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Eni (E) Lags Q1 Earnings Estimates, Reaffirms Production View

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Eni SpA E reported first-quarter 2021 adjusted earnings from continuing operations of 10 cents per American Depository Receipt (ADR), missing the Zacks Consensus Estimate of 42 cents. The underperformance was owing to a drop in retail gas sales. However, the bottom line improved from 4 cents per ADR in the year-ago quarter, thanks to higher realized commodity prices.

Revenues in the quarter totaled $17,839 million, up from $15,537 million a year ago.

Eni SpA Price, Consensus and EPS Surprise

Eni SpA Price, Consensus and EPS Surprise
Eni SpA Price, Consensus and EPS Surprise

Eni SpA price-consensus-eps-surprise-chart | Eni SpA Quote

Operational Performance

The company operates through four business segments — Exploration & Production, Global Gas & LNG Portfolio, Refining & Marketing and Chemicals and EGL, and Power & Renewables.

Exploration & Production

Total oil and gas production for the first quarter was 1,704 thousand barrels of oil equivalent per day, down 5% year over year.

Liquids production was 814 thousand barrels per day (MBbl/d), down 9% from the year-ago level of 892 MBbl/d. Moreover, natural gas production dropped 1% year over year to 4,726 million cubic feet per day.

Average realized price of liquids was $57.23 per barrel, up 31% from $43.58 reported a year ago. Moreover, realized natural gas price was $4.55 per thousand cubic feet, up 6% from $4.28 a year ago.

Higher realizations of average liquids and natural gas prices aided the company’s Exploration & Production segment. The segment reported a profit of €1,378 million, up from €1,037 million recorded in the March quarter of 2020.

Global Gas & LNG Portfolio

Eni’s worldwide sales of natural gas for the March quarter were recorded at 17.48 billion cubic meters (bcm), up 5% year over year.

The integrated energy major’s Global Gas & LNG Portfolio business segment reported adjusted operating loss of €30 million, deteriorating from the year-ago profit of €233 million. Notably, positive contributions from portfolio optimization aided the segment in the year-ago quarter.

Refining & Marketing and Chemicals

For the March quarter, total refinery throughputs were recorded at 6.40 million tonnes (mmtonnes), up 6% year over year. Moreover, petrochemical product sales improved 33% year over year to 1.18 mmtonnes for the first quarter of 2021. However, Eni’s wholesale sales in Europe fell 17% year over year to 1.72 mmtonnes.

For the quarter under review, the segment reported an adjusted loss of €120 million, contracting from a profit of €16 million in the year-ago quarter owing to lower wholesale sales in Europe.

EGL, Power & Renewables

Retail gas sales — managed by Eni gas e luce (EGL) — decreased 3% year over year to 3.52 bcm owing to lower consumption in Italy. However, retail power sales improved 11% year over year, thanks to a growing base of retail customers. Notably, EGL is an energy retail company that is controlled entirely by Eni.

Power sales in the open market, under the Power & Renewables business, declined 1% year over year owing to a downturn in economic activities.

Overall, from EGL, Power and Renewables, the company reported a profit of €202 million, reflecting a 6% year-over-year improvement.

Financials

As of Mar 31, Eni had long-term debt of €22,372 million and cash and cash equivalents of €8,460 million. Its debt to capitalization was 40.3%.

For the reported quarter, net cash generated by operating activities amounted to €1,376 million. Capital expenditure totaled €1,139 million.

Other News

In a separate release, the company announced that it is planning for listing or selling a minority stake in its newly-formed retail and renewable energy business unit. The target of the new business, as expected by the integrated player, is to deliver more than 5GW of renewable power generation capacity by 2025.

Outlook

The company reaffirmed its hydrocarbon production target for 2021 at 1.7 million BoE/D.

Zacks Rank & Stocks to Consider

Eni currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include Whiting Petroleum Corporation WLL, Continental Resources, Inc. CLR and Matador Resources Company MTDR. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days.

Continental is likely to see earnings growth of 256% in 2021.

Matador is expected to see earnings growth of 300% in 2021.

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