Eni: first quarter 2023 results

Eni's Board of Directors, chaired by Lucia Calvosa, yesterday approved the unaudited consolidated results for the first quarter of 2023. Eni CEO Claudio Descalzi said:

“Eni has delivered an excellent set of operating and financial results despite a weakening scenario. This was driven by a resilient E&P result that featured a recovery in hydrocarbon production and very strong gas and LNG performance. We also saw a steady contribution from biorefineries, the commercial network and continued growth from Plenitude and Power meaning the Company recorded €4.6 billion of adjusted EBIT and €2.9 billion of adjusted net profit. During the quarter, we made substantial progress against our strategy and plans. We set up Sustainable Mobility, Eni’s latest satellite business which combines our growing biorefining portfolio with our mobility product marketing operation. Its biofuel growth will be aided by the agreement signed for the St. Bernard Renewables plant in Louisiana, expected to begin operating soon. Plenitude has increased its renewable capacity to 2.3 GW and is on track to reach the yearly target of more than 3 GW, while Versalis has just finalized a transformative deal regarding its interest in Novamont’s green chemicals business. Therefore in confirming the progress of our decarbonization pathway, to address energy security and deepen our gas exposure, we signed a landmark agreement with NOC to develop the A&E Structures in Libya and we strengthened our position in Algeria, closing the acquisition of bp’s natural gas assets. We generated €5.3 billion of adjusted cash flow before working capital movements in the quarter, significantly exceeding outflows relating to organic capex of €2.2 billion and dividend payment. We remain financially disciplined as a necessity to meet the challenges of the energy market and deliver value for our shareholders. In the context of this performance, we confirm our 2023 guidance, and with our resilient financial position and flexibility we can confirm the basis on which we will seek authorization at the AGM in May for the previously announced plan to raise the 2023 dividend to €0.94 per share and begin our €2.2 billion share buy-back.”

• Q1 2023 adjusted profit before tax of €5.0 bln was only 5% lower than Q1 2022 despite a 20% fall in crude oil price and a 42% drop in gas price.
• This performance reflects a highly resilient E&P result and an outstanding contribution from the GGP business plus steady earnings from Sustainable Mobility & Refining. Of note is the 30% rise in adjusted EBIT and 14% rise in adjusted profit before tax on Q4 2022 despite the weakening Upstream scenario.
• E&P earned €2.8 bln of adjusted EBIT, mainly affected by weaker realized prices and the deconsolidation of the Angolan activities. Including the contribution of Azule, the Q1 2023 pro-forma EBIT increased to €2.93 bln, a reduction of 33% year on year.
• GGP earned €1.37 bln of adjusted EBIT, 47% higher than the Q1 2022, driven by optimization and trading activities.
• Eni Sustainable Mobility, operational as of January 1, 2023, delivered €0.14 bln of adjusted EBIT, up by €0.07 bln compared to the proforma adjusted EBIT of the Q1 2022 following the restatement of the comparative period^[1] .
• The Refining business earned €0.13 bln of adjusted EBIT compared to a loss of €0.04 bln during Q1 2022. The improvement was driven by higher benchmark refining margins, with Eni’s SERM up to 11 $/bbl (vs a negative value in 2022) but negatively impacted by planned turnaround activity at important upgrading refinery units and lower leverage to natural gas price energy costs than in the benchmark due to efficiency initiatives already undertaken.
• Versalis was negatively affected by lower demand and market uncertainties, which held back purchase decisions by resellers and continued competitive pressures of products from Middle and East Asia.
• Plenitude & Power delivered solid results with €0.19 bln of adjusted EBIT (flat year on year) helped by the ramp up in the renewable installed capacity and production volumes and optimizations in the business of power generation from gas-fired plants. Plenitude generated €0.23 bln of adjusted EBITDA despite challenging conditions.
• Q1 2023 adjusted net profit attributable to Eni shareholders was €2.9 bln and, compared with Q1 2022, was 11% lower impacted by lower oil and gas prices and the UK energy profit levy but significantly offset by the strong underlying business performance of the Group.
• In Q1 2023, the Group adjusted operating cash flow before working capital at replacement cost was €5.3 bln, largely exceeding the cash outflows related to organic capex of €2.2 bln and dividend payments (€0.8 bln). Seasonal factors that typically shape working capital requirements in the first quarter accounted for the bulk of the excess cashflow with other investing activities also a €0.2 bln outflow and the net effect of acquisition and disposal amounting to €0.3 bln.
• In March 2023, Eni paid the third instalment of the 2022 dividend of €0.22 per share. The fourth tranche of €0.22 per share will be paid in May 2023.
• Net borrowings ex-IFRS 16 as of March 31, 2023, were €7.8 bln, and Group leverage stood at 0.14, versus 0.13 as of December 31, 2022.

_{^[1] See “Basis of presentation” of this press release for the full restatement of the adjusted EBIT of the 2022 comparative periods, following the re-segmentation of the previous Refining & Marketing business from which the new entity Eni Sustainable Mobility has been spun-out.}

Exploration & Production

• In Q1 2023 around 200 mln boe of new resources were added to the reserve base, driven mainly by the discoveries made off Cyprus, Mexico and Egypt. A positive appraisal of prior findings was also made in Abu Dhabi.
• In March, Eni announced the Yatzil discovery in the Block 7 exploration prospect (operated by Eni with a 45% w.i.), in the Sureste Basin, off Mexico. Yatzil was the second commitment well of Block 7 and the eighth successful exploration well drilled by Eni in this basin.
• In January, a milestone agreement was signed with the National Oil Corporation of Libya (NOC) to develop the large gas reserves of A&E Structures, a strategic project between Eni and NOC, in contractual Area D, targeting to begin production in 2026. The project will leverage synergies with the Mellitah Complex to reach a plateau of 750 mmcf/d, with volumes destined both to the Libyan domestic market and mainland Italy through the existing Greenstream pipeline, connecting Mellitah to Sicily. The project also comprises construction of an onshore hub for carbon capture and storage.
• 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.
• In February, Eni closed the acquisition of bp’s business in Algeria, relating to the two gas-producing concessions “In Amenas” and “In Salah”, jointly operated with Sonatrach and Equinor.
• In April, the FPSO Firenze sailed out from Dubai to the Baleine field in Côte d'Ivoire. The FPSO to be renamed Baleine upon its mooring has been refurbished and upgraded to increase its processing capacity up to 15,000 bbl/d of oil and around 25 mmcf/d of associated gas.

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. It entailed a divestiture of 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 a shareholding of 50.1% and 49.9%, respectively. Eni has earned cash proceeds of €405 mln.

Sustainable Mobility, Refining and Chemicals

• In February, Eni signed an agreement with US refiner PBF to establish a 50-50 joint venture to operate the St. Bernard Renewables 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 mln and to provide expertise in biorefining operations. The biorefinery start up 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.
• In February, Eni signed a Memorandum of Understanding (MoU) with Saipem to evaluate the utilizations of biofuels to power Saipem’s fleet of drilling and construction vessels, starting with those currently deployed in the Mediterranean Sea.
• In April signed agreements to sell biofuels to two of Italy’s largest transport and logistics companies (Fercam and Spinelli).
• In April, Versalis, currently owning a 36% interest in Novamont, finalized an agreement to purchase the 64% participating interest in the venture retained by the other shareholder Mater-Bi. The closing of the transaction is subject to the customary conditions.

Plenitude and Power

• 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" off Apulia and "Krimisa" off 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.
• In March, GreenIT, a joint venture between Plenitude and an Italian state agency, signed an agreement with Copenhagen Infrastructure Partners (CIP) to develop floating offshore wind projects in Latium and Sardinia.

Decarbonization and Sustainability

• In January, Eni signed several strategic agreements with Sonatrach to pursue the common objective of strengthening energy security and accelerating the transition to a low-carbon economy. The two partners will evaluate initiatives targeting the reduction of greenhouse gas emissions through projects in energy efficiency, renewables, green hydrogen and carbon capture and storage as well as strengthening energy security, including evaluating options to improve Algeria's natural gas export capacity to Europe.
• In March, Eni signed a strategic agreement with ADNOC to evaluate initiatives in the fields of renewable energy, blue and green hydrogen, carbon capture and storage (CCS), curbing GHG and methane emissions and routine gas flaring, and endorsement of the Global Methane Pledge, as part of the shared vision of strengthening global energy security and contributing to a sustainable energy transition.
• In March, the world's first ISWEC (Inertial Sea Wave Energy Converter) which started operations off the coast of Pantelleria, is intended to convert energy from sea waves to produce renewable electricity. The ISWEC technology was developed by Eni in collaboration with the Politecnico di Torino and Wave for Energy Srl (a spin-off of the university).
• In March, Eni signed a new collaboration agreement with Commonwealth Fusion Systems (CFS), a spin-out from the Massachusetts Institute of Technology. Eni became a strategic shareholder, to accelerate the industrialization of the magnetic confinement fusion energy. This deal will leverage Eni’s global engineering and project management experience to support CFS in the endeavor of developing, at industrial scale, the nascent technology of magnetic confinement fusion energy, which Eni believes will play a major role in decarbonizing the economy since it promises a virtually inexhaustible supply of secure and emission-free energy, pointing to a transformation of the energy paradigm.
• In March, the HyNet North West cluster, comprising five submissions, was confirmed by the UK Department for Energy Security and Net Zero (DESNZ) to have been granted public funds provided by the UK government to develop a carbon capture and storage hub to decarbonize hard-to-abate industrial businesses in North-West England. Eni will be responsible for operating carbon transportation and storage using its depleted natural gas fields in the Liverpool Bay. The project is expected to start in the mid current decade with an injection rate of approximately 4.5 million tonnes/year in the first phase and reaching a capacity of approximately 10 million tonnes of CO₂ per year from 2030. Furthermore, Eni recently submitted an application to the North Sea Transition Authority (NSTA) for a carbon storage license to exploit the Hewett depleted natural gas field, in the Southern British North Sea.
• In March, Enivibes, a venture participated in by Eni with an interest of 76%, was established with the goal of enhancing the market value of a proprietary technology called E-vpms^® (Eni Vibroacoustic Pipeline Monitoring System) The technology is dedicated to the mission-critical monitoring of the integrity of pipelines transporting liquids. Enivibes is the first venture established as part of the activities of Eniverse, Eni's Corporate Venture Builder.

The Company is issuing the following updated operational and financial guidance for the full year based on information to date and management’s judgement subject to the potential risks and uncertainties of the scenario.

• E&P: Hydrocarbon production for 2023 is confirmed in the range of 1.63-1.67 million boe/d at the Company’s price scenario of $85/bbl. In Q2 2023 production is forecast at 1.6 million boe/d due to planned maintenance taking place mainly in the quarter.
• E&P: Exploration target of 700 mln boe of discovered resources is confirmed
• GGP: narrowed adjusted EBIT guidance to be in the range of €2.0 bln – €2.2 bln for the year, vs. the initial guidance of €1.7 bln - €2.2 bln.
• Plenitude & Power: Plenitude adjusted EBITDA confirmed higher than €0.7 bln.
• Sustainable Mobility, Refining and Chemicals: Sustainable Mobility EBITDA more than €0.9 bln, better than planned. Downstream pro-forma EBIT expected at €1.0 bln - €1.1 bln, consistent with prior guidance at a constant exchange rate scenario.
• Financials: Group adjusted EBIT and cash flow^[2]  expected to be €12 bln and over €16 bln, respectively, an improvement versus the original guidance at the same scenario^.[3]
• Capex: capex is now expected to be around €9.2 bln, lower than original guidance at €9.5 bln, taking into account a stronger Euro. Additional potential for lower capex is retained from continued optimization and flexibility.
• Balance Sheet: Leverage is expected to remain within the stated range of 10-20%.
• Shareholder Distribution: Full year dividend of €0.94 per share is confirmed pending authorization at the Annual General Meeting on May 10^th, 2023. The planned €2.2 bln share buy-back is confirmed, also pending authorization from the AGM for a total of up to €3.5 bln.

_{^[2]  Before working capital movements.}

_{^[3]  Updated 2023 Scenario is: Brent 85 $/bbl (unchanged), SERM 8 $/bbl (from 7 $/bbl), PSV 529 €/kmc (from 970 €/kmc) and average EUR/USD exchange rate: 1.08 (from 1.03).}

The full version of the Press Release is available in PDF format.