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)