Eni Strategy and Results

Transcription

1 Eni Strategy and Results Marco Mangiagalli CFO Palermo, May 20 th 2004

2 Disclaimer This presentation contains forward-looking statements regarding future events and the future results of Eni that are based on current expectations, estimates, forecasts, and projections about the industries in which Eni operates and the beliefs and assumptions of the management of Eni. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management and competition are forward-looking in nature. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, seeks, estimates, variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Eni s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, the impact of competition, political and economic developments in the countries in which Eni operates, regulatory developments in Italy and internationally and changes in oil prices and in the margins for Eni products. Any forward-looking statements made by or on behalf of Eni speak only as of the date they are made. Eni does not undertake to update forward-looking statements to reflect any changes in Eni s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any further disclosures Eni may make in documents it files with the US Securities and Exchange Commission. 2

3 1Q 2004 Results Palermo, May 20 th 2004

4 Market Environment /$ Exchange rate Brent Average European Refining Margin* 1,3 $/boe /boe $/boe /boe ,2 1, ,5 3 2,5 3,5 3 2, Q03 2Q03 3Q03 4Q03 1Q Q03 2Q03 3Q03 4Q03 1Q ,5 1Q03 2Q03 3Q03 4Q03 1Q04 1,5 1Q04/1Q03 /$ Δ% Q04/1Q03 $/boe /boe Δ% Q04/1Q03 $/boe /boe Δ% * FOB Mediterranean market, lead free gasoline. Eni calculations on Platt s Oilgram data 4

5 Eni Consolidated Results: net income Million Reported Excluding special items +6.9% -14.1% 2,145 2,006 1,901 1,633 1Q Q Q Q

6 Eni Consolidated Result: operating income Million Reported Excluding special items 3, % 3, % 3,363 3, % net of /US$ appreciation 1Q Q Q Q

7 Maintaining a Solid Financial Structure Million Investments Net financial debt Capex Financial invest. 9,414 8, % 1,366 13,057 4,255 8,802 11,141 13, , % 5,247 3, ,766 1,735 1,741 Dec 02 Dec 03 Mar 04 1Q Q

8 Strategic Highlights Palermo, May 20 th 2004

9 Industry Challenges and Priorities and Eni Strategic Plan From end of 90s to nowdays! Production growth! Operating efficiency, maximizing sinergies after mega mergers & acquisitions! Rationalization in downstream oil! European energy market liberalization! Growth based on capital discipline Future trend! Reserve replacement! Development in frontier areas pursuing long term profitable growth! Further development of gas industry! Capital & operative efficiency! Focus on cash Strategic plan Strategic plan 9

10 Eni Strategic Highlights in Growth in core business Sustain attractive returns leveraging on business integration! E&P: Efficient organic growth continuing portfolio rationalization Reserve replacement! G&P: Profitable growth leveraging on Italian gas demand and power development in Italy and international gas expansion! R&M: Continuing Italian network requalification and expansion in Europe Efficiency! Delivering on cost cutting! Strong Focus on unit cost Shareholders return! Capital and financial discipline! Dividend 10

11 E&P: confirming strong organic production growth in (kboe/d) Net of portfolio rationalization CAGR +10% 1,472 1,562 +5% Above 1,800 1,900 1, Target

12 E&P: 1Q Strong Production Trend confirmed Thousands boe/d 1Q 04 / 1Q % 1,628 1,498 1Q Q

13 E&P: reserve replacement consistent with production trend (million boe) PROVED HYDROCARBON RESERVES 5, % 7,272! Booking criteria in line with SEC guidelines! Centralized control system! Independent auditors assessing reserves on a rotating basis REPLACEMENT RATIO All sources +181% % % RRR target >100% Organic +127% 137% 141% 13

14 E&P: efficient organic growth enhancing portfolio value and quality EFFICIENCY AND CASH FLOW! Leading position in lifting costs! Reduction in discovery costs! Strong focus on F&D costs trend! High cash flow per Boe! Continuing rationalization! Operatorship & concentration N OF PRODUCING COUNTRIES % of equity production in only 8 countries PORTFOLIO Countries producing > than 100 kboed 5 8! Selectivity in exploration ! Developing large scale projects: Libya, West Africa, Caspian Basin Project selectivity based on strict capital discipline 14

15 E&P: building beyond the plan period Kashagan Giant field CONTRACT BLOCKS! Operatorship! High reserves KAIRAN Long term! Management and engineering knowhow! High potential exploration KALAMKAS KASHAGAN SW AKTOTE profitable production growth Further exploration activity in: Kashagan SW Kalamkas Aktote and Kairan 15

16 Eni achievements in G&P: gas sales increase leveraging on international expansion Italy Internationally /2003 Ceiling respected in the Italian gas market * 8.5* * 52.6** * 52.8** First quarter data * 9.1* 18.9** 18.8** Q Q 2004 * Including gas sales in South America ** Including self consumption 16

17 Eni: acting proactively in the Italian gas market opening ITALIAN DEMAND (Bcm) ~85.0 ~ ,0 PRICE TRENDS NET OF SCENARIO Gas demand and price trends -7% , ! Higher flexibility in the supply contract both in Italy and abroad Supply contract! No risk on Take or Pay in period thanks to the expansion abroad and gas demand increase driven by power generation 17

18 Eni: acting proactively in the Italian gas market opening Bcm Italian gas demand Thermoelec. Industry Resid.& Comm *+5.3% Normalized for weather effect %* +17% +1% +10% Q 2003 Eni gas sales in Italy % +11% +6% -0.1% Q 2004 x 18.8 Final customer** Wholesalers ** Including Italgas sales ,7 11, , ,9 1Q Q

19 Eni profitable Expansion in the Italian Power Market Strategic targets confirmed Powergen market in Italy:! 3% Growth rate in *! Inefficient power generation capacity! Environmental issue * Source GRTN Eni powergen development plan can leverage on:! Gas self consumption! Eni s sites availability! CCGT high efficiency! Commercial integration! Environmental sustainable! 5-6 GW of installed capacity! 6-7 Bcm of gas selfconsumption! Attractive returns FIRST OPERATOR STARTING NEW POWER PLANTS IN ITALY 19

20 EniPower Ongoing Expansion in the Italian Market: on track with strategy INSTALLED CAPACITY* (GW) SALES (TWh) OPERATING RESULT ( million) Q Q Q Q Q Q 2004 * In commercial operation Trading Production 20

21 Eni Regulated Asset Base STRATEGIC TARGET RECENT DEVELOPMENTS FUTURE STEPS Reduce exposure in regulated assets according to market dynamics and industrial needs October 2003 DECREE LAW sets the new rules for ownership in both gas and electricity transmission activity:! Maximum stake allowed: 20%! Timing: within June 2007 Optimize Italgas assets coherently with:! New RAB (Jan. 2004): 3.6 billion! Second regulatory period (July 2004)! Concession regime! Network Code! Market developments Sale of 9.05% of Snam Rete Gas 21

22 Eni: exploit European presence delivering on volume targets European sales (Bcm) Expansion in Target Markets: 2003 result 10% higher than 00/03 target 44 CAGR 03/02: 40% CAGR 07/03: 12% * Including Libyan gas in 2007 ** Including E&P direct sales ! Target markets! Iberian peninsula! Germany! Turkey! Hungary (secondary distribution)! Shippers *! Equity ** 22

23 Eni Strategy in R&M confirmed STRATEGY REFINING! Completing reduction in FOB production in Italy (Mln ton) FOB capacity CIF capacity target MARKETING ITALY! Continuing network requalification EUROPE! Expansion in selected European areas Leveraging on brand awareness Supply advantages Increasing Increasing retail retail sales/refining sales/refining capacity capacity ratio ratio Throughtput per site (Mln lt/ss) Total sales (Bln lt) 2007 TARGETS Italy & Abroad

24 Capital Employed Billion % Continuing focus on core business Other Core business! CHEMICALS 2003: only less than 2% of overall capital employed (well below sector average) 2003 achievements: 3 plants shut down and 1 plant disposed Key priority: focus on cash flow Q 2004: additional plants shut down in chemicals 24

25 Continuing Cost Cutting Billion real terms 2003: : 1,720 Confirmed Strong focus on unit costs Target exceeded by 15% ! Operating performances! Capital efficiency in pursuing growth Target Target

26 Eni Use of Cash Investments Dividend Share buy back Capital and financial discipline in Eni use of cash 26

27 Eni Use of Cash: capital expenditure Bn Strict capital discipline in selective projects, particularly in E&P sector Other E&OS R&M G&P E&P 4% 5% % 17% Capital Expenditure Highlights! Including non defined projects in E&P! Snam Rete Gas deconsolidation in %! Powergen development completed by the end of

28 Eni Use of Cash: capital expenditure Bn 01/03 Investments trend:! Key projects in E&P! Higher production level in E&P! Developing powergeneration! Gas transmission abroad Peak of Eni investments Average Capex ~ plan 28

29 Eni: solid returns for shareholders Payout 29% 37% 62% 51% Board proposal to next AGM in May: 0.75 /share DIVIDEND (Euro per share) Confirming sustainability in the period Total shareholders return CAGR 00-03: 15% 29

30 Eni Strategy: share buy-back Bn SHARE BUY-BACK PROGRAM UPDATE ! From September 1, 2000 up to 2003 Bought back 231 million shares (5.8% of share capital) Spent 3.2 billion

31 Eni Financial Targets and Shareholders Return Growth in core business 2007! E&P production 5%! Gas sales abroad 12% Efficiency! Focus on unit costs and efficiency Capex! Dividend sustainability (0.75 per share)! Cash flow covering capex and dividends at mid cycle conditions (9-10 billion euro)! Debt to equity 0.4! 25.5 billion Mid Cycle Assumptions! Brent 16 $US/boe (real 2000)! /$ Exchange Rate 1 31

32 Eni Strategy and Results Marco Mangiagalli CFO Palermo, May 20 th 2004