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Eni Earnings Miss Ests as Output Declines

Zacks Equity Research

Eni SpA’s (E) first quarter 2014 adjusted earnings from continuing operations of 90 cents per American Depository Receipt/ADR (€0.33 per share) failed to meet the Zacks Consensus Estimate of 92 cents and also decreased from the year-earlier earnings of $1.00 per ADR (€0.38 per share). The decline was mainly due to lesser production and lower realized average prices.

Total revenue in the quarter decreased 6.3% to €29.2 billion ($40.0 billion) from the year-ago revenue of €31.2 billion ($41.2 billion).

Operational Performance

Total liquids and gas production in the quarter was 1,583 thousand barrels of oil equivalent per day (MBoe/d), down 1.1% year over year, mainly due to political events in Libya and Nigeria as well as mature field declines.

Liquids production was 822 thousand barrels per day (MBbl/d), up 0.5% from the year-ago level of 818 MBbl/d. Natural gas production decreased 2.5% year over year to 4,182 million cubic feet per day (MMcf/d).

Gas sales were 26.76 billion cubic meters (Bcm), down 11.3% from the year-ago quarter, reflecting weak sales in the industrial and residential segments as well as a fall in consumption due to the economic downturn.


As of Mar 31, 2014, the company had cash and cash equivalents of €6.7 billion and long-term debt (including current portions) of €22.7 billion. The debt-to-capitalization ratio was approximately 27.1%.

In the reported quarter, net cash generated by operating activities from continuing operations amounted to €2.2 billion. Capital expenditure totaled €2.54 billion (down 18.6% year over year).

Company Outlook

Eni believes that a certain degree of ambiguity still looms with respect to the economic slowdown, particularly in the Euro zone, and volatile market conditions. This Italian giant expects the uncertainty to prevail in the European gas, refining and marketing and chemicals sectors. Overall demand will likely remain weak due to the ongoing economic dormancy and the appreciation of the Euro.

The company expects 2014 oil and natural gas production to be in line with 2013. This however excludes the impact of the divestment of Eni’s interest in the Russian gas assets of Artic Russia.

Worldwide gas sales are expected to fall from the 2013 level. The downside would come from both the large customers and retail segments, considering an ongoing demand downturn and oversupplies, particularly in Italy.

For 2014, refining throughputs are expected to decline from the 2013 level due to capacity reductions. This would be partially offset by higher output at the new EST technology conversion plant at the Sannazzaro Refinery.

The company expects full-year capital spending broadly in line with 2013. Eni had 12.75 billion euros in capital expenditure and 0.32 billion euros in financial investments in 2013.

Zacks Rank

Eni currently carries Zacks Rank #5 (Strong Sell) rating. Better-ranked stocks in the oil and gas industry include Unit Corp. (UNT), Helmerich & Payne, Inc. (HP) and Boardwalk Pipeline Partners, LP (BWP). All these sport a Zacks Rank #1 (Strong Buy).

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