Eni SpA (NYSE:E) Q1 2017 Earnings Conference Call - Final Transcript

May 10, 2017 • 06:00 am ET

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Eni SpA (NYSE:E) Q1 2017 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, welcome to Eni's 2017 First Quarter Results Conference Call hosted by Massimo Mondazzi, Chief Financial Officer. [Operator Instructions]

I'm now handing you over to your host to begin today's conference. Thank you.

Executive
Massimo Mondazzi

Good afternoon and welcome to the presentation of our first quarter 2017 results. In the first quarter, we continued to execute our long-term strategy, focused on upstream profitable growth and the strengthening of mid-downstream businesses. The main achievement this quarter were the following. In upstream, production was 1.795 million BOE per day, 6% higher than last year, adjusted for PSA effect and OPEC cuts.

All key developments are on track and we are close to start up production from Jangkrik in Indonesia and immediately after OCTP in Ghana, while Zohr is progressing ahead of schedule towards first gas by year-end. Kashagan ramp-up continues with 32,000 BOE per day net to Eni in this quarter and more than 65,000 BOE per day expected in the fourth quarter. In the mid-downstream, we recorded over EUR0.5 billion of adjusted EBIT due to a strong performance in gas and power, thanks to the successful execution of the turnaround, and positive result in the downstream sector, both in R&M and chemical.

Finally, our disposal plan is well advanced. On the basis of the two deals already announced, area 4 in Mozambique and retail in Belgium, we expect to cash-in this year pre-tax proceed of around EUR3 billion, over half of the lower end of the full-year planned disposal target. In addition, this year, we expect to cash in around EUR1 billion related to the closing of the Zohr farm-downs to BP, which has already been completed, and Rosneft, which is expected to complete in the second half of the year.

And now before detailing the quarterly result, I would like to give you some color on the market environment affecting our results. Trends were positive with slightly stronger oil and constant European gas prices and refining margins. In more detail, the average oil price were $54 per barrel, around 58% higher than the minimum of last year, following the OPEC cuts and the start of market rebalancing. Gas prices in Italy increased by 42% versus first quarter 2016, thanks to a 9% increase in overall gas demand that was driven mainly by the power and retail sectors. Refining margins remained stable, whilst Chemical margins, although up on the previous quarter due to shortages in US and China, were lower than a year ago.

Having said that, now, the review by business. Upstream production in the first quarter of 2017 consolidates the exit rate of last year of 1.856 million BOE per day. We recorded an output of 1.795 million BOE per day that is in line with the last quarter production if we take into account the impact of Goliat 40-day shutdown, the OPEC cuts that affected our production in Algeria and Venezuela, and PSA effects. Versus the first quarter of 2016, our adjusted growth is close to 6%.

For 2016