Italy's Eni Posts Loss on Weak Oil Price -- Update

By Eric Sylvers 

Eni SpA swung to a loss in the second quarter as the low price of crude oil led to a steep drop in revenue, while the forced shutdown of a domestic oil field in southern Italy resulted in a drop in production.

Like BP PLC, Royal Dutch Shell and other rivals that have reported weaker earnings in the second quarter, Eni continues to search for ways to confront the drop in oil prices. In March the Italian company promised EUR13 billion ($14.40 billion) in cost cuts and assets sales by 2019. The cost cuts are mostly to come from renegotiating supplier contracts, while the assets sales will be of stakes in recently discovered oil and gas fields.

Friday, Eni confirmed its target to cut capital spending this year by 20%.

Eni, which is 30%-owned by the government, is looking to sell stakes in several large oil and gas projects, including one off the coast of Mozambique. Eni expects to announce that sale, which could net the company about EUR3 billion, before the end of the year. Exxon Mobil Corp. is in advanced talks to buy a stake in the Mozambique project, people familiar with the negotiations have said.

Brent crude, the global benchmark, averaged $46 a barrel in the second quarter. While that was about a third better than the first quarter, it was still down sharply from the $62 barrel in last year's second quarter. Friday Brent traded at about $43 a barrel with many analysts expecting the price to remain under pressure in coming months as concerns grow that there is an oversupply in part due to a resurgence of U.S. shale oil.

Eni is ensnared in a legal dispute in the Italian region of Basilicata where prosecutors forced the shutdown of the Val d'Agri complex pending an investigation into illegal waste trafficking. Eni isn't under investigation. The shutdown is costing Eni about 60,000 barrels of oil a day. Royal Dutch Shell also has a stake in the oil field.

Hydrocarbon production fell 2.2% in the quarter to 1.73 million barrels of oil equivalent a day though Eni confirmed guidance for full-year production to be in line with 2015 as it ramps up new projects. In the first half, production was up 0.5%.

The company repeated it can pay out its current yearly dividend--80 euro cents a share--without resorting to debt or unplanned asset sales if oil stays around $50 a barrel. Eni pays out its dividend in two tranches and Friday, as expected, said it would pay an interim dividend of 40 cents a share.

Eni surprised the market early last year by cutting its dividend by almost a third and is still the only major oil company to do so.

The net loss from continuing operations was EUR446 million in the second quarter compared with a profit of EUR498 million in the same period a year earlier. Revenue plunged by a third to EUR13.42 billion.

Eni shares were down 1.6% at EUR13.44 in early trading in Milan. The shares are little changed this year and down by about 15% in the past 12 months.

Write to Eric Sylvers at [e-mail]

(END) Dow Jones Newswires

July 29, 2016 04:58 ET (08:58 GMT)

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