Eni’s Performance decreases in the third quarter of 2023. Italian hydrocarbon giant Eni reported a 67% drop in net profit to 1.91 billion euros. This decline is attributed to lower oil and gas prices. However, this result, published on Friday, exceeds the expectations of Factset analysts, who were forecasting a profit of 1.64 billion euros.
Impact of lower oil and gas prices
Adjusted net income, a key indicator followed by the markets as it excludes exceptional items, also fell to 1.81 billion euros, down 51%. In 2022, Eni posted a record net profit of 13.8 billion euros, benefiting from rising oil and gas prices. In 2023, however, the situation has changed radically. The price of a barrel of North Sea Brent averaged $86.76 in the third quarter, marking a 14% drop, as indicated in Eni’s press release. However, this decline is less severe than the 31% drop recorded in the second quarter, when the average price was $78.39. In addition, the benchmark price of natural gas fell by 83% in the third quarter, according to Eni.
Sales below forecasts
Eni’s sales fell by 40% to €22.31 billion, well below analysts’ forecasts of €32.58 billion. Adjusted Ebit (operating profit) fell by 48% to 3.01 billion euros in the third quarter. However, for the full year, Eni has revised its adjusted Ebit forecast upwards to 14 billion euros, from 12 billion euros previously.
Forecasts and Future Strategy
This revision is largely due to the recovery in oil prices, fuelled by fears that the conflict between Israel and Hamas could spread to neighboring countries. Eni now forecasts a Brent crude oil price of $84 per barrel for 2023, compared with $80 previously.
Increased Production and Diversification
In terms of hydrocarbon production, Eni recorded a 4% increase, reaching 1.63 million barrels per day in the third quarter. The company’s ambition is to increase the proportion of gas in its production to 60% by 2030, compared with around 50% at present, in order to reduce its dependence on Russia. With this in mind, Eni has signed a supply agreement with Qatar to supply up to one million tonnes of liquefied natural gas (LNG) to Italy. Deliveries will begin in 2026 for a period of 27 years. In October, Eni also announced the discovery of a “major” gas field in Indonesia, estimated at around 140 billion cubic meters. Future daily production is estimated at between 2.2 and 2.7 million cubic metres.
