Eni results for the second quarter and half year 2021
Key operating and financial results
Average EUR/USD exchange rate
Spot Gas price at Italian PSV
Spread PSV vs. TTF
Standard Eni Refining Margin (SERM)
Adjusted operating profit (loss) ⁽ᵃ⁾
Global Gas & LNG Portfolio (GGP)
R&M and Chemicals
Eni gas e luce, Power & Renewables
Adjusted net profit (loss) ⁽ᵃ⁾⁽ᵇ⁾
per share - diluted (€)
Net profit (loss) ⁽ᵇ⁾
per share - diluted (€)
Cash flow from operations before changes in working capital at replacement cost ⁽ᵃ⁾
Net cash from operations
Net capital expenditure ⁽ᶜ⁾
Net borrowings before lease liabilities ex IFRS 16
Net borrowings after lease liabilities ex IFRS 16
Shareholders' equity including non-controlling interest
Leverage before lease liabilities ex IFRS 16
Leverage after lease liabilities ex IFRS 16
Non-GAAPmeasure. For further information see the paragraph "Non-GAAP measures" on page 18.
Attributable to Eni's shareholders.
Net of expenditures relating to business combinations, purchase of minority interests and other non-organic items.
Eni's Board of Directors, chaired by Lucia Calvosa, yesterday approved the unaudited consolidated results for the second quarter and first half 2021. Eni CEO Claudio Descalzi said:
"Eni delivered exceptional results in the second quarter of the year, continuing the upward trend of the last three quarters and beating market expectations across all of its business segments. With an improved macro backdrop and energy market fundamentals, the Group reported €2 billion of EBIT and €0.93 billion of net profit, a €1.6 billion increase compared to the second quarter of 2020.
Group results were driven by a robust performance from the E&P segment, which recorded €1.84 billion of EBIT, up by €2.6 billion from the same quarter last year. The newly incorporated Eni gas e luce & Renewables division reported €70 million of EBIT, an increase of €50 million over the comparative period due to a growing customer base and higher revenue from value- added services. In renewables, we are going to exceed our 2021 target, reaching 2 GW of installed and in-construction power capacity. Finally, the Chemicals business reported around €200 million of EBIT, an increase of €270 million.
The strong performances across our business and a continued focus on capital discipline resulted in strong cash flow generation in the first half of 2021 with €1.82 billion of free cash flow after organic capital expenditure.
These results, the progress on delivering our strategy, the outlook, and a Brent reference scenario of 65 $/bbl, have allowed us to increase our dividend back to pre-COVID levels at €0.86 per share, with 50% paid next September. We will also start a €400 million share buy-back program over the next 6 months."
Having reviewed the fundamentals of the energy scenario and the prospects of the oil market, Eni's Board of Directors resolved to define a Brent reference scenario of 65 $/bbl. Based on the shareholder remuneration policy approved on February 18, 2021, this means:
anannual dividend of €0.86/sh. for the fiscal year 20211, representing an increase of more than 100% from 2020 recovering the pre-COVID level;
the start of a buy-back program of €400 million2.
As announced by the proxy conferred by the Shareholders Meeting held on May 12, 2021, the Board of Directors approved the distribution of 50% of the expected dividend, equal to €0.43/sh, as 2021 interim dividend to be paid in September3. This distribution is planned to be made from the retained earnings and other available capital reserves of the parent company Eni SpA.
Commodities and energy prices performed strongly in the second quarter 2021: the Brent price increased from 61 $/bbl in the first quarter 2021 to 69 $/bbl; natural gas prices in Europe increased by 30-35% respectively for the Italian reference spot price "PSV" and the continental reference spot price "TTF"; in the chemical sector the polyethylene-ethylene spread reached the highest value since 2015 to about 800 $/ton (from 550 $/ton);
On the negative side, refining margins continued to be extremely weak in the European/Mediterranean region, with the Eni benchmark margin SERM down to historic lows (-0.4 $/bbl on average in the second quarter 2021). This was due to continuing pandemic effects, which on one side with the gradual easing of OPEC+ supported the cost of the oil feedstock, while on the other side negatively affected demand for products, particularly middle distillates. In the wholesale gas business, spreads between the Italian PSV spot market and the spot prices at the "TTF" continental hub narrowed remarkably down to 1 €/kcm in the second quarter from 3 €/kcm in the first quarter 2021 and 18 €/kcm in the second quarter 2020.
Strong recovery in Group adjusted EBIT: €2 billion in the second quarter 2021 compared to a loss of €0.4 billion in the same 2020 reporting period (€3.4 billion in the first half, up by €2.5 billion y-o-y). The Group result was driven by:
arobust performance in the E&P segment, which reported €1.84 billion of EBIT, €2.6 billion higher than 2020, thanks to a better pricing environment and lower costs, despite 132 kboe/day less hydrocarbon production due to maintenance activities. The quarterly result also benefitted from retroactive contractual revisions;
theChemical segment, which reported its best ever quarterly results with EBIT of €202 million (up by €268 million) due to an improved macro backdrop, higher product margins and higher production availability, allowing the segment to capture a rebound in demand, in addition to a contribution from the green chemical business;
resilient results from the Eni gas e luce & Renewables business, which earned €71 million of EBIT (up €48 million) benefitting from effective marketing activities, a growing customer base and better margins.
Furthermore, despite an unfavorable comparison with the second quarter 2020, the segments that have lagged the recovery so far are also showing improving trends:
theGGP business reported a positive €24 million (down by €106 million from the second
The procedure to implement the buy-back program is detailed in the section "Other information - start of the buy-back program" of this press release.
Ex-dividenddate being September 20, 2021 (record date September 21, 2021). The dividend will be paid on September 22, 2021. The Board of Directors resolved to distribute part of retained earnings and/or available capital reserves of the parent company Eni SpA as 2021 interim dividend in place of the resolution of the 2021 interim dividend, in accordance to Art. 2433 - bis c.c., scheduled in Eni's financial calendar on September 16, 2021. The Company's financial calendar will be amended accordingly and a dedicated press release will be disseminated to the market. ADR holders will receive €0.86/ADR.
quarter 2020) up by €54 million when compared to the first quarter 2021; the reduction of gas spreads (PSV vs TTF) was more than offset by the better result of the LNG business and one- off positive effects related to contract renegotiations;
theR&M business, which narrowed its losses to -€12 million (down by €151 million vs. the second quarter 2020), substantially at breakeven, improving results by €147 million from the first quarter of 2021, thanks to a partial recovery of sales volumes at the retail network due to the reopening of the economy. Reduced by 10 percentage points the volume of palm oil supplied to the production of bio-diesel leveraging better plant flexibility due to the start-up of the Gela Biomass Treatment Unit.
Adjusted net profit back topre-COVIDlevels: €0.93 billion and €1.20 billion respectively in the second quarter and first half 2021 (up by €1.6 billion and €1.9 billion) due to a better operating performance and the normalization of the tax rate (58% in the first half of 2021) due to an improved oil price scenario and a better profitability outlook of the green activities in Italy.
Robust cash flow from operations before changes in working capital at replacement cost: €2.80 billion in the second quarter to fund net capex of €1.52 billion. In the first half of 2021, the Group generated €4.76 billion of cash flow, which after funding €2.91 billion of net capex (unchangedy-o-y)left a free cash flow ante working capital of €1.82 billion.
Portfolio: net investment of about €0.87 billion, including net borrowings of acquired entities, fully deployed to accelerate growth in the renewables business.
Significant reduction in net borrowings ante IFRS 16: €10 billion, down by €1.5 billion vs. December 31, 2020. Leverage lowered to 0.25 (vs 0.31 as of December 31, 2020). In May 2021, Eni Published the first Sustainable Linked Framework in the industry and in June 2021 the first sustainable linked bond of €1 billion was placed and was oversubscribed six times compared to the initial offer.
FY 2021 cash flow from operations before changes in working capital at replacement cost expected to be above €10 billion at a Brent scenario of 65 $/bbl and assuming a SERM benchmark refining margin slightly in negative territory.
Reaffirming the guidance for hydrocarbon production at about 1.7 million boe/d for the FY 2021. In the third quarter hydrocarbon production is expected at 1.68 million boe/d.
Fast growing renewable installed and under construction capacity: expected to be 2 GW at year end, a strong increase from the previous outlook of about 1 GW. Leveraging recently acquired assets, installed capacity is expected to increase from a previous target of 0.7 GW to 1.2 GW at year end 2021.
All the other targets are reaffirmed as previously guided:
2021 organic capex expected at approximately €6 billion, of which approximately €4.5 billion in the E&P segment;
about 500 million boe of new explorative resources to be discovered in 2021;
GGP: adjusted EBIT expected to reach breakeven despite a worsening trading environment. Expected about €200 million of free cash flow from this segment in 2021;
Eni gas e luce & Renewables adjusted EBIT projected at €350 million, cash flow from operations expected at approximately €400 million;
Downstream: pro-forma adjusted EBIT at about €400 million. The greater portion of this result is related to the Chemical segment, offsetting R&M result affected by slightly negative SERM refining margins;
Organic leverage expected lower than 0.3 at year end, at a Brent price of 65 $/bbl and a slightly negative SERM refining margin.
Exploration & Production
Hydrocarbon production in the second quarter: 1.6 million boe/day, down by approximately 5% net of price effects compared to the same period of 2020 (1.65 million in the first half; down by 6%).
This change was due to greater maintenance activity (in Norway, Italy and the UK), which in the second quarter 2020 was postponed, and due to lower activity in Nigeria and mature fields decline.
Robust growth in Egypt driven by the performance of the Zohr gas field and in Indonesia with the Merakes start-up.
In the first half 2021, start-upsandramp-ups added 50 kboe/d mainly due to Merakes in Indonesia that achieved the first gas in April, Berkine in Algeria, Agogo in Angola, and the Mahani gas project in the Sharjah Emirate (UAE).
In the first half discovered 320 mmboe of explorative resources, more than 60% of the yearly target, with shorttime-to-market,leveraging the strategy focused on acreage close to existing infrastructures("infrastructure-led-exploration").
Main discoveries of the second quarter:
made an oil and gas discovery in the PL027 production licence operated by Vår Energi in the Southern part of the Norwegian North Sea through a "dual branch" exploration well in thePrince and King prospects, near the Balder field and the Righorne platform;
made an oil discovery atGarantiana West, extension of Garantiana, in the license PL554 in the North Sea (participated by Vår Energi) close to the Snorre field;
drilled and successfully tested the delineation well of theMaha-2 discovery, in the West Ganal Block offshore the Kalimantan, in Indonesia, close to the Jangkrik floating production unit (FPU);
made an oil discovery in theEban exploratory prospect, in CTP 4 Block, offshore Ghana, close to the production hub of Sankofa where the floating production and storage unit (FPSO) that operates the OCTP field is located.
In the first half, renewed theexploration portfolio with the addition of approximately 13,000 square kilometers of new leases in the UAE, Vietnam, the UK and Norway.
Egypt: signed an agreement with the Egyptian General Petroleum Corporation (EGPC) and Lukoil for the extension to 2036, with an option until 2041, of the concessions of Meleiha and Meleiha Deep contractual areas, in the Western Desert.
Angola: signed a memorandum of understanding with bp to evaluate the combination of the respective upstream portfolios in the country, establishing a jointly-controlled venture based on the Vår Energi business model.
As part of the Hynet North West project for the construction of a CO2 capture/storage hub in the UK, signed a framework agreement with the partner Progressive Energy Limited to accelerate the project, where Eni will develop and manage the transport and storage of CO2 at the semi-depleted oilfields in the Liverpool Bay.
Eni signed a memorandum of understanding with Uniper in the United Kingdom to evaluate decarbonisation initiatives in Wales with the possibility of developing depleted Eni oilfields in the Liverpool Bay into CO2 storage hubs.
As part of the Net Zero Emissions strategy of the E&P segment by 2030 (relating scope 1/2 emissions), Vårgronn, a subsidiary of Vår Energi, has signed a collaboration agreement with Equinor for the possible development of offshore wind installations in the North Utsira area.
In line with the strategy of energy transition in Egypt, Eni signed an agreement with the state energy and gas companies to assess the economic feasibility of green and blue hydrogen production, in synergy with the storage of CO2 in depleted natural gas fields.
Direct GHG emissions (Scope 1)/operated hydrocarbon gross production (upstream) at 20.2 tonnes CO₂ eq./kboe, reporting a better trend compared to the same period of 2020 which was mainly due to the recovery in operations.
Refining & Marketing and Chemicals
In the second quarter of 2021, the volumes of palm oil supplied to the production of bio-diesel was reduced by over 10 percentage points, leveraging on the start-up of a new Biomass Treatment Unit (BTU) at the Gela bio-refinery enabling the use of up to 100% of biomass not in competition with the food chain for the production of biofuels.
The construction of a new unit for the enhancement of the feedstock pre-treatment facilities at the Venicebio-refinery is currently under evaluation, aiming at increasing the plant flexibility to achieve zero use of palm oil to manufacture biofuels by 2023.
The acquisition ofFRI-ELBiogas Holding, the Italian leader in the biogas producing sector has now been completed, in order to transform biogas into biomethane to be supplied to the Eni's retail service stations.
Versalis signed an agreement with Saipem to internationally promotePROESA®, Versalis' proprietary technology used to produce sustainable bioethanol and chemicals from lignocellulosic biomass.
Eni gas e luce, Power & Renewables
Growth of the retail business portfolio to 9.95 million of PoD, up by 250,000 PoD compared to December 31, 2020 (up by about 3%) leveraging the organic development in France and Greece and the 100% acquisition of Aldro Energía, engaged in the retail market in Spain.
As of June 30, 2021, theinstalled capacity from renewables was 331 MW, up by 8% compared to December 31, 2020. 2 GW of installed or under construction capacity is expected at year end, a strong increase over the previous target of about 1 GW. Leveraging the last acquisitions, the installed capacity is expected at 1.2 GW at year-end, up from 0.7 GW.
Signed an agreement in Italy with Glennmont Partners and PGGM Infrastructure Fund to acquire 100% of a portfolio of thirteen onshore wind facilities already in operation, with a total capacity of 315 MW.
Reached themechanical completion of the wind project in Puglia, Italy, with a capacity of 35.2 MW and the photovoltaic plant at Westmoreland in the USA, with a capacity of 30 MW (14.7 MW net to Eni).
Signed an agreement withA2A for a 20-year supply of cogenerated heat from the EniPower production plant in Bolgiano, to feed the Milan district heating network with approximately 54 GWh/year of low- emitting thermal energy.
Established an equal partnership withRed Rock Power, a leading Scottish company in the development of offshore wind projects, with the aim of presenting a competitive offer to Scotwind, the tender for wind power in Scotland and for further future projects. The two companies will also benefit from the support of Transmission Investment, a company engaged in the field of electricity transmission in the UK.
In July 2021, signed an agreement for the acquisition fromAzora Capital of a portfolio of nine renewable energy projects in Spain, for a total capacity of 1.2 GW. The operation includes the acquisition of three wind plants in development, one wind plant under construction, in the centre-north area of Spain, for a total of 230 MW, as well as, five large photovoltaic projects in an advanced stage of development for approximately 1 GW.
In July 2021, acquired theDhamma Energy Group, which owns photovoltaic projects under