Eni Poised to Grow on Increased Production & Cost Control - Analyst Blog

By Zacks Equity Research,

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On Jul 16, 2014, Zacks Investment Research issued an updated report on Eni SpA ( E ).

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 quarters.

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. ( XCO ), ConocoPhillips ( COP ) and Statoil ASA ( STO ), all sporting a Zacks Rank #1 (Strong Buy), are worth reckoning.

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ENI SPA-ADR (E): Free Stock Analysis Report

CONOCOPHILLIPS (COP): Free Stock Analysis Report

STATOIL ASA-ADR (STO): Free Stock Analysis Report

EXCO RESOURCES (XCO): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: E , COP , STO , XCO

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