We reaffirmed our Neutral recommendation on
) on Jan 7, 2013, based on its increasing production volume. The
ongoing recovery in Libya as well as development and
commissioning of new fields are the key drivers of this volume
However, the European gas market remains shrouded in uncertainty.
Sluggish demand, supply glut and competitive pressures in Europe
are expected to weigh on the stock.
The Italian oil major's outlook for the upcoming months is
favorable, given its 2012-2015 strategic plans to enhance
production and implement steps to control costs and increase
profitability. The company remains upbeat on its production
growth target, expecting it to increase more than 3% annually, up
from the previous 2% until 2021.
Eni's constant efforts to expand its upstream operations in
Egypt, Vietnam, Indonesia, Pakistan, Kenya along with project
start-ups, inputs from big projects in Iraq, Australia, Russia
and Egypt, as well as its strategic position in non-conventional
gas, are expected to augment volumes going forward. This is
evident from the group's total liquids and gas production, which
grew 16% year over year during the third quarter.
Eni's recent deal with
Anadarko Petroleum Corporation
) for the development of natural gas reservoirs offshore
Mozambique opens up a new market and will assist it to further
explore the West Africa Transform Margin.
However, we are concerned about Eni's act of reorganizing
projects in major fields, the closure of the Elgin-Franklin
platform off the British section of the North Sea and liquids
loss in Nigeria. Eni's upstream portfolio also carries greater
political risk than its peers, since it has the broadest exposure
to the Organization of the Petroleum Exporting Countries (OPEC).
Eni's stock showed no momentum over the last 30 days for the
fourth quarter of 2012 and for full-year 2012. The Zacks
Consensus Estimates for the fourth quarter and the full-year 2012
is currently pegged at $1.06 and $5.19 per share, reflecting a
year-over-year decrease of 6.2% and 3.1%, respectively.
Other Stocks to Consider
While we prefer to remain on the sidelines for Eni, there are
other stocks in the sector that appear more attractive. These
Royal Dutch Shell plc
ANADARKO PETROL (APC): Free Stock Analysis
ENI SPA-ADR (E): Free Stock Analysis Report
ROYAL DTCH SH-B (RDS.B): Free Stock Analysis
TOTAL FINA SA (TOT): Free Stock Analysis
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