Eni Earnings: Strong Gas Business Cushions Impact of Lower Oil Prices, Weaker Refining Margins

Eni ENI reported second-quarter adjusted net earnings of EUR 1.9 billion compared with adjusted net earnings of EUR 3.8 billion the year before as a strong global gas performance was not enough to offset the impact of lower oil and gas prices hurting E&P earnings and weak refining margins reducing refining earnings. Our fair value estimate and moat rating are unchanged.

Eni reported operating cash flow, excluding working capital, of EUR 4.2 billion compared with EUR 5.2 billion a year before. Net debt excluding leases rose to EUR 8.2 billion, implying a gearing ratio of 19% compared with 18% at year-end 2022, in line with peers. Capital spending was EUR 2.6 billion, with guidance reduced to EUR 9.0 billion from EUR 9.2 billion previously. Eni left its shareholder payout guidance unchanged for 2023—a dividend of EUR 0.94 per share and EUR 2.2 billion in share buybacks.

The exploration and production segment reported an adjusted operating profit of EUR 2.1 billion during the quarter compared with an adjusted operating profit of EUR 4.9 billion the year before, on lower realized oil and gas prices that offset the effect of positive production volumes and mix. Second-quarter production rose to 1.61 million barrels of oil equivalent per day from 1.59 mmboe/d the year before as new project ramp-ups in Mozambique and Mexico were offset by planned maintenance. Full-year guidance was confirmed in the range of 1.63-1.67 mmboe/d assuming $80/bbl oil.

In June, Eni with its Norwegian subsidiary Var announced the acquisition of gas-focused E&P Neptune for $4.9 billion, which will add about 100 mboed to Eni’s consolidated plateau production and holds about $500 million in synergy opportunities. Neptune’s primarily gas portfolio (about 70% of production and 80% of reserves) ensures Eni’s leverage to hydrocarbons while moving toward its goal of a 60% as production portfolio by 2030.