E

Business Context and Reporting Period

Company: ENI S.p.A.
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: Third Quarter (Q3) and Nine Months ended September 30, 2024.
Date of Filing: October 25, 2024.

Eni reported resilient financial performance despite a weaker trading environment characterized by lower Brent prices, a stronger Euro, and deteriorating refining margins. The period was marked by significant strategic milestones, including the sale of a 25% stake in Enilive to KKR, the creation of a new UK E&P satellite with Ithaca Energy, and the acceleration of the share buyback program.

Key Financial Metrics

Note: Net borrowings increased due to the Neptune Energy acquisition and hybrid bond issuance, offset by strong operating cash flow and shareholder returns.

Material Changes vs. Prior Period

• Profitability Decline: Proforma adjusted EBIT decreased 14% in Q3 and 17% in the nine months compared to the prior year. This was driven by lower realized prices in E&P, a 66% drop in Global Gas & LNG Portfolio (GGP) EBIT due to a less favorable trading environment compared to 2023, and significant margin compression in Refining and Chemicals.
• Production Growth: Hydrocarbon production increased 2% in Q3 and 4% in the nine months to 1.661 and 1.704 kboe/d respectively, driven by the Neptune acquisition and ramp-ups in Côte d'Ivoire and Mozambique.
• Segment Performance:
  • E&P: EBIT down 5% in Q3 due to lower oil prices, offset by production growth.
  • Refining/Chemicals: Refining margins (SERM) collapsed to $1.7/bbl in Q3 from $11.7/bbl in Q3 2023. Chemicals reported a loss of €193 million in Q3 due to weak demand and high European energy costs.
  • Enilive/Plenitude: EBIT down 32% in Q3, impacted by low biofuel margins and seasonal gas demand.
• Balance Sheet: Net borrowings rose to €11.6 billion (from €9.6 billion at Jan 1, 2024) primarily due to the Neptune acquisition and a €1.6 billion hybrid bond issuance. Leverage remains within the guided range of 0.15-0.25.

Guidance, Outlook, and Management Commentary

• Shareholder Returns:
  • Dividend: Board approved the second tranche of the 2024 dividend at €0.25 per share (total annual provision €1.00), representing a 6% increase over 2023.
  • Buyback: Increased the 2024 share buyback program to €2 billion (from €1.6 billion), reflecting accelerated portfolio monetization and deleveraging prospects.
• Strategic Transactions:
  • Enilive: Signed agreement for KKR to acquire a 25% stake for €2.938 billion, valuing Enilive at €11.75 billion post-money.
  • UK Satellite: Finalized combination of UK upstream assets with Ithaca Energy to create a new satellite.
• 2024 Outlook:
  • Production: Full-year hydrocarbon production expected at ~1.70 million boe/d.
  • EBIT: Group proforma adjusted EBIT expected at €14 billion; Adjusted CFFO before working capital at €13.5 billion (based on Brent $83/bbl).
  • Capex: Organic capex projected below €9 billion for the full year.
  • Leverage: Expected to end the year in the 15%-20% range on a proforma basis.
• Risks: Management highlighted risks related to commodity price volatility, geopolitical instability, and the timing of project execution. The refining sector faces continued headwinds from weak demand and overcapacity.

Key Facts for Investor Verification

• KKR Transaction Closing: Verify the closing conditions and regulatory approvals for the €2.9 billion KKR investment in Enilive.
• Refining Margin Recovery: Monitor the Standard Eni Refining Margin (SERM) for signs of recovery from the Q3 low of $1.7/bbl.
• Chemicals Restructuring: Track the execution of the €2 billion transformation plan for the Versalis chemicals business to restore profitability.
• Divestment Progress: Confirm the realization of the €8 billion disposal plan proceeds to support the accelerated deleveraging and buyback targets.
• Neptune Integration: Assess the integration progress and production ramp-up of the Neptune Energy assets.