Eni increases buyback as second-quarter profit hits 3-yr high
Eni's Financial Performance and Strategic Moves in Q2
By Francesca Landini
MILAN, July 29 (Reuters) - Italian energy group Eni on Wednesday lifted its share buyback programme by €600 million to €3.4 billion ($3.9 billion) after reporting better than expected second-quarter results.
Q2 Profit Surges to Three-Year High
The company's adjusted net profit more than doubled in April-June compared with the same period last year to €2.3 billion, beating an analyst consensus of €2.09 billion and hitting its highest level in three years.
Potential for Extra Dividend
Eni said it may pay an extra dividend in the fourth quarter if the price of Brent oil remains substantially above its forecasts.
Market Reaction
Shares in the state-controlled group were up 4.4% at 0750 GMT, outperforming a 0.2% rise in Milan's blue-chip index.
Drivers Behind Eni's Strong Performance
Key Contributors to Profit Growth
"Adjusted net income betters market consensus, driven by gains in gas trading, a positive contribution from elevated biofuels margins and from a lower tax charge in the core upstream business," Citi said in a note to clients.
Impact of Geopolitical Events
A spike in energy prices triggered by the U.S.-Iran conflict helped the group's performance.
The Iran war has disrupted traffic through the Strait of Hormuz, cut supplies, and driven crude and gas prices to multi-year highs, boosting profits for oil majors including Norway's Equinor and France's Totalenergies.
Financial Deal with Asset Manager Ares
Production Growth and Upgraded Targets
Hydrocarbon production rose 7% year-on-year in the second quarter, leading the company to improve its full-year growth target to 5% from a previous 3%-4%.
Division Performance Highlights
Proforma adjusted earnings before interest and taxes (EBIT) at Eni's exploration and production (E&P) division came in at €4.77 billion, above an analysts' estimate. EBIT at the gas and LNG division also beat consensus, reaching €503 million.
Details of the Ares Partnership
Eni also announced that it would receive a $2 billion capital contribution from US-based asset manager Ares under a partnership agreement involving some of the group's oil and gas infrastructures.
The financial transaction, for which Rothschild acted as adviser for Ares, aims to free up capital for new projects and will not increase Eni's debt. The deal confirms a Reuters report in May.
Outlook and CEO Statement
On the back of the latest results, Eni now expects its underlying cash flow from operations (CFFO) to grow more strongly and reach €15 billion.
"We are successfully scaling our E&P business for the next phase of growth and value creation," CEO Claudio Descalzi said in a statement.
Additional Information
($1 = 0.8773 euros)
(Reporting by Francesca Landini, editing by Gavin Jones)
