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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 April 2010
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 o
(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 o No x
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): )
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Annual Report 2009 (including the opinion of the external Auditors)
Press Release dated April 12, 2010
Press Release dated April 12, 2010
Press Release dated April 23, 2010
Press Release dated April 23, 2010
Press Release dated April 26, 2010
Press Release dated April 29, 2010
Notice of Shareholders’ Meeting Resolutions
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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: Antonio Cristodoro | ||||
| Title: | Deputy Corporate Secretary | |||
Date: April 30, 2010
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Ordinary Shareholders’ Meeting of April 27 and 29, 2010
The notice convening the meeting was published
on the
Gazzetta Ufficiale of the Republic of Italy
No. 35, section II of March 23, 2010 page 1
This annual report includes the report of
Eni’s Board of Directors and
Eni’s consolidated financial statements for the year ended
December 31,
2009, which have been prepared under the International Financial
Reporting Standards (IFRS), as adopted by the European Union.
Disclaimer
This annual report contains certain forward-looking statements in particular under the section “Outlook” regarding capital expenditures, development and management of oil and gas resources, dividends, share repurchases, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sale 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 problems; 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.
Table of Contents
| Operating and financial review | ||||
4 |
Profile of the year | |||
9 |
Letter to Shareholders | |||
| Operating Review | ||||
13 |
Exploration & Production | |||
32 |
Gas & Power | |||
45 |
Refining & Marketing | |||
51 |
Petrochemicals | |||
53 |
Engineering & Construction | |||
| Financial Review and other information | ||||
56 |
Financial Review | |||
56 |
Profit and loss account | |||
77 |
Summarized Group Balance Sheet | |||
82 |
Cash Flow Statements | |||
89 |
Risk factors and uncertainties | |||
98 |
Outlook | |||
99 |
Other information | |||
100 |
Corporate Governance and Shareholding Structure Report | |||
144 |
Commitment to sustainable development | |||
165 |
Glossary | |||
| Consolidated Financial Statements | ||||
169 |
Consolidated Financial Statements | |||
180 |
Basis of presentation and principles of consolidation | |||
181 |
Summary of significant accounting policies | |||
195 |
Notes to the Consolidated Financial Statements | |||
277 |
Supplemental oil and gas information (unaudited) | |||
288 |
Management’s certification | |||
289 |
Report of Independent Auditors |
“Eni” means the parent company Eni SpA and its consolidated subsidiaries
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ENI ANNUAL REPORT / PROFILE OF THE YEAR
| Results Eni reported net profit of euro 4.37 billion for the full year 2009. Adjusted basis net profit was euro 5.21 billion, down 48.8% from a year ago. The reduction reflected lower results mainly reported by the Exploration & Production division due to an unfavorable trading environment for oil prices in the first nine months of the year and by the Refining & Marketing division driven by sharply lower refining margins. The Gas & Power division and the Engineering & Construction business segment showed a resilient performance. Cash inflows for the year mainly comprised cash flow from operations of euro 11.14 billion, proceeds of euro 3.6 billion from divesting certain interests and non strategic assets, and euro 1.54 billion from a share capital increase subscribed by minorities following the restructuring of Eni’s regulated gas businesses in Italy. These inflows enabled the Company to partially fund capital expenditures of euro 13.69 billion to support organic growth and exploration activities, the completion of the Distrigas acquisition of euro 2.04 billion and the payment of dividends to Eni shareholders amounting to euro 4.17 billion. Ratio of net borrowings to total equity was 0.46 (0.38 at December 31, 2008). Dividends Based on 2009 results and taking into account the Company’s sound fundamentals, a dividend of euro 1.00 per share (euro 1.30 in 2008) will be distributed to shareholders. Included in this annual payment is euro 0.50 per share already distributed as interim |
dividend in September 2009.
Management reaffirms its commitment to create value for
Eni’s investors. Oil and natural gas production In 2009 oil and natural gas production amounted to 1,769 kboe/d, down 1.6% from 2008. When excluding OPEC cuts amounting to approximately 28 kbbl/d, it was substantially unchanged. Continuing production ramp-up and the start-up of new fields helped make for lower production uplifts associated with weak European gas demand, the impact of unplanned facility downtime in Nigeria and mature field declines. The company targets a production level in excess of 2 mmboe/d by 2013, with an average annual growth rate higher than 2.5%, based on a 65 $/bbl price scenario. Proved oil and natural gas reserves Eni’s estimated net proved reserves at December 31, 2009 amounted to 6.57 bboe, at a reference Brent price of 59.9 $/bbl. The all-sources reserve replacement ratio was 96%, corresponding to an average reserve life index of 10.2 years. Excluding price effects on PSAs’ entitlements, the replacement ratio was 109%. Natural gas sales Worldwide natural gas sales were 103.72 bcm, representing a small decline from 2008 (down 0.5%). Sharply lower volumes were recorded on the Italian market (down 24.3%) as a result of the economic downturn and rising competitive pressures. This negative trend was partly offset by full contribution of the Distrigas |
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| acquisition (up 12.02 bcm)
and organic growth achieved in a number of European
markets. In a challenging outlook for the gas market, Eni expects to achieve gas sales of 118 bcm by 2013, implying an annual growth rate higher than 3%. To achieve this target, Eni will leverage on extracting synergies from integrating Distrigas commercial operations and its excellent strategic positioning in the European gas market. Distrigas In 2009 Eni completed the acquisition of Distrigas by means of a tender offer on Distrigas minorities. After the completion of the acquisition, Distrigas shares were delisted from Euronext Brussels. This transaction represented a milestone in strengthening Eni’s leadership in the European gas market as a result of relevant integration synergies. Reorganization of the regulated businesses in the Italian gas sector In 2009 Eni reorganized its regulated businesses in Italy through the sale of its natural gas distribution and storage activities performed by Italgas and Stoccaggi Gas Italia to Eni’s subsidiary Snam Rete Gas. This transaction allowed Eni to unlock value by achieving significant structural synergies in the regulated business segment and to strengthen its consolidated balance sheet. Strategic partnership between Eni and Gazprom In 2009 the strategic partnership between Eni and Gazprom, the world-leading gas producer, celebrated its 40th anniversary. Both partners intend to continue pursuing the joint development of projects in upstream and gas markets. In 2009 the following transactions were completed: (i) Eni divested its 20% stake in OAO Gazprom Neft to Gazprom upon exercise of a call option at the contractual price of euro 3.07 billion; (ii) Eni and its Italian partner Enel in the 60-40% owned joint-venture OOO SeverEnergia divested a 51% stake in the venture to Gazprom following exercise of a call option by the Russian company. Eni’s share of this transaction is worth $940 million (25% of which had been collected at the balance sheet date and the remaining 75% collected on March 31, 2010); (iii) Eni and Gazprom agreed to widen the original scope of work of the project for building the South Stream pipeline by increasing its transport capacity from 31 to 63 bcm/y. Portfolio developments In January 2010, Eni leading with a 32.8% stake a consortium of international companies signed a contract with Iraq’s state-owned South Oil Company (SOC) and |
Missan Oil Company to
redevelop the Zubair giant oil field. The development
plan of the field targets a production of 1.2 bbbl/d to
be achieved in the next six years. In January 2010, Eni and the Venezuelan national company PDVSA signed a preliminary agreement for the joint development of the Junin 5 giant heavy oil field, located in the Orinoco Faja, which has 35 bbbl of certified oil in place. In June 2009, Eni purchased from Quicksilver Resources Inc a 27.5% interest in the Alliance area, in Northern Texas, with gas shale reserves. The price of the transaction was $280 million. In 2009 production from the acquired assets amounted to 4,000 boe/d, and is expected to ramp up to approximately 10,000 boe/d by 2011. In November 2009, Eni has been awarded a 37.8% stake in the Sanga Sanga license for the production of coal-bed methane in Indonesia. Preliminary studies in the block show a resource potential of about 4 trillion cubic feet (111 bcm) of gas to be better defined through an appraisal program that will commence in 2010. In May 2009, Eni and the Egypt’s Ministry of Petroleum signed a cooperation agreement to extend by 10 years the concession on the Belayim giant field. Eni plans to invest $1.5 billion over the next 5 years in developing expenditures, operating costs and interventions aimed at optimizing production. In January 2010, Eni signed an agreement to acquire oil downstream activities in Austria. This includes a retail network with 135 service stations, wholesale activities and commercial assets in the aviation business as well as logistics and storage activities. In October 2009, Eni and its Turkish and Russian partners in the construction of the Samsun-Ceyhan pipeline signed a Memorandum of Understanding whereby parties will define certain economic and contractual conditions in order to enable Russian companies to participate in the project. This will ensure the necessary volumes of crude in order to support the project profitability. The project is designed to build a by-pass for oil incoming from the East, avoiding transport by sea through the Dardanelles and Bosporus, thus enhancing safety and environmental protection. As part of the optimization process of its upstream portfolio, management approved a plan for rationalizing |
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| Eni mineral activities in
Italy that entails the sale of three Newcos, entirely
controlled by Eni. The assets are divided into three
groups, depending on their geographical location, which
will each be transferred into a single newco: the first
lies in northern Italy (Po Valley and Emilia Romagna),
the second in central Italy (Marche, Abruzzo, Molise) and
the third in southern Italy (Crotone area). Negotiations
are well underway for the sale of two companies, Società
Padana Energia SpA and Società Adriatica Idrocarburi
SpA, holding the assets located in northern and central
Italy. Partnership agreements In 2009, leveraging its established co-operation model with oil host countries, Eni finalized a number of strategic partnerships pursuing new ventures. The framework of these ventures provides integration between the traditional oil business and sustainable development initiatives designed to support the host countries population in |
achieving high social and
economic standards. These agreements concerned mainly
Angola, Egypt, Kazakhstan and Turkmenistan and represent
opportunities to access new reserves. Exploration activities In 2009 exploration activities (euro 1,228 million) achieved a number of successes, in particular with the giant Perla discovery (Eni 50%) in Venezuela and with the high potential Cabaça Norte discovery (Eni operator with a 35% interest) in Angola. Further exploration success was achieved in Ghana, the Gulf of Mexico, Indonesia, the North Sea and Pakistan. In 2009, 69 net exploration wells were completed, in addition to 10 wells in progress at year end with a success rate of 43.6% net to Eni. The exploration portfolio was strengthened through acquisitions in Angola, China, Ghana, the Gulf of Mexico and Norway in line with Eni’s strategy of consolidating its presence in selected areas. |
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| Financial highlights | 2007 |
2008 |
2009 |
|||
| (euro million) |
| Net sales from operations | 87,204 | 108,082 | 83,227 | |||||
| Operating profit | 18,739 | 18,517 | 12,055 | |||||
| Adjusted operating profit (a) | 19,004 | 21,608 | 13,122 | |||||
| Net profit (b) | 10,011 | 8,825 | 4,367 | |||||
| Adjusted net profit (a) (b) | 9,569 | 10,164 | 5,207 | |||||
| Net cash provided by operating activities | 15,517 | 21,801 | 11,136 | |||||
| Capital expenditures | 10,593 | 14,562 | 13,695 | |||||
| Acquisition of investments and businesses (c) | 9,909 | 4,305 | 2,323 | |||||
| Dividends pertaining to the period (d) | 4,750 | 4,714 | 3,622 | |||||
| Cash dividends | 4,583 | 4,910 | 4,166 | |||||
| R&D expenditures | 208 | 217 | 207 | |||||
| Total assets at period end | 101,460 | 116,673 | 117,529 | |||||
| Debts and bonds at period end | 19,830 | 20,837 | 24,800 | |||||
| Shareholders' equity including minority interests at period end | 42,867 | 48,510 | 50,051 | |||||
| Net borrowings at period end | 16,327 | 18,376 | 23,055 | |||||
| Net capital employed at period end | 59,194 | 66,886 | 73,106 | |||||
| Shares price at period end | (euro) | 25.05 | 16.74 | 17.80 | ||||
| Number of shares outstanding at period end | (million) | 3,656.8 | 3,622.4 | 3,622.4 | ||||
| Market capitalization (e) | (euro billion) | 91.6 | 60.6 | 64.5 |
| (a) | For a detailed explanation of adjusted profits (net and operating), that do not include inventory gain/loss and special items, see paragraph "Reconciliation of reported operating profit and reported net profit to results on an adjusted basis". | |
| (b) | Profit attributable to Eni shareholders. | |
| (c) | Net of acquired cash. | |
| (d) | 2009 amount (relating to dividend’s payment) is estimated. | |
| (e) | Number of outstanding shares by reference price at period end. | |
| Summary financial data | 2007 |
2008 |
2009 |
|||
| Net profit: | ||||||||
| - per ordinary share (a) | (euro) | 2.73 | 2.43 | 1.21 | ||||
| - per ADR (a) (b) | (USD) | 7.49 | 7.15 | 3.36 | ||||
| Adjusted net profit: | ||||||||
| - per ordinary share (a) | (euro) | 2.61 | 2.79 | 1.44 | ||||
| - per ADR (a) (b) | (USD) | 7.16 | 8.21 | 4.01 | ||||
| Return On Average Capital Employed (ROACE): | ||||||||
| - reported | (%) | 20.5 | 15.7 | 8.0 | ||||
| - adjusted | (%) | 19.4 | 17.6 | 9.2 | ||||
| Leverage | 0.38 | 0.38 | 0.46 | |||||
| Dividends pertaining to the year | (euro per share) | 1.30 | 1.30 | 1.00 | ||||
| Pay-out (c) | (%) | 47 | 53 | 83 | ||||
| Total Shareholder Return (TSR) | (%) | 3.2 | (29.1 | ) | 13.7 | |||
| Dividend yield (d) | (%) | 5.3 | 7.6 | 5.8 |
| (a) | Fully diluted. Ratio of net profit and average number of shares outstanding in the period. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by ECB for the period presented. | |
| (b) | One American Depositary Receipt (ADR) is equal to two Eni ordinary shares. | |
| (c) | 2009 pay-out ratio is estimated with reference to the amounts due on the payment of the dividend balance of 2009. | |
| (d) | Ratio of dividend for the period and average price of Eni shares in December. | |
| Key market indicators | 2007 |
2008 |
2009 |
|||
| Average price of Brent dated crude oil (a) | 72.52 | 96.99 | 61.51 | |||||
| Average EUR/USD exchange rate (b) | 1.371 | 1.471 | 1.393 | |||||
| Average price in euro of Brent dated crude oil | 52.90 | 65.93 | 44.16 | |||||
| Average European refining margin (c) | 4.52 | 6.49 | 3.13 | |||||
| Average European refining margin Brent/Ural (c) | 6.45 | 8.85 | 3.56 | |||||
| Average Europe refining margin in euro | 3.30 | 4.41 | 2.25 | |||||
| Euribor - three-month euro rate | (%) | 4.3 | 4.6 | 1.2 | ||||
| Libor - three-month dollar rate | (%) | 5.3 | 2.9 | 0.7 |
| (a) | In USD per barrel. Source: Platt’s Oilgram. | |
| (b) | Source: ECB. | |
| (c) | In USD per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platt’s Oilgram data. |
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| Summary operating data | 2007 |
2008 |
2009 |
|||
| Exploration & Production | ||||||||
| Estimated net proved reserves of hydrocarbons (at period end) | (mmboe) | 6,370 | 6,600 | 6,571 | ||||
| - Liquids | (mmbbl) | 3,219 | 3,335 | 3,463 | ||||
| - Natural gas | (bcf) | 18,090 | 18,748 | 17,850 | ||||
| Average reserve life index | (year) | 10.0 | 10.0 | 10.2 | ||||
| Production of hydrocarbons | (kboe/d) | 1,736 | 1,797 | 1,769 | ||||
| - Liquids | (kbbl/d) | 1,020 | 1,026 | 1,007 | ||||
| - Natural gas | (mmcf/d) | 4,114 | 4,424 | 4,374 | ||||
| Gas & Power | ||||||||
| Worldwide gas sales (a) | (bcm) | 98.96 | 104.23 | 103.72 | ||||
| LNG sales (b) | (bcm) | 11.7 | 12.0 | 12.9 | ||||
| Customers in Italy | (million) | 6.61 | 6.63 | 6.88 | ||||
| Gas volumes transported in Italy | (bcm) | 83.28 | 85.64 | 76.90 | ||||
| Electricity sold | (TWh) | 33.19 | 29.93 | 33.96 | ||||
| Refining & Marketing | ||||||||
| Refining throughputs on own account | (mmtonnes) | 37.15 | 35.84 | 34.55 | ||||
| Retail sales of petroleum products in Europe | (mmtonnes) | 11.80 | 12.03 | 12.02 | ||||
| Service stations in Europe at period end (c) | (units) | 6,440 | 5,956 | 5,986 | ||||
| Average throughput of service stations in Europe (c) | (kliters) | 2,486 | 2,502 | 2,477 | ||||
| Petrochemicals | ||||||||
| Production | (ktonnes) | 8,795 | 7,372 | 6,521 | ||||
| Sales of petrochemical products | (ktonnes) | 5,513 | 4,684 | 4,265 | ||||
| Engineering & Construction | ||||||||
| Orders acquired | (euro million) | 11,845 | 13,860 | 9,917 | ||||
| Order backlog at period end | (euro million) | 15,390 | 19,105 | 18,730 | ||||
| Employees at period end | (units) | 75,862 | 78,880 | 78,417 |
| (a) | Include E&P sales volumes of 6.17 bcm (5.39 and 6.00 bcm in 2007 and 2008, respectively) marketed by the Exploration & Production division in Europe (3.59, 3.36 and 2.57 bcm for 2007, 2008 and 2009, respectively) and in the Gulf of Mexico (1.80, 2.64 and 3.60 bcm for 2007, 2008 and 2009, respectively). | |
| (b) | Refer to LNG sales of G&P division (included in worldwide gas sales) and E&P division. | |
| (c) | Full year 2007 data include downstream activities in the Iberian Peninsula divested to Galp in October 2008. |
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ENI ANNUAL REPORT / TO OUR SHAREHOLDERS
| To our
shareholders In 2009, Eni delivered better results than expected, amongst the best in our industry, against the backdrop of the worst economic recessions over the past 60 years. Our integrated business portfolio has again proved its resilience, and we managed to mitigate the impact of the downturn on the company. We delivered on our targets, positioning the Company for future growth. In E&P, we are strategically focusing on giant projects in the world’s fastest-growing oil-producing areas, namely Iraq and Venezuela. We entered new, high-potential areas like Ghana, and signed a number of framework agreements in our core regions of Russia, the Caspian Sea (Kazakhstan and Turkmenistan) and Africa. In G&P, we completed the acquisition of Distrigas and the reorganization of our regulated businesses in Italy. We strengthened our long-standing strategic partnership with Gazprom, celebrating its 40th year of activity in 2009. We plan to continue developing joint projects in the sectors of upstream and natural gas markets. On January 22, 2010, we signed a Technical Service Contract for the development of the Zubair field in Iraq, under a 20-year term with an option for a further 5 years, targeting a production plateau of 1.2 mmboe/d by 2016. On January 26, 2010 we signed an agreement with the Venezuelan state-owned company PDVSA for the joint development of the giant field Junin 5, with 35 bbbls of certified heavy oil in place. In 2009, Eni has been acknowledged as one of the best oil and gas companies in the Dow Jones Sustainability Index. |
We have continued to focus
on improving efficiency in all our businesses. The cost
reduction program we launched in 2006 has delivered euro
0.4 billion of savings in 2009 and euro 1.3 billion to
date. Despite an ongoing recovery in oil prices, the outlook for 2010 points to significant challenges. However, our strategy remains unchanged. We continue to target superior production growth over the long-term and to strengthen our leadership position in the European gas market, while maintaining a strong financial position and creating value for our shareholders. Financial performance Eni’s 2009 net profit was euro 4.37 billion. |
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| Our net debt to equity ratio
at year end was 0.46. The results achieved in 2009 enable us to propose at the Annual General Shareholders Meeting a dividend of euro 1.00 per share, of which euro 0.50 was paid as an interim dividend in September 2009. Sustaining growth and shareholder returns Our strategic direction has remained unchanged. Our
strong pipeline of capital projects and investment
opportunities will enable us to deliver on our growth
targets. |
exploration activities in
Venezuela, with the giant Perla discovery, Angola, Ghana
and the Gulf of Mexico. This was achieved amid a 30%
reduction in exploration expenses year on year. In 2009 a total of 27 new fields have been put into production, which will add 190 kboe/d to our production at plateau. In addition to the above-mentioned agreements in Iraq and Venezuela, our upstream portfolio has been further strengthened by continuing exploration success in Angola, acquisition of new licenses in Ghana, the Barents Sea and Pakistan. We entered the unconventional gas sector in the USA with the purchase of a stake in the Alliance Area containing shale gas, from Quicksilver Resources Inc, and in Indonesia by purchasing a 37.8% interest in the Sanga Sanga license for the production of coal bed methane. We target an average annual production increase higher than 2.5% in the 2010-2013 plan. By 2013, our hydrocarbon production will hit 2.00 million bbl/d, based on our $65 per barrel Brent price scenario. Most of our projects are in the final investment decision stage or have already been sanctioned. Three quarters of our 2013 production will come from fields already operating in 2009, and the rest from new start-ups, particularly the Zubair project in Iraq, Kashagan in the Caspian Region and Algeria with the fields acquired from First Calgary. Overall, new start-ups will add approximately 560 kbbl/d by 2013. In GAS & POWER, we reported adjusted net profit of euro 2.92 billion, an increase of 10% from 2008, despite very weak market conditions, with gas consumption down |
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| by 7.4% in Europe and 10% in
Italy. This result was largely due to stable performances
in the regulated businesses, excellent results achieved
by Distrigas and integration synergies. Sales volumes
were stable at 104 bcm, as a result of expansion in
European markets that made for declining sales in Italy
(down 24%). Leveraging on our strategic partnership with Gazprom, we renegotiated terms and conditions of our main long-term supply contracts, improving our operating flexibility. Our strategy will focus on strengthening our leadership in the European gas market, as well as margins and market share in Italy, relying upon our commercial strength, long-term relationships with producing countries and access to international transport infrastructures. This access will not be impaired by the possible divestment of our interests in three gas import pipelines from Russia and Northern Europe, which we have proposed to the relevant European authorities in order to settle an antitrust procedure. In 2010 we expect a weak recovery in gas demand, particularly in Italy. Commercial integration with Distrigas and the advantages granted to us by renegotiating supply contracts with international suppliers will enable us to make for any declines in domestic markets, targeting sales volumes at the same level as in 2009. By 2013, we expect to grow our gas sales by an average growth rate higher than 3% a year, targeting a volume of 118 bcm. Our regulated businesses in Italy are expected to deliver stable returns, independent of trends in the gas market. They will be supported by guaranteed returns on planned capital expenditures and the cost synergies |
deriving from integrating
gas transport, distribution and storage activities. In REFINING & MARKETING we reported adjusted net loss of euro 197 million due to an extremely weak refining scenario (down by 52% the TRC Brent margin). Refining throughputs were reduced by one million tonnes. These impacts were partly offset by the good performance in marketing as a result of effective marketing initiatives. In 2010, we expect a challenging refining environment and we will react accordingly by selectively strengthening our refineries, improving conversion capacity and increasing energy efficiency. In marketing, we aim to reinforce our leadership in the Italian market through continuing improvements in quality standards, loyalty programs and enhanced non-oil services, along with the re-branding of our service stations to the Eni brand. Abroad, we will focus on growth in three countries: Germany, Switzerland and Austria. On January 21, 2010 we purchased 135 service stations, wholesale activities and logistics and storage assets from Exxon in Austria. In ENGINEERING & CONSTRUCTION, we reported an improved adjusted net profit of euro 892 million (14% higher than in 2008) thanks to a better operating performance driven by a strong order backlog and increased efficiency. Saipem is completing the expansion of its world-class fleet of construction and drilling vessels, consolidating its leading position in the project management, engineering and construction activities within the oilfield services industry. In PETROCHEMICALS we reported adjusted losses at both operating and net profit levels (down euro 426 million |
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| and euro 340 million,
respectively) due to an unfavorable market environment
that was dragged down by weak demand, excess capacity and
strong competitive pressures on commodity products. Our target is to improve efficiency, shifting our product mix to higher value added products and selectively investing in areas where we can count on competitive advantages (styrenics and elastomers), also leveraging on our proprietary technologies. Sustainable development We intend to maintain our position: an oil and gas
company with one of the highest sustainability ratings in
the world. |
new phase where our
strategic priorities will be developing technologies for
finding and producing hydrocarbons, the sustainable use
of renewable energy and environmental restoration and
clean-up of divested sites. We will pursue these
objectives by forging strategic alliances with poles of
international excellence and constant commitment of
dedicated Eni resources. Key to the Company’s success is our strong attention to our people. In managing human resources, we are committed to implementing programs to improve leadership skills, increase knowledge and promote international development. We continue to strengthen important relationships with our local partners as part of a cooperation model that aims at developing host countries, through the valorization of local resources, exploitation of specific skills, as well as the realization of projects and the definition of cooperation agreements. In conclusion, in spite of an unfavorable energy and market environment, Eni delivered a good year. 2010 will pose further challenges but Eni’s strategic positioning will enable it to continue to deliver industry-leading results and create sustainable value for its shareholders in both the short and the long-term. |
March 11, 2010
In representation of the Board of Directors
|
|
| Chairman | Chief Executive Officer and General Manager |
| BOARD OF DIRECTORS (1) | BOARD OF STATUTORY AUDITORS (7) | |
| Chairman | Chairman | |
| Roberto Poli (2) | Ugo Marinelli | |
| Chief Executive Officer and General Manager | Statutory Auditors | |
| Paolo Scaroni (3) | Roberto Ferranti, Luigi Mandolesi, | |
| Directors | Tiziano Onesti, Giorgio Silva | |
| Alberto Clô, Paolo Andrea Colombo, | Alternate Auditors | |
| Paolo Marchioni, Marco Reboa, Mario Resca, | Francesco Bilotti, Pietro Alberico Mazzola | |
| Pierluigi Scibetta, Francesco Taranto | ||
| MAGISTRATE OF THE COURT OF AUDITORS | ||
| CHIEF OPERATING OFFICERS | DELEGATED TO THE FINANCIAL CONTROL OF ENI SpA | |
| Exploration & Production Division | Raffaele Squitieri (8) | |
| Claudio Descalzi (4) | Alternate | |
| Gas & Power Division | Amedeo Federici (9) | |
| Domenico Dispenza (5) | ||
| Refining & Marketing Division | External Auditors (10) | |
| Angelo Caridi (6) | PricewaterhouseCoopers SpA | |
| (1)
Appointed by the Shareholders’ Meeting held on June
10, 2008 for a three year period. The Board of Directors
expires at the date of approval of the financial
statements for the 2010 financial year. (2) Appointed by the Shareholders’ Meeting held on June 10, 2008. (3) Powers conferred by the Board of Directors on June 11, 2008. (4) Appointed by the Board of Directors on July 30, 2008. (5) Appointed by the Board of Directors on December 14, 2005, effective from January 1, 2006. |
(6)
Appointed by the Board of Directors on August 3, 2007. (7) Appointed by the Shareholders’ Meeting held on June 10, 2008 for a three year period, expiring at the date of the approval of the financial statements for the 2010 financial year. (8) Duties conferred by the Governing Council of the Court of Auditors on October 28, 2009. (9) Duties conferred by the Governing Council of the Court of Auditors on December 3-4, 2008. (10) Appointment extended by the Shareholders’ Meeting held on May 24, 2007 for the 2007-2009 three year term. |
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| Key performance indicators (a) | 2007 |
|
2008 |
|
2009 |
|
| Net sales from operations (b) | (euro million) | 26,920 | 33,042 | 23,801 | ||||
| Operating profit | 13,433 | 16,239 | 9,120 | |||||
| Adjusted operating profit | 13,770 | 17,222 | 9,484 | |||||
| Adjusted net profit | 6,328 | 7,900 | 3,878 | |||||
| Capital expenditures | 6,480 | 9,281 | 9,486 | |||||
| of which: exploratory expenditures (c) | 1,659 | 1,918 | 1,228 | |||||
| Adjusted capital employed, net at year end (d) | 23,826 | 30,362 | 32,455 | |||||
| Adjusted ROACE | (%) | 30.4 | 29.2 | 12.3 | ||||
| Average realizations | ||||||||
| - Liquids | ($/bbl) | 67.70 | 84.05 | 56.95 | ||||
| - Natural gas | ($/mmcf) | 5.42 | 8.01 | 5.62 | ||||
| - Total hydrocarbons | ($/boe) | 53.17 | 68.13 | 46.90 | ||||
| Production (e) | ||||||||
| - Liquids | (kbbl/d) | 1,020 | 1,026 | 1,007 | ||||
| - Natural gas | (mmcf/d) | 4,114 | 4,424 | 4,374 | ||||
| - Total hydrocarbons | (kboe/d) | 1,736 | 1,797 | 1,769 | ||||
| Estimated net proved reserves (e) (f) (g) | ||||||||
| - Liquids | (mmbbl) | 3,219 | 3,335 | 3,463 | ||||
| - Natural gas | (bcf) | 18,090 | 18,748 | 17,850 | ||||
| - Total hydrocarbons | (mmboe) | 6,370 | 6,600 | 6,571 | ||||
| Reserve life index | (years) | 10.0 | 10.0 | 10.2 | ||||
| All sources reserve replacement ration (e) (g) | (%) | 90 | 135 | 96 | ||||
| Employees at year end | (units) | 9,023 | 10,891 | 10,870 |
| (a) | From January 1, 2009, results of the gas storage business are reported within the Gas & Power segment reporting unit following restructuring of Eni's regulated gas businesses in Italy. Prior period results have been restated accordingly. | |
| (b) | Before elimination of intragroup sales. | |
| (c) | Includes exploration bonuses. | |
| (d) | For a detailed explanation of adjusted capital employed and adjusted ROACE, see paragraph "Return On Average Capital Employed (ROACE)". | |
| (e) | Includes Eni's share of equity-accounted entities. | |
| (f) | The new US SEC rule has changed the pricing mechanism for oil&gas reserves estimation in 2009. It specifies that, in calculating economic producibility, a company must use a 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. Prior period results use the one day price measured on the last day of the company’s fiscal year. | |
| (g) | Includes a 29.4% stake of the reserves of the three equity-accounted Russian companies participated by joint-venture OOO SeverEnergia, owned by Eni (60%) and its Italian partner Enel (40%) which on September 23, 2009 completed the divestment of the 51% stake in the venture to Gazprom in line with the call option arrangement. |
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Portfolio
› Signed a technical service contract, under a 20-year
term with an option for further 5 years, with Iraqi National Oil
Companies to develop the Zubair oil field (Eni’s interest
32.8%). The partners of the project expect to gradually increase
production to a target plateau level of 1.2 mmbbl/d over the next
six years.
› Signed an agreement with the Venezuelan National Oil
Company PDVSA for the joint development of the Junin 5 giant
field with 35 billion barrels of certified heavy oil in place,
located in the Orinoco oil belt. Production start-up is planned
for 2013 at an initial level of 75 kbbl/d and a long term
production plateau of 240 kbbl/d is targeted.
› Acquired from Quicksilver Resources Inc a 27.5% interest
in the Alliance area, in Northern Texas with gas shale reserves.
Quicksilver has retained the 72.5% of the property and
operatorship. The cash consideration for the transaction amounted
to $280 million. Production from the acquired assets amounted to
4 kboe/d net to Eni for the full year 2009, ramping up to
approximately 10 kboe/d by 2011.
› Awarded a 37.8% stake in the Indonesian Sanga Sanga
license for the production of coal bed methane. Recent
preliminary studies in the block showed a resource potential of
about 3,920 bcf of gas to be verified through an appraisal
program that will commence in 2010.
› As part of the optimization process of its upstream
portfolio, management approved a plan for rationalizing Eni
mineral activities in Italy that entails the sale of three
Newcos, entirely controlled by Eni. The assets are divided into
three groups, depending on their geographical location, which
will each be transferred into a single newco: the first lies in
northern Italy (Pianura Padana and Emilia Romagna), the second in
central Italy (Marche, Abruzzo, Molise) and the third in southern
Italy (Crotone area). Negotiations are well underway for the sale
of two companies, Società Padana Energia SpA and Società
Adriatica Idrocarburi SpA, holding the assets located in northern
and central Italy.
› Awarded new exploration leases in Angola, China, Ghana,
the Gulf of Mexico, India, Norway and Yemen.
Divestment of Russian assets
› On April 7, 2009 Gazprom exercised its call option to
purchase a 20% interest in OAO Gazprom Neft held by Eni, based on
the existing agreements between the two partners. The exercise
price of the call option collected by Eni on April 24, 2009
amounting to euro 3,070 million is equal to the price ($3.7
billion) outlined in the bid procedure for the assets of bankrupt
Russian company Yukos as adjusted by subtracting dividends
distributed and adding the contractual yearly remuneration of
9.4% on the capital employed and financing collateral expenses.
At the same time, Eni and Gazprom signed new cooperation
agreements targeting certain development projects to be conducted
jointly in Russia and other countries of interest.
› On September 23, 2009, Eni and its Italian partner Enel in
the 60-40% owned joint-venture OOO SeverEnergia completed the
divestment of the 51% stake in the venture to Gazprom based on
the call option exercised by the Russian company. The total cash
consideration amounted to $940 million net to Eni. The three
partners are committed to producing first gas from the
Samburskoye field by June 2011, targeting a production plateau of
150 kboe/d within two years from the start of production.
Partnership Agreements
In 2009, leveraging its established co-operation model with oil
host countries, Eni finalized a number of strategic partnerships
pursuing new ventures. The framework of these ventures provides
for integration between the traditional oil business and
sustainable development initiatives designed to support the host
countries population in achieving high social and economic
standards:
› In February 2009 three agreements were finalized as part
of the Memorandum of Understanding signed in August 2008 with
Angola’s national oil company Sonangol, providing for: (i) a
feasibility study to assess the economics of the utilization of
associated gas in feeding a grass-root onshore power plant; (ii)
a joint study to evaluate and collect data on certain Angolan
onshore basins in view of identifying upstream opportunities;
(iii) the design of a number of educational and training projects
targeting Angolan professionals in the development of energy
resources.
› In March 2009 signed a Protocol for Cooperation with the
government of Pakistan to develop a number of important upstream,
midstream and downstream projects in the Country. Eni will
provide its expertise as well as new technologies developed in
the field of exploring for and developing hydrocarbon fields.
› In May 2009 signed a cooperation agreement with
Egypt’s Ministry for Oil to increase and widen cooperation
in development activities. The agreement provides for: (i) an
extension of the concession of the giant Belayim field
(Eni’s
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ENI ANNUAL REPORT / OPERATING REVIEW
interest 100%) in the Gulf of Suez till 2030, with Eni’s
commitment to spending $1.5 billion over the next five years to
execute development expenditures, upgrading actions and operating
costs; (ii) a joint study to evaluate a number of industrial
initiatives to monetize the natural gas reserves at high depth;
(iii) training and knowledge management.
› In August 2009 signed a strategic partnership with the Oil
Ministry of the Democratic Republic of Congo to start cooperation
in developing the host country’s conventional and
unconventional oil reserves, upgrading industrial facilities and
training projects.
› In November 2009 signed a co-operation agreement as part
of the Memorandum of Understanding signed in July 2009 with the
Kazakh National Oil Company KazMunaiGas. The agreement provides
for: (i) joint exploration activities in the Isatay and Shangala
areas located in the Caspian Sea; (ii) studies of initiatives to
optimize gas usage in Kazakhstan; (iii) the evaluation of a
number of industrial initiatives including the upgrading of the
Pavlodar refinery, in which KMG holds a majority interest.
› In December 2009 signed a memorandum of understanding with
Turkmenistan aimed at promoting and reinforcing the partnership
in the development of the oil industry of the Country. Eni will
co-operate with state bodies and the Agency for Hydrocarbons to
carry out studies to ascertain the oil and gas potential of the
country. Eni will contribute its expertise in technology and the
sustainability field.
Financial results
› Adjusted net profit for the full year was euro
3,878 million, a decrease of euro 4,022 million from 2008 (down
50.9%) driven by lower oil realizations as a result of the
negative price environment recorded in the first nine months of
the year, lower gas realizations and lower sales volumes. These
negatives were partly offset by the depreciation of the euro
against the dollar.
› Return on average capital employed calculated on an
adjusted basis was 12.3% in 2009 (29.2% in 2008).
› Full-year liquids and gas realizations in dollar terms
declined by 31.2% on average reflecting market conditions (Brent
dated was down 36.6%).
Production
› Oil and natural gas production for the full year
2009 amounted to 1,769 kboe/d, representing a decrease of 28
kboe/d from 2008 (down 1.6%). Excluding OPEC cuts (down 28
kboe/d) production was barely unchanged. Lower production uplifts
associated with weak European gas demand, the impact of unplanned
facility downtime, continuing security issues in Nigeria and
mature field declines were partly offset by continuing production
ramp-ups and field start-ups as well as positive price impacts in
the Company’s PSAs and similar contractual schemes (up 35
kbbl/d).
› Leveraging on organic growth in Africa and Central Asia,
Eni expects to deliver more than 2.5% compound average growth
rate over the next four-year period, targeting a production level
in excess of 2 mmboe/d by 2013 under Brent scenario at $65 per
barrel.
Estimated net proved reserves
› Estimated net proved reserves at December 31,
2009 were 6.57 bboe (down 0.4% from 2008) based on a 12-month
average Brent price of $59.9 per barrel. All sources reserve
replacement ratio was 96%, with an average reserve life index of
10.2 years (10 years at December 31, 2008). Excluding the price
effect resulting from higher liquids prices from a year ago (the
Brent crude price was $36.5 per barrel in 2008) the replacement
ratio would be 109%.
Exploration and development expenditures
› In 2009, capital expenditures amounted to euro
9,486 million to enhance assets in well established areas of
Africa, the Gulf of Mexico and Central Asia. Exploration
activities (euro 1,228 million) achieved a number of successes
such as the large Perla gas discovery in the Venezuelan offshore
and the Cabaça Norte oil discovery in the Angolan offshore
basin. Further discoveries were made in Ghana, the North Sea, the
Gulf of Mexico and the Indonesian offshore.
› A total of 69 new exploratory wells were drilled (37.6 of
which represented Eni’s share), in addition to 10
exploratory wells in progress at year end (4.2 net to Eni). The
overall commercial success rate was 41.9% (43.6% net to Eni).
› Development expenditures were euro 7,478 million (up 16.3%
from 2008) to fuel the growth of major projects in Kazakhstan,
the United States, Egypt, Congo, Italy and Angola.
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| Reserves Overview |
Reserves Governance Eni has always exercised centralized rigorous control over the process of booking proved reserves. The Reserves Department of the Exploration & Production Division is entrusted with the task of: (i) assuring the periodic certification process of proved reserves; (ii) continuously updating the Company’s guidelines on reserves evaluation and classification and the internal procedures; and (iii) to provide training of staff involved in the process of reserves estimation. Company guidelines have been reviewed by DeGolyer and MacNaughton (D&M), an independent petroleum engineering company, which has affirmed their compliance with the SEC rules2; D&M has also stated that the company formal guidelines whenever SEC rules may be less precise, provide a reasonable interpretation in line with the generally accepted practices in the industry. When participating in exploration and production activities operated by others entities, Eni also estimates its proved reserves on the basis of the above guidelines. The process for evaluating reserves, as described in the internal procedure, involves: (i) business unit manager (geographic units) and Local Reserves Evaluators (LRE), who perform the evaluation and classification of reserves including estimates of production profiles, capital expenditures, operating costs and costs related to asset retirement obligations; (ii) geographic area managers at head offices checking evaluation carried out by business unit managers; (iii) the Planning and Control Department which provides the economic evaluation of reserves; (iv) the Reserve Department which, through Division Reserves Evaluators (DRE), provides independent reviews of the fairness and correctness of classifications carried out by the above mentioned units and aggregates worldwide reserve data. The Head of the Reserve Department attended the “Politecnico di Torino” and received a Master of Science degree in Mining Engineering in 1985. She has more than 20 years of experience in the oil and gas industry and more than 10 years of experience directly in evaluating reserves. Staff involved in the reserves evaluation process fulfils the professional qualifications requested and maintains the highest level of independence, objectivity and |
| (1) | In prior periods, year-end liquids and natural gas prices were used in the estimate of proved reserves. | |
| (2) | The reports of independent engineers are available on Eni website www.eni.com section Documentation/Annual Report 2009. |
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ENI ANNUAL REPORT / OPERATING REVIEW
| confidentiality respecting
professional ethics. Reserves Evaluators qualifications
comply with international standards defined by the
Society of Petroleum Engineers. Reserves independent evaluation Since 1991, Eni has requested qualified independent oil engineering companies to carry out an independent audit3 of its proved reserves on a rolling basis. The description of qualifications of the persons primarily responsible of the reserve audit is included in the third party audit report4. In the preparation of their reports, those independent evaluators rely, without independent verification, upon information furnished by Eni with respect to property interests, production, current costs of operations and development, sale agreements, prices and other factual information and data that were accepted as represented by the independent evaluators. These data, equally used by Eni in its internal process, include logs, directional surveys, core and PVT (Pressure Volume Temperature) analysis, maps, oil/gas/water production/injection data of wells, reservoir studies; technical analysis relevant to field performance, reservoir |
performance, long-term
development plans, future capital and operating costs. In order to calculate the economic value of Eni equity reserves, actual prices applicable to hydrocarbon sales, price adjustments required by applicable contractual arrangements and other pertinent information are provided. In 2009 Ryder Scott Company and DeGolyer and MacNaughton provided an independent evaluation of 28% of Eni’s total proved reserves at December 31, 20095, confirming, as in previous years, the reasonableness of Eni internal evaluations4. In the 2007-2009 three year period, 86% of Eni total proved reserves were subject to independent evaluation. As at December 31, 2009 among the most important Eni properties, the only one was not subject to an independent review is Barbara (Italy). Movements in estimated net proved reserves Eni’s estimated proved reserves were determined taking into account Eni’s share of proved reserves of equity-accounted entities6. Movements in Eni’s 2009 estimated proved reserves were as follows: |
| (mmboe) | Consolidated Subsidiaries |
Equity-accounted entities | Total | |||
| Estimated net proved reserves at December 31, 2008 | 6,242 | 358 | 6,600 | |||||||||||||||||
| Extensions, discoveries and other additions, revisions of previous estimates, improved recovery and other factors, excluding price effect | 680 | 15 | 695 | |||||||||||||||||
| Price effect | (100 | ) | (3 | ) | (103 | ) | ||||||||||||||
| Reserve additions, total | 580 | 12 | 592 | |||||||||||||||||
| Proved property acquisitions | 26 | 26 | ||||||||||||||||||
| Sales of mineral-in-place | (1 | ) | (1 | ) | ||||||||||||||||
| Production of the year | (638 | ) | (8 | ) | (646 | ) | ||||||||||||||
| Estimated net proved reserves pro-forma at December 31, 2009 | 6,209 | 362 | 6,571 | |||||||||||||||||
| Reserve replacement ratio, all sources | (%) | 95 | 150 | 96 | ||||||||||||||||
| Reserve replacement ratio, all sources and excluding price effect | (%) | 109 | 187 | 109 | ||||||||||||||||
| Additions to proved reserves booked in 2009 were 592 mmboe and derived from: (i) revisions of previous estimates were 361 mmboe mainly reported in Egypt, Italy, Congo, the United Kingdom and the United States partly offset by the unfavorable effect | of higher oil prices on reserve entitlements in certain PSAs and buy-back contracts (down 103 mmboe) resulting from higher oil prices from a year ago (the Brent price used in the reserve estimation process was $59.9 per barrel in 2009 compared to $36.6 per barrel |
| (3) | From 1991 to 2002, DeGolyer and MacNaughton; from 2003, also Ryder Scott. | |
| (4) | The reports of independent engineers are available on Eni website www.eni.com section Documentation/Annual Report 2009. | |
| (5) | Includes Eni’s share of proved reserves of equity-accounted entities. | |
| (6) | Proved reserves included a 29.4% stake of proved reserves owned by the three equity-accounted Russian companies participated by the joint-venture OOO SeverEnergia following the divestment of a 51% stake in the venture to Gazprom on September 23, 2009, in line with the call option arrangement. |
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| in 2008). Higher oil prices
also resulted in upward revisions associated with
improved economics of marginal productions; (ii)
extensions, discoveries and other factors were 297 mmboe,
with major increases booked in Norway, Algeria, Iraq and
Libya; (iii) improved recovery were 37 mmboe mainly
reported in Angola, Norway and Libya. The largest additions were related to following fields/projects: Goliat in Norway, Belayim in Egypt, M’Boundi |
in Congo, Bahr Essalam in
Libya, CAFC and MLE in Algeria and Zubair in Iraq. Acquisitions related mainly to a 27.5% stake purchased from Quicksilver Resources Inc in the Alliance area, in Texas. In 2009 Eni achieved an all sources reserve replacement ratio7 of 96% with a reserve life index of 10.2 years (10 years at December 31, 2008). Excluding the price effect, the replacement ratio would be 109%. |
| Estimated net proved hydrocarbon reserves |
| (mmboe) | Italy | Rest of Europe | North Africa | West Africa | Kazakhstan (b) | Rest of Asia | America | Australia and Oceania | Total consolidated subsidiaries | Equity-accounted entities | Total | |||||||||||
| Year ended December 31, 2007 (a) | 747 | 638 | 1,879 | 1,095 | 1,061 | 198 | 259 | 133 | 6,010 | 360 | 6,370 | |||||||||||
| Developed | 534 | 537 | 1,183 | 766 | 494 | 127 | 158 | 63 | 3,862 | 63 | 3,925 | |||||||||||
| Undeveloped | 213 | 101 | 696 | 329 | 567 | 71 | 101 | 70 | 2,148 | 297 | 2,445 | |||||||||||
| Year ended December 31, 2008 (a) | 681 | 525 | 1,922 | 1,146 | 1,336 | 265 | 235 | 132 | 6,242 | 358 | 6,600 | |||||||||||
| Developed | 465 | 417 | 1,229 | 827 | 647 | 168 | 133 | 62 | 3,948 | 68 | 4,016 | |||||||||||
| Undeveloped | 216 | 108 | 693 | 319 | 689 | 97 | 102 | 70 | 2,294 | 290 | 2,584 | |||||||||||
| Year ended December 31, 2009 (a) | 703 | 590 | 1,922 | 1,141 | 1,221 | 236 | 263 | 133 | 6,209 | 362 | 6,571 | |||||||||||
| Developed | 490 | 432 | 1,266 | 799 | 614 | 139 | 168 | 122 | 4,030 | 74 | 4,104 | |||||||||||
| Undeveloped | 213 | 158 | 656 | 342 | 607 | 97 | 95 | 11 | 2,179 | 288 | 2,467 | |||||||||||
| Estimated net proved liquids reserves |
| (mmbbl) | Italy | Rest of Europe | North Africa | West Africa | Kazakhstan (b) | Rest of Asia | America | Australia and Oceania | Total consolidated subsidiaries | Equity-accounted entities | Total | |||||||||||
| Year ended December 31, 2007 (a) | 215 | 345 | 878 | 725 | 753 | 44 | 138 | 29 | 3,127 | 92 | 3,219 | |||||||||||
| Developed | 133 | 299 | 649 | 511 | 219 | 35 | 81 | 26 | 1,953 | 21 | 1,974 | |||||||||||
| Undeveloped | 82 | 46 | 229 | 214 | 534 | 9 | 57 | 3 | 1,174 | 71 | 1,245 | |||||||||||
| Year ended December 31, 2008 (a) | 186 | 277 | 823 | 783 | 911 | 106 | 131 | 26 | 3,243 | 92 | 3,335 | |||||||||||
| Developed | 111 | 222 | 613 | 576 | 298 | 92 | 74 | 23 | 2,009 | 27 | 2,036 | |||||||||||
| Undeveloped | 75 | 55 | 210 | 207 | 613 | 14 | 57 | 3 | 1,234 | 65 | 1,299 | |||||||||||
| Year ended December 31, 2009 (a) | 233 | 351 | 895 | 770 | 849 | 94 | 153 | 32 | 3,377 | 86 | 3,463 | |||||||||||
| Developed | 141 | 218 | 659 | 544 | 291 | 45 | 80 | 23 | 2,001 | 34 | 2,035 | |||||||||||
| Undeveloped | 92 | 133 | 236 | 226 | 558 | 49 | 73 | 9 | 1,376 | 52 | 1,428 | |||||||||||
| (a) | Includes a 29.4% stake of the reserves of the three equity-accounted Russian companies participated by joint-venture OOO SeverEnergia, owned by Eni (60%) and its Italian partner Enel (40%) which on September 23, 2009 completed the divestment of the 51% stake in the venture to Gazprom in line with the call option arrangement. | |
| (b) | As of December 31, 2009 and 2008 Eni’s proved reserves of the Kashagan field were determined based on Eni working interest of 16.81% and 18.52% as of December 31, 2007. |
| (7) | Ratio of changes in proved reserves for the year resulting from revisions of previously reported reserves, improved recovery, extensions, discoveries and sales or purchases of minerals in place, to production for the year. A ratio higher than 100% indicates that more proved reserves were added than produced in a year. The Reserve Replacement Ratio is not an indicator of future production because the ultimate development and production of reserves is subject to a number of risks and uncertainties. These include the risks associated with the successful completion of large-scale projects, including addressing ongoing regulatory issues and completion of infrastructure, as well as changes in oil and gas prices, political risks and geological and other environmental risks. |
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| Estimated net proved natural gas reserves |
| (bcf) | Italy | Rest of Europe | North Africa | West Africa | Kazakhstan (b) | Rest of Asia | America | Australia and Oceania | Total consolidated subsidiaries | Equity-accounted entities | Total | |||||||||||
| Year ended December 31, 2007 (a) | 3,057 | 1,675 | 5,751 | 2,122 | 1,770 | 880 | 696 | 598 | 16,549 | 1,541 | 18,090 | |||||||||||
| Developed | 2,304 | 1,364 | 3,065 | 1,469 | 1,580 | 530 | 442 | 213 | 10,967 | 237 | 11,204 | |||||||||||
| Undeveloped | 753 | 311 | 2,686 | 653 | 190 | 350 | 254 | 385 | 5,582 | 1,304 | 6,886 | |||||||||||
| Year ended December 31, 2008 (a) | 2,844 | 1,421 | 6,311 | 2,084 | 2,437 | 911 | 600 | 606 | 17,214 | 1,534 | 18,748 | |||||||||||
| Developed | 2,031 | 1,122 | 3,537 | 1,443 | 2,005 | 439 | 340 | 221 | 11,138 | 230 | 11,368 | |||||||||||
| Undeveloped | 813 | 299 | 2,774 | 641 | 432 | 472 | 260 | 385 | 6,076 | 1,304 | 7,380 | |||||||||||
| Year ended December 31, 2009 (a) | 2,704 | 1,380 | 5,894 | 2,127 | 2,139 | 814 | 629 | 575 | 16,262 | 1,588 | 17,850 | |||||||||||
| Developed | 2,001 | 1,231 | 3,486 | 1,463 | 1,859 | 539 | 506 | 565 | 11,650 | 234 | 11,884 | |||||||||||
| Undeveloped | 703 | 149 | 2,408 | 664 | 280 | 275 | 123 | 10 | 4,612 | 1,354 | 5,966 | |||||||||||
| The conversion rate of natural gas from cubic feet to boe is 1,000 cubic feet = 0.1742 barrels of oil. | ||
| (a) | Includes a 29.4% stake of the reserves of the three equity-accounted Russian companies participated by joint-venture OOO SeverEnergia, owned by Eni (60%) and its Italian partner Enel (40%) which on September 23, 2009 completed the divestment of the 51% stake in the venture to Gazprom in line with the call option arrangement. | |
| (b) | As of December 31, 2009 and 2008 Eni’s proved reserves of the Kashagan field were determined based on Eni working interest of 16.81% and 18.52% as of December 31, 2007. | |
| Oil and gas
production Liquids and gas production for the full year 2009 was 1,769 kboe/d, representing a decline of 28 kboe/d from 2008, or 1.6%. Excluding OPEC cuts (down 28 kboe/d) production was barely unchanged. Lower production uplifts associated with weak European gas demand, unplanned facility downtime, continuing security issues in Nigeria and mature field declines negatively affected full-year performance. Production increases were driven by continuing production ramp-ups/start-ups in Angola, Congo, Egypt, Kazakhstan, Venezuela and the Gulf of Mexico as well as the positive price impact reported in the Company’s PSAs and similar contractual schemes (up 35 kbbl/d). The share of oil and natural gas produced outside Italy was 90% (89% in 2008). Liquids production (1,007 kbbl/d) declined by 19 kbbl/d from 2008 (down 1.9%) due to OPEC cuts. Excluding OPEC cuts, the unplanned facility downtime in Libya and mature field declines, mainly in Italy and the North Sea were offset by production increases achieved in: (i) Angola due to the start-up of the Tombua-Landana project (Eni’s interest 20%) and improved performance in Block 0 (Eni’s interest 9.8%); (ii) Congo due to the ramp-up of the Awa Paloukou project (Eni’s interest 90%); (iii) Kazakhstan due to a better performance; (iv) the Gulf of Mexico due to the start-up of the Thunderhawk (Eni’s interest 25%), Pegasus (Eni’s interest 58%) and Longhorn (Eni’s interest 75%) projects; (v) Venezuela due to the ramp-up of the Corocoro field (Eni’s interest 26%). |
Natural gas
production (4,374 mmcf/d) slightly declined from 2008
(down 0.8%). Main increases were registered in the Gulf
of Mexico, Congo due to the contribution of M’Boundi
gas project (Eni’s interest 83%), and Croatia due to
the start-up of Annamaria field (Eni’s interest
50%). Production decreased in Libya due to lower gas
demand on the European market and the mentioned technical
reasons, and for mature field declines, mainly in Italy.
|
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| Production of oil and natural gas (a) (b) |
Liquids |
|
Natural gas |
|
Hydrocarbons |
|
Liquids |
|
Natural gas |
|
Hydrocarbons |
|
Liquids |
|
Natural gas |
|
Hydrocarbons |
|
Change |
||||
|
|
(kbbl/d) |
|
(mmcf/d) |
|
(kboe/d) |
|
(kbbl/d) |
|
(mmcf/d) |
|
(kboe/d) |
|
(kbbl/d) |
|
(mmcf/d) |
|
(kboe/d) |
|
Ch. |
|
% |
| 2007 | 2008 | 2009 | 2009 vs 2008 | |||||
| Italy | 75 | 789.7 | 212 | 68 | 749.9 | 199 | 56 | 652.6 | 169 | (30 | ) | (15.1 | ) | |||||||||||
| Rest of Europe | 157 | 647.2 | 270 | 140 | 626.7 | 249 | 133 | 655.5 | 247 | (2 | ) | (0.8 | ) | |||||||||||
| Croatia | 52.5 | 9 | 68.7 | 12 | 95.5 | 17 | 5 | 41.7 | ||||||||||||||||
| Norway | 90 | 271.1 | 137 | 83 | 264.8 | 129 | 78 | 273.7 | 126 | (3 | ) | (2.3 | ) | |||||||||||
| United Kingdom | 67 | 323.6 | 124 | 57 | 293.2 | 108 | 55 | 286.3 | 104 | (4 | ) | (3.7 | ) | |||||||||||
| North Africa | 337 | 1,474.2 | 594 | 338 | 1,761.6 | 645 | 292 | 1,614.2 | 573 | (72 | ) | (11.2 | ) | |||||||||||
| Algeria | 85 | 18.8 | 88 | 80 | 18.5 | 83 | 80 | 19.7 | 83 | |||||||||||||||
| Egypt | 97 | 811.2 | 238 | 98 | 818.4 | 240 | 91 | 793.7 | 230 | (10 | ) | (4.2 | ) | |||||||||||
| Libya | 142 | 629.6 | 252 | 147 | 907.6 | 306 | 108 | 780.4 | 244 | (62 | ) | (20.3 | ) | |||||||||||
| Tunisia | 13 | 14.6 | 16 | 13 | 17.1 | 16 | 13 | 20.4 | 16 | |||||||||||||||
| West Africa | 280 | 274.2 | 327 | 289 | 260.7 | 335 | 312 | 274.3 | 360 | 25 | 7.5 | |||||||||||||
| Angola | 132 | 25.1 | 136 | 121 | 28.1 | 126 | 125 | 29.3 | 130 | 4 | 3.2 | |||||||||||||
| Congo | 67 | 11.4 | 69 | 84 | 12.7 | 87 | 97 | 27.3 | 102 | 15 | 17.2 | |||||||||||||
| Nigeria | 81 | 237.7 | 122 | 84 | 219.9 | 122 | 90 | 217.7 | 128 | 6 | 4.9 | |||||||||||||
| Kazakhstan | 70 | 237.9 | 112 | 69 | 244.7 | 111 | 70 | 259.0 | 115 | 4 | 3.6 | |||||||||||||
| Rest of Asia | 37 | 408.9 | 108 | 49 | 426.2 | 124 | 57 | 444.8 | 135 | 11 | 8.9 | |||||||||||||
| China | 6 | 11.0 | 8 | 6 | 10.9 | 8 | 7 | 8.2 | 8 | |||||||||||||||
| India | 3.7 | 1 | 1 | |||||||||||||||||||||
| Indonesia | 2 | 105.4 | 20 | 2 | 99.7 | 20 | 2 | 104.8 | 21 | 1 | 5.0 | |||||||||||||
| Iran | 26 | 26 | 28 | 28 | 35 | 35 | 7 | 25.0 | ||||||||||||||||
| Pakistan | 1 | 292.5 | 52 | 1 | 315.6 | 56 | 1 | 328.1 | 58 | 2 | 3.6 | |||||||||||||
| Russia | 2 | 2 | ||||||||||||||||||||||
| Turkmenistan | 12 | 12 | 12 | 12 | ||||||||||||||||||||
| America | 53 | 240.3 | 95 | 63 | 311.5 | 117 | 79 | 424.7 | 153 | 36 | 30.8 | |||||||||||||
| Ecuador | 16 | 16 | 16 | 16 | 14 | 14 | (2 | ) | (12.5 | ) | ||||||||||||||
| Trinidad & Tobago | 58.9 | 10 | 54.6 | 9 | 67.0 | 12 | 3 | 33.3 | ||||||||||||||||
| United States | 37 | 181.4 | 69 | 42 | 256.9 | 87 | 57 | 357.7 | 119 | 32 | 36.8 | |||||||||||||
| Venezuela | 5 | 5 | 8 | 8 | 3 | 60.0 | ||||||||||||||||||
| Australia and Oceania | 11 | 41.5 | 18 | 10 | 42.2 | 17 | 8 | 48.6 | 17 | |||||||||||||||
| Australia | 11 | 41.5 | 18 | 10 | 42.2 | 17 | 8 | 48.6 | 17 | |||||||||||||||
| Total | 1,020 | 4,113.9 | 1,736 | 1,026 | 4,423.5 | 1,797 | 1,007 | 4,373.7 | 1,769 | (28 | ) | (1.6 | ) |
| (a) | Includes volumes of gas consumed in operations (300, 281 and 296 mmcf/d in 2009, 2008 and 2007, respectively). | |
| (b) | Includes Eni's share of production of equity-accounted entities. |
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| Drilling and
other exploratory and development activities Exploration |
Development In 2009 a total of 418 development wells were drilled (175.1 of which represented Eni’s share) as compared to 366 development wells drilled in 2008 (155.1 of which represented Eni’s share) and 349 development wells drilled in 2007 (156.7 of which represented Eni’s share). The drilling of 116 development wells (41.2 of which represented Eni’s share) is currently underway. Oil and natural gas producing wells are 7,181 (2,417.2 of which represent Eni’s share). The following tables show the number of net productive, dry and in progress development wells as well as productive wells in the years indicated by the Group and its equity-accounted entities in accordance with the requirements of the FASB Extractive-Oil & Gas (Topic 932). |
| Net exploration and development drilling activity |
| (units) | Italy | Rest of Europe | North Africa | West Africa | Kazakhstan | Rest of Asia | America | Australia and Oceania | Total | |||||||||
| 2007 | ||||||||||||||||||
| Exploratory | 4.0 | 1.4 | 15.3 | 1.7 | 0.2 | 0.2 | 9.6 | 0.6 | 33.0 | |||||||||
| Productive | 0.5 | 7.7 | 0.5 | 0.2 | 3.6 | 12.5 | ||||||||||||
| Dry (a) | 3.5 | 1.4 | 7.6 | 1.2 | 0.2 | 6.0 | 0.6 | 20.5 | ||||||||||
| Development | 17.0 | 27.3 | 45.8 | 18.5 | 1.3 | 37.8 | 8.4 | 0.6 | 156.7 | |||||||||
| Productive | 17.0 | 27.2 | 45.8 | 18.5 | 1.3 | 34.1 | 5.9 | 0.6 | 150.4 | |||||||||
| Dry (a) | 0.1 | 3.7 | 2.5 | 6.3 | ||||||||||||||
| 2008 | ||||||||||||||||||
| Exploratory | 0.7 | 3.7 | 22.9 | 7.4 | 16.2 | 3.4 | 1.4 | 55.7 | ||||||||||
| Productive | 0.7 | 8.7 | 4.0 | 9.4 | 1.4 | 24.2 | ||||||||||||
| Dry (a) | 0.7 | 3.0 | 14.2 | 3.4 | 6.8 | 2.0 | 1.4 | 31.5 | ||||||||||
| Development | 12.9 | 5.5 | 47.6 | 37.2 | 2.6 | 43.0 | 6.3 | 155.1 | ||||||||||
| Productive | 11.3 | 5.5 | 46.4 | 36.4 | 2.6 | 36.5 | 6.3 | 145.0 | ||||||||||
| Dry | 1.6 | 1.2 | 0.8 | 6.5 | 10.1 | |||||||||||||
| 2009 | ||||||||||||||||||
| Exploratory | 1.0 | 4.3 | 8.6 | 2.7 | 6.2 | 4.8 | 2.2 | 29.8 | ||||||||||
| Productive | 4.1 | 4.8 | 2.3 | 1.0 | 0.8 | 13.0 | ||||||||||||
| Dry (a) | 1.0 | 0.2 | 3.8 | 2.7 | 3.9 | 3.8 | 1.4 | 16.8 | ||||||||||
| Development | 18.3 | 12.5 | 41.1 | 37.7 | 3.8 | 42.9 | 16.6 | 2.2 | 175.1 | |||||||||
| Productive | 18.3 | 12.5 | 40.7 | 35.8 | 3.8 | 38.6 | 15.6 | 2.2 | 167.5 | |||||||||
| Dry (a) | 0.4 | 1.9 | 4.3 | 1.0 | 7.6 |
| (a) | A dry well is an exploratory, development, or extension well that proves to be incapable of producing either oil or gas sufficient quantities to justify completion as an oil or gas well. |
| (8) | Including drilled exploratory wells that have been suspended pending further evaluation. |
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Present activities
| Drilling activity in progress |
| (units) | Italy | Rest of Europe | North Africa | West Africa | Kazakhstan | Rest of Asia | America | Australia and Oceania | Total | |||||||||
| 2009 | ||||||||||||||||||
| Exploratory (a) | ||||||||||||||||||
| gross | 6.0 | 25.0 | 26.0 | 60.0 | 13.0 | 19.0 | 22.0 | 1.0 | 172.0 | |||||||||
| net | 4.4 | 6.6 | 18.6 | 15.4 | 2.3 | 8.8 | 8.4 | 1.0 | 65.5 | |||||||||
| Development | ||||||||||||||||||
| gross | 6.0 | 8.0 | 16.0 | 23.0 | 2.0 | 13.0 | 47.0 | 1.0 | 116.0 | |||||||||
| net | 5.8 | 1.2 | 6.9 | 8.2 | 0.7 | 6.2 | 12.1 | 0.1 | 41.2 |
| (a) | Includes temporary suspended wells pending further evaluation. |
Oil and gas properties, wells, operations and acreage
| Productive oil and gas wells (a) |
| (units) | Italy | Rest of Europe | North Africa | West Africa | Kazakhstan | Rest of Asia | America | Australia and Oceania | Total | |||||||||
| 2009 | ||||||||||||||||||
| Oil wells | ||||||||||||||||||
| gross | 185.0 | 384.0 | 1,103.0 | 2,764.0 | 85.0 | 355.0 | 125.0 | 4.0 | 5,005.0 | |||||||||
| net | 145.7 | 64.5 | 469.2 | 474.3 | 27.6 | 255.1 | 56.3 | 2.6 | 1,495.3 | |||||||||
| Gas wells | ||||||||||||||||||
| gross | 481.0 | 198.0 | 120.0 | 501.0 | 658.0 | 207.0 | 11.0 | 2,176.0 | ||||||||||
| net | 421.1 | 75.2 | 49.1 | 36.6 | 264.3 | 72.6 | 3.0 | 921.9 |
| (a) | Productive wells are producing wells and wells capable of production. One or more completions in the same bore hole are counted as one well. |
| Acreage As of December 31, 2009, Eni’s mineral right portfolio consisted of 1,246 exclusive or shared rights for exploration and development in 40 countries on five continents for a total acreage of 347,862 square kilometers net to Eni of which developed acreage of 41,794 square kilometers and undeveloped acreage of 306,068 square kilometers. In 2009 total net acreage increased mainly due to: (i) the acquisition of a 27.5% interest in the Alliance area, in Northern Texas from Quicksilver Resources Inc and of a 37.8% interest in the Sanga Sanga license in Indonesia, |
both in the development of
non-conventional gas resources; (ii) the signing of the
technical service contract to develop the giant Zubair
oil field (Eni 32.8%); (iii) new leases in Angola, China,
Ghana, the Gulf of Mexico, India, Norway and Yemen for a
total acreage of approximately 40,000 square kilometers
net to Eni. Main decreases were in Mali due to the release of exploration licenses covering an undeveloped acreage of 100,000 square kilometers. Other exploration licenses were released in Congo, Egypt, Italy, Morocco, Norway, Russia, the United Kingdom and the United States mainly related to undeveloped areas. |
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| Oil and natural gas interests |
| Dec. 31, 2008 | December 31, 2009 | |||
| Total net acreage (a) | Number of interest | Gross developed acreage (a) (b) | Gross undeveloped acreage (a) | Total gross acreage (a) | Net developed acreage (a) (b) | Net undeveloped acreage (a) | Total net acreage (a) | |||||||||
| EUROPE | 30,511 | 315 | 17,918 | 33,643 | 51,561 | 11,794 | 19,813 | 31,607 | ||||||||
| Italy | 20,409 | 167 | 11,641 | 15,537 | 27,178 | 9,692 | 12,346 | 22,038 | ||||||||
| Rest of Europe | 10,102 | 148 | 6,277 | 18,106 | 24,383 | 2,102 | 7,467 | 9,569 | ||||||||
| Croatia | 988 | 2 | 1,975 | 1,975 | 987 | 987 | ||||||||||
| Norway | 3,861 | 51 | 2,277 | 8,907 | 11,184 | 338 | 3,074 | 3,412 | ||||||||
| United Kingdom | 1,450 | 89 | 2,025 | 3,140 | 5,165 | 777 | 692 | 1,469 | ||||||||
| Other countries | 3,803 | 6 | 6,059 | 6,059 | 3,701 | 3,701 | ||||||||||
| AFRICA | 249,672 | 276 | 70,121 | 230,549 | 300,670 | 19,865 | 138,884 | 158,749 | ||||||||
| North Africa | 31,088 | 119 | 30,820 | 54,725 | 85,545 | 13,431 | 32,580 | 46,011 | ||||||||
| Algeria | 909 | 38 | 2,152 | 17,458 | 19,610 | 727 | 16,517 | 17,244 | ||||||||
| Egypt | 9,741 | 57 | 4,445 | 18,652 | 23,097 | 1,571 | 6,757 | 8,328 | ||||||||
| Libya | 18,164 | 13 | 17,947 | 18,427 | 36,374 | 8,951 | 9,214 | 18,165 | ||||||||
| Tunisia | 2,274 | 11 | 6,276 | 188 | 6,464 | 2,182 | 92 | 2,274 | ||||||||
| West Africa | 156,557 | 151 | 39,301 | 98,600 | 137,901 | 6,434 | 54,090 | 60,524 | ||||||||
| Angola | 3,323 | 67 | 4,532 | 16,317 | 20,849 | 590 | 2,803 | 3,393 | ||||||||
| Congo | 8,244 | 25 | 1,865 | 13,724 | 15,589 | 991 | 7,197 | 8,188 | ||||||||
| Gabon | 7,615 | 6 | 7,615 | 7,615 | 7,615 | 7,615 | ||||||||||
| Ghana | 2 | 2,300 | 2,300 | 1,086 | 1,086 | |||||||||||
| Mali | 128,801 | 1 | 47,500 | 47,500 | 31,668 | 31,668 | ||||||||||
| Nigeria | 8,574 | 50 | 32,904 | 11,144 | 44,048 | 4,853 | 3,721 | 8,574 | ||||||||
| Other countries | 62,027 | 6 | 77,224 | 77,224 | 52,214 | 52,214 | ||||||||||
| ASIA | 93,710 | 80 | 18,924 | 204,274 | 223,198 | 6,369 | 119,272 | 125,641 | ||||||||
| Kazakhstan | 880 | 6 | 324 | 4,609 | 4,933 | 105 | 775 | 880 | ||||||||
| Rest of Asia | 92,830 | 74 | 18,600 | 199,665 | 218,265 | 6,264 | 118,497 | 124,761 | ||||||||
| China | 192 | 7 | 237 | 18,461 | 18,698 | 39 | 18,283 | 18,322 | ||||||||
| East Timor | 9,779 | 5 | 9,999 | 9,999 | 7,999 | 7,999 | ||||||||||
| India | 9,091 | 14 | 303 | 27,861 | 28,164 | 143 | 9,946 | 10,089 | ||||||||
| Indonesia | 17,316 | 12 | 1,735 | 25,940 | 27,675 | 656 | 15,863 | 16,519 | ||||||||
| Iraq | 1 | 1,950 | 1,950 | 640 | 640 | |||||||||||
| Iran | 820 | 4 | 1,456 | 1,456 | 820 | 820 | ||||||||||
| Pakistan | 18,855 | 21 | 9,122 | 24,782 | 33,904 | 2,708 | 15,493 | 18,201 | ||||||||
| Russia | 3,891 | 5 | 3,597 | 3,039 | 6,636 | 1,058 | 1,265 | 2,323 | ||||||||
| Saudi Arabia | 25,844 | 1 | 51,687 | 51,687 | 25,844 | 25,844 | ||||||||||
| Turkmenistan | 200 | 1 | 200 | 200 | 200 | 200 | ||||||||||
| Yemen | 3,598 | 2 | 23,296 | 23,296 | 20,560 | 20,560 | ||||||||||
| Other countries | 3,244 | 1 | 14,600 | 14,600 | 3,244 | 3,244 | ||||||||||
| AMERICA | 12,043 | 558 | 4,737 | 17,234 | 21,971 | 3,090 | 8,433 | 11,523 | ||||||||
| Brazil | 1,389 | 2 | 1,389 | 1,389 | 1,067 | 1,067 | ||||||||||
| Ecuador | 2,000 | 1 | 2,000 | 2,000 | 2,000 | 2,000 | ||||||||||
| Trinidad & Tobago | 66 | 1 | 382 | 382 | 66 | 66 | ||||||||||
| United States | 6,648 | 543 | 1,977 | 9,120 | 11,097 | 926 | 5,524 | 6,450 | ||||||||
| Venezuela | 614 | 3 | 378 | 1,178 | 1,556 | 98 | 516 | 614 | ||||||||
| Other countries | 1,326 | 8 | 5,547 | 5,547 | 1,326 | 1,326 | ||||||||||
| AUSTRALIA AND OCEANIA | 29,558 | 17 | 1,057 | 48,216 | 49,273 | 676 | 19,666 | 20,342 | ||||||||
| Australia | 29,520 | 16 | 1,057 | 47,452 | 48,509 | 676 | 19,628 | 20,304 | ||||||||
| Other countries | 38 | 1 | 764 | 764 | 38 | 38 | ||||||||||
| Total | 415,494 | 1,246 | 112,757 | 533,916 | 646,673 | 41,794 | 306,068 | 347,862 |
| (a) | Square kilometers. | |
| (b) | Developed acreage refers to those leases in which at least a portion of the area is in production or encompasses proved developed reserves. |
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| Main
exploration and development projects ITALY
REST OF EUROPE |
In May 2009 following an
international bid procedure Eni was awarded the
operatorship of exploration licenses PL 533 (Eni’s
interest 40%) and PL 529 (Eni’s interest 40%) in
addition to a 30% stake in PL 532 in the Barents Sea. Full year production start-up was achieved in: (i) the Yttergryta (Eni’s interest 9.8%) field, with a production of approximately 71 mmcf/d; (ii) the Tyrihans (Eni’s interest 6.23%) field, with a production of approximately 3 kbbl/d. Development activities progressed on recent oil and gas discoveries near the Aasgard field (Eni’s interest 14.82%). In particular the development plan of the Morvin discovery (Eni’s interest 30%) provides linkage to existing production facilities that will be upgraded. Production start-up is expected in 2010 with peak production at 12 kboe/d net to Eni in 2014. Other ongoing projects aim at maintaining and optimizing production at the Ekofisk field by means of infilling wells, the development of the South Area, upgrading of existing facilities and optimization of water injection. During the year the final investment decision of the Goliat project (Eni’s interest 65%) was sanctioned. Start-up is expected in 2013 with a production plateau at 100 kbbl/d. United Kingdom Exploration activities yielded positive results in Block 22/25a (Eni’s interest 16.95%) with the Culzean gas discovery near the Elgin/Franklin producing field (Eni’s interest 21.87%). Study of development activities is underway. Development activities concerned infilling actions at the Elgin/Franklin, Mac-Culloch (Eni’s interest 40%) and Jade (Eni’s interest 7%) fields to maintain production levels as well as upgrading the facilities in the Liverpool Bay area (Eni’s interest 53.9%). Pre-development activities are underway at the following discoveries: (i) the Burghley field (Eni’s interest 21.92%) with expected start-up in 2010; (ii) the Kinnoul oil and gas field (Eni’s interest 16.67%) to be developed in synergy with the production facilities of the Andrew field (Eni’s interest 16.21%) and expected start-up in 2012; (iii) the Jasmine gas field (Eni’s interest 33%) with expected start-up in 2012; (iv) the Mariner field (Eni’s interest 8.89%) with expected start-up in 2015. NORTH AFRICA Algeria Relevant authorities confirmed the acquisition of the operatorship of the Kerzaz exploration area (Blocks 319a, 321a and 316b) covering a total acreage of 16,000 square kilometers. Exploration activities are underway. Activities of the year regarded mainly: (i) the development of the Rom and satellites reserves |
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| (Zea, Zek and Rec) following
the mineral potential revaluation. Current production is
collected at the Rom Central Production Facility (CPF)
and delivered to the treatment plant in Bir Rebaa North.
Drilling and work over activities were started in 2009.
An export pipeline and a new multiphase pumping system
are underway in compliance with applicable Country law to
reduce gas flaring; (ii) the MLE and CAFC integrated
project (Eni’s interest 75%) purchased in 2008 from
Canadian company First Calgary. The project regards the
construction of a treatment plant with a capacity of 350
mmcf/d of NGL and 35 kbbl/d of oil. Production start-up
is expected in 2011 with a production plateau of
approximately 33 kboe/d net to Eni by 2012. Drilling
activities are underway. In 2009 the EPC contract for the
construction of a gas treatment plant, gathering and
exporting facilities has been awarded. The 11% of the
project was completed at year-end. In 2009 the final investment decision of El Merk was sanctioned. During the year all EPC contracts for the development of facilities were awarded. Drilling activity started. The 24% of the project was completed. Start-up is expected in 2012. Egypt In 2009, in the offshore area of the Nile Delta, the North Bardawil (Eni operator with a 60% interest) and Thekah fields (Eni operator with a 50% interest) started-up by linking to El Gamil facilities with an overall production plateau at approximately 212 mmcf/d. The basic engineering is ongoing at the Belayim field for the upgrading of water injection facilities to recover residual reserves. Other development activities concerned the Tuna project, the second phase at the Denise field and upgrading of the El Gamil compression plant by adding new capacity to support production. Through its affiliate Unión Fenosa Gas, Eni has an indirect interest in the Damietta natural gas liquefaction plant with a producing capacity of 5.1 mmtonnes/y of LNG corresponding to approximately 268 bcf/y of feed gas. Eni is currently supplying 35 bcf/y for a twenty-year period. Natural gas supplies derived from the Taurt and Denise fields with 17 kboe/d net to Eni of feed gas. Libya Main development activities underway concerned the Western Libyan Gas project (Eni’s interest 50%) for the monetization of gas reserves ratified in the strategic agreements between Eni and NOC. In particular: (i) upgrading of plants and facilities in order to increase sale gas by 49 bcf/y was completed; (ii) additional 71 bcf/y will be on stream by 2015 through the installation of a new platform on |
structure A,
an upgrading of the Mellitah plant and of the GreenStream
compression capacity; further 106 bcf/y will be achieved
by means of another offshore field development; (iii)
maintaining gas production profiles at the Wafa and Bahr
Essalam fields is underway through increasing compression
capacity at Wafa field and joint drilling additional
wells.
Other projects underway regarded: (i) a
plan to monetize flaring gas and associated condensates
from the Bouri oil field (Eni’s interest 50%) that
will be pre-treated in the area and then delivered at the
Mellitah plant for the final treatment; (ii) ongoing
activities aimed at maintaining the El Feel field
(Eni’s interest 33.3%) production plateau through
water injection. |
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| WEST AFRICA Angola Exploration activities yielded positive results in: (i) Block 3 (Eni’s interest 12%), the Punja-4 appraisal well showed the presence of liquids and natural gas; (ii) the Development Areas of former Block 14 (Eni’s interest 20%) whit the Malange-2 appraisal well containing oil; (iii) the Development Areas of former Block 15 (Eni’s interest 20%) with the Mondo-4 appraisal well containing oil; (iv) Block 15/06 (Eni operator with a 35% interest) where the Cabaça Norte and Nzanza discoveries showed the presence of oil and yielded 6.5 kbbl/d and 1.5 kbbl/d in test production, respectively. In 2009 production started-up at the Mafumeira field in Block 0 in the Cabinda-A area (Eni’s interest 9.8%) and the Landana-Tombua fields in the Development Areas of the former Block 14. Peak production at 33 kboe/d and 136 kboe/d is expected in 2010 and 2011, respectively. Within the activities for reducing gas flaring, projects progressed at the Nemba field in Block 0. Start-up is expected in 2013 reducing flared gas by approximately 85%. In 2009 the development activity of Takula field was completed. Gas flared is re-injected in the field; condensates will be shipped to the Malongo treatment plant, nearing completion. Main projects underway in the Development Areas of former Block 15 regarded: (i) the development activities started-up at the satellites of Kizomba project-phase 1. The project provides for the drilling of 18 producing wells linked to the FPSO vessels existing in the area. Associated gas will be initially re-injected in the reservoirs in the Kizomba area, and thereafter delivered to the A-LNG liquefaction plant. Start-up is expected in 2012. Peak production at 100 kboe/d (21 net to Eni) is expected in 2013. The second phase provides for production from nearby discoveries; (ii) the Gas Gathering project, entailing the construction of a pipeline collecting all gas from the Kizomba, Mondo and Saxi/Batuque areas, is underway. Completion is expected in 2011. Eni holds a 13.6% interest in the Angola LNG Limited (A-LNG) consortium responsible for the construction of an LNG plant in Soyo, 300 kilometers north of Luanda. It will be designed with a processing capacity of 1 bcf/d of natural gas and to produce 5.2 mmtonnes/y of LNG. The project has been sanctioned by relevant Angolan authorities. It envisages the development of 10,594 bcf of associated gas reserves in 30 years. Start-up is expected in the first quarter of 2012. The LNG will be delivered to the United States market at the re-gasification plant in Pascagoula under construction (Eni’s capacity 45%, amounting to approximately 205 bcf/y), in Louisiana. Start-up is expected in late 2011. In addition, Eni finalized with the national Angolan company and other partners another agreement to |
be part of a second gas
consortium which will explore further potential gas
discoveries to support the feasibility of a second LNG
train. Eni is technical advisor with a 20% interest. Congo Exploration activities yielded positive results in: (i) the Marine XII permit (Eni operator with a 90% interest) with two discoveries wells which confirmed the mineral potential of the area. The related PSA was signed; (ii) the Le Kouilou permit (Eni’s interest 85%) with the Zingali field, confirmed by subsequently long production test. In 2009 the development plan of Awa-Paloukou field (Eni’s interest 90%) was completed. Production started-up at 12 kbbl/d. Activities on the M’Boundi operated field (Eni’s interest 83%) moved forward with the revision of the production schemes and layout to plan application of advanced recovery techniques and a design to monetize associated gas. In 2009, Eni signed a long term agreement to supply associated gas from the M’Boundi field to feed three facilities in the Pointe Noire area: (i) the Koilou potassium plant, owned by Canadian Company MAG Industries and under construction; (ii) the CED (Centrale Electrique du Djeno) existing power plant; (iii) the new built CEC (Centrale Electrique du Congo - Eni’s interest 20%). These facilities will also receive gas in the future from the offshore discoveries of the Marine XII permit. The development activities to build the CEC power plant moved forward in 2009 as scheduled in the Cooperation Agreement signed by Eni and the Republic of Congo in 2007, and the start-up of the first turbo-generator occurred by the end of march 2010. Also the studies related to the possible exploitation of unconventional oil reserves from the Tchikatanga and Tchikatanga-Makola areas have progressed, according to the cooperation agreement signed in 2008, with the particular aim to identify areas where it would be possible to withstand the stringent Eni’s environmental and sustainability requirements for development. Ghana On September 28, 2009, Eni acquired operatorship of the offshore exploration permits Cape Three Point South and Cape Three Point (Eni’s interest 47.2%). Exploration activities yielded positive results in the latter with the Sankofa discovery containing oil and natural gas. Nigeria In 2009 production of the Oyo offshore field in Blocks OML 120/121 (Eni’s interest 40%) started-up at 25 kbbl/d. In Blocks OML 60, 61, 62 and 63 (Eni operator |
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| with a 20% interest), within
the activities aimed at guaranteeing production to feed
gas to the Bonny liquefaction plant (Eni’s interest
10.4%), the development of gas reserves continued for
increasing capacity at the Obiafu/Obrikom plant as well
as the installation of a new treatment plant and
transport facilities for carrying 155 mmcf/d net to Eni
of feed gas for 20 years. To the same end the development
plan of the Tuomo gas field has been progressing along
with its linkage to the Ogbainbiri treatment plant. An integrated oil and gas project is underway in the Gbaran-Ubie area. The development plan provides for the construction of a Central Processing Facility (CPF) with treatment capacity of about 1 bcf/d of gas and 120 kbbl/d of liquids, the drilling of producing wells and the construction of a pipeline to carry the gas to the Bonny liquefaction plant. First gas is expected in the third quarter of 2010. Eni holds a 10.4% interest in Nigeria LNG Ltd responsible for the management of the Bonny liquefaction plant, located in the Eastern Niger Delta. The plant has a design treatment capacity of approximately 1,236 bcf/y of feed gas corresponding to a production of 22 mmtonnes/y of LNG on 6 trains. The seventh unit is being engineered as it is in the pre-fid phase. When fully operational, total capacity will amount to approximately 30 mmtonnes/y of LNG, corresponding to a feedstock of approximately 1,624 bcf/y. Natural gas supplies to the plant are provided under gas supply agreements with a 20-year term from the SPDC joint venture (Eni’s interest 5%) and the NAOC JV, the latter operating the OMLs 60, 61, 62 and 63 (Eni’s interest 20%). In 2009, total supplies were 1,798 mmcf/d (130 mmcf/d net to Eni corresponding to 23 kboe/d). LNG production is sold under long-term contracts and exported to European and American markets by the Bonny Gas Transport fleet, wholly-owned by Nigeria LNG Co. Eni holds a 17% interest of the Brass LNG Ltd Company for the construction of a natural gas liquefaction plant to be built near the existing Brass terminal, 100 kilometers west of Bonny. This plant is expected to start operating in 2015 with a production capacity of 10 mmtonnes/y of LNG corresponding to 590 bcf/y (approximately 60 net to Eni) of feed gas on 2 trains for twenty years. Supplies to this plant will derive from the collection of associated gas from nearby producing fields and from the development of gas reserves in the onshore OMLs 60 and 61. The venture signed preliminary long-term contracts to sell the whole LNG production capacity. Eni acquired 1.67 mmtonnes/y of LNG capacity (corresponding to approximately 81 bcf/y). The LNG will be delivered to the United States market mainly at the |
re-gasification plant in
Cameron, in Louisiana, USA. Eni’s capacity amounts
to approximately 201 bcf/y. Front end engineering
activities progressed. The final investment decision is
expected at the end of 2010. KAZAKHSTAN Kashagan Eni holds a 16.81% working interest in the North Caspian Sea Production Sharing Agreement (NCSPSA). The NCSPSA defines terms and conditions for the exploration and development of the Kashagan field which was discovered in the Northern section of the contractual area in the year 2000 over an undeveloped area extending for 4,600 square kilometers. Kashagan is believed to be one of the most important oil discoveries in the world in the past thirtyfive years. Management estimates that the gross recoverable reserves of the field amount to 7-9 bbbl, extendible to 13 bbbl through partial gas re-injection. A change in the working interest was effective as of January 1, 2008 according to the final agreement signed in 2008 with the Kazakh authorities following which the stake held by the partner KazMunaiGas increased to 16.81%. The other partners of this initiative are the international oil companies Total, Shell and ExxonMobil, each with a participating interest currently of 16.81%, ConocoPhillips with 8.40%, and Inpex with 7.56%. The exploration and development activities of the Kashagan field and of the other discoveries made in the contractual area are executed through an operating model which entails an increased role of the Kazakh partner and defines the international parties’ responsibilities in the execution of the subsequent development phases of the project. The new North Caspian Operating Company (NCOC) BV participated by the seven partners of the consortium has taken over the operatorship of the project. Subsequently development, drilling and production activities have been delegated by NCOC BV to the main partners of the Consortium: Eni is confirmed to be the operator of phase-one of the project (the so-called “Experimental Program”) and in addition will retain operatorship of the onshore operations of phase 2 of the development plan. The phased development plan of the Kashagan field provides for the drilling of about 240 wells and the construction of production plants located on artificial islands which will collect production from other satellite artificial islands. Oil production will be marketed. Natural gas will be mostly used (80%) for re-injection into the reservoir for maintaining pressure levels. The natural gas not re-injected will be treated for the removal of hydrogen sulphide and will be used |
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| as fuel in power generation
for the production plants. The remaining amounts will be
marketed. In consideration of the magnitude of the reserve base, the results of the well tests conducted and the findings of subsurface studies completed so far support expectations for a full field production plateau of 1.5 mmbbl/d. In conjunction with the final agreement signed in 2008, the Kazakh authorities reached a final approval of the revised expenditure budget of phase-one, amounting to $32.2 billion (excluding general and administrative expenses) of which $25.4 billion related to the original scope of work of phase 1 (including tranches 1 and 2), with the remaining part planned to be spent to execute tranche 3 and build certain exporting facilities. Eni will fund those investments in proportion to its participating interest of 16.81%. On the basis of progress to completion (70% of phase 1 of the project) and expertise developed, Eni management expects to achieve first oil by the end of 2012. In the following 12-15 months the treatment and compression plant for gas re-injection will be completed reaching an installed production capacity of 370 kbbl/d in 2014. Subsequently, production capacity of phase-one is expected to step up to 450 kbbl/d, leveraging on availability of further compressor capacity for gas re-injection associated with the start-up of phase-two offshore facilities. Phase 2 is actually in the stage of Front End Engineering Design (FEED). However, taking into account that future development expenditures will be incurred over a long time horizon and subsequently to the production start-up, management does not expect any material impact on the Company’s liquidity or its ability to fund these capital expenditures. In addition to the expenditures for developing the field, further capital expenditures will be required to build the infrastructures needed for exporting the production to international markets. As of December 31, 2009, the aggregate costs incurred by Eni for the Kashagan project capitalized in the financial statements amounted to $4.5 billion (euro 3.1 billion at the EUR/USD exchange rate of December 31, 2009). This capitalized amount included: (i) $3.4 billion relating to expenditures incurred by Eni for the development of the oilfield; and (ii) $1.1 billion relating primarily to accrued finance charges and expenditures for the acquisition of interests in the North Caspian Sea PSA consortium from exiting partners upon exercise of pre-emption rights in previous years. |
As of December 31, 2009,
Eni’s proved reserves booked for the Kashagan field
amounted to 588 mmboe, recording a decrease of 6 mmboe
with respect 2008. Karachaganak In 2009 production of the Karachaganak field averaged 238 kbbl/d of liquids (70 net to Eni) and 883 mmcf/d of natural gas (259 net to Eni). The fourth treatment unit has been progressing to completion and will enable to increase export of oil volumes to European markets. Currently non-stabilized oil production is delivered to the Orenburg terminal. The development activities of the Uralsk Gas Pipeline are ongoing. This new infrastructure, with a length of 150 kilometers, will link the Karachaganak field to the Kazakhstan gas network. Start-up is expected in 2010. The engineering activities of Phase 3 of the Karachaganak project identified a new design to complete development activities in multiple phases. The project provides for the installation of gas producing and re-injection facilities to increase gas sales at the Orenburg plant up to 565 bcf/y, according to the General Supply Agreement signed in 2007, and the liquids production up to approximately 14 mmtonnes/y. The sanction of relevant Authority to start-up with Phase 3 is currently in the phase of technical and marketing discussion. As of December 31, 2009, Eni’s proved reserves booked for the Karachaganak field amounted to 633 mmboe, recording a decrease of 107 mmboe with respect to 2008 and derived from downward revisions due to lower prices and from production of the year. REST OF ASIA China In 2009 Eni signed the PSAs related to exploration Blocks 3/27 and 28/20 located in the South China Sea covering a total net acreage of 18,194 square kilometers. Eni was awarded a 100% stake in the exploration stage. India In 2009 production started-up at the PY-1 gas field, part of the purchased assets from Hindustan Oil Exploration Company Ltd (Eni’s interest 47.18%), acquired in 2008 as part of Burren deal. Gas production is sold to the local national oil company. Indonesia Exploration activity yielded positive results with the Jangkrik discovery located in the Muara Bakau Block (Eni’s interest 55%) offshore Borneo. Eni is also involved in the ongoing joint development of the oil and gas discoveries in the Bukat permit |
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| (Eni operator with a 66.25%
interest) and the five discoveries in the Kutei Deep
Water Basin area (Eni’s interest 20%). In 2009 the development plan of the Jau field in the Krueng Mane Block (Eni’s interest 75%) located offshore Sumatra was completed. The project is subject to approval by the relevant Authority. In November 2009, Eni was awarded a 37.8% stake in the Indonesian Sanga Sanga PSC for the production of coal bed methane. The contract refers to exploration, development and production of gas from superficial levels of coal from a contractual area that coincides with the one regulated by the Sanga Sanga PSC for the production of conventional oil. Exploration activity start-up is expected in 2010. In case of commercial discovery, the project will also benefit from synergies with existing production and treatment plants in addition to feeding the LNG plants of Bontang and Sanga Sanga. Iraq On January 22, 2010, Eni leading a consortium of international companies and the Iraqi National Oil Companies, South Oil and Missan Oil signed a technical service contract, under a 20-year term with an option for further 5 years, to develop the Zubair oil field (Eni 32.8%). The field was awarded to the Eni-led consortium following a successful first bid round and was offered under a competitive bid starting on June 30, 2009. The partners of the project plan to gradually increase production to a target plateau level of 1.2 mmbbl/d over the next six years. The contract provides that the consortium will earn a remuneration fee on the incremental oil production once production has been raised by 10% from its current level of approximately 180 kbbl/d and will recover its expenditures through a cost recovery mechanism based on the revenues from the field’s production. Iran In 2009 activities were executed at the Darquain project which related to plant commissioning and start-up in view of making formal hand over of operations to local partners. Darquain was the sole Eni-operated project in the Country. Pakistan Exploration activity yielded positive results with discoveries in the Badhra (Eni operator with a 40% interest), Kadanwari (Eni operator with an 18% interest) and Miano (Eni’s interest 15%) areas. The production start-up of the recent discoveries benefited from the existing facilities. Development activities concerned: (i) the Bhit field (Eni operator with a 40% interest) with the ongoing installation of a compressor plant aimed at maintaining |
current production plateau;
(ii) the Sawan field (Eni’s interest 23.68%) with
the ongoing construction activity of a compressor plant;
(iii) the Zamzama permit (Eni’s interest 17.75%)
with the construction of the third treatment plant for
the production of HVC gas aimed at optimizing current
production. During the year other activities were targeted to optimize production from the Bhit, Sawan and Kadanwari fields by means of the drilling additional wells. Russia In September 2009, Eni and its Italian partner Enel in the 60-40% owned joint-venture OOO SeverEnergia completed the divestment of the 51% stake in the venture to Gazprom based on the call option exercised by the Russian company. Eni collected the total cash consideration ($940 million), 25% of which had been collected at the transaction date and the remaining 75% on March 31, 2010. A gain amounting to euro 100 million was recognized in the profit for the year. The gain was associated with interest income at an annual rate of 9.4% accruing on the initial investment in the venture when it was acquired on April 4, 2007 based on the contractual arrangements between Eni and Gazprom. The three partners are committed to producing first gas from the Samburskoye field by June 2011, targeting a production plateau of 150 kboe/d within two years from the start of production. In April 2009, Gazprom exercised its call option to purchase a 20% interest in OAO Gazprom Neft held by Eni based on the existing agreements between the two partners. The exercise price of the call option collected by Eni on April 24, 2009 amounting to euro 3,070 million is equal to the price ($3.7 billion) outlined in the bid procedure for the assets of bankrupt Russian company Yukos as adjusted by subtracting dividends distributed and adding the contractual yearly remuneration of 9.4% on the capital employed and financing collateral expenses. Eni and Gazprom signed new cooperation agreements targeting certain development projects to be conducted jointly in Russia and other countries of interest. AMERICA Trinidad & Tobago The main development project concerns the Poinsettia, Bougainvillea and Heliconia fields in the North Coast Marine Area 1 (Eni’s interest 17.4%). The project provides for the installation of a production platform on the Poinsettia field and the linkage to the Hibiscus treatment facility which was already upgraded. The drilling program on Heliconia and Bougainvillea fields is underway. Start-up is expected in 2010. In 2009 production started-up at the Poinsettia field. |
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| United States
Offshore exploration activities yielded positive results
in the following blocks: (i) Green Canyon 859 (Eni’s
interest 12.5%) with the oil and gas Heidelberg-1
discovery; (ii) Keathley Canyon 919 (Eni’s interest
25%) with the oil and gas Hadrian West discovery. In May 2009, Eni signed a strategic alliance with Quicksilver Resources Inc, an independent US natural gas producer, to acquire a 27.5% interest in the Alliance area, in the Fort Worth basin, in Texas. The acquisition for cash consideration amounting to $280 million includes gas shale9 production assets with 40 mmbbl of resources base. Production plateau at 10 kboe/d net to Eni is expected in 2011.
In 2009 production start-up was achieved in: (i) the Thunderhawk field (Eni’s interest 25%) through the drilling of underwater wells and linkage to a semi submersible production unit with a treatment capacity of 45 kbbl/d of oil and about 71 mmcf/d of natural gas; (ii) the Longhorn field (Eni’s interest 75%) through the drilling of underwater wells and installation of production platform with a treatment capacity of approximately 247 mmcf/d; (iii) the Leo field (Eni’s interest 75%) by means of the linkage to the Longhorn production facilities. |
The development plan of the
Appaloosa discovery (Eni’s interest 100%) was
sanctioned. The discovery is planned to be developed in
synergy with the Longhorn production facilities. Start-up
is expected in 2010 with production peaking at 1.5
kboe/d. Other ongoing activities concerned the phased development plan of the Nikaitchuq operated field (Eni’s interest 100%), located in North Slope basins in Alaska. First oil is expected in 2011 with peaking production at 28 kbbl/d. Venezuela A large gas discovery was
made in the Perla field, located in the Cardon IV block
(Eni 50%) in the Gulf of Venezuela, yielding 21 mmcf/d
(approximately 3.7 kboe/d) during flow tests. The field
has been estimated to contain a reserve potential of more
than 5,650 bcf of gas (1 bboe). AUSTRALIA AND OCEANIA |
| (9) | Shale gas is a continuous natural gas reservoir contained within fine grained rocks, dominated by shale. |
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| Capital
expenditures Capital expenditures of the Exploration & Production division (euro 9,486 million) concerned development of oil and gas reserves (euro 7,478 million) directed mainly outside Italy, in particular Kazakhstan, United States, Egypt, Congo and Angola. Development expenditures in Italy concerned the well drilling program and facility upgrading in Val d’Agri as well as sidetrack and infilling activities in mature fields. About 97% of exploration expenditures that amounted to euro 1,228 million were directed outside Italy in particular to the United States, Libya, Egypt, Norway and Angola. In |
Italy, exploration
activities were directed mainly to the offshore of
Sicily. Acquisition of proved and unproved property concerned mainly the acquisition from Quicksilver Resources Inc of a 27.5% interest in the Alliance area, in Northern Texas and the extension of Eni’s mineral rights in Egypt, following the agreement signed in May 2009. As compared to 2008, capital expenditures increased by euro 205 million, up 2.2%, due to higher development expenditures mainly in Congo, Algeria, Nigeria, Kazakhstan, Italy, Australia and India. |
| Capital expenditures | (euro million) |
2007 |
2008 |
2009 |
Change |
% Ch. |
||||||
| Acquisition of proved and unproved properties | 96 | 836 | 697 | (139 | ) | (16.6 | ) | ||||||||
| North Africa | 11 | 626 | 351 | ||||||||||||
| West Africa | 210 | 73 | |||||||||||||
| Rest of Asia | 94 | ||||||||||||||
| America | 85 | 179 | |||||||||||||
| Exploration | 1,659 | 1,918 | 1,228 | (690 | ) | (36.0 | ) | ||||||||
| Italy | 104 | 135 | 40 | (95 | ) | (70.4 | ) | ||||||||
| Rest of Europe | 195 | 227 | 113 | (114 | ) | (50.2 | ) | ||||||||
| North Africa | 373 | 379 | 317 | (62 | ) | (16.4 | ) | ||||||||
| West Africa | 246 | 485 | 284 | (201 | ) | (41.4 | ) | ||||||||
| Kazakhstan | 36 | 16 | 20 | 4 | 25.0 | ||||||||||
| Rest of Asia | 162 | 187 | 159 | (28 | ) | (15.0 | ) | ||||||||
| America | 505 | 441 | 243 | (198 | ) | (44.9 | ) | ||||||||
| Australia and Oceania | 38 | 48 | 52 | 4 | 8.3 | ||||||||||
| Development | 4,643 | 6,429 | 7,478 | 1,049 | 16.3 | ||||||||||
| Italy | 461 | 570 | 689 | 119 | 20.9 | ||||||||||
| Rest of Europe | 429 | 598 | 673 | 75 | 12.5 | ||||||||||
| North Africa | 948 | 1,246 | 1,381 | 135 | 10.8 | ||||||||||
| West Africa | 1,343 | 1,717 | 2,105 | 388 | 22.6 | ||||||||||
| Kazakhstan | 733 | 968 | 1,083 | 115 | 11.9 | ||||||||||
| Rest of Asia | 238 | 355 | 406 | 51 | 14.4 | ||||||||||
| America | 345 | 655 | 706 | 51 | 7.8 | ||||||||||
| Australia and Oceania | 146 | 320 | 435 | 115 | 35.9 | ||||||||||
| Other expenditures | 82 | 98 | 83 | (15 | ) | (15.3 | ) | ||||||||
| 6,480 | 9,281 | 9,486 | 205 | 2.2 |
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| Key performance indicators (a) | 2007 |
|
2008 |
|
2009 |
|
| Net sales from operations (b) | (euro million) | 27,793 | 37,062 | 30,447 | ||||
| Operating profit | 4,465 | 4,030 | 3,687 | |||||
| Adjusted operating profit | 4,414 | 3,564 | 3,901 | |||||
| Market | 2,284 | 1,309 | 1,721 | |||||
| Regulated businesses in Italy | 1,685 | 1,732 | 1,796 | |||||
| International transport | 445 | 523 | 384 | |||||
| Adjusted net profit | 3,127 | 2,648 | 2,916 | |||||
| EBITDA pro-forma adjusted (b) | 5,029 | 4,310 | 4,403 | |||||
| Market | 3,061 | 2,271 | 2,392 | |||||
| Regulated businesses in Italy | 1,248 | 1,284 | 1,345 | |||||
| International transport | 720 | 755 | 666 | |||||
| Capital expenditures | 1,511 | 2,058 | 1,686 | |||||
| Adjusted capital employed, net at year end (c) | 21,364 | 22,273 | 25,024 | |||||
| Adjusted ROACE (c) | (%) | 15.2 | 12.2 | 12.3 | ||||
| Worldwide gas sales (d) | (bcm) | 98.96 | 104.23 | 103.72 | ||||
| LNG sales (e) | 11.7 | 12.0 | 12.9 | |||||
| Customers in Italy | (million) | 6.61 | 6.63 | 6.88 | ||||
| Gas volumes transported in Italy | (bcm) | 83.28 | 85.64 | 76.90 | ||||
| Electricity sold | (TWh) | 33.19 | 29.93 | 33.96 | ||||
| Employees at year end | (units) | 11,893 | 11,692 | 11,404 |
| (a) | From January 1, 2009, results of the gas storage business are reported within the Gas & Power segment reporting unit, within the regulated businesses results, following restructuring of Eni regulated gas businesses in Italy. As of that date, the results of the regulated businesses in Italy therefore include results of the Transport, Distribution, Regasification and Storage activities in Italy. Results of the power generation activity are reported within the marketing business as it is ancillary to the latter. Prior period results have been restated accordingly. | |
| (b) | Before the elimination of intragroup sales. | |
| (c) | For a detailed explanation of adjusted capital employed and adjusted ROACE, see paragraph "Return On Average Capital Employed (ROACE)". | |
| (d) | Include volumes marketed by the Exploration & Production division of 6.17 bcm (5.39 and 6.00 bcm in 2007 and 2008, respectively), of which 2.57 bcm in Europe (3.59 and 3.36 bcm in 2007 and 2008, respectively) and in the Gulf of Mexico (1.80 bcm and 2.84 bcm in 2007 and 2008, respectively). | |
| (e) | Refer to LNG sales of the G&P division (included in worldwide gas sales) and the E&P division. |
Presentation to the European Commission of a set of
structural remedies related to some international gas pipelines
› On February 4, 2010, Eni has formally presented to the
European Commission a set of structural remedies relating to
certain international gas pipelines. With prior agreement from
its partners, Eni has committed to dispose of its interests in
the German TENP, in the Swiss Transitgas and in the Austrian TAG
gas pipelines. The European Commission intends to submit these
remedies to a market test. In case the Commission approves those
remedies upon conclusion of the market test,
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Eni will be in the position to resolve an inquiry started in May 2006 for alleged infringements of the European antitrust regulations in the gas sector, which involved the main players in the European gas market. Eni received a statement of objections from the European Commission which alleged that during the 2000-2005 period Eni was responsible for limiting the access of third parties to the gas pipelines TAG, TENP and Transitgas, thus restricting gas availability in Italy. Given the strategic importance of the Austrian TAG pipeline, which transports gas from Russia to Italy, Eni has negotiated a solution with the Commission which calls for the transfer of its stake to an entity controlled by the Italian State. The remedies negotiated with the Commission do not affect Eni’s contractual gas transport rights. For further details on this topic see note "Guarantees, commitments and risks" to the Consolidated Financial Statements.
European gas market
› In 2009, the mandatory tender offer on the minorities
of Distrigas was finalized and Distrigas shares have been
delisted from Euronext Brussels. Thanks to the achievement of
synergies on integration, the Distrigas acquisition represented
for Eni a remarkable result in strengthening its leadership in
the European gas market.
› Notwithstanding the unfavorable trends in natural gas demand, in 2009 Eni achieved organic growth outside Italy, increasing market shares in a number of European gas markets. This increase, coupled with the full contribution of Distrigas sales, determined a change in natural gas sales portfolio with international sales at 63.68 bcm representing 61% of total sales (49% in 2008).
Reorganization of regulated businesses in the Italian gas
sector
› In 2009 the reorganization of gas infrastructures was
concluded through the sale of Italgas SpA and Stoccaggi Gas
Italia SpA (Stogit) to Snam Rete Gas. The transaction is expected
to create significant synergies in the segment of regulated
businesses allowing Eni to maximize the value of both gas
distribution and storage activities and to strengthen the
financial soundness of the Group’s capital structure.
Strategic partnership with Gazprom
› The strategic partnership between Eni and Gazprom,
leading world natural gas producer, celebrated its 40th
year of activity in 2009. The partners plan to proceed with the
joint development of projects in the sectors of upstream and
natural gas markets. In particular, concerning the gas business,
Eni and Gazprom have agreed upon a new scope of work in the
development project of the South Stream pipeline, aimed at
increasing its transport capacity from an original amount of 31
bcm/y to 63 bcm/y.
Projects in the Hewett area
› In order to strengthen its European leadership in the
storage business, Eni continued pre-development activities for a
project to build an offshore storage facility in the Hewett area,
near the Bacton terminal (North Sea basin). Eni targets to
develop storage capacity in order to support the seasonal swings
of gas demand in the United Kingdom. The project sanction is
expected at some point in 2010, with start up in 2015.
Financial results
› In 2009 adjusted net profit was euro 2,916 million,
increasing by euro 268 million from 2008 (up 10.1%) due to the
positive performance recorded by the Marketing business. An
improved scenario for energy parameters, the full contribution of
the acquisition of Distrigas in terms of integration synergies
and improved performance, as well as the impact of the
renegotiation of long-term supply contracts, were the main
positive drivers of the year. These positives were partly offset
by lower sales volumes, mainly on the Italian market. Regulated
Businesses in Italy recorded steady results. The International
transport business reported weaker results.
› In 2010 natural gas sales are expected to remain flat compared to 2009. Increasing competitive pressures, mainly in Italy, will be offset by an expected recovery in European gas demand. Other positive trends include a benefit associated with integrating Distrigas operations and the optimization of supply portfolio, including re-negotiation of long-term supply contracts.
› Eni expects to achieve gas sales of approximately 118 bcm by 2013 with an average annual growth rate higher than 3%.
› Return on average capital employed (ROACE) on an adjusted basis was 12.3% (12.2% in 2008).
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› Capital expenditures totaled euro 1,686 million and mainly related to the development and upgrading of Eni’s transport and distribution networks in Italy, the upgrading of storage capacity and the ongoing plan for improving power generation efficiency standards.
Operating results
› In 2009 Eni’s natural gas sales (103.72 bcm) were
slightly down as a result of offsetting trends. On the negative
side, volumes supplied to the Italian market were materially
lower from a year ago against the backdrop of the economic
downturn and stronger competitive pressures (down 12.83 bcm, or
24.3%). On the plus side, volumes gains were associated with the
full contribution of the Distrigas acquisition (up 12.02 bcm for
the full year) and organic growth achieved in a number of
European markets.
› Electricity volumes sold were 33.96 TWh, increasing by 4.03 TWh, or 13.5%, from 2008.
› Natural gas volumes transported on the Italian network were 76.90 bcm, down 10.2% from 2008.
 NATURAL GAS Supply of natural gas In 2009 Eni’s consolidated subsidiaries,
including the Distrigas share amounting to 16.91 bcm,
supplied 88.65 bcm of natural gas with a 1 bcm decrease
from 2008, down 1.1%. |
consolidated companies),
imported in Italy or sold outside Italy, represented 91%
of total supplies with an increase of 0.14 bcm from 2008,
or 0.2%, mainly due to the growth registered on European
markets in particular due to Distrigas full contribution,
with higher volumes purchased from: (i) Norway (up 5.68
bcm); (ii) Qatar (up 2.20 bcm) due to the coming on
stream of LNG long-term supply contracts; and (iii) the
Netherlands (up 1.90 bcm). Lower volumes were purchased from: (i) Algeria (down 5.40 bcm) due to the damage occurred to the TMPC pipeline in late December 2008; (ii) Libya (down 0.73 bcm); (iii) Russia mainly to Italy (down 2.75 bcm) in line with the implementation of agreements with Gazprom providing for Gazprom’s entrance in the market of supplies to Italian importers. Supplies in Italy (6.86 bcm) declined by 1.14 bcm from 2008, or 14.3%, due to lower domestic production. In 2009, main gas volumes from equity production derived from: (i) Italian gas fields (6.5 bcm); (ii) the Wafa and Bahr Essalam fields in Libya linked to Italy through the GreenStream pipeline. In 2009 these two fields supplied 2.5 bcm net to Eni; (iii) certain Eni fields located in the British and Norwegian sections of the North Sea (2.9 bcm); and (iv) other European areas (in particular Croatia with 0.8 bcm). Considering also the direct sales of the Exploration & Production division in Europe and in the Gulf of Mexico and LNG supplied from the Bonny liquefaction plant in Nigeria, supplied gas volumes from equity production were approximately 20.1 bcm representing 19% of total volumes available for sale. |
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| Supply of natural gas | (bcm) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| ITALY | 8.65 | 8.00 | 6.86 | (1.14 | ) | (14.3 | ) | ||||||||
| Russia | 23.44 | 22.91 | 22.02 | (0.89 | ) | (3.9 | ) | ||||||||
| Algeria (including LNG) | 18.41 | 19.22 | 13.82 | (5.40 | ) | (28.1 | ) | ||||||||
| Libya | 9.24 | 9.87 | 9.14 | (0.73 | ) | (7.4 | ) | ||||||||
| Netherlands | 7.74 | 9.83 | 11.73 | 1.90 | 19.3 | ||||||||||
| Norway | 5.78 | 6.97 | 12.65 | 5.68 | 81.5 | ||||||||||
| United Kingdom | 3.15 | 3.12 | 3.06 | (0.06 | ) | (1.9 | ) | ||||||||
| Hungary | 2.87 | 2.84 | 0.63 | (2.21 | ) | (77.8 | ) | ||||||||
| Qatar (LNG) | - | 0.71 | 2.91 | 2.20 | .. | ||||||||||
| Other supplies of natural gas | 2.20 | 4.07 | 4.49 | 0.42 | 10.3 | ||||||||||
| Other supplies of LNG | 2.32 | 2.11 | 1.34 | (0.77 | ) | (36.5 | ) | ||||||||
| OUTSIDE ITALY | 75.15 | 81.65 | 81.79 | 0.14 | 0.2 | ||||||||||
| Total supplies of Eni's consolidated subsidiaries | 83.80 | 89.65 | 88.65 | (1.00 | ) | (1.1 | ) | ||||||||
| Offtake from (input to) storage | 1.49 | (0.08 | ) | 1.25 | 1.33 | .. | |||||||||
| Network losses, measurement differences and other changes | (0.46 | ) | (0.25 | ) | (0.30 | ) | (0.05 | ) | 20.0 | ||||||
| AVAILABLE FOR SALE BY ENI'S CONSOLIDATED SUBSIDIARIES | 84.83 | 89.32 | 89.60 | 0.28 | 0.3 | ||||||||||
| Available for sale by Eni's affiliates | 8.74 | 8.91 | 7.95 | (0.96 | ) | (10.8 | ) | ||||||||
| E&P volumes | 5.39 | 6.00 | 6.17 | 0.17 | 2.8 | ||||||||||
| GAS VOLUMES AVAILABLE FOR SALE | 98.96 | 104.23 | 103.72 | (0.51 | ) | (0.5 | ) |
 Sales of natural gas In 2009 natural gas sales were 103.72 bcm, declining slightly from 2008 (down 0.51 bcm, or 0.5%). Sales included own consumption, Eni’s share of sales made by equity-accounted entities and upstream sales in Europe and the Gulf of Mexico. The contribution of the Distrigas acquisition (up 12.02 bcm) partly offset the negative effects of sharply lower gas demand in Italy (down 10%) and Europe (down 7.4%, both percentages net of seasonal swings). |
In Italy, sales volumes
decreased by 12.83 bcm, or 24.3%, to 40.04 bcm reflecting
sharply lower supplies to power generation utilities
(down 8.01 bcm), industrial customers (down 2.01 bcm) and
wholesalers (down 1.60 bcm) dragged down by a decline in
industrial production following the economic downturn and
competitive pressures, especially in the last part of the
year which was affected by new gas availability. Volumes
sold to the residential sector increased slightly due to
higher weather-related sales, particularly in the first
and fourth quarter of 2009 as well as volumes destined to
Eni’s power generation business. International sales were up 12.32 bcm, or 24%, to 63.68 bcm, benefiting from the contribution of Distrigas (up 12.02 bcm). Organic sales increases were achieved in France (up 1.27 bcm) and in Northern Europe (up 1.10 bcm). These increases were offset in part by lower volumes reported in supplies to importers to Italy (down 0.77 bcm), in the Iberian Peninsula (down 0.63 bcm) and Hungary (down 0.24 bcm) mainly due to declining demand. Sales to markets outside Europe (2.06 bcm) declined by 0.27 bcm from 2008. E&P sales in Europe and in the United States (6.17 bcm) increased by 0.17 bcm, up 2.8%. |
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| Gas sales by market | (bcm) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| ITALY | 56.13 | 52.87 | 40.04 | (12.83 | ) | (24.3 | ) | ||||||||
| Wholesalers | 10.01 | 7.52 | 5.92 | (1.60 | ) | (21.3 | ) | ||||||||
| Gas release | 2.37 | 3.28 | 1.30 | (1.98 | ) | (60.4 | ) | ||||||||
| Italian gas exchange and spot markets | 1.90 | 1.89 | 2.37 | 0.48 | 25.4 | ||||||||||
| Industries | 11.77 | 9.59 | 7.58 | (2.01 | ) | (21.0 | ) | ||||||||
| Medium-sized enterprises and services | 1.00 | 1.05 | 1.08 | 0.03 | 2.9 | ||||||||||
| Power generation | 17.21 | 17.69 | 9.68 | (8.01 | ) | (45.3 | ) | ||||||||
| Residential | 5.79 | 6.22 | 6.30 | 0.08 | 1.3 | ||||||||||
| Own consumption | 6.08 | 5.63 | 5.81 | 0.18 | 3.2 | ||||||||||
| INTERNATIONAL SALES | 42.83 | 51.36 | 63.68 | 12.32 | 24.0 | ||||||||||
| Rest of Europe | 35.02 | 43.03 | 55.45 | 12.42 | 28.9 | ||||||||||
| Importers in Italy | 10.67 | 11.25 | 10.48 | (0.77 | ) | (6.8 | ) | ||||||||
| European markets | 24.35 | 31.78 | 44.97 | 13.19 | 41.5 | ||||||||||
| Iberian Peninsula | 6.91 | 7.44 | 6.81 | (0.63 | ) | (8.5 | ) | ||||||||
| Germany-Austria | 5.03 | 5.29 | 5.36 | 0.07 | 1.3 | ||||||||||
| Belgium | - | 4.57 | 14.86 | 10.29 | .. | ||||||||||
| Hungary | 2.74 | 2.82 | 2.58 | (0.24 | ) | (8.5 | ) | ||||||||
| Northern Europe | 3.15 | 3.21 | 4.31 | 1.10 | 34.3 | ||||||||||
| Turkey | 4.62 | 4.93 | 4.79 | (0.14 | ) | (2.8 | ) | ||||||||
| France | 1.62 | 2.66 | 4.91 | 2.25 | 84.6 | ||||||||||
| Other | 0.28 | 0.86 | 1.35 | 0.49 | 57.0 | ||||||||||
| Outside Europe | 2.42 | 2.33 | 2.06 | (0.27 | ) | (11.6 | ) | ||||||||
| E&P in Europe and in the Gulf of Mexico | 5.39 | 6.00 | 6.17 | 0.17 | 2.8 | ||||||||||
| WORLDWIDE GAS SALES | 98.96 | 104.23 | 103.72 | (0.51 | ) | (0.5 | ) |
| Gas sales by entity | (bcm) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Sales of consolidated companies | 84.83 | 89.32 | 89.60 | 0.28 | 0.3 | ||||||||||
| Italy (including own consumption) | 56.08 | 52.82 | 40.04 | (12.78 | ) | (24.2 | ) | ||||||||
| Rest of Europe | 27.86 | 35.61 | 48.65 | 13.04 | 36.6 | ||||||||||
| Outside Europe | 0.89 | 0.89 | 0.91 | 0.02 | 2.2 | ||||||||||
| Sales of Eni's affiliates (net to Eni) | 8.74 | 8.91 | 7.95 | (0.96 | ) | (10.8 | ) | ||||||||
| Italy | 0.05 | 0.05 | - | (0.05 | ) | (100.0 | ) | ||||||||
| Rest of Europe | 7.16 | 7.42 | 6.80 | (0.62 | ) | (8.4 | ) | ||||||||
| Outside Europe | 1.53 | 1.44 | 1.15 | (0.29 | ) | (20.1 | ) | ||||||||
| E&P in Europe and in the Gulf of Mexico | 5.39 | 6.00 | 6.17 | 0.17 | 2.8 | ||||||||||
| Worldwide gas sales | 98.96 | 104.23 | 103.72 | (0.51 | ) | (0.5 | ) |
Risk factors related to the natural gas market
| Risks and uncertainties
associated with the current outlook for gas demand and
supply in Europe and Italy In 2009 European gas demand was severely impacted by the economic downturn (down 7.4% from 2008, assuming normal average temperatures). As a result of that trend, both producing activities and request for electricity reduced. The Italian market was particularly hit by the downturn as demand fell by approximately 9 bcm from 2008, down 10%, and almost 10 bcm from the pre-crisis levels seen in 2007, down 12%, assuming normal average temperatures. In the meantime, new gas supplies entered the market as several operators, including Eni, completed plans to upgrade gas import pipelines from gas producing Countries or to build new |
facilities to import gas to Europe via LNG. Particularly, Eni has finalized plans to upgrade the import capacity of its two main pipelines from Russia and Algeria by 13 bcm/y (the gas pipelines TAG and TTPC), with new capacity entirely sold to third parties. A new LNG terminal with a capacity of 8 bcm/y commenced operations late in 2009, operated by a consortium of competitors. As a result, gas availability on the Italian market increased at a time when demand actually shrunk, resulting in a situation of oversupply. In this context, Eni’s results of the gas marketing business, sales volumes and average gas selling margins were driven down by rising competition and weak demand both in Italy and Europe. Large gas availability on European markets also prevented the |
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| Company from disposing of
part of its gas availability by selling it on European
markets. The outlook for gas supply and demand both in Europe and Italy is challenging as GDP growth in the 27 EU Countries will remain weak over the next few years and gas demand is expected to recover only gradually to pre-crisis levels. In addition, ongoing patterns towards energy preservation and rising competition from renewable or alternative sources of energy will further dampen recovery perspectives of gas demand. Specifically, at the March 2007 European Council, the European Heads of Government decided to adopt their Climate Action and Renewable Energy Package. This legislation was voted by the European Parliament in December 2008. The package includes a commitment to reduce greenhouse gas (GHG) emissions by 20% by 2020 compared to emission levels recorded in 1990 (the target being 30% if an international agreement is reached), as well as an improved energy efficiency within the EU Member States of 20% by 2020 and a 20% renewable energy target by 2020. To factor in those trends, management has revised down its long-term projections of European gas demand growth from a previous compound average growth rate (c.a.g.r.) of 2% till 2020 to a revised 1.5% c.a.g.r. These assumptions imply an overall consumption of approximately 600 bcm by 2020 compared to a previous forecast of 720 bcm. Management also expects the Italian market to grow less than anticipated at an annual rate that will be slightly lower than 2%, implying a level of consumption amounting to 94 bcm versus a previous forecast of 107 bcm at 2020. These demand trends of sluggish growth associated with ample gas availability on the marketplace might adversely affect the Company’s results of operations and cash flow in its gas marketing business over the next few years. Current negative trends in gas demand and
supply may impair the Company’s ability to fulfill
its minimum off-take obligations in connection with its
take-or-pay, long-term gas supply contracts |
to collect pre-paid volumes
of gas in later years during the period of contract
execution. Amounts of cash pre-payments and time
schedules for collecting pre-paid gas vary from contract
to contract. Generally speaking, cash pre-payments are
calculated on the basis of the energy prices current in
the year of non-fulfillment with the balance due in the
year when the gas is actually collected. Amounts of
pre-payments range from 10 to 100 percent of the full
price. The right to collect pre-paid gas expires within a
ten-year term in some contracts or remains in place until
contract expiration in other arrangements. In addition, rights to collect pre-paid gas in future years can be exercised provided that the Company has fulfilled its minimum take obligation in a given year and within the limit of the maximum annual quantity that can be collected in each contractual year. In this case, Eni will pay the residual price calculating it as the percentage that complements 100, based on the arithmetical average of monthly base prices in place in the year of the off-take. Similar considerations apply to ship-or-pay contractual obligations. Management believes that the current outlook for gas demand and large gas availability on the marketplace, as well as the possible evolution of sector-specific regulation, represent risks factors to the Company’s ability to fulfill its minimum take obligations associated with its long-term supply contracts. Under current contractual terms, in 2009 Eni collected lower volumes than its minimum take and recognized a trade payables corresponding to the amount of gas that the Company was contractually required to collect. Management believes that over the next three years the Company will experience failure to fulfill its take-or-pay obligations associated with significant volumes of gas, unless demand fundamentals improve substantially and a better balance between demand and supply is achieved on the marketplace. Currently, the Company is unable to forecast the timing of such a recovery. In addition, there also exist both a pricing risk as a portion of the gas purchase price is based on the prices of the energy parameters recorded in the year of non-fulfillment, and a volume risk in case the Company is actually unable to dispose of pre-paid volumes. In this context, the Company’s selling margins, results of operations and cash flow may be negatively affected. Based on management’s projections for sales volumes and prices for the four-year plan and subsequent years, volumes for which an obligation to pay cash advances might arise due to take or pay clauses will be off-taken within contractual terms, thus recovering cash advances. Even if financing associated with cash advances is factored in, the net present value associated with those long-term contracts discounted at the weighted average cost of capital for the Gas & Power |
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| segment still remains a
positive and consequently those contracts do not fall
within the category of the onerous contract provided by
IAS 37. In the medium term Eni intends to preserve the profitability and cash flow generation of its gas marketing operations. A number of initiatives have been identified, including: - Maximization of gas sales volumes leveraging on the multiple presence in a number of markets; market knowledge, the integration with Distrigas commercial operations and supply portfolio (which is not expected to have take-or-pay obligations in future years) and marketing policies aimed at increasing Eni’s market share in Europe; - Renegotiations of the main long-term supply contracts through the exercise of the contractual right to amend terms and conditions of the contracts as provided by specific contractual clauses in case of significant changes in the market environment, as those that have been occurring from the second half of 2008. These renegotiations were finalized early in 2010 with a positive impact both on 2009 results and on future commercial plans giving Eni more flexibility in its marketing operations; - Launching of innovative pricing formulas and improving the quality of services on the core Italian market; - Reduction in the cost-to-serve; - Monitoring and controlling working capital requirements. Risks associated with sector-specific
regulations in Italy |
and in establishing tariffs
for the use of natural gas infrastructures. Specifically,
the Authority for Electricity and Gas holds a general
surveillance power on pricing in the natural gas market
in Italy and the power to establish selling tariffs for
the supply of natural gas to residential and commercial
users consuming less than 200,000 cm/y (qualified as non
eligible customers at December 31, 2002 as defined by
Legislative Decree No. 164/2000) taking into account the
public goal of containing the inflationary pressure due
to rising energy costs. Accordingly, decisions of the
Authority on these matters may limit the ability of Eni
to pass an increase in the cost of fuels onto final
consumers of natural gas. Following a complex and lengthy
administrative procedure started in 2004 and finalized in
March 2007 with Resolution No. 79/2007, the Authority
finally established a new indexation mechanism for
updating the raw material cost component in supplies to
residential and commercial users consuming less than
200,000 cm/y, establishing, among other things that
Italian natural gas importers – including Eni –
must renegotiate wholesale supply contracts in order to
take account a new indexation mechanism of the raw
material cost component. This indexation mechanism has
been recently updated based on Resolution No. 64/2009 of
the Authority, which provides that changes in a preset
basket of hydrocarbons are transferred to the cost of the
supply to those customers. Also a floor has been
established in the form of a fixed amount that applies
only at certain low level of international prices of
hydrocarbons. Also certain provisions of law may limit the Company’s ability to set commercial margins. Specifically, Law Decree No. 112 enacted in June 2008 forbids energy companies like Eni to pass to prices to final customers the higher income taxes incurred in connection with a supplemental tax rate of 6.5 percentage points introduced by the same decree on energy companies with a yearly turnover in excess of euro 25 million. The Authority for Electricity and Gas is in charge of monitoring compliance with this rule. The Authority has subsequently established with a set of deliberations that energy companies have to adopt effective operational and monitoring systems in order to prevent unlawful increases in final prices of gas. Other risk factors and uncertainties deriving from the regulatory framework are associated with the regulation of the access to the Italian gas transport network that is currently set by Decision No. 137/2002 of the Authority for Electricity and Gas. The decision is fully incorporated into the network code presently in force as prepared by the system’s operator. The decision sets priority criteria for transport capacity entitlements at points where the Italian transport network connects with international |
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| import pipelines (the
so-called entry points to the Italian transport system).
Specifically, operators that are holders of take-or-pay
contracts, as in the case of Eni, are entitled to a
priority in allocating available transport capacity
within the limit of average daily contractual volumes.
Gas volumes exceeding average daily contractual volumes
are not entitled to any priority and, in case of
congestion at any entry points, they are entitled
available capacity on a proportionate basis together with
all pending requests for capacity assignments. The
ability of Eni to collect gas volumes exceeding average
daily volumes as provided by its take-or-pay supply
contracts represents an important operational flexibility
that the Company uses to satisfy demand peaks. In
planning its commercial flows, the Company normally
assumes to make full use of its contractual flexibility
and to obtain the necessary capacity entitlements at the
entry points to the national transport network. Those
assumptions may be inconsistent with rules set by
Decision No. 137/2002 specifically with regard to
priority criteria governing capacity entitlements. Eni
considers Decision No. 137/2002 to be illegitimate as it
is supposedly in contrast with the rationale of the
European regulatory framework on the gas market as
provided in European Directive 55/03/CE. Based on that
belief the Company has opened an administrative procedure
to repeal Decision No. 137/2002 before an administrative
court which recently confirmed in part Eni’s
position. An upper grade court also confirmed the
Company’s position. Specifically, the Court stated
that the purchase of contractual flexibility is an
obligation on part of the importer, which responds to a
collective interest. According to the Court, there is no
reasonable motivation whereby volumes corresponding to
such contractual flexibility should not be granted
priority in the access to the network, also in case
congestion occurs. At the moment, however, no case of
congestion occurred at entry points to the Italian
transport infrastructure such to impair Eni’s
marketing plans. Further uncertainty factors related to the regulatory |
framework are the so called
gas release measures that are intended to increase
flexibility and liquidity in the gas market. This measure
strongly affected Eni’s marketing activity in Italy.
In 2004, based on certain agreements with the Antitrust
Authority, Eni released in a four-year period a total
amount of 9.2 bcm (2.3 bcm per year between October 1,
2004 and September 30, 2008) and the related transport
capacity. In addition, in 2007 Eni agreed to adhere to a
new gas release program involving 4 bcm which were
disposed of at the virtual exchange point (PSV) in a
two-year period (from October 1, 2007 and September 30,
2009). For thermal year 2009-2010 Italian Law No. 99/2009 introduced a new obligation for Eni to make additional sales at the virtual exchange point for a total of 5 bcm of gas in yearly and half-yearly amounts. Although the allotment procedure (bid) was based on a minimum price set by the Ministry for Economic Development as proposed by the Authority (Eni considering this point discriminatory, filed a claim to the competent authority), only a 1.1 bcm portion of the gas release was awarded out of the 5 bcm which had been planned. For the next few years, based on indications of the Authority (in a report to the Parliament on the situation of the gas and electricity market in Italy as provided in Resolution PAS 3/2010), Eni cannot exclude the possibility that new gas release programs will be imposed on it. LNG In 2009, LNG sales (12.9 bcm) increased by 0.9 bcm from 2008, up 7.5%, mainly reflecting higher volumes sold by the Gas & Power segment (9.8 bcm, included in worldwide gas sales) that increased by 1.4 bcm, up 16.7%, from 2008, due to the Distrigas contribution related to the coming on stream of a long-term supply contract from Qatar (up 2.2 bcm). |
| LNG sales | (bcm) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| G&P sales | 8.0 | 8.4 | 9.8 | 1.4 | 16.7 | ||||||||||
| Italy | 1.2 | 0.3 | 0.1 | (0.2 | ) | (66.7 | ) | ||||||||
| Rest of Europe | 5.6 | 7.0 | 8.9 | 1.9 | 27.1 | ||||||||||
| Outside Europe | 1.2 | 1.1 | 0.8 | (0.3 | ) | (27.3 | ) | ||||||||
| E&P sales | 3.7 | 3.6 | 3.1 | (0.5 | ) | (13.9 | ) | ||||||||
| Terminals: | |||||||||||||||
| - Bontang (Indonesia) | 0.7 | 0.7 | 0.8 | 0.1 | 14.3 | ||||||||||
| - Point Fortin (Trinidad & Tobago) | 0.6 | 0.5 | 0.5 | ||||||||||||
| - Bonny (Nigeria) | 2.0 | 2.0 | 1.4 | (0.6 | ) | (30.0 | ) | ||||||||
| - Darwin (Australia) | 0.4 | 0.4 | 0.4 | ||||||||||||
| 11.7 | 12.0 | 12.9 | 0.9 | 7.5 |
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| POWER Availability of electricity Eni’s power generation sites are located in
Ferrera Erbognone, Ravenna, Livorno, Taranto, Mantova,
Brindisi and Ferrara. In 2009, power generation was 24.09
TWh, up 0.76 TWh or 3.3% from 2008, due mainly to higher
production at the Ferrara plant (Eni’s interest
51%), in connection with the coming on line of two new
390 megawatt combined cycle units. |
at Taranto (Eni 100%) and
Ferrara (Eni 51%), as well as at the recently acquired
Bolgiano plant (Eni 100%). Electricity sales In 2009 electricity sales (33.96 TWh) were directed to
the free market (73%), the Italian power exchange (14%),
industrial sites (9%) and others (4%). |
2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||||
| Purchases of natural gas | (mmcm) | 4,860 | 4,530 | 4,790 | 260 | 5.7 | |||||||||||
| Purchases of other fuels | (ktoe) | 720 | 560 | 569 | 9 | 1.6 | |||||||||||
| Power generation | (TWh) | 25.49 | 23.33 | 24.09 | 0.76 | 3.3 | |||||||||||
| Steam | (ktonnes) | 10,849 | 10,584 | 10,048 | (536 | ) | (5.1 | ) |
| Availability of electricity | (TWh) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Power generation | 25.49 | 23.33 | 24.09 | 0.76 | 3.3 | ||||||||||||
| Trading of electricity (a) | 7.70 | 6.60 | 9.87 | 3.27 | 49.5 | ||||||||||||
| 33.19 | 29.93 | 33.96 | 4.03 | 13.5 | |||||||||||||
| Free market | 20.73 | 22.89 | 24.74 | 1.85 | 8.1 | ||||||||||||
| Italian power exchange | 8.66 | 3.82 | 4.70 | 0.88 | 23.0 | ||||||||||||
| Industrial plants | 2.81 | 2.71 | 2.92 | 0.21 | 7.7 | ||||||||||||
| Other (a) | 0.99 | 0.51 | 1.60 | 1.09 | .. | ||||||||||||
| Electricity sales | 33.19 | 29.93 | 33.96 | 4.03 | 13.5 |
| (a) | Include positive and negative unbalances. |
Transport and regasification of natural gas
| Volumes of gas transported
in Italy in 2009 were 76.90 bcm decreasing by 8.74 bcm,
or 10.2%, from 2008 due to lower gas deliveries due to a
weaker demand. Natural gas volumes transported on behalf of third |
parties (37.27 bcm)
increased by 0.09 bcm, or 10.1%. In 2009, the LNG terminal in Panigaglia (La Spezia) regasified 1.32 bcm of natural gas (1.52 bcm in 2008). |
| (1) | Capacity available after completion of dismantling of obsolete plants. |
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| Gas volumes transported (a) | (bcm) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Eni | 52.39 | 51.80 | 39.63 | (12.17 | ) | (23.5 | ) | ||||||||
| On behalf of third parties | 30.89 | 33.84 | 37.27 | 3.43 | 10.1 | ||||||||||
| 83.28 | 85.64 | 76.90 | (8.74 | ) | (10.2 | ) |
| (a) | Include amounts destined to domestic storage. |
Storage
| In 2009, 8.71 bcm of gas were supplied (up 3.44 bcm from 2008) while 7.81 bcm were input to the Company’s storage deposits, an increase of 1.51 bcm compared to 2008. | In 2009 storage capacity
amounted to 13.9 bcm, of which 5 were destined to
strategic storage. The share of storage capacity used by third parties was 70% (61% in 2008). |
2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||||
| Total storage capacity: | (bcm) | 13.6 | 13.7 | 13.9 | 0.2 | 1.5 | ||||||||||||
| - of which strategic storage | 5.1 | 5.1 | 5 | (0.1 | ) | (2.0 | ) | |||||||||||
| - of which available storage | 8.5 | 8.6 | 8.9 | 0.3 | 3.5 | |||||||||||||
| Available capacity: share utilized by Eni | (%) | 44 | 39 | 30 | (9 | ) | (23.1 | ) | ||||||||||
| Total offtake from (input to) storage: | (bcm) | 9.27 | 11.57 | 16.52 | 4.95 | 42.8 | ||||||||||||
| - input to storage | 4.00 | 6.30 | 7.81 | 1.51 | 24.0 | |||||||||||||
| - offtake from storage | 5.27 | 5.27 | 8.71 | 3.44 | 65.3 | |||||||||||||
| Total customers | (No.) | 44 | 48 | 56 | 8 | 16.7 |
Main development projects for 2009
| MARKETING Natural gas Finalization of the acquisition of Distrigas Following the acquisition of the 57.24% majority stake in Distrigas NV from French company Suez-Gaz de France, Eni made an unconditional mandatory public takeover bid on the minorities of Distrigas (42.76% stake), at the same price proposed to Suez (euro 6,809.64 per share)2. On March 19, 2009, the mandatory tender offer on the minorities of Distrigas was finalized. Shareholders representing 41.61% of the share capital of Distrigas, including the second largest shareholder, Publigaz SCRL with a 31.25% interest, tendered their shares. The squeeze-out of the residual 1.14% of the share capital was finalized on May 4, 2009. After this, Distrigas shares have been delisted from Euronext Brussels. The total cash consideration amounted to euro 2,045 million. As of December 31, 2009, Eni owns the entire share capital of Distrigas, except for one share with special powers owned by the Belgian State. The purchase of Belgian company Distrigas has entailed |
a significant expansion of Eni’s supply portfolio with an addition of long-term supplies of approximately 14.7 bcm (from the Netherlands, Norway and Qatar) having a maximum residual life of 18 years. In 2009 Distrigas sales amounted to 17.25 bcm. Projects in the Hewett
area |
| (2) | Eni recognized to minority shareholders a certificate granting the right to receive an additional consideration to the bid price for a pro-rata amount of any price revision set as a part of the sale agreement pursuant to which Distrigas sold its subsidiary Distrigas & Co to Belgian operators Fluxys SA and Huberator SA. |
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| LNG USA Cameron In the third quarter of 2009 operations started at the Cameron re-gasification plant located on the banks of the Calcasieu River, approximately 15 miles south of Lake Charles in Louisiana, USA. In consideration of a changed demand outlook, on March 1, 2010, Eni renegotiated certain terms of the contract with US company Cameron LNG, relating to the farming out of a share of the regasification capacity. The new agreement provides that Eni will be entitled to a daily send-out of 572,000 mmbtu (approximately 5.7 bcm/y) and a dedicated storage capacity of 160 kcm, giving Eni more flexibility in managing seasonal swings in gas demand. Taking into account the oversupply characterizing at the moment the US gas market, Eni rescheduled the Brass project (West Africa) for developing gas reserves to fuel the Cameron plant. The start-up is now expected in 2015. Pascagoula
This project is part of an upstream development related
to the construction of an LNG plant in Angola designed to
produce 5.2 mmtonnes of LNG (approximately 7.3 bcm/y) for
the North American market in order to market part of the
Company’s gas reserves. As part of the downstream
leg of the project, Eni signed with Gulf LNG a 20-year
contract to buy 5.8 bcm/y of the regasification capacity
of the plant under construction near Pascagoula in
Mississippi, with expected start up by end of 2012 in
line with the start-up of the upstream project in Angola. REGULATED BUSINESSES IN ITALY |
and Eni for their respective
shares; and (ii) arranging medium and long-term
financing. The main impact expected on Eni’s
consolidated financial statements are: (i) as of December
31, 2009 a decrease of euro 1.54 billion was reported in
the Group consolidated net borrowings and a corresponding
increase in total equity as a consequence of the
pro-quota subscription of the Snam Rete Gas capital
increase by minorities; (ii) a decrease in Eni’s net
profit equal to 45% of the aggregate net profit of
Italgas and Stogit reported in the consolidated profit
and loss for the second half of 2009, with a
corresponding increase in net profit pertaining to
minorities. As of December 31, 2009 Eni’s interest in Snam Rete Gas is equal to 52.54%. SOUTH STREAM PROJECT INTERNATIONAL TRANSPORT TAG - Russia |
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| Regulatory
framework Legislative Decree No. 164/2000 Resolution ARG/gas 64/2009: Approval of the code
for the retail sale of natural gas and gas other than
natural gas distributed through urban pipeline networks Resolution ARG/gas 159/2008: Tariff criteria for
the 2009-2012 regulated period for the service of gas
distribution and measurement and transitional rules for
2009 |
tariffs and defined as total
revenue cap, representing the maximum remuneration
recognized by the Authority to each operator for covering
costs borne. In previous years, revenues were determined
by applying tariffs set by the Authority to volumes
actually distributed to selling companies in the relevant
year. The resolution also provides for any positive or
negative difference between the total revenue cap and
revenues resulting from invoices for actually distributed
volumes to be regulated through an equalization device
making use of credit/debit cards lodged with the
Electricity Equalization Exchange. As a result of the new
mechanism, revenues are no longer related to the
seasonality of volumes distributed. The introduction of
this new mechanism does not cause a decline in total
revenues on a yearly basis. Law No. 99 July 23, 2009
converting the "Anti-crisis Decree" Resolution ARG/gas 184/2009 - Quality and tariff
code for the natural gas transport and dispatching
services and tariff regulations for the metering service
of natural gas transport for the 2010-2013 regulatory
period |
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| December 2, 2009, the
Authority set the criteria regulating the tariffs for
natural gas transportation on the national and regional
gas pipeline network for the third regulatory period
(January 1, 2010 - December 31, 2013). The Authority also recognized Snam Rete Gas a total amount of euro 33.6 million as settlement of additional costs incurred during the 2007-2008 thermal year and referring to the purchase of fuel gas for compression stations. The Regulatory Asset Base (RAB) is calculated with the re-valuated historical cost methodology. The allowed rate of return (WACC) on the RAB has been set equal to 6.4% in real terms pre tax. The new tariff structure confirms the recognition in tariffs of expenditures incurred for network upgrading, providing for a higher remuneration than WACC, changing in a 1-3% range in relation to the nature of expenditures and for a period of 5 to 15 years. Depreciation costs of gas transport infrastructures (gas pipelines) are determined on a 50-year useful technical life and are excluded from the price cap mechanism. Operating costs are defined with reference to operating costs incurred during 2008 and increased by a 50% rate to recognize productivity gains achieved in the second regulatory period. Fuel gas is excluded from the price cap mechanism. The revenue component related to volumes transported is determined referring to operating costs recognized in tariffs and amounts to 15% of the revenue cap. Third Energy Package: 2009 European Directive
No. 2009/73/CE |
the internal market for
natural gas requesting that member states choose one of
two options for ensuring carriers’ independence in
case transport systems belong to vertically integrated
companies. The two options provided are: (i) Separation of ownership under two alternative modes: - Ownership Unbundling (OU): the company that owns the networks and manages transport activities is unbundled from its integrated parent company that will retain supply/production and sale activities; - Independent System Operator (ISO): the vertically integrated company retains ownership of the networks but confers their management to a third independent party. (ii) Strengthened functional separation: - Independent Transmission Operator (ITO): the vertically integrated company retains control of the company that manages transport activities and owns transport networks, provided the vertically integrated company refrains from interfering in the decision-making process of the controlled carrier company. Capital expenditures In 2009, capital expenditures totaled euro 1,686 million and mainly related to: (i) developing and upgrading Eni’s transport network in Italy (euro 1,479 million); (ii) developing and upgrading Eni’s storage capacity in Italy (euro 282 million); (iii) developing and upgrading Eni’s distribution network in Italy (euro 278 million); (iv) completion of construction of combined cycle power plants (euro 73 million), in particular at the Ferrara site; (v) the upgrading plan of international pipelines (euro 32 million). |
| Capital expenditures | (euro million) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Italy | 1,219 | 1,750 | 1,564 | (186 | ) | (10.6 | ) | ||||||||
| Outside Italy | 292 | 308 | 122 | (186 | ) | (60.4 | ) | ||||||||
| 1,511 | 2,058 | 1,686 | (372 | ) | (18.1 | ) | |||||||||
| Marketing | 238 | 198 | 175 | (23 | ) | (11.6 | ) | ||||||||
| Marketing | 63 | 91 | 102 | 11 | 12.1 | ||||||||||
| Italy | 13 | 16 | 12 | (4 | ) | (25.0 | ) | ||||||||
| Outside Italy | 50 | 75 | 90 | 15 | 20.0 | ||||||||||
| Power generation | 175 | 107 | 73 | (34 | ) | (31.8 | ) | ||||||||
| Regulated businesses in Italy | 1,031 | 1,627 | 1,479 | (148 | ) | (9.1 | ) | ||||||||
| Transport | 691 | 1,130 | 919 | (211 | ) | (18.7 | ) | ||||||||
| Distribution | 195 | 233 | 278 | 45 | 19.3 | ||||||||||
| Storage | 145 | 264 | 282 | 18 | 6.8 | ||||||||||
| International transport | 242 | 233 | 32 | (201 | ) | (86.3 | ) | ||||||||
| 1,511 | 2,058 | 1,686 | (372 | ) | (18.1 | ) |
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| Key performance indicators | 2007 |
|
2008 |
|
2009 |
|
| Net sales from operations (a) (b) | (euro million) | 36,349 | 45,017 | 31,769 | |||||||
| Operating profit | 686 | (988 | ) | (102 | ) | ||||||
| Adjusted operating profit | 292 | 580 | (357 | ) | |||||||
| Adjusted net profit | 294 | 521 | (197 | ) | |||||||
| Capital expenditures | 979 | 965 | 635 | ||||||||
| Adjusted capital employed, net at year end (c) | 7,149 | 8,260 | 7,560 | ||||||||
| Adjusted ROACE (c) | (%) | 4.6 | 6.5 | (2.6 | ) | ||||||
| Refinery throughputs on own account | (mmtonnes) | 37.15 | 35.84 | 34.55 | |||||||
| Conversion index | (%) | 56 | 58 | 60 | |||||||
| Balanced capacity of refineries | (kbbl/d) | 748 | 737 | 747 | |||||||
| Retail sales of petroleum products in Europe | (mmtonnes) | 11.80 | 12.03 | 12.02 | |||||||
| Service stations in Europe at year end (d) | (units) | 6,440 | 5,956 | 5,986 | |||||||
| Average throughput per service station in Europe (d) | (kliters) | 2,486 | 2,502 | 2,477 | |||||||
| Employees at year end | (units) | 9,428 | 8,327 | 8,166 |
| (a) | From January 1, 2009 Eni adopted IFRIC 13 "Customer Loyalty Programmes" that requires that the award points granted to clients within the related loyalty programmes be accounted as a separate component of the basic transaction, evaluated at their fair value and recognized as revenues when effectively used. Prior period results have been restated accordingly. | |
| (b) | Before elimination of intragroup sales. | |
| (c) | For a detailed explanation of adjusted capital employed and adjusted ROACE, see paragraph "Return On Average Capital Employed (ROACE)". | |
| (d) | 2007 data include downstream activities in the Iberian Peninsula divested to Galp in October 2008. |
Portfolio development and main projects
› On January 21, 2010 Eni signed an agreement for the
acquisition of downstream activities in Austria, including a
retail network of 135 service stations, wholesale activities
(with 36 additional Esso retail service stations owned by third
parties) as well as commercial assets in the aviation business
and related logistic and storage activities. The finalization of
the transaction is subject to the approval of the relevant
antitrust authorities.
› The upgrading process of Eni’s retail network of service stations continued aimed at improving service and quality standards. In 2010 the re-branding to "eni" brand of all downstream activities was launched.
Financial results
› In 2009 the Refining & Marketing division reported
an adjusted net loss of euro 197 million (down euro 718 million,
reversing a prior year profit of euro 521 million) mainly driven
by a lower operating performance, reflecting lower refining
margins as a result of an
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unfavorable trading scenario, as well as decreased earnings reported by equity-accounted subsidiaries.
› Return on average capital employed on an adjusted basis was a negative 2.6% declining from 2008 (6.5%).
› Capital expenditures totaled euro 635 million and related mainly to projects designed to improve the conversion rate and flexibility of refineries, logistic assets, the upgrade the refined product retail network in Italy and in the rest of Europe.
› In the medium term, management plans to recovery profitability by improving the refining system and reinforcing Eni’s leadership in the Italian retail market and increasing market shares in core European countries.
Operating results
Eni’s refining throughputs for 2009 were 34.55 mmtonnes,
down 3.6% from 2008. Lower volumes were recorded in Italy (down
3.3%) as refinery operations were rescheduled at certain plants
to take account of weak demand for products. Volumes processed
outside Italy declined in particular in the Czech Republic due to
lower utilization of plant capacity in response to weak market
conditions.
In 2009 Eni’s retail market share in Italy averaged 31.5%, up 0.9 percentage points from 2008 driven by the "You&Agip" promotional campaign, marketing pricing initiatives (in particular the success of the Iperself program), and the opening of new service stations. While Italian consumption was barely unchanged (down 0.6%), retail sales in Italy were 9.03 mmtonnes (up 2.5%) driven by higher volumes of gasoil and LPG sales.
Retail sales in the rest of Europe (approximately 2.99 mmtonnes) decreased by approximately 230 ktonnes, or 7.1%, mainly reflecting a decline in fuel demand, particularly in Eastern Europe.
In 2009 Eni opened/restructured 53 stores for the sale of convenience items and car services at its service stations in Italy. Excluding the impact of the divestment of marketing activities in the Iberian Peninsula in October 2008, non oil revenues were euro 147 million, up 2.4% from 2008.
| Supply and
trading In 2009, a total of 67.40 mmtonnes of crude were purchased by the Refining & Marketing division (57.91 mmtonnes in 2008), of which 32.75 mmtonnes from Eni’s Exploration & Production division. Volumes amounting to 19.71 mmtonnes were purchased under |
long-term supply contracts with producing countries, while 14.94 mmtonnes were purchased on the spot market. Approximately 25% of crude purchased in 2009 came from West Africa, 19% from European and Asian Russia, 15% from the Middle East, 13% from North Africa, 11% from the North Sea, 4% from Italy, and 13% from other areas. |
| Purchases | (mmtonnes) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Equity crude oil | |||||||||||||||
| Eni production outside Italy | 27.47 | 26.14 | 29.84 | 3.70 | 14.2 | ||||||||||
| Eni production in Italy | 4.10 | 3.57 | 2.91 | (0.66 | ) | (18.5 | ) | ||||||||
| 31.57 | 29.71 | 32.75 | 3.04 | 10.2 | |||||||||||
| Other crude oil | |||||||||||||||
| Purchases on spot markets | 11.34 | 12.09 | 14.94 | 2.85 | 23.6 | ||||||||||
| Purchases under long-term contracts | 16.65 | 16.11 | 19.71 | 3.60 | 22.3 | ||||||||||
| 27.99 | 28.20 | 34.65 | 6.45 | 22.9 | |||||||||||
| Total crude oil purchases | 59.56 | 57.91 | 67.40 | 9.49 | 16.4 | ||||||||||
| Purchases of intermediate products | 3.59 | 3.39 | 2.92 | (0.47 | ) | (13.9 | ) | ||||||||
| Purchases of products | 16.14 | 17.42 | 13.98 | (3.44 | ) | (19.7 | ) | ||||||||
| TOTAL PURCHASES | 79.29 | 78.72 | 84.30 | 5.58 | 7.1 | ||||||||||
| Consumption for power generation | (1.13 | ) | (1.00 | ) | (0.96 | ) | 0.04 | (4.0 | ) | ||||||
| Other changes (a) | (2.19 | ) | (1.04 | ) | (1.64 | ) | (0.60 | ) | (57.7 | ) | |||||
| 75.97 | 76.68 | 81.70 | 5.02 | 6.5 |
| (a) | Include change in inventories, decrease in transportation, consumption and losses. |
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| In 2009 some 36.11 mmtonnes
of crude purchased were marketed, up 38.9% from 2008,
mainly driven by higher trading activities. In addition,
2.92 mmtonnes of intermediate products were purchased
(3.39 mmtonnes in the 2008) to be used as feedstock in
conversion plants and 13.98 mmtonnes of refined products
(17.42 mmtonnes in the 2008) were purchased to be sold on
markets outside Italy (10.10 mmtonnes) and on the
domestic market (3.88 mmtonnes) as a complement to
available production. Refining In 2009, refining throughputs on own account in Italy and outside Italy were 34.55 mmtonnes, down 1.29 mmtonnes from 2008, or 3.6%. Volumes processed in Italy decreased by approximately 990 ktonnes, down 3.3%, mainly at the Gela plant due to the extension of planned refinery downtime, and at the Livorno |
and Taranto plants as
refinery operations were rescheduled to take account of a
weak demand for products. Volumes processed outside Italy
declined by approximately 330 ktonnes in particular in
the Czech Republic and in Germany due to lower
utilization of plant capacity in response to weak market
conditions and the restructuring of the Ingolstadt
facility in Germany. Total throughputs in wholly-owned refineries (24.02 mmtonnes) decreased by 1.57 mmtonnes, down 6.1%, from 2008, due to lower refining throughputs for third parties in the Venezia and Sannazzaro plants for the termination of the agreement with Tamoil at the end of 2008. Approximately 16.3% of volumes of processed crude was supplied by Eni’s Exploration & Production segment (21.5% in 2008) representing a 5.2 percentage point decrease from 2008, corresponding to a lower volume of 1.87 mmtonnes. |
| Availability of refined products | (mmtonnes) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| ITALY | |||||||||||||||
| At wholly-owned refineries | 27.79 | 25.59 | 24.02 | (1.57 | ) | (6.1 | ) | ||||||||
| Less input on account of third parties | (1.76 | ) | (1.37 | ) | (0.49 | ) | 0.88 | 64.2 | |||||||
| At affiliated refineries | 6.42 | 6.17 | 5.87 | (0.30 | ) | (4.9 | ) | ||||||||
| Refinery throughputs on own account | 32.45 | 30.39 | 29.40 | (0.99 | ) | (3.3 | ) | ||||||||
| Consumption and losses | (1.63 | ) | (1.61 | ) | (1.60 | ) | 0.01 | 0.6 | |||||||
| Products available for sale | 30.82 | 28.78 | 27.80 | (0.98 | ) | (3.4 | ) | ||||||||
| Purchases of refined products and change in inventories | 2.16 | 2.56 | 3.73 | 1.17 | 45.7 | ||||||||||
| Products transferred to operations outside Italy | (3.80 | ) | (1.42 | ) | (3.89 | ) | (2.47 | ) | .. | ||||||
| Consumption for power generation | (1.13 | ) | (1.00 | ) | (0.96 | ) | 0.04 | 4.0 | |||||||
| Sales of products | 28.05 | 28.92 | 26.68 | (2.24 | ) | (7.7 | ) | ||||||||
| OUTSIDE ITALY | |||||||||||||||
| Refinery throughputs on own account | 4.70 | 5.45 | 5.15 | (0.30 | ) | (5.5 | ) | ||||||||
| Consumption and losses | (0.31 | ) | (0.25 | ) | (0.25 | ) | |||||||||
| Products available for sale | 4.39 | 5.20 | 4.90 | (0.30 | ) | (5.8 | ) | ||||||||
| Purchases of refined products and change in inventories | 13.91 | 15.14 | 10.12 | (5.02 | ) | (33.2 | ) | ||||||||
| Products transferred from Italian operations | 3.80 | 1.42 | 3.89 | 2.47 | .. | ||||||||||
| Sales of products | 22.10 | 21.76 | 18.91 | (2.85 | ) | (13.1 | ) | ||||||||
| Refinery throughputs on own account | 37.15 | 35.84 | 34.55 | (1.29 | ) | (3.6 | ) | ||||||||
| of which: refinery throughputs of equity crude on own account | 9.29 | 6.98 | 5.11 | (1.87 | ) | (26.8 | ) | ||||||||
| Total sales of refined products | 50.15 | 50.68 | 45.59 | (5.09 | ) | (10.0 | ) | ||||||||
| Crude oil sales | 25.82 | 26.00 | 36.11 | 10.11 | 38.9 | ||||||||||
| TOTAL SALES | 75.97 | 76.68 | 81.70 | 5.02 | 6.5 |
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Marketing of refined products
| In 2009, excluding the impact of the divestment of marketing activities in the Iberian Peninsula in 2008 (down 1.52 mmtonnes), sales volumes of | refined products (45.59 mmtonnes) were down 3.57 mmtonnes from 2008, or 7.3%, mainly due to lower wholesale sales on the domestic and foreign market. |
| Product sales in Italy and outside Italy by market | (mmtonnes) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Retail | 8.62 | 8.81 | 9.03 | 0.22 | 2.5 | ||||||||||
| Wholesale | 11.09 | 11.15 | 9.56 | (1.59 | ) | (14.3 | ) | ||||||||
| Petrochemicals | 1.93 | 1.70 | 1.33 | (0.37 | ) | (21.8 | ) | ||||||||
| Other sales | 6.41 | 7.26 | 6.76 | (0.50 | ) | (6.9 | ) | ||||||||
| Sales in Italy | 28.05 | 28.92 | 26.68 | (2.24 | ) | (7.7 | ) | ||||||||
| Retail rest of Europe | 3.18 | 3.22 | 2.99 | (0.23 | ) | (7.1 | ) | ||||||||
| Wholesale rest of Europe | 3.20 | 3.94 | 3.66 | (0.28 | ) | (7.1 | ) | ||||||||
| Wholesale outside Italy | 0.57 | 0.56 | 0.41 | (0.15 | ) | (26.8 | ) | ||||||||
| Other sales | 13.11 | 12.52 | 11.85 | (0.67 | ) | (5.4 | ) | ||||||||
| Sales outside Italy | 20.06 | 20.24 | 18.91 | (1.33 | ) | (6.6 | ) | ||||||||
| 48.11 | 49.16 | 45.59 | (3.57 | ) | (7.3 | ) | |||||||||
| Iberian Peninsula | 2.04 | 1.52 | - | (1.52 | ) | .. | |||||||||
| of which: | |||||||||||||||
| - Retail | 0.85 | 0.64 | (0.64 | ) | .. | ||||||||||
| - Wholesale | 1.19 | 0.88 | (0.88 | ) | .. | ||||||||||
| TOTAL SALES | 50.15 | 50.68 | 45.59 | (5.09 | ) | (10.0 | ) |
| Retail sales in Italy In 2009, while domestic consumption was barely unchanged, retail sales on the Italian network (9.03 mmtonnes) were up approximately 220 ktonnes from 2008, or 2.5%, mainly due to fidelity programs, marketing and pricing initiatives, in particular "Iperself" sales, and the opening of new services stations that sustained a 0.9 percentage point growth in market share from 30.6% at December 31, 2008 to 31.5% at December 31,2009. Higher sales mainly regarded gasoil and LPG sales, while gasoline sales declined slightly. |
At December 31, 2009, Eni’s retail network in Italy consisted of 4,474 service stations, 65 more than at December 31, 2008 (4,409 service stations), resulting from the positive balance of acquisitions/releases of lease concessions (90 units), the opening of new service stations (7 units), partly offset by the closing of service stations with low throughput (24 units) and the release of 9 service stations under highway concession. Average throughput related to gasoline and gasoil (2,482 kliters) registered an increase of 13 kliters from 2008. |
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| Retail and wholesale sales of refined products | (mmtonnes) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Italy | 19.71 | 19.96 | 18.59 | (1.37 | ) | (6.9 | ) | ||||||||
| Retail sales | 8.62 | 8.81 | 9.03 | 0.22 | 2.5 | ||||||||||
| Gasoline | 3.19 | 3.11 | 3.05 | (0.06 | ) | (1.9 | ) | ||||||||
| Gasoil | 5.25 | 5.50 | 5.74 | 0.24 | 4.4 | ||||||||||
| LPG | 0.17 | 0.19 | 0.22 | 0.03 | 15.8 | ||||||||||
| Lubricants | 0.01 | 0.01 | 0.02 | 0.01 | .. | ||||||||||
| Wholesale sales | 11.09 | 11.15 | 9.56 | (1.59 | ) | (14.3 | ) | ||||||||
| Gasoil | 4.42 | 4.52 | 4.30 | (0.22 | ) | (4.9 | ) | ||||||||
| Fuel Oil | 0.95 | 0.85 | 0.72 | (0.13 | ) | (15.3 | ) | ||||||||
| LPG | 0.37 | 0.38 | 0.35 | (0.03 | ) | (7.9 | ) | ||||||||
| Gasoline | 0.15 | 0.15 | 0.12 | (0.03 | ) | (20.0 | ) | ||||||||
| Lubricants | 0.13 | 0.12 | 0.09 | (0.03 | ) | (25.0 | ) | ||||||||
| Bunker | 1.58 | 1.70 | 1.38 | (0.32 | ) | (18.8 | ) | ||||||||
| Other | 3.49 | 3.43 | 2.60 | (0.83 | ) | (24.2 | ) | ||||||||
| Outside Italy (retail+wholesale) | 8.99 | 7.72 | 7.06 | (0.66 | ) | (8.5 | ) | ||||||||
| Gasoline | 2.29 | 2.12 | 1.89 | (0.23 | ) | (10.8 | ) | ||||||||
| Gasoil | 5.16 | 3.80 | 3.54 | (0.26 | ) | (6.8 | ) | ||||||||
| Jet fuel | 0.38 | 0.47 | 0.35 | (0.12 | ) | (25.5 | ) | ||||||||
| Fuel Oil | 0.25 | 0.23 | 0.28 | 0.05 | 21.7 | ||||||||||
| Lubricants | 0.09 | 0.11 | 0.10 | (0.01 | ) | (9.1 | ) | ||||||||
| LPG | 0.49 | 0.52 | 0.50 | (0.02 | ) | (3.8 | ) | ||||||||
| Other | 0.33 | 0.47 | 0.40 | (0.07 | ) | (14.9 | ) | ||||||||
| 28.70 | 27.68 | 25.65 | (2.03 | ) | (7.3 | ) | |||||||||
| Iberian Peninsula | 2.04 | 1.52 | - | (1.52 | ) | .. | |||||||||
| TOTAL SALES | 30.74 | 29.20 | 25.65 | (3.55 | ) | (12.2 | ) |
| In 2009, fuel sales of the
Blu line – high performance and low environmental
impact fuel – recorded lower prices from 2008 with
the stability of sales due to marketing initiatives and
fidelity programs during the year. Sales of BluDiesel and
its reformulated version BluDieselTech amounted
approximately to 600 ktonnes (720 mmliters), and
represented 10.5% of gasoil sales on Eni’s retail
network. At December 31, 2009, service stations marketing
BluDiesel totaled 4,104 units (4,095 at 2008 year end)
covering approximately 92% of Eni’s network. Retail
sales of BluSuper amounted to 82 ktonnes (110 mmliters),
in line with 2008 and covered 2.6% of gasoline sales on
Eni’s retail network. At December 31, 2009, service
stations marketing BluSuper totaled 2,679 units (2,631 at
December 31, 2008), covering approximately 60% of
Eni’s network. "You&Agip", the promotional campaign, launched in March 2007 and lasting 3 years finished in 2009. As of December 31, 2009, the number of customers that actively used the card in the year amounted to approximately 5.4 million. The average number of cards active each month was over 3.1 million. Volumes of fuel marketed under this initiative represented over 45% of total volumes marketed on Eni’s service stations joining |
the program, and 44% of overall volumes marketed on Eni’s network. In February 2010 Eni launched the new promotional campaign "you&eni" lasting 3 years until January 31, 2013.
|
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| Retail sales in the Rest
of Europe Excluding the impact of the divestment of marketing activities in the Iberian Peninsula to Galp (down 0.64 mmtonnes), in 2009 retail sales of refined products marketed in the rest of Europe (2.99 mmtonnes) were down approximately 230 ktonnes from 2008, or 7.1%, mainly in Germany and Eastern Europe due to a decrease in fuel demand. At December 31, 2009, Eni’s retail network in the rest of Europe consisted of 1,512 units, a decrease of 35 units from December 31, 2008 (1,547 service stations). The network evolution was as follows: (i) 32 low throughput service stations were closed; (ii) negative balance of acquisitions/releases of lease concessions (32 units) with negative changes in Germany and positive changes in Hungary; (iii) purchased 21 service stations, in particular in Romania; (iv) opened 8 new outlets. Average throughput (2,461 kliters) decreased by 116 kliters from 2008. Wholesale and other sales |
divestments in the Iberian
Peninsula), mainly in Germany, in the Czech Republic and
Switzerland due to declining consumption in particular of
gasoil for heating. Supplies of feedstock to the petrochemical industry (1.33 mmtonnes) decreased by approximately 370 ktonnes due to declining demand. Other sales (18.61 mmtonnes) decreased by approximately 1.17 mmtonnes, or 5.9%, mainly due to lower sales volumes to trader and oil companies, as well as the reduction of volumes sold to the cargo market, also due to lower refining throughputs. Capital expenditures In 2009, capital expenditures in the Refining & Marketing segment amounted to euro 635 million and regarded mainly: (i) refining, supply and logistics in Italy (euro 436 million), with projects designed to improve the conversion rate and flexibility of refineries, including the construction of an industrial plant employing the Eni’s proprietary Est technology, a new hydrocracker at the Sannazzaro refinery (operating from July) and at the Taranto refinery (start up scheduled in 2010) as well as expenditures on health, safety and environmental upgrades; (ii) upgrade of the retail network in Italy, wholesale and LPG activities (euro 118 million); (iii) upgrade of the retail network and purchase of service stations in the rest of Europe (euro 54 million). Expenditures on health, safety and the environment amounted to euro 78 million. |
| Capital expenditures | (euro million) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Italy | 873 | 850 | 581 | (269 | ) | (31.6 | ) | ||||||||
| Outside Italy | 106 | 115 | 54 | (61 | ) | (53.0 | ) | ||||||||
| 979 | 965 | 635 | (330 | ) | (34.2 | ) | |||||||||
| Refinery, supply and logistic | 675 | 630 | 436 | (194 | ) | (30.8 | ) | ||||||||
| Italy | 675 | 630 | 436 | (194 | ) | (30.8 | ) | ||||||||
| Marketing | 282 | 298 | 172 | (126 | ) | (42.3 | ) | ||||||||
| Italy | 176 | 183 | 118 | (65 | ) | (35.5 | ) | ||||||||
| Outside Italy | 106 | 115 | 54 | (61 | ) | (53.0 | ) | ||||||||
| Other | 22 | 37 | 27 | (10 | ) | (27.0 | ) | ||||||||
| 979 | 965 | 635 | (330 | ) | (34.2 | ) |
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| Key performance indicators | 2007 |
|
2008 |
|
2009 |
|
| Net sales from operations (a) | (euro million) | 6,934 | 6,303 | 4,203 | |||||||
| Basic petrochemicals | 3,582 | 3,060 | 1,832 | ||||||||
| Polymers | 3,109 | 2,961 | 2,185 | ||||||||
| Other sales | 243 | 282 | 186 | ||||||||
| Operating profit | 100 | (845 | ) | (675 | ) | ||||||
| Adjusted operating profit | 116 | (398 | ) | (426 | ) | ||||||
| Adjusted net profit | 74 | (323 | ) | (340 | ) | ||||||
| Capital expenditures | 145 | 212 | 145 | ||||||||
| Production | (ktonnes) | 8,795 | 7,372 | 6,521 | |||||||
| Sales of petrochemical products | 5,513 | 4,684 | 4,265 | ||||||||
| Average plant utilization rate | (%) | 80.6 | 68.6 | 65.4 | |||||||
| Employees at period end | (units) | 6,534 | 6,274 | 6,068 |
| (a) | Before elimination of intragroup sales. |
› In 2009, the Petrochemical segment incurred an adjusted net loss of euro 340 million, a decrease of euro 17 million from 2008, due to a prolonged weakness in industry fundamentals reflecting lower end-market demand and high competitive pressure.
› Sales of petrochemical products were 4,265 ktonnes, down 419 ktonnes from last year, or 8.9%, due to a context of economic downturn, especially in the automotive sector, that negatively influenced demand for petrochemical products.
› Petrochemical production volumes were 6,521 ktonnes, down 851 ktonnes, or 11.5%, due to a steep decline in demand for petrochemical products in all business.
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| Sales -
production - prices In 2009 sales of petrochemical products (4,265 ktonnes) decreased by 419 ktonnes from 2008 (or 8.9%) due to a general weakness of end-markets in the first nine months of 2009 with a slight recovery in demand for polymers in the last quarter. Petrochemical production (6,521 ktonnes) decreased by 851 ktonnes from 2008 (or 11.5%) affecting all business areas. The general demand decrease in the chemical industry, in particular for commodities, required unexpected outages in a number of plants in order to avoid excess stocks. Relevant production decreases were registered at the Porto Torres plant (down 51%), as result of the shutdown of the phenol plant at the beginning of the year and of reduced |
production for commercial
reasons. Nominal production capacity decreased by 3.3% from 2008, due to the shutdown of the Gela cracker and the Porto Torres phenol plant. The average plant utilization rate, calculated on nominal capacity decreased from 68.6% to 65.4% due to reduced production. Average unit sale prices decreased by 26%. The steeper decreases affected the prices of the main petrochemical products (olefins were down 35%), due to the negative impact of the oil price scenario (virgin naphtha was down 32.3% from 2008). Average unit prices of polymers, in particular elastomers (down 17%) decreased less, due to a slower adjustment to the oil scenario and to expected price increases in 2010. |
| Product availability | (ktonnes) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Basic petrochemicals | 6,274 | 5,110 | 4,350 | (760 | ) | (14.9 | ) | ||||||||
| Polymers | 2,521 | 2,262 | 2,171 | (91 | ) | (4.0 | ) | ||||||||
| Production | 8,795 | 7,372 | 6,521 | (851 | ) | (11.5 | ) | ||||||||
| Consumption and losses | (4,099 | ) | (3,539 | ) | (2,701 | ) | 838 | (23.7 | ) | ||||||
| Purchases and change in inventories | 816 | 851 | 445 | (406 | ) | (47.7 | ) | ||||||||
| 5,513 | 4,684 | 4,265 | (419 | ) | (8.9 | ) |
Business trends
| Basic petrochemicals Basic petrochemical revenues (euro 1,832 million) decreased by euro 1,228 million from 2008 (or 40.1%) in all the main business segments due to the steep reduction in average unit prices (ranging from 25% to 35%) related to the prices of main petrochemical products, and to a lower extent to the decrease in sales volumes. In particular olefins and aromatics sales volumes decreased by 8% and 10.5%, respectively, with a slight increase in the last quarter of 2009. Intermediates sales volumes continued to report a negative performance (down 34%) as a result of lower product availability due to the shutdown of the Porto Torres plant as a result of the unfavorable scenario. Basic petrochemicals production (4,350 ktonnes) decreased by 760 ktonnes from 2008 (or 14.9%), in line with lower demand of monomers. Polymers |
months of the year. Styrene
sales achieved a stable performance and compact
polystyrene sales increased by 2.5% from 2008. Sales
decreases were registered mainly in elastomers (down 7%)
due to a greater impact of industrial sectors affected by
the economic downturn (mainly automotive). Polymers production (2,171 ktonnes) decreased by 91 ktonnes from 2008 (or 4%), in line with sales trends. Production volumes of styrene and elastomers decreased by 3% mainly due to the shutdown of the Porto Torres plant. Elastomers production decreased by 8.8% as a result of plants outages, mainly in the first months of 2009 due to lower demand from industries, in particular the automotive sector. Capital expenditures In 2009, capital expenditures in the Petrochemicals segment amounted to euro 145 million (euro 212 million in 2008) and regarded mainly plant upgrades (euro 58 million), extraordinary maintenance (euro 28 million), environmental protection, safety and environmental regulation compliance (euro 28 million), upkeeping and rationalization (euro 20 million). |
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| Key performance indicators | 2007 |
|
2008 |
|
2009 |
|
| Net sales from operations (a) | (euro million) | 8,678 | 9,176 | 9,664 | ||||
| Operating profit | 837 | 1,045 | 881 | |||||
| Adjusted operating profit | 840 | 1,041 | 1,120 | |||||
| Adjusted net profit | 658 | 784 | 892 | |||||
| Capital expenditures | 1,410 | 2,027 | 1,630 | |||||
| Adjusted ROACE (b) | (%) | 17.1 | 16.8 | 15.4 | ||||
| Orders acquired | (euro million) | 11,845 | 13,860 | 9,917 | ||||
| Order backlog | (euro million) | 15,390 | 19,105 | 18,730 | ||||
| Employees at period end | (units) | 33,111 | 35,629 | 35,969 |
| (a) | Before elimination of intragroup sales. | |
| (b) | For a detailed explanation of adjusted capital employed and adjusted ROACE, see paragraph "Return On Average Capital Employed (ROACE)". |
› Adjusted net profit was euro 892 million, up euro 108 million from a year ago, or 13.8%, driven by steady revenue flows and profitability as a result of the large number of oil & gas projects that were started during the upward phase of the oil cycle.
› Operating profit decreased to euro 881 million, down euro 164 million from 2008, or 15.7%, as a result of a non-recurring charge amounting to euro 250 million reflecting the estimated cost of a possible resolution of the investigation related to the TSKJ consortium based on the current status of the ongoing discussions with US Authorities. The matter is fully disclosed under the section "Legal Proceedings" in the notes to the consolidated statements. Notwithstanding the charge is recognized in the segment results of the Engineering & Construction business as it relates to a project to build gas liquefaction plants, it will be fully incurred by Eni and Saipem’s minorities will be left unaffected due to the contractual obligations assumed by Eni to indemnify Saipem as part of the divestiture of Snamprogetti SpA, whose subsidiary Snamprogetti Netherlands BV participated to the TSKJ venture.
› Return on average capital employed calculated on an adjusted basis was 15.4% in 2009, lower than in 2008 (16.8%).
› Orders acquired amounted to euro 9,917 million, down euro 3,943 million from 2008 (down 28.4%), in particular in onshore construction and drilling onshore activities.
› Order backlog was euro 18,730 million at December 31, 2009 (euro 19,105 million at December 31, 2008), related in particular to projects in North Africa (30%), West Africa (15%) and the Rest of Europe (13%).
› Capital expenditures amounted to euro 1,630 million, down euro 397 million from 2008, or 19.6%. The main projects related to the upgrade of the construction and drilling fleet.
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| Activity for
the year Among the main orders acquired in 2009
were: |
Project offshore Angola. The
project is related to the connection of the Mavacola and
Clochas fields to the existing FPSO units; - an EPC contract on behalf of Qafco for the construction of a new urea plant in the city of Mesaieed, in Qatar; - a contract on behalf of Esso Highlands Ltd, for the installation of the gas sealine PNG LNG EPC2 for a total length of 407 kilometers, in Papua New Guinea; - an EPIC contract on behalf of Premier Oil Natuna Sea BV for the construction of two platforms and related infrastructures in the Gajah Baru offshore field in Indonesia; - an EPC contract on behalf of Sonatrach for the construction of a marine export terminal for the future urea/ammonia plant to be built near Arzew, in Algeria. Orders acquired amounted to euro 9,917 million, of these projects to be carried out outside Italy represented 79%, while orders from Eni companies amounted to 32% of the total. Eni’s order backlog was euro 18,730 million at December 31, 2008 (euro 19,105 million at December 31, 2008). Projects to be carried out outside Italy represented 93% of the total order backlog, while orders from Eni companies amounted to 22% of the total. |
| Orders acquired | (euro million) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Orders acquired | 11,845 | 13,860 | 9,917 | (3,943 | ) | (28.4 | ) | |||||||
| Offshore construction | 3,496 | 4,381 | 5,089 | 708 | 16.2 | |||||||||
| Onshore construction | 6,070 | (a) | 7,522 | 3,665 | (3,857 | ) | (51.3 | ) | ||||||
| Offshore drilling | 1,644 | 760 | 585 | (175 | ) | (23.0 | ) | |||||||
| Onshore drilling | 635 | 1,197 | 578 | (619 | ) | (51.7 | ) | |||||||
| of which: | ||||||||||||||
| - Eni | 1,923 | 540 | 3,147 | 2,607 | .. | |||||||||
| - Third parties | 9,922 | 13,320 | 6,770 | (6,550 | ) | (49.2 | ) | |||||||
| of which: | ||||||||||||||
| - Italy | 574 | 831 | 2,081 | 1,250 | .. | |||||||||
| - Outside Italy | 11,271 | 13,029 | 7,836 | (5,193 | ) | (39.9 | ) |
| (a) | Net of the backlog of divested companies (Haldor Topsøe and Camom Group) for euro 181 million. |
| Order backlog | (euro million) | Dec. 31, 2007 |
|
Dec. 31, 2008 |
|
Dec. 31, 2009 |
|
Change |
|
% Ch. |
||
| Order backlog | 15,390 | 19,105 | 18,730 | (375 | ) | (2.0 | ) | |||||||
| Offshore construction | 4,215 | 4,682 | 5,430 | 748 | 16.0 | |||||||||
| Onshore construction | 7,003 | (a) | 9,201 | 8,035 | (1,166 | ) | (12.7 | ) | ||||||
| Offshore drilling | 3,471 | 3,759 | 3,778 | 19 | 0.5 | |||||||||
| Onshore drilling | 701 | 1,463 | 1,487 | 24 | 1.6 | |||||||||
| of which: | ||||||||||||||
| - Eni | 3,399 | 2,547 | 4,103 | 1,556 | 61.1 | |||||||||
| - Third parties | 11,991 | 16,558 | 14,627 | (1,931 | ) | (11.7 | ) | |||||||
| of which: | ||||||||||||||
| - Italy | 799 | 435 | 1,341 | 906 | .. | |||||||||
| - Outside Italy | 14,591 | 18,670 | 17,839 | (831 | ) | (4.5 | ) |
| (a) | Net of the backlog of divested companies (Haldor Topsøe and Camom Group) for euro 181 million. |
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| Capital
expenditures In 2009 capital expenditures in the
Engineering & Construction segment (euro 1,630
million) mainly regarded: |
the conversion of a tanker
into an FPSO; (ii) Offshore drilling: construction of the two semisubmersible rigs Scarabeo 8 and 9, the new ultra deep water drillship Saipem 12000 and the jack up Perro Negro 6; (iii) Onshore drilling: construction/development of operating structures; (iv) Onshore: maintenance and upgrading of the existing asset base. |
| Capital expenditures | (euro million) | 2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Offshore construction | 566 | 741 | 691 | (50 | ) | (6.7 | ) | |||||
| Onshore construction | 76 | 48 | 19 | (29 | ) | (60.4 | ) | |||||
| Offshore drilling | 478 | 785 | 706 | (79 | ) | (10.1 | ) | |||||
| Onshore drilling | 266 | 424 | 188 | (236 | ) | (55.7 | ) | |||||
| Other expenditures | 24 | 29 | 26 | (3 | ) | (10.3 | ) | |||||
| 1,410 | 2,027 | 1,630 | (397 | ) | (19.6 | ) |
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Financial review
PROFIT AND LOSS ACCOUNT
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 87,204 | Net sales from operations (a) | 108,082 | 83,227 | (24,855 | ) | (23.0 | ) | ||||||||
| 833 | Other income and revenues | 728 | 1,118 | 390 | 53.6 | ||||||||||
| (61,933 | ) | Operating expenses | (80,354 | ) | (62,532 | ) | 17,822 | 22.2 | |||||||
| (8 | ) | of which non recurring items | 21 | (250 | ) | (271 | ) | ||||||||
| (129 | ) | Operating income (expense) (b) | (124 | ) | 55 | 179 | .. | ||||||||
| (7,236 | ) | Depreciation, depletion, amortization and impairments | (9,815 | ) | (9,813 | ) | 2 | .. | |||||||
| 18,739 | Operating profit | 18,517 | 12,055 | (6,462 | ) | (34.9 | ) | ||||||||
| 46 | Finance (expense) income | (640 | ) | (551 | ) | 89 | 13.9 | ||||||||
| 1,243 | Net income from investments | 1,373 | 569 | (804 | ) | (58.6 | ) | ||||||||
| 20,028 | Profit before income taxes | 19,250 | 12,073 | (7,177 | ) | (37.3 | ) | ||||||||
| (9,219 | ) | Income taxes | (9,692 | ) | (6,756 | ) | 2,936 | 30.3 | |||||||
| 46.0 | Tax rate (%) | 50.3 | 56.0 | 5.7 | |||||||||||
| 10,809 | Net profit | 9,558 | 5,317 | (4,241 | ) | (44.4 | ) | ||||||||
| Attributable to: | |||||||||||||||
| 10,011 | - Eni | 8,825 | 4,367 | (4,458 | ) | (50.5 | ) | ||||||||
| 798 | - minority interest | 733 | 950 | 217 | 29.6 | ||||||||||
| (a) | From January 1, 2009 Eni adopted IFRIC 13 "Customer Loyalty Programmes" that requires that the award points granted to clients within the related loyalty programmes be accounted as a separate component of the basic transaction, evaluated at their fair value and recognized as revenues when effectively used. Prior period results have been restated accordingly. | |
| (b) | From year 2009, the Company accounts gains and losses on non-hedging commodity derivative instruments, including both fair value re-measurement and settled transactions, as items of operating profit. Adjusted operating profit and net profit only include gains and losses associated with settled transactions, gross and net of the associated tax impact respectively. Prior period results have been restated accordingly. |
| Net profit In 2009 Eni’s net profit was euro 4,367 million compared with euro 8,825 million a year ago, down euro 4,458 million, or 50.5%. This result was driven by lower reported operating profit (down euro 6,462 million, or 34.9%) reflecting an unfavorable trading environment for oil prices, which were significantly lower than a year ago in the first nine months of the year. This trend was partly offset by the circumstance that the Company incurred a material charge related to inventory write-down of oil and products (down euro 2.35 billion) as they were aligned to their net realizable value at 2008 year end when the oil cycle hit a low. |
Group results were also affected by lower profits reported by equity-accounted entities, and a higher consolidated tax rate up from 50.3% to 56% (up 5.7 percentage points), mainly due to new tax rules in Italy and outside Italy which impacted taxes currently payable, charges accounted in the year which are not considered for fiscal purposes, and the circumstance that in 2008 the tax rate benefited from certain tax gains associated with an adjustment to deferred taxation amounting to euro 733 million as new tax provisions came into effect pertaining to both Italian and foreign subsidiaries. |
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Adjusted net profit
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 10,011 | Net profit attributable to Eni | 8,825 | 4,367 | (4,458 | ) | (50.5 | ) | ||||||||
| (499 | ) | Exclusion of inventory holding (gain) loss | 723 | (191 | ) | (914 | ) | ||||||||
| 57 | Exclusion of special items | 616 | 1,031 | 415 | |||||||||||
| of which: | |||||||||||||||
| 35 | - non recurring items | (21 | ) | 250 | 271 | ||||||||||
| 22 | - other special items | 637 | 781 | 144 | |||||||||||
| 9,569 | Eni's adjusted net profit (a) | 10,164 | 5,207 | (4,957 | ) | (48.8 | ) | ||||||||
| (a) | For a detailed explanation of adjusted operating profit and net profit see paragraph "Reconciliation of reported operating profit and reported net profit to results on an adjusted basis". |
| Eni’s adjusted net
profit for the year was euro 5,207 million compared
with euro 10,164 million a year ago, down euro 4,957
million, or 48.8%. Adjusted net profit excludes an inventory holding profit of euro 191 million and net special charges of euro 1,031 million, resulting in an overall adjustment equal to an increase of euro 840 million. The balance between special charges and gains is comprised of, on the negative side, impairment charges recorded on oil & gas properties in the Exploration & Production division, refineries and goodwill recognized on marketing assets in the Refining & Marketing division, and a number of petrochemicals plants (euro 1,395 million as before tax impact) as well as environmental (euro 298 million) and operational provisions (euro 378 million), including a non-recurring charge amounting to euro 250 million reflecting the estimated cost of a possible resolution of the investigation related to the TSKJ consortium based on the current status of the ongoing discussions with U.S. Authorities. |
The matter is fully
disclosed in the section "Legal Proceedings" in
the notes to the consolidated financial statements.
Notwithstanding the charge is recognized in the segment
results of the Engineering & Construction business as
it relates to a project to build gas liquefaction plants,
it will be fully incurred by Eni and Saipem’s
minorities will be left unaffected altogether due to the
contractual obligations assumed by Eni to indemnify
Saipem as part of the divestiture of Snamprogetti SpA,
whose subsidiary Snamprogetti Netherlands BV participates
to the TSKJ venture. On the positive side, gains were
recorded on the divestment of certain oil & gas
properties to the partner Suez (euro 277 million), gains
on fair value evaluation of certain non-hedging commodity
derivatives (euro 287 million), and positive adjustments
on deferred taxation and other tax benefits (euro 222
million). The breakdown of adjusted net profit by division is shown in the table below: |
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 6,328 | Exploration & Production | 7,900 | 3,878 | (4,022 | ) | (50.9 | ) | ||||||||
| 3,127 | Gas & Power | 2,648 | 2,916 | 268 | 10.1 | ||||||||||
| 294 | Refining & Marketing | 521 | (197 | ) | (718 | ) | .. | ||||||||
| 74 | Petrochemicals | (323 | ) | (340 | ) | (17 | ) | (5.3 | ) | ||||||
| 658 | Engineering & Construction | 784 | 892 | 108 | 13.8 | ||||||||||
| (210 | ) | Other activities | (279 | ) | (245 | ) | 34 | 12.2 | |||||||
| (62 | ) | Corporate and financial companies | (532 | ) | (744 | ) | (212 | ) | (39.8 | ) | |||||
| (16 | ) | Impact of unrealized intragroup profit elimination (a) | 76 | (3 | ) | (79 | ) | .. | |||||||
| 10,193 | 10,795 | 6,157 | (4,638 | ) | (43.0 | ) | |||||||||
| of which attributable to: | |||||||||||||||
| 624 | - Minority interest | 631 | 950 | 319 | 50.6 | ||||||||||
| 9,569 | - Eni | 10,164 | 5,207 | (4,957 | ) | (48.8 | ) | ||||||||
| (a) | This item concerned mainly intragroup sales of commodities, services and capital goods recorded in the assets of the purchasing business segment as of end of the period. |
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| The decline in group
adjusted net profit reflected lower results mainly
reported by: - the Exploration & Production division reported a decrease of euro 4,022 million in adjusted net profit, down 50.9%, due to a weaker operating performance (down euro 7,738 million, or 44.9%) affected by lower oil & gas realizations in dollars (down 32.2% and 29.8%, respectively) and lower sales volumes (down 9.2 mmboe, or 1.5%). These negatives were partly offset by the depreciation of the euro over the dollar (down 5.3%). The divisional performance was also impacted by a higher tax rate (from 55.9% to 60%); - the Refining & Marketing division reported adjusted net loss of euro 197 million, reversing a prior year profit of euro 521 million. The euro 718 million decline was mainly due to an adjusted operating loss of euro 357 million, a decrease of euro 937 million from 2008, driven by sharply lower refining margins as a result of an unfavorable trading environment; - the Petrochemicals division continued to report losses at both operating and net level (down euro 426 million and euro 340 million, respectively) due to weak industry fundamentals reflecting lower end markets demand, excess capacity and high competitive pressures. Net loss was almost in line with 2008. These negative
performances were partly offset by higher results
reported by: |
investors to understand
these business trends (see page 67). When measured
against this performance indicator, the Marketing
business confirmed the achievement of positive results.
The underlying performance was mainly driven by a
favorable trading environment related to energy
parameters, improved results reported by the subsidiary
Distrigas and the achievement of synergies on
integration, as well as the impact of the renegotiation
of long-term supply contracts. These positives were
partly offset by lower sales volumes, mainly on the
Italian market and the impact of rising competitive
pressure on marketing margins. Regulated
Businesses in Italy recorded steady results. The
International transport business reported weaker results; - the Engineering & Construction business achieved an increase of euro 108 million from 2008, or 13.8% reflecting better operating performance (up euro 79 million) driven by steady revenue flows and profitability as a result of the large number of oil & gas projects that were started during the upward phase of the oil cycle. Return on average capital employed (ROACE) calculated on an adjusted basis was 9.2% (17.6% in 2008). Eni’s results for 2009 were achieved in a trading environment characterized by an average 31.2% decrease in hydrocarbon realizations driven by a fall in Brent prices which were down 36.6% from 2008. Eni’s realized refining margins in dollar terms were sharply lower in the full year 2009, mirroring trends in Brent margins (down $3.4 per barrel, or 51.8%). A number of negative factors explained the reduction. Firstly, significantly compressed light-heavy crude differentials due to a reduction in heavy crude availability on the marketplace negatively affected the profitability of Eni’s complex refineries. Secondly, the industry continued to be plagued by weak fundamentals due to excess capacity, high inventory levels and stagnant demand affecting end-prices, while feedstock costs have been on an upward trend since the beginning of the second half. Finally, middle-distillates prices plunged to historical lows in terms of spread versus the cost of oil. Results of operations for the full year were helped by the depreciation of the euro vs. the US dollar, down by 5.3%. |
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Analysis of profit and loss account items
Net sales from operations
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 26,920 | Exploration & Production | 33,042 | 23,801 | (9,241 | ) | (28.0 | ) | ||||||||
| 27,793 | Gas & Power | 37,062 | 30,447 | (6,615 | ) | (17.8 | ) | ||||||||
| 36,349 | Refining & Marketing | 45,017 | 31,769 | (13,248 | ) | (29.4 | ) | ||||||||
| 6,934 | Petrochemicals | 6,303 | 4,203 | (2,100 | ) | (33.3 | ) | ||||||||
| 8,678 | Engineering & Construction | 9,176 | 9,664 | 488 | 5.3 | ||||||||||
| 205 | Other activities | 185 | 88 | (97 | ) | (52.4 | ) | ||||||||
| 1,313 | Corporate and financial companies | 1,331 | 1,280 | (51 | ) | (3.8 | ) | ||||||||
| Impact of unrealized intragroup profit elimination | 75 | (66 | ) | (141 | ) | ||||||||||
| (20,988 | ) | Consolidation adjustment | (24,109 | ) | (17,959 | ) | 6,150 | .. | |||||||
| 87,204 | 108,082 | 83,227 | (24,855 | ) | (23.0 | ) | |||||||||
| Eni’s net sales from
operations (revenues) for 2009 (euro 83,227 million)
were down euro 24,855 million from 2008 (down 23%)
primarily reflecting lower realizations on oil, products
and natural gas in dollar terms and lower sales volumes.
These negatives were partly offset by the positive impact
of the depreciation of the euro vs. the US dollar. Revenues generated by the Exploration & Production division (euro 23,801 million) decreased by euro 9,241 million, or 28%, mainly due to lower realizations in dollars (oil down 32.2%; natural gas down 29.8%) reflecting the first nine months trading environment and the impact of energy parameters on gas prices and a fall in gas spot prices. This decrease reflected also lower sales volumes (down 9.2 mmboe, or 1.5%). These negatives were partly offset by the depreciation of the euro vs. the US dollar. Revenues generated by the Gas & Power division (euro 30,447 million) decreased by euro 6,615 million, down 17.8%, mainly due to lower gas prices reflecting trends in energy parameters, as well as lower volumes sold in |
Italy (down 12.8 bcm, or
24.2%) due to the impact of the economic downturn. These
negatives were partly offset by increased sales due to
contribution of the Distrigas acquisition (up 12.02 bcm). Revenues generated by the Refining & Marketing division (euro 31,769 million) decreased by euro 13,248 million, or 29.4%, reflecting lower product prices and lower sales volumes (down 10%), partly offset by the impact of the depreciation of the euro vs. the US dollar. Revenues generated by the Petrochemical division (euro 4,203 million) decreased by euro 2,100 million, down 33.3% from 2008, mainly reflecting lower sales prices (down 26%) and a decline in volumes sold due to lower end-markets demand. Revenues generated by the Engineering & Construction business (euro 9,664 million) increased by euro 488 million, up 5.3% from 2008, as a result of the large number of oil & gas projects that were started during the upward phase of the oil cycle. |
Operating expenses
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 58,133 | Purchases, services and other | 76,350 | 58,351 | (17,999 | ) | (23.6 | ) | ||||||||
| of which: | |||||||||||||||
| 91 | - non-recurring items | (21 | ) | 250 | 271 | ||||||||||
| 470 | - other special items | 761 | 537 | (224 | ) | ||||||||||
| 3,800 | Payroll and related costs | 4,004 | 4,181 | 177 | 4.4 | ||||||||||
| of which: | |||||||||||||||
| (83 | ) | - non-recurring items | |||||||||||||
| 198 | - provision for redundancy incentives | 91 | 134 | 43 | |||||||||||
| 61,933 | 80,354 | 62,532 | (17,822 | ) | (22.2 | ) | |||||||||
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| Operating expenses
for the year (euro 62,532 million) decreased by euro
17,822 million from 2008, down 22.2%. Purchases,
services and other costs (euro 58,351 million)
decreased by euro 17,999 million (down 23.6%) due to
lower supply costs of purchased oil, gas and
petrochemical feedstocks, partially offset by the
depreciation of the euro against the dollar. Non-recurring items represented by a charge amounting to euro 250 million, estimated on the basis of the possible resolution of the investigation related to the TSKJ consortium based on the current status of the |
ongoing discussions with
U.S. Authorities. The matter is fully disclosed in the
section "Legal Proceedings" in the notes to the
consolidated financial statements. In 2008, environmental and risk provisions as well as impairments of certain current assets amounted to euro 761 million. Payroll and related costs (euro 4,181 million) increased by euro 177 million (up 4.4%) mainly due to higher unit labor cost in Italy and outside Italy, partly due to exchange rate translation differences, the increase in the average number of employees outside Italy, following the consolidation of Distrigas in the Gas & Power division, increased personnel in the Engineering & Construction and Exploration & Production businesses due to higher activity levels, as well as increased provisions for redundancy incentives. These increases were partially offset by a decrease in the average number of employees in Italy. |
Depreciation, depletion, amortization and impairments
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 5,431 | Exploration & Production | 6,678 | 6,789 | 111 | 1.7 | ||||||||||
| 739 | Gas & Power | 797 | 981 | 184 | 23.1 | ||||||||||
| 433 | Refining & Marketing | 430 | 408 | (22 | ) | (5.1 | ) | ||||||||
| 116 | Petrochemicals | 117 | 83 | (34 | ) | (29.1 | ) | ||||||||
| 248 | Engineering & Construction | 335 | 433 | 98 | 29.3 | ||||||||||
| 4 | Other activities | 3 | 2 | (1 | ) | (33.3 | ) | ||||||||
| 68 | Corporate and financial companies | 76 | 83 | 7 | 9.2 | ||||||||||
| (10 | ) | Impact of unrealized intragroup profit elimination | (14 | ) | (17 | ) | (3 | ) | |||||||
| 7,029 | Total depreciation, depletion and amortization | 8,422 | 8,762 | 340 | 4.0 | ||||||||||
| 207 | Impairments | 1,393 | 1,051 | (342 | ) | (24.6 | ) | ||||||||
| 7,236 | 9,815 | 9,813 | (2 | ) | .. | ||||||||||
| Depreciation, depletion
and amortization (euro 8,762 million) increased by
euro 340 million from 2008 (up 4%) mainly in the Gas
& Power and Exploration & Production divisions
(up euro 184 million and euro 111 million, respectively)
in connection with rising development amortization
charges reflecting consolidation of acquired assets and
increased expenditures to develop new complex fields.
These negatives were partly offset by the depreciation of
the euro against the dollar. Impairment charges of euro 1,051 million mainly regarded: (i) impairment charges recorded on proved and unproved properties in the Exploration & Production |
division due to downward reserve revisions and cost increases mainly recorded in the Gulf of Mexico, Australia, Congo and Egypt; (ii) refinery plants with low complexity, impairment of goodwill recognized on marketing assets acquired in Central-Eastern Europe and certain other marketing assets in the Refining & Marketing division, in the light of the negative outlook for the refining industry and a downsizing of growth expectations on certain markets; (iii) a number of plants in the Petrochemical division due to a worsening pricing/margin environment as a result of lower petrochemical demand, excess capacity and higher competitive pressure. |
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The breakdown of impairment charges by division is shown in the table below:
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 143 | Exploration & Production | 810 | 576 | (234 | ) | (28.9 | ) | ||||||||
| Gas & Power | 1 | (1 | ) | .. | |||||||||||
| 58 | Refining & Marketing | 299 | 346 | 47 | 15.7 | ||||||||||
| Petrochemicals | 279 | 121 | (158 | ) | (56.6 | ) | |||||||||
| Engineering & Construction | 2 | 2 | .. | ||||||||||||
| 6 | Other activities | 4 | 6 | 2 | 50.0 | ||||||||||
| 207 | 1,393 | 1,051 | (342 | ) | (24.6 | ) | |||||||||
Operating profit
The breakdown of the reported operating profit by division is
provided below:
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 13,433 | Exploration & Production | 16,239 | 9,120 | (7,119 | ) | (43.8 | ) | ||||||||
| 4,465 | Gas & Power | 4,030 | 3,687 | (343 | ) | (8.5 | ) | ||||||||
| 686 | Refining & Marketing | (988 | ) | (102 | ) | 886 | 89.7 | ||||||||
| 100 | Petrochemicals | (845 | ) | (675 | ) | 170 | 20.1 | ||||||||
| 837 | Engineering & Construction | 1,045 | 881 | (164 | ) | (15.7 | ) | ||||||||
| (444 | ) | Other activities | (346 | ) | (382 | ) | (36 | ) | (10.4 | ) | |||||
| (312 | ) | Corporate and financial companies | (743 | ) | (474 | ) | 269 | 36.2 | |||||||
| (26 | ) | Impact of unrealized intragroup profit elimination | 125 | (125 | ) | ||||||||||
| 18,739 | Operating profit | 18,517 | 12,055 | (6,462 | ) | (34.9 | ) | ||||||||
Adjusted operating profit
The breakdown of adjusted operating profit by division is
provided below:
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 18,739 | Operating profit | 18,517 | 12,055 | (6,462 | ) | (34.9 | ) | ||||||||
| (620 | ) | Exclusion of inventory holding (gains) losses | 936 | (345 | ) | (1,281 | ) | ||||||||
| 885 | Exclusion of special items | 2,155 | 1,412 | (743 | ) | ||||||||||
| of which: | |||||||||||||||
| 8 | - non-recurring items | (21 | ) | 250 | 271 | ||||||||||
| 877 | - other special items | 2,176 | 1,162 | (1,014 | ) | ||||||||||
| 19,004 | Adjusted operating profit | 21,608 | 13,122 | (8,486 | ) | (39.3 | ) | ||||||||
| Breakdown by division: | |||||||||||||||
| 13,770 | Exploration & Production | 17,222 | 9,484 | (7,738 | ) | (44.9 | ) | ||||||||
| 4,414 | Gas & Power | 3,564 | 3,901 | 337 | 9.5 | ||||||||||
| 292 | Refining & Marketing | 580 | (357 | ) | (937 | ) | .. | ||||||||
| 116 | Petrochemicals | (398 | ) | (426 | ) | (28 | ) | (7.0 | ) | ||||||
| 840 | Engineering & Construction | 1,041 | 1,120 | 79 | 7.6 | ||||||||||
| (207 | ) | Other activities | (244 | ) | (258 | ) | (14 | ) | (5.7 | ) | |||||
| (195 | ) | Corporate and financial companies | (282 | ) | (342 | ) | (60 | ) | (21.3 | ) | |||||
| (26 | ) | Impact of unrealized intragroup profit elimination | 125 | (125 | ) | ||||||||||
| 19,004 | 21,608 | 13,122 | (8,486 | ) | (39.3 | ) | |||||||||
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| Eni’s adjusted
operating profit amounted to euro 13,122 million, a
reduction of euro 8,486 million from 2008 (down 39.3%).
Adjusted operating profit is calculated by excluding an
inventory holding profit of euro 345 million and special
losses of euro 1,412 million. This reduction is mainly
due to a weaker performance recorded by the following
divisions: - the Exploration & Production division performance (down euro 7,738 million, or 44.9%) was driven by lower oil and natural gas realizations in dollars (down 32.2% and 29.8%, respectively) and lower production sales volumes (down 9.2 mmboe). These negatives were partly offset by the depreciation of the euro over the dollar (approximately euro 500 million); - the Refining & Marketing division reported an adjusted operating loss of euro 357 million (down euro 937 million) driven by sharply lower refining margins as a result of weak industry fundamentals and weaker results reported by the Marketing business; - the Petrochemicals division reported an operating loss of euro 426 million (down euro 28 million, or 7%) due to a prolonged weakness in industry fundamentals reflecting lower end-markets demand and high competitive pressures. These negatives were partly offset by the better operating performance recorded by: - the Gas & Power division improved performance (up euro 337 million, or 9.5%) was driven by a better operating performance of the Marketing activities. This reflected gains recorded on the settlement of certain non-hedging commodity derivatives |
amounting to euro 218
million, associated with future sales of gas and
electricity. Under IFRS, the Company is required to
recognize fair value accounting effects on those
derivatives in profit or loss because hedge accounting is
not followed. However, in assessing the underlying
performance of the Marketing business, management
calculates the EBITDA pro-forma adjusted as an
alternative measure of performance, by bringing forward
the impact of the settlement of those derivatives to
future reporting periods where the associated revenues
are expected to be recognized. Management believes that
disclosing this internally-used measure is helpful in
assisting investors to understand these business trends
(see page 67). When measured against this performance
indicator, the Marketing business confirmed the
achievement of positive results driven by a favorable
trading environment related to energy parameters and
exchange rates, the improved results of the subsidiary
Distrigas and the achievement of synergies on
integration, as well as the impact of the renegotiation
of long-term supply contracts. These positives were
partly offset by lower sales volumes (down 12.8 bcm),
mainly on the Italian market and the impact of the
competitive pressure on sale margins. The International
Transport business recorded a drop in operating profit; - the Engineering & Construction increased results (up euro 79 million, or 7.6%) were due to steady revenue flows and profitability as a result of the large number of oil & gas projects that were started during the upward phase of the oil cycle. |
Finance income (expense)
2007 |
(euro million) |
2008 |
2009 |
Change |
||||
| (412 | ) | Finance income (expense) related to net borrowings | (824 | ) | (673 | ) | 151 | |||||
| (703 | ) | Finance expense on short and long-term debt | (993 | ) | (753 | ) | 240 | |||||
| 236 | Net interest due to banks | 87 | 33 | (54 | ) | |||||||
| 55 | Net income from receivables and securities for non-financing operating activities | 82 | 47 | (35 | ) | |||||||
| 155 | Income (expense) on derivatives | (427 | ) | (4 | ) | 423 | ||||||
| (51 | ) | Exchange differences, net | 206 | (106 | ) | (312 | ) | |||||
| 174 | Other finance income and expense | 169 | 9 | (160 | ) | |||||||
| 188 | Income from equity instruments | 241 | 163 | (78 | ) | |||||||
| 127 | Net income from receivables and securities for financing operating activities and interest on tax credits | 99 | 43 | (56 | ) | |||||||
| (186 | ) | Finance expense due to the passage of time (accretion discount) | (249 | ) | (218 | ) | 31 | |||||
| 45 | Other | 78 | 21 | (57 | ) | |||||||
| (134 | ) | (876 | ) | (774 | ) | 102 | ||||||
| 180 | Finance expense capitalized | 236 | 223 | (13 | ) | |||||||
| 46 | (640 | ) | (551 | ) | 89 | |||||||
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| In 2009, net finance expenses decreased by euro 89 million to euro 551 million from 2008, mainly due to lower finance charges on finance debt due to lower interest rates on both euro-denominated (down 3.4 percentage points) and dollar loans (down 2.2 percentage points). Increased exchange differences losses (up euro 312 million) were offset by gains recognized in connection with fair value evaluation through profit and loss of certain derivative instruments on exchange rates (up | euro 423 million). The main financial gains amounting to euro 163 million, related to the contractual remuneration of 9.4% on the 20% interest in OAO Gazprom Neft, calculated until April 24, 2009, when Gazprom paid for the call option exercised on April 7, 2009. The gain also included the recovery of certain collateral operating expenses and other charges for a total amount of euro 172 million ($229 million at the exchange rate of the payment date). |
Net income from investments
The table below sets forth the breakdown of net income from
investments by division:
| 2009 (euro million) |
Exploration |
|
Gas |
|
Refining |
|
Engineering |
|
Other |
|
Group |
||
| Share of gains (losses) from equity-accounted investments | 142 | 310 | (70 | ) | 50 | (39 | ) | 393 | ||||||||||
| Dividends | 110 | 13 | 39 | 2 | 164 | |||||||||||||
| Gains on disposal | 3 | 2 | 1 | 10 | 16 | |||||||||||||
| Other income (expense), net | 1 | (3 | ) | (3 | ) | 1 | (4 | ) | ||||||||||
| 256 | 322 | (30 | ) | 59 | (38 | ) | 569 |
| Net income from investments amounted to euro 569 million and related to: (i) Eni’s share of profit of entities accounted for with the equity method (euro 393 million), mainly in the Gas & Power and Exploration & Production divisions. Gains also comprised an equity gain on the 60% interest in Artic Russia (euro 100 million) due to the divestment of a 51% stake in OOO Severenergia to | Gazprom based on the call
option exercised by the Russian company; (ii) dividends
received by entities accounted for at cost (euro 164
million), mainly related to Nigeria LNG Ltd. The table below sets forth a breakdown of net income/loss from investments for 2009: |
2007 |
|
(euro million) |
|
2008 |
|
2009 |
|
Change |
| 773 | Share of gains (losses) from equity-accounted investments | 640 | 393 | (247 | ) | |||||||
| 170 | Dividends | 510 | 164 | (346 | ) | |||||||
| 300 | Gains on disposal | 217 | 16 | (201 | ) | |||||||
| Other income (expense), net | 6 | (4 | ) | (10 | ) | |||||||
| 1,243 | 1,373 | 569 | (804 | ) | ||||||||
| The decrease of euro 804 million from 2008 related to lower profit and dividends from equity or cost-accounted entities in the Gas & Power and Exploration & Production divisions driven by an | unfavorable trading environment, as well as the circumstance that in 2008 a net gain of euro 190 million on the divestment of certain interests was recorded in the Engineering & Construction segment. |
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Income taxes
2007 |
|
(euro million) |
|
2008 |
|
2009 |
|
Change |
| Profit before income taxes | ||||||||||||
| 5,849 | Italy | 1,894 | 2,403 | 509 | ||||||||
| 14,179 | Outside Italy | 17,356 | 9,670 | (7,686 | ) | |||||||
| 20,028 | 19,250 | 12,073 | (7,177 | ) | ||||||||
| Income taxes | ||||||||||||
| 1,798 | Italy | 313 | 1,190 | 877 | ||||||||
| 7,421 | Outside Italy | 9,379 | 5,566 | (3,813 | ) | |||||||
| 9,219 | 9,692 | 6,756 | (2,936 | ) | ||||||||
| Tax rate (%) | ||||||||||||
| 30.7 | Italy | 16.5 | 49.5 | 33.0 | ||||||||
| 52.3 | Outside Italy | 54.0 | 57.6 | 3.6 | ||||||||
| 46.0 | 50.3 | 56.0 | 5.7 | |||||||||
| Income taxes were
euro 6,756 million, down euro 2,936 million, or 30.3%,
mainly reflecting lower income taxes currently payable by
subsidiaries in the Exploration & Production division
operating outside Italy due to lower taxable profit.
Reported tax rate increased by 5.7 percentage points due
to: (i) the impact of recently enacted tax regulations that provided a one-percentage point increase in the tax rate applicable to Italian companies in the energy sector and the enactment of a supplemental tax rate to be added to the Italian statutory tax rate resulting in higher taxes currently payable, amounting to euro 239 million in the full year; (ii) the recognition of a non-recurring item which is not considered for fiscal purposes represented by a charge amounting to euro 250 million that was estimated on the base of the possible resolution of the investigation related to the TSKJ consortium based on the current status of the ongoing discussions with U.S. Authorities. The matter is fully disclosed in the section "Legal Proceedings" in the notes to the consolidated financial statements; (iii) the payment of a balance for prior-year income taxes amounting to $310 million (or euro 230 million) in Libya as new rules came into effect which reassessed revenues for tax purposes; (iv) a write-down of certain deferred tax assets associated with upstream properties to factor in |
expected lower profitability
(down euro 72 million); (v) a lower capacity for Italian companies to deduct the cost of goods sold associated with lower gas inventories at year end (down euro 64 million); (vi) the circumstance that in 2008 certain tax gains associated with an adjustment to deferred taxation amounting to euro 733 million were recorded as new tax provisions came into effect pertaining to both Italian and foreign subsidiaries. These higher tax expenses were partly offset by recognition of a positive adjustment to deferred taxation following alignment of the tax base of certain oil and gas properties to their higher carrying amounts by paying a one-off tax, as part of the reorganization of upstream activities in Italy, and lower income taxes currently payable as new rules came into effect providing for the partial deduction of an Italian local tax from taxable income, also applying to previous fiscal years (for a total positive impact of euro 222 million). Adjusted tax rate, calculated as ratio of income taxes to net profit before taxes on an adjusted basis, was 53.6% (51.4% in 2008). Minority interest |
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Divisional performance1
Exploration & Production (a)
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 13,433 | Operating profit | 16,239 | 9,120 | (7,119 | ) | (43.8 | ) | ||||||||
| 337 | Exclusion of special items | 983 | 364 | ||||||||||||
| of which: | |||||||||||||||
| (11 | ) | Non-recurring items | |||||||||||||
| 348 | Other special items: | 983 | 364 | ||||||||||||
| 226 | - asset impairments | 989 | 618 | ||||||||||||
| - gains on disposals of assets | 4 | (270 | ) | ||||||||||||
| 6 | - provision for redundancy incentives | 8 | 31 | ||||||||||||
| 74 | - re-measurement gains/losses on commodity derivatives | (18 | ) | (15 | ) | ||||||||||
| 42 | - other | ||||||||||||||
| 13,770 | Adjusted operating profit | 17,222 | 9,484 | (7,738 | ) | (44.9 | ) | ||||||||
| 60 | Net finance income (expense) (b) | 70 | (23 | ) | (93 | ) | |||||||||
| 176 | Net income (expense) from investments (b) | 609 | 243 | (366 | ) | ||||||||||
| (7,678 | ) | Income taxes (b) | (10,001 | ) | (5,826 | ) | 4,175 | ||||||||
| 54.8 | Tax rate (%) | 55.9 | 60.0 | 4.1 | |||||||||||
| 6,328 | Adjusted net profit | 7,900 | 3,878 | (4,022 | ) | (50.9 | ) | ||||||||
| Results also include: | |||||||||||||||
| 5,574 | amortizations and depreciations | 7,488 | 7,365 | (123 | ) | (1.6 | ) | ||||||||
| of which: | |||||||||||||||
| 1,777 | exploration expenditures | 2,057 | 1,551 | (506 | ) | (24.6 | ) | ||||||||
| 1,370 | - amortizations of exploratory drilling expenditure and other | 1,577 | 1,264 | (313 | ) | (19.8 | ) | ||||||||
| 407 | - amortizations of geological and geophysical exploration expenses | 480 | 287 | (193 | ) | (40.2 | ) | ||||||||
| (a) | From January 1, 2009, results of the gas storage business are reported within the Gas & Power segment reporting unit following restructuring of Eni’ regulated gas businesses in Italy that was approved by the Company’s Board of Directors and is expected to close by mid-year. Prior period results have been restated accordingly. | |
| (b) | Excluding special items. |
| In 2009, the Exploration
& Production division reported an adjusted
operating profit of euro 9,484 million, a decrease of
euro 7,738 million compared to 2008, or 44.9%, driven by
lower oil & gas realizations in dollars (down 32.2%
and down 29.8%, respectively) and lower sales volumes
(down 9.2 mmboe). These negatives were partly offset by
the depreciation of the euro over the dollar
(approximately euro 500 million). Special charges excluded by adjusted operating profit amounted to euro 364 million and comprised impairments of proved and unproved mineral interests mainly due to downward reserve revisions and cost increases, mainly in the Gulf of Mexico. Gains were recorded on the divestment of certain exploration and production assets as part of the agreements signed with Suez, while re-measurement losses were recorded on fair value evaluation of the ineffective portion of certain cash flow hedges and provisions for redundancy incentives. |
In 2009 liquids and gas
realizations decreased on average by 31.2% in dollar
terms, driven by lower oil prices for market benchmarks
(Brent crude price decreased by 36.6%), partly offset by
a relative appreciation of the Eni equity basket (down
32.2%). Eni’s average oil realizations were barely unchanged, due to the settlement of certain commodity derivatives relating to the sale of 42.2 mmbbl. In the first nine months of the year, liquids realizations increased by $0.45 per barrel from the sale of 31.6 mmbbl at the hedged price. The gain was absorbed by the reduction on average by $1.46 per barrel from the sale of 10.6 mmbbl in the fourth quarter, reflecting the inversion in oil prices trends. These derivatives were entered into to hedge exposure to variability in future cash flows expected from the sale of a portion of the Company’s proved reserves, in connection with the acquisition of oil and gas assets in Congo and in the Gulf of Mexico, for an original amount |
| (1) | For a detailed explanation of adjusted operating profit and net profit see the paragraph "Reconciliation of reported operating profit and reported net profit to results on an adjusted basis". |
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| of approximately 125.7 mmbbl
in the 2008-2011 period, decreasing to approximately 37.5
mmbbl by end of 2009. In 2009 average gas realizations were down 29.8%, driven by time-lags between movements in oil prices |
and their effect on gas
prices provided in pricing formulae and weak spot prices. Liquids realizations and the impact of commodity derivatives were as follows: |
| Liquids | 2008 |
|
2009 |
|
| Sales volumes | (mmbbl) | 364.3 | 373.5 | |||||
| Sales volumes hedged by derivatives (cash flow hedge) | 46.0 | 42.2 | ||||||
| Total price per barrel, excluding derivatives | ($/bbl) | 88.17 | 56.98 | |||||
| Realized gains (losses) on derivatives | (4.13 | ) | (0.03 | ) | ||||
| Total average price per barrel | ($/bbl) | 84.05 | 56.95 |
Gas & Power (a)
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 4,465 | Operating profit | 4,030 | 3,687 | (343 | ) | (8.5 | ) | ||||||||
| 44 | Exclusion of inventory holding (gains) losses | (429 | ) | 326 | |||||||||||
| (95 | ) | Exclusion of special items: | (37 | ) | (112 | ) | |||||||||
| of which: | |||||||||||||||
| (61 | ) | Non-recurring items | |||||||||||||
| (34 | ) | Other special items: | (37 | ) | (112 | ) | |||||||||
| 15 | - environmental provisions | 12 | 19 | ||||||||||||
| - asset impairments | 1 | 27 | |||||||||||||
| - gains on disposals of assets | 7 | (6 | ) | ||||||||||||
| - risk provisions | 115 | ||||||||||||||
| 38 | - provisions for redundancy incentives | 20 | 25 | ||||||||||||
| (16 | ) | - re-measurement gains/losses on commodity derivatives | (74 | ) | (292 | ) | |||||||||
| (71 | ) | - other | (3 | ) | |||||||||||
| 4,414 | Adjusted operating profit | 3,564 | 3,901 | 337 | 9.5 | ||||||||||
| 2,284 | Marketing | 1,309 | 1,721 | 412 | 31.5 | ||||||||||
| 1,685 | Regulated business in Italy | 1,732 | 1,796 | 64 | 3.7 | ||||||||||
| 445 | International transport | 523 | 384 | (139 | ) | (26.6 | ) | ||||||||
| (5 | ) | Net finance income (expense) (b) | (13 | ) | (15 | ) | (2 | ) | |||||||
| 420 | Net income (expense) from investments (b) | 420 | 332 | (88 | ) | ||||||||||
| (1,702 | ) | Income taxes (b) | (1,323 | ) | (1,302 | ) | 21 | ||||||||
| 35.2 | Tax rate (%) | 33.3 | 30.9 | (2.4 | ) | ||||||||||
| 3,127 | Adjusted net profit | 2,648 | 2,916 | 268 | 10.1 | ||||||||||
| (a) | From January 1, 2009, results of the gas storage business are reported within the Gas & Power segment reporting unit, within the regulated businesses results, following restructuring of Eni regulated gas businesses in Italy. As of that date, the results of the regulated businesses in Italy therefore include results of the Transport, Distribution, Re-gasification and Storage activities in Italy. Results of the Power generation activity are reported within the Marketing business as it is ancillary to the latter. Prior period results have been restated accordingly. | |
| (b) | Excluding special items. |
| In 2009 the Gas & Power division reported adjusted operating profit of euro 3,901 million, an increase of euro 337 million compared to 2008, up 9.5%, driven by a better operating performance of the Marketing activities (up euro 412 million, or 31.5%). This reflected gains recorded on the settlement of certain non-hedging commodity derivatives amounting to euro 218 million, associated with future sales of gas and electricity. Under IFRS, the Company is required to recognize fair | value accounting effects on those derivatives in profit or loss because hedge accounting is not followed. However, in assessing the underlying performance of the Marketing business, management calculates the EBITDA pro-forma adjusted as an alternative measure of performance, by bringing forward the impact of the settlement of those derivatives to future reporting periods where the associated revenues are expected to be recognized. Management believes that disclosing |
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| this internally-used measure
is helpful in assisting investors to understand these
business trends (see below). When measured against this
performance indicator, the Marketing business confirmed
the achievement of positive results driven by a favorable
trading environment related to energy parameters and
exchange rates, the improved results of the subsidiary
Distrigas and the achievement of synergies on
integration, as well as the impact of the renegotiation
of certain long-term supply contracts. These positives
were partly offset by lower sales volumes, mainly on the
Italian market and the impact of rising competitive
pressures. The International Transport business recorded
a drop in operating profit. Special items excluded from the adjusted operating profit amounted to euro 112 million and mainly regarded a provision in the LNG business and re-measurement impacts recorded on fair value evaluation of certain non-hedging commodity derivatives (euro 292 million) in the Marketing business, as well as provisions for redundancy incentives. Adjusted net profit was euro 2,916 million, increasing by euro 268 million from 2008 (up 10.1%) due to an improved operating performance and offset in part by lower earnings reported by equity accounted entities. Marketing |
down by approximately a
fourth (down 12.8 bcm) and the impact of competitive
pressures on margins. An improved scenario for energy
parameters, the contribution of the acquisition of
Distrigas in terms of integration synergies and improved
performance together with the impact of the renegotiation
of long-term supply contracts were the main positive
trends for the year. Regulated businesses in Italy The Storage business reported an increased adjusted operating profit from a year ago (euro 227 million and euro 183 million in 2009 and 2008, respectively). International Transport Other performance indicators |
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 5,029 | Pro-forma EBITDA adjusted | 4,310 | 4,403 | 93 | 2.2 | ||||||||||
| 3,061 | Marketing | 2,271 | 2,392 | 121 | 5.3 | ||||||||||
| (64 | ) | of which: +/(-) adjustment on commodity derivatives | 119 | (133 | ) | ||||||||||
| 1,248 | Regulated businesses in Italy | 1,284 | 1,345 | 61 | 4.8 | ||||||||||
| 720 | International transport | 755 | 666 | (89 | ) | (11.8 | ) | ||||||||
| EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization charges) on an adjusted basis is calculated by adding amortization and depreciation charges to adjusted operating profit which is also modified to take into account impact associated with certain derivatives instruments as discussed below. | This performance indicator includes the adjusted EBITDA of Eni’s wholly owned subsidiaries and Eni’s share of adjusted EBITDA generated by certain associates which are accounted for under the equity method for IFRS purposes. Snam Rete Gas’ EBITDA is included according to Eni’s share of equity (55.57% |
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| as of December 31, 2009, which takes into account the amount of own shares held in treasury by the subsidiary itself) although this Company is fully consolidated when preparing consolidated financial statements in accordance with IFRS, due to its listed company status. Italgas SpA and Stoccaggi Gas Italia SpA results are also included according to the same share of equity as Snam Rete Gas, due to the closing of the restructuring deal which involved Eni’s regulated business in the Italian gas sector, whereby the parent company Eni SpA divested the entire share capital of the two subsidiaries to Snam Rete Gas. In order to calculate the EBITDA pro-forma adjusted, the adjusted operating profit of the Marketing business is modified to take into account the impact of the settlement of certain commodity and exchange rate derivatives that do not meet the formal criteria to be classified as hedges under the IFRS. Those are entered into by | the Company in view of
certain amounts of gas and electricity that the Company
expects to supply at fixed prices in future periods. The
impact of those derivatives is allocated to the EBITDA
pro-forma adjusted relating to the reporting periods
during which those supplies at fixed prices are
recognized. Management believes that the EBITDA pro-forma
adjusted is an important alternative measure to assess
the performance of Eni’s Gas & Power division,
taking into account evidence that this division is
comparable to European utilities in the gas and power
generation sector. This measure is provided in order to
assist investors and financial analysts in assessing the
Eni Gas & Power divisional performance as compared to
its European peers, as EBITDA is widely used as the main
performance indicator for utilities. The EBITDA pro-forma adjusted is a non-GAAP measure under IFRS. |
Refining & Marketing
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 686 | Operating profit | (988 | ) | (102 | ) | 886 | (89.7 | ) | |||||||
| (658 | ) | Exclusion of inventory holding (gains) losses | 1,199 | (792 | ) | ||||||||||
| 264 | Exclusion of special items | 369 | 537 | ||||||||||||
| of which: | |||||||||||||||
| 35 | Non-recurring items | (21 | ) | ||||||||||||
| 229 | Other special items: | 390 | 537 | ||||||||||||
| 128 | - environmental provisions | 76 | 72 | ||||||||||||
| 58 | - asset impairments | 299 | 389 | ||||||||||||
| - gains on disposals of assets | 13 | (2 | ) | ||||||||||||
| 9 | - risk provisions | 17 | |||||||||||||
| 31 | - provisions for redundancy incentives | 23 | 22 | ||||||||||||
| 6 | - re-measurement gains/losses on commodity derivatives | (21 | ) | 39 | |||||||||||
| (3 | ) | - other | |||||||||||||
| 292 | Adjusted operating profit | 580 | (357 | ) | (937 | ) | .. | ||||||||
| Net finance income (expense) (a) | 1 | (1 | ) | ||||||||||||
| 126 | Net income (expense) from investments (a) | 174 | 75 | (99 | ) | ||||||||||
| (124 | ) | Income taxes (a) | (234 | ) | 85 | 319 | |||||||||
| 29.7 | Tax rate (%) | 31.0 | .. | .. | |||||||||||
| 294 | Adjusted net profit | 521 | (197 | ) | (718 | ) | .. | ||||||||
| (a) | Excluding special items. |
| In 2009 the Refining & Marketing division reported an adjusted operating loss of euro 357 million, reversing a prior year profit of euro 580 million. The marked decrease (down euro 937 million from 2008) was mainly driven by sharply lower refining margins as a result of an unfavorable trading environment, due to narrowing price differentials between heavy and light crude and excess finished products, in particular diesel oil, whose spread on raw material reached historical lows in the | fourth quarter. Full year results were also affected by lower operating performance delivered by the Marketing activities. An improved performance was delivered in the first nine months reflecting market share gains posted by the Italian retailing activities supported by effective marketing campaigns and pricing initiatives, which were more than offset by lower marketed volumes affected by weak demand on wholesale markets in Italy and retail European markets. |
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| Special charges excluded from adjusted operating profit amounted to euro 537 million and mainly related to asset impairment charges recorded in the light of the negative outlook for the refining industry and a downsizing of the growth expectations on certain markets. In particular, impairment charges affected low complexity refineries, including refineries participated by Eni, goodwill recognized on marketing assets acquired in Central-Eastern Europe, marketing assets in Europe and capital expenditures for the period on assets impaired in previous | reporting periods. Other
special charges mainly related to environmental and other
risk provisions and re-measurement losses recorded on
fair value evaluation of certain non-hedging commodity
derivatives. Full-year adjusted net loss was euro 197 million (down euro 718 million, reversing a prior year profit of euro 521 million), mainly due to a lower operating performance (down euro 937 million) and decreased earnings reported by equity-accounted entities. |
Petrochemicals
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 100 | Operating profit | (845 | ) | (675 | ) | 170 | 20.1 | ||||||||
| (6 | ) | Exclusion of inventory holding (gains) losses | 166 | 121 | |||||||||||
| 22 | Exclusion of special items | 281 | 128 | ||||||||||||
| of which: | |||||||||||||||
| (2 | ) | Non-recurring items | |||||||||||||
| 24 | Other special items: | 281 | 128 | ||||||||||||
| - asset impairments | 278 | 121 | |||||||||||||
| - gains on disposals of assets | (5 | ) | |||||||||||||
| 24 | - provisions for redundancy incentives | 8 | 10 | ||||||||||||
| - re-measurement gains/losses on commodity derivatives | (3 | ) | |||||||||||||
| 116 | Adjusted operating profit | (398 | ) | (426 | ) | (28 | ) | (7.0 | ) | ||||||
| 1 | Net finance income (expense) (a) | 1 | (1 | ) | |||||||||||
| 1 | Net income (expense) from investments (a) | (9 | ) | 9 | |||||||||||
| (44 | ) | Income taxes (a) | 83 | 86 | 3 | ||||||||||
| 74 | Adjusted net profit | (323 | ) | (340 | ) | (17 | ) | (5.3 | ) | ||||||
| (a) | Excluding special items. |
| The Petrochemical division
reported an adjusted operating loss of euro 426
million, an increase of euro 28 million from 2008, due to
a prolonged weakness in industry fundamentals reflecting
lower end-markets demand and high competitive pressures. Special charges excluded from adjusted operating loss of euro 128 million related mainly to impairment |
of assets, in particular the Porto Marghera and Sicily plants for the production of olefins, aromatics and polyethylene, due to an expected unfavorable trading environment in terms of margins/volumes, affected by lower petrochemical products demand and higher competitive pressures, in connection with new available capacity in the Middle-East. |
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Engineering & Construction
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 837 | Operating profit | 1,045 | 881 | (164 | ) | (15.7 | ) | ||||||||
| 3 | Exclusion of special items | (4 | ) | 239 | |||||||||||
| of which: | |||||||||||||||
| (4 | ) | Non-recurring items | 250 | ||||||||||||
| 7 | Other special items: | (4 | ) | (11 | ) | ||||||||||
| - asset impairments | 2 | ||||||||||||||
| - gains on disposals of assets | (4 | ) | 3 | ||||||||||||
| 7 | - provisions for redundancy incentives | ||||||||||||||
| - re-measurement gains/losses on commodity derivatives | (16 | ) | |||||||||||||
| 840 | Adjusted operating profit | 1,041 | 1,120 | 79 | 7.6 | ||||||||||
| Net finance income (expense) (a) | 1 | (1 | ) | ||||||||||||
| 80 | Net income (expense) from investments (a) | 49 | 49 | ||||||||||||
| (262 | ) | Income taxes (a) | (307 | ) | (277 | ) | 30 | ||||||||
| 28.5 | Tax rate (%) | 28.1 | 23.7 | (4.4 | ) | ||||||||||
| 658 | Adjusted net profit | 784 | 892 | 108 | 13.8 | ||||||||||
| (a) | Excluding special items. |
| The Engineering &
Construction division reported an adjusted operating
profit increasing by euro 79 million or 7.6%, to euro
1,120 million, reflecting steady revenue flows and
profitability as a result of the large number of oil
& gas projects that were started during the upward
phase of the oil cycle. Special charges excluded from adjusted operating profit related mainly to a non-recurring item represented by a charge amounting to euro 250 |
million that was estimated
on the basis of the possible resolution of the
investigation related to the TSKJ consortium based on the
current status of the ongoing discussions with U.S.
Authorities. The matter is fully disclosed in the section
"Legal Proceedings" in the notes to the
consolidated financial statements. Adjusted net profit amounted to euro 892 million, an increase of euro 108 million from 2008. |
Other activities
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| (444 | ) | Operating profit | (346 | ) | (382 | ) | (36 | ) | (10.4 | ) | |||||
| 237 | Exclusion of special items | 102 | 124 | ||||||||||||
| of which: | |||||||||||||||
| 61 | Non-recurring items | ||||||||||||||
| 176 | Other special items: | 102 | 124 | ||||||||||||
| 210 | - environmental provisions | 101 | 153 | ||||||||||||
| 6 | - asset impairments | 5 | 5 | ||||||||||||
| - gains on disposals of assets | (14 | ) | (2 | ) | |||||||||||
| 13 | - risk provision | 4 | (4 | ) | |||||||||||
| 18 | - provisions for redundancy incentives | 4 | 8 | ||||||||||||
| (71 | ) | - other | 2 | (36 | ) | ||||||||||
| (207 | ) | Adjusted operating profit | (244 | ) | (258 | ) | (14 | ) | (5.7 | ) | |||||
| (8 | ) | Net financial income (expense) (a) | (39 | ) | 12 | 51 | |||||||||
| 5 | Net income (expense) from investments (a) | 4 | 1 | (3 | ) | ||||||||||
| (210 | ) | Adjusted net profit | (279 | ) | (245 | ) | 34 | 12.2 | |||||||
| (a) | Excluding special items. |
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Corporate and financial companies
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| (312 | ) | Operating profit | (743 | ) | (474 | ) | 269 | 36.2 | |||||||
| 117 | Exclusion of special items | 461 | 132 | ||||||||||||
| of which: | |||||||||||||||
| (10 | ) | Non-recurring items | |||||||||||||
| 127 | Other special items: | 461 | 132 | ||||||||||||
| 12 | - environmental provisions | 120 | 54 | ||||||||||||
| - gains on disposals of assets | (9 | ) | |||||||||||||
| 32 | - provisions for redundancy incentives | 28 | 38 | ||||||||||||
| 83 | - re-measurement gains/losses on commodity derivatives | 52 | |||||||||||||
| - other | 270 | 40 | |||||||||||||
| (195 | ) | Adjusted operating profit | (282 | ) | (342 | ) | (60 | ) | (21.3 | ) | |||||
| (25 | ) | Net financial income (expense) (a) | (661 | ) | (525 | ) | 136 | ||||||||
| 4 | Net income (expense) from investments (a) | 5 | (5 | ) | |||||||||||
| 154 | Income taxes (a) | 406 | 123 | (283 | ) | ||||||||||
| (62 | ) | Adjusted net profit | (532 | ) | (744 | ) | (212 | ) | (39.8 | ) | |||||
| (a) | Excluding special items. |
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Non-GAAP measures
Reconciliation of reported operating profit and
reported net profit to results on an adjusted basis
| Management evaluates Group
and business performance on the basis of adjusted
operating profit and adjusted net profit, which are
arrived at by excluding inventory holding gains or losses
and special items. Further more, finance charges on
finance debt, interest income, gains or losses deriving
from evaluation of certain derivative financial
instruments at fair value through profit or loss (as they
do not meet the formal criteria to be assessed as hedges
under IFRS, excluding commodity derivatives), and
exchange rate differences are all excluded when
determining adjusted net profit of each business segment.
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. The
Italian statutory tax rate of 34% is applied to finance
charges and income (33% in previous reporting periods).
Adjusted operating profit and adjusted net profit are
non-GAAP financial measures under either IFRS, or U.S.
GAAP. Management includes them in order to facilitate a
comparison of base business performance across periods
and allow financial analysts to evaluate Eni’s
trading performance on the basis of their forecasting
models. In addition, management uses segmental adjusted
net profit when calculating return on average capital
employed (ROACE) by each business segment. The
following is a description of items that are excluded
from the calculation of adjusted results. Special items include certain significant income or charges pertaining to either: (i) infrequent or unusual events and transaction, being identified as non-recurring items under such circumstances; |
or (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. 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 include gains and losses on
re-measurement at fair value of certain non-hedging
commodity derivatives, including the ineffective portion
of cash flow hedges. 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. In addition gains or losses on the fair value evaluation of the aforementioned derivative financial instruments, excluding commodity derivatives, and exchange rate differences are excluded from the adjusted net profit of business segments. 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 division). Finance charges or interest income and related taxation effects excluded from the adjusted net profit of the business segments are allocated on the aggregate Corporate and financial companies. For a reconciliation of adjusted operating profit and adjusted net profit to reported operating profit and reported net profit see tables below. |
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2009
| (euro million) | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized intragroup profit elimination | Group | |||||||||
| Reported operating profit | 9,120 | 3,687 | (102 | ) | (675 | ) | 881 | (382 | ) | (474 | ) | 12,055 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | 326 | (792 | ) | 121 | (345 | ) | |||||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | 250 | 250 | |||||||||||||||||||||||||
| Other special (income) charges: | 364 | (112 | ) | 537 | 128 | (11 | ) | 124 | 132 | 1,162 | |||||||||||||||||
| - environmental charges | 19 | 72 | 153 | 54 | 298 | ||||||||||||||||||||||
| - asset impairments | 618 | 27 | 389 | 121 | 2 | 5 | 1,162 | ||||||||||||||||||||
| - gains on disposals of assets | (270 | ) | (6 | ) | (2 | ) | 3 | (2 | ) | (277 | ) | ||||||||||||||||
| - risk provisions | 115 | 17 | (4 | ) | 128 | ||||||||||||||||||||||
| - provision for redundancy incentives | 31 | 25 | 22 | 10 | 8 | 38 | 134 | ||||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | (15 | ) | (292 | ) | 39 | (3 | ) | (16 | ) | (287 | ) | ||||||||||||||||
| - other | (36 | ) | 40 | 4 | |||||||||||||||||||||||
| Special items of operating profit | 364 | (112 | ) | 537 | 128 | 239 | 124 | 132 | 1,412 | ||||||||||||||||||
| Adjusted operating profit | 9,484 | 3,901 | (357 | ) | (426 | ) | 1,120 | (258 | ) | (342 | ) | 13,122 | |||||||||||||||
| Net finance (expense) income (a) | (23 | ) | (15 | ) | 12 | (525 | ) | (551 | ) | ||||||||||||||||||
| Net income from investments (a) | 243 | 332 | 75 | 49 | 1 | 700 | |||||||||||||||||||||
| Income taxes (a) | (5,826 | ) | (1,302 | ) | 85 | 86 | (277 | ) | 123 | (3 | ) | (7,114 | ) | ||||||||||||||
| Tax rate (%) | 60.0 | 30.9 | 23.7 | 53.6 | |||||||||||||||||||||||
| Adjusted net profit | 3,878 | 2,916 | (197 | ) | (340 | ) | 892 | (245 | ) | (744 | ) | (3 | ) | 6,157 | |||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 950 | ||||||||||||||||||||||||||
| - Eni's adjusted net profit | 5,207 | ||||||||||||||||||||||||||
| Eni's reported net profit | 4,367 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | (191 | ) | |||||||||||||||||||||||||
| Exclusion of special items: | 1,031 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | 250 | ||||||||||||||||||||||||||
| - other special (income) charges | 781 | ||||||||||||||||||||||||||
| Eni's adjusted net profit | 5,207 | ||||||||||||||||||||||||||
| (a) | Excluding special items. |
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2008
| (euro million) | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized intragroup profit elimination | Group | |||||||||
| Reported operating profit | 16,239 | 4,030 | (988 | ) | (845 | ) | 1,045 | (346 | ) | (743 | ) | 125 | 18,517 | ||||||||||||||
| Exclusion of inventory holding (gains) losses | (429 | ) | 1,199 | 166 | 936 | ||||||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | (21 | ) | (21 | ) | |||||||||||||||||||||||
| Other special (income) charges: | 983 | (37 | ) | 390 | 281 | (4 | ) | 102 | 461 | 2,176 | |||||||||||||||||
| - environmental charges | 12 | 76 | 101 | 120 | 309 | ||||||||||||||||||||||
| - asset impairments | 989 | 1 | 299 | 278 | 5 | 1,572 | |||||||||||||||||||||
| - gains on disposals of assets | 4 | 7 | 13 | (5 | ) | (4 | ) | (14 | ) | (9 | ) | (8 | ) | ||||||||||||||
| - risk provisions | 4 | 4 | |||||||||||||||||||||||||
| - provision for redundancy incentives | 8 | 20 | 23 | 8 | 4 | 28 | 91 | ||||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | (18 | ) | (74 | ) | (21 | ) | 52 | (61 | ) | ||||||||||||||||||
| - other | (3 | ) | 2 | 270 | 269 | ||||||||||||||||||||||
| Special items of operating profit | 983 | (37 | ) | 369 | 281 | (4 | ) | 102 | 461 | 2,155 | |||||||||||||||||
| Adjusted operating profit | 17,222 | 3,564 | 580 | (398 | ) | 1,041 | (244 | ) | (282 | ) | 125 | 21,608 | |||||||||||||||
| Net finance (expense) income (a) | 70 | (13 | ) | 1 | 1 | 1 | (39 | ) | (661 | ) | (640 | ) | |||||||||||||||
| Net income from investments (a) | 609 | 420 | 174 | (9 | ) | 49 | 4 | 5 | 1,252 | ||||||||||||||||||
| Income taxes (a) | (10,001 | ) | (1,323 | ) | (234 | ) | 83 | (307 | ) | 406 | (49 | ) | (11,425 | ) | |||||||||||||
| Tax rate (%) | 55.9 | 33.3 | 31.0 | 28.1 | 51.4 | ||||||||||||||||||||||
| Adjusted net profit | 7,900 | 2,648 | 521 | (323 | ) | 784 | (279 | ) | (532 | ) | 76 | 10,795 | |||||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 631 | ||||||||||||||||||||||||||
| - Eni's adjusted net profit | 10,164 | ||||||||||||||||||||||||||
| Eni's reported net profit | 8,825 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | 723 | ||||||||||||||||||||||||||
| Exclusion of special items: | 616 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | (21 | ) | |||||||||||||||||||||||||
| - other special (income) charges | 637 | ||||||||||||||||||||||||||
| Eni's adjusted net profit | 10,164 | ||||||||||||||||||||||||||
| (a) | Excluding special items. |
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2007
| (euro million) | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized intragroup profit elimination | Group | |||||||||
| Reported operating profit | 13,433 | 4,465 | 686 | 100 | 837 | (444 | ) | (312 | ) | (26 | ) | 18,739 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | 44 | (658 | ) | (6 | ) | (620 | ) | ||||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | (11 | ) | (61 | ) | 35 | (2 | ) | (4 | ) | 61 | (10 | ) | 8 | ||||||||||||||
| Other special (income) charges: | 348 | (34 | ) | 229 | 24 | 7 | 176 | 127 | 877 | ||||||||||||||||||
| - environmental charges | 15 | 128 | 210 | 12 | 365 | ||||||||||||||||||||||
| - asset impairments | 226 | 58 | 6 | 290 | |||||||||||||||||||||||
| - risk provisions | 9 | 13 | 22 | ||||||||||||||||||||||||
| - provision for redundancy incentives | 6 | 38 | 31 | 24 | 7 | 18 | 32 | 156 | |||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | 74 | (16 | ) | 6 | 83 | 147 | |||||||||||||||||||||
| - other | 42 | (71 | ) | (3 | ) | (71 | ) | (103 | ) | ||||||||||||||||||
| Special items of operating profit | 337 | (95 | ) | 264 | 22 | 3 | 237 | 117 | 885 | ||||||||||||||||||
| Adjusted operating profit | 13,770 | 4,414 | 292 | 116 | 840 | (207 | ) | (195 | ) | (26 | ) | 19,004 | |||||||||||||||
| Net finance (expense) income (a) | 60 | (5 | ) | 1 | (8 | ) | (25 | ) | 23 | ||||||||||||||||||
| Net income from investments (a) | 176 | 420 | 126 | 1 | 80 | 5 | 4 | 812 | |||||||||||||||||||
| Income taxes (a) | (7,678 | ) | (1,702 | ) | (124 | ) | (44 | ) | (262 | ) | 154 | 10 | (9,646 | ) | |||||||||||||
| Tax rate (%) | 54.8 | 35.2 | 29.7 | 28.5 | 48.6 | ||||||||||||||||||||||
| Adjusted net profit | 6,328 | 3,127 | 294 | 74 | 658 | (210 | ) | (62 | ) | (16 | ) | 10,193 | |||||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 624 | ||||||||||||||||||||||||||
| - Eni's adjusted net profit | 9,569 | ||||||||||||||||||||||||||
| Eni's reported net profit | 10,011 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | (499 | ) | |||||||||||||||||||||||||
| Exclusion of special items: | 57 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | 35 | ||||||||||||||||||||||||||
| - other special (income) charges | 22 | ||||||||||||||||||||||||||
| Eni's adjusted net profit | 9,569 | ||||||||||||||||||||||||||
| (a) | Excluding special items. |
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Breakdown of special items
| 2007 | (euro million) | 2008 | 2009 | |||
| 8 | Non-recurring charges (income) | (21 | ) | 250 | |||||
| of which: | |||||||||
| - estimated charge of the possible resolution of the TSKJ matter | 250 | ||||||||
| (83 | ) | - curtailment recognized of the reserve for post-retirement benefits for Italian employees | |||||||
| 91 | - provisions and utilizations against proceedings | (21 | ) | ||||||
| 877 | Other special charges (income): | 2,176 | 1,162 | ||||||
| 365 | - environmental charges | 309 | 298 | ||||||
| 290 | - asset impairments | 1,572 | 1,162 | ||||||
| - gains on disposal of assets | (8 | ) | (277 | ) | |||||
| 22 | - risk provisions | 4 | 128 | ||||||
| 156 | - provision for redundancy incentives | 91 | 134 | ||||||
| 147 | - re-measurement gains/losses on commodity derivatives | (61 | ) | (287 | ) | ||||
| (103 | ) | - other | 269 | 4 | |||||
| 885 | Special items of operating profit | 2,155 | 1,412 | ||||||
| (23 | ) | Net financial (expense) income | |||||||
| (321 | ) | Net income from investments | (239 | ) | 179 | ||||
| of which, gain on divestment of: | |||||||||
| (290 | ) | - Haldor Topsøe AS and Camom SA | |||||||
| - GTT (Gaztransport et Technigaz SAS) | (185 | ) | |||||||
| (658 | ) | Income taxes | (1,402 | ) | (560 | ) | |||
| of which: | |||||||||
| tax impact pursuant to Law Decree No. 112 of June 25, 2008 for Italian subsidiaries: | (270 | ) | (27 | ) | |||||
| - on inventories | (176 | ) | |||||||
| - on deferred taxes | (94 | ) | (27 | ) | |||||
| tax impact pursuant Budget Law 2008 for Italian subsidiaries | (290 | ) | |||||||
| (394 | ) | adjustment to deferred tax for Italian subsidiaries | |||||||
| adjustment to deferred tax for Libyan assets | (173 | ) | |||||||
| impairment of deferred tax assets E&P | 72 | ||||||||
| (50 | ) | other special items | (46 | ) | (192 | ) | |||
| (214 | ) | taxes on special items of operating profit | (623 | ) | (413 | ) | |||
| (117 | ) | Total special items of net profit | 514 | 1,031 | |||||
| attributable to: | |||||||||
| (174 | ) | - Minority interest | (102 | ) | |||||
| 57 | - Eni | 616 | 1,031 |
Breakdown of impairments
2007 |
(euro million) |
2008 |
2009 |
Change |
| 207 | Tangible and intangible asset impairments | 1,349 | 993 | (356 | ) | |||||||
| Goodwill impairments | 44 | 58 | 14 | |||||||||
| 207 | Sub total | 1,393 | 1,051 | (342 | ) | |||||||
| 83 | Impairment losses on current and non-current assets | 179 | 111 | (68 | ) | |||||||
| 290 | Impairments | 1,572 | 1,162 | (410 | ) | |||||||
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Summarized Group Balance Sheet
| The summarized group balance sheet aggregates the amount of assets and liabilities derived from the statutory balance sheet in accordance with functional criteria which consider the enterprise conventionally divided into the three fundamental areas focusing on resource investments, operations and financing. Management believes that this summarized group balance sheet is useful information in assisting investors | to assess Eni’s capital structure and to analyze its sources of funds and investments in fixed assets and working capital. Management uses the summarized group balance sheet to calculate key ratios such as return on capital employed (ROACE) and the proportion of net borrowings to shareholders’ equity (leverage) intended to evaluate whether Eni’s financing structure is sound and well-balanced. |
Summarized Group Balance Sheet (a)
| (euro million) | Dec. 31, 2008 |
|
Dec. 31, 2009 |
|
Change |
|
| Fixed assets | |||||||||
| Property, plant and equipment | 59,255 | 63,177 | 3,922 | ||||||
| Inventories - compulsory stock | 1,196 | 1,736 | 540 | ||||||
| Intangible assets | 7,697 | 8,057 | 360 | ||||||
| Equity-accounted investments and other investments | 5,881 | 6,244 | 363 | ||||||
| Receivables and securities held for operating purposes | 1,219 | 1,261 | 42 | ||||||
| Net payables related to capital expenditures | (787 | ) | (749 | ) | 38 | ||||
| 74,461 | 79,726 | 5,265 | |||||||
| Net working capital | |||||||||
| Inventories | 6,082 | 5,495 | (587 | ) | |||||
| Trade receivables | 16,444 | 14,916 | (1,528 | ) | |||||
| Trade payables | (12,590 | ) | (10,078 | ) | 2,512 | ||||
| Tax payables and provision for net deferred tax liabilities | (5,323 | ) | (1,988 | ) | 3,335 | ||||
| Provisions | (9,506 | ) | (10,319 | ) | (813 | ) | |||
| Other current and non-current assets and liabilities (b) | (4,544 | ) | (3,968 | ) | 576 | ||||
| (9,437 | ) | (5,942 | ) | 3,495 | |||||
| Current investments | 2,741 | (2,741 | ) | ||||||
| Provisions for employee post-retirement benefits | (947 | ) | (944 | ) | 3 | ||||
| Net assets held for sale including related net borrowings | 68 | 266 | 198 | ||||||
| CAPITAL EMPLOYED, NET | 66,886 | 73,106 | 6,220 | ||||||
| Shareholders' equity: | |||||||||
| - Eni | 44,436 | 46,073 | 1,637 | ||||||
| - Minority interest | 4,074 | 3,978 | (96 | ) | |||||
| 48,510 | 50,051 | 1,541 | |||||||
| Net borrowings | 18,376 | 23,055 | 4,679 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 66,886 | 73,106 | 6,220 |
| (a) | For a reconciliation to the statutory balance sheet see the paragraph "Reconciliation of summarized group balance sheet and summarized group cash flow statement to statutory schemes". | |
| (b) | Include receivables and securities for financing operating activities for euro 339 million (euro 410 million at December 31, 2008) and securities covering technical reserves of Eni's insurance activities for euro 284 million (euro 302 million at December 31, 2008). |
| The appreciation of the euro, in particular versus the US dollar, from December 31, 2008 (the EUR/USD exchange rate was 1.441 as of December 31, 2009, as compared to 1.392 as of December 31, 2008, up 3.5%) reduced net capital employed, net equity and net borrowings by euro 894 million, euro 869 million and euro 25 million, respectively, as a result of translation differences. | At December 31, 2009, net
capital employed totaled euro 73,106 million,
representing an increase of euro 6,220 million from
December 31, 2008. Fixed assets |
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| (euro 13,695 million) and
the recognition of the share of goodwill associated with
the buy-out of the Distrigas minorities (euro 903
million), partly offset by depreciation, depletion,
amortization and impairment charges (euro 9,813 million). The item intangible assets included among fixed assets, increased by euro 360 million to euro 8,057 million mainly due to the completion of the Distrigas acquisition whereby goodwill increased by the amount of goodwill pertaining to Distrigas minorities (euro 903 million) following the buyout, thus increasing the total amount of goodwill recognized on the acquisition to euro 2,148 million. In order to test the recoverability of its carrying amount, the Distrigas goodwill has been allocated to the group of cash generating unit forming the European gas market cash generating unit that is expected to benefit from synergies of the acquisition. Net working capital |
- a decrease in gas
inventories as a result of gas off-takes made during
winter time (down euro 587 million); - environmental and operational provisions, legal proceeding provisions and oil & gas asset decommissioning provisions accrued in the year, including the impact of lower interest rates in evaluating the discount factor of future obligations, for a total amount of euro 813 million; - the negative change of euro 502 million (from a negative euro 28 million to a negative euro 530 million; respectively down euro 28 million and euro 312 million net of taxes) in fair value of certain derivative instruments Eni entered into to hedge exposure to variability in future cash flows deriving from the sale in the 2008-2011 period of approximately 2% of Eni’s proved reserves as of December 31, 2006 corresponding to 125.7 mmboe, decreasing to 37.5 mmboe as of end of December 2009 due to transactions settled in the year. These hedging transactions were undertaken in connection with acquisitions of oil and gas assets in the Gulf of Mexico and Congo in 2007. The effective portion of changes in fair value of these hedges is recognized directly in equity, whilst the ineffective portion is recognized in profit and loss. The line item equity instruments decreased by an amount corresponding to the book value of a 20% interest in Gazprom Neft (euro 2,741 million at the 2008 balance sheet date) as on April 7, 2009 the Russian company Gazprom exercised its call option on the whole interest based on the arrangements in place with Eni. On April 4, 2007, Eni acquired the 20% interest in OAO Gazprom Neft, following finalization of a bid as part of the Yukos liquidation procedures. At that time, Eni granted Gazprom a call option on the entire 20% to be exercisable by Gazprom within 24 months from the acquisition date, at a price of $3.7 billion equaling the bid price, as modified by subtracting dividends distributed, a contractual remuneration of 9.4% on the capital employed and financing collateral expenses. Total cash consideration amounting to euro 3,070 million ($4.06 billion, increasing to approximately euro 3.16 billion or $4.2 billion when including the 2008 dividend) was paid by Gazprom on April 24, 2009. Net assets held for sale including related liabilities (euro 266 million) mainly related to the divestment of certain mineral properties in Italy which were contributed in kind to two newcos Società Padana Energia SpA and Società Adriatica Idrocarburi SpA as well as the company Gas Brasiliano Distribuidora SA operating in marketing and distribution of natural gas in Brazil, whose disposal to third parties is under negotiation. |
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Return On Average Capital Employed (ROACE)
| Return on Average Capital Employed for the Group, on an adjusted basis is the return on the Group average capital invested, calculated as ratio of net adjusted profit before minority interest, plus net finance charges on net borrowings net of the related tax effect, to net average capital employed. The tax rate applied on finance charges is the Italian statutory tax rate of 34% effective from January 1, 2009. The capital invested as | of period-end used for the calculation of net average capital invested is obtained by deducting inventory gains or losses as of in the period, net of the related tax effect. ROACE by division is determined as ratio of adjusted net profit to net average capital invested pertaining to each division and rectifying the net capital invested as of period-end, from net inventory gains or losses (after applying the division specific tax rate). |
| December 31, 2009 | (euro million) | Exploration |
|
Gas |
|
Refining |
|
Group |
|
| Adjusted net profit | 3,878 | 2,916 | (197 | ) | 6,157 | ||||
| Exclusion of after-tax finance expenses/interest income | - | - | - | 283 | |||||
| Adjusted net profit unlevered | 3,878 | 2,916 | (197 | ) | 6,440 | ||||
| Adjusted capital employed, net: | |||||||||
| - at the beginning of period | 30,362 | 22,547 | 7,379 | 66,886 | |||||
| - at the end of period | 32,455 | 25,024 | 7,560 | 72,915 | |||||
| Adjusted average capital employed, net | 31,409 | 23,786 | 7,470 | 69,901 | |||||
| Adjusted ROACE (%) | 12.3 | 12.3 | (2.6 | ) | 9.2 | ||||
| December 31, 2008 | (euro million) | Exploration |
|
Gas |
|
Refining |
|
Group |
|
| Adjusted net profit | 7,900 | 2,648 | 521 | 10,795 | |||||
| Exclusion of after-tax finance expenses/interest income | - | - | - | 335 | |||||
| Adjusted net profit unlevered | 7,900 | 2,648 | 521 | 11,130 | |||||
| Adjusted capital employed, net: | |||||||||
| - at the beginning of period | 23,826 | 21,333 | 7,675 | 59,194 | |||||
| - at the end of period | 30,362 | 22,273 | 8,260 | 67,609 | |||||
| Adjusted average capital employed, net | 27,094 | 21,803 | 7,968 | 63,402 | |||||
| Adjusted ROACE (%) | 29.2 | 12.2 | 6.5 | 17.6 | |||||
| December 31, 2007 | (euro million) | Exploration |
|
Gas |
|
Refining |
|
Group |
|
| Adjusted net profit | 6,328 | 3,127 | 294 | 10,193 | |||||
| Exclusion of after-tax finance expenses/interest income | - | - | - | 174 | |||||
| Adjusted net profit unlevered | 6,328 | 3,127 | 294 | 10,367 | |||||
| Adjusted capital employed, net: | |||||||||
| - at the beginning of period | 17,783 | 19,713 | 5,631 | 47,966 | |||||
| - at the end of period | 23,826 | 21,364 | 7,149 | 58,695 | |||||
| Adjusted average capital employed, net | 20,805 | 20,539 | 6,390 | 53,331 | |||||
| Adjusted ROACE (%) | 30.4 | 15.2 | 4.6 | 19.4 | |||||
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Leverage and net borrowings
| Leverage is a measure used by management to asses the Company’s level of indebtedness. It is calculated as ratio of net borrowings – which is calculated by excluding cash and cash equivalents and certain very liquid assets from financial debt to shareholders’ equity, including | minority 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. |
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
Change |
|||
| Total debt | 20,837 | 24,800 | 3,963 | ||||||
| - Short-term debt | 6,908 | 6,736 | (172 | ) | |||||
| - Long-term debt | 13,929 | 18,064 | 4,135 | ||||||
| Cash and cash equivalents | (1,939 | ) | (1,608 | ) | 331 | ||||
| Securities held for non-operating purposes | (185 | ) | (64 | ) | 121 | ||||
| Financing receivables for non-operating purposes | (337 | ) | (73 | ) | 264 | ||||
| Net borrowings | 18,376 | 23,055 | 4,679 | ||||||
| Shareholders' equity including minority interest | 48,510 | 50,051 | 1,541 | ||||||
| Leverage | 0.38 | 0.46 | 0.08 |
| Net borrowings at
December 31, 2009 amounted to euro 23,055 million and
increased by euro 4,679 million from December 2008. Total debt amounted to euro 24,800 million, of which euro 6,736 million were short-term (including the portion |
of long-term debt due within
12 months for euro 3,191 million) and euro 18,064 million
were long-term. The ratio of net borrowings to shareholders’ equity including minority interest – leverage – increased to 0.46 with respect to 0.38 recorded at the end of 2008. |
Comprehensive income
| 2007 | (euro million) | 2008 | 2009 | |||
| 10,809 | Net profit (loss) | 9,558 | 5,317 | ||||||
| Other items of comprehensive income: | |||||||||
| (1,980 | ) | - foreign currency translation differences | 1,077 | (869 | ) | ||||
| (2,237 | ) | - change in fair value of cash flow hedge derivates | 1,969 | (481 | ) | ||||
| (6 | ) | - change in fair value of available-for-sale securities | 3 | 1 | |||||
| - share of "Other comprehensive income" on equity-accounted entities | 2 | ||||||||
| 869 | - taxation | (767 | ) | 202 | |||||
| (3,354 | ) | Other comprehensive income | 2,282 | (1,145 | ) | ||||
| 7,455 | Total comprehensive income | 11,840 | 4,172 | ||||||
| Attributable to: | |||||||||
| 6,708 | - Eni | 11,148 | 3,245 | ||||||
| 747 | - minority interest | 692 | 927 |
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Changes in shareholders’ equity
(euro million)
| Shareholders' equity at December 31, 2008 | 48,510 | ||||
| Total comprehensive income | 4,172 | ||||
| Dividends paid to Eni shareholders | (4,166 | ) | |||
| Dividends paid by consolidated subsidiaries to minorities | (350 | ) | |||
| Acquisition of Distrigas minorities | (1,146 | ) | |||
| Cancellation of Publigaz put option | 1,495 | ||||
| Share capital increase subscribed by Snam Rete Gas minorities | 1,542 | ||||
| Rights cancelled stock option - 2006 plan | (7 | ) | |||
| Current cost of assigned options | 13 | ||||
| Other contributions from payments of shareholders | 18 | ||||
| Other changes | (30 | ) | |||
| Total changes | 1,541 | ||||
| Shareholders' equity at December 31, 2009 | 50,051 | ||||
| Attributable to: | |||||
| - Eni | 46,073 | ||||
| - Minority Interest | 3,978 |
| The Group’s total equity including minorities increased by euro 1,541 million to euro 50,051 million, reflecting (i) comprehensive income for the period (euro 4,172 million) as a result of net profit for the period (euro 5,317 million), losses on fair value evaluation of certain cash flow hedges placed in reserve and foreign currency translation effects; (ii) closing of the mandatory public takeover bid on the minorities of Distrigas which determined an increase in shareholders’ equity due to derecognition of the put option awarded | to Publigaz SCRL in 2008 (euro 1,495 million); (iii) Snam Rete Gas share capital increase subscribed by minorities for euro 1,542 million. These increases were partly offset by: (i) dividend payments to Eni shareholders (euro 4,166 million) as well as minority shareholders of certain consolidated subsidiaries (euro 350 million); (ii) elimination of the book value, including their respective share of profit for the period, of the Distrigas minorities who tendered their shares to the public offer (euro 1,146 million). |
Reconciliation of net profit and shareholders’ equity of the parent company Eni SpA to consolidated net profit and shareholders’ equity
| Net profit | Shareholders’ equity | |||
| (euro million) | 2008 | 2009 | Dec. 31, 2008 | Dec. 31, 2009 | ||||||
| As recorded in Eni SpA's financial statements | 6,745 | 5,061 | 30,049 | 32,144 | ||||||||
| Difference between the equity value of individual accounts of consolidated subsidiaries with respect to the corresponding book value in the statutory accounts of the parent company | 4,140 | 158 | 18,999 | 17,464 | ||||||||
| Consolidation adjustments: | ||||||||||||
| - difference between purchase cost and underlying book value of net equity | (330 | ) | (213 | ) | 5,161 | 5,068 | ||||||
| - elimination of tax adjustments and compliance with group account policies | (1,373 | ) | (113 | ) | (2,852 | ) | (1,062 | ) | ||||
| - elimination of unrealized intercompany profits | 216 | 117 | (3,127 | ) | (4,582 | ) | ||||||
| - deferred taxation | 159 | 378 | (15 | ) | 1,175 | |||||||
| - other adjustments | 1 | (71 | ) | 295 | (156 | ) | ||||||
| 9,558 | 5,317 | 48,510 | 50,051 | |||||||||
| Minority interest | (733 | ) | (950 | ) | (4,074 | ) | (3,978 | ) | ||||
| As recorded in the Consolidated Financial Statements | 8,825 | 4,367 | 44,436 | 46,073 |
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Summarized Group cash flow statement and change in net borrowings
| Eni’s summarized Group cash flow statement derives from the statutory statement of cash flows. It enables investors to understand 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 in the period. The measure enabling such a link is represented by the free cash flow which 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. The free cash flow is a non-GAAP measure of financial performance. |
Summarized Group cash flow statement (a)
2007 |
(euro million) |
2008 |
2009 |
Change |
||||
| 10,809 | Net profit | 9,558 | 5,317 | (4,241 | ) | |||||||
| Adjustments to reconcile to cash generated from operating profit before changes in working capital: | ||||||||||||
| 6,346 | - amortization and depreciation and other non monetary items | 11,388 | 9,847 | (1,541 | ) | |||||||
| (309 | ) | - net gains on disposal of assets | (219 | ) | (226 | ) | (7 | ) | ||||
| 8,850 | - dividends, interest, taxes and other changes | 9,080 | 6,687 | (2,393 | ) | |||||||
| 25,696 | Net cash generated from operating profit before changes in working capital | 29,807 | 21,625 | (8,182 | ) | |||||||
| (1,667 | ) | Changes in working capital related to operations | 2,212 | (1,769 | ) | (3,981 | ) | |||||
| (8,512 | ) | Dividends received, taxes paid, interest (paid) received during the period | (10,218 | ) | (8,720 | ) | 1,498 | |||||
| 15,517 | Net cash provided by operating activities | 21,801 | 11,136 | (10,665 | ) | |||||||
| (10,593 | ) | Capital expenditures | (14,562 | ) | (13,695 | ) | 867 | |||||
| (9,665 | ) | Investments and purchase of consolidated subsidiaries and businesses | (4,019 | ) | (2,323 | ) | 1,696 | |||||
| 659 | Disposals | 979 | 3,595 | 2,616 | ||||||||
| (35 | ) | Other cash flow related to capital expenditures, investments and disposals | (267 | ) | (295 | ) | (28 | ) | ||||
| (4,117 | ) | Free cash flow | 3,932 | (1,582 | ) | (5,514 | ) | |||||
| (479 | ) | Borrowings (repayment) of debt related to financing activities | 911 | 396 | (515 | ) | ||||||
| 8,761 | Changes in short and long-term financial debt | 980 | 3,841 | 2,861 | ||||||||
| (5,836 | ) | Dividends paid and changes in minority interests and reserves | (6,005 | ) | (2,956 | ) | 3,049 | |||||
| (200 | ) | Effect of changes in consolidation and exchange differences | 7 | (30 | ) | (37 | ) | |||||
| (1,871 | ) | NET CASH FLOW FOR THE PERIOD | (175 | ) | (331 | ) | (156 | ) | ||||
Changes in net borrowings
2007 |
(euro million) |
2008 |
2009 |
Change |
||||
| (4,117 | ) | Free cash flow | 3,932 | (1,582 | ) | (5,514 | ) | |||||
| (244 | ) | Net borrowings of acquired companies | (286 | ) | 286 | |||||||
| Net borrowings of divested companies | 181 | (181 | ) | |||||||||
| 637 | Exchange differences on net borrowings and other changes | 129 | (141 | ) | (270 | ) | ||||||
| (5,836 | ) | Dividends paid and changes in minority interests and reserves | (6,005 | ) | (2,956 | ) | 3,049 | |||||
| (9,560 | ) | CHANGE IN NET BORROWINGS | (2,049 | ) | (4,679 | ) | (2,630 | ) | ||||
| (a) | For a reconciliation to the statutory statement of cash flows see the paragraph "Reconciliation of Summarized Group Balance Sheet and Statement of Cash Flows to statutory schemes". |
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| Main cash inflows for the year were: (i) net cash provided by operating activities (euro 11,136 million); (ii) cash proceeds of euro 3,070 million associated with the divestment of a 20% interest in Gazprom Neft following the exercise of a call option agreement by Gazprom, plus the first tranche of the proceeds from the sale of a 51% interest in OOO SeverEnergia (Eni’s share 60%) for euro 155 million (including repayment of financing); (iii) the subscription by Snam Rete Gas minorities of a share capital increase amounting to euro 1,542 million; (iv) further cash proceeds of euro 370 million mainly associated with the divestment of certain non strategic assets in the Exploration & | Production division, following agreements signed with Suez in 2008. These inflows were used to partially fund capital expenditures of euro 13,695 million, completion of a mandatory takeover bid on the Distrigas minorities, including the squeeze-out procedure for a total cash consideration of euro 2,045 million, payment of dividends to Eni shareholders (euro 4,166 million of which euro 1,811 million as interim dividend for the year 2009) as well as dividend payments to minorities (euro 350 million) in particular relating to Snam Rete Gas and Saipem (euro 335 million). Net borrowings increased by euro 4,679 million from a year ago to euro 23,055 million. |
Capital expenditures
2007 |
(euro million) |
2008 |
2009 |
Change |
% Ch. |
|||||
| 6,480 | Exploration & Production | 9,281 | 9,486 | 205 | 2.2 | ||||||||||
| 1,511 | Gas & Power | 2,058 | 1,686 | (372 | ) | (18.1 | ) | ||||||||
| 979 | Refining & Marketing | 965 | 635 | (330 | ) | (34.2 | ) | ||||||||
| 145 | Petrochemicals | 212 | 145 | (67 | ) | (31.6 | ) | ||||||||
| 1,410 | Engineering & Construction | 2,027 | 1,630 | (397 | ) | (19.6 | ) | ||||||||
| 59 | Other activities | 52 | 44 | (8 | ) | (15.4 | ) | ||||||||
| 108 | Corporate and financial companies | 95 | 57 | (38 | ) | (40.0 | ) | ||||||||
| (99 | ) | Impact of unrealized profit in inventory | (128 | ) | 12 | 140 | |||||||||
| 10,593 | Capital expenditures | 14,562 | 13,695 | (867 | ) | (6.0 | ) | ||||||||
| In 2009, capital
expenditures amounted to euro 13,695 million (euro
14,562 million in 2008), of which 86% related to the
Exploration & Production, Gas & Power and
Refining & Marketing divisions. Main expenditures
were the following ones: - oil & gas development activities were euro 7,478 million and were deployed mainly in Kazakhstan, the United States, Egypt, Congo, Italy and Angola; - exploration projects were euro 1,228 million of which 97% were carried out outside Italy, primarily in the United States, Libya, Egypt, Norway and Angola; - acquisition of proved and unproved properties amounting to euro 697 million mainly related to the acquisition of a 27.5% interest in assets with gas shale reserves from Quicksilver Resources Inc and extension of the duration of oil and gas properties in Egypt following the agreement signed in May 2009; - development and upgrading of Eni’s natural gas transport network in Italy amounted to euro 919 million. Distribution network upgrades were euro 278 million, and further euro 282 million were invested to develop and increase storage capacity; - projects aimed at improving the conversion capacity and flexibility of refineries amounted to euro 436 million. Building and upgrading service stations in Italy and |
outside Italy absorbed euro
172 million; - upgrading of the fleet used in the Engineering & Construction division amounted to euro 1,630 million. Investments and purchases of consolidated subsidiaries and businesses (euro 2,323 million) mainly related to the completion of the acquisition of Distrigas NV. Disposals amounted to euro 3,595 million and mainly related to the divestment of a 20% interest in Gazprom Neft following exercise on April 7, 2009 of the call option by Gazprom (euro 3,070 million). The exercise price of the call option is equal to the bid price ($3.7 billion) as adjusted by subtracting dividends distributed and adding the contractual annual remuneration of 9.4% on capital employed and certain financial collateral expenses. In addition a 51% stake in the joint venture OOO SeverEnergia (Eni 60%) was divested to Gazprom. Eni’s share of the transaction is worth $940 million of which $230 million were collected as of year end, which corresponded to euro 155 million at the exchange rate of the transaction date. The remaining $710 million were collected on March 31, 2010 (euro 526 million at exchange rate of 1.35). |
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| Other disposals related to
non strategic oil & gas properties following
agreements signed with Suez. Dividends paid and changes in minority interests and reserves amounting to euro 2,956 million mainly related to: (i) cash dividends to Eni shareholders (euro 4,166 million, of which euro 2,355 million pertained to the payment of the balance of the dividend for fiscal year 2008 and euro 1,811 million pertained to |
the payment of an interim dividend for fiscal year 2009); (ii) dividend payment for fiscal year 2008 from certain consolidated subsidiaries to minorities (euro 350 million) mainly relating to Snam Rete Gas and Saipem (euro 335 million). These outflows were partly offset by the subscription by Snam Rete Gas minorities of a share capital increase amounting to euro 1,542 million as part of Eni’s reorganization of its regulated businesses in Italy. |
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Reconciliation of Summarized Group Balance Sheet and Statement of Cash Flows to Statutory Schemes
Summarized Group Balance Sheet
| (euro million) | December 31, 2008 | December 31, 2009 | ||
| Items
of Summarized Group Balance Sheet (where not expressly indicated, the item derives directly from the statutory scheme) |
Notes to
the consolidated financial statements |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
|||||
| Fixed assets | ||||||||||||||
| Property, plant and equipment | 59,255 | 63,177 | ||||||||||||
| Inventories - compulsory stock | 1,196 | 1,736 | ||||||||||||
| Intangible assets | 7,697 | 8,057 | ||||||||||||
| Equity-accounted investments and other investments | 5,881 | 6,244 | ||||||||||||
| Receivables and securities held for operating activities | (see Note 3 and 12) | 1,219 | 1,261 | |||||||||||
| Net payables related to capital expenditures, made up of: | (787 | ) | (749 | ) | ||||||||||
| - receivables related to capital expenditures/disposals | (see Note 3) | 149 | 82 | |||||||||||
| - receivables related to capital expenditures/disposals | (see Note 14) | 780 | 710 | |||||||||||
| - payables related to capital expenditures | (see Note 16) | (1,716 | ) | (1,541 | ) | |||||||||
| Total fixed assets | 74,461 | 79,726 | ||||||||||||
| Net working capital | ||||||||||||||
| Inventories | 6,082 | 5,495 | ||||||||||||
| Trade receivables | (see Note 3) | 16,444 | 14,916 | |||||||||||
| Trade payables | (see Note 16) | (12,590 | ) | (10,078 | ) | |||||||||
| Tax payables and provisions for net deferred tax liabilities, made up of: | (5,323 | ) | (1,988 | ) | ||||||||||
| - income tax payables | (1,949 | ) | (1,291 | ) | ||||||||||
| - other tax payables | (1,660 | ) | (1,431 | ) | ||||||||||
| - deferred tax liabilities | (5,784 | ) | (4,907 | ) | ||||||||||
| - other tax liabilities | (see Note 24) | (254 | ) | (52 | ) | |||||||||
| - current tax assets | 170 | 753 | ||||||||||||
| - other current tax assets | 1,130 | 1,270 | ||||||||||||
| - deferred tax assets | 2,912 | 3,558 | ||||||||||||
| - other tax assets | (see Note 14) | 112 | 112 | |||||||||||
| Provisions | (9,506 | ) | (10,319 | ) | ||||||||||
| Other current assets and liabilities: | ||||||||||||||
| Other, made up of: | (4,544 | ) | (3,968 | ) | ||||||||||
| - securities held for operating purposes | (see Note 2) | 310 | 284 | |||||||||||
| - receivables for operating purposes | (see Note 3) | 402 | 339 | |||||||||||
| - other receivables | (see Note 3) | 4,805 | 4,825 | |||||||||||
| - other (current) assets | 1,870 | 1,307 | ||||||||||||
| - other receivables and other assets | (see Note 14) | 989 | 1,116 | |||||||||||
| - advances, other payables | (see Note 16) | (6,209 | ) | (7,555 | ) | |||||||||
| - other (current) liabilities | (3,863 | ) | (1,856 | ) | ||||||||||
| - other payables and other liabilities | (see Note 24) | (2,848 | ) | (2,428 | ) | |||||||||
| Total net working capital | (9,437 | ) | (5,942 | ) | ||||||||||
| Current investments | (see Note 2) | 2,741 | ||||||||||||
| Provisions for employee post-retirement benefits | (947 | ) | (944 | ) | ||||||||||
| Net assets held for sale including related net borrowings, made up of: | 68 | 266 | ||||||||||||
| - assets held for sale | 68 | 542 | ||||||||||||
| - liabilities directly associated to assets held for sale | (276 | ) | ||||||||||||
| CAPITAL EMPLOYED, NET | 66,886 | 73,106 |
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continued Summarized Group Balance Sheet
| (euro million) | December 31, 2008 | December 31, 2009 | ||
| Items
of Summarized Group Balance Sheet (where not expressly indicated, the item derives directly from the statutory scheme) |
Notes to
the Consolidated Financial Statements |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
| CAPITAL EMPLOYED, NET | 66,886 | 73,106 | ||||||||||||
| Shareholders' equity including minority interest | 48,510 | 50,051 | ||||||||||||
| Net borrowings | ||||||||||||||
| Total debt, made up of: | 20,837 | 24,800 | ||||||||||||
| - long-term debt | 13,929 | 18,064 | ||||||||||||
| - current portion of long-term debt | 549 | 3,191 | ||||||||||||
| - short-term financial liabilities | 6,359 | 3,545 | ||||||||||||
| less: | ||||||||||||||
| Cash and cash equivalents | (1,939 | ) | (1,608 | ) | ||||||||||
| Securities held for non-operating purposes | (see Note 2) | (185 | ) | (64 | ) | |||||||||
| Financing receivables for non-operating purposes | (see Note 3) | (337 | ) | (73 | ) | |||||||||
| Total net borrowings (a) | 18,376 | 23,055 | ||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 66,886 | 73,106 |
| (a) | For details on net borrowings see also Note 20 to the consolidated financial statements. |
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Summarized Group Cash Flow Statement
| (euro million) | December 31, 2008 | December 31, 2009 | ||
| Items
of Summarized Group Cash Flow Statement and confluence/reclassification of items in the statutory scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
| Net profit | 9,558 | 5,317 | ||||||||||
| Adjustments to reconcile to cash generated from operating profit before changes in working capital: | ||||||||||||
| Depreciation, depletion and amortization and other non monetary items: | 11,388 | 9,847 | ||||||||||
| - depreciation, depletion and amortization | 8,422 | 8,762 | ||||||||||
| - net impairments (write-ups) | 2,560 | 495 | ||||||||||
| - net changes in provisions | 414 | 574 | ||||||||||
| - net changes in the provisions for employee benefits | (8 | ) | 16 | |||||||||
| Net gains on disposal of assets | (219 | ) | (226 | ) | ||||||||
| Dividends, interest, income taxes and other changes: | 9,080 | 6,687 | ||||||||||
| - dividend income | (510 | ) | (164 | ) | ||||||||
| - interest income | (592 | ) | (352 | ) | ||||||||
| - interest expense | 809 | 603 | ||||||||||
| - exchange differences | (319 | ) | (156 | ) | ||||||||
| - income taxes | 9,692 | 6,756 | ||||||||||
| Cash generated from operating profit before changes in working capital | 29,807 | 21,625 | ||||||||||
| Changes in working capital related to operations: | 2,212 | (1,769 | ) | |||||||||
| - inventories | (801 | ) | 52 | |||||||||
| - trade and other receivables | (974 | ) | (19 | ) | ||||||||
| - other assets | 162 | (472 | ) | |||||||||
| - trade and other payables | 2,318 | (1,201 | ) | |||||||||
| - other liabilities | 1,507 | (129 | ) | |||||||||
| Dividends received, taxes paid, interest (paid) received during the period: | (10,218 | ) | (8,720 | ) | ||||||||
| - dividend received | 1,150 | 576 | ||||||||||
| - interest received | 266 | 594 | ||||||||||
| - interest paid | (852 | ) | (583 | ) | ||||||||
| - income taxes paid | (10,782 | ) | (9,307 | ) | ||||||||
| Net cash provided by operating activities | 21,801 | 11,136 | ||||||||||
| Capital expenditures: | (14,562 | ) | (13,695 | ) | ||||||||
| - tangible assets | (12,312 | ) | (12,300 | ) | ||||||||
| - intangible assets | (2,250 | ) | (1,395 | ) | ||||||||
| Acquisition of investments and businesses: | (4,019 | ) | (2,323 | ) | ||||||||
| - investments | (385 | ) | (230 | ) | ||||||||
| - consolidated subsidiaries and businesses | (3,634 | ) | (25 | ) | ||||||||
| - acquisition of additional interests in subsidiaries | (2,068 | ) | ||||||||||
| Disposals: | 979 | 3,595 | ||||||||||
| - tangible assets | 318 | 126 | ||||||||||
| - intangible assets | 2 | 250 | ||||||||||
| - consolidated subsidiaries and businesses | 149 | |||||||||||
| - investments | 510 | 3,219 | ||||||||||
| - sale of interests in subsidiaries | ||||||||||||
| Other cash flow related to capital expenditures, investments and disposals: | (267 | ) | (295 | ) | ||||||||
| - securities | (152 | ) | (2 | ) | ||||||||
| - financing receivables | (710 | ) | (972 | ) | ||||||||
| - change in payables and receivables relating to investments and capitalized depreciation | 367 | (97 | ) | |||||||||
| reclassification: purchase of securities and financing receivables for non-operating purposes | 173 | 38 | ||||||||||
| - disposal of securities | 145 | 164 | ||||||||||
| - disposal of financing receivables | 1,293 | 861 | ||||||||||
| - change in payables and receivables | (299 | ) | 147 | |||||||||
| reclassification: disposal of securities and financing receivables held for non-operating purposes | (1,084 | ) | (434 | ) | ||||||||
| Free cash flow | 3,932 | (1,582 | ) |
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continued Summarized Group Cash Flow Statement
| (euro million) | December 31, 2008 | December 31, 2009 | ||
| Items
of Summarized Group Cash Flow Statement and confluence/reclassification of items in the statutory scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
| Free cash flow | 3,932 | (1,582 | ) | |||||||||
| Borrowings (repayment) of debt related to financing activities | 911 | 396 | ||||||||||
| reclassification: purchase of securities and financing receivables held for non-operating purposes | (173 | ) | (38 | ) | ||||||||
| reclassification: sale of securities and financing receivables held for non-operating purposes | 1,084 | 434 | ||||||||||
| Changes in short and long-term finance debt: | 980 | 3,841 | ||||||||||
| - proceeds from long-term finance debt | 3,774 | 8,774 | ||||||||||
| - payments of long-term finance debt | (2,104 | ) | (2,044 | ) | ||||||||
| - increase (decreases) in short-term finance debt | (690 | ) | (2,889 | ) | ||||||||
| Dividends paid and changes in minority interests and reserves: | (6,005 | ) | (2,956 | ) | ||||||||
| - net capital contributions/payments by/to minority shareholders | 20 | 1,551 | ||||||||||
| - dividends paid by Eni to shareholders | (4,910 | ) | (4,166 | ) | ||||||||
| - dividends paid to minority interest | (297 | ) | (350 | ) | ||||||||
| - net repurchase of treasury shares | (768 | ) | ||||||||||
| - treasury shares repurchased by consolidated subsidiaries | (50 | ) | 9 | |||||||||
| Effect of changes in consolidation area and exchange differences: | 7 | (30 | ) | |||||||||
| - effect of change in consolidation area | (1 | ) | ||||||||||
| - effect of exchange differences and other changes | 8 | (30 | ) | |||||||||
| CHANGE IN CASH AND CASH EQUIVALENTS | (175 | ) | (331 | ) |
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RISK FACTORS, UNCERTAINTIES AND TREND INFORMATION
| Foreword The
main risks that the Company is facing and actively
monitoring and managing are the following: (i) the market
risk deriving from exposure to fluctuations in interest
rates, foreign currency exchange rates and commodity
prices; (ii) the credit risk deriving from the possible
default of a counterparty; (iii) the liquidity risk
deriving from the risk that suitable sources of funding
for the Group’s operations may not be available;
(iv) the country risk in the upstream business; (v) the
operational risk; (vi) the possible evolution of the
Italian gas market; (vii) the specific risks deriving
from exploration and production activities. Market risk Market risk is the possibility that changes in currency exchange rates, interest rates or commodity prices will adversely affect the value of the Group’s financial assets, liabilities or expected future cash flows. The Company actively manages market risk in accordance with a set of policies and guidelines that provide a centralized model of conducting finance, treasury and risk management operations based on separate entities: the parent company’s (Eni SpA) finance department, Eni Coordination Center and Banque Eni which is subject to certain bank regulatory restrictions preventing the Group’s exposure to concentrations of credit risk and Eni Trading & Shipping that has the mandate to manage and monitor solely commodity derivative contracts. In particular Eni SpA and Eni Coordination Center manage subsidiaries’ financing requirements in and outside Italy, respectively, covering funding requirements and using available surpluses. |
All transactions concerning currencies and derivative financial contracts are managed by the parent company as well as the activity of trading certificates according to the European Union Emission Trading Scheme. The commodity risk is managed by each business unit with Eni Trading & Shipping ensuring the negotiation of hedging derivatives. Eni uses derivative financial instruments (derivatives) in order to minimize exposure to market risks related to changes in exchange rates and interest rates and to manage exposure to commodity prices fluctuations. Eni does not enter into derivative transactions on a speculative basis. The framework defined by Eni’s policies and guidelines prescribes that measurement and control of market risk be performed on the basis of maximum tolerable levels of risk exposure defined in accordance with value-at-risk techniques. These techniques make a statistical assessment of the market risk on the Group’s activity, i.e., potential gain or loss in fair values, due to changes in market conditions taking account of the correlation existing among changes in fair value of existing instruments. Eni’s finance departments define maximum tolerable levels of risk exposure to changes in interest rates and foreign currency exchange rates, pooling Group companies risk positions. Eni’s calculation and measurement techniques for interest rate and foreign currency exchange rate risks are in accordance with established banking standards, as established by the Basel Committee for bank activities surveillance. Tolerable levels of risk are based on a conservative approach, considering the industrial nature of the company. Eni’s guidelines prescribe that Eni’s Group companies minimize such kinds of market risks. With regard to the commodity risk, Eni’s policies and guidelines define rules to manage this risk aiming at the optimization of core activities and the pursuing of preset targets of industrial margins. The |
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| maximum tolerable level of
risk exposure is pre-defined in terms of value-at-risk in
connection with trading and commercial activities, while
the strategic risk exposure to commodity prices
fluctuations – i.e. the impact on the Group’s
business results deriving from changes in commodity
prices – is monitored in terms of value-at-risk,
albeit not hedged in a systematic way. Accordingly, Eni
evaluates the opportunity to mitigate its commodity risk
exposure by entering into hedging transactions in view of
certain acquisition deals of oil and gas reserves as part
of the Group’s strategy to achieve its growth
targets or ordinary asset portfolio management. The Group
controls commodity risk with a maximum value-at-risk
limit awarded to each business unit. Hedging needs from
business units are pooled by Eni Trading & Shipping
which also manages its own risk exposure. The three
different market risks, whose management and control have
been summarized above, are described below. Exchange
rate risk |
through the profit and loss
account as they do not meet the formal criteria to be
recognized as hedges in accordance with IAS 39. The VAR
techniques are based on variance/covariance simulation
models and are used to monitor the risk exposure arising
from possible future changes in market values over a
24-hour period within a 99% confidence level and a 20-day
holding period. Interest rate risk Commodity risk |
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| commodity exposure is measured daily on the basis of a historical simulation technique, with a 95% confidence level and a one-day holding period. The following table shows amounts in terms of value at risk, recorded in | 2009 (compared with 2008) relating to interest rate and exchange rate risks in the first section, and commodity risk in the second section. Var values are stated in U.S. dollars, the currency used in oil products markets. |
(Exchange and interest rate: Value at Risk - parametric method variance/covariance; holding period: 20 days; confidence level: 99%)
| 2008 | 2009 | |||
| (euro million) | High | Low | Avg | At period end | High | Low | Avg | At period end |
| Interest rate | 12.31 | 0.73 | 4.17 | 6.54 | 6.85 | 1.65 | 3.35 | 1.98 | ||||||||
| Exchange rate | 1.48 | 0.09 | 0.48 | 0.47 | 1.22 | 0.07 | 0.35 | 0.31 |
(Commodity risk: Value at Risk - historic simulation method; holding period: 1 day; confidence level: 95%)
| 2008 | 2009 | |||
| ($ million) | High | Low | Avg | At period end | High | Low | Avg | At period end |
| Area oil, products | 46.48 | 3.44 | 19.88 | 5.43 | 37.51 | 4.74 | 17.65 | 6.64 | ||||||||
| Area Gas & Power (*) | 67.04 | 24.38 | 43.53 | 32.07 | 51.62 | 28.01 | 40.97 | 38.26 |
| (*) | In 2008, amounts relating to the Gas & Power business also include Distrigas' contribution, since the acquisition date. |
Credit risk
| Credit risk is the potential
exposure of the Group to losses in case counterparties
fail to perform or pay amounts due. The Group manages
differently credit risk depending on whether credit risk
arises from exposure to financial counterparties or to
customers relating to outstanding receivables. Individual
business units are responsible for managing credit risk
arising in the normal course of the business. The Group
has established formal credit systems and processes to
ensure that before trading with a new counterpart can
start, its creditworthiness is assessed. Also credit
litigation and receivable collection activities are
assessed. The monitoring activity of credit risk exposure
is performed at the Group level according to set
guidelines and measurement techniques that establish
counterparty limits and systems to monitor exposure
against limits and report regularly on those exposures.
Specifically, credit risk exposure to multi-business
clients and exposures higher than the limit set at euro 4
million are closely monitored. Monitoring activities do
not include retail clients and public administrations.
The assessment methodology assigns a score to individual
clients based on publicly available financial data and
capital, profitability and liquidity ratios. Based on
those scores, an internal credit rating is assigned to
each counterparty who is accordingly allocated to its
proper risk category. The Group risk categories are
comparable to those prepared by the main rating agencies
on the marketplace. The Group’s internal ratings are
also benchmarked against ratings prepared by a
specialized external source. With regard to risk arising from financial counterparties, Eni has established guidelines prior to entering into |
cash management and derivative contracts to assess the counterparty’s financial soundness and rating in view of optimizing the risk profile of financial activities while pursuing operational targets. Maximum limits of risk exposure are set in terms of maximum amounts of credit exposures for categories of counterparties as defined by the Company’s Board of Directors taking into accounts the credit ratings provided by primary credit rating agencies on the marketplace. Credit risk arising from financial counterparties is managed by the Group central finance departments, including Eni’s subsidiary Eni Trading & Shipping which specifically engages in commodity derivatives transactions. Those are the sole Group entities entitled to be party to financial transactions due to the Group centralized finance model. Eligible financial counterparties are closely monitored to check exposures against limits assigned to each counterparty on a daily basis. Exceptional market conditions have forced the Group to adopt contingency plans and under certain circumstances to suspend eligibility to be a Group financial counterparty. Actions implemented also have been intended to limit concentrations of credit risk by maximizing counterparty diversification and turnover. Counterparties have also been selected on more stringent criteria particularly in transactions on derivatives instruments and with maturity longer than a three-month period. Eni has not experienced material non-performance by any counterparty. As of December 31, 2009, Eni had no significant concentrations of credit risk. |
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| Liquidity
risk Liquidity risk is the risk that suitable sources of funding for the Group may not be available, or the Group is unable to sell its assets on the market place as to be unable to meet short-term finance requirements and to settle obligations. Such a situation would negatively impact Group results as it would result in the Company incurring higher borrowing expenses to meet its obligations or under the worst of conditions the inability of the Company to continue as a going concern. As part of its financial planning process, Eni manages the liquidity risk by targeting such a capital structure as to allow the Company to maintain a level of liquidity adequate to the Group’s needs optimizing the opportunity cost of maintaining liquidity reserves also achieving an efficient balance in terms of maturity and composition of finance debt. The Group capital structure is set according to the Company’s industrial targets and within the limits established by the Company’s Board of Directors who are responsible for prescribing the maximum ratio of debt to total equity and minimum ratio of medium and long-term debt to total debt as well as fixed rate medium and long-term debt to total medium and long-term debt. In spite of ongoing tough credit market conditions resulting in higher spreads to borrowers, the Company has succeeded in maintaining access to a wide range of funding at competitive rates through the capital markets and banks. The actions implemented as part of Eni’s financial planning have enabled the Group to maintain access to the credit market particularly via the issue of commercial paper also targeting to increase the flexibility of funding |
facilities. In particular in
2009, Eni issued bonds addressed to institutional
investor and to the retail market for euro 3 billion and
euro 2 billion, respectively. The above mentioned actions
aimed at ensuring availability of suitable sources of
funding to fulfill short-term commitments and due
obligations also preserving the necessary financial
flexibility to support the Group’s development
plans. In doing so, the Group has pursued an efficient
balance of finance debt in terms of maturity and
composition leveraging on the structure of its lines of
credit particularly the committed ones. At present, the
Group believes it has access to sufficient funding and
has also both committed and uncommitted borrowing
facilities to meet currently foreseeable borrowing
requirements. As of December 31, 2009, Eni maintained short-term committed and uncommitted unused borrowing facilities of euro 11,774 million, of which euro 2,241 million were committed, and long-term committed unused borrowing facilities of euro 2,850 million. These facilities were under interest rates that reflected market conditions. Fees charged for unused facilities were not significant. Eni has in place a program for the issuance of Euro Medium Term Notes up to euro 15 billion, of which euro 9,211 million were drawn as of December 31, 2009. The Group has debt ratings of AA- and A-1+ respectively for long (outlook negative) and short-term debt assigned by Standard & Poor’s and Aa2 and P-1 (outlook negative) assigned by Moody’s. The tables below summarize the Group main contractual obligations for finance debt repayments, including expected payments for interest charges, and trade and other payables maturities. |
Current and non current finance debt
Maturity year |
||
| (euro million) | 2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 and thereafter |
|
Total |
|
| Non current debt | 3,191 | 1,342 | 3,660 | 1,967 | 2,487 | 8,608 | 21,255 | |||||||
| Current financial liabilities | 3,545 | 3,545 | ||||||||||||
| Fair value of derivative instruments | 1,371 | 517 | 133 | 46 | 14 | 98 | 2,179 | |||||||
| 8,107 | 1,859 | 3,793 | 2,013 | 2,501 | 8,706 | 26,979 | ||||||||
| Interest on finance debt | 654 | 570 | 545 | 510 | 426 | 1,159 | 3,864 | |||||||
| Guarantees to banks | 377 | 377 |
Trade and other payables
Maturity year |
||
| (euro million) | 2010 |
|
2011-2014 |
|
2015 and thereafter |
|
Total |
|
| Trade payables | 10,078 | 10,078 | ||||||
| Advances, other payables | 9,096 | 31 | 23 | 9,150 | ||||
| 19,174 | 31 | 23 | 19,228 |
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| In addition to finance debt and trade payables presented in the financial statements, the Group has in place a number of contractual obligations arising in the normal course of the business. To meet these commitments, the Group will have to make payments to third parties. The Company’s main obligations are certain arrangements to purchase goods or services that are enforceable and legally binding and that specify all significant terms. Such arrangements include non-cancelable, long-term contractual obligations to secure access to supply and transport of natural gas, which include take-or-pay clauses whereby the Company obligations consist of off-taking minimum quantities of product or service or | paying the corresponding
cash amount that entitles the Company to off-take the
product in future years. Future obligations in connection
with these contracts were calculated by applying the
forecasted prices of energy or services included in the
four-year business plan approved by the Company’s
Board of Directors and on the basis of the long-term
market scenarios used by Eni for planning purposes to
minimum take and minimum ship quantities. The table below summarizes the Group principal contractual obligations as of the balance sheet date, shown on an undiscounted basis. |
Expected payments by period under contractual obligations and commercial commitments
Maturity year |
||
| (euro million) | 2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 and thereafter |
|
Total |
|
| Operating lease obligations (1) | 886 | 889 | 561 | 470 | 415 | 1,034 | 4,255 | |||||||
| Decommissioning liabilities (2) | 79 | 55 | 112 | 161 | 1,640 | 9,280 | 11,327 | |||||||
| Environmental liabilities | 293 | 259 | 257 | 214 | 193 | 687 | 1,903 | |||||||
| Purchase obligations (3) | 14,845 | 14,151 | 13,923 | 14,634 | 14,651 | 175,888 | 248,092 | |||||||
| Gas | ||||||||||||||
| - Natural gas to be purchased in connection with take-or-pay contracts | 13,986 | 13,365 | 13,123 | 13,827 | 13,838 | 169,268 | 237,407 | |||||||
| - Natural gas to be transported in connection with ship-or-pay contracts | 546 | 538 | 545 | 559 | 567 | 3,658 | 6,413 | |||||||
| Other take-or-pay and ship-or-pay obligations | 162 | 154 | 139 | 133 | 131 | 1,068 | 1,787 | |||||||
| Other purchase obligations (4) | 151 | 94 | 116 | 115 | 115 | 1,894 | 2,485 | |||||||
| Other obligations | 21 | 4 | 3 | 3 | 3 | 152 | 186 | |||||||
| of which: | ||||||||||||||
| - Memorandum of intent relating Val d’Agri | 21 | 4 | 3 | 3 | 3 | 152 | 186 | |||||||
| 16,124 | 15,358 | 14,856 | 15,482 | 16,902 | 187,041 | 265,763 |
| (1) | Operating leases primarily regarded assets for drilling activities, time charter and long term rentals of vessels, lands, service stations and office buildings. Such leases did not include renewal options. There are no significant restrictions provided by these operating leases which limit the ability of the Company to pay dividend, use assets or to take on new borrowings. | |
| (2) | Represents the estimated future costs for the decommissioning of oil and natural gas production facilities at the end of the producing lives of fields, well-plugging, abandonment and site restoration. | |
| (3) | Represents any agreement to purchase goods or services that is enforceable and legally binding and that specifies all significant terms. | |
| (4) | Mainly refers to arrangements to purchase capacity entitlements at certain re-gasification facilities in the U.S. |
| In the 2010-2013 four-year period management plans to invest euro 52.8 billion. The table below summarizes Eni’s capital expenditure commitments for property, plant and equipment and capital projects at December | 31, 2009. Capital expenditures are considered to be committed when the project has received the appropriate level of internal management approval. Such costs are included in the amounts shown. |
Capital expenditure commitments
Maturity year |
||
| (euro million) | 2010 |
2011 |
2012 |
2013 |
2014 and subsequent years |
Total |
||||||
| Committed on major projects | 4,119 | 3,793 | 2,829 | 1,928 | 11,357 | 24,026 | ||||||
| Other committed projects | 9,330 | 5,284 | 3,467 | 3,640 | 7,489 | 29,210 | ||||||
| 13,449 | 9,077 | 6,296 | 5,568 | 18,846 | 53,236 |
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| Country risk Substantial
portions of Eni’s hydrocarbons reserves are located
in countries outside the EU and North America, certain of
which may be politically or economically less stable than
EU or North American. At December 31, 2009, approximately
80% of Eni’s proved hydrocarbons reserves were
located in such countries. Similarly, a substantial
portion of Eni’s natural gas supplies comes from
countries outside the EU and North America. In 2009,
approximately 60% of Eni’s domestic supply of
natural gas came from such countries. Developments in the
political framework, economic crisis, social unrest can
compromise temporarily or permanently Eni’s ability
to operate or to economically operate in such countries,
and to have access to oil and gas reserves. Further risks
associated with activities in those countries are
represented by: (i) lack of well established and reliable
legal systems and uncertainties surrounding enforcement
of contractual rights; (ii) unfavorable developments in
laws and regulations leading to expropriation of
Eni’s titles and mineral assets, changes in
unilateral contractual clauses reducing the value of
Eni’s assets; (iii) restrictions on exploration,
production, imports and exports; (iv) tax or royalty
increases; (v) civil and social unrest leading to
sabotages, acts of violence and incidents. While the
occurrence of these events is unpredictable, it is
possible that they can have a material adverse impact on
Eni’s financial condition and results of operations.
Eni periodically monitors political, social and economic
risks of approximately 60 countries where it has
invested, or, with regard to upstream projects
evaluation, where Eni is planning to invest in order to
assess returns of single projects based also on the
evaluation of each country’s risk profile. Country
risk is mitigated in accordance with guidelines on risk
management defined in the procedure "Project risk
assessment and management". In the most recent
years, unfavorable developments in the regulatory
framework, mainly regarding tax issues, have been
implemented or announced also in EU countries and in
North America. Operational risk Eni’s business activities conducted in and outside Italy are subject to a broad range of laws and regulations, including specific rules concerning oil and gas activities currently in force in countries in which it operates. In particular, those laws and regulations require the acquisition of a license before exploratory drilling may commence and compliance with health, safety and environment standards. Environmental |
laws impose restrictions on
the types, quantities and concentration of various
substances that can be released into the environment and
on discharges to surface and subsurface water. In
particular Eni is required to follow strict operating
practices and standards to protect biodiversity when
exploring for, drilling and producing oil and gas in
certain ecologically sensitive locations (protected
areas). Breach of environmental, health and safety laws
exposes employees to criminal and civil liability and in
the case of violation of certain rules regarding safety
on the workplace also companies can be liable as provided
for by a general EU rule on businesses liability due to
negligent or willful conduct on part of their employees
as adopted in Italy with Law Decree No. 231/2001. Environmental, health and safety laws and regulations have a substantial impact on Eni’s operations and expenses and liabilities that Eni may incur in relation to compliance with environmental, health and safety laws and regulations are expected to remain material to the Group’s results of operations or financial position in future years. Recently enacted regulations on safety and health in the workplace in Italy impose a new array of obligations to the Company operations, particularly regarding contractors. New regulations prescribe that a company adopts certified operational and organizational systems whereby the Company can discharge possible liabilities due to a violation of health and security standards on condition that adopted operational systems and processes worked properly and were effective. Eni has adopted guidelines for assessing and managing health, safety and environmental (HSE) risks, with the objective of protecting Eni’s employees, the populations involved in its activity, contractors and clients, and the environment and being in compliance with local and international rules and regulations. Eni’s guidelines prescribe the adoption of international best practices in setting internal principles, standards and solutions. The ongoing process for identifying, evaluating and managing HSE operations in each phase of the business activity is performed through the adoption of procedures and effective pollution management systems tailored to the peculiarities of each business and industrial site and on steady enhancement of plants and process. Additionally, coding activities and procedures on operating phases allow to reduce the human component in the plant risk management. Operating emergencies that may have an adverse impact on assets, people and the environment are managed by the business units for each site. These units manage the HSE risk |
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| in a systematic way that
involves having emergency response plans in place with a
number of corrective actions to be taken that minimize
damage in the event of an incident. In the case of a
major crisis, Divisions/Entities are assisted by the Eni
Unit of Crisis to deal with the emergency through a team
which has the necessary training and skills to coordinate
in a timely and efficient manner resources and
facilities. The integrated management system of health,
safety and environmental matters is supported by the
adoption of Eni’s Model of HSE operations in all the
Division and companies of the Eni Group. This is a
procedure based on an annual cycle of planning,
implementation, control, review of results and definition
of new objectives. The model is directed towards the
prevention of risks, the systematic monitoring and
control of HSE performance, in a continuous improvement
cycle (Deming cycle). Eni is reaching the goal of total certification of its plants. Industrial and commercial sites of the R&M segment have been certified as ISO 14001, and six of them are EMAS certified; in the petrochemical segment facilities are certified under ISO 14001, EMAS and OHSAS 18001. EniPower power stations are EMAS certified, while in other segments facilities are mainly certified under ISO 14001 and OHSAS 18001. The system for monitoring HSE operational risks is based on the monitoring of HSE indicators at quarterly intervals and on an audit plan addressed to three levels: HSE Corporate, HSE business unit and at site level consisting of: - internal audits of management systems (performed by Eni employees or external consultants); - audits for the confirmation or renewal of certification of management systems performed annually by external certifying entities; - control of compliance with existing HSE regulations; - specific audits on relevant issues (e.g. following events/accidents/reported failures). Eni provides a program of specific training and development to its HSE staff in order to: - promote the execution of behaviors consistent with guidelines; - drive people’s learning growth process by developing professionalism, management and corporate culture; - support management knowledge and control of HSE risks. Possible evolution of the Italian gas market Detailed information is furnished in the paragraph "Risk factors" - Operating Review of the Gas & Power division. |
Specific
risks associated with exploration and production of oil
and natural gas Exploration and production of oil and natural gas requires high levels of capital expenditure and entails particular economic risks. It is subject to natural hazards and other uncertainties including those relating to the physical characteristics of oil or natural gas fields. Exploratory activity involves numerous risks including the risk of dry holes or failure to find commercial quantities of hydrocarbons. Developing and marketing hydrocarbons reserves typically requires several years after a discovery is made. This is because a development project involves an array of complex and lengthy activities, including appraising a discovery in order to evaluate its commerciality, sanctioning a development project and building and commissioning relating facilities. As a consequence, rates of return of such long- lead-time projects are exposed to the volatility of oil and gas prices and the risk of an increase in developing and lifting costs, resulting in lower rates of return. This set of circumstances is particularly important to those projects intended to develop reserves located in deep water and harsh environments, where the majority of Eni’s planned and ongoing projects is located. Risks associated with the cyclicality of the oil and gas sector The global economic downturn and the associated
reduction in industrial output recorded in 2008 and for
most of 2009 triggered a sharp decline in worldwide
demand for energy, resulting in significantly lower
commodity prices. |
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| oil & gas projects based
on long-term scenarios for oil prices, which reflect
management’s best assumptions about the underlying
fundamentals of global demand and offer. The adoption of
long-term prices in assessing capital projects support
the achievement of the planned rates of return. Eni plans to invest euro 52.8 billion in the 2010-2013 four-year period, at the Company’s long-term price for Brent crude of $65/barrel (in real terms 2013). Of these, euro 37.7 billion, or 71%, will be dedicated to execute projects for exploring and developing oil and gas reserves. The plan shows an increase of 8% from the previous plan that was approved when the trading environment was particularly depressed. The main drivers which explain the increase are: (i) planned expenditures for developing new upstream projects, particularly those associated with reserves development in Iraq, Venezuela and certain fields offshore Angola; (ii) the circumstance that the Company is forecasting steady trends in costs for materials and sector specific services which have fallen far less than what management has anticipated due to the fast recovery in international oil prices, and the impact of the decision on part of most oil companies to maintain their spending patterns substantially unchanged. In the previous plan, management assumed a decline in those costs. These increasing trends will be partially offset by the impact of the US dollar depreciation versus the euro. Volatile oil prices also influence the reserve replacement ratio. Changes in oil prices normally trigger two opposite impacts in proved reserves revisions. On one side, a larger or smaller amount of reserves is booked in connection with production sharing agreements and similar contractual schemes. Under such contracts, the Company is entitled to receive a portion of the production, the sale of which should cover expenditures incurred and earn the Company a share of profit. Accordingly, the higher the reference prices for crude oil used to determine production and reserves entitlements, the lower the number of barrels to cover the same dollar amounts hence the amounts of booked reserves; and vice versa. On the other side, downward revisions of reserves occur for those marginal amounts of reserves that are no longer economically producible based on oil prices that are significantly lower than those at which they were originally assessed and sanctioned; and the opposite occurs in case of higher oil prices. In the Gas & Power division, Eni’s outlook for the year 2010 factors in a modest improvement in Italian and European gas demand, recovering from the sharp decline suffered in 2009. |
Eni also expects that the
gas market will be well supplied as new import capacity
to Europe and Italy is available in light of recent
facility start-ups and upgrades of the main import
pipelines made by Eni and other operators. Those trends,
together with the recently enacted gas release programs
in Italy, represent risk factors to the Company’s
ability to maintain its margins in the marketing business
also taking into account the take or pay clauses of
certain long-term supply contracts which require the
Company to collect minimum predetermined volumes of gas
or, in case of failure, to pay the price, or a portion of
it, for uncollected volumes. Under take-or- pay clauses
the Company is entitled to collect pre-paid volumes of
gas in future years, assuming a stronger recovery in gas
demand. For more information see the specific risk paragraph in the "Operating Review" of the Gas & Power section in this annual report. The Refining & Marketing and the Petrochemical divisions are particularly exposed to the volatility of the economic cycle, as their respective industries continue to be plagued by excess capacity, intense competitive pressure, low entry barriers and commoditized products. These industries are also exposed to movements in oil prices and the speed at which the prices of refined products and petrochemicals products adjust to reflect change in the cost of oil-based feedstock. Normally, a time lag occurs between movements in oil prices and those of refined and petrochemical products. As a consequence, in a period of rapidly escalating feedstock costs, margins on refined and petrochemical products are negatively affected. For 2010, Eni’s management does not expect any appreciable recovery in the main trends that negatively affected the performances of these businesses last year. In 2009 Eni’s realized refining margins were sharply lower mirroring the environment for Brent margins (down 50%), while margins on a mix of light and heavy crude were further lower, down by 60%, both under break-even. A number of negative factors contribute to the reduction. Firstly, significantly compressed light-heavy crude differentials due to a reduction in heavy crude availability on the market place negatively affected the profitability of Eni’s complex refineries. Secondly, the industry continued to be plagued by weak fundamentals due to excess capacity, high inventory levels and stagnant demand affecting end-prices, while feedstock costs have been on an upward trend since the beginning of the second half. Finally, middle-distillates prices plunged to historical lows in terms of spread versus the cost of oil. At the moment, |
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| management does not expect a
reversal in those trends on the short-term. In its Petrochemical division, management has been pursuing a number of initiatives designed to reduce fixed operating expenses and to realign the industrial set-up of Eni’s petrochemical operations with a view of enhancing areas of competitive advantage. In spite of all this, the achievement of the operating break-even in this segment depends on a global recovery in the economy that is uncertain at least in the short-term. The Engineering & Construction segment followed a |
different trend, maintaining a steady order backlog and economic returns, thanks to a business model articulated across various market sectors combined with a strong competitive position in frontier areas, which are traditionally less exposed to the cyclical nature of this market. The start of operations of new distinctive assets in 2010 and 2011 coupled with the size and quality of the backlog and the strong operating performance on projects, underpin expectations for a further significant strengthening of Saipem’s competitive position in the medium-term. |
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OUTLOOK
| In what remains an uncertain
energy environment, Eni forecasts a modest improvement in
global oil demand and a Brent price of 65 $/bbl in 2010.
Gas demand in Europe and Italy is expected to recover
gradually from the steep decline suffered in 2009, which
mainly impacted the industrial and power generation
sectors at a time when new import capacity was coming on
line. The Company faces a challenging refining
environment, excluding any significant recovery in
industry fundamentals that will entail prolonged weakness
in refinery margins. - Production of liquids and natural gas is forecast to achieve a level not lower than in 2009, when production came in at 1.769 million boe/d, based on the Company’s scenario for a Brent price of 65 $/bbl for the full year, OPEC restrictions at the same level as 2009 and asset disposals underway. Growth will be driven by continuing field start-ups, mainly in Congo, Norway and marginally the Zubair project in Iraq, and production ramp-up at the Company’s recently started fields, mainly in Nigeria, Angola and the USA. These additions will be offset by mature field declines. Production growth will resume at a strong rate in the coming years. - Natural gas sales are expected to remain flat compared to 2009 (approximately 104 bcm were achieved in 2009). Increasing competitive pressures, mainly in Italy, will be offset by an expected recovery in European gas demand. Other positive trends include a benefit associated with integrating Distrigas operations and the optimization of supply portfolio, including re-negotiation of long-term supply contracts. |
- Regulated businesses in
Italy will benefit from the pre-set, regulatory
return on new capital expenditures and cost savings from
integrating the whole chain of transport, storage and
distribution activities. - Refining throughputs on Eni’s account are planned to be in line with 2009 (actual throughputs in 2009 were 34.55 mmtonnes). Volumes processed at wholly-owned refineries are expected to increase, resulting in a higher capacity utilization rate, due to a reduction in volumes on third party refineries reflecting the Company’s decision to terminate certain processing agreements. Efficiency improvement actions will partly offset the unfavorable trading environment. - Retail sales of refined products in Italy and the rest of Europe are expected to be unchanged from 2009 (12.02 mmtonnes in 2009) reflecting weak demand. New marketing initiatives are planned in order to strengthen Eni’s leadership on the Italian retail market and to develop its market share in European markets. - The Engineering & Construction business is expected to see solid results due to a robust order backlog. In 2010, management plans to make capital expenditures broadly in line with 2009 (euro 13.69 billion were invested in 2009). Capital expenditures will mainly be directed to the development of oil and natural gas reserves, exploration projects, the upgrading of construction vessels and rigs, and the upgrading of natural gas transport infrastructure. Management has planned a number of measures designed to ensure the achievement of a ratio of net borrowings to total equity (leverage) which will adequately support a strong credit rating. |
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Other information
| Continuing listing
standards provided by Article No. 36 of Italian exchanges
regulation about issuers that control subsidiaries
incorporated or regulated in accordance with laws of
extra-EU countries Certain provisions have been recently enacted regulating 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, the Company discloses that: - as of December 31, 2009, the provisions of Article No. 36 of Italian exchanges regulation in accordance with Italian continuing listing standards apply to |
Eni’s subsidiaries
Burren Energy (Bermuda) Ltd, Eni Congo SA, Eni Norge AS,
Eni Petroleum Co Inc, NAOC-Nigerian Agip Oil Co Ltd,
Nigerian Agip Exploration Ltd, Trans Tunisian Pipeline Co
Ltd e Burren Energy (Congo) Ltd which fell within the
scope of the regulation as of September 30, 2009, as well
as the following subsidiary Eni Finance USA Inc; - the Company has already adopted adequate procedure to ensure full compliance with the regulation. Subsequent events Subsequent business developments are described in the operating review of Eni’s business segment. |
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Corporate Governance and
Shareholding
Structure Report
| This Report is intended to
provide a general and complete overview of the corporate
governance system adopted by Eni. Fulfilling the applicable legal and regulatory duties1, in accordance with the guidelines and recommendations of Borsa Italiana SpA ("Borsa Italiana") – the company responsible for the organization and management of the Italian stock exchange – and the most representative trade associations, the Report contains information regarding ownership structures and compliance with the Corporate Governance Code promoted by Borsa Italiana, giving reasons for the choices made in the application of corporate governance principles, as well as practices actually applied. Borsa Italiana’s Corporate Governance Code is accessible to the public at www.borsaitaliana.it2. The text of this Report is also available at the registered office, published in the "Corporate Governance" section of the Company’s website3 and forwarded to Borsa Italiana according to the procedures and by the deadlines required by applicable regulations. The information contained in this Report relates to the financial year 2009 and has been updated, in respect of certain matters, as of March 11, 2010, the date of the Board of Directors’ meeting that approved it together with the Directors’ report, the consolidated financial statements and the draft financial statements for the financial year 2009. |
Eni: profile,
structure and values Profile |
| (1) | Article 123-bis of Legislative Decree No. 58/1998 ("Consolidated Law on Finance") and Article 89-bis of Consob Resolution No. 11971/1999 and subsequent amendments ("Consob Regulations on Issuers"). | |
| (2) | At the following address: http://www.borsaitaliana.it/borsaitaliana/ufficio-stampa/comunicati-stampa/2006/ codiceautodisciplina.en_pdf.htm | |
| (3) | At the following address: http://www.eni.com/en_IT/governance/report-on-corporate-governance/report-on-corporate-governance.shtml |
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| Governance structure The corporate governance structure of Eni follows the traditional model, which assigns corporate management to the Board of Directors, the linchpin of the organizational system, supervisory functions to the Board of Statutory Auditors and auditing of the accounts to the audit firm appointed by the Shareholders’ Meeting. In compliance with the provisions of the By-laws, the Board appoints a Chief Executive Officer (CEO), to whom it assigns the management of the Company, with the exception of some matters which it reserves for itself, and assigns proxies to the Chairman to identify and promote integrated projects and strategically important international agreements. The chosen model therefore establishes a clear distinction between the functions of the Chairman and those of the CEO, pursuant to Article 25 of the By-laws, both of them retain representative powers for the Company. The Board of Directors has created three internal committees with consulting and advisory functions: the "Internal Control Committee", "Compensation Committee" and "Oil-Gas Energy Committee". Furthermore, on a proposal made by the CEO, in agreement with the Chairman, it has appointed three General Managers (Chief Operating Officers) to head the three operating Divisions of Eni4. The Board of Directors, on a proposal made by the CEO, in agreement with the Chairman, subject to the prior approval of the Board of Statutory Auditors, has appointed the Company’s Chief Financial Officer as the Officer in charge of preparing financial reports. The Chief Operating Officers and the Chief Financial Officer, together with the Chief Corporate Operations Officer and the Executives which directly report to the CEO (Senior Executive Vice President of the Company) are permanent members of the Management Committee, which advises and supports the CEO. Some of the organizational and management choices highlighted in the Report have been made in order to fulfill US legal requirements, with which the Company has been required to comply following its listing on the New York Stock Exchange ("NYSE"). Code of
Ethics |
implemented in compliance
with the relevant laws and in a context of fair
competition, honesty, integrity, fairness and good faith
as well as in accordance with the legitimate interests of
all the stakeholders with which Eni comes into contact on
a daily basis: shareholders, employees, suppliers,
customers, commercial and financial partners, as well as
local communities and institutions within the countries
in which Eni operates. These values are embedded in the new Eni Code of Ethics, approved by the Board of Directors at its meeting held on March 14, 2008 to replace the previous Business Conduct Code of 1998. The Code of Ethics fulfils the evolution of the regulatory framework, expands on the issues of human rights and sustainability, ensures compliance with international best practices and updates references in relation to Eni’s new organizational structure. Everyone working for Eni, from the corporate bodies and management downwards, is specifically committed to complying and ensuring compliance with these principles in the context of their duties and responsibilities. Under no circumstances may the conviction that one is acting for the benefit of Eni justify behavior which conflicts with these principles. The Guarantor of the Code of Ethics defends and promotes these principles and presents a report on the implementation of the Code, on a half-yearly basis, to the Internal Control Committee as well as to the Board of Statutory Auditors, the Chairman and the CEO, who in turn report to the Board. With specific reference to corporate governance issues, the new Code refers to the main corporate governance rules contained in the Corporate Governance Code adopted by Eni5, highlighting relations with shareholders and the market and defining the general principles to be applied when disseminating company information and in relations with the media. The Code is also a general unwaivable principle of Model 231, of which it is an integral part: the synergies between the Code of Ethics and the Model are also emphasized by the allocation of Guarantor functions with respect to the Code of Ethics to the Eni Watch Structure, the latter being established by Model 231, with responsibility for promoting and verifying its implementation. The Code of Ethics applies to all subsidiaries which are directly and indirectly controlled in Italy and abroad by Eni. Subsidiaries which are listed on the stock exchange and those of the gas sector which are subject to so-called unbundling regulations adopt the Code and adjust it as necessary, in accordance with their own |
| (4) | "Exploration& Production", "Gas& Power" and "Refining& Marketing" Divisions. | |
| (5) | For further details, see the paragraph entitled "Compliance with the Corporate Governance Code of Borsa Italiana and Eni Code". |
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| company peculiarities and
the principle of managerial autonomy. Each subsidiary
assigns Guarantor functions with respect to the Code of
Ethics to its own Watch Structure. The representatives specified by Eni in the corporate bodies of other investee companies, as well as in consortia and joint ventures, promote the principles and contents of the Code within their respective areas of responsibility. Eni’s commitment to disseminating the principles of the Code is further underlined by the creation, under the responsibility of the Guarantor of the Code of Ethics, of a specific "Code of Ethics Promotion Team". The Team’s task is to promote knowledge and facilitate the implementation of the Code providing all the tools required to interpret and understand it. For this purpose, it promotes a variety of initiatives depending on the stakeholders involved. These initiatives also aim to stimulate observations on the Code so that it can be constantly updated to fulfill the needs of the social context in which Eni operates. In particular, through a specific Promotion Plan, the Code of Ethics Promotion Team realized in 2009 various initiatives concerning dissemination and communication, training and participation of stakeholders. For further details regarding dissemination and communication activities relating to the Code, see the "Sustainability" Section of the Eni website and the Sustainability Report6. Sustainability |
the Sustainability Report,
which is also submitted to the Shareholders’
Meeting. The audit firm certifies the Sustainability
Report, verifying the correctness of the planning and
management process for the activity as a whole and of the
flow of data supplied by operating sites, which are
subsequently consolidated and audited at level of
Country, Company, Division, Corporate Management and
Sustainability Unit. This certification process complies
with the requirements of the ISAE 3000 standard, issued
in 2004 by the International Auditing and Assurance
Standard Board (IAASB), the same body that is assigned to
issuing auditing principles. The most significant initiatives carried out by Eni in recent years to ensure the sustainability of the governance system include in particular encouraging shareholders to participate in the life of the company, raising awareness among shareholders and the Board about issues connected with the model of sustainability and diversity in particular, as well as disseminating good governance practices according to the principles of the Code of Ethics. Eni’s commitment to sustainable development is also recognized by the leading financial Sustainability indexes. In 2009, the company’s place was reconfirmed in the Dow Jones Sustainability Index and STOXX, where it has been since 2007. The company is also included in the FTSE4GOOD index and had its second place in the Accountability Rating Italy 2009 reconfirmed. Moreover, Eni came first both in the Italian and world CSR Online Awards 2009, ranks drawn up by the financial communication company Lundquist. Finally, in June 2009 in New York, Eni’s CEO was presented with the Foreign Policy Association’s Corporate Social Responsibility Award. For further details, see the Sustainability Report and the Sustainability section of the Eni website7. Information about the shareholding structure8 Share capital structure and significant
shareholdings |
| (6) | http://www.eni.com/en_IT/sustainability/sustainability_swf.page | |
| (7) | http://www.eni.com/en_IT/sustainability/sustainability_swf.page | |
| (8) | The
information regarding the ownership structure is provided
in accordance with Article 123-bis, paragraph 1, of the
Testo Unico della Finanza (Consolidated Law on Finance).
For information regarding: - the mechanism for the exercise of voting rights in any employee share scheme, where voting rights are not exercised directly by the employees, as required by letter e) of the aforementioned provision, see the paragraph entitled “Shareholders’ meeting and rights”; - agreements between companies and its Directors, which provide compensation in the event of a resignation or dismissal without just cause or if employment contracts are terminated following a takeover bid, as required by letter i) of the aforementioned provision, see the paragraph entitled “Directors’ Remuneration”; - rules applicable to the appointment and replacement of Directors, as required by letter l) of the aforementioned provision, see the paragraph entitled “Appointment of the Board of Directors”; - amendments to the By-laws required by letter l) of the aforementioned provision, see the paragraph entitled “Shareholders’ meetings and rights”. |
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| one voting right. Owners of
Eni shares may vote in the ordinary and extraordinary
shareholders’ meetings of the company and may, in
any case, exercise the corporate and financial rights
which are ascribed to them by current regulations, in
compliance with the limits imposed by the latter and by
the Company’s By-laws. On December 31, 2009, the Company’s share capital was Euro 4,005,358,876, fully paid-up and represented by 4,005,358,876 ordinary registered shares, each with a nominal value of euro 1.00. In 1995, Eni issued an ADR (American Depositary Receipt) program for the US market. The ADR identifies |
the stock certificates
representing shares of foreign companies traded in stock
exchanges of the United States. Each Eni ADR represents
two ordinary shares and is listed on the New York Stock
Exchange9. Based on the information available and communications received in accordance with Article 120 of Legislative Decree No. 58/1998 (Testo Unico della Finanza - Italian Consolidated Law on Finance), Consob Resolution No. 11971/1999 (Regolamento Emittenti Consob - Consob Regulations on Issuers), on December 31, 2009 the shareholders who owned a more than 2% share of Eni’s capital were: |
| Main shareholders |
| Shareholders | Shares held | % of capital | ||
| Ministry of Economy and Finance | 813,443,277 | 20.31 | ||
| Cassa Depositi e Prestiti SpA (a) | 400,288,338 | 9.99 | ||
| Eni SpA (own shares) | 382,952,240 | 9.56 | ||
| (a) | Cassa Depositi e Prestiti SpA is controlled by the Ministry of Economy and Finance. |
| Shareholders by area | ||||||
| Shareholders | Number of shareholders | Number of shares | % of capital (a) | |||
| Italy | 340,489 | 2,246,718,828 | 56.09 | |||
| UK and Ireland | 998 | 188,379,015 | 4.70 | |||
| Other UE | 4,603 | 523,822,062 | 13.08 | |||
| USA and Canada | 1,701 | 394,799,891 | 9.86 | |||
| Rest of world | 1,175 | 241,943,718 | 6.04 | |||
| Own shares at the dividend date | 382,952,240 | 9.56 | ||||
| Other | 26,743,122 | 0.67 | ||||
| Total | 4,005,358,876 | 100.00 |
| (a) | As of September 24, 2009, payment date of the interim dividend for fiscal year 2009 (ex-dividend date, September 21, 2009). |
| Shareholders by amount of shares held | ||||||
| Shareholders | Number of shareholders | Number of shares | % of capital (a) | |||
| >10% | 1 | 813,443,277 | 20.31 | |||
| 3%-10 (b) | 2 | 551,813,303 | 13.78 | |||
| 2%-3% | - | - | - | |||
| 1%-2% | 8 | 431,214,800 | 10.77 | |||
| 0.5%-1% | 6 | 168,306,301 | 4.20 | |||
| 0.3%-0.5% | 13 | 190,695,057 | 4.76 | |||
| 0.1%-0.3% | 36 | 254,058,897 | 6.34 | |||
| < 0.1% | 348,900 | 1,186,131,879 | 29.61 | |||
| Own shares at the dividend date | 382,952,240 | 9.56 | ||||
| Other | 26,743,122 | 0.67 | ||||
| Total | 4,005,358,876 | 100.00 |
| (a) | As of September 24, 2009, payment date of the interim dividend for fiscal year 2009 (ex-dividend date, September 21, 2009). | |
| (b) | Afterwards, Intesa San Paolo Group reduced the percentage of shares held from 3.78% to 1.39%. |
| (9) | For further details on ADR program see the Eni website section relative to "FAQ":http://www.eni.com/en_IT/investor-relation/investor-tools/investor-faq/investor-faq.shtml |
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| Eni is not subject to
management and coordination activities10. Shareholding
limits and restrictions on voting rights Special powers of the State (Golden Share) |
rights connected with the
shares that represent the significant shareholding remain
suspended. In the event of the right of objection being
exercised, by means of a duly justified decision based on
the actual prejudicial effect caused by the transaction
to the vital interests of the State, the assignee will be
forbidden from exercising its voting rights and any
rights other than property rights connected with the
shares that represent the significant shareholding, and
will be required to assign these same shares within one
year. In the event of a failure to comply, the Court, at
the request of the Ministry of Economy and Finance, will
order the sale of the shares representing the significant
shareholding according to the procedures set out in
Article 2359-ter of the Civil Code; b) objection to the signing of agreements, as defined in Article 122 of the Consolidated Law on Finance, in the event that at least 3% of the share capital consisting of shares with the right to vote in ordinary shareholders’ meetings is represented in the agreements. For the purpose of allowing the right of objection to be exercised, Consob will inform the Ministry of the Economy and Finance of any significant agreements of which it has been notified under the terms of the aforementioned Article 122 of the Consolidated Law on Finance. The right of objection must be exercised within ten days of the date of Consob’s notification. During the period of time allowed for the right of objection to be exercised, the voting rights and any rights other than property rights of the shareholders signing up to the agreement are suspended. If an objection decision is issued with due justification detailing the actual prejudicial effect of the aforesaid agreements to the vital interests of the State, the agreement will be null and void. If the conduct during the Shareholders’ Meeting of the shareholders bound by the agreement reveals that the undertakings given under an agreement pursuant to the aforesaid Article 122 of the Consolidated Law on Finance have been maintained, any resolutions passed with the casting vote of these same shareholders may be challenged; c) vetoing, if duly justified by an actual prejudicial effect to the vital interests of the State, of resolutions to dissolve the Company, transfer the company, merge, demerge, transfer the registered office overseas, change the company purpose, amend the By-laws in a way that withdraws or modifies the powers detailed |
| (10) | Article 19, paragraph 6, of Law Decree No. 78/2009, converted into Law No. 102/2009, states that the term enti (entities) in the reference contained in Article 2497, paragraph 1, of the Civil Code, regarding management and coordination, should be understood to refer to "legal entities other than the State that own a shareholding in the context of their business activities or for economic or financial purposes". | |
| (11) | According to Law No. 266 of 2005 (2006 Budget Law), to which a specific paragraph of this Report is dedicated, the same clause would cease to apply if rules regarding the issue of the shares or financial instruments for which the same law provides were included in the By-laws. |
| (12) | These are the parties described in Article 6.1 of the By-laws, excluding those described in Article 32.2. |
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| in letters (a), (b), (c) and
the subsequent letter (d); d) appointment of a Director with no right to vote in Board meetings. Decisions to exercise the powers detailed in letters a), b) and c) may be challenged within sixty days, by the parties entitled to do so, before the Regional Administrative Court of Lazio. Shares and
participating financial instruments referred to in Law
No. 266 of December 22, 2005 Agreements between shareholders Significant agreements that would become effective,
be modified or be extinguished in the event of a change
of control of Eni |
the joint management of Galp
Energia SGPS SA. The agreement provides that in case of
change of control of any participating company, the other
partners have a call option to purchase the Galp
shareholding held by the party whose controlling entity
has changed; (ii) any expiry of the natural gas distribution license of the subsidiary Distribuidora de Gas Cuyana SA, due to the provisions of Article 34 of title VIII of Law 24.076 if the company were to be controlled by a shareholder that engages directly or through subsidiaries in the activities production, storage or distribution of natural gas in Argentina. Proxies for capital increases,
power of Directors to issue participating financial
instruments and authorizations to purchase treasury
shares Corporate Governance information14 Compliance with the Corporate Governance Code of
Borsa Italiana and Eni Code |
| (13) | For further information, go to http://www.eni.com/en_IT/governance/shareholders/treasury-shares/treasury-shares.shtml | |
| (14) | The governance information is also provided in accordance with the requirements of Article 123-bis, paragraph 1, letters e), i), l), and paragraph 2, of the Consolidated Law on Finance. |
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| promoted by Borsa Italiana,
according to the version issued on March 14, 2006
("Code of Borsa Italiana")15. In accordance with the Code of Borsa Italiana, Eni has adopted its own Corporate Governance Code (following the "Code" or "Eni Code") for the purpose of transposing its provisions, adapting them to the specific reality of Eni, clarifying some of them and at the same time enhancing and raising the general standards of governance of the Company. The Eni Code is therefore a clear and comprehensive description of the Company’s governance system that complies with the provisions of the Code of Borsa Italiana and with the Company’s main documents. In particular, the Code takes into account the fact that Eni is a parent company that is not controlled by any other company and is not subject to management or coordination by others. Equally, the Code takes into account the current provisions of the By-laws, which establish a traditional administration and control system (therefore eliminating the provisions regarding the single and dual models contained in the Code of Borsa Italiana), separating the posts of Chairman and CEO (which avoids the need for a lead independent Director to be appointed) and establishing specific provisions for the appointment and composition of the Board of Directors and the Board of Statutory Auditors. In order to ensure greater transparency and intelligibility, the Eni Code deals directly with the various options envisaged by the Code of Borsa Italiana, without therefore referring to later documents (e.g. with regard to the decision not to redistribute or modify the functions of the Board’s internal committees, to provide for a single Officer in charge of internal control, to provide for this Officer also to report to the CEO, not to assign Internal Auditing to external parties). The provisions of the Code of Borsa Italiana that refer to the responsibilities of the Shareholders’ Meeting have been included as hopes or recommendations, since the Board cannot guarantee compliance with them. Some of the generic recommendations of the Code of Borsa Italiana have been made specific, particularly those relating to the independence of Directors, adopting specific terms which identify "additional remunerations" that prejudice their independence and which define "close family members". Finally, provisions have been included that raise the standard of governance proposed by the Code of Borsa Italiana and in particular: - the interest of all stakeholders has been established as a benchmark for Directors: Directors act and decide in |
an informed manner and
autonomously, pursuing the primary objective of creating
value for shareholders, taking into account the interest
of other stakeholders; - the minimum reporting frequency to the Board on the part of Directors with proxies has been reduced from three to two months; - for the purposes of the self-assessment of the Board (board review), it is possible to utilize the services of a specialized external consultant in order to ensure that the implemented work is objective; - the commitment of Directors and Auditors to stay in office until they are capable of ensuring sufficient time for implementing their tasks has been emphasized; - it has been established that the internal Committees of the Board required by the Eni Code (with specific reference to the Committee for Internal Control and Compensation Committee) shall not consist of a number of Directors that represent a majority of the Board, so as not to alter the process for Board resolutions; - provision has been made for an opinion to be issued by the Internal Control Committee in relation to rules for ensuring transparency as well as substantive and procedural fairness during transactions with related parties – and transactions involving interests on the part of Directors. The Committee has also been ascribed a significant role in the preliminary phase of operations with related parties, in compliance with sector principles and best practices; - for the appointment of the Officer in charge of internal control, the Board’s proposal is made by the CEO in agreement with the Chairman. In a resolution approved on October 30, 2008, the Board of Directors provided for the proposal to be made after having also heard from the Internal Control Committee and for these appointment procedures also to apply to the Senior Executive Vice President of Internal Audit; it therefore appointed the latter, with the agreement of the Committee, as Eni’s Officer in charge of internal control16; - provision has been made for at least two members of the Internal Control Committee to have adequate experience in the accounting and financial fields (the Code of Borsa Italiana only requires one). As of December 13, 2006, the Board of Statutory Auditors has expressly complied with the relevant provisions of the Code. Following the adoption of the Eni Code, the Board of Directors also approved a number of resolutions implementing and specifying the provisions it contains. |
| (15) | The Code of Borsa Italiana is available to the public on the www.borsaitaliana.it website at: http://www.borsaitaliana.it /borsaitaliana/ufficio-stampa/comunicati-stampa/2006/codiceautodisciplina.en_pdf.htm | |
| (16) | The Board thus confirmed a previous resolution of March 16, 2007. |
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| In particular: - the functions of the Board of Directors have been redefined. The Board maintains an absolutely central position with respect to the corporate governance system of the Company and retains wide-ranging responsibilities, particularly in terms of Company and Group organization and the internal control system; - the most significant operations of the Company and its subsidiaries have been defined and presented for approval by the Board, which is required to pay particular attention to situations in which the Directors have personal or third party interests as well as to transactions with related parties; - the Board of Directors also has a key role in defining sustainability policies and approving the Sustainability Report, which are also submitted to the Shareholders’ Meeting; - subsidiaries that are of strategic importance (Snam Rete Gas SpA, Saipem SpA, Polimeri Europa SpA and Eni International BV) have been identified; - the guidelines on the maximum number of offices held by Directors in other companies have been defined in order to ensure that Directors dedicate the time required to perform their duty effectively; the provisions set for the Executive Director are extended to cover the General Managers as well; - the principle has been established of respect for the managerial independence of listed subsidiaries (currently, in Italy, Saipem SpA and Snam Rete Gas SpA) and the commitment on the part of Eni to comply with the provisions of the Code that relate to the shareholders of issuers. This principle has been subsequently extended, as a result of developments in the legal framework, to cover companies that are subject to separate administration and accounting systems (known as "unbundling") as required by specific regulation applicable (in addition to Snam Rete Gas SpA, for Italy, Italgas SpA and Stogit SpA17). At its meeting on April 23, 2009, the Board of Directors also established the general governance principles that Eni applies, in its position as the shareholder, to its investee companies in Italy and overseas. For this purpose, it has issued Guidelines, complemented by specific implementation rules, aimed at establishing general principles, roles and organizational responsibilities for identifying governance and control systems and for the composition of company bodies and the respective appointment criteria. In particular, the governance model chosen for the Italian companies |
is that of the joint-stock
company with a traditional administration and control
system, while for overseas companies provision has been
made for the adoption of legal forms that are similar to
that of a joint-stock and/or limited liability company
under Italian law. The auditing of investee companies in
Italy and overseas must be entrusted to an audit firm. In
order to ensure adequate representation of diversity in
company bodies, particularly gender diversity, a
monitoring project in Eni scenery has been launched. The Eni corporate governance system therefore complies with the requirements of the Code of Borsa Italiana and also contains provisions that improve the standard of corporate governance. Further details of the implementation of the respective provisions will be provided in the rest of this Report. The Eni Code is published in the Corporate Governance section of the Eni website18. In order to avoid making the text too burdensome to read, the "Comment" contained in the Code of Borsa Italiana does not appear but it is borne in mind by Eni in applying the Principles and Criteria. Shareholders’ Meetings and rights19 The Shareholders’ Meeting, whether ordinary or
extraordinary, has the power to pass resolutions
according to the procedures and on the matters stated in
the law and in the By-laws. In particular, the Ordinary
Shareholders’ Meeting appoints and dismisses
Directors and Statutory Auditors, determines their
remuneration, approves the financial statements (closed
on December 31 of each year) and appoints the audit firm
and determines its remuneration. The Extraordinary
Shareholders’ Meeting passes resolutions on changes
to the By-laws and operations of an extraordinary nature,
such as capital increases, mergers and demergers. |
| (17) | With effect from July 2009, Eni sold its shareholding in the two companies to Snam Rete Gas SpA. |
| (18) | At the following address: http://www.eni.com/en_IT/governance/governance-model-policies/eni-corporate-governance-code/eni-corporate-governance-code.shtml | |
| (19) | Information provided pursuant to Article 123-ii, paragraph 1, letters e) and l) with reference to changes to the By-laws, and paragraph 2, letter c), of the Consolidated Law on Finance. |
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| by incorporation and
proportional demergers of companies at least 90% of whose
shares or units are owned by the Company, as well as on
the establishment and closure of secondary offices. In order to promote the attendance of shareholders at Shareholders’ Meetings, until the new provisions become effective20, the convocation will be sent out by notice addressed to Borsa Italiana and published on the website and in the Gazzetta Ufficiale, as well as, in accordance with Article 13 of the By-laws and current legislation, in the daily newspapers Il Sole 24 Ore, Corriere della Sera and The Financial Times. Convocation notices must state the provisions of the By-laws that are relevant to the meeting, including, in particular, instructions on how to obtain proxy forms. In order to speak at a Shareholders’ Meeting, notice must be submitted, at least two working days before the date of first convocation of the Shareholders’ Meeting, by an authorized financial broker. The entitled person may withdraw this notice, through the financial broker, thus losing the right to speak at the meeting. In order to facilitate attendance by shareholders, the By-laws provide for votes to be cast by mail and establish specific facilities for collecting proxies. Votes sent by mail, within the period established by law, may be revoked by means of an explicit declaration made known to the Company at least one day before the Shareholders’ Meeting. Anyone intending to attend the Shareholders’ Meeting as the legal or voluntary representative of shareholders or other persons entitled to attend must submit documentation that demonstrates their powers to the relevant department of the Company according to the terms and procedures stated in the convocation notice. Furthermore, pursuant to Article 14 of the By-laws, in order to facilitate the collection of proxies from shareholders who are employees of the Company and its subsidiaries, and who are members of shareholders’ associations that fulfill the requirements of current relevant legislation, the associations in question are provided, according to terms and procedures agreed by their legal representatives, with spaces to be used for communication purposes and for the collection of proxies. In accordance with the law and the By-laws, within five days of the convocation notice being published, shareholders who, whether jointly or individually, |
represent at least one
fortieth of the share capital may submit a request for
the list of additional matters to be discussed. The
request must state the proposed matters (which must
exclude any matters that may only be proposed by the
Directors or are based on plans or reports drawn up by
the Directors). In order to ensure the orderly and efficient running of Shareholders’ Meetings and allow each shareholder to contribute to the matters being discussed, on December 4, 1998, the Shareholders’ Meeting approved the regulations for its meetings, which are available on the Eni website21. Shareholders’ Meetings are chaired by the Chairman of the Board of Directors or, in his stead, by the individuals named in the By-laws. As part of the initiatives launched to stimulate the interest of shareholders and a greater degree of involvement, at the last Annual Shareholders’ Meeting (April 29-30, 2009) an interactive animation and a Shareholders’ Handbook were produced, available on the website22, in order to provide clear and immediate information on the attendance procedures and the rights that can be exercised at these events which are so important for the life of the Company and its shareholders. Eni also intends to extend these initiatives to the Shareholders’ Meeting that will be convened to approve the financial statements for 2009, paying more attention, also communicative, to the relation with its shareholders. During the Shareholders’ Meetings, the Board strives to ensure the greatest transparency of the matters discussed by shareholders, who are granted the opportunity to ask for information about the matters included in the agenda, this information being subsequently provided in accordance with the rules regarding inside information. Board of Directors23 Composition |
| (20) | For shareholders’ meetings whose convocation notices will be published after October 31, 2010, the new provisions will apply which transpose Directive 2007/36/EC on the convocation, contribution and voting rights of shareholders. |
| (21) | At the following address: http://www.eni.com/en_IT/governance/shareholder-meeting/meeting-regulation/meeting-regulation.shtml | |
| (22) | At the following address: http://www.eni.com/en_IT/governance/shareholders/initiatives/initiatives.shtml | |
| (23) | Information also provided pursuant to Article 123-bis, second paragraph, letter d) of the Consolidated Law on Finance. |
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| The Shareholders’
Meeting of June 10, 2008, set the number of Directors at
nine, appointing the Board of Directors and Chairman of
the Board for three financial years or in any case until
the date of the Shareholders’ Meeting convened to
approve the financial statements for the financial year
2010. On June 11, 2008 the Board of Directors appointed
Paolo Scaroni Chief Executive Officer of Eni. The Board consists of Roberto Poli (Chairman of the Board), Paolo Scaroni (Chief Executive Officer), Alberto Clô, Paolo Andrea Colombo, Paolo Marchioni, Marco Reboa, Mario Resca, Pierluigi Scibetta and Francesco Taranto. Roberto Poli, Paolo Scaroni, Paolo Andrea Colombo, Paolo Marchioni, Mario Resca and Pierluigi Scibetta were elected on the basis of the list submitted by the Ministry of the Economy and Finance, which owns 20.31% of the share capital. Alberto Clô, Marco Reboa and Francesco Taranto were elected on the basis of the list submitted by the institutional investors, which owned a total of 1.10% of the share capital at the time. Roberto Ulissi, Corporate Affairs and Governance Senior Executive Vice President of the Company was confirmed as Secretary of the Board of Directors. Information is provided below on the personal and professional lives of the elected Directors. ROBERTO
POLI PAOLO SCARONI |
1973, he joined the Saint
Gobain Group, where he performed numerous managerial
tasks in Italy and overseas until he was appointed
President of the Glass Division in Paris in 1984. Between
1985 and 1996, he was Vice President and CEO of Techint
and managed the privatizations of the subsidiaries SIV,
Italimpianti and Dalmine. In 1996, he moved to the UK and
joined Pilkington, working as CEO until May 2002. Between
May 2002 and May 2005, he was CEO and General Manager of
Enel. Between 2005 and July 2006 he was Chairman of
Alliance Unichem (UK). In November 2007, he was honored
by France as an Officer of the Legion of Honor. ALBERTO
CLÔ PAOLO ANDREA COLOMBO |
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| PAOLO MARCHIONI Born in 1969. Director of Eni SpA since June 2008. Lawyer specialized in criminal and administrative law, counsel for defense in the Italian Supreme Court and superior jurisdictions. Advisor of public organizations, and commercial companies in matters of commercial, corporate, administrative and local government law. Mayor of the town of Baveno (VB) between April 1995 and June 2004. President of the Assembly of Mayors of Con.Ser.Vco between September 1995 and June 1999 and member of the Assembly of Mayors of ASL14, the management committee of the Verbano Health District, the Assembly of Mayors of the Waste Water Consortium of the Val d’Ossola and the Assembly of Mayors of the Social Services Consortium of Verbano until June 2004. Councilor of the Municipality of Stresa (VB) between April 2005 and January 2008. Between October 2001 and April 2004, he was a Director of C.i.m. SpA, Novara (Goods Interport Centre) and, between December 2002 and December 2005, Director and member of the Executive Committee of Finpiemonte SpA. Between June 2005 and June 2008 he was a Director of Consip. Since June 2009, he has been Vice President of the Province of Verbano-Cusio-Ossola and provincial alderman for budgeting, property, legal affairs and production activities. MARCO REBOA MARIO RESCA |
Finanziaria (Fiat Group) and
between 1976 and 1991 he was a partner in Egon Zehnder.
During this period he served as a Director of Lancôme
Italia, companies in the RCS Corriere della Sera Group
and the Versace Group. Between 1995 and 2007, he was
Chairman and CEO of McDonald’s Italia. He has also
been Chairman of Sambonet SpA, Kenwood Italia SpA,
founding partner of Eric Salmon & Partners and
President of the American Chamber of Commerce. In June
2002, he received the honor of Cavaliere del Lavoro. PIERLUIGI
SCIBETTA FRANCESCO TARANTO Appointment24 |
| (24) | Information also provided pursuant to Article 123-bis, first paragraph, letter l) of the Consolidated Law on Finance. |
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| 474/199425 and in
compliance with the provisions of the Consolidated Law on
Finance26, the By-laws provide for Directors
to be appointed by list voting. In particular, pursuant
to Article 17 of the By-laws and by virtue of the
provisions of Law No. 474/1994, lists may be presented
both by shareholders, either individually or together
with others, representing at least 1% of the share
capital, or by the Board of Directors. Each shareholder
may present or contribute towards presenting, and vote
for, a single list. The entities that control it, the
companies controlled by them and those that are jointly
controlled are not allowed to present, or contribute to
presenting, other lists or to vote for them, not even
through a third party or trust company. The lists, which
must expressly identify candidates who fulfill the
independence requirements, must be deposited at the
registered office at least ten days before the date for
which the Shareholders’ Meeting is first convened
(twenty days if presented by the Board of Directors) and
published in at least three national Italian daily
newspapers, two of them financial, according to the
requirements of Law No. 474/1994. The lists will also be
forwarded to market management companies and published on
the company’s website. All candidates must fulfill
the integrity requirements imposed by current laws. At
the same time as each list is deposited, on pain of the
list being considered inadmissible, the professional CV
of each candidate must be presented together with
statements in which they accept their candidacy and
confirm that there are no reasons for ineligibility and
incompatibility, and that they fulfill the honorability
and any necessary independence requirements. After the voting formalities have been completed, the appointment is implemented by drawing seven tenths of the Directors (rounded down to the nearest whole number in the event of a fraction), in the progressive order in which they are listed, from the list which won a majority of votes; the remaining ones being drawn from other lists which are not directly or indirectly connected with the shareholders that presented or voted for the list that came first in terms of the number of votes. The list voting procedure only applies in the event of the whole Board of Directors being replaced. For the appointment of Directors who were not elected by this method, for whatever reason, the Shareholders’ Meeting shall pass a resolution by the majority required |
by law in order to ensure
that the composition of the Board complies with the law
and the By-laws. Pursuant to Article 6, paragraph 2, letter d) of the By-laws, in addition to the Directors appointed by the Shareholders’ Meeting, the Ministry of the Economy and Finance is entitled to appoint one non-voting Director in agreement with the Minister of Economic Development. This power has not be exercised. Independence
requirements |
| (25) | Article 4 of Law 474/1994 provides for the Board to be elected by list voting and for at least one fifth of Directors with voting rights to be reserved for the minority lists, rounded up to the nearest whole number in case of a fraction. Shareholders’ meetings whose convocation notices will be published after October 31, 2010 will be subject to the new provisions that transpose Directive 2007/36/EC, according to which the provisions of Articles 125-bis, 147-ter and 148 of the Consolidated Law on Finance will apply to privatized listed companies, subject to the proviso that at least one fifth of Directors are drawn from the minority lists. | |
| (26) | Article 147-ter of the Consolidated Law on Finance provides for the voting list mechanism and establishes that at least one of the members of the Board of Directors must be drawn from the minority list and that he/she must have won the majority of votes and is not connected directly or indirectly with the shareholders that presented or voted for the list which came first in terms of the number of votes. |
| (27) | Criterion 3.C.1.b). | |
| (28) | Criterion 3.C.1.d). | |
| (29) | Criterion 3.C.1.h). |
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| criteria in its periodic
assessments of the independence of its non-executive
members, prioritizing substance over than form. Following the appointment, the non-executive Directors made the statements regarding fulfillment of the independence requirements and the Board verified that these existed, as required by current regulations and the Eni Code. In accordance with the By-laws and the Eni Code, which require the fulfillment of independence requirements to be verified periodically, at its meeting on February 11, 2010, the Board of Directors confirmed, on the basis of the statements made and the information available to the Company, that the non-executive Directors Clô, Colombo, Marchioni, Reboa, Resca, Scibetta and Taranto are independent under the terms of the law and the By-laws, as well as the Eni Code30. Director Clô was confirmed as being independent, under the terms of the Eni Code as well, even though he has held the position for over nine years31, because he has been appointed by the minority shareholders (specifically the institutional investors) and because of his recognized professional skills and independence of judgment. The Board of Statutory Auditors has always verified, most recently at its meeting on February 11, 2010, the correct application of the criteria and procedures adopted by the Board for assessing the independence of its members. The result of this assessment is summarized in the tables attached to this Report. No lead independent Director has been appointed given the presence of a CEO and a Chairman with different roles. Integrity
requirements, reasons for ineligibility and
incompatibility |
special rules applicable to
them. The same provision also requires the Board periodically to assess both the fulfillment of independence and integrity requirements of Directors and to verify that no reasons for ineligibility and incompatibility exist. Also under the terms of Article 17.3 of the By-laws, if one of the Directors should not fulfill or no longer fulfill the independence or integrity requirements declared and required by legislation, or if there are reasons for ineligibility or incompatibility, the Board will declare the dismissal of the Director and arrange for him to be replaced or ask for the reason for incompatibility to be removed within an established period of time, on pain of forfeiture of the post. Appointed Directors must inform the Company if they no longer fulfill the independence and integrity requirements or if reasons for ineligibility or incompatibility should arise. Following the appointment, the non-executive Directors made the statements regarding fulfillment of the integrity requirements imposed by legislation and the Board verified their existence, as required by current regulations and the Eni Code. In accordance with the instructions contained in the By-laws and the Eni Code, which require that the fulfillment of requirements is verified periodically by the Board, at its meeting on February 11, 2010, on the basis of the statements made and the information available to the Company, the Board of Directors verified that the integrity requirements were fulfilled and that there were no reasons for incompatibility and ineligibility affecting any of the Directors, not even in relation to the banking and financial subsidiaries. Guidelines
of the Board of Directors on the maximum number of
offices held by the Directors in other companies |
| (30) | Despite being a non-executive Director, the Chairman of the Board cannot be declared independent under a strict interpretation of the requirements of the Code of Borsa Italiana because he is a significant representative of the company (Application Criterion 3.C.2). | |
| (31) | Director Clô was appointed for the first time in 1999. | |
| (32) | Ministerial Decree No. 162 of March 30, 2000. |
| (33) | For the purpose assessing the maximum number of offices, financial companies are considered to be the financial intermediaries referred to in Article 106 of Legislative Decree 385/1993 (Banking Consolidation Act) and the companies that perform investment or collective savings management services under the terms of the Consolidated Law on Finance. |
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| equity of over euro 10
billion and (ii) the office of non-executive Director or
Statutory Auditor (or member of a controlling body) in
more than three of the aforesaid companies; - a non-executive Director, in addition to the office held in the company, should not hold: (i) the office of executive Director in more than one of the aforesaid companies and the office of non-executive Director or Statutory Auditor (or member of another controlling body) in more than three of the aforesaid companies, or (ii) the office of non-executive Director or Statutory Auditor in more than six of the aforesaid companies. The limit on multiple offices excludes offices held in Eni Group companies. If these limits are exceeded, the Directors will promptly inform the Board, which will assess the situation in light of the interests of the Company and will call upon the Director to take the consequent decisions. In any case, before taking up a post of Director or Statutory Auditor (or member of another controlling body) in another company that is not an investee company or a company which is directly or indirectly controlled by Eni, the executive Director must inform the Board of Directors, which will evaluate the compatibility of the office with the functions attributed to the executive Director and with the interests of Eni. The rules applicable to the executive Director also apply to Chief Operating Officers. On the basis of the information supplied, following the appointments and at the meeting held on February 11, 2009, the Board of Directors verified that the Directors had complied with the aforementioned limits on multiple offices. Detailed information about the number of offices held by the members of the Board with reference to the resolution on the number of offices that may be held is available in the table attached to this Report. Responsibilities |
management body in the Eni
Code. In more detail, the Board: 1. Defines the system and rules of corporate governance of the Company and the Group. In particular and after consulting the Internal Control Committee, it adopts rules which ensure transparency as well as substantive and procedural correctness in transactions with related parties and in transactions in which a Director retains a personal interest or an interest on behalf of third parties; in addition, it adopts a procedure for the handling and disclosure of corporate information, with specific reference to inside information. 2. Establishes the internal committees of the Board with advisory and consulting functions and appoints their members, while establishing their tasks and remuneration and approving their regulations. 3. Assigns and revokes proxies to the CEO and to the Chairman, defining the limits and modalities for exercising these proxies in addition to determining – after examining the proposals of the relative Committee and consulting with the Board of Statutory Auditors – the remuneration associated with these proxies. May impart directives to the delegated bodies and implement itself any operations falling under the proxy. 4. Defines the fundamental guidelines pertaining to the organizational, administrative and accounting structure of the company, including the internal control system, of the primary subsidiaries and of the Group. Assesses the adequacy of the organizational, administrative and accounting structure formulated by the CEO, particularly in reference to modalities for managing conflicts of interest. 5. Defines, in particular, after having examined the proposals of the Internal Control Committee, the guidelines of the internal control system in order to ensure the identification, measurement, management and monitoring of the primary risks of the company and its subsidiaries. Assesses, on an annual basis, the adequacy, efficacy and effective functioning of the internal control system that is supervised by the CEO. 6. Defines – on a proposal from the CEO – the strategic guidelines and objectives of the company and the Group, including sustainability policies. Examines and approves the strategic, industrial and financial plans of the company and the Group as well as agreements of strategic nature for the company. Examines and approves the plan for non-profit |
| (34) | Paolo Scaroni was appointed CEO of the company for the first time on June 1, 2005. |
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| operations of the company
and approves operations not included within the plan
whose cost exceeds euro 500,000. 7. Examines and approves the annual budgets of the divisions as well as of the company and the consolidated Group budget. 8. Examines and approves the half-year financial report and the interim reports of the company and the Group, in accordance with currently effective regulations. Examines and approves the Sustainability Report which must be presented to the Shareholders’ Meeting. 9. Receives information from Directors with proxies – at the time of Board meetings – and in any case at least on a bi-monthly basis relative to activities implemented during the exercising of proxies as well as on activities of the Group and atypical or unusual operations or with related parties of the company which have not been presented for examination and approval to the Board. In particular, it periodically receives information on a half-year basis along with justification for any modifications applied to investment operations which were previously approved by the Board, in accordance with point 12, letter b) and c) and on the basis of criteria established by the Board itself. 10. Receives periodical half-year information from the internal committees of the Board. 11. Assesses the general management trends of the company and of the Group on the basis of information received from Directors with proxies while paying particular attention to conflicts of interest and comparing attained results – as reported in the financial statements and periodical accounting statements – with budget estimates. 12. Examines and approves the operations of the company and its subsidiaries which are significant from a strategic, economic and financial perspective, particularly with regards to situations in which one or more Directors retain personal or third party interests as well as related parties transactions; In the case of listed companies, as well as companies subject to unbundling regulations, the Board must guarantee the principle of managerial autonomy. These provisions are applicable without prejudice to compliance with confidentiality obligations pertaining to commercial relations between the subsidiary and Eni or third parties, thereby protecting the interests of the subsidiary. The following operations are considered significant in nature: a) acquisitions or sales of shareholdings, companies or company branches, mineral rights and real estate, |
company mergers, spin-offs
and liquidations, whose value exceeds 100 million Euro
and without prejudice to the provisions of Article 23.2
of the By-laws; b) investments in fixed asset whose value exceeds euro 300 million or even of smaller amount if of particular strategic value or in the case of specific risks; c) exploration initiatives and portfolio operations in the E&P sector in new countries; d) purchase and sale of goods and services other than those allocated for investments and gas supplies, for an overall price exceeding euro 1 billion – excluding the purchase and sale of real estate and services included in ordinary administration – or whose duration exceeds 20 years; gas supply contracts, or amendments to such contracts, for a minimum of three billion cubic meters per year and a ten-year duration; e) financing to parties other than subsidiaries: (i) for amounts exceeding euro 200 million if in proportion to the shareholding quota or (ii) in the case of any amount if provided in favor of non-subsidiaries or for amounts that are not proportional to the shareholding quota; f) the issue of personal or real securities to parties other than subsidiaries: (i) for amounts exceeding euro 200 million, if in the interest of the company or of subsidiaries, or in the interest of non-subsidiary companies, so long as the security is proportional to the shareholding quota, or (ii) in the case of any amount if provided in the interest of non-controlled subsidiaries or if the security is not proportional to the shareholding quota. For the issue of the securities pursuant to point (i) whose amount ranges between euro 100 and 200 million, the Board grants a joint proxy to the CEO and the Chairman; g) Eni SpA intermediary agreements. 13. Appoints and dismisses – on a proposal from the CEO and in agreement with the Chairman – the Chief Operating Officers and grants their powers. If the CEO is appointed as the Chief Executive Officer, the proposal is made by the Chairman. 14. Appoints and dismisses – on a proposal from the CEO, in agreement with the Chairman and following approval from the Board of Statutory Auditors – the Officer in charge of preparing financial reports and ensures that the Officer is equipped with adequate powers and means in order to exercise his legally ascribed tasks in addition to monitoring the effective compliance with the administrative and accounting procedures formulated by this Officer. 15. Appoints and dismisses – on a proposal from |
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| the CEO, in agreement with
the Chairman and following a consultation from the
Internal Control Committee – an Officer in charge of
internal control and an Senior Executive Vice President
of Internal Audit in addition to defining their
remuneration in accordance with the compensation policies
of the company as well as approving the guidelines for
the activities of these two managers. 16. Ensures that a manager is appointed for the body which manages shareholder relations. 17. Defines – after having examined the proposals of the relative Committee – the criteria for remunerating the top management of the Company and of the Group in addition to implementing the compensation plans on the basis of stocks or financial instruments deliberated by the Shareholders’ Meeting. 18. Resolves – on a proposal from the CEO – on the exercise of voting rights and on the appointment of members of corporate bodies of the primary subsidiaries. In the case of listed companies, the Board must guarantee compliance with the provisions of the Corporate Governance Code falling under the competence of the Shareholders’ Meeting. 19. Formulates the proposals to present to the Shareholders’ Meeting. 20. Examines and resolves on other issues which Directors with proxies believe it is appropriate to present to the Board due to their particular relevance or sensitivity. In
accordance with Article 23.2 of the By-laws, the Board
also resolves: on merger by incorporation operations and
proportional demergers operations of at least 90%
directly owned subsidiaries; on the creation and closing
of secondary offices; and on adjustments of the By-laws
to regulatory requirements. |
At its meeting held on June
11, 2008, the Board identified Saipem SpA, Snam Rete Gas
SpA, Eni International BV and Polimeri Europa SpA as
subsidiaries of strategic importance for the purposes of
the approval of transactions pursuant to point 12 of the
aforementioned powers. At its meeting held on January 18, 2010, the Board of Directors confirmed the appropriateness of the organizational, administrative and accounting structure of the Company, the main subsidiaries and the Group. At its meeting held on March 11, 2010, the Board of Directors confirmed the appropriateness, effectiveness and efficient operation of Eni’s internal control system as a whole. At the same meeting, pursuant to Article 154-bis of the Consolidated Law on Finance, the Board also verified compliance with the administrative and accounting procedures established by the Officer in charge of preparing financial report and also confirmed the appropriateness of the powers and resources assigned to him for the performance of his duties. At its meeting held on February 12, 2009, with the approval of the Internal Control Committee, the Board approved the Guidelines on transactions involving interests of Directors (and Statutory Auditors) and those with related parties35. At its meeting held on February 25, 2010, the Board carried out a self-assessment of its composition and operation36. Meetings and running of
meetings |
| (35) | For further details see the paragraph of the Report specifically dedicated to this topic. | |
| (36) | For further details see the paragraph of the Report specifically dedicated to this topic. |
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| matters included in the
agenda, with the exception of price-sensitive
information, which is not included in any prior
communication. Managers of the company and its
subsidiaries are typically invited to attend Board
meetings in order to provide information on specific
topics pertaining to the agenda. Specific information is
also provided on the individual sectors in which the
Company and the Group are operating. In accordance with the provisions of Article 2391 of the Italian Civil Code and of the Eni Code, before each item on the agenda of the Board meeting is discussed, each Director is required to report any personal or third party interests that he/she may have in relation to the topics or issues under discussion, specifying their nature, terms, origin and scope. Transactions in which a Director (or Statutory Auditor) retains an interest or is a related party are regulated by the Guidelines relative to transactions involving interests of Directors (or Statutory Auditors) and related parties transactions, approved on February 12, 2009 by the Board of Directors following consultation with the Internal Control Committe. During 2009, the Board of Directors met 17 times for an average of 3 hours and 17 minutes at a time. In 2009, an average of 98.7% of Directors attended Board meetings and, in particular, 98.3% of independent Directors. During the current financial year, as of March 11, 2010, 5 meetings have been held, including the one held on that date. A further 12 meetings are planned to take place before the end of the financial year. The public is notified in advance, usually by the end of the financial year, of the dates of meetings of the Board of Directors to review the pre-final results, the financial statements and the intra-year accounting reports required by current legislation. These meetings also serve to determine the interim dividend payable for the year and to submit a proposal for balance of the dividend to the Shareholders’ Meeting along with the relative dates for dividend payment and detachment of the coupon. The financial calendar is available on the Eni website37. The Eni Code allows independent Directors to decide whether to meet in the absence of the other Directors for discussion of topics deemed relevant to the functioning of the Board. This express provision allowing such meetings to take place was requested by the independent Directors themselves in order to have greater flexibility to deal with actual requirements. In 2009, the independent Directors, in consideration of the frequency of the Board meetings, had numerous |
opportunities to meet,
holding formal and informal meetings to hold discussions
and exchange opinions. The tables attached to this Report show each Director’s percentage of attendance at meetings of the Board of Directors and meetings of the committees of which they are members. Board Review |
| (37) | At the following address: http://www.eni.com/en_IT/investor-relation/financial-calendar/financial-calendar.shtml |
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| The Directors also convened
to undertake, in a proper meeting, a detailed analysis of
the results of the Board review and the comparison with
the best practice, in particular in order to identify the
most appropriate conditions to: (i) allow the Board to
focus its attention on strategic and directive issues;
and (ii) increase the value of contribution of
non-executive Directors. Induction program of the
Board of Directors Remuneration report |
the achievement of
economic/financial, business development and operating
targets established to ensuring the sustainability of
results and the creation of value for shareholders over a
medium to long-term period, in accordance with Eni’s
Strategic Plan. The remuneration system is complemented by benefits, which consist of goods and services primarily associated with supplementary social security and health care. Governance
Rules Remuneration structure |
| (38) | Managers who have been members of the Eni’s Steering Committee, with the CEO and the General Managers of Eni’s Divisions, and Eni Senior Executive Vice Presidents who report directly to the CEO. |
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| that the Company continues
to apply the insurance policy already authorized in May
25, 2006, in favor of the Board Members and Statutory
Auditors for risks associated with the execution of the
respective tasks. The remuneration structure of the Chairman, in relation to the powers delegated to him, consists of a fixed part and a variable part associated with the achievement of specific company objectives established for the previous financial year. The remuneration structure of the CEO consists of a fixed component, based on the powers delegated to him, and an annual variable component associated with the achievement of specific company objectives (economic/financial, operating and strategic) established for the previous financial year and a variable long-term component composed by two separate plans with different company performance conditions, established over a three-year period and measured both in absolute terms and in relative terms compared to an oil industry peer group. The remuneration structure of managers with strategic responsibilities and other managerial resources consists of a fixed remuneration, determined according to the role and responsibilities assigned, with reference to the levels applied to equivalent positions in large national and international companies (oil, industrial and services sectors) and with annual adjustments according to merit (continuity of individual performance) or promotion (progression in terms of role/responsibility), and a variable annual remuneration associated with the achievement of specific economic, financial and operating targets, and a variable long-term remuneration associated with company performance, measured over a three-year period. In 2009, the variable annual remuneration of the Chairman and CEO was determined in accordance with Eni’s objectives for 2008 as approved by the Board of Directors, on proposal of the Compensation Committee, defined in accordance with Eni’s Strategic Plan and annual budget in terms of adjusted EBITDA, divisional operating performance, reduction in company costs and maintaining of position in sustainability indexes. The company results, assessed on a constant scenario basis, have been verified by the Compensation Committee and approved by the Board of Directors and have set out the score of 120 on a |
scale of 85 (minimum) - 130
(maximum), used for the purpose of determining the
variable remuneration to be paid. On March 25, 2009, the Board of Directors resolved to eliminate the Eni Stock Option Plan for 2009 and to maintain the Deferred Monetary Incentive Plan for the three-year period 2009-2011. This Plan, which is aimed at all managerial resources and is focused on certain business growth and operating efficiency targets, provides for an incentive to be paid after a period of three years in an amount connected with the achievement of annual EBITDA objectives (actual results vs. budget, on a constant scenario basis) defined for the reference three-year period. In order to adopt an alternative incentive scheme to Stock Option Plan, the Compensation Committee defined a new long-term incentive plan for critical managerial resources that will be approved by the Board of Directors in 2010. In 2009 the Board of Directors approved a plan with similar characteristics for the CEO; this plan provides for an incentive to be paid after a period of three years in an amount connected with the variation of the adjusted net profit + DD&A (Depletion, Depreciation & Amortization), measured over the three-year period 2009-2011 in relative terms compared to the other six largest international oil companies for market capitalization. In 2009, the vesting period of the long-term incentive plan assigned in 2006 expired. This plan consisted of a Deferred Monetary Incentive Plan, aimed at managerial resources, and a Stock Option Plan, aimed only at managerial resources holding positions that are more directly responsible for results and are of strategic interest. The Board of Directors, on March 25, 2009, based on the results achieved in 2006-2008, as verified by the Compensation Committee, resolved that: (i) with reference to the Deferred Monetary Incentive Plan, a multiplier of 143% should be applied to the amount awarded in 2006, calculated on the basis of the performance achieved in terms of Eni’s EBITDA; (ii) with reference to the Stock Option Plan, a percentage of 47% of exercisable options, calculated on the basis of the performance achieved in terms of Eni’s relative TSR, should be applied to the total amount granted in 2006. The CEO, in his quality of General Manager, participated in both Plans. |
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| In 2009, the remuneration structure of the Chairman, CEO, Divisional Chief Operating Officers and other | managers with strategic responsibilities was the following: |
| (%) |
|
Chairman |
CEO |
Divisional COO |
Other managers with strategic responsibilities |
|||||
| Fixed remuneration | 66 | 22 | 46 | 50 | ||||
| Annual variable remuneration (linked to performance) | 34 | 27 | 32 | 31 | ||||
| Long-term variable remuneration (linked to performance) (a) | 51 | 22 | 19 | |||||
| Total | 100 | 100 | 100 | 100 |
| (a) | Evaluation of the deferred monetary incentive (discounted) for target result. |
| Remuneration earned by
members of the Board of Directors, Statutory Auditors,
Chief Operating Officers, and other managers with
strategic responsibilities Pursuant to Article 78 of Consob Decision No. 11971 of May 14, 1999, and to its subsequent modifications, remuneration earned by members of the Board of Directors, Statutory Auditors, Chief Operating Officers and other managers with strategic responsibilities is reported in the table below. Remuneration earned by managers who held a position in 2009 for a fraction of the year is reported too. Pursuant to Consob decisions: - in the column "Emoluments for service at Eni SpA" are reported fixed fees paid to non-executive and executive directors, fixed fees paid to Directors attending the Committees formed by the Board of Directors, and fees paid to Statutory Auditors. Fixed fees earned by the Chairman and the CEO include also fees earned for the powers delegated to them by the Board; |
- in the column
"Non-cash benefits" are reported amounts
referring to all fringe benefits, including insurance
policies; - in the column "Bonuses and other incentives" are reported the portion of fees linked to performances which was awarded in the year to both non-executive directors and executive directors, and the portion of salaries linked to performances which was awarded in the year to the CEO, the Chief Operating Officers of Eni’s Divisions and other managers with strategic responsibilities; - in the column "Salaries and other elements" are reported base salaries and elements associated to salary paid to the CEO, the Chief Operating Officers of Eni’s Divisions and other managers with strategic responsibilities, and indemnities paid upon termination of the employment contract. Referring to the Statutory Auditors, fees paid for positions held on the Board of Statutory Auditors in Eni’s subsidiaries are also reported. |
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| (euro thousand) | ||||||||||||||||
| Name | Position |
Term of office |
Expiry date of the position (a) |
Emoluments |
Non-cash benefits |
Bonuses and other incentives (b) |
Salaries and |
Total |
||||||||
| Board of Directors | ||||||||||||||||
| Roberto Poli | Chairman | 01.01-12.31 | 04.2011 | 765 | 400 | 1,165 | ||||||||||
| Paolo Scaroni | CEO | 01.01-12.31 | 04.2011 | 430 | 1 | 2,824 | 1,017 | 4,272 | ||||||||
| Alberto Clô | Director | 01.01-12.31 | 04.2011 | 162 | 10 | 172 | ||||||||||
| Paolo Andrea Colombo | Director | 01.01-12.31 | 04.2011 | 96 | 10 | 106 | ||||||||||
| Paolo Marchioni | Director | 01.01-12.31 | 04.2011 | 107 | 10 | 117 | ||||||||||
| Marco Reboa | Director | 01.01-12.31 | 04.2011 | 163 | 10 | 173 | ||||||||||
| Mario Resca | Director | 01.01-12.31 | 04.2011 | 162 | 10 | 172 | ||||||||||
| Pierluigi Scibetta | Director | 01.01-12.31 | 04.2011 | 96 | 10 | 106 | ||||||||||
| Francesco Taranto | Director | 01.01-12.31 | 04.2011 | 153 | 10 | 163 | ||||||||||
| Board of Statutory Auditors | ||||||||||||||||
| Ugo Marinelli | Chairman | 01.01-12.31 | 04.2011 | 121 | 121 | |||||||||||
| Roberto Ferranti (c) | Auditor | 01.01-12.31 | 04.2011 | 84 | 84 | |||||||||||
| Luigi Mandolesi | Auditor | 01.01-12.31 | 04.2011 | 84 | 84 | |||||||||||
| Tiziano Onesti (d) | Auditor | 01.01-12.31 | 04.2011 | 84 | 40 | 124 | ||||||||||
| Giorgio Silva | Auditor | 01.01-12.31 | 04.2011 | 44 | 44 | |||||||||||
| Divisional Chief Operating Officers | ||||||||||||||||
| Claudio Descalzi | Exploration & Production | 01.01-12.31 | 3 | 772 | 734 | 1,509 | ||||||||||
| Domenico Dispenza | Gas & Power | 01.01-12.31 | 1 | 1,002 | 745 | 1,748 | ||||||||||
| Angelo Caridi | Refining & Marketing | 01.01-12.31 | 2 | 648 | 642 | 1,292 | ||||||||||
| Other managers with strategic responsibilities (e) | 15 | 4,179 | 4,266 | 8,460 | ||||||||||||
| 2,551 | 22 | 9,895 | 7,444 | 19,912 |
| (a) | The term of position ends with the Meeting approving financial statements for the year ending December 31, 2010. | |
| (b) | Based on the annual incentive plan related to performance achieved in 2008 (euro 6,283 thousand) and payment of the deferred monetary incentive granted in 2006 (euro 3,612 thousand). | |
| (c) | Compensation for the service is paid to the Ministry for Economy and Finance. | |
| (d) | Includes the compensation obtained as Chairman of the Board of Statutory Auditors of AGI and Servizi Aerei. | |
| (e) | Managers who, during the year, have been members of Eni’s Management Committee with the CEO and the Divisional Chief Operating Officers, and Eni Senior Executive Vice Presidents who report directly to the CEO (8 managers). |
| Long-Term Incentive Plan
awarded to the CEO, the Divisional Chief Operating Officers and managers with strategic responsibilities 1.
DEFERRED MONETARY INCENTIVE |
according to a variable amount equal to a percentage ranging from 0 to 170% of the amount established for the target performance in relation to the performances achieved in a three-year period as approved by the Board of Directors. The following table sets out the basic bonus awarded in the year 2009 to the CEO and to the Divisional Chief Operating Officers, and the total amount awarded to the Company’s managers with strategic responsibilities. |
(euro thousand)
| Name | Deferred bonus awarded | |||
| Paolo Scaroni | CEO and General Manager of Eni | 787 | ||
| Claudio Descalzi | COO of the E&P Division | 340 | ||
| Domenico Dispenza | COO of the G&P Division | 350 | ||
| Angelo Caridi | COO of the R&M Division | 307 | ||
| Other managers with strategic responsibilities (a) | 1,612 | |||
| (a) | No. 8 managers. |
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| With reference to Eni Board
of Directors’ resolution not to implement the Eni
stock option Plan for 2009 and the relevant commitment to
the CEO of adopting an alternative incentive scheme with
the same financial effectiveness, has been approved a new
long-term monetary incentive plan in behalf of CEO to
replace and compensate the Eni stock option Plan for
2009, whose value and characteristics are comparable with
those of the former plan. Performance conditions of this plan are set in terms of variation of the Adjusted Net Profit + Depletion Depreciation & Amortization (DD&A) measured on 2009-2011 three-year period and compared, in relative terms, to that of the other six largest international oil companies for market capitalization. The amount of incentive assigned in 2009 is euro 2,716,391 and it’ll be paid in 2012, after a three-year vesting period, in a percentage ranging from 0 to 130% of the amount assigned in 2009 in relation to the performance achieved in the reference three-year period. 2.
STOCK OPTIONS |
scheme provided that
grantees had the right to purchase treasury shares in a 1
to 1 ratio, with a strike price calculated as the
arithmetic average of official prices registered on the
Mercato Telematico Azionario in the month preceding award
or, if greater, as the average carrying cost of treasury
shares held by Eni as of the date preceding the award. The most recent stock option scheme covered the three-year period 2006-2008 and was approved on May 25, 2006, by the Shareholders’ Meeting that authorized the Board of Directors to dispose of a maximum amount of 30 million treasury shares (equal to 0.749% of the share capital) for the stock option plan. This stock option plan also provided a performance condition upon which options can be exercised. At the end of each vesting period with a three-year duration, the Board of Directors determined the number of exercisable options, in a percentage ranging from 0% to 100% of the total amount awarded for each year of the scheme, depending on the performance of Eni shares measured in terms of Total Shareholder Return as compared to that achieved by a panel of major international oil companies in terms of market capitalization. Options may be exercised upon fulfillment of all conditions after three years from the award and within the next three years. At December 31, 2009, a total of 19,482,330 options were outstanding for the purchase of an equal amount of ordinary shares nominal value euro 1.00 of Eni SpA, carrying an average strike price of euro 23.576. The following is a summary of residual stock option activity as in 2009 there were no awards: |
2008 |
2009 |
|||
| Number of shares | Weighted average exercise price (euro) | Market price (a) (euro) | Number of shares | Weighted average exercise price (euro) | Market price (a) (euro) | |||||||
| Options as of January 1 | 17,699,625 | 23.822 | 25.120 | 23,557,425 | 23.540 | 16.556 | ||||||
| New options granted | 7,415,000 | 22.540 | 22.538 | |||||||||
| Options exercised in the period | (582,100 | ) | 17.054 | 24.328 | 2,000 | 13.743 | 16.207 | |||||
| Options cancelled in the period | (975,100 | ) | 24.931 | 19.942 | 4,073,095 | 23.374 | 14.866 | |||||
| Options outstanding as of December 31 | 23,557,425 | 23.540 | 16.556 | 19,482,330 | 23.576 | 17.811 | ||||||
| of which exercisable at December 31 | 5,184,250 | 21.263 | 16.556 | 7,298,155 | 21.843 | 17.811 | ||||||
| (a) | Market price relating to new rights assigned, rights exercised in the period and rights cancelled in the period correspond to the average market value (arithmetic average of official prices recorded on Mercato Telematico Azionario in the month preceding: (i) the date of assignment; (ii) the date of the recording in the securities account of the managers to whom the options have been assigned; (iii) the date of the unilateral termination of employment for rights cancelled). Market price of shares referring to options as of the beginning and the end of the year, is the price recorded at December 31. |
| Further information on stock options is furnished in Note 31 to the Consolidated Financial Statements. The following table presents the amount of outstanding | stock options awarded in past years to Eni’s CEO, Divisional Chief Operating Officers and other managers with strategic responsibilities. |
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| CEO and General Manager of Eni | COO of E&P Division |
COO of G&P Division |
COO of R&M Division |
Other managers with strategic responsibilities (a) | ||||||
| Paolo Scaroni (b) | Claudio Descalzi | Domenico Dispenza | Angelo Caridi | |||||||
| Options outstanding at the beginning of the period: | |||||||||||||||||||||
| - number of options | 2,587,500 | 264,000 | 380,000 | 142,000 | (c) | 150,500 | 122,000 | (d) | 1,671,000 | 80,500 | (e) | ||||||||||
| - average exercise price | (euro) | 23.767 | 24.009 | 24.142 | 4.399 | 22.534 | 21.098 | 23.660 | 21.545 | ||||||||||||
| - average maturity in months | 55 | 55 | 56 | 54 | 65 | 48 | 56 | 48 | |||||||||||||
| Options granted during the period: | |||||||||||||||||||||
| - number of options | |||||||||||||||||||||
| - average exercise price | (euro) | ||||||||||||||||||||
| - average maturity in months | |||||||||||||||||||||
| Options exercised at the end of the period: | |||||||||||||||||||||
| - number of options | 35,600 | (e) | |||||||||||||||||||
| - average exercise price | (euro) | 17.519 | |||||||||||||||||||
| - average market price at date of exercise | (euro) | 22.264 | |||||||||||||||||||
| Options expired during the period: | |||||||||||||||||||||
| - number of options | 360,930 | 40,280 | 64,925 | 14,700 | (d) | 233,995 | 8,900 | (e) | |||||||||||||
| - average exercise price | (euro) | 23.100 | 23.100 | 23.100 | 17.519 | 23.100 | 17.519 | ||||||||||||||
| - average market price at date of exercise | (euro) | 14.079 | 14.079 | 14.079 | 12.240 | 14.079 | 12.240 | ||||||||||||||
| Options outstanding at the end of the period: | |||||||||||||||||||||
| - number of options | 2,226,570 | 223,720 | 315,075 | 142,000 | (c) | 150,500 | 107,300 | (d) | 1,437,005 | 36,000 | (e) | ||||||||||
| - average exercise price | (euro) | 23.875 | 24.173 | 24.357 | 4.399 | 22.534 | 21.588 | 23.751 | 26.521 | ||||||||||||
| - average maturity in months | 45 | 46 | 46 | 42 | 53 | 36 | 46 | 43 | |||||||||||||
| (a) | No. 8 managers. | |
| (b) | The assignment to the CEO have been integrated in 2007 with a monetary incentive to be paid after three years in relation to the performance of Eni shares, equal to 80,500 options with a strike price of euro 27.451. Relating to the attribution of this incentive for 2006, equal to 96,000 options with a strike price of euro 23.100, the conditions for its payment were not fulfilled, since the price of Eni share resulted lower to the exercise-price at the end of the three-year vesting period. | |
| (c) | Options on Snam Rete Gas shares: assigned by the company to Domenico Dispenza who held the position of Chairman of Snam Rete Gas until December 23, 2005. | |
| (d) | Options on Saipem shares: assigned by the company to Angelo Caridi who held the position of CEO of Snamprogetti until August 2, 2007. | |
| (e) | Options on Saipem shares. |
| Indemnity upon
termination Upon expiry of the contract as employee of Eni, the CEO in his quality of General Manager of the parent company is entitled to receive an indemnity that is accrued along the service period. The indemnity is determined by taking into account social security contribution rates and post-retirement benefit computations applied to the CEO base salary and 50% of the bonuses earned as a Director. In 2009 a provision of euro 244,435.07 has been accrued. In case the work contract of the CEO is terminated at or before the expiry of his office, the CEO will receive a termination payment, in addition to other termination elements, equal to euro 3,200,000 plus an amount corresponding to the average performance bonus earned in the three-year period 2008-2010 in lieu of |
notice thus waiving both
parties from any obligation related to notice. This
payment is not applicable in case the work contract is
terminated upon due cause, death or resignation from
office other than as a result of a reduction in powers
currently attributed to the CEO. Overall
remuneration of key management personnel |
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| Board
Committees39 The Board has set up
three internal committees, two of which are required by
the Code of Borsa Italiana, with consulting and advisory
functions: a) the Internal Control Committee, b) the
Compensation Committee and c) the Oil-Gas Energy
Committee. The composition, tasks and operation of the
committees are governed by the Board, according to
specific regulations, in compliance with the criteria
outlined in the Eni Code. |
by the Shareholders’
Meeting on the basis of lists presented by shareholders. The regulations of the three Committees are available on the Eni website. Internal Control Committee |
| (39) | Information provided pursuant to Article 123-bis, second paragraph, letter d) of the Consolidated Law on Finance. | |
| (40) | For further details of the tasks of the Internal Control Committee, see the "Internal Control System" paragraph of this Report. |
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| judicial investigation with
reference to crimes which could, even potentially,
involve Eni or its direct or indirect subsidiaries both
in Italy and abroad, or on the part of its Directors
and/or employees; (x) reports on developments regarding disputes considered to be of particular interest, particularly as regards the appropriateness of documentation supporting assessments of the potential liabilities that may be connected with these proceedings and the text of the respective disclosures to the market in the context of the annual and half-yearly financial report; (xi) the Reports of the Officer in charge of preparing financial reports on the administrative and accounting structure of Eni as of December 31, 2008 and as of June 30, 2009, verifying the appropriateness of the powers and resources made available to the Chief Financial Officer as the Officer in charge of preparing financial reports. In this respect, the examination is focused on the main organizational changes that took place at the end of the second half of 2009 in the CFO area, particularly as regards administrative activities; (xii) the Reports of the relevant Officer in charge of internal controls contained in the financial statement on December 31, 2008 and on June 30, 2009, and the update on November 30, 2009; (xiii) the essential aspects of the Statutory and consolidated financial statements as of December 31, 2009, holding meetings with the most senior member of Eni’s administrative functions, its main subsidiaries and the companies subject to so-called unbundling rules for this purpose, as well as the Chairmen or other members of the Board of Statutory Auditors of each company and the partners of the Auditing Company instructed to express an opinion on the individual financial statements; the representation in the financial statements of specific transactions and/or shareholdings; the draft consolidated half-year financial report as of June 30, 2009, with particular reference to the application of the IAS 36 international accounting standard to the assets of Eni’s main areas of business; the reports of the audit firm on the Annual Financial Report for 2008 and the Half-Year Financial Report for 2009; (xiv) the main aspects of the Annual Report on Form 20-F 2008 and the new developments associated with application of the International Financial Reporting Interpretation Committee (IFRIC) 12, the statement on the implementation of SOA activities |
and update on the 2009 Fraud
Prevention Program; (xv) the draft of the Report on Operations of the Directors pursuant to Article 2433-bis of the Italian Civil Code and relative to the interim dividends for the year 2009; (xvi) the chapter on the Internal Control System to be inserted within the Corporate Governance Report of the 2008 financial statements;(xvii) the report on the reports presented by the audit firms on the 2008 Financial Statements, the auditing approach and strategy used in 2008 and 2009 and the audit firm’s communication on the outcome of the auditing activities pertaining to the internal controls that oversee the process of drawing up Eni’s consolidated financial statements for 2008 in accordance with section 404 of the Sarbanes-Oxley Act; (xviii) the report on the tender launched in the second half of 2009 to assign the task of auditing the financial statements and internal control system of the Eni group, in accordance with the Sarbanes-Oxley Act, for the nine-year period 2010-2018; (xix) the organization and control model adopted by Eni for the purpose of ensuring fulfillment of the requirements of AEEG VIS Resolution No. 109/2008 of December 11, 2009 regarding the ban on passing on the charge imposed by Article 81 of Decree Law No. 112 of June 25, 200841 ("Consumer Prices Control Model") in its prices; (xx) the main aspects of the company’s organizational model regarding Health, Safety and the Environment; (xxi) updating of the Eni Guidelines pertaining to the management and control of financial risks; (xxii) the results of the "Unbundling Implementation Program" launched in 2007, with particular reference to the organizational activities carried out and the formalities required to comply with relevant national and European regulations; (xxiii) the main features of Eni’s current regulatory system and the state of progress of improvements implemented by the company in mid-2009 to rationalize the management architecture and method, with a view to simplifying it and making it easier to use, while maintaining its effectiveness; (xxiv) the main activities carried out by the working group on "Gas Metering Systems"; (xxv) the main aspects of Eni’s Security activities, with particular reference to the organization, procedures and operational costs of the dedicated company structure; |
| (41) | Turned into Law No. 133 of August 6, 2008. |
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| (xxvi) the periodic Report
on the disciplinary actions taken against illegal conduct
on the part of employees drawn up by the relevant
sections of the Human Resources and Organization
departments in accordance with the company’s
regulations; (xxvii) the main features of the ICT operation processes and main initiatives currently under way to strengthen the security of information systems and prevent computer crime and illegal data processing under the terms of Legislative Decree 231/2001. Compensation Committee Oil-Gas Energy Committee |
has advisory and consulting
functions with respect to the Board of Directors,
particularly in relation to drafting of the Group’s
Strategic Plans and verifying the consistency of
operational policies adopted in the multi-year plans. The OGEC met 10 times in 2009 with an 80% attendance rate on the part of its five member Directors. The meetings were also often attended by the Chairman and other Directors. The Committee’s first meetings of the year were aimed at monitoring the effects of the economic and financial crisis on the national and international energy market, in order to allow the Board of Directors to assess the potential impacts on Eni and take appropriate and prompt countermeasures. The OGEC spent a considerable amount of time examining the scenario of oil and natural gas prices, which is important for strategic corporate planning and the assessment of investments. The committee’s analysis of oil price formation mechanisms and the respective financial markets were particularly important. During the year, the OGEC began to reflect on the fundamental challenges of the Strategic Master Plan, which are likely to have a very significant impact on market developments and therefore on Eni’s business. For this purpose, two meetings were dedicated to the evolution of the gas market in Europe, which is characterized by great uncertainty about supply and demand. The composition, appointment and operating methods, tasks, powers and resources of the Committee are governed by an appropriate regulation approved by the Board of Directors43. Chief Operating Officers In accordance with Article 24 of the By-laws, the
Board of Directors can appoint one or more Chief
Operating Officers44, establishing their
powers, on a proposal from the CEO, in agreement with the
Chairman, subject to their fulfillment of the integrity
requirements imposed by the law being verified. The Board
periodically assesses the integrity of the Chief
Operating Officers on the basis of statements made by the
Managers themselves. Any failure to fulfill the
requirements leads to dismissal from their post. |
| (42) | http://www.eni.com/en_IT/governance/committees/committees.shtml | |
| (43) | http://www.eni.com/en_IT/governance/committees/committees.shtml | |
| (44) | For further details, see the section of the website that also contains the company’s organizational chart http://www.eni.com/en_IT/company/organisation-chart/organisation-chart.shtml |
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| regarding the number of
posts they may hold, in accordance with the rules
applicable to the CEO. The Board of Directors has appointed three Chief Operating Officers responsible for Eni’s three operating divisions: - Claudio Descalzi, Chief Operating Officer, Exploration & Production Division; - Domenico Dispenza, Chief Operating Officer, Gas & Power Division; - Angelo Caridi, Chief Operating Officer, Refining & Marketing Division. At its meeting on February 10, 2010, the Board of Directors, based on the statements made, verified the fulfillment of the integrity requirements and also verified that the Chief Operating Officers complied with the rules on the maximum number of posts they may hold. Board of Statutory Auditors Responsibilities |
On March 22, 2005, the Board
of Directors, by virtue of the rights granted by the
Stock Exchange Commission (SEC) to foreign issuers listed
on the regulated US markets, has identified the Board of
Statutory Auditors as the body that, since June 1, 2005,
has been fulfilling, within the limits set forth by
Italian laws, the responsibilities assigned to the Audit
Committee of such foreign issuers by the Sarbanes-Oxley
Act and by SEC regulations. On June 15, 2005, the Board
of Statutory Auditors has approved the regulations
concerning the fulfillment of the responsibilities
assigned pursuant to the aforementioned U.S. regulations45,
the text of which is available on Eni’s website46. Composition
and appointments |
| (45) | These regulations were amended on March 30, 2007 in order to include the new provisions introduced by Legislative Decree 303/2006 to Article 159, paragraph 1 of the Consolidated Law on Finance, and by Eni’s Code, as well as to make the necessary adjustments based on the organizational changes that have occurred since June 15, 2005 when the original regulations were approved. | |
| (46) | At the following address: http://www.eni.com/en_IT/governance/board-of-Statutory-auditors/board-of-Statutory-auditors.shtml |
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| information on the
shareholder or shareholders who are submitting the list;
a declaration, from each candidate, stating compliance
with the legal independence, integrity and professional
requirements; their personal and professional curricula. The lists shall be filed with the registered office at least ten days prior to the date of the first call of the Shareholders’ Meeting and published in three Italian daily newspapers, two of them financial, with national circulation. The lists are also forwarded to the market management company and published on the company’s website. The appointment procedure shall adopt the methods already described in the Board of Directors section. The procedure of proportional representation (voto di lista) only applies in the event of the entire Board of Statutory Auditors being replaced. In the event of a replacement of an Auditor from the list that has received the majority of votes, the alternate Auditor from the same list fills the vacant position; in the event of a replacement of an Auditor from other lists, the alternate Auditor from those lists fills the vacant position. Pursuant to Article 28.2 of the By-laws, in compliance with the provisions of the Consolidated Law on Finance, the Shareholders’ Meeting appoints as Chairman of the Board of Statutory Auditors one of the elected candidates from a list that did not receive the majority of votes. On June 10, 2008, the Shareholders’ Meeting has appointed the following Auditors for a period of three years and in any case until the date when the Shareholders’ Meeting is convened to approve the 2010 financial statements: Ugo Marinelli, Chairman, Roberto Ferranti, Luigi Mandolesi, Tiziano Onesti and Giorgio Silva, effective Statutory Auditors, Francesco Bilotti and Pietro Alberico Mazzola, alternate Auditors. The Shareholders’ Meeting has also determined the pre-tax annual compensation for the Chairman of the Board of Statutory Auditors and of each Statutory Auditor, in the respective amounts of euro 115,000 and euro 80,000, in addition to reimbursement for any expenses incurred while performing auditing duties. Roberto Ferranti, Luigi Mandolesi, Tiziano Onesti and Francesco Bilotti were elected from the list submitted by the Ministry of the Economy and Finances as holder of 20.30% of the share capital. Ugo Marinelli, Giorgio Silva and Pietro Alberico Mazzola were elected from the list submitted by the institutional investors, holders of 1.10% of the share capital. Personal and professional information on the Statutory Auditors is provided here below. UGO MARINELLI |
Corporate Auditing in the
department of Economics "Federico Caffé" at
Roma Tre University, Rome. He is also a Professional
Accountant and Auditor. He spent a large part of his
career (from 1965 to 2000) at Arthur Andersen, where he
occupied positions with increasing responsibilities at
both the domestic and international levels. Expert in
international accounting principles, he was a member of
EFRAG - European Financial Reporting Advisory Group
– the technical advisory body of the European
Commission for the endorsement of international
accounting principles issued by IASB - International
Accounting Standards Board. As a professional corporate
business consultant, he specializes in risk management
and internal control. He has held and continues to hold a
number of positions in many companies. He is currently
Chairman of the Board of Statutory Auditors of A.D.
Moving SpA, of Società Energie Rinnovabili SpA and its
subsidiary Società Energie Rinnovabili 1 SpA. He is also
Chairman of Auditors of Civita and a member of the Board
of Directors of Fingold SpA. Since June 2008, he has been
Statutory Auditor and Chairman of the Board of Statutory
Auditors of Eni. ROBERTO FERRANTI |
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| LUIGI MANDOLESI Born in 1943. After graduating in Economics and Business from Università La Sapienza di Roma, he took a position as a Certified Public Accountant and Accounting Specialist in 1966 and as a Certified Auditor in 1995. He was appointed Chairman of the Order of Accountants and Auditors of Rome, Rieti and Velletri and also held the position of Vice Chairman of the Order of Certified Public Accountants and Accounting Specialists of Rome, Rieti, Tivoli and Velletri. He is partner in the firm "Studio Commercialisti Associati Luigi e Massimo Mandolesi". He is Chairman of the Board of Auditors of Procter & Gamble Holding Srl, Finamca, Impreme, Albergo Centrale, Edev Italia and Edf en Italia; he is a Statutory Auditor of Altec, Pietro Mezzaroma e Figli, Larimart and Fondazione Luca Pacioli, and he is a member of the Board of Directors of Villa Margherita and Finconcordia. He has been a Statutory Auditor of Eni since 2008. TIZIANO ONESTI |
GIORGIO SILVA Born in 1945, he holds a degree in Economics and Business from Università Cattolica del Sacro Cuore in Milano; he has been registered in the Register of Certified Public Accountants of Busto Arsizio since July 4, 1975 and in the Register of Varese since May 3, 1989. He has been a Chartered Accountant since 1981 and a Certified Auditor since 1995 (Ministerial Decree 12/04/1995 published in Gazzetta Ufficiale n. 31 bis of 21/4/1955). He held executive administrative positions in primary industrial companies from 1965 to 1973. He assumed an executive role in the tax section of the audit firm Peat Marwick & Mitchell (currently KPMG) in Milan from 1973 to 1976. In 1977, he joined Studio legale Tributario L. Biscozzi - A. Fantozzi, currently Studio Legale e Tributario Biscozzi Nobili, of which he is a founding partner. He held positions of Board Director in listed companies such as Gemina SpA, from 1996 to May 3, 1999; of Chairman of the Board of Auditors in Impregilo SpA from 1999 to May 2, 2005, and in ATC Trevisan Cometal SpA until May 7, 2008. The positions he currently holds are: Chairman of the Board of Auditors of Kedrios SpA, TSP - Tecnologie e Servizi per il Pubblico Srl; Statutory Auditor of the listed RCS Mediagroup SpA, Statutory Auditor of: Alitalia Compagnia Aerea Italiana SpA, CAI Second SpA, Air One SpA, Air One Cityliner SpA, Air One Technic SpA, SIA - SSB SpA, Hewlett Packard Italiana Srl, Bolton Alimentari SpA (he also holds the position as Alternate Auditor in Autogrill SpA, CAI First SpA, Nuova Sidap Srl; Auditor in Fondazione Corriere della Sera; Auditor in Fondazione Candido Cannavò per lo sport, and Auditor for the Provincia di Varese). He is a speaker at conventions and the author of numerous articles and publications on the taxation system. He is a member of the Eni Watch Structure overseeing compliance with Legislative Decree 631/2001 of RCS Mediagroup SpA and Luxottica SpA. He has been a Statutory Auditor of Eni since May 2005. The personal and professional résumés of the Statutory Auditors are also available on Eni’s Website, in the Corporate Governance section. Independence, integrity and professional
requirements, causes for ineligibility, incompatibility
and dismissal |
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| requirements, as set forth
in the regulations issued by the Ministry of Justice and
the Ministry of Economy and Finance. As for the professional requirements, Article 28 of the By-laws states that, as set forth in the aforementioned ministerial regulatory provisions, the requirements may be met also through a professional or teaching experience (of at least three years) in the business law, business economics and finance disciplines or through the exercise (for at least three years) of executive functions in the engineering end geology fields. The Auditors in office must also be registered in the Registry of Certified Auditors. The Statutory Auditors have stated for the first time, on the occasion of their appointment, to meet the requirements of independence, integrity and professionalism set forth in the applicable regulations, and the Board of Directors has completed the verification assignments conferred to them at the meeting of June 11, 2008. Subsequently and in compliance with the provisions of Eni’s Code, aimed at ensuring that the Statutory Auditors satisfy the prerequisites of independence, also in accordance with the criteria provided for in the same Code for the Board of Directors, the Board of Statutory Auditors has verified, at the meeting of January 21, 2009 and January 18, 2010, that its members meet the afore mentioned requirements (independence, integrity and professionalism) and the Board of Directors, at the meetings of February 26, 2009 and February 11, 2010 respectively, has completed the verification assignment received. Finally, pursuant to all applicable laws, the subjects who hold the same position in five other issuer companies, are not allowed to assume the role of member of the auditing body in any other issuer company. They may however be assigned other administrative and control functions in Italian companies, within the limits set forth by Consob and in compliance with internal corporate regulations. In compliance with this policy, entered into effect on June 30, 2008, each Statutory auditor has forwarded to Consob, in September 2008, a communication stating compliance with the aforementioned restrictions. In July 2009, the Statutory Auditors have submitted to Consob their annual report on the number of offices held and on the ranking associated with such offices. |
Meetings attendance The Statutory Auditors and the Directors are simultaneously provided with documentation on the items of the agenda to be discussed at the Board of Directors meeting, and the Board of Directors and the CEO shall report, at least every quarter or in any case, at the time of the Board of Directors meetings, on the activities performed and on the most relevant economic, financial activities and operations carried out by the company and by its subsidiaries, pursuant to Article 23.3 of the By-laws. In compliance with the specifications of the Eni’s Code, the Statutory Auditors must inform the Board of Directors and the other Auditors of any interest they may retain on their own or on behalf of third parties with respect to specific transactions of the company. Corporate operations in which the Statutory Auditors retain an interest, or of which they are the related third parties, are regulated by specific Guidelines that were approved on February 12, 2009 by the Board of Directors following consultation with the Internal Control Committee. The meetings of the Board of Statutory Auditors may be held by video or teleconference. In 2008, the Board of Statutory Auditors met 26 times. The average duration of the meetings was approximately 3 hours and 48 minutes. In 2009, the average attendance at the meetings of the Board of Statutory Auditors was 91% of the members whereas the average attendance at the meetings of the Board of Directors was 95% of the members. The tables attached to this report show the attendance of each Auditor at the meetings of the Board of Statutory Auditors and of the Board of Directors. Internal Control System47 The internal control system is a set of rules, procedures and organizational structures aimed at creating healthy and sound company management that is consistent with established goals, by means of an adequate process for the identification, measurement, management and monitoring of the main risks. An effective internal control system contributes towards guaranteeing the protection of the company’s assets as well as efficiency and efficacy of business transactions, reliability of financial reporting and compliance with laws and regulations. |
| (47) | Information provided pursuant to Article 123-bis, second paragraph, letter b), of the Consolidated Law on Finance. |
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| The structure of the
internal control system, is a part of the organizational
and management model of the company and involves, in
different roles, administrative bodies, watch structures
auditing bodies48, management and all
personnel, in compliance with the principles of the Code
of Borsa italiana and the framework of reference,
"COSO Report"49. Each specific
structuring of this system is integrated with the
provisions of the Code of Ethics which provides for the
following as fundamental values: the formal and
substantive legitimacy of the behaviors of members of
corporate bodies and of employees at any organizational
level; accounting transparency; and the promotion of a
corporate culture based on internal controls. Eni is aware that the investors rely on the commitment of the corporate bodies, management and employees to maintain full compliance with the rules set forth in the corporate internal control system. Within this scope, Eni manages, by means of a set of internal regulations and in compliance with the provisions set forth in the Sarbanes-Oxley Act, the receipt – through easily accessible communication channels – the analysis and the handling of the reports of issues, even in confidential or anonymous form (whistle blowing), that are received by Eni and its subsidiaries and related to internal control, financial reporting, company administrative responsibility, frauds or other types of concerns50. According to Eni, the so-called "culture of risk and related control" contributes to characterize and affect the management’s aptitude and choices in pursuing company objectives and reporting the outcomes. Eni is consistently committed to promote the development and pervasiveness by the company’s employees of an awareness regarding internal control issues. For the purposes of ensuring an effective and sound management of corporate operations, in compliance with pre-set strategies and objectives, Eni supports a risk prevention approach and focuses its choices and management activities on the reduction of the probability of the occurrence of negative events and their potential impact. To this end, Eni adopts strategies of risk management, depending on their nature and |
type such as mainly
financial and industrial risks, compliance/regulatory
risks, as well as other strategic and operational risks,
such as country risks in oil & gas activities, and
other risks related to exploration for and production of
hydrocarbon. The methods by which management identifies,
assesses, handles and monitors the specific risks
associated with the company operations, are regulated by
internal guidelines, rules, procedures and organizational
provisions within the company’s regulatory system,
which being risk prevention-based, contribute to their
containment. With specific regard to industrial51
and financial risks, special control measures have been
set forth and special regulations have been issued or are
being issued within the CEO‘s area of competence,
which will be periodically updated in order to guarantee
an effective and transversal management of these types of
risks. In addition, the development of risk assessment
programs in specific areas contributes to further
developing the sensibility of management with respect to
risk management and contributes to the improvement and
efficacy of decision-making processes. In 2009, in line with the evolution of the company organizational model and consistent with the company’s mission and values, Eni has undertaken initiatives to streamline and integrate its own regulatory system by simplifying it and easing its use for the purpose of higher overall efficacy. Similar initiatives were applied also to the ICT processes and are currently undergoing an assessment in terms of streamlining and integrating the risk management system. The internal control system is subject, over time, to evaluation and updates in order to steadily guarantee its capacity to preside over the main areas of corporate risks, according to the typical issues of each operating segment and organizational structure, ready to take account of any new law or regulations. The main changes introduced in 2009 are part of a natural evolutionary process aimed at achieving "on-going improvements" of the efficacy and efficiency of the system itself. In particular, in response to the evolution of the applicable legislation, Model 231 was updated to include the types of offences recently added within the application scope of Legislative Decree No. 231 of |
| (48) | For further information on the supervisory activities performed by the Board of Statutory Auditors in regard to the adequacy of the internal control system and of the administrative-accounting system, also as Audit Committee under US laws, see the paragraph "Board of Statutory Auditors - Responsibilities" above and "Officer in charge of preparing financial reports and internal control system on financial reporting". | |
| (49) | See CoSO - Committee of Sponsoring Organizations of the Treadway Commission (1992), Internal Control. Integrated Framework. The adoption by Eni of the CoSO Report is mentioned in several documents, among which the most relevant are: Eni’s organizational, management and control Model pursuant to Legislative Decree No. 231 of 2001 approved by the Board of Directors in the meetings of December 15, 2003, of January 28, 2004 and March 14, 2008; Guidelines on internal control system over corporate reporting – Rules and Methods – II Release approved by the Board of Directors on June 20, 2007, as well as all referenced best practices set forth by the Internal Audit. | |
| (50) | Eni guarantees full confidentiality of the identity of the people who reports issues of concern in good faith, and communicates the results of the assessment carried out on report cases to the top management of the company as well as to the appropriate control and supervisory bodies. | |
| (51) | The term "Industrial risks" refers specifically to risks that occurs from events which may cause damage to the company's asset (property) and/or to third parties, within the scope of their activities (causality), including damages suffered by the people involved in the production process. |
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| 2001, as detailed
hereinafter, and a specific Control Model was adopted in
order to prevent the application, to consumer prices, of
the charge associated with the income surtax introduced
by Legislative Decree No. 112 of 2008 (Consumer Prices
Control Model). Board of Directors Internal Control Committee |
charge of preparing
financial reports, the Officer in charge of Internal
Control and the Eni Watch Structure and, in general, must
be based on the evidence acquired while performing its
activities, which are: - examining and assessing – in conjunction with the Officer in charge of preparing financial reports and the Audit firm – the correct utilization of accounting principles and their homogeneity for the drafting of the annual and half-year financial statements before approval by the Board of Directors; - assisting the Board in defining the guidelines for the internal control system; - providing an evaluation – upon request by the CEO – on specific aspects concerning the process used to identify the main risks related to the Company as well as on the planning, implementation and management of the internal control system; - overseeing the activities of Internal Audit and of the Officer in charge of Internal Control; furthermore within this area of responsibility, the Committee examines: the proposal of the Audit Plan and its potential amendments during the financial year; the annual budget of the Internal Audit Department; the periodical reports and performance indicators on the activities of the Internal Audit Department; - examining and assessing the following: (i) the outcomes of internal audit reports as well as any evidence on related monitoring activities on improvement actions on control system, planned after the audits are performed; (ii) evidence resulting from the periodical reports on the outcomes of the monitoring activities conducted on the internal control system over financial reporting, on its adequacy and actual application, as well as the adequacy of the powers and means assigned to the Officer in charge of preparing financial reports; (iii) communications and information received from the Board of Statutory Auditors and its members regarding the internal control system, also in reference to the outcomes of preliminary inquiries conducted by the Internal Audit department following reports received also in anonymous form (whistle blowing); (iv) evidence emerging from the reports and management letters submitted by the Audit Firm53; (v) periodical reports issued by Eni Watch Structure, also in its capacity as Guarantor of the Code of Ethics; (vi) evidence emerging from the periodical reports submitted by the Officer in charge of preparing financial reports and by the Officer in Charge of internal control; (vii) information on the internal control system as it relates to the company’s |
| (52) | Unlike to the Code of Borsa Italiana, the Eni Code requires that at least two (and not only one) Committee members have adequate expertise in accounting and financial matters, to be assessed by the Board of Directors at the time of their appointment. |
| (53) | Eni entrusted to the Board of Statutory Auditors, as set forth in the Code of Borsa Italiana, the role of Audit Committee under the SOA and therefore the task of reviewing the proposals submitted by Audit Firm in order to obtain the auditing mandate and monitor the efficacy of the accounting auditing process. |
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| structure, also through
periodical meetings with management, as well as enquiries
and reviews carried out by third; - performing other specific activities aimed at formulating analyses and opinions on topics falling under its competence and based on the Board’s request for details, and in particular, providing an opinion on the rules concerning the transparency and substantial and procedural correctness of operations carried out with related third parties, as well as transactions where a Director of the Board retains a personal interest or an interest on behalf of third parties, and finally carrying out any additional task assigned within this scope, including the review and evaluation of specific types of transactions. The activities performed by the Committee in 2009 are described in the dedicated paragraph above. Chief
Executive Officer Eni’s people - Management |
Officer in
charge of internal control and internal audit A primary role in monitoring and assessment process of the internal control system is performed by the Officer in charge of Internal Control, a position which, in Eni, is held by the Senior Executive Vice President of Internal Audit (Rita Marino), given the substantial identity of operational areas and the consequent strong link between the two roles. Officer in charge of Internal Control Internal Audit Department |
| (54) | To this end, please see details in the following paragraph describing the responsibilities assigned to the Officer in charge of preparing financial reports. |
| (55) | The Officer in charge of internal control was appointed for the first time in the meeting of March 16, 2007 and later reconfirmed by a resolution issued on October 30, 2008. |
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| Auditors in its capacity as
"Audit Committee" in accordance with US law:
audits, analyses, assessments and recommendations
pertaining to the design and functioning of, as well as
compliance with, the internal control system of the
company and of the Group, in order to promote its
efficiency, and efficacy. The Internal Audit Department
performs the activities, within its own area of
responsibility, as regards Eni SpA and the subsidiaries
in which ENI retains majority voting rights, with the
exception of those with listed shares or those under the
supervision of the Bank of Italy. Those subsidiaries have
their own Internal Audit Departments. The Senior Executive Vice President of Internal Audit, reports to the CEO who is entrusted with overseeing the functioning of the internal control system; the Internal Control Committee oversees the activities carried out by the Internal Audit which reports also to the Board of Statutory Auditors, in its capacity as "Audit Committee", pursuant to the laws of the Unites States. The methods for appointing/revoking the Senior Executive Vice President of Internal Audit are compliant with the provisions set forth in the Code of Ethics, as regards the Internal Control Manager, given the synergy between the two roles. The Internal Control Committee evaluates annually the upholding of the characteristics of honorability, competence and expertise of the Senior Executive Vice President of Internal Audit, as well as the absence of any causes of incompatibility, and provides the Board of Directors with its opinion on the compensation to be paid to the Senior Executive Vice President of Internal Audit upon proposal by the CEO in accordance with corporate policies. Tasks, powers
and means of the Internal Audit Department and
information flows |
for professional practices
and the Code of Ethics, performs the following main
activities: (i) Executes audit activities (operational, financial and compliance audit, with particular attention given to the provisions of Legislative Decree No. 231 of 2001), thus implementing the Annual Audit Plan formulated with a top-down risk based approach and approved by the Board of Directors together with the budget of the resources and, for the relevant aspects as set forth in Legislative Decree No. 231 of 2001, by the Eni Watch Structure. (ii) Performs unplanned internal audit activities, upon request by the primary stakeholders of the internal control system and/or by the top management. (iii) Monitors the implementation of corrective actions defined on the basis of audit activities. (iv) Organizes and oversees the development and management of the information flows set up for receiving the reports, also in anonymous form, of which it keeps an updated archive, and conducts preliminary audits in compliance with applicable corporate procedures. (v) Performs monitoring activities, as provided for in the 231 Model of Eni SpA. Within this specific area, the Internal Audit Department has started, in 2009, monitoring activities pertaining to HS, which, in compliance with the aforementioned Internal Audit Charter, provide for conducting independent assessments on the auditing, measurement and reporting activities, to be carried out by the competent HSE units. (vi) Carries out independent monitoring activities performed for financial reporting, according to a plan communicated by the CFO and, starting in 2009, performs also independent monitoring activities for relevant operations in terms of "Consumer Prices Control Model", based on the Plan formulated by the General Manager of each Division. (vii) Participates in corporate training regarding internal control issues. The Internal Audit department ensures systematic and periodical reporting (quarterly summary reports and half-year reports) on the outcomes of its activities which are forwarded to the control and supervisory bodies and to upper management in order to enable them to perform their duties, in terms of control and assessment of the internal control system; in addition, it promptly informs the CEO and the control and supervisory bodies about serious deficiencies identified in the internal control system and about any circumstance that may compromise its own prerequisites of independence. |
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| Officer in
charge of preparing financial reports and internal
control system applied to financial reporting Officer
in charge of preparing financial reports Tasks, powers and means of the Appointed Officer |
(CFO) and has deemed as
being adequate, for the purpose of performing his
functions, the conferred expenditure powers, to be
exercised independently from or jointly with the CEO, as
well as the means at his disposal in terms of
organizational structures and administrative, accounting
and internal control systems. In the meeting of March 11, 2010, the Board of Directors has confirmed the adequacy of the "powers and means" at the disposal of the CFO, in his capacity as AO, and has verified compliance of the procedures implemented by the AO with the applicable law. Main
characteristics of the risk management and internal
control systems applied to the financial reporting
process |
| (56) | Reliability (of the reporting): A reporting that meets the requirements of correctness and compliance with generally accepted accounting principles and includes the characteristics sets forth by the applicable laws and regulations. |
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| The planning, set up and
maintenance of the internal control system applied to
financial reporting are guaranteed through: risk
assessment, controls identification, controls evaluation
and reporting. The risk assessment process, based on a "top-down" approach, aims at identifying the organizational entities, the processes and the specific activities capable of generating risks of unintentional errors or of frauds, which may significantly affect the financial statements. In particular, the identification of the organizational entities under the internal control system applied to financial reporting, is based on the contribution, by the various entities, to the figures stated in the consolidated financial statements (assets, financial debt, net proceeds, taxable income) also in consideration of their relevance in terms of processes and specific risks57. Within the companies that are relevant to the control system applied to financial reporting, significant processes are subsequently identified upon an analysis of quantitative factors (processes that contribute to determining the financial statement items for amounts over a certain percentage of pre-tax profits) and of qualitative factors (e.g.: complexity in the accounting handling of financial operations; news and/or significant changes in the business conditions). Following identification of all relevant processes and activities, the potential risks are identified. The term "risk" refers to potential events that may compromise the achievement of the control system’s objectives applied to financial reporting (e.g. financial statements). The identified risks are assessed in terms of their potential impact and probability of occurrence, based on qualitative and quantitative parameters and assuming the absence of a control system (inherent assessment). In particular, with reference to fraud risks58, a risk assessment was performed based on a specific methodology used in the "Anti-fraud programs and controls" to which the aforementioned Guidelines refer. In consideration of the relevant companies, of the processes and risks involved, a control system was set up on the basis of two fundamental principles: the application of the control system to all levels of the corporate organizational structure and in accordance with the assigned operating responsibilities, and the controls’ sustainability over time so as to ensure a performance that is integrated and compatible with operational requirements. The structure of the control system applied to financial reporting provides for controls implemented at the level of entities that operate in a transversal manner with |
respect to the reference
entity (Group/Division/single company), and provides for
controls at the process level. The controls implemented at the entity level are organized in a checklist which, based on the model adopted in the COSO Report, focuses on five components (control environment, risk assessment, control activity, information systems and reporting, monitoring activities). Of particular importance are the control activities related to the scheduling of drafting and disseminating economic-financial operating results ("half-year and financial statement circular" and related timelines); the existence of organizational structures and of a regulatory body aimed at reaching the pre-set objectives as regards financial reporting (these controls provide, for example, for auditing and updating activities carried out through specialized corporate functions, as set forth in the Group’s Regulations, with reference to the group’s financial statements and Accounting Plan); training activities on accounting principles and an internal control system applied to financial reporting; and finally activities related to the reporting system for the management of the consolidation process (Mastro). The controls at the process level are divided as follows: specific controls intended as a set of manual or automated activities aimed at preventing, identifying and correcting errors or irregularities that may occur in carrying out operational activities; pervasive controls intended as structural elements of the control system applied to financial reporting and aimed at defining the general conditions that would promote a correct execution and control of operational activities (e.g. segregation of incompatible tasks and general controls on information systems). The "specific controls" consist in special procedures that define both the execution of corporate processes and the so-called "key controls", the absence or non-functioning of which would carry the risk of a relevant error or fraud in the financial statements that may not be detected by other forms of controls. The controls at the entity and process level are subject to evaluation (monitoring) in order to assess, over time, the effectiveness of their design and their actual functioning. For this purpose, the following activities were provided for: ongoing monitoring – assigned to the management group responsible for the relevant processes/activities – and separate evaluations, assigned to the Internal Audit Department which operates in compliance with a preset plan, formulated by the |
| (57) | Among the entities under the internal control system, are some companies established and operating in compliance with the laws of countries that are not part of the European Union, to which the regulatory provisions of Article 39 of the Consob Market Regulations apply. | |
| (58) | Fraud: within Internal Control System, each act or intentional omission which generates a deceptive statement. |
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| CFO/AO, that defines the
scope and the objectives of the interventions through
agreed upon auditing procedures. The monitoring activities enable the identification of deficiencies present in the control system applied to financial reporting, which are subject to evaluation in terms of probability and impact on Eni’s financial reporting and, based on their relevance, are qualified as "deficiencies", "significant weak points" or "relevant deficiencies". The results of these monitoring activities are included in periodical reports on the status of the control system applied to financial reporting, through the use of computerized tools in order to guarantee the tracking of the information collected on the effectiveness of the design and on the actual functioning of the controls. Based on this reporting activity, the CFO/AO prepares a report on the adequacy and actual implementation of the control system applied to financial reporting, which, after approval by the CEO, is submitted to the Board of Directors, following review by the Internal Control Committee and upon approval of the annual and half-year financial statements, in order to enable the execution of the required supervisory functions and of the appropriate evaluations, related to the internal control system applied to financial reporting. This report is also submitted to the Board of Statutory Auditors, in its capacity as Audit Committee in compliance with US regulations. The CEO/AO is assisted, in his/her activities within ENI, by several other individuals whose tasks and responsibilities are defined in the aforementioned Guidelines. More specifically, control activities involve all levels of Eni’s organizational structure, from business managers to executives to administrative Directors and the CEO. Within this organizational structure, the so-called "risk owner" assumes a particular relevance, as regards the internal control system, as he/she performs ongoing monitoring activities aimed at evaluating the design and effectiveness of specific and pervasive controls, as well as providing information to be used in the reports on monitoring activities and on any identified deficiencies, in order to promptly implement all necessary corrective actions. Eni
Watch Structure and Model 231 |
to certain offences that are
attempted or committed in Italy or abroad in the interest
or for the benefit of the company. The companies may, in
any case, adopt organizational, management and control
models suitable to the prevention of possible offences. With regards to this issue, Eni SpA’s Board of Directors – in its meetings of December 15, 2003 and January 28, 2004 – has approved an organizational, managerial and control model pursuant to Legislative Decree No. 231 of 2001 (hereinafter, "Model 231") and has appointed the Eni Watch Structure. The composition of the Eni Watch Structure, initially consisting of only three members, was amended in 2007 with the addition of two external members, one of them appointed by the Chairman of the Eni Watch Structure and selected from among university professors and professionals of proven experience and expertise in economics and business management. The internal members are represented by the Senior Executive Vice President (or managers directly reporting to them) of Legal Affairs, Human Resources and the Internal Audit Departments. The Eni Watch Structure carries out the following main activities: (i) monitors the efficacy of Model 231 of Eni SpA as well as all related implementation and updating activities; (ii) evaluates the effectiveness of Model 231 and ensures the maintenance over time of its sound and efficient functioning by proposing the necessary updates; (iii) monitors the progress of its application to the subsidiaries and promotes the dissemination and knowledge to the same of the methodologies and tools to be used for the Model’s implementation (iv) approves the annual planning of all Eni SpA’s supervisory activities, coordinates their implementation; and evaluates the results; (v) manages the reporting activities, working for this purpose with the Watch Structure of subsidiaries’ appropriate personnel and supervisory bodies. The synergies between Model 231 and the Code of Ethics, an integral part and underogable principle of Model 231, are evident in the assignment to Eni SpA’s Watch Structure of the functions of Guarantor of the Code of Ethics. Similarly, each subsidiary assigns the functions of Guarantor of the Code of Ethics to its own Watch Structure. The Watch Structure of Eni SpA reports periodically on its activities to the Chairman, to the CEO – who informs the Board of Directors by means of his/her own report on the execution of delegated powers – to the Internal Control Committee and to the Board of Statutory Auditors. These periodical reports are processed according to the evidence acquired while performing its activities. Following the first approval of Model 231 and its subsequent updates in compliance with legislative developments, in the meeting of March 14, 2008, the |
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| Board of Directors of Eni
SpA, after consultation with the Board of Statutory
Auditors, has approved its own update which has been
implemented in accordance with corporate organizational
changes, new legal requirements59, new
developments on the part of authorities and case law,
issues resulting from the application of the Model
(including any knowledge stemming from legal disputes),
the practices of Italian and foreign companies with
regards to the models, the outcomes of supervisory
activity and the results of internal auditing activities. Model 231 of Eni SpA, a set of principles and the point of reference for subsidiaries, is provided to each subsidiary so that they may adopt and/or update their own models. The subsidiaries listed on the stock exchange and those operating in the gas and electrical sectors, subject to unbundling regulations, adopt their own model and adjust it as necessary, in accordance with their own company characteristics and with the principle of managerial autonomy. The representatives identified, as indicated by Eni, within the corporate bodies of the subsidiaries as well as in consortia and joint ventures, promote the principles and contents of Model 231 within their respective areas of competence. Control provisions (based on general and specific standards) have been set forth in order to regulate corporate activities for the prevention of crimes, pursuant to Legislative Decree No. 231 of 2001. In addition, in compliance with the applicable law, a disciplinary system has been implemented to sanction infringements of Model 231 and failures to comply with corporate procedures. At the end of 2009, Eni has launched some initiatives aimed at streamlining and optimizing the organizational and operational structure of the watch structures of the subsidiaries, and at analyzing the process implemented by the subsidiaries themselves for the adoption of Model 231 while taking into consideration any developments in the regulatory system and in best practices. The Board of Directors plays a primary role concerning Model 231 since, as mentioned earlier, it has reserved the right to approve it, to establish and appoint the members of the Watch Structure and to receive, through the CEO, periodical reports on its operations. On the other hand, the CEO is responsible for implementing and updating Model 231, pursuant to the powers conferred to him/her by the Model itself. |
For this purpose, the CEO
has set up a multifunctional Team ("Team 231")
responsible for drafting/submitting proposals for
updates. During 2009, the Team 231 has completed the
update of Model 231 to include crimes pertaining to
receiving stolen goods, recycling, and unlawful usage of
money and properties of illegal origins, computer crimes
and unlawful data processing, and will shortly implement
new updates by adding new types of presumed crimes
introduced by the legislature in 2009 (organized crimes,
crimes against industry and commerce, infringements of
copyrights, instigation not to make statements or to make
false statements to judicial authorities). In 2009, the rationale and methods to be applied to the planning and implementation of supervisory activities were defined in the areas of workplace safety and health for the prevention of "manslaughter or serious or very serious personal injuries, in violation of workplace safety and health laws", pursuant to the provisions of Legislative Decree No. 231/2001, to the principles and the content of Model 231 and to Eni SpA’s Managing System Model HSE concerning internal assessments and controls. The activities were carried out by a dedicated multifunctional team, under the coordination of the Watch Structure of Eni SpA, which, in accordance with the tasks assigned by Model 231, shall promote, in 2010, the implementation in the subsidiaries of the principles defined for Eni’s supervisory activities pertaining to HS. For a correct implementation of Model 231, training and/or communication activities based on the type of recipient (including third party and the market) have been planned. A Web Based Training (WBT) on Model 231 has been planned for the year 2010 and will be provided specifically to managers/executives, corporate organizational communication groups and to key officers of Eni. Model 231 and the Code of Ethics are published on Eni’s web site and are available on the company’s intranet network. Anti-Corruption
Policy |
| (59) | The current scope of application of Legislative Decree No. 231 of 2001 provides for the following: Offences against public authorities and public faith, (ii) corporate crimes, (iii) crimes associated with the subversion of public order, and financing of terrorism, (iv) offences against the person, (v) market abuse ("abuse of confidential information" and "market manipulation"), (vi) offences against individuals, Law No. 7 of 2006, (vii) transnational crimes, (viii) manslaughter and serious or very serious personal injury committed in violation of industrial accident laws and of the protection of industrial hygiene and health, (ix) crimes related to receiving stolen goods, recycling, and unlawful usage of money and properties of illegal origins, (x) computer crimes and unlawful data processing, (xi) organized crimes, (xii) offences against industry and commerce, (xiii) infringements of copyrights, (xiv) instigation to make false statements to judicial authorities. |
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| Anti-Corruption Procedures,
on specific subject matters, are currently under review.
The Anti-Corruption Guidelines and Auxiliary
Anti-Corruption Procedures aim at providing a systematic
reference framework with anti-corruption regulations and
procedures, already implemented by Eni over time, as well
as at ensuring full compliance, by Eni and its employees,
with the Code of Ethics, with Model 231 and with national
and international anti-corruption laws. For this purpose,
both the Anti-Corruption Guidelines and the Auxiliary
Anti-Corruption Procedures are being adopted by all of
Eni’s subsidiaries, both in Italy and abroad, upon
resolution issued by the Board of Directors (or by the
corresponding body/function, if the governance of the
subsidiary does not provide for the establishment of a
Board). The internal regulations adopted by Eni, as
regards this subject matter, provide for the involvement
of Eni’s Board of Directors or of the subsidiary
company, in the approval phase of the most significant
activities (such as the appointment of intermediaries).
In compliance with international market best practices,
an anti-corruption unit was also set up, within the Eni
SpA’s Legal Affairs Department, with the objective
of providing legal advisory services and support, in
anti-corruption matters, to Eni’s business units and
unlisted subsidiaries. At the time of the adoption of this policy, a presentation event was held in order to provide Eni’s personnel with information on the company’s new and future initiatives aiming at a continuously more effective fight against, and prevention of corruption. An anti-corruption training program for the company’s employees, currently under development, will be held in the course of the year and will consist of an information session, delivered through e-learning modules with an overview of the anti-corruption topic, and a series of interactive workshops for a more in-depth analysis on specific sub-topics. Audit firm60 The auditing of Eni’s financial statements is
entrusted, in accordance with the law, to an audit firm,
registered in the Consob special registry and appointed
by the Board of Directors, upon a documented proposal
submitted by the Board of Statutory Auditors. |
requires the issue of an
assessment on the efficacy of the internal control
system, applied to financial reporting, which oversees
the preparation of the consolidated financial statements. For the most part, the subsidiaries’ financial statements are subject to auditing by the same company that audits Eni’s financial statements. In addition and for the purpose of issuing an assessment on the consolidated financial statements, Eni’s audit firm assumes the responsibility for the work performed by other auditing companies as regards those subsidiaries’ financial statements which represent altogether an irrelevant part of the company’s assets and consolidated turnover. The current audit firm is PricewaterhouseCoopers SpA. Its first mandate of June 1, 2001, was later confirmed for three more years by the Shareholders’ Meeting held on May 28, 2004, and subsequently extended to the 2007-2009 financial years by the Shareholders’ Meeting held on May 24, 2007, pursuant to Legislative Decree No. 303/2006, since the maximum term of nine financial years provided for by the law had yet to be completed. Consequently, at the time of the approval of the financial statements of the 2009 financial year, PricewaterhouseCoopers SpA will have fulfilled its mandate and the Shareholders’ Meeting will appoint another audit firm. During the course of its operations, the audit firm shall have access to the information and data in both printed and digital form, as well as to the archives and assets of the company and of its subsidiaries. The single reference framework for the application to Eni’s group of auditing regulations is represented by the Financial Statements Auditing Regulations (Normativa in materia di revisione dei bilanci) adopted by the Board of Directors as of April 3, 2008. These regulations include the new legislative provisions issued in the last few years61 as well as the provisions issued by the appropriate control authorities (Consob and SEC). The regulations comply with the general framework of principles applied to the following: granting and revocation of the mandate; relations between the Group’s primary and secondary Auditors; independence of the audit firm and reasons for incompatibility; reporting responsibilities and obligations of the audit firm; regulations applied to the reports to be submitted to the company, to Consob and SEC. In order to protect the independent nature of the Auditors, a monitoring system of "non-auditing" tasks has been set up where, in general, the entrusted |
| (60) | The audit firm, verified the redaction of this Report, renders an opinion according to Article 156, par. 4-bis, lett. d) of the Consolidated Law on Finance on the information provided according to Article 123-bis, par. 1, lett. c), d), f), l) and m), and par. 2, lett. b) of the same law. The audit report is published together with the Annual Financial Report. | |
| (61) | Law No. 262/2005 and Legislative Decree No. 303/2006 which have amended the Consolidated Law on Finance. |
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| audit firm and the companies of its network, shall not be assigned tasks other than those pertaining to accounting audits, with few exceptions in the case of assignments that are not prohibited by Italian laws or the Sarbanes-Oxley Act. These assignments are approved by the Board of Directors of each company, following consultation with the Board of Statutory Auditors of that same company, and are subsequently authorized by Eni’s Board of Statutory Auditors if such assignments are not included among those provided | for in the applicable laws
and regulations. Eni’s Board of Statutory Auditors
is, in any case, periodically informed of the tasks
entrusted to the audit firm by the companies of the
Group. The following table shows total fees paid by Eni, its consolidated and non-consolidated subsidiaries and Eni’s share of fees incurred by joint ventures for services provided by Eni audit for and its member firms, with respect to the years indicated: |
| Principal accountant fees and services | 2007 |
|
2008 |
|
2009 |
|
| (euro thousand) | ||||||
| Audit fees | 26,383 | 27,962 | 30,748 | |||
| Audit-related fees | 169 | 152 | 276 | |||
| Tax fees | 81 | 46 | 51 | |||
| All other fees | 120 | 1 | - | |||
| 26,753 | 28,161 | 31,075 |
| Court of
Auditors The financial management of Eni is
subject to control by the Court of Auditors in order to
protect public finances. This activity was carried out by
the Judge of the Court of Auditors, Lucio Todaro
Marescotti, succeeded by Raffaele Squitieri62,
appointed by resolutions issued on October 28, 2009 by
the Council of the Presidency of the Court of Auditors. Directors’ interests and transactions with related third parties While awaiting the issue of the executive provisions
of Article 2391-bis of the Italian Civil Code, the Board
of Directors – following consultation with the
Internal Control Committee – has adopted the
Guidelines relative to transactions involving Directors
and Auditors’ interests and related third parties in
order to ensure compliance with the principles of
transparency and of formal and substantial correctness
which govern these transactions – in relation to the
aforementioned transactions – by the cited
provisions and by the Code of Borsa Italiana. |
- has identified, on the
basis of pre-determined criteria, the most relevant
transactions with related third parties that fall under
its decision-making area of competence; - has assigned a decisive role to the independent Directors by providing for the involvement of the Internal Control Committee in the inquiry and deliberative phases of the aforementioned relevant transactions with the possibility to be assisted in carrying out these tasks by one or more experts appointed in its choice. The Committee plays also an important role in those transactions that do not fall within the area of the competence of the Board; - has provided for a more in-depth inquiry into all transactions conducted with related third parties, regardless of deliberative powers, in order to ensure transparency as well as a substantial and procedural correctness of the transactions; this transparency must also be ensured in the subsequent deliberative phase. Consequently, the approved Guidelines define the policies to be adopted by the Group in this area. The number of relations of a commercial, financial and other nature with related third parties, the description of the type of most relevant transactions, the impact of these relations and transactions on the balance sheet, the income statement and cash flow statements, are highlighted in the explanatory notes to the consolidated financial statements (Note 36 – Relations with related third parties). The Guidelines, as required by Eni’s Code, also regulate transactions involving the interests of Directors/ |
| (62) | Alternate Judge is Amedeo Federici. |
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| Auditors, thereby providing
that: - Directors and Auditors periodically issue a statement reporting the potential interests held by each party in relation to the company and to the Group, and they promptly notify the other Directors and the Board of Statutory Auditors about individual transactions with the Company in which they hold interests that are "external" to the company; - the involved Directors normally do not take part in the discussion and in the resolutions issued by the Board with regard to relevant issues; at times they may even leave the meeting room. In any case, the transactions in which the related third party is a Director or an Auditor, or other parties associated with them, are considered relevant and thus subject to more in-depth investigational and deliberative procedures, as well as to a resolution that the Board of Directors takes after consulting with the Internal Control Committee. The text of the Guidelines is available on the website of the company, in the Corporate Governance section. Relations with the shareholders and the market From the start of the privatization process and in
compliance with its Code of Ethics and Corporate
Governance Code, Eni maintains an open and on-going
communication with institutional investors, with retail
shareholders and with the market in order to ensure the
dissemination of complete, correct and timely information
on its activity, with restrictions applied only to
certain confidential information. |
disclosed to the market and
published on the website with details on the main
financial events of the following year. The pages
"Eni on the Stock Markets" (Eni in Borsa), in
the Investor Relations section of Eni’s website63
are constantly updated with information regarding
dividends, securities prices, peer securities trends and
main exchange codes. Also available on the web site are the periodical reports, the press releases, the Report, the Governance Code and related procedures, Eni’s By-Laws, communications to shareholders and bond holders, reports and documentation regarding the topics of the agenda of the Shareholders’ and Bondholders meetings, with the related minutes. The documentation is sent to anybody who may request it, also through the website64. The company has also agreed to fulfill the requests, which have emerged in recent Shareholders’ meetings, for an increasing involvement of the investors. Eni is fully committed to make available to the public all information, as required by the law, and in addition all information related to its own Corporate Governance system, with particular attention given to keeping the content on the website consistently updated. A section of the website is dedicated to Eni’s corporate governance, and the governance system is illustrated in a summary interactive diagram65 as well as through additional detailed explanations. The site also provides a significant amount of documentation, easy to consult, including this Report, previous reports and all the documents mentioned in the Report. The efficacy of the communication provided by Eni through its corporate website has been rated of the best quality for two consecutive years (2008 and 2009), both at national and European levels66, thanks to its capacity for guaranteeing a high level of disclosure through a clear, accessible and transparent presentation style. In particular, the corporate governance section has earned the highest score among Italian companies and the second highest among European companies67. Notwithstanding all regulatory and Statutory provisions, the project aiming at encouraging the interest and participation of the shareholders is progressing. In recent years, in fact, the objective to have companies not only respect the rights of the shareholders, but also promote their active participation by assisting them in exercising their rights, by communicating comprehensible and easily accessible information and by encouraging their participation in corporate activities, has been strongly stressed. |
| (63) | At the following address: http://www.eni.com/en_IT/investor-relation/eni-stock-markets/eni-stock.shtml |
| (64) | At the following address: http://www.eni.com/en_IT/documentation/documentation.page?type=bil-rap&header=documentazione&doc_from=hpeni_header | |
| (65) | At the following address: http://www.eni.com/en_IT/governance/governance-model-policies/eni-corporate-governance-code/eni-corporate-governance-code.shtml | |
| (66) | This refers to the "H&H Webranking" which provides the most authoritative rankings on the quality of corporate communication through a website of the most important 100 Italian and 500 European companies. | |
| (67) | At the following address: http://www.eni.com/en_IT/governance/governance-model-policies/eni-governance-awards/eni-governance-awards.shtml |
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| The commitment to presenting
Eni to the shareholders in the simplest and most
intuitive way led to the idea of creating a section of
the website68 dedicated to direct
communications including a Guide for the Shareholders and
an overview of future initiatives. One of these
initiatives is the presentation of the Shareholders’
Meeting – held on April 30, 2009, for the approval
of the 2008 financial statements – and of the
shareholders rights, by means of a simple and quick
interactive animated film. Specific positions/functions
within Eni ensure effective relations with institutional
investors, shareholders and the media. In particular, as set forth in the Eni’s Code, the relations with institutional investors and financial analysts are handled by the Manager of Investor Relations; all related information is available on the Eni website and may be requested by e-mail at the address: investor.relations@eni.com. The relations with the media are handled by the External Communication Manager; all related information is available on the Eni website and may be requested by e-mail at the address: ufficio.stampa@eni.com. The relations with the shareholders are handled by the Company Secretary For Eni SpA Manager. All related information is available on the Eni website and may be requested by e-mail at the address segreteriasocietaria.azionisti@eni.com or by calling the toll free number 800940924 (outside of Italy: 80011223456). The relations with the shareholders, as regards corporate governance matters, are handled by the Corporate Governance Systems and Policies Manager. All related information is available on the Eni website and may be requested by e-mail at the address: info.governance@eni.com. Corporate information processing In compliance with the provisions set forth in the Consolidated Law on Finance and in the Consob Regulations on Issuers, upon implementation of the European Directive on the so-called Market Abuse, the Board of Directors, on February 28, 2006, has approved procedures for communicating privileged information to the market, for creating a log of individuals with access to privileged information and for notifying about transactions carried out by previously identified "relevant subjects" and concerning the shares of the company (internal dealing). These procedures were subsequently updated to include the interpretations provided by Consob through a communication dated |
March 28, 2006, and are
available in the Corporate Governance section of the Eni
website69 Following is a summary of the
approved procedures. Communication to the market of
documents and inside information Register of persons having access to inside
information |
| (68) | At the following address: http://www.eni.com/en_IT/governance/shareholders/initiatives/initiatives.shtml |
| (69) | At the following address: http://www.eni.com/en_IT/governance/market-abuse/market-abuse-procedures/market-abuse-procedures.shtml |
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| Internal Dealing The "Procedure concerning identification of the relevant persons and the transactions carried out directly or through nominees in respect of shares issued by Eni SpA or other related financial instruments " (Internal Dealing Procedure) has replaced the previous policy on the subject matter, dating back to 2002, and is written in compliance with the provisions of Article 114, paragraph 7, of the Consolidated Law on Finance. The procedure, in accordance with the indications provided for in the Consob Regulations on Issuers (i) identifies the relevant subjects; (ii) defines the transactions on shares issued by Eni or other related financial instruments; (iii) sets forth the methods and terms for communicating to Eni the transactions that are carried out, as well as the terms for disclosing such communications to the public. |
The procedure provides also,
in addition to regulatory obligations, for certain
periods of the year during which the subjects identified
as "relevant" are not allowed to perform
transactions (blocking periods). A similar principle has
also been introduced in another internal procedure
approved on December 23, 2008, concerning transactions
carried out by the company on Eni’s securities or on
securities associated with Eni’s securities. The
Internal Dealing procedure was updated further on
September 1, 2009 to include some organizational changes. Following are the tables mentioned in the "Handbook for the preparation of the Report on Corporate Governance", issued in March 2004 by Assonime and Emittenti Titoli SpA. |
| Structure of the Board of Directors and its Committees |
Board of Directors |
Internal Control |
Compensation |
Oil-Gas Energy Committee |
||||
Members |
executive |
non executive |
independent |
% attendance |
other appointments (a) |
members |
% attendance |
members |
% attendance |
members |
% attendance |
|||||||||||
| Chairman | ||||||||||||||||||||||
| Roberto Poli | X | 100 | 3 | |||||||||||||||||||
| CEO | ||||||||||||||||||||||
| Paolo Scaroni | X | 100 | 3 | |||||||||||||||||||
| Directors | ||||||||||||||||||||||
| Alberto Clô (*) | X | X | 100 | 3 | X | 92 | X | 100 | ||||||||||||||
| Paolo Andrea Colombo | X | X | 100 | 6 | X | 92 | X | 100 | ||||||||||||||
| Paolo Marchioni | X | X | 100 | 0 | X | 80 | ||||||||||||||||
| Marco Reboa (*) | X | X | 100 | 3 | X | 100 | X | 100 | ||||||||||||||
| Mario Resca | X | X | 88.2 | 1 | X | 100 | X | 10 | ||||||||||||||
| Pierluigi Scibetta | X | X | 100 | 0 | X | 95 | X | 90 | ||||||||||||||
| Francesco Taranto (*) | X | X | 100 | 2 | X | 100 | X | 100 | ||||||||||||||
| Number of meetings in 2009 | 17 | 20 | 13 | 10 | ||||||
| Average duration of meetings | 3h 17m | 4h 36m | 1h 46m | 1h 31m | ||||||
| Average attendance percentage | 98.3% | 98.7% | 93.80% | 96% | 80% | |||||
| (a) | Appointments as director or statutory auditor in other listed companies, also outside Italy, in financial, banking, insurance or large companies. | |
| (*) | Appointed by the minority list. | |
| For presenting a list a shareholder or group of shareholders must hold at least 1% of voting shares in an ordinary shareholders’ meeting, unless new regulation coming into force. | ||
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| Board of Statutory Auditors |
| Members | % attendance |
% attendance |
Number of other |
Total number of |
||||
| Members | ||||||||
| Chairman | ||||||||
| Ugo Marinelli (*) | 100 | 94 | 1 | 5 | ||||
| Auditors | ||||||||
| Roberto Ferranti | 69 | 82 | 1 | 2 | ||||
| Luigi Mandolesi | 96 | 100 | 1 | 10 | ||||
| Tiziano Onesti | 96 | 100 | 2 | 18 | ||||
| Giorgio Silva (*) | 92 | 100 | 2 | 12 | ||||
| Number of meetings in 2009 | 26 | 17 | ||||||
| Average duration of meetings | 3h 48m | |||||||
| Average attendance percentage | 91% | 95% |
| (*) | Appointed by the minority list. | |
| (a) | Including Eni SpA in accordance with Article 144-quinquiesdecies of "Regolamento Emittenti Consob". | |
| (b) | Including listed companies in accordance with Article 144-quinquiesdecies of "Regolamento Emittenti Consob". | |
| For presenting a list a shareholder or group of shareholders must hold at least 1% of voting shares in an ordinary shareholders’ meeting, unless new regulation coming into force. | ||
| Other information to be disclosed under the Self-discipline Code |
Yes |
No |
|||
| System of delegated powers and transactions with related parties | ||||
| The Board of Directors delegated powers defining: | ||||
| a) limitations | X |
|||
| b) exercise | X |
|||
| c) periodicity of information | X |
|||
| The Board of Directors reserved examination and approval of relevant transactions (including transactions with related parties) | X |
|||
| The Board of Directors defined guidelines for identifying relevant transactions | X |
|||
| Such guidelines are described in the report | X |
|||
| The Board of Directors defined procedures for examination and approval of transactions with related parties | X |
|||
| Such procedures are described in the annual report | X |
|||
| Procedures for the latest appointment of Directors and Statutory Auditors | ||||
| Lists of candidate directors were deposited at least 10 days before the date set for appointment | X |
|||
| Lists were accompanied by sufficient information on candidates | X |
|||
| Candidates to the role of director disclosed information that qualified them as independent | X |
|||
| Lists of candidate auditors were deposited at least 10 days before the date set for appointment | X |
|||
| Lists were accompanied by sufficient information on candidates | X |
|||
| Meetings | ||||
| The company approved regulations of meetings | X |
|||
| The regulations are attached to the report (indication of where to find it online is provided) | X |
|||
| Internal Control | ||||
| The company appointed persons responsible for internal control | X |
|||
| Such persons do not report to managers of operating divisions | X |
| Internal office responsible of internal control (Article 9.3 of the Code) | Internal Audit |
|
||
| Investor relations | ||||
| The company appointed an investor relations manager | X |
| Information on investor relations manager (telephone, address, e-mail) and unit |
|
|||
| Eni SpA - Piazza Vanoni, 1 - San Donato Milanese (Milan) 20097 Italy - Tel: +39 02 52051651 - Fax +39 02 52031929 - investor.relations@eni.com |
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Commitment to sustainable development
The implementation of a
sustainability model and relations with stakeholders
| The sustainability model is
part of Eni’s governance system and allows to plan,
manage and communicate Eni’s commitment to
sustainable development, focusing on the issues emerging
from the assumptions on future energy scenarios and from
dialogue with our stakeholders. The commitment to
sustainable development is part of Eni’s governance
model and affects the development of our management
system. The most significant actions taken in this
direction in the past few years concerned the promotion
of shareholders’ participation in the company’s
life, a stronger focus on issues of sustainability to be
communicated to shareholders, the Board and the company
itself and the dissemination of good governance practices
in accordance with the principles stated in Eni’s
Code of Ethics. In 2009 Eni’s 231 Team updated Model 231 for the parts concerning crimes of receiving stolen goods, recycling and using moneys, goods and utilities deriving from illegal sources, crimes in IT and illegal data treatment, and will also take care of updating it with the new crimes introduced into Italian law in 2009. During 2009 the Code Promotion Team carried out the implementation of a promotion plan that concerned: dissemination of the code to all those to whom Eni relates in its ordinary business activity, training activities and engagement of Eni’s main stakeholders on this issue. Relations with the Global Compact were enhanced in light of the strategic value of this initiative for multilateral cooperation and with the United Nations. In 2009, in particular, Eni prepared an analysis of the ten principles of Global Compact in terms of achieved results, future commitments and measurability of results. |
With the aim of promoting
transparency and fairness in dealings with the countries
where it operates, in 2009 Eni continued to provide its
contribution to the Extractive Industries Transparency
Initiative (EITI) detailing the cash flows generated by
its business activities in the countries participating in
the Initiative in cooperation with the Italian Ministry
for External Affairs with the aim of promoting the
initiative in the countries that have not yet endorsed
it. As concerns human rights, after the completion of the experimental phase of the Human Rights Compliance Assessment (HRCA) methodology, in 2009 three new assessments were performed in industrial sites in Algeria, Egypt and Congo. In Nigeria and Kazakhstan, where pilot assessments were carried out, work continued for sharing results and analyzing recommendations on gaps recorded. As concerns security activities, in 2009, Eni designed and implemented a module on human rights in the framework of a training course addressed to security managers, along with a test training for staff of security agencies working for Eni. As concerns the provision of security services, Eni resolved to include specific provisions on the respect of human rights in its supply contracts. Eni’s commitment to sustainability is confirmed by its ranking in the major sustainability indexes. In 2009 Eni was included in the Dow Jones Sustainability Index, in the STOXX and in the FTSE4GOOD, in addition to ranking second in the Accountability Rating Italy 2009. Eni was also ranked first in the Italian and world rating of the CSR Online Award 2009. In June 2009 Eni’s CEO received the Foreign Policy Association’s Corporate Social Responsibility Award. Eni’s commitment for human resources in 2009 was focused on improvement actions based on the |
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| climate analysis performed
and on the updating of management and development tools
with a special focus on feedback processes. In the area of safety, the progressive improvement of performance indicators achieved also in 2009 confirms Eni’s constant commitment to reducing the number of accidents involving employees and contractors and preventing and mitigating process risks. Eni also continued to work to improve the management of health protection, carried out with a "systemic" approach in all Eni sites in Italy and abroad, based on the development of a system for the integrated management of HSE issues. The complexity and globality of the issues of sustainable development led Eni to cooperate actively with international organizations in the area of dissemination of sustainability. In 2009 Eni requested CENSIS to perform a qualitative and quantitative survey addressed to Eni employees. The survey interviewed over 240 senior and junior managers and allowed to obtain an interesting view of the quality of the relations Eni holds with the countries where it operates, Italy included, as well as an overall view of its strengths and of the areas where improvement is required. In 2009 Eni continued its work in consolidating relations with producing countries through the signing of agreements that integrate our traditional business with actions aimed at sustainable development. In 2009 Eni signed agreements in this sense in Angola, Kazakhstan, Congo, Egypt, Pakistan, Turkmenistan. Eni has been committed for a long time to the protection of biodiversity and ecosystems by means of an organic approach to territories, that can highlight risks and opportunities related to a better management of resources, the enhancement of the environmental, cultural and social wealth of the countries where it operates. The main objectives of Eni’s commitment to customers and consumers are represented by its ability to combine efficiently its sustainability model with the |
offer provided to its
customers and increasing its dialogue with
consumers’ associations. In 2009 in fact, Eni
developed various new projects aimed at improving the
quality of the services rendered and customer
satisfaction, as well as consolidating relations with
consumers’ associations. The fact of being active in different parts of the world requires Eni to invest consistently so that also local suppliers and contractors respect the principles upheld by Eni. In 2009 Eni focused on projects aimed at: - improving and codifying qualifications and controls of supply chains (vendor management systems), including an improvement of management systems and auditing, in particular in the areas requiring greater attention (e.g. emerging countries, critical areas); - monitoring and disseminating the respect of sustainability principles in the supply chain; - improving data collection systems especially outside Italy. Commitment to environmental protection and investment of resources in it are major strategic objectives for Eni. The projects approved for reaching by 2012 the goal of decreasing by 70% flaring emissions (from emissions registered in 2007) reached on average 80% of completion in 2009, while many water injection projects have been carried out. Research and innovation are a basic part of our commitment to constantly improve our sustainability model. Technologies developed to date intend to favor access to new energy sources, improve their recovery from the soil and the efficiency of use while reducing environmental impact. Eni’s R&D is also addressed to the field of renewable energy sources, mainly solar energy and biofuels. In order to reach excellent results in this area and to overcome the current limitations to renewable sources by means of breakthrough solutions, Eni continued its policy of strategic alliances and cooperation based on the construction of a global network with major research centers while developing internal resources. |
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PEOPLE
| To Eni the people working in
its production system represent an asset to be
safeguarded and enhanced with careful career paths.
Accurate assessment and development of personnel,
training initiatives customized to roles and persons,
along with the respect of shared ethical values, are key
factors for the creation of sustainable value in the
long-term. Eni’s main objectives for its human
resources are: - constantly updating management and development tools with a specific focus on feedback processes, addressing them to various population targets and extending them to all business units; - investing on different types of population by identifying specific tools within a general policy aimed at a better integration and valorization of internal resources with a reduced recourse to new hiring; - protecting, sharing and developing strategic know-how for supporting business strategies; - supporting the engagement of personnel also with the introduction of additional welfare tools aimed at reconciling private and working life. More detailed information on the management of human resources is found on Eni’s website in the area People and in the Sustainability Report. Employees At December 31, 2009, Eni’s employees totaled 78,417, with a decrease of 463 employees from |
December 31, 2008, down
0.6%, reflecting a 718 increase in employees hired and
working outside Italy and a decrease of 718 employees
hired in Italy. Employees hired in Italy were 38,299
(48.9% of all Group employees). Of these, 34,794 were
working in Italy, 3,282 outside Italy and 223 on board of
vessels, with a 1,181 unit decrease from 2008. Declines
were registered in all business segments due to
efficiency actions and to the postponement to 2010 of
some orders obtained by Saipem. The process of improvement in the quality mix of employees continued in 2009 with the hiring of 1,163 persons, of which 491 with fixed-term contracts. A total of 672 persons were hired with open-end and with apprenticeship contracts, most of them with university qualifications (359 persons) and 282 persons with a high school diploma. During the year 2,357 persons left their job at Eni, of these 1,634 had an open-end contract and 491 a fixed-term contract. Employees hired and working outside Italy were 40,118 (51.1% of all Group employees), with a 718 persons increase, of these approximately 650 employees were hired with fixed-term contracts in the Engineering & Construction segment due mainly to new contracts in Nigeria and Kazakhstan (Kashagan project), and 160 persons in the Exploration & Production segment, offset by downsizing in other segments, in particular in Hungary in the Gas & Power segment (Tigaz). |
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| Employees at year end | (units) |
2007 |
|
2008 |
|
2009 |
|
Change |
|
% Ch. |
||
| Exploration & Production | 9,023 | 10,891 | 10,870 | (21 | ) | (0.2 | ) | ||||||
| Gas & Power | 11,893 | 11,692 | 11,404 | (288 | ) | (2.5 | ) | ||||||
| Refining & Marketing | 9,428 | 8,327 | 8,166 | (161 | ) | (1.9 | ) | ||||||
| Petrochemicals | 6,534 | 6,274 | 6,068 | (206 | ) | (3.3 | ) | ||||||
| Engineering & Construction | 33,111 | 35,629 | 35,969 | 340 | 1.0 | ||||||||
| Other activities | 1,172 | 1,070 | 968 | (102 | ) | (9.5 | ) | ||||||
| Corporate and financial companies | 4,701 | 4,997 | 4,972 | (25 | ) | (0.5 | ) | ||||||
| 75,862 | 78,880 | 78,417 | (463 | ) | (0.6 | ) |
 Organization In 2009 Eni continued to upgrade its structures and
organizational processes following guidelines consistent
with the new corporate integrated model adopted by Eni. |
Insurance, respectively. The
former insurance unit has been eliminated with the new
company taking up this role (Eni insurance) reporting
directly to the CFO; - a new structure has been given to the supply and procurement function, now called Global Procurement and Strategic Sourcing aimed at strengthening its presence outside Italy and optimizing the planning of procurement through a stronger integration with the requesting lines (to this end specific competence centers have been established that are made up of personnel from procurement and technical line reference persons); - the reorganization of the Legal Department continued through the consolidation of a structure organized by geographical areas with a greater focus on compliance and antibribery issues (the new structure has been finalized on December 1, 2009 and started operating on January 1, 2010); - the definition of a new structure for the Strategy and Development department, concerning in particular an improvement of direction and control of the areas of innovation and the integrated monitoring of long-term strategies; - the start-up of new project called "Eni rules" aimed at defining a system of regulations and procedures oriented to processes, providing greater efficiency and flexibility in line with Eni’s new organizational model. The design phase has been completed in December 2009, along with the inception of pilot projects, while in the first part of 2010 Eni intends to launch a new information system supporting document consultation, provided also with a view by process. As concerns business units, Eni continued to upgrade their organizational structures to better adjust to business requirements and industrial plans in order to maximize efficiency and the protection of safety, health and the environment. |
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| Management
and development of human resources The "Eni secondo te
2008" climate analysis was a great opportunity for
collecting opinions and suggestions from Eni people,
following which Eni launched and continued various
initiatives aimed at improving communication, leadership
and engagement also providing a stronger support to the
effort at reconciling private and working life. These
initiatives have been collected in a dedicated internet
site that is going to be opened to users in 2010 in
coincidence with the start-up of a new survey. Training and internal communication Following the results of the "Eni secondo te" climate analysis performed in 2008, in 2009 various training activities have been carried out in order to develop leadership, improve relations between managers and |
employees, support
individual motivation and favor widespread wellbeing. A
total of 1,100 managers from all business areas
participated to these initiatives that included also
managers involved in the "360° feedback"
project. In addition, at the end of 2009, a training initiative was addressed to key managers and concerned assessment of and feedback to employees. The action will continue also in 2010. In 2009, expenditure for training amounted to euro 49.2 million, of which euro 30.4 million in Italy and euro 18.8 million outside Italy. A total of 3,094,487 training hours were provided (1,423,051 in Italy and 1,674,436 outside Italy). In addition, 807,969 hours of training were provided to non consolidated companies outside Italy for an expenditure of euro 21.1 million. Eni continued its work on the development of knowledge management systems by implementing dedicated IT systems supporting existing ones, increasing the number of persons addressed and creating new practice communities in the E&P and R&M divisions, in the HSE area and at Polimeri Europa. Also in the G&P division projects have been started for the creation of a knowledge management portal and the development of a practice community in the division and at EniPower. In 2009, Eni inaugurated the 53rd academic year of the Scuola Mattei operating in research and post-graduate training in the fields of energy and the environment. From its foundation in 1957, the school trained over 2,600 young talents, of which 55% came from 110 countries in the world. In 2009-2010 the school hosts 59 students (28 from Italy and 31 from the rest of the world). Special attention has been paid to internal communication to promote a more widespread and constant penetration of communication that favors the exchange of information and ideas. In 2009 the cascade program addressed to all Eni people and aimed at stressing the concept that the contribution of each person allows to reach corporate objectives, engaged 30,940 persons in 43 countries and consisted of 484 meetings in 103 sites. All internal communication programs are published on myeni, the corporate intranet portal, a unified platform for sharing information with 31,700 registered employees. The program for extending myeni outside Italy continued and reached a total of over 5,400 users (up 34%). Other communication channels have also been increased by means of tools such as digital signage (a system of plasma screens centrally managed to disseminate news and |
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| videos in real time), myeni
news (a paper version for employees who do not use a
computer); an internal communication network (an
international network aimed at highlighting success
experiences, disseminating information and providing a
local base for cross company initiatives). In 2009 the new welfare site has been launched, as a communication tool where employees find information on current and new initiatives aimed at enhancing and showing Eni’s commitment to the issues of reconciling private and working life. New activities and services meeting the real and specific needs of Eni people are being elaborated, such as services supporting families and favoring an improved management of money and time. Industrial relations Industrial relations in 2009 have been characterized
by a constant dialogue with workers’ unions that led
to significant agreements concerning the reorganization
of business units that touched Eni and its subsidiaries. |
Health Eni
is committed to the protection of the health of its
people, of the communities living in the areas where its
plants are located and of all those that get in touch at
various times with its activities. Safety Eni has always been deeply engaged in the issue of the
safety of its workers, of the people living in the areas
where its industrial sites are located and of its
producing assets. |
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| As a response to these
policies, Eni started the following actions. In the area of enhancing the safety culture of Eni people: a new project called Communicating safety, developed and promoted jointly by the corporate HSE department and the Internal Communication department, based on a careful survey of the most frequent accident causes, from which it emerged that a relevant portion (over 60%) of accidents is related to behaviors such as underestimation of risk, lack of concentration, etc. This project is directed to 11 business units, in about 100 sites, and addressed to employees and contractors for a total of about 60,000 persons. The first operating phase (teasing) started on December 18, 2009, anticipates the dissemination of messages on safety making use of well established media techniques: posters in the workplace, images and slogans that capture attention and accompany people on a route of awareness and motivation. The application of a methodology for increasing awareness of middle management and workers called Leadership in safety, developed and successfully applied by Saipem in the past two years in refineries of the R&M division. On the question of process safety a seminar has been organized for middle management and staff (for a total of 140 persons) aimed at exchanging knowledge and experiences integrated by lectures on the European approach to the issue. This initiative is part of the HSE training for top middle management that |
will be reported to
employees through the cascade system. As for technological support, business units have been provided with the INDACO database for the collection, management and dissemination of information on accidents, near misses and under standard operating conditions. The most relevant business units have started to feed in their data. Support to business units includes also the simulation of accident trends (Congo, Italy) based on historical data, information on the developments of emergency management worldwide and participation to emergency drills and trials (Archimede, oil spills in the sea, with the cooperation of the Italian navy). Among the actions for improving safety management, we like to mention: technical guidelines on monitoring contractors, guidelines for obtaining work permits, the updating of safety audits according to the most recent model, the developments in the 3TER software to an advanced version with better integration of georeferenced data of industrial sites. After the earthquake in Abruzzo, Eni provided its valuable support to the civil works department with qualified professionals and appliances. Eni’s new HSE emergency room and personnel from its emergency unit coordinated all the work required for guaranteeing the safety of plants and the distribution of refined products in the area affected by the quake. This constant commitment led to a further improvement in safety indicators for Eni, confirming the positive trends of the past three years. |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
RELATIONS WITH TERRITORY AND COMMUNITIES
| The model of
cooperation and development in territories One of the
distinctive features of Eni’s relations with the
communities and territories where it operates – ever
since the early times of the "Mattei formula"
– consists in developing strategies for dialogue,
cooperation and the creation of actions and projects for
producing development paths that respect local
specificities. The tools used by our company for
implementing a cooperation model in the countries where
it operates are the promotion of open and proactive
dialogue with the main stakeholders, the definition of
integrated agreements (Memorandum of understanding or
Intent protocol) with subjects in countries or regions,
the promotion of local content through the enhancement of
local supply chains, the support of development
initiatives for the self-determination of social and
economic systems, the integrated charitable action of Eni
foundation. |
In 2009 Eni signed
agreements in Angola, Kazakhstan, the Democratic Republic
of Congo, Egypt, Pakistan, Turkmenistan. In February 2009
in Angola Eni signed with Sonangol the first agreements
provided for by a Memorandum of Understanding relating to
a contribution to the sustainable development of the
country’s energy infrastructure and the
implementation of educational and training projects for
local professionals. Within the cooperation agreement
signed with the Egyptian Oil Ministry, Eni agreed to
provide its infrastructure and the skills of Eni
Corporate University for a joint training program for
local professionals addressed to selected qualified
resources. In November 2009 Eni signed a cooperation
agreement with Turkmenistan for the provision of training
to local resources. In Italy Eni signed an addendum to the intent protocol with the Basilicata Region that implements actions for sustainable development and the management of an environmental monitoring system on upstream activities in Val d’Agri with an investment of approximately euro 67 million to be paid by Eni in annual installments in the next 10 and 15 years, respectively. Eni also signed a protocol of intent with the Ministry of Education and the University of L’Aquila for the project called "A bridge to innovation". In 2009 expenditures for local development amounted to euro 98.6 million. |
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Engaging communities and knowing territories
 Engaging communities and knowing territories Eni acts as an integral part of the territories where
it is present proactively opening areas of dialogue and
communication with local communities. The engagement of
local stakeholders is included in all phases of our
business projects. In addition, in order to manage and
monitor the effect of its activities on the areas, Eni
performs feasibility studies and impact assessments. In
order to improve these tools, in late 2009 Eni started a
cooperation with the International Business Leaders Forum
(IBLF) aimed at integrating the impact assessment
criteria directly related to human rights in business
practices (impact analysis). Development of territories Eni aims at creating opportunities for the territories where it operates respecting the directions chosen by local communities through integrated long-term programs and projects, as for example the Green River Project that started in 1987, and continues to support the development of local communities in the states of Nigeria where it operates. |
In 2009 Eni started various
initiatives for the development of local social and
economic activities through the upgrading of local
procurement, microcredit actions, local empowerment,
vocational training and provision of infrastructure and
basic services for communities. In 2009 expenditure for local communities amounted to euro 70.4 million, over 60% of which was devoted to infrastructure and social actions.
In Italy in 2009 in cooperation with FEEM and the
Aaster consortium Eni continued the "Community
Mission" project aimed at engaging local communities
in actions and dialogue for fostering tourism. |
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| and approximately $10
million in infrastructure, such as schools, hospitals,
sports and arts centers aimed at fostering local social
and economic development policies. In Pakistan Eni continued in 2009 the Bhit Rural Support program with an investment of $420,000. The BSRP is a rural development program based on the promotion of local skills and on the engagement of the local community in the definition and implementation of activities such as vocational training, microcredit for starting new enterprises, creation and management |
of infrastructure for
improving the life conditions of local communities,
support of animal husbandry and agriculture. In East Timor Eni continued its integrated rural development program started in 2008 in partnership with CARE, the international NGO, aimed at improving health and life conditions in 6 villages in the Bobonaro and Covalima districts. Over 100 courses of health and food education have been provided along with the supplies for planting 140 vegetable gardens and training 364 farmers. |
| Country | Areas /Activities 2009 | |
| Algeria | Construction of infrastructure for power generation from solar energy and water supply in cooperation with the Sonatrach-Tassili Foundation; at Setif, training and hiring of local staff for the restoration of the Roman Bacchus mosaic; sponsoring of the second pan-African cultural festival; environmental and social impact assessments. | |
| Angola | Finalization of specific agreements included in the MoU among which a Cooperation Protocol for education signed with Sonangol. | |
| Australia | Local empowerment actions and capacity building projects, support of local indigenous entrepreneurship; campaigns for the protection of women’s and children’s health; support and enhancement of indigenous culture; social impact assessments. | |
| Republic of Congo | Construction of water infrastructure, agricultural development projects, construction of schools; creation of a Monitoring Committee and a Working Team for the "Oil Palm" pilot project. | |
| Ecuador | Construction of roads and water supply mains; construction of health centers and schools; cooperation agreements with indigenous communities in the area of the Villano Project. | |
| Egypt | Campaigns on road safety; provision of a training course on health and safety; support of health services; support of education by means of scholarships. | |
| India | Social structure assessments in the Andaman Islands. | |
| Indonesia | Construction of roads; support of agricultural development; sponsoring of projects for specialized surgery; enhancement of local cultural heritage; environmental and social impact assessments. | |
| Italy | Basilicata – Signed
an Addendum to the Intent Protocol with the Basilicata
Region; support to the development of tourism and
start-up/improvement of relations with developing
entrepreneurs; protection of natural beauties and
construction of an educational nature trail; elaboration
of the first social territorial balance of Val Camastra
(FEEM); creation of a permanent seat of confrontation
between Eni and local stakeholders; provision of training
for journalists (with FEEM) and educational activities;
restoration and enhancement of local cultural heritage;
environmental and health impact assessments. L’Aquila - signed an Intent Protocol for starting the project "A bridge for innovation". Ravenna - Social and economic impact assessments. |
|
| Kazakhstan | Construction of infrastructure for the health, education and community sectors, for gas and water supply; promotion of local empowerment actions fostering entrepreneurship; support to culture, training and education; social impact assessments. | |
| Libya | Construction of
infrastructure for the health and education sectors. Restoration of the existing museums and construction of a new visitor trail in the Archaeological Site of Sabratha; study on the management of urban, special and hospital waste; inauguration of a laboratory at the department of environmental engineering at the Sabratha - Seventh of April University; support to treatment programs for AIDS patients; environmental impact assessments. |
|
| Mali | Construction of water wells powered with solar energy for local communities; training of medical and paramedical staff; environmental and social impact assessments. | |
| Mozambique | Restoration of water supply networks; provision of education and training; environmental impact assessments. | |
| Nigeria | Signed a MoU concerning actions in education, power supply, health protection, infrastructure and protection of coastal areas; improvement of water supply and road networks, civil, health and education infrastructure; microcredit projects, development of human resources, support to farmers; scholarships; environmental impact assessments. | |
| Norway | Construction of a bird watching center; design of an Arctic Slow Food Centre; educational projects for increasing learning of industry related subjects. | |
| Pakistan | Signed partnership agreements for the 2010-2013 period with local NGOs; integrated projects for rural development by means of capacity building; construction of water mains, medical buildings and services; support to medical centers; training for promoting food safety, for computer use, teaching projects; social impact assessments. | |
| East Timor | Integrated rural development projects fostering local entrepreneurship, health and safe nutrition, training and capacity building; health and nutrition education, children’s rights and protection of children’s and mothers’ health; environmental impact assessments. | |
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| Eni
Foundation In 2009 the Eni Enrico Mattei
Foundation continued its work for solidarity actions in
support of the health of women and children especially in
Africa with the Salissa Mwana and Kento Mwana programs in
Congo and Kamba Kiaxi in Angola. In 2009 in Congo nearly
5,000 pregnant women applied to the health centers that
provide tests and protocols for the prevention of AIDS.
In Angola approximately 150,000 children received care
from a program sponsored by Eni. Protection and enhancement of ecosystems Eni has been committed for years to the protection of
biodiversity and ecosystems through an organic approach
that highlights risks and opportunities related to an
improved management of resources, the protection of the
environmental, cultural and social heritage of the
countries where it operates. The culture of sustainable development The promotion and support of culture as a lever for
education and training of new generations have become a
distinctive feature of Eni. |
service contracts), 17% was
dedicated to training and 23% scholarships and other
funding. In May 2009, in L’Aquila, a Protocol of Understanding was signed by the Italian Ministry of Education, University and Research, the University of L’Aquila and Eni which launched the "Un ponte per l’Innovazione" (A Bridge for Innovation) Project for the support and accommodation at structures belonging to the Eni Group of 50 PhD students and researchers from the university, also through study grants and project contracts aimed at allowing the continuation or start-up of study, teaching or research activities in the energy and environmental sectors. Eni supports culture also by sponsoring projects based on criteria such as affinity with Eni’s image and identity, links with areas of presence, adherence to Eni’s business objective and high visibility, always keeping account of sustainability. In 2009 Eni sponsored projects and events with a total expenditure of euro 16.6 million.
Eni was partner of the municipal museums of Venice and
financed various events and exhibitions in Italy, such as
the Mantova Festival and the Ravenna Festival. Eni was
also a partner for the festival of the city and area of
Ferrara centered on the issue of territory in all its
aspects. |
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| Activities of
the Eni Enrico Mattei Foundation The Fondazione
Eni Enrico Mattei (FEEM) that celebrated in 2009 twenty
years of activity in the field of sustainable development
is considered one of the international centers of
excellence on the study of environmental and energy
issues. FEEM supports Eni in actions favoring sustainable
development, in particular in Basilicata by providing
training, research and support to local activities. |
an agreement on policies for
climate change (COP15), FEEM worked at defining
indicators of sustainability in addition to GDP. This
year has been important also for innovation in the
promotion of research, dissemination of scientific
results and communication, three factors that contributed
to confirming the relevance and impact of FEEM. In 2009 various cooperation agreements were confirmed with important Italian and international institutions such as the Fondazione Giorgio Cini in Venice and the Monitor Group in the USA. |
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RESPONSIBILITY TOWARDS THE ENVIRONMENT
| Reference
scenario The impact of industrial activities on
the environment is affected by an increasing number of
stringent laws and regulations in Italy and Europe. In
2009 this trend was further confirmed. In Italy Law No.
68/2009 devolved authority to the government to approve
before June 30, 2010 legislative decrees for adjusting
and integrating the so called "Environmental
Code" intended to collect and simplify all laws and
regulations pertaining to the environment. A ministerial
decree of December 17, 2009 defined a system to trace all
waste. In Europe too the situation has changed. In April
a new directive was published concerning the geological
storage of carbon dioxide (2009/31/CE). On October 10,
2009 the new REACH discipline came into force. In
November 2009, the European Union marked the official
start of the new E-PRTR (European Pollutant Release and
Transfer Register) where 2007 data of over 24,000
industrial facilities covering 65 different economic
activities are stored. At the end of 2009 the new EMAS
1221/2009 regulation came in force. At the end of
December the European Commission published a list of
sectors and sub-sectors considered exposed to an
increased risk of relocalization of carbon emissions. |
themes to its employees. Eni
pursues the highest performance targets, extending its
standards to its suppliers and contractors and at its
foreign affiliates. More detailed information on the reduction of the environmental footprint is found on Eni’s website in the area Sustainability and in the Sustainability Report. Environmental management Eni pursues the objective of a high environmental
performance in all its activities by means of
comprehensive certification programs of its HSE
management system applied in all areas in line with its
management model, as updated in January 2010. |
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| and improvement of
environmental management and of performance monitoring.
This system, currently being released to business units
will provide for the collection of environmental data for
2010. In 2009 Eni obtained 5 integrated environmental authorizations (AIA) for 4 types of facility (refinery, power plant, platform, petrochemical plant), while the remaining facilities are still undergoing the relevant survey. As concerns certification, nearly all major production plants obtained the ISO 14001 certification. In Europe, Eni’s main production facilities have applied for EMAS certification, while many foreign affiliates, petrochemical plants and gas pipelines obtained a OHSAS 18001 certification or ISO 9000 or both. In the Exploration |
& Production division,
on a total of 37 companies, 23 obtained the ISO 14001
certification; in the petrochemical segment the ISO 14001
certification was completed for all production plants, as
already done in the refining area. The electric segment
expects to complete the ISO 14001 certification of all
plants by 2010. Know-how in the HSE area is managed also with the help of specific career paths aimed at enhancing the contribution of qualified resources conferring their competence and expertise. These qualified professional resources are managed in a way that enables them to share information and knowledge, thus optimizing synergies among the various units. |
| Rational use
of natural resources The minimization of use of
natural resources and the control of impacts that are
priority objectives of a sustainable environmental
management are achieved by adopting the best practices
and technologies capable of ensuring a proper control of
releases in the environment (air, waters, soils). |
use of energy in industrial
processes guarantee the containment of all air emissions.
Eni has been striving for years to use low environmental
impact fuels and promotes the use of natural gas with
ensuing benefits for air quality. The rationalization of water consumption has been obtained by preferring integrated production cycles based on the treatment and recycling of process water. In the Exploration & Production division, water injection projects allow to maintain field pressure, reducing the environmental impact of releasing process waters. In 2009 re-injection of water increased due to projects carried out in Libya (in the Bouri field from June 2009, in the Bu Attifel field is expected to come on line in the first quarter of 2010), Egypt (where a 50% share of reinjected water was reached from 40% in 2008), Algeria |
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| (expected to reach 100% at
mid-2010), Indonesia (in 2008 all water had been
reinjected at the Badak, Nilam and Semberah sites and in
2009 the project has been extended to Pamaguan and
Mutiara) and Kazakhstan, where in the settlements built
for the workers and the facilities of the offshore
Kashagan project water treatment plants have been
installed that reduced the amount of clear water
required. In addition, in 2009, work continued to define
the standard on the minimization of water consumption and
discharge that already led to a 17% reduction in water
consumption from 2008. The management of waste deriving from production activities is obtained by optimizing production processes, identifying actions for reducing waste sent to landfills and by controlling also the operations of contractors. Eni continued the planning and management of divestment/decommissioning of industrial plants, the environmental reclaiming of soils and aquifers under approved and environmentally adequate processes and procedures. Waste from production processes amounted to approximately 1.6 mmtonnes, in line with 2008. In 2009 the Exploration & Production division following the assessment of waste management performed, published a standard for waste management planning addressed to all its affiliates and indicating the planning process to be carried out for each year and four-year period that will allow to monitor and plan the management of different kinds of waste, identifying all possible improvement actions. In the Petrochemical segment, technical and management actions continued to reduce total waste produced, while Syndial applied a program for the management of reclaiming actions also intended to reduce waste production. In order to protect the areas where Eni operates, responsibilities and operating modes aiming at reducing the negative impact of oil spills have been defined. Tools available include the recourse to external professionals and/or international organizations. Various projects in oil spill assessment/response/plan are underway or have been completed. In the R&M division in 2009 Eni continued to apply technical improvements for prevention and containment to its facilities with new actions planned to be carries out in the next few years. In 2009, In the Exploration & Production segment a total of 287 oil spills were registered for a total of 21,547 barrels of oil spilled (increasing from the preceding two years). About 17% of all spills were due |
to sabotage, while the
volumes deriving from accidents increased by 33%. In line with the increasing attention for green remediation, Eni also invested in the concept of taking account of all the aspect of remediation also outside the specific site and is currently planning its reclaiming actions protecting the environment at sustainable cost and creating value for communities. Climate change and emissions Eni’s action plan for the mitigation of climate
change, finalized in 2009, is based on projects for the
reduction of gas flaring, for energy saving and
increasing efficiency of industrial plants and R&D
projects aimed at the containment of CO2
emissions. |
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| invested in the 2009-2013
period in the areas of energy saving, renewables, the
distribution network for methane as vehicle fuel. Aim of
this agreement is to save 160 ktoe/y of consumption and
459 ktoe CO2/y from 2013. In 2009 total greenhouse gas emissions in CO2 tonnes, including CO2 emissions from combustion and processes, methane emissions (converted into CO2 using the Global Warming Potential of 21) and flaring and venting emissions decreased by 8% from 2008. The most significant decrease in the Exploration & Production segment, which accounts for 50% of total Eni emissions and reduced its emissions by 13% from 2008, resulted from reductions in flaring (down 20%) and venting (down 9%). |
|
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THE FUTURE OF ENERGY AND INNOVATION
| The future
challenges of energy The availability of energy
is crucial in supporting social and economic development
worldwide. The energy industry has to face the challenge
of the growth of energy requirements and relevant issues
of energy interdependence, security of supplies and
environmental impact of fossil fuel production and use. |
in the medium-term the cost
of renewable energy will remain high and not competitive
with traditional sources. It is difficult to economically
support an industry, like generation from renewable
sources, that requires subsidization for growing, also
because in some cases the policies aimed at boosting the
use of these sources can produce an increase in costs
that is too high both for consumers and producers. Furthermore, although renewable sources are growing at a considerable rate, they start from a very low contribution to overall consumption and will not be able to meet a high share of requirements unless relevant technological breakthroughs are obtained, as is foreseeable in the long-term. The prevalence of fossil sources in the overall energy mix brings to the forefront the problem of the environmental impact of energy production. About 60% of current CO2 emissions from human activities (about 38 billion tonnes in 2004) derive from the energy segment. In order to win these challenges, it is necessary to work on the cornerstones represented by technological innovation and energy efficiency, also developing new forms of cooperation with producing countries and national oil companies. Eni pays special attention to these aspects that directly affect the supply and consumption of energy and are crucial for mitigating their negative impact on the environment. A strategy for innovation The consequences of the recent financial crisis and the related decline in energy consumption, environmental pressures for the containment of greenhouse gas |
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| emissions and the increase
in use of renewable energy sources allow to outline a
scenario without scarcity of oil and natural gas
worldwide. All this notwithstanding, the growth in consumption related to the accelerated industrialization of emerging countries, such as China and India, requires the development and dissemination of technologies that reduce the environmental impact of production and use of fossil fuels, leading to sustainable development. Consistent
with this vision, Eni launched in 2006 an innovation
strategy based on the following lines: |
increase from 2008 and 374%
increase from its first edition in 2007. It received 82
application for the prize for research debut from post
doc students in 25 Italian universities. Results achieved in 2009 In 2009 overall expenditure in R&D amounted to
approximately euro 207 million, excluding general and
administrative expenses (euro 217 million in 2008 and
euro 208 million in 2007). Exploration & Production division Advanced exploration techniques Drilling technologies |
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| Increase in recovery
rates - Enhanced oil recovery with CO2 injection: In 2009 the research phase was completed and a field application is planned for 2010. CO2 will be recovered from industrial plants near the fields. - Bright water injection: This technology is based on an additive that is injected in the ground and selectively blocks the rock parts where water is present, thus potentially increasing the extraction of crude. A field test has been started with results scheduled for 2011. Marketing of marginal gas
resources Conversion of heavy crude into lighter products
(oil upgrading) |
23,000 bbl/d at the
Sannazzaro refinery with start-up expected in 2012. - Flexible FCC (Fluid Catalytic Cracking): A proprietary material – the ERS-10 zeolite – has been developed and used as additive in an FCC catalyst thus increasing the conversion of heavier fractions. In 2009 the catalytic results have been confirmed and cooperation has started with a leading firm in FCC catalyst production aimed at industrial testing in an Eni refinery. - Dual Catalyst Slurry System: Aim of this project is to develop a catalyst that further increases the conversion of heavy residues into fuels. The development of a bi-functional catalyst is underway that hydrogenates and desulphorates feesdtocks and increases the cracking rate and nitrogen removal. - H2S splitting: Aim of this project is the enhancement of hydrogen sulphide contained in natural gas or by-product of refining obtaining hydrogen from it. A promising technology consists in the decomposition of H2S by means of cold plasma into sulphur and hydrogen. Lab activities were completed in 2009. Tests will be performed in a pilot plant in 2010. - Downstream application of microwave technology for improving the features of heavy crude and cuts: Lab studies have been performed aimed at testing the possibility of significantly and permanently reducing the viscosity of crude, residues and bitumen improving their handling and reducing the use of flux oil by applying microwaves. Based on the results reached, in 2009 two patent applications have been filed. For 2010 tests on a continuous reactor are scheduled. - Hydrogen: SCT-CPO (Short Contact Time-Catalytic Partial Oxidation) is a reforming technology that can convert gaseous and liquid hydrocarbons (also derived from biomass) into synthetic gas (carbon monoxide and hydrogen). This technology can contribute to process intensification as it allows to produce synthetic gas and hydrogen using reactors up to 100 times smaller than those currently in use with relevant savings. Petrochemicals - Basic petrochemicals: A proprietary process
for the selective hydrogenation of acetone to isopropylic
alcohol has been successfully determined (the latter
being later used for producing cumene). |
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| are produced by means of a
proprietary catalysis and are used in the production of
plastic films. On a pilot plant new polyethylenes have
been produced using a new proprietary catalyst, these are
HDPE (high density polyethylene) and LLDPE provided with
good physical and mechanical properties and better
processability. - Elastomers: In cooperation with a primary producer of lubricant base oils, at pilot level new butadiene-styrene copolymers have been produced with improved viscosity index. On a pilot scale new grades of SBR (styrene-butadiene rubber) have been produced that improved performance in terms of adhesion and resistance to heating in tire materials. - Styrenic polymers: On a pilot scale we completed the validation of production of HIPS (shock resistant polystyrene) and ABS (acrylonitryl-butadiene-styrene polymer) with anionic radical single stage polymerization. At the Mantova plant we completed the first test production of a new EPS (continuous mass expandable polystyrene) in the new 38,000 tonnes/y plant with the new PE proprietary technology. At the Dunastyr site (Hungary) a white improved EPS type has been successfully industrialized that shows higher insulating power with unchanged mechanical properties (called VERDI) exclusively produced by PE. Environment and efficiency - New formulas for fuels and lubricants: The
development of the new premium products of the Blu line
has been completed. Tests were performed on engines and
vehicles in order to optimize engine efficiency and
reducing noxious emissions. Tests of the new premium
gasoline were performed on new Fiat Multiair engines in
the framework of an agreement with the Fiat research
center. In 2009 two new lubricants that reduce
consumption and emissions reached the commercial stage. |
capacity along with a
feasibility study for an annual volume of 5,000 tonnes of
slime. - Ensolvex process: In the framework of the cleaning up of an area within the Gela refinery Eni plans to build an Ensolvex plant for the reclaiming of soil polluted by hydrocarbons within the limits imposed by the law. The design phase has been completed in 2009 and the plant is expected to be built by the first half of 2010. - En-Z-lite process: In 2009 at the Taranto refinery a demonstration plant has been tested for removing organic compounds from water by means of adsorption on synthetic hydrophobic zeolites complying with the most stringent standards on MTBE and TPH levels as well as metal content. This technology can be used for treating underground waters and for steam production. A new system for regenerating zeolites has been patented. Renewable energy sources - Green Diesel: In 2009 tests have been started
for using non-food feedstock in the EcofiningTM process, that has already
been used with traditional vegetable oils at industrial
level. |
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| plates including adequate substances playing a double role: converting solar light, concentrating and carrying light to the edges of the plate where silicon is located and converts radiating energy into electricity. The conversion of light is exerted on components of solar radiation that are | usually underused by traditional silicon materials, converting them into radiation with a wavelength that can induce a photovoltaic effect. These results are expected to be consolidated in 2010 thus testing the reproducibility and stability of the process and preparing large prototypes. |
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Glossary
The glossary of oil and gas
terms is available on Eni’s web page at the address www.eni.com.
Below is a selection of the most frequently used terms.
Dividend Yield Measures the return on a share based on dividends for the year. Calculated as the ratio of dividends per share of the year and the average reference price of shares in the last month of the year. Generally, companies tend to keep a constant dividend yield, as shareholders compare this indicator with the yield of other shares or other financial instruments (e.g. bonds). Leverage Is a measure of a company’s debt, calculated as the ratio between net financial debt and shareholders’ equity, including minority interests. ROACE Return On Average Capital Employed Is the return on average capital invested, calculated as the ratio between net income before minority interests, plus net financial charges on net financial debt, less the related tax effect and net average capital employed. TSR Total Shareholder Return Measures the total return of a share calculated on a yearly basis, keeping account of changes in prices (beginning and end of year) and dividends distributed and reinvested at the ex-dividend date. |
Average reserve life index Ratio between the amount of reserves at the end of the year and total production for the year. Barrel Volume unit corresponding to 159 liters. A barrel of oil corresponds to about 0.137 metric tons. Boe (Barrel of Oil Equivalent) Is used as a standard unit measure for oil and natural gas. The latter is converted from standard cubic meters into barrels of oil equivalent using a coefficient equal to 0.00615. Concession contracts Contracts currently applied mainly in Western countries regulating relationships between States and oil companies with regards to hydrocarbon exploration and production. The company holding the mining concession has an exclusive on mining activities and for this reason it acquires a right on hydrocarbons extracted, against the payment of royalties to the State on production and taxes on oil revenues. Condensates These are light hydrocarbons produced along with gas, that condense to a liquid state at normal temperature and pressure for surface production facilities. |
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| Contingent resources
Amounts of oil and gas estimated at a given date that are
potentially recoverable by means of development projects
that are not considered commercially recoverable due to
one or more contingency. Deep waters Waters deeper than 200 meters. Development Drilling and other post-exploration activities aimed at the production of oil and gas. Elastomers (or Rubber) Polymers, either natural or synthetic, which, unlike plastic, when stress is applied, return, to a certain degree, to their original shape, once the stress ceases to be applied. The main synthetic elastomers are polybutadiene (BR), styrene-butadiene rubber (SBR), ethylene-propylene rubber (EPR), thermoplastic rubber (TPR) and nitrylic rubber (NBR). Enhanced recovery Techniques used to increase or stretch over time the production of wells. EPC (Engineering, Procurement, Construction) A contract typical of onshore construction of large plants in which the contractor supplies engineering, procurement and construction of the plant. The contract is defined "turnkey" when the plant is supplied for start-up. EPIC (Engineering, Procurement, Installation, Commissioning) A contract typical of offshore construction of complex projects (such as the installation of production platforms or FPSO systems) in which the global or main contractor, usually a company or a consortium of companies, supplies engineering, procurement, construction of plant and infrastructure, transport to the site and all preparatory activities for the start-up of plants. Exploration Oil and natural gas exploration that includes land surveys, geological and geophysical studies, seismic data gathering and analysis, and well drilling. |
FPSO vessel Floating,
Production, Storage and Offloading system made up of a
large capacity oil tanker including a large hydrocarbon
treatment plant. This system, moored at the bow in order
to maintain a geostationary position, is in fact a
temporary fixed platform linking the underwater wellheads
to the treatment, storage and offloading systems onboard
by means of risers from the seabed. Infilling wells Infilling wells are wells drilled in a producing area in order to improve the recovery of hydrocarbons from the field and to maintain and/or increase production levels. LNG Liquefied Natural Gas obtained through the cooling of natural gas to minus 160°C at normal pressure. The gas is liquefied to allow transportation from the place of extraction to the sites at which it is transformed and consumed. One ton of LNG corresponds to 1,400 cubic meters of gas. LPG Liquefied Petroleum Gas, a mix of light petroleum fractions, gaseous at normal pressure and easily liquefied at room temperature through limited compression. Mineral Potential (Potentially recoverable hydrocarbon volumes) Estimated recoverable volumes which cannot be defined as reserves due to a number of reasons, such as the temporary lack of viable markets, a possible commercial recovery dependent on the development of new technologies, or for their location in accumulations yet to be developed or where evaluation of known accumulations is still at an early stage. Mineral Storage Volumes of natural gas required for allowing optimal operation of natural gas fields in Italy for technical and economic reasons. Modulation Storage Volumes of natural gas required for meeting hourly, daily and seasonal swings of demand. Natural gas liquids Liquid or liquefied hydrocarbons recovered from natural gas through separation |
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| equipment or natural gas
treatment plants. Propane, normal-butane and isobutane,
isopentane and pentane plus, that used to be defined
natural gasoline, are natural gas liquids. Network Code A code containing norms and regulations for access to, management and operation of natural gas pipelines. Offshore/Onshore The term offshore indicates a portion of open sea and, by induction, the activities carried out in such area, while onshore refers to land operations. Olefins (or Alkenes) Hydrocarbons that are particularly active chemically, used for this reason as raw materials in the synthesis of intermediate products and of polymers. Over/Underlifting Agreements stipulated between partners regulate the right of each to its share in the production of a set period of time. Amounts different from the agreed ones determine temporary Over/Underlifting situations. Possible reserves Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. Probable reserves Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered. Production Sharing Agreement Contract in use in non OECD countries, regulating relationships between States and oil companies with regard to the exploration and production of hydrocarbons. The mining concession is assigned to the national oil company jointly with the foreign oil company who has exclusive right to perform exploration, development and production activities and can enter agreements with other local or international entities. In this type of contract the national oil |
company assigns to the
international contractor the task of performing
exploration and production with the contractor’s
equipment and financial resources. Exploration risks are
borne by the contractor and production is divided into
two portions: "cost oil" is used to recover
costs borne by the contractor, "profit oil" is
divided between contractor and national company according
to variable schemes and represents the profit deriving
from exploration and production. Further terms and
conditions may vary from one country to the other. Proved reserves Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from know reservoirs, and under existing economic conditions. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. Reserves Quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project. Reserves can be: (i) developed reserves quantities of oil and gas anticipated to be through installed extraction equipment and infrastructure operational at the time of the reserves estimate; (ii) undeveloped reserves: oil and gas expected to be recovered from new wells, facilities and operating methods. Reserve replacement ratio Measure of the reserves produced replaced by proved reserves. Indicates the company’s ability to add new reserves through exploration and purchase of property. A rate higher than 100% indicates that more reserves were added than produced in the period. The ratio should be averaged on a three-year period in order to reduce the distortion deriving from the purchase of proved property, the revision of previous estimates, |
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| enhanced recovery,
improvement in recovery rates and changes in the value of
reserves – in PSAs – due to changes in
international oil prices. Management also calculates this
ratio by excluding the effect of the purchase of proved
property in order to better assess the underlying
performance of the Company’s operations. Ship-or-pay Clause included in natural gas transportation contracts according to which the customer for which the transportation is carried out is bound to pay for the transportation of the gas also in case the gas is not transported. Strategic Storage Volumes of natural gas required for covering lack or reduction of supplies from extra-European sources or crises in the natural gas system. Swap In the gas sector, the term is referred to a buy/sell contract between some counterparties and is generally aimed to the optimization of transport costs and respective commitments in purchasing and supplying. Take-or-pay Clause included in natural gas purchase contracts according to which the purchaser is bound to pay the contractual price or a fraction of such price for a minimum quantity of the gas set in the contract also in case it is not collected by the customer. The customer has the option of collecting the gas paid and not delivered at a price equal to the residual fraction of the price set in the contract in subsequent contract years. Upstream/Downstream The term upstream refers to all hydrocarbon exploration and production activities. The term downstream includes all activities inherent |
to the oil sector that are
downstream of exploration and production activities. Wholesale sales Domestic sales of refined products to wholesalers/distributors (mainly gasoil), public administrations and end consumers, such as industrial plants, power stations (fuel oil), airlines (jet fuel), transport companies, big buildings and households. They do not include distribution through the service station network, marine bunkering, sales to oil and petrochemical companies, importers and international organizations. Workover Intervention on a well for performing significant maintenance and substitution of basic equipment for the collection and transport to the surface of liquids contained in a field.
mmcf = million cubic feet |
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Balance sheet
| Dec. 31, 2008 | Dec. 31, 2009 | |||
| (euro million) | Note | Total amount |
|
of which with related parties |
|
Total amount |
of which with related parties |
|||
| ASSETS | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | (1) | 1,939 | 1,608 | |||||||||
| Other financial assets held for trading or available for sale: | (2) | |||||||||||
| - equity instruments | 2,741 | |||||||||||
| - other securities | 495 | 348 | ||||||||||
| 3,236 | 348 | |||||||||||
| Trade and other receivables | (3) | 22,222 | 1,539 | 20,348 | 1,355 | |||||||
| Inventories | (4) | 6,082 | 5,495 | |||||||||
| Current tax assets | (5) | 170 | 753 | |||||||||
| Other current tax assets | (6) | 1,130 | 1,270 | |||||||||
| Other current assets | (7) | 1,870 | 59 | 1,307 | 9 | |||||||
| Total current assets | 36,649 | 31,129 | ||||||||||
| Non-current assets | ||||||||||||
| Property, plant and equipment | (8) | 59,255 | 63,177 | |||||||||
| Inventory - compulsory stock | (9) | 1,196 | 1,736 | |||||||||
| Intangible assets | (10) | 7,697 | 8,057 | |||||||||
| Equity-accounted investments | (11) | 5,471 | 5,828 | |||||||||
| Other investments | (11) | 410 | 416 | |||||||||
| Other financial assets | (12) | 1,134 | 356 | 1,148 | 438 | |||||||
| Deferred tax assets | (13) | 2,912 | 3,558 | |||||||||
| Other non-current receivables | (14) | 1,881 | 21 | 1,938 | 40 | |||||||
| Total non-current assets | 79,956 | 85,858 | ||||||||||
| Assets held for sale | (25) | 68 | 542 | |||||||||
| TOTAL ASSETS | 116,673 | 117,529 | ||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Current liabilities | ||||||||||||
| Short-term debt | (15) | 6,359 | 153 | 3,545 | 147 | |||||||
| Current portion of long-term debt | (20) | 549 | 3,191 | |||||||||
| Trade and other payables | (16) | 20,515 | 1,253 | 19,174 | 1,241 | |||||||
| Income taxes payable | (17) | 1,949 | 1,291 | |||||||||
| Other taxes payable | (18) | 1,660 | 1,431 | |||||||||
| Other current liabilities | (19) | 3,863 | 4 | 1,856 | 5 | |||||||
| Total current liabilities | 34,895 | 30,488 | ||||||||||
| Non-current liabilities | ||||||||||||
| Long-term debt | (20) | 13,929 | 9 | 18,064 | ||||||||
| Provisions for contingencies | (21) | 9,506 | 10,319 | |||||||||
| Provisions for employee benefits | (22) | 947 | 944 | |||||||||
| Deferred tax liabilities | (23) | 5,784 | 4,907 | |||||||||
| Other non-current liabilities | (24) | 3,102 | 53 | 2,480 | 49 | |||||||
| Total non-current liabilities | 33,268 | 36,714 | ||||||||||
| Liabilities directly associated with assets held for sale | (25) | 276 | ||||||||||
| TOTAL LIABILITIES | 68,163 | 67,478 | ||||||||||
| SHAREHOLDERS' EQUITY | (26) | |||||||||||
| Minority interest | 4,074 | 3,978 | ||||||||||
| Eni shareholders' equity | ||||||||||||
| Share capital | 4,005 | 4,005 | ||||||||||
| Reserves | 40,722 | 46,269 | ||||||||||
| Treasury shares | (6,757 | ) | (6,757 | ) | ||||||||
| Interim dividend | (2,359 | ) | (1,811 | ) | ||||||||
| Net profit | 8,825 | 4,367 | ||||||||||
| Total Eni shareholders' equity | 44,436 | 46,073 | ||||||||||
| TOTAL SHAREHOLDERS' EQUITY | 48,510 | 50,051 | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 116,673 | 117,529 | ||||||||||
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Profit and loss account
| 2007 | 2008 | 2009 | ||||
| (euro million) | Note | Total amount |
|
of which with related parties |
|
Total amount |
|
of which with related parties |
|
Total amount |
|
of which with related parties |
||
| REVENUES | ||||||||||||||||||||
| Net sales from operations | (29) | 87,204 | 4,198 | 108,082 | 5,048 | 83,227 | 3,300 | |||||||||||||
| Other income and revenues | 833 | 728 | 39 | 1,118 | 26 | |||||||||||||||
| Total revenues | 88,037 | 108,810 | 84,345 | |||||||||||||||||
| OPERATING EXPENSES | (30) | |||||||||||||||||||
| Purchases, services and other | 58,133 | 3,777 | 76,350 | 6,298 | 58,351 | 4,999 | ||||||||||||||
| - of which non-recurring charge | 91 | (21 | ) | 250 | ||||||||||||||||
| Payroll and related costs | 3,800 | 4,004 | 4,181 | |||||||||||||||||
| - of which non-recurring income | (83 | ) | ||||||||||||||||||
| OTHER OPERATING (CHARGE) INCOME | (129 | ) | 10 | (124 | ) | 58 | 55 | 44 | ||||||||||||
| DEPRECIATION, DEPLETION, AMORTIZATION AND IMPAIRMENTS | 7,236 | 9,815 | 9,813 | |||||||||||||||||
| OPERATING PROFIT | 18,739 | 18,517 | 12,055 | |||||||||||||||||
| FINANCE INCOME (EXPENSE) | (31) | |||||||||||||||||||
| Finance income | 4,445 | 49 | 7,985 | 42 | 5,950 | 27 | ||||||||||||||
| Finance expense | (4,554 | ) | (20 | ) | (8,198 | ) | (17 | ) | (6,497 | ) | (4 | ) | ||||||||
| Derivative financial instruments | 155 | (427 | ) | (4 | ) | |||||||||||||||
| 46 | (640 | ) | (551 | ) | ||||||||||||||||
| INCOME (EXPENSE) FROM INVESTMENTS | (32) | |||||||||||||||||||
| Share of profit (loss) of equity-accounted investments | 773 | 640 | 393 | |||||||||||||||||
| Other gain (loss) from investments | 470 | 733 | 176 | |||||||||||||||||
| 1,243 | 1,373 | 569 | ||||||||||||||||||
| PROFIT BEFORE INCOME TAXES | 20,028 | 19,250 | 12,073 | |||||||||||||||||
| Income taxes | (33) | (9,219 | ) | (9,692 | ) | (6,756 | ) | |||||||||||||
| Net profit | 10,809 | 9,558 | 5,317 | |||||||||||||||||
| Attributable to: | ||||||||||||||||||||
| - Eni | 10,011 | 8,825 | 4,367 | |||||||||||||||||
| - Minority interest | (26) | 798 | 733 | 950 | ||||||||||||||||
| 10,809 | 9,558 | 5,317 | ||||||||||||||||||
| Earnings per share attributable to Eni (euro per share) | (34) | |||||||||||||||||||
| Basic | 2.73 | 2.43 | 1.21 | |||||||||||||||||
| Diluted | 2.73 | 2.43 | 1.21 | |||||||||||||||||
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ENI ANNUAL REPORT / CONSOLIDATED FINANCIAL STATEMENTS
Statement of comprehensive income
| (euro million) | Note | 2007 | 2008 | 2009 | ||||
| Net profit | 10,809 | 9,558 | 5,317 | ||||||||
| Other items of comprehensive income | |||||||||||
| Foreign currency translation differences | (1,980 | ) | 1,077 | (869 | ) | ||||||
| Change in the fair value of cash flow hedging derivatives | (26) | (2,237 | ) | 1,969 | (481 | ) | |||||
| Change in the fair value of available-for-sale securities | (26) | (6 | ) | 3 | 1 | ||||||
| Share of "Other comprehensive income" on equity-accounted entities | 2 | ||||||||||
| Taxation | (26) | 869 | (767 | ) | 202 | ||||||
| Other comprehensive income | (3,354 | ) | 2,282 | (1,145 | ) | ||||||
| Total comprehensive income | 7,455 | 11,840 | 4,172 | ||||||||
| Attributable to: | |||||||||||
| - Eni | 6,708 | 11,148 | 3,245 | ||||||||
| - Minority interest | 747 | 692 | 927 | ||||||||
| 7,455 | 11,840 | 4,172 |
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ENI ANNUAL REPORT / CONSOLIDATED FINANCIAL STATEMENTS
Statements of changes in shareholders’ equity
Eni shareholders’ equity |
||
| (euro million) | Share capital |
Legal reserve of Eni SpA |
Reserve for treasury shares |
Reserve related to the fair value of cash flow hedging derivatives net of the tax effect |
Reserve related to the fair value of available-for-sale securities net of the tax effect |
Other reserves |
Cumulative currency translation |
Treasury shares |
Retained earnings |
Interim dividend |
Net profit for the year |
Total |
Minority interest |
Total shareholders’ equity |
||||||||||||||
| Balance at December 31, 2006 | 4,005 | 959 | 7,262 | 1 | 6 | 393 | (398 | ) | (5,374 | ) | 25,168 | (2,210 | ) | 9,217 | 39,029 | 2,170 | 41,199 | |||||||||||||||||||||||||
| Net profit for the year | 10,011 | 10,011 | 798 | 10,809 | ||||||||||||||||||||||||||||||||||||||
| Other items of comprehensive income | ||||||||||||||||||||||||||||||||||||||||||
| Change in the fair value of cash flow hedge derivatives net of the tax effect | (1,370 | ) | (1,370 | ) | (1,370 | ) | ||||||||||||||||||||||||||||||||||||
| Change in the fair value of available-for-sale securities net of the tax effect | (4 | ) | (4 | ) | (4 | ) | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation differences | 25 | (1,835 | ) | (119 | ) | (1,929 | ) | (51 | ) | (1,980 | ) | |||||||||||||||||||||||||||||||
| (1,345 | ) | (4 | ) | (1,835 | ) | (119 | ) | (3,303 | ) | (51 | ) | (3,354 | ) | |||||||||||||||||||||||||||||
| Total recognized income and (expense) for the year | (1,345 | ) | (4 | ) | (1,835 | ) | (119 | ) | 10,011 | 6,708 | 747 | 7,455 | ||||||||||||||||||||||||||||||
| Transactions with shareholders | ||||||||||||||||||||||||||||||||||||||||||
| Dividend distribution of Eni SpA (euro 0.65 per share in settlement of 2006 interim dividend of euro 0.60 per share) | 2,210 | (4,594 | ) | (2,384 | ) | (2,384 | ) | |||||||||||||||||||||||||||||||||||
| Interim dividend distribution of Eni SpA (euro 0.60 per share) | (2,199 | ) | (2,199 | ) | (2,199 | ) | ||||||||||||||||||||||||||||||||||||
| Dividend distribution of other companies | (289 | ) | (289 | ) | ||||||||||||||||||||||||||||||||||||||
| Payments by minority shareholders | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||
| Allocation of 2006 net profit | 4,623 | (4,623 | ) | |||||||||||||||||||||||||||||||||||||||
| Shares repurchased | (680 | ) | (680 | ) | (680 | ) | ||||||||||||||||||||||||||||||||||||
| Net effect related to the purchase of treasury shares by Saipem SpA and Snam Rete Gas SpA | (201 | ) | (201 | ) | ||||||||||||||||||||||||||||||||||||||
| Treasury shares sold under incentive plans for Eni managers | (55 | ) | 35 | 55 | 11 | 46 | 46 | |||||||||||||||||||||||||||||||||||
| Difference between the carrying amount and strike price of stock options exercised by Eni managers | 9 | 9 | 9 | |||||||||||||||||||||||||||||||||||||||
| (55 | ) | 35 | (625 | ) | 4,643 | 11 | (9,217 | ) | (5,208 | ) | (489 | ) | (5,697 | ) | ||||||||||||||||||||||||||||
| Other changes in shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||||
| Cost related to stock options and stock grant | 18 | 18 | 18 | |||||||||||||||||||||||||||||||||||||||
| Other changes | (119 | ) | (119 | ) | 11 | (108 | ) | |||||||||||||||||||||||||||||||||||
| (101 | ) | (101 | ) | 11 | (90 | ) | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2007 | 4,005 | 959 | 7,207 | (1,344 | ) | 2 | 428 | (2,233 | ) | (5,999 | ) | 29,591 | (2,199 | ) | 10,011 | 40,428 | 2,439 | 42,867 | ||||||||||||||||||||||||
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ENI ANNUAL REPORT / CONSOLIDATED FINANCIAL STATEMENTS
Statements of changes in shareholders’equity continued
Eni shareholders’ equity |
||
| (euro million) | Share capital |
Legal reserve of Eni SpA |
Reserve for treasury shares |
Reserve related to the fair value of cash flow hedging derivatives net of the tax effect |
Reserve related to the fair value of available-for-sale securities net of the tax effect |
Other reserves |
Cumulative currency translation |
Treasury shares |
Retained earnings |
Interim dividend |
Net profit for the year |
Total |
Minority interest |
Total shareholders’ equity |
||||||||||||||
| Balance at December 31, 2007 | 4,005 | 959 | 7,207 | (1,344 | ) | 2 | 428 | (2,233 | ) | (5,999 | ) | 29,591 | (2,199 | ) | 10,011 | 40,428 | 2,439 | 42,867 | ||||||||||||||||||||||||
| Net profit for the year | 8,825 | 8,825 | 733 | 9,558 | ||||||||||||||||||||||||||||||||||||||
| Gains (losses) recognized directly in equity | ||||||||||||||||||||||||||||||||||||||||||
| Change in the fair value of cash flow hedge derivatives net of the tax effect | 1,255 | 1,255 | (52 | ) | 1,203 | |||||||||||||||||||||||||||||||||||||
| Change in the fair value of available-for-sale securities net of the tax effect | 2 | 2 | 2 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation differences | 25 | 1,264 | (223 | ) | 1,066 | 11 | 1,077 | |||||||||||||||||||||||||||||||||||
| 1,280 | 2 | 1,264 | (223 | ) | 2,323 | (41 | ) | 2,282 | ||||||||||||||||||||||||||||||||||
| Total recognized income and (expense) for the year | 1,280 | 2 | 1,264 | (223 | ) | 8,825 | 11,148 | 692 | 11,840 | |||||||||||||||||||||||||||||||||
| Transactions with shareholders | ||||||||||||||||||||||||||||||||||||||||||
| Dividend distribution of Eni SpA (euro 0.70 per share in settlement of 2007 interim dividend of euro 0.60 per share) | 2,199 | (4,750 | ) | (2,551 | ) | (2,551 | ) | |||||||||||||||||||||||||||||||||||
| Interim dividend distribution of Eni SpA (euro 0.65 per share) | (2,359 | ) | (2,359 | ) | (2,359 | ) | ||||||||||||||||||||||||||||||||||||
| Dividend distribution of other companies | (297 | ) | (297 | ) | ||||||||||||||||||||||||||||||||||||||
| Payments by minority shareholders | 20 | 20 | ||||||||||||||||||||||||||||||||||||||||
| Allocation of 2007 net profit | 5,261 | (5,261 | ) | |||||||||||||||||||||||||||||||||||||||
| Shares repurchased | (778 | ) | (778 | ) | (778 | ) | ||||||||||||||||||||||||||||||||||||
| Treasury shares sold under incentive plans for Eni managers | (20 | ) | 13 | 20 | (1 | ) | 12 | 12 | ||||||||||||||||||||||||||||||||||
| Difference between the carrying amount and strike price of stock options exercised by Eni managers | 2 | 2 | 2 | |||||||||||||||||||||||||||||||||||||||
| Net effect related to the purchase of treasury shares by Saipem SpA | (31 | ) | (31 | ) | ||||||||||||||||||||||||||||||||||||||
| Put option granted to Publigaz SCRL (the Distrigas NV minority shareholder) | (1,495 | ) | (1,495 | ) | (1,495 | ) | ||||||||||||||||||||||||||||||||||||
| Minority interest recognized following the acquisition of Distrigas NV and Hindustan Oil Exploration Co Ltd | 1,261 | 1,261 | ||||||||||||||||||||||||||||||||||||||||
| (20 | ) | (1,482 | ) | (758 | ) | 5,262 | (160 | ) | (10,011 | ) | (7,169 | ) | 953 | (6,216 | ) | |||||||||||||||||||||||||||
| Other changes in shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||||
| Cost related to stock options and stock grant | 18 | 18 | 18 | |||||||||||||||||||||||||||||||||||||||
| Other changes | (26 | ) | 37 | 11 | (10 | ) | 1 | |||||||||||||||||||||||||||||||||||
| (26 | ) | 55 | 29 | (10 | ) | 19 | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2008 (Note 26) | 4,005 | 959 | 7,187 | (90 | ) | 4 | (1,054 | ) | (969 | ) | (6,757 | ) | 34,685 | (2,359 | ) | 8,825 | 44,436 | 4,074 | 48,510 | |||||||||||||||||||||||
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ENI ANNUAL REPORT / CONSOLIDATED FINANCIAL STATEMENTS
Statements of changes in shareholders’ equity continued
Eni shareholders’ equity |
||
| (euro million) | Share capital |
Legal reserve of Eni SpA |
Reserve for treasury shares |
Reserve related to the fair value of cash flow hedging derivatives net of the tax effect |
Reserve related to the fair value of available-for-sale securities net of the tax effect |
Other reserves |
Cumulative currency translation |
Treasury shares |
Retained earnings |
Interim dividend |
Net profit for the year |
Total |
Minority interest |
Total shareholders’ equity |
||||||||||||||
| Balance at December 31, 2008 (Note 26) | 4,005 | 959 | 7,187 | (90 | ) | 4 | (1,054 | ) | (969 | ) | (6,757 | ) | 34,685 | (2,359 | ) | 8,825 | 44,436 | 4,074 | 48,510 | |||||||||||||||||||||||
| Net profit for the year | 4,367 | 4,367 | 950 | 5,317 | ||||||||||||||||||||||||||||||||||||||
| Gains (losses) recognized directly in equity | ||||||||||||||||||||||||||||||||||||||||||
| Change in the fair value of cash flow hedge derivatives net of the tax effect (Note 26) | (279 | ) | (279 | ) | (279 | ) | ||||||||||||||||||||||||||||||||||||
| Change in the fair value of available-for-sale securities net of the tax effect (Note 26) | 1 | 1 | 1 | |||||||||||||||||||||||||||||||||||||||
| Share of "Other comprehensive income" on equity-accounted entities | 2 | 2 | 2 | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation differences | 1 | (696 | ) | (151 | ) | (846 | ) | (23 | ) | (869 | ) | |||||||||||||||||||||||||||||||
| (278 | ) | 1 | 2 | (696 | ) | (151 | ) | (1,122 | ) | (23 | ) | (1,145 | ) | |||||||||||||||||||||||||||||
| Total recognized income and (expense) for the year | (278 | ) | 1 | 2 | (696 | ) | (151 | ) | 4,367 | 3,245 | 927 | 4,172 | ||||||||||||||||||||||||||||||
| Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||||
| Dividend distribution of Eni SpA (euro 0.65 per share in settlement of 2007 interim dividend of euro 0.65 per share) | 2,359 | (4,714 | ) | (2,355 | ) | (2,355 | ) | |||||||||||||||||||||||||||||||||||
| Interim dividend distribution of Eni SpA (euro 0.50 per share) | (1,811 | ) | (1,811 | ) | (1,811 | ) | ||||||||||||||||||||||||||||||||||||
| Dividend distribution of other companies | (350 | ) | (350 | ) | ||||||||||||||||||||||||||||||||||||||
| Payments by minority shareholders | 1,560 | 1,560 | ||||||||||||||||||||||||||||||||||||||||
| Allocation of 2008 net profit | 4,111 | (4,111 | ) | |||||||||||||||||||||||||||||||||||||||
| Put option granted to Publigaz SCRL (the Distrigas NV minority shareholder) | 1,495 | 1,495 | 1,495 | |||||||||||||||||||||||||||||||||||||||
| Effect related to the purchase of Italgas SpA and Stoccaggi Gas SpA by Snam Rete Gas SpA | 1,086 | 1,086 | (1,086 | ) | ||||||||||||||||||||||||||||||||||||||
| Minority interest acquired following the mandatory tender offer and the squeeze-out on the shares of Distrigas NV | (1,146 | ) | (1,146 | ) | ||||||||||||||||||||||||||||||||||||||
| 2,581 | 4,111 | 548 | (8,825 | ) | (1,585 | ) | (1,022 | ) | (2,607 | ) | ||||||||||||||||||||||||||||||||
| Other changes in shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||||
| Utilization of the reserve for the acquisition of treasury shares | (430 | ) | 1 | 429 | ||||||||||||||||||||||||||||||||||||||
| Cost related to stock options and stock grant | 13 | 13 | 13 | |||||||||||||||||||||||||||||||||||||||
| Stock option expired | (7 | ) | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||||||||||
| Other changes | (71 | ) | (38 | ) | 80 | (29 | ) | (1 | ) | (30 | ) | |||||||||||||||||||||||||||||||
| (430 | ) | (71 | ) | (37 | ) | 515 | (23 | ) | (1 | ) | (24 | ) | ||||||||||||||||||||||||||||||
| Balance at December 31, 2009 (Note 26) | 4,005 | 959 | 6,757 | (439 | ) | 5 | 1,492 | (1,665 | ) | (6,757 | ) | 39,160 | (1,811 | ) | 4,367 | 46,073 | 3,978 | 50,051 | ||||||||||||||||||||||||
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ENI ANNUAL REPORT / CONSOLIDATED FINANCIAL STATEMENTS
Statement of cash flows
| (euro million) | Note |
2007 |
2008 |
2009 |
||||
| Net profit of the year | 10,809 | 9,558 | 5,317 | ||||||||
| Depreciation, depletion and amortization | (30) | 7,029 | 8,422 | 8,762 | |||||||
| Revaluations, net | (494 | ) | 2,560 | 495 | |||||||
| Net change in provisions for contingencies | (122 | ) | 414 | 574 | |||||||
| Net change in the provisions for employee benefits | (67 | ) | (8 | ) | 16 | ||||||
| Gain on disposal of assets, net | (309 | ) | (219 | ) | (226 | ) | |||||
| Dividend income | (32) | (170 | ) | (510 | ) | (164 | ) | ||||
| Interest income | (603 | ) | (592 | ) | (352 | ) | |||||
| Interest expense | 523 | 809 | 603 | ||||||||
| Exchange differences | (119 | ) | (319 | ) | (156 | ) | |||||
| Income taxes | (33) | 9,219 | 9,692 | 6,756 | |||||||
| Cash generated from operating profit before changes in working capital | 25,696 | 29,807 | 21,625 | ||||||||
| (Increase) decrease: | |||||||||||
| - inventories | (1,117 | ) | (801 | ) | 52 | ||||||
| - trade and other receivables | (655 | ) | (974 | ) | (19 | ) | |||||
| - other assets | (362 | ) | 162 | (472 | ) | ||||||
| - trade and other payables | 360 | 2,318 | (1,201 | ) | |||||||
| - other liabilities | 107 | 1,507 | (129 | ) | |||||||
| Cash from operations | 24,029 | 32,019 | 19,856 | ||||||||
| Dividends received | 658 | 1,150 | 576 | ||||||||
| Interest received | 333 | 266 | 594 | ||||||||
| Interest paid | (555 | ) | (852 | ) | (583 | ) | |||||
| Income taxes paid, net of tax receivables received | (8,948 | ) | (10,782 | ) | (9,307 | ) | |||||
| Net cash provided from operating activities | 15,517 | 21,801 | 11,136 | ||||||||
| - of which with related parties | (36) | 549 | (62 | ) | (1,188 | ) | |||||
| Investing activities: | |||||||||||
| - tangible assets | (8) | (8,532 | ) | (12,312 | ) | (12,300 | ) | ||||
| - intangible assets | (10) | (2,061 | ) | (2,250 | ) | (1,395 | ) | ||||
| - consolidated subsidiaries and businesses | (4,759 | ) | (3,634 | ) | (25 | ) | |||||
| - investments | (11) | (4,890 | ) | (385 | ) | (230 | ) | ||||
| - securities | (76 | ) | (152 | ) | (2 | ) | |||||
| - financing receivables | (1,646 | ) | (710 | ) | (972 | ) | |||||
| - change in payables and receivables in relation to investments and capitalized depreciation | 185 | 367 | (97 | ) | |||||||
| Cash flow from investments | (21,779 | ) | (19,076 | ) | (15,021 | ) | |||||
| Disposals: | |||||||||||
| - tangible assets | 172 | 318 | 126 | ||||||||
| - intangible assets | 28 | 2 | 250 | ||||||||
| - consolidated subsidiaries and businesses | 56 | 149 | |||||||||
| - investments | 403 | 510 | 3,219 | ||||||||
| - securities | 491 | 145 | 164 | ||||||||
| - financing receivables | 545 | 1,293 | 861 | ||||||||
| - change in payables and receivables in relation to disposals | (13 | ) | (299 | ) | 147 | ||||||
| Cash flow from disposals | 1,682 | 2,118 | 4,767 | ||||||||
| Net cash used in investing activities (*) | (20,097 | ) | (16,958 | ) | (10,254 | ) | |||||
| - of which with related parties | (36) | (822 | ) | (1,598 | ) | (1,262 | ) | ||||
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ENI ANNUAL REPORT / CONSOLIDATED FINANCIAL STATEMENTS
Statement of cash flows continued
| (euro million) | Note |
2007 |
2008 |
2009 |
||||
| Proceeds from long-term debt | 6,589 | 3,774 | 8,774 | ||||||||
| Repayments of long-term debt | (2,295 | ) | (2,104 | ) | (2,044 | ) | |||||
| Increase (decrease) in short-term debt | 4,467 | (690 | ) | (2,889 | ) | ||||||
| 8,761 | 980 | 3,841 | |||||||||
| Net capital contributions by minority shareholders | 1 | 20 | 1,551 | ||||||||
| Net acquisition of treasury shares different from Eni SpA | (340 | ) | (50 | ) | 9 | ||||||
| Acquisition of additional interests in consolidated subsidiaries | (16 | ) | (2,068 | ) | |||||||
| Dividends paid to Eni's shareholders | (4,583 | ) | (4,910 | ) | (4,166 | ) | |||||
| Dividends paid to minority interest | (289 | ) | (297 | ) | (350 | ) | |||||
| Net purchase of treasury shares | (625 | ) | (768 | ) | |||||||
| Net cash used in financing activities | 2,909 | (5,025 | ) | (1,183 | ) | ||||||
| - of which with related parties | (36) | 20 | 14 | (14 | ) | ||||||
| Effect of change in consolidation (inclusion/exclusion of significant/insignificant subsidiaries) | (40 | ) | (1 | ) | |||||||
| Effect of exchange rate changes on cash and cash equivalents and other changes | (160 | ) | 8 | (30 | ) | ||||||
| Net cash flow for the period | (1,871 | ) | (175 | ) | (331 | ) | |||||
| Cash and cash equivalents - beginning of year | (1) | 3,985 | 2,114 | 1,939 | |||||||
| Cash and cash equivalents - end of year | (1) | 2,114 | 1,939 | 1,608 | |||||||
| (*) | Net cash used
in investing activities included investments in certain
financial assets to absorb temporary surpluses of cash or
as part of our ordinary management of financing
activities. Due to their nature and the circumstance that
they are very liquid, these financial assets are netted
against finance debt in determining net borrowings. For
the definition of net borrowings, see "Financial
Review" in the "Report of the Directors". Cash flows of such investments were as follows: |
|
| (euro million) |
|
2007 |
2008 |
2009 |
||||
| Financing investments: | |||||||||
| - securities | (75 | ) | (74 | ) | (2 | ) | |||
| - financing receivables | (970 | ) | (99 | ) | (36 | ) | |||
| (1,045 | ) | (173 | ) | (38 | ) | ||||
| Disposal of financing investments: | |||||||||
| - securities | 419 | 145 | 123 | ||||||
| - financing receivables | 147 | 939 | 311 | ||||||
| 566 | 1,084 | 434 | |||||||
| Net cash flows from financing activities | (479 | ) | 911 | 396 |
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ENI ANNUAL REPORT / CONSOLIDATED FINANCIAL STATEMENTS
| SUPPLEMENTAL CASH FLOW INFORMATION |
| (euro million) |
|
2007 |
2008 |
2009 |
||||
| Effect of investment of companies included in consolidation and businesses | |||||||||
| Current assets | 398 | 1,938 | 7 | ||||||
| Non-current assets | 5,590 | 7,442 | 47 | ||||||
| Net borrowings | 1 | 1,543 | 4 | ||||||
| Current and non-current liabilities | (972 | ) | (3,598 | ) | (29 | ) | |||
| Net effect of investments | 5,017 | 7,325 | 29 | ||||||
| Minority interests | (1,261 | ) | |||||||
| Fair value of investments held before the acquisition of control | (13 | ) | (601 | ) | |||||
| Sale of unconsolidated entities controlled by Eni | |||||||||
| Purchase price | 5,004 | 5,463 | 29 | ||||||
| less: | |||||||||
| Cash and cash equivalents | (245 | ) | (1,829 | ) | (4 | ) | |||
| Cash flow on investments | 4,759 | 3,634 | 25 | ||||||
| Effect of disposal of consolidated subsidiaries and businesses | |||||||||
| Current assets | 73 | 277 | |||||||
| Non-current assets | 20 | 299 | |||||||
| Net borrowings | 26 | (118 | ) | ||||||
| Current and non-current liabilities | (94 | ) | (270 | ) | |||||
| Net effect of disposals | 25 | 188 | |||||||
| Gain on disposal | 33 | 25 | |||||||
| Minority interest | (1 | ) | |||||||
| Selling price | 58 | 212 | |||||||
| less: | |||||||||
| Cash and cash equivalents | (2 | ) | (63 | ) | |||||
| Cash flow on disposals | 56 | 149 | |||||||
Transactions that did not produce cash
flows
Acquisition of equity investments in exchange of businesses
contribution:
| (euro million) |
|
2007 |
2008 |
2009 |
||||
| Current assets | |||||||||
| Non-current assets | 38 | ||||||||
| Net borrowings | (4 | ) | |||||||
| Long-term and short-term liabilities | |||||||||
| Net effect of contribution | 34 | ||||||||
| Minority interest | |||||||||
| Gain on contribution | |||||||||
| Acquisition of investments | 34 | ||||||||
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Basis of presentation
The Consolidated Financial Statements of Eni Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU) pursuant to Article 6 of the EC Regulation No. 1606/2002 of the European Parliament and Council of July 19, 2002 and in accordance with Article 9 of Legislative Decree No. 38/20051. Oil and natural gas exploration and production activity is accounted for in conformity with internationally accepted accounting principles. Specifically, this concerns the determination of the amortization expenses using the unit-of-production method and the recognition of the production-sharing agreements and buy-back contracts. The Consolidated Financial Statements have been prepared on a historical cost basis except for certain items that under IFRS must be recognized at fair value as described in the summary of significant accounting policies paragraph. The Consolidated Financial Statements include the statutory accounts of Eni SpA and the accounts of controlled subsidiary companies where the company holds the right to directly or indirectly exercise control, determine financial and management decisions and obtain economic and financial benefits. Immaterial subsidiaries are not consolidated. A subsidiary is generally considered to be immaterial when it does not exceed two of the following three limits: (i) total assets or liabilities: euro 3,125 thousand; (ii) total revenues: euro 6,250 thousand; and (iii) average number of employees: 50 units. Moreover, companies for which consolidation does not produce significant economic and financial effects are not consolidated. These are essentially entities acting as sole-operator in the management of oil and gas contracts on behalf of companies participating in a joint venture. These are financed proportionately based on a budget approved by the participating companies upon presentation of periodical reports of proceeds and expenses. Costs and revenues and other operating data (production, reserves, etc.) of the project, as well as the obligations arising from the project, are recognized proportionally in the financial statements of the companies involved. The effects of these exclusions are immaterial2. Immaterial subsidiaries excluded from consolidation, jointly controlled entities, associates and other interests are accounted for as described below under the item "Financial fixed assets". Subsidiaries’ financial statements are audited by the independent auditors who examine and certify also the information required for the preparation of the Consolidated Financial Statements. The 2009 Consolidated Financial Statements approved by Eni’s Board of Directors on March 11, 2010 were audited by the independent auditor PricewaterhouseCoopers SpA (PwC) who reviewed disclosed information. The independent auditor of Eni SpA, as the main auditor of the Group, is in charge of the auditing activities of the subsidiaries, unless this is incompatible with local laws, and, to the extent allowed under Italian legislation, of the work of other independent auditors. Amounts in the notes to these financial statements are expressed in millions of euros (euro million).
Principles of consolidation
Interest in consolidated companies
Assets and liabilities, revenues and expenses related to
fully consolidated subsidiaries are wholly incorporated in the
Consolidated Financial Statements; the book value of interests in
these subsidiaries is eliminated against the corresponding share
of the shareholders’ equity by attributing to each of the
balance sheet items its fair value at the acquisition date. When
acquired, the net equity of controlled subsidiaries is initially
recognized at fair value. The excess of the purchase price of an
acquired entity over the total fair value assigned to assets
acquired and liabilities assumed is recognized as goodwill;
negative goodwill is recognized in the profit and loss account.
Equity and net profit of minority shareholders are included in
specific lines of the financial statements; this share of equity
is determined using the fair value of assets and liabilities,
excluding any related goodwill, at the time when control is
acquired. The purchase of additional ownership interests in
subsidiaries from minority shareholders is recognized as goodwill
and represents the excess of the amount paid over the carrying
value of the minority interest acquired. Gains or losses
associated with the sale of interests in consolidated
subsidiaries are reflected in the profit and loss account for the
difference between the proceeds from the sale and the divested
portion of net equity.
| (1) | Differences in certain respects between IFRS as endorsed by the EU and IFRS as issued by IASB are on matters that do not relate to Eni. On this basis, the Consolidated Financial Statements are fully compliant with IFRS as issued by the IASB and effective for the year 2009 with the exception of IFRIC 12 "Service Concession Arrangements" and IFRIC 18 "Transfers of Assets from Customers" (see also "Recent Accounting Principles" paragraph). | |
| (2) | According to the requirements of the Framework of international accounting standards, information is material if its omission or misstatement could influence the economic decisions that users make on the basis of the financial statements. |
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Inter-company transactions
Inter-company transactions, balances and unrealized gains
on transactions between group companies are eliminated.
Unrealized losses are not eliminated since they are considered an
impairment indicator of the asset transferred.
Foreign currency translation
Financial statements of foreign companies having a
functional currency other than the euro are translated into the
presentation currency using closing exchange rates for assets and
liabilities, historical exchange rates for equity accounts and
average rates for the period for the profit and loss account
(source: Bank of Italy). Cumulative exchange rate differences
resulting from this translation are recognized in
shareholders’ equity under "Other reserves" in
proportion to the Group’s interest and under "Minority
interest" for the portion related to minority shareholders.
Cumulative exchange rate differences are charged to the profit
and loss account when the investments are sold or the capital
employed is repaid. Financial statements of foreign subsidiaries
which are translated into the euro are denominated in the
functional currencies of the countries where the entities
operate. The U.S. dollar is the prevalent functional currency for
the entities that do not adopt euro.
Summary of significant accounting policies
The most significant accounting policies used in the preparation of the Consolidated Financial Statements are described below.
Current assets
Held for trading financial assets and available-for-sale
financial assets are measured at fair value with gains or losses
recognized in the profit and loss account under "Financial
income (expense)" and to the equity reserve related to other
comprehensive income, respectively. In the latter case, changes
in fair value recognized in equity are charged to the profit and
loss account when they are impaired or realized. The objective
evidence that an impairment loss has occurred is verified
considering, interalia, significant breaches of contracts,
serious financial difficulties or the high probability of
insolvency of the counterparty; asset write downs are included in
the carrying amount3.
Available-for-sale financial assets include financial assets
other than derivative financial instruments, loans and
receivables, held for trading financial assets, held-to-maturity
financial assets and, if applicable, investments associated with
a derivative financial instrument. The latter are stated at fair
value with effects of changes in fair value recognized in the
profit and loss account rather than shareholders’ equity
(the so-called "fair value option") in order to ensure
a match with the recognition in the profit and loss account for
the changes in fair value of the derivative instrument4.
The fair value of financial instruments is determined by market
quotations or, in their absence, by the value resulting from the
adoption of suitable financial valuation models which take into
account all the factors adopted by market operators and prices
obtained in similar recent transactions in the market. Interests
and dividends on financial assets stated at fair value with gains
or losses reflected in the profit and loss account are accounted
for on an accrual basis in "Financial income (expense)"
and "Other gain (loss) from investments", respectively.
When the purchase or sale of a financial asset under a contract
whose terms require delivery of the asset within the time frame
generally established by regulation or convention in the market
place concerned, the transaction is accounted for on the
settlement date. Receivables are carried at amortized cost (see
item "Financial fixed assets" below). Transferred
financial assets are derecognized when the contractual rights to
receive the cash flows of the financial assets are transferred
together with the risks and rewards of the ownership.
Inventories, including compulsory stocks and excluding contract
work in progress, are stated at the lower of purchase or
production cost and net realizable value. Net realizable value is
the estimated selling price less the costs to sell, or, with
reference to inventories of crude oil and petroleum products
already included in binding sale contracts, the contractual sale
price. The cost for inventories of hydrocarbons (crude oil,
condensates and natural gas) and petroleum products is determined
by applying the weighted-average cost method on a three-month
basis, or monthly, when it is justified by the use and the
turnover of inventories of crude oil and petroleum products; the
cost for inventories of the Petrochemical segment is determined
by applying the weighted-average cost on an annual basis.
Contract work in progress is measured using the
| (3) | By EU Commission Regulation No. 1004/2008 of October 15, 2008, amendments to IAS 39 "Financial Instruments: Recognition and Measurement" and to IFRS 7 "Financial Instruments: Disclosures" were endorsed. The amendments permit, with certain criteria met, an entity to reclassify held for trading and available-for-sale financial assets into financial instruments valuated at cost or at amortized cost. The change has not produced any effect for Eni. | |
| (4) | Regarding the investment in OAO Gazprom Neft see Note 2 – Other financial assets held for trading or available for sale. |
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cost-to-cost method whereby contract revenue is recognized
based on the stage of completion as determined by the cost
incurred. Advances are deducted from inventories within the
limits of contractual considerations; any excess of such advances
over the value of the inventories is recorded as a liability.
Losses related to construction contracts are accrued for once the
company becomes aware of such losses. Contract work in progress
not yet invoiced, whose payment will be made in a foreign
currency, is translated to euro using the current exchange rates
at year end and the effect of rate changes is reflected in the
profit and loss account.
When take-or-pay clauses are included in long term natural gas
purchase contracts, uncollected gas volumes which imply the
"pay" clause, measured using the price formulas
contractually defined, are recognized under "Other
assets" as "Deferred costs" as an offset to
"Trade payables" or, after the settlement, to
"Cash and Cash equivalents".
The allocated deferred costs are charged to the profit and loss
account: (i) when natural gas is actually delivered – the
related cost is included in the determination of the
weighted-average cost of inventories and (ii) for the portion
which is not recoverable, when it is not possible to collect gas
that was previously uncollected within the contractually defined
deadlines. Furthermore, the allocated deferred costs are tested
for economic recoverability by comparing the related carrying
amount and their net realizable value, measured adopting the same
criteria described for inventories.
Hedging instruments are described in the section "Derivative
Instruments".
Non-current assets
Property, plant and equipment5
Tangible assets, including investment properties, are
recognized using the cost model and stated at their purchase or
self-construction cost including any costs directly attributable
to bringing the asset into operation. In addition, when a
substantial period of time is required to make the asset ready
for use, the purchase price or self-construction cost includes
the borrowing costs incurred that could have otherwise been saved
had the investment not been made. In the case of a present
obligation for the dismantling and removal of assets and the
restoration of sites, the carrying value includes, with a
corresponding entry to a specific provision, the estimated
(discounted) costs to be incurred at the moment the asset is
retired. Changes in estimate of the carrying amounts of
provisions due to the passage of time and changes in discount
rates are recognized under "Provisions for
contingencies"6. Property, plant and equipment is
not revalued for financial reporting purposes. Assets carried
under financial leasing or concerning arrangements that do not
take the legal form of a finance lease but substantially transfer
all the risks and rewards of ownership of the leased asset are
recognized at fair value, net of taxes due from the lessor or, if
lower, at the present value of the minimum lease payments. Leased
assets are included within property, plant and equipment. A
corresponding financial debt payable to the lessor is recognized
as a financial liability. These assets are depreciated using the
criteria described below. When the renewal is not reasonably
certain, leased assets are depreciated over the shorter of the
lease term or the estimated useful life of the asset.
Expenditures on renewals, improvements and transformations which
provide additional economic benefits are capitalized to property,
plant and equipment. Tangible assets, from the moment they begin
or should begin to be used, are depreciated systematically using
a straight-line method over their useful life which is an
estimate of the period over which the assets will be used by the
company. When tangible assets are composed of more than one
significant element with different useful lives, each component
is depreciated separately. The amount to be depreciated is the
book value less the estimated net realizable value at the end of
the useful life, if it is significant and can be reasonably
determined. Land is not depreciated, even when purchased with a
building. Tangible assets held for sale are not depreciated (see
item "Non-current assets held for sale" below). Assets
that can be used free of charge by third parties are depreciated
over the shorter term of the duration of the concession or the
asset’s useful life. Replacement costs of identifiable
components in complex assets are capitalized and depreciated over
their useful life; the residual book value of the component that
has been substituted is charged to the profit and loss account.
Expenditures for ordinary maintenance and repairs are expensed as
incurred. The carrying value of property, plant and equipment is
reviewed for impairment whenever events indicate that the
carrying amounts for those assets may not be recoverable. The
recoverability of an asset is assessed by comparing its carrying
value with the recoverable amount, which is the higher of fair
value less costs to sell or its value in use. If there is no
binding sales agreement, fair value is
| (5) | Recognition and evaluation criteria of exploration and production activities are described in the section "Exploration and production activities" below. | |
| (6) | The company recognizes material provisions for the retirement of assets in the Exploration & Production business. No significant asset retirement obligations associated with any legal obligations to retire refining, marketing and transportation (downstream) and chemical long-lived assets are generally recognized, as undetermined settlement dates for asset retirements do not allow a reasonable estimate of the fair value of the associated retirement obligation. The company performs periodic reviews of its downstream and chemical long-lived assets for any changes in facts and circumstances that might require recognition of a retirement obligation. |
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estimated on the basis of market values, recent transactions, or the best available information that shows the proceeds that the company could reasonably expect to collect from the disposal of the asset. Value in use is the present value of the future cash flows expected to be derived from the use of the asset and, if significant and reasonably determinable, the cash flows deriving from its disposal at the end of its useful life, net of disposal costs. Cash flows are determined on the basis of reasonable and documented assumptions that represent the best estimate of the future economic conditions during the remaining useful life of the asset, giving more importance to independent assumptions. Oil, natural gas and petroleum products prices (and to prices for products which derive there from) used to quantify the expected future cash flows are estimated based on forward prices prevailing in the marketplace for the first four years and management’s long-term planning assumptions thereafter. Discounting is carried out at a rate that reflects a current market valuation of the time value of money and of those specific risks of the asset that are not reflected in the estimate of the future cash flows. In particular, the discount rate used is the Weighted Average Cost of Capital (WACC) adjusted for the specific country risk of the activity. The evaluation of the specific country risk to be included in the discount rate is provided by external parties. The WACC differs considering the risk associated with individual operating segments; in particular for the assets belonging to the Gas & Power and Engineering & Constructions segments, taking into account the different risk compared with Eni, specific WACC rates have been defined (for Gas & Power segment on the basis of a sample of companies operating in the same segment; for Engineering & Constructions segment on the basis of the market quotation); WACC used for impairments in the Gas & Power segment is adjusted to take into consideration the risk premium of the specific country of the activity while WACC used for impairments in the Engineering & Constructions segment is not adjusted for country risk as most of the company assets are not located in a specific country. For the regulated activities, the discount rate used for the measurement of the value in use is equal to the rate return defined by the Regulator. For the other segments, a single WACC is used considering that the risk is the same to that of Eni as a whole. Value in use is calculated net of the tax effect as this method results in values similar to those resulting from discounting pre-tax cash flows at a pre-tax discount rate deriving, through an iteration process, from a post-tax valuation. Valuation is carried out for each single asset or, if the realizable value of a single asset cannot be determined, for the smallest identifiable group of assets that generates independent cash inflows from their continuous use, the so-called "cash generating unit". When the reasons for their impairment cease to exist, Eni makes a reversal that is recognized in the profit or loss account as income from asset revaluation. This reversed amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.
Intangible assets
Intangible assets are assets without physical substance,
controlled by the company and able to produce future economic
benefits, and goodwill acquired in business combinations. An
asset is classified as intangible when management is able to
distinguish it clearly from goodwill. This condition is normally
met when: (i) the intangible asset arises from contractual or
legal rights, or (ii) the asset is separable, i.e. can be sold,
transferred, licensed, rented or exchanged, either individually
or as an integral part of other assets. An entity controls an
asset if it has the power to obtain the future economic benefits
generated by the underlying asset and to restrict the access of
others to those cash flows. Intangible assets are initially
stated at cost as determined by the criteria used for tangible
assets and they are not revalued for financial reporting
purposes. Intangible assets with a definite useful life are
amortized systematically over their useful life estimated as the
period over which the assets will be used by the company; the
amount to be amortized and the recoverability of the carrying
amount are verified in accordance with the criteria described in
the section "Property, plant and equipment". Goodwill
and other intangible assets with an indefinite useful life are
not amortized. The recoverability of their carrying value is
reviewed at least annually and whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. Goodwill is tested for impairment at the level of
the smallest aggregate on which the company, directly or
indirectly, evaluates the return on the capital expenditure to
which goodwill relates. When the carrying amount of the cash
generating unit, including goodwill allocated thereto, exceeds
the cash generating unit’s recoverable amount, the excess is
recognized as impairment. The impairment loss is first allocated
to reduce the carrying amount of goodwill; any remaining excess
to be allocated to the assets of the unit is applied pro-rata on
the basis of the carrying amount of each asset in the unit.
Impairment charges against goodwill are not reversed7.
Negative goodwill is recognized in the profit and loss
account. Costs of technological development activities are
capitalized when: (i) the cost attributable to the development
activity can be reasonably determined; (ii) there is the
intention, availability of funding and technical capacity to make
the asset available for use or sale; and (iii) it can be
demonstrated that the asset is able to generate future economic
benefits.
| (7) | Impairment charges recognized in an interim period are not reversed also when, considering conditions existing in a subsequent interim period, they would have been recognized in a smaller amount or would not have been recognized. |
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Exploration and production activities8
ACQUISITION OF MINERAL RIGHTS
Costs associated with the acquisition of mineral rights are
capitalized in connection with the assets acquired (such as
exploratory potential, probable and possible reserves and proved
reserves). When the acquisition is related to a set of
exploratory potential and reserves, the cost is allocated to the
different assets acquired on the basis of the value of the
relevant discounted cash flows. Expenditure for the exploratory
potential, represented by the costs for the acquisition of the
exploration permits and for the extension of existing permits, is
recognized under "Intangible assets" and is amortized
on a straight-line basis over the period of the exploration as
contractually established. If the exploration is abandoned, the
residual expenditure is charged to the profit and loss account.
Acquisition costs for proved reserves and for possible and
probable reserves are recognized in the balance sheet as assets.
Costs associated with proved reserves are amortized on a UOP
basis, as detailed in the section "Development",
considering both developed and undeveloped reserves. Expenditures
associated with possible and probable reserves are not amortized
until classified as proved reserves; in case of a negative
result, the costs are charged to the profit and loss account.
EXPLORATION
Costs associated with exploratory activities for oil and gas
producing properties incurred both before and after the
acquisition of mineral rights (such as acquisition of seismic
data from third parties, test wells and geophysical surveys) are
initially capitalized in order to reflect their nature as an
investment and subsequently amortized in full when incurred.
DEVELOPMENT
Development costs are those costs incurred to obtain access to
proved reserves and to provide facilities for extracting,
gathering and storing oil and gas. They are then capitalized
within property, plant and equipment and amortized generally on a
UOP basis, as their useful life is closely related to the
availability of feasible reserves. This method provides for
residual costs at the end of each quarter to be amortized at a
rate representing the ratio between the volumes extracted during
the quarter and the proved developed reserves existing at the end
of the quarter, increased by the volumes extracted during the
quarter. This method is applied with reference to the smallest
aggregate representing a direct correlation between investments
and proved developed reserves. Costs related to unsuccessful
development wells or damaged wells are expensed immediately as
losses on disposal. Impairments and reversal of impairments of
development costs are made on the same basis as those for
tangible assets.
PRODUCTION
Production costs are those costs incurred to operate and maintain
wells and field equipment and are expensed as incurred.
PRODUCTION-SHARING AGREEMENTS AND BUY-BACK CONTRACTS
Oil and gas reserves related to production-sharing agreements and
buy-back contracts are determined on the basis of contractual
clauses related to the repayment of costs incurred for the
exploration, development and production activities executed
through the use of company’s technologies and financing
(cost oil) and the company’s share of production volumes not
destined to cost recovery (profit oil). Revenues from the sale of
the production entitlements against both cost oil and profit oil
are accounted for on an accrual basis whilst exploration,
development and production costs are accounted for according to
the policies mentioned above. The company’s share of
production volumes and reserves representing the profit oil
includes the share of hydrocarbons which corresponds to the taxes
to be paid, according to the contractual agreement, by the
national government on the behalf of the company. As a
consequence the company has to recognize at the same time an
increase in the taxable profit, through the increase of the
revenues, and a tax expense.
RETIREMENT
Costs expected to be incurred with respect to the retirement of a
well, including costs associated with removal of production
facilities, dismantlement and site restoration, are capitalized
and amortized on a UOP basis, consistent with the policy
described under "Property, plant and equipment".
| (8) | IFRS does not establish specific criteria for hydrocarbon exploration and production activities. Eni continues to use existing accounting policies for exploration and evaluation assets previously applied before the introduction of IFRS 6 "Exploration for and evaluation of mineral resources". |
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Grants
Grants related to assets are recorded as a reduction of
purchase price or production cost of the related assets when
there is reasonable assurance that all the required conditions
attached to them, agreed upon with government entities, have been
met. Grants not related to capital expenditure are recognized in
the profit and loss account.
Financial fixed assets
INVESTMENTS
Investments in subsidiaries excluded from consolidation, jointly
controlled entities and associates are accounted for using the
equity method9. When there is objective evidence of
impairment (see also section "Current assets"), the
recoverability is tested by comparing the carrying amount and the
related recoverable amount determined by adopting the criteria
indicated in the section "Property, plant and
equipment".
Subsidiaries, joint ventures and associates excluded from
consolidation are accounted for at cost, adjusted for impairment
losses if this does not result in a misrepresentation of the
company’s financial condition. When the reasons for their
impairment cease to exist, investments accounted for at cost are
re-valued within the limit of the impairment made and their
effects are included in "Other income (expense) from
investments".
Other investments, included in non-current assets, are recognized
at their fair value and their effects are included in the equity
reserve related to other comprehensive income; the changes in
fair value recognized in equity are charged to the profit and
loss account when it is impaired or realized. When investments
are not traded in a public market and fair value cannot be
reasonably determined, investments are accounted for at cost,
adjusted for impairment losses; impairment losses may not be
reversed10. The risk deriving from losses
exceeding shareholders’ equity is recognized in a specific
provision to the extent the parent company is required to fulfill
legal or implicit obligations towards the subsidiary or to cover
its losses.
RECEIVABLES AND FINANCIAL ASSETS TO BE HELD TO MATURITY
Receivables and financial assets to be held to maturity are
stated at cost represented by the fair value of the initial
exchanged amount adjusted to take into account direct external
costs related to the transaction (e.g. fees of agents or
consultants, etc.). The initial carrying value is then adjusted
to take into account capital repayments, devaluations and
amortization of the difference between the reimbursement value
and the initial carrying value. Amortization is carried out on
the basis of the effective interest rate of return represented by
the rate that equalizes, at the moment of the initial
revaluation, the current value of expected cash flows to the
initial carrying value (so-called "amortized cost
method"). Receivables for finance leases are recognized at
an amount equal to the present value of the lease payments and
the purchase option price or any residual value; the amount is
discounted at the interest rate implicit in the lease.
Any impairment is recognized by comparing the carrying value with
the present value of the expected cash flows discounted at the
effective interest rate as defined at initial recognition, or at
the moment of its updating to reflect re-pricings contractually
established. Receivables and financial assets to be held to
maturity are recognized net of the allowance for impairment
losses; when the impairment loss is definite the allowance for
impairment losses is reversed for excess charges. Changes to the
carrying amount of receivables or financial assets in accordance
with the amortized cost method are recognized as "Financial
income (expense)".
Non-current assets held for sale
Non-current assets and current and non-current assets
included within disposal groups, whose carrying amount will be
recovered principally through a sale transaction rather than
through their continuing use, are classified as held for sale.
Non-current assets held for sale, current and non-current assets
included within disposal groups that have been classified as held
for sale and the liabilities directly associated with them are
recognized in the balance sheet separately from the entity’s
other assets and liabilities.
Non-current assets held for sale are not depreciated and they are
measured at the lower of the fair value less costs to sell or
their carrying amount.
Any difference between the carrying amount and the fair value
less costs to sell is taken to the profit or loss account as an
impairment loss; any subsequent reversal is recognized up to the
cumulative impairment losses, including those recognized prior to
qualification of the asset as held for sale.
| (9) | In the case of step acquisition of a significant influence (or joint control), the investment is recognized at the acquisition date of significant influence (joint control) at the amount deriving from the use of the equity method assuming the adoption of this method since initial acquisition; the "step-up" of the carrying amount of interests owned before the acquisition of significant influence (joint control) is taken to equity. | |
| (10) | Impairment charges recognized in an interim period are not reversed also when, considering conditions existing in a subsequent interim period, they would have been recognized in a smaller amount or would not have been recognized. |
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Financial liabilities
Debt is carried at amortized cost (see item
"Financial fixed assets" above).
Provisions for contingencies
Provisions for contingencies are liabilities for risks and
charges of a definite nature and whose existence is certain or
probable but for which at year-end the timing or amount of future
expenditure is uncertain. Provisions are recognized when:
(i) there is a current obligation (legal or constructive),
as a result of a past event; (ii) it is probable that the
settlement of that obligation will result in an outflow of
resources embodying economic benefits; and (iii) the amount of
the obligation can be reliably estimated. The amount recognized
as a provision is the best estimate of the expenditure required
to settle the present obligation at the balance sheet date or to
transfer it to third parties at that time. The amount recognized
for onerous contracts is the lower of the cost necessary to
fulfill the obligations, net of expected economic benefits
deriving from the contracts, and any indemnity or penalty arising
from failure to fulfill these obligations. If the effect of the
time value is material, and the payment date of the obligations
can be reasonably estimated, provisions to be accrued are the
present value of the expenditures expected to be required to
settle the obligation at a discount rate that reflects the
company’s average borrowing rate taking into account the
risks associated with the obligation. The increase in the
provision due to the passage of time is recognized as
"Financial income (expense)". When the liability
regards a tangible asset (e.g. site restoration and abandonment),
the provision is stated with a corresponding entry to the asset
to which it refers. Charges to the profit and loss account are
made with the amortization process. Costs that the company
expects to bear in order to carry out restructuring plans are
recognized when the company formally defines the plan and the
interested parties have developed the reasonable expectation that
the restructuring will happen. Provisions are periodically
updated to show the variations of estimates of costs, production
times and actuarial rates. The estimated revisions to the
provisions are recognized in the same profit and loss account
item that had previously held the provision, or, when the
liability regards tangible assets (i.e. site restoration and
abandonment) with a corresponding entry to the assets to which
they refer. In the notes to the Consolidated Financial
Statements, the following potential liabilities are described:
(i) possible, but not probable obligations deriving from past
events, whose existence will be confirmed only when one or more
future events beyond the company’s control occur and (ii)
current obligations deriving from past events whose amount cannot
be reasonably estimated or whose fulfillment will probably not
result in an outflow of resources embodying economic benefits.
Employee benefits
Post-employment benefit plans, including constructive
obligations, are classified as either defined contribution plans
or defined benefit plans depending on the economic substance of
the plan as derived from its principal terms and conditions. In
the first case, the company’s obligation, which consists of
making payments to the State or a trust or a fund, is determined
on the basis of contributions due. The liabilities related to
defined benefit plans, net of any plan assets, are determined on
the basis of actuarial assumptions and charged on an accrual
basis during the employment period required to obtain the
benefits. The valuation of the liability is made by independent
actuaries. The actuarial gains and losses of defined benefit
plans are recognized pro-rata on service, in the profit and loss
account using the corridor method, if and to the extent that net
cumulative unrecognized actuarial gains and losses at the end of
the previous reporting period exceed the greater of 10% of the
present value of the defined benefit obligation or 10% of the
fair value of the plan assets, over the expected average
remaining working lives of the employees participating in the
plan. Such actuarial gains and losses derive from changes in the
actuarial assumptions used or from a change in the conditions of
the plan. Obligations for long-term benefits are determined by
adopting actuarial assumptions. The effect of changes in
actuarial assumptions or a change in the characteristics of the
benefit are taken to the profit or loss in their entirety.
Treasury shares
Treasury shares are recorded at cost and as a reduction of
equity. Gains resulting from subsequent sales are recorded in
equity.
Revenues and costs
Revenues associated with sales of products and services
are recorded when significant risks and rewards of ownership pass
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to the customer or when the transaction can be considered
settled and the associated revenue can be reliably measured. In
particular, revenues are recognized for the sale of:
- crude oil, generally upon shipment;
- natural gas, upon delivery to the customer;
- petroleum products sold to retail distribution networks,
generally upon delivery to the service stations, whereas all
other sales of petroleum products are generally recognized upon
shipment;
- chemical products and other products, generally upon shipment.
Revenues are recognized upon shipment when, at that date,
significant risks are transferred to the buyer. Revenues from
crude oil and natural gas production from properties in which Eni
has an interest together with other producers are recognized on
the basis of Eni’s net working interest in those properties
(entitlement method). Differences between Eni’s net working
interest volume and actual production volumes are recognized at
current prices at year end. Income related to partially rendered
services is recognized in the measurement of accrued income if
the stage of completion can be reliably determined and there is
no significant uncertainty as to the collectability of the amount
and the related costs. When the outcome of the transaction cannot
be estimated reliably, revenue is recognized only to the extent
of the expenses recognized that are recoverable. Revenues accrued
during the year related to construction contracts are recognized
on the basis of contractual revenues with reference to the stage
of completion of a contract measured on the cost-to-cost basis.
Requests of additional revenues, deriving from a change in the
scope of work, are included in the total amount of revenues when
it is probable that the customer will approve the variation and
the related amount. Claims deriving from additional costs
incurred for reasons attributable to the client are included in
the total amount of revenues when it is probable that the
counterparty will accept them. Revenues are stated net of
returns, discounts, rebates, bonuses and direct taxation.
Award credits, related to customer loyalty programs, are
recognized as a separate component of the sales transaction which
grant the right to customers. Therefore, the portion of revenues
related to the fair value of award credits granted is recognized
as an offset to the item "Other liabilities". The
liability is charged to the profit and loss account in the period
in which the award credits are redeemed by customers or the
related right is lost.
The exchange of goods and services of a similar nature and value
do not give rise to revenues and costs as they do not represent
sale transactions. Costs are recorded when the related goods and
services are sold, consumed or allocated, or when their future
benefits cannot be determined.
Costs associated with emission quotas, determined on the basis of
the average prices of the main European markets at period end,
are reported in relation to the amount of the carbon dioxide
emissions that exceed the amount assigned. Costs related to the
purchase of the emission rights are taken to intangible assets
net of any negative difference between the amount of emissions
and the quotas assigned. Revenues related to emission quotas are
recognized when they are realized after the related sale. In case
of sale, if applicable, the acquired emission rights should be
considered as the first to be sold.
Operating lease payments are recognized in the profit and loss
account over the length of the contract. Labor costs include
stock options granted to managers, consistent with their actual
remunerative nature. The instruments granted are recorded at fair
value on the vesting date and are not subject to subsequent
adjustments; the current portion is calculated pro-rata over the
vesting period11. The fair value of stock
options is determined using valuation techniques which consider
conditions related to the exercise of options, current share
prices, expected volatility and the risk-free interest rate. The
fair value of stock options is recorded as a charge to
"Other reserves". The costs for the acquisition of new
knowledge or discoveries, the study of products or alternative
processes, new techniques or models, the planning and
construction of prototypes or, in any case, costs incurred for
other scientific research activities or technological
development, which cannot be capitalized, are included in the
profit and loss account.
Exchange rate differences
Revenues and costs associated with transactions in
currencies other than the functional currency are translated into
the functional currency by applying the exchange rate at the date
of the transaction.
Monetary assets and liabilities denominated in currencies other
than functional currency are converted by applying the year end
exchange rate and the effect is stated in the profit and loss
account. Non-monetary assets and liabilities denominated in
currencies other than the functional currency valued at cost are
translated at the initial exchange rate. Non-monetary assets that
are re-measured to fair value, recoverable amount or realizable
value, are translated at the exchange rate applicable at the date
of re-measurement.
| (11) | The period between the date of the award and the date starting from the option can be exercised. |
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Dividends
Dividends are recognized at the date of the general
shareholders’ meeting in which they were declared, except
when the sale of shares before the ex-dividend date is certain.
Income taxes
Current income taxes are determined on the basis of
estimated taxable income. The estimated liability is included in
"Income taxes payables". Current income tax assets and
liabilities are measured at the amount expected to be paid to
(recovered from) the tax authorities, using tax laws that have
been enacted or substantively enacted as of the balance sheet
date and the tax rates estimated on annual basis. Deferred tax
assets or liabilities are provided on temporary differences
arising between the carrying amounts of the assets and
liabilities and their tax bases, based on tax rates (tax laws)
that have been enacted or substantively enacted for future years.
Deferred tax assets are recognized when their realization is
considered probable. Deferred tax assets and liabilities are
included in non-current assets and liabilities and are offset at
a single entity level if related to offsettable taxes. The
balance of the offset, if positive, is recognized in the item
"Deferred tax assets"; if negative, in the item
"Deferred tax liabilities". When the results of
transactions are recognized directly in shareholders’
equity, current taxes, deferred tax assets and liabilities are
also charged to the shareholders’ equity.
Derivatives
Derivatives, including embedded derivatives which are
separated from the host contract, are assets and liabilities
recognized at their fair value which is estimated by using the
criteria described in the section "Current assets".
When there is objective evidence that an impairment loss has
occurred (see "Current assets" paragraph) derivative
are recognized net the allowance for impairment losses.
Derivatives are classified as hedging instruments when the
relationship between the derivative and the hedged item is
formally documented and the hedge is highly effectiveness and
regularly reviewed. When hedging instruments cover the risk of
variation of the fair value of the hedged item (fair value hedge,
e.g. hedging of the variability on the fair value of fixed
interest rate assets/liabilities) the derivatives are stated at
fair value and the effects charged to the profit and loss
account. Hedged items are consistently adjusted to reflect the
variability of fair value associated with the hedged risk. When
derivatives hedge the cash flow variation risk of the hedged item
(cash flow hedge, e.g. hedging the variability on the cash flows
of assets/liabilities as a result of the fluctuations of exchange
rate), changes in the fair value of the derivatives, considered
effective are initially stated in equity and then recognized in
the profit and loss account consistent with the economic effects
produced by the hedged transaction. The changes in the fair value
of derivatives that do not meet the conditions required to
qualify for hedge accounting are reported in the profit and loss
account. Economic effects of transactions, which relate to
purchase or sales contracts for commodities entered into to meet
the entity’s normal operating requirements and for which the
settlement is provided with the delivery of the goods, are
recognized on an accrual basis (the so-called normal sale and
normal purchase exemption or own use exemption).
Financial statements12
Assets and liabilities on the balance sheet are classified
as current and non-current. Items of the profit and loss account
are presented by nature13.
| (12) | The financial statements are the same reported in the Annual Report 2008 with the exception of: (i) the adjustments related the application, starting from 2009, of the revised IAS 1 "Presentation of Financial Statements" as integrated by the document "Improvements to IFRSs" issued in May 2008, which requires the preparation of the statement of comprehensive income and the recognition of the non-hedging derivatives in the "current" and "non-current" section of the balance sheet. The classification of non-hedging derivatives determined the following effects: (a) the reclassification from current assets to non-current assets of euro 290 million and euro 480 million at January 1, 2008 and December 31, 2008 respectively; (b) the reclassification from current liabilities to non-current liabilities of euro 86 million and euro 564 million at January 1, 2008 and December 31, 2008 respectively; (ii) the recognition of the changes in the fair value of the non-hedging derivatives on commodities, also including the effects of settlements, in the new profit and loss account item "Other operating income (expense)". Comparative period figures have been consistently restated; (iii) the final allocation of the acquisition costs of Distrigas NV, Eni Hewett Ltd, First Calgary Petroleums Ltd and Hindustan Oil Exploration Co Ltd related to business combinations occurred in 2008; carrying amounts of certain assets and liabilities acquired have been restated starting from the acquisition date. The final allocations are indicated in Note 27 – Other information. | |
| (13) | Further information on financial instruments as classified in accordance with IFRS is provided in Note 28 – Guarantees, commitments and risks - Other information about financial instruments. |
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The statement of comprehensive income shows net profit
integrated with income and expenses that are recognized directly
in equity according to IFRS.
The statement of changes in shareholders’ equity includes
profit and loss for the year, transactions with shareholders and
other changes in shareholders’ equity.
The statement of cash flows is presented using the indirect
method, whereby net profit is adjusted for the effects of
non-cash transactions.
Changes in accounting principles
Starting from January 1, 2009, following the adoption of the
provisions of IFRIC 13 "Customer Loyalty Programmes",
award credits granted are recognized as a separate component of
the sales transaction which granted the right to customers. As a
result, part of the consideration received from the sale
transaction is allocated to award credits granted, on the basis
of their fair value, as an offset to the balance sheet item
"Other liabilities"; such liability is recorded to the
profit and loss account (as a revenue) in the year when award
credits are redeemed by customers or rights are cancelled.
The application of IFRIC 13 determined the following adjustments
in the 2007 and 2008 profit and loss account and in the balance
sheet as of January 1, 2008 and December 31, 2008: (i) a decrease
of euro 52 million and of euro 66 million in the "Net sales
from operations" in the 2007 and 2008 profit and loss
account, respectively; (ii) an increase of euro 6 million and
euro 8 million in the "Other income and revenues" in
the 2007 and 2008 profit and loss account, respectively; (iii) a
decrease of euro 46 million and euro 58 million in the line item
"Purchases, services and other" in the 2007 and 2008
profit and loss account, respectively; (iv) the reclassification
of euro 53 million and euro 66 million from "Provisions for
contingencies" to "Other current liabilities" in
the balance sheet as of January 1, 2008 and December 31, 2008,
respectively.
Segment reporting is prepared according to the provisions of IFRS
8 "Operating Segments", effective from January 1, 2009.
The new standard requires segment reporting to be prepared
according to the requirements used for the preparation of
internal reports for the entity’s chief operating decision
maker. Therefore, the identification of operating segments and
the related reporting are prepared on the basis of internal
reports that are regularly reviewed by the entity’s chief
operating decision maker in order to allocate resources to the
segment and to assess its performance. The adoption of the
provisions of IFRS 8 "Operating segments" has not
modified the reporting segments14.
Use of accounting estimates
The company’s Consolidated Financial Statements are prepared in accordance with IFRS. These require the use of estimates and assumptions that affect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto, including discussion and disclosure of contingent liabilities. Estimates made are based on complex or subjective judgments and past experience of other assumptions deemed reasonable in consideration of the information available at the time. The accounting policies and areas that require the most significant judgments and estimates to be used in the preparation of the Consolidated Financial Statements are in relation to the accounting for oil and natural gas activities, specifically in the determination of proved and proved developed reserves, impairment of fixed assets, intangible assets and goodwill, asset retirement obligations, business combinations, pensions and other post-retirement benefits, recognition of environmental liabilities and recognition of revenues in the oilfield services construction and engineering businesses. Although the company uses its best estimates and judgments, actual results could differ from the estimates and assumptions used. A summary of significant estimates follows.
| (14) | Moreover, starting from 2009, the provisions of the revised IAS 23 "Borrowing Costs" are effective. The revised standard requires the capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset that takes a substantial period of time to get ready for use or sale. As a result, the main change from the previous version is the removal of the option of immediately recognizing as an expense such borrowing costs. The change does not affect Eni’s financial statements as it already capitalizes such costs. |
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Oil and gas activities
Engineering estimates of the Company’s oil and gas
reserves are inherently uncertain. Proved reserves are the
estimated volumes of crude oil, natural gas and gas condensates,
liquids and associated substances which geological and
engineering data demonstrate that can be economically producible
with reasonable certainty from known reservoirs under existing
economic conditions and operating methods. Although there are
authoritative guidelines regarding the engineering criteria that
must be met before estimated oil and gas reserves can be
designated as "proved", the accuracy of any reserve
estimate is a function of the quality of available data,
engineering and geological interpretation and judgment. Field
reserves will only be categorized as proved when all the criteria
for attribution of proved status have been met. At this stage,
all booked reserves will be classified as proved undeveloped.
Volumes will subsequently be reclassified from proved undeveloped
to proved developed as a consequence of development activity. The
first proved developed bookings will occur at the point of first
oil or gas production. Major development projects typically take
one to four years from the time of initial booking to the start
of production. Eni reassesses its estimate of proved reserves
periodically. The estimated proved reserves of oil and natural
gas may be subject to future revision and upward and downward
revision may be made to the initial booking of reserves due to
production, reservoir performance, commercial factors,
acquisition and divestment activity and additional reservoir
development activity. In particular, changes in oil and natural
gas prices could impact the amount of Eni’s proved reserves
in regards to the initial estimate and, in the case of
Production-sharing agreements and buy-back contracts, the share
of production and reserves to which Eni is entitled. Accordingly,
the estimated reserves could be materially different from the
quantities of oil and natural gas that ultimately will be
recovered. Oil and natural gas reserves have a direct impact on
certain amounts reported in the Consolidated Financial
Statements. Estimated proved reserves are used in determining
depreciation and depletion expenses and impairment expense.
Depreciation rates on oil and gas assets using the UOP basis are
determined from the ratio between the amount of hydrocarbons
extracted in the quarter and proved developed reserves existing
at the end of the quarter increased by the amounts extracted
during the quarter. Assuming all other variables are held
constant, an increase in estimated proved developed reserves for
each field decreases depreciation, depletion and amortization
expense. Conversely, a decrease in estimated proved developed
reserves increases depreciation, depletion and amortization
expense. In addition, estimated proved reserves are used to
calculate future cash flows from oil and gas properties, which
serve as an indicator in determining whether or not property
impairment is to be carried out. The larger the volume of
estimated reserves, the lower the likelihood of asset impairment.
Impairment of assets
Eni assesses its tangible assets and intangible assets,
including goodwill, for possible impairment if there are events
or changes in circumstances that indicate the carrying values of
the assets are not recoverable. Such indicators include changes
in the Group’s business plans, changes in commodity prices
leading to unprofitable performance, a reduced utilization of the
plants and, for oil and gas properties, significant downward
revisions of estimated proved reserve quantities or significant
increase of the estimated development costs. Determination as to
whether and how much an asset is impaired involves management
estimates on highly uncertain matters such as future commodity
prices, the effects of inflation and technology improvements on
operating expenses, production profiles and the outlook for
global or regional market supply and demand conditions for crude
oil, natural gas, commodity chemicals and refined products.
Similar remarks are valid for the physical recoverability of
assets recognized in the balance sheet (deferred cost - see also
item "Current assets") related to natural gas volumes
not collected under long term purchase contracts with take-or-pay
clauses.
The amount of an impairment loss is determined by comparing the
book value of an asset with its recoverable amount. The
recoverable amount is the greater of fair value net of disposal
cost or the value in use. The estimated value in use is based on
the present values of expected future cash flows net of disposal
costs. The expected future cash flows used for impairment
analyses are based on judgmental assessments of future production
volumes, prices and costs, considering available information at
the date of review and are discounted by using a rate related to
the activity involved.
For oil and natural gas properties, the expected future cash
flows are estimated principally based on developed and
non-developed proved reserves including, among other elements,
production taxes and the costs to be incurred for the reserves
yet to be developed. The estimated future level of production is
based on assumptions concerning: future commodity prices, lifting
and development costs, field decline rates, market demand and
supply, economic regulatory climates and other factors. Oil,
natural gas and petroleum product prices used to quantify the
expected future cash flows are estimated based on forward prices
prevailing in the marketplace for the first four years and
management’s long-term planning assumptions thereafter. The
estimate of the future amount of production is based on
assumptions related to the commodity future prices, lifting and
development costs, market demand and other factors. The discount
rate reflects the current market valuation of the time value of
money and of the specific risks of the asset not reflected in the
estimate of the future cash flows. Goodwill
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and other intangible assets with an indefinite useful life are not subject to amortization. The company tests such assets at the cash-generating unit level for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. In particular, goodwill impairment is based on the determination of the fair value of each cash-generating unit to which goodwill can be attributed on a reasonable and consistent basis. A cash generating unit is the smallest aggregate on which the company, directly or indirectly, evaluates the return on the capital expenditure. If the recoverable amount of a cash generating unit is lower than the carrying amount, goodwill attributed to that cash generating unit is impaired up to that difference; if the carrying amount of goodwill is less than the amount of impairment, assets of the cash generating unit are impaired on a pro-rata basis for the residual difference.
Asset retirement obligations
Obligations to remove tangible equipment and restore land or
seabed require significant estimates in calculating the amount of
the obligation and determining the amount required to be recorded
presently in the Consolidated Financial Statements. Estimating
future asset retirement obligations is complex. It requires
management to make estimates and judgments with respect to
removal obligations that will come to term many years into the
future and contracts and regulations are often unclear as to what
constitutes removal. In addition, the ultimate financial impact
of environmental laws and regulations is not always clearly known
as asset removal technologies and costs constantly evolve in the
countries where Eni operates, as do political, environmental,
safety and public expectations. The subjectivity of these
estimates is also increased by the accounting method used that
requires entities to record the fair value of a liability for an
asset retirement obligation in the period when it is incurred
(typically, at the time the asset is installed at the production
location). When liabilities are initially recorded, the related
fixed assets are increased by an equal corresponding amount. The
liabilities are increased with the passage of time (i.e. interest
accretion) and any change in the estimates following the
modification of future cash flows and discount rate adopted. The
recognized asset retirement obligations are based on future
retirement cost estimates and incorporate many assumptions such
as: expected recoverable quantities of crude oil and natural gas,
abandonment time, future inflation rates and the risk-free rate
of interest adjusted for the Company’s credit costs.
Business combinations
Accounting for business combinations requires the allocation
of the purchase price to the various assets and liabilities of
the acquired business at their respective fair values. Any
positive residual difference is recognized as
"Goodwill". Negative residual differences are credited
to the profit and loss account. Management uses all available
information to make these fair value determinations and, for
major business acquisitions, typically engages an independent
appraisal firm to assist in the fair value determination of the
acquired assets and liabilities.
Environmental liabilities
Together with other companies in the industries in which it
operates, Eni is subject to numerous EU, national, regional and
local environmental laws and regulations concerning its oil and
gas operations, production and other activities. They include
legislations that implement international conventions or
protocols. Environmental costs are recognized when it becomes
probable that a liability has been incurred and the amount can be
reasonably estimated. Management, considering the actions already
taken, insurance policies obtained to cover environmental risks
and provision for risks accrued, does not expect any material
adverse effect on Eni’s consolidated results of operations
and financial position as a result of such laws and regulations.
However, there can be no assurance that there will not be a
material adverse impact on Eni’s consolidated results of
operations and financial position due to: (i) the possibility of
an unknown contamination; (ii) the results of the ongoing surveys
and other possible effects of statements required by Decree No.
471/1999 of the Ministry of Environment concerning the
remediation of contaminated sites; (iii) the possible effects of
future environmental legislations and rules; (iv) the effects of
possible technological changes relating to future remediation;
and (v) the possibility of litigation and the difficulty of
determining Eni’s liability, if any, against other
potentially responsible parties with respect to such litigations
and the possible insurance recoveries.
Employee benefits
Defined benefit plans and other long-term benefits are
evaluated with reference to uncertain events and based upon
actuarial assumptions including among others discount rates,
expected rates of return on plan assets, expected rates of salary
increases, medical cost trends, estimated retirement dates and
mortality rates. The significant assumptions used to account for
pensions and other post-retirement benefits are determined as
follows: (i) discount and inflation rates reflect the rates at
which benefits could be effectively settled, taking into account
the duration of the obligation. Indicators used in selecting the
discount rate include rates of annuity contracts and rates of
return on high quality fixed-income investments. The inflation
rates reflect
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market conditions observed country by country; (ii) the future salary levels of the individual employees are determined including an estimate of future changes attributed to general price levels (consistent with inflation rate assumptions), productivity, seniority and promotion; (iii) healthcare cost trend assumptions reflect an estimate of the actual future changes in the cost of the healthcare related benefits provided to the plan participants and are based on past and current healthcare cost trends including healthcare inflation, changes in healthcare utilization and changes in health status of the participants; (iv) demographic assumptions such as mortality, disability and turnover reflect the best estimate of these future events for individual employees involved, based principally on available actuarial data; and (v) determination of the expected rates of return on assets is made through compound averaging. For each plan, the distribution of investments among bonds, equities and cash and their specific average expected rate of return is taken into account. Differences between expected and actual costs and between the expected return and the actual return on plan assets routinely occur and are called actuarial gains and losses. Eni applies the corridor method to amortize its actuarial losses and gains. This method amortizes on a pro-rata basis the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting period that exceed 10% of the greater of: (i) the present value of the defined benefit obligation; and (ii) the fair value of plan assets, over the average expected remaining working lives of the employees participating in the plan. Additionally, obligations for other long-term benefits are determined by adopting actuarial assumptions. The effect of changes in actuarial assumptions or a change in the characteristics of the benefit are taken to the profit or loss in their entirety.
Contingencies
In addition to accruing the estimated costs for environmental
liabilities, asset retirement obligation and employee benefits,
Eni accrues for all contingencies that are both probable and
estimable. These other contingencies are primarily related to
litigation and tax issues. Determining the appropriate amount to
accrue is a complex estimation process that includes subjective
judgments.
Revenue recognition in the Engineering & Construction
segment
Revenue recognition in the Engineering & Construction
segment is based on the stage of completion of a contract as
measured on the cost-to-cost basis applied to contractual
revenues. Use of the stage of completion method requires
estimates of future gross profit on a contract by contract basis.
The future gross profit represents the profit remaining after
deducting costs attributable to the contract from revenues
provided for in the contract. The estimate of future gross profit
is based on a complex estimation process that includes
identification of risks related to the geographical region,
market conditions in that region and any assessment that is
necessary to estimate with sufficient precision the total future
costs as well as the expected timetable. Requests of additional
income, deriving from a change in the scope of work, are included
in the total amount of revenues when it is probable that the
customer will approve the variation and the related amount.
Claims deriving from additional costs incurred for reasons
attributable to the client are included in the total amount of
revenues when it is probable that the counterparty will accept
them.
Recent accounting principles
Accounting standards and interpretations issued by IASB
/IFRIC and endorsed by EU
By Commission Regulation No. 495/2009 and 494/2009 of June 3,
2009 the revised IFRS 3 "Business Combinations" and an
amended version of IAS 27 "Consolidated and Separate
Financial Statements" have been endorsed. The revisions to
IFRS 3 require, interalia, (i) the acquisition-related costs to
be accounted for separately from the business combination and
then recognized as expenses; (ii) the recognition to the profit
and loss account of any change to contingent consideration; and
(iii) the choice of the full goodwill method which means to
account for the full value of the goodwill of the business
combination including the share attributable to non-controlling
interests. In the case of step acquisitions, the revisions also
require the recognition in the profit and loss account the
difference between the fair value at the acquisition date of the
net assets previously held and their carrying amounts. The
amendments of IAS 27 require, interalia, that acquisitions or
disposals of ownership interests in a subsidiary that do not
result in the acquisition (loss) of control, shall be accounted
for as equity transactions. By contrast, disposal of any
interests that the parent retains in a former subsidiary, jointly
controlled entity or associate may result in a loss of control,
joint control and significant influence. In this case, at the
date when control (joint control or significant influence) is
lost, the remaining investment retained is recognized at its fair
value with gains or losses arising from the difference between
the fair value and carrying amount of the held investment
recorded in the profit or loss account. The revised Standards
shall be applied for annual periods beginning on or after July 1,
2009 (for Eni: 2010 financial statements).
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By Commission Regulation No. 1293/2009 of December 23, 2009, the amendment to IAS 32 "Classification of rights issues" has been endorsed. The amendment clarifies how to classify in the issuer’s financial statements those financial instruments which grant to shareholders the right to acquire equity instruments of the issuers for a price denominated in a currency other than issuer’s functional currency. If such instruments are issued pro rata to the issuer’s existing shareholders for a fixed amount of cash, they should be classified as equity even if their exercise price is denominated in a currency other than the issuer’s functional currency. The amendment to IAS 32 shall be applied for annual period beginning on or after February 1, 2010 (for Eni: 2011 financial statements).
By Commission Regulation No. 254/2009 of March 25, 2009 IFRIC 12 "Service Concession Arrangements" (hereinafter IFRIC 12) has been endorsed. The interpretation provides guidance on the accounting by operators for public-to-private service concession arrangements. An arrangement within the scope of this interpretation involves for a specified period of time an operator constructing, upgrading, operating and maintaining the infrastructure used to provide the public service. In particular when the grantor controls or regulates what services the operator must provide with the infrastructure, at what price and any significant residual interest in the infrastructure at the end of the term of the arrangement, the operator shall recognize the concession as an intangible asset or as a financial asset on the basis of the agreements. According to the Commission Regulation, this interpretation shall be applied for annual periods beginning on or after March 29, 2009 (for Eni: 2010 financial statements)15.
By Commission Regulation No. 1142/2009 of November 26, 2009 IFRIC 17 "Distributions of Non-cash Assets to Owners" (hereinafter IFRIC 17) has been endorsed. The interpretation provides clarification and guidance on the accounting treatment of distributions of non-cash assets to owners of an entity, or distributions that give owners a choice of receiving either non-cash assets or a cash alternative. In particular, the interpretation requires, interalia, that the distribution is measured at the fair value of the assets to be distributed. The liability to pay a dividend shall be recognized when the dividend is appropriately authorized; the liability and the related adjustments are recognized as an offset to equity. When an entity settles the dividend payable, it shall recognize the difference, if any, between the carrying amount of the non-cash assets distributed and the fair value of the dividend payable in the profit or loss account. According to the Commission Regulation, this interpretation shall be applied for annual periods beginning on or after October 31, 2009 (for Eni: 2010 financial statements)16.
By Commission Regulation No. 1164/2009 of November 27, 2009
IFRIC 18 "Transfers of Assets from Customers"
(hereinafter IFRIC 18) has been endorsed. The interpretation
provides clarification and guidance on the accounting for
transfers of assets to be used to connect customers to a network
to supply goods or services.
The interpretation is also applied in the cases in which the
entity receives cash from a customer that must be used only to
connect the customer to a network. When the definition of an
asset set out in the Framework is met, the asset received
is recognized at its fair value; when the agreement states the
supply of more than one service (for example, connection to a
network and supply of goods) the entity receiving the transfer
shall assess which service is provided against the transferred
asset and recognizes, consistently, a revenue when the connection
is made or over a period no longer than the length of the supply
and the useful life of the asset. IFRIC 18 provisions do not
apply to assets within the scope of IFRIC 12. According to the
Commission Regulation, this interpretation shall be applied for
annual periods beginning after October 31, 2009 (for Eni: 2010
financial statements)17.
| (15) | According to IFRIC 12 provisions, the interpretation shall be applied for annual periods beginning on or after January 1, 2008. Therefore, IFRIC 12 had to be considered, starting from 2008, for the preparation of Annual Report on Form 20-F. In particular starting from 2007 year Eni applies the SEC provisions allowing elimination of the U.S. GAAP reconciliation of the net income and equity for foreign private issuers that prepare their financial statements adopting the provisions of the international accounting standards (IFRS) issued by the IASB (even if not endorsed yet or, even if endorsed, they have a different effective date). The IFRIC 12 provisions regard some Group companies of the secondary gas distribution segment; the effects of the application of the interpretation regard the different classification of the carrying amount of the distribution networks from the line item "Property, plant and equipment" to assets under concession arrangements. | |
| (16) | According to IFRIC 17 provisions, the interpretation shall be applied for annual periods beginning on or after July 1, 2009. | |
| (17) | According to IFRIC 18 provisions, the interpretation shall be applied prospectively to transfers of assets from customers received on or after July 1, 2009. Therefore, similarly to IFRIC 12, IFRIC 18 provisions have to be considered for the preparation of Annual Report on Form 20-F. |
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Accounting standards and interpretations issued by
IASB/IFRIC and not yet been endorsed by EU
On November 4, 2009, IASB issued a new version of IAS 24
"Related Party Disclosures", which: (i) enhances the
definition of a related party requiring new cases; (ii) for
transactions between entities related to the same Government,
allows to limit quantitative disclosures to significant
transactions. The revised standard shall be applied for annual
periods beginning on or after January 1, 2011.
On November 12, 2009 IASB issued IFRS 9 "Financial Instruments" which changes recognition and measurement of financial assets and their classification in the financial statements. In particular, new provisions require, interalia, a classification and measurement model of financial assets based exclusively on the following categories: (i) financial assets measured at amortized cost; (ii) financial assets measured at fair value. New provisions also require that investments in equity instruments, other than subsidiaries, jointly controlled entities or associates, shall be measured at fair value with effects taken to the profit and loss account. If these investments are not held for trading purposes, subsequent changes in the fair value can be recognized in other comprehensive income, even if dividends are taken to the profit and loss account. Amounts taken to other comprehensive income shall not be subsequently transferred to the profit or loss account even at disposal. IFRS 9 provisions shall be applied for annual periods beginning on or after January 1, 2013.
On November 26, 2009 IASB issued IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments" which defines the accounting treatment to adopt when a financial liability is settled by issuing equity instruments to the creditor (debt for equity swaps). Equity instruments issued to extinguish a liability in full or in part, are measured at their fair value or, if fair value cannot be reliably measured, at the fair value of the financial liability extinguished. The difference between the carrying amount of the financial liability extinguished and the fair value of equity instrument issued shall be recognized in the profit or loss account. IFRIC 19 provisions shall be applied for annual periods beginning on or after July 1, 2010 (for Eni: 2011 financial statements).
On April 16, 2009, IASB issued the document "Improvements to IFRSs" which includes only changes to the existing standards and interpretation with a technical and editorial nature. The provisions come into effect starting from 2010.
Eni is currently reviewing these new IFRS and interpretations to determine the likely impact on the Group’s results.
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Notes to the Consolidated
Financial Statements
Current assets
1 Cash and cash equivalents
Cash and cash equivalents in the amount of euro 1,608
million (euro 1,939 million as of December 31, 2008) included
financing receivables originally due within 90 days for euro 450
million (euro 616 million as of December 31, 2008). The latter
were related to amounts on deposit with financial institutions
accessible only with a 48-hour notice.
2 Other financial assets held for trading or
available for sale
Other financial assets held for trading or available for
sale are set out below:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Investments | 2,741 | |||
| Securities held for operating purposes | ||||
| Listed Italian treasury bonds | 257 | 113 | ||
| Listed securities issued by Italian and foreign financial institutions | 45 | 171 | ||
| Non-quoted securities | 8 | |||
| 310 | 284 | |||
| Securities held for non-operating purposes | ||||
| Listed Italian treasury bonds | 109 | 49 | ||
| Listed securities issued by Italian and foreign financial institutions | 67 | 14 | ||
| Non-quoted securities | 9 | 1 | ||
| 185 | 64 | |||
| Total securities | 495 | 348 | ||
| 3,236 | 348 | |||
Equity instruments decreased by the carrying amount of the 20%
interest in OAO Gazprom Neft (euro 2,741 million), purchased by
Gazprom, following the exercising of a call option on April 7,
2009 on the basis of the existing agreements with Eni. On April
24, 2009, Eni received a payment of euro 3,070 million (U.S.
$4,062 million at the exchange rate of the date of the
transaction). Eni acquired the investment in Gazprom Neft on
April 4, 2007 through a bid on the liquidation of the second lot
of ex-Yukos assets. The strike price of the call option was equal
to the bid price (U.S. $3.7 billion) decreased by the dividends
distributed and an increase of the contractual remuneration of
9.4% on the capital employed and financing collateral expenses.
Other securities in the amount of euro 348 million (euro 495
million as of December 31, 2008) were classified as
available-for-sale securities. As of December 31, 2008 and 2009,
Eni did not own financial assets held for trading.
The effects of the valuation at fair value of securities are set below:
| (euro million) | Value at |
Changes recognized in the reserves of shareholders' equity |
Value at |
|||
| Fair value | 5 | 1 | 6 | ||||||
| Deferred tax liabilities | (1 | ) | (1 | ) | |||||
| Other reserves of shareholders' equity | 4 | 1 | 5 |
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Securities held for operating purposes in the amount of euro
284 million (euro 310 million as of December 31, 2008) were
designed to provide coverage of technical reserves for the
Group’s insurance company Eni Insurance Ltd (euro 302
million as of December 31, 2008).
The fair value of securities was determined by reference to
quoted market prices.
3 Trade and other receivables
Trade and other receivables were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Trade receivables | 16,444 | 14,916 | ||
| Financing receivables: | ||||
| - for operating purposes - short-term | 402 | 339 | ||
| - for operating purposes - current portion of long-term receivables | 85 | 113 | ||
| - for non-operating purposes | 337 | 73 | ||
| 824 | 525 | |||
| Other receivables: | ||||
| - from disposals | 149 | 82 | ||
| - other | 4,805 | 4,825 | ||
| 4,954 | 4,907 | |||
| 22,222 | 20,348 | |||
Receivables are stated net of the allowance for impairment losses in the amount of euro 1,647 million (euro 1,251 million as of December 31, 2008):
| (euro million) | Value at |
Additions |
Deductions |
Other changes |
Value at |
|||||
| Trade receivables | 747 | 260 | (15 | ) | (50 | ) | 942 | |||||
| Financing receivables | 19 | (13 | ) | 6 | ||||||||
| Other receivables | 485 | 206 | (24 | ) | 32 | 699 | ||||||
| 1,251 | 466 | (52 | ) | (18 | ) | 1,647 |
Trade receivables decreased in the amount of euro 1,528
million primarily due to the Gas & Power segment (euro 1,990
million), which was partially offset by the increase in the
Refining & Marketing segment (euro 380 million).
Trade and other receivables were as follows:
Dec. 31, 2008 |
Dec. 31, 2009 |
|||
(euro million) |
Trade receivables |
Other receivables |
Total |
Trade receivables |
Other receivables |
Total |
||||||
| Neither impaired nor past due | 12,611 | 3,395 | 16,006 | 11,557 | 3,004 | 14,561 | ||||||
| Impaired (net of the valuation allowance) | 1,242 | 88 | 1,330 | 1,037 | 58 | 1,095 | ||||||
| Not impaired and past due in the following periods: | ||||||||||||
| - within 90 days | 1,812 | 502 | 2,314 | 1,168 | 772 | 1,940 | ||||||
| - 3 to 6 months | 231 | 68 | 299 | 503 | 56 | 559 | ||||||
| - 6 to 12 months | 248 | 294 | 542 | 294 | 439 | 733 | ||||||
| - over 12 months | 300 | 607 | 907 | 357 | 578 | 935 | ||||||
| 2,591 | 1,471 | 4,062 | 2,322 | 1,845 | 4,167 | |||||||
| 16,444 | 4,954 | 21,398 | 14,916 | 4,907 | 19,823 |
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Trade receivables not impaired and past due primarily referred
to high-credit-quality public administrations and other
highly-reliable counterparties for oil, natural gas and chemical
products supplies.
Allowances for impairment losses of traded receivables in the
amount of euro 260 million (euro 251 million for the year ended
December 31, 2008) primarily referred to the Gas & Power
segment (euro 165 million).
Allowances for impairment losses of other receivables in the
amount of euro 206 million (euro 137 million for the year ended
December 31, 2008) primarily referred to the Exploration &
Production segment (euro 205 million) which primarily represents
the impairment of certain receivables associated with cost
recovery with respect to local state-owned co-venturers based on
underlying petroleum agreements and modifications of the
Company’s interest in certain joint ventures.
Trade receivables included guarantees for work in progress in the
amount of euro 168 million (euro 213 million as of December 31,
2008).
Other receivables in the amount of euro 461 million (euro 227
million as of December 31, 2008) associated with cost recovery in
the Exploration & Production segment are currently undergoing
arbitration procedure.
Receivables for financing operating activities in the amount of
euro 452 million (euro 487 million as of December 31, 2008)
included euro 245 million due from unconsolidated subsidiaries,
joint ventures and associates (euro 399 million as of December
31, 2008), euro 179 million cash deposit to provide coverage of
Eni Insurance Ltd technical reserves (euro 47 million as of
December 31, 2008) and receivables for financial leasing in the
amount of euro 19 million (the same amount as of December 31,
2008). More information about receivables for financial leasing
is included in Note 12 – Other financial assets.
Receivables for financing non-operating activities amounted to
euro 73 million (euro 337 million as of December 31, 2008) of
which euro 67 million related to deposits for the Engineering
& Construction segment. The decrease of euro 264 million is
mainly due to the release of a deposit of Eni Lasmo Plc made to
guarantee a debenture (euro 173 million) and the decrease of
deposits of Eni Insurance Ltd (euro 88 million).
Other receivables were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Accounts receivable from: | ||||
| - joint venture operators in exploration and production | 2,242 | 2,372 | ||
| - Italian government entities | 378 | 457 | ||
| - insurance companies | 146 | 194 | ||
| 2,766 | 3,023 | |||
| Prepayments for services | 857 | 860 | ||
| Receivables relating to factoring operations | 171 | 156 | ||
| Other receivables | 1,160 | 868 | ||
| 4,954 | 4,907 | |||
Receivables deriving from factoring operations in the amount
of euro 156 million (euro 171 million as of December 31, 2008)
related to Serfactoring SpA and consisted primarily of advances
for factoring operations with recourse and receivables for
factoring operations without recourse.
Receivables with related parties are described in Note 36 –
Transactions with related parties.
Because of the short-term maturity of trade receivables, the fair
value approximates their carrying amount.
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4 Inventories
Inventories were as follows:
Dec. 31, 2008 |
Dec. 31, 2009 |
|||
(euro million) |
Crude oil, gas and petroleum products |
Chemical products |
Work in progress |
Other |
Total |
Crude oil, gas and petroleum products |
Chemical products |
Work in progress |
Other |
Total |
||||||||||
| Raw and auxiliary materials and consumables | 466 | 263 | 1,155 | 1,884 | 616 | 150 | 1,363 | 2,129 | ||||||||||||
| Products being processed and semi finished products | 48 | 17 | 3 | 68 | 74 | 17 | 9 | 100 | ||||||||||||
| Work in progress | 953 | 953 | 759 | 759 | ||||||||||||||||
| Finished products and goods | 2,528 | 557 | 92 | 3,177 | 1,889 | 552 | 66 | 2,507 | ||||||||||||
| 3,042 | 837 | 953 | 1,250 | 6,082 | 2,579 | 719 | 759 | 1,438 | 5,495 |
Contract work in progress in the amount of euro 759 million (euro 953 million as of December 31, 2008) are net of prepayments in the amount of euro 13 million (euro 274 million as of December 31, 2008) which are within the limits of contractual considerations.
Inventories are stated net of the valuation allowance in the amount of euro 103 million (euro 697 million as of December 31, 2008):
| (euro million) | Value at |
Additions |
Deductions |
Other changes |
Value at |
|||||
| 697 | 36 | (550 | ) | (80 | ) | 103 |
Deductions in the amount of euro 550 million essentially
represent the Refining & Marketing (euro 336 million) and the
Petrochemical segments (euro 200 million).
5 Current tax assets
Current tax assets were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Italian subsidiaries | 53 | 570 | ||
| Foreign subsidiaries | 117 | 183 | ||
| 170 | 753 | |||
The increase in other current tax assets in the amount of euro
583 million mainly relates to receivables for interim tax
payments which exceeded the full-year tax payable (euro 430
million) made by Eni SpA.
6 Other current tax assets
Other current tax assets were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| VAT | 623 | 889 | ||
| Excise and customs duties | 167 | 119 | ||
| Other taxes and duties | 340 | 262 | ||
| 1,130 | 1,270 | |||
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7 Other current assets
Other current assets were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Fair value of non-hedging derivatives | 1,128 | 698 | ||
| Fair value of cash flow hedge derivatives | 474 | 236 | ||
| Other assets | 268 | 373 | ||
| 1,870 | 1,307 | |||
The fair value of derivative contracts which do not meet the criteria to be classified as hedges under IFRS was as follows:
Dec. 31, 2008 |
Dec. 31, 2009 |
|||
| (euro million) |
|
Fair value |
|
Purchase commitments |
|
Sale |
|
Fair value |
|
Purchase commitments |
|
Sale |
| Non-hedging derivatives on exchange rate | ||||||||||||
| Interest Currency Swap | 35 | 80 | 2 | 113 | ||||||||
| Currency swap | 201 | 2,653 | 1,701 | 64 | 1,855 | 1,117 | ||||||
| Other | 285 | 98 | 1,154 | 142 | 174 | 537 | ||||||
| 521 | 2,751 | 2,935 | 208 | 2,142 | 1,654 | |||||||
| Non-hedging derivatives on interest rate | ||||||||||||
| Interest rate swap | 2 | 300 | 1 | 133 | ||||||||
| Other | 4 | 9 | 9 | |||||||||
| 2 | 4 | 300 | 10 | 142 | ||||||||
| Non-hedging derivatives on commodities | ||||||||||||
| Over the counter | 547 | 1,063 | 1,850 | 469 | 1,383 | 1,257 | ||||||
| Other | 58 | 65 | 53 | 11 | 234 | 8 | ||||||
| 605 | 1,128 | 1,903 | 480 | 1,617 | 1,265 | |||||||
| 1,128 | 3,883 | 5,138 | 698 | 3,901 | 2,919 |
Fair value of the derivative contracts is determined using
market quotations provided by primary info-provider, or in the
absence of market information, appropriate valuation methods used
on the marketplace.
Fair values of non-hedging derivatives in the amount of euro 698
million (euro 1,128 million as of December 31, 2008) consisted of
derivative contracts that do not meet the formal criteria to be
designated as hedges under IFRS because they were entered into in
order to manage the net business exposures in foreign currency
exchange rates, interest rates and commodity prices. Therefore,
such derivatives were not related to specific trade or financing
transactions.
The decrease in the fair value of the non-hedging derivatives in
the amount of euro 430 million primarily referred to the Gas
& Power segment (euro 315 million) and Eni SpA (euro 160
million).
Fair value of the cash flow hedge derivatives in the amount of
euro 236 million referred to Distrigas NV. These derivatives were
designated to hedge surpluses or deficits of gas to achieve a
proper balance in the gas portfolio. The negative fair value for
contracts expiring in 2010 is given in Note 19 – Other
current liabilities; positive and negative fair value of
contracts expiring beyond 2010 is given in Note 14 – Other
non-current receivables and Note 24 – Other non-current
liabilities. The effects of the evaluation at fair value of cash
flow hedge derivatives are provided in Note 26 –
Shareholders’ equity and Note 30 – Operating expenses.
The nominal value of cash flow hedge derivatives represented
purchase and sale commitments in the amount of euro 25 million
and euro 603 million, respectively.
Information on the hedged risks and the hedging policies is
provided in Note 28 – Guarantees, commitments and risks.
Other assets amounted to euro 373 million (euro 268 million as of
December 31, 2008) and included prepayments and accrued income
for euro 104 million (euro 63 million as of December 31, 2008),
rentals for euro 35 million (euro 31 million as of December 31,
2008) and insurance premiums for euro 18 million (euro 11 million
as of December 31, 2008).
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Non-current assets
8 Property, plant and equipment
Analysis of tangible assets is set out below:
| (euro million) | Net value at the beginning of the year | Investments | Depreciation | Impairments | Changes in the scope of consolidation | Currency translation differences | Other changes | Net value at the end of the year | Gross value at the end of the year | Provisions for amortization and impairments | ||||||||||
| Dec. 31, 2008 | ||||||||||||||||||||||||||||||
| Land | 598 | 8 | (7 | ) | 27 | 626 | 656 | 30 | ||||||||||||||||||||||
| Buildings | 1,376 | 102 | (106 | ) | (29 | ) | (122 | ) | 7 | (342 | ) | 886 | 3,125 | 2,239 | ||||||||||||||||
| Plant and machinery | 35,880 | 3,590 | (5,737 | ) | (652 | ) | 1,301 | 112 | 4,548 | 39,042 | 91,864 | 52,822 | ||||||||||||||||||
| Industrial and commercial equipment | 550 | 228 | (177 | ) | (3 | ) | 1 | 227 | 826 | 2,203 | 1,377 | |||||||||||||||||||
| Other assets | 341 | 124 | (83 | ) | (6 | ) | (13 | ) | 5 | 9 | 377 | 1,563 | 1,186 | |||||||||||||||||
| Tangible assets in progress and advances | 11,392 | 8,260 | (653 | ) | 2,442 | 408 | (4,351 | ) | 17,498 | 18,716 | 1,218 | |||||||||||||||||||
| 50,137 | 12,312 | (6,103 | ) | (1,343 | ) | 3,601 | 533 | 118 | 59,255 | 118,127 | 58,872 | |||||||||||||||||||
| Dec. 31, 2009 | ||||||||||||||||||||||||||||||
| Land | 626 | 10 | 2 | (3 | ) | (9 | ) | 626 | 654 | 28 | ||||||||||||||||||||
| Buildings | 886 | 36 | (100 | ) | (37 | ) | 25 | (34 | ) | 46 | 822 | 3,129 | 2,307 | |||||||||||||||||
| Plant and machinery | 39,042 | 3,599 | (6,370 | ) | (496 | ) | 3 | (176 | ) | 7,238 | 42,840 | 101,538 | 58,698 | |||||||||||||||||
| Industrial and commercial equipment | 826 | 214 | (179 | ) | (2 | ) | 16 | (17 | ) | 228 | 1,086 | 2,482 | 1,396 | |||||||||||||||||
| Other assets | 377 | 152 | (130 | ) | (4 | ) | (8 | ) | 156 | 543 | 1,920 | 1,377 | ||||||||||||||||||
| Tangible assets in progress and advances | 17,498 | 8,289 | (451 | ) | 2 | (273 | ) | (7,805 | ) | 17,260 | 18,801 | 1,541 | ||||||||||||||||||
| 59,255 | 12,300 | (6,779 | ) | (990 | ) | 48 | (511 | ) | (146 | ) | 63,177 | 128,524 | 65,347 |
Capital expenditures in the amount of euro 12,300 million
(euro 12,312 million for the year ended December 31, 2008)
essentially related to the Exploration & Production segment
(euro 8,196 million), the Gas & Power segment (euro 1,622
million), the Engineering & Construction segment (euro 1,615
million), and the Refining & Marketing segment (euro 626
million). Capital expenditures included capitalized finance
expenses of euro 222 million (euro 236 million for the year ended
December 31, 2008) essentially related to the Exploration &
Production segment (euro 77 million), the Engineering &
Construction segment (euro 76 million), the Refining &
Marketing segment (euro 35 million) and the Gas & Power
segment (euro 32 million). The interest rate used for the
capitalization of finance expense ranged between 1.9% to 3.7%
(3.5% and 5.1% for the year ended December 31, 2008).
The depreciation rates used were as follows:
| (%) | |||||||||
| Buildings | 2 |
- |
10 |
||||||
| Plant and machinery | 2 |
- |
10 |
||||||
| Industrial and commercial equipment | 4 |
- |
33 |
||||||
| Other assets | 6 |
- |
33 |
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Impairments in the amount of euro 990 million (euro 1,343 million as of December 31, 2008) and the associated tax effect by segment is provided below:
| (euro million) | 2008 |
2009 |
||
| Impairment | ||||
| Exploration & Production | 765 | 576 | ||
| Refining & Marketing | 292 | 287 | ||
| Petrochemicals | 279 | 121 | ||
| Other segments | 7 | 6 | ||
| 1,343 | 990 | |||
| Tax effect | ||||
| Exploration & Production | 213 | 197 | ||
| Refining & Marketing | 108 | 108 | ||
| Petrochemicals | 88 | 33 | ||
| Other segments | 2 | 2 | ||
| 411 | 340 | |||
| Impairment net of the relevant tax effect | ||||
| Exploration & Production | 552 | 379 | ||
| Refining & Marketing | 184 | 179 | ||
| Petrochemicals | 191 | 88 | ||
| Other segments | 5 | 4 | ||
| 932 | 650 | |||
In assessing whether an impairment is required, the carrying
value of an asset is compared with its recoverable amount. The
recoverable amount is the higher of the asset’s fair value
less costs to sell or value-in-use. Given the nature of
Eni’s activities, information on the fair value of an asset
is usually difficult to obtain unless negotiations with potential
purchasers are taking place. Eni assesses individual assets or
groups of assets (Cash Generating Units - CGUs) which represent
the lowest level at which there are identifiable cash flows that
are largely independent of the cash flows of other groups of
assets. In particular, the CGUs consist of: (i) the Exploration
& Production segment, which include individual oilfields or
pools of oilfields whereby technical, economic or contractual
features make the underlying cash flows interdependent; (ii) the
Gas & Power segment, which include transport and distribution
networks and related facilities, storage sites and
re-gasification facilities in a consistent way with the gas
segments of operations that are defined by the Italian Authority
for Electricity and Gas for the purpose of tariff settings and
other authorities. Other CGUs are gas carrier ships and plants
for the production of electricity; (iii) the Refining &
Marketing segment, which include refining plants and commercial
facilities relating to each distribution channel and by country
(ordinary network, high-ways network, and wholesale activity);
(iv) the Petrochemicals segment, which include production plants
and related facilities; and (v) the Engineering &
Construction segment, which include Business Units Offshore
construction, Onshore construction and Onshore drilling
facilities and individual Rigs for Offshore operations.
The recoverable amount used in assessing the impairment charges
described below is value-in-use. Value-in-use is calculated by
discounting the estimated cash flows determined on the basis of
the best information available at the moment of the assessment
which is derived from: (i) the Company’s four-year plan
approved by top management that provides information on the
expected oil and gas production, sales volumes, capital
expenditures, operating costs and margins and industrial and
marketing set-up, as well as trends on the main monetary
variables, including inflation, nominal interest rates and
exchange rates. For the subsequent years beyond the four-year
plan a nominal growth rate is used ranging from 0% to 2%; (ii)
the commodity prices have been assessed based on the forward
prices prevailing on the market place as of the balance sheet
date for the first four years of the cash flow projections and
the long-term price assumptions adopted by the Company’s
management for strategic planning purposes for the following
years (see "Basis of presentation").
Post-tax cash flows are discounted at the rate which corresponds
for the Exploration & Production, Refining & Marketing
and Petrochemicals segments to the Company’s weighted
average cost of capital, adjusted to consider the risks specific
to each country of activity (adjusted post-tax WACC). For 2009,
the adjusted post-tax rates used for impairment testing showed an
increase of 0.5 percentage points on average from the previous
year as a result of a higher market premium for the equity risk
and the country risk. Such increase was partially reduced by
decreased nominal interest rates reflected in the cost of
borrowings and in rates of assets risk-free. For 2009, the
adjusted post-tax rates ranged from 9% to 13.5%. Post-tax cash
flows and discount rates have been adopted as they result in an
assessment that is substantially equal to a pre-tax assessment.
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In the Exploration & Production segment the main
impairments related to proved and unproved oil & gas
properties mainly located in the Gulf of Mexico, Australia,
Congo, Egypt and Nigeria as a result of downward reserve
revisions and cost increases.
In the Refining & Marketing segment the main impairments
related to refining plants. The drivers of those impairments were
a weak refining environment and the Company’s expectations
for a slow recovery in those trends which negatively affected the
refining performance in 2009, including compressed price
differentials between heavy and light crudes, and weak prices for
middle distillates that were dragged down by excess inventory.
Also, plant-specific factors were taken into account,
particularly low complexity.
In the Petrochemicals segment the main impairments related to the
olefins-aromatic-polyethylene plants of Porto Marghera and the
Sicilian pole. The main drivers of those impairments were
continuing trends for margin pressures and volumes reduction,
particularly in the case of commoditized products, due to weak
industry fundamentals in terms of sluggish demand, excess
capacity and rising competitive pressures as new capacity is
expected to come on line in the Middle East.
Negative foreign currency translation differences in the amount
of euro 511 million were primarily related to translation of
entities accounts denominated in U.S. dollar (euro 1,005
million). This effect was partially offset by translation of
entities accounts denominated in Norwegian krones (euro 339
million).
Other negative changes in the net book value of tangible assets
(euro 146 million) relate to the reclassification to assets
classified as held for sale in the amount of euro 421 million and
the disposals of assets in the amount of euro 150 million, which
was offset by an increase in the initial recognition and change
of estimated costs for the dismantling and restoration of sites
in the amount of euro 289 million which mainly relate to the
Exploration & Production segment (euro 273 million).
The following is a description of unproved mineral interests,
included in tangible assets in progress and advances:
| (euro million) |
|
Value at the beginning of the year |
|
Acquisitions |
|
Impairments |
|
Reclassification to Proved Mineral Interest |
|
Other changes and currency translation differences |
|
Net value at the end of the year |
| Dec. 31, 2008 | |||||||||||||||
| Congo | 641 | 862 | (10 | ) | (81 | ) | 85 | 1,497 | |||||||
| USA | 1,401 | (144 | ) | 74 | 1,331 | ||||||||||
| Turkmenistan | 809 | (164 | ) | 40 | 685 | ||||||||||
| Algeria | 748 | (59 | ) | 689 | |||||||||||
| Other countries | 255 | 209 | (90 | ) | (85 | ) | (1 | ) | 288 | ||||||
| 2,297 | 2,628 | (408 | ) | (166 | ) | 139 | 4,490 | ||||||||
| Dec. 31, 2009 | |||||||||||||||
| Congo | 1,497 | 42 | (333 | ) | (42 | ) | 1,164 | ||||||||
| USA | 1,331 | 43 | (231 | ) | (229 | ) | (32 | ) | 882 | ||||||
| Turkmenistan | 685 | (13 | ) | (23 | ) | 649 | |||||||||
| Algeria | 689 | (220 | ) | (17 | ) | 452 | |||||||||
| Other countries | 288 | 137 | (54 | ) | (140 | ) | 231 | ||||||||
| 4,490 | 222 | (285 | ) | (935 | ) | (114 | ) | 3,378 |
Unproved mineral interests are normally
recognized upon allocation of the purchase price of business
combinations in the Exploration & Production segment. The
main amounts are associated with probable and possible reserves
in Congo, Gulf of Mexico, Turkmenistan and Algeria associated
with recent acquisitions. Changes during the year amounted to a
decrease of euro 935 million which related to transfers to
property, plant and equipment associated with recognition of
proved reserves and internal approval for development.
Impairments for the year amounted to euro 285 million due to
downward revisions related to properties in the Gulf of Mexico
and, to a lesser extent, Nigeria.
The accumulated provisions for impairments amounted to euro 4,692
million and euro 5,680 million as of December 31, 2008 and 2009,
respectively.
As of December 31, 2009, Eni pledged property, plant and
equipment for euro 28 million primarily as collateral against
certain borrowings (euro 29 million as of December 31, 2008).
Government grants recorded as a reduction of property, plant and
equipment amounted to euro 1,335 million (euro 1,308 million as
of December 31, 2008).
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Assets acquired under financial lease agreements amounted to
euro 28 million (euro 163 million as of December 31, 2008), of
which, euro 19 million related to FPSO ships used by the
Exploration & Production segment to support oil production
and treatment activities and euro 9 million related to service
stations in the Refining & Marketing segment. The decrease of
euro 135 million primarily related to the exercise of the option
for the acquisition of a drilling platform by the Engineering
& Construction segment for euro 127 million.
Contractual commitments related to the purchase of property,
plant and equipment are included in Note 28 – Guarantees,
commitments and risks - Liquidity risk.
Property, plant and equipment under concession arrangements are
described in Note 28 – Guarantees, commitments and risks -
Asset under concession arrangements.
Property, plant and equipment by segment
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Property, plant and equipment, gross | ||||||
| Exploration & Production | 64,338 | 71,189 | ||||
| Gas & Power | 26,566 | 27,998 | ||||
| Refining & Marketing | 12,899 | 13,378 | ||||
| Petrochemicals | 5,036 | 5,174 | ||||
| Engineering & Construction | 7,702 | 9,163 | ||||
| Other activities | 1,550 | 1,592 | ||||
| Corporate and financial companies | 391 | 373 | ||||
| Elimination of intra-group profits | (355 | ) | (343 | ) | ||
| 118,127 | 128,524 | |||||
| Accumulated depreciation, amortization and impairment losses | ||||||
| Exploration & Production | 31,983 | 36,727 | ||||
| Gas & Power | 10,206 | 10,808 | ||||
| Refining & Marketing | 8,403 | 8,981 | ||||
| Petrochemicals | 4,124 | 4,321 | ||||
| Engineering & Construction | 2,548 | 2,858 | ||||
| Other activities | 1,467 | 1,513 | ||||
| Corporate and financial companies | 179 | 194 | ||||
| Elimination of intra-group profits | (38 | ) | (55 | ) | ||
| 58,872 | 65,347 | |||||
| Property, plant and equipment, net | ||||||
| Exploration & Production | 32,355 | 34,462 | ||||
| Gas & Power | 16,360 | 17,190 | ||||
| Refining & Marketing | 4,496 | 4,397 | ||||
| Petrochemicals | 912 | 853 | ||||
| Engineering & Construction | 5,154 | 6,305 | ||||
| Other activities | 83 | 79 | ||||
| Corporate and financial companies | 212 | 179 | ||||
| Elimination of intra-group profits | (317 | ) | (288 | ) | ||
| 59,255 | 63,177 |
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9 Inventory
- compulsory stock
Inventory - compulsory stock was as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Crude oil and petroleum products | 1,040 | 1,586 | ||
| Natural gas | 156 | 150 | ||
| 1,196 | 1,736 | |||
Compulsory stock was primarily held by Italian companies (euro
1,184 million and euro 1,724 million as of December 31, 2008 and
2009, respectively) in accordance with minimum stock requirements
set forth by applicable laws.
10 Intangible assets
Intangible assets were as follows:
| (euro million) | Net value at the beginning of the year |
Investments |
Amortization |
Changes in the scope of consolidation |
Other changes |
Net value at the end of the year |
Gross value at the end of the year |
Provisions for amortization |
||||||||
| Dec. 31, 2008 | |||||||||||||||||||
| Intangible assets with finite useful lives | |||||||||||||||||||
| Exploration expenditures | 749 | 1,907 | (2,097 | ) | 335 | 77 | 971 | 2,295 | 1,324 | ||||||||||
| Industrial patents and intellectual property rights | 148 | 44 | (85 | ) | 42 | 149 | 1,203 | 1,054 | |||||||||||
| Concessions, licenses, trademarks and similar items | 786 | 17 | (93 | ) | (15 | ) | 38 | 733 | 2,475 | 1,742 | |||||||||
| Intangible assets in progress and advances | 377 | 264 | (61 | ) | 580 | 590 | 10 | ||||||||||||
| Other intangible assets | 158 | 18 | (52 | ) | 1,595 | 14 | 1,733 | 1,995 | 262 | ||||||||||
| 2,218 | 2,250 | (2,327 | ) | 1,915 | 110 | 4,166 | 8,558 | 4,392 | |||||||||||
| Intangible assets with indefinite useful lives | |||||||||||||||||||
| Goodwill | 2,115 | 1,417 | (1 | ) | 3,531 | ||||||||||||||
| 4,333 | 2,250 | (2,327 | ) | 3,332 | 109 | 7,697 | |||||||||||||
| Dec. 31, 2009 | |||||||||||||||||||
| Intangible assets with finite useful lives | |||||||||||||||||||
| Exploration expenditures | 971 | 1,273 | (1,615 | ) | 2 | 631 | 2,259 | 1,628 | |||||||||||
| Industrial patents and intellectual property rights | 149 | 10 | (85 | ) | 64 | 138 | 1,275 | 1,137 | |||||||||||
| Concessions, licenses, trademarks and similar items | 733 | 20 | (153 | ) | 71 | 671 | 2,403 | 1,732 | |||||||||||
| Intangible assets in progress and advances | 580 | 83 | (82 | ) | 581 | 584 | 3 | ||||||||||||
| Other intangible assets | 1,733 | 9 | (136 | ) | 20 | 1,626 | 2,035 | 409 | |||||||||||
| 4,166 | 1,395 | (1,989 | ) | 75 | 3,647 | 8,556 | 4,909 | ||||||||||||
| Intangible assets with indefinite useful lives | |||||||||||||||||||
| Goodwill | 3,531 | 15 | 864 | 4,410 | |||||||||||||||
| 7,697 | 1,395 | (1,989 | ) | 15 | 939 | 8,057 |
Exploration expenditures in the amount of euro 631 million
mainly related to license acquisition costs that are amortized on
a straight-line basis over the contractual term of the
exploration lease or fully written off against profit and loss in
case of release or when no future activity is planned. Additions
for the year included exploration drilling expenditures which
were fully amortized as incurred in the amount of euro 1,271
million (euro 1,715 million as of December 31, 2008).
Concessions, licenses, trademarks and similar items in the amount
of euro 671 million primarily comprised of transmission rights
for natural gas imported from Algeria (euro 452 million) and
concessions for mineral exploration (euro 157 million).
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Other intangible assets with finite useful lives in the amount
of euro 1,626 million primarily referred to: (i) customer
relationship and order backlog in the amount of euro 1,244
million (euro 1,355 million as of December 31, 2008) recognized
after the acquisition of control on Distrigas NV. These assets
are amortized on the basis of the supply contract with the
longest term (19 years) and the residual useful life of the sale
contract (4 years); (ii) the development project of the gas
storage capacity recognized after the acquisition of control of
Eni Hewett Ltd in the amount of euro 234 million (euro 208
million as of December 31, 2008); (iii) royalties for the use of
licenses by Polimeri Europa SpA in the amount of euro 68 million
(euro 72 million as of December 31, 2008); (iv) estimated costs
for Eni’s social responsibility projects in relation to oil
development programs in Val d’Agri in the amount of euro 38
million (euro 18 million at December 31, 2008) following
commitments made with the Basilicata Region.
The depreciation rates used were as follows:
| (%) | |||||||||
| Exploration expenditures | 14 |
- |
33 |
||||||
| Industrial patents and intellectual property rights | 20 |
- |
33 |
||||||
| Concessions, licenses, trademarks and similar items | 3 |
- |
33 |
||||||
| Other intangible assets | 4 |
- |
25 |
Other changes of intangible assets with a definite useful live
in the amount of euro 75 million include negative currency
translation differences of euro 5 million.
Changes in the scope of consolidation related to intangible
assets with indefinite useful live (goodwill) in the amount of
euro 15 million mainly refers to the acquisition of Seacom SpA
(euro 13 million).
The carrying amount of goodwill as of December 31, 2009 was euro
4,410 million (euro 3,531 million as of December 31, 2008). The
break-down by operating segment is as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Exploration & Production | 243 | 249 | ||
| Gas & Power | 2,400 | 3,328 | ||
| Refining & Marketing | 142 | 84 | ||
| Engineering & Construction | 746 | 749 | ||
| 3,531 | 4,410 |
Goodwill acquired through business combinations has been
allocated to the cash generating units ("CGUs") that
are expected to benefit from the synergies of the acquisition.
The recoverable amount of the CGUs is the higher of: (i) fair
value less costs to sell if there is an active market or recent
transactions for similar assets within the same industry between
knowledgeable and willing parties; (ii) value-in-use which is
determined by discounting the estimated future cash flows based
of the best information available at the moment of the assessment
which is derived from: (a) the Company’s four-year plan
approved by top management that provides information on the
expected oil and gas production, sales volumes, capital
expenditures, operating costs and margins and industrial and
marketing set-up, as well as trends on the main monetary
variables, including inflation, nominal interest rates and
exchange rates. For the subsequent years beyond the four-year
plan, a nominal growth rate is used ranging from 0% to 2%; (b)
the commodity prices have been assessed based on the forward
prices prevailing on the market place as of the balance sheet
date for the first four years of the cash flow projections and
the long-term price assumptions adopted by the Company’s top
management for strategic planning purposes for the following
years (see "Basis of presentation").
Value-in-use is determined by discounting post-tax cash flows at
the following rates: (i) in the Exploration & Production and
Refining & Marketing and Petrochemicals segments, impairment
rates correspond to the Company’s weighted average cost of
capital, as adjusted to consider risks specific to each country
of activity (adjusted post-tax WACC). For 2009, the adjusted
post-tax rates used for impairment testing showed an increase of
0.5 percentage points on average from the previous year as a
result of a higher market premium for the equity risk and the
country risk. Such increases were partially reduced by decreased
nominal interest rates reflected in the cost of borrowings and in
rates of assets risk-free. For 2009, the adjusted post-tax rates
ranged from 9% to 13.5%; (ii) for the Gas & Power and
Engineering & Construction segments, specific adjusted
post-tax WACC have been used. For the Gas & Power segment it
has been estimated on the basis of a sample of companies
operating in the same segment, for the Engineering &
Construction segment on the basis of market data. Rates used for
impairments in the Gas & Power segment has been adjusted to
take into consideration risks specific to each country of
activity, while rates used in the Engineering & Construction
segment has not been adjusted as most of the company assets are
not permanently located in a specific country.
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Rates for the Gas & Power segment have ranged from 7% to
8%, representing a reduction of 0.5 percentage points on average
from the previous year, which reflects decreased nominal interest
rates, while the equity risk for utilities has remained
unchanged. In the Engineering & Construction segment, rates
at 8.5% have increased on average by 0.5 percentage points due to
higher equity risk; (iii) for the regulated activities in the
Italian natural gas sector, the discount rates have been assumed
equal to the rates of return defined by the Italian Authority for
Electricity and Gas.
Post-tax cash flows and discount rates have been adopted as they
result in an assessment that is substantially equal to a pre-tax
assessment.
Goodwill has been allocated to the following CGUs:
Gas & Power segment
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Domestic gas market | 743 | 766 | ||
| Foreign gas market | 1,342 | 2,247 | ||
| - of which European market (Distrigas) | 1,248 | 2,148 | ||
| Domestic natural gas transportation network | 305 | 305 | ||
| Other | 10 | 10 | ||
| 2,400 | 3,328 | |||
Goodwill allocated to the CGU domestic gas market primarily
related to goodwill recognized upon the buy-out of minorities in
Italgas SpA in 2003 through a public offering (euro 706 million).
The key assumptions adopted for assessing the recoverable amount
of the CGU which exceeds its carrying amount included commercial
margins, forecast sales volumes, the discount rate and the growth
rates adopted to determine the terminal value. Information on
these drivers has been collected from the four-year-plan approved
by the Company’s top management that factored in revised
downward prospects of gas demand growth in Italy. The terminal
value was estimated based on the perpetuity method of the
last-year-plan assuming a long-term nominal growth rate equal to
zero. The excess of the recoverable amount of the domestic gas
market CGU over its carrying amount including the allocated
portion of goodwill (headroom) would be reduced to zero under
each of the following hypothesis: (i) a decrease of 28.7% on
average in the projected commercial margins; (ii) a decrease of
28.7% on average in the projected sales volumes; (iii) an
increase of 3.4 percentage points in the discount rate; (iv) a
negative nominal growth rate of 4.4%. The recoverable amount of
the CGU domestic gas market and the relevant sensitivity analysis
were calculated solely on the basis of retail margins, thus
excluding wholesale and business client margins (industrial,
thermoelectric and others).
Goodwill allocated to the CGU represented by the European gas
market was recognized upon acquisition of the Belgian company
Distrigas NV that was acquired in two different steps: (i) a
controlling interest of 57.24% was acquired in October 2008 and
(ii) a mandatory tender offer was finalized on the minorities of
Distrigas and the subsequent squeeze-out at the same price of the
acquisition of the controlling interest. Such goodwill has been
allocated to the CGU that is expected to benefit from the
synergies of the acquisition corresponding to the European market
that includes the activities of Distrigas and other European
marketing activities conducted by the Gas & Power Division of
Eni SpA. Key assumptions adopted for assessing the recoverable
amount of the European market CGU which exceeds its carrying
amount included commercial margins, forecast sales volumes, the
discount rate and the growth rates adopted to determine the
terminal value. The determination of the value-in use is based on
the four-year-plan approved by Eni’s top management which
assumed full integration of the Distrigas activities with other
European activities. The plan also factored in the revised
downward prospects for gas demand growth in Europe and consistent
projection on marketing margins. The terminal value was estimated
based on the perpetuity method of the last-year-plan assuming a
long-term nominal growth rate equal to 1.6%. The excess of the
recoverable amount of the European market CGU over its carrying
amount including the allocated portion of goodwill (headroom)
would be reduced to zero under each of the following hypothesis:
(i) a decrease of 40.9% on average in the projected marketing
margins; (ii) a decrease of 40.9% on average in planned sales
volumes; (iii) an increase of 3.9 percentage points in the
discount rate; (iv) a negative nominal growth rate of 4.0%.
Goodwill allocated to the domestic natural gas transportation
network CGU referred to the purchase of own shares by Snam Rete
Gas SpA and it is equal to the difference between the purchase
price over the carrying amount of the corresponding share of
equity. The recoverable amount of the CGU is assessed based on
its Regulatory Asset Base (RAB) as recognized by the Italian
Authority for Electricity and Gas and it is higher than its
carrying amount, including the allocated goodwill. Management
believes that no reasonably possible change in the assumptions
adopted would cause the headroom of the CGU to be reduced to
zero.
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Engineering & Construction segment
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Offshore constructions | 416 | 416 | ||
| Onshore constructions | 314 | 317 | ||
| Other | 16 | 16 | ||
| 746 | 749 | |||
The Engineering & Construction segment’s goodwill in
the amount of euro 749 million was mainly recognized following
the acquisition of Bouygues Offshore SA, now Saipem SA (euro 711
million).
The key assumptions adopted for assessing the recoverable amount
of the CGUs which exceeds the carrying amount referred to
operating results, the discount rate and the growth rates adopted
to determine the terminal value. Information on these drivers has
been collected from the four-year-plan approved by the
Company’s top management while the terminal value has been
estimated by using a perpetual nominal growth rate of 2% applied
to the cash flow of the four-year period. The following changes
in each of the assumptions, ceteris paribus would cause
the headroom of the Offshore construction CGU to be reduced to
zero: (i) a decrease of 56% of the operating result of the four
years of the plan; (ii) increase of 8 percentage points of the
discount rate; and (iii) a negative real growth rate.
Changes in each of the assumptions, ceteris paribus that
would cause the headroom of the Onshore construction CGU to be
reduced to zero are greater than those of the Offshore
construction CGU described above.
The Exploration & Production and the Refining & Marketing
segments tested their goodwill, yielding the following results:
(i) in the Exploration & Production segment (euro 249 million
of carrying amount), management believes that there are no
reasonably possible changes in the pricing environment and
production/cost profiles that would cause the headroom of the
relevant CGUs to be reduced to zero. Goodwill mainly refers to
the portion of the acquisition cost that was not allocated to
proved or unproved mineral interests from the business
combinations of Lasmo, Burren Energy (Congo) and First Calgary.
The change in goodwill recorded by the segment in the period
derived from the completion of the purchase price allocation of
First Calgary in the amount of euro 65 million; (ii) in the
Refining & Marketing segment (euro 84 million), the Company
recorded an impairment charge in the amount of euro 58 million,
of which euro 48 million related to goodwill allocated to the
fuel retail business assets and aviation fuel supply business
recently acquired in Central-Eastern Europe driven by lower
expectations for margins/volumes due to decreased fuel demand
caused by the economic downturn and loss of market share and an
impairment charge in the amount of euro 10 million related to
goodwill allocated to minor assets. Net of this impairment, the
residual goodwill primarily referred to the retail network CGUs
which relates to the acquisitions in Czech Republic, Hungary and
Slovakia.
Other changes in intangible assets with a indefinite useful lives
in the amount of euro 864 million include the accounting of
goodwill related to the acquisition of 42.757% of Distrigas NV,
following the finalization of the mandatory tender offer for the
minorities with a 41.617% adhesion of the share capital,
including the 31.25% interest of Publigaz SCRL, the other major
stakeholder of Distrigas, and the 1.14% interest through the
squeeze-out procedure (euro 903 million) and, as a decrease, the
impairments in the amount of euro 58 million related to the
Refining & Marketing segment as described above.
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11 Investments
Investments accounted for using the equity method
Equity-accounted investments were as follows:
| (euro million) | Value at the beginning of the year | Acquisition and subscriptions | Share of profit of equity-accounted investments | Share of loss of equity-accounted investments | Deduction for dividends | Currency translation differences | Other changes | Value at the end of the year | ||||||||
| Dec. 31, 2008 | ||||||||||||||||||||
| Investments in unconsolidated entities controlled by Eni | 141 | 41 | 27 | (6 | ) | (5 | ) | 3 | (24 | ) | 177 | |||||||||
| Joint ventures | 3,310 | 47 | 536 | (94 | ) | (444 | ) | (123 | ) | 25 | 3,257 | |||||||||
| Associates | 2,188 | 289 | 198 | (5 | ) | (266 | ) | 35 | (402 | ) | 2,037 | |||||||||
| 5,639 | 377 | 761 | (105 | ) | (715 | ) | (85 | ) | (401 | ) | 5,471 | |||||||||
| Dec. 31, 2009 | ||||||||||||||||||||
| Investments in unconsolidated entities controlled by Eni | 177 | 1 | 42 | (4 | ) | (8 | ) | (3 | ) | 12 | 217 | |||||||||
| Joint ventures | 3,257 | 25 | 478 | (81 | ) | (254 | ) | (54 | ) | (44 | ) | 3,327 | ||||||||
| Associates | 2,037 | 200 | 173 | (156 | ) | (122 | ) | (31 | ) | 183 | 2,284 | |||||||||
| 5,471 | 226 | 693 | (241 | ) | (384 | ) | (88 | ) | 151 | 5,828 |
Acquisitions and subscriptions in the amount of euro 226
million relates to the increase in subscription of capital in the
amount of euro 224 million, of which euro 181 million related to
Angola LNG Ltd.
Share of profit of equity-accounted investments and the decrease
following the distribution of the dividends referred to the
following companies:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
Share of profit of equity-accounted investments |
|
Deduction for dividends |
|
Eni’s interest % |
|
Share of profit of equity-accounted investments |
|
Deduction for dividends |
|
Eni’s interest % |
||
| Galp Energia SGPS SA | 39 | 88 | 33.34 | 116 | 64 | 33.34 | |||||||
| Unión Fenosa Gas SA | 200 | 185 | 50.00 | 108 | 138 | 50.00 | |||||||
| Artic Russia BV | 29 | 60.00 | 103 | 60.00 | |||||||||
| Trans Austria Gasleitung GmbH | 39 | 28 | 89.00 | 84 | 22 | 89.00 | |||||||
| Eni BTC Ltd | 16 | 100.00 | 35 | 100.00 | |||||||||
| Blue Stream Pipeline Co BV | 34 | 50.00 | 33 | 50.00 | |||||||||
| United Gas Derivatives Co | 107 | 127 | 33.33 | 24 | 40 | 24.55 | (*) | ||||||
| EnBW Eni Verwaltungsgesellschaft mbH | 40 | 22 | 50.00 | 15 | 50.00 | ||||||||
| Supermetanol CA | 39 | 34 | 34.51 | 6 | 13 | 34.51 | |||||||
| Other investments | 218 | 231 | 169 | 107 | |||||||||
| 761 | 715 | 693 | 384 |
| (*) | Equity ratio 33.33. |
Share of loss of equity-accounted investments in the amount of
euro 241 million primarily relates to Ceska Rafinerska AS (euro
140 million) as a result of an impairment test on the refinery,
Transmediterranean Pipeline Co Ltd (euro 30 million) and Super
Octanos CA (euro 21 million) following the impairment on the
relevant CGU mainly due to the negative trends in exchange rates.
Other changes in the amount of euro 151 million include the
reclassification from receivables made for operating financing
purposes associated with the contribution of the Venezuelan
activities of Corocoro (euro 153 million) to PetroSucre SA. Also
an increase was recorded upon reclassification from assets
classified as held for sale of Fertilizantes Nitrogenados de
Oriente (euro 68 million). A decrease was recorded as a capital
reimbursement was made by the joint venture Artic Russia BV (euro
111 million) upon divestment of a 51% stake in the 60-40% owned
joint-venture OOO SeverEnergia following the exercise of the call
option by Gazprom on September 23, 2009. The transaction is worth
U.S. $940 million net to Eni. Eni collected the first tranche of
the price corresponding to approximately 25% of the whole amount
for euro 155 million (or U.S. $230 million at the EUR/USD
exchange rate of
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1.48 as of the transaction date). A gain was recognized in the
profit and loss on equity-accounted evaluation of the investments
in Artic Russia BV in the amount of euro 103, of which euro 100
million related to the contractual remuneration at an annual rate
of 9.4% accruing on the initial investment in the venture when it
was acquired on April 4, 2007 in accordance with the arrangements
between Eni and Gazprom.
The following table sets out the net carrying amount relating to
equity-accounted:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
Net carrying amount |
Eni’s interest % |
Net carrying amount |
Eni’s interest % |
|||||
| Investments in unconsolidated entities controlled by Eni: | |||||||||
| - Eni BTC Ltd | 62 | 100.00 | 93 | 100.00 | |||||
| - Other investments (1) | 115 | 124 | |||||||
| 177 | 217 | ||||||||
| Joint ventures: | |||||||||
| - Artic Russia BV | 895 | 60.00 | 918 | 60.00 | |||||
| - Unión Fenosa Gas SA | 499 | 50.00 | 473 | 50.00 | |||||
| - Blue Stream Pipeline Co BV | 351 | 50.00 | 371 | 50.00 | |||||
| - EnBW Eni Verwaltungsgesellschaft mbH | 268 | 50.00 | 284 | 50.00 | |||||
| - Azienda Energia e Servizi Torino SpA | 166 | 49.00 | 170 | 49.00 | |||||
| - Eteria Parohis Aeriou Thessalonikis AE | 158 | 49.00 | 161 | 49.00 | |||||
| - Toscana Energia SpA | 136 | 49.38 | 143 | 49.38 | |||||
| - Raffineria di Milazzo ScpA | 128 | 50.00 | 128 | 50.00 | |||||
| - Trans Austria Gasleitung GmbH | 109 | 89.00 | 170 | 89.00 | |||||
| - Super Octanos CA | 90 | 49.00 | 66 | 49.00 | |||||
| - Supermetanol CA | 90 | 34.51 | 80 | 34.51 | |||||
| - Unimar Llc | 65 | 50.00 | 72 | 50.00 | |||||
| - Eteria Parohis Aeriou Thessalias AE | 42 | 49.00 | 43 | 49.00 | |||||
| - Starstroi Llc | 19 | 50.00 | 31 | 50.00 | |||||
| - Transmediterranean Pipeline Co Ltd | 40 | 50.00 | 8 | 50.00 | |||||
| - Transitgas AG | 33 | 46.00 | 33 | 46.00 | |||||
| - Altergaz SA | 25 | 38.91 | 28 | 41.62 | |||||
| - Other investments (1) | 143 | 148 | |||||||
| 3,257 | 3,327 | ||||||||
| Associates: | |||||||||
| - Galp Energia SGPS SA | 862 | 33.34 | 914 | 33.34 | |||||
| - Angola LNG Ltd | 453 | 13.60 | 612 | 13.60 | |||||
| - Ceska Rafinerska AS | 323 | 32.44 | 184 | 32.44 | |||||
| - PetroSucre SA | 19 | 26.00 | 176 | 26.00 | |||||
| - United Gas Derivatives Co | 128 | 33.33 | 84 | 24.55 | (2) | ||||
| - Fertilizantes Nitrogenados de Oriente CEC | 68 | 20.00 | 68 | 20.00 | |||||
| - ACAM Gas SpA | 46 | 49.00 | 47 | 49.00 | |||||
| - Distribuidora de Gas del Centro SA | 32 | 31.35 | 29 | 31.35 | |||||
| - Other investments (1) | 106 | 170 | |||||||
| 2,037 | 2,284 | ||||||||
| 5,471 | 5,828 |
| (1) | Each individual amount included herein did not exceed euro 25 million. | |
| (2) | Equity ratio 33.33. |
The net carrying amount of investments in unconsolidated entities controlled by Eni, joint ventures and associates include the differences between the purchase price and Eni’s equity in investments of euro 521 million. Such differences primarily related to Unión Fenosa Gas SA (euro 195 million), EnBW - Eni Verwaltungsgesellschaft mbH (euro 181 million) and Galp Energia SGPS SA (euro 106 million).
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The fair value of listed investments was as follows:
| Shares | Ownership (%) |
Price
per share (euro) |
Fair
value (euro million) |
|||||
| Galp Energia SGPS SA | 276,472,161 | 33.34 | 12.08 | 3,340 | ||||
| Altergaz SA | 1,123,954 | 41.62 | 29.80 | 33 |
The table below sets out the provisions for losses included in the provisions for contingencies in the amount of euro 170 million (euro 119 million as of December 31, 2008), which primarily relate to the following equity-accounted investments:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Industria Siciliana Acido Fosforico - ISAF SpA (under liquidation) | 27 | 64 | ||
| Cardon IV SA | 11 | 32 | ||
| Polimeri Europa Elastomeres France SA (under liquidation) | 31 | 32 | ||
| Charville - Consultores e Serviços Lda | 33 | 21 | ||
| Southern Gas Constructors Ltd | 17 | 13 | ||
| Other investments | 8 | |||
| 119 | 170 | |||
Other investments
Other investments were as follows:
| (euro million) | Net value at the beginning of the year | Acquisition and subscriptions | Currency translation differences | Other changes | Net value at the end of the year | Gross value at the end of the year | Accumulated impairment charges | |||||||
| Dec. 31, 2008 | ||||||||||||||||
| Investments in unconsolidated entities controlled by Eni | 25 | 1 | 4 | 30 | 41 | 11 | ||||||||||
| Associates | 10 | (6 | ) | 4 | 28 | 24 | ||||||||||
| Other investments | 437 | 5 | 11 | (77 | ) | 376 | 382 | 6 | ||||||||
| 472 | 6 | 11 | (79 | ) | 410 | 451 | 41 | |||||||||
| Dec. 31, 2009 | ||||||||||||||||
| Investments in unconsolidated entities controlled by Eni | 30 | (1 | ) | 15 | 44 | 55 | 11 | |||||||||
| Associates | 4 | 4 | 8 | 8 | ||||||||||||
| Other investments | 376 | 4 | (7 | ) | (9 | ) | 364 | 371 | 7 | |||||||
| 410 | 4 | (8 | ) | 10 | 416 | 434 | 18 |
Investments in unconsolidated entities controlled by Eni and associates are stated at cost net of impairment losses. Other investments, for which fair value cannot be reliably determined, were recognized at cost and adjusted for impairment losses.
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The net carrying amount of other investments in the amount of euro 416 million (euro 410 million as of December 31, 2008) was related to the following entities:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
Net carrying amount |
|
Eni’s interest % |
|
Net carrying amount |
|
Eni’s interest % |
||
| Investments in unconsolidated entities controlled by Eni (*) | 30 | 44 | ||||||
| Associates | 4 | 8 | ||||||
| Other investments: | ||||||||
| - Interconnector (UK) Ltd | 135 | 16.06 | 134 | 16.06 | ||||
| - Nigeria LNG Ltd | 85 | 10.40 | 82 | 10.40 | ||||
| - Darwin LNG Pty Ltd | 83 | 10.99 | 78 | 10.99 | ||||
| - Other (*) | 73 | 70 | ||||||
| 376 | 364 | |||||||
| 410 | 416 |
| (*) | Each individual amount included herein did not exceed euro 25 million. |
Provisions for losses related to other investments, included within the provisions for contingencies, amounted to euro 41 million (euro 44 million as of December 31, 2008) and were primarily in relation to the following entities:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Burren Energy Ship Management Ltd | 17 | 25 | ||
| Caspian Pipeline Consortium R - Closed Joint Stock Co | 24 | 15 | ||
| Other investments | 3 | 1 | ||
| 44 | 41 | |||
Other information about investments
The following table summarizes key financial data, net to
Eni, as disclosed in the latest available financial statements of
unconsolidated entities controlled by Eni, joint ventures and
associates:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
Unconsolidated entities controlled by Eni |
|
Joint ventures |
|
Associates |
|
Unconsolidated entities controlled by Eni |
|
Joint ventures |
|
Associates |
||
| Total assets | 1,361 | 7,761 | 4,020 | 2,215 | 6,981 | 4,218 | |||||||
| Total liabilities | 1,230 | 4,565 | 1,958 | 2,081 | 3,721 | 1,929 | |||||||
| Net sales from operations | 134 | 5,303 | 5,067 | 65 | 3,936 | 5,718 | |||||||
| Operating profit | 2 | 736 | 702 | (48 | ) | 564 | 141 | ||||||
| Net profit | 20 | 490 | 690 | (9 | ) | 474 | 101 |
The total assets and liabilities of unconsolidated controlled entities of euro 2,215 million and euro 2,081 million, respectively (euro 1,361 million and euro 1,230 million as of December 31, 2008) concerned for euro 1,873 million and euro 1,860 million (euro 923 million and euro 923 million as of December 31, 2008) entities for which the consolidation does not produce significant effects. The residual amount referred to controlled entities which are not consolidated due to their immateriality based on the criteria of significance indicated in the "Basis of presentation".
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12 Other financial assets
Other financing receivables were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Receivables for financing operating activities | 1,084 | 1,112 | ||
| Securities held for operating purposes | 50 | 36 | ||
| 1,134 | 1,148 | |||
Financing receivables are presented net of the allowance for
impairment losses in the amount of euro 29 million (euro 26
million as of December 31, 2008).
Operating financing receivables in the amount of euro 1,112
million (euro 1,084 million as of December 31, 2008) primarily
consist of loans entered into by the Exploration & Production
segment (euro 580 million), Gas & Power segment (euro 311
million) and Refining & Marketing segment (euro 111 million),
as well as receivables for financial leasing of euro 97 million
(euro 128 million as of December 31, 2008). Receivables for
financial leasing related to the disposal of the Belgian gas
network by Finpipe GIE are included in the consolidation area
after the acquisition of control by Gas & Power segment of
Distrigas NV. The following table shows principal receivable by
maturity date, which was obtained by summing future lease payment
receivables discounted at the effective interest rate, interests
and the nominal value of future lease receivables:
| (euro million) | Maturity range |
||
Within 12 months |
|
Between one and five years |
|
Beyond five years |
|
Total |
||
| Principal receivable | 19 | 77 | 20 | 116 | ||||
| Interests | 6 | 11 | 1 | 18 | ||||
| Undiscounted value of future lease payments | 25 | 88 | 21 | 134 |
Receivables with a maturity date within one year are shown in
current assets in the trade receivables for operating purposes -
current portion of long-term receivables in Note 3 – Trade
and other receivables.
Receivables in currencies other than euro amounted to euro 716
million (euro 827 million as of December 31, 2008).
Receivables due beyond five years amounted to euro 460 million
(euro 617 million as of December 31, 2008).
Securities in the amount of euro 36 million (euro 50 million as
of December 31, 2008), designated as held-to-maturity
investments, are listed securities, issued by the Italian
Government (euro 21 million) and by foreign governments (euro 15
million). The decrease of euro 14 million relates to Banque Eni
SA.
Securities with a maturity beyond five years amounted to euro 20
million.
The fair value of financing receivables and securities did not
differ significantly from their carrying amount. The fair value
of financing receivables has been determined based on the present
value of expected future cash flows discounted at rates ranging
from 1.0% to 4.5% (1.9% and 3.9% as of December 31, 2008). The
fair value of securities was derived from quoted market prices.
Receivables with related parties are described in Note 36 –
Transactions with related parties.
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13 Deferred tax assets
Deferred tax assets were recognized net of deferred tax
liabilities able to be offset in the amount of euro 3,764 million
(euro 3,468 million as of December 31, 2008).
| (euro million) | Value at |
Additions |
Deductions |
Currency translation differences |
Other changes |
Value at |
||||||
2,912 |
1,715 |
(1,078 |
) | (28 |
) | 37 |
3,558 |
Deferred tax assets are described in Note 23 – Deferred tax liabilities.
14 Other non-current receivables
The following table provides an analysis of other non-current
receivables:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Tax receivables from: | ||||
| - income tax | 24 | 18 | ||
| - interest on tax credits | 58 | 55 | ||
| - Value Added Tax (VAT) | 2 | |||
| 84 | 73 | |||
| - foreign tax authorities | 28 | 39 | ||
| 112 | 112 | |||
| Other receivables: | ||||
| - in relation to disposals | 780 | 710 | ||
| - other non-current receivables | 268 | 215 | ||
| 1,048 | 925 | |||
| Fair value of non-hedging derivatives | 480 | 339 | ||
| Fair value of cash flow hedge derivative instruments | 197 | 129 | ||
| Other asset | 44 | 433 | ||
| 1,881 | 1,938 | |||
Other receivables related to disposals in the amount of euro 710 million relate to: (i) a receivable of euro 421 million recognized upon the agreement signed with the Republic of Venezuela whereby Eni will receive a cash compensation for the expropriated Dación assets, part of which was already collected. Eni is set to collect seven annual installments which yield interest income from the date of the agreement. The 2009 installment of euro 71 million ($104 million) was paid through an equivalent assignment of hydrocarbons (compensation in-kind); (ii) a receivable of euro 279 million related to the disposal of the interest of 1.71% in the Kashagan project to the local partner KazMunaiGas on the basis of the agreements defined with the international partners of the North Caspian Sea PSA and the Kashagan government, which were effective starting from January 1, 2008.
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The fair value of derivative contracts which do not meet the criteria to be classified as hedges under IFRS was as follows:
Dec. 31, 2008 |
Dec. 31, 2009 |
|||
| (euro million) |
|
Fair value |
|
Purchase commitments |
|
Sale |
|
Fair value |
|
Purchase commitments |
|
Sale |
| Non-hedging derivatives on exchange rate | ||||||||||||
| Interest Currency Swap | 106 | 403 | 120 | 112 | 458 | 197 | ||||||
| Currency swap | 1 | 1 | 11 | 7 | 333 | 33 | ||||||
| Other | 29 | 13 | 48 | |||||||||
| 136 | 417 | 179 | 119 | 791 | 230 | |||||||
| Non-hedging derivatives on interest rate | ||||||||||||
| Interest rate swap | 27 | 217 | 403 | 46 | 677 | 563 | ||||||
| 27 | 217 | 403 | 46 | 677 | 563 | |||||||
| Non-hedging derivatives on commodities | ||||||||||||
| Over the counter | 317 | 207 | 859 | 172 | 540 | 659 | ||||||
| Other | 2 | 37 | ||||||||||
| 317 | 207 | 859 | 174 | 577 | 659 | |||||||
| 480 | 841 | 1,441 | 339 | 2,045 | 1,452 |
The fair value of the derivative contracts is determined using
market quotations provided by primary info-provider, or in the
absence of such market information, the appropriate valuation
methods generally accepted in the marketplace.
Fair values of non-hedging derivatives in the amount of euro 339
million (euro 480 million as of December 31, 2008) consisted of
derivative contracts that do not meet the formal criteria to be
designated as hedges under IFRS because they were entered into in
order to manage the net business exposures in foreign currency
exchange rates, interest rates and commodity prices. Therefore,
such derivatives were not related to specific trade or financing
transactions.
Fair value of the cash flow hedge derivatives in the amount of
euro 129 million referred to Distrigas NV. Further information on
cash flow hedge derivatives is provided in Note 19 – Other
current liabilities. Fair value related to the contracts expiring
beyond 2010 is provided in Note 24 – Other non-current
liabilities; fair value related to the contracts expiring in 2010
is included in Note 7 – Other current assets and in Note 19
– Other current liabilities. The effects of the evaluation
at fair value of cash flow hedge derivatives are provided in Note
26 – Shareholders’ equity and in Note 30 –
Operating expenses.
The nominal value of cash flow hedge derivatives relating to
purchase and sale commitments amounted to euro 29 million and
euro 427 million, respectively.
Information on the hedged risks and the hedging policies is
provided in Note 28 – Guarantees, commitments and risks.
Other asset in the amount of euro 433 million (euro 44 million as
of December 31, 2008) included a deferred cost that relates to
amounts of gas which were collected below minimum take quantities
for the year provided by take-or-pay clauses contained in certain
long-term gas purchase contracts. Those volumes were recorded to
offset a trade payable for an amount of euro 255 million based on
the contractual purchase price formula provided in the relevant
contractual arrangements and the contractual percentage of
advance, as aligned to their net realizable value as of year end.
The Company expects to collect the underlying gas volumes over a
period longer than the next twelve months.
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Current liabilities
15 Short-term debt
Short-term debt was as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Banks | 2,411 | 683 | ||
| Ordinary bonds | 3,663 | 2,718 | ||
| Other financial institutions | 285 | 144 | ||
| 6,359 | 3,545 | |||
Short-term debt decreased by euro 2,814 million primarily due
to the balance of repayments and new proceeds (euro 2,889
million), partially offset by currency translation differences
(euro 97 million). Debt comprised of commercial paper in the
amount of euro 2,718 million (euro 3,663 million as of December
31, 2008) which was mainly issued by the financial company Eni
Finance USA Inc (euro 2,020 million) and Eni Coordination Center
SA (euro 698 million).
Short-term debt per currency is shown in the table below:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Euro | 3,801 | 1,143 | ||
| U.S. dollar | 1,332 | 2,321 | ||
| Other currencies | 1,226 | 81 | ||
| 6,359 | 3,545 | |||
In 2009, the weighted average interest rate on short-term debt
was 0.8% (4.2% in 2008).
As of December 31, 2009 Eni had undrawn committed and uncommitted
borrowing facilities available in the amount of euro 2,241
million and euro 9,533 million, respectively (euro 3,313 million
and euro 7,696 million as of December 31, 2008). These facilities
were under interest rates that reflected market conditions.
Charges in unutilized facilities were not significant.
16 Trade and other payables
Trade and other payables were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Trade payables | 12,590 | 10,078 | ||
| Advances | 2,916 | 3,230 | ||
| Other payables: | ||||
| - related to capital expenditures | 1,716 | 1,541 | ||
| - others | 3,293 | 4,325 | ||
| 5,009 | 5,866 | |||
| 20,515 | 19,174 | |||
The decrease in trade payables in the amount of euro 2,512
million was primarily related to the Gas & Power segment
(euro 1,640 million), the Engineering & Construction segment
(euro 619 million), the Exploration & Production segment
(euro 566 million) which was offset by an increase in the
Refining & Marketing segment (euro 266 million).
Advances in the amount of euro 3,230 million (euro 2,916 million
as of December 31, 2008) were related to advances on contract
work in progress in the amount of euro 2,590 million (euro 2,516
million as of December 31, 2008) and other advances in the amount
of euro 640 million (euro 400 million as of December 31, 2008).
Advances on contract work in progress related to the Engineering
& Construction segment.
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Other payables were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Payables due to: | ||||
| - joint venture operators in exploration and production activities | 2,007 | 2,305 | ||
| - suppliers in relation to investments | 1,057 | 809 | ||
| - non-financial government entities | 441 | 661 | ||
| - employees | 400 | 451 | ||
| - social security entities | 284 | 292 | ||
| 4,189 | 4,518 | |||
| Other payables | 820 | 1,348 | ||
| 5,009 | 5,866 | |||
Payables with related parties are described in Note 36 –
Transactions with related parties.
The fair value of trade and other payables did not differ
significantly from their carrying amount considering the
short-term maturity of trade payables.
17 Income taxes payable
Income taxes payable were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Italian subsidiaries | 808 | 363 | ||
| Foreign subsidiaries | 1,141 | 928 | ||
| 1,949 | 1,291 | |||
Income taxes payable by Italian subsidiaries were affected by
the fair value valuation of cash flow hedging derivatives (euro
137 million). Further information is provided in Note 19 –
Other current liabilities.
18 Other taxes payable
Other taxes payable were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Excise and customs duties | 920 | 832 | ||
| Other taxes and duties | 740 | 599 | ||
| 1,660 | 1,431 | |||
19 Other current liabilities
Other current liabilities were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Fair value of non-hedging derivatives | 1,418 | 691 | ||
| Fair value of cash flow hedge derivatives | 452 | 680 | ||
| Other liabilities | 1,993 | 485 | ||
| 3,863 | 1,856 | |||
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Fair value of non-hedging derivative contracts was as follows:
Dec. 31, 2008 |
Dec. 31, 2009 |
|||
| (euro million) | Fair value |
|
Purchase commitments |
|
Sale commitments |
|
Fair value |
|
Purchase commitments |
|
Sale commitments |
|
| Non-hedging derivatives on exchange rate | ||||||||||||
| Currency swap | 211 | 1,234 | 2,379 | 113 | 3,044 | 2,487 | ||||||
| Interest currency swap | 78 | 694 | 60 | 8 | 113 | |||||||
| Other | 299 | 101 | 1,181 | 135 | 107 | 684 | ||||||
| 588 | 2,029 | 3,620 | 256 | 3,264 | 3,171 | |||||||
| Non-hedging derivatives on interest rate | ||||||||||||
| Interest rate swap | 5 | 500 | 15 | 816 | ||||||||
| 5 | 500 | 15 | 816 | |||||||||
| Non-hedging derivatives on commodities | ||||||||||||
| Over the counter | 769 | 2,528 | 191 | 415 | 1,244 | 549 | ||||||
| Other | 56 | 66 | 119 | 5 | 2 | 54 | ||||||
| 825 | 2,594 | 310 | 420 | 1,246 | 603 | |||||||
| 1,418 | 5,123 | 3,930 | 691 | 4,510 | 4,590 |
Fair value of derivative contracts was determined by using
market quotations given by primary info-providers, or, absent
market information, on the basis of valuation models generally
accepted in the marketplace.
Fair values of non-hedging derivatives in the amount of euro 691
million (euro 1,418 million as of December 31, 2008) consisted of
derivative contracts that do not meet the formal criteria to be
designated as hedges under IFRS because they were entered into in
order to manage the net business exposures in foreign currency
exchange rates, interest rates and commodity prices. Therefore,
such derivatives were not related to specific trade or financing
transactions.
The fair value of cash flow hedges amounted to euro 680 million
(euro 452 million as of December 31, 2008) and related to
Exploration & Production segment in the amount of euro 369
million and Distrigas NV in the amount of euro 311 million (euro
37 million and euro 415 million as of December 31, 2008,
respectively). Fair value related to the Exploration &
Production segment referred to the fair value of the future sale
agreements of the proved oil reserves with deadlines in 2010.
Those derivatives were entered into to hedge exposure to
variability in future cash flows deriving from the sales during
the 2008-2011 period of approximately 2% of Eni’s proved
reserves as of December 31, 2006 corresponding to 125.7 mmbbl,
decreasing to 37.5 mmbbl as of December 31, 2009 due to
transactions settled in the past year. These hedging transactions
were undertaken in connection with acquisitions of oil and gas
assets in the Gulf of Mexico and Congo that were executed in
2007. The Distrigas NV derivatives were designated to hedge
surpluses or deficits of gas to achieve a proper balance in gas
portfolio.
Fair value of contracts expiring by 2010 is provided in Note 7
– Other current assets; fair value of contracts expiring
beyond 2010 is provided in Note 24 – Other non-current
liabilities and in Note 14 – Other non-current assets. The
effects of the evaluation at fair value of cash flow hedge
derivatives are provided in Note 26 – Shareholders’
equity and in Note 30 – Operating expenses.
The nominal value of cash flow hedge derivatives relating to
purchase and sale commitments amount to euro 1,882 million and
euro 272 million, respectively (euro 989 million and euro 895
million as of December 31, 2008, respectively).
Information on the hedged risks and the hedging policies is
provided in Note 28 – Guarantees, commitments and risks.
The decrease of other liabilities in the amount of euro 1,508
million mainly relate to the extinction of the euro 1,495 million
put option exercised by Publigaz. Eni granted the put option to
Publigaz (the Distrigas minority shareholder) to divest its
31.25% stake in Distrigas NV to Eni on the same per-share price
of the mandatory tender offer to minorities as part of the
Distrigas NV acquisition. The relevant liability was recognized
with a corresponding entry in a reserve within equity.
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Non-current liabilities
20 Long-term debt and current maturities of
long-term debt
Long-term debt included the current portion maturing
during the year following the balance sheet date (current
maturity). The table below analyzes debt by year of forecasted
repayment:
(euro million) |
At December 31 | Long-term maturity | ||||
Type of debt instrument |
Maturity range |
2008 |
2009 |
Current maturity 2010 |
2011 |
2012 |
2013 |
2014 |
After |
Total |
||||||||||
| Banks | 2010-2029 | 7,003 | 9,056 | 2,028 | 1,106 | 3,559 | 323 | 1,122 | 918 | 7,028 | ||||||||||
| Ordinary bonds | 2010-2037 | 6,843 | 11,687 | 1,111 | 141 | 38 | 1,589 | 1,314 | 7,494 | 10,576 | ||||||||||
| Other financial institutions | 2010-2021 | 632 | 512 | 52 | 95 | 63 | 55 | 51 | 196 | 460 | ||||||||||
| 14,478 | 21,255 | 3,191 | 1,342 | 3,660 | 1,967 | 2,487 | 8,608 | 18,064 |
Long-term debt, including the current portion of long-term
debt, of euro 21,255 million (euro 14,478 million as of December
31, 2008) increased by euro 6,777 million. The increase mainly
reflected the balance of payments and new proceeds of euro 6,730
million as well as translation differences arising on debt taken
on by euro-reporting subsidiaries denominated in a foreign
currency which are translated into euros at the year-end exchange
rates (euro 100 million). These increases were offset by currency
translation differences resulting from the translation of
financial statements denominated in currencies other than euro
(euro 74 million).
Debt from banks in the amount of euro 9,056 million mainly relate
committed and uncommitted borrowing facilities in the amount of
euro 4,030 million.
Debt from other financial institutions in the amount of euro 512
million (euro 632 million as of December 31, 2008) included euro
24 million of finance lease transactions (euro 161 million as of
December 31, 2008). The decrease of euro 137 million mainly
referred to the exercise of the option to purchase a drilling rig
by the Engineering & Construction segment.
Eni entered into long-term borrowing facilities with the European
Investment Bank which were conditioned to the maintenance of
certain performance indicators based on Eni’s consolidated
financial statements or the maintenance of a minimum level of
rating. According to the agreements, the lack of this latter
condition required new guarantees, able to be accepted by the
European Investment Bank, to be found. As of December 31, 2008
and 2009, the amount of short and long-term debt subject to
restrictive covenants was euro 1,323 million and euro 1,508
million, respectively. Eni considers that the non-compliance with
the above covenants does not produce relevant effects.
Furthermore, Saipem SpA entered into certain borrowing facilities
in the amount of euro 75 million (the same amount as of December
31, 2008) with a number of financial institutions subordinated to
the maintenance of certain performance indicators based on the
consolidated financial statements of Saipem. Eni and Saipem are
in compliance with the covenants contained in their respective
financing arrangements.
Bonds in the amount of euro 11,687 million consisted of bonds
issued through the Euro Medium Term Notes Program for a total of
euro 9,419 million and other bonds for a total of euro 2,268
million.
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The following table analyzes bonds per issuing entity, maturity date, interest rate and currency as of December 31, 2009:
Amount |
Discount on bond issue and accrued expense |
Total |
Currency |
Maturity |
% rate |
|||||||
| (euro million) | from |
to |
from |
to |
||||||||||||
| Issuing entity | |||||||||||||||||
| Euro Medium Term Notes | |||||||||||||||||
| Eni SpA | 1,500 | 58 | 1,558 | EUR | 2016 | 5.000 | |||||||||||
| Eni SpA | 1,500 | 44 | 1,544 | EUR | 2013 | 4.625 | |||||||||||
| Eni SpA | 1,500 | 8 | 1,508 | EUR | 2019 | 4.125 | |||||||||||
| Eni SpA | 1,250 | 66 | 1,316 | EUR | 2014 | 5.875 | |||||||||||
| Eni SpA | 1,250 | (4 | ) | 1,246 | EUR | 2017 | 4.750 | ||||||||||
| Eni Coordination Center SA | 733 | 6 | 739 | GBP | 2010 | 2019 | 4.875 | 6.125 | |||||||||
| Eni SpA | 500 | 17 | 517 | EUR | 2010 | 6.125 | |||||||||||
| Eni Coordination Center SA | 350 | 10 | 360 | EUR | 2010 | 2028 | 2.876 | 5.600 | |||||||||
| Eni Coordination Center SA | 346 | 2 | 348 | YEN | 2012 | 2037 | 1.150 | 2.810 | |||||||||
| Eni Coordination Center SA | 176 | 3 | 180 | USD | 2013 | 2015 | 4.450 | 4.800 | |||||||||
| Eni Coordination Center SA | 41 | (1 | ) | 40 | EUR | 2011 | 2015 | variable | |||||||||
| Eni Coordination Center SA | 34 | 34 | CHF | 2010 | 2.043 | ||||||||||||
| Eni Coordination Center SA | 31 | (2 | ) | 29 | USD | 2013 | variable | ||||||||||
| 9,211 | 208 | 9,419 | |||||||||||||||
| Other bonds | |||||||||||||||||
| Eni SpA | 1,000 | 7 | 1,007 | EUR | 2015 | 4.000 | |||||||||||
| Eni SpA | 1,000 | (15 | ) | 985 | EUR | 2015 | variable | ||||||||||
| Eni USA Inc | 277 | (3 | ) | 274 | USD | 2027 | 7.300 | ||||||||||
| Eni UK Holding Plc | 2 | 2 | GBP | 2013 | variable | ||||||||||||
| 2,279 | (11 | ) | 2,268 | ||||||||||||||
| 11,490 | 197 | 11,687 |
As of December 31, 2009 bonds maturing within 18 months (euro
993 million) were issued by Eni Coordination Center SA in the
amount of euro 476 million and by Eni SpA in the amount of euro
517 million. During 2009, Eni SpA issued bonds in the amount of
euro 5,058 million.
The following table shows the currency composition of long-term
debt and its current portion and the related weighted average
interest rates on total borrowings.
Dec. 31, 2008 |
Average rate |
Dec. 31, 2009 |
Average rate |
|||||
| Euro | 12,284 | 4.2 | 19,345 | 3.9 | ||||
| U.S. dollar | 912 | 6.1 | 779 | 3.9 | ||||
| British pound | 859 | 6.2 | 742 | 5.2 | ||||
| Japanese yen | 367 | 2.0 | 348 | 2.0 | ||||
| Other currencies | 56 | 3.8 | 41 | 3.0 | ||||
| 14,478 | 21,255 |
As of December 31, 2009 Eni had undrawn committed long-term borrowing facilities in the amount of euro 2,850 million (euro 1,850 million as of December 31, 2008). Interest rates on these contracts were at market conditions. Charges for unutilized facilities were not significant.
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Fair value of long-term debt, including the current portion of long-term debt amounted to euro 22,320 million (euro 15,247 million as of December 31, 2008) and consisted of the following:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Ordinary bonds | 7,505 | 12,618 | ||
| Banks | 7,056 | 9,152 | ||
| Other financial institutions | 686 | 550 | ||
| 15,247 | 22,320 | |||
Fair value was calculated by discounting the expected future
cash flows at rates ranging from 1.0% to 4.5% (1.4% and 3.9% as
of December 31, 2008).
As of December 31, 2009 Eni did not pledge restricted deposits as
collateral against its borrowings (euro 151 million as of
December 31, 2008).
Analysis of net borrowings, as defined in the "Financial
Review", was as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
Current |
Non-current |
Total |
Current |
Non-current |
Total |
|||||||
| A. Cash and cash equivalents | 1,939 | 1,939 | 1,608 | 1,608 | ||||||||
| B. Available-for-sale securities | 185 | 185 | 64 | 64 | ||||||||
| C. Liquidity (A+B) | 2,124 | 2,124 | 1,672 | 1,672 | ||||||||
| D. Financing receivables | 337 | 337 | 73 | 73 | ||||||||
| E. Short-term debt towards banks | 2,411 | 2,411 | 683 | 683 | ||||||||
| F. Long-term debt towards banks | 147 | 6,856 | 7,003 | 2,028 | 7,028 | 9,056 | ||||||
| G. Bonds | 360 | 6,483 | 6,843 | 1,111 | 10,576 | 11,687 | ||||||
| H. Short-term debt towards related parties | 153 | 153 | 147 | 147 | ||||||||
| I. Long-term debt towards related parties | 9 | 9 | ||||||||||
| L. Other short-term debt | 3,795 | 3,795 | 2,715 | 2,715 | ||||||||
| M. Other long-term debt | 42 | 581 | 623 | 52 | 460 | 512 | ||||||
| N. Total borrowings (E+F+G+H+I+L+M) | 6,908 | 13,929 | 20,837 | 6,736 | 18,064 | 24,800 | ||||||
| O. Net borrowings (N-C-D) | 4,447 | 13,929 | 18,376 | 4,991 | 18,064 | 23,055 |
Available-for-sale securities in the amount of euro 64 million
(euro 185 million as of December 31, 2008) were held for
non-operating purposes. Not included in the calculation above
were held-to-maturity and available-for-sale securities held for
operating purposes amounting to euro 320 million (euro 360
million as of December 31, 2008), of which euro 284 million (euro
302 million as of December 31, 2008) were held to provide
coverage of technical reserves for Eni’s insurance company,
Eni Insurance Ltd.
Financing receivables in the amount of euro 73 million (euro 337
million as of December 31, 2008) were held for non-operating
purposes.
Not included in the calculation above were financing receivables
held for operating purposes amounting to euro 452 million (euro
487 million as of December 31, 2008), of which euro 245 million
(euro 399 million as of December 31, 2008) were in respect of
securities granted to unconsolidated subsidiaries, joint ventures
and associates primarily in relation to the implementation of
certain capital projects and a euro 179 million cash deposit
(euro 47 million as of December 31, 2008) to provide coverage for
Eni Insurance Ltd technical reserves. As of December 31, 2008,
current financial receivables in the amount of euro 173 million
referred to a restricted deposit held by Eni Lasmo Plc as a
guarantee of a debenture.
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21 Provisions for contingencies
Provisions for contingencies were as follows:
| (euro million) | Value at Dec. 31, 2008 |
Additions |
Changes of estimated expenditures |
Accretion discount |
Reversal of utilized provisions |
Reversal of unutilized provisions |
Other changes |
Value at Dec. 31, 2009 |
||||||||
| Provision for site restoration and abandonment | 4,574 | 317 | 212 | (191 | ) | (5 | ) | (110 | ) | 4,797 | ||||||||||
| Provision for environmental risks | 1,980 | 280 | (249 | ) | (22 | ) | (53 | ) | 1,936 | |||||||||||
| Provision for legal and other proceedings | 812 | 372 | (62 | ) | (39 | ) | 85 | 1,168 | ||||||||||||
| Loss adjustments and actuarial provisions for Eni's insurance companies | 404 | 135 | (25 | ) | 514 | |||||||||||||||
| Provisions for the supply of goods | 308 | 35 | 10 | 353 | ||||||||||||||||
| Provision for taxes | 260 | 46 | (1 | ) | (9 | ) | 296 | |||||||||||||
| Provision for losses on investments | 163 | 96 | (39 | ) | (9 | ) | 211 | |||||||||||||
| Provision for onerous contracts | 4 | 115 | (26 | ) | (3 | ) | 90 | |||||||||||||
| Provision for OIL insurance | 72 | 9 | (1 | ) | (1 | ) | 79 | |||||||||||||
| Other (*) | 929 | 306 | 22 | (4 | ) | (298 | ) | (72 | ) | (8 | ) | 875 | ||||||||
| 9,506 | 1,394 | 339 | 218 | (827 | ) | (179 | ) | (132 | ) | 10,319 |
| (*) | Each individual amount included herein does not exceed euro 50 million. |
Provision for site restoration and abandonment in the amount
of euro 4,797 million primarily referred to the estimation of
future costs relating to decommissioning of oil and natural gas
production facilities at the end of the producing lives of
fields, well-plugging, abandonment and site restoration (euro
4,500 million). The increase in the provision for the year
amounted to euro 317 million and was primarily due to changes in
the estimates of future costs made by Eni Petroleum Co Inc (euro
153 million), Eni UK Ltd (euro 76 million) and Eni SpA (euro 51
million). Also an amount of euro 212 million was recognized
through profit and loss as the accretion charge for the period.
The discount rates adopted ranged from 1.9% to 8.8% (from 3.3% to
6.2% for the year ended December 31, 2008). Other changes in the
amount of euro 110 million mainly related to the reclassification
of the liabilities directly associated with assets held for sale
(euro 188 million).
Offsetting this effect were negative currency translation
differences which resulted from the translation of financial
statements denominated in currencies other than euro (euro 70
million).
Provision for environmental risks in the amount of euro 1,936
million primarily related to the estimated future costs of
remediation in accordance with existing laws and regulations and
the estimated costs of reclamation and restoration sanctioned by
the competent authorities. These provisions mainly relate to
Syndial SpA (euro 1,412 million) and to the Refining &
Marketing segment (euro 394 million). The increases in the
provision in the amount of euro 280 million were primarily
related to Syndial SpA (euro 186 million) and the Refining &
Marketing segment (euro 68 million). Decreases in the amount of
euro 249 million were related to the reversal of utilized
provisions primarily by the Refining & Marketing segment
(euro 125 million) and Syndial SpA (euro 97 million).
Provision for legal and other proceedings in the amount of euro
1,168 million primarily included charges expected for the failure
to perform certain contractual obligations and estimated future
losses on pending litigation including legal, antitrust and
administrative matters. These provisions are stated on the basis
of Eni’s best estimate of the expected probable liability
and primarily related to the Gas & Power segment (euro 476
million), Engineering & Construction segment (euro 278
million), Syndial SpA (euro 220 million), Eni Corporate (euro 79
million) and the Petrochemical segment (euro 34 million). The
increases in the provision in the amount of euro 372 million
includes the estimate of a non-recurring item represented by a
charge amounting to euro 250 million that was estimated based on
management’s best knowledge of the possible resolution of
the TSKJ matter with US Authorities. The matter is fully
disclosed in Note 28 – Guarantees, commitments and risks
– Legal Proceedings. The charge is recognized in the segment
results of the Engineering & Construction business as it
relates to a project that was executed in Nigeria by the TSKJ
joint venture. At the time of the project, the venture was
participated by Snamprogetti Netherlands BV that was controlled
by Snamprogetti SpA that was subsequently divested by the parent
company Eni SpA to the subsidiary Saipem. On the occasion of the
divestiture, Eni agreed to indemnify Saipem of all possible
claims that might arise in connection with Snamprogetti
involvement in the TSKJ venture. As a result, the future monetary
settlement of the provision will be incurred by Eni SpA and
Saipem’s minorities will be left unaffected altogether.
Loss adjustments and actuarial provisions for Eni’s
insurance companies in the amount of euro 514 million represent
the liabilities accrued for claims on insurance policies
underwritten by Eni’s insurance company, Eni Insurance Ltd.
Provisions for the supply of goods in the amount of euro 353
million include the estimated costs of the supply contracts.
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ENI ANNUAL REPORT / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Provision for taxes in the amount of euro 296 million
primarily included charges for unsettled tax claims in connection
with uncertain applications of tax regulations for foreign
subsidiaries of the Exploration & Production segment (euro
176 million) and the Engineering & Construction segment (euro
66 million).
Provision for losses on investments in the amount of euro 211
million was made with respect to losses from investments in
entities incurred to date, where the losses exceed the carrying
amount of the investments.
Provision for onerous contracts in the amount of euro 90 million
relate to contracts for which the termination or execution costs
exceed the relevant benefits.
Provision for OIL insurance cover in the amount of euro 79
million include a mutual insurance provision related to future
increase of insurance charges, as a result of accidents that
occurred in past periods that will be paid in the next 5 years by
Eni for participating in the mutual insurance of Oil Insurance
Ltd.
22 Provisions for employee benefits
Provisions for employee benefits were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| TFR | 458 | 445 | ||
| Foreign pension plans | 223 | 204 | ||
| Supplementary medical reserve for Eni managers (FISDE) and other foreign medical plans | 98 | 107 | ||
| Other benefits | 168 | 188 | ||
| 947 | 944 | |||
Provisions for indemnities upon termination of employment
primarily relate to the provisions accrued by Italian companies
for employee termination indemnities ("TFR"), which are
determined using actuarial techniques and is regulated by Article
2120 of the Italian Civil Code.
The indemnity is paid upon retirement as a lump sum payment in
the amount which corresponds to the total provisions accrued
during the employees’ service period based on payroll costs
as revalued until retirement. Following the changes in regime,
starting from January 1, 2007 the amount already then accrued and
future benefits will be put in pension funds or the treasury fund
held by the Italian administration for post-retirement benefits
(INPS). For companies with less than 50 employees, it will be
possible to continue the scheme as in previous years. Therefore,
the allocation of future TFR provisions to pension funds or the
INPS treasury fund determines that these amounts will be
classified as costs to provide benefits under a defined
contribution plan. Past unpaid amounts accrued as of December 31,
2006 for post-retirement indemnities under the Italian TFR regime
continue to represent costs to provide benefits under a defined
benefit plan and must be assessed based on actuarial assumptions.
Pension funds are defined benefit plans provided by foreign
subsidiaries located mainly in Nigeria and in Germany. Benefits
under these plans consist of payments based on seniority and the
salary paid in the last year of service, or alternatively, the
average annual salary over a defined period prior to retirement.
Group companies provide healthcare benefits to retired managers.
Liability for these plans (FISDE and other foreign healthcare
plans) and the current cost are limited to the contributions made
by the company.
Other benefits primarily related to a deferred cash incentive
scheme for managers and certain Jubilee awards. The provision for
the deferred cash incentive scheme is assessed based on the
probability of the company reaching planned targets and employee
reaching individual performance goals. Jubilee awards are
benefits due following the attainment of a minimum period of
service and, for the Italian companies, consist of an in-kind
remuneration.
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The value of employee benefits, estimated by applying actuarial techniques, consisted of the following:
| Foreign pension plans | ||
| (euro million) | TFR |
|
Gross liability |
|
Plan assets |
|
FISDE |
|
Other benefits |
|
Total |
|
| 2008 | ||||||||||||||||||
| Current value of benefit liabilities and plan assets at beginning of year | 476 | 621 | (362 | ) | 92 | 118 | 945 | |||||||||||
| Current cost | 21 | 1 | 48 | 70 | ||||||||||||||
| Interest cost | 25 | 28 | 5 | 5 | 63 | |||||||||||||
| Expected return on plan assets | (25 | ) | (25 | ) | ||||||||||||||
| Employee contributions | (1 | ) | (41 | ) | (42 | ) | ||||||||||||
| Actuarial gains (losses) | 8 | (11 | ) | 102 | 3 | 3 | 105 | |||||||||||
| Benefits paid | (65 | ) | (25 | ) | 20 | (7 | ) | (7 | ) | (84 | ) | |||||||
| Curtailments and settlements | (2 | ) | (2 | ) | ||||||||||||||
| Currency translation differences and other changes | (1 | ) | 169 | (147 | ) | 2 | 1 | 24 | ||||||||||
| Current value of benefit liabilities and plan assets at end of year | 443 | 802 | (453 | ) | 94 | 168 | 1,054 | |||||||||||
| 2009 | ||||||||||||||||||
| Current value of benefit liabilities and plan assets at beginning of year | 443 | 802 | (453 | ) | 94 | 168 | 1,054 | |||||||||||
| Current cost | 27 | 2 | 45 | 74 | ||||||||||||||
| Interest cost | 26 | 22 | 6 | 6 | 60 | |||||||||||||
| Amendments | 81 | 10 | 91 | |||||||||||||||
| Expected return on plan assets | (16 | ) | (16 | ) | ||||||||||||||
| Employee contributions | 1 | (42 | ) | (41 | ) | |||||||||||||
| Actuarial gains (losses) | 18 | 301 | (16 | ) | 9 | 4 | 316 | |||||||||||
| Benefits paid | (41 | ) | (45 | ) | 22 | (7 | ) | (39 | ) | (110 | ) | |||||||
| Curtailments and settlements | (15 | ) | 14 | (1 | ) | |||||||||||||
| Currency translation differences and other changes | 1 | (28 | ) | (9 | ) | 1 | 4 | (31 | ) | |||||||||
| Current value of benefit liabilities and plan assets at end of year | 447 | 1,146 | (500 | ) | 115 | 188 | 1,396 |
The gross liability for foreign employee pension plans in the
amount of euro 1,146 million (euro 802 million as of December 31,
2008) include the liabilities related to joint ventures operating
in exploration and production activities in the amount of euro 77
million and euro 62 million as of December 31, 2008 and 2009,
respectively. A receivable of an amount equivalent to such
liability was recorded. Other benefits in the amount of euro 188
million (euro 168 million as of December 31, 2008) mainly relate
to the deferred monetary incentive plan in the amount of euro 119
million (euro 107 million as of December 31, 2008) and Jubilee
awards in the amount of euro 52 million (euro 47 million as of
December 31, 2008).
The reconciliation analysis of benefit obligations and plan
assets was as follows:
| TFR | Foreign pension plans | FISDE and other foreign medical plans | Other benefits | |||||
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
Dec. 31, 2008 |
Dec. 31, 2009 |
Dec. 31, 2008 |
Dec. 31, 2009 |
Dec. 31, 2008 |
Dec. 31, 2009 |
||||||||
| Present value of benefit obligations with plan assets | 610 | 935 | ||||||||||||||||||
| Present value of plan assets | (453 | ) | (500 | ) | ||||||||||||||||
| Net present value of benefit obligations with plan assets | 157 | 435 | ||||||||||||||||||
| Present value of benefit obligations without plan assets | 443 | 447 | 192 | 211 | 94 | 115 | 168 | 188 | ||||||||||||
| Actuarial gains (losses) not recognized | 15 | (2 | ) | (126 | ) | (442 | ) | 4 | (6 | ) | ||||||||||
| Past service cost not recognized | (2 | ) | ||||||||||||||||||
| Net liabilities recognized in provisions for employee benefits | 458 | 445 | 223 | 204 | 98 | 107 | 168 | 188 |
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Costs charged to the profit and loss account were as follows:
| (euro million) | TFR |
Foreign pension plans |
FISDE and other foreign medical plans |
Other benefits |
Total |
|||||
| 2008 | |||||||||||||||
| Current cost | 21 | 1 | 48 | 70 | |||||||||||
| Interest cost | 25 | 28 | 5 | 5 | 63 | ||||||||||
| Expected return on plan assets | (25 | ) | (25 | ) | |||||||||||
| Amortization of actuarial gains (losses) | 1 | 1 | |||||||||||||
| Effect of curtailments and settlements | (2 | ) | (2 | ) | |||||||||||
| 25 | 25 | 4 | 53 | 107 | |||||||||||
| 2009 | |||||||||||||||
| Current cost | 27 | 2 | 45 | 74 | |||||||||||
| Interest cost | 26 | 22 | 6 | 6 | 60 | ||||||||||
| Expected return on plan assets | (16 | ) | (16 | ) | |||||||||||
| Amortization of actuarial gains (losses) | 10 | 7 | 4 | 21 | |||||||||||
| Effect of curtailments and settlements | 1 | (3 | ) | (2 | ) | ||||||||||
| 26 | 44 | 15 | 52 | 137 |
The main actuarial assumptions used in the evaluation of post-retirement benefit obligations at year end and in the estimate of costs expected for 2010 were as follows:
| (%) | TFR |
Foreign pension plans |
FISDE and other foreign medical plans |
Other benefits |
||||
| 2008 | ||||||||
| Discount rate | 6.0 | 3.5-13.0 | 6.0 | 5.2-6.0 | ||||
| Expected return rate on plan assets | 4.5-13.0 | |||||||
| Rate of compensation increase | 2.7-3.0 | 2.4-13.0 | 2.7-4.0 | |||||
| Rate of price inflation | 2.5 | 1.3-11.0 | 2.5 | 2.5 | ||||
| 2009 | ||||||||
| Discount rate | 5.0 | 2.7-11.0 | 5.0 | 2.0-5.0 | ||||
| Expected return rate on plan assets | 4.0-13.0 | |||||||
| Rate of compensation increase | 3.0 | 2.7-14.0 | 2.7-4.0 | |||||
| Rate of price inflation | 2.0 | 0.9-10.0 | 2.0 | 2.0 |
With regards to Italian plans, demographic tables prepared by
Ragioneria Generale dello Stato (RG48) were used. Expected return
rate by plan assets has been determined by reference to quoted
prices expressed in regulated markets.
Plan assets consisted of the following:
| (%) | Plan assets |
Expected return |
||
| Securities | 10.0 | 6.0-7.5 | ||
| Bonds | 28.8 | 2.4-13.0 | ||
| Real estate | 1.6 | 6.0-7.5 | ||
| Other | 59.6 | 0.5-13.0 | ||
| Total | 100.0 |
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The effective return of the plan assets amounted to zero (a
cost in the amount of euro 77 million for the year ended December
31, 2008).
With reference to healthcare plans, the effects deriving from a
1% change of the actuarial assumptions of medical costs were as
follows:
| (euro million) | 1% Increase |
1% Decrease |
||
| Impact on the current costs and interest costs | 1 | (1 | ) | ||
| Impact on net benefit obligation | 14 | (12 | ) |
The amount expected to be accrued for defined benefit plans in
2010 amounted to euro 88 million.
The analysis of changes in the actuarial valuation of the net
liability with respect to prior year deriving from the
non-correspondence of actuarial assumptions with actual values
recorded at year-end was as follows:
| (euro million) | TFR |
Foreign pension plans |
FISDE and other foreign medical plans |
Other benefits |
||||
| 2008 | ||||||||||
| Impact on net benefit obligation | 7 | 15 | 3 | 1 | ||||||
| Impact on plan assets | (62 | ) | ||||||||
| 2009 | ||||||||||
| Impact on net benefit obligation | (7 | ) | 4 | 3 | 2 | |||||
| Impact on plan assets | (16 | ) |
23 Deferred tax liabilities
Deferred tax liabilities were recognized net of offsettable
deferred tax assets in the amount of euro 3,764 million (euro
3,468 million as of December 31, 2008).
| (euro million) | Value at |
Additions |
Deductions |
Changes in the scope of consolidation |
Currency translation differences |
Other changes |
Value at |
|||||||
5,784 |
631 |
(1,434 |
) | 3 |
(22 |
) | (55 |
) | 4,907 |
Deferred tax assets and liabilities consisted of the following:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Deferred tax liabilities | 9,252 | 8,671 | ||||
| Deferred tax assets available for offset | (3,468 | ) | (3,764 | ) | ||
| 5,784 | 4,907 | |||||
| Deferred tax assets not available for offset | (2,912 | ) | (3,558 | ) | ||
| 2,872 | 1,349 |
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The most significant temporary differences giving rise to net deferred tax liabilities were as follows:
| (euro million) | Value at |
Additions |
Deductions |
Currency translation differences |
Other changes |
Value at |
||||||
| Deferred tax liabilities: | ||||||||||||||||||
| - accelerated tax depreciation | 5,366 | 238 | (392 | ) | (6 | ) | (34 | ) | 5,172 | |||||||||
| - site restoration and abandonment (tangible assets) | 654 | 59 | (132 | ) | 27 | (59 | ) | 549 | ||||||||||
| - capitalized interest expense | 173 | 3 | (15 | ) | (2 | ) | 159 | |||||||||||
| - application of the weighted average cost method in evaluation of inventories | 79 | 31 | (91 | ) | 42 | 61 | ||||||||||||
| - other | 2,980 | 300 | (804 | ) | (43 | ) | 297 | 2,730 | ||||||||||
| 9,252 | 631 | (1,434 | ) | (22 | ) | 244 | 8,671 | |||||||||||
| Deferred tax assets: | ||||||||||||||||||
| - site restoration and abandonment (provisions for contingencies) | (1,572 | ) | (84 | ) | 100 | (8 | ) | 79 | (1,485 | ) | ||||||||
| - accruals for impairment losses and provisions for contingencies | (1,397 | ) | (334 | ) | 309 | 32 | (1,390 | ) | ||||||||||
| - depreciation and amortization | (910 | ) | (474 | ) | 140 | 33 | 25 | (1,186 | ) | |||||||||
| - assets revaluation as per Laws No. 342/2000 and No. 448/2001 | (735 | ) | 58 | (677 | ) | |||||||||||||
| - carry-forward tax losses | (57 | ) | (150 | ) | 40 | (7 | ) | (174 | ) | |||||||||
| - other | (1,709 | ) | (673 | ) | 431 | 10 | (469 | ) | (2,410 | ) | ||||||||
| (6,380 | ) | (1,715 | ) | 1,078 | 28 | (333 | ) | (7,322 | ) | |||||||||
| Net deferred tax liabilities | 2,872 | (1,084 | ) | (356 | ) | 6 | (89 | ) | 1,349 |
Deferred tax assets are recognized for deductible temporary
differences to the extent that it is probable that sufficient
taxable profit will be available against which part or all of the
deductible temporary differences can be utilized. In the case
where future taxable profit is no longer deemed to be sufficient
to absorb all existing deferred tax assets, any surplus is
written off.
Other changes in the amount of euro 89 million include the
recognition of the deferred tax effect against equity on the fair
value evaluation of derivatives designated as cash flow hedge in
the amount of euro 65 million. Further information on cash flow
hedge derivatives is provided in Note 19 – Other current
liabilities.
Italian taxation law allows the carry-forward of tax losses over
the five subsequent years. Losses suffered in the first three
years of the company’s life can, however, be, for the most
part, carried forward indefinitely. Foreign taxation laws allows,
on average, the carry-forward of tax losses over a period higher
than the five subsequent years, and in many cases, indefinitely.
The tax rate applied by the Italian subsidiaries to determine the
portion of carry-forwards tax losses to be utilized equaled
25.8%; this rate equaled on average to 28.2% for foreign
entities.
Carry-forward tax losses in the amount of euro 1,532 million can
be used in the following periods:
| (euro million) | Italian |
Foreign |
||
| 2010 | ||||
| 2011 | 2 | |||
| 2012 | 1 | |||
| 2013 | 7 | |||
| 2014 | 107 | 43 | ||
| Beyond 2014 | 64 | 19 | ||
| Without limit | 16 | 1,273 | ||
| 194 | 1,338 |
Carry-forward tax losses in the amount of euro 634 million expected to be offset against future taxable profit and were in respect of Italian subsidiaries in the amount of euro 194 million and of foreign subsidiaries in the amount of euro 440 million. Deferred tax assets recognized on these losses amounted to euro 50 million and euro 124 million, respectively.
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24 Other non-current liabilities
Other non-current liabilities were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Fair value of non-hedging derivatives | 564 | 372 | ||
| Fair value of cash flow hedge derivatives | 499 | 436 | ||
| Non-current liabilities for current income tax | 254 | 52 | ||
| Other payables | 55 | 54 | ||
| Other liabilities | 1,730 | 1,566 | ||
| 3,102 | 2,480 | |||
Fair value of derivative contracts was determined by using
market quotations given by primary info-providers, or, in lack of
market information, on the basis of generally accepted methods
for financial valuations.
Fair value of non-hedging derivatives was as follows:
Dec. 31, 2008 |
Dec. 31, 2009 |
|||
| (euro million) | Fair value |
|
Purchase commitments |
|
Sale commitments |
|
Fair value |
|
Purchase commitments |
|
Sale commitments |
|
| Non-hedging derivatives on exchange rate | ||||||||||||
| Currency swap | 82 | 694 | 100 | 10 | 296 | 94 | ||||||
| Interest currency swap | 4 | 40 | 23 | 394 | ||||||||
| Other | 28 | 50 | 16 | |||||||||
| 114 | 744 | 156 | 33 | 690 | 94 | |||||||
| Non-hedging derivatives on interest rate | ||||||||||||
| Interest rate swap | 129 | 141 | 3,002 | 137 | 41 | 4,030 | ||||||
| 129 | 141 | 3,002 | 137 | 41 | 4,030 | |||||||
| Non-hedging derivatives on commodities | ||||||||||||
| Over the counter | 321 | 769 | 197 | 199 | 850 | 219 | ||||||
| Other | 3 | 12 | 9 | |||||||||
| 321 | 769 | 197 | 202 | 862 | 228 | |||||||
| 564 | 1,654 | 3,355 | 372 | 1,593 | 4,352 |
Fair value of non-hedging derivatives in the amount of euro
372 million (euro 564 million as of December 31, 2008) referred
to derivative contracts that do not meet the formal criteria to
be designated as hedges under IFRS because they were entered into
in order to manage the net business exposures in foreign currency
exchange rates, interest rates and commodity prices. Therefore,
such derivatives were not related to specific trade or financing
transactions.
Fair value of cash flow hedge derivatives amounted to euro 436
million (euro 499 million as of December 31, 2008) related to
Distrigas NV in the amount of euro 275 million (euro 235 million
as of December 31, 2008) and the Exploration & Production
segment in the amount of euro 161 million (euro 264 million as of
December 31, 2008).
Further information on cash flow hedge derivatives is provided in
Note 19 – Other current liabilities. Fair value of contracts
expiring beyond 2010 is provided in Note 14 – Other
non-current receivables; fair value of contracts expiring by 2010
is provided in Note 19 – Other current liabilities and Note
7 – Other current assets. The effects of the evaluation at
the fair value of cash flow hedge derivatives are provided in
Note 26 – Shareholders’ equity and Note 30 –
Operating expenses.
The nominal value of the derivatives relating to purchase and
sale commitments amounted to euro 1,544 million and euro 129
million, respectively (euro 1,878 million and 1,832 million as of
December 31, 2008, respectively).
Information on the hedged risks and the hedging policies is shown
in Note 28 – Guarantees, commitments and risks.
The group’s non-current liability for current income taxes
in the amount of euro 52 million (euro 254 million as of December
31, 2008) was due as special tax (with a rate lower than the
statutory tax rate), relating to the option to increase the
deductible tax bases of certain tangible and other assets to
their carrying amounts as permitted by the 2008 Budget Law.
Other liabilities in the amount of euro 1,566 million (euro 1,730
million as of December 31, 2008) included advances received by
Suez following the long-term supplying of natural gas and
electricity in the amount of euro 1,455 million (euro 1,552
million as of December 31, 2008).
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25 Assets held for sale and liabilities
directly associated with assets held for sale
Non-current assets held for sale and liabilities directly
associated with non-current assets held for sale amounted to euro
542 million and euro 276 million, respectively, which mainly
relate to the divestment of certain mineral properties in Italy
which were contributed in kind to two new entities Società
Padana Energia SpA and Società Adriatica Idrocarburi SpA, for
the disposal of Gas Brasiliano Distribuidora SA, a company
operating in the distribution and marketing of natural gas in an
area of São Paulo state in Brazil, and Distri RE SA, a company
acquired following the acquisition of Distrigas NV. The disposals
to third parties are under negotiation.
26 Shareholders’ equity
Minority interest
Profit attributable to minority interest and the minority
interest in certain consolidated subsidiaries related to:
| (euro million) | Net profit |
Shareholders’ equity |
||
2008 |
2009 |
Dec. 31, 2008 |
Dec. 31, 2009 |
|||||
| Saipem SpA | 407 | 567 | 1,560 | 2,005 | |||||
| Snam Rete Gas SpA | 254 | 369 | 948 | 1,568 | |||||
| Hindustan Oil Exploration Co Ltd | (1 | ) | 1 | 128 | 123 | ||||
| Tigàz Tiszàntùli Gàzszolgàltatò Részvénytàrsasàg | (11 | ) | 8 | 65 | 72 | ||||
| Distrigas NV | 74 | 1,162 | |||||||
| Others | 10 | 5 | 211 | 210 | |||||
| 733 | 950 | 4,074 | 3,978 |
The increase in Snam Rete Gas SpA equity is due to the increase in the share capital for the minority shareholders’ contribution (euro 1,542 million) partially offset by the effect of acquisition from Eni of Italgas SpA and Stogit SpA (euro 1,086 million). The zero amounts of the minority interests in Distrigas NV is due to the acquisition of the entire share capital of the company through the finalization of the mandatory tender offer on the minorities of Distrigas. Shareholders, including Publigaz with its entire interest (31.25%), tendered shares representing 41.617% of the share capital of Distrigas. The residual 1.14% of the share capital has been acquired by Eni through a squeeze-out.
Eni shareholders’ equity
Eni’s net equity as of December 31, 2008 and 2009
was as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Share capital | 4,005 | 4,005 | ||||
| Legal reserve | 959 | 959 | ||||
| Reserve for treasury shares | 7,187 | 6,757 | ||||
| Reserve related to the fair value of cash flow hedging derivatives net of the tax effect | (90 | ) | (439 | ) | ||
| Reserve related to the fair value of available-for-sale securities net of the tax effect | 4 | 5 | ||||
| Other reserves | (1,054 | ) | 1,492 | |||
| Cumulative currency translation differences | (969 | ) | (1,665 | ) | ||
| Treasury shares | (6,757 | ) | (6,757 | ) | ||
| Retained earnings | 34,685 | 39,160 | ||||
| Interim dividend | (2,359 | ) | (1,811 | ) | ||
| Net profit for the period | 8,825 | 4,367 | ||||
| 44,436 | 46,073 |
Share capital
As of December 31, 2009 the parent company’s issued
share capital consisted of 4,005,358,876 shares (nominal value
euro 1 each) fully paid-up (the same amount as of December 31,
2008).
On April 30, 2009 Eni’s Shareholders’ Meeting declared
a dividend distribution of euro 0.65 per share, with the
exclusion of treasury shares held at the ex-dividend date, in
full settlement of the 2008 dividend of euro 1.30 per share, of
which euro 0.65 per share paid as interim dividend. The balance
was payable on May 21, 2009 to shareholders on the register as of
May 18, 2009.
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Legal reserve
This reserve represents earnings restricted from the payment
of dividends pursuant to Article 2430 of the Italian Civil Code.
The legal reserve has reached the maximum amount required by the
Italian Law.
Reserve for treasury shares
The reserve for treasury shares represents the reserve
destined to purchase its own shares in accordance with the
decisions reached at Eni’s Shareholders’ Meetings. The
amount of euro 6,757 million (euro 7,187 million as of December
31, 2008) included treasury shares purchased. During the year
2009 the company has not purchased its own shares and the term
established by Eni’s Shareholders’ Meetings for the
purchase has expired. The residual amount of euro 430 million was
taken to Retained earnings (euro 429 million) and Other reserves
(euro 1 million).
Reserve referring to the valuation at fair value of cash
flow hedging derivatives and available-for-sale securities, net
of the related tax
The valuation of fair value of cash flow hedging derivatives
and available-for-sale securities, net of the related tax,
consisted of the following:
| Available-for-sale securities | Cash flow hedge derivatives | Total | ||||
| (euro million) | Gross reserve |
|
Deferred tax liabilities |
|
Net reserve |
|
Gross reserve |
|
Deferred tax liabilities |
|
Net reserve |
|
Gross reserve |
|
Deferred tax liabilities |
|
Net reserve |
|
| Reserve as of December 31, 2007 | 2 | 2 | (2,185 | ) | 841 | (1,344 | ) | (2,183 | ) | 841 | (1,342 | ) | |||||||||||||
| Changes of the year 2008 | 3 | (1 | ) | 2 | 964 | (364 | ) | 600 | 967 | (365 | ) | 602 | |||||||||||||
| Changes in the scope of consolidation | (68 | ) | 23 | (45 | ) | (68 | ) | 23 | (45 | ) | |||||||||||||||
| Foreign currency translation differences | 48 | (23 | ) | 25 | 48 | (23 | ) | 25 | |||||||||||||||||
| Amount recognized in the profit and loss account | 1,005 | (402 | ) | 603 | 1,005 | (402 | ) | 603 | |||||||||||||||||
| Reserve as of December 31, 2008 | 5 | (1 | ) | 4 | (236 | ) | 75 | (161 | ) | (231 | ) | 74 | (157 | ) | |||||||||||
| of which: Eni Group | 5 | (1 | ) | 4 | (128 | ) | 38 | (90 | ) | (123 | ) | 37 | (86 | ) | |||||||||||
| Changes of the year 2009 | 1 | 1 | (636 | ) | 246 | (390 | ) | (635 | ) | 246 | (389 | ) | |||||||||||||
| Foreign currency translation differences | 3 | (2 | ) | 1 | 3 | (2 | ) | 1 | |||||||||||||||||
| Amount recognized in the profit and loss account | 155 | (44 | ) | 111 | 155 | (44 | ) | 111 | |||||||||||||||||
| Reserve as of December 31, 2009 | 6 | (1 | ) | 5 | (714 | ) | 275 | (439 | ) | (708 | ) | 274 | (434 | ) |
The ineffective portion of the change in fair value of cash flow hedging derivatives (time value component) entered into by the Exploration & Production segment consisted of the following:
| (euro million) | Value at |
Changes recognized in profit and loss account |
Currency translation differences |
Value at |
||||
(45 |
) | 6 |
1 |
(38 |
) |
Other reserves
Other reserves of negative amount were euro 1,492 million (as
of December 31, 2008 other reserves of negative amount were euro
1,054 million) and included:
- a reserve in the amount of euro
1,086 million related to the increase of Eni’s
shareholders’ equity as a control to minority interest
following the sale by Eni SpA of Italgas SpA and Stogit SpA to
Snam Rete Gas SpA;
- a reserve in the amount of euro 247
million related to the increase of Eni’s shareholders’
equity as a control to minority interest following the sale by
Eni SpA of Snamprogetti SpA to Saipem Projects SpA, both merged
in Saipem SpA (same amount as of December 31, 2008);
- a reserve in the amount of euro 157
million deriving from Eni SpA’s equity (euro 194 million as
of December 31, 2008);
- a reserve in the amount of euro 2
million related to the share of "Other comprehensive
income" on equity-accounted entities;
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- as of December 31, 2008 other reserves of negative amount mainly related to the put option granted to Publigaz (the Distrigas minority shareholder) to divest its 31.25% stake in Distrigas NV valued at the same per-share price of the mandatory tender offer to minorities (euro 1,495 million). Publigaz agreed to the mandatory tender offer and the related reserve has been set to zero.
Cumulative foreign currency translation differences
The cumulative foreign currency translation differences arose
from the translation of financial statements denominated in
currencies other than euro.
Treasury shares
A total of 382,952,240 ordinary shares (382,954,240 as of
December 31, 2008) with a nominal value of euro 1 each, were held
in treasury, for a total cost of euro 6,757 million (same amount
as of December 31, 2008). During the year 2009 the company has
not purchased its own shares and the term established by
Eni’s Shareholders’ Meetings for the purchase has
expired. 19,482,330 treasury shares (23,557,425 as of December
31, 2008) at a cost of euro 414 million (euro 505 million for the
year-ended December 31, 2008) were available for 2002-2005 and
2006-2008 stock option plans.
The decrease of 4,075,095 shares consisted of the following:
Stock option |
||
| Number of shares at December 31, 2008 | 23,557,425 | ||
| Rights exercised | (2,000 | ) | |
| Rights cancelled | (4,073,095 | ) | |
| (4,075,095 | ) | ||
| Number of shares at December 31, 2009 | 19,482,330 |
As of December 31, 2009, options outstanding were 19,482,330
shares. Options refer to the 2002 stock plan for 97,000 shares
with an exercise price of euro 15.216 per share, to the 2003
stock plan for 229,900 shares with an exercise price of euro
13.743 per share, to the 2004 stock plan for 671,600 shares with
an exercise price of euro 16.576 per share, to the 2005 stock
plan for 3,281,500 shares with an exercise price of euro 22.512
per share, to the 2006 stock plan for 3,018,155 shares with an
weighted average exercise price of euro 23.119 per share, to the
2007 stock plan for 5,144,050 with an weighted average exercise
price of euro 27.451 per share and to the 2008 stock plan for
7,040,125 with an exercise price of euro 22.540 per share.
Information about commitments related to stock grant and stock
option plans is included in Note 30 – Operating expenses.
Interim dividend
Interim dividend for the year ended December 31, 2009
amounted of euro 1,811 million corresponding to euro 0.50 per
share, as decided by the Board of Directors on September 10, 2009
in accordance with Article 2433-bis, paragraph 5 of the Italian
Civil Code; the dividend was paid on September 24, 2009.
Distributable reserves
As of December 31, 2009 Eni shareholders’ equity
included distributable reserves in the amount of euro 41,100
million.
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Reconciliation of net profit and shareholders’ equity of the parent company Eni SpA to consolidated net profit and shareholders’ equity
Net profit |
Shareholders’ equity |
|||
| (euro million) | 2008 |
2009 |
Dec. 31, 2008 |
Dec. 31, 2009 |
||||
| As recorded in Eni SpA’s Financial Statements | 6,745 | 5,061 | 30,049 | 32,144 | ||||||||
| Difference between the equity value of individual accounts of consolidated subsidiaries with respect to the corresponding carrying amount in the statutory accounts of the parent company | 4,140 | 158 | 18,999 | 17,464 | ||||||||
| Consolidation adjustments: | ||||||||||||
| - difference between cost and underlying value of equity | (330 | ) | (213 | ) | 5,161 | 5,068 | ||||||
| - elimination of tax adjustments and compliance with accounting policies | (1,373 | ) | (113 | ) | (2,852 | ) | (1,062 | ) | ||||
| - elimination of unrealized intercompany profits | 216 | 117 | (3,127 | ) | (4,582 | ) | ||||||
| - deferred taxation | 159 | 378 | (15 | ) | 1,175 | |||||||
| - other adjustments | 1 | (71 | ) | 295 | (156 | ) | ||||||
| 9,558 | 5,317 | 48,510 | 50,051 | |||||||||
| Minority interest | (733 | ) | (950 | ) | (4,074 | ) | (3,978 | ) | ||||
| As recorded in Consolidated Financial Statements | 8,825 | 4,367 | 44,436 | 46,073 |
27 Other information
On February 4, 2010 Eni formally presented to the
Directorate General for Competition of the European Commission a
set of structural remedies for the conclusion of a legal
proceeding related to some international gas pipelines.
The legal proceeding concerns the Statement of Objections that
Eni received from the European Commission on March 9, 2009 which,
under Article No. 82 of the EC Treaty and Article No. 54 of the
SEE agreement, alleged that during the period 2000-2005, Eni was
responsible for limiting the access of third parties to the gas
pipelines TAG, TENP and Transitgas.
With prior agreement from its partners, Eni has committed to
dispose of its interests in both the German Tenp gas pipeline and
in Switzerland’s Transitgas pipeline which both transport
gas from the sites in the North of Europe.
Given the strategic importance of the Austrian Tag pipeline,
which transports gas from Russia to Italy, Eni has negotiated a
solution with the Commission which calls for the transfer of its
stake into an entity controlled by the Italian State. The
remedies negotiated with the Commission do not affect Eni’s
contractual gas transport rights.
The European Commission accepted commitments proposed by Eni and
will implement a market test before adopting a decision under
Article 9 of Regulation (EC) No. 1/2003.
Assets in hand refer to investments in Trans Austria Gasleitung
GmbH (TAG), Trans Europa Naturgas Pipeline GmbH & Co KG
(TENP) and Transitgas AG as well as assets and liabilities mainly
referring to the marketing of the transportation capacity of the
consolidated companies Eni Gas Transport Deutschland SpA and Eni
Gas Transport International SA.
Considering the amounts as of December 31, 2009, the foreseen
disposals concerns the investments accounted for using the equity
method in the amount of euro 210 million, current assets in the
amount of euro 258 million, liabilities in the amount of euro 98
million of which euro 8 million are non-current, and Group’s
equity for a total amount of euro 160 million.
Main acquisitions
Distrigas NV
On October 30, 2008, following the acquisition of a 57.243%
majority stake from the French company Suez-Tractebel, Eni
acquired control over the Belgian company Distrigas NV. On March
19, 2009, Eni finalized the mandatory tender offer on the
minorities of Distrigas. Shareholders, including Publigaz with
its entire interest (31.25%), tendered shares representing
41.617% of the share capital of Distrigas. On May 4, 2009, the
residual 1.14% of the share capital has been acquired by Eni
through a squeeze-out procedure. At December 31, 2009 Eni owns
100% of share capital of Distrigas NV with the exception of a
share with special rights owned by the Belgian State.
Consideration for the acquisition of control amounted to euro
2,751 million, which million includes euro 12 million related to
additional costs directly attributable to the acquisition. The
allocation of the cost, not including the minority interest, to
assets and liabilities was made on a preliminary basis as of
December 31, 2008, and on a definitive basis as of December 31,
2009.
Eni Hewett Ltd
On November 28, 2008, following the finalization of an
agreement with the British company Tullow Oil Ltd Eni acquired a
52% stake and the operatorship of fields in the Hewett Unit and
relevant facilities in the North Sea, with the aim to upgrade
certain depleted
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fields in the area so as to achieve a gas storage facility. Total consideration for this transaction amounted to euro 224 million which was allocated to assets and liabilities on a preliminary basis as of December 31, 2008, and on a definitive basis as of December 31, 2009.
First Calgary Petroleums Ltd
On November 21, 2008, following the acquisition of all of the
common shares Eni gained control of First Calgary Petroleums Ltd,
a Canadian oil and gas company with exploration and development
activities in Algeria. Total consideration for this transaction
amounted to euro 605 million, of which euro 5 million related to
additional costs directly attributable to the acquisition. The
allocation of the cost to assets and liabilities was made on a
preliminary basis as of December 31, 2008, and on a definitive
basis as of December 31, 2009.
Hindustan Oil Exploration Co Ltd (HOEC)
On August 5, 2008, following the execution of a mandatory
tender offer on a 20% stake of the HOEC share capital, Eni
acquired control over the Indian company Hindustan Oil
Exploration Co Ltd (HOEC). The mandatory tender offer was
associated with Eni’s acquisition of 27.18% of HOEC as part
of the Burren deal. Total consideration for this transaction in
the amount of euro 107 million, not including the minority
interest, has been allocated to assets and liabilities on a
preliminary basis as of December 31, 2008, and on a definitive
basis as of December 31, 2009.
The definitive allocation of the costs of the business combinations made during the year ended December 31, 2008 year consisted of the following:
| (euro million) | Distrigas NV (a) |
Eni Hewett Ltd |
First Calgary Petroleums Ltd |
Hindustan Oil Exploration Co Ltd |
||||
Preliminary allocation
at Dec. 31, |
Definitive allocation |
Preliminary allocation
at Dec. 31, |
Definitive allocation |
Preliminary allocation
at Dec. 31, |
Definitive allocation |
Preliminary allocation
at Dec. 31, |
Definitive allocation |
|||||||||
| Current assets | 3,375 | 3,375 | 19 | 20 | 148 | 148 | 115 | 115 | ||||||||
| Property, plant and equipment | 30 | 30 | 118 | 118 | 757 | 855 | 199 | 201 | ||||||||
| Intangible assets | 1,395 | 1,390 | 208 | 217 | ||||||||||||
| Goodwill | 1,245 | 1,248 | 39 | 37 | 88 | 65 | ||||||||||
| Investments | 112 | 112 | 1 | 1 | ||||||||||||
| Other non-current assets | 203 | 203 | ||||||||||||||
| Assets acquired | 6,360 | 6,358 | 384 | 392 | 993 | 1,068 | 315 | 317 | ||||||||
| Current liabilities | 1,796 | 1,796 | 17 | 22 | 45 | 82 | 37 | 37 | ||||||||
| Deferred tax liabilities | 504 | 502 | 91 | 94 | 108 | 147 | 31 | 33 | ||||||||
| Provisions for contingencies | 80 | 80 | 52 | 52 | 6 | 5 | 3 | 3 | ||||||||
| Other non-current liabilities | 88 | 88 | 229 | 229 | 17 | 17 | ||||||||||
| Liabilities acquired | 2,468 | 2,466 | 160 | 168 | 388 | 463 | 88 | 90 | ||||||||
| Minority interest | 1,141 | 1,141 | 120 | 120 | ||||||||||||
| Eni's shareholders equity | 2,751 | 2,751 | 224 | 224 | 605 | 605 | 107 | 107 |
| (a) | It does not include the share of goodwill attributable to minorities whose equity interest has been acquired during 2009. |
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28 Guarantees, commitments and
risks
Guarantees
Guarantees were as follows:
Dec. 31, 2008 |
Dec. 31, 2009 |
|||
(euro million) |
Unsecured guarantees |
Other |
Total |
Unsecured guarantees |
Other |
Total |
||||||
| Consolidated subsidiaries | 13,139 | 13,139 | 9,863 | 9,863 | ||||||||
| Unconsolidated entities controlled by Eni | 151 | 151 | 146 | 146 | ||||||||
| Joint ventures and associates | 6,027 | 1,075 | 7,102 | 6,060 | 1,251 | 7,311 | ||||||
| Others | 8 | 245 | 253 | 5 | 266 | 271 | ||||||
| 6,035 | 14,610 | 20,645 | 6,065 | 11,526 | 17,591 |
Other guarantees issued on behalf of consolidated subsidiaries
in the amount of euro 9,863 million (euro 13,139 million as of
December 31, 2008) primarily consisted of: (i) guarantees given
to third parties relating to bid bonds and performance bonds in
the amount of euro 6,091 million (euro 7,004 million as of
December 31, 2008), of which euro 4,936 million related to the
Engineering & Construction segment (euro 5,965 million as of
December 31, 2008); (ii) VAT recoverable from tax authorities in
the amount of euro 1,171 million (euro 1,248 million as of
December 31, 2008); (iii) insurance risk in the amount of euro
253 million reinsured by Eni (euro 257 million as of December 31,
2008). During 2009, guarantees for euro 2,739 million expired.
Such guarantees were issued on behalf of Eni Gas & Power
Belgium SA following the Share Purchase Agreement with
Suez-Tractebel SA for the acquisition of a 57.24% majority stake
in Distrigas NV. As of December 31, 2009 the underlying
commitment covered by such guarantees was euro 9,783 million
(euro 10,202 million as of December 31, 2008).
Other guarantees issued on behalf of unconsolidated subsidiaries
in the amount of euro 146 million (euro 151 million as of
December 31, 2008) consisted of letters of patronage and other
guarantees issued to commissioning entities relating to bid bonds
and performance bonds in the amount of euro 141 million (euro 146
million as of December 31, 2008). As of December 31, 2009, the
underlying commitment covered by such guarantees was euro 64
million (euro 79 million as of December 31, 2008).
Unsecured guarantees and other guarantees issued on behalf of
joint ventures and associates in the amount of euro 7,311 million
(euro 7,102 million as of December 31, 2008) primarily consisted
of: (i) an unsecured guarantee in the amount of euro 6,037
million (euro 6,001 million as of December 31, 2008) given by Eni
SpA to Treno Alta Velocità - TAV SpA for the proper and timely
completion of a project relating to the Milan-Bologna train link
by CEPAV (Consorzio Eni per l’Alta Velocità) Uno;
consortium members, excluding unconsolidated entities controlled
by Eni, gave Eni liability of surety letters and bank guarantees
amounting to 10% of their respective portion of the work; (ii)
unsecured guarantees, letters of patronage and other guarantees
given to banks in relation to loans and lines of credit received
in the amount of euro 971 million (euro 871 million as of
December 31, 2008), of which euro 692 million related to a
contract released by Eni SpA on behalf of Blue Stream Pipeline Co
BV (Eni 50%) to a consortium of international financial
institutions (euro 716 million as of December 31, 2008); (iii)
unsecured guarantees and other guarantees given to commissioning
entities relating to bid bonds and performance bonds in the
amount of euro 126 million (euro 107 million as of December 31,
2008). As of December 31, 2009, the underlying commitment covered
by such guarantees was euro 814 million (euro 983 million as of
December 31, 2008).
Unsecured and other guarantees given on behalf of third parties
in the amount of euro 271 million (euro 253 million as of
December 31, 2008) consisted primarily of: (i) guarantees issued
on behalf of Gulf LNG Energy and Gulf LNG Pipeline and on behalf
of Angola LNG Supply Service Llc (Eni 13.6%) as security against
payment commitments for fees in connection with the
re-gasification activity. The expected commitment has been valued
at euro 206 million (euro 223 million as of December 31, 2008)
and it is included in the off-balance sheet commitments in the
following paragraph "Liquidity risk"; (ii) guarantees
issued by Eni SpA to banks and other financial institutions in
relation to loans and lines of credit in the amount of euro 23
million on behalf of minor investments or companies sold (euro 19
million as of December 31, 2008).
As of December 31, 2009 the underlying commitment covered by such
guarantees was euro 266 million (euro 232 million as of December
31, 2008).
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Commitments and contingencies
Commitments and contingencies were as follows:
| (euro million) | Dec. 31, 2008 |
Dec. 31, 2009 |
||
| Commitments | 13,382 | 16,668 | ||
| Risks | 1,660 | 1,277 | ||
| 15,042 | 17,945 | |||
Other commitments in the amount euro 16,668 million (euro
13,382 million as of December 31, 2008) mainly related to: (i)
parent company guarantees that were issued in connection with
certain contractual commitments for hydrocarbon exploration and
production activities that was quantified on the basis of the
capital expenditures expected to be incurred which is euro 10,302
million (euro 10,585 million as of December 31, 2008); (ii) a
commitment entered into by Eni USA Gas Marketing Llc on behalf of
Angola LNG Supply Service for the acquisition of regasified gas
at the Pascagoula plant (USA) that will come into force when the
regasification service starts during the period between
2011-2032. The expected commitment has been valued at euro 3,941
million and it is included in the off-balance sheet commitments
in the following paragraph "Liquidity risk"; (iii) a
commitment entered into by Eni USA Gas Marketing Llc on behalf of
Gulf LNG Energy for the acquisition of regasification capacity of
Pascagoula’s terminal (6 bcm/y) over a twenty-year period
(2011-2031). The expected commitment has been valued at euro
1,151 million (euro 1,247 million as of December 31, 2008) and it
is included in the off-balance sheet commitments in the following
paragraph "Liquidity risk"; (iv) a commitment entered
into by Eni USA Gas Marketing Llc on behalf of Cameron Llc for
the acquisition of regasification capacity at the Cameron plant
(USA) (5.7 bcm/y) over a twenty-year period (until 2029). The
expected commitment has been valued at euro 990 million (euro
1,222 million as of December 31, 2008) and it is included in the
off-balance sheet commitments in the following paragraph
"Liquidity risk"; (v) a memorandum of intent signed
with the Basilicata Region, whereby Eni has agreed to invest euro
150 million in the future, also on account of Shell Italia
E&P SpA, in connection with Eni’s development plan of
oil fields in Val d’Agri (euro 180 million as of December
31, 2008). The commitment is included in the off-balance sheet
commitments in the following paragraph "Liquidity
risk"; (vi) a commitment entered into by Eni USA Gas
Marketing Llc for the contract of gas transportation from the
Cameron plant (USA) to the American network. The expected
commitment has been valued at euro 110 million (euro 123 million
as of December 31, 2008) and it is included in the off-balance
sheet commitments in the following paragraph "Liquidity
risk".
Risks in the amount of euro 1,277 million (euro 1,660 million as
of December 31, 2008) primarily relate to potential risks
associated with the value of assets of third parties under the
custody of Eni in the amount of euro 899 million (euro 1,273
million as of December 31, 2008) and contractual assurances given
to acquirers of certain investments and businesses of Eni in the
amount of euro 378 million (euro 387 million as of December 31,
2008).
Non-quantifiable commitments
Under the convention signed on October 15, 1991 by Treno Alta
Velocità - TAV SpA and CEPAV (Consorzio Eni per l’Alta
Velocità) Due, Eni committed to guarantee the execution of
design and construction of the works assigned to the CEPAV
Consortium (to which it is party) and guaranteed to TAV the
correct and timely execution of all obligations indicated in the
convention in a subsequent integration deed and in any further
addendum or change or integration to the same. The regulation of
CEPAV Consortium contains the same obligations and guarantees
contained in the CEPAV Uno Agreement.
Eni is liable for certain non-quantifiable risks related to
contractual assurances given to acquirers of certain of
Eni’s assets, including businesses and investments, against
certain contingent liabilities deriving from tax, social security
contributions, environmental issues and other matters applicable
to periods during which such assets were operated by Eni. Eni
believes such matters will not have a material adverse effect on
Eni’s results of operations and liquidity.
Risk factors
Foreword
The main risks that the Company is facing and actively monitoring
and managing are the following: (i) market risk derived from
exposure to fluctuations in interest rates, foreign currency
exchange rates and commodity prices; (ii) credit risk derived
from the possible default of a counterparty; (iii) liquidity risk
derived from the risk that suitable sources of funding for the
Group’s operations may not be available; (iv) country risk
in the upstream business; (v) operational risk; (vi) the possible
evolution of the Italian gas market; (vii) the specific risks
derived from exploration and production activities.
Financial risks are managed in respect of guidelines defined by
the parent company, targeting to align and coordinate Group
companies policies on financial risks.
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Market risk
Market risk is the possibility that changes in currency
exchange rates, interest rates or commodity prices will adversely
affect the value of the Group’s financial assets,
liabilities or expected future cash flows. The Company actively
manages market risk in accordance with a set of policies and
guidelines that provide a centralized model of conducting
finance, treasury and risk management operations based on
separate entities: the parent company’s (Eni SpA) finance
department, Eni Coordination Center and Banque Eni which is
subject to certain bank regulatory restrictions preventing the
Group’s exposure to concentrations of credit risk and Eni
Trading & Shipping that has the mandate to manage and solely
monitor commodity derivative contracts. In particular, Eni SpA
and Eni Coordination Center manage subsidiaries’ financing
requirements inside and outside of Italy, respectively, covering
funding requirements and using available surpluses. All
transactions concerning currencies and derivative financial
contracts are managed by the parent company as well as the
activity of trading certificates according to the European Union
Emission Trading Scheme. The commodity risk is managed by each
business unit with Eni Trading & Shipping ensuring the
negotiation of hedging derivatives. Eni uses derivative financial
instruments (derivatives) in order to minimize exposure to market
risks related to changes in exchange rates and interest rates and
to manage exposure to commodity prices fluctuations. Eni does not
enter into derivative transactions on a speculative basis. The
framework defined by Eni’s policies and guidelines
prescribes that measurement and control of market risk be
performed on the basis of maximum tolerable levels of risk
exposure defined in accordance with value-at-risk techniques.
These techniques make a statistical assessment of the market risk
on the Group’s activity, i.e., potential gain or loss in
fair values, due to changes in market conditions taking into
account the correlation that exists among changes in fair value
of existing instruments. Eni’s finance departments define
maximum tolerable levels of risk exposure to changes in interest
rates and foreign currency exchange rates, pooling Group
companies risk positions. Eni’s calculation and measurement
techniques for interest rate and foreign currency exchange rate
risks are in accordance with established banking standards, as
established by the Basel Committee for bank activities
surveillance. Tolerable levels of risk are based on a
conservative approach, considering the industrial nature of the
company. Eni’s guidelines prescribe that Eni’s Group
companies minimize such market risks. With regard to the
commodity risk, Eni’s policies and guidelines define rules
to manage this risk aiming at the optimization of core activities
and the pursuit of preset targets of industrial margins. The
maximum tolerable level of risk exposure is pre-defined in terms
of value-at-risk in connection with trading and commercial
activities, while the strategic risk exposure to commodity prices
fluctuations – i.e. the impact on the Group’s business
results deriving from changes in commodity prices – is
monitored in terms of value-at-risk, albeit not hedged in a
systematic way. Accordingly, Eni evaluates the opportunity to
mitigate its commodity risk exposure by entering into hedging
transactions in view of certain acquisition deals of oil and gas
reserves as part of the Group’s strategy to achieve its
growth targets or ordinary asset portfolio management. The Group
controls commodity risk with a maximum value-at-risk limit
awarded to each business unit. Hedging needs from business units
are pooled by Eni Trading & Shipping which also manages its
own risk exposure. The three different market risks, whose
management and control have been summarized above, are described
below.
Exchange rate risk
Exchange rate risk derives from the fact that Eni’s operations are conducted in currencies other than the euro (mainly in the U.S. dollar). Revenues and expenses denominated in foreign currencies may be significantly affected by exchange rates fluctuations due to conversion differences on single transactions arising from the time lag existing between execution and definition of relevant contractual terms (economic risk) and conversion of foreign currency-denominated trade and financing payables and receivables (transactional risk). Exchange rate fluctuations affect Group’s reported results and net equity as financial statements of subsidiaries denominated in currencies other than the euro are translated from their functional currency into euro (translation risk). Generally, an appreciation of the U.S. dollar versus the euro has a positive impact on Eni’s results of operations, and vice versa. Eni’s foreign exchange risk management policy is to minimize economic and transactional exposures arising from foreign currency movements. Eni does not undertake any hedging activity for risks deriving from the translation of foreign currency denominated profits or assets and liabilities of subsidiaries which prepare financial statements in a currency other than the euro, except for single transactions to be evaluated on a case-by-case basis. Effective management of exchange rate risk is performed within Eni’s central finance departments which match opposite positions within Group companies, hedging the Group’s net exposure through the use of certain derivatives, such as currency swaps, forwards and options. Such derivatives are evaluated at fair value on the basis of market prices provided by specialized sources. Changes in fair value of those derivatives are normally recognized through the profit and loss account as they do not meet the formal criteria to be recognized as hedges in accordance with IAS 39. The VAR techniques are based on variance/covariance simulation models and are used to monitor the risk exposure arising from possible future changes in market values over a 24-hour period within a 99% confidence level and a 20-day holding period.
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ENI ANNUAL REPORT / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Interest rate risk
Changes in interest rates affect the market value of
financial assets and liabilities of the company and the level of
finance charges. Eni’s interest rate risk management policy
is to minimize risk with the aim to achieve financial structure
objectives defined and approved in the management’s finance
plans. Borrowing requirements of the Group’s companies are
pooled by the Group’s central finance department in order to
manage net positions and the funding of portfolio developments
consistently with management’s plans while maintaining a
level of risk exposure within prescribed limits. Eni enters into
interest rate derivative transactions, in particular interest
rate swaps, to effectively manage the balance between fixed and
floating rate debt. Such derivatives are evaluated at fair value
on the basis of market prices provided from specialized sources.
Changes in fair value of those derivatives are normally
recognized through the profit and loss account as they do not
meet the formal criteria to be accounted for under the hedge
accounting method in accordance with IAS 39. Value at risk
deriving from interest rate exposure is measured daily on the
basis of a variance/covariance model, with a 99% confidence level
and a 20-day holding period.
Commodity risk
Eni’s results of operations are affected by changes in
the prices of commodities. A decrease in oil and gas prices
generally has a negative impact on Eni’s results of
operations and vice-versa. Eni manages exposure to commodity
price risk arising in normal trading and commercial activities in
view of achieving stable margins. In order to accomplish this,
Eni uses derivatives traded on the organized markets of ICE and
NYMEX (futures) and derivatives traded over the counter (swaps,
forward, contracts for differences and options) with the
underlying commodities being crude oil, refined products or
electricity. Such derivatives are evaluated at fair value on the
basis of market prices provided from specialized sources or,
absent market prices, on the basis of estimates provided by
brokers or suitable evaluation techniques. Changes in fair value
of those derivatives are normally recognized through the profit
and loss account as they do not meet the formal criteria to be
recognized as hedges in accordance with IAS 39. Value-at-risk
derived from commodity exposure is measured daily on the basis of
a historical simulation technique, with a 95% confidence level
and a one-day holding period. The following table shows amounts
in terms of value-at-risk, recorded in 2009 (compared with 2008)
relating to interest rate and exchange rate risks in the first
section, and commodity risk in the second section. VAR values are
stated in U.S. dollars, the currency used in oil products
markets.
(Interest and exchange rate risk - Value at risk - parametric method variance/covariance; holding period: 20 days; confidence level: 99%)
| 2008 | 2009 | |||
| (euro million) | High | Low | Avg | At year end | High | Low | Avg | At year end |
| Interest rate | 12.31 | 0.73 | 4.17 | 6.54 | 6.85 | 1.65 | 3.35 | 1.98 | ||||||||
| Exchange rate | 1.48 | 0.09 | 0.48 | 0.47 | 1.22 | 0.07 | 0.35 | 0.31 |
(Commodity risk: Value at risk - Historic simulation method; holding period: 1 day; confidence level: 95%)
| 2008 | 2009 | |||
| ($ million) | High | Low | Avg | At year end | High | Low | Avg | At year end |
| Area oil, products | 46.48 | 3.44 | 19.88 | 5.43 | 37.51 | 4.74 | 17.65 | 6.64 | ||||||||
| Area Gas & Power (*) | 67.04 | 24.38 | 43.53 | 32.07 | 51.62 | 28.01 | 40.97 | 38.26 |
| (*) | Amounts relating to the Gas & Power business also include results of Distrigas NV starting from the date of acquisition. |
Credit risk
Credit risk is the potential exposure of the Group to losses in
case counterparties fail to perform or pay amounts due. The Group
manages credit risk differently depending on whether credit risk
arises from exposure to financial counterparties or to customers
relating to outstanding receivables. Individual business units
are responsible for managing credit risk arising in the normal
course of the business. The Group has established formal credit
systems and processes to ensure that before trading with a new
counterpart can start, its creditworthiness is assessed. Also
credit litigation and receivable collection activities are
assessed. The monitoring activity of credit risk exposure is
performed at the Group level according to set guidelines and
measurement techniques that establish counterparty limits and
systems to monitor exposure against limits and report regularly
on those exposures. Specifically, credit risk exposure to
multi-business clients and exposures higher than the limit set at
euro 4 million are closely monitored. Monitoring activities do
not include retail clients and public administrations. The
assessment methodology assigns a score to individual clients
based on publicly available financial data and capital,
profitability and liquidity ratios. Based on those scores, an
internal credit rating is assigned to each counterparty and
accordingly allocated to its proper risk category. The Group risk
categories are comparable to those prepared by the main rating
agencies on the marketplace. The Group’s internal ratings
are also benchmarked against ratings prepared by a specialized
external source.
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ENI ANNUAL REPORT / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
With regard to risk arising from financial counterparties, Eni has established guidelines prior to entering into cash management and derivative contracts to assess the counterparty’s financial soundness and rating in view of optimizing the risk profile of financial activities while pursuing operational targets. Maximum limits of risk exposure are set in terms of maximum amounts of credit exposures for categories of counterparties as defined by the Company’s Board of Directors taking into account the credit ratings provided by primary credit rating agencies on the marketplace. Credit risk arising from financial counterparties is managed by the Group central finance departments, including Eni’s subsidiary Eni Trading & Shipping which specifically engages in commodity derivatives transactions. Those are the sole Group entities entitled to be party to financial transactions due to the Group centralized finance model. Eligible financial counterparties are closely monitored to check exposures against limits assigned to each counterparty on a daily basis. Exceptional market conditions have forced the Group to adopt contingency plans and under certain circumstances to suspend eligibility to be a Group financial counterparty. Actions implemented also have been intended to limit concentrations of credit risk by maximizing counterparty diversification and turnover. Counterparties have also been selected on more stringent criteria, particularly in transactions on derivatives instruments and with maturity longer than a three-month period. Eni has not experienced material non-performance by any counterparty. As of December 31, 2009, Eni did not have significant concentration of credit risk.
Liquidity risk
Liquidity risk is the risk that suitable sources of funding for
the Group may not be available, or the Group is unable to sell
its assets on the market place as to be unable to meet short-term
finance requirements and to settle obligations. Such a situation
would negatively impact Group results as it would result in the
Company incurring higher borrowing expenses to meet its
obligations or under the worst of conditions the inability of the
Company to continue as a going concern. As part of its financial
planning process, Eni manages the liquidity risk by targeting
such a capital structure as to allow the Company to maintain a
level of liquidity adequate to the Group’s needs optimizing
the opportunity cost of maintaining liquidity reserves also
achieving an efficient balance in terms of maturity and
composition of finance debt. The Group’s capital structure
is set according to the Company’s industrial targets and
within the limits established by the Company’s Board of
Directors who are responsible for prescribing the maximum ratio
of debt to total equity and minimum ratio of medium and long term
debt to total debt as well as fixed rate medium and long term
debt to total medium and long term debt. In spite of ongoing
tough credit market conditions resulting in higher spreads to
borrowers, the Company has succeeded in maintaining access to a
wide range of funding at competitive rates through the capital
markets and banks. The actions implemented as part of Eni’s
financial planning have enabled the Group to maintain access to
the credit market particularly via the issue of commercial paper
also targeting to increase the flexibility of funding facilities.
In particular in 2009, Eni issued bonds addressed to
institutional investor and to the retail market in the amount of
euro 3 billion and euro 2 billion, respectively. The above
mentioned actions aimed at ensuring availability of suitable
sources of funding to fulfill short term commitments and
obligations due while preserving the necessary financial
flexibility to support the Group’s development plans. In
doing so, the Group has pursued an efficient balance of finance
debt in terms of maturity and composition leveraging on the
structure of its lines of credit particularly the committed ones.
At present, the Group believes it has access to sufficient
funding and has also both committed and uncommitted borrowing
facilities to meet currently foreseeable borrowing requirements.
As of December 31, 2009, Eni maintained short term committed and
uncommitted unused borrowing facilities in the amount of euro
11,774 million, of which euro 2,241 million were committed, and
long term committed unused borrowing facilities in the amount of
euro 2,850 million. These facilities were under interest rates
that reflected market conditions. Fees charged for unused
facilities were not significant.
Eni has a program in place for the issuance of Euro Medium Term
Notes up to euro 15 billion, of which euro 9,211 million were
drawn as of December 31, 2009.
The Group has debt ratings of AA- and A-1+ for long (outlook
negative) and short-term debt, respectively, which has been
assigned by Standard & Poor’s and Aa2 (outlook negative)
and P-1 assigned by Moody’s for long and short-term debt,
respectively.
The tables below summarize the maturities of the Group’s
main contractual obligations for finance debt repayments,
including expected payments for interest charges, and trade and
other payables.
Finance debt
Maturity year |
||
| (euro million) | 2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 and thereafter |
|
Total |
|
| Non current debt | 3,191 | 1,342 | 3,660 | 1,967 | 2,487 | 8,608 | 21,255 | |||||||
| Current financial liabilities | 3,545 | 3,545 | ||||||||||||
| Fair value of derivative instruments | 1,371 | 517 | 133 | 46 | 14 | 98 | 2,179 | |||||||
| 8,107 | 1,859 | 3,793 | 2,013 | 2,501 | 8,706 | 26,979 | ||||||||
| Interest on finance debt | 654 | 570 | 545 | 510 | 426 | 1,159 | 3,864 | |||||||
| Guarantees to banks | 377 | 377 |
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Trade and other payables
Maturity year |
||
| (euro million) | 2010 |
|
2011-2014 |
|
2015 and thereafter |
|
Total |
|
| Trade payables | 10,078 | 10,078 | ||||||
| Advances, other payables | 9,096 | 31 | 23 | 9,150 | ||||
| 19,174 | 31 | 23 | 19,228 |
In addition to finance debt and trade payables presented in
the financial statements, the Group has in place a number of
contractual obligations arising in the normal course of business.
To meet these commitments, the Group will have to make payments
to third parties. The Company’s main obligations are certain
arrangements to purchase goods or services that are enforceable
and legally binding and that specify all significant terms. Such
arrangements include non-cancelable, long-term contractual
obligations to secure access to supply and transport of natural
gas, which include take-or-pay clauses whereby the Company’s
obligations consist of off-taking minimum quantities of product
or service or paying the corresponding cash amount that entitles
the Company to off-take the product in future years. Future
obligations in connection with these contracts were calculated by
applying the forecasted prices of energy or services included in
the four-year business plan approved by the Company’s Board
of Directors and on the basis of the long-term market scenarios
used by Eni for planning purposes to minimum take and minimum
ship quantities.
The table below summarizes the Group principal contractual
obligations as of the balance sheet date, shown on an
undiscounted basis.
Expected payments by period under contractual obligations and commercial commitments
Maturity year |
||
| (euro million) | 2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 and thereafter |
|
Total |
|
| Operating lease obligations (1) | 886 | 889 | 561 | 470 | 415 | 1,034 | 4,255 | |||||||
| Decommissioning liabilities (2) | 79 | 55 | 112 | 161 | 1,640 | 9,280 | 11,327 | |||||||
| Environmental liabilities | 293 | 259 | 257 | 214 | 193 | 687 | 1,903 | |||||||
| Purchase obligations (3) | 14,845 | 14,151 | 13,923 | 14,634 | 14,651 | 175,888 | 248,092 | |||||||
| Gas | ||||||||||||||
| - Natural gas to be purchased in connection with take-or-pay contracts | 13,986 | 13,365 | 13,123 | 13,827 | 13,838 | 169,268 | 237,407 | |||||||
| - Natural gas to be transported in connection with ship-or-pay contracts | 546 | 538 | 545 | 559 | 567 | 3,658 | 6,413 | |||||||
| Other take-or-pay and ship-or-pay obligations | 162 | 154 | 139 | 133 | 131 | 1,068 | 1,787 | |||||||
| Other purchase obligations (4) | 151 | 94 | 116 | 115 | 115 | 1,894 | 2,485 | |||||||
| Other obligations | 21 | 4 | 3 | 3 | 3 | 152 | 186 | |||||||
| of which: | ||||||||||||||
| - Memorandum of intent relating Val d’Agri | 21 | 4 | 3 | 3 | 3 | 152 | 186 | |||||||
| 16,124 | 15,358 | 14,856 | 15,482 | 16,902 | 187,041 | 265,763 |
| (1) | Operating leases primarily regarded assets for drilling activities, time charter and long term rentals of vessels, lands, service stations and office buildings. Such leases did not include renewal options. There are no significant restrictions provided by these operating leases which limit the ability of the Company to pay dividend, use assets or to take on new borrowings. | |
| (2) | Represents the estimated future costs for the decommissioning of oil and natural gas production facilities at the end of the producing lives of fields, well-plugging, abandonment and site restoration. | |
| (3) | Represents any agreement to purchase goods or services that is enforceable and legally binding and that specifies all significant terms. | |
| (4) | Mainly refers to arrangements to purchase capacity entitlements at certain re-gasification facilities in the U.S. |
Over the next four-year period, Eni plans to invest euro 52.8 billion. The table below summarizes Eni’s capital expenditure commitments for property, plant and equipment and capital projects at December 31, 2009. Capital expenditures are considered to be committed when the project has received the appropriate level of internal management approval and for which, usually, procurements have yet been arranged or set. Such costs are included in the amounts shown.
Capital expenditure commitments
Maturity year |
||
| (euro million) | 2010 |
2011 |
2012 |
2013 |
2014 and thereafter |
Total |
||||||
| Committed on major projects | 4,119 | 3,793 | 2,829 | 1,928 | 11,357 | 24,026 | ||||||
| Other committed projects | 9,330 | 5,284 | 3,467 | 3,640 | 7,489 | 29,210 | ||||||
| 13,449 | 9,077 | 6,296 | 5,568 | 18,846 | 53,236 |
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Country risk
Substantial portions of Eni’s hydrocarbons reserves are
located in countries outside the EU and North America, certain of
which may be politically or economically less stable than the EU
or North America. As of December 31, 2009, approximately 80% of
Eni’s proved hydrocarbons reserves were located in such
countries. Similarly, a substantial portion of Eni’s natural
gas supplies comes from countries outside the EU and North
America. In 2009, approximately 60% of Eni’s domestic supply
of natural gas came from such countries. Developments in the
political framework, economic crisis and social unrest can
compromise temporarily or permanently Eni’s ability to
operate or to economically operate in such countries, and to have
access to oil and gas reserves. Further risks associated with
activities in those countries are represented by: (i) lack of
well established and reliable legal systems and uncertainties
surrounding enforcement of contractual rights; (ii) unfavorable
developments in laws and regulations leading to expropriation of
Eni’s titles and mineral assets, changes in unilateral
contractual clauses reducing the value of Eni’s assets;
(iii) restrictions on exploration, production, imports and
exports; (iv) tax or royalty increases; (v) civil and social
unrest leading to sabotages, acts of violence and incidents.
While the occurrence of these events is unpredictable, it is
possible that they can have a material adverse impact on
Eni’s financial condition and results of operations. Eni
periodically monitors political, social and economic risks of
approximately 60 countries where it has invested, or, with regard
to upstream projects evaluation, where Eni is planning to invest
in order to assess returns of single projects based also on the
evaluation of each country’s risk profile. Country risk is
mitigated in accordance with guidelines on risk management
defined in the procedure "Project risk assessment and
management". In the most recent years, unfavorable
developments in the regulatory framework, mainly regarding tax
issues, have been implemented or announced also in EU countries
and in North America.
Operational risk
Eni’s business activities conducted in and
outside Italy are subject to a broad range of laws and
regulations, including specific rules concerning oil and gas
activities currently in force in countries in which it operates.
In particular, those laws and regulations require the acquisition
of a license before exploratory drilling may commence and
compliance with health, safety and environment standards.
Environmental laws impose restrictions on the types, quantities
and concentration of various substances that can be released into
the environment and on discharges to surface and subsurface
water. In particular Eni is required to follow strict operating
practices and standards to protect biodiversity when exploring
for, drilling and producing oil and gas in certain ecologically
sensitive locations (protected areas). Breach of environmental,
health and safety laws exposes employees to criminal and civil
liability and in the case of violation of certain rules regarding
safety on the workplace also companies can be liable as provided
for by a general EU rule on businesses liability due to negligent
or willful conduct on part of their employees as adopted in Italy
with Law Decree No. 231/2001.
Environmental, health and safety laws and regulations have a
substantial impact on Eni’s operations and expenses and
liabilities that Eni may incur in relation to compliance with
environmental, health and safety laws and regulations are
expected to remain material to the group’s results of
operations or financial position in future years. Recently
enacted regulations on safety and health in the workplace in
Italy (Legislative Decree No. 81/2008 and Legislative Decree No.
106/2009) impose a new array of obligations to the Company’s
operations, particularly regarding contractors. New regulations
prescribe that a company adopts certified operational and
organizational systems whereby the Company can discharge possible
liabilities due to a violation of health and security standards
on condition that adopted operational systems and processes
worked properly and were effective.
Eni has adopted guidelines for assessing and managing health,
safety and environmental (HSE) risks, with the objective of
protecting Eni’s employees, the populations involved in its
activity, contractors and clients, and the environment and being
in compliance with local and international rules and regulations.
Eni’s guidelines prescribe the adoption of international
best practices in setting internal principles, standards and
solutions. The ongoing process for identifying, evaluating and
managing HSE operations in each phase of the business activity is
performed through the adoption of procedures and effective
pollution management systems tailored to the peculiarities of
each business and industrial site and on steady enhancement of
plants and process. Additionally, coding activities and
procedures on operating phases allow to reduce the human
component in the plant risk management. Operating emergencies
that may have an adverse impact on assets, people and the
environment are managed by the business units for each site.
These units manage the HSE risk in a systematic way that involves
having emergency response plans in place with a number of
corrective actions to be taken that minimize damage in the event
of an incident. In the case of a major crisis, Divisions/Entities
are assisted by the Eni Unit of Crisis to deal with the emergency
through a team which has the necessary training and skills to
coordinate in a timely and efficient manner resources and
facilities. The integrated management system of health, safety
and environmental matters is supported by the adoption of
Eni’s Model of HSE operations in all the Division and
companies of the Eni Group. This is a procedure based on an
annual cycle of planning, implementation, control, review of
results and definition of new objectives. The model is directed
towards the prevention of risks, the systematic monitoring and
control of HSE performance, in a continuous improvement cycle
(Deming cycle).
Eni is reaching the goal of total certification of its plants.
Industrial and commercial sites of the R&M segment have been
certified as ISO 14001, and six of them are EMAS certified; in
the petrochemical segment facilities are certified under ISO
14001, EMAS and OHSAS 18001. EniPower power stations are EMAS
certified, while in other segments facilities are mainly
certified under ISO 14001 and OHSAS 18001.
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The system for monitoring HSE operational risks is based on
the monitoring of HSE indicators at quarterly intervals and on an
audit plan addressed to three levels: HSE Corporate, HSE business
unit and at site level consisting of:
- internal audits of management systems (performed by Eni
employees or external consultants)
- audits for the confirmation or renewal of certification of
management systems performed annually by external certifying
entities;
- control of compliance with existing HSE regulations;
- specific audits on relevant issues (e.g. following
events/accidents/reported failures).
Eni provides a program of specific training and development to
its HSE staff in order to:
- promote the execution of behaviors consistent with guidelines;
- drive people’s learning growth process by developing
professionalism, management and corporate culture;
- support management knowledge and control of HSE risks.
Risk factors related to the natural gas market
Risks and uncertainties associated with the current
outlook for gas demand and supply in Europe and Italy
In 2009 European gas demand was severely impacted by the
economic downturn (down 7.4% from 2008, assuming normal average
temperatures). As a result of that trend, both producing
activities and request for electricity reduced. The Italian
market was particularly hit by the downturn as demand fell by
approximately 9 bcm from 2008, down 10%, and almost 10 bcm from
the pre-crisis levels seen in 2007, down 12%, assuming normal
average temperatures. In the meantime, new gas supplies entered
the market as several operators, including Eni, completed plans
to upgrade gas import pipelines from gas producing Countries or
to build new facilities to import gas to Europe via LNG.
Particularly, Eni has finalized plans to upgrade the import
capacity of its two main pipelines from Russia and Algeria by 13
bcm/y (the gas pipelines TAG and TTPC), with new capacity
entirely sold to third parties. A new LNG terminal with a
capacity of 8 bcm/y commenced operations late in 2009, operated
by a consortium of competitors. As a result, gas availability on
the Italian market increased at a time when demand actually
shrunk, resulting in a situation of oversupply. In this context,
Eni’s results of the gas marketing business, sales volumes
and average gas selling margins were driven down by rising
competition and weak demand both in Italy and Europe. Large gas
availability on European markets also prevented the Company from
disposing of part of its gas availability by selling it on
European markets. The outlook for gas supply and demand both in
Europe and Italy is challenging as GDP growth in the 27 EU
Countries will remain weak over the next few years and gas demand
is expected to recover only gradually to precrisis levels. In
addition, ongoing patterns towards energy preservation and rising
competition from renewable or alternative sources of energy will
further dampen recovery perspectives of gas demand. Specifically,
at the March 2007 European Council, the European Heads of
Government decided to adopt their Climate Action and Renewable
Energy Package. This legislation was voted by the European
Parliament in December 2008. The package includes a commitment to
reduce greenhouse gas (GHG) emissions by 20% by 2020 compared to
emission levels recorded in 1990 (the target being 30% if an
international agreement is reached), as well as an improved
energy efficiency within the EU Member States of 20% by 2020 and
a 20% renewable energy target by 2020. To factor in those trends,
management has revised down its long-term projections of European
gas demand growth from a previous compound average growth rate
(c.a.g.r.) of 2% till 2020 to a revised 1.5% c.a.g.r. These
assumptions imply an overall consumption of approximately 600 bcm
by 2020 compared to a previous forecast of 720 bcm. Management
also expects the Italian market to grow less than anticipated at
an annual rate that will be slightly lower than 2%, implying a
level of consumption amounting to 94 bcm versus a previous
forecast of 107 bcm at 2020. These demand trends of sluggish
growth associated with ample gas availability on the marketplace
might adversely affect the Company’s results of operations
and cash flow in its gas marketing business over the next few
years.
Current negative trends in gas demand and supply may impair
the Company’s ability to fulfill its minimum off-take
obligations in connection with its take-or-pay, long-term gas
supply contracts
In order to secure long-term access to gas availability,
particularly in view of supplying the Italian gas market, the
Company has signed a number of long-term gas supply contracts
with key producing Countries that supply European gas markets.
These contracts will ensure approximately 62.4 bcm of gas
availability in 2010 (excluding the contribution of other
subsidiaries and associates) with a residual life of
approximately 20 years, and provide take-or-pay clauses whereby
the Company is required to collect minimum predetermined volumes
of gas in each year of the contractual term or, in case of
failure, to pay the whole price, or a fraction of it, of
uncollected volumes up to the minimum contractual quantity. The
take-or-pay clause entitles the Company to collect pre-paid
volumes of gas in later years during the period of contract
execution. Amounts of cash prepayments and time schedules for
collecting pre-paid gas vary from contract to contract. Generally
speaking, cash pre-payments are calculated on the basis of the
energy prices current in the year of non-fulfillment with the
balance due in the year when the gas is actually collected.
Amounts of pre-payments range from 10 to 100 percent of the full
price. The right to collect pre-paid gas expires within a
ten-year term in some contracts or remains in place until
contract expiration in other arrangements. In addition, rights to
collect
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pre-paid gas in future years can be exercised provided that
the Company has fulfilled its minimum take obligation in a given
year and within the limit of the maximum annual quantity that can
be collected in each contractual year. In this case, Eni will pay
the residual price calculating it as the percentage that
complements 100, based on the arithmetical average of monthly
base prices in place in the year of the off-take. Similar
considerations apply to ship-or-pay contractual obligations.
Management believes that the current outlook for gas demand and
large gas availability on the marketplace, as well as the
possible evolution of sector-specific regulation, represent risks
factors to the Company’s ability to fulfill its minimum take
obligations associated with its long-term supply contracts. Under
current contractual terms, in 2009 Eni collected lower volumes
than its minimum take and recognized a trade payables
corresponding to the amount of gas that the Company was
contractually required to collect. Management believes that over
the next three years the Company will experience failure to
fulfill its take-or-pay obligations associated with significant
volumes of gas, unless demand fundamentals improve substantially
and a better balance between demand and supply is achieved on the
marketplace. Currently, the Company is unable to forecast the
timing of such a recovery. In addition, there also exist both a
pricing risk as a portion of the gas purchase price is based on
the prices of the energy parameters recorded in the year of
non-fulfillment, and a volume risk in case the Company is
actually unable to dispose of pre-paid volumes. In this context,
the Company’s selling margins, results of operations and
cash flow may be negatively affected. Based on management’s
projections for sales volumes and prices for the four-year plan
and subsequent years, volumes for which an obligation to pay cash
advances might arise due to take or pay clauses will be off-taken
within contractual terms, thus recovering cash advances. Even if
financing associated with cash advances is factored in, the net
present value associated with those long-term contracts
discounted at the weighted average cost of capital for the Gas
& Power segment still remains a positive and consequently
those contracts do not fall within the category of the onerous
contract provided by IAS 37. In the medium term Eni intends to
preserve the profitability and cash flow generation of its gas
marketing operations. A number of initiatives have been
identified, including:
- maximization of gas sales volumes leveraging on the multiple
presence in a number of markets; market knowledge, the
integration with Distrigas commercial operations and supply
portfolio (which is not expected to have take-or-pay obligations
in future years) and marketing policies aimed at increasing
Eni’s market share in Europe;
- renegotiations of the main long-term supply contracts through
the exercise of the contractual right to amend terms and
conditions of the contracts as provided by specific contractual
clauses in case of significant changes in the market environment,
as those that have been occurring from the second half of 2008.
These renegotiations were finalized early in 2010 with a positive
impact both on 2009 results and on future commercial plans giving
Eni more flexibility in its marketing operations;
- launching of innovative pricing formulas and improving the
quality of services on the core Italian market;
- reduction in the cost-to-serve;
- monitoring and controlling working capital requirements.
Risks associated with sector-specific regulations in Italy
Legislative Decree No. 164/2000 opened the Italian natural
gas market to competition, impacting on Eni’s activities, as
the company is engaged in all the phases of the natural gas
chain. The opening to competition was achieved through the
enactment of certain antitrust thresholds on volumes input into
the national transport network and on volumes sold to final
customers. These enabled new competitors to enter the Italian gas
market, resulting in declining selling margins on gas. Other
material aspects regarding the Italian gas sector regulations are
the regulated access to natural gas infrastructure (transport
backbones, storage fields, distribution networks and LNG
terminals), the provision that activities relating to
infrastructures are mandatory charged to separate companies; the
Code adopted by the Authority for Electricity and Gas on the
issue of unbundling which forbids a controlling entity from
interfering in the decision-making process of its subsidiaries
running gas transport and distribution and other infrastructures
and the circumstance that the Authority for Electricity and Gas
is entrusted with certain powers in the matters of natural gas
pricing and in establishing tariffs for the use of natural gas
infrastructures. Specifically, the Authority for Electricity and
Gas holds a general surveillance power on pricing in the natural
gas market in Italy and the power to establish selling tariffs
for the supply of natural gas to residential and commercial users
consuming less than 200,000 cm/y (qualified as non eligible
customers as of December 31, 2002 as defined by Legislative
Decree No. 164/2000) taking into account the public goal of
containing the inflationary pressure due to rising energy costs.
Accordingly, decisions of the Authority on these matters may
limit the ability of Eni to pass an increase in the cost of fuels
onto final consumers of natural gas. Following a complex and
lengthy administrative procedure started in 2004 and finalized in
March 2007 with Resolution No. 79/2007, the Authority finally
established a new indexation mechanism for updating the raw
material cost component in supplies to residential and commercial
users consuming less than 200,000 cm/y, establishing, among other
things that Italian natural gas importers – including Eni
– must renegotiate wholesale supply contracts in order to
take account a new indexation mechanism of the raw material cost
component. This indexation mechanism has been recently updated
based on Resolution No. 64/2009 of the Authority, which provides
that changes in a preset basket of hydrocarbons are
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transferred to the cost of the supply to those customers. Also
a floor has been established in the form of a fixed amount that
applies only at certain low level of international prices of
hydrocarbons. Also certain provisions of law may limit the
Company’s ability to set commercial margins. Specifically,
Law Decree No. 112 enacted in June 2008 forbids energy companies
like Eni to pass to prices to final customers the higher income
taxes incurred in connection with a supplemental tax rate of 6.5
percentage points introduced by the same decree on energy
companies with a yearly turnover in excess of euro 25 million.
The Authority for Electricity and Gas is in charge of monitoring
compliance with this rule. The Authority has subsequently
established with a set of deliberations that energy companies
have to adopt effective operational and monitoring systems in
order to prevent unlawful increases in final prices of gas. Other
risk factors and uncertainties deriving from the regulatory
framework are associated with the regulation of the access to the
Italian gas transport network that is currently set by Decision
No. 137/2002 of the Authority for Electricity and Gas. The
decision is fully incorporated into the network code presently in
force as prepared by the system’s operator. The decision
sets priority criteria for transport capacity entitlements at
points where the Italian transport network connects with
international import pipelines (the so-called entry points to the
Italian transport system). Specifically, operators that are
holders of take-or-pay contracts, as in the case of Eni, are
entitled to a priority in allocating available transport capacity
within the limit of average daily contractual volumes. Gas
volumes exceeding average daily contractual volumes are not
entitled to any priority and, in case of congestion at any entry
points, they are entitled available capacity on a proportionate
basis together with all pending requests for capacity
assignments. The ability of Eni to collect gas volumes exceeding
average daily volumes as provided by its take-or-pay supply
contracts represents an important operational flexibility that
the Company uses to satisfy demand peaks. In planning its
commercial flows, the Company normally assumes to make full use
of its contractual flexibility and to obtain the necessary
capacity entitlements at the entry points to the national
transport network. Those assumptions may be inconsistent with
rules set by Decision No. 137/2002 specifically with regard to
priority criteria governing capacity entitlements. Eni considers
Decision No. 137/2002 to be illegitimate as it is supposedly in
contrast with the rationale of the European regulatory framework
on the gas market as provided in European Directive 55/2003/CE.
Based on that belief the Company has opened an administrative
procedure to repeal Decision No. 137/2002 before an
administrative court which recently confirmed in part Eni’s
position. An upper grade court also confirmed the Company’s
position. Specifically, the Court stated that the purchase of
contractual flexibility is an obligation on part of the importer,
which responds to a collective interest. According to the Court,
there is no reasonable motivation whereby volumes corresponding
to such contractual flexibility should not be granted priority in
the access to the network, also in case congestion occurs. At the
moment, however, no case of congestion occurred at entry points
to the Italian transport infrastructure such to impair Eni’s
marketing plans. Further uncertainty factors related to the
regulatory framework are the so called gas release measures that
are intended to increase flexibility and liquidity in the gas
market. This measure strongly affected Eni’s marketing
activity in Italy. In 2004, based on certain agreements with the
Antitrust Authority, Eni released in a four-year period a total
amount of 9.2 bcm (2.3 bcm per year between October 1, 2004 and
September 30, 2008) and the related transport capacity. In
addition, in 2007 Eni agreed to adhere to a new gas release
program involving 4 bcm which were disposed of at the virtual
exchange point (PSV) in a two-year period (from October 1, 2007
and September 30, 2009) For thermal year 2009-2010 Italian Law
No. 99/2009 introduced a new obligation for Eni to make
additional sales at the virtual exchange point for a total of 5
bcm of gas in yearly and half-yearly amounts. Although the
allotment procedure (bid) was based on a minimum price set by the
Ministry for Economic Development as proposed by the Authority
(Eni considering this point discriminatory, filed a claim to the
competent authority), only a 1.1 bcm portion of the gas release
was awarded out of the 5 bcm which had been planned. For the next
few years, based on indications of the Authority (in a report to
the Parliament on the situation of the gas and electricity market
in Italy as provided in Resolution PAS 3/2010), Eni cannot
exclude the possibility that new gas release programs will be
imposed on it.
Specific risks associated with exploration and production
of oil and natural gas
Exploration and production of oil and natural gas requires
high levels of capital expenditure and entails particular
economic risks. It is subject to natural hazards and other
uncertainties including those relating to the physical
characteristics of oil or natural gas fields. Exploratory
activity involves numerous risks including the risk of dry holes
or failure to find commercial quantities of hydrocarbons.
Developing and marketing hydrocarbons reserves typically requires
several years after a discovery is made. This is because a
development project involves an array of complex and lengthy
activities, including appraising a discovery in order to evaluate
its commerciality, sanctioning a development project and building
and commissioning related facilities. As a consequence, rates of
return of such long lead-time projects are exposed to the
volatility of oil and gas prices and the risk of an increase in
developing and lifting costs, resulting in lower rates of return.
This set of circumstances is particularly important to those
projects intended to develop reserves located in deep water and
harsh environments, where the majority of Eni’s planned and
ongoing projects are located.
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Risks associated with the cyclicality of the oil and gas
sector
The global economic downturn and the associated reduction in
industrial output recorded in 2008 and for most of 2009 triggered
a sharp decline in worldwide demand for energy, resulting in
significantly lower commodity prices.
In spite of weak fundamentals (level of global demand and level
of inventories), international oil prices have shown a steady
upward trend since the second half of 2009 driven by expectations
for a global economic recovery and OPEC production cuts, settling
by year end in a range of 70-80 $/bbl.
Volatile oil prices pose a critical issue to the sustainability
of capital plans of oil and gas companies, considering that they
are engaged in long lead-time projects. Such projects normally
require lengthy and complex activities for assessing all
technical and commercial aspects and developing and marketing
hydrocarbons. As a consequence, return rates of projects are
exposed to the volatility of oil and gas prices which may be
substantially lower with respect to prices assumed when the
investment decision was made, resulting in lower rates of return.
The Company, likewise other players in the industry, assesses its
oil and gas projects based on long-term scenarios for oil prices,
which reflect management’s best assumptions about the
underlying fundamentals of global demand and offer. The adoption
of long-term prices in assessing capital projects support the
achievement of the planned rates of return.
Eni plans to invest euro 52.8 billion in the four-year period
from 2010 through 2013, at the Company’s long-term price for
Brent crude of 65 $/bbl (in real terms 2013). Of this, euro 37.7
billion, or 71%, will be dedicated to execute projects for
exploring and developing oil and gas reserves. The plan shows an
increase of 8% from the previous plan that was approved when the
trading environment was particularly depressed. The main drivers
which explain the increase are: (i) planned expenditures for
developing new upstream projects, particularly those associated
with reserves development in Iraq, Venezuela and certain fields
offshore Angola; (ii) the circumstance that the Company is
forecasting steady trends in costs for materials and sector
specific services which have fallen far less than what management
has anticipated due to the fast recovery in international oil
prices, and the impact of the decision on part of most oil
companies to maintain their spending patterns substantially
unchanged. In the previous plan, management assumed a decline in
those costs. These increasing trends will be partially offset by
the impact of the US dollar depreciation versus the euro.
Volatile oil prices also influence the reserve replacement ratio.
Changes in oil prices normally trigger two opposite impacts in
proved reserves revisions. On one side, a larger or smaller
amount of reserves is booked in connection with production
sharing agreements and similar contractual schemes. Under such
contracts, the Company is entitled to receive a portion of the
production, the sale of which should cover expenditures incurred
and earn the Company a share of profit. Accordingly, the higher
the reference prices for crude oil used to determine production
and reserves entitlements, the lower the number of barrels to
cover the same dollar amounts hence the amounts of booked
reserves; and vice versa. On the other side, downward revisions
of reserves occur for those marginal amounts of reserves that are
no longer economically producible based on oil prices that are
significantly lower than those at which they were originally
assessed and sanctioned; and the opposite occurs in case of
higher oil prices.
In the Gas & Power segment, Eni’s outlook for the year
2010 factors in a modest improvement in Italian and European gas
demand, recovering from the sharp decline suffered in 2009.
Eni also expects that the gas market will be well supplied as new
import capacity to Europe and Italy is available in light of
recent facility start-ups and upgrades of the main import
pipelines made by Eni and other operators. Those trends, together
with the recently enacted gas release programs in Italy,
represent risk factors to the Company’s ability to maintain
its margins in the marketing business also taking into account
the take or pay clauses of certain long-term supply contracts
which require the Company to collect minimum predetermined
volumes of gas or, in case of failure, to pay the price, or a
portion of it, for uncollected volumes. Under take or pay clauses
the Company is entitled to collect pre-paid volumes of gas in
future years, assuming a stronger recovery in gas demand.
For more information see the specific risk paragraph in the
"Operating Review" of the Gas & Power section in
this annual report.
The Refining & Marketing and the Petrochemical segments are
particularly exposed to the volatility of the economic cycle, as
their respective industries continue to be plagued by excess
capacity, intense competitive pressure, low entry barriers and
commoditized products. These industries are also exposed to
movements in oil prices and the speed at which the prices of
refined products and petrochemicals products adjust to reflect
change in the cost of oil-based feedstock. Normally, a time lag
occurs between movements in oil prices and those of refined and
petrochemical products. As a consequence, in a period of rapidly
escalating feedstock costs, margins on refined and petrochemical
products are negatively affected.
For 2010, Eni’s management does not expect any appreciable
recovery in the main trends that negatively affected the
performances of these businesses last year. In 2009 Eni’s
realized refining margins were sharply lower mirroring the
environment for Brent margins (down 50%), while margins on a mix
of light and heavy crude were further lower, down by 60%, both
under break-even. A number of negative factors contribute to the
reduction. Firstly, significantly compressed light-heavy crude
differentials due to a reduction in heavy crude availability on
the market place negatively affected the profitability of
Eni’s complex refineries. Secondly, the industry continued
to be plagued by weak fundamentals due to excess capacity, high
inventory levels and stagnant demand affecting end-prices, while
feedstock costs have been on an upward trend since the beginning
of the
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second half. Finally, middle-distillates prices plunged to
historical lows in terms of spread versus the cost of oil. At the
moment, management does not expect a reversal in those trends on
the short-term.
In its Petrochemical segment, management has been pursuing a
number of initiatives designed to reduce fixed operating expenses
and to realign the industrial set-up of Eni’s petrochemical
operations with a view of enhancing areas of competitive
advantage. In spite of all this, the achievement of the operating
break-even in this segment depends on a global recovery in the
economy that is uncertain at least in the short-term.
The Engineering & Construction segment followed a different
trend, maintaining a steady order backlog and economic returns,
thanks to a business model articulated across various market
sectors combined with a strong competitive position in frontier
areas, which are traditionally less exposed to the cyclical
nature of this market. The start of operations of new distinctive
assets in 2010 and 2011 coupled with the size and quality of the
backlog and the strong operating performance on projects,
underpin expectations for a further significant strengthening of
Saipem’s competitive position in the medium term.
Other information about financial instruments
The carrying amount of financial instruments and relevant
economic effect as of and for the years ended December 31, 2008
and 2009 consisted of the following:
| 2008 | 2009 | |||
| Finance income (expense) recognized in: | Finance income (expense) recognized in: | |||
| (euro million) | Carrying amount | Profit and loss account | Equity | Carrying amount | Profit and loss account | Equity | ||||||
| Held-for-trading financial instruments | |||||||||||||||||
| Non-hedging derivatives (a) | (374 | ) | (558 | ) | (26 | ) | 45 | ||||||||||
| Held-to-maturity financial instruments | |||||||||||||||||
| Securities (b) | 50 | 2 | 36 | 1 | |||||||||||||
| Available-for-sale financial instruments | |||||||||||||||||
| Securities (b) | 495 | 19 | 3 | 348 | 13 | 1 | |||||||||||
| Receivables and payables and other assets/liabilities valued at amortized cost | |||||||||||||||||
| Trade and receivables and other (c) | 22,446 | (254 | ) | 20,348 | (361 | ) | |||||||||||
| Financing receivables (b) | 1,908 | 117 | 1,637 | 72 | |||||||||||||
| Trade payables and other (d) | 20,570 | (53 | ) | 19,174 | (48 | ) | |||||||||||
| Financing payables (b) | 20,837 | (607 | ) | 24,800 | (552 | ) | |||||||||||
| Assets at fair value through profit or loss (fair value option) | |||||||||||||||||
| Investments (b) | 2,741 | 241 | 163 | ||||||||||||||
| Net liabilities for hedging derivatives (e) | 280 | 1,012 | 964 | 751 | 161 | (636 | ) |
| (a) | In the profit and loss account, incomes were recognized within "Other operating income (loss)" for euro 49 million (expenses for euro 131 million at December 31, 2008) and within "Finance income (expense)" for euro 4 million (expenses for euro 427 million at December 31, 2008). | |
| (b) | Income or expense were recognized in the profit and loss account within "Finance income (expense)". | |
| (c) | In the profit and loss account, essentially impairments were recognized within "Purchase, services and other" for euro 427 million (euro 385 million at December 31, 2008) while positive exchange differences arising from accounts denominated in foreign currency and translated into euro at year-end were recognized within "Finance income (expense)" for euro 66 million (euro 131 million at December 31, 2009). | |
| (d) | In the profit and loss account, primarily exchange differences arising from accounts denominated in foreign currency and translated into euro at year-end were recognized within "Finance income (expense)". | |
| (e) | Income or expense were recognized in the profit and loss account within "Net sales from operations" and "Purchase, services and other" for euro 155 million (euro 1,005 million at December 31, 2008) within "Finance income (expense)" for euro 6 million (euro 7 million at December 31, 2008) (time value component). |
Fair value of financial instruments
Following the classification of financial assets and
liabilities, measured at fair value in the balance sheet, is
provided according to the fair value hierarchy defined on the
basis of the relevance of the inputs used in the measurement
process. In particular, on the basis of the features of the
inputs used in making the measurements, the fair value hierarchy
shall have the following levels:
| (a) | Level 1: quoted prices (unadjusted) in active markets for identical financial assets or liabilities; | |
| (b) | Level 2: measurements based on the basis of inputs, other than quoted prices above, which, for assets and liabilities which have to be measured, can be observable directly (e.g. prices) or indirectly (e.g. deriving from prices); | |
| (c) | Level 3: inputs not based on observable market data. |
Financial instruments measured at fair value in the balance sheet as of at December 31, 2009 were classified as follows: (i) level 1, "Other financial assets held for trading or available for sale"; (ii) level 2, derivative instruments included in "Other current assets", "Other non-current assets", "Other current liabilities" and "Other non-current liabilities". During 2009 no transfers were done between the different hierarchy levels of fair value. More information about the amount of financial instruments valued at fair value
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are provided in Note 2 – Other financial assets held for trading or available for sale, Note 7 – Other current assets, Note 14 – Other non-current assets, Note 19 – Other current liabilities and Note 24 – Other non-current liabilities.
Legal Proceedings
Eni is a party to a number of civil actions and
administrative arbitral and other judicial proceedings arising in
the ordinary course of business. Based on information available
to date, and taking into account the existing risk provisions,
Eni believes that the foregoing will not have an adverse effect
on Eni’s Consolidated Financial Statements.
The following is a description of the most significant
proceedings currently pending. Unless otherwise indicated below,
no provisions have been made for these legal proceedings as Eni
believes that negative outcomes are not probable or because the
amount of the provision cannot be estimated reliably.
1. Environment
1.1 Criminal proceedings
ENI SPA
(i) Subsidence. The Court of Rovigo
conducted investigations concerning a subsidence phenomenon
allegedly caused by hydrocarbon exploration and extraction
activities in the Ravenna and North Adriatic area both on land
and in the sea. Eni appointed an independent and
interdisciplinary scientific commission, composed of prominent
and highly qualified international experts of subsidence caused
by hydrocarbon exploration and extraction activities, with the
aim of verifying the magnitude and effects and any actions
appropriate to reduce or to neutralize any subsidence phenomenon
in the area. This commission produced a study which excludes the
possibility of any risk to human health or damage to the
environment. The study also states that worldwide there are no
instances of accidents of harm to public safety caused by
subsidence induced by hydrocarbon production. It also shows that
Eni employs the most advanced techniques for monitoring,
measuring and controlling the soil. This proceeding is in the
first level hearing stage. The Veneto Region, other local bodies
and two private entities have been acting as plaintiffs. Eni was
admitted as a defendant. At the end of the renewed preliminary
investigations the Court of Ravenna requested the closing of the
proceeding. According to press news a number of plaintiffs would
file appeals against this decision.
(ii) Alleged damage - Prosecuting body: Public Prosecutor of
Gela. In 2002, the public prosecutor of Gela commenced a
criminal investigation to ascertain alleged damage caused by
emissions of the Gela plant, owned by Polimeri Europa SpA,
Syndial SpA (formerly EniChem SpA) and Raffineria di Gela SpA.
The judge for the preliminary hearing dismissed the accusation of
adulteration of food products, while the proceeding for the other
allegations regarding pollution and environmental damage remains
underway. The trial ended in acquittal with regard to the general
manager and officer pro tempore of the refinery. The sentence of
the Gela Tribunal stated that the charges were lacking factual
basis. A number of farmers of Gela area, who have been acting as
plaintiffs in the first level hearing stage, filed an appeal
against the acquittal sentence in the civil action. In the first
hearing on December 17, 2009, the public prosecutor asked for the
dismissal of the appeal confirming the motivations of the
acquittal sentence in the first degree proceeding. The Court of
Rome postponed the proceeding to the hearing of February 25,
2010. In February 25, 2010 the Court confirmed the acquittal
sentence. The Court would file the grounds of the judgments
within the next 60 days.
(iii) Alleged negligent fire in the refinery of Gela. In
June 2002, in connection with a fire at the refinery of Gela, a
criminal investigation began concerning alleged negligent fire,
environmental crimes and crimes against natural beauty. First
degree proceedings ended with an acquittal sentence. In November
2007, the public prosecutors of Gela and of Caltanissetta filed
an appeal against this decision. In the first hearing the Court
re-opened the examining phase, arranging a collegial appraiser.
On December 10, 2009 the appraisers appointed by the Court filed
their report. On January 21, 2010, the Court of Caltanissetta
announced an acquittal sentence for all the defendants.
(iv) Investigation of the quality of ground water in the area
of the refinery of Gela. In 2002, the public prosecutor of
Gela commenced a criminal investigation concerning the refinery
of Gela to ascertain the quality of ground water in the area of
the refinery. Eni is charged of having breached environmental
rules concerning the pollution of water and soil and of illegal
disposal of liquid and solid waste materials. The preliminary
hearing phase was closed for one employee who would stand trial,
while the preliminary hearing phase is ongoing for other
defendants. During the hearings the judge admitted as plaintiffs
three environmental associations. The proceeding was subsequently
assigned to a different judge and was disposed the renewal of the
debate phase. In the said phase were examined indictment and
defense witnesses. Subsequently it was examined the first
technical appraiser of the defense. The proceeding continues with
examination of another technical appraiser of the defense.
(v) Alleged negligent fire (Priolo). The public prosecutor
of Siracusa commenced an investigation regarding certain Eni
managers who were previously in charge of conducting operations
at the Priolo refinery (Eni divested this asset in 2002) to
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ascertain whether they acted with negligence in connection
with a fire that occurred at the Priolo plants on April 30 and
May 1-2, 2006. After preliminary investigations the public
prosecutor requested the opening of a proceeding against the
mentioned managers for negligent behavior. The first hearing, in
which the parties could present themselves as plaintiffs, was
scheduled for February 26, 2010. On February 5, 2010, the Court
of Siracusa following the exception of inadmissibility issued by
the defendants, admitted as a plaintiff the only Ministry for the
Environment excluding all the other counterparts, including the
Council of Ministers. The proceeding continues with the
examination of three witnesses of the Public Prosecutor.
(vi) Groundwater at the Priolo site - Prosecuting body: Public
Prosecutor of Siracusa. The Public Prosecutor of Siracusa
(Sicily) has started an investigation in order to ascertain the
level of contamination of the groundwater at the Priolo site. The
Company has been notified that a number of its executive officers
are being investigated who were in charge at the time of the
events subject to probe, including chief executive officers and
plant general managers of the Company’s subsidiaries
AgipPetroli SpA (now merged into the parent company Eni SpA in
the Refining & Marketing division), Syndial and Polimeri
Europa. Probes on technical issues required by the Prosecutor
were finalized on October 15, 2009. On February 25, 2010 the
technical survey was filed. According to this report the ground
and the groundwater at the Priolo site should be considered
polluted according to Law Decree 152/2006. This contamination was
caused by a spill-over made in the period prior to 2001 and not
subsequent to 2005; the equipments still operating on the site
represent another source of risk, in particular the ones owned by
another operator. According to the findings of this report the
defense of Syndial, Polimeri Europa and Eni SpA (Refining &
Marketing division) will file a defensive memorandum to request
the dismissal of the proceeding.
SYNDIAL SPA
(vii) Porto Torres - Prosecuting body: Public Prosecutor of
Sassari. In March 2009, the Public Prosecutor of Sassari
(Sardinia) resolved to commence a criminal trial against a number
of executive officers and managing directors of companies
engaging in petrochemicals operations at the site of Porto
Torres, including the manager responsible for plant operations of
the Company’s fully-owned subsidiary Syndial. The charge
involves environmental damage and poisoning of water and stuff
destined to feeding. In the preliminary hearing on July 17, 2009,
the Province of Sassari, the Association Anpana (animal
preservation) and the company Fratelli Polese Snc situated in the
industrial site have been acting as plaintiffs. None of these
parties claimed the identification of the civil responsible and
the damage quantification that will be asked in a second step.
The legal defense of Syndial requested further time for the
recognition of the proceeding plaintiffs and the verification of
their right to institute proceedings. The defense of Syndial
filled a number of exceptions on the admissibility in acting as
plaintiffs of the counterpart; the judge will resolve the
question in the hearing which has been scheduled for February 19,
2010. In this hearing the judge, based on the exceptions issued
by Syndial on the lack of connection between the action as
plaintiff and the charge, excluded all the counterparts that have
been acting as plaintiff with regard to the serious pathologies
related to the existence of poisoning agents in the fishing
talent of the industrial port of Porto Torres; the judge admitted
as plaintiffs the Municipality of Sassari, the Environmental
Association Anpana and the company Fratelli Polese Snc. The judge
also requested that Syndial SpA, Polimeri Europa SpA, Ineos
Vinyls and Sasol Italy SpA stand trial. The proceeding continues
for the constitution as defendants of the said parts.
1.2 Civil and administrative proceedings
SYNDIAL SPA (FORMER ENICHEM SPA)
(i) Alleged pollution caused by the activity of the Mantova
plant. In 1992, the Ministry of Environment summoned EniChem
SpA (now Syndial SpA) and Edison SpA before the Court of Brescia.
The Ministry requested, primarily, environmental remediation for
the alleged pollution caused by the activity of the Mantova plant
from 1976 until 1990, and provisionally, in case there was no
possibility to remediate, the payment of environmental damages.
Edison agreed on a settlement with the Ministry whereby Edison
quantified compensation for environmental damage freeing from any
obligation Syndial, which purchased the plant in 1989.
Negotiations between the parts for the quantification of the
environmental damage (relating only to 1990) are underway; the
judgment has been postponed a number of times until the next
hearing that has been scheduled for January 28, 2010. This
hearing has been adjourned again to July 22, 2010 because
negotiations between the parties are underway.
(ii) Summon before the Court of Venice for environmental
damages allegedly caused to the lagoon of Venice by the Porto
Marghera plants. On December 2002, EniChem SpA (now Syndial
SpA), jointly with Ambiente SpA (now merged into Syndial SpA) and
European Vinyls Corporation Italia SpA (EVC Italia, then Ineos
Vinyls SpA, actually Vinyls Italia SpA) was summoned before the
Court of Venice by the Province of Venice. The province requested
compensation for environmental damages that initially were not
quantified, allegedly caused to the lagoon of Venice by the Porto
Marghera plants, which were already the
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subject of two previous criminal proceedings against employees
and managers of the defendants. EVC Italia and the actual
company, Vinyls, presented an action to be indemnified by
Eni’s Group companies in case the alleged pollution is
proved. The Province of Venice, in the preliminary stage of the
proceeding, filed claims amounting to euro 287 million. Syndial
submitted its written reply evidencing that the abovementioned
damage quantification has been made lacking of probations for the
damage and based on evidence that allowed the Court of First and
Second Instance to disclaim EniChem of any responsibility through
definitive sentence. In the hearing on October 16, 2009,
scheduled to review the technical appraisal, the Court declared
the interruption of the proceeding because Vinyls Italia had
undergone a reorganization procedure. The proceeding is suspended
until the eventual action as plaintiff of the Province of Venice.
(iii) Claim of environmental damages, allegedly caused by
industrial activities in the area of Crotone - Prosecuting
Bodies: the Council of Ministers, the Delegated Commissioner for
Environmental Emergency in the Calabria Region and the Calabria
Region. The council of Ministers, the Ministry for the
Environment, the Delegated Commissioner for Environmental
Emergency in the Calabria Region and the Calabria Region
requested Syndial to appear before the Court of Milan in order
Syndial is condemned to compensate for the environmental damage
caused by the operations of Pertusola Sud SpA (merged in EniChem,
now Syndial) in the Crotone site. This first degree proceeding
was generated in January 2008 by the unification of two different
actions, the first brought by Calabria Region in October 2004,
the second one by the council of Ministers, the Ministry for the
Environment and the Delegated Commissioner for Environmental
Emergency in the Calabria Region commenced in February 2006. The
Calabria Region is claiming compensation amounting to euro 129
million for the site environmental remediation and clean-up on
the basis of the cost estimation provided in the remediation plan
submitted by the Delegated Commissioner, plus additional
compensation amounting to a preliminary estimate of euro 800
million relating to environmental damage, estimated increases in
the regional health expenditures and damage to the public image
to be fairly determined during the civil proceeding. The council
of Ministers, the Ministry for the Environment and the Delegated
Commissioner is claiming compensation amounting to euro 129
million for the site environmental remediation and clean-up (this
request is analogous to that of the Calabria Region) and eventual
compensation for other environmental damage to be fairly
determined during the civil proceeding. In February 2007 the
Ministry for the Environment filed with the Court an independent
appraiser’s report issued by APAT that estimated a
refundable environmental damage amounting to euro 1,920 million,
including the remediation and clean-up expenditures, increased by
euro 1,620 million from the original amount of euro 129 million,
and an estimation of environmental damage and other damage items
amounting approximately to euro 300 million. The amounts
estimated by the independent appraiser, added to the claim of the
Calabria Region, generate a total of euro 2,720 million of
potential compensation. In May and September 2007 Syndial
presented its own technical advice that, based on what the
Company believes to be well-founded circumstances, vigorously
object the independent appraiser’s findings filed by the
Ministry for the Environment on site contamination, the
responsibility of Syndial in the contamination of the site, the
criteria of estimate remediation costs, which according to the
Company are erroneous, arbitrary and technically inadequate. On
October 7, 2009 an independent appraiser report was filed that
reviewed the environmental status of the site and estimated the
remediation costs while the estimate of both the health damage
caused by the pollution and the environmental damage would be
issued in a further independent appraiser report. The findings of
the independent appraisers are substantially in line with the
issues expressed by Syndial on the measures for the environmental
remediation and clean-up, based on a risk analysis aimed to
define effective and specific actions. The clean-up project,
approved to a great extent by the ministry for the Environment
and the Calabria Region, has been considered substantially
adequate. The independent appraisers affirmed the necessity of
clean-up measures that were not planned by Syndial on one of the
external areas (the so-called archaeological area) and considered
being unnecessary the dredging of sea sediments. The estimated
clean-up costs are in line with the estimate made by Syndial. The
independent appraiser report is less favorable to Syndial because
it identifies as source of the contamination the production slag
management, even recent. The independent appraiser report
evaluated that the production technology was a BAT (best
available technology), instead the slag treatment could be
performed in a more respectful way for the environment and the
products (the so-called Cubilot) lacked the physic-chemical
characteristic of stability that would avoided the emission of
polluting agents in the soil. As regards the quantification of
the environmental damage different by the remediation, the
independent report APAT provided by the Ministry of Environment
quantified the damage for the lack of fruition of the site basing
on the remediation costs that were significantly reduced by the
independent appraiser report. In case the judge resolves on the
responsibility of Syndial in the contamination of the site based
on the conclusions of the independent appraiser report, the
Company could be liable, for the environmental damage different
from the goods fruition (damage to the community, increases in
the regional health expenditures), at least in part and as far as
the damage is actually probed. On November 14, 2009 Syndial filed
its objections to the independent appraiser report, sharing the
conceptual model adopted by the independent appraiser report but
demonstrating that the site contamination should be charged
mainly to
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past management of the pollution slag on part of other
operators that operated the site until the ’70s. On November
11, 2009 the Calabria Region filed its objection to the
independent appraiser report affirming that the environmental
damage to the surrounding areas of the site has not been assessed
by the independent appraisers. The hearing for the review of the
independent appraiser report and of the parts objections has been
scheduled for April 13, 2010, as it has been assigned to another
judge.
In order to arrange for a possible resolution of all
environmental claims, in 2007 Eni’s subsidiary Syndial took
charge of the management of the clean-up activities and on
December 5, 2008 presented a new clean-up project. As for the
approval procedure of the abovementioned project all interested
parties approved the removal of the dump from the seafront to
another area, the construction of an hydraulic barrier and of the
related treatment plant of the groundwater (providing that if the
subsequent monitoring would demonstrate the efficiency of the
plant, Eni’s subsidiary would build up a physical barrier in
the seafront) and the start-up of the first lot of activities on
the soil through in situ technologies on condition that all the
waste present in the areas, recognized after a specific
inspection.
Initially, the environmental provision made by Syndial in its
financial statements amounted to euro 103 million based on the
cost estimation of the original clean-up project, as the
Eni’s subsidiary believes to have no responsibility for the
environmental damage considering the limited period during which
it conducted industrial activities in the site and the Delegated
Commissioner responsibility for not having properly managed the
site cleanup activities. In the 2008 financial statements, Eni
increased the environmental provision by euro 154 million
bringing the total amount of the environmental provision related
to the clean-up project to euro 257 million. The provision
doesn’t cover the entire amount of clean-up project expenses
(euro 300 million) considering the circumstance that it has been
only partially approved. It must be noted that in 2003 the
Delegated Commissioner for Environmental Emergency, Calabria
Region and Province of Crotone presented a first claim for the
payment of damages. With a decision in May 2007, the Court of
Milan declared the invalidity of the power of proxy conferred to
the Delegated Commissioner to act on behalf of the Calabria
Region with the notice served to Syndial SpA and decided the
liquidation of expenses born by the defendant. The appeal against
that decision is pending. The claims made in this first instance
are substantially absorbed in the two subsequent proceedings.
(iv) Summon for alleged environmental damage caused by DDT
pollution in the Lake Maggiore - Prosecuting body: Ministry of
the Environment. With a temporarily executive decision dated
July 3, 2008 the District Court of Turin sentenced the subsidiary
Syndial SpA (former EniChem) to compensate for environmental
damages that were allegedly caused when EniChem managed an
industrial plant at Pieve Vergonte during the 1990-1996 period.
Specifically, the Court sentenced Syndial to pay the Italian
Ministry of the Environment compensation amounting to euro
1,833.5 million, plus legal interests that accrue from the filing
of the decision. Syndial and Eni technical-legal consultants have
considered the decision and the amount of the compensation to be
without factual and legal basis and have concluded that a
negative outcome of this proceeding is unlikely. Particularly,
Eni and its subsidiary deem the amount of the environmental
damage to be absolutely ill-founded as the sentence has been
considered to lack sufficient elements to support such a material
amount of the liability charged to Eni and its subsidiary with
respect to the volume of pollutants ascertained by the Italian
Environmental Minister. On occasion of the 2008 consolidated
financial statements, management confirmed its stance of making
no loss provision for this proceeding on the basis of the
abovementioned technical legal advice, in concert with external
consultants on accounting principles. In July 2009, Eni’s
subsidiary Syndial filed an appeal against the abovementioned
sentence, also requesting suspension of the sentence
effectiveness. The Ministry of the Environment, in the appeal
filed, requested to the Second Instance Court to adjust the first
degree sentence condemning Syndial to the payment of euro 1,900
million or alternatively euro 1,300 million in addition to the
amount assessed by the First Degree Court. In the hearing on
December 11, 2009, the Second Instance Court considering the
modification of Environmental Damage regulation introduced by the
Article 5 of the Law Decree 135/2009 and following a request of
the Board of State lawyers decided the postponement to May 28,
2010, pending the Decree of the Ministry of the Environment
related to the determination of the quantification criteria for
the monetary compensation of the environmental damage pursuant to
the abovementioned Article 5-bis of the Law Decree No. 135/2009.
The Board of State lawyers committed itself to not examine the
sentence until the next hearing. Another administrative
proceeding is ongoing regarding a ministerial decree enacted by
the Italian Ministry for the Environment. The decree provides
that Syndial executes the following tasks: (i) the upgrading of a
hydraulic barrier to protect the site; and (ii) the design of a
project for the environmental remediation of Lake Maggiore. The
Administrative Court of Piemonte rejected Syndial’s
opposition against the outlined environmental measures requested
by the Ministry of the Environment. However, the Court judged the
prescriptions of the Ministry regarding the remediation of the
site to be plain findings of an environmental enquiry to
ascertain the state of the lake. Syndial has filed an appeal
against the decision of the Court before an upper degree body,
also requesting suspension of the effectiveness of the decision.
The appeal has been put on hold considering that a plan to
ascertain the environmental status of the site has been approved
by all interested parties, including the Ministry and local
municipalities pursuant to the statement on April 28, 2009, which
included certain recommendations. Syndial appealed against this
statement and the related Ministerial Decree of approval
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in order to avoid the case to give implicit consent to the
request (appealed by the Company) of the Minister that claimed
that Syndial is obliged to execute the clean-up. On the contrary,
Syndial has agreed on the scope of the plan to ascertain the
environmental status of the site, as it has been actually
implementing it.
Syndial also presented a clean-up project for the groundwater and
the soil, that hasn’t been approved, as the abovementioned
prescriptions that have been prescribed are the object of the
Company opposition in the abovementioned proceeding. In case
Syndial should be found guilty, it would incur remediation and
cleanup expenses, actually not quantifiable, that would be offset
against any compensation for the environmental damage that
Eni’s subsidiary is condemned to pay with regard to civil
proceeding pending before the second instance court of Turin.
(v) Action commenced by the Municipality of Carrara for the
remediation and reestablishment of previous environmental
conditions at the Avenza site and payment of environmental
damage. The Municipality of Carrara commenced an action
before the Court of Genova requesting Syndial SpA to remediate
and restore previous environmental conditions at the Avenza site
and the payment of unavoidable environmental damage (amounting to
euro 139 million), further damages of various types (e.g. damage
to the natural beauty of this site) amounting to euro 80 million
as well as damages relating to loss of profit and property
amounting to approximately euro 16 million. This request is
related to an accident that occurred in 1984, as a consequence of
which EniChem Agricoltura SpA (later merged into Syndial SpA), at
the time owner of the site, carried out safety and remediation
works. The Ministry of the Environment joined the action and
requested environmental damage payment – from a minimum of
euro 53.5 million to a maximum of euro 93.3 million – to be
broken down among the various companies that ran the plant in the
past. Syndial summoned Rumianca SpA, Sir Finanziaria SpA and
Sogemo SpA, who ran the plant in previous years, in order to be
guaranteed. A report produced by an independent expert charged by
the judge was filed with the Court. The findings of this report
quantify the residual environmental damage at euro 15 million.
With a sentence of March 2008, the Court of Genova rejected all
claims made by the Municipality of Carrara and the Ministry of
Environment. Both plaintiffs filed an appeal against this
decision in June 2008 confirming the requests issued in the first
judgment degree and a total compensation in the amount of euro
189.8 million. Syndial filed in the appeal hearing, disputing the
plaintiffs’ claims. The proceeding is underway without any
further investigation. The hearing has been postponed to July
2010 for the filing of the pleadings.
(vi) Ministry for the Environment Augusta harbor. The
Italian Ministry for the Environment with various administrative
acts prescribed companies running plants in the petrochemical
site of Priolo to perform safety and environmental remediation
works in the Augusta harbor. Companies involved include Eni
subsidiaries Polimeri Europa, Syndial and Eni R&M. Pollution
has been detected in this area primarily due to a high mercury
concentration which is allegedly attributed to the industrial
activity of the Priolo petrochemical site. The abovementioned
companies opposed said administrative actions, objecting in
particular to the way in which remediation works have been
designed and information on concentration of pollutants has been
gathered. The Regional Administrative Court of Catania with the
Sentence No. 1254/2007 annulled the said decisions. The Ministry
and the municipalities of Augusta and Melilli filed a claim for
the revocation of the decision and requested the suspension of
sentence effectiveness with the Administrative Council of the
Sicily Region which accepted the claim. The recommendations which
the Council’s decision related, have been restated by the
Ministry for the Environment with further administrative
resolutions that have been appealed by the Eni companies. Again
the Regional Administrative Court of Catania reiterated its
decision to suspend the effectiveness of the Ministry’s
acts.
In January 2008 the Regional Court of Catania accepted further
claims on this matter. In June 2008 the Ministry for the
Environment and the Municipalities of Melilli and Augusta filed
an appeal against the decision of the Regional Court of Catania
with the Administrative Council of the Sicily region, without a
resolution of the issue of suspending the effectiveness of the
Regional Court’s decisions.
The hearing for the examination of both appeal pending with the
Administrative Council of the Sicily Region that has been
originally scheduled on December 11, 2008, has been postponed sine
die due to preliminary issues pending with the Court of
Justice of the European community.
In April 2008, the Eni companies challenged certain
administrative acts of December 20, 2007 related to the execution
of further clean-up and remediation works of sediments in the
Augusta harbor. In this proceeding the Regional Court of Catania
has ordered an independent appraiser report, issued on February
20, 2009, that resulted favorable to the objections of the
recurring companies. The proceeding is pending.
In May 2008, the Eni companies also challenged with the Regional
Court of Catania, requesting the suspension of administrative act
effectiveness, certain decisions of an Administrative Body on
March 6, 2008 (and other subsequent decisions). Those decisions
were intended to enlarge the scope of the already approved
project of environmental remediation and clean-up of the
groundwater trough works of physic limitation and the new
criteria used by the Administration Body in the restitution of
the areas to their legitimate use. With regard to this last
proceeding, basing on a request of the appealing companies, the
Regional
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Court of Catania requested the decision of the Court of
Justice of EU to decide on the correct application of the
community principle, that represent the basis for the all
appeals’ decision particularly the principles of the
liability associated with the environmental damage, the
proportionality in bearing the expenditures associated with
environmental remediation and clean-up, as well as a criteria of
reasonableness and diligent execution in remedying an
environmental damage. On March 9, 2010 the European Court gave a
sentence that basically represented a favorable outcome for
Eni’s subsidiaries involved in the matter. Specifically, the
European Court confirmed the community principle of the liability
associated with the environmental damage, whereby central to its
correct interpretation is the relation between cause and effect
and the identification of the entity that is actually liable for
polluting.
It must be noted that the Public Prosecutor of Siracusa commenced
a criminal action against unknown in order to verify the
effective contamination of the Augusta harbor and the connected
risks on the execution on the clean-up project proposed by the
Ministry. The technical assessment disposed by the Public
Prosecutor generated the following outcomes: a) no public health
risk in the Augusta harbor; b) absence of any involvement on part
of Eni companies in the contamination; c) drainages
dangerousness. Based on those findings, the Public Prosecutor
decided to dismiss the proceeding.
ENI SPA
(vii) Reorganization procedure of the airlines companies Volare
Group, Volare Airlines and Air Europe - Prosecuting body:
Delegated Commissioner. In March 2009 Eni and its subsidiary
Sofid (now Eni Adfin) were notified of a bankruptcy claw-back as
part of a reorganization procedure filed by the airlines
companies Volare Group, Volare Airlines and Air Europe which
commenced under the provisions of Ministry of Production
Activities, on November 30, 2004. The request regarded the
override of all the payments made by those entities to Eni and
Eni Adfin, as Eni agent for the receivables collection, in the
year previous to the insolvency declaration from November 30,
2003 to November 29, 2004, for a total estimated amount of euro
46 million plus interest. Eni and Eni Adfin were admitted as
defendants and the trial has been postponed to the hearing on May
5, 2010 for the related investigation. Eni accrued a risk
provision with respect to this proceeding.
2. Other judicial or arbitration proceedings
SYNDIAL SPA (FORMER ENICHEM SPA)
(i) Serfactoring: disposal of receivables.
In 1991, Agrifactoring SpA commenced proceedings against
Serfactoring SpA. The claim relates to an amount receivable of
euro 182 million for fertilizer sales (plus interest and
compensation for inflation), originally owed by Federconsorzi to
EniChem Agricoltura SpA and Terni Industrie Chimiche SpA (both
merged into Syndial). Such receivables were transferred by
Agricoltura and Terni Industrie Chimiche to Serfactoring, which
appointed Agrifactoring as its agent to collect payments.
Agrifactoring guaranteed to pay the amount of such receivables to
Serfactoring, regardless of whether or not it received payment on
the due date. Following payment by Agrifactoring to Serfactoring,
Agrifactoring was placed in liquidation and the liquidator of
Agrifactoring commenced proceedings in 1991 against Serfactoring
to recover such payments (equal to euro 182 million) made to
Serfactoring based on the claim that the foregoing guarantee
became invalid when Federconsorzi was itself placed in
liquidation, claiming for the reimbursement of the amount paid to
Serfactoring and not liquidated to Agrifactoring by
Federconsorzi. Syndial and Serfactoring filed counterclaims
against Agrifactoring (in liquidation) for damages amounting to
euro 97 million relating to acts carried out by Agrifactoring SpA
as agent. The amount of these counterclaims was subsequently
reduced to euro 46 million following partial payment of the
original receivables by the liquidator of Federconsorzi and
various setoffs. These proceedings, which were unitized, were
decided with a partial judgment, deposited on February 24, 2004;
the request of Agrifactoring – that was reduced by an
independent accounting consultant to the amount of euro 42.3
million – was rejected and the company was ordered to pay
the sum requested by Serfactoring and Syndial to be determined
following the decision. Agrifactoring appealed this decision and
in June 2008, the trial was decided with a partial judgment that,
reforming the previous judgment of the Court of Rome, granted the
requests of Agrifactoring and condemned Serfactoring to reimburse
Agrifactoring the sum paid by the latter to the former and not
refunded by Federconsorzi. The Court resolved to charge an
independent accounting consultant with quantifying the total
amount paid by Agrifactoring to Serfactoring and the amount paid
by Federconsorzi to Agrifactoring in order to determine the sum
to be reimbursed to Agrifactoring.
The proceeding will continue with the recognition of the
assessment made by the independent accounting consultant.
Serfactoring and Syndial (as precautionary measure, since they
have already filed a preliminary appeal) appealed the above
mentioned partial sentence of 2008 of the second instance Court
of Rome with an upper degree Court. Agrifactoring in turn filed
counterclaim, requesting the declaration of inadmissibility or
the rejection of the appeal. The judgment is still pending. Eni
accrued a provision with respect to this proceeding.
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SAIPEM SPA
(ii) CEPAV Uno and CEPAV Due. Saipem holds interests in the
CEPAV Uno (50.36%) and CEPAV Due (52%) consortia that in 1991
signed two contracts with TAV SpA for the construction of two
railway tracks for high speed/high capacity trains from Milan to
Bologna (under construction) and from Milan to Verona (in the
design phase). With regard to the project for the construction of
the line from Milan to Bologna, an Addendum to the contract
between CEPAV Uno and TAV was signed on June 27, 2003, redefining
certain terms and conditions of the contract. Subsequently, the
CEPAV Uno consortium requested a time extension for the
completion of works and a claim amounting to euro 800 million
then increased to euro 1,770 million. CEPAV Uno and TAV failed to
solve this dispute amicably. CEPAV Uno opened an arbitration
procedure as provided for under terms of the contract on April
27, 2006. The deadline for the submission of the arbitration
determination has been scheduled for December 27, 2011. With
regard to the project for the construction of a high-speed
railway from Milan to Verona, in December 2004, CEPAV Due
presented the final project, prepared in accordance with Law No.
443/2001 on the basis of the preliminary project approved by an
Italian governmental authority (CIPE). As concerns the
arbitration procedure, commenced on December 28, 2000, requested
by CEPAV Due against TAV for the recognition of costs incurred by
the Consortium in the ten-year period from 1991 through 2000 plus
damages suffered, in January 2007, the arbitration committee
determined the Consortium’s right to recover the costs
incurred in connection with the design activities performed. The
technical independent survey to assess the amount of compensation
was submitted on October 19, 2009. The trial ended on February
23, 2010 with the resolution of the arbitration that condemned
TAV to pay to CEPAV Due consortium an amount of euro 44,176,787
plus legal interest and compensation for inflation accrued from
the submission of the arbitration until the date of effective
damage payment; the Court also condemned TAV to pay euro
1,115,000 plus interest and compensation for inflation accrued
from October 30, 2000 until the date of effective damage payment.
TAV filed with the second instance court of Rome an appeal
against the partial arbitration committee’s determination of
January 2007. The hearing for the examination of the pleadings
has been scheduled for January 28, 2011. In February 2007, the
Consortium CEPAV Due notified to TAV a second request of
arbitration following the Decree No. 7 of December 31, 2007, that
revoked the concessions awarded to TAV resulting in the annulment
of arrangements signed between TAV and the Consortium to build
the high-speed railway section from Milan to Verona. The European
Court of Justice was requested to judge on this matter.
Subsequently, Law 133/2008 re-established the concessions awarded
to TAV resulting in the continuation of the arrangements between
the consortium CEPAV Due and a new entity in charge of managing
the Italian railway system. The second arbitration proceeding,
which continued in order to determinate the damages suffered by
the Consortium even in the period prior to the revocation of the
concession through an independent appraiser report. The deadline
for the submission of the arbitration determination has been
scheduled for December 31, 2010.
3. Antitrust, EU Proceedings, Actions of the Authority for Electricity and Gas and of Other Regulatory Authorities
3.1 Antitrust
(i) Abuse of dominant position of Snam alleged by the
Italian Antitrust Authority. In March 1999,
the Italian Antitrust Authority concluded its investigation
started in 1997 and: (i) found that Snam SpA (merged in Eni SpA
in 2002) abused its dominant position in the market for the
transportation and primary distribution of natural gas relating
to the transportation and distribution tariffs applied to third
parties and the access of third parties to infrastructure; (ii)
fined Snam for euro 2 million; and (iii) ordered a review of the
practices relating to such abuses. Snam believes it has complied
with existing legislation and appealed the decision with the
Regional Administrative Court of Lazio requesting its suspension.
On May 26, 1999, stating that these decisions are against Law No.
9/1991 and the European Directive 98/30/EC, this Court granted
the suspension of the decision. The Authority did not appeal this
decision. The decision on the merit of this dispute is still
pending before the same Administrative Court.
(ii) European Commission’s investigations on players
active in the natural gas sector. In the context of its
initiatives aimed at verifying the level of competition in the
natural gas sector within the European Union, the Commission
adopted a decision – notified to Eni in May, 2006 –
whereby it ordered Eni and all companies solely or jointly
controlled by the latter to submit to inspections pursuant to
Article 20, paragraph 4 of the Council Regulation No. 1/2003. The
inspections were intended to verify the possible existence of
behaviors or commercial practices violating EC competition rules
and aimed at limiting access to the Italian wholesale natural gas
market or at sharing the market with other companies active in
the sale or transport of natural gas. The Commission undertook
similar initiatives with respect to the other largest European
players in the natural gas sector in Germany, France, Austria and
Belgium. On March 9, 2009, Eni received a statement of
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objections by the European Commission relating to a proceeding
under Article 82 EC and Article 54 of the EEA Agreement and
concerning an alleged unjustified refusal to grant access to the
TAG (Austria), TENP/Transitgas (Germany/Switzerland) pipelines,
connected with the Italian gas transport system. In particular,
according to the Statement of Objections, the alleged refusal to
grant access would have been carried out through "capacity
hoarding, capacity degradation and strategic underinvestment"
and would have had the effect of "hindering the
development of effective competition in the downstream market and
[...] harming consumers". In the Statement of
Objections, the Commission envisages the possible imposition upon
Eni of structural remedies and a fine, which, if imposed, could
be significant. Eni after the completion of the assessment of the
allegations set forth by the Commission in Statement of
Objections with respect to both the existence of the alleged
behaviors and whether they can be properly qualified as
infringements of EC competition rules submitted its written reply
that was exposed before the representatives of the Commission in
November 27, 2009. On February 4, 2010 Eni, reaffirming the
legitimacy of its activity, filed with the European Commission a
number of structural remedies with a view to resolving the
proceeding without the ascertainment of the illicit behavior and
consequently without sanctions. Eni has committed to dispose of
its interests in the German TENP, in the Swiss Transitgas and in
the Austrian TAG gas pipelines. Given the strategic importance of
the Austrian Tag pipeline, which transports gas from Russia to
Italy, Eni has negotiated a solution with the Commission which
calls for the transfer of its stake to an entity controlled by
the Italian State. The European Commission has announced its
intention to submit those remedies to a market test. According to
the results of the market test, the Commission may issue a
decision pursuant to Article 9 of Council Regulation No. 1/2003,
making the remedies mandatory thus excluding the imposition of
any fines upon Eni. In case the Commission, after the performance
of the market test, resolves to reject Eni’s remedies, or
the Company decides to withdraw those remedies for any reasons,
the ordinary antitrust proceeding would resume and in this
eventuality an adverse conclusion cannot be excluded, thus
resulting in a sentence of conviction including a fine and
possibly structural remedies during the course of 2010. Eni would
in any event be entitled to file an appeal for the annulment of
such a sentence before the EC Courts.
(iii) TTPC. In April 2006, Eni filed a
claim before the Regional Administrative Court of Lazio against
the decision of the Italian Antitrust Authority of February 15,
2006 stating that Eni’s behavior pertaining to
implementations of plans for the upgrading of the TTPC pipeline
for importing natural gas from Algeria represented an abuse of
dominant position under Article 82 of the European Treaty and
fined Eni. The initial fine amounted to euro 390 million and was
reduced to euro 290 million in consideration of Eni’s
commitment to perform actions favoring competition including the
upgrade of the gasline. Eni accrued a provision with respect to
this proceeding. With a decision filed on November 29, 2006, the
Regional Administrative Court of Lazio partially accepted
Eni’s claim, annulling such part of the Authority’s
decision where the fine was quantified. Eni is waiting for the
filing of the motivations of the Court decision to ascertain the
impact of said decision. Pending this development, the payment of
the fine has been voluntarily suspended. In 2007, the Regional
Administrative Court of Lazio accepted in part Eni’s claim
and cancelled the quantification of the fine based on the
Antitrust Authority’s inadequate evaluation of the
circumstances presented by Eni. Eni filed an appeal with the
Council of State, as did the Antitrust Authority and TTPC.
Pending the final outcome, Eni awaits for the determination of
the amount of the fine to be paid.
(iv) Italian Antitrust Authority’s inquiry in the
distribution and selling of gas in the retail sector. On May
7, 2009, the Italian Antitrust Authority, based on complaints
sent by the company Sorgenia, started a preliminary investigation
against various operators engaging in the gas retail market in
Italy by means of integrated operations in both gas distribution
via local low-pressure network and gas marketing to retail
customers in urban areas, among them the Company and its
fully-owned subsidiary Italgas. The investigation targets an
alleged abuse of dominant position in the gas retail market in
Italy associated with commercial practices intended to make it
difficult for retail customers consuming less than 200,000 cubic
meters per year to change the supplier. According to the Italian
Antitrust Authority, these commercial practices would enable
selling companies that belong to integrated group companies to
preserve their market shares in the areas operated by
Group’s distributors. The deadline for the finalization of
the preliminary investigation against Eni and Italgas has been
scheduled for June 30, 2010.
ENI SPA, POLIMERI EUROPA SPA AND SYNDIAL SPA
(v) Inquiries in relation to alleged anti-competitive agreements
in the area of elastomers - Prosecuting Body: European
Commission. In December 2002, inquiries were commenced
concerning alleged anti-competitive agreements in the field of
elastomers. These inquiries were commenced concurrently by
European and U.S. authorities. At present, a proceeding is still
pending before the European Commission regarding the NBR product.
In December 2007, the European Commission dismissed
Syndial’s position on CR and imposed on Eni and Polimeri a
fine amounting to euro 132.16 million. The two companies have
filed an appeal with the EU Court of First Instance against this
decision and, at the same time, paid the fine in March 2008.
Investigations relating to other elastomers products (BR and SBR)
resulted in the ascertainment of Eni having infringed European
competition laws. On November 29, 2006, the Commission fined Eni
and its subsidiary Polimeri Europa for an
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amount of euro 272.25 million. Eni and its subsidiary filed claims against this decision before the European Court of First Instance in February 2007. The hearings took place in October 2009 and the filing of the Court’s decisions is still pending. Pending the outcome, Polimeri Europa presented a bank guarantee for euro 200 million and paid the residual amount of the fine. In August 2007, with respect to the above mentioned decision of the European Commission, Eni submitted a request for a negative ascertainment with the Court of Milan aimed at proving the non-existence of alleged damages suffered by tire BR/SBR manufacturers. The Court of Milan declared the appeal inadmissible appealing against a sentence of the District Court of Milan; the related hearing has been scheduled for May 2010.
3.2 Regulation
(i) Toscana Energia Clienti SpA. Eni’s subsidiary
Toscana Energia Clienti SpA started an action against a customer
regarding alleged lack of measurement of gas consumption due to
inability to access a measurement facility at the customer’s
site, also in connection with the application of Resolution No.
229/2001 of the Italian Authority for Electricity and Gas. This
customer has annual consumption in excess of 5,000 cm. The
defendant has filed a counter-claim in relation to this
proceeding. During the hearing on November 12, 2008, the judge
resolved to partially accept the Eni’s subsidiary reasons
and to limit compensation to be paid to the defendant to only
euro 1,475 with interests amounting to euro 90. The sum was paid
and the defendant in December 2009 filed an appeal against the
said decision.
(ii) Distribudora de Gas Cuyana SA. Formal investigation
of the agency entrusted with the regulations for the natural gas
market in Argentina. Enargas started a formal investigation on
some operators, among them Distribuidora de Gas Cuyana SA, a
company controlled by Eni. Enargas stated that the company
improperly applied conversion factors to volumes of natural gas
invoiced to customers and requested the company to apply the
conversion factors imposed by local regulations from the date of
the default notification (March 31, 2004) without prejudice to
any damage payment and fines that may be decided after closing
the investigation. In April 2004 the company filed a defensive
memorandum. On April 28, 2006, the company formally requested the
acquisition of documents from Enargas in order to have access to
the documents on which the allegations are based.
(iii) Preliminary investigation of the Authority for
Electricity and Gas on the application of the regulation on the
issue of the transparency of invoices. On September 25, 2009
the Authority for Electricity and Gas sentenced (Sentence VIS
93/2009) to commence a preliminary investigation against 5
marketing companies in the electricity sector, including Eni, to
ascertain the eventual violation of the regulation on the issue
of the transparency of the invoices (Resolutions 152/2006,
156/2007 and 272/2007) and to eventually inflict administrative
monetary penalties. The preliminary investigation should be
finalized within a 120-day term from the communication of the
proceeding to the parties.
4. Tax Proceedings
ITALY - ENI SPA
(i) Dispute for the omitted payment of the municipal tax related
to oil platforms located in territorial waters in the Adriatic
Sea. Dispute for the omitted payment of the municipal tax
related to oil platforms located in territorial waters in the
Adriatic Sea. With a formal assessment presented by the
Municipality of Pineto (Teramo) in December 1999, Eni SpA has
been accused of not having paid a municipal tax on real estate
for the period from 1993 to 1998 on four oil platforms located in
the Adriatic Sea which constitute municipal waters in front of
the coast of Pineto. Eni was requested to pay a total of
approximately euro 17 million including interest and a fine. Eni
filed a claim against this request stating that the sea where the
platforms are located is not part of the municipal territory and
the tax application as requested by the municipality lacked
objective fundamentals. The claim has been accepted in the first
two degrees of judgment at the Provincial and Regional Tax
Commissions. However, the Court overturned both judgments,
declaring that a municipality can consider requesting a tax on
real estate in the sea facing its territory and with the decision
of February 2005 sent the proceeding to another section of the
Regional Tax Commission in order to judge on the matters of the
proceeding. This commission charged an independent consultant
with assessing all the accounting/technical aspects of the
matter. The independent consultant confirmed that Eni’s
offshore installations lack any ground to be subject to the
municipal tax that was claimed by the local Municipality. Those
findings were accepted by the Regional Tax Commission with a rule
made on January 19, 2009, and filed on December 14, 2009.
Also, on December 28, 2005, the Municipality of Pineto presented
similar claims relating to the same Eni’s platforms for the
years 1999 to 2004. The total amount requested was euro 24
million including interest and penalties. Eni filed a claim
against this claim which was accepted by the first degree judge
with a decision of December 4, 2007. Similar formal assessments
related
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to Eni oil and gas offshore platforms were presented by the
Municipalities of Falconara Marittima, Tortoreto, Pedaso, and
also from 2009, the Gela Municipality. The total amounts of those
claims were approximately euro 7.5 million. The company filed
appeal against all those claims.
OUTSIDE ITALY - AGIP KARACHAGANAK BV
(ii) Claims concerning unpaid taxes and relevant payment of
interest and penalties. In July 2004, relevant Kazakh
Authorities informed Agip Karachaganak BV and Karachaganak
Petroleum Operating BV, shareholder and operator of the
Karachaganak contract, respectively, on the final outcome of 2000
to 2003 tax audits. Both companies counterclaimed against the
assessment and a preliminary agreement was reached on November
18, 2004. Final assessments have now been issued by the Kazakh
Authorities, and payment has been made. The final amount assessed
and paid was $39 million net to Eni; this figure included taxes
and interest. The companies continue to dispute the assessments
and reserve the right to engage in International Arbitration
proceedings with the Kazakh Authorities.
In October 2009, Kazakh Tax Authorities conducted a complex tax
audit of Agip Karachaganak BV Branch and Karachaganak Petroleum
Operating Co BV Branch, for the period 2004-2007.
In December 2009, the tax authorities issued Tax Audit Act and
relevant Notification for the year 2004 but so far nothing has
been finalized for the later years. The 2004 audit resulted in an
assessment of $21.6 million relating to CIT and WHT ($0.3
million). These amounts are disputed and appeals have been
submitted to the Higher Level Tax Authority. There is also a
dispute in relation to certain unresolved items of expenditure
incurred by the operating company Karachaganak Petroleum
Operating BV which has led to the Kazakh Authorities making
certain claims against the company on the base of audits
performed relating to prior years 2003-2006. Parties are
negotiating in order to settle the dispute.
(iii) Tax proceeding Eni Angola Production BV. In
the first months of 2009 the Ministry of the Finance of Angola,
following to a fiscal audit commenced at the end of 2007, filed a
notice of tax assessment for fiscal years 2002 to 2007 by which
objected to the deductibility of amortization charges recognized
on assets in progress related to the payment of the Petroleum
Income Tax that was made by Eni Angola Production BV as
co-operator of Cabinda concession. The company filed an appeal
against this decision with the Provincial Court of Luanda for all
the years of the claim. The Court of First Instance declared that
it lacked competence in judging the matter. The judgment is still
pending before the Supreme Court. Eni accrued a provision with
respect to this proceeding.
5. Court Inquiries
(i) EniPower. In June 2004, the Milan Public Prosecutor commenced inquiries into contracts awarded by Eni’s subsidiary EniPower and on supplies from other companies to EniPower. These inquiries were widely covered by the media. It emerged that illicit payments were made by EniPower suppliers to a manager of EniPower who was immediately dismissed. The Court presented EniPower (commissioning entity) and Snamprogetti (now Saipem SpA) (contractor of engineering and procurement services) with notices of process in accordance with existing laws regulating the administrative responsibility of companies (Legislative Decree No. 231/2001). In its meeting of August 10, 2004, Eni’s Board of Directors examined the aforementioned situation and Eni’s CEO approved the creation of a task force in charge of verifying the compliance with Group procedures regarding the terms and conditions for the signing of supply contracts by EniPower and Snamprogetti and the subsequent execution of works. The Board also advised divisions and departments of Eni to cooperate fully in every respect with the Court. From the inquiries performed, no default in the organization emerged, nor deficiency in internal control systems. External experts have performed inquiries with regard to certain specific aspects. In accordance with its transparency and firmness guidelines, Eni took the necessary steps in acting as plaintiff in the expected legal action in order to recover any damage that could have been caused to Eni by the illicit behavior of its suppliers and of their and Eni employees. In the meantime, preliminary investigations have found that both EniPower and Snamprogetti are not to be considered defendants in accordance with existing laws regulating the administrative responsibility of companies (Legislative Decree No. 231/2001). In August 2007, Eni was notified that the Public Prosecutor requested the dismissal of EniPower SpA and Snamprogetti SpA, while the proceeding continues against former employees of these companies and employees and managers of the suppliers under the provisions of Legislative Decree No. 231/2001. Eni SpA, EniPower and Snamprogetti presented themselves as plaintiffs in the preliminary hearing. In the preliminary hearing related to the main proceeding on April 27, 2009, the Judge for the preliminary hearing requested all the parties that have not requested the plea-bargain to stand in trial, excluding Romeo Franco Musazzi and ABB Instrumentation SpA as a result of the statute of limitations. During the hearing on March 2, 2010 the Court confirmed the admission as plaintiffs of Eni SpA, EniPower SpA and Saipem SpA against the inquired parts under the provisions of Legislative Decree No. 231/2001. The trial has been postponed to the
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hearing on April 13, 2010 in order to permit the
identification of the defendants of further companies involved.
(ii) Trading. An investigation is pending regarding two
former Eni managers who were allegedly bribed by third parties in
favor to the closing of certain transactions with two oil product
trading companies. Within such investigation, on March 10, 2005,
the public prosecutor of Rome notified Eni of two judicial
measures for the seizure of documentation concerning Eni’s
transactions with the said companies. Eni is acting as plaintiff
in this proceeding. The judge for preliminary hearings rejected
most of the dismissal requests issued by the public prosecutor.
Basing on the decision of the judge for preliminary hearings, the
public prosecutor of Rome notified Eni, as injured part, the
summon against two former managers of the company charged of
aggravated fraud related to the relevant patrimonial damage
caused to the injured part through the abuse of working relations
and activities. The first hearing, scheduled for January 27,
2010, has been postponed to March 30, 2010 due to the
cancellation of the hearings deliberated by the Association of
Italian Criminal Courts.
(iii) TSKJ Consortium Investigations by U.S., Italian, and
Other Authorities. Snamprogetti Netherlands BV has a 25%
participation in the TSKJ Consortium companies. The remaining
participations are held in equal shares of 25% by
Halliburton/KBR, Technip, and JGC. Beginning in 1994 the TSKJ
Consortium has been involved in the construction of natural gas
liquefaction facilities at Bonny Island in Nigeria. Snamprogetti
SpA, the holding company of Snamprogetti Netherlands BV, was a
wholly owned subsidiary of Eni until February 2006, when an
agreement was entered into for the sale of Snamprogetti to Saipem
SpA and Snamprogetti was merged into Saipem as of October 1,
2008. Eni holds a 43% participation in Saipem. In connection with
the sale of Snamprogetti to Saipem, Eni agreed to indemnify
Saipem for a variety of matters, including potential losses and
charges resulting from the investigations into the TSKJ matter
referred to below, even in relation to Snamprogetti subsidiaries.
The U.S. Securities and Exchange Commission (SEC), the U.S.
Department of Justice (DOJ), and other authorities, including the
Public Prosecutor’s office of Milan, are investigating
alleged improper payments made by the TSKJ Consortium to certain
Nigerian public officials. The proceedings in the US: beginning
in June 2004, Eni and Saipem/Snamprogetti have been voluntarily
providing information in response to requests by the SEC and the
DOJ in connection with the investigations. In February 2009, KBR
and its former parent company, Halliburton, announced that they
had reached a settlement with the SEC and the DOJ with respect to
the TSKJ matter as well as other unspecified matters.
KBR/Halliburton pleaded guilty to Foreign Corrupt Practices Act
(FCPA) charges, for the conduct stemming from their participation
in TSKJ, and they have agreed to pay a criminal fine of $402
million to the DOJ and a civil penalty of $177 million to the
SEC. In view of the agreements entered into by KBR/Halliburton
with the DOJ and SEC, the TSKJ matter could result in legal
liability on the part of individuals as well as the other members
of the TSKJ Consortium Entities found in violation of the FCPA,
and those entities could be subject to substantial fines and the
imposition of ongoing measures by the US government to prevent
future violations, including potentially a monitor of internal
controls, and debarment from government contracts.
In a press release on February 12, 2010, the French company
Technip announced, as a result of the circumstances that its
discussions with US authorities have intensified over the last
weeks, the recognition of a provision for an amount of euro 245
million reflecting the estimated cost of resolution with such
Authorities. The decision was made according to the status of
ongoing discussions with DOJ and SEC that allowed Technip to
estimate a global resolution of all potential claims against the
company arising from the investigation.
As to Eni, the contacts with the US authorities have been
intensified recently. Based on the ongoing status of the
discussions, the Company has been able to estimate the cost of a
global resolution of all potential claims arising from the
investigation with the US authorities, similarly to Technip. As a
result of this, a provision in the amount of euro 250 million has
been accrued, also considering the contractual obligations
assumed by Eni to indemnify Saipem as part of the divestment of
Snamprogetti. Discussions with the US authorities are underway.
The proceedings in Italy: beginning in 2004, the TSKJ matter has
prompted investigations by the Public Prosecutor’s office of
Milan against unknown persons. Since March 10, 2009, the company
received requests of exhibition of documents by the Public
Prosecutor’s office of Milan. On July 17, 2009, the date on
which a search and attachment warrant was served on
Saipem/Snamprogetti, the Public Prosecutor’s office of Milan
indicated to the company that it is investigating one or more
people, including at least one former manager of Snamprogetti;
previously, as far as the company knew, nobody was under formal
investigation. The events under investigation cover the period
since 1994 and also concern the period of time subsequent to the
June 8, 2001 enactment of the Italian Legislative Decree No. 231
concerning the liability of legal entities. A violation of
Legislative Decree June 8, 2001, No. 231 can result in the
confiscation of criminal profits in addition to administrative
penalties. During the preliminary investigations, the preventive
attachment of such profits and other precautionary measures are
possible.
On July 31, 2009, a decree issued by the Judge for Preliminary
Investigation at the Court of Milan was served on Saipem SpA (as
legal entity incorporating Snamprogetti SpA). The decree sets for
September 22, 2009 a hearing in Court in relation to a proceeding
ex Legislative Decree No. 231 of June 8, 2001 whereby the Public
prosecutor of Milan is investigating Eni
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SpA and Saipem SpA for liability of legal entities arising
from offences involving international corruption charged to two
former managers of Snamprogetti SpA. The Public Prosecutor of
Milan requested Eni SpA and Saipem SpA to be debarred from
activities involving – directly or indirectly – any
agreement with the Nigerian National Petroleum Corporation and
its subsidiaries. The above mentioned hearing allow Eni and
Saipem to conduct own defense before any decision is made on the
requested disqualification. The events referred to the request of
precautionary measures of the Public Prosecutor of Milan cover
TSKJ Consortium practices in the period from 1995 to 2004. To
this regard, the Public Prosecutor claims the inadequacy and
violation of the organizational, management and control Model
adopted to prevent those offences charged to people subject to
direction and supervision. At the time of the events under
investigation, the company had adopted a code of practice and
internal procedures with reference to the best practices at the
time. Subsequently, such code and internal procedures have been
improved aiming at the continuous improvement of internal
controls. Furthermore, on March 14, 2008 Eni approved a new Code
of Ethics and a new Model 231 reaffirming that the belief that
one is acting in favor or to the advantage of Eni can never, in
any way, justify – not even in part – any behaviors
that conflict with the principles and contents of the Code. Since
April 23, 2009, with regard to investigations on the TSKJ matter
the Company’s Board of Directors has timely recalled the
analysis of the existing internal procedures against corruption,
in order to implement any upgrading to be possibly needed, and to
continue the cooperation with the relevant authorities and also
resolved to promote all legal measures for protecting the
Company’s interests and reputation, in case the
responsibility of its employees or collaborators is verified. The
jury room of September 22, 2009 has been postponed to the hearing
of October 21, 2009 when the judge for the preliminary
investigation rejected the request of precautionary measures of
disqualification filed by the Public Prosecutor of Milan against
Eni and Saipem. The Public Prosecutor of Milan appealed the
decision of the Judge for Preliminary Investigation. The hearing
for the review of the appeal, scheduled initially for January 20,
2010 has been anticipated, through a measure communicated to the
defense on January 12, 2010, on January 19, 2010 when the Judge
of Re-examination dismissed as unfounded the appeal of the Public
Prosecutor. In February 19, 2010 the Public Prosecutor of Milan
filed an appeal with the Third Instance Court, asking for the
cancellation of the abovementioned decision of the Judge of
Re-examination. At the same time in February 11, 2010 the Public
Prosecutor of Milan requested, according to Article 248 of Penal
Code the collection of documentation and information related to
companies participated by Eni SpA and Saipem SpA (former
Snamprogetti SpA) involved in Bonny Island project.
(iv) Gas Metering. On May 28, 2007, a
seizure order (in respect to certain documentation) was served
upon Eni and other Group companies as part of a proceeding
brought by the Public Prosecutor at the Courts of Milan. The
order was also served upon five top managers of the Group
companies in addition to third party companies and their top
managers. The investigation alleges behavior which breaches
Italian criminal law, starting from 2003, regarding the use of
instruments for measuring gas, the related payments of excise
duties and the billing of clients as well as relations with the
Supervisory Authorities. The allegation regards, interalia, the
offense contemplated by Legislative Decree of June 8, 2001, No.
231, which establishes the liability of the legal entity for
crimes committed by its employee in the interests of such legal
entity, or to its advantage. Accordingly, notice of the
commencement of investigations was served upon Eni Group
companies (Eni, Snam Rete Gas and Italgas) as well as third party
companies. On November 26, 2009 a notice of conclusion of the
preliminary investigation was served to Eni’s Group
companies whereby 14 Eni employees, also including former
employees, are under investigation. The exceptions filed in the
notice include: (i) violations pertaining recognition and payment
of certain amounts of the excise on natural gas; (ii) violations
or failure in submitting the annual statement of gas consumption
and/or in the annual declarations to be filed with the Duty
Authority or the Authority for Electricity and Gas; (iii) a
related obstacle which has been allegedly posed to the monitoring
functions performed by the Authority for Electricity and Gas.
Based on information reported by the press on March 9, 2010, it
has been disseminated that the Public Prosecutor of Milan
requested that a number of investigated Eni’s employees and
former employees would stand trial.
On February 23, 2010 Eni, Snam Rete Gas and Italgas have been
received a notification requesting the collection of documents
related to procedures of constitution, definition, update and
implementation of Model 231 in the period from 2003 to 2008.
The Group companies are cooperating with the Supervising
Authorities in the investigations.
(v) Agip KCO NV. In November 2007, the
public prosecutor of Kazakhstan informed Agip KCO of the start of
an inquiry for an alleged fraud in the award of a contract to the
Overseas International Constructors GmbH in 2005.
(vi) Kazakhstan. On October 1, 2009 the
Public Prosecutor of Milan requested a number of documents
pursuant to Article 248 of the Penal Code. Through this decision,
part of a criminal proceeding against unknown, Eni SpA was
requested to transmit – in relation to the alleged
international corruption, embezzling pillage, and other crimes
– audit reports and other documentation related to anomalies
and critical issues on the management of the Karachaganak plant
and the Kashagan project. The crime of "international
corruption" mentioned in the said request of transmission of
documents is sanctioned, in addition to the Italian criminal
code, by Legislative Decree June 8, 2001, No. 231 which
establishes the administrative responsibility of companies for
crimes committed by their employees on their behalf. Eni
commenced the collection of the documentation in order to rapidly
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fulfill the requests of the Public Prosecutor. The company has
deposited in different phases the documents collected. The
Company continues to fully collaborate with the Public Prosecutor
providing also further documentation when available.
6. Settled Proceedings
(i) Preliminary investigation of the Authority for
Electricity and Gas about application of the "K"
conversion factors for volumes adjustments. In May 2009 the
Authority for Electricity and Gas, based on evidence collected
during certain inspections and subsequent requests of
information, communicated to the Company the results of an
inquiry that stated that the company improperly applied the
conversion factor "K" for natural gas volumes
accounting at a number of Eni’s delivery points. The company
filed its conclusions in a defensive memorandum, objecting to the
Authority’s findings. On the basis of a comparative
evaluation of the sanctions imposed at the end of analogous
inquiries commenced against other gas companies, Eni accrued a
risk provision with respect to this proceeding. On October 5,
2009, the Authority for Electricity and Gas with sentence VIS
94/2009 upheld partially Eni’s objections and recognized
that the obligation to apply the "K" conversion index
for marketing companies as determined by the distribution
companies was effective from 2004 as opposed to the year 2001 as
initially stated by the Authority for Electricity and Gas. This
decision determined in one case the ceasing of the infringement
as well as the reduction of the liability and associated duration
in all the other cases. The Authority for Electricity and Gas
imposed a fine amounting to euro 1,023,000 on Eni that was fully
covered by the accrued risk provision. Eni paid the sanction even
if the Company considers its motivations to be well grounded in
the appeal proposed against the Authority for Electricity and Gas
findings before the Administrative Court in December 2009.
(ii) Formal assessment commenced by the Commission of the
European Communities for the evaluation of alleged participation
to activities limiting competition in the field of paraffin.
On April 28, 2005, the Commission of the European Communities
commenced a formal assessment to evaluate the alleged
participation of Eni and its subsidiaries in activities limiting
competition in the field of paraffin. The alleged violation of
competition is for: (i) the determination of an increase in
prices; (ii) the subdivision of customers; and (iii) exchange of
trade secrets, such as production capacity and sales volumes.
After the Commission requested information on Eni’s
activities in the field of paraffin and certain documentation
acquired by the Commission during an inspection, Eni filed the
requested information. In October 2008, the Commission of the
European Communities issued the final decision on the matter
condemning Eni to the payment of a sanction amounting to euro
29,120,000. Eni paid the fine which was fully covered by the
accrued risk provision, filing however for recourse against this
decision.
(iii) Alleged unauthorized waste management activities -
EniPower. In 2004, the public prosecutor of Rovigo commenced
an investigation for alleged crimes related to unauthorized waste
management activities in Loreo relating to the samples of soil
used during the construction of the new EniPower power station in
Mantova. The prosecutor requested the CEO of EniPower and the
managing director of the Mantova plant at the time of the alleged
crime to stand trial. In the hearing on April 6, 2009, the Judge
dismissed the accusation as a result of the statute of
limitations.
Assets under concession arrangements
Eni operates under concession arrangements mainly in the
Exploration & Production segment and in some activities of
the Gas & Power segment and the Refining & Marketing
segment. In the Exploration & Production segment contractual
clauses governing mineral concessions, licenses and exploration
permits regulate the access of Eni to hydrocarbon reserves. Such
clauses can differ in each country. In particular, mineral
concessions, licenses and permits are granted by the legal owners
and, generally, entered into with government entities, State oil
companies and, in some legal contexts, private owners. As a
compensation for mineral concessions, Eni pays royalties and
taxes in accordance with local tax legislation. Eni sustains all
the operation risks and costs related to the exploration and
development activities and it is entitled to the productions
realized. In Production Sharing Agreement and in buy-back
contracts, realized productions are defined on the basis of
contractual agreements drawn up with State oil companies which
hold the concessions. Such contractual agreements regulate the
recovery of costs incurred for the exploration, development and
operating activities (cost oil) and give entitlement to the own
portion of the realized productions (profit oil). With reference
to natural gas storage in Italy, the activity is conducted on the
basis of concessions with a duration that does not exceed twenty
years and it is granted by the Ministry of Productive Activities
to persons that are consistent with legislation requirements and
that can demonstrate to be able to conduct a storage program that
meets the public interest in accordance with the laws. In the Gas
& Power segment the gas distribution activity is primarily
conducted on the basis of concessions granted by local public
entities. At the expiration date of the concession, compensation
is paid, defined by using criteria of business appraisal, to the
outgoing operator following the sale of its own gas distribution
network. Service tariffs for distribution are defined on the
basis of a method established by the Authority for Electricity
and Gas. Legislative Decree No.
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164/2000 provides the grant of distribution service
exclusively by tender, with a maximum length of 12 years.
In the Refining & Marketing segment several service stations
and other auxiliary assets of the distribution service are
located in the motorway areas and they are granted by the
motorway concession operators following a public tender for the
sub-concession of the supplying of oil products distribution
service and other auxiliary services. Such assets are amortized
over the length of the concession (generally, 5 years for Italy).
In exchange of the granting of the services described above, Eni
provides to the motorway companies fixed and variable royalties
on the basis of quantities sold. At the end of the concession
period, all non-removable assets are transferred to the grantor
of the concession.
Environmental regulations
Risks associated with the footprint of Eni’s activities
on the environment, health and safety are described in the risk
section above, under the paragraph "Operational risks".
In the future, Eni will sustain significant expenses in relation
to compliance with environmental, health and safety laws and
regulations and for reclaiming, safety and remediation works of
areas previously used for industrial production and dismantled
sites. In particular, regarding the environmental risk,
management does not currently expect any material adverse effect
upon Eni’s consolidated financial statements, taking account
of ongoing remedial actions, existing insurance policies and the
environmental risk provision accrued in the consolidated
financial statements. However, management believes that it is
possible that Eni may incur material losses and liabilities in
future years in connection with environmental matters due to: (i)
the possibility of as yet unknown contamination; (ii) the results
of the ongoing surveys and the other possible effects of
statements required by Decree No. 471/1999 of the Ministry of
Environment; (iii) new developments in environmental regulation;
(iv) the effect of possible technological changes relating to
future remediation; and (v) the possibility of litigation and the
difficulty of determining Eni’s liability, if any, as
against other potentially responsible parties with respect to
such litigation and the possible insurance recoveries.
Emission trading
Legislative Decree No. 216 of April 4, 2006 implemented the
Emission Trading Directive 2003/87/EC concerning greenhouse gas
emissions and Directive 2004/101/EC concerning the use of carbon
credits deriving from projects for the reduction of emissions
based on the flexible mechanisms devised by the Kyoto Protocol.
This European emission trading scheme has been in force since
January 1, 2005, and on this matter, on November 27, 2008, the
National Committee for Emissions Trading Scheme (Ministry of
Environment-Mse) published the Resolution 20/2008 defining
emission permits for the 2008-2012 period.
Eni was assigned permits corresponding to 126.4 million tonnes of
carbon dioxide (of which, 25.8 in 2008, 25.8 in 2009, 25.1 in
2010, 25.0 in 2011, 24.7 in 2012) and in addition to
approximately 8.6 million of permits expected to be assigned with
respect to new plants in the five-year period 2008-2012.
Emissions of carbon dioxide from Eni’s plants were lower
than permits assigned in 2009. Against emissions of carbon
dioxide amounted to approximately 24.8 millions tonnes, emission
permits amounting to 25.9 million tonnes were assigned,
determining a 1.1 million tonnes surplus. In addition to such
surplus, a 0.3 million tonnes of permits (as increase in the
availability of Eni) are to be included following the contract of
Virtual Power Plan GDF Suez Energia Italia, primarily assigned to
cover the emissions of the EniPower plants. For this reason, the
total surplus amounted to about 1.4 million tonnes.
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29 Revenues
The following is a summary of the main components of
"Revenues". For more information about changes in
revenues, see "Financial Review" of the "Report of
Directors".
Net sales from operations were as follows:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Net sales from operations | 87,051 | 107,777 | 83,519 | ||||||
| Change in contract work in progress | 153 | 305 | (292 | ) | |||||
| 87,204 | 108,082 | 83,227 |
Net sales from operations were net of the following items:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Excise taxes | 13,292 | 13,142 | 12,122 | |||
| Exchanges of oil sales (excluding excise taxes) | 2,728 | 2,694 | 1,680 | |||
| Services billed to joint venture partners | 1,554 | 2,081 | 2,435 | |||
| Sales to service station managers for sales billed to holders of credit cards | 1,480 | 1,700 | 1,531 | |||
| Exchanges of other products | 121 | 83 | 55 | |||
| 19,175 | 19,700 | 17,823 |
Net sales from operations by business segment and geographic area of destination are presented in Note 35 – Information by business segment and geographic financial information.
Other income and revenues
Other income and revenues were as follows:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Gains from sale of assets | 66 | 48 | 306 | ||||||
| Lease and rental income | 95 | 98 | 100 | ||||||
| Compensation for damages | 87 | 15 | 54 | ||||||
| Contract penalties and other trade revenues | 181 | 23 | 31 | ||||||
| Gains on price adjustments under overlifting/underlifting transactions | 79 | 180 | 148 | ||||||
| Other proceeds (*) | 325 | 364 | 479 | ||||||
| 833 | 728 | 1,118 |
| (*) | Each individual amount included herein does not exceed euro 50 million. |
Gains from sale of assets amounted to euro 306 million of which, euro 283 million related to the Exploration & Production segment.
30 Operating expenses
The following is a summary of the main components of
"Operating expenses".
For more information about changes in operating expenses, see
"Financial Review" of the "Report of
Directors".
Purchases, services and other
Purchases, services and other included the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Production costs - raw, ancillary and consumable materials and goods | 44,850 | 58,662 | 40,311 | ||||||
| Production costs - services | 10,828 | 13,355 | 13,520 | ||||||
| Operating leases and other | 2,276 | 2,558 | 2,567 | ||||||
| Net provisions for contingencies | 573 | 884 | 1,055 | ||||||
| Other expenses | 1,101 | 1,660 | 1,527 | ||||||
| 59,628 | 77,119 | 58,980 | |||||||
| less: | |||||||||
| - capitalized direct costs associated with self-constructed assets - tangible assets | (1,357 | ) | (680 | ) | (576 | ) | |||
| - capitalized direct costs associated with self-constructed assets - intangible assets | (138 | ) | (89 | ) | (53 | ) | |||
| 58,133 | 76,350 | 58,351 |
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Production costs-services included brokerage fees related to
Engineering & Construction segment in the amount of euro 79
million (euro 37 million and euro 155 million for the years ended
December 31, 2007 and 2008, respectively).
Costs incurred in connection with research and development
activity recognized in the profit and loss account amounted to
euro 207 million (euro 189 million and euro 216 million for the
years ended December 31, 2007 and 2008, respectively) as they do
not meet the requirements to be capitalized.
The item "Operating leases and other" included
operating leases in the amount of euro 1,220 million (euro 1,081
million and euro 957 million for the years ended December 31,
2007 and 2008, respectively) and royalties on hydrocarbons
extracted in the amount of euro 641 million (euro 772 million and
euro 871 million for the years ended December 31, 2007 and 2008,
respectively). Future minimum lease payments expected to be paid
under non-cancelable operating leases were as follows:
| (euro million) | 2007 |
2008 |
2009 |
|||
| To be paid within 1 year | 588 | 618 | 886 | ||||||
| Between 2 and 5 years | 1,401 | 2,585 | 2,335 | ||||||
| Beyond 5 years | 942 | 1,084 | 1,034 | ||||||
| 2,931 | 4,287 | 4,255 |
Operating leases primarily relate to assets for drilling
activities, time charter and long-term rentals of vessels, lands,
service stations and office buildings. Such leases did not
include renewal options. There are no significant restrictions
provided by these operating leases which limit the ability of Eni
to pay dividends, use assets or to take on new borrowings
Increase of provisions for contingencies net of reversal of
unutilized provisions amounted to euro 1,055 million (euro 573
million and euro 884 million for the years ended December 31,
2007 and 2008, respectively) and mainly related to legal or other
proceedings in the amount of euro 333 million (euro 79 million
and euro 55 million for the years ended December 31, 2007 and
2008, respectively) and environmental risks in the amount of euro
258 million (euro 327 million and euro 360 million for the years
ended December 31, 2007 and 2008, respectively). More information
is included in Note 21 – Provisions for contingencies.
Payroll and related costs
Payroll and related costs were as follows:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Wages and salaries | 2,906 | 3,204 | 3,330 | ||||||
| Social security contributions | 690 | 694 | 706 | ||||||
| Cost related to defined benefits plans and defined contributions plans | 161 | 107 | 137 | ||||||
| Other costs | 275 | 282 | 342 | ||||||
| 4,032 | 4,287 | 4,515 | |||||||
| less: | |||||||||
| - capitalized direct costs associated with self-constructed assets - tangible assets | (184 | ) | (235 | ) | (280 | ) | |||
| - capitalized direct costs associated with self-constructed assets - intangible assets | (48 | ) | (48 | ) | (54 | ) | |||
| 3,800 | 4,004 | 4,181 |
Average number of employees
The average number and break-down of employees by category of
Eni’s subsidiaries were as follows:
| (number) | 2007 |
2008 |
2009 |
|||
| Senior managers | 1,594 | 1,621 | 1,653 | ||||||
| Junior managers | 11,816 | 12,597 | 13,255 | ||||||
| Employees | 35,725 | 36,766 | 37,207 | ||||||
| Workers | 25,582 | 26,387 | 26,533 | ||||||
| 74,717 | 77,371 | 78,648 |
The average number of employees was calculated as the average between the number of employees at the beginning and end of the respective period. The average number of senior managers includes managers employed and operating in foreign countries, whose position is comparable to that of a senior manager.
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Stock-based compensation
STOCK OPTION
In 2009, Eni suspended the incentive plan based on the stock
option assignment to managers of Eni and its subsidiaries as
defined in Article 2359. The following is the information about
the residual plans of past periods.
As of December 31, 2009 19,482,330 options were outstanding for the purchase of 19,482,330 Eni ordinary shares (nominal value euro 1 each). The break-down of outstanding options are as followings:
Rights outstanding |
Average strike price (euro) |
|||
| Stock option plan 2002 | 97,000 | 15.216 | ||
| Stock option plan 2003 | 229,900 | 13.743 | ||
| Stock option plan 2004 | 671,600 | 16.576 | ||
| Stock option plan 2005 | 3,281,500 | 22.512 | ||
| Stock option plan 2006 | 3,018,155 | 23.119 | ||
| Stock option plan 2007 | 5,144,050 | 27.451 | ||
| Stock option plan 2008 | 7,040,125 | 22.540 | ||
| 19,482,330 |
As of December 31, 2009 the weighted-average remaining
contractual life of the 2002, 2003, 2004, 2005, 2006, 2007 and
2008 plans were 7 months, 1 year and 7 months, 2 years and 7
months, 3 years and 7 months, 2 years and 7 months, 3 years and 7
months and 4 years and 7 months, respectively.
The 2006-2008 stock option plans have introduced a performance
condition for the exercise of the options. At the end of each
three-year period (vesting period) from the assignment, the Board
of Directors determines the percentage of exercisable options,
from 0 to 100, in relation to the Total Shareholders’ Return
(TSR) of Eni’s shares as benchmarked against the TSR
delivered by a panel of the six largest international oil
companies for market capitalization. Options can be exercised
after three years from the assignment (vesting period) and for
maximum period of three years. The strike price is calculated as
an arithmetic average of official prices registered on the
Mercato Telematico Azionario in the month preceding the
assignment.
In 2009, changes of stock option plans consisted of the
carry-over of the previous plans. The following table summarizes
these changes:
2007 |
2008 |
2009 |
||||
Number |
|
Average strike price (euro) |
|
Market price (a) (euro) |
|
Number |
|
Average strike price (euro) |
|
Market price (a) (euro) |
|
Number |
|
Average strike price (euro) |
|
Market price (a) (euro) |
||
| Rights outstanding as of January 1 | 15,290,400 | 21.022 | 25.520 | 17,699,625 | 23.822 | 25.120 | 23,557,425 | 23.540 | 16.556 | ||||||||||||
| New rights granted | 6,128,500 | 27.451 | 27.447 | 7,415,000 | 22.540 | 22.538 | |||||||||||||||
| Rights exercised in the period | (3,028,200 | ) | 16.906 | 25.338 | (582,100 | ) | 17.054 | 24.328 | (2,000 | ) | 13.743 | 16.207 | |||||||||
| Rights cancelled in the period | (691,075 | ) | 24.346 | 24.790 | (975,100 | ) | 24.931 | 19.942 | (4,073,095 | ) | 13.374 | 14.866 | |||||||||
| Rights outstanding as of December 31 | 17,699,625 | 23.822 | 25.120 | 23,557,425 | 23.540 | 16.556 | 19,482,330 | 23.576 | 17.811 | ||||||||||||
| of which exercisable at December 31 | 2,292,125 | 18.440 | 25.120 | 5,184,250 | 21.263 | 16.556 | 7,298,155 | 21.843 | 17.811 |
| (a) | Market price relating to new rights granted, rights exercised in the period and rights cancelled in the period corresponds to the average market value (arithmetic average of official prices recorded on Mercato Telematico Azionario in the month preceding: (i) the date of the Board of Directors resolution regarding the stock grant assignment; (ii) the date on which the emission/transfer of the shares granted were recorded in the grantee’s securities account; and (iii) the date of the unilateral termination of employment for rights cancelled), weighted with the number of shares. Market price of stock at the beginning and end of the year is the price recorded at December 31. |
The fair value of stock options granted during the years 2002, 2003, 2004 and 2005 was euro 5.39, euro 1.50, euro 2.01 and euro 3.33 per share, respectively. For 2006, 2007 and 2008 the weighted average considering options granted was euro 2.89, euro 2.98 and euro 2.60 per share, respectively.
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The fair value was determined by applying the following assumptions:
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
||||||||||
| Risk-free interest rate | (%) | 3.5 | 3.2 | 3.2 | 2.5 | 4.0 | 4.7 | 4.9 | ||||||||
| Expected life | (years) | 8 | 8 | 8 | 8 | 6 | 6 | 6 | ||||||||
| Expected volatility | (%) | 43.0 | 22.0 | 19.0 | 21.0 | 16.8 | 16.3 | 19.2 | ||||||||
| Expected dividends | (%) | 4.5 | 5.4 | 4.5 | 4.0 | 5.3 | 4.9 | 6.1 |
Costs of the year related to stock option plans amounted to euro 12 million (euro 27 million and euro 25 million for the years ended December 31, 2007 and 2008, respectively).
Compensation of key management
Compensation of persons responsible for key positions in
planning, direction and control functions of Eni Group, including
executive and non-executive officers, general managers and
managers with strategic responsibility (key management) in office
for the years ended December 31, 2007, 2008 and 2009 amounted to
euro 25 million, euro 25 million and euro 35 million,
respectively, and consisted of the following:
| (euro million) | 2007 |
2008 |
2009 (*) |
|||
| Wages and salaries | 17 | 17 | 20 | ||||||
| Post-employment benefits | 1 | 1 | 1 | ||||||
| Other long-term benefits | 3 | 3 | 10 | ||||||
| Stock grant/option | 4 | 4 | 4 | ||||||
| 25 | 25 | 35 |
| (*) | Comparing with the previous years, the increase is attributable to a different composition of key managers and to the introduction, as substitution of stock options, of deferred bonus. The fair value of such bonus is recognized in the year while the fair value of stock options was recognized pro-quota along the duration of the plan. |
Compensation of Directors and Statutory Auditors
Compensation of Directors amounted to euro 8.9 million, euro
6.4 million and euro 9.9 million for the years ended December 31,
2007, 2008 and 2009, respectively. Compensation of Statutory
Auditors amounted to euro 0.678 million, euro 0.634 million and
euro 0.475 million for the years ended December 31, 2007, 2008
and 2009, respectively.
Compensation included emoluments and all other retributive and
social security compensations due for the function of directors
or statutory auditor assumed by Eni SpA or other companies
included in the scope of consolidation, representing a cost for
Eni.
Other operating income (loss)
Other operating income (loss) related to the recognition in
the profit and loss account the effects related to the valuation
of fair value, including the effects deriving from the
settlement, of those derivatives on commodities which cannot be
recognized according to the hedge accounting under IFRS. Net gain
on commodity derivatives in the amount of euro 55 million (euro
129 million and euro 124 million for the years ended December 31,
2007 and 2008, respectively) included euro 6 million related to
the ineffective portion of the negative change in the fair value
of cash flow hedging derivatives (time value component) entered
into by the Exploration & Production segment (a loss of euro
52 million and a gain of euro 7 million for the years ended
December 31, 2007 and 2008, respectively).
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Depreciation, depletion, amortization and impairments
Depreciation, depletion, amortization and impairments charges
consisted of the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Depreciation, depletion and amortization: | |||||||||
| - tangible assets | 5,031 | 6,103 | 6,779 | ||||||
| - intangible assets | 2,000 | 2,327 | 1,989 | ||||||
| 7,031 | 8,430 | 8,768 | |||||||
| Impairments: | |||||||||
| - tangible assets | 145 | 1,343 | 990 | ||||||
| - intangible assets | 62 | 53 | 62 | ||||||
| 207 | 1,396 | 1,052 | |||||||
| less: | |||||||||
| - reversal of impairments - tangible assets | (2 | ) | (1 | ) | |||||
| - reversal of impairment - intangible assets | (1 | ) | |||||||
| - capitalized direct costs associated with self-constructed assets - tangible assets | (2 | ) | (6 | ) | (4 | ) | |||
| - capitalized direct costs associated with self-constructed assets - intangible assets | (2 | ) | (2 | ) | |||||
| 7,236 | 9,815 | 9,813 |
31 Finance income (expense)
Finance income (expense) consisted of the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Finance income (expense) | |||||||||
| Finance income | 4,445 | 7,985 | 5,950 | ||||||
| Finance expense | (4,554 | ) | (8,198 | ) | (6,497 | ) | |||
| (109 | ) | (213 | ) | (547 | ) | ||||
| Gain (loss) on derivative financial instruments | 155 | (427 | ) | (4 | ) | ||||
| 46 | (640 | ) | (551 | ) |
Net finance income (expense) consisted of the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Finance income (expense) related to net borrowings | |||||||||
| Interest and other finance expense on ordinary bonds | (258 | ) | (248 | ) | (423 | ) | |||
| Interest due to banks and other financial institutions | (445 | ) | (745 | ) | (330 | ) | |||
| Interest from banks | 236 | 87 | 33 | ||||||
| Interest and other income on financing receivables and securities held for non-operating purposes | 55 | 82 | 47 | ||||||
| (412 | ) | (824 | ) | (673 | ) | ||||
| Exchange differences | |||||||||
| Positive exchange differences | 2,877 | 7,339 | 5,572 | ||||||
| Negative exchange differences | (2,928 | ) | (7,133 | ) | (5,678 | ) | |||
| (51 | ) | 206 | (106 | ) | |||||
| Other finance income (expense) | |||||||||
| Capitalized finance expense | 180 | 236 | 223 | ||||||
| Income from equity instruments | 188 | 241 | 163 | ||||||
| Interest and other income on financing receivables and securities held for operating purposes | 96 | 62 | 39 | ||||||
| Interest on tax credits | 31 | 37 | 4 | ||||||
| Finance expense due to passage of time (accretion discount) (a) | (186 | ) | (249 | ) | (218 | ) | |||
| Other finance income | 45 | 78 | 21 | ||||||
| 354 | 405 | 232 | |||||||
| (109 | ) | (213 | ) | (547 | ) |
| (a) | The item related to the increase in provisions for contingencies that are shown at present value in non-current liabilities. |
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Income from equity instruments in the amount of
euro 163 million (euro 188 million and euro 241 million for the
years ended December 31, 2007 and 2008, respectively) related to
the contractual remuneration of 9.4% on the 20% interest in OAO
Gazprom Neft according to the contractual arrangements between
Eni and Gazprom. Income has been recognized up to the date of the
payment from Gazprom of the strike price on the call option,
including the recovery of any additional costs, on April 24, 2009
(more information is included in Note 2 – Other financial
assets held for trading or available for sale).
The fair value gain (loss) on derivative financial instruments
consisted of the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Derivatives on exchange rate | 120 | (300 | ) | 40 | |||||
| Derivatives on interest rate | 35 | (127 | ) | (52 | ) | ||||
| Derivatives on commodities | 8 | ||||||||
| 155 | (427 | ) | (4 | ) |
Net loss from derivatives in the amount of euro 4 million (euro 155 million of net gain for the years ended December 31, 2007 and euro 427 million of net loss for the years ended December 31, 2008) was primarily due to the recognition in the profit and loss account of the change in the fair value of those derivatives which cannot be recognized according to the hedge accounting under IFRS as they were entered into for amounts equal to the net exposure to exchange rate risk and interest rate risk, and as such, they cannot be referred to specific trade or financing transactions. The lack of these formal requirements to qualify these derivatives as hedging instruments under IFRS also included the recognition in the profit and loss account the negative impact from currency translation differences on assets and liabilities denominated in currencies other than the functional currency, as this effect cannot be offset by changes in the fair value of the related instruments.
32 Income (expense) from investments
Share of profit (loss) of equity-accounted investments
Share of profit (loss) of equity-accounted investments
consisted of the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Share of profit of equity-accounted investments | 906 | 761 | 693 | ||||||
| Share of loss of equity-accounted investments | (135 | ) | (105 | ) | (241 | ) | |||
| Decreases (increases) in the provision for losses on investments | 2 | (16 | ) | (59 | ) | ||||
| 773 | 640 | 393 |
More information is provided in Note 11 – Investments.
Other gain (loss) from investments
Other gain (loss) from investments consisted of the
following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Dividends | 170 | 510 | 164 | ||||||
| Gains on disposals | 301 | 218 | 16 | ||||||
| Losses on disposals | (1 | ) | (1 | ) | |||||
| Other income (expense), net | 6 | (4 | ) | ||||||
| 470 | 733 | 176 |
Dividends in the amount of euro 164 million mainly relate to
Nigeria LNG (euro 101 million).
Gains on disposals in 2009 amounted to euro 16 million and
primarily related to a price revision for the sale of
Gaztransport et Technigaz SAS (euro 10 million), which occurred
in 2008. Gains on disposals in 2008 amounted to euro 218 million
and primarily for the sale of Gaztransport et Technigaz SAS (euro
185 million), Agip España SA (euro 15 million) and Padana
Assicurazioni SpA (euro 10 million). Gains on disposals in 2007
amounted to euro 301 million and primarily related to the sale of
Haldor Topsøe AS (euro 265 million) and Camom SA (euro 25
million).
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33 Income tax expense
Income tax expense consisted of the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Current taxes: | |||||||||
| - Italian subsidiaries | 2,380 | 1,916 | 1,724 | ||||||
| - foreign subsidiaries of the Exploration & Production segment | 6,695 | 9,744 | 5,989 | ||||||
| - foreign subsidiaries | 482 | 426 | 483 | ||||||
| 9,557 | 12,086 | 8,196 | |||||||
| Net deferred taxes: | |||||||||
| - Italian subsidiaries | (582 | ) | (1,603 | ) | (534 | ) | |||
| - foreign subsidiaries of the Exploration & Production segment | 246 | (827 | ) | (733 | ) | ||||
| - foreign subsidiaries | (2 | ) | 36 | (173 | ) | ||||
| (338 | ) | (2,394 | ) | (1,440 | ) | ||||
| 9,219 | 9,692 | 6,756 |
Current income taxes in the amount of euro 1,724 million
consist of IRES (euro 1,485 million) and IRAP (euro 219 million)
for Italian subsidiaries and foreign taxes (euro 20 million).
The effective tax rate was 56.0% (46.0% and 50.3% for the years
ended December 31, 2007 and 2008, respectively) compared with a
statutory tax rate of 40.1% (37.9% and 38.2% for the years ended
December 31, 2007 and 2008, respectively) and calculated by
applying a 34.0%18 tax rate (IRES) to profit before
income taxes and 3.9% tax rate (IRAP) to the net value of
production as provided for by Italian laws.
The difference between the statutory and effective tax rate was due to the following factors:
| (%) | 2007 |
2008 |
2009 |
|||
| Statutory tax rate | 37.9 | 38.2 | 40.1 | ||||||
| Items increasing (decreasing) statutory tax rate: | |||||||||
| - higher foreign subsidiaries tax rate | 10.2 | 15.2 | 13.3 | ||||||
| - changes in Italian statutory tax rate and adjustment of tax base of amortizable assets for Italian subsidiaries | (2.0 | ) | |||||||
| - impact pursuant to Law Decree No. 112 of June 25, 2008, the Budget Law 2008 and enactment of a renewed tax framework in Libya | (3.8 | ) | 2.4 | ||||||
| - permanent differences and other adjustments | (0,1 | ) | 0.7 | 0.2 | |||||
| 8.1 | 12.1 | 15.9 | |||||||
| 46.0 | 50.3 | 56.0 |
The increase in the tax rate of foreign subsidiaries primarily
related to a 16.1 percentage points increase in the Exploration
& Production segment (15.0% and 17.1% for the years ended
December 31, 2007 and 2008, respectively).
The impact pursuant to Law Decree No. 112 of June 25, 2008, the
Budget Law 2008 and enactment of a renewed tax framework in Libya
consisted of the following: in the 2009 (i) the equalization in
Libya of the 2008 income taxes in the amount of euro 230 million
following adjustments to the valorization criteria of revenues;
(ii) a reduced deductibility in Italy of the cost of goods sold
following the reduction in the gas volumes of inventories in the
amount of euro 64 million; in the 2008 (iii) the utilization of
deferred tax liabilities recognized on higher carrying amounts of
year-end inventories of oil, gas and refined products stated at
the weighted-average cost with respect to their tax base
according to the last-in-first-out method (LIFO) (euro 528
million). In fact, pursuant to the Law Decree No. 112 of June 25,
2008 (become Law No. 133/2008), energy companies in Italy were
required from 2008 to state inventories of hydrocarbons at the
weighted-average cost for tax purposes as opposed to the previous
LIFO evaluation and to recognize a one-off tax calculated by
applying a special tax with a 16% rate on the difference between
the two amounts. Accordingly, the profit and loss account
benefited from the difference between utilization of deferred tax
liabilities accrued on hydrocarbons inventories and the one-off
tax (euro 229 million), for a total positive impact of euro 176
million, which consider previously applicable statutory tax rate
(Ires) of 33% pursuant to the Law Decree No. 112 of June 25, 2008
instead of 27.5% of the previous tax regime. This one-off tax
will be paid in three annual installments of same amount, due
from
| (18) | Includes a 5.5% supplemental tax rate on taxable profit of energy companies in Italy (whose primary activity is the production and marketing of hydrocarbons and electricity and with annual revenues in excess of euro 25 million) effective from January 1, 2008 and a further 1% increase effective from January 1, 2009, pursuant to the Law Decree No. 112 of June 25, 2008. |
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2009 onwards; (iv) application of the Italian Budget Law for
2008 that provide an increase in limits whereby carrying amounts
of assets and liabilities of consolidated subsidiaries can be
recognized for tax purposes by paying a one-off tax calculated by
applying a special rate of 6% (positive impact on the profit and
loss account in the amount of euro 370 million; euro 290 million
net of the special tax); (v) enactment of a renewed tax framework
in Libya regarding oil companies operating in accordance with
production sharing schemes. Based on the new provisions, the tax
base of the Company’s Libyan oil properties has been
reassessed resulting in the partial utilization of previously
accrued tax liabilities in the amount of euro 173 million; (vi)
the impact of above mentioned Law Decree No. 112/2008 on energy
companies calculated by applying statutory tax rate (Ires) of 33%
pursuant to the Law Decree No. 112/2008 instead of the previously
applicable statutory tax rate (Ires) of 27.5% (euro 94 million).
The adjustment to deferred tax assets and liabilities and to the
2007 tax rate for Italian subsidiaries were recognized in
connection with certain amendments to the Italian tax regime
enacted by the 2008 Budget Law and the subsequent modification
introduced by the Law Decree No. 112/2008. These included an
option regarding the increase of the tax bases of certain
tangible and other assets to their carrying amounts (euro 773
million) by paying a special tax (euro 325 million) and a lower
statutory tax rate (Ires from 33% to 27.5%, Irap from 4.25% to
3.9%, euro 54 million).
In 2009, permanent differences and other adjustments for 0.2
percentage points included: (i) as an increase, a non-recurring
item represented by a charge amounting to euro 250 million that
was estimated on the base of the management’s best knowledge
of the possible resolution of the TSKJ matter with US
Authorities. More information is provided in Note 28 –
Guarantees, commitments and risks; (ii) as a decrease, deferred
tax assets accounted for following an adjustment of the fiscal
value to the carrying amount of oil & gas properties related
to a reorganization of the Italian activities by paying a special
tax and the partial deductibility of Irap of income taxes from
previous years (euro 222 million).
34 Earnings per share
Basic earnings per ordinary share are calculated by dividing net
profit for the year attributable to Eni’s shareholders by
the weighted average number of ordinary shares issued and
outstanding during the year, excluding treasury shares.
The average number of ordinary shares used for the calculation of
the basic earnings per share outstanding as of December 31, 2007,
2008 and 2009, was 3,668,305,807, 3,638,835,896 and 3,622,405,852
respectively.
Diluted earnings per share is calculated by dividing net profit
for the year attributable to Eni’s shareholders by the
weighted average number of fully-diluted shares which includes
issued and outstanding shares during the year, excluding treasury
shares and including the number of shares that could potentially
be issued in connection with stock-based compensation plans.
As of December 31, 2008 and 2009, the number of shares that could
potentially be issued were related to stock options plans.
As of December 31, 2007, the number of shares that could
potentially be issued were related to stock options and stock
grant plans.
The average number of shares fully diluted used in the
calculation of diluted earnings was 3,669,172,762, 3,638,854,276
and 3,622,438,937 for the years ended December 31, 2007, 2008 and
2009, respectively.
Reconciliation of the average number of shares used for the
calculation for both basic and diluted earning per share was as
follows:
2007 |
2008 |
2009 |
||||
| Average number of shares used for the calculation of the basic earnings per share | 3,668,305,807 | 3,638,835,896 | 3,622,405,852 | |||||
| Number of potential shares following stock grant plans | 302,092 | |||||||
| Number of potential shares following stock options plans | 564,863 | 18,380 | 33,085 | |||||
| Average number of shares used for the calculation of the diluted earnings per share | 3,669,172,762 | 3,638,854,276 | 3,622,438,937 | |||||
| Eni’s net profit | (euro million) | 10,011 | 8,825 | 4,367 | ||||
| Basic earning per share | (euro per share) | 2.73 | 2.43 | 1.21 | ||||
| Diluted earning per share | (euro per share) | 2.73 | 2.43 | 1.21 |
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35 Information by industry segment
and geographic financial information
Information by industry segment
(euro million) |
Exploration & Production |
Gas & Power |
Refining & Marketing |
Petrochemicals |
Engineering & Construction |
Other activities |
Corporate and financial companies |
Intra-group profits |
Total |
|||||||||
| 2007 | ||||||||||||||||||||||||||
| Net sales from operations (a) | 26,920 | 27,793 | 36,349 | 6,934 | 8,678 | 205 | 1,313 | |||||||||||||||||||
| Less: intersegment sales | (16,280 | ) | (757 | ) | (1,276 | ) | (363 | ) | (1,182 | ) | (31 | ) | (1,099 | ) | ||||||||||||
| Net sales to customers | 10,640 | 27,036 | 35,073 | 6,571 | 7,496 | 174 | 214 | 87,204 | ||||||||||||||||||
| Operating profit | 13,433 | 4,465 | 686 | 100 | 837 | (444 | ) | (312 | ) | (26 | ) | 18,739 | ||||||||||||||
| Provisions for contingencies | 7 | 35 | 238 | 15 | 11 | 264 | 3 | 573 | ||||||||||||||||||
| Depreciation, amortization and writedowns | 5,574 | 739 | 491 | 116 | 248 | 10 | 68 | (10 | ) | 7,236 | ||||||||||||||||
| Share of profit (loss) of equity-accounted investments | 23 | 449 | 216 | 79 | 6 | 773 | ||||||||||||||||||||
| Identifiable assets (b) | 32,382 | 25,583 | 13,767 | 3,427 | 8,017 | 275 | 854 | (692 | ) | 83,613 | ||||||||||||||||
| Unallocated assets | 17,847 | |||||||||||||||||||||||||
| Equity-accounted investments | 1,926 | 2,152 | 1,267 | 15 | 230 | 49 | 5,639 | |||||||||||||||||||
| Identifiable liabilities (c) | 10,955 | 5,915 | 5,420 | 939 | 4,349 | 1,827 | 1,380 | 30,785 | ||||||||||||||||||
| Unallocated liabilities | 27,808 | |||||||||||||||||||||||||
| Capital expenditures | 6,480 | 1,511 | 979 | 145 | 1,410 | 59 | 108 | (99 | ) | 10,593 | ||||||||||||||||
| 2008 | ||||||||||||||||||||||||||
| Net sales from operations (a) | 33,042 | 37,062 | 45,017 | 6,303 | 9,176 | 185 | 1,331 | 75 | ||||||||||||||||||
| Less: intersegment sales | (18,917 | ) | (873 | ) | (1,496 | ) | (398 | ) | (1,219 | ) | (29 | ) | (1,177 | ) | ||||||||||||
| Net sales to customers | 14,125 | 36,189 | 43,521 | 5,905 | 7,957 | 156 | 154 | 75 | 108,082 | |||||||||||||||||
| Operating profit | 16,239 | 4,030 | (988 | ) | (845 | ) | 1,045 | (346 | ) | (743 | ) | 125 | 18,517 | |||||||||||||
| Provisions for contingencies | 154 | 238 | 190 | 2 | 36 | 99 | 165 | 884 | ||||||||||||||||||
| Depreciation, amortization and writedowns | 7,488 | 798 | 729 | 395 | 335 | 8 | 76 | (14 | ) | 9,815 | ||||||||||||||||
| Share of profit (loss) of equity-accounted investments | 173 | 413 | 16 | (9 | ) | 43 | 4 | 640 | ||||||||||||||||||
| Identifiable assets (b) | 40,815 | 33,151 | 11,081 | 2,629 | 10,630 | 362 | 789 | (641 | ) | 98,816 | ||||||||||||||||
| Unallocated assets | 17,857 | |||||||||||||||||||||||||
| Equity-accounted investments | 1,787 | 2,249 | 1,227 | 25 | 130 | 53 | 5,471 | |||||||||||||||||||
| Identifiable liabilities (c) | 10,481 | 11,802 | 4,481 | 664 | 6,177 | 1,638 | 1,780 | (75 | ) | 36,948 | ||||||||||||||||
| Unallocated liabilities | 31,215 | |||||||||||||||||||||||||
| Capital expenditures | 9,281 | 2,058 | 965 | 212 | 2,027 | 52 | 95 | (128 | ) | 14,562 | ||||||||||||||||
| 2009 | ||||||||||||||||||||||||||
| Net sales from operations (a) | 23,801 | 30,447 | 31,769 | 4,203 | 9,664 | 88 | 1,280 | (66 | ) | |||||||||||||||||
| Less: intersegment sales | (13,630 | ) | (635 | ) | (965 | ) | (238 | ) | (1,315 | ) | (24 | ) | (1,152 | ) | ||||||||||||
| Net sales to customers | 10,171 | 29,812 | 30,804 | 3,965 | 8,349 | 64 | 128 | (66 | ) | 83,227 | ||||||||||||||||
| Operating profit | 9,120 | 3,687 | (102 | ) | (675 | ) | 881 | (382 | ) | (474 | ) | 12,055 | ||||||||||||||
| Provisions for contingencies | (2 | ) | 277 | 154 | 1 | 311 | 139 | 175 | 1,055 | |||||||||||||||||
| Depreciation, amortization and writedowns | 7,365 | 981 | 754 | 204 | 435 | 8 | 83 | (17 | ) | 9,813 | ||||||||||||||||
| Share of profit (loss) of equity-accounted investments | 142 | 310 | (70 | ) | 50 | (39 | ) | 393 | ||||||||||||||||||
| Identifiable assets (b) | 42,729 | 32,135 | 12,244 | 2,583 | 11,611 | 355 | 1,031 | (553 | ) | 102,135 | ||||||||||||||||
| Unallocated assets | 15,394 | |||||||||||||||||||||||||
| Equity-accounted investments | 1,989 | 2,044 | 1,494 | 37 | 213 | 51 | 5,828 | |||||||||||||||||||
| Identifiable liabilities (c) | 10,918 | 9,161 | 4,684 | 742 | 5,967 | 1,639 | 1,690 | (8 | ) | 34,793 | ||||||||||||||||
| Unallocated liabilities | 32,685 | |||||||||||||||||||||||||
| Capital expenditures | 9,486 | 1,686 | 635 | 145 | 1,630 | 44 | 57 | 12 | 13,695 |
| (a) | Before elimination of intersegment sales. | |
| (b) | Includes assets directly associated with the generation of operating profit. | |
| (c) | Includes liabilities directly associated with the generation of operating profit. |
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Intersegment revenues are conducted on an arm’s length basis.
Geographic financial information
IDENTIFIABLE ASSETS AND INVESTMENTS BY GEOGRAPHIC AREA OF
ORIGIN
| (euro million) | Italy |
Other European Union |
Rest of Europe |
America |
Asia |
Africa |
Other areas |
Total |
||||||||||
| 2007 | ||||||||||||||||
| Identifiable assets (a) | 39,742 | 11,071 | 3,917 | 6,260 | 6,733 | 15,368 | 522 | 83,613 | ||||||||
| Capital expenditures | 3,246 | 1,246 | 469 | 1,004 | 1,253 | 3,152 | 223 | 10,593 | ||||||||
| 2008 | ||||||||||||||||
| Identifiable assets (a) | 40,432 | 15,071 | 3,561 | 6,224 | 10,563 | 22,044 | 921 | 98,816 | ||||||||
| Capital expenditures | 3,674 | 1,660 | 582 | 1,240 | 1,777 | 5,153 | 476 | 14,562 | ||||||||
| 2009 | ||||||||||||||||
| Identifiable assets (a) | 40,861 | 15,571 | 3,520 | 6,337 | 11,187 | 23,397 | 1,262 | 102,135 | ||||||||
| Capital expenditures | 3,198 | 1,454 | 574 | 1,207 | 2,033 | 4,645 | 584 | 13,695 |
| (a) | Includes assets directly related to the generation of operating profit. |
SALES FROM OPERATIONS BY GEOGRAPHIC AREA OF DESTINATION
| (euro million) | 2007 |
2008 |
2009 |
|||
| Italy | 37,294 | 42,843 | 27,950 | ||||||
| Other European Union | 23,074 | 29,341 | 24,331 | ||||||
| Rest of Europe | 5,507 | 7,125 | 5,213 | ||||||
| America | 6,447 | 7,218 | 7,080 | ||||||
| Asia | 5,840 | 8,916 | 8,208 | ||||||
| Africa | 8,010 | 12,331 | 10,174 | ||||||
| Other areas | 1,032 | 308 | 271 | ||||||
| 87,204 | 108,082 | 83,227 |
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36 Transactions with related
parties
In the ordinary course of business, Eni enters into transactions
relating to:
| a) | the exchange of goods, provision of services and financing with joint ventures, associates and non-consolidated subsidiaries; | |
| b) | the exchange of goods and provision of services with entities directly and indirectly owned or controlled by the Government; | |
| c) | transactions with Cosmi
Holding Group, which is related to Eni through a member
of the Board of Directors, for certain acquisition of
engineering, construction and maintenance services.
Relevant transactions which were executed at an
arm’s length basis amounted to approximately euro 18
million, euro 13 million and euro 21 million in 2007,
2008 and 2009, respectively. As of December 31, 2009, there were outstanding receivables in the amount of euro 4 million and payables in the amount of euro 9 million (euro 4 million and euro 8 million as of December 31, 2008, respectively); |
|
| d) | contributions to entities, controlled by Eni with the aim to develop solidarity, culture and research initiatives. In particular these related to: (i) Eni Foundation established by Eni as a non-profit entity with the aim of pursuing exclusively solidarity initiatives in the fields of social assistance, health, education, culture and environment as well as research and development. Transactions with Eni Foundation related to contributions for the year ended December 31, 2008 in the amount of euro 200 million to the solidarity fund pursuant to Italian Law Decree No. 112/2008 and the payable as of December 31, 2008 and 2009 in the amount of euro 100 million related to the portion of the contribution that had not yet been paid. Transactions in the periods preceding 2008 were not material; (ii) Enrico Mattei Foundation established by Eni with the aim of enhancing, through studies, research and training initiatives, knowledge in the fields of economics, energy and environment, both at the national and international level. Transactions with Enrico Mattei Foundation were not material. |
Transactions with related parties were conducted in the interest of Eni companies and, with exception of those with entities with the aim to develop solidarity, culture and research initiatives, at an arm’s length basis.
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Trade and other transactions with joint ventures, associates and non-consolidated subsidiaries as well as with entities directly and indirectly owned or controlled by the Government in the years ended December 31, 2007, 2008 and 2009, respectively, consisted of the following:
| (euro million) | Dec. 31, 2007 |
2007 |
||
Costs |
Revenues |
||||
| Name | Receivables and other assets |
|
Payables and other liabilities |
|
Guarantees |
|
Goods |
|
Services |
|
Goods |
|
Services |
|
Other operating (charge) income |
|
| Joint ventures and associates | ||||||||||||||||
| ASG Scarl | 6 | 43 | 121 | 108 | 3 | |||||||||||
| Bernhard Rosa Inh. Ingeborg Plöchinger GmbH | 11 | 86 | ||||||||||||||
| Blue Stream Pipeline Co BV | 19 | 183 | 1 | |||||||||||||
| Bronberger & Kessler und Gilg & Schweiger GmbH | 18 | 106 | ||||||||||||||
| CEPAV (Consorzio Eni per l'Alta Velocità) Uno | 84 | 70 | 5,870 | 263 | ||||||||||||
| CEPAV (Consorzio Eni per l'Alta Velocità) Due | 1 | 1 | 64 | 1 | 1 | |||||||||||
| Eni Oil Co Ltd | 7 | 60 | 141 | 1 | ||||||||||||
| Fox Energy SpA | 49 | 139 | ||||||||||||||
| Gasversorgung Süddeutschland GmbH | 54 | 195 | 4 | |||||||||||||
| Gruppo Distribuzione Petroli Srl | 26 | 50 | ||||||||||||||
| Karachaganak Petroleum Operating BV | 43 | 102 | 24 | 301 | 7 | |||||||||||
| Mellitah Oil & Gas BV | 10 | 137 | 105 | 1 | 6 | |||||||||||
| OOO "EniNeftegaz" | 215 | 1 | ||||||||||||||
| Petrobel Belayim Petroleum Co | 60 | 211 | ||||||||||||||
| Raffineria di Milazzo ScpA | 17 | 21 | 245 | 118 | 5 | |||||||||||
| Supermetanol CA | 11 | 78 | 1 | |||||||||||||
| Super Octanos CA | 18 | 201 | 1 | |||||||||||||
| Trans Austria Gasleitung GmbH | 6 | 80 | 43 | 147 | 47 | |||||||||||
| Transitgas AG | 8 | 64 | ||||||||||||||
| Transmediterranean Pipeline Co Ltd | 6 | 70 | 1 | |||||||||||||
| Unión Fenosa Gas SA | 1 | 61 | 193 | |||||||||||||
| Other (*) | 120 | 127 | 56 | 76 | 374 | 122 | 118 | |||||||||
| 687 | 744 | 6,172 | 422 | 1,950 | 1,011 | 459 | ||||||||||
| Unconsolidated entities controlled by Eni | ||||||||||||||||
| Agip Kazakhstan North Caspian Operating Co NV | 49 | 111 | 11 | 534 | 52 | |||||||||||
| Eni BTC Ltd | 138 | 1 | ||||||||||||||
| Other (*) | 23 | 8 | 11 | 2 | 18 | 5 | 18 | |||||||||
| 72 | 119 | 149 | 13 | 552 | 5 | 71 | ||||||||||
| 759 | 863 | 6,321 | 435 | 2,502 | 1,016 | 530 | ||||||||||
| Entities owned or controlled by the Government | ||||||||||||||||
| Gruppo Alitalia | 4 | 363 | 1 | |||||||||||||
| Gruppo Enel | 384 | 8 | 245 | 894 | 408 | |||||||||||
| GSE - Gestore Servizi Elettrici | 124 | 63 | 239 | 37 | 870 | 7 | 10 | |||||||||
| Terna SpA | 19 | 69 | 106 | 105 | 31 | |||||||||||
| Other (*) | 45 | 79 | 19 | 89 | 75 | 3 | ||||||||||
| 576 | 219 | 364 | 476 | 2,202 | 450 | 10 | ||||||||||
| 1,335 | 1,082 | 6,321 | 799 | 2,978 | 3,218 | 980 | 10 |
| (*) | Each individual amount included herein does not exceed euro 50 million. |
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| (euro million) | Dec. 31, 2008 |
2008 |
||
Costs |
Revenues |
||||
| Name | Receivables and other assets |
|
Payables and other liabilities |
|
Guarantees |
|
Goods |
|
Services |
|
Other |
|
Goods |
|
Services |
|
Other |
|
Other operating (charge) income |
|
| Joint ventures and associates | ||||||||||||||||||||
| Agiba Petroleum Co | 11 | 60 | ||||||||||||||||||
| Altergaz SA | 30 | 135 | ||||||||||||||||||
| ASG Scarl | 2 | 25 | 49 | 57 | ||||||||||||||||
| Bayernoil Raffineriegesellschaft mbH | 3 | 4 | 1 | 6 | 62 | 4 | ||||||||||||||
| Bernhard Rosa Inh. Ingeborg Plöchinger GmbH | 5 | 98 | ||||||||||||||||||
| Blue Stream Pipeline Co BV | 23 | 17 | 171 | 1 | ||||||||||||||||
| Bronberger & Kessler und Gilg & Schweiger GmbH | 12 | 175 | ||||||||||||||||||
| CEPAV (Consorzio Eni per l'Alta Velocità) Uno | 95 | 37 | 6,001 | 17 | 3 | 397 | ||||||||||||||
| CEPAV (Consorzio Eni per l'Alta Velocità) Due | 4 | 1 | 64 | 1 | 1 | |||||||||||||||
| Eni Oil Co Ltd | 9 | 28 | 660 | 6 | ||||||||||||||||
| Fox Energy SpA | 37 | 2 | 329 | 1 | ||||||||||||||||
| FPSO Mystras - Produção de Petròleo Lda | 94 | 10 | ||||||||||||||||||
| Gasversorgung Süddeutschland GmbH | 64 | 337 | 18 | |||||||||||||||||
| Gruppo Distribuzione Petroli Srl | 20 | 111 | ||||||||||||||||||
| InAgip doo | 24 | 45 | 116 | 3 | 35 | |||||||||||||||
| Karachaganak Petroleum Operating BV | 72 | 207 | 874 | 380 | 25 | 12 | ||||||||||||||
| Mellitah Oil & Gas BV | 10 | 121 | 329 | 2 | 4 | |||||||||||||||
| Petrobel Belayim Petroleum Co | 77 | 181 | ||||||||||||||||||
| Raffineria di Milazzo ScpA | 11 | 4 | 276 | 135 | 3 | |||||||||||||||
| Saipon Snc | 4 | 58 | 12 | |||||||||||||||||
| Super Octanos CA | 24 | 286 | ||||||||||||||||||
| Supermetanol CA | 5 | 90 | ||||||||||||||||||
| Trans Austria Gasleitung GmbH | 8 | 78 | 60 | 153 | 64 | |||||||||||||||
| Transitgas AG | 5 | 1 | 64 | |||||||||||||||||
| Unión Fenosa Gas SA | 1 | 25 | 62 | 25 | 257 | 1 | ||||||||||||||
| Other (*) | 231 | 115 | 18 | 36 | 319 | 46 | 71 | 129 | 8 | |||||||||||
| 665 | 829 | 6,253 | 1,473 | 2,783 | 148 | 1,657 | 684 | 8 | ||||||||||||
| Unconsolidated entities controlled by Eni | ||||||||||||||||||||
| Agip Kazakhstan North Caspian Operating Co NV | 144 | 166 | 720 | 11 | 1 | 367 | 10 | |||||||||||||
| Eni BTC Ltd | 146 | |||||||||||||||||||
| Other (*) | 22 | 18 | 4 | 2 | 20 | 2 | 4 | 6 | 4 | |||||||||||
| 166 | 184 | 150 | 2 | 740 | 13 | 5 | 373 | 14 | ||||||||||||
| 831 | 1,013 | 6,403 | 1,475 | 3,523 | 161 | 1,662 | 1,057 | 22 | ||||||||||||
| Entities owned or controlled by the Government | ||||||||||||||||||||
| Gruppo Alitalia | 4 | 417 | 2 | |||||||||||||||||
| Gruppo Enel | 153 | 12 | 13 | 223 | 941 | 380 | ||||||||||||||
| Gruppo Ferrovie dello Stato | 19 | 7 | 27 | 1 | 57 | |||||||||||||||
| GSE - Gestore Servizi Elettrici | 92 | 63 | 315 | 79 | 347 | 16 | 6 | 58 | ||||||||||||
| Terna SpA | 33 | 35 | 14 | 128 | 12 | 83 | 10 | |||||||||||||
| Other (*) | 28 | 72 | 33 | 88 | 5 | 72 | 2 | 1 | ||||||||||||
| 329 | 189 | 375 | 466 | 85 | 1,846 | 483 | 17 | 58 | ||||||||||||
| 1,160 | 1,202 | 6,403 | 1,850 | 3,989 | 246 | 3,508 | 1,540 | 39 | 58 | |||||||||||
| (*) | Each individual amount included herein does not exceed euro 50 million. |
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| (euro million) | Dec. 31, 2009 |
2009 |
||
Costs |
Revenues |
||||
| Name | Receivables and other assets |
|
Payables and other liabilities |
|
Guarantees |
|
Goods |
|
Services |
|
Other |
|
Goods |
|
Services |
|
Other |
|
Other operating (charge) income |
|
| Joint ventures and associates | ||||||||||||||||||||
| Agiba Petroleum Co | 5 | 64 | ||||||||||||||||||
| Altergaz SA | 50 | 142 | ||||||||||||||||||
| ASG Scarl | 10 | 54 | 25 | |||||||||||||||||
| Azienda Energia e Servizi Torino SpA | 1 | 30 | 62 | 1 | ||||||||||||||||
| Bayernoil Raffineriegesellschaft mbH | 31 | 1 | 15 | 77 | 2 | |||||||||||||||
| Blue Stream Pipeline Co BV | 17 | 15 | 34 | 163 | ||||||||||||||||
| Bronberger & Kessler und Gilg & Schweiger GmbH | 16 | 95 | ||||||||||||||||||
| CEPAV (Consorzio Eni per l'Alta Velocità) Uno | 38 | 12 | 6,037 | 5 | 84 | |||||||||||||||
| CEPAV (Consorzio Eni per l'Alta Velocità) Due | 6 | 1 | 76 | 1 | 2 | |||||||||||||||
| Fox Energy SpA | 44 | 1 | 241 | |||||||||||||||||
| Gasversorgung Süddeutschland GmbH | 17 | 196 | 8 | |||||||||||||||||
| Gruppo Distribuzione Petroli Srl | 15 | 71 | ||||||||||||||||||
| InAgip doo | 44 | 23 | 86 | 71 | ||||||||||||||||
| Karachaganak Petroleum Operating BV | 61 | 196 | 588 | 344 | 27 | 9 | 10 | |||||||||||||
| Kwanda Suporto Logistico Lda | 72 | 20 | ||||||||||||||||||
| Mellitah Oil & Gas BV | 30 | 190 | 306 | 2 | 31 | |||||||||||||||
| Petrobel Belayim Petroleum Co | 4 | 12 | 205 | 4 | 2 | |||||||||||||||
| Raffineria di Milazzo ScpA | 14 | 8 | 242 | 98 | 5 | |||||||||||||||
| Saipon Snc | 8 | 2 | 61 | 45 | ||||||||||||||||
| Super Octanos CA | 24 | 133 | ||||||||||||||||||
| Trans Austria Gasleitung GmbH | 4 | 71 | 36 | 157 | 40 | |||||||||||||||
| Transitgas AG | 1 | 61 | ||||||||||||||||||
| Unión Fenosa Gas SA | 8 | 62 | 12 | 53 | 1 | |||||||||||||||
| Other (*) | 143 | 58 | 15 | 62 | 188 | 41 | 117 | 125 | 10 | |||||||||||
| 592 | 688 | 6,340 | 847 | 1,926 | 129 | 1,026 | 446 | 13 | ||||||||||||
| Unconsolidated entities controlled by Eni | ||||||||||||||||||||
| Agip Kazakhstan North Caspian Operating Co NV | 194 | 224 | 1 | 914 | 7 | 15 | 466 | 7 | ||||||||||||
| Eni BTC Ltd | 141 | 1 | ||||||||||||||||||
| Other (*) | 29 | 23 | 4 | 1 | 52 | 4 | 14 | 6 | 1 | |||||||||||
| 223 | 247 | 145 | 2 | 966 | 11 | 29 | 473 | 8 | ||||||||||||
| 815 | 935 | 6,485 | 849 | 2,892 | 140 | 1,055 | 919 | 21 | ||||||||||||
| Entities owned or controlled by the Government | ||||||||||||||||||||
| Gruppo Enel | 96 | 32 | 9 | 286 | 77 | 342 | 428 | 1 | ||||||||||||
| Gruppo Finmeccanica | 33 | 37 | 16 | 56 | 21 | 7 | ||||||||||||||
| GSE - Gestore Servizi Elettrici | 83 | 74 | 373 | 79 | 342 | 15 | 19 | |||||||||||||
| Terna SpA | 7 | 37 | 52 | 52 | 19 | 7 | 86 | 4 | 25 | |||||||||||
| Other (*) | 78 | 71 | 1 | 71 | 6 | 62 | 16 | |||||||||||||
| 297 | 251 | 451 | 465 | 181 | 774 | 552 | 5 | 44 | ||||||||||||
| 1,112 | 1,186 | 6,485 | 1,300 | 3,357 | 321 | 1,829 | 1,471 | 26 | 44 |
| (*) | Each individual amount included herein does not exceed euro 50 million. |
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The most significant transactions with joint ventures, associates and non-consolidated subsidiaries consisted of the following:
| - | transactions related to the planning and the construction of the tracks for high speed/high capacity trains from Milan to Bologna with ASG Scarl, CEPAV (Consorzio Eni per l’Alta Velocità) Uno, and related guarantees; | |
| - | transportation and distribution activity with Azienda Energia e Servizi Torino SpA; | |
| - | acquisition of refining services from Bayernoil Raffineriegesellschaft mbH and Raffineria di Milazzo ScpA in relation to incurred costs; | |
| - | supply of oil products to Bronberger & Kessler und Gilg & Schweiger GmbH, Fox Energy SpA, Gruppo Distribuzione Petroli Srl and Raffineria di Milazzo ScpA on the basis of prices related to the quotations on international markets of the main oil products, as they would be conducted at an arm’s length basis; | |
| - | acquisition of natural gas transport services outside Italy from Blue Stream Pipeline Co BV, Trans Austria Gasleitung GmbH and Transitgas AG and the issuing of guarantees on behalf of Blue Stream Pipeline Co BV; | |
| - | guarantees issued on behalf of CEPAV (Consorzio Eni per l’Alta Velocità) Due and Saipon Snc in relation to contractual commitments related to the execution of project planning and realization; | |
| - | provision of specialized services in upstream activities and payables for investment activities from Agip Kazakhstan North Caspian Operating Co NV, Agiba Petroleum Co, InAgip doo, Karachaganak Petroleum Operating BV, Mellitah Oil & Gas BV, Petrobel Belayim Petroleum Co and, only for Karachaganak Petroleum Operating BV supply of oil products; services are invoiced on the basis of costs incurred; | |
| - | logistic support by Kwanda Suporto Logistico Lda; |
| - | sale of natural gas to Altergaz SA and Gasversorgung Süddeutschland GmbH; | |
| - | acquisition of petrochemical products from Super Octanos CA on the basis of prices related to the quotations on international markets of the main products; | |
| - | performance guarantees given on behalf of Unión Fenosa Gas SA in relation to contractual commitments related to the results of operations; | |
| - | guarantees issued in relation to the construction of an oil pipeline on behalf of Eni BTC Ltd. |
The most significant transactions with entities owned or controlled by the Government consisted of the following:
| - | sale and transportation of natural gas, the sale of fuel oil and the sale and purchase of electricity and the acquisition of electricity transmission service with Enel; | |
| - | a long term contract for the maintenance of the newly combined cycle power plants with Gruppo Finmeccanica; | |
| - | sale and purchase of electricity, green certificates and the fair value of derivative financial instruments included in prices of electricity related to sale/purchase transactions with GSE - Gestore Servizi Elettrici; | |
| - | sale and purchase of electricity, the acquisition of domestic electricity transmission service and the fair value of derivative financial instruments included in prices of electricity related to sale/purchase transactions with Terna SpA. |
Financing transactions with joint ventures, associates and non-consolidated subsidiaries as well as with entities directly and indirectly owned or controlled by the Government for the years ended December 31, 2007, 2008 and 2009, respectively, consisted of the following:
| (euro million) | Dec. 31, 2007 |
2007 |
||
| Name | Receivables |
|
Payables |
|
Guarantees |
|
Charges |
|
Gains |
|
| Joint ventures and associates | ||||||||||
| Blue Stream Pipeline Co BV | 1 | 711 | 20 | |||||||
| Raffineria di Milazzo ScpA | 60 | |||||||||
| Trans Austria Gasleitung GmbH | 65 | 3 | ||||||||
| Transmediterranean Pipeline Co Ltd | 97 | 9 | ||||||||
| Other (*) | 108 | 120 | 52 | 19 | 11 | |||||
| 270 | 121 | 823 | 19 | 43 | ||||||
| Unconsolidated entities controlled by Eni | ||||||||||
| Other (*) | 114 | 26 | 1 | 1 | 6 | |||||
| 114 | 26 | 1 | 1 | 6 | ||||||
| 384 | 147 | 824 | 20 | 49 |
| (*) | Each individual amount included herein does not exceed euro 50 million. |
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| (euro million) | Dec. 31, 2008 |
2008 |
||
| Name | Receivables |
|
Payables |
|
Guarantees |
|
Charges |
|
Gains |
|
| Joint ventures and associates | ||||||||||
| Bayernoil Raffineriegesellschaft mbH | 131 | |||||||||
| Blue Stream Pipeline Co BV | 752 | 14 | ||||||||
| PetroSucre SA | 153 | |||||||||
| Raffineria di Milazzo ScpA | 70 | |||||||||
| Trans Austria Gasleitung GmbH | 186 | 7 | ||||||||
| Transmediterranean Pipeline Co Ltd | 103 | 6 | ||||||||
| Other (*) | 123 | 124 | 27 | 16 | 9 | |||||
| 696 | 124 | 849 | 16 | 36 | ||||||
| Unconsolidated entities controlled by Eni | ||||||||||
| Other (*) | 115 | 38 | 1 | 1 | 6 | |||||
| 115 | 38 | 1 | 1 | 6 | ||||||
| 811 | 162 | 850 | 17 | 42 |
| (*) | Each individual amount included herein does not exceed euro 50 million. |
| (euro million) | Dec. 31, 2009 |
2009 |
||
| Name | Receivables |
|
Payables |
|
Guarantees |
|
Charges |
|
Gains |
|
| Joint ventures and associates | ||||||||||
| Artic Russia BV | 70 | 1 | 170 | 1 | ||||||
| Bayernoil Raffineriegesellschaft mbH | 133 | |||||||||
| Blue Stream Pipeline Co BV | 692 | 12 | ||||||||
| Raffineria di Milazzo ScpA | 85 | |||||||||
| Trans Austria Gasleitung GmbH | 171 | 5 | ||||||||
| Transmediterranean Pipeline Co Ltd | 149 | 3 | ||||||||
| Other (*) | 125 | 112 | 24 | 2 | 3 | |||||
| 648 | 113 | 971 | 2 | 24 | ||||||
| Unconsolidated entities controlled by Eni | ||||||||||
| Other (*) | 78 | 34 | 1 | 2 | 3 | |||||
| 78 | 34 | 1 | 2 | 3 | ||||||
| 726 | 147 | 972 | 4 | 27 |
| (*) | Each individual amount included herein does not exceed euro 50 million. |
The most significant transactions with joint ventures, associates and non-consolidated subsidiaries consisted of the following:
| - | bank debt guarantee issued on behalf of Artic Russia BV, Blue Stream Pipeline Co BV and Raffineria di Milazzo ScpA, and, exclusively with Artic Russia BV, financing loans and cash deposit at Eni’s financial companies; | |
| - | financing loan to Bayernoil Raffineriegesellschaft mbH; | |
| - | financing of the Austrian section of the gasline from the Russian Federation to Italy and the construction of natural gas transmission facilities and transport services with Trans Austria Gasleitung GmbH and Transmediterranean Pipeline Co Ltd, respectively. |
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Impact of transactions and positions with related parties
on the balance sheet, profit and loss account and statement of
cash flows
The impact of transactions and positions with related parties
on the balance sheet, profit and loss account and statement of
cash flows consisted of the following:
Dec. 31, 2007 |
Dec. 31, 2008 |
Dec. 31, 2009 |
||||
| (euro million) | Total | Related parties | Impact % | Total | Related parties | Impact % | Total | Related parties | Impact % | |||||||||
| Trade and other receivables | 20,676 | 1,616 | 7.82 | 22,222 | 1,539 | 6.93 | 20,348 | 1,355 | 6.66 | |||||||||||||||
| Other current assets | 790 | 1,870 | 59 | 3.16 | 1,307 | 9 | 0.69 | |||||||||||||||||
| Other non-current financial assets | 923 | 87 | 9.43 | 1,134 | 356 | 31.39 | 1,148 | 438 | 38.15 | |||||||||||||||
| Other non-current assets | 1,400 | 16 | 1.14 | 1,881 | 21 | 1.12 | 1,938 | 40 | 2.06 | |||||||||||||||
| Current financial liabilities | 7,763 | 131 | 1.69 | 6,359 | 153 | 2.41 | 3,545 | 147 | 4.15 | |||||||||||||||
| Trade and other payables | 17,116 | 1,021 | 5.97 | 20,515 | 1,253 | 6.11 | 19,174 | 1,241 | 6.47 | |||||||||||||||
| Other liabilities | 1,523 | 4 | 0.26 | 3,863 | 4 | 0.10 | 1,856 | 5 | 0.27 | |||||||||||||||
| Long-term debt and current portion of long-term debt | 12,067 | 16 | 0.13 | 14,478 | 9 | 0.06 | 21,255 | |||||||||||||||||
| Other non-current liabilities | 2,117 | 57 | 2.69 | 3,102 | 53 | 1.71 | 2,480 | 49 | 1.98 |
The impact of transactions with related parties on the profit and loss account consisted of the following:
2007 |
2008 |
2009 |
||||
| (euro million) | Total | Related parties | Impact % | Total | Related parties | Impact % | Total | Related parties | Impact % | |||||||||
| Net sales from operations | 87,204 | 4,198 | 4.81 | 108,082 | 5,048 | 4.67 | 83,227 | 3,300 | 3.97 | |||||||||||||||
| Other income and revenues | 833 | .. | 728 | 39 | 5.36 | 1,118 | 26 | 2.33 | ||||||||||||||||
| Purchases, services and other | 58,133 | 3,777 | 6.50 | 76,350 | 6,298 | 8.25 | 58,351 | 4,999 | 8.57 | |||||||||||||||
| Other operating income (expense) | (129 | ) | 10 | .. | (124 | ) | 58 | .. | 55 | 44 | 80.00 | |||||||||||||
| Financial income | 4,445 | 49 | 1.10 | 7,985 | 42 | 0.53 | 5,950 | 27 | 0.45 | |||||||||||||||
| Financial expense | (4,554 | ) | (20 | ) | 0.44 | (8,198 | ) | (17 | ) | 0.21 | (6,497 | ) | (4 | ) | 0.06 |
Transactions with related parties during the ordinary course
of Eni’s business were mainly conducted at an arm’s
length basis.
Main cash flows with related parties were as follows:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Revenues and other income | 4,198 | 5,087 | 3,326 | ||||||
| Costs and other expenses | (3,777 | ) | (6,298 | ) | (4,999 | ) | |||
| Other operating income (loss) | 10 | 58 | 44 | ||||||
| Net change in trade and other receivables and liabilities | (492 | ) | 351 | 34 | |||||
| Dividends and net interests | 610 | 740 | 407 | ||||||
| Net cash provided from operating activities | 549 | (62 | ) | (1,188 | ) | ||||
| Capital expenditures in tangible and intangible assets | (779 | ) | (2,022 | ) | (1,364 | ) | |||
| Investments | 8 | ||||||||
| Change in accounts payable in relation to investments | (8 | ) | 27 | 19 | |||||
| Change in financial receivables | (43 | ) | 397 | 83 | |||||
| Net cash used in investing activities | (822 | ) | (1,598 | ) | (1,262 | ) | |||
| Change in financial liabilities | 20 | 14 | (14 | ) | |||||
| Net cash used in financing activities | 20 | 14 | (14 | ) | |||||
| Total financial flows to related parties | (253 | ) | (1,646 | ) | (2,464 | ) |
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The impact on the statement of cash flows with related parties consisted of the following:
2007 |
2008 |
2009 |
||||
| (euro million) | Total | Related parties | Impact % | Total | Related parties | Impact % | Total | Related parties | Impact % | |||||||||
| Cash provided from operating activities | 15,517 | 549 | 3.54 | 21,801 | (62 | ) | .. | 11,136 | (1,188 | ) | .. | |||||||||||||
| Cash used in investing activities | (20,097 | ) | (822 | ) | 4.09 | (16,958 | ) | (1,598 | ) | 9.42 | (10,254 | ) | (1,262 | ) | 12.31 | |||||||||
| Cash used in financing activities | 2,909 | 20 | 0.69 | (5,025 | ) | 14 | .. | (1,183 | ) | (14 | ) | 1.18 |
37 Significant non-recurring events and operations
Non-recurring income (charges) consisted of the following:
| (euro million) | 2007 |
2008 |
2009 |
|||
| Estimate of the charge from the possible resolution of the TSKJ matter | 250 | ||||||||
| Curtailment of post-retirement benefits for Italian employees | 83 | ||||||||
| Risk provisions for proceedings against Antitrust authorities | (130 | ) | 21 | ||||||
| Risk provisions for proceedings against the Italian Authority for Electricity and Gas | 39 | ||||||||
| (8 | ) | 21 | 250 |
Estimate of the charge from the possible resolution of the
TSKJ matter represents a charge in the amount of euro 250 million
that was estimated based on management’s best knowledge of
the possible resolution of the TSKJ matter with US Authorities.
The matter is fully disclosed in Note 28 – Guarantees,
commitments and risks – Legal Proceedings. The charge is
recognized in the results of the Engineering & Construction
segment as it relates to a project that was executed in Nigeria
by the TSKJ joint venture. However, the charge will be incurred
by Eni due to the contractual obligations assumed by Eni related
to the indemnification of Saipem as part of the divestment of
Snamprogetti. At the time of the project, the TSKJ venture was
participated by Snamprogetti Netherlands BV which was controlled
by Snamprogetti. As a result, the future monetary settlement of
the provision will be incurred by Eni SpA and Saipem’s
minorities will be left unaffected.
Non-recurring income consist of a gain resulting from the
curtailment of the provisions accrued by Italian companies for
employee termination indemnities ("TFR") following the
changes introduced by Italian Budget Law for 2007 and related
decrees (euro 83 million). Non-recurring charges for 2007 consist
of risk provisions related to ongoing antitrust proceedings
against the European Antitrust authorities (euro 130 million).
38 Positions or transactions deriving from
atypical and/or unusual operations
There were no positions or transactions deriving from
atypical and/or unusual operations for the years ended December
31, 2007, 2008 and 2009.
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Supplemental oil and gas information (unaudited)
The following information pursuant to "International Financial Reporting Standards" (IFRS) is presented in accordance with SFAB Extractive Activities – Oil & Gas (Topic 932). Amounts related to minority interests are not significant.
Capitalized costs
Capitalized costs represent the total expenditures for proved and unproved mineral interests and related support equipment and facilities utilized in oil and gas exploration and production activities, together with related accumulated depreciation, depletion and amortization. Capitalized costs by geographical area consist of the following:
| (euro million) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (1) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total joint ventures and affiliates (2) | ||||||||||
| December 31, 2008 | ||||||||||||||||||||||||||||||
| Proved mineral interests | 10,772 | 7,852 | 10,116 | 11,368 | 1,663 | 3,939 | 4,737 | 392 | 50,839 | 813 | ||||||||||||||||||||
| Unproved mineral interests | 32 | 316 | 638 | 2,267 | 37 | 1,461 | 2,418 | 43 | 7,212 | 928 | ||||||||||||||||||||
| Support equipment and facilities | 283 | 24 | 1,205 | 520 | 51 | 16 | 43 | 4 | 2,146 | 14 | ||||||||||||||||||||
| Incomplete wells and other | 1,374 | 249 | 1,006 | 1,443 | 2,631 | 713 | 632 | 362 | 8,410 | 267 | ||||||||||||||||||||
| Gross Capitalized Costs | 12,461 | 8,441 | 12,965 | 15,598 | 4,382 | 6,129 | 7,830 | 801 | 68,607 | 2,022 | ||||||||||||||||||||
| Accumulated depreciation, depletion and amortization | (7,943 | ) | (5,327 | ) | (6,318 | ) | (7,027 | ) | (560 | ) | (3,224 | ) | (3,638 | ) | (173 | ) | (34,210 | ) | (441 | ) | ||||||||||
| Net Capitalized Costs (a) (b) | 4,518 | 3,114 | 6,647 | 8,571 | 3,822 | 2,905 | 4,192 | 628 | 34,397 | 1,581 | ||||||||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||||||||||
| Proved mineral interests | 10,079 | 9,472 | 11,122 | 14,011 | 1,723 | 4,566 | 5,750 | 1,338 | 58,061 | 791 | ||||||||||||||||||||
| Unproved mineral interests | 33 | 305 | 580 | 1,854 | 36 | 1,518 | 2,144 | 38 | 6,508 | 443 | ||||||||||||||||||||
| Support equipment and facilities | 273 | 31 | 1,287 | 585 | 57 | 17 | 45 | 4 | 2,299 | 13 | ||||||||||||||||||||
| Incomplete wells and other | 1,028 | 329 | 1,228 | 934 | 3,481 | 316 | 600 | 14 | 7,930 | 358 | ||||||||||||||||||||
| Gross Capitalized Costs | 11,413 | 10,137 | 14,217 | 17,384 | 5,297 | 6,417 | 8,539 | 1,394 | 74,798 | 1,605 | ||||||||||||||||||||
| Accumulated depreciation, depletion and amortization | (7,557 | ) | (6,824 | ) | (7,044 | ) | (8,424 | ) | (620 | ) | (3,679 | ) | (4,673 | ) | (379 | ) | (39,200 | ) | (485 | ) | ||||||||||
| Net Capitalized Costs (a) (b) (c) | 3,856 | 3,313 | 7,173 | 8,960 | 4,677 | 2,738 | 3,866 | 1,015 | 35,598 | 1,120 |
| (1) | Eni's capitalized costs of the Kashagan field are determined based on Eni share of 16.81%. | |
| (2) | The amounts of joint ventures and affiliates as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (a) | The amounts include net capitalized financial charges totaling euro 537 million in 2008 and euro 570 million in 2009. | |
| (b) | The amounts do not include costs associated with exploration activities which are capitalized in order to reflect their investment nature and amortized in full when incurred. The "Successful Effort Method" application would have led to an increase in net capitalized costs of in euro 3,308 million in 2008 and euro 3,690 million in 2009 for the consolidated companies and of euro 48 million in 2008 and euro 76 million in 2009 for joint ventures affiliates. | |
| (c) | Amounts of 2009 do not include the capitalized costs related to the Italian gas storage activities, following restructuring of Eni regulated gas businesses in Italy now reported in Gas & Power segment. |
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Cost incurred
Costs incurred represent amounts both capitalized and expensed in
connection with oil and gas producing activities. Costs incurred
by geographical area consist of the following:
| (euro million) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (1) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total joint ventures and affiliates (2) | ||||||||||
| 2007 | ||||||||||||||||||||
| Proved property acquisitions (b) | 11 | 451 | 1,395 | 1,857 | 187 | |||||||||||||||
| Unproved property acquisitions (b) | 510 | 1,417 | 1,927 | 1,086 | ||||||||||||||||
| Exploration (b) | 104 | 195 | 373 | 305 | 36 | 162 | 980 | 37 | 2,192 | 42 | ||||||||||
| Development (a) (b) | 320 | 557 | 1,047 | 1,425 | 744 | 247 | 734 | 165 | 5,239 | 156 | ||||||||||
| Total costs incurred | 424 | 752 | 1,431 | 2,691 | 780 | 409 | 4,526 | 202 | 11,215 | 1,471 | ||||||||||
| 2008 | ||||||||||||||||||||
| Proved property acquisitions (b) | 626 | 413 | 256 | 1,295 | ||||||||||||||||
| Unproved property acquisitions (b) | 33 | 384 | 655 | 647 | 1,719 | |||||||||||||||
| Exploration (b) | 135 | 227 | 403 | 600 | 16 | 345 | 440 | 48 | 2,214 | 48 | ||||||||||
| Development (a) (b) | 644 | 957 | 1,388 | 1,884 | 1,023 | 598 | 748 | 325 | 7,567 | 163 | ||||||||||
| Total costs incurred | 779 | 1,217 | 2,801 | 3,552 | 1,039 | 1,846 | 1,188 | 373 | 12,795 | 211 | ||||||||||
| 2009 | ||||||||||||||||||||
| Proved property acquisitions | 298 | 27 | 11 | 131 | 467 | |||||||||||||||
| Unproved property acquisitions | 54 | 42 | 83 | 43 | 222 | |||||||||||||||
| Exploration | 40 | 114 | 317 | 284 | 20 | 159 | 242 | 52 | 1,228 | 41 | ||||||||||
| Development (a) | 742 | 727 | 1,401 | 2,121 | 1,086 | 423 | 858 | 462 | 7,820 | 206 | ||||||||||
| Total costs incurred | 782 | 841 | 2,070 | 2,474 | 1,106 | 676 | 1,274 | 514 | 9,737 | 247 |
| (1) | Eni's incurred costs of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009 and 18.52% as at December 2007. | |
| (2) | The amounts of joint ventures and affiliates as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (a) | Includes the abandonment costs of the assets for euro 173 million in 2007, euro 628 million in 2008 and euro 301 million in 2009. | |
| (b) | Of which business combination: |
| (euro million) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total joint ventures and affiliates | ||||||||||
| 2007 | ||||||||||||||||||||
| Proved property acquisitions | 451 | 1,395 | 1,846 | 187 | ||||||||||||||||
| Unproved property acquisitions | 510 | 1,334 | 1,844 | 1,086 | ||||||||||||||||
| Exploration | 59 | 474 | 533 | |||||||||||||||||
| Development | 10 | 345 | 355 | 101 | ||||||||||||||||
| Total | 1,030 | 3,548 | 4,578 | 1,374 | ||||||||||||||||
| 2008 | ||||||||||||||||||||
| Proved property acquisitions | 298 | 256 | 554 | |||||||||||||||||
| Unproved property acquisitions | 33 | 384 | 560 | 647 | 1,624 | |||||||||||||||
| Exploration | 23 | 115 | 158 | 296 | ||||||||||||||||
| Development | 52 | 132 | 4 | 233 | 421 | |||||||||||||||
| Total | 85 | 539 | 977 | 1,294 | 2,895 |
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Results of operations from oil and gas
producing activities
Results of operations from oil and gas producing
activities, represent only those revenues and expenses directly
associated with such activities, including operating overheads.
These amounts do not include any allocation of interest expense
or general corporate overhead and, therefore, are not necessarily
indicative of the contributions to consolidated net earnings of
Eni. Related income taxes are computed by applying the local
income tax rates to the pre-tax income from producing activities.
Eni is a party to certain Production Sharing Agreements (PSAs),
whereby a portion of Eni’s share of oil and gas production
is withheld and sold by its joint venture partners which are
state-owned entities, with proceeds being remitted to the state
in satisfaction of Eni’s PSA-related tax liabilities.
Revenue and income taxes include such taxes owed by Eni but paid
by state-owned entities out of Eni’s share of oil and gas
production.
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Results of operations from oil and gas producing activities by geographical area consist of the following:
| (euro million) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (1) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total joint ventures and affiliates (2) | Total consolidated subsidiaries, joint ventures and affiliates | |||||||||||
| Revenues | |||||||||||||||||||||||||||||||||
| Sales to consolidated entities | 3,171 | 3,273 | 3,000 | 4,439 | 296 | 44 | 229 | 91 | 14,543 | 14,543 | |||||||||||||||||||||||
| Sales to third parties | 163 | 755 | 4,793 | 693 | 833 | 961 | 1,112 | 187 | 9,497 | 176 | 9,673 | ||||||||||||||||||||||
| Total revenues | 3,334 | 4,028 | 7,793 | 5,132 | 1,129 | 1,005 | 1,341 | 278 | 24,040 | 176 | 24,216 | ||||||||||||||||||||||
| Operations costs | (248 | ) | (584 | ) | (542 | ) | (499 | ) | (142 | ) | (39 | ) | (177 | ) | (50 | ) | (2,281 | ) | (27 | ) | (2,308 | ) | |||||||||||
| Production taxes | (188 | ) | (91 | ) | (473 | ) | (28 | ) | (780 | ) | (6 | ) | (786 | ) | |||||||||||||||||||
| Exploration expenses | (108 | ) | (196 | ) | (379 | ) | (297 | ) | (36 | ) | (168 | ) | (566 | ) | (27 | ) | (1,777 | ) | (42 | ) | (1,819 | ) | |||||||||||
| D.D. & A. and Provision for abandonment (a) | (499 | ) | (766 | ) | (768 | ) | (685 | ) | (76 | ) | (422 | ) | (511 | ) | (19 | ) | (3,746 | ) | (51 | ) | (3,797 | ) | |||||||||||
| Other income and (expenses) | (283 | ) | (83 | ) | (627 | ) | (285 | ) | (72 | ) | (134 | ) | (18 | ) | (65 | ) | (1,567 | ) | (18 | ) | (1,585 | ) | |||||||||||
| Pretax income from producing activities | 2,008 | 2,399 | 5,386 | 2,893 | 803 | 214 | 69 | 117 | 13,889 | 32 | 13,921 | ||||||||||||||||||||||
| Income taxes | (746 | ) | (1,447 | ) | (3,102 | ) | (1,820 | ) | (284 | ) | (93 | ) | (110 | ) | (10 | ) | (7,612 | ) | (49 | ) | (7,661 | ) | |||||||||||
| Results of operations from E&P activities (b) | 1,262 | 952 | 2,284 | 1,073 | 519 | 121 | (41 | ) | 107 | 6,277 | (17 | ) | 6,260 | ||||||||||||||||||||
| 2008 | |||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||
| Sales to consolidated entities | 3,956 | 3,892 | 2,622 | 5,013 | 360 | 39 | 323 | 66 | 16,271 | 16,271 | |||||||||||||||||||||||
| Sales to third parties | 126 | 160 | 7,286 | 1,471 | 1,025 | 1,335 | 1,599 | 218 | 13,220 | 265 | 13,485 | ||||||||||||||||||||||
| Total revenues | 4,082 | 4,052 | 9,908 | 6,484 | 1,385 | 1,374 | 1,922 | 284 | 29,491 | 265 | 29,756 | ||||||||||||||||||||||
| Operations costs | (260 | ) | (521 | ) | (528 | ) | (609 | ) | (157 | ) | (68 | ) | (233 | ) | (35 | ) | (2,411 | ) | (34 | ) | (2,445 | ) | |||||||||||
| Production taxes | (195 | ) | (32 | ) | (616 | ) | (35 | ) | (878 | ) | (53 | ) | (931 | ) | |||||||||||||||||||
| Exploration expenses | (135 | ) | (228 | ) | (406 | ) | (548 | ) | (16 | ) | (232 | ) | (435 | ) | (58 | ) | (2,058 | ) | (48 | ) | (2,106 | ) | |||||||||||
| D.D. & A. and Provision for abandonment (a) | (551 | ) | (829 | ) | (1,120 | ) | (1,115 | ) | (79 | ) | (823 | ) | (837 | ) | (35 | ) | (5,389 | ) | (84 | ) | (5,473 | ) | |||||||||||
| Other income and (expenses) | (420 | ) | (56 | ) | (934 | ) | (268 | ) | (270 | ) | (259 | ) | (6 | ) | (41 | ) | (2,254 | ) | (15 | ) | (2,269 | ) | |||||||||||
| Pretax income from producing activities | 2,521 | 2,418 | 6,888 | 3,328 | 863 | (43 | ) | 411 | 115 | 16,501 | 31 | 16,532 | |||||||||||||||||||||
| Income taxes | (924 | ) | (1,623 | ) | (4,170 | ) | (2,262 | ) | (302 | ) | (122 | ) | (214 | ) | (70 | ) | (9,687 | ) | (49 | ) | (9,736 | ) | |||||||||||
| Total results of operations from E&P activities (b) | 1,597 | 795 | 2,718 | 1,066 | 561 | (165 | ) | 197 | 45 | 6,814 | (18 | ) | 6,796 | ||||||||||||||||||||
| 2009 | |||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||
| Sales to consolidated entities | 2,274 | 2,583 | 1,738 | 4,386 | 245 | 41 | 808 | 29 | 12,104 | 12,104 | |||||||||||||||||||||||
| Sales to third parties | 540 | 5,037 | 586 | 739 | 1,208 | 639 | 181 | 8,930 | 232 | 9,162 | |||||||||||||||||||||||
| Total revenues | 2,274 | 3,123 | 6,775 | 4,972 | 984 | 1,249 | 1,447 | 210 | 21,034 | 232 | 21,266 | ||||||||||||||||||||||
| Operations costs | (271 | ) | (517 | ) | (553 | ) | (749 | ) | (153 | ) | (78 | ) | (273 | ) | (41 | ) | (2,635 | ) | (34 | ) | (2,669 | ) | |||||||||||
| Production taxes | (148 | ) | (20 | ) | (445 | ) | (34 | ) | (647 | ) | (44 | ) | (691 | ) | |||||||||||||||||||
| Exploration expenses | (40 | ) | (114 | ) | (319 | ) | (451 | ) | (20 | ) | (204 | ) | (341 | ) | (62 | ) | (1,551 | ) | (41 | ) | (1,592 | ) | |||||||||||
| D.D. & A. and Provision for abandonment (a) | (463 | ) | (921 | ) | (956 | ) | (1,502 | ) | (78 | ) | (535 | ) | (1,108 | ) | (186 | ) | (5,749 | ) | (76 | ) | (5,825 | ) | |||||||||||
| Other income and (expenses) | (125 | ) | (134 | ) | (471 | ) | (467 | ) | (186 | ) | (17 | ) | 170 | (47 | ) | (1,277 | ) | (41 | ) | (1,318 | ) | ||||||||||||
| Pretax income from producing activities | 1,227 | 1,437 | 4,456 | 1,358 | 547 | 381 | (105 | ) | (126 | ) | 9,175 | (4 | ) | 9,171 | |||||||||||||||||||
| Income taxes | (467 | ) | (833 | ) | (3,010 | ) | (1,042 | ) | (180 | ) | (67 | ) | (2 | ) | 23 | (5,578 | ) | (40 | ) | (5,618 | ) | ||||||||||||
| Results of operations from E&P activities (b) (c) | 760 | 604 | 1,446 | 316 | 367 | 314 | (107 | ) | (103 | ) | 3,597 | (44 | ) | 3,553 |
| (1) | Eni's results of operations of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009 and 18.52% as at December 2007. | |
| (2) | The amounts of joint ventures and affiliates as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (a) | Includes asset impairments amounting to euro 91 million in 2007, euro 770 million in 2008 and euro 576 million in 2009. | |
| (b) | The "Successful Effort Method" application would have led to an increase of result of operations of euro 438 million in 2007, euro 408 million in 2008 and euro 320 million in 2009 for the consolidated companies and of euro 26 million in 2007 and any variation in 2008 and euro 26 million in 2009 for joint ventures and affiliates. | |
| (c) | Amounts of 2009 do not include result of operation related to the Italian gas storage activities, following restructuring of Eni regulated gas businesses in Italy now reported in Gas & Power segment. |
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Oil and natural gas reserves
Eni’s criteria concerning evaluation and classification
of proved developed and undeveloped reserves follow Regulation
S-X 4-10 of the U.S. Securities and Exchange Commission and have
been disclosed in accordance with FASB Extractive Activities -
Oil & Gas (Topic 932).
Proved oil and gas reserves are those quantities of oil and gas,
which, by analysis of geoscience and engineering data, can be
estimated with reasonable certainty to be economically
producible, from a given date forward, from known reservoirs, and
under existing economic conditions, operating methods, and
government regulations, prior to the time at which contracts
providing the right to operate expire, unless evidence indicates
that renewal is reasonably certain, regardless of whether
deterministic or probabilistic methods are used for the
estimation. The project to extract the hydrocarbons must have
commenced or the operator must be reasonably certain that it will
commence the project within a reasonable time.
Existing economic conditions include prices and costs at which
economic producibility from a reservoir is to be determined. The
price19 shall be the average price during the 12-month
period prior to the ending date of the period covered by the
report, determined as an unweighted arithmetic average of the
first-day-of-the-month price for each month within such period,
unless prices are defined by contractual arrangements, excluding
escalations based upon future conditions.
Net proved reserves exclude interests and royalties owned by
others.
Proved reserves are classified as either developed or
undeveloped.
Developed oil and gas reserves are reserves that can be expected
to be recovered through existing wells with existing equipment
and operating methods or in which the cost of the required
equipment is relatively minor compared to the cost of a new well.
Undeveloped oil and gas reserves are reserves of any category
that are expected to be recovered from new wells on undrilled
acreage, or from existing wells where a relatively major
expenditure is required for recompletion.
Since 1991 Eni has requested qualified independent oil
engineering companies to carry out an independent evaluation20
of part of its proved reserves on a rotational basis. The
description of qualifications of the person primarily responsible
of the reserve audit is included in the third party audit report21.
In the preparation of their reports, independent evaluators rely,
without independent verification, upon information furnished by
Eni with respect to property interest, production, current cost
of operation and development, sale agreements, prices and other
factual information and data that were accepted as represented by
the independent evaluators. These data, equally used by Eni in
its internal process, include logs, directional surveys, core and
PVT (Pressure Volume Temperature) analysis, maps, oil/gas/water
production/injection data of wells, reservoir studies; technical
analysis relevant to field performance, reservoir performance,
long-term development plans, future capital and operating costs.
In order to calculate the economic value of Eni equity reserves,
actual prices applicable to hydrocarbon sales, price adjustments
required by applicable contractual arrangements, and other
pertinent information are provided.
In 2009 Ryder Scott Company and DeGolyer and MacNaughton21
provided an independent evaluation of almost 28% of Eni’s
total proved reserves as of December 31, 200922
confirming, as in previous years, the reasonableness of
Eni’s internal evaluations.
In the three year period from 2007 to 2009, 86% of Eni’s
total proved reserves were subject to independent evaluation.
As of December 31, 2009 among the most important Eni properties,
the only one which was not subject to an independent review was
Barbara (Italy).
Eni operates under Production Sharing Agreements, PSAs, in
several of the foreign jurisdictions where it has oil and gas
exploration and production activities. Reserves of oil and
natural gas to which Eni is entitled under PSA arrangements are
shown in accordance with Eni’s economic interest in the
volumes of oil and natural gas estimated to be recoverable in
future years. Such reserves include estimated quantities
allocated to Eni for recovery of costs, income taxes owed by Eni
but settled by its joint venture partners (which are state-owned
entities) out of Eni’s share of production and Eni’s
net equity share after cost recovery.
Proved oil and gas reserves associated with PSAs represented 46%,
54% and 57% of total proved reserves as of December 31, 2007,
2008 and 2009, respectively, on an oil-equivalent basis.
Similar effects as PSAs apply to service and "buy-back"
contracts; proved reserves associated with such contracts
represented 1%, 2% and 2% of total proved reserves on an
oil-equivalent basis as of December 31, 2007, 2008 and 2009,
respectively.
Oil and gas reserve quantities include: (i) oil and natural gas
quantities in excess to cost recovery which the company has an
obligation to purchase under certain PSAs with governments or
authorities, whereby the company serves as producer of
| (19) | In prior periods, year-end liquids and natural gas prices were used in the estimate of proved reserves. | |
| (20) | From 1991 to 2002 DeGolyer and MacNaughton, from 2003 also Ryder Scott. | |
| (21) | The reports of independent engineers are available on Eni website www.eni.com, section Documentation/Annual Report 2009. | |
| (22) | Including reserves of joint ventures and affiliates. |
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reserves. Reserve volumes associated with oil and gas deriving
from such obligation represent 1.8%, 0.1% and 0.3% of total
proved reserves as of December 31, 2007, 2008 and 2009,
respectively, on an oil-equivalent basis; (ii) volumes of natural
gas used for own consumption, (iii) the quantities of natural gas
produced to feed the Angola LNG plant and (iv) volumes of natural
gas held in certain Eni’s storage fields in Italy. Proved
reserves attributable to these fields include: (a) the residual
natural gas volumes of the reservoirs and (b) natural gas volumes
from other Eni fields input into these reservoirs in subsequent
periods. Proved reserves do not include volumes owned by or
acquired from third parties. Gas withdrawn from storage is
produced and thereby removed from proved reserves when sold.
Numerous uncertainties are inherent in estimating quantities of
proved reserves, in projecting future productions and development
expenditures. The accuracy of any reserve estimate is a function
of the quality of available data and engineering and geological
interpretation and judgment. The results of drilling, testing and
production after the date of the estimate may require substantial
upward or downward revisions. In addition, changes in oil and
natural gas prices have an effect on the quantities of Eni’s
proved reserves since estimates of reserves are based on prices
and costs relevant to the date when such estimates are made.
Consequently, the evaluation of reserves could also significantly
differ from actual oil and natural gas volumes that will be
actually produced.
The following tables present yearly changes in estimated proved
reserves, developed and undeveloped, of crude oil (including
condensate and natural gas liquids) and natural gas as of
December 31, 2007, 2008 and 2009.
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Crude oil (including condensate and natural gas liquids)
| (million barrels) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (1) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total joint ventures and affiliates (2) | Total consolidated subsidiaries, joint ventures and affiliates | |||||||||||
| Reserves at December 31, 2006 | 215 | 386 | 982 | 786 | 893 | 62 | 98 | 35 | 3,457 | 24 | 3,481 | ||||||||||||||||||||||
| of which: developed | 136 | 329 | 713 | 546 | 262 | 53 | 54 | 33 | 2,126 | 18 | 2,144 | ||||||||||||||||||||||
| undeveloped | 79 | 57 | 269 | 240 | 631 | 9 | 44 | 2 | 1,331 | 6 | 1,337 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 32 | 54 | 86 | 101 | 187 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 28 | 14 | (35 | ) | (26 | ) | (114 | ) | (6 | ) | (23 | ) | (2 | ) | (164 | ) | 20 | (144 | ) | ||||||||||||||
| Improved Recovery | 1 | 9 | 12 | 22 | 1 | 23 | |||||||||||||||||||||||||||
| Extensions and Discoveries | 1 | 43 | 22 | 28 | 1 | 95 | 1 | 96 | |||||||||||||||||||||||||
| Production | (28 | ) | (57 | ) | (121 | ) | (101 | ) | (26 | ) | (12 | ) | (19 | ) | (5 | ) | (369 | ) | (5 | ) | (374 | ) | |||||||||||
| Reserves at December 31, 2007 | 215 | 345 | 878 | 725 | 753 | 44 | 138 | 29 | 3,127 | 142 | 3,269 | ||||||||||||||||||||||
| of which: developed | 133 | 299 | 649 | 511 | 219 | 35 | 81 | 26 | 1,953 | 26 | 1,979 | ||||||||||||||||||||||
| undeveloped | 82 | 46 | 229 | 214 | 534 | 9 | 57 | 3 | 1,174 | 116 | 1,290 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 32 | 36 | 68 | 68 | |||||||||||||||||||||||||||||
| Revisions of Previous Estimates | (8 | ) | (30 | ) | 56 | 80 | 239 | 42 | 11 | 1 | 391 | 4 | 395 | ||||||||||||||||||||
| Improved Recovery | 7 | 25 | 32 | 1 | 33 | ||||||||||||||||||||||||||||
| Extensions and Discoveries | 4 | 13 | 4 | 26 | 2 | 3 | 52 | 52 | |||||||||||||||||||||||||
| Production | (25 | ) | (51 | ) | (122 | ) | (105 | ) | (25 | ) | (18 | ) | (21 | ) | (4 | ) | (371 | ) | (5 | ) | (376 | ) | |||||||||||
| Sales of Minerals in Place | (56 | ) | (56 | ) | (56 | ) | |||||||||||||||||||||||||||
| Reserves at December 31, 2008 | 186 | 277 | 823 | 783 | 911 | 106 | 131 | 26 | 3,243 | 142 | 3,385 | ||||||||||||||||||||||
| of which: developed | 111 | 222 | 613 | 576 | 298 | 92 | 74 | 23 | 2,009 | 33 | 2,042 | ||||||||||||||||||||||
| undeveloped | 75 | 55 | 210 | 207 | 613 | 14 | 57 | 3 | 1,234 | 109 | 1,343 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 2 | 2 | 2 | ||||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 57 | 40 | 129 | 78 | (36 | ) | (35 | ) | 36 | 1 | 270 | 270 | |||||||||||||||||||||
| Improved Recovery | 8 | 10 | 15 | 33 | 33 | ||||||||||||||||||||||||||||
| Extensions and Discoveries | 10 | 74 | 38 | 5 | 44 | 12 | 8 | 191 | 1 | 192 | |||||||||||||||||||||||
| Production | (20 | ) | (48 | ) | (105 | ) | (113 | ) | (26 | ) | (21 | ) | (26 | ) | (3 | ) | (362 | ) | (6 | ) | (368 | ) | |||||||||||
| Sales of Minerals in Place | (51 | ) | (51 | ) | |||||||||||||||||||||||||||||
| Reserves at December 31, 2009 | 233 | 351 | 895 | 770 | 849 | 94 | 153 | 32 | 3,377 | 86 | 3,463 | ||||||||||||||||||||||
| of which: developed | 141 | 218 | 659 | 544 | 291 | 45 | 80 | 23 | 2,001 | 34 | 2,035 | ||||||||||||||||||||||
| undeveloped | 92 | 133 | 236 | 226 | 558 | 49 | 73 | 9 | 1,376 | 52 | 1,428 |
| (1) | Eni's proved reserves of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009 and 18.52% as at December 2007. | |
| (2) | The amounts of joint ventures and affiliates as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). |
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Natural gas
| (billion cubic feet) | Italy (a) |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (1) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total joint ventures and affiliates (2) | Total consolidated subsidiaries, joint ventures and affiliates | |||||||||||
| Reserves at December 31, 2006 | 3,391 | 1,836 | 5,946 | 1,927 | 1,874 | 991 | 299 | 633 | 16,897 | 68 | 16,965 | ||||||||||||||||||||||
| of which: developed | 2,449 | 1,480 | 3,042 | 1,447 | 1,511 | 614 | 159 | 247 | 10,949 | 48 | 10,997 | ||||||||||||||||||||||
| undeveloped | 942 | 356 | 2,904 | 480 | 363 | 377 | 140 | 386 | 5,948 | 20 | 5,968 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 5 | 395 | 400 | 2,963 | 3,363 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | (53 | ) | 66 | 250 | 74 | (222 | ) | 23 | 4 | (20 | ) | 122 | 5 | 127 | |||||||||||||||||||
| Improved Recovery | 3 | 3 | 3 | ||||||||||||||||||||||||||||||
| Extensions and Discoveries | 4 | 6 | 89 | 213 | 205 | 4 | 86 | 607 | 607 | ||||||||||||||||||||||||
| Production | (285 | ) | (236 | ) | (534 | ) | (97 | ) | (87 | ) | (138 | ) | (88 | ) | (15 | ) | (1,480 | ) | (14 | ) | (1,494 | ) | |||||||||||
| Reserves at December 31, 2007 | 3,057 | 1,675 | 5,751 | 2,122 | 1,770 | 880 | 696 | 598 | 16,549 | 3,022 | 19,571 | ||||||||||||||||||||||
| of which: developed | 2,304 | 1,364 | 3,065 | 1,469 | 1,580 | 530 | 442 | 213 | 10,967 | 428 | 11,395 | ||||||||||||||||||||||
| undeveloped | 753 | 311 | 2,686 | 653 | 190 | 350 | 254 | 385 | 5,582 | 2,594 | 8,176 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 8 | 6 | 114 | 128 | 128 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 56 | (58 | ) | 1,163 | 45 | 772 | 52 | (13 | ) | 24 | 2,041 | 6 | 2,047 | ||||||||||||||||||||
| Improved Recovery | 4 | 4 | 4 | ||||||||||||||||||||||||||||||
| Extensions and Discoveries | 5 | 25 | 38 | 2 | 11 | 31 | 112 | 112 | |||||||||||||||||||||||||
| Production | (274 | ) | (229 | ) | (641 | ) | (95 | ) | (89 | ) | (146 | ) | (114 | ) | (16 | ) | (1,604 | ) | (13 | ) | (1,617 | ) | |||||||||||
| Sales of Minerals in Place | (16 | ) | (16 | ) | (16 | ) | |||||||||||||||||||||||||||
| Reserves at December 31, 2008 | 2,844 | 1,421 | 6,311 | 2,084 | 2,437 | 911 | 600 | 606 | 17,214 | 3,015 | 20,229 | ||||||||||||||||||||||
| of which: developed | 2,031 | 1,122 | 3,537 | 1,443 | 2,005 | 439 | 340 | 221 | 11,138 | 420 | 11,558 | ||||||||||||||||||||||
| undeveloped | 813 | 299 | 2,774 | 641 | 432 | 472 | 260 | 385 | 6,076 | 2,595 | 8,671 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 1 | 136 | 137 | 137 | |||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 97 | 149 | (309 | ) | 142 | (204 | ) | 52 | 43 | (17 | ) | (47 | ) | 18 | (29 | ) | |||||||||||||||||
| Improved Recovery | 25 | 25 | 25 | ||||||||||||||||||||||||||||||
| Extensions and Discoveries | 1 | 26 | 479 | 2 | 7 | 4 | 519 | 80 | 599 | ||||||||||||||||||||||||
| Production | (238 | ) | (239 | ) | (587 | ) | (100 | ) | (94 | ) | (151 | ) | (155 | ) | (18 | ) | (1,582 | ) | (14 | ) | (1,596 | ) | |||||||||||
| Sales of Minerals in Place | (2 | ) | (2 | ) | (4 | ) | (1,511 | ) | (1,515 | ) | |||||||||||||||||||||||
| Reserves at December 31, 2009 | 2,704 | 1,380 | 5,894 | 2,127 | 2,139 | 814 | 629 | 575 | 16,262 | 1,588 | 17,850 | ||||||||||||||||||||||
| of which: developed | 2,001 | 1,231 | 3,486 | 1,463 | 1,859 | 539 | 506 | 565 | 11,650 | 234 | 11,884 | ||||||||||||||||||||||
| undeveloped | 703 | 149 | 2,408 | 664 | 280 | 275 | 123 | 10 | 4,612 | 1,354 | 5,966 |
| (1) | Eni's proved reserves of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009 and 18.52% as at December 2007. | |
| (2) | The amounts of joint ventures and affiliates as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (a) | Including approximately, 754, 749, 746 and 769 billion of cubic feet of natural gas held in storage at December 31, 2006, 2007, 2008 and 2009, respectively. |
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ENI ANNUAL REPORT / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Standardized measure of discounted future net cash flows
Estimated future cash inflows represent the revenues that
would be received from production and are determined by applying
year-end prices of oil and gas for the years ended December 31,
2007 and 2008 and the average prices during the year ended
December 31, 2009 to estimated future production of proved
reserves. Future price changes are considered only to the extent
provided by contractual arrangements. Estimated future
development and production costs are determined by estimating the
expenditures to be incurred in developing and producing the
proved reserves at the end of the year. Neither the effects of
price and cost escalations nor expected future changes in
technology and operating practices have been considered.
The standardized measure is calculated as the excess of future
cash inflows from proved reserves less future costs of producing
and developing the reserves, future income taxes and a yearly 10%
discount factor.
Future production costs include the estimated expenditures
related to the production of proved reserves plus any production
taxes without consideration of future inflation. Future
development costs include the estimated costs of drilling
development wells and installation of production facilities, plus
the net costs associated with dismantlement and abandonment of
wells and facilities, under the assumption that year-end costs
continue without considering future inflation. Future income
taxes were calculated in accordance with the tax laws of the
countries in which Eni operates.
The standardized measure of discounted future net cash flows,
related to the preceding proved oil and gas reserves, is
calculated in accordance with the requirements of FASB Extractive
Activities - Oil & Gas (Topic 932). The standardized measure
does not purport to reflect realizable values or fair market
value of Eni’s proved reserves. An estimate of fair value
would also take into account, among other things, hydrocarbon
resources other than proved reserves, anticipated changes in
future prices and costs and a discount factor representative of
the risks inherent in the oil and gas exploration and production
activity.
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ENI ANNUAL REPORT / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The standardized measure of discounted future net cash flows by geographical area consists of the following:
| (euro million) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (1) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total joint ventures and affiliates (2) | Total consolidated subsidiaries, joint ventures and affiliates | |||||||||||
| At December 31, 2007 | |||||||||||||||||||||||||||||||||
| Future cash inflows | 47,243 | 30,390 | 73,456 | 48,283 | 42,710 | 4,855 | 11,180 | 3,544 | 261,661 | 7,135 | 268,796 | ||||||||||||||||||||||
| Future production costs | (5,926 | ) | (6,759 | ) | (11,754 | ) | (9,875 | ) | (4,997 | ) | (476 | ) | (1,758 | ) | (459 | ) | (42,004 | ) | (1,249 | ) | (43,253 | ) | |||||||||||
| Future development and abandonment costs | (7,218 | ) | (2,653 | ) | (4,643 | ) | (3,013 | ) | (3,374 | ) | (306 | ) | (1,533 | ) | (428 | ) | (23,168 | ) | (1,721 | ) | (24,889 | ) | |||||||||||
| Future net inflow before income tax | 34,099 | 20,978 | 57,059 | 35,395 | 34,339 | 4,073 | 7,889 | 2,657 | 196,489 | 4,165 | 200,654 | ||||||||||||||||||||||
| Future income tax | (10,778 | ) | (14,388 | ) | (29,083 | ) | (23,083 | ) | (9,977 | ) | (1,109 | ) | (3,272 | ) | (1,003 | ) | (92,693 | ) | (2,009 | ) | (94,702 | ) | |||||||||||
| Future net cash flows | 23,321 | 6,590 | 27,976 | 12,312 | 24,362 | 2,964 | 4,617 | 1,654 | 103,796 | 2,156 | 105,952 | ||||||||||||||||||||||
| 10% discount factor | (13,262 | ) | (1,757 | ) | (11,143 | ) | (3,953 | ) | (17,480 | ) | (718 | ) | (1,568 | ) | (913 | ) | (50,794 | ) | (1,265 | ) | (52,059 | ) | |||||||||||
| Standardized measure of discounted future net cash flows | 10,059 | 4,833 | 16,833 | 8,359 | 6,882 | 2,246 | 3,049 | 741 | 53,002 | 891 | 53,893 | ||||||||||||||||||||||
| At December 31, 2008 | |||||||||||||||||||||||||||||||||
| Future cash inflows | 46,458 | 16,963 | 62,785 | 22,344 | 21,648 | 5,072 | 5,257 | 2,937 | 183,464 | 4,782 | 188,246 | ||||||||||||||||||||||
| Future production costs | (5,019 | ) | (3,467 | ) | (10,673 | ) | (6,715 | ) | (6,273 | ) | (707 | ) | (1,657 | ) | (405 | ) | (34,916 | ) | (1,104 | ) | (36,020 | ) | |||||||||||
| Future development and abandonment costs | (6,805 | ) | (2,317 | ) | (6,153 | ) | (3,868 | ) | (4,842 | ) | (738 | ) | (1,022 | ) | (258 | ) | (26,003 | ) | (1,845 | ) | (27,848 | ) | |||||||||||
| Future net inflow before income tax | 34,634 | 11,179 | 45,959 | 11,761 | 10,533 | 3,627 | 2,578 | 2,274 | 122,545 | 1,833 | 124,378 | ||||||||||||||||||||||
| Future income tax | (11,329 | ) | (7,697 | ) | (27,800 | ) | (5,599 | ) | (2,745 | ) | (768 | ) | (232 | ) | (861 | ) | (57,031 | ) | (1,032 | ) | (58,063 | ) | |||||||||||
| Future net cash flows | 23,305 | 3,482 | 18,159 | 6,162 | 7,788 | 2,859 | 2,346 | 1,413 | 65,514 | 801 | 66,315 | ||||||||||||||||||||||
| 10% discount factor | (13,884 | ) | (1,042 | ) | (8,639 | ) | (2,155 | ) | (6,230 | ) | (672 | ) | (672 | ) | (768 | ) | (34,062 | ) | (763 | ) | (34,825 | ) | |||||||||||
| Standardized measure of discounted future net cash flows | 9,421 | 2,440 | 9,520 | 4,007 | 1,558 | 2,187 | 1,674 | 645 | 31,452 | 38 | 31,490 | ||||||||||||||||||||||
| At December 31, 2009 | |||||||||||||||||||||||||||||||||
| Future cash inflows | 26,243 | 22,057 | 59,413 | 33,676 | 30,273 | 5,680 | 7,088 | 2,973 | 187,403 | 3,718 | 191,121 | ||||||||||||||||||||||
| Future production costs | (4,732 | ) | (6,215 | ) | (7,771 | ) | (9,737 | ) | (6,545 | ) | (1,427 | ) | (1,797 | ) | (529 | ) | (38,753 | ) | (1,251 | ) | (40,004 | ) | |||||||||||
| Future development and abandonment costs | (5,143 | ) | (5,375 | ) | (8,618 | ) | (5,134 | ) | (4,345 | ) | (1,409 | ) | (1,897 | ) | (214 | ) | (32,135 | ) | (1,168 | ) | (33,303 | ) | |||||||||||
| Future net inflow before income tax | 16,368 | 10,467 | 43,024 | 18,805 | 19,383 | 2,844 | 3,394 | 2,230 | 116,515 | 1,299 | 117,814 | ||||||||||||||||||||||
| Future income tax | (5,263 | ) | (6,621 | ) | (24,230 | ) | (9,894 | ) | (4,827 | ) | (636 | ) | (694 | ) | (563 | ) | (52,728 | ) | (432 | ) | (53,160 | ) | |||||||||||
| Future net cash flows | 11,105 | 3,846 | 18,794 | 8,911 | 14,556 | 2,208 | 2,700 | 1,667 | 63,787 | 867 | 64,654 | ||||||||||||||||||||||
| 10% discount factor | (5,868 | ) | (1,455 | ) | (9,160 | ) | (3,102 | ) | (10,249 | ) | (520 | ) | (1,162 | ) | (771 | ) | (32,287 | ) | (610 | ) | (32,897 | ) | |||||||||||
| Standardized measure of discounted future net cash flows (a) | 5,237 | 2,391 | 9,634 | 5,809 | 4,307 | 1,688 | 1,538 | 896 | 31,500 | 257 | 31,757 |
| (1) | Eni's standardized measure of discounted future of net cash flows of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009 and 18.52% as at December 2007. | |
| (2) | The amounts of joint ventures and affiliates as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (a) | Amounts of 2009 do not include standardized measure of discounted future net cash flows related to the Italian gas storage activities, following restructuring of Eni regulated gas businesses in Italy now reported in Gas & Power segment. |
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ENI ANNUAL REPORT / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Changes in standardized measure of discounted future net cash flows
Changes in standardized measure of discounted future net cash flows for the years ended December 31, 2007, 2008 and 2009, are as follows:
| (euro million) | Total consolidated subsidiaries |
Total joint ventures and affiliates |
Total consolidated subsidiaries, joint ventures and affiliates |
|||
| Value at December 31, 2006 | 43,227 | 354 | 43,581 | ||||||
| Increase (Decrease): | |||||||||
| . sales, net of production costs | (20,979 | ) | (143 | ) | (21,122 | ) | |||
| . net changes in sales and transfer prices, net of production costs | 34,999 | 153 | 35,152 | ||||||
| . extensions, discoveries and improved recovery, net of future production and development costs | 3,982 | 46 | 4,028 | ||||||
| . changes in estimated future development and abandonment costs | (4,000 | ) | (73 | ) | (4,073 | ) | |||
| . development costs incurred during the period that reduced future development costs | 4,682 | 56 | 4,738 | ||||||
| . revisions of quantity estimates | (2,995 | ) | 527 | (2,468 | ) | ||||
| . accretion of discount | 7,968 | 50 | 8,018 | ||||||
| . net change in income taxes | (17,916 | ) | (1,027 | ) | (18,943 | ) | |||
| . purchase of reserves in-place | 3,521 | 929 | 4,450 | ||||||
| . changes in production rates (timing) and other | 513 | 19 | 532 | ||||||
| Net increase (decrease) | 9,775 | 537 | 10,312 | ||||||
| Value at December 31, 2007 | 53,002 | 891 | 53,893 | ||||||
| Increase (Decrease): | |||||||||
| . sales, net of production costs | (26,202 | ) | (178 | ) | (26,380 | ) | |||
| . net changes in sales and transfer prices, net of production costs | (39,699 | ) | (1,254 | ) | (40,953 | ) | |||
| . extensions, discoveries and improved recovery, net of future production and development costs | 1,110 | 10 | 1,120 | ||||||
| . changes in estimated future development and abandonment costs | (6,222 | ) | (129 | ) | (6,351 | ) | |||
| . development costs incurred during the period that reduced future development costs | 6,584 | 145 | 6,729 | ||||||
| . revisions of quantity estimates | 5,835 | (61 | ) | 5,774 | |||||
| . accretion of discount | 10,538 | 201 | 10,739 | ||||||
| . net change in income taxes | 21,359 | 657 | 22,016 | ||||||
| . purchase of reserves in-place | 476 | 476 | |||||||
| . sale of reserves in-place | 25 | 25 | |||||||
| . changes in production rates (timing) and other | 4,646 | (244 | ) | 4,402 | |||||
| Net increase (decrease) | (21,550 | ) | (853 | ) | (22,403 | ) | |||
| Value at December 31, 2008 | 31,452 | 38 | 31,490 | ||||||
| Increase (Decrease): | |||||||||
| . sales, net of production costs | (17,752 | ) | (154 | ) | (17,906 | ) | |||
| . net changes in sales and transfer prices, net of production costs | 4,515 | 286 | 4,801 | ||||||
| . extensions, discoveries and improved recovery, net of future production and development costs | 3,587 | 22 | 3,609 | ||||||
| . changes in estimated future development and abandonment costs | (9,915 | ) | (157 | ) | (10,072 | ) | |||
| . development costs incurred during the period that reduced future development costs | 7,401 | 208 | 7,609 | ||||||
| . revisions of quantity estimates | 4,686 | (113 | ) | 4,573 | |||||
| . accretion of discount | 6,112 | 29 | 6,141 | ||||||
| . net change in income taxes | 674 | (67 | ) | 607 | |||||
| . purchase of reserves in-place | 161 | 161 | |||||||
| . sale of reserves in-place | (7 | ) | 81 | 74 | |||||
| . changes in production rates (timing) and other | 586 | 84 | 670 | ||||||
| Net increase (decrease) | 48 | 219 | 267 | ||||||
| Value at December 31, 2009 | 31,500 | 257 | 31,757 |
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Certification pursuant to rule 154-bis paragraph 5 of the Legislative Decree No. 58/1998 (Testo Unico della Finanza)
| 1. | The undersigned Paolo Scaroni and Alessandro Bernini, in their quality as Chief Executive Officer and manager responsible for the preparation of financial reports of Eni, respectively, also pursuant to rule 154-bis, paragraphs 3 and 4 of Legislative Decree No. 58/1998, certify that internal controls over financial reporting in place for the reparation of the Annual Report as of December 31, 2009 and during the period covered by the report, were: | |
| • adequate to the company structure, and | ||
| • effectively applied during the process of preparation of the report. | ||
| 2. | Internal controls over financial reporting in place for the preparation of the 2009 consolidated accounts have been defined and the evaluation of their effectiveness has been assessed based on principles and methodologies adopted by Eni in accordance with the Internal Control-Integrated Framework Model issued by the Committee of Sponsoring Organizations of the Treadway Commission, which represents an internationally-accepted framework for the internal control system. | |
| 3. | The undersigned officers also certify that: | |
| 3.1 | This 2009 consolidated Annual Report: | |
| a) was prepared in accordance with the evaluation and measurement criteria 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; | ||
| b) corresponds to the company’s evidence and accounting books and entries; | ||
| c) fairly represents the financial condition, results of operations and cash flows of the parent company and the Group consolidated companies as of, and for, the period presented in this report. | ||
| 3.2 | The operating and financial review provides a reliable analysis of business trends and results, including trend analysis of the parent company and the Group companies, as well as a description of the main risks and uncertainties. |
March 11, 2010
| /s/ Paolo Scaroni ————————— Paolo Scaroni Chief Executive Officer |
/s/Alessandro Bernini ————————— Alessandro Bernini Chief Financial Officer |
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Report of Independent Auditors
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290
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Relations Piazza Ezio Vanoni, 1 - 20097 San Donato Milanese (Milan) Tel. +39-0252051651 - Fax +39-0252031929 e-mail: investor.relations@eni.com
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Table of Contents
Eni: giant field Perla resources to increase by more than 30%
San Donato Milanese (Milan), April 12, 2010 - Eni has successfully drilled the Perla 2 well, located in the Cardón IV Block, in the shallow water of the Gulf of Venezuela. The results largely exceeded pre-drill expectations, thus increasing the initial resource estimations by 30%, with potential for further improvement.
This result confirms Perla as a world-class gas discovery, one of the most significant in recent years, and the largest ever in Venezuela.
Perla 2, drilled in 60 m of water depth, encountered 840 ft (260 m) of net pay in a carbonate sequence with excellent reservoir characteristics, confirmed by 700 ft (210 m) of bottom hole cores that have been recovered.
During the production test, the well flowed 50 mmscf/day of gas and 1,500 bopd of condensate. Normalized gas production per well is expected to increase to over 70 mmscf/day of gas and 2,000 bopd of condensate.
The Cardón IV Block is currently licensed and operated by a Joint Operating Company, owned 50% by Eni and 50% by Repsol, named Cardón IV S.A. The Venezuelan state company Petróleos de Venezuela S.A. (PDVSA) owns a 35% back-in right to be exercised in the development phase, and at that time Eni and Repsol will each hold a 32.5% interest in the project, which will then be jointly operated by the three companies.
Eni and Repsol have already begun, together with PDVSA, to evaluate options for a fast track development of Perla, through an early production phase targeted to start up in early-mid 2013 with 300 million scf per day.
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Eni is present in Venezuela through its participation in Petrosucre, the Operating Company which runs the Corocoro Field (PDVSA 74%, Eni 26%) with a daily equity production of approximately 10,000 barrels of oil per day, and in Petrolera Guiria (PDVSA 64.25%, Eni 19.5%, Ineparia 16.25%) which operates the discovery of Punta Sur. Both the Corocoro and Punta Sur fields are located in the offshore of the Gulf of Paria.
Furthermore, Eni has recently signed an agreement with PDVSA aimed at developing the Junin-5 heavy oil block, located in the Faja of Orinoco, which holds 35 billion barrels of certified oil in place. PDVSA will hold 60% and Eni 40% in the Junin-5 venture, which will be jointly operated.
Company Contacts:
Press Office: Tel. +39.0252031875 - +39.065982398
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +39.800 11 22 34 56
Switchboard: +39.0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Web site: www.eni.com
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Eni and Gazprom meet on South Stream and upstream projects
San Donato Milanese (Milan), April 12, 2010 - Gazprom Chairman Alexey Miller and Eni CEO Paolo Scaroni met today in Moscow to discuss the two companies' common projects.
South Stream
Eni and Gazprom confirm their full commitment to the South
Stream project and their intention to complete the feasibility
study of the offshore section. The two companies also agreed to
accelerate the activities of their joint venture South Stream AG.
Eni and Gazprom also confirmed their support to EdF entry into the project and committed to starting negotiations with EdF.
Upstream projects
Eni and Gazprom have agreed on the terms of Gazprom's entry
into the Elephant project in Libya. The detailed agreement will
be finalised in the coming days and will be submitted to Libyan
authorities for approval.
First production at the Samburskoye field is confirmed for 2011. Plateau production of 150,000 boepd is expected within two years of start-up.
Company Contacts:
Press Office: Tel. +39.0252031875 - +39.065982398
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +39.800 11 22 34 56
Switchboard: +39.0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Web site: www.eni.com
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 |
ENI ANNOUNCES RESULTS FOR THE
FIRST QUARTER OF 2010
Financial Highlights
• Adjusted operating profit: up 15.4% to euro 4.33 billion
• Adjusted net profit: up 3.6% to euro 1.82 billion
• Net profit: up 16.7% to euro 2.22 billion
• Cash flow: euro 4.55 billion
Operational Highlights
• Oil and natural gas production: up 2.1% to 1.816 million barrels per day
• Natural gas sales: down 5.7% to 30.51 billion cubic meters
Rome, April 23, 2010 - Eni, the international oil and gas
company, today announces its group results for the first quarter
of 20101 (unaudited).
Paolo Scaroni, Chief Executive Officer, commented:
“Eni delivered solid operating and financial results for
the first quarter of 2010, in spite of ongoing market challenges.
We continue investing to drive growth and efficiency as we
maintain our focus on creating value for our shareholders.”
| (1) | This press release represents the quarterly report prepared in compliance with Italian listing standards as provided by Article 154-ter of the Italian code for securities and exchanges (Testo Unico della Finanza). |
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Financial Highlights
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| SUMMARY GROUP RESULTS | (euro million) |
| 2,466 | Operating profit | 3,967 | 4,847 | 22.2 | ||||||||
| 3,702 | Adjusted operating profit (a) | 3,754 | 4,331 | 15.4 | ||||||||
| 391 | Net profit (b) | 1,904 | 2,222 | 16.7 | ||||||||
| 0.11 | - per share (euro) (c) | 0.53 | 0.61 | 15.1 | ||||||||
| 0.33 | - per ADR ($) (c) (d) | 1.38 | 1.69 | 22.5 | ||||||||
| 1,394 | Adjusted net profit (a) (b) | 1,759 | 1,822 | 3.6 | ||||||||
| 0.38 | - per share (euro) (c) | 0.49 | 0.50 | 2.0 | ||||||||
| 1.12 | - per ADR ($) (c) (d) | 1.28 | 1.38 | 7.8 | ||||||||
| (a) | For a detailed explanation of adjusted operating profit and net profit see paragraph "Reconciliation of reported operating and net profit to results on an adjusted basis" page 20. | |
| (b) | Profit attributable to Eni shareholders. | |
| (c) | Fully diluted. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented. | |
| (d) | One ADR (American Depositary Receipt) is equal to two Eni ordinary shares. |
Adjusted operating profit
Adjusted operating profit was euro 4.33 billion, up 15.4%
from the first quarter of 2009. This was due to an excellent
operating performance reported by the Exploration &
Production division driven by increased oil prices and production
growth. The Petrochemical division also improved versus a year
ago as operating losses were cut in half. Theses positive trends
were partially offset by reduced results reported by both the
Refining & Marketing and the Gas & Power divisions.
Adjusted Net Profit
Adjusted net profit was euro 1.82 billion, up 3.6% compared
with a year ago, as a better operating performance was partly
absorbed by the negative impact associated with an increased
adjusted tax rate (from 49% to 53%).
Capital expenditures
Capital expenditures for the quarter amounted to euro 2.78
billion mainly related to continuing development of oil and gas
reserves, the construction of rigs and offshore vessels in the
Engineering & Construction segment and the upgrading of gas
transport infrastructure.
Cash flow
The main cash inflows for the quarter were net cash generated
by operating activities amounting to euro 4.55 billion and
proceeds from divestments of euro 729 million. These inflows were
used to fund the financing requirements associated with capital
expenditures (euro 2.78 billion) and to pay down finance debt. As
of March 31, 2010 net borrowings2 amounted to euro
21.05 billion, representing a decrease of euro 2 billion from
year end 2009, notwithstanding negative exchange rate translation
differences (down approximately euro 370 million).
Financial Ratios
Return on Average Capital Employed (ROACE)3
calculated on an adjusted basis at March 31, 2010 was 9.1%. The
ratio of net borrowings to shareholders’ equity including
minority interest – leverage3 – decreased to
0.39 at March 31, 2010 from 0.46 as of December 31, 2009.
| (2) | Information on net borrowings composition is furnished on page 27. | |
| (3) | Non-GAAP financial measures disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided for by CESR Recommendation No. 2005-178b. See pages 27 and 28 for leverage and ROACE, respectively. |
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Operational Highlights and Trading Environment
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| KEY STATISTICS |
| 1,886 | Production of oil and natural gas | (kboe/d) | 1,779 | 1,816 | 2.1 | |||||||||
| 1,073 | - Liquids | (kbbl/d) | 1,013 | 1,011 | (0.2 | ) | ||||||||
| 4,668 | - Natural gas | (mmcf/d) | 4,398 | 4,615 | 4.8 | |||||||||
| 28.39 | Worldwide gas sales | (bcm) | 32.35 | 30.51 | (5.7 | ) | ||||||||
| 1.82 | - of which: E&P sales in Europe and the Gulf of Mexico | 1.49 | 1.60 | 7.4 | ||||||||||
| 9.42 | Electricity sales | (TWh) | 7.78 | 9.00 | 15.7 | |||||||||
| 3.00 | Retail sales of refined products in Europe | (mmtonnes) | 2.79 | 2.68 | (3.9 | ) | ||||||||
Exploration & Production
Eni reported liquids and gas production of 1,816 kboe/d for
the first quarter of 2010. Production grew by 2.1% as a result of
continuing production ramp-up in Nigeria, Congo and the United
States, and additions from fields which were started-up in 2009.
These positive trends were partly offset by a combined negative
impact associated with lower entitlements in Company’s PSAs
due to higher oil prices, and lower OPEC restrictions. Also,
production for the quarter was negatively affected by unplanned
facility shutdowns and mature field declines, particularly in the
North Sea.
Realized Oil and Gas Prices
Oil realizations in dollar terms increased by 68.5% driven by
a recovery in market benchmark Brent prices (up 71.7% from the
first quarter of 2009). Natural gas realizations declined due to
the impact of the time lag in oil-linked pricing formulae and
weak demand.
Gas & Power
Eni’s worldwide natural gas sales were 30.51 bcm, down
by 5.7% compared with the first quarter of 2009. The performance
was negatively affected by sharply lower volumes supplied to the
Italian market (down by 2.34 bcm, or 17.7%) due to increased
competitive pressures in the power generation business, as well
as in sales to wholesalers and industrial customers. Sales
outside of Italy increased by 2.6% as a result of organic growth
achieved in Northern Europe, France and Belgium.
Refining & Marketing
Eni’s realized refining margins in dollar terms were
sharply lower mirroring the environment for Brent margins (down
$2.94 per barrel in the quarter, or 55.1%). This reduction
reflected prolonged weakness in industry fundamentals as
rapidly-escalating of oil-based feedstock costs were not fully
transferred to final prices of products due to excess capacity,
sluggish demand and high inventory levels.
Currency
Results of operations for the quarter were negatively
affected by a steep appreciation of euro vs the US dollar, up by
6.3%. This particularly impacted reported results of foreign
subsidiaries in the Exploration & Production division which
use the US dollar as their functional currency.
Portfolio developments
Venezuela
The Perla 2 well, located in the Cardón IV Block, in the
shallow waters of the Gulf of Venezuela, was successfully
drilled. The results exceeded the initial resource estimation by
30% with potential for further improvements to be defined through
the future wells. This result confirms Perla as a world-class gas
discovery, one of the most significant in recent years, and the
largest ever in Venezuela.
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Angola
Two oil discoveries were made offshore in the 15/06 block
(Eni 35%, operator) with the exploration wells Nzanza-1 e
Cinguvu-1, which have been flowing at more than 1,600 and 6,400
barrels per day, respectively.
Russia
As part of the transaction to divest a 51% stake in the
joint-venture Eni-Enel OOO SeverEnergia to Gazprom, based on the
call option exercised by the Russian company on September 24,
2009, Eni collected a second installment of the transaction by
March 31, 2010. This amounted to euro 526 million (as converted
at the EUR/USD exchange rate of 1.35 as of the transaction date,
corresponding to approximately $710 million, approximately 75% of
the whole amount).
Main production start-ups
In line with the Company’s production plans, production was started at the Annamaria B field (Eni 90% operator), located in the offshore section between Italy and Croatia, which flowed at approximately 28 mmcf/day. A production plateau of 42 mmcf/day (7,500 barrels of oil equivalent) is targeted. Other start-ups were achieved in Algeria, China and Congo.
Outlook
In what remains an uncertain energy environment, Eni forecasts a modest improvement in global oil demand and a Brent price of 76 $/barrel in 2010. Gas demand in Europe and Italy is expected to recover gradually from the steep decline suffered in 2009, which mainly impacted the industrial and thermoelectric sectors at a time when new import capacity was coming on line. The Company faces a challenging refining environment, excluding any significant recovery in industry fundamentals, which will result in prolonged weakness in refinery margins.
| - | Production of liquids and natural gas is forecast to slightly increase compared to 2009 (production in 2009 was 1.769 million boe/d). This estimate is based on the Company’s scenario for a Brent price of 76 $/barrel for the full year, the same level of OPEC restrictions as in the first quarter of 2010 and asset disposals underway. Growth will be driven by continuing field start-ups, mainly in Italy, Algeria and Norway and marginally the Zubair project in Iraq, and production ramp-up at the Company’s recently started fields, mainly in Nigeria, Angola and the USA. These additions will be partly offset by mature field declines. | |
| - | Natural gas sales are forecasted to decrease slightly compared with 2009 (approximately 104 bcm were achieved in 2009). Increasing competitive pressures, mainly in Italy, are expected to be partly offset by an expected recovery in European gas demand. Other positive trends include a benefit associated with integrating Distrigas operations and the optimization of its supply portfolio, including re-negotiation of long-term supply contracts. | |
| - | Regulated businesses in Italy will benefit from the pre-set regulatory return on new capital expenditures and cost savings from integrating the whole chain of transport, storage and distribution activities. | |
| - | Refining throughputs on Eni’s account are planned to be in line with 2009 (actual throughputs in 2009 were 34.55 mmtonnes). Volumes processed at wholly-owned refineries are expected to increase, resulting in a higher capacity utilization rate, due to a reduction of volumes on third party refineries reflecting the Company’s decision to terminate certain processing agreements. Efficiency improvement actions will partly offset the unfavorable trading environment. | |
| - | Retail sales of refined products in Italy and the rest of Europe are expected to be unchanged from 2009 (12.02 mmtonnes in 2009) reflecting weak demand. New marketing initiatives are planned in order to strengthen Eni’s leadership on the Italian retail market and to develop its market share in European markets. | |
| - | The Engineering & Construction business is expected to see solid results due to a robust order backlog. |
In 2010, management plans to make capital expenditures broadly in line with 2009 (euro 13.69 billion were invested in 2009). Capital expenditures will mainly be directed to the development of oil and natural gas reserves, exploration projects, the upgrading of construction vessels and rigs, and the upgrading of natural gas transport infrastructure. Management has planned a number of measures designed to ensure the achievement of a ratio of net borrowings to total equity (leverage) which will adequately support a strong credit rating.
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This press release for the first quarter of 2010 (unaudited)
provides data and information on business and financial
performance in compliance with Article 154-ter of the Italian
code for securities and exchanges ("Testo Unico della
Finanza" - TUF). Results are presented for the first quarter
of 2010 and for the first quarter and the fourth quarter of 2009.
Information on liquidity and capital resources relates to end of
the period as of March 31, 2010, and December 31, 2009. Tables
contained in this press release are comparable with those
presented in the management’s disclosure section of the
Company’s annual report and interim report. Quarterly
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. The evaluation
and recognition criteria applied during the preparation of the
report for the first quarter are unchanged from those adopted for
the preparation of the 2009 Annual Report, with the exception of
the international accounting standards come into force from
January 1, 2010 described in the section of the 2009 Annual
Report "Accounting standards and interpretations issued by
IASB /IFRIC and endorsed by EU".
Adoption of those accounting standards did not have any impacts
on the financial results of the first quarter 2010 with the sole
exception of interpretation IFRIC 12 "service concession
arrangements". IFRIC 12 provides guidance on the accounting
by operators for public-to-private service concession
arrangements. An arrangement within the scope of this
interpretation involves for a specified period of time an
operator constructing, upgrading, operating and maintaining the
infrastructure used to provide the public service. In particular
when the grantor controls or regulates what services the operator
must provide with the infrastructure, at what price and any
significant residual interest in the infrastructure at the end of
the term of the arrangement, the operator shall recognize the
concession as an intangible asset or as a financial asset on the
basis of the agreements. Based on existing arrangements in Eni
Group companies, adoption of IFRIC 12 has led to the Company
classifying infrastructures used to provide the public service
within intangible assets in the balance sheet as of March 31,
2010. Balance sheet data as of December 31, 2009 have been
restated accordingly for an amount of euro 3,412 million (i.e.
the net book value of infrastructures used to provide the public
service which were presented within property, plant and equipment
in prior years).
Considering the tariff set-up of public services rendered under
concessions arrangements and absent any benchmarks, the Company
was in no position to reliably quantify margins for construction
and upgrading activities and consequently capital expenditure
made in the period have been recognized as contract work in
progress for an equal amount as costs incurred. Infrastructures
used to provide the public service are amortized on the basis of
the expected pattern of consumption of expected future economic
benefits embodied in those assets and their residual value, as
provided by the relevant regulatory framework.
Non-GAAP financial measures and other performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided by recommendation CESR/05-178b.
Eni’s Chief Financial Officer, Alessandro Bernini, in his
position as manager responsible for the preparation of the
Company’s financial reports, certifies pursuant to rule
154-bis paragraph 2 of Legislative Decree No. 58/1998, that data
and information disclosed in this press release correspond to the
Company’s evidence and accounting books and entries.
Cautionary statement
This press release, in particular the statements under
the section "Outlook", contains certain forward-looking
statements particularly those regarding capital expenditures,
development and management of oil and gas resources, dividends,
share repurchases, 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 problems; 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
first quarter of the year cannot be extrapolated on an annual
basis.
- 5 -
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* * *
Contacts
E-mail: segreteriasocietaria.azionisti@eni.com
Investor Relations
E-mail: investor.relations@eni.com
Tel.: +39 0252051651 - Fax: +39 0252031929
Eni Press Office
E-mail: ufficiostampa@eni.com
Tel.: +39 0252031287 - +39 0659822040
* * *
Eni
Società per Azioni, Rome, Piazzale Enrico Mattei, 1
Share capital: euro 4,005,358,876 fully paid
Tax identification number 00484960588
Tel.: +39-0659821 - Fax: +39-0659822141
* * *
This press release for the first quarter of 2010 (unaudited) is also available on the Eni web site eni.com.
- 6 -
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Summary results for the first quarter of 2010
Fourth Quarter |
First Quarter |
2009 |
(euro million) |
2009 |
2010 |
% Ch. |
||||
| 22,077 | Net sales from operations | 23,741 | 24,804 | 4.5 | ||||||||
| 2,466 | Operating profit | 3,967 | 4,847 | 22.2 | ||||||||
| (135 | ) | Exclusion of inventory holding (gains) losses | 125 | (409 | ) | |||||||
| 1,371 | Exclusion of special items | (338 | ) | (107 | ) | |||||||
| of which: | ||||||||||||
| 250 | - non recurring items | |||||||||||
| 1,121 | - other special items | (338 | ) | (107 | ) | |||||||
| 3,702 | Adjusted operating profit | 3,754 | 4,331 | 15.4 | ||||||||
| 391 | Net profit attributable to Eni’s shareholders | 1,904 | 2,222 | 16.7 | ||||||||
| (31 | ) | Exclusion of inventory holding (gains) losses | 91 | (280 | ) | |||||||
| 1,034 | Exclusion of special items | (236 | ) | (120 | ) | |||||||
| of which: | ||||||||||||
| 250 | - non recurring items | |||||||||||
| 784 | - other special items | (236 | ) | (120 | ) | |||||||
| 1,394 | Adjusted net profit attributable to Eni’s shareholders | 1,759 | 1,822 | 3.6 | ||||||||
| 287 | Adjusted net profit of non-controlling interest | 206 | 197 | (4.4 | ) | |||||||
| 1,681 | Adjusted net profit | 1,965 | 2,019 | 2.7 | ||||||||
| Breakdown by division (a): | ||||||||||||
| 1,019 | Exploration & Production | 908 | 1,245 | 37.1 | ||||||||
| 852 | Gas & Power | 988 | 955 | (3.3 | ) | |||||||
| (118 | ) | Refining & Marketing | 68 | (30 | ) | .. | ||||||
| (85 | ) | Petrochemicals | (95 | ) | (43 | ) | 54.7 | |||||
| 229 | Engineering & Construction | 223 | 197 | (11.7 | ) | |||||||
| (83 | ) | Other activities | (25 | ) | (61 | ) | .. | |||||
| (95 | ) | Corporate and financial companies | (174 | ) | (202 | ) | (16.1 | ) | ||||
| (38 | ) | Impact of unrealized intragroup profit elimination (b) | 72 | (42 | ) | |||||||
| Net profit attributable to Eni’s shareholders | ||||||||||||
| 0.11 | per share (euro) | 0.53 | 0.61 | 15.1 | ||||||||
| 0.33 | per ADR ($) | 1.38 | 1.69 | 22.5 | ||||||||
| Adjusted net profit attributable to Eni’s shareholders | ||||||||||||
| 0.38 | per share (euro) | 0.49 | 0.50 | 2.0 | ||||||||
| 1.12 | per ADR ($) | 1.28 | 1.38 | 7.8 | ||||||||
| 3,622.4 | Weighted average number of outstanding shares (c) | 3,622.4 | 3,622.4 | |||||||||
| 1,481 | Net cash provided by operating activities | 5,443 | 4,554 | (16.3 | ) | |||||||
| 3,894 | Capital expenditures | 3,147 | 2,779 | (11.7 | ) | |||||||
| (a) | For a detailed explanation of adjusted net profit by division see page 20. | |
| (b) | Unrealized intragroup profit concerns profit on the intragroup sale of products, goods, services and tangible and intangible goods reported in the acquiring company’s shareholders’ equity at period end. | |
| (c) | Fully diluted (million shares). |
Trading environment indicators
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 74.57 | Average price of Brent dated crude oil (a) | 44.40 | 76.24 | 71.7 | ||||||||
| 1.478 | Average EUR/USD exchange rate (b) | 1.302 | 1.384 | 6.3 | ||||||||
| 50.45 | Average price in euro of Brent dated crude oil | 34.10 | 55.09 | 61.6 | ||||||||
| 1.24 | Average European refining margin (c) | 5.34 | 2.40 | (55.1 | ) | |||||||
| 1.80 | Average European refining margin Brent/Ural (c) | 6.28 | 3.20 | (49.0 | ) | |||||||
| 0.84 | Average European refining margin in euro | 4.10 | 1.74 | (57.6 | ) | |||||||
| 0.7 | Euribor - three-month euro rate (%) | 2.0 | 0.6 | (70.0 | ) | |||||||
| 0.3 | Libor - three-month dollar rate (%) | 1.2 | 0.3 | (79.8 | ) | |||||||
| (a) | In USD dollars per barrel. Source: Platt’s Oilgram. | |
| (b) | Source: ECB. | |
| (c) | In USD per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platt’s Oilgram data. |
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Group results
Net profit attributable to Eni’s shareholders for
the first quarter of 2010 was euro 2,222 million, an increase of
euro 318 million from the first quarter of 2009, up 16.7%. The
result was driven by an increase in operating performance (up
euro 880, or 22.2%) which was mainly reported by the Exploration
& Production division on the back of higher oil prices and
production growth. The improved operating results were partly
offset by the negative effect associate with an increased
Group’s tax rate from 48.3% to 49.9%.
Adjusted net profit attributable to Eni’s shareholders amounted to euro 1,822, an increase of euro 63 million from the first quarter of 2009, up 3.6%. Adjusted net profit is calculated by excluding an inventory holding profit of euro 280 million and net special gains of euro 120 million, resulting in an overall adjustment equivalent to a decrease of euro 400 million. The balance between special charges and gains is comprised of, on the positive side, gains recorded on the divestment of non-strategic assets in the Exploration & Production division. On the negative side, provisions for redundancy incentives and environmental charges were recorded.
Results by division
The increase in the Group adjusted net profit reflected
higher results reported by the following divisions:
| - | Exploration & Production (up euro 337 million, or 37.1%). This increase reflected a better operating performance (up euro 945 million, or 43.5%) driven by higher oil realizations in dollar (up 68.5%), higher sales volumes (up 1.4%) and lower exploration expenses, which were partly offset by increased operating costs and amortization charges taken in connection with developing activities. Also results were negatively affected by the appreciation of the euro over the dollar (up 6.3%) and an increased adjusted tax rate which was up by 1.7 percentage points (from 58.6% to 60.3%). | |
| - | Petrochemicals (up euro 52 million). The division improved its performance as losses at both net and operating levels were reduced (from euro 95 million to euro 43 million, and from euro 111 million to euro 59 million, respectively) driven by a recovery in product demand and cost efficiencies. |
These increases were partly offset by a decrease in the adjusted net profit reported in the following divisions:
| - | Refining & Marketing. The division achieved an adjusted net loss amounting to euro 30 million (down euro 98 million). This result reflected a move from profit to loss at operating level (from plus euro 55 million to minus euro 94 million) due to sharply lower refining margins affected by an unfavorable trading environment. Also marketing activities in Italy reported a decrease in results. | |
| - | Gas & Power (down euro 33 million, or 3.3%). The decrease was affected by a lower operating profit which was down by euro 96 million, or 7%, due to the negative performance of the Marketing business. This negative was partly offset by a positive impact resulting from a lower tax rate (down 2.2 percentage points). |
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Liquidity and capital resources
Summarized Group Balance Sheet4
(euro million)
| Dec. 31, 2009 | Mar. 31, 2010 | Change | ||||
| Fixed assets (a) | |||||||||
| Property, plant and equipment | 59,765 | 62,033 | 2,268 | ||||||
| Inventory - compulsory stock | 1,736 | 1,873 | 137 | ||||||
| Intangible assets | 11,469 | 11,446 | (23 | ) | |||||
| Equity-accounted investments and other investments | 6,244 | 6,026 | (218 | ) | |||||
| Receivables and securities held for operating purposes | 1,261 | 1,300 | 39 | ||||||
| Net payables related to capital expenditures | (749 | ) | (612 | ) | 137 | ||||
| 79,726 | 82,066 | 2,340 | |||||||
| Net working capital | |||||||||
| Inventories | 5,495 | 5,517 | 22 | ||||||
| Trade receivables | 14,916 | 17,803 | 2,887 | ||||||
| Trade payables | (10,078 | ) | (12,001 | ) | (1,923 | ) | |||
| Tax payables and provisions for net deferred tax liabilities | (1,988 | ) | (4,003 | ) | (2,015 | ) | |||
| Provisions | (10,319 | ) | (10,644 | ) | (325 | ) | |||
| Other current assets and liabilities (b) | (3,968 | ) | (3,297 | ) | 671 | ||||
| (5,942 | ) | (6,625 | ) | (683 | ) | ||||
| Provisions for employee post-retirement benefits | (944 | ) | (964 | ) | (20 | ) | |||
| Net assets held for sale including related liabilities | 266 | 897 | 631 | ||||||
| CAPITAL EMPLOYED, NET | 73,106 | 75,374 | 2,268 | ||||||
| Shareholders’ equity | |||||||||
| Eni shareholders’ equity | 46,073 | 50,099 | 4,026 | ||||||
| Non-controlling interest | 3,978 | 4,223 | 245 | ||||||
| 50,051 | 54,322 | 4,271 | |||||||
| Net borrowings | 23,055 | 21,052 | (2,003 | ) | |||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 73,106 | 75,374 | 2,268 |
| (a) | For the explanation of IFRIC 12 adoption, see the methodology note at page 5, under the second paragraph. | |
| (b) | Include receivables and securities for financing operating activities for euro 181 million (euro 339 million at December 31, 2009) and securities covering technical reserves of Eni’s insurance activities for euro 444 million (euro 381 million at December 31, 2009). |
The depreciation of the euro versus the US dollar, from December 31, 2009 (the EUR/USD exchange rate was 1.348 as of March 31, 2010, as compared to 1.441 as of December 31, 2009, down 7%) increased net capital employed, net equity and net borrowings by approximately euro 2,240 million, euro 1,870 million, and euro 370 million, respectively, as a result of exchange rate translation differences.
Fixed assets amounted to euro 82,066 million, representing an increase of euro 2,340 million from December 31, 2009 reflecting exchange rate translation differences and capital expenditures incurred in the period (euro 2,779 million), partly offset by depreciation, depletion, amortization and impairment charges (euro 2,184 million) recorded in the period.
Net working capital amounted to a negative euro 6,625 million, representing a decrease of euro 683 million. This decrease was mainly due to an increase in tax payable and provisions for net deferred tax liabilities accrued in the quarter, and the increased risk provisions due to exchange rate translation differences. These decreases were partly offset by a greater balance achieved between trade receivables and trade payables.
Net assets held for sale including related liabilities (euro 897 million) mainly related the following assets: the mineral properties in Italy which were contributed in kind to two subsidiaries Società Padana Energia SpA and Società Adriatica Idrocarburi SpA, the subsidiaries Gas Brasiliano Distribuidora SA and Distri RE SA, as well as the GreenStream gas pipeline, a stake of which is expected to be divested.
Shareholders’ equity including non-controlling interest increased by euro 4,271 million to euro 54,322 million, reflecting comprehensive income for the period (euro 4,276 million). This increase was as a result of net profit for the period (euro 2,419 million) and foreign currency exchange differences.
| (4) | The summarized group balance sheet aggregates the amount of assets and liabilities derived from the statutory balance sheet in accordance with functional criteria which consider the enterprise conventionally divided into the three fundamental areas focusing on resource investments, operations and financing. Management believes that this summarized group balance sheet is useful information in assisting investors to assess Eni’s capital structure and to analyze its sources of funds and investments in fixed assets and working capital. Management uses the summarized group balance sheet to calculate key ratios such as return on capital employed (ROACE) and the proportion of net borrowings to shareholders’ equity (leverage) intended to evaluate whether Eni’s financing structure is sound and well-balanced. |
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Summarized Group Cash Flow Statement5
Fourth Quarter |
(euro million) |
First Quarter |
2009 |
2009 |
2010 |
Change |
|||||
| 678 | Net profit | 2,110 | 2,419 | 309 | ||||||||
| Adjustments to reconcile to cash generated from operating profit before changes in working capital: | ||||||||||||
| 3,282 | - amortization and depreciation and other non monetary items | 2,238 | 1,901 | (337 | ) | |||||||
| 58 | - net gains on disposal of assets | (157 | ) | (169 | ) | (12 | ) | |||||
| 1,766 | - dividends, interest and taxes | 1,929 | 2,471 | 542 | ||||||||
| (1,691 | ) | Changes in working capital related to operations | 964 | (370 | ) | (1,334 | ) | |||||
| (2,612 | ) | Dividends received, taxes paid, interest (paid) received during the period | (1,641 | ) | (1,698 | ) | (57 | ) | ||||
| 1,481 | Net cash provided by operating activities | 5,443 | 4,554 | (889 | ) | |||||||
| (3,894 | ) | Capital expenditures | (3,147 | ) | (2,779 | ) | 368 | |||||
| (46 | ) | Investments and purchase of consolidated subsidiaries and businesses | (2,039 | ) | (39 | ) | 2,000 | |||||
| 28 | Disposals | 182 | 729 | 547 | ||||||||
| 214 | Other cash flow related to capital expenditures, investments and disposals | 1,745 | (118 | ) | (1,863 | ) | ||||||
| (2,217 | ) | Free cash flow | 2,184 | 2,347 | 163 | |||||||
| 13 | Borrowings (repayment) of debt related to financing activities | 102 | (88 | ) | (190 | ) | ||||||
| 2,167 | Changes in short and long-term financial debt | (2,380 | ) | (1,484 | ) | 896 | ||||||
| (86 | ) | Dividends paid and changes in non-controlling interest and reserves | (2 | ) | 13 | 15 | ||||||
| (13 | ) | Effect of changes in consolidation and exchange differences | 2 | 49 | 47 | |||||||
| (136 | ) | NET CASH FLOW FOR THE PERIOD | (94 | ) | 837 | 931 | ||||||
CHANGE IN NET BORROWINGS
Fourth Quarter |
(euro million) |
First Quarter |
2009 |
2009 |
2010 |
Change |
|||||
| (2,217 | ) | Free cash flow | 2,184 | 2,347 | 163 | |||||||
| (212 | ) | Exchange differences on net borrowings and other changes | (334 | ) | (357 | ) | (23 | ) | ||||
| (86 | ) | Dividends paid and changes in non-controlling interest and reserves | (2 | ) | 13 | 15 | ||||||
| (2,515 | ) | CHANGE IN NET BORROWINGS | 1,848 | 2,003 | 155 | |||||||
Net cash provided by operating activities (euro 4,554 million) coupled with cash from divestments for euro 729 million, were mainly used to fund cash outflows relating to capital expenditures totaling euro 2,779 million and to pay down finance debt (euro 2,003 million). The divestments related to non strategic assets in the Exploration & Production division, as well as proceeds from the sale to Gazprom of a 51% interest in the joint-venture OOO SeverEnergia (euro 526 million).
Financial and operating information by division for the first quarter of 2010 is provided in the following pages.
| (5) | Eni’s summarized group cash flow statement derives from the statutory statement of cash flows. It enables investors to understand 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. The measure enabling such a link is represented by the free cash flow which 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. The free cash flow is a non-GAAP measure of financial performance. |
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Exploration & Production
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| RESULTS | (euro million) |
| 6,648 | Net sales from operations | 6,145 | 7,385 | 20.2 | ||||||||||
| 2,411 | Operating profit | 2,374 | 3,297 | 38.9 | ||||||||||
| 393 | Exclusion of special items: | (201 | ) | (179 | ) | |||||||||
| 403 | - asset impairments | |||||||||||||
| 8 | - gains on disposal of assets | (163 | ) | (160 | ) | |||||||||
| 20 | - provision for redundancy incentives | 2 | 2 | |||||||||||
| (38 | ) | - re-measurement gains/losses on commodity derivatives | (40 | ) | (21 | ) | ||||||||
| 2,804 | Adjusted operating profit | 2,173 | 3,118 | 43.5 | ||||||||||
| (57 | ) | Net financial income (expense) (a) | 33 | (49 | ) | |||||||||
| 24 | Net income from investments (a) | (12 | ) | 67 | ||||||||||
| (1,752 | ) | Income taxes (a) | (1,286 | ) | (1,891 | ) | ||||||||
| 63.2 | Tax rate (%) | 58.6 | 60.3 | |||||||||||
| 1,019 | Adjusted net profit | 908 | 1,245 | 37.1 | ||||||||||
| Results also include: | ||||||||||||||
| 2,436 | - amortizations and depreciations | 1,686 | 1,680 | (0.4 | ) | |||||||||
| of which: | ||||||||||||||
| 350 | exploration expenditure: | 478 | 312 | (34.7 | ) | |||||||||
| 269 | - amortization of exploratory drilling expenditure and other | 376 | 231 | (38.6 | ) | |||||||||
| 81 | - amortization of geological and geophysical exploration expenses | 102 | 81 | (20.6 | ) | |||||||||
| 2,490 | Capital expenditures | 2,148 | 1,964 | (8.6 | ) | |||||||||
| of which: | ||||||||||||||
| 284 | - exploratory expenditure (b) | 380 | 256 | (32.6 | ) | |||||||||
| Production (c) (d) | ||||||||||||||
| 1,073 | Liquids (e) | (kbbl/d) | 1,013 | 1,011 | (0.2 | ) | ||||||||
| 4,668 | Natural gas | (mmcf/d) | 4,398 | 4,615 | 4.8 | |||||||||
| 1,886 | Total hydrocarbons | (kboe/d) | 1,779 | 1,816 | 2.1 | |||||||||
| Average realizations | ||||||||||||||
| 68.42 | Liquids (e) | ($/bbl) | 42.09 | 70.93 | 68.5 | |||||||||
| 183.52 | Natural gas | ($/mmcf) | 249.38 | 202.36 | (18.9 | ) | ||||||||
| 52.24 | Total hydrocarbons | ($/boe) | 41.46 | 54.28 | 30.9 | |||||||||
| Average oil market prices | ||||||||||||||
| 74.57 | Brent dated | ($/bbl) | 44.40 | 76.24 | 71.7 | |||||||||
| 50.45 | Brent dated | (euro/bbl) | 34.10 | 55.09 | 61.6 | |||||||||
| 76.06 | West Texas Intermediate | ($/bbl) | 42.97 | 78.67 | 83.1 | |||||||||
| 153.27 | Gas Henry Hub | ($/kcm) | 161.39 | 181.90 | 12.7 | |||||||||
| (a) | Excluding special items. | |
| (b) | Includes exploration bonuses. | |
| (c) | Supplementary operating data is provided on page 35. | |
| (d) | Includes Eni’s share of production of equity-accounted entities. | |
| (e) | Includes condensates. |
Results
The Exploration & Production division reported adjusted operating profit amounting to euro 3,118 million for the first quarter of 2010, representing an increase of euro 945 million from the first quarter of 2009, or 43.5%. The positive performance was driven by higher oil realizations in dollars (up 68.5%) and production sales volumes growth (up 2.1 million boe). Lower expenses were also incurred in connection with exploration activities. These positives were partly offset by: (i) rising operating costs and amortization charges taken in connection with development activities as new fields were brought into production in 2009; (ii) foreign currency exchange rate translation differences as the euro appreciated over the dollar (down approximately euro 60 million); (iii) lower natural gas realizations in dollars (down 18.9%).
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Special charges excluded from adjusted operating profit
amounted to euro 179 million and mainly concerned gains from the
divestment of certain non strategic assets as well as
re-measurement gains recorded on fair value evaluation of certain
non-hedging commodity derivatives.
First quarter adjusted net profit increased by euro 337
million to euro 1,245 million from the first quarter of 2009 due
to an improvement in operating performance and higher results
from associates. This increase was partly offset by a higher tax
rate from 58.6% to 60.3%, (up 1.7 percentage points) mainly due
to a higher share of profit before tax earned in foreign
countries with higher taxation.
Operating review
Eni reported liquids and gas production of 1,816 kboe/d for the first quarter of 2010. Production grew by 2.1% as a result of continuing production ramp-up in Nigeria, Congo and the United States, and additions from fields which were started-up in 2009. These positive trends were partly offset by a combined negative impact associated with lower entitlements in Company’s PSAs due to higher oil prices, and lower OPEC restrictions. Also, production for the quarter was negatively affected by unplanned facility shutdowns and mature field declines, particularly in the North Sea. The share of oil and gas production outside Italy was 90% (90% in the first quarter of 2009).
Liquids production (1,011 kbbl/d) was barely unchanged (down 0.2%). Main increases were recorded in Nigeria, due to the ramp-up of the Oyo project (Eni’s interest 40%) and lower impact of disruptions resulting from security issues, and Congo, due to the ramp-up of the Awa Paloukou project (Eni’s interest 90%). The main reductions were recorded for mature fields decline in the North Sea and for the unplanned facility downtime in Algeria as well as price effects in the Company’s PSAs and similar contractual schemes net of lower OPEC restrictions mainly in Angola and Nigeria.
Natural gas production (4,615 mmcf/d) increased by 217 mmcf/d from the first quarter of 2009 (up 4.8%). The organic growth in Nigeria and the USA as well as higher entitlements in Libya were partially offset by declines in Egypt and North Sea.
Liquids and gas realizations for the first quarter in
dollar terms (54.28 $/bbl) increased by 30.9% on average driven
by higher oil prices for market benchmarks (the Brent crude price
increased by 71.7%). Natural gas realizations were down by 18.9%
driven by the time-lag between movements in oil prices and their
effect on gas prices provided in pricing formulae and by weak
demand.
Eni’s average liquids realizations decreased by 1.13 $/bbl
due to the settlement of certain commodity derivatives relating
to the sale of 7.1 mmbbl in the quarter. This was part of a
derivative transaction the Company entered into to hedge exposure
to the variability in future cash flows expected from the sale of
a portion of the Company’s proved reserves for an original
amount of approximately 125.7 mmbbl in the 2008-2011 period,
decreasing to approximately 30.4 mmbbl as of end of March 2010.
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| LIQUIDS |
| 95.4 | Volumes sold | (mmbbl) | 92.9 | 85.8 | |||||||
| 10.5 | Sales volumes hedged by derivatives (cash flow hedge) | 10.5 | 7.1 | ||||||||
| 69.88 | Total price per barrel, excluding derivatives | ($/bbl) | 40.63 | 72.06 | |||||||
| (1.46 | ) | Realized gains (losses) on derivatives | 1.46 | (1.13 | ) | ||||||
| 68.42 | Total average price per barrel | 42.09 | 70.93 | ||||||||
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Gas & Power
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| RESULTS | (euro million) |
| 7,468 | Net sales from operations | 11,849 | 8,708 | (26.5 | ) | |||||||||
| 1,004 | Operating profit | 1,253 | 1,316 | 5.0 | ||||||||||
| (9 | ) | Exclusion of inventory holding (gains) losses | 276 | (81 | ) | |||||||||
| 132 | Exclusion of special items: | (166 | ) | 32 | ||||||||||
| 1 | - environmental charges | 2 | 5 | |||||||||||
| 27 | - asset impairments | 10 | ||||||||||||
| (1 | ) | - gains on disposal of assets | ||||||||||||
| 115 | - risk provisions | |||||||||||||
| 13 | - provision for redundancy incentives | 3 | 6 | |||||||||||
| (23 | ) | - re-measurement gains/losses on commodity derivatives | (171 | ) | 11 | |||||||||
| 1,127 | Adjusted operating profit | 1,363 | 1,267 | (7.0 | ) | |||||||||
| 549 | Marketing | 774 | 614 | (20.7 | ) | |||||||||
| 487 | Regulated businesses in Italy (a) | 469 | 533 | 13.6 | ||||||||||
| 91 | International transport | 120 | 120 | |||||||||||
| 4 | Net finance income (expense) (b) | (6 | ) | (2 | ) | |||||||||
| 94 | Net income from investments (b) | 100 | 100 | |||||||||||
| (373 | ) | Income taxes (b) | (469 | ) | (410 | ) | ||||||||
| 30.4 | Tax rate (%) | 32.2 | 30.0 | |||||||||||
| 852 | Adjusted net profit | 988 | 955 | (3.3 | ) | |||||||||
| 591 | Capital expenditures | 390 | 310 | (20.5 | ) | |||||||||
| Natural gas sales | (bcm) | |||||||||||||
| 24.31 | Sales of consolidated subsidiaries | 28.36 | 26.45 | (6.7 | ) | |||||||||
| 10.01 | Italy (includes own consumption) | 13.21 | 10.87 | (17.7 | ) | |||||||||
| 14.14 | Rest of Europe | 15.03 | 15.45 | 2.8 | ||||||||||
| 0.16 | Outside Europe | 0.12 | 0.13 | 8.3 | ||||||||||
| 2.26 | Eni’s share of sales of natural gas of affiliates | 2.50 | 2.46 | (1.6 | ) | |||||||||
| 26.57 | Total sales and own consumption (G&P) | 30.86 | 28.91 | (6.3 | ) | |||||||||
| 1.82 | E&P in Europe and in the Gulf of Mexico | 1.49 | 1.60 | 7.4 | ||||||||||
| 28.39 | Worldwide gas sales | 32.35 | 30.51 | (5.7 | ) | |||||||||
| 21.56 | Gas volumes transported in Italy | (bcm) | 20.29 | 23.98 | 18.2 | |||||||||
| 9.82 | Eni | 10.42 | 10.21 | (2.0 | ) | |||||||||
| 11.74 | On behalf of third parties | 9.87 | 13.77 | 39.5 | ||||||||||
| 9.42 | Electricity sales | (TWh) | 7.78 | 9.00 | 15.7 | |||||||||
| (a) | From January 1, 2010, amortization and depreciation in the transportation business segment were determined taking into account an increase in the useful life of pipelines (from 40 to 50 years), which was revised recently by the Electricity and Gas Authority for tariff purposes. Taking into account the ways of recognizing tariff components linked to new amortization and depreciation, the company decided to adjust the useful life of these assets in line with the conventional tariff duration. | |
| (b) | Excluding special items. |
Results
In the first quarter of 2010 the Gas & Power division reported adjusted operating profit of euro 1,267 million, a decrease of euro 96 million from the first quarter of 2009, down 7%, due to a lower performance delivered by the Marketing business. Results from that business did not take into account certain gains recorded in previous quarters on the settlement of non-hedging commodity and exchange rate derivatives amounting to euro 21 million for the first quarter 2010 which could be associated with the sale of gas and electricity occurring in the quarter. With respect to those derivatives, hedge-accounting is not permitted by IFRS as they do not meet all formal criteria to be designated as hedges. If the Company had followed hedge-accounting, those gains would have impacted realized prices in the quarter. However, in assessing the underlying performance of the Marketing business, management calculates (as an alternative measure of performance) the EBITDA pro-forma adjusted, by carrying over the impact of the settlement of those derivatives to the reporting periods where the associated revenues have been recognized. Management
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believes that disclosing this internally used measure is helpful in assisting investors to understand these business trends (see page 16). The EBITDA pro-forma adjusted delivered by the Marketing business in the first quarter 2010 showed a sharp decline compared to the first quarter 2009 due to rising competitive pressures in Italy, determining both lower sales volumes (down 17.7%) and reduced margins, as well as an unfavorable scenario, partly offset by the impact of the renegotiation of a number of long-term supply contracts and supply optimization measures.
Special items excluded from operating profit amounted to net charges of euro 32 million. These mainly related to the impact on fair value evaluation of certain non-hedging commodity derivatives in the Marketing business (euro 11 million), provisions for both redundancy incentives and environmental charges, and minor impairments.
Adjusted net profit for the first quarter 2010 was euro 955 million, declining by euro 33 million from 2009 (down 3.3%) due to a weaker operating performance which was partly offset by a lower adjusted tax rate (from 32.2% to 30%).
Operating review
Marketing
This business reported adjusted operating profit of euro 614
million for the first quarter of 2010, representing a decrease of
euro 160 million from the first quarter of 2009 (down 20.7%). In
considering the impact associated with the above mentioned
non-hedging commodity derivatives, the following factors had a
negative effect on Marketing results:
| (i) | A sharp reduction in volumes sold in Italy (down 2.34 million cubic meters, or 17.7%) and declining margins as competitive pressures mounted. | |
| (ii) | Gas margins were negatively affected by unfavorable trends in energy parameters provided in contractual pricing formulae. |
These negatives were partly offset by the impact of the renegotiation of a number of long-term supply contracts and supply optimization measures.
NATURAL GAS SALES BY MARKET
(bcm)
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 10.01 | ITALY | 13.21 | 10.87 | (17.7 | ) | |||||||
| 1.47 | Wholesalers | 2.81 | 1.93 | (31.3 | ) | |||||||
| 0.41 | Gas release | 0.41 | 0.40 | (2.4 | ) | |||||||
| 1.35 | Italian exchange for gas and spot markets | 0.10 | 1.04 | .. | ||||||||
| 1.62 | Industries | 2.12 | 1.58 | (25.5 | ) | |||||||
| 0.39 | Medium-sized enterprises and services | 0.48 | 0.52 | 8.3 | ||||||||
| 1.29 | Power generation | 2.65 | 0.75 | (71.7 | ) | |||||||
| 1.98 | Residential | 3.13 | 3.11 | (0.6 | ) | |||||||
| 1.50 | Own consumption | 1.51 | 1.54 | 2.0 | ||||||||
| 18.38 | INTERNATIONAL SALES | 19.14 | 19.64 | 2.6 | ||||||||
| 15.97 | Rest of Europe | 17.18 | 17.61 | 2.5 | ||||||||
| 2.64 | Importers in Italy | 3.41 | 3.22 | (5.6 | ) | |||||||
| 13.33 | European markets | 13.77 | 14.39 | 4.5 | ||||||||
| 1.64 | Iberian Peninsula | 1.55 | 1.63 | 5.2 | ||||||||
| 1.59 | Germany-Austria | 1.73 | 1.82 | 5.2 | ||||||||
| 4.75 | Belgium | 5.10 | 5.22 | 2.4 | ||||||||
| 0.82 | Hungary | 1.29 | 1.09 | (15.5 | ) | |||||||
| 1.31 | Northern Europe | 0.97 | 1.41 | 45.4 | ||||||||
| 1.30 | Turkey | 1.30 | 0.98 | (24.6 | ) | |||||||
| 1.53 | France | 1.34 | 1.77 | 32.1 | ||||||||
| 0.39 | Other | 0.49 | 0.47 | (4.1 | ) | |||||||
| 0.59 | Extra European markets | 0.47 | 0.43 | (8.5 | ) | |||||||
| 1.82 | E&P in Europe and in the Gulf of Mexico | 1.49 | 1.60 | 7.4 | ||||||||
| 28.39 | WORLDWIDE GAS SALES | 32.35 | 30.51 | (5.7 | ) | |||||||
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Sales of natural gas for the first quarter 2010 were
30.51 bcm, a decrease of 1.84 bcm from the first quarter of 2009,
down 5.7%. This was mainly as a result of rising competitive
pressures in Italy, partly offset by steady trends in sales on
the European markets. Sales included own consumption, Eni’s
share of sales made by equity-accounted entities and upstream
sales in Europe and the Gulf of Mexico.
Sales volumes on the Italian market declined by 2.34 bcm, or
17.7%, to 10.87 bcm due to strong competitive pressures also
resulting from the greater availability of gas on the marketplace
following the start-up of a new regasification plant offshore of
the Adriatic Coast in the fourth quarter of 2009 and the upgrade
of import pipelines coming on-stream. Eni suffered lower sales to
the power generation business (down 1.90 bcm), wholesalers (down
0.88 bcm) and, to a lesser extent, to industrial customers (down
0.54 bcm), sales volumes to the residential sector were barely
unchanged.
International sales were up 0.50 bcm, or 2.6%, to 19.64 bcm, benefiting from organic growth achieved on target markets in the Rest of Europe (up 0.62 bcm, or 4.5%) particularly in Northern Europe (up 0.44 bcm), France (up 0.43 bcm) where ongoing marketing initiatives helped boost sales, and Belgium (up 0.12 bcm). Sales declined in Turkey (down 0.32 bcm) and Hungary (down 0.20 bcm).
First quarter 2010 electricity sales increased to 9 TWh (up 15.7%) compared with the first quarter of 2009. Eni’s sales were driven by higher sales traded on the Italian power exchange. Sales on the open market declined marginally, in particular in the wholesalers segment, while sales to large and retail clients increased following effective marketing campaigns with sales benefiting from the greater availability of power from Eni’s production plants.
Regulated businesses in Italy
These businesses reported an adjusted operating profit
of euro 533 million for the first quarter of 2010, up euro 64
million, or 13.6% from the same period of 2009, due to a new
tariff mechanism that recognizes the fuel gas and higher volumes
transported (up euro 58 million) reflecting a recovery in gas
demand in Italy. The Distribution business reported unchanged
results versus the first quarter of 2009 (euro 120 million). The
Storage business reported adjusted operating profit of euro 90
million in the first quarter of 2009 (euro 84 million in the
first quarter of 2010).
Volumes of gas transported in Italy in the first quarter of 2010 were 23.98 bcm increasing by 3.69 bcm, or 18.2%, from the first quarter of 2009 reflecting seasonal sales and higher gas offtakes from domestic storage deposits.
In the first quarter of 2010, 4.83 bcm of gas were supplied (up 1.22 bcm from the first quarter of 2009) while 0.26 bcm were inputted to Company’s storage deposits, an increase of 0.23 bcm compared to the same period of 2009.
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Other performance indicators
(euro million)
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 1,159 | Pro-forma adjusted EBITDA | 1,720 | 1,432 | (16.7 | ) | |||||||
| 623 | Marketing | 1,184 | 856 | (27.7 | ) | |||||||
| (143 | ) | of which: +/(-) adjustment on commodity derivatives | 175 | 21 | ||||||||
| 363 | Regulated businesses in Italy | 343 | 379 | 10.5 | ||||||||
| 173 | International transport | 193 | 197 | 2.1 | ||||||||
EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization charges) on an adjusted basis is calculated by
adding amortization and depreciation charges to adjusted
operating profit which is also modified to take into account the
impact associated with certain derivatives instruments as
discussed below.
This performance indicator includes the adjusted EBITDA of
Eni’s wholly owned subsidiaries and Eni’s share of
adjusted EBITDA generated by certain associates which are
accounted for under the equity method for IFRS purposes. Snam
Rete Gas’ EBITDA is included according to Eni’s share
of equity (55.57% as of December 31, 2009, which takes into
account the amount of own shares held in treasury by the
subsidiary itself) although this Company is fully consolidated
when preparing consolidated financial statements in accordance
with IFRS, due to its listed company status. Italgas SpA and
Stoccaggi Gas Italia SpA results are also included according to
the same share of equity as Snam Rete Gas, due to the closing of
the restructuring deal which involved Eni’s regulated
business in the Italian gas sector. The parent company Eni SpA
divested the entire share capital of the two subsidiaries to Snam
Rete Gas. In order to calculate the EBITDA pro-forma adjusted,
the adjusted operating profit of the Marketing business has been
modified to take into account the impact of the settlement of
certain commodity and exchange rate derivatives that do not meet
the formal criteria to be classified as hedges under the IFRS.
These are entered into by the Company in view of certain amounts
of gas and electricity that the Company expects to supply at
fixed prices during future periods. The impact of those
derivatives has been allocated to the EBITDA proforma adjusted
relating to the reporting periods during which those supplies at
fixed prices are recognized. Management believes that the EBITDA
pro-forma adjusted is an important alternative measure to assess
the performance of Eni’s Gas & Power division, taking
into account evidence that this division is comparable to
European utilities in the gas and power generation sector. This
measure is provided in order to assist investors and financial
analysts in assessing the Eni Gas & Power divisional
performance as compared to its European peers, as EBITDA is
widely used as the main performance indicator for utilities. The
EBITDA pro-forma adjusted is a non-GAAP measure under IFRS.
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Refining & Marketing
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| RESULTS | (euro million) |
|
|
| 9,066 | Net sales from operations | 6,386 | 9,346 | 46.4 | ||||||||||
| (423 | ) | Operating profit (a) | 240 | 105 | (56.3 | ) | ||||||||
| (152 | ) | Exclusion of inventory holding (gains) losses | (209 | ) | (232 | ) | ||||||||
| 379 | Exclusion of special items: | 24 | 33 | |||||||||||
| 31 | - environmental charges | 7 | 17 | |||||||||||
| 325 | - asset impairments | 6 | 22 | |||||||||||
| (1 | ) | - gains on disposal of assets | (1 | ) | (10 | ) | ||||||||
| 2 | - risk provisions | |||||||||||||
| 11 | - provision for redundancy incentives | 5 | 2 | |||||||||||
| 11 | - re-measurement gains/losses on commodity derivatives | 7 | 2 | |||||||||||
| (196 | ) | Adjusted operating profit | 55 | (94 | ) | .. | ||||||||
| 14 | Net income from investments (b) | 35 | 45 | |||||||||||
| 64 | Income taxes (b) | (22 | ) | 19 | ||||||||||
| 35.2 | Tax rate (%) | 24.4 | .. | |||||||||||
| (118 | ) | Adjusted net profit | 68 | (30 | ) | .. | ||||||||
| 254 | Capital expenditures | 85 | 118 | 38.8 | ||||||||||
| Global indicator refining margin | ||||||||||||||
| 1.24 | Brent | ($/bbl) | 5.34 | 2.40 | (55.1 | ) | ||||||||
| 0.84 | Brent | (euro/bbl) | 4.10 | 1.74 | (57.6 | ) | ||||||||
| 1.80 | Brent/Ural | ($/bbl) | 6.28 | 3.20 | (49.0 | ) | ||||||||
| Refining throughputs and sales | (mmtonnes) | |||||||||||||
| 5.97 | Refining throughputs of wholly-owned refineries | 5.72 | 5.86 | 2.4 | ||||||||||
| 7.30 | Refining throughputs on own account Italy | 7.05 | 6.88 | (2.4 | ) | |||||||||
| 1.31 | Refining throughputs on own account Rest of Europe | 1.28 | 1.26 | (1.6 | ) | |||||||||
| 8.61 | Refining throughputs on own account | 8.33 | 8.14 | (2.3 | ) | |||||||||
| 2.26 | Retail sales Italy | 2.10 | 2.01 | (4.3 | ) | |||||||||
| 0.74 | Retail sales Rest of Europe | 0.69 | 0.67 | (2.9 | ) | |||||||||
| 3.00 | Total retail sales in Europe | 2.79 | 2.68 | (3.9 | ) | |||||||||
| 2.47 | Wholesale Italy | 2.41 | 2.04 | (15.4 | ) | |||||||||
| 0.96 | Wholesale Rest of Europe | 0.91 | 0.86 | (5.5 | ) | |||||||||
| 3.43 | Total wholesale in Europe | 3.32 | 2.90 | (12.7 | ) | |||||||||
| 0.10 | Wholesale other | 0.09 | 0.09 | |||||||||||
| 5.59 | Other sales | 4.77 | 5.20 | 9.0 | ||||||||||
| 12.12 | SALES | 10.97 | 10.87 | (0.9 | ) | |||||||||
| Refined product sales by region | ||||||||||||||
| 6.90 | Italy | 6.18 | 6.17 | (0.2 | ) | |||||||||
| 1.70 | Rest of Europe | 1.60 | 1.53 | (4.4 | ) | |||||||||
| 3.52 | Rest of World | 3.19 | 3.17 | (0.6 | ) | |||||||||
| (a) | From January 1, 2010, management has reviewed the residual useful lives of refineries and related facilities due to a change in the expected pattern of consumption of the expected future economic benefit embodied in those assets. In doing so, the Company has aligned with practices prevailing among integrated oil companies, particularly the European companies. Management’s conclusions have been supported by an independent technical review. The impact on quarterly results was immaterial. | |
| (b) | Excluding special items. |
Results
In the first quarter of 2010 Refining & Marketing reported an adjusted operating loss amounting to euro 94 million, reversing a prior year profit of euro 55 million. The marked decrease (down euro 149 million from the first quarter of 2009) was driven by lower refining margins due to the decrease in the relative prices of products to oil feedstock costs due to weak industry fundamentals associated with excess capacity, sluggish demand and high inventory levels partly offset by improved light-heavy crude differentials. Quarterly results were also affected by lower operating performance delivered by the Marketing activities, due to weak demand in retail and wholesale markets, in Italy and outside Italy, as well as a reduction of the market share in Italy.
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Special charges excluded from adjusted operating loss amounted to euro 33 million and mainly related to impairment of capital expenditures on assets impaired in previous reporting periods, environmental provisions, and provisions for redundancy incentives.
In the first quarter of 2010, adjusted net loss was euro 30 million (down euro 98 million from the first quarter of 2009) mainly due to a lower operating performance partly offset by higher earnings reported by equity-accounted entities.
Operating review
Eni’s refining throughputs for the first quarter
of 2010 were 8.14 mmtonnes, down 2.3% from the first quarter of
2009. Lower volumes were processed in Italy (down 2.4%)
reflecting termination of a processing contract on a third-party
refinery. Volumes processed outside Italy decreased by 1.6%
particularly at Eni’s plants in the Czech Republic due to
lower capacity utilization in response to weak market demand.
The capacity utilization rate of Italian refineries was lower
compared with the first quarter of 2009 as Eni’s main
refineries at Taranto, Sannazzaro and Gela lowered processed
volumes.
Retail sales in Italy (2.01 mmtonnes) decreased by
approximately 90 ktonnes, down 4.3%, driven by lower demand of
both gasoline and gasoil. Eni’s retail market share for the
first quarter was 30.5%, down 1 percentage point from the first
quarter 2009 (31.5%).
Wholesale sales in Italy (2.04 mmtonnes) decreased by 370
ktonnes, down 15.4%, due to lower demand reflecting challenging
economic conditions.
Retail sales in the rest of Europe (670 ktonnes)
decreased by approximately 20 ktonnes, or 2.9%, mainly reflecting
a decline in fuel demand, in particular in Germany, Hungary and
Czech Republic.
Wholesale sales in the rest of Europe (860 ktonnes)
decreased by approximately 50 ktonnes, mainly in the Czech
Republic, Switzerland and Slovenia.
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Summarized Group profit and loss account
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 22,077 | Net sales from operations | 23,741 | 24,804 | 4.5 | ||||||||
| 284 | Other income and revenues | 360 | 285 | (20.8 | ) | |||||||
| (16,728 | ) | Operating expenses | (17,973 | ) | (18,096 | ) | (0.7 | ) | ||||
| (250 | ) | of which non recurring items | ||||||||||
| 94 | Other operating income (expense) | 17 | 38 | .. | ||||||||
| (3,261 | ) | Depreciation, depletion, amortization and impairments | (2,178 | ) | (2,184 | ) | (0.3 | ) | ||||
| 2,466 | Operating profit | 3,967 | 4,847 | 22.2 | ||||||||
| (157 | ) | Finance income (expense) | (30 | ) | (245 | ) | .. | |||||
| 17 | Net income from investments | 144 | 225 | 56.3 | ||||||||
| 2,326 | Profit before income taxes | 4,081 | 4,827 | (18.3 | ) | |||||||
| (1,648 | ) | Income taxes | (1,971 | ) | (2,408 | ) | (22.2 | ) | ||||
| n.s. | Tax rate (%) | 48.3 | 49.9 | |||||||||
| 678 | Net profit | 2,110 | 2,419 | 14.6 | ||||||||
| 391 | - Net profit attributable to Eni’s shareholders | 1,904 | 2,222 | 16.7 | ||||||||
| 287 | - Net profit attributable to non-controlling interests | 206 | 197 | (4.4 | ) | |||||||
| 391 | Net profit attributable to Eni’s shareholders | 1,904 | 2,222 | 16.7 | ||||||||
| (31 | ) | Exclusion of inventory holding (gains) losses | 91 | (280 | ) | |||||||
| 1,034 | Exclusion of special items | (236 | ) | (120 | ) | |||||||
| of which: | ||||||||||||
| 250 | - non recurring items | |||||||||||
| 784 | - other special items | (236 | ) | (120 | ) | |||||||
| 1,394 | Adjusted net profit attributable to Eni’s shareholders (a) | 1,759 | 1,822 | 3.6 | ||||||||
| (a) | For a detailed explanation of adjusted operating profit and adjusted net profit see the paragraph "Reconciliation of reported operating profit and reported net profit to results on an adjusted basis". |
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Non-GAAP measures
Reconciliation of reported operating profit and reported
net profit to results on an adjusted basis
Management evaluates Group and business performance on the
basis of adjusted operating profit and adjusted net profit, which
are arrived at by excluding inventory holding gains or losses and
special items. Furthermore, finance charges on finance debt,
interest income, gains or losses deriving from the evaluation of
certain derivative financial instruments at fair value through
profit or loss (as they do not meet the formal criteria to be
assessed as hedges under IFRS, excluding commodity derivatives),
and exchange rate differences are all excluded when determining
adjusted net profit of each business segment. 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.
The Italian statutory tax rate of 34% is applied to finance
charges and income. Adjusted operating profit and adjusted net
profit are non-GAAP financial measures under either IFRS, or U.S.
GAAP.
Management includes them in order to facilitate a comparison of
base business performance across periods and allow financial
analysts to evaluate Eni’s trading performance on the basis
of their forecasting models.
In addition, management uses segmental adjusted net profit when
calculating return on average capital employed (ROACE) by each
business segment.
The following is a description of items that are excluded from the calculation of adjusted results.
Inventory holding gain or loss 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.
Special items 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; or (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. 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 include gains and losses on re-measurement at fair value of certain non-hedging commodity derivatives, including the ineffective portion of cash flow hedges.
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. In addition gains or losses on the fair value evaluation of the aforementioned derivative financial instruments, excluding commodity derivatives, and exchange rate differences are excluded from the adjusted net profit of business segments. 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 division). Finance charges or interest income and related taxation effects excluded from the adjusted net profit of the business segments are allocated on the aggregate Corporate and financial companies.
For a reconciliation of adjusted operating profit and adjusted net profit to reported operating profit and reported net profit see tables below.
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| First quarter 2010 | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized intragroup profit elimination | Group | |||||||||
| (euro million) |
| Reported operating profit | 3,297 | 1,316 | 105 | 36 | 291 | (60 | ) | (70 | ) | (68 | ) | 4,847 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | (81 | ) | (232 | ) | (96 | ) | (409 | ) | |||||||||||||||||||
| Exclusion of special items: | |||||||||||||||||||||||||||
| environmental charges | 5 | 17 | 22 | ||||||||||||||||||||||||
| asset impairments | 10 | 22 | 32 | ||||||||||||||||||||||||
| gains on disposal of assets | (160 | ) | (10 | ) | (170 | ) | |||||||||||||||||||||
| provision for redundancy incentives | 2 | 6 | 2 | 1 | 1 | 5 | 17 | ||||||||||||||||||||
| re-measurement gains/losses on commodity derivatives | (21 | ) | 11 | 2 | (2 | ) | (10 | ) | |||||||||||||||||||
| other | 2 | 2 | |||||||||||||||||||||||||
| Special items of operating profit | (179 | ) | 32 | 33 | 1 | (2 | ) | 3 | 5 | (107 | ) | ||||||||||||||||
| Adjusted operating profit | 3,118 | 1,267 | (94 | ) | (59 | ) | 289 | (57 | ) | (65 | ) | (68 | ) | 4,331 | |||||||||||||
| Net finance (expense) income (a) | (49 | ) | (2 | ) | (194 | ) | (245 | ) | |||||||||||||||||||
| Net income from investments (a) | 67 | 100 | 45 | 2 | (4 | ) | 210 | ||||||||||||||||||||
| Income taxes (a) | (1,891 | ) | (410 | ) | 19 | 16 | (94 | ) | 57 | 26 | (2,277 | ) | |||||||||||||||
| Tax rate (%) | 60.3 | 30.0 | .. | 32.3 | 53.0 | ||||||||||||||||||||||
| Adjusted net profit | 1,245 | 955 | (30 | ) | (43 | ) | 197 | (61 | ) | (202 | ) | (42 | ) | 2,019 | |||||||||||||
| of which: | |||||||||||||||||||||||||||
| - adjusted net profit of non-controlling interest | 197 | ||||||||||||||||||||||||||
| - Eni’s shareholders adjusted net profit | 1,822 | ||||||||||||||||||||||||||
| Eni reported net profit | 2,222 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | (280 | ) | |||||||||||||||||||||||||
| Exclusion of special items | (120 | ) | |||||||||||||||||||||||||
| Eni’s adjusted net profit | 1,822 | ||||||||||||||||||||||||||
| (a) | Excluding special items. |
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Table of Contents
| First quarter 2009 | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized intragroup profit elimination | Group | |||||||||
| (euro million) |
| Reported operating profit | 2,374 | 1,253 | 240 | (167 | ) | 270 | (55 | ) | (63 | ) | 115 | 3,967 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | 276 | (209 | ) | 58 | 125 | ||||||||||||||||||||||
| Exclusion of special items: | |||||||||||||||||||||||||||
| environmental charges | 2 | 7 | 9 | ||||||||||||||||||||||||
| asset impairments | 6 | 1 | 7 | ||||||||||||||||||||||||
| gains on disposal of assets | (163 | ) | (1 | ) | (1 | ) | (165 | ) | |||||||||||||||||||
| provision for redundancy incentives | 2 | 3 | 5 | 1 | 5 | 16 | |||||||||||||||||||||
| re-measurement gains/losses on commodity derivatives | (40 | ) | (171 | ) | 7 | (3 | ) | 2 | (205 | ) | |||||||||||||||||
| Special items of operating profit | (201 | ) | (166 | ) | 24 | (2 | ) | 2 | 5 | (338 | ) | ||||||||||||||||
| Adjusted operating profit | 2,173 | 1,363 | 55 | (111 | ) | 272 | (55 | ) | (58 | ) | 115 | 3,754 | |||||||||||||||
| Net finance (expense) income (a) | 33 | (6 | ) | 30 | (87 | ) | (30 | ) | |||||||||||||||||||
| Net income from investments (a) | (12 | ) | 100 | 35 | 8 | 131 | |||||||||||||||||||||
| Income taxes (a) | (1,286 | ) | (469 | ) | (22 | ) | 16 | (57 | ) | (29 | ) | (43 | ) | (1,890 | ) | ||||||||||||
| Tax rate (%) | 58.6 | 32.2 | 24.4 | 20.4 | 49.0 | ||||||||||||||||||||||
| Adjusted net profit | 908 | 988 | 68 | (95 | ) | 223 | (25 | ) | (174 | ) | 72 | 1,965 | |||||||||||||||
| of which: | |||||||||||||||||||||||||||
| - adjusted net profit of non-controlling interest | 206 | ||||||||||||||||||||||||||
| - Eni’s shareholders adjusted net profit | 1,759 | ||||||||||||||||||||||||||
| Eni reported net profit | 1,904 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | 91 | ||||||||||||||||||||||||||
| Exclusion of special items | (236 | ) | |||||||||||||||||||||||||
| Eni’s adjusted net profit | 1,759 | ||||||||||||||||||||||||||
| (a) | Excluding special items. |
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| Fourth quarter 2009 | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized intragroup profit elimination | Group | |||||||||
| (euro million) |
| Reported operating profit | 2,411 | 1,004 | (423 | ) | (161 | ) | 27 | (177 | ) | (153 | ) | (62 | ) | 2,466 | |||||||||||||
| Exclusion of inventory holding (gains) losses | (9 | ) | (152 | ) | 26 | (135 | ) | ||||||||||||||||||||
| Exclusion of special items: | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | 250 | 250 | |||||||||||||||||||||||||
| Other special (income) charges: | 393 | 132 | 379 | 31 | 7 | 111 | 68 | 1,121 | |||||||||||||||||||
| environmental charges | 1 | 31 | 108 | 54 | 194 | ||||||||||||||||||||||
| asset impairments | 403 | 27 | 325 | 24 | 2 | (1 | ) | 780 | |||||||||||||||||||
| gains on disposal of assets | 8 | (1 | ) | (1 | ) | 7 | 13 | ||||||||||||||||||||
| risk provisions | 115 | 2 | 117 | ||||||||||||||||||||||||
| provision for redundancy incentives | 20 | 13 | 11 | 7 | 4 | 18 | 73 | ||||||||||||||||||||
| re-measurement gains/losses on commodity derivatives | (38 | ) | (23 | ) | 11 | (2 | ) | (52 | ) | ||||||||||||||||||
| other | (4 | ) | (4 | ) | |||||||||||||||||||||||
| Special items of operating profit | 393 | 132 | 379 | 31 | 257 | 111 | 68 | 1,371 | |||||||||||||||||||
| Adjusted operating profit | 2,804 | 1,127 | (196 | ) | (104 | ) | 284 | (66 | ) | (85 | ) | (62 | ) | 3,702 | |||||||||||||
| Net finance (expense) income (a) | (57 | ) | 4 | (16 | ) | (88 | ) | (157 | ) | ||||||||||||||||||
| Net income from investments (a) | 24 | 94 | 14 | 20 | (1 | ) | 151 | ||||||||||||||||||||
| Income taxes (a) | (1,752 | ) | (373 | ) | 64 | 19 | (75 | ) | 78 | 24 | (2,015 | ) | |||||||||||||||
| Tax rate (%) | 63.2 | 30.4 | .. | 24.7 | 54.5 | ||||||||||||||||||||||
| Adjusted net profit | 1,019 | 852 | (118 | ) | (85 | ) | 229 | (83 | ) | (95 | ) | (38 | ) | 1,681 | |||||||||||||
| of which: | |||||||||||||||||||||||||||
| - adjusted net profit of non-controlling interest | 287 | ||||||||||||||||||||||||||
| - Eni’s shareholders adjusted net profit | 1,394 | ||||||||||||||||||||||||||
| Eni reported net profit | 391 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | (31 | ) | |||||||||||||||||||||||||
| Exclusion of special items: | 1,034 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | 250 | ||||||||||||||||||||||||||
| - other special (income) charges | 784 | ||||||||||||||||||||||||||
| Eni’s adjusted net profit | 1,394 | ||||||||||||||||||||||||||
| (a) | Excluding special items. |
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Table of Contents
Breakdown of special items
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 250 | Non-recurring charges (income) | ||||||||||
| 250 | of which: estimated charge of the possible resolution of the TSKJ matter | ||||||||||
| 1,121 | Other special charges (income): | (338 | ) | (107 | ) | ||||||
| 780 | asset impairments | 7 | 32 | ||||||||
| 194 | environmental charges | 9 | 22 | ||||||||
| 13 | gains on disposal of property, plant and equipment | (165 | ) | (170 | ) | ||||||
| 117 | risk provisions | ||||||||||
| 73 | provisions for redundancy incentives | 16 | 17 | ||||||||
| (52 | ) | re-measurement gains/losses on commodity derivatives | (205 | ) | (10 | ) | |||||
| (4 | ) | other | 2 | ||||||||
| 1,371 | Special items of operating profit | (338 | ) | (107 | ) | ||||||
| 148 | Net income from investments | (10 | ) | ||||||||
| (485 | ) | Income taxes | 112 | (13 | ) | ||||||
| of which: | |||||||||||
| 72 | deferred tax assets E&P | ||||||||||
| (192 | ) | other special items | |||||||||
| (365 | ) | taxes on special items of operating profit | 112 | (13 | ) | ||||||
| 1,034 | Total special items of net profit | (236 | ) | (120 | ) | ||||||
Adjusted operating profit
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 2,804 | Exploration & Production | 2,173 | 3,118 | 43.5 | ||||||||
| 1,127 | Gas & Power | 1,363 | 1,267 | (7.0 | ) | |||||||
| (196 | ) | Refining & Marketing | 55 | (94 | ) | .. | ||||||
| (104 | ) | Petrochemicals | (111 | ) | (59 | ) | 46.8 | |||||
| 284 | Engineering & Construction | 272 | 289 | 6.3 | ||||||||
| (66 | ) | Other activities | (55 | ) | (57 | ) | (3.6 | ) | ||||
| (85 | ) | Corporate and financial companies | (58 | ) | (65 | ) | (12.1 | ) | ||||
| (62 | ) | Impact of unrealized intragroup profit elimination | 115 | (68 | ) | |||||||
| 3,702 | 3,754 | 4,331 | 15.4 | |||||||||
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Net sales from operations
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 6,648 | Exploration & Production | 6,145 | 7,385 | 20.2 | ||||||||
| 7,468 | Gas & Power | 11,849 | 8,708 | (26.5 | ) | |||||||
| 9,066 | Refining & Marketing | 6,386 | 9,346 | 46.4 | ||||||||
| 1,136 | Petrochemicals | 878 | 1,476 | 68.1 | ||||||||
| 2,400 | Engineering & Construction | 2,415 | 2,512 | 4.0 | ||||||||
| 21 | Other activities | 26 | 25 | (3.8 | ) | |||||||
| 359 | Corporate and financial companies | 309 | 302 | (2.3 | ) | |||||||
| (50 | ) | Impact of unrealized intragroup profit elimination | (14 | ) | 64 | |||||||
| (4,971 | ) | Consolidation adjustment | (4,253 | ) | (5,014 | ) | ||||||
| 22,077 | 23,741 | 24,804 | 4.5 | |||||||||
Operating expenses
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 15,636 | Purchases, services and other | 16,983 | 17,051 | 0.4 | ||||||||
| of which: | ||||||||||||
| 250 | - non-recurring items | |||||||||||
| 411 | - other special items | 9 | 37 | |||||||||
| 1,092 | Payroll and related costs | 990 | 1,045 | 5.6 | ||||||||
| of which: | ||||||||||||
| 73 | - provision for redundancy incentives | 16 | 17 | |||||||||
| 16,728 | 17,973 | 18,096 | 0.7 | |||||||||
Gains and losses on non-hedging commodity derivate instruments
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 37 | Exploration & Production | 40 | 21 | ||||||||
| (1 | ) | - settled transactions | (36 | ) | 19 | ||||||
| 38 | - re-measurement gains/losses | (207 | ) | 30 | |||||||
| 78 | Gas & Power | 171 | (11 | ) | |||||||
| 55 | - settled transactions | 3 | (5 | ) | |||||||
| 23 | - re-measurement gains/losses | 10 | (3 | ) | |||||||
| (21 | ) | Refining & Marketing | (7 | ) | (2 | ) | |||||
| (10 | ) | - settled transactions | 9 | 1 | |||||||
| (11 | ) | - re-measurement gains/losses | 6 | 1 | |||||||
| 1 | Petrochemicals | 3 | |||||||||
| 1 | - settled transactions | (3 | ) | 2 | |||||||
| - re-measurement gains/losses | (1 | ) | |||||||||
| (1 | ) | Engineering & Construction | (2 | ) | 2 | ||||||
| (3 | ) | - settled transactions | 17 | 38 | |||||||
| 2 | - re-measurement gains/losses | (188 | ) | 28 | |||||||
| 94 | Total | 205 | 10 | ||||||||
| 42 | - settled transactions | ||||||||||
| 52 | - re-measurement gains/losses | ||||||||||
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Table of Contents
Depreciation, depletion, amortization and impairments
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 2,064 | Exploration & Production | 1,686 | 1,680 | (0.4 | ) | |||||||
| 261 | Gas & Power | 240 | 244 | 1.7 | ||||||||
| 109 | Refining & Marketing | 99 | 80 | (19.2 | ) | |||||||
| 19 | Petrochemicals | 24 | 19 | (20.8 | ) | |||||||
| 111 | Engineering & Construction | 107 | 114 | 6.5 | ||||||||
| Other activities | 1 | |||||||||||
| 22 | Corporate and financial companies | 19 | 18 | (5.3 | ) | |||||||
| (5 | ) | Impact of unrealized intragroup profit elimination | (4 | ) | (4 | ) | ||||||
| 2,581 | Total depreciation, depletion and amortization | 2,171 | 2,152 | (0.9 | ) | |||||||
| 680 | Impairments | 7 | 32 | |||||||||
| 3,261 | 2,178 | 2,184 | 0.3 | |||||||||
Net income from investments
| (euro million) |
| Exploration & Production |
Gas & Power | Refining & Marketing |
Engineering & Construction |
Other activities | Group | |||||||
| Share of gains (losses) from equity-accounted investments | 56 | 98 | 32 | 2 | (4 | ) | 184 | ||||||||
| Dividends | 12 | 2 | 28 | 42 | |||||||||||
| Other income (expense), net | (1 | ) | (1 | ) | |||||||||||
| 67 | 100 | 60 | 2 | (4 | ) | 225 | |||||||||
Income taxes
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| Profit before income taxes | ||||||||||||
| (146 | ) | Italy | 1,595 | 1,151 | (444 | ) | ||||||
| 2,472 | Outside Italy | 2,486 | 3,676 | 1,190 | ||||||||
| 2,326 | 4,081 | 4,827 | 746 | |||||||||
| Income taxes | ||||||||||||
| (3 | ) | Italy | 666 | 450 | (216 | ) | ||||||
| 1,651 | Outside Italy | 1,305 | 1,958 | 653 | ||||||||
| 1,648 | 1,971 | 2,408 | 437 | |||||||||
| Tax rate (%) | ||||||||||||
| n.s. | Italy | 41.8 | 39.1 | (2.7 | ) | |||||||
| 66.8 | Outside Italy | 52.5 | 53.3 | 0.8 | ||||||||
| n.s. | 48.3 | 49.9 | 1.6 | |||||||||
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Table of Contents
Leverage and net borrowings
Leverage is a measure used by management to assess the Company’s level of indebtedness. It is calculated as ratio of net borrowings – which is calculated by excluding cash and cash equivalents and certain very liquid assets from financial debt to shareholders’ equity, including minority 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.
| (euro million) |
| Dec. 31, 2009 | March 31, 2010 | Change | ||||
| Total debt | 24,800 | 23,723 | (1,077 | ) | |||||
| Short-term debt | 6,736 | 7,708 | 972 | ||||||
| Long-term debt | 18,064 | 16,015 | (2,049 | ) | |||||
| Cash and cash equivalents | (1,608 | ) | (2,445 | ) | (837 | ) | |||
| Securities held for non-operating purposes | (64 | ) | (57 | ) | 7 | ||||
| Financing receivables for non-operating purposes | (73 | ) | (169 | ) | (96 | ) | |||
| Net borrowings | 23,055 | 21,052 | (2,003 | ) | |||||
| Shareholders’ equity including non-controlling interest | 50,051 | 54,322 | 4,271 | ||||||
| Leverage | 0.46 | 0.39 | (0.07 | ) | |||||
Bonds maturing in the 18-months period starting on March 31, 2010
| (euro million) | ||
| Issuing entity | Amount at March 31, 2010 (a) |
|
| Eni SpA | 525 | |
| Eni Coordination Center SA | 482 | |
| 1,007 | ||
| (a) | Amounts in euro at March 31, 2010 include interest accrued and discount on issue. |
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Return On Average Capital Employed
(ROACE)
Return on Average Capital Employed for the Group, on an adjusted
basis is the return on the Group average capital invested,
calculated as ratio of net adjusted profit before minority
interest, plus net finance charges on net borrowings net of the
related tax effect, to net average capital employed. The tax rate
applied on finance charges is the Italian statutory tax rate of
34% effective from January 1, 2009. The capital invested as of
period-end used for the calculation of net average capital
invested is obtained by deducting inventory gains or losses in
the period, net of the related tax effect. ROACE by division is
determined as ratio of adjusted net profit to net average capital
invested pertaining to each division and rectifying the net
capital invested as of period-end, from net inventory gains or
losses (after applying the division specific tax rate).
| (euro million) |
| Calculated on a 12-month period ending on March 31, 2010 |
Exploration & Production | Gas &Power | Refining & Marketing | Group | ||||
| Adjusted net profit | 4,215 | 2,883 | (295 | ) | 6,211 | ||||
| Exclusion of after-tax finance expenses/interest income | - | - | - | 316 | |||||
| Adjusted net profit unlevered | 4,215 | 2,883 | (295 | ) | 6,527 | ||||
| Adjusted capital employed, net: | |||||||||
| - at the beginning of period | 33,667 | 22,300 | 7,120 | 68,534 | |||||
| - at the end of period | 34,572 | 25,107 | 7,306 | 74,812 | |||||
| Adjusted average capital employed, net | 34,120 | 23,704 | 7,213 | 71,673 | |||||
| Adjusted ROACE (%) | 12.4 | 12.2 | (4.1 | ) | 9.1 |
| (euro million) |
| Calculated on a 12-month period ending on March 31, 2009 |
Exploration & Production | Gas &Power | Refining & Marketing | Group | ||||
| Adjusted net profit | 3,878 | 2,916 | (197 | ) | 6,157 | ||||
| Exclusion of after-tax finance expenses/interest income | - | - | - | 283 | |||||
| Adjusted net profit unlevered | 3,878 | 2,916 | (197 | ) | 6,440 | ||||
| Adjusted capital employed, net: | |||||||||
| - at the beginning of period | 30,362 | 22,547 | 7,379 | 66,886 | |||||
| - at the end of period | 32,455 | 25,024 | 7,560 | 72,915 | |||||
| Adjusted average capital employed, net | 31,409 | 23,786 | 7,470 | 69,901 | |||||
| Adjusted ROACE (%) | 12.3 | 12.3 | (2.6 | ) | 9.2 |
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Table of Contents
GROUP BALANCE SHEET
| (euro million) |
| Dec. 31, 2009 | Mar. 31, 2010 | |||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 1,608 | 2,445 | ||||
| Other financial assets held for trading or available for sale | 348 | 346 | ||||
| Trade and other receivables | 20,348 | 23,660 | ||||
| Inventories | 5,495 | 5,517 | ||||
| Current tax assets | 753 | 371 | ||||
| Other current tax assets | 1,270 | 937 | ||||
| Other current assets | 1,307 | 1,362 | ||||
| Total current assets | 31,129 | 34,638 | ||||
| Non-current assets | ||||||
| Property, plant and equipment | 59,765 | 62,033 | ||||
| Inventory - compulsory stock | 1,736 | 1,873 | ||||
| Intangible assets | 11,469 | 11,446 | ||||
| Equity-accounted investments | 5,828 | 5,592 | ||||
| Other investments | 416 | 434 | ||||
| Other financial assets | 1,148 | 1,077 | ||||
| Deferred tax assets | 3,558 | 3,603 | ||||
| Other non-current receivables | 1,938 | 2,004 | ||||
| Total non-current assets | 85,858 | 88,062 | ||||
| Assets held for sale | 542 | 1,253 | ||||
| TOTAL ASSETS | 117,529 | 123,953 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current liabilities | ||||||
| Short-term debt | 3,545 | 4,535 | ||||
| Current portion of long-term debt | 3,191 | 3,173 | ||||
| Trade and other payables | 19,174 | 20,383 | ||||
| Income taxes payable | 1,291 | 1,619 | ||||
| Other taxes payable | 1,431 | 2,162 | ||||
| Other current liabilities | 1,856 | 1,925 | ||||
| Total current liabilities | 30,488 | 33,797 | ||||
| Non-current liabilities | ||||||
| Long-term debt | 18,064 | 16,015 | ||||
| Provisions for contingencies | 10,319 | 10,644 | ||||
| Provisions for employee benefits | 944 | 964 | ||||
| Deferred tax liabilities | 4,907 | 5,106 | ||||
| Other non-current liabilities | 2,480 | 2,749 | ||||
| Total non-current liabilities | 36,714 | 35,478 | ||||
| Liabilities directly associated with assets held for sale | 276 | 356 | ||||
| TOTAL LIABILITIES | 67,478 | 69,631 | ||||
| SHAREHOLDERS’ EQUITY | ||||||
| Non-controlling interest | 3,978 | 4,223 | ||||
| Eni shareholders’ equity | ||||||
| Share capital | 4,005 | 4,005 | ||||
| Reserves | 46,269 | 50,432 | ||||
| Treasury shares | (6,757 | ) | (6,757 | ) | ||
| Interim dividend | (1,811 | ) | ||||
| Net profit | 4,367 | 2,419 | ||||
| Total Eni shareholders’ equity | 46,073 | 50,099 | ||||
| TOTAL SHAREHOLDERS’ EQUITY | 50,051 | 54,322 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 117,529 | 123,953 | ||||
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GROUP PROFIT AND LOSS ACCOUNT
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| REVENUES | ||||||
| Net sales from operations | 23,741 | 24,804 | ||||
| Other income and revenues | 360 | 285 | ||||
| Total revenues | 24,101 | 25,089 | ||||
| OPERATING EXPENSES | ||||||
| Purchases, services and other | 16,983 | 17,051 | ||||
| Payroll and related costs | 990 | 1,045 | ||||
| OTHER OPERATING (CHARGE) INCOME | 17 | 38 | ||||
| DEPRECIATION, DEPLETION, AMORTIZATION AND IMPAIRMENTS | 2,178 | 2,184 | ||||
| OPERATING PROFIT | 3,967 | 4,847 | ||||
| FINANCE INCOME (EXPENSE) | ||||||
| Finance income | 2,087 | 1,363 | ||||
| Finance expense | (2,095 | ) | (1,422 | ) | ||
| Derivative financial instruments | (22 | ) | (186 | ) | ||
| INCOME (EXPENSE) FROM INVESTMENTS | ||||||
| Share of profit (loss) of equity-accounted investments | 113 | 184 | ||||
| Other gain (loss) from investments | 31 | 41 | ||||
| 144 | 225 | |||||
| PROFIT BEFORE INCOME TAXES | 4,081 | 4,827 | ||||
| Income taxes | (1,971 | ) | (2,408 | ) | ||
| Net profit | 2,110 | 2,419 | ||||
| Net profit attributable to Eni | 1,904 | 2,222 | ||||
| Net profit attributable to non-controlling interest | 206 | 197 | ||||
| 2,110 | 2,419 | |||||
| Earnings per share attributable to Eni (euro per share) | ||||||
| Basic | 0.53 | 0.61 | ||||
| Diluted | 0.53 | 0.61 | ||||
COMPREHENSIVE INCOME
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| Net profit | 2,110 | 2,419 | ||||
| Other items of comprehensive income | ||||||
| Foreign currency translation differences | 1,120 | 1,870 | ||||
| Change in the fair value of cash flow hedging derivatives | 36 | (23 | ) | |||
| Taxation | (17 | ) | 10 | |||
| Other comprehensive income | 1,139 | 1,857 | ||||
| Total comprehensive income | 3,249 | 4,276 | ||||
| Attributable to: | ||||||
| - Eni shareholders’ equity | 3,044 | 4,036 | ||||
| - Non-controlling interest | 205 | 240 | ||||
| 3,249 | 4,276 | |||||
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GROUP CASH FLOW STATEMENT
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| Net profit | 2,110 | 2,419 | ||||
| Adjustments to reconcile net profit to net cash provided by operating activities | ||||||
| Depreciation, depletion and amortization | 2,171 | 2,152 | ||||
| Impairments of tangible and intangible assets, net | 7 | 32 | ||||
| Share of profit (loss) of equity-accounted investments | 113 | (184 | ) | |||
| Gain on disposal of assets, net | (157 | ) | (169 | ) | ||
| Dividend income | (17 | ) | (43 | ) | ||
| Interest income | (240 | ) | (39 | ) | ||
| Interest expense | 215 | 145 | ||||
| Income taxes | 1,971 | 2,408 | ||||
| Other changes | (43 | ) | (95 | ) | ||
| Changes in working capital: | ||||||
| - inventories | 1,341 | (120 | ) | |||
| - trade receivables | 245 | (1,930 | ) | |||
| - trade payables | (427 | ) | 1,436 | |||
| - provisions for contingencies | 6 | 56 | ||||
| - other assets and liabilities | (201 | ) | 188 | |||
| Cash flow from changes in working capital | 964 | (370 | ) | |||
| Net change in the provisions for employee benefits | (10 | ) | (4 | ) | ||
| Dividends received | 17 | 35 | ||||
| Interest received | 75 | 47 | ||||
| Interest paid | (121 | ) | (143 | ) | ||
| Income taxes paid, net of tax receivables received | (1,612 | ) | (1,637 | ) | ||
| Net cash provided from operating activities | 5,443 | 4,554 | ||||
| Investing activities: | ||||||
| - tangible assets | (2,742 | ) | (2,447 | ) | ||
| - intangible assets | (405 | ) | (332 | ) | ||
| - investments | (48 | ) | (39 | ) | ||
| - securities | (1 | ) | (4 | ) | ||
| - financing receivables | (676 | ) | (366 | ) | ||
| - change in payables and receivables in relation to investments and capitalized depreciation | 1,794 | (104 | ) | |||
| Cash flow from investments | (2,078 | ) | (3,292 | ) | ||
| Disposals: | ||||||
| - tangible assets | 27 | 203 | ||||
| - intangible assets | 145 | |||||
| - investments | 10 | 526 | ||||
| - securities | 87 | 6 | ||||
| - financing receivables | 611 | 306 | ||||
| - change in payables and receivables in relation to disposals | 32 | (44 | ) | |||
| Cash flow from disposals | 912 | 997 | ||||
| Net cash used in investing activities (*) | (1,166 | ) | (2,295 | ) | ||
- 31 -
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GROUP CASH FLOW STATEMENT (continued)
| (euro million) |
First Quarter |
2009 |
2010 |
|||
| Proceeds from long-term debt | 1,867 | 22 | ||||
| Repayments of long-term debt | (2,718 | ) | (2,198 | ) | ||
| Increase (decrease) in short-term debt | (1,529 | ) | 692 | |||
| (2,380 | ) | (1,484 | ) | |||
| Net capital contributions by non-controlling interest | (2 | ) | ||||
| Net acquisition of treasury shares different from Eni SpA | 13 | |||||
| Acquisition of additional interests in consolidated subsidiaries | (1,991 | ) | ||||
| Net cash used in financing activities | (4,373 | ) | (1,471 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents and other changes | 2 | 49 | ||||
| Net cash flow for the period | (94 | ) | 837 | |||
| Cash and cash equivalents - beginning of the period | 1,939 | 1,608 | ||||
| Cash and cash equivalents - end of the period | 1,845 | 2,445 | ||||
| (*) | Net cash used in investing activities included investments in certain financial assets to absorb temporary surpluses of cash or as a part of our ordinary management of financing activities. Due to their nature and circumstance that they are very liquid, these financial assets are netted against finance debt in determining net borrowings. Cash flows of such investments were as follows: |
| (euro million) | First Quarter |
2009 |
2010 |
|||
| Financing investments: | ||||||
| - securities | (1 | ) | ||||
| - financing receivables | (183 | ) | (106 | ) | ||
| (184 | ) | (106 | ) | |||
| Disposal of financing investments: | ||||||
| - securities | 72 | 6 | ||||
| - financing receivables | 214 | 12 | ||||
| 286 | 18 | |||||
| Net cash flows from financing activities | 102 | (88 | ) | |||
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CAPITAL EXPENDITURES
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
% Ch. |
|||||
| 2,490 | Exploration & Production | 2,148 | 1,964 | (8.6 | ) | |||||||
| 591 | Gas & Power | 390 | 310 | (20.5 | ) | |||||||
| 254 | Refining & Marketing | 85 | 118 | 38.8 | ||||||||
| 64 | Petrochemicals | 9 | 26 | .. | ||||||||
| 409 | Engineering & Construction | 495 | 412 | (16.8 | ) | |||||||
| 25 | Other activities | 6 | 9 | 50.0 | ||||||||
| 22 | Corporate and financial companies | 10 | 17 | 70.0 | ||||||||
| 39 | Impact of unrealized intragroup profit elimination | 4 | (77 | ) | ||||||||
| 3,894 | 3,147 | 2,779 | (11.7 | ) | ||||||||
In the first quarter of 2010, capital expenditures amounting to euro 2,779 million (euro 3,147 million in the first quarter of 2009) related mainly to:
| - | development activities (euro 1,693 million) deployed mainly in Congo, Kazakhstan, Algeria, Egypt, the United States, Italy and Norway and exploratory activities (euro 256 million) of which 97% was spent outside Italy, primarily in the United States, Angola, Indonesia, Ghana and Pakistan; | |
| - | development and upgrading of Eni’s natural gas transport network in Italy (euro 164 million) and distribution network (euro 58 million), as well as development and increase of storage capacity (euro 46 million); | |
| - | projects aimed at improving the conversion capacity and flexibility of refineries (euro 95 million), as well as building and upgrading service stations in Italy and outside Italy (euro 17 million); | |
| - | upgrading of the fleet used in the Engineering & Construction division (euro 412 million). |
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| Capital expenditures by division |
||||
| EXPLORATION & PRODUCTION |
||||
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 207 | Acquisitions of proved and unproved property | 9 | |||||||||
| 113 | North Africa | 6 | |||||||||
| 94 | Rest of Asia | ||||||||||
| America | 3 | ||||||||||
| 284 | Exploration | 380 | 256 | ||||||||
| 6 | Italy | 21 | 8 | ||||||||
| 14 | Rest of Europe | 24 | 15 | ||||||||
| 37 | North Africa | 112 | 21 | ||||||||
| 123 | West Africa | 75 | 76 | ||||||||
| 4 | Kazakhstan | 5 | 2 | ||||||||
| 29 | Rest of Asia | 60 | 53 | ||||||||
| 68 | America | 54 | 80 | ||||||||
| 3 | Australia and Oceania | 29 | 1 | ||||||||
| 1,968 | Development | 1,744 | 1,693 | ||||||||
| 203 | Italy | 174 | 142 | ||||||||
| 188 | Rest of Europe | 137 | 161 | ||||||||
| 315 | North Africa | 378 | 421 | ||||||||
| 760 | West Africa | 387 | 504 | ||||||||
| 241 | Kazakhstan | 232 | 220 | ||||||||
| 83 | Rest of Asia | 150 | 63 | ||||||||
| 118 | America | 188 | 167 | ||||||||
| 60 | Australia and Oceania | 98 | 15 | ||||||||
| 31 | Other expenditures | 15 | 15 | ||||||||
| 2,490 | 2,148 | 1,964 | |||||||||
| GAS & POWER |
||||
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 545 | Italy | 371 | 283 | ||||||||
| 46 | Outside Italy | 19 | 27 | ||||||||
| 591 | 390 | 310 | |||||||||
| 73 | Marketing | 24 | 42 | ||||||||
| 42 | - Marketing | 10 | 27 | ||||||||
| 4 | Italy | ||||||||||
| 38 | Outside Italy | 10 | 27 | ||||||||
| 31 | - Power generation | 14 | 15 | ||||||||
| 510 | Regulated businesses in Italy | 357 | 268 | ||||||||
| 358 | - Transport | 237 | 164 | ||||||||
| 70 | - Distribution | 65 | 58 | ||||||||
| 82 | - Storage | 55 | 46 | ||||||||
| 8 | International transport | 9 | |||||||||
| 591 | 390 | 310 | |||||||||
| REFINING & MARKETING |
||||
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 231 | Italy | 77 | 112 | ||||||||
| 23 | Outside Italy | 8 | 6 | ||||||||
| 254 | 85 | 118 | |||||||||
| 174 | Refining, Supply and Logistic | 48 | 95 | ||||||||
| 174 | Italy | 48 | 95 | ||||||||
| 75 | Marketing | 26 | 17 | ||||||||
| 52 | Italy | 18 | 11 | ||||||||
| 23 | Outside Italy | 8 | 6 | ||||||||
| 5 | Other activities | 11 | 6 | ||||||||
| 254 | 85 | 118 | |||||||||
- 34 -
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Exploration & Production
PRODUCTION OF OIL AND NATURAL
GAS BY REGION
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 1,886 | Production of oil and natural gas (a) (b) | (kboe/d) | 1,779 | 1,816 | |||||||
| 173 | Italy | 174 | 178 | ||||||||
| 255 | Rest of Europe | 256 | 240 | ||||||||
| 565 | North Africa | 595 | 579 | ||||||||
| 421 | West Africa | 330 | 401 | ||||||||
| 117 | Kazakhstan | 119 | 120 | ||||||||
| 130 | Rest of Asia | 150 | 119 | ||||||||
| 209 | America | 135 | 156 | ||||||||
| 16 | Australia and Oceania | 20 | 23 | ||||||||
| 166.8 | Production sold (a) | (mmboe) | 154.2 | 156.3 | |||||||
PRODUCTION OF LIQUIDS BY REGION
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 1,073 | Production of liquids (a) | (kbbl/d) | 1,013 | 1,011 | |||||||
| 61 | Italy | 55 | 58 | ||||||||
| 138 | Rest of Europe | 139 | 132 | ||||||||
| 281 | North Africa | 304 | 287 | ||||||||
| 349 | West Africa | 294 | 341 | ||||||||
| 72 | Kazakhstan | 70 | 72 | ||||||||
| 50 | Rest of Asia | 73 | 36 | ||||||||
| 116 | America | 66 | 77 | ||||||||
| 6 | Australia and Oceania | 12 | 8 | ||||||||
PRODUCTION OF NATURAL GAS BY REGION
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| 4,668 | Production of natural gas (a) (b) | (mmcf/d) | 4,398 | 4,615 | |||||||
| 645 | Italy | 685 | 687 | ||||||||
| 673 | Rest of Europe | 672 | 618 | ||||||||
| 1,629 | North Africa | 1,671 | 1,679 | ||||||||
| 411 | West Africa | 210 | 339 | ||||||||
| 261 | Kazakhstan | 276 | 272 | ||||||||
| 458 | Rest of Asia | 446 | 479 | ||||||||
| 534 | America | 395 | 453 | ||||||||
| 57 | Australia and Oceania | 43 | 88 | ||||||||
| (a) | Includes Eni’s share of production of equity-accounted entities. | |
| (b) | Includes volumes of gas consumed in operations (316 and 289 mmcf/d in the first quarter 2010 and 2009, respectively and 318 mmcf/d in the fourth quarter 2009). |
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Petrochemicals
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| Sales of petrochemical products | (euro million) | ||||||||||
| 503 | Basic petrochemicals | 341 | 673 | ||||||||
| 584 | Polymers | 485 | 758 | ||||||||
| 49 | Other revenues | 52 | 45 | ||||||||
| 1,136 | 878 | 1,476 | |||||||||
| Production | (ktonnes) | ||||||||||
| 1,080 | Basic petrochemicals | 1,019 | 1,241 | ||||||||
| 575 | Polymers | 520 | 607 | ||||||||
| 1,655 | 1,539 | 1,848 | |||||||||
Engineering & Construction
| (euro million) |
Fourth Quarter |
First Quarter |
2009 |
2009 |
2010 |
||||
| Offshore construction | |||||||||||
| 1,681 | Offshore construction | 561 | 1,105 | ||||||||
| 891 | Onshore construction | 1,621 | 1,247 | ||||||||
| 355 | Offshore drilling | 316 | 140 | ||||||||
| 41 | Onshore drilling | 20 | 186 | ||||||||
| 2,968 | 2,518 | 2,678 | |||||||||
| (euro million) |
Dec. 31, 2009 |
March 31, 2010 |
|||
| Order backlog | 18,730 | 18,769 | ||
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Eni: Board of Directors approves bond issue
San Donato Milanese (Milan), April 23, 2010 - Eni's Board of Directors this morning approved the issue of one or more bonds for a maximum amount of euro 3 billion, in one or more tranches, by April 23, 2011.
The bonds will enable Eni to achieve a better balance between its short-term and medium/long-term debt, and will be listed on regulated markets.
Company Contacts:
Press Office: Tel. +39.0252031875 - +39.065982398
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +39.800 11 22 34 56
Switchboard: +39.0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Web site: www.eni.com
Table of Contents
ANNUAL REPORT ON FORM 20-F 2009
Rome, April 26, 2010 - Today Eni’s Annual Report on Form 20-F for the year ended December 31, 2009, has been filed with the U.S. Securities and Exchange Commission (SEC).
The Annual Report on Form 20-F 2009 is available on the Publications section of Eni’s website, www.eni.com.
Shareholders can receive a hard copy of Eni’s Annual Report on Form 20-F 2009, free of charge, by filling in the request form found in the Publications section or by emailing a request to segreteriasocietaria.azionisti@eni.com or to investor.relations@eni.com.
Company Contacts:
Press Office: Tel. +39.0252031875 - +39.065982398
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +39.800 11 22 34 56
Switchboard: +39.0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Web site: www.eni.com
Table of Contents
Eni: Shareholders' meeting approves 2009 financial statements
- dividend of euro 1
- net income at euro 5.06 billion
- appointment of Reconta Ernst & Young as Independent Auditors of Eni financial statements for the period 2010-2018
- amendments to articles 1, 4, 12, 14, 15 and 16 of the By-laws
Rome, April 29, 2010 - The Ordinary and Extraordinary Shareholders’ Meeting held today resolved to:
• approve Eni Financial Statements at December 31, 2009, which disclose a net income of euro 5,060,639,549.44;
• allocate euro 3,249,436,231.44 of Eni’s 2009 net income of euro 5,060,639,549.44, remaining after the payment of an interim dividend of euro 0.50 per share resolved by the Board of Directors on September 10, 2009 and paid as of September 24, 2009, as follows:
- to pay a dividend of 0.50 euro for each share outstanding on the ex-dividend date, Eni treasury shares on that date are excluded. Therefore, including the payment of the 2009 interim dividend of 0.50 euro per share, the 2009 dividend per share proposed amounts to 1 euro;
- to contribute the remaining net income after allotment of the dividend to the Distributable Reserve;
• pay said dividend as of May 27, 2010, the ex-dividend date being May 24, 2010;
• appoint the auditing firm Reconta Ernst & Young as Independent Auditors of Eni financial statements for the period 2010-2018;
- 1 -
Table of Contents
• approve the amendments to articles 1, 4, 12, 14, 15 and 16 of the By-laws proposed by the Board of Directors. These include the recent changes to shareholders rights introduced in Italy by the decree on the Shareholders rights directive.
Payment of year 2009 final dividend
Eni Shareholders’ Meeting resolved to pay final dividends as of May 27, 2010, coupon No. 14, being the ex-dividend date May 24, 2010. Therefore, as of this date, Eni shares will be traded without the right to the payment of 2009 final dividend.
In order to exercise the rights incorporated in the shares owned, Shareholders whose shares are not yet dematerialised shall deliver said shares to a financial intermediary for their deposit with Monte Titoli (the Italian Securities Register Centre) and their subsequent dematerialisation.
The payment of dividends to Beneficial Owners of ADRs, each of them representing two Eni shares, listed on the New York Stock Exchange, will be executed through JPMorgan Chase Bank, N.A.
Company Contacts:
Press Office: Tel. +39.0252031875 - +39.065982398
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +39.800 11 22 34 56
Switchboard: +39.0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Web site: www.eni.com
- 2 -
Table of Contents
Contents
Table of Contents
Contents
Table of Contents
Contents
Table of Contents
Contents
| Eni’s Fact Book is a
supplement to Eni’s 2009 Annual Report and is
designed to provide supplemental financial and operating
information. It contains certain forward-looking statements in particular under the section "Outlook" 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 sale 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 problems; 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. April 29, 2010 |
Periodical updates will be available on the web site: www.factbook.eni.com
Table of Contents
| Contents | 4 |
Eni in 2009 | ||
5 |
Eni’s strategy | |||
11 |
Exploration & Production | |||
47 |
Gas & Power | |||
66 |
Refining & Marketing | |||
79 |
Engineering & Construction | |||
87 |
Research and Innovation | |||
| Tables | ||||
92 |
• Financial data | |||
105 |
• Employees | |||
106 |
• Supplemental oil and gas information | |||
117 |
• Quarterly information |
Contents
Eni Fact Book Eni
| Eni in 2009 | ||
| Eni is a major integrated
energy company, committed to growth in the activities of
finding, producing, transporting, transforming and
marketing oil and gas. In 2009 Eni’s adjusted net profit was euro 5.21 billion, a decrease of 49% compared to 2008, driven by the sharp decline in oil prices recorded in the first nine months of the year and lower refining margins, those negative trends were partially offset by improved results in the Gas & Power and Engineering & Construction segments. Adjusted return on average capital employed (ROACE)
was 9.2%. In 2009 the Exploration & Production segment achieved adjusted net profit of euro 3.9 billion, down 50.9% from 2008, driven by an unfavorable trading environment for oil prices in the first nine months (Brent prices were down 37%), lower sales volumes and a higher tax rate. Oil and gas production was 1,769 kboe/day, down 1.6% from 2008. When excluding OPEC restrictions amounting to approximately 28 kbbl/d, production remained substantially |
unchanged from a year ago
with an average reference price of Brent at 59.9 $/bbl.
Eni’s all-sources reserve replacement ratio was 96%,
resulting in a reserve life index of 10.2 years at
December 31, 2009. Over the course of the year we
increased our resource base by more than 1 billion boe to
30 billion boe thanks to successful exploration
activities in Venezuela, with the giant Perla discovery,
Angola, Ghana and the Gulf of Mexico. The Gas & Power segment reported adjusted net profit of euro 2.92 billion, an increase of 10% from 2008, in spite of challenging market conditions, with gas consumption down by 7.4% in Europe and 10% in Italy. This result was largely due to a stable performance in the regulated businesses, excellent results achieved by Distrigas and integration synergies and the impact of the renegotiation of long-term supply contracts. Those trends were partially offset by sharply lower sales volumes and margins, in particular on the Italian market. However, global sales volumes were stable at 104 bcm, as a result of the expansion in European markets that absorbed declining sales in Italy (down 24%). The Refining & Marketing segment reported adjusted net loss of euro 197 million, a decline of euro 718 million as compared to a net profit of euro 521 million in 2008, due to an extremely weak refining scenario. Refining throughputs were reduced by one million tonnes. These impacts were partly offset by a good performance in marketing as a result of our effective marketing initiatives. The Engineering & Construction segment reported adjusted net profit of euro 892 million (14% higher than in 2008) thanks to a better operating performance driven by a strong order backlog, the profitability of orders acquired in the upward phase of the oil cycle and increased efficiency. |
- 4 -
Contents
Eni Fact Book Eni
Eni’s strategy
| In spite of uncertain
perspectives for the global economy and muted
expectations for the energy scenario on both the short
and medium term, our strategic direction has remained
unchanged. Eni will continue pursuing growth and creating
sustainable long-term shareholders’ value. Our strategy will leverage on Eni’s unique integrated business model, its high-quality asset portfolio and investment opportunities. Eni’s strategy is based on the following pillars: Over the next four years, Eni plans to execute a capital expenditure program amounting to euro 52.8 billion to support organic growth in its businesses. Approximately euro 37 billion (or 71%) of planned capital expenditures will be invested to explore for and grow high-quality oil and gas resources. Planned projects have been assessed against our long-term scenario for Brent prices at 65 $/barrel. Eni expect to fund its capital expenditure plans with the expected cash flows from operations. |
Additional resources (free
cash flow) will be used to support our dividend policy
and progressively reduce the ratio of net borrowings to
total equity ("leverage") to below 0.40. In the next four year period, management intends to pursue a progressive dividend policy, paying a dividend of euro 1 per share for 2010, in line with the 2009 the dividend, and thereafter growing it in line with OECD inflation. This dividend policy is based on management’s planning assumptions for oil prices at 65 $/barrel flat in the next four years. Business strategies and targets In the Exploration & Production division
Eni boasts strong competitive positions in a number of
strategic oil and gas basins in the world, namely the
Caspian Region, North and West Africa and Venezuela. The
Company can count on a robust pipeline of giant fields
which grant competitive costs and access to conventional
resources, increasing operatorship as well as
long-standing partnerships with key host producing
countries. |
- 5 -
Contents
Eni Fact Book Eni
| Management plans to achieve
75% of that production target by continuing production
ramp-up at our existing fields by applying the
Company’s advanced recovery technologies and a
further 25% by starting production at 41 new fields,
particularly the Zubair project in Iraq, Kashagan in the
Caspian area, Algeria with the fields acquired from First
Calgary, the Goliat field offshore Norway and the Block
15 development area in Angola. Overall, new start-ups are
expected to add approximately 560 kboe/d by 2013. Most of our projects are in the final investment decision stage or have already been sanctioned. |
preserve the profitability
of the business by strengthening its leadership in the
European market. By 2013 we expect to grow our gas sales at an average annual rate higher than 3%, or an overall increase of 14 bcm from 2009 (104 bcm) targeting a global sales volume of 118 bcm. Our growth plans will be directed to the European markets, mainly France, Benelux and Germany, where the Company plans to achieve sales volumes of approximately 59 bcm by 2013, from sales of 47 bcm in 2009. Our efforts will be supported by synergies deriving from the integration of Distrigas activities. |
| Management intends to
consolidate its industry-leading position on costs
leveraging on economies of scale associated with giant
projects development, a focused presence in core legacy
areas providing low lifting costs and increasing
operatorship that ensures a better control on project
schedules and costs. Management will continue focusing on reserve replacement in order to sustain the long-term growth prospects of the business. Over the last five years we have grown our resource base by some 10 billion barrels, to 30 billion barrels or 46 years of production, thanks to successful exploration and continuing development activities. In the Gas & Power division Eni is leader
in the European gas market leveraging is fully-integrated
presence along the gas value chain: supply, transport,
distribution, storage and marketing of natural gas, as
well as power generation and sales of electricity. |
In Italy, management intends
to maintain the Company’s market share and preserve
the profitability of the business. To achieve those
targets, the Company will pursue effective marketing
initiatives and increasing levels of efficiency mainly by
reducing the cost of service and cost associated with
business supporting activities. Stable returns are
expected from regulated businesses in Italy, which will
benefit from the pre-set, regulatory returns on new
capital expenditures and cost savings from integrating
the whole chain of transport, storage and distribution
activities. In the Refining & Marketing
division Eni is leader in the retail marketing of refined
products in Italy with a market share of 31.5 as of the
end of 2009. |
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Contents
Eni Fact Book Eni
 how and the proprietary EST
technology. Recovery in profitability will be achieved
through cost efficiencies and energy measures. In the Engineering & Construction segment, Eni operates through its subsidiary Saipem, boasting a worldwide leading position in engineering, construction and drilling activities, leveraging on innovative technologies and distinctive know-how mainly in the realization of complex projects. Saipem is completing the expansion and revamping program of its world class of construction and drilling vessels which, combined with a strong competitive position in frontier areas which are traditionally less exposed to the cyclical nature of this market, underpin expectations for a further strengthening of Eni’s competitive position in the Engineering & Construction segment which |
maintains steady orders
backlog and profitability. Over the four year plan, efficiency remains one of the pillars of our strategy. The cost reduction program launched in 2006, in a favorable trading environment, has delivered euro 1.3 billion of savings to date. In 2009 alone we delivered cost savings of around euro 400 million. In the next four year period, the Company is targeting euro 1.1 billion of additional efficiency gains through technology improvements, commercial and supply optimization as well as continuous process streamlining.
Research and innovation will play a central
role in Eni’s growth strategy. In recent years Eni
engaged in the generation, identification and protection
of innovative results obtained in R&D both in the
technologies related to its core business and in the
field of renewable energy sources. |
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Contents
Eni Fact Book Eni
Main data
| Key financial data | Italian GAAP |
IFRS |
||
(euro million) |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
| Net sales from operations (a) | 47,938 | 49,272 | 47,922 | 51,487 | 57,498 | 73,692 | 86,071 | 87,204 | 108,082 | 83,227 | ||||||||||||||||||||||
| Operating profit (b) (c) | 10,772 | 10,313 | 8,502 | 9,517 | 12,399 | 16,664 | 19,336 | 18,739 | 18,517 | 12,055 | ||||||||||||||||||||||
| Exploration & Production (d) | 6,603 | 5,984 | 5,175 | 5,746 | 7,890 | 12,324 | 15,368 | 13,433 | 16,239 | 9,120 | ||||||||||||||||||||||
| Gas & Power (d) | 3,178 | 3,672 | 3,244 | 3,627 | 3,723 | 3,580 | 4,022 | 4,465 | 4,030 | 3,687 | ||||||||||||||||||||||
| Refining & Marketing | 986 | 985 | 321 | 583 | 1,080 | 1,852 | 324 | 686 | (988 | ) | (102 | ) | ||||||||||||||||||||
| Petrochemicals | 4 | (415 | ) | (126 | ) | (176 | ) | 320 | 202 | 172 | 100 | (845 | ) | (675 | ) | |||||||||||||||||
| Engineering & Construction | 144 | 255 | 298 | 311 | 203 | 307 | 505 | 837 | 1,045 | 881 | ||||||||||||||||||||||
| Other activities | (214 | ) | (293 | ) | (395 | ) | (934 | ) | (622 | ) | (444 | ) | (346 | ) | (382 | ) | ||||||||||||||||
| Corporate and financial companies | (143 | ) | (168 | ) | (196 | ) | (281 | ) | (363 | ) | (526 | ) | (300 | ) | (312 | ) | (743 | ) | (474 | ) | ||||||||||||
| Impact
of unrealized intragroup profit elimination |
(59 | ) | (141 | ) | (133 | ) | (26 | ) | 125 | |||||||||||||||||||||||
| Adjusted operating profit (c) | 10,482 | 8,959 | 9,958 | 12,582 | 17,396 | 20,483 | 19,004 | 21,608 | 13,122 | |||||||||||||||||||||||
| Net profit | 5,771 | 7,751 | 4,593 | 5,585 | 7,059 | 8,788 | 9,217 | 10,011 | 8,825 | 4,367 | ||||||||||||||||||||||
| Adjusted net profit (c) | 5,757 | 4,923 | 5,096 | 6,645 | 9,251 | 10,401 | 9,569 | 10,164 | 5,207 | |||||||||||||||||||||||
| Net cash provided by operating activities | 10,583 | 8,084 | 10,578 | 10,827 | 12,500 | 14,936 | 17,001 | 15,517 | 21,801 | 11,136 | ||||||||||||||||||||||
| Capital expenditures and investments | 9,815 | 11,270 | 9,414 | 13,057 | 7,815 | 7,560 | 7,928 | 20,502 | 18,867 | 16,018 | ||||||||||||||||||||||
| Capital expenditures | 5,431 | 6,606 | 8,048 | 8,802 | 7,499 | 7,414 | 7,833 | 10,593 | 14,562 | 13,695 | ||||||||||||||||||||||
| Investments | 4,384 | 4,664 | 1,366 | 4,255 | 316 | 146 | 95 | 9,909 | 4,305 | 2,323 | ||||||||||||||||||||||
| Shareholders’ equity including minority interest | 24,073 | 29,189 | 28,351 | 28,318 | 35,540 | 39,217 | 41,199 | 42,867 | 48,510 | 50,051 | ||||||||||||||||||||||
| Net borrowing | 7,742 | 10,104 | 11,141 | 13,543 | 10,443 | 10,475 | 6,767 | 16,327 | 18,376 | 23,055 | ||||||||||||||||||||||
| Net capital employed (b) | 31,815 | 39,293 | 39,492 | 41,861 | 45,983 | 49,692 | 47,966 | 59,194 | 66,886 | 73,106 | ||||||||||||||||||||||
| Exploration & Production (d) | 12,646 | 18,252 | 17,318 | 17,340 | 16,770 | 19,109 | 17,783 | 23,826 | 30,363 | 32,455 | ||||||||||||||||||||||
| Gas & Power (d) | 10,721 | 12,777 | 12,488 | 15,617 | 19,554 | 20,075 | 19,713 | 21,333 | 22,546 | 24,754 | ||||||||||||||||||||||
| Refining & Marketing | 4,563 | 4,476 | 5,093 | 5,089 | 5,081 | 5,993 | 5,631 | 7,675 | 7,379 | 8,105 | ||||||||||||||||||||||
| Petrochemicals | 2,581 | 1,075 | 2,130 | 1,821 | 2,076 | 2,018 | 1,953 | 2,228 | 1,915 | 1,774 | ||||||||||||||||||||||
| Engineering & Construction | 1,395 | 1,635 | 2,335 | 2,119 | 2,403 | 2,844 | 3,399 | 4,313 | 5,023 | 6,566 | ||||||||||||||||||||||
| Corporate,
financial companies and other activities |
(91 | ) | 1,078 | 128 | (125 | ) | 277 | 2 | (95 | ) | 294 | 24 | (192 | ) | ||||||||||||||||||
| Impact of
unrealized intragroup profit elimination |
(178 | ) | (349 | ) | (418 | ) | (475 | ) | (364 | ) | (356 | ) | ||||||||||||||||||||
| Return On Average Capital Employed (ROACE) | (%) | |||||||||||||||||||||||||||||||
| Reported | 21.5 | 23.9 | 13.7 | 15.6 | 16.6 | 19.5 | 20.2 | 20.5 | 15.7 | 8.0 | ||||||||||||||||||||||
| Adjusted | 15.9 | 20.5 | 22.6 | 19.4 | 17.6 | 9.2 | ||||||||||||||||||||||||||
| Leverage | 0.32 | 0.35 | 0.39 | 0.48 | 0.29 | 0.27 | 0.16 | 0.38 | 0.38 | 0.46 |
| (a) | From January 1, 2009 Eni adopted IFRIC 13 "Customer Loyalty Programmes" that requires that the award points granted to clients within the related loyalty programmes be accounted as a separate component of the basic transaction, evaluated at their fair value and recognized as revenues when effectively used. Prior period results under IFRS have been restated accordingly. | |
| (b) | From January 1, 2006 Eni’s subsidiaries operating in diversified sectors (such as real estate services, insurance and financing intermediation, R&D and training services) are reported in the aggregate "Corporate and financing companies" with the exception of Tecnomare which is reported in the Exploration & Production division (previously all these diversified activities were reported in the aggregate "Other activities"). The "Other activities" aggregate includes only Syndial SpA, a subsidiary which runs minor petrochemical activities and reclamation and decommissioning activities pertaining to certain business which Eni exited in past years. In order to allow for comparison, 2005 data have been reclassified accordingly. Previous years data have not been reclassified. | |
| (c) | From year 2009, the Company accounts gains and losses on non-hedging commodity derivative instruments, including both fair value remeasurement and settled transactions, as items of operating profit. Adjusted operating profit and net profit only include gains and losses associated with settled transactions, gross and net of the associated tax impact respectively. Prior period results under IFRS have been restated accordingly. | |
| (d) | From January 1, 2009, results of the gas storage business, accounted for the Exploration & Production segment until December 31, 2008, are reported within the Gas & Power segment, in the regulated businesses results, following restructuring of Eni regulated gas businesses in Italy. IFRS data have been restated accordingly. |
| Key market indicators | 2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
| Average price of Brent dated crude oil (a) | 28.39 | 24.46 | 24.98 | 28.84 | 38.22 | 54.38 | 65.14 | 72.52 | 96.99 | 61.51 | ||||||||||||
| Average EUR/USD exchange rate (b) | 0.924 | 0.896 | 0.946 | 1.131 | 1.244 | 1.244 | 1.256 | 1.371 | 1.471 | 1.393 | ||||||||||||
| Average price in euro of Brent dated crude oil | 30.73 | 27.30 | 26.41 | 25.50 | 30.72 | 43.71 | 51.86 | 52.90 | 65.93 | 44.16 | ||||||||||||
| Average European refining margin (c) | 3.99 | 1.97 | 0.80 | 2.65 | 4.35 | 5.78 | 3.79 | 4.52 | 6.49 | 3.13 | ||||||||||||
| Average European refining margin Brent/Ural (c) | 4.80 | 2.60 | 1.40 | 3.40 | 7.03 | 8.33 | 6.50 | 6.45 | 8.85 | 3.56 | ||||||||||||
| Euribor - three-month euro rate | (%) | 4.4 | 4.3 | 3.3 | 2.3 | 2.1 | 2.2 | 3.1 | 4.3 | 4.6 | 1.2 |
| (a) | In US dollars per barrel. Source: Platt’s Oilgram. | |
| (b) | Source: ECB. | |
| (c) | In US dollars per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platt’s Oilgram data. |
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Contents
Eni Fact Book Eni
| Selected operating data | 2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | ||||||||||||||||||||||
| Proved reserves of hydrocarbons at period end | (mmboe) | 6,008 | 6,929 | 7,030 | 7,272 | 7,218 | 6,837 | 6,436 | 6,370 | 6,600 | 6,571 | |||||||||||
| Reserve life index | (years) | 14.0 | 13.7 | 13.2 | 12.7 | 12.1 | 10.8 | 10.0 | 10.0 | 10.0 | 10.2 | |||||||||||
| Hydrocarbon production | (kboe/d) | 1,187 | 1,369 | 1,472 | 1,562 | 1,624 | 1,737 | 1,770 | 1,736 | 1,797 | 1,769 | |||||||||||
| Gas & Power | ||||||||||||||||||||||
| Sales of consolidated companies (including own consumption) | (bcm) | 64.63 | 65.72 | 66.14 | 71.39 | 76.49 | 82.62 | 85.76 | 84.83 | 89.32 | 89.60 | |||||||||||
| Sales of Eni’s affiliates (Eni’s share) | (bcm) | 0.87 | 1.38 | 2.40 | 6.94 | 5.84 | 7.08 | 7.65 | 8.74 | 8.91 | 7.95 | |||||||||||
| Total sales and own consumption (G&P) | (bcm) | 65.50 | 67.10 | 68.54 | 78.33 | 82.33 | 89.70 | 93.41 | 93.57 | 98.23 | 97.55 | |||||||||||
| E&P gas sales (a) | (bcm) | 4.70 | 4.51 | 4.69 | 5.39 | 6.00 | 6.17 | |||||||||||||||
| Worldwide gas sales | (bcm) | 65.50 | 67.10 | 68.54 | 78.33 | 87.03 | 94.21 | 98.10 | 98.96 | 104.23 | 103.72 | |||||||||||
| Natural gas transported on behalf of third parties in Italy | (bcm) | 9.45 | 11.41 | 19.11 | 24.63 | 28.26 | 30.22 | 30.90 | 30.89 | 33.84 | 37.27 | |||||||||||
| Electricity sold | (TWh) | 4.77 | 6.55 | 6.74 | 8.65 | 16.95 | 27.56 | 31.03 | 33.19 | 29.93 | 33.96 | |||||||||||
| Refining & Marketing | ||||||||||||||||||||||
| Throughputs on own account | (mmtonnes) | 41.27 | 39.99 | 37.73 | 35.43 | 37.69 | 38.79 | 38.04 | 37.15 | 35.84 | 34.55 | |||||||||||
| Balanced capacity of wholly-owned refineries at period end | (kbbl/d) | 664 | 664 | 504 | 504 | 504 | 524 | 534 | 544 | 544 | 554 | |||||||||||
| Sales of refined products (b) | (mmtonnes) | 53.46 | 53.24 | 52.24 | 50.43 | 53.54 | 51.63 | 51.13 | 50.15 | 49.16 | 45.59 | |||||||||||
| Retail sales in Europe (b) | (mmtonnes) | 13.92 | 14.11 | 13.71 | 14.01 | 14.40 | 12.42 | 12.48 | 12.65 | 12.03 | 12.02 | |||||||||||
| Service stations at year end (b) | (units) | 12,085 | 11,707 | 10,762 | 10,647 | 9,140 | 6,282 | 6,294 | 6,440 | 5,956 | 5,986 | |||||||||||
| Average throughput per service station | (kliters/y) | 1,555 | 1,621 | 1,674 | 1,771 | 1,970 | 2,479 | 2,470 | 2,486 | 2,502 | 2,477 | |||||||||||
| Engineering & Construction | ||||||||||||||||||||||
| Orders acquired | (euro million) | 4,726 | 3,716 | 7,852 | 5,876 | 5,784 | 8,395 | 11,172 | 11,845 | 13,860 | 9,917 | |||||||||||
| Order backlog at year end | (euro million) | 6,638 | 6,937 | 10,065 | 9,405 | 8,521 | 10,122 | 13,191 | 15,390 | 19,105 | 18,370 | |||||||||||
| Employees at year end | (units) | 69,969 | 72,405 | 80,655 | 76,521 | 70,348 | 72,258 | 73,572 | 75,862 | 78,880 | 78,417 |
| (a) | Includes E&P gas sales in Europe (4.70 bcm, 4.51 bcm, 4.07 bcm, 3.59 bcm, 3.36 bcm and 2.57 bcm, in 2004, 2005, 2006, 2007, 2008 and 2009, respectively) and in the Gulf of Mexico (0.62 bcm, 1.8 bcm, 2.64 bcm and 3.60 bcm in 2006, 2007, 2008 and 2009, respectively). | |
| (b) | 2008-2009 data not include downstream activities in the Iberian Peninsula divested to Galp in October 2008. |
| Share data | Italian GAAP |
IFRS |
||
|
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
| Net profit (a) | (euro) | 1.44 | 1.98 | 1.20 | 1.48 | 1.87 | 2.34 | 2.49 | 2.73 | 2.43 | 1.21 | |||||||||||||||||||||
| Dividend | (euro) | 0.424 | 0.75 | 0.75 | 0.75 | 0.90 | 1.10 | 1.25 | 1.30 | 1.30 | 1.00 | |||||||||||||||||||||
| Dividend pertaining to the year (b) | (euro million) | 1,664 | 2,876 | 2,833 | 2,828 | 3,384 | 4,086 | 4,594 | 4,750 | 4,714 | 3,622 | |||||||||||||||||||||
| Cash flow | (euro) | 2.65 | 2.07 | 2.76 | 2.87 | 3.31 | 3.97 | 4.59 | 4.23 | 5.99 | 3.07 | |||||||||||||||||||||
| Dividend yield (c) | (%) | 3.2 | 5.6 | 5.2 | 5.1 | 4.9 | 4.7 | 5.0 | 5.3 | 7.6 | 5.8 | |||||||||||||||||||||
| Net profit per ADR (d) | ($) | 2.71 | 3.52 | 2.52 | 3.72 | 4.66 | 5.81 | 6.26 | 7.49 | 7.15 | 3.36 | |||||||||||||||||||||
| Dividend per ADR (d) | ($) | 0.72 | 1.48 | 1.71 | 1.83 | 2.17 | 2.74 | 3.14 | 3.56 | 3.82 | 2.79 | |||||||||||||||||||||
| Cash flow per ADR (d) | ($) | 4.98 | 3.68 | 5.79 | 7.22 | 8.96 | 9.40 | 11.53 | 11.60 | 17.63 | 8.56 | |||||||||||||||||||||
| Dividend yield per ADR (c) | (%) | 3.0 | 6.2 | 5.8 | 5.0 | 5.0 | 4.7 | 5.0 | 5.3 | 7.6 | 5.8 | |||||||||||||||||||||
| Pay-out | (%) | 29 | 37 | 62 | 51 | 48 | 46 | 50 | 47 | 53 | 83 | |||||||||||||||||||||
| Number of shares at period-end representing share capital | (million shares) | 4,001.1 | 4,001.3 | 4,001.8 | 4,002.9 | 4,004.4 | 4,005.4 | 4,005.4 | 4,005.4 | 4,005.4 | 4,005.4 | |||||||||||||||||||||
| Average number of share outstanding in the year (e) (fully diluted) | (million shares) | 3,995.1 | 3,911.9 | 3,826.9 | 3,778.4 | 3,771.7 | 3,763.4 | 3,701.3 | 3,669.2 | 3,638.9 | 3,622.4 | |||||||||||||||||||||
| TSR | (%) | 29.2 | 6.0 | 13.1 | 4.3 | 28.5 | 35.3 | 14.8 | 3.2 | (29.1 | ) | 13.7 |
| (a) | Calculated on the average number of Eni shares outstanding during the year. | |
| (b) | Amounts due on the payment of the balance of 2009 dividends are estimated. | |
| (c) | Ratio between dividend of the year and average share price in December. | |
| (d) | One ADR represents 2 shares. Net profit, dividends and cash flow data were converted using average exchange rates. Dividends data were converted at the Noon Buying Rate of the pay-out date. | |
| (e) | Calculated by excluding own shares in portfolio. |
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Contents
Eni Fact Book Eni
| Share information | 2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
| Share price - Milan Stock Exchange | ||||||||||||||||||||||
| High | (euro) | 14.50 | 15.60 | 17.15 | 15.75 | 18.75 | 24.96 | 25.73 | 28.33 | 26.93 | 18.35 | |||||||||||
| Low | (euro) | 9.54 | 11.56 | 12.94 | 11.88 | 14.72 | 17.93 | 21.82 | 22.76 | 13.80 | 12.30 | |||||||||||
| Average | (euro) | 11.78 | 14.10 | 15.29 | 13.64 | 16.94 | 21.60 | 23.83 | 25.10 | 21.43 | 16.59 | |||||||||||
| End of period | (euro) | 13.64 | 14.05 | 15.15 | 14.96 | 18.42 | 23.43 | 25.48 | 25.05 | 16.74 | 17.80 | |||||||||||
| ADR price (a) - New York Stock Exchange | ||||||||||||||||||||||
| High | ($) | 64.88 | 69.70 | 82.11 | 94.98 | 126.45 | 151.35 | 67.69 | 78.29 | 84.14 | 54.45 | |||||||||||
| Low | ($) | 46.56 | 52.50 | 60.90 | 66.15 | 92.35 | 118.50 | 54.65 | 60.22 | 37.22 | 31.07 | |||||||||||
| Average | ($) | 54.18 | 63.22 | 72.20 | 77.44 | 105.60 | 134.02 | 59.97 | 68.80 | 63.38 | 46.36 | |||||||||||
| End of period | ($) | 64.31 | 61.96 | 78.49 | 94.98 | 125.84 | 139.46 | 67.28 | 72.43 | 47.82 | 50.61 | |||||||||||
| Average daily exchanged shares | (million shares) | 17.3 | 17.4 | 19.4 | 22.0 | 20.0 | 28.5 | 26.2 | 30.5 | 28.70 | 27.88 | |||||||||||
| Value | (euro million) | 203.9 | 245.0 | 295.4 | 298.5 | 338.7 | 620.7 | 619.1 | 773.1 | 610.40 | 461.66 | |||||||||||
| Number of shares outstanding at period end (b) | (million shares) | 3,956.7 | 3,846.9 | 3,795.1 | 3,772.3 | 3,770.0 | 3,727.3 | 3,680.4 | 3,656.8 | 3,622.4 | 3,622.4 | |||||||||||
| Market capitalization (c) | ||||||||||||||||||||||
| EUR | (billion) | 54.0 | 54.0 | 57.5 | 56.4 | 69.4 | 87.3 | 93.8 | 91.6 | 60.6 | 64.5 | |||||||||||
| USD | (billion) | 50.7 | 48.1 | 60.4 | 71.1 | 94.9 | 104.0 | 117.8 | 264.9 | 173.2 | 183.3 |
| (a) | Effective January 10, 2006 a 5:2 stock split was made. Previous period’s prices have not been restated. | |
| (b) | Excluding treasury shares. | |
| (c) | Number of outstanding shares by reference price at period end. |
| Data on Eni share placements | 1995 |
1996 |
1997 |
1998 |
2001 |
| Offer price | (euro/share) | 5.42 | 7.40 | 9.90 | 11.80 | 13.60 | ||||||
| Number of share placed | (million) | 601.9 | 647.5 | 728.4 | 608.1 | 200.1 | ||||||
| of which through bonus shares | (million) | 1.9 | 15.0 | 24.4 | 39.6 | |||||||
| Percentage of share capital (a) | (%) | 15.0 | 16.2 | 18.2 | 15.2 | 5.0 | ||||||
| Proceeds | (euro million) | 3,254 | 4,596 | 6,869 | 6,714 | 2,721 |
| (a) | Refers to share capital at December 31, 2009. |
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Contents
Eni Fact Book Exploration & Production
| Key performance indicators (a) | 2005 | 2006 | 2007 | 2008 | 2009 |
| Net sales from operations (b) | (euro million) | 22,120 | 26,738 | 26,920 | 33,042 | 23,801 | ||||||
| Operating profit | 12,324 | 15,368 | 13,433 | 16,239 | 9,120 | |||||||
| Adjusted operating profit | 12,649 | 15,521 | 13,770 | 17,222 | 9,484 | |||||||
| Adjusted net profit | 6,032 | 7,135 | 6,328 | 7,900 | 3,878 | |||||||
| Capital expenditures | 4,932 | 5,163 | 6,480 | 9,281 | 9,486 | |||||||
| of which: exploratory expenditures (c) | 656 | 1,348 | 1,659 | 1,918 | 1,228 | |||||||
| Adjusted capital employed, net at year end | 19,109 | 17,783 | 23,826 | 30,362 | 32,455 | |||||||
| Adjusted ROACE | (%) | 33.6 | 38.7 | 30.4 | 29.2 | 12.3 | ||||||
| Average realizations | ||||||||||||
| - Liquids | ($/bbl) | 49.09 | 60.09 | 67.70 | 84.05 | 56.95 | ||||||
| - Natural gas | ($/mmcf) | 4.49 | 5.29 | 5.42 | 8.01 | 5.62 | ||||||
| - Total hydrocarbons | ($/boe) | 41.06 | 48.87 | 53.17 | 68.13 | 46.90 | ||||||
| Production (d) | ||||||||||||
| - Liquids | (kbbl/d) | 1,111 | 1,079 | 1,020 | 1,026 | 1,007 | ||||||
| - Natural gas | (mmcf/d) | 3,595 | 3,964 | 4,114 | 4,424 | 4,374 | ||||||
| - Total hydrocarbons | (kboe/d) | 1,737 | 1,770 | 1,736 | 1,797 | 1,769 | ||||||
| Estimated net proved reserves (d) (e) (f) | ||||||||||||
| - Liquids | (mmbbl) | 3,773 | 3,481 | 3,219 | 3,335 | 3,463 | ||||||
| - Natural gas | (bcf) | 17,591 | 16,965 | 18,090 | 18,748 | 17,850 | ||||||
| - Total hydrocarbons | (mmboe) | 6,837 | 6,436 | 6,370 | 6,600 | 6,571 | ||||||
| Reserve life index | (years) | 10.8 | 10.0 | 10.0 | 10.0 | 10.2 | ||||||
| Reserve replacement ration including equity-accounted entities (f) | (%) | 40 | 38 | 90 | 135 | 96 | ||||||
| Employees at year end | (units) | 7,739 | 8,040 | 9,023 | 10,891 | 10,870 |
| (a) | From January 1, 2009, results of the gas storage business are reported within the Gas & Power segment reporting unit following restructuring of Eni’s regulated gas businesses in Italy. Prior period results have been restated accordingly. | |
| (b) | Before elimination of intragroup sales. | |
| (c) | Includes exploration bonuses. | |
| (d) | Includes Eni’s share of equity-accounted entities. | |
| (e) | The new US SEC rule has changed the pricing mechanism for oil & gas reserves estimation in 2009. It specifies that, in calculating economic producibility, a company must use a 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. Prior period results use the one-day-price measured on the last day of the company’s fiscal year. | |
| (f) | Includes a 29.4% stake of the reserves of the three equity-accounted Russian companies participated by joint-venture OOO SeverEnergia, owned by Eni (60%) and its Italian partner Enel (40%) which on September 23, 2009 completed the divestment of the 51% stake in the venture to Gazprom in line with the call option arrangement. |
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Contents
Eni Fact Book Exploration & Production
| 2009 Highlights Portfolio Divestment of
Russian assets |
venture to Gazprom based on
the call option exercised by the Russian company. The
total cash consideration amounted to $940 million net to
Eni. The three partners are committed to producing first
gas from the Samburskoye field by June 2011, targeting a
production plateau of 150 kboe/d within two years from
the start of production. Partnership
agreements |
- 12 -
Contents
Eni Fact Book Exploration & Production
| in which KMG holds a
majority interest. - In December 2009 signed a memorandum of understanding with Turkmenistan aimed at promoting and reinforcing the partnership in the development of the oil industry of the Country. Eni will co-operate with state bodies and the Agency for Hydrocarbons to carry out studies to ascertain the oil and gas potential of the country. Eni will contribute its expertise in technology and the sustainability field. Financial results Production |
- Leveraging on organic
growth in Africa and Central Asia, Eni expects to deliver
more than 2.5% compound average growth rate over the next
four-year period, targeting a production level in excess
of 2 mmboe/day by 2013 under Brent scenario at $65 per
barrel. Estimated net proved
reserves Exploration and
development expenditures |
| Strategies | ||
| Eni’s Exploration & Production business boasts strong competitive positions in a number of strategic oil and gas basins in the world, namely the Caspian Region, North and West Africa and Venezuela. A high quality portfolio of assets with high exposure to the most competitive giant projects, a strengthened resource base and long-standing relationships with key host countries will enable Eni to deliver industry-leading growth. Our excellent track record of successfully bringing on stream projects on time and budget and integrating acquired assets as well as operational excellence underpins our ambitious production and reserve replacement targets to 2013 and beyond. Consistent with this goal, strategic guidelines for | Exploration
& Production division have remained basically
unchanged in the years, as follows: - Maintain strong profitable production
growth. In order to carry out these strategies, over the next four years Eni intends to invest approximately euro 37 billion to fund organic growth and exploration initiatives; euro 0.5 billion of which will be spent to build transportation infrastructures through equity-accounted entities. |
|
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Eni Fact Book Exploration & Production
Maintain strong profitable production growth Eni’s strategy is intended to deliver strong
profitable production growth via organic developments. We
intend to grow high-quality oil and gas resources and
invest in our robust pipeline of capital projects. Our
large exposure to giant projects will enable to Company
to reap the benefits associated with scale. We intended
to continue increasing recovery from those giant fields
by applying our optimization techniques so as to contrast
natural declines and provide a stable production
platform. Those fields provide, 50% of our production and
most of them are still in their early phases of
development, with large residual potential. Production: 2009 and outlook |
Norway, with production of
approximately 71 mmcf/d and approximately 3 kbbl/d net to
Eni, respectively; (iii) North Bardawil (Eni operator
with a 60% interest) and Thekah (Eni operator with a 50%
interest) offshore in the Nilo Delta, in Egypt; (iv)
Mafumeira in Block 0 in Cabinda-Area A (Eni’s
interest 9.8%) and Landana-Tombua in the Development Area
of former Block 14, in Angola. A production peak is
expected in 2010 at 33 kbbl/d and 2011 with 136 kbbl/d,
respectively; (v) Oyo in Blocks OML 120/121 (Eni’s
interest 40%) offshore Nigeria, with initial production
of 25 kbbl/d; (vi) the PY-1 gas field, an asset held by
Hindustan Oil Exploration Company Ltd (Eni’s
interest 47.18%), purchased within the Burren
transaction; (vii) Thunderhawk (Eni’s interest 25%),
Longhorn (Eni’s interest 75%) and Leo (Eni’s
interest 75%) offshore in the Gulf of Mexico. In the medium-term, Eni targets to deliver high production growth with the object of a production level in excess of 2 mmboe/d by 2013, corresponding to an average annual growth rate of 2.5% in the 2010-2013 period under Eni’s Brent price scenario at $65 per barrel. Looking forward, Eni projects an approximately 2% annual growth rate until 2016. To achieve those targets, we intend: - to leverage our robust pipeline of project start-ups, particularly in Kazakhstan, Russia, Iraq, Algeria, Congo, Norway, the Gulf of Mexico and Angola, most of which is Eni operated or holds a significant interest. In the next four years, we expect to start 41 new fields that will add approximately 560 kboe/d to our production in 2013. Most of the projects has been already sanctioned or is progressing towards fid. The whole new production will be profitable also at a Brent price of 40 $/bbl; - to competitively increase production profiles at giant fields particularly the Western Libyan Gas project in Libya, Karachaganak in Kazakhstan, Val d’Agri in Italy, M’Boundi in Congo and Ekofisk in Norway. We expected that our giant fields will add approximately 400 kboe/d to our production in 2013; - to develop opportunities in LNG to monetize our wide gas reserve base in particular in West Africa, and non conventional resources with a view of supporting long-term growth. Ensure medium to
long-term business Eni intends to pay special attention to reserve
replacement in order to ensure the medium to long-term
sustainability of the business. We will pursue this goal
by: |
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Eni Fact Book Exploration & Production
| - searching for new
exploration opportunities targeting a sound balance
between high risk/high reward initiatives and
established/mature projects. In 2009 Eni added over 1 billion barrels to its resource base essentially due to successful exploration. The main discoveries of the year were the giant Perla gas discovery offshore Venezuela, the oil discovery Cabaça Norte offshore Angola and other large discoveries in Ghana, the North Sea, the Gulf of Mexico and offshore Indonesia. Eni estimates the contribution to production of its recent discoveries at 170 kboe/d by 2013. Over the past five years, discovered reserves, access to giant fields and final investment decisions all contributed to increase our resource base by 10 billion boe, essentially conventional resources with low production costs. New resources are located both in areas of well-established presence, such as West and North Africa and the North Sea and in new frontier areas such as the deep offshore of the Gulf of Mexico and South America. At 30 billion barrels assuming the Company’s long-term price scenario ($65 per barrel in real term), Eni’s resource base will ensure 46 years of production at current rates. In the medium-term, Eni expects to achieve a high reserve replacement ratio at the Company’s long-term price scenario leveraging on the monetization of Eni’s core assets in the Caspian Sea, West and North Africa, the Gulf of Mexico and new high potential areas such as Venezuela and Iraq. Exploration activities will be the pillar in enlarging Eni’s resource base in order to fuel new production and in securing access to new opportunities. In 2009, Eni exploration expenditures amounted to euro 1,228 million to execute a selected campaign with the completion of 69 new exploratory wells were drilled (37.6 of which represented |
Eni’s share) and an
overall commercial success rate of 41.9% (43.6% net to
Eni). In 2009 we acquired new acreage for a total
extension of approximately 40,000 square kilometers in
well established areas in Angola, China, the Gulf of
Mexico, India and Norway and in new high potential areas
such as Ghana and Yemen. In the next four years, management plans to invest a cumulative euro 4 billion in exploratory projects focused on: - monetize our assets in core areas where 70% of capex is directed; - to conduct activities in recently acquired areas with high risk/high reward opportunities; - optimize our asset portfolio; - to selectively assess opportunities to enhance the competitiveness of Eni’s full-cycle production costs. In particular, investments in well established areas of presence enable Eni to capture synergies leveraging on availability of production facilities and existing competencies. Eni also intends to selectively pursue high risk/high reward opportunities arising from expansion in high risk/high reward areas with high mineral potential. As of December 31, 2009 Eni’s mineral right portfolio consisted of 1,246 exclusive or shared rights for exploration and development in 40 countries on five continents for a total net acreage of 347,862 square kilometers net to Eni, of which 41,794 kilometers regarded development properties. Leveraging on the strengthening in core areas of Africa, Central Asia and Russia where Eni already boasted leadership, we increased our portfolio diversity and exposure to less risky areas. |
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Eni Fact Book Exploration & Production
| Year | w. i. | Peak 100% | Year | w. i. | Peak 100% | Year | w. i. | Peak 100% | ||||||||||||||
| Algeria | Egypt | Norway | ||||||||||||||||||||
| Rom Integrated | 2010 | 29 kboe/d | Ha’py 9 | 2010 | 50% | 26 kboe/d | Morvin | 2010 | 30% | 51 kboe/d | ||||||||||||
| IAN/EOR | 2012 | 22.38% | 5 kboe/d | Melehia Deep | 2010 | 56% | 9 kboe/d | Gamma | 2012 | 17% | 20 kboe/d | |||||||||||
| Menzel Ledjmet East | 2011 | 75% | 55 kboe/d | Tuna | 2010 | 50% | 28 kboe/d | Goliat | 2013 | 65% | 100 kboe/d | |||||||||||
| Central Area Field Complex | 2011 | 75% | 67 kboe/d | Seth | 2012 | 50% | 27 kboe/d | Marulk | 2012 | 20% | 35 kboe/d | |||||||||||
| El Merk | 2012 | 12.25% | 146 kboe/d | Iraq | Russia | |||||||||||||||||
| Angola | Zubair | 2010 | 32.8% | 1,200 kboe/d | Samburskoye | 2011 | 29.4% | 145 kboe/d | ||||||||||||||
| A-LNG | 2012 | 13.6% | 176 kboe/d | Indonesia | Tunisia | |||||||||||||||||
| Block 15/06 | 2012 | 35% | 84 kboe/d | Coal Bed Methane (CBM) | 2013 | 37.8% | 105 kboe/d | Baraka | 2010 | 49% | 5 kboe/d | |||||||||||
| Kakocha | 2013 | 20% | 33 kboe/d | Italy | United Kingdom | |||||||||||||||||
| Lianzi | 2012 | 10% | 43 kboe/d | Aquila, Phase 2 | 2011 | 100% | 9 kboe/d | Burghley | 2010 | 21.9% | 11 kboe/d | |||||||||||
| Mavacola/ Clochas | 2011 | 20% | 120 kboe/d | Annamaria | 2010 | 90% | 5 kboe/d | Jasmine | 2012 | 33% | 86 kboe/d | |||||||||||
| Australia | Cerro Falcone | 2010 | 60.77% | 42 kboe/d | Kinnoul | 2012 | 16.67% | 31 kboe/d | ||||||||||||||
| Kitan | 2011 | 40% | 40 kboe/d | Offshore Ibleo | 2013 | 60% | 26 kboe/d | United States | ||||||||||||||
| Congo | Libya | Appaloosa | 2010 | 100% | 3 kboe/d | |||||||||||||||||
| Libondo | 2011 | 35% | 8 kboe/d | Bouri - natural gas | 2011 | 50% | 36 kboe/d | Nikaitchuq | 2011 | 100% | 26 kboe/d | |||||||||||
| Litchendjili | 2013 | 100% | 20 kboe/d | NC 118 | 2013 | 50% | 9 kboe/d | Venezuela | ||||||||||||||
| M'Boundi Gas to IPP | 2010 | 100% | 22 kboe/d | Kazakhstan | Junin 5 | 2013 | 40% | 235 kboe/d | ||||||||||||||
| Tar Sands Project | 2012 | 50% | 39 kboe/d | Kashagan, Phase 1 | 2012 | 16.81% | 450 kboe/d | Perla | 2013 | 32.5% | 140 kboe/d |
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Eni Fact Book Exploration & Production
Activity areas n Italy Adriatic Sea |
Central-Southern
Apennines |
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Eni Fact Book Exploration & Production
| Sicily Production Eni is operator of 15 production concessions onshore and offshore Sicily. Its main fields are Gela, Ragusa, Giaurone, Fiumetto and Prezioso, which in 2009 accounted for 10% of Eni’s production in Italy.
Development In 2009 activities concerned
workover and infilling actions on the Gela field for the
recovery of the residual mineral potential; upgrading of
facilities at the Ragusa plants. Other onshore activities
concerned the completion of the development of the
Tresauro oil field where early production was started in
2009 by means of LPT of the existing well. The recovery
of the residual reserves of the Tresauro field will be
obtained by drilling 2 wells that are expected to be
linked to the Ragusa treatment station, with start-up
expected in the second half of 2011. Po Valley |
of three production wells
and the linkage to the San Potito plant, that is expected
to be revamped. Start-up is expected in 2012. n Rest of Europe Croatia
Development Further drilling activities are
nearing completion in the Katarina field. Start-up is
expected in the third quarter of 2010 at approximately 7
mmcf/d. Norway |
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Eni Fact Book Exploration & Production
| kilometers (3,412 square
kilometers net to Eni). In 2009 Eni’s production in
Norway amounted to 126 kboe/d. In May 2009, following an international bid procedure, Eni was awarded the operatorship of the PL 533 (Eni’s interest 40%) and PL 529 (Eni’s interest 40%) exploration licenses in addition to a 30% stake in PL 532 in the Barents Sea. Exploration and production activities in Norway are regulated by Production Licenses (PL). According to a PL, the holder is entitled to perform seismic surveys and drilling and production activities for a few years with possible extensions. In the medium-term, planned development projects will offset by mature field declines. Norwegian
Sea Norwegian section of the North Sea |
existing facilities and optimization of water
injection. Barents Sea United Kingdom |
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Eni Fact Book Exploration & Production
 In the medium-term, production is expected to decrease due to mature field declines. British section of the North
Sea |
Irish
Sea Production Eni holds a 53.9% interest in 6 production fields in the Liverpool Bay area (Douglas, Hamilton and Lennox and their extensions) which in 2009 accounted for 21% of Eni’s production in the UK. Oil and gas volumes are collected at the Douglas hub. Facilities upgrading is underway. Shetland
Islands
n North Africa Algeria |
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Eni Fact Book Exploration & Production
 404a (Eni’s interest
12.25%); (d) under development Blocks 212 (Eni’s
interest 22.38%), 208 (Eni’s interest 12.25%) and
405b (Eni’s interest 75%; following the First
Calgary transaction). Blocks 403a/d |
construction of a new oil
treatment plant with a capacity of 32 kbbl/d with
production start-up expected in 2012. Blocks
401a/402a Block 403 Block 405b Block 208 Egypt |
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Eni Fact Book Exploration & Production
| participated concession of
North Port Said (former Port Fouad, Eni’s interest
100%), Baltim (50% interest), Ras el Barr (50% interest,
non-operated) and el Temsah (50% interest) offshore the
Nile Delta. In 2009 production from these concessions accounted for over 80% of Eni’s production in Egypt. In May 2009 Eni signed a cooperation agreement with Egypt’s Ministry for Oil to increase and widen cooperation in development activities. The agreement provides for: (i) an extension of the concession of the giant Belayim field in the Gulf of Suez till 2030, with Eni’s commitment to spending $1.5 billion over the next five years in development expenditures, upgrading actions and operating costs; (ii) a joint study to evaluate a number of industrial initiatives to monetize the natural gas reserves at high depth; (iii) training and knowledge management. Exploration and production activities in Egypt are regulated by PSAs. In the next four years Egypt confirms to be one of Eni’s largest oil and gas producing countries. Gulf of Suez
|
Nile
Delta North Port Said Production Eni’s production for the year amounted to over 32 kboe/d (approximately 177 mmcf/d of gas and 4 kbbl/d of condensates net to Eni). Part of the production of this concession is supplied to the NGL (natural gas liquids) plant owned by United Gas Derivatives Co (Eni’s interest 33%) with a treatment capacity of 1.1 bcf/d of natural gas and a yearly production of 380 ktonnes of propane, 305 ktonnes of LPG and 1.5 mmbbl of condensates. A plan is being studied for upgrading the plant’s capacity to 1.3 bcf/d. Development Ongoing development activities aim at supporting the current gas production level. Upgrading progressed at the El Gamil compression facility to support the Nord Port Said, el Temsah and Ras el Barr production concessions.
Baltim |
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Eni Fact Book Exploration & Production
| Ras el Barr Production This concession contains three fields: Ha’py, Akhen and Taurt. Eni’s production in 2009 amounted to 177 mmcf/d net to Eni. El Temsah Exploration in the Nile Delta Western Desert
|
Ras Qattara (Eni’s
interest 75%), West Abu Gharadis (Eni’s interest
80%) and West Razzak (Eni’s interest 80%)
development permits containing mainly oil. Concessions in
the Western Desert accounted for approximately 6% of
Eni’s production in Egypt in 2009. The
LNG business in Egypt Libya Area A |
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Eni Fact Book Exploration & Production
| Area
B Production Located in the Eastern Libyan Desert, it includes the Bu Attifel oil field discovered in 1967 and started-up in 1972, as well as the smaller NC 125 field. Eni’s production in 2009 amounted to approximately 88 kbbl/d (approximately 14 net to Eni). Infilling wells are currently being drilled in order to recover the residual mineral potential that will also be supported by the construction of new facilities to favor production from lower pressure fields and through the upgrading of the associated gas compression plant. Exploration In the medium-term an extensive exploration activity has been planned to monetize the residual mineral potential. Area
C
|
Area
D Production The area includes the offshore NC 41 block and the onshore NC 169 block jointly developed in the Western Libyan Gas Project. Production comes from: (i) the Wafa onshore field that was started-up in September 2004. In 2009 this field produced approximately 117 kboe/d of liquids and natural gas (approximately 88 net to Eni); (ii) the Bahr Essalam offshore field that was started-up in August 2005. In 2009 this field produced approximately 148 kboe/d of liquids and natural gas (approximately 112 net to Eni). Onshore production is treated at the Wafa facility and delivered by pipeline to the Mellitah plant for the export of gas and fractioning and marketing of oil and condensates. Offshore production is operated through the Sabratha platform located on the Bahr Essalam field where gas and liquids undergo a pre-treatment phase and are delivered via sealine to the Mellitah plant. Most of the natural gas produced is exported to Europe through the GreenStream pipeline. In 2009 volumes delivered through this pipeline were 309 bcf. In addition, 43 bcf were sold on the Libyan market for power generation and to feed the GreenStream compressor station. Development Upgrading actions of existing plants and facilities in order to increase gas sales by 49 bcf/y was completed. Additional gas volumes are also expected from a portfolio of undeveloped fields. Activities aiming at maintaining the production profile of Wafa and Bahr Essalam are underway and include the construction of a compression unit and the drilling of additional wells at Wafa and the drilling of 13 new underwater wells a Bahr Essalam linked to the Sabratha platform. Area E Area F |
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Eni Fact Book Exploration & Production
| Tunisia Eni has been present in Tunisia since 1960. In 2009 Eni’s production amounted to 16 kboe/d. Eni’s activities are located mainly in the Mediterranean offshore facing Hammamet over a developed and undeveloped acreage of 6,464 square kilometers (2,274 square kilometers net to Eni). Exploration and production in this country are regulated by concessions. Eni’s production in Tunisia is expected to post an increase in the medium-term due to the development of recent discoveries. Production Production mainly comes from the Adam (Eni operator with a 25% interest), Oued Zar (Eni operator with a 50% interest), MLD (Eni’s interest 50%) and El Borma (Eni’s interest 50%) onshore blocks. The development plan of Maamoura concession (Eni operator with a 49% interest) is almost completed with early production started-up in late 2009. The Baraka (Eni operator with a 49% interest) development project is in final stage with peaking production at 11 kboe/d which is expected in 2010. Development The ongoing development projects mainly regarded the optimization of production at the Adam, Djebel Grouz (Eni’s interest 50%), Oued Zar and El Borma concessions. Exploration Exploration activities yielded positive results with four discovery wells of five drilled. In 2009 gas production was started in one well, while two more wells are expected to start-up in 2010.
|
n West Africa Angola Block 0 |
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Eni Fact Book Exploration & Production
 be completed concern the
construction of facilities for gas reinjection and a new
platform with facilities used for de-bottlenecking.
Start-up is expected in 2013 reducing flared gas by
approximately 85%. Block 3 |
approximately 73 kbbl/d
(approximately 6 kbbl/d net to Eni). Exploration Exploration activities yielded positive results with the Punja-4 gas and liquids appraisal well, that confirmed the mineral potential of the area. Block 14 Block 15 |
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Eni Fact Book Exploration & Production
| Development
Activities started for the Kizomba satellites project -
phase 1. The first phase plans to produce reservoir of
the Clochas and Mavacola oil discoveries with a mineral
potential estimated at 254 mmbbl. The project provides
for the drilling of 18 producing wells linked to the FPSO
vessels existing in the area. Associated gas will be
initially re-injected in the reservoirs in the Kizomba
area, and thereafter delivered to the A-LNG liquefaction
plant. Start-up is expected in 2012. Peak production at
100 kboe/d (21 kboe/d net to Eni) is expected in 2013.
The second phase provides for production from nearby
discoveries (Mondo South, Kakocha, Bavuca, Tchihumba). Drilling is underway in the Mondo and Saxi/Batuque fields to complete their development plans. Optimization of production in the Hungo/Chocalho (Kizomba A) and Kissanje/Dikanza (Kizomba B) fields is underway to maintain their production plateau. Exploration Exploration activity yielded positive results with the Mondo-4 appraisal well showing the presence of oil increasing the potential of the area. Block 15/06 The LNG business in Angola |
In addition, Eni finalized
another agreement with the national Angolan company and
other partners to be part of a second gas consortium
which will explore further potential gas discoveries (Gas
Project) to support the feasibility of a second LNG
train. Eni is technical advisor with a 20% interest. This Gas Project covers blocks 1, 2, 3, 15 and 15/06, the Lower Congo Basin and the Angolan offshore. Exploration, development and production of non associated gas and condensates are initially foreseen only in Block 2 (Open Areas). In 2009 seismic data have been acquired. The first appraisal well of the project is scheduled in the second half of 2010. Congo
|
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Eni Fact Book Exploration & Production
| Other relevant producing
areas are a 35% interest in the Pointe Noire Grand Fond
(Eni’s interest 35%) and Pex (Eni’s interest
35%) permits. Eni also holds interests in the exploration phase in the deep offshore block Mer Très Profonde Sud (Eni’s interest 30%), and onshore Noumbi (Eni’s interest 37%) while it is operator with a 65% interest of the offshore Marine XII and onshore Le Kouilou permit (Eni’s interest 85%). Exploration and production activities in the Congo are regulated by Production Sharing Agreements. In 2009 Eni and the Republic of Congo signed a certain strategic agreements for cooperation and monetization of conventional and non conventional hydrocarbon resources. The agreement implements Eni’s model of cooperation with partner countries for integrating traditional business with sustainable development and promoting high socio-economic standards. Production in Congo is expected to increase in the medium-term targeting a level in excess of 150 kbbl/d in 2013 due to the integration and development of recently acquired assets as well as projects underway. Production Production is provided mainly by the M’Boundi (30 kboe/d), Zatchi (11 kboe/d) and Loango (8 kboe/d), Foukanda, Djambala and Mwafi (overall approximately 8 kboe/d) and Kitina (1.5 kboe/d) fields and by non operated fields located in production Pex and Pointe Noire Grand Fond (overall 22 kboe/d) permits. In 2009, the development plan of Awa-Paloukou field was completed. Production start-up was 12 kbbl/d. Development Activities on the M’Boundi operated field moved forward with the application of advanced recovery techniques and a design to monetize associated gas. In 2009, Eni signed a long-term agreement to supply associated gas from the M’Boundi field to feed three facilities in the Pointe Noire area: (i) the Koilou potassium plant, owned by Canadian Company MAG Industries and under construction; (ii) the CED (Centrale Electrique du Djeno) existing power plant; and (iii) the newly built CEC (Centrale Electrique du Congo - Eni’s interest 20%). The facilities will also receive gas in the future from the offshore discoveries of the Marine XII permit. The development activities to build the CEC power plant moved forward in 2009 as scheduled in the Cooperation Agreement signed by Eni and the Republic of Congo in 2007, and the start-up of the first turbo-generator occurred by the end of March 2010. Within the cooperation agreement signed in 2008, a project concerns the development and extraction of unconventional oil from the Tchikatanga and Tchikatanga-Makola oil sands deposits. The two deposits cover an area of 1,790 square kilometers and are deemed to contain significant amounts of resources based on a recent survey. Eni plans to apply its proprietary Eni Slurry Technology (EST) for the monetization of heavy oils extracted from these sands. This technology can totally abate heavy residues and maximize light products. |
The project will also
benefit from synergies resulting from the close proximity
of the M’Boundi oilfield. Exploration Exploration activities yielded positive results in: (i) the Marine XII permit (Eni operator with a 65% interest) with two discoveries wells which confirmed the mineral potential of the area. The related PSA was signed; (ii) the Le Kouilou permit (Eni’s interest 85%) with the Zingali field, confirmed by subsequently long production test. Eni applied for a development and production permit in the area. Ghana Nigeria Blocks OMLs 60, 61, 62 and 63 |
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Eni Fact Book Exploration & Production
| Another portion of gas
production is employed in firing the combined cycle power
plant at Kwale-Okpai with a 480 MW generation capacity.
In 2009 supplies to this power station were an overall
amount of 57 mmcf/d, corresponding to approximately 10
kboe/d (2 kboe/d net to Eni). This project is part of the
Nigerian government and Eni’s plans for the
reduction of carbon dioxide emissions and qualifies as
CDM (Clean Development Mechanism) as provided for by the
Kyoto Protocol. Development In the framework of the activities aimed at guaranteeing production to feed the Bonny LNG plant, the basic engineering work for increasing capacity at the Obiafu/Obrikom plant was completed as well as the installation of a new treatment plant and transport facilities for carrying 155 mmcf/d of feed gas for 20 years. To the same end the development plan of the Tuomo gas field has been progressing along with its linkage to the Ogbainbiri treatment plant. Block
OML 125 |
of 33 kbbl/d (24 kbbl/d net
to Eni) in 2009. Production is supported by an FPSO unit
with a 45 kbbl/d capacity and an 800 kbbl storage
capacity. Block OML 118 Block OML 119 Blocks OML 120 and 121 |
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Eni Fact Book Exploration & Production
| SPDC
Joint Venture (NASE) In 2009 production from the SPDC JV accounted for approximately 19% of Eni’s production in Nigeria. The Forcados/Yokri oil and gas field with recoverable reserves of 320 mmboe is under development as part of the integrated associated gas gathering project aimed at supplying gas to the Bonny liquefaction plant. Offshore production facilities have been installed. Onshore activities regard the upgrading of the Yokri and North/South Bank flowstations and the construction of a gas compression plant with a 233 mmcf/d capacity. Completion is expected in 2012. An integrated oil and gas project is underway in the Gbaran-Ubie area. The development plan provides for the construction of a Central Processing Facility (CPF) with treatment capacity of about 1 bcf/d of gas and 120 kbbl/day of liquids, the drilling of producing wells and the construction of a pipeline to carry the gas to the Bonny liquefaction plant. First gas is expected in the third quarter of 2010. The LNG
business in Nigeria |
n Kazakhstan Eni has been present in Kazakhstan since 1992 where the Company co-operates the Karachaganak producing field and is a partner of the consortium of the North Caspian Sea PSA to develop the Kashagan field. Kashagan Karachaganak |
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Eni Fact Book Exploration & Production
| Operating consortium (KPO)
and are regulated by a Production Sharing Agreement
lasting 40 years, until 2037. Eni and British Gas are
cooperators of the venture both with a 32.5% interest. In 2009 production of the Karachaganak field averaged 238 kbbl/d of liquids (70 kbbl/d net to Eni) and 883 mmcf/d of natural gas (259 mmcf/d net to Eni). This field is developed by producing liquids from the deeper layers of the reservoir and re-injecting the associated gas in the higher layers. Approximately two thirds of liquid production are stabilized at the Karachaganak Processing Complex (KPC) with a capacity in excess of 150 kbbl/d and exported to Western markets through the Caspian Pipeline Consortium (Eni’s interest 2%) and the Atyrau-Samara pipeline linking to Russian export networks. The remaining third of non stabilized liquid production and volumes of associated gas not re-injected in the reservoir are marketed at the Russian terminal in Orenburg. Development The execution fourth treatment unit has been progressing towards completion and will enable to increase export of oil volumes to Western markets of currently non-stabilized liquids delivered to the Orenburg terminal. The construction of the Uralsk Gas Pipeline is ongoing. This new infrastructure, with a length of 150 kilometers, will link the Karachaganak field to the Kazakhstan gas network. Start-up is expected in 2010. The engineering activities of Phase 3 of the Karachaganak project identified a staged approach to best develop the field. The project provides for the installation of gas producing and re-injection facilities to increase gas sales at the Orenburg plant up to 565 bcf/y, and the liquids production up to
|
approximately 14 mmtonnes/y. With the view to sanctioning the Phase 3, technical and commercial discussions with the relevant authority are ongoing. n Rest of Asia China East Timor India |
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Eni Fact Book Exploration & Production
| Exploration
Exploration in the year concerned onshore Block RJ-ONN
-2003/1 (Eni operator with a 34% interest) through the
drilling of 4 commitment wells and the Hindustan assets
acquired: RJ-ONN-2005/1 (Eni operator with a 25%
interest) and RJ-ONN-2005/2 (Eni’s interest 20%) in
Rajahstan basin, as well as block AAP-ON-94/1 (Eni
operator with a 40% interest) in Assam basin, located in
the north-east area. Other exploration activities were carried out at the offshore Blocks AN-DWN-2003/2 (Eni operator with a 40% interest) and MN-DWN-2002/1 (Eni’s interest 34%) located west of the Andaman islands where 3 deepwater wells are going to be drilled at the end of 2011. In Block AN-DWN-2002/1 located in the deep offshore of the eastern coast the drilling of the first commitment well is expected in late, 2010. Indonesia
|
Exploration activity
start-up is expected in 2010. If the results of these
preliminary activities are positive, the project will
benefit from the opportunities of synergy provided by the
existing production and treatment facilities in Sanga
Sanga and the Bontang LNG plant. Exploration and production activities in Indonesia are regulated by PSAs. Production Production consists mainly of gas and derives from the Sanga Sanga permit (Eni’s interest 37.81%) with seven production fields. This gas is treated at the Bontang liquefaction plant, one of the largest in the world, and is exported to the Japanese, South Korean and Taiwanese markets. Development Eni is involved in the ongoing joint development of the oil and gas discoveries in the Bukat permit (Eni operator with a 66.25% interest) and the five gas discoveries in the Kutei Deep Water Basin area (Eni’s interest 20%). In 2009 the development plan of the Jau field in the Krueng Mane Block (Eni’s interest 75%) located offshore Sumatra was submitted to the relevant Authority. Exploration Eni holds interests in 9 exploration blocks ranging from 20% to 100%, 6 as operator. Exploration activity yielded positive results with the Jangkrik gas discovery located in the Muara Bakau Block (Eni’s interest 55%) offshore Borneo. Iran Iraq |
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Eni Fact Book Exploration & Production
| The field development plan
will take place in two phases: (i) the Rehabilitation
Plan, which will improve the existing production rate to
gain full knowledge of the reservoir; and (ii) the
Redevelopment Plan, which will increase production to the
target plateau.
Pakistan |
In September 2009, following
an international bid procedure, Eni was awarded as
operator an exploration license for the Sukhpur onshore
block in joint-venture with another international oil
company and the national Pakistani oil company. The block
is located near the Bhit operated production area. In
case of commercial discovery relevant operating synergies
will be possible. Exploration activity yielded positive results with discoveries in the operated Badhra, Kadanwari areas and in the Miano field (Eni’s interest 15%). The production start-up of the recent discoveries benefited from the existing producing facilities.
Russia |
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Eni Fact Book Exploration & Production
| Sambugursky and
Yevo-Yahinskii including seven gas and condensates fields
currently in the appraisal/development phase. Main fields
are Sambugorskoye and Urengoiskoye; the three partners
are committed to producing first gas from the Samburskoye
field by June 2011, targeting a production plateau of 150
kboe/d within two years from the start of production;
(ii) ZAO Urengoil Inc owns exploration and development
licenses for the Yaro-Yakhinskoye gas and condensates
field. Ongoing development activities moved forward
bringing the wells to a sufficient level of safety as
well as an acquisition seismographic data; (iii) OAO
Neftegaztechnologia owns the exploration and development
license of the Severo-Chaselskoye field where a seismic
acquisition campaign is underway. Saudi Arabia Turkmenistan |
Activities were targeted to
optimize production by means of drilling 18 development
wells and continuation of the program for water injection
and facilities upgrading. Exploration Activity in the year concerned mainly the appraisal of areas nearby the Burun field. Yemen n America Brazil Ecuador Trinidad &
Tobago |
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Eni Fact Book Exploration & Production
| Production Production
is provided by the Chaconia, Ixora and Hibiscus gas
fields in the North Coast Marine Area 1 Block (Eni’s
interest 17.4%). Production is supported by fixed
platforms linked to the Hibiscus treatment facility. Natural gas is used to feed trains 2, 3 and 4 of the Atlantic LNG liquefaction plant under long-term contracts. LNG production is sold in the United States, Spain and the Dominican Republic. Development The main development project underway concerns the Poinsettia, Bougainvillea and Heliconia fields. The project provides for the installation of a production platform on the Poinsettia field and the linkage to the Hibiscus treatment facility which was already upgraded. The drilling program on Heliconia and Bougainvillea fields is underway. Start-up is expected in 2010. In 2009 production started-up as scheduled at the Poinsettia field. United
States |
assets with 40 mmbbl of resources base. Production
plateau at 10 kboe/d net to Eni is expected in 2011. Gulf of Mexico |
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Eni Fact Book Exploration & Production
| Production The main
fields operated by Eni with a 100% interest are
Allegheny, East Breaks and Morphet. Eni is operator in
joint-venture in the Devils Towers, King Kong, Longhorn,
Pegasus, San Jacinto, Triton and Goldfinger fields. Eni
also holds interests in the Medusa (Eni’s interest
25%) and Europa (Eni’s interest 32%) fields. In 2009 production start-up was achieved in: (i) the Thunderhawk field (Eni’s interest 25%) through the drilling of underwater wells and linkage to a semi-submersible production unit with a treatment capacity of 45 kbbl/d of oil and about 71 mmcf/d of natural gas; (ii) the Longhorn field (Eni’s interest 75%) through the drilling of underwater wells and installation of production platform with a treatment capacity of approximately 247 mmcf/d; (iii) the Leo field (Eni’s interest 75%) by means of the linkage to the Longhorn production facilities. Development The development plan of the Appaloosa discovery (Eni’s interest 100%) was approved. The project provides for the linkage an underwater oil well to the operated Corral platform at nearby Longhorn field. Production start-up is expected in 2010 peaking at 1.5 kboe/d. Exploration Exploration activities yielded positive results in the following blocks: (i) offshore Green Canyon 859 (Eni’s interest 12.5%) with the oil and gas Heidelberg-1 discovery at a water depth of 9,163 meters; (ii) Keathley Canyon 919 (Eni’s interest 25%) with the oil and gas Hadrian West discovery. Alaska Venezuela |
A stake of at least 60% in
the capital of such company is held by an affiliate of
PDVSA preferably Corporación Venezuelana de Petróleo. Production Production derives from the Corocoro field (Eni’s interest 26%) in the Gulf of Paria West. The plan provides for two phases, the second development phase will depend on the results achieved in the first one regarding well production rate and field performance under water and gas injection. A production peak of 40 kbbl/d (10 net to Eni) is expected in 2012. Development In January 2010 Eni and the Venezuelan National Oil Company PDVSA signed an agreement for the joint development of the giant Junin 5 field with 35 billion barrels of certified heavy oil in place, located in the Orinoco oil belt. Production start-up is planned for 2013 at an initial level of 75 kbbl/d and a long-term production plateau of 240 kbbl/d is targeted. The agreement will be sanctioned in the next two months and provides for the establishment of an Empresa Mixta (Eni 40%, PDVSA 60%) and the payment by Eni of a $300 million bonus. Additional $346 million will be paid with the progress of the project. Finally, Eni will present a project for the construction of a power plant in the Guiria peninsula. Exploration A large gas discovery was made with the Perla field, located in the Cardon IV block (Eni’s interest 50%) in the Gulf of Venezuela, yielding 21 mmcf/d (approximately 3.7 kboe/d) during flow tests. The field has been estimated to contain a reserve potential of more than 5,650 billion cubic feet of gas (1 billion of barrels of oil equivalent). In 2010 the Perla 2 well has been successfully drilled. The development plan targets about 353 mmcf/d by 2013. Other activities are concentrated in: (i) the offshore Blanquilla and Tortuga areas (Eni’s interest 20%) in the Caribbean Sea over an area of approximately 5,000 square kilometers; (ii) Gulf of Paria Central (Eni’s interest 19.5%), covering an area of 259 square kilometers, where the Punta Sur oil discovery is located. n Australia and Oceania Australia |
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Eni Fact Book Exploration & Production
| 06-15 (Eni’s interest
40%), where the Kitan discovery is located. The Kitan
development activities started in April 2010. Exploration and production activities in Australia are regulated by concession agreements, whereas in the cooperation zone between East Timor and Australia (Joint Petroleum Development Area - JPDA) they are regulated by PSAs. In the medium-term, Eni’s production in this Country is expected to increase through ongoing development activities. Block WA-25-L Block JPDA 03-13 |
is mostly carried by a
500-kilometer long pipeline and is treated at the Darwin
liquefaction plant which has a capacity of 3.2 mmtonnes/y
of LNG (equivalent to approximately 173 bcf/y of feed
gas). LNG is sold to Japanese power generation companies
under long-term contracts. A further development phase
(phase 2) is being studied aimed at increasing liquids
production and maintaining the field’s production
profile. Block WA-33-L |
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Eni Fact Book Exploration & Production
| Estimated net proved hydrocarbons reserves by geographic area (a) | (mmboe) |
2005 |
2006 |
2007 (b) |
2008 (b) |
2009 (b) |
| (at December 31) | ||||||||||||
| Italy | 868 | 805 | 747 | 681 | 703 | |||||||
| of which: | ||||||||||||
| developed | 620 | 562 | 534 | 465 | 490 | |||||||
| undeveloped | 248 | 243 | 213 | 216 | 213 | |||||||
| Rest of Europe | 781 | 706 | 638 | 525 | 590 | |||||||
| of which: | ||||||||||||
| developed | 626 | 586 | 537 | 417 | 432 | |||||||
| undeveloped | 155 | 120 | 101 | 108 | 158 | |||||||
| North Africa | 2,026 | 2,018 | 1,879 | 1,922 | 1,922 | |||||||
| of which: | ||||||||||||
| developed | 1,230 | 1,242 | 1,183 | 1,229 | 1,266 | |||||||
| undeveloped | 796 | 776 | 696 | 693 | 656 | |||||||
| West Africa | 1,279 | 1,122 | 1,095 | 1,146 | 1,141 | |||||||
| of which: | ||||||||||||
| developed | 793 | 798 | 766 | 827 | 799 | |||||||
| undeveloped | 486 | 324 | 329 | 319 | 342 | |||||||
| Kazakhstan | 1,087 | 1,219 | 1,061 | 1,336 | 1,221 | |||||||
| of which: | ||||||||||||
| developed | 548 | 525 | 494 | 647 | 614 | |||||||
| undeveloped | 539 | 694 | 567 | 689 | 607 | |||||||
| Rest of Asia | 271 | 235 | 198 | 265 | 236 | |||||||
| of which: | ||||||||||||
| developed | 194 | 161 | 127 | 168 | 139 | |||||||
| undeveloped | 77 | 74 | 71 | 97 | 97 | |||||||
| America | 332 | 150 | 259 | 235 | 263 | |||||||
| of which: | ||||||||||||
| developed | 223 | 82 | 158 | 133 | 168 | |||||||
| undeveloped | 109 | 68 | 101 | 102 | 95 | |||||||
| Australia and Oceania | 152 | 145 | 133 | 132 | 133 | |||||||
| of which: | ||||||||||||
| developed | 41 | 76 | 63 | 62 | 122 | |||||||
| undeveloped | 111 | 69 | 70 | 70 | 11 | |||||||
| Equity-accounted entities | 41 | 36 | 360 | 358 | 362 | |||||||
| of which: | ||||||||||||
| developed | 31 | 27 | 63 | 68 | 74 | |||||||
| undeveloped | 10 | 9 | 297 | 290 | 288 | |||||||
| Total | 6,837 | 6,436 | 6,370 | 6,600 | 6,571 | |||||||
| of which: | ||||||||||||
| developed | 4,306 | 4,059 | 3,925 | 4,016 | 4,104 | |||||||
| undeveloped | 2,531 | 2,377 | 2,445 | 2,584 | 2,467 |
| Reserve life index (b) | (years) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 9.2 | 9.3 | 9.7 | 9.3 | 11.4 | |||||||
| Rest of Europe | 7.3 | 6.6 | 6.5 | 5.8 | 6.6 | |||||||
| North Africa | 11.7 | 10.0 | 8.8 | 8.2 | 9.3 | |||||||
| West Africa | 10.2 | 8.3 | 9.2 | 9.5 | 8.9 | |||||||
| Kazakhstan | 29.4 | 32.1 | 26.0 | 32.9 | 29.0 | |||||||
| Rest of Asia | 6.8 | 6.1 | 13.2 | 12.8 | 11.1 | |||||||
| America | 7.4 | 5.7 | 8.1 | 5.9 | 5.0 | |||||||
| Australia and Oceania | 18.7 | 14.9 | 19.7 | 21.0 | 21.5 | |||||||
| 10.8 | 10.0 | 10.0 | 10.0 | 10.2 |
| Reserve replacement ratio, all sources (b) | (%) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 77 | 28 | 25 | 10 | 136 | |||||||
| Rest of Europe | 52 | 27 | 30 | - | 174 | |||||||
| North Africa | 60 | 95 | 36 | 118 | 99 | |||||||
| West Africa | 42 | - | 76 | 142 | 106 | |||||||
| Kazakhstan | - | 447 | - | 776 | - | |||||||
| Rest of Asia | - | - | 791 | 248 | - | |||||||
| America | - | - | 474 | 40 | 144 | |||||||
| Australia and Oceania | 537 | 25 | - | 75 | 112 | |||||||
| 40 | 38 | 90 | 135 | 96 |
| (a) | Eni’s proved reserves of the Kashagan field were determined based on Eni working interest of 16.81% as of December 31, 2008 and 2009 and 18.52% in previous years. | |
| (b) | Includes a 29.4% stake of the reserves of the three equity-accounted Russian companies participated by joint venture OOO SeverEnergia, owned by Eni (60%) and its Italian partner Enel (40%) which on September 23, 2009 completed the divestment of the 51% stake in the venture to Gazprom in line with the call option arrangement. |
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Eni Fact Book Exploration & Production
| Estimated net proved liquids reserves by geographic area (a) | (mmbbl) |
2005 |
2006 |
2007 (b) |
2008 (b) |
2009 (b) |
| (at December 31) | ||||||||||||
| Italy | 228 | 215 | 215 | 186 | 233 | |||||||
| of which: | ||||||||||||
| developed | 149 | 136 | 133 | 111 | 141 | |||||||
| undeveloped | 79 | 79 | 82 | 75 | 92 | |||||||
| Rest of Europe | 433 | 386 | 345 | 277 | 351 | |||||||
| of which: | ||||||||||||
| developed | 353 | 329 | 299 | 222 | 218 | |||||||
| undeveloped | 80 | 57 | 46 | 55 | 133 | |||||||
| North Africa | 961 | 982 | 878 | 823 | 895 | |||||||
| of which: | ||||||||||||
| developed | 697 | 713 | 649 | 613 | 659 | |||||||
| undeveloped | 264 | 269 | 229 | 210 | 236 | |||||||
| West Africa | 936 | 786 | 725 | 783 | 770 | |||||||
| of which: | ||||||||||||
| developed | 568 | 546 | 511 | 576 | 544 | |||||||
| undeveloped | 368 | 240 | 214 | 207 | 226 | |||||||
| Kazakhstan | 778 | 893 | 753 | 911 | 849 | |||||||
| of which: | ||||||||||||
| developed | 266 | 262 | 219 | 298 | 291 | |||||||
| undeveloped | 512 | 631 | 534 | 613 | 558 | |||||||
| Rest of Asia | 82 | 62 | 44 | 106 | 94 | |||||||
| of which: | ||||||||||||
| developed | 68 | 53 | 35 | 92 | 45 | |||||||
| undeveloped | 14 | 9 | 9 | 14 | 49 | |||||||
| America | 291 | 98 | 138 | 131 | 153 | |||||||
| of which: | ||||||||||||
| developed | 193 | 54 | 81 | 74 | 80 | |||||||
| undeveloped | 98 | 44 | 57 | 57 | 73 | |||||||
| Australia and Oceania | 39 | 35 | 29 | 26 | 32 | |||||||
| of which: | ||||||||||||
| developed | 37 | 33 | 26 | 23 | 23 | |||||||
| undeveloped | 2 | 2 | 3 | 3 | 9 | |||||||
| Equity-accounted entities | 25 | 24 | 92 | 92 | 86 | |||||||
| of which: | ||||||||||||
| developed | 19 | 18 | 21 | 27 | 34 | |||||||
| undeveloped | 6 | 6 | 71 | 65 | 52 | |||||||
| Total | 3,773 | 3,481 | 3,219 | 3,335 | 3,463 | |||||||
| of which: | ||||||||||||
| developed | 2,350 | 2,144 | 1,974 | 2,036 | 2,035 | |||||||
| undeveloped | 1,423 | 1,337 | 1,245 | 1,299 | 1,428 |
| (a) | Eni’s proved reserves of the Kashagan field were determined based on Eni working interest of 16.81% as of December 31, 2008 and 2009 and 18.52% in previous years. | |
| (b) | Includes a 29.4% stake of the reserves of the three equity-accounted Russian companies participated by joint-venture OOO SeverEnergia, owned by Eni (60%) and its Italian partner Enel (40%) which on September 23, 2009 completed the divestment of the 51% stake in the venture to Gazprom in line with the call option arrangement. |
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Eni Fact Book Exploration & Production
| Estimated net proved natural gas reserves by geographic area (a) | (bcf) |
2005 |
2006 |
2007 (b) |
2008 (b) |
2009 (b) |
| (at December 31) | ||||||||||||
| Italy | 3,676 | 3,391 | 3,057 | 2,844 | 2,704 | |||||||
| of which: | ||||||||||||
| developed | 2,704 | 2,449 | 2,304 | 2,031 | 2,001 | |||||||
| undeveloped | 972 | 942 | 753 | 813 | 703 | |||||||
| Rest of Europe | 1,999 | 1,835 | 1,675 | 1,421 | 1,380 | |||||||
| of which: | ||||||||||||
| developed | 1,567 | 1,480 | 1,364 | 1,122 | 1,231 | |||||||
| undeveloped | 432 | 355 | 311 | 299 | 149 | |||||||
| North Africa | 6,117 | 5,946 | 5,751 | 6,311 | 5,894 | |||||||
| of which: | ||||||||||||
| developed | 3,060 | 3,042 | 3,065 | 3,537 | 3,486 | |||||||
| undeveloped | 3,057 | 2,904 | 2,686 | 2,774 | 2,408 | |||||||
| West Africa | 1,965 | 1,927 | 2,122 | 2,084 | 2,127 | |||||||
| of which: | ||||||||||||
| developed | 1,289 | 1,447 | 1,469 | 1,443 | 1,463 | |||||||
| undeveloped | 676 | 480 | 653 | 641 | 664 | |||||||
| Kazakhstan | 1,774 | 1,874 | 1,770 | 2,437 | 2,139 | |||||||
| of which: | ||||||||||||
| developed | 1,618 | 1,511 | 1,580 | 2,005 | 1,859 | |||||||
| undeveloped | 156 | 363 | 190 | 432 | 280 | |||||||
| Rest of Asia | 1,083 | 992 | 880 | 911 | 814 | |||||||
| of which: | ||||||||||||
| developed | 728 | 614 | 530 | 439 | 539 | |||||||
| undeveloped | 355 | 378 | 350 | 472 | 275 | |||||||
| America | 238 | 299 | 696 | 600 | 629 | |||||||
| of which: | ||||||||||||
| developed | 169 | 159 | 442 | 340 | 506 | |||||||
| undeveloped | 69 | 140 | 254 | 260 | 123 | |||||||
| Australia and Oceania | 649 | 633 | 598 | 606 | 575 | |||||||
| of which: | ||||||||||||
| developed | 24 | 247 | 213 | 221 | 565 | |||||||
| undeveloped | 625 | 386 | 385 | 385 | 10 | |||||||
| Equity-accounted entities | 90 | 68 | 1,541 | 1,534 | 1,588 | |||||||
| of which: | ||||||||||||
| developed | 70 | 48 | 237 | 230 | 234 | |||||||
| undeveloped | 20 | 20 | 1,304 | 1,304 | 1,354 | |||||||
| Total | 17,591 | 16,965 | 18,090 | 18,748 | 17,850 | |||||||
| of which: | ||||||||||||
| developed | 11,229 | 10,997 | 11,204 | 11,368 | 11,884 | |||||||
| undeveloped | 6,362 | 5,968 | 6,886 | 7,380 | 5,966 |
| (a) | Eni’s proved reserves of the Kashagan field were determined based on Eni working interest of 16.81% as of December 31, 2008 and 2009 and 18.52% in previous years. | |
| (b) | Includes a 29.4% stake of the reserves of the three equity-accounted Russian companies participated by joint venture OOO SeverEnergia, owned by Eni (60%) and its Italian partner Enel (40%) which on September 23, 2009 completed the divestment of the 51% stake in the venture to Gazprom in line with the call option arrangement. |
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Eni Fact Book Exploration & Production
| Production of oil and natural gas by country (a) | (kboe/d) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 261 | 238 | 212 | 199 | 169 | |||||||
| Rest of Europe | 290 | 294 | 270 | 249 | 247 | |||||||
| Croatia | 7 | 12 | 9 | 12 | 17 | |||||||
| Norway | 138 | 140 | 137 | 129 | 126 | |||||||
| United Kingdom | 145 | 142 | 124 | 108 | 104 | |||||||
| North Africa | 480 | 555 | 594 | 645 | 573 | |||||||
| Algeria | 88 | 91 | 88 | 83 | 83 | |||||||
| Egypt | 213 | 227 | 238 | 240 | 230 | |||||||
| Libya | 164 | 222 | 252 | 306 | 244 | |||||||
| Tunisia | 15 | 15 | 16 | 16 | 16 | |||||||
| West Africa | 343 | 372 | 327 | 335 | 360 | |||||||
| Angola | 124 | 156 | 136 | 126 | 130 | |||||||
| Congo | 67 | 67 | 69 | 87 | 102 | |||||||
| Nigeria | 152 | 149 | 122 | 122 | 128 | |||||||
| Kazakhstan | 102 | 103 | 112 | 111 | 115 | |||||||
| Rest of Asia | 118 | 111 | 108 | 124 | 135 | |||||||
| China | 7 | 8 | 8 | 8 | 8 | |||||||
| India | 1 | |||||||||||
| Indonesia | 27 | 23 | 20 | 20 | 21 | |||||||
| Iran | 35 | 29 | 26 | 28 | 35 | |||||||
| Pakistan | 49 | 51 | 52 | 56 | 58 | |||||||
| Russia | 2 | |||||||||||
| Turkmenistan | 12 | 12 | ||||||||||
| America | 121 | 71 | 95 | 117 | 153 | |||||||
| Ecuador | 17 | 15 | 16 | 16 | 14 | |||||||
| Trinidad & Tobago | 10 | 9 | 10 | 9 | 12 | |||||||
| United States | 33 | 32 | 69 | 87 | 119 | |||||||
| Venezuela | 61 | 15 | 5 | 8 | ||||||||
| Australia and Oceania | 22 | 26 | 18 | 17 | 17 | |||||||
| Australia | 22 | 26 | 18 | 17 | 17 | |||||||
| Total outside Italy | 1,476 | 1,532 | 1,524 | 1,598 | 1,600 | |||||||
| 1,737 | 1,770 | 1,736 | 1,797 | 1,769 |
| (a) | Includes production volumes of natural gas consumed in operations (300, 281, 296, 286 and 247 mmcf/d, in 2009, 2008, 2007, 2006 and 2005, respectively). |
| Oil and natural gas production sold | (mmboe) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Oil and natural gas production | 634.2 | 645.9 | 633.7 | 657.5 | 645.7 | ||||||||||||
| Change in inventories/other | (3.1 | ) | (2.4 | ) | (3.5 | ) | (7.6 | ) | (3.8 | ) | |||||||
| Own consumption of gas | (16.2 | ) | (18.4 | ) | (18.8 | ) | (17.9 | ) | (19.1 | ) | |||||||
| Oil and natural gas production sold | 614.9 | 625.1 | 611.4 | 632.0 | 622.8 | ||||||||||||
| Oil | (mmbbl) | 402.60 | 391.07 | 370.28 | 370.24 | 365.20 | |||||||||||
| - of which to R&M division | 267.37 | 267.84 | 227.68 | 194.64 | 224.98 | ||||||||||||
| Natural gas | (bcf) | 1,219 | 1,344 | 1,385 | 1,503 | 1,479 | |||||||||||
| - of which to G&P division | 377 | 534 | 510 | 480 | 444 |
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Eni Fact Book Exploration & Production
| Liquids production by Country | (kbbl/d) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 86 | 79 | 75 | 68 | 56 | |||||||
| Rest of Europe | 179 | 178 | 157 | 140 | 133 | |||||||
| Norway | 96 | 98 | 90 | 83 | 78 | |||||||
| United Kingdom | 83 | 80 | 67 | 57 | 55 | |||||||
| North Africa | 308 | 329 | 337 | 338 | 292 | |||||||
| Algeria | 86 | 88 | 85 | 80 | 80 | |||||||
| Egypt | 90 | 85 | 97 | 98 | 91 | |||||||
| Libya | 120 | 144 | 142 | 147 | 108 | |||||||
| Tunisia | 12 | 12 | 13 | 13 | 13 | |||||||
| West Africa | 310 | 322 | 280 | 289 | 312 | |||||||
| Angola | 122 | 151 | 132 | 121 | 125 | |||||||
| Congo | 65 | 65 | 67 | 84 | 97 | |||||||
| Nigeria | 123 | 106 | 81 | 84 | 90 | |||||||
| Kazakhstan | 64 | 64 | 70 | 69 | 70 | |||||||
| Rest of Asia | 46 | 38 | 37 | 49 | 57 | |||||||
| China | 7 | 6 | 6 | 6 | 7 | |||||||
| Indonesia | 3 | 2 | 2 | 2 | 2 | |||||||
| Iran | 35 | 29 | 26 | 28 | 35 | |||||||
| Pakistan | 1 | 1 | 1 | 1 | 1 | |||||||
| Russia | 2 | |||||||||||
| Turkmenistan | 12 | 12 | ||||||||||
| America | 97 | 51 | 53 | 63 | 79 | |||||||
| Ecuador | 17 | 15 | 16 | 16 | 14 | |||||||
| United States | 19 | 21 | 37 | 42 | 57 | |||||||
| Venezuela | 61 | 15 | 5 | 8 | ||||||||
| Australia and Oceania | 21 | 18 | 11 | 10 | 8 | |||||||
| Australia | 21 | 18 | 11 | 10 | 8 | |||||||
| Total outside Italy | 1,025 | 1,000 | 945 | 958 | 951 | |||||||
| 1,111 | 1,079 | 1,020 | 1,026 | 1,007 |
| Natural gas production by Country (a) | (mmcf/d) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 1,002.9 | 911.4 | 789.7 | 749.9 | 652.6 | |||||||
| Rest of Europe | 642.8 | 663.8 | 647.2 | 626.7 | 655.5 | |||||||
| Croatia | 42.4 | 66.8 | 52.5 | 68.7 | 95.5 | |||||||
| Norway | 243.7 | 245.2 | 271.1 | 264.8 | 273.7 | |||||||
| United Kingdom | 356.7 | 351.8 | 323.6 | 293.2 | 286.3 | |||||||
| North Africa | 988.8 | 1,299.1 | 1,474.2 | 1,761.6 | 1,614.2 | |||||||
| Algeria | 14.1 | 19.4 | 18.8 | 18.5 | 19.7 | |||||||
| Egypt | 706.3 | 813.4 | 811.2 | 818.4 | 793.7 | |||||||
| Libya | 254.3 | 452.1 | 629.6 | 907.6 | 780.4 | |||||||
| Tunisia | 14.1 | 14.2 | 14.6 | 17.1 | 20.4 | |||||||
| West Africa | 190.7 | 281.7 | 274.2 | 260.7 | 274.3 | |||||||
| Angola | 17.7 | 24.1 | 25.1 | 28.1 | 29.3 | |||||||
| Congo | 7.1 | 9.8 | 11.4 | 12.7 | 27.3 | |||||||
| Nigeria | 165.9 | 247.8 | 237.7 | 219.9 | 217.7 | |||||||
| Kazakhstan | 222.5 | 227.6 | 237.9 | 244.7 | 259.0 | |||||||
| Rest of Asia | 413.2 | 416.7 | 408.9 | 426.2 | 444.8 | |||||||
| China | 9.4 | 11.0 | 10.9 | 8.2 | ||||||||
| India | 3.7 | |||||||||||
| Indonesia | 137.7 | 118.1 | 105.4 | 99.7 | 104.8 | |||||||
| Pakistan | 275.5 | 289.2 | 292.5 | 315.6 | 328.1 | |||||||
| America | 130.7 | 116.0 | 240.3 | 311.5 | 424.7 | |||||||
| Trinidad & Tobago | 56.5 | 51.7 | 58.9 | 54.6 | 67.0 | |||||||
| United States | 74.2 | 64.3 | 181.4 | 256.9 | 357.7 | |||||||
| Australia and Oceania | 3.5 | 47.9 | 41.5 | 42.2 | 48.6 | |||||||
| Australia | 3.5 | 47.9 | 41.5 | 42.2 | 48.6 | |||||||
| Total outside Italy | 2,592.2 | 3,052.8 | 3,324.2 | 3,673.6 | 3,721.1 | |||||||
| 3,595.1 | 3,964.2 | 4,113.9 | 4,423.5 | 4,373.7 |
| (a) | Includes production volumes of natural gas consumed in operations (300, 281, 296, 286 and 247 mmcf/d, in 2009, 2008, 2007, 2006 and 2005, respectively). |
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Contents
Eni Fact Book Exploration & Production
| Production of oil and natural gas available for sale (a) | (kboe/d) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 256 | 233 | 208 | 195 | 165 | |||||||
| Rest of Europe | 284 | 286 | 263 | 242 | 239 | |||||||
| North Africa | 465 | 536 | 573 | 627 | 554 | |||||||
| West Africa | 336 | 363 | 318 | 325 | 349 | |||||||
| Kazakhstan | 99 | 101 | 109 | 108 | 113 | |||||||
| Rest of Asia | 112 | 105 | 101 | 119 | 130 | |||||||
| America | 120 | 71 | 94 | 116 | 150 | |||||||
| Australia and Oceania | 21 | 25 | 18 | 16 | 16 | |||||||
| 1,693 | 1,720 | 1,684 | 1,748 | 1,716 |
| Natural gas production available for sale (a) | (mmcf/d) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 972 | 883 | 763 | 725 | 630 | |||||||
| Rest of Europe | 605 | 622 | 607 | 588 | 608 | |||||||
| North Africa | 900 | 1,187 | 1,357 | 1,661 | 1,503 | |||||||
| West Africa | 151 | 232 | 220 | 204 | 213 | |||||||
| Kazakhstan | 207 | 214 | 222 | 227 | 241 | |||||||
| Rest of Asia | 382 | 386 | 380 | 396 | 417 | |||||||
| America | 127 | 112 | 232 | 304 | 416 | |||||||
| Australia and Oceania | 43 | 38 | 38 | 46 | ||||||||
| 3,344 | 3,679 | 3,819 | 4,143 | 4,074 |
| (a) | Do not include natural gas consumed in operation (300, 281, 296, 286 and 251 mmcf/d, in 2009, 2008, 2007, 2006 and 2005, respectively). |
| Average realizations by geographic area | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan |
Rest of Asia |
America |
Australia and Oceania |
Total |
| 2005 | ||||||||||||||||||||
| Liquids | ($/bbl) | 45.50 | 52.67 | 50.11 | 51.45 | 41.87 | 47.73 | 39.24 | 52.85 | 49.09 | ||||||||||
| Natural gas | ($/mmcf) | 6.32 | 5.35 | 3.37 | 0.79 | 0.35 | 4.05 | 7.21 | 4.49 | |||||||||||
| Hydrocarbon | ($/boe) | 39.41 | 44.48 | 39.56 | 47.79 | 27.38 | 33.27 | 39.64 | 52.85 | 41.06 | ||||||||||
| 2006 | ||||||||||||||||||||
| Liquids | ($/bbl) | 55.22 | 63.01 | 60.99 | 61.55 | 53.18 | 58.70 | 50.53 | 65.12 | 60.09 | ||||||||||
| Natural gas | ($/mmcf) | 8.23 | 7.09 | 4.17 | 1.05 | 0.39 | 4.24 | 5.92 | 4.86 | 5.29 | ||||||||||
| Hydrocarbon | ($/boe) | 49.93 | 54.38 | 46.71 | 55.10 | 34.13 | 36.66 | 45.93 | 53.68 | 48.87 | ||||||||||
| 2007 | ||||||||||||||||||||
| Liquids | ($/bbl) | 62.47 | 70.84 | 67.86 | 69.77 | 59.34 | 64.73 | 66.37 | 71.23 | 67.70 | ||||||||||
| Natural gas | ($/mmcf) | 8.58 | 6.71 | 4.60 | 1.21 | 0.41 | 4.34 | 6.69 | 5.94 | 5.42 | ||||||||||
| Hydrocarbon | ($/boe) | 54.03 | 57.95 | 50.47 | 62.36 | 38.98 | 39.24 | 54.23 | 57.72 | 53.17 | ||||||||||
| 2008 | ||||||||||||||||||||
| Liquids (a) | ($/bbl) | 84.87 | 71.90 | 84.71 | 91.58 | 79.06 | 75.08 | 88.69 | 82.80 | 84.05 | ||||||||||
| Natural gas | ($/mmcf) | 13.06 | 10.55 | 7.14 | 1.50 | 0.53 | 5.50 | 8.81 | 9.59 | 8.01 | ||||||||||
| Hydrocarbon | ($/boe) | 78.46 | 67.15 | 64.64 | 81.77 | 51.30 | 49.60 | 71.05 | 71.43 | 68.13 | ||||||||||
| 2009 | ||||||||||||||||||||
| Liquids (a) | ($/bbl) | 56.02 | 56.46 | 55.97 | 59.75 | 52.34 | 55.23 | 55.74 | 50.40 | 56.95 | ||||||||||
| Natural gas | ($/mmcf) | 9.01 | 7.06 | 5.78 | 1.66 | 0.45 | 4.30 | 4.05 | 8.14 | 5.62 | ||||||||||
| Hydrocarbon | ($/boe) | 53.16 | 49.53 | 45.26 | 54.61 | 33.64 | 38.34 | 40.22 | 48.68 | 46.90 |
| (a) | In 2008 Eni’s liquid realizations amounted to $84.05 per barrel and were reduced by approximately $4.13 per barrel due to the settlement of certain commodity derivatives relating to the sale of 46 mmbbl in the year. This was part of a derivative transaction the Company entered into to hedge exposure to variability in future cash flows expected from the sale of a portion of the Company’s proved reserves for an original amount of approximately 125.7 mmbbl in the 2008-2011 period, decreasing to 79.7 mmbbl by the end of December 2008. | |
| (b) | In 2009 Eni’s liquid realizations amounted to $56.95 per barrel and were marginally affected ($0.03 per barrel) by the settlement of certain commodity derivatives relating to the sale of 42.2 mmbbl in the year (37.5 mmbbl at the end of December 2009). |
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Contents
Eni Fact Book Exploration & Production
| Principal oil and natural gas interests at December 31, 2009 |
Commencement of operations |
Number of interests |
Gross developed acreage (a) (b) |
Net developed acreage (a) (b) |
Gross undeveloped acreage (a) |
Net undeveloped acreage (a) |
Type of fields/acreage |
Number of producing fields |
Number of other fields |
||||||||||
| EUROPE | 315 | 17,918 | 11,794 | 33,643 | 19,813 | 143 | 105 | |||||||||||
| Italy | 1926 | 167 | 11,641 | 9,692 | 15,537 | 12,346 | Onshore/Offshore | 87 | 84 | |||||||||
| Rest of Europe | 148 | 6,277 | 2,102 | 18,106 | 7,467 | 56 | 21 | |||||||||||
| Croatia | 1996 | 2 | 1,975 | 987 | Offshore | 9 | 3 | |||||||||||
| Norway | 1965 | 51 | 2,277 | 338 | 8,907 | 3,074 | Offshore | 15 | 6 | |||||||||
| United Kingdom | 1964 | 89 | 2,025 | 777 | 3,140 | 692 | Offshore | 32 | 12 | |||||||||
| Other countries | 6 | 6,059 | 3,701 | Offshore | ||||||||||||||
| AFRICA | 276 | 70,121 | 19,865 | 230,549 | 138,884 | 272 | 130 | |||||||||||
| North Africa | 119 | 30,820 | 13,431 | 54,725 | 32,580 | 101 | 56 | |||||||||||
| Algeria | 1981 | 38 | 2,152 | 727 | 17,458 | 16,517 | Onshore | 26 | 15 | |||||||||
| Egypt | 1954 | 57 | 4,445 | 1,571 | 18,652 | 6,757 | Onshore/Offshore | 39 | 24 | |||||||||
| Libya | 1959 | 13 | 17,947 | 8,951 | 18,427 | 9,214 | Onshore/Offshore | 12 | 15 | |||||||||
| Tunisia | 1961 | 11 | 6,276 | 2,182 | 188 | 92 | Onshore/Offshore | 24 | 2 | |||||||||
| West Africa | 151 | 39,301 | 6,434 | 98,600 | 54,090 | 171 | 74 | |||||||||||
| Angola | 1980 | 67 | 4,532 | 590 | 16,317 | 2,803 | Onshore/Offshore | 47 | 27 | |||||||||
| Congo | 1968 | 25 | 1,865 | 991 | 13,724 | 7,197 | Onshore/Offshore | 24 | 6 | |||||||||
| Gabon | 2008 | 6 | 7,615 | 7,615 | Onshore/Offshore | |||||||||||||
| Ghana | 2009 | 2 | 2,300 | 1,086 | Offshore | |||||||||||||
| Mali | 2006 | 1 | 47,500 | 31,668 | Onshore | |||||||||||||
| Nigeria | 1962 | 50 | 32,904 | 4,853 | 11,144 | 3,721 | Onshore/Offshore | 100 | 41 | |||||||||
| Other countries | 6 | 77,224 | 52,214 | Onshore/Offshore | ||||||||||||||
| ASIA | 80 | 18,924 | 6,369 | 204,274 | 119,272 | 38 | 29 | |||||||||||
| Kazakhstan | 1992 | 6 | 324 | 105 | 4,609 | 775 | Onshore/Offshore | 1 | 5 | |||||||||
| Rest of Asia | 74 | 18,600 | 6,264 | 199,665 | 118,497 | 37 | 24 | |||||||||||
| China | 1984 | 7 | 237 | 39 | 18,461 | 18,283 | Offshore | 10 | 1 | |||||||||
| East Timor | 2006 | 5 | 9,999 | 7,999 | Offshore | |||||||||||||
| India | 2005 | 14 | 303 | 143 | 27,861 | 9,946 | Onshore/Offshore | 5 | 1 | |||||||||
| Indonesia | 2001 | 12 | 1,735 | 656 | 25,940 | 15,863 | Onshore/Offshore | 7 | 13 | |||||||||
| Iraq | 2009 | 1 | 1,950 | 640 | Onshore | 1 | ||||||||||||
| Iran | 1957 | 4 | 1,456 | 820 | Onshore/Offshore | 3 | ||||||||||||
| Pakistan | 2000 | 21 | 9,122 | 2,708 | 24,782 | 15,493 | Onshore/Offshore | 10 | ||||||||||
| Russia | 2007 | 5 | 3,597 | 1,058 | 3,039 | 1,265 | Onshore | 8 | ||||||||||
| Saudi Arabia | 2004 | 1 | 51,687 | 25,844 | Onshore | |||||||||||||
| Turkmenistan | 2008 | 1 | 200 | 200 | Onshore | 2 | ||||||||||||
| Yemen | 2008 | 2 | 23,296 | 20,560 | Onshore/Offshore | |||||||||||||
| Other countries | 1 | 14,600 | 3,244 | Offshore | ||||||||||||||
| AMERICA | 558 | 4,737 | 3,090 | 17,234 | 8,433 | 73 | 19 | |||||||||||
| Brazil | 1999 | 2 | 1,389 | 1,067 | Offshore | |||||||||||||
| Ecuador | 1988 | 1 | 2,000 | 2,000 | Onshore | 1 | 1 | |||||||||||
| Trinidad & Tobago | 1970 | 1 | 382 | 66 | Offshore | 4 | 3 | |||||||||||
| United States | 1968 | 543 | 1,977 | 926 | 9,120 | 5,524 | Onshore/Offshore | 67 | 13 | |||||||||
| Venezuela | 1998 | 3 | 378 | 98 | 1,178 | 516 | Offshore | 1 | 1 | |||||||||
| Other countries | 8 | 5,547 | 1,326 | Offshore | 1 | |||||||||||||
| AUSTRALIA AND OCEANIA | 17 | 1,057 | 676 | 48,216 | 19,666 | 3 | 3 | |||||||||||
| Australia | 2001 | 16 | 1,057 | 676 | 47,452 | 19,628 | Offshore | 3 | 3 | |||||||||
| Other countries | 1 | 764 | 38 | Offshore | ||||||||||||||
| Total | 1,246 | 112,757 | 41,794 | 533,916 | 306,068 | 529 | 286 |
| (a) | Square kilometers. | |
| (b) | Developed acreage refers to those leases in which at least a portion of the area is in production or encompasses proved developed reserves. |
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Contents
Eni Fact Book Exploration & Production
| Net developed and undeveloped acreage | (square kilometers) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Europe | 41,534 | 37,716 | 32,055 | 30,511 | 31,607 | |||||||
| Italy | 24,053 | 22,496 | 20,664 | 20,409 | 22,038 | |||||||
| Rest of Europe | 17,481 | 15,220 | 11,391 | 10,102 | 9,569 | |||||||
| Africa | 125,520 | 230,700 | 227,932 | 249,672 | 158,749 | |||||||
| North Africa | 66,456 | 63,557 | 62,886 | 31,088 | 46,011 | |||||||
| West Africa | 19,202 | 111,400 | 112,832 | 156,557 | 60,524 | |||||||
| Other countries | 39,862 | 55,743 | 52,214 | 62,027 | 52,214 | |||||||
| Asia | 66,760 | 74,013 | 80,339 | 93,710 | 125,641 | |||||||
| Kazakhstan | 959 | 960 | 959 | 880 | 880 | |||||||
| Rest of Asia | 65,801 | 73,053 | 79,380 | 92,830 | 124,761 | |||||||
| America | 9,802 | 10,618 | 12,804 | 12,043 | 11,523 | |||||||
| Australia and Oceania | 22,386 | 32,172 | 41,361 | 29,558 | 20,342 | |||||||
| Total | 266,002 | 385,219 | 394,491 | 415,494 | 347,862 |
| Capital expenditures | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Acquisition of proved and unproved property | 301 | 152 | 96 | 836 | 697 | |||||||
| Italy | 139 | |||||||||||
| North Africa | 10 | 11 | 626 | 351 | ||||||||
| West Africa | 60 | 210 | 73 | |||||||||
| Kazakhstan | 169 | |||||||||||
| Rest of Asia | 94 | |||||||||||
| America | 49 | 3 | 85 | 179 | ||||||||
| Australia and Oceania | 23 | |||||||||||
| Exploration | 656 | 1,348 | 1,659 | 1,918 | 1,228 | |||||||
| Italy | 38 | 128 | 104 | 135 | 40 | |||||||
| Rest of Europe | 127 | 180 | 195 | 227 | 113 | |||||||
| North Africa | 153 | 270 | 373 | 379 | 317 | |||||||
| West Africa | 75 | 471 | 246 | 485 | 284 | |||||||
| Kazakhstan | 15 | 25 | 36 | 16 | 20 | |||||||
| Rest of Asia | 64 | 101 | 162 | 187 | 159 | |||||||
| America | 158 | 138 | 505 | 441 | 243 | |||||||
| Australia and Oceania | 26 | 35 | 38 | 48 | 52 | |||||||
| Development | 3,919 | 3,589 | 4,643 | 6,429 | 7,478 | |||||||
| Italy | 378 | 363 | 461 | 570 | 689 | |||||||
| Rest of Europe | 463 | 451 | 429 | 598 | 673 | |||||||
| North Africa | 1,007 | 701 | 948 | 1,246 | 1,381 | |||||||
| West Africa | 889 | 864 | 1,343 | 1,717 | 2,105 | |||||||
| Kazakhstan | 593 | 593 | 733 | 968 | 1,083 | |||||||
| Rest of Asia | 285 | 254 | 238 | 355 | 406 | |||||||
| America | 271 | 339 | 345 | 655 | 706 | |||||||
| Australia and Oceania | 33 | 24 | 146 | 320 | 435 | |||||||
| Other expenditures | 56 | 74 | 82 | 98 | 83 | |||||||
| 4,932 | 5,163 | 6,480 | 9,281 | 9,486 |
| Economic indicators per boe | ($/boe) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Lifting cost (a) | 5.5 | 5.6 | 6.7 | 7.5 | 7.3 | |||||||
| Exploration cost (three-year average) - discovery cost (b) | 1.67 | 2.86 | 7.8 | 5.2 | 4.9 | |||||||
| Finding and development cost (three-year average) (c) | 10.72 | 13.87 | 29.1 | 20.4 | 22.9 | |||||||
| Income | 12.20 | 14.97 | 14.03 | 15.8 | 7.96 |
| (a) | Ratio of production costs (costs incurred to operate and maintain wells and related equipment and facilities and royalties) to volumes produced. | |
| (b) | Exploration cost for each boe of new reserves added is calculated as ratio of costs incurred with respect to exploration activity and purchase of unproved property to proved reserve additions related to improved recovery, extensions and new discoveries and revisions of previous estimates. Data for 2007 and 2008 were calculated based on amounts determined in accordance with IFRS. Previous year data were in accordance with U.S. GAAP. Differences between the amounts determined under the two bodies of accounting standards were immaterial. Data disclosed in the table were calculated excluding the purchase costs of probable and possible reserves and other resources which were incurred in connection with acquisitions of properties and corporations, particularly the assets acquired in the Gulf of Mexico, Congo and Russia (according to a 60% interest) in 2007 as well as in Congo, Turkmenistan and Algeria in 2008. | |
| (c) | Finding and development cost for each boe of new reserves added is calculated as ratio of costs incurred with respect to exploration and development activities and purchase of unproved property to proved reserve additions related to improved recovery, extensions and new discoveries and revisions of previous estimates. Data for 2007 and 2008 were calculated based on amounts determined in accordance with IFRS. Previous year data were in accordance with U.S. GAAP. Differences between the amounts determined under the two bodies of accounting standards were immaterial. Data disclosed in the table were calculated excluding the purchase costs of probable and possible reserves and other resources which were incurred in connection with acquisitions of properties and corporations, particularly the assets acquired in the Gulf of Mexico, Congo and Russia (according to a 60% interest) in 2007 as well as in Congo, Turkmenistan and Algeria in 2008. Data also excluded development costs incurred in connection with Iranian buy-back contracts and costs estimated to be incurred in connection with asset retirement obligations. |
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Eni Fact Book Exploration & Production
| Net exploration and development drilling activity | (units) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan |
Rest of Asia |
America |
Australia and Oceania |
Total |
| 2007 | ||||||||||||||||||||
| Exploratory | 4.0 | 1.4 | 15.3 | 1.7 | 0.2 | 0.2 | 9.6 | 0.6 | 33.0 | |||||||||||
| Productive | 0.5 | 7.7 | 0.5 | 0.2 | 3.6 | 12.5 | ||||||||||||||
| Dry (a) | 3.5 | 1.4 | 7.6 | 1.2 | 0.2 | 6.0 | 0.6 | 20.5 | ||||||||||||
| Development | 17.0 | 27.3 | 45.8 | 18.5 | 1.3 | 37.8 | 8.4 | 0.6 | 156.7 | |||||||||||
| Productive | 17.0 | 27.2 | 45.8 | 18.5 | 1.3 | 34.1 | 5.9 | 0.6 | 150.4 | |||||||||||
| Dry (a) | 0.1 | 3.7 | 2.5 | 6.3 | ||||||||||||||||
| 2008 | ||||||||||||||||||||
| Exploratory | 0.7 | 3.7 | 22.9 | 7.4 | 16.2 | 3.4 | 1.4 | 55.7 | ||||||||||||
| Productive | 0.7 | 8.7 | 4.0 | 9.4 | 1.4 | 24.2 | ||||||||||||||
| Dry (a) | 0.7 | 3.0 | 14.2 | 3.4 | 6.8 | 2.0 | 1.4 | 31.5 | ||||||||||||
| Development | 12.9 | 5.5 | 47.6 | 37.2 | 2.6 | 43.0 | 6.3 | 155.1 | ||||||||||||
| Productive | 11.3 | 5.5 | 46.4 | 36.4 | 2.6 | 36.5 | 6.3 | 145.0 | ||||||||||||
| Dry (a) | 1.6 | 1.2 | 0.8 | 6.5 | 10.1 | |||||||||||||||
| 2009 | ||||||||||||||||||||
| Exploratory | 1.0 | 4.3 | 8.6 | 2.7 | 6.2 | 4.8 | 2.2 | 29.8 | ||||||||||||
| Productive | 4.1 | 4.8 | 2.3 | 1.0 | 0.8 | 13.0 | ||||||||||||||
| Dry (a) | 1.0 | 0.2 | 3.8 | 2.7 | 3.9 | 3.8 | 1.4 | 16.8 | ||||||||||||
| Development | 18.3 | 12.5 | 41.1 | 37.7 | 3.8 | 42.9 | 16.6 | 2.2 | 175.1 | |||||||||||
| Productive | 18.3 | 12.5 | 40.7 | 35.8 | 3.8 | 38.6 | 15.6 | 2.2 | 167.5 | |||||||||||
| Dry (a) | 0.4 | 1.9 | 4.3 | 1.0 | 7.6 |
| (a) | A dry well is an exploratory, development, or extension well that proves to be incapable of producing either oil or gas sufficient quantities to justify completion as an oil or gas well. |
| Drilling activity in progress | (units) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan |
Rest of Asia |
America |
Australia and Oceania |
Total |
| 2009 | ||||||||||||||||||||
| Exploratory (a) | ||||||||||||||||||||
| gross | 6.0 | 25.0 | 26.0 | 60.0 | 13.0 | 19.0 | 22.0 | 1.0 | 172.0 | |||||||||||
| net | 4.4 | 6.6 | 18.6 | 15.4 | 2.3 | 8.8 | 8.4 | 1.0 | 65.5 | |||||||||||
| Development | ||||||||||||||||||||
| gross | 6.0 | 8.0 | 16.0 | 23.0 | 2.0 | 13.0 | 47.0 | 1.0 | 116.0 | |||||||||||
| net | 5.8 | 1.2 | 6.9 | 8.2 | 0.7 | 6.2 | 12.1 | 0.1 | 41.2 |
| (a) | Included long-term suspended wells pending further evaluation. |
| Productive oil and gas wells (a) | (units) | Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan |
Rest of Asia |
America |
Australia and Oceania |
Total |
| 2009 (b) | ||||||||||||||||||||
| Oil wells | ||||||||||||||||||||
| gross | 185.0 | 384.0 | 1,103.0 | 2,764.0 | 85.0 | 355.0 | 125.0 | 4.0 | 5,005.0 | |||||||||||
| net | 145.7 | 64.5 | 469.2 | 474.3 | 27.6 | 255.1 | 56.3 | 2.6 | 1,495.3 | |||||||||||
| Gas wells | ||||||||||||||||||||
| gross | 481.0 | 198.0 | 120.0 | 501.0 | 658.0 | 207.0 | 11.0 | 2,176.0 | ||||||||||||
| net | 421.1 | 75.2 | 49.1 | 36.6 | 264.3 | 72.6 | 3.0 | 921.9 |
| (a) | Productive wells are producing wells and wells capable of production. One or more completions in the same bore hole are counted as one well. | |
| (b) | Includes approximately 2,144 gross (633 net to Eni) multiple wells (more than one producing into the same well bore). |
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Contents
Eni Fact Book Gas & Power
| Key performance indicators (a) | 2005 | 2006 | 2007 | 2008 | 2009 |
| Net sales from operations (b) | (euro million) | 23,174 | 28,547 | 27,793 | 37,062 | 30,447 | ||||||
| Operating profit | 3,580 | 4,022 | 4,465 | 4,030 | 3,687 | |||||||
| Adjusted operating profit | 3,784 | 4,117 | 4,414 | 3,564 | 3,901 | |||||||
| Market | 1,713 | 2,035 | 2,284 | 1,309 | 1,721 | |||||||
| Regulated businesses in Italy | 1,776 | 1,610 | 1,685 | 1,732 | 1,796 | |||||||
| International transport | 295 | 472 | 445 | 523 | 384 | |||||||
| Adjusted net profit | 2,704 | 3,002 | 3,127 | 2,648 | 2,916 | |||||||
| EBITDA pro-forma adjusted | 4,213 | 4,841 | 5,029 | 4,310 | 4,403 | |||||||
| Market | 2,505 | 2,973 | 3,061 | 2,271 | 2,392 | |||||||
| Regulated businesses in Italy | 1,160 | 1,160 | 1,248 | 1,284 | 1,345 | |||||||
| International transport | 548 | 708 | 720 | 755 | 666 | |||||||
| Capital expenditures | 1,185 | 1,214 | 1,511 | 2,058 | 1,686 | |||||||
| Adjusted capital employed, net at year end | 19,995 | 19,671 | 21,364 | 22,273 | 25,024 | |||||||
| Adjusted ROACE | (%) | 13.7 | 15.1 | 15.2 | 12.2 | 12.3 | ||||||
| Worldwide gas sales | (bcm) | 94.21 | 98.10 | 98.96 | 104.23 | 103.72 | ||||||
| of which: E&P sales (c) | 4.51 | 4.69 | 5.39 | 6.00 | 6.17 | |||||||
| LNG sales (d) | 7.00 | 9.90 | 11.70 | 12.00 | 12.90 | |||||||
| Customers in Italy | (million) | 6.02 | 6.54 | 6.61 | 6.63 | 6.88 | ||||||
| Gas volumes transported in Italy | (bcm) | 85.10 | 87.99 | 83.28 | 85.64 | 76.9 | ||||||
| Electricity sold | (TWh) | 27.56 | 31.03 | 33.19 | 29.93 | 33.96 | ||||||
| Employees at year end | (units) | 12,615 | 12,370 | 11,582 | 11,692 | 11,404 |
| (a) | From January 1, 2009, results of the gas storage business are reported within the Gas & Power segment reporting unit, within the regulated businesses results, following restructuring of Eni regulated gas businesses in Italy. As of that date, the results of the regulated businesses in Italy therefore include results of the Transport, Distribution, Regasification and Storage activities in Italy. Results of the power generation activity are reported within the marketing business as it is ancillary to the latter. Prior period results have been restated accordingly. | |
| (b) | Before the elimination of intragroup sales. | |
| (c) | Exploration & Production sales in Europe and in the Gulf of Mexico. | |
| (d) | Refer to LNG sales of the G&P division (included in worldwide gas sales) and the E&P division. |
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Contents
Eni Fact Book Gas & Power
| 2009 Highlights Presentation to the
European Commission of a set of structural remedies
related to some international gas pipelines European gas market Reorganization of
regulated businesses in the Italian gas sector |
Strategic partnership with Gazprom - South
Stream Project I Based on agreements between Italy and Russia of May 15, 2009, a new scope of work in the development project of the South Stream pipeline has been defined providing for an increase in the design of transport capacity from an original amount of 31 bcm/y to 63 bcm. Projects in
the Hewett area Financial and
operating results I Eni expects to achieve gas sales of approximately 118 bcm by 2013 with an average annual growth rate higher than 3.2%. I Return on average capital employed (ROACE) on an adjusted basis was 12.3% (12.2% in 2008). I Capital expenditures totaled euro 1,686 million and mainly related to the development and upgrading of Eni’s transport and distribution networks in Italy, the upgrading of storage capacity and ongoing plans for improving power generation efficiency standards. I Electricity volumes sold were 33.96 TWh, increasing by 4.03 TWh, or 13.5%, from 2008. I Natural gas volumes transported on the Italian network were 76.90 bcm, down 10.2% from 2008. |
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| Strategies | ||
| Eni boasts
European leadership in the gas market leveraging on
synergies from its fully integrated presence along the
whole gas value chain: supply, transport, distribution,
storage and marketing of natural gas and power generation
and sale. Its large and diversified gas supply portfolio,
market knowledge, long-term relationships with key
producing countries, and integration with the Exploration
& Production segment represent competitive
advantages. Against the backdrop of an uncertain demand outlook over the next 2-3 years and increasingly strong competitive pressures both on European and Italian markets, Eni intends to maintain the profitability of the business targeting continuing sales growth on European markets. In Italy Eni aims at preserving profitability and market shares. Expected results will be supported by continuously improving efficiency and efficacy of operations and stable returns from regulated businesses. By 2013 Eni intends to increase worldwide gas sales by approximately 14 bcm (from 104 bcm to 118 bcm) leveraging on additional synergies expected from the integration with Distrigas and strengthening both its direct presence and strategic partnerships in selected European markets, particularly in France, Benelux and Germany. We intend to optimize our supply portfolio, including the renegotiation of long-term supply contracts, and improving operating flexibility so as to enhance the competitiveness of Eni’s offer. |
The high
degree of integration with the Exploration &
Production division will enable the Company to achieve
growth options on the gas market and monetize equity gas
reserves. These actions, coupled with tight cost control will allow Eni to face an extremely challenging trading environment that is expected over the next two to three years, in particular in 2010 when the first signs of recovery in gas demand are expected to emerge. Beyond the timeline of our plan, European demand is expected to grow driven by the fundamental trends deriving from the environmental compatibility of natural gas, the depletion of European reserves and economic growth. Thanks to its integrated presence in the natural gas and power chain and contribution from regulated assets, the Gas & Power segment confirmed its ability to provide stable results and registered in 2009 pro-forma adjusted EBITDA of euro 4.4 billion, increasing from 2008 despite an unfavorable market scenario. The strategic guidelines to maintain the business profitability levels in the medium-term are: - To strengthen leadership on European
natural gas markets. |
|
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| Supply It is a free activity
where prices are determined by free negotiations of
demand and supply involving gas resellers and natural gas
producers. Eni’s supply volumes are purchased under
long-term contracts or supplied from equity production.
In the case of power, supplies derive from access to
negotiations on the Power Exchange (in the case of
trading) and from Eni’s power generation activities. Infrastructure In Italy the Authority for Electricity and Gas is granted regulatory powers in matters of natural gas pricing and access to infrastructures (storage, transport and regasification) and in matters of technical quality of services. Sale Eni operates in a liberalized market where energy customers are allowed to choose the supplier of gas and, according to their specific needs, to evaluate the quality of services and offers. With regard to the retail market in Italy, the Authority for Electricity and Gas regulates and defines the tariff system for those customers who have not yet |
chosen their supplier on the
free market, mainly residential customers. The Italian
market includes four segments of customers: large
businesses, the power generation sector, wholesalers and
residential customers. Large businesses and power
generation utilities are directly linked to the national
and the regional natural gas networks. Wholesalers mainly
include local selling companies which resell natural gas
to residential customers through low pressure
distribution networks, and distributors of natural gas
for automotive use. Residential customers include
households (also referred to as the retail market), the
tertiary sector (mainly commercial outlets, hospitals,
schools and local administrations) and small businesses
(also referred to as the middle market) located in large
metropolitan areas and urban centers. Overall Eni supplies approximately 2,500 clients including large businesses, power generation utilities, wholesalers and distributors of natural gas for automotive use. Residential users are 6.88 million and include households, professionals, small and medium sized enterprises, and public bodies located all over Italy. |
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Gas market trends Overview |
- an increase in gas used
for power generation, in particular with reference to the
adoption of the combined cycle technology that has lower
investment costs, higher efficiency and lower emissions
as compared to other technologies based on the use of
fossil fuels. Eni’s long-term projections of European gas demand growth consider a compound average growth rate of 1.5%. These assumptions imply an overall consumption of approximately 600 bcm by 2020. Management also expects the Italian market to grow less than anticipated at an annual rate that will be slightly lower than 2%, implying a level of consumption amounting to 94 bcm at 2020. 1. Marketing 1.1 Natural Gas |
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| Marketing in Italy In 2009, sales volumes in Italy (including own consumption) decreased by 12.83 bcm, down by 24.3%, to 40.04 bcm reflecting sharply lower supplies to power generation utilities (down 8.01 bcm), industrial customers (down 2.01 bcm) and wholesalers (down 1.60 bcm) dragged down by the economic downturn and rising competitive pressures. Volumes sold to the residential sector increased slightly due to effective marketing and higher weather-related sales. In Italy against the backdrop of a weak demand outlook and increased competition, management intends to maintain the Company’s 51%1 market share and preserve profitability by leveraging on a number of marketing initiatives designed to enhance the Company’s gas offer. Planned actions include: - diversifying the commercial offer in terms of combinations of pricing formulae and services designed to better suit to different customers’ needs; |
- increasing capillarity
through wide sale-force presence. In the segment of large customers (power generation, industries and wholesalers) Eni intends to make use of its ability in providing large volumes meeting customers’ specific needs in terms of offering and pricing and flexibility in offtaking volumes also extending to them the dual offer of gas and electricity. In the residential segment, Eni intends to strengthen its leadership through excellent services and retaining and enlarging its portfolio of customers, in particular leveraging on the potential of its dual offer. These actions will be supported by a continuing commitment to reducing the cost to serve, leveraging on innovation, streamlining front-end and back-end processes and achieving economies of scale and synergies, particularly those deriving from integrating marketing of both gas and electricity in the dual offer scheme. |
| (1) | In accordance with Article 19, paragraph 4 of Legislative Decree No. 164/2000 the volumes of natural gas consumed in own operations by a company or its subsidiaries are excluded from calculation of ceilings for sales to end customers and for volumes input into the Italian network to be sold in Italy (50%). In 2009 Eni’s presence on the Italian market complied with the limits set by current laws as it was 48%. |
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| Sales and market shares on the Italian gas market | (bcm) |
2008 |
2009 |
||||||||||
| Volumes sold | Market share (%) | Volumes sold | Market share (%) | % Ch. 2009 vs 2008 | |||||||
| Italy to third parties | 47.24 | 55.7 | 34.23 | 43.8 | (27.5 | ) | |||||
| Wholesalers | 7.52 | 5.92 | (21.3 | ) | |||||||
| Gas release | 3.28 | 1.30 | (60.4 | ) | |||||||
| Gas Exchange and spot markets | 1.89 | 2.37 | 25.4 | ||||||||
| Industries | 9.59 | 7.58 | (21.0 | ) | |||||||
| Medium-sized enterprises and services | 1.05 | 1.08 | 2.9 | ||||||||
| Power generation | 17.69 | 9.68 | (45.3 | ) | |||||||
| Residential | 6.22 | 6.30 | 1.3 | ||||||||
| Own consumption | 5.63 | 5.81 | 3.2 | ||||||||
| TOTAL SALES IN ITALY | 52.87 | 62.3 | 40.04 | 51.2 | (24.3 | ) | |||||
| Gas demand (a) | 84.88 | 78.13 | (8.0 | ) | |||||||
| (a) | Source: Ministry of Economic Development. |
| Marketing in the rest of
Europe In spite of a challenging environment due to a weak demand outlook and strong competitive pressures, management intends to maintain the profitability of the gas business by strengthening its European leadership. Planned actions are targeted to expand sales volumes and revenues in the European markets where the Company’s presence is well established and market opportunities are being created. Those markets will include France, Germany, the Benelux countries and continental hubs in Northern Europe. In 2009 sales on European markets were 44.97 bcm (47 bcm when including E&P sales), up 41.5%, mainly due to the contribution of Distrigas and increases achieved in France and in Northern Europe. Eni intends to develop its market |
share in Europe (including E&P sales in Europe and excluding sales in Italy and sales to importers in Italy). Management plans to achieve sales volumes in Europe of approximately 59 bcm by 2013, with an annual growth rate of 6% from 2009 when sales in European markets amounted to 47 bcm. The drivers of this growth are expected to be integration with Distrigas activities, competitive advantages ensured by gas availability under long-term supply contracts and equity gas, including benefits associated with contract re-negotiations, access to infrastructures, long-term relationships with key producing countries (mainly Russia, Algeria and Libya), market knowledge, a widespread commercial sale force and a diversified portfolio of clients. |
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| Gas sales by market | (bcm) |
2005 |
2006 |
2007 |
2008 |
2009 |
| ITALY | 58.08 | 57.09 | 56.13 | 52.87 | 40.04 | |||||||
| Wholesalers | 12.05 | 11.54 | 10.01 | 7.52 | 5.92 | |||||||
| Gas release | 1.95 | 2.00 | 2.37 | 3.28 | 1.30 | |||||||
| Italian gas exchange and spot markets | 1.90 | 1.89 | 2.37 | |||||||||
| Industries | 13.07 | 13.33 | 11.77 | 9.59 | 7.58 | |||||||
| Medium-sized enterprises and services | 1.00 | 1.00 | 1.00 | 1.05 | 1.08 | |||||||
| Power generation | 17.60 | 16.67 | 17.21 | 17.69 | 9.68 | |||||||
| Residential | 6.87 | 6.42 | 5.79 | 6.22 | 6.30 | |||||||
| Own consumption | 5.54 | 6.13 | 6.08 | 5.63 | 5.81 | |||||||
| INTERNATIONAL SALES | 36.13 | 41.01 | 42.83 | 51.36 | 63.68 | |||||||
| Rest of Europe | 29.91 | 34.81 | 35.02 | 43.03 | 55.45 | |||||||
| Importers in Italy | 11.53 | 14.10 | 10.67 | 11.25 | 10.48 | |||||||
| European markets | 18.38 | 20.71 | 24.35 | 31.78 | 44.97 | |||||||
| Iberian Peninsula | 4.59 | 5.24 | 6.91 | 7.44 | 6.81 | |||||||
| Germany-Austria | 4.23 | 4.72 | 5.03 | 5.29 | 5.36 | |||||||
| Belgium | 4.57 | 14.86 | ||||||||||
| Hungary | 3.39 | 3.10 | 2.74 | 2.82 | 2.58 | |||||||
| Northern Europe | 2.93 | 2.62 | 3.15 | 3.21 | 4.31 | |||||||
| Turkey | 2.46 | 3.68 | 4.62 | 4.93 | 4.79 | |||||||
| France | 0.15 | 1.07 | 1.62 | 2.66 | 4.91 | |||||||
| Other | 0.63 | 0.28 | 0.28 | 0.86 | 1.35 | |||||||
| Outside Europe | 1.71 | 1.51 | 2.42 | 2.33 | 2.06 | |||||||
| E&P in Europe and in the Gulf of Mexico | 4.51 | 4.69 | 5.39 | 6.00 | 6.17 | |||||||
| WORLDWIDE GAS SALES | 94.21 | 98.10 | 98.96 | 104.23 | 103.72 |
Follows a description of Eni’s presence in main European markets.
| Benelux The acquisition of Distrigas completed in the first half of 2009 represents a strategic achievement for Eni. Distrigas is a key operator in Benelux, in particular in Belgium, the strategic hub of the continental European gas market thanks to its central position and high level of interconnectivity with the gas transit networks of Central and Northern Europe. The |
company currently operates in Belgium, Luxembourg, France, the Netherlands and Germany selling natural gas mainly to industries, wholesalers and power generation utilities. Distrigas also has diversified sources of supply, which are ensured by long-term supply contracts from the Netherlands, Norway and Qatar, spot supplies mainly made at the Zeebrugge hub on the Belgian coast, access to capacity via pipeline transport and |
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| LNG operations. It also owns
an 11% interest in Interconnector UK Ltd, the company
that owns the interconnection of the gas transit networks
between Belgium and the UK. In 2009 Distrigas natural gas sales in Benelux amounted to approximately 15.72 bcm. Over the medium-term Eni plans to achieve further synergies by integrating Distrigas operations targeting both revenue opportunities and cost efficiencies by: - optimizing the supply portfolio of long-term contracts by integrating gas flows and relevant arbitration activities; - unitizing logistics operations so as to achieve cost efficiencies deriving from a joint use of transport capacity; - integrating trading activities in Italy and abroad; - pursuing gas marketing opportunities on continental spot markets (Zeehub, NBP, TTF), exploiting Distrigas consolidated presence and transport capacity; - reallocating Eni’s sales portfolio in target countries shifting volumes to more profitable markets and segments: in particular in France the commercial strategy will target acquisition and retention of final customers focusing on the medium-large industrial segment leveraging on Distrigas consolidated presence in this segment; in Benelux the growth of Distrigas sales will focus mainly on the Netherlands (a market worth about 40 bcm); - reducing marketing costs by integrating local commercial units in France and Germany. France Germany/Austria |
Iberian Peninsula Portugal Eni operates on the Portuguese market through its affiliate Galp Energia (Eni’s interest 33.34%) which sold approximately 4.34 bcm in 2009 (1.45 bcm being Eni’s share). Spain Eni operates in the Spanish gas market through a direct marketing structure that markets its portfolio of LNG and Unión Fenosa Gas (UFG) (Eni’s interest 50%) which mainly supplies natural gas to industrial clients, wholesalers and power generation utilities. In 2009 UFG gas sales in Europe amounted to 4.68 bcm (2.34 bcm Eni’s share). UFG holds an 80% interest in the Damietta liquefaction plant, on the Egyptian coast (see below), and a 7.36% interest in a liquefaction plant in Oman. In addition, it holds interests in the Sagunto (Valencia) and El Ferrol (Galicia) regasification plants (42.5% and 18.9%, respectively). In 2009 Eni sales in Spain amounted to 5.36 bcm representing a slight decline from a year ago. Turkey UK/Northern Europe Projects in the Hewett area 1.2 LNG |
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| interests in joint-ventures
and affiliates. Eni’s presence in the business is
tied to the Company’s plans to develop its large gas
reserve base in Africa. The LNG business has been deeply
impacted by the economic downturn of 2009 and structural
modifications in the US market where large availability
of gas from non traditional sources promise to reduce in
perspective the Country’s dependence from gas
imports via LNG Eni’s main assets in LNG are: Italy Qatar Egypt Spain USA |
LNG, relating to the farming
out of a share of its regasification capacity. The new
agreement provides that Eni will be entitled to a daily
send-out of 572,000 mmbtu (approximately 5.7 bcm/y) and a
dedicated storage capacity of 160 kcm, giving Eni more
flexibility in managing seasonal swings in gas demand. Taking into account current conditions of oversupply on the US gas market, Eni rescheduled the Brass project (West Africa) for developing gas reserves to fuel the Cameron plant. The start-up is now expected in 2015. Pascagoula 1.3 Power generation
|
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 |
the recently acquired
Bolgiano plant. In 2009, power generation was 24.09 TWh, up 0.76 TWh, or 3.3% from 2008, due mainly to higher production at the Ferrara plant (Eni’s interest 51%), in connection with the coming on line of two new 390 megawatt combined cycle units. At December 31, 2009, installed capacity was 5.3 GW (4.9 GW in 2008). Power availability in 2009 was supported by the growth in electricity trading activity (up 3.27 TWh from 2008, or 49.5%) as a consequence of higher volumes traded on the Italian power exchange benefiting from lower purchase prices. By 2013 Eni intends to complete its plan for expanding its power generation capacity, targeting an installed capacity of 5.4 GW2. Residual expected capital expenditure amounts to euro 0.7 billion in addition to the euro 2.4 billion already invested until 2009. Development plans are underway at Taranto (Eni 100%) and Ferrara (Eni 51%), as well as at the recently acquired Bolgiano plant (Eni 100%). This expansion will allow Eni to consolidate its market share and its position as third power producer in Italy. At full capacity in 2013, production is expected to amount to approximately 26 TWh, corresponding to approximately 8% of power expected to be generated in Italy at that date. When fully operational, natural gas supplied will amount to 5.3 bcm/y from Eni’s supply portfolio. |
| (2) | Capacity available after completion of dismantling of obsolete plants. |
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| 2. International transport and
regulated businesses in Italy Overview |
Algeria, the North Sea and
Libya). In Italy through Snam Rete Gas and its subsidiaries Eni operates almost all the lines which form the national transport network, gas underground storage deposits and related facilities, a re-gasification plant in Panigaglia and can count on an extended system of local distribution networks. |
| 2.1 International Transport Eni owns capacity entitlements in an extensive network of international high pressure pipelines for a total length of approximately 4,400 kilometers enabling the Company to import natural gas produced in Russia, Algeria, the North Sea and Libya to Italy. - The TAG pipeline, 1,140-kilometer long, made up of three lines, each about 380-kilometer long, with a transport capacity of 37.4 bcm/y, and five compression stations. This pipeline transports Russian natural gas from Baumgarten, the delivery point at the border of Austria and Slovakia, to Tarvisio, point of entry in the Italian natural gas transport system. In 2009 the upgrading of this facility was finalized by completing construction of two new compression stations that increased transport capacity by 6.5 bcm/y. The whole new capacity has been entirely awarded to third parties. - The TTPC pipeline, 740-kilometer long, made up of two lines each 370-kilometer long with a transport capacity of 33.5 bcm/y and five compression stations. This pipeline transports natural gas from Algeria across Tunisia from Oued Saf Saf at the Algerian border to Cap Bon on the Mediterranean coast where it links with the TMPC pipeline. The pipeline was recently upgraded by increasing compression capacity so as to enable transportation of additional 6.5 bcm/y. The upgrade was finalized in 2008 and came fully on line in the course of 2009. The whole |
new capacity has been
entirely awarded to third parties. - The TMPC pipeline for the import of Algerian gas, 775-kilometer long, made up of five lines each 155-kilometer long with a transport capacity of 33.5 bcm/y. It crosses underwater the Sicily Channel from Cap Bon to Mazara del Vallo in Sicily, the point of entry into the Italian natural gas transport system. In 2009, the operation of the TMPC gas pipeline was fully restored. One of the five lines of the import pipeline from Algeria was damaged by an oil tanker anchor crossing the Sicily channel on December 19, 2008. - The TENP pipeline, 1,000-kilometer long (two 500-kilometer long lines) with transport capacity of 15.5 bcm/y and four compression stations. It transports natural gas through Germany, from the German-Dutch border of Bocholtz to Wallbach at the German-Swiss border. - The Transitgas pipeline, 290-kilometer long, with one compression station, that transports natural gas crossing Switzerland with its 165-kilometer long main line and a 70-kilometer long doubling line, from Wallbach where it joins the TENP pipeline to Passo Gries at the Italian border. It has a transit capacity of 20 bcm/y. A new 55-kilometer long line from Oltingue/Rodersdorf at the French-Swiss border to Lostorf, an interconnection point with the line coming from Wallbach, was built for the transport of Norwegian gas. - The GreenStream pipeline that started operations in October 2004 for the import of Libyan gas produced in |
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| Eni operated fields at Bahr
Essalam and Wafa. It is 520-kilometer long with a
transport capacity of 8 bcm/y and crosses underwater the
Mediterranean Sea from Mellitah on the Libyan coast to
Gela in Sicily, the point of entry into the Italian
natural gas transport system. In 2009 the pipeline was
upgraded by 3 bcm/y, which are expected to come fully on
stream in 2010, bringing total capacity to 11 bcm/y. This
new capacity will support Eni’s planned ramp-up of
equity gas production in Libya, part of the Western
Libyan Gas Project. Eni holds a 50% interest in the Blue Stream underwater pipeline (water depth greater than 2,150 meters) linking the Russian coast to the Turkish coast of the Black Sea. This pipeline is 774-kilometer long on two lines and has transport capacity of 16 bcm/y. On February 4, 2010, Eni formally filed a set of structural remedies relating certain international gas pipelines with the European Commission. With prior agreement from its partners, Eni committed to dispose of its interests in the German TENP, the Swiss Transitgas and the Austrian TAG gas pipelines. The European Commission intends to submit these |
remedies to a market test.
In case the Commission approves those remedies upon
conclusion of the market test, Eni will be in the
position to settle the above mentioned antitrust
proceeding without imposition of any fine or other
measures. In light of the strategic importance of the
Austrian TAG pipeline to the supply of the Italian
system, which transports gas from Russia to Italy, Eni
negotiated a solution with the Commission which called
for the transfer of its stake to an entity controlled by
the Italian State. If they are implemented, the remedies
negotiated with the Commission will not affect Eni’s
contractual gas transport rights. 2.2 Regulated businesses in Italy |
| Italian Transport
Activity Under Legislative Decree No. 164/2000 concerning the opening up of the natural gas market in Italy, transport and regasification activities are regulated by the Authority for Electricity and Gas |
which determines the methods for calculating tariffs and fixing the return on capital employed. This makes transport a low risk business capable of delivering stable returns. |
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| Major pricing elements for regulated activities |
| TRANSPORT | REGASIFICATION | DISTRIBUTION | STORAGE | |
| Calculation of net invested capital recognized for regulatory purpose (RAB) | - Re-valued historical cost | - Re-valued historical cost | - Re-valued
historical cost - Parametric method for centralized revenues |
- Re-valued historical cost |
| Remuneration of net investment capital recognized for regulatory purposes (WACC pre-tax) | - 6.7% | - 7.6% | - 7.6% (distribution) - 8% (metering) |
- 7.1% |
| INCENTIVES of new investments | - 1% for 5
years (on investments in security) - 2% for 7/10 years (on investments in capacity development) - 3% for 10/15 years (on investments in entry capacity development) |
- 2% for 8
years (on upgrading existing terminals less than 30%) - 3% for 16 years (on upgrading existing terminals more than 30%) |
- 2% for 8 years (on substitutions of cast-iron pipes and renewal of odorization systems) | - 4% for 8
years (on upgrading existing capacities) - 4% for 16 years (on development of new storage sites) |
| Efficiency factor (X FACTOR) |
- 2% on operating costs - 2% on amortization and depreciation - 3.5% on commodity components |
- 0.5% on operating costs | - 3.2% on distribution operating costs - 3.6% on metering operating costs |
- 2% on operating costs - 1.5% on amortization and depreciation |
| Snam Rete Gas is the leading Italian operator in transport and dispatching of natural gas in Italy, as it manages nearly all transport infrastructures in Italy, with over 31,500 kilometers | of high and medium pressure trunk-lines (approximately 94% of the whole transport system). |
| Transport capacity in Italy | (mmcm/d) |
2008-2009 Thermal year | 2009-2010 Thermal year |
| Entry points | Available capacity | Awarded capacity | Saturation (%) |
Available capacity | Awarded capacity | Saturation (%) |
| Tarvisio | 106.0 | 97.8 | 92.2 | 119.7 | 102.8 | 85.9 | ||||||
| Mazara del Vallo | 101.8 | 93.2 | 91.6 | 103.6 | 98.7 | 95.3 | ||||||
| Passo Gries | 64.9 | 60.8 | 93.7 | 64.9 | 59.0 | 90.9 | ||||||
| Gela | 30.5 | 30.5 | 100.0 | 33.0 | 32.9 | 99.7 | ||||||
| Cavarzere (LNG) | 26.4 | 21.0 | 79.5 | |||||||||
| Panigaglia (LNG) | 13.0 | 11.4 | 87.7 | 13.0 | 7.2 | 55.4 | ||||||
| Gorizia | 4.8 | 4.8 | ||||||||||
| 321.0 | 293.7 | 91.5 | 365.4 | 321.6 | 88.0 |
| Eni’s network
comprises: - a national transport network extending over 8,871 kilometers, made up of high pressure trunk-lines mainly with a large diameter, which carry natural gas from the entry points to the system – import lines, storage sites and main Italian natural gas fields – to the linking points with regional transport network Gaslines can be laid underground, with maximum diameter of 1,400 mm carrying gas at a pressure between 24 and 75 bar, or underwater crossing the Messina strait, with diameter between 500 and 650 mm and pressure up to 115 bar. In 2009 the national gasline network increased by 92 kilometers with the construction of pipelines from Montalbano to Messina, Rende to Tarsia, Gagliano to Sparacollo and for upgrades of existing structures. Natural gas coming from outside Italy is input in the national grid at 7 entry points, corresponding to the interconnections with import pipelines (Tarvisio, Gorizia, Passo Gries, Mazara del Vallo, Gela) and LNG regasification |
terminals (Panigaglia and
Cavarzere). Storage fields are connected to the transport
network at 2 virtual entry/exit points to the storage
hubs. Natural gas leaving the national grid is carried on
the regional network to the delivery points where it is
offtaken by customers; - a regional transport network extending over 22,660 kilometers, made up of smaller lines and allowing the transport of natural gas to large industrial complexes, power stations and local distribution companies in the various local areas served. The major pipelines interconnected with import trunklines that are part of Eni’s national network are: for natural gas imported from Algeria (Mazara del Vallo delivery point): - two lines with a 48/42-inch diameter, each approximately 1,500-kilometer long, including the smaller pipes that cross underwater the Messina Strait, connect Mazara del Vallo on the Southern coast of Sicily where they link with the TMPC pipeline carrying Algerian gas, to Minerbio (near |
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| Bologna). This pipeline is
undergoing an upgrade with the laying of a third line
with a 48-inch diameter 583-kilometer long (of these 505
are already operating). At the Mazara del Vallo entry
point the available transport capacity, which is measured
at the beginning of each thermal year starting on October
1, is approximately 104 mmcm/d; for natural gas imported from Libya (Gela delivery point): - a 36-inch line, 67-kilometer long linking Gela, the entry point of the GreenStream underwater pipeline, to the national network near Enna along the trunkline transporting gas coming from Algeria. Transport capacity at the Gela entry point is approximately 33 mmcm/d; for natural gas imported from Russia (Tarvisio and Gorizia delivery points): - two lines with 42/36/34-inch diameters extending for a total length of approximately 900 kilometers connect the Austrian network at Tarvisio. This facility crosses the Po Valley reaching Sergnano (near Cremona) and Minerbio. This pipeline has been upgraded by the laying of a third 264-kilometer long line with diameter from 48 to 56 inches. The pipeline transport capacity at the Tarvisio entry point amounts to approximately 120 mmcm/d plus the transport capacity available at the Gorizia entry point of approximately 5 mmcm/d; for natural gas imported from the Netherlands and Norway (Passo Gries delivery point): - one line, with a 48-inch diameter, 177-kilometer long extends from the Italian border at Passo Gries (Verbania), to the node of Mortara, in the Po Valley. The pipeline transport capacity at the Passo Gries entry point amounts to 65 mmcm/d; for natural gas coming from the Panigaglia LNG terminal: - one line, with a 30-inch diameter, 170-kilometer long links the Panigaglia terminal to the national transport network near Parma. The pipeline transport capacity at the Panigaglia entry point amounts to 13 mmcm/d; for natural gas coming from the Rovigo Adriatic LNG terminal: - a 36 inch connection at the Minerbio junction with the Cavarzere-Minerbio pipeline belonging to Edison Stoccaggio SpA, which receives gas from the LNG terminal located offshore of Porto Viro. The pipeline transport capacity at the Cavarzere entry point amounts to 26 mmcm/d. Eni’s system is completed by: (i) eleven
compressor stations with a total power of 830 MW used to
increase gas pressure in pipelines to the level required
for its flow; and (ii) four marine terminals linking
underwater pipelines with the on-land network at Mazara
del Vallo and Messina in Sicily and Favazzina and Palmi
in Calabria. |
the connection of pipes
working at different pressures. Snam Rete Gas also provides dispatching services through a central operating plant that monitors and controls the operations of he transport network, receiving data from approximately 3,000 plant, of which over 1,500 are remotely controlled and are located all over Italy. Distribution activity Storage activity |
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| - wells; - linkage facilities; - compression stations; - treatment plants. Storage fields contain cushion gas and working gas. Cushion gas is the amount of gas necessary for the field’s operation and is the minimum indispensable volume present or injected in the field at the beginning of storage, that needs to be always present in the field. Working gas is the volume of gas produced and injected cyclically during the year. Storage activity consists of two separate phases: - injection of gas underground; - offtake of previously injected gas. Injection of gas in the fields, through storage wells, usually taking place between April and October, is achieved through compression plants that increase the pressure of gas taken from the national distribution network. Gas offtake, usually |
taking place between
November and the following March, is achieved through
treatment plants required to bring gas back to the
marketing specifications. In 2009, 8.71 bcm of gas were supplied (up 3.44 bcm from 2008) while 7.81 bcm were input to the Company’s storage deposits, an increase of 1.51 bcm compared to 2008. In 2009 storage capacity amounted to 13.9 bcm, of which 5 were destined to strategic storage. The share of storage capacity used by third parties was 70% (61% in 2008). Through Stogit, Eni is the leading Italian operator and one of the major operators in Europe. The development of storage projects aimed at increasing capacity, represents on of the core elements for Eni’s business as it allows to increase the security of supplies and introduce greater flexibility in meeting demand in peak periods, contributing to the optimization of Eni’s gas supply portfolio. |
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| Supply of natural gas | (bcm) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 10.73 | 10.21 | 8.65 | 8.00 | 6.86 | ||||||||||||
| Outside Italy | |||||||||||||||||
| Russia | 23.50 | 24.98 | 23.44 | 22.91 | 22.02 | ||||||||||||
| Algeria (including LNG) | 21.03 | 20.42 | 18.41 | 19.22 | 13.82 | ||||||||||||
| Libya | 4.61 | 7.70 | 9.24 | 9.87 | 9.14 | ||||||||||||
| Netherlands | 8.29 | 10.28 | 7.74 | 9.83 | 11.73 | ||||||||||||
| Norway | 5.78 | 5.92 | 5.78 | 6.97 | 12.65 | ||||||||||||
| United Kingdom | 2.28 | 2.50 | 3.15 | 3.12 | 3.06 | ||||||||||||
| Hungary | 3.63 | 3.28 | 2.87 | 2.84 | 0.63 | ||||||||||||
| Qatar (LNG) | 0.71 | 2.91 | |||||||||||||||
| Other supplies of natural gas | 2.02 | 2.41 | 2.20 | 4.07 | 4.49 | ||||||||||||
| Other supplies of LNG | 0.69 | 1.57 | 2.32 | 2.11 | 1.34 | ||||||||||||
| 71.83 | 79.06 | 75.15 | 81.65 | 81.79 | |||||||||||||
| Total supplies of Eni’s own companies | 82.56 | 89.27 | 83.80 | 89.65 | 88.65 | ||||||||||||
| Offtake from (input to) storage | 0.84 | (3.01 | ) | 1.49 | (0.08 | ) | 1.25 | ||||||||||
| Network losses, measurement differences and other changes | (0.78 | ) | (0.50 | ) | (0.46 | ) | (0.25 | ) | (0.30 | ) | |||||||
| Available for sale by Eni’s consolidated subsidiaries | 82.62 | 85.76 | 84.83 | 89.32 | 89.60 | ||||||||||||
| Available for sale of Eni’s affiliates | 7.08 | 7.65 | 8.74 | 8.91 | 7.95 | ||||||||||||
| E&P volumes | 4.51 | 4.69 | 5.39 | 6.00 | 6.17 | ||||||||||||
| Gas volumes available for sale | 94.21 | 98.10 | 98.96 | 104.23 | 103.72 |
| Gas sales by entity | (bcm) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Sales of consolidated companies | 82.62 | 85.76 | 84.83 | 89.32 | 89.60 | |||||||
| Italy (including own consumption) | 58.01 | 57.07 | 56.08 | 52.82 | 40.04 | |||||||
| Rest of Europe | 23.44 | 27.93 | 27.86 | 35.61 | 48.65 | |||||||
| Outside Europe | 1.17 | 0.76 | 0.89 | 0.89 | 0.91 | |||||||
| Sales of Eni’s affiliates (net to Eni) | 7.08 | 7.65 | 8.74 | 8.91 | 7.95 | |||||||
| Italy | 0.07 | 0.02 | 0.05 | 0.05 | - | |||||||
| Rest of Europe | 6.47 | 6.88 | 7.16 | 7.42 | 6.8 | |||||||
| Outside Europe | 0.54 | 0.75 | 1.53 | 1.44 | 1.15 | |||||||
| E&P in Europe and in the Gulf of Mexico | 4.51 | 4.69 | 5.39 | 6.00 | 6.17 | |||||||
| Worldwide gas sales | 94.21 | 98.10 | 98.96 | 104.23 | 103.72 |
| LNG sales | (bcm) |
|
2006 |
2007 |
2008 |
2009 |
| G&P sales | 6.4 | 8.0 | 8.4 | 9.8 | ||||||||
| Italy | 1.5 | 1.2 | 0.3 | 0.1 | ||||||||
| Rest of Europe | 4.4 | 5.6 | 7.0 | 8.9 | ||||||||
| Extra European markets | 0.5 | 1.2 | 1.1 | 0.8 | ||||||||
| E&P sales | 3.5 | 3.7 | 3.6 | 3.1 | ||||||||
| Liquefaction plants: | ||||||||||||
| - Bontang (Indonesia) | 0.9 | 0.7 | 0.7 | 0.8 | ||||||||
| - Point Fortin (Trinidad & Tobago) | 0.4 | 0.6 | 0.5 | 0.5 | ||||||||
| - Bonny (Nigeria) | 1.8 | 2.0 | 2.0 | 1.4 | ||||||||
| - Darwin (Australia) | 0.4 | 0.4 | 0.4 | 0.4 | ||||||||
| 9.9 | 11.7 | 12.0 | 12.9 |
| Electricity sales | (TWh) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Free market | 14.76 | 16.22 | 20.73 | 22.89 | 24.74 | |||||||
| Italian power exchange | 7.74 | 9.67 | 8.66 | 3.82 | 4.70 | |||||||
| Industrial plants | 2.71 | 2.70 | 2.81 | 2.71 | 2.92 | |||||||
| Other (a) | 2.35 | 2.44 | 0.99 | 0.51 | 1.60 | |||||||
| Electricity sales | 27.56 | 31.03 | 33.19 | 29.93 | 33.96 | |||||||
| Power generation | 22.77 | 24.82 | 25.49 | 23.33 | 24.09 | |||||||
| Trading of electricity (a) | 4.79 | 6.21 | 7.70 | 6.60 | 9.87 |
| (a) | Include positive and negative unbalancings. |
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| EniPower power stations | Installed capacity in 2009 (a) | Full installed capacity (2013) (b) | Effective/planned start up | Fuel |
| Power stations | (GW) | (GW) | ||||||
| Brindisi | 1.3 | 1.4 | 2006 | gas | ||||
| Ferrera Erbognone | 1.0 | 1.0 | 2004 | gas/syngas | ||||
| Livorno | 0.2 | 0.2 | 2000 | gas | ||||
| Mantova | 0.9 | 0.8 | 2005 | gas | ||||
| Ravenna | 1.0 | 1.0 | 2004 | gas | ||||
| Taranto | 0.1 | 0.1 | 2014 | gas | ||||
| Ferrara | 0.8 | 0.8 | 2008 | gas | ||||
| Bolgiano (c) | 0.1 | 2012 | gas | |||||
| 5.3 | 5.4 |
| (a) | Installed and operational generation capacity. | |
| (b) | Capacity available after completion of dismantling of obsolete plants. | |
| (c) | Acquired in January 2010. | |
| Power generation | 2005 |
2006 |
2007 |
2008 |
2009 |
| Purchases | ||||||||||||
| Natural gas | (mmcm) | 4,384 | 4,775 | 4,860 | 4,530 | 4,790 | ||||||
| Other fuels | (ktoe) | 563 | 616 | 720 | 560 | 569 | ||||||
| - of which steam from cracking | 96 | 136 | 137 | 131 | 82 | |||||||
| Production | ||||||||||||
| Power generation | (TWh) | 22.77 | 24.82 | 25.49 | 23.33 | 24.09 | ||||||
| Steam | (ktonnes) | 10,660 | 10,287 | 10,849 | 10,584 | 10,048 | ||||||
| Installed generation capacity | (GW) | 4.5 | 4.9 | 4.9 | 4.9 | 5.3 |
| Gas volumes transported in Italy (a) | (bcm) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Eni | 54.88 | 57.09 | 52.39 | 51.80 | 39.63 | |||||||
| On behalf of third parties | 30.22 | 30.90 | 30.89 | 33.84 | 37.27 | |||||||
| 85.10 | 87.99 | 83.28 | 85.64 | 76.90 |
| (a) | Include amounts destined to domestic storage. |
| Regasified gas volumes | (bcm) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Eni | 0.73 | 1.50 | 1.11 | 0.29 | 0.10 | |||||||
| On behalf of third parties | 1.76 | 1.63 | 1.27 | 1.23 | 1.22 | |||||||
| 2.49 | 3.13 | 2.38 | 1.52 | 1.32 |
| Transport infrastructure |
| Route | Lines |
Length |
Diameter |
Transport
capacity (a) |
Pressure
min-max |
Compression
stations |
| ITALY | ||||||||||||
| Mazara del Vallo-Minerbio (under upgrading) | 2/3 | 1,480 | 48/42 - 48 | 103.6 | 75 | 7 | ||||||
| Tarvisio-Sergnano-Minerbio | 3 | 433 | 42/36, 34 and 48/56 | 119.7 | 58/75 | 3 | ||||||
| Passo Gries-Mortara | 1/2 | 177 | 48/34 | 64.9 | 55/75 | 1 | ||||||
| OUTSIDE ITALY | Lines |
Total
length |
Diameter |
Transport
capacity (b) |
Transit |
Compression
stations |
||||||
| TENP (Bocholtz-Wallbach) | 2 lines of km 500 | 1,000 | 36/38/40 | 22.9 | 15.5 | 4 | ||||||
| Transitgas (Rodersdorf-Lostorf) | 3 lines of km 165, 71 and 55 | 291 | 36/48 | 24.9 | 19.9 | 1 | ||||||
| TAG (Baumgarten-Tarvisio) | 3 lines of km 380 | 1,140 | 36/38/40/42 | 45.2 | 37.4 | 5 | ||||||
| TTPC (Oued Saf Saf-Cap Bon) | 2 lines of km 370 | 740 | 48 | 34.0 | 33.2 | 5 | ||||||
| TMPC (Cap Bon-Mazara del Vallo) | 5 lines of km 155 | 775 | 20/26 | 33.2 | 33.2 | |||||||
| GreenStream (Mellitah-Gela) | 1 line of km 520 | 520 | 32 | 8.0 | 8.0 | 1 | ||||||
| Blue Stream (Beregovaya-Samsun) | 2 lines of km 387 | 774 | 24 | 16.0 | 16.0 | 1 |
| (a) | Transport capacity refers to the capacity at the entry point connected to the import pipelines. | |
| (b) | Include both transit capacity and volumes of natural gas destined to local markets and offtaken at various points along the pipeline. | |
| (c) | Maximum volume of natural gas input at various entry points along the pipeline and transported to the next pipeline. |
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| Distribution Italy | 2005 |
2006 |
2007 |
2008 |
2009 |
| Volumes distributed | (bcm) | 8.65 | 7.54 | 7.44 | 7.63 | 7.73 | ||||||
| to Eni | 8.13 | 6.33 | 5.66 | 6.33 | 6.26 | |||||||
| to third parties | 0.52 | 1.41 | 1.78 | 1.30 | 1.47 | |||||||
| Installed network | (km) | 48,146 | 48,724 | 48,746 | 49,410 | 49,973 | ||||||
| Active meters | (contracts) | 5,838,085 | 5,550,700 | 5,598,677 | 5,676,105 | 5,770,672 | ||||||
| Municipalities served | (units) | 1,282 | 1,315 | 1,318 | 1,320 | 1,322 |
| Storage | 2005 |
2006 |
2007 |
2008 |
2009 |
| Total storage capacity: | (bcm) | 12.6 | 13.5 | 13.6 | 13.7 | 13.9 | ||||||
| - of which strategic storage | 5.1 | 5.1 | 5.1 | 5.1 | 5.0 | |||||||
| - of which available storage | 7.5 | 8.4 | 8.5 | 8.6 | 8.9 | |||||||
| Available capacity: | (%) | |||||||||||
| - share utilized by Eni | 44 | 54 | 44 | 39 | 30 | |||||||
| - share utilized by third parties | 56 | 46 | 56 | 61 | 70 | |||||||
| Total offtake from (input to) storage | (bcm) | 18.27 | 16.40 | 9.27 | 11.57 | 16.52 | ||||||
| - input to storage | 8.55 | 9.91 | 4.00 | 6.30 | 7.81 | |||||||
| - offtake from storage | 9.72 | 6.49 | 5.27 | 5.27 | 8.71 | |||||||
| Total customers | (No.) | 35 | 38 | 44 | 48 | 56 |
| Capital expenditures | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 1,099 | 1,054 | 1,219 | 1,750 | 1,564 | |||||||
| Outside Italy | 86 | 160 | 292 | 308 | 122 | |||||||
| 1,185 | 1,214 | 1,511 | 2,058 | 1,686 | ||||||||
| Market | 279 | 292 | 238 | 198 | 175 | |||||||
| Market | 40 | 63 | 63 | 91 | 102 | |||||||
| Italy | 2 | 13 | 16 | 12 | ||||||||
| Outside Italy | 38 | 63 | 50 | 75 | 90 | |||||||
| Power generation | 239 | 229 | 175 | 107 | 73 | |||||||
| Regulated businesses in Italy | 858 | 825 | 1,031 | 1,627 | 1,479 | |||||||
| Transport | 643 | 627 | 691 | 1,130 | 919 | |||||||
| Distribution | 182 | 158 | 195 | 233 | 278 | |||||||
| Storage | 33 | 40 | 145 | 264 | 282 | |||||||
| International transport | 48 | 97 | 242 | 233 | 32 | |||||||
| 1,185 | 1,214 | 1,511 | 2,058 | 1,686 |
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| Key performance indicators | 2005 | 2006 | 2007 | 2008 | 2009 |
| Net sales from operations (a) (b) | (euro million) | 33,696 | 38,176 | 36,349 | 45,017 | 31,769 | ||||||||
| Operating profit | 1,852 | 324 | 686 | (988 | ) | (102 | ) | |||||||
| Adjusted operating profit | 1,210 | 794 | 292 | 580 | (357 | ) | ||||||||
| Adjusted net profit | 943 | 631 | 294 | 521 | (197 | ) | ||||||||
| Capital expenditures | 656 | 645 | 979 | 965 | 635 | |||||||||
| Adjusted capital employed, net at year end | 5,326 | 5,766 | 7,149 | 8,260 | 7,560 | |||||||||
| Adjusted ROACE | (%) | 18.1 | 10.7 | 4.6 | 6.5 | (2.6 | ) | |||||||
| Refinery throughputs on own account | (mmtonnes) | 38.79 | 38.04 | 37.15 | 35.84 | 34.55 | ||||||||
| Refinery conversion index | (%) | 56 | 57 | 56 | 58 | 60 | ||||||||
| Balanced capacity of refineries | (kbbl/d) | 701 | 711 | 748 | 737 | 747 | ||||||||
| Retail sales in Europe (c) | (mmtonnes) | 12.42 | 12.48 | 12.65 | 12.03 | 12.02 | ||||||||
| Agip branded service stations in Europe at period end (c) | (units) | 6,282 | 6,294 | 6,440 | 5,956 | 5,986 | ||||||||
| Average throughput per service stations in Europe | (kliters) | 2,479 | 2,470 | 2,486 | 2,502 | 2,477 | ||||||||
| Employees at year end | (units) | 8,894 | 9,437 | 9,428 | 8,327 | 8,166 |
| (a) | From January 1, 2009 Eni adopted IFRIC 13 "Customer Loyalty Programmes" that requires that the award points granted to clients within the related loyalty programmes be accounted as a separate component of the basic transaction, evaluated at their fair value and recognized as revenues when effectively used. Prior period results have been restated accordingly. | |
| (b) | Before elimination of intragroup sales. | |
| (c) | 2005-2007 data include downstream activities in the Iberian Peninsula divested to Galp in October 2008. |
| 2009 Highlights Portfolio development I On January 21, 2010 Eni signed an agreement for the acquisition of downstream activities in Austria, including a retail network of 135 service stations, wholesale activities (with 36 additional Esso branded retail service stations) as well as commercial assets in the aviation business and related logistic and storage activities. The finalization of the transaction is subject to the approval of the relevant antitrust authorities. |
Re-branding of downstream oil activities I The upgrading process of Eni’s retail network of service stations continued aimed at improving service and quality standards. In 2010 the re-branding to the "eni" brand of all downstream activities was launched. Financial and operating
results |
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| margins as a result of an
unfavorable trading scenario, as well as decreased
earnings reported by equity-accounted subsidiaries. I Return on average capital employed on an adjusted basis was a negative 2.6% declining from 2008 (6.5%). I Capital expenditures totaled euro 635 million and related mainly to projects designed to improve the conversion rate |
and flexibility of
refineries, logistic assets, the upgrade of the refined
product retail network in Italy and in the rest of
Europe. I In the medium-term, management plans to recover profitability by improving the refining system and reinforcing Eni’s leadership in the Italian retail market and increasing market shares in core European countries. |
| Strategies | ||
| Eni’s
Refining & Marketing segment engages in refining of
crude oil and marketing of refined products primarily in
Italy and in Central-Eastern Europe. Eni is leader in the
retail marketing of refined products in Italy with a
market share of 31.5 as of the end of 2009. The Company’s operations are fully integrated through refining, supply, trading, logistics and marketing so as to maximize cost efficiencies and effectiveness of operations. Integration with upstream activities, technological know-how in refining, a well known brand, the quality of products and services provided to a wide and loyal customer base, represent further competitive advantages on which Eni can leverage to better face an extremely challenging scenario. To cope with this challenging outlook, management plans to: - Keep tight control on capital expenditures, particularly in refining through strong financial discipline in selecting capital projects. |
- Strongly focus on cost reductions and
energy efficiency improvements. - Improve profitability of marketing activities by increasing the quality and range of its retail offer. As
a result of all these actions, management believes that
the Refining & Marketing segment will be cash flow
positive in 2012. |
|
Market trends Refining |
reduced availability of
heavy crude oil in the Mediterranean area. Another
negative factor was the exceptional decline of gasoil
prices, whose spread over raw materials fell
significantly. Management believes that those trends are
likely to persist for the next two to three years as
demand for refined products will continue being affected
by: - increasing demand for high energy efficient engines and use of bio-fuels based on the more and more widespread attention to environmental issues; - increasing refining capacity particularly in Middle and Far East; - lower propensity of the US market to import gasoline. On the plus side, the eventual margin level will be influenced by the pace of the global economic recovery |
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 and the extent of refinery
rationalization in the face of weak margins. Marketing |
of service quality, a
diversification of its commercial offer, widening its
client base with innovative promotional campaigns and
client retention actions, as well as recovery of
operating efficiency. Activities 1.
Refining Management also targets flexibility enhancement at the
Company refineries whereby the Company intends to achieve
a 15 percentage point increase in the share of spot crude
supplies to processes. Logistics and process optimization
will help in selecting the most profitable slate to
satisfy market needs also in light of expected
development in European regulations on environmental
performance of fuels. |
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| n Italy Eni’s refining system in Italy is composed of five wholly owned refineries and a 50% interest in the Milazzo refinery in Sicily. Each of Eni’s refineries in Italy has operating and strategic features that aim at maximizing the value associated to the asset structure, the geographic positioning with respect to end markets and the integration with Eni’s other activities. Sannazzaro: with balanced refining capacity of 180 kbbl/d and a conversion index of 61.2%, it is one of the most efficient refineries in Europe. Located in the Po Valley, it supplies mainly markets in North-Western Italy and Switzerland. The high degree of flexibility of this refinery allows it to process a wide range of feedstock. From a logistical standpoint this refinery is located along the route of the Central Europe Pipeline, which links the Genoa terminal with French speaking Switzerland. This refinery contains two primary distillation plants and relevant facilities, including three desulphurization units. Conversion is obtained through a fluid catalytic cracker (FCC), two mild hydrocracker (HDCK) middle distillate conversion units one of them came on stream in 2009 and a visbreaking thermal conversion unit, with a gasification facility using the heavy residue from visbreaking (tar) to produce syngas to feed the nearby EniPower power plant at Ferrera Erbognone. In 2009 Eni completed the upgrading of the refinery capacity and flexibility increased by a new HDCK with 28 kbbl/d capacity that came on stream in June 2009. In addition Eni plans to develop a conversion plant employing the Eni Slurry Technology with a |
23 kbbl/d capacity for the
processing of extra heavy crude with high sulphur content
producing high quality middle distillates, in particular
gasoil, and reducing the yield of fuel oil to zero.
Start-up of this facility is scheduled in 2012. Taranto: with balanced refining capacity of 110 kbbl/d and a conversion index of 64.8%, this refinery can process a wide range of crude and other feedstock. It mainly produces fuels for automotive use and residential heating purposes for the Southern Italian markets. Besides its primary distillation plants and relevant facilities, including two units for the desulphurization of middle distillates, this refinery contains a two-stage thermal conversion plant (visbreaking/thermal cracking) and an RHU conversion plant for the conversion of high sulphur content residues into valuable products and catalytic cracking feedstocks. It processes most of the oil produced in Eni’s Val d’Agri fields carried to Taranto through the Monte Alpi pipeline (in 2009 a total of 1.5 mmtonnes of this oil were processed). The new hydrocracking unit with a capacity of 17 kbbl/d is expected to start production in 2010. Eni’s plan to upgrade the conversion capacity of this refinery will enable to extract value from fuel oil and other semifinished products currently exported. Gela: with a balanced refining capacity of 100 kbbl/d and a conversion index of 142.4%, this refinery located on the Southern coast of Sicily is highly integrated with upstream operations as it processes heavy crude produced from nearby Eni fields offshore and onshore Sicily. In addition, it |
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| is integrated downstream as
it supplies large volumes of petrochemical feedstock to
Eni’s in site petrochemical plants. The refinery
mostly manufactures fuels for automotive use and
petrochemical feedstock. Its high conversion level is
ensured by an FCC unit with go-finer for the upgrading of
feedstocks and two coking plants for the vacuum
conversion of heavy residues. The power plant of this
refinery also contains modern residue and exhaust fume
treatment plants which allow full compliance with the
tightest environmental standards. An upgrade of the Gela
refinery is underway by means of the: (i) construction of
a new steam reformer by 2012; (ii) upgrade of its power
plant and revamping of its boilers, aimed at increasing
profitability by exploiting the synergies deriving from
the integration of refining and power generation; (iii)
introduction of a new tank for the segregation of
extra-heavy crude and start of a new sulphur recovery
plant both by 2012. Livorno: with a balanced refining capacity of 84 kbbl/d and a conversion index of 11.4%, manufactures mainly gasoline, fuel oil for bunkering and lubricant bases. Besides its primary distillation plants, this refinery contains two lubricant manufacturing lines. Its pipeline links with the local harbor and with the Florence storage sites by means of two pipelines and optimizes intake, handling and distribution of products. Venice: with a balanced refining capacity of 80 kbbl/d and a conversion index of 20.2%, this refinery supplies mainly markets in North-Eastern Italy and Austria. Besides its primary distillation plants, this refinery contains a two-stage thermal conversion plant (visbreaking/thermal cracking) designed to increase yields of valuable products. n Outside Italy In Germany Eni holds an 8.3% interest in the Schwedt
refinery and a 20% interest in Bayernoil, an integrated
pole that includes the Vohburg and Neustadt refineries.
Eni’s refining capacity in Germany amounts to
approximately 60 kbbl/d mainly used to supply Eni’s
distribution network in Bavaria and Eastern Germany. In
2008 the restructuring of the Bayernoil complex was
completed and a new hydrocraking unit come on stream in
2009 determining an increase of middle distillate yields
and a corresponding reduction of the production of
gasoline giving more profitability to the activities
conducted there. |
2. Logistics Eni is a primary operator in storage and transport of petroleum products in Italy with its logistical integrated infrastructure consisting of 21 directly managed storage sites and a network of petroleum product pipelines for the sale and storage of refined products, LPG and crude. Eni’s logistic model is organized on a hub structure including five main areas. These hubs monitor and centralize the handling of products flows aiming to drive forward more efficiency particularly in cost control of collection and delivery of orders. Eni holds interests in five joint entities established by partnering the major Italian operators. These are located in Vado Ligure-Genova (Petrolig), Arquata Scrivia (Sigemi), Venice (Petroven), Ravenna (Petra) and Trieste (DCT) and aim at reducing logistic costs, and increasing efficiency. Eni operates in the transport of oil and refined products: (i) on land through a pipeline network of leased and owned pipelines extending over 3,019 kilometers (of which 1,447 kilometers in operation are owned by Eni); and (ii) by sea through spot and long-term lease contracts of tanker ships. Secondary distribution to retail and wholesale markets is effected through third parties who also own their
|
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| means of transportation, in
some instances with minority participation of Eni. 3. Marketing n Retail Italy In Italy Eni is leader in retail marketing of refined
products with a 31.5% market share. At year end 2009
Eni’s distribution network included 4,474 service
stations. Retail fuel sales amounted to approximately 11
billion liters (9.03 million tonnes) with average
throughput of 2.48 million liters.
Premium fuels |
averaged high levels. Sales
of BluDieselTech amounted approximately to 600 ktonnes
(720 mmliters), increasing by 17 ktonnes from 2008 and
represented 10.5% of gasoil sales on Eni’s retail
network. At December 31, 2009, service stations marketing
BluDiesel totaled 4,104 units (4,095 at 2008 year end)
covering approximately 92% of Eni’s network. Retail sales of BluSuper amounted to 82 ktonnes (110 mmliters), barely unchanged from 2008, and covered 2.7% of gasoline sales on Eni’s retail network. At December 31, 2009, service stations marketing BluSuper totaled 2,679 units (2,631 at December 31, 2008), covering approximately 60% of Eni’s network. Promotional actions You&Agip Multicard Routex |
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| Europe as the card can be
used in Italy on all Agip branded service stations and,
in its international version, on the service stations of
all members of the Routex consortium (Aral, BP, OMV and
Statoil). In 2009 volumes bought with this card in Agip
service stations represented approximately 16.6% of total
sales in Italy and 11.4% in Europe. Non oil n Rest of Europe In 2009 retail sales of refined products marketed in
the rest of Europe (2.99 mmtonnes) were down
approximately 230 ktonnes from 2008, or 7.1%, mainly in
Germany and Eastern Europe due to a decrease in fuel
demand. |
Growth outside Italy will
continue to be selective and aimed at strengthening
Eni’s competitive position in key markets in
particular in Central Eastern Europe, based on the
competitive advantage provided by synergies in supply,
logistics and brand awareness. Non oil activities in the rest of Europe are carried out under the CiaoAgip® brand name in 1,152 service stations, of these 398 are in Germany and 159 in France with a 76% coverage of the network and a virtually complete coverage of owned stations.
4. Wholesale businesses Fuels |
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| mmtonnes) were down 1.59
mmtonnes from 2008, or 14.3%, reflecting mainly a
decrease in demand for jet fuel, the bunkering market and
fuel oil for power generation, as well as in gasoil sales
due to lower industrial consumption reflecting the
economic downturn. Sales on wholesale markets in the rest
of Europe (3.66 mmtonnes) decreased by approximately 280
ktonnes, or 7.1% (excluding the impact of asset
divestments in the Iberian Peninsula), mainly in Germany,
in the Czech Republic and Switzerland due to declining
consumption in particular of gasoil for heating. Eni also markets jet fuel directly at 46 airports, of which 27 in Italy. In 2009, these sales amounted to 1.8 mmtonnes (of which 1.4 mmtonnes in Italy). Eni is active also in the international market of bunkering, marketing marine fuel mainly in 40 ports, of which 23 are in Italy. In 2009 marine fuel sales were 2.1 mmtonnes (2.0 mmtonnes in Italy). Other sales were 18.60 mmtonnes down 1.17 mmtonnes or 5.9% due mainly to a decline in volumes sold to traders and oil companies and lower activities in the cargo market due to lower throughputs. Supplies of feedstock to the petrochemical industry (1.33 mmtonnes) declined by approximately 370 ktonnes due to declining demand. LPG |
Lubricants Eni operates 7 (owned and co-owned) blending plants, in Italy, Europe, North and South America and the Far East. With a wide range of products composed of over 650 different blends, Eni masters international state of the-art know-how for the formulation of products for vehicles (engine oil, special fluids and transmission oils) and industries (lubricants for hydraulic systems, industrial machinery and metal processing). In Italy Eni is leader in the manufacture and sale of lubricant bases. Base oils are manufactured primarily at Eni’s refinery in Livorno. Eni also owns one facility for the production of additives and solvents in Robassomero. In 2009, retail and wholesale sales in Italy amounted to 93 ktonnes with a 23.3% market share. Eni also sold approximately 4 ktonnes of special products (white oils, transformer oil and anti-freeze fluids). Outside Italy sales amounted to approximately 102 ktonnes, of these about 70% were registered in Europe (mainly Spain, Germany, and France). Oxygenates |
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| Refining system in 2009 |
Ownership
share |
Distillation
capacity (total) |
Distillation
capacity (Eni’s share) |
Primary balanced refining
capacity (Eni’s share)(kbbl/d) |
Conversion
index(%) |
Fluid
catalytic cracking - FCC(kbbl/d) |
Residue
conversion(kbbl/d) |
Go-Finer(kbbl/d) |
Mild
Hydro- cracking/ Hydro- cracking(kbbl/d) |
Visbreaking/
Thermal Cracking(kbbl/d) |
Coking(kbbl/d) |
Distillation
capacity utilization rate (Eni’s share)(%) |
Balanced
refining capacity utilization rate (Eni’s share)(%) |
| Wholly owned refineries | 685 |
685 |
554 |
60.3 |
69 |
33 |
37 |
29 |
89 |
46 |
82 |
94 |
||||||||||||||
| Italy | ||||||||||||||||||||||||||
| Sannazzaro | 100 |
223 |
223 |
180 |
50.9 |
34 |
11 | 29 |
29 |
73 |
99 |
|||||||||||||||
| Gela | 100 |
129 |
129 |
100 |
144.8 |
35 |
37 |
46 |
82 |
101 |
||||||||||||||||
| Taranto | 100 |
120 |
120 |
110 |
64.6 |
22 |
38 |
97 |
79 |
|||||||||||||||||
| Livorno | 100 |
106 |
106 |
84 |
11.4 |
88 |
102 |
|||||||||||||||||||
| Porto Marghera | 100 |
107 |
107 |
80 |
20.2 |
22 |
79 |
86 |
||||||||||||||||||
| Partially owned refineries (a) | 874 |
245 |
193 |
49.7 |
163 |
25 |
99 |
27 |
77 |
98 |
||||||||||||||||
| Italy | ||||||||||||||||||||||||||
| Milazzo | 50 |
248 |
124 |
80 |
73 |
41 |
25 |
32 |
68 |
99 |
||||||||||||||||
| Germany | ||||||||||||||||||||||||||
| Vohburg/Neustadt (Bayernoil) |
20 |
215 |
43 |
41 |
34 |
49 |
43 |
93 |
95 |
|||||||||||||||||
| Schwedt | 8.33 |
231 |
19 |
19 |
41.8 |
49 |
27 |
98 |
102 |
|||||||||||||||||
| Czech Republic | ||||||||||||||||||||||||||
| Kralupy
and Litvinov (Ceska Rafinerska) |
32.4 |
180 |
59 |
53 |
29.6 |
24 |
24 |
86 |
80 |
|||||||||||||||||
| Total | 1,559 |
930 |
747 |
57.6 |
232 |
58 |
37 |
128 |
116 |
46 |
81 |
95 |
| (a) | Capacity of conversion plant is 100%. |
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| Supply of oil | (mmtonnes) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Equity crude oil | |||||||||||||||||
| Production outside Italy | 32.86 | 32.76 | 27.47 | 26.14 | 29.84 | ||||||||||||
| Production in Italy | 4.44 | 4.05 | 4.10 | 3.57 | 2.91 | ||||||||||||
| Other crude oils | |||||||||||||||||
| Purchases on spot markets | 14.33 | 10.73 | 11.34 | 12.09 | 14.94 | ||||||||||||
| Purchases under long-term contracts | 14.85 | 18.16 | 16.65 | 16.11 | 19.71 | ||||||||||||
| 29.18 | 28.89 | 27.99 | 28.20 | 34.65 | |||||||||||||
| Total crude oil purchases | 66.48 | 65.70 | 59.56 | 57.91 | 67.40 | ||||||||||||
| Purchases of intermediate products | 3.58 | 3.18 | 3.59 | 3.39 | 2.92 | ||||||||||||
| Purchase of products | 16.21 | 16.00 | 16.14 | 17.42 | 13.98 | ||||||||||||
| Consumption for power generation | (1.09 | ) | (1.10 | ) | (1.13 | ) | (1.00 | ) | (0.96 | ) | |||||||
| Other changes (a) | (2.49 | ) | (1.99 | ) | (2.19 | ) | (1.04 | ) | (1.64 | ) | |||||||
| TOTAL PURCHASES | 82.69 | 81.79 | 75.97 | 76.68 | 81.70 |
| (a) | Includes changes in inventories, transport decline, consumption and losses. |
| Refinery capacity | 2005 |
2006 |
2007 |
2008 |
2009 |
| Primary distillation capacity (a) | (kbbl/d) | 886 | 886 | 910 | 930 | 930 | ||||||
| Balanced capacity (a) | 701 | 711 | 748 | 737 | 747 | |||||||
| Refinery throughputs on own account | 776 | 761 | 743 | 717 | 480 | |||||||
| Distillation capacity utilization rate | (%) | 82 | 82 | 81 | 81 | 73 |
| (a) | Eni’s share. |
| Availability of refined products | (mmtonnes) |
2005 |
2006 |
2007 |
2008 |
2009 |
| ITALY | |||||||||||||||||
| At wholly-owned refineries | 27.34 | 27.17 | 27.79 | 25.59 | 24.02 | ||||||||||||
| Less input on account of third parties | (1.70 | ) | (1.53 | ) | (1.76 | ) | (1.37 | ) | (0.49 | ) | |||||||
| At affiliate refineries | 8.58 | 7.71 | 6.42 | 6.17 | 5.87 | ||||||||||||
| Refinery throughputs on own account | 34.22 | 33.35 | 32.45 | 30.39 | 29.40 | ||||||||||||
| Consumption and losses | (1.87 | ) | (1.45 | ) | (1.63 | ) | (1.61 | ) | (1.60 | ) | |||||||
| Products available for sale | 32.35 | 31.90 | 30.82 | 28.78 | 27.80 | ||||||||||||
| Purchases of refined products and change in inventories | 4.85 | 4.45 | 2.16 | 2.56 | 3.73 | ||||||||||||
| Products transferred to operations outside Italy | (5.41 | ) | (4.82 | ) | (3.80 | ) | (1.42 | ) | (3.89 | ) | |||||||
| Consumption for power generation | (1.09 | ) | (1.10 | ) | (1.13 | ) | (1.00 | ) | (0.96 | ) | |||||||
| Sales of products | 30.70 | 30.43 | 28.05 | 28.92 | 26.68 | ||||||||||||
| OUTSIDE ITALY | |||||||||||||||||
| Refinery throughputs on own account | 4.57 | 4.69 | 4.70 | 5.45 | 5.15 | ||||||||||||
| Consumption and losses | (0.24 | ) | (0.32 | ) | (0.31 | ) | (0.25 | ) | (0.25 | ) | |||||||
| Products available for sale | 4.33 | 4.37 | 4.39 | 5.20 | 4.90 | ||||||||||||
| Purchases of finished products and change in inventories | 11.19 | 11.51 | 13.91 | 15.14 | 10.12 | ||||||||||||
| Products transferred from Italian operations | 5.41 | 4.82 | 3.80 | 1.42 | 3.89 | ||||||||||||
| Sales of products | 20.93 | 20.70 | 22.10 | 21.76 | 18.91 | ||||||||||||
| Refinery throughputs on own account | 38.79 | 38.04 | 37.15 | 35.84 | 34.55 | ||||||||||||
| Total equity crude input | 12.53 | 12.50 | 9.29 | 6.98 | 5.11 | ||||||||||||
| Total sales of refined products | 51.63 | 51.13 | 50.15 | 50.68 | 45.59 | ||||||||||||
| Crude oil sales | 31.06 | 30.66 | 25.82 | 26.00 | 36.11 | ||||||||||||
| TOTAL SALES | 82.69 | 81.79 | 75.97 | 76.68 | 81.70 |
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| Production and sales | (mmtonnes) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Products | ||||||||||||
| Gasoline | 9.30 | 9.02 | 8.85 | 8.32 | 8.43 | |||||||
| Gasoil | 14.72 | 14.37 | 13.91 | 13.44 | 13.33 | |||||||
| Jet fuel/kerosene | 1.46 | 1.57 | 1.38 | 1.54 | 1.42 | |||||||
| Fuel oil | 5.08 | 4.85 | 4.89 | 4.34 | 4.01 | |||||||
| LPG | 0.65 | 0.72 | 0.69 | 0.71 | 0.66 | |||||||
| Lubricants | 0.65 | 0.55 | 0.64 | 0.60 | 0.49 | |||||||
| Petrochemical feedstocks | 1.35 | 1.65 | 1.89 | 2.16 | 2.08 | |||||||
| Other | 3.47 | 3.54 | 2.96 | 2.86 | 2.28 | |||||||
| Total products | 36.68 | 36.27 | 35.21 | 33.97 | 32.70 | |||||||
| Sales | ||||||||||||
| Italy | 30.70 | 30.43 | 28.05 | 28.92 | 26.68 | |||||||
| Gasoline | 4.40 | 3.53 | 3.34 | 3.26 | 3.17 | |||||||
| Gasoil | 10.35 | 9.69 | 9.67 | 10.03 | 10.04 | |||||||
| Jet fuel/kerosene | 1.65 | 1.84 | 1.97 | 1.94 | 1.42 | |||||||
| Fuel oil | 1.49 | 1.26 | 0.95 | 0.85 | 0.72 | |||||||
| LPG | 0.66 | 0.59 | 0.54 | 0.57 | 0.57 | |||||||
| Lubricants | 0.10 | 0.14 | 0.13 | 0.13 | 0.09 | |||||||
| Petrochemical feedstocks | 3.07 | 2.61 | 1.93 | 1.70 | 1.33 | |||||||
| Other | 8.98 | 10.77 | 9.52 | 10.44 | 9.34 | |||||||
| Rest of Europe | 18.62 | 17.02 | 20.08 | 19.63 | 16.02 | |||||||
| Gasoline | 2.14 | 2.06 | 2.14 | 2.21 | 1.89 | |||||||
| Gasoil | 4.71 | 4.89 | 5.16 | 5.11 | 3.55 | |||||||
| Jet fuel/kerosene | 0.34 | 0.34 | 0.38 | 0.47 | 0.35 | |||||||
| Fuel oil | 0.12 | 0.23 | 0.25 | 0.23 | 0.29 | |||||||
| LPG | 0.11 | 0.12 | 0.13 | 0.16 | 0.14 | |||||||
| Lubricants | 0.07 | 0.10 | 0.10 | 0.11 | 0.08 | |||||||
| Other | 11.13 | 9.28 | 11.92 | 11.34 | 9.72 | |||||||
| Extra Europe | 2.31 | 3.68 | 2.02 | 2.13 | 2.89 | |||||||
| Gasoline | 1.59 | 1.94 | 1.52 | 1.63 | 2.51 | |||||||
| LPG | 0.34 | 0.34 | 0.36 | 0.37 | 0.36 | |||||||
| Lubricants | 0.04 | 0.02 | 0.02 | 0.03 | 0.02 | |||||||
| Other | 0.34 | 1.38 | 0.12 | 0.10 | ||||||||
| Worldwide | ||||||||||||
| Gasoline | 8.13 | 7.53 | 7.00 | 7.10 | 7.57 | |||||||
| Gasoil | 15.06 | 14.58 | 14.83 | 15.14 | 13.59 | |||||||
| Jet fuel/kerosene | 1.99 | 2.18 | 2.35 | 2.41 | 1.77 | |||||||
| Fuel oil | 1.61 | 1.49 | 1.20 | 1.08 | 1.01 | |||||||
| LPG | 1.11 | 1.05 | 1.03 | 1.10 | 1.07 | |||||||
| Lubricants | 0.21 | 0.26 | 0.25 | 0.27 | 0.19 | |||||||
| Petrochemical feedstocks | 3.07 | 2.61 | 1.93 | 1.70 | 1.33 | |||||||
| Other | 20.45 | 21.43 | 21.56 | 21.88 | 19.06 | |||||||
| Total sales | 51.63 | 51.13 | 50.15 | 50.68 | 45.59 |
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| Sales in Italy and outside Italy by market | (mmtonnes) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Retail | 10.05 | 8.66 | 8.62 | 8.81 | 9.03 | |||||||
| Wholesale | 12.11 | 11.74 | 11.09 | 11.15 | 9.56 | |||||||
| 22.16 | 20.40 | 19.71 | 19.96 | 18.59 | ||||||||
| Petrochemicals | 3.07 | 2.61 | 1.93 | 1.70 | 1.33 | |||||||
| Other markets | 5.47 | 7.42 | 6.41 | 7.26 | 6.76 | |||||||
| Sales in Italy | 30.70 | 30.43 | 28.05 | 28.92 | 26.68 | |||||||
| Retail rest of Europe | 3.67 | 3.82 | 4.03 | 3.22 | 2.99 | |||||||
| Wholesale rest of Europe | 4.10 | 4.19 | 4.39 | 3.94 | 3.66 | |||||||
| Wholesale outside Europe | 0.40 | 0.41 | 0.57 | 0.56 | 0.41 | |||||||
| 8.17 | 8.42 | 8.99 | 7.72 | 7.06 | ||||||||
| Other markets | 12.76 | 12.28 | 13.11 | 12.52 | 11.85 | |||||||
| Sales outside Italy | 20.93 | 20.70 | 22.10 | 20.24 | 18.91 | |||||||
| Total sales (a) | 51.63 | 51.13 | 50.15 | 49.16 | 45.59 |
| (a) | 2005-2007 data include downstream activities in the Iberian Peninsula divested to Galp in October 2008. |
| Sales by product/market | (mmtonnes) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 22.16 | 20.40 | 19.71 | 19.96 | 18.59 | |||||||
| Retail sales | 10.05 | 8.66 | 8.62 | 8.81 | 9.03 | |||||||
| Gasoline | 4.35 | 3.38 | 3.19 | 3.11 | 3.05 | |||||||
| Gasoil | 5.49 | 5.09 | 5.25 | 5.50 | 5.74 | |||||||
| LPG | 0.20 | 0.18 | 0.17 | 0.19 | 0.22 | |||||||
| Lubricants | 0.01 | 0.01 | 0.01 | 0.01 | 0.02 | |||||||
| Wholesale sales | 12.11 | 11.74 | 11.09 | 11.15 | 9.56 | |||||||
| Gasoline | 0.16 | 0.15 | 0.15 | 0.15 | 0.12 | |||||||
| Gasoil | 4.86 | 4.60 | 4.42 | 4.52 | 4.30 | |||||||
| LPG | 0.46 | 0.41 | 0.37 | 0.38 | 0.35 | |||||||
| Lubricants | 0.13 | 0.13 | 0.13 | 0.12 | 0.09 | |||||||
| Fuel oil | 1.50 | 1.27 | 0.95 | 0.85 | 0.72 | |||||||
| Bunker | 1.63 | 1.68 | 1.58 | 1.70 | 1.38 | |||||||
| Other | 3.37 | 3.50 | 3.49 | 3.43 | 2.60 | |||||||
| Outside Italy (retail + wholesale) | 8.17 | 8.42 | 8.99 | 7.72 | 7.06 | |||||||
| Gasoline | 2.14 | 2.06 | 2.29 | 2.12 | 1.89 | |||||||
| Gasoil | 4.71 | 4.90 | 5.16 | 3.80 | 3.54 | |||||||
| LPG | 0.44 | 0.46 | 0.49 | 0.52 | 0.50 | |||||||
| Lubricants | 0.10 | 0.10 | 0.09 | 0.11 | 0.10 | |||||||
| Fuel oil | 0.12 | 0.23 | 0.25 | 0.23 | 0.28 | |||||||
| Jet fuel | 0.34 | 0.34 | 0.38 | 0.47 | 0.35 | |||||||
| Other | 0.32 | 0.33 | 0.33 | 0.47 | 0.40 | |||||||
| Total (a) | 30.33 | 28.82 | 28.70 | 27.68 | 25.65 |
| (a) | 2005-2007 data include downstream activities in the Iberian Peninsula divested to Galp in October 2008. |
| Number of service stations | (units) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 4,349 | 4,356 | 4,390 | 4,409 | 4,474 | |||||||
| Ordinary stations | 4,204 | 4,214 | 4,253 | 4,273 | 4,344 | |||||||
| Highway stations | 145 | 142 | 137 | 136 | 130 | |||||||
| Outside Italy | 1,933 | 1,938 | 2,050 | 1,547 | 1,512 | |||||||
| Germany | 689 | 681 | 672 | 521 | 478 | |||||||
| France | 197 | 204 | 202 | 199 | 196 | |||||||
| Iberian Peninsula (a) | 373 | 358 | 371 | - | - | |||||||
| Austria/Switzerland | 432 | 444 | 443 | 458 | 446 | |||||||
| Eastern Europe | 242 | 251 | 362 | 369 | 392 | |||||||
| Service stations selling Blu products | 4,042 | 4,242 | 4,357 | 4,445 | 4,822 | |||||||
| "Multi-Energy" service stations | 1 | 3 | 4 | 4 | 4 | |||||||
| Service stations selling LPG and natural gas | 476 | 490 | 538 | 537 | 690 | |||||||
| Non-oil sales | (euro million) | 135 | 137 | 144 | 153 | 147 |
| (a) | In October 2008 downstream activities including 371 service stations were sold to Galp. |
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| Average throughput | (kliters/No. of service stations) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 2,509 | 2,463 | 2,444 | 2,470 | 2,482 | |||||||
| Germany | 2,875 | 2,978 | 2,968 | 2,868 | 3,167 | |||||||
| France | 2,478 | 2,388 | 2,365 | 2,152 | 2,193 | |||||||
| Iberian Peninsula (a) | 2,633 | 2,707 | 2,910 | 2,519 | - | |||||||
| Austria/Switzerland | 1,697 | 1,743 | 1,767 | 1,763 | 1,691 | |||||||
| Eastern Europe | 2,124 | 2,212 | 2,348 | 2,832 | 2,642 | |||||||
| Average throughput | 2,479 | 2,470 | 2,486 | 2,502 | 2,477 |
| (a) | Referred to the first nine months of 2008. In October 2008 downstream activities including 371 service stations were sold to Galp. |
| Market shares in Italy | (%) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Retail | 29.7 | 29.3 | 29.2 | 30.6 | 31.5 | |||||||
| Gasoline | 27.5 | 27.2 | 27.3 | 28.5 | 29.0 | |||||||
| Gasoil | 32.3 | 31.6 | 31.2 | 32.7 | 33.8 | |||||||
| LPG (automotive) | 17.9 | 18.1 | 18.2 | 19.1 | 20.2 | |||||||
| Lubricants | 23.2 | 24.4 | 24.3 | 23.7 | 21.5 | |||||||
| Wholesale | 28.0 | 26.9 | 29.0 | 30.4 | 27.5 | |||||||
| Gasoil | 32.8 | 31.2 | 31.3 | 31.8 | 32.0 | |||||||
| Fuel oil | 17.9 | 15.2 | 16.2 | 16.3 | 17.2 | |||||||
| Bunker | 46.5 | 46.6 | 44.0 | 44.6 | 40.1 | |||||||
| Lubricants | 23.2 | 24.0 | 24.3 | 25.0 | 23.3 | |||||||
| Domestic market share | 29.0 | 28.2 | 29.5 | 31.0 | 29.3 |
| Retail market shares outside Italy | (%) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Central Europe | ||||||||||||
| Austria | 7.4 | 7.2 | 7.8 | 7.0 | 7.3 | |||||||
| Switzerland | 5.7 | 5.8 | 5.9 | 6.4 | 6.4 | |||||||
| Germany | 4.1 | 4.4 | 4.2 | 3.8 | 3.4 | |||||||
| France | 1.1 | 1.2 | 1.1 | 1.1 | 1.1 | |||||||
| Eastern Europe | ||||||||||||
| Hungary | 6.0 | 6.3 | 7.9 | 11.6 | 11.6 | |||||||
| Czech Republic | 5.5 | 5.9 | 7.7 | 11.4 | 11.3 | |||||||
| Slovakia | 10.2 | 9.2 | ||||||||||
| Slovenia | 1.3 | 1.7 | 2.0 | 2.1 | 2.4 | |||||||
| Iberian Peninsula (a) | ||||||||||||
| Spain | 3.1 | 3.2 | 3.3 | 3.4 | - | |||||||
| Portugal | 0.9 | 0.7 | 1.0 | 0.9 | - |
| (a) | Referred to the first nine months of 2008. In October 2008 downstream activities including 371 service stations were sold to Galp. |
| Capital expenditures | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 585 | 547 | 873 | 850 | 581 | |||||||
| Outside Italy | 71 | 98 | 106 | 115 | 54 | |||||||
| 656 | 645 | 979 | 965 | 635 | ||||||||
| Refining, supply and logistics | 349 | 376 | 675 | 630 | 436 | |||||||
| Italy | 349 | 376 | 675 | 630 | 436 | |||||||
| Marketing | 225 | 223 | 282 | 298 | 172 | |||||||
| Italy | 154 | 125 | 176 | 183 | 118 | |||||||
| Outside Italy | 71 | 98 | 106 | 115 | 54 | |||||||
| Other | 82 | 46 | 22 | 37 | 27 | |||||||
| 656 | 645 | 979 | 965 | 635 |
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| Key performance indicators (a) | 2005 | 2006 | 2007 | 2008 | 2009 |
| Net sales from operations (a) | (euro million) | 5,733 | 6,979 | 8,678 | 9,176 | 9,664 | ||||||
| Operating profit | 307 | 505 | 837 | 1,045 | 881 | |||||||
| Adjusted operating profit | 314 | 508 | 840 | 1,041 | 1,120 | |||||||
| Adjusted net profit | 328 | 400 | 658 | 784 | 892 | |||||||
| Capital expenditures | 349 | 591 | 1,410 | 2,027 | 1,630 | |||||||
| Adjusted ROACE | (%) | 12.0 | 12.8 | 17.1 | 16.8 | 15.4 | ||||||
| Orders acquired: | (euro million) | 8,395 | 11,172 | 11,845 | 13,860 | 9,917 | ||||||
| - Offshore construction | 3,096 | 3,681 | 3,496 | 4,381 | 5,089 | |||||||
| - Onshore construction | 4,720 | 4,923 | 6,070 | 7,522 | 3,665 | |||||||
| - Offshore Drilling | 367 | 2,230 | 1,644 | 760 | 585 | |||||||
| - Onshore Drilling | 212 | 338 | 635 | 1,197 | 578 | |||||||
| Order backlog: | 10,122 | 13,191 | 15,390 | 19,105 | 18,730 | |||||||
| - Offshore construction | 3,721 | 4,283 | 4,215 | 4,682 | 5,430 | |||||||
| - Onshore construction | 5,721 | 6,285 | 7,003 | 9,201 | 8,035 | |||||||
| - Offshore Drilling | 382 | 2,247 | 3,471 | 3,759 | 3,778 | |||||||
| - Onshore Drilling | 298 | 376 | 701 | 1,463 | 1,487 | |||||||
| Employees at year end | (units) | 28,684 | 30,902 | 33,111 | 35,629 | 35,969 |
| (a) | Before elimination of intragroup sales. |
| 2009 Highlights I Adjusted net profit was euro 892 million, up euro 108 million from a year ago, or 13.8%, driven by steady revenue flows and profitability as a result of the large number of oil & gas projects that were started during the upward phase of the oil cycle. I Return on average capital employed calculated on an adjusted basis was 15.4% in 2009, lower than in 2008 (16.8%). |
I Orders acquired amounted to euro 9,917
million, down euro 3,943 million from 2008 (down 28.4%),
in particular in onshore construction and onshore
drilling activities. I Order backlog amounting to euro 18,730 million at December 31, 2009 (euro 19,105 million at December 31, 2008), related in particular to projects in North Africa (30%), West Africa (15%) and the Rest of Europe (13%). I Capital expenditures amounted to euro 1,630 million, down euro 397 million from 2008, or 19.6%. The main projects relate to the upgrade of the construction and drilling fleet. |
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Eni Fact Book Engineering & Construcion
| Strategies | ||
| Eni
operates in engineering, construction and drilling both
offshore and onshore for the oil & gas industry
through Saipem, a subsidiary listed on the Italian Stock
Exchange (Eni’s interest is 43%). Saipem boasts a
strong position in the relevant market leveraging on
technological and operational skills mainly in frontier
areas, harsh environments and complex projects, as well
as on engineering and project management capabilities and
ownership or availability of necessary technologies as a
result of a challenging internal (investments on offshore
fleet) and external (acquisition of Bouygues Offshore and
Snamprogetti) growth process. In spite of the uncertainty on the time of the recovery of global economy, Saipem plans to continue consolidating its position in the main business segments, implementing the following strategic guidelines: - To maximize the efficiency in all business areas maintaining top execution and security standards, preserving competitive supply costs, optimizing the utilization rate of the fleet, increasing structure flexibility in order to mitigate the effects of negative business cycles as well as developing and promoting a company culture that will permit the identification and management of risks and business opportunities. |
- To continue focusing on the more
complex and difficult projects in the strategic segments
of deepwater, FPSO, heavy crude and LNG upgrading
(offshore and onshore, for the monetization of stranded
gas reserves) in order to consolidate the Company’s
competitive position in large offshore and onshore
projects for the development of hydrocarbon fields. - To promote local content in terms of employment of local contractors and assets in strategic countries where large projects are carried out supporting the development of delocalized logistic hubs and construction yards when requested by clients in order to achieve a long-term consolidation of its market position in those countries. - To leverage on the capacity to execute internally more phases of large projects on an EPC and EPIC basis, pursuing better control of costs and terms of execution adapting with flexibility to clients’ needs, thus expanding the Company’s value proposition. - To complete the expansion and revamping program of its construction and drilling fleet in consideration of the future needs of the oil & gas industry, in order to confirm the Company’s leading position in the segment of complex projects with high profitability. |
|
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Eni Fact Book Engineering & Construcion
| Business areas Offshore |
(CastorOne), a field
development ship for deep waters (FDS2) and other
supporting assets for offshore activity. These capital
expenditures will allow the company to reinforce its
capabilities in the operations performed in the deepwater
and sub-Arctic areas. The company will also continue to
invest (assets and infrastructures) supporting relevant
projects in portfolio (among them the new Aquila FPSO,
that will be operative in 2011). In 2009, revenues of the offshore segment were euro 4,317 million, accounting for 45% of total revenues. Contribution from operations came in at euro 719 million, up euro 108 million representing 55% of total contribution from operations. These results reflect in particular higher levels of activity in West Africa, Kazakhstan and the Mediterranean Area. Among the main acquisitions of 2009 were: |
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Eni Fact Book Engineering & Construcion
| the development of the
Kizomba Satellites Project offshore Angola. The project
is aimed to link the Mavacola and Clochas fields to the
existing FPSO units. Onshore |
new cycle of investments in
the oil & gas industry will take place, Saipem will
be focused on taking advantage of the opportunities
raising from the market in the plant and pipeline
segments leveraging on its solid competitive position in
the realization of complex projects in the strategic
areas of the Middle East, Caspian Sea, North and West
Africa and Russia. In 2009 revenues of the Onshore construction segment amounted to euro 4,258 million, accounting for 44% of total revenues. Contribution from operations of euro 313 million decreased by euro 28 million from 2008, mainly due to the postponement of the activities related to the Manifa project on behalf of Saudi Aramco. Among the major orders acquired in 2009 were: |
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Eni Fact Book Engineering & Construcion
| Offshore drilling Saipem is the only engineering and construction contractor that provides also offshore and onshore drilling services to oil companies. In the offshore drilling segment Saipem mainly operates in West Africa, North Sea, Mediterranean Sea and Middle East and boasts significant market positions in the most complex segments of deep and ultra-deep offshore, leveraging on the outstanding technical features of its drilling platforms and vessels, capable of operating at a maximum depth of 3,000 meters. Saipem is finalizing an upgrading program of its drilling fleet providing it with state-of-art rigs to enhance its role as high quality player capable of operating also in complex and harsh environments and to be adherent to the actual and future needs of the oil industry. In particular, in the next years Saipem intends to complete the building of: (i) the Scarabeo 8 and 9, new generation semi-submersible platforms, that have been already rented to Eni under multi-year contracts; and (ii) the new deepwater S12000 drilling ship to perform operations in West Africa on behalf of Total. In parallel, investments are underway to renew and to keep up the production capacity of other fleet equipment (upgrade equipment to the characteristics of projects or to clients needs and purchase of support equipment). In 2009 revenues of the offshore drilling segment were euro 566 million, accounting for 6% of total revenues. Contribution from operations increased by euro 19 million to euro 207 million from a year earlier mainly related to higher levels of activity of |
the Perro Negro 3 and Perro
Negro 7 jack up and of a Tender Assisted Drilling Barge. Main
orders acquired in 2009 related to: Onshore
drilling |
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Eni Fact Book Engineering & Construcion
| operations came in at euro
71 million, down euro 15 million from 2008 reflecting
lower average utilization rate of equipment. The most significant contracts awarded during the period include: - a contract on behalf of Agip KCO for the lease of 2 rigs in Kazakhstan for the development of the Kashagan field with a contract duration of five and half years; |
- a contract on behalf of
Eni in Congo for the lease of two rigs that will operate
in the M’Boundi field with a contract duration of
two years; - a contract on behalf of the joint-venture between First Calgary Petroleum and Sonatrach in Algeria for the lease of 2 rigs that will operate in the 405B block situated in the Berline basins with a contract duration of three years. |
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Eni Fact Book Engineering & Construcion
| Main operating data | 2005 |
2006 |
2007 |
2008 |
2009 |
| Offshore pipelines laid | (km) | 883 | 1,514 | 665 | 815 | 1,000 | ||||||
| Onshore pipelines laid | (km) | 1,005 | 871 | 770 | 683 | 716 | ||||||
| Offshore structures installed | (t) | 134,602 | 120,453 | 187,054 | 24,835 | 62,333 | ||||||
| Onshore structures installed | (t) | 7,112 | 5,242 | 194,561 | 163,137 | 76,543 | ||||||
| Offshore drilling | (km) | 114 | 126 | 123 | 150 | 140 | ||||||
| Onshore drilling | (km) | 548 | 599 | 657 | 622 | 719 | ||||||
| Offshore wells drilled | (units) | 67 | 75 | 47 | 50 | 54 | ||||||
| Onshore wells drilled | (units) | 213 | 236 | 256 | 241 | 241 |
| Construction vessels |
| Name | Type | Laying technique | Transport/lifting capability (t) | Maximum laying depth (m) | Pipelaying maximum diameter (inches) | |||||
| Saipem 7000 | Semi-submersible, self-propelled pipelay and DP vessel capable of lifting structures and J-laying pipelines in deep waters | J | 14,000 | 3,000 | 32 | |||||
| Saipem FDS | Multipurpose monohull dynamically positioned crane and pipelay (J-lay) vessel utilized for the development of hydrocarbon fields in deep waters | J | 600 | 2,100 | 22 | |||||
| Castoro Sei | Semi-submersible pipelay vessel capable of laying large diameter pipe | S | 300 | 1,000 | 60 | |||||
| Castoro Sette | Semi-submersible pipelay vessel capable of laying large diameter pipe | S | 60 | |||||||
| Castoro Otto | Crane and pipelay vessel | S | 2,200 | 600 | 60 | |||||
| Saipem 3000 | Mono-hull, self-propelled DP crane ship, capable of laying flexible pipes and umbilicals in deep waters and lifting structures | Reel, J, S | 2,200 | 3,000 | 6 | |||||
| Bar Protector | Dynamically positioned dive support vessel used for deep waters diving operations and works on platforms | |||||||||
| Semac 1 | Semi-submersible pipelay vessel capable of laying pipes in deep waters | S | 318 | 600 | 58 | |||||
| Castoro II | Derrick/lay barge | S | 1,000 | 60 | ||||||
| Castoro 10 | Trench/lay barge | S | 300 | 60 | ||||||
| Castoro 12 | Shallow waters pipelay barge | S | 1.4 | 40 | ||||||
| S355 | Derrick/lay barge | S | 600 | 42 | ||||||
| Crawler | Derrick/lay barge | S | 540 | 60 | ||||||
| Saipem Trenching barge | Barge for post-trenching and backfilling of pipelines operating in shallow waters | 1.4 | 40 | |||||||
| Saibos 230 | Derrick pipelay barge equipped with a mobile crane for piling, marine terminals and fixed platforms | S | 30 | |||||||
| Ersai 1 (a) | Technical pontoon equipped with two crawler cranes, capable of carrying out installations whilst grounded on the seabed | 1,800 | ||||||||
| Ersai 2 (a) | Work barge equipped with a fixed crane capable of lifting structures | 200 | ||||||||
| Ersai 400 (a) | Accommodation vessel (maximum capacity: 400 people), refuge provided | |||||||||
| Castoro 9 | Launching/cargo barge | 5,000 | ||||||||
| Castoro XI | Heavy duty cargo barge | 15,000 | ||||||||
| Castoro 14 | Deck cargo barge | 10,000 | ||||||||
| Castoro 15 | Deck cargo barge | 6,200 | ||||||||
| S42 | Launching/cargo barge | 8,000 | ||||||||
| S44 | Launching/cargo barge | 30,000 | ||||||||
| S45 | Launching/cargo barge | 20,000 | ||||||||
| Bos 600 | Launching/cargo barge | 30,000 | ||||||||
| Saibos 103 | Lightweight cargo barge | 3,600 | ||||||||
| FPSO - Cidade de Vitoria | FPSO unit with a production capacity of up to 100,000 barrels a day |
| (a) | Owned by the Saipem-managed joint venture ERSAI Caspian Contractor Llc. |
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Eni Fact Book Engineering & Construcion
| Drilling vessels |
| Name | Type | Drilling plant | Maximum depth (m) |
Drilling maximum (m) |
Other | |||||
| Perro Negro 2 | Jack-up | Oilwell E 2000 |
90 |
6,500 |
Heliport provided |
|||||
| Perro Negro 3 | Jack-up | Ideco E 2100 |
90 |
6,000 |
Heliport provided |
|||||
| Perro Negro 4 | Jack-up | National 110 UE |
45 |
5,000 |
Heliport provided |
|||||
| Perro Negro 5 | Jack-up | National 1320 UE |
90 |
6,500 |
Heliport provided |
|||||
| Perro Negro 6 | Jack-up | National SSDG 3000 |
107 |
9,150 |
Heliport provided |
|||||
| Perro Negro 7 | Jack-up | National 1625 UE |
115 |
9,150 |
Heliport provided |
|||||
| Scarabeo 3 | Semi-submersible drilling platform helped propulsion system | National 1625 DE |
550 |
7,600 |
Heliport provided |
|||||
| Scarabeo 4 | Semi-submersible drilling platform helped propulsion system | National 1625 DE |
550 |
7,600 |
Heliport provided |
|||||
| Scarabeo 5 | Semi-submersible drilling platform, self-propelled | Emco C3 |
1,900 |
8,000 |
Heliport provided |
|||||
| Scarabeo 6 | Semi-submersible drilling platform, self-propelled | Oilwell E 3000 |
500 |
7,600 |
Heliport provided |
|||||
| Scarabeo 7 | Semi-submersible drilling platform, self-propelled | Wirth SH 3000 EG |
1,500 |
8,000 |
Heliport provided |
|||||
| Saipem 10000 | Ultra deep waters drillship, self-propelled, dynamic positioning | Wirth GH 4500 EG |
3,000 |
9,200 |
Oil storage capacity: 140,000 bbl; |
|||||
| Saipem TAD | Tender assisted drilling barge | Bentec 1500 Hp |
150 |
4,877 |
Heliport provided |
| Main capital expenditures |
| Name | Type | Business Unit | Start-up year | |||
| Scarabeo 8 | Semi-submersible drilling platform self-propelled capable of operating in deep waters | Offshore drilling |
2010 |
|||
| CastorOne | Dynamically positioned crane and pipelay (S-lay) vessel utilized for the development of hydrocarbon fields in deep waters | Offshore construction |
2011 |
|||
| S12000 | Dynamically positioned drillship | Offshore drilling |
2010 |
|||
| Scarabeo 9 | Semi-submersible self-propelled drilling platform capable of operating in deep waters | Offshore drilling |
2010 |
|||
| New FDS 2 | Multipurpose monohull dynamically positioned crane and pipelay (J-lay) vessel utilized for the development of hydrocarbon fields in deep waters | Offshore construction |
2011 |
|||
| New DSV | Support vessel for offshore projects | Offshore construction |
2011 |
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Eni Fact Book Research and Innovation
Research and innovation
| Research and innovation have
been confirmed as key elements of Eni’s activities.
Technologies developed at Eni will allow to access new
energy resources, to improve their collection from the
subsoil and their efficient use, reducing the
environmental impact and effect on climate change of
Eni’s businesses. In 2009 Eni continued its commitment both at the level of energy supply, providing access to new and complex mineral basins or producing countries, and at the level of consumption and environmental sustainability of energy production. In 2009 overall expenditure in R&D amounted to approximately euro 207 million, excluding general and administrative expenses (euro 217 million in 2008 and euro 208 million in 2007) net of general and overhead costs. At December 31, 2009, a total of 1,019 persons were employed in research and development activities. Within its growth strategy Eni considers intellectual property as a key factor. In the past few years Eni engaged in the generation, identification and protection of innovative results obtained in R&D both on the areas of technologies related to its core business and in the field of renewable energy sources. In 2009 Eni filed 106 patent applications (96 in 2008). In particular, 61 applications derived from Eni’s R&D departments, 15 concerned petrochemical technology and 30 the area of Engineering & Construction, In 2009 a total of 7,760 patents were in Eni’s portfolio, including patent applications and patents still in force. In the next four years Eni defined a relevant capital expenditure plan in R&D amounting to approximately euro 1.4 billion, focusing in particular on: - developing techniques aiming at improving the assessment of the production potential of fields and the performance of exploration and production activities; |
- increasing the hydrocarbon
recovery factor; - monetizing natural gas reserves and upgrading transport infrastructure; - converting low grade products (e.g. ultra-heavy crude, bitumen, fuel oil) to higher grade distillates; - producing biofuels from non food biomass; - converting solar energy by means of innovative materials and processes. Main innovation projects Depth Velocity Analysis (DVA) Depositional models Uncertainty estimation |
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Eni Fact Book Research and Innovation
| Coil shooting This technology, applied for the first time ever in Indonesian waters, allows to obtain more detailed images of the subsoil than conventional techniques thanks to its innovative way of collecting and processing data: streamers pushed on spiraling routes instead of the traditional grid routes, reducing operating times and mineral risks.
Dual casing running |
Radial
drilling This technology, applied by Eni in a pioneering effort, allows to increase production in heavy oil fields reducing also their footprint. Drilling is performed radially from the main well with small diameter bores. Enhanced Oil Recovery with CO2 injection Bright Water Injection Gas-to-Liquids (GtL) |
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Eni Fact Book Research and Innovation
| Monitoring of
offshore pipelines (Dionisio project) Eni is developing a proprietary technology based on vibro-acoustic systems (patent application filed) capable of detecting damage to underwater pipelines in real time. In 2009 a prototype has been installed at a gas import terminal. A field test on an offshore pipeline confirmed the potential of this approach.
TPI-intermediate pressure transport Conversion of heavy crude and fractions
into lighter products |
Flexible FCC (fluid catalytic cracking) Dual Catalyst Slurry System H2S splitting Downstream application of microwave
technology |
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Eni Fact Book Research and Innovation
| Hydrogen SCT-CPO (Short Contact Time-Catalytic Partial Oxidation) is a reforming technology that can convert gaseous and liquid hydrocarbons (also derived from biomass) into synthetic gas (carbon monoxide and hydrogen). This technology can contribute to process intensification as it allows to produce synthetic gas and hydrogen using reactors up to 100 times smaller than those currently in use with relevant savings.
New formulas for fuels and lubricants GHG program (Green House Gas) Zero waste |
generated by the oil
industry by means of a thermal process developed by Eni
allows to transform them in utilizable gas and inert
residue that is easier and less costly to dispose. A
patent application has been filed on this project. Ensolvex® process En-Z-lite® process Green Diesel Biodiesel by means of micro algae Biodiesel from waste Micro-organisms for diesel Photoactive materials |
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Eni Fact Book Research and Innovation
| to use a much smaller surface of silicon as compared to conventional photovoltaic technology, at parity of power produced, with a potential cost reduction for electricity generation. This result was obtained by using dull, transparent or colored plates including adequate substances playing a double role: converting solar light, concentrating and carrying light to the edges of the plate where silicon is located and converting radiating energy into electricity. The conversion of light is exerted on components of solar radiation that are usually underused by traditional silicon | materials, converting them
into radiation with a wavelength that can induce a
photovoltaic effect. These results are expected to be
consolidated in 2010 thus testing the reproducibility and
stability of the process and preparing large prototypes. When touched by ultraviolet light, invisible to human eyes, these plates emit blue or red visible light according to the element used and operate a spectrum conversion. This device increases the fraction of solar energy transformed into electricity of a photovoltaic system. |
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Eni Fact Book Financial Data
| Profit and loss account | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Net sales from operations (a) | 73,692 | 86,071 | 87,204 | 108,082 | 83,227 | ||||||||||
| Other income and revenues | 801 | 796 | 833 | 728 | 1,118 | ||||||||||
| Total revenues | 74,493 | 86,867 | 88,037 | 108,810 | 84,345 | ||||||||||
| Purchases, services and other | (48,534 | ) | (57,469 | ) | (58,133 | ) | (76,350 | ) | (58,351 | ) | |||||
| Payroll and related costs | (3,351 | ) | (3,650 | ) | (3,800 | ) | (4,004 | ) | (4,181 | ) | |||||
| Total operating expenses | (51,885 | ) | (61,119 | ) | (61,933 | ) | (80,354 | ) | (62,532 | ) | |||||
| Other operating income (expense) (b) | (163 | ) | 9 | (129 | ) | (124 | ) | 55 | |||||||
| Depreciation, depletion, amortization and impairments | (5,781 | ) | (6,421 | ) | (7,236 | ) | (9,815 | ) | (9,813 | ) | |||||
| Operating profit | 16,664 | 19,336 | 18,739 | 18,517 | 12,055 | ||||||||||
| Finance (expense) income | (203 | ) | 152 | 46 | (640 | ) | (551 | ) | |||||||
| Net income from investments | 914 | 903 | 1,243 | 1,373 | 569 | ||||||||||
| Profit before income taxes | 17,375 | 20,391 | 20,028 | 19,250 | 12,073 | ||||||||||
| Income taxes | (8,128 | ) | (10,568 | ) | (9,219 | ) | (9,692 | ) | (6,756 | ) | |||||
| Tax rate (%) | 46.8 | 51.8 | 46.0 | 50.3 | 56.0 | ||||||||||
| Net profit | 9,247 | 9,823 | 10,809 | 9,558 | 5,317 | ||||||||||
| Attributable to: | |||||||||||||||
| - Eni | 8,788 | 9,217 | 10,011 | 8,825 | 4,367 | ||||||||||
| - minority interest | 459 | 606 | 798 | 733 | 950 | ||||||||||
| Net profit attributable to Eni | 8,788 | 9,217 | 10,011 | 8,825 | 4,367 | ||||||||||
| Exclusion of inventory holding (gain) loss | (759 | ) | 33 | (499 | ) | 723 | (191 | ||||||||
| Exclusion of special items | 1,222 | 1,151 | 57 | 616 | 1,031 | ||||||||||
| of which: | |||||||||||||||
| - non recurring items | 290 | 239 | 35 | (21 | ) | 250 | |||||||||
| - other special items | 932 | 912 | 22 | 637 | 781 | ||||||||||
| Eni’s adjusted net profit | 9,251 | 10,401 | 9,569 | 10,164 | 5,207 |
| (a) | From January 1, 2009 Eni adopted IFRIC 13 "Customer Loyalty Programmes" that requires that the award points granted to clients within the related loyalty programmes be accounted as a separate component of the basic transaction, evaluated at their fair value and recognized as revenues when effectively used. Prior period results have been restated accordingly. | |
| (b) | From year 2009, the Company accounts gains and losses on non-hedging commodity derivative instruments, including both fair value re-measurement and settled transactions, as items of operating profit. Adjusted operating profit and net profit only include gains and losses associated with settled transactions, gross and net of the associated tax impact respectively. Prior period results have been restated accordingly. |
| Summarized Group Balance Sheet | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Fixed assets | |||||||||||||||
| Property, plant and equipment | 45,013 | 44,312 | 50,137 | 59,255 | 63,177 | ||||||||||
| Other assets | 629 | 563 | |||||||||||||
| Inventories - compulsory stock | 2,194 | 1,827 | 2,171 | 1,196 | 1,736 | ||||||||||
| Intangible assets | 3,194 | 3,753 | 4,333 | 7,697 | 8,057 | ||||||||||
| Equity-accounted investments and other investments | 4,311 | 4,246 | 6,111 | 5,881 | 6,244 | ||||||||||
| Receivables and securities held for operating purposes | 775 | 557 | 725 | 1,219 | 1,261 | ||||||||||
| Net payables related to capital expenditures | (1,196 | ) | (1,090 | ) | (1,191 | ) | (787 | ) | (749 | ) | |||||
| 54,291 | 54,234 | 62,849 | 74,461 | 79,726 | |||||||||||
| Net working capital | |||||||||||||||
| Inventories | 3,563 | 4,752 | 5,499 | 6,082 | 5,495 | ||||||||||
| Trade receivables | 14,101 | 15,230 | 15,609 | 16,444 | 14,916 | ||||||||||
| Trade payables | (8,170 | ) | (10,528 | ) | (11,092 | ) | (12,590 | ) | (10,078 | ) | |||||
| Tax payables and provision for net deferred tax liabilities | (4,857 | ) | (5,396 | ) | (4,412 | ) | (5,323 | ) | (1,988 | ) | |||||
| Provisions | (7,643 | ) | (8,580 | ) | (8,433 | ) | (9,506 | ) | (10,319 | ) | |||||
| Other current and non-current assets and liabilities (a) | (562 | ) | (675 | ) | (2,653 | ) | (4,544 | ) | (3,968 | ) | |||||
| (3,568 | ) | (5,197 | ) | (5,482 | ) | (9,437 | ) | (5,942 | ) | ||||||
| Current investments | 2,476 | 2,741 | |||||||||||||
| Provisions for employee post-retirement benefits | (1,031 | ) | (1,071 | ) | (935 | ) | (947 | ) | (944 | ) | |||||
| Net assets held for sale including related net borrowings | 286 | 68 | 266 | ||||||||||||
| CAPITAL EMPLOYED, NET | 49,692 | 47,966 | 59,194 | 66,886 | 73,106 | ||||||||||
| Shareholders’ equity: | |||||||||||||||
| attributable to: | |||||||||||||||
| - Eni (b) | 36,868 | 39,029 | 40,428 | 44,436 | 46,073 | ||||||||||
| - Minority interest | 2,349 | 2,170 | 2,439 | 4,074 | 3,978 | ||||||||||
| 39,217 | 41,199 | 42,867 | 48,510 | 50,051 | |||||||||||
| Net borrowings | 10,475 | 6,767 | 16,327 | 18,376 | 23,055 | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 49,692 | 47,966 | 59,194 | 66,886 | 73,106 |
| (a) | Include receivables and securities for financing operating activities and securities covering technical reserves of Eni’s insurance activities. | |
| (b) | Net of own shares in portfolio. |
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Eni Fact Book Financial Data
| Summarized Group Cash Flow Statement | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Net profit | 9,247 | 9,823 | 10,809 | 9,558 | 5,317 | ||||||||||
| Adjustments to reconcile to cash generated from operating profit before changes in working capital: | |||||||||||||||
| - amortization and depreciation and other non monetary items | 6,518 | 5,753 | 6,346 | 11,388 | 9,847 | ||||||||||
| - net gains on disposal of assets | (220 | ) | (59 | ) | (309 | ) | (219 | ) | (226 | ) | |||||
| - dividends, interest, taxes and other changes | 8,471 | 10,435 | 8,850 | 9,080 | 6,687 | ||||||||||
| Net cash generated from operating profit before changes in working capital | 24,016 | 25,952 | 25,696 | 29,807 | 21,625 | ||||||||||
| Changes in working capital related to operations | (2,422 | ) | (1,024 | ) | (1,667 | ) | 2,212 | (1,769 | ) | ||||||
| Dividends received, taxes paid, interest (paid) received during the period | (6,658 | ) | (7,927 | ) | (8,512 | ) | (10,218 | ) | (8,720 | ) | |||||
| Net cash provided by operating activities | 14,936 | 17,001 | 15,517 | 21,801 | 11,136 | ||||||||||
| Capital expenditures | (7,414 | ) | (7,833 | ) | (10,593 | ) | (14,562 | ) | (13,695 | ) | |||||
| Investments and purchase of consolidated subsidiaries and businesses | (127 | ) | (95 | ) | (9,665 | ) | (4,019 | ) | (2,323 | ) | |||||
| Disposals | 542 | 328 | 659 | 979 | 3,595 | ||||||||||
| Other cash flow related to capital expenditures, investments and disposals | 293 | 361 | (35 | ) | (267 | ) | (295 | ) | |||||||
| Free cash flow | 8,230 | 9,762 | (4,117 | ) | 3,932 | (1,582 | ) | ||||||||
| Borrowings (repayment) of debt related to financing activities | (109 | ) | 216 | (479 | ) | 911 | 396 | ||||||||
| Changes in short and long-term finance debt | (540 | ) | (682 | ) | 8,761 | 980 | 3,841 | ||||||||
| Dividends paid and changes in minority interest and reserves | (7,284 | ) | (6,443 | ) | (5,836 | ) | (6,005 | ) | (2,956 | ) | |||||
| Effect of changes in consolidation and exchange differences | 33 | (201 | ) | (200 | ) | 7 | (30 | ) | |||||||
| NET CASH FLOW FOR THE PERIOD | 330 | 2,652 | (1,871 | ) | (175 | ) | (331 | ) |
| Change in net borrowings | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Free cash flow | 8,230 | 9,762 | (4,117 | ) | 3,932 | (1,582 | ) | ||||||||
| Net borrowings of acquired companies | (19 | ) | (244 | ) | (286 | ) | |||||||||
| Net borrowings of divested companies | 21 | 1 | 181 | ||||||||||||
| Exchange differences on net borrowings and other changes | (980 | ) | 388 | 637 | 129 | (141 | ) | ||||||||
| Dividends paid and changes in minority interest and reserves | (7,284 | ) | (6,443 | ) | (5,836 | ) | (6,005 | ) | (2,956 | ) | |||||
| CHANGE IN NET BORROWINGS | (32 | ) | 3,708 | (9,560 | ) | (2,049 | ) | (4,679 | ) |
| Net sales from operations | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | 22,120 | 26,738 | 26,920 | 33,042 | 23,801 | ||||||||||
| Gas & Power | 23,174 | 28,547 | 27,793 | 37,062 | 30,447 | ||||||||||
| Refining & Marketing | 33,696 | 38,176 | 36,349 | 45,017 | 31,769 | ||||||||||
| Petrochemicals | 6,255 | 6,823 | 6,934 | 6,303 | 4,203 | ||||||||||
| Engineering & Construction | 5,733 | 6,979 | 8,678 | 9,176 | 9,664 | ||||||||||
| Other activities | 863 | 823 | 205 | 185 | 88 | ||||||||||
| Corporate and financial companies | 1,239 | 1,174 | 1,313 | 1,331 | 1,280 | ||||||||||
| Impact of unrealized intragroup profit elimination (a) | 75 | (66 | ) | ||||||||||||
| Consolidation adjustment | (19,388 | ) | (23,189 | ) | (20,988 | ) | (24,109 | ) | (17,959 | ) | |||||
| 73,692 | 86,071 | 87,204 | 108,082 | 83,227 |
| (a) | This item concerned mainly intragroup sales of commodities, services and capital goods recorded in the assets of the purchasing business segment as of end of the period. |
| Net sales to customers | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | 7,562 | 8,545 | 10,640 | 14,125 | 10,171 | ||||||||||
| Gas & Power | 22,605 | 27,800 | 27,036 | 36,189 | 29,812 | ||||||||||
| Refining & Marketing | 32,604 | 36,876 | 35,073 | 43,521 | 30,804 | ||||||||||
| Petrochemicals | 5,572 | 6,156 | 6,571 | 5,905 | 3,965 | ||||||||||
| Engineering & Construction | 4,808 | 6,208 | 7,496 | 7,957 | 8,349 | ||||||||||
| Other activities | 317 | 303 | 174 | 156 | 64 | ||||||||||
| Corporate and financial companies | 224 | 183 | 214 | 154 | 128 | ||||||||||
| Impact of unrealized intragroup profit elimination | 75 | (66 | ) | ||||||||||||
| 73,692 | 86,071 | 87,204 | 108,082 | 83,227 |
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Eni Fact Book Financial Data
| Net sales by geographic area of destination | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 32,810 | 36,309 | 37,294 | 42,843 | 27,950 | |||||||
| Other EU countries | 19,601 | 23,949 | 23,074 | 29,341 | 24,331 | |||||||
| Rest of Europe | 5,123 | 6,975 | 5,507 | 7,125 | 5,213 | |||||||
| Africa | 5,259 | 5,949 | 8,010 | 12,331 | 10,174 | |||||||
| Americas | 6,103 | 6,250 | 6,447 | 7,218 | 7,080 | |||||||
| Asia | 4,399 | 5,595 | 5,840 | 8,916 | 8,208 | |||||||
| Other areas | 397 | 1,044 | 1,032 | 308 | 271 | |||||||
| Total outside Italy | 40,882 | 49,762 | 49,910 | 65,239 | 55,277 | |||||||
| 73,692 | 86,071 | 87,204 | 108,082 | 83,227 | ||||||||
| Purchases, services and other | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Production costs - raw, ancillary and consumable materials and goods | 35,271 | 44,625 | 44,850 | 58,662 | 40,331 | ||||||||||
| Production costs - services | 9,405 | 10,015 | 10,828 | 13,355 | 13,520 | ||||||||||
| Operating leases and other | 1,929 | 1,903 | 2,276 | 2,558 | 2,567 | ||||||||||
| Net provisions | 1,654 | 769 | 573 | 884 | 1,055 | ||||||||||
| Other expenses | 1,103 | 1,102 | 1,101 | 1,660 | 1,507 | ||||||||||
| less: | |||||||||||||||
| capitalized direct costs associated with self-constructed tangible and intangible assets | (828 | ) | (945 | ) | (1,495 | ) | (769 | ) | (629 | ) | |||||
| 48,534 | 57,469 | 58,133 | 76,350 | 58,351 |
| Principal accountant fees and services | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Audit fees | 12,591 | 22,240 | 26,383 | 27,962 | 30,748 | |||||||
| Audit-related fees | 190 | 166 | 169 | 152 | 276 | |||||||
| Tax fees | 246 | 303 | 81 | 46 | 51 | |||||||
| All other fees | 38 | 6 | 120 | 1 | ||||||||
| 13,065 | 22,715 | 26,753 | 28,161 | 31,075 |
| Payroll and related costs | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Wages and salaries | 2,484 | 2,630 | 2,906 | 3,204 | 3,330 | ||||||||||
| Social security contributions | 662 | 691 | 690 | 694 | 706 | ||||||||||
| Cost related to defined benefit plans and defined contribution plans | 126 | 230 | 161 | 107 | 137 | ||||||||||
| Other costs | 255 | 305 | 275 | 282 | 342 | ||||||||||
| less: | |||||||||||||||
| capitalized direct costs associated with self-constructed tangible and intangible assets | (176 | ) | (206 | ) | (232 | ) | (283 | ) | (334 | ) | |||||
| 3,351 | 3,650 | 3,800 | 4,004 | 4,181 |
| Depreciation, depletion, amortization and impairments | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | 3,897 | 4,589 | 5,431 | 6,678 | 6,789 | ||||||||||
| Gas & Power | 732 | 744 | 739 | 797 | 981 | ||||||||||
| Refining & Marketing | 462 | 434 | 433 | 430 | 408 | ||||||||||
| Petrochemicals | 118 | 124 | 116 | 117 | 83 | ||||||||||
| Engineering & Construction | 176 | 195 | 248 | 335 | 433 | ||||||||||
| Other activities | 16 | 6 | 4 | 3 | 2 | ||||||||||
| Corporate and financial companies | 112 | 70 | 68 | 76 | 83 | ||||||||||
| Impact of unrealized intragroup profit elimination | (4 | ) | (9 | ) | (10 | ) | (14 | ) | (17 | ) | |||||
| Total depreciation, depletion and amortization | 5,509 | 6,153 | 7,029 | 8,422 | 8,762 | ||||||||||
| Impairments | 272 | 268 | 207 | 1,393 | 1,051 | ||||||||||
| 5,781 | 6,421 | 7,236 | 9,815 | 9,813 |
| Operating profit by division | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | 12,324 | 15,368 | 13,433 | 16,239 | 9,120 | ||||||||||
| Gas & Power | 3,580 | 4,022 | 4,465 | 4,030 | 3,687 | ||||||||||
| Refining & Marketing | 1,852 | 324 | 686 | (988 | ) | (102 | ) | ||||||||
| Petrochemicals | 202 | 172 | 100 | (845 | ) | (675 | ) | ||||||||
| Engineering & Construction | 307 | 505 | 837 | 1,045 | 881 | ||||||||||
| Other activities | (934 | ) | (622 | ) | (444 | ) | (346 | ) | (382 | ) | |||||
| Corporate and financial companies | (526 | ) | (300 | ) | (312 | ) | (743 | ) | (474 | ) | |||||
| Impact of unrealized intragroup profit elimination | (141 | ) | (133 | ) | (26 | ) | 125 | ||||||||
| 16,664 | 19,336 | 18,739 | 18,517 | 12,055 |
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Eni Fact Book Financial Data
NON-GAAP measures
Reconciliation of reported operating profit and reported net profit to results on an adjusted basis
| Management evaluates Group
and business performance on the basis of adjusted
operating profit and adjusted net profit, which are
arrived at by excluding inventory holding gains or losses
and special items. Further more, finance charges on
finance debt, interest income, gains or losses deriving
from evaluation of certain derivative financial
instruments at fair value through profit or loss (as they
do not meet the formal criteria to be assessed as hedges
under IFRS, excluding commodity derivatives), and
exchange rate differences are all excluded when
determining adjusted net profit of each business segment.
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. The
Italian statutory tax rate of 34% is applied to finance
charges and income (33% in previous reporting periods).
Adjusted operating profit and adjusted net profit are
non-GAAP financial measures under either IFRS, or U.S.
GAAP. Management includes them in order to facilitate a
comparison of base business performance across periods
and allow financial analysts to evaluate Eni’s
trading performance on the basis of their forecasting
models. In addition, management uses segmental adjusted
net profit when calculating return on average capital
employed (ROACE) by each business segment. The
following is a description of items that are excluded
from the calculation of adjusted results. Special items include certain significant income or charges pertaining to either: (i) infrequent or unusual events and transaction, being identified as non-recurring items under such circumstances; or (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. 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 include gains and losses on
re-measurement at fair value of certain non-hedging
commodity derivatives, including the ineffective portion
of cash flow hedges. 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. In addition gains or losses on the fair value evaluation of the aforementioned derivative financial instruments, excluding commodity derivatives, and exchange rate differences are excluded from the adjusted net profit of business segments. 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 division). Finance charges or interest income and related taxation effects excluded from the adjusted net profit of the business segments are allocated on the aggregate Corporate and financial companies. For a reconciliation of adjusted operating profit and adjusted net profit to reported operating profit and reported net profit see tables below. |
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Eni Fact Book Financial Data
| 2005 | (euro million) |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Impact of unrealized intragroup profit elimination |
Group |
||||||||||
| Reported operating profit | 12,324 | 3,580 | 1,852 | 202 | 307 | (934 | ) | (526 | ) | (141 | ) | 16,664 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | (127 | ) | (1,064 | ) | (19 | ) | (1,210 | ) | |||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | 290 | 290 | |||||||||||||||||||||||||
| Other special (income) charges: | 325 | 40 | 422 | 78 | 7 | 638 | 142 | 1,652 | |||||||||||||||||||
| - environmental charges | 31 | 337 | 413 | 54 | 835 | ||||||||||||||||||||||
| - asset impairments | 247 | 1 | 5 | 29 | 4 | 75 | 2 | 363 | |||||||||||||||||||
| - risk provisions | 39 | 36 | 126 | 201 | |||||||||||||||||||||||
| - increase insurance charges | 57 | 6 | 30 | 17 | 4 | 64 | 178 | ||||||||||||||||||||
| - provision for redundancy incentives | 7 | 8 | 22 | 4 | 3 | 6 | 29 | 79 | |||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | 14 | (7 | ) | 1 | (7 | ) | 1 | ||||||||||||||||||||
| - other | 1 | (12 | ) | (8 | ) | 14 | (5 | ) | |||||||||||||||||||
| Special items of operating profit | 325 | 330 | 422 | 78 | 7 | 638 | 142 | 1,942 | |||||||||||||||||||
| Adjusted operating profit | 12,649 | 3,783 | 1,210 | 261 | 314 | (296 | ) | (384 | ) | (141 | ) | 17,396 | |||||||||||||||
| Net finance (expense) income (a) | (72 | ) | 29 | (133 | ) | (176 | ) | ||||||||||||||||||||
| Net income from investments (a) | 10 | 370 | 231 | 3 | 141 | (1 | ) | 23 | 777 | ||||||||||||||||||
| Income taxes (a) | (6,555 | ) | (1,478 | ) | (498 | ) | (37 | ) | (127 | ) | 356 | 52 | (8,287 | ) | |||||||||||||
| Tax rate (%) | 52.1 | 35.3 | 34.6 | 27.9 | 46.0 | ||||||||||||||||||||||
| Adjusted net profit | 6,032 | 2,704 | 943 | 227 | 328 | (297 | ) | (138 | ) | (89 | ) | 9,710 | |||||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 459 | ||||||||||||||||||||||||||
| - Eni’s adjusted net profit | 9,251 | ||||||||||||||||||||||||||
| Eni’s reported net profit | 8,788 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | (759 | ) | |||||||||||||||||||||||||
| Exclusion of special items: | 1,222 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | 290 | ||||||||||||||||||||||||||
| - other special (income) charges | 932 | ||||||||||||||||||||||||||
| Eni’s adjusted net profit | 9,251 |
| (a) | Excluding special items. |
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Eni Fact Book Financial Data
| 2006 | (euro million) |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Impact of unrealized intragroup profit elimination |
Group |
||||||||||
| Reported operating profit | 15,368 | 4,022 | 324 | 172 | 505 | (622 | ) | (300 | ) | (133 | ) | 19,336 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | (67 | ) | 215 | (60 | ) | 88 | |||||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | 55 | 109 | 13 | 62 | 239 | ||||||||||||||||||||||
| Other special (income) charges: | 153 | 107 | 146 | 94 | 3 | 261 | 56 | 820 | |||||||||||||||||||
| - environmental charges | 44 | 111 | 126 | 11 | 292 | ||||||||||||||||||||||
| - asset impairments | 231 | 51 | 14 | 50 | 1 | 22 | 369 | ||||||||||||||||||||
| - gains on disposals of assets | (61 | ) | (61 | ) | |||||||||||||||||||||||
| - risk provisions | 8 | 31 | 75 | 114 | |||||||||||||||||||||||
| - provision for redundancy incentives | 13 | 37 | 47 | 19 | 2 | 17 | 43 | 178 | |||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | (30 | ) | 15 | (1 | ) | (16 | ) | ||||||||||||||||||||
| - other | (40 | ) | (33 | ) | (6 | ) | 21 | 2 | (56 | ) | |||||||||||||||||
| Special items of operating profit | 153 | 162 | 255 | 107 | 3 | 323 | 56 | 1,059 | |||||||||||||||||||
| Adjusted operating profit | 15,521 | 4,117 | 794 | 219 | 508 | (299 | ) | (244 | ) | (133 | ) | 20,483 | |||||||||||||||
| Net finance (expense) income (a) | (50 | ) | 7 | (7 | ) | 196 | 146 | ||||||||||||||||||||
| Net income from investments (a) | 85 | 489 | 184 | 2 | 66 | 5 | 831 | ||||||||||||||||||||
| Income taxes (a) | (8,421 | ) | (1,611 | ) | (347 | ) | (47 | ) | (174 | ) | 93 | 54 | (10,453 | ) | |||||||||||||
| Tax rate (%) | 54.1 | 34.9 | 35.5 | 30.3 | 48.7 | ||||||||||||||||||||||
| Adjusted net profit | 7,135 | 3,002 | 631 | 174 | 400 | (301 | ) | 45 | (79 | ) | 11,007 | ||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 606 | ||||||||||||||||||||||||||
| - Eni’s adjusted net profit | 10,401 | ||||||||||||||||||||||||||
| Eni’s reported net profit | 9,217 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | 33 | ||||||||||||||||||||||||||
| Exclusion of special items: | 1,151 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | 239 | ||||||||||||||||||||||||||
| - other special (income) charges | 912 | ||||||||||||||||||||||||||
| Eni’s adjusted net profit | 10,401 |
| (a) | Excluding special items. |
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Eni Fact Book Financial Data
| 2007 | (euro million) |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Impact of unrealized intragroup profit elimination |
Group |
||||||||||
| Reported operating profit | 13,433 | 4,465 | 686 | 100 | 837 | (444 | ) | (312 | ) | (26 | ) | 18,739 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | 44 | (658 | ) | (6 | ) | (620 | ) | ||||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | (11 | ) | (61 | ) | 35 | (2 | ) | (4 | ) | 61 | (10 | ) | 8 | ||||||||||||||
| Other special (income) charges: | 348 | (34 | ) | 229 | 24 | 7 | 176 | 127 | 877 | ||||||||||||||||||
| - environmental charges | 15 | 128 | 210 | 12 | 365 | ||||||||||||||||||||||
| - asset impairments | 226 | 58 | 6 | 290 | |||||||||||||||||||||||
| - risk provisions | 9 | 13 | 22 | ||||||||||||||||||||||||
| - provision for redundancy incentives | 6 | 38 | 31 | 24 | 7 | 18 | 32 | 156 | |||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | 74 | (16 | ) | 6 | 83 | 147 | |||||||||||||||||||||
| - other | 42 | (71 | ) | (3 | ) | (71 | ) | (103 | ) | ||||||||||||||||||
| Special items of operating profit | 337 | (95 | ) | 264 | 22 | 3 | 237 | 117 | 885 | ||||||||||||||||||
| Adjusted operating profit | 13,770 | 4,414 | 292 | 116 | 840 | (207 | ) | (195 | ) | (26 | ) | 19,004 | |||||||||||||||
| Net finance (expense) income (a) | 60 | (5 | ) | 1 | (8 | ) | (25 | ) | 23 | ||||||||||||||||||
| Net income from investments (a) | 176 | 420 | 126 | 1 | 80 | 5 | 4 | 812 | |||||||||||||||||||
| Income taxes (a) | (7,678 | ) | (1,702 | ) | (124 | ) | (44 | ) | (262 | ) | 154 | 10 | (9,646 | ) | |||||||||||||
| Tax rate (%) | 54.8 | 35.2 | 29.7 | 28.5 | 48.6 | ||||||||||||||||||||||
| Adjusted net profit | 6,328 | 3,127 | 294 | 74 | 658 | (210 | ) | (62 | ) | (16 | ) | 10,193 | |||||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 624 | ||||||||||||||||||||||||||
| - Eni's adjusted net profit | 9,569 | ||||||||||||||||||||||||||
| Eni's reported net profit | 10,011 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | (499 | ) | |||||||||||||||||||||||||
| Exclusion of special items: | 57 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | 35 | ||||||||||||||||||||||||||
| - other special (income) charges | 22 | ||||||||||||||||||||||||||
| Eni's adjusted net profit | 9,569 |
| (a) | Excluding special items. |
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Eni Fact Book Financial Data
| 2008 | (euro million) |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Impact of unrealized intragroup profit elimination |
Group |
||||||||||
| Reported operating profit | 16,239 | 4,030 | (988 | ) | (845 | ) | 1,045 | (346 | ) | (743 | ) | 125 | 18,517 | ||||||||||||||
| Exclusion of inventory holding (gains) losses | (429 | ) | 1,199 | 166 | 936 | ||||||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | (21 | ) | (21 | ) | |||||||||||||||||||||||
| Other special (income) charges: | 983 | (37 | ) | 390 | 281 | (4 | ) | 102 | 461 | 2,176 | |||||||||||||||||
| - environmental charges | 12 | 76 | 101 | 120 | 309 | ||||||||||||||||||||||
| - asset impairments | 989 | 1 | 299 | 278 | 5 | 1,572 | |||||||||||||||||||||
| - gains on disposals of assets | 4 | 7 | 13 | (5 | ) | (4 | ) | (14 | ) | (9 | ) | (8 | ) | ||||||||||||||
| - risk provisions | 4 | 4 | |||||||||||||||||||||||||
| - provision for redundancy incentives | 8 | 20 | 23 | 8 | 4 | 28 | 91 | ||||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | (18 | ) | (74 | ) | (21 | ) | 52 | (61 | ) | ||||||||||||||||||
| - other | (3 | ) | 2 | 270 | 269 | ||||||||||||||||||||||
| Special items of operating profit | 983 | (37 | ) | 369 | 281 | (4 | ) | 102 | 461 | 2,155 | |||||||||||||||||
| Adjusted operating profit | 17,222 | 3,564 | 580 | (398 | ) | 1,041 | (244 | ) | (282 | ) | 125 | 21,608 | |||||||||||||||
| Net finance (expense) income (a) | 70 | (13 | ) | 1 | 1 | 1 | (39 | ) | (661 | ) | (640 | ) | |||||||||||||||
| Net income from investments (a) | 609 | 420 | 174 | (9 | ) | 49 | 4 | 5 | 1,252 | ||||||||||||||||||
| Income taxes (a) | (10,001 | ) | (1,323 | ) | (234 | ) | 83 | (307 | ) | 406 | (49 | ) | (11,425 | ) | |||||||||||||
| Tax rate (%) | 55.9 | 33.3 | 31.0 | 28.1 | 51.4 | ||||||||||||||||||||||
| Adjusted net profit | 7,900 | 2,648 | 521 | (323 | ) | 784 | (279 | ) | (532 | ) | 76 | 10,795 | |||||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 631 | ||||||||||||||||||||||||||
| - Eni's adjusted net profit | 10,164 | ||||||||||||||||||||||||||
| Eni's reported net profit | 8,825 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | 723 | ||||||||||||||||||||||||||
| Exclusion of special items: | 616 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | (21 | ) | |||||||||||||||||||||||||
| - other special (income) charges | 637 | ||||||||||||||||||||||||||
| Eni's adjusted net profit | 10,164 |
| (a) | Excluding special items. |
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Eni Fact Book Financial Data
| 2009 | (euro million) |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Impact of unrealized intragroup profit elimination |
Group |
||||||||||
| Reported operating profit | 9,120 | 3,687 | (102 | ) | (675 | ) | 881 | (382 | ) | (474 | ) | 12,055 | |||||||||||||||
| Exclusion of inventory holding (gains) losses | 326 | (792 | ) | 121 | (345 | ) | |||||||||||||||||||||
| Exclusion of special items | |||||||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||
| Non-recurring (income) charges | 250 | 250 | |||||||||||||||||||||||||
| Other special (income) charges: | 364 | (112 | ) | 537 | 128 | (11 | ) | 124 | 132 | 1,162 | |||||||||||||||||
| - environmental charges | 19 | 72 | 153 | 54 | 298 | ||||||||||||||||||||||
| - asset impairments | 618 | 27 | 389 | 121 | 2 | 5 | 1,162 | ||||||||||||||||||||
| - gains on disposals of assets | (270 | ) | (6 | ) | (2 | ) | 3 | (2 | ) | (277 | ) | ||||||||||||||||
| - risk provisions | 115 | 17 | (4 | ) | 128 | ||||||||||||||||||||||
| - provision for redundancy incentives | 31 | 25 | 22 | 10 | 8 | 38 | 134 | ||||||||||||||||||||
| - re-measurement gains/losses on commodity derivatives | (15 | ) | (292 | ) | 39 | (3 | ) | (16 | ) | (287 | ) | ||||||||||||||||
| - other | (36 | ) | 40 | 4 | |||||||||||||||||||||||
| Special items of operating profit | 364 | (112 | ) | 537 | 128 | 239 | 124 | 132 | 1,412 | ||||||||||||||||||
| Adjusted operating profit | 9,484 | 3,901 | (357 | ) | (426 | ) | 1,120 | (258 | ) | (342 | ) | 13,122 | |||||||||||||||
| Net finance (expense) income (a) | (23 | ) | (15 | ) | 12 | (525 | ) | (551 | ) | ||||||||||||||||||
| Net income from investments (a) | 243 | 332 | 75 | 49 | 1 | 700 | |||||||||||||||||||||
| Income taxes (a) | (5,826 | ) | (1,302 | ) | 85 | 86 | (277 | ) | 123 | (3 | ) | (7,114 | ) | ||||||||||||||
| Tax rate (%) | 60.0 | 30.9 | 23.7 | 53.6 | |||||||||||||||||||||||
| Adjusted net profit | 3,878 | 2,916 | (197 | ) | (340 | ) | 892 | (245 | ) | (744 | ) | (3 | ) | 6,157 | |||||||||||||
| of which: | |||||||||||||||||||||||||||
| - Adjusted net profit of minority interest | 950 | ||||||||||||||||||||||||||
| - Eni's adjusted net profit | 5,207 | ||||||||||||||||||||||||||
| Eni's reported net profit | 4,367 | ||||||||||||||||||||||||||
| Exclusion of inventory holding (gains) losses | (191 | ) | |||||||||||||||||||||||||
| Exclusion of special items: | 1,031 | ||||||||||||||||||||||||||
| - non-recurring (income) charges | 250 | ||||||||||||||||||||||||||
| - other special (income) charges | 781 | ||||||||||||||||||||||||||
| Eni's adjusted net profit | 5,207 |
| (a) | Excluding special items. |
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| Breakdown of special items | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Non-recurring charges (income) | 290 | 239 | 8 | (21 | ) | 250 | |||||||||
| of which: | |||||||||||||||
| estimated charge of the possible resolution of the TSKJ matter | 250 | ||||||||||||||
| curtailment recognized of the reserve for post-retirement benefits for Italian employees | (83 | ) | |||||||||||||
| provisions and utilizations against antitrust proceedings and regulations | 290 | 239 | 91 | (21 | ) | ||||||||||
| Other special charges (income): | 1,652 | 820 | 877 | 2,176 | 1,162 | ||||||||||
| - environmental charges | 835 | 292 | 365 | 309 | 298 | ||||||||||
| - asset impairments | 363 | 369 | 290 | 1,572 | 1,162 | ||||||||||
| - gains on disposal of assets | (61 | ) | (8 | ) | (277 | ) | |||||||||
| - risk provisions | 201 | 114 | 22 | 4 | 128 | ||||||||||
| - increase insurance charges | 178 | ||||||||||||||
| - provision for redundancy incentives | 79 | 178 | 156 | 91 | 134 | ||||||||||
| - re-measurement gains/losses on commodity derivatives | 1 | (16 | ) | 147 | (61 | ) | (287 | ) | |||||||
| - other | (5 | ) | (56 | ) | (103 | ) | 269 | 4 | |||||||
| Special items of operating profit | 1,942 | 1,059 | 885 | 2,155 | 1,412 | ||||||||||
| Net finance (expense) income | 27 | (6 | ) | (23 | ) | ||||||||||
| Net income from investments | (137 | ) | (72 | ) | (321 | ) | (239 | ) | 179 | ||||||
| of which: | |||||||||||||||
| gain on the disposal of Italiana Petroli (IP) | (132 | ) | |||||||||||||
| gain on Galp Energia SGPS SA (disposal of A21 assets Rede Electrica National) | (73 | ) | |||||||||||||
| gain from the sale of stakes in Haldor Topsøe AS and Camom SA | (290 | ) | |||||||||||||
| gain on divestment of GTT (Gaztransport et Technigaz SAS) | (185 | ) | |||||||||||||
| Income taxes | (610 | ) | 170 | (658 | ) | (1,402 | ) | (560 | ) | ||||||
| of which: | |||||||||||||||
| tax impact pursuant to Law Decree No. 112 of June 25, 2008 for Italian subsidiaries | (270 | ) | (27 | ) | |||||||||||
| - on inventories | (176 | ) | |||||||||||||
| - on deferred taxes | (94 | ) | (27 | ) | |||||||||||
| tax impact pursuant Budget Law 2008 for Italian subsidiaries | (290 | ) | |||||||||||||
| adjustment to deferred tax for Italian subsidiaries | (394 | ) | |||||||||||||
| adjustment to deferred tax for Libyan assets | (173 | ) | |||||||||||||
| supplemental tax rate UK | 91 | ||||||||||||||
| wind-fall tax Algeria | 179 | ||||||||||||||
| tax proceedings Venezuela | 77 | ||||||||||||||
| impairment of deferred tax assets E&P | 72 | ||||||||||||||
| other tax items | (50 | ) | (46 | ) | (192 | ) | |||||||||
| taxes on special items of operating profit | (610 | ) | (177 | ) | (214 | ) | (623 | ) | (413 | ) | |||||
| Total special items of net profit | 1,222 | 1,151 | (117 | ) | 514 | 1,031 | |||||||||
| attributable to: | |||||||||||||||
| - Minority interest | (174 | ) | (102 | ) | |||||||||||
| - Eni | 1,222 | 1,151 | 57 | 616 | 1,031 |
| Adjusted operating profit by division | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | 12,649 | 15,521 | 13,770 | 17,222 | 9,484 | ||||||||||
| Gas & Power | 3,783 | 4,117 | 4,414 | 3,564 | 3,901 | ||||||||||
| Refining & Marketing | 1,210 | 794 | 292 | 580 | (357 | ) | |||||||||
| Petrochemicals | 261 | 219 | 116 | (398 | ) | (426 | ) | ||||||||
| Engineering & Construction | 314 | 508 | 840 | 1,041 | 1,120 | ||||||||||
| Other activities | (296 | ) | (299 | ) | (207 | ) | (244 | ) | (258 | ) | |||||
| Corporate and financial companies | (384 | ) | (244 | ) | (195 | ) | (282 | ) | (342 | ) | |||||
| Impact of unrealized intragroup profit elimination | (141 | ) | (133 | ) | (26 | ) | 125 | ||||||||
| 17,396 | 20,483 | 19,004 | 21,608 | 13,122 |
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Eni Fact Book Financial Data
| Adjusted net profit by division | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | 6,032 | 7,135 | 6,328 | 7,900 | 3,878 | ||||||||||
| Gas & Power | 2,704 | 3,002 | 3,127 | 2,648 | 2,916 | ||||||||||
| Refining & Marketing | 943 | 631 | 294 | 521 | (197 | ) | |||||||||
| Petrochemicals | 227 | 174 | 74 | (323 | ) | (340 | ) | ||||||||
| Engineering & Construction | 328 | 400 | 658 | 784 | 892 | ||||||||||
| Other activities | (297 | ) | (301 | ) | (210 | ) | (279 | ) | (245 | ) | |||||
| Corporate and financial companies | (138 | ) | 45 | (62 | ) | (532 | ) | (744 | ) | ||||||
| Impact of unrealized intragroup profit elimination (a) | (89 | ) | (79 | ) | (16 | ) | 76 | (3 | ) | ||||||
| 9,710 | 11,007 | 10,193 | 10,795 | 6,157 | |||||||||||
| of which attributable to: | |||||||||||||||
| Minority interest | 459 | 606 | 624 | 631 | 950 | ||||||||||
| Eni | 9,251 | 10,401 | 9,569 | 10,164 | 5,207 |
| Finance income (expense) | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Income from equity instruments | 188 | 241 | 163 | ||||||||||||
| Exchange differences, net | 169 | (152 | ) | (51 | ) | 206 | (106 | ) | |||||||
| Finance income (expense) related to net borrowings and other | (235 | ) | (121 | ) | (279 | ) | (668 | ) | (612 | ) | |||||
| Net income from securities | 36 | 51 | 39 | 21 | 3 | ||||||||||
| Financial expense due to the passage of time (accretion discount) | (109 | ) | (116 | ) | (186 | ) | (249 | ) | (218 | ) | |||||
| Income (expense) on derivatives | (223 | ) | 374 | 155 | (427 | ) | (4 | ) | |||||||
| less: | |||||||||||||||
| Finance expense capitalized | 159 | 116 | 180 | 236 | 223 | ||||||||||
| (203 | ) | 152 | 46 | (640 | ) | (551 | ) | ||||||||
| of which, net income from receivables and securities held for financing operating activities and interest on tax credits | 106 | 119 | 96 | 62 | 39 |
| Income (expense on) from investments | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Share of profit of equity-accounted investments | 770 | 887 | 906 | 761 | 693 | ||||||||||
| Share of loss of equity-accounted investments | (33 | ) | (36 | ) | (135 | ) | (105 | ) | (241 | ) | |||||
| Gains on disposals | 179 | 25 | 301 | 218 | 16 | ||||||||||
| Losses on disposals | (8 | ) | (7 | ) | (1 | ) | (1 | ) | |||||||
| Dividends | 33 | 98 | 170 | 510 | 164 | ||||||||||
| Decreases (increases) in the provision for losses on investments | (56 | ) | 2 | (16 | ) | (59 | ) | ||||||||
| Other income (expense), net | (27 | ) | (8 | ) | 6 | (4 | ) | ||||||||
| 914 | 903 | 1,243 | 1,373 | 569 |
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Eni Fact Book Financial Data
| Property, plant and equipment by division (at year end) | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Property, plant and equipment gross | |||||||||||||||
| Exploration & Production | 47,916 | 47,619 | 52,780 | 64,338 | 71,189 | ||||||||||
| Gas & Power | 22,730 | 23,660 | 24,641 | 26,566 | 27,998 | ||||||||||
| Refining & Marketing | 9,420 | 11,273 | 12,421 | 12,899 | 13,378 | ||||||||||
| Petrochemicals | 4,402 | 4,380 | 4,918 | 5,036 | 5,174 | ||||||||||
| Engineering & Construction | 3,878 | 4,363 | 5,823 | 7,702 | 9,163 | ||||||||||
| Other activities | 1,999 | 1,967 | 1,543 | 1,550 | 1,592 | ||||||||||
| Corporate and financial companies | 453 | 321 | 344 | 391 | 373 | ||||||||||
| Impact of unrealized intragroup profit elimination | (88 | ) | (128 | ) | (227 | ) | (355 | ) | (343 | ) | |||||
| 90,710 | 93,455 | 102,243 | 118,127 | 128,524 | |||||||||||
| Property, plant and equipment net | |||||||||||||||
| Exploration & Production | 23,956 | 22,355 | 25,751 | 32,355 | 34,462 | ||||||||||
| Gas & Power | 14,289 | 14,714 | 15,204 | 16,360 | 17,190 | ||||||||||
| Refining & Marketing | 3,556 | 3,791 | 4,495 | 4,496 | 4,397 | ||||||||||
| Petrochemicals | 1,139 | 1,072 | 1,099 | 912 | 853 | ||||||||||
| Engineering & Construction | 1,847 | 2,225 | 3,513 | 5,154 | 6,305 | ||||||||||
| Other activities | 117 | 93 | 82 | 83 | 79 | ||||||||||
| Corporate and financial companies | 193 | 176 | 196 | 212 | 179 | ||||||||||
| Impact of unrealized intragroup profit elimination | (84 | ) | (114 | ) | (203 | ) | (317 | ) | (288 | ) | |||||
| 45,013 | 44,312 | 50,137 | 59,255 | 63,177 |
| Capital expenditures by division | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Exploration & Production | 4,932 | 5,163 | 6,480 | 9,281 | 9,486 | ||||||||
| Gas & Power | 1,185 | 1,214 | 1,511 | 2,058 | 1,686 | ||||||||
| Refining & Marketing | 656 | 645 | 979 | 965 | 635 | ||||||||
| Petrochemicals | 112 | 99 | 145 | 212 | 145 | ||||||||
| Engineering & Construction | 349 | 591 | 1,410 | 2,027 | 1,630 | ||||||||
| Other activities | 48 | 72 | 59 | 52 | 44 | ||||||||
| Corporate and financial companies | 132 | 88 | 108 | 95 | 57 | ||||||||
| Impact of unrealized intragroup profit elimination | (39 | ) | (99 | ) | (128 | ) | 12 | ||||||
| 7,414 | 7,833 | 10,593 | 14,562 | 13,695 |
| Capital expenditures by geographic area of origin | (euro million) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 2,442 | 2,529 | 3,246 | 3,674 | 3,198 | |||||||
| Other European Union countries | 545 | 713 | 1,246 | 1,660 | 1,454 | |||||||
| Rest of Europe | 415 | 436 | 469 | 582 | 574 | |||||||
| Africa | 2,233 | 2,419 | 3,152 | 5,153 | 4,645 | |||||||
| Americas | 507 | 572 | 1,004 | 1,240 | 1,207 | |||||||
| Asia | 1,181 | 1,032 | 1,253 | 1,777 | 2,033 | |||||||
| Other areas | 91 | 132 | 223 | 476 | 584 | |||||||
| Total outside Italy | 4,972 | 5,304 | 7,347 | 10,888 | 10,497 | |||||||
| 7,414 | 7,833 | 10,593 | 14,562 | 13,695 |
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Eni Fact Book Financial Data
| Net borrowings | (euro million) |
| Debt and bonds | Cash and cash equivalents | Securities held for non-operating purposes | Financing receivables held for non-operating purposes | Total | ||||||
| 2005 | |||||||||||||||
| Short-term debt | 5,345 | (1,333 | ) | (903 | ) | (12 | ) | 3,097 | |||||||
| Long-term debt | 7,653 | (28 | ) | (247 | ) | 7,378 | |||||||||
| 12,998 | (1,333 | ) | (931 | ) | (259 | ) | 10,475 | ||||||||
| 2006 | |||||||||||||||
| Short-term debt | 4,290 | (3,985 | ) | (552 | ) | (143 | ) | (390 | ) | ||||||
| Long-term debt | 7,409 | (252 | ) | 7,157 | |||||||||||
| 11,699 | (3,985 | ) | (552 | ) | (395 | ) | 6,767 | ||||||||
| 2007 | |||||||||||||||
| Short-term debt | 8,500 | (2,114 | ) | (174 | ) | (990 | ) | 5,222 | |||||||
| Long-term debt | 11,330 | (225 | ) | 11,105 | |||||||||||
| 19,830 | (2,114 | ) | (174 | ) | (1,215 | ) | 16,327 | ||||||||
| 2008 | |||||||||||||||
| Short-term debt | 6,908 | (1,939 | ) | (185 | ) | (337 | ) | 4,447 | |||||||
| Long-term debt | 13,929 | 13,929 | |||||||||||||
| 20,837 | (1,939 | ) | (185 | ) | (337 | ) | 18,376 | ||||||||
| 2009 | |||||||||||||||
| Short-term debt | 6,736 | (1,608 | ) | (64 | ) | (73 | ) | 4,991 | |||||||
| Long-term debt | 18,064 | 18,064 | |||||||||||||
| 24,800 | (1,608 | ) | (64 | ) | (73 | ) | 23,055 |
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Eni Fact Book Financial Data
Employees
| Employees at year end | (units) |
2005 |
2006 |
2007 |
2008 |
2009 |
| Italy | 4,736 | 4,977 | 5,224 | 5,468 | 5,287 | ||||||
| Exploration & Production | Outside Italy | 3,003 | 3,063 | 3,799 | 5,423 | 5,583 | |||||
| 7,739 | 8,040 | 9,023 | 10,891 | 10,870 | |||||||
| Italy | 10,024 | 9,898 | 9,425 | 9,113 | 8,911 | ||||||
| Gas & Power | Outside Italy | 2,591 | 2,472 | 2,468 | 2,579 | 2,493 | |||||
| 12,615 | 12,370 | 11,893 | 11,692 | 11,404 | |||||||
| Italy | 6,680 | 7,196 | 7,101 | 6,641 | 6,493 | ||||||
| Refining & Marketing | Outside Italy | 2,214 | 2,241 | 2,327 | 1,686 | 1,673 | |||||
| 8,894 | 9,437 | 9,428 | 8,327 | 8,166 | |||||||
| Italy | 5,164 | 4,948 | 5,476 | 5,230 | 5,054 | ||||||
| Petrochemicals | Outside Italy | 1,298 | 1,077 | 1,058 | 1,044 | 1,014 | |||||
| 6,462 | 6,025 | 6,534 | 6,274 | 6,068 | |||||||
| Italy | 5,799 | 6,164 | 6,618 | 7,316 | 7,003 | ||||||
| Engineering & Construction | Outside Italy | 22,885 | 24,738 | 26,493 | 28,313 | 28,966 | |||||
| 28,684 | 30,902 | 33,111 | 35,629 | 35,969 | |||||||
| Italy | 2,636 | 2,219 | 1,172 | 1,070 | 968 | ||||||
| Other activities | Outside Italy | ||||||||||
| 2,636 | 2,219 | 1,172 | 1,070 | 968 | |||||||
| Italy | 5,153 | 4,363 | 4,411 | 4,642 | 4,583 | ||||||
| Corporate and financial companies | Outside Italy | 75 | 216 | 290 | 355 | 389 | |||||
| 5,228 | 4,579 | 4,701 | 4,997 | 4,972 | |||||||
| Italy | 40,192 | 39,765 | 39,427 | 39,480 | 38,299 | ||||||
| Total employees at year end | Outside Italy | 32,066 | 33,807 | 36,435 | 39,400 | 40,118 | |||||
| 72,258 | 73,572 | 75,862 | 78,880 | 78,417 | |||||||
| of which: senior managers | 1,748 | 1,603 | 1,585 | 1,658 | 1,649 |
| (a) | From January 1, 2009, employees of "Stoccaggi Gas Italia", accounted for in the Exploration & Production segment until December 31, 2008, are reported within the Gas & Power segment, in the regulated business results, following restructuring of Eni regulated gas business in Italy. As of that date, regulated businesses in Italy therefore include the Transport, Distribution, Regasification and Storage activities in Italy. Prior period have been restated accordingly. |
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Eni Fact Book Financial Data
Supplemental oil and gas information
| Oil
and natural gas reserves Eni’s criteria concerning evaluation and classification of proved developed and undeveloped reserves follow Regulation S-X 4-10 of the U.S. Securities and Exchange Commission and have been disclosed in accordance with FASB Extractive Activities - Oil & Gas (Topic 932). Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price1 shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. Net proved reserves exclude interests and royalties owned by others. Proved reserves are classified as either developed or undeveloped. Developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well. Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Since 1991 Eni has requested qualified independent oil engineering companies to carry out an independent |
evaluation2 of
part of its proved reserves on a rotational basis. The
description of qualifications of the person primarily
responsible of the reserve audit is included in the third
party audit report3. In the preparation of their reports, independent evaluators rely, without independent verification, upon information furnished by Eni with respect to property interest, production, current cost of operation and development, sale agreements, prices and other factual information and data that were accepted as represented by the independent evaluators. These data, equally used by Eni in its internal process, include logs, directional surveys, core and PVT (Pressure Volume Temperature) analysis, maps, oil/gas/water production/injection data of wells, reservoir studies; technical analysis relevant to field performance, reservoir performance, long-term development plans, future capital and operating costs. In order to calculate the economic value of Eni equity reserves, actual prices applicable to hydrocarbon sales, price adjustments required by applicable contractual arrangements, and other pertinent information are provided. In 2009 Ryder Scott Company and DeGolyer and MacNaughton3 provided an independent evaluation of almost 28% of Eni’s total proved reserves as of December 31, 20094 confirming, as in previous years, the reasonableness of Eni’s internal evaluations. In the three year period from 2007 to 2009, 86% of Eni’s total proved reserves were subject to independent evaluation. As of December 31, 2009 among the most important Eni properties, the only one which was not subject to an independent review was Barbara (Italy). Eni operates under Production Sharing Agreements, PSAs, in several of the foreign jurisdictions where it has oil and gas exploration and production activities. Reserves of oil and natural gas to which Eni is entitled under PSA arrangements are shown in accordance with Eni’s economic interest in the volumes of oil and natural gas estimated to be recoverable in future years. Such reserves include estimated quantities allocated to Eni for recovery of costs, income taxes owed by Eni but settled by its joint venture partners (which are state-owned entities) out of Eni’s share of production and Eni’s net equity share after cost recovery. Proved oil and gas reserves associated with PSAs represented 46%, 54% and 57% of total proved reserves as of |
| (1) | In prior periods, year-end liquids and natural gas prices were used in the estimate of proved reserves. | |
| (2) | From 1991 to 2002 DeGolyer and MacNaughton, from 2003 also Ryder Scott Company. | |
| (3) | The reports of independent engineers are available on Eni website www.eni.com, section Documentation/Annual Report 2009. | |
| (4) | Including reserves of joint ventures and affiliates. |
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Eni Fact Book Financial Data
| December 31, 2007, 2008 and
2009, respectively, on an oil-equivalent basis. Similar effects as PSAs apply to service and "buy-back" contracts; proved reserves associated with such contracts represented 1%, 2% and 2% of total proved reserves on an oil-equivalent basis as of December 31, 2007, 2008 and 2009, respectively. Oil and gas reserve quantities include: (i) oil and natural gas quantities in excess to cost recovery which the company has an obligation to purchase under certain PSAs with governments or authorities, whereby the company serves as producer of reserves. Reserve volumes associated with oil and gas deriving from such obligation represent 1.8%, 0.1% and 0.3% of total proved reserves as of December 31, 2007, 2008 and 2009, respectively, on an oil-equivalent basis; (ii) volumes of natural gas used for own consumption, (iii) the quantities of natural gas produced to feed the Angola LNG plant and (iv) volumes of natural gas held in certain Eni’s storage fields in Italy. Proved reserves attributable to these fields include: (a) the residual natural gas volumes of the reservoirs and (b) natural gas volumes from other Eni fields input into these reservoirs in subsequent periods. Proved |
reserves do not include
volumes owned by or acquired from third parties. Gas
withdrawn from storage is produced and thereby removed
from proved reserves when sold. Numerous uncertainties are inherent in estimating quantities of proved reserves, in projecting future productions and development expenditures. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. The results of drilling, testing and production after the date of the estimate may require substantial upward or downward revisions. In addition, changes in oil and natural gas prices have an effect on the quantities of Eni’s proved reserves since estimates of reserves are based on prices and costs relevant to the date when such estimates are made. Consequently, the evaluation of reserves could also significantly differ from actual oil and natural gas volumes that will be actually produced. The following tables present yearly changes in estimated proved reserves, developed and undeveloped, of hydrocarbon, oil (including condensate and natural gas liquids) and natural gas as of December 31, 2007, 2008 and 2009. |
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Eni Fact Book Financial Data
| Movements in net proved hydrocarbons reserves (a) | (mmboe) |
Italy (b) |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (c) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities(d) | Total | ||||||||||||
| Reserves at December 31, 2006 | 805 | 706 | 2,018 | 1,122 | 1,219 | 235 | 150 | 145 | 6,400 | 36 | 6,436 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 562 | 586 | 1,242 | 798 | 525 | 161 | 82 | 76 | 4,032 | 27 | 4,059 | ||||||||||||||||||||||
| - undeveloped | 243 | 120 | 776 | 324 | 694 | 74 | 68 | 69 | 2,368 | 9 | 2,377 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 33 | 123 | 156 | 617 | 773 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 18 | 26 | 8 | (13 | ) | (153 | ) | (2 | ) | (21 | ) | (6 | ) | (143 | ) | 20 | (123 | ) | |||||||||||||||
| Improved Recovery | 2 | 9 | 12 | 23 | 1 | 24 | |||||||||||||||||||||||||||
| Extensions and Discoveries | 1 | 2 | 59 | 59 | 36 | 1 | 42 | 1 | 201 | 1 | 202 | ||||||||||||||||||||||
| Production | (77 | ) | (98 | ) | (215 | ) | (118 | ) | (41 | ) | (36 | ) | (35 | ) | (7 | ) | (627 | ) | (7 | ) | (634 | ) | |||||||||||
| Reserves at December 31, 2007 | 747 | 638 | 1,879 | 1,095 | 1,061 | 198 | 259 | 133 | 6,010 | 668 | 6,678 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 534 | 537 | 1,183 | 766 | 494 | 127 | 158 | 63 | 3,862 | 101 | 3,963 | ||||||||||||||||||||||
| - undeveloped | 213 | 101 | 696 | 329 | 567 | 71 | 101 | 70 | 2,148 | 567 | 2,715 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 2 | 33 | 56 | 91 | 91 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 2 | (41 | ) | 259 | 87 | 374 | 51 | 9 | 5 | 746 | 5 | 751 | |||||||||||||||||||||
| Improved Recovery | 7 | 26 | 33 | 1 | 34 | ||||||||||||||||||||||||||||
| Extensions and Discoveries | 5 | 17 | 11 | 26 | 4 | 8 | 71 | 71 | |||||||||||||||||||||||||
| Production | (73 | ) | (91 | ) | (234 | ) | (121 | ) | (40 | ) | (44 | ) | (41 | ) | (6 | ) | (650 | ) | (8 | ) | (658 | ) | |||||||||||
| Sales of Minerals in Place | (59 | ) | (59 | ) | (59 | ) | |||||||||||||||||||||||||||
| Reserves at December 31, 2008 | 681 | 525 | 1,922 | 1,146 | 1,336 | 265 | 235 | 132 | 6,242 | 666 | 6,908 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 465 | 417 | 1,229 | 827 | 647 | 168 | 133 | 62 | 3,948 | 107 | 4,055 | ||||||||||||||||||||||
| - undeveloped | 216 | 108 | 693 | 319 | 689 | 97 | 102 | 70 | 2,294 | 559 | 2,853 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 2 | 24 | 26 | 26 | |||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 74 | 65 | 76 | 102 | (72 | ) | (26 | ) | 44 | (2 | ) | 261 | 3 | 264 | |||||||||||||||||||
| Improved Recovery | 13 | 10 | 14 | 37 | 37 | ||||||||||||||||||||||||||||
| Extensions and Discoveries | 10 | 79 | 121 | 6 | 44 | 13 | 9 | 282 | 15 | 297 | |||||||||||||||||||||||
| Production | (62 | ) | (91 | ) | (207 | ) | (129 | ) | (43 | ) | (47 | ) | (53 | ) | (6 | ) | (638 | ) | (8 | ) | (646 | ) | |||||||||||
| Sales of Minerals in Place | (1 | ) | (1 | ) | (314 | ) | (315 | ) | |||||||||||||||||||||||||
| Reserves at December 31, 2009 | 703 | 590 | 1,922 | 1,141 | 1,221 | 236 | 263 | 133 | 6,209 | 362 | 6,571 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 490 | 432 | 1,266 | 799 | 614 | 139 | 168 | 122 | 4,030 | 74 | 4,104 | ||||||||||||||||||||||
| - undeveloped | 213 | 158 | 656 | 342 | 607 | 97 | 95 | 11 | 2,179 | 288 | 2,467 |
| (a) | The conversion rate of natural gas from cubic feet to boe is 1,000 cubic feet = 0.1742 barrels of oil. | |
| (b) | Including approximately, 754, 749, 746 and 769 billion of cubic feet of natural gas held in storage at December 31, 2006, 2007, 2008 and 2009, respectively. | |
| (c) | Eni’s proved reserves of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009, and 18.52% as at December 2007 and 2006. | |
| (d) | The amounts of equity-accounted entities as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). |
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Eni Fact Book Financial Data
| Movements in net proved liquids reserves | (mmbbl) |
Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (a) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities (b) | Total | ||||||||||||
| Reserves at December 31, 2006 | 215 | 386 | 982 | 786 | 893 | 62 | 98 | 35 | 3,457 | 24 | 3,481 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 136 | 329 | 713 | 546 | 262 | 53 | 54 | 33 | 2,126 | 18 | 2,144 | ||||||||||||||||||||||
| - undeveloped | 79 | 57 | 269 | 240 | 631 | 9 | 44 | 2 | 1,331 | 6 | 1,337 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 32 | 54 | 86 | 101 | 187 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 28 | 14 | (35 | ) | (26 | ) | (114 | ) | (6 | ) | (23 | ) | (2 | ) | (164 | ) | 20 | (144 | ) | ||||||||||||||
| Improved Recovery | 1 | 9 | 12 | 22 | 1 | 23 | |||||||||||||||||||||||||||
| Extensions and Discoveries | 1 | 43 | 22 | 28 | 1 | 95 | 1 | 96 | |||||||||||||||||||||||||
| Production | (28 | ) | (57 | ) | (121 | ) | (101 | ) | (26 | ) | (12 | ) | (19 | ) | (5 | ) | (369 | ) | (5 | ) | (374 | ) | |||||||||||
| Reserves at December 31, 2007 | 215 | 345 | 878 | 725 | 753 | 44 | 138 | 29 | 3,127 | 142 | 3,269 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 133 | 299 | 649 | 511 | 219 | 35 | 81 | 26 | 1,953 | 26 | 1,979 | ||||||||||||||||||||||
| - undeveloped | 82 | 46 | 229 | 214 | 534 | 9 | 57 | 3 | 1,174 | 116 | 1,290 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 32 | 36 | 68 | 68 | |||||||||||||||||||||||||||||
| Revisions of Previous Estimates | (8 | ) | (30 | ) | 56 | 80 | 239 | 42 | 11 | 1 | 391 | 4 | 395 | ||||||||||||||||||||
| Improved Recovery | 7 | 25 | 32 | 1 | 33 | ||||||||||||||||||||||||||||
| Extensions and Discoveries | 4 | 13 | 4 | 26 | 2 | 3 | 52 | 52 | |||||||||||||||||||||||||
| Production | (25 | ) | (51 | ) | (122 | ) | (105 | ) | (25 | ) | (18 | ) | (21 | ) | (4 | ) | (371 | ) | (5 | ) | (376 | ) | |||||||||||
| Sales of Minerals in Place | (56 | (56 | ) | (56 | ) | ||||||||||||||||||||||||||||
| Reserves at December 31, 2008 | 186 | 277 | 823 | 783 | 911 | 106 | 131 | 26 | 3,243 | 142 | 3,385 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 111 | 222 | 613 | 576 | 298 | 92 | 74 | 23 | 2,009 | 33 | 2,042 | ||||||||||||||||||||||
| - undeveloped | 75 | 55 | 210 | 207 | 613 | 14 | 57 | 3 | 1,234 | 109 | 1,343 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 2 | 2 | 2 | ||||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 57 | 40 | 129 | 78 | (36 | ) | (35 | ) | 36 | 1 | 270 | 270 | |||||||||||||||||||||
| Improved Recovery | 8 | 10 | 15 | 33 | 33 | ||||||||||||||||||||||||||||
| Extensions and Discoveries | 10 | 74 | 38 | 5 | 44 | 12 | 8 | 191 | 1 | 192 | |||||||||||||||||||||||
| Production | (20 | ) | (48 | ) | (105 | ) | (113 | ) | (26 | ) | (21 | ) | (26 | ) | (3 | ) | (362 | ) | (6 | ) | (368 | ) | |||||||||||
| Sales of Minerals in Place | (51 | ) | (51 | ) | |||||||||||||||||||||||||||||
| Reserves at December 31, 2009 | 233 | 351 | 895 | 770 | 849 | 94 | 153 | 32 | 3,377 | 86 | 3,463 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 141 | 218 | 659 | 544 | 291 | 45 | 80 | 23 | 2,001 | 34 | 2,035 | ||||||||||||||||||||||
| - undeveloped | 92 | 133 | 236 | 226 | 558 | 49 | 73 | 9 | 1,376 | 52 | 1,428 |
| (a) | Eni’s proved reserves of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009, and 18.52% as at December 2007 and 2006. | |
| (b) | The amounts of equity-accounted entities as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). |
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Eni Fact Book Financial Data
| Movements in net proved natural gas reserves | (bcf) |
Italy (a) |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (b) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities (c) | Total | ||||||||||||
| Reserves at December 31, 2006 | 3,391 | 1,836 | 5,946 | 1,927 | 1,874 | 991 | 299 | 633 | 16,897 | 68 | 16,965 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 2,449 | 1,480 | 3,042 | 1,447 | 1,511 | 614 | 159 | 247 | 10,949 | 48 | 10,997 | ||||||||||||||||||||||
| - undeveloped | 942 | 356 | 2,904 | 480 | 363 | 377 | 140 | 386 | 5,948 | 20 | 5,968 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 5 | 395 | 400 | 2,963 | 3,363 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | (53 | ) | 66 | 250 | 74 | (222 | ) | 23 | 4 | (20 | ) | 122 | 5 | 127 | |||||||||||||||||||
| Improved Recovery | 3 | 3 | 3 | ||||||||||||||||||||||||||||||
| Extensions and Discoveries | 4 | 6 | 89 | 213 | 205 | 4 | 86 | 607 | 607 | ||||||||||||||||||||||||
| Production | (285 | ) | (236 | ) | (534 | ) | (97 | ) | (87 | ) | (138 | ) | (88 | ) | (15 | ) | (1,480 | ) | (14 | ) | (1,494 | ) | |||||||||||
| Reserves at December 31, 2007 | 3,057 | 1,675 | 5,751 | 2,122 | 1,770 | 880 | 696 | 598 | 16,549 | 3,022 | 19,571 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 2,304 | 1,364 | 3,065 | 1,469 | 1,580 | 530 | 442 | 213 | 10,967 | 428 | 11,395 | ||||||||||||||||||||||
| - undeveloped | 753 | 311 | 2,686 | 653 | 190 | 350 | 254 | 385 | 5,582 | 2,594 | 8,176 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 8 | 6 | 114 | 128 | 128 | ||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 56 | (58 | ) | 1,163 | 45 | 772 | 52 | (13 | ) | 24 | 2,041 | 6 | 2,047 | ||||||||||||||||||||
| Improved Recovery | 4 | 4 | 4 | ||||||||||||||||||||||||||||||
| Extensions and Discoveries | 5 | 25 | 38 | 2 | 11 | 31 | 112 | 112 | |||||||||||||||||||||||||
| Production | (274 | ) | (229 | ) | (641 | ) | (95 | ) | (89 | ) | (146 | ) | (114 | ) | (16 | ) | (1,604 | ) | (13 | ) | (1,617 | ) | |||||||||||
| Sales of Minerals in Place | (16 | ) | (16 | ) | (16 | ) | |||||||||||||||||||||||||||
| Reserves at December 31, 2008 | 2,844 | 1,421 | 6,311 | 2,084 | 2,437 | 911 | 600 | 606 | 17,214 | 3,015 | 20,229 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 2,031 | 1,122 | 3,537 | 1,443 | 2,005 | 439 | 340 | 221 | 11,138 | 420 | 11,558 | ||||||||||||||||||||||
| - undeveloped | 813 | 299 | 2,774 | 641 | 432 | 472 | 260 | 385 | 6,076 | 2,595 | 8,671 | ||||||||||||||||||||||
| Purchase of Minerals in Place | 1 | 136 | 137 | 137 | |||||||||||||||||||||||||||||
| Revisions of Previous Estimates | 97 | 149 | (309 | ) | 142 | (204 | ) | 52 | 43 | (17 | ) | (47 | ) | 18 | (29 | ) | |||||||||||||||||
| Improved Recovery | 25 | 25 | 25 | ||||||||||||||||||||||||||||||
| Extensions and Discoveries | 1 | 26 | 479 | 2 | 7 | 4 | 519 | 80 | 599 | ||||||||||||||||||||||||
| Production | (238 | ) | (239 | ) | (587 | ) | (100 | ) | (94 | ) | (151 | ) | (155 | ) | (18 | ) | (1,582 | ) | (14 | ) | (1,596 | ) | |||||||||||
| Sales of Minerals in Place | (2 | ) | (2 | ) | (4 | ) | (1,511 | ) | (1,515 | ) | |||||||||||||||||||||||
| Reserves at December 31, 2009 | 2,704 | 1,380 | 5,894 | 2,127 | 2,139 | 814 | 629 | 575 | 16,262 | 1,588 | 17,850 | ||||||||||||||||||||||
| of which: | |||||||||||||||||||||||||||||||||
| - developed | 2,001 | 1,231 | 3,486 | 1,463 | 1,859 | 539 | 506 | 565 | 11,650 | 234 | 11,884 | ||||||||||||||||||||||
| - undeveloped | 703 | 149 | 2,408 | 664 | 280 | 275 | 123 | 10 | 4,612 | 1,354 | 5,966 |
| (a) | Including approximately, 754, 749, 746 and 769 billion of cubic feet of natural gas held in storage at December 31, 2006, 2007, 2008 and 2009, respectively. | |
| (b) | Eni’s proved reserves of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009, and 18.52% as at December 2007 and 2006. | |
| (c) | The amounts of equity-accounted entities as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). |
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Eni Fact Book Financial Data
| Results of operations from oil & gas producing activities (a) | (euro million) |
Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (b) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities (c) | Total | ||||||||||||
| 2007 | |||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||
| Sales to consolidated entities | 3,171 | 3,273 | 3,000 | 4,439 | 296 | 44 | 229 | 91 | 14,543 | 14,543 | |||||||||||||||||||||||
| Sales to third parties | 163 | 755 | 4,793 | 693 | 833 | 961 | 1,112 | 187 | 9,497 | 176 | 9,673 | ||||||||||||||||||||||
| Total revenues | 3,334 | 4,028 | 7,793 | 5,132 | 1,129 | 1,005 | 1,341 | 278 | 24,040 | 176 | 24,216 | ||||||||||||||||||||||
| Operations costs | (248 | ) | (584 | ) | (542 | ) | (499 | ) | (142 | ) | (39 | ) | (177 | ) | (50 | ) | (2,281 | ) | (27 | ) | (2,308 | ) | |||||||||||
| Production taxes | (188 | ) | (91 | ) | (473 | ) | (28 | ) | (780 | ) | (6 | ) | (786 | ) | |||||||||||||||||||
| Exploration expenses | (108 | ) | (196 | ) | (379 | ) | (297 | ) | (36 | ) | (168 | ) | (566 | ) | (27 | ) | (1,777 | ) | (42 | ) | (1,819 | ) | |||||||||||
| D.D.&A. and Provision for abandonment (d) | (499 | ) | (766 | ) | (768 | ) | (685 | ) | (76 | ) | (422 | ) | (511 | ) | (19 | ) | (3,746 | ) | (51 | ) | (3,797 | ) | |||||||||||
| Other income and (expenses) | (283 | ) | (83 | ) | (627 | ) | (285 | ) | (72 | ) | (134 | ) | (18 | ) | (65 | ) | (1,567 | ) | (18 | ) | (1,585 | ) | |||||||||||
| Pretax income from producing activities | 2,008 | 2,399 | 5,386 | 2,893 | 803 | 214 | 69 | 117 | 13,889 | 32 | 13,921 | ||||||||||||||||||||||
| Income taxes | (746 | ) | (1,447 | ) | (3,102 | ) | (1,820 | ) | (284 | ) | (93 | ) | (110 | ) | (10 | ) | (7,612 | ) | (49 | ) | (7,661 | ) | |||||||||||
| Results of operations from E&P activities (e) | 1,262 | 952 | 2,284 | 1,073 | 519 | 121 | (41 | ) | 107 | 6,277 | (17 | ) | 6,260 | ||||||||||||||||||||
| 2008 | |||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||
| Sales to consolidated entities | 3,956 | 3,892 | 2,622 | 5,013 | 360 | 39 | 323 | 66 | 16,271 | 16,271 | |||||||||||||||||||||||
| Sales to third parties | 126 | 160 | 7,286 | 1,471 | 1,025 | 1,335 | 1,599 | 218 | 13,220 | 265 | 13,485 | ||||||||||||||||||||||
| Total revenues | 4,082 | 4,052 | 9,908 | 6,484 | 1,385 | 1,374 | 1,922 | 284 | 29,491 | 265 | 29,756 | ||||||||||||||||||||||
| Operations costs | (260 | ) | (521 | ) | (528 | ) | (609 | ) | (157 | ) | (68 | ) | (233 | ) | (35 | ) | (2,411 | ) | (34 | ) | (2,445 | ) | |||||||||||
| Production taxes | (195 | ) | (32 | ) | (616 | ) | (35 | ) | (878 | ) | (53 | ) | (931 | ) | |||||||||||||||||||
| Exploration expenses | (135 | ) | (228 | ) | (406 | ) | (548 | ) | (16 | ) | (232 | ) | (435 | ) | (58 | ) | (2,058 | ) | (48 | ) | (2,106 | ) | |||||||||||
| D.D.&A. and Provision for abandonment (d) | (551 | ) | (829 | ) | (1,120 | ) | (1,115 | ) | (79 | ) | (823 | ) | (837 | ) | (35 | ) | (5,389 | ) | (84 | ) | (5,473 | ) | |||||||||||
| Other income and (expenses) | (420 | ) | (56 | ) | (934 | ) | (268 | ) | (270 | ) | (259 | ) | (6 | ) | (41 | ) | (2,254 | ) | (15 | ) | (2,269 | ) | |||||||||||
| Pretax income from producing activities | 2,521 | 2,418 | 6,888 | 3,328 | 863 | (43 | ) | 411 | 115 | 16,501 | 31 | 16,532 | |||||||||||||||||||||
| Income taxes | (924 | ) | (1,623 | ) | (4,170 | ) | (2,262 | ) | (302 | ) | (122 | ) | (214 | ) | (70 | ) | (9,687 | ) | (49 | ) | (9,736 | ) | |||||||||||
| Results of operations from E&P activities (e) | 1,597 | 795 | 2,718 | 1,066 | 561 | (165 | ) | 197 | 45 | 6,814 | (18 | ) | 6,796 | ||||||||||||||||||||
| 2009 | |||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||
| Sales to consolidated entities | 2,274 | 2,583 | 1,738 | 4,386 | 245 | 41 | 808 | 29 | 12,104 | 12,104 | |||||||||||||||||||||||
| Sales to third parties | 540 | 5,037 | 586 | 739 | 1,208 | 639 | 181 | 8,930 | 232 | 9,162 | |||||||||||||||||||||||
| Total revenues | 2,274 | 3,123 | 6,775 | 4,972 | 984 | 1,249 | 1,447 | 210 | 21,034 | 232 | 21,266 | ||||||||||||||||||||||
| Operations costs | (271 | ) | (517 | ) | (553 | ) | (749 | ) | (153 | ) | (78 | ) | (273 | ) | (41 | ) | (2,635 | ) | (34 | ) | (2,669 | ) | |||||||||||
| Production taxes | (148 | ) | (20 | ) | (445 | ) | (34 | ) | (647 | ) | (44 | ) | (691 | ) | |||||||||||||||||||
| Exploration expenses | (40 | ) | (114 | ) | (319 | ) | (451 | ) | (20 | ) | (204 | ) | (341 | ) | (62 | ) | (1,551 | ) | (41 | ) | (1,592 | ) | |||||||||||
| D.D.&A. and Provision for abandonment (d) | (463 | ) | (921 | ) | (956 | ) | (1,502 | ) | (78 | ) | (535 | ) | (1,108 | ) | (186 | ) | (5,749 | ) | (76 | ) | (5,825 | ) | |||||||||||
| Other income and (expenses) | (125 | ) | (134 | ) | (471 | ) | (467 | ) | (186 | ) | (17 | ) | 170 | (47 | ) | (1,277 | ) | (41 | ) | (1,318 | ) | ||||||||||||
| Pretax income from producing activities | 1,227 | 1,437 | 4,456 | 1,358 | 547 | 381 | (105 | ) | (126 | ) | 9,175 | (4 | ) | 9,171 | |||||||||||||||||||
| Income taxes | (467 | ) | (833 | ) | (3,010 | ) | (1,042 | ) | (180 | ) | (67 | ) | (2 | ) | 23 | (5,578 | ) | (40 | ) | (5,618 | ) | ||||||||||||
| Results of operations from E&P activities (e) (f) | 760 | 604 | 1,446 | 316 | 367 | 314 | (107 | ) | (103 | ) | 3,597 | (44 | ) | 3,553 |
| (a) | Results of operations from oil and gas producing activities, represent only those revenues and expenses directly associated with such activities, including operating overheads. These amounts do not include any allocation of interest expense or general corporate overhead and, therefore, are not necessarily indicative of the contributions to consolidated net earnings of Eni. Related income taxes are computed by applying the local income tax rates to the pre-tax income from producing activities. Eni is a part to certain Production Sharing Agreements (PSAs), whereby a portion of Eni’s share of oil and gas production is withheld and sold by its joint venture partners which are state-owned entities, with proceeds being remitted to the state in satisfaction of Eni’s PSA related tax liabilities. Revenue and income taxes include such taxes owed by Eni but paid by state-owned entities out of Eni’s share of oil and gas production. | |
| (b) | Eni’s results of operations of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009, and 18.52% as at December 2007. | |
| (c) | The amounts of equity-accounted entities as at December 31, 2009 include 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (d) | Includes asset impairments amounting to euro 91 million in 2007, euro 770 million in 2008 and euro 576 million in 2009. | |
| (e) | The "Successful Effort Method" application would have led to an increase of result of operations of euro 438 million in 2007, euro 408 million in 2008 and euro 320 million in 2009 for the consolidated companies and of euro 26 million in 2007 and any variation in 2008 and euro 26 million in 2009 for joint-ventures and affiliates. | |
| (f) | Amounts of 2009 do not include result of operation related to the Italian gas storage activities, following restructuring of Eni regulated gas businesses in Italy now reported in Gas & Power segment. |
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Eni Fact Book Financial Data
| Capitalized costs (a) | (euro million) |
Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (b) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities (c) | |||||||||||
| December 31, 2008 | ||||||||||||||||||||||||||||||
| Proved mineral interests | 10,772 | 7,852 | 10,116 | 11,368 | 1,663 | 3,939 | 4,737 | 392 | 50,839 | 813 | ||||||||||||||||||||
| Unproved mineral interests | 32 | 316 | 638 | 2,267 | 37 | 1,461 | 2,418 | 43 | 7,212 | 928 | ||||||||||||||||||||
| Support equipment and facilities | 283 | 24 | 1,205 | 520 | 51 | 16 | 43 | 4 | 2,146 | 14 | ||||||||||||||||||||
| Incomplete wells and other | 1,374 | 249 | 1,006 | 1,443 | 2,631 | 713 | 632 | 362 | 8,410 | 267 | ||||||||||||||||||||
| Gross Capitalized Costs | 12,461 | 8,441 | 12,965 | 15,598 | 4,382 | 6,129 | 7,830 | 801 | 68,607 | 2,022 | ||||||||||||||||||||
| Accumulated depreciation, depletion and amortization | (7,943 | ) | (5,327 | ) | (6,318 | ) | (7,027 | ) | (560 | ) | (3,224 | ) | (3,638 | ) | (173 | ) | (34,210 | ) | (441 | ) | ||||||||||
| Net Capitalized Costs (d) (e) | 4,518 | 3,114 | 6,647 | 8,571 | 3,822 | 2,905 | 4,192 | 628 | 34,397 | 1,581 | ||||||||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||||||||||
| Proved mineral interests | 10,079 | 9,472 | 11,122 | 14,011 | 1,723 | 4,566 | 5,750 | 1,338 | 58,061 | 791 | ||||||||||||||||||||
| Unproved mineral interests | 33 | 305 | 580 | 1,854 | 36 | 1,518 | 2,144 | 38 | 6,508 | 443 | ||||||||||||||||||||
| Support equipment and facilities | 273 | 31 | 1,287 | 585 | 57 | 17 | 45 | 4 | 2,299 | 13 | ||||||||||||||||||||
| Incomplete wells and other | 1,028 | 329 | 1,228 | 934 | 3,481 | 316 | 600 | 14 | 7,930 | 358 | ||||||||||||||||||||
| Gross Capitalized Costs | 11,413 | 10,137 | 14,217 | 17,384 | 5,297 | 6,417 | 8,539 | 1,394 | 74,798 | 1,605 | ||||||||||||||||||||
| Accumulated depreciation, depletion and amortization | (7,557 | ) | (6,824 | ) | (7,044 | ) | (8,424 | ) | (620 | ) | (3,679 | ) | (4,673 | ) | (379 | ) | (39,200 | ) | (485 | ) | ||||||||||
| Net Capitalized Costs (d) (e) (f) | 3,856 | 3,313 | 7,173 | 8,960 | 4,677 | 2,738 | 3,866 | 1,015 | 35,598 | 1,120 |
| (a) | Capitalized costs represent the total expenditures for proved and unproved mineral interests and related support equipment and facilities utilized in oil and gas exploration and production activities, together with related accumulated depreciation, depletion and amortization. | |
| (b) | Eni’s results of operations of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009, and 18.52% as at December 2007. | |
| (c) | The amounts of equity-accounted entities as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (d) | Includes asset impairments amounting to euro 91 million in 2007, euro 770 million in 2008 and euro 576 million in 2009. | |
| (e) | The "Successful Effort Method" application would have led to an increase of result of operations of euro 438 million in 2007, euro 408 million in 2008 and euro 320 million in 2009 for the consolidated companies and of euro 26 million in 2007 and any variation in 2008 and euro 26 million in 2009 for joint-ventures and affiliates. | |
| (f) | Amounts of 2009 do not include result of operation related to the Italian gas storage activities, following restructuring of Eni regulated gas businesses in Italy now reported in Gas & Power segment. |
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Eni Fact Book Financial Data
| Costs incurred (a) | (euro million) |
Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (b) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities (c) | |||||||||||
| 2007 | ||||||||||||||||||||||||||||||
| Proved property acquisitions (e) | 11 | 451 | 1,395 | 1,857 | 187 | |||||||||||||||||||||||||
| Unproved property acquisitions (e) | 510 | 1,417 | 1,927 | 1,086 | ||||||||||||||||||||||||||
| Exploration (e) | 104 | 195 | 373 | 305 | 36 | 162 | 980 | 37 | 2,192 | 42 | ||||||||||||||||||||
| Development (d) (e) | 320 | 557 | 1,047 | 1,425 | 744 | 247 | 734 | 165 | 5,239 | 156 | ||||||||||||||||||||
| Total cost incurred | 424 | 752 | 1,431 | 2,691 | 780 | 409 | 4,526 | 202 | 11,215 | 1,471 | ||||||||||||||||||||
| 2008 | ||||||||||||||||||||||||||||||
| Proved property acquisitions (e) | 626 | 413 | 256 | 1,295 | ||||||||||||||||||||||||||
| Unproved property acquisitions (e) | 33 | 384 | 655 | 647 | 1,719 | |||||||||||||||||||||||||
| Exploration (e) | 135 | 227 | 403 | 600 | 16 | 345 | 440 | 48 | 2,214 | 48 | ||||||||||||||||||||
| Development (d) (e) | 644 | 957 | 1,388 | 1,884 | 1,023 | 598 | 748 | 325 | 7,567 | 163 | ||||||||||||||||||||
| Total cost incurred | 779 | 1,217 | 2,801 | 3,552 | 1,039 | 1,846 | 1,188 | 373 | 12,795 | 211 | ||||||||||||||||||||
| 2009 | ||||||||||||||||||||||||||||||
| Proved property acquisitions | 298 | 27 | 11 | 131 | 467 | |||||||||||||||||||||||||
| Unproved property acquisitions | 54 | 42 | 83 | 43 | 222 | |||||||||||||||||||||||||
| Exploration | 40 | 114 | 317 | 284 | 20 | 159 | 242 | 52 | 1,228 | 41 | ||||||||||||||||||||
| Development (d) | 742 | 727 | 1,401 | 2,121 | 1,086 | 423 | 858 | 462 | 7,820 | 206 | ||||||||||||||||||||
| Total cost incurred | 782 | 841 | 2,070 | 2,474 | 1,106 | 676 | 1,274 | 514 | 9,737 | 247 |
| (a) | Costs incurred represent amounts both capitalized and expensed in connection with oil and gas producing activities. | |
| (b) | Eni’s incurred costs of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009, and 18.52% as at December 2007. | |
| (c) | The amounts of equity-accounted entities as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (d) | Includes the abandonment costs of the assets for euro 173 million in 2007, euro 628 million in 2008 and euro 301 million in 2009. | |
| (e) | Of which business combination: |
Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (b) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities (c) | |||||||||||
| 2007 | ||||||||||||||||||||||||||||||
| Proved property acquisitions | 451 | 1,395 | 1,846 | 187 | ||||||||||||||||||||||||||
| Unproved property acquisitions | 510 | 1,334 | 1,844 | 1,086 | ||||||||||||||||||||||||||
| Exploration | 59 | 474 | 533 | |||||||||||||||||||||||||||
| Development | 10 | 345 | 355 | 101 | ||||||||||||||||||||||||||
| Total | 1,030 | 3,548 | 4,578 | 1,374 | ||||||||||||||||||||||||||
| 2008 | ||||||||||||||||||||||||||||||
| Proved property acquisitions | 298 | 256 | 554 | |||||||||||||||||||||||||||
| Unproved property acquisitions | 33 | 384 | 560 | 647 | 1,624 | |||||||||||||||||||||||||
| Exploration | 23 | 115 | 158 | 296 | ||||||||||||||||||||||||||
| Development | 52 | 132 | 4 | 233 | 421 | |||||||||||||||||||||||||
| Total | 85 | 539 | 977 | 1,294 | 2,895 |
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Contents
Eni Fact Book Financial Data
Standardized measure of discounted future net cash flows
| Estimated future cash
inflows represent the revenues that would be received
from production and are determined by applying year-end
prices of oil and gas for the years ended December 31,
2007 and 2008 and the average prices during the year
ended December 31, 2009 to estimated future production of
proved reserves. Future price changes are considered only
to the extent provided by contractual arrangements.
Estimated future development and production costs are
determined by estimating the expenditures to be incurred
in developing and producing the proved reserves at the
end of the year. Neither the effects of price and cost
escalations nor expected future changes in technology and
operating practices have been considered. The standardized measure is calculated as the excess of future cash inflows from proved reserves less future costs of producing and developing the reserves, future income taxes and a yearly 10% discount factor. Future production costs include the estimated expenditures related to the production of proved reserves plus any |
production taxes without
consideration of future inflation. Future development
costs include the estimated costs of drilling development
wells and installation of production facilities, plus the
net costs associated with dismantlement and abandonment
of wells and facilities, under the assumption that
year-end costs continue without considering future
inflation. Future income taxes were calculated in
accordance with the tax laws of the countries in which
Eni operates. The standardized measure of discounted future net cash flows, related to the preceding proved oil and gas reserves, is calculated in accordance with the requirements of FASB Extractive Activities - Oil & Gas (Topic 932). The standardized measure does not purport to reflect realizable values or fair market value of Eni’s proved reserves. An estimate of fair value would also take into account, among other things, hydrocarbon resources other than proved reserves, anticipated changes in future prices and costs and a discount factor representative of the risks inherent in the oil and gas exploration and production activity. |
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Contents
Eni Fact Book Financial Data
| Standardized measure of discounted future net cash flows | (euro million) |
Italy |
Rest of Europe |
North Africa |
West Africa |
Kazakhstan (a) |
Rest of Asia |
America |
Australia and Oceania |
Total consolidated subsidiaries | Total equity- accounted entities (b) | Total | ||||||||||||
| At December 31, 2007 | |||||||||||||||||||||||||||||||||
| Future net cash inflows | 47,243 | 30,390 | 73,456 | 48,283 | 42,710 | 4,855 | 11,180 | 3,544 | 261,661 | 7,135 | 268,796 | ||||||||||||||||||||||
| Future production costs | (5,926 | ) | (6,759 | ) | (11,754 | ) | (9,875 | ) | (4,997 | ) | (476 | ) | (1,758 | ) | (459 | ) | (42,004 | ) | (1,249 | ) | (43,253 | ) | |||||||||||
| Future development and abandonment costs | (7,218 | ) | (2,653 | ) | (4,643 | ) | (3,013 | ) | (3,374 | ) | (306 | ) | (1,533 | ) | (428 | ) | (23,168 | ) | (1,721 | ) | (24,889 | ) | |||||||||||
| Future net inflow before income tax | 34,099 | 20,978 | 57,059 | 35,395 | 34,339 | 4,073 | 7,889 | 2,657 | 196,489 | 4,165 | 200,654 | ||||||||||||||||||||||
| Future income tax | (10,778 | ) | (14,388 | ) | (29,083 | ) | (23,083 | ) | (9,977 | ) | (1,109 | ) | (3,272 | ) | (1,003 | ) | (92,693 | ) | (2,009 | ) | (94,702 | ) | |||||||||||
| Future net cash flows | 23,321 | 6,590 | 27,976 | 12,312 | 24,362 | 2,964 | 4,617 | 1,654 | 103,796 | 2,156 | 105,952 | ||||||||||||||||||||||
| 10% discount factor | (13,262 | ) | (1,757 | ) | (11,143 | ) | (3,953 | ) | (17,480 | ) | (718 | ) | (1,568 | ) | (913 | ) | (50,794 | ) | (1,265 | ) | (52,059 | ) | |||||||||||
| Standardized measure of discounted future net cash flows | 10,059 | 4,833 | 16,833 | 8,359 | 6,882 | 2,246 | 3,049 | 741 | 53,002 | 891 | 53,893 | ||||||||||||||||||||||
| At December 31, 2008 | |||||||||||||||||||||||||||||||||
| Future net cash inflows | 46,458 | 16,963 | 62,785 | 22,344 | 21,648 | 5,072 | 5,257 | 2,937 | 183,464 | 4,782 | 188,246 | ||||||||||||||||||||||
| Future production costs | (5,019 | ) | (3,467 | ) | (10,673 | ) | (6,715 | ) | (6,273 | ) | (707 | ) | (1,657 | ) | (405 | ) | (34,916 | ) | (1,104 | ) | (36,020 | ) | |||||||||||
| Future development and abandonment costs | (6,805 | ) | (2,317 | ) | (6,153 | ) | (3,868 | ) | (4,842 | ) | (738 | ) | (1,022 | ) | (258 | ) | (26,003 | ) | (1,845 | ) | (27,848 | ) | |||||||||||
| Future net inflow before income tax | 34,634 | 11,179 | 45,959 | 11,761 | 10,533 | 3,627 | 2,578 | 2,274 | 122,545 | 1,833 | 124,378 | ||||||||||||||||||||||
| Future income tax | (11,329 | ) | (7,697 | ) | (27,800 | ) | (5,599 | ) | (2,745 | ) | (768 | ) | (232 | ) | (861 | ) | (57,031 | ) | (1,032 | ) | (58,063 | ) | |||||||||||
| Future net cash flows | 23,305 | 3,482 | 18,159 | 6,162 | 7,788 | 2,859 | 2,346 | 1,413 | 65,514 | 801 | 66,315 | ||||||||||||||||||||||
| 10% discount factor | (13,884 | ) | (1,042 | ) | (8,639 | ) | (2,155 | ) | (6,230 | ) | (672 | ) | (672 | ) | (768 | ) | (34,062 | ) | (763 | ) | (34,825 | ) | |||||||||||
| Standardized measure of discounted future net cash flows | 9,421 | 2,440 | 9,520 | 4,007 | 1,558 | 2,187 | 1,674 | 645 | 31,452 | 38 | 31,490 | ||||||||||||||||||||||
| At December 31, 2009 | |||||||||||||||||||||||||||||||||
| Future net cash inflows | 26,243 | 22,057 | 59,413 | 33,676 | 30,273 | 5,680 | 7,088 | 2,973 | 187,403 | 3,718 | 191,121 | ||||||||||||||||||||||
| Future production costs | (4,732 | ) | (6,215 | ) | (7,771 | ) | (9,737 | ) | (6,545 | ) | (1,427 | ) | (1,797 | ) | (529 | ) | (38,753 | ) | (1,251 | ) | (40,004 | ) | |||||||||||
| Future development and abandonment costs | (5,143 | ) | (5,375 | ) | (8,618 | ) | (5,134 | ) | (4,345 | ) | (1,409 | ) | (1,897 | ) | (214 | ) | (32,135 | ) | (1,168 | ) | (33,303 | ) | |||||||||||
| Future net inflow before income tax | 16,368 | 10,467 | 43,024 | 18,805 | 19,383 | 2,844 | 3,394 | 2,230 | 116,515 | 1,299 | 117,814 | ||||||||||||||||||||||
| Future income tax | (5,263 | ) | (6,621 | ) | (24,230 | ) | (9,894 | ) | (4,827 | ) | (636 | ) | (694 | ) | (563 | ) | (52,728 | ) | (432 | ) | (53,160 | ) | |||||||||||
| Future net cash flows | 11,105 | 3,846 | 18,794 | 8,911 | 14,556 | 2,208 | 2,700 | 1,667 | 63,787 | 867 | 64,654 | ||||||||||||||||||||||
| 10% discount factor | (5,868 | ) | (1,455 | ) | (9,160 | ) | (3,102 | ) | (10,249 | ) | (520 | ) | (1,162 | ) | (771 | ) | (32,287 | ) | (610 | ) | (32,897 | ) | |||||||||||
| Standardized measure of discounted future net cash flows (c) | 5,237 | 2,391 | 9,634 | 5,809 | 4,307 | 1,688 | 1,538 | 896 | 31,500 | 257 | 31,757 |
| (a) | Eni’s proved reserves of the Kashagan field are determined based on Eni share of 16.81% as at December 2008 and 2009, and 18.52% as at December 2007 and 2006. | |
| (b) | The amounts of equity-accounted entities as at December 31, 2009 includes 29.4% of the three Russian companies former Yukos as a result of the Gazprom call option on the 51% of the shares (2007 and 2008 are reported at 60%). | |
| (c) | Amounts of 2009 do not include standardized measure of discounted future net cash flows related to the Italian gas storage activities, following restructuring of Eni regulated gas businesses in Italy now reported in Gas & Power segment. |
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Eni Fact Book Financial Data
| Changes in standardized measure of discounted future net cash flows | (euro million) |
| Total consolidated subsidiaries | Total equity- accounted entities | Total | ||||
| Value at December 31, 2006 | 43,227 | 354 | 43,581 | ||||||
| Increase (decrease): | |||||||||
| - sales, net of production costs | (20,979 | ) | (143 | ) | (21,122 | ) | |||
| - net changes in sales and transfer price, net of production costs | 34,999 | 153 | 35,152 | ||||||
| - extensions, discoveries and improved recovery, net of future production and development costs | 3,982 | 46 | 4,028 | ||||||
| - changes in estimated future development and abandonment costs | (4,000 | ) | (73 | ) | (4,073 | ) | |||
| - development costs incurred during the period that reduced future development costs | 4,682 | 56 | 4,738 | ||||||
| - revision of quantity estimates | (2,995 | ) | 527 | (2,468 | ) | ||||
| - accretion discount | 7,968 | 50 | 8,018 | ||||||
| - net change in income taxes | (17,916 | ) | (1,027 | ) | (18,943 | ) | |||
| - purchase of reserves in-place | 3,521 | 929 | 4,450 | ||||||
| - changes in production rates (timing) and other | 513 | 19 | 532 | ||||||
| Net increase (decrease) | 9,775 | 537 | 10,312 | ||||||
| Value at December 31, 2007 | 53,002 | 891 | 53,893 | ||||||
| Increase (decrease): | |||||||||
| - sales, net of production costs | (26,202 | ) | (178 | ) | (26,380 | ) | |||
| - net changes in sales and transfer price, net of production costs | (39,699 | ) | (1,254 | ) | (40,953 | ) | |||
| - extensions, discoveries and improved recovery, net of future production and development costs | 1,110 | 10 | 1,120 | ||||||
| - changes in estimated future development and abandonment costs | (6,222 | ) | (129 | ) | (6,351 | ) | |||
| - development costs incurred during the period that reduced future development costs | 6,584 | 145 | 6,729 | ||||||
| - revision of quantity estimates | 5,835 | (61 | ) | 5,774 | |||||
| - accretion discount | 10,538 | 201 | 10,739 | ||||||
| - net change in income taxes | 21,359 | 657 | 22,016 | ||||||
| - purchase of reserves in-place | 476 | 476 | |||||||
| - sale of reserves in-place | 25 | 25 | |||||||
| - changes in production rates (timing) and other | 4,646 | (244 | ) | 4,402 | |||||
| Net increase (decrease) | (21,550 | ) | (853 | ) | (22,403 | ) | |||
| Value at December 31, 2008 | 31,452 | 38 | 31,490 | ||||||
| Increase (decrease): | |||||||||
| - sales, net of production costs | (17,752 | ) | (154 | ) | (17,906 | ) | |||
| - net changes in sales and transfer price, net of production costs | 4,515 | 286 | 4,801 | ||||||
| - extensions, discoveries and improved recovery, net of future production and development costs | 3,587 | 22 | 3,609 | ||||||
| - changes in estimated future development and abandonment costs | (9,915 | ) | (157 | ) | (10,072 | ) | |||
| - development costs incurred during the period that reduced future development costs | 7,401 | 208 | 7,609 | ||||||
| - revision of quantity estimates | 4,686 | (113 | ) | 4,573 | |||||
| - accretion discount | 6,112 | 29 | 6,141 | ||||||
| - net change in income taxes | 674 | (67 | ) | 607 | |||||
| - purchase of reserves in-place | 161 | 161 | |||||||
| - sale of reserves in-place | (7 | ) | 81 | 74 | |||||
| - changes in production rates (timing) and other | 586 | 84 | 670 | ||||||
| Net increase (decrease) | 48 | 219 | 267 | ||||||
| Value at December 31, 2009 | 31,500 | 257 | 31,757 |
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Quarterly information
| Main financial data (a) | (euro million) |
| 2007 | 2008 | 2009 | ||||
| I Q | II Q | III Q | IV Q | I Q | II Q | III Q | IV Q | I Q | II Q | III Q | IV Q | ||||||||||||||||||||||||||||||||||
| Net sales from operations (b) | 21,901 | 19,746 | 20,171 | 25,386 | 87,204 | 28,292 | 27,096 | 28,144 | 24,550 | 108,082 | 23,741 | 18,267 | 19,142 | 22,077 | 83,227 | ||||||||||||||||||||||||||||||
| Operating income: | 4,964 | 4,335 | 4,322 | 5,118 | 18,739 | 6,177 | 5,793 | 6,239 | 308 | 18,517 | 3,967 | 2,405 | 3,217 | 2,466 | 12,055 | ||||||||||||||||||||||||||||||
| Exploration & Production (c) | 2,962 | 3,347 | 3,227 | 3,897 | 13,433 | 4,269 | 4,774 | 5,209 | 1,987 | 16,239 | 2,374 | 1,778 | 2,557 | 2,411 | 9,120 | ||||||||||||||||||||||||||||||
| Gas & Power (c) | 1,697 | 607 | 622 | 1,539 | 4,465 | 1,735 | 690 | 687 | 918 | 4,030 | 1,253 | 863 | 567 | 1,004 | 3,687 | ||||||||||||||||||||||||||||||
| Refining & Marketing | (28 | ) | 420 | 268 | 26 | 686 | 215 | 561 | 428 | (2,192 | ) | (988 | ) | 240 | 47 | 34 | (423 | ) | (102 | ) | |||||||||||||||||||||||||
| Petrochemicals | 137 | 74 | 6 | (117 | ) | 100 | (32 | ) | (231 | ) | (89 | ) | (493 | ) | (845 | ) | (167 | ) | (287 | ) | (60 | ) | (161 | ) | (675 | ) | |||||||||||||||||||
| Engineering & Construction | 185 | 205 | 211 | 236 | 837 | 214 | 253 | 276 | 302 | 1,045 | 270 | 310 | 274 | 27 | 881 | ||||||||||||||||||||||||||||||
| Other activities | (16 | ) | (215 | ) | (51 | ) | (162 | ) | (444 | ) | (47 | ) | (94 | ) | (52 | ) | (153 | ) | (346 | ) | (55 | ) | (122 | ) | (28 | ) | (177 | ) | (382 | ) | |||||||||||||||
| Corporate and financial companies | (78 | ) | 26 | (17 | ) | (243 | ) | (312 | ) | (75 | ) | (32 | ) | (274 | ) | (362 | ) | (743 | ) | (63 | ) | (124 | ) | (134 | ) | (153 | ) | (474 | ) | ||||||||||||||||
| Unrealized profit intragroup elimination | 105 | (129 | ) | 56 | (58 | ) | (26 | ) | (102 | ) | (128 | ) | 54 | 301 | 125 | 115 | (60 | ) | 7 | (62 | ) | ||||||||||||||||||||||||
| Net income | 2,588 | 2,267 | 2,146 | 3,010 | 10,011 | 3,321 | 3,437 | 2,941 | (874 | ) | 8,825 | 1,904 | 832 | 1,240 | 391 | 4,367 | |||||||||||||||||||||||||||||
| Capital expenditures | 2,013 | 2,244 | 2,679 | 3,657 | 10,593 | 3,118 | 3,641 | 3,112 | 4,691 | 14,562 | 3,147 | 3,697 | 2,957 | 3,894 | 13,695 | ||||||||||||||||||||||||||||||
| Investments | 10 | 4,925 | 3,776 | 1,198 | 9,909 | 1,784 | 165 | 127 | 2,229 | 4,305 | 2,039 | 175 | 63 | 46 | 2,323 | ||||||||||||||||||||||||||||||
| Net borrowings at period end | 3,852 | 9,122 | 11,430 | 16,327 | 16,327 | 15,591 | 16,565 | 17,823 | 18,376 | 18,376 | 16,528 | 18,355 | 20,540 | 23,055 | 23,055 |
| (a) | Quarterly data are unaudited. | |
| (b) | From January 1, 2009 Eni adopted IFRIC 13 "Customer Loyalty Programmes" that requires that the award points granted to clients within the related loyalty programs be accounted as a separate component of the basic transaction, evaluated at their fair value and recognized as revenues when effectively used. Prior period results have been restated accordingly. | |
| (c) | From January 1, 2009, results of the gas storage business, accounted for in the Exploration & Production segment until December 31, 2008, are reported within the Gas & Power segment, in the regulated businesses results, following restructuring of Eni regulated gas businesses in Italy. As of that date, the results of the regulated businesses in Italy therefore include results of the Transport, Distribution, Regasification and Storage activities in Italy. Prior period have been restated accordingly. |
| Key market indicator (a) |
| 2007 | 2008 | 2009 | ||||
| I Q | II Q | III Q | IV Q | I Q | II Q | III Q | IV Q | I Q | II Q | III Q | IV Q | |||||||||||||||||||
| Average price of Brent dated crude oil (a) | 57.75 | 68.76 | 74.87 | 88.70 | 72.52 | 96.90 | 121.38 | 114.78 | 54.91 | 96.99 | 44.40 | 58.79 | 68.28 | 74.57 | 61.51 | |||||||||||||||
| Average EUR/USD exchange rate | 1.310 | 1.348 | 1.375 | 1.449 | 1.371 | 1.500 | 1.562 | 1.504 | 1.317 | 1.471 | 1.302 | 1.362 | 1.431 | 1.478 | 1.393 | |||||||||||||||
| Average price in euro of Brent dated crude oil (b) | 44.08 | 51.01 | 54.45 | 61.21 | 52.90 | 64.60 | 77.71 | 76.32 | 41.69 | 65.93 | 34.1 | 43.16 | 47.71 | 50.45 | 44.16 | |||||||||||||||
| Average European refining margins (c) | 3.06 | 6.90 | 4.04 | 4.07 | 4.52 | 3.81 | 8.04 | 6.37 | 7.72 | 6.49 | 5.34 | 3.61 | 2.34 | 1.24 | 3.13 | |||||||||||||||
| Average European refining margins Brent/Ural (c) | 6.07 | 8.43 | 5.19 | 6.12 | 6.45 | 6.04 | 11.25 | 8.51 | 9.61 | 8.85 | 6.28 | 3.90 | 2.26 | 1.80 | 3.56 | |||||||||||||||
| Euribor % | 3.8 | 4.1 | 4.5 | 4.7 | 4.3 | 4.5 | 4.9 | 5.0 | 4.2 | 4.6 | 2.0 | 1.3 | 0.8 | 0.7 | 1.2 |
| (a) | In USD/barrel. Source: Platt’s Oilgram. | |
| (b) | Eni calculation. | |
| (c) | In US dollars per barrel FOB Mediterranean Brent crude. From 1995 lead-free gasoline. Eni elaborations on Platt’s Oilgram data. |
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| Main operating data |
| 2007 | 2008 | 2009 | ||||
| I Q | II Q | III Q | IV Q | I Q | II Q | III Q | IV Q | I Q | II Q | III Q | IV Q | |||||||||||||||||||
| Production of oil | (kbbl/d) | 1,030 | 1,026 | 975 | 1,048 | 1,020 | 1,012 | 998 | 1,015 | 1,079 | 1,026 | 1,013 | 986 | 957 | 1,073 | 1,007 | ||||||||||||||||
| Production of natural gas | (bcf) | 115 | 116 | 111 | 125 | 117 | 128 | 126 | 122 | 126 | 126 | 125 | 121 | 117 | 132 | 124 | ||||||||||||||||
| Production of hydrocarbons | (kboe/d) | 1,734 | 1,736 | 1,659 | 1,815 | 1,736 | 1,796 | 1,772 | 1,764 | 1,854 | 1,797 | 1,779 | 1,733 | 1,678 | 1,886 | 1,769 | ||||||||||||||||
| Italy | 223 | 215 | 204 | 207 | 212 | 206 | 204 | 196 | 190 | 199 | 174 | 169 | 161 | 173 | 169 | |||||||||||||||||
| Rest of Europe | 296 | 272 | 222 | 289 | 270 | 249 | 262 | 228 | 255 | 249 | 256 | 246 | 230 | 255 | 247 | |||||||||||||||||
| North Africa | 566 | 599 | 568 | 641 | 594 | 626 | 652 | 666 | 635 | 645 | 595 | 567 | 567 | 565 | 573 | |||||||||||||||||
| West Africa | 337 | 333 | 324 | 316 | 327 | 325 | 305 | 352 | 356 | 335 | 330 | 343 | 344 | 421 | 360 | |||||||||||||||||
| Kazakhstan | 114 | 118 | 104 | 111 | 112 | 127 | 113 | 92 | 113 | 111 | 119 | 121 | 106 | 117 | 115 | |||||||||||||||||
| Rest of Asia | 116 | 116 | 103 | 97 | 108 | 114 | 113 | 108 | 162 | 124 | 150 | 138 | 122 | 130 | 135 | |||||||||||||||||
| America | 61 | 62 | 118 | 138 | 95 | 134 | 110 | 100 | 125 | 117 | 135 | 133 | 132 | 209 | 153 | |||||||||||||||||
| Australia and Oceania | 21 | 21 | 16 | 16 | 18 | 15 | 13 | 22 | 18 | 17 | 20 | 16 | 16 | 16 | 17 | |||||||||||||||||
| Production sold | (mmboe) | 150.1 | 152.2 | 147.0 | 162.1 | 611.4 | 157.0 | 156.9 | 154.4 | 163.2 | 631.5 | 154.2 | 154.2 | 147.6 | 166.8 | 622.8 | ||||||||||||||||
| Sales of natural gas to third parties | (bcm) | 23.41 | 16.31 | 15.49 | 23.54 | 78.75 | 26.66 | 18.99 | 16.78 | 27.26 | 89.69 | 28.34 | 17.54 | 19.45 | 24.63 | 89.96 | ||||||||||||||||
| Own consumption of natural gas | (bcm) | 1.39 | 1.48 | 1.62 | 1.59 | 6.08 | 1.62 | 1.33 | 1.42 | 1.26 | 5.63 | 1.51 | 1.25 | 1.55 | 1.50 | 5.81 | ||||||||||||||||
| Sales to third parties and own consumption | (bcm) | 24.80 | 17.79 | 17.11 | 25.13 | 84.83 | 28.28 | 20.32 | 18.20 | 28.52 | 95.32 | 29.85 | 18.79 | 21.00 | 26.13 | 95.77 | ||||||||||||||||
| Sales of natural gas of Eni’s affiliates (net to Eni) | (bcm) | 2.27 | 1.77 | 1.96 | 2.74 | 8.74 | 2.63 | 1.84 | 1.97 | 2.47 | 8.91 | 2.50 | 1.67 | 1.52 | 2.26 | 7.95 | ||||||||||||||||
| Total sales and own consumption of natural gas | (bcm) | 27.07 | 19.56 | 19.07 | 27.87 | 93.57 | 30.91 | 22.16 | 20.17 | 30.99 | 104.23 | 32.35 | 20.46 | 22.52 | 28.39 | 103.72 | ||||||||||||||||
| Volumes transported on behalf of third parties in Italy | (bcm) | 7.96 | 7.22 | 6.38 | 9.33 | 30.89 | 9.95 | 8.20 | 6.61 | 9.08 | 33.84 | 9.86 | 8.20 | 7.47 | 11.74 | 37.27 | ||||||||||||||||
| Electricity sales | (TWh) | 7.38 | 8.86 | 8.67 | 8.28 | 33.19 | 8.16 | 7.21 | 7.62 | 6.94 | 29.93 | 7.78 | 7.57 | 9.19 | 9.42 | 33.96 | ||||||||||||||||
| Sales of refined products: | (mmtonnes) | 12.34 | 12.02 | 11.90 | 13.89 | 50.15 | 11.60 | 11.96 | 15.01 | 12.11 | 50.68 | 10.97 | 11.16 | 11.34 | 12.12 | 45.59 | ||||||||||||||||
| Retail sales in Italy | 1.98 | 2.19 | 2.25 | 2.20 | 8.62 | 2.06 | 2.18 | 2.28 | 2.29 | 8.81 | 2.10 | 2.31 | 2.36 | 2.26 | 9.03 | |||||||||||||||||
| Wholesale sales in Italy | 2.61 | 2.66 | 2.85 | 2.97 | 11.09 | 2.56 | 2.80 | 2.90 | 2.89 | 11.15 | 2.41 | 2.25 | 2.43 | 2.47 | 9.56 | |||||||||||||||||
| Retail sales Rest of Europe | 0.70 | 0.78 | 0.82 | 0.88 | 3.17 | 0.79 | 0.82 | 0.84 | 0.77 | 3.22 | 0.69 | 0.76 | 0.80 | 0.74 | 2.99 | |||||||||||||||||
| Wholesale sales outside Italy | 0.87 | 0.84 | 1.00 | 1.02 | 3.73 | 1.04 | 1.16 | 1.17 | 1.13 | 4.50 | 1.00 | 0.97 | 1.04 | 1.06 | 4.07 | |||||||||||||||||
| Other sales | 5.67 | 5.02 | 4.47 | 6.29 | 21.45 | 4.64 | 4.47 | 7.34 | 5.03 | 21.48 | 4.77 | 4.87 | 4.71 | 5.59 | 19.94 | |||||||||||||||||
| Iberian Peninsula | 0.51 | 0.53 | 0.51 | 0.53 | 2.08 | 0.51 | 0.53 | 0.48 | 1.52 |
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Contents
Table of Contents
Ordinary and Extraordinary Shareholders’ Meeting Resolutions
Eni S.p.A. Ordinary and
Extraordinary Shareholders’ Meeting held on April
29, 2010 resolved to:
Documents available to the public Eni’s Annual Report 2009 (Italian Edition) – including the financial statements of the parent company, approved by the Shareholders’ Meeting, the consolidated financial statements, the report of the directors, the certification pursuant to article 154-bis, paragraph 5, of Legislative Decree 58/98 – the reports of the external auditors, the |
report of the statutory
auditors pursuant to article 153 of Legislative Decree
58/98 and the Sustainability Report 2009 are available at
Eni S.p.A. Registered Office and Borsa Italiana S.p.A.
(the Italian Stock Exchange: www.borsaitaliana.it). The minutes of the Shareholders’ Meeting will be available under law provisions at Eni S.p.A. Registered Office and Borsa Italiana S.p.A. (the Italian Stock Exchange: www.borsaitaliana.it). The above-mentioned documents are available also on www.eni.com and may be requested by e-mail at segreteriasocietaria.azionisti@eni.com or by calling the Toll-Free number 800 940 924 for calls from Italy and 800 11 22 34 56 for calls from outside Italy, after dialling the proper international code (+). Payment of Year 2009 Final Dividend Eni S.p.A. Shareholders’ Meeting resolved to pay
final dividends as from May 27, 2010, coupon No. 14,
being the ex-dividend date May 24, 2010. Therefore, as of
this last date, Eni shares will be traded without the
right to the payment of 2009 final dividend. |