Eni 2nd-Quarter Profit Rises 52 Percent on New Output (Update2)
By Anthony DiPaola
July 31 (Bloomberg) -- Eni SpA, Italy's largest oil company, said second-quarter profit rose 52 percent as crude prices reached a record and production climbed.
Net income advanced to 3.44 billion euros ($5.36 billion) from 2.27 billion euros, the Rome-based company said today in a statement. Profit excluding changes in the value of inventories rose 4.4 percent to 2.32 billion euros, missing the 2.42 billion-euro estimate in a survey of nine analysts by Bloomberg.
Chief Executive Officer Paolo Scaroni, in his fourth year at Eni, is relying on production at fields acquired over the past year to help boost the company's production by an average of 4.5 percent a year through 2011.
``Eni and the French company Total SA have done better in this area than their rivals,'' Karim Bertoni, a Geneva-based fund manager at Banque Syz & Co., which oversees $26 billion and doesn't hold Eni stock, said in an interview. ``In the last five years they've made better use of reserves and we saw the influence of acquisitions on results.''
Operating profit was higher than expected, Bertoni said. Earnings before interest and tax and not accounting for inventory changes rose 34 percent to 5.6 billion euros, exceeding analysts' estimates Eni would report 5.56 billion euros of adjusted Ebit.
Shares Gain
The shares gained as much as 40 cents, or 1.8 percent, to 22.44 euros and traded at 22.07 at 10:06 a.m. in Milan. The company, with a market value of 88 billion euros, has lost 12 percent of its value this year, better than the 15 percent slide in the Bloomberg European Energy Index.
Crude prices almost doubled in the second quarter from the year earlier, averaging $123.80 a barrel. Oil reached a record $147.27 a barrel on July 11.
Eni lowered its 2008 oil production forecast to about 1.77 million barrels of oil equivalent a day, about 2 percent higher than last year, to account for the higher prices. Contracts with oil-rich countries, called production sharing agreements, allow them to keep a larger portion of output as prices rise.
Scaroni in February said output would rise to more than 1.8 million barrels a day this year based on an oil price assumption of $64 a barrel. Today's forecast is based on an annual average price assumption of $112 a barrel.
In the quarter, oil and natural gas output rose 2.1 percent to 1.77 million barrels of oil equivalent a day, the company said. Eni boosted its interim dividend 8.3 percent to 65 cents a share.
Alaska, Siberia
Eni is adding output at deposits from Alaska to Siberia as energy companies step up their search for reserves. Scaroni spent about $14 billion last year buying gas deposits in Russia and Turkmenistan to meet targets. In May the company said it will start developing heavy crude in the Republic of Congo.
``At the time Scaroni took over the reins, Eni had obvious portfolio gaps,'' Sanford C. Bernstein & Co. analyst Neil McMahon wrote in a report July 17. ``The company undertook an aggressive acquisition strategy. This tactical move is one of the first in the industry in response to the new higher price environment.''
The company is raising investment to exploit new reserves, with 2008 capital spending set to rise 32 percent to 14 billion euros, it said. Investment in the quarter surged 62 percent to 3.6 billion euros, Eni said.
Eni, Shell
Oil companies like Eni and Royal Dutch Shell Plc, Europe's biggest oil company, are looking for new resources as producing countries seek a higher share of gains by increasing taxes or their take of output. Eni renegotiated and extended supply contracts with Libya and is working to agree with the Kazakh government on production terms at the Kashagan oil field.
Shell today said second-quarter net income climbed 33 percent to $11.56 billion. Excluding inventory changes and one- time items, earnings missed analysts' estimates. Exxon Mobil Corp., the world's biggest energy company, may later today say net income rose 26 percent to $12.9 billion, the highest ever for a U.S. company without one-time gains, seven analysts surveyed said. Total is scheduled to report results tomorrow.
Eni and Kashagan project partners, including Shell, Exxon and Total, are struggling to start production before a 2013 deadline. They have battled rising project costs and winter weather that limits work half the year, forcing them to delay the start date four times.
To help boost European gas market share, Eni, the largest seller of the fuel on the continent, agreed in May to pay 2.74 billion euros for control of Belgian distributor Distrigaz SA.
To contact the reporter on this story: Anthony DiPaola in Rome at
adipaola@bloomberg.net.
Last Updated: July 31, 2008 05:01 EDT
Enviado: 31/7/2008 19:14
