ENI ANNOUNCES THE RESULTS FOR THE FIRST QUARTER OF 2010

Transcription

1 ENI ANNOUNCES THE RESULTS FOR THE FIRST QUARTER OF 2010 Financial Highlights Adjusted operating profit: up 15.4% to 4.33 billion Adjusted net profit: up 3.6% to 1.82 billion Net profit: up 16.7% to 2.22 billion Cash flow: 4.55 billion Operational Highlights Oil and natural gas production: up 2.1% to million barrels per day. Natural gas sales: down 5.7% to billion cubic meters. Rome, April 23, 2010 Eni, the international oil and gas company, today announces its group results for the first quarter of (unaudited). Paolo Scaroni, Chief Executive Officer, commented: Eni delivered solid operating and financial results for the first quarter of 2010, in spite of ongoing market challenges. We continue investing to drive growth and efficiency as we maintain our focus on creating value for our shareholders. (1) This press release represents the quarterly report prepared in compliance with Italian listing standards as provided by article 154-ter of the Italian code for securities and exchanges (Testo Unico della Finanza)

2 Financial Highlights SUMMARY GROUP RESULTS First % Ch. 2,466 Operating profit 3,967 4, ,702 Adjusted operating profit (a) 3,754 4, Net profit (b) 1,904 2, per share ( ) (c) per ADR ($) (c) (d) ,394 Adjusted net profit (a) (b) 1,759 1, per share ( ) (c) per ADR ($) (c) (d) (a) For a detailed explanation of adjusted operating profit and net profit see paragraph Reconciliation of reported operating and net profit to results on an adjusted basis page 20. (b) Profit attributable to Eni shareholders. (c) Fully diluted. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented. (d) One ADR (American Depositary Receipt) is equal to two Eni ordinary shares. Adjusted operating profit Adjusted operating profit was 4.33 billion, up 15.4% from the first quarter of. This was due to an excellent operating performance reported by the Exploration & Production division driven by increased oil prices and production growth. The Petrochemical division also improved versus a year ago as operating losses were cut in half. Theses positive trends were partially offset by reduced results reported by both the Refining & Marketing and the Gas & Power divisions. Adjusted Net Profit Adjusted net profit was 1.82 billion, up 3.6% compared with a year ago, as a better operating performance was partly absorbed by the negative impact associated with an increased adjusted tax rate (from 49% to 53%). Capital expenditures Capital expenditures for the quarter amounted to 2.78 billion mainly related to continuing development of oil and gas reserves, the construction of rigs and offshore vessels in the Engineering & Construction segment and the upgrading of gas transport infrastructure. Cash flow The main cash inflows for the quarter were net cash generated by operating activities amounting to 4.55 billion and proceeds from divestments of 729 million. These inflows were used to fund the financing requirements associated with capital expenditures ( 2.78 billion) and to pay down finance debt. As of March 31, 2010 net borrowings 2 amounted to billion, representing a decrease of 2 billion from year end, notwithstanding negative exchange rate translation differences (down approximately 370 million). Financial Ratios Return on Average Capital Employed (ROACE) 3 calculated on an adjusted basis at March 31, 2010 was 9.1%. The ratio of net borrowings to shareholders equity including minority interest leverage 3 decreased to 0.39 at March 31, 2010 from 0.46 as of December 31,. (2) Information on net borrowings composition is furnished on page 27. (3) Non-GAAP financial measures disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided for by CESR Recommendation No b. See pages 27 and 28 for leverage and ROACE, respectively

3 Operational Highlights and Trading Environment KEY STATISTICS First % Ch. 1,886 Production of oil and natural gas (kboe/d) 1,779 1, ,073 - Liquids (kbbl/d) 1,013 1,011 (0.2) 4,668 - Natural gas (mmcf/d) 4,398 4, Worldwide gas sales (bcm) (5.7) of which: E&P sales in Europe and the Gulf of Mexico Electricity sales (TWh) Retail sales of refined products in Europe (mmtonnes) (3.9) Exploration & Production Eni reported liquids and gas production of 1,816 kboe/d for the first quarter of Production grew by 2.1% as a result of continuing production ramp-up in Nigeria, Congo and the United States, and additions from fields which were started-up in. These positive trends were partly offset by a combined negative impact associated with lower entitlements in Company s PSAs due to higher oil prices, and lower OPEC restrictions. Also, production for the quarter was negatively affected by unplanned facility shutdowns and mature field declines, particularly in the North Sea. Realized Oil and Gas Prices Oil realizations in dollar terms increased by 68.5% driven by a recovery in market benchmark Brent prices (up 71.7% from the first quarter of ). Natural gas realizations declined due to the impact of the time lag in oillinked pricing formulae and weak demand. Gas & Power Eni s worldwide natural gas sales were bcm, down by 5.7% compared with the first quarter of. The performance was negatively affected by sharply lower volumes supplied to the Italian market (down by 2.34 bcm, or 17.7%) due to increased competitive pressures in the power generation business, as well as in sales to wholesalers and industrial customers. Sales outside of Italy increased by 2.6% as a result of organic growth achieved in Northern Europe, France and Belgium. Refining & Marketing Eni s realized refining margins in dollar terms were sharply lower mirroring the environment for Brent margins (down $2.94 per barrel in the quarter, or 55.1%). This reduction reflected prolonged weakness in industry fundamentals as rapidly-escalating of oil-based feedstock costs were not fully transferred to final prices of products due to excess capacity, sluggish demand and high inventory levels. Currency Results of operations for the quarter were negatively affected by a steep appreciation of euro vs the US dollar, up by 6.3%. This particularly impacted reported results of foreign subsidiaries in the Exploration & Production division which use the US dollar as their functional currency. Portfolio developments Venezuela The Perla 2 well, located in the Cardón IV Block, in the shallow waters of the Gulf of Venezuela, was successfully drilled. The results exceeded the initial resource estimation by 30% with potential for further improvements to be defined through the future wells. This result confirms Perla as a world-class gas discovery, one of the most significant in recent years, and the largest ever in Venezuela

4 Angola Two oil discoveries were made offshore in the 15/06 block (Eni 35%, operator) with the exploration wells Nzanza-1 e Cinguvu-1, which have been flowing at more than 1,600 and 6,400 barrels per day respectively. Russia As part of the transaction to divest a 51% stake in the joint-venture Eni-Enel OOO SeverEnergia to Gazprom, based on the call option exercised by the Russian company on September 24,, Eni collected a second instalment of the transaction by March 31, This amounted to 526 million (as converted at the EUR/USD exchange rate of 1.35 as of the transaction date, corresponding to approximately $710 million, approximately 75% of the whole amount). Main production start-ups In line with the Company s production plans, production was started at the Annamaria B field (Eni 90% operator), located in the offshore section between Italy and Croatia, which flowed at approximately 28 mmcf/day. A production plateau of 42 mmcf/day (7,500 barrels of oil equivalent) is targeted. Other start-ups were achieved in Algeria, China and Congo. Outlook In what remains an uncertain energy environment, Eni forecasts a modest improvement in global oil demand and a Brent price of 76$/barrel in Gas demand in Europe and Italy is expected to recover gradually from the steep decline suffered in, which mainly impacted the industrial and thermoelectric sectors at a time when new import capacity was coming on line. The Company faces a challenging refining environment, excluding any significant recovery in industry fundamentals, which will result in prolonged weakness in refinery margins. - Production of liquids and natural gas is forecast to slightly increase compared to (production in was million boe/d). This estimate is based on the Company s scenario for a Brent price of 76$/barrel for the full year, the same level of OPEC restrictions as in the first quarter of 2010 and asset disposals underway. Growth will be driven by continuing field start-ups, mainly in Italy, Algeria and Norway and marginally the Zubair project in Iraq, and production ramp-up at the Company s recently started fields, mainly in Nigeria, Angola and the USA. These additions will be partly offset by mature field declines. - Natural gas sales are forecasted to decrease slightly compared with (approximately 104 bcm were achieved in ). Increasing competitive pressures, mainly in Italy, are expected to be partly offset by an expected recovery in European gas demand. Other positive trends include a benefit associated with integrating Distrigas operations and the optimization of its supply portfolio, including re-negotiation of longterm supply contracts. - Regulated businesses in Italy will benefit from the pre-set regulatory return on new capital expenditures and cost savings from integrating the whole chain of transport, storage and distribution activities. - Refining throughputs on Eni s account are planned to be in line with (actual throughputs in were mmtonnes). Volumes processed at wholly-owned refineries are expected to increase, resulting in a higher capacity utilization rate, due to a reduction of volumes on third party refineries reflecting the Company s decision to terminate certain processing agreements. Efficiency improvement actions will partly offset the unfavourable trading environment. - Retail sales of refined products in Italy and the rest of Europe are expected to be unchanged from (12.02 mmtonnes in ) reflecting weak demand. New marketing initiatives are planned in order to strengthen Eni s leadership on the Italian retail market and to develop its market share in European markets. - The Engineering & Construction business is expected to see solid results due to a robust order backlog. In 2010, management plans to make capital expenditures broadly in line with ( billion were invested in ). Capital expenditures will mainly be directed to the development of oil and natural gas reserves, exploration projects, the upgrading of construction vessels and rigs, and the upgrading of natural gas transport infrastructure. Management has planned a number of measures designed to ensure the achievement of a ratio of net borrowings to total equity (leverage) which will adequately support a strong credit rating

5 This press release for the first quarter of 2010 (unaudited) provides data and information on business and financial performance in compliance with article 154-ter of the Italian code for securities and exchanges ( Testo Unico della Finanza TUF). Results are presented for the first quarter of 2010 and for the first quarter and the fourth quarter of. Information on liquidity and capital resources relates to end of the period as of March 31, 2010, and December 31,. Tables contained in this press release are comparable with those presented in the management s disclosure section of the Company s annual report and interim report. ly 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, The evaluation and recognition criteria applied during the preparation of the report for the first quarter are unchanged from those adopted for the preparation of the Annual Report, with the exception of the international accounting standards come into force from January 1, 2010 described in the section of the Annual Report Accounting standards and interpretations issued by IASB /IFRIC and endorsed by EU. Adoption of those accounting standards did not have any impacts on the financial results of the first quarter 2010 with the sole exception of interpretation IFRIC12 service concession arrangements. IFRIC12 provides guidance on the accounting by operators for public-to-private service concession arrangements. An arrangement within the scope of this interpretation involves for a specified period of time an operator constructing, upgrading, operating and maintaining the infrastructure used to provide the public service. In particular when the grantor controls or regulates what services the operator must provide with the infrastructure, at what price and any significant residual interest in the infrastructure at the end of the term of the arrangement, the operator shall recognize the concession as an intangible asset or as a financial asset on the basis of the agreements. Based on existing arrangements in Eni Group companies, adoption of IFRIC12 has led to the Company classifying infrastructures used to provide the public service within intangible assets in the balance sheet as of March 31, Balance sheet data as of December 31, have been restated accordingly for an amount of 3,412 million (i.e. the net book value of infrastructures used to provide the public service which were presented within property, plant and equipment in prior years). Considering the tariff set-up of public services rendered under concessions arrangements and absent any benchmarks, the Company was in no position to reliably quantify margins for construction and upgrading activities and consequently capital expenditure made in the period have been recognized as contract work in progress for an equal amount as costs incurred. Infrastructures used to provide the public service are amortized on the basis of the expected pattern of consumption of expected future economic benefits embodied in those assets and their residual value, as provided by the relevant regulatory framework. Non-GAAP financial measures and other performance indicators disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided by recommendation CESR/05-178b. Eni s Chief Financial Officer, Alessandro Bernini, in his position as manager responsible for the preparation of the Company s financial reports, certifies pursuant to rule 154-bis paragraph 2 of Legislative Decree No. 58/1998, that data and information disclosed in this press release correspond to the Company s evidence and accounting books and entries. Cautionary statement This press release, in particular the statements under the section Outlook, contains certain forward-looking statements particularly those regarding capital expenditures, development and management of oil and gas resources, dividends, share repurchases, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sales growth, new markets, and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the 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 problems; 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 first quarter of the year cannot be extrapolated on an annual basis

6 Contacts * * * Investor Relations investor.relations@eni.com Tel.: Fax: Eni Press Office ufficio.stampa@eni.com Tel.: Eni Società per Azioni Rome, Piazzale Enrico Mattei, 1 Share capital: euro 4,005,358,876 fully paid Tax identification number Tel.: Fax: * * * * * * This press release for the first quarter of 2010 (unaudited) is also available on the Eni web site eni.com

7 Summary results for the first quarter of 2010 First % Ch. 22,077 Net sales from operations 23,741 24, ,466 Operating profit 3,967 4, (135) Exclusion of inventory holding (gains) losses 125 (409) 1,371 Exclusion of special items (338) (107) of which: non recurring items 1,121 - other special items (338) (107) 3,702 Adjusted operating profit 3,754 4, Net profit attributable to Eni s shareholders 1,904 2, (31) Exclusion of inventory holding (gains) losses 91 (280) 1,034 Exclusion of special items (236) (120) of which: non recurring items other special items (236) (120) 1,394 Adjusted net profit attributable to Eni s shareholders 1,759 1, Adjusted net profit of non-controlling interest (4.4) 1,681 Adjusted net profit 1,965 2, Breakdown by division (a) : 1,019 Exploration & Production 908 1, Gas & Power (3.3) (118) Refining & Marketing 68 (30).. (85) Petrochemicals (95) (43) Engineering & Construction (11.7) (83) Other activities (25) (61).. (95) Corporate and financial companies (174) (202) (16.1) (38) Impact of unrealized intragroup profit elimination (b) 72 (42) Net profit attributable to Eni s shareholders 0.11 per share ( ) per ADR ($) Adjusted net profit attributable to Eni s shareholders 0.38 per share ( ) per ADR ($) ,622.4 Weighted average number of outstanding shares (c) 3, , ,481 Net cash provided by operating activities 5,443 4,554 (16.3) 3,894 Capital expenditures 3,147 2,779 (11.7) (a) For a detailed explanation of adjusted net profit by division see page 20. (b) Unrealized intragroup profit concerns profit on the intragroup sale of products, goods, services and tangible and intangible goods reported in the acquiring company's shareholders' equity at period end. (c) Fully diluted (million shares). Trading environment indicators First % Ch Average price of Brent dated crude oil (a) Average EUR/USD exchange rate (b) Average price in euro of Brent dated crude oil Average European refining margin (c) (55.1) 1.80 Average European refining margin Brent/Ural (c) (49.0) 0.84 Average European refining margin in euro (57.6) 0.7 Euribor - three-month euro rate (%) (70.0) 0.3 Libor - three-month dollar rate (%) (79.8) (a) In USD dollars per barrel. Source: Platt s Oilgram. (b) Source: ECB. (c) In USD per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platt s Oilgram data

8 Group results Net profit attributable to Eni s shareholders for the first quarter of 2010 was 2,222 million, an increase of 318 million from the first quarter of, up 16.7%. The result was driven by an increase in operating performance (up 880 or 22.2%) which was mainly reported by the Exploration & Production division on the back of higher oil prices and production growth. The improved operating results were partly offset by the negative effect associate with an increased Group s tax rate from 48.3% to 49.9%. Adjusted net profit attributable to Eni s shareholders amounted to 1,822, an increase of 63 million from the first quarter of, up 3.6%. Adjusted net profit is calculated by excluding an inventory holding profit of 280 million and net special gains of 120 million, resulting in an overall adjustment equivalent to a decrease of 400 million. The balance between special charges and gains is comprised of, on the positive side, gains recorded on the divestment of non-strategic assets in the Exploration & Production division. On the negative side, provisions for redundancy incentives and environmental charges were recorded. Results by division The increase in the Group adjusted net profit reflected higher results reported by the following divisions: - Exploration & Production (up 337 million or 37.1%). This increase reflected a better operating performance (up 945 million or 43.5%) driven by higher oil realizations in dollar (up 68.5%), higher sales volumes (up 1.4%) and lower exploration expences, which were partly offset by increased operating costs and amortization charges taken in connection with developing activities. Also results were negatively affected by the appreciation of the euro over the dollar (up 6.3%) and an increased adjusted tax rate which was up by 1.7 percentage points (from 58.6% to 60.3%). - Petrochemicals (up 52 million). The division improved its performance as losses at both net and operating levels were reduced (from 95 million to 43 million, and from 111 million to 59 million respectively) driven by a recovery in product demand and cost efficiencies. These increases were partly offset by a decrease in the adjusted net profit reported in the following divisions: - Refining & Marketing. The division achieved an adjusted net loss amounting to 30 million (down 98 million). This result reflected a move from profit to loss at operating level (from plus 55 million to minus 94 million) due to sharply lower refining margins affected by an unfavourable trading environment. Also marketing activities in Italy reported a decrease in results. - Gas & Power (down 33 million or 3.3%). The decrease was affected by a lower operating profit which was down by 96 million or 7%, due to the negative performance of the Marketing business. This negative was partly offset by a positive impact resulting from a lower tax rate (down 2.2 percentage points)

9 Liquidity and capital resources Summarized Group Balance Sheet 4 Dec. 31, March 31, 2010 Change Fixed assets (a) Property, plant and equipment 59,765 62,033 2,268 Inventory - Compulsory stock 1,736 1, Intangible assets 11,469 11,446 (23) Equity-accounted investments and other investments 6,244 6,026 (218) Receivables and securities held for operating purposes 1,261 1, Net payables related to capital expenditures (749) (612) ,726 82,066 2,340 Net working capital Inventories 5,495 5, Trade receivables 14,916 17,803 2,887 Trade payables (10,078) (12,001) (1,923) Tax payables and provisions for net defered tax liabilities (1,988) (4,003) (2,015) Provisions (10,319) (10,644) (325) Other current assets and liabilities (b) (3,968) (3,297) 671 (5,942) (6,625) (683) Provisions for employee post-retirement benefits (944) (964) (20) Net assets held for sale including related liabilities CAPITAL EMPLOYED, NET 73,106 75,374 2,268 Shareholders equity: Eni shareholders equity 46,073 50,099 4,026 Non-controlling interest 3,978 4, ,051 54,322 4,271 Net borrowings 23,055 21,052 (2,003) TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 73,106 75,374 2,268 (a) For the explanation of IFRIC12 adoption, see the methodology note at page 5, under the second paragraph. (b) Include receivables and securities for financing operating activities for 181 million ( 339 million at December 31, ) and securities covering technical reserves of Eni s insurance activities for 444 million ( 381 million at December 31, ). The depreciation of the euro versus the US dollar, from December 31, (the EUR/USD exchange rate was as of March 31, 2010, as compared to as of December 31,, down 7%) increased net capital employed, net equity and net borrowings by approximately 2,240, 1,870, and 370 million respectively, as a result of exchange rate translation differences. Fixed assets amounted to 82,066 million, representing an increase of 2,340 million from December 31, reflecting exchange rate translation differences and capital expenditures incurred in the period ( 2,779 million), partly offset by depreciation, depletion, amortization and impairment charges ( 2,184 million) recorded in the period. Net working capital amounted to a negative 6,625 million, representing a decrease of 683 million. This decrease was mainly due to an increase in tax payable and provisions for net deferred tax liabilities accrued in the quarter, and the increased risk provisions due to exchange rate translation differences. These decreases were partly offset by a greater balance achieved between trade receivables and trade payables. Net assets held for sale including related liabilities ( 897 million) mainly related the following assets: the mineral properties in Italy which were contributed in kind to two subsidiaries Società Padana Energia SpA and Società Adriatica Idrocarburi SpA, the subsidiaries Gas Brasiliano Distribuidora SA and Distri RE SA, as well as the GreenStream gas pipeline, a stake of which is expected to be divested. Shareholders equity including non-controlling interest increased by 4,271 million to 54,322 million, reflecting comprehensive income for the period ( 4,276 million). This increase was as a result of net profit for the period ( 2,419 million) and foreign currency exchange differences. (4) The summarized group balance sheet aggregates the amount of assets and liabilities derived from the statutory balance sheet in accordance with functional criteria which consider the enterprise conventionally divided into the three fundamental areas focusing on resource investments, operations and financing. Management believes that this summarized group balance sheet is useful information in assisting investors to assess Eni s capital structure and to analyze its sources of funds and investments in fixed assets and working capital. Management uses the summarized group balance sheet to calculate key ratios such as return on capital employed (ROACE) and the proportion of net borrowings to shareholders equity (leverage) intended to evaluate whether Eni s financing structure is sound and well-balanced

10 Summarized Group Cash Flow Statement 5 First Change 678 Net profit 2,110 2, Adjustments to reconcile to cash generated from operating profit before changes in working capital: 3,282 - amortization and depreciation and other non monetary items 2,238 1,901 (337) 58 - net gains on disposal of assets (157) (169) (12) 1,766 - dividends, interest and taxes 1,929 2, (1,691) Changes in working capital related to operations 964 (370) (1,334) (2,612) Dividends received, taxes paid, interest (paid) received during the period (1,641) (1,698) (57) 1,481 Net cash provided by operating activities 5,443 4,554 (889) (3,894) Capital expenditures (3,147) (2,779) 368 (46) Investments and purchase of consolidated subsidiaries and businesses (2,039) (39) 2, Disposals Other cash flow related to capital expenditures, investments and disposals 1,745 (118) (1,863) (2,217) Free cash flow 2,184 2, Borrowings (repayment) of debt related to financing activities 102 (88) (190) 2,167 Changes in short and long-term financial debt (2,380) (1,484) 896 (86) Dividends paid and changes in non-controlling interest and reserves (2) (13) Effect of changes in consolidation and exchange differences (136) NET CASH FLOW FOR THE PERIOD (94) Change in net borrowings First Change (2,217) Free cash flow 2,184 2, (212) Exchange differences on net borrowings and other changes (334) (357) (23) (86) Dividends paid and changes in non-controlling interest and reserves (2) (2,515) CHANGE IN NET BORROWINGS 1,848 2, Net cash provided by operating activities ( 4,554 million) coupled with cash from divestments for 729 million, were mainly used to fund cash outflows relating to capital expenditures totalling 2,779 million and to pay down finance debt ( 2,003 million). The divestments related to non strategic assets in the Exploration & Production division, as well as proceeds from the sale to Gazprom of a 51% interest in the joint-venture OOO SeverEnergia ( 526 million). Financial and operating information by division for the first quarter of 2010 is provided in the following pages. (5) Eni s summarized group cash flow statement derives from the statutory statement of cash flows. It enables investors to understand 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. The measure enabling such a link is represented by the free cash flow which 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. The free cash flow is a non-gaap measure of financial performance

11 Exploration & Production RESULTS First % Ch. 6,648 Net sales from operations 6,145 7, ,411 Operating profit 2,374 3, Exclusion of special items: (201) (179) asset impairments 8 - gains on disposal of assets (163) (160) 20 - provision for redundancy incentives 2 2 (38) - re-measurement gains/losses on commodity derivatives (40) (21) 2,804 Adjusted operating profit 2,173 3, (57) Net financial income (expense) (a) 33 (49) 24 Net income from investments (a) (12) 67 (1,752) Income taxes (a) (1,286) (1,891) 63.2 Tax rate (%) ,019 Adjusted net profit 908 1, Results also include: 2,436 - amortizations and depreciations 1,686 1,680 (0.4) of which: 350 exploration expenditure (34.7) amortization of exploratory drilling expenditure and other (38.6) 81 - amortization of geological and geophysical exploration expenses (20.6) 2,490 Capital expenditures 2,148 1,964 (8.6) of which: exploratory expenditure (b) (32.6) (c) (d) Production 1,073 Liquids (e) (kbbl/d) 1,013 1,011 (0.2) 4,668 Natural gas (mmcf/d) 4,398 4, ,886 Total hydrocarbons (kboe/d) 1,779 1, Average realizations Liquids (e) ($/bbl) Natural gas ($/mmcf) (18.9) Total hydrocarbons ($/boe) Average oil market prices Brent dated ($/bbl) Brent dated ( /bbl) West Texas Intermediate ($/bbl) Gas Henry Hub ($/kmc) (a) Excluding special items. (b) Includes exploration bonuses. (c) Supplementary operating data is provided on page 35. (d) Includes Eni s share of production of equity-accounted entities. (e) Includes condensates. Results The Exploration & Production division reported adjusted operating profit amounting to 3,118 million for the first quarter of 2010, representing an increase of 945 million from the first quarter of, or 43.5%. The positive performance was driven by higher oil realizations in dollars (up 68.5%) and production sales volumes growth (up 2.1 million boe). Lower expenses were also incurred in connection with exploration activities. These positives were partly offset by: (i) rising operating costs and amortization charges taken in connection with development activities as new fields were brought into production in ; (ii) foreign currency exchange rate translation differences as the euro appreciated over the dollar (down approximately 60 million); (iii) lower natural gas realizations in dollars (down 18.9%)

12 Special charges excluded from adjusted operating profit amounted to 179 million and mainly concerned gains from the divestment of certain non strategic assets as well as re-measurement gains recorded on fair value evaluation of certain non-hedging commodity derivatives. First quarter adjusted net profit increased by 337 million to 1,245 million from the first quarter of due to an improvement in operating performance and higher results from associates. This increase was partly offset by a higher tax rate from 58.6% to 60.3%, (up 1.7 percentage points) mainly due to a higher share of profit before tax earned in foreign countries with higher taxation. Operating review Eni reported liquids and gas production of 1,816 kboe/d for the first quarter of Production grew by 2.1% as a result of continuing production ramp-up in Nigeria, Congo and the United States, and additions from fields which were started-up in. These positive trends were partly offset by a combined negative impact associated with lower entitlements in Company s PSAs due to higher oil prices, and lower OPEC restrictions. Also, production for the quarter was negatively affected by unplanned facility shutdowns and mature field declines, particularly in the North Sea. The share of oil and gas production outside Italy was 90% (90% in the first quarter of ). Liquids production (1,011 kbbl/d) was barely unchanged (down 0.2%). Main increases were recorded in Nigeria, due to the ramp-up of the Oyo project (Eni s interest 40%) and lower impact of disruptions resulting from security issues, and Congo, due to the ramp-up of the Awa Paloukou project (Eni s interest 90%). The main reductions were recorded for mature fields decline in the North Sea and for the unplanned facility downtime in Algeria as well as price effects in the Company s PSAs and similar contractual schemes net of lower OPEC restrictions mainly in Angola and Nigeria. Natural gas production (4,615 mmcf/d) increased by 217 mmcf/d from the first quarter of (up 4.8%). The organic growth in Nigeria and the USA as well as higher entitlements in Libya were partially offset by declines in Egypt and North Sea. Liquids and gas realizations for the first quarter in dollar terms ($54.28/bbl) increased by 30.9% on average driven by higher oil prices for market benchmarks (the Brent crude price increased by 71.7%). Natural gas realizations were down by 18.9% driven by the time-lag between movements in oil prices and their effect on gas prices provided in pricing formulae and by weak demand. Eni s average liquids realizations decreased by 1.13$/bbl due to the settlement of certain commodity derivatives relating to the sale of 7.1 mmbbl in the quarter. This was part of a derivative transaction the Company entered into to hedge exposure to the variability in future cash flows expected from the sale of a portion of the Company s proved reserves for an original amount of approximately mmbbl in the period, decreasing to approximately 30.4 mmbbl as of end of March liquids First 95.4 Volumes sold (mmbbl) Sales volumes hedged by derivatives (cash flow hedge) Total price per barrel, excluding derivatives ($/bbl) (1.46) Realized gains (losses) on derivatives 1.46 (1.13) Total average price per barrel

13 Gas & Power Results First % Ch. 7,468 Net sales from operations 11,849 8,708 (26.5) 1,004 Operating profit 1,253 1, (9) Exclusion of inventory holding (gains) losses 276 (81) 132 Exclusion of special items: (166) environmental charges asset impairments 10 (1) - gains on disposal of assets risk provisions 13 - provision for redundancy incentives 3 6 (23) - re-measurement gains/losses on commodity derivatives (171) 11 1,127 Adjusted operating profit 1,363 1,267 (7.0) 549 Marketing (20.7) 487 Regulated businesses in Italy (a) International transport Net finance income (expense) (b) (6) (2) 94 Net income from investments (b) (373) Income taxes (b) (469) (410) 30.4 Tax rate (%) Adjusted net profit (3.3) 591 Capital expenditures (20.5) Natural gas sales Sales of consolidated subsidiaries (6.7) Italy (includes own consumption) (17.7) Rest of Europe Outside Europe Eni s share of sales of natural gas of affiliates (1.6) Total sales and own consumption (G&P) (6.3) 1.82 E&P in Europe and in the Gulf of Mexico Worldwide gas sales (5.7) Gas volumes transported in Italy (bcm) Eni (2.0) On behalf of third parties Electricity sales (TWh) (a) From January 1, 2010, amortization and depreciation in the trasportation business segment were determined taking into account an increase in the useful life of pipelines (from 40 to 50 years), which was revised recently by the Electricity and Gas Authority for tariff purposes. Taking into account the ways of recognising tariff components linked to new amortization and depreciation, the company decided to adjust the useful life of these assets in line with the conventional tariff duration. (b) Excluding special items. (bcm) Results In the first quarter of 2010 the Gas & Power division reported adjusted operating profit of 1,267 million, a decrease of 96 million from the first quarter of, down 7%, due to a lower performance delivered by the Marketing business. Results from that business did not take into account certain gains recorded in previous quarters on the settlement of non-hedging commodity and exchange rate derivatives amounting to 21 for the first quarter 2010 which could be associated with the sale of gas and electricity occurring in the quarter. With respect to those derivatives, hedge-accounting is not permitted by IFRS as they do not meet all formal criteria to be designated as hedges. If the Company had followed hedge-accounting, those gains would have impacted realized prices in the quarter. However, in assessing the underlying performance of the Marketing business, management calculates (as an alternative measure of performance) the EBITDA pro-forma adjusted, by carrying over the impact of the settlement of those derivatives to the reporting periods where the associated revenues have been recognized. Management

14 believes that disclosing this internally used measure is helpful in assisting investors to understand these business trends (see page 16). The EBITDA pro-forma adjusted delivered by the Marketing business in the first quarter 2010 showed a sharp decline compared to the first quarter due to rising competitive pressures in Italy, determining both lower sales volumes (down 17.7%) and reduced margins, as well as an unfavourable scenario, partly offset by the impact of the renegotiation of a number of long-term supply contracts and supply optimization measures. Special items excluded from operating profit amounted to net charges of 32 million. These mainly related to the impact on fair value evaluation of certain non-hedging commodity derivatives in the Marketing business ( 11 million), provisions for both redundancy incentives and environmental charges, and minor impairments. Adjusted net profit for the first quarter 2010 was 955 million, declining by 33 million from (down 3.3%) due to a weaker operating performance which was partly offset by a lower adjusted tax rate (from 32.2% to 30%). Operating review Marketing This business reported adjusted operating profit of 614 million for the first quarter of 2010, representing a decrease of 160 million from the first quarter of (down 20.7%). In considering the impact associated with the above mentioned non-hedging commodity derivatives, the following factors had a negative effect on Marketing results: (i) A sharp reduction in volumes sold in Italy (down 2.34 million cubic meters, or 17.7%) and declining margins as competitive pressures mounted. (ii) Gas margins were negatively affected by unfavourable trends in energy parameters provided in contractual pricing formulae. These negatives were partly offset by the impact of the renegotiation of a number of long-term supply contracts and supply optimization measures. NATURAL GAS SALES BY MARKET (bcm) First ITALY (17.7) Wholesalers (31.3) Gas release (2.4) Italian exchange for gas and spot markets Industries (25.5) Medium-sized enterprises and services Power generation (71.7) Residential (0.6) Own consumption INTERNATIONAL SALES Rest of Europe Importers in Italy (5.6) European markets Iberian Peninsula Germany - Austria Belgium Hungary (15.5) 1.31 Northern Europe Turkey (24.6) 1.53 France Other (4.1) 0.59 Extra European markets (8.5) 1.82 E&P in Europe and in the Gulf of Mexico WORLDWIDE GAS SALES (5.7) % Ch

15 Sales of natural gas for the first quarter 2010 were bcm, a decrease of 1.84 bcm from the first quarter of, down 5.7%. This was mainly as a result of rising competitive pressures in Italy, partly offset by steady trends in sales on the European markets. Sales included own consumption, Eni s share of sales made by equityaccounted entities and upstream sales in Europe and the Gulf of Mexico. Sales volumes on the Italian market declined by 2.34 bcm, or 17.7%, to bcm due to strong competitive pressures also resulting from the greater availability of gas on the marketplace following the start-up of a new regasification plant offshore of the Adriatic Coast in the fourth quarter of and the upgrade of import pipelines coming on-stream. Eni suffered lower sales to the power generation business (down 1.90 bcm), wholesalers (down 0.88 bcm) and, to a lesser extent, to industrial customers (down 0.54 bcm), sales volumes to the residential sector were barely unchanged. International sales were up 0.50 bcm, or 2.6%, to bcm, benefiting from organic growth achieved on target markets in the Rest of Europe (up 0.62 bcm, or 4.5%) particularly in Northern Europe (up 0.44 bcm), France (up 0.43 bcm) where ongoing marketing initiatives helped boost sales, and Belgium (up 0.12 bcm). Sales declined in Turkey (down 0.32 bcm) and Hungary (down 0.20 bcm). First quarter 2010 electricity sales increased to 9 TWh (up 15.7%) compared with the first quarter of. Eni s sales were driven by higher sales traded on the Italian power exchange. Sales on the open market declined marginally, in particular in the wholesalers segment, while sales to large and retail clients increased following effective marketing campaigns with sales benefiting from the greater availability of power from Eni s production plants. Regulated businesses in Italy These businesses reported an adjusted operating profit of 533 million for the first quarter of 2010, up 64 million, or 13.6% from the same period of, due to a new tariff mechanism that recognizes the fuel gas and higher volumes transported (up 58 million) reflecting a recovery in gas demand in Italy. The Distribution business reported unchanged results versus the first quarter of ( 120 million). The Storage business reported adjusted operating profit of 90 million in the first quarter of ( 84 million in the first quarter of 2010). Volumes of gas transported in Italy in the first quarter of 2010 were bcm increasing by 3.69 bcm, or 18.2%, from the first quarter of reflecting seasonal sales and higher gas offtakes from domestic storage deposits. In the first quarter of 2010, 4.83 bcm of gas were supplied (up 1.22 bcm from the first quarter of ) while 0.26 bcm were inputted to Company s storage deposits, an increase of 0.23 bcm compared to the same period of

16 Other performance indicators First % Ch. 1,159 Pro-forma adjusted EBITDA 1,720 1,432 (16.7) 623 Marketing 1, (27.7) (143) of which: +/(-) adjustment on commodity derivatives Regulated businesses in Italy International transport EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization charges) on an adjusted basis is calculated by adding amortization and depreciation charges to adjusted operating profit which is also modified to take into account the impact associated with certain derivatives instruments as discussed below. This performance indicator includes the adjusted EBITDA of Eni s wholly owned subsidiaries and Eni s share of adjusted EBITDA generated by certain associates which are accounted for under the equity method for IFRS purposes. Snam Rete Gas EBITDA is included according to Eni s share of equity (55.57% as of December 31,, which takes into account the amount of own shares held in treasury by the subsidiary itself) although this Company is fully consolidated when preparing consolidated financial statements in accordance with IFRS, due to its listed company status. Italgas SpA and Stoccaggi Gas Italia SpA results are also included according to the same share of equity as Snam Rete Gas, due to the closing of the restructuring deal which involved Eni s regulated business in the Italian gas sector. The parent company Eni SpA divested the entire share capital of the two subsidiaries to Snam Rete Gas. In order to calculate the EBITDA pro-forma adjusted, the adjusted operating profit of the Marketing business has been modified to take into account the impact of the settlement of certain commodity and exchange rate derivatives that do not meet the formal criteria to be classified as hedges under the IFRS. These are entered into by the Company in view of certain amounts of gas and electricity that the Company expects to supply at fixed prices during future periods. The impact of those derivatives has been allocated to the EBITDA proforma adjusted relating to the reporting periods during which those supplies at fixed prices are recognized. Management believes that the EBITDA pro-forma adjusted is an important alternative measure to assess the performance of Eni s Gas & Power division, taking into account evidence that this division is comparable to European utilities in the gas and power generation sector. This measure is provided in order to assist investors and financial analysts in assessing the Eni Gas & Power divisional performance as compared to its European peers, as EBITDA is widely used as the main performance indicator for utilities. The EBITDA pro-forma adjusted is a non-gaap measure under IFRS

17 Refining & Marketing Results First % Ch. 9,066 Net sales from operations 6,386 9, (423) Operating profit (a) (56.3) (152) Exclusion of inventory holding (gains) losses (209) (232) 379 Exclusion of special items: environmental charges asset impairments 6 22 (1) - gains on disposal of assets (1) (10) 2 - risk provisions 11 - provision for redundancy incentives re-measurement gains/losses on commodity derivatives 7 2 (196) Adjusted operating profit 55 (94).. 14 Net income from investments (b) Income taxes (b) (22) Tax rate (%) (118) Adjusted net profit 68 (30) Capital expenditures Global indicator refining margin 1.24 Brent ($/bbl) (55.1) 0.84 Brent ( /bbl) (57.6) 1.80 Brent/Ural ($/bbl) (49.0) Refining throughputs and sales (mmtonnes) 5.97 Refining throughputs of wholly-owned refineries Refining throughputs on own account Italy (2.4) 1.31 Refining throughputs on own account Rest of Europe (1.6) 8.61 Refining throughputs on own account (2.3) 2.26 Retail sales Italy (4.3) 0.74 Retail sales Rest of Europe (2.9) 3.00 Total retail sales in Europe (3.9) 2.47 Wholesale Italy (15.4) 0.96 Wholesale Rest of Europe (5.5) 3.43 Total wholesale in Europe (12.7) 0.10 Wholesale other Other sales SALES (0.9) Refined product sales by region 6.90 Italy (0.2) 1.70 Rest of Europe (4.4) 3.52 Rest of World (0.6) (a) From January 1, 2010, management has reviewed the residual useful lives of refineries and related facilities due to a change in the expected pattern of consumption of the expected future economic benefit embodied in those assets. In doing so, the Company has aligned with practices prevailing among integrated oil companies, particularly the European companies. Management s conclusions have been supported by an independent technical review. The impact on quarterly results was immaterial. (b) Excluding special items. Results In the first quarter of 2010 Refining & Marketing reported an adjusted operating loss amounting to 94 million, reversing a prior year profit of 55 million. The marked decrease (down 149 million from the first quarter of ) was driven by lower refining margins due to the decrease in the relative prices of products to oil feedstock costs due to weak industry fundamentals associated with excess capacity, sluggish demand and high inventory levels partly offset by improved light-heavy crude differentials. ly results were also affected by lower operating performance delivered by the Marketing activities, due to weak demand in retail and wholesale markets, in Italy and outside Italy, as well as a reduction of the market share in Italy