Eni Cuts Output Goal on Libya as Profit Misses Estimates

Eni SpA, Italy’s largest energy producer, cut its full-year production target because of the disruption to Libyan production as second-quarter earnings missed analysts’ estimates.

Adjusted net income declined 14 percent to 1.44 billion euros ($2.06 billion) from 1.67 billion euros a year earlier, the Rome-based company said today in a statement. That was below the 1.6 billion-euro average estimate in a Bloomberg survey of 16 analysts. Output fell 15 percent to the equivalent of 1.49 million barrels of oil a day.

Results were hurt by the “disruption in supply of oil and gas from Libya which affected all our business activities,” Chief Executive Officer Paolo Scaroni said in the statement. “Gas and power results also suffered from the high supply costs of natural gas.”

The ongoing halt to Libyan oil production caused by the conflict between Muammar Qaddafi and rebel forces is damaging oil and gas producers such as Eni and Total SA of France that had been active in the country. Eni’s production from Libya has fallen to around 50,000 barrels of oil equivalent a day from 280,000 barrels.

“The second-quarter results may lead us to trim our full-year estimates,” Equita Sim SpA analyst Domenico Ghilotti wrote in a note to investors today. He has a buy rating on the stock with a target price of 20.5 euros.

Stock Performance

Eni retreated 1.3 percent to 15.18 euros in Milan. The stock is down 7.1 percent this year.

Full-year output will be below the 1.82 million barrels of oil equivalent recorded in 2010, based on a price of $115 a barrel, the producer said. In February, Eni had forecast an increase in production. Some of the lost Libyan production will be compensated by ramping up existing fields and starting new ones in the U.S., Australia, Egypt, Italy and Algeria.

Scaroni said he continues to see “solid full-year results” which allowed the company to propose an interim dividend of 0.52 euro per share.

Earnings advanced 17 percent in exploration and production, while profit fell 54 percent at Eni’s gas and power division. Refining and marketing had a loss of 79 million euros.

Profitability at the gas division was hurt by increased competition and costly gas procurement contracts that are still being renegotiated, the company said. Eni predicted continuing weakness in the European gas market in the months to come.

Discussions with OAO Gazprom, Russia’s gas export monopoly, and Algeria’s state-owned Sonatrach are “progressing constructively” over contracts, according to slides posted on the company’s website.

Refining margins are expected to remain unprofitable due to low demand and excess capacity, according to Eni. The refining utilization rate fell to 73 percent in the second quarter from 82 percent in the first three months of the year.

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