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Eni (E) Earnings Miss Estimates in Q4, Revenues Fall Y/Y

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Eni SpA (E - Free Report) reported fourth-quarter 2019 adjusted earnings from continuing operations of 33 cents per American Depository Receipt (ADR), lagging the Zacks Consensus Estimate of 51 cents and declining from the year-ago quarter’s 94 cents.

Total revenues in the quarter totaled $18,226 million, down 20.4% year over year.

The weak quarterly results can be blamed on lower average realized prices of liquids and natural gas, and a decline in petrochemical product sales.

Eni SpA Price, Consensus and EPS Surprise

 

Eni SpA Price, Consensus and EPS Surprise

Eni SpA price-consensus-eps-surprise-chart | Eni SpA Quote

Operational Performance

The company operates through three business segments — Exploration & Production, Gas & Power, and Refining & Marketing and Chemicals.

Exploration & Production

Total oil and gas production in the fourth quarter was 1,921 thousand barrels of oil equivalent per day, up 2.6% year over year. Ramped-up production volume in new upstream developments in Norway, Egypt, Algeria and Mexico along with contributions from Zohr field drove oil equivalent volumes.

Liquids production was 926 thousand barrels per day (MBbl/d), up 3.2% from the year-ago level of 897 MBbl/d. Moreover, natural gas production increased 0.7% year over year to 5,379 million cubic feet per day.

Average realized price of liquids was $59.06 per barrel, down 4% from $61.22 reported a year ago. Moreover, realized natural gas price was $4.79 per thousand cubic feet, down 22% from $6.11 a year ago.

Lower realizations of average liquids and natural gas prices hurt the company’s Exploration & Production segment. The segment reported a 30% year-over-year decline in adjusted operating profit to €2,051 million.

Gas & Power

Gas sales were 17.09 billion cubic meters, down 9% from the year-ago quarter primarily because of lower sales in Italy and rest of Europe.  

The company’s power sales in the fourth quarter were recorded at 9.92 terawatt-hours (TWh), almost in line with the year-ago quarter level. This partly helped the Gas & Power segment report a 240% year-over-year rise in adjusted operating profit to €143 million. Notably, the unit’s outperformance was aided by contribution from retail business and optimization of Europe’s gas and power assets.

Refining & Marketing and Chemicals

In the December-end quarter, total refinery throughputs were recorded at 5.50 million tonnes (mmtonnes), down 1% year over year. Eni’s wholesale sales in Europe increased 2% year over year to 2.65 mmtonnes. However, petrochemical product sales declined 13% year over year to 1.03 mmtonnes in the fourth quarter of 2019.

In the quarter, the segment reported an adjusted loss of €186 million against a year-ago quarter profit of €143 million. The underperformance was owing to lower refinery throughputs and a decline in petrochemical product sales.

Financials

As of Dec 31, Eni had long-term debt of €18,910 million, and cash and cash equivalents of €5,994 million. Its debt-to-capitalization ratio was 33.9%.

In the reported quarter, net cash generated by operating activities amounted to €3,725 million. Capital expenditure totaled €2,241 million.

Proved Reserves Grow

As of Dec 31, 2019, the company’s net proved reserves were reported at 7,268 MMBoE, higher than 7,153 MMBoE at 2019-end.

Outlook

The company expects compound annual production growth rate of 3.5% from 2019 to 2023. Eni also has plans to generate a total of €2 billion of adjusted EBIT from its midstream and downstream operations by 2023, which is three times the amount recorded in 2019.

The integrated energy player expects to generate free cashflow of €23 billion through 2023 starting this year. Moreover, for green activities, the company is planning to invest roughly €4 billion from 2020 to 2023.

Zacks Rank & Stocks to Consider

Eni currently carries a Zacks Rank #3 (Hold). Meanwhile, a few-better ranked players in the energy sector are Precision Drilling Corporation (PDS - Free Report) , Antero Resources Corporation (AR - Free Report) and Hess Corporation (HES - Free Report) . While Hess carries a Zacks Rank #2 (Buy), Precision Drilling and Antero sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Precision Drilling beat the Zacks Consensus Estimate for earnings in the prior four reported quarters.

Antero is likely to see earnings growth of more than 270% in 2020.

Hess’ bottom line for 2020 is expected to climb 93.7% year over year.

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