Italian oil and gas firm ENI SpA (E) Wednesday reported a sharp decline in second-quarter profit, hurt mainly by hefty impairment losses. Adjusted earnings increased as production benefited from recovery in Libya, while natural gas sales fell due to weak demand and ongoing competitive pressures. Looking ahead, Eni expects the outlook for 2012 to be challenging, weighted down by weakening growth prospects in the euro-zone.
For the second quarter, net profit attributable to Eni's shareholders was 227 million euros, down 81.9 percent from the prior year. Attributable net income from continuing operations fell 87 percent to 156 million euros or 0.04 euros per share. Earnings per American Depository share or ADR was $0.10, down 89.5 percent from last year.
The latest quarter results included an inventory holding gain of 209 million euros and special losses of 1.02 billion euros, mainly related to impairment losses on goodwill and tangible assets in the gas marketing and refining businesses.
Adjusted attributable net profit from continuing operations, which excluded items, edged up 0.3 percent to 1.38 billion euros. Earnings per ADR, meanwhile, fell 11 percent to $0.97 from $1.09 a year ago. Adjusted operating profit climbed 14 percent, partly benefited from the appreciation of the US dollar against the euro.
The company generated excellent performance in the Exploration & Production Division due to the ongoing production recovery in Libya.
Meanwhile, operating performance of the Gas & Power and Refining & Marketing Divisions were hit by weak demand and continuing margin pressure.
Net sales from operations climbed 24.6 percent to 30.06 billion euros from 24.12 billion euros in 2011.
Oil and gas production grew 10.6 percent to 1.647 mmboe/d in the quarter with a 7.9 percent increase in liquids and a 12.7 percent increase in natural gas production. Along with ongoing recovery in Libyan production, the production growth reflected starting-up and ramping-up new fields in Australia, Russia and Egypt.
Meanwhile, natural gas sales fell 4 percent to 20.15 bcm. Volumes marketed on the domestic market declined 8.3 percent mainly due to sharply lower volumes supplied to the power generation segment which was affected by higher competitiveness of coal and growing use of renewable sources.
For the first half, attributable net profit from continuing operations dropped 2.9 percent, while adjusted attributable net profit grew 4 percent. Sales for the six months climbed 20.3 percent.
Citing the confidence in Eni's outlook, the company's Board proposed an interim dividend of 0.54 euros per share, higher than last year's 0.52 euros, payable on September 27.
For fiscal 2012, ENI projects unfavorable trading conditions to continue in the European gas sector. Gas demand would fall sharply as a consequence of the economic slowdown as well as a big drop in thermoelectric consumption. In this scenario, the company expects stiff price competition among operators.
For the year, production of liquids and natural gas is expected to grow from last year's hydrocarbons production of 1.58 million boe/d. Eni also expects natural gas sales to be roughly in line with last year's 96.76 bcm.
In Italy, Eni shares are currently trading at 16.86 euros, up 0.02 euros or 0.12 percent.
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