SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of July 2017
Eni S.p.A.
(Exact name of Registrant as specified in its charter)
Piazzale Enrico Mattei 1 -- 00144 Rome, Italy
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F x Form 40-F ¨
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2b under the Securities Exchange Act of 1934.)
Yes ¨ No x
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): )
| - | Press Release dated July 28, 2017 |
| - | Press Release dated July 28, 2017 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorised.
| Eni S.p.A. | |||
| Name: | Roberto Ulissi | ||
| Title: | Corporate Affairs and | ||
| Governance - SEVP | |||
Date: July 31, 2017
 |
Registered Head Office, |
| Piazzale Enrico Mattei, 1 | |
| 00144 Rome | |
| Tel. +39 06598.21 | |
| www.eni.com | |
| San Donato Milanese |
July 28, 2017
Eni results for the second quarter and half year 2017
| Key operating and financial results |
| IQ 17 | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. | ||
| 53.78 | Brent dated | $/bbl | 49.83 | 45.57 | 9 | 51.81 | 39.73 | 30 |
| 1.065 | Average EUR/USD exchange rate | 1.101 | 1.129 | (2) | 1.083 | 1.116 | (3) | |
| 1,795 | Hydrocarbon production | kboe/d | 1,771 | 1,715 | 3 | 1,783 | 1,734 | 3 |
| 1,834 | Adjusted operating profit (loss) (a) | € million | 1,019 | 188 | .. | 2,853 | 771 | .. |
| 1,415 | of which: E&P | 845 | 355 | .. | 2,260 | 450 | .. | |
| 338 | G&P | (146) | (229) | 36 | 192 | 56 | .. | |
| 189 | R&M and Chemicals | 352 | 156 | .. | 541 | 333 | 62 | |
| 744 | Adjusted net profit (loss) (a) | 463 | (317) | .. | 1,207 | (315) | .. | |
| 0.21 | - per share (€) | 0.13 | (0.09) | 0.34 | (0.09) | .. | ||
| 965 | Net profit (loss) (b) | 18 | (446) | .. | 983 | (829) | .. | |
| 0.27 | - per share (€) | .. | (0.12) | 0.27 | (0.23) | .. | ||
| 2,597 | Adjusted cash flow from operations (c) | 2,284 | 1,004 | .. | 4,881 | 2,477 | 97 | |
| 1,932 | Net cash flow from operations | 2,706 | 1,730 | 56 | 4,638 | 3,100 | 50 | |
| 2,867 | Capital expenditure (d) | 2,106 | 2,452 | (14) | 4,973 | 6,031 | (18) | |
| 14,931 | Net borrowings | 15,467 | 13,814 | 12 | 15,467 | 13,814 | 12 | |
| 0.28 | Leverage | % | 0.32 | 0.26 | 0.32 | 0.26 | ||
| (a) | Non-GAAP measure. For further information see the paragraph "Non-GAAP measures" on page 15. |
| (b) | Attributable to Eni's shareholders - continuing operations. |
| (c) | Non GAAP measure. Net cash flow from operations before changes in working capital and excluding inventory holding gains or losses. |
| (d) | Include capital contribution to equity accounted entities. |
Yesterday, Eni’s Board of Directors approved the Group results for the second quarter and the first half 2017 (unaudited). Commenting on the results, Claudio Descalzi, CEO of Eni, remarked:
“In the first half of 2017, Eni produced strong results, confirming the soundness of our strategy. We began production of three major offshore projects in Ghana, Angola and Indonesia achieving a record time-to-market and underscoring the robustness of our development model. We also continued our success in exploration, where we discovered 500 million barrels of new resources in the first half. Total production also grew by around 200 kboe/d or over 6% year-on-year, continuing the upward trend seen in recent months. In addition, at the end of the year production will begin at Zohr.
These results have been achieved while maintaining an extremely efficient spending structure, which will reduce capex by about 18% compared to 2016, according to our plan. The Gas, R&M and Chemicals businesses continue to deliver results above expectations: in particular, Chemicals achieved a record result of over €300 million in EBIT, a sign that our efforts to boost and reposition the portfolios products as well as our research efficiency are bearing fruit.
These achievements have enabled us to generate around €5 billion of organic cash, with a free cash flow of €700 million, despite the volatile environment. Therefore, we are able to confirm our goal of funding capital investments and the dividend from organic sources. On this basis, I will propose an interim dividend of €0.40 per share to the Board of Directors, on September 14.”
| -1- |
| Highlights |
Exploration & Production
| · | Hydrocarbon Production: up by 3.3% to 1.77 million boe/d in the quarter; up by 5.2% excluding negative price effects of PSAs and OPEC cuts (up by 6.1% in the first half 2017). |
| · | Started operations from the OCTP gas project offshore Ghana and the Jangkrik offshore complex in Indonesia, in a record time-to-market, confirming the value of Eni’s development model, which strives for continuous improvement. |
| · | Additional production from start-ups and ramp-ups: 192 kboe/d added in the first half of 2017. |
| · | In Area 4 offshore Mozambique the Coral South LNG project entered the execution phase with the signing of the construction contract for the Floating LNG unit and finalization of project financing agreements. |
| · | Restarted operations at the Val d’Agri Oil Center following the finalization of all necessary HSE remediation measures as required by the relevant authorities. Production is already at plateau. |
| · | Successfully drilled two wells in the Amoca discovery offshore Mexico, boosting the resource estimate of Area 1 to 1.3 billion barrels of oil equivalent in place. The definition of the development plan is expected this year. |
| · | Additional exploration successes achieved in Libya, Indonesia and Norway; 0.5 billion boe of additions to the Company’s reserve backlog in the first half of 2017. |
| · | Acquired new leases in Cyprus, Ivory Coast and Norway, for a total acreage of approximately 11,000 square kilometers. |
| · | Ongoing progress at the Zohr project: 80% finalized, start-up confirmed by the end of 2017. |
| · | E&P adjusted operating profit more than doubled to €0.85 billion in the second quarter; a fivefold increase to €2.26 billion for the first half of 2017. |
Gas & Power
| · | Finalized the disposal of the Belgian retail business in July 2017. |
| · | G&P adjusted operating result: reported a 36% improvement vs the second quarter of 2016 in a tipically weak quarter due to seasonality; in the first half of 2017, adjusted operating profit more than tripled y-o-y to €192 million (up €136 million). |
Refining & Marketing and Chemicals
| · | Confirmed refining breakeven margin below 4 $/barrel on average for the FY. |
| · | R&M adjusted operating profit: €165 million in the second quarter, almost four times greater than the same period in 2016, notwithstanding the partial shutdown of the Sannazzaro refinery (€231 million for the first half, up 110%). |
| · | Record adjusted operating profit achieved by the Chemical business: €187 million in the second quarter 2017, up by 67% y-o-y, the highest level ever; €310 million in the first half (up by 39%). |
| -2- |
Group results
| · | Adjusted operating profit: a fivefold increase in the second quarter of 2017 to €1.02 billion (up €0.83 billion y-o-y); an almost fourfold increase in the first half of 2017 to €2.85 billion (up €2.08 billion y-o-y). |
| · | Adjusted net profit: €0.46 billion in the quarter, €1.21 billion for the first half of 2017 compared to net losses reported in the 2016 comparative periods. |
| · | Net profit: almost at breakeven in the quarter (€0.98 billion in the first half of 2017). |
| · | Strong cash generation: €2.71 billion in the second quarter, up by 56% y-o-y; €4.64 billion in the first half of 2017 (up by 50%). |
| · | Doubled the adjusted cash flow from operations before changes in working capital at replacement cost (€2.28 billion and €4.88 billion in the second quarter and the first half of 2017, respectively). |
| · | Capex: €4.97 billion in the first half of 2017 (€4.27 billion on a pro-forma1 basis), peak expenditure for the year due to the completion of large projects which started production in the first half of 2017, as scheduled. Self-financing ratio of pro-forma capex at approximately 110%. |
| · | Free cash flow: €700 million to fund the cash dividend. |
| · | Disposals agreed in the first half of 2017 of €2.9 billion, approximately 60% of the minimum target planned for the 2017-2020 four-year period. |
| · | Net debt: €15.5 billion; expected to decrease y-o-y following the closing of the disposals underway. |
| · | Leverage at June 30, 2017: 0.32 compared to 0.28 at December 31, 2016, well below the 0.30 threshold at year end based on Eni’s scenario assumptions, driven by cash flow from operations and disposals. |
| · | 2017 interim dividend proposal: €0.40 per share. |
| Outlook |
Exploration & Production
Confirmed the 2017 target of 0.8 bln boe of new resources, at a unitary discovery cost of approximately 1 $/bbl.
Confirmed FY production target of 1.84 mln boe/d (up by 5% from 2016) leveraging on new project start-ups (Indonesia, Angola and Ghana) and ramp-ups of fields entered into operations in 2016, mainly in Kazakhstan, Egypt and Norway. The unexpected shutdown of Val d’Agri, which lasted almost a full quarter and the impact of OPEC cuts, will be absorbed by the implementation of other initiatives to optimize production, as well as by the earlier than planned start-up of the large projects in Angola, Indonesia and Ghana.
Gas & Power
Confirmed structural positive results from 2017.
Confirmed cost position improvements by leveraging on long-term supply contracts revision already finalized in large part in the first half of the year.
Eni plans to retain market share in the large customers and retail segments, increasing the value of the existing customer base by developing innovative commercial initiatives, integrating services and optimizing operations.
1 Net of reimbursement of capex relating to asset disposals and advances made by the Egyptian partners in the Zohr project, see page 12.
| -3- |
Refining & Marketing and Chemicals
Confirmed the target of refining breakeven margin at 3 $/barrel in 2018.
Refinery intakes on own account are expected to decrease slightly y-o-y due to the downtime of certain assets at the Sannazzaro refinery and of the Taranto refinery, partially offset by higher volumes at Livorno and Milazzo refineries. Against a backdrop of strong competition, management expects to consolidate volume and market share in the Italian retail market by leveraging innovation and product and service differentiation. In the rest of Europe, sales on a like-for-like basis are expected to slightly increase.
In the Chemical business, sales are expected to trend up, due to higher production supplies. Cracker and polyethylene margins are expected to decline.
Group
Confirmed the target of around 18% reduction in capex y-o-y on a pro-forma basis, i.e. net of the capex which will be reimbursed in connection with asset disposals and advances paid by the Egyptian partners in the Zohr project.
Cash neutrality: confirmed the organic coverage of capex and dividends at a Brent price of approximately 60 $/bbl in 2017.
Leverage at the end of 2017: projected to substantially decline from 2016 level, also reflecting the expected closing of portfolio transactions, particularly the Mozambique deal.
| Sustainability |
| IH 17 | IH 16 | Ch. % | ||
| Total recordable injury rate (TRIR) |
(total recordable injury rate/worked hours) x 1,000,000 |
0.326 | 0.408 | (20.1) |
| Direct GHG emissions | (mmtonnes CO2 eq.) | 20.03 | 19.58 | 2.3 |
| - of which CO2 from combustion and process | 15.12 | 14.69 | 2.9 | |
| - of which CO2 eq from methane | 1.02 | 1.21 | (15.6) | |
| - of which CO2 eq from flaring | 3.02 | 2.85 | 6.0 | |
| - of which CO2 eq from venting | 0.87 | 0.84 | 3.9 | |
| Direct GHG emissions E&P/production | (tonnes CO2 eq./toe) | 0.165 | 0.167 | (1.0) |
| Water reinjection | (%) | 60 | 57 | 6.3 |
| · | Total recordable injury rate (down by 20.1% y-o-y) confirmed the improving trend, benefitting from performances recorded by both employees (down by 9.5%) and contractors (down by 24.6%). |
| · | Direct GHG emissions E&P/production: 0.165 tCO2 eq/toe, an improvement y-o-y.
Direct GHG emissions from combustion and process increased, reflecting higher production level in the E&P and G&P segments. Emissions from flaring in the E&P segment are up by 6% due to an increase in production and the anticipated start-up of East Hub FPSO in Angola and OCTP FPSO in Ghana (for both the projects the gas re-injection is expected within the current year). Emissions from venting are up by 3.9% due to the temporary issues. Emissions from methane: down by 15.6% due to better monitoring and reduction of fugitive emissions in the E&P and G&P segments. |
| · | Water reinjection at the E&P segment: a result of 60%, benefitting from the contribution of the subsidiaries in Ecuador, Egypt, Indonesia, Congo and the United States. |
| -4- |
| Business segments operating review |
Exploration & Production
Production and prices
| IQ 17 | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. | ||
| Production | ||||||||
| 832 | Liquids | kbbl/d | 827 | 852 | (2.9) | 830 | 871 | (4.7) |
| 5,254 | Natural gas | mmcf/d | 5,152 | 4,709 | 9.8 | 5,203 | 4,713 | 10.5 |
| 1,795 | Hydrocarbons | kboe/d | 1,771 | 1,715 | 3.3 | 1,783 | 1,734 | 2.8 |
| Average realizations | ||||||||
| 48.65 | Liquids | $/bbl | 45.29 | 40.58 | 11.6 | 46.90 | 35.14 | 33.5 |
| 3.60 | Natural gas | $/kcf | 3.45 | 3.11 | 10.9 | 3.53 | 3.21 | 10.0 |
| 33.42 | Hydrocarbons | $/boe | 32.05 | 29.30 | 9.4 | 32.73 | 26.69 | 22.6 |
| · | In the second quarter of 2017, oil and natural gas production averaged 1,771 kboe/d, up by 3.3% from the same period a year ago (1,783 kboe/d in the first half of 2017, up by 2.8%). This performance was driven by new project start-ups and the ramp-ups at fields started up in 2016, mainly in Angola, Egypt, Ghana, Indonesia, Kazakhstan and Norway (an overall contribution of 224 kboe/d and 192 kboe/d in the two reporting periods, respectively) as well as by higher maintenance activity of the first half of 2016. This trend was partly offset by OPEC production cuts, price effect and mature fields declines. When excluding the price effect on PSAs contracts and OPEC cuts (overall 30 kboe/d and 50 kboe/d in the quarter and the first half of 2017, respectively), hydrocarbon production increased by 5.2% (up 6.1% in the first half of 2017). |
| · | Liquids production (827 kbbl/d) decreased by 25 kbbl/d, or 2.9% from the second quarter of 2016 (830 kbbl/d in the first half of 2017, down by 4.7%). Mature fields declines, price effect and OPEC cuts were partly offset by start-ups and ramp-ups of the period mainly in Angola, Ghana, Kazakhstan and Norway. |
| · | Natural gas production (5,152 mmcf/d) increased by 443 mmcf/d, or 9.8% compared to the second quarter of the previous year (5,203 mmcf/d in the first half, up by 10.5%). Start-ups and ramp-ups of producing assets were partly offset by mature fields declines and price effect. |
| · | Val d’Agri On July 18, 2017, Eni resumed operations at the Val d'Agri Oil Center (COVA) following approval from the Regional Council of the Basilicata Region. The resumption of the plant activity was due to approval from the relevant authorities confirming the functionality of the plant and the presence of all necessary safety conditions. The shutdown of the plant occurred on April 18, 2017. During the shutdown period, Eni performed all of the remediation measures mandated by the relevant authorities, including the upgrading of an oil tank where a spill occurred, which was equipped with a double-bottom. |
| -5- |
Results
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. | |
| 1,628 | Operating profit (loss) | 851 | 194 | .. | 2,479 | 288 | .. | |
| (213) | Exclusion of special items | (6) | 161 | (219) | 162 | |||
| 1,415 | Adjusted operating profit (loss) | 845 | 355 | .. | 2,260 | 450 | .. | |
| 56 | Net finance (expense) income | (28) | (57) | 28 | (115) | |||
| 18 | Net income (expense) from investments | 169 | 33 | 187 | 37 | |||
| (859) | Income taxes | (425) | (403) | (1,284) | (710) | |||
| 57.7 | tax rate (%) | 43.1 | 121.8 | 51.9 | 190.9 | |||
| 630 | Adjusted net profit (loss) | 561 | (72) | .. | 1,191 | (338) | .. | |
| Results also include: | ||||||||
| 208 | exploration expense: | 113 | 153 | (26.1) | 321 | 240 | 33.8 | |
| 65 | - prospecting, geological and geophysical expenses | 74 | 59 | 25.4 | 139 | 114 | 21.9 | |
| 143 | - write-off of unsuccessful wells (a) | 39 | 94 | (58.5) | 182 | 126 | 44.4 | |
| 2,706 | Capital expenditure | 1,909 | 2,267 | (15.8) | 4,615 | 4,509 | 2.4 | |
(a) Also includes write-off of unproved exploration rights, if any, related to projects with negative outcome.
| · | In the second quarter of 2017, the Exploration & Production segment reported an adjusted operating profit of €845 million, more than doubled from the second quarter of 2016 (€355 million). This improvement reflected the upward trend in crude oil prices (with the Brent price up by 9%), lower differentials of Eni’s oil which determined a 11.6% rise in Eni’s realizations in dollar terms, production increase and lower operating costs. |
In the first half of 2017, adjusted operating profit amounted to €2,260 million, a five-fold increase from the same period of 2016, up by €1,810 million, driven by the same drivers mentioned above and in particular by the higher recovery of Brent price in the first quarter (up by 59%). These positives were partially offset by higher exploration write-offs.
| · | In the second quarter of 2017, adjusted net profit amounted to €561 million, an improvement of €633 million from the second quarter of 2016 (€1,191 million in the first half of 2017, compared to the loss of €338 million reported in the first half of 2016). This was due to the robust recovery in operating performance and the normalization of tax rate due to higher profit before taxes, which helped improve the deductibility of operating expenses including those incurred in connection with PSA schemes, as well as the recognition of deferred tax assets due to the production start-up of the Ghana project and the finalization of all contracts for commencing the development phase of the Coral project in Mozambique. |
For the disclosure of the business segment special charges/gains see page 11.
| -6- |
Gas & Power
Sales
| IQ 17 | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. | ||
| 219 | PSV | €/kcm | 192 | 158 | 21.5 | 206 | 156 | 32.1 |
| 195 | TTF | 165 | 140 | 17.9 | 180 | 138 | 30.4 | |
| Natural gas sales | bcm | |||||||
| 10.38 | Italy | 9.50 | 8.63 | 10.1 | 19.88 | 19.42 | 2.4 | |
| 11.53 | Rest of Europe | 8.23 | 10.55 | (22.0) | 19.76 | 21.66 | (8.8) | |
| 1.04 | of which: Importers in Italy | 0.89 | 0.99 | (10.1) | 1.93 | 2.12 | (9.0) | |
| 10.49 | European markets | 7.34 | 9.56 | (23.2) | 17.83 | 19.54 | (8.8) | |
| 1.37 | Rest of World | 0.90 | 1.30 | (30.8) | 2.27 | 2.69 | (15.6) | |
| 23.28 | Worldwide gas sales | 18.63 | 20.48 | (9.0) | 41.91 | 43.77 | (4.2) | |
| 9.37 | Power sales | Twh | 8.39 | 8.64 | (2.9) | 17.76 | 18.09 | (1.8) |
| · | In the second quarter of 2017, natural gas sales were 18.63 bcm (41.91 in the first half of 2017), a decrease from the same periods of the previous year. Sales in Italy were up by 10.1% to 9.50 bcm due to recovery in demand and the acquisition of new sale contracts. Sales in the European markets (7.34 bcm) decreased by 23.2% reflecting lower sales in Germany, Benelux and France as well as lower volumes sold in Hungary following the disposal of customers in 2016, partly balanced by higher volumes sold in Turkey, higher sales to Botas and in the United Kingdom. |
| · | Power sales were 8.39 TWh in the second quarter of 2017, down by 2.9% (17.76 TWh in the first half of 2017, with a reduction of 1.8% compared to the same period of 2016) mainly due to lower volumes sold to the middle market and to the residential segment, partly offset by higher sales to the large customer segment. |
Results
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. | |
| 214 | Operating profit (loss) | (225) | (154) | (46.1) | (11) | (71) | 84.5 | |
| (44) | Exclusion of inventory holding (gains) losses | 30 | (44) | 158 | ||||
| 168 | Exclusion of special items | 79 | (105) | 247 | (31) | |||
| 338 | Adjusted operating profit (loss) | (146) | (229) | 36.2 | 192 | 56 | .. | |
| 6 | Net finance (expense) income | 2 | 6 | 4 | ||||
| (1) | Net income (expense) from investments | (2) | (7) | (3) | (2) | |||
| (133) | Income taxes | 15 | 73 | (118) | (55) | |||
| 38.8 | tax rate (%) | .. | .. | 60.5 | 94.8 | |||
| 210 | Adjusted net profit (loss) | (133) | (161) | 17.4 | 77 | 3 | .. | |
| 19 | Capital expenditure | 30 | 22 | 36.4 | 49 | 44 | 11.4 | |
| · | In the second quarter of 2017, the Gas & Power segment reported an adjusted operating loss of €146 million, an improvement of €83 million from the second quarter of 2016. This result reflected better margins due to positive effects of renegotiations of purchase long-term contracts, including some contract terminations. These positives were partly offset by lower non-recurring gains relating to the renegotiations defined in 2016 with retroactive benefits. In the first half of 2017, adjusted operating profit amounted to €192 million, representing a three-fold increase from the first half of 2016, leveraging on the above mentioned drivers, which allowed, in the first quarter, to capture the effects of a positive scenario. |
| · | The adjusted net result was a loss of €133 million (a profit of €77 million in the first half of 2017), with an improvement of €28 million from the second quarter of 2016. |
For the disclosure of the business segment special charges/gains see page 11.
| -7- |
Refining & Marketing and Chemicals
Production and sales
| IQ 17 | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. | ||
| 4.2 | Standard Eni Refining Margin (SERM) | $/bbl | 5.3 | 4.6 | 15.2 | 4.7 | 4.4 | 6.8 |
| 5.18 | Throughputs in Italy | mmtonnes | 4.88 | 5.48 | (10.9) | 10.06 | 10.68 | (5.8) |
| 0.64 | Throughputs in the rest of Europe | 0.75 | 0.71 | 5.6 | 1.39 | 1.41 | (1.4) | |
| 5.82 | Total throughputs | 5.63 | 6.19 | (9.0) | 11.45 | 12.09 | (5.3) | |
| 0.02 | Green throughputs | 0.08 | 0.05 | 60.0 | 0.10 | 0.09 | 11.1 | |
| 85.5 | Average plant utilization rate | % | 70.7 | 94.1 | (24.9) | 78.1 | 89.8 | (13.0) |
| Marketing | ||||||||
| 2.00 | Retail sales | mmtonnes | 2.19 | 2.21 | (0.9) | 4.19 | 4.21 | (0.5) |
| 1.42 | Retail sales in Italy | 1.54 | 1.50 | 2.7 | 2.96 | 2.87 | 3.1 | |
| 0.58 | Retail sales in the rest of Europe | 0.65 | 0.71 | (8.5) | 1.23 | 1.34 | (8.2) | |
| 24.8 | Retail market share in Italy | % | 25.2 | 24.3 | 3.7 | 25.0 | 24.1 | 3.7 |
| 2.36 | Wholesale sales | mmtonnes | 2.76 | 2.80 | (1.4) | 5.12 | 5.35 | (4.3) |
| 1.68 | Wholesale sales in Italy | 1.98 | 2.01 | (1.5) | 3.66 | 3.85 | (4.9) | |
| 0.68 | Wholesale sales in the rest of Europe | 0.78 | 0.79 | (1.3) | 1.46 | 1.50 | (2.7) | |
| Chemicals | ||||||||
| 1,525 | Production of petrochemical products | ktonnes | 1,508 | 1,460 | 3.3 | 3,033 | 2,898 | 4.7 |
| · | In the second quarter of 2017, the Eni’s Standard Refining Margin – SERM – increased by 15.2% from the second quarter of 2016 at a level of 5.3 $/barrel (up by approximately 7% at 4.7 $/barrel in the first half of 2017) due to stable relative prices of products compared to the cost of petroleum feedstock. |
| · | Eni refining throughputs were 5.63 mmtonnes, down by 9% from the second quarter of 2016 (down by 5.3% from the first half of 2016), mainly due to the downtime of some plants at Sannazzaro refinery and of the Taranto plant, partly offset by a better performance reported at Milazzo and Livorno. |
| · | Volumes of biofuels produced at the Venice green refinery increased by 60% in the second quarter of 2017 (up by 11.1% compared to the first half of 2016). |
| · | Retail sales in Italy of 1.54 mmtonnes increased by 2.7% in the quarter (2.96 mmtonnes, up by 3.1% in the first half of 2017) in a stable consumptions environment, benefitting from effective marketing actions and product differentiation. Eni’s retail market share was 25.2%, increasing by one percentage point from the second quarter of 2016 (24.3%). |
| · | Wholesale sales in Italy were 1.98 mmtonnes, down by 1.5% compared to the second quarter of 2016 (down by 4.9% from the first half of 2016). Lower volumes sold of bunkering and fuel oil were partly offset by higher sales of gasoil and jet fuel. |
| · | Retail and wholesale sales in the rest of Europe decreased by 4.7% in the quarter, down by 5.3% in the first half of 2017, mainly due to the disposal of certain operations in Eastern Europe. On a homogeneous base, sale volumes increased. |
| · | Petrochemical production of 1,508 ktonnes increased by 3.3% and 4.7% y-o-y reflecting better plant performance. |
| -8- |
Results
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. | |
| 364 | Operating profit (loss) | 33 | 315 | (89.5) | 397 | 363 | 9.4 | |
| (199) | Exclusion of inventory holding (gains) losses | 255 | (215) | 56 | (152) | |||
| 24 | Exclusion of special items | 64 | 56 | 88 | 122 | |||
| 189 | Adjusted operating profit (loss) | 352 | 156 | .. | 541 | 333 | 62.5 | |
| 66 | of which: Refining & Marketing | 165 | 44 | .. | 231 | 110 | 110.0 | |
| 123 | Chemicals | 187 | 112 | 67.0 | 310 | 223 | 39.0 | |
| Net finance (expense) income | 2 | (1) | 2 | |||||
| 10 | Net income (expense) from investments | (9) | 1 | 20 | ||||
| (71) | Income taxes | (119) | (51) | (190) | (105) | |||
| 35.7 | tax rate (%) | 34.5 | 32.9 | 34.9 | 29.7 | |||
| 128 | Adjusted net profit (loss) | 226 | 104 | .. | 354 | 248 | 42.7 | |
| 100 | Capital expenditure | 151 | 127 | 18.9 | 251 | 212 | 18.4 | |
| · | In the second quarter of 2017, the Refining & Marketing and Chemicals segment reported an adjusted operating profit of €352 million (€541 million in the first half), more than doubled from the second quarter of 2016 (up by 62.5% from the first half of 2016). |
| · | The Refining & Marketing business reported an adjusted operating profit of €165 million (€231 million in the first half of 2017; up by 110%), an almost four-fold increase from the second quarter of 2016, reflecting the recovery of the market share in the retail market in Italy and the ongoing initiatives to reduce the refining breakeven margin, expected to be below $4 per barrel on average for FY 2017, which allowed to fully capture a better trading environment. Identified optimization actions contributed to offset the expected margin loss due to the downtime of some plants at the Sannazzaro and Taranto refineries. |
| · | The Chemical business reported a record performance with an adjusted operating profit of €187 million up by 67% from the second quarter of 2016 (€310 million in the first half of 2017; up by 39% from the first half of 2016). The first half result has equalized the overall 2015 performance, which represented a record year in the recent history of Eni’s chemical business. The improvement was driven by the restructuring plan executed in the last few years, focused on the optimization of the plants set up at core hubs and an ongoing shift of the product portfolio towards higher-value segments and the closing of marginal business. These actions enabled the business to fully capture certain favorable market trends, particularly in the olefin segment, and to achieve cost efficiencies and volume upsides. |
| · | Adjusted net profit of €226 million (€354 million in the first half of 2017) increased by €122 million and €106 million from the corresponding reporting periods. |
For the disclosure on the business segment special charges see page 11.
| -9- |
| Group results |
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. |
| 18,047 | Net sales from operations - continuing operations | 15,643 | 13,416 | 16.6 | 33,690 | 26,760 | 25.9 |
| 2,111 | Operating profit (loss) - continuing operations | 563 | 220 | .. | 2,674 | 325 | 722.8 |
| (259) | Exclusion of inventory holding (gains) losses | 252 | (180) | (7) | 149 | ||
| (18) | Exclusion of special items (a) | 204 | 148 | 186 | 297 | ||
| 1,834 | Adjusted operating profit (loss) - continuing operations | 1,019 | 188 | .. | 2,853 | 771 | .. |
| Breakdown by segment: | |||||||
| 1,415 | Exploration & Production | 845 | 355 | .. | 2,260 | 450 | .. |
| 338 | Gas & Power | (146) | (229) | 36.2 | 192 | 56 | .. |
| 189 | Refining & Marketing and Chemicals | 352 | 156 | .. | 541 | 333 | 62.5 |
| (115) | Corporate and other activities | (160) | (126) | (27.0) | (275) | (216) | (27.3) |
| 7 | Impact of unrealized intragroup profit elimination and other consolidation adjustments (b) | 128 | 32 | 135 | 148 | ||
| 965 | Net profit (loss) attributable to Eni's shareholders - continuing operations | 18 | (446) | .. | 983 | (829) | .. |
| (186) | Exclusion of inventory holding (gains) losses | 180 | (123) | (6) | 101 | ||
| (35) | Exclusion of special items (a) | 265 | 252 | 230 | 413 | ||
| 744 | Adjusted net profit (loss) attributable to Eni's shareholders - continuing operations | 463 | (317) | .. | 1,207 | (315) | .. |
| 965 | Net profit (loss) attributable to Eni's shareholders | 18 | (446) | .. | 983 | (1,242) | .. |
| 965 | Net profit (loss) attributable to Eni's shareholders - continuing operations | 18 | (446) | .. | 983 | (829) | .. |
| Net profit (loss) attributable to Eni's shareholders - discontinued operations | (413) | .. | |||||
(a) For further information see "Breakdown of special items".
(b) Unrealized intragroup profit elimination mainly pertained to intra-group sales of commodities and services recorded in the assets of the purchasing business segment as of the end of the period.
Adjusted results
| · | In the second quarter of 2017, Eni recorded a fivefold increase of consolidated adjusted operating profit at €1.02 billion compared to the second quarter of 2016 (up by €0.83 billion). The improvement was driven by a robust performance in all of Eni’s businesses. The E&P segment more than doubled operating profit with an increase of €0.49 billion, driven by production growth and a recovery in crude oil prices (the Brent benchmark was up by 9%), although at a slower pace than in the first quarter 2017. The G&P segment in a seasonally weak quarter, improved its performance (up by €0.08 billion or 36%) due to the positive effects of the renegotiations of long-term supply contracts, which more than offset the one-off gains recorded in the same quarter of 2016 due to certain renegotiations with retroactive economic effects. The R&M and Chemicals businesses achieved record performances, increasing operating profits by 275% and 67% respectively (up by €0.2 billion the overall increase), due to continued initiatives to reduce the breakeven margin and to upgrade the plant setup and the product mix, which allowed the businesses to fully capture a moderate improvement in the trading environment. The quarterly result increase of approximately €0.8 billion was explained for €0.6 billion by the better scenario and for €0.2 billion to the underlying performance. |
| · | In the first half of 2017 all the businesses recorded a robust performance with a strong increase y-o-y. The consolidated adjusted operating profit of €2.85 billion almost fourfold the one achieved in the comparative period. The €2.1 billion increase was explained for €1.9 billion by the scenario recovery and for €0.2 billion by the underlying performance. |
| · | Adjusted net profit of €0.46 billion considerably improved (up by €0.8 billion) compared to the loss recorded in the second quarter of 2016 driven by the robust recovery in operating performance and the normalization of tax rate at 52.8% in the quarter (55.4% in the first half) due to higher profit before taxes, which helped improve the deductibility of operating expenses including those incurred in connection with PSA schemes, as well as the recognition of deferred tax assets due to the production start-up of the Ghana project and the finalization of all contracts for commencing the |
| -10- |
development phase of the Coral project in Mozambique. In the first half of 2017, adjusted net profit was €1.21 billion compared to the €0.32 billion loss of the comparative period.
Special items
The break-down by segment of special items of the operating profit (a net charge of €204 million in the quarter and €186 million in the first half) is:
| · | E&P: net gains of €6 million in the quarter and €219 million in the first half, mainly composed of: a gain on the disposal of a 10% interest in the Zohr asset (€339 million), risk provisions (€88 million) and exchange rate differences and derivatives gains (€21 million in the quarter and €12 million in the first half). |
| · | G&P: net charges of €79 million in the quarter and €247 million in the first half composed of: the effects of fair-valued commodity derivatives that lacked the formal criteria to be accounted as hedges under IFRS (€55 million in the quarter and €243 million in the first half), a charge of €41 million in the quarter and €33 million in the first half to align the doubtful credit allowance of the retail G&P business (included in the G&P reportable segment) to the “expected loss” accounting model replacing the criteria of the incurred loss in the evaluation of the recoverability of trade receivables, and finally, provisions for redundancy incentives (€32 million in the quarter and €34 million in the first half), as well as a downward revision of revenues accrued on the sale of gas and power for past reporting periods (€42 million). The G&P adjusted operating result also includes the negative balance of €80 million in the quarter and €94 million in the first half, related to derivative financial instruments entered into to manage margin exposure to movements in foreign currency exchange rates and exchange translation differences of commercial payables and receivables. |
| · | R&M and Chemicals: net charges of €64 million (€88 million in the first half) mainly composed of: the write down of capital expenditure relating to certain Cash Generating Units in the R&M business, which were impaired in previous reporting periods and continued to lack any prospects of profitability (€39 million in the quarter and €58 million in the first half); environmental provisions (€17 million in the quarter and €24 million in the first half). |
Non-operating special items included the tax effects related to the operating special items and the extraordinary charges/impairments recognized by Saipem and attributable to Eni (€62 million).
Reported results
Net profit attributable to Eni’s shareholders for the first half of 2017 was €983 million, a substantial improvement over the comparative period when a loss of €1,242 million was incurred from both continuing and discontinued operations due to the oil price downturn and a €400 million charge on the Saipem shareholding following the loss of control over the investee. However, the first half trends were uneven with the net result almost entirely earned in the first quarter due to the volatility in crude oil prices that were supported by the announcement of the OPEC cuts in the first quarter, but then slowed down markedly in the second one, because of uncertainties about the timing of recovery in market fundamentals. Furthermore, the second quarter result was negatively affected by a shutdown at the Val d’Agri oil center due to HSE issues (this event is not relevant for comparison purpose with the second quarter of 2016 also negatively affected by the Val d’Agri oil center shutdown).
The first half of 2017 benefitted from an overall 30% increase in the Brent crude oil price compared to the first half of 2016, production growth and the strong performance of the mid and downstream businesses due to contract renegotiations and the restructuring initiatives executed in the latest years which allowed the businesses to fully capture a certain improvement in the trading environment. These drivers determined an increase of more than 700% of the reported operating profit (up by €2.35 billion). Moreover, the tax rate normalization improved the net profit of the first half of 2017 as disclosed in the discussion to the adjusted results.
| -11- |
Net borrowings and cash flow from operations
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | Change | IH 17 | IH 16 | Change |
| 967 | Net profit (loss) - continuing operations | 18 | (444) | 462 | 985 | (824) | 1,809 |
| Adjustments to reconcile net profit (loss) to net cash provided by operating activities: | |||||||
| 2,056 | - depreciation, depletion and amortization and other non monetary items | 2,466 | 1,960 | 506 | 4,522 | 3,852 | 670 |
| (343) | - net gains on disposal of assets | 7 | (9) | 16 | (336) | (27) | (309) |
| 1,146 | - dividends, interests and taxes | 377 | 643 | (266) | 1,523 | 1,083 | 440 |
| (924) | Changes in working capital related to operations | 674 | 546 | 128 | (250) | 772 | (1,022) |
| (970) | Dividends received, taxes paid, interests (paid) received | (836) | (966) | 130 | (1,806) | (1,756) | (50) |
| 1,932 | Net cash provided by operating activities | 2,706 | 1,730 | 976 | 4,638 | 3,100 | 1,538 |
| (2,831) | Capital expenditure | (2,092) | (2,424) | 332 | (4,923) | (4,879) | (44) |
| (36) | Investment and purchase of consolidated subsidiaries and businesses | (14) | (28) | 14 | (50) | (1,152) | 1,102 |
| 557 | Disposal of consolidated subsidiaries, businesses tangible and intangible assets and investments | 67 | 146 | (79) | 624 | 951 | (327) |
| 185 | Other cash flow related to capital expenditure, investments and disposals | 54 | (4) | 58 | 239 | (43) | 282 |
| (193) | Free cash flow | 721 | (580) | 1,301 | 528 | (2,023) | 2,551 |
| (160) | Borrowings (repayment) of debt related to financing activities | 56 | (788) | 844 | (104) | 5,199 | (5,303) |
| 150 | Changes in short and long-term financial debt | 172 | 1,880 | (1,708) | 322 | (1,822) | 2,144 |
| Dividends paid and changes in non-controlling interests and reserves | (1,443) | (1,444) | 1 | (1,443) | (1,444) | 1 | |
| (6) | Effect of changes in consolidation, exchange differences and cash and cash equivalent related to discontinued operations | (32) | 2 | (34) | (38) | (20) | (18) |
| (209) | NET CASH FLOW | (526) | (930) | 404 | (735) | (110) | (625) |
| Change in net borrowings | |||||||
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | Change | IH 17 | IH 16 | Change |
| (193) | Free cash flow | 721 | (580) | 1,301 | 528 | (2,023) | 2,551 |
| Net borrowings of divested companies | 2 | (2) | 5,820 | (5,820) | |||
| 38 | Exchange differences on net borrowings and other changes | 186 | 430 | (244) | 224 | 704 | (480) |
| Dividends paid and changes in non-controlling interest and reserves | (1,443) | (1,444) | 1 | (1,443) | (1,444) | 1 | |
| (155) | CHANGE IN NET BORROWINGS | (536) | (1,592) | 1,056 | (691) | 3,057 | (3,748) |
Cash flow from operating activities amounted to €4.64 billion, or €4.88 billion when excluding changes in working capital at replacement cost.
Capital expenditure for the period of €4.97 billion represented a peak due to certain large projects (Angola, Ghana and Indonesia) which commenced production as planned in the first half of 2017.
Pro-forma capex was €4.27 billion, which excluded the share of capex to be borne by the operators who purchased interests in certain Group exploration assets under development (namely in Egypt and Mozambique) with retroactive economic effects, the capex share of which will be reimbursed to Eni at the closing of the underlying transactions, as well as advances cashed in from our State owned partners in the Zohr project. Cash flow generated from operations in excess of funding pro-forma capex amounted to €0.70 billion and covered part of the payment of the 2016 final dividend to Eni’s shareholders (€1.44 billion). Proceeds from disposals (€0.62 billion) related mainly to the closing of the sale of a 10% stake in the Zohr exploration asset to BP (€0.56 billion). The total consideration includes the reimbursement of capex borne by Eni since January 1, 2016 (the 2017 amount being $64 million).
Cash flow from operations was also influenced by a lower level of receivables due beyond the end of the reporting period, being sold to financing institutions compared to the amount sold at the end of the previous reporting period (approximately €0.29 billion).
| -12- |
Summarized Group Balance Sheet
| (€ million) | Jun. 30, 2017 | Dec. 31, 2016 | Change vs. Dec. 31, 2016 |
| Fixed assets | 75,945 | 79,729 | (3,784) |
| Net working capital | |||
| Inventories | 4,858 | 4,637 | 221 |
| Trade receivables | 9,744 | 11,186 | (1,442) |
| Trade payables | (9,381) | (11,038) | 1,657 |
| Tax payables and provisions for, net deferred tax liabilities | (3,286) | (3,073) | (213) |
| Provisions | (14,044) | (13,896) | (148) |
| Other current assets and liabilities | 1,275 | 1,171 | 104 |
| (10,834) | (11,013) | 179 | |
| Provisions for employee post-retirements benefits | (880) | (868) | (12) |
| Assets held for sale including related liabilities | 165 | 14 | 151 |
| CAPITAL EMPLOYED, NET | 64,396 | 67,862 | (3,466) |
| Eni's shareholders equity | 48,881 | 53,037 | (4,156) |
| Non-controlling interest | 48 | 49 | (1) |
| Shareholders' equity | 48,929 | 53,086 | (4,157) |
| Net borrowings | 15,467 | 14,776 | 691 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 64,396 | 67,862 | (3,466) |
| Leverage | 0.32 | 0.28 | 0.04 |
| · | As of June 30, 2017, net borrowings2 were €15.47 billion, recording an increase of €0.69 billion compared to December 31, 2016. Management expects to reduce the Company’s net borrowings y-o-y due to the finalization of announced disposals. |
| · | As of June 30, 2017, the ratio of net borrowings to shareholders’ equity including non-controlling interest – leverage3 – was 0.32, up from 0.28 as of December 31, 2016. Total equity decreased by €4.16 billion, driven by unfavorable foreign currency translation differences (about €3.5 billion), the payment of the 2016 final dividend (€1.44 billion) and negative changes in the cash flow hedge reserve (down by €0.3 billion). Foreign currency differences relating to net borrowings determined a decrease of €0.85 billion. |
2 Details on net borrowings are furnished on page 24.
3 Non-GAAP financial measures and other alternative performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables in line with guidance provided by ESMA guidelines on alternative performance measures (ESMA/2015/1415), published on October 5, 2015. For further information see the section “Non-GAAP measures” of this press release. See pages 15 and subsequent.
| -13- |
Other information, basis of presentation and disclaimer
Article No. 36 of Italian regulatory exchanges (Consob Resolution No. 16191/2007 and subsequent amendments). Continuing listing standards about issuers that control subsidiaries incorporated or regulated in accordance with laws of extra-EU Countries. Certain provisions have been enacted to regulate continuing Italian listing standards of issuers controlling subsidiaries that are incorporated or regulated in accordance with laws of extra-EU Countries, also having a material impact on the consolidated financial statements of the parent company. Regarding the aforementioned provisions, as of June 30, 2017, Eni’s subsidiaries - Eni Congo SA, Eni Norge AS, Eni Petroleum Co Inc, Nigerian Agip Oil Co Ltd, Nigerian Agip Exploration Ltd, Eni Finance USA Inc, Eni Trading & Shipping Inc, Eni Canada Holding Ltd, Eni Turkmenistan Ltd and Eni Ghana Exploration and Production Ltd – fall within the scope of the new continuing listing standards. Eni has already adopted adequate procedures to ensure full compliance with the new regulations.
This press release on Eni’s results of the first and second quarter of 2017 and the first half of 2017 has been prepared on a voluntary basis according to article 82-ter, Regulations on issuers (Consob Regulation No. 11971 of May 14, 1999 and subsequent amendments and inclusions). The disclosure of results and business trends on a quarterly basis is consistent with Eni’s policy to provide the market and investors with regular information about the Company’s financial and industrial performances and business prospects considering the reporting policy followed by oil&gas peers who are communicating results each quarter. Results and cash flow are presented for the first and second quarter of 2017, the first half of 2017 and for the second quarter and the first half of 2016. Information on the Company’s financial position relates to end of the periods as of March 31, 2017 and December 31, 2016. Accounts set forth herein have been prepared in accordance with the evaluation and recognition criteria set by the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure set forth in Article 6 of the European Regulation (CE) No. 1606/2002 of the European Parliament and European Council of July 19, 2002. These criteria are unchanged from the 2016 Annual report on form 20-F filed with the US SEC on March 22, 2017, which investors are urged to read.
Non-GAAP financial measures and other alternative performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables in line with guidance provided by ESMA guidelines on alternative performance measures (ESMA/2015/1415), published on October 5, 2015. For further information see the section “Alternative performance measures (Non-GAAP measures)” of this press release.
Eni’s Chief Financial Officer, Massimo Mondazzi, in his position as manager responsible for the preparation of the Company’s financial reports, certifies that data and information disclosed in this press release correspond to the Company’s evidence and accounting books and records, pursuant to rule 154-bis paragraph 2 of Legislative Decree No. 58/1998.
* * *
Disclaimer
This press release, in particular the statements under the section “Outlook”, contains certain forward-looking statements particularly those regarding capital expenditure, development and management of oil and gas resources, dividends, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sales growth, new markets and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the timing of bringing new fields on stream; management’s ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply; demand and pricing; operational issues; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; development and use of new technology; changes in public expectations and other changes in business conditions; the actions of competitors and other factors discussed elsewhere in this document. Due to the seasonality in demand for natural gas and certain refined products and the changes in a number of external factors affecting Eni’s operations, such as prices and margins of hydrocarbons and refined products, Eni’s results from operations and changes in net borrowings for the second quarter of the year cannot be extrapolated on an annual basis.
* * *
Company Contacts
Press Office: +39.0252031875 - +39.0659822030
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +80011223456
Switchboard: +39-0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Website: www.eni.com
* * *
Eni
Società per Azioni Rome, Piazzale Enrico Mattei, 1
Share capital: €4,005,358,876 fully paid.
Tax identification number 00484960588
Tel.: +39 0659821 - Fax: +39 0659822141
This press release for the second quarter and the first half of 2017 (unaudited) is also available on Eni’s website eni.com.
| -14- |
| Alternative performance measures (Non-GAAP measures) |
Management evaluates underlying business performance on the basis of non-GAAP financial measures under IFRS (“Alternative performance measures”), such as adjusted operating profit and adjusted net profit, which are arrived at by excluding inventory holding gains or losses, special items and, in determining the business segments’ adjusted results, finance charges on finance debt and interest income. The adjusted operating profit of each business segment reports gains and losses on derivative financial instruments entered into to manage exposure to movements in foreign currency exchange rates which affect industrial margins and translation of commercial payables and receivables. Accordingly, also currency translation effects recorded through profit and loss are reported within business segments’ adjusted operating profit. The taxation effect of the items excluded from adjusted operating or net profit is determined based on the specific rate of taxes applicable to each of them. Management includes them in order to facilitate a comparison of base business performance across periods, and to allow financial analysts to evaluate Eni’s trading performance on the basis of their forecasting models. Non-GAAP financial measures should be read together with information determined by applying IFRS and do not stand in for them. Other companies may adopt different methodologies to determine Non-GAAP measures.
Follows the description of the main alternative performance measures adopted by Eni. The measures reported below refer to the actual performance:
Adjusted operating and net profit
Adjusted operating and net profit are determined by excluding inventory holding gains or losses, special items and, in determining the business segments’ adjusted results, finance charges on finance debt and interest income. The adjusted operating profit of each business segment reports gains and losses on derivative financial instruments entered into to manage exposure to movements in foreign currency exchange rates which impact industrial margins and translation of commercial payables and receivables. Accordingly, also currency translation effects recorded through profit and loss are reported within business segments’ adjusted operating profit. The taxation effect of the items excluded from adjusted operating or net profit is determined based on the specific rate of taxes applicable to each of them. Finance charges or income related to net borrowings excluded from the adjusted net profit of business segments are comprised of interest charges on finance debt and interest income earned on cash and cash equivalents not related to operations. Therefore, the adjusted net profit of business segments includes finance charges or income deriving from certain segment operated assets, i.e., interest income on certain receivable financing and securities related to operations and finance charge pertaining to the accretion of certain provisions recorded on a discounted basis (as in the case of the asset retirement obligations in the Exploration & Production segment).
Inventory holding gain or loss
This is the difference between the cost of sales of the volumes sold in the period based on the cost of supplies of the same period and the cost of sales of the volumes sold calculated using the weighted average cost method of inventory accounting as required by IFRS.
Special items
These include certain significant income or charges pertaining to either: (i) infrequent or unusual events and transactions, being identified as non-recurring items under such circumstances; (ii) certain events or transactions which are not considered to be representative of the ordinary course of business, as in the case of environmental provisions, restructuring charges, asset impairments or write ups and gains or losses on divestments even though they occurred in past periods or are likely to occur in future ones; in this respect, from the reporting period 2017 special items comprise an adjustment to align the doubtful credit allowance of the retail G&P business (included in the G&P reportable segment) to the “expected loss” accounting model replacing the criteria of the incurred loss in the evaluation of the recoverability of trade receivables. The new criterion will be adopted in GAAP accounts effective January 1, 2018. This result adjustment is consistent with management assessment of this business performance and improves the correlation between revenues and costs incurred in the period with respect to the current accounting method; or (iii) exchange rate differences and derivatives relating to industrial activities and commercial payables and receivables, particularly exchange rate derivatives to manage commodity pricing formulas which are quoted in a currency other than the functional currency. Those items are reclassified in operating profit with a corresponding adjustment to net finance charges, notwithstanding the handling of foreign currency exchange risks is made centrally by netting off naturally-occurring opposite positions and then dealing with any residual risk exposure in the exchange rate market.
As provided for in Decision No. 15519 of July 27, 2006 of the Italian market regulator (CONSOB), non-recurring material income or charges are to be clearly reported in the management’s discussion and financial tables. Also, special items allow to allocate to future reporting periods gains and losses on re-measurement at fair value of certain non hedging commodity derivatives and exchange rate derivatives relating to commercial exposures, lacking the criteria to be designed as hedges, including the ineffective portion of cash flow hedges and certain derivative financial instruments embedded in the pricing formula of long-term gas supply agreements of the Exploration & Production segment.
Leverage
Leverage is a Non-GAAP measure of the Company’s financial condition, calculated as the ratio between net borrowings and shareholders’ equity, including non-controlling interest. Leverage is the reference ratio to assess the solidity and efficiency of the Group balance sheet in terms of incidence of funding sources including third-party funding and equity as well as to carry out benchmark analysis with industry standards.
Adjusted cash flow
Adjusted cash flow is defined as net cash provided from operating activities before changes in working capital at replacement cost.
Free cash flow
Free cash flow represents the link existing between changes in cash and cash equivalents (deriving from the statutory cash flows statement) and in net borrowings (deriving from the summarized cash flow statement) that occurred from the beginning of the period to the end of period. Free cash flow is the cash in excess of capital expenditure needs. Starting from free cash flow it is possible to determine either: (i) changes in cash and cash equivalents for the period by adding/deducting cash flows relating to financing debts/receivables (issuance/repayment of debt and receivables related to financing activities), shareholders’ equity (dividends paid, net repurchase of own shares, capital issuance) and the effect of changes in consolidation and of exchange rate differences; (ii) changes in net borrowings for the period by adding/deducting cash flows relating to shareholders’ equity and the effect of changes in consolidation and of exchange rate differences.
| -15- |
Net borrowings
Net borrowings is calculated as total finance debt less cash, cash equivalents and certain very liquid investments not related to operations, including among others non-operating financing receivables and securities not related to operations. Financial activities are qualified as “not related to operations” when these are not strictly related to the business operations.
| (€ million) | ||||||
| Second Quarter 2017 | Exploration & Production |
Gas & Power |
Refining & Marketing and |
Corporate and other |
Impact of unrealized profit elimination |
GROUP |
| Reported operating profit (loss) | 851 | (225) | 33 | (227) | 131 | 563 |
| Exclusion of inventory holding (gains) losses | 255 | (3) | 252 | |||
| Exclusion of special items: | ||||||
| environmental charges | 17 | 18 | 35 | |||
| impairments losses (impairment reversals), net | 1 | (6) | 39 | 7 | 41 | |
| net gains on disposal of assets | 1 | (2) | (1) | |||
| risk provisions | 4 | 49 | 53 | |||
| provision for redundancy incentives | 3 | 32 | 1 | 3 | 39 | |
| commodity derivatives | 55 | 3 | 58 | |||
| exchange rate differences and derivatives | (21) | (80) | (6) | (107) | ||
| other | 6 | 78 | 12 | (10) | 86 | |
| Special items of operating profit (loss) | (6) | 79 | 64 | 67 | 204 | |
| Adjusted operating profit (loss) | 845 | (146) | 352 | (160) | 128 | 1,019 |
| Net finance (expense) income (a) | (28) | 2 | (183) | (209) | ||
| Net income (expense) from investments (a) | 169 | (2) | (9) | 13 | 171 | |
| Income taxes (a) | (425) | 15 | (119) | 49 | (38) | (518) |
| Tax rate (%) | 43.1 | .. | 34.5 | 52.8 | ||
| Adjusted net profit (loss) | 561 | (133) | 226 | (281) | 90 | 463 |
| of which: | ||||||
| - Adjusted net profit (loss) of non-controlling interest | ||||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | 463 | |||||
|
Reported net profit (loss) attributable to Eni's shareholders |
18 | |||||
| Exclusion of inventory holding (gains) losses | 180 | |||||
| Exclusion of special items | 265 | |||||
| Adjusted net profit (loss) attributable to Eni's shareholders | 463 |
(a) Excluding special items.
| -16- |
| (€ million) | ||||||
| Second Quarter 2016 | Exploration & Production |
Gas & Power |
Refining & Marketing and Chemicals |
Corporate and other |
Impact of unrealized intragroup profit elimination |
GROUP |
| Reported operating profit (loss) | 194 | (154) | 315 | (162) | 27 | 220 |
| Exclusion of inventory holding (gains) losses | 30 | (215) | 5 | (180) | ||
| Exclusion of special items: | ||||||
| environmental charges | 44 | 34 | 78 | |||
| impairments losses (impairment reversals), net | 105 | 21 | 5 | 131 | ||
| net gains on disposal of assets | 1 | (1) | (4) | (4) | ||
| risk provisions | 1 | 1 | ||||
| provision for redundancy incentives | 3 | 1 | 4 | |||
| commodity derivatives | 11 | (247) | (12) | (248) | ||
| exchange rate differences and derivatives | 25 | (1) | 24 | |||
| other | 16 | 143 | 7 | (4) | 162 | |
| Special items of operating profit (loss) | 161 | (105) | 56 | 36 | 148 | |
| Adjusted operating profit (loss) | 355 | (229) | 156 | (126) | 32 | 188 |
| Net finance (expense) income (a) | (57) | 2 | (1) | (121) | (177) | |
| Net income (expense) from investments (a) | 33 | (7) | 10 | 36 | ||
| Income taxes (a) | (403) | 73 | (51) | 27 | (8) | (362) |
| Tax rate (%) | 121.8 | .. | 32.9 | .. | ||
| Adjusted net profit (loss) | (72) | (161) | 104 | (210) | 24 | (315) |
| of which: | ||||||
| - Adjusted net profit (loss) of non-controlling interest | 2 | |||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | (317) | |||||
| Reported net profit (loss) attributable to Eni's shareholders | (446) | |||||
| Exclusion of inventory holding (gains) losses | (123) | |||||
| Exclusion of special items | 252 | |||||
| Adjusted net profit (loss) attributable to Eni's shareholders | (317) |
(a) Excluding special items.
| -17- |
| (€ million) | ||||||
| First Half 2017 |
Exploration &
Production |
Gas & Power |
Refining & Marketing and Chemicals |
Corporate and other activities |
Impact of unrealized profit |
GROUP |
| Reported operating profit (loss) | 2,479 | (11) | 397 | (345) | 154 | 2,674 |
| Exclusion of inventory holding (gains) losses | (44) | 56 | (19) | (7) | ||
| Exclusion of special items: | ||||||
| environmental charges | 24 | 18 | 42 | |||
| impairments losses (impairment reversals), net | 1 | (6) | 58 | 8 | 61 | |
| net gains on disposal of assets | (342) | (2) | (344) | |||
| risk provisions | 88 | 49 | 137 | |||
| provision for redundancy incentives | 5 | 34 | 3 | 3 | 45 | |
| commodity derivatives | 243 | (8) | 235 | |||
| exchange rate differences and derivatives | (12) | (94) | (7) | (113) | ||
| other | 41 | 70 | 20 | (8) | 123 | |
| Special items of operating profit (loss) | (219) | 247 | 88 | 70 | 186 | |
| Adjusted operating profit (loss) | 2,260 | 192 | 541 | (275) | 135 | 2,853 |
| Net finance (expense) income (a) | 28 | 6 | 2 | (390) | (354) | |
| Net income (expense) from investments (a) | 187 | (3) | 1 | 28 | 213 | |
| Income taxes (a) | (1,284) | (118) | (190) | 127 | (38) | (1,503) |
| Tax rate (%) | 51.9 | 60.5 | 34.9 | 55.4 | ||
| Adjusted net profit (loss) | 1,191 | 77 | 354 | (510) | 97 | 1,209 |
| of which: | ||||||
| - Adjusted net profit (loss) of non-controlling interest | 2 | |||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | 1,207 | |||||
| Reported net profit (loss) attributable to Eni's shareholders | 983 | |||||
| Exclusion of inventory holding (gains) losses | (6) | |||||
| Exclusion of special items | 230 | |||||
| Adjusted net profit (loss) attributable to Eni's shareholders | 1,207 |
(a) Excluding special items.
| -18- |
| (€ million) | ||||||||
| First Half 2016 |
Exploration & |
Gas & Power |
Refining & Marketing and Chemicals |
Corporate and other |
Impact of unrealized profit |
GROUP |
DISCONTINUED OPERATIONS |
CONTINUING OPERATIONS |
| Reported operating profit (loss) | 288 | (71) | 363 | (260) | 5 | 325 | 325 | |
| Exclusion of inventory holding (gains) losses | 158 | (152) | 143 | 149 | 149 | |||
| Exclusion of special items: | ||||||||
| environmental charges | 67 | 34 | 101 | 101 | ||||
| impairments losses (impairment reversals), net | 105 | 34 | 9 | 148 | 148 | |||
| impairment of exploration projects | 7 | 7 | 7 | |||||
| net gains on disposal of assets | 1 | (1) | (4) | (4) | (4) | |||
| risk provisions | 1 | 1 | 1 | |||||
| provision for redundancy incentives | 4 | 1 | 4 | 2 | 11 | 11 | ||
| commodity derivatives | 15 | (144) | 14 | (115) | (115) | |||
| exchange rate differences and derivatives | 25 | (40) | (3) | (18) | (18) | |||
| other | 5 | 153 | 10 | (2) | 166 | 166 | ||
| Special items of operating profit (loss) | 162 | (31) | 122 | 44 | 297 | 297 | ||
| Adjusted operating profit (loss) | 450 | 56 | 333 | (216) | 148 | 771 | 771 | |
| Net finance (expense) income (a) | (115) | 4 | (155) | (266) | (266) | |||
| Net income (expense) from investments (a) | 37 | (2) | 20 | 3 | 58 | 58 | ||
| Income taxes (a) | (710) | (55) | (105) | 43 | (46) | (873) | (873) | |
| Tax rate (%) | .. | 94.8 | 29.7 | .. | .. | |||
| Adjusted net profit (loss) | (338) | 3 | 248 | (325) | 102 | (310) | (310) | |
| of which: | ||||||||
| - Adjusted net profit (loss) of non-controlling interest | 5 | 5 | ||||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | (315) | (315) | ||||||
| Reported net profit (loss) attributable to Eni's shareholders | (1,242) | 413 | (829) | |||||
| Exclusion of inventory holding (gains) losses | 101 | 101 | ||||||
| Exclusion of special items | 826 | (413) | 413 | |||||
| Adjusted net profit (loss) attributable to Eni's shareholders | (315) | (315) | ||||||
(a) Excluding special items.
| -19- |
| (€ million) | ||||||
| First Quarter 2017 |
Exploration & |
Gas & Power |
Refining & Marketing and Chemicals |
Corporate and other |
Impact of unrealized profit elimination |
GROUP |
| Reported operating profit (loss) | 1,628 | 214 | 364 | (118) | 23 | 2,111 |
| Exclusion of inventory holding (gains) losses | (44) | (199) | (16) | (259) | ||
| Exclusion of special items: | ||||||
| environmental charges | 7 | 7 | ||||
| impairments losses (impairment reversals), net | 19 | 1 | 20 | |||
| net gains on disposal of assets | (343) | (343) | ||||
| risk provisions | 84 | 84 | ||||
| provision for redundancy incentives | 2 | 2 | 2 | 6 | ||
| commodity derivatives | 188 | (11) | 177 | |||
| exchange rate differences and derivatives | 9 | (14) | (1) | (6) | ||
| other | 35 | (8) | 8 | 2 | 37 | |
| Special items of operating profit (loss) | (213) | 168 | 24 | 3 | (18) | |
| Adjusted operating profit (loss) | 1,415 | 338 | 189 | (115) | 7 | 1,834 |
| Net finance (expense) income (a) | 56 | 6 | (207) | (145) | ||
| Net income (expense) from investments (a) | 18 | (1) | 10 | 15 | 42 | |
| Income taxes (a) | (859) | (133) | (71) | 78 | (985) | |
| Tax rate (%) | 57.7 | 38.8 | 35.7 | 56.9 | ||
| Adjusted net profit (loss) | 630 | 210 | 128 | (229) | 7 | 746 |
| of which: | ||||||
| - Adjusted net profit (loss) of non-controlling interest | 2 | |||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | 744 | |||||
| Reported net profit (loss) attributable to Eni's shareholders | 965 | |||||
| Exclusion of inventory holding (gains) losses | (186) | |||||
| Exclusion of special items | (35) | |||||
| Adjusted net profit (loss) attributable to Eni's shareholders | 744 |
(a) Excluding special items.
| -20- |
Breakdown of special items4
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | IH 17 | IH 16 |
| 7 | Environmental charges | 35 | 78 | 42 | 101 |
| 20 | Impairments losses (impairment reversals), net | 41 | 131 | 61 | 148 |
| Impairment of exploration projects | 7 | ||||
| (343) | Net gains on disposal of assets | (1) | (4) | (344) | (4) |
| 84 | Risk provisions | 53 | 1 | 137 | 1 |
| 6 | Provisions for redundancy incentives | 39 | 4 | 45 | 11 |
| 177 | Commodity derivatives | 58 | (248) | 235 | (115) |
| (6) | Exchange rate differences and derivatives | (107) | 24 | (113) | (18) |
| 37 | Other | 86 | 162 | 123 | 166 |
| (18) | Special items of operating profit (loss) | 204 | 148 | 186 | 297 |
| 6 | Net finance (income) expense | 125 | (24) | 131 | 72 |
| of which: | |||||
| 6 | - exchange rate differences and derivatives reclassified to operating profit (loss) | 107 | (24) | 113 | 18 |
| (2) | Net income (expense) from investments | 68 | (22) | 66 | 343 |
| of which: | |||||
| - gains on disposal of assets | (7) | (7) | |||
| - impairments/revaluation of equity investments | 68 | 8 | 68 | 373 | |
| (21) | Income taxes | (132) | 150 | (153) | 114 |
| of which: | |||||
| - net impairment of deferred tax assets of Italian subsidiaries | 149 | 149 | |||
| (21) | - taxes on special items of operating profit and other special items | (132) | 1 | (153) | (35) |
| (35) | Total special items of net profit (loss) | 265 | 252 | 230 | 826 |
4 For further details on impairments and reversals of continuing operations, see the following page.
| -21- |
| Analysis of Profit and Loss account items |
Net sales from operations
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. |
| 4,950 | Exploration & Production | 4,376 | 3,887 | 12.6 | 9,326 | 7,243 | 28.8 |
| 13,942 | Gas & Power | 11,710 | 9,734 | 20.3 | 25,652 | 19,764 | 29.8 |
| 5,515 | Refining & Marketing and Chemicals | 5,344 | 4,829 | 10.7 | 10,859 | 8,698 | 24.8 |
| 4,294 | - Refining & Marketing | 4,167 | 3,886 | 7.2 | 8,461 | 6,802 | 24.4 |
| 1,346 | - Chemicals | 1,255 | 1,083 | 15.9 | 2,601 | 2,102 | 23.7 |
| (125) | - Consolidation adjustment | (78) | (140) | (203) | (206) | ||
| 348 | Corporate and other activities | 339 | 319 | 6.3 | 687 | 629 | 9.2 |
| (6,708) | Consolidation adjustments | (6,126) | (5,353) | (12,834) | (9,574) | ||
| 18,047 | 15,643 | 13,416 | 16.6 | 33,690 | 26,760 | 25.9 | |
Operating expenses
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. |
| 13,619 | Purchases, services and other | 12,447 | 10,769 | 15.6 | 26,066 | 21,420 | 21.7 |
| 91 | of which: - other special items | 88 | 79 | 179 | 102 | ||
| 784 | Payroll and related costs | 778 | 736 | 5.7 | 1,562 | 1,544 | 1.2 |
| 6 | of which: - provision for redundancy incentives and other | 39 | 4 | 45 | 11 | ||
| 14,403 | 13,225 | 11,505 | 15.0 | 27,628 | 22,964 | 20.3 | |
DD&A, impairments, reversals and write-off
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. |
| 1,646 | Exploration & Production | 1,758 | 1,699 | 3.5 | 3,404 | 3,323 | 2.4 |
| 89 | Gas & Power | 88 | 88 | 177 | 174 | 1.7 | |
| 89 | Refining & Marketing and Chemicals | 90 | 89 | 1.1 | 179 | 185 | (3.2) |
| 75 | - Refining & Marketing | 77 | 87 | (11.5) | 152 | 175 | (13.1) |
| 14 | - Chemicals | 13 | 2 | .. | 27 | 10 | .. |
| 16 | Corporate and other activities | 15 | 18 | .. | 31 | 37 | (16.2) |
| (7) | Impact of unrealized intragroup profit elimination | (7) | (7) | (14) | (14) | ||
| 1,833 | Total depreciation, depletion and amortization | 1,944 | 1,887 | 3.0 | 3,777 | 3,705 | 1.9 |
| 20 | Impairment losses (impairment reversals), net | 41 | 131 | .. | 61 | 148 | .. |
| 1,853 | Depreciation, depletion, amortization, impairments and reversals | 1,985 | 2,018 | (1.6) | 3,838 | 3,853 | (0.4) |
| 144 | Write-off | 49 | 86 | .. | 193 | 121 | .. |
| 1,997 | 2,034 | 2,104 | (3.3) | 4,031 | 3,974 | 1.4 |
| -22- |
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | IH 17 | IH 16 |
| 20 | Asset impairment | 63 | 168 | 83 | 185 |
| Impairment reversals | (22) | (37) | (22) | (37) | |
| 20 | Impairments losses (impairment reversals), net | 41 | 131 | 61 | 148 |
Income (expense) from investments
| (€ million) | |||||
| First Half 2017 | Exploration & Production |
Gas & Power |
Refining & Marketing and Chemicals |
Corporate and other activities |
Group |
| Share of gains (losses) from equity-accounted investments | 126 | (3) | (4) | (34) | 85 |
| Dividends | 59 | 10 | 69 | ||
| Other income (expense), net | 2 | (6) | (3) | (7) | |
| 187 | (9) | 3 | (34) | 147 |
| -23- |
| Leverage and net borrowings |
Leverage is a measure used by management to assess the Company’s level of indebtedness. It is calculated as a ratio of net borrowings to shareholders’ equity, including non-controlling interest. Management periodically reviews leverage in order to assess the soundness and efficiency of the Group balance sheet in terms of optimal mix between net borrowings and net equity, and to carry out benchmark analysis with industry standards.
| Mar 31, 2017 |
(€ million) |
June 30, 2017 |
Dec. 31, 2016 |
Change vs. Dec. 31, 2016 |
| 27,285 | Total debt | 27,075 | 27,239 | (164) |
| 7,060 | Short-term debt | 7,042 | 6,675 | 367 |
| 20,225 | Long-term debt | 20,033 | 20,564 | (531) |
| (5,465) | Cash and cash equivalents | (4,939) | (5,674) | 735 |
| (6,410) | Securities held for trading and other securities held for non-operating purposes | (6,305) | (6,404) | 99 |
| (479) | Financing receivables held for non-operating purposes | (364) | (385) | 21 |
| 14,931 | Net borrowings | 15,467 | 14,776 | 691 |
| 53,133 | Shareholders' equity including non-controlling interest | 48,929 | 53,086 | (4,157) |
| 0.28 | Leverage | 0.32 | 0.28 | 0.04 |
Net borrowings are calculated under Consob provisions on Net Financial Position (Com. no. DEM/6064293 of 2006).
Bonds maturing in the 18-months period starting on June 30, 2017
| (€ million) | |||||
| Issuing entity | Amount at June 30, 2017 (a) | ||||
| Eni SpA | 3,664 | ||||
| Eni Finance International SA | 176 | ||||
| 3,840 |
(a) Amounts include interest accrued and discount on issue.
Bonds issued in the second quarter of 2017 (guaranteed by Eni Spa)
| Issuing entity |
Nominal amount |
Currency |
Amount at June 30, 2017 (a) |
Maturity | Rate | % | |
| Eni SpA | 750 | EUR | 748 | 2027 | fixed | 1.500 | |
| 750 | 748 |
(a) Amounts include interest accrued and discount on issue.
| -24- |
| Consolidated financial statements |
BALANCE SHEET
| (€ million) | |||
| June 30, 2017 | March 31, 2017 | Dec. 31, 2016 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 4,939 | 5,465 | 5,674 |
| Other financial activities held for trading | 6,082 | 6,172 | 6,166 |
| Other financial assets available for sale | 223 | 238 | 238 |
| Trade and other receivables | 15,836 | 19,429 | 17,593 |
| Inventories | 4,858 | 4,728 | 4,637 |
| Current tax assets | 303 | 366 | 383 |
| Other current tax assets | 433 | 519 | 689 |
| Other current assets | 1,432 | 1,403 | 2,591 |
| 34,106 | 38,320 | 37,971 | |
| Non-current assets | |||
| Property, plant and equipment | 67,585 | 70,703 | 70,793 |
| Inventory - compulsory stock | 1,147 | 1,279 | 1,184 |
| Intangible assets | 3,043 | 3,262 | 3,269 |
| Equity-accounted investments | 3,944 | 4,057 | 4,040 |
| Other investments | 234 | 276 | 276 |
| Other financial assets | 1,793 | 1,859 | 1,860 |
| Deferred tax assets | 4,084 | 3,783 | 3,790 |
| Other non-current assets | 1,529 | 1,403 | 1,348 |
| 83,359 | 86,622 | 86,560 | |
| Assets held for sale | 355 | 261 | 14 |
| TOTAL ASSETS | 117,820 | 125,203 | 124,545 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Current liabilities | |||
| Short-term debt | 2,851 | 2,778 | 3,396 |
| Current portion of long-term debt | 4,191 | 4,282 | 3,279 |
| Trade and other payables | 14,956 | 17,063 | 16,703 |
| Income taxes payable | 426 | 526 | 426 |
| Other taxes payable | 1,948 | 2,186 | 1,293 |
| Other current liabilities | 1,547 | 1,736 | 2,599 |
| 25,919 | 28,571 | 27,696 | |
| Non-current liabilities | |||
| Long-term debt | 20,033 | 20,225 | 20,564 |
| Provisions for contingencies | 14,044 | 13,960 | 13,896 |
| Provisions for employee benefits | 880 | 862 | 868 |
| Deferred tax liabilities | 6,228 | 6,569 | 6,667 |
| Other non-current liabilities | 1,597 | 1,740 | 1,768 |
| 42,782 | 43,356 | 43,763 | |
| Liabilities directly associated assets held for sale | 190 | 143 | |
| TOTAL LIABILITIES | 68,891 | 72,070 | 71,459 |
| SHAREHOLDERS' EQUITY | |||
| Non-controlling interest | 48 | 52 | 49 |
| Eni shareholders' equity: | |||
| Share capital | 4,005 | 4,005 | 4,005 |
| Reserve related to the fair value of cash flow hedging derivatives net of tax effect | (60) | (41) | 189 |
| Other reserves | 44,534 | 48,733 | 52,329 |
| Treasury shares | (581) | (581) | (581) |
| Interim dividend | (1,441) | ||
| Net profit (loss) | 983 | 965 | (1,464) |
| Total Eni shareholders' equity | 48,881 | 53,081 | 53,037 |
| TOTAL SHAREHOLDERS' EQUITY | 48,929 | 53,133 | 53,086 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 117,820 | 125,203 | 124,545 |
| -25- |
GROUP PROFIT AND LOSS ACCOUNT
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | IH 17 | IH 16 |
| REVENUES | |||||
| 18,047 | Net sales from operations | 15,643 | 13,416 | 33,690 | 26,760 |
| 485 | Other income and revenues | 141 | 295 | 626 | 502 |
| 18,532 | Total revenues | 15,784 | 13,711 | 34,316 | 27,262 |
| OPERATING EXPENSES | |||||
| 13,619 | Purchases, services and other | 12,447 | 10,769 | 26,066 | 21,420 |
| 784 | Payroll and related costs | 778 | 736 | 1,562 | 1,544 |
| (21) | Other operating (expense) income | 38 | 118 | 17 | 1 |
| 1,833 | Depreciation, Depletion and Amortization | 1,944 | 1,887 | 3,777 | 3,705 |
| 20 | Impairment Losses (Impairment reversals), net | 41 | 131 | 61 | 148 |
| 144 | Write-Off | 49 | 86 | 193 | 121 |
| 2,111 | OPERATING PROFIT (LOSS) | 563 | 220 | 2,674 | 325 |
| FINANCE INCOME (EXPENSE) | |||||
| 1,326 | Finance income | 946 | 1,357 | 2,272 | 3,190 |
| (1,498) | Finance expense | (1,732) | (1,343) | (3,230) | (3,420) |
| 1 | Income (expense) from other financial activities held for trading | (52) | (16) | (51) | (53) |
| 20 | Derivative financial instruments | 504 | (151) | 524 | (5) |
| (151) | (334) | (153) | (485) | (288) | |
| INCOME (EXPENSE) FROM INVESTMENTS | |||||
| 29 | Share of profit (loss) of equity-accounted investments | 56 | 26 | 85 | 81 |
| 15 | Other gain (loss) from investments | 47 | 32 | 62 | (3) |
| 44 | 103 | 58 | 147 | 78 | |
| 2,004 | PROFIT (LOSS) BEFORE INCOME TAXES | 332 | 125 | 2,336 | 115 |
| (1,037) | Income taxes | (314) | (569) | (1,351) | (939) |
| 967 | Net profit (loss) - continuing operations | 18 | (444) | 985 | (824) |
| Net profit (loss) - discontinued operations | (413) | ||||
| 967 | Net profit (loss) | 18 | (444) | 985 | (1,237) |
| Eni's shareholders: | |||||
| 965 | - continuing operations | 18 | (446) | 983 | (829) |
| - discontinued operations | (413) | ||||
| 965 | 18 | (446) | 983 | (1,242) | |
| Non controlling interest | |||||
| 2 | - continuing operations | 2 | 2 | 5 | |
| - discontinued operations | |||||
| 2 | 2 | 2 | 5 | ||
| Net profit (loss) per share attributable to Eni's shareholders (€ per share) |
|||||
| 0.27 | - basic | 0.00 | (0.12) | 0.27 | (0.34) |
| 0.27 | - diluted | 0.00 | (0.12) | 0.27 | (0.34) |
| Net profit (loss) per share - continuing operations attributable to Eni's shareholders (€ per share) |
|||||
| 0.27 | - basic | 0.00 | (0.12) | 0.27 | (0.23) |
| 0.27 | - diluted | 0.00 | (0.12) | 0.27 | (0.23) |
| -26- |
COMPREHENSIVE INCOME
| (€ million) | IIQ 17 | IIQ 16 | IH 17 | IH 16 |
| Net profit (loss) | 18 | (444) | 985 | (1,237) |
| Items that may be reclassified to profit in later periods | ||||
| Currency translation differences | (2,794) | 989 | (3,512) | (875) |
| Change in the fair value of cash flow hedging derivatives | (21) | 472 | (325) | 428 |
| Change in the fair value of other available-for-sale financial instruments | 2 | 2 | ||
| Share of "Other comprehensive income" on equity-accounted entities | 33 | (6) | 51 | 34 |
| Taxation | 2 | (118) | 76 | (106) |
| Total other items of comprehensive income (loss) | (2,778) | 1,337 | (3,708) | (519) |
| Total comprehensive income (loss) | (2,760) | 893 | (2,723) | (1,756) |
| attributable to: | ||||
| Eni's shareholders | (2,760) | 891 | (2,725) | (1,761) |
| - continuing operations | (2,760) | 891 | (2,725) | (1,348) |
| - discontinued operations | (413) | |||
| Non-controlling interest | 2 | 2 | 5 | |
| - continuing operations | 2 | 2 | 5 | |
| - discontinued operations | ||||
CHANGES IN SHAREHOLDERS’ EQUITY
| (€ million) | ||
| Shareholders' equity at January 1, 2016: | 57,409 | |
| Total comprehensive income (loss) | (1,756) | |
| Dividends paid to Eni's shareholders | (1,440) | |
| Deconsolidation of Saipem's non-controlling interest | (1,872) | |
| Dividends distributed by consolidated subsidiaries | (4) | |
| Other changes | (34) | |
| Total changes | (5,106) | |
| Shareholders' equity at June 30, 2016: | 52,303 | |
| attributable to: | ||
| - Eni's shareholders | 52,257 | |
| - Non-controlling interest | 46 | |
| Shareholders' equity at January 1, 2017: | 53,086 | |
| Total comprehensive income (loss) | (2,723) | |
| Dividends paid to Eni's shareholders | (1,440) | |
| Dividends distributed by consolidated subsidiaries | (3) | |
| Other changes | 9 | |
| Total changes | (4,157) | |
| Shareholders' equity at June 30, 2017: | 48,929 | |
| attributable to: | ||
| - Eni's shareholders | 48,881 | |
| - Non-controlling interest | 48 | |
| -27- |
GROUP CASH FLOW STATEMENT
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | IH 17 | IH 16 |
| 967 | Net profit (loss) - continuing operations | 18 | (444) | 985 | (824) |
| Adjustments to reconcile net profit (loss) to net cash provided by operating activities: | |||||
| 1,833 | Depreciation, depletion and amortization | 1,944 | 1,887 | 3,777 | 3,705 |
| 20 | Impairment losses (impairment reversals), net | 41 | 131 | 61 | 148 |
| 144 | Write-off | 49 | 86 | 193 | 121 |
| (29) | Share of (profit) loss of equity-accounted investments | (56) | (26) | (85) | (81) |
| (343) | Gain on disposal of assets, net | 7 | (9) | (336) | (27) |
| (11) | Dividend income | (58) | (33) | (69) | (55) |
| (48) | Interest income | (50) | (52) | (98) | (120) |
| 168 | Interest expense | 171 | 159 | 339 | 319 |
| 1,037 | Income taxes | 314 | 569 | 1,351 | 939 |
| 91 | Other changes | 455 | (119) | 546 | (49) |
| Changes in working capital: | |||||
| (219) | - inventories | (137) | (500) | (356) | 30 |
| (1,501) | - trade receivables | 2,533 | 1,726 | 1,032 | 1,537 |
| 257 | - trade payables | (1,580) | (53) | (1,323) | (40) |
| 47 | - provisions for contingencies | 86 | 123 | 133 | (953) |
| 492 | - other assets and liabilities | (228) | (750) | 264 | 198 |
| (924) | Cash flow from changes in working capital | 674 | 546 | (250) | 772 |
| (3) | Net change in the provisions for employee benefits | 33 | 1 | 30 | 8 |
| 4 | Dividends received | 98 | 82 | 102 | 87 |
| 8 | Interest received | 15 | 22 | 23 | 67 |
| (184) | Interest paid | (127) | (168) | (311) | (394) |
| (798) | Income taxes paid, net of tax receivables received | (822) | (902) | (1,620) | (1,516) |
| 1,932 | Net cash provided by operating activities | 2,706 | 1,730 | 4,638 | 3,100 |
| Investing activities: | |||||
| (2,727) | - tangible assets | (2,069) | (2,406) | (4,796) | (4,847) |
| (104) | - intangible assets | (23) | (18) | (127) | (32) |
| (36) | - investments | (14) | (28) | (50) | (1,152) |
| (65) | - securities | (9) | (1,155) | (74) | (1,225) |
| (320) | - financing receivables | (64) | (338) | (384) | (624) |
| 495 | - change in payables in relation to investments and capitalized depreciation | 48 | 103 | 543 | 31 |
| (2,757) | Cash flow from investments | (2,131) | (3,842) | (4,888) | (7,849) |
| Disposals: | |||||
| 557 | - tangible assets | 6 | 8 | 563 | 9 |
| - consolidated subsidiaries and businesses net of cash and cash equivalent disposed of | 11 | (415) | |||
| - investments | 61 | 127 | 61 | 468 | |
| - securities | 25 | 25 | 7 | ||
| 215 | - financing receivables | 116 | 579 | 331 | 6,916 |
| (300) | - change in receivables in relation to disposals | (6) | 19 | (306) | 51 |
| 472 | Cash flow from disposals | 202 | 744 | 674 | 7,036 |
| (2,285) | Net cash used in investing activities | (1,929) | (3,098) | (4,214) | (813) |
| -28- |
GROUP CASH FLOW STATEMENT (continued)
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | IH 17 | IH 16 |
| 753 | Increase in long-term debt | 2 | 1,892 | 755 | 2,103 |
| (67) | Repayments of long-term debt | (202) | (120) | (269) | (1,969) |
| (536) | Increase (decrease) in short-term debt | 372 | 108 | (164) | (1,956) |
| 150 | 172 | 1,880 | 322 | (1,822) | |
| Dividends paid to Eni's shareholders | (1,440) | (1,440) | (1,440) | (1,440) | |
| Dividends paid to non-controlling interests | (3) | (4) | (3) | (4) | |
| 150 | Net cash used in financing activities | (1,271) | 436 | (1,121) | (3,266) |
| 5 | Effect of change in consolidation (inclusion/exclusion of significant/insignificant subsidiaries) | 2 | (1) | 7 | (1) |
| Effect of cash and cash equivalents relating to discontinued operations | 889 | ||||
| (11) | Effect of exchange rate changes on cash and cash equivalents and other changes | (34) | 3 | (45) | (19) |
| (209) | Net cash flow for the period | (526) | (930) | (735) | (110) |
| 5,674 | Cash and cash equivalents - beginning of the period (excluding discontinued operations) | 5,465 | 6,029 | 5,674 | 5,209 |
| 5,465 | Cash and cash equivalents - end of the period (excluding discontinued operations) | 4,939 | 5,099 | 4,939 | 5,099 |
(*) Net cash used in investing activities included investments and divestments (on net basis) in held-for-trading financial assets and other investments/divestments in certain short-term financial assets. Due to their nature and the circumstance that they are very liquid, these financial assets are netted against finance debt in determing net borrowings. Cash flows of such investments were as follows:
| IQ 17 | IIQ 17 | IIQ 16 | IH 17 | IH 16 | |
| (160) | Net cash flow from financing activities | 56 | (788) | (104) | 5,199 |
SUPPLEMENTAL INFORMATION
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | IH 17 | IH 16 |
| Effect of disposals of consolidated subsidiaries and businesses | |||||
| Current assets | 7 | 6,500 | |||
| Non-current assets | 9 | 8,550 | |||
| Net borrowings | (2) | (5,392) | |||
| Current and non-current liabilities | (7) | (6,310) | |||
| Net effect of disposals | 7 | 3,348 | |||
| Reclassification of exchange rate differences included in other comprehensive income | |||||
| Current value of residual interests following the loss of control | (1,006) | ||||
| Gains (losses) on disposal | 5 | 5 | |||
| Non-controlling interest | (1,872) | ||||
| Selling price | 12 | 475 | |||
| less: | |||||
| Cash and cash equivalents disposed of | (1) | (890) | |||
| Cash flow on disposals | 11 | (415) | |||
| -29- |
Capital expenditure
| IQ 17 | (€ million) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. |
| 2,771 | Exploration & Production | 1,983 | 2,326 | (14.7) | 4,754 | 4,623 | 2.8 |
| - acquisition of proved and unproved properties | 2 | ||||||
| 65 | - g&g costs | 74 | 59 | 25.4 | 139 | 114 | 21.9 |
| 199 | - exploration | 85 | 80 | 6.3 | 284 | 170 | 67.1 |
| 2,495 | - development | 1,814 | 2,171 | (16.4) | 4,309 | 4,293 | 0.4 |
| 12 | - other expenditure | 10 | 16 | (37.5) | 22 | 44 | (50.0) |
| 19 | Gas & Power | 30 | 22 | 36.4 | 49 | 44 | 11.4 |
| 100 | Refining & Marketing and Chemicals | 151 | 127 | 18.9 | 251 | 212 | 18.4 |
| 68 | - Refining & Marketing | 111 | 91 | 22.0 | 179 | 140 | 27.9 |
| 32 | - Chemicals | 40 | 36 | 11.1 | 72 | 72 | |
| 7 | Corporate and other activities | 9 | 11 | (18.2) | 16 | 20 | (20.0) |
| (1) | Impact of unrealized intragroup profit elimination | (7) | (3) | (8) | 94 | ||
| 2,896 | Capital expenditure - continuing operations | 2,166 | 2,483 | (12.8) | 5,062 | 4,993 | 1.4 |
| 65 | Cash out in net cash flow from operating activities | 74 | 59 | 25.4 | 139 | 114 | 21.9 |
| 2,831 | Cash out in net cash flow from investment activities | 2,092 | 2,424 | (13.7) | 4,923 | 4,879 | 0.9 |
In the first half of 2017, capital expenditure amounted to €4,923 million (€4,879 million in the first half of 2016) and mainly related to:
- development activities (€4,309 million) deployed mainly in Egypt, Ghana, Angola, Congo, Iraq and Indonesia; exploration activities (€284 million) concerned mainly Cyprus, Norway, Libya, Egypt and Mexico;
- refining activity in Italy and outside Italy (€141 million) aimed at assets integrity, as well as initiatives in the field of health, security and environment; marketing activity, mainly regulation compliance and stay in business initiatives in the refined product retail network in Italy and in the Rest of Europe (€38 million);
- initiatives relating to gas marketing (€34 million) as well as initiatives to improve flexibility and upgrade
combined-cycle power plants (€14 million).
Cash-outs comprised in net cash from operating activities (€139 million) relate to geological and geophysical studies as part of the exploration activities, which are charged to expenses.
| -30- |
Exploration & Production
| PRODUCTION OF OIL AND NATURAL GAS BY REGION | ||||||
| IQ 17 | IIQ 17 | IIQ 16 | IH 17 | IH 16 | ||
| 1,795 | Production of oil and natural gas (a) (b) | (kboe/d) | 1,771 | 1,715 | 1,783 | 1,734 |
| 154 | Italy | 100 | 96 | 127 | 125 | |
| 202 | Rest of Europe | 218 | 188 | 210 | 189 | |
| 707 | North Africa | 679 | 651 | 692 | 634 | |
| 302 | Sub-Saharan Africa | 345 | 350 | 324 | 346 | |
| 142 | Kazakhstan | 136 | 90 | 139 | 104 | |
| 93 | Rest of Asia | 108 | 141 | 101 | 136 | |
| 172 | America | 164 | 174 | 168 | 176 | |
| 23 | Australia and Oceania | 21 | 25 | 22 | 24 | |
| 151.3 | Production sold (a) | (mmboe) | 149.7 | 147.5 | 301.0 | 299.0 |
| PRODUCTION OF LIQUIDS BY REGION | ||||||
| IQ 17 | IIQ 17 | IIQ 16 | IH 17 | IH 16 | ||
| 832 | Production of liquids (a) | (kbbl/d) | 827 | 852 | 830 | 871 |
| 65 | Italy | 27 | 19 | 46 | 40 | |
| 107 | Rest of Europe | 123 | 99 | 116 | 94 | |
| 225 | North Africa | 214 | 248 | 219 | 246 | |
| 215 | Sub-Saharan Africa | 239 | 259 | 227 | 260 | |
| 87 | Kazakhstan | 86 | 49 | 86 | 58 | |
| 51 | Rest of Asia | 62 | 92 | 57 | 86 | |
| 79 | America | 74 | 83 | 76 | 84 | |
| 3 | Australia and Oceania | 2 | 3 | 3 | 3 | |
| PRODUCTION OF NATURAL GAS BY REGION | ||||||
| IQ 17 | IIQ 17 | IIQ 16 | IH 17 | IH 16 | ||
| 5,254 | Production of natural gas (a) (b) | (mmcf/d) | 5,152 | 4,709 | 5,203 | 4,713 |
| 484 | Italy | 399 | 417 | 441 | 464 | |
| 513 | Rest of Europe | 515 | 486 | 514 | 517 | |
| 2,629 | North Africa | 2,536 | 2,200 | 2,583 | 2,115 | |
| 479 | Sub-Saharan Africa | 581 | 498 | 530 | 475 | |
| 302 | Kazakhstan | 277 | 220 | 289 | 250 | |
| 226 | Rest of Asia | 249 | 271 | 238 | 275 | |
| 509 | America | 495 | 496 | 502 | 499 | |
| 112 | Australia and Oceania | 100 | 121 | 106 | 118 | |
(a) Includes Eni’s share of production of equity-accounted entities.
(b) Includes volumes of gas consumed in operation (526 and 467 mmcf/d in the second quarter 2017 and 2016, respectively, 501 mmcf/d and 447 mmcf/d in the first half 2017 and 2016, respectively, and 476 mmcf/d in the first quarter 2017).
| -31- |
Gas & Power
Natural gas sales by market
| IQ 17 | (bcm) | IIQ 17 | IIQ 16 | % Ch. | IH 17 | IH 16 | % Ch. |
| 10.38 | ITALY | 9.50 | 8.63 | 10.1 | 19.88 | 19.42 | 2.4 |
| 2.96 | - Wholesalers | 2.12 | 1.73 | 22.5 | 5.08 | 3.99 | 27.3 |
| 1.77 | - Italian exchange for gas and spot markets | 3.98 | 3.50 | 13.7 | 5.75 | 6.40 | (10.2) |
| 1.14 | - Industries | 1.15 | 1.15 | 2.29 | 2.29 | ||
| 0.36 | - Medium-sized enterprises and services | 0.16 | 0.35 | (54.3) | 0.52 | 1.01 | (48.5) |
| 0.22 | - Power generation | 0.31 | 0.09 | .. | 0.53 | 0.30 | 76.7 |
| 2.34 | - Residential | 0.38 | 0.50 | (24.0) | 2.72 | 2.59 | 5.0 |
| 1.59 | - Own consumption | 1.40 | 1.31 | 6.9 | 2.99 | 2.84 | 5.3 |
| 12.90 | INTERNATIONAL SALES | 9.13 | 11.85 | (23.0) | 22.03 | 24.35 | (9.5) |
| 11.53 | Rest of Europe | 8.23 | 10.55 | (22.0) | 19.76 | 21.66 | (8.8) |
| 1.04 | - Importers in Italy | 0.89 | 0.99 | (10.1) | 1.93 | 2.12 | (9.0) |
| 10.49 | - European markets | 7.34 | 9.56 | (23.2) | 17.83 | 19.54 | (8.8) |
| 1.25 | Iberian Peninsula | 1.26 | 1.07 | 17.8 | 2.51 | 2.45 | 2.4 |
| 1.99 | Germany/Austria | 1.52 | 2.81 | (45.9) | 3.51 | 4.18 | (16.0) |
| 1.57 | Benelux | 1.18 | 2.10 | (43.8) | 2.75 | 4.04 | (31.9) |
| Hungary | 0.14 | .. | 0.87 | .. | |||
| 0.68 | UK | 0.57 | 0.35 | 62.9 | 1.25 | 0.72 | 73.6 |
| 2.18 | Turkey | 1.63 | 1.39 | 17.3 | 3.81 | 2.98 | 27.9 |
| 2.52 | France | 1.05 | 1.68 | (37.5) | 3.57 | 3.91 | (8.7) |
| 0.30 | Other | 0.13 | 0.02 | .. | 0.43 | 0.39 | 10.3 |
| 1.37 | Rest of World | 0.90 | 1.30 | (30.8) | 2.27 | 2.69 | (15.6) |
| 23.28 | WORLDWIDE GAS SALES | 18.63 | 20.48 | (9.0) | 41.91 | 43.77 | (4.2) |
| -32- |
Eni's Board of Directors establishes an Advisory Board of international energy experts
San Donato Milanese (Milan), 28 July 2017 – Eni's Board of Directors has established an Advisory Board, following the decision of April 13.
The Advisory Board will be chaired by Director Fabrizio Pagani and composed of leading international experts:
• Ian Bremmer - President and founder of the Eurasia Group think tank, which focuses on geopolitical issues;
• Christiana Figueres – UNFCCC Executive Secretary from 2010 to 2016, the main promoter of the Paris climate agreement and one of the top experts on environmental issues; Founder of the "Mission 2020" initiative;
• Philip Lambert - CEO of the English company Lambert Energy Advisory specializing in strategic analysis and M&A operations in the Energy sector;
• Davide Tabarelli - President and founder of Nomisma Energia, an Italian research firm on energy issues.
The Advisory Board will analyze the main geopolitical, technological and economic trends, including issues related to the decarbonisation process for the Board and Eni’s CEO.
Director Fabrizio Pagani, Chairman of the Advisory board, commented: “We are very pleased to have attracted high-level experts with different backgrounds and skills: we will immediately start to work. This is an important enhancement for Eni, as an Italian company and global leader."
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