Eni Profit Falls on Weak Demand and Declining Refining MarginsAlessandra Migliaccio
Eni SpA, Italy’s biggest oil company, said first-quarter profit fell 14 percent on weak demand in its European businesses and declining refining margins.
Adjusted net income for the quarter dropped to 1.19 billion euros ($1.65 billion) from 1.39 billion euros a year earlier, the Rome-based company said in a statement. That’s higher than the 1.16 billion euro estimate of nine analysts surveyed by Bloomberg.
“The outlook for 2014 is in line with our expectations, benefiting from the ramp-up of new projects and restructuring activities,” Eni Chief Executive Officer Paolo Scaroni said in the statement. That’s “in the context of continued volatility in Libya and weakness of European demand.”
Eni has been struggling with reduced output from Libya due to strikes and other disruptions caused by political instability in the country. The Rome-based company also faces narrowing refining margins and falling prices in its gas and power business.
Eni’s Exploration and Production division posted a 21 percent decline in first quarter adjusted net income to 1.31 billion euros, hurt by the appreciation of the euro against the dollar and a higher adjusted tax rate.
Production rose 0.6 percent to 1.58 million barrels of oil equivalent a day as increases in the U.K. and Algeria helped offset halts in Libya and mature field declines. Eni said the figure excludes the effects of asset sales in Siberia.
The refining and marketing division’s loss deepened to 159 million euros from a loss of 51 million euros due to excess capacity and competition from Russian, Middle Eastern and U.S. imports.
The gas and power division benefited from the renegotiation of a Norwegian gas supply contract, posting an adjusted net income of 157 million euros in the quarter compared with a loss of 141 million euros in the same period a year ago.
Eni said it sees “continuing weak conditions” and no improvement in demand in the European industries of gas distribution, refining and marketing of fuels and chemical products. The company said it will continue with measures such as cost cuts, renegotiation of long-term gas supply contracts and capacity restructuring to help support its mid and downstream businesses.
The company is scheduled to elect a new CEO at its annual shareholder meeting on May 8. The Italian government, which controls 30 percent of the company through direct and indirect stakes, has nominated current head of Exploration and Production Claudio Descalzi for the position.
Eni managers are scheduled to hold a conference call with analysts at 4:30 p.m. CET.