) fourth quarter 2012 adjusted earnings from continuing
operations of $1.09 per American Depository Receipt/ADR (€0.42
per share) surpassed the Zacks Consensus Estimate of $1.06. The
outperformance was mainly backed by solid operating performance
from the Exploration & Production division and positive
results out from the ongoing production recovery in Libya.
However, earnings decreased 6.0% from the year-earlier adjusted
profit level of $1.16 per ADR (€0.43 per share). This was mainly
due to an increased consolidated tax rate (up about 11 percentage
points) owing to higher taxable profit earned by Eni in countries
with higher taxation.
Total revenue in the quarter jumped 9.9% to €32.6 billion ($42.2
billion) from the year-ago revenue of €29.6 billion ($40.0
Total liquids and gas production in the quarter was 1,738
thousand barrels of oil equivalent per day (MBoe/d), up 3.6% year
over year, mainly attributable to the ongoing recovery in Libya
and development as well as commissioning of new fields in Russia.
Increased production in Iraq also aided the growth. However, the
shut down of production in the United Kingdom, force majeure
actions in Nigeria and mature field declines restricted the
quarter's production growth.
Liquids production was 912 thousand barrels per day (MBbl/d), up
1.8% from the year-ago level of 896 MBbl/d. Natural gas
production increased 5.5% year over year to 4,584 million cubic
feet per day (MMcf/d).
Gas sales were 25.08 billion cubic meters (Bcm), down 1.5% from
the year-ago quarter, reflecting weak sales in the European
In 2012, total oil and gas production was 1,692 MBoe/d,
reflecting an increase of 7.0% from the year-ago level of 1,581
The Italian energy major made a record number of discoveries
during 2012 and added resources of 3.64 billion barrels of oil
equivalent (BBoe). At the end of 2012, Eni's proved reserves were
an eight-year record high at 7.17 BBoe and the organic reserve
replacement ratio was 147%.
As of Dec 31, 2012, the company had cash and cash equivalents of
€7.83 billion and long-term debt (including current portions) of
€22.24 billion. The debt-to-capitalization ratio was
In the reported quarter, net cash generated by operating
activities from continuing operations amounted to €2.17 billion.
Capital expenditure totaled €3.89 billion in the fourth quarter
(up 15.0% year over year) and €12.76 billion (up 7.2%) for 2012.
Eni believes that a certain degree of ambiguity still looms with
respect to the economic slowdown, particularly in the Euro Zone,
and volatile market conditions. It expects the condition to
continue in the European gas, refining and marketing of fuels and
chemicals sectors. Overall demand will likely remain weak due to
the ongoing economic dormancy.
The company expects 2013 oil and natural gas production to be
higher than the 2012 level given the commissioning of major
projects like Kashagan in Kazakhstan, Angola liquefied natural
gas and the gas assets in Algeria. This is expected to be
accompanied with stepped up production at the fields commissioned
Worldwide gas sales are expected to be at par with the 2012
level. Despite experiencing lackluster demand, management seeks
to boost sales volumes and market share as well as maintain and
develop its retail customer base.
For 2013, refining throughputs are expected to remain at the 2012
level of 30.01 million tons. However, retail volumes in the
domestic market are expected to weaken due to the expected
reduction in demand for the domestic use of fuels.
We believe Eni's constant efforts to expand its upstream
operations in Egypt, Vietnam, Indonesia, Pakistan and Kenya are
expected to augment volumes going forward. Again, project
start-ups, inputs from big ventures in Iraq, Australia, Russia
and Egypt, as well as its strategic position in non-conventional
gas are also expected to contribute to volume expansion.
Eni currently carries a Zacks Rank #4, which translates into a
Sell rating. There are other stocks in the oil and gas industry
that appear more attractive. These include
Penn Virginia Corporation
Breitburn Energy Partners L.P.
) that hold a Zacks Rank #2 (Buy) and are expected to perform
BREITBURN EGY (BBEP): Free Stock Analysis
ENI SPA-ADR (E): Free Stock Analysis Report
PENN VIRGINIA (PVA): Free Stock Analysis
TOTAL FINA SA (TOT): Free Stock Analysis
To read this article on Zacks.com click here.