Eni in 2009

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<ul><li>1.Eni in 2009 </li></ul><p>2. E UROPE 3. MISSION A FRICA A SIA AND O CEANIAA MERICAS 4. 2009 RESULTSEN I GROUP 5. Contentsletter to shareholDers2PerformanCe reviewProfile of the Year6 Business reviewExploration&amp;Production12 Gas&amp;Power 20 Refining&amp;Marketing28 Engineering&amp;Construction34 Commitment to sustainaBle DeveloPment38finanCial reviewGrouP results for the Year TradingEnvironment462009Results 46Outlookfor2010 50RiskFactors 50 finanCial information51 FrequentlyUsedTerms 60 DireCtors anD offiCers 64 investor information 68 Eni in 2009 report comprises an extract of the description of the Actual results may differ from those expressed in such statements, business,themanagementsdiscussionandanalysisoffinancialconditiondepending on a variety of factors, including the timing of bringing new and results of operations and certain other company information fromfields on stream; managements ability in carrying out industrial plans EnisAnnualReportfortheyearendedDecember31,2009.Itdoesnotand in succeeding in commercial transactions; future levels of industry containsufficientinformationtoallowasfullanunderstandingoffinancialproduct supply; demand and pricing; operational problems; general results,operatingperformancesandbusinessdevelopmentsofEniasEnieconomicconditions;politicalstabilityandeconomicgrowthinrelevant 2009AnnualReport.Itisnotdeemedtobefiledorsubmittedwithany areas of the world; changes in laws and governmental regulations; ItalianorUSmarketorotherregulatoryauthorities.developmentanduseofnewtechnology;changesinpublicexpectations YoumayobtainacopyofEniin2009andEni2009AnnualReporton andotherchangesinbusinessconditions;theactionsofcompetitorsand request,freeofcharge(seetherequestformonEniswebsite- eni.com-otherfactorsdiscussedelsewhereinthisdocument. underthesectionPublications). Eni in 2009 and Eni 2009 Annual Report may be downloaded from As Eni shares, in the form of ADRs, are listed on the New York Stock EniswebsiteunderthesectionPublications.Exchange (NYSE), an Annual Report on Form 20-F has been filed with theUSSecuritiesandExchangeCommissioninaccordancewiththeUS Allfinancialdatapresentedinthisreportisbasedonconsolidatedfinancial SecuritiesExchangeActof1934. statementspreparedinaccordancewithIFRS.Hardcopiesmaybeobtainedfreeofcharge(seetherequestformonEnis For definitions of certain financial and operating terms see Frequentlyweb site - eni.com - under the section Publications). Eni discloses on usedtermssection,onpage60.its Annual Report on Form 20-F significant ways in which its corporate governance practices differ from those mandated for US companies Thisreportcontainscertainforward-lookingstatementsparticularlythose underNYSElistingstandards. regardingcapitalexpenditures,developmentandmanagementofoilandgasThetermshareholderinthisreportmeans,unlessthecontextotherwise resources,dividends,allocationoffuturecashflowfromoperations,future requires,investorsintheequitycapitalofEniSpA,bothdirectand/orindirect. operatingperformance,gearing,targetsofproductionandsalegrowth,new marketsandtheprogressandtimingofprojects.Bytheirnature,forward-EnisharesaretradedontheItalianStockExchange(MercatoTelematico looking statements involve risks and uncertainties because they relate to Azionario)andontheNewYorkStockExchange(NYSE)undertheticker eventsanddependoncircumstancesthatwillormayoccurinthefuture. symbolE. 6. letter to shareholDersIn2009,Enideliveredbetterresultsthanexpected,amongstthebest inourindustry,againstthebackdropoftheworsteconomicrecessions over the past 60 years. Our integrated business portfolio has again proveditsresilience,andwemanagedtomitigatetheimpactofthe downturnontheCompany.We delivered on our targets, positioning the Company for future growth. In E&amp;P, we are strategically focusing on giant projects in the worlds fastest-growing oil-producing areas, namely Iraq and Venezuela. We entered new, high-potential areas like Ghana, andRobertoPoliPaoloScaroni signed a number of framework agreements in our core regions ChairmanCEO of Russia, the Caspian Sea (Kazakhstan and Turkmenistan) and Africa. In G&amp;P, we completed the acquisition of Distrigas and theSuStaining growth and Shareholder returnS reorganizationofourregulatedbusinessesinItaly.Ourstrategicdirectionhasremainedunchanged.Ourstrongpipeline We strengthened our long-standing strategic partnership with of capital projects and investment opportunities will enable us to Gazprom, celebrating its 40th year of activity in 2009. We plan todeliveronourgrowthtargets. continue developing joint projects in the sectors of upstream and Over the next four years, we plan to invest 52.8 billion to fuel naturalgasmarkets.continuing organic growth, including the strategic projects in Iraq OnJanuary22,2010,wesignedaTechnicalServiceContractfortheand Venezuela. This is an increase of approximately 8% from the developmentoftheZubairfieldinIraq,undera20-yeartermwith previous plan. The projected cash flows and planned divestments anoptionforafurther5years,targetingaproductionplateauof1.2 willenableustoservicethefinancingrequirementsassociatedwith mmboe/dby2016.capitalexpendituresandshareholdersremuneration. OnJanuary26,2010wesignedanagreementwiththeVenezuelan state-ownedcompanyPDVSAforthejointdevelopmentofthegiant Inexploration &amp; production,weachievedadjustednetprofitof3.9 fieldJunin5,with35bbblsofcertifiedheavyoilinplace. billion, down 50.9% compared to 2008, driven by an unfavourable In2009,Enihasbeenacknowledgedasoneofthebestoilandgastrading environment for oil prices in the first nine months (Brent companiesintheDowJonesSustainabilityIndex.pricesweredown37%),lowersalesvolumesandahighertaxrate. We have continued to focus on improving efficiency in all ourOilandgasproductionwas1,769kboe/d,down1.6%from2008.When businesses. The cost reduction program we launched in 2006 hasexcluding OPEC restrictions amounting to approximately 28 kbbl/d, delivered0.4billionofsavingsin2009and1.3billiontodate. productionremainedsubstantiallyunchangedfromayearago. Ourall-sourcesreservereplacementratiowas96%,resultinginareserve Despite an ongoing recovery in oil prices, the outlook for 2010lifeindexof10.2yearsatDecember31,2009(10yearsin2008). points to significant challenges. However, our strategy remains Over the course of the year we increased our resource base by unchanged. We continue to target superior production growth more than 1 billion boe thanks to successful exploration activities overthelong-termandtostrengthenourleadershippositionintheinVenezuela,withthegiantPerladiscovery,Angola,Ghanaandthe Europeangasmarket,whilemaintainingastrongfinancialposition GulfofMexico.Thiswasachievedamida30%reductioninexploration andcreatingvalueforourshareholders.expensesyearonyear. In2009atotalof27newfieldshavebeenputintoproduction,which Financial perFormance willadd190kboe/dtoourproductionatplateau. Enis2009netprofitwas4.37billion. Inadditiontotheabove-mentionedagreementsinIraqandVenezuela, Adjusted net profit was 5.21 billion, a decrease of 49% compared toourupstreamportfoliohasbeenfurtherstrengthenedbycontinuing 2008,drivenbythesharpdeclineinoilpricesrecordedinthefirstnine explorationsuccessinAngola,acquisitionofnewlicencesinGhana, monthsoftheyear.TheresultwasalsoaffectedbyweakrefiningmarginstheBarentsSeaandPakistan. andahigheradjustedtaxrate.Onthepositiveside,theGas&amp;Powerand Engineering&amp;Constructionsegmentsbothreportedimprovedresults.WeenteredtheunconventionalgassectorintheUSAwiththepurchase Adjustedreturnonaveragecapitalemployedwas9.2%. ofastakeintheAllianceAreacontainingshalegas,fromQuicksilver Netcashgeneratedbyoperatingactivitiesamountedto11.1billion.ResourcesInc,andinIndonesiabypurchasinga37.8%interestinthe Proceedsfromdisposalswere3.6billionandfurthera1.5billion SangaSangalicensefortheproductionofcoalbedmethane. wasprovidedbyasharecapitalincreasethatwassubscribedbySnam ReteGasminoritiesaspartoftherestructuringplanofEnisregulated Wetargetanaverageannualproductionincreasehigherthan2.5%in gas businesses in Italy. These inflows were used to fund part of the the 2010-2013 plan. By 2013, our hydrocarbon production will hit financingrequirementsassociatedwithorganiccapitalexpenditures2.00millionbbl/d,basedonour$65perbarrelBrentpricescenario. andexplorationprojectsamountingto13.7billion,thecompletionMostofourprojectsareinthefinalinvestmentdecisionstageorhave oftheDistrigasacquisitionfor2.04billion,andthepaymentof4.17 alreadybeensanctioned. billiontoEnisshareholdersviadividends. Threequartersofour2013productionwillcomefromfieldsalready Ournetdebttoequityratioatyearendwas0.46.operatingin2009,andtherestfromnewstart-ups,particularlythe The results achieved in 2009 enable us to propose at the Annual Zubair project in Iraq, Kashagan in the Caspian Region and Algeria GeneralShareholdersMeetingadividendof1.00pershare,ofwhich withthefieldsacquiredfromFirstCalgary.Overall,newstart-upswill 0.50waspaidasaninterimdividendinSeptember2009.addapproximately560kbbl/dby2013. 7. eni in 2009 LETTER TO SHAREHOLDERS 3 Ingas &amp; power,wereportedadjustednetprofitof2.92billion,an Inengineering &amp; construction,wereportedanimprovedadjusted increaseof10%from2008,despiteveryweakmarketconditions,with netprofitof892million(14%higherthanin2008)thankstoabetter gasconsumptiondownby7.4%inEuropeand10%inItaly.Thisresult operatingperformancedrivenbyastrongorderbacklogandincreased waslargelyduetostableperformancesintheregulatedbusinesses,efficiency.Saipemiscompletingtheexpansionofitsworld-classfleet excellentresultsachievedbyDistrigasandintegrationsynergies.Sales ofconstructionanddrillingvessels,consolidatingitsleadingposition volumeswerestableat104bcm,asaresultofexpansioninEuropean intheprojectmanagement,engineeringandconstructionactivities marketsthatmadefordecliningsalesinItaly(down24%).withintheoilfieldservicesindustry. Leveraging on our strategic partnership with Gazprom, we renegotiated terms and conditions of our main long-term supply Inpetrochemicalswereportedadjustedlossesatbothoperatingand contracts,improvingouroperatingflexibility. netprofitlevels(down426millionand340million,respectively) duetoanunfavourablemarketenvironmentthatwasdraggeddown Our strategy will focus on strengthening our leadership in thebyweakdemand,excesscapacityandstrongcompetitivepressures Europeangasmarket,aswellasmarginsandmarketshareinItaly, oncommodityproducts. relying upon our commercial strength, long-term relationshipsOurtargetistoimproveefficiency,shiftingourproductmixtohigher with producing countries and access to international transportvalueaddedproductsandselectivelyinvestinginareaswherewecan infrastructures. count on competitive advantages (styrenics and elastomers), also leveragingonourproprietarytechnologies. This access will not be impaired by the possible divestment of our interests in three gas import pipelines from Russia and NorthernSuStainaBle deVelopment Europe,whichwehaveproposedtotherelevantEuropeanauthoritiesWeintendtomaintainourposition:anoilandgascompanywithone inordertosettleanantitrustprocedure.ofthehighestsustainabilityratingsintheworld. In2010weexpectaweakrecoveryingasdemand,particularlyinItaly. CommercialintegrationwithDistrigasandtheadvantagesgranted Wewillstrivetoimprovethesustainabilityofouractivitiesthrough tousbyrenegotiatingsupplycontractswithinternationalsuppliers our commitment to research and innovation, the development willenableustomakeforanydeclinesindomesticmarkets,targeting of local communities, the protection of the environment, the salesvolumesatthesamelevelasin2009.By2013,weexpecttoendorsement of higher health and safety standards and people growourgassalesbyanaveragegrowthratehigherthan3%ayear,empowerment.Inconductingoperationsandinourrelationswith targetingavolumeof118bcm. partnersweupholdtheprotectionandpromotionofhumanrights. Our regulated businesses in Italy are expected to deliver stableEnireaffirmsitscommitmenttoResearchandInnovationoverthenext returns, independent of trends in the gas market. They will be fouryearsbystartinganewphasewhereourstrategicprioritieswillbe supported by guaranteed returns on planned capital expenditures developingtechnologiesforfindingandproducinghydrocarbons,the and the cost synergies deriving from integrating gas transport,sustainableuseofrenewableenergyandenvironmentalrestoration distributionandstorageactivities.and clean-up of divested sites. We will pursue these objectives by forgingstrategicallianceswithpolesofinternationalexcellenceand In refining &amp; marketing we reported adjusted net loss of 197constantcommitmentofdedicatedEniresources. millionduetoanextremelyweakrefiningscenario(downby52%theKeytotheCompanyssuccessisourstrongattentiontoourpeople. TRCBrentmargin).RefiningthroughputswerereducedbyonemillionInmanaginghumanresources,wearecommittedtoimplementing tonnes.Theseimpactswerepartlyoffsetbythegoodperformanceinprograms to improve leadership skills, increase knowledge and marketingasaresultofeffectivemarketinginitiatives. promoteinternationaldevelopment. In 2010, we expect a challenging refining environment and weWe continue to strengthen important relationships with our local will react accordingly by selectively strengthening our refineries, partnersaspartofacooperationmodelthataimsatdevelopinghost improvingconversioncapacityandincreasingenergyefficiency. countries,throughthevalorisationoflocalresources,exploitationof Inmarketing,weaimtoreinforceourleadershipintheItalianmarket specificskills,aswellastherealisationofprojectsandthedefinition through continuing improvements in quality standards, loyaltyofcooperationagreements. programsandenhancednon-oilservices,alongwiththere-branding In conclusion, in spite of an unfavourable energy and market of our service stations to the Eni brand. Abroad, we will focus on environment, Eni delivered a good year. 2010 will pose further growth in three countries: Germany, Switzerland and Austria. Onchallenges but Enis strategic positioning will enable it to continue January 21, 2010 we purchased 135 service stations, wholesaletodeliverindustry-leadingresultsandcreatesustainablevalueforits activitiesandlogisticsandstorageassetsfromExxoninAustria.shareholdersinboththeshortandthelong-term. March11,2010 InrepresentationoftheBoardofDirectors Chairman ChiefExecutiveOfficer 8. PerformanCe review In2009,Enideliveredbetterresultsthanexpected,amongstthebestinourindustry. Ourintegratedbusinessportfoliohasagainproveditsresilience,andwemanagedtomitigatetheimpactofthedownturnontheCompany. 9. Profile of the Year finanCial hiGhliGhts 2007 2008 2009 ( million, unless otherwise specified) Net sales from operations87,204108,082 83,227 Operating profit 18,739 18,517 12,055 Adjusted operating profit19,004 21,608 13,122 Net profit attributable to Eni 10,0118,8254,367 Adjusted net profit attributable to Eni 9,569 10,1645,207 Net cash provided by operating activities15,517 21,801 11,136 Capital expenditures and investments 20,502 18,867 16,018 Capital expenditures 10,593 14,562 13,695 Investments 9,9094,3052,323 Cash dividends to Enis shareholders4,5834,9104,166 Researc...</p>