Italian oil major expects to see its oil and gas production flatten out this year after strong growth in 2015, while production growth in the short and medium term will be affected by a fresh round of spending cuts.
The Rome-based company said it plans to cut its capital spending by a fifth this year to spare thinning cash flows after the oil price slide forced large writedowns on the value of upstream operations.
Eni will be unable to grow its production year on year in 2016 as the startup of new fields in Norway, Egypt, Angola, Kazakhstan and the US fail to offset declines at mature fields, the company said in a quarterly earnings statement.
The company posted production of 1.88 million b/d of oil equivalent for the fourth quarter of 2015, up 14% on the year-ago period and its highest level in five years. The result helped boost the company's full-year production to 1.76 million boe/d, up 10% and an improvement on its initial guidance of a 5% increase.
But Eni said it plans a 20% reduction in capital spending this year, following a 17% year-on-year reduction in 2015, as low oil prices spark further capital efficiency moves.
The company said it expects to re-phase and reschedule some capital projects, be more selective with exploration targets and renegotiate its supply contracts to help save cash.
"Those initiatives are expected to have a limited impact on our plans to grow production in the short and medium term," Eni said in a statement.
Eni, which plans to update its four-year strategic plan next month, had previously being forecasting production growth of 3.5% a year for the 2015-2018 period.
IMPAIRMENTS HIT BOTTOM LINE
Despite reporting quarterly oil and gas output at the highest level in five years, Eni posted an adjusted loss of Eur379 million ($418 million) for the fourth quarter, compared to a Eur250 million profit in the year-earlier quarter. Including major writedowns mainly on its upstream operations, however, Eni reported a quarterly loss of $8.46 billion.
Impairments due to projections of lower prices in the medium to long term saw Eni book a $4.47 billion charge in the fourth quarter.
Eni, which was the first integrated oil major to cut its dividends last year, is looking to be "even better organized to compete in a low energy price environment," CEO Claudio Descalzi said in a statement.
"We are continuing Eni's transformation process with the goal of making the group even stronger and better able to operate in difficult external conditions."
Downstream, Eni said it expects to see profitable refining margins this year, but at a lower average than in 2015.
Refinery crude intake is expected to be flat year-on-year excluding the effect of the disposal of its refining capacity at the CRC refinery in the Czech Republic, which was finalized on April 30, 2015.
