Eni: fourth quarter and full year 2022 results

Eni's Board of Directors, chaired by Lucia Calvosa, yesterday approved the unaudited consolidated results for the full year and the fourth quarter of 2022.

Eni CEO Claudio Descalzi said:

“In 2022, Eni was not only engaged in progressing its sustainable energy transition goals, but also in ensuring the security and stability of energy supplies to Italy and Europe, building up a diversified geographic mix of energy sources. The Company delivered excellent financial and operating results while contributing to the stability of energy supplies to Italy and Europe and progressing its decarbonization plans. During the year, we were able to finalize agreements and activities to fully replace Russian gas by 2025, leveraging our strong relationships with producing states and fast-track development approach to ramp-up volumes from Algeria, Egypt, Mozambique, Congo and Qatar. The recently signed deal with Libya’s NOC on the A&E Structures development and exploration successes off Cyprus, Egypt and Norway will further strengthen our integrated supply diversification. This prompt reaction to the gas crisis and the integration with the E&P activities were important driver of the performance of our GGP business, which was able to ensure its supply commitments through different sources. Plenitude reached a renewable capacity of 2.2 GW, doubling last year level, and together with our newly established Eni Sustainable Mobility will continue to progress our plans to zeroing customers’ emissions. This new entity, leveraging our strong biofuels footprint will offer increasingly decarbonized mobility solutions to customers in Italy and Europe. While market conditions were clearly supportive, our 2022 financial results were underpinned by capital and cost discipline, operating performance and by effective risk management of price volatility and supply tightness. Strong cash generation with an organic CFFO of €20.4 bln allowed us to invest and grow the business, to reach an all-time low leverage of 0.13 and to return €5.4 bln to shareholders via dividends and an accelerated share buy-back program. Our strategic objectives are unchanged: we will invest to ensure stable and affordable supplies to meet energy market demand and decarbonize our operations and clients, while maintaining financial discipline to ensure attractive returns for our shareholders.”

• FY 2022 group adjusted EBIT was €20.4 bln, double the amount of FY 2021, driven by a strong performance of the E&P, GGP and R&M businesses:
       - E&P with €16.4 bln of EBIT was up more than 70% y-o-y due its capacity to capture the upside of a favorable commodity environment;
       - GGP earned €2.1 bln of EBIT, replacing Russian flows with equity gas or supplies from countries where we operate, and ensuring optimization of the gas and LNG portfolio in a tight market, while ensuring stable and secure supplies to its customers and managing financial risks;
       - R&M achieved its best performance ever with €2.2 bln, compared to breakeven in 2021, due to plant availability and output optimization allowing to capture the upside of a strong refining environment, and efficiency measures to address the rise in plant utility expenses;
       - Plenitude delivered against its operating and financial targets with EBIT of €0.34 bln and a renewable capacity of 2.2 GW, despite the challenging market scenario;
       - Versalis was impacted by competitive pressures, weakening demand and higher gas-indexed utilities expenses, driving a loss of €0.25 bln.
• FY 2022 adjusted net profit attributable to Eni shareholders was €13.3 bln and, compared with FY 2021, was €9 bln higher due to a strong operating performance and higher results of equity-accounted entities.
• FY 2022 net profit attributable to Eni shareholders was €13.8 bln and, compared with FY 2021, was driven by an improved underlying performance partly offset by lower net special gains mainly due to inventory evaluation.
  In 2022 special charges largely related to environmental and remediation provision of €2 bln, including €0.3 bln decommissioning provision for refinery, impairment charges of €1.1 bln for oil & gas assets and chemicals plants, and windfall taxes on energy profits totalling €1.7 bln, of which €1 bln was paid in 2022. These charges were offset by gains of €2.5 bln on the Azule transaction and of €0.4 bln on the divestment of an interest in the Vår Energi associate and by deferred taxes of €1.6 bln.
• Q4 2022 group adjusted EBIT was €3.6 bln, down by €0.2 bln from Q4 2021 owing to the reclassification of Azule Energy (Eni E&P activities in Angola) into associates, lower hydrocarbons production and GGP one-off gains in 2021, partly offset by a strong performance of the R&M business.
• Q4 2022 adjusted net profit attributable to Eni shareholders was €2.5 bln and almost 50% higher compared with the Q4 2021, up by €0.8 bln due to higher results of equity-accounted entities partly as a result of the Azule JV, more than offsetting a lower operating profit.
• Q4 2022 net profit attributable to Eni shareholders was €550 mln and was reduced by fair-valued commodity derivatives of €1.1 bln (compared to a gain of €1.7 bln in the previous year), asset impairments of €0.9 bln (compared to reversals of €0.5 bln in the previous year) and extraordinary solidarity tax contributions of €0.7 bln, partly offset by deferred taxes of €1.6 bln. All these gains and losses were classified as special items.
• In Q4 2022, the Group adjusted operating cash flow before working capital at replacement cost was €4.1 bln. In FY 2022, it reached €20.4 bln, net of €8.5 bln of cash taxes, up 60% y-o-y: after funding organic capex of €8.2 bln, up 42% y-o-y due to a stronger US dollar and planned post-lockdown activity, and covering working capital needs, the Group delivered an organic FCF of €12.8 bln to cover portfolio activities, reduce net borrowing by €2 bln and return €5.4 bln of cash to shareholders via dividends and share repurchases.
• In September and November, Eni paid the first and the second quarterly instalment of the 2022 dividend of €0.22 per share each, amounting to €1.47 bln. The third instalment of €0.22 per share will be paid to shareholders on March 22, 2023, being the ex-dividend date March 20, 2023.
• In November, Eni completed the announced buy-back program of €2.4 bln, repurchasing 196 mln shares.
• In January 2023, Eni successfully placed the first sustainability-linked bond among the retail public in Italy for a total amount of €2 bln. Orders for over €10 bln were received compared to €1 bln initially offered, setting the Italian record for a single tranche corporate bond issue aimed at retail. The offering was closed in advance in just 5 days, the minimum term set in the prospectus.
• Net borrowings ex-IFRS 16 as of December 31, 2022, were €7 bln, down by €2 bln compared to December 31, 2021, and Group leverage stood at 0.13, versus 0.20 as of December 31, 2021.

Advancing our satellite model

• In FY 2022, significant progress was made in pursuing our distinctive satellite model of creating dedicated entities capable of independently accessing capital markets to fund their growth and to reveal the real value of each business, benefitting from Eni’s technologies, know-how and services, at the same time allowing the Group to optimize its financial structure:
       - Plenitude has substantially grown its renewable capacity, while the Sustainable Mobility business was set up to offer increasingly decarbonized solutions/products to people on the move, leveraging the strong marketing network and biorefineries vertically integrated with our agri-business.
  In E&P these entities will continue to bring new volumes to the market for energy security, while freeing additional capital and delivering dividends that allow us to optimize investments in our decarbonized energy portfolio:
       - In August Azule Energy, the JV combining Eni and bp asset in Angola, started operations as the largest independent Angolan O&G producer to pursue growth opportunities and deliver real value to its shareholders;
       - Vår Energi performed strongly in 2022 and delivered extra value to Eni through its listing at the Norway exchange and entry of new investors.
  Finally, our SPAC, NEOA, was established and listed on the UK main exchange to pursue a business combination with targets poised to benefit from the global transition towards a low carbon economy.

Exploration & Production

• In FY 2022 around 750 mln boe of new resources were added to the reserve base continuing the delivery of outstanding exploration performance.
  Several discoveries were made close to existing assets and facilities as part of our fast-track development model in Algeria, Egypt and Abu Dhabi.
  Important reserve additions were made with the appraisal wells of the offshore Ndungu oilfield in Angola and of the offshore Baleine oilfield in the Côte d'Ivoire, allowing us to significantly raise the estimated hydrocarbons in place in both cases. The XF-002 in the UAE and the Cronos off Cyprus gas discoveries also significantly contributed to the year’s results. The later success of Zeus in Cyprus, still in evaluation at the end of the year and of Nargis in Egypt in January further confirmed the potential of the East Mediterranean area.
• Production for the year was 1.610 mln boe/d, down by 4% due to unplanned outages and force majeure.
• In Q4 2022, activities have been fast-tracked in Algeria and several fields have come onstream: two gas deposits as part of the new Berkine South contract, just six months from the closing, and then, the HDLE/HDLS project, in the Zemlet el Arbi concession in the Berkine North Basin, just six months after the discovery made in March.
• In November, the first loading of liquefied natural gas (LNG) produced from the Coral gas field, in the ultra-deep waters of the Rovuma Basin in Mozambique, was shipped from the Coral Sul Floating Liquefied Natural Gas (FLNG) facility, marking a milestone in the worldwide LNG business thanks to our ability to deliver the project on time and on budget notwithstanding the pandemic disruptions, while launching the Country as a new relevant LNG hub.
• In November, construction works began to build a second 10 MW photovoltaic plant in partnership with Sonatrach in the Bir Rebaa North (BRN) production complex, South-Eastern Algeria, to decarbonize hydrocarbons operations. Another photovoltaic facility is planned at the Menzel Ledjmet East Project (MLE) production complex, with construction expected to begin in 2023.
• In December, a photovoltaic plant in Tataouine, Southern Tunisia, built by a joint venture between Eni and ETAP (Entreprise Tunisienne d'Activités Pétrolières) was linked to the national grid. The plant, with an installed capacity of 10 MW, is expected to supply over 20 GWh of renewable electricity per year under a 20-year Power Purchase Agreement.
• In December, as part of the Congo LNG project to exploit Eni’s gas reserves in block Marine XII and support the security of gas supplies to Europe, a turn-key contract was signed to build, install and commission a Floating Liquefied Natural Gas (FLNG) vessel with a capacity of 2.4 mln tonnes/year, which will pair the Tango FLNG vessel purchased earlier to speed up Eni’s development plans. LNG production is expected to reach a plateau capacity of 3 mln tonnes/year in 2025.
• In December, our associate Vår Energi announced a gas discovery in the Barents Sea, Norway, with estimated recoverable resources of gas in the range of 9-21 bln cubic meters (57-132 mln barrels of oil equivalent). Subsequently, in January, the venture was awarded twelve exploration licenses (five of which are operated) following the “Awards in Predefined Areas 2022” (APA) by the Ministry of Petroleum and Energy of Norway.
• In December, Eni closed the acquisition of a 3% interest in the giant North Field East LNG project in Qatar.
• In December, Eni signed an agreement with Snam to jointly develop and manage the Ravenna Carbon Capture and Storage (CCS) Project, which is intended to gather data to support the planned construction of a large CCS hub, which will leverage Eni’s depleted offshore reservoirs in the area. The Phase 1 of project is ongoing and from 2024 is expected to begin capturing 25 ktons of CO₂ emitted from Eni's natural gas treatment plant in Casalborsetti (Ravenna), to be subsequently transported and injected into a nearby depleted gas field. By 2027, Phase 2 will start the industrial scale up with a storage injection of up to 4 mln tons.
• In January, we announced the non-operated Nargis gas discovery, offshore Egypt. The new reserves will be developed by leveraging Eni’s existing facilities.
• In January, we signed an agreement with the National Oil Corporation of Libya (NOC) for the development of the large gas reserves of A&E Structures, offshore Tripoli. Production is expected to start in 2026 to reach a plateau of 750 mmscf/d, with volumes destined both to the domestic market and to Europe via the existing Greenstream offshore pipeline leveraging synergies with the Mellitah Complex. The project comprises construction of an onshore Carbon Capture and Storage (CCS) hub.
• In January, a 30% interest in offshore exploration Blocks 4 and 9, in Lebanon, operated by TotalEnergies, was farmed out to QatarEnergy. Eni will retain a 35% interest in the venture.

Global Gas & LNG Portfolio

• In January, a restructuring of Eni’s natural gas transport business from the Southern route was agreed with Snam, the Italian natural gas grid operator, by divesting a 49.9% stake in the equity interests of Eni’s subsidiaries managing the TTPC/Transmed pipelines connecting Algeria’s network to Italy through Tunisia and the Mediterranean Sea, and the relevant transportation rights. A new entity “SeaCorridor” was established to hold the participating interests in those businesses, which will be jointly controlled by Eni and Snam with shareholding of 50.1% and 49.9%, respectively. Eni received cash proceeds of €405 mln.

Refining & Marketing and Chemicals

• In October, a first cargo of vegetable oil, produced at Eni’s Makueni agri-hub in Kenya, was shipped to the Eni’s biorefinery of Gela. This renewable feedstock will be used in the manufacturing of biofuels, respecting all applicable standards of sustainability and the circular economy by repurposing abandoned land and by favorably contributing to local job creation and development. Production of such sustainable oil is expected to scale up rapidly to 20,000 tons by 2023. This project marks the start of Eni’s innovative model of vertically integrating its agri-business with its biorefineries, which will be replicated in a network incorporating other African countries.  
• In October, Eni completed the phase-out of palm oil as feedstock supply for Eni’s biorefineries, with it fully replaced by sustainable raw materials.
• In October, Eni launched a study to assess the economic feasibility of building and operating a biorefinery at the Livorno hub, with a design capacity of 500 ktonnes/y.
• In December, started a collaboration with Euglena, a leading Japanese biotechnology firm, and Petronas, Malaysia state-owned oil company, to evaluate the economic feasibility of building and operating a biorefinery complex in the South-Eastern Asian country. An investment decision is expected to be reached by 2023 with possible completion in 2025 and a targeted processing capacity of up to 650 ktonnes/y of bio-feedstock. The project will leverage the Honeywell UOP’s Ecofining^TM process technology, which was jointly developed by Eni and Honeywell UOP.
• In December, Versalis acquired from DSM a technology to produce enzymes for second-generation ethanol to be employed at the Crescentino plant to integrate the proprietary Proesa^® technology to deliver sustainable bioethanol and chemical products from lignocellulosic biomass.
• In December, further inroads into the Sustainable Aviation Fuel (SAF) market were made with the agreement with DHL Express Italy and SEA Group that operates the Milan airports of Malpensa and Linate, for a test involving use of Eni Biojet, a 20% blended with JetA1 produced exclusively from waste raw materials, animal fat and used vegetable oils.
• In January, as part of Eni’s strategy to set up dedicated vehicles to accelerate the decarbonization of the Group’s customer portfolio (Scope 3 emissions), Eni Sustainable Mobility was established as a stand-alone business. This vertically integrated entity will support Eni’s energy transition by pairing the offer of increasingly sustainable fuels and advanced services to motorists in Italy and Europe by leveraging a network of 5 thousand service stations, which will be upgraded to support electric and hydrogen-based mobility. Eni Sustainable Mobility will manage Eni’s operating biorefineries, the biomethane business and will pursue the development of new projects, including those at Livorno and Pengerang in Malaysia, which are currently under evaluation.
• In February, Eni Sustainable Mobility entered into definitive agreements with PBF to partner in a 50-50 joint venture, St. Bernard Renewables LLC (SBR), for the biorefinery currently under construction in Louisiana (US). The deal, which is subject to customary closing conditions, foresees Eni’s subsidiary Eni Sustainable Mobility to make a capital contribution of $835 million and to provide expertise in biorefining operations. The biorefinery startup is expected in the first half of 2023, with a target processing capacity of about 1.1 mln tonnes/year of raw materials to produce mainly HVO Diesel.

Plenitude and Power

• In October, the 104.5 MW El Monte wind farm in the Spanish region of Castilla La Mancha, started producing renewable electricity. The plant will produce about 300 GWh/y, equivalent to the domestic consumption of 100,000 households.
• In October, the disposal of Plenitude’s 20% interest in the Dogger Bank offshore wind projects to the Norwegian joint venture Vårgrønn engaged in the development of a windpower business was finalized. Based on the shareholders’ agreement, HitecVision increased its ownership interest from 30.4% to 35% through a cash contribution.
• In December, Plenitude finalized the 100% acquisition of PLT (PLT Energia Srl and SEF Srl and their respective subsidiaries and affiliates), an integrated Italian group with an installed capacity of 0.3 GW already operational, 0.1 GW under construction, 1.2 GW of projects under development (mainly wind power) both in Italy and Spain. Furthermore, the PLT Group also supplies a portfolio of 90,000 customers in Italy.
• In December, Plenitude signed an agreement to acquire the 81 MW Kellam photovoltaic plant located in Texas, USA, boosting the total installed capacity in the country to 878 MW.
• In January, Plenitude signed an agreement with Simply Blue Group for the joint development of floating offshore wind projects in Italy. The first two projects, "Messapia" in offshore Apulia and "Krimisa" offshore Calabria, have already been submitted for approval to the relevant authorities, with a design capacity of 1.3 GW and 1.1 GW, respectively.
• In January, Plenitude started production at the 263 MW “Golden Buckle Solar Project” in Brazoria County, Texas. The yearly average solar energy production is expected in the range of 400 to 500 GWh.

Decarbonization and Sustainability

• In October, two projects by Eni and Enel Green Power to develop green hydrogen were approved as beneficiaries of public funding under IPCEI Hy2Use, an EU-backed initiative to support development of a hydrogen value chain. Two electrolyzers of 20 MW and 10 MW capacity will be operated respectively at Eni’s biorefinery in Gela, Sicily, and in the Eni’s nearby oil refinery in Taranto, both designed to use the PEM (polymer electrolyte membrane) technology.
• In October, Commonwealth Fusion Systems, of which Eni is the main shareholder, was selected after a competitive tender process by the UK Atomic Energy Authority to support work on the magnetic confinement system for the UKAEA’s Spherical Tokomak for Energy Production.
• In the quarter Eni was ranked first out of 30 companies in the European oil & gas sector by Moody’s ESG Solutions due to its advanced capabilities in managing ESG risks. Eni’s ESG score improved and remains in the Advanced category.
• In November, Eni signed an agreement with Leonardo for the joint development of sustainability and innovation initiatives, with the aim of boosting the energy transition and the decarbonization of the two partners’ operations.
• In November, Eni signed an agreement with Autostrade per l'Italia and CDP to jointly develop initiatives with the aim to upgrade Italian motorway infrastructure by increasing the offer of products for sustainable mobility and other decarbonization solutions.
• In November, Eni signed several agreements with the Government of Rwanda to jointly develop initiatives in the fields of agriculture, protection of forest ecosystems, health and technology. This collaboration aims to support the energy transition by promoting high-quality seed production suitable for agri-feedstock, for the production of biofuel in Eni’s biorefinery. It will also generate carbon credit initiatives, and support development infrastructures and services for the health and education of local communities.
• In November, Eni signed a collaboration agreement with Bonifiche Ferraresi to evaluate the development of an agri-business in Italy, not in competition with the food chain, regenerating abandoned and degraded lands and promoting sustainable practices, to produce crops to be used as feedstock for the production of biofuel.  
• In January, Eni signed strategic agreements with Sonatrach reaffirming the common objective of strengthening energy security and accelerating the transition to a low-carbon economy. The two partners have agreed on identifying and pursuing joint opportunities for the reduction of greenhouse gas emissions through energy efficiency initiatives, renewables development, green hydrogen projects and carbon dioxide capture and storage projects, to support energy security and a sustainable energy transition, including the evaluation of possible measures to improve Algeria's energy export capacity to Europe.

The Company will issue its financial and operating targets for 2023 and its strategic plans at a capital markets day scheduled today at 13:00 CET. A press release summarising the Group’s strategy and objectives will be issued on the same day and disseminated through the Company’s website (eni.com) and other public channels as required by applicable listing standards.