Earnings Release • Oct 28, 2020
Earnings Release
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| IIQ | IIIQ | Nine months | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. | |||
| 29.20 | Brent dated | \$/bbl | 43.00 | 61.94 | (31) | 40.82 | 64.66 | (37) | |
| 1.101 | Average EUR/USD exchange rate | 1.169 | 1.112 | 5 | 1.125 | 1.124 | 0 | ||
| 26.51 | Brent dated | €/bbl | 36.78 | 55.70 | (34) | 36.28 | 57.54 | (37) | |
| 75 | PSV | €/kcm | 95 | 131 | (27) | 97 | 175 | (45) | |
| 2.3 | Standard Eni Refining Margin (SERM) | \$/bbl | 0.7 | 6.0 | (88) | 2.2 | 4.4 | (50) | |
| 1,729 | Hydrocarbon production | kboe/d | 1,701 | 1,888 | (10) | 1,740 | 1,854 | (6) | |
| (434) | Adjusted operating profit (loss) ⁽ᵃ⁾⁽ᵇ⁾ | € million | 537 | 2,159 | (75) | 1,410 | 6,792 | (79) | |
| (807) | E&P | 515 | 2,141 | (76) | 745 | 6,589 | (89) | ||
| 130 | Global Gas & LNG Portfolio (GGP) | 64 | 69 | (7) | 427 | 239 | 79 | ||
| 73 | R&M and Chemicals | 21 | 149 | (86) | 110 | 182 | (40) | ||
| 85 | Eni gas e luce, Power, Renewables | 57 | 15 | 280 | 333 | 214 | 56 | ||
| (714) | Adjusted net profit (loss) ⁽ᵃ⁾⁽ᶜ⁾ | (153) | 776 | (808) | 2,330 | ||||
| (0.20) | per share - diluted (€) | (0.04) | 0.22 | (0.23) | 0.65 | ||||
| (4,406) | Net profit (loss) ⁽ᶜ⁾ | (503) | 523 | (7,838) | 2,039 | ||||
| (1.23) | per share - diluted (€) | (0.14) | 0.15 | (2.19) | 0.57 | ||||
| 1,148 | Net cash before changes in working capital at replacement cost ⁽ᵈ⁾ | 1,774 | 2,573 | (31) | 5,144 | 9,162 | (44) | ||
| 1,403 | Net cash from operations | 1,456 | 2,055 | (29) | 3,834 | 8,667 | (56) | ||
| 957 | Net capital expenditure ⁽ᵉ⁾⁽ᶠ⁾ | 902 | 1,791 | (50) | 3,764 | 5,580 | (33) | ||
| 14,329 | Net borrowings before lease liabilities ex IFRS 16 | 14,525 | 12,709 | 14 | 14,525 | 12,709 | 14 | ||
| 19,971 | Net borrowings after lease liabilities ex IFRS 16 | 19,853 | 18,517 | 7 | 19,853 | 18,517 | 7 | ||
| 38,839 | Shareholders' equity including non-controlling interest | 36,533 | 51,471 | (29) | 36,533 | 51,471 | (29) | ||
| 0.37 | Leverage before lease liabilities ex IFRS 16 | 0.40 | 0.25 | 0.40 | 0.25 | ||||
| 0.51 | Leverage after lease liabilities ex IFRS 16 | 0.54 | 0.36 | 0.54 | 0.36 |
(a) Non-GAAP measure. For further information see the paragraph "Non-GAAP measures" on page 23.
(b) Due to a new Group-wide structure approved by the management last June to adhere to the decarbonization strategy underway, effective July 1, 2020 the reportable segments ofthe Company's financial reporting have been re-designed. As required by international accounting standards, the new segment information is effective as of the beginning of the reporting year with the restatement of the 2019 comparative periods. For more information see page 21.
(c) Attributable to Eni's shareholders.
(d)Non-GAAP measure. Net cash provided by operating activities before changes in working capital excluding inventory holding gains or losses and provisions for extraordinary credit losses and other charges, as well as from the third quarter 2020 considering the high market volatility, changes in fair value of commodity derivatives lacking the formal criteria to be designed as hedges, for which the underlying transactions are expected to occur in future reporting periods.
(e) Include capital contribution to equity accounted entities.
(f) Net of expenditures relating to reserves acquisition, purchase of minority interests and other non-organic items.
Today, Eni's Board of Directors approved the consolidated results for the third quarter and the nine months of 2020 (not subject to audit). Having examined the results, Eni CEO Claudio Descalzi said:
"In a market environment that remains challenging, we are continuing to successfully mitigate the negative impact of this crisis and making progress with our decarbonization strategy. We achieved excellent results during the quarter, clearly exceeding market expectations in the face of a 30% decline in oil and gas prices, and a 90% decline in refining margins. In E&P, even with Brent at 43 \$/barrel, we achieved production levels in line with our expectations, and an EBIT of €0.52 billion, double consensus estimates. In a quarter that is traditionally weaker seasonally, the Global Gas & LNG Portfolio has achieved significant results. R&M has shown its resilience in a particularly unfavourable scenario for traditional refining, driven by strong marketing performance, particularly in biofuels, as our two biorefineries allowed us to capture advantageous market opportunities. The growth of gas retail, driven by customer loyalty, and the stable results of the power and oil products marketing, helped to offset the impact of an extremely negative scenario in traditional refining and chemicals. Over the last nine months, thanks to the reduction in capex and costs efficiencies implemented earlier this year, we generated an operating cash flow of over €5 billion, compared to a level of capex equal to €3.8 billion. These results showcase our robust capital structure that has been further strengthened by the two hybrid bond issues of €3 billion made in October, which have allowed us to keep leverage below 30%. Faced with a crisis of unprecedented proportions, Eni has demonstrated great resilience and flexibility. In light of these results, we look forward to a recovery in demand, whilst continuing to pursue our energy transition program."
On June 4, 2020, Eni's Board of Directors established a new organizational structure with two business groups to align with an ongoing strategic shift. The "Natural Resources" business group is responsible for enhancing the upstream oil & gas portfolio in a sustainable manner, focusing also on energy efficiency activities, projects for forests conservation (REDD+) and carbon capture and storage projects. In addition to E&P, this business group comprises the results of the wholesale gas and LNG businesses as well as the activity of environmental clean-up and remediation managed by our subsidiary Eni Rewind. The other business group "Energy Evolution" is responsible for progressing the generation, transformation and retail and marketing businesses from fossil to bio, blue and green products. This business group comprises the results of the Refining & Marketing business, the chemical business managed by Versalis SpA and its subsidiaries, the retail gas and power business managed by Eni gas e luce and the business of producing and selling power from thermoelectric plants and renewable sources.
The new organizational structure is a fundamental step towards the implementation of Eni's 2050 strategy aimed at leading the market for the supply of de-carbonized products, combining value creation, businesses sustainability and economic and financial robustness.
In re-designing the Group's segmental information for financial reporting purposes, the management evaluated that the components of the Company whose operating results are regularly reviewed by the CEO (Chief Operating Decision Maker as defined by IFRS 8) to make decisions about the allocation of resources and to assess performances would continue being the single business units which are comprised in the two newly-established business groups, rather than the two groups themselves. Therefore, in order to comply with the provisions of the international reporting standard that regulates the segment reporting (IFRS 8), the new reportable segments of Eni, substantially confirming the pre-existing setup, are identified as follows:
1 The new Eni segment information including the restatement of the previous reporting periods and the nine months/third quarter 2020 results showing both the new and the previous segmental information is reported on page 21.
a better performance in Nigeria, as well as portfolio contributions in Norway, were partly offset by lower volumes in Libya driven by an expected contractual trigger, lower entitlements/spending and losses due to force majeure, as well as mature field declines.
• GGP's adjusted operating result: €64 million in the third quarter, down by 7% compared to the same period of 2019 due to an unfavourable trading environment. In the nine months, adjusted operating profit was €0.43 billion, up by 79% compared to the same period of 2019 driven by the optimization of the gas and the LNG assets portfolio, leveraging elevated price volatility.
production of 27 GWh/y, avoiding 370 ktons of CO2 emissions over the service life of the plant.
• EGL, Power, Renewables' adjusted operating result: €57 million in the third quarter of 2020, an almost fourfold increase compared to the same period of 2019 (€333 million in the nine months of 2020, up by 56% from the same period of 2019). The positive performance leveraged on solid and growing results reported by the retail business, despite lower seasonal sales and the COVID-19 impact on demand and counterparty risk.
Results were significantly impacted by the combined effects of the economic downturn due to COVID-19 that suppressed energy demand and caused oversupplied markets. The third quarter performance showed a noticeable improvement over the previous quarter due to a better balance in oil market fundamentals, against the backdrop of a slow economic recovery and uncertainties about the containment of the pandemic with repercussions on travel.
• Adjusted operating profit of €0.54 billion in the third quarter 2020 increased significantly from the second quarter 2020 loss (up by €1 billion). Compared to the year-ago quarter, the quarterly performance (down by 75%) was materially hit by the downturn in energy demand driven by the COVID-19 pandemic. In the nine months of 2020, adjusted operating profit was €1.41 billion (down by 79% compared to same period of 2019).
Net of scenario effects of -€1.6 billion in the quarter (-€5.1 billion in the nine months) and the operational effects of COVID-19 for -€0.3 billion (-€0.8 billion in the nine months)2, the underlying performance was a positive €0.3 billion in the quarter (+€0.5 billion in the nine months).
2 They comprise a reduction in hydrocarbon production due to capex cut and lower global gas demand, lower offtakes at LNG supply in Asia, lower production sale volumes in R&M and Chemicals, higher allowances for doubtful accounts due to an expected deterioration in the counterparty risk.
December 31, 2019.
Management expects the fourth quarter to be in line with the business trends recorded in the just-ended quarter, which featured high volatility in energy commodity prices due to an uncertain and uneven economic recovery. Possible downside risks. The fundamentals of the oil market are anticipated to remain weak due to continuing oversupply, high global inventory levels and a sluggish pace in demand growth due to a complex pandemic situation which is weighing on economic activity, trade and travel. The same trends are expected in the other business segments. The Brent price is estimated at approximately 40 \$/barrel for the year; PSV gas price at 3 \$/mmBTU; SERM margin at 2.4 \$/barrel. In 2021, expected a rebound in energy demand.
During the year 2020, in response to an unprecedented crisis for the oil industry due to the fall in energy demand caused by the COVID-19 pandemic and continued pressure on product prices, Eni's management has repeatedly reviewed business plans and operating schedules to adapt the business to the current challenges, defining a set of actions and initiatives designed to strengthen liquidity and the robustness of the balance sheet, to preserve profitable operations and increase the portfolio resilience to the scenario, without impairing the Company's ability to grow as soon as macro-economic conditions improve, while accelerating the low-carbon evolution of the business.
The initiatives already announced and implemented comprise:
Management is currently executing on several initiatives which comprise:
2020-2021 capex optimizations almost fully focused in the E&P segment. Higher investments expected for 2022-2023 for an overall amount of €800 million targeting growth at the green businesses (bio-refineries, renewables and retail customers expansion);
Confirmed 2020 production target within the range of 1.72-1.74 mboe/d including OPEC+ cuts, in line with what previously announced, based on capex curtailments in response to the COVID-19 crisis, the reduction of worldwide gas demand (also partly related to the pandemic) and the extension of force majeure in Libya until the end of September 2020. Reviewed the target production profile of 2023 to approximately 2 million boe/d;
| IIQ | IIIQ | Nine months | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. | ||
| Production | ||||||||
| 853 | Liquids | kbbl/d | 817 | 893 | (9) | 854 | 882 | (3) |
| 4,653 | Natural gas | mmcf/d | 4,694 | 5,379 | (13) | 4,705 | 5,256 | (11) |
| 1,729 | Hydrocarbons ⁽ᵃ⁾ | kboe/d | 1,701 | 1,888 | (10) | 1,740 | 1,854 | (6) |
| Average realizations | ||||||||
| 24.24 | Liquids | \$/bbl | 39.64 | 56.90 | (30) | 35.55 | 59.34 | (40) |
| 3.40 | Natural gas | \$/kcf | 3.44 | 4.49 | (23) | 3.71 | 4.99 | (26) |
| 21.56 | Hydrocarbons | \$/boe | 29.06 | 40.99 | (29) | 28.03 | 43.57 | (36) |
(a) Effective January 1, 2020, the conversion rate of natural gas from cubic feet to boe has been updated to 1 barrel of oil = 5,310 cubic feet of gas (it was 1 barrel of oil = 5,408 cubic feet of gas). The effect on production has been 16 kboe/d in the third quarter and nine months 2020. Data of the previous 2020 quarters have been restated accordingly.
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| (2,393) | Operating profit (loss) | 514 | 2,162 | (76) | (1,164) | 6,587 | |
| 1,586 | Exclusion of special items | 1 | (21) | 1,909 | 2 | ||
| (807) | Adjusted operating profit (loss) | 515 | 2,141 | (76) | 745 | 6,589 | (89) |
| (54) | Net finance (expense) income | (102) | (119) | (271) | (322) | ||
| 102 | Net income (expense) from investments | 58 | 50 | 101 | 198 | ||
| 45 | of which: - Vår Energi | 37 | (27) | 45 | 38 | ||
| (26) | Income taxes | (402) | (1,267) | (1,079) | (3,857) | ||
| (785) | Adjusted net profit (loss) | 69 | 805 | (91) | (504) | 2,608 | |
| Results also include: | |||||||
| 261 | Exploration expenses: | 26 | 69 | (62) | 462 | 375 | 23 |
| 45 | - prospecting, geological and geophysical expenses | 43 | 66 | 143 | 212 | ||
| 216 | - write-off of unsuccessful wells | (17) | 3 | 319 | 163 | ||
| 760 | Capital expenditure | 673 | 1,559 | (57) | 2,691 | 5,221 | (48) |
• In the third quarter of 2020, the Exploration & Production adjusted operating profit of €515 million rebounded significantly from the previous quarter loss of approximately €800 million, driven by a partial recovery in the pricing environment with the Brent crude oil price of 43 \$/barrel on average vs. 29 \$/barrel in the previous quarter. Instead, the comparison with the corresponding period a year ago down by 76% was negatively affected by a depressed oil scenario due to the COVID-19 pandemic which impacted economic activity and travel leading to both reduced hydrocarbons realized prices (down by 29% on average) and lower production. Particularly, lower sales volumes were driven by capex optimizations intended to preserve the Company's cash flows, the production cuts implemented by the OPEC+ agreement and falling gas demand with more pronounced effects in certain geographies (e.g. Egypt).
• In the nine months of 2020, adjusted operating profit was €745 million, down by €5.84 billion y-o-y, or 89%. Approximately €5.1 billion of the EBIT contraction was driven by a sharply deteriorated pricing scenario in all the geographies particularly in the second quarter which was the hardest hit by the downturn, as well as the negative impacts associated with COVID-19. Furthermore, the result of the period was affected by a loss incurred in reselling the gas entitlements of a Libyan partner, which were marketed in Europe. This resale price is excluded from the calculation of Eni's average realized gas prices because Eni's realized prices are calculated only with reference to equity production.
Unfavorable volume/mix effects as previously discussed and bigger write-off expenses relating to unsuccessful exploration wells also negatively affected the nine-months performance and were partly offset by operating expense savings.
For the disclosure on business segment special charges, see page 15.
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. | |
| 75 | PSV €/kcm |
95 | 131 | (27) | 97 | 175 | (45) |
| 57 | TTF | 82 | 108 | (24) | 81 | 146 | (45) |
| Natural gas sales bcm |
|||||||
| 9.13 | Italy | 10.55 | 8.73 | 21 | 28.65 | 29.27 | (2) |
| 3.80 | Rest of Europe | 4.27 | 6.17 | (31) | 14.74 | 19.90 | (26) |
| 0.98 | of which: Importers in Italy | 0.79 | 1.11 | (29) | 2.73 | 3.23 | (15) |
| 2.82 | European markets | 3.48 | 5.06 | (31) | 12.01 | 16.67 | (28) |
| 0.92 | Rest of World | 1.16 | 1.93 | (40) | 3.03 | 6.63 | (54) |
| 13.85 | Worldwide gas sales ⁽*⁾ | 15.98 | 16.83 | (5) | 46.42 | 55.80 | (17) |
| 2.00 | of which: LNG sales | 2.10 | 2.50 | (16) | 6.60 | 7.40 | (11) |
(*) Data include intercomapny sales.
Sales
• In the third quarter 2020 natural gas sales of 15.98 bcm decreased by 5% compared to the same period of 2019 (46.42 bcm in the nine months, down by 17% vs. the comparative period), due to the lower volumes lifted from certain long-term gas supply contracts. In the nine months of 2020 natural gas sales decreased by 17% y-o-y based on the same trends of the quarter and on a greater impact by economic downturn driven by the COVID-19 situation, which mainly impacted volumes lifted at the industrial and the thermoelectric sectors, as well as at the main European countries of presence.
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| 62 | Operating profit (loss) | (205) | (80) | (42) | 150 | ||
| 68 | Exclusion of special items | 269 | 149 | 469 | 89 | ||
| 130 | Adjusted operating profit (loss) | 64 | 69 | (7) | 427 | 239 | 79 |
| Net finance (expense) income | 1 | ||||||
| (4) | Net income (expense) from investments | 2 | (17) | (11) | (24) | ||
| (71) | Income taxes | (3) | (14) | (126) | (66) | ||
| 55 | Adjusted net profit (loss) | 63 | 38 | 66 | 290 | 150 | 93 |
| 2 | Capital expenditure | 1 | 4 | (75) | 8 | 8 |
• In the third quarter 2020, the Global Gas & LNG Portfolio segment reported an adjusted operating profit of €64 million, down by 7% compared to the same period of 2019 due to an unfavourable gas and LNG trading environment, the effects of which were partly offset by the positive outcome of a contract settlement in the LNG business.
In the nine months of 2020, the Global Gas & LNG Portfolio segment reported an adjusted operating profit of €427 million, up by 79% compared to the same period of 2019, due to the optimization of the gas and the LNG assets portfolio leveraging high price volatility and on contracts' flexibility, as well as to a favourable outcome of an LNG contract renegotiation closed in the third quarter. These positive trends more than offset the lower performance at the gas business negatively affected by a contraction in gas demand at the main European markets due to the COVID-19 pandemic mainly in the second quarter of 2020, being the height of the crisis.
For the disclosure on business segment special charges, see page 15.
| IIQ | IIIQ | Nine months | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. | ||
| 2.3 | Standard Eni Refining Margin (SERM) | \$/bbl | 0.7 | 6.0 | (88) | 2.2 | 4.4 | (50) |
| 3.15 | Throughputs in Italy | mmtonnes | 3.68 | 5.65 | (35) | 10.89 | 15.84 | (31) |
| 0.50 | Throughputs in the rest of Europe | 0.61 | 0.61 | 1.66 | 1.40 | 19 | ||
| 1.69 | Throughputs in the Middle East (ADNOC Refining 20%) | 1.82 | 1.45 | 26 | 4.93 | 1.45 | ||
| 5.34 | Total throughputs | 6.11 | 7.71 | (21) | 17.48 | 18.69 | (6) | |
| 60 | Average refineries utilization rate | % | 69 | 94 | 68 | 89 | ||
| 188 | Bio throughputs | ktonnes | 151 | 85 | 78 | 527 | 185 | |
| 66 | Average bio refineries utilization rate | % | 53 | 38 | 62 | 44 | ||
| Marketing | ||||||||
| 1.32 | Retail sales in Europe | mmtonnes | 2.02 | 2.19 | (8) | 4.98 | 6.23 | (20) |
| 0.89 | Retail sales in Italy | 1.41 | 1.53 | (8) | 3.42 | 4.39 | (22) | |
| 0.43 | Retail sales in the rest of Europe | 0.61 | 0.66 | (8) | 1.56 | 1.84 | (15) | |
| 23.9 | Retail market share in Italy | % | 23.0 | 23.7 | 23.4 | 23.7 | ||
| 1.75 | Wholesale sales in Europe | mmtonnes | 2.21 | 2.83 | (22) | 6.04 | 7.66 | (21) |
| 1.16 | Wholesale sales in Italy | 1.58 | 2.07 | (24) | 4.25 | 5.75 | (26) | |
| 0.59 | Wholesale sales in the rest of Europe | 0.63 | 0.76 | (17) | 1.79 | 1.91 | (6) | |
| Chemicals | ||||||||
| 1.02 | Sales of petrochemical products | mmtonnes | 1.10 | 1.09 | 1 | 3.01 | 3.24 | (7) |
| 60 | Average plant utilization rate | % | 66 | 68 | 61 | 68 |
• In the third quarter of 2020, the Standard Eni Refining Margin reported unprofitable values (0.7 \$/barrel the average quarterly level, down by almost 90% from the third quarter of 2019; 2.2 \$/barrel the average of nine-months period, down by 50% vs. the comparative period) driven mainly by lower crack spreads of gasoil, due to an ongoing weak fuels demand with consumption levels severely hit by the pandemic which affected economic activity and travel, against a backdrop of overcapacity and high inventory levels. The weak scenario was exacerbated by a recovery in the cost of the oil feedstock, which was supported in the quarter by implementation of production cuts resolved by the OPEC+ agreement. Refining margins were also penalized by the shrinking spread between sour crudes like the Ural vs. light-sweet crudes, such as the Brent, for the lower availability of sour crudes due to OPEC+ cuts (the Ural actually traded at premium vs. the Brent of +0.4 \$/barrel on average in the quarter), which resulted in low margins of conversion plants.
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| (392) | Operating profit (loss) | (22) | (8) | (2,324) | 324 | ||
| (321) | Exclusion of inventory holding (gains) losses | 30 | 129 | 1,400 | (315) | ||
| 786 | Exclusion of special items | 13 | 28 | 1,034 | 173 | ||
| 73 | Adjusted operating profit (loss) | 21 | 149 | (86) | 110 | 182 | (40) |
| 139 | - Refining & Marketing | 74 | 219 | (66) | 294 | 326 | (10) |
| (66) | - Chemicals | (53) | (70) | 24 | (184) | (144) | (28) |
| 1 | Net finance (expense) income | 1 | (18) | (6) | (30) | ||
| (19) | Net income (expense) from investments | (61) | 2 | (90) | 9 | ||
| (14) | of which: ADNOC Refining | (77) | (13) | (109) | (13) | ||
| 25 | Income taxes | (18) | (51) | (55) | (91) | ||
| 80 | Adjusted net profit (loss) | (57) | 82 | (41) | 70 | ||
| 142 | Capital expenditure | 138 | 231 | (40) | 515 | 648 | (21) |
For the disclosure on business segment special charges, see page 15.
| Production and sales | ||||||||
|---|---|---|---|---|---|---|---|---|
| IIQ | IIIQ | Nine months | ||||||
| 2020 | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. | ||
| EGL | ||||||||
| 0.88 | Retail gas sales | bcm | 0.66 | 0.74 | (11) | 5.17 | 6.14 | (16) |
| 2.78 | Retail power sales | TWh | 3.14 | 2.81 | 12 | 9.31 | 8.15 | 14 |
| 9.55 | Retail customers (POD) | mln pod | 9.54 | 9.32 | 2 | 9.54 | 9.32 | 2 |
| Power & Renewables | ||||||||
| 5.60 | Power sales in the open market | TWh | 6.65 | 7.37 | (10) | 18.75 | 21.42 | (12) |
| 4.88 | Thermoelectric production | 5.43 | 5.86 | (7) | 15.77 | 16.60 | (5) | |
| 100 | Energy production sold from renewable sources | GWh | 108 | 18 | 252 | 44 | ||
| 251 | Installed capacity from renewables at period end | MW | 276 | 42 | 276 | 42 | ||
| 78 | of which: - photovoltaic | % | 80 | 100 | 80 | 100 | ||
| 19 | - wind | 17 | 17 | |||||
| 3 | - installed storage capacity | 3 | 3 |
Retail power sales were 3.14 TWh in the third quarter of 2020 and 9.31 TWh in the nine months, increasing by 12% and 14% respectively, benefitting from the growth of the retail customers portfolio outside Italy.
Power sales in the open market were 6.65 TWh in the third quarter, decreased by 10% due to the economic downturn (18.75 Twh in the nine months; down by 12% from the same period of 2019).
| IIQ | IIIQ Nine months |
||||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| 113 | Operating profit (loss) | 43 | (9) | 256 | 99 | ||
| (28) | Exclusion of special items | 14 | 24 | 77 | 115 | ||
| 85 | Adjusted operating profit (loss) | 57 | 15 | 280 | 333 | 214 | 56 |
| 26 | - Eni gas e luce | 39 | (4) | 222 | 162 | 37 | |
| 59 | - Power & Renewables | 18 | 19 | (5) | 111 | 52 | |
| (1) | Net finance (expense) income | (1) | |||||
| (1) | Net income (expense) from investments | (3) | (1) | 4 | 7 | ||
| (27) | Income taxes | (15) | (5) | (102) | (66) | ||
| 56 | Adjusted net profit (loss) | 39 | 9 | 234 | 155 | 51 | |
| 70 | Capital expenditure | 63 | 88 | (28) | 204 | 221 | (8) |
• In the third quarter of 2020 the retail gas and power business, managed by Eni gas e luce, reported a solid and growing performance (adjusted operating profit increased by €43 million vs. the quarter 2019; up by €60 million in the nine months) notwithstanding reduced sales due to lower consumption following the economic downturn and higher provisions for impairment losses at trade receivables in line with an expected deterioration in the counterparty risk. The performance was supported by commercial and efficiency initiatives, the contribution of extra-commodity business in Italy and by the development of the business in France and Greece. The Power & Renewables business reported an adjusted operating profit of €18 million (unchanged) and €111 million (up by €59 million) in the third quarter and in the nine months, respectively, benefitting from optimizations of assets portfolio and higher margins.
For the disclosure on business segment special charges, see page 15.
| IIQ | IIIQ | Nine months | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. | |
| 8,157 | Sales from operations | 10,326 | 16,686 | (38) | 32,356 | 53,666 | (40) | |
| (2,680) | Operating profit (loss) | 220 | 1,861 | (88) | (3,555) | 6,610 | ||
| (183) | Exclusion of inventory holding (gains) losses | (7) | 109 | 1,387 | (237) | |||
| 2,429 | Exclusion of special items ⁽ᵃ⁾ | 324 | 189 | 3,578 | 419 | |||
| (434) | Adjusted operating profit (loss) | 537 | 2,159 | (75) | 1,410 | 6,792 | (79) | |
| Breakdown by segment: | ||||||||
| (807) | Exploration & Production | 515 | 2,141 | (76) | 745 | 6,589 | (89) | |
| 130 | GGP | 64 | 69 | (7) | 427 | 239 | 79 | |
| 73 | Refining & Marketing and Chemicals | 21 | 149 | (86) | 110 | 182 | (40) | |
| 85 | EGL, Power, Renewables | 57 | 15 | 280 | 333 | 214 | 56 | |
| (135) | Corporate and other activities | (84) | (144) | 42 | (423) | (399) | (6) | |
| 220 | Impact of unrealized intragroup profit elimination and other consolidation adjustments Utile (perdita) operativo adjusted continuing operations |
(36) | (71) | 218 | (33) | # IV/0! | ||
| (4,406) | Net profit (loss) attributable to Eni's shareholders | (503) | 523 | (7,838) | 2,039 | |||
| (127) | Exclusion of inventory holding (gains) losses | (5) | 77 | 986 | (167) | |||
| 3,819 | Exclusion of special items ⁽ᵃ⁾ | 355 | 176 | 6,044 | 458 | |||
| (714) | Adjusted net profit (loss) attributable to Eni's shareholders | (153) | 776 | (808) | 2,330 |
(a) For further information see table "Breakdown of special items".
3 They comprise a reduction in hydrocarbon production due to capex cut and lower global gas demand, lower offtakes at LNG supply in Asia, lower production sale volumes in R&M and Chemicals, higher allowances for doubtful accounts due to an expected deterioration in the counterparty risk.
- the recognition of current income taxes on intercompany dividend distribution which created a mismatch due to absence of pre-tax profit at Group level (intercompany dividends are eliminated in the consolidation process).
Net of these transactions, the Group's normalized tax rate would come at 72% reflecting the high impact in the Eni's portfolio of PSA oil contracts that have tax rates less sensitive to oil prices.
| (€ million) | Nine months 2020 | ||||
|---|---|---|---|---|---|
| reported (ex-special items) |
costs, losses and non-deductible exploration items |
amounts of deferred tax assets not recognized on losses for the period |
tax accrued on intercompany dividends |
normalized tax rate |
|
| Pre-tax profit | 628 | 692 | 1,320 | ||
| Accrued income taxes | 1,431 | (354) | (130) | 947 | |
| Tax rate | n.s. | 72% |
The breakdown of special items of operating profit by segment (a net charge of €3,578 million in the nine months and €324 million in the quarter) is the following:
• EGL, Power, Renewables: net charge of €77 million (€14 million in the quarter) included the accounting effect of certain fair-valued commodity derivatives lacking the formal criteria to be classified as hedges (charges of €45 million and gain of €14 million in the nine months of 2020 and in the third quarter, respectively) and provision for redundancy incentives (€27 million and €26 million in the nine months and in the quarter, respectively).
Special items of investment in the nine months include: (i) charges of €703 million relating to the JV Vår Energi, driven by impairment losses recorded at oil&gas assets due to a revised oil price outlook. A special charge was also recorded in connection with accrued currency translation differences at finance debt denominated in a currency other than the reporting currency for which the reimbursement cash outflows are expected to be matched by highly probable cash inflows from the sale of production volumes, in the same currency as the finance debt as part of a natural hedge relationship; (ii) a loss of €246 million relating to non-current assets impairment losses driven by a reviewed scenario of refining margins and the alignment of raw material and products inventories to their net realizable values at period end at ADNOC Refining; (iii) charges of €252 million relating to Saipem.
In the nine months of 2020, the Group reported a net loss attributable to Eni's shareholders of €7,838 million compared to a net profit of €2,039 million reported in the same period of the previous year due to an operating loss of approximately €3.6 billion. In addition to the drivers described in the review of the Company's business segments, the operating performance was negatively affected by the recognition of impairment losses of €2.75 billion mainly taken at oil&gas assets and refineries, driven by the revision of the scenario for Brent prices and margins and by the impact of falling oil and product prices on inventories evaluation, which were aligned to their net realizable values at period end (resulting in an operating charge of €1.4 billion). The Group incurred losses of €1.32 billion at joint ventures and other industrial investments which were negatively affected by the same market and industrial trends as operated activities, as well as to impairment losses of tangible assets and inventories valuation allowance.
Finally, the net result was negatively affected by the write-off of deferred tax assets driven by projections of lower future taxable income (€0.8 billion).
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | Change | 2020 | 2019 | Change |
| (4,405) | Net profit (loss) | (501) | 524 | (1,025) | (7,833) | 2,044 | (9,877) |
| Adjustments to reconcile net profit (loss) to net cash provided by operating activities: | |||||||
| 4,970 | - depreciation, depletion and amortization and other non monetary items | 1,860 | 1,962 | (102) | 10,165 | 6,246 | 3,919 |
| (1) | - net gains on disposal of assets | (2) | (18) | 16 | (6) | (44) | 38 |
| 1,245 | - dividends, interests and taxes | 658 | 1,483 | (825) | 2,624 | 4,666 | (2,042) |
| 3 | Changes in working capital related to operations | (74) | (438) | 364 | 614 | (972) | 1,586 |
| 172 | Dividends received by equity investments | 85 | 72 | 13 | 413 | 1,227 | (814) |
| (334) | Taxes paid | (352) | (1,220) | 868 | (1,424) | (3,736) | 2,312 |
| (247) | Interests (paid) received | (218) | (310) | 92 | (719) | (764) | 45 |
| 1,403 | Net cash provided by operating activities | 1,456 | 2,055 | (599) | 3,834 | 8,667 | (4,833) |
| (978) | Capital expenditure | (889) | (1,899) | 1,010 | (3,457) | (6,135) | 2,678 |
| (42) | Investments | (95) | (2,931) | 2,836 | (359) | (2,982) | 2,623 |
| Disposal of consolidated subsidiaries, businesses, tangible and intangible assets and | |||||||
| 13 | investments | 1 | 192 | (191) | 22 | 230 | (208) |
| (300) | Other cash flow related to capital expenditure, investments and disposals | (339) | (117) | (222) | (732) | (76) | (656) |
| 96 | Free cash flow | 134 | (2,700) | 2,834 | (692) | (296) | (396) |
| 1,198 | Borrowings (repayment) of debt related to financing activities | 507 | (31) | 538 | 970 | (153) | 1,123 |
| 3,359 | Changes in short and long-term financial debt | 372 | (1,432) | 1,804 | 3,279 | (2,095) | 5,374 |
| (213) | Repayment of lease liabilities | (214) | (255) | 41 | (676) | (652) | (24) |
| (1,537) | Dividends paid and changes in non-controlling interests and reserves | (423) | (1,719) | 1,296 | (1,960) | (3,244) | 1,284 |
| (17) | Effect of changes in consolidation, exchange differences and cash and cash equivalent | (24) | 16 | (40) | (36) | 18 | (54) |
| 2,886 | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENT | 352 | (6,121) | 6,473 | 885 | (6,422) | 7,307 |
| 1,148 | Adjusted net cash before changes in working capital at replacement cost | 1,774 | 2,573 | (799) | 5,144 | 9,162 | (4,018) |
| IIQ | IIIQ | Nine months | |||||
| 2020 | (€ million) | 2020 | 2019 | Change | 2020 | 2019 | Change |
| 96 | Free cash flow | 134 | (2,700) | 2,834 | (692) | (296) | (396) |
| (213) | Repayment of lease liabilities | (214) | (255) | 41 | (676) | (652) | (24) |
| (1) | Net borrowings of acquired companies | (67) | (67) | ||||
| Net borrowings of divested companies | 13 | (13) | 13 | (13) | |||
| 246 | Exchange differences on net borrowings and other changes | 307 | (179) | 486 | 347 | (241) | 588 |
| (1,537) | Dividends paid and changes in non-controlling interest and reserves | (423) | (1,719) | 1,296 | (1,960) | (3,244) | 1,284 |
| (1,409) | CHANGE IN NET BORROWINGS BEFORE LEASE LIABILITIES | (196) | (4,840) | 4,644 | (3,048) | (4,420) | 1,372 |
| IFRS 16 first application effect | (5,759) | 5,759 | |||||
| 213 | Repayment of lease liabilities | 214 | 255 | (41) | 676 | 652 | 24 |
| (94) | New leases subscription of the period and other changes | 100 | (341) | 441 | (356) | (701) | 345 |
| 119 | Change in lease liabilities | 314 | (86) | 400 | 320 | (5,808) | 6,128 |
| (1,290) | CHANGE IN NET BORROWINGS AFTER LEASE LIABILITIES | 118 | (4,926) | 5,044 | (2,728) | (10,228) | 7,500 |
Net cash provided by operating activities in the nine months of 2020 was €3,834 million, 56% lower than the same period of the previous year due to a deteriorated scenario and the circumstance that the 2019 amount included higher dividends paid by the JV Vår Energi (€1,047 million in 2019 vs. €232 million in the current period).
Changes in working capital in the nine months of 2020 were positive for €614 million mainly driven by a reduction in the book value of inventories due to the alignment to their net realizable values at period-end and despite a lower amount of trade receivables due in subsequent reporting periods divested to financing institutions compared to the fourth quarter 2019 (-€1.2 billion).
Adjusted cash flow was €5,144 million (€1,774 million in the quarter) 44% lower than the same period of the previous year. This Non-GAAP measure includes net cash provided by operating activities before changes in working capital excluding inventory holding gains or losses and provisions for extraordinary credit losses and other charges, as well as from the third quarter 2020 considering the high market volatility, changes in fair value of commodity derivatives lacking the formal criteria to be designated as hedges, for which the underlying transactions are expected to occur in future reporting periods. The reduction from the nine months 2019 is due to scenario effects of -€4.8 billion, including the impact of dividends from equity accounted entities, operational impacts associated with the COVID-19 for -€0.9 billion, while the underlying performance was a positive of €1.7 billion.
The Group cash tax rate was 29% (33% in the nine months of 2019).
A reconciliation of adjusted net cash before changes in working capital at replacement cost to net cash provided by operating activities for the third quarter and nine-months period of 2020 is provided below:
| IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|
| (€ million) | 2020 | 2019 | Change | 2020 | 2019 | Change |
| Net cash provided by operating activities | 1,456 | 2,055 | (599) | 3,834 | 8,667 | (4,833) |
| Changes in working capital related to operations | 74 | 438 | (364) | (614) | 972 | (1,586) |
| Exclusion of commodity derivatives | 277 | (29) | 306 | 389 | (240) | 629 |
| Exclusion of inventory holding (gains) losses | (7) | 109 | (116) | 1,387 | (237) | 1,624 |
| Provisions for extraordinary credit losses and other charges | (26) | 148 | ||||
| Adjusted net cash before changes in working capital at replacement cost | 1,774 | 2,573 | (799) | 5,144 | 9,162 | (4,018) |
Cash outflows for capital expenditure and investments were €3,816 million, including the acquisition of the control of the Evolvere company and of minority interests in Finproject and in Novis Renewables Holdings, as well as capital contributions made to certain equity-accounted entities engaged in the execution of projects of Eni's interest. Net of the above-mentioned non-organic items and of utilization of trade advances cashed by Egyptian partners in previous reporting periods in relation to the financing of the Zohr project (€0.26 billion), net capital expenditures amounted to €3.76 billion, 33% lower than the same period of 2019 leveraging the curtailments implemented by the management following a review of the industrial plan 2020-2021 in response to the pandemic COVID-19 crisis. In the nine months of 2020 net capex were fully funded by the adjusted cash flow.
| (€ million) | Sept. 30, 2020 | Dec. 31, 2019 | Change |
|---|---|---|---|
| Fixed assets | |||
| Property, plant and equipment | 55,726 | 62,192 | (6,466) |
| Right of use | 4,950 | 5,349 | (399) |
| Intangible assets | 3,025 | 3,059 | (34) |
| Inventories - Compulsory stock | 914 | 1,371 | (457) |
| Equity-accounted investments and other investments | 8,130 | 9,964 | (1,834) |
| Receivables and securities held for operating purposes | 1,264 | 1,234 | 30 |
| Net payables related to capital expenditure | (1,473) | (2,235) | 762 |
| 72,536 | 80,934 | (8,398) | |
| Net working capital | |||
| Inventories | 4,031 | 4,734 | (703) |
| Trade receivables | 6,968 | 8,519 | (1,551) |
| Trade payables | (7,736) | (10,480) | 2,744 |
| Net tax assets (liabilities) | (3,500) | (1,594) | (1,906) |
| Provisions | (13,225) | (14,106) | 881 |
| Other current assets and liabilities | (1,597) | (1,864) | 267 |
| (15,059) | (14,791) | (268) | |
| Provisions for employee post-retirements benefits | (1,109) | (1,136) | 27 |
| Assets held for sale including related liabilities | 18 | 18 | |
| CAPITAL EMPLOYED, NET | 56,386 | 65,025 | (8,639) |
| Eni's shareholders equity | 36,460 | 47,839 | (11,379) |
| Non-controlling interest | 73 | 61 | 12 |
| Shareholders' equity | 36,533 | 47,900 | (11,367) |
| Net borrowings before lease liabilities ex IFRS 16 | 14,525 | 11,477 | 3,048 |
| Lease liabilities | 5,328 | 5,648 | (320) |
| - of which Eni working interest | 3,588 | 3,672 | (84) |
| - of which Joint operators' working interest | 1,740 | 1,976 | (236) |
| Net borrowings after lease liabilities ex IFRS 16 | 19,853 | 17,125 | 2,728 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 56,386 | 65,025 | (8,639) |
| Leverage before lease liabilities ex IFRS 16 | 0.40 | 0.24 | 0.16 |
| Leverage after lease liabilities ex IFRS 16 | 0.54 | 0.36 | 0.18 |
| Gearing | 0.35 | 0.26 | 0.09 |
euro as of September 30, 2020 vs. December 31, 2019, partly offset by a positive change in the cash flow hedge reserve (+€271 million).
4 Details on net borrowings are furnished on page 31.
5 Non-GAAP financial measures and other alternative performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables in line with guidance provided by ESMA guidelines on alternative performance measures (ESMA/2015/1415), published on October 5, 2015. For further information, see the section "Non-GAAP measures" of this press release. See pages 23 and subsequent.
This press release on Eni's results for the third quarter and the nine months of 2020 has been prepared on a voluntary basis according to article 82-ter, Regulations on issuers (CONSOB Regulation No. 11971 of May 14, 1999 and subsequent amendments and inclusions). The disclosure of results and business trends on a quarterly basis is consistent with Eni's policy to provide the market and investors with regular information about the Company's financial and industrial performances and business prospects considering the reporting policy followed by oil&gas peers who are communicating results on quarterly basis. Results and cash flow are presented for the second and third quarter of 2020, the nine months of 2020 and for the third quarter and the nine months of 2019. Information on the Company's financial position relates to end of the periods as of September 30, 2020 and December 31, 2019.
Accounts set forth herein have been prepared in accordance with the evaluation and recognition criteria set by the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure set forth in Article 6 of the European Regulation (CE) No. 1606/2002 of the European Parliament and European Council of July 19, 2002.
These criteria are unchanged from the 2019 Annual Report on Form 20-F filed with the US SEC on April 2, 2020, which investors are urged to read.
Effective January 1, 2020, Eni has updated the conversion rate of gas produced to 5,310 cubic feet of gas equals 1 barrel of oil (it was 5,408 cubic feet of gas per barrel in previous reporting periods). This update reflected changes in volumes and Eni's gas properties that took place in the last years and was assessed by collecting data on the heating power of gas in Eni's gas fields currently on stream. The effect of this update on production expressed in boe was 16 kboe/d for the third quarter and nine months. For the sake of comparability also production of the first and the second quarter of 2020 was restated resulting in an effect equal to that of the third quarter. Other per-boe indicators were only marginally affected by the update (e.g. realized prices, costs per boe) and also negligible was the impact on depletion charges. Other oil companies may use different conversion rates.
Effective July 1, 2020, Eni's management has redesigned the macro-organizational structure of the Group, in line with its new long-term strategy, disclosed on February 2020 to the market and aimed at transforming the Company into a leader in the production and marketing of decarbonized energy products. The new organization is based on two new business groups:
In re-designing the Group's segment information for financial reporting purposes, the management evaluated that the components of the Company whose operating results are regularly reviewed by the Chief Operating Decision Maker (CEO) to make decisions about the allocation of resources and to assess performances would continue being the single business units which are comprised in the two newly-established business groups, rather than the two groups themselves. Therefore, in order to comply with the provisions of the international reporting standard that regulates the segment reporting (IFRS 8), the new reportable segments of Eni, substantially confirming the pre-existing setup, are identified as follows:
According to the requirements of IFRS 8, the new Eni information segment has been effective since January 1, 2020; therefore, the results of the first and second quarter of 2020 and the 2019 comparative periods have been restated to adjust them to the change of the segment information, as follows:
| 2020 | First quarter | Second quarter | Third quarter | Nine months | ||||
|---|---|---|---|---|---|---|---|---|
| As published | As restated As published | As restated | previous segmentation |
new segmentation |
previous segmentation |
new segmentation |
||
| Adjusted operating profit (loss) | 1,307 | 1,307 | (434) | (434) | 537 | 537 | 1,410 | 1,410 |
| of which: E&P | 1,037 | 1,037 | (807) | (807) | 515 | 515 | 745 | 745 |
| G&P | 431 | 218 | 125 | 774 | ||||
| GGP | 233 | 130 | 64 | 427 | ||||
| Refining & Marketing and Chemicals |
16 | 16 | 73 | 73 | 21 | 21 | 110 | 110 |
| EGL, Power, Renewables | 191 | 85 | 57 | 333 | ||||
| Corporate and other activities | (211) | (204) | (138) | (135) | (88) | (84) | (437) | (423) |
| Impact of unrealized intragroup profit elimination and other consolidation adjustments |
34 | 34 | 220 | 220 | (36) | (36) | 218 | 218 |
| 2019 | First half | Third quarter | Fourth quarter | Full year | ||||
|---|---|---|---|---|---|---|---|---|
| As published | As restated As published | As restated | As published | As restated | As published | As restated | ||
| Adjusted operating profit (loss) | 4,633 | 4,633 | 2,159 | 2,159 | 1,805 | 1,805 | 8,597 | 8,597 |
| of which: E&P | 4,448 | 4,448 | 2,141 | 2,141 | 2,051 | 2,051 | 8,640 | 8,640 |
| G&P | 378 | 89 | 118 | 585 | ||||
| GGP | 170 | 69 | (46) | 193 | ||||
| Refining & Marketing and Chemicals | 33 | 33 | 149 | 149 | (161) | (161) | 21 | 21 |
| EGL, Power, Renewables | 199 | 15 | 156 | 370 | ||||
| Corporate and other activities | (264) | (255) | (149) | (144) | (211) | (203) | (624) | (602) |
| Impact of unrealized intragroup profit elimination and other consolidation adjustments |
38 | 38 | (71) | (71) | 8 | 8 | (25) | (25) |
* * *
Non-GAAP financial measures and other alternative performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables in line with guidance provided by ESMA guidelines on alternative performance measures (ESMA/2015/1415), published on October 5, 2015. For further information, see the section "Alternative performance measures (Non-GAAP measures)" of this press release.
The manager responsible for the preparation of the Company's financial reports, Francesco Esposito, declares pursuant to rule 154-bis paragraph 2 of Legislative Decree No. 58/1998 that data and information disclosed in this press release correspond to the Company's evidence and accounting books and records.
* * *
This press release, in particular the statements under the section "Outlook", contains certain forward-looking statements particularly those regarding capital expenditure, development and management of oil and gas resources, dividends, share repurchases, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sales growth, new markets and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the impact of the pandemic disease, the timing of bringing new fields on stream; management's ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply; demand and pricing; operational issues; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; development and use of new technology; changes in public expectations and other changes in business conditions; the actions of competitors and other factors discussed elsewhere in this document. Due to the seasonality in demand for natural gas and certain refined products and the changes in a number of external factors affecting Eni's operations, such as prices and margins of hydrocarbons and refined products, Eni's results from operations and changes in net borrowings for the quarter of the year cannot be extrapolated on an annual basis.
* * *
Press Office: Tel. +39.0252031875 - +39.0659822030 Freephone for shareholders (from Italy): 800940924 Freephone for shareholders (from abroad): +80011223456 Switchboard: +39-0659821 [email protected] [email protected] [email protected] website: www.eni.com
* * *
Eni Società per Azioni, Rome, Piazzale Enrico Mattei, 1 Share capital: €4,005,358,876 fully paid. Tax identification number 00484960588 Tel.: +39 0659821 - Fax: +39 0659822141
This press release for the third quarter and nine months of 2020 (unaudited) is also available on Eni's website eni.com.
Management evaluates underlying business performance on the basis of Non-GAAP financial measures, which are not provided by IFRS ("Alternative performance measures"), such as adjusted operating profit, adjusted net profit, which are arrived at by excluding from reported results certain gains and losses, defined special items, which include, among others, asset impairments, including impairments of deferred tax assets, gains on disposals, risk provisions, restructuring charges, the accounting effect of fair-valued derivatives used to hedge exposure to the commodity, exchange rate and interest rate risks, which lack the formal criteria to be accounted as hedges, and analogously evaluation effects of assets and liabilities utilized in a relation of natural hedge of the above mentioned market risks. Furthermore, in determining the business segments' adjusted results, finance charges on finance debt and interest income are excluded (see below). In determining adjusted results, inventory holding gains or losses are excluded from base business performance, which is the difference between the cost of sales of the volumes sold in the period based on the cost of supplies of the same period and the cost of sales of the volumes sold calculated using the weighted average cost method of inventory accounting as required by IFRS, except in those business segments where inventories are utilized as a lever to optimize margins.
Finally, the same special charges/gains are excluded from the Eni's share of results at JVs and other equity accounted entities, including any profit/loss on inventory holding.
Management is disclosing Non-GAAP measures of performance to facilitate a comparison of base business performance across periods, and to allow financial analysts to evaluate Eni's trading performance on the basis of their forecasting models.
Non-GAAP financial measures should be read together with information determined by applying IFRS and do not stand in for them. Other companies may adopt different methodologies to determine Non-GAAP measures.
Follows the description of the main alternative performance measures adopted by Eni. The measures reported below refer to the performance of the reporting periods disclosed in this press release:
Adjusted operating profit and adjusted net profit are determined by excluding inventory holding gains or losses, special items and, in determining the business segments' adjusted results, finance charges on finance debt and interest income. The adjusted operating profit of each business segment reports gains and losses on derivative financial instruments entered into to manage exposure to movements in foreign currency exchange rates, which impact industrial margins and translation of commercial payables and receivables. Accordingly, also currency translation effects recorded through profit and loss are reported within business segments' adjusted operating profit. The taxation effect of the items excluded from adjusted operating or net profit is determined based on the specific rate of taxes applicable to each of them.
Finance charges or income related to net borrowings excluded from the adjusted net profit of business segments are comprised of interest charges on finance debt and interest income earned on cash and cash equivalents not related to operations. Therefore, the adjusted net profit of business segments includes finance charges or income deriving from certain segment operated assets, i.e., interest income on certain receivable financing and securities related to operations and finance charge pertaining to the accretion of certain provisions recorded on a discounted basis (as in the case of the asset retirement obligations in the Exploration & Production segment).
This is the difference between the cost of sales of the volumes sold in the period based on the cost of supplies of the same period and the cost of sales of the volumes sold calculated using the weighted average cost method of inventory accounting as required by IFRS.
These include certain significant income or charges pertaining to either: (i) infrequent or unusual events and transactions, being identified as non-recurring items under such circumstances; (ii) certain events or transactions which are not considered to be representative of the ordinary course of business, as in the case of environmental provisions, restructuring charges, asset impairments or write ups and gains or losses on divestments even though they occurred in past periods or are likely to occur in future ones. Exchange rate differences and derivatives relating to industrial activities and commercial payables and receivables, particularly exchange rate derivatives to manage commodity pricing formulas which are quoted in a currency other than the functional currency are reclassified in operating profit with a corresponding adjustment to net finance charges, notwithstanding the handling of foreign currency exchange risks is made centrally by netting off naturally-occurring opposite positions and then dealing with any residual risk exposure in the derivative market. Finally, special items include the accounting effects of fair-valued commodity derivatives relating to commercial exposures, in addition to those which lack the criteria to be designed as hedges, also those which are not eligible for the own use exemption, including the ineffective portion of cash flow hedges, as well as the accounting effects of settled commodity and exchange rates derivatives whenever it is deemed that the underlying transaction is expected to occur in future reporting periods.
Correspondently, special charges/gains also include the evaluation effects relating to assets/liabilities utilized in a natural hedge relation to offset a market risk, as in the case of accrued currency differences at finance debt denominated in a currency other than the reporting currency, where the cash outflows for the reimbursement are matched by highly probable cash inflows in the same currency. The deferral of both the unrealized portion of fair-valued commodity and other derivatives and evaluation effects are reversed to future reporting periods when the underlying transaction occurs.
As provided for in Decision No. 15519 of July 27, 2006 of the Italian market regulator (CONSOB), non-recurring material income or charges are to be clearly reported in the management's discussion and financial tables.
Leverage is a Non-GAAP measure of the Company's financial condition, calculated as the ratio between net borrowings and shareholders' equity, including non-controlling interest. Leverage is the reference ratio to assess the solidity and efficiency of the Group balance sheet in terms of incidence of funding sources including third-party funding and equity as well as to carry out benchmark analysis with industry standards.
Gearing is calculated as the ratio between net borrowings and capital employed net and measures how much of capital employed net is financed recurring to third-party funding.
Adjusted net cash is defined as net cash provided from operating activities before changes in working capital at replacement cost and excluding certain non-recurring charges such as extraordinary credit allowances and, from the third quarter 2020, considering the high market volatility, changes in the fair value of commodity derivatives lacking the formal criteria to be designed as hedges, including derivatives which were not eligible for the own use exemption, the ineffective portion of cash flow hedges, as well as the effects of certain settled commodity derivatives whenever it is deemed that the underlying transaction is expected to occur in future reporting periods.
Free cash flow represents the link existing between changes in cash and cash equivalents (deriving from the statutory cash flows statement) and in net borrowings (deriving from the summarized cash flow statement) that occurred from the beginning of the period to the end of period. Free cash flow is the cash in excess of capital expenditure needs. Starting from free cash flow it is possible to determine either: (i) changes in cash and cash equivalents for the period by adding/deducting cash flows relating to financing debts/receivables (issuance/repayment of debt and receivables related to financing activities), shareholders' equity (dividends paid, net repurchase of own shares, capital issuance) and the effect of changes in consolidation and of exchange rate differences; (ii) changes in net borrowings for the period by adding/deducting cash flows relating to shareholders' equity and the effect of changes in consolidation and of exchange rate differences.
Net borrowings is calculated as total finance debt less cash, cash equivalents and certain very liquid investments not related to operations, including among others non-operating financing receivables. Financial activities are qualified as "not related to operations" when these are not strictly related to the business operations.
| (€ million) | |||||||
|---|---|---|---|---|---|---|---|
| Third Quarter 2020 | Exploration & Production |
Global Gas & LNG Portfolio |
Refining & Marketing and Chemicals |
Eni gas e luce, Power, Renewables |
Corporate and other activities |
Impact of unrealized intragroup profit elimination |
GROUP |
| Reported operating profit (loss) | 514 | (205) | (22) | 43 | (111) | 1 | 220 |
| Exclusion of inventory holding (gains) losses | 30 | (37) | (7) | ||||
| Exclusion of special items: | |||||||
| environmental charges | 13 | 13 | |||||
| impairment losses (impairment reversals), net | (24) | 14 | (1) | 7 | (4) | ||
| net gains on disposal of assets | (2) | (2) | |||||
| risk provisions | 22 | 4 | 26 | ||||
| provision for redundancy incentives | 7 | 1 | 4 | 26 | 15 | 53 | |
| commodity derivatives | 318 | (27) | (14) | 277 | |||
| exchange rate differences and derivatives | 7 | (93) | (1) | 3 | (84) | ||
| other | (11) | 43 | 12 | 1 | 45 | ||
| Special items of operating profit (loss) | 1 | 269 | 13 | 14 | 27 | 324 | |
| Adjusted operating profit (loss) | 515 | 64 | 21 | 57 | (84) | (36) | 537 |
| Net finance (expense) income ⁽ᵃ⁾ | (102) | 1 | (88) | (189) | |||
| Net income (expense) from investments ⁽ᵃ⁾ | 58 | 2 | (61) | (3) | (23) | (27) | |
| Income taxes ⁽ᵃ⁾ | (402) | (3) | (18) | (15) | (44) | 10 | (472) |
| Tax rate (%) | 147.0 | ||||||
| Adjusted net profit (loss) | 69 | 63 | (57) | 39 | (239) | (26) | (151) |
| of which: | |||||||
| - Adjusted net profit (loss) of non-controlling interest | 2 | ||||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | (153) | ||||||
| Reported net profit (loss) attributable to Eni's shareholders | (503) | ||||||
| Exclusion of inventory holding (gains) losses | (5) | ||||||
| Exclusion of special items | 355 | ||||||
| Adjusted net profit (loss) attributable to Eni's shareholders | (153) |
| (€ million) | |||||||
|---|---|---|---|---|---|---|---|
| Third Quarter 2019 | Exploration & Production |
Global Gas & LNG Portfolio |
Refining & Marketing and Chemicals |
Eni gas e luce, Power, Renewables |
Corporate and other activities |
Impact of unrealized intragroup profit elimination |
GROUP |
| Reported operating profit (loss) | 2,162 | (80) | (8) | (9) | (153) | (51) | 1,861 |
| Exclusion of inventory holding (gains) losses | 129 | (20) | 109 | ||||
| Exclusion of special items: | |||||||
| environmental charges | 35 | 41 | 76 | ||||
| impairment losses (impairment reversals), net | 4 | 28 | 1 | 33 | |||
| net gains on disposal of assets | (1) | (1) | |||||
| risk provisions | 2 | (20) | 23 | 5 | |||
| provision for redundancy incentives | 6 | 7 | 1 | 2 | 16 | ||
| commodity derivatives | (5) | (55) | 31 | (29) | |||
| exchange rate differences and derivatives | 105 | (11) | (8) | 86 | |||
| other | (32) | 49 | 44 | (58) | 3 | ||
| Special items of operating profit (loss) | (21) | 149 | 28 | 24 | 9 | 189 | |
| Adjusted operating profit (loss) | 2,141 | 69 | 149 | 15 | (144) | (71) | 2,159 |
| Net finance (expense) income ⁽ᵃ⁾ | (119) | (18) | (49) | (186) | |||
| Net income (expense) from investments ⁽ᵃ⁾ | 50 | (17) | 2 | (1) | 8 | 42 | |
| Income taxes ⁽ᵃ⁾ | (1,267) | (14) | (51) | (5) | 75 | 24 | (1,238) |
| Tax rate (%) | 61.4 | ||||||
| Adjusted net profit (loss) | 805 | 38 | 82 | 9 | (110) | (47) | 777 |
| of which: | |||||||
| - Adjusted net profit (loss) of non-controlling interest | 1 | ||||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | 776 | ||||||
| Reported net profit (loss) attributable to Eni's shareholders | 523 | ||||||
| Exclusion of inventory holding (gains) losses | 77 | ||||||
| Exclusion of special items | 176 | ||||||
| Adjusted net profit (loss) attributable to Eni's shareholders | 776 |
| (€ million) Nine months 2020 |
|||||||
|---|---|---|---|---|---|---|---|
| Global Gas & LNG | Refining & Marketing | Eni gas e luce, Power, | Corporate and other | Impact of unrealized intragroup profit |
|||
| Exploration & Production |
Portfolio | and Chemicals | Renewables | activities | elimination | GROUP | |
| Reported operating profit (loss) | (1,164) | (42) | (2,324) | 256 | (512) | 231 | (3,555) |
| Exclusion of inventory holding (gains) losses | 1,400 | (13) | 1,387 | ||||
| Exclusion of special items: | |||||||
| environmental charges | 1 | 74 | 75 | ||||
| impairment losses (impairment reversals), net | 1,657 | 1,070 | 5 | 13 | 2,745 | ||
| net gains on disposal of assets | 1 | (5) | (2) | (6) | |||
| risk provisions | 107 | 6 | 113 | ||||
| provision for redundancy incentives | 17 | 2 | 9 | 27 | 36 | 91 | |
| commodity derivatives | 469 | (125) | 45 | 389 | |||
| exchange rate differences and derivatives | 7 | (100) | (15) | (108) | |||
| other | 119 | 98 | 26 | 36 | 279 | ||
| Special items of operating profit (loss) | 1,909 | 469 | 1,034 | 77 | 89 | 3,578 | |
| Adjusted operating profit (loss) | 745 | 427 | 110 | 333 | (423) | 218 | 1,410 |
| Net finance (expense) income ⁽ᵃ⁾ | (271) | (6) | (1) | (439) | (717) | ||
| Net income (expense) from investments ⁽ᵃ⁾ | 101 | (11) | (90) | 4 | (69) | (65) | |
| Income taxes ⁽ᵃ⁾ | (1,079) | (126) | (55) | (102) | (14) | (55) | (1,431) |
| Tax rate (%) | 227.9 | ||||||
| Adjusted net profit (loss) | (504) | 290 | (41) | 234 | (945) | 163 | (803) |
| of which: | |||||||
| - Adjusted net profit (loss) of non-controlling interest | 5 | ||||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | (808) | ||||||
| Reported net profit (loss) attributable to Eni's shareholders | (7,838) | ||||||
| Exclusion of inventory holding (gains) losses | 986 | ||||||
| Exclusion of special items | 6,044 | ||||||
| Adjusted net profit (loss) attributable to Eni's shareholders | (808) |
| Nine months 2019 | |||||||
|---|---|---|---|---|---|---|---|
| Global Gas & LNG | Refining & Marketing | Eni gas e luce, Power, | Corporate and other | Impact of unrealized | |||
| Exploration & Production |
Portfolio | and Chemicals | Renewables | activities | intragroup profit elimination |
||
| GROUP | |||||||
| Reported operating profit (loss) | 6,587 | 150 | 324 | 99 | (439) | (111) | 6,610 |
| Exclusion of inventory holding (gains) losses | (315) | 78 | (237) | ||||
| Exclusion of special items: | |||||||
| environmental charges | 120 | 32 | 152 | ||||
| impairment losses (impairment reversals), net | 26 | 315 | 3 | 344 | |||
| net gains on disposal of assets | (21) | (3) | (24) | ||||
| risk provisions | (10) | 21 | 11 | ||||
| provision for redundancy incentives | 9 | 1 | 8 | 3 | 4 | 25 | |
| commodity derivatives | (256) | (109) | 125 | (240) | |||
| exchange rate differences and derivatives | 6 | 158 | (18) | (13) | 133 | ||
| other | (8) | 186 | (140) | (20) | 18 | ||
| Special items of operating profit (loss) | 2 | 89 | 173 | 115 | 40 | 419 | |
| Adjusted operating profit (loss) | 6,589 | 239 | 182 | 214 | (399) | (33) | 6,792 |
| Net finance (expense) income ⁽ᵃ⁾ | (322) | 1 | (30) | (380) | (731) | ||
| Net income (expense) from investments ⁽ᵃ⁾ | 198 | (24) | 9 | 7 | 25 | 215 | |
| Income taxes ⁽ᵃ⁾ | (3,857) | (66) | (91) | (66) | 136 | 3 | (3,941) |
| Tax rate (%) | 62.8 | ||||||
| Adjusted net profit (loss) | 2,608 | 150 | 70 | 155 | (618) | (30) | 2,335 |
| of which: | |||||||
| - Adjusted net profit (loss) of non-controlling interest | 5 | ||||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | 2,330 | ||||||
| Reported net profit (loss) attributable to Eni's shareholders | 2,039 | ||||||
| Exclusion of inventory holding (gains) losses | (167) | ||||||
| Exclusion of special items | 458 | ||||||
| Adjusted net profit (loss) attributable to Eni's shareholders | 2,330 |
| (€ million) Second Quarter 2020 |
|||||||
|---|---|---|---|---|---|---|---|
| Exploration & | Global Gas & LNG | Refining & Marketing and Chemicals |
Eni gas e luce, Power, | Corporate and other | Impact of unrealized intragroup profit |
||
| Production | Portfolio | Renewables | activities | elimination | GROUP | ||
| Reported operating profit (loss) | (2,393) | 62 | (392) | 113 | (152) | 82 | (2,680) |
| Exclusion of inventory holding (gains) losses | (321) | 138 | (183) | ||||
| Exclusion of special items: | |||||||
| environmental charges | 1 | 46 | 47 | ||||
| impairment losses (impairment reversals), net | 1,484 | 917 | 5 | 2 | 2,408 | ||
| net gains on disposal of assets | (2) | (2) | |||||
| risk provisions | 58 | 3 | 61 | ||||
| provision for redundancy incentives | 5 | 2 | 9 | 16 | |||
| commodity derivatives | 59 | (183) | (33) | (157) | |||
| exchange rate differences and derivatives | 1 | (56) | (7) | (62) | |||
| other | 37 | 65 | 11 | 5 | 118 | ||
| Special items of operating profit (loss) | 1,586 | 68 | 786 | (28) | 17 | 2,429 | |
| Adjusted operating profit (loss) | (807) | 130 | 73 | 85 | (135) | 220 | (434) |
| Net finance (expense) income ⁽ᵃ⁾ | (54) | 1 | (1) | (14) | (68) | ||
| Net income (expense) from investments ⁽ᵃ⁾ | 102 | (4) | (19) | (1) | (43) | 35 | |
| Income taxes ⁽ᵃ⁾ | (26) | (71) | 25 | (27) | (91) | (56) | (246) |
| Tax rate (%) | (52.7) | ||||||
| Adjusted net profit (loss) | (785) | 55 | 80 | 56 | (283) | 164 | (713) |
| of which: | |||||||
| - Adjusted net profit (loss) of non-controlling interest | 1 | ||||||
| - Adjusted net profit (loss) attributable to Eni's shareholders | (714) | ||||||
| Reported net profit (loss) attributable to Eni's shareholders | (4,406) | ||||||
| Exclusion of inventory holding (gains) losses | (127) | ||||||
| Exclusion of special items | 3,819 | ||||||
| Adjusted net profit (loss) attributable to Eni's shareholders | (714) |
| IIQ | IIIQ | Nine months | |||
|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | 2020 | 2019 |
| 47 | Environmental charges | 13 | 76 | 75 | 152 |
| 2,408 | Impairment losses (impairment reversals), net | (4) | 33 | 2,745 | 344 |
| (2) | Net gains on disposal of assets | (2) | (1) | (6) | (24) |
| 61 | Risk provisions | 26 | 5 | 113 | 11 |
| 16 | Provisions for redundancy incentives | 53 | 16 | 91 | 25 |
| (157) | Commodity derivatives | 277 | (29) | 389 | (240) |
| (62) | Exchange rate differences and derivatives | (84) | 86 | (108) | 133 |
| 118 | Other | 45 | 3 | 279 | 18 |
| 2,429 | Special items of operating profit (loss) | 324 | 189 | 3,578 | 419 |
| 50 | Net finance (income) expense | 86 | (86) | 84 | (79) |
| of which: | |||||
| 62 | - exchange rate differences and derivatives reclassified to operating profit (loss) | 84 | (86) | 108 | (133) |
| 524 | Net income (expense) from investments | (85) | (31) | 1,256 | (4) |
| of which: | |||||
| 299 | - impairment/revaluation of equity investments | (57) | 837 | ||
| 816 | Income taxes | 30 | 104 | 1,126 | 122 |
| 3,819 | Total special items of net profit (loss) | 355 | 176 | 6,044 | 458 |
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| 2,557 | Exploration & Production | 3,344 | 5,908 | (43) | 10,095 | 17,432 | (42) |
| 1,140 | Global Gas & LNG Portfolio | 1,233 | 2,156 | (43) | 4,853 | 9,343 | (48) |
| 4,698 | Refining & Marketing and Chemicals | 6,635 | 10,962 | (39) | 18,783 | 32,641 | (42) |
| 1,298 | EGL, Power, Renewables | 1,467 | 1,452 | 1 | 5,414 | 6,201 | (13) |
| 365 | Corporate and other activities | 365 | 423 | (14) | 1,113 | 1,187 | (6) |
| (1,901) | Consolidation adjustments | (2,718) | (4,215) | (7,902) | (13,138) | ||
| 8,157 | 10,326 | 16,686 | (38) | 32,356 | 53,666 | (40) |
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| 5,517 | Purchases, services and other | 7,531 | 12,183 | (38) | 24,717 | 38,974 | (37) |
| 139 | Impairment losses (impairment reversals) of trade and other receivables, net | 3 | 102 | (97) | 214 | 348 | (39) |
| 704 | Payroll and related costs | 677 | 705 | (4) | 2,219 | 2,258 | (2) |
| 16 | of which: provision for redundancy incentives and other | 53 | 16 | 91 | 25 | ||
| 6,360 | 8,211 | 12,990 | (37) | 27,150 | 41,580 | (35) |
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| 1,716 | Exploration & Production | 1,529 | 1,805 | (15) | 4,866 | 5,119 | (5) |
| 31 | Global Gas & LNG Portfolio | 31 | 34 | (9) | 94 | 94 | |
| 149 | Refining & Marketing and Chemicals | 135 | 152 | (11) | 433 | 457 | (5) |
| 52 | EGL, Power, Renewables | 54 | 47 | 15 | 156 | 137 | 14 |
| 37 | Corporate and other activities | 36 | 37 | (3) | 109 | 110 | (1) |
| (8) | Impact of unrealized intragroup profit elimination | (8) | (8) | (24) | (24) | ||
| 1,977 | Total depreciation, depletion and amortization |
1,777 | 2,067 | (14) | 5,634 | 5,893 | (4) |
| 2,408 | Impairment losses (impairment reversals) of tangible and intangible and right of use assets, net |
(4) | 33 | 2,745 | 344 | ||
| 4,385 | Depreciation, depletion, amortization, impairments and reversals | 1,773 | 2,100 | (16) | 8,379 | 6,237 | 34 |
| 229 | Write-off of tangible and intangible assets | (36) | 2 | 311 | 180 | 73 | |
| 4,614 | 1,737 | 2,102 | (17) | 8,690 | 6,417 | 35 |
| (€ million) Nine months 2020 |
Exploration & Production |
Global Gas & LNG Portfolio |
Refining & Marketing and Chemicals |
EGL, Power, Renewables |
Corporate and other activities |
Group |
|---|---|---|---|---|---|---|
| Share of profit (loss) from equity-accounted investments | (684) | (11) | (367) | 4 | (320) | (1,378) |
| Dividends | 73 | 31 | 104 | |||
| Other income (expense), net | (30) | (17) | (47) | |||
| (611) | (41) | (353) | 4 | (320) | (1,321) |
Leverage is a measure used by management to assess the Company's level of indebtedness. It is calculated as a ratio of net borrowings to shareholders' equity, including non-controlling interest. Management periodically reviews leverage in order to assess the soundness and efficiency of the Group balance sheet in terms of optimal mix between net borrowings and net equity, and to carry out benchmark analysis with industry standards.
| Jun. 30, 2020 | (€ million) | Sept. 30, 2020 | Dec. 31, 2019 | Change |
|---|---|---|---|---|
| 27,388 | Total debt | 27,365 | 24,518 | 2,847 |
| 4,642 | - Short-term debt | 4,209 | 5,608 | (1,399) |
| 22,746 | - Long-term debt | 23,156 | 18,910 | 4,246 |
| (6,527) | Cash and cash equivalents | (6,879) | (5,994) | (885) |
| (6,042) | Securities held for trading | (5,611) | (6,760) | 1,149 |
| (490) | Financing receivables held for non-operating purposes | (350) | (287) | (63) |
| 14,329 | Net borrowings before lease liabilities ex IFRS 16 | 14,525 | 11,477 | 3,048 |
| 5,642 | Lease Liabilities | 5,328 | 5,648 | (320) |
| 3,766 | - of which Eni working interest | 3,588 | 3,672 | (84) |
| 1,876 | - of which Joint operators' working interest | 1,740 | 1,976 | (236) |
| 19,971 | Net borrowings after lease liabilities ex IFRS 16 | 19,853 | 17,125 | 2,728 |
| 38,839 | Shareholders' equity including non-controlling interest | 36,533 | 47,900 | (11,367) |
| 0.37 | Leverage before lease liability ex IFRS 16 | 0.40 | 0.24 | 0.16 |
| 0.51 | Leverage after lease liability ex IFRS 16 | 0.54 | 0.36 | 0.18 |
| (€ million) | Reported measure | Lease liabilities of Joint operators' working interest |
Pro-forma measure |
|---|---|---|---|
| Net borrowings after lease liabilities ex IFRS 16 | 19,853 | 1,740 | 18,113 |
| Shareholders' equity including non-controlling interest | 36,533 | 36,533 | |
| Pro-forma leverage | 0.54 | 0.50 |
Pro-forma leverage is net of followers' lease liabilities which are recovered through a cash call mechanism.
Net borrowings are calculated under CONSOB provisions on Net Financial Position (Com. no. DEM/6064293 of 2006).
(€ million)
| Sept. 30, 2020 | Dec. 31, 2019 | |
|---|---|---|
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 6,879 | 5,994 |
| Other financial activities held for trading | 5,611 | 6,760 |
| Other financial assets | 424 | 384 |
| Trade and other receivables | 10,763 | 12,873 |
| Inventories | 4,031 | 4,734 |
| Income tax assets | 202 | 192 |
| Other assets | 2,473 | 3,972 |
| 30,383 | 34,909 | |
| Non-current assets | ||
| Property, plant and equipment | 55,726 | 62,192 |
| Right of use assets | 4,950 | 5,349 |
| Intangible assets | 3,025 | 3,059 |
| Inventory - compulsory stock | 914 | 1,371 |
| Equity-accounted investments | 7,226 | 9,035 |
| Other investments | 904 | 929 |
| Other financial assets | 1,219 | 1,174 |
| Deferred tax assets | 4,588 | 4,360 |
| Income tax assets | 169 | 173 |
| Other assets | 980 | 871 |
| 79,701 | 88,513 | |
| Assets held for sale | 18 | 18 |
| TOTAL ASSETS | 110,102 | 123,440 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities | ||
| Short-term debt | 3,003 | 2,452 |
| Current portion of long-term debt | 1,206 | 3,156 |
| Current portion of long-term lease liabilities | 856 | 889 |
| Trade and other payables | 12,054 | 15,545 |
| Income taxes payable | 301 | 456 |
| Other liabilities | 6,115 | 7,146 |
| 23,535 | 29,644 | |
| Non-current liabilities | ||
| Long-term debt | 23,156 | 18,910 |
| Long-term lease liabilities | 4,472 | 4,759 |
| Provisions for contingencies | 13,225 | 14,106 |
| Provisions for employee benefits | 1,109 | 1,136 |
| Deferred tax liabilities | 5,955 | 4,920 |
| Income taxes payable | 456 | 454 |
| Other liabilities | 1,661 | 1,611 |
| 50,034 | 45,896 | |
| Liabilities directly associated with assets held for sale | ||
| TOTAL LIABILITIES | 73,569 | 75,540 |
| SHAREHOLDERS' EQUITY | ||
| Non-controlling interest | 73 | 61 |
| Eni shareholders' equity: | ||
| Share capital | 4,005 | 4,005 |
| Retained earnings | 34,478 | 37,436 |
| Cumulative currency translation differences | 5,403 | 7,209 |
| Other reserves | 1,422 | 1,564 |
| Treasury shares | (581) | (981) |
| Interim dividend | (429) | (1,542) |
| Net profit (loss) | (7,838) | 148 |
| Total Eni shareholders' equity | 36,460 | 47,839 |
| TOTAL SHAREHOLDERS' EQUITY | 36,533 | 47,900 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 110,102 | 123,440 |
| IIQ | IIIQ | Nine months | |||
|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | 2020 | 2019 |
| REVENUES | |||||
| 8,157 | Sales from operations | 10,326 | 16,686 | 32,356 | 53,666 |
| 247 | Other income and revenues | 194 | 275 | 654 | 919 |
| 8,404 | Total revenues | 10,520 | 16,961 | 33,010 | 54,585 |
| OPERATING EXPENSES | |||||
| (5,517) | Purchases, services and other | (7,531) | (12,183) | (24,717) | (38,974) |
| (139) | Impairment reversals (impairment losses) of trade and other receivables, net | (3) | (102) | (214) | (348) |
| (704) | Payroll and related costs | (677) | (705) | (2,219) | (2,258) |
| (110) | Other operating (expense) income | (352) | (8) | (725) | 22 |
| (1,977) | Depreciation, Depletion and Amortization | (1,777) | (2,067) | (5,634) | (5,893) |
| Impairment reversals (impairment losses) of tangible and intangible and | |||||
| (2,408) | right of use assets, net | 4 | (33) | (2,745) | (344) |
| (229) | Write-off of tangible and intangible assets | 36 | (2) | (311) | (180) |
| (2,680) | OPERATING PROFIT (LOSS) | 220 | 1,861 | (3,555) | 6,610 |
| FINANCE INCOME (EXPENSE) | |||||
| 808 | Finance income | 1,023 | 1,005 | 3,176 | 2,425 |
| (1,078) | Finance expense | (1,505) | (1,085) | (4,101) | (3,114) |
| 92 | Net finance income (expense) from financial assets held for trading | 25 | 43 | 18 | 121 |
| 60 | Derivative financial instruments | 182 | (63) | 106 | (84) |
| (118) | (275) | (100) | (801) | (652) | |
| INCOME (EXPENSE) FROM INVESTMENTS | |||||
| (528) | Share of profit (loss) of equity-accounted investments | 26 | 3 | (1,378) | 55 |
| 39 | Other gain (loss) from investments | 32 | 70 | 57 | 164 |
| (489) | 58 | 73 | (1,321) | 219 | |
| (3,287) | PROFIT (LOSS) BEFORE INCOME TAXES | 3 | 1,834 | (5,677) | 6,177 |
| (1,118) | Income taxes | (504) | (1,310) | (2,156) | (4,133) |
| (4,405) | Net profit (loss) | (501) | 524 | (7,833) | 2,044 |
| attributable to: | |||||
| (4,406) | - Eni's shareholders | (503) | 523 | (7,838) | 2,039 |
| 1 | - Non-controlling interest | 2 | 1 | 5 | 5 |
| Net profit (loss) per share attributable | |||||
| to Eni's shareholders (€ per share) | |||||
| (1.23) | - basic | (0.14) | 0.15 | (2.19) | 0.57 |
| (1.23) | - diluted | (0.14) | 0.15 | (2.19) | 0.57 |
| Weighted average number of shares outstanding (million) | |||||
| 3,572.5 | - basic | 3,572.5 | 3,590.5 | 3,572.5 | 3,597.4 |
| 3,574.8 | - diluted | 3,575.4 | 3,593.3 | 3,575.4 | 3,600.1 |
| IIIQ | Nine months | |||
|---|---|---|---|---|
| (€ million) | 2020 | 2019 | 2020 | 2019 |
| Net profit (loss) | (501) | 524 | (7,833) | 2,044 |
| Items that are not reclassified to profit or loss in later periods | 8 | |||
| Change in the fair value of interests with effects on other comprehensive income | 8 | |||
| Items that may be reclassified to profit in later periods | (1,363) | 1,638 | (1,569) | 1,562 |
| Currency translation differences | (1,642) | 1,481 | (1,806) | 1,801 |
| Change in the fair value of cash flow hedging derivatives | 394 | 246 | 271 | (318) |
| Share of other comprehensive income on equity-accounted entities | (18) | 46 | (13) | |
| Taxation | (115) | (71) | (80) | 92 |
| Total other items of comprehensive income (loss) | (1,363) | 1,638 | (1,561) | 1,562 |
| Total comprehensive income (loss) | (1,864) | 2,162 | (9,394) | 3,606 |
| attributable to: | ||||
| - Eni's shareholders | (1,866) | 2,161 | (9,399) | 3,601 |
| - Non-controlling interest | 2 | 1 | 5 | 5 |
(€ million)
| Shareholders' equity at January 1, 2019 | 51,069 | |
|---|---|---|
| Total comprehensive income (loss) | 3,606 | |
| Dividends paid to Eni's shareholders | (3,018) | |
| Dividends distributed by consolidated subsidiaries | (3) | |
| Buy-back program | (229) | |
| Reimbursement to third party shareholders | (1) | |
| Other changes | 47 | |
| Total changes | 402 | |
| Shareholders' equity at September 30, 2019 | 51,471 | |
| attributable to: | ||
| - Eni's shareholders | 51,413 | |
| - Non-controlling interest | 58 | |
| Shareholders' equity at December 31, 2019 | 47,900 | |
| Total comprehensive income (loss) | (9,394) | |
| Dividends paid to Eni's shareholders | (1,965) | |
| Dividends distributed by consolidated subsidiaries | (3) | |
| Other changes | (5) | |
| Total changes | (11,367) | |
| Shareholders' equity at September 30, 2020 | 36,533 | |
| attributable to: | ||
| - Eni's shareholders | 36,460 | |
| - Non-controlling interest | 73 |
| IIQ | IIIQ | Nine months | |||
|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | 2020 | 2019 |
| (4,405) | Net profit (loss) | (501) | 524 | (7,833) | 2,044 |
| Adjustments to reconcile net profit (loss) to net cash provided by operating activities: | |||||
| 1,977 | Depreciation, depletion and amortization | 1,777 | 2,067 | 5,634 | 5,893 |
| 2,408 | Impairment losses (impairment reversals) of tangible, intangible and right of use, net | (4) | 33 | 2,745 | 344 |
| 229 | Write-off of tangible and intangible assets | (36) | 2 | 311 | 180 |
| 528 | Share of (profit) loss of equity-accounted investments | (26) | (3) | 1,378 | (55) |
| (1) | Gains on disposal of assets, net | (2) | (18) | (6) | (44) |
| (56) | Dividend income | (32) | (54) | (104) | (143) |
| (44) | Interest income | (24) | (37) | (96) | (109) |
| 227 | Interest expense | 210 | 264 | 668 | 785 |
| 1,118 | Income taxes | 504 | 1,310 | 2,156 | 4,133 |
| (161) | Other changes | 171 | (91) | 93 | (105) |
| Changes in working capital: | |||||
| (716) | - inventories | 17 | 52 | 1,078 | (50) |
| 1,791 | - trade receivables | (523) | 796 | 1,493 | 927 |
| (981) | - trade payables | (86) | (1,028) | (2,691) | (1,901) |
| (303) | - provisions for contingencies | (77) | (30) | (476) | (60) |
| 212 | - other assets and liabilities | 595 | (228) | 1,210 | 112 |
| 3 | Cash flow from changes in working capital | (74) | (438) | 614 | (972) |
| (11) | Net change in the provisions for employee benefits | (22) | (46) | 4 | (11) |
| 172 | Dividends received | 85 | 72 | 413 | 1,227 |
| 10 | Interest received | (1) | 37 | 32 | 69 |
| (257) | Interest paid | (217) | (347) | (751) | (833) |
| (334) | Income taxes paid, net of tax receivables received | (352) | (1,220) | (1,424) | (3,736) |
| 1,403 | Net cash provided by operating activities | 1,456 | 2,055 | 3,834 | 8,667 |
| Investing activities: | |||||
| (940) | - tangible assets and prepaid right of use | (839) | (1,836) | (3,308) | (5,945) |
| (38) | - intangible assets | (50) | (63) | (149) | (190) |
| (10) | - consolidated subsidiaries and businesses net of cash and cash equivalent acquired | (109) | |||
| (32) | - investments | (95) | (2,931) | (250) | (2,982) |
| (9) | - securities held for operating purposes | (15) | (8) | ||
| (41) | - financing receivables held for operating purposes | (29) | (57) | (114) | (144) |
| (275) (1,345) |
- change in payables in relation to investing activities Cash flow from investing activities |
(332) (1,345) |
(90) (4,977) |
(702) (4,647) |
(110) (9,379) |
| Disposals: | |||||
| 11 | - tangible assets | 1 | 2 | 16 | 28 |
| - intangible assets | 1 | 1 | |||
| - consolidated subsidiaries and businesses net of cash and cash equivalent disposed of | 187 | 187 | |||
| - tax on disposals | (3) | (3) | |||
| 2 | - investments | 5 | 6 | 17 | |
| 2 | - securities held for operating purposes | 3 | 15 | 5 | |
| 23 | - financing receivables held for operating purposes | 19 | 31 | 84 | 87 |
| - change in receivables in relation to disposals | (1) | 94 | |||
| 38 | Cash flow from disposals | 23 | 222 | 121 | 416 |
| 1,198 | Net change in receivables and securities not held for operating purposes | 507 | (31) | 970 | (153) |
| (109) | Net cash used in investing activities | (815) | (4,786) | (3,556) | (9,116) |
| IIQ | IIIQ | Nine months | |||
|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | 2020 | 2019 |
| 3,293 | Increase in long-term debt | 840 | 22 | 5,132 | 1,043 |
| (1,081) | Repayments of long-term debt | (505) | (1,560) | (2,621) | (3,296) |
| (213) | Repayment of lease liabilities | (214) | (255) | (676) | (652) |
| 1,147 | Increase (decrease) in short-term financial debt | 37 | 106 | 768 | 158 |
| 3,146 | 158 | (1,687) | 2,603 | (2,747) | |
| Net capital reimbursement to non-controlling interest | (1) | ||||
| (1,534) | Dividends paid to Eni's shareholders | (423) | (1,543) | (1,957) | (3,018) |
| (3) | Dividends paid to non-controlling interests | (3) | (3) | ||
| Net purchase of treasury shares | (176) | (222) | |||
| 1,609 | Net cash used in financing activities | (265) | (3,406) | 643 | (5,991) |
| 1 | Effect of change in consolidation (inclusion/exclusion of significant/insignificant subsidiaries) | (6) | 1 | (7) | |
| (18) | Effect of exchange rate changes on cash and cash equivalents and other changes | (24) | 22 | (37) | 25 |
| 2,886 | Net increase (decrease) in cash and cash equivalent | 352 | (6,121) | 885 | (6,422) |
| 3,641 | Cash and cash equivalents - beginning of the period | 6,527 | 10,554 | 5,994 | 10,855 |
| 6,527 | Cash and cash equivalents - end of the period | 6,879 | 4,433 | 6,879 | 4,433 |
| IIQ | IIIQ | Nine months | |||
|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | 2020 | 2019 |
| Investment of consolidated subsidiaries and businesses | |||||
| 1 | Current assets | 15 | |||
| 11 | Non-current assets | 182 | |||
| (1) | Cash and cash equivalents (net borrowings) | (64) | |||
| (2) | Current and non-current liabilities | (11) | |||
| 9 | Net effect of investments | 122 | |||
| 1 | Non-controlling interest | (10) | |||
| 10 | Purchase price | 112 | |||
| less: | |||||
| Cash and cash equivalents | (3) | ||||
| 10 | Investment of consolidated subsidiaries and businesses net of cash and cash equivalent acquired | 109 | |||
| Disposal of consolidated subsidiaries and businesses | |||||
| Current assets | 77 | 77 | |||
| Non-current assets | 188 | 188 | |||
| Cash and cash equivalents (net borrowings) | 11 | 11 | |||
| Current and non-current liabilities | (57) | (57) | |||
| Net effect of disposals | 219 | 219 | |||
| Reclassification of exchange rate differences included in other comprehensive income | (24) | (24) | |||
| Gain (loss) on disposal | 16 | 16 | |||
| Selling price | 211 | 211 | |||
| less: | |||||
| Cash and cash equivalents disposed of | (24) | (24) | |||
| Disposal of consolidated subsidiaries and businesses net of cash and cash equivalent divested | 187 | 187 |
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | (€ million) | 2020 | 2019 | % Ch. | 2020 | 2019 | % Ch. |
| 760 | Exploration & Production | 673 | 1,559 | (57) | 2,691 | 5,221 | (48) |
| - acquisition of proved and unproved properties | 51 | 24 | 51 | 396 | (87) | ||
| 76 | - exploration | 27 | 86 | (69) | 274 | 399 | (31) |
| 670 | - development | 583 | 1,431 | (59) | 2,323 | 4,388 | (47) |
| 14 | - other expenditure | 12 | 18 | (33) | 43 | 38 | 13 |
| 2 | Global Gas & LNG Portfolio | 1 | 4 | (75) | 8 | 8 | |
| 142 | Refining & Marketing and Chemicals | 138 | 231 | (40) | 515 | 648 | (21) |
| 105 | - Refining & Marketing | 100 | 208 | (52) | 374 | 587 | (36) |
| 37 | - Chemicals | 38 | 23 | 65 | 141 | 61 | |
| 70 | EGL, Power, Renewables | 63 | 88 | (28) | 204 | 221 | (8) |
| 34 | - EGL | 41 | 38 | 8 | 121 | 118 | 3 |
| 16 | - Power | 12 | 8 | 50 | 34 | 23 | 48 |
| 20 | - Renewables | 10 | 42 | (76) | 49 | 80 | (39) |
| 9 | Corporate and other activities | 17 | 21 | (19) | 49 | 47 | 4 |
| (5) | Impact of unrealized intragroup profit elimination | (3) | (4) | (10) | (10) | ||
| 978 | Capital expenditure | 889 | 1,899 | (53) | 3,457 | 6,135 | (44) |
In the nine months of 2020, capital expenditure amounted to €3,457 million (€6,135 million in the nine months of 2019), decreasing by 44% from the same period of the previous year, and mainly related to:
‐ development activities (€2,323 million) mainly in Egypt, Indonesia, the United Arab Emirates, Iraq, Italy, Mexico, Mozambique, the United States and Kazakhstan;
‐ initiatives relating to gas and power marketing in the retail business (€121 million).
| IIQ | IIIQ | Nine months | |||||
|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2020 | 2019 | |||
| 1,729 | Production of oil and natural gas ⁽ᵃ⁾⁽ᵇ⁾⁽ᶜ⁾ | (kboe/d) | 1,701 | 1,888 | 1,740 | 1,854 | |
| 106 | Italy | 105 | 120 | 108 | 124 | ||
| 243 | Rest of Europe | 224 | 146 | 241 | 154 | ||
| 258 | North Africa | 253 | 372 | 254 | 378 | ||
| 266 | Egypt | 290 | 369 | 286 | 351 | ||
| 386 | Sub-Saharan Africa | 369 | 395 | 376 | 386 | ||
| 167 | Kazakhstan | 144 | 169 | 162 | 146 | ||
| 173 | Rest of Asia | 172 | 183 | 179 | 181 | ||
| 114 | Americas | 127 | 106 | 117 | 106 | ||
| 16 | Australia and Oceania | 17 | 28 | 17 | 28 | ||
| 144 | Production sold ⁽ᵃ⁾⁽ᶜ⁾ | (mmboe) | 143 | 162 | 431 | 464 |
| IIQ | IIIQ | Nine months | ||||
|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2020 | 2019 | ||
| 853 | Production of liquids (kbbl/d) |
817 | 893 | 854 | 882 | |
| 45 | Italy | 47 | 52 | 47 | 53 | |
| 139 | Rest of Europe | 133 | 86 | 141 | 91 | |
| 118 | North Africa | 107 | 160 | 114 | 167 | |
| 58 | Egypt | 64 | 77 | 65 | 74 | |
| 231 | Sub-Saharan Africa | 217 | 252 | 227 | 257 | |
| 113 | Kazakhstan | 101 | 118 | 110 | 96 | |
| 88 | Rest of Asia | 90 | 90 | 90 | 84 | |
| 61 | Americas | 58 | 56 | 60 | 58 | |
| Australia and Oceania | 2 | 2 |
| IIQ | IIIQ | Nine months | |||
|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2020 | 2019 | |
| 4,653 | Production of natural gas (mmcf/d) |
4,694 | 5,379 | 4,705 | 5,256 |
| 324 | Italy | 310 | 364 | 323 | 384 |
| 550 | Rest of Europe | 481 | 326 | 532 | 339 |
| 742 | North Africa | 772 | 1,144 | 746 | 1,144 |
| 1,102 | Egypt | 1,201 | 1,581 | 1,174 | 1,498 |
| 822 | Sub-Saharan Africa | 808 | 776 | 790 | 699 |
| 291 | Kazakhstan | 232 | 277 | 275 | 267 |
| 451 | Rest of Asia | 432 | 506 | 470 | 523 |
| 285 | Americas | 367 | 268 | 305 | 264 |
| 86 | Australia and Oceania | 91 | 137 | 90 | 138 |
(a) Includes Eni's share of production of equity-accounted entities.
(b)Includes volumes of hydrocarbons consumed in operation (130 and 136 kboe/d in the third quarter of 2020 and 2019, respectively, 123 and 126 kboe/d in the nine months of 2020 and 2019, respectively, and 116 kboe/d in the second quarter of 2020).
(c) For further information see page 21.
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