ENI's CEO Discusses Q4 2011 Results - Earnings Call Transcript

ENI S.p.A. ( E)

Q4 2011 Earnings Call

February 15, 2012 09:00 a.m. ET


Paolo Scaroni – CEO

Alessandro Bernini – CFO

Claudio Descalzi – COO, Exploration & Production

Umberto Vergine - COO of Gas & Power Division


Nitin Sharma - JP Morgan

Marc Kofler – Macquarie Securities

Alejandro Demichelis – Merrill Lynch

Theepan Jothilingam – Nomura International

Oswald Clint – Bernstein Research

Andrea Scauri - Mediobanca Securities

Domenico Ghilotti – Equita S.I.M. S.p.A.

Mark Bloomfield - Deutsche Bank

Neill Morton - Berenberg Bank



Good afternoon, ladies and gentlemen, and welcome to ENI’s 2011 Fourth Quarter and Full Year Results Conference Call hosted by Paolo Scaroni, Chief Executive Officer and Alessandro Bernini, Chief Financial Officer. For the duration of the call, you will be in listen-only mode. However, at the end of the call, you have the opportunity to ask questions.

I am now handing you over to your host to begin today's conference call. Thank you.

Paolo Scaroni

Good afternoon ladies and gentleman, welcome to our 2011 Fourth Quarter and Full Year Results presentation. 2011, we made exceptional progress on our medium and long term growth prospect. We had some remarkable successes in exploration with important discoveries in the Far East, with the discoveries in Yan Creek North East which have almost doubled our resources in the area.

In the Barents Sea, we've Skrugrad and recently weeks Havis had opened up a new hub with 500 BOE of recovered reserves and of course, in Mozambique where we've today announced the results of our second well Mamba North raised our estimate of gas in place to 30 TCF. We're very excited about the blocks further potential and have expanded our exploration and appraisal plan with eight further wells to be drilled in the next two years.

Overall, we've added one 1.1 billion BOE of resource in 2011 building on our excellent track record in exploration over the past four years. We've also made good progress on our key project for medium term growth signing the GSAs and taking final investment decisions for Perla in Venezuela as one of our FID in the Yamal Peninsula in Russia.

We're pleased with the technically commercial progress on these developments which alongside would be yet other FIDs will contribute one other for 2,000 BOE a day our new production by 2015.

Another highlight of ENI's performance in 2011 was the quick operational recovery in Libya. While the turmoil in our largest producing country affected both volumes and results last year, our consolidated local relationships and experience have to contain the impact of the crisis. We were the only IOC to maintain some level of production in Libya during the revolution with local employees continuing to work at ____00:2;47___ and get production for domestic power generation exempt from international sanctions. And since the liberation of ______ in September, we've restarted all of our fields and reopened the GreenStream ramping up production faster than even we had anticipated.

Today, we're almost back to pre-crisis level and expect 2012 production from Libya of around 130,000 to 140,000 BOE per day compared to their 110,000 BOE per day reported for the full year 2011 and to 173,000 BOE per day in 2010.

Let's now turn to gas and power and then in petrochemicals. Follow all these businesses the market context in 2011 was difficult and we still a deterioration in the fourth quarter of the year as the sovereign debt crisis started to affect the European and particularly the Italian economy. This crisis spread across all our Italian businesses, in gas and power demand was down 11% in the quarter also due to mild weather. In R&M consumption of refined products declined by 5.5% in the quarter and for petrochemicals the second part of the year was the worst in the last 10 years.

In this context we've taken steps to strengthen our competitive position in each sector. In gas and power we continue our strategy of reviewing our supply costs, enable ready close the agreement with Sonatrach. However, it is worth reminding you that gas and power results do not yet include the expected benefits of the Gazprom renegotiation which is progressing constructively and will be retroactive for the whole of 2011.

Meanwhile, we've strengthened our position in the most resilient retail segment through organic growth in Italy and selective acquisitions in France and Belgium. In Refining and marketing we are concentrating our efforts on efficiency. In 2011, we exceeded our target with over €150 million savings. In Petrochemicals alongside cost cutting we're refocusing our business on more profitable niches and example comes from our innovative project to convert a structural loss making basic chemical plants to biochemical giving us the full told in these fast growing markets.

Thank you for your attention, and I'll now hand it over to Sandro for a closer look at our fourth quarter results.

Alessandro Bernini

Thank you, Paul. In the fourth quarter of 2011, the market environment was mixed. The brand price averaged $109 a barrel, up 26% compared to the fourth quarter of 2010. Meanwhile, the average European refining margin Brent/Ural was $2.5 a barrel well below historical levels, and the showing an 8% decline year-on-year. The euro-dollar exchange rates were broadly inline with the last quarter of 2010 at $1.35 per euro.

Moving to our results, ENI's adjusted operating profit for the fourth quarter of 2011 was to €4.3 billion, a decrease of 10% from the fourth quarter '10. These results reflects the operating losses recorded by the bouncing businesses against the backdrop of recessionary environment and the increased competitive pressure on gas and power marketing results which only partially included the benefits of supply renegotiations. These negatives were to some extent offset by the improved operating performance in ELP where operating profits were up 4.3% year-on-year replacing higher oil prices and the effort made to recover the Libyan production after the suspension of ___01 2.22__ in the country during the crisis.

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