Eni SpA said second-quarter profit dropped 84 percent as its oil-and-gas contractor unit Saipem SpA booked $1 billion in writedowns earlier this week after a plunge in crude prices.
Adjusted net income declined to 139 million euros ($153 million) from 883 million euros a year earlier, Italy’s largest oil producer said Thursday in a statement.
Still, it proposed an interim dividend of 40 euro cents a share after maintaining cash flow at 5.7 billion euros in the first half, almost unchanged from a year earlier despite oil’s plunge. The company also raised its production target for the year after output grew 11 percent in the quarter.
“Beyond the Saipem debacle, Eni’s results are actually really impressive,” Oswald Clint, an analyst at Sanford C. Bernstein & Co., said in a note to clients. The stock climbed as much as 2.4 percent after falling earlier.
Crude producers have seen profit eroded by a 50 percent slump in prices over the past year amid a global oversupply. Integrated companies such as Eni -- those with refining operations as well as exploration and production -- have used the drop in oil costs to boost fuels output, helping to buoy the balance sheet.
The company’s refining, marketing and chemicals unit posted a 79 million-euro net adjusted profit, up from a loss of 204 euros a year earlier, helped by an almost fourfold increase in its refining margin to $9.13 a barrel.
The exploration and production unit’s adjusted net profit fell 50 percent to 571 million euros, even as output rose to 1.75 million barrels of oil equivalent a day. The Rome-based company now aims to grow output by more than 7 percent this year, compared with 5 percent earlier.
Refining and productivity gains were offset by an adjusted net loss of 717 million euros at the engineering and construction unit, which includes Eni’s 42.9 percent share in Saipem. The Milan-listed contractor on Tuesday said it plans to cut 8,800 jobs as writedowns of 929 million euros led to a net loss of 997 million euros in the second quarter.
After Eni first declared that Saipem isn’t a core part of its business, Chief Executive Officer Claudio Descalzi said earlier this year it may sell only a part of its stake in order to reduce debt.
“The main objective for us is to deconsolidate the debt,” Descalzi said in a phone interview on Bloomberg TV. “We are working on it,” he said, declining to provide more details.
“I don’t say that Saipem is a concern for us, it’s an opportunity,” Descalzi said. “I am happy about what they are doing now” in terms of cost cuts and refocusing its business, he said.
Eni expects to maintain leverage, or its ratio of net borrowings, within 30 percent at the end of the year, it said. In March, Eni became the first major oil company to announce a dividend cut following the slump in crude prices.
The shares rose 1.9 percent to 16.14 euros at 1:15 p.m. in Milan after declining as much as 1.4 percent.