Eni Axes More Capex After Q2 Loss

Italy's Eni announced a further reduction in capital expenditure on July 30, mostly at upstream projects, after swinging to a €4.4bn ($5.2bn) loss.

The company's result compares with a €424mn profit a year earlier, and was mainly caused by €3.5bn in post-tax impairment charges booked to reflect a weaker oil and gas price outlook. Fellow European majors BP, Shell and Total have taken on similarly significant charges, after revising forecasts in response to the Covid-19 pandemic and global decarbonisation efforts.

Eni now expects Brent to average $40/barrel this year, rising to $48/b in 2021, $55/b in 2022 and $60/b in 2023, after previously predicting $45/b in 2020 and $70/b in 2023.

"Spot gas prices at the Italian hub have been reduced by 30% in the long-term, while refining margins are expected to decline in the short term," the major said.

Eni suffered an adjusted operating loss of €434mn, versus a €2.28bn profit a year earlier, on the back of €807mn in upstream losses, compared with €2.14bn in income in the second quarter of 2019. Its gas and power division achieved a fourfold increase in profit to €218mn, whereas refining, marketing and chemicals managed a 43% growth in profit to €73mn.

The company has now set its capital expenditure target at €5.6bn, down €2.6bn or 35% from the original plan and €300mn lower than the revised figure it gave after the onset of the Covid-19 pandemic. These cuts are "almost fully focused" on upstream activities, it said.

Eni produced 1.74mn barrels of oil equivalent/day in the first half of the year, down 5.1% compared with the same period in 2019, owing to weaker gas demand in Egypt and lower output in Libya, partly offset by gains in Angola, Nigeria, Kazakhstan and Mexico. Its full-year guidance is now 1.71-1.76mn boe/d, down from a 1.75-1.80mn boe/d forecast it made in April. The cut was made in light of capex reductions, lower gas demand and the extension of force majeure in Libya, which is in the midst of civil war.

CEO Claudio Descalzi said the second-quarter results were "extremely positive considering we have gone through what is likely to be one of the most challenging quarters that the oil and gas industry has faced in its history."