Eni Rises in Milan as Dividend Boost Counters Profit Decline

Eni SpA, Italy’s largest oil company, rose the most in five months in Milan trading after increasing its dividend 3.7 percent even as profit shrank.

The shares advanced as much as 3.8 percent, the biggest gain since Sept. 14, and traded up 2.9 percent at 17.83 euros as of 4:51 p.m. local time.

Eni proposed a 2012 dividend of 1.08 euros a share, up from 1.04 euros a year earlier, according to a statement today. The company reported a 3.6 percent drop in fourth-quarter adjusted net income to 1.52 billion euros ($2 billion) as taxes climbed.

“The dividend yield is attractive and sustainable, we think, at just over 6 percent versus a peer average of around 5 percent, but it is effectively supported by debt and asset sales,” analysts at Investec Bank Plc wrote in a note. “We remain skeptics on the strategy.”

Eni is boosting cash and trimming debt by selling stakes in Italian gas network Snam SpA and Portuguese oil producer Galp Energia SGPS SA. The Rome-based company, whose borrowings rose in 2011 as the Libyan conflict reduced output, has also sold bonds to bolster its balance sheet and fund operations in 85 countries including Algeria, Kazakhstan and Russia.

Libyan Output

Eni said today it raised about 4.5 billion euros from the Snam and Galp sales. It reported a 7 percent increase in 2012 production to 1.7 million barrels a day after restoring output in Libya, where it expects volumes to return to pre-war levels of about 285,000 barrels a day by the end of the year.

A forecast increase in total production in 2013, underpinned by new projects in Kazakhstan, Angola and Algeria, will help counter higher financial charges and a weaker performance in its natural-gas and refining divisions, Eni said.

“Management expects continuing weak conditions in the European gas, refining and marketing of fuels, and chemicals sectors,” the company said today, posting a 1.5 percent decline in gas sales to 95.3 billion cubic meters. “Demand for energy commodities is anticipated to remain sluggish due to the economic stagnation.”

Eni’s gas, power, refining and marketing businesses represent a “domestic drag on upstream success,” analysts at Citigroup Inc. wrote in a note. “Consensus overestimates the potential recovery in earnings from these businesses.”

Eni this month stood by its Chief Executive Officer Paolo Scaroni as a probe into alleged bribery by Saipem SpA, where it’s the largest shareholder, widened to include him. Several executives have already stepped down amid an Italian probe into the award of oil-services contracts to Saipem in Algeria.

Scaroni said today that Saipem had been an “excellent” investment and a review of that investment wasn’t a priority, responding to questions about a possible sale. He reiterated that neither he nor Eni are implicated in the probe.