Strong gas business helps to cushion Eni profit fall

The logo of Italian multinational oil and gas company is displayed on a fuel tanker truck parked outside an Eni petrol station in Cyprus’ capital Nicosia on September 9, 2022.

Amir Makar | Afp | Getty Images

Italian energy group Eni reported a 49% fall in its adjusted net profit in the second quarter because of weaker commodity prices but a strong performance from its gas business helped it to beat forecasts.

Adjusted net profit in the period came in at 1.94 billion euros ($2.13 billion) down from a bumper result of 3.81 billion euros a year ago, but above an analyst consensus of 1.64 billion euros.

The state-controlled group raised its 2023 guidance for its gas business (GGP) after it underpinned the group’s results in the second quarter with an adjusted operating profit of 1.1 billion euros, more than double the 0.5 billion analysts had pencilled in.

Following Russia’s invasion of Ukraine last year, Eni moved quickly to replace Moscow’s gas supplies with fuel it extracts in African countries, strengthening its position on the gas markets.

Trading activity related to its large gas portfolio and re-negotiations and settlements related to contracts were the factors behind the good performance of the division in the last three months, it said.

Eni now expects the gas business to reach an adjusted earnings before interest and taxes (EBIT) figure of between 2.7 billion and 3.0 billion euros for the year versus previous guidance of 2.0-2.2 billion euros.

It also improved its full-year outlook for its low-carbon unit Plenitude and trimmed plans for capital expenditure this year to below 9 billion euros from a previous estimate of 9.2 billion euros.

Group’s expectation for adjusted EBIT for this year is confirmed at 12 billion euros even after taking into account a weaker oil and gas prices.

Rewarding investors

On Thursday Shell and TotalEnergies reported sharp falls in second-quarter profit from bumper 2022 earnings as oil and gas prices, refining margins and trading results all weakened.

“Eni has reported a strong set of second-quarter results, with adjusted EBIT and net income coming in well ahead of market expectations,” said Royal Bank of Scotland in a note, adding the new guidance for the gas division was a significant move up relative to market expectations.

Shares in the group were up 1%, outperforming a flat Milan’s blue-chip index at 0740 GMT.

In the second quarter Eni and other energy groups had to cope with a 30% fall in crude oil prices and a drop of more than 60% in the gas price and refining margins compared with the same period last year.

Despite a weaker outlook for commodity prices, Eni said it would continue a share buy-back programme started in May.

“Considering our first-half results and continuing business performance that drives raised guidance, we have a solid position from which to pay our first quarterly instalment of the raised 0.94 euros per share 2023 dividend in September and continue our 2.2 billion euro buy-back,” Eni CEO Claudio Descalzi said.

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