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"Race To The Bottom" In Oil Continues: ENI (Europe's "Chevron") Halts Buyback, Raises Production, Slashes Capex

Tyler Durden's picture




 

Oil prices legged lower in the last few minutes as Italy's largest energy company ENI has made a series of rather major announcements (following Chevron's decision in January). The company plans to sell EUR8bn in assets, slash capex by 17%, and suspends buybacks. But perhaps most worryingly for the oil-patch, ENI plans to increase production 3.5% each year until 2018 as the race to the bottom in energy markets continues.

  • *ENI PLANS TO SELL $8BLN IN ASSETS OVER NEXT 4 YEARS
  • *ENI WILL CUT CAPEX OVER NEXT 4 YEARS BY TOTAL OF 17%
  • *ENI SAYS NEW PROJECTS AVERAGE BREAKEVEN AT $45/BBL (BRENT)
  • *ENI SEES E&P PRODUCTION INCREASING 3.5% A YR IN 2015-2018

The buy-back plan is suspended. It will assess its reactivation when the strategic progress and the market scenario allow.

Full presentation here

It appears the presentation was leaked early, which tumbled the shares and was halted... when it re-opened it was down over 6%...

 

And crude oil prices also began tyo fall as the production raise was leaked...

 

As Reuters reports,

Italy’s Eni cut its dividend and suspended a share buyback programme on Friday as part of moves to offset the slump in oil prices and fund growth in its core business of looking for oil and gas.

 

In the first major business plan of CEO Claudio Descalzi, Italy's biggest listed company said it would pay a 2015 dividend of 0.8 euros per share compared to the 1.12 euros per share it paid on 2014 results.

 

The state-controlled oil major said it would cut investments by 17 percent in the 2015-2018 period to around 48 billion euros ($50 billion) and sell assets worth 8 billion euros. At 1437 GMT Eni shares were down more than 6 percent.

 

The slump in oil prices  since June is testing the ability of listed oil companies to support cash flows and has sparked a rush to cut costs across the sector.

 

Many big oil firms have announced cuts of 10 to 15 percent to their spending budgets and some have suspended share buybacks or revived dividend payment via company stock, known as scrip shares.

 

Eni, which is shifting its focus increasingly to upstream exploration and production activity, said it was targeting annual output growth of 3.5 percent, up from the 3 percent growth in its previous 2014-2017 plan.

ENI is currently Italy's largest industrial company with a market capitalization

The Italian government owns a 30.303% golden share in the company, 3.934% held through the state Treasury and 26.369% held through the Cassa Depositi e Prestiti.

 

Another 2.012% of the shares are held by People's Bank of China

And just as European stock valuations were getting absolutely idiotic.

 

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Fri, 03/13/2015 - 10:57 | 5885173 SethDealer
SethDealer's picture

oil going to $30

Fri, 03/13/2015 - 11:00 | 5885185 Tsar Pointless
Tsar Pointless's picture

There should be a decimal point in front of the 3.

Fri, 03/13/2015 - 11:17 | 5885239 ParkAveFlasher
ParkAveFlasher's picture

Oil at $3 is bullish for miners!  /sarc

Fri, 03/13/2015 - 11:24 | 5885276 maskone909
maskone909's picture

halting buybacks is a bigger flag than most think.  buybacks have been the foundation for the lies built on the "recovery".  if they cant do that, well i am not sure what else they can do.  corporate bond issuance? im sure the fed will buy trillions, right?

Fri, 03/13/2015 - 11:27 | 5885287 kowalli
kowalli's picture

they can prop up stocks with nailguns and Nirp...

Fri, 03/13/2015 - 12:51 | 5885598 KnuckleDragger-X
KnuckleDragger-X's picture

Hollow points, soft points or full metal jacket. Decisions, decisions, suicide is so complicated....

Fri, 03/13/2015 - 11:09 | 5885209 FieldingMellish
FieldingMellish's picture

Then we will probably see the dollar index at 120 and gold at $900.

Fri, 03/13/2015 - 11:22 | 5885267 Bell's 2 hearted
Bell's 2 hearted's picture

and not to mention a hard recession (as exports and capex collapse)

Fri, 03/13/2015 - 11:37 | 5885316 ParkAveFlasher
ParkAveFlasher's picture

Yes, but think of all the assets you can buy overseas!  oh wait

Fri, 03/13/2015 - 11:31 | 5885305 disabledvet
disabledvet's picture

Everything can be counted now.

 

Simply "assign a number" (serialization)and even infinity can be conquered.

 

Once a "numbering system" is assigned to all things...everything can be counted and therefore "counts."

 

If this is a living thing it will give off a "signature" in effect "counting itself." (Heat, smell, touch, taste, etc)...

 

Now...not only can I construct a reality based PURELY on mathematics (rendering) I can also "confirm identity" (that my mathematical description matches what in fact is real)...if I have a "motion detector"....

 

BANG!

 

your dead.

Fri, 03/13/2015 - 10:58 | 5885180 Tsar Pointless
Tsar Pointless's picture

Human race=pointless.

Fri, 03/13/2015 - 11:26 | 5885282 Mayer Amschel R...
Mayer Amschel Rothschild's picture

Because oil will be cheap?

<$10/barrel in <20 years.

Fri, 03/13/2015 - 11:38 | 5885319 Hohum
Hohum's picture

Could be.  And about 2 mllion barrels per day produced in the entire world.

Fri, 03/13/2015 - 11:41 | 5885337 disabledvet
disabledvet's picture

Every dollar has a serial number.

 

If what is produced and then consumed gets big enough those values may fall thus causing those numbers to be capable of very precise measurement.

 

This is not an ESTIMATE either...but an actual number..."how many serialized paper thingy's in fact are in existence and circulating."

 

When it comes to dollars those numbers can in fact be shockingly small...making CREDIT very valuable.

 

Gold of course is of near infinite monetary value because there is such a small amount of it.

 

However since there is no way to guarantee the supply...

Fri, 03/13/2015 - 11:03 | 5885181 clade7
clade7's picture

OT:  My accountant said, I got some good news, and some bad news....good news is I can assure you your tax refund was not stolen!

 

Bad news is you aint getting one, and in fact owe some more mutherfuckin money!  C'mon nickel gas!

Fri, 03/13/2015 - 10:59 | 5885182 herman55
herman55's picture

https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2015-03-12.pdf

 

 

always some interesting statistics on the Bakken

Fri, 03/13/2015 - 11:36 | 5885315 Hohum
Hohum's picture

Most interesting.  Big question: how different is Bakken from Eagle Ford/Permian, et. al.?

Fri, 03/13/2015 - 13:50 | 5885921 herman55
herman55's picture

......the big difference ?  The Bakken is 1600 miles from most of the refineries and you can read that as $12 a barrel less up here due to Buffets railroad;

The BNSF....given their proclivity for going off track and burning , around here that stands for BETTER NOT START a FAMILY.

Fri, 03/13/2015 - 11:08 | 5885213 venturen
venturen's picture

Shouldn't bad news be good?

Fri, 03/13/2015 - 11:12 | 5885224 Hohum
Hohum's picture

Sure, they "plan."  But I'll take the under on whether ENI executes the "plan."

Fri, 03/13/2015 - 11:14 | 5885227 q99x2
q99x2's picture

The dollarpetro must have been supporting oil.

Fri, 03/13/2015 - 11:17 | 5885240 q99x2
q99x2's picture

Bitcoin is going up against other currencies.

Fri, 03/13/2015 - 11:19 | 5885251 Bell's 2 hearted
Bell&#039;s 2 hearted's picture

Jed Clampett timed it right ... now it would be Bakersfield Hillbillies ...

Fri, 03/13/2015 - 11:24 | 5885274 SoDamnMad
SoDamnMad's picture

Cut share buy backs. How dare they set this bad example.  Look for more oil and gas. Why? It's already too cheap to make an outrageous profit. Because they are looking long term. Who does that anymore.  We have to maximize the year-end bonus pool by any means possible.

Fri, 03/13/2015 - 11:38 | 5885322 iofera
iofera's picture

Vlad said whomever's Western Unioning him 50 cents at a time, it's not funny.

Fri, 03/13/2015 - 11:48 | 5885359 the grateful un...
the grateful unemployed's picture

this the same plan the parent Chevron announced. ramping up production, that phrase should get everyone's attention. of course crude can be stored, and with Russia acting funny, controllling the NG pipeline and such [the American neocons love to frighten the europeans into consent, and more importantly into electing hard right wing candidates. if you dont like socialist Europe you must be a neocon] and the election 2016 in America is shaping up as a battle of the neocons, neocon lite, is Hillary. capitalist localorie neocon is Kerry. [this is why Romney got out, hes not a member of the club] Bush et all are full blown drooling snarling neocons [or at least their operatives will be] Putin is off calculating a way to keep the bastards out, but both parties are NC so good luck with that Vlad. maybe China will pull the dollar peg, maybe they can feed some fires other places, like Africa. the neocons have no strategy for ISIS, or terrorism, they like regime change for its own sake. [hence the arab spring has been a real neocon bonanza, and bibi can actually walk onto the floor of the US congress stand behind an AIPAC sign, and ask for support, and much of it will get kicked back] if there is a war you should be buying the oil companies on the dip, because with crude this cheap, production ramping up, the dogs of war are getting ready. the MIC needs lots of the stuff

Fri, 03/13/2015 - 11:57 | 5885404 combatsnoopy
combatsnoopy's picture

Hang on, I'm still trying to translate from Italiano.  If it doesn't say "dolce", buon" "ciao" or "gniocchis", I need all the help I can get.  

I'm curious how many petrodollars ENI makles for Italy's banks, and what the connection is with ECB.   

Fri, 03/13/2015 - 12:03 | 5885424 combatsnoopy
combatsnoopy's picture
Page 1 1 Eni 2015-2018 Strategic Plan Transform Eni to create value Main objectives of the four • E & P: production growing steadily supported by substantial discoveries or Production up 3.5% average annual or 2 billion boe of new resources expected in the unit cost of $ 2.6 / b Self-financing or investment in 2017-18 amounted to 140% • G & P: improving faster than expected or C ompleto market alignment and recover substantial volumes Take or Pay by 2016 Operating cash flow or cumulative 3 billion euro • R & M: efficiency in continuous improvement Draw or the operating cash flow and EBIT adj. Early 2015 Operating cash flow or accumulated more than 1.5 billion euro • Chemistry: capacity reduction and repositioning of the product portfolio Draw or the operating cash flow and EBIT adj. 2016 • Reduced costs compared to the Strategic Plan 2014-17 or CAPEX: - 17% at constant exchange € / $ or OPEX per barrel: - 7% or G & A: -500 million euro / year, 2 billion euro accumulated by 2018 • Free cash flow strong and sustainable or 2015-16: with Brent to average $ 63 / b, 100% investments financed from cash flow operating or 2017-18: with Brent to average $ 85 / b, operating cash flow + 40% compared to 2015-16 Disposals or for 8 billion euro, of which 70% in the first two years Free cash flow or cumulative: more than 16 billion euro • Policy shareholder remuneration or Proposed dividend for 2015 to 0.8 € / share Remuneration of shareholders or growing with the results Page 2 2 The CEO of Eni, Claudio Descalzi commented: "We have made significant progress in the transformation of Eni, which started last summer, in a society integrated more focused on the oil and gas business. Continuing to maintain the Our focus on exploration success we have accelerated the restructuring of G & P bringing it back to positive results one year ahead of schedule. There restructuring of our R & M will take us to breakeven already in 2015. Despite these successes, the fall in oil prices means that our Plan 2015-2018 is based on much lower prices than in the past. We have adopted a series of new measures, including the optimization of investments and cost reduction strengthen our business. In the new scenario of oil prices, we deemed appropriate rebasing the dividend for 2015 in line with our strategic goals. It is a level that allows us to maintain sustainable growth and to confirm a progressive dividend policy with the expected results. We are building un'Eni much more solid, can also face price scenarios falling oil, while continuing to generate sustainable results and create shareholder value " London, March 13, 2015 - Claudio Descalzi, Eni CEO, explains today the financial community with the Strategic Plan of the company for the period 2015-2018. The completion of the process of transformation of Eni started in 2014, even before the fall in oil prices and made ??even more crucial by the current scenario market, will allow the company to achieve its objectives within the Plan of i) strong cash generation and value creation, ii) sustainable shareholder remuneration and iii) financial strength, even in a scenario of low prices. This transformation process is part of a global scenario radically other than that provided in the previous plan, with an estimated price of Brent now $ 55 / b in 2015, more than half of the average of the last four years, and expected gradual growth up to $ 90 / b in 2018. Page 3 3 In this scenario the company deems necessary to put in place some significant efforts additional: • ensure a continued strengthening combined growth of the upstream sector, relying on the ability to discover new and large reserves of hydrocarbons and lead to rapid completion 70 major development projects, much of it already initiated and well diversified geographically; • complete the process of restructuring under way in the areas mid-downstream oil & gas, heavily penalized by the recent crisis in the European gas market and the refining, reporting the business situation of breakeven at first time, and subsequently in useful; • continue to pursue in all sectors of activity optimization of investments (-17% Compared to the previous plan) and the containment of operating costs and those General and Administrative. As part of the transformation process of the Group and data plan targets, after having programmed the significant additional efforts mentioned above, the company intends to propose 2015 a dividend of € 0.8 per share. The distribution policy will be progressive in relation to the growth of the expected results. The buy-back plan is suspended. It will assess its reactivation when the strategic progress and the market scenario allow. Exploration & Production The exploration will remain an important driver of growth for the company. During the Plan Eni expects new discoveries for 2 billion boe at competitive cost of $ 2.6 to barrel. In the first two years, the activities will be focused on basins with proved reserves (proven) located near fields already developed so as to quickly complete the evaluation of the mineral potential and exploit the synergies for future development activities and put into production. The goal of growth of hydrocarbon production is equal to 3.5% per annum in the period 2015-2018 and will be achieved mainly through the launch of new projects and to ramp up of those already initiated in 2014, with a total contribution of over 650.000boed 2018. These Page 4 4 projects are characterized by an average breakeven of $ 45 / b and generate a stream of Operating cash cumulative additional 19 billion euro in the period 2015-18. Gas & Power The restructuring of Gas & Power, which has seen a significant acceleration in 2014, will be completed in the years of the plan and provides: • the complete alignment of the costs of gas supply to the prices market and the substantial recovery in volumes take or pay already paid by 2016; • simplification of the operating structure and the optimization of logistics costs a savings of 300 million by 2018; • the development and growth in its high value, particularly retail, trading and marketing of liquefied gas. The cumulative operating cash flow expected for the period 2015-18 will be 3 Milardi euro. Refining & Marketing To deal with a scenario of refining that is expected in structurally weak next four years, Eni will complete the process of transformation of the R & M segment, leading to the break-even as early as 2015, the operating cash flow and adjusted EBIT, through: • completion of the process of rationalization and converting facilities in Italy and abroad with a further 20% reduction in refining capacity that will add to the 30% already achieved; • continue to improve energy • the development of marketing and rationalization of the business portfolio in Italy and abroad. Overall, the planned actions will reduce the margin of break- even in the refining adjusted to about 3 $ / ba floor end and to achieve a flow of Operating cash total of R & M in the period 2015-18 amounted to over 1.5 billion euro. Chemistry Eni confirms its objective of bringing to breakeven EBIT adjusted in 2016 by leveraging: Page 5 5 • the conversion of critical sites; • refocusing on products with higher value added and the development of chemical "green"; • internationalization of the business thanks to strategic alliances. Financial Strategy The investment plan, focused on projects with a high value and accelerating returns, an expenditure in the four years of around 48 billion euro, a decrease of 17% in CER compared to the previous plan. Half of the investment was not still contracted, allowing a high level of financial flexibility should the conditions of weakness scenario persist. In terms of operating costs Eni unit has maintained in 2014 the lowest level of the oil industry, reaching 8.3 $ / b, and requires a further reduction of 7% compared to the previous plan. Over the floor general and administrative costs accumulated will be reduced by about 2 billion euro. The operating cash flow in the period 2015-16 will be able to fully finance investments considering a scenario of oil prices average $ 63 / b. In biennium 2017-18 the operating cash flow will grow by 40% to the combined effect of actions industrial development in E & P, the restructuring of the business and mid-downstream the expected improvement of the scenario with an average price of Brent expected to $ 85 / b. A substantial contribution to cash generation will come from disposals planned which will amount to 8 billion euro, of which approximately 70% in the first two years of plan. About 50% will cover the sale of investments in recent exploration discoveries in which Eni, holding very high altitudes, intends diluted while maintaining the role of operator ("dual exploration model"). The sale of the remaining shares in Snam and Galp will represent about 25% while the remaining 25% will come from asset cessone upstream mature and non-core activities in the mid-downstream. Free cash flow accumulated in 2015-18 is estimated over 16 billion euro. In conclusion, the strategic transformation outlined in the plan will create very un'Eni more solid, able to address in a sustainable manner even scenarios of oil price decline, while continuing to create value. Page 6 6 Company Contacts: Press Office: Tel. +39 02.52031875 - +39 06.59822030 Toll shareholders (from Italy): 800 940 924 Toll shareholders (from abroad): +80011223456 Switchboard: +39 06.59821 ufficio.stampa@eni.com segreteriasocietaria.azionisti@eni.com investor.relations@eni.com

Website: www.eni.com

http://www.eni.com/it_IT/attachments/media/comunicati-stampa/2015/03/Eni...

 

 

http://translate.google.com/translate?hl=en&sl=it&u=http://www.eni.com/i...

Fri, 03/13/2015 - 12:42 | 5885573 the grateful un...
the grateful unemployed's picture

didnt read all that, but really, both US Chevron and ENI will stop spending money on stock buybacks, and increase production, somebody is bullish on the economy. the US is going full export model, while eastern europe may become a new manufacturing center (to replace China i suppose) this is what the battle for Ukraine is all about. maybe Cheneys NATO push was smarter than we thought. but then he has the CIA giving him the benefit of those long term studies. ah the Balkans, what a wonderful region.. first order of business is to settle the muslim problem, that includes Syria and Turkey. second order to divide up the cold war spoils. give Putin his share. Iran is a nonplayer. you can hear the wheels turning

Fri, 03/13/2015 - 12:09 | 5885450 Serfs Up
Serfs Up's picture

Let me see if I have this straight...

ENI is going to cut CAPEX, sell assets AND raise production 3.5%/yr?

I guess the only quesion left is why didn't these geniuses produce more while spending less last year?  Okay, one follow up question; or the year before that?

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