For the first time, Eni has chosen New York as the venue for an Investor Day during which the company's CEO, Claudio Descalzi presented the results achieved by the Six-Legged Dog to the international financial community: "We want to talk about the future starting from the past" said the CEO opening the event and "now that we are at the end of the first phase of transformation and restructuring we want to present the results achieved".
Results that speak for themselves: after having lived through three difficult years also due to the collapse in oil prices, the company has managed to raise its head and achieve important numbers. In 2017 production will reach 1 barrels a day, the highest level reached by the oil group, in parallel the energy giant has managed to achieve financial neutrality at 840 dollars a barrel while the projects launched in the two-year period 50-2016, combined with Kashagan and Goliat, will produce over 2017 barrels per day when fully operational and will generate a total operating cash flow of over 500 billion euros in 4.
These are the figures presented by Descalzi, achieved thanks to three years of sacrifices during which Eni has carried out a transformation and restructuring strategy which has made it "a different society from the past".
Going into detail, the change process, as underlined by the CEO of the group, "was substantially aimed at aligning costs with prices, preserving the growth of the company in a scenario which in 2014 included the fall in European gas consumption (over 100 billion cubic meters between 2008 and 2014), the drop in oil demand (10% between 2008 and 2014) and refining margins (from 7 dollars a barrel in 2008 to 3 dollars a barrel in 2014), and the collapse of oil prices”.
Thanks to the efforts put in place to reorganize the company, but also to the sale of the stakes in Galp and Snam and the reduction of the stake in Saipem, to which must be added the sale of the non-core stakes concerning the different types of business, the disposals generated a total of 10 billion euros in cash. Speaking precisely of costs, in the three-year period from 2014 to 2016, Eni achieved a reduction in capex (capital and investment expenditure) of 33% and of 23% in terms of opex (operating expenditure). “All of this – explains Descalzi – combined with the reduction of general and administrative costs (700 million euros per year), has led to an overall reduction in costs since 2014 of 10 billion euros”.
The CEO of the Six-legged dog announces that the capex reduction in the upstream area will continue next year as well. But despite this the company, as mentioned earlier, will be able to achieve a production level of 1 barrels of oil equivalent per day, reaching its all-time high.“In less than three years – continued the manager – we have achieved the highest organic growth in the industry with an increase of more than 15% in production, equal to over 250.000 barrels per day, and we are close to achieving the production record ”.
But the restructuring process started in 2014 has allowed the company to reduce its level of cash neutrality, going from 127 dollars a barrel in 2013 to 50 dollars a barrel today.
Although during the same period the 50% drop in oil prices complicated plans and the absence of Snam's contribution (which amounted to approximately 2 billion euro) did not help to make ends meet, the company was able to generate in the period 2014-2016 operating cash of 34 billion euro, in line with the period 2011-2013 (37 billion euro).
As regards the projects launched by Eni in the two-year period 2016-2017, together with Kashagan and Goliat, over 500 barrels per day will be reached when fully operational, a level that will allow for the generation of a total operating cash flow of more than 2018 billion euros in 4 in a scenario of oil prices of $60 a barrel.
It should be emphasized that, shortly before the start of the Investor Day, another important novelty was announced: Eni has reached an agreement with the Algerian company Sonatrach on gas supplies for the 2016/2017 thermal year. The agreement, "reached under the Framework Agreement signed by Eni and Sonatrach on November 25, 2016, demonstrates the strong cooperation existing between the two companies and strengthens the partnership between the parties", reads the note issued by the company.
Eni's CEO, Claudio Descalzi, commented: "I am particularly satisfied with the conclusion of the renegotiation of the gas supply contract and with the level of strategic collaboration with Sonatrach, which also concerns the exploration and production sector and the recent and new agreement on renewables”.
Going into details, the agreement concerns almost 20% of the gas imported into Italy and "represents a further step in Eni`s renegotiation activity in long-term gas supply contracts".
The agreement, explained the CEO during the Investor Day, "is a very important result that allows us to confirm our objective of structural break-even in the Gas&Power sector in 2017". In the sector, the company has almost completed the recovery of the take-or-pay contracts accumulated in previous years, for a value of 1,6 billion euros.
On Piazza Affari, just over half an hour after closing, Eni dropped -0,2% to 14,75 euros.
