Eni SpA (E), an integrated energy major, has three segments:
- E&P (Exploration and Production)
- G&P (Gas and Power)
- R&M (Refining and Marketing)
E&P is Eni’s largest segment in terms of contribution to earnings. In 1Q15, the E&P segment contributed -1.1 billion euros (76%), or about $1.3 billion, to Eni’s adjusted operating income. This fell to 95 million euros, or about $109.6 million, in 1Q16, but the drop was due to the fall in oil prices. (Brent prices, which averaged $54 per barrel in 1Q15, slipped down to $34 per barrel in 1Q16.)
The situation is similar for Eni’s peers Exxon Mobil (XOM), Total (TOT), and Suncor (SU), which witnessed steep falls in their upstream earnings in 1Q16. Notably, the iShares Russell 1000 Value ETF (IWD) has ~13% exposure to energy sector stocks.
G&P and R&M
Eni’s G&P segment reported a fall in earnings by 3% over 1Q15 to 285 million euros, or about $328.7 million, in 1Q16. This was due to the fall in natural gas volumes—by 5.9% in 1Q16 compared to in 1Q15. This was partially offset by the 11.6% rise in electricity sales volumes.
Earnings from Eni’s R&M segment declined by 28% over 1Q15 to 66 million euros, or about $76.1 million, in 1Q16. This was on account of lower refining margins coupled with a decline in throughput. Standard ENI’s Refining Margin fell by $3.4 per barrel, as compared to 1Q15, to $4.2 per barrel in 1Q16.
Eni’s total throughput declined by 14.6%, as compared to 1Q15, to 5.9 million tons in 1Q16. This decline in throughput was majorly on account of lower throughputs in Italy due to planned maintenance activities. The volumes were also impacted by the disposal of refining capacity at the Czech Republic in April 2015.
Continue to the next part for a look at Eni’s recent stock performance.