Slide 1: 2013 results and 2014-2017 strategy
2013 results and 2014-2017 strategy February 13, 2014 eni.com
Slide 2: 2013: despite strong headwinds in our market environment…
2013: despite strong headwinds in our market environment… Libya total oil production Italian oil & gas demand delta clean/dark spark spread TRCH margin – MED* *Margin Brent/Ural 2
Slide 3: …we generated robust cash flows
…we generated robust cash flows 2013 sources and uses of cash bln € 17.4 17.3 robust e&p performance improved downstream contribution disposal of excess stakes in exploration strict capex discipline progressive cash distribution to shareholders 3
Slide 4: eni's resilience underpins strong cash returns in 2014-17
eni’s resilience underpins strong cash returns in 2014-17 cash flow from operations bln € +55% main assumptions +40% geopolitical instability easing from 2016 upstream high value persistent weak gas growth market in Europe depressed demand for mid/downstream oil products rightsizing and turnar
Slide 5: leading exploration discoveries are fuelling growth ...
leading exploration discoveries are fuelling growth ... discoveries vs production 2008-13 production growth bln boe kboe/d 2,5x 0,5x 0,4x 0,5x 0,3x 0,2x 0,2x peers* average 0,3x *peers = XOM, CVX, COP, BP, RDS, TOT 5
Slide 6: …and support stronger upstream cash flow
…and support stronger upstream cash flow e&p cash flow from operation (CFFO) bln € +40% vs 2013 high-margin new barrels oil share: from 52% to 57% 9% CAGR in operating cashflow* e&p capex 2014-2017: -5% vs previous plan * at 108$/bbl flat scenario 6
Slide 7: mid/downstream restructuring support cash targets
mid/downstream restructuring support cash targets g&p 2014–2017 cumulated CFFO renegotiate supply portfolio focus on premium segments streamlining logistic costs r&m further cut in refining capacity logistic and energy cost reductions >€ 3bln improve synergy with trading Versalis cut b
Slide 8: 2014-17 main targets
2014-17 main targets +3% production CAGR mid-downstream cash breakeven in 2015 +40% cash from operation in 2014-15; +55% 2016-17 -5% capex vs previous plan 9 bln euro of disposals robust free cash flow growth 8
Slide 9: exploration & production
exploration & production Claudio Descalzi eni.com
Slide 10: 2013 year-end results 1/2
2013 year-end results 1/2 HSE exploration TRIR* 1.64 ∼1.8 bln boe resources discovered 0.67 average UEC of 1.2 $/boe best performance ever projects portfolio contribution to production of about 140 kboe/d all 8 planned start-ups achieved 7 main projects sanctioned *n. of TRI/mln of worked
Slide 11: 2013 year-end results 2/2
2013 year-end results 2/2 production net profit kboe/d bln € 0.4 0.6 7.4 7.0 6.0 ∼2% 110 1,729 1,701 1,619 cash flow from net profit bln € 0.4 1.0 15.1 14.8 13.4 11
Slide 12: industry main challenge
industry main challenge variation of cost incurred* variation of self financing ratio** 2008 = 1 2008 = 1 sustainable growth and value creation peers: XOM, CVX, COP, BP, RDS, TOT *cost incurred: exploration and development cost (including abandonment) plus acquisitions ** self financing ratio: cash
Slide 13: eni's answer: a distinctive model
eni’s answer: a distinctive model high-value projects exploration driven value and growth operational efficiency $/boe bln boe conventional asset base for safe, sustainable and efficient growth superior cash generation * XOM, CVX, COP, BP, RDS, TOT company data 13
Slide 14: exploration continues to be the root of our value
exploration continues to be the root of our value frontier exploration in emerging basins conventional assets in proven basins Arctic Cyprus Norwegian, Russian Barents Egypt nearfield Pakistan nearfield Levantine Basin Sea, East Greenland Caspian and Black Sea East Africa West Africa proven Mozambiq
Slide 15: …. our Congo discovery ....
…. our Congo discovery …. Marine XII discovered 2.5 bln boe of resources in place, light oil and rich gas fast-track development: Nenè Litchendjili 2015 Litchendjili Nenè 2016 0 20 40 Km 15
Slide 16: a strong base for the future
a strong base for the future discovered and prospective resources bln boe +7 +3 cash generation from exploration efficient organic growth upside from dual early monetization 4YP target of 0.8 bln boe/y on average, UEC 2,2 $/boe approach > 200 wells in the 4Y 16
Slide 17: from exploration to high value projects
from exploration to high value projects Time-To-Market* main FIDs 2014 -2015 OCTP (Ghana) Block 4 phase 1 (Mozambique) Argo Cluster (Italy) Bahr Essalam phase 2 (Libya) Jau (Indonesia) OPL 245 (Nigeria) Kutei Basin IDD (Indonesia) Junin 5 FF (Venezuela) Nenè (Congo) Bonga South W
Slide 18: our diversified projects pipeline
our diversified projects pipeline 2014-2015 SU 2016-2017 SU Beyond 2017 SU Angola 15/06 West Hub Angola 15/06 East Hub Mozambique Straddling/non straddling Congo Litchendjili gas Nigeria OPL 245 ph.1 Congo Loango Redev Sub-Saharan Congo Litchendjili oil Angola Kizomba sat. ph.2 Gha
Slide 19: progress on sanctioned projects
progress on sanctioned projects start up project country op Longhorn Ph.3 USA Hadrian South USA West Franklin Ph.2 UK Lucius USA Goliat Norway Asgard Mikkel Norway 2014-2015 15/06 West Hub Angola Eldfisk II Ph.1 Norway Wafa Compression Libya Perla EP Venezuela Mafumeira Sul Angola Litche
Slide 20: key start-up and ramp-up
key start-up and ramp-up Kashagan ep commissioning of onshore and offshore facilities completed, with first oil in September 2013 pipeline issue encountered during production ramp up intensive repairs to reinstate the pipeline being carried out forward commissioning of Train 2 and gas re-inj
Slide 21: Mozambique
Mozambique Mozambique exploration programme 11 wells drilled so far >85 Tcf GIIP discovered 2014 drilling program: 1 appraisal + 1 exploration wells development programme Area 4 straddling resources 15 MTPA with 1 (+1) LNG on-shore train and 2 FLNG Non straddling resources 1 FLNG for d
Slide 22: robust return and cash generation
robust return and cash generation robust returns of our portfolio 2013-2017 start-ups (SU) cash flow bln € SU 2016-2017 SU 2014-2015 SU 2013 SU 2014-2015 SU 2016-2017 capex bln € 22
Slide 23: operational efficiency
operational efficiency production and maintenance industry leading operating costs $/boe downtime: 6% drilling activities NPT <12% with ~250 mln $ saving per year reservoir management recovery factor: oil 43% - gas 67% decline rate <5% ~ 70 kboe/d per year with IRR >50% * XOM, CVX, COP, BP, RD
Slide 24: sustainable growth target…
sustainable growth target… production growth production diversification kboe/d kboe/d CAGR: 4% CAGR: 3% Brent scenario ($/bbl): 104 (2014); 98 (2015); 94 (2016); 90 (2017) + 2%/year thereafter 24
Slide 25: …and strict capital discipline…
…and strict capital discipline… 47.2 exploration bln € 0.7 44.4 0.8 5.5 40% 5.6 20% 40% 41.0 38.0 development 16% 5% 29% 21% 29% 25
Slide 26: …for a superior cash growth
…for a superior cash growth self financing ratio main projects unit costs +12% $/boe < 30$/boe cash flow growth CAGR CFFO and Free Cash Flow: 9% Brent ($/bbl) @108 26
Slide 27: midstream (g&p and refining)
midstream (g&p and refining) Marco Alverà eni.com
Slide 28: 2013 gas & power results
2013 gas & power results actions 2013 vs 2012 results mln € EBIT reached agreement on 85% of third party supply contracts 356 ~ -200 started arbitration with Statoil -662 avoided Take or Pay 2012 2012 2013 Future 2013 continuing development of optimization underlying retroactive underlying b
Slide 29: transformed natural gas and power market in Europe
transformed natural gas and power market in Europe significant lower volumes oil indexed contracts deterioration of clean Italy (-18% 2013 vs 2008) still “out of the money” spark spread in Italy Europe (-11% 2013 vs 2008) EU27 demand gas pricing in Europe Clean Spark Spread european Eni estimate
Slide 30: pillars of turnaround
pillars of turnaround new round of renegotiations of gas supply contracts 2014-2017 plan growth in high value market segments streamlining operation costs and logistics returning gas & power to profitability by 2015 30
Slide 31: contract renegotiations will align supply prices to market
contract renegotiations will align supply prices to market Δ supply costs vs mkt price new wave of renegotiations in 2014-2015 contract reference period is backward looking and compensation is retroactive “supply contracts shall enable the buyer to market economically the gas delivered” 2012-201
Slide 32: focusing on high value added segments
focusing on high value added segments LNG capacity B2B, optimization & trading 20 new trading platform developed mtpa enhanced optimization and risk management activities 10 launched new products catalogue in 2013 integration with trading for large accounts maximizing value extraction from
Slide 33: streamlining costs of operations and logistics
streamlining costs of operations and logistics costs of operations and logistics integration of foreign subsidiaries into eni merger of multiple operating platform into 1 (billing, IT, back office) cost cutting program restructuring of logistics costs target saving by 2017 > €300 mln 33
Slide 34: gas & power improving performance
gas & power improving performance EBITDA pf adj bln € deterioration in B2B margins and power in 2014 ~0.3 ~1.2 strong renegotiation benefits in 2014/2015 EBIT positive in 2015 high value segments* potential for further upside from European scenario recovery * retail, trading, LNG 34
Slide 35: midstream oil (refining, supply & trading)
midstream oil (refining, supply & trading) italian market eni’s actions -245 kbbl/d vs 2010 (-12%) reduction in eni refining capacity to max diesel yield Sannazzaro: start-up of EST Plant in 4Q13 Venezia: start-up of Green Diesel Plant in 2Q14 Gela: shut down of gasoline production plants in 3
Slide 36: 2013 results and financial strategy
2013 results and financial strategy Massimo Mondazzi eni.com
Slide 37: Q4 and full year consolidated results
Q4 and full year consolidated results adj. operating profit * adj. net profit * mln € mln € FY 2013 FY 2013 12,620 4,433 -34% vs 2012 -35% vs 2012 4,970 1,518 3,521 1,301 reported net profit € 5.2 bln (+24%) * figures exclude Snam contribution 37
Slide 38: net debt stabilised
net debt stabilised 0.25 0.25 bln € 15.5 15.4 11 4.2 13.1 6.4 leverage (net debt/equity) 38
Slide 39: strong future cash generation growth
strong future cash generation growth average cash flow bln € high CFFO growth avg capex disposals disciplined capex 39
Slide 40: growth & turnaround delivered with lower capex…
growth & turnaround delivered with lower capex… capex 2008-13* 4Y plan comparison bln € bln € 56.8 14.1 53.8 13.1 13.2 13.3 13.0 12.9 a selective plan of investments *constant FX @1.3 $/€ excluding Snam 40
Slide 41: ...while asset disposals boost cash generation...
...while asset disposals boost cash generation... asset sales bln € 3.0 21.7 3.6 12.4 0.4 2.2* 12.9 3.4 1.7 ~15 bln € 1.8 completed 5.6 debt repaid corporate + e&p other non core more than 34 bln euro of total cash-in since 2012 *cash-in from russian assets in Q1 2014 reported figures are pre-tax 41
Slide 42: …helping to reinforce our business model
…helping to reinforce our business model average net capital employed leverage 2013 net capital employed € 77 bln strong liquidity position leverage = net debt / equity 42
Slide 43: closing remarks
closing remarks Paolo Scaroni eni.com
Slide 44: strong growth in free cash generation
summary Libya and Nigeria problems likely to persist e&p selective high-value growth accelerated value creation continuing pricing pressure g&p renegotiations to align supply prices to market levels focus on premium segments continuing depressed demand r&m accelerated capacity reduct
Slide 45: shareholder distribution policy
shareholder distribution policy progressive dividend 10% of outstanding shares multi-year buyback programme flexible tool reflects eni’s underlying growth linked to the and value creation scenario dividend per share 1.12 euro 45
Slide 46: appendix
appendix eni.com
Slide 47: definitions
definitions CFFO: net profit + DD&A +/- working capital adjustment cost incurred: capex+ acquisitions FCF: CFFO + disposal – cost incurred leverage: net debt/equity self financing ratio: CFFO/cost incurred UEC: unit exp cost per boe (exploration cost/discovered resources) 47
Slide 48: assumptions and sensitivity
assumptions and sensitivity 4YP Scenario 2014 2015 2016 2017 Brent dated ($/bl) 104 98 94 90 FX avg (€/$) 1,3 1,3 1,3 1,3 TRCH margin Brent/Ural ($/bbl) 3.7 3.9 4.2 4.3 Henry Hub ($/mmbtu) 3.7 4.1 4.4 4.4 NBP ($/mmbtu) 10.5 10.0 9.7 9.2 4YP sensitivity* Ebit adj (bln €) Net adj(bln €) FCF(bln €) Bre
Slide 49: main start-ups 2014-2015
main start-ups 2014-2015 ~ peak equity project country OP production (year) Hadrian South USA 15 (2017) West Franklin Ph.2 UK 10 (2016) Goliat Norway 55 (2015) Asgard Mikkel Norway 15 (2018) 15/06 West Hub Angola 25 (2017) Eldfisk II Ph.1 Norway 10 (2017) Wafa Compression Libya 65 (2017) Perla EP Ve
Slide 50: main start-ups 2016-2017
main start-ups 2016-2017 project ~ peak equity country OP production (year) CAFC (oil + gas) Algeria 20 (2021) Jangkrik Complex Indonesia 40 (2018) Perla FF Venezuela 70 (2020)* 15/06 East Hub** Angola 15 (2018) Heidelberg USA 10 (2017) Bahr Essalam ph.2 Libya 35 (2017) OCTP (oil) Ghana 20 (2018) OP