Eni 2013-16 Strategic Plan

Zacks

Italian energy giant Eni SpA (E) disclosed its strategic plan for 2013-2016. Per the plan, production growth is pegged at more than 4% per year for 2013-2016 and 3% per year through 2022.

The growth in the first phase is likely to be backed by organic development as well as exploration successes in major development hubs, including Russia (Yamal), the Barents Sea, Kazakhstan, Venezuela, the Far Eastand the sub-Saharan region.

Broad based and synergic pipeline development along with a low decline rate of about 4% is expected to support the second phase of growth.

Eni remains cautious about its gas segment, particularly in Italy, due to the prevailing macroeconomic weakness.  Attempts are on to sustain profitability, with 80% of supply volumes awaiting renegotiations with buyers. In 2016, the Gas & Power segment is expected to have pro forma adjusted EBITDA of around 1.5 billion euro.

In Refining & Marketing, Eni has commenced an aggressive cost reduction program and is optimizing its refining operations to improve profitability. Some of the key projects include conversion of the Venice refinery into a bio-refinery. EBIT growth is estimated to exceed 500 million euro by 2016.

Eni has assured a turnaround for Versalis in Europe. Currently, it is characterized by increasing pressure on prices. However, Eni is committed to the expansion of its emerging market activities through strategic partnerships and will continue to support proposals for efficient plants and processes. These new initiatives are projected to increase EBIT to over 400 million euro by 2015 and to over 500 million euro by 2016.

Eni’s leverage also halved year over year in 2012 and is targeted at 10–30% for 2013–2016. Eni intends to invest around 56.8 billion euro over the same time frame. Further, the new shareholders’ distribution policy proposes a dividend of 1.10 euro per share, up approximately 2% from 2012. A new buyback program is also slated.

Eni holds a Zacks Rank #4 (Sell rating). However, there are other stocks in the energy sector, namely, Enerplus Corporation (ERF), Range Resources Corporation (RRC) and EPL Oil & Gas, Inc. (EPL), which carry a Zacks Rank #1 (Strong Buy) and are expected to perform impressively over the next few months.

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