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Eni cuts output target, slashes 2020 capex 30% over COVID-19

April 24/2020

MOSCOW (MRC) -- Italy's Eni on Friday lowered its production guidance for 2020 and announced at least a 30% cut in planned capex for 2020 and 2021, in response to the collapse in oil prices and the economic impact of the coronavirus pandemic, reported S&P Global.

The Rome-based major said it expects oil and production to average between 1.75 million1.80 million b/d of oil equivalent in 2020, down from initial forecasts of around 1.9 million boe/d for the year.
Eni said it will also cut Eur2.3 billion from 2020 capex, 30% lower than the initial targets, and anticipates further reductions of 30%-35% lower than original plans in 2021.

"(The lower production guidance) is due to capex curtailments, COVID-19 effects, a lower global gas demand also impacted by the pandemic effects and finally extension of force majeure in Libya for the entire first half of the year," Eni said in a quarter earnings statement.

The new production guidance for 2020 does not take into account the possible impacts of the recently announced OPEC+ cuts totalling 9.7 million b/d that are to be implemented on a "field-by-field basis," it said.

Eni's capex cuts will be focused in the exploration and production segment with the "re-phasing" of some projects. However, the projects are "expected to resume quickly once market fundamentals improve, thus recovering any lost production volumes," it said.

Eni is planning three oil and gas field startups in 2020 along with seven FIDs, four of which are in the UAE. Mozambique's giant Rovuma LNG development is also on the cards.

The company could also pare back drilling on the 2.5 billion boe of resources it is targeting with exploration wells over the next three years and slow its downstream projects.

Halting share buybacks - which Eni has announced - and cutting dividends are other key levers.

For the first quarter of 2020, Eni reported average production of 1.77 million boe/d, 3.6% lower than the first quarter of 2019.

The company reported adjusted net earnings of Eur59 million for the period, down from Eur992 million in the year-ago period on sharply weaker prices, lower production and the negative impacts associated with the COVID-19 crisis.

Eni reported a Eur2.93 billion net loss for the period, from a profit of Eur1.1 billion in the first quarter of 2019, reflecting major price-related writedowns of its oil and gas inventories.

As MRC informed before, Italian energy group Eni said in early April that most of its oil refineries in Italy were working at around 60% of their capacity as the coronavirus emergency continues. The pandemic has shut down large parts of economies across the globe and prompted many governments to slap tough restrictions on travel, triggering a steep fall in the demand for refined oil products. In emailed comments, Eni said its biggest refinery Sannazzaro, in northern Italy, was running at around 50% of its capacity since it was also impacted by planned maintenance work.

Earlier, in mid-March, the company said all its refineries in Italy were working normally except for two which had partially cut their volumes for maintenance work.

At the same time, operations at Italian petrochemical producer Versalis (part of Eni) have not affected by emergency quarantine measures in the country at that period. Italian Prime Minister Giuseppe Conte extended its emergency coronavirus measures in mid-March and announced the closure of "non-essential" commercial businesses. This follows the earlier announcement of a nationwide lockdown, limiting movement for around 60 million people. Under these measures people werel only allowed to leave their homes for work or health reasons. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
Author:Margaret Volkova
Tags:PP, PE, LLDPE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, Eni, Versalis, Italy, Russia.
Category:General News
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