Eni Presentation to the Financial Community London, March 1 st, 2005
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
Eni Strategy Vittorio Mincato CEO London, March 1 st, 2005
Industry Challenges and Priorities Current market scenario High and volatile oil price in medium term Robust gas demand Production and Reserve replacement challenges Access to new frontier areas Rising Costs Capital Discipline Eni position Strong production increase and solid reserve replacement Well placed in frontier areas pursuing long term profitable growth Expanding in international gas sector Operational efficiency and strong cash flow generation High returns to shareholder 4
2004 Results Tackling Industry Challenges 2004 Growth in core business Financial results E&P: 4% organic production growth (6.4% before PSA impact) 105% organic reserve replacement G&P: 8% increase in overall gas sales Power Generation capacity doubled R&M: 8% growth in volumes processed in owned refineries 15% increase in retail network sales abroad Reported net profit: 7.3 billion All time record adjusted net income: 6.7 billion All time record cash flow: 12.4 billion Delivery on target and shareholders return Shareholders return 0.90/share dividend, up 20% 2004 Total Shareholders Return: 28.5% 5
2005-2008: continuity in growth and shareholders return Growth in core business E&P: Efficient production growth Focus on reserve replacement G&P: Acting proactively in the Italian market Expansion in LNG and in European gas markets Sustain attractive returns leveraging on business integration and technological innovation R&M: Improving refineries performance Development in selected European regions Efficiency Focus on efficiency and unit costs Shareholder return Capital and financial discipline Dividend Share buy back 6
E&P: robust production trend (kboe/d) 1,562 Before PSA impact: +6.4% 2004 production marked by: Organic growth +4% 1,624 Delivery on projects start-ups 2003 2004 2003 2004 IV Q 04 average production: 1,704 kboe/d 7
E&P: confirming strong production growth in 2005-2008 (kboe/d) CAGR CAGR +8.2% 1,624 >5% 1,900 2,000 05/08 GROWTH 1,187 Driven by projects build up and new start-ups Asset management 2000 2004 Target 2008 2007 8
E&P: delivering on reserve replacement (Million boe) REPLACEMENT RATIO 2004 40.5 $/bl 30* $/bl Organic 105% 132% Solid organic RRR in a high oil price scenario Reserve booking in line with SEC criteria All sources 91% 118% * Proforma data based on 31st December 2002 and 2003 Brent price RRR target 2005-2008 >100% 9
Enhance Upstream Portfolio Value and Quality Strong cash generation & efficiency Leading position in operating costs Reduction in discovery costs Focus on F&D costs Strong cash flow per boe Develop world scale projects leveraging on distinctive execution skills GREEN STREAM Portfolio Exploration: High selectivity Focus on materiality & synergies Western Libya gas project KASHAGAN FIELD 10
Well Positioned to seize Future Developments in Upstream High quality portfolio fueling growth in 05/08 and New initiatives in producing regions Access to high potential areas New themes Existing porfolio Oppotunities E&P growth leveraging on: Operatorship Legacy countries Technology development Integrated gas projects Sustaining long term growth 11
An International Player in the Growing Gas Market (Bcm) E&PAND G&PGAS SALES +7.5% 95.1 102.2 82.3 30.0 23.4 30.4 48.1 42.3 28.8 58.9 52.8 54.1 CAGR 4.0% ~120 30 35 % ~70 % ~50 International Italy Growth in international gas sales leveraging on: Expansion in European valuable markets Expansion in LNG 2001 2003 2004 2008 95.1 102.2 82.3 16.8 17.7 14.9 78.3 84.5 67.4 120 E&P direct sales G&P Equity gas Contracted gas Monetizing equity gas through integrated projects 2001 2003 2004 2008 12
G&P 2004 Achievements consistent with Strategy Bcm CAGR +7.8% 2004/2003 International 67.4 8.5* 68.7 16.1* +7.9% 84.5 78.3 30.4* 25.5* International sales: +19% Italian sales**: +2.5% Italy 58.9 52.6** 52.8** 54.1** 2001 2002 2003 2004 2002-2004 Compliant with Italian gas market ceiling 1st Jan. inlet ceiling to Italian market: 75% 1st Jan. Italian gas market fully open * Including gas sales in South America ** Including self consumption of 1.9 bcm in 2002/03 and 3.7 bcm in 2004 13
Acting Proactively in the Italian Gas Market Opening Supply Diversifing supply sources Lybia: Greenstream project to monetize equity gas Increase import capacity: at least 6.5 bcm by 2008 TAG (Russia) and TTPC (Algeria) Regulated asset base Snam Rete Gas Sale of 9.05% stake in 2004 Further reduction to 20% by 1st July 2007 Confirmed INSTALLED CAPACITY * GAS SELF CONSUMPTION (GW) 5-6 (Bcm) 6-7 Powergen 1.4 2.8 0.9 2.6 2007 Target Confirmed * Commercial operation 2003 2004 2007 2003 2004 2007 14
Enhance Presence in the European Gas Market European sales (Bcm) 44 48 Target markets & Shippers CAGR 04/01: 41% CAGR 08/04: 9% 12 7 28 23 34 29 42 Iberian peninsula Germany Turkey Hungary UK & North Europe France * E&P direct sales 5 5 5 6 2001 2003 2004 Target 2007 2008 Equity * France: France: entering a new entering a new market through market through commercial supply commercial supply agreements agreements 15
LNG Expansion sustaining Long Term Growth (Bcm) New initiatives in LNG monetizing equity gas REGANOSA SINES SAGUNTO PANIGAGLIA DAMIETTA Eni PARTICIPATION BRASS BONNY OMAN Liquefaction New initiatives Regasification DARWIN Equity production 0 50 100 200 Eni equity gas reserves areas Reserves* (Bcm) * 2003 figures 16
R&M: improving performance and strengthening integration REFINING Balancing refining capacity vs retail sales Increasing conversion capacity in hydrocracking units in Italy Higher integration maximizing volume and value of equity oil Refinery Throughput (Mln tons/y) 2008 TARGETS Italy & Abroad 39.6 57 2004 38 63 2008 Complexity index MARKETING ITALY Continuing network requalification EUROPE Continuing expansion in traditional selected European regions Throughput per site (Mln lt/ss) Total sales (Bln lt) 2008 TARGETS Italy & Abroad 2.0 2004 18.4 2.8 2008 >19 2004 2008 17
Continuing Cost Cutting Billion real terms Upside potential on 2006 target Focus on unit costs 2004 2.8 0.5 2.3 3.4 Operating performances Capital efficiency in pursuing growth Target exceeded by 15% 1999-03 1999-2004 2006 18
Use of Cash: sustaining growth and shareholders return Investments Pursuing long term growth in core business Capital discipline Dividend Competitive yield Share buy back A flexible lever for additional returns to shareholders 19
Use of Cash: capital expenditure to sustain long term growth in core business Bn 05/08 Investments trend 95% IN CORE BUSINESS Confirming Snam Rete Gas deconsolidation in 2007 Including new initiatives in E&P and G&P 26.9 2005-08 Capital Expenditure by activity 10% 4% 6% E&P G&P R&M 16% E&OS Other 64% 20
Robust Returns to Shareholders Payout 29% 37% 62% 51% 47% DIVIDEND 0.75 0.75 0.75 0.90 Dividend up +20% (Euro per share) 0.424 2000 2001 2002 2003 2004 Total Shareholders Return 2000-04: Yearly average 15.6% Interim dividend distribution from 2005 Competitive dividend yield 21
Robust Returns to Shareholders SHARE BUY-BACK PROGRAM 2000/2004 Authorized 5.4 billion Spent 3.2 billion Bought back 235 million shares (5.9% of share capital) Going forwards Remaining 2.2 billion Resumed in January 2005 22
Final Remarks 2008 Growth in core business 05/08 E&P production: cagr> 5% Gas sales abroad: cagr 9% Efficiency Focus on unit costs and efficiency Capex 26.9 billion Dividend sustainability (0.90 per share) Cash neutrality at 20US$/bbl Debt to equity ceiling 0.4 Maintain current credit rating 23