Eni today reports unaudited consolidated results for the full year and the fourth quarter of 2020.

Eni CEO Claudio Descalzi commented:
“In a year like no other in the history of the energy industry, Eni has proven the robustness and flexibility of its business model by reacting swiftly and effectively to the extraordinary crisis context, while progressing the Company’s irreversible path for the energy transition. In the space of a few months after the outbreak of the pandemic we reduced capital spending and limited the impact of the sharp drop in crude oil prices on the cash flow, strengthening our liquidity and preserving the robustness of our balance sheet. The fourth quarter operating profit and net profit outperformed estimates, achieved through a 44 $/barrel oil price, underpinned by our operating cash generation and the effectiveness of our response to the crisis. The upstream business is strengthening its recovery, while our businesses in the production and sale of decarbonized products achieved excellent results in the year, driven by a 17% Ebit increase from Eni Gas e Luce, a 130% increase in bio-refining processing and 1 GW of new solar and wind generation capacity already installed or sanctioned. We laid foundations for strong growth in renewables by entering two strategic markets, the US and the Dogger Bank wind project in the UK’s North Sea offshore wind market, which will be the largest in the world in the sector. Through leveraging the actions we put in place, our 2020 adjusted cash flow of €6.7 billion was able to finance our capex, with a surplus of €1.7 billion. Net borrowings (before IFRS 16) are at the same level as at the end of 2019, and leverage is at around 30%”.

Highlights for the fourth quarter and the full year 2020

• Implementation Eni’s strategy to become a leader in the supply of decarbonized products by 2050 combining value creation, sustainability and financial resilience, and to achieve a better-balanced portfolio, reducing the exposure to the volatility of hydrocarbons prices. For these purposes Eni created a new organizational setup in line with the transformative strategy by establishing two business groups: the Natural Resources business which has the task of valorizing the oil&gas portfolio in a sustainable way and of managing the projects of forestry conservation (REDD+) and CO2 capture; and the Energy Evolution business which has the task of growing the businesses of power generation, products manufacturing and retail marketing, progressing the portfolio evolution by expanding the generation of green power and developing sustainable products from decarbonized processes (blue) and from bio masses (bio).
• The trading environment in 2020 saw the largest drop in oil demand in history (down by an estimated 9% y-o-y) driven by the lockdown measures implemented globally to contain the spread of the COVID-19 pandemic causing a material hit to economic activity, international commerce and travel.
• The pandemic-induced demand shock led to a collapse in the prices and margins of commodities: the Brent crude oil benchmark was down by 35% y-o-y, the benchmark price of natural gas at the Italian spot market was down by 35% and the Eni benchmark refining margin “SERM” was down by 60%, which materially and adversely affected the Group results of operations and cash flow.
• To cope with the fallouts of the crisis, management took decisive actions to preserve the Company’s liquidity and to strengthen the balance sheet, while aiming to increase the profitability of operations and the financial resiliency. The Company is set to resume growing once the macro backdrop normalizes.
• Revised the Company’s strategy and plans for the short-to-medium term leveraging on a reduction of €8 billion in the outlays for expenses and capital expenditures in the two-year period 2020-2021, more exposed to the downturn. Additional financial resources of approximately €0.8 billion are expected to be allocated in the post-crisis years to the expansion of the green businesses, including the installed capacity of renewable power, bio-refineries and growth in the retail market.
• Capex optimizations achieved mainly in the E&P business by means of re-phasing development projects, which could be resumed once the scenario normalizes. Reshaped the growth profile of production.
• Assumed a more conservative oil price scenario with a long-term deck of 60 $/barrel for the Brent crude oil benchmark in real terms 2023, down from the previous assumptions of 70 $/barrel, to factor in risks of a delayed macroeconomic recovery, with the potential for weaker energy demands for a sustained period and growing expectations that the aftermath of the pandemic will accelerate the pace of the energy transition considering the fiscal measures being enacted by governments to rebuild the economy on more sustainable grounds. Recognized impairment losses at non-current assets of approximately €3.2 billion, driven by the revised long-term oil and gas price outlook and lower refining margins. In addition €1.3 billion of impairment losses were accounted by Eni’s investees.
• Issued hybrid bonds for a total amount of €3 billion.
• The segment information of the Group statutory financial reporting has been upgraded by disclosing the results of the new operating segment “Eni gas e luce, Power & Renewables”.
• Hydrocarbon production for the FY 2020: 1.73 mmboe/d, in line with the Company’s guidance updated following the pandemic.
• Added 400 million boe of new equity exploration resources at a competitive unit cost of 1.6 $/boe.
• Proved hydrocarbon reserves at year end: 6.9 billion boe, all sources replacement ratio: 43%; (96% on a three-year average).
• Adjusted EBIT: €1.9 billion in the full year (€0.5 billion in the fourth quarter) decreased by approximately €6.7 billion, €6.8 billion of which was due to the decline in prices and margins of hydrocarbons and €1 billion due to the effects of COVID-19, partially offset by a better performance for €1.1 billion.
• Adjusted EBIT Exploration & Production segment: €1.5 billion in the year (€0.8 billion in the fourth quarter), lower y-o-y due to a depressed scenario in hydrocarbon prices and lower production.
• Adjusted EBIT in the mid-downstream businesses: totaling €0.63 billion; GGP reported €0.33 billion came in higher than the guidance. R&M (including the pro-forma ADNOC Refining result), the Chemicals business, EGL and Power reported results of €0.3 billion in line with guidance, supported by the growth of biofuels and a better performance in the retail gas&power business.
• Adjusted net profit: €66 million in the quarter. For the full year the adjusted net result was a loss of €0.74 billion.
• In 2020, net organic capital expenditures were lowered to €5 billion (down by €2.6 billion or 35% vs. the original budget at constant exchange rates) due to the optimizations implemented. Opex were reduced by €1.9 billion compared to the pre-COVID level, of which about 30% is structural.
• FY cash flow adjusted before working capital at €6.73 billion was enough to fund the net capex, with a surplus of €1.7 billion.
• Compared to the initial guidance for the cash flow adjusted of €11.5 billion at a Brent price of 60 $/barrel, the shortfall is due to lower hydrocarbon prices (for a total effect of approximately -€4.5 billion) and COVID-19 impact (approximately -€1.7 billion), partly offset by opex savings and a better performance.
• Year-end leverage: 0.31.
• Liquidity: Eni is well equipped to withstand an uncertain trading environment in 2021. As at December 31, 2020, the Company can count on a liquidity reserve of approximately €20.4 billion, consisting of €9.4 billion of cash and cash equivalents, €5.5 billion of readily disposable securities, €0.2 billion of short-term financing receivables and €5.3 billion of committed undrawn credit facilities.
• Confirmed 2020 dividend proposal equal to the floor dividend of €0.36 per share (of which, €0.12 paid as interim dividend in September 2020).

Hydrocarbon production

• 1.71 million boe/d in the fourth quarter 2020 (down by 11% compared to the same period of 2019), 1.73 boe/d in the full year, in line with the consensus.
• Net of price effects, the decline was due to COVID-19 impacts, related OPEC+ production cuts and lower gas demand, mainly in Egypt. Production start-ups/ramp-ups, better contribution of Kazakhstan and portfolio contributions in Norway were partly offset by lower volumes in Libya driven by an expected contractual trigger, lower entitlements/spending and losses due to force majeure, as well as mature field declines.
• In the full year start-ups and ramp-ups added 109 kboe/d mainly in Mexico (ramp-up of Area 1), Algeria (Berkine gas field start-up), Congo (Nenè phase 2B start-up) and Angola (Agogo oilfield start-up).

In the fourth quarter of 2020, oil and natural gas production averaged 1.713 million boe/d (1.733 million boe/d in the full year of 2020), a decrease of 11% compared to the fourth quarter of 2019 (down by 7% from the full year of 2019). Net of price effects, the decline was due to COVID19 effects and related OPEC+ production cuts as well as lower gas demand, mainly in Egypt. Production start-ups/ramp-ups in Algeria and Mexico, better contribution of Kazakhstan and portfolio contributions in Norway, were partly offset by the lower volumes in Libya driven by an anticipated contractual trigger, lower entitlements/spending and force majeure, as well as mature field declines.

Liquids production in the quarter was 809 kbbl/d, down by 13% from the fourth quarter 2019 (843 kbbl/d in the full year, down by 6% compared to the same period of 2019). The reduction in Libya, the effect of OPEC+ cuts, as well as mature field declines were partly offset by the contribution of portfolio activities and production growth in Mexico due to the ramp-up of Area 1, Angola for the start-up of Agogo, Congo due to the Nenè phase 2B start-up, Algeria and Kazakhstan.

Natural gas production in the quarter amounted to 4,800 mmcf/d, decreasing by 579 mmcf/d or by 11% y-o-y (4,729 mmcf/d in the full year, down by 11%). Lower production in Libya and the impact of lower natural gas demand in certain areas (mainly in Egypt), as well as lower LNG demand were partly offset by the growth in Algeria due to the start-up of the Berkine gas project and in Kazakhstan.

Proved oil & gas reserves 

• In 2020, net additions of proved reserves were 271 million boe relating to new discoveries, extensions and revisions of previous estimates. These additions drove an all-sources reserve replacement ratio of 43%. Net additions were impacted by unfavorable price effects (for 6 million boe) mainly due to a decreased Brent reference price for reserve estimation (41 $/barrel in 2020 compared to 63 $/barrel in 2019) driving downward revisions of reserves which became uneconomical in this environment and increased entitlements in certain PSAs.
• The reserve life index was 10.9 years as of December 31, 2020

Exploration & Production
Started up gas production in early 2021 in the Sharjah Emirate (UAE), in the Mahani exploration prospect (Eni w.i. 50%) in the onshore Concession B, just one year since discovery and two years after signing the concession agreement.

Exploration acreage

• awarded the operatorship of the offshore Block 3 (Eni w.i. 70%) of approximately 12,000 square kilometers, in the United Arab Emirates with near-field targets;
• in Angola awarded the operatorship of the offshore Block 28 (Eni w.i. 60%) in the Namibe and Benguela basins, onshore block Cabinda Central (Eni w.i. 42.5%) and Block 1/14 (Eni w.i. 35%) in shallow waters of the Congo Basin;
• the JV Vår Energi was awarded 27 new exploration licenses of which 12 operated (as part of the 2019 and 2020 APA rounds), in the three main basins of the Norwegian continental shelf;
• ratified the award of the onshore exploration block of West Sherbean (Eni w.i. 50%) in the Nile Delta area, in Egypt;
• ratified the award of the onshore exploration lease Dumre in Albania (Eni w.i. 100%);
• awarded offshore Indonesia the West Ganal exploration block (Eni operator, w.i. 40%);
• awarded in January 2021 the operatorship of the exploration license P2511 (Eni w.i. 100%) in the North Sea in the United Kingdom;
• exploration licenses renewed in Kenya as part of a long-term partnership with the country for access to energy and decarbonization.

Exploration success

• increased to 1 billion barrels of oil in place at the Agogo discovery in Block 15/06 (Eni operator, w.i. 36.8%), offshore Angola, following a successful appraisal well;
• made a gas and condensate discovery in the Sharjah Block B in the exploration prospect Mahani (Eni w.i. 50%);
• made an oil discovery in the Saasken exploration prospect in Block 10 (Eni operator, w.i. 65%), offshore Mexico. Estimated 200-300 million barrels of oil in place;
• near-field successes in Egypt: two gas discoveries in the Bashrush prospect (Eni operator, w.i. 37.5%) and in the Abu Madi West concession (Eni operator, w.i. 75%) in the Great Nooros Area in the Nile Delta, and two oil discoveries in the Meleiha (Eni operator, w.i. 76%) and in the South West Meleiha onshore concessions (Eni operator, w.i. 100%), all immediately contributing to production and cash flows;
• increased reserves estimated to 7-9 trillion cubic feet of gas in place and 400-500 million barrels of condensate at the Ken Bau discovery in Block 114 (Eni operator, w.i. 50%), offshore Vietnam.

E&P’s adjusted operating profit continued rebounding in the fourth quarter at €0.8 billion, up by approximately 60% compared to the third quarter. The comparison against the previous year reporting periods (down by 61% and 82% in the quarter and in the full year, respectively) was negatively and significantly affected by a 2020 depressed scenario for hydrocarbon prices and by lower production due to anti-COVID actions and the sharp drop in energy demand.

Global Gas & LNG Portfolio

• Signed a series of agreements with the Arab Republic of Egypt (ARE) and the Spanish partner Naturgy for the restart of the Damietta liquefaction plant, expected by the first quarter of 2021, and the resolution of all pending issues of the JV Uniòn Fenosa Gas with the Egyptian partners and the subsequent restructuring of the venture, which assets will be split between the two shareholders. The deal will strengthen Eni’s portfolio of LNG and allow Eni to directly enter the Spanish gas market.
• GGP’s adjusted operating result: was a loss of €0.1 billion in the fourth quarter, worse than the same period in 2019, due to an unfavourable trading environment. In the full year, adjusted operating profit was €0.33 billion, up by 69% y-o-y and ahead of expectations due to optimization of the gas and LNG portfolio to exploit value from a volatile scenario. 

Eni gas e luce, Power & Renewables

• Signed in 2021 an agreement to acquire 100% of Aldro Energía, with a portfolio of approximately 250,000 customers located in Spain and Portugal. The transaction will be completed upon receipt of the authorizations by the relevant authorities.
• Agreement between Eni gas e luce and Be Charge, to increase the national supply of charging infrastructures for electric mobility. The charging station will be powered by renewable energy, supplied by Eni gas e luce.
• Acquired a 20% interest in Tate s.r.l., a start-up operating in the activation and management of electricity and gas contracts through digital solutions.
• Launched a strategic partnership between Eni gas e luce and OVO targeting the residential market in France to raise customer awareness for a responsible use of energy and access to zero-emission technologies leveraging digitalization.
• Increased the customer base in the gas & power retail market by adding 150,000 delivery points from the end of 2019 (up by 1.6%) due to growth in Italy and in other markets in Europe, notwithstanding the pandemic impact.
• Expansion of the generation capacity in renewable energies: as of December 31, 2020, reached an installed capacity of 307 MW (up by 133 MW compared to December 31, 2019).
• Acquired three wind projects from Asja Ambiente for a total capacity of 35.2 MW expected to produce approximately 90 GWh/y, avoiding around 38 ktonnes of CO2 emissions per year.
• Launched a photovoltaic plant at Volpiano (total capacity of 18 MW) in July with an expected production of 27 GWh/y, avoiding 370 ktonnes of CO2 emissions over the service life of the plant.
• Signed a Sale and Purchase agreement for the acquisition from Equinor and SSE Renewables of a 20% interest in the Dogger Bank (A and B) offshore wind projects in the UK, which will be the largest wind power facility in the world, with a planned installed capacity of 2.4 GW (100% share), with completion expected in 2023-2024. The operation will contribute 480 MW to the renewable generation capacity and to Eni’s growth targets.
• Signed an agreement with X–Elio for the acquisition of three photovoltaic projects in Spain for a total capacity of 140 MW.
• EGL, Power & Renewables’ adjusted operating result: €132 million in the fourth quarter of 2020, down by 15% compared to the same period of 2019; €465 million in the full year of 2020, up by 26% from 2019. The positive annual performance was driven by solid and growing results reported by the retail business, despite the COVID-19 impact on demand and counterparty risk.

Established a strategic alliance with the Italian Group Falck Renewables for an expansion into the US renewable market, in this context:

• in March, acquired a 49% share of Falck’s photovoltaic plants in operation in the Country (56.7 MW in Eni share);
• in November, finalized the acquisition from Building Energy SpA of 62 MW of operating capacity (30 MW in Eni share) in wind and solar plants and a pipeline of wind projects up to 160 MW. Production
• in operation will avoid more than 93 ktonnes of CO2 emissions per year;
• in November, acquired a 30 MW solar project "ready to build" in Virginia from Savion LLC (14.7 MW in Eni share). The plant will avoid over 33 ktonnes of CO2 emissions per year.

KeyFacts Energy: Eni Italy country profile