Italy's Eni Posts Loss on Weak Oil Price -- Update
July 29 2016 - 5:13AM
Dow Jones News
By Eric Sylvers
Eni SpA swung to a loss in the second quarter as the low price
of crude oil led to a steep drop in revenue, while the forced
shutdown of a domestic oil field in southern Italy resulted in a
drop in production.
Like BP PLC, Royal Dutch Shell and other rivals that have
reported weaker earnings in the second quarter, Eni continues to
search for ways to confront the drop in oil prices. In March the
Italian company promised EUR13 billion ($14.40 billion) in cost
cuts and assets sales by 2019. The cost cuts are mostly to come
from renegotiating supplier contracts, while the assets sales will
be of stakes in recently discovered oil and gas fields.
Friday, Eni confirmed its target to cut capital spending this
year by 20%.
Eni, which is 30%-owned by the government, is looking to sell
stakes in several large oil and gas projects, including one off the
coast of Mozambique. Eni expects to announce that sale, which could
net the company about EUR3 billion, before the end of the year.
Exxon Mobil Corp. is in advanced talks to buy a stake in the
Mozambique project, people familiar with the negotiations have
said.
Brent crude, the global benchmark, averaged $46 a barrel in the
second quarter. While that was about a third better than the first
quarter, it was still down sharply from the $62 barrel in last
year's second quarter. Friday Brent traded at about $43 a barrel
with many analysts expecting the price to remain under pressure in
coming months as concerns grow that there is an oversupply in part
due to a resurgence of U.S. shale oil.
Eni is ensnared in a legal dispute in the Italian region of
Basilicata where prosecutors forced the shutdown of the Val d'Agri
complex pending an investigation into illegal waste trafficking.
Eni isn't under investigation. The shutdown is costing Eni about
60,000 barrels of oil a day. Royal Dutch Shell also has a stake in
the oil field.
Hydrocarbon production fell 2.2% in the quarter to 1.73 million
barrels of oil equivalent a day though Eni confirmed guidance for
full-year production to be in line with 2015 as it ramps up new
projects. In the first half, production was up 0.5%.
The company repeated it can pay out its current yearly
dividend--80 euro cents a share--without resorting to debt or
unplanned asset sales if oil stays around $50 a barrel. Eni pays
out its dividend in two tranches and Friday, as expected, said it
would pay an interim dividend of 40 cents a share.
Eni surprised the market early last year by cutting its dividend
by almost a third and is still the only major oil company to do
so.
The net loss from continuing operations was EUR446 million in
the second quarter compared with a profit of EUR498 million in the
same period a year earlier. Revenue plunged by a third to EUR13.42
billion.
Eni shares were down 1.6% at EUR13.44 in early trading in Milan.
The shares are little changed this year and down by about 15% in
the past 12 months.
Write to Eric Sylvers at eric.sylvers@wsj.com
(END) Dow Jones Newswires
July 29, 2016 04:58 ET (08:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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