Eni SpA (E - Free Report) is now seeking to divest assets in Norway and the Republic of Congo, per Bloomberg.
The source revealed that the energy major is planning to sell the Jotun floating production, storage and offloading vessel in Norway, while in Congo, the aim is to divest a package of properties.
With the price of crude oil plunging more than 32% since January 2020, owing to the coronavirus pandemic, energy majors are slashing operating costs, reducing headcounts and also divesting assets to survive the pandemic. Hence, the integrated energy company’s asset divestment plan is not an exception.
On Jul 6, Eni announced that it has estimated a write-off of roughly €3.5 billion from its non-current assets value following the downward revision of its long-term oil prices.
The downward revisions were a result of the coronavirus pandemic-dented global energy demand. Also, the company believes that post COVID-19, there will be rising transition to a low-carbon economy since investors are increasingly building pressure on oil companies to drastically reduce carbon emissions, in line with the Paris climate goals.
Taking these impacts into consideration, Eni trimmed its forecast for Brent oil price starting 2023 from $70 per barrel to $60. Moreover, for the years 2020 to 2022, the energy giant made a downward revision for its forecast of Brent crude from $45, $55 and $70 per barrel to $40, $48 and $55 per barrel, respectively.
The downward commodity price revisions have convinced this integrated energy firm to include post-tax impairment charges of €3.5 billion, plus/minus 20%, in the second quarter. The company added that the write-offs will mostly be booked against upstream assets.
The integrated firm has also reaffirmed its stance to lower greenhouse gas emissions by 80% by 2050.
Overall, Eni’s recent announcement for asset write-offs follows similar moves by energy majors like BP plc (BP - Free Report) and Royal Dutch Shell plc (RDS.A - Free Report) . Notably, the moves reveal the urgency to recalculate the values of assets and reserves as the pandemic has affected worldwide energy businesses and there is a gradual transition by oil majors to low-carbon energy operations.
Eni currently carries a Zacks Rank #3 (Hold). Meanwhile, a better-ranked player in the energy space is Cimarex Energy Co (XEC - Free Report) . The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cimarex Energy has witnessed upward estimate revisions for its bottom line in the past 30 days.
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