Eni announces results for the third quarter and the first nine months of 2008

Rome, October 31, 2008 - Eni, the international oil and gas company, today announces its group results for the third quarter and the first nine months of 2008 ⁽¹⁾ (unaudited).

Paolo Scaroni, Chief Executive Officer, commented:

“Eni has delivered another quarter of excellent results driven by strong production growth and good operational performance in all our divisions. I am particularly satisfied by our record cash generation that enables us to finance growth and provide sector-leading returns to shareholders while preserving the Company’s solid capital structure.‘

(a) For a detailed explanation of adjusted operating profit and net profit see page 26.
(b) Profit attributable to Eni shareholders.
(c) Fully diluted. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented.
(d) One ADR (American Depositary Receipt) is equal to two Eni ordinary shares.

(1) This press release represents the quarterly report prepared in compliance with Italian listing standards as provided by article 154-ter of the Italian code for securities and exchanges (Testo Unico della Finanza).

Financial highlights

Third quarter of 2008

• Adjusted operating profit was €6.2 billion, up 46.1% from the third quarter of 2007. This was due to the better operating performance of the Exploration & Production division, driven by higher realizations and production growth. In addition, the Refining & Marketing division reverted to a better level of profitability.
  
• Adjusted net profit was up 52.7% to €2.89 billion, mainly as a result of the stronger operating performance.
  
• Capital expenditures for the quarter were up 16.2% from a year ago to €3.11 billion mainly related to continuing development of oil and gas reserves, the upgrading of gas transportation infrastructure and the construction of rigs and offshore vessels in the Engineering & Construction division.
  
• Net cash generated by operating activities amounting to €5.73 billion was used to fund a part of financing needs associated with expenditures on capital and exploration projects (€3.11 billion), other funding requirements associated with investing activities (€0.6 billion), the payment of the 2008 interim dividend (€2.36 billion) and the repurchase of 18.1 million own shares at a cost of €369 million. Net borrowings (2) in the quarter increased by €1.26 billion to €17.82 billion from the end of June 2008. This increase was affected by negative foreign currency translation differences of approximately €0.5 billion.

First nine months of 2008

• Adjusted operating profit for the first nine months of 2008 was €17.72 billion, up 29.4% from a year ago, due to a better operating performance reported by the Exploration & Production division, and, to a lesser extent, the Engineering & Construction division. These improvements were partly offset by a decline in operating profit reported by the Company’s downstream businesses, particularly the Petrochemical division which reported a big operating loss amid an industry downturn.
  
• Adjusted net profit was up 21.6% to €8.26 billion, mainly as a result of the stronger operating performance, that was partly offset by a higher tax rate on adjusted basis (from 49.1% to 52.4%).
• Net cash generated by operating activities amounting to €15.68 billion and coupled with cash from divestments for €529 million was used to fund a part of Eni’s financing needs associated with expenditures on capital and exploration projects (€9.87 billion), payment of dividend by Eni SpA (€4.91 billion, of which €2.36 billion related to 2008 interim dividend), the completion of the acquisition of Burren Energy Plc (€1.7 billion) and the repurchase of 34.7 million own shares at a cost of €757 million. At September 30, 2008 net borrowings amounted to €17.82 billion and increased by €1.5 billion from December 31, 2007.
  
• Return on Average Capital Employed (ROACE)(3) calculated on an adjusted basis for the twelve-month period ending September 30, 2008 was 20.0% (19.5% for the twelve-month period ending September 30, 2007).
• Ratio of net borrowings to shareholders’ equity including minority interest - leverage (3)- was 0.37, substantially unchanged in comparison with the end of 2007 (0.38).

(2) Information on net borrowings composition and borrowings facilities is furnished on page 36.
(3) Non-GAAP financial measures disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided for by CESR Recommendation No. 2005-178b. See pages 36 and 39 for leverage and ROACE, respectively.

Operational highlights and trading environment

Third quarter of 2008

• Oil and natural gas production for the third quarter amounted to 1,764 kboe/d, representing an increase of 6.3% from the third quarter of 2007. This improvement reflected contribution from Burren assets that were acquired in Congo and Turkmenistan early in 2008 (for an overall increase of 24 kboe/d), and continuing production ramp-up in Angola, Congo, Egypt, Pakistan and Venezuela. Production growth was also boosted by lower facility downtime particularly in the UK where the Cats pipeline was halted for an accident occurred in the third quarter of 2007. These improvements were partially offset by hurricane disruptions in the Gulf of Mexico (down 25 kboe/d) and mature field declines in Norway and Italy. Higher oil prices resulted in lower volume entitlements in Eni’s Production Sharing Agreements (PSAs) and similar contractual schemes, down 60 kboe/d. When excluding the impact of lower entitlements in PSAs, production was up approximately 10%.
  
• Eni’s worldwide natural gas sales were 20.17 bcm, down 0.8% as lower sales volumes were reported in Italy, partly offset by higher international sales that were up 3.6%, mainly as a result of organic growth achieved in European markets.
  
• Oil and gas realizations for the quarter were up 47.1% driven by strength in Brent prices (up 53.3% from the third quarter of 2007).
  
• The trading environment favorably influenced natural gas marketing margins due to favorable trends in the euro vs. the dollar exchange rate and energy parametres.
  
• Realized refining margins were supported by the widening of heavy crude differentials in the Mediterranean area that enabled Eni’s complex refineries to capture the advantage to process low-cost feedstock, as well as higher relative prices of certain products.

First nine months of 2008

• Oil and natural gas production for the first nine months of 2008 was 1,777 kboe/d, representing an increase of 3.9% compared with the first nine months of 2007. This improvement was mainly driven by the benefit of the assets acquired in 2007 and 2008 in the Gulf of Mexico, Congo and Turkmenistan (up 73 kboe/d), as well as continuing production ramp-up in Angola, Egypt, Pakistan and Venezuela. These positives were partially offset by mature field declines, as well as planned and unplanned facility downtime in the North Sea and hurricane-related impacts in the Gulf of Mexico. Higher oil prices resulted in lower volume entitlements in Eni’s PSAs and similar contractual schemes, down approximately 70 kboe/d. When excluding the impact of lower entitlements in PSAs, production was up approximately 8%.
• Eni’s worldwide natural gas sales were 73.24 bcm, up 5.8% driven by an increase in international sales that were up by 15.1 % mainly reflecting organic growth achieved in European markets in addition to the higher seasonal sales recorded in the first quarter, partially offset by lower sales in Italy.
• Oil and gas realizations in the first nine months of 2008 were up 50.6% driven by strength in Brent prices (up 65.4% from the first nine months of 2007).
• Natural gas marketing margins decreased slightly in the nine months as the improvement in the trading environment seen in the third quarter was insufficient to counter the gas margin decline that was experienced in the first half of the year.
• Realized refining margins decreased from a year ago due to the appreciation of the euro against the dollar, partially offset by a favourable trading environment as measured by movements in the relative prices of products compared to the cost of the oil feedstock.

Portfolio developments

• On October 30, 2008, following authorization from the European Commission, Eni closed the acquisition of a 57.243% interest in Distrigaz SA from the French company Suez-Tractebel for a cash consideration of €2.74 billion. Eni will launch a tender offer to acquire the minority stake in Distrigaz SA, as soon as authorization from Belgian authorities is granted. On the same occasion, Eni signed agreements with Suez to dispose of certain Eni assets as part of the Company’s asset portfolio optimization. The disposed assets include Eni’s network of low-pressure pipelines serving the consumer area of Rome and interests in a number of Eni’s upstream assets. In addition, certain long-term supply contracts of electricity, gas and LNG have been agreed upon.
• Finalized an agreement to acquire all the common shares of First Calgary Petroleum Ltd, a Canadian oil and gas company with exploration and development activities in Algeria. The acquisition values the fully diluted share capital of First Calgary at approximately CAN$923 million. Production start up at First Calgary’s fields is expected in 2011 with a projected plateau of approximately 30,000 boe/d net to Eni by 2012. The transaction is expected to close late in 2008.
• On October 1, 2008, Eni divested the entire share capital of subsidiary Agip España to Galp Energia SGPS SA, following the exercise of a call option in October 2007 pursuant to agreements among Galp’s shareholders. The divested asset includes 371 service stations located in the Iberian Peninsula, as well as wholesale marketing activities of oil products.
• Awarded 5 new exploration licenses in Keathley Canyon, Gulf of Mexico, following an international bid procedure. The transaction is subject to approval from local authorities.
• Signed a partnership agreement with Papua New Guinea for the exploration of oil and gas and identification of opportunities to develop the Country’s resources.
• Signed a strategic agreement with Petroleos de Venezuela, S.A. (PDVSA) for the exploration and development of two offshore Venezuelan fields through gas resources to be processed in an LNG project.
• Started-up production at the Saxi and Batuque fields offshore Angola, following the start-up of Mondo in the first quarter, as part of the large Kizomba C development project. The Saxi and Batuque fields are expected to plateau at approximately 100 kboe/d (18 kboe/d net to Eni).
• Signed a Memorandum of Understanding with Sonangol for the definition of an integrated model of cooperation and development. The agreement covers onshore development activities and construction of facilities in Angola designed to monetize flaring gas as well as collaboration in the field of bio-fuels.
• Continued exploration success:
  (i) offshore Sicily (Italy), the new gas Argo 2 discovery (Eni 60%) was made, yielding approximately 6 mmcf/d of gas in test production;
  (ii) offshore Angola, the oil discovery Ngoma-1 was achieved in the operated Block 15/06 (Eni 35%).

Outlook for 2008

The outlook for Eni in 2008 remains positive, with key business trends for the year as follows:

• Production of liquids and natural gas is forecasted to increase by approximately 3% from 2007 (actual oil and gas production averaged 1,736 mmboe/d in 2007), based on the Company’s scenario for Brent prices at $100 per barrel for the full year.  Additional production flowing from assets acquired in 2007 and 2008 in the Gulf of Mexico, Congo and Turkmenistan, as well as field start-ups in Angola, Egypt, Venezuela, Congo, Pakistan and the USA will sustain production performance against expected mature field declines and lower volume entitlements in the Company’s production sharing agreements (PSAs).
• Sales volumes of natural gas worldwide are forecasted to increase by approximately 4% from 2007 (actual sales volumes in 2007 were 98.96 bcm). The increase that reflects the stronger seasonal sales recorded in the first quarter, will be supported by expansion in target European markets, mainly in France, the Iberian Peninsula and Turkey, and in the LNG business. This sales forecast does not include any contribution from the acquisition of Distrigaz, whilst it takes into account the full contribution coming from upstream gas operations that were acquired in the Gulf of Mexico in midst 2007.
• Refining throughputs on Eni’s account are expected to be unchanged from 2007 (actual throughputs in 2007 were 37.15 mmtonnes). Higher throughputs are forecasted at Ceska Rafinerska as a result of the acquisition of an additional stake made in 2007. This improvement will be offset by an expected decrease in Italy mainly at the Taranto, Venice, Milazzo and Livorno refineries as a result of planned and unplanned facility downtime and temporary shutdowns. The Sannazzaro and Gela refineries are expected to achieve higher processing.
• Retail sales of refined products are expected to increase by approximately 1% from the 2007 level (11.8 mmtonnes were the comparable volumes achieved in 2007, which excludes volumes marketed in the Iberian Peninsula). This increase will be driven by higher sales in Europe due to the full contribution of assets acquired in 2007 in Central-Eastern Europe and higher market share projected in retail marketing operations in Italy.

In 2008, management expects to spend approximately €14.4 billion on capital expenditures up 36% from 2007 (€10.59 billion in 2007). Major increases are expected in the development of oil and natural gas reserves, the upgrading of construction vessels and rigs, and the upgrading of natural gas transport infrastructures.
On the basis of planned cash outflows to fund capital expenditures, the acquisitions of Distrigaz and First Calgary, and shareholders remuneration, as well as proceeds from asset sales, management expects the Group’s leverage to achieve a slightly lower level compared with 0.38 as reported in 2007. The projection is based on the Company’s scenario for Brent prices at $100 per barrel for the full year.
The Company relies on cash flows from operating activities and proceeds from asset sales to support its liquidity requirements. The Company expects that these sources of liquidity will be adequate to meet its funding requirements associated with its capital-spending program, cash returns to shareholders, and required debt re-payments.

This press release for the third quarter of 2008 and the first nine months of 2008 (unaudited) provides data and information on business and financial performance in compliance with article 154-ter of the Italian code for securities and exchanges (“Testo Unico della Finanza‘ – TUF).
Quarterly accounts set forth herein have been prepared in accordance with the evaluation and recognition criteria set by the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure set forth in Article 6 of the European Regulation (CE) No. 1606/2002 of the European Parliament and European Council of July 19, 2002. The evaluation and recognition criteria applied during the preparation of the report for the third quarter are unchanged from those adopted for the preparation of the Annual Report on Form 20-F for the year ended December 31, 2007 filed with the U.S. SEC. On October 15, 2008, the European Commission adopted certain amendments to accounting standards IAS39 and IFRS7 that enable under rare circumstances the reclassification of certain held for trading financial assets to other categories of financial instruments, thus changing their measurement criteria. These amendments did not result in any significant modification to the Company’s classification of its financial instruments.
Results are presented for the Third Quarter and the First Nine Months of 2008 and for the Third Quarter and the First Nine Months of 2007. Information on liquidity and capital resources relates to end of the period as of September 30, 2008, June 30, 2008, and December 31, 2007. Tables contained in this press release are comparable with those presented in the management’s disclosure section of the Company’s annual report and interim report.
Non-GAAP financial measures and other performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided by recommendation CESR/05-178b.

Eni’s Chief Financial Officer, Alessandro Bernini, in his position as manager responsible for the preparation of the Company’s financial reports, certifies pursuant to rule 154-bis paragraph 2 of Legislative Decree No. 58/1998, that data and information disclosed in this press release correspond to the Company’s evidence and accounting books and entries.

Cautionary statement

This press release, in particular the statements under the section “Outlook‘, contains certain forward-looking statements particularly those regarding capital expenditures, development and management of oil and gas resources, dividends, share repurchases, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sales growth, new markets, and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the timing of bringing new fields on stream; management’s ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply; demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; development and use of new technology; changes in public expectations and other changes in business conditions; the actions of competitors and other factors discussed elsewhere in this document.

Due to the seasonality in demand for natural gas and certain refined products and the changes in a number of external factors affecting Eni’s operations, such as prices and margins of hydrocarbons and refined products, Eni’s results from operations and changes in net borrowings for the First Nine Months of the year cannot be extrapolated on an annual basis.

Contacts
E-mail: segreteriasocietaria.azionisti@eni.it

Investor Relations
E-mail: investor.relations@eni.it
Tel.: +39 0252051651 - Fax: +39 0252031929

Eni Press Office
E-mail: ufficiostampa@eni.it
Tel.: +39 0252031287 - +39 0659822040

* * *

Eni
Societa per Azioni, Rome, Piazzale Enrico Mattei, 1
Capital Stock: euro 4,005,358,876 fully paid
Tax identification number 00484960588
Tel.: +39 0659821 - Fax: +39 0659822141

* * *

This press release for the Third Quarter and the First Nine Months of 2008 (unaudited) is also available on the Eni web site: www.eni.it.

About Eni
Eni is one of the leading integrated energy companies in the world operating in the oil and gas, power generation, petrochemicals, engineering and construction industries. Eni is present in 70 countries and is Italy's largest company by market capitalization.