performance

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Performance of the year

Exploration successes
3.4 bln boe

of discovered resources
in 2014-2016

Proved reserves
7.5 bln boe

at year end with a replacement ratio of 193%

Cost optimization
-19%

Capex net of exchange rate effects

-€0.8bln

G&A

Disposal plan
€2.6 bln

about 40% of 2016-2019 plan

Fields development

Planned start-ups, 2016 ramp-ups and production optimization approximately

850 kboe/d

in 2020

Safety
TRIR

down by

21%
Decarbonization

Start-up of Project Italia with

220 MWp

of capacity installed by 2022

GHG emissions

GHG down by

9%

per unit of production

down by

43%

vs 2014 at 2025 target

  • Financial highlights
  • Summary financial data
  • Financial highlights(*)(**)

     

     

     

     

     

     

     

    2014

    2015

    2016

    (*)

     

    Pertaining to continuing operations. Following the divestment of Saipem in January 2016, the results of the segment have been classified as discontinued operations based on the guidelines of IFRS 5. The comparative reporting periods have been restated consistently.

     

     

    (**)

     

    Effective January 1, 2016, management modified on voluntary basis the criterion to recognize exploration expenses adopting the accounting of the successful-effort-method (SEM). Accordingly, the comparative amounts disclosed for the FY 2016 have been restated. The retrospective application of the SEM has required adjustment of the opening balance of the retained earnings and other comparative amounts as of January 1, 2014. Specifically, the opening balance of the carrying amount of property, plant and equipment was increased by €3,524 million, intangible assets by €860 million and the retained earnings by €3,001 million. Other adjustments related to deferred tax liabilities and other minor line items. Concerning the FY 2015, the adoption of SEM determined a reduction of operating profit of €815 million. More information is disclosed in the notes of the consolidated financial statement of the 2016 Annual Report on Form 20-F.

     

     

    (a)

     

    Attributable to Eni’s shareholders.

     

     

    (b)

     

    Non-GAAP measures. Results of comparative periods are calculated on a standalone basis, i.e. by excluding the results of Saipem earned from both third parties and the Group’s continuing operations, therefore determining its deconsolidation.

     

     

    (c)

     

    The amount of dividends for the year 2016 is based on the Board’s proposal.

     

     

    (d)

     

    Number of outstanding shares by reference price at year end.

     

     

    Net sales from operations

    (€ million)

    98,218

    72,286

    55,762

    Operating profit (loss)

     

    8,965

    (3,076)

    2,157

    Adjusted operating profit (loss)(b)

     

    11,223

    4,486

    2,315

    Adjusted net profit (loss)(a)(b)

     

    3,723

    803

    (340)

    Net profit (loss)(a)

     

    1,720

    (7,952)

    (1,051)

    Net profit (loss) - discontinued operations(a)

     

    (417)

    (826)

    (413)

    Group net profit (loss)(a)
    (continuing + discontinued operations)

     

    1,303

    (8,778)

    (1,464)

    Comprehensive income(a)

     

    6,817

    (3,416)

    819

    Net cash flow from operating activities(b)

     

    13,544

    12,155

    7,673

    Capital expenditure

     

    11,178

    10,741

    9,180

    of which: exploration

     

    1,030

    566

    417

    development of hydrocarbon reserves

     

    9,021

    9,341

    7,770

    Dividends to Eni’s shareholders pertaining to the year(c)

     

    4,037

    2,880

    2,881

    Cash dividends to Eni’s shareholders

     

    4,006

    3,457

    2,881

    Total assets at year end

     

    150,366

    139,001

    124,545

    Shareholders’ equity including non-controlling interests at year end

     

    65,641

    57,409

    53,086

    Net borrowings at year end

     

    13,685

    16,871

    14,776

    Net capital employed at year end

     

    79,326

    74,280

    67,862

    of which: Exploration & Production

     

    51,061

    53,968

    57,910

    Gas & Power

     

    9,031

    5,803

    4,100

    Refining & Marketing and Chemicals

     

    9,711

    6,986

    6,981

    Share price at year end

    (€)

    14.5

    13.8

    15.5

    Weighted average number of shares outstanding

    (million)

    3,610.4

    3,601.1

    3,601.1

    Market capitalization(d)

    (€ billion)

    52

    50

    56

  • Summary financial data

     

     

     

     

     

     

     

    2014

    2015

    2016

    (a)

    Fully diluted. Ratio of net profit/cash flow and average number of shares outstanding in the period. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by Reuters (WMR) for the period presented.

    (b)

    One American Depositary Receipt (ADR) is equal to two Eni ordinary shares.

    (c)

    Ratio of dividend for the period and the average price of Eni shares as recorded in December.

    Net profit (loss) - continuing operations

     

     

     

     

    - per share(a)

    (€)

    0.48

    (2.21)

    (0.29)

    - per ADR(a)(b)

    ($)

    1.27

    (4.90)

    (0.65)

    Adjusted net profit (loss) - continuing operations

     

     

     

     

    - per share(a)

    (€)

    1.16

    0.37

    (0.09)

    - per ADR(a)(b)

    ($)

    3.08

    0.82

    (0.20)

    Cash flow - continuing operations

     

     

     

     

    - per share(a)

    (€)

    4.01

    3.58

    2.13

    - per ADR(a)(b)

    ($)

    10.66

    7.95

    4.72

    Adjusted Return on average capital employed (ROACE)

    (%)

    5.8

    1.8

    0.2

    Leverage

     

    21

    29

    28

    Coverage

     

    7.7

    (2.4)

    2.4

    Current ratio

     

    1.5

    1.4

    1.4

    Debt coverage

     

    105.7

    76.3

    51.9

    Dividends pertaining to the year

    (€ per share)

    1.12

    0.80

    0.80

    Total Share Return (TSR)

    (%)

    (11.9)

    1.1

    19.2

    Pay-out

     

    310

    (33)

    (197)

    Dividend yield(c)

    (%)

    7.6

    5.7

    5.4

Operating and sustainability data(a)

 

 

 

 

 

 

 

2014

2015

2016

(a)

Pertaining to continuing operations.

(b)

Incidental events which do not transform in damages or injuries.

(c)

Net of general and administrative costs.

Employees at year end

(number)

34,846

34,196

33,536

of which: women

 

8,076

7,960

7,700

outside Italy

 

13,639

13,316

12,626

Local employees outside Italy

(%)

86

85

85

Female managers (senior managers and managers)

(%)

23

24

24

Pay gap (women vs men)

(%)

97

97

97

TRIR (Total Recordable Injury Rate)

(recordable injuries/worked hours) x 1,000,000

0.71

0.45

0.35

of which: employees

 

0.56

0.41

0.36

contractors

 

0.79

0.47

0.35

Fatality index (employees and contractors)

(Fatal injuries per one hundred millions of worked hours)

1.03

1.46

0.72

Near miss(b)

(number)

1,729

1,489

1,644

Training expenditures

(€ million)

39.1

29.1

26.6

Training hours

(thousand hours)

1,213

1,099

939

of which: e-learning

 

120

183

197

Total volume of oil spills (> 1 barrel)

(barrels)

15,562

16,481

5,648

of which: due to sabotage and terrorism

 

14,401

14,847

4,489

operational

 

1,161

1,634

1,159

Direct GHG emissions

(mmtonnes CO2eq)

42.02

41.56

40.10

of which: CO2 equivalent from combustion and process

 

30.92

31.49

30.60

CO2 equivalent from flaring

 

5.73

5.51

5.40

CO2 equivalent from non-combusted methane and fugitive emissions

 

3.48

2.77

2.42

CO2 equivalent from venting

 

1.89

1.80

1.67

Total water withdrawals

(mmcm)

1,874

1,805

1,851

of which: sea water

 

1,704

1,634

1,710

fresh water

 

160

157

130

salt/salty water from subsoil or surface

 

10

13

12

R&D expenditure(c)

(€ million)

174

176

161

of which: new energy

 

 

 

51

First patent filing applications

(number)

64

33

40

of which: filed on renewable sources

 

29

16

12

Number of suppliers used

(number)

13,145

11,380

10,041

Total procurement

(€ million)

24,068

20,350

13,249

of which: local procurement

 

15,183

13,412

10,390

Interventions on the territory based on agreements, conventions and PSAs (Community investment)

 

65

75

67

  • Exploration & Production
  • Gas & Power
  • Refining & Marketing and Chemicals
  • Exploration & Production

     

     

     

     

     

     

     

    2014

    2015

    2016

    (a)

    Includes Eni's share in joint ventures and equity-accounted entities.

    (b)

    Related to consolidated subsidiaries.

    (c)

    Three-year average.

    (d)

    Hydrocarbon production from fields fully operated by Eni (Eni's interest 100%) amounting to 122 mln toe, 125 mln toe and 117 mln toe in 2016, 2015 and 2014, respectively.

    Employees at year end

    (number)

    12,777

    12,821

    12,494

    TRIR (Total Recordable Injury Rate)

    (recordable injuries/worked hours) x 1,000,000

    0.56

    0.34

    0.34

    of which: employees

     

    0.20

    0.22

    0.34

    contractors

     

    0.68

    0.39

    0.34

    Net proved reserves of hydrocarbons

    (mmboe)

    6,602

    6,890

    7,490

    Average reserve life index

    (years)

    11.3

    10.7

    11.6

    Hydrocarbon production(a)

    (kboe/d)

    1,598

    1,760

    1,759

    Organic reserve replacement ratio

     

    112

    148

    193

    Profit per boe(b)(c)

    ($/boe)

    14.5

    7.4

    2.7

    Opex per boe(b)

     

    8.4

    7.2

    6.2

    Cash flow per boe

     

    30.1

    20.9

    12.9

    Finding & Development cost per boe(c)

     

    21.5

    19.3

    13.2

    Direct GHG emissions

    (mmtonnes CO2eq)

    23.4

    22.8

    20.4

    CO2 emissions/100% operated hydrocarbon gross production(d)

    (tonnes CO2eq/toe)

    0.201

    0.182

    0.166

    % produced water re-injected

    (%)

    56

    56

    58

    Volumes of hydrocarbon sent to flaring

    (mmcm)

    1,767

    1,989

    1,950

    of which: sent to flaring process

     

    1,678

    1,564

    1,530

    Oil spills due to operations (> 1 barrel)

    (barrels)

    936

    1,177

    1,025

    Interventions on the territory based on agreements, conventions and PSAs (Community investment)

     

    63

    72

    63

  • Gas & Power

     

     

     

     

     

     

     

    2014

    2015

    2016

    (a)

    Pertaining to continuing operations.

    (b)

    The average evaluation reflects results of customers interviews based on clarity, courtesy and waiting time.

    Employees at year end

    (number)

    4,561

    4,484

    4,261

    TRIR (Total Recordable Injury Rate)

    (recordable injuries/worked hours) x 1,000,000

    0.82

    0.89

    0.28

    of which: employees

     

    0.87

    0.91

    0.27

    contractors

     

    0.70

    0.81

    0.31

    Worldwide gas sales

    (bcm)

    89.17

    90.88

    88.93

    - in Italy

     

    34.04

    38.44

    38.43

    - outside Italy

     

    55.13

    52.44

    50.50

    Customers in Italy

    (million)

    7.9

    7.9

    7.8

    Direct GHG emissions

    (mmtonnes CO2eq)

    10.12

    10.57

    11.22

    GHG emissions/kWheq (EniPower)

    (gCO2eq/kWheq)

    409

    409

    398

    Installed capacity power plants

    (GW)

    5.3

    4.9

    4.7

    Electricity produced

    (TWh)

    19.55

    20.69

    21.78

    Electricity sold

     

    33.58

    34.88

    37.05

    Customer satisfaction rate(b)

    (scale from 0 to 100)

    81.4

    85.6

    86.2

  • Refining & Marketing and Chemicals

     

     

     

     

     

     

     

    2014

    2015

    2016

    (a)

    2014 data includes Livorno, Sannazzaro, Taranto and Gela; 2015 data refers to Livorno, Sannazzaro and Taranto.

    Employees at year end

    (number)

    11,884

    10,995

    10,858

    TRIR (Total Recordable Injury Rate)

    (recordable injuries/worked hours) x 1,000,000

    1.51

    1.07

    0.38

    of which: employees

     

    1.60

    0.97

    0.44

    contractors

     

    1.40

    1.17

    0.32

    Oil spills due to operations (> 1 barrel)

    (barrels)

    225

    427

    134

    Direct GHG emissions

    (mmtonnes CO2eq)

    8.45

    8.19

    8.50

    SOx emissions (sulphur oxide)

    (ktonnes SO2eq)

    6.84

    6.17

    4.35

    Refinery throughputs on own account

    (mmtonnes)

    25.03

    26.41

    24.52

    Retail market share in Italy

    (%)

    25.5

    24.5

    24.3

    Retail sales of petroleum products in Europe

    (mmtonnes)

    9.21

    8.89

    8.59

    Service stations in Europe at year end

    (number)

    6,220

    5,846

    5,622

    Average throughput of service stations in Europe

    (kliters)

    1,725

    1,754

    1,742

    Balanced capacity of refineries

    (kbbl/d)

    617

    548

    548

    Capacity of biorefineries

    (ktonnes/year)

    360

    360

    360

    Production of biofuels

    (ktonnes)

    105

    179

    191

    GHG emissions/refining throughputs (traditional refineries)(a)

    (tonnes CO2eq/kt)

    287

    237

    272

    Production of petrochemical products

    (ktonnes)

    5,283

    5,700

    5,646

    Sales of petrochemical products

     

    3,463

    3,801

    3,759

    Average plant utilization rate

    (%)

    71

    73

    72

Financial review

Capital expenditure

 

 

 

 

 

 

 

 

(€ million)

2014

2015

2016

Change

% Ch.

Exploration & Production

10,156

9,980

8,254

(1,726)

(17.3)

- acquisition of proved and unproved properties

 

 

2

 

 

- exploration

1,030

566

417

 

 

- development

9,021

9,341

7,770

 

 

- other expenditure

105

73

65

 

 

Gas & Power

172

154

120

(34)

(22.1)

Refining & Marketing and Chemicals

819

628

664

36

5.7

- Refining & Marketing

537

408

421

13

3.2

- Chemicals

282

220

243

23

10.5

Corporate and other activities

113

64

55

(9)

(14.1)

Impact of unrealized intragroup profit elimination

(82)

(85)

87

172

..

Capital expenditure - continuing operations

11,178

10,741

9,180

(1,561)

(14.5)

Capital expenditure - discontinued operations

694

561

 

(561)

 

Capital expenditure

11,872

11,302

9,180

(2,122)

(18.8)

Adjusted results

 

 

 

 

 

 

(€ million)

2014

2015

2016

Change

% Ch.

Adjusted operating profit (loss) - continuing operations

12,337

5,708

2,315

(3,393)

(59.4)

Reinstatement of intercompany transactions vs. discontinued operations

(1,114)

(1,222)

 

 

 

Adjusted operating profit (loss) - continuing operations on a standalone basis

11,223

4,486

2,315

(2,171)

(48.4)

 

 

 

 

 

 

Net profit (loss) attributable to Eni’s shareholders - continuing operations

1,720

(7,952)

(1,051)

6,901

86.8

Exclusion of inventory holding (gains) losses

1,008

782

(120)

 

 

Exclusion of special items

1,471

8,487

831

 

 

Adjusted net profit (loss) attributable to Eni’s shareholders - continuing operations

4,199

1,317

(340)

(1,657)

..

Reinstatement of intercompany transactions vs. discontinued operations

(476)

(514)

 

 

 

Adjusted net profit (loss) attributable to Eni’s shareholders on a standalone basis

3,723

803

(340)

(1,143)

..

Tax rate (%)

65.9

82.4

120.6

 

 

Summarized Group Balance Sheet

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 the proportion of net borrowings to shareholders’ equity (leverage) intended to evaluate whether Eni’s financing structure is sound and well-balanced.

Summarized Group Balance Sheet

 

 

 

 

(€ million)

December 31, 2015

December 31, 2016

Change

Fixed assets

 

 

 

Property, plant and equipment

68,005

70,793

2,788

Inventories - Compulsory stock

909

1,184

275

Intangible assets

3,034

3,269

235

Equity-accounted investments and other investments

3,513

4,316

803

Receivables and securities held for operating purposes

2,273

1,932

(341)

Net payables related to capital expenditure

(1,284)

(1,765)

(481)

 

76,450

79,729

3,279

Net working capital

 

 

 

Inventories

4,579

4,637

58

Trade receivables

12,616

11,186

(1,430)

Trade payables

(9,605)

(11,038)

(1,433)

Tax payables and provisions for net deferred tax liabilities

(4,137)

(3,073)

1,064

Provisions

(15,375)

(13,896)

1,479

Other current assets and liabilities

1,827

1,171

(656)

 

(10,095)

(11,013)

(918)

Provisions for employee post-retirement benefits

(1,123)

(868)

255

Discontinued operations and assets held for sale including related liabilities

9,048

14

(9,034)

CAPITAL EMPLOYED, NET

74,280

67,862

(6,418)

Eni shareholders’ equity

55,493

53,037

(2,456)

Non-controlling interest

1,916

49

(1,867)

Shareholders’ equity

57,409

53,086

(4,323)

Net borrowings

16,871

14,776

(2,095)

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

74,280

67,862

(6,418)

The Summarized Group Balance Sheet was affected by the movement in the EUR/USD exchange rate, which determined an increase in net capital employed, total equity and net borrowings by €1,747 million, €1,198 million, and €549 million respectively. This was due to translation into euros of the financial statements of US-denominated subsidiaries reflecting a 3.2% depreciation of the euro against the US dollar (1 EUR= 1.054 USD at December 31, 2016 compared to 1.089 at December 31, 2015).

Fixed assets (€79,729 million) increased by €3,279 million from December 31, 2015. The item “Property, plant and equipment” was up by €2,788 million mainly due to capital expenditure (€9,180 million), positive currency movements and net asset impairments reversals (€475 million). These positives were offset by DD&A (€7,559 million), the write-off of exploration projects lacking the criteria for continuing to be capitalized and the write-off of the damaged units of the EST plant in Sannazzaro refinery (€350 million). The increase in the item “Equity-accounted investments and other investments” of €803 million was due to the recognition as an equity-accounted investment of the stake of 30.55% retained in Saipem following loss of control over the former subsidiary and the pro-quota share capital increase of Saipem subscribed by for an overall amount of €1,614 million, net of losses incurred in the period.

Net working capital was in negative territory at minus €11,013 million and decreased by €918 million y-o-y driven by reduced trade receivables, due to better management of working capital and higher volume of trade receivables due beyond end of the reporting period which were transferred to factoring institution, as well as increased trade payables. Other current assets and liabilities decreased due mainly to the impairment of certain receivables in the E&P segment owed by certain NOCs, due to the expected outcome of ongoing negotiations in relation to under-lifting position.

These negatives were partly offset by the decrease in tax payables and provisions for deferred taxes, reflecting lower provisions for current tax, driven by the reduction of taxable profit and E&P utilization of deferred tax liabilities relating to the impairment of under-lifting receivables, as well as the reduction in the risk provisions for the fulfilment of obligations.

Discontinued operations, assets held for sale including related liabilities (€14 million) decreased by €9,034 million due to the closing of the Saipem transaction and the divestment of fuel distribution activities in Eastern Europe.

Shareholders’ equity including non-controlling interest was €53,086 million, down by €4,323 million from December 31, 2015. This was due to the net loss of the year (€1,457 million), the de-recognition of Saipem non-controlling interest (€1,872 million), as well as dividend distribution and other changes of €2,885 million (including the 2015 balance and the 2016 interim dividends paid to Eni’s shareholders amounting to €2,881 million). These effects were partially offset by a positive change in the cash flow hedge reserve (€883 million) and positive foreign currency translation differences (€1,198 million).

Summarized Group Cash Flow Statement

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; and (ii) change 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 and net cash provided by operating activities from continuing operations on a standalone basis are non-GAAP measures of financial performance.

Summarized Group Cash Flow Statement

 

 

 

 

 

(€ million)

2014

2015

2016

Change

Net profit (loss) - continuing operations

1,808

(7,399)

(1,044)

6,355

Adjustments to reconcile net profit (loss) to net cash provided by operating activities:

 

 

 

 

- depreciation, depletion and amortization and other non monetary items

10,898

17,216

7,773

(9,443)

- net gains on disposal of assets

(224)

(577)

(48)

529

- dividends, interests, taxes and other changes

6,600

3,215

2,229

(986)

Changes in working capital related to operations

2,199

4,781

2,112

(2,669)

Dividends received, taxes paid, interests (paid) received during the period

(6,812)

(4,361)

(3,349)

1,012

Net cash provided by operating activities - continuing operations

14,469

12,875

7,673

(5,202)

Net cash provided by operating activities - discontinued operations

273

(1,226)

 

1,226

Net cash provided by operating activities

14,742

11,649

7,673

(3,976)

Capital expenditure - continuing operations

(11,178)

(10,741)

(9,180)

1,561

Capital expenditure - discontinued operations

(694)

(561)

 

561

Capital expenditure

(11,872)

(11,302)

(9,180)

2,122

Investments and purchase of consolidated subsidiaries and businesses

(408)

(228)

(1,164)

(936)

Disposals of consolidated subsidiaries, businesses, tangible and intangible assets and investments

3,684

2,258

1,054

(1,204)

Other cash flow related to capital expenditure, investments and disposals

435

(1,351)

465

1,816

Free cash flow

6,581

1,026

(1,152)

(2,178)

New borrowings (repayment) of long-term finance debt

(414)

(300)

5,271

5,571

Changes in short and long-term financial debt

(628)

2,126

(766)

(2,892)

Dividends paid and changes in non-controlling interests and reserves

(4,434)

(3,477)

(2,885)

592

Effect of changes in consolidation, exchange differences and cash and cash equivalent related to discontinued operations

78

(780)

(3)

777

NET CASH FLOW

1,183

(1,405)

465

1,870

Net cash provided by operating activities on a standalone basis

13,544

12,155

7,673

(4,482)

Change in net borrowings

 

 

 

 

 

(€ million)

2014

2015

2016

Change

Free cash flow

6,581

1,026

(1,152)

(2,178)

Net borrowings of acquired companies

(19)

 

 

 

Net borrowings of divested companies

 

83

5,848

5,765

Exchange differences on net borrowings and other changes

(850)

(818)

284

1,102

Dividends paid and changes in non-controlling interest and reserves

(4,434)

(3,477)

(2,885)

592

CHANGE IN NET BORROWINGS

1,278

(3,186)

2,095

5,281

Results by segment

Exploration & Production

In 2016, the Exploration & Production segment reported an adjusted operating profit of €2,494 million, down by 40.4% y-o-y. The €1,688 million decline mainly reflected a weaker commodity environment, with the marker Brent down by 16.7% and declining gas prices in Europe and the United States. Profit for the year was also negatively affected by the Val d’Agri shutdown, which lasted four months and half. These effects were only partially offset by higher production in other areas and lower operating expenses and DD&A. This latter was due to lower capital expenditure and the reduction in the carrying amounts of oil&gas properties following the material impairment losses booked last year (€5,212 million).

Adjusted operating profit excluded a positive adjustment of €73 million and related to asset revaluations of €1,440 million at oil&gas properties driven by an upward revision to management’s long-term assumption for the benchmark Brent price to $70 per barrel from the previous $65 adopted in the financial projections of the 2017-2020 industrial plan. These were absorbed by: (i) impairment losses of gas properties driven by a lowered price outlook in Europe and other oil&gas properties due to contractual changes, reserves revision and a higher country risk (overall amount of €756 million); and (ii) other charges of €461 million mainly relating to the impairment of certain overdue receivables owed by national oil companies due to the expected outcome of ongoing negotiations. The recognition of those receivables as deductible items for tax purposes resulted in the reversal of unused deferred tax liabilities of €380 million.

For the FY2016, adjusted net profit amounted to €508 million, a decline of €483 million, or 48.7%, from 2015 due to a lower operating performance.

In 2016, taxes paid represented approximately 32% of the cash flow from operating activities of the E&P segment before changes in working capital and income taxes paid.

Gas & Power

In 2016, the Gas & Power segment reported an adjusted operating loss of €390 million, down by €264 million y-o-y. This reflected lower margins on LNG sales and higher one-off benefits from contracts renegotiations reported in 2015, partly offset by logistic costs optimizations and better performance in trading activities. The retail segment reported lower results due to unusual winter weather conditions.

Adjusted operating loss excluded a loss on stock of €90 million and net special gains of €89 million. Special gains comprised the effects of the fair-value evaluation of certain commodity derivatives lacking the formal criteria to be accounted as hedges under IFRS (gains of €443 million), a downward revision of revenues accrued on the sale of gas and power for past reporting periods, resulting from the restructuring plan launched in 2015 (€161 million), the impairment loss of certain assets due to the increased country risk and the weakness of the scenario (€81 million). Adjusted operating result included a negative balance of €19 million of exchange rate differences and derivatives.

In the full year, the Gas & Power segment reported an adjusted net loss of €330 million due to the reduction of operating performance.

Refining & Marketing and Chemicals

In 2016, the Refining & Marketing and Chemicals segment reported an adjusted operating profit of €583 million, declining by €112 million from the previous year.

The Refining & Marketing business reported an adjusted operating profit of €278 million, down by €109 million, or 28.2% compared to 2015. This decline was driven by an unfavorable refining margin scenario (the Eni’s standard refining margin – SERM – was down by 49.4% to 4.2 $/bbl in 2016 from 8.3 $/bbl in 2015), as well as, the scheduled maintenance activities at certain refineries. The refining break-even margin improved to 4.2 $/bbl, better than the planned target of 4.5 $/bbl. These negatives were partly offset by improved plant optimization and efficiency. Moreover, marketing recorded lower results reflecting weaker margins due to stronger competitive pressure and the subsidiaries disposal in Slovenia and Hungary.

The Chemical business reported an adjusted operating profit of €305 million, almost unchanged y-o-y, due to an unfavorable trading environment, which hit commodity margins, mainly in feedstocks, polyethylenes and styrenics, and competitive pressure. The result also reflected lower products availability following unplanned shutdowns.

These negatives were offset by efficiency actions implemented in previous years and reduction in depreciation due to the asset impairment recorded in 2015 to align assets book value to their fair value.

Special charges excluded from adjusted operating profit amounted to a net positive of €266 million. This included impairment losses to write down capital expenditure of the period at assets impaired in previous reporting periods (€104 million), environmental charges (€104 million) as well as fair-value evaluation of certain commodity derivatives (charges of €3 million) lacking the formal criteria to be accounted as hedges under IFRS. Furthermore, special charges include the write-off related to the EST conversion plant, at Sannazzaro Refinery, affected by the event occurred in December 2016, and the environmental provision for removal and clean-up (a total amount of €217 million), partially offset by the insurance compensation paid by third parties which was recognized virtually certain at the closing date (€122 million).

Adjusted net profit of €419 million reduced by €93 million reflecting the operating performance.

Adjusted operating profit by segment

 

 

 

 

 

 

 

(€ million)

2014

2015

2016

Change

% Ch.

(a)

This item concerned mainly intragroup sales of commodities, services and capital goods recorded in the assets of the purchasing business segment as of end of the period.

Exploration & Production

11,679

4,182

2,494

(1,688)

(40.4)

Gas & Power

168

(126)

(390)

(264)

..

Refining & Marketing and Chemicals

(412)

695

583

(112)

(16.1)

Corporate and other activities

(443)

(369)

(452)

(83)

(22.5)

Impact of unrealized intragroup profit elimination(a)

1,345

1,326

80

(1,246)

 

Adjusted net profit (loss) - continuing operations

12,337

5,708

2,315

(3,393)

(59.4)

Outlook

Management’s forecasts for the Group’s 2017 production and sale metrics are disclosed in this section.

Risk factors and uncertainties

The risks described in this section may have a material effect on our operational and financial performance. We invite our investors to consider these risks carefully.