Business context and reporting period
Eni SpA filed its Form 20-F for the fiscal year ended December 31, 2021, prepared under IFRS as issued by the IASB and audited by PricewaterhouseCoopers SpA. The requested “2021 Q4” information is discussed within the full-year filing; the filing does not provide a standalone fourth-quarter income statement.
Eni is an integrated energy company operating across Exploration & Production, Global Gas & LNG Portfolio, Refining & Marketing and Chemicals, Plenitude & Power, and Corporate activities. Its performance is highly exposed to oil and gas prices, refining margins, foreign exchange rates, geopolitical conditions and the energy transition.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Sales from operations | €76.575 billion | €43.987 billion | +74.1% |
| Operating profit | €12.341 billion | €3.275 billion loss | Turnaround |
| Net profit attributable to Eni | €5.821 billion | €8.635 billion loss | Turnaround |
| Adjusted operating profit | €9.664 billion | €1.898 billion | +410% |
| Adjusted net profit | €4.330 billion | €758 million loss | Turnaround |
| Net cash from operating activities | €12.861 billion | €4.822 billion | +€8.039 billion |
| Capital expenditures | €5.234 billion | €4.644 billion | +12.7% |
| Acquisitions | €2.738 billion | €392 million | Higher investment |
| Cash and cash equivalents | €8.254 billion | €9.413 billion | Down €1.159 billion |
| Finance debt including leases | €33.131 billion | €31.704 billion | +€1.427 billion |
| Net borrowings excluding leases | €8.987 billion | €11.568 billion | Down €2.581 billion |
| Leverage excluding IFRS 16 | 20% | 31% | Improved |
| Dividend per share | €0.86 | €0.36 | Higher |
Reported operating profit included a €1.491 billion inventory holding gain and other identified non-core items. The filing reports a 45% effective tax rate and a 50% adjusted tax rate.
Segment performance
| Segment operating profit | 2021 | 2020 |
|---|---|---|
| Exploration & Production | €10.066 billion | €610 million loss |
| Global Gas & LNG Portfolio | €899 million | €332 million loss |
| Refining & Marketing and Chemicals | €45 million | €2.463 billion loss |
| Plenitude & Power | €2.355 billion | €660 million |
| Corporate and other activities | €816 million loss | €563 million loss |
Exploration & Production benefited from an 80% increase in average liquid realizations and a 77% increase in average gas realizations. Production declined approximately 3% to 1,566 thousand barrels of oil equivalent per day. Global gas sales increased 8.4% to 70.45 billion cubic meters.
Refining remained weak: the Standard Eni Refining Margin averaged negative $0.9 per barrel versus positive $1.7 per barrel in 2020. Chemical revenues increased to €5.590 billion from €3.387 billion, supported by higher prices and demand.
Material changes versus the prior comparable period
- Oil and gas prices recovered sharply: Brent averaged $70.73 per barrel versus $41.67 in 2020.
- European gas markets became exceptionally tight. Fourth-quarter TTF prices averaged approximately €92/MWh, up 529% year over year, with a December peak of €180/MWh.
- Working capital absorbed €3.146 billion of cash, primarily because of higher inventories, derivative fair values and receivables associated with rising commodity prices.
- Eni drew €4 billion from committed credit facilities during the fourth quarter to meet commodity-related margin calls.
- Refining assets were impaired by approximately €0.9 billion, effectively writing off the book value of Eni’s European refineries; chemical assets incurred approximately €163 million of impairment losses.
- Previously recognized oil and gas impairments were reversed by approximately €1.244 billion as pricing assumptions improved.
- Renewable installed capacity increased to approximately 1.14 GW from 0.33 GW, more than tripling year over year.
- Eni acquired renewable generation, retail energy and electric-vehicle charging assets, including Dhamma Energy, wind portfolios, Aldro Energia, FRI-EL Biogas and Be Power.
- Proved reserves decreased 4% to 6,628 million barrels of oil equivalent. The reserves replacement ratio was 55%, below the 100% replacement level.
Guidance, outlook, risks and unusual items
2022 and medium-term outlook
- Management’s base planning assumption is Brent at $80 per barrel in 2022, $75 in 2023 and $70 in 2024-2025.
- Production is expected to be broadly flat in 2022 and to grow at an average 3% annually toward approximately 1.9 million barrels of oil equivalent per day in 2025.
- Planned 2022 capital expenditures are approximately €7.7 billion, including €4.9 billion for Exploration & Production. Total 2022-2025 capital expenditure is planned at approximately €28 billion.
- At Brent of $80 per barrel, management expected 2022 operating cash flow to cover planned capital expenditures and a €1.2 billion base dividend, with a total expected dividend of €0.88 per share and a planned €1.1 billion share repurchase, subject to shareholder approval.
- Management estimates operating cash flow sensitivity of approximately €140 million for each $1 per barrel change in Brent and approximately €120 million for each $1 per barrel change in the SERM.
- Management targets leverage excluding IFRS 16 to remain below 20% over the plan period.
Principal risks and contingencies
- Russia-Ukraine conflict: Russian gas represented approximately 43% of Eni’s 2021 purchased gas supply, or about 30 billion cubic meters. Disruption or sanctions could materially affect supply obligations, margins, receivables and liquidity.
- Commodity volatility and margin calls: forward sales and derivatives may require substantial collateral. Eni planned to increase cash and committed borrowing facilities.
- Take-or-pay and ship-or-pay obligations: undiscounted purchase obligations totaled €159.099 billion, including €153.559 billion for gas contracts.
- Geopolitical and counterparty exposure: material exposures include Venezuela, Nigeria, Libya and other non-OECD jurisdictions. Venezuela-related receivables from PDVSA had a net recoverable amount of €538 million and an estimated expected credit loss rate of approximately 53%.
- Legal and environmental matters: provisions totaled €13.593 billion, including €9.621 billion for site restoration, abandonment and social projects and €2.206 billion for environmental matters. Numerous proceedings remain pending.
- Saipem: Eni expects to contribute approximately €0.61 billion to a planned €2 billion capital increase for its jointly controlled investee.
- Italian windfall tax: management could not reliably estimate the impact of the one-time extra-profit charge enacted in March 2022.
- Energy transition: Eni targets net-zero Scope 1, 2 and 3 emissions by 2050, but faces risks from lower long-term hydrocarbon demand, carbon pricing, stranded assets, litigation and higher financing costs.
Most important facts an investor should verify
- Whether 2022 commodity prices and Russian supply disruptions materially change cash flow, margin calls and the €0.88 per-share dividend outlook.
- The final amount and timing of the Italian windfall tax and any additional government price-control or taxation measures.
- The status and funding of the planned Saipem capital increase and Eni’s expected €0.61 billion contribution.
- Progress toward Plenitude’s proposed listing, renewable-capacity targets and planned asset disposals.
- The sustainability of the 55% reserves replacement ratio and the development timetable for the 2,020 million barrels of oil equivalent of proved undeveloped reserves.
- Recoverability of Nigerian, Venezuelan and other state-counterparty receivables, including arbitration and repayment arrangements.
- Refining cash generation after the European refinery write-offs, continued negative margins and rising emissions-compliance costs.
- Details of the €159.099 billion gas and other purchase obligations, including take-or-pay exposure under alternative gas-price and demand scenarios.