Eni(US:E)2021-04-01 16:00Financial Reporting and Compliance - Eni's consolidated financial statements are prepared in accordance with International Financial Standards (IFRS) [10] - The company is committed to regulatory compliance and monitoring by the Italian Regulatory Authority for Energy, Networks and Environment [16] - Eni's statutory tax rate for corporate profit is currently 24%, with expectations that the marginal tax rate in the oil and gas industry may increase with higher oil prices, impacting net profit [71] - Eni has faced adverse changes in tax regimes in various countries, leading to a higher effective tax rate on its oil and gas operations compared to other commercial activities [68] Financial Performance and Metrics - The company evaluates its financial condition using net borrowings, calculated as total finance debt less cash and cash equivalents [14] - Eni's total shareholder return (TSR) is assessed yearly, accounting for changes in share price and dividends distributed [14] - Total assets decreased to €109,648 million in 2020 from €123,440 million in 2019, a decline of approximately 11.1% [28] - Finance debt increased to €31,704 million in 2020, up from €30,166 million in 2019, representing a rise of about 5.1% [28] - Shareholders' equity decreased to €37,415 million in 2020 from €47,839 million in 2019, a decline of approximately 21.7% [28] - Dividend per share was €0.36 in 2020, significantly lower than €0.86 in 2019, a decrease of about 58.1% [28] Production and Reserves - The average reserve life index is calculated as the ratio between the amount of reserves at the end of the year and total production for the year [14] - The company reported a significant increase in proved oil and gas reserves, estimated at 1.5 billion barrels of oil equivalent, representing a 10% increase year-over-year [19] - The reserve replacement ratio for the year was 120%, indicating that the company added more reserves than it produced, showcasing strong exploration success [19] - Eni's average daily production in 2020 amounted to 1,609 KBOE/d, with total proved reserves as of December 31, 2020, reaching 6,905 mmBOE [112] - Eni's proved reserves as of December 31, 2020, totaled 6,905 mmBOE, a decrease of 363 mmBOE or 5% from 2019 due to low crude oil prices caused by the COVID-19 pandemic [167] Environmental and Sustainability Initiatives - The company aims to improve its carbon efficiency index by reducing greenhouse gas emissions relative to production [16] - The company achieved a net carbon intensity reduction of 15% compared to the previous year, reflecting its commitment to sustainability and emissions reduction [21] - Eni aims to achieve net zero emissions of carbon dioxide by 2050, aligning its strategy with the climate targets of the Paris Agreement [112] - Eni plans to capture and store up to 7 million tons of CO2 per year by 2030, with projects in the Adriatic Sea and Liverpool Bay [122] - Eni aims for a 25% reduction in net lifecycle GHG emissions by 2030 and a 65% reduction by 2040, with a target of achieving net zero by 2050 [129] Market and Competitive Position - Eni's competitive position is based on management estimates and independent market studies [11] - The company is expanding its market presence in Asia, targeting a 15% market share in the region by 2025 through strategic partnerships and acquisitions [19] - Eni's market share estimates are based on publicly available information about the financial results of market participants [11] Operational Challenges and Risks - Eni's operations are significantly affected by weather conditions, with colder years leading to higher demand for natural gas [57] - The exploration and production of oil and natural gas are subject to high capital expenditures and various natural hazards [58] - Eni's ability to manage operational risks is critical for maintaining its financial condition and shareholder returns [56] - The company faces risks related to environmental incidents, which could lead to significant financial liabilities and operational disruptions [56] - Eni's access to capital may be reduced due to potential downgrades in credit ratings, negatively affecting its cost of capital and ability to execute business plans [40] Investment and Future Outlook - The company plans to invest $1 billion in new technologies aimed at enhancing hydrocarbon recovery and reducing environmental impact over the next five years [19] - Future guidance indicates expected revenue growth of 8% for the next fiscal year, driven by increased production and market expansion strategies [19] - Eni plans to invest approximately €4.5 billion per year in the oil and gas business over the next four years, with capital expenditures in 2021 expected to be slightly below €6 billion, 70% of which will be allocated to the Exploration & Production segment [108] Digital Transformation and Customer Engagement - User data indicated a 25% increase in customer engagement with the company's digital platforms, highlighting successful digital transformation efforts [19] - The gas & power retail marketing business plans to grow its customer base from 9.6 million in 2020 to 11 million by 2024, enhancing profitability through innovative products and improved customer experience [125] Mergers, Acquisitions, and Strategic Partnerships - The company is actively pursuing mergers and acquisitions to enhance its portfolio, with a focus on integrating sustainable practices into its operations [19] - Eni signed an agreement to acquire 100% of Aldro Energía, serving approximately 250,000 customers in Spain and Portugal, pending regulatory approvals [137] - Eni plans to acquire FRI-EL Biogas Holding to strengthen its position in the circular economy and become the leading biomethane producer in Italy [135] Production Costs and Economic Factors - Oil and gas production costs per BOE increased to $6.31 in 2020 from $6.05 in 2019, an increase of approximately 4.3% [31] - The company estimates that lower crude oil realizations and other scenario effects reduced underlying operating profit and net cash provided by operating activities by about €7 billion in 2020 [38] - The average production cost per BOE for consolidated subsidiaries in 2020 was $6.31, compared to $6.05 in 2019 [188] Exploration and Development Activities - Eni's exploration activities are subject to significant mining risks, including the potential for dry holes and geological failures, which may lead to increased operational costs and unsuccessful drilling outcomes [61] - In 2020, a total of 182 development wells were drilled, with Eni's share being 57.4, compared to 241 in 2019 and 209 in 2018 [189] - The overall commercial success rate for exploratory wells in 2020 was 28%, down from 36% in 2019 and 62% in 2018 [193]