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 July 2018

 

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

 

- Press release dated July 27, 2018.

 

 

 

 

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/ Vanessa Siscaro
  Name: Vanessa Siscaro
  Title: Head of Corporate
  Secretary’s Staff Office

 

Date: August 3, 2018

 

 

 

 

 

Registered Head Office,

Piazzale Enrico Mattei, 1

00144 Rome

Tel. +39 06598.21

www.eni.com

 

San Donato Milanese

July 27, 2018

 

Eni results for the second quarter and half year 2018

 

Key operating and financial results  

 

IQ     IIQ IH
2018   2018 2017 % Ch. 2018 2017 % Ch.
66.76 Brent dated $/bbl 74.35 49.83 49 70.55 51.81 36
1.229 Average EUR/USD exchange rate   1.191 1.101 8 1.210 1.083 12
54.32 Brent dated €/bbl 62.40 45.26 38 58.31 47.83 22
1,867 Hydrocarbon production kboe/d 1,863 1,771 5 1,865 1,783 5
2,380 Adjusted operating profit (loss) (a) € million 2,564 1,019 152 4,944 2,853 73
2,085 of which:  E&P   2,742 845 224 4,827 2,260 114
322                 G&P   108 (146) .. 430 192 124
77                 R&M and Chemicals   67 352 (81) 144 541 (73)
978 Adjusted net profit (loss) (a) (b)   767 463 66 1,745 1,207 45
0.27 - per share (€)   0.21 0.13   0.48 0.34  
946 Net profit (loss) (b)   1,252 18 .. 2,198 983 124
0.26 - per share (€)   0.35 0.00   0.61 0.27  
3,166 Adjusted net cash from operations at replacement cost (c)   2,823 2,324 21 5,989 4,930 21
2,187 Net cash from operations   3,033 2,706 12 5,220 4,638 13
1,758 Net capital expenditure (d)(e)   1,916 1,807 6 3,674 4,265 (14)
11,278 Net borrowings   9,897 15,467 (36) 9,897 15,467 (36)
0.23 Leverage   0.20 0.32   0.20 0.32  

 

(a) Non-GAAP measure. For further information see the paragraph "Non-GAAP measures" on page 18.

(b) Attributable to Eni's shareholders.

(c) Non-GAAP measure. Net cash provided by operating activities before changes in working capital excluding inventory holding gains or losses and certain non-recurring items. For further information see page 14.

(d) Include capital contribution to equity accounted entities.

(e) Net of the entry bonus relating to the acquisition of two Concession Agreements in the UAE, the development capex incurred in 2018 on a 10% interest in the Zohr project which were reimbursed by the acquirer of the interest an the collection of trade advances intended to fund the Zohr project.

 

Yesterday, Eni’s Board of Directors approved the Group results for the second quarter and first half of 2018 (unaudited). Commenting on the results, Claudio Descalzi, CEO of Eni, remarked:

 

Eni recorded another period of strong profitability in the second quarter. In the context of a 38% rise in the price of Brent, Eni reported a 152% increase in operating profit, driven by the performance of the Exploration & Production business, which more than tripled its contribution. Our cash generation also grew significantly, driven by the price of Brent and increased production levels, contributing to $20 per barrel, allowing us to confirm the lowering of our cash neutrality to $55 per barrel for 2018. The Gas & Power segment also reported excellent results, thanks to the strong integration of the LNG business with upstream activities and the positive impact of the restructuring carried out over the last years. A deterioration in Refining and Chemicals environment – which runs counter-cyclically to the price of Brent – meant a reduction in the contribution of these businesses, albeit remaining positive thanks to recent restructuring. There was significant progress in our portfolio management this quarter with the creation of Vår Energi in Norway as well as the funds received for the sale of Eni’s 10% stake in the Zohr field to Mubadala. As a result, net debt fell below €10 billion – the lowest level in 11 years. Consequently I will propose an interim dividend of €0.42 per share at the Board meeting on 13 September.”

 

-1-

 

 

Highlights  

 

Exploration & Production

 

·Strong growth reported in hydrocarbon production at 1.86 million boe/d (in both the reporting periods): up by 5.2% q-o-q, up by 4.6% in the first half. Net of price effects in PSAs, the growth rate was 6.6% in the quarter and 5.4% in the first half;

 

production growth fueled by the ramp-up of giant projects, recently started up: Zohr, Noroos, Jangkrik, OCTP, Ochigufu, Nenè phase 2; higher production at the Kashagan and Val d’Agri fields (the latter shutdown in the second quarter 2017) and the entry in Abu Dhabi;

 

main start-ups: Ochigufu offshore Block 15/06 in Angola, maintaining the production plateau at 150 kboe/d; Phase 2 of the giant Bahr Essalam gas field in Libya, just three years after the final investment decision.

 

·Strengthened Eni presence in Norway following the agreement to merge the subsidiary Eni Norge AS with Point Resources. The combined entity will be a leading Norwegian upstream company producing around 180 kboe/d in 2018. Closing is expected by the end of 2018.

 

·Significant progress has been made towards the final investment decision of the Rovuma LNG project to monetize the gas reserves of Area 4 in Mozambique. The development plan of the first phase of the project has been submitted to the Mozambique government. Under negotiation Rovuma LNG sales and purchase agreements. The final investment decision is expected in 2019.

 

·Zohr ramp-up in Egypt: the fourth treatment unit started up in record time increasing installed capacity to approximately 1.6 bscfd (220 kboe/d). Expected in September the start-up of the fifth treatment unit, for a total capacity of approximately 2 bscfd.

 

·Dual exploration model: the divestment to Mubadala Petroleum of a 10% stake in the Shorouk concession in offshore Egypt, where the super-giant Zohr gas field is producing, was finalized.

 

·Exploration:

 

Oil exploration successes at the Block 15/06 in Angola, as well as at two exploration prospects located in the Faghur basin, in the South West Meleiha license in Egypt.

 

New exploration acreage: awarded 100% interest in the East Ganal deepwater exploration block, in Indonesia. In the first half, awarded new mineral licences in Mexico, Lebanon and Morocco, a total of 22,000 square kilometers.

 

Resource base: in the first half of 2018 added approximately 280 million boe.

 

·A cooperation agreement with Sonatrach was finalized to develop new gas resources in conjunction with existing assets.

 

·Exploration & Production adjusted operating profit: €2.74 billion in the second quarter, a more than three-fold increase q-o-q; €4.83 billion in the first half, more than doubling y-o-y.

 

 

Gas & Power

 

·Robust recovery in profitability due to the restructuring of the portfolio of long-term gas contracts, a growing LNG business and optimizations in power and logistics: in the second quarter, adjusted operating profit of €0.11 billion, compared to a loss of €0.15 billion in the second quarter of 2017; more than doubling at €0.43 billion in the first half of 2018 (€0.19 billion in the first half of 2017).

 

·Finalized an agreement with Sonatrach for gas supplies in the 2018-2019 thermal year.

 

-2-

 

 

·LNG sales: up by 54% to 5.40 bcm in the first half of 2018, more than half sold on the Asian markets leveraging on supplies of upstream equity gas in Indonesia, as result of the improved integration across businesses.

 

·Retail business: continuous increase in the customer base, excluding the impact of the divestments.

 

·Finalized the divestment of gas distribution activities in Hungary.

 

 

Refining & Marketing and Chemicals

 

·Improved refinery utilization rates: 87% in the second quarter, 92% in the first half of 2018 (up by 4 and 6 percentage points, respectively).

 

·Petrochemical sales up by 12.5% in the second quarter of 2018 (up by 7% in the first half of 2018), driven by an improvement in plant performance.

 

·Refining & Marketing adjusted operating profit: €61 million, down by 63% q-o-q (€79 million for the first half, down by 66%) due to an unfavorable trading environment.

 

·Chemicals adjusted operating profit: €6 million in the second quarter, negatively affected by rapidly-escalating costs of oil-based feedstock, not yet fully recovered in product prices; €65 million in the first half (down by 79%).

 

 

Group results

 

·Adjusted operating profit: €2.56 billion, up by 152% on a quarterly basis; €4.94 billion in the first half (up by 73% vs. first half of 2017).

 

·Adjusted net profit: €0.77 billion, up by 66% q-o-q; €1.74 billion, up by 45% in the first half of 2018.

 

·Net profit: €1.25 billion in the second quarter (€2.20 billion in the first half).

 

·Strong cash flow from operations: €3 billion (up by 12% q-o-q); €5.2 billion in the first half (up by 13%).

 

·Adjusted cash flow from operations1 before changes in working capital at replacement cost at €2.82 billion in the second quarter, €5.99 billion in the first half (up by 21% q-o-q and y-o-y).

 

·Net capex: €3.67 billion2 in the first half; more than funded by organic cash flow.

 

·Net borrowings: €9.9 billion.

 

·Leverage: 0.20, lower than the level of December 31, 2017 (0.23).

 

·2018 interim dividend proposal: €0.42 per share3, out of a full-year dividend of €0.83 per share.

 

 

1 See table on page 14.

2 See details on page 1, footnote (d).

3 Dividends are not entitled to tax credit and, depending on the receiver, are subject to a withholding tax on distribution or are partially cumulated to the receivers' taxable income.

 

-3-

 

 

Outlook 2018  

 

Exploration & Production

 

Hydrocarbon production: the Company is forecasting a 4% increase for the FY 2018 vs. 2017 at a Brent price scenario of 60 $/bbl, equalling to a production level of about 1.9 million boe/d. This growth is expected to be driven by: continuing production ramp-up at the fields started up in 2017, particularly in Egypt, Indonesia and Ghana, a larger contribution from the Kashagan, Goliat and Val d’Agri fields, new fields start-ups in Angola, Libya and Ghana, as well as the contribution of the new venture in UAE. These increases are expected to be partly offset principally by mature fields declines.

 

 

Gas & Power

 

Revised upwardly the guidance of the FY adjusted operating profit at €400 million, notwithstanding the business seasonality with the third quarter being the weaker in the year.

 

Gas sales: expected to decline in line with an expected reduction in long-term contractual commitments both to procure and to supply gas. An increase in nearly 9 million tons of LNG contracted volumes expected by 2018 year-end.

 

 

Refining & Marketing and Chemicals

 

A projected refining break-even margin of approximately 3 $/barrel by the end of 2018, leveraging on the restart of the EST unit, at the Sannazzaro refinery.

 

Refining throughputs on own accounts expected to be flat compared to 2017, due to better performance at the Sannazzaro and Livorno refineries because of unplanned shutdowns in 2017, offset by reductions at the Taranto and Milazzo plants. Green diesel productions are expected to grow at the Venice plant. A higher refineries utilization rate is projected.

 

Retail sales were substantially unchanged y-o-y in Italy and in European markets. The market share in Italy is expected to be stable at around 24%.

 

Versalis: spreads of the main commodities, which were negatively affected by rapidly-escalating oil-based feedstock costs in the second quarter 2018, are expected to normalize. Sales volumes are expected to grow in all business lines driven by higher product availability and by fewer planned standstills and upsets.

 

 

Group

 

Cash neutrality: funding of capex for the FY and the dividend is confirmed at a Brent price of approximately 55 $/bbl in 2018.

 

2018 FY Capex expected to be €7.7 billion, in line with the guidance.

 

-4-

 

 

Sustainability and Energy Solution business development  

 

 

    IH  
    2018 2017 Ch. %
Total recordable injury rate (TRIR) (total recordable injury rate/worked hours) x 1,000,000 0.29 0.35 (17.1)
Direct GHG emissions (mmtonnes CO2 eq.) 21.14 20.53 3.0
- of which CO2 eq from combustion and process 16.28 15.88 2.5
- of which CO2 eq from methane fugitive   0.67 0.51 31.4
- of which CO2 eq from flaring   3.37 3.27 3.1
- of which CO2 eq from venting   0.82 0.87 (5.7)
Direct GHG emissions E&P/production (tonnes CO2 eq./toe) 0.153 0.164 (6.7)
Oil spills due to operations (>1 barrel) (barrels) 653 2,829 (76.9)
Water reinjection (%) 60 60 ..

 

·Energy Solution business development:

 

- Signed the final investment decision with the Kazakh Energy Minister to build, develop and operate a 50 MW wind farm to supply renewable energy to the Country;

 

- Eni and GSE presented a 26 MWp photovoltaic plant in the Assemini industrial area in the province of Cagliari. The plant is part of Progetto Italia, a pool of Eni initiatives designed to create sustainable value by revamping neglected industrial hubs, mainly in Southern Italy.

 

·The total recordable injury rate improved by 17.1% y-o-y.

 

·Direct GHG emissions/operated hydrocarbon production: 0.153 tCO2eq/toe, an improvement of 6.7% y-o-y.

 

Direct GHG emissions from combustion and process increased by 2.5% reflecting higher production level mainly in the E&P segment due to the ramp-ups and restart of certain plants, partially offset by lower power production in the G&P business.

 

Emissions from methane fugitive: up by 31.4% due to higher upstream productions.

 

Emissions from flaring in the E&P segment are up by 3.1% due to temporary commissioning activities relating to new projects started at the end of 2017 and the restart of operations in Libya.

 

·Water reinjection rate at the E&P segment is unchanged at 60%, mainly benefitting from the positive trend in performance reported by fields in Egypt and Ecuador.

 

-5-

 

 

Business segments operating review  

 

Exploration & Production

 

Production and prices

 

IQ     IIQ   IH  
2018   2018 2017 % Ch. 2018 2017 % Ch.
  Production              
885 Liquids kbbl/d 881 827 6.5 883 830 6.4
5,358 Natural gas mmcf/d 5,359 5,152 4.1 5,359 5,203 3.4
1,867 Hydrocarbons kboe/d 1,863 1,771 5.2 1,865 1,783 4.6
  Average realizations              
61.17 Liquids $/bbl 69.17 45.29 52.7 65.35 46.90 39.3
4.50 Natural gas $/kcf 4.52 3.45 31.2 4.51 3.53 28.0
42.34 Hydrocarbons $/boe 47.62 32.05 48.6 45.02 32.73 37.5

 

·In the second quarter of 2018, oil and natural gas production averaged 1,863 kboe/d, up by 5.2% from the second quarter of 2017 (1,865 kboe/d in the first half of 2018; up by 4.6%). This performance was driven by the ramp-up at fields started up in 2017, mainly in Indonesia, Egypt, Congo and Ghana and the 2018 start-ups (with a total contribution of 287 kboe/d), as well as higher production at the Kashagan and Val d’Agri fields (the latter shutdown in the second quarter 2017) and the acquisition of the two Concession Agreements Lower Zakum (5%) and Umm Shaif/Nasr (10%) producing offshore in the United Arab Emirates. These positives were partly offset by negative price effects at PSAs contracts, lower production as a result of planned and unplanned shutdowns in Libya, the United Kingdom and Norway, as well as declines from mature fields. When excluding price effects to PSAs contracts (approximately 25 kboe/d and 14 kboe/d in the quarter and the first half, respectively), hydrocarbons production increased by 6.6% and 5.4% in the quarter and the first half of 2018, respectively.

 

·Liquids production (881 kbbl/d) increased by 54 kbbl/d, or 6.5% from the second quarter of 2017 (883 kbbl/d in the first half of 2018, up by 6.4%) due to production ramp-ups of the period and the acquisition in the United Arab Emirates partially offset by price effect and mature fields decline.

 

·Natural gas production (5,359 mmcf/d) increased by 207 mmcf/d, or 4.1% compared to the second quarter of the previous year (5,359 mmcf/d in the first half, up by 3.4%). Start-ups and ramp-ups of producing assets were partly offset by planned and unplanned shutdowns.

 

-6-

 

 

Results

 

IQ     IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
1,966 Operating profit (loss)   2,602 851 .. 4,568 2,479 84.3
119 Exclusion of special items   140 (6)   259 (219)  
2,085 Adjusted operating profit (loss)   2,742 845 224.5 4,827 2,260 113.6
(56) Net finance (expense) income   (263) (28)   (319) 28  
35 Net income (expense) from investments   109 169   144 187  
(1,140) Income taxes   (1,504) (425)   (2,644) (1,284)  
55.2 tax rate (%)   58.1 43.1   56.8 51.9  
924 Adjusted net profit (loss)   1,084 561 93.2 2,008 1,191 68.6
  Results also include:              
75 Exploration expenses:   86 113 (23.9) 161 321 (49.8)
64 - prospecting, geological and geophysical expenses   64 74   128 139  
11 - write-off of unsuccessful wells   22 39   33 182  
2,368 Capital expenditure   1,693 1,909 (11.3) 4,061 4,615 (12.0)

 

·In the second quarter of 2018, the Exploration & Production segment reported an adjusted operating profit of €2,742 million, a more than threefold increase from the second quarter of 2017 (€845 million). This improvement reflected sharply higher crude oil prices (with the Brent price up by 49% in dollar terms) and higher hydrocarbon production, partly offset by currency headwinds (with the EUR/USD exchange rate up by 8% q-o-q). In the first half of 2018, adjusted operating profit was €4,827 million, more than doubling y-o-y, driven by the same trends mentioned above.

 

·In the second quarter of 2018, adjusted net profit was €1,084 million, up by €523 million or 93.2% compared to the second quarter of 2017 (€2,008 million in the first half of 2018, up by €817 million y-o-y). This was due to higher operating performance partly offset by the write-off of financing receivables taken in connection with an unsuccessful exploration project executed by a joint venture in the Black Sea (€200 million). Results were also impacted by an increased adjusted tax rate (up by 15 and 5 percentage points in the quarter and first half, respectively) due to a higher share of taxable profit reported in Countries with higher taxation as well as the non-deductible expense related to the unsuccessful initiative above mentioned. Cash tax rate was 32.7% and 28.4% in the two reporting period.

 

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

 

-7-

 

 

Gas & Power

 

Sales

 

IQ     IIQ   IH  
2018   2018 2017 % Ch. 2018 2017 % Ch.
239 PSV €/kcm 245 192 27.8 242 206 17.7
227 TTF   224 165 35.5 225 180 25.2
  Natural gas sales bcm            
11.19 Italy   9.77 9.50 2.8 20.96 19.88 5.4
9.28 Rest of Europe   6.14 8.23 (25.4) 15.42 19.76 (22.0)
0.89 of which: Importers in Italy   0.49 0.89 (44.9) 1.38 1.93 (28.5)
8.39                European markets   5.65 7.34 (23.0) 14.04 17.83 (21.3)
1.97 Rest of World   2.17 0.90 .. 4.14 2.27 82.4
22.44 Worldwide gas sales   18.08 18.63 (3.0) 40.52 41.91 (3.3)
2.70 of which: LNG sales   2.70 1.50 80.0 5.40 3.50 54.3
9.22 Power sales Twh 8.49 8.39 1.2 17.71 17.76 (0.3)

 

·In the second quarter of 2018, natural gas sales were 18.08 bcm (40.52 bcm in the first half), down by 3% from the second quarter of 2017. Sales in Italy were up by 2.8% to 9.77 bcm, due to higher sales to wholesalers and the residential segment, partly offset by lower spot sales. Sales in European markets (5.65 bcm) decreased by 23% reflecting the termination of some long-term and short-term contracts mainly in Germany/Austria, as a result of portfolio rationalization.

 

·Power sales were 8.49 TWh in the second quarter of 2018, up by 1.2% mainly due to higher volumes sold in France. In the first half, sales volumes remained almost unchanged (17.71 TWh).

 

Results

 

 

IQ

    IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
398 Operating profit (loss)   157 (225) .. 555 (11) ..
(76) Exclusion of special items and inventory holding (gains) losses   (49) 79   (125) 203  
322 Adjusted operating profit (loss)   108 (146) .. 430 192 ..
3 Net finance (expense) income   (9)     (6) 6  
11 Net income (expense) from investments     (2)   11 (3)  
(121) Income taxes   (42) 15   (163) (118)  
36.0 tax rate (%)   42.4 10.1   37.5 60.5  
215 Adjusted net profit (loss)   57 (133) .. 272 77 ..
42 Capital expenditure   55 30 83.3 97 49 98.0

 

·In the second quarter of 2018, the Gas & Power segment reported an adjusted operating profit of €108 million, a significant improvement compared to the loss of €146 million reported in the second quarter of 2017. This result reflected the overall restructuring of the portfolio of long-term gas supply contracts, including lower logistic costs and optimizations in the power business. These positives were offset by lower non-recurring gains relating to retroactive effects of the renegotiations performed in 2017 and lower gas volumes sold. In the first half of 2018, adjusted operating profit amounted to €430 million, representing an increase of €238 million compared to the first half of 2017.

 

·Adjusted net profit amounted to €57 million in the second quarter of 2018, reverting a loss of €133 million reported in the previous year (a profit of €272 million in the first half of 2018).

 

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

 

-8-

 

 

Refining & Marketing and Chemicals

 

Production and sales

 

IQ     IIQ   IH  
2018   2018 2017 % Ch. 2018 2017 % Ch.
3.0 Standard Eni Refining Margin (SERM) $/bbl 4.1 5.3 (22.6) 3.5 4.7 (24.8)
5.51 Throughputs in Italy mmtonnes 4.84 4.88 (0.7) 10.35 10.06 2.9
0.68 Throughputs in the rest of Europe   0.76 0.75 0.8 1.44 1.39 3.3
6.19 Total throughputs   5.60 5.63 (0.5) 11.79 11.45 3.0
97 Average refineries utilization rate   87 83   92 86  
0.06 Green throughputs   0.07 0.07 .. 0.13 0.10 30.0
  Marketing              
1.99 Retail sales in Europe mmtonnes 2.11 2.19 (3.6) 4.10 4.19 (2.1)
1.40 Retail sales in Italy   1.48 1.55 (4.1) 2.88 2.96 (2.7)
0.59 Retail sales in the rest of Europe   0.63 0.64 (2.3) 1.22 1.23 (0.7)
24.1 Retail market share in Italy % 24.1 24.4   24.1 24.2  
2.37 Wholesale sales in Europe mmtonnes 2.67 2.77 (3.5) 5.04 5.12 (1.6)
1.68 Wholesale sales in Italy   1.89 1.98 (4.7) 3.57 3.66 (2.5)
0.69 Wholesale sales in the rest of Europe   0.78 0.79 (0.6) 1.47 1.46 0.6
  Chemicals              
1,236 Sales of petrochemical products ktonnes 1,304 1,159 12.5 2,540 2,374 7.0
80 Average plant utilization rate % 79 76   79 77  

 

 

·In the second quarter of 2018, Eni’s Standard Refining Margin – SERM – was 4.1 $/barrel, down by 22.6% from the second quarter of 2017, due to lower relative prices of products compared to the cost of the petroleum feedstock (-24.8%; 3.5 $/barrel in the first half) reflecting the strong increase of oil prices.

 

·Eni refining throughputs were 5.60 mmtonnes, a slight decrease from the second quarter of 2017 (up by 3% in the first half), reflecting lower volumes processed at the Sannazzaro and Milazzo refineries due to planned standstills, offset by higher volumes at the Taranto refinery due to a downtime at the topping unit in the same period of the previous year and the planned standstill at the Bayern Oil refinery occurred in 2017.

 

·Volumes of biofuels produced at the Venice Green refinery were barely unchanged from the second quarter of 2017 (up by 30% compared to the first half of 2017).

 

·Retail sales in Italy of 1.48 mmtonnes declined by 4.1% in the quarter (2.88 mmtonnes, down by 2.7% in the first half of 2018), due to lower volumes sold to all market segments on the back of declining consumptions and increasing competitive pressure. Eni’s retail market share for the quarter was 24.1%, lower than in the second quarter of 2017 (24.4%).

 

·Wholesale sales in Italy were 1.89 mmtonnes, declining by 4.7% from the second quarter of 2017 (down by 2.5% from the first half of 2017) mainly due to lower sales of gasoil, bunker and jet fuel, partly offset by increased sales of fuel oil and bitumes.

 

·Retail and wholesale sales in the rest of Europe decreased by 1.4% q-o-q (unchanged in the first half of 2018), due to lower sales volumes in France and Switzerland, partly offset by higher sales in Spain.

 

·Sales of petrochemical products of 1,304 ktonnes increased by 12.5% and 7% in the second quarter and first half of 2018 respectively, mainly due to higher sales of intermediates driven by fewer shutdowns as well as elastomers due to higher product availability.

 

-9-

 

 

Results

 

IQ     IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
138 Operating profit (loss)   258 33 .. 396 397 (0.3)
(99) Exclusion of inventory holding (gains) losses   (260) 255   (359) 56  
38 Exclusion of special items   69 64   107 88  
77 Adjusted operating profit (loss)   67 352 (81.0) 144 541 (73.4)
18 - Refining & Marketing   61 165 (63.0) 79 231 (65.8)
59 - Chemicals   6 187 (96.8) 65 310 (79.0)
12 Net finance (expense) income   (1) 2   11 2  
23 Net income (expense) from investments   (21) (9)   2 1  
(45) Income taxes   (26) (119)   (71) (190)  
40.2 tax rate (%)   57.8 34.5   45.2 34.9  
67 Adjusted net profit (loss)   19 226 (91.6) 86 354 (75.7)
125 Capital expenditure   199 151 31.8 324 251 29.1

 

·In the second quarter of 2018, the Refining & Marketing and Chemicals segment reported an adjusted operating profit of €67 million (€144 million in the first half), down by 81% from €352 million reported in the second quarter of 2017 (down by 73.4% from the first half of 2017).

 

·The Refining & Marketing business reported an adjusted operating profit of €61 million, down by 63% q-o-q (€79 million in the first half of 2018; down by 65.8%) due to an unfavorable trading environment with the refining margin declining by 23%, reflecting higher oil feedstock costs which were not passed onto product prices, and the appreciation of the euro against the US dollar (up by 8%). Moreover, performance was negatively affected by operating difficulties in the oxygenate business in Venezuela. In the first half of 2018, the overall result benefitted from a lower number of unplanned shutdowns. The negative scenario was partly offset by plants and supply optimizations. The marketing performance was substantially unchanged q-o-q.

 

·The Chemical business reported an adjusted operating profit of €6 million, down by 96.8% q-o-q (€65 million in the first half of 2018; down by 79% from the first half of 2017). This decrease was driven by lower margins on sales of intermediates and polyethylene, due to rapidly-escalating costs of oil-based feedstock unable to recover in final prices and mounting competitive pressures from cheaper product streams from the Middle-East and the USA. Furthermore, it is worth mentioning that first half of 2017 results benefitted from peak prices recorded for intermediates, mainly butadiene and benzene, reflecting one-off effects (product shortages in the USA and Asian markets).

 

·Adjusted net profit amounting to €19 million in the second quarter of 2018 decreased by 91.6% q-o-q (€86 million in the first half of 2018; down by 75.7%) due to lower operating performance.

 

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

 

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Group results  

 

IQ   IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
17,932 Net sales from operations 18,139 15,643 16.0 36,071 33,690 7.1
2,399 Operating profit (loss) 2,639 563 .. 5,038 2,674 88.4
(95) Exclusion of inventory holding (gains) losses (259) 252   (354) (7)  
76 Exclusion of special items (a) 184 204   260 186  
2,380 Adjusted operating profit (loss) 2,564 1,019 151.6 4,944 2,853 73.3
  Breakdown by segment:            
2,085 Exploration & Production 2,742 845 224.5 4,827 2,260 113.6
322 Gas & Power 108 (146) 174.0 430 192 124.0
77 Refining & Marketing and Chemicals 67 352 (81.0) 144 541 (73.4)
(162) Corporate and other activities (169) (160) (5.6) (331) (275) (20.4)
58 Impact of unrealized intragroup profit elimination and other consolidation adjustments (b) (184) 128   (126) 135  
946 Net profit (loss) attributable to Eni's shareholders 1,252 18 .. 2,198 983 ..
(67) Exclusion of inventory holding (gains) losses (184) 180   (251) (6)  
99 Exclusion of special items (a) (301) 265   (202) 230  
978 Adjusted net profit (loss) attributable to Eni's shareholders 767 463 65.7 1,745 1,207 44.6

 

(a) For further information see table "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 second quarter of 2018, Eni’s consolidated adjusted operating profit of €2,564 million more than doubled compared to the second quarter of 2017. The improvement was driven by a robust performance in the E&P segment (the adjusted operating profit was €2,742 million, a three-fold increase q-o-q) due to sharply higher crude oil prices (the Brent benchmark in dollar terms was up by 49%) and production growth, partly offset by a weaker dollar (the EUR/USD exchange rate was up by 8%). The G&P segment reported an adjusted operating profit of €108 million compared to the operating loss of €146 million in the second quarter of 2017. This result reflected further actions concerning long-term supply contracts, a reduction in logistic costs and an improved performance in the power and LNG businesses. The R&M and Chemicals segment reported a decrease of 81% in operating performance due to an unfavorable trading environment, partly offset by continued efficiency initiatives and plant optimizations as well as better utilization rates.

 

·In the first half of 2018, the consolidated adjusted operating profit of €4,944 million was up by 73%. The €2.1 billion increase was comprised of a €1.4 billion increase from scenario effects and a €0.7 billion increase from production growth and efficiency and optimization gains. Second quarter results benefitted from scenario effects for €0.9 billion and an improved performance for €0.6 billion.

 

·Adjusted net profit for the quarter was €767 million, up by 66% q-o-q. The operating performance was partly offset by lower income from investments and financial items and an increased tax rate (65% in the second quarter of 2018, up by approximately 12 percentage points) mainly in the E&P segment driven by a higher share of taxable profit reported in Countries with higher taxation and non-deductible expenses related to unsuccessful exploration initiative. In the first half of 2018, an adjusted net profit of €1,745 million was reported, increasing by 45%. Adjusted tax rate was 60.7%, up by 5 percentage points. 

 

Special items

 

The breakdown by segment of special items of operating profit (a net charge of €184 million in the quarter and €260 million in the first half) is the following:

·E&P recorded net charges of €140 million (€259 million in the first half) mainly due to the outcome of an arbitration proceeding relating a long-term contract to purchase regasification services, which

 

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established the termination of the contract and of the related annual fees charged to Eni. It also awarded the counterpart equitable compensation of €282 million (plus financial interests of €18 million), an impairment loss for a gas asset to align its book value to fair value (€58 million), a risk provision relating to a contractual litigation (€45 million); an allowance for doubtful accounts as part of a dispute to recover investments towards a State counterparty to align the recoverable amount with the expected outcome of an ongoing renegotiation. The main gains were recorded on the disposal of a 10% interest in the Shorouk concession, offshore of Egypt, to Mubadala Petroleum, a UAE-based company (€323 million net of assignment bonus and other charges).

·G&P: net gains of €49 million (€125 million in the first half) were mainly driven by: the effects of fair-value commodity derivatives that lacked the formal criteria to be accounted as hedges under IFRS (net gains of €103 million in the quarter and €170 million in the first half) and an impairment relating to the alignment of the book value of the Hungarian gas distribution activity to its fair value, divested in June 2018 (€6 million in the first half). The G&P adjusted operating result also includes the positive balance of €56 million related to derivative financial instruments used 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 €69 million (€107 million in the first half) mainly comprising 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 (€20 million and €35 million in the quarter and the first half of 2018, respectively) and environmental provision (€46 million and €79 million in two reporting periods)

 

Non-operating special items included the tax effects relating to operating special items, Eni’s interest of extraordinary charges/impairment recognized by the Saipem subsidiary (€102 million) in the first half of 2018 as well as an impairment reversal (€423 million) at the Angola LNG equity-accounted entity due to improved project economics.  

 

Reported results

In the first half of 2018, net profit attributable to Eni’s shareholders was €2,198 million, more than doubled compared to the first half of 2017 (€983 million). This performance was driven by a robust operating performance of the E&P segment due to strengthening crude oil prices (up by 36% from the first half of 2017 for the Brent crude oil benchmark) on the back of a global economic recovery, and production growth. These positives were partly offset by a weaker USD (the EUR/USD exchange rate appreciated by 12% on average). The G&P segment reported a significant improvement driven by further actions at long-term supply contracts, the reduction in logistic costs and an improved performance in the power and LNG businesses, the latter also combining with the upstream segment.

The R&M and Chemicals segment was weighted down by an unfavorable trading environment due to increased oil-based feedstock costs, which were not reflected in selling prices and the competitive pressure from cheaper products streams coming from the Middle East and the USA. This negative trend which accelerated in the second quarter caused sharply lower refining margins (down by 25% q-o-q) and spreads vs. the feedstock of the main petrochemicals commodities (cracker margin down by 44% and polyethylene down by 52%). This trend was partly offset by plant optimizations and lower plant shutdowns, allowing a recovery in produced volumes, as well as by efficiency actions.

Net profit benefitted from the improved operating performance (up by €2,364 million) and the increase in finance income and net income from investments (up by €191 million) driven by an impairment reversal of the Angola LNG entity were partly offset by the write-off of a financing receivable related to an unsuccessful exploration initiative executed by a joint venture in the Black Sea. Net profit was negatively impacted by higher income taxes (up by €1,335 million), notwithstanding a 3 percentage points decrease in the group reported tax rate (54.9%) due to higher non-taxable gains.

 

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Net borrowings and cash flow from operations

 

 

IQ

  IIQ   IH  
2018 (€ million) 2018 2017 Change 2018 2017 Change
948 Net profit (loss) 1,257 18 1,239 2,205 985 1,220
  Adjustments to reconcile net profit (loss) to net cash provided by operating activities:            
1,990 - depreciation, depletion and amortization and other non monetary items 1,673 2,466 (793) 3,663 4,522 (859)
(1) - net gains on disposal of assets (417) 7 (424) (418) (336) (82)
1,368 - dividends, interests and taxes 1,415 377 1,038 2,783 1,523 1,260
(1,074) Changes in working capital related to operations 398 674 (276) (676) (250) (426)
(1,044) Dividends received, taxes paid, interests (paid) received (1,293) (836) (457) (2,337) (1,806) (531)
2,187 Net cash provided by operating activities 3,033 2,706 327 5,220 4,638 582
(2,541) Capital expenditure (1,961) (2,092) 131 (4,502) (4,923) 421
(37) Investments (73) (14) (59) (110) (50) (60)
67 Disposal of consolidated subsidiaries, businesses, tangible and intangible assets and investments 1,194 67 1,127 1,261 624 637
(140) Other cash flow related to capital expenditure, investments and disposals 812 54 758 672 239 433
(464) Free cash flow 3,005 721 2,284 2,541 528 2,013
(265) Borrowings (repayment) of debt related to financing activities 206 56 150 (59) (104) 45
(889) Changes in short and long-term financial debt (85) 172 (257) (974) 322 (1,296)
(1) Dividends paid and changes in non-controlling interests and reserves (1,442) (1,443) 1 (1,443) (1,443)  
(19) Effect of changes in consolidation, exchange differences and cash and cash equivalent 31 (32) 63 12 (38) 50
(1,638) NET CASH FLOW 1,715 (526) 2,241 77 (735) 812
           
IQ   IIQ   IH  
2018 (€ million) 2018 2017 Change 2018 2017 Change
(464) Free cash flow 3,005 721 2,284 2,541 528 2,013
(2) Net borrowings of acquired companies       (2)   (2)
  Net borrowings of divested companies (5)   (5) (5)   (5)
105 Exchange differences on net borrowings and other changes (177) 186 (363) (72) 224 (296)
(1) Dividends paid and changes in non-controlling interest and reserves (1,442) (1,443) 1 (1,443) (1,443)  
(362) CHANGE IN NET BORROWINGS 1,381 (536) 1,917 1,019 (691) 1,710

 

Net cash flow from operating activities amounted to €5,220 million in the first half 2018. Cash flow from operating activities 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 fourth quarter 2017 (approximately €700 million).

 

Net cash flow from operating activities before changes in working capital at replacement cost was €5,542 million, up by 14% compared to the first half of 2017 (€4,881 million). This performance was negatively affected by an expense recognized in connection with the final outcome of an arbitration proceeding (€300 million), an extraordinary allowance for doubtful accounts in the E&P segment (€69 million) and charges related to the sale of 10% interest in Zohr, to be substantially considered as a reduction of the proceeds from the asset disposal. Net of these charges, cash flow from operating activities before changes in working capital at replacement cost is re-determined at €5,989 million (see reconciliation table on the next page).

 

Capital expenditure for the period, including investments, was €4,612 million. Net capex amounted to approximately €3.67 billion and excluding the following items: an entry bonus paid in connection with the award of the two Concession Agreements in the UAE (€723 million); the share of the 2018 capex pertaining to a 10% divested interest in the Zohr project (€159 million), which were reimbursed to Eni by the buyer at the transaction date (end of June). Also the Company collected €50 million as an advance on future gas supplies to Egyptian state-owned partners which were intended to finance the capex of Zohr. The self-financing ratio of net capex was 142% in the first half of 2018.

 

Cash flow from disposals (€1,261 million) mainly related to the sale of the 10% interest in the Zohr project, non-strategic assets in the E&P segment and gas distribution activities in Hungary. Other cash flow related to capital expenditure, investments and disposals (€672 million) included the collection of the deferred tranches of the consideration on the sale of 10% and 30% interests in the Zohr project finalized in 2017 (€439 million) and increased payables related to capital expenditure following the progress in the development of Zohr.

 

-13-

 

 

Cash flow from operations in excess of these outflows and the payment of the 2017 final dividend to Eni’s shareholders (€1,443 million) amounted to approximately €1.1 billion and was utilized to reduce finance debt.

 

(€ million)      
  GAAP
measures
Profit/Loss on
stock
Final award of an
arbitration
Extraordinary
allowance for
doubtful accounts
Expense due
on 10% Zohr
disposal
Trade advances
cashed-in to
fund the Zohr
project
Non-GAAP measures
First half of 2018                
Net cash before changes in working capital 5,896 (354) 300 69 78   5,989 Adjusted net cash before changes in working capital
Changes in working capital (676) 354 (300) (69)   (50) (741)  
Net cash provided by operating activities 5,220       78 (50) 5,248 Underlying net cash provided by operating activities
II quarter of 2018                
Net cash before changes in working capital 2,635 (259) 300 69 78   2,823 Adjusted net cash before changes in working capital
Changes in working capital 398 259 (300) (69)   (33) 255  
Net cash provided by operating activities 3,033       78 (33) 3,078 Underlying net cash provided by operating activities

 

Summarized Group Balance Sheet

 

Mar. 31, 2018 Change (€ million) Jun. 30, 2018 Dec. 31, 2017 Change
           
           
71,515 (3,182) Fixed assets 68,333 71,415 (3,082)
    Net working capital      
4,326 393 Inventories 4,719 4,621 98
11,729 (1,071) Trade receivables 10,658 10,182 476
(10,956) 438 Trade payables (10,518) (10,890) 372
(3,774) 1,461 Tax payables and provisions for, net deferred tax liabilities (2,313) (2,387) 74
(13,096) 1,360 Provisions (11,736) (13,447) 1,711
649 (293) Other current assets and liabilities 356 287 69
(11,122) 2,288   (8,834) (11,634) 2,800
(1,059) (5) Provisions for employee post-retirements benefits (1,064) (1,022) (42)
176 1,757 Assets held for sale including related liabilities 1,933 236 1,697
59,510 858 CAPITAL EMPLOYED, NET 60,368 58,995 1,373
           
48,181 2,237 Eni's shareholders equity 50,418 48,030 2,388
51 2 Non-controlling interest 53 49 4
48,232 2,239 Shareholders' equity 50,471 48,079 2,392
11,278 (1,381) Net borrowings 9,897 10,916 (1,019)
59,510 858 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 60,368 58,995 1,373
0.23 (0.03) Leverage 0.20 0.23 (0.03)
0.19 (0.03) Gearing 0.16 0.18 (0.02)

 

·As of June 30, 2018, fixed assets decreased by €3,082 million to €68,333 million mainly due to the reclassification of Eni Norge assets as held for sale following the merger agreement signed in July with the shareholders of Point Resources. The increase of capital expenditure for the period (€4,502 million) and positive currency movements (€1,351 million) were partly offset by DD&A (€3,708 million). The increase in “Equity-accounted investments and other investments” was €1,104 million due to a new accounting of equity instruments required by IFRS 9 and impairment reversal of the Angola LNG entity.

 

·Net working capital (-€8,834 million) increased by €2,800 million mainly as a result of a decrease in risk provisions due to the reclassification of Eni Norge decommissioning provision in the disposal group

 

-14-

 

 

 

held for sale, as well as an estimate revision to the decommissioning provision due to higher discount rates.

 

·Shareholders’ equity including non-controlling interest was €50,471 million, up by €2.392 million. This was due to net profit for the period and positive foreign currency translation differences (€1,194 million) reflecting the appreciation of the dollar compared to the euro (up by 3%; EUR/USD exchange rate of 1.165 at June 30, 2018 compared to 1.2 at December 31, 2017), partly offset by the payment of the 2017 final dividend (€1,443 million).

 

·Net borrowings4 at June 30, 2018 was €9,897 million, lower than 2017 (down by €1,019 million).

 

·As of June 30, 2018, the ratio of net borrowings to shareholders’ equity including non-controlling interest – leverage5 – was 0.20, down from 0.23 as of December 31, 2017.

 

 

4 Details on net borrowings are furnished on page 26.

5 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 18 and subsequent.

 

-15-

 

 

Other information, basis of presentation and disclaimer

 

Article No. 15 (former Article No. 36) of Italian regulatory exchanges (Consob Resolution No. 20249 published on December 28, 2017).

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, the Company discloses that:

- as of June 30, 2018, ten of 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;

- the Company has already adopted adequate procedures to ensure full compliance with the new regulations.

 

This press release on Eni’s results of the second quarter of 2018 and the first half of 2018 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 on quarterly basis.

Results and cash flow are presented for the first and second quarter of 2018, the first half of 2018 and for the second quarter and the first half of 2017. Information on the Company’s financial position relates to end of the periods as of June 30, 2018 and December 31, 2017.

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 2017 Annual report on form 20-F filed with the US SEC on April 6, 2018, which investors are urged to read, excepted for the adoption of IFRS 9 and 15.

 

Adoption of IFRS 9 and IFRS 15

Effective January 1, 2018, the new accounting standards IFRS 15 “Revenue from Contracts with Customers” and IFRS9 “Financial instruments” are current. For both standards Eni elected to apply the cumulative effect method, whereby the retrospective re-measurement of net equity is recognized as restatement of the opening balance of net equity at January 1, 2018, considering the transactions current at that date, without restating the comparative reporting periods.

Further details are disclosed in the Annual report on Form 20-F 2017, in the note 7” IFRSs not yet adopted” of the Consolidated financial statements. The table below summarizes the impacts of these IFRSs on the opening balances as of January, 1, 2018. No effects were recorded at the Group net borrowings.

 

 

  Reported Impact Reclassifications Restated
(€ million) January 1, 2018 IFRS 9 IFRS 15   January 1, 2018
Current assets 36,433 (427) (372)   35,634
of which:  Trade and other receivables 15,737 (427) (372) (466) 14,472
Other current assets 1,573     466 2,039
Non-current assets 78,172 721 247   79,140
of which:  Intangible assets 2,925   87   3,012
Other investments 219 681     900
Deferred tax assets 4,078 71 166   4,315
Assets held for sale 323       323
TOTAL ASSETS 114,928 294 (125)   115,097
Current liabilities 24,735   (113)   24,622
of which:  Trade and other payables 16,748   (113) (1,330) 15,305
Other current liabilities 1,515     1,330 2,845
Non-current liabilities 42,027   37   42,064
Liabilities directly associated with assets held for sale 87       87
TOTAL LIABILITIES 66,849   (76)   66,773
TOTAL SHAREHOLDERS' EQUITY 48,079 294 (49)   48,324
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 114,928 294 (125)   115,097

 

 

* * *

 

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.

 

* * *

 

-16-

 

 

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 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 second quarter and first half of 2018 (unaudited) is also available on Eni’s website eni.com.

 

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Alternative performance measures (Non-GAAP measures)  

 

Management evaluates underlying business performance on the basis of Non-GAAP financial measures, not determined in accordance with IFRS (“Alternative performance measures”), such as adjusted operating profit and adjusted net profit, which are arrived at by excluding from reported operating profit and net profit certain gains and losses, defined special items, which include, among others, asset impairments, gains on disposals, risk provisions, restructuring charges and, in determining the business segments’ adjusted results, finance charges on finance debt and interest income (see below). In determining adjusted results, also inventory holding gains or losses are excluded from base business performance, which 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, except in those business segments where inventories are utilized as a lever to optimize margins.

 

Management is disclosing Non-GAAP measures of performance 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 performance of the reporting periods disclosed in this press release:

 

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; 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.

 

Gearing

Gearing is calculated as the ratio between net borrowings and capital employed net and measures how much of capital employed net is financed recurring to third-party funding.

 

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 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.

 

-18-

 

 

Reconciliation tables of Non-GAAP results to the most comparable measures of financial performance determined in accordance to GAAPs

 

(€ million)            
IIQ 2018 Exploration &
Production
Gas &
Power
Refining &
Marketing
and
Chemicals
Corporate
and other
activities
Impact of
unrealized
intragroup
profit
elimination
GROUP
Reported operating profit (loss) 2,602 157 258 (193) (185) 2,639
Exclusion of inventory holding (gains) losses     (260)   1 (259)
Exclusion of special items:            
environmental charges 45   46 10   101
impairment losses (impairment reversals), net 58 (7) 20 2   73
net gains on disposal of assets (418)   (6)     (424)
risk provisions 274     4   278
provision for redundancy incentives 1 1   (3)   (1)
commodity derivatives   (103) (7)     (110)
exchange rate differences and derivatives 1 56 (1)     56
other 179 4 17 11   211
Special items of operating profit (loss) 140 (49) 69 24   184
Adjusted operating profit (loss) 2,742 108 67 (169) (184) 2,564
Net finance (expense) income (a) (263) (9) (1) (171)   (444)
Net income (expense) from investments (a) 109   (21) (1)   87
Income taxes (a) (1,504) (42) (26) 78 59 (1,435)
Tax rate (%) 58.1 42.4 57.8     65.0
Adjusted net profit (loss) 1,084 57 19 (263) (125) 772
of which:            
- Adjusted net profit (loss) of non-controlling interest           5
- Adjusted net profit (loss) attributable to Eni's shareholders           767
             
Reported net profit (loss) attributable to Eni's shareholders           1,252
Exclusion of inventory holding (gains) losses           (184)
Exclusion of special items           (301)
Adjusted net profit (loss) attributable to Eni's shareholders           767

 

(a) Excluding special items.

 

-19-

 

 

(€ million)            
IIQ 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
impairment 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-

 

 

(€ million)            
IH 2018 Exploration &
Production
Gas &
Power
Refining &
Marketing
and
Chemicals
Corporate
and other
activities
Impact of
unrealized
intragroup
profit
elimination
GROUP
Reported operating profit (loss) 4,568 555 396 (350) (131) 5,038
Exclusion of inventory holding (gains) losses     (359)   5 (354)
Exclusion of special items:            
environmental charges 63   79 10   152
impairment losses (impairment reversals), net 58 6 35 3   102
net gains on disposal of assets (418)   (7)     (425)
risk provisions 339     6   345
provision for redundancy incentives 3 4 1 (3)   5
commodity derivatives   (170) (7)     (177)
exchange rate differences and derivatives 2 37 1     40
other 212 (2) 5 3   218
Special items of operating profit (loss) 259 (125) 107 19   260
Adjusted operating profit (loss) 4,827 430 144 (331) (126) 4,944
Net finance (expense) income (a) (319) (6) 11 (334)   (648)
Net income (expense) from investments (a) 144 11 2 2   159
Income taxes (a) (2,644) (163) (71) 134 41 (2,703)
Tax rate (%) 56.8 37.5 45.2     60.7
Adjusted net profit (loss) 2,008 272 86 (529) (85) 1,752
of which:            
- Adjusted net profit (loss) of non-controlling interest           7
- Adjusted net profit (loss) attributable to Eni's shareholders           1,745
             
Reported net profit (loss) attributable to Eni's shareholders           2,198
Exclusion of inventory holding (gains) losses           (251)
Exclusion of special items           (202)
Adjusted net profit (loss) attributable to Eni's shareholders           1,745

 

(a) Excluding special items.

 

-21-

 

 

(€ million)            
IH 2017 Exploration &
Production
Gas &
Power
Refining &
Marketing
and
Chemicals
Corporate
and other
activities
Impact of
unrealized
intragroup
profit
elimination
GROUP
Reported operating profit (loss) 2,479 (11) 397 (345) 154 2,674
Exclusion of inventory holding (gains) losses   (44) 56   (19) (7)
Exclusion of special items:            
environmental charges     24 18   42
impairment losses (impairment reversals), net 1 (6) 58 8   61
net gains on disposal of assets (342)   (2)     (344)
risk provisions 88     49   137
provision for redundancy incentives 5 34 3 3   45
commodity derivatives   243 (8)     235
exchange rate differences and derivatives (12) (94) (7)     (113)
other 41 70 20 (8)   123
Special items of operating profit (loss) (219) 247 88 70   186
Adjusted operating profit (loss) 2,260 192 541 (275) 135 2,853
Net finance (expense) income (a) 28 6 2 (390)   (354)
Net income (expense) from investments (a) 187 (3) 1 28   213
Income taxes (a) (1,284) (118) (190) 127 (38) (1,503)
Tax rate (%) 51.9 60.5 34.9     55.4
Adjusted net profit (loss) 1,191 77 354 (510) 97 1,209
of which:            
- Adjusted net profit (loss) of non-controlling interest           2
- Adjusted net profit (loss) attributable to Eni's shareholders           1,207
             
Reported net profit (loss) attributable to Eni's shareholders           983
Exclusion of inventory holding (gains) losses           (6)
Exclusion of special items           230
Adjusted net profit (loss) attributable to Eni's shareholders           1,207

 

(a) Excluding special items.

 

-22-

 

 

(€ million)            
IQ 2018 Exploration &
Production
Gas &
Power
Refining &
Marketing
and
Chemicals
Corporate
and other
activities
Impact of
unrealized
intragroup
profit
elimination
GROUP
Reported operating profit (loss) 1,966 398 138 (157) 54 2,399
Exclusion of inventory holding (gains) losses     (99)   4 (95)
Exclusion of special items:            
environmental charges 18   33     51
impairment losses (impairment reversals), net   13 15 1   29
net gains on disposal of assets     (1)     (1)
risk provisions 65     2   67
provision for redundancy incentives 2 3 1     6
commodity derivatives   (67)       (67)
exchange rate differences and derivatives 1 (19) 2     (16)
other 33 (6) (12) (8)   7
Special items of operating profit (loss) 119 (76) 38 (5)   76
Adjusted operating profit (loss) 2,085 322 77 (162) 58 2,380
Net finance (expense) income (a) (56) 3 12 (163)   (204)
Net income (expense) from investments (a) 35 11 23 3   72
Income taxes (a) (1,140) (121) (45) 56 (18) (1,268)
Tax rate (%) 55.2 36.0 40.2     56.4
Adjusted net profit (loss) 924 215 67 (266) 40 980
of which:            
- Adjusted net profit (loss) of non-controlling interest           2
- Adjusted net profit (loss) attributable to Eni's shareholders           978
             
Reported net profit (loss) attributable to Eni's shareholders           946
Exclusion of inventory holding (gains) losses           (67)
Exclusion of special items           99
Adjusted net profit (loss) attributable to Eni's shareholders           978

 

(a) Excluding special items.

 

-23-

 

 

Breakdown of special items

 

IQ   IIQ IH
2018 (€ million) 2018 2017 2018 2017
51 Environmental charges 101 35 152 42
29 Impairment losses (impairment reversals), net 73 41 102 61
(1) Net gains on disposal of assets (424) (1) (425) (344)
67 Risk provisions 278 53 345 137
6 Provisions for redundancy incentives (1) 39 5 45
(67) Commodity derivatives (110) 58 (177) 235
(16) Exchange rate differences and derivatives 56 (107) 40 (113)
7 Other 211 86 218 123
76 Special items of operating profit (loss) 184 204 260 186
20 Net finance (income) expense (47) 125 (27) 131
  of which:        
16 - exchange rate differences and derivatives reclassified to operating profit (loss) (56) 107 (40) 113
4 Net income (expense) from investments (319) 68 (315) 66
  of which:        
  - impairment/revaluation of equity investments (423) 68 (423) 68
(1) Income taxes (119) (132) (120) (153)
  of which:        
  - net impairment of deferred tax assets of Italian subsidiaries (73)   (73)  
(1) - taxes on special items of operating profit and other special items (46) (132) (47) (153)
99 Total special items of net profit (loss) (301) 265 (202) 230

 

-24-

 

 

Analysis of Profit and Loss account items  

 

Net sales from operations

 

IQ   IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
5,473 Exploration & Production 6,351 4,376 45.1 11,824 9,326 26.8
13,742 Gas & Power 13,035 11,710 11.3 26,777 25,652 4.4
5,566 Refining & Marketing and Chemicals 6,425 5,344 20.2 11,991 10,859 10.4
4,433 - Refining & Marketing 5,228 4,167 25.5 9,661 8,461 14.2
1,272 - Chemicals 1,343 1,255 7.0 2,615 2,601 0.5
(139) - Consolidation adjustments (146) (78)   (285) (203)  
361 Corporate and other activities 383 339 13.0 744 687 8.3
(7,210) Consolidation adjustments (8,055) (6,126)   (15,265) (12,834)  
17,932   18,139 15,643 16.0 36,071 33,690 7.1

 

Operating expenses

 

 

IQ

  IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
12,832 Purchases, services and other 13,616 12,359 10.2 26,448 25,882 2.2
114 Net (impairment losses) reversals of trade and other receivables 118 88 34.1 232 184 26.1
844 Payroll and related costs 707 778 (9.1) 1,551 1,562 (0.7)
6 of which:   provision for redundancy incentives and other (1) 39   5 45  
13,790   14,441 13,225 9.2 28,231 27,628 2.2

 

DD&A, impairments, reversals and write-off

 

IQ   IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
1,640 Exploration & Production 1,558 1,758 (11.4) 3,198 3,404 (6.1)
91 Gas & Power 106 88 20.5 197 177 11.3
97 Refining & Marketing and Chemicals 100 90 11.1 197 179 10.1
76 - Refining & Marketing 76 77 (1.3) 152 152  
21 - Chemicals 24 13 84.6 45 27 66.7
14 Corporate and other activities 15 15   29 31 (6.5)
(7) Impact of unrealized intragroup profit elimination (8) (7)   (15) (14)  
1,835 Total depreciation, depletion and amortization 1,771 1,944 (8.9) 3,606 3,777 (4.5)
29 Impairment losses (impairment reversals), net 73 41 78.0 102 61 67.2
1,864 Depreciation, depletion, amortization, impairments and reversals 1,844 1,985 (7.1) 3,708 3,838 (3.4)
6 Write-off of tangible and intangible assets 15 49 (69.4) 21 193 (89.1)
1,870   1,859 2,034 (8.6) 3,729 4,031 (7.5)

 

Income (expense) from investments

 

 

(€ million)

         
IH 2018 Exploration &
Production
Gas &
Power
Refining &
Marketing and
Chemicals
Corporate
and other
activities
Group
Share of gains (losses) from equity-accounted investments 511 11 (21) (100) 401
Dividends 56   23   79
Net gains (losses) on disposals   (6)     (6)
Other income (expense), net          
  567 5 2 (100) 474

 

-25-

 

 

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.

 

Mar. 31, 2018 Change (€ million) Jun. 30, 2018 Dec. 31, 2017 Change
23,638 353 Total debt 23,991 24,707 (716)
3,774 1,180  -  Short-term debt 4,954 4,528 426
19,864 (827)  -  Long-term debt 19,037 20,179 (1,142)
(5,725) (1,706) Cash and cash equivalents (7,431) (7,363) (68)
(6,402) (83) Securities held for trading and other securities held for non-operating purposes (6,485) (6,219) (266)
(233) 55 Financing receivables held for non-operating purposes (178) (209) 31
11,278 (1,381) Net borrowings 9,897 10,916 (1,019)
48,232 2,239 Shareholders' equity including non-controlling interest 50,471 48,079 2,392
0.23 (0.03) Leverage 0.20 0.23 (0.03)

 

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 June 30, 2018

 

(€ million)
Issuing entity   Amount at
June 30, 2018 (a)
Eni SpA   2,297
Eni Finance International SA   429
    2,726

 

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

 

Bonds issued in the second quarter of 2018 (guaranteed by Eni Spa)

 

Issuing entity Nominal amount
(€ million)
Currency Amount at  Jun. 30,
2018 (a)

(€ million)
Maturity Rate %
Eni Finance International SA 429 USD 426 2028 Variable  
  429   426      

 

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

 

-26-

 

 

Consolidated financial statements

 

BALANCE SHEET

  (€ million)    
Mar. 31, 2018   Jun. 30, 2018  Dec. 31, 2017
  ASSETS    
  Current assets    
5,725 Cash and cash equivalents 7,431 7,363
6,402 Other financial activities held for trading 6,485 6,012
  Financial assets available for sale   207
16,797 Trade and other receivables 15,670 15,737
4,326 Inventories 4,719 4,621
183 Current tax assets 175 191
581 Other current tax assets 443 729
1,854 Other current assets 3,100 1,573
35,868   38,023 36,433
  Non-current assets    
62,390 Property, plant and equipment 59,669 63,158
1,353 Inventory - compulsory stock 1,342 1,283
2,958 Intangible assets 2,992 2,925
3,478 Equity-accounted investments 3,893 3,511
876 Other investments 941 219
1,732 Other financial assets 1,613 1,675
3,966 Deferred tax assets 4,057 4,078
1,400 Other non-current assets 862 1,323
78,153   75,369 78,172
303 Assets held for sale 4,931 323
114,324 TOTAL ASSETS 118,323 114,928
  LIABILITIES AND SHAREHOLDERS' EQUITY    
  Current liabilities    
2,312 Short-term debt 2,236 2,242
1,462 Current portion of long-term debt 2,718 2,286
15,234 Trade and other payables 15,490 16,748
696 Income taxes payable 651 472
2,513 Other taxes payable 2,236 1,472
2,545 Other current liabilities 3,693 1,515
24,762   27,024 24,735
  Non-current liabilities    
19,864 Long-term debt 19,037 20,179
13,096 Provisions for contingencies 11,736 13,447
1,059 Provisions for employee benefits 1,064 1,022
5,705 Deferred tax liabilities 4,521 5,900
1,479 Other non-current liabilities 1,472 1,479
41,203   37,830 42,027
127 Liabilities directly associated with assets held for sale 2,998 87
66,092 TOTAL LIABILITIES 67,852 66,849
  SHAREHOLDERS' EQUITY    
51 Non-controlling interest 53 49
  Eni shareholders' equity:    
4,005 Share capital 4,005 4,005
139 Reserve related to the fair value of cash flow hedging derivatives net of tax effect 394 183
43,672 Other reserves 44,402 42,490
(581) Treasury shares (581) (581)
  Interim dividend   (1,441)
946 Net profit  (loss) 2,198 3,374
48,181 Total Eni shareholders' equity 50,418 48,030
48,232 TOTAL SHAREHOLDERS' EQUITY 50,471 48,079
114,324 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 118,323 114,928

 

-27-

 

 

GROUP PROFIT AND LOSS ACCOUNT

 

IQ   IIQ IH
2018 (€ million) 2018 2017 2018 2017
  REVENUES        
17,932 Net sales from operations 18,139 15,643 36,071 33,690
135 Other income and revenues 703 141 838 626
18,067 Total revenues 18,842 15,784 36,909 34,316
  OPERATING EXPENSES        
(12,832) Purchases, services and other (13,616) (12,359) (26,448) (25,882)
(114) Impairment reversals (impairment losses) of trade and other receivables, net (118) (88) (232) (184)
(844) Payroll and related costs (707) (778) (1,551) (1,562)
(8) Other operating (expense) income 97 38 89 17
(1,835) Depreciation, Depletion and Amortization (1,771) (1,944) (3,606) (3,777)
(29) Impairment reversals (impairment losses), net (73) (41) (102) (61)
(6) Write-off of tangible and intangible assets (15) (49) (21) (193)
2,399 OPERATING PROFIT (LOSS) 2,639 563 5,038 2,674
  FINANCE INCOME (EXPENSE)        
804 Finance income 1,545 946 2,349 2,272
(1,088) Finance expense (1,626) (1,732) (2,714) (3,230)
(6) Income (expense) from other financial activities held for trading 23 (52) 17 (51)
66 Derivative financial instruments (339) 504 (273) 524
(224)   (397) (334) (621) (485)
  INCOME (EXPENSE) FROM INVESTMENTS        
45 Share of profit (loss) of equity-accounted investments 356 56 401 85
23 Other gain (loss) from investments 50 47 73 62
68   406 103 474 147
2,243 PROFIT (LOSS) BEFORE INCOME TAXES 2,648 332 4,891 2,336
(1,295) Income taxes (1,391) (314) (2,686) (1,351)
948 Net profit (loss) 1,257 18 2,205 985
  attributable to:        
946 - Eni's shareholders 1,252 18 2,198 983
2 - Non-controlling interest 5   7 2
           
  Net profit (loss) per share attributable to Eni's shareholders (€ per share)        
0.26 - basic 0.35 0.00 0.61 0.27
0.26 - diluted 0.35 0.00 0.61 0.27

 

-28-

 

 

COMPREHENSIVE INCOME (LOSS)

 

  IIQ IH
(€ million) 2018 2017 2018 2017
Net profit (loss) 1,257 18 2,205 985
Items that may be reclassified to profit in later periods 2,425 (2,778) 1,385 (3,708)
Currency translation differences 2,201 (2,794) 1,194 (3,512)
Change in the fair value of cash flow hedging derivatives 338 (21) 278 (325)
Change in the fair value of financial assets, other financial investments, with effect to OCI   2   2
Share of "Other comprehensive income" on equity-accounted entities (31) 33 (20) 51
Taxation (83) 2 (67) 76
Total other items of comprehensive income (loss) 2,425 (2,778) 1,385 (3,708)
Total comprehensive income (loss) 3,682 (2,760) 3,590 (2,723)
attributable to:        
- Eni's shareholders 3,677 (2,760) 3,583 (2,725)
- Non-controlling interest 5   7 2

 

CHANGES IN SHAREHOLDERS’ EQUITY

 

(€ million)    
Shareholders' equity at January 1, 2017:   53,086
Total comprehensive income (loss) (2,723)  
Dividends paid to Eni's shareholders (1,440)  
Dividends distributed by consolidated subsidiaries (3)  
Other changes 9  
Total changes   (4,157)
Shareholders' equity at June 30, 2017:   48,929
attributable to:    
- Eni's shareholders   48,881
- Non-controlling interest   48
     
Shareholders' equity at December 31, 2017   48,079
Impact of IFRS 9 and IFRS 15 adoption   245
Shareholders' equity at January 1, 2018:   48,324
Total comprehensive income (loss) 3,590  
Dividends paid to Eni's shareholders (1,440)  
Dividends distributed by consolidated subsidiaries (3)  
Total changes   2,147
Shareholders' equity at June 30, 2018:   50,471
attributable to:    
- Eni's shareholders   50,418
- Non-controlling interest   53

 

-29-

 

  

GROUP CASH FLOW STATEMENT

 

IQ   IIQ IH
2018 (€ million) 2018 2017 2018 2017
948 Net profit (loss) 1,257 18 2,205 985
  Adjustments to reconcile net profit (loss) to net cash provided by operating activities:        
1,835 Depreciation, depletion and amortization 1,771 1,944 3,606 3,777
29 Impairment losses (impairment reversals), net 73 41 102 61
6 Write-off of tangible and intangible assets 15 49 21 193
(45) Share of (profit) loss of equity-accounted investments (356) (56) (401) (85)
(1) Gains on disposal of assets, net (417) 7 (418) (336)
(23) Dividend income (56) (58) (79) (69)
(43) Interest income (57) (50) (100) (98)
139 Interest expense 137 171 276 339
1,295 Income taxes 1,391 314 2,686 1,351
130 Other changes 169 455 299 546
  Changes in working capital:        
188 - inventories (369) (137) (181) (356)
(1,916) - trade receivables 1,009 2,533 (907) 1,032
95 - trade payables (350) (1,580) (255) (1,323)
104 - provisions for contingencies (442) 86 (338) 133
455 - other assets and liabilities 550 (228) 1,005 264
(1,074) Cash flow from changes in working capital 398 674 (676) (250)
35 Net change in the provisions for employee benefits 1 33 36 30
5 Dividends received 95 98 100 102
21 Interest received 4 15 25 23
(186) Interest paid (142) (127) (328) (311)
(884) Income taxes paid, net of tax receivables received (1,250) (822) (2,134) (1,620)
2,187 Net cash provided by operating activities 3,033 2,706 5,220 4,638
  Investing activities:        
(2,507) - tangible assets (1,879) (2,069) (4,386) (4,796)
(34) - intangible assets (82) (23) (116) (127)
(15) - consolidated subsidiaries and businesses net of cash and cash equivalent acquired     (15)  
(22) - investments (73) (14) (95) (50)
(241) - securities (78) (9) (319) (74)
(193) - financing receivables (118) (64) (311) (384)
(8) - change in payables in relation to investing activities and capitalized depreciation 307 48 299 543
(3,020) Cash flow from investing activities (1,923) (2,131) (4,943) (4,888)
  Disposals:        
6 - tangible assets 1,011 6 1,017 563
  - intangible assets 5   5  
32 - consolidated subsidiaries and businesses net of cash and cash equivalent disposed of 146   178  
29 - investments 32 61 61 61
5 - securities 23 25 28 25
80 - financing receivables 402 116 482 331
(48) - change in receivables in relation to disposals 482 (6) 434 (306)
104 Cash flow from disposals 2,101 202 2,205 674
(2,916) Net cash used in investing activities (*) 178 (1,929) (2,738) (4,214)

 

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GROUP CASH FLOW STATEMENT (continued)

 

IQ   IIQ IH
2018 (€ million) 2018 2017 2018 2017
511 Increase in long-term debt 407 2 918 755
(1,568) Repayments of long-term debt (81) (202) (1,649) (269)
168 Increase (decrease) in short-term debt (411) 372 (243) (164)
(889)   (85) 172 (974) 322
(1) Dividends paid to Eni's shareholders (1,439) (1,440) (1,440) (1,440)
  Dividends paid to non-controlling interests (3) (3) (3) (3)
(890) Net cash used in financing activities (1,527) (1,271) (2,417) (1,121)
  Effect of change in consolidation (inclusion/exclusion of significant/insignificant subsidiaries)   2   7
(19) Effect of exchange rate changes on cash and cash equivalents and other changes 31 (34) 12 (45)
(1,638) Net cash flow for the period 1,715 (526) 77 (735)
7,363 Cash and cash equivalents - beginning of the period 5,725 5,465 7,363 5,674
5,725 Cash and cash equivalents - end of the period 7,440 4,939 7,440 4,939

 

(*) 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:

 

IQ   IIQ IH
2018 (€ million) 2018 2017 2018 2017
(265) Net cash flow from financing activities 206 56 (59) (104)

 

 

SUPPLEMENTAL INFORMATION

 

IQ   IIQ IH
2018 (€ million) 2018 2017 2018 2017
  Investment of consolidated subsidiaries and businesses        
2 Current assets     2  
23 Non-current assets 1   24  
(1) Cash and cash equivalents (Net borrowings)     (1)  
(8) Current and non-current liabilities 7   (1)  
16 Net effect of investments 8   24  
  Bargain Purchase (8)   (8)  
16 Purchase price     16  
  less:        
(1) Cash and cash equivalents     (1)  
15 Investment of consolidated subsidiaries and businesses net of cash and cash equivalent     15  
  Disposal of consolidated subsidiaries and businesses        
39 Current assets 13   52  
9 Non-current assets 189   198  
  Cash and cash equivalents (Net borrowings) 18   18  
(16) Current and non-current liabilities (55)   (71)  
32 Net effect of disposals 165   197  
  Gains (losses) on disposal (6)   (6)  
32 Selling price 159   191  
  less:        
  Cash and cash equivalents disposed of (13)   (13)  
32 Disposal of consolidated subsidiaries and businesses net of cash and cash equivalent 146   178  

 

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Capital expenditure

 

IQ   IIQ   IH  
2018 (€ million) 2018 2017 % Ch. 2018 2017 % Ch.
2,432 Exploration & Production 1,757 1,983 (11.4) 4,189 4,754 (11.9)
712 - acquisition of proved and unproved properties 11   .. 723   ..
64 - g&g costs 64 74 (13.5) 128 139 (7.9)
65 - exploration 96 85 12.9 161 284 (43.3)
1,586 - development 1,572 1,814 (13.3) 3,158 4,309 (26.7)
5 - other expenditure 14 10 40.0 19 22 (13.6)
42 Gas & Power 55 30 .. 97 49 ..
125 Refining & Marketing and Chemicals 199 151 31.8 324 251 29.1
100 - Refining & Marketing 157 111 41.4 257 179 43.6
25 - Chemicals 42 40 5.0 67 72 (6.9)
11 Corporate and other activities 17 9 88.9 28 16 75.0
(5) Impact of unrealized intragroup profit elimination (3) (7)   (8) (8)  
2,605 Capital expenditure 2,025 2,166 (6.5) 4,630 5,062 (8.5)
64 Cash out in net cash flow from operating activities 64 74 (13.5) 128 139 (7.9)
2,541 Cash out in net cash flow from investments 1,961 2,092 (6.3) 4,502 4,923 (8.6)

 

In the first half of 2018, capital expenditure amounted to €4,502 million (€4,923 million in the first half of 2017) and mainly related to:

- development activities (€3,158 million) deployed mainly in Egypt, Ghana, Norway, Libya, Congo, Italy and Angola. The acquisition of proved and unproved reserves of €723 million relates to the entry bonus in two producing concession agreements in the United Arab Emirates;

- refining activity in Italy and outside Italy (€223 million) aimed at reconversion of Gela refinery into a bio-refinery, reconstruction works of the EST conversion plant at the Sannazzaro refinery, maintain plants’ 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 (€34 million);

- initiatives relating to gas marketing (€82 million).

 

Cash-outs comprised in net cash from operating activities (€128 million) relate to geological and geophysical studies as part of the exploration activities, which are charged to expenses.

 

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Exploration & Production

 

PRODUCTION OF OIL AND NATURAL GAS BY REGION

 

IQ     IIQ 1H
2018     2018 2017 2018 2017
1,867 Production of oil and natural gas (a) (b)   (kboe/d) 1,863 1,771 1,865 1,783
144 Italy   142 100 143 127
218 Rest of Europe   186 218 201 210
442 North Africa   417 453 430 467
259 Egypt   290 226 275 225
348 Sub-Saharan Africa   354 345 351 324
139 Kazakhstan   135 136 137 139
151 Rest of Asia   176 108 164 101
142 Americas   144 164 143 168
24 Australia and Oceania   19 21 21 22
156.9 Production sold (a)  (mmboe) 158.6 149.4 315.5 298.7

 

PRODUCTION OF LIQUIDS BY REGION

 

IQ     IIQ IH
2018     2018 2017 2018 2017
885 Production of liquids (a) (kbbl/d) 881 827 883 830
64 Italy   63 27 64 46
132 Rest of Europe   108 123 120 116
151 North Africa   150 145 150 148
77 Egypt   81 69 79 71
251 Sub-Saharan Africa   247 239 249 227
88 Kazakhstan   89 86 88 86
52 Rest of Asia   80 62 66 57
68 Americas   62 74 65 76
2 Australia and Oceania   1 2 2 3

 

PRODUCTION OF NATURAL GAS BY REGION

 

IQ     IIQ IH
2018     2018 2017 2018 2017
5,358 Production of natural gas (a) (b) (mmcf/d) 5,359 5,152 5,359 5,203
436 Italy   431 399 434 441
469 Rest of Europe   423 515 446 514
1,595 North Africa   1,456 1,681 1,525 1,740
989 Egypt   1,142 855 1,066 843
528 Sub-Saharan Africa   586 581 557 530
277 Kazakhstan   254 277 266 289
543 Rest of Asia   525 249 534 238
401 Americas   445 495 423 502
120 Australia and Oceania   97 100 108 106

 

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

(b) Includes volumes of gas consumed in operation (593 and 526 mmcf/d in the second quarter of 2018 and 2017, respectively, 566 and 501 mmcf/d in the first half of 2018 and 2017, respectively, and 539 mmcf/d in the first quarter of 2018 ).

 

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Gas & Power

 

Natural gas sales by market

 

IQ   IIQ   IH  
2018 (bcm) 2018 2017 % Ch. 2018 2017 % Ch.
11.19 ITALY 9.77 9.50 2.8 20.96 19.88 5.4
2.68 - Wholesalers 2.57 2.12 21.2 5.25 5.08 3.3
2.97 - Italian exchange for gas and spot markets 3.52 3.98 (11.6) 6.49 5.75 12.9
1.21 - Industries 1.21 1.15 5.2 2.42 2.29 5.7
0.31 - Medium-sized enterprises and services 0.16 0.16   0.47 0.52 (9.6)
0.32 - Power generation 0.42 0.31 35.5 0.74 0.53 39.6
2.11 - Residential 0.55 0.38 44.7 2.66 2.72 (2.2)
1.59 - Own consumption 1.34 1.40 (4.3) 2.93 2.99 (2.0)
11.25 INTERNATIONAL SALES 8.31 9.13 (9.0) 19.56 22.03 (11.2)
9.28 Rest of Europe 6.14 8.23 (25.4) 15.42 19.76 (22.0)
0.89 - Importers in Italy 0.49 0.89 (44.9) 1.38 1.93 (28.5)
8.39 - European markets 5.65 7.34 (23.0) 14.04 17.83 (21.3)
1.27 Iberian Peninsula 1.06 1.26 (15.9) 2.33 2.51 (7.2)
0.87 Germany/Austria 0.26 1.52 (82.9) 1.13 3.51 (67.8)
1.28 Benelux 1.63 1.18 38.1 2.91 2.75 5.8
0.78 UK 0.45 0.57 (21.1) 1.23 1.25 (1.6)
2.00 Turkey 1.44 1.63 (11.7) 3.44 3.81 (9.7)
1.96 France 0.76 1.05 (27.6) 2.72 3.57 (23.8)
0.23 Other 0.05 0.13 (61.5) 0.28 0.43 (34.9)
1.97 Rest of World 2.17 0.90 .. 4.14 2.27 82.4
22.44 WORLDWIDE GAS SALES 18.08 18.63 (3.0) 40.52 41.91 (3.3)
2.70 of which: LNG sales 2.70 1.50 80.0 5.40 3.50 54.3

 

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