Eni(E) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2021, Eni reported a net profit adjusted for the first nine months of EUR 2.6 billion, exceeding pre-COVID levels from 2019, driven by EUR 1.4 billion in Q3, marking one of the strongest results since 2013 [10][29] - The cash flow from operations before working capital for the first nine months was strong at EUR 8.1 billion, covering CapEx of EUR 4 billion [26][29] - The company expects a cash flow from operations close to EUR 12 billion for 2021, with a potential increase to around EUR 13 billion if current forward prices are confirmed [26][27] Business Line Data and Key Metrics Changes - In the Upstream segment, production reached 1.66 million barrels per day in the first nine months, with adjusted EBIT at EUR 5.7 billion [15][19] - The Retail & Renewables segment reported a pro forma EBITDA of EUR 440 million, a 35% increase year-on-year, with expectations for an EBITDA of EUR 600 million by year-end [19] - The Refining & Marketing (R&M) segment turned positive with an EBIT of EUR 150 million in the last quarter, driven by higher focus and asset optimization [20] Market Data and Key Metrics Changes - Brent crude prices returned to around $85 per barrel, while gas prices reached historical records of $30 per million BTU in European markets [4][5] - The company registered a positive EBIT in the GGP segment, expecting to exceed EUR 500 million of EBIT and EUR 300 million of free cash flow for 2021 [18] Company Strategy and Development Direction - Eni is focused on capital discipline to reduce cash neutrality and accelerate decarbonization plans through new technology deployment [5][10] - The company is pursuing a business combination in Angola and reviewing the ownership structure of Vår Energi, which could include a potential IPO in 2022 [8][14] - Eni aims to enhance its portfolio through business combinations and is actively restructuring to create growth-oriented autonomous vehicles [12][29] Management's Comments on Operating Environment and Future Outlook - Management noted that the recovery of the global economy and energy demand is accelerating, but supply weaknesses persist due to years of underinvestment [3][4] - The company expects production to recover further in Q4 2021, with a target of around 1.76 million barrels per day [15] - Management expressed confidence in the growth of the renewable energy sector and the potential for sustainable aviation fuel, despite increasing competition [42][45] Other Important Information - Eni's HyNet CCS project in the UK was accepted as a Track-1 project, allowing access to GBP 1 billion in government funding [8] - The company is developing agro initiatives in Africa to secure biofeedstock supply for biorefinery and biochemical capacity growth [25] Q&A Session All Questions and Answers Question: Renegotiation gains impacting GGP in Q4 - Management confirmed that the renegotiation aimed to reduce exposure to the PSV-TTF spread, with cash benefits expected next year while most EBIT will be accrued this year [34] Question: Impact of high prices on R&R business - Management stated that they have not suffered drawbacks from high prices due to being fully covered for deliveries, and credit risk has not been significantly impacted [35] Question: Cash distribution to shareholders - Management acknowledged the flexible dividend strategy and indicated that future distribution policies will be considered in the context of long-term planning [40] Question: Biofuels and competition - Management highlighted the competitive landscape for sustainable aviation fuel but emphasized their technological advantages and robust growth plans [42][45] Question: Vår Energi strategic rationale - Management explained that Vår Energi is a success story and a partial divestment could free up cash for future growth opportunities [48] Question: Mozambique production start-up - Management confirmed that Coral floating LNG is expected to start production in the second half of 2022 [50] Question: Cost inflation pressures - Management noted that upstream projects are under fixed contracts, limiting the impact of raw material price fluctuations, but they are preparing for potential future increases [92] Question: Capital allocation priorities - Management indicated that the capital raised from IPOs will be used for deleveraging, maintaining an attractive distribution policy, and improving the company structure [95]