Eni’s Q1 2024 Results Show Accelerated Growth and Strategic Portfolio Transformation

Eni’s Q1 2024 Results Show Accelerated Growth and Strategic Portfolio Transformation

(IN BRIEF) Eni’s Board of Directors, under the leadership of Giuseppe Zafarana, approved the unaudited consolidated results for Q1 2024, showcasing an accelerated transformation of the company’s portfolio. CEO Claudio Descalzi highlighted key achievements, including the acquisition of Neptune Energy and a UK-focused merger with Ithaca Energy. Operationally, Eni reported resilient performance, with exploration and production (E&P) delivering strong results, including a 5% production increase. The Enilive and Plenitude segments contributed significantly to the group’s earnings, demonstrating growth and profitability. Financially, Eni reported proforma adjusted EBIT of €4.12 billion, with adjusted net profit of €1.58 billion and operating cash flow of €3.9 billion, positioning the company well within its leverage targets. Strategic initiatives in renewable energy, refining, chemicals, and technology underscore Eni’s commitment to sustainability and innovation. The company raised its full-year earnings guidance and announced an increased share buy-back program, reflecting confidence in its strategic direction and financial performance.

(PRESS RELEASE) MILAN, 24-Apr-2024 — /EuropaWire/ — Eni’s Board of Directors, chaired by Giuseppe Zafarana, approved the unaudited consolidated results for the first quarter of 2024. Eni CEO Claudio Descalzi said:

“In the first quarter 2024, we have accelerated in executing the transformation of our portfolio through different high value platforms of growth in both the legacy and transition businesses. With the closing of the acquisition of Neptune Energy and the announced UK focused combination with Ithaca Energy in the Upstream, we will reinforce our exposure to gas and to OECD countries, while the EIP investment into Plenitude at an enterprise value in excess of €10 bln confirms the material potential of our renewable and retail segment. Operationally, we continue to leverage our exploration and development skills: a new giant discovery in Côte d’Ivoire will expand our optionality in the long term both in term of resources and potential dilution; fast tracking development has ensured the start-up of the first LNG in Congo, just one year after the Final Investment Decision. The quarterly performance was excellent, with a strong result from E&P, supported by production up 5% versus last year, and continuing growth at Plenitude and Enilive. This drove €4.1 bln of proforma adjusted Ebit leading to €1.6 bln of adjusted net profit. Operating cash flow, net of working capital adjustments, was €3.9 bln, twofold our capex, thus enabling us to report a leverage of 0.23 well within our planned range despite the disbursement for the Neptune Energy acquisition. The results put the Company firmly on track to exceed the full-year earnings and cash flow guidance as we work to efficiently grow the upstream, profitably develop the businesses tied to the energy transition, and work to fully capture the market scenario. Based on our updated scenario, we expect full year CFFO to be above €14 bln and, in line with our distribution commitment, we are raising the planned 2024 share buy-back by 45% to €1.6 bln”.

Financial highlights of the first quarter 2024

From Q1 ’24 Eni’s results are reported in a way that fits with the underlying performance and strategic transformation of the Company. Emphasis is now given to segmental proforma adjusted EBIT[1] to incorporate the contribution of our main Joint Venture/Associates. Enilive and Plenitude, our key business dedicated to the decarbonization of the retail demand, are grouped together for segmental reporting purposes also in order to highlight their growing importance.

  • The trading environment of Q1 ’24 featured a decline in natural gas prices (down almost 50% y-o-y at the main European hubs), affecting the results of our gas value chain, while crude oil prices were almost flat with the Brent benchmark averaging 83 $/bbl. Refining margins recovered from Q4 ’23 but were still down y-o-y. Against this scenario, the Group reported excellent results with proforma adjusted EBIT of €4.12 bln, net profit of €1.58 bln and adjusted cash flow before working capital changes of €3.9 bln, signalling the strong underlying performance supported by our operational execution, growth, valuable assets and financial discipline.
  • In Q1 ’24 E&P delivered €3.32 bln of proforma adjusted EBIT fueled by production growth of 5% y-o-y to 1.74 mln boe/d thanks to continuing project ramp-ups and the Neptune Energy business acquisition. This growth added to the focus on efficiency yielded resilient outcome (down just by 13% versus last year), despite the impact of lower natural gas prices realizations.
  • Q1 ’24 GGP proforma adjusted EBIT was €0.33 bln in line with management’s expectations anticipating lower trading opportunities due to both reduced prices and volatility versus last year.
  • In Q1 ’24, the new reporting segment Enilive and Plenitude contributed strongly to Group results with €0.42 bln of proforma adjusted EBIT, up by almost 60% from the Q1 ’23. Enilive earned €0.18 bln, up by 30%, driven by higher biorefinery throughputs and positive marketing performance. Plenitude earned €0.24 bln, 80% above last year, driven by higher retail commodity margins, supported by lower scenario volatility and the improved performance in international retail markets, as well as the ramp-up in renewable installed capacity and related production volumes.
    Enilive proforma adjusted EBITDA in the Q1 ’24 at €0.25 bln, up by 27% and Plenitude proforma adjusted EBITDA at €0.35 bln, up by approximately 50% were both in line with the Company’s guidance.
  • In Q1 ’24, the Refining business performance was robust with €0.2 bln of proforma adjusted EBIT thanks to good refining margins and European plant reliability. The Chemical business managed by Versalis reported a loss of €0.17 bln in Q1 ’24 driven by continuing macro headwinds and energy cost disadvantages of European plants vs. other areas. However, a continuous focus on cost optimization ensured an improvement of around €70 mln vs. Q4 ’23.
  • Q1 ’24 adjusted net profit attributable to Eni shareholders was €1.58 bln, with a Group tax rate of about 49%.
  • In Q1 ’24, Group adjusted operating cash flow before working capital at replacement cost was €3.9 bln, exceeding outflows related to organic capex of €2 bln, and resulting in an organic free cash flow (FCF) of €1.9 bln. In addition to fund working capital requirements (around €2 bln), the organic FCF was deployed to return cash to shareholders through dividends and share repurchases (€1.2 bln overall) as well as to fund the strategic acquisition of the Neptune Energy Group (€2.3 bln) and of renewable capacity in the USA (€0.2 bln), partly offset with the proceeds from the sale of a minority stake of 7.6% in Plenitude to the EIP fund (about €0.6 bln) and non-strategic E&P assets (€0.2 bln).
  • Net borrowings ex-IFRS 16 as of March 31, 2024, were €12.9 bln, with the Group leverage at 0.23.
  • In March 2024, the third out of four instalments of the dividend for the fiscal year 2023 of €0.24 per share was paid for a total consideration of €0.8 bln. The fourth instalment of the 2023 dividend of €0.23 per share is scheduled to be paid on May 22, 2024.
  • As of March 5, 2024, the 2023 buy-back program was completed with an overall amount of 153.5 mln shares purchased from May 2023 to March 2024, for a cash outlay of €2,200 mln (24.5 mln shares at a cost of €363 mln in Q1 ’24).

Main business developments

Exploration & Production

  • On April 23, 2024, Eni reached an agreement on the combination of substantially all its upstream assets in the UK, excluding East Irish Sea assets and CCUS activities with Ithaca Energy, marking a strategic move to significantly strengthen its presence on the UK Continental Shelf. The combination is being funded through the issue to Eni UK of new ordinary shares representing 38.5% of the enlarged issued share capital of Ithaca. The economic effective date for the combination will be June 30, 2024, with completion expected in Q3 2024, subject to the satisfaction of certain regulatory and other customary conditions precedent. The combination will immediately create an enlarged and stronger combined group with 2024 production greater than 100,000 boe/d and the underlying potential to organically grow to 150,000 boe/d by the early 2030s. The combination is aimed at replicating the previous successful execution of upstream combinations that Eni has formed using its distinctive Satellite Model.
  • In Q1 ‘24, hydrocarbons production rose by 5% to 1.74 mln boe/d thanks to the purchase of Neptune Energy, including those properties acquired by Vår Energi in Norway, and ramp-ups at the Baleine project in Côte d’Ivoire and in Mozambique.
  • In Q1 ‘24, exploration activities delivered another outstanding outcome with 435 mln boe of new additions to the resource base, driven by the Calao discovery in the CI-205 block (Eni’s interest 90%) off Côte d’Ivoire and the positive appraisal of the Cronos discovery in the operated Block 6, off Cyprus.
  • The business combination with Neptune Energy, in conjunction with associate Vår Energi, completed in January 2024, represents an exceptional strategic and operational fit by complementing Eni’s asset portfolio and geographies, strengthening Eni’s positions in key areas like Indonesia, Algeria and UK, and as it aligns with our strategy of growing the natural gas business to provide the market and the customers with affordable, secure, and low-carbon energy.
  • In February, just one year after the FID, the Congo FLNG project commenced its deliveries of LNG to international markets, making the Republic of Congo a new exporter in the global landscape of this fuel.
  • In March, in line with Eni’s strategy of high-grading and rationalizing the upstream portfolio, the divestment was finalized to Perenco of Eni’s participating interests in several production permits in Congo.

Enilive and Plenitude

  • In January, Enilive and LG Chem building on the preliminary agreement signed in September 2023, established a joint venture, which will make the final investment decision on a biorefinery project in South Korea expected to start operations in 2026 with processing capacity of 400 ktons/y of feedstocks, leveraging on Eni’s Ecofining™ technology.
  • In January, signed a Letter of Intent (LoI) between Enilive and Ryanair for the long-term supply of sustainable aviation fuel “SAF” (Sustainable Aviation Fuel) at selected Ryanair airports across Italy. This agreement provides for up to 100 ktons of SAF between 2025 and 2030.
  • The decision to go ahead with Italy’s third bio-refinery in Livorno will add capacity of 500 ktons/y of HVO diesel, VVO naphtha and bio-LPG through the reconfiguration of the existing hub and expected start-up in 2026.
  • In February, Plenitude started operations at the Ravenna Ponticelle photovoltaic plant, with an installed capacity of 6 MW.
  • In March, Plenitude and Energy Infrastructure Partners (EIP) finalized the agreement for EIP to enter Plenitude’s share capital through a reserved capital increase of approximately €0.6 bln, equal to 7.6% of the Company’s share capital.
  • In March, Eni signed an agreement with Fincantieri and RINA, a multinational inspection, certification, and engineering consultancy, to evaluate initiatives in the energy transition, targeting the decarbonization of the maritime sector.
  • In April, construction works started at the Renopool photovoltaic solar installation in Spain, the largest PV plant ever built by the company, with an installed capacity of 330 MW. The solar park will generate 660 GWh/y and it will feature seven photovoltaic plants and one electric substation.

Refining, Chemicals and Power

  • The Refining business moved forward in its decarbonization process with the final investment decision to convert the Livorno traditional plant into a biorefinery similar to the successful model adopted at Gela and Venice. The start-up of the new biorefining lines is expected in 2026 and the hub will be transferred to Enilive. The project is awaiting official authorizations and includes the construction of a biogenic feedstock pre-treatment unit, an Ecofining™ plant and a facility to produce hydrogen from natural gas.
  • In April, Versalis finalized the acquisition of 100% of Tecnofilm SpA, a specialist company operating in the compounding sector. The operation is in line with Versalis’ strategy intended to strengthen the market share in high-value segments.

Decarbonization, Sustainability and Technology

  • In January, Eni began building a new high-performance computing system, HPC6, aimed at significantly increasing computational power from a current 70 PFlops/s peak to over 600 PFlops/s. Once completed, HPC6 will be one of the world’s most powerful supercomputers dedicated to industrial applications, reinforcing Eni’s leadership in industrial high-performance computing and consolidating its position as a high-tech company supporting the energy transition.
  • In March, Eni received the authorization, through Development Consent Order (DCO), from the UK Government’s Department for Energy Security and Net Zero (DESNZ) to build, operate and maintain the HyNet North West CO2 pipeline to transport captured CO2 as part of the HyNet CCS cluster.
  • In March, Eni renewed its membership participation in the MIT Energy Initiative (MITEI) as a Founding Member until the end of 2027, furthering its commitment to the field of low-carbon energy research. The agreement demonstrates Eni’s commitment for innovation and research as core drivers behind its short, medium and long-term decarbonization goals, in line with the company’s strategy.

Outlook 2024

The Company is providing the following updated operational and financial guidance for 2024:

  • E&P: full-year hydrocarbon production is confirmed in a range of 1.69 – 1.71 mln boe/d at the revised Brent price of 86 $/bbl.
  • GGP: €0.8 bln of proforma adjusted EBIT for the full year confirmed.
  • Enilive and Plenitude:
  • proforma adjusted EBITDA of €1 bln for each business for the full year is confirmed;
  • installed capacity from renewable sources is projected at 4 GW at 2024 year-end, with additional 2 GW of organic projects under construction.
  • Group financials: at the revised scenario[2] the Group expected proforma adjusted EBIT and CFFO before working capital are both raised above €14 bln for the full year.
  • Organic Capex: projected at about €9 bln for the full year as planned. Including the expected developments in the disposition plan, capex net of proceeds from disposal are confirmed in a range of €7 – 8 bln.
  • Shareholder’s Remuneration: the 2024 share buy-back is now expected to be €1.6 bln, a 45% increase versus the €1.1 bln guidance provided at the latest Capital Markets Update in March. This is in line with our distribution policy of returning shareholders between 30%-35% of CFFO [3] through dividends and share repurchases and up to 60% of incremental CFFO above management plan to share repurchases. This remains subject to shareholder approval at the Annual General Meeting convened on May 15, 2024 for a proposed buy-back of up to €3.5 bln. The Annual General Meeting is also due to approve a dividend of €1 per share for fiscal year 2024, representing a 6% increase over 2023, to be paid in four instalments, starting in September 2024.
  • Next quarterly dividend: as resolved by the Board of Directors on April 4, 2024, the last quarterly instalment of the 2023 dividend of €0.23 per share is due to be paid on May 22, 2024, being May 20, 2024, the ex-dividend date.

The above-described outlook is a forward-looking statement based on information to date and management’s judgement and is subject to the potential risks and uncertainties of the scenario (see our disclaimer on page 19).

[1] For a reconciliation of Group proforma adjusted EBIT and segment breakdown see pages 20 and subsequent. The list of the main JV/associates is included on page 25.

[2] Updated 2024 Scenario is: Brent 86 $/bbl (previously $80/bbl); SERM 6.8 $/bbl from 6.6 $/bbl; PSV 33 €/MWh (vs 31 €/MWh) and average EUR/USD exchange rate at 1.075 (vs 1.08).

[3] On an adjusted basis, before working capital changes.

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SOURCE: Eni S.p.A.


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