ENI WOULD CUT INVESTMENT 14%
Italy's Eni raised its dividend on Wednesday despite a slump in fourth-quarter profits and like its rivals pledged to cut investment this year in the face of lower oil prices.
Eni posted a 64 percent drop in fourth quarter adjusted net profit and said it would cut investment in 2015 by about 14 percent, mainly at its exploration and production business.
Oil companies across the globe have announced spending cuts and asset sales worth billions of dollars to strengthen their balance sheets and offset falling crude prices.
Larger energy firms such as BP and Total have said they do not intend to cut dividends, a key attraction for investors, even if oil prices remain low.
Eni CEO Claudio Descalzi said 100,000 square kilometers of new acreage had been discovered in 2014 and he confirmed the firms's oil and gas output would grow by 3 percent a year.
While analysts welcomed the forecast, some were concerned the reduction in capital expenditure may curb expansion further out, and others sounded a note of caution on Libya.
"I'm a bit worried cutting capex might mean curtailing future growth," Ifigest fund manager Roberto Lottici said.
Eni, which has had a reserves replacement ratio of 127 percent in the last five years, has one of the best discovery records amongst large oil firms and analysts said it had scope to ease back on some of its activity.
The company is the biggest foreign oil producer in Libya where escalating violence has seriously hit production.
"In the last quarter we were close to 275,000 barrels per day (bpd)," Descalzi said. He said current production in the conflict-torn country was close to 300,000 bpd, in contrast to Libyan energy officials who put output at below 200,000 bpd.
State-controlled Eni said it would pay an annual dividend of 1.12 euros for 2014, up from 1.10 euros a year ago.
"The dividend is higher than 2013 and there was no scrip dividend which had been a worry. Cash flow was very good despite the oil price," a Milan-based analyst said.
Eni shares closed up 3.4 percent while the European oil index was up 1.5 percent.
Cash flow for the fourth quarter was at a six-year high, boosted by asset sales, including 3.7 billion euros ($4 billion) from Arctic Russia.
Pressed on future dividend policy, Descalzi declined to comment but said "we are in a strong position". Eni has a dividend yield of 7.1 percent versus a peer average of 5.3 percent.
But some analysts are worried lower oil prices and the difficulty in selling assets might challenge the company's policy in the future.
In December, Eni was forced to pull the sale of part of its stake in oil contractor Saipem due to market conditions. It still needs to raise about six billion euros under an 11 billion euro program through 2017.
The sale of a 10 percent stake in the giant Rovuma gas field in Mozambique was still on the agenda, Descalzi told analysts. He also said Eni was looking at options to extract value from its retail gas business.
Sources recently told Reuters that Eni was working with Goldman Sachs on a possible spinoff of assets in its power and gas unit.
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Libya’s oil production increased steeply to the current level of 850,000 b/d from a low point in August 2016 of below 300,000 b/d. Production surpassed 1 million b/d in July.
- Revenue of $7.9 billion increased 6% sequentially - Pretax operating income of $1.1 billion increased 11% sequentially - GAAP EPS, including Cameron integration-related charges of $0.03 per share, was $0.39 - EPS, excluding Cameron integration-related charges, was $0.42 - Cash flow from operations was $1.9 billion; free cash flow was $1.1 billion
“The combination of GE Oil & Gas and Baker Hughes closed on July 3, and we are pleased with our progress during our first operating quarter. Despite the continuing challenging environment, we delivered solid orders growth and secured important wins from customers, advanced existing projects and enhanced our technology offerings in the quarter. We also achieved key integration milestones and made significant progress working as a combined company. I am now more convinced than ever that we combined the right companies at the right time,” said Lorenzo Simonelli, BHGE chairman and chief executive officer.
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