Italy’s Eni slashes 2016 investment plans after reporting heavy losses
2/29/2016 12:00:00 AM
By Stephen Jewkes
MILAN (Reuters) -- Italian oil producer Eni said it will cut investments by 20% this year and fast-track lower-cost projects after impairments due to weak oil prices resulted in a heavy fourth-quarter loss.
Eni posted a net loss in the quarter of 8.46 billion euros ($9.4 bln) on Friday after writing down 4.4 billion euros on upstream assets and booking charges on its stake in oil service company Saipem and chemical unit Versalis.
On a standalone basis, the state-controlled company which is Europe's fourth-largest oil major by market capitalization, said its adjusted net loss was 0.2 billion euros for the quarter.
Production in the fourth quarter, however, jumped 14% to 1.88 million bpd, the highest level recorded by Eni in the past five years.
The company, which increased its reserves by 48% in the fourth quarter, expects production this year to be in line with 2015, boosted by start-ups in Norway's Goliat field and the giant Kashagan field in the Caspian Sea.
"They've done great with the drill bit, finding big volume reserves at the right time and are well placed for 2016-2017," said Santander oil analyst Jason Kenney.
Eni's plans to slash capital spending helped send its shares up 5.7% by 1540 GMT, outperforming a higher European oil and gas index.
Weaker oil prices driven by a global supply glut have undermined revenues across the industry and prompted drastic cuts to investment as it sought to maintain dividends.
The world's largest oil company, ExxonMobil, this month posted its smallest quarterly profit in over a decade, while BP's 2015 loss was its biggest ever.
Since taking the helm in 2014, Eni CEO Claudio Descalzi has refocused the company on finding more oil and gas with a preference for projects that are lower cost and faster to market.
Earlier this month the group completed the sale of part of its stake in Saipem to allow it to get around 6.7 billion euros of gross debt off its balance sheet and help fund growth.
"This (2015) has been a crucial year... we now have a leaner and less leveraged company, positioned to overcome a longer downturn," Descalzi told analysts in a conference call.
Last year Eni added 1.4 billion bbl of new resources, compared to a target of 0.5 billion, at a cost of just $0.7/bbl.
That was mainly due to its giant Zohr discovery, the largest natural gas discovery ever made in Egypt and the Mediterranean Sea, which is due to start up at the end of 2017.
"Zohr is entering and replacing other long-term projects," Descalzi said. The group was delaying work in Iraq and Venezuela, and non-operated operations in Indonesia and Norway, he said.
Eni said earlier on Friday that it had drilled a new well in Egypt's Nile Delta which should soon be tied in to nearby infrastructure.
($1 = 0.9039 euros)
(Reporting by Stephen Jewkes; Editing by Alexander Smith and Susan Fenton)
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