Eni reveals ‘excellent’ annual results as natural gas and LNG business cushions drop in profit

While on a mission to boost energy security and propel decarbonization forward in a challenging environment marked by a steep fall in oil and gas prices, Italy’s energy giant Eni has disclosed strong financial and operating results for the fourth quarter and full year 2023 on the back of its natural gas and LNG portfolio, which has been bolstered further with the acquisition of Neptune Energy’s business. However, the European oil major still experienced a 38% fall in annual net profit compared to the sum collected in 2022.

Eni has now joined its European and U.S. peers in posting a slump in profits for 4Q and the full year 2023 as a result of the downward trend in oil and gas prices, which nosedived from the high levels observed during 2022. Despite the price volatility and market uncertainty, all oil majors have managed to score multi-billion-dollar profits.

This was illustrated by Shell, Chevron, ExxonMobil, BP, and TotalEnergies, which reported profits of $28 billion in 2023 compared to $39.9 billion in 2022; $21.37 billion last year versus $35.5 billion in 2022; $36 billion in 2023 in comparison with $55.7 billion from the year before; $13.8 billion in 2023 compared with $27.7 billion in 2022; and $21.4 billion in 2023 versus $20.5 billion in 2022, respectively.

Notwithstanding a volatile scenario featuring both weaker Brent, down 5% from 4Q 2022, and natural gas prices, down 57% for the European benchmarks, Eni posted an adjusted operating profit for 4Q 2023 of €2.77 billion (around $2.98 billion), a 23% drop from €3.58 billion (nearly $3.86 billion) in 4Q 2022. The company’s adjusted operating profit for the full year 2023 was €13.8 billion (around $14.86 billion), a 32% drop from €20.4 billion (nearly $21.97 billion) for the full year 2022, driven by strong operational execution and financial discipline due to a strong performance of the E&P, Global Gas & LNG Portfolio (GGP), and R&M businesses.

Including the contribution of JV/associates, proforma adjusted EBIT for the full year 2023 was €17.81 billion (about $19.2 billion) versus €25.3 billion (close to $27.3 billion) in 2022. On the other hand, the proforma adjusted EBIT for 4Q 2023 was €3.8 billion (around $4.1 billion) versus €4.99 billion (close to $5.34 billion) in 4Q 2022, driven by steady E&P results, a record-breaking GGP performance and a positive contribution from Plenitude.

The company’s adjusted net profit attributable to its shareholders was €8.3 billion (nearly $8.94 billion) for the full year 2023, a drop of 38% compared with €13.3 billion (almost $14.33 billion) during the full year 2022. The oil major’s adjusted net profit attributable to its shareholders was €1.64 billion (nearly $1.77 billion) in 4Q 2023, which is 34% lower compared with €2.5 billion (about $2.7 billion) in 4Q 2022.

The Italian giant’s net profit attributable to its shareholders was €4.75 billion (more than $5.12 billion) for the full year 2023, down 66% compared with €13.89 billion (about $14.96 billion) for the full year 2022. The oil and gas player’s net profit attributable to its shareholders was €149 million (approximately $160 million) in 4Q 2023, a fall of 76% compared to €627 million (over $675 million) in 4Q 2022.

The Italian player’s adjusted operating cash flow before working capital at replacement cost was €3.6 billion (nearly $3.9 billion) in 4Q 2023, compared to €4.1 billion (almost $4.4 billion) in 4Q 2022. However, it reached €16.5 billion (about $17.8 billion) for the full year 2023, down 19% year-on-year from €20.4 billion (about $21.97 billion) in 2022.

Claudio Descalzi, Eni’s CEO, commented: “2023 was another year of excellent results for Eni in the face of an uncertain and volatile scenario. We delivered strongly on both financial and operational targets and we continued to progress our strategy of generating value while decarbonizing and ensuring secure and affordable energy supplies to markets. Our results were underpinned by our distinctive satellite model that continues to prove to be an effective lever in accelerating growth and value creation.

“We have completed the acquisition of Neptune which with its gas-weighted portfolio strongly synergistic to our assets in North Europe, Indonesia and North Africa will be a core element of our future plans. In 2023 we continued to deliver our organic growth, with the completion on time and on budget of the two flagship, low-carbon projects of Baleine in Cote d’Ivoire and Congo FLNG.”

Eni’s E&P earned €2.4 billion (approximately $2.58 billion) in 4Q 2023 before interest and taxes (EBIT), down 17% from €2.9 billion (almost $3.13 billion) in 4Q 2022, affected by weaker realized prices, partly offset by a strong rebound in hydrocarbon production, up by 6% to 1.71 mln boe/d in the quarter. The E&P adjusted EBIT for full-year 2023 was €9.9 billion (nearly $10.7 billion) versus €16.5 billion (almost $17.79 billion) in 2022, reflecting weaker hydrocarbons realization and the effect of the deconsolidation of Azule Energy.

In line with this, adjusted GGP was €0.68 billion (circa $0.73 billion) in 4Q 2023, compared to €63 million (about $67.9 million) in 4Q 2022. The adjusted GGP for full-year 2023 was a record €3.2 billion (around $3.45 billion), up by 57% 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.

Descalzi further elaborated: “We maintained leadership in exploration thanks to outstanding success in Indonesia and elsewhere, while we also hit the upper range of our production target. GGP achieved its historical result thanks to the quality of its portfolio, steady optimization drive and favorable contractual settlements. Delivering gas and low carbon projects is one aspect of our transition plan as we are also materially growing our presence in the new energies.

“Enilive, our activity dedicated to biofuels and mobility services, has expanded its international presence by purchasing a 50% interest in the Chalmette biorefinery in the USA and by signing a JV agreement in South Korea. Plenitude has now reached 3 GW of renewable capacity. These two businesses already generate an economic performance of around €1 bln EBITDA each.”

Eni underlined that Enilive delivered €0.12 billion of adjusted EBIT in the 4Q 2023, up by 5% y-o-y. For the full year 2023, Enilive brought €0.73 billion, up by 8% from 2022, benefitting from a resilient marketing performance. On the other hand, Plenitude’s proforma adjusted EBITDA in the full year 2023 was €0.93 billion well ahead of the original EBITDA guidance.

Furthermore, Eni’s Plenitude & Power delivered €0.11 billion of adjusted EBIT in 4Q 2023, down 6% year-on-year, impacted by lower marketing margins for both renewables and gas-fired plants, while this segment’s full-year 2023 adjusted EBIT was €0.68 billion, up 11% leveraging on strong performance in the retail business and the material ramp-up in renewable capacity.

In 2023, Eni delivered an organic FCF of around €7.3 billion, which was deployed to return cash to shareholders through dividends of €3 billion, a share repurchase program of €1.8 billion, and to pursue strategic M&A opportunities to accelerate growth in the decarbonization businesses with €2.4 billion, including the Chalmette deal, the acquisition of Novamont control, and the purchase of gas assets in Algeria.

Eni’s net borrowings (ex-IFRS 16) were €10.9 billion (over $11.7 billion) as of December 31, 2023, an increase of around €3.9 billion compared to €7 billion (about $7.5 billion) at December 31, 2022.

The Italian energy giant emphasized that its exploration activities during 2023 delivered “an outstanding performance” with around 900 million boe of new resource additions to the reserve base, driven by the Geng North discovery in Indonesia and continuing success in Egypt, Mexico, Algeria, Tunisia, and the UAE. During 4Q 2023, the firm’s production resumed its growth trajectory with 1.71 mln boe/d, up by 6% y-o-y; production for the year was 1.66 mln boe/d, hitting the upper range of its production target.

Among Eni’s production highlights of 2023 is the start-up of the Baleine oilfield off the Côte d’Ivoire, which came online less than two years after the discovery, and the commissioning of the Tango FLNG vessel in block Marine XII off Congo, which is on track to deliver the first LNG cargo in the first quarter of 2024.

Come January 2024, the Neptune acquisition was finalized, comprising the company’s entire portfolio other than its operations in Norway – purchased by Eni’s 63% owned Vår Energi – and Germany. The latter was carved out of the transaction. Eni underlines that this acquisition is aligned with its strategy of providing the market and the customers with “affordable, secure, and low-carbon energy, guaranteed by natural gas.” 

According to the Italian oil major, Indonesia is expected to become one of the major growth drivers of natural gas in E&P, as the giant Geng North discovery coupled with the integration of Neptune assets and the interests in the Rapak and Ganal PSC blocks, farmed-in from Chevron, will give the company access to massive resources whose development will be synergistic with its existing fields and the Bontang LNG export terminal, offering the prospect of transforming the Kutei basin into “a new world-class gas hub.”

Moreover, Eni claims that its GGP segment has delivered on ensuring “stable and reliable” natural gas supplies to European markets notwithstanding the massive fall in the import flows from Russia. In November 2023, the firm signed an agreement with Open EP to guarantee the flow of gas from France to Switzerland and Italy in the event of interruptions or significant flow reductions from Germany. 

The Italian oil major has also worked on advancing its decarbonization efforts. To this end, the company got a carbon dioxide appraisal and storage license for the depleted Hewett gas field in the Southern North Sea sector of the UK. In October last year, Eni and the UK government reached an agreement in principle on an economic model for the activities of CO₂ transportation and storage at the Eni-operated HyNet NorthWest CCS hub, which is expected to be operational around the middle of this decade with an initial storage capacity of 4.5 mmtonnes/y of CO₂.

During a meeting in London with the UK’s Secretary of State for Energy Security and Net Zero, Eni’s CEO discussed the company’s activities and plans in the country, which span across the entire energy value chain. The Italian giant used the opportunity to reiterate its intention to continue contributing to the UK’s energy security, which was reinforced with the Neptune acquisition. In addition, the oil major confirmed its role as “a key partner” in the country’s net zero transition.

Eni got a ‘Gold Standard’ ranking within the Oil and Gas Methane Partnership 2.0 (OGMP 2.0) program, reported in the International Methane Emissions Observatory (IMEO), which is published by the United Nations Environment Programme (UNEP). This follows the company’s improvements in methane emissions reporting and compliance with the Oil and Gas Climate Initiative (OGCI) recommendation of reducing upstream methane emission intensity well below 0.2% by 2025.

The Italian player achieved this target thanks to a continuous focus on reducing fugitive emissions and through projects of methane abatement from venting and flaring. In 2022, this value stood at 0.08%. When it comes to the ESG/climate ratings, Sustainalytics has maintained Eni in the ‘medium risk’ band once again in 2023.

Additionally, the firm has been recognized for the fourth consecutive year by Carbon Tracker’s ‘Absolute Impact 2023’ research as the only company among the 25 largest ones in the oil and gas sector to have established climate objectives that meet the prerequisites to be aligned with the Paris Agreement.

Last but not least, Eni also disclosed its financial support to the Global Flaring and Methane Reduction trust fund (GFMR), a program sponsored by the World Bank to help governments and operators in developing countries eliminate routine flaring and reduce methane emissions from the oil and gas sector to near zero by 2030.