Eni Plans to Reduce Annual Capex to $7.6B through 2027

Eni SPA has set a target net capital expenditure of EUR 7 billion ($7.6 billion) yearly from 2024 to 2027, down more than 20 percent compared to last year’s plan. The Italian energy major plans to execute capital discipline through “optimization, improved project quality and greater portfolio management”, Eni said in a news release announcing strategic targets for 2024–27. The state-controlled company expects to generate about EUR 13.5 billion ($14.7 billion) in cash flow from operations (CFFO) before working capital this year and EUR 62 billion ($67.4 billion) over 2024–27 with a 30 percent growth. Eni sees upstream production growing by a compound annual rate (CAGR) of three to four percent in the four years.

At Enilive, Eni’s biofuel and sustainable mobility business, Eni expects to raise pro-forma earnings before income tax, depreciation and amortization (EBITDA) by 20 percent yearly to reach over EUR 1.6 billion ($1.7 billion) in 2027. “Biorefining capacity is seen at over 3 MPTA by 2026 (2x end-2023) and over 5 MTPA by 2030, with more than 1 MTPA SAF [sustainable aviation fuel] optionality by 2026, and the potential to double by 2030”, the announcement stated. “Eni’s agribusiness will grow to account for over 35 percent of the Company’s Italian throughputs by 2027”. Eni plans to build a fourth biorefinery in Italy and expects to reach final investment decisions this year for two biorefineries in Malaysia and South Korea.

Meanwhile Plenitude, Eni’s renewable energy arm, targets EUR 2 billion ($2.2 billion) in pro-forma EBITDA in 2027. Eni anticipates an increase from the current three gigawatts (GW) to four GW in renewable generation capacity this year, and eight GW in 2027. For Eni’s struggling chemical production arm, the company said, “The restructuring and transformation of Versalis will lead to the EBITDA reaching breakeven in 2025, and to positive EBIT in 2026, representing an improvement of over €600 million [$652 million] to the Group”.

Eni plans to raise shareholder payout, in the forms of dividends and buybacks, to 30–35 percent of CFFO from 25–30 percent previously for the four-year period. “The proposed 2024 dividend is raised by over 6 percent to €1.00 [$1.1] per share from €0.94 cents, paid in quarterly installments, and the share buyback set at €1.1 billion [$1.2 billion] and up to 3.5 billion [$3.8 billion]”, the press release said. “Over the 4-year Plan period distributions are equivalent to 40 percent of the current market capitalization”.

Chief executive Claudio Descalzi said in a statement, “We are embracing the challenges created by the energy transition with a distinctive and accretive strategy creating value while addressing energy security and affordability needs, and decarbonization goals”. “We are growing our cashflows significantly while also differentiating our sources of cash and lowering our risks, expanding into new areas of opportunity linked to the energy transition”, Descalzi added.

Eni earlier reported EUR 1.64 billion ($1.8 billion) in net profit adjusted for extraordinary or nonrecurring items for the fourth quarter of 2023, down from EUR 1.82 billion ($2 billion) for the prior three-month period and EUR 2.5 billion ($2.7 billion) for the fourth quarter of 2022 as commodity prices fell. Annual adjusted net income landed at EUR 8.3 billion ($9 billion), down from EUR 13.3 billion ($14.5 billion). It highlighted natural gas and liquefied natural gas delivered record earnings for the company. “FY ’23 adjusted EBIT [earnings before interests and taxes] was a record EUR 3.2 bln [$3.5 billion], up by 57 percent compared with 2022, driven by an optimized natural gas and LNG portfolio and contract renegotiations benefits, while maintaining stability and reliability of supplies to European markets and compensating for the reduction of Russian volumes”, Eni said in a media release February 16.

In the fourth quarter Eni’s gas business benefitted from “the favorable outcome of an arbitration procedure”, the release stated providing no details. Reuters reported November 27, citing trading sources, that an arbitration court had ordered German gas trader Uniper SE to pay EUR 550 million ($597.7 million) to Eni over an LNG supply contract that expired 2022. “In Q4 ’23, Group adjusted operating cash flow before working capital at replacement cost was EUR 3.6 bln [$3.9 billion], exceeding outflows related to organic capex of EUR 2.4 bln [$2.6 billion], and resulting in an organic free cash flow ‘FCF’ of EUR 1.2 bln [$1.3 billion]”, Eni said. “In the FY ’23, adjusted cash flow was EUR 16.5 bln [$17.9 billion], exceeding outflows related to capex of EUR 9.2 bln [$10 billion], resulting in an organic FCF of around EUR 7.3 bln [$7.9 billion]”.

Eni saw upstream production rise sequentially and year-on-year to 1.71 million barrels of oil equivalent per day (MMboepd). Eni added 900 MMboe to its reserves last year “driven by the exceptional Geng North discovery in Indonesia, one of the best in the whole sector, and continuing success in Egypt, Mexico, Algeria, Tunisia and UAE”, it said. Eni announced October 2 a “significant gas discovery” at the Geng North-1 exploration well under the North Ganal Production Sharing Contract in the Kutei basin, reporting preliminary estimates of five trillion cubic feet of gas and 400,000 barrels of condensate.

“Indonesia is expected to become one of the major growth drivers of natural gas in E&P [the exploration and production segment]”, Eni said in the earnings announcement. “The giant Geng North discovery coupled with the integration of Neptune assets and of the interests in the Rapak and Ganal PSC blocks, farmed-in from Chevron, will give Eni access to massive resources whose development will be synergistic with Eni’s existing fields and the Bontang LNG export terminal, offering the prospect of transforming the Kutei basin into a new world class gas hub”. On January 31 Eni announced the completion of its side of a transaction that saw Neptune Energy Group Ltd’s assets in Germany and Norway go to Var Energi ASA and the remaining to Eni. Eni returned EUR 4.8 billion ($5.2 billion) to shareholders through dividends and buybacks for 2023.