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    Eni Responds to Greener Demands

Summary

Share buy-backs and more renewables and gas are among the company's short-term goals in its four-year plan.

by: William Powell

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Eni Responds to Greener Demands

Italian energy company Eni unveiled March 15 a four-year strategy that aims to boost oil and gas output and become greener at the same time. CEO Claudio Descalzi said the company would focus on low-cost, high-potential basins, pursue more opportunities along the value chain, and grow in renewables and biofuels, "making our company more profitable." 

The four-year investment plan, focused on high-value projects with rapid returns, puts capital expenditures at about €33bn ($37.4bn), of which 77% will be spent upstream, with the focus on developments in Middle East, Norway and Mexico. This year capital expenditure will be €8bn.

Eni has reinforced the pipeline of long-term/long plateau projects that will further underpin the growth beyond the plan, which is now forecast to yield 3.5% compound annual growth to 2025 compared with the previous guidance of 3%. It will target 2.5bn barrels of oil equivalent in new resources, and new projects breakeven at $25/b Brent, providing €22bn free cash flow over the period.

He said Eni would continue to grow organically in upstream, drilling 140 exploration wells in the plan period; and it has an inventory of future final investment decisions based on 3bn barrels of reserves. “We will continue to keep a strong discipline on investment,” he said. All the while it will work towards carbon neutrality upstream by 2030.

Upstream will continue to represent the key driver of Eni’s organic growth. The mid-downstream businesses are expected to double their operating income, creating value even in a lower scenario thanks to the restructuring, repositioning, and improvements undertaken during the recent downturn.

Gas & Power will grow thanks to better synergies with all businesses and a deeper integration with upstream activities, in order to capitalise on equity gas. The company also plans to speed up the growth of its LNG portfolio, to reach 14mn mt/year of contracted volumes by 2022 and 16mn mt/yr by 2025.

It also wants its retail sector in Europe to reach around 12mn customers in 2022, up about 26% on 2018. Descalzi said these actions “will allow G&P to continue to grow in the future, achieving an earnings before interest and tax of €700mn in 2022, of which 70% coming from the retail sector."

Eni is also embarking on a share buy-back plan with a capital allocation of €400mn in 2019 with Brent at $60-65/b, or twice as much if the price remains above $65/b.