Eni defends balance sheet and dividend with huge capex and opex cuts
Italian oil and gas company Eni has decided to reduce its capex and opex for this year and the next as a result of the coronavirus pandemic and the oil price war. The reductions are mainly related to Eni’s Upstream activities.
Last week, Eni said that, due to the recent market developments, the spread of the COVID-19 pandemic, and the recent decisions taken by OPEC+, Eni’s board of directors decided to update the commodities scenario for the years 2020 and 2021, downgrading the forecasts on the Brent price to $40-45 in 2020 and $50-55 in 2021.
The board also decided to withdraw the proposal to authorize the purchase of treasury shares at the shareholder meeting of 13 May 2020, with a total amount of €400 million in 2020.
In an update released on Wednesday, Eni said it had concluded in advance a revision to its planned activities as a result of the sharp decrease in commodities prices and the foreseeable constraints arising from the COVID-19 pandemic.
With this decision, Eni has joined numerous oil and gas operators that made the same decision in the last couple of weeks, including majors like ConocoPhillips, Total, ExxonMobil, Shell, and Equinor.
‘Mainly’ Upstream cuts
Specifically, Eni will reduce capex in 2020 by around 2 billion euros, equal to 25% of the total capex planned, and opex by around 400 million euros.
In 2021, Eni expects a capex reduction of around 2.5-3 billion euros, equal to 30-35% of the capex scheduled for the same year in the business plan.
The projects involved are related mainly to Upstream activities, particularly production optimization and new project developments scheduled to start in the short-term.
In both cases, activities will be restarted as soon as appropriate market conditions appear, and related production will be recovered accordingly.
As a result of these measures and the current depressed scenario, production in 2020 is expected between 1.8 and 1.84 million barrels of oil equivalent per day, and it will remain unchanged in the following year.
Eni CEO, Claudio Descalzi, commented: “We are taking these actions in order to defend our robust balance sheet and the dividend while maintaining the highest standards of safety at work.”