(Eni SpA, 26.Jul.2024) — Eni‘s Board of Directors, chaired by Giuseppe Zafarana, yesterday approved the unaudited consolidated results for the second quarter and first half 2024. Eni CEO Claudio Descalzi said:
“In the second quarter 2024, we have delivered results ahead of expectations, demonstrating the significant progress Eni has made in multiple areas of our strategy and against the Plan set out to investors in March. We have a clear objective to grow our business lines where we have a competitive advantage: oil and gas production, bio-refining and renewables generating capacity, and have delivered impressive growth in each. This in turn has enabled us to deliver an excellent financial performance of €1.5bn of adjusted net profit. Alongside our operational advances we are also making better than expected progress in our portfolio activities both in terms of timing and value. We are upgrading our Upstream portfolio, having recently announced the divestment of our non-core assets in Alaska, the ongoing completion of the sale of onshore Nigeria, and agreed a combination with Ithaca Energy for our UK assets. Notably, Enilive announced an exclusivity agreement with KKR for an investment similar to the transaction concluded earlier in the year at Plenitude. These actions serve to both help fund growth and confirm the value we are creating in our transition businesses. Even in the absence of significant portfolio activity net debt reduced over the quarter. With the progress now being made on divestments, we expect leverage to be significantly below 0.2 by year end, better than our original expectation. This will enable us to speed up the execution of our €1.6bn share buyback program and confirm our delivery of both business growth and shareholder returns.”
Strategic and financial highlights
Strong strategic progress achieving key milestones. Eni delivered efficient growth and portfolio rationalization while remaining financially disciplined.
- Oil and gas production rose by 6% year-on-year driven by ongoing ramp-up at our flagship projects in Cote d’Ivoire and Congo Floating LNG, higher contribution from Libya and by the full integration of Neptune.
- Our industry leading exploration continues to play a key role with a recent new discovery in the Sureste Basin offshore Mexico. We estimate close to 1 bln Boe of new resources have been added in the first half of the year.
- Agreement with Ithaca Energy creating a transformational combination, combining two highly complementary UK upstream portfolios to establish a new satellite and a leading operator in the UKCS able to deliver growth and value by leveraging financial and technical synergies.
- Also, as part of our objective for upgrading the E&P portfolio and divesting non-strategic assets, we agreed the sale of our Alaska properties and we are completing on the divestment of our onshore Nigeria activities of NAOC.
- We recently signed an exclusivity agreement with KKR for the valorization of 20-25% of Enilive. We expect to close the transaction by year end. The sale has been agreed valuing the company between €11.5bn and €12.5bn and similar to the deal concluded by Plenitude earlier in 2024 both helps to fund growth and confirms the value being created.
- Enilive and Plenitude are our two competitively advantaged transition businesses delivering high growth and value. Enilive more than doubled bio throughputs year-on-year, while Plenitude grew installed renewable capacity by 24%.
Focus on building a stronger and strategically more valuable business while remaining committed to delivering an attractive and competitive distribution policy.
- In addition to building a stronger and more valuable business, Eni is committed to delivering an attractive and competitive distribution policy. The 2024 share buyback program commenced in May with a target amount of €1.6bn to be completed by April 2025. As of 19 July 2024, around 21 mln shares have been purchased, for a cash outlay of €0.3bn. With the better than expected progress we are making in our divestments, we are aiming to accelerate the pace of the buyback above the original plan.
Excellent results despite the mixed market environment with good crude oil realizations, and stable gas prices, higher refining margins albeit down sequentially, and weaker margins of chemical products.
- Importantly, leverage is back on a descending trajectory, down to 0.22 at the end of the first half.
- In Q2 ’24 delivered Group proforma adjusted EBIT of €4.1bn, and adjusted net profit of €1.5bn.
- In Q2 ’24 adjusted cash flow before working capital of €3.9bn signaled the strong underlying performance supported by our operational execution, growth, valuable assets and financial discipline.
- Q2 ’24 E&P proforma adjusted EBIT was €3.5bn, higher both y-o-y and sequentially (up by 26% and 6%, respectively), helped by production growth of 6% y-o-y to 1.71 mln boe/d and a focus on efficiency boosting bottom line.
- Q2 ’24 GGP proforma adjusted EBIT was €0.33bn continuing to successfully optimize gas and LNG portfolio.
- Enilive generated €0.12bn driven by a positive marketing performance and higher biorefinery throughputs, partly offset by lower biofuels margins. In Q2 ’24 Plenitude earned a proforma adjusted EBIT of €0.15bn, up by 12%, driven by the increased retail performance and the ramp-up in renewable installed capacity and related production volumes.
- Refining proforma adjusted EBIT was €0.1bn, higher than Q2 ‘23 thanks to supportive refining margins with in-line utilization. The Chemical business managed by Versalis reported a loss of €0.22bn in Q2 ’24 impacted by very challenging economic conditions.
- Q2 ’24 included a post-tax, net charge of around €0.5bn as result of E&P’s asset writedowns, driven by the re-prioritization of investment capital away from future phases of the development of marginal properties to focus on core projects in the portfolio consistent with the strategy, mitigated by a gain due to agreement with an Italian operator for environmental cost sharing included in the special items.
- €7.8bn of operating cash flow delivered in the first half, largely covering the organic capex funding needs of €4.1bn. Organic free funds “FCF” of €3.7bn have been used to fuel shareholders cash returns of €2bn and together with around €1bn of disposals related to the Plenitude and Saipem transactions has enabled the company to reduce net borrowings to €12.1bn after the peak related to the cash-outs for the closing of Neptune acquisition (€2.3bn).
Outlook 2024
Full year guidance and increased capacity confirmed for Enilive and Plenitude; upside to E&P and GGP performance expectations
- Leveraging on the positive operating performance E&P: full-year hydrocarbon production is expected towards the top of the anticipated range of 1.69 – 1.71 MMboe/d at the forecast Brent price of 86 $/bbl.
- GGP: proforma adjusted EBIT for the full year is raised to around €1bn.
- Enilive and Plenitude:
– confirmed proforma adjusted EBITDA of approximately €1bn for each segment despite a lower market environment.
– confirmed installed renewable capacity to reach 4 GW by 2024 year-end (+30% vs the previous year).
Financial targets raised and Capex plan on track
- Group financials based on Eni scenario: the Group proforma adjusted EBIT guidance is raised to around €15bn; adjusted CFFO before working capital is expected to be over €14bn for the full year.
- Organic Capex: projected as planned at about €9bn for the full year. Including an expected upwardly revised contribution from the ongoing divestment plan, capex net of proceeds from disposals are now streamlined to below €6bn.
Shareholder Returns: 6% increase in interim dividend and increased pace in the 2024 buyback
- Next quarterly dividend: following Shareholders’ approval of a dividend of €1 per share for fiscal year 2024, a 6% increase over 2023, the first 2024 quarterly instalment of €0.25 per share is due to be paid on 25 Sep. 2024, with 23 Sep. 2024 being the ex-dividend date, as resolved by the Board of Directors yesterday.
- Following Shareholders’ approval of the new buyback plan of up to €3.5bn, management’s 2024 plan for a share buyback of €1.6bn is confirmed but will assume a quicker pace in stock repurchases compared with the previous assumptions.
- Moreover, in line with our distribution policy, given the lower expected debt in the light of the progress of the M&A, we will be able in the third quarter, to evaluate a further raise of the distribution share up to the maximum limit of 35% of the budgeted CFFO[1] which corresponds to a potential buyback value of additional €500mn.
Progress of divestment program ahead of plan enabling debt reduction program
- Leverage for the year is expected well below 20%, versus an original expectation between 20-25%. On a proforma basis, taking into account of identified but not yet completed transactions, leverage could be around 15%.
- The Group disposal plan is proceeding faster than expected with excellent visibility of almost all the €8bn net disposal proceeds over the four-year plan.
____________________
[1] On an adjusted basis, before working capital changes.
