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    Eni Swings to Q3 Loss on Weak Demand


The company says it is well-positioned to weather the downturn, thanks to its €17.4bn in liquidity and strong cash flow.

by: Joe Murphy

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Eni Swings to Q3 Loss on Weak Demand

Italy's Eni swung to a €0.15bn adjusted net loss in the third quarter, from a €0.78bn profit a year earlier, the company reported on October 28, blaming the reversal on weak demand. The major said it was well-positioned to weather the downturn, however, pointing to its €17.4bn in liquidity at the end of September. It generated €1.77bn in adjusted net cash flow from operations in Q3, down 31% year on year.

Eni's upstream adjusted operating profit slumped 76% to €515mn. Dated Brent fell 31% yr/yr to $43/b in Q3, while gas prices at Italy's PSV hub fell 27% to €95/'000 m3, Eni noted. Earnings were also affected by a 10% decline in production to 1.7mn barrels of oil equivalent/day, which the company attributed to the various effects of the Covid-19 pandemic, as well as OPEC+ output cuts and weaker gas demand, primarily in Egypt.

The company said it was still on track to produce 1.72-1.74mn boe/d during the year as a whole, however, with output set to reach around 2mn boe/d in 2023. 

Eni's global gas and LNG business performed well, achieving an adjusted operating profit of €64mn, versus €69mn in the same period of 2019, while refining and marketing earnings slumped to €21mn, from €149mn, as margins shrank by 88%. Its renewables division posted €57mn in operating profit, up from €15mn a year earlier.

"In a market environment that remains challenging, we are continuing to successfully mitigate the negative impact of the crisis and making progress with our decarbonisation strategy," CEO Claudio Descalzi said in a statement. "We achieved excellent results during the quarter, clearly exceeding market expectations."

Eni's cash flow was strong thanks to reductions in capital expenditure and general cost-cutting, Descalzi said, while the company's leverage has been kept below 30%.

"Faced with a crisis of unprecedented proportions, Eni has demonstrated great resilience and flexibility," he said. "In light of these results, we look forward to a recovery in demand, whilst continuing to pursue our energy transition programme."

Eni announced in June it would separate its renewable energy activities from its oil and gas operations under a new division called Energy Evolution, in order to put the company on "an irreversible path" towards decarbonisation.

The company is in advanced talks on €1bn in asset disposals this year, including for its gas operations in Australia, and has opportunities for further divestments in 2021.