Upstream highlights of Eni's 2012 results

Italian major, Eni S.p.A., announced results for fourth-quarter and full-year 2012 on Friday, 15 Feb 2013.

Operational highlights include:

  • Record amount of discovered resources in the year: 3.64 bboe;
  • Proved reserves at eight-year record: 7.17 bboe with a reference Brent price of $111/bbl. The organic reserve replacement ratio was 147%;
  • Oil and natural gas production: 1.701 million bbl/d in the year, up 7% from 2011 (up 3.6% in the quarter);
  • Natural gas sales: down 1.5% to 95.32 billion cu.m in the year (down 1.5% in the quarter);
  • Signed an agreement with Anadarko for the development of common onshore activities in Mozambique;
  • Acquired exploration licenses in the emerging areas of Liberia, Kenya, Vietnam, Cyprus and offshore Russia during the year;
  • Further progress in the divestment of Snam and Galp also through the placement of convertible bonds;
  • Started reorganization of Eni's downstream activities in 2012.

Paolo Scaroni, Chief Executive Officer, commented:
"2012 was a record year for exploration at Eni with discovered resources about six times yearly production thanks to our outstanding achievements in Mozambique and our other successes in West Africa, in the Barents Sea and in Indonesia. We have also made significant progress in developing projects, further increasing our reserves to best ever levels. Production growth has delivered excellent operating profits at our Exploration and Production division. In Gas & Power and Refining & Marketing we have realised significant efficiency improvements that have allowed us to absorb most of the effects of the still difficult European scenario. Thanks to Eni’s capital structure, which has also been strengthened by the disposals of Snam and Galp, the company will achieve industry-leading upstream growth rates."

Eni S.p.A.(Image: Eni S.p.A.)

Capital expenditure

Capital expenditure of continuing operation for the fourth quarter of 2012 amounted to €3.89 billion (€12.76 billion for the full year 2012), mainly related to the continuing development of oil and gas reserves and exploration projects (€3.14 billion) as well as the upgrading of rigs and offshore vessels in the Engineering & Construction division. The Group also incurred expenditures of €0.57 billion in the year to finance acquisitions, joint-venture projects and equity investees.

Exploration & Production

In fourth-quarter 2012, reported liquids and gas production was 1.747 mmboe/d (1.701 mmboe/d in 2012), calculated using the updated gas conversion coefficient of 1,000 cu.m equivalent to 6.43 bbl (previously 6.36 bbl; see the methodology note on page 9 for further details). On a homogeneous basis, i.e. excluding the effect of the updating of the gas conversion coefficient, production grew by 3.6% in the quarter, and 7% in the whole year. Performance was sustained by the recovery of activities in Libya, the start-up/ramp-up of fields, particularly in Russia, and higher production in Iraq. These positive factors were partially offset by the shut down of production in the United Kingdom after the incident at the Elgin/Franklin field (Eni's interest 21.87%) operated by another oil major, force majeure events in Nigeria and mature field declines.

Business developments

In 2012 Eni laid the foundations for a new development phase of its oil&gas production. Over the intermediate and long-term we expect to achieve industry-leading growth by leveraging the extraordinary success of our exploration in the last four years, particularly in 2012, the almost completed recovery in Libya and a strong project pipeline. In the Exploration & Production division, 2012 was a record for exploration, adding 3.64 billion boe of fresh resources to an already strong base. This was due to the massive volumes of natural gas discovered in Mozambique following appraisal works at the Mamba complex and the discovery of a new exploration play at Coral. Other significant success was achieved in core areas in Norway, Angola, Indonesia, Ghana and Pakistan. Eni’s portfolio was boosted with the acquisition of new exploration acreage in Kenya, Liberia, offshore Russia, Vietnam, Ukraine, Pakistan and China. Production benefited from the nearly complete recovery of production levels in Libya in spite of the complex transition phase the Country is undergoing following the revolution. The Gas & Power, Refining & Marketing and Chemical divisions due to their exposure to the European slowdown were adversely affected by a sharp fall in demand for energy commodities and competitive pressures. In those segments we have been intensifying the initiatives to restore our profitability against the backdrop of ongoing difficult market conditions and weak and volatile margins. In the Gas & Power division we are progressing in the process of renegotiating our supply contracts and implementing measures to optimize margins and mitigate the take-or-pay risk. In the Refining & Marketing division we have stepped up efficiency efforts at our refineries and succeeded in preserving our market share in the retail market. In the Chemical sector we are restructuring our loss-making plants and executing our strategy designed to increase the relative weight of the green chemistry business as well as higher margin businesses. All of our three downstream divisions are expanding outside Europe to seize opportunities in growing markets.

Exploration success

In addition to the above-mentioned exploration successes in Mozambique and the oil discovery in Ghana, it is worth mentioning that exploration activities performed well in:

  • Norway, with the oil and gas Skrugard and Havis discoveries, located in the PL532 (Eni's interest 30%) license in the Barents Sea. Recoverable oil reserves are estimated to approximately 500 million barrels (100%);
  • Egypt, in the Meleiha license (Eni 's interest 56%) with (i) the important Emry Deep 1X discovery that was started up; (ii) the Rosa North 1X discovery, estimated to start-up in 2013. The short time to market of these discoveries is in line with Eni’s strategy to focus on fast track development of conventional and synergic oil;
  • Congo, with the hydrocarbon discovery of Nene Marine 1 located, in the offshore Marine XII license (Eni's interest 65%, operator). The appraisal of the discovery is expected in 2013;
  • Indonesia, with the gas discovery of Katak Biru, in the Muara Bakau license (Eni's interest 55%, operator), 30 km far from the Jangkrik Northern West discovery;
  • Angola, (i) in Block 15/06 (Eni 's interest 35%, operator), with the Vandumbu 1 oil discovery, within the West Hub project; (ii) in Block 2 (Eni's interest 20%) with the condensates and gas Etele Tampa 7 well;
  • United States in Green Canyon Block 903 (Eni's interest 12.25%) in the Gulf of Mexico with a successful outlining campaign of the Heidelberg discovery, increasing recoverable reserves to approximately 200 million barrels (100%);
  • Pakistan with a relevant gas discovery in the Exploration concession Badhra Area B (Eni's interest 40%, operator). The Badhra B North-1 exploration well was started up. The discovery is estimated to hold from 8.5 to 11.5 billion cubic meters of gas in place. A further outline of the discovery will require additional wells;
  • Nigeria, in Blocks Opl 282 (Eni 's interest 90%) and Opl 2009 (Eni 's interest 49%) with the oil discoveries at the Tinpa 1 field and Afiando 1 and 2 wells.

See for full report.

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