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Eni lowers price assumptions, expects to write off EUR3.5 billion in assets value

July 15/2020

MOSCOW (MRC) -- Eni (Rome, Italy) says it expects to record a post-tax, noncash impairment charge of approximately EUR3.5 billion (USD3.95 billion) in its second-quarter 2020 results after revising downward its short- and long-term price assumptions for oil and gas following an assessment of the impact of COVID-19 on its trading environment, said Chemweek.

Up to EUR2.8 billion of the write-down relates to the value of its upstream assets, with the remaining amount to be recorded in its refining business, says Claudio Descalzi. The companys long-term price of Brent crude oil has been lowered by USD10/barrel (bbl) from its previous assumption to USD60/bbl from 2023 onward in real terms, he says. The estimated impairment charge has a plus or minus range of 20%, with the estimation representing a drop of around 4% in the value of noncurrent assets, he adds.

The Brent price for the period 202022 is expected to be USD40/bbl, USD48/bbl, and USD55/bbl, respectively, compared with its previous assumptions of USD45/bbl, USD55/bbl, and USD70/bbl. The Italian spot gas price is estimated at USD5.5/million British thermal units (MMBtu) in 2023 real terms, compared with the previous assumption of USD7.8/MMBtu. Long-term refining margins in the Mediterranean area are confirmed at lower than USD5/bbl, it says.

Confirming the companys strategy to become a leader in the market supplying decarbonized products, Eni is assessing how to speed up our plans. This ongoing evolution will allow the company to achieve a better balanced portfolio, reducing the exposure to the volatility of hydrocarbon prices, while progressing toward our targets of sustainability and profitability, Descalzi says. The revised long-term price assumptions will be incorporated in our processes of capital allocation, he says. The market developments linked to the spread of the COVID-19 pandemic have made even more compelling the robustness of our strategic path and of our long-term choices, he adds.

Eni is due to release its results, which include its Versalis (Milan) chemicals business, on 30 July. In April the company reported a first-quarter net loss of EUR2.93 billion, while Versalis reported an adjusted operating loss of EUR65 million. In March Eni had announced a cut in its planned capital expenditure for 2020 of about EUR2 billion due to the impact of the pandemic.

As MRC informed earlier, Italian oil major Eni is planning to create a division to focus on new energy solutions which could be headed by its CFO, as it steps up preparations for a decarbonised future.

We remind that none of the big oil companies currently meet U.N. targets to limit global warming despite the most ambitious targets set by Royal Dutch Shell and Eni.

We also remind that the ongoing transition to low-carbon energy sources may accelerate as economies recover from the impact of the coronavirus crisis, said the head of oil and gas company Royal Dutch Shell in the May statement.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim.  At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, petrochemistry, Eni.
Category:General News
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