6-K 1 c477887_6k.htm FORM 6-K

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

  

 

Form 6-K

 

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

 

For the month of October 2017

 

 

Eni S.p.A.

(Exact name of Registrant as specified in its charter)

 

 

Piazzale Enrico Mattei 1 -- 00144 Rome, Italy

(Address of principal executive offices)

 

_________________________

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

Form 20-F   x Form 40-F   ¨

 

_________________________

 

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2b under the Securities Exchange Act of 1934.)

 

Yes   ¨ No   x

 

(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): )

 

 

 

 

 

 

Table of contents

 

-Eni: results for the third quarter and the nine months of 2017

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorised.

 

  Eni S.p.A.  
       
       
  /s/ Roberto Ulissi  
  Name: Roberto Ulissi  
  Title: Corporate Affairs and  
    Governance - SEVP  

 

Date: October 31, 2017

 

 

 

 

Registered Head Office,

Piazzale Enrico Mattei, 1

00144 Rome

Tel. +39 06598.21

www.eni.com

San Donato Milanese

October 27, 2017

 

Eni: results for the third quarter and the nine months of 2017

 

Key operating and financial results  

 

IIQ     IIIQ   Nine months  
2017   2017 2016 % Ch. 2017 2016 % Ch.
49.83 Brent dated $/bbl 52.08 45.85 14 51.90 41.77 24
1.101 Average EUR/USD exchange rate   1.175 1.116 5 1.114 1.116  
1,771 Hydrocarbon production kboe/d 1,803 1,710 5 1,790 1,726 4
1,019 Adjusted operating profit (loss) (a) € million 947 258 267 3,800 1,029 269
845 of which: E&P   1,046 644 62 3,306 1,094 202
(146)                  G&P   (193) (374) 48 (1) (318) 100
352                  R&M and Chemicals   337 175 93 878 508 73
463 Adjusted net profit (loss) (a)   229 (484) .. 1,436 (799) ..
0.13 - per share (€)   0.06 (0.13)   0.40 (0.22)  
18 Net profit (loss) (b)   344 (562) .. 1,327 (1,391) ..
.. - per share (€)   0.10 (0.16)   0.37 (0.39)  
2,284 Adjusted cash flow from operations (c)   1,722 1,353 27 6,603 3,830 72
2,706 Net cash flow from operations   2,161 1,325 63 6,799 4,425 54
2,106 Capital expenditure (d)     2,023 2,057 (2) 6,996 8,088 (14)
15,467 Net borrowings   14,965 16,008 (7) 14,965 16,008 (7)
0.32 Leverage % 0.32 0.32   0.32 0.32  

 

(a) Non-GAAP measure. For further information see the paragraph "Non-GAAP measures" on page 15.

(b) Attributable to Eni's shareholders - continuing operations.

(c) Non GAAP measure. Net cash flow from operations before changes in working capital and excluding inventory holding gains or losses.

(d) Include capital contribution to equity accounted entities.

 

Yesterday, Eni’s Board of Directors approved the Group results for the third quarter and the nine months of 2017 (unaudited). Commenting on the results, Claudio Descalzi, CEO of Eni, remarked:

 

“In the third quarter, we achieved excellent results with an increase in operating profit almost four times higher, a net result above €700 million and net growth in operating cash flow compared to the third quarter of 2016. Investments followed trends in line with expectations, with a reduction of approximately 18% during the year compared with 2016.

In 2017 we expect to achieve organic coverage of investments and dividends, entirely paid in cash, at a Brent price of 60$ a barrel as planned, or 45$ a barrel when taking into account our dual exploration model initiatives.

These results have been achieved thanks to progress made in pursuing our strategy.

In the Upstream sector, hydrocarbon production grew by 7%, net of the cuts imposed by OPEC and the price effect.

The Downstream refining and chemical sectors exceeded our expectations by doubling operating profit. They benefited from an optimized industrial structure and demonstrated their ability to seize growth opportunities in the market. In G&P we have achieved structural breakeven and expect a positive result for the full year.”

 

 -1- 

 

 

Highlights  

 

Exploration & Production

 

·Robust hydrocarbon production growth:

 

Produced an average of 1.8 million boe/d in the third quarter, up by 5.4% (up by 3.7% in the nine months of 2017); excluding price effects at PSAs and OPEC cuts, up by 7% (up by 6% in the nine months of 2017).

 

Start-ups and ramp-ups additions: 224 kboe/d added in the nine months thanks to the optimization of major projects started in 2017.

 

Production expected to ramp up further in the fourth quarter, reaching approximately 1.9 million boe/d on average in the period, the highest level in seven years, with the contribution of high valuable barrels.

 

·Dual exploration model: closed in October the divestment of a 30% stake in the super-giant Zohr gas field, off Egypt, to Rosneft.

 

·Expected to be completed by the end of 2017 the divestment to Exxon Mobil of a 25% stake in Area 4 in Mozambique.

 

·Libya: resumed the second development phase of the giant offshore field Bahr Essalam. First gas is expected in 2018.

 

·Continued exploration success offshore Mexico: the resources of the whole contractual Area 1 were boosted to 1.4 billion boe in place thanks to the appraisal of the Mizton discovery, which followed that of Amoca. Expected a fast-track development plan. Awarded three new exploration and production licenses at Block 7, 10 and 14, in the Sureste basin.

 

·Ongoing progress at the Zohr project: start-up confirmed by the end of 2017.

 

·E&P adjusted operating profit: €1.05 billion in the third quarter (up by 62%); more than tripled to €3.31 billion in the nine months of 2017.

 

 

Gas & Power

 

·Continuous, strong progress in the wholesale business leveraging improvements at long-term supply contracts and logistics.

 

·Retail business: better performance in converting revenues into cash; growth in the customer base, excluding the impact of disposals.

 

·G&P adjusted operating result: in spite of weak seasonal trends, the third quarter of 2017 showed a remarkable improvement y-o-y (up by 48%); the 2017 nine months period was at breakeven (up €0.32 billion y-o-y).

 

 

Refining & Marketing and Chemicals

 

·Confirmed refining breakeven margin below 4 $/barrel on average for the FY.

 

·Record quarterly results in R&M: adjusted operating profit more than doubled y-o-y at €0.22 billion, despite the partial downtime of the Sannazzaro and Livorno refineries (€0.46 billion for the nine months, up by 117%).

 

 -2- 

 

 

·Chemical business adjusted operating profit: €0.11 billion in the third quarter 2017, up by 51% y-o-y; €0.42 billion in the nine months of 2017 (up by 42%). Expected record full year results.

 

 

Group results

 

·Adjusted operating profit increased almost four times both for the third quarter and the nine months of 2017, to €0.95 billion (up €0.69 billion y-o-y) and €3.80 billion (up €2.77 billion y-o-y), respectively.

 

·Adjusted net profit: €0.23 billion in the third quarter, €1.44 billion in the nine months of 2017 compared to net losses reported in the comparative periods of last year.

 

·Net profit: €0.34 billion in the third quarter (€1.33 billion in the nine months of 2017).

  

·Continued structural improvement in cash generation: €2.16 billion in the third quarter, up by 63% y-o-y; €6.8 billion in the nine months of 2017 (up by 54%).

 

·Adjusted cash flow from operations before changes in working capital at replacement cost: €1.72 billion in the third quarter (up by 27%) and €6.60 billion in the nine months of 2017 (up by 72%), affected by an extraordinary tax payment in Angola amounting €0.15 billion.

 

·Capex: €7 billion in the nine months of 2017 (€5.7 billion on a pro-forma1 basis), spending has reduced in the third quarter after a peak registered in the first half of 2017 due to the completion of certain large projects. Self-financing ratio of pro-forma capex at approximately 120%.

 

·Disposals: expected €3.7 billion to be cashed in for the FY, of which approximately €1.5 billion in the nine months of 2017, mainly related to the dual exploration model.

 

·Net debt: €14.96 billion; expected to decrease y-o-y following the closing of disposals.

 

·Leverage at September 30, 2017: 0.32, expected at 0.25 at year end driven by cash flow from operations and disposals.

 

Outlook  

 

Exploration & Production

 

Confirmed the 2017 target of 0.8 bln boe of new resources discovered, at a unitary discovery cost of approximately 1 $/bbl.

 

Expected an average FY production of 1.815 million boe/d, matching the all-time high in 2010, a 5% increase from 2016 excluding price effects at PSAs and OPEC cuts. This will be driven by new project start-ups (Indonesia, Angola and Ghana), ramp-ups of fields entered into operation in 2016, mainly in Kazakhstan, Egypt and Norway, as well as the restart of certain Libyan fields. Contingent factors such as the shutdown of the Val d’Agri oil centre, which was down for almost the entire second quarter, the impact of OPEC cuts, as well as certain contractual one-offs recorded in 2016, will be absorbed by the implementation of other initiatives to optimize production, as well as by the earlier than planned start-up of the large projects in Angola, Indonesia and Ghana.

 

 

Gas & Power

 

Expected structural positive results from 2017. The wholesale business is seen to achieve structural breakeven one year earlier than planned.

 

 

 

1 Net of reimbursement of capex relating to asset disposals and advances made by the Egyptian partners in the Zohr project, see page 12.

 

 -3- 

 

 

Eni plans to retain market share in the retail segment, increasing the value of the existing customer base by developing innovative commercial initiatives, integrating services and optimizing operations.

 

 

Refining & Marketing and Chemicals

 

Confirmed the target of refining breakeven margin at 3 $/barrel in 2018.

 

Refinery intakes on own account are expected to decrease slightly y-o-y due to the downtime of certain assets at the Sannazzaro refinery, which has been almost completely offset by higher volumes at Milazzo. Stable at approximately 90% the refinery utilization rate. Against a backdrop of strong competition, management expects to consolidate both volume and market share in the Italian retail market by leveraging innovation and product and service differentiation. In the rest of Europe, sales on a like-for-like basis are expected to increase slightly.

 

In the Chemical business, we expect stable sales volumes. Cracker margins are expected to be broadly in positive territory, with a peak in butadiene, while polyethylene margins are expected to decline. Expected record full year results.

 

 

Group

 

2017 FY capex projected at €7.5 billion on a proforma basis, i.e. net of the capex which will be reimbursed in connection with asset disposals and advances paid by the Egyptian partners in the Zohr project. Confirmed the target of reducing capex by approximately 18% y-o-y at constant exchange rates.

 

Cash neutrality: confirmed organic coverage of capex and dividends at a Brent price of 60 $/bbl in 2017; 45 $/bbl considering cash inflow yielded by the dual exploration model.

 

Leverage at the end of 2017: projected at 0.25, substantially declining from the 2016 level, also reflecting the expected closing of portfolio transactions, particularly the Mozambique deal.

 

 -4- 

 

 

Business segments operating review  

 

 

Exploration & Production

 

Production and prices

 

IIQ     IIIQ   Nine months  
2017   2017 2016 % Ch. 2017 2016 % Ch.
  Production              
827 Liquids kbbl/d 885 864 2.4 848 869 (2.4)
5,152 Natural gas mmcf/d 5,012 4,616 8.4 5,138 4,680 9.8
1,771 Hydrocarbons kboe/d 1,803 1,710 5.4 1,790 1,726 3.7
  Average realizations              
45.29 Liquids $/bbl 48.03 40.82 17.7 47.31 37.05 27.7
3.45 Natural gas $/kcf 3.80 3.14 21.0 3.61 3.19 13.5
32.05 Hydrocarbons $/boe 35.14 29.70 18.3 33.55 27.69 21.2

 

·In the third quarter of 2017, oil and natural gas production averaged 1,803 kboe/d, up by 5.4% from the same period a year ago (1,790 kboe/d in the nine months of 2017, up by 3.7%). This performance was driven by new project start-ups and the ramp-ups at fields started up in 2016, mainly in Angola, Egypt, Ghana, Indonesia, Kazakhstan and Norway (an overall contribution of 285 kboe/d and 224 kboe/d in the two reporting periods, respectively) as well as by restarting production at certain Libyan fields, following recovery in safety conditions. This trend was partly offset by OPEC production cuts, price effects and planned and unplanned shutdowns in the United Kingdom and the Gulf of Mexico, as well as mature field declines. When excluding the price effect on PSAs contracts and OPEC cuts (overall 25 kboe/d and 40 kboe/d in the quarter and the nine months of 2017, respectively), hydrocarbon production increased by 7% (up by 6% in the nine months of 2017).

 

·Liquids production (885 kbbl/d) increased by 21 kbbl/d, or 2.4% from the third quarter of 2016 (848 kbbl/d in the nine months of 2017, down by 2.4%). Start-ups and ramp-ups of the period and higher production in Libya were partly offset by price effect, OPEC cuts, the shutdowns in the United Kingdom and the Gulf of Mexico.

 

·Natural gas production (5,012 mmcf/d) increased by 396 mmcf/d, or 8.4% compared to the third quarter of last year (5,138 mmcf/d in the nine months of 2017, up by 9.8%). Start-ups and ramp-ups of producing assets in Indonesia and Egypt were partly offset by the shutdowns in the United Kingdom and the Gulf of Mexico, mature fields decline and price effect.

 

 -5- 

 

 

Results

 

IIQ     IIIQ   Nine months  
2017 (€  million)   2017 2016 % Ch. 2017 2016 % Ch.
851 Operating profit (loss)   1,041 559 86.2 3,520 847 ..
(6) Exclusion of special items   5 85   (214) 247  
845 Adjusted operating profit (loss)   1,046 644 62.4 3,306 1,094 ..
(28) Net finance (expense) income   (39) (63)   (11) (178)  
169 Net income (expense) from investments   104 (46)   291 (9)  
(425) Income taxes   (670) (548)   (1,954) (1,258)  
43.1 tax rate (%)   60.3 102.4   54.5 138.7  
561 Adjusted net profit (loss)   441 (13) .. 1,632 (351) ..
  Results also include:              
113 exploration expense:   69 61 13.1 390 301 29.6
74 - prospecting, geological and geophysical expenses   61 45 35.6 200 159 25.8
39 - write-off of unsuccessful wells (a)   8 16 (50.0) 190 142 33.8
1,909 Capital expenditure   1,343 1,874 (28.3) 5,958 6,383 (6.7)

 

(a) Also includes write-off of unproved exploration rights, if any, related to projects with negative outcome.

 

·In the third quarter of 2017, the Exploration & Production segment reported an adjusted operating profit of €1,046 million, an increase of 62% from the third quarter of 2016. This improvement reflected an upward trend in crude oil prices (with the Brent price up by 14%), narrowing differentials between the market benchmarks and Eni’s equity crudes yielding an 18% rise in Eni’s realizations in dollar terms and production growth. These positives were partly offset by higher depreciation charges taken in connection with project start-ups and ramp-ups. In the nine months of 2017, adjusted operating profit amounted to €3,306 million, more than tripling y-o-y (up €2,212 million), driven by the same drivers as above with the Brent price up by 24% on average in the nine-month period. These positives were partially offset by the higher write-offs of exploration wells.

 

·In the third quarter of 2017, adjusted net profit amounted to €441 million compared to an adjusted net loss of €13 million in the third quarter of 2016, up by €454 million (an increase of approximately €2 billion in the nine month of 2017 compared to the previous year). This was due to the robust recovery in operating performance and the normalization of the tax rate due to higher profit before taxes, which helped improve the deductibility of operating expenses including those incurred in connection with PSA schemes and reduce the incidence on non-deductible expenses. Furthermore, in the nine months of 2017 certain deferred tax assets were recognized in connection with the FID of the Coral project in Mozambique, as well as with the production start-up at the Ghana project.

 

For the disclosure of the business segment special charges/gains see page 11.

 

 -6- 

 

 

Gas & Power

 

Sales

 

IIQ     IIIQ   Nine months  
2017     2017 2016 % Ch. 2017 2016 % Ch.
192 PSV €/kcm 192 156 23.1 201 156 28.8
165 TTF   171 135 26.7 177 137 29.2
  Natural gas sales bcm            
9.50 Italy   7.93 8.76 (9.5) 27.81 28.18 (1.3)
8.23 Rest of Europe   8.21 8.98 (8.6) 27.97 30.64 (8.7)
0.89 of which: Importers in Italy   0.97 1.10 (11.8) 2.90 3.22 (9.9)
7.34                European markets   7.24 7.88 (8.1) 25.07 27.42 (8.6)
0.90 Rest of World   1.30 1.54 (15.6) 3.57 4.23 (15.6)
18.63 Worldwide gas sales   17.44 19.28 (9.5) 59.35 63.05 (5.9)
8.39 Power sales Twh 8.91 9.17 (2.8) 26.67 27.26 (2.2)

 

·In the third quarter of 2017, natural gas sales were 17.44 bcm (59.35 bcm in the nine months of 2017), a decrease from the the third quarter of 2016, due in part to the divestment of retail activities in Belgium and Hungary. Sales in Italy were down by 9.5% to 7.93 bcm due to declining sales across all the market segments, partly offset by higher sales at the thermoelectric segment. Sales in European markets (7.24 bcm) decreased by 8.1% reflecting lower sales in Benelux, Germany and France, partly balanced by higher volumes sold in Turkey.

 

·Power sales were 8.91 TWh in the third quarter of 2017, down by 2.8% (26.67 TWh in the nine months of 2017, with a reduction of 2.2% compared to the same period of 2016) mainly because of lower volumes sold to the wholesale segment and to the middle market, partly offset by higher sales to the large customer segment.

 

 

Results

 

IIQ     IIIQ   Nine months  
2017 (€  million)   2017 2016 % Ch. 2017 2016 % Ch.
(225) Operating profit (loss)   (120) (325) 63.1 (131) (396) 66.9
  Exclusion of inventory holding (gains) losses   15 (12)   (29) 146  
79 Exclusion of special items   (88) (37)   159 (68)  
(146) Adjusted operating profit (loss)   (193) (374) 48.4 (1) (318) 99.7
  Net finance (expense) income   3 3   9 7  
(2) Net income (expense) from investments   (2) (10)   (5) (12)  
15 Income taxes   53 79   (65) 24  
(133) Adjusted net profit (loss)   (139) (302) 54.0 (62) (299) 79.3
30 Capital expenditure   33 23 43.5 82 67 22.4

 

·In the third quarter of 2017, the Gas & Power segment reported an adjusted operating loss of €193 million, a 48% improvement (up €181 million) from the third quarter of 2016. This result reflected better margins due to positive effects of renegotiations of purchase long-term contracts, including some contract terminations, as well as portfolio optimization, which allowed to capture the effects of a positive scenario. In the nine months of 2017, Gas & Power almost achieved breakeven, representing a recovery of €317 million compared to 2016, leveraging on the above drivers, which were partly offset by lower non-recurring gains relating to the renegotiations outlined in 2016 with retroactive benefits.

 

·The adjusted net result was a loss of €139 million, an improvement of €163 million from the third quarter of 2016. Net loss reduced to €62 million in the nine months of 2017.

 

For the disclosure of the business segment special charges/gains see page 11.

 

 -7- 

 

 

Refining & Marketing and Chemicals

 

Production and sales

 

IIQ     IIIQ   Nine months  
2017   2017 2016 % Ch. 2017 2016 % Ch.
5.3 Standard Eni Refining Margin (SERM) $/bbl 6.4 3.3 93.9 5.3 4.0 32.5
                 
4.88 Throughputs in Italy mmtonnes 5.63 5.71 (1.4) 15.69 16.39 (4.3)
0.75 Throughputs in the rest of Europe   0.76 0.75 1.3 2.15 2.16 (0.5)
5.63 Total throughputs   6.39 6.46 (1.1) 17.84 18.55 (3.8)
0.08 Green throughputs   0.08 0.06 33.3 0.17 0.15 13.3
  Marketing              
2.19 Retail sales mmtonnes 2.24 2.30 (2.6) 6.43 6.51 (1.2)
1.54 Retail sales in Italy   1.56 1.59 (1.9) 4.52 4.46 1.3
0.65 Retail sales in the rest of Europe   0.68 0.71 (4.2) 1.91 2.05 (6.8)
25.2 Retail market share in Italy % 25.2 24.8   25.0 24.3  
2.76 Wholesale sales mmtonnes 2.83 3.06 (7.5) 7.95 8.42 (5.6)
1.98 Wholesale sales in Italy   2.04 2.23 (8.5) 5.70 6.08 (6.3)
0.78 Wholesale sales in the rest of Europe   0.79 0.83 (4.8) 2.25 2.34 (3.8)
  Chemicals              
1,508 Production of petrochemical products ktonnes 1,360 1,413 (3.8) 4,393 4,309 1.9
75.6 Average plant utilization rate % 68.1 70.5   73.5 71.5  

 

·In the third quarter of 2017, Eni’s Standard Refining Margin – SERM – almost doubled from the third quarter of 2016 at a level of 6.4 $/barrel (up by 32.5% to 5.3 $/barrel in the nine months of 2017) due to stable relative prices of products compared to the cost of petroleum feedstock.

 

·Eni refining throughputs were 6.4 mmtonnes, slightly lower compared to the third quarter of 2016 (down by 1.1%; down by 3.8% in the nine months of 2017), mainly affected by the downtime of the EST plant at the Sannazzaro refinery and the shutdown of the Livorno refinery due to a force majeure event. These negatives were almost fully offset by a better performance reported at the Milazzo refinery following lower shutdowns and at the Taranto plant.

 

·Volumes of biofuels produced at the Venice green refinery increased by 33.3% in the third quarter of 2017 (up by 13.3% compared to the nine months of 2016).

 

·Retail sales in Italy of 1.56 mmtonnes fell by 1.9% in the third quarter (4.52 mmtonnes, up by 1.3% in the nine months of 2017) in a declining consumptions environment, reflecting lower volumes mainly sold at highway fuel stations. Eni’s retail market share was 25.2%, higher than in the third quarter of 2016 (24.8%).

 

·Wholesale sales in Italy were 2.04 mmtonnes, down by 8.5% compared to the third quarter of 2016 (down by 6.3% from the nine months of 2016). Lower sales of gasoil, bunkering and fuel oil were partly offset by higher sales of jet fuel.

 

·Retail and wholesale sales in the rest of Europe decreased by 4.5% in the third quarter of 2017 (down by 5.2% in the nine months of 2017) mainly following the disposal of certain operations in Eastern Europe and lower sales in France and Austria, partly offset by higher sales in Switzerland.

 

·Petrochemical production of 1,360 ktonnes decreased by 3.8% in the third quarter compared to 2016 reflecting the unplanned shutdown of certain plants. In the nine months of 2017, production was 4,393 ktonnes, up by 1.9%.

 

 -8- 

 

 

Results

 

IIQ     IIIQ   Nine months  
2017 (€  million)   2017 2016 % Ch. 2017 2016 % Ch.
33 Operating profit (loss)   367 192 91.1 764 555 37.7
255 Exclusion of inventory holding (gains) losses   (95) (73)   (39) (225)  
64 Exclusion of special items   65 56   153 178  
352 Adjusted operating profit (loss)   337 175 92.6 878 508 72.8
165 of which:  Refining & Marketing   224 100 124.0 455 210 116.7
187                  Chemicals   113 75 50.7 423 298 41.9
2 Net finance (expense) income   1     3    
(9) Net income (expense) from investments   15 3   16 23  
(119) Income taxes   (111) (57)   (301) (162)  
34.5 tax rate (%)   31.4 32.0   33.6 30.5  
226 Adjusted net profit (loss)   242 121 100.0 596 369 61.5
151 Capital expenditure   188 149 26.2 439 361 21.6

 

·In the third quarter of 2017, the Refining & Marketing and Chemicals segment reported an adjusted operating profit of €337 million (€878 million in the nine months), almost doubling compared to the third quarter of 2016 (up by 73% from the nine months of 2016).

 

·In the third quarter of 2017, the Refining & Marketing business reported an adjusted operating profit of €224 million, more than doubling the third quarter of 2016 (€455 million in the nine months of 2017; up by 117%). This positive trend was due to ongoing initiatives to reduce the refining breakeven margin, which is expected to come at below $4 per barrel on average for FY 2017, which allowed to fully capture a strengthened trading environment in the third quarter. Identified optimization actions and lower planned downtime at Milazzo refinery contributed to offset the expected margin loss due to the shutdown of some plants at the Sannazzaro refinery and the force majeure event at the Livorno site with the shutdown of the refinery in September. Marketing results were unchanged compared to the third quarter of 2016. In the nine months, results benefitted from the first half contribution mainly from the retail sales in Italy, driven by both higher volumes and margins.

 

·In the third quarter of 2017, the Chemical business reported an adjusted operating profit of €113 million in the third quarter, a 51% increase y-o-y (up by 42% for the nine months 2017). The improvement was driven by the restructuring plan executed in the last few years, focused on optimizing plant setup at core hubs, repositioning the product portfolio towards higher-value segments and closing or divesting marginal business line. Thanks to a streamlined industrial structure, the business was able to fully capture the upside in the trading environment and to achieve cost efficiencies and volume upsides. In the nine months of 2017, adjusted operating profit achieved a record performance of €423 million, higher than the overall 2015 performance, a record year in the recent history of Eni’s chemical business. This performance confirmed the value of the progress in the turnaround process.

 

·Adjusted net profit amounting to €242 million in the third quarter (€596 million in the nine months of 2017) increased by €121 million y-o-y (up by €227 million in the nine months).

 

 

For the disclosure on the business segment special charges see page 11.

 

 -9- 

 

 

Group results  

 

IIQ   IIIQ   Nine months  
2017 (€  million) 2017 2016 % Ch. 2017 2016 % Ch.
15,643 Net sales from operations 15,684 13,195 18.9 49,374 39,955 23.6
563 Operating profit (loss) 998 192 419.8 3,672 517 610.3
252 Exclusion of inventory holding (gains) losses (63) (87)   (70) 62  
204 Exclusion of special items (a) 12 153   198 450  
1,019 Adjusted operating profit (loss) 947 258 267.1 3,800 1,029 269.3
  Breakdown by segment:            
845 Exploration & Production 1,046 644 62.4 3,306 1,094 202.2
(146) Gas & Power (193) (374) 48.4 (1) (318) 99.7
352 Refining & Marketing and Chemicals 337 175 92.6 878 508 72.8
(160) Corporate and other activities (151) (118) (28.0) (426) (334) (27.5)
128 Impact of unrealized intragroup profit elimination and other consolidation adjustments (b) (92) (69)   43 79  
18 Net profit (loss) attributable to Eni's shareholders - continuing operations 344 (562) .. 1,327 (1,391) ..
180 Exclusion of inventory holding (gains) losses (45) (59)   (51) 42  
265 Exclusion of special items (a) (70) 137   160 550  
463 Adjusted net profit (loss) attributable to Eni's shareholders - continuing operations 229 (484) .. 1,436 (799) ..
18 Net profit (loss) attributable to Eni's shareholders 344 (562) .. 1,327 (1,804) ..
18 Net profit (loss) attributable to Eni's shareholders - continuing operations 344 (562) .. 1,327 (1,391) ..
  Net profit (loss) attributable to Eni's shareholders - discontinued operations         (413) ..

 

(a) For further information see "Breakdown of special items".

(b) Unrealized intragroup profit elimination mainly pertained to intra-group sales of commodities and services recorded in the assets of the purchasing business segment as of the end of the period.

 

 

Adjusted results

 

·In the third quarter of 2017, Eni’s consolidated adjusted operating profit increased almost four times y-o-y to €0.95 billion (up €0.69 billion). The improvement was driven by a robust performance across all of Eni’s businesses. The E&P segment reported an increase in operating profit of €0.4 billion due to an ongoing recovery in crude oil prices (the Brent benchmark was up by 14%) and production growth. The G&P segment strengthened its performance (up €0.18 billion or by 48%) in a seasonally weak quarter, due to the positive effects of the renegotiations of long-term supply contracts and other optimizations. The R&M and Chemicals businesses achieved a strong increase in operating profit, which was up by 124% and 51% respectively, with a cumulative improvement of €0.16 billion of operating result. This trend was driven by continued initiatives intended to reduce the breakeven margin and to upgrade the plant setup and the product mix, which allowed the businesses to fully capture the improvement in the trading environment and other opportunities in the markets. The quarterly increase in the Group operating result of approximately €0.7 billion was explained for €0.6 billion by an improved commodity scenario and for €0.1 billion by the underlying performance.
·In the nine months of 2017 all the businesses recorded a robust performance, strongly increasing from the same period of 2016. The consolidated adjusted operating profit of €3.80 billion increased almost four times y-o-y. The €2.8 billion increase was explained for €2.5 billion by an ongoing recovery in the scenario and for €0.5 billion by volumes growth, efficiency and optimizations actions, partly offset by OPEC cuts and one-off effects (€0.2 billion).
·Adjusted net profit of €0.23 billion improved by €0.7 billion compared to the loss recorded in the third quarter of 2016, driven by a robust recovery in operating performance and the normalization of tax rate at 74.5% in the third quarter 2017 (60.2% in the nine months of 2017) compared to 2016 reporting periods that were affected by the recognition of income taxes higher than the consolidated taxable income. This trend reflected the recovery in profitability mainly in the E&P segment, which allowed higher deductibility of operating expenses including those incurred in connection with PSA schemes, as well as a lower incidence of non-deductible expenses. In the nine months of 2017, adjusted net profit was €1.44 billion compared to the €0.80 billion loss of the comparable period.

 

 -10- 

 

 

The tax rate in the nine months of 2017 was positively affected by the recognition of deferred tax assets due to the FID of the Coral project in Mozambique and to the production start-up of the Ghana project.

 

Special items

 

The break-down by segment of special items of operating profit (a net charge of €12 million in the third quarter and €198 million in the nine months of 2017) is: 

·E&P: net charges of €5 million in the third quarter and net gains of €214 million in the nine months, mainly composed of: a gain on the disposal of a 10% interest in the Zohr asset (€339 million), recorded in the first quarter of 2017, risk provisions (€87 million in the nine months) and exchange rate differences and derivatives charges (€20 million in the third quarter and €32 million in the nine months).
·G&P: net gains of €88 million in the third quarter and net charges of €159 million in the nine months, composed of: the effects of fair-valued commodity derivatives that lacked the formal criteria to be accounted as hedges under IFRS (net gains of €90 million in the third quarter and net charges of €153 million in the nine months), a charge of €65 million in the third quarter and €98 million in the nine months to align the doubtful credit allowance of the retail G&P business (included in the G&P reportable segment) to the “expected loss” accounting model replacing the criteria of the incurred loss in the evaluation of the recoverability of trade receivables, and finally, provisions for redundancy incentives (€34 million in the nine months), as well as a downward revision of revenues accrued on the sale of gas and power for past reporting periods (€42 million in the nine months). The G&P adjusted operating result also includes the negative balance of €64 million in the third quarter and €158 million in the nine months, related to derivative financial instruments entered into to manage margin exposure to foreign currency exchange rate movements and exchange translation differences of commercial payables and receivables.
·R&M and Chemicals: net charges of €65 million (€153 million in the nine months) mainly composed of: the write down of capital expenditure relating to certain Cash Generating Units in the R&M business, which were impaired in previous reporting periods and continued to lack any profitability prospects of (€31 million in the third quarter and €89 million in the nine months); environmental provisions (€29 million in the third quarter and €53 million in the nine months).

 

Non-operating special items included tax effects relating to operating special items, the extraordinary charges/impairments recognized by Saipem and attributable to Eni (€64 million recorded in the nine months of 2017) and the gains on disposal of the gas and power retail activities in Belgium (€164 million in the third quarter).

 

Reported results

 

Net profit attributable to Eni’s shareholders for the nine months of 2017 was €1,327 million, a substantial improvement over the same period last year when a loss of €1,804 million was incurred from both continuing and discontinued operations, with the latter including a one-off charge of €400 million on the Saipem shareholding following the loss of control over the investee. Net of the Saipem transaction, Eni Group recorded a substantial recovery in profitability across all business segments. This trend benefitted from the progress in the implementation of the Group’s strategy, in terms of accelerating the time-to-market of discoveries, strengthening efficiency, capital discipline and restructuring the long-term gas contracts portfolio, as well as the plant setup at refineries and petrochemical plants.

Leveraging on the turnaround achievements, Eni has been able to fully capture an ongoing recovery in the oil price scenario, supported by growing demand and shrinking oversupply due to the full implementation of production cuts from members of OPEC and other non-member countries. The mid-downstream businesses were helped by higher global demand for commodities. These market trends drove a rebound in crude oil prices (the marker Brent was up by 24% y-o-y), in the SERM refining margin (up by 33%) and a substantial increase of petrochemical margins.

Against this backdrop, Group consolidated sales from operations for the nine months of 2017 grew by 24% and operating profit was up by 610% (or €3.2 billion). Furthermore, the increase in net profit for the nine months of 2017 (approximately €2.7 billion, excluding Saipem) benefitted from the normalization of the tax rate as disclosed in the adjusted results. Similar trends featured in the third quarter of 2017 with operating profit increasing by 420% y-o-y (+€0.8 billion) and net profit improving by €0.9 billion.

 

 -11- 

 

Net borrowings and cash flow from operations

 

IIQ   IIIQ   Nine months  
2017 (€  million) 2017 2016 Change 2017 2016 Change
18 Net profit (loss) 345 (561) 906 1,330 (1,385) 2,715
  Adjustments to reconcile net profit (loss) to net cash provided by operating activities:            
2,466 - depreciation, depletion and amortization and other non monetary items 1,991 2,181 (190) 6,513 6,033 480
7 - net gains on disposal of assets (159) (10) (149) (495) (37) (458)
377 - dividends, interests and taxes 678 397 281 2,201 1,480 721
674 Changes in working capital related to operations 376 (115) 491 126 657 (531)
(836) Dividends received, taxes paid, interests (paid) received (1,070) (567) (503) (2,876) (2,323) (553)
2,706 Net cash provided by operating activities 2,161 1,325 836 6,799 4,425 2,374
(2,092) Capital expenditure (1,570) (2,051) 481 (6,493) (6,930) 437
(14) Investments (453) (6) (447) (503) (1,158) 655
67 Disposal of consolidated subsidiaries, businesses tangible and intangible assets and investments 368 70 298 992 1,021 (29)
54 Other cash flow related to capital expenditure, investments and disposals 1,128 (106) 1,234 1,367 (149) 1,516
721 Free cash flow 1,634 (768) 2,402 2,162 (2,791) 4,953
56 Borrowings (repayment) of debt related to financing activities (10) 30 (40) (114) 5,229 (5,343)
172 Changes in short and long-term financial debt 754 1,854 (1,100) 1,076 32 1,044
(1,443) Dividends paid and changes in non-controlling interests and reserves (1,440) (1,408) (32) (2,883) (2,852) (31)
(32) Effect of changes in consolidation, exchange differences and cash and cash equivalent related to discontinued operations (14) (5) (9) (52) (25) (27)
(526) NET CASH FLOW 924 (297) 1,221 189 (407) 596

 

Change in net borrowings

 

IIQ   IIIQ   Nine months  
2017 (€ million) 2017 2016 Change 2017 2016 Change
721 Free cash flow 1,634 (768) 2,402 2,162 (2,791) 4,953
  Net borrowings of divested companies (3) 28 (31) (3) 5,848 (5,851)
186 Exchange differences on net borrowings and other changes 311 (46) 357 535 658 (123)
(1,443) Dividends paid and changes in non-controlling interest and reserves (1,440) (1,408) (32) (2,883) (2,852) (31)
(536) CHANGE IN NET BORROWINGS 502 (2,194) 2,696 (189) 863 (1,052)

 

Cash flow from operating activities amounted to €6.8 billion, or €6.6 billion when excluding changes in working capital at replacement cost.

 

Capital expenditure and investments of €7 billion for the period presented an expenditure slowdown in the third quarter of 2017 subsequently to the peak reported in the first half of 2017 due to the completion of certain large projects (Angola, Ghana and Indonesia). Investing activities relating investments included the capital contribution made to the equity-accounted entity Coral FLNG, which has commissioned the construction of an LNG floating unit as part of the development plan of the gas reserves of the Coral field, offshore Mozambique.

Pro-forma capex was €5.7 billion, which excluded the share of capex to be borne by the operators who purchased interests in certain Group exploration assets under development (namely in Egypt and Mozambique) with retroactive economic effects, the capex share of which will be reimbursed to Eni at the closing of the underlying transactions, advances cashed in from our State owned partners in the Zohr project, as well as the share of capital contribution to Coral FLNG which is planned to be replaced by third-party financing.

 

Adjusted cash flow from operations in excess of funding pro-forma capex amounted to approximately €1 billion and funded part of the payment of the 2016 final dividend to Eni’s shareholders and the 2017 interim dividend (€2.88 billion). Proceeds from disposals (€1 billion) related mainly to the closing of the sale of a 10% stake in the Zohr exploration asset to BP (€0.54 billion), finalized in the first quarter of 2017. The total consideration includes the reimbursement of capex borne by Eni since January 1, 2016 (the 2017 amount being $64 million). Furthermore, disposals included the Gas&Power retail activities in Belgium (€0.30 billion). Other cash flows related to capital expenditure included an advance on the divestment to Rosneft of a 30% stake in the Zohr project ($1.38 billion) and the unpaid portion of the Coral FLNG capital increase, while on the minus side was the deferred price of the 10% stake in the Zohr exploration asset divested to BP.

 

 -12- 

 

 

In the nine months of 2017, cash flow from operations was also influenced by a lower level of receivables due beyond the end of the reporting period being sold to financing institutions compared to the amount sold at the end of the previous reporting period (approximately €0.2 billion).

 

Summarized Group Balance Sheet

 

(€ million) Sept. 30, 2017 June 30, 2017 Dec. 31, 2016 Change vs.
June 30, 2017		 Change vs.
Dec. 31, 2016
           
Fixed assets 73,001 75,945 79,729 (2,944) (6,728)
Net working capital          
Inventories 4,638 4,858 4,637 (220) 1
Trade receivables 9,886 9,744 11,186 142 (1,300)
Trade payables (9,522) (9,381) (11,038) (141) 1,516
Tax payables and provisions for, net deferred tax liabilities (3,018) (3,286) (3,073) 268 55
Provisions (13,410) (14,044) (13,896) 634 486
Other current assets and liabilities 834 1,275 1,171 (441) (337)
  (10,592) (10,834) (11,013) 242 421
Provisions for employee post-retirements benefits (880) (880) (868)   (12)
Assets held for sale including related liabilities 13 165 14 (152) (1)
CAPITAL EMPLOYED, NET 61,542 64,396 67,862 (2,854) (6,320)
           
Eni's shareholders equity 46,529 48,881 53,037 (2,352) (6,508)
Non-controlling interest 48 48 49   (1)
Shareholders' equity 46,577 48,929 53,086 (2,352) (6,509)
Net borrowings 14,965 15,467 14,776 (502) 189
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 61,542 64,396 67,862 (2,854) (6,320)
Leverage 0.32 0.32 0.28   0.04

 

·As of September 30, 2017, net borrowings2 were €14.96 billion, recording a slight increase of €0.2 billion compared to December 31, 2016. Management expects to reduce the Company’s net borrowings y-o-y due to the finalization of announced disposals.

 

·As of September 30, 2017, the ratio of net borrowings to shareholders’ equity including non-controlling interest – leverage3 – was 0.32, up from 0.28 as of December 31, 2016. Total equity decreased by €6.5 billion driven by unfavorable foreign currency translation differences (about €4.9 billion) and the payment of the 2016 final dividend and the 2017 interim dividend (€2.88 billion).

 

 

2 Details on net borrowings are furnished on page 24.

3 Non-GAAP financial measures and other alternative performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables in line with guidance provided by ESMA guidelines on alternative performance measures (ESMA/2015/1415), published on October 5, 2015. For further information see the section “Non-GAAP measures” of this press release. See pages 15 and subsequent.

 

 -13- 

 

 

Other information, basis of presentation and disclaimer

 

Article No. 36 of Italian regulatory exchanges (Consob Resolution No. 16191/2007 and subsequent amendments). Continuing listing standards about issuers that control subsidiaries incorporated or regulated in accordance with laws of extra-EU Countries. Certain provisions have been enacted to regulate continuing Italian listing standards of issuers controlling subsidiaries that are incorporated or regulated in accordance with laws of extra-EU Countries, also having a material impact on the consolidated financial statements of the parent company. Regarding the aforementioned provisions, as of September 30, 2017, Eni’s subsidiaries - Eni Congo SA, Eni Norge AS, Eni Petroleum Co Inc, Nigerian Agip Oil Co Ltd, Nigerian Agip Exploration Ltd, Eni Finance USA Inc, Eni Trading & Shipping Inc, Eni Canada Holding Ltd, Eni Turkmenistan Ltd and Eni Ghana Exploration and Production Ltd – fall within the scope of the new continuing listing standards. Eni has already adopted adequate procedures to ensure full compliance with the new regulations.

 

This press release on Eni’s results of the second, third and nine months of 2017 has been prepared on a voluntary basis according to article 82-ter, Regulations on issuers (Consob Regulation No. 11971 of May 14, 1999 and subsequent amendments and inclusions). The disclosure of results and business trends on a quarterly basis is consistent with Eni’s policy to provide the market and investors with regular information about the Company’s financial and industrial performances and business prospects considering the reporting policy followed by oil&gas peers who are communicating results each quarter. Results and cash flow are presented for the second and third quarter of 2017, the nine months of 2017 and for the third quarter and the nine months of 2016. Information on the Company’s financial position relates to end of the periods as of September 30, June 30, 2017 and December 31, 2016. Accounts set forth herein have been prepared in accordance with the evaluation and recognition criteria set by the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure set forth in Article 6 of the European Regulation (CE) No. 1606/2002 of the European Parliament and European Council of July 19, 2002. These criteria are unchanged from the 2016 Annual report on form 20-F filed with the US SEC on March 22, 2017, which investors are urged to read.

 

Non-GAAP financial measures and other alternative performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables in line with guidance provided by ESMA guidelines on alternative performance measures (ESMA/2015/1415), published on October 5, 2015. For further information see the section “Alternative performance measures (Non-GAAP measures)” of this press release.

 

Eni’s Chief Financial Officer, Massimo Mondazzi, in his position as manager responsible for the preparation of the Company’s financial reports, certifies that data and information disclosed in this press release correspond to the Company’s evidence and accounting books and records, pursuant to rule 154-bis paragraph 2 of Legislative Decree No. 58/1998.

 

* * *

 

Disclaimer

This press release, in particular the statements under the section “Outlook”, contains certain forward-looking statements particularly those regarding capital expenditure, development and management of oil and gas resources, dividends, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sales growth, new markets and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the timing of bringing new fields on stream; management’s ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply; demand and pricing; operational issues; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; development and use of new technology; changes in public expectations and other changes in business conditions; the actions of competitors and other factors discussed elsewhere in this document. Due to the seasonality in demand for natural gas and certain refined products and the changes in a number of external factors affecting Eni’s operations, such as prices and margins of hydrocarbons and refined products, Eni’s results from operations and changes in net borrowings for the third quarter of the year cannot be extrapolated on an annual basis.

 

* * *

 

Company Contacts

Press Office: +39.0252031875 - +39.0659822030

Freephone for shareholders (from Italy): 800940924

Freephone for shareholders (from abroad): +80011223456

Switchboard: +39-0659821

ufficio.stampa@eni.com

segreteriasocietaria.azionisti@eni.com

investor.relations@eni.com

Website: www.eni.com

* * *

Eni

Società per Azioni Rome, Piazzale Enrico Mattei, 1

Share capital: €4,005,358,876 fully paid.

Tax identification number 00484960588

Tel.: +39 0659821 - Fax: +39 0659822141

 

This press release for the third quarter and the nine months of 2017 (unaudited) is also available on Eni’s website eni.com.

 

 -14- 

 

 

Alternative performance measures (Non-GAAP measures)  

 

Management evaluates underlying business performance on the basis of Non-GAAP financial measures under IFRS (“Alternative performance measures”), such as adjusted operating profit and adjusted net profit, which are arrived at by excluding inventory holding gains or losses, special items and, in determining the business segments’ adjusted results, finance charges on finance debt and interest income. The adjusted operating profit of each business segment reports gains and losses on derivative financial instruments entered into to manage exposure to movements in foreign currency exchange rates which affect industrial margins and translation of commercial payables and receivables. Accordingly, also currency translation effects recorded through profit and loss are reported within business segments’ adjusted operating profit. The taxation effect of the items excluded from adjusted operating or net profit is determined based on the specific rate of taxes applicable to each of them. Management includes them in order to facilitate a comparison of base business performance across periods, and to allow financial analysts to evaluate Eni’s trading performance on the basis of their forecasting models. Non-GAAP financial measures should be read together with information determined by applying IFRS and do not stand in for them. Other companies may adopt different methodologies to determine Non-GAAP measures.

 

Follows the description of the main alternative performance measures adopted by Eni. The measures reported below refer to the actual performance:

 

Adjusted operating and net profit

Adjusted operating and net profit are determined by excluding inventory holding gains or losses, special items and, in determining the business segments’ adjusted results, finance charges on finance debt and interest income. The adjusted operating profit of each business segment reports gains and losses on derivative financial instruments entered into to manage exposure to movements in foreign currency exchange rates which impact industrial margins and translation of commercial payables and receivables. Accordingly, also currency translation effects recorded through profit and loss are reported within business segments’ adjusted operating profit. The taxation effect of the items excluded from adjusted operating or net profit is determined based on the specific rate of taxes applicable to each of them. Finance charges or income related to net borrowings excluded from the adjusted net profit of business segments are comprised of interest charges on finance debt and interest income earned on cash and cash equivalents not related to operations. Therefore, the adjusted net profit of business segments includes finance charges or income deriving from certain segment operated assets, i.e., interest income on certain receivable financing and securities related to operations and finance charge pertaining to the accretion of certain provisions recorded on a discounted basis (as in the case of the asset retirement obligations in the Exploration & Production segment).

 

Inventory holding gain or loss

This is the difference between the cost of sales of the volumes sold in the period based on the cost of supplies of the same period and the cost of sales of the volumes sold calculated using the weighted average cost method of inventory accounting as required by IFRS.

 

Special items

These include certain significant income or charges pertaining to either: (i) infrequent or unusual events and transactions, being identified as non-recurring items under such circumstances; (ii) certain events or transactions which are not considered to be representative of the ordinary course of business, as in the case of environmental provisions, restructuring charges, asset impairments or write ups and gains or losses on divestments even though they occurred in past periods or are likely to occur in future ones; in this respect, from the reporting period 2017 special items comprise an adjustment to align the doubtful credit allowance of the retail G&P business (included in the G&P reportable segment) to the “expected loss” accounting model replacing the criteria of the incurred loss in the evaluation of the recoverability of trade receivables. The new criterion will be adopted in GAAP accounts effective January 1, 2018. This result adjustment is consistent with management assessment of this business performance and improves the correlation between revenues and costs incurred in the period with respect to the current accounting method; or (iii) exchange rate differences and derivatives relating to industrial activities and commercial payables and receivables, particularly exchange rate derivatives to manage commodity pricing formulas which are quoted in a currency other than the functional currency. Those items are reclassified in operating profit with a corresponding adjustment to net finance charges, notwithstanding the handling of foreign currency exchange risks is made centrally by netting off naturally-occurring opposite positions and then dealing with any residual risk exposure in the exchange rate market.

As provided for in Decision No. 15519 of July 27, 2006 of the Italian market regulator (CONSOB), non-recurring material income or charges are to be clearly reported in the management’s discussion and financial tables. Also, special items allow to allocate to future reporting periods gains and losses on re-measurement at fair value of certain non hedging commodity derivatives and exchange rate derivatives relating to commercial exposures, lacking the criteria to be designed as hedges, including the ineffective portion of cash flow hedges and certain derivative financial instruments embedded in the pricing formula of long-term gas supply agreements of the Exploration & Production segment.

 

Leverage

Leverage is a Non-GAAP measure of the Company’s financial condition, calculated as the ratio between net borrowings and shareholders’ equity, including non-controlling interest. Leverage is the reference ratio to assess the solidity and efficiency of the Group balance sheet in terms of incidence of funding sources including third-party funding and equity as well as to carry out benchmark analysis with industry standards.

 

Adjusted cash flow

Adjusted cash flow is defined as net cash provided from operating activities before changes in working capital at replacement cost.

 

Free cash flow

Free cash flow represents the link existing between changes in cash and cash equivalents (deriving from the statutory cash flows statement) and in net borrowings (deriving from the summarized cash flow statement) that occurred from the beginning of the period to the end of period. Free cash flow is the cash in excess of capital expenditure needs. Starting from free cash flow it is possible to determine

 

 -15- 

 

 

either: (i) changes in cash and cash equivalents for the period by adding/deducting cash flows relating to financing debts/receivables (issuance/repayment of debt and receivables related to financing activities), shareholders’ equity (dividends paid, net repurchase of own shares, capital issuance) and the effect of changes in consolidation and of exchange rate differences; (ii) changes in net borrowings for the period by adding/deducting cash flows relating to shareholders’ equity and the effect of changes in consolidation and of exchange rate differences.

 

Net borrowings

Net borrowings is calculated as total finance debt less cash, cash equivalents and certain very liquid investments not related to operations, including among others non-operating financing receivables and securities not related to operations. Financial activities are qualified as “not related to operations” when these are not strictly related to the business operations.

 

(€ million)            
Third Quarter 2017 Exploration &
Production		 Gas &
Power 		Refining &
Marketing
and
Chemicals		 Corporate
and other
activities		 Impact of
unrealized
intragroup
profit
elimination		 GROUP
Reported operating profit (loss) 1,041 (120) 367 (181) (109) 998
Exclusion of inventory holding (gains) losses   15 (95)   17 (63)
Exclusion of special items:            
environmental charges     29     29
impairments losses (impairment reversals), net   1 31 1   33
net gains on disposal of assets (1)     (1)   (2)
risk provisions (1)     30   29
provision for redundancy incentives 2   1 (1)   2
commodity derivatives   (90) 1     (89)
exchange rate differences and derivatives (20) (64) (4)     (88)
other 25 65 7 1   98
Special items of operating profit (loss) 5 (88) 65 30   12
Adjusted operating profit (loss) 1,046 (193) 337 (151) (92) 947
Net finance (expense) income (a) (39) 3 1 (146)   (181)
Net income (expense) from investments (a) 104 (2) 15 18   135
Income taxes (a) (670) 53 (111) 29 28 (671)
Tax rate (%) 60.3 .. 31.4     74.5
Adjusted net profit (loss) 441 (139) 242 (250) (64) 230
of which:            
- Adjusted net profit (loss) of non-controlling interest           1
- Adjusted net profit (loss) attributable to Eni's shareholders           229
             
Reported net profit (loss) attributable to Eni's shareholders           344
Exclusion of inventory holding (gains) losses           (45)
Exclusion of special items           (70)
Adjusted net profit (loss) attributable to Eni's shareholders           229

 

(a) Excluding special items.

 

 -16- 

 

 

(€ million)            
Third Quarter 2016  Exploration &
Production		 Gas &
Power 		Refining &
Marketing
and
Chemicals		 Corporate
and other
activities		 Impact of
unrealized
intragroup
profit
elimination		 GROUP
Reported operating profit (loss) 559 (325) 192 (167) (67) 192
Exclusion of inventory holding (gains) losses   (12) (73)   (2) (87)
Exclusion of special items:            
environmental charges     19 45   64
impairments losses (impairment reversals), net     30 3   33
net gains on disposal of assets   1 (1)      
risk provisions 106   1     107
provision for redundancy incentives 1   1 1   3
commodity derivatives 4 (34) (3)     (33)
exchange rate differences and derivatives (27) (12) 1     (38)
other 1 8 8     17
Special items of operating profit (loss) 85 (37) 56 49   153
Adjusted operating profit (loss) 644 (374) 175 (118) (69) 258
Net finance (expense) income (a) (63) 3   (175)   (235)
Net income (expense) from investments (a) (46) (10) 3 (13)   (66)
Income taxes (a) (548) 79 (57) 64 22 (440)
Tax rate (%) 102.4 .. 32.0     ..
Adjusted net profit (loss) (13) (302) 121 (242) (47) (483)
of which:            
- Adjusted net profit (loss) of non-controlling interest           1
- Adjusted net profit (loss) attributable to Eni's shareholders           (484)
Reported net profit (loss) attributable to Eni's shareholders           (562)
Exclusion of inventory holding (gains) losses           (59)
Exclusion of special items           137
Adjusted net profit (loss) attributable to Eni's shareholders           (484)

 

(a) Excluding special items.

 

 -17- 

 

 

(€ million)            
Nine month 2017  Exploration &
Production		 Gas &
Power 		Refining &
Marketing
and
Chemicals		 Corporate
and other
activities		 Impact of
unrealized
intragroup
profit
elimination		 GROUP
Reported operating profit (loss) 3,520 (131) 764 (526) 45 3,672
Exclusion of inventory holding (gains) losses   (29) (39)   (2) (70)
Exclusion of special items:            
environmental charges     53 18   71
impairments losses (impairment reversals), net 1 (5) 89 9   94
net gains on disposal of assets (343)   (2) (1)   (346)
risk provisions 87     79   166
provision for redundancy incentives 7 34 4 2   47
commodity derivatives   153 (7)     146
exchange rate differences and derivatives (32) (158) (11)     (201)
other 66 135 27 (7)   221
Special items of operating profit (loss) (214) 159 153 100   198
Adjusted operating profit (loss) 3,306 (1) 878 (426) 43 3,800
Net finance (expense) income (a) (11) 9 3 (536)   (535)
Net income (expense) from investments (a) 291 (5) 16 46   348
Income taxes (a) (1,954) (65) (301) 156 (10) (2,174)
Tax rate (%) 54.5 .. 33.6     60.2
Adjusted net profit (loss) 1,632 (62) 596 (760) 33 1,439
of which:            
- Adjusted net profit (loss) of non-controlling interest           3
- Adjusted net profit (loss) attributable to Eni's shareholders           1,436
Reported net profit (loss) attributable to Eni's shareholders           1,327
Exclusion of inventory holding (gains) losses           (51)
Exclusion of special items           160
Adjusted net profit (loss) attributable to Eni's shareholders           1,436

 

(a) Excluding special items.

 

 -18- 

 

 

 

(€ million)                
Nine months 2016 Exploration &
Production		 Gas &
Power 		Refining &
Marketing
and
Chemicals		 Corporate
and other
activities		 Impact of
unrealized
intragroup
profit
elimination		 GROUP DISCONTINUED
OPERATIONS		 CONTINUING
OPERATIONS
Reported operating profit (loss) 847 (396) 555 (427) (62) 517   517
Exclusion of inventory holding (gains) losses   146 (225)   141 62   62
Exclusion of special items:                
environmental charges     86 79   165   165
impairments losses (impairment reversals), net 105   64 12   181   181
impairment of exploration projects 7         7   7
net gains on disposal of assets 1   (5)     (4)   (4)
risk provisions 106   1 1   108   108
provision for redundancy incentives 5 1 5 3   14   14
commodity derivatives 19 (178) 11     (148)   (148)
exchange rate differences and derivatives (2) (52) (2)     (56)   (56)
other 6 161 18 (2)   183   183
Special items of operating profit (loss) 247 (68) 178 93   450   450
Adjusted operating profit (loss) 1,094 (318) 508 (334) 79 1,029   1,029
Net finance (expense) income (a) (178) 7   (330)   (501)   (501)
Net income (expense) from investments (a) (9) (12) 23 (10)   (8)   (8)
Income taxes (a) (1,258) 24 (162) 107 (24) (1,313)   (1,313)
Tax rate (%) 138.7 .. 30.5     ..   ..
Adjusted net profit (loss) (351) (299) 369 (567) 55 (793)   (793)
of which:                
- Adjusted net profit (loss) of non-controlling interest           6   6
- Adjusted net profit (loss) attributable to Eni's shareholders         (799)   (799)
Reported net profit (loss) attributable to Eni's shareholders           (1,804) 413 (1,391)
Exclusion of inventory holding (gains) losses           42   42
Exclusion of special items           963 (413) 550
Adjusted net profit (loss) attributable to Eni's shareholders           (799)   (799)

 

(a) Excluding special items.

 

 -19- 

 

 

(€ million)            
Second Quarter 2017 Exploration &
Production		 Gas &
Power 		Refining &
Marketing
and
Chemicals		 Corporate
and other
activities		 Impact of
unrealized
intragroup
profit
elimination		 GROUP
Reported operating profit (loss) 851 (225) 33 (227) 131 563
Exclusion of inventory holding (gains) losses     255   (3) 252
Exclusion of special items:            
environmental charges     17 18   35
impairments losses (impairment reversals), net 1 (6) 39 7   41
net gains on disposal of assets 1   (2)     (1)
risk provisions 4     49   53
provision for redundancy incentives 3 32 1 3   39
commodity derivatives   55 3     58
exchange rate differences and derivatives (21) (80) (6)     (107)
other 6 78 12 (10)   86
Special items of operating profit (loss) (6) 79 64 67   204
Adjusted operating profit (loss) 845 (146) 352 (160) 128 1,019
Net finance (expense) income (a) (28)   2 (183)   (209)
Net income (expense) from investments (a) 169 (2) (9) 13   171
Income taxes (a) (425) 15 (119) 49 (38) (518)
Tax rate (%) 43.1 .. 34.5     52.8
Adjusted net profit (loss) 561 (133) 226 (281) 90 463
of which:            
- Adjusted net profit (loss) of non-controlling interest            
- Adjusted net profit (loss) attributable to Eni's shareholders           463
Reported net profit (loss) attributable to Eni's shareholders           18
Exclusion of inventory holding (gains) losses           180
Exclusion of special items           265
Adjusted net profit (loss) attributable to Eni's shareholders           463

 

(a) Excluding special items.

 

 -20- 

 

 

Breakdown of special items

 

IIQ   IIIQ Nine months
2017 (€ million) 2017 2016 2017 2016
35 Environmental charges 29 64 71 165
41 Impairments losses (impairment reversals), net 33 33 94 181
  Impairment of exploration projects       7
(1) Net gains on disposal of assets (2)   (346) (4)
53 Risk provisions 29 107 166 108
39 Provisions for redundancy incentives 2 3 47 14
58 Commodity derivatives (89) (33) 146 (148)
(107) Exchange rate differences and derivatives (88) (38) (201) (56)
86 Other 98 17 221 183
204 Special items of operating profit (loss) 12 153 198 450
125 Net finance (income) expense 103 38 234 110
  of which:        
107 - exchange rate differences and derivatives reclassified to operating profit (loss) 88 38 201 56
68 Net income (expense) from investments (162) 112 (96) 455
  of which:        
  - gains on disposal of assets (164) (45) (164) (52)
68 - impairments/revaluation of equity investments 2 108 70 481
(132) Income taxes (23) (166) (176) (52)
  of which:        
  - net impairment of deferred tax assets of Italian subsidiaries   (101)   48
(132) - taxes on special items of operating profit and other special items (23) (65) (176) (100)
265 Total special items of net profit (loss) (70) 137 160 963

 

 -21- 

 

  

Analysis of Profit and Loss account items  

  

Net sales from operations

 

IIQ   IIIQ   Nine months  
2017 (€ million) 2017 2016 % Ch. 2017 2016 % Ch.
4,376 Exploration & Production 4,628 3,991 16.0 13,954 11,234 24.2
11,710 Gas & Power 11,430 9,211 24.1 37,082 28,975 28.0
5,344 Refining & Marketing and Chemicals 5,449 4,910 11.0 16,308 13,608 19.8
4,167 - Refining & Marketing 4,440 3,989 11.3 12,901 10,791 19.6
1,255 - Chemicals 1,120 1,012 10.7 3,721 3,114 19.5
(78) - Consolidation adjustment (111) (91)   (314) (297)  
339 Corporate and other activities 344 323 6.5 1,031 952 8.3
(6,126) Consolidation adjustments (6,167) (5,240)   (19,001) (14,814)  
15,643   15,684 13,195 18.9 49,374 39,955 23.6

 

Operating expenses

 

IIQ   IIIQ   Nine months  
2017 (€ million) 2017 2016 % Ch. 2017 2016 % Ch.
12,447 Purchases, services and other 12,064 10,358 16.5 38,130 31,778 20.0
88  of which: - other special items 58 171   237 273  
778 Payroll and related costs 702 709 (1.0) 2,264 2,253 0.5
39  of which: - provision for redundancy incentives and other 2 3   47 14  
13,225     12,766 11,067   15.4   40,394   34,031   18.7

 

DD&A, impairments, reversals and write-off

 

IIQ   IIIQ   Nine months  
2017 (€ million) 2017 2016 % Ch. 2017 2016 % Ch.
1,758 Exploration & Production 1,761 1,692 4.1 5,165 5,015 3.0
88 Gas & Power 83 88 (5.7) 260 262 (0.8)
90 Refining & Marketing and Chemicals 88 98 (10.2) 267 283 (5.7)
77 - Refining & Marketing 75 89 (15.7) 227 264 (14.0)
13 - Chemicals 13 9 44.4 40 19 ..
15 Corporate and other activities 14 18 (22.2) 45 55 (18.2)
(7) Impact of unrealized intragroup profit elimination (8) (7)   (22) (21)  
1,944 Total depreciation, depletion and amortization 1,938 1,889 2.6 5,715 5,594 2.2
41 Impairment losses (impairment reversals), net 33 33   94 181 (48.1)
1,985 Depreciation, depletion, amortization, impairments and reversals 1,971 1,922 2.5 5,809 5,775 0.6
49 Write-off 9 17 (47.1) 202 138 46.4
2,034   1,980 1,939 2.1 6,011 5,913 1.7

 

 -22- 

 

 

 

IIQ   IIIQ Nine months
2017 (€ million) 2017 2016 2017 2016
63 Asset impairment 33 33 116 218
(22) Impairment reversals     (22) (37)
41 Impairments losses (impairment reversals), net 33 33 94 181

 

 

Income (expense) from investments

(€ million)          
Nine months 2017 Exploration &
Production		 Gas &
Power		 Refining &
Marketing and
Chemicals		 Corporate
and other
activities		 Group
Share of gains (losses) from equity-accounted investments 190 (5) (3) (18) 164
Dividends 104   24   128
Net gains (losses) on disposals   164     164
Other income (expense), net (3) (6) (3)   (12)
  291 153 18 (18) 444

 

 -23- 

 

 

Leverage and net borrowings

 

Leverage is a measure used by management to assess the Company’s level of indebtedness. It is calculated as a ratio of net borrowings to shareholders’ equity, including non-controlling interest. Management periodically reviews leverage in order to assess the soundness and efficiency of the Group balance sheet in terms of optimal mix between net borrowings and net equity, and to carry out benchmark analysis with industry standards.

 

June 30,
2017		 (€ million) Sept. 30,
2017		 Dec. 31,
2016		 Change vs.
Dec. 31, 2016
27,075 Total debt 27,508 27,239 269
7,042  -  Short-term debt 7,108 6,675 433
20,033  -  Long-term debt 20,400 20,564 (164)
(4,939) Cash and cash equivalents (5,863) (5,674) (189)
(6,305) Securities held for trading and other securities held for non-operating purposes (6,365) (6,404) 39
(364) Financing receivables held for non-operating purposes (315) (385) 70
15,467 Net borrowings 14,965 14,776 189
48,929 Shareholders' equity including non-controlling interest 46,577 53,086 (6,509)
0.32 Leverage 0.32 0.28 0.04

 

Net borrowings are calculated under Consob provisions on Net Financial Position (Com. no. DEM/6064293 of 2006).

 

 

Bonds maturing in the 18-months period starting on September 30, 2017

 

(€ million)  
Issuing entity Amount at  Sept.
30, 2017 (a)
Eni SpA 3,705
Eni Finance International SA 411
   
  4,116

 

(a) Amounts include interest accrued and discount on issue.

 

 

Bonds issued in the nine months of 2017 (guaranteed by Eni Spa)

 

Issuing entity Nominal
amount		 Currency Amount at
Sept. 30, 2017 (a)		 Maturity Rate %
  (€ million)   (€ million)      
Eni SpA 750 EUR 751 2027 fixed 1.50
Eni SpA 650 EUR 647 2025 fixed 1.00
             
  1,400   1,398      

 

(a) Amounts include interest accrued and discount on issue.

 

 -24- 

 

 

Consolidated financial statements

 

BALANCE SHEET

(€ million)      
  Sept. 30, 2017 June 30, 2017 Dec. 31, 2016
ASSETS      
Current assets      
Cash and cash equivalents 5,863 4,939 5,674
Other financial activities held for trading 6,157 6,082 6,166
Other financial assets available for sale 208 223 238
Trade and other receivables 15,117 15,836 17,593
Inventories 4,638 4,858 4,637
Current tax assets 286 303 383
Other current tax assets 896 433 689
Other current assets 1,263 1,432 2,591
  34,428 34,106 37,971
Non-current assets      
Property, plant and equipment 65,336 67,585 70,793
Inventory - compulsory stock 1,209 1,147 1,184
Intangible assets 2,956 3,043 3,269
Equity-accounted investments 4,360 3,944 4,040
Other investments 222 234 276
Other financial assets 1,804 1,793 1,860
Deferred tax assets 4,071 4,084 3,790
Other non-current assets 1,483 1,529 1,348
  81,441 83,359 86,560
Assets held for sale 13 355 14
TOTAL ASSETS 115,882 117,820 124,545
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities      
Short-term debt 2,712 2,851 3,396
Current portion of long-term debt 4,396 4,191 3,279
Trade and other payables 15,948 14,956 16,703
Income taxes payable 388 426 426
Other taxes payable 2,310 1,948 1,293
Other current liabilities 1,323 1,547 2,599
  27,077 25,919 27,696
Non-current liabilities      
Long-term debt 20,400 20,033 20,564
Provisions for contingencies 13,410 14,044 13,896
Provisions for employee benefits 880 880 868
Deferred tax liabilities 6,017 6,228 6,667
Other non-current liabilities 1,521 1,597 1,768
  42,228 42,782 43,763
Liabilities directly associated assets held for sale   190  
       
TOTAL LIABILITIES 69,305 68,891 71,459
SHAREHOLDERS' EQUITY      
Non-controlling interest 48 48 49
Eni shareholders' equity:      
Share capital 4,005 4,005 4,005
Reserve related to the fair value of cash flow hedging derivatives net of tax effect 63 (60) 189
Other reserves 43,156 44,534 52,329
Treasury shares (581) (581) (581)
Interim dividend (1,441)   (1,441)
Net profit (loss) 1,327 983 (1,464)
Total Eni shareholders' equity 46,529 48,881 53,037
TOTAL SHAREHOLDERS' EQUITY 46,577 48,929 53,086
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 115,882 117,820 124,545

 

 -25- 

 

  

GROUP PROFIT AND LOSS ACCOUNT

 

IIQ   IIIQ Nine months
2017 (€ million) 2017 2016 2017 2016
  REVENUES        
15,643 Net sales from operations 15,684 13,195 49,374 39,955
141 Other income and revenues 99 82 725 584
15,784 Total revenues 15,783 13,277 50,099 40,539
  OPERATING EXPENSES        
12,447 Purchases, services and other 12,064 10,358 38,130 31,778
778 Payroll and related costs 702 709 2,264 2,253
38 Other operating (expense) income (39) (79) (22) (78)
1,944 Depreciation, Depletion and Amortization 1,938 1,889 5,715 5,594
41 Impairment Losses (Impairment reversals), net 33 33 94 181
49 Write-Off 9 17 202 138
563 OPERATING PROFIT (LOSS) 998 192 3,672 517
  FINANCE INCOME (EXPENSE)        
946 Finance income 985 762 3,257 3,952
(1,732) Finance expense (1,424) (892) (4,654) (4,312)
(52) Income (expense) from other financial activities held for trading (41) (36) (92) (89)
504 Derivative financial instruments 196 (107) 720 (112)
(334)   (284) (273) (769) (561)
  INCOME (EXPENSE) FROM INVESTMENTS        
56 Share of profit (loss) of equity-accounted investments 79 (208) 164 (127)
47 Other gain (loss) from investments 218 30 280 27
103   297 (178) 444 (100)
332 PROFIT (LOSS) BEFORE INCOME TAXES 1,011 (259) 3,347 (144)
(314) Income taxes (666) (302) (2,017) (1,241)
18 Net profit (loss) - continuing operations 345 (561) 1,330 (1,385)
  Net profit (loss) - discontinued operations       (413)
18 Net profit (loss) 345 (561) 1,330 (1,798)
  Eni's shareholders:        
18  - continuing operations 344 (562) 1,327 (1,391)
   - discontinued operations       (413)
18   344 (562) 1,327 (1,804)
  Non controlling interest        
   - continuing operations 1 1 3 6
   - discontinued operations        
    1 1 3 6
  Net profit (loss) per share attributable
to Eni's shareholders (€ per share)		        
0.00 - basic 0.10 (0.16) 0.37 (0.50)
0.00 - diluted 0.10 (0.16) 0.37 (0.50)
  Net profit (loss) per share - continuing operations
attributable to Eni's shareholders (€ per share)		        
0.00 - basic 0.10 (0.16) 0.37 (0.39)
0.00 - diluted 0.10 (0.16) 0.37 (0.39)

 

 -26- 

 

 

COMPREHENSIVE INCOME

 

  IIIQ Nine months
(€ million) 2017 2016 2017 2016
Net profit (loss) 345 (561) 1,330 (1,798)
Items that may be reclassified to profit in later periods        
Currency translation differences (1,395) (218) (4,907) (1,093)
Change in the fair value of cash flow hedging derivatives 162 64 (163) 492
Change in the fair value of other available-for-sale financial instruments     2  
Share of "Other comprehensive income" on equity-accounted entities 14 10 65 44
Taxation (39) (22) 37 (128)
         
Total other items of comprehensive income (loss) (1,258) (166) (4,966) (685)
Total comprehensive income (loss) (913) (727) (3,636) (2,483)
attributable to:        
Eni's shareholders (914) (728) (3,639) (2,489)
 - continuing operations (914) (728) (3,639) (2,076)
 - discontinued operations       (413)
Non-controlling interest 1 1 3 6
 - continuing operations 1 1 3 6
 - discontinued operations        
         

 

 

CHANGES IN SHAREHOLDERS’ EQUITY

 

(€ million)      
Shareholders' equity at January 1, 2016:     57,409
       
Total comprehensive income (loss)   (2,483)  
Dividends paid to Eni's shareholders   (2,880)  
Deconsolidation of Saipem's non-controlling interest   (1,872)  
Payments to minority shareholders   (4)  
Other changes   (26)  
Total changes     (7,265)
Shareholders' equity at Sept. 30, 2016:     50,144
attributable to:      
 - Eni's shareholders     50,096
 - Non-controlling interest     48
       
Shareholders' equity at January 1, 2017:     53,086
Total comprehensive income (loss)   (3,636)  
Dividends paid to Eni's shareholders   (2,881)  
Payments to minority shareholders   (3)  
Other changes   11  
Total changes     (6,509)
Shareholders' equity at Sept. 30, 2017:     46,577
attributable to:      
 - Eni's shareholders     46,529
 - Non-controlling interest     48
       

 

 -27- 

 

 

GROUP CASH FLOW STATEMENT

 

IIQ   IIIQ Nine months
2017 (€ million) 2017 2016 2017 2016
18 Net profit (loss) 345 (561) 1,330 (1,385)
  Adjustments to reconcile net profit (loss) to net cash provided by operating activities:        
1,944 Depreciation, depletion and amortization 1,938 1,889 5,715 5,594
41 Impairment losses (impairment reversals), net 33 33 94 181
49 Write-off 9 17 202 138
(56) Share of (profit) loss of equity-accounted investments (79) 208 (164) 127
7 Gain on disposal of assets, net (159) (10) (495) (37)
(58) Dividend income (59) (22) (128) (77)
(50) Interest income (117) (48) (215) (168)
171 Interest expense 188 165 527 484
314 Income taxes 666 302 2,017 1,241
455 Other changes 78 20 624 (29)
  Changes in working capital:        
(137) - inventories 132 (158) (224) (128)
2,533 - trade receivables (102) 397 930 1,934
(1,580) - trade payables 123 (292) (1,200) (332)
86 - provisions for contingencies (156) 190 (23) (763)
(228) - other assets and liabilities 379 (252) 643 (54)
674 Cash flow from changes in working capital 376 (115) 126 657
33 Net change in the provisions for employee benefits 12 14 42 22
98 Dividends received 75 42 177 129
15 Interest received 28 23 51 90
(127) Interest paid (181) (26) (492) (420)
(822) Income taxes paid, net of tax receivables received (992) (606) (2,612) (2,122)
2,706 Net cash provided by operating activities 2,161 1,325 6,799 4,425
  Investing activities:        
(2,069) - tangible assets (1,551) (2,035) (6,347) (6,882)
(23) - intangible assets (19) (16) (146) (48)
(14) - investments (453) (6) (503) (1,158)
(9) - securities (142) (58) (216) (1,283)
(64) - financing receivables (57) (316) (441) (940)
48 - change in payables in relation to investments and capitalized depreciation (229) (81) 314 (50)
(2,131) Cash flow from investments (2,451) (2,512) (7,339) (10,361)
  Disposals:        
6 - tangible assets 44 3 607 12
  - consolidated subsidiaries and businesses net of cash and cash equivalent disposed of 301 53 301 (362)
61 - investments 23 14 84 482
25 - securities 11 9 36 16
116 - financing receivables 123 370 454 7,286
(6) - change in receivables in relation to disposals 1,412   1,106 51
202 Cash flow from disposals 1,914 449 2,588 7,485
(1,929) Net cash used in investing activities (*) (537) (2,063) (4,751) (2,876)

 

 -28- 

 

 

GROUP CASH FLOW STATEMENT (continued)

 

IIQ   IIIQ Nine months
2017 (€ million) 2017 2016 2017 2016
2 Increase in long-term debt 650 1,827 1,405 3,930
(202) Repayments of long-term debt (22) (211) (291) (2,180)
372 Increase (decrease) in short-term debt 126 238 (38) (1,718)
172   754 1,854 1,076 32
(1,440) Dividends paid to Eni's shareholders (1,440) (1,408) (2,880) (2,848)
(3) Dividends paid to non-controlling interests     (3) (4)
(1,271) Net cash used in financing activities (686) 446 (1,807) (2,820)
2

Effect of change in consolidation (inclusion/exclusion of significant/insignificant

subsidiaries)

     7 (1)
  Effect of cash and cash equivalents relating to discontinued operations       889
(34) Effect of exchange rate changes on cash and cash equivalents and other changes (14) (5) (59) (24)
(526) Net cash flow for the period 924 (297) 189 (407)
5,465 Cash and cash equivalents - beginning of the period (excluding discontinued operations) 4,939 5,099 5,674 5,209
4,939 Cash and cash equivalents - end of the period (excluding discontinued operations) 5,863 4,802 5,863 4,802

 

(*) Net cash used in investing activities included investments and divestments (on net basis) in held-for-trading financial assets and other investments/divestments in certain short-term financial assets. Due to their nature and the circumstance that they are very liquid, these financial assets are netted against finance debt in determing net borrowings. Cash flows of such investments were as follows:

 

IIQ   IIIQ Nine months
2017   2017 2016 2017 2016
56 Net cash flow from financing activities (10) 30 (114) 5,229

 

 

SUPPLEMENTAL INFORMATION

 

IIQ   IIIQ Nine months
2017 (€ million) 2017 2016 2017 2016
  Effect of disposals of consolidated subsidiaries and businesses        
  Current assets 144 26 144 6,526
  Non-current assets 123 64 123 8,614
  Net borrowings 12 (23) 12 (5,415)
  Current and non-current liabilities (133) (24) (133) (6,334)
  Net effect of disposals 146 43 146 3,391
  Reclassification of exchange rate differences included in other comprehensive income   7   7
  Current value of residual interests following the loss of control       (1,006)
  Gains (losses) on disposal 164 7 164 12
  Non-controlling interest       (1,872)
  Selling price 310 57 310 532
  less:        
  Cash and cash equivalents disposed of (9) (4) (9) (894)
  Cash flow on disposals 301 53 301 (362)
           

 

 -29- 

 

  

Capital expenditure

 

IIQ   IIIQ   Nine months  
2017 (€ million) 2017 2016 % Ch. 2017 2016 % Ch.
1,983 Exploration & Production 1,404 1,919 (26.8) 6,158 6,542 (5.9)
  - acquisition of proved and unproved properties         2  
74 - g&g costs 61 45 35.6 200 159 25.8
85 - exploration 102 113 (9.7) 386 283 36.4
1,814 - development 1,229 1,752 (29.9) 5,538 6,045 (8.4)
10 - other expenditure 12 9 33.3 34 53 (35.8)
30 Gas & Power 33 23 43.5 82 67 22.4
151 Refining & Marketing and Chemicals 188 149 26.2 439 361 21.6
111 - Refining & Marketing 132 97 36.1 311 237 31.2
40 - Chemicals 56 52 7.7 128 124 3.2
9 Corporate and other activities 13 9 44.4 29 29  
(7) Impact of unrealized intragroup profit elimination (7) (4)   (15) 90  
2,166 Capital expenditure 1,631 2,096 (22.2) 6,693 7,089 (5.6)
74 Cash out in net cash flow from operating activities 61 45 35.6 200 159 25.8
2,092 Cash out in net cash flow from investment activities 1,570 2,051 (23.5) 6,493 6,930 (6.3)

 

In the nine months of 2017, capital expenditure amounted to €6,493 million (€6,930 million in the nine months of 2016) and mainly related to:

- development activities (€5,538 million) deployed mainly in Egypt, Ghana, Angola, Congo, Iraq and Indonesia; exploration activities (€386 million) concerned mainly Cyprus, Norway, Egypt, Libya, Mexico and Ivory Coast;

- refining activity in Italy and outside Italy (€246 million) aimed at assets integrity, as well as initiatives in the field of health, security and environment; marketing activity, mainly regulation compliance and stay in business initiatives in the refined product retail network in Italy and in the Rest of Europe (€65 million);

- initiatives relating to gas marketing (€59 million) as well as initiatives to improve flexibility and upgrade combined-cycle power plants (€21 million).

Cash-outs comprised in net cash from operating activities (€200 million) relate to geological and geophysical studies as part of the exploration activities, which are charged to expenses.

 

 -30- 

 

  

Exploration & Production

 

PRODUCTION OF OIL AND NATURAL GAS BY REGION

 

IIQ     IIIQ Nine months
2017     2017 2016 2017 2016
1,771 Production of oil and natural gas (a) (b)  (kboe/d) 1,803 1,710 1,790 1,726
100 Italy   136 125 130 125
218 Rest of Europe   174 187 198 188
679 North Africa   685 638 690 635
345 Sub-Saharan Africa   374 330 341 341
136 Kazakhstan   118 103 132 104
108 Rest of Asia   137 133 113 135
164 America   160 171 165 174
21 Australia and Oceania   19 23 21 24
149.7 Production sold (a)  (mmboe) 156.3 148.5 457.3 447.5

 

 

            
PRODUCTION OF LIQUIDS BY REGION          
           
IIQ     IIIQ Nine months
2017     2017 2016 2017 2016
827 Production of liquids (a) (kbbl/d) 885 864 848 869
27 Italy   56 42 49 40
123 Rest of Europe   96 108 109 99
214 North Africa   243 242 227 245
239 Sub-Saharan Africa   277 239 244 253
86 Kazakhstan   77 64 83 60
62 Rest of Asia   56 85 57 86
74 America   78 81 77 83
2 Australia and Oceania   2 3 2 3

 

  

            
PRODUCTION OF NATURAL GAS BY REGION          
           
IIQ     IIIQ Nine months
2017     2017 2016 2017 2016
5,152 Production of natural gas (a) (b) (mmcf/d) 5,012 4,616 5,138 4,680
399 Italy   436 453 439 460
515 Rest of Europe   424 430 484 488
2,536 North Africa   2,413 2,162 2,526 2,131
581 Sub-Saharan Africa   527 495 529 482
277 Kazakhstan   222 216 266 238
249 Rest of Asia   447 262 308 270
495 America   449 492 484 497
100 Australia and Oceania   94 106 102 114

 

(a) Includes Eni’s share of production of equity-accounted entities.

(b) Includes volumes of gas consumed in operation (527 and 462 mmcf/d in the third quarter of 2017 and 2016, respectively, 510 mmcf/d and 452 mmcf/d in the nine months of 2017 and 2016, respectively, and 526 mmcf/d in the second quarter 2017).

 

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Gas & Power

 

Natural gas sales by market

 

IIQ   IIIQ   Nine months  
2017 (bcm) 2017 2016 % Ch. 2017 2016 % Ch.
9.50 ITALY 7.93 8.76 (9.5) 27.81 28.18 (1.3)
2.12 - Wholesalers 1.03 1.39 (25.9) 6.11 5.38 13.6
3.98 - Italian exchange for gas and spot markets 2.75 3.95 (30.4) 8.50 10.35 (17.9)
1.15 - Industries 1.04 1.06 (1.9) 3.33 3.35 (0.6)
0.16 - Medium-sized enterprises and services 0.14 0.27 (48.1) 0.66 1.28 (48.4)
0.31 - Power generation 1.17 0.22 .. 1.70 0.52 ..
0.38 - Residential 0.25 0.27 (7.4) 2.97 2.86 3.8
1.40 - Own consumption 1.55 1.60 (3.1) 4.54 4.44 2.3
9.13 INTERNATIONAL SALES 9.51 10.52 (9.6) 31.54 34.87 (9.5)
8.23 Rest of Europe 8.21 8.98 (8.6) 27.97 30.64 (8.7)
0.89 - Importers in Italy 0.97 1.10 (11.8) 2.90 3.22 (9.9)
7.34 - European markets 7.24 7.88 (8.1) 25.07 27.42 (8.6)
1.26 Iberian Peninsula 1.31 1.31 0.0 3.82 3.76 1.6
1.52 Germany/Austria 1.53 1.79 (14.5) 5.04 5.97 (15.6)
1.18 Benelux 0.96 1.31 (26.7) 3.71 5.35 (30.7)
  Hungary   0.06 ..   0.93 ..
0.57 UK 0.40 0.34 17.6 1.65 1.06 55.7
1.63 Turkey 2.14 1.58 35.4 5.95 4.56 30.5
1.05 France 0.87 1.05 (17.1) 4.44 4.96 (10.5)
0.13 Other 0.03 0.44 (93.2) 0.46 0.83 (44.6)
0.90 Rest of World 1.30 1.54 (15.6) 3.57 4.23 (15.6)
18.63 WORLDWIDE GAS SALES 17.44 19.28 (9.5) 59.35 63.05 (5.9)

 

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