Eni Posts Fourth-Quarter Loss as Lower Oil Prices Bite

  • Oil, gas production rose 14% to highest in five years
  • Italian company maintains dividend, seeks deeper cost cuts

Eni SpA reported a fourth-quarter loss after the slide in energy prices deepened even as the company’s oil and gas production rose to the highest in five years.

Italy’s largest oil producer posted an adjusted net loss of 379 million euros ($419 million) after a profit of 250 million euros a year earlier. That compares with average estimates for a 225 million-euro adjusted profit in a Bloomberg survey of eight analysts. Hydrocarbon production rose 14 percent as the company’s exploration and production unit exceeded analysts’ expectations. The shares gained 4.2 percent.

The worst crude-market collapse in a generation has slashed earnings for producers from Exxon Mobil Corp. to BP Plc and the industry is struggling to strike a balance between maintaining strong finances and making shareholder payouts. Eni was the first major oil company to cut its dividend last year and was followed by Repsol SA Thursday. Eni said it will maintain the payout this year, offsetting the impact of falling oil prices by driving down costs.

Eni is working to make itself “even better organized to compete in a low energy price environment,” Chief Executive Officer Claudio Descalzi said in the statement. “We are continuing Eni’s transformation process with the goal of making the group even stronger and better able to operate in difficult external conditions.”

Strong Volumes

Hydrocarbon production for the quarter rose to 1.88 million barrels of oil equivalent a day, above the average of 1.77 million estimated by five analysts. The gain was driven by new fields in Angola and Venezuela and a rise in output in Libya. The company said it expects total production to be flat this year.

“Volumes were strong” and the company’s exploration and production unit exceeded expectations, Goldman Sachs Group Inc. said in a research note. “We view the results positively, particularly given the under performance of the stock into the results.”

Including writedowns in the value of assets because of the plunge in energy prices, the company reported a loss of 6.9 billion euros for the quarter. The bulk of the impairments were in the exploration and production segment, where it wrote down the value of assets by 4.4 billion euros due to “projections of lower hydrocarbon prices in the medium to long term.” Eni now assumes a reduced long-term price outlook for Brent crude of $65 a barrel from a previous view of $90.

Eni plans a further decrease in its capital expenditure of 20 percent this year, exceeding the 17 percent drop last year.

The company’s credit ratings were placed on watch for possible downgrade earlier this month by Standard & Poor’s. The decline in oil prices “could result in us lowering the A- rating by one notch,” the ratings company warned on Feb. 1. Eni said Friday its net debt fell to 16.9 billion euros from 18.4 billion euros in September.

Shares of the company rose 4.2 percent to 12.60 euros in Milan amid a broader rally of energy stocks, paring this year’s decline to 6.2 percent.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE