The external scenario has completely changed and Eni's strategic plan for 2015-18 is also changing. The dividend cut goes beyond expectations: €0,80 for 2015, against an expected cut of around €1 (compared to €1,12 per share paid in 2014). A cut that will be equally divided (half the dividend will be paid as an advance on 2015, the rest as a balance in 2016) but which adds up to the stop on the buyback programme, through which additional liquidity was distributed to shareholders.
The Stock Exchange did not like it and the sell orders were triggered. But the strategic plan presented by Claudio Descalzi to the financial community in London goes beyond the cut of the dividend and responds to a strong repositioning of Eni, increasingly oriented towards exploration and development, a shift towards the model of the oil & gas company started last May. With the goal – declared repeatedly by Descalzi during the meeting in London – “to be fully sustainable organically, without drawing on reserves. Hence the decision to increase efficiency, reduce costs and increase cash flow”. Even if this will lead, in the short term, to a lower collection of over 300 million for the Treasury.
Dividend cut
“We are building a'Eni much more solid, capable of coping with falling oil price scenarios as well, while continuing to deliver sustainable results and create shareholder value. In the new oil price scenario we have deemed it appropriate to lower the dividend for 2015, in line with our strategic objectives”, said Descalzi starting his presentation. The cut of the dividend, he said in response to a question, “was not agreed with our main shareholder, the Treasury, but before deciding we had lengthy discussions with the board and took all the necessary steps to test the pulse of all shareholders. It is nonetheless about a starting point".
A subject on which Emma Marcegaglia, president of Eni, also wanted to intervene, to underline the full support of the board to the management's choice. The goal for the future is to maintain a balance between the reduction in the payout which is expected to drop from the current 100% to a variable quota between 60 and 80 per cent over the 2017-18 horizon against a cash neutrality that Eni estimates to achieve with oil at 60 dollars a barrel in 2016 including disposals and organically in 2017 excluding them.
Growth and development
The plan starts from a radically different global scenario from that envisaged in the previous plan, with a Brent price now estimated at 55 dollars a barrel in 2015, more than half the average of the last four years, and expected to gradually increase to 90 dollars per barrel in 2018.
In Exploration & Production (E&P) the group expects a composite growth rate of 3,5% in the period of the plan with a +5% in 2015 and the start-up of numerous projects: Goliat (Norway) in the second half of 2015, Perla (Venezuela) in the first half of 2014 year, Angola launched in 2017 and gradually expanding until the second half of 2017 as well as Octp in Ghana. In Indonesia Jangkrik is expected to start in the first half of 2016 while Kashagan after various postponements is scheduled for the first half of 19. All the projects are expected to generate 650 billion euro of cash flow overall with an additional production of 2018 thousand barrels in 160.000. Cora and Mamba in Mozambique alone carry XNUMX boe (barrels of oil equivalent).
For gas and powerr the plan envisages a cumulative operating cash flow of 3 billion euros and a complete alignment with the market as well as the completion of the renegotiations on the Take or pay contracts by 2016. The return to positive EBIT is foreseen in the two-year period 2015-16 and more markedly in 2017-18. Operational and logistics cost savings are estimated at 300 million.
In Refining and marketing, the breakeven of operating cash flow and adjusted Ebit is anticipated to 2015 with a cumulative operating cash flow exceeding 1,5 billion. Confirmed the 50% production cut already announced in addition to the conversion program of which Gela is "a pillar".
In chemistry, the breakeven of operating cash flow and adjusted EBIT is set for 2016. In Eni management's forecasts, the 30% cut on the production of basic materials and the shift to specialized chemicals and bio, together with the conversions in progress, will lead 400 million of cash flow in the period.
Investments and disposals
The investment plan will shrink by 17% compared to the previous plan (2014-17), to around 48 billion. Most of the cut (13% out of 17%) will come upstream. As for the divestments, around 50% will concern the sale of shares in recent exploration discoveries in which Eni, holding very high stakes, intends to dilute itself while maintaining the role of operator. A share of Mozambique could therefore be sold but it is not included in the plan where there is no mention of Saipem. The sale of the remaining shares in Snam and Galp will represent approximately 25% while the remaining 25% will derive from the sale of mature upstream assets and non-core activities in the mid-downstream (refining and distribution).“In the list of mature fields – Descalzi then specified – they are there assets in Africa, Gulf of Mexico, Italy but I won't go into details because we are in negotiations. We will sell shares of assets even in fields where we currently have very high shares of equity”.
Il cumulative free cash flowside in 2015-18 is expected to exceed 16 billion euros with an increase of 40% (confirmed) over the course of the plan.
