Eni SpA E has estimated a write-off of roughly €3.5 billion from its non-current assets value following the downward revision of its long-term oil prices.
The downward revisions were a result of the coronavirus pandemic-dented global energy demand. Also, the company believes that post COVID-19, there will be rising transition to a low-carbon economy since investors are increasingly building pressure on oil companies to drastically reduce carbon emissions, in line with the Paris climate goals.
To incorporate these impacts, Eni trimmed its forecast for Brent oil price starting 2023 from $70 per barrel to $60. Moreover, for the years 2020 to 2022, the energy giant made a downward revision for its forecast of Brent crude from $45, $55 and $70 per barrel to $40, $48 and $55 per barrel, respectively.
The downward commodity price revisions have convinced this integrated energy firm to include post-tax impairment charges of €3.5 billion, plus/minus 20%, in the second quarter. The company added that the write-offs will mostly be booked against upstream assets.
The integrated firm has also reaffirmed its stance to lower greenhouse gas emissions by 80% by 2050.
Overall, Eni’s recent announcement for asset write-offs follows similar moves by energy majors like BP plc BP and Royal Dutch Shell plc RDS.B. Notably, the moves reveal the urgency to recalculate the values of assets and reserves as the pandemic has affected worldwide energy businesses and there is a gradual transition by oil majors to low-carbon energy operations.
Eni SpA Price
Eni SpA price | Eni SpA Quote
Eni currently carries a Zacks Rank #4 (Sell). Meanwhile, a better-ranked player in the energy space is Murphy USA Inc. MUSA. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Murphy USA is likely to see earnings growth of 7% in the next five years.
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Eni SpA (E) : Free Stock Analysis Report
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