Eni SpA Q3 FY2024 earnings call

Strategic Activities

• Confirmed KKR investment in Enilive with €2.9 billion for 25% stake, supporting growth. Sanctioned two biorefineries in Q3 and confirmed Livorno construction start, with first biojet plant in Gela to start end of year.
• Upstream had gas production start at Argo-Cassiopea, Johan Castberg and Baleine Phase 2 to start by year-end. Indonesian authorities approved Plan of Development for Northern Hub and extension for Southern Hub, with over 400,000 bpd potential. Identified over 30 TcF near-field exploration potential.
• CCUS project: First CO2 injection at Ravenna project, secured government funding for HyNet CCS project, aiming to build over 15 million tonne capacity by 2030.
• Versalis restructuring: Plan to focus on high value downstream, biochemistry, circular economy; shut down cracking at Priolo and Brindisi, exit or reduce exposure at Dunkirk, reduce polymer capacity at Ragusa.

Financials and Distributions

• Q3 pro forma adjusted EBIT €3.4 billion, cash flow from operation €2.9 billion. Net debt fallen even with modest divestment income. CapEx for Q3 €2 billion, nine months €6.1 billion, expected below €9 billion for year. Raised 2024 share buyback to €2 billion, distribution yield at 11.5%.

In Q3, Eni reported pro forma adjusted EBIT of €3.4 billion and cash flow from operation of €2.9 billion, down 14% year-on-year. Upstream businesses were standout contributors. Global Natural Resources' E&P contributed €3.2 billion pro forma EBIT with production up 2% year-on-year. GGP had strong results for summer months. Enilive saw biorefining throughput growth but EBIT hurt by weak bio scenario. Plenitude continued its growth trajectory. Versalis is undergoing restructuring with plans to focus on high value downstream, biochemistry, and circular economy, aiming for positive EBIT by 2027 and free cash flow breakeven by 2028. Enilive's revenue contribution from KKR investment was highlighted, with €2.9 billion for a 25% stake. Upstream production in Q3 had gas production start at Argo-Cassiopea offshore Sicily, and Johan Castberg and Baleine Phase 2 set to start up by year-end.

Guidance

• Full year upstream production expected around 1.7 million bpd. GGP pro forma EBIT raised to €1.1 billion. Transition businesses to deliver EBITDA of €1 billion each. Group pro forma EBIT and cash flow from operation reduced from Q2 but reflect outperformance vs original plan. Gross CapEx below €9 billion, net CapEx well below €6 billion. Buyback raised to €2 billion from original guidance figures.

Risks

• Energy markets remain volatile and unpredictable, impacting business performance. Structural challenges in European basic chemicals manufacturing, as seen in Versalis, with no immediate improvement expected. Market volatility affecting distribution of guidance and financial performance.

Q: On Enilive, how much of a priority is selling additional stakes?

A: Eni is moving to lower end of 5%-10% additional stake sale range, considering potential partners.

Q: On Versalis restructuring, when to expect benefit?

A: Improvement will come gradually over next four-five years through restructuring base chemical portfolio and developing new platforms. Unlikely to be breakeven EBITDA in 2025 but expect better performance than 2024.

Q: On disposals, how much cash-in expected next year?

A: Expect around €2.5 billion cash-in from disposals next year.

Q: On Indonesia production growth, shape of growth?

A: Combined production of over 400,000 bopd expected, leveraging existing facilities and exploration potential. Front-end engineering design for facilities, drilling activity ongoing.

Q: On new business structure, what does it allow?

A: New structure focalizes on different business segments: CFO structure for Enilive/Plenitude IPO focus, Global Natural Resource for centralizing technical and trading, Transformation for chemical restructuring.

Q: On U.K. North Sea post-Ithaca completion?

A: Ithaca deal provides synergies, operational and financial, with opportunity to grow oil and gas presence in U.K., including CCS and renewables.

Q: On cash tax rate increase, remaining windfall tax payment?

A: Last installment of €240 million in November, totaling ~€2 billion paid from 2022-2024.

Q: On buyback flexibility, rationalization?

A: Buyback is flexible, with distribution policy split between dividend and buyback, 60% upside considered.

Q: On Egypt gas supply, drilling plans?

A: Positive signals in Egypt with investment deals and financial support, activity restarting with production optimization plans, rig coming end of year for Zohr.

Q: On biofuels RED III impact, Italy application?

A: RED III to set new targets from mid-2026, Italy already increasing energy content target, pure HVO mandate increasing.

Q: On Enilive valuation, uniqueness?

A: Enilive's unique position in biofuel market with retail hedging, growth potential, and stable performance.

Q: On Versalis €2 billion spending, growth vs restructuring?

A: ~10% CapEx for base chemical, 90% for new platforms; specialty business to increase from 30% to 65% in five years.

Q: On CCS satellite plan, progress?

A: Tendering activity for CCS with interest from five-six potential investors, working on dual exposure model.

Q: On Azule Namibia drilling, timeline?

A: Rig planned to move end of year, spud first well in December, first results by Q1, second well by late Q1 or early Q2.

Q: On CapEx movement, deferrals?

A: No deferred investment, maturation of FID in last quarter contributing to CapEx number.

Q: On biorefining market balance, timing?

A: Medium-term scenario clear with regulation in place, RED III doubling growth path, expecting demand to overtake supply by 2030.

Q: On IPOs, Plenitude inclusion in cash-in?

A: €2.5 billion cash-in next year mainly from ongoing negotiations, not including IPOs. Enilive valuation multiple supports holding stake for potential IPO control.

Q: On distribution policy forward, buyback floor?

A: Buyback has a floor, with improvement expected based on yearly performance and portfolio execution, potentially continuing in coming years.