Eni - Interim / Quarterly Report 2018

6-K 1 c486374_6k.htm FORM 6-K

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of February 2018

Eni S.p.A.

(Exact name of Registrant as specified in its charter)

Piazzale Enrico Mattei 1 -- 00144 Rome, Italy

(Address of principal executive offices)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F x Form 40-F ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2b under the Securities Exchange Act of 1934.)

Yes ¨ No x

(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): )

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Table of contents

- Press release dated February 16, 2018.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorised.

| Eni
S.p.A. |
| --- |
| /s/ Vanessa Siscaro |
| Name:
Vanessa Siscaro |
| Title:
Head of Corporate |
| Secretary’s
Staff Office |

Date: February 28, 2018

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Registered Head Office, Piazzale Enrico Mattei, 1 00144 Rome Tel. +39 06598.21 www.eni.com

San Donato Milanese

February 16, 2018

Eni: full year 2017 and fourth quarter results

Key operating and financial results

IIIQ — 2017		2017	2016	% Ch.	2017	2016	% Ch.
52.08	Brent dated	$/bbl	61.39	49.46	24	54.27	43.69	24
1.175	Average EUR/USD exchange rate		1.177	1.079	9	1.130	1.107	2
44.34	Brent dated	€/bbl	52.14	45.84	14	48.03	39.47	22
1,803	Hydrocarbon production	kboe/d	1,892	1,856	2	1,816	1,759	3
947	Adjusted
operating profit (loss) (a)	€ million	1,995	1,286	55	5,795	2,315	150
1,046	of which: E&P		1,864	1,400	33	5,170	2,494	107
(193)	G&P		213	(72)	..	212	(390)	..
337	R&M e Chemicals		114	75	52	992	583	70
229	Adjusted
net profit (loss) (a)		975	459	112	2,411	(340)	..
0.06	- per share (€)		0.27	0.13		0.67	(0.09)
344	Net profit (loss) (b)		2,100	340	518	3,427	(1,464)	..
0.10	- per share (€)		0.58	0.09		0.95	(0.41)
1,938	Adjusted
net cash before changes in working capital (c)		2,423	2,123	14	9,256	6,179	50
2,124	Underlying
net cash provided by operating activities (d)		3,218	3,546	(9)	9,986	7,971	25
1,463	Net capital expenditure (d) (e)		1,891	2,256	(16)	7,619	9,275	(18)
	Net disposals (d)		2,323			3,797
14,965	Net borrowings		10,916	14,776	(26)	10,916	14,776	(26)
0.32	Leverage		0.23	0.28		0.23	0.28

(a) Non-GAAP measure. For further information see the paragraph "Non-GAAP measures" on page 18 of the Press Release on Full Year 2017 and fourth quarter results.

(b) Attributable to Eni's shareholders - 2016 results refer to continuing and discontinued operations.

(c) Non-GAAP measure. Net cash provided by operating activities before changes in working capital excluding inventory holding gains or losses and certain non-recurring items. For further information see page 15 of the Press Release on Full Year 2017 and fourth quarter results.

(d) For further information see page 15 of the Press Release on Full Year 2017 and fourth quarter results.

(e) Include capital contribution to equity accounted entities.

Yesterday, Eni’s Board of Directors approved the Group results for the fourth quarter and the full year of 2017 (unaudited). Commenting on the results, Claudio Descalzi, CEO of Eni, remarked:

“ We close 2017 with excellent results which underline how the process of intense change started in 2014 has transformed Eni into a company able to grow and create value even in difficult market conditions. In Upstream we beat our historical record of production having even reduced our development capex by 40% vs. the 2014 baseline, continued to record outstanding results from our exploration programme and started our most significant projects in record time, in particular the jewel in our crown, Zohr. In Mid-Downstream, Gas & Power returned to positive structural results a year ahead of schedule, while we achieved our best full year results in eight years for Refining & Marketing and record numbers in our Chemicals business Versalis. Consequently, our cash generation increased 50% compared with an increase in Brent of 22% and our cash-neutrality decreased to 57 $/bl. We also strengthened our capital structure, also through divestments over the course of the year. Looking to the future, we see excellent growth prospects for all of our businesses. However, growth must be sustainable and we will pursue it in a disciplined way with great respect for the possibility of the most difficult operating conditions. Nevertheless, should conditions be more favourable, we will be in a position to create substantial surplus value for our shareholders. On this basis, I will propose a dividend of €0.80 per share in 2017 to the Board of Directors, on March 15.”

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Highlights

Exploration & Production

· Hydrocarbon production at record level :

reached 1.92 million boe/d in December 2017, marking an all-time high for Eni;
produced an average of 1.89 million boe/d in the fourth quarter, the highest quarterly production in the last seven years (up by 1.9%); FY production averaged 1.82 million boe/d (up by 3.2% y-o-y), its highest ever level. Excluding price effects at PSAs and OPEC cuts, production was up by 3.7% in the fourth quarter and by 5.3% for the FY 2017;
start-ups and ramp-ups additions: added 243 kboe/d on average over the FY, leveraging on Eni’s integrated model of exploration and development, designed to optimize new projects’ time-to-market (Zohr in Egypt, East-Hub in Angola, OCTP in Ghana, Jangkrik in Indonesia, all in 2017) and to accelerate fields ramp-up (as in the case of the Noroos project).

· Achieved production start-up at the super-giant Zohr gas field in record time-to-market: in less than two years from the FID and two and a half years from discovery.

· Exploration resources: discovered 1 billion boe of new resources, of which 800 million from in house exploration with a discovery cost of approximately 1 $/bbl.

· Successfully completed the exploration campaign in Area 1, offshore Mexico : the appraisal of Tecoalli discovery, which followed that of Amoca and Miztòn, resulted in a rise in estimated hydrocarbons in place of the Area to 2 billion boe, of which approximately 90% oil.

· Renewed the exploration portfolio adding approximately 97,000 Km 2 of new acreage:

obtained 50% of the mineral rights of the Isatay Block in the Kazakh Caspian Sea ;
signed an exploration and production sharing agreement of Block 52, offshore Oman (Eni 85%);
acquired new exploration licenses in Morocco, Mexico, Cyprus, Ivory Coast and Norway .

· Proved hydrocarbon reserves: 7 billion boe with an organic replacement ratio of 103%. Excluding the de-booking of a volume of PUD reserves to unproved in Venezuela due to the Country’s current outlook, the ratio increases to 151%.

· Dual Exploration Model success: Eni closed the divestment of a 25% stake in Area 4 in Mozambique to Exxon Mobil in the fourth quarter of 2017.

· E&P adjusted operating profit: €1.86 billion in the fourth quarter of 2017 (up by 33%); more than doubled y-o-y at €5.17 billion.

Gas & Power

· Structurally positive EBIT a year ahead of expectations thanks to business restructuring.

· Retail business : better performance in converting revenues into cash; growth in the customer base, excluding the impact of disposals.

· Portfolio rationalization: divested the retail activity in Belgium; signed a preliminary agreement to dispose of the gas distribution business in Hungary.

· G&P adjusted operating profit : €0.21 billion in the fourth quarter and in the full year of 2017, a substantial improvement both q-o-q (up by €0.29 billion) and y-o-y (up by €0.6 billion).

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Refining & Marketing and Chemicals

· Refining breakeven margin below 4 $/barrel in the FY of 2017.

· Achieving value from our expertise: signed a licensing agreement with Sinopec, the largest refining company in the world, for the use of the EST conversion proprietary technology.

· International development of Versalis: started operations at the Lotte-Versalis Elastomers joint venture for the production of elastomers in South Korea.

· R&M adjusted operating profit : €77 million in the fourth quarter of 2017, up by 13% despite the partial downtime of the Sannazzaro refinery and a negative scenario. Best full year result in the last eight years at €532 million, up by 91% y-o-y.

· Record results in the Chemical business: adjusted operating profit of €37 million in the fourth quarter of 2017 (up by 400%) and €460 million in the FY 2017 (up by 51%).

Group results

· Strong increase in adjusted operating profit: up by 55% q-o-q to €1.99 billion; FY operating profit more than doubled to €5.79 billion (up by €3.48 billion).

· Adjusted net profit : more than doubled in the fourth quarter of 2017 to €0.98 billion; €2.41 billion in the full year of 2017 compared to a net loss in 2016.

· Net profit : €2.10 billion in the fourth quarter; €3.43 billion in the full year of 2017.

· Strong structural improvement in underlying cash generation 1 : €3.22 billion in the fourth quarter and €9.99 billion in the full year of 2017.

· Adjusted cash flow from operations before changes in working capital at replacement cost 2 : €2.42 billion in the fourth quarter and €9.26 billion in the full year of 2017.

· FY net capex : €7.6 billion 1 , down by 18% y-o-y. Self-financing ratio of net capex at approximately 130%.

· Organic cash neutrality covering capex and dividend at a Brent price of 57$/bl; 39$/bl, factoring in proceeds from disposals.

· FY net disposals 3 : cashed in €3.8 billion, mainly relating to the Dual Exploration Model.

· Net debt : €10.92 billion.

· 2017 dividend proposal 4 : €0.80, of which €0.40 already paid as interim dividend.

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1 See note (d) in the table of page 1.

2 See note (c) in the table of page 1.

3 See note (d) in the table of page 1.

4 The Board of Directors intends to submit a proposal for distributing a dividend of €0.80 per share (€0.80 in 2016) at the Annual Shareholders’ Meeting convened for May 10, 2018. Included in this annual payment is €0.40 per share paid as interim dividend in September 2017. The balance of €0.40 per share is payable to shareholders on May 23, 2018, the ex-dividend date being May 21, 2018.

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Outlook

Eni’s business outlook and financial and operational targets of the 2018-2021 industrial plan will be illustrated during a strategy presentation scheduled March 16, 2018. The key strategic guidelines and targets will be disclosed in a press release to be published on March 16, 2018, that will be available at our website “eni.com” and publicly disseminated as required by applicable listing standards. The outlook for the year 2018 is summarized below:

Exploration & Production

Expected a 3% growth rate in 2018 FY production . This will be driven by ramp-ups of fields entered into operation in 2017, mainly in Egypt, Angola and Indonesia and start-up of a number of satellites phases at giant producing fields (Libya, Angola and Ghana).

Gas & Power

Expected an enhanced performance with an adjusted EBIT projected at €0.3 billion due to new renegotiation of long-term supply contracts, reduction of logistic costs and synergies from upstream integration in the LNG business .

Refining & Marketing and Chemicals

Expected a refining breakeven margin at around 3 $/barrel at 2018 year end, leveraging on new initiatives of plants set-up and supply optimization.

Group

2018 FY capex projected at approximately €8 billion.

Sustainability

Total recordable injury rate (TRIR)	(total recordable injury rate/worked hours) x 1,000,000	0.33	0.35	(6.8)
Direct GHG emissions E&P/production	(tonnes CO 2 eq./toe)	0.163	0.167	(2.7)
Direct GHG emissions	(mmtonnes CO 2 eq.)	41.49	40.18	3.3
- of which CO 2 from combustion and process		31.62	30.71	3.0
- of which CO 2 eq from methane		1.45	2.40	(39.4)
- of which CO 2 eq from flaring		6.83	5.40	26.5
- of which CO 2 eq from venting		1.58	1.67	(5.3)
Oil spills due to operations (>1 barrel)	(barrels)	3,228	1,231	..
Water reinjection	(%)	59	58

· Total recordable injury rate (down by 6.8% y-o-y) confirmed the improving trend, benefitting from performances recorded by both employees (down by 17.2%) and contractors (down by 2%).

· Direct GHG emissions E&P/production: 0.163 tCO 2 eq/toe, declining by 2.7% y-o-y.

Direct GHG emissions from combustion and process increased, reflecting higher production level in the E&P segment (in particular for Libyan activities and start-ups in Ghana, Angola and Indonesia) and G&P (due to higher power generation and natural gas volumes transported).

Emissions from methane were down by 39.4% due to the regular maintenance and monitoring of fugitive emissions in the E&P and G&P segments.

Emissions from flaring in the E&P segment were up by 26.5% due to the aforementioned start-ups and the restart of Abu Attifel field in Libya.

· Water reinjection at the E&P segment was 59%, an increase from 2016, benefitting from the Abu Attifel restart in Libya and the continuous positive performance in water reinjection in Ecuador and Egypt.

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Business segments operating review

Exploration & Production

Production, reserves and prices

IIIQ — 2017		2017	2016	% Ch.	2017	2016	% Ch.
	Production
885	Liquids	kbbl/d	861	906	(5.0)	852	878	(3.0)
5,012	Natural gas	mmcf/d	5,625	5,184	8.2	5,261	4,807	9.6
1,803	Hydrocarbons	kboe/d	1,892	1,856	1.9	1,816	1,759	3.2
	Adjusted net proved reserves	mmboe				6,990	7,142	(2.1)
	Adjusted reserves replacement
ratio	(%)				151	139
	Reserves
replacement ratio					103	193
	Average realizations
48.03	Liquids	$/bbl	57.64	44.56	29.4	50.06	39.18	27.8
3.80	Natural gas	$/kcf	3.89	3.50	10.9	3.69	3.27	12.8
35.14	Hydrocarbons	$/boe	39.12	32.95	18.7	35.06	29.14	20.3

· In the fourth quarter of 2017, oil and natural gas production averaged 1,892 kboe/d, up by 1.9% from the same period a year ago, the highest level achieved in the last seven years. For the full year of 2017, production was 1,816 kboe/d, up by 3.2% and a record level. This performance was driven by new project start-ups and the ramp-ups at fields started up in 2016, mainly in Angola, Egypt, Ghana, Indonesia and Kazakhstan as well as by restarting production at certain Libyan fields thanks to better safety conditions. These positives were partly offset by OPEC production cuts, negative price effects at PSAs contracts and lower production as a result of planned and unplanned shutdowns in Norway, the United Kingdom and the Gulf of Mexico, as well as declines from mature fields. When excluding price effects at PSAs contracts and OPEC cuts (overall 32 kboe/d and 35 kboe/d in the fourth quarter and in the full year of 2017, respectively), hydrocarbon production increased by 3.7% (up by 5.3% in the full year of 2017).

· Liquids production (861 kbbl/d) decreased by 45 kbbl/d, or 5% from the fourth quarter of 2016 (852 kbbl/d in the full year of 2017, down by 3%). Price effect, OPEC cuts and shutdowns in Norway, the United Kingdom and the Gulf of Mexico were partly offset by start-ups and ramp-ups of the period and higher production in Libya.

· Natural gas production (5,625 mmcf/d) increased by 441 mmcf/d, or 8.2% compared to the fourth quarter of 2016 (5,261 mmcf/d in the full year of 2017, up by 9.6%). Start-ups and ramp-ups of producing assets in Indonesia and Egypt and the increasing production in Libya were partly offset by shutdowns, mature fields decline and price effect.

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Net proved hydrocarbon reserves

(mmboe) — Net proved reserves at December 31, 2016			7,490
40% sale of Zohr reserves signed in 2016			(348)
Adjusted net
proved reserves at December 31, 2016			7,142
Organic additions (a)			999
Production (b)			(663)
De-booking of the Perla Phase 2 project reserves (c)			(315)
Portfolio: 25% sale of Area 4 in Mozambique and other (d)			(173)
Net proved reserves
at December 31, 2017			6,990
Adjusted reserves replacement ratio	(a/b)	(%)	151
Reserves replacement ratio, organic	(a+c/b)		103
Adjusted reserves replacement ratio, all sources	(a+c+d/b)		77

· In 2017, net proved reserves were 6,990 million boe. Additions to proved reserves booked in 2017 were 684 mmboe and mainly derived from the final investment decisions made for the Coral project offshore Mozambique and the Johan Castberg project offshore Norway and progress in development activities at the Zohr, Jangkrik and Kashagan projects. These additions were partly offset by the de-booking of 315 million boe of proved undeveloped reserves at the Perla gas project in Venezuela due to the Country’s current outlook. Production for the year was 663 million boe. Disposals of minerals in place were 521 million boe and related to the divestment of a 40% stake in the Zohr project and of a 25% interest in Area 4 in Mozambique where the Coral project is located. Therefore, the organic reserves replacement ratio was 103%. The ratio increased to 151% when excluding the Venezuelan de-booking. The all-sources replacement ratio was 77% considering the disposal of a 25% interest in Area 4 offshore Mozambique, while the divestment of a 40% stake in Zohr, substantially finalized in 2016, is considered in reduction of the reserves opening balance. The reserves life index was 10.5 years (11.6 years in 2016). More information on our reserve activities will be reported in the Annual Report on Form 20-F for the 2017 fiscal year.

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Results

| IIIQ — 2017 | | (€ million) | IVQ — 2017 | 2016 | %
Ch. | Full Year — 2017 | 2016 | %
Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 1,041 | | Operating profit
(loss) | 4,149 | 1,720 | .. | 7,669 | 2,567 | .. |
| 5 | | Exclusion of special items | (2,285) | (320) | | (2,499) | (73) | |
| 1,046 | | Adjusted operating profit (loss) | 1,864 | 1,400 | 33.1 | 5,170 | 2,494 | .. |
| (39 | ) | Net finance (expense) income | (39) | 123 | | (50) | (55) | |
| 104 | | Net income (expense) from investments | 118 | 77 | | 409 | 68 | |
| (670 | ) | Income taxes | (847) | (741) | | (2,801) | (1,999) | |
| 60.3 | | tax rate (%) | 43.6 | 46.3 | | 50.7 | 79.7 | |
| 441 | | Adjusted
net profit (loss) | 1,096 | 859 | .. | 2,728 | 508 | .. |
| | | Results also include: | | | | | | |
| 69 | | Exploration expenses: | 135 | 73 | 84.9 | 525 | 374 | 40.4 |
| 61 | | - prospecting, geological and geophysical expenses | 73 | 45 | 62.2 | 273 | 204 | 33.8 |
| 8 | | - write-off of unsuccessful wells (a) | 62 | 28 | .. | 252 | 170 | 48.2 |
| 1,343 | | Capital
expenditure | 1,781 | 1,871 | (4.8) | 7,739 | 8,254 | (6.2) |

(a) Also includes write-off of unproved exploration rights, if any, related to projects with negative outcome.

· In the fourth quarter of 2017, the Exploration & Production segment reported an adjusted operating profit of €1,864 million, an increase of 33% from the fourth quarter of 2016. This improvement reflected the recovery in crude oil prices (with the Brent price up by 24%) and production growth. These positives were partly offset by a weaker dollar compared to the euro, lower appreciation of Eni’s average realizations than the Brent benchmark, which has not been yet fully reflected in gas prices due to the time lags in oil-linked price formulas, and higher depreciation charges taken in connection with project start-ups and ramp-ups. For the FY 2017, adjusted operating profit was €5,170 million, more than doubled y-o-y (up by €2,676 million from 2016), due to the same drivers mentioned in the quarter, except for a lower penalization due to EUR/USD exchange rate movements than in the quarter.

· In the fourth quarter of 2017, adjusted net profit was €1,096 million compared to €859 million in the fourth quarter of 2016, up by €237 million (an increase of approximately €2.2 billion in the full year of 2017 compared to the previous year). This was due to a recovery in operating performance and a reduced tax rate (down by approximately 2 percentage points, from 46% to 44%) due to higher profit before taxes, which helped improve the deductibility of operating expenses including those incurred in connection with PSA schemes and reduce the incidence of non-deductible expenses. Furthermore, in the FY 2017 the tax rate reported a more pronounced reduction (from 80% to 51%) due to the recognition of certain deferred tax assets in connection with the FID of the Coral project in Mozambique and with the production start-up at the Ghana project.

For the disclosure of the business segment special charges/gains see page 12.

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Gas & Power

Sales

IIIQ — 2017		2017	2016	% Ch.	2017	2016	% Ch.
192	PSV	€/kcm	241	202	19.3	211	168	25.6
171	TTF		202	182	11.0	183	148	23.6
	Natural gas sales	bcm
7.93	Italy		9.62	10.25	(6.1)	37.43	38.43	(2.6)
8.21	Rest of Europe		10.26	11.79	(13.0)	38.23	42.43	(9.9)
0.97	of which: Importers in Italy		0.99	1.15	(13.9)	3.89	4.37	(11.0)
7.24	European markets		9.27	10.64	(12.9)	34.34	38.06	(9.8)
1.30	Rest of World		1.60	1.22	31.1	5.17	5.45	(5.1)
17.44	Worldwide
gas sales		21.48	23.26	(7.7)	80.83	86.31	(6.3)
8.91	Power
sales	Twh	8.66	9.79	(11.5)	35.33	37.05	(4.6)

· In the fourth quarter of 2017, natural gas sales were 21.48 bcm, down by 7.7% from the fourth quarter of 2016, in line with the reduction of take-or-pay contracts obligations. Sales in Italy were down by 6.1% to 9.62 bcm, due to declining sales across all the market segments, partly offset by higher sales at the thermoelectric segment driven by lower production from renewable sources and lower power imports. Sales in European markets (9.27 bcm) decreased by 12.9% reflecting lower sales in France, the United Kingdom, Benelux and the Iberian Peninsula. On a yearly basis, natural gas sales were 80.83 bcm, down by 6.3% or by 5.48 bcm from the full year of 2016. Sales in Italy decreased by 2.6% from 2016 to 37.43 bcm due to the same drivers mentioned in the quarter. Lower sales in European markets (34.34 bcm) mainly reflected the disposal of the retail business in Belgium and Hungary as well as lower volumes sold in France and Germany/Austria.

· Power sales were 8.66 TWh in the fourth quarter of 2017, down by 11.5% (35.33 TWh in 2017, down by 4.6% from 2016) mainly due to lower volumes sold to the wholesale segment and to the middle market, partly offset by higher sales to the industries segment.

Results

| IIIQ — 2017 | | (€
million) | IVQ — 2017 | 2016 | % Ch. | Full Year — 2017 | 2016 | % Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (120 | ) | Operating profit
(loss) | 201 | 5 | .. | 70 | (391) | .. |
| 15 | | Exclusion of inventory holding (gains) losses | 29 | (56) | | | 90 | |
| (88 | ) | Exclusion of special items | (17) | (21) | | 142 | (89) | |
| (193 | ) | Adjusted operating profit (loss) | 213 | (72) | .. | 212 | (390) | .. |
| 3 | | Net finance (expense) income | 1 | (1) | | 10 | 6 | |
| (2 | ) | Net income (expense) from investments | (4) | (8) | | (9) | (20) | |
| 53 | | Income taxes | (97) | 50 | | (162) | 74 | |
| .. | | tax rate (%) | 46.2 | .. | | 76.1 | .. | |
| (139 | ) | Adjusted
net profit (loss) | 113 | (31) | .. | 51 | (330) | .. |
| 33 | | Capital
expenditure | 60 | 53 | 13.2 | 142 | 120 | 18.3 |

· In the fourth quarter of 2017, the Gas & Power segment reported an adjusted operating profit of €213 million, up by €285 million from the loss reported in the fourth quarter of 2016. This result reflected better margins from the renegotiation of long-term supply contracts, including some contract terminations, lower logistic costs, as well as the improved performance in trading, LNG and Power businesses. In the full year of 2017, the Gas & Power segment reported an adjusted operating profit of €212 million (up by €602 million from 2016), the best result over the latest seven years, targeting structural positive profit one year ahead of plans due to the drivers disclosed in the fourth quarter. From 2017, the profit/loss on stock has been included in the business underlying performance due to a changed regulatory framework on gas storage in Italy, on which basis management has elected to leverage gas stocks as a way to improve margins.

· Adjusted net profit amounted to €113 million, an improvement of €144 million from the fourth quarter of 2016. In the full year of 2017, adjusted net profit was €51 million.

For the disclosure of the business segment special charges/gains see page 12.

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Refining & Marketing and Chemicals

Production and sales

IIIQ — 2017		2017	2016	% Ch.	2017	2016	% Ch.
6.4	Standard Eni Refining Margin (SERM)	$/bbl	4.3	4.7	(8.5)	5.0	4.2	19.0
5.63	Throughputs in Italy	mmtonnes	5.46	5.22	4.6	21.15	21.61	(2.1)
0.76	Throughputs in the rest of Europe		0.72	0.75	(4.0)	2.87	2.91	(1.4)
6.39	Total throughputs		6.18	5.97	3.5	24.02	24.52	(2.0)
0.08	Green throughputs		0.07	0.06	16.7	0.24	0.21	14.3
	Marketing
2.24	Retail sales	mmtonnes	2.11	2.08	1.4	8.54	8.59	(0.6)
1.56	Retail sales in Italy		1.49	1.47	1.4	6.01	5.93	1.3
0.68	Retail sales in the rest of Europe		0.62	0.61	1.6	2.53	2.66	(4.9)
25.2	Retail market share in Italy	%	25.1	24.3		25.0	24.3
2.83	Wholesale sales	mmtonnes	2.71	2.92	(7.2)	10.66	11.34	(6.0)
2.04	Wholesale sales in Italy		1.94	2.08	(6.7)	7.64	8.16	(6.4)
0.79	Wholesale sales in the rest of Europe		0.77	0.84	(8.3)	3.02	3.18	(5.0)
	Chemicals
1,360	Production of petrochemical products	ktonnes	1,425	1,337	6.6	5,818	5,646	3.0
68.1	Average plant utilization rate	%	70.8	66.1		72.8	71.4

· In the fourth quarter of 2017, the Eni’s Standard Refining Margin (SERM) decreased by 8.5% y-o-y at a level of 4.3 $/barrel due to compressed relative prices of products compared to the cost of the petroleum feedstock reflecting the swift upward movements in the Brent price reported in the last part of 2017 (in the full year of 2017, SERM increased by 19% to 5 $/barrel).

· Eni refining throughputs were 6.18 mmtonnes, up by 3.5% from the fourth quarter of 2016 reflecting higher throughputs at the Livorno refinery due to fewer shutdowns and improved performance of the Taranto and Milazzo refineries, partially offset by the downtime of the EST plant at the Sannazzaro refinery. Refining throughputs in the full year of 2017 (24.02 mmtonnes) decreased by 2% from 2016 and were mainly affected by the downtime of some plants at Sannazzaro refinery and the shutdown at the Taranto refinery, partly offset by a better performance of Milazzo and Livorno refineries.

· Green throughputs processed at the Venice green refinery increased by 16.7% in the fourth quarter of 2017 (up by 14.3% in the full year of 2017).

· Retail sales in Italy of 1.49 mmtonnes increased by 1.4% in the fourth quarter (6.01 mmtonnes, up by 1.3% in the full year of 2017) despite declining consumption, due to higher volumes mainly sold at company-owned fuel stations partially offset by lower sales in the highway and lease concession segment. Eni’s retail market share was 25.1%, higher than in the fourth quarter of 2016 (24.3%) and was also driven by effective marketing initiatives.

· Wholesale sales in Italy were 1.94 mmtonnes, down by 6.7% compared to the fourth quarter of 2016 (7.64 mmtonnes in the full year of 2017; down by 6.4% compared to 2016). Lower sales of gasoil and bunkering were partly offset by higher sales of jet fuel and bitumen.

· Retail and wholesale sales in the rest of Europe decreased by 4.1% in the fourth quarter of 2017 (down by 5% in the full year of 2017) due to lower sales volumes in the wholesale business in France and Austria, partly offset by higher sales in Germany.

· Petrochemical production of 1,425 ktonnes increased by 6.6% in the fourth quarter compared to 2016 reflecting higher productions of polyethylene and elastomers. In the full year of 2017, production was 5,818 ktonnes, up by 3%.

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Results

| IIIQ — 2017 | (€
million) | IVQ — 2017 | 2016 | % Ch. | Full year — 2017 | 2016 | % Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 367 | Operating profit
(loss) | 218 | 168 | 29.8 | 982 | 723 | 35.8 |
| (95) | Exclusion of inventory holding (gains) losses | (174) | (181) | | (213) | (406) | |
| 65 | Exclusion of special items | 70 | 88 | | 223 | 266 | |
| 337 | Adjusted operating profit (loss) | 114 | 75 | 52.0 | 992 | 583 | 70.2 |
| 224 | - Refining & Marketing | 77 | 68 | 13.2 | 532 | 278 | 91.4 |
| 113 | - Chemicals | 37 | 7 | 428.6 | 460 | 305 | 50.8 |
| 1 | Net finance (expense) income | 2 | 1 | | 5 | 1 | |
| 15 | Net income (expense) from investments | 5 | 9 | | 21 | 32 | |
| (111) | Income taxes | (56) | (35) | | (357) | (197) | |
| 31.4 | tax rate (%) | 46.3 | 41.2 | | 35.1 | 32.0 | |
| 242 | Adjusted
net profit (loss) | 65 | 50 | 30.0 | 661 | 419 | 57.8 |
| 188 | Capital
expenditure | 290 | 303 | (4.3) | 729 | 664 | 9.8 |

· In the fourth quarter of 2017, the Refining & Marketing and Chemicals segment reported an adjusted operating profit of €114 million (€992 million in the full year of 2017), an increase compared to the fourth quarter of 2016 (up by 52% and 70% in the quarter and in the full year of 2017 respectively).

· In the fourth quarter of 2017, the Refining & Marketing business reported an adjusted operating profit of €77 million, an increase of €9 million or 13% q-o-q. This was driven by lower facility downtime at the Livorno and Milazzo plants and a gain from the licensing of the EST conversion technology to Sinopec, which helped offset an unfavorable SERM scenario and the Sannazzaro shutdown. Marketing activity’s performance was barely unchanged from the comparative period. In the full year of 2017 adjusted operating profit amounted to €532 million (up by €254 million or 91% compared to the full year of 2016), benefitting from the initiatives implemented over the last years, which were designed to improve the set-up of Eni’s refining system allowing to reduce the break-even margin below the 4 $/barrel threshold. The improved cost structure enabled the Company to fully capture the upside in the scenario recorded in the first nine months of 2017. The marketing business reported a positive performance driven by the effective commercial initiatives, which supported the premium segments.

· In the fourth quarter of 2017, the Chemical business reported an adjusted operating profit of €37 million representing a five-fold increase compared to the same period of 2016, benefitting from the restructuring plan to optimize plant setup at core hubs and reposition the product portfolio towards higher-value segments. Thanks to a streamlined industrial structure, the business was able to fully capture the upside in the trading environment and to achieve volume upsides. In the full year of 2017, adjusted operating profit achieved a record of €460 million (up by 51% from 2016). This result represents the best performance reported in the recent history of Eni’s Chemical business and demonstrates the value of the progress in the turnaround process.

· Adjusted net profit amounting to €65 million in the fourth quarter (€661 million in the full year of 2017) increased by €15 million in the fourth quarter (up by €242 million in the full year of 2017).

For the disclosure on the business segment special charges see page 12.

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Group results

| IIIQ — 2017 | | (€
million) | IVQ — 2017 | 2016 | %
Ch. | Full Year — 2017 | 2016 | %
Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 15,684 | | Net sales from operations | 17,547 | 15,807 | 11.0 | 66,921 | 55,762 | 20.0 |
| 998 | | Operating profit (loss) | 4,350 | 1,640 | .. | 8,022 | 2,157 | .. |
| (63 | ) | Exclusion of inventory holding (gains) losses | (149 ) | (237) | | (219) | (175) | |
| 12 | | Exclusion of special items (a) | (2,206 ) | (117) | | (2,008) | 333 | |
| 947 | | Adjusted operating profit (loss) | 1,995 | 1,286 | 55.1 | 5,795 | 2,315 | 150.3 |
| | | Breakdown by segment: | | | | | | |
| 1,046 | | Exploration & Production | 1,864 | 1,400 | 33.1 | 5,170 | 2,494 | 107.3 |
| (193 | ) | Gas & Power | 213 | (72) | 395.8 | 212 | (390) | 154.4 |
| 337 | | Refining & Marketing and Chemicals | 114 | 75 | 52.0 | 992 | 583 | 70.2 |
| (151 | ) | Corporate and other activities | (116 ) | (118) | 1.7 | (542) | (452) | (19.9) |
| (92 | ) | Impact
of unrealized intragroup profit elimination and other consolidation adjustments (b) | (80) | 1 | | (37) | 80 | |
| 344 | | Net profit (loss) attributable
to Eni's shareholders - continuing operations | 2,100 | 340 | 517.6 | 3,427 | (1,051) | 426.1 |
| (45 | ) | Exclusion of inventory holding (gains) losses | (105) | (162) | | (156) | (120) | |
| (70 | ) | Exclusion of special items (a) | (1,020) | 281 | | (860) | 831 | |
| 229 | | Adjusted
net profit (loss) attributable to Eni's shareholders - continuing operations | 975 | 459 | 112.4 | 2,411 | (340) | 809.1 |
| 344 | | Net profit (loss) attributable to Eni's shareholders | 2,100 | 340 | .. | 3,427 | (1,464) | .. |
| 344 | | Net profit (loss) attributable
to Eni's shareholders - continuing operations | 2,100 | 340 | 517.6 | 3,427 | (1,051) | 426.1 |
| | | Net profit (loss) attributable to Eni's shareholders
- discontinued operations | | | | | (413) | .. |

(a) For further information see table "Breakdown of special items"

(b) Unrealized intragroup profit elimination mainly pertained to intra-group sales of commodities and services recorded in the assets of the purchasing business segment as of the end of the period.

Adjusted results

· In the fourth quarter of 2017, Eni’s consolidated adjusted operating profit increased by 55% to €1.99 billion (up by €0.71 billion). The improvement was driven by an excellent performance of the E&P segment (up by €0.46 billion) due to an ongoing recovery in crude oil prices (the Brent benchmark in dollar terms was up by 24%; however, it was up by 14% in euro terms) and production growth. All the other Eni’s businesses reported steady performances. The G&P segment, driven by an acceleration in the fourth quarter (€0.21 billion of EBIT, up by €0.29 billion from the fourth quarter of 2016) achieved the target of structural positive results one year ahead of plans. This was driven by the renegotiation of long-term supply contracts, the reduction in logistic costs and other optimizations. The R&M and Chemicals segment reported an improvement of 52% y-o-y, even in a less favorable trading environment, leveraging on continued initiatives to improve the breakeven margin and optimization of plant set-up.

· In the full-year of 2017, all of Eni’s businesses recorded markedly better performances y-o-y, leveraging on a strategy based on the reduction in the time-to-market of reserves, efficiency actions, the renegotiation of gas supply contracts and plant restructuring in the R&M and Chemicals business. These actions enabled the Company to fully capture the recovery in the commodity scenario. The consolidated adjusted operating profit of €5.79 billion increased by €3.48 billion (up by 150%) due to a strong performance in the E&P segment (up by €2.68 billion), the return to profitability in the G&P business for the first time in seven years (up by €0.60 billion), and record results reported by the R&M and Chemicals segment with a total operating profit of approximately €1 billion (up by €0.41 billion). The €3.5 billion increase was explained for €3.1 billion by scenario effects and for €0.6 billion by volumes growth and efficiency and optimization gains, partly offset by OPEC cuts and one-off effects (€0.2 billion).

· Adjusted net profit for the quarter of €0.98 billion improved by €0.52 billion compared to the fourth quarter of 2016, driven by the increasing operating performance and a reduced tax rate (down by 9

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percentage points, from 58% in the fourth quarter of 2016 to 49% in the fourth quarter of 2017). This trend reflected improved profitability mainly in the E&P segment, which allowed higher deductibility of operating expenses including those incurred in connection with PSA schemes, as well as a lower incidence of non-deductible expenses. In the full year of 2017, adjusted net profit was €2.41 billion compared to a loss of €0.34 billion in 2016. The full-year result benefitted from better operating performance and a sharp decline in the adjusted Group tax rate (from 121% to 56%), which was due to the quarter’s drivers and to the recognition of deferred tax assets due to the start-up of the execution phase of the Coral project in Mozambique and to the production start-up of the Ghana project by mid of 2017.

Special items

Special items were represented by net gains of €1,020 million in the fourth quarter and €860 million in the full year of 2017. The business segment breakdown is disclosed below:

· E&P : the main gains were recorded on the disposal of a 40% interest in the Zohr asset (€1,281 million) and of a 25% interest in the exploration Area 4 offshore Mozambique where development is underway (€1,985 million). Furthermore, previously recorded impairment losses were reversed at certain oil&gas CGUs (€349 million) driven by upward reserve revisions and the impact of the new tax laws in the USA, as well as improved market fundamentals factored in the upward revision of management’s long-term assumption for the benchmark Brent price to 72 $/barrel from the previous 70 $/barrel adopted in the impairment review of 2016. Extraordinary charges mainly related to impairment losses recorded at certain oil&gas projects in Venezuela and the associated trade receivables owed by the National Oil Company PDVSA, respectively for €623 million and €135 million, driven by the Venezuelan financial crisis, which was factored in the evaluation of assets recoverability, also considering lower future capex. Other charges related to a valuation allowance for doubtful accounts in connection with cost recovery and other matters due to the limited progress made in the course of 2017 for recovering the disputed amounts (for an amount of €258 million), as well as the recognition of losses on certain contractual and commercial disputes (for an amount of €298 million in the year), accounted for mainly in the quarter;

· G&P : the main charges comprised the effects of fair-valued commodity derivatives that lacked the formal criteria to be accounted as hedges under IFRS (net loss of €157 million in the year), an adjustment of €125 million in the fourth quarter and €223 million in the year to the allowance for doubtful accounts of the retail G&P business (included in the G&P reportable segment) to include the allowance determination made in accordance with the “expected loss” accounting model thus replacing the incurred loss accounting method, provisions for redundancy incentives (€38 million in the year), as well as a downward revision of revenues accrued on the sale of gas and power in past reporting periods (€22 million in the fourth quarter and €64 million in the year). The G&P adjusted operating result also includes the negative balance of €172 million in the year, related to derivative financial instruments entered to manage margin exposure to foreign currency exchange rate movements and exchange translation differences of commercial payables and receivables. These charges were totally or partly offset by the reversal of asset impairment losses recorded in previous reporting periods for €142 million, mainly relating to the alignment of the book value of the Hungarian gas distribution activity to its fair value, being a sale negotiation ongoing at the balance sheet date in order to close the transaction in 2018. Furthermore, extraordinary gains included the one recorded on the divestment of the retail activity in Belgium (€163 million) in the year;

· R&M and Chemicals: as far as R&M is concerned, net charges were mainly composed of the write down of capital expenditure relating to certain Cash Generating Units, which were impaired in previous reporting periods and continued to lack any profitability prospects (€41 million in the fourth quarter and €130 million in the year) as well as environmental provisions (€73 million in the fourth quarter and €111 million in the year). Referring to Versalis, the asset impairment reversal of €76 million reflects improved profitability prospects of the unique Cash Generation Unit of the Chemical business, environmental provisions and restoration costs of certain no more operation industrial hubs (€20 million in the quarter and €48 milion in the year) as well as the impairment of Eni’s interest and the financial receivables due to Eni by an industrial joint venture because of lower profitability prospects (€207 million).

· Special items of taxes included the tax effects relating to operating special items, the write-off of deferred tax asset of subsidiaries in the USA following the recognition of the impact of the newly enacted

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tax regime, offset by the recognition of higher deferred tax assets at Versalis driven by the projection of improving future taxable profit.

Reported results

Net profit attributable to Eni’s shareholders for the full year of 2017 was €3,427 million, a substantial improvement y-o-y. In 2016, a loss of €1,464 million was incurred from both continuing and discontinued operations, with the latter including a one-off charge of €400 million on the Saipem shareholding following the loss of control over the investee. The reported operating profit for the full year of 2017 was €8,022 million, representing a three-fold increase from the full year of 2016 (up by €5,865 million). Net of the Saipem transaction, the Eni Group recorded a substantial recovery in profitability across all business segments. This trend benefitted from the progress in the implementation of the Group’s strategy, in terms of accelerating the time-to-market of discoveries, production growth, efficiency gains, restructuring of long-term gas contracts portfolio, as well as the restructuring of the refinery and petrochemical plant setup.

Leveraging on the turnaround achievements, Eni was able to fully captured an ongoing recovery in the oil price scenario, supported by growing demand and shrinking oversupplies due to the production curtailment from members of OPEC and other non-member countries. The downstream businesses were helped by higher global demand for commodities. These market trends drove a rebound in crude oil prices (the marker Brent was up by 24% y-o-y), in the SERM refining margin (up by 19%) and a substantial increase in petrochemical margins. The 2017 net profit benefitted not only from an improved operating performance but also from approximately €2.7 billion of net gains achieved in connection with the Dual Exploration Model, i.e. the closing of the disposal of a 40% stake of Zohr and a 25% interest in Area 4 in Mozambique. Two-thirds of these positives were offset by non-recurring charges mainly relating to the impairment of oil&gas projects in Venezuela and trade receivables towards the Country.

Furthermore, the increase in net profit for the full year of 2017 (€4.48 billion, excluding Saipem) reflected the normalization of the tax rate as disclosed in the adjusted results. Similar trends featured in the fourth quarter of 2017 with operating profit increasing by 165% y-o-y (up by €2.71 billion) and net profit improving by €1.76 billion.

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Net borrowings and cash flow from operations

IIIQ — 2017	(€ million)	IVQ — 2017	2016	Change	2017	2016	Change
345	Net profit (loss)	2,100	341	1,759		3,430	(1,044)	4,474
	Adjustments to reconcile net profit (loss) to net cash provided by operating activities:
1,991	- depreciation, depletion and amortization and other non monetary items	2,175	1,740	435		8,688	7,773	915
(159)	- net gains on disposal of assets	(2,951)	(11)	(2,940)		(3,446)	(48)	(3,398)
678	- dividends, interests and taxes	1,471	749	722		3,672	2,229	1,443
376	Changes in working capital related to operations	1,275	1,455	(180)		1,401	2,112	(711)
(1,070)	Dividends received, taxes paid, interests (paid) received	(748)	(1,026)	278		(3,624)	(3,349)	(275)
2,161	Net cash provided
by operating activities	3,322	3,248	74		10,121	7,673	2,448
(1,570)	Capital expenditure	(2,184)	(2,250)	66		(8,677)	(9,180)	503
(453)	Investments	(7)	(6)	(1)		(510)	(1,164)	654
368	Disposal of consolidated subsidiaries, businesses tangible and intangible assets and investments	4,463	33	4,430		5,455	1,054	4,401
1,128	Other cash flow related to capital expenditure, investments and disposals	(1,742)	614	(2,356)		(375)	465	(840)
1,634	Free cash flow	3,852	1,639	2,213		6,014	(1,152)	7,166
(10)	Borrowings (repayment) of debt related to financing activities	450	42	408		336	5,271	(4,935)
754	Changes in short and long-term financial debt	(2,789)	(798)	(1,991	)	(1,713)	(766)	(947)
(1,440)	Dividends paid and changes in non-controlling interests and reserves		(33)	33		(2,883)	(2,885)	2
(14)	Effect of changes in consolidation, exchange differences and cash and cash equivalent related to discontinued operations	(13)	22	(35	)	(65)	(3)	(62)
924	NET CASH
FLOW	1,500	872	628		1,689	465	1,224

Change in net borrowings

IIIQ — 2017	(€ million)	IVQ — 2017	2016	Change	Full Year — 2017	2016	Change
1,634	Free cash flow	3,852	1,639	2,213	6,014	(1,152)	7,166
(3)	Net borrowings of divested companies	264		264	261	5,848	(5,587)
311	Exchange differences on net borrowings and other changes	(67)	(374)	307	468	284	184
(1,440)	Dividends paid and changes in non-controlling interest and reserves		(33)	33	(2,883)	(2,885)	2
502	CHANGE IN
NET BORROWINGS	4,049	1,232	2,817	3,860	2,095	1,765

Cash flow from operating activities amounted to €10.12 billion in the full year of 2017, €3.32 billion in the fourth quarter of 2017. Income taxes on the disposals of Eni’s interests in Zohr and in Area 4 in Mozambique (€0.44 billion) were netted against cash flow from disposals, as provided by international accounting standards. In the full year of 2017, cash flow from operations was also influenced by a higher level of receivables due beyond the end of the reporting period being sold to financing institutions compared to the amount sold at the end of the previous reporting period (approximately €0.3 billion).

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Adjusted cash flow from operating activities

Adjusted cash flow from operating activities amounted to €2,423 million in the quarter and €9,256 million in the full year of 2017 and was determined by excluding from net cash provided by operating activities the movements of working capital, the profit/loss on stock and an extraordinary valuation allowance (see page 12).

(€ million)

| GAAP
measures | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Full
year 2017 | | | | | | | | | | | | |
| Net cash before changes in working
capital | 8,720 | (219 | ) | 616 | | 150 | | | (11 | ) | 9,256 | Adjusted net cash before changes
in working capital |
| Changes in working capital | 1,401 | 219 | | (616 | ) | | (192 | ) | 68 | | 880 | |
| Net
cash provided by operating activities | 10,121 | | | | | | (192 | ) | 57 | | 9,986 | Underlying
net cash provided by operating activities |
| IVQ 2017 | | | | | | | | | | | | |
| Net cash before changes in working
capital | 2,047 | (149 | ) | 518 | | | | | 7 | | 2,423 | Adjusted net cash before changes
in working capital |
| Changes in working capital | 1,275 | 149 | | (518 | ) | | (112 | ) | 1 | | 795 | |
| Net
cash provided by operating activities | 3,322 | | | | | | (112 | ) | 8 | | 3,218 | Underlying
net cash provided by operating activities |
| Full year 2016 | | | | | | | | | | | | |
| Net cash before changes in working
capital | 5,561 | (175 | ) | 688 | | 105 | | | | | 6,179 | Adjusted net cash before changes
in working capital |
| Changes in working capital | 2,112 | 175 | | (688 | ) | (105 | ) | 298 | | | 1,792 | |
| Net
cash provided by operating activities | 7,673 | | | | | | | 298 | | | 7,971 | Underlying
net cash provided by operating activities |
| IVQ 2016 | | | | | | | | | | | | |
| Net cash before changes in working
capital | 1,793 | (237 | ) | 568 | | | | | (1 | ) | 2,123 | Adjusted net cash before changes
in working capital |
| Changes in working capital | 1,455 | 237 | | (568 | ) | | | 298 | 1 | | 1,423 | |
| Net
cash provided by operating activities | 3,248 | | | | | | | 298 | | | 3,546 | Underlying
net cash provided by operating activities |

(a) In 2017 includes tax settlement in Angola not accrued in the year.

Organic coverage of capex and floor dividend

Management is disclosing below certain alternative measures of cash performance to factor in the retroactive economic effects of the disposals of the Dual Exploration Model, namely a 40% interest in Zohr located in Egypt sold to BP and Rosneft and a 25% interest of Area 4 located in Mozambique divested to ExxonMobil, whereby the consideration of these disposals included the share of 2017 capex incurred until the completion date and attributable to the buyers. In addition, in 2017 Eni cashed in advances for €0.2 billion on future gas supplies to the Egyptian State-owned partners, with the aim of financing their capex share in the Zohr project. Therefore, cash flow from operating activities including changes in working capital was netted of those advances and other minor items to €9.99 billion, whereas capex for the FY 2017 was netted of the share reimbursed by the buyers of the minority interests in the Zohr and Mozambique projects and other minor items to €7.62 billion, respectively, yielding a surplus of approximately €2.3 billion, which funded approximately 80% of the total amount of the cash dividend (€2.9 billion). Consequently, on the basis of the Group cash flow sensitivity to the Brent scenario which is assuming an increase of approximately €0.2 billion in free cash flow for each one-dollar increase in the Brent price (and vice versa), the organic cash neutrality for funding FY capex and the floor dividend is achieved at 57$/bbl, better than management’s expectations at 60$/bbl and in line with the long-term Company’s target of a cash neutrality structurally below the 60$/bbl threshold. 2017 disposals net of the share of the transaction price relating to capex reimbursements amounted to €3.80 billion. When considering this cash inflow, the Brent level at which cash neutrality was achieved in 2017 reduced to 39$/bbl.

| (€ million) — GAAP measures | Advances
on future gas supplies
to the Egyptian partners
to fund the Zohr
project | Share
of 2017 capex reimbursed
at closing of the
disposals relating to the Dual
Exploration Model | Non-recurring items | Reimbursement of
net debt as part of the
Area 4 deal (25%
sale to Exxon) | Zohr
disposal expected
to be cashed-in
2018 and
2019 | | Non-GAAP
measures | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net cash provided by operating
activities | 10,121 | (192 ) | | 57 | | | 9,986 | Underlying net cash provided by
operating activities |
| Capital expenditure | (9,187) | 192 | 1,227 | 149 | | | (7,619) | Net capital expenditure |
| Disposals | 5,455 | | (1,151 ) | (48 ) | 185 | (644 ) | 3,797 | Net
disposals |

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Summarized Group Balance Sheet

Sept. 30, 2017 — 73,001	(1,532)	(€ million) — Fixed assets	71,469	79,729	(8,260)
		Net working capital
4,638	(20)	Inventories	4,618	4,637	(19)
9,886	324	Trade receivables	10,210	11,186	(976)
(9,522)	(1,369)	Trade payables	(10,891)	(11,038)	147
(3,018)	596	Tax payables and provisions for, net deferred tax liabilities	(2,422)	(3,073)	651
(13,410)	4	Provisions	(13,406)	(13,896)	490
834	(565)	Other current assets and liabilities	269	1,171	(902)
(10,592)	(1,030)		(11,622)	(11,013)	(609)
(880)	(142)	Provisions for employee post-retirements
benefits	(1,022)	(868)	(154)
13	223	Assets held
for sale including related liabilities	236	14	222
61,542	(2,481)	CAPITAL EMPLOYED,
NET	59,061	67,862	(8,801)
46,529	1,567	Eni's shareholders equity	48,096	53,037	(4,941)
48	1	Non-controlling interest	49	49
46,577	1,568	Shareholders' equity	48,145	53,086	(4,941)
14,965	(4,049)	Net borrowings	10,916	14,776	(3,860)
61,542	(2,481)	TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY	59,061	67,862	(8,801)
0.32	(0.09)	Leverage	0.23	0.28	(0.05)
0.24	(0.06)	Gearing	0.18	0.22	(0.04)

· Net borrowings 5 at December 31, 2017 was €10.92 billion, lower by €3.86 billion from 2016 leveraging on the business operations and the finalization of portfolio transactions due to the Dual Exploration Model and other non-strategic assets (retail activity in Belgium).

· As of December 31, 2017, the ratio of net borrowings to shareholders’ equity including non-controlling interest – leverage 6 – was 0.23, down from 0.28 as of December 31, 2016. This was driven by a reduction in net borrowings, partly offset by a decrease in total equity (down by €4.94 billion) driven by unfavorable foreign currency translation differences (about €5.56 billion) and the payment of the 2016 final dividend and the 2017 interim dividend (€2.88 billion), partly offset by the income of the period.

· As of December 31, 2017, gearing – the ratio of net borrowings to net capital employed – was 0.18, lower than 0.22 at December 31, 2016.

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5 Details on net borrowings are furnished on page 27.

6 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 18 and subsequent.

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Other information, basis of presentation and disclaimer

Article No. 15 (former Article No. 36) of Italian regulatory exchanges (Consob Resolution No. 20249 published on December 28, 2017).

Continuing listing standards about issuers that control subsidiaries incorporated or regulated in accordance with laws of extra-EU Countries. Certain provisions have been enacted to regulate continuing Italian listing standards of issuers controlling subsidiaries that are incorporated or regulated in accordance with laws of extra-EU Countries, also having a material impact on the consolidated financial statements of the parent company. Regarding the aforementioned provisions, as of December 31, 2017, Eni’s subsidiaries - Eni Congo SA, Eni Norge AS, Eni Petroleum Co Inc, Nigerian Agip Oil Co Ltd, Nigerian Agip Exploration Ltd, Eni Finance USA Inc, Eni Trading & Shipping Inc, Eni Canada Holding Ltd, Eni Turkmenistan Ltd and Eni Ghana Exploration and Production Ltd – fall within the scope of the new continuing listing standards. Eni has already adopted adequate procedures to ensure full compliance with the new regulations.

This press release for the fourth quarter and full year of 2017 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 each quarter. Results and cash flow are presented for the third and fourth quarter of 2017, the full year of 2017 and for the fourth quarter and the full year of 2016. Information on the Company’s financial position relates to end of the periods as of December 31, September 30, 2017 and December 31, 2016.

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 2016 Annual report on form 20-F filed with the US SEC on March 22, 2017, which investors are urged to read.

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.

Eni’s Chief Financial Officer, Massimo Mondazzi, in his position as manager responsible for the preparation of the Company’s financial reports, certifies that data and information disclosed in this press release correspond to the Company’s evidence and accounting books and records, pursuant to rule 154-bis paragraph 2 of Legislative Decree No. 58/1998.

Disclaimer

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, 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 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 fourth quarter of the year cannot be extrapolated on an annual basis.

The all sources reserve replacement ratio disclosed elsewhere in this press release is calculated as ratio of changes in proved reserves for the year resulting from revisions of previously reported reserves, improved recovery, extensions, discoveries and sales or purchases of minerals in place, to production for the year. A ratio higher than 100% indicates that more proved reserves were added than produced in a year. The Reserve Replacement Ratio is a measure used by management to indicate the extent to which production is replaced by proved oil and gas reserves. The Reserve Replacement Ratio is not an indicator of future production because the ultimate development and production of reserves is subject to a number of risks and uncertainties. These include the risks associated with the successful completion of large-scale projects, including addressing ongoing regulatory issues and completion of infrastructure, as well as changes in oil and gas prices, political risks and geological and other environmental risks.

Company Contacts

Press Office: +39.0252031875 - +39.0659822030

Freephone for shareholders (from Italy): 800940924

Freephone for shareholders (from abroad): +80011223456

Switchboard: +39-0659821

[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 fourth quarter and the full year of 2017 (unaudited) is also available on Eni’s website eni.com.

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Alternative performance measures (Non-GAAP measures)

Management evaluates underlying business performance on the basis of Non-GAAP financial measures under IFRS (“Alternative performance measures”), such as adjusted operating profit and adjusted net profit, which are arrived at 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. From 2017, the recognition of the inventory holding (gains) losses has been revised in the Gas & Power segment considering a recently-enacted, less restrictive regulatory framework relating the legal obligation on part of gas wholesalers to retain gas volumes in storage to ensure an adequate level of modulation to the retail segment. On this basis, management has progressively reduced gas quantities held in storage and has commenced to leverage those quantities to improve margins by seeking to capture the seasonality in gas prices existing between the phase of gas injection (which typically occurs in summer months) vs. the phase of gas off-take (which typically occurs during the winter months). Therefore, from the closure of the statutory period of gas injection, i.e. from the fourth quarter of 2017, the determination of the stock profit or loss in the Gas&Power segment has changed and currently gas off-takes from storage are valued at the average cost incurred during the injection period net of the effects of hedging derivatives, ensuring when the purchased volumes are matched by the corresponding sales (net of the effects of hedging derivatives) the proper measurement and accountability of the economic performances.

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 affect 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. Management includes them in order 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 and net profit

Adjusted operating and 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).

Inventory holding gain or loss

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.

Special items

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; in this respect, from the reporting period 2017 special items comprise an adjustment to align the doubtful credit allowance of the retail G&P business (included in the G&P reportable segment) to the “expected loss” accounting model replacing the criteria of the incurred loss in the evaluation of the recoverability of trade receivables. The new criterion will be adopted in GAAP accounts effective January 1, 2018. This result adjustment is consistent with management assessment of this business performance and improves the correlation between revenues and costs incurred in the period with respect to the current accounting method; or (iii) 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. Those items 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 exchange rate market.

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. Also, special items allow to allocate to future reporting periods gains and losses on re-measurement at fair value of certain non hedging commodity derivatives and exchange rate derivatives relating to commercial exposures, lacking the criteria to be designed as hedges, including the ineffective portion of cash flow hedges and certain derivative financial instruments embedded in the pricing formula of long-term gas supply agreements of the Exploration & Production segment.

Leverage

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.

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Gearing

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 cash flow

Adjusted cash flow is defined as net cash provided from operating activities before changes in working capital at replacement cost.

Free cash flow

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

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 and securities not related to operations. Financial activities are qualified as “not related to operations” when these are not strictly related to the business operations.

| (€ million) — Full Year 2017 | Exploration
& Production | Gas & Power | Refining
& Marketing and Chemicals | Corporate and other activities | Impact
of unrealized intragroup profit elimination | GROUP |
| --- | --- | --- | --- | --- | --- | --- |
| Reported operating
profit (loss) | 7,669 | 70 | 982 | (668) | (31) | 8,022 |
| Exclusion of inventory holding (gains) losses | | | (213) | | (6) | (219) |
| Exclusion of special items: | | | | | | |
| environmental charges | 46 | | 136 | 26 | | 208 |
| impairment losses (impairment reversals), net | (142) | (142) | 54 | 25 | | (205) |
| net gains on disposal of assets | (3,269) | | (13) | (1) | | (3,283) |
| risk provisions | 333 | | | 82 | | 415 |
| provision for redundancy incentives | 19 | 38 | (6) | (2) | | 49 |
| commodity derivatives | | 157 | (11) | | | 146 |
| exchange rate differences and derivatives | (68) | (172) | (9) | | | (249) |
| other | 582 | 261 | 72 | (4) | | 911 |
| Special
items of operating profit (loss) | (2,499) | 142 | 223 | 126 | | (2,008) |
| Adjusted operating profit (loss) | 5,170 | 212 | 992 | (542) | (37) | 5,795 |
| Net finance (expense) income (a) | (50) | 10 | 5 | (723) | | (758) |
| Net income (expense) from investments (a) | 409 | (9) | 21 | 70 | | 491 |
| Income taxes (a) | (2,801) | (162) | (357) | 187 | 19 | (3,114) |
| Tax rate (%) | 50.7 | 76.1 | 35.1 | | | 56.3 |
| Adjusted
net profit (loss) | 2,728 | 51 | 661 | (1,008) | (18) | 2,414 |
| of which: | | | | | | |
| - Adjusted net profit (loss) of non-controlling interest | | | | | | 3 |
| - Adjusted
net profit (loss) attributable to Eni's shareholders | | | | | | 2,411 |
| Reported net
profit (loss) attributable to Eni's shareholders | | | | | | 3,427 |
| Exclusion of inventory holding (gains) losses | | | | | | (156) |
| Exclusion of special items | | | | | | (860) |
| Adjusted
net profit (loss) attributable to Eni's shareholders | | | | | | 2,411 |

(a) Excluding special items.

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| (€ million) — Full
Year 2016 | Exploration
& Production | Gas
& Power | Refining
& Marketing and Chemicals | Corporate and other activities | Impact
of unrealized intragroup profit elimination | GROUP | DISCONTINUED OPERATIONS | CONTINUING OPERATIONS | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reported
operating profit (loss) | 2,567 | (391) | 723 | (681) | (61) | | 2,157 | | 2,157 |
| Exclusion of inventory
holding (gains) losses | | 90 | (406) | | 141 | | (175) | | (175) |
| Exclusion of special
items: | | | | | | | | | |
| environmental charges | | 1 | 104 | 88 | | | 193 | | 193 |
| impairment losses (impairment reversals), net | (684) | 81 | 104 | 40 | | | (459) | | (459) |
| impairment of exploration projects | 7 | | | | | | 7 | | 7 |
| net gains on disposal of assets | (2) | | (8) | | | | (10) | | (10) |
| risk provisions | 105 | 17 | 28 | 1 | | | 151 | | 151 |
| provision for redundancy incentives | 24 | 4 | 12 | 7 | | | 47 | | 47 |
| commodity derivatives | 19 | (443) | (3) | | | | (427) | | (427) |
| exchange rate differences and derivatives | (3) | (19) | 3 | | | | (19) | | (19) |
| other | 461 | 270 | 26 | 93 | | | 850 | | 850 |
| Special
items of operating profit (loss) | (73) | (89) | 266 | 229 | | | 333 | | 333 |
| Adjusted operating
profit (loss) | 2,494 | (390) | 583 | (452) | 80 | | 2,315 | | 2,315 |
| Net finance (expense) income (a) | (55) | 6 | 1 | (721) | | | (769) | | (769) |
| Net income (expense) from investments (a) | 68 | (20) | 32 | (6) | | | 74 | | 74 |
| Income
taxes (a) | (1,999) | 74 | (197) | 188 | (19 | ) | (1,953) | | (1,953) |
| Tax rate (%) | 79.7 | .. | 32.0 | | | | 120.6 | | 120.6 |
| Adjusted
net profit (loss) | 508 | (330) | 419 | (991) | 61 | | (333) | | (333) |
| of which: | | | | | | | | | |
| - Adjusted net profit (loss) of non-controlling interest | | | | | | | 7 | | 7 |
| -
Adjusted net profit (loss) attributable to Eni's shareholders | | | | | | | (340) | | (340) |
| Reported
net profit (loss) attributable to Eni's shareholders | | | | | | | (1,464) | 413 | (1,051) |
| Exclusion of inventory holding (gains) losses | | | | | | | (120) | | (120) |
| Exclusion of special
items | | | | | | | 1,244 | (413) | 831 |
| Adjusted
net profit (loss) attributable to Eni's shareholders | | | | | | | (340) | | (340) |

(a) Excluding special items.

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| (€ million) — IVQ
2017 | Exploration
& Production | Gas
& Power | Refining
& Marketing and Chemicals | Corporate and other activities | Impact
of unrealized intragroup profit elimination | GROUP |
| --- | --- | --- | --- | --- | --- | --- |
| Reported
operating profit (loss) | 4,149 | 201 | 218 | (142) | (76) | 4,350 |
| Exclusion of inventory
holding (gains) losses | | 29 | (174) | | (4) | (149) |
| Exclusion of
special items: | | | | | | |
| environmental charges | 46 | | 83 | 8 | | 137 |
| impairment losses (impairment
reversals), net | (143) | (137) | (35) | 16 | | (299) |
| net gains on disposal of assets | (2,926) | | (11) | | | (2,937) |
| risk provisions | 246 | | | 3 | | 249 |
| provision for redundancy incentives | 12 | 4 | (10) | (4) | | 2 |
| commodity derivatives | | 4 | (4) | | | |
| exchange rate differences and
derivatives | (36) | (14) | 2 | | | (48) |
| other | 516 | 126 | 45 | 3 | | 690 |
| Special
items of operating profit (loss) | (2,285) | (17) | 70 | 26 | | (2,206) |
| Adjusted operating
profit (loss) | 1,864 | 213 | 114 | (116) | (80) | 1,995 |
| Net finance (expense) income (a) | (39) | 1 | 2 | (187) | | (223) |
| Net income (expense) from investments (a) | 118 | (4) | 5 | 24 | | 143 |
| Income taxes (a) | (847) | (97) | (56) | 31 | 29 | (940) |
| Tax rate (%) | 43.6 | 46.2 | 46.3 | | | 49.1 |
| Adjusted
net profit (loss) | 1,096 | 113 | 65 | (248) | (51) | 975 |
| of which: | | | | | | |
| - Adjusted net profit (loss) of non-controlling
interest | | | | | | |
| - Adjusted net
profit (loss) attributable to Eni's shareholders | | | | | | 975 |
| Reported net
profit (loss) attributable to Eni's shareholders | | | | | | 2,100 |
| Exclusion of inventory holding (gains) losses | | | | | | (105) |
| Exclusion of special
items | | | | | | (1,020) |
| Adjusted
net profit (loss) attributable to Eni's shareholders | | | | | | 975 |
| (a) Excluding special items. | | | | | | |

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| (€ million) — IVQ 2016 | Exploration
& Production | Gas
& Power | Refining
& Marketing and Chemicals | Corporate and other activities | Impact
of unrealized intragroup profit elimination | GROUP |
| --- | --- | --- | --- | --- | --- | --- |
| Reported operating
profit (loss) | 1,720 | 5 | 168 | (254) | 1 | 1,640 |
| Exclusion of inventory holding (gains)
losses | | (56) | (181) | | | (237) |
| Exclusion of special items: | | | | | | |
| environmental charges | | 1 | 18 | 9 | | 28 |
| impairment losses (impairment reversals), net | (789) | 81 | 40 | 28 | | (640) |
| net gains on disposal of assets | (3) | | (3) | | | (6) |
| risk provisions | (1) | 17 | 27 | | | 43 |
| provision for redundancy incentives | 19 | 3 | 7 | 4 | | 33 |
| commodity derivatives | | (265) | (14) | | | (279) |
| exchange rate differences and derivatives | (1) | 33 | 5 | | | 37 |
| other | 455 | 109 | 8 | 95 | | 667 |
| Special
items of operating profit (loss) | (320) | (21) | 88 | 136 | | (117) |
| Adjusted operating profit (loss) | 1,400 | (72) | 75 | (118) | 1 | 1,286 |
| Net finance (expense) income (a) | 123 | (1) | 1 | (391) | | (268) |
| Net income (expense) from investments (a) | 77 | (8) | 9 | 4 | | 82 |
| Income taxes (a) | (741) | 50 | (35) | 81 | 5 | (640) |
| Tax rate (%) | 46.3 | .. | 41.2 | | | 58.2 |
| Adjusted
net profit (loss) | 859 | (31) | 50 | (424) | 6 | 460 |
| of which: | | | | | | |
| - Adjusted net profit (loss) of non-controlling interest | | | | | | 1 |
| - Adjusted net profit (loss)
attributable to Eni's shareholders | | | | | | 459 |
| Reported net profit (loss) attributable
to Eni's shareholders | | | | | | 340 |
| Exclusion of inventory holding (gains) losses | | | | | | (162) |
| Exclusion of special items | | | | | | 281 |
| Adjusted
net profit (loss) attributable to Eni's shareholders | | | | | | 459 |
| (a) Excluding special items. | | | | | | |

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| (€ million) — IIIQ
2017 | Exploration
& Production | Gas
& Power | Refining
& Marketing and Chemicals | Corporate and other activities | Impact
of unrealized intragroup profit elimination | GROUP |
| --- | --- | --- | --- | --- | --- | --- |
| Reported operating
profit (loss) | 1,041 | (120) | 367 | (181) | (109) | 998 |
| Exclusion of inventory holding (gains)
losses | | 15 | (95) | | 17 | (63) |
| Exclusion of special items: | | | | | | |
| environmental charges | | | 29 | | | 29 |
| impairment losses (impairment reversals), net | | 1 | 31 | 1 | | 33 |
| net gains on disposal of assets | (1) | | | (1) | | (2) |
| risk provisions | (1) | | | 30 | | 29 |
| provision for redundancy incentives | 2 | | 1 | (1) | | 2 |
| commodity derivatives | | (90) | 1 | | | (89) |
| exchange rate differences and derivatives | (20) | (64) | (4) | | | (88) |
| other | 25 | 65 | 7 | 1 | | 98 |
| Special
items of operating profit (loss) | 5 | (88) | 65 | 30 | | 12 |
| Adjusted operating profit (loss) | 1,046 | (193) | 337 | (151) | (92) | 947 |
| Net finance (expense) income (a) | (39) | 3 | 1 | (146) | | (181) |
| Net income (expense) from investments (a) | 104 | (2) | 15 | 18 | | 135 |
| Income taxes (a) | (670) | 53 | (111) | 29 | 28 | (671) |
| Tax rate (%) | 60.3 | .. | 31.4 | | | 74.5 |
| Adjusted
net profit (loss) | 441 | (139) | 242 | (250) | (64) | 230 |
| of which: | | | | | | |
| - Adjusted net profit (loss) of non-controlling interest | | | | | | 1 |
| - Adjusted net profit (loss)
attributable to Eni's shareholders | | | | | | 229 |
| Reported net profit (loss) attributable
to Eni's shareholders | | | | | | 344 |
| Exclusion of inventory holding (gains) losses | | | | | | (45) |
| Exclusion of special items | | | | | | (70) |
| Adjusted
net profit (loss) attributable to Eni's shareholders | | | | | | 229 |
| (a) Excluding special items. | | | | | | |

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Breakdown of special items

| IIIQ — 2017 | (€
million) | IVQ — 2017 | 2016 | Full
Year — 2017 | 2016 |
| --- | --- | --- | --- | --- | --- |
| 29 | Environmental
charges | 137 | 28 | 208 | 193 |
| 33 | Impairment
losses (impairment reversals), net | (299) | (640) | (205) | (459) |
| | Impairment
of exploration projects | | | | 7 |
| (2) | Net
gains on disposal of assets | (2,937) | (6) | (3,283) | (10) |
| 29 | Risk
provisions | 249 | 43 | 415 | 151 |
| 2 | Provisions
for redundancy incentives | 2 | 33 | 49 | 47 |
| (89) | Commodity
derivatives | | (279) | 146 | (427) |
| (88) | Exchange
rate differences and derivatives | (48) | 37 | (249) | (19) |
| 98 | Other | 690 | 667 | 911 | 850 |
| 12 | Special
items of operating profit (loss) | (2,206) | (117) | (2,008) | 333 |
| 103 | Net
finance (income) expense | 244 | 56 | 478 | 166 |
| | of
which: | | | | |
| 88 | -
exchange rate differences and derivatives reclassified to operating profit (loss) | 48 | (37) | 249 | 19 |
| (162) | Net
income (expense) from investments | 454 | 362 | 358 | 817 |
| | of
which: | | | | |
| (164) | -
gains on disposal of assets | 1 | (5) | (163) | (57) |
| 2 | -
impairment/revaluation of equity investments | 453 | 415 | 523 | 896 |
| (23) | Income
taxes | 488 | (20) | 312 | (72) |
| | of
which: | | | | |
| | -
net impairment of deferred tax assets of Italian subsidiaries | | 122 | | 170 |
| | -
net impairment of deferred tax assets of upstream business outside Italy | | 6 | | 6 |
| | -
USA tax reform | 115 | | 115 | |
| (23) | -
taxes on special items of operating profit and other special items | 373 | (148) | 197 | (248) |
| (70) | Total
special items of net profit (loss) | (1,020) | 281 | (860) | 1,244 |

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Analysis of Profit and Loss account items

Net sales from operations

| IIIQ — 2017 | (€
million) | IVQ — 2017 | 2016 | %
Ch. | Full
Year — 2017 | 2016 | %
Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 4,628 | Exploration
& Production | 5,571 | 4,855 | 14.7 | 19,525 | 16,089 | 21.4 |
| 11,430 | Gas & Power | 13,540 | 11,986 | 13.0 | 50,622 | 40,961 | 23.6 |
| 5,449 | Refining & Marketing
and Chemicals | 5,802 | 5,125 | 13.2 | 22,110 | 18,733 | 18.0 |
| 4,440 | -
Refining & Marketing | 4,787 | 4,141 | 15.6 | 17,688 | 14,932 | 18.5 |
| 1,120 | - Chemicals | 1,134 | 1,082 | 4.8 | 4,855 | 4,196 | 15.7 |
| (111) | -
Consolidation adjustments | (119) | (98) | | (433) | (395) | |
| 344 | Corporate and other
activities | 431 | 391 | 10.2 | 1,462 | 1,343 | 8.9 |
| (6,167) | Consolidation adjustments | (7,797) | (6,550) | | (26,798) | (21,364) | |
| 15,684 | | 17,547 | 15,807 | 11.0 | 66,921 | 55,762 | 20.0 |

Operating expenses

| IIIQ — 2017 | (€ million) | IVQ — 2017 | 2016 | %
Ch. | Full Year — 2017 | 2016 | %
Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 12,064 | Purchases, services and other | 14,307 | 12,346 | 15.9 | 52,437 | 44,124 | 18.8 |
| 58 | of which: other
special items | 390 | 87 | | 627 | 360 | |
| 702 | Payroll and related costs | 687 | 741 | (7.3) | 2,951 | 2,994 | (1.4) |
| 2 | of which: provision
for redundancy incentives and other | 2 | 33 | | 49 | 47 | |
| 12,766 | | 14,994 | 13,087 | 14.6 | 55,388 | 47,118 | 17.6 |

DD&A, impairments, reversals and write-off

| IIIQ — 2017 | (€ million) | IVQ — 2017 | 2016 | %
Ch. | Full Year — 2017 | 2016 | %
Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 1,761 | Exploration & Production | 1,583 | 1,757 | (9.9) | 6,748 | 6,772 | (0.4) |
| 83 | Gas & Power | 85 | 92 | (7.6) | 345 | 354 | (2.5) |
| 88 | Refining & Marketing and Chemicals | 93 | 106 | (12.3) | 360 | 389 | (7.5) |
| 75 | - Refining & Marketing | 77 | 95 | (18.9) | 304 | 359 | (15.3) |
| 13 | - Chemicals | 16 | 11 | 45.5 | 56 | 30 | 86.7 |
| 14 | Corporate and other activities | 15 | 17 | .. | 60 | 72 | (16.7) |
| (8) | Impact of unrealized intragroup profit elimination | (7) | (7) | | (29) | (28) | |
| 1,938 | Total depreciation,
depletion and amortization | 1,769 | 1,965 | (10.0) | 7,484 | 7,559 | (1.0) |
| 33 | Impairment losses
(impairment reversals), net | (303) | (656) | 53.8 | (209) | (475) | 56.0 |
| 1,971 | Depreciation, depletion, amortization,
impairments and reversals | 1,466 | 1,309 | 12.0 | 7,275 | 7,084 | 2.7 |
| 9 | Write-off of
tangible and intangible assets | 61 | 212 | (71.2) | 263 | 350 | (24.9) |
| 1,980 | | 1,527 | 1,521 | 0.4 | 7,538 | 7,434 | 1.4 |

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25 -

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IIIQ — 2017	(€ million)	IVQ — 2017	2016	Full Year — 2017	2016
33	Asset impairments	777	849	893	1,067
	Impairment reversals	(1,080)	(1,505)	(1,102)	(1,542)
33	Subtotal	(303)	(656)	(209)	(475)
	Impairment of receivables identified as non-recurring
activities	4	16	4	16
33	Total impairment
losses (impairment reversals), net	(299)	(640)	(205)	(459)

Income (expense) from investments

| (€ million) — Full Year 2017 | Exploration
& Production | Gas
& Power | Refining
& Marketing and Chemicals | Corporate and other activities | Group |
| --- | --- | --- | --- | --- | --- |
| Share of gains (losses) from equity-accounted investments | (98) | (10) | (55) | (39) | (202) |
| Dividends | 179 | | 25 | 1 | 205 |
| Net gains (losses) on disposals | | 163 | | | 163 |
| Other income (expense), net | (2) | (35) | (3) | 7 | (33) |
| | 79 | 118 | (33) | (31) | 133 |

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Leverage and net borrowings

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.

| Sept.
30, 2017 — 27,508 | (2,801) | (€ million) — Total debt | 24,707 | 27,239 | (2,532) |
| --- | --- | --- | --- | --- | --- |
| 7,108 | (2,581) | - Short-term
debt | 4,527 | 6,675 | (2,148) |
| 20,400 | (220) | - Long-term
debt | 20,180 | 20,564 | (384) |
| (5,863) | (1,500) | Cash and cash equivalents | (7,363) | (5,674) | (1,689) |
| (6,365) | 146 | Securities held for trading and other securities
held for non-operating purposes | (6,219) | (6,404) | 185 |
| (315) | 106 | Financing receivables
held for non-operating purposes | (209) | (385) | 176 |
| 14,965 | (4,049) | Net
borrowings | 10,916 | 14,776 | (3,860) |
| 46,577 | 1,568 | Shareholders'
equity including non-controlling interest | 48,145 | 53,086 | (4,941) |
| 0.32 | (0.09) | Leverage | 0.23 | 0.28 | (0.05) |

Net borrowings are calculated under Consob provisions on Net Financial Position (Com. no. DEM/6064293 of 2006).

Bonds maturing in the 18-months period starting on December 31, 2017

(€ million)
Issuing
entity	Amount
at Dec. 31, 2017 (a)
Eni SpA	1,795
Eni Finance International SA	404
	2,199
(a) Amounts include interest accrued and discount
on issue.

Bonds issued in the full year of 2017 (guaranteed by Eni Spa)

| Issuing
entity — Eni SpA | 750 | Currency — EUR | 754 | 2027 | Rate — fixed | 1.50 |
| --- | --- | --- | --- | --- | --- | --- |
| Eni SpA | 650 | EUR | 649 | 2025 | fixed | 1.00 |
| Eni Finance International SA | 417 | USD | 414 | 2026 | variable | |
| | 1,817 | | 1,817 | | | |
| (a) Amounts include interest accrued
and discount on issue. | | | | | | |

Field: Page; Sequence: 30; Value: 1

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Consolidated financial statements

BALANCE SHEET

| Sept.
30, 2017 | | (€
million) — Dec.
31, 2017 | | Dec.
31, 2016 | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | ASSETS | | | | |
| | | Current assets | | | | |
| 5,863 | | Cash and cash equivalents | 7,363 | | 5,674 | |
| 6,157 | | Other financial activities held for trading | 6,013 | | 6,166 | |
| 208 | | Other financial assets available for sale | 206 | | 238 | |
| 15,117 | | Trade and other receivables | 15,741 | | 17,593 | |
| 4,638 | | Inventories | 4,618 | | 4,637 | |
| 286 | | Current tax assets | 193 | | 383 | |
| 896 | | Other current tax assets | 729 | | 689 | |
| 1,263 | | Other current assets | 1,573 | | 2,591 | |
| 34,428 | | | 36,436 | | 37,971 | |
| | | Non-current assets | | | | |
| 65,336 | | Property, plant and equipment | 63,134 | | 70,793 | |
| 1,209 | | Inventory - compulsory stock | 1,283 | | 1,184 | |
| 2,956 | | Intangible assets | 2,925 | | 3,269 | |
| 4,360 | | Equity-accounted investments | 3,586 | | 4,040 | |
| 222 | | Other investments | 220 | | 276 | |
| 1,804 | | Other financial assets | 1,675 | | 1,860 | |
| 4,071 | | Deferred tax assets | 4,126 | | 3,790 | |
| 1,483 | | Other non-current
assets | 1,323 | | 1,348 | |
| 81,441 | | | 78,272 | | 86,560 | |
| 13 | | Assets
held for sale | 323 | | 14 | |
| 115,882 | | TOTAL ASSETS | 115,031 | | 124,545 | |
| | | LIABILITIES AND SHAREHOLDERS'
EQUITY | | | | |
| | | Current liabilities | | | | |
| 2,712 | | Short-term debt | 2,241 | | 3,396 | |
| 4,396 | | Current portion of long-term debt | 2,286 | | 3,279 | |
| 15,948 | | Trade and other payables | 16,739 | | 16,703 | |
| 388 | | Income taxes payable | 470 | | 426 | |
| 2,310 | | Other taxes payable | 1,489 | | 1,293 | |
| 1,323 | | Other current liabilities | 1,517 | | 2,599 | |
| 27,077 | | | 24,742 | | 27,696 | |
| | | Non-current liabilities | | | | |
| 20,400 | | Long-term debt | 20,180 | | 20,564 | |
| 13,410 | | Provisions for contingencies | 13,406 | | 13,896 | |
| 880 | | Provisions for employee benefits | 1,022 | | 868 | |
| 6,017 | | Deferred tax liabilities | 5,976 | | 6,667 | |
| 1,521 | | Other non-current
liabilities | 1,473 | | 1,768 | |
| 42,228 | | | 42,057 | | 43,763 | |
| | | Liabilities
directly associated with assets held for sale | 87 | | | |
| 69,305 | | TOTAL LIABILITIES | 66,886 | | 71,459 | |
| | | SHAREHOLDERS' EQUITY | | | | |
| 48 | | Non-controlling interest | 49 | | 49 | |
| | | Eni shareholders' equity: | | | | |
| 4,005 | | Share capital | 4,005 | | 4,005 | |
| 63 | | Reserve related to the fair value of cash flow hedging
derivatives net of tax effect | 240 | | 189 | |
| 43,156 | | Other reserves | 42,446 | | 52,329 | |
| (581 | ) | Treasury shares | (581 | ) | (581 | ) |
| (1,441 | ) | Interim dividend | (1,441 | ) | (1,441 | ) |
| 1,327 | | Net profit (loss) | 3,427 | | (1,464 | ) |
| 46,529 | | Total Eni shareholders' equity | 48,096 | | 53,037 | |
| 46,577 | | TOTAL SHAREHOLDERS'
EQUITY | 48,145 | | 53,086 | |
| 115,882 | | TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY | 115,031 | | 124,545 | |

Field: Page; Sequence: 31; Value: 1

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GROUP PROFIT AND LOSS ACCOUNT

IIIQ — 2017		(€ million)	IVQ — 2017	2016	Full Year — 2017	2016
		REVENUES
15,684		Net sales from operations	17,547	15,807	66,921	55,762
99		Other income and revenues	3,334	347	4,059	931
15,783		Total revenues	20,881	16,154	70,980	56,693
		OPERATING EXPENSES
12,064		Purchases, services and other	14,307	12,346	52,437	44,124
702		Payroll and related costs	687	741	2,951	2,994
(39	)	Other operating
(expense) income	(10)	94	(32)	16
1,938		Depreciation,
Depletion and Amortization	1,769	1,965	7,484	7,559
33		Impairment Losses
(Impairment reversals), net	(303)	(656)	(209)	(475)
9		Write-off of
tangible and intangible assets	61	212	263	350
998		OPERATING PROFIT (LOSS)	4,350	1,640	8,022	2,157
		FINANCE INCOME (EXPENSE)
985		Finance income	665	1,898	3,922	5,850
(1,424	)	Finance expense	(1,225)	(1,920)	(5,879)	(6,232)
(41	)	Income (expense) from other financial activities held for trading	(25)	68	(117)	(21)
196		Derivative financial instruments	118	(370)	838	(482)
(284	)		(467)	(324)	(1,236)	(885)
		INCOME (EXPENSE) FROM INVESTMENTS
79		Share of profit (loss) of equity-accounted investments	(366)	(199)	(202)	(326)
218		Other gain (loss) from investments	55	(81)	335	(54)
297			(311)	(280)	133	(380)
1,011		PROFIT (LOSS) BEFORE INCOME TAXES	3,572	1,036	6,919	892
(666	)	Income taxes	(1,472)	(695)	(3,489)	(1,936)
345		Net profit (loss) - continuing
operations	2,100	341	3,430	(1,044)
		Net profit (loss) - discontinued
operations				(413)
345		Net profit (loss)	2,100	341	3,430	(1,457)
		Eni's shareholders:
344		- continuing operations	2,100	340	3,427	(1,051)
		- discontinued operations				(413)
344			2,100	340	3,427	(1,464)
		Non controlling interest
1		- continuing operations		1	3	7
		- discontinued operations
1				1	3	7
		Net profit (loss) per share attributable to Eni's
shareholders (€ per share)
0.10		- basic	0.58	0.09	0.95	(0.41)
0.10		- diluted	0.58	0.09	0.95	(0.41)
		Net profit (loss) per share - continuing operations
attributable to Eni's shareholders (€ per share)
0.10		- basic	0.58	0.09	0.95	(0.29)
0.10		- diluted	0.58	0.09	0.95	(0.29)

Field: Page; Sequence: 32; Value: 1

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COMPREHENSIVE INCOME

(€ million)	IVQ — 2017	2016	Full Year — 2017	2016
Net profit (loss)	2,100	341	3,430	(1,457)
Items that may not be reclassified to profit
in later periods	(4)	(19)	(4)	(19)
Remeasurements of defined benefit plans	(33)	16	(33)	16
Taxation	29	(35)	29	(35)
Items that may be reclassified to profit in later
periods	(535)	2,574	(5,501)	1,889
Currency translation differences	(656)	2,291	(5,563)	1,198
Change in the fair value of cash flow hedging
derivatives	157	391	(6)	883
Change in the fair value of other available-for-sale
financial instruments		(4)	2	(4)
Share of "Other comprehensive income" on
equity-accounted entities		(12 )	65	32
Taxation	(36)	(92)	1	(220)
Total other items of comprehensive
income (loss)	(539)	2,555	(5,505)	1,870
Total comprehensive income (loss)	1,561	2,896	(2,075)	413
attributable to:
Eni's shareholders	1,561	2,895	(2,078)	406
- continuing operations	1,561	2,895	(2,078)	819
- discontinued operations				(413)
Non-controlling interest		1	3	7
- continuing operations		1	3	7
- discontinued operations

CHANGES IN SHAREHOLDERS’ EQUITY

(€ million)
Shareholders' equity
at January 1, 2016:	57,409
Total comprehensive income (loss)	413
Dividends paid to Eni's shareholders	(2,881)
Deconsolidation of Saipem's
non-controlling interest	(1,872)
Dividends distributed by consolidated
subsidiaries	(4)
Other changes	21
Total changes	(4,323)
Shareholders'
equity at Dec. 31, 2016:	53,086
attributable to:
-
Eni's shareholders	53,037
- Non-controlling interest	49
Shareholders' equity at January
1, 2017:	53,086
Total comprehensive income (loss)	(2,075)
Dividends paid to Eni's shareholders	(2,881)
Dividends distributed by consolidated
subsidiaries	(3)
Other changes	18
Total changes	(4,941)
Shareholders'
equity at Dec. 31, 2017:	48,145
attributable to:
-
Eni's shareholders	48,096
- Non-controlling interest	49

Field: Page; Sequence: 33; Value: 1

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GROUP CASH FLOW STATEMENT

IIIQ — 2017		(€ million)	IVQ — 2017	2016		2017		2016
345		Net profit (loss)	2,100		341		3,430		(1,044	)
		Adjustments to reconcile net profit (loss) to
net cash provided by operating activities:
1,938		Depreciation, depletion and amortization	1,769		1,965		7,484		7,559
33		Impairment losses (impairment reversals), net	(303	)	(656	)	(209	)	(475	)
9		Write-off of tangible and intangible assets	61		212		263		350
(79	)	Share of (profit) loss of equity-accounted investments	366		199		202		326
(159	)	Gains on disposal of assets, net	(2,951	)	(11	)	(3,446	)	(48	)
(59	)	Dividend income	(77	)	(66	)	(205	)	(143	)
(117	)	Interest income	(68	)	(41	)	(283	)	(209	)
188		Interest expense	144		161		671		645
666		Income taxes	1,472		695		3,489		1,936
78		Other changes	286		20		910		(9	)
		Changes in working capital:
132		- inventories	(119	)	(145	)	(343	)	(273	)
(102	)	- trade receivables	(294	)	(648	)	636		1,286
123		- trade payables	1,483		1,827		283		1,495
(156	)	- provisions for contingencies	78		(280	)	55		(1,043	)
379		- other assets and liabilities	127		701		770		647
376		Cash flow from changes in working capital	1,275		1,455		1,401		2,112
12		Net change in the provisions for employee benefits	(4	)			38		22
75		Dividends received	114		83		291		212
28		Interest received	53		70		104		160
(181	)	Interest paid	(90	)	(360	)	(582	)	(780	)
(992	)	Income taxes paid, net of tax receivables received	(825	)	(819	)	(3,437	)	(2,941	)
2,161		Net cash provided by operating
activities	3,322		3,248		10,121		7,673
		Investing activities:
(1,551	)	- tangible assets	(2,139	)	(2,185	)	(8,486	)	(9,067	)
(19	)	- intangible assets	(45	)	(65	)	(191	)	(113	)
(453	)	- investments	(7	)	(6	)	(510	)	(1,164	)
(142	)	- securities	(105	)	(53	)	(321	)	(1,336	)
(57	)	- financing receivables	(216	)	(268	)	(657	)	(1,208	)
(229	)	- change in payables in relation to investing activities and capitalized
depreciation	(164	)	42		150		(8	)
(2,451	)	Cash flow from investing activities	(2,676	)	(2,535	)	(10,015	)	(12,896	)
		Disposals:
44		- tangible assets	2,138		7		2,745		19
		- intangible assets	2				2
301		- consolidated subsidiaries and businesses net of cash and cash
equivalent disposed of	2,361				2,662		(362	)
		- income taxes paid on disposals	(436	)			(436	)
23		- investments	398		26		482		508
11		- securities	188		4		224		20
123		- financing receivables	545		777		999		8,063
1,412		- change in receivables in relation to disposals	(1,540	)	154		(434	)	205
1,914		Cash flow from disposals	3,656		968		6,244		8,453
(537	)	Net cash
used in investing activities (*)	980		(1,567	)	(3,771	)	(4,443	)

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GROUP CASH FLOW STATEMENT (continued)

IIIQ — 2017	(€ million)	IVQ — 2017	2016	Full Year — 2017	2016
650	Increase in long-term debt	437	272	1,842	4,202
(22)	Repayments of long-term debt	(2,682)	(143 )	(2,973)	(2,323)
126	Increase (decrease) in short-term debt	(544)	(927 )	(582)	(2,645 )
754		(2,789)	(798)	(1,713)	(766)
(1,440)	Dividends paid to Eni's shareholders		(33 )	(2,880)	(2,881)
	Dividends paid to non-controlling interests			(3)	(4)
(686)	Net cash used in financing activities	(2,789)	(831)	(4,596)	(3,651)
	Effect of change in consolidation (inclusion/exclusion of significant/insignificant
subsidiaries)		(4)	7	(5)
	Effect of cash and cash equivalents relating to discontinued operations				889
(14)	Effect of exchange rate changes on cash and cash equivalents and
other changes	(13)	26	(72)	2
924	Net cash flow for the period	1,500	872	1,689	465
4,939	Cash and cash equivalents - beginning
of the period (excluding discontinued operations)	5,863	4,802	5,674	5,209
5,863	Cash
and cash equivalents - end of the period (excluding discontinued operations)	7,363	5,674	7,363	5,674

(*) Net cash used in investing activities included investments and divestments (on net basis) in held-for-trading financial assets and other investments/divestments in certain short-term financial assets. Due to their nature and the circumstance that they are very liquid, these financial assets are netted against finance debt in determing net borrowings. Cash flows of such investments were as follows:

IIIQ — 2017	(€ million)	IVQ — 2017	2016	Full Year — 2017	2016
(10)	Net
cash flow from financing activities	450	42	336	5,271

SUPPLEMENTAL INFORMATION

IIIQ — 2017	(€ million)	IVQ — 2017	2016	Full Year — 2017	2016
	Effect of disposals of consolidated subsidiaries
and businesses
144	Current assets	22		166	6,526
123	Non-current assets	691	1	814	8,615
12	Net borrowings	(264)		(252)	(5,415)
(133)	Current and non-current liabilities	(72)		(205)	(6,334)
146	Net effect of disposals	377	1	523	3,392
	Reclassification of exchange rate differences included in other
comprehensive income				7
	Current value of residual interests following the loss of control				(1,006)
164	Gains (losses) on disposal	1,984	(1)	2,148	11
	Non-controlling interest				(1,872)
310	Selling price	2,361		2,671	532
	less:
(9)	Cash and cash equivalents disposed of			(9)	(894)
301	Cash
flow on disposals	2,361		2,662	(362)

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Capital expenditure

| IIIQ — 2017 | (€ million) | IVQ — 2017 | 2016 | %
Ch. | Full Years — 2017 | 2016 | %
Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 1,404 | Exploration & Production | 1,854 | 1,916 | (3.2) | 8,012 | 8,458 | (5.3) |
| | - acquisition of proved and unproved properties | 5 | | | 5 | 2 | |
| 61 | - g&g costs | 73 | 45 | 62.2 | 273 | 204 | 33.8 |
| 102 | - exploration | 56 | 134 | (58.2) | 442 | 417 | 6.0 |
| 1,229 | - development | 1,698 | 1,725 | (1.6) | 7,236 | 7,770 | (6.9) |
| 12 | - other expenditure | 22 | 12 | 83.3 | 56 | 65 | (13.8) |
| 33 | Gas & Power | 60 | 53 | 13.2 | 142 | 120 | 18.3 |
| 188 | Refining & Marketing and Chemicals | 290 | 303 | (4.3) | 729 | 664 | 9.8 |
| 132 | - Refining & Marketing | 215 | 184 | 16.8 | 526 | 421 | 24.9 |
| 56 | - Chemical | 75 | 119 | (37.0 ) | 203 | 243 | (16.5 ) |
| 13 | Corporate and other activities | 58 | 26 | .. | 87 | 55 | 58.2 |
| (7) | Impact of unrealized intragroup
profit elimination | (5) | (3) | | (20) | 87 | |
| 1,631 | Capital
expenditure | 2,257 | 2,295 | (1.7) | 8,950 | 9,384 | (4.6 ) |
| 61 | Cash out in
net cash flow from operating activities | 73 | 45 | 62.2 | 273 | 204 | 33.8 |
| 1,570 | Cash out
in net cash flow from investment activities | 2,184 | 2,250 | (2.9) | 8,677 | 9,180 | (5.5) |

In the full year of 2017, capital expenditure amounted to €8,677 million (€9,180 million in the FY 2016) and mainly related to:

development activities (€7,236 million) deployed mainly in Egypt, Ghana, Angola, Congo, Algeria, Iraq and Norway; exploration activities (€442 million) concerned mainly Cyprus, Norway, Mexico, Egypt, Libya and Ivory Coast;
refining activity in Italy and outside Italy (€395 million) aimed at assets integrity, reconversion of refinery system, as well as initiatives in the field of health, security and environment; marketing activity, mainly regulation compliance and stay in business initiatives in the refined product retail network in Italy and in the Rest of Europe (€131 million);
initiatives relating to gas marketing (€102 million) as well as initiatives to improve flexibility and upgrade combined-cycle power plants (€36 million).

Cash-outs comprised in net cash from operating activities (€273 million) relate to geological and geophysical studies as part of the exploration activities, which are charged to expenses.

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Exploration & Production

PRODUCTION OF OIL AND NATURAL GAS BY REGION

IIIQ — 2017		2017	2016	2017	2016
1,803	Production of
oil and natural gas (a) (b)	(kboe/d)	1,892	1,856	1,816	1,759
136	Italy		146	159	134	133
174	Rest of Europe		163	240	189	201
685	North Africa		782	680	713	647
374	Sub-Saharan Africa		365	334	347	339
118	Kazakhstan		130	133	132	111
137	Rest of Asia		139	103	119	127
160	America		144	184	160	177
19	Australia and Oceania		23	23	22	24
156.3	Production
sold (a)	(mmboe)	165.0	161.1	622.3	608.6

PRODUCTION OF LIQUIDS BY REGION

IIIQ — 2017		2017	2016	2017	2016
885	Production of
liquids (a)	(kbbl/d)	861	906	852	878
56	Italy		64	67	53	47
96	Rest of Europe		80	140	102	109
243	North Africa		251	241	233	244
277	Sub-Saharan Africa		265	237	250	249
77	Kazakhstan		83	78	83	65
56	Rest of Asia		47	58	54	78
78	America		69	82	75	83
2	Australia and Oceania		2	3	2	3

PRODUCTION OF NATURAL GAS BY REGION

IIIQ — 2017		2017	2016	2017	2016
5,012	Production of
natural gas (a) (b)	(mmcf/d)	5,625	5,184	5,261	4,807
436	Italy		448	504	442	471
424	Rest of Europe		453	543	476	502
2,413	North Africa		2,900	2,394	2,620	2,197
527	Sub-Saharan Africa		545	527	533	493
222	Kazakhstan		256	301	264	254
447	Rest of Asia		502	247	357	265
449	America		407	555	464	511
94	Australia and Oceania		114	113	105	114

(a) Includes Eni’s share of production of equity-accounted entities.

(b) Includes volumes of gas consumed in operation (578 and 556 mmcf/d in the fourth quarter of 2017 and 2016, respectively, 527 mmcf/d and 478 mmcf/d in the FY 2017 and 2016, respectively, and 527 mmcf/d in the third quarter 2017).

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Gas & Power

Natural gas sales by market

| IIIQ — 2017 | (bcm) | IVQ — 2017 | 2016 | %
Ch. | Full Year — 2017 | 2016 | %
Ch. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 7.93 | ITALY | 9.62 | 10.25 | (6.1) | 37.43 | 38.43 | (2.6) |
| 1.03 | - Wholesalers | 2.25 | 2.55 | (11.8) | 8.36 | 7.93 | 5.4 |
| 2.75 | - Italian exchange for gas and spot markets | 2.31 | 2.63 | (12.2) | 10.81 | 12.98 | (16.7) |
| 1.04 | - Industries | 1.09 | 1.19 | (8.4) | 4.42 | 4.54 | (2.6) |
| 0.14 | - Medium-sized enterprises and services | 0.27 | 0.44 | (38.6) | 0.93 | 1.72 | (45.9) |
| 1.17 | - Power generation | 0.52 | 0.25 | .. | 2.22 | 0.77 | .. |
| 0.25 | - Residential | 1.54 | 1.53 | 0.7 | 4.51 | 4.39 | 2.7 |
| 1.55 | - Own consumption | 1.64 | 1.66 | (1.2) | 6.18 | 6.10 | 1.3 |
| 9.51 | INTERNATIONAL SALES | 11.86 | 13.01 | (8.8) | 43.40 | 47.88 | (9.4) |
| 8.21 | Rest of Europe | 10.26 | 11.79 | (13.0) | 38.23 | 42.43 | (9.9) |
| 0.97 | - Importers in Italy | 0.99 | 1.15 | (13.9) | 3.89 | 4.37 | (11.0) |
| 7.24 | - European markets | 9.27 | 10.64 | (12.9) | 34.34 | 38.06 | (9.8) |
| 1.31 | Iberian Peninsula | 1.24 | 1.52 | (18.4) | 5.06 | 5.28 | (4.2) |
| 1.53 | Germany/Austria | 1.91 | 1.84 | 3.8 | 6.95 | 7.81 | (11.0) |
| 0.96 | Benelux | 1.35 | 1.68 | (19.6) | 5.06 | 7.03 | (28.0) |
| | Hungary | | | | | 0.93 | .. |
| 0.40 | UK | 0.56 | 0.95 | (41.1) | 2.21 | 2.01 | 10.0 |
| 2.14 | Turkey | 2.08 | 1.99 | 4.5 | 8.03 | 6.55 | 22.6 |
| 0.87 | France | 1.94 | 2.46 | (21.1) | 6.38 | 7.42 | (14.0) |
| 0.03 | Other | 0.19 | 0.20 | (5.0) | 0.65 | 1.03 | (36.9) |
| 1.30 | Rest of World | 1.60 | 1.22 | 31.1 | 5.17 | 5.45 | (5.1) |
| 17.44 | WORLDWIDE
GAS SALES | 21.48 | 23.26 | (7.7) | 80.83 | 86.31 | (6.3) |

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Eni SpA parent company accounts

Profit and loss account

(€ million)
Full year
2017	2016
REVENUES
Net sales from operations	28,983	27,718
Other income and revenues	2,316	547
Total
Revenues	31,299	28,265
OPERATING EXPENSES
Purchases, services and other	(27,362)	(27,247)
Payroll and related costs	(1,159)	(1,179)
OTHER
OPERATING (EXPENSE) INCOME	(239)	(50)
DEPRECIATION,
DEPLETION AND AMORTIZATION	(727)	(815)
IMPAIRMENT
LOSSES (IMPAIRMENT REVERSALS), NET	(124)	(443)
WRITE-OFF
OF TANGIBLE AND INTANGIBLE ASSETS	(5)	(209)
OPERATING
PROFIT (LOSS)	1,683	(1,678)
FINANCE INCOME (EXPENSE)
Finance income	1,682	2,149
Finance expense	(2,698)	(2,540)
Income (expense) from other financial activities
held for trading	(110)	(21)
Derivative financial instruments	481	(34)
	(645)	(446)
INCOME (EXPENSE) FROM INVESTMENTS	2,702	6,058
NET PROFIT BEFORE TAXES
- continuing operations	3,740	3,934
Income taxes	(218)	232
NET
PROFIT - continuing operations	3,522	4,166
NET
PROFIT - discontinued operations		355
NET
PROFIT	3,522	4,521

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Balance sheet

| (€ million) — Dec.
31, 2017 | Dec.
31, 2016 | |
| --- | --- | --- |
| ASSETS | | |
| Current Assets | | |
| Cash and cash equivalents | 6,214 | 4,583 |
| Other financial activities held for trading | 5,793 | 6,062 |
| Trade and other receivables: | 8,587 | 15,658 |
| - financial receivables | 2,700 | 7,763 |
| - trade and other receivables | 5,887 | 7,895 |
| Inventories | 1,389 | 1,277 |
| Current income tax assets | 59 | 92 |
| Other current tax assets | 267 | 346 |
| Other current assets | 693 | 1,011 |
| | 23,002 | 29,029 |
| Non-current assets | | |
| Property, plant and equipment | 7,166 | 8,046 |
| Inventory - compulsory stock | 1,297 | 1,172 |
| Intangible assets | 195 | 1,205 |
| Equity-accounted investments | 42,337 | 40,009 |
| Other financial assets | 4,832 | 1,428 |
| Deferred tax assets | 1,104 | 1,185 |
| Other non-current receivables | 481 | 700 |
| | 57,412 | 53,745 |
| Discontinued operations and assets held for sales | 2 | 4 |
| TOTAL ASSETS | 80,416 | 82,778 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | |
| Current liabilities | | |
| Short-term debt | 4,146 | 4,159 |
| Current portion of long-term debt | 1,973 | 3,014 |
| Trade and other payables | 6,226 | 6,209 |
| Income taxes payable | 64 | 4 |
| Other taxes payable | 809 | 887 |
| Other current liabilities | 872 | 1,205 |
| | 14,090 | 15,478 |
| Non-current liabilities | | |
| Long-term debt | 18,843 | 19,554 |
| Provisions for contingencies | 3,785 | 4,054 |
| Provisions for employee benefits | 353 | 391 |
| Other non-current liabilities | 880 | 1,366 |
| | 23,861 | 25,365 |
| TOTAL LIABILITIES | 37,951 | 40,843 |
| SHAREHOLDERS’ EQUITY | | |
| Share capital | 4,005 | 4,005 |
| Legal reserve | 959 | 959 |
| Other reserves | 36,001 | 34,472 |
| Interim dividend | (1,441) | (1,441) |
| Treasury shares | (581) | (581) |
| Net profit | 3,522 | 4,521 |
| TOTAL SHAREHOLDERS’ EQUITY | 42,465 | 41,935 |
| TOTAL LIABILITIES
AND SHAREHOLDERS’ EQUITY | 80,416 | 82,778 |

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Cash Flow Statement

(€ million)
	Full Year
	2017	2016
Net profit	3,583	4,166
Adjustments to reconcile net profit to net cash provided by operating activities:
Depreciation, depletion and amortization	727		815
Impairment losses (impairment reversals), net	124		443
Write-off of tangible and intangible assets	5		209
Impairment losses (impairment reversals) of investments	367		374
Gain on disposal of assets, net	(1,996	)	29
Dividend income	(3,061	)	(6,486	)
Interest income	(204	)	(161	)
Interest expense	599		588
Income taxes	218		(232	)
Other changes	230		159
Changes in working capital:
- inventories	(238	)	(66	)
- trade receivables	241		1,353
- trade payables	335		93
- provisions for contingencies	(192	)	(30	)
- other assets and liabilities	(194	)	(585	)
Cash flow from changes in working capital	(48	)	765
Net change in the provisions for employee benefits	42		16
Dividends received	3,076		6,458
Interest received	201		165
Interest paid	(576	)	(692	)
Income taxes paid, net of tax receivables received	55		7
Net cash provided
from operating activities	3,281		6,623
Investing activities:
- tangible assets	(738	)	(788	)
- intangible assets	(35	)	(58	)
- consolidated subsidiaries and businesses	(2,586	)	(8,299	)
- securities held for operating purposes
- financing receivables held for operating purposes	(3,041	)	(1,585	)
- change in payables and receivables in relation to investments and capitalized depreciation			(507	)
Cash flow from investments	(6,400	)	(11,237	)
Disposals:
- tangible assets	14		5
- intangible assets
- consolidated subsidiaries and businesses net of cash and cash equivalent disposed of	2,062
- income taxes paid on disposals	(301	)
- investments	1,033		2,209
- securities	1
- financing receivables held for operating purposes	1,901		5,405
- change in payables and receivables in relation to disposals	382
Cash flow from disposals	5,392		7,619
Net cash used
in investing activities	(1,008	)	(3,618	)

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Cash Flow Statement (continued)

(€ million)
Full Year
2017	2016
Other financial activities held
for trading	1	(1,257)
New borrowings (repayments) of long-term finance
debt	(1,345)	2,135
Increase (decrease) in short-term financial
debt	26	548
Financing receivables held for non-operating
purposes	3,556	(1,105)
Dividends paid to Eni's shareholders	(2,880)	(2,881)
Net
cash used in financing activities	(642)	(2,560)
Effect of change in consolidation
(inclusion/exclusion of significant/insignificant subsidiaries)		6
Net
cash flow for the period	1,631	451
Cash
and cash equivalents - beginning of the period	4,583	4,132
Cash
and cash equivalents - end of the period	6,214	4,583

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