Eni SpA Q3 FY2026 earnings call

• Upstream Growth: Production growth is sector-leading, with a full-year guidance raise to 6-7%. Exploration success is record-breaking, with over 1.2 billion barrels discovered at a cost below $1 per barrel.
• Strategic Projects: Key Final Investment Decisions (FID) secured for Balene Phase III (Côte d'Ivoire), Gandal/Gandang (Indonesia), Kronos (Cyprus), and Greater Pagi (Angola). Venezuela’s Junín 5 project signed a new contractual regime for 25 years, aiming for 200,000 bpd in Phase 1 within 24 months.
• LNG Expansion: New contracts in Indonesia and Cyprus add up to 3.4 million tons/year, supporting the target of >20 million tons/year equity LNG production by 2030.
• Balance Sheet Strength: Reported gearing hit a record low of 10% (pro forma 9%), aided by strong cash flow and consolidation of Plenitude debt. Credit rating upgraded by S&P.
• Shareholder Returns: Total cash payout increased to €8.2 billion (50% of CFO), including a special dividend of €1.3 billion and an increased share buyback program of €3.8 billion.
• Transition Business: Enilive achieved record results ahead of new biorefining capacity additions. Plenitude’s structure adjusted with Ares taking a larger share to support growth.

EMP (Exploration & Production): Pro forma EBIT of €4.6 billion, driven by 4.2% production growth and supportive market conditions. Gas & Power Group (GGP): Pro forma EBIT of €0.4 billion, supported by strong gas and LNG optimization results without one-time benefits. Transition Businesses: Enilive and Plenitude reported combined pro forma EBIT of €0.7 billion (€0.6 billion attributable to ENI); Enilive benefited from strong biorefining margins, while Plenitude faced headwinds from competitive retail pressures. Transformation (Refining & Chemicals): Refining saw recovery in utilization post-turnaround; Versalis suffered from weak demand and energy costs but remains on track for breakeven by 2028.

• Full-Year 2026 Production: Raised full-year underlying production guidance to 6-7% growth.
• Full-Year 2026 EBIT: Pro forma EBIT guidance raised to approximately €1.5 billion, driven by gas/LNG strategy contributions.
• Full-Year 2026 Cash Flow: Cash flow from operations expected at €16.5 billion, which is 43% above initial guidance.
• Full-Year Tax Rate: Expected charge between 36% and 37%, higher than the Q3 rate of 32% due to normalization factors.
• Capital Expenditure: Capex of €1.35 billion in Q3 is consistent with the annual guide of €7 billion, with expectations for lower spend in H2 2026.

• Venezuela Operational Risk: Phased development requires significant capital and logistical coordination; delays in regulatory approval or facility construction could impact timelines.
• Regulatory and Political Risk: Operations in Venezuela and Argentina depend on government approvals and favorable regulatory frameworks; changes in policy could affect FID timing.
• Market Volatility: Exposure to fluctuating crude oil prices, shipping rates, and petrochemical demand impacts profitability, particularly in Versalis and refining segments.
• Energy Price Caps: Implementation of fuel price caps in Italy may result in quarterly earnings impacts of several hundred million euros, affecting short-term cash flows.
• Competitive Pressures: Intense competition in European retail energy markets and unfavorable trade policies (e.g., elimination of import duties vs. US) challenge Versalis's competitiveness.

Q: Analyst asked about future capex levels to sustain growth and specific capex needs for Venezuela’s Junín 5 and Perla projects. / A: Management indicated that capex will likely remain stable around current levels (€7 billion range) to maximize growth opportunities without compromising investment efficiency. Regarding Venezuela, they are still assessing total capital requirements due to the phased nature of the project and reliance on existing facilities with spare capacity initially, though new facilities will be needed as volumes increase.

Q: Analyst inquired about tanker rate exposure and tax rate modeling for next year. / A: Approximately 60% of shipping is under long-term agreements, mitigating spot market volatility, while the remaining 40% allows some cost pass-through to buyers. The tax rate is expected to remain significantly lower than historical norms due to high-grade production mix, lower tax regimes, and satellite contributions, rather than reverting to 40-45%.

Q: Analyst sought details on Venezuela’s production timeline, diluent challenges, and Argentina’s FID status/accounting. / A: Junín 5 Phase 1 aims for 200k bpd in 18-24 months, reaching 400k bpd by end-2029 and potentially 1m bpd by 2032-2033. Diluent needs will be met via synergies with Perla condensate exports. Argentina’s FID is targeted for year-end pending regulatory approval, with financing expected at 65-70%; upstream and downstream activities will be consolidated via a special purpose vehicle.

Q: Analyst questioned if the 600k bpd new production includes Venezuela and the scale of resource additions. / A: The 600k bpd sanctioned in 2026 does not include Venezuela. However, 2026 was a strategic turning point, adding 4.6 billion BOE of resources, largely driven by access to large reserves in Argentina (Vaca Muerta) and Venezuela (Junín 5), alongside other global hubs.

Q: Analyst asked about net cash potential given low gearing and Versalis loss trajectory. / A: While net cash is possible in certain scenarios, the primary focus is maximizing financial potential through shareholder returns rather than holding excess cash. Versalis losses are driven by weak demand, high energy costs, and lost US import duty advantages; the transformation plan continues despite these headwinds, aiming for breakeven by 2028.