SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN
ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of July 2011
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): )
TABLE OF CONTENTS
Press Release dated July 29, 2011
Press Release dated July 29, 2011
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: July 31, 2011
ENI ANNOUNCES RESULTS FOR THE
SECOND QUARTER
AND THE FIRST HALF OF 2011
San Donato Milanese, July 29, 2011 - Eni, the international oil and gas company, today announces its group results for the second quarter and the first half of 2011 (unaudited).
Financial Highlights
| Adjusted operating profit: euro 9.1 billion in the first half (up 8%); euro 4 billion in the quarter (down 3%). | |
| Adjusted net profit: euro 3.63 billion in the first half (up 4%); euro 1.44 billion in the quarter (down 14%). | |
| Net profit: euro 3.8 billion in the first half (down 6%); euro 1.25 billion in the quarter (down 31%). | |
| Cash flow: euro 8.6 billion in the first half; euro 4.41 billion in the quarter. | |
| Interim dividend proposal of euro 0.52 per share. |
Operational Highlights
| Oil and gas production affected by the prolonged crisis in Libya: down by 15% for the second quarter to 1.489 mmboe/d (down by 12% for the first half). When excluding the impact of the production loss in Libya and price effects, the decline was 2% for the quarter (down by 1% for the first half). | |
| Gas sales: up by 9% for the second quarter to 21 bcm (up by 7% in the first half). | |
| In the first half 4 new fields have been put into production, in the USA, Congo and Italy. | |
| Granted new growth opportunities in East-South Asia by acquiring exploration acreage in Indonesia and an interest in two gas discoveries in the Australian Timor Sea. | |
| Finalized a deal with Sonatrach to pursue development of gas shale plays in Algeria. | |
| Continued exploration success in Norway, USA, Ghana, Venezuela, UK, Angola and Egypt added 415 million barrels to the Companys resource base in the first half. |
Paolo Scaroni, Chief Executive Officer, commented:
"The main feature impacting Enis results in the
first half of 2011 was the disruption in supply of oil and gas
from Libya, which affected all of our business activities.
G&P results also suffered from the high supply costs of
natural gas, which currently take no account of the expected
retroactive benefits of ongoing renegotiations. In this context,
Eni delivered solid results, benefiting in particular from
improved profitability in E&P. In the first half of the year
we have strengthened our growth prospects through the progress on
key development projects, continuing exploration success and new
agreements which secure access to resources in core and new high
potential areas. Managements expectations for solid
full-year results and the Companys growth and profitability
outlook underpin our dividend policy and our proposal for an
interim dividend of euro 0.52 per share."
On the same occasion of reviewing this press release, the Board has approved the interim consolidated report as of June 30, 2011, which has been prepared in accordance to Italian listing standards as per Article 154-ter of the Code for securities and exchanges (Testo Unico della Finanza). The document was immediately submitted to the Companys external auditor. Publication of the interim consolidated report is scheduled within the first half of August 2011 alongside completion of the auditors review.
- 1 -
Financial Highlights
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
SUMMARY GROUP RESULTS | (euro million) | |||||||||||||||||
4,305 | 5,638 | 3,810 | (11.5 | ) | Operating profit | 9,152 | 9,448 | 3.2 | ||||||||||
4,128 | 5,099 | 4,003 | (3.0 | ) | Adjusted operating profit (a) | 8,459 | 9,102 | 7.6 | ||||||||||
1,824 | 2,547 | 1,254 | (31.3 | ) | Net profit (b) | 4,046 | 3,801 | (6.1 | ) | |||||||||
0.50 | 0.70 | 0.35 | (30.0 | ) | - per share (euro) (c) | 1.12 | 1.05 | (6.3 | ) | |||||||||
1.27 | 1.91 | 1.01 | (20.5 | ) | - per ADR ($) (c) (d) | 2.97 | 2.95 | (0.7 | ) | |||||||||
1,667 | 2,198 | 1,436 | (13.9 | ) | Adjusted net profit (a) (b) | 3,489 | 3,634 | 4.2 | ||||||||||
0.46 | 0.61 | 0.40 | (13.0 | ) | - per share (euro) (c) | 0.96 | 1.00 | 4.2 | ||||||||||
1.17 | 1.67 | 1.15 | (1.7 | ) | - per ADR ($) (c) (d) | 2.55 | 2.81 | 10.2 | ||||||||||
i | i | i |
(a) | i | 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 27. |
(b) | i | Profit attributable to Enis shareholders. |
(c) | i | 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) | i | One ADR (American Depositary Receipt) is equal to two Eni ordinary shares. |
Adjusted operating profit
Eni reported lowered adjusted operating profit for the second
quarter of 2011 at euro 4 billion, down by 3% from the
year-earlier quarter, dragged down by a weak performance of the
downstream businesses. The Gas & Power divisions profit
fell by 60% from a year ago driven by reduced marketing margins
on gas sales due to strong competitive pressures and a weak
trading environment. The divisions performance did not take
into account the possible benefit associated with ongoing
renegotiations of the Companys long-term gas purchase
contracts which may become effective earlier than the end of June
2011. The Refining & Marketing and Petrochemical divisions
both reported widening operating losses driven by high costs for
oil-based feedstock only partially transferred to end prices. On
the positive side, the Exploration & Production division
delivered an improved performance (up by 11% from a year ago)
driven by a strong oil price environment, partly offset by the
impact associated with a lowered Libyan output and the
appreciation of the euro vs. the US dollar (up by 13%). Also the
Engineering & Construction segment posted higher profit (up
10%) helped by a stronger turnover and higher margins on works.
For the first half of 2011, the Group reported an improved
operating profit compared to the first half of 2010 (up by 8% to
euro 9.1 billion) on the back of better performances reported by
the Exploration & Production and, to a lesser extent, the
Engineering & Construction segment, partly offset by weak
trends in the Companys downstream businesses.
Adjusted net profit
Adjusted net profit for the second quarter of 2011 was euro
1.44 billion, a decrease of 14% compared with the second quarter
of 2010 as a result of the decreased operating performance and 2
percentage points increase of the Group tax rate. Adjusted net
profit for the first half of 2011 was euro 3.63 billion (up 4%
from the first half of 2010) driven by a better operating
performance, also helped by a slight decrease in the Group tax
rate (down by a half percentage point).
Capital expenditure
Capital expenditure was euro 3,740 million for the quarter
and euro 6,615 million for the first half mainly relating to
continuing development of oil and gas reserves, the upgrading of
rigs and offshore vessels in the Engineering & Construction
segment and of the gas transport infrastructures.
Cash flow
In the second quarter of 2011 net cash generated by operating
activities amounted to euro 4,411 million (euro 8,596 million in
the first half). Cash flow from operating activities of the
quarter benefited from a cash inflow of euro 248 million
associated with transferring trade receivables due beyond March
31, 2011, to factoring institutions amounting to euro 932 million
in the first quarter 2011, while the current quarter benefited
from transferring euro 1,180 million of trade receivables due
beyond June 30, 2011, to the same institutions.
These inflows were used to fund part of the financing
requirements associated with capital expenditure incurred in the
period and dividend payment, which included payment of balance
dividend for the fiscal year 2010 to Enis shareholders for
euro 1,811 million and to non-controlling interests by
consolidated entities (euro 397 million). As a result, net
borrowings1 as of June 30, 2011, amounted to euro
25,978 million, representing a slight decrease of euro 141
million from December 31, 2010, and an increase of euro 1,027
million from March 31, 2011.
____________
(1) | Information on net borrowings composition is furnished on page 36. |
- 2 -
Financial Ratios
Return on Average Capital Employed (ROACE)2
calculated on an adjusted basis for the twelve-month period to
June 30, 2011, was 10.9% (9.7% at June 30, 2010).
Ratio of net borrowings to shareholders equity including
non-controlling interest leverage2 was
0.47 at June 30, 2011, unchanged from December 31, 2010. This
indicator was positively influenced by net profit for the period
and the slight decrease of net borrowings which effects were
absorbed by the appreciation of the euro against the US dollar as
recorded at period end exchange rates (up 8%) which reduced
shareholders equity by euro 2.37 billion, as well as
dividend payment.
Interim dividend 2011
In light of the financial results achieved for the first half
of 2011 and managements expectations for the full-year
results, the interim dividend proposal to the Board of Directors
on September 8, 2011, will amount to euro 0.52 per share (euro
0.50 per share in 2010). The interim dividend is payable on
September 22, 2011, being September 19, 2011 the ex dividend
date.
Operational highlights and trading environment
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
1,758 | 1,684 | 1,489 | (15.3 | ) | Production of oil and natural gas | (kboe/d) | 1,800 | 1,586 | (11.9 | ) | ||||||||
980 | 899 | 793 | (19.1 | ) | - Liquids | (kbbl/d) | 995 | 846 | (15.0 | ) | ||||||||
4,319 | 4,356 | 3,867 | (9.8 | ) | - Natural gas | (mmcf/d) | 4,466 | 4,110 | (7.9 | ) | ||||||||
19.19 | 32.33 | 21.00 | 9.4 | Worldwide gas sales | (bcm) | 49.70 | 53.33 | 7.3 | ||||||||||
9.61 | 9.68 | 9.66 | 0.5 | Electricity sales | (TWh) | 18.61 | 19.34 | 3.9 | ||||||||||
2.94 | 2.64 | 2.90 | (1.4 | ) | Retail sales of refined products in Europe | (mmtonnes) | 5.62 | 5.54 | (1.4 | ) | ||||||||
Exploration & Production
Eni reported liquids and gas production of 1,489 kboe/d for
the second quarter of 2011 (1,586 kboe/d in the first half of
2011), down by 15% from the second quarter of 2010 (down by 12%
from the first half of 2010). The magnitude of this reduction was
the result of the shutdown of activities at all Enis
producing sites in Libya and the closure of the GreenStream
pipeline transporting gas from Libya to Italy, with the sole
exception of the Wafa field which has been flowing at a level of
approximately 50 kboe/d net to Eni with the full supply
supporting local production of electricity.
Performance for the quarter was also negatively impacted by lower
entitlements in the Companys PSAs due to higher oil prices
with an overall effect of 36 kboe/d compared to the year-earlier
quarter (approximately 30 kboe/d from the first half of 2010), in
addition to the above mentioned loss of Libyan output amounting
to approximately 200 kboe/d compared to the second quarter of
2010 (down by approximately 170 kboe/d from the first half of
2010). Net of those effects, production for the quarter decreased
by 2 percentage points (down 1 percentage point in the first half
of 2011) mainly due to planned facility downtime in particular in
Italy. Production decline at mature fields was absorbed by
continuing production ramp up in Norway, Egypt and Iraq.
Gas & Power
In the second quarter of 2011 Enis gas sales were 21
bcm, an increase of 9% compared with the second quarter of 2010
(up 7% from the first half of 2010) which reflected an improved
performance both in Europe and the domestic market. Volumes gains
in European markets (up by 2.29 bcm in the quarter of 2011, or
26%; up by 19% in the first half of 2011) were driven by growth
registered in Turkey, Germany/Austria, Belgium, UK/Northern
Europe and France. In Italy volume increases (up by 0.84 bcm in
the quarter of 2011, or 13%; up by 11% in the first half of 2011)
were driven by client additions and higher off-takes in power
generation, wholesalers and industrial segments which gave a
boost to Enis market share. These increases were partly
offset by lower sales to shippers which import gas to Italy (down
by 74% and 55% in the second quarter and first half of 2011,
respectively) due to reduced off-takes and lower availability of
Libyan gas resulting from the closure of the GreenStream
importing pipeline.
_______________
(2) | 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 36 and 37 for leverage and ROACE, respectively. |
- 3 -
Refining & Marketing
In the second quarter of 2011, the benchmark refining margin
on TRC Brent crude was unprofitable (down by 68% to 1.1 $/barrel
from the second quarter of 2010; down by 51% from the first half
of 2010 to 1.4 $/barrel) as high costs of oil-based feedstock
were only partially transferred to product prices pressured by
weak demand, high inventory levels and excess capacity. In
addition refinery utilities expenses registered large increases
as they are indexed to the cost of oil. Against this backdrop,
Enis realized margins fell sharply although Enis
complex cycles were helped by widening sweet-sour crude price
differentials on the marketplace and higher premium prices on
gasoline and gasoil compared to fuel oil.
In the second quarter of 2011, sales volumes on the Italian
retail market decreased by 1.4% from a year ago (down by 2.4 in
the first half of 2011) due to a large drop in fuel consumption
(down by 1.9%). Market share for the period increased by 0.1
percentage points to 30.2% compared to the same period of the
previous year. Also retail sales on European market were weaker
in the quarter due to lower demand and higher competitive
pressure (down by 1.3% in the quarter; however they were up 1.4%
in the first half) with reductions in Germany, France and Eastern
Europe. These negatives were partly offset by the purchase of a
network of service stations in Austria closed during 2010.
Currency
Results of operations for the second quarter and first half
of 2011 were negatively impacted by the appreciation of the euro
vs the US dollar (up 13% and 5.6% in the quarter and in the first
half of 2011, respectively).
Update on Libyan situation
All of Enis producing facilities came to halt including export through the GreenStream gas pipeline, with the sole exception of the Wafa field where it is supporting local production of electricity. Plants and pipelines were put into safety status and no damage has been reported. Eni is technically able to resume the gas output at a level similar to the pre-crisis flows in 2010 once the situation has returned to normal. Since March 2011 Eni has evacuated all its personnel and suspended ongoing exploration and development activities. Enis production in Libya is currently flowing at a rate of approximately 50 kboe/d, down from the expected level of 280 kboe/d for the year. As of June 30, 2011, Enis net capital employed in Libya amounted to $2.04 billion ($2.5 billion as of December 31, 2010), including a 50% interest in GreenStream BV.
Portfolio developments
Algeria
In April 2011, Eni signed a cooperation agreement with
Sonatrach to explore for and develop unconventional hydrocarbons,
particularly shale gas plays.
Australia
In May 2011, Eni signed an agreement with MEO Australia Ltd
to farm-in the Heron and Blackwood gas discoveries in permit
NT/P-68, located in the Timor Sea. Eni will acquire a 50% stake
and operatorship in the first gas discovery by financing
exploration activities relating to the drilling of two appraisal
wells. Eni was granted an option to earn a 50% stake in Blackwood
discovery by drilling one appraisal well in the area and
performing seismic surveys. The agreement also provides an option
to acquire an additional 25% in both the discoveries by financing
the development plan required to reach a Final Investment
Decision (FID).
Indonesia
In May 2011, Eni was awarded rights to explore and the
operatorship of the Arguni I block with a 100% interest, located
in the Bintuni basin, with high mineral potential. The agreement
foresees drilling 2 wells to be carried out in the first 3 years
of exploration license.
South Africa
In June 2011, Eni signed a Memorandum of Understanding with
South Africas State-owned oil company PetroSA to promote
common opportunities to jointly expand operations in conventional
and unconventional hydrocarbons in South Africa and in Africa.
The parties will also study joint initiatives to evaluate
long-term LNG supplies for power generation and gas-to-liquids
(GTL) as well as refined products to be provided by Eni.
- 4 -
In addition, Eni will support the construction of new power plants aimed at guaranteeing economic development of the country. In addition, Eni and PetroSA will also evaluate leasing options to use storage facilities in Saldanha, located strategically between the Asian, American and European markets.
Bio-based chemical
In June 2011, through its subsidiary Polimeri Europa, Eni
signed a cooperation agreement with Novamont SpA to convert
Enis Porto Torres chemical plant into an innovative
bio-based chemical complex to produce bio-plastics and other
bio-based petrochemical products (bio-lubricants and
bio-additives) for which significant growth is expected in the
medium-long term. The project will be supported by an integrated
supply chain and raw materials of vegetable origin. Novamont will
contribute its technologies and skills in the bio-plastics and
bio-based chemical sector. Eni will contribute to the joint
entity the Porto Torres plant, infrastructure and professional
staff as well as its industry and technical-engineering and
commercial know-how in the petrochemical sector. In addition, Eni
foresees to build a biomass power plant and to carry out a number
of projects for environmental restoration and clean-up
activities. Eni plans to make capital expenditure totaling
approximately euro 1.2 billion in the 2011-2016 period to execute
the above mentioned projects directly or through the joint
entity.
Egypt
In July 2011, Eni and the Egyptian Authorities reaffirmed
their upstream commitment in the country, particularly in the
Western Desert, the Mediterranean Sea and the Sinai basins. The
program of activity foresees a development plan including the
drilling of additional wells and the fast track of recent
discoveries as well as an exploration plan including the drilling
of 12 wells. In addition, Eni will provide for a number of
sustainable initiatives designed to support the countrys
population.
Belgium
In July 2011, Eni signed an agreement with NV Noun Energy for
the acquisition of the subsidiary Noun Belgium NV. The company
supplies gas and electricity to the industrial and residential
segments in Belgium. The agreement is subject to the approval of
the relevant Authorities.
Exploration activities
Exploration activities yielded positive results in: | ||
(i) | Norway, with the Skrugard oil and gas discovery to be readily put in production in the PL 532 (Enis interest 30%), with initial recoverable reserves of approximately 250 mmbbl; | |
(ii) | USA, in the Gulf of Mexico, with the Hadrian North appraisal well containing oil and natural gas resources in Block KC919 (Enis interest 25%); | |
(iii) | Ghana, with the appraisal well Sankofa-2 and Gye Nyame discovery containing oil and gas resources in the offshore license Cape Three Points (Eni 47.22%, operator); | |
(iv) | Venezuela, with the Perla 4 and 5 appraisal wells in Block Cardon IV (Enis interest 50%) that have been successfully drilled. The results exceeded the initial resource estimation to more than approximately 16,000 bcf. The development plan provides for a production target of approximately 300 mmcf/d in 2013; | |
(v) | the United Kingdom with the appraisal of the Culzean gas and liquids discovery (Enis interest 16.95%); | |
(vi) | Angola, in Block 15/06 (Eni operator with a 35% interest) with the Mukuvo-1 discovery and Cinguvu-2 appraisal oil wells, within the West Hub project sanctioned in 2010. Planned activities progressed and start-up is expected in 2013 with peak production at 22 kbbl/d; | |
(vii) | Egypt, with near field activities in: (i) the Belayim concession (Enis interest 100%) with the BB-10 and BLNE-1 oil discoveries that were linked to existing facilities; (ii) the development lease Abu Madi West (Enis interest 75%) with the Nidoco West and Nidoco East gas discoveries. Their linking to the existing facilities progressed; (iii) the development lease Meleiha (Enis interest 56%) with the Aman SW and Dorra-1X oil discoveries that were started-up; | |
(viii) | Pakistan, with the Kadanwari-27 exploration well (Enis interest 18.42%), in the Kadanwari permit. |
- 5 -
Main production start-ups | ||
In line with the Companys production plans, production was started at the following main fields: | ||
(i) | Capparuccia (Enis interest 77.8%) in Italy, with an initial production of approximately 4 kboe/d; | |
(ii) | Libondo (Enis interest 35%), offshore Congo; | |
(iii) | Nikaitchuq (Eni operator with a 100% interest), offshore Alaska. Peak production is expected at 28 kbbl/d; | |
(iv) | Appaloosa (Enis interest 100%) in the Gulf of Mexico, with a production of approximately 7 kbbl/d. |
Divestment of international pipelines
As part of the agreement signed with the European Commission for the divestment of Enis interests in the German TENP, the Swiss Transitgas and the Austrian TAG gas transport pipelines, interconnected with the Italian transport system, on June 10, 2011, Eni entered a purchase agreement with Italian Cassa Depositi e Prestiti SpA ("CDP") for the sale of its whole interest in Trans Austria Gasleitung GmbH representing 89% of outstanding shares, which give right to 94% of the entity's earnings. Trans Austria Gasleitung GmbH is the company which owns the transport rights for the Austrian section of the pipeline that connects Russia to Italy. The divestment, subject to approval of the European Commission, provides for the payment of euro 483 million, plus the reimbursement of a shareholder loan granted by Eni to the company equal to euro 192 million. These amounts will be subject to review at the closing date as per market practice. The parties have also agreed upon earn-out mechanisms linked to the occurrence of certain events. The transaction, once finalized, will leave unaffected the ship-or-pay contract signed by Eni with TAG. Procedures are progressing for the divestment of Enis interest in the other two gas transport pipelines, the German TENP and the Swiss Transitgas.
Outlook
Management expects that the global economic recovery will continue to progress at a modest pace during the year 2011. Nonetheless, the 2011 outlook is also characterized by a certain degree of uncertainty and volatility in light of ongoing macroeconomic and geopolitical developments, particularly the evolution of the Libyan crisis. Eni forecasts an upward trend for Brent crude oil prices also supported by healthier global oil demand. For its short-term economic and financial projections, Eni assumes an average Brent price of 115 $/bbl for the full year 2011. Management expects that the European gas market will remain weak as sluggish demand growth is insufficient to absorb current oversupplies and ongoing competitive pressures undermine gas operators profitability. Refining margins are expected to remain at unprofitable levels due to weak underlying fundamentals (sluggish demand and excess capacity) and high feedstock costs. Against this backdrop, management expectations about the main trends in the Companys businesses for 2011 are disclosed below.
- | Production of liquids and natural gas is forecast to decline from 2010 (1.815 million boe/d was the actual level in 2010 at 80 $/bbl) at the Companys pricing scenario of 115 $/bbl for the full year. The decline is expected as a result of volume losses in Libya following the shutdown of almost all of the Companys production facilities. Better production performance at the Companys assets elsewhere in the world will help partly offset the impact associated with rising crude oil prices on PSAs entitlements. Assuming the actual production level at 50 kboe/d in Libya for the remainder of 2011, management forecasts a 10 percentage points reduction in the expected production plateau for the full year at a constant pricing scenario. Management has been implementing its plans to target production growth in the Companys assets by ramping up fields that were started in 2010, starting up new fields in the USA, Australia, Egypt, Italy and Algeria, as well as executing production optimizations in particular in Nigeria, Norway, Egypt, Angola and the United Kingdom; | |
- | Worldwide gas sales are expected to grow from 2010 (in 2010 actual sales amounted to 97.06 bcm), in spite of sales losses to certain Italian importers due to lower availability of gas from Libya. Management plans to drive volume growth in Italy, leveraging clients additions in the power generation, industrial and wholesale segments, as well as regaining significant market share, and capitalizing on organic growth in key European markets. Considering mounting competitive pressure in the gas market, the achievement of the planned volume targets will be underpinned by strengthening the Companys leadership on the European market; marketing actions intended to strengthen the customer base in the domestic market and renegotiating the Companys long-term gas purchase contracts. The cash flow impact associated with lower sales to Italian shippers will be offset by expected lower cash outflows associated with the Companys take-or-pay gas purchase contracts as the |
- 6 -
Company is planning to meet lower availability of Libyan gas with gas from other sources in its portfolio; | ||
- | Regulated businesses in Italy will benefit from the pre-set regulatory return on new capital expenditure and continuing efficiency actions; | |
- | Refining throughputs on Enis account are expected to slightly decline compared to 2010 (actual throughputs in 2010 were 34.8 mmtonnes). The decline is mainly expected at the Venice refinery due to difficulties in supplying Libyan crude oil. Higher volumes are expected to be processed at the Sannazzaro and Taranto refineries and optimization of refinery cycles, as well as efficiency actions are expected to be implemented in response to a negative trading environment; | |
- | Retail sales of refined products in Italy and the rest of Europe are expected to be slightly lower than in 2010 (11.73 mmtonnes in 2010) against the backdrop of weaker demand. Management plans to counteract that negative trend by leveraging selective pricing and marketing initiatives, developing the "non-oil" business and service upgrade; | |
- | The Engineering & Construction business confirms solid results due to increasing turnover and a robust order backlog. |
In 2011, management plans to make capital expenditure broadly in line with 2010 (euro 13.87 billion was invested in 2010) mainly directed to developing giant fields and starting production at new important fields in the Exploration & Production division, refinery upgrading related in particular to the realization of the EST project, completing the program of enhancing Saipems fleet of vessels and rigs, and upgrading the natural gas transport infrastructures. Assuming a Brent price of 115 $/barrel and the planned divestment of certain assets, management forecasts that the ratio of net borrowings to total equity (leverage) at year-end will be lower than in 2010.
- 7 -
This press release has been prepared on a
voluntary basis in accordance with the best practices in the
marketplace. It provides data and information on the
Companys business and financial performance for the second
quarter and the first half of 2011 (unaudited). Results of
operations for the first half of 2011 and material business
trends have been extracted from the interim consolidated report
2011 which has been prepared in compliance with Article 154-ter
of the Italian code for securities and exchanges ("Testo
Unico della Finanza" - TUF) and approved by the
Companys Board of Directors today. The interim report has
been transmitted to the Companys external auditor as
provided by applicable regulations. Publication of the interim
report is scheduled in the first half of August, alongside the
Companys external auditor report upon completion of
relevant audits.
In this press release results and cash flows are presented for
the second quarter and the first half of 2011 and for the second
quarter and the first half of 2010. Information on liquidity and
capital resources relates to the end of the periods as of June
30, 2011, March 31, 2011 and December 31, 2010. Tables contained
in this press release are comparable with those presented in
managements disclosure section of the Companys annual
report and interim report. Quarterly and semi-annual 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.
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.
Enis Chief Financial Officer, Alessandro Bernini, in his position as manager responsible for the preparation of the Companys 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 Companys 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 expenditure,
development and management of oil and gas resources, dividends,
allocation of future cash flow from operations, future operating
performance, gearing, targets of production and sales growth, new
markets, and the progress and timing of projects. By their
nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Actual
results may differ from those expressed in such statements,
depending on a variety of factors, including the timing of
bringing new fields on stream; managements 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 Enis operations, such as prices and margins of
hydrocarbons and refined products, Enis results from
operations and changes in net borrowings for the first half of
the year cannot be extrapolated on an annual basis.
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 second quarter and the first half of 2011 (unaudited) is also available on the Eni web site: eni.com.
- 8 -
Quarterly consolidated report |
Summary results for the second quarter and first half of 2011 |
(euro million) |
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
22,902 | 28,779 | 24,596 | 7.4 | Net sales from operations | 47,706 | 53,375 | 11.9 | ||||||||||||||||
4,305 | 5,638 | 3,810 | (11.5 | ) | Operating profit | 9,152 | 9,448 | 3.2 | |||||||||||||||
(368 | ) | (669 | ) | (240 | ) | Exclusion of inventory holding (gains) losses | (777 | ) | (909 | ) | |||||||||||||
191 | 130 | 433 | Exclusion of special items | 84 | 563 | ||||||||||||||||||
of which: | |||||||||||||||||||||||
69 | - non-recurring items | 69 | |||||||||||||||||||||
191 | 130 | 364 | - other special items | 84 | 494 | ||||||||||||||||||
4,128 | 5,099 | 4,003 | (3.0 | ) | Adjusted operating profit (a) | 8,459 | 9,102 | 7.6 | |||||||||||||||
Breakdown by division: | |||||||||||||||||||||||
3,442 | 4,120 | 3,826 | 11.2 | Exploration & Production | 6,560 | 7,946 | 21.1 | ||||||||||||||||
629 | 958 | 251 | (60.1 | ) | Gas & Power | 1,896 | 1,209 | (36.2 | ) | ||||||||||||||
(52 | ) | (176 | ) | (114 | ) | (119.2 | ) | Refining & Marketing | (146 | ) | (290 | ) | (98.6 | ) | |||||||||
(11 | ) | (12 | ) | (30 | ) | (172.7 | ) | Petrochemicals | (70 | ) | (42 | ) | 40.0 | ||||||||||
343 | 342 | 378 | 10.2 | Engineering & Construction | 632 | 720 | 13.9 | ||||||||||||||||
(51 | ) | (45 | ) | (60 | ) | (17.6 | ) | Other activities | (108 | ) | (105 | ) | (2.8 | ) | |||||||||
(75 | ) | (84 | ) | (69 | ) | (8.0 | ) | Corporate and financial companies | (140 | ) | (153 | ) | 9.3 | ||||||||||
(97 | ) | (4 | ) | (179 | ) | Impact of unrealized intragroup profit elimination (b) | (165 | ) | (183 | ) | |||||||||||||
(309 | ) | (83 | ) | (292 | ) | Net finance (expense) income (a) | (554 | ) | (375 | ) | |||||||||||||
311 | 265 | 414 | Net income from investments (a) | 521 | 679 | ||||||||||||||||||
(2,348 | ) | (2,671 | ) | (2,443 | ) | Income taxes (a) | (4,625 | ) | (5,114 | ) | |||||||||||||
56.9 | 50.6 | 59.2 | Adjusted tax rate | (%) | 54.9 | 54.4 | |||||||||||||||||
1,782 | 2,610 | 1,682 | (5.6 | ) | Adjusted net profit | 3,801 | 4,292 | 12.9 | |||||||||||||||
1,824 | 2,547 | 1,254 | (31.3 | ) | Net profit attributable to Enis shareholders | 4,046 | 3,801 | (6.1 | ) | ||||||||||||||
(250 | ) | (474 | ) | (170 | ) | Exclusion of inventory holding (gains) losses | (530 | ) | (644 | ) | |||||||||||||
93 | 125 | 352 | Exclusion of special items | (27 | ) | 477 | |||||||||||||||||
of which: | |||||||||||||||||||||||
69 | - non recurring items | 69 | |||||||||||||||||||||
93 | 125 | 283 | - other special items | (27 | ) | 408 | |||||||||||||||||
1,667 | 2,198 | 1,436 | (13.9 | ) | Adjusted net profit attributable to Enis shareholders | 3,489 | 3,634 | 4.2 | |||||||||||||||
Net profit attributable to Enis shareholders | |||||||||||||||||||||||
0.50 | 0.70 | 0.35 | (30.0 | ) | per share | (euro) | 1.12 | 1.05 | (6.3 | ) | |||||||||||||
1.27 | 1.91 | 1.01 | (20.5 | ) | per ADR | ($) | 2.97 | 2.95 | (0.7 | ) | |||||||||||||
Adjusted net profit attributable to Enis shareholders | |||||||||||||||||||||||
0.46 | 0.61 | 0.40 | (13.0 | ) | per share | (euro) | 0.96 | 1.00 | 4.2 | ||||||||||||||
1.17 | 1.67 | 1.15 | (1.7 | ) | per ADR | ($) | 2.55 | 2.81 | 10.2 | ||||||||||||||
3,622.4 | 3,622.5 | 3,622.6 | Weighted average number of outstanding shares (c) | 3,622.4 | 3,622.6 | ||||||||||||||||||
4,585 | 4,185 | 4,411 | (3.8 | ) | Net cash provided by operating activities | 9,139 | 8,596 | (5.9 | ) | ||||||||||||||
4,328 | 2,875 | 3,740 | (13.6 | ) | Capital expenditure | 7,107 | 6,615 | (6.9 | ) | ||||||||||||||
(a) | Excluding special items. For a detailed explanation of adjusted net profit by division see page 27. | |
(b) | This item mainly pertained to intra-group sales of commodities, services and capital goods recorded in the assets of the purchasing business segment as of the end of the period. | |
(c) | Fully diluted (million shares). |
i |
Trading environment indicators |
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
78.30 | 104.97 | 117.36 | 49.9 | Average price of Brent dated crude oil (a) | 77.27 | 111.16 | 43.9 | |||||||||||
1.273 | 1.367 | 1.439 | 13.0 | Average EUR/USD exchange rate (b) | 1.328 | 1.403 | 5.6 | |||||||||||
61.51 | 76.79 | 81.56 | 32.6 | Average price in euro of Brent dated crude oil | 58.19 | 79.23 | 36.2 | |||||||||||
3.39 | 1.74 | 1.09 | (67.8 | ) | Average European refining margin (c) | 2.90 | 1.41 | (51.4 | ) | |||||||||
4.56 | 3.35 | 2.20 | (51.8 | ) | Average European refining margin Brent/Ural (c) | 3.89 | 2.77 | (28.8 | ) | |||||||||
5.68 | 9.09 | 9.36 | 64.8 | NBP gas price (d) | 5.64 | 9.23 | 63.7 | |||||||||||
2.66 | 1.27 | 0.75 | (71.8 | ) | Average European refining margin in euro | 2.18 | 1.00 | (54.1 | ) | |||||||||
0.7 | 1.1 | 1.4 | 100.0 | Euribor - three-month euro rate | (%) | 0.9 | 1.3 | 44.4 | ||||||||||
0.4 | 0.3 | 0.3 | (25.0 | ) | Libor - three-month dollar rate | (%) | 0.3 | 0.3 | ||||||||||
(a) | In USD dollars per barrel. Source: Platts Oilgram. | |
(b) | Source: ECB. | |
(c) | In USD per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platts Oilgram data. | |
(d) | In USD per million btu. |
- 9 -
Group results
Eni reported lowered net profit attributable to Enis
shareholders for the second quarter of 2011 at euro 1,254
million, down euro 570 million, or 31.3%, from the year-earlier
quarter. The decline reflected a reduced operating performance
(down by 11.5%) dragged down by weak trends in Enis
downstream businesses, whose effects were partly offset by an
improved performance from the Exploration & Production and
Engineering & Construction divisions. The quarterly
results were negatively affected by a higher consolidated tax
rate, up by approximately 6 percentage points, mainly due to
certain tax items unrelated to the Group profit for the period,
namely tax charges on intercompany dividends and a non deductible
tax item related to an antitrust provision.
Net profit attributable to Enis shareholders for the
first half of 2011 amounted to euro 3,801 million, down euro 245
million from 2010, or 6.1%, due to a higher share of profit
attributable to non-controlling interests (euro 346 million) and
higher income taxes (down euro 468 million) with an increased
Group tax rate (up by two percentage points). Those negatives
were partly offset by an improved operating performance (up by
3.2%) mainly in the Exploration & Production division
reflecting higher oil prices, as well as lowered net finance and
exchange rate expenses (up euro 224 million) reflecting a
positive change in fair value evaluation of certain commodity
derivatives which did not meet the formal criteria for hedge
accounting.
In the second quarter of 2011 adjusted net profit attributable to Enis shareholders amounted to euro 1,436 million, down euro 231 million from the second quarter of 2010 (down 13.9%). In the first half of 2011 adjusted net profit was euro 3,634 million, up euro 145 million (up 4.2% from the first half of 2010). Adjusted net profit for the quarter was calculated excluding an inventory holding gain amounting to euro 170 million and special charges amounting to euro 352 million, resulting in a positive adjustment of euro 182 million. In the first half of 2011, an inventory holding gain of euro 644 million and special charges of euro 477 million resulted in a negative adjustment of euro 167 million.
In the first half of 2011, special charges on the operating profit included: (i) impairment charges amounting to euro 265 million and relating to mineral assets in the Exploration & Production segment, as certain gas properties in the USA were impaired due to negative reserve revisions and a reduced outlook for gas prices as well as certain capital expenditure made in the period for safety reasons in the Refining & Marketing and Petrochemical division plants which was written off as it related to assets totally impaired in previous reporting periods; (ii) a provision amounting to euro 69 million was accrued with regard to an antitrust proceeding in the European sector of elastomers following a decision by the European Court of Justice; (iii) negative fair value evaluation of certain commodity derivatives which did not meet the formal criteria for hedge accounting provided by IAS 39 (euro 160 million); (iv) environmental provisions and provisions for redundancy incentives (euro 42 million and euro 34 million, respectively). Special gains in the period mainly related to gains on disposal of marginal assets in the Exploration & Production division.
Results by division
The decrease in the Group adjusted net profit reported in the
second quarter of 2011 (down 13.9%) reflected lower adjusted
operating profit (down 3%) from the Gas & Power, Refining
& Marketing and Petrochemical divisions, partly offset by
higher results in the Exploration & Production division and,
to a lesser extent, the Engineering & Construction segment.
In the first half of 2011, the Group adjusted net profit
increased by 4.2%, reflecting higher operating profit (up 7.6%)
mainly due to better performance reported by the Exploration
& Production division and, to a lesser extent, the
Engineering & Construction segment.
Gas & Power
In the second quarter of 2011, the Gas & Power division
reported lower adjusted operating profit which was down by 60.1%
from the second quarter of 2010 (down by 36.2% in the first half
of 2011). The result was negatively affected by a severe
contraction in the performance of the Marketing business which
suffered a loss of euro 383 million in the second quarter of 2011
compared to a profit of euro 51 million in the year ago quarter
(down by euro 760 million from the first half of 2010). The
Marketing business was affected by sharply lower gas margins both
in Italy and Europe, which were dragged down by strong
competitive pressure and oversupply. Also the quarterly
performance was impacted by sales losses to shippers which import
Libyan gas due to the unavailability of the raw material, lower
seasonal sales and negative scenario impacts as well as lower
margins on power generation. The lower results of the Marketing
business were partly offset by the better operating performance
of the Regulated Businesses in Italy (up by 4.6% in the quarter;
up by 4.2% in the first half) and
- 10 -
the improved result of the International Transport business (up by 35.1% in the quarter; up by 13.8% in the first half). Adjusted net profit of the division was euro 239 million in the first quarter (down by 54.1%) and euro 1,002 million in the first half (down by 32.1%).
Refining & Marketing
In the second quarter of 2011 the Refining & Marketing
division reported widening adjusted operating losses amounting to
euro 114 million (a loss of euro 290 million for the first half
of 2011), representing a decrease of euro 62 million from the
second quarter of 2010 (down by euro 144 million from the first
half of 2010). Losses were driven by sharply lower refining
margins, which effects were partially offset by continuing
optimization and efficiency efforts as well as a steady
performance in the Marketing business. Net adjusted loss for the
second quarter and first half of 2011 widened by euro 60 million
and euro 127 million, respectively as a result of the negative
trends in the operations.
Petrochemicals
In the second quarter of 2011 the Petrochemical division
reported widening adjusted operating losses, down by euro 19
million (from -euro 11 million to -euro 30 million). This trend
was negatively impacted by lower margins as high supply costs of
oil-based feedstock were not fully recovered in sales prices on
end markets, and a substantial decrease in demand due to
expectations for a reduction of prices of petrochemical
commodities on the marketplace. The Petrochemicals results for
the first half of 2011 benefited from the good performance
achieved in the first quarter of the year with the operating loss
decreasing by 40% (from -euro 70 million to -euro 42 million).
Adjusted net profit was stable in the second quarter of 2011 and
almost halved in the first half of 2011.
Exploration & Production
In the second quarter of 2011, the Exploration &
Production division reported improved adjusted operating profit,
which was up by 11.2% to euro 3,826 million (up 21.1% in the
first half) driven by higher hydrocarbon realizations in dollars
(up by 38.7% and 31.5% on average, in the second quarter and the
first half, respectively). These positives were partly offset by
the impact associated with a lowered Libyan output and the
appreciation of the euro vs. the US dollar (up by 13%). Adjusted
net profit for the second quarter of 2011 was up by 17% to euro
1,684 million and by 31% to euro 3,517 million for the first half
of 2011.
Engineering & Construction
The Engineering & Construction segment reported a solid
operating performance amounting to euro 378 million and euro 720
million in the second quarter and first half of 2011,
respectively (up by 10.2% and 13.9%) driven by revenue gains and
higher profitability of works executed in the Engineering &
Construction business. Adjusted net profit increased by 1.5% and
14%, respectively in the two reporting periods.
- 11 -
Liquidity and capital resources
Summarized Group Balance Sheet3
(euro million) | Dec. 31, 2010 |
March 31, 2011 |
June 30, 2011 |
Change vs |
Change vs |
|||||
Fixed assets | |||||||||||||||
Property, plant and equipment | 67,404 | 65,949 | 67,162 | (242 | ) | 1,213 | |||||||||
Other properties | |||||||||||||||
Inventories - compulsory stock | 2,024 | 2,312 | 2,370 | 346 | 58 | ||||||||||
Intangible assets | 11,172 | 11,072 | 10,891 | (281 | ) | (181 | ) | ||||||||
Equity-accounted investments and other investments | 6,090 | 6,132 | 6,079 | (11 | ) | (53 | ) | ||||||||
Receivables and securities held for operating purposes | 1,743 | 1,675 | 1,746 | 3 | 71 | ||||||||||
Net payables related to capital expenditures | (970 | ) | (732 | ) | (1,130 | ) | (160 | ) | (398 | ) | |||||
87,463 | 86,408 | 87,118 | (345 | ) | 710 | ||||||||||
Net working capital | |||||||||||||||
Inventories | 6,589 | 6,414 | 6,911 | 322 | 497 | ||||||||||
Trade receivables | 17,221 | 17,665 | 15,277 | (1,944 | ) | (2,388 | ) | ||||||||
Trade payables | (13,111 | ) | (11,665 | ) | (11,293 | ) | 1,818 | 372 | |||||||
Tax payables and provisions for net deferred tax liabilities | (2,684 | ) | (4,374 | ) | (3,753 | ) | (1,069 | ) | 621 | ||||||
Provisions | (11,792 | ) | (11,501 | ) | (11,743 | ) | 49 | (242 | ) | ||||||
Other current assets and liabilities | (1,286 | ) | (521 | ) | (180 | ) | 1,106 | 341 | |||||||
(5,063 | ) | (3,982 | ) | (4,781 | ) | 282 | (799 | ) | |||||||
Provisions for employee post-retirement benefits | (1,032 | ) | (1,019 | ) | (1,064 | ) | (32 | ) | (45 | ) | |||||
Net assets held for sale including net borrowings | 479 | 410 | 409 | (70 | ) | (1 | ) | ||||||||
Capital employed, net | 81,847 | 81,817 | 81,682 | (165 | ) | (135 | ) | ||||||||
Shareholders equity: | |||||||||||||||
- Eni shareholders equity | 51,206 | 51,966 | 50,942 | (264 | ) | (1,024 | ) | ||||||||
- Non-controlling interest | 4,522 | 4,900 | 4,762 | 240 | (138 | ) | |||||||||
55,728 | 56,866 | 55,704 | (24 | ) | (1,162 | ) | |||||||||
Net borrowings | 26,119 | 24,951 | 25,978 | (141 | ) | 1,027 | |||||||||
Total liabilities and shareholders equity | 81,847 | 81,817 | 81,682 | (165 | ) | (135 | ) | ||||||||
Leverage | 0.47 | 0.44 | 0.47 | 0.03 | |||||||||||
The appreciation of the euro versus the US dollar as at June 30, 2001 from December 31, 2010 (the EUR/USD exchange rate was 1.445 as of June 30, 2011, as compared to 1.336 as of December 31, 2010, up by 8%) reduced net capital employed, net equity and net borrowings by euro 2,766 million, euro 2,374 million, and euro 392 million, respectively, due to exchange rate translation differences. The appreciation of the euro vs. the US dollar from March 31, 2011 was lower (up by 2%), resulting in a reduction of net capital employed, net equity and net borrowings of euro 586 million, euro 494 million, and euro 92 million, respectively compared to that date.
The decrease in net equity due to currency translation differences coupled with dividend payment was absorbed by net profit for the period and the slight decrease in net borrowings, resulting in the Group leverage being unchanged at 0.47 as of June 30, 2011 compared to the level as at December 31, 2010. The Group leverage increased (by 0.03) compared to the level of March 31, 2011 due to the higher level of net borrowings registered in the second quarter in relation to dividend payment.
Fixed assets amounted to euro 87,118 million, representing a decrease of euro 345 million from December 31, 2010, reflecting negative exchange rate translation differences, which were partly offset by the positive balance of capital expenditure incurred in the period (euro 6,615 million) and depreciation, depletion, amortization and impairment charges (euro 4,278 million).
____________
(3) | 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 Enis 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 Enis financing structure is sound and well-balanced. |
- 12 -
Net working capital amounted to a negative euro 4,781 million, representing a slight increase of euro 282 million from the closing balance as of December 31, 2010. This was due to increased current and non current other assets and liabilities (up euro 1,106 million) mainly reflecting payment of payables in respect of the Companys gas suppliers outstanding as the end of 2010 due to the take-or-pay position accrued in 2010 (euro 170 million) and a higher balance of receivables and payables from joint-venture partners and dividend receivables from entities accounted at cost in the Exploration & Production division (for a total amount of approximately euro 300 million). This increase was partly offset by higher tax payables and net provisions for deferred tax liabilities accrued in the quarter (down euro 1,069 million). The reduction of trade receivables of euro 1,944 million was absorbed by a similar amount relating to the reduction of trade payables (euro 1,818 million).
Net assets held for sale including related liabilities (euro 409 million) mainly related to the following assets: the subsidiary Gas Brasiliano Distribuidora SA and the associate TAG Gmbh, both of which are in the final stage of the divestment process as preliminary agreements have already been signed with third parties, and Enis subsidiaries and associates engaged in gas transport in Germany and Switzerland for which divestment plans have been progressing in accordance with Enis commitments with the European Commission.
Shareholders equity including non-controlling interest of euro 55,704 million was barely unchanged from 2010. The comprehensive income for the period of euro 2,156 million which consisted of net profit for the period (euro 4,459 million), partly offset by negative exchange rate translation differences (down euro 2,374 million) and other items, was absorbed by dividend payments to Enis shareholders (euro 1,811 million) and non-controlling interests, mainly Snam Rete Gas and Saipem (euro 397 million).
- 13 -
Summarized Group Cash Flow Statement4
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
1,939 | 2,959 | 1,500 | Net profit | 4,358 | 4,459 | ||||||||||
Adjustments to reconcile net profit to cash provided by operating activities: | |||||||||||||||
2,502 | 2,003 | 1,939 | - depreciation, depletion and amortization and other non monetary items | 4,403 | 3,942 | ||||||||||
(75 | ) | (19 | ) | (9 | ) | - net gains on disposal of assets | (244 | ) | (28 | ) | |||||
2,362 | 2,907 | 2,280 | - dividends, interests, taxes and other changes | 4,833 | 5,187 | ||||||||||
483 | (1,729 | ) | 1,367 | Changes in working capital related to operations | 113 | (362 | ) | ||||||||
(2,626 | ) | (1,936 | ) | (2,666 | ) | Dividends received, taxes paid, interests (paid) received during the period | (4,324 | ) | (4,602 | ) | |||||
4,585 | 4,185 | 4,411 | Net cash provided by operating activities | 9,139 | 8,596 | ||||||||||
(4,328 | ) | (2,875 | ) | (3,740 | ) | Capital expenditure | (7,107 | ) | (6,615 | ) | |||||
(76 | ) | (41 | ) | (87 | ) | Investments and purchase of consolidated subsidiaries and businesses | (115 | ) | (128 | ) | |||||
66 | 26 | 77 | Disposals | 795 | 103 | ||||||||||
(88 | ) | (195 | ) | 295 | Other cash flow related to capital expenditure, investments and disposals | (206 | ) | 100 | |||||||
159 | 1,100 | 956 | Free cash flow | 2,506 | 2,056 | ||||||||||
94 | (67 | ) | 47 | Borrowings (repayment) of debt related to financing activities | 6 | (20 | ) | ||||||||
1,118 | (637 | ) | 750 | Changes in short and long-term financial debt | (366 | ) | 113 | ||||||||
(2,161 | ) | 5 | (2,181 | ) | Dividends paid and changes in non-controlling interest and reserves | (2,148 | ) | (2,176 | ) | ||||||
20 | (28 | ) | (20 | Effect of changes in consolidation and exchange differences | 69 | (48 | ) | ||||||||
(770 | ) | 373 | (448 | ) | NET CASH FLOW FOR THE PERIOD | 67 | (75 | ) | |||||||
Change in net borrowings
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
159 | 1,100 | 956 | Free cash flow | 2,506 | 2,056 | ||||||||||
(288 | ) | 63 | 198 | Exchange differences on net borrowings and other changes | (645 | ) | 261 | ||||||||
(2,161 | ) | 5 | (2,181 | ) | Dividends paid and changes in non-controlling interest and reserves | (2,148 | ) | (2,176 | ) | ||||||
(2,290 | ) | 1,168 | (1,027 | ) | CHANGE IN NET BORROWINGS | (287 | ) | 141 | |||||||
Net cash provided by operating activities amounted to euro 8,596 million in the first half of 2011. Proceeds from divestments amounted to euro 103 million. Those cash inflows were used to fund cash outflows relating to capital expenditure totaling euro 6,615 million and dividend payments amounting to euro 2,208 million (which included payment of the balance of the 2010 dividend to Enis shareholders amounting to euro 1,811 million and the remaining amount to minorities, particularly Saipem and Snam Rete Gas) and helped to pay down finance debt (down by euro 141 million from December 31, 2010). Divestments mainly related to non-strategic assets in the Exploration & Production division.
Net cash provided by operating activities in the first half was negatively affected by lower cash inflow of euro 99 million associated with transferring trade receivables due beyond December 31, 2010 to factoring institutions amounting to euro 1,279 million in the fourth quarter of 2010, while the current half benefited from transferring euro 1,180 million of trade receivables due beyond June 30, 2011 to the same institutions.
____________
(4) | Enis 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) change 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. |
- 14 -
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 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, as of June 30, 2011, nine of Enis 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, Burren Energy (Congo) Ltd and Eni Finance USA Inc fall within the scope of the new continuing listing standard as stated in the quarterly consolidated report as of March 31, 2011. Eni has already adopted adequate procedures to ensure full compliance with the new regulation.
Financial and operating information by division for the second quarter and the first half of 2011 is provided in the following pages.
- 15 -
Exploration & Production
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
RESULTS | (euro million) | ||||||||||||||||||||||
7,184 | 7,474 | 6,778 | (5.7 | ) | Net sales from operations | 14,569 | 14,252 | (2.2 | ) | ||||||||||||||
3,401 | 4,106 | 3,693 | 8.6 | Operating profit | 6,698 | 7,799 | 16.4 | ||||||||||||||||
41 | 14 | 133 | Exclusion of special items: | (138 | ) | 147 | |||||||||||||||||
29 | 141 | - asset impairments | 29 | 141 | |||||||||||||||||||
(7 | ) | (17 | ) | (11 | ) | - gains on disposal of assets | (167 | ) | (28 | ) | |||||||||||||
6 | 2 | 2 | - provision for redundancy incentives | 8 | 4 | ||||||||||||||||||
13 | 29 | 1 | - re-measurement gains/losses on commodity derivatives | (8 | ) | 30 | |||||||||||||||||
3,442 | 4,120 | 3,826 | 11.2 | Adjusted operating profit | 6,560 | 7,946 | 21.1 | ||||||||||||||||
(57 | ) | (57 | ) | (59 | ) | Net financial income (expense) (a) | (106 | ) | (116 | ) | |||||||||||||
199 | 117 | 295 | Net income (expense) from investments (a) | 266 | 412 | ||||||||||||||||||
(2,145 | ) | (2,347 | ) | (2,378 | ) | Income taxes (a) | (4,036 | ) | (4,725 | ) | |||||||||||||
59.8 | 56.1 | 58.5 | Tax rate (%) | 60.1 | 57.3 | ||||||||||||||||||
1,439 | 1,833 | 1,684 | 17.0 | Adjusted net profit | 2,684 | 3,517 | 31.0 | ||||||||||||||||
Results also include: | |||||||||||||||||||||||
1,778 | 1,588 | 1,580 | (11.1 | ) | - amortization and depreciation | 3,458 | 3,168 | (8.4 | ) | ||||||||||||||
of which: | |||||||||||||||||||||||
318 | 266 | 310 | (2.5 | ) | exploration expenditures | 630 | 576 | (8.6 | ) | ||||||||||||||
184 | 163 | 234 | 27.2 | - amortization of exploratory drilling expenditures and other | 415 | 397 | (4.3 | ) | |||||||||||||||
134 | 103 | 76 | (43.2 | ) | - amortization of geological and geophysical exploration expenses | 215 | 179 | (16.7 | ) | ||||||||||||||
3,186 | 1,952 | 2,767 | (13.2 | ) | Capital expenditure | 5,150 | 4,719 | (8.4 | ) | ||||||||||||||
of which: | |||||||||||||||||||||||
259 | 236 | 253 | (2.3 | ) | - exploratory expenditure (b) | 515 | 489 | (5.0 | ) | ||||||||||||||
Production (c) (d) | |||||||||||||||||||||||
980 | 899 | 793 | (19.1 | ) | Liquids (e) | (kbbl/d) | 995 | 846 | (15.0 | ) | |||||||||||||
4,319 | 4,356 | 3,867 | (9.8 | ) | Natural gas | (mmcf/d) | 4,466 | 4,110 | (7.9 | ) | |||||||||||||
1,758 | 1,684 | 1,489 | (15.3 | ) | Total hydrocarbons | (kboe/d) | 1,800 | 1,586 | (11.9 | ) | |||||||||||||
Average realizations | |||||||||||||||||||||||
72.33 | 95.36 | 108.59 | 50.1 | Liquids (e) | ($/bbl) | 71.63 | 101.89 | 42.2 | |||||||||||||||
5.81 | 5.99 | 6.34 | 9.3 | Natural gas (e) | ($/mmcf) | 5.77 | 6.15 | 6.7 | |||||||||||||||
55.06 | 66.62 | 76.39 | 38.7 | Total hydrocarbons | ($/boe) | 54.26 | 71.34 | 31.5 | |||||||||||||||
Average oil market prices | |||||||||||||||||||||||
78.30 | 104.97 | 117.36 | 49.9 | Brent dated | ($/bbl) | 77.27 | 111.16 | 43.9 | |||||||||||||||
61.51 | 76.79 | 81.56 | 32.6 | Brent dated | (euro/bbl) | 58.19 | 79.23 | 36.2 | |||||||||||||||
77.78 | 93.98 | 102.44 | 31.7 | West Texas Intermediate | ($/bbl) | 78.23 | 98.21 | 25.5 | |||||||||||||||
152.56 | 146.91 | 153.97 | 0.9 | Gas Henry Hub | ($/kcm) | 167.39 | 150.79 | (9.9 | ) | ||||||||||||||
(a) | Excluding special items. | |
(b) | Includes exploration bonuses. | |
(c) | Supplementary operating data is provided on page 46. | |
(d) | Includes Enis share of equity-accounted entities production. | |
(e) | Includes condensates. |
Results
In the second quarter of 2011, the Exploration & Production division reported an adjusted operating profit amounting to euro 3,826 million, increasing by euro 384 million, or 11.2%, from the second quarter of 2010, driven by higher oil and gas realizations (oil up 50.1%; natural gas up 9.3%). These positive factors were partly offset by the impact associated with lower Libyan output and by the appreciation of the euro vs the US dollar (down approximately euro 300 million).
Special charges excluded from adjusted operating profit amounted to euro 133 million in the second quarter 2011 (euro 147 million in the first half) and consisted mainly of impairment charges of oil&gas properties in the USA, reflecting a reduced outlook for gas prices and downward reserve revisions, gains on the divestment of non-strategic assets as well as the re-measurement gains recorded on fair value evaluation of the ineffective
- 16 -
portion of certain cash flow hedge commodity derivatives.
Adjusted net profit for the second quarter of 2011 was up by euro
245 million, or 17%, to euro 1,684 million due to an improved
operating performance and higher results from equity-accounted
and cost-accounted entities.
Adjusted operating profit for the first half of 2011 was euro 7,946 million, representing an increase of euro 1,386 million from the first half of 2010, up 21.1%, driven by higher oil and gas realizations (oil up 42.2% and natural gas 6.7%), partly offset by the impact associated with lower Libyan output. In addition, the result of the division was negatively impacted by the appreciation of the euro vs the US dollar (down approximately euro 270 million).
Adjusted net profit for the first half of 2011 increased by euro 833 million to euro 3,517 million from the first half of 2010, up by 31%, due to an improved operating performance and higher results from equity-accounted or cost-accounted entities. The increase was also supported by a lower tax rate (down 3 percentage points) mainly due to non-taxable dividends from cost-accounted entities earned in the period and the reversal to profit of certain provisions which were taxed in previous quarters.
Operating review
Eni reported liquids and gas production of 1,489 kboe/d for the second quarter of 2011, down by 15.3% from the second quarter of 2010. The magnitude of this reduction was the result of the shutdown of activities at almost all Eni producing sites in Libya and the closure of the GreenStream pipeline transporting gas from Libya to Italy. Performance for the quarter was also negatively impacted by lower entitlements in the Companys PSAs due to higher oil prices with an overall effect of 36 kboe/d compared to the year-earlier quarter, in addition to the above mentioned loss of Libyan output amounting to approximately 200 kboe/d compared to the first quarter of 2010. Net of those effects, production for the quarter decreased by 2 percentage points due to planned facility downtime mainly in Italy. Production decline at mature fields was absorbed by continuing production ramp up in Norway, Egypt and Iraq.
Liquids production (793 kbbl/d) decreased by 187 kbbl/d, or
19.1% due to production losses in Libya and lower entitlements in
the Companys PSAs and planned facility downtime. The main
increases were registered in Iraq due to start-up in the Zubair
field (Eni 32.8%) and an improved performance in Norway.
Natural gas production (3,867 mmcf/d) decreased by 452 mmcf/d
(down 9.8%) due to production losses in Libya.
Eni reported liquids and gas production of 1,586 kboe/d in the first half of 2011 down by 11.9% from the first half of 2010 due to production losses in Libya. Performance for the first half was also negatively impacted by lower entitlements in the Companys PSAs due to higher oil prices with an overall effect of 30 kboe/d from the first half of 2010, in addition to the above mentioned loss of Libyan output amounting to approximately 170 kboe/d. Net of these effects, production for the first half decreased by 1 percentage point mainly due to planned facility downtime. Production decline at mature fields was absorbed by continuing production ramp up in Norway, Egypt and Iraq.
Liquids production (846 kbbl/d) decreased by 149 kbbl/d, or
15% due to production losses in Libya and lower entitlements in
the Companys PSAs and planned facility downtime, partly
offset by the growth registered in Norway and Iraq.
Natural gas production (4,110 mmcf/d) decreased by 356 mmcf/d
(down 7.9%) due to production losses in Libya.
Liquids and gas realizations for the second quarter increased by 50.1% on average in dollar terms (up by 42.2% in the first half), driven by higher oil prices for market benchmarks (the Brent crude price increased by 49.9% in the quarter; 43.9% in the first half). Enis average liquids realizations decreased by 1.69 $/bbl in the second quarter (1.50 $/bbl in the first half) due to the settlement of certain commodity derivatives relating to the sale of 2.3 mmbbl in the quarter (4.5 mmbbl in the first half). This was part of a derivative transaction the Company entered into in order to hedge exposure to the variability in future cash flows expected from the sale of a portion of the Companys proved reserves for an original amount of approximately 125.7 mmbbl in
- 17 -
the 2008-2011 period, decreasing to approximately 4.5 mmbbl as of the end of June 2011. Enis average gas realizations increased at a slower pace in the quarter (up 9.3% in the quarter; up 6.7% in the first half), due to time lags in oil-linked pricing formulae and weak spot price in some areas (in particular USA).
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
LIQUIDS | |||||||||||||||||
86.4 | 75.7 | 73.9 | Sales volumes | (mmbbl) | 172.2 | 149.6 | |||||||||||
7.1 | 2.2 | 2.3 | Sales volumes hedged by derivatives (cash flow hedge) | 14.2 | 4.5 | ||||||||||||
73.64 | 96.66 | 110.28 | Total price per barrel, excluding derivatives | ($/bbl) | 72.85 | 103.39 | |||||||||||
(1.31 | ) | (1.30 | ) | (1.69 | ) | Realized gains (losses) on derivatives | (1.22 | ) | (1.50 | ) | |||||||
72.33 | 95.36 | 108.59 | Total average price per barrel | 71.63 | 101.89 | ||||||||||||
- 18 -
Gas & Power
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
RESULTS | (euro million) | ||||||||||||||||||||||
5,960 | 10,614 | 6,235 | 4.6 | Net sales from operations | 14,668 | 16,849 | 14.9 | ||||||||||||||||
592 | 910 | 184 | (68.9 | ) | Operating profit | 1,908 | 1,094 | (42.7 | ) | ||||||||||||||
(25 | ) | (41 | ) | (12 | ) | Exclusion of inventory holding (gains) losses | (106 | ) | (53 | ) | |||||||||||||
62 | 89 | 79 | Exclusion of special items: | 94 | 168 | ||||||||||||||||||
(1 | ) | 1 | 3 | - environmental charges | 4 | 4 | |||||||||||||||||
- asset impairments | 10 | ||||||||||||||||||||||
1 | 5 | - gains on disposal of assets | 1 | 5 | |||||||||||||||||||
2 | 3 | 3 | - provision for redundancy incentives | 8 | 6 | ||||||||||||||||||
60 | 80 | 74 | - re-measurement gains/losses on commodity derivatives | 71 | 154 | ||||||||||||||||||
5 | (6 | ) | - other | (1 | ) | ||||||||||||||||||
629 | 958 | 251 | (60.1 | ) | Adjusted operating profit | 1,896 | 1,209 | (36.2 | ) | ||||||||||||||
51 | 288 | (383 | ) | .. | Marketing | 665 | (95 | ) | .. | ||||||||||||||
481 | 554 | 503 | 4.6 | Regulated businesses in Italy | 1,014 | 1,057 | 4.2 | ||||||||||||||||
97 | 116 | 131 | 35.1 | International transport | 217 | 247 | 13.8 | ||||||||||||||||
9 | 5 | 16 | Net finance income (expense) (a) | 7 | 21 | ||||||||||||||||||
95 | 116 | 103 | Net income from investments (a) | 195 | 219 | ||||||||||||||||||
(212 | ) | (316 | ) | (131 | ) | Income taxes (a) | (622 | ) | (447 | ) | |||||||||||||
28.9 | 29.3 | 35.4 | Tax rate | (%) | 29.6 | 30.8 | 4.1 | ||||||||||||||||
521 | 763 | 239 | (54.1 | ) | Adjusted net profit | 1,476 | 1,002 | (32.1 | ) | ||||||||||||||
367 | 279 | 446 | 21.5 | Capital expenditures | 677 | 725 | 7.1 | ||||||||||||||||
Natural gas sales | (bcm) | ||||||||||||||||||||||
6.27 | 11.98 | 7.11 | 13.4 | Italy | 17.14 | 19.09 | 11.4 | ||||||||||||||||
12.92 | 20.35 | 13.89 | 7.5 | International sales | 32.56 | 34.24 | 5.2 | ||||||||||||||||
10.87 | 18.28 | 11.59 | 6.6 | - Rest of Europe | 28.48 | 29.87 | 4.9 | ||||||||||||||||
0.71 | 1.32 | 1.59 | 123.9 | - Extra European markets | 1.14 | 2.91 | 155.3 | ||||||||||||||||
1.34 | 0.75 | 0.71 | (47.0 | ) | - E&P sales in Europe and in the Gulf of Mexico | 2.94 | 1.46 | (50.3 | ) | ||||||||||||||
19.19 | 32.33 | 21.00 | 9.4 | WORLDWIDE GAS SALES | 49.70 | 53.33 | 7.3 | ||||||||||||||||
of which: | |||||||||||||||||||||||
15.81 | 28.77 | 18.15 | 14.8 | - Sales of consolidated subsidiaries | 42.26 | 46.92 | 11.0 | ||||||||||||||||
2.04 | 2.81 | 2.14 | 4.9 | - Enis share of sales of natural gas of affiliates | 4.50 | 4.95 | 10.0 | ||||||||||||||||
1.34 | 0.75 | 0.71 | (47.0 | ) | - E&P sales in Europe and in the Gulf of Mexico | 2.94 | 1.46 | (50.3 | ) | ||||||||||||||
9.61 | 9.68 | 9.66 | 0.5 | Electricity sales | (TWh) | 18.61 | 19.34 | 3.9 | |||||||||||||||
6.76 | 6.25 | 6.77 | 0.1 | - Free market | 12.97 | 13.02 | 0.4 | ||||||||||||||||
1.70 | 2.41 | 1.70 | 0.0 | - Italian Exchange for electricity | 3.54 | 4.11 | 16.1 | ||||||||||||||||
0.81 | 0.83 | 0.75 | (7.4 | ) | - Industrial plants | 1.56 | 1.58 | 1.3 | |||||||||||||||
0.34 | 0.19 | 0.44 | 29.4 | - Other (b) | 0.54 | 0.63 | 16.7 | ||||||||||||||||
19.04 | 23.59 | 18.31 | (3.8 | ) | Gas volumes transported in Italy | (bcm) | 43.02 | 41.90 | (2.6 | ) | |||||||||||||
(a) | Excluding special items. | |
(b) | Including positive and negative imbalances. |
Results
In the second quarter of 2011, the Gas & Power division reported adjusted operating profit of euro 251 million, a decrease of euro 378 million from the second quarter of 2010, down 60.1% dragged down by a sharply lower performance in the Marketing business. The Marketing business results did not take into account the possible benefit associated with ongoing renegotiations of the Companys long-term gas purchase contracts which may become effective earlier than end of June 2011. These results were also affected by gains on non-hedging commodity derivatives amounting to euro 52 million which could be associated with future sales of gas and electricity, while the second quarter of 2010 did not take into account derivative gains amounting to euro 61 million recognized in previous reporting periods, which could be associated with the sale of gas and electricity occurred in the 2010 second quarter. As those derivatives did not meet the formal criteria to be designated as hedges under IFRS, the Company was barred from applying hedge accounting and thus gains and losses associated with those derivatives cannot be brought forward to the reporting periods when the associated sales occur. However, in assessing the underlying performance of the Marketing business, management calculates the EBITDA pro-forma adjusted which represents those derivatives as being hedges with associated gains and losses recognized in the reporting period
- 19 -
when the relevant sales occur. Management believes that
disclosing this measure is helpful in assisting investors to
understand these particular business trends (see page 23). The
EBITDA pro-forma adjusted also includes Enis share of
results of entities which are equity-accounted for statutory
reporting purposes and confirms the size of the decline of the
Marketing activity reflecting underlying business trends.
Special items excluded from operating profit amounted to net
charges of euro 79 million for the quarter (euro 168 million in
the first half). These mainly related to negative fair value
evaluation of certain commodity derivatives (euro 74 million and
euro 154 million, respectively) which did not meet the formal
criteria for hedge accounting provided by IAS 39.
Adjusted net profit for the second quarter of 2011 was euro 239
million, a decrease of euro 282 million from 2010 (down by 54.1%)
due to lowered operating performance.
In the first half of 2011, the Gas & Power division
reported adjusted operating profit of euro 1,209 million, a
decrease of euro 687 million from the first half of 2010, down
36.2%. The decrease was due to sharply lower results delivered by
the Marketing business, partly offset by positive results of the
Regulated Businesses in Italy and International Transport. The
Marketing business results did not take into account the possible
benefit associated with ongoing renegotiations of the
Companys long-term gas purchase contracts which may become
effective earlier than end of June 2011. These were also affected
by higher gains on non-hedging commodity derivatives amounting to
euro 111 million which could be associated with future sales of
gas and electricity. The first half of 2010 results did not take
into account commodity derivative gains of euro 82 million
accrued in previous reporting periods. The EBITDA pro-forma
adjusted which represents those derivatives as being hedges with
associated gains and losses recognized in the reporting period
when the relevant sales showed a wider decline (down 38.3 from
the first half of 2010) of the Marketing activity reflecting
underlying business trends. The EBITDA pro-forma adjusted also
includes Enis share of results of entities which are
equity-accounted for statutory reporting purposes.
Adjusted net profit for the first half of 2011 was euro 1,002
million, a decrease of euro 474 million from the first half of
2010 (down by 32.1%) due to a lowered operating performance.
Operating review
Marketing
In the second quarter of 2011, the Marketing business
reported sharply lower results due to an adjusted operating loss
of euro 383 million, from a profit of euro 51 million registered
in the second quarter of 2010 (down by euro 434 million).
Marketing results were negatively impacted by:
(i) | weaker margins on gas sales registered in Italy and European markets, due to increasing competitive pressures, a prevailing oversupply in the marketplace as well as weak demand trends which negatively impacted selling prices; | |
(ii) | lower margins on power generation sales; | |
(iii) | reduced sales of Libyan gas to shippers to Italy; | |
(iv) | lower seasonal gas sales and unfavorable scenario effects. |
These negative trends were partly offset by higher gas sales achieved by consolidated subsidiaries (up by 14.8% for the quarter). Performance for the quarter also included a loss of euro 10 million recorded on fair value evaluation of certain commodity derivatives the Company entered into to manage economic margins as provided by the new business model of the Marketing activity.
In the first half of 2011, net operating loss amounted to euro 95 million, a decrease of euro 760 million from the same period of the previous year, due to the same drivers described in the disclosure on the second quarter results.
- 20 -
NATURAL GAS SALES BY MARKET
(bcm)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
6.27 | 11.98 | 7.11 | 13.4 | ITALY | 17.14 | 19.09 | 11.4 | |||||||||
0.65 | 2.24 | 0.84 | 29.2 | - Wholesalers | 2.58 | 3.08 | 19.4 | |||||||||
0.14 | (100.0 | ) | - Gas release | 0.54 | ||||||||||||
0.71 | 1.6 | 1.19 | 67.6 | - Italian exchange for gas and spot markets | 1.75 | 2.79 | 59.4 | |||||||||
1.51 | 1.99 | 1.75 | 15.9 | - Industries | 3.09 | 3.74 | 21.0 | |||||||||
0.14 | 0.46 | 0.09 | (35.7 | ) | - Medium-sized enterprises and services | 0.66 | 0.55 | (16.7 | ) | |||||||
0.83 | 1.17 | 1.17 | 41.0 | - Power generation | 1.58 | 2.34 | 48.1 | |||||||||
0.76 | 2.87 | 0.54 | (28.9 | ) | - Residential | 3.87 | 3.41 | (11.9 | ) | |||||||
1.53 | 1.65 | 1.53 | - Own consumption | 3.07 | 3.18 | 3.6 | ||||||||||
12.92 | 20.35 | 13.89 | 7.5 | INTERNATIONAL SALES | 32.56 | 34.24 | 5.2 | |||||||||
10.87 | 18.28 | 11.59 | 6.6 | Rest of Europe | 28.48 | 29.87 | 4.9 | |||||||||
2.13 | 1.85 | 0.56 | (73.7 | ) | - Importers in Italy | 5.35 | 2.41 | (55.0 | ) | |||||||
8.74 | 16.43 | 11.03 | 26.2 | - European markets | 23.13 | 27.46 | 18.7 | |||||||||
1.7 | 2.04 | 1.71 | 0.6 | Iberian Peninsula | 3.33 | 3.75 | 12.6 | |||||||||
1.25 | 2.07 | 1.67 | 33.6 | Germany-Austria | 3.07 | 3.74 | 21.8 | |||||||||
2.64 | 4.02 | 3.06 | 15.9 | Belgium | 7.86 | 7.08 | (9.9 | ) | ||||||||
0.26 | 1.07 | 0.27 | 3.8 | Hungary | 1.35 | 1.34 | (0.7 | ) | ||||||||
0.88 | 1.67 | 1.26 | 43.2 | Northern Europe | 2.29 | 2.93 | 27.9 | |||||||||
0.47 | 1.86 | 1.41 | 200.0 | Turkey | 1.45 | 3.27 | 125.5 | |||||||||
1.24 | 2.55 | 1.58 | 27.4 | France | 3.01 | 4.13 | 37.2 | |||||||||
0.3 | 1.15 | 0.07 | (76.7 | ) | Other | 0.77 | 1.22 | 58.4 | ||||||||
0.71 | 1.32 | 1.59 | 123.9 | Extra European markets | 1.14 | 2.91 | 155.3 | |||||||||
1.34 | 0.75 | 0.71 | (47.0 | ) | E&P sales in Europe and in the Gulf of Mexico | 2.94 | 1.46 | (50.3 | ) | |||||||
19.19 | 32.33 | 21.00 | 9.4 | WORLDWIDE GAS SALES | 49.70 | 53.33 | 7.3 | |||||||||
Sales of natural gas for the second quarter of
2011 were 21 bcm (including Enis own consumption,
Enis share of sales made by equity-accounted entities and
upstream sales in Europe and the Gulf of Mexico) registering an
increase of 1.81 bcm, up 9.4%, which reflected an improved
performance both in Europe and the domestic market.
Sales volumes in the Italian market amounted to 7.11 bcm, up 0.84
bcm or 13.4%, due to higher spot volumes on the PVS (up 0.48
bcm), as a number of importers to Italy requested gas supplies to
replace the Libyan gas, as well as client additions and higher
gas off-takes in the power generation (up 0.34 bcm), wholesalers
(up 0.19 bcm) and industrial segments (up 0.24 bcm) which gave a
boost to Enis market share. The residential segment
registered a decrease due to lower seasonal consumption (down
0.22 bcm).
Sales to shippers which import gas to Italy decreased by 1.57 bcm
(down 73.7%) due to reduced gas off-takes as well as lower
availability of Libyan gas resulting from the closure of the
GreenStream importing pipeline.
Sales in the European market increased by 2.29 bcm (or 26.2%) in
particular in Turkey (up 0.94 bcm), Germany/Austria (up 0.42
bcm), Belgium (up 0.42 bcm), UK/Northern Europe (up 0.38 bcm) and
France (up 0.34 bcm).
Sales of natural gas (including Enis own
consumption, Enis share of sales made by accounted entities
and upstream sales in Europe and the Gulf of Mexico) for the first
half of 2011 were 53.33 bcm registering an increase of 3.63
bcm, up 7.3% from the first half of 2010.
Sales in Italy were 19.09 bcm increasing by 1.95 bcm from the
first half 2010 (up 11.4%) due to higher spot sales on the PVS
(up 1.04 bcm) and positive effects of marketing activities aimed
at recapturing clients and increasing market share in main
utilization segments coupled with higher off-takes by large
industrial clients (power generation up 0.76 bcm; industrial up
0.65 bcm; wholesalers up 0.50 bcm). The residential segment
registered a decrease due to lower seasonal consumption (down
0.46 bcm).
Sales to shippers which import gas to Italy decreased by 2.94 bcm
(down 55%). This was due to reduced gas off-takes and lower
availability of Libyan gas resulting from the closure of the
GreenStream importing pipeline.
Sales increased in all European markets to 27.46 bcm (up 4.33 bcm, or 18.7% from the first half of 2010) except for sales in Belgium decreasing by 0.78 bcm due to lower seasonal gas sales and increasing competitive pressure. Main increases were recorded in the target markets of Turkey (up 1.82 bcm), France (up 1.12 bcm), Germany/Austria (up 0.67 bcm), UK/Northern Europe (up 0.64 bcm) and Iberian Peninsula (up 0.42 bcm).
- 21 -
Electricity sales for the second quarter of 2011 were nearly unchanged (at 9.66 TWh, up 0.5%). In the first half of 2011 electricity sales increased by 3.9% to 19.34 TWh due to a partial recovery in power generation demand, an increase in clients portfolio as well as higher volumes traded on the Italian power exchange (up 0.57 from the first half of 2010).
Regulated Businesses in Italy
In the second quarter of 2011, these businesses
reported an adjusted operating profit of euro 503 million, up
euro 22 million from the same period a year-ago, or 4.6%, due to
improved results in all regulated businesses. In particular,
notwithstanding lower transported volumes due to a decrease in
natural gas demand in Italy, the Transport business registered an
improved operating performance (up euro 7 million, or 2.2%)
reflecting higher yields of new capital expenditure and
efficiency actions.
These trends have driven the performance of the Distribution
business (up euro 14 million), positively influenced also by the
impact associated with a new tariff regime set by the Authority
for Electricity and Gas intended to cover amortization charges.
The Storage businesses reported an adjusted operating profit
amounting to euro 45 million, with a slight increase from the
second quarter of 2010 (euro 44 million).
In the first half of 2011, these businesses reported an
adjusted operating profit of euro 1,057 million, up euro 43
million, or 4.2%, mainly due to the improved results achieved by
the Distribution (up euro 25 million) and Transport businesses
(up euro 9 million) and due to the same factors described above.
The Storage businesses reported an adjusted operating profit
amounting to euro 143 million, increasing by euro 9 million from
the first half of 2010 (euro 134 million).
Volumes of gas transported in Italy (18.31 bcm in the second quarter of 2011 and 41.90 bcm in the first half of 2011) registered a decrease when compared to the corresponding periods of 2010 (down 0.73 bcm in the quarter and down 1.12 bcm in the first half) mainly due to lower natural gas demand in Italy.
International Transport
This business reported an adjusted operating profit of euro
131 million for the second quarter of 2011 (euro 247
million for the first half) representing an increase of euro 34
million from the second quarter of 2010, or 35.1%, (up euro 30
million, or 13.8%, from the first half of 2010), mainly due to an
improved profitability, partly offset by the closure of the
GreenStream importing pipeline.
- 22 -
Other performance indicators
Follows a breakdown of the pro-forma adjusted EBITDA by business:
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
825 | 1,054 | 338 | (59.0 | ) | Pro-forma adjusted EBITDA | 2,257 | 1,392 | (38.3 | ) | ||||||||||||
299 | 456 | (234 | ) | .. | Marketing | 1,155 | 222 | (80.8 | ) | ||||||||||||
61 | (59 | ) | (52 | ) | of which: +/(-) adjustment on commodity derivatives | 82 | (111 | ) | |||||||||||||
350 | 393 | 367 | 4.9 | Regulated businesses in Italy | 729 | 760 | 4.3 | ||||||||||||||
176 | 205 | 205 | 16.5 | International transport | 373 | 410 | 9.9 | ||||||||||||||
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 Enis wholly owned subsidiaries and Enis 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 Enis share of equity (55.54% as of June 30, 2011, 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 restructuring of Enis 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 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 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 Enis 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.
- 23 -
Refining & Marketing
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
10,909 | 11,806 | 13,015 | 19.3 | Net sales from operations | 20,255 | 24,821 | 22.5 | ||||||||||||||||
255 | 303 | 73 | (71.4 | ) | Operating profit | 360 | 376 | 4.4 | |||||||||||||||
(305 | ) | (508 | ) | (229 | ) | Exclusion of inventory holding (gains) losses | (537 | ) | (737 | ) | |||||||||||||
(2 | ) | 29 | 42 | Exclusion of special items: | 31 | 71 | |||||||||||||||||
17 | 14 | 12 | - environmental charges | 34 | 26 | ||||||||||||||||||
11 | 16 | 22 | - asset impairments | 33 | 38 | ||||||||||||||||||
(4 | ) | (5 | ) | - gains on disposal of assets | (10 | ) | (9 | ) | |||||||||||||||
5 | - risk provisions | 5 | |||||||||||||||||||||
4 | 3 | 5 | - provision for redundancy incentives | 6 | 8 | ||||||||||||||||||
(34 | ) | (2 | ) | (4 | ) | - re-measurement gains/losses on commodity derivatives | (32 | ) | (6 | ) | |||||||||||||
2 | 7 | - other | 9 | ||||||||||||||||||||
(52 | ) | (176 | ) | (114 | ) | (119.2 | ) | Adjusted operating profit | (146 | ) | (290 | ) | (98.6 | ) | |||||||||
Net finance income (expense) (a) | |||||||||||||||||||||||
21 | 27 | 11 | Net income (expense) from investments (a) | 66 | 38 | ||||||||||||||||||
12 | 52 | 24 | Income taxes (a) | 31 | 76 | ||||||||||||||||||
38.7 | 34.9 | 23.3 | Tax rate | (%) | 38.8 | 30.2 | |||||||||||||||||
(19 | ) | (97 | ) | (79 | ) | 315.8 | Adjusted net profit | (49 | ) | (176 | ) | (259.2 | ) | ||||||||||
149 | 132 | 184 | 23.5 | Capital expenditure | 267 | 316 | 18.4 | ||||||||||||||||
Global indicator refining margin | |||||||||||||||||||||||
3.39 | 1.74 | 1.09 | (67.8 | ) | Brent | ($/bbl) | 2.90 | 1.41 | (51.4 | ) | |||||||||||||
2.66 | 1.27 | 0.75 | (71.8 | ) | Brent | (euro/bbl) | 2.18 | 1.00 | (54.1 | ) | |||||||||||||
4.56 | 3.35 | 2.20 | (51.8 | ) | Brent/Ural | ($/bbl) | 3.89 | 2.77 | (28.8 | ) | |||||||||||||
REFINING THROUGHPUTS AND SALES | (mmtonnes) | ||||||||||||||||||||||
6.54 | 5.96 | 5.26 | (19.6 | ) | Refining throughputs of wholly-owned refineries | 12.40 | 11.22 | (9.5 | ) | ||||||||||||||
8.73 | 8.14 | 7.63 | (12.6 | ) | Refining throughputs on own account | 16.87 | 15.77 | (6.5 | ) | ||||||||||||||
7.42 | 7.03 | 6.30 | (15.1 | ) | - Italy | 14.30 | 13.33 | (6.8 | ) | ||||||||||||||
1.31 | 1.11 | 1.33 | 1.5 | - Rest of Europe | 2.57 | 2.44 | (5.1 | ) | |||||||||||||||
2.94 | 2.64 | 2.90 | (1.4 | ) | Retail sales | 5.62 | 5.54 | (1.4 | ) | ||||||||||||||
2.17 | 1.94 | 2.14 | (1.4 | ) | - Italy | 4.18 | 4.08 | (2.4 | ) | ||||||||||||||
0.77 | 0.70 | 0.76 | (1.3 | ) | - Rest of Europe | 1.44 | 1.46 | 1.4 | |||||||||||||||
3.30 | 3.00 | 3.19 | (3.3 | ) | Wholesale sales | 6.20 | 6.19 | (0.2 | ) | ||||||||||||||
2.33 | 2.19 | 2.22 | (4.7 | ) | - Italy | 4.37 | 4.41 | 0.9 | |||||||||||||||
0.97 | 0.81 | 0.97 | - Rest of Europe | 1.83 | 1.78 | (2.7 | ) | ||||||||||||||||
0.11 | 0.10 | 0.11 | Wholesale sales outside Europe | 0.20 | 0.21 | 5.0 | |||||||||||||||||
(a) | Excluding special items. |
Results
In the second quarter of 2011 the Refining &
Marketing business reported widening adjusted operating losses
down by euro 62 million from the same period of 2010, or 119%, to
euro 114 million. This poor performance reflected continuing
unprofitable refining margins due to high costs for oil feedstock
which were only partially transferred to product prices pressured
by weak demand and capacity oversupply recorded in the
Mediterranean area. In addition, performance for the quarter was
hit by rising costs for plant utilities which are indexed to the
cost of crude oil, as well as the depreciation of the US dollar
vs the euro. These negatives were mitigated by an improved
profitability of Enis complex refineries helped by widening
price differentials between sweet and sour crudes, higher pricing
premiums for gasoline and gasoil compared to fuel oil as well as
efficiency improvements and optimization of refinery cycles.
Marketing activities benefited by higher sales margins positively
influenced by commercial and pricing initiatives.
In the second quarter of 2011 special charges excluded from
adjusted operating loss amounted to euro 42 million (euro 71
million for the first half of 2011) and mainly related to
impairment charges of capital expenditures made for safety
reasons on refining and retail assets impaired in previous
reporting periods, and environmental provisions.
- 24 -
In the second quarter of 2011, adjusted net loss was euro 79 million (down euro 60 million from the second quarter of 2010) mainly due to a lower operating performance.
In the first half of 2011 the Refining & Marketing
business reported an adjusted operating loss amounting to euro
290 million, down euro 144 million from the same period of 2010,
driven by sharply lower refining margins on the back of an
unfavorable scenario, partly offset by the positive results
recorded by the marketing activities.
In the first half of 2011, adjusted net loss was euro 176 million
(down euro 127 million from the first half of 2010).
Operating review
Enis refining throughputs for the second quarter
of 2011 were 7.63 mmtonnes (15.77 mmtonnes in the first half of
2011) decreasing by 12.6% from the year-ago second quarter (down
by 6.5% from the first half of 2010). In Italy processed volumes
for the second quarter decreased by 15.1% from the year earlier
quarter (down by 6.8% in the first half) reflecting lower volumes
at the Livorno and Gela refineries due to planned facility
downtimes and lower capacity utilization in response to a weak
market environment at the Venezia refinery. These negatives were
partly offset by the higher volumes processed at the Sannazzaro,
Milazzo and Taranto refineries reflecting lower facility
downtimes.
Outside Italy, Enis refining throughputs slightly increased
from the second quarter of 2010 (down 5.1% from the first half of
2010).
Retail sales in Italy amounted to 2.14 mmtonnes in the
second quarter of 2011 (4.08 mmtonnes in the first half of 2011)
decreasing by approximately 30 ktonnes, or 1.4% (down 2.4% in the
first half of 2011) due to a lower consumption (down 1.9%). Eni's
average market share for the first half of 2011 was 30.1%, down
0.2 percentage points from the first half of 2010. Market share
for the second quarter of 2011 was 30.2%, up 0.1 percentage
points from the second quarter of 2010.
Wholesale sales in Italy (2.22 mmtonnes) decreased by
approximately 110 ktonnes, down 4.7% from the second quarter of
2010, due to lower demand of engines gasoil, marine bunkering and
fuel oil from industrial clients. In the period were registered
higher sales of jet fuel for the aviation segment. In the first
half of 2011 wholesale sales in Italy registered a slight
increase from 2010 (up approximately 40 ktonnes, or 0.9%) mainly
due to higher sales of jet fuel for the aviation segment, bitumen
and coke, partly offset by lower sales of gasoil, marine
bunkering and fuel oil in relation to lower demand for products.
Retail sales in the rest of Europe amounting to
approximately 760 ktonnes in the second quarter of 2011 (1.46
mmtonnes in the first half of 2011) were weaker in the quarter
due to lower demand and higher competitive pressure (down by 1.3%
in the quarter; however they were up 1.4% in the first half) with
reductions in Germany, France and Eastern Europe. These negatives
were partly offset by the purchase of a network of service
stations in Austria closed during 2010.
Wholesale sales in the Rest of Europe were approximately
970 ktonnes (1.78 mmtonnes in the first half of 2010) and were
stable in the quarter while experienced a slight decrease in the
first half mainly due to lower sales in Czech Republic, Germany,
Slovenia, Hungary and France, mainly in bitumen, partly offset by
higher sales volumes in Austria, Switzerland and Romania.
- 25 -
Summarized Group profit and loss account
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
22,902 | 28,779 | 24,596 | 7.4 | Net sales from operations | 47,706 | 53,375 | 11.9 | ||||||||||||||||
252 | 233 | 357 | 41.7 | Other income and revenues | 537 | 590 | 9.9 | ||||||||||||||||
(16,569 | ) | (21,222 | ) | (19,005 | ) | (14.7 | ) | Operating expenses | (34,665 | ) | (40,227 | ) | (16.0 | ) | |||||||||
(69 | ) | of which non-recurring items | (69 | ) | |||||||||||||||||||
(5 | ) | (28 | ) | 16 | Other operating income (expense) | 33 | (12 | ) | |||||||||||||||
(2,275 | ) | (2,124 | ) | (2,154 | ) | 5.3 | Depreciation, depletion, amortization and impairments | (4,459 | ) | (4,278 | ) | 4.1 | |||||||||||
4,305 | 5,638 | 3,810 | (11.5 | ) | Operating profit | 9,152 | 9,448 | 3.2 | |||||||||||||||
(356 | ) | (83 | ) | (294 | ) | 17.4 | Finance income (expense) | (601 | ) | (377 | ) | 37.3 | |||||||||||
447 | 291 | 430 | (3.8 | ) | Net income from investments | 672 | 721 | 7.3 | |||||||||||||||
4,396 | 5,846 | 3,946 | (10.2 | ) | Profit before income taxes | 9,223 | 9,792 | (6.2 | ) | ||||||||||||||
(2,457 | ) | (2,887 | ) | (2,446 | ) | 0.4 | Income taxes | (4,865 | ) | (5,333 | ) | (9.6 | ) | ||||||||||
55.9 | 49.4 | 62.0 | Tax rate | (%) | 52.7 | 54.5 | |||||||||||||||||
1,939 | 2,959 | 1,500 | (22.6 | ) | Net profit, attributable to: | 4,358 | 4,459 | 2.3 | |||||||||||||||
1,824 | 2,547 | 1,254 | (31.3 | ) | - Enis shareholders | 4,046 | 3,801 | (6.1 | ) | ||||||||||||||
115 | 412 | 246 | 113.9 | - Non controlling interest | 312 | 658 | 110.9 | ||||||||||||||||
1,824 | 2,547 | 1,254 | (31.3 | ) | Net profit attributable to Enis shareholders | 4,046 | 3,801 | (6.1 | ) | ||||||||||||||
(250 | ) | (474 | ) | (170 | ) | Exclusion of inventory holding (gains) losses | (530 | ) | (644 | ) | |||||||||||||
93 | 125 | 352 | Exclusion of special items | (27 | ) | 477 | |||||||||||||||||
of which: | |||||||||||||||||||||||
69 | - non-recurring items | 69 | |||||||||||||||||||||
93 | 125 | 283 | - other special items | (27 | ) | 408 | |||||||||||||||||
1,667 | 2,198 | 1,436 | (13.9 | ) | Adjusted net profit attributable to Enis shareholders (a) | 3,489 | 3,634 | 4.2 | |||||||||||||||
(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". |
- 26 -
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 is applied to finance
charges and income (34% is applied to charges recorded by
companies in the energy sector, whilst a tax rate of 27.5% is
applied to all other companies). Adjusted operating profit and
adjusted net profit are non-GAAP financial measures under either
IFRS, or US GAAP. Management includes them in order to facilitate
a comparison of base business performance across periods and
allow financial analysts to evaluate Enis 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 managements discussion and include gains and losses on re-measurement at fair value of certain commodity derivatives, which do not meet formal criteria to the classified as hedges under IFRS, 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.
- 27 -
First Half 2011 |
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 | 7,799 | 1,094 | 376 | (5 | ) | 720 | (165 | ) | (188 | ) | (183 | ) | 9,448 | ||||||||||||||
Exclusion of inventory holding (gains) losses | (53 | ) | (737 | ) | (119 | ) | (909 | ) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 10 | 59 | 69 | ||||||||||||||||||||||||
Other special (income) charges: | 147 | 168 | 71 | 72 | 1 | 35 | 494 | ||||||||||||||||||||
environmental charges | 4 | 26 | 12 | 42 | |||||||||||||||||||||||
asset impairments | 141 | 38 | 70 | 14 | 2 | 265 | |||||||||||||||||||||
gains on disposal of assets | (28 | ) | 5 | (9 | ) | 3 | (29 | ) | |||||||||||||||||||
risk provisions | 5 | (1 | ) | 4 | |||||||||||||||||||||||
provision for redundancy incentives | 4 | 6 | 8 | 2 | 1 | 1 | 12 | 34 | |||||||||||||||||||
re-measurement gains/losses on commodity derivatives | 30 | 154 | (6 | ) | (18 | ) | 160 | ||||||||||||||||||||
other | (1 | ) | 9 | (13 | ) | 23 | 18 | ||||||||||||||||||||
Special items of operating profit | 147 | 168 | 71 | 82 | 60 | 35 | 563 | ||||||||||||||||||||
Adjusted operating profit | 7,946 | 1,209 | (290 | ) | (42 | ) | 720 | (105 | ) | (153 | ) | (183 | ) | 9,102 | |||||||||||||
Net finance (expense) income (a) | (116 | ) | 21 | 4 | (284 | ) | (375 | ) | |||||||||||||||||||
Net income from investments (a) | 412 | 219 | 38 | 1 | 9 | 679 | |||||||||||||||||||||
Income taxes (a) | (4,725 | ) | (447 | ) | 76 | 13 | (193 | ) | 94 | 68 | (5,114 | ) | |||||||||||||||
Tax rate (%) | 57.3 | 30.8 | .. | 26.5 | 54.4 | ||||||||||||||||||||||
Adjusted net profit | 3,517 | 1,002 | (176 | ) | (28 | ) | 536 | (101 | ) | (343 | ) | (115 | ) | 4,292 | |||||||||||||
of which: | |||||||||||||||||||||||||||
- Adjusted net profit of non-controlling interest | 658 | ||||||||||||||||||||||||||
- Adjusted net profit attributable to Enis shareholders | 3,634 | ||||||||||||||||||||||||||
Reported net profit attributable to Enis shareholders | 3,801 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses (b) | (644 | ) | |||||||||||||||||||||||||
Exclusion of special items | 477 | ||||||||||||||||||||||||||
- non-recurring (income) charges | 69 | ||||||||||||||||||||||||||
- other special (income) charges | 408 | ||||||||||||||||||||||||||
Adjusted net profit attributable to Enis shareholders | 3,634 | ||||||||||||||||||||||||||
i | i | i |
(a) | i | Excluding special items. |
(b) | i | Including euro 67 million related to equity-accounted entities. |
- 28 -
(euro million)
First Half 2010 |
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 | 6,698 | 1,908 | 360 | 53 | 625 | (175 | ) | (152 | ) | (165 | ) | 9,152 | |||||||||||||||
Exclusion of inventory holding (gains) losses | (106 | ) | (537 | ) | (134 | ) | (777 | ) | |||||||||||||||||||
Exclusion of special items: | |||||||||||||||||||||||||||
environmental charges | 4 | 34 | 53 | 91 | |||||||||||||||||||||||
asset impairments | 29 | 10 | 33 | 9 | 8 | 89 | |||||||||||||||||||||
gains on disposal of assets | (167 | ) | 1 | (10 | ) | (176 | ) | ||||||||||||||||||||
risk provisions | 6 | 6 | |||||||||||||||||||||||||
provision for redundancy incentives | 8 | 8 | 6 | 2 | 7 | 1 | 12 | 44 | |||||||||||||||||||
re-measurement gains/losses on commodity derivatives | (8 | ) | 71 | (32 | ) | 31 | |||||||||||||||||||||
other | (1 | ) | (1 | ) | |||||||||||||||||||||||
Special items of operating profit | (138 | ) | 94 | 31 | 11 | 7 | 67 | 12 | 84 | ||||||||||||||||||
Adjusted operating profit | 6,560 | 1,896 | (146 | ) | (70 | ) | 632 | (108 | ) | (140 | ) | (165 | ) | 8,459 | |||||||||||||
Net finance (expense) income (a) | (106 | ) | 7 | 47 | (10 | ) | (492 | ) | (554 | ) | |||||||||||||||||
Net income from investments (a) | 266 | 195 | 66 | 2 | (3 | ) | (4 | ) | (1 | ) | 521 | ||||||||||||||||
Income taxes (a) | (4,036 | ) | (622 | ) | 31 | 2 | (206 | ) | 144 | 62 | (4,625 | ) | |||||||||||||||
Tax rate (%) | 60.1 | 29.6 | .. | 30.5 | 54.9 | ||||||||||||||||||||||
Adjusted net profit | 2,684 | 1,476 | (49 | ) | (66 | ) | 470 | (122 | ) | (489 | ) | (103 | ) | 3,801 | |||||||||||||
of which: | |||||||||||||||||||||||||||
- Adjusted net profit of non-controlling interest | 312 | ||||||||||||||||||||||||||
- Adjusted net profit attributable to Enis shareholders | 3,489 | ||||||||||||||||||||||||||
Reported net profit attributable to Enis shareholders | 4,046 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses (b) | (530 | ) | |||||||||||||||||||||||||
Exclusion of special items | (27 | ) | |||||||||||||||||||||||||
Adjusted net profit attributable to Enis shareholders | 3,489 | ||||||||||||||||||||||||||
i | i | i |
(a) | i | Excluding special items. |
(b) | i | Including euro 33 million related to equity-accounted entities. |
- 29 -
(euro million)
Second Quarter 2011 |
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 | 3,693 | 184 | 73 | (113 | ) | 366 | (138 | ) | (76 | ) | (179 | ) | 3,810 | ||||||||||||||
Exclusion of inventory holding (gains) losses | (12 | ) | (229 | ) | 1 | (240 | ) | ||||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 10 | 59 | 69 | ||||||||||||||||||||||||
Other special (income) charges: | 133 | 79 | 42 | 72 | 12 | 19 | 7 | 364 | |||||||||||||||||||
environmental charges | 3 | 12 | 12 | 27 | |||||||||||||||||||||||
asset impairments | 141 | 22 | 70 | 14 | 1 | 248 | |||||||||||||||||||||
gains on disposal of assets | (11 | ) | 5 | (5 | ) | 2 | (9 | ) | |||||||||||||||||||
risk provisions | 5 | (1 | ) | 4 | |||||||||||||||||||||||
provision for redundancy incentives | 2 | 3 | 5 | 2 | 1 | 1 | 8 | 22 | |||||||||||||||||||
re-measurement gains/losses on commodity derivatives | 1 | 74 | (4 | ) | (5 | ) | 66 | ||||||||||||||||||||
other | (6 | ) | 7 | 6 | (1 | ) | 6 | ||||||||||||||||||||
Special items of operating profit | 133 | 79 | 42 | 82 | 12 | 78 | 7 | 433 | |||||||||||||||||||
Adjusted operating profit | 3,826 | 251 | (114 | ) | (30 | ) | 378 | (60 | ) | (69 | ) | (179 | ) | 4,003 | |||||||||||||
Net finance (expense) income (a) | (59 | ) | 16 | 4 | (253 | ) | (292 | ) | |||||||||||||||||||
Net income from investments (a) | 295 | 103 | 11 | 1 | 4 | 414 | |||||||||||||||||||||
Income taxes (a) | (2,378 | ) | (131 | ) | 24 | 6 | (105 | ) | 74 | 67 | (2,443 | ) | |||||||||||||||
Tax rate (%) | 58.5 | 35.4 | .. | 27.5 | 59.2 | ||||||||||||||||||||||
Adjusted net profit | 1,684 | 239 | (79 | ) | (23 | ) | 277 | (56 | ) | (248 | ) | (112 | ) | 1,682 | |||||||||||||
of which: | |||||||||||||||||||||||||||
- Adjusted net profit of non-controlling interest | 246 | ||||||||||||||||||||||||||
- Adjusted net profit attributable to Enis shareholders | 1,436 | ||||||||||||||||||||||||||
Reported net profit attributable to Enis shareholders | 1,254 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses (b) | (170 | ) | |||||||||||||||||||||||||
Exclusion of special items | 352 | ||||||||||||||||||||||||||
- non-recurring (income) charges | 69 | ||||||||||||||||||||||||||
- other special (income) charges | 283 | ||||||||||||||||||||||||||
Adjusted net profit attributable to Enis shareholders | 1,436 | ||||||||||||||||||||||||||
i | i | i |
(a) | i | Excluding special items. |
(b) | i | Including euro 17 million related to equity-accounted entities. |
- 30 -
(euro million)
Second Quarter 2010 |
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 | 3,401 | 592 | 255 | 17 | 334 | (115 | ) | (82 | ) | (97 | ) | 4,305 | |||||||||||||||
Exclusion of inventory holding (gains) losses | (25 | ) | (305 | ) | (38 | ) | (368 | ) | |||||||||||||||||||
Exclusion of special items: | |||||||||||||||||||||||||||
environmental charges | (1 | ) | 17 | 53 | 69 | ||||||||||||||||||||||
asset impairments | 29 | 11 | 9 | 8 | 57 | ||||||||||||||||||||||
gains on disposal of assets | (7 | ) | 1 | (6 | ) | ||||||||||||||||||||||
risk provisions | 6 | 6 | |||||||||||||||||||||||||
provision for redundancy incentives | 6 | 2 | 4 | 1 | 7 | 7 | 27 | ||||||||||||||||||||
re-measurement gains/losses on commodity derivatives | 13 | 60 | (34 | ) | 2 | 41 | |||||||||||||||||||||
other | (3 | ) | (3 | ) | |||||||||||||||||||||||
Special items of operating profit | 41 | 62 | (2 | ) | 10 | 9 | 64 | 7 | 191 | ||||||||||||||||||
Adjusted operating profit | 3,442 | 629 | (52 | ) | (11 | ) | 343 | (51 | ) | (75 | ) | (97 | ) | 4,128 | |||||||||||||
Net finance (expense) income (a) | (57 | ) | 9 | 47 | (10 | ) | (298 | ) | (309 | ) | |||||||||||||||||
Net income from investments (a) | 199 | 95 | 21 | 2 | (5 | ) | (1 | ) | 311 | ||||||||||||||||||
Income taxes (a) | (2,145 | ) | (212 | ) | 12 | (14 | ) | (112 | ) | 87 | 36 | (2,348 | ) | ||||||||||||||
Tax rate (%) | 59.8 | 28.9 | .. | 29.1 | 56.9 | ||||||||||||||||||||||
Adjusted net profit | 1,439 | 521 | (19 | ) | (23 | ) | 273 | (61 | ) | (287 | ) | (61 | ) | 1,782 | |||||||||||||
of which: | |||||||||||||||||||||||||||
- Adjusted net profit of non-controlling interest | 115 | ||||||||||||||||||||||||||
- Adjusted net profit attributable to Enis shareholders | 1,667 | ||||||||||||||||||||||||||
Reported net profit attributable to Enis shareholders | 1,824 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses (b) | (250 | ) | |||||||||||||||||||||||||
Exclusion of special items | 93 | ||||||||||||||||||||||||||
Adjusted net profit attributable to Enis shareholders | 1,667 | ||||||||||||||||||||||||||
i | i | i |
(a) | i | Excluding special items. |
(b) | i | Including euro 16 million related to equity-accounted entities. |
- 31 -
(euro million)
First Quarter 2011 |
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 | 4,106 | 910 | 303 | 108 | 354 | (27 | ) | (112 | ) | (4 | ) | 5,638 | |||||||||||||||
Exclusion of inventory holding (gains) losses | (41 | ) | (508 | ) | (120 | ) | (669 | ) | |||||||||||||||||||
Exclusion of special items: | |||||||||||||||||||||||||||
environmental charges | 1 | 14 | 15 | ||||||||||||||||||||||||
asset impairments | 16 | 1 | 17 | ||||||||||||||||||||||||
gains on disposal of assets | (17 | ) | (4 | ) | 1 | (20 | ) | ||||||||||||||||||||
provision for redundancy incentives | 2 | 3 | 3 | 4 | 12 | ||||||||||||||||||||||
re-measurement gains/losses on commodity derivatives | 29 | 80 | (2 | ) | (13 | ) | 94 | ||||||||||||||||||||
other | 5 | 2 | (19 | ) | 24 | 12 | |||||||||||||||||||||
Special items of operating profit | 14 | 89 | 29 | (12 | ) | (18 | ) | 28 | 130 | ||||||||||||||||||
Adjusted operating profit | 4,120 | 958 | (176 | ) | (12 | ) | 342 | (45 | ) | (84 | ) | (4 | ) | 5,099 | |||||||||||||
Net finance (expense) income (a) | (57 | ) | 5 | (31 | ) | (83 | ) | ||||||||||||||||||||
Net income from investments (a) | 117 | 116 | 27 | 5 | 265 | ||||||||||||||||||||||
Income taxes (a) | (2,347 | ) | (316 | ) | 52 | 7 | (88 | ) | 20 | 1 | (2,671 | ) | |||||||||||||||
Tax rate (%) | 56.1 | 29.3 | .. | 25.4 | 50.6 | ||||||||||||||||||||||
Adjusted net profit | 1,833 | 763 | (97 | ) | (5 | ) | 259 | (45 | ) | (95 | ) | (3 | ) | 2,610 | |||||||||||||
of which: | |||||||||||||||||||||||||||
- Adjusted net profit of non-controlling interest | 412 | ||||||||||||||||||||||||||
- Adjusted net profit attributable to Enis shareholders | 2,198 | ||||||||||||||||||||||||||
Reported net profit attributable to Enis shareholders | 2,547 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses (b) | (474 | ) | |||||||||||||||||||||||||
Exclusion of special items | 125 | ||||||||||||||||||||||||||
Adjusted net profit attributable to Enis shareholders | 2,198 | ||||||||||||||||||||||||||
i | i | i |
(a) | i | Excluding special items. |
(b) | i | Including euro 50 million related to equity-accounted entities. |
- 32 -
Breakdown of special items
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
69 | Non-recurring charges (income) | 69 | |||||||||||||
69 | of which: - settlement/payments on antitrust and other Authorities proceedings | 69 | |||||||||||||
191 | 130 | 364 | Other special charges (income): | 84 | 494 | ||||||||||
69 | 15 | 27 | - environmental charges | 91 | 42 | ||||||||||
57 | 17 | 248 | - asset impairments | 89 | 265 | ||||||||||
(6 | ) | (20 | ) | (9 | ) | - gains on disposal of assets | (176 | ) | (29 | ) | |||||
6 | 4 | - risk provisions | 6 | 4 | |||||||||||
27 | 12 | 22 | - provisions for redundancy incentives | 44 | 34 | ||||||||||
41 | 94 | 66 | - re-measurement gains/losses on commodity derivatives | 31 | 160 | ||||||||||
(3 | ) | 12 | 6 | - other | (1 | ) | 18 | ||||||||
191 | 130 | 433 | Special items of operating profit | 84 | 563 | ||||||||||
47 | 2 | Net finance (income) expense | 47 | 2 | |||||||||||
(118 | ) | 24 | 1 | Net income from investments | (118 | ) | 25 | ||||||||
of which: | |||||||||||||||
(140 | ) | - gains on disposal of assets | (140 | ) | |||||||||||
20 | - impairments | 20 | |||||||||||||
(27 | ) | (29 | ) | (84 | ) | Income taxes | (40 | ) | (113 | ) | |||||
of which: | |||||||||||||||
42 | 27 | 44 | - re-allocation of tax impact on Eni SpA dividends and other special items | 42 | 71 | ||||||||||
(69 | ) | (56 | ) | (128 | ) | - taxes on special items of operating profit | (82 | ) | (184 | ) | |||||
93 | 125 | 352 | Total special items of net profit | (27 | ) | 477 | |||||||||
Net sales from operations
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
7,184 | 7,474 | 6,778 | (5.7 | ) | Exploration & Production | 14,569 | 14,252 | (2.2 | ) | ||||||||||||
5,960 | 10,614 | 6,235 | 4.6 | Gas & Power | 14,668 | 16,849 | 14.9 | ||||||||||||||
10,909 | 11,806 | 13,015 | 19.3 | Refining & Marketing | 20,255 | 24,821 | 22.5 | ||||||||||||||
1,698 | 1,797 | 1,747 | 2.9 | Petrochemicals | 3,174 | 3,544 | 11.7 | ||||||||||||||
2,496 | 2,785 | 2,920 | 17.0 | Engineering & Construction | 5,008 | 5,705 | 13.9 | ||||||||||||||
27 | 25 | 20 | (25.9 | ) | Other activities | 52 | 45 | (13.5 | ) | ||||||||||||
332 | 303 | 341 | 2.7 | Corporate and financial companies | 634 | 644 | 1.6 | ||||||||||||||
(171 | ) | (101 | ) | (57 | ) | Impact of unrealized intragroup profit elimination | (107 | ) | (158 | ) | |||||||||||
(5,533 | ) | (5,924 | ) | (6,403 | ) | Consolidation adjustment | (10,547 | ) | (12,327 | ) | |||||||||||
22,902 | 28,779 | 24,596 | 7.4 | 47,706 | 53,375 | 11.9 | |||||||||||||||
- 33 -
Operating expenses
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
15,415 | 20,103 | 17,862 | 15.9 | Purchases, services and other | 32,466 | 37,965 | 16.9 | ||||||||
of which: | |||||||||||||||
69 | - non-recurring (income) charges | 69 | |||||||||||||
60 | 3 | 51 | - other special items | 97 | 54 | ||||||||||
1,154 | 1,119 | 1,143 | (1.0 | ) | Payroll and related costs | 2,199 | 2,262 | 2.9 | |||||||
of which: | |||||||||||||||
27 | 12 | 22 | - provision for redundancy incentives | 44 | 34 | ||||||||||
16,569 | 21,222 | 19,005 | 14.7 | 34,665 | 40,227 | 16.0 | |||||||||
Gains and losses on non-hedging commodity
derivate instruments
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
(14 | ) | (29 | ) | (1 | ) | Exploration & Production | 7 | (30 | ) | ||||||
(1 | ) | - settled transactions | (1 | ) | |||||||||||
(13 | ) | (29 | ) | (1 | ) | - re-measurement gains/losses | 8 | (30 | ) | ||||||
(30 | ) | 4 | (3 | ) | Gas & Power | (11 | ) | 1 | |||||||
30 | 84 | 71 | - settled transactions | 60 | 155 | ||||||||||
(60 | ) | (80 | ) | (74 | ) | - re-measurement gains/losses | (71 | ) | (154 | ) | |||||
45 | (76 | ) | 11 | Refining & Marketing | 40 | (65 | ) | ||||||||
11 | (78 | ) | 7 | - settled transactions | 8 | (71 | ) | ||||||||
34 | 2 | 4 | - re-measurement gains/losses | 32 | 6 | ||||||||||
2 | Petrochemicals | 1 | 2 | ||||||||||||
2 | - settled transactions | 1 | 2 | ||||||||||||
- re-measurement gains/losses | |||||||||||||||
(6 | ) | 12 | 2 | Engineering & Construction | (4 | ) | 14 | ||||||||
(4 | ) | (1 | ) | (3 | ) | - settled transactions | (4 | ) | (4 | ) | |||||
(2 | ) | 13 | 5 | - re-measurement gains/losses | 18 | ||||||||||
(5 | ) | (87 | ) | 9 | Derivatives lacking formal criteria for hedging accounting | 33 | (78 | ) | |||||||
36 | 7 | 75 | - settled transactions | 64 | 82 | ||||||||||
(41 | ) | (94 | ) | (66 | ) | - re-measurement gains/losses | (31 | ) | (160 | ) | |||||
59 | 7 | Trading derivatives Gas & Power | 66 | ||||||||||||
(5 | ) | (28 | ) | 16 | Total | 33 | (12 | ) | |||||||
Depreciation, depletion, amortization
and impairments
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
1,749 | 1,588 | 1,439 | (17.7 | ) | Exploration & Production | 3,429 | 3,027 | (11.7 | ) | ||||||||||||
226 | 248 | 218 | (3.5 | ) | Gas & Power | 470 | 466 | (0.9 | ) | ||||||||||||
87 | 92 | 83 | (4.6 | ) | Refining & Marketing | 167 | 175 | 4.8 | |||||||||||||
20 | 22 | 24 | 20.0 | Petrochemicals | 39 | 46 | 17.9 | ||||||||||||||
122 | 145 | 138 | 13.1 | Engineering & Construction | 236 | 283 | 19.9 | ||||||||||||||
.. | Other activities | 1 | (100.0 | ) | |||||||||||||||||
19 | 17 | 18 | (5.3 | ) | Corporate and financial companies | 37 | 35 | (5.4 | ) | ||||||||||||
(5 | ) | (5 | ) | (6 | ) | Impact of unrealized intragroup profit elimination | (9 | ) | (11 | ) | |||||||||||
2,218 | 2,107 | 1,914 | (13.7 | ) | Total depreciation, depletion and amortization | 4,370 | 4,021 | (8.0 | ) | ||||||||||||
57 | 17 | 240 | 321.1 | Impairments | 89 | 257 | 188.8 | ||||||||||||||
2,275 | 2,124 | 2,154 | (5.3 | ) | 4,459 | 4,278 | (4.1 | ) | |||||||||||||
- 34 -
Net income from investments
(euro
million) First Half 2011 |
Exploration |
Gas |
Refining |
Engineering |
Other activities |
Group |
||||||
Share of gains (losses) from equity-accounted investments | 63 | 160 | 74 | 9 | (24 | ) | 282 | ||||||
Dividends | 343 | 60 | 31 | 3 | 437 | ||||||||
Net gains on disposal | 1 | 1 | |||||||||||
Other income (expense), net | 2 | (1 | ) | 1 | |||||||||
408 | 220 | 105 | 9 | (21 | ) | 721 | |||||||
Income taxes
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
Change |
||||||
Profit before income taxes | |||||||||||||
690 | 1,312 | 16 | Italy | 1,841 | 1,328 | (513 | ) | ||||||
3,706 | 4,534 | 3,930 | Outside Italy | 7,382 | 8,464 | 1,082 | |||||||
4,396 | 5,846 | 3,946 | 9,223 | 9,792 | 569 | ||||||||
Income taxes | |||||||||||||
393 | 538 | 206 | Italy | 843 | 744 | (99 | ) | ||||||
2,064 | 2,349 | 2,240 | Outside Italy | 4,022 | 4,589 | 567 | |||||||
2,457 | 2,887 | 2,446 | 4,865 | 5,333 | 468 | ||||||||
Tax rate (%) | |||||||||||||
57.0 | 41.0 | .. | Italy | 45.8 | 56.0 | 10.2 | |||||||
55.7 | 51.8 | 57.0 | Outside Italy | 54.5 | 54.2 | (0.3 | ) | ||||||
55.9 | 49.4 | 62.0 | 52.7 | 54.5 | 1.8 | ||||||||
Adjusted net profit
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
1,439 | 1,833 | 1,684 | 17.0 | Exploration & Production | 2,684 | 3,517 | 31.0 | ||||||||||||||
521 | 763 | 239 | (54.1 | ) | Gas & Power | 1,476 | 1,002 | (32.1 | ) | ||||||||||||
(19 | ) | (97 | ) | (79 | ) | (315.8 | ) | Refining & Marketing | (49 | ) | (176 | ) | (259.2 | ) | |||||||
(23 | ) | (5 | ) | (23 | ) | Petrochemicals | (66 | ) | (28 | ) | 57.6 | ||||||||||
273 | 259 | 277 | 1.5 | Engineering & Construction | 470 | 536 | 14.0 | ||||||||||||||
(61 | ) | (45 | ) | (56 | ) | 8.2 | Other activities | (122 | ) | (101 | ) | 17.2 | |||||||||
(287 | ) | (95 | ) | (248 | ) | 13.6 | Corporate and financial companies | (489 | ) | (343 | ) | 29.9 | |||||||||
(61 | ) | (3 | ) | (112 | ) | Impact of unrealized intragroup profit elimination | (103 | ) | (115 | ) | |||||||||||
1,782 | 2,610 | 1,682 | (5.6 | ) | 3,801 | 4,292 | (12.9 | ) | |||||||||||||
Attributable to: | |||||||||||||||||||||
115 | 412 | 246 | 113.9 | - Enis shareholders | 312 | 658 | (110.9 | ) | |||||||||||||
1,667 | 2,198 | 1,436 | (13.9 | ) | - Non controlling interest | 3,489 | 3,634 | 4.2 | |||||||||||||
- 35 -
Leverage and net borrowings
Leverage is a measure used by management to assess the Companys level of indebtedness. It is calculated as a 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, 2010 |
March 31, 2011 |
June 30, 2011 |
Change vs |
Change vs |
|||||
Total debt | 27,783 | 27,058 | 27,594 | (189 | ) | 536 | |||||||||
Short-term debt | 7,478 | 6,156 | 5,573 | (1,905 | ) | (583 | ) | ||||||||
Long-term debt | 20,305 | 20,902 | 22,021 | 1,716 | 1,119 | ||||||||||
Cash and cash equivalents | (1,549 | ) | (1,922 | ) | (1,474 | ) | 75 | 448 | |||||||
Securities held for non-operating purposes | (109 | ) | (110 | ) | (131 | ) | (22 | ) | (21 | ) | |||||
Financing receivables for non-operating purposes | (6 | ) | (75 | ) | (11 | ) | (5 | ) | 64 | ||||||
Net borrowings | 26,119 | 24,951 | 25,978 | (141 | ) | 1,027 | |||||||||
Shareholders equity including non-controlling interest | 55,728 | 56,866 | 55,704 | (24 | ) | (1,162 | ) | ||||||||
Leverage | 0.47 | 0.44 | 0.47 | 0.03 | |||||||||||
Bonds maturing in the 18-month period
starting on June 30, 2011
(euro million)
Issuing entity |
Amounts at June 30, 2011 (a) |
Eni Coordination Center SA | 43 |
Eni Coordination Center SA | 26 |
69 |
|
(a) | Amounts include interest accrued and discount on issue. |
Bonds issued in the first half of 2011
Issuing entity | Nominal amount (million) |
Currency | Amounts at March 31, 2011 (a) (euro million) |
Maturity | Rate | % | ||||||
Eni Coordination Center SA | 100 | GBP | 112 | 2021 | Fixed | 4.75 | ||||||
112 |
(a) | Amounts include interest accrued and discount on issue. |
- 36 -
ROACE (Return On Average Capital Employed)
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 interests, 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%. The capital invested, as of the 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 June 30, 2011 |
Exploration |
Gas & Power |
Refining |
Group |
||||
Adjusted net profit | 6,433 | 2,084 | (176 | ) | 8,425 | ||||
Exclusion of after-tax finance expense/interest income | - | - | - | 409 | |||||
Adjusted net profit unlevered | 6,433 | 2,084 | (176 | ) | 8,834 | ||||
Adjusted capital employed, net: | |||||||||
- at the beginning of period | 38,847 | 25,524 | 8,533 | 80,717 | |||||
- at the end of period | 36,487 | 27,325 | 8,508 | 80,958 | |||||
Adjusted average capital employed, net | 37,667 | 26,425 | 8,521 | 80,838 | |||||
Adjusted ROACE (%) | 17.1 | 7.9 | (2.1 | ) | 10.9 | ||||
(euro million)
Calculated
on a 12-month period ending on June 30, 2010 |
Exploration |
Gas & Power |
Refining |
Group |
||||
Adjusted net profit | 4,646 | 2,907 | (215 | ) | 6,841 | ||||
Exclusion of after-tax finance expense/interest income | - | - | - | 341 | |||||
Adjusted net profit unlevered | 4,646 | 2,907 | (215 | ) | 7,182 | ||||
Adjusted capital employed, net: | |||||||||
- at the beginning of period | 30,489 | 23,614 | 7,359 | 68,564 | |||||
- at the end of period | 38,847 | 25,539 | 7,932 | 80,048 | |||||
Adjusted average capital employed, net | 34,668 | 24,577 | 7,646 | 74,306 | |||||
Adjusted ROACE (%) | 13.4 | 11.8 | (2.8 | ) | 9.7 | ||||
(euro million)
Calculated
on a 12-month period ending on December 31, 2010 |
Exploration |
Gas & Power |
Refining |
Group |
||||
Adjusted net profit | 5,600 | 2,558 | (49 | ) | 7,934 | ||||
Exclusion of after-tax finance expense/interest income | - | - | - | 337 | |||||
Adjusted net profit unlevered | 5,600 | 2,558 | (49 | ) | 8,271 | ||||
Adjusted capital employed, net: | |||||||||
- at the beginning of period | 32,455 | 24,754 | 8,105 | 73,106 | |||||
- at the end of period | 37,646 | 27,270 | 7,859 | 81,237 | |||||
Adjusted average capital employed, net | 35,051 | 26,012 | 7,982 | 77,172 | |||||
Adjusted ROACE (%) | 16.0 | 9.8 | (0.6 | ) | 10.7 | ||||
- 37 -
GROUP BALANCE SHEET
(euro million)
Dec. 31, 2010 |
Mar. 31, 2011 |
June 30, 2011 |
||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | 1,549 | 1,922 | 1,474 | ||||||
Other financial assets held for trading or available for sale | 382 | 387 | 360 | ||||||
Trade and other receivables | 23,636 | 24,274 | 22,180 | ||||||
Inventories | 6,589 | 6,414 | 6,911 | ||||||
Current tax assets | 467 | 269 | 231 | ||||||
Other current tax assets | 938 | 936 | 864 | ||||||
Other current assets | 1,350 | 1,664 | 1,358 | ||||||
34,911 | 35,866 | 33,378 | |||||||
Non-current assets | |||||||||
Property, plant and equipment | 67,404 | 65,949 | 67,162 | ||||||
Inventory - compulsory stock | 2,024 | 2,312 | 2,370 | ||||||
Intangible assets | 11,172 | 11,072 | 10,891 | ||||||
Equity-accounted investments | 5,668 | 5,725 | 5,704 | ||||||
Other investments | 422 | 407 | 375 | ||||||
Other financial assets | 1,523 | 1,520 | 1,578 | ||||||
Deferred tax assets | 4,864 | 4,186 | 5,028 | ||||||
Other non-current receivables | 3,355 | 3,520 | 3,713 | ||||||
96,432 | 94,691 | 96,821 | |||||||
Assets held for sale | 517 | 458 | 480 | ||||||
TOTAL ASSETS | 131,860 | 131,015 | 130,679 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY | |||||||||
Current liabilities | |||||||||
Short-term debt | 6,515 | 5,196 | 4,357 | ||||||
Current portion of long-term debt | 963 | 960 | 1,216 | ||||||
Trade and other payables | 22,575 | 20,235 | 20,022 | ||||||
Income taxes payable | 1,515 | 2,108 | 2,100 | ||||||
Other taxes payable | 1,659 | 2,474 | 2,271 | ||||||
Other current liabilities | 1,620 | 1,930 | 1,480 | ||||||
34,847 | 32,903 | 31,446 | |||||||
Non-current liabilities | |||||||||
Long-term debt | 20,305 | 20,902 | 22,021 | ||||||
Provisions for contingencies | 11,792 | 11,501 | 11,743 | ||||||
Provisions for employee benefits | 1,032 | 1,019 | 1,064 | ||||||
Deferred tax liabilities | 5,924 | 5,344 | 5,803 | ||||||
Other non-current liabilities | 2,194 | 2,432 | 2,827 | ||||||
41,247 | 41,198 | 43,458 | |||||||
Liabilities directly associated with assets held for sale | 38 | 48 | 71 | ||||||
TOTAL LIABILITIES | 76,132 | 74,149 | 74,975 | ||||||
SHAREHOLDERS EQUITY | |||||||||
Non-controlling interest | 4,522 | 4,900 | 4,762 | ||||||
Eni shareholders equity: | |||||||||
Share capital | 4,005 | 4,005 | 4,005 | ||||||
Reserves | 49,450 | 52,169 | 49,890 | ||||||
Treasury shares | (6,756 | ) | (6,755 | ) | (6,754 | ) | |||
Interim dividend | (1,811 | ) | |||||||
Net profit | 6,318 | 2,547 | 3,801 | ||||||
Total Eni shareholders equity | 51,206 | 51,966 | 50,942 | ||||||
TOTAL SHAREHOLDERS EQUITY | 55,728 | 56,866 | 55,704 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | 131,860 | 131,015 | 130,679 | ||||||
- 38 -
Group profit and loss account
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
REVENUES | |||||||||||||||
22,902 | 28,779 | 24,596 | Net sales from operations | 47,706 | 53,375 | ||||||||||
252 | 233 | 357 | Other income and revenues | 537 | 590 | ||||||||||
23,154 | 29,012 | 24,953 | Total revenues | 48,243 | 53,965 | ||||||||||
OPERATING EXPENSES | |||||||||||||||
15,415 | 20,103 | 17,862 | Purchases, services and other | 32,466 | 37,965 | ||||||||||
69 | - of which non recurring (income) expense | 69 | |||||||||||||
1,154 | 1,119 | 1,143 | Payroll and related costs | 2,199 | 2,262 | ||||||||||
(5 | ) | (28 | ) | 16 | OTHER OPERATING (CHARGE) INCOME | 33 | (12 | ) | |||||||
2,275 | 2,124 | 2,154 | DEPRECIATION, DEPLETION, AMORTIZATION AND IMPAIRMENTS | 4,459 | 4,278 | ||||||||||
4,305 | 5,638 | 3,810 | OPERATING PROFIT | 9,152 | 9,448 | ||||||||||
FINANCE INCOME (EXPENSE) | |||||||||||||||
2,297 | 3,117 | (259 | ) | Finance income | 3,660 | 2,858 | |||||||||
(2,508 | ) | (3,397 | ) | (63 | ) | Finance expense | (3,930 | ) | (3,460 | ) | |||||
(145 | ) | 197 | 28 | Derivative financial instruments | (331 | ) | 225 | ||||||||
(356 | ) | (83 | ) | (294 | ) | (601 | ) | (377 | ) | ||||||
INCOME (EXPENSE) FROM INVESTMENTS | |||||||||||||||
108 | 200 | 82 | Share of profit (loss) of equity-accounted investments | 292 | 282 | ||||||||||
339 | 91 | 348 | Other gain (loss) from investments | 380 | 439 | ||||||||||
447 | 291 | 430 | 672 | 721 | |||||||||||
4,396 | 5,846 | 3,946 | PROFIT BEFORE INCOME TAXES | 9,223 | 9,792 | ||||||||||
(2,457 | ) | (2,887 | ) | (2,446 | ) | Income taxes | (4,865 | ) | (5,333 | ) | |||||
1,939 | 2,959 | 1,500 | Net profit | 4,358 | 4,459 | ||||||||||
Attributable to: | |||||||||||||||
1,824 | 2,547 | 1,254 | - Enis shareholders | 4,046 | 3,801 | ||||||||||
115 | 412 | 246 | - Non-controlling interest | 312 | 658 | ||||||||||
1,939 | 2,959 | 1,500 | 4,358 | 4,459 | |||||||||||
Earnings per share attributable to Enis shareholders (euro per share) | |||||||||||||||
0.51 | 0.70 | 0.35 | Basic | 1.12 | 1.05 | ||||||||||
0.51 | 0.70 | 0.35 | Diluted | 1.12 | 1.05 | ||||||||||
- 39 -
Comprehensive income
(euro million)
First Half 2010 |
First Half 2011 |
||
Net profit | 4,358 | 4,459 | ||||
Other items of comprehensive income: | ||||||
- foreign currency translation differences | 4,974 | (2,374 | ) | |||
- change in the fair value of available-for-sale securities | (6 | ) | ||||
- change in the fair value of cash flow hedging derivatives | 342 | 120 | ||||
- share of "Other comprehensive income" on equity-accounted entities | (16 | ) | 5 | |||
- taxation | (134 | ) | (48 | ) | ||
Total changes | 5,166 | (2,303 | ) | |||
Total comprehensive income | 9,524 | 2,156 | ||||
Attributable to: | ||||||
- Enis shareholders | 9,118 | 1,549 | ||||
- Non-controlling interest | 406 | 607 | ||||
Changes in shareholders' equity
(euro million)
Shareholders equity at December 31, 2010 | 55,728 | |||||
Total comprehensive income | 2,156 | |||||
Dividends paid to Enis shareholders | (1,811 | ) | ||||
Dividends paid by consolidated subsidiaries to non-controlling interest | (397 | ) | ||||
Stock options expired | (6 | ) | ||||
Cost related to stock options | 2 | |||||
Other changes | 32 | |||||
Total changes | (24 | ) | ||||
Shareholders equity at June 30, 2011 | 55,704 | |||||
Attributable to: | ||||||
- Enis shareholders | 50,942 | |||||
- Non-controlling interest | 4,762 | |||||
- 40 -
Group cash flow statement
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
1,939 | 2,959 | 1,500 | Net profit | 4,358 | 4,459 | ||||||||||
Adjustments to reconcile net profit to net cash provided by operating activities: | |||||||||||||||
2,218 | 2,107 | 1,914 | Depreciation, depletion and amortization | 4,370 | 4,021 | ||||||||||
57 | 17 | 240 | Impairments of tangible and intangible assets, net | 89 | 257 | ||||||||||
(108 | ) | (200 | ) | (82 | ) | Share of loss of equity-accounted investments | (292 | ) | (282 | ) | |||||
(75 | ) | (19 | ) | (9 | ) | Gain on disposal of assets, net | (244 | ) | (28 | ) | |||||
(199 | ) | (114 | ) | (323 | ) | Dividend income | (242 | ) | (437 | ) | |||||
(25 | ) | (25 | ) | (25 | ) | Interest income | (64 | ) | (50 | ) | |||||
129 | 159 | 182 | Interest expense | 274 | 341 | ||||||||||
2,457 | 2,887 | 2,446 | Income taxes | 4,865 | 5,333 | ||||||||||
322 | 86 | (128 | ) | Other changes | 227 | (42 | ) | ||||||||
Changes in working capital: | |||||||||||||||
(1,070 | ) | (270 | ) | (577 | ) | - inventories | (1,190 | ) | (847 | ) | |||||
2,810 | (601 | ) | 2,312 | - trade receivables | 86 | 1,711 | |||||||||
(854 | ) | (1,222 | ) | (284 | ) | - trade payables | 947 | (1,506 | ) | ||||||
(2 | ) | (48 | ) | 215 | - provisions for contingencies | 54 | 167 | ||||||||
(401 | ) | 412 | (299 | ) | - other assets and liabilities | 216 | 113 | ||||||||
483 | (1,729 | ) | 1,367 | Cash flow from changes in working capital | 113 | (362 | ) | ||||||||
13 | (7 | ) | (5 | ) | Net change in the provisions for employee benefits | 9 | (12 | ||||||||
353 | 118 | 336 | Dividends received | 388 | 454 | ||||||||||
27 | (14 | ) | 19 | Interest received | 74 | 5 | |||||||||
(265 | ) | (216 | ) | (322 | ) | Interest paid | (408 | ) | (538 | ) | |||||
(2,741 | ) | (1,824 | ) | (2,699 | ) | Income taxes paid, net of tax receivables received | (4,378 | ) | (4,523 | ) | |||||
4,585 | 4,185 | 4,411 | Net cash provided from operating activities | 9,139 | 8,596 | ||||||||||
Investing activities: | |||||||||||||||
(3,968 | ) | (2,533 | ) | (3,338 | ) | - tangible assets | (6,415 | ) | (5,871 | ) | |||||
(360 | ) | (342 | ) | (402 | ) | - intangible assets | (692 | ) | (744 | ) | |||||
(22 | ) | - consolidated subsidiaries and businesses | (22 | ) | |||||||||||
(76 | ) | (41 | ) | (65 | ) | - investments | (115 | ) | (106 | ) | |||||
(9 | ) | (8 | ) | (32 | ) | - securities | (13 | ) | (40 | ) | |||||
(270 | ) | (513 | ) | (107 | ) | - financing receivables | (636 | ) | (620 | ) | |||||
64 | (225 | ) | 285 | - change in payables and receivables in relation to investments and capitalized depreciation | (40 | ) | 60 | ||||||||
(4,619 | ) | (3,662 | ) | (3,681 | ) | Cash flow from investments | (7,911 | ) | (7,343 | ) | |||||
Disposals: | |||||||||||||||
10 | 7 | 78 | - tangible assets | 213 | 85 | ||||||||||
5 | 18 | (10 | ) | - intangible assets | 5 | 8 | |||||||||
48 | 1 | - consolidated subsidiaries and businesses | 48 | 1 | |||||||||||
3 | 1 | 8 | - investments | 529 | 9 | ||||||||||
20 | 52 | - securities | 26 | 52 | |||||||||||
189 | 480 | 38 | - financing receivables | 495 | 518 | ||||||||||
12 | 4 | 106 | - change in payables and receivables in relation to disposals | (32 | ) | 110 | |||||||||
287 | 510 | 273 | Cash flow from disposals | 1,284 | 783 | ||||||||||
(4,332 | ) | (3,152 | ) | (3,408 | ) | Net cash used in investing activities (*) | (6,627 | ) | (6,560 | ) | |||||
- 41 -
continued Group cash flow statement
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
346 | 771 | 2,279 | Proceeds from long-term debt | 368 | 3,050 | ||||||||||
1,051 | (308 | ) | (749 | ) | Repayments of long-term debt | (1,147 | ) | (1,057 | ) | ||||||
(279 | ) | (1,100 | ) | (780 | ) | Increase (decrease) in short-term debt | 413 | (1,880 | ) | ||||||
1,118 | (637 | ) | 750 | (366 | ) | 113 | |||||||||
6 | 21 | Net capital contributions by non-controlling interest | 27 | ||||||||||||
3 | 7 | 6 | Net acquisition of treasury shares different from Eni SpA | 16 | 13 | ||||||||||
(8 | ) | Acquisition of additional interests in consolidated subsidiaries | (8 | ) | |||||||||||
(1,811 | ) | (1,811 | ) | Dividends paid to Eni's shareholders | (1,811 | ) | (1,811 | ) | |||||||
(353 | ) | (397 | ) | Dividends paid by consolidated subsidiaries to non-controlling interest | (353 | ) | (397 | ) | |||||||
(1,043 | ) | (632 | ) | (1,431 | ) | Net cash used in financing activities | (2,514 | ) | (2,063 | ) | |||||
(6 | ) | (1 | ) | Effect of change in consolidation (inclusion/exclusion of significant/insignificant subsidiaries) | (7 | ) | |||||||||
20 | (22 | ) | (19 | ) | Effect of exchange rate changes on cash and cash equivalents and other changes | 69 | (41 | ) | |||||||
(770 | ) | 373 | (448 | ) | Net cash flow for the period | 67 | (75 | ) | |||||||
2,445 | 1,549 | 1,922 | Cash and cash equivalents - beginning of the period | 1,608 | 1,549 | ||||||||||
1,675 | 1,922 | 1,474 | Cash and cash equivalents - end of the period | 1,675 | 1,474 | ||||||||||
(*) | 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 the 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) |
||||||||||||
Second Quarter 2010 | First Quarter 2011 | Second Quarter 2011 | First Half 2010 | First Half 2011 | ||||||||
i | i | Financing investments: | |||||||||||||||
i | i | i(13 | ) | (3 | ) | (21 | ) | - securities | (13 | ) | (24 | ) | |||||
i | i | i104 | (77 | ) | 34 | - financing receivables | (2 | ) | (43 | ) | |||||||
i | i | i91 | (80 | ) | 13 | (15 | ) | (67 | ) | ||||||||
i | i | i | Disposal of financing investments: | ||||||||||||||
i | i | 2i | - securities | 8 | |||||||||||||
i | i | 1 | 13 | 34 | - financing receivables | 13 | 47 | ||||||||||
i | i | 3 | 13 | 34 | 21 | 47 | |||||||||||
i | i | 94 | (67 | ) | 47 | Net cash flows from financing activities | 6 | (20 | ) | ||||||||
- 42 -
Supplemental information
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
Effect of investment in companies included in consolidation and businesses | ||||||||||||
72 | Current assets | 72 | ||||||||||
2 | 22 | Non-current assets | 2 | 22 | ||||||||
11 | Net borrowings | 11 | ||||||||||
(63 | ) | Current and non-current liabilities | (63 | ) | ||||||||
22 | 22 | Net effect of investments | 22 | 22 | ||||||||
(11 | ) | Fair value of investments held before the acquisition of control | (11 | ) | ||||||||
11 | 22 | Purchase price | 11 | 22 | ||||||||
less: | ||||||||||||
(11 | ) | Cash and cash equivalents | (11 | ) | ||||||||
22 | Cash flow on investments | 22 | ||||||||||
Effect of disposal of consolidated subsidiaries and businesses | ||||||||||||
80 | Current assets | 80 | ||||||||||
696 | 1 | Non-current assets | 696 | 1 | ||||||||
(282 | ) | Net borrowings | (282 | ) | ||||||||
(136 | ) | Current and non-current liabilities | (136 | ) | ||||||||
358 | 1 | Net effect of disposals | 358 | 1 | ||||||||
(149 | ) | Fair value of non-controlling interest retained after disposals | (149 | ) | ||||||||
140 | Gain on disposal | 140 | ||||||||||
(46 | ) | Non-controlling interest | (46 | ) | ||||||||
303 | 1 | Selling price | 303 | 1 | ||||||||
less: | ||||||||||||
(255 | ) | Cash and cash equivalents | (255 | ) | ||||||||
48 | 1 | Cash flow on disposals | 48 | 1 | ||||||||
- 43 -
Capital expenditure
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
% Ch. |
First Half 2010 |
First Half 2011 |
% Ch. |
|||||||
3,186 | 1,952 | 2,767 | (13.2 | ) | Exploration & Production | 5,150 | 4,719 | (8.4 | ) | |||||||
367 | 279 | 446 | 21.5 | Gas & Power | 677 | 725 | 7.1 | |||||||||
149 | 132 | 184 | 23.5 | Refining & Marketing | 267 | 316 | 18.4 | |||||||||
45 | 39 | 76 | 68.9 | Petrochemicals | 71 | 115 | 62.0 | |||||||||
380 | 345 | 206 | (45.8 | ) | Engineering & Construction | 792 | 551 | (30.4 | ) | |||||||
10 | 2 | 1 | (90.0 | ) | Other activities | 19 | 3 | (84.2 | ) | |||||||
33 | 40 | 22 | (33.3 | ) | Corporate and financial companies | 50 | 62 | 24.0 | ||||||||
158 | 86 | 38 | Impact of unrealized intragroup profit elimination | 81 | 124 | |||||||||||
4,328 | 2,875 | 3,740 | (13.6 | ) | 7,107 | 6,615 | (6.9 | ) | ||||||||
In the first half of 2011, capital expenditure amounting to euro 6,615 million related mainly to: | ||
- | development activities (euro 3,432 million) deployed mainly in Algeria, Kazakhstan, Norway, the Unites States, Italy and Congo as well as blocks and interests in licenses awarded amounting to euro 757 million, mainly in Nigeria and exploratory activities (euro 489 million) of which 96% was spent outside Italy, primarily in Angola, Ghana, Australia, the United States, Egypt, Indonesia and Norway; | |
- | development and upgrading of Enis natural gas transport network in Italy (euro 374 million) and distribution network (euro 152 million), as well as development as well as the increase of storage capacity (euro 131 million); | |
- | projects aimed at improving the conversion capacity and flexibility of refineries (euro 249 million), as well as building and upgrading service stations in Italy and outside Italy (euro 61 million); | |
- | upgrading of the fleet used in the Engineering & Construction division (euro 551 million). |
- 44 -
Capital expenditure by division
EXPLORATION & PRODUCTION
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
175 | 164 | 198 | Italy | 327 | 362 | |||||
254 | 330 | 369 | Rest of Europe | 431 | 699 | |||||
1,247 | 426 | 412 | North Africa | 1,692 | 838 | |||||
635 | 488 | 1,114 | West Africa | 1,223 | 1,602 | |||||
284 | 217 | 255 | Kazakhstan | 507 | 472 | |||||
136 | 112 | 119 | Rest of Asia | 252 | 231 | |||||
385 | 153 | 276 | America | 632 | 429 | |||||
70 | 62 | 24 | Australia and Oceania | 86 | 86 | |||||
3,186 | 1,952 | 2,767 | 5,150 | 4,719 | ||||||
GAS & POWER
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
68 | 18 | 45 | Marketing and Power generation | 110 | 63 | |||||
293 | 260 | 397 | Regulated businesses in Italy | 561 | 657 | |||||
178 | 157 | 217 | - Transport | 342 | 374 | |||||
65 | 64 | 88 | - Distribution | 123 | 152 | |||||
50 | 39 | 92 | - Storage | 96 | 131 | |||||
6 | 1 | 4 | International transport | 6 | 5 | |||||
367 | 279 | 446 | 677 | 725 | ||||||
REFINING & MARKETING
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
106 | 107 | 142 | Refining, Supply and Logistic | 201 | 249 | |||||
40 | 20 | 41 | Marketing | 57 | 61 | |||||
3 | 5 | 1 | Other activities | 9 | 6 | |||||
149 | 132 | 184 | 267 | 316 | ||||||
- 45 -
Exploration & Production
PRODUCTION OF OIL AND NATURAL GAS BY REGION
Second Quarter 2009 |
First Quarter 2010 |
Second Quarter 2010 |
First Half 2009 |
First Half 2010 |
|||||
1,758 | 1,684 | 1,489 | Production of oil and natural gas (a) (b) | (kboe/d) | 1,800 | 1,586 | ||||||
185 | 186 | 172 | Italy | 184 | 179 | |||||||
208 | 224 | 221 | Rest of Europe | 225 | 223 | |||||||
583 | 505 | 384 | North Africa | 586 | 444 | |||||||
388 | 375 | 356 | West Africa | 395 | 365 | |||||||
107 | 117 | 106 | Kazakhstan | 114 | 112 | |||||||
123 | 120 | 104 | Rest of Asia | 123 | 111 | |||||||
139 | 131 | 122 | America | 149 | 127 | |||||||
25 | 26 | 24 | Australia and Oceania | 24 | 25 | |||||||
154.1 | 145.7 | 129.1 | Production sold (a) | (mmboe) | 312.7 | 274.8 | ||||||
PRODUCTION OF LIQUIDS BY REGION
Second Quarter 2009 |
First Quarter 2010 |
Second Quarter 2010 |
First Half 2009 |
First Half 2010 |
|||||
980 | 899 | 793 | Production of liquids (a) | (kbbl/d) | 995 | 846 | ||||||
63 | 67 | 52 | Italy | 61 | 59 | |||||||
113 | 123 | 122 | Rest of Europe | 122 | 123 | |||||||
306 | 239 | 189 | North Africa | 296 | 214 | |||||||
318 | 286 | 265 | West Africa | 329 | 275 | |||||||
63 | 71 | 65 | Kazakhstan | 68 | 68 | |||||||
39 | 38 | 29 | Rest of Asia | 37 | 34 | |||||||
69 | 67 | 63 | America | 73 | 65 | |||||||
9 | 8 | 8 | Australia and Oceania | 9 | 8 | |||||||
PRODUCTION OF NATURAL GAS BY REGION
Second Quarter 2009 |
First Quarter 2010 |
Second Quarter 2010 |
First Half 2009 |
First Half 2010 |
|||||
4,319 | 4,356 | 3,867 | Production of natural gas (a) (b) | (mmcf/d) | 4,466 | 4,110 | ||||||
676 | 661 | 665 | Italy | 682 | 663 | |||||||
530 | 563 | 549 | Rest of Europe | 573 | 556 | |||||||
1,539 | 1,474 | 1,080 | North Africa | 1,609 | 1,276 | |||||||
390 | 496 | 509 | West Africa | 364 | 502 | |||||||
241 | 257 | 227 | Kazakhstan | 256 | 242 | |||||||
471 | 452 | 411 | Rest of Asia | 475 | 431 | |||||||
386 | 353 | 335 | America | 420 | 344 | |||||||
86 | 100 | 91 | Australia and Oceania | 87 | 96 | |||||||
(a) | Includes Enis share of production of equity-accounted entities. | |
(b) | Includes volumes of gas consumed in operations (305 and 307 mmcf/d in the second quarter 2011 and 2010, respectively, 313 and 312 mmcf/d in the first half 2011 and 2010, respectively, and 321 mmcf/d in the first quarter 2011). |
- 46 -
Petrochemicals
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
Sales of petrochemical products | (euro million) | |||||||||||
810 | 847 | 823 | Basic petrochemicals | 1,483 | 1,670 | |||||||
838 | 903 | 876 | Polymers | 1,596 | 1,779 | |||||||
50 | 47 | 48 | Other revenues | 95 | 95 | |||||||
1,698 | 1,797 | 1,747 | 3,174 | 3,544 | ||||||||
Production | (ktonnes) | |||||||||||
1,295 | 1,171 | 1,036 | Basic petrochemicals | 2,536 | 2,207 | |||||||
605 | 553 | 587 | Polymers | 1,212 | 1,140 | |||||||
1,900 | 1,724 | 1,623 | 3,748 | 3,347 | ||||||||
Engineering & Construction
(euro million)
Second Quarter 2010 |
First Quarter 2011 |
Second Quarter 2011 |
First Half 2010 |
First Half 2011 |
|||||
Orders acquired | ||||||||||
818 | 1,727 | 1,535 | Engineering & Construction Offshore | 1,923 | 3,262 | |||||
3,534 | 933 | 1,144 | Engineering & Construction Onshore | 4,781 | 2,077 | |||||
9 | 75 | 274 | Offshore drilling | 149 | 349 | |||||
20 | 173 | 145 | Onshore drilling | 206 | 318 | |||||
4,381 | 2,908 | 3,098 | 7,059 | 6,006 | ||||||
(euro million) | Dec. 31, 2010 | June 30, 2011 | ||
Order backlog | 20,505 | 20,490 | ||
- 47 -
The Board of Directors of Eni establishes the Nomination Committee
San Donato Milanese (Milan), July 29, 2011 - The Board
of Directors of Eni established the Nomination Committee, led by
the Chairman of the Board of Directors, Giuseppe Recchi, and
composed by the Chairmen of the other Board Committees:
Alessandro Lorenzi (Chairman of the Internal Control Committee)
Alessandro Profumo (Chairman of the Oil-Gas Energy Committee) and
Mario Resca (Chairman of the Compensation Committee).
The Committe resolves on the basis of the proposals of the CEO,
who takes part to its meetings.
The members of the Nomination Committee are all non-executive directors. The majority of them are independent in accordance with the recommendations of the Corporate Governance Code of Borsa Italiana.
In addition to the tasks set by Eni's Corporate Governance Code, the Committee has the authority to propose and consult the Board in relation to: appointment, under the Boards competence, of the managers of the Company and of the members of the bodies of the subsidiaries; the succession plans for the managers with strategic responsibilities of the Company; the Board and its committees annual review; the guidelines regarding the maximum number of offices of the directors; the evaluation of their requirements, as well as of any business they may carry on in competition.
Company Contacts:
Press Office: +39.0252031875 - +39.0659822030
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
Website: www.eni.com