Eni SpA, one of Europe's biggest oil companies by market value, Wednesday said the continent's economic slowdown took a bite out of 2011 profit and warned that this year will also be "challenging," as the slump hits its core market of Italy and other European nations.
The Rome-based company suffered in 2011 from loss of production due to Libya's civil war but said it expects "rapid recovery and growth" of around 10% in its exploration and production activities this year. However, it also warned that the euro zone's woes means it expects soft sales demand in its key natural-gas market in 2012.
Eni also boosted its full-year dividend 4% to €1.04 ($1.37) a share, despite lower adjusted earnings.
As an example of the level of the economic slowdown, Chief Executive Paolo Scaroni said the crisis is affecting all of its Italian operations—gas, power and refining.
Eni was also keen to promote its bigger hydrocarbon projects. Earlier in the day it announced a new "giant" gas discovery in the offshore Mozambique Mamba complex, taking potential total volumes there to around 850 billion cubic meters and leaving the company well placed to serve Asia's increasing appetite for the fossil fuel.
"We are very excited by the Mamba block's potential," Mr. Scaroni said.
Roberto Mascarello, an analyst at Kepler Capital Markets, said Eni's gas-and-power and refining divisions remain troubled, "although exploration and production will improve with the end of the Libya conflict."
He also said that the Mamba announcement "sweetened the pill" of the poor 2012 guidance.
In recent weeks, most European oil companies and U.S. majors have reported profits that were capped by weak fundamentals in refining and gas prices, despite high oil prices.
Eni has been particularly hit by a large production cut resulting from last year's civil war in Libya, where it the largest foreign operator, and a weak demand environment for gas, a sector where it is traditionally strong in part through its links with Russia's giant OAO Gazprom. But Wednesday Eni said it has returned to around 80% of preconflict daily production in Libya, or about 240,000 barrels of oil equivalent, and said that it expects its output there to be back to full capacity in the second half of the year.
It posted a net profit of €1.32 billion ($1.73 billion) for the fourth quarter of 2011, up from €548 million a year earlier but boosted by a €1.04 billion gain from the sale of its interest in pipelines that transport gas from Northern Europe and Russia.
Eni said adjusted fourth-quarter net profit—the figure closely watched by analysts because it excludes the often-volatile value of oil inventories—slipped 9.5% on the year, to €1.54 billion, hurt by a drop in Libyan output, low gas prices and weak refinery margins, despite higher crude-oil prices. The figure was broadly in line with an average forecast of €1.57 billion in a Dow Jones Newswires poll of eight analysts.
Net sales rose 7.1%, to €30.10 billion from €28.11 billion a year earlier.
(Source: Wall Street Journal)