Eni Has First Quarterly Loss in at Least Seven Years

By Adam L. Freeman

Feb. 13 (Bloomberg) -- Eni SpA, Italy’s largest oil company, reported its first quarterly loss in at least seven years and will cut spending after the global recession spurred a record plunge in crude prices.

The loss was 874 million euros ($1.13 billion) compared with net income of 3 billion euros a year earlier, Rome-based Eni said today in a statement. Excluding inventories, profit beat analyst estimates. Revenue declined 3 percent to 24.6 billion euros.

Chief Executive Officer Paolo Scaroni is relying on fields in the Gulf of Mexico, Congo and Turkmenistan to bolster production and counter disruptions in Nigeria caused by militant attacks. Eni will spend “slightly less” this year than the 14.56 billion euros earmarked for investment in 2008.

“They performed well in a difficult and challenging environment,” Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said in a telephone interview. “You have got to be prudent in this kind of market.”

Eni proposed to keep its final dividend unchanged at 1.30 euros a share. Scaroni will brief analysts and investors over the company’s strategy at a presentation in London starting at noon.

Profit excluding changes in the value of inventories was 1.94 billion euros. Eni was expected to report earnings on this basis of 1.83 billion euros, according to the median estimate of nine analysts surveyed by Bloomberg News.

Eni rose 40 cents, or 2.4 percent, to 17.22 euros at 9:54 a.m. in Milan. The stock has lost 22 percent during the past 12 months, giving the company a market value of 69 billion euros.

Shell, BP

Eni is the last of Europe’s four biggest oil companies to report fourth-quarter earnings. Royal Dutch Shell Plc, Europe’s largest oil company, recorded its first quarterly loss in a decade of $2.8 billion. BP Plc had its first loss in seven years of $3.3 billion. France’s Total SA had a quarterly loss of 794 million euros.

Crude futures in New York slumped 56 percent in the quarter, the biggest drop since trading started in 1983. Oil futures for March delivery traded at $34.63 today.

Snam Rete Gas SpA, owner of the Italian natural gas grid, yesterday agreed to buy Eni’s gas retail and storage businesses for 4.72 billion euros.

Snam will buy gas retailer Italgas SpA for 3.07 billion euros and Stoccaggi Gas Italia, or Stogit, for 1.65 billion euros. As a 50.03 percent shareholder of Snam, Eni will still maintain control over those units.

Output Gains

Eni’s oil and natural-gas output rose 2.1 percent to 1.85 million barrels a day in the quarter. Production gained 3.5 percent in 2008 and will continue to rise this year. The company also forecast a rise in global gas sales from 2008’s 104 billion cubic meters due to the purchase of Belgian gas supplier Distrigaz SA..

An Eni-led group in October agreed to cede more royalties and oversight to the Kazakh government for the Kashagan development, which is due to start production at the end of 2012 when the Italian company relinquishes its role as sole operator.

Eni’s Kashagan partners are Exxon Mobil Corp., Total SA and Shell. The largest oil discovery in 35 years is expected to produce around 370,000 barrels a day a year after the start of output before peaking at 1.5 million barrels a day.

Eni last year won rights to search for oil and gas in Algeria and extended an oil and gas supply agreement with Libya for 25 years. The company also paid 2.74 billion euros for Suez SA’s 57 percent stake in Distrigaz. Scaroni said the acquisition would enable Eni to sell 21 percent of western Europe’s gas.

Eni’s share-price forecast was raised to 25 euros yesterday from 20 euros by analysts at Sanford C. Bernstein & Co.

Out of 37 analysts who follow the company, 29 rate it “buy,” seven have “hold” recommendations and one advises clients to sell the stock.

To contact the reporter on this story: Adam L. Freeman in Rome at afreeman5@bloomberg.net