Eni SpA’s (E) third quarter 2013 adjusted earnings from continuing operations of 85 cents per American Depository Receipt/ADR (€0.32 per share) comfortably beat the Zacks Consensus Estimate of 73 cents but decreased from the year-earlier earnings of $1.23 per ADR (€0.49 per share).
Total revenue in the quarter decreased 6.6% to €29.4 billion ($39.7 billion) from the year-ago revenue of €31.5 billion ($42.5 billion). The revenues failed to meet the Zacks Consensus Estimate of $42.7 billion.
Operational Performance
Total liquids and gas production in the quarter was 1,653 thousand barrels of oil equivalent per day (MBoe/d), down 3.8% from 1,718 MBoe/d in the year-ago quarter.
Liquids production was 851 thousand barrels per day (MBbl/d), down 4.5% from the year-ago level of 891 MBbl/d. Natural gas production increased 3.1% year over year to 4,402 million cubic feet per day (MMcf/d).
Gas sales were 18.35 billion cubic meters (Bcm), down 5.8% from the year-ago quarter, owing to the ongoing downturn in demand, intense competitive pressure and oversupplies.
Financials
As of Sep 30, 2013, the company had cash and cash equivalents of €6.0 billion and long-term debt (including current portions) of €20.2 billion. The debt-to-capitalization ratio was approximately 24%.
In the third quarter net cash generated by operating activities from continuing operations amounted to €3.0 billion. Capital expenditure– mainly related to continuing development of oil and gas reserves – totaled €3.1 billion.
Company Outlook
Eni believes that a certain degree of ambiguity still looms with respect to the economic slowdown, particularly in the Euro zone, and volatile market conditions. This Italian giant expects the uncertainty to prevail in the European gas, refining and marketing and chemicals sectors. Overall demand will likely remain weak due to the ongoing economic dormancy and the appreciation of the Euro.
The company expects 2013 oil and natural gas production to be lower than the 2012 level. This is mainly due to the impact of geopolitical factors, in particular in Nigeria and Libya.
Worldwide gas sales are expected to fall from the 2012 level. The downside would come from the divestment of Galp and renegotiation of long-term supply contracts. Retail sales volumes also would be lower reflecting an expected contraction in domestic demand and increasing competitive pressure.
For 2013, refining throughputs are expected to decline from the 2012 level of 30.01 million tons. The downside would be due to the ongoing industry downturn.
The company expects the full-year capital budget broadly in line with 2012. Eni had 12.76 billion euros in capital expenditure and 0.57 billion euros in financial investments in 2012.
Zacks Rank
Eni currently carries a Zacks Rank #3, which translates into a Hold rating. But there are other stocks in the oil and gas industry that are performing well. These include Legacy Reserves Lp (LGCY), Matador Resources Company (MTDR) and Northern Oil and Gas, Inc. (NOG), which hold Zacks Rank #1 (Strong Buy).
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