How Eni will move on dividend, bay-back and more
All the details on Eni's half-yearly report
Adjusted net profit in the first half of 2021 returned to pre-Covid levels for Eni at 1.20 billion "a marked improvement on the 2020 loss", with a change of +1.9 billion euro, "due to the improved operating performance and the normalization of the tax rate (58% in the half year) due to the improvement of the upstream scenario and the better profit forecasts of green activities in Italy ".
Here are numbers and comments.
ALL THE 2021 NUMBERS OF ENI
“In the second quarter of 2021, Eni achieved excellent results, exceeding the market consensus of all the businesses and confirming the progressive recovery trend already underway for three quarters. In a more favorable economic context and an energy scenario with improved fundamentals, the Group recorded 2 billion EBIT and 0.93 billion net profit, an increase of +1.6 billion compared to the second quarter of 2020. The result was driven by the strong performance of EP which achieved an EBIT of 1.84 billion, an increase of +2.6 billion compared to last year ”. This is the comment of Eni's CEO Claudio Descalzi in the note accompanying the consolidated results of the second quarter and the first half of 2021 that yesterday the company's board of directors approved under the presidency of Lucia Calvosa.
WHAT DESCALZI SAID
According to Descalzi, Eni gas and electricity and Renewables performed solidly with an EBIT of 70 million, up by approximately 50 million compared to the second quarter of 2020 thanks to the expansion of the customer base and new value-added services. In renewables, we have largely exceeded our target by 2021, reaching 2 GW of installed and under construction power. Chemicals achieved the best results ever, with an EBIT of around 200 million, up by +270 million. The performance of the business and the selectivity in investments allowed us to generate a significant free cash flow of 1.82 billion euro in the first half of 2021 after the financing of organic investments. The results achieved so far, the progress in the implementation of our strategy and the management forecasts allow us, with the Brent reference scenario of 65 dollars / bbl, to bring the 2021 dividend back to the pre-COVID level of 0.86 per share, and launch a € 400 million buy-back program for the next six months. As announced to the market, 50% of the dividend will be distributed in September. "
RESULTS SECOND QUARTER 2021
The second quarter of 2021, underlines the Eni note, sees a strengthening of all commodities: Brent grew from 61 dollars / bbl in the first quarter to 69 dollars / bbl; gas prices in Europe rose by approximately 30-35% (respectively for the Italian PSV and continental “TTF” spot reference); for the chemical sector, the polyethylene-ethylene spread reached almost 800 dollars / ton (from 550 dollars / ton), the highest value since 2015. On the other hand, the refining scenario in the Europe / Mediterranean area remains depressed with benchmark values SERM at historic lows (-0.4 dollars / bbl on average in the second quarter) due to the persistence of the effects of the pandemic, the sharp increase in the cost of crude oil (prolongation of OPEC + cuts) and the simultaneous weakness in demand for products, especially spirits medium. Furthermore, as regards the gas market, the difference between the Italian "PSV" spot price and the spot prices at Northern European hubs (TTF) is reduced to $ 1/000 m3 in the second quarter from € 3/000 m3 in the first quarter. 2021 and $ 18 / thousand cubic meters in the second quarter of 2020 ", highlights the note again.
ENI's EBIT
As anticipated by Descalzi, the Group's adjusted EBIT is in strong recovery: "2 billion in the second quarter compared to the loss of 0.4 billion in the same period of 2020 (3.4 billion in the first half with an increase of 2.5 billion) . The Group result compared to 2020 was driven by: strong performance of the EP which recorded an EBIT of 1.84 billion, an increase of 2.6 billion thanks to the recovery of the energy scenario and lower costs, despite 132 thousand boe / day of lower production impacted mainly by maintenance. The result also benefited from contractual negotiations with retroactive effect; best historical result of Chemicals which recorded an EBIT of 202 million, an increase of 268 million, due to the economic recovery, the improvement in product margins and, in this context, the production performance which made it possible to grasp the rebound in demand , as well as the contribution of green chemistry ". But also “solid results of the Eni gas and light Renewables business with EBIT of 71 million, up by 48 million, due to the effectiveness of the commercial action, growth in the customer base and better margins”.
NET PROFIT
Adjusted net profit at pre-COVID levels recorded 0.93 billion in the quarter and 1.20 billion in the half year, a clear improvement compared to the loss in 2020, with a change of +1.6 and +1.9 billion respectively, due to the better operating performance and the normalization of the tax rate (58% in the half year) due to the improvement of the upstream scenario and the better income forecasts of green activities in Italy.
CASH FLOWS
Robust operating cash flow (before working capital at replacement cost): 2.80 billion in the second quarter against net capex of 1.52 billion. In the first half of the year, a cash flow of 4.76 billion was achieved which financed net capex of € 2.91, unchanged vs. the comparative period, with a pre-circulating free cash flow of 1.82 billion.
THE WALLET
The portfolio saw net outlays of approximately 0.87 billion, which include the acquired debt, entirely dedicated to accelerating the growth of the renewables portfolio, while net financial debt before IFRS 16 is significantly down: € 10 billion, -1, 5 billion vs. December 31, 2020. Leverage down to 0.25 vs. 0.31 at the end of 2020.
FORECASTS
As regards the 2021 forecasts, an operating cash flow before working capital is expected to exceed 10 billion assuming 65 dollars / bbl of Brent and a slightly negative SERM refining margin. 2021 hydrocarbon production is confirmed at around 1.7 million boe / day. Production in the third quarter expected at 1.68 million boe / day. Renewable capacity installed and under construction is growing strongly with a target of 2 GW at the end of the year, a significant increase compared to the previous forecast of around 1 GW. Thanks also to recent acquisitions, it is estimated that installed capacity will pass from the initial target of 0.7 GW to 1.2 GW at the end of 2021.
THE ESTIMATES OF ENI
“All the other forecasts for the year remain confirmed”, warns Eni in particular, “organic spending for investments of approximately 6 billion, of which approximately 4.5 billion in the EP; annual exploration target of around 500 million barrels of discoveries ”GGP with an adjusted operating profit“ almost at breakeven, despite the worsening of the scenario ”and a free cash flow 2021 expected to be around 200 million. Eni gas and electricity and Renewables should record an "adjusted operating profit of 350 million, operating cash flow of approximately 400 million", the Downstream pro-forma operating profit of approximately 400 million. “Most of the result is brought by Chemistry whose performance is expected to offset the RM results with weakly negative refining margins”. Finally, the 2021 leverage expected to be lower than 0.3, assuming a Brent of 65 dollars / bbl and a slightly negative SERM refining margin ”.
EXPLORATION & PRODUCTION
From the point of view of hydrocarbon production in the second quarter, the latter reached 1.6 million boe / day, down by 5% compared to the comparative period at the same price (1.65 million in the half-year; -6 %). The change is due “to greater maintenance activity in Norway, Italy and the UK, which was deferred in the comparative quarter, as well as to lower activity in Nigeria and the decline in mature fields”. But there is "strong growth in Egypt driven by Zohr and in Indonesia with the start-up of Merakes".
In the first half of the year, exploration resources of 320 million boe were discovered, over 60% of the annual target, with reduced time-to-market thanks to the strategy focused on areas close to infrastructures (“infrastructure-led exploration”).
"In the second quarter the production of hydrocarbons equal to 1.597 million boe / day (1.650 in the first half, -6%) decreased by 8% compared to the comparative period, which restated at -5% at the same price ( -6% in the semester). The decline is due to the greater maintenance interventions in Norway, Italy and the United Kingdom which were deferred in the comparison period, to the lower activity in Nigeria and to the decline of mature fields. The strong growth in Egypt driven by the Zohr field and supported by the international recovery of gas demand and the restart of the Damietta liquefaction plant, as well as the start-up of Merakes in Indonesia have partially offset these reductions ”, Eni stressed.
Oil production was 779,000 barrels / day, -9% compared to the second quarter 2020 (797,000 barrels / day in the first half, -9% compared to the comparison period). The reduction due to greater maintenance, the price effect, the reduction in Nigeria as well as the decline in mature fields was partially offset by the growth in production in Egypt.
GAS DOSSIER
Natural gas production was 123 million cubic meters / day in the second quarter, -7% compared to the corresponding period of 2020 (128 million cubic meters / day in the first half, -4%). The lower production due to maintenance activities, natural declines and reduction in Nigeria was partially offset by the robust recovery of gas demand in some regional markets (in particular in Egypt) and by the growth in Indonesia due to the start-up of Merakes. Eni notes.
In the second quarter of 2021, natural gas sales of 16.95 billion cubic meters increased by 22% compared to the same period of 2020 mainly due to higher volumes traded in foreign markets (Turkey and France) thanks to the economic recovery and the growth in volumes of LNG marketed in particular by Damietta. In the first half of the year, sales amounted to 34.43 billion cubic meters with an increase of 13%, confirming the same drivers as in the quarter.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/come-si-muovera-eni-su-dividendo-bay-back-e-non-solo/ on Fri, 30 Jul 2021 09:31:53 +0000.