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Here's Why Eni Has Decided to Write Off EUR 3.5B From Assets
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Eni SpA (E - Free Report) 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.
To incorporate these impacts, 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 . 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.
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Here's Why Eni Has Decided to Write Off EUR 3.5B From Assets
Eni SpA (E - Free Report) 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.
To incorporate these impacts, 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 . 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 SpA Price
Eni SpA price | Eni SpA Quote
Eni currently carries a Zacks Rank #4 (Sell). Meanwhile, a better-ranked player in the energy space is Murphy USA Inc. (MUSA - 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.
Murphy USA is likely to see earnings growth of 7% in the next five years.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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