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Behind Eni’s Stock Performance after 1Q16

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May. 3 2016, Published 2:12 p.m. ET

Eni’s stock performance

Eni SpA (E) announced its 1Q16 earnings on April 29, 2016. On the same day, Eni opened at $32.7, marginally higher than the previous day’s close of $32.6. Eni saw highs of $33 and lows of $32.5 during that day and closed at $32.8—around 0.6% higher than its previous day’s close, trending in line with its peers YPF (YPF) and Petrobras (PBR).

Behind Eni's Stock Performance after 1Q16

On April 29, 2016, peers YPF and PBR rose by 0.15% and 0.13%, respectively. But PetroChina (PTR) fell by 0.6%. For diversified exposure to global stocks, you might consider the Vanguard FTSE All-World Ex-US Fund (VEU).

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Outlook for 2016

In 1Q16, Eni incurred capital expenditure, or capex, of 2.4 billion euros, or about $2.8 billion. For 2016, Eni plans to lower its capex by 20% over 2015. But Eni expects oil market fundamentals to be weak in 2016.

To combat the lower oil price scenario, Eni’s management stated in its first quarter press release that “in order to cope with the anticipated negative impact of the scenario on the E&P results from operations and cash flow, management is planning to increase efforts to optimize capex and reduce operating costs by exploiting the deflationary pressure induced by the fall in crude oil prices.”

Coping with lower demand growth and oversupply

According to Eni, its G&P (gas and power) segment is expected to put on a dull show in 2016 on account of lower demand growth and oversupply. In the segment, management expects to renegotiate long-term contracts to improve earnings.

Refining margins are also expected to be lower in 2016 than in 2015. To overcome the R&M (refining and marketing) segment’s bleak outlook, Eni expects to optimize refinery processes and costs. The company also plans to work toward improving its marketing earnings.

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