On Jul 16, 2014, Zacks Investment Research issued an updated
Eni's outlook for the coming months is favorable, based on its
2013-2016 strategic plans to enhance production and implement steps
to control costs and drive profitability. The company remains
upbeat on its production growth target of more than 4% growth
annually in the said period and 3% annually until 2022.
The company's current dividend yield is 4.55%. The dividend is
expected to increase 2% in 2014, which is equivalent to a payout
ratio of 90% for the second consecutive year. Given the company's
diverse set of NGL, natural gas, crude oil and refined products
midstream infrastructure assets, its distribution growth will
continue to improve.
Eni's constant efforts to expand its upstream operations in Cyprus,
Egypt, Vietnam, Indonesia, Pakistan and Kenya will go a long way in
generating growth in the future. Moreover, project start-ups,
inputs from big projects in Algeria, Iraq, Australia, Russia and
Egypt, as well as its strategic position in non-conventional gas,
are expected to augment volumes going forward. Eni's commissioning
of 22 new projects is expected to increase output by over 500
thousand barrels equivalent per day by 2020.
The commissioning of major projects like Kashagan in Kazakhstan as
well as other assets including the Angola liquefied natural gas and
the gas assets in Algeria keeps Eni optimistic about its future
growth. Moreover, stepped-up production at the fields commissioned
last year makes us hopeful of Eni's profitability over the coming
However, in the first quarter, Eni's earnings and revenues dropped
year over year due to less production from mature fields and lower
realized average prices.
Moreover, Eni believes that challenges related to the economic
slowdown, in particular the Euro Zone continue to linger. The
European gas, refining and marketing sectors, along with the
chemicals sector, also remain highly volatile. Furthermore, the
overall demand will likely remain weak due to the present economic
sluggishness. The company's exposure to Libya (14% of 2013
production) and Nigeria (8%), where activities remain restricted
due to civil unrest is a matter of concern.
Key Picks in the Sector
Eni has a Zacks Rank #3 (Hold). Currently, we prefer to remain at
the periphery regarding the stock. However, better-ranked players
in the energy sector like
EXCO Resources, Inc.
), all sporting a Zacks Rank #1 (Strong Buy), are worth
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