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Eni (E) Q1 Earnings Miss Estimates on Lower Production Volumes

Zacks Equity Research

Eni SpA E reported first-quarter 2020 adjusted earnings from continuing operations of 4 cents per American Depository Receipt (ADR), lagging the Zacks Consensus Estimate of 14 cents and declining from the year-ago quarter’s 64 cents.

Total revenues in the quarter totaled $15,537 million, down from $21,351 million in the year-ago quarter.

The weak quarterly results can be blamed on lower production volumes and average realized prices of liquids and natural gas.

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 three business segments — Exploration & Production, Gas & Power, and Refining & Marketing and Chemicals.

Exploration & Production

Total oil and gas production in the first quarter was 1,774thousand barrels of oil equivalent per day, down 3.6% year over year.

Liquids production was 892 thousand barrels per day (MBbl/d), up 0.6% from the year-ago level of 887 MBbl/d. However, natural gas production dropped 7.5% year over year to 4,768 million cubic feet per day.

Average realized price of liquids was $43.58 per barrel, down 25% from $58.08 reported a year ago. Moreover, realized natural gas price was $4.28 per thousand cubic feet, down 24% from $5.61 a year ago.

Lower realizations of average liquids and natural gas prices hurt the company’s Exploration & Production segment. The segment reported a 55% year-over-year decline in adjusted operating profit to €1,037 million.

Gas & Power

Gas sales were 16.75 billion cubic meters, down 21% from the year-ago quarter primarily because of lower sales in Italy.

The company’s power sales in the first quarter were recorded at 9.89 terawatt-hours (TWh), down from the year-ago quarter level by 2%.  Notably, the Gas & Power segment reported a 29% year-over-year rise in adjusted operating profit to €431million, thanks to contributions from the Gas & LNG Marketing and Power business.

Refining & Marketing and Chemicals

In the March-end quarter, total refinery throughputs were recorded at 6.03 million tonnes (mmtonnes), up 13% year over year. However, Eni’s wholesale sales in Europe fell 8% year over year to 2.08 mmtonnes. Moreover, petrochemical product sales declined 15% year over year to 0.89 mmtonnes in the first quarter of 2020.

In the quarter, the segment reported an adjusted profit of €16 million against the year-ago quarter loss of €18 million. The outperformance was led by higher refinery throughputs.

Financials

As of Mar 31, Eni had long-term debt of €19,698 million, and cash and cash equivalents of €3,641 million. Its debt-to-capitalization ratio was 34.9.   

In the reported quarter, net cash generated by operating activities amounted to €975 million. Capital expenditure totaled €1,590million.

Outlook

Since, the coronavirus pandemic is hurting the global energy demand, the company has revised its capital spending budget downward for 2020 by 30%. Owing to the lower spending, the company has decided to reduce its planned production volumes to the range of 1.75 to 1.80 MBoE/D in 2020.

Zacks Rank & Stocks to Consider

Eni currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector includeLilis Energy, Inc. LLEX, CNX Resources Corporation CNX and Comstock Resources, Inc. CRK. While Lilis Energy sports a Zacks Rank #1 (Strong Buy), CNX Resources and Comstock Resources carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Lilis Energy has witnessed upward estimate revisions for 2020 bottom line in the past 60 days.

CNX Resources has witnessed upward estimate revisions for 2020 bottom line in the past 60 days.

Comstock has witnessed upward estimate revisions for 2020 bottom line in the past 30 days.

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Comstock Resources, Inc. (CRK) : Free Stock Analysis Report
 
CNX Resources Corporation. (CNX) : Free Stock Analysis Report
 
Eni SpA (E) : Free Stock Analysis Report
 
Lilis Energy Inc. (LLEX) : Free Stock Analysis Report
 
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