Business Context and Reporting Period
Company: ENI S.p.A.
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: Second Quarter (Q2) and First Half (IH) ended June 30, 2023.
Filing Date: July 28, 2023.
Eni reported unaudited consolidated results for Q2 and IH 2023. The Board of Directors approved the first tranche of the 2023 dividend provision of €0.24 per share. The company continues its strategic transformation, highlighted by the proposed acquisition of Neptune Energy and the expansion of its biorefining and renewable energy portfolios.
Key Financial Metrics
| Metric (€ million) | Q2 2023 | Q2 2022 | IH 2023 | IH 2022 |
|---|---|---|---|---|
| Adjusted Operating Profit | 3,381 | 5,841 | 8,022 | 11,032 |
| Adjusted Net Profit (Attributable to Eni) | 1,935 | 3,808 | 4,842 | 7,078 |
| Net Profit (GAAP, Attributable to Eni) | 294 | 3,815 | 2,682 | 7,398 |
| Adjusted EPS (Diluted) | €0.57 | €1.07 | €1.43 | €1.98 |
| Net Cash from Operations | 4,443 | 4,183 | 7,425 | 7,281 |
| Net Capital Expenditure | 2,597 | 1,822 | 4,811 | 3,439 |
| Net Borrowings (ex-IFRS 16) | 8,215 | 7,872 | 8,215 | 7,872 |
| Leverage (ex-IFRS 16) | 0.15 | 0.15 | 0.15 | 0.15 |
Note: Adjusted figures are Non-GAAP measures excluding special items and inventory holding gains/losses.
Material Changes vs. Prior Period
- Profit Decline: Adjusted operating profit for Q2 2023 decreased 42% year-over-year (YoY) to €3.38 billion, and IH 2023 decreased 27% to €8.02 billion. This was primarily driven by lower realized prices for crude oil (Brent down ~31% in Q2) and natural gas, and a significant drop in refining margins.
- Segment Performance:
- E&P: Adjusted operating profit fell 58% in Q2 to €2.07 billion due to lower prices and the deconsolidation of Azule. Production increased 2% YoY to 1.61 million boe/d.
- Global Gas & LNG (GGP): Adjusted operating profit surged to €1.09 billion in Q2 (from a loss of €14 million in Q2 2022), driven by contractual triggers and asset optimization.
- Refining & Chemicals: Adjusted operating profit dropped 92% in Q2 to €87 million. The Standard Eni Refining Margin (SERM) fell to $6.6/bbl from $17.2/bbl in Q2 2022.
- Plenitude & Power: Adjusted operating profit increased 18% in Q2 to €186 million, supported by renewable capacity ramp-up.
- Cash Flow: Adjusted operating cash flow before working capital was €4.2 billion in Q2. Organic free cash flow for IH 2023 was approximately €3 billion.
- Balance Sheet: Net borrowings increased to €8.2 billion (from €7.0 billion at year-end 2022), while leverage remained stable at 0.15.
Guidance, Outlook, and Management Commentary
- Updated 2023 Guidance:
- Group Adjusted EBIT: Confirmed at €12 billion (underlying raise of ~€2 billion vs. previous guidance) despite a lowered price scenario (Brent $80/bbl).
- GGP Adjusted EBIT: Raised to €2.7–€3.0 billion (from €2.0–€2.2 billion).
- Plenitude Proforma Adjusted EBITDA: Raised to ~€0.8 billion (from >€0.7 billion).
- Downstream Proforma Adjusted EBIT: Lowered to €0.8 billion (from €1.0–€1.1 billion) due to market conditions.
- Capex: Expected to be under €9.0 billion (reduced from €9.2 billion).
- Shareholder Returns:
- Dividend: First quarterly installment of €0.24 per share approved, payable September 20, 2023. Total 2023 dividend remains €0.94 per share.
- Buyback: €2.2 billion share buyback program commenced in May; €588 million spent through July 21, 2023.
- Strategic Developments:
- Neptune Energy: Signed agreement to acquire Neptune Energy (Enterprise Value $4.9 billion; Eni share $2.6 billion). Expected to close early 2024, adding ~100 kboe/d to production plateau.
- Acquisitions: Acquired Chevron's assets in Indonesia; finalized St. Bernard biorefinery JV with PBF Energy.
- Risks: Results are sensitive to commodity price volatility, geopolitical stability, and regulatory changes (e.g., UK energy profit levy, Italian extraordinary contributions).
Key Facts for Investor Verification
- Dividend Payment Date: Verify the ex-dividend date (September 18, 2023) and payment date (September 20, 2023) for the €0.24 per share tranche.
- Neptune Energy Deal: Monitor the closing timeline (expected early 2024) and regulatory approvals for the $2.6 billion acquisition.
- Refining Margins: Track the Standard Eni Refining Margin (SERM) trend, which dropped significantly to $6.6/bbl in Q2, impacting downstream profitability.
- Special Items: Review the €1.37 billion in special items for Q2 2023, which includes impairment losses and commodity derivative adjustments, to understand the gap between GAAP and Adjusted profit.
- Production Growth: Confirm the 2% YoY increase in hydrocarbon production (1.61 million boe/d) despite mature field declines.