two months, CDP sold about 2.1 billion euros of shares in the oil company, reducing its stake to 25.8 percent. Debt fell to 19.6 billion euros in the quarter from 26.9 billion euros in the second quarter after the disposal of Snam, Eni said.

Eni, together with Exxon Mobil Corp. and Royal Dutch Shell Plc, plans to start production in March at Kazakhstan’s Kashagan, one of the world’s biggest oilfields. The partners were originally scheduled to start pumping at the site in 2005.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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