SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN
ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of May 2007
Eni S.p.A.
(Exact name of Registrant as specified in its
charter)
Piazzale Enrico
Mattei 1 - 00144 Rome, Italy
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F x Form 40-F o
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2b under the Securities Exchange Act of 1934.)
Yes o No x
(If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): )
Press Release dated May 4, 2007
Press Release dated May 11, 2007
Press Release dated May 24, 2007
Press Release dated May 28, 2007
Press Release dated May 28, 2007
Press Release dated May 30, 2007
Press Release dated May 30, 2007
Press Release dated May 31, 2007
Report on the First Quarter 2007
Analist presentation - 1Q 07 results
Annual Report at December 31, 2006 (including the Report of External Auditors)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorised.
Eni S.p.A. |
||||
Name: Fabrizio Cosco | ||||
Title: | Company Secretary | |||
Date: May 31, 2007
Eni convenes Board of Directors
San Donato Milanese, 4 May 2007 - Enis Board of Directors will be held on 10 May 2007 in San Donato Milanese (Milan) to examine Enis Quarterly Report at 31 March 2007.
Company Contacts:
Press Office: +39 0659822040 / +39 0252031287
Switchboard number: +39-0659821
Free Number: 800940924
ufficio.stampa@eni.it
segreteriasocietaria.azionisti@eni.it
investor.relations@eni.it
Internet page: www.eni.it
ENI ANNOUNCES RESULTS FOR THE
FIRST QUARTER OF 2007
2007-2010 PRODUCTION GROWTH
TARGET RAISED FROM 3% TO 4%
San Donato Milanese, May 11, 2007 - Eni, the international oil
and gas company today announces its group results for the first
quarter of 2007 (unaudited).
Paolo Scaroni, Chief Executive Officer, commented:
The first quarter 2007 was affected by weaker oil
prices, a strong euro, and low seasonal gas and product sales due
to unusually mild weather conditions. Despite these, Eni managed
to deliver excellent results among the best in the European oil
& gas sector. In the first months of 2007 we undertook a
successful acquisition campaign purchasing attractive oil assets
which will make an important contribution to our growth strategy
in the following years.
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
Summary Group results (million euro) | |||||||||
3,957 | Operating profit | 5,595 | 5,105 | (8.8 | ) | ||||
4,776 | Adjusted operating profit (a) | 5,533 | 5,253 | (5.1 | ) | ||||
1,520 | Net profit (b) | 2,974 | 2,588 | (13.0 | ) | ||||
0.41 | - per ordinary share (euro) (c) | 0.80 | 0.70 | (12.5 | ) | ||||
1.06 | - per ADR ($) (c) (d) | 1.92 | 1.83 | (4.7 | ) | ||||
2,355 | Adjusted net profit (a) (b) | 2,954 | 2,680 | (9.3 | ) | ||||
0.64 | - per ordinary share (euro) (c) | 0.79 | 0.73 | (7.6 | ) | ||||
1.65 | - per ADR ($) (c) (d) | 1.90 | 1.91 | 0.5 |
(a) | For a detailed explanation of adjusted operating profit and net profit see page 16. | |
(b) | Profit attributable to Eni shareholders. | |
(c) | Fully diluted. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented. | |
(d) | One ADR (American Depositary Receipt) is equal to two Eni ordinary shares. |
- 1 -
Financial highlights
Operational highlights and trading environment
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
Key operating data | |||||||||||
1,796 | Production of hydrocarbons | (kboe/d) | 1,827 | 1,734 | (5.1 | ) | |||||
1,079 | Liquids | (kbbl/d) | 1,143 | 1,030 | (9.9 | ) | |||||
4,132 | Natural gas | (mmcf/d) | 3,920 | 4,061 | 3.6 | ||||||
26.93 | Worldwide gas sales | (bcm) | 31.20 | 28.14 | (9.8 | ) | |||||
1.06 | of which: upstream sales | 1.12 | 1.07 | (4.5 | ) | ||||||
7.79 | Electricity sold | (TWh) | 7.73 | 7.61 | (1.6 | ) | |||||
3.13 | Retail sales of refined products in Europe | (mmtonnes) | 2.93 | 2.88 | (1.7 | ) |
Oil and natural gas production for the quarter averaged 1.73 mmboe/d, a decrease of 5.1% compared with the first quarter of 2006. This result was impacted by the loss of production at the Venezuelan Dación oilfield (down 60 kbbl/d) which was a result of the unilateral cancellation of the service agreement for the field exploitation by the Venezuelan State Oil Company PDVSA effective April 1, 2006, and the continuing social unrest in Nigeria. When factoring in these two events, production was at similar levels to the first quarter of 2006. Increases in productivity in Libya, Kazakhstan and the Gulf of Mexico were offset by mature fields in decline, particularly in Italy, and by facility shutdowns;
Enis worldwide natural gas sales were down 9.8% to 28.1 bcm due to lower European gas demand owing to unusually mild winter weather, partially offset by a growth achieved in some target markets (in particular Spain and Turkey);
The trading environment was affected by lower oil prices with Brent crude prices averaging $57.75 per barrel, down 6.5% compared to the first quarter of 2006, and the appreciation of the euro over the dollar (up 9.0%). These negatives were partially offset by: (i) favourable trends in energy and exchange rate parameters used in determining purchase and selling prices of natural gas; (ii) an increase in refining margins on the Brent crude marker (up 3.7%), and (iii) higher sales margins on petrochemical products.
(1) | Non-GAAP financial measures disclosed throughout this press release are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided for by CESR recommendation No. 2005-178b. See pages 22 and 23 for leverage, net borrowings and ROACE, respectively. |
- 2 -
Portfolio developments
Outlook for 2007
The outlook for Eni in 2007 remains positive,
with key business trends for the year as follows:
- Production of liquids and natural gas is
forecast to remain at the same level as 2006 (in 2006 oil and gas
production averaged 1.77 mmboe/d). Additional production expected
in the second half of the year from acquired properties in the
Gulf of Mexico and Congo and the expected build-up in gas
production in Libya will enable Eni to recover the first quarter
decline in production due to escalating social unrest in Nigeria
and the loss of the Dación oilfield in Venezuela;
- Sales volumes of natural gas worldwide are
expected to increase by 1% over 2006 (actual sales volumes in
2006 were 97.48 bcm). Major increases are expected in certain
target markets in the Rest of Europe, mainly in the Iberian
Peninsula, the North of Europe, France and Germany/Austria
markets;
- Sales volumes of electricity are expected to
slightly increase from 2006 (actual volumes in 2006 were 31.03
TWh);
- Refining throughputs on Enis account are
forecast to slightly decrease from 2006 (actual throughputs in
2006 were 38.04 mmtonnes) due to expiration of a processing
contract at the Priolo refinery owned by a third party late in
2006, to be offset by higher throughputs expected at the Gela,
Livorno and Taranto refineries;
- Retail sales of refined products are expected
to slightly increase from 2006 (actual volumes sold in 2006 were
12.48 mmtonnes). Increases are expected on both the Italian and
European markets due to the entry into service of new outlets,
and also following the acquisition of stations in target markets.
In 2007 management expects Enis capital expenditure on
exploration and capital projects to amount to approximately euro
10.5 billion, representing a 34% increase over 2006.
Approximately 86% of this capital expenditure programme is
expected to be deployed in the Exploration & Production, Gas
& Power and Refining & Marketing divisions. Furthermore,
acquisitions of assets and interests amounting to euro 9.2
billion are forecast for 2007, mainly related to: (i) the agreed
purchase of ex-Yukos assets; (ii) the other agreements which are
expected to be finalised by the end of the year, including the
purchase of upstream assets in the Gulf of Mexico and Congo, and
a retail station network in the Central-Eastern Europe. Assuming
Gazprom exercises its call options to purchase a 20% interest in
OAO Gazprom Neft and a 51% interest in ex-Yukos gas assets from
Eni, net cash outflows used in investing activities will decrease
to euro 16.2 billion.
On the basis of the expected cash outflows for this capital
expenditure and acquisition programme, and shareholders
remuneration, also assuming a 55$/barrel scenario for the Brent
crude oil, Eni foresees its leverage to range from 0.3 to 0.4 by
the end of the year, depending on the exercise of the above
mentioned call options by Gazprom.
- 3 -
Disclaimer
Due to the seasonality in demand for natural gas and certain
refined products and the changes in a number of external factors
affecting Enis operations, such as prices and margins of
hydrocarbons and refined products, Enis results from
operations and changes in net borrowings for the first quarter
cannot be extrapolated on an annual basis.
Cautionary statement
This press release, in particular the statements under the
section Outlook, contains certain forward-looking
statements particularly those regarding capital expenditure,
development and management of oil and gas resources, dividends,
share repurchases, allocation of future cash flow from
operations, future operating performance, gearing, targets of
production and sale growth, new markets, and the progress and
timing of projects. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and
depend on circumstances that will or may occur in the future.
Actual results may differ from those expressed in such
statements, depending on a variety of factors, including the
timing of bringing new fields on stream; managements
ability in carrying out industrial plans and in succeeding in
commercial transactions; future levels of industry product
supply; demand and pricing; operational problems; general
economic conditions; political stability and economic growth in
relevant areas of the world; changes in laws and governmental
regulations; development and use of new technology; changes in
public expectations and other changes in business conditions; the
actions of competitors and other factors discussed elsewhere in
this document.
* * *
Contacts
E-mail: segreteriasocietaria.azionisti@eni.it
Investor Relations
E-mail: investor.relations@eni.it
Tel.: +39 0252051651 - fax: +39 0252031929
Eni Press Office
Casella e-mail: ufficiostampa@eni.it
Tel.: +39 0252031287 - +39 0659822040
* * *
Eni
Società per Azioni Roma, Piazzale Enrico Mattei, 1
Capitale sociale: euro 4.005.358.876 i. v.
Registro Imprese di Roma, c. f. 00484960588
Tel. +39-0659821 - Fax
+39-0659822141
* * *
This press release and Enis Report on Group Results
for the first quarter 2007 (unaudited) are also available on the
Eni web site: www.eni.it.
About Eni
Eni is one of the leading integrated energy companies in the
world operating in the oil and gas, power generation,
petrochemicals, engineering and construction industries. Eni is
present in 70 countries and is Italys largest company by
market capitalisation.
- 4 -
Summary results for the first quarter
(million euro) |
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
21,416 | Net sales from operations | 23,584 | 21,913 | (7.1 | ) | |||||||
3,957 | Operating profit | 5,595 | 5,105 | (8.8 | ) | |||||||
341 | Exclusion of inventory holding (gains) losses | (94 | ) | 155 | ||||||||
478 | Exclusion of special items: | 32 | (7 | ) | ||||||||
of which: | ||||||||||||
184 | - non recurring items | |||||||||||
294 | - other special items | 32 | (7 | ) | ||||||||
4,776 | Adjusted operating profit | 5,533 | 5,253 | (5.1 | ) | |||||||
1,520 | Net profit pertaining to Eni | 2,974 | 2,588 | (13.0 | ) | |||||||
213 | Exclusion of inventory holding (gains) losses | (59 | ) | 97 | ||||||||
622 | Exclusion of special items: | 39 | (5 | ) | ||||||||
of which: | ||||||||||||
184 | - non recurring items | |||||||||||
438 | - other special items | 39 | (5 | ) | ||||||||
2,355 | Adjusted net profit pertaining to Eni | 2,954 | 2,680 | (9.3 | ) | |||||||
178 | Net profit of minorities | 156 | 155 | (0.6 | ) | |||||||
2,533 | Adjusted net profit | 3,110 | 2,835 | (8.8 | ) | |||||||
Break down by division (a) | ||||||||||||
1,304 | Exploration & Production | 2,095 | 1,409 | (32.7 | ) | |||||||
873 | Gas & Power | 879 | 1,159 | 31.9 | ||||||||
115 | Refining & Marketing | 86 | 113 | 31.4 | ||||||||
141 | Petrochemicals | 16 | 79 | 393.8 | ||||||||
131 | Engineering & Construction | 87 | 145 | 66.7 | ||||||||
(85 | ) | Other activities | (58 | ) | (50 | ) | 13.8 | |||||
57 | Corporate and financial companies | 6 | (86 | ) | .. | |||||||
(3 | ) | Effect of unrealized profit in inventory (b) | (1 | ) | 66 | .. | ||||||
Net profit | ||||||||||||
0.41 | per ordinary share (euro) | 0.80 | 0.70 | (12.5 | ) | |||||||
1.06 | per ADR ($) | 1.92 | 1.83 | (4.7 | ) | |||||||
Adjusted net profit | ||||||||||||
0.64 | per ordinary share (euro) | 0.79 | 0.73 | (7.6 | ) | |||||||
1.65 | per ADR ($) | 1.90 | 1.91 | 0.5 | ||||||||
3,684.7 | Weighted average number of outstanding shares (c) | 3,726.0 | 3,679.0 | (1.3 | ) | |||||||
1,778 | Net cash provided by operating activities | 5,863 | 5,563 | (5.1 | ) | |||||||
2,944 | Capital expenditure | 1,340 | 2,013 | 50.2 | ||||||||
(a) | For a detailed explanation of adjusted net profit by division see page 16. | |
(b) | Unrealized profit in inventory concerned intra-group sales of goods and services recorded at period end in the equity of the purchasing business segment. | |
(c) | Assuming dilution. |
Trading environment indicators
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
59.68 | Average price of Brent dated crude oil (a) | 61.75 | 57.75 | (6.5 | ) | ||||
1.290 | Average EUR/USD exchange rate (b) | 1.202 | 1.310 | 9.0 | |||||
46.26 | Average price in euro of Brent dated crude oil | 51.37 | 44.08 | (14.2 | ) | ||||
2.18 | Average European refining margin (c) | 2.95 | 3.06 | 3.7 | |||||
1.69 | Margin Average European refining margin in euro | 2.45 | 2.34 | (4.5 | ) | ||||
3.6 | Euribor - three month rate (%) | 2.6 | 3.8 | 46.2 | |||||
5.3 | Libor - three month dollar rate (%) | 4.7 | 5.3 | 12.8 |
(a) | In USD dollars per barrel. Source: Platts Oilgram. | |
(b) | Source: ECB. | |
(c) | In USD per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platts Oilgram data. |
- 5 -
Bottom line
Enis net profit for the first quarter of
2007 was euro 2,588 million, down euro 386 million from the first
quarter of 2006, or 13%, due primarily to a lower operating
performance (down euro 490 million, or 8.8%) as a result of a
decline in the Exploration & Production division, partially
offset by a positive performance delivered by Eni's downstream
and the Engineering & Construction businesses. This reduction
in net profit was also due to higher net financial expenses
mainly owing to losses on the fair value evaluation of certain
financial derivative instruments.
Enis adjusted net profit amounted to euro
2,680 million, down 9.3% from the first quarter 2006. Adjusted
net profit is arrived at by excluding an inventory holding loss
of euro 97 million and special income of euro 5 million net.
Divisional performance
The decline in the Group adjusted net profit was owed to the
reduction of adjusted net profit registered in the Exploration
& Production division (down euro 686 million
or 32.7%), due to a weaker operating performance (down euro 1,119
million or 26.3%) which was adversely impacted by the
appreciation of the euro over the dollar (9.0%), a decline in
production sold (down 9.5 mmboe/d), lower oil realizations in
dollars (oil down 3.3%), and higher exploration expenses.
The decline in the adjusted net profit of the Exploration &
Production division was partly offset by a higher adjusted net
profit reported in the divisions:
Gas & Power (up euro 280 million or 31.9%), as a result of an improved operating performance (up euro 480 million or 40%) reflecting higher natural gas selling margins supported by a favourable trading environment relating particularly to trends in the euro vs. the dollar exchange rate. The divisions performance also benefited from positive developments in Italys regulatory framework. These positives were partly offset by lower natural gas sales (down 2.87 bcm or 10.4%), impacted by lower European gas demand due to the unusually mild weather conditions registered in the first quarter 2007;
Refining & Marketing (up euro 27 million or 31.4%), reflecting an improved refining performance boosted by higher processed volumes and better yields, also in light of lower maintenance shutdowns;
Petrochemicals (up euro 63 million, or 393.8%), due to an improved operating performance (up euro 99 million) reflecting a recovery in product selling margins;
Engineering & Construction (up euro 58 million, or 66.7%), reflecting an improved operating performance (up euro 98 million) against the backdrop of favourable demand trends in oilfield services.
Net borrowings and cash flow
Net borrowings as of March 31, 2007 amounted to
euro 3,852 million, decreasing by euro 2,915 million from
December 31, 2006. Net cash provided by operating
activities totalled euro 5,563 million. Main cash
outflows related to: (i) capital expenditure totalling euro 2,013
million; (ii) the repurchase of own shares for euro 203 million
by Eni SpA and euro 242 million by Snam Rete Gas SpA.
Leverage, the ratio of net borrowings to
shareholders equity including minority interest decreased
to 0.09, from 0.16 at December 31, 2006.
Repurchase of own shares
From January 1 to March 31, 2007 a total of 8.52 million own
shares were purchased by the company for a total amount of euro
203 million (representing an average cost of euro 23.847 per
share). Since the inception of the share buy-back programme
(September 1, 2000), Eni has repurchased 344 million shares,
equal to 8.58% of outstanding capital stock, at a total cost of
euro 5,716 million (representing an average cost of euro 16.638
per share).
Capital expenditure
Capital expenditure in the first quarter of 2007
amounted to euro 2,013 million (euro 1,340 million in the first
quarter 2006) and related mainly to:
Development activities (euro 909 million) deployed mainly in Kazakhstan, Egypt, Angola, Italy and Congo and exploration projects (euro 373 million) of which 91% was spent outside Italy, primarily in Norway, Nigeria, Egypt and the United States. In Italy exploration activity related primarily to projects off the coast of Sicily;
upgrading of natural gas import pipelines to Italy and the development and maintenance of Enis natural gas transport network in Italy (for an overall amount of euro 144 million).
- 6 -
Post closing events
Upstream asset acquisition in the Gulf of Mexico
On April 30, 2007 Eni agreed to acquire the Gulf of Mexico
upstream activity of Dominion, one of the major American energy
companies listed on the New York stock exchange at the agreed
price equal to US $4,757 million, inclusive of exploration assets
for US $680 million.
The transaction, includes production, development and exploration
assets located in deepwater Gulf of Mexico. The acquisition will
increase Enis equity production in the Gulf of Mexico from
the current 36,000 boepd to more than 110,000 boepd in the second
half of 2007 and the proved and probable equity reserves by 222
million boe, at an implied cost per barrel of US $18.4. From
2007-2010 production from the acquired assets is expected to
average more than 75,000 boepd.
In addition, Eni will further enhance its portfolio in the Gulf
of Mexico thanks to new leases with significant exploration
potential; approximately 60% of these leases are operated.
The transaction is subject to government approvals, 30-days
notice to holders of certain preferential rights to purchase
(which apply to less than 5% of total reserves), and to other
customary precedent conditions. Final agreement is anticipated to
take place on July 2, 2007.
Yukos asset acquisition
On April 4, 2007 Eni, through its partnership in EniNeftegaz (60%
Eni, 40% Enel SpA) acquired Lot 2 in the Yukos liquidation
procedure for a total price of $5.83 billion. Lot 2 includes:
100% of OAO Arctic Gas Co
100% of ZAO Urengoil Inc
100% of OAO Neftegaztechnologia.
These three companies own 5 oil and gas fields and condensate
fields and parts of 3 others in the Yamal Nenets (YNAO) region,
the worlds largest gas producing region. Together they have
large oil and gas reserves.
Eni and Enel have offered Gazprom an option to acquire 51%
participation interest in these assets within two years. In the
event that Gazprom exercises its call option, the assets will be
operated through a joint venture between Eni and Gazprom which
will have access to Enis most advanced technologies.
Lot 2 also includes:
various minor assets that will be sold or liquidated and
20% of OAO Gazprom Neft which will be wholly owned by Eni.
Eni offered Gazprom an option to acquire 20% participation
interest in OAO Gazprom Neft within two years, at a total price
of $3.7 billion, in addition to financial expenses relating to
the acquisition. These agreements are an additional step in
implementing the Strategic Partnership between Eni and Gazprom
signed in November 2006, under which the two companies
established an alliance to develop upstream, midstream and
downstream energy projects inside and outside of Russia.
Acquisition of the retail station network in Czechia,
Slovakia and Hungary
On April 27, 2007 Eni and ExxonMobil Central Europe Holding GmbH
signed an agreement for the sale of shares of Esso spol sro (Esso
Czechia), Esso Slovensko spol sro (Esso Slovakia) and ExxonMobil
Hungary Kft to Eni. The agreement, subject to the approval by
relevant authorities, includes ExxonMobil's retail station
network in the three countries, totalling 102 stations and its
aviation business at the Prague and Bratislava airports.
Additionally, the lubricants business conducted in these
countries by ExxonMobil Petroleum and Chemical, BVBA, Brussels,
is included in the transaction.
- 7 -
Acquisition of 70%, including
operatorship, of the Nikaitchuq Field in Alaska
On April 11, 2007 Eni acquired 70% and the operatorship of the
Nikaitchuq Field, located on and offshore in the North Slope of
Alaska. Eni, which already owned a 30% stake in the field, now
retains the 100% working interest. Eni acquired the additional
interest and operatorship as the result of an agreement with
Kerr-McGee Oil and Gas Corporation, a wholly owned subsidiary of
Anadarko Petroleum Corporation.
Nikaitchuq would be the first development project operated by Eni
in Alaska. Successful appraisal drilling has been completed,
confirming the potential viability of the development project.
Plans for a phased development are currently being evaluated with
the target of sanctioning the project by year end, and first oil
to flow by the end of 2009. The Nikaitchuq project comprises the
drilling of approximately 80 wells, out of which 32 are located
onshore and the remaining from an offshore artificial island. All
wells will then be tied back to a production facility located at
Oliktok Point to reach a production of 40,000 b/d. Total
investment will amount to approximately $900 million.
Memorandum of Understanding for the acquisition of an
interest in Angola LNG Ltd
On April 2, 2007 Eni and Sonangol signed a Memorandum of
Understanding for the acquisition of a 13.6% stake in Angola LNG
Limited Consortium (A-LNG). This company is responsible for the
construction of an LNG plant in Soyo, 300 km north Luanda, with a
yearly capacity of 5 million tonnes.
Upon completion of this agreement, Angola LNG Limiteds
shareholding structure will be as follows: Sonangol 22.8%,
Chevron 36.4%, Eni 13.6%, Total 13.6% and BP 13.6%.
The project, for a total investment of approximately $4 billion,
has been approved by the Angolan Government and Parliament. It
envisages, for 28 years, the development of 220 billion cubic
meters of gas, the production of 128 million tons of LNG, 104
million barrels of condensate and 257 million barrels of LPG.
LNG will be directed to the United States market and will be
delivered to the re-gasification plant of Pascagoula, in the Gulf
of Mexico, in which Eni, following this agreement, will acquire
re-gasification capacity of 5 billion cubic meters per year.
Other information
The Board also approved the merger into the parent company of
Enis wholly-owned subsidiaries AgipFuel, Napoletana Gas
Clienti and Siciliana Gas. The relevant merger proposals were
approved by the Board on March 29, 2007.
Financial and operating information by division for the first
quarter 2007 is provided in the following pages.
- 8 -
Exploration & Production
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
Results (million euro) | ||||||||||||||
6,152 | Net sales from operations | 7,412 | 6,361 | (14.2 | ) | |||||||||
3,141 | Operating profit | 4,308 | 3,132 | (27.3 | ) | |||||||||
54 | Exclusion of special items: | (57 | ) | |||||||||||
51 | - asset impairments | |||||||||||||
(7 | ) | - gains on disposal of assets | (57 | ) | ||||||||||
10 | - provision for redundancy incentives | |||||||||||||
3,195 | Adjusted operating profit | 4,251 | 3,132 | (26.3 | ) | |||||||||
(22 | ) | Net financial incomes (expenses) (a) | (17 | ) | (35 | ) | ||||||||
(18 | ) | Net income (expenses) from investments (a) | 10 | 10 | ||||||||||
(1,851 | ) | Income taxes (a) | (2,149 | ) | (1,698 | ) | ||||||||
58.7 | Tax rate | (%) | 50.6 | 54.7 | ||||||||||
1,304 | Adjusted net profit | 2,095 | 1,409 | (32.7 | ) | |||||||||
Results also include: | ||||||||||||||
1,418 | - amortisations and depreciations | 1,095 | 1,240 | 13.2 | ||||||||||
419 | - of which amortisations of exploration expenditure | 187 | 375 | .. | ||||||||||
1,937 | Capital expenditure | 961 | 1,366 | 42.1 | ||||||||||
Production (b) (c) | ||||||||||||||
1,079 | Liquids (d) | (kbbl/d) | 1,143 | 1,030 | (9.9 | ) | ||||||||
4,132 | Natural gas | (mmcf/d) | 3,920 | 4,061 | 3.6 | |||||||||
1,796 | Total hydrocarbons | (kboe/d) | 1,827 | 1,734 | (5.1 | ) | ||||||||
Average realisations | ||||||||||||||
54.85 | Liquids (d) | ($/bbl) | 56.27 | 54.39 | (3.3 | ) | ||||||||
5.39 | Natural gas | ($/mmcf) | 5.23 | 2.30 | 1.3 | |||||||||
45.53 | Total hydrocarbons | ($/boe) | 46.71 | 45.12 | (3.40 | ) | ||||||||
Average oil market prices | ||||||||||||||
59.68 | Brent dated | ($/bbl) | 61.75 | 57.75 | (6.5 | ) | ||||||||
46.26 | Brent dated | (euro/bbl) | 51.37 | 44.08 | (14.2 | ) | ||||||||
59.94 | West Texas Intermediate | ($/bbl) | 63.29 | 57.99 | (8.4 | ) | ||||||||
235.20 | Gas Henry Hub | ($/kcm) | 271.90 | 266.60 | (1.9 | ) |
(a) | Excluding special items. | |
(b) | Supplementary operating data is provided on page 26. | |
(c) | Includes Eni's share of production of equity-accounted entities. | |
(d) | Includes condensates. |
Adjusted operating profit for the first quarter 2007 was euro 3,132 million, a decrease of euro 1,119 million from the first quarter 2006, or 26.3%), due primarily to:
An adverse impact of approximately euro 300 million resulting from the appreciation of the euro versus the dollar.
A lower production sold, which was down 9.5 mmboe.
Lower oil realisations in dollars (down 3.3%), partly offset by slightly higher gas prices (up 1.3%).
Higher expenses incurred in connection with exploratory activity (euro 188 million; euro 218 on a constant exchange rate basis).
Higher production costs and amortisation/depreciation charges which also reflects the impacts of sector-specific inflation.
The adjusted net profit was euro 1,409 million, down euro 686 million from the first quarter of 2006. This result was impacted by a weaker operating performance and a higher tax rate (increased from 50.6% to 54.7%), primarily due to the Algerian windfall tax on upstream earnings effective August 1, 2006 and the supplemental tax rate applicable to profit earned in North Sea operations as enacted by the British Government in July 2006.
- 9 -
Oil and natural gas production in the first
quarter of 2007 averaged 1,734 kboe/d, a decrease of 93 kboe/d
from the same period of the previous year (down 5.1%). This
reduction was due primarily to the unilateral cancellation of the
Dación field service contract by the Venezuelan state company
PDVSA with effect from April 1, 2006 (down 60 kboe/d) and social
unrest in Nigeria. Factoring in these effects, oil and natural
gas production level was in line with the first quarter 2006.
Production increases were achieved mainly in Libya, Kazakhstan
and the Gulf of Mexico offsetting mature field declines in Italy
and facility shutdowns.
Daily production of oil and condensates (1,030
kbbl) decreased by 113 kbbl, or 9.9% from the first quarter of
2006. Production decreases were reported mainly in Venezuela and
Nigeria due to the above mentioned causes and in the United
Kingdom due to a technical problem in the Elgin/Franklin field
(Eni's interest 21.87%) and ordinary maintenance shutdowns at
other facilities. In Italy a few technical problems occurred at
the FPSO operating the Aquila field. Significant increases were
registered in Kazakhstan, and the United States.
Daily production of natural gas for the first
quarter (4,061 mmcf/d) increased by 141 mmcf/d, or 3.6%, mainly
as a result of the build-up of the Bahr Essalam field offshore
Libya, full operations at train fifth at Bonny LNG plant in
Nigera, a better performance of Norways largest fields, and
full production of Bayu Undan gas field offshore Australia. Gas
production in Italy decreased due to mature field declines.
- 10 -
Gas & Power
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
Results (million euro) | ||||||||||||||
8,170 | Net sales from operations | 9,134 | 8,543 | (6.5 | ) | |||||||||
1,303 | Operating profit | 1,199 | 1,641 | 36.9 | ||||||||||
(41 | ) | Exclusion of inventory holding (gains) losses | (30 | ) | 40 | |||||||||
7 | Exclusion of special items: | 34 | 2 | |||||||||||
of which: | ||||||||||||||
Non-recurring items | ||||||||||||||
7 | Other special items | 34 | 2 | |||||||||||
2 | - environmental provisions | 20 | ||||||||||||
15 | - provisions for redundancy incentives | 14 | 2 | |||||||||||
(10 | ) | - other | ||||||||||||
1,269 | Adjusted operating profit | 1,203 | 1,683 | 39.9 | ||||||||||
832 | Market and Distribution | 705 | 1,177 | 67.0 | ||||||||||
286 | Transport in Italy | 305 | 286 | (6.2 | ) | |||||||||
144 | Transport outside Italy | 154 | 163 | 5.8 | ||||||||||
7 | Power generation (a) | 39 | 57 | 46.2 | ||||||||||
(1 | ) | Net financial incomes (expenses) (b) | 6 | 3 | ||||||||||
97 | Net income (expenses) from investments (b) | 137 | 115 | |||||||||||
(492 | ) | Income taxes (b) | (467 | ) | (642 | ) | ||||||||
36.0 | Tax rate | (%) | 34.7 | 35.6 | ||||||||||
873 | Adjusted net profit | 879 | 1,159 | 31.9 | ||||||||||
453 | Capital expenditure | 151 | 221 | 46.4 | ||||||||||
Natural gas sales | (bcm) | |||||||||||||
14.09 | Italy to third parties (*) | 17.47 | 15.41 | (11.8 | ) | |||||||||
1.55 | Own consumption (*) | 1.47 | 1.39 | (5.4 | ) | |||||||||
8.14 | Rest of Europe (*) | 8.57 | 7.90 | (7.8 | ) | |||||||||
0.12 | Outside Europe | 0.16 | 0.10 | (37.5 | ) | |||||||||
23.90 | Sales to third parties and own consumption of consolidated companies | 27.67 | 24.80 | (10.4 | ) | |||||||||
1.97 | Sales of Eni's affiliates (net to Eni) | 2.41 | 2.27 | (5.8 | ) | |||||||||
0.01 | Italy (*) | 0.01 | 0.01 | |||||||||||
1.83 | Rest of Europe (*) | 2.33 | 2.10 | (9.9 | ) | |||||||||
0.13 | Outside Europe | 0.07 | 0.16 | .. | ||||||||||
25.87 | Total sales and own consumption (G&P) | 30.08 | 27.07 | (10.0 | ) | |||||||||
1.06 | Upstream in Europe | 1.12 | 1.07 | (4.5 | ) | |||||||||
26.93 | Worldwide sales | 31.20 | 28.14 | (9.8 | ) | |||||||||
26.68 | Total sales in Europe | 30.97 | 27.88 | (10.0 | ) | |||||||||
22.45 | Gas volumes transported in Italy | (bcm) | 24.89 | 23.51 | (5.5 | ) | ||||||||
14.97 | Eni | 16.12 | 15.55 | (3.5 | ) | |||||||||
7.48 | On behalf of third parties | 8.77 | 7.96 | (9.2 | ) | |||||||||
7.79 | Electricity sold | (TWh) | 7.73 | 7.61 | (1.6 | ) |
(a) | Starting on January 1, 2007, results from marketing of electricity have been included in results from market and distribution activities following an internal reorganization. As a consequence of this, electricity generation activity conducted by EniPower subsidiary comprises only results from production of electricity. Prior quarter results have not been restated. | |
(b) | Excluding special items. | |
(*) | Market segments with asterisk merge into "Total sales in Europe". |
The adjusted operating profit of the Gas & Power division totalled euro 1,683 million, up euro 480 million or 39.9% from the first quarter of 2006, reflecting primarily:
Increased natural gas selling margins owing to a favourable trading environment relating particularly to trends in the euro vs. the dollar exchange rate.
- 11 -
These positives were partly offset by a decline in natural gas
sales (down 2.87 bcm, or 10.4%), a result of lower European gas
demand because of the unusually mild weather conditions of the
first quarter 2007, partly offset by a growth in sales in certain
target markets in the rest of Europe. Lower gas demand negatively
affected the operating performance of transport activities in
Italy and volumes distributed on low pressure networks. Sales
volumes of electricity decreased by 0.12 TWh, or 1.6%.
Special charges for the quarter referred to redundancy incentives
(euro 2 million).
The adjusted net profit was euro 1,159 million,
up euro 280 million, or 31.9%, reflecting the increased adjusted
operating profit.
Enis worldwide natural gas sales for the
first quarter of 2007 amounted to 28.14 bcm, including own
consumption and sales by affiliates and upstream sales in Europe,
with a decrease of 3.06 bcm from the first quarter of 2006, or
9.8%. This decline was impacted by lower seasonal gas sales due
to unusually mild winter time.
In an increasingly competitive market, sales in the Italian
market were 15.41 bcm with a decrease of 2.06 bcm, or 11.8%. All
market segments posted sale volumes declines from the first
quarter of 2006:
Gas sales in the Rest of Europe were 7.9 bcm with a decrease of 0.67 bcm, or 7.8%, due to:
These decreases were partly offset by increases in the supplies to the Turkish (up 0.34 bcm) and Spanish (up 0.18 bcm) markets.
(1) | For more details on Resolution No. 79/2007 see the Report on the First Quarter of 2007 - Operating Review - Gas & Power published with this press release. |
- 12 -
Refining & Marketing
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
Results (million euro) | ||||||||||||||
8,579 | Net sales from operations | 9,280 | 7,943 | (14.4 | ) | |||||||||
(386 | ) | Operating profit | 89 | (10 | ) | .. | ||||||||
386 | Exclusion of inventory holding (gains) losses | (47 | ) | 112 | ||||||||||
148 | Exclusion of special items: | 47 | 18 | |||||||||||
of which: | ||||||||||||||
109 | Non-recurring items | |||||||||||||
39 | Other special items | 47 | 18 | |||||||||||
13 | - asset impairments | |||||||||||||
27 | - environmental provisions | 44 | 17 | |||||||||||
30 | - provisions for redundancy incentives | 5 | 1 | |||||||||||
4 | - provision to the reserve for contingencies | 1 | ||||||||||||
(35 | ) | - other | (3 | ) | ||||||||||
148 | Adjusted operating profit | 89 | 120 | 34.8 | ||||||||||
Net financial incomes (expenses) (a) | ||||||||||||||
31 | Net income (expenses) from investments (a) | 47 | 51 | 8.5 | ||||||||||
(64 | ) | Income taxes (a) | (50 | ) | (58 | ) | 16.0 | |||||||
35.8 | Tax rate | (%) | 36.8 | 33.9 | ||||||||||
115 | Adjusted net profit | 86 | 113 | 31.4 | ||||||||||
272 | Capital expenditure | 95 | 134 | 41.1 | ||||||||||
Global indicator refining margin | ||||||||||||||
2.18 | Brent ($/bbl) | 2.95 | 3.06 | 3.7 | ||||||||||
1.69 | Brent (euro/bbl) | 2.45 | 2.34 | (4.5 | ) | |||||||||
4.87 | Ural ($/bbl) | 5.76 | 6.07 | 5.4 | ||||||||||
Refining throughputs and sales | (mmtonnes) | |||||||||||||
9.05 | Refining throughputs on own account Italy | 7.49 | 7.86 | 4.9 | ||||||||||
1.20 | Refining throughputs on own account Rest of Europe | 1.12 | 1.14 | 1.8 | ||||||||||
7.36 | Refining throughputs of wholly-owned refineries | 5.86 | 6.67 | 13.8 | ||||||||||
100 | Utilization rate of balanced capacity | (%) | 100 | 100 | ||||||||||
2.16 | Retail sales Italy | 2.06 | 1.98 | (3.9 | ) | |||||||||
0.97 | Retail sales rest of Europe | 0.87 | 0.90 | 3.4 | ||||||||||
3.13 | Sub-total retail sales | 2.93 | 2.88 | (1.7 | ) | |||||||||
2.93 | Wholesale Italy | 2.94 | 2.61 | (11.2 | ) | |||||||||
1.06 | Wholesale Rest of Europe | 1.03 | 1.05 | 1.9 | ||||||||||
0.10 | Wholesale Rest of World | 0.10 | 0.13 | 30.0 | ||||||||||
5.96 | Other sales | 5.32 | 5.67 | 6.6 | ||||||||||
13.18 | Sales | 12.32 | 12.34 | 0.2 | ||||||||||
Refined product sales by region | (mmtonnes) | |||||||||||||
7.71 | Italy | 7.55 | 7.30 | (3.3 | ) | |||||||||
2.03 | Rest of Europe | 1.90 | 1.95 | 2.6 | ||||||||||
3.44 | Rest of World | 2.87 | 3.09 | 7.7 |
(a) | Excluding special items. |
The Refining & Marketing division reported an adjusted operating profit of euro 120 million, representing an increase of euro 31 million from the first quarter of 2006, or 34.8%. This increase reflected primarily a better operating performance delivered by the refining activity, which was boosted by higher processed volumes and better yields also in light of lower maintenance shutdowns. The benefit of higher refining margins (margins on the Brent crude oil were up 0.11 dollar/bbl, or 3.7%) was more than offset by thenegative impact of the
- 13 -
euro appreciation over the dollar. Marketing activities in
Italy reported a lower operating profit due mainly to lower
retail margins and a decline in wholesale volumes as a
consequence of lower heating oil demand in Italy particularly in
the thermoelectric sector caused by a relatively mild winter
weather.
The adjusted net profit was euro 113 million, up
euro 27 million, or 31.4%, due to the improved operating
performance.
Special charges excluded from the adjusted operating profit for
the first quarter 2007 were euro 18 million, reflecting
environmental provisions and provisions for redundancy
incentives.
Refining throughputs on Enis own account
increased by 390 ktonnes from the first quarter of 2006, to 9
mmtonnes, or 4.5%. This increase was due to lower maintenance
shutdowns in Livorno and Venice refineries, partly offset by
expiration of a processing contract at the Priolo refinery owned
by a third party and lower throughputs at the Gela and Taranto
refineries due to planned maintenance shutdowns.
The wholly-owned refineries throughputs increased by 0.81
mmtonnes from the first quarter of 2006, to 6.67 mmtonnes, or
13.8%, mainly in the Livorno, Taranto and Venice refineries. The
wholly-owned refinery utilisation rate was 100% based on the
utilisation rates of refinery balanced capacity.
Sales of refined products increased by 20
ktonnes from the first quarter of 2006, to 12.34 mmtonnes, or
0.2%, due to: (i) higher volumes sold to oil companies and
traders in Italy, partly offset by lower volumes sold to the
petrochemical sector reflecting expiration of a processing
contract at the Priolo refinery (overall up 350 ktonnes); and
(ii) higher sales on both the retail and wholesale markets in the
Rest of Europe (up 50 ktonnes). These positives were partly
offset by a decline in both the retail and wholesale markets in
Italy (down 410 ktonnes) due to the impact of milder weather in
the first quarter 2007 and competitive pressure.
Sales of refined products on the retail market in Italy decreased
by 80 ktonnes from the first quarter of 2006, to 1.98 mmtonnes,
or 3.9%, primarily due to competitive pressure and lower demand.
Sales in the retail market in the Rest of Europe increased by 30
ktonnes from the first quarter of 2006, to 0.9 mmtonnes, or 3.4%,
mainly in Spain.
Sales in the wholesale market in Italy decreased by 330 ktonnes
from the first quarter of 2006, to 2.61 mmtonnes, or 11.2%, due
to lower demand for heating products particularly from the
thermoelectric sector caused by unusually milder weather.
Sales on the wholesale market in the Rest of Europe increased by
20 ktonnes, to 1.05 mmtonnes, or 1.9%, primarily reflecting the
increase in sales in the Czech Republic.
- 14 -
Summarized group profit and loss account
(million euro) |
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
21,416 | Net sales from operations | 23,584 | 21,913 | (7.1 | ) | |||||||
302 | Other income and revenues | 209 | 281 | 34.4 | ||||||||
(15,874 | ) | Operating expenses | (16,739 | ) | (15,462 | ) | 7.6 | |||||
(184 | ) | of which non recurring items | ||||||||||
(1,887 | ) | Depreciation, amortisation and impairments | (1,459 | ) | (1,627 | ) | (11.5 | ) | ||||
3,957 | Operating profit | 5,595 | 5,105 | (8.8 | ) | |||||||
52 | Net financial income (expense) | 42 | (133 | ) | .. | |||||||
157 | Net income from investments | 240 | 202 | (15.8 | ) | |||||||
4,166 | Profit before income taxes | 5,877 | 5,174 | (12.0 | ) | |||||||
(2,468 | ) | Income taxes | (2,747 | ) | (2,431 | ) | 11.5 | |||||
59.2 | Tax rate (%) | 46.7 | 47.0 | .. | ||||||||
1,698 | Net profit | 3,130 | 2,743 | (12.4 | ) | |||||||
pertaining to: | ||||||||||||
1,520 | - Eni | 2,974 | 2,588 | (13.0 | ) | |||||||
178 | - minority interest | 156 | 155 | (0.6 | ) | |||||||
1,520 | Net profit pertaining to Eni | 2,974 | 2,588 | (13.0 | ) | |||||||
213 | Exclusion of inventory holding (gain) loss | (59 | ) | 97 | ||||||||
622 | Exclusion of special items: | 39 | (5 | ) | ||||||||
of which: | ||||||||||||
184 | - non-recurring items | |||||||||||
438 | - other special items | 39 | (5 | ) | ||||||||
2,355 | Eni's adjusted net profit (1) | 2,954 | 2,680 | (9.3 | ) |
(1) | Adjusted operating profit and net profit are before inventory holding gains or losses and special items. For an explanation of these measure and reconciliation of adjusted operating profit and net profit to reported operating profit and net profit see below. |
- 15 -
NON-GAAP Measures
Reconciliation of reported operating profit and net profit to
results on an adjusted basis
Management evaluates Group and business performance on the
basis of adjusted operating profit and adjusted net profit, which
are arrived at by excluding inventory holding gains or losses and
special items. Further, finance charges on finance debt, interest
income, charges or income deriving from the fair value evaluation
of derivative financial instruments held for trading purposes,
and exchange rate differences are excluded when determining
adjusted net profit of each business segment.
The taxation effect of such items excluded from adjusted net
profit is determined based on the specific rate of taxes
applicable to each item, with the exception for finance charges
or income, to which the Italian statutory tax rate of 33% is
applied.
Adjusted operating profit and adjusted net profit are non-GAAP
financial measures under either IFRS, or U.S. GAAP. Management
includes them in order to facilitate a comparison of base
business performance across periods and allow financial analysts
to evaluate Enis trading performance on the basis of their
forecasting models. In addition, management uses segmental
adjusted net profit when calculating return on average capital
employed (ROACE) by each business segment.
The following is a description of items which are excluded from
the calculation of adjusted results.
Inventory holding gain or loss is the difference
between the cost of sales of the volumes sold in the period based
on the cost of supplies of the same period and the cost of sales
of the volumes sold calculated using the weighted average cost
method of inventory accounting.
Special items include certain relevant income or
charges pertaining to either: (i) infrequent or unusual events
and transactions, being identified as non-recurring items under
such circumstances; or (ii) certain events or transactions which
are not considered to be representative of the ordinary course of
business, as in the case of environmental provisions,
restructuring charges, asset impairments or write ups and gains
or losses on divestments even though they occurred in past
periods or are likely to occur in future ones. As provided for in
Decision No. 15519 of July 27, 2006 of the Italian market
regulator (CONSOB), non recurring material income or charges are
to be clearly reported in the managements discussion and
financial tables.
Finance charges or income related to net borrowings
excluded from the adjusted net profit of business segments are
comprised of interest charges on finance debt and interest income
earned on cash and cash equivalents not related to operations. In
addition gains or losses on the fair value evaluation of
derivative financial instruments held for trading purposes and
exchange rate differences are excluded from the adjusted net
profit of business segments.
Therefore, the adjusted net profit of business segments includes
finance charges or income deriving from certain segment-operated
assets, i.e., interest income on certain receivable financing and
securities related to operations and finance charge pertaining to
the accretion of certain provisions recorded on a discounted
basis (as in the case of the asset retirement obligations in the
Exploration & Production division).
Finance charges or interest income and related taxation effects
excluded from the adjusted net profit of the business segments
are allocated on the aggregate Corporate and financial companies.
For a reconciliation of adjusted operating profit and adjusted
net profit to reported operating profit and reported net profit
see tables below.
- 16 -
First Quarter 2007 | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized profit in inventory |
Group | |||||||||
(million euro) |
Reported operating profit | 3,132 | 1,641 | (10 | ) | 115 | 176 | (16 | ) | (38 | ) | 105 | 5,105 | |||||||||||||||
Exclusion of inventory holding (gains) losses | 40 | 112 | 3 | 155 | |||||||||||||||||||||||
Exclusion of special items: | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | |||||||||||||||||||||||||||
Other special (income) charges: | 2 | 18 | 4 | (34 | ) | 3 | (7 | ) | |||||||||||||||||||
environmental charges | 17 | 17 | |||||||||||||||||||||||||
asset impairments | 3 | 3 | |||||||||||||||||||||||||
provision for redundancy incentives | 2 | 1 | 4 | 3 | 10 | ||||||||||||||||||||||
other | (37 | ) | (37 | ) | |||||||||||||||||||||||
Special items of operating profit | 2 | 18 | 4 | (34 | ) | 3 | (7 | ) | |||||||||||||||||||
Adjusted operating profit | 3,132 | 1,683 | 120 | 122 | 176 | (50 | ) | (35 | ) | 105 | 5,253 | ||||||||||||||||
Net financial (expense) income (*) | (35 | ) | 3 | (101 | ) | (133 | ) | ||||||||||||||||||||
Net income from investments (*) | 10 | 115 | 51 | 26 | 202 | ||||||||||||||||||||||
Income taxes (*) | (1,698 | ) | (642 | ) | (58 | ) | (43 | ) | (57 | ) | 50 | (39 | ) | (2,487 | ) | ||||||||||||
Tax rate (%) | 54.7 | 35.6 | 33.9 | 46.7 | |||||||||||||||||||||||
Adjusted net profit | 1,409 | 1,159 | 113 | 79 | 145 | (50 | ) | (86 | ) | 66 | 2,835 | ||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 155 | ||||||||||||||||||||||||||
- Eni's adjusted net profit | 2,680 | ||||||||||||||||||||||||||
Eni's reported net profit | 2,588 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 97 | ||||||||||||||||||||||||||
Exclusion of special items | (5 | ) | |||||||||||||||||||||||||
- non-recurring (income) charges | |||||||||||||||||||||||||||
- other special (income) charges | (5 | ) | |||||||||||||||||||||||||
Eni's adjusted net profit | 2,680 |
(*) | Excluding special items. |
- 17 -
First Quarter 2006 | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized profit in inventory |
Group | |||||||||
(million euro) |
Reported operating profit | 4,308 | 1,199 | 89 | 39 | 78 | (65 | ) | (51 | ) | (2 | ) | 5,595 | |||||||||||||||
Exclusion of inventory holding (gains) losses | (30 | ) | (47 | ) | (17 | ) | (94 | ) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | |||||||||||||||||||||||||||
Other special (income) charges: | (57 | ) | 34 | 47 | 1 | 2 | 5 | 32 | |||||||||||||||||||
environmental charges | 20 | 44 | 64 | ||||||||||||||||||||||||
asset impairments | 3 | 3 | |||||||||||||||||||||||||
gains on disposal of assets | (57 | ) | (57 | ) | |||||||||||||||||||||||
provisions to the reserve for contingencies | 1 | 2 | 3 | ||||||||||||||||||||||||
provision for redundancy incentives | 14 | 5 | 5 | 24 | |||||||||||||||||||||||
other | (3 | ) | (1 | ) | (1 | ) | (5 | ) | |||||||||||||||||||
Special items of operating profit | (57 | ) | 34 | 47 | 1 | 2 | 5 | 32 | |||||||||||||||||||
Adjusted operating profit | 4,251 | 1,203 | 89 | 23 | 78 | (63 | ) | (46 | ) | (2 | ) | 5,533 | |||||||||||||||
Net financial (expense) income (*) | (17 | ) | 6 | 53 | 42 | ||||||||||||||||||||||
Net income from investments (*) | 10 | 137 | 47 | 41 | 5 | 240 | |||||||||||||||||||||
Income taxes (*) | (2,149 | ) | (467 | ) | (50 | ) | (7 | ) | (32 | (1 | ) | 1 | (2,705 | ) | |||||||||||||
Tax rate (%) | 50.6 | 34.7 | 36.8 | 46.5 | |||||||||||||||||||||||
Adjusted net profit | 2,095 | 879 | 86 | 16 | 87 | (58 | ) | 6 | (1 | ) | 3,110 | ||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 156 | ||||||||||||||||||||||||||
- Eni's adjusted net profit | 2,954 | ||||||||||||||||||||||||||
Eni's reported net profit | 2,974 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (59 | ) | |||||||||||||||||||||||||
Exclusion of special items | 39 | ||||||||||||||||||||||||||
- non-recurring (income) charges | |||||||||||||||||||||||||||
- other special (income) charges | 39 | ||||||||||||||||||||||||||
Eni's adjusted net profit | 2,954 |
(*) | Excluding special items. |
- 18 -
Fourth Quarter 2006 | E&P | G&P | R&M | Petrochemicals | Engineering & Construction |
Other activities | Corporate and financial companies | Impact of unrealized profit in inventory |
Group | |||||||||
(million euro) |
Reported operating profit | 3,141 | 1,303 | (386 | ) | 72 | 149 | (221 | ) | (89 | ) | (12 | ) | 3,957 | ||||||||||||||
Exclusion of inventory holding (gains) losses | (41 | ) | 386 | (4 | ) | 341 | |||||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 109 | 13 | 62 | 184 | |||||||||||||||||||||||
Other special (income) charges: | 54 | 7 | 39 | 73 | 3 | 82 | 36 | 294 | |||||||||||||||||||
environmental charges | 2 | 27 | 62 | 11 | 102 | ||||||||||||||||||||||
asset impairments | 51 | 13 | 50 | 1 | 12 | 127 | |||||||||||||||||||||
gains on disposal of assets | (7 | ) | (7 | ) | |||||||||||||||||||||||
provisions to the reserve for contingencies | 4 | 11 | 15 | ||||||||||||||||||||||||
provision for redundancy incentives | 10 | 15 | 30 | 14 | 2 | 1 | 29 | 101 | |||||||||||||||||||
other | (10 | ) | (35 | ) | (2 | ) | 7 | (4 | ) | (44 | ) | ||||||||||||||||
Special items of operating profit | 54 | 7 | 148 | 86 | 3 | 144 | 36 | 478 | |||||||||||||||||||
Adjusted operating profit | 3,195 | 1,269 | 148 | 154 | 152 | (77 | ) | (53 | ) | (12 | ) | 4,776 | |||||||||||||||
Net financial (expense) income (*) | (22 | ) | (1 | ) | (7 | ) | 87 | 57 | |||||||||||||||||||
Net income from investments (*) | (18 | ) | 97 | 31 | 1 | 47 | (1 | ) | 1 | 158 | |||||||||||||||||
Income taxes (*) | (1,851 | ) | (492 | ) | (64 | ) | (14 | ) | (68 | ) | 22 | 9 | (2,458 | ) | |||||||||||||
Tax rate (%) | 58.7 | 36.0 | 35.8 | 49.2 | |||||||||||||||||||||||
Adjusted net profit | 1,304 | 873 | 115 | 141 | 131 | (85 | ) | 57 | (3 | ) | 2,533 | ||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 178 | ||||||||||||||||||||||||||
- Eni's adjusted net profit | 2,355 | ||||||||||||||||||||||||||
Eni's reported net profit | 1,520 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 213 | ||||||||||||||||||||||||||
Exclusion of special items | 622 | ||||||||||||||||||||||||||
- non-recurring (income) charges | 184 | ||||||||||||||||||||||||||
- other special (income) charges | 438 | ||||||||||||||||||||||||||
Eni's adjusted net profit | 2,355 |
(*) | Excluding special items. |
- 19 -
Analysis of special items
(million euro) |
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
184 | Non-recurring (income) charges | |||||||||||||
294 | Other special charges: | 32 | (7 | ) | (39 | ) | ||||||||
102 | environmental charges | 64 | 17 | (47 | ) | |||||||||
127 | asset impairments | 3 | 3 | |||||||||||
(7 | ) | gains on disposal of assets | (57 | ) | 57 | |||||||||
15 | provisions to the reserve for contingencies | 3 | (3 | ) | ||||||||||
101 | provision for redundancy incentives | 24 | 10 | (14 | ) | |||||||||
(44 | ) | other | (5 | ) | (37 | ) | (32 | ) | ||||||
478 | Special items of operating profit | 32 | (7 | ) | (39 | ) | ||||||||
5 | Net financial (expense) income | |||||||||||||
1 | Net income from investments | |||||||||||||
of which: | ||||||||||||||
(73 | ) | gain on Galp Energia SGPS SA (disposal of gas assets to Rede Electrica National) | ||||||||||||
138 | Income taxes | 7 | 2 | (5 | ) | |||||||||
of which: | ||||||||||||||
179 | wind-fall tax Algeria | |||||||||||||
2 | legal proceeding in Venezuela | 38 | (38 | ) | ||||||||||
622 | Total special items of net profit | 39 | (5 | ) | (44 | ) | ||||||||
Adjusted net profit by division
(million euro) |
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
3,195 | Exploration & Production | 4,251 | 3,132 | (26.3 | ) | |||||||||
1,269 | Gas & Power | 1,203 | 1,683 | 39.9 | ||||||||||
148 | Refining & Marketing | 89 | 120 | 34.8 | ||||||||||
154 | Petrochemicals | 23 | 122 | 430.4 | ||||||||||
152 | Engineering & Construction | 78 | 176 | 125.6 | ||||||||||
(77 | ) | Other activities | (63 | ) | (50 | ) | (20.6 | ) | ||||||
(53 | ) | Corporate and financial companies | (46 | ) | (35 | ) | (23.9 | ) | ||||||
(12 | ) | Impact of unrealized profit in inventory | (2 | ) | 105 | |||||||||
4,776 | 5,533 | 5,253 | (5.1 | ) | ||||||||||
- 20 -
Summarized Group balance sheet (a)
Summarized group balance sheet aggregates the amount of assets
and liabilities derived from the statutory balance sheet in
accordance with functional criteria which consider the enterprise
conventionally divided into the three fundamental areas focusing
on resource investments, operations and financing. Management
believes that this Summarized group balance sheet is useful
information in assisting investors to assess Enis capital
structure and to analyse its sources of funds and investments in
fixed assets and working capital. Management uses the Summarized
group balance sheet to calculate key ratios such as return on
capital employed (ROACE) and the proportion of net borrowings to
shareholders equity (leverage) intended to evaluate whether
Enis financing structure is sound and well-balanced.
(million euro) |
Dec. 31, 2006 | Mar. 31, 2007 | Change | ||||
Fixed assets | |||||||||
Property, plant and equipment, net | 44,312 | 44,435 | 123 | ||||||
Other tangible assets | 629 | 622 | (7 | ) | |||||
Inventories - compulsory stock | 1,827 | 1,711 | (116 | ) | |||||
Intangible assets, net | 3,753 | 3,885 | 1321 | ||||||
Investments, net | 4,246 | 4,373 | 127 | ||||||
Accounts receivable financing and securities related to operations | 557 | 515 | (42 | ) | |||||
Net accounts payable in relation to capital expenditure | (1,090 | ) | (897 | ) | 193 | ||||
54,234 | 54,644 | 410 | |||||||
Net working capital | |||||||||
Inventories | 4,752 | 4,888 | 136 | ||||||
Trade accounts receivable | 15,230 | 15,006 | (224 | ) | |||||
Trade accounts payable | (10,528 | ) | (9,692 | ) | 836 | ||||
Taxes payable and reserve for net deferred income tax liabilities | (5,396 | ) | (7,306 | ) | (1,910 | ) | |||
Reserve for contingencies | (8,614 | ) | (8,335 | ) | 279 | ||||
Other operating assets and liabilities (b) | 641 | (1,230 | ) | (589 | ) | ||||
(5,197 | ) | (6,669 | ) | (1,472 | ) | ||||
Employee termination indemnities and other benefits | (1,071 | ) | (1,032 | ) | 39 | ||||
Capital employed, net | 47,966 | 46,943 | (1,023 | ) | |||||
Shareholders' equity including minority interests | 41,199 | 43,091 | 1,892 | ||||||
Net borrowings | 6,767 | 3,852 | (2,915 | ) | |||||
Total liabilities and shareholders' equity | 47,966 | 46,943 | (1,023 | ) | |||||
(a) | For a reconciliation to the statutory balance sheet see paragraph "Reconciliation of Summarized Group Balance Sheet and Statement of Cash Flows to statutory schemes" pages 77-78 in Eni's Annual Report 2006. | |
(b) | Include operating financing receivables and securities related to operations for euro 220 million (euro 249 million at December 31, 2006) and securities covering technical reserves of Enis insurance activities for euro 451 million (euro 417 million at December 31, 2006). Other current liabilities net increased by euro 589 million compared with December 31, 2006. This increase was due to a euro 575 million loss recognized on the fair value evaluation of certain financial derivatives instruments. The Group entered into such transactions in order to hedge cash flow expected in the 2008-2011 period from the sale of approximately 2% of Enis proved hydrocarbon reserves as of 2006 year-end in connection with its purchase of certain oil producing assets and proved and unproved property onshore Congo and in the Gulf of Mexico finalized in February and April 2007, respectively. In light of this, Eni put in place certain forward sale contracts at a fixed price and call and put options with the same date of exercise. These options can be exercised in presence of crude oil market prices higher or lower compared with contractual prices. Gain and losses relating to these cash flow hedges are taken to reserves. This treatment does not apply to the time value component arising from market price fluctuations within the range provided by these call and put options which is recognized in the profit and loss account under the item net financial expenses because the hedging relationship is ineffective. |
- 21 -
Leverage and net borrowings
Leverage is a measure of a companys level of indebtedness,
calculated as the ratio between net borrowings which is
calculated by excluding cash and cash equivalents and certain
very liquid assets from financial debt and shareholders
equity, including minority interests. Management makes use of
leverage in order to assess the soundness and efficiency of the
Group balance sheet in terms of optimal mix between net
borrowings and net equity, and to carry out benchmark analysis
with industry standards. In the medium term, management plans to
maintain a strong financial structure targeting a level of
leverage up to 0.40.
(million euro) |
Dec. 31, 2006 | Mar. 31, 2007 | Change | ||||
Total debt | 11,699 | 16,470 | 4,771 | ||||||
- Short term debt | 4,290 | 9,670 | 5,380 | ||||||
- Long term debt | 7,409 | 6,800 | (609 | ) | |||||
Cash and cash equivalents | (3,985 | ) | (6,670 | ) | (2,738 | ) | |||
Securities not related to operations | (552 | ) | (270 | ) | 282 | ||||
Non-operating financing receivables (a) | (395 | ) | (5,625 | ) | (5,230 | ) | |||
Net borrowings | 6,767 | 3,852 | (2,915 | ) | |||||
Shareholders' equity including minority interest | 41,199 | 43,091 | 1,892 | ||||||
Leverage | 0.16 | 0.09 | (0.07 | ) |
(a) | The increase of euro 5,230 million is mainly referred to the need to collect the necessary funds to participate in a bid to purchase ex-Yukos gas assets. |
Changes in shareholders equity
(million euro) |
Shareholders' equity at December 31, 2006 | 41,199 | ||||
Net profit for the period | 2,743 | ||||
Reserve for cash flow hedges | (301 | ) | |||
Shares repurchased | (203 | ) | |||
Issue of ordinary share capital for employee share incentive schemes | 8 | ||||
Dividends paid by consolidated subsidiaries to shareholders | (3 | ) | |||
Effect on equity of the shares repurchased by consolidated subsidiaries (Snam Rete Gas/Saipem) | (140 | ) | |||
Exchange differences from translation of financial statements denominated in currencies other than the euro | (223 | ) | |||
Other changes | 11 | ||||
Total changes | 1,892 | ||||
Shareholders' equity at March 31, 2007 | 43,091 |
- 22 -
ROACE (Return On Average Capital Employed)
Return on Average Capital Employed for the Group, on an adjusted
basis is the return on Group average capital invested, calculated
as the ratio between net adjusted profit before minority
interests, plus net finance charges on net borrowings, less the
related tax effect and net average capital employed. The tax rate
applied on finance charges is the Italian statutory tax rate of
33%. The capital invested as of period-end used for the
calculation of net average capital invested is obtained by
deducting inventory gains or losses as of the period, rectified
from the related tax effect.
ROACE by business segment is determined as the ratio between
adjusted net profit and net average capital invested pertaining
to each business segment and rectifying the net capital invested
as of period-end, from net inventory gains or losses (after
applying the business segment specific tax rate).
(million euro) |
Calculated on a 12-month period ending on | E&P | G&P | R&M | Group | ||||
March 31, 2007 | ||||||||
Adjusted net profit | 6,593 | 3,142 | 656 | 10,743 | |||||
Exclusion of after-tax finance expenses/interest income | 50 | ||||||||
Adjusted net profit unlevered | 6,593 | 3,142 | 656 | 10,793 | |||||
Capital employed, net | |||||||||
- at the beginning of period | 19,702 | 17,656 | 5,556 | 47,843 | |||||
- at the end of period | 17,143 | 18,985 | 5,830 | 47,132 | |||||
Average capital employed, net | 18,423 | 18,321 | 5,693 | 47,488 | |||||
ROACE adjusted (%) | 35.8 | 17.2 | 11.5 | 22.7 |
(million euro) |
Calculated on a 12-month period ending on | E&P | G&P | R&M | Group | ||||
March 31, 2006 | ||||||||
Adjusted net profit | 6,931 | 2,427 | 908 | 10,303 | |||||
Exclusion of after-tax finance expenses/interest income | (80 | ) | |||||||
Adjusted net profit unlevered | 6,931 | 2,427 | 908 | 10,223 | |||||
Capital employed, net | |||||||||
- at the beginning of period | 18,708 | 18,283 | 4,247 | 46,623 | |||||
- at the end of period | 19,702 | 17,590 | 4,950 | 47,147 | |||||
Average capital employed, net | 19,205 | 17,937 | 4,599 | 46,885 | |||||
ROACE adjusted (%) | 36.1 | 13.5 | 19.7 | 21.8 |
(million euro) |
Calculated on a 12-month period ending on | E&P | G&P | R&M | Group | ||||
December 31, 2006 | ||||||||
Adjusted net profit | 7,279 | 2,862 | 629 | 11,018 | |||||
Exclusion of after-tax finance expenses/interest income | 46 | ||||||||
Adjusted net profit unlevered | 7,279 | 2,862 | 629 | 11,064 | |||||
Capital employed, net | |||||||||
- at the beginning of period | 20,206 | 18,978 | 5,993 | 49,692 | |||||
- at the end of period | 18,590 | 18,864 | 5,766 | 47,999 | |||||
Average capital employed, net | 19,398 | 18,921 | 5,880 | 48,846 | |||||
ROACE adjusted (%) | 37.5 | 15.1 | 10.7 | 22.7 |
- 23 -
Summarized Group cash flow statement
Enis summarized group cash flow statement derives from the
statutory statement of cash flows. It allows to create a link
between changes in cash and cash equivalents (deriving from the
statutory cash flows statement) occurring from the beginning of
period to the end of period and changes in net borrowings
(deriving from the summarised cash flow statement) occurring from
the beginning of period to the end of period. The measure
enabling to make such a link is represented by free cash
flow which is the cash in excess of capital expenditure
needs. Starting from free cash flow it is possible to determine
either: (i) changes in cash and cash equivalents for the period
by adding/deducting cash flows relating to financing
debts/receivables (issuance/repayment of debt and receivables
related to financing activities), shareholders equity
(dividends paid, net repurchase of own shares, capital issuance)
and the effect of changes in consolidation and of exchange
differences; (ii) changes in net borrowings for the period by
adding/deducting cash flows relating to shareholders equity
and the effect of changes in consolidation and of exchange
differences.
SUMMARIZED GROUP CASH FLOW STATEMENT (1)
(million euro) |
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
1,698 | Net profit | 3,130 | 2,743 | (387 | ) | |||||||||
adjustments to reconcile to cash generated from operating profit before changes in working capital: | ||||||||||||||
1,568 | - amortisation and depreciation and other non monetary items | 1,321 | 1,251 | (70 | ) | |||||||||
(4 | ) | - net gains on disposal of assets | (63 | ) | (14 | ) | 49 | |||||||
2,314 | - dividends, interest, taxes and other changes | 2,843 | 2,397 | (446 | ) | |||||||||
5,576 | Cash generated from operating profit before changes in working capital | 7,231 | 6,377 | (854 | ) | |||||||||
(847 | ) | Changes in working capital related to operations | 131 | 445 | 314 | |||||||||
(2,951 | ) | Dividends received, taxes paid, interest (paid) received | (1,499 | ) | (1,259 | ) | 240 | |||||||
1,778 | Net cash provided by operating activities | 5,863 | 5,563 | (300 | ) | |||||||||
(2,944 | ) | Capital expenditure | (1,340 | ) | (2,013 | ) | (673 | ) | ||||||
(19 | ) | Investments | (19 | ) | (10 | ) | 9 | |||||||
201 | Disposals | 85 | 12 | (73 | ) | |||||||||
407 | Other cash flow related to capital expenditure, investments and disposals | (108 | ) | (152 | ) | (44 | ) | |||||||
(577 | ) | Free cash flow | 4,481 | 3,400 | (1,081 | ) | ||||||||
(247 | ) | Borrowings (repayment) of debt related to financing activities | 380 | (5,035 | ) | (5,415 | ) | |||||||
839 | Changes in short and long-term financial debt | (1,851 | ) | 4,887 | 6,738 | |||||||||
(2,412 | ) | Dividends paid and changes in minority interests and reserves | (356 | ) | (445 | ) | (89 | ) | ||||||
(77 | ) | Effect of changes in consolidation and exchange differences | (30 | ) | (69 | ) | (39 | ) | ||||||
(2,474 | ) | NET CASH FLOW FOR THE PERIOD | 2,624 | 2,738 | 114 | |||||||||
CHANGE IN NET BORROWINGS
(million euro) |
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
(577 | ) | Free cash flow | 4,481 | 3,400 | (1,081 | ) | ||||||||
Net borrowings of acquired companies | ||||||||||||||
Net borrowings of divested companies | 46 | (46 | ) | |||||||||||
72 | Exchange differences on net borrowings and other changes | 13 | (40 | ) | (53 | ) | ||||||||
(2,412 | ) | Dividends paid and changes in minority interests and reserves | (356 | ) | (445 | ) | (89 | ) | ||||||
(2,917 | ) | CHANGE IN NET BORROWINGS | 4,184 | 2,915 | (1,269 | ) | ||||||||
(1) | For a reconciliation of the summarised group cash flow statement to the statutory cash flow statement see 2006 Eni's Annual Report "Reconciliation of summarised group balance sheet and cash flow statement to statutory schemes" pages 79-80. |
- 24 -
Capital expenditure
Exploration & Production
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
139 | Acquisitions of proved and unproved property | 73 | .. | |||||||||||
139 | Italy | .. | ||||||||||||
North Africa | 5 | .. | ||||||||||||
West Africa | .. | |||||||||||||
Rest of world | 68 | .. | ||||||||||||
706 | Exploration | 173 | 373 | .. | ||||||||||
38 | Italy | 23 | 34 | 47.8 | ||||||||||
91 | North Africa | 48 | 83 | 72.9 | ||||||||||
366 | West Africa | 47 | 68 | 44.7 | ||||||||||
75 | North Sea | 15 | 75 | .. | ||||||||||
136 | Rest of world | 40 | 113 | .. | ||||||||||
1,056 | Development | 777 | 909 | 17.0 | ||||||||||
133 | Italy | 85 | 107 | 25.9 | ||||||||||
209 | North Africa | 140 | 188 | 34.3 | ||||||||||
294 | West Africa | 138 | 266 | 92.8 | ||||||||||
121 | North Sea | 94 | 89 | (5.3 | ) | |||||||||
299 | Rest of world | 320 | 259 | (19.1 | ) | |||||||||
36 | Other | 11 | 11 | .. | ||||||||||
1,937 | 961 | 1,366 | 42.1 |
Gas & Power
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
397 | Italy | 140 | 154 | 10.0 | ||||||||||
56 | Outside Italy | 11 | 67 | .. | ||||||||||
453 | 151 | 221 | 46.4 | |||||||||||
22 | Market | 7 | 5 | (28.6 | ) | |||||||||
Italy | .. | |||||||||||||
22 | Outside Italy | 7 | 5 | (28.6 | ) | |||||||||
54 | Distribution | 27 | 25 | (7.4 | ) | |||||||||
287 | Transport | 91 | 144 | 58.2 | ||||||||||
253 | Italy | 87 | 82 | (5.7 | ) | |||||||||
34 | Outside Italy | 4 | 62 | .. | ||||||||||
90 | Power generation | 26 | 47 | 80.8 | ||||||||||
453 | 151 | 221 | 46.4 |
Refining & Marketing
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
241 | Italy | 79 | 123 | 55.7 | ||||||||||
31 | Outside Italy | 16 | 11 | (31.3 | ) | |||||||||
272 | 95 | 134 | 41.1 | |||||||||||
139 | Refining and Supply and Logistics | 67 | 104 | 55.2 | ||||||||||
139 | Italy | 67 | 104 | 55.2 | ||||||||||
Outside Italy | .. | |||||||||||||
90 | Marketing | 25 | 30 | 20.0 | ||||||||||
59 | Italy | 9 | 19 | .. | ||||||||||
31 | Outside Italy | 16 | 11 | (31.3 | ) | |||||||||
43 | Other activities | 3 | .. | |||||||||||
272 | 95 | 134 | 41.1 |
- 25 -
Exploration & Production
Daily production of oil and natural gas by region
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
1,796 | Daily production of oil and natural gas (a) | (kboe/d) | 1,827 | 1,734 | (5.1 | ) | ||||||||
232 | Italy | 247 | 223 | (9.7 | ) | |||||||||
571 | North Africa | 541 | 566 | 4.6 | ||||||||||
372 | West Africa | 382 | 337 | (11.8 | ) | |||||||||
291 | North Sea | 298 | 287 | (3.7 | ) | |||||||||
330 | Rest of world | 359 | 321 | (10.6 | ) | |||||||||
159.2 | Oil and natural gas production sold (a) | (mmboe) | 159.5 | 150.1 | (5.9 | ) |
Daily production of liquids by region
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
1,079 | Production of liquids (a) | (kbbl/d) | 1,143 | 1,030 | (9.9 | ) | ||||||||
80 | Italy | 82 | 77 | (6.1 | ) | |||||||||
334 | North Africa | 325 | 328 | 0.9 | ||||||||||
315 | West Africa | 339 | 288 | (15.0 | ) | |||||||||
181 | North Sea | 188 | 170 | (9.6 | ) | |||||||||
169 | Rest of world | 209 | 167 | (20.1 | ) |
Daily production of natural gas by region
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
4,132 | Production of natural gas (a) | (mmcf/d) | 3,920 | 4,061 | 3.6 | |||||||||
883 | Italy | 954 | 848 | (11.1 | ) | |||||||||
1,377 | North Africa | 1,236 | 1,377 | 11.4 | ||||||||||
318 | West Africa | 247 | 283 | 14.3 | ||||||||||
636 | North Sea | 636 | 671 | 5.6 | ||||||||||
918 | Rest of world | 847 | 882 | 4.2 |
(a) | Includes Eni's share of production of equity-accounted entities. |
- 26 -
Gas & Power
Natural gas sales
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
14.09 | Italy to third parties (*) | 17.47 | 15.41 | (11.8 | ) | |||||||||
3.45 | Wholesalers (selling companies) | 5.06 | 4.62 | (8.7 | ) | |||||||||
0.56 | Gas release | 0.59 | 0.49 | (16.9 | ) | |||||||||
10.08 | End Customers | 11.82 | 10.30 | (12.9 | ) | |||||||||
3.50 | Industries | 3.80 | 3.33 | (12.4 | ) | |||||||||
4.30 | Power generation | 4.27 | 3.93 | (8.0 | ) | |||||||||
2.28 | Residential | 3.75 | 3.04 | (18.9 | ) | |||||||||
1.55 | Own consumption (*) | 1.47 | 1.39 | (5.4 | ) | |||||||||
8.14 | Rest of Europe (*) | 8.57 | 7.90 | (7.8 | ) | |||||||||
0.12 | Outside Europe | 0.16 | 0.10 | (37.5 | ) | |||||||||
23.90 | Total sales to third parties and own consumption | 27.67 | 24.80 | (10.4 | ) | |||||||||
1.97 | Sales of Eni's affiliates (net to Eni) | 2.41 | 2.27 | (5.8 | ) | |||||||||
0.01 | Italy (*) | 0.01 | 0.01 | |||||||||||
1.83 | Rest of Europe (*) | 2.33 | 2.10 | (9.9 | ) | |||||||||
0.13 | Outside Europe | 0.07 | 0.16 | .. | ||||||||||
25.87 | Total sales and own consumption (G&P) | 30.08 | 27.07 | (10.0 | ) | |||||||||
1.06 | Upstream in Europe | 1.12 | 1.07 | (4.5 | ) | |||||||||
26.93 | Worldwide sales | 31.20 | 28.14 | (9.8 | ) | |||||||||
26.68 | Total sales in Europe | 30.97 | 27.88 | (10.0 | ) | |||||||||
25.62 | G&P in Europe (*) | 29.85 | 26.81 | (10.2 | ) | |||||||||
1.06 | Upstream in Europe | 1.12 | 1.07 | (4.5 | ) |
(*) | Market sector denoted with an asterisk are included within "Total sales in Europe". |
- 27 -
PRESS RELEASE
Eni S.p.A.
Registered Office: Piazzale Enrico Mattei, No. 1, Rome - Italy
Company Share capital euro 4,005,358,876.00 fully paid up
Rome Companies Register, Tax Identification Number 00484960588
VAT Number 00905811006, R.E.A. Rome No. 756453
Ordinary and Extraordinary Shareholders Meeting Resolutions
Eni S.p.A. Ordinary and Extraordinary Shareholders Meeting held on May 24, 2007 resolved to:
Eni 2006 Financial Statements and Sustainability Report
Eni S.p.A. Financial Statements at December 31, 2006 approved by the Shareholders Meeting, Eni consolidated Financial Statements at December 31, 2006, Eni Portugal Investment S.p.A. and Società Finanziaria Eni - Enifin S.p.A. financial statements at December 31, 2006 are available at Eni S.p.A. Registered Office and the Borsa Italiana S.p.A. (the Italian Stock Exchange: www.borsaitaliana.it).
The minutes of the Meeting will be available within June 8, 2007 at Eni S.p.A. Registered Office and the Borsa Italiana S.p.A. (the Italian Stock Exchange: www.borsaitaliana.it).
It is also available at Eni S.p.A. Registered Office and the Borsa Italiana S.p.A. (the Italian Stock Exchange: www.borsaitaliana.it) the Sustainability Report 2006.
The above-mentioned documents are available also on www.eni.it and may be requested by e-mail at segreteriasocietaria.azionisti@eni.it or by calling the Toll-Free number 800 940 924 for calls from Italy and 800 11 22 34 56 for calls from outside Italy.
Payment of Year 2006 final Dividend
Eni S.p.A. Shareholders Meeting resolved to pay final dividends as from June 21, 2007, coupon No. 8, being the ex-dividend date June 18, 2007. Therefore, as of this last date, Eni shares will be traded without the right to the payment of 2006 final dividend.
In order to exercise the rights incorporated in the shares owned, Shareholders whose shares are not yet in uncertificated form shall previously deliver said shares to a financial intermediary for their deposit with Monte Titoli S.p.A. (the Italian Securities Register Centre) and their subsequent dematerialisation.
The payment of dividends to Beneficial Owners of ADRs, each of them representing two Eni shares, listed on the New York Stock Exchange, will be executed through JPMorgan Chase Bank, N.A..
Company contacts:
Press Office: Phone +39 02.52031875 -
+39 06.5982398
Switchboard: +39-0659821
ufficio.stampa@eni.it
segreteriasocietaria.azionisti@eni.it
investor.relations@eni.it
Website: www.eni.it
San Donato Milanese (Milan) - May 28, 2007 - As part of the inquiry launched last year by the Public Prosecutor Office of Milan on the instruments to assess the natural gas transport and distribution used in Italy by companies operating in the sector, today the Italian Fiscal Police sequestrated documents dating from 2003 belonging to various companies, among them are some Enis companies.
Under investigation are the so-called venturimeters, instruments always used in Italy and abroad and that do not have any impact on the assessments connected with costumers bills.
With regard to Eni Group, the companies involved are Snam Rete Gas and Italgas. Paolo Scaroni, as legal representative of the parent company Eni SpA, and other managers are under inquiry.
Company contacts:
Press Office: Phone +39 02.52031875 -
+39 06.5982398
Switchboard: +39-0659821
ufficio.stampa@eni.it
segreteriasocietaria.azionisti@eni.it
investor.relations@eni.it
Website: www.eni.it
San Donato Milanese (Milan), May 28, 2007 - Inquiry by the Public Prosecutor Office of Milan, Paolo Scaroni, Enis CEO commented:
"We are confident: the measurements under investigation receive a special attention from all the companies operating in the gas market in Italy and abroad. In fact, I myself, as soon as I arrived in Eni, gave mandate to specialized international consultants to undertake an assessment of this gas measurements procedures.
Furthermore, we are referring to measurements on non-booked gas, which is the difference between gas that Eni buys from its suppliers and the one that Eni then sells to distributors. This difference represents so far, for our company, a net loss of some hundred million cubic meters of gas per year. Its important for me to remind that gas measurements for the retail market are carried out in strict compliance with the indications given by the Authority for Energy and Gas and by the competent offices of the Ministry of Economic Development".
Company contacts:
Press Office: Phone +39 02.52031875 -
+39 06.5982398
Switchboard: +39-0659821
ufficio.stampa@eni.it
segreteriasocietaria.azionisti@eni.it
investor.relations@eni.it
Website: www.eni.it
Eni completes acquisition of Maurel & Proms assets in Congo
San Donato Milanese (Milan), May 30, 2007 - Eni announces that it has today completed the acquisition of Maurel & Prom assets in the Republic of Congo. Eni has obtained the operatorship of the MBoundi (Eni equity 43.1%) and Kouakouala "A" (66.67%) concessions and of the Le Kouilou exploration permit (48%).
Through the development of the MBoundi field, which has oil-in-place estimated at 1.4 billion barrels and 2P reserves amounting to 320 million barrels, Enis equity production in Congo will rise from 67,000 barrels per day (bpd) in 2006 to approximately 100,000 bpd in 2010.
In the development of these new fields, Eni intends to create important synergies with existing activities in the country. By adopting the most advanced technologies, such as an intense drilling programme of water injection wells, Eni also aims to improve the oil recovery factor of the acquired fields and to develop the exploration potential of Le Kouilou permit.
As part of its sustainability strategy, Eni has also signed a "Protocole dAccord" with the Republic of Congo for doubling the volumes of power of the Djeno power station by installing a second 25-MW turbo-generator to be supplied with associated gas produced from the MBoundi field. This project aims at increasing the power and reliability of the local electricity system, needed for the countrys industrial development and social improvement.
Eni has been active in Congo in exploration and development activities since 1968 and has invested some 4 billion dollars to 2006.
Company contacts:
Press Office: Phone +39 02.52031875 -
+39 06.5982398
Switchboard: +39-0659821
ufficio.stampa@eni.it
segreteriasocietaria.azionisti@eni.it
investor.relations@eni.it
Website: www.eni.it
Eni: Agreement completed with Burren Energy
San Donato Milanese (Milan), May 30, 2007 - As part of the acquisition of the Maurel & Prom assets in the Republic of Congo, Eni announces that it has today completed its agreement with Burren Energy. Under this agreement Eni assigned to Burren a participating interest of 5.5% and 2% in the MBoundi concession and Le Kouilou exploration permit, respectively, at the same economic terms and conditions as the acquisition from Maurel & Prom.
Eni maintains the operatorship of the MBoundi (43.1%) and Kouakoula "A" (66.67%) concessions and Le Kouilou exploration permit (48.0%).
Company contacts:
Press Office: Phone +39 02.52031875 -
+39 06.5982398
Switchboard: +39-0659821
ufficio.stampa@eni.it
segreteriasocietaria.azionisti@eni.it
investor.relations@eni.it
Website: www.eni.it
Eni Board of Directors
San Donato Milanese (Milan), May 31, 2007 - An extra-ordinary Board of Directors was held today in Rome to examine the main points of the provision by the Power of attorney of the Republic of Milan (Procura della Repubblica di Milano) on gas measurements. In particular, the Board has examined the explanations given by the management of the companies and executive structures involved in gas transport, distribution and sale.
Taking note of the correcteness of the behaviour of Enis companies and executive structures involved in gas transport, distribution and sale, the Board has given mandate to its lawyers to supply all available information and to cooperate fully with the Prosecutor Office.
Company contacts:
Press Office: Phone +39 02.52031875 -
+39 06.5982398
Switchboard: +39-0659821
ufficio.stampa@eni.it
segreteriasocietaria.azionisti@eni.it
investor.relations@eni.it
Website: www.eni.it
Enis Fact Book is a supplement to
Enis Annual Report designed to provide supplemental
financial and operating information.
It contains certain forward-looking statements in particular
under the section Outlook regarding capital
expenditure, development andmanagement of oil and gas resources,
dividends, share repurchases, allocation of future cash flow from
operations, future operating performance, gearing, targets of
production and sale growth, new markets, and the progress and
timing of projects. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and
depend on circumstances that will or may occur in the future.
Actual results may differ from those expressed in such
statements, depending on a variety of factors, including the
timing of bringing new fields on stream; managements
ability in carrying out industrial plans and in succeeding in
commercial transactions; future levels of industry product
supply; demand and pricing; operational problems; general
economic conditions; political stability and economic growth in
relevant areas of the world; changes in laws and governmental
regulations; development and use of new technology; changes in
public expectations and other changes in business conditions; the
actions of competitors and other factors discussed elsewhere in
this document.
April 30, 2007
Eni | 2 | Activities Strategies Objectives | ||
5 | Main data | |||
Exploration & Production | 10 | Strategies | ||
10 | 2006 Highlights | |||
13 | Activity Areas | |||
35 | Main data | |||
Gas & Power | 44 | Strategies | ||
45 | 2006 Highlights | |||
46 | The Gas System | |||
47 | Activities | |||
58 | Main data | |||
Refining & Marketing | 61 | Strategies | ||
62 | 2006 Highlights | |||
63 | Activities | |||
70 | Main data | |||
Engineering & Construction | 74 | Strategies | ||
75 | Business areas | |||
80 | Main data | |||
Technological Innovation | 82 | Technological innovation | ||
Tables | 87 | Financial data | ||
102 | Employees | |||
103 | Supplemental oil and gas information | |||
121 | Energy conversion table | |||
122 | Quarterly information |
Abbreviations | /d | per day | LNG | liquefied natural gas | ||
/y | per year | LPG | liquefied petroleum gas | |||
bbbbl | billion barrels | kbbl | thousand barrels | |||
bbls | barrels | kboe | thousand barrels of oil equivalent | |||
bboe | billion barrels of oil equivalent | km | kilometers | |||
bcf | billion cubic feet | ktonnes | thousand tonnes | |||
bcm | billion cubic meters | mmbbl | million barrels | |||
boe | barrels of oil equivalent | mmboe | million barrels of oil equivalent | |||
EPC | Engineering Procurement Construction | mmcf | million cubic feet | |||
EPIC | Engineering Procurement Installation Construction | mmcm | million cubic meters | |||
FPSO | Floating Production Storage and Offloading system | mmtonnes | million tonnes | |||
FSO | Floating Storage and Offloading System | no. | number | |||
GWh | gigawatthour | NGL | Natural Gas Liquids | |||
PSA | Production Sharing Agreement | |||||
TWh | terawatthour |
ENI FACT BOOK / ENI
Activities
Strategies Objectives |
||
Eni is a major integrated
energy company, committed to growth in the activities of
finding, producing, transporting, transforming and
marketing oil and gas. In Exploration & Production, Eni boasts strong positions in some of the fastest growing oil and gas basins in the world such as the Caspian Region, North and West Africa. The quality of our assets, long-standing relationships with key host countries, and a strong pipeline of capital projects and investment opportunities will enable Eni to deliver industry-leading growth in both the short term and the long term. Eni Gas & Power division covers all phases of the gas value chain: supply, transport, distribution and marketing, resulting in a fully integrated business model. A significant installed power generation capacity enables Eni to extract further value from gas, diversifying its commercial outlets. The main feature of the Gas & Power division is its ability to generate a steady stream of earnings and cash flow leveraging on its unparalleled asset base. Eni boasts market leadership in Europe owing to a unique competitive position thanks to gas availability under long-term supply contracts and equity gas, access to infrastructure, long-term relationships with key producing countries, market knowledge and a wide portfolio of clients. These assets provide Eni with a unique platform for growth. Integration with upstream operations provides the Group with the ability to monetize its equity gas reserves and to pursue opportunities arising in the gas market. Eni is leader in the refining business and in the marketing of refined products in Italy and holds solid positions in the marketing of refined products in certain |
selected European countries.
Enis refining and marketing operations are
efficiently integrated also with the support of an array
of valuable logistic assets, as to maximize cost
economies and returns on capital employed. Integration of
Eni refineries with upstream operations further
strengthens the competitive positioning of the Refining
& Marketing Division. The significant presence in engineering and oilfield services provides Eni with the necessary competence and, expertise coupled with access to engineering skills and technologies to design and execute world scale projects, representing a key elements supporting Eni plans of growth and innovation. This business mix is unique among integrated oil and gas companies. The relevant weight of the downstream gas business ensures Eni a stable, robust stream of earnings and cash flow, virtually independent of energy price movements, thus counterbalancing the fluctuations of the oil cycle and the higher riskiness of the upstream business. The same applies to the downstream oil business. Eni key objectives are to deliver superior growth and attractive shareholder returns over the long term, leveraging on the quality of its assets and its strengths. Enis strategy is consistent with these goals, and relies upon the following guidelines:
|
- 2 -
ENI FACT BOOK / ENI
Over the next four years, Eni expects to invest
approximately euro 44.6 billion in its businesses to
support continued growth also beyond 2010, featuring the
largest investment program in Eni history.
Exploration & Production |
Eni will maintain a strong
focus on exploration activities. Investments are expected
to be concentrated on well established areas of presence,
where availability of production facilities and existing
competencies will enable Eni to readily put in production
discovered resources, capturing synergies. On the other
hand, we expect to selectively pursue high risk/high
reward opportunities arising from expansion in areas with
high mineral potential. Leveraging on the access to new
reserves and on the mineral potential of core assets, Eni
expects to fully replace produced reserves trough organic
additions. We will continue our commitment in expanding
the LNG business in a global scale in order to monetize
our large gas reserve base. This will be achieved by
implementing significant capital expenditure in order to
develop new gas reserves to ensure supplies to
liquefaction plants and to build new liquefaction
capacity. Gas & Power Our key objective in the Gas & Power division is to deliver a level of free cash flow of euro 2.1 billion in 2010, with an average growth rate of approximately 3%. This target will be achieved by implementing our strategy focused on growing our market share in key European markets, preserving our domestic natural gas business, effectively managing regulated business and the power generation business, and expanding LNG sales. In strengthening our market leadership in Europe, we will leverage on our competitive advantages ensured by gas availability both equity and purchased under long term supply contracts access to infrastructure, an adequate regasification capacity, long-standing relationships with natural gas producing countries, a large customer base, and market knowledge. |
(1) | Cash from operations exceeding finance needs for investments. |
- 3 -
ENI FACT BOOK / ENI
The target of maintaining
sales volumes on the domestic market will be achieved
thanks to the support of an effective commercial policy,
enhanced by the expected launch of the dual offer of gas
and electricity. By 2010 Eni will be selling some 105 bcm worldwide, with international sales expected to grow by a solid 10% per year on average. Refining & Marketing Enis key objective is to significantly increase profitability in the Refining & Marketing business. In pursuing this, Eni intends to enhance its refining activity by means of a huge investment program aiming at capturing market opportunities in terms of demand trends, also in connection with adoption of increasingly strict environmental requirements, and relative abundance of heavy and non-conventional crude. Planned actions are intended to boost refinery conversion rate and flexibility in order to produce higher-value products and to process low-quality crude that is typically discounted in the market-place, and to lower operating costs. In Marketing, we aim to extract full value from our retail business in Italy through a selective investment program, customer-focused marketing initiatives, effective differentiation of pricing, an improved premium-products offer, and operating efficiencies. We plan to selectively develop our presence outside Italy, aiming at strengthening our competitive position in target European markets, leveraging on |
synergies deriving from the
proximity to Enis production and logistic
facilities. Engineering & Construction Saipem aims at capturing opportunities arising from a growing market, acquiring large projects in complex areas and supporting Enis investment plans. In order to achieve this, Saipem will leverage on its strong competitive position, enhanced by integration with Snamprogetti, and an important investment program intended to further expand the geographical reach and operational features of its world-class fleet. Technological innovation Our commitment in technological research and innovation underscores a fundamental belief that technology is key to acquiring and preserving competitive advantages over the long term and promoting sustainable growth. Over the next four years, we plan to invest approximately euro 1.5 billion to support these activities. The main lines of research under development pertain primarily to reduce costs to find and recover hydrocarbons, upgrade heavy oils, monetize stranded gas and protect the environment. In particular we are moving forward on our breakthrough technologies: EST (Eni Slurry Technology) for the full exploitation of the heavy barrel, TAP (gas transportation at high pressure) and GTL (gas-to-liquids) for gas monetization. |
Key medium-term targets announced to investors | 2006 | 2010 |
E&P | ||
Oil and gas production | 1.77 mmboe/d | >2 mmboe/d - c.a.g.r. 3% (Brent 42 $/bl al 2010) |
Reserve replacement ratio | 65% | >100% on average in the next four-year period (Brent 42 $/bbl at 2010) |
Sales of LNG | 9.9 bcm | ~13 bcm |
G&P | ||
Worldwide gas sales (1) | 97.5 bcm | >105 bcm - c.a.g.r. 10% in international sales |
Power generation capacity | 4.9 GW | 5.5 GW |
Free cash flow | euro 1.9 bn | euro 2.1 bn |
R&M | ||
Overall index of wholly-owned refineries conversion capacity | 57% | 58% |
Refinery throughputs on own account | 38.0 mmtonnes | 40.2 mmtonnes |
Sales of refined products in Europe | 15.8 bn liters | 17.4 bn liters |
Allocation of cash provided by operating activities | ||
Capital expenditure | euro 32.2 bn four-year period 2006-2009 | euro 44.6 bn four-year period 2007-2010 |
Dividend | euro 1.25 per share | sustainable in the next four-year period 2007-2010 |
Efficiency program | ~euro 1 bn of net benefit expected in 2010 |
(1) | Include upstream sales in Europe. |
- 4 -
ENI FACT BOOK / IENI
Main data
Key financial data | Italian GAAP |
IFRS |
||
(million euro) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Net sales from operations | 31,359 | 28,341 | 31,008 | 47,938 | 49,272 | 47,922 | 51,487 | 57,545 | 73,728 | 86,105 | ||||||||||||||||||||||
Operating profit (1) | 5,345 | 3,810 | 5,480 | 10,772 | 10,313 | 8,502 | 9,517 | 12,399 | 16,827 | 19,327 | ||||||||||||||||||||||
Exploration & Production | 2,590 | 594 | 2,834 | 6,603 | 5,984 | 5,175 | 5,746 | 8,185 | 12,574 | 15,580 | ||||||||||||||||||||||
Gas & Power | 2,012 | 2,513 | 2,580 | 3,178 | 3,672 | 3,244 | 3,627 | 3,428 | 3,321 | 3,802 | ||||||||||||||||||||||
Refining & Marketing | 578 | 730 | 478 | 986 | 985 | 321 | 583 | 1,080 | 1,857 | 319 | ||||||||||||||||||||||
Petrochemicals | 187 | - | (362 | ) | 4 | (415 | ) | (126 | ) | (176 | ) | 320 | 202 | 172 | ||||||||||||||||||
Engineering & Construction | 169 | 198 | 149 | 144 | 255 | 298 | 311 | 203 | 307 | 505 | ||||||||||||||||||||||
Other activities | (214 | ) | (293 | ) | (395 | ) | (902 | ) | (622 | ) | ||||||||||||||||||||||
Corporate and financial companies | (138 | ) | (168 | ) | (199 | ) | (143 | ) | (168 | ) | (196 | ) | (281 | ) | (363 | ) | (391 | ) | (296 | ) | ||||||||||||
Unrealized profit in inventory | (59 | ) | (141 | ) | (133 | ) | ||||||||||||||||||||||||||
Activities to be divested | (53 | ) | (57 | ) | ||||||||||||||||||||||||||||
Adjusted operating profit | 10,482 | 8,959 | 9,958 | 12,582 | 17,558 | 20,490 | ||||||||||||||||||||||||||
Net profit | 2,643 | 2,328 | 2,857 | 5,771 | 7,751 | 4,593 | 5,585 | 7,059 | 8,788 | 9,217 | ||||||||||||||||||||||
Adjusted net profit | 5,757 | 4,923 | 5,096 | 6,645 | 9,251 | 10,412 | ||||||||||||||||||||||||||
Net cash provided by operating activities | 6,515 | 6,864 | 8,248 | 10,583 | 8,084 | 10,578 | 10,827 | 12,500 | 14,936 | 17,001 | ||||||||||||||||||||||
Capital expenditure and investments | 4,362 | 5,589 | 5,597 | 9,815 | 11,270 | 9,414 | 13,057 | 7,815 | 7,560 | 7,928 | ||||||||||||||||||||||
Capital expenditure | 4,169 | 5,152 | 5,483 | 5,431 | 6,606 | 8,048 | 8,802 | 7,499 | 7,414 | 7,833 | ||||||||||||||||||||||
Investments | 193 | 437 | 114 | 4,384 | 4,664 | 1,366 | 4,255 | 316 | 146 | 95 | ||||||||||||||||||||||
Shareholders equity including minority interest | 16,244 | 17,390 | 19,749 | 24,073 | 29,189 | 28,351 | 28,318 | 35,540 | 39,217 | 41,199 | ||||||||||||||||||||||
Net borrowing | 8,050 | 7,070 | 6,267 | 7,742 | 10,104 | 11,141 | 13,543 | 10,443 | 10,475 | 6,767 | ||||||||||||||||||||||
Net capital employed (1) | 24,294 | 24,460 | 26,016 | 31,815 | 39,293 | 39,492 | 41,861 | 45,983 | 49,692 | 47,966 | ||||||||||||||||||||||
Exploration & Production | 6,469 | 6,862 | 9,279 | 12,646 | 18,252 | 17,318 | 17,340 | 17,937 | 20,196 | 18,590 | ||||||||||||||||||||||
Gas & Power | 8,518 | 8,289 | 8,481 | 10,721 | 12,777 | 12,488 | 15,617 | 18,387 | 18,978 | 18,906 | ||||||||||||||||||||||
Refining & Marketing | 4,071 | 4,186 | 4,028 | 4,563 | 4,476 | 5,093 | 5,089 | 5,081 | 5,993 | 5,631 | ||||||||||||||||||||||
Petrochemicals | 3,099 | 2,956 | 2,604 | 2,581 | 1,075 | 2,130 | 1,821 | 2,076 | 2,018 | 1,953 | ||||||||||||||||||||||
Engineering & Construction | 195 | 392 | 1,103 | 1,395 | 1,635 | 2,335 | 2,119 | 2,403 | 2,844 | 3,399 | ||||||||||||||||||||||
Corporate
and financial companies and other activities |
1,942 | 1,775 | 521 | (91 | ) | 1,078 | 128 | (125 | ) | 277 | 2 | (95 | ) | |||||||||||||||||||
Unrealized profit in inventory | (178 | ) | (339 | ) | (418 | ) | ||||||||||||||||||||||||||
Return On Average Capital Employed | (%) | |||||||||||||||||||||||||||||||
Reported | 12.2 | 10.7 | 12.5 | 21.5 | 23.9 | 13.7 | 15.6 | 16.6 | 19.5 | 20.3 | ||||||||||||||||||||||
Adjusted | 15.9 | 20.5 | 22.7 | |||||||||||||||||||||||||||||
Leverage | 0.5 | 0.41 | 0.32 | 0.32 | 0.35 | 0.39 | 0.48 | 0.29 | 0.27 | 0.16 |
(1) | From January 1, 2006 Enis subsidiaries operating in diversified sectors (such as real estate services, insurance and financing intermediation, R&D and training services) are reported in the aggregate Corporate and financing companies with exception of Tecnomare which is reported in the Exploration & Production division (previously all these diversified activities were reported in the aggregate Other activities). The Other activities aggregate includes only Syndial SpA, a subsidiary which runs minor petrochemical activities and reclamation and decommissioning activities pertaining to certain business which Eni exited in past years. In order to allow for comparison, 2005 data has been reclassified accordingly. Previous years data has not been reclassified. |
Key market indicators | 1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Average price of Brent dated crude oil (1) | 19.10 | 12.74 | 17.87 | 28.39 | 24.46 | 24.98 | 28.84 | 38.22 | 54.38 | 65.14 | ||||||||||||
Average EUR/USD exchange rate (2) | 1.137 | 1.115 | 1.067 | 0.924 | 0.896 | 0.946 | 1.131 | 1.244 | 1.244 | 1.256 | ||||||||||||
Average price in euro of Brent dated crude oil | 16.80 | 11.43 | 16.75 | 30.73 | 27.30 | 26.41 | 25.50 | 30.72 | 43.71 | 51.86 | ||||||||||||
Average European refining margin (3) | 1.86 | 1.99 | 1.21 | 3.9 | 1.97 | 0.80 | 2.65 | 4.35 | 5.78 | 3.79 | ||||||||||||
Euribor - three-month euro rate | (%) | 6.9 | 5.0 | 3.0 | 4.4 | 4.3 | 3.3 | 2.3 | 2.1 | 2.2 | 3.1 |
(1) | In US dollars per barrel. Source: Platts Oilgram. | |
(2) | Source: ECB. | |
(3) | In US dollars per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platts Oilgram data. |
- 5 -
ENI FACT BOOK / ENI
Selected operating data | 1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Exploration & Production | ||||||||||||||||||||||
Proved reserves of hydrocarbons at period end | (mmboe) | 5,073 | 5,255 | 5,534 | 6,008 | 6,929 | 7,030 | 7,272 | 7,218 | 6,837 | 6,436 | |||||||||||
Reserve life index | (year) | 13.6 | 13.4 | 14.0 | 14.0 | 13.7 | 13.2 | 12.7 | 12.1 | 10.8 | 10.0 | |||||||||||
Daily production of hydrocarbons | (kboe/d) | 1,021 | 1,038 | 1,064 | 1,187 | 1,369 | 1,472 | 1,562 | 1,624 | 1,737 | 1,770 | |||||||||||
Gas & Power | ||||||||||||||||||||||
Sales of natural gas to third parties | (bcm) | 55.94 | 58.41 | 62.92 | 62.63 | 63.72 | 64.12 | 69.49 | 72.79 | 77.08 | 79.63 | |||||||||||
Own consumption of natural gas | (bcm) | 2.00 | 2.00 | 2.02 | 1.90 | 3.70 | 5.54 | 6.13 | ||||||||||||||
Sales to third parties and own consumption | (bcm) | 64.63 | 65.72 | 66.14 | 71.39 | 76.49 | 82.62 | 85.76 | ||||||||||||||
Sales of natural gas of affiliates and companies (Enis share) | (bcm) | 0.13 | 0.16 | 0.16 | 0.87 | 1.38 | 2.40 | 6.94 | 5.84 | 7.08 | 7.65 | |||||||||||
Total sales and own consumption of natural gas (G&P) | (bcm) | 56.07 | 58.57 | 63.08 | 65.50 | 67.10 | 68.54 | 78.33 | 82.33 | 89.70 | 93.41 | |||||||||||
Upstream in Europe (1) | (bcm) | 4.70 | 4.51 | 4.07 | ||||||||||||||||||
Worldwide | (bcm) | 56.07 | 58.57 | 63.08 | 65.50 | 67.10 | 68.54 | 78.33 | 87.03 | 94.21 | 97.48 | |||||||||||
Natural gas transported on behalf of third parties in Italy | (bcm) | 4.35 | 6.07 | 6.90 | 9.45 | 11.41 | 19.11 | 24.63 | 28.26 | 30.22 | 30.90 | |||||||||||
Electricity production sold | (TWh) | 4.77 | 4.99 | 5.00 | 5.55 | 13.85 | 22.77 | 24.82 | ||||||||||||||
Refining & Marketing | ||||||||||||||||||||||
Throughputs on own account | (mmtonnes) | 38.60 | 42.33 | 40.65 | 41.27 | 39.99 | 37.73 | 35.43 | 37.69 | 38.79 | 38.04 | |||||||||||
Balanced capacity of wholly-owned refineries at period end | (kbbl/d) | 664 | 664 | 664 | 664 | 664 | 504 | 504 | 504 | 524 | 534 | |||||||||||
Utilization rate of balanced capacity of wholly-owned refineries | (%) | 94 | 103 | 96 | 99 | 97 | 99 | 100 | 100 | 100 | 100 | |||||||||||
Sales of refined products | (mmtonnes) | 51.60 | 54.19 | 51.82 | 53.46 | 53.24 | 52.24 | 50.43 | 53.54 | 51.63 | 51.13 | |||||||||||
Service stations at period end (in Italy and outside Italy) | (units) | 12,756 | 12,984 | 12,489 | 12,085 | 11,707 | 10,762 | 10,647 | 9,140 | 6,282 | 6,294 | |||||||||||
Average throughput per service station (in Italy and outside Italy) | (kliters/y) | 1,463 | 1,512 | 1,543 | 1,555 | 1,621 | 1,674 | 1,771 | 1,970 | 1,926 | 2,470 | |||||||||||
Engineering & Construction | ||||||||||||||||||||||
Orders acquired | (euro million) | 3,865 | 3,248 | 2,600 | 4,726 | 3,716 | 7,852 | 5,876 | 5,784 | 8,395 | 11,172 | |||||||||||
Order backlog at period end | (euro million) | 5,180 | 4,934 | 4,439 | 6,638 | 6,937 | 10,065 | 9,405 | 8,521 | 10,122 | 13,191 | |||||||||||
Employees at period end | (units) | 80,178 | 78,906 | 72,023 | 69,969 | 72,405 | 80,655 | 76,521 | 70,348 | 72,258 | 73,572 |
(1) | Does not include Enis share of sales made by Nigeria LNG (Enis share 10.4%) in Europe amounting to 1.30, 1.31 and 1.55 bcm in 2004, 2005 and 2006 respectively. |
- 6 -
ENI FACT BOOK / ENI
Share data | Italian GAAP |
IFRS |
||
|
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Net profit (1) | (euro) | 0.66 | 0.58 | 0.71 | 1.44 | 1.98 | 1.20 | 1.48 | 1.87 | 2.34 | 2.49 | |||||||||||
Dividend | (euro) | 0.289 | 0.310 | 0.362 | 0.424 | 0.750 | 0.750 | 0.750 | 0.90 | 1.10 | 1.25 | |||||||||||
Dividend pertaining to the year (2) | (euro million) | 1,157 | 1,239 | 1,446 | 1,664 | 2,876 | 2,833 | 2,828 | 3,384 | 4,086 | 4,594 | |||||||||||
Cash flow | (euro) | 1.63 | 1.72 | 2.06 | 2.65 | 2.07 | 2.76 | 2.87 | 3.31 | 3.97 | 4.59 | |||||||||||
Dividend yield (3) | (%) | 2.8 | 2.9 | 3.4 | 3.2 | 5.6 | 5.2 | 5.1 | 4.9 | 4.7 | 5.0 | |||||||||||
Net profit per ADR (4) | ($) | 1.44 | 1.36 | 1.43 | 2.71 | 3.52 | 2.52 | 3.72 | 5.06 | 5.81 | 6.26 | |||||||||||
Dividend per ADR (4) | ($) | 0.63 | 0.64 | 0.47 | 0.72 | 1.48 | 1.71 | 1.83 | 2.17 | 2.63 | 3.14 | |||||||||||
Cash flow per ADR (4) | ($) | 3.55 | 4.02 | 4.16 | 4.98 | 3.75 | 5.79 | 7.22 | 8.96 | 9.40 | 11.53 | |||||||||||
Dividend yield per ADR (3) | (%) | 2.8 | 2.6 | 3.2 | 3.0 | 6.2 | 5.8 | 5 | 5.0 | 4.70 | 5.0 | |||||||||||
Pay-out | (%) | 44 | 53 | 51 | 29 | 37 | 62 | 51 | 48 | 46.00 | 50 | |||||||||||
Number of shares at December 31 representing share capital | (million) | 3,999.6 | 4,000.1 | 4,001.1 | 4,001.1 | 4,001.3 | 4,001.8 | 4,002.9 | 4,004.4 | 4,005.4 | 4,005.4 | |||||||||||
Average number of share outstanding in the year (5) (fully diluted) | (million) | 3,999.6 | 4,000.1 | 4,001.3 | 3,995.1 | 3,911.9 | 3,826.9 | 3,778.4 | 3,771.7 | 3,763.4 | 3,701.3 | |||||||||||
TSR | (%) | 32.8 | 10.1 | (0.4 | ) | 29.2 | 6.0 | 13.1 | 4.3 | 28.5 | 35.3 | 14.8 |
(1) | Calculated on the average number of Eni shares outstanding during the year. | |
(2) | Amounts due on the payment of the balance of 2006 dividend are estimated. | |
(3) | Ratio between dividend of the year and average share price in December. | |
(4) | One ADR represents 2 shares. Net profit, dividends and cash flow are converted at the average rate of the year (1 EUR=1.256 USD as of 2006). Dividends of 1997-2005 were converted at the Noon Buying Rate of the pay-out date. | |
(5) | Calculated by excluding own shares in portfolio. |
Share information | 1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Share price - Milan Stock Exchange | ||||||||||||||||||||||
High | (euro) | 11.36 | 13.80 | 12.60 | 14.50 | 15.60 | 17.15 | 15.75 | 18.75 | 24.96 | 25.73 | |||||||||||
Low | (euro) | 8.06 | 9.19 | 10.18 | 9.54 | 11.56 | 12.94 | 11.88 | 14.72 | 17.93 | 21.82 | |||||||||||
Average | (euro) | 9.79 | 11.28 | 11.40 | 11.78 | 14.10 | 15.29 | 13.64 | 16.94 | 21.60 | 23.83 | |||||||||||
End of the period | (euro) | 10.43 | 11.21 | 10.88 | 13.64 | 14.05 | 15.15 | 14.96 | 18.42 | 23.43 | 25.48 | |||||||||||
ADR price (1) - New York Stock Exchange | ||||||||||||||||||||||
High | ($) | 63.13 | 73.50 | 69.00 | 64.88 | 69.70 | 82.11 | 94.98 | 126.45 | 151.35 | 67.69 | |||||||||||
Low | ($) | 48.13 | 50.50 | 52.38 | 46.56 | 52.50 | 60.90 | 66.15 | 92.35 | 118.50 | 54.65 | |||||||||||
Average | ($) | 55.62 | 63.04 | 60.94 | 54.18 | 63.22 | 72.20 | 77.44 | 105.60 | 134.02 | 59.97 | |||||||||||
End of the period | ($) | 57.06 | 67.75 | 55.13 | 64.31 | 61.96 | 78.49 | 94.98 | 125.84 | 139.46 | 67.28 | |||||||||||
Average daily exchanged shares | (million share) | 7.9 | 11.1 | 12.3 | 17.3 | 17.4 | 19.4 | 22.0 | 20.0 | 28.5 | 26.2 | |||||||||||
Value | (euro million) | 78.8 | 126.0 | 141.0 | 203.9 | 245.0 | 295.4 | 298.5 | 338.7 | 620.7 | 619.1 | |||||||||||
Number of shares outstanding at period end (2) | (million) | 3,999.6 | 4,000.1 | 4,001.1 | 3,956.7 | 3,846.9 | 3,795.1 | 3,772.3 | 3,770.0 | 3,727.3 | 3,680.4 | |||||||||||
Market capitalization (3) | ||||||||||||||||||||||
EUR | (billion) | 41.7 | 44.8 | 43.5 | 54 | 54 | 57.5 | 56.4 | 69.4 | 87.3 | 93.8 | |||||||||||
USD | (billion) | 45.5 | 52.5 | 44 | 50.7 | 48.1 | 60.4 | 71.1 | 94.9 | 104.0 | 117.8 |
(1) | Effective January 10, 2006 a 5:2 stock split was made. | |
(2) | Excluding treasury shares. | |
(3) | Number of outstanding shares by reference price at period end. |
Data on Eni share placements | 1995 |
1996 |
1997 |
1998 |
2001 |
Offer price | (euro/share) | 5.42 | 7.40 | 9.90 | 11.80 | 13.60 | ||||||
Number of share placed | (million) | 601.9 | 647.5 | 728.4 | 608.1 | 200.1 | ||||||
of which through bonus shares | (million) | 1.9 | 15.0 | 24.4 | 39.6 | |||||||
Percentage of share capital (1) | (%) | 15.0 | 16.2 | 18.2 | 15.2 | 5.0 | ||||||
Proceeds | (euro million) | 3,254 | 4,596 | 6,869 | 6,714 | 2,721 |
(1) | Refers to share capital at December 31, 2006. |
- 7 -
ENI FACT BOOK / ENI
- 8 -
ENI FACT BOOK / EXPLORATION & PRODUCTION
Key performance indicators | 2004 |
2005 |
2006 |
Net sales from operations (a) | (million euro) |
15,346 |
22,531 |
27,173 |
|||||||
Operating profit | 8,185 |
12,592 |
15,580 |
||||||||
Adjusted operating profit | 8,202 |
12,903 |
15,763 |
||||||||
Adjusted net profit | 4,033 |
6,186 |
7,279 |
||||||||
Capital expenditure | 4,853 |
4,965 |
5,203 |
||||||||
of which: exploration (b) | 499 |
656 |
1,348 |
||||||||
Capital employed, net | 17,937 |
20,206 |
18,590 |
||||||||
ROACE adjusted | (%) |
22.7 |
32.4 |
37.5 |
|||||||
Average realizations | |||||||||||
- Liquids | ($/bbl) |
34.73 |
49.09 |
60.09 |
|||||||
- Natural gas | ($/mmcf) |
3.90 |
4.50 |
5.30 |
|||||||
- Total hydrocarbons | ($/boe) |
30.40 |
41.06 |
48.87 |
|||||||
Production | |||||||||||
- Liquids | (kbbl/d) |
1,034 |
1,111 |
1,079 |
|||||||
- Natural gas | (mmcf/d) |
3,387 |
3,595 |
3,966 |
|||||||
- Total hydrocarbons | (kboe/d) |
1,624 |
1,737 |
1,770 |
|||||||
Net proved reserves | |||||||||||
- Liquids | (mmbbl) |
4,008 |
3,773 |
3,481 |
|||||||
- Natural gas | (bcf) |
18,435 |
17,591 |
16,965 |
|||||||
- Total hydrocarbons | (mmboe) |
7,218 |
6,837 |
6,436 |
|||||||
Reserve life index | (year) |
12.1 |
10.8 |
10.0 |
|||||||
Proved reserve replacement ratio | (%) |
91 |
40 |
65 |
|||||||
Employees at year end | (unit) |
7,477 |
8,030 |
8,336 |
(a) | Before elimination of intersegment sales. | ||
(b) | Includes exploration bonus. |
- 9 -
ENI FACT BOOK / EXPLORATION & PRODUCTION
STRATEGIES
In Exploration & Production, Eni boasts strong positions in
some of the fastest growing oil and gas basins in the world such
as the Caspian Region, North and West Africa. The quality of our
assets, long-standing relationships with key host countries, and
a strong pipeline of capital projects and investment
opportunities will enable Eni to deliver industry-leading growth
in both the short and the long term. Consistent with this goal,
strategies for our global exploration, development and production
operations have remained basically unchanged for many years to
date and feature as follows:
Maintain strong production growth;
Ensure medium to long-term business sustainability by focusing on reserve replacement;
Develop new projects to fuel future growth; and
Develop the LNG business.
In order to carry out these fundamental strategies, Eni intends to invest approximately euro 30.6 billion addressed to exploration initiatives and reserve development over the next four-year period.
2006
Highlights In February 2007, Eni purchased exploration and production onshore activities operated by Maurel & Prom in Congo, entailing a cash consideration of $1.4 billion. This deal is consistent with Enis strategy of purchasing proved and unproved reserves and producing assets in legacy countries where Eni can achieve synergies leveraging on own competencies and the availability of facilities. This transaction is subject to approval by the Congolese Authorities. In 2006 adjusted net profit was euro 7,279 million, up euro 1,093 million from a year ago (+17.7%), reflecting a better operating profit as a result of higher oil and natural gas realizations in dollars combined with increased production volumes sold. These positives were offset in part by higher operating costs and a high adjusted tax rate. Return on average capital employed calculated on an adjusted basis was 37.5% in 2006, higher than in 2005 (32.4%). Oil and natural gas production for the year averaged 1.77 mmboe/d, up 1.9% from 2005. This included the loss of production at the Venezuelan Dación oilfield and lower entitlements in certain Production Sharing Agreements (PSAs) and buy-back contracts due to higher oil and gas prices. Eni delivered its 3% production growth rate based on a $55 per barrel scenario, as announced in the 2006 quarterly production outlook. |
Net proved reserves at
December 31, 2006 stood at 6.44 bboe (down 6% from
December 31, 2005), representing 10 years of remaining
production at the current rate. Organic proved additions,
as calculated by applying a year-end Brent price of
$58.925 per barrel, replaced 65% of production. Assuming
Brent is constant at $40 per barrel when determining
entitlements in PSAs, the three-year average proved
reserve replacement ratio would be 106%. Eni invested euro 3.6 billion in the development of oil and natural gas reserves, in particular in Kazakhstan, Angola, Egypt and Italy. In exploration activities Eni invested euro 1.4 billion (up 106% compared with 2005) to support reserve replacement and the renewal of its portfolio. In 2006, Eni achieved several hydrocarbon discoveries, mainly in Indonesia, Egypt, Kazakhstan, Norway, Nigeria, the United Kingdom, the Gulf of Mexico, Italy, Angola and Congo. A total of 68 exploratory wells were completed (35.9 net to Eni), with a commercial rate of success of 43% (49% net to Eni). A further 26 wells were in progress as of the year-end. Enis exploration portfolio was strengthened through acquisition of assets in both core areas such as Angola, Alaska, Brazil, Congo, Egypt, Nigeria, Norway, Pakistan, the Gulf of Mexico and new countries/areas with high mineral potential such as Mali, Mozambique and East Timor. Gross acquired acreage extends for approximately 259,000 square kilometers (152,000 net to Eni, 99% operated). |
- 10 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - STRATEGIES
MAINTAIN
STRONG PRODUCTION GROWTH Enis strategy is to build on its strong position in some of the worlds most attractive oil and gas basins to deliver industry leading production growth. We plan to accomplish this by applying the most cost-effective technologies and operations management systems to each and every asset to maximize the commercial recovery of hydrocarbons. Enis assets are well balanced between mature producing fields and fields that are at the early stages of their producing cycles with significant opportunities for growth. Mature areas include mainland and offshore Italy, the North Sea and certain basins in Egypt. Growing areas include Libya, offshore and onshore West Africa, the Caspian Sea and the Nile Delta. Eni expects contributions from the latter to boost production growth to 2010 and beyond. Eni continually invests in its existing asset base to increase resource recovery, maximize profitability, and extend field life. New production volumes are generated through workovers, drilling of new wells, and project implementation. In 2006, Eni invested euro 3.6 billion to develop new reserves and to maximize resource recovery from existing fields. In the next four years, Eni plans to invest approximately euro 322.5 billion evenly allocated to initiatives intended to counteract mature field decline, fuel medium-term growth and support growth beyond 2010. Several fields/projects were started up during 2006. Among the key start-ups are: (i) the Benguela/Belize and Lobito/Tomboco fields in Block 14 (Enis interest 20%) in Angola, holding recoverable reserves of approximately 460 mmbbl. Peak production at 158 kbbl/d (20 net to Eni) is expected in 2009 upon completion of the drilling program; (ii) the fifth train as a part of the development of the Bonny liquefaction plant (Enis interest 10.4%) in Nigeria, increasing plant capacity to 17 mmtonnes/y of LNG (812 bcf/y of feed gas); (iii) the gas phase of the Bayu-Undan field (Enis interest 12.04%) in Australia, starting supplies to the Darwin plant with liquefaction capacity of 3.5 mmtonnes/y of LNG. Peak production at 160 kboe/d (18 net to Eni) is expected in 2008. Production volumes outlook In 2006, oil and gas production averaged 1,770 kboe/d, up 33 kboe from 2005 or 1.9%, despite: (i) the impact of the loss of production at the Dación oil field in Venezuela (down 46 kboe/d) as a consequence of the unilateral cancellation of the relevant service contract by the Venezuelan state oil company PDVSA; and (ii) adverse entitlement effects (down 21 kboe/d) in PSAs and buyback |
contracts due to higher oil
prices. Production growth was driven by a remarkable
increase in gas production mainly in Libya, Egypt,
Nigeria, Australia and Croatia; oil production increased
in Angola and Libya. Organic growth was partially offset
by mature field declines and production outages in
Nigeria due to social unrest. The share of production
outside Italy was 87% (85% in 2005). In the medium term, Eni expects to deliver a 3% compound average growth rate from 2007 to 2010, targeting a production level in excess of 2 mmboe/d by 2010. In subsequent years and up to 2013, Eni projects an annual growth rate of 3%. This goal will be achieved entirely through organic growth mainly in our key producing basins of North and West Africa and the Caspian region, leveraging on Enis unique position and solid relationships with many of the fastest growing producing countries in the world and on its strong pipeline of capital projects and investment opportunities. In greater detail, production growth will be fed by means of:
Enis future production profiles are based on a
long-term Brent price assumption of 40 $/bbl in real
terms. ENSURE MEDIUM TO LONG-TERM BUSINESS SUSTAINABILITY BY FOCUSING ON RESERVE REPLACEMENT Eni intends to pay special attention to reserve replacement in order to ensure the medium to long term sustainability of its business. In pursuing this goal, Eni intends to:
As of December 31, 2006, Enis portfolio of mineral rights consisted of 1,029 exclusive or shared rights for exploration and development in 36 countries on five continents for a total net acreage of 385,219 square kilometers. Of these, 48,273 square kilometers concerned production and development. |
- 11 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - STRATEGIES
This geographically and
geologically diverse, high-quality portfolio balances
risks and rewards to deliver both near-term and long-term
production growth. In the medium term, Eni expects to
more than replace produced reserves through organic
additions. Enis reserve replacement ratio will be
supported by the high mineral potential of our assets
located in core areas such as the Caspian Sea, West and
North Africa. The success of Enis approach is demonstrated by its ability in replacing produced reserves. In the 2003-2006 four-year period, exploration reserves discovered were approximately 700 mmboe on average for a cumulative amount of 2.8 bboe, higher than our cumulative production over the same period frame. Positive contributions came from both legacy countries such as Nigeria, Angola, Egypt and Kazakhstan and new frontier areas such as the Barents Sea and the ultra-deep waters of the Gulf of Mexico. At 25 bboe, our solid resource base1 will secure 38 years of production at current rates. Under SEC reporting standards, proved reserves at 2006 year-end were 6.4 billion boe, representing a life index of 10 years. In the 2004-2006 period, considering adverse entitlement impacts in certain PSAs and buy-back contracts resulting from higher oil prices and assuming Brent constant at $40 per barrel when determining entitlements in PSAs, we would have replaced on average 106% of production through organic additions. For 2006 only, by applying the year-end price of $58.925/bbl, organic additions for the year came in at 417 mmboe with a reserve replacement ratio of 65%. Exploration activities will play a crucial role in enlarging Enis resource base in order to fuel new production, and in securing access to new opportunities. In light of this, management will devote a great deal of focus and effort to exploration. In 2006, Eni more than doubled its investment in exploration from the previous year, resulting in a total of 68 wells drilled with an SEC exploration success of 43%, and capturing 12 new opportunities spanning from new, untested exploration plays to well established plays or already-discovered resources, for a total acreage of about 152,000 square kilometers net to Eni, of these 99% as operator. In the next four years, management plans to invest on average approximately euro 31.1 billion per year in exploration activities, resulting in a cumulative euro 34.4 billion that is substantially higher (+51%) than the previous four-year |
plan (2006-2009). The
cornerstones of Enis exploration strategy are:
In fact, management intends to concentrate investments
in well established areas of presence where availability
of production facilities, existing competencies and
log-term relationships with host countries will enable
Eni to readily put in production discovered resources,
reducing the time to market and capturing synergies. On
the other hand, Eni expects to selectively pursue high
risk/high reward opportunities arising from expansion in
areas with high mineral potential. Finally, portfolio
renewal will be completed, bearing in mind that
approximately 70% of total acreage has been renewed over
the last three years.
Net liquefaction capacity in 2006 was 321 bcf, mainly concentrated in Nigeria and Egypt, and is expected to expand to 343 bcf in 2010 and in excess of 509 bcf in 2012 by means of developing capacity at the Bonny liquefaction plant, building the new Brass plant in Nigeria, and implementing the expansion plan of the Damietta LNG plant in Egypt.LNG sales are expected to grow from127 bcf in 2006 to166 bcf in 2010; equity gas supplies to LNG plants of 162 bcf in 2006 are expected to increase up to 233 bcf in 2010. |
(1) | Oil and gas volumes contained in a reservoir as ascertained based on available engineering and geological data (sum of proved, probable and possible reserves) plus volumes not yet discovered but that are expected to be eventually recovered from the reservoir net of a risk factor (risked exploration resources). |
- 12 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
ACTIVITY
AREAS Italy Eni has been operating in Italy since 1926. In 2006 Enis oil and gas production amounted to 238 kboe/d. Enis activities in Italy are deployed in the Adriatic Sea, the Central Southern Apennines, mainland and offshore Sicily and the Po Valley on a total acreage of 28,508 square kilometers (22,496 net to Eni). Enis exploration and development activities in Italy are regulated by concession contracts. Production is expected to remain stable in the medium term despite mature field declines, owing to the continued ramp up of production in Val dAgri, development projects underway and initiatives for supporting production levels in gas fields. Sicily Production Eni is operator of 13 production concessions onshore and offshore Sicily. Its main fields are Gela, Ragusa, Giaurone, Fiumetto and Prezioso, which in 2006 accounted for 6% of Enis production in Italy. In the second half of 2006, the Samperi well was started up with full production of approximately 2,871 cf/d to be reached in 2007. Development The main development projects underway concern gas onshore Sicily: (i) Pizzo Tamburino, the project provides for the drilling of two producing wells, the installation of facilities for liquids/gas separation and the linkage to the Gagliano station by means of a 16-kilometer long pipe. The start-up of the first well, Pizzo Tamburino, is scheduled for the second half of 2007 |
- 13 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
with expected production of
approximately 5.74 mmcf/d; (ii) the recovery of
additional reserves in the Fiumetto concession by means
of the drilling of the Fiumetto 1 well expected to
start-up in the first half of 2007 with an expected
production increase of approximately 3,445 cf/d. Exploration Exploration activity yielded positive results with gas discoveries in the GR.13.AG offshore permit (Enis interest 60%) with the Argo 1 well, which yielded up to 769 cf/d in test production. In the San Teodoro onshore permit, mineral surveys are underway on the Borgo Giuliano 1 well. A concession has been requested after this discovery |
Adriatic Sea |
field. The project provides
for the installation of a production platform and the
linkage of 4 wells to the existing nearby facilities.
Production volumes will be delivered to the Ravenna Mare
station. Production start-up is scheduled for 2007 with
an expected production peak of approximately 35 mmcf/d to
be reached in the same year. Exploration Exploration activity yielded positive results with a gas discovery in the AR.95.EA permit with the Benedetta 1 well, which yielded up to 5,121 cf/d in test production. Po Valley Exploration Exploration activity yielded positive results with a gas discovery in the San Potito concession with the drilling of the Longanesi 1 well, which yielded 3,143 cf/d in test production. |
Central-Southern
Apennines Production Eni is operator of the Val dAgri concession (Enis interest 60.77%) in Basilicata, resulting from the unitization of the Volturino and Grumento Nova concessions made in late 2005. Recoverable reserves in this concession amount to 608 mmboe. Production from the Monte Alpi, Enoc and Cerro Falcone fields is fed by 22 production wells of the 27 foreseen by the sanctioned development plan and is supported by the Viggiano oil center, containing 6 trains with a treatment capacity of 104 kbbl/ day of oil and 99 mmcf/d of natural gas. Oil produced is carried to Enis refinery in Taranto via a 136-kilometer long pipeline. In 2006 the Val dAgri concession produced 105 kboe/d (68 net to Eni) corresponding to 29% of Enis production in Italy. |
- 14 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
Development The main project
underway concerns the development of the oil and gas
onshore Miglianico field (Enis interest 100%). The
project provides for the linkage of 3 wells, the
construction of a treatment facility for oil, which will
be supplied to Enis Refining & Marketing
logistic facilities, while the gas will be input to the
national transport network through a pipeline. Production
start-up is scheduled for the second half of 2008 with an
expected production peak of 7.2 kboe/d to be reached in
2009. As for the development of gas reserves, the project
in the South-West area of the Candela permit is well
underway, with production start-up expected in the second
half of 2007. Activities in the Val dAgri concession concerned the continuation of the drilling program and the upgrading of production facilities. Exploration Exploration activity yielded positive results with a gas discovery in the Mezzocolle concession with the drilling of the Longanesi 1 well. |
North
Africa Algeria Eni has been present in Algeria since 1981. In 2006, Enis oil production averaged 91 kboe/d. Operating activities accounting for 53% of Enis production in Algeria are located in the Bir Rebaa area in the South-Eastern desert and include the following exploration and production blocks: a) Blocks 403 a/d (Enis interest 100%); b) Blocks 401a/402a (Enis interest 55%); c) Block 403 (Enis interest 50%); d) Blocks 212 (Enis interest 22.38%) and 208 (Enis interest 12.25%); e) exploration Blocks 404a (Enis interest 25%) and 403 c/e (Enis interest 33.33%). Gross acreage of Enis interests in Algeria was 12,739 square kilometers (3,456 net to Eni). Exploration and production activities in Algeria are regulated by Production Sharing Agreements (PSA) and concession contracts. In the medium-term, Eni expects production in Algeria to increase reflecting ongoing development activities, targeting a 100 kboe/d level by 2010. BLOCKS 403 a/d Production Production in the area is supplied mainly by the HBN and Rom and satellite fields. Blocks 403 a/d accounted for approximately 46% of Enis production in Algeria in 2006. Development The main project underway is Rom/Zea Integrated Development for the production of reserves identified by the recent appraisal activity conducted in the area, leading to a revaluation of the resources of this area. Current production is collected at Roms Central Production Facility and delivered to the treatment centre in Bir Rebaa North in Block 403. The project provides for the upgrade of production facilities and the injection into the field of water and gas currently flared at the Rom satellite center. As a result, flared gas is expected to be reduced by approximately 90%, as required by applicable Algerian laws. Production is expected to peak at 21 kbbl/d (12 net to Eni) in 2010. Exploration Exploration activity yielded positive results with the finalization of an appraisal campaign intended to evaluate reserves in the area covered by the Rom Integrated project as described above. BLOCKS 401a/402a Daily production from the area is supplied mainly by the Rod and satellite fields. Blocks 401a/402a accounted for approximately 27% of Enis production in Algeria in 2006. Infilling activities are being performed on producing fields in order to maintain the current production |
- 15 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
plateau. The drilling of
further 6 wells (4 production and 2 water injection
wells) is planned for the recovery of recently
ascertained reserves. BLOCK 403 The main fields in the area are BRN, BRW and BRSW. Block 403 accounted for approximately 13% of Enis production in Algeria in 2006. Exploration activity remains intense in this area. BLOCK 208 Block 208 is located south of Bir Rebaa. The El Merk Synergy plan for the development of this block in conjunction with the development of adjoining blocks (212 and 405a and 404 operated by other companies) is the main project underway in Algeria and is aimed at producing recoverable reserves up to 728 mmboe. In Block 208 the EKT, EMK, EMN and EME oil and gas fields, discovered between 1993 and 1998 are expected to be developed. The working plan provides for the drilling of 145 wells, that will be linked to a Central Production Facility with a treatment capacity of 150 kbbl/d of oil and approximately 1 bcf/d of associated wet gas for the extraction of liquids (approximately 50 kbbl/d) and the subsequent gas cycling (reinjection in the field). Marketing of associated gas is envisaged 8 years after the production is started up. Start up is expected in 2010 peaking at 144 kboe/d (19 net to Eni) in the same year. About 85%
of basic engineering has been completed in 2006. |
Egypt Eni has been present in Egypt since 1954 and is the first international operator in oil and gas with a gross production amounting to 523 kboe (227 kboe net to Eni) in 2006, on a total acreage of 23,214 square kilometers (13,901 net to Eni). Enis main producing activities are located in the Belayim concession (Enis interest 100%) located in the Gulf of Suez which contains oil and condensates and in the North Port Said (former Port Fouad, Enis interest 100%), Baltim (Eni operator with a 50% interest), Ras el Barr (Enis interest 50%) and el Temsah (Eni operator with a 50% interest) predominantly gas concessions located offshore in the Nile Delta. In 2006 production from these concessions accounted for 90% of Enis production in Egypt. Exploration and production activities in Egypt are regulated by concession contracts and PSAs. Production is expected to increase in the medium term reflecting ongoing development of gas reserves, despite expected production decline of mature oil fields. Eni targets a production level of 250 kboe/d in 2010, making Egypt Enis first hydrocarbon producing country by that date. GULF OF SUEZ Production Oil and condensate production came mainly from the Belayim field, Enis first large discovery of oil in Egypt, which produced 51 kbbl/d net to Eni in 2006. Other producing assets are located in the Ashrafi concession, which in 2006 produced 6 kbbl/d. Exploration Exploration activity aims at the recovery of the residual mineral potential of this area in order to contain the natural decline of producing fields. In 2006 the Abu Rudeis Marine 4 discovery was made and showed the presence of oil at a depth of over 3,000 meters; the well has been linked to existing production facilities. NILE DELTA NORTH PORT SAID Production In this concession Enis production in 2006 amounted to 459 mmcf/d net to Eni, also following the reaching of full production of the Barboni field started up in 2005. In 2006 the Anshuga gas field was started up and linked by sealines to the production facilities of the nearby Nouras field. Production is targeted at approximately 18 mmcf/d net to Eni. Part of the production of this concession is destined to the NGL (natural gas liquids) plant owned by United Gas Derivatives Co (Enis interest 33%) with a treatment capacity of 1,095 mmcf/d of natural gas and a yearly production of 330 ktonnes of propane, 280 ktonnes of LPG and 1.1 mmbbl of condensates. |
- 16 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
Development
Ongoing development activities aim at supporting the
current gas production level of 459 mmcf/d net to Eni.
The Semmani field is under development by means of the
drilling of 2 producing wells to be linked by sealines to
the nearby production platforms. Start-up is expected in
2007 with a flow of approximately 1 mmcm/d net to Eni.
Upgrading activities of the el Gamil terminal have been
progressing. This project provides for the expansion of a
compression station and the installation of a new unit
linked to the el Temsah and Ras el Barr producing areas. BALTIM Production In this concession Enis production in 2006 amounted to 106 mmcf/d net to Eni. |
RAS
EL BARR Production This concession contains three fields: Hapy, Akhen and Taurt and is located about 25 kilometers north-west of el Temsah. Enis production in 2006 amounted to 177 mmcf/d. Development Ongoing development activities aim at supporting the current gas production level of 170 mmcf/d net to Eni. In 2006 the first phase of the installation of gas compression units along the sealine linking to the West Harbour terminal for the development of the Hapy field was completed. Engineering activities are underway for the development of recoverable gas reserves amounting to 932 bcf of the offshore Taurt field. This project provides for the drilling of 7 production wells which are expected to be linked to existing onshore treatment facilities. Production is expected to start in 2008. EL TEMSAH Production Enis production in 2006 amounted to 64 mmcf/d due to the start-up of the Temsah NW 2 production platform. Development Ongoing development activities aim at reaching a gas production peak of 111 kboe/d (33 net to Eni) in 2008. Engineering activities are underway for the development of the gas reserves in the Denise field. The project provides for two phases. The first one entails the drilling of 4 producing wells to be linked to the Denise A facility installed on the Temsah NW 2 platform. In the second phase, 4 more production wells will be drilled and the Denise B platform is to be installed and linked to the Temsah NW 2 platform. Production start-up is expected in 2008. EXPLORATION IN THE NILE DELTA AREA An intense exploration campaign is underway for ascertaining the large mineral potential of the Nile Delta area. In 2006 exploration yielded positive results with the NFW Meret 1 and 2 wells which showed the presence of layers containing gas and condensates in the western area of the el Temsah concession at a depth of over 1,500 and 3,000 meters, respectively. In the Thekah permit the Thekah North discovery well (gas) is waiting to be linked to existing production facilities. WESTERN DESERT Other production activities are located in the Western Desert, in particular in the Melehis (Enis interest 56%) and West Razzak (Enis interest 80%) concessions containing mainly oil. Concessions in the Western |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
Desert accounted for
approximately 7% of Enis production in Egypt in
2006. Exploration activity yielded positive results with the Aghar SW-1X oil discovery in the West Razzak concession, the Lotus North 1-X and Nada Ne 1-X oil wells in the Melehis concession. The latter two wells have started production. THE LNG BUSINESS IN EGYPT Eni owns a 40% interest in the Damietta natural gas liquefaction plant. As part of the expansion plan of the plant, Eni and its partners signed a framework agreement in June 2006 for doubling the capacity of the plant by means of the construction of a second train with a treatment capacity of 5 mmtonnes/y of LNG corresponding to approximately 268 bcf/y of gas for a twenty-year period starting in 2010. Eni will supply 88 bcf/y to the second train from new gas discoveries in the Nile Delta, some of which in the deep waters. A new company is going to be established for the construction of the plant made up of Eni, Unión Fenosa, SEGAS (Spanish Egyptian Gas Co), BP and Egyptian national companies EGAS and EGPC. Eni already supplies approximately 53 bcf/y to the first train of the plant for a twenty year period. Libya Eni started operations in Libya in 1959. In 2006 Enis oil and gas production averaged 222 kboe/d, the portion of liquids being 65%. Production activity is carried out in the Mediterranean offshore facing Tripoli and in the Libyan desert area, over a total acreage of approximately 39,569 square kilometers (34,113 net to Eni). The main production blocks in which Eni holds interests are: (i) onshore NC169A (Enis interest 50%) and offshore NC41 (Enis interest 30% for oil and 50% for gas); (ii) onshore NC 174 (Enis interest 33.3%) and (iii) onshore concessions 82 and 100 (Enis interest 50%). Eni also holds a 50% interest in the NC118 block where, after a declaration of commercial discovery, it is developing the A-NC118 field. In the exploration phase, Eni is operator of four onshore blocks in the Muzurk basin (161/1, 161/2&4, 176/3) an in the Kufra area (186/1, 2, 3 & 4). Exploration and production activities in Libya are regulated by concessions and PSAs. Eni s production in Libya is expected to post an increase in the medium term owing to |
the expected ramp up of new
structures near the Western Libyan Gas Project fields,
despite mature field production declines. Libya confirms
to be one of Enis largest oil and gas producing
countries BLOCKS NC169/NC41 Production Block NC169 is located in the western Libyan desert near the border with Algeria while block NC-41 is located in the Mediterranean offshore north of Tripoli. Production comes from: (i) the onshore Wafa field started up in September 2004, which in 2006 produced 139 kboe/d of liquids and natural gas (69 net to Eni); (ii) the Bahr Essalam offshore field started up in August 2005, that in 2006 produced 102 kboe/d of liquids and natural gas (51 net to Eni); (iii) the Bouri offshore field (Enis interest 30%) discovered in 1976, that in 2006 produced 55 kboe/d of liquids (17 net to Eni). The Wafa and Bahr Essalam fields, containing recoverable reserves of approximately 1.6 bboe were developed as part of the upstream-midstream integrated Western Libyan Gas Project aimed also at exporting natural gas to Europe through the underwater Greenstream pipeline. In 2006 volumes delivered through this pipeline were 240 bcf and are expected to target 283 bcf (equal to approximately to an average of 777 mmcf/d) when operations are fully on line. Said volumes are supplied to third parties on the Italian natural gas market under long term contracts. Further 71 bcf of gas will be delivered to the Libyan market once these two fields have achieved production plateau. Production from these two fields is treated at the Mellitah plant on the Libyan coast, made up of three trains for the treatment of gas from Bahr Essalam, while the gas produced at Wafa is ready for sale. Mellitah includes also facilities for the compression of natural gas that is carried to Sicily, as well as facilities for the storage and loading of oil and LPG. In 2006 a total of 26 offshore producing wells were drilled and linked to the Sabratha platform as foreseen by phase 1 of the sanctioned project. The Bouri field is exploited through two platforms linked to an FPSO unit with a storage capacity of approximately 1.5 mmbbl. In 2006 the Bouri East Development project was completed with the start-up of 4 underwater wells. Exploration Exploration activity was successful with the T1 discovery well, about 20 kilometers west of the Bouri field, which identified oil at a depth of 2,800 meters. |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
BLOCK
NC174 Production Block NC174 is located in the south-western Libyan desert about 800 kilometers from of Tripoli. Daily production is provided mainly by the El Feel (Elephant) field discovered in 1997. In 2006 the field yielded 124 kbbl/d (24 net to Eni) treated at the fields facilities and then delivered to the Mellitah treatment plant by pipeline. After completing the storage and loading facilities of the Mellitah terminal, this field reached a production peak of 150 kbbl/d (35 net to Eni). BLOCKS 82 AND 100 |
Exploration
Exploration activity was successful with the KK4-82/ST3
discovery well, which identified oil at a depth of
approximately 5,000 meters. Mali In November 2006, Eni purchased five onshore exploration licenses (Eni operator with a 50% interest) from the companies Baraka Mali Operations Limited and Baraka Mali Ventures Limited, covering a gross acreage of approximately 193,200 square kilometers (96,600 net to Eni). Blocks are located in the central part of the Taodueni Basin at the border with Algeria, a completely unexplored and high potential basin according to recent studies. The life span of this exploration license was fixed at four years. In March 2007, this operation was approved by the Malian Authorities. West Africa Angola Eni has been present in Angola since 1980. In 2006 Enis oil production averaged 155 kboe/d. Enis activities are concentrated in the conventional and deep offshore over a gross acreage of 18,776 square kilometers (3,275 net to Eni). The main blocks in which Eni holds an interest are: (i) Block 0 in Cabinda (Enis interest 9.8%) west of the Angolan coast; (ii) Block 14 (Enis interest 20%) in the deep offshore west of Block 0; (iii) Block 15 (Enis interest 20%) in the deep offshore of the Congo basin. Eni also holds interests in other minor concessions, in particular in some areas of Block 3 (with interests varying from 12 to 15%). In the exploration phase, Eni is operator of block 15/06 (with a 35% interest) awarded in May 2006 and holds interests in the 14K/A IMI Unit Area and in Block 3/05-A with a 11.5% and a 12% interest, respectively. Exploration and production activities in Angola are regulated by concessions and PSAs. Production is expected to increase in the medium term reflecting contributions from ongoing development projects, despite the production decline of mature fields. By 2010 Angola will confirm its status as one of Enis largest oil and gas producing countries with a level of 160 kbbl/d. BLOCK 0 Production In 2006 production from this block accounted for approximately 27% of Enis production in Angola at 41 kbbl/d (gross production averaged 418 kbbl/d). Block 0 is divided into areas A and B Oil production from area A, deriving mainly from the Takula |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
and Malongo fields amounted
to 22 kbbl/d net to Eni. Production of area B including
oil, condensates and LPG derives mainly from the Bomboco,
Kokongo, Lomba, NDola, Nemba and Sanha fields, and
amounted to 19 kbbl/d net to Eni in 2006. In 2007
Enis production from Block 0 is targeted at 40
kbbl/d. Development The development plan of the Banzala field in area A progressed towards completion, with the commissioning of the first of the two production platforms envisaged by the plan and the drilling of development wells. Production start-up is expected in the first half of 2007, peaking at 27 kbbl/d (3 net to Eni) in 2009. BLOCK 14 Production Block 14 produced 108 kbbl/d (17 net to Eni) in 2006 and is one of the most fruitful areas in the West African offshore, recording 9 commercial discoveries to date. In 2006 the joint development of the Benguela-Belize/Lobito-Tomboco oil fields has been completed. Phase 1 has been started up in January, while phase 2 was started up in June. Production from these fields holding recoverable reserves of 380 mmbbl is supported by a Compliant Piled Tower provided with treatment facilities for Benguela/Belize and an underwater linkage system for Lobito/Tomboco. Peak production of 158 kbbl/d (20 net to Eni) is expected in 2009 with the finalization of the drilling program. Development Eni participates to the development project of the Landana and Tombua deepwater oil fields discovered in 1997 and 2001 respectively, holding recoverable reserves of 322 mmbbl in water depths between 270 and 500 meters. The development project includes the drilling of 46 subsea wells, 6 of which related to the Landana North field, that are expected to be linked to the Benguela/Belize-Lobito/Tomboco facilities. The first of these wells started producing in June 2006. The remaining part of the project will be carried out by means of the installation of a Compliant Piled Tower provided with treatment capacity. Production is planned to start up in 2009 peaking at 130 kbbl/d (22 net to Eni) in 2011 once the drilling program has been completed. Associated gas will be reinjected in the reservoir. Exploration Exploration activity was successful with the Lucapa 1 discovery, which identified oil and gas at a depth of approximately 1,200 meters. BLOCK 15 Production In 2006 production from this block averaged 573 kbbl/d (90 net to Eni). This is considered the most interesting area in the West African offshore with recoverable reserves estimated at 2.55 bbbl of oil. |
The Hungo and Chocalho fields were started up in August 2004, and the Kissanje and Dikanza fields were started-up in July 2005 as part of phases A and B of the global development plan of the Kizomba reserves. Production from these fields is supported by FPSO units. In 2006, these fields yielded a cumulative production of 527 kbbl/d (85 net to Eni), nearing peak levels. In the medium-term, |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
peak production is expected
to be supported by developing reserves from nearby
discoveries. In December 2006 the Marimba oil field,
discovered in 1998, was started up. The project provides
for the drilling of 5 wells (3 production and 2 water
injection wells) that will be linked to the existing
production facilities. Production from this satellite is expected to peak at 39 kbbl/d (7 net to Eni) in 2008. Another large field in Block 15 is Xikomba, yielding 4 kbbl/d net to Eni in 2006. In 2006 production from Block 15 accounted for approximately 59% of Enis production in Angola. Development In March 2006 the development of the Mondo and Saxi/Batuque fields was sanctioned as part of phase C of the global development plan of the Kizomba reserves. The Mondo field contains recoverable reserves of 278 mmbbl. The relevant development project provides for the installation of an FPSO vessel with a treatment capacity of 100 kbbl/d and a storage capacity of approximately 2 mmbbl and the drilling of 17 wells (10 producing, 4 water injection and 3 water/gas injection wells). The Saxi/Batuque fields holding recoverable reserves of 305 mmbbl will be developed according to a scheme similar to that of the Mondo field by installing an FPSO vessel with a treatment capacity of 100 kbbl/d and a storage capacity of approximately 1.7 mmbbl, and drilling 19 wells (9 producing, 6 water injection and 4 water/gas injection). Production is expected to start in the first and second quarter of 2008, respectively, peaking at 100 kbbl/d for both projects (18 net to Eni) in 2009. . Exploration Exploration activity was
successful with the Tchihumba 2 discovery, which
identified oil and gas at a depth of approximately 3,000
meters. |
BLOCK 14K/A IMI Uni |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
with a total acreage of
10,000 square kilometers and will give to its partner a
20% interest in the Mer Très Profonde Nord permit (Eni
operator with a 40% interest) offshore Congo. |
Production
Daily production is provided mainly by the Zatchi
(approximately 16 kbbl/d) and Loango (10 kbbl/d) fields,
Tchibuela and Yanga/Snedji fields in the Pointe Noire
Grand Fonde permit (overall 14 kbbl/d) and by fields
located in the Marine VI (approximately 11 kbbl/d) and
Marine VII (3 kbbl/d). Eni holds a 50% interest in the Djeno power plant. The plant has a 25 MW capacity and is fired with associated gas from the Kitina field (in Marine VII permit). It was started up in 2002 and represents the first example of monetization of associated gas in Congo. In 2006 in the Pex permit the Litanzi offshore field started production through the facilities of the Tchendo field. A peak production of 4.1 kboe/d (1.4 net to Eni) was reached in 2006. Development The main development project underway concerns the Awa Palokou (Enis interest 90%) and Ikalou-Ikalou Sud (Enis interest 100%) fields in the Marine X and Madingo permits. Start up is expected in 2008 with a production peak of 13 kboe/d net to Eni in 2009. Exploration Exploration yielded positive results in the Mer Très Profonde Sud permit with the Aurige Nord Marine discovery that yielded approximately 5 kboe/d in test production. Nigeria Eni has been present in Nigeria since 1962. In 2006, Enis oil and gas production averaged 149 kboe/d over a gross acreage of 43,215 square kilometers (7,356 net to Eni) located mainly in the onshore and offshore of the Niger Delta. In the development /production phase Eni is operator of 4 onshore Oil Mining Leases (OML) 60, 61, 62 and 63 (Enis interest 20%) and offshore OML 125 (Enis interest 50.19%), OMLs 120-121 (Enis interest 40%) and OML 118 (Enis interest 12.5%). It also holds a service contract for the offshore OMLs 119 and 116. Through SPDC JV, the largest oil joint venture in the country, Eni also holds a 5% interest in 31 onshore blocks and a 12.86% interest in 5 conventional offshore blocks. Eni holds a 5% interest in offshore OML 28 where the Kolo Creek appraisal well showed the presence of hydrocarbons in the reservoir of the Kolo Creek structure. In the exploration phase Eni is operator of Oil Prospecting Leases (OPL) 244 (Enis interest 60%), OML 134 (former OPL 211 - Enis interest 50.19%) and onshore OML 135 (former OPL 219 - Enis interest 12.5%) and OPL 282 (Enis interest 90%) In OML 135 exploration activity yielded positive results with the Bolia 4 appraisal well which discovered oil at a depth of 3,600 meters and opened the way to further surveys of the field. |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
The partners of OMLs 135 and
129 are also appraising the development of the Nnwa-Doro
field and a possible marketing of the gas. In March 2007 Eni acquired a 48% interest and the operatorship of activities in OPL 135. The exploration program provides for the exploration and development of new oil and gas reserves near existing networks and the Kwake/Okpai power station operated by Eni over a period of 25 years. Exploration and production activities in Nigeria are regulated by Production Sharing Contracts. Enis counterparties are state owned oil companies, while in service contracts Eni acts as contractor for state owned companies. Service contracts provide for the recovery of reimbursable costs born by the contractor through a share of production, while non reimbursable costs (mainly costs related to dry wells) are recovered through the contractors share of profits.OPLs typically last 10 years. When a discovery is made OPLs are transformed into OMLs with a 20 year duration. Production is expected to increase in the medium term in particular for the exploiting of gas reserves that will enable Eni to reach approximately 200 kboe/d, confirming Nigeria among Enis largest producing countries. |
OMLs 60, 61, 62 and 63 |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
OML
125 OML 125 produced 12 kbbl/d of oil net to Eni in 2006. Production derived from the Abo field, under development and expected to reach a peak production of 20 kbbl/d (9 net to Eni) by 2009. Production is assisted by an FPSO unit with a 45 kbbl/d capacity and a 800 kbbl storage capacity. OML 118 OML 118 produced 22 kbbl/d of oil net to Eni in 2006. Production derived from the Bonga oil field, on which an FPSO unit with a 225 kbbl/d capacity and a 2 mmbbl storage capacity is installed. Associated gas is carried to a collection platform on the EA field and from here is delivered to the Bonny liquefaction plant. Exploration yielded positive results with the Bonga North 2 appraisal well which showed the presence of oil at a depth of 3,560 meters. OML 119 Located about 55 kilometers off the Nigerian coast at a water depth of 65 meters, OML 119 produced 17 kbbl/d of oil net to Eni in 2006. Production derived from the Okono/Okpoho field through an FPSO unit with an 80 kbbl/d capacity and a 1 mmbbl storage capacity. OMLS 120 AND 121 An exploration plan is underway aimed at appraising the reserves in the Oyo discovery for a subsequent development. In OML 120 the Oyo dir appraisal well found oil at a depth of 2,730 meters. SDPC JOINT VENTURE (NASE) The Forcados/Yokri oil and gas field with recoverable reserves of 320 mmboe is under development as part of the integrated associated gas gathering project aimed at supplying gas to the Bonny liquefaction plant. Offshore production facilities have been installed. Onshore activities concern the upgrading of the Yokri and North/South Bank flow stations and the construction of a gas compression plant with a 8.1 bcf/d capacity. 28 wells have been drilled and 122 started production. Completion is expected in 2008. THE LNG BUSINESS IN NIGERIA Eni holds a 10.4% interest in Nigeria LNG Ltd which manages the liquefaction plant located on Bonny island, in the eastern part of the Niger Delta, with a treatment capacity of approximately 812 bcf/y of feed gas corresponding to a production of 17 million tonnes/year of LNG on 5 trains. A sixth train is under construction with a treatment capacity of 4.1 |
mmtonnes/y
expected to start operations in 2007. Engineering
activities of a seventh train are underway with expected
start up in 2011. When fully operational, this plant is
expected to have a capacity of 30 mmtonnes/y of LNG
corresponding to about 1,448 bcf/y of feed gas. |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
North
Sea Norway Eni has been operating in Norway since 1964. Enis activities are performed in the Norwegian Sea, in the Norwegian section of the North Sea and in the Barents Sea over a gross acreage of 18,851 square kilometers (7,077 net to Eni). Enis production in Norway amounted to 140 kbbl/d in 2006. Exploration and production activities in Norway are regulated by Production Licenses (PL). According to a production license, the holder is entitled to perform seismic surveys and drilling and production activities for a few years with possible extensions. In the medium term, production is expected to decline slightly due to production decline in mature fields, to recover later when ongoing development activities start to support production levels. NORWEGIAN SECTION OF THE NORTH SEA Production Eni holds interests in 4 production Licenses in the Norwegian section of the North Sea covering a total acreage of 2,168 square kilometers. The main producing field is Ekofisk (Enis interest 12.39%) in PL018 containing mainly oil, which in 2006 produced 416 kboe/d (52 net to Eni) and accounted for 37% of Enis production in Norway. In 2006 initiatives were executed to support and optimize production, in particular two further stretches of pipes were laid that will start operations in 2007. Exploration Eni holds interests ranging from 12 to 60% in 5 prospecting Licenses, one of them as operator. NORWEGIAN SEA Production Eni holds interests in 6 production areas in the Norwegian Sea covering a gross acreage of 1,027 square kilometers. The main producing fields are Aasgard (Enis interest 14.82%), Kristin (Enis interest 8.25%), Heidrun (Enis interest 5.12%), Mikkel (Enis interest 14.9%) and Norne (Enis interest 6.9%) which accounted for 63% of Enis production in Norway. In 2006 the drilling program of the Kristin field was completed, after this intervention production is expected to reach 218 kboe/d (18 net to Eni) in 2007. Development The main structures in the development phase are located near Kristin, in particular Tyrihans (Enis interest 6.23%). The development of this field is economically viable thanks to the synergies obtainable from the Kristin production facilities. The development plan of Tyrihans provides for the drilling of 12 wells (9 production, 2 gas injection and 1 water injection) |
and the
laying of a 45-kilometer long underwater pipeline
connecting to Kristin. Production start-up is expected in
2009, in coincidence with the production decline of
Kristin which will free spare capacity for Tyrihans
production. |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
BARENTS
SEA Currently Eni is only performing exploration activities in this area. Eni is operator of 2 PLs 201 (Enis interest 67%) and 229 (Enis interest 65%) and holds interests varying from 15 to 31% in 3 other Licenses. Operations in this area are focused on the appraisal of the mineral potential of the large Goliath discovery made in 2000 at a water depth of 370 meters in PL 229 aimed at its commercial development. In late 2006 five appraisal wells have been successfully drilled and confirmed the presence of hydrocarbons in the Goliath structure at a depth of 1,000-1,800 meters. In 2006 following an international bid procedure, Eni acquired blocks 7124/6, 7125/4 e 7125/5 in PL393 (Enis interest 30%). In 2007 the exploration plan provides for the drilling of one well. |
United Kingdom |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
to the Elgin/Franklin
transport infrastructure and production platform. This field produced 12 kboe/d (1 net to Eni) in 2006. Other actions in the year concerned optimization of producing fields, in particular MacCulloch, Elgin/Franklin and J-Block through the drilling of additional wells and workover actions for supporting production levels. Development The main project underway concerns the development of the reserves in the Blane field in Block 30/3a (Enis interest 18%). This project provides for the drilling of 3 subsea wells (2 production and 1 water injection) and a linkage to existing treatment facilities. Associated gas will be reinjected in the nearby Ula field reservoir. Start-up is expected in the third quarter of 2007 with an initial flow of 12 kboe/d (2.2 net to Eni). Exploration Eni holds interests in 32 exploration blocks ranging from 3 to 66%, in 3 of these Eni is operator. Exploration yielded positive results in permit P/011 Block 30/06a (Enis interest 53.9%) with a hydrocarbon discovery and in permit P/672 block 30/02c (Enis interest 7%) with an oil discovery that has been linked to the production facilities of the nearby Jade field (Enis interest 7%). IRISH SEA Production Eni holds interests in 5 production blocks in the Liverpool Bay area (Enis interest 53.9%) in the eastern section of the Irish Sea for a total acreage of 222 square kilometers. Main fields are Douglas, Hamilton and Lennox, which in 2006 accounted for 26% of Enis production in this area. SHETLAND ISLES Production Eni holds interests in 6 production permits located east of the Shetland Isles for a for a total acreage of 644 square kilometers. Main fields are Ninian (Enis interest 12.94%) and Magnus (Enis interest 5%) which in 2006 accounted for 5% of Enis production in the United Kingdom. In 2006 maintenance and optimization actions were performed with the upgrade of the Ninian facility and the drilling of additional wells on Magnus. Exploration Eni holds interests in 7 exploration blocks ranging from 20 to 38%, where an intense exploration campaign is underway. Rest of World Saudi Arabia Eni entered Saudi Arabia in 2004. Ongoing activities concern exploration of the so called C area in order to discover and develop gas reserves. This license covering 51,687 square kilometers (25,844 net to Eni) is located in the Rub al Khali basin at the border with Qatar and |
|
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
of blocks TP-22, WA-280-P
and WA-326-P. Exploration and production activities in Australia are regulated by concessions, while in the cooperation zone between East Timor and Australia (JPDA) they are regulated by PSAs. In the medium term, production is expected to increase due to ongoing development activities. BLOCK WA-25-L Production With a total acreage of 400 square kilometers this block is located offshore the Carnavon Basin, north west of Australia at a water depth of 100 meters. The main field is Woollybutt with a production of 10 kbbl/d (6.5 net to Eni) in 2006. The field is operated by an FPSO unit with a 55kbbl/d treatment capacity. Development The area south of Woollybutt is under development with the linking of two production wells to existing facilities. Start-up is expected in 2008. Exploration Exploration is intense in order to extend Woollybutts production profile. In particular the Woollybutt 5 appraisal well found new oil strata in the southern area of the field. BLOCK JPDA 03-13 Production With a total acreage of 330 square kilometers this block is located offshore north western Australia at a water depth of 80 meters in the cooperation zone between East Timor and Australia. Production of liquids and gas comes from the Bayu Undan field. Liquid production started in 2004 and is supported by 3 treatment platforms and an FPSO unit for the separate storage of condensates, propane and butane. Production of natural gas is carried by a 500-kilometer long pipeline to the Darwin liquefaction plant which has a capacity of 3.5 mmtonnes/y of LNG (equivalent to approximately 173 bcf/y of feed gas). Unused volumes are reinjected in the field. In February 2006 the first shipment of LNG was made to the Japanese market to two companies operating in power generation and natural gas distribution. |
Total production from Bayu
Undan was 182 kboe/d (20 net to Eni) in 2006. BLOCK WA-279-P Development In this block with a total acreage of 2,780 square kilometers, the development of the Blacktip field with recoverable reserves of 150 mmboe is underway. This project provides for the drilling of 2 production wells, the installation of a production platform, the laying of a 108 kilometers long pipeline and the construction on land of a treatment plant with a capacity of 46 bcf/y. Natural gas extracted from this field will be used mainly for power generation for the city of Darwin and other centers in the Northern Territory under a 25-year contract signed with Darwin Power & Water Utility Co. Production start-up is expected in 2009 at an initial flow of 2.3 bcf/y, due to increase to 39 bcf/y. Brazil In January 2006 following the international bid procedure of October 2005, Eni acquired the operatorship of a six-year exploration license in Block BM-Cal-14, covering an area of over 750 square kilometers in deep and ultradeep waters located in the offshore Camamu-Almada basin. In November 2006 following an international bid procedure, Eni presented the best offer for the exploration license of of Block S-M-857 (Enis interest 100%) with a gross acreage of about 700 square kilometers in the deep offshore of the Santos basin. The assignation of blocks has not yet been completed. Croatia Eni has been present in Croatia since 1999. In 2006 Enis net production of natural gas averaged 67 mmcf/d. Activities are deployed in the Adriatic offshore facing the city of Pula over an area of 6,056 square kilometers (3,028 net to Eni). Exploration and production activities in Croatia are regulated by PSA. |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
Production
Eni through a 50/50 joint venture with INA, the national
Croatian oil company, operates the Ivana natural gas
field. As part of the development plan of the natural gas
reserves in the area, the Ivana C/K platform and the Ika
A/B and Ida A fields were started up. Production from
these fields is sent to the Ivana K platform, from here
to the Garibaldi K platform and sold on the Italian
market. In 2006 the Katarina field (Enis interest 50%) has been started up. Production is sent to Italy through the Marica and Barbara T2 platform. Development The main project underway concerns the Annamaria field (Enis interest 50%) and it provides for the installation of 2 production platforms and the linking by a 37-kilometer long pipeline to the Ivana K platform. Start-up is expected for 2009. Exploration Exploration is focused on the mineral potential of the Ivana permit. In 2006 the Ana 1 and Vesna 1 discovery wells identified gas bearing strata. India In 2005, following an international bid procedure Eni obtained an exploration license as operator in Block RJ-ONN-2003/1 (Enis interest 34%) and Block AN-DWN-2003/2 (Enis interest 40%) located in onshore in Rajasthan in the north-west of India and in the Indian Ocean, near the Andaman Islands, respectively. The exploration program for Block RJ-ONN-2003/1 provides for the drilling of 4 wells in the first 4 years of the license. Any hydrocarbons discovered will be sold locally. The exploration program for Block AN-DWN-2003/2 provides for the drilling of 3 wells in the first 4 years of the license. The development of any reserves found provides for the installation of an FPSO unit for liquid production and of facilities for gas treatment. In February 2007 Eni concluded an agreement with a partner whereby interests in India and Congo were exchanged. Following this transaction Eni acquired a 34% interest in block MN-Dwn-22002/ with high mineral potential in the Indian offshore at a water depth of 2,000 meters with a total acreage of 10,000 square kilometers and will give to its partner a 20% interest in the Mer Très Profonde Nord permit (Eni operator with a 40% interest) offshore Congo. Iran Eni has been present in Iran since 1957. In 2006 production net to Eni averaged 29 kboe/d. Enis activities are concentrated in the offshore of the Persian Gulf and onshore for a total acreage of 1,456 square kilometers (820 net to Eni). |
Exploration and production activities in
Iran are regulated by buy-back contracts. |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
These actions aim at
increasing production from the present 50 kbbl/d to over
160 kbbl/d (14 net to Eni). In the medium term Enis liquid production in Iran is expected to increase due to ongoing development initiatives. Indonesia Eni has been present in Indonesia since 2000. Enis production in 2006 amounted to 23 kboe/d. Production is concentrated in the western offshore and onshore of Borneo and offshore Sumatra over a total acreage of 28,438 square kilometers (16,301 net to Eni). Exploration and production activities in Indonesia are regulated by PSA. Production Production consists mainly of gas and derives from the Sanga Sanga permit (Enis interest 37.81%). This gas is treated at the Bontang liquefaction plant, the largest in the world, and is exported to the Japanese, South Korean and Taiwanese markets. Activities are underway for mitigating the natural decline of production by means of infilling wells. Exploration Eni holds interest in 11 exploration blocks, 6 as operator with interests ranging from 20% to 100%. An intense exploration campaign is underway in the Tarakan basin offshore Borneo. Kazakhstan Eni has been present in Kazakhstan since 1992. Main activities are performed in the Karachaganak field onshore in western Kazakhstan and in the area covered by the North Caspian Sea PSA in the shallow waters of the Northern Caspian Sea. Eni is co-operator with British Gas with a 32.5% interest of the Karachaganak oil, gas and condensate field. In 2006 production from this field (net to Eni) averaged 64 kbbl/d of liquids and 6.4 mmcm/d of natural gas, totalling 103 kboe/d. This field is developed by producing liquids (oil and condensates) from the deeper layers of the reservoir and reinjecting the associated gas in the higher layers. This scheme enables to increase the recovery of liquids. Approximately two thirds of liquid production are stabilized at the Karachaganak Processing Complex (KPC) with a capacity of 150 kbbl/d and exported to Western markets, most of it through the Caspian Pipeline Consortium pipeline (Eni's interest 2%) linked to the field by a 635-kilometer long pipe, while the rest flows though the Atyrau-Samara pipeline from 2006. The remaining third of non stabilized liquid production and the associated gas not reinjected are marketed at the Russian terminal in Orenburg. Field activities in 2006 concerned: (i) the sanctioning of the |
expansion of stabilization
capacity (4th train) which will enable to further
increase exported volumes entailing the achievement of
better realization prices with respect to the sale on
local Russian markets; (ii) the continuation of
activities required for keeping production plateau at the
current levels, in particular by drilling new wells.
Studies are underway for designing a further development
phase, as provided for in the PSA governing activities at
this field, aimed at monetizing reserves of gas and
associated liquids through the signing of gas sale
contracts with Russian and Kazakh companies and the
construction of a gas treatment plant. As part of the North Caspian Sea PSA, Eni with an 18.52% interest is single operator of the development of the Kashagan field, which is believed to be the most important discovery in the world in the past thirty years. The development plan sanctioned in February 2004 envisages field development through three phases aiming at producing from 7 to 9 bbbl of gross recoverable reserves, extendible to 13 bbbl through partial gas reinjection. The development plan of this field provides for the construction of production hubs located on platforms and artificial islands which will collect production from satellite islands from which production wells will be drilled. Oil and non reinjected gas will be treated in the hubs and delivered, through two separate lines, to onshore treatment plants (located at Bolashak, near Atyrau). The oil will be further stabilized and purified; natural gas will be treated for the removal of hydrogen sulphide and will be mostly used as fuel for the production plants. The remaining amounts will be marketed. The first development phase is progressing leveraging on the use of the most advanced techniques in order to cope with high pressures in the reservoir, the presence of high concentration of hydrogen sulphide and harsh environmental conditions. By the end of 2006, works had been completed corresponding to 59% of the initial scope, with the total amount of contracts awarded at $10.6 billion. Drilling activities and completion of development wells from the two artificial islands already installed have been progressing. In addition, three rigs, two of which being of the most advanced class, were installed on said islands. Three development wells were completed yielding high rates of productivity under test phase. Production start-up is currently scheduled for the third quarter of 2010 as compared to an initial forecast indicating a start-up in 2008, due also to the need on the part of Eni to perform certain studies to define measures intended to enhance the overall level |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
of safety and operability of
facilities. As a result of said reconfiguration completed
by year-end, the onshore design has been confirmed, while
certain enhancements have been identified offshore which
do not alter the original development concept. |
expects a full field
production plateau of 1.5 mmbl/d, representing a 25%
increase from the original target envisaged by the
development plan. Capital expenditure amounts indicated above do not include the capital expenditure for the construction of the infrastructure for exporting production to international markets, for which various options are under scrutiny by the consortium. These include: (i) the use of existing infrastructure, such as the Caspian Pipeline Consortium pipeline (Eni's interest 2%) and the Atyrau-Samara pipeline; (ii) the laying of a new pipeline according to two different options. The first one envisages laying of a line connecting the Bolashak production centre with the Baku-Tbilisi-Cehyan pipeline (Eni's interest 5% corresponding to the right to transport up to 50 kbbl/y). The second option envisages laying of a pipeline designed to bypass the Turkish Straits of Bosporus and Dardanelles, enabling delivery of oil produced in the Caspian region to the Ceyhan commercial hub on the Mediterranean coast. Following award of the relevant license to the Turkish company Çalik Enerji, partnering Eni in this initiative (both with a 50% stake), engineering activities have been started in the second half of 2006. This new infrastructure is expected to be 550-kilometers long
with a maximum transport capacity of 1 mmbbl/d of oil,
expandable to 1.5 mmbbl/d. |
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ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
In the medium term Eni's
production in Kazakhstan is expected to grow due to the
contribution of increased gas volumes produced at
Karachaganak and the start up of Kashagan. |
fields, in particular Sawan,
Kadanwari, Miano and Bhit by means of drilling additional
wells and workover aimed at maintaining production
levels. Development The main project underway, sanctioned in 2006, concerns the Bhit permit for the construction of a third treatment train at the existing terminal which will make available also the production from the nearby Badhara field. A study is underway for the construction of a compression station at Bhit. Work continued in the Zamzama permit for the construction of a new treatment plant for the production of HVC gas. Also a compression station at Sawan is under study. Exploration Eni holds interests in 11 exploration blocks ranging from 30 to 100%. In 2006 following an international bid procedure Eni was awarded the operatorship of four exploration licenses relating to Block Rjar/Mithi, Thar and Umarkot. These blocks are located in the East Sindh and cover a gross area of about 9,950 square kilometers. The exploration plan provides for the drilling of a well in each block in the first year and the completion of seismic surveys. In the Bhit permit seismic surveys were completed in the year. Exploration activity is intense in the offshore. |
- 32 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
United States Eni has been present in the United States since 1966. In 2006 Eni's oil production averaged 32 kboe/day. Activities are performed in the conventional and deep offshore in the Gulf of Mexico and onshore and offshore Alaska over a total acreage of 7,803 square kilometers (3,758 net to Eni). Exploration and production activities in the United States are regulated by concessions. In the medium term Eni's production is expected to remain stable. GULF OF MEXICO Production Eni holds interests in 24 production blocks in the deep and conventional offshore covering a total acreage of 803 square kilometers. The main fields are Allegheny (Eni operator with an 86% interest), Medusa (Eni's interest 22%), Europa (Eni's interest 28%), King Kong (Eni operator with a 49% interest), East Breaks (Eni operator with an 84% interest) and Morphet (Eni operator with an 84% interest). These fields accounted for 81% of Eni's production in 2006. In 2006 the Allegheny South |
(Eni's interest 100%) and
North Black Widow (Eni's interest 25.19%) fields have
been started-up. Production from Allegheny South reached
3 kbbl/d 18 months after its discovery. Exploration Eni holds interests in 76 exploration permits varying from 5 to 100%. In 19 of these Eni is operator. Exploration yielded positive results in: (i) Green Canyon Block 473 (Eni operator with a 50% interest), where the presence of oil was confirmed; (ii) Mississippi Canyon Block 502 (Eni's interest 100%), the Longhorn North discovery well showed the presence of natural gas. A feasibility study to develop this discovery is underway. ALASKA Eni's activities in Alaska are currently in the exploration and development phase. In November 2006, Eni started an exploration campaign in the onshore Rock Flour area (Eni's interest 100%). The approved plan provides for the drilling of three wells. In March 2006, following an international bid procedure, Eni was awarded 11 exploration blocks near Rock Flour. |
- 33 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - ACTIVITY AREAS
Overall Eni holds interests
in 151 blocks ranging from 10 to 100%, in over half of
these is operator. Eni signed an agreement with a partner for a swap of interests in 64 exploration blocks (Eni's interest 60%) located in the Beaufort Sea, offshore North Alaska. Based on this agreement, Eni is entitled to 140 exploration blocks (50% of which operated). Exploration plans provide for 3D seismic surveys and drilling of an exploration well by 2010. Development The main development plan concerns the offshore Oooguruk field (Eni's interest 30%) in the Beaufort Sea with recoverable reserves of 301 mmboe. The project provides for the beginning of production of the Kuparuk C and Nisquit areas. In the first area the plan provides for the drilling of 5 wells (3 production and 2 water injection). For the second area the plan provides for the drilling of 33 wells (18 production and 15 water/gas injection). Production is expected to start at the end of 2007 peaking at 17 kboe/d (5.4 net |
to Eni) in 2010 and to be
sent to the DS-3H onshore plant. In January 2007 Eni
signed an agreement for the purchase of the remaining 70%
interest in the Nikaitchuq field, where it already holds
a 30% interest. Drilling activities are underway. The project is expected to yield approximately 100 mmboe when started-up in late 2009. East Timor In May 2006 following an international bid procedure Eni was awarded the operatorship of five exploration licenses (Eni's interest 100%) covering contract areas A, B, C, E and H with a gross acreage of about 12,183 square kilometers located in the deep offshore between the Timor Island and the international cooperation zone between East Timor and Australia. Relevant Production Sharing contracts were signed. |
- 34 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Liquids reserves by geographic area |
(mmbbl) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
(at December 31) | ||||||||||||||||||||
Italy | 360 | 329 | 328 | 296 | 309 | 255 | 252 | 225 | 228 | 215 | ||||||||||
North Africa | 985 | 1,024 | 1,071 | 1,039 | 1,171 | 1,072 | 1,080 | 993 | 979 | 998 | ||||||||||
West Africa | 728 | 790 | 900 | 934 | 976 | 1,022 | 1,038 | 1,056 | 942 | 793 | ||||||||||
North Sea | 428 | 433 | 417 | 455 | 552 | 498 | 529 | 450 | 433 | 386 | ||||||||||
Rest of World | 343 | 305 | 421 | 698 | 940 | 936 | 1,239 | 1,284 | 1,191 | 1,089 | ||||||||||
Total outside Italy | 2,484 | 2,552 | 2,809 | 3,126 | 3,639 | 3,528 | 3,886 | 3,783 | 3,545 | 3,266 | ||||||||||
2,844 | 2,881 | 3,137 | 3,422 | 3,948 | 3,783 | 4,138 | 4,008 | 3,773 | 3,481 |
Natural gas reserves by geographic area |
(bcf) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
(at December 31) | ||||||||||||||||||||
Italy | 7,207 | 6,977 | 6,439 | 6,125 | 5,640 | 5,295 | 4,166 | 3,818 | 3,676 | 3,391 | ||||||||||
North Africa | 3,154 | 3,834 | 4,504 | 5,152 | 5,509 | 5,563 | 5,467 | 6,453 | 6,132 | 5,963 | ||||||||||
West Africa | 721 | 696 | 964 | 922 | 925 | 1,533 | 1,656 | 1,729 | 1,967 | 1,929 | ||||||||||
North Sea | 1,312 | 1,349 | 1,331 | 1,418 | 1,892 | 1,899 | 2,223 | 2,051 | 1,864 | 1,697 | ||||||||||
Rest of World | 274 | 659 | 427 | 1,155 | 3,106 | 4,339 | 4,496 | 4,384 | 3,952 | 3,985 | ||||||||||
Total outside Italy | 5,461 | 6,538 | 7,226 | 8,647 | 11,432 | 13,334 | 13,842 | 14,617 | 13,915 | 13,574 | ||||||||||
12,668 | 13,515 | 13,665 | 14,772 | 17,072 | 18,629 | 18,008 | 18,435 | 17,591 | 16,965 |
- 35 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Net proved hydrocarbon reserves by geographic area | (mmboe) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
(at December 31) | ||||||||||||||||||||
Italy | 1,646 | 1,574 | 1,477 | 1,389 | 1,315 | 1,199 | 996 | 890 | 868 | 805 | ||||||||||
North Africa | 1,530 | 1,686 | 1,849 | 1,929 | 2,122 | 2,033 | 2,024 | 2,117 | 2,047 | 2,037 | ||||||||||
West Africa | 852 | 910 | 1,067 | 1,093 | 1,136 | 1,287 | 1,324 | 1,357 | 1,285 | 1,129 | ||||||||||
North Sea | 655 | 666 | 646 | 700 | 879 | 825 | 912 | 807 | 758 | 682 | ||||||||||
Rest of World | 390 | 419 | 495 | 897 | 1,477 | 1,686 | 2,016 | 2,047 | 1,879 | 1,783 | ||||||||||
Total outside Italy | 3,427 | 3,681 | 4,057 | 4,619 | 5,614 | 5,831 | 6,276 | 6,328 | 5,969 | 5,631 | ||||||||||
5,073 | 5,255 | 5,534 | 6,008 | 6,929 | 7,030 | 7,272 | 7,218 | 6,837 | 6,436 |
Liquids production by country |
(kbbl/d) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 105 | 100 | 88 | 76 | 69 | 86 | 84 | 80 | 86 | 79 | ||||||||||
North Africa | 212 | 213 | 221 | 227 | 228 | 252 | 250 | 261 | 308 | 329 | ||||||||||
Egypt | 75 | 88 | 109 | 112 | 97 | 97 | 92 | 94 | 90 | 85 | ||||||||||
Libya | 103 | 92 | 80 | 82 | 84 | 79 | 82 | 89 | 120 | 144 | ||||||||||
Algeria | 20 | 19 | 18 | 21 | 35 | 65 | 65 | 66 | 86 | 88 | ||||||||||
Tunisia | 14 | 14 | 14 | 12 | 12 | 11 | 11 | 12 | 12 | 12 | ||||||||||
West Africa | 177 | 194 | 202 | 213 | 219 | 222 | 236 | 285 | 310 | 322 | ||||||||||
Nigeria | 77 | 68 | 65 | 75 | 84 | 83 | 108 | 134 | 123 | 106 | ||||||||||
Angola | 55 | 58 | 59 | 63 | 64 | 62 | 58 | 78 | 122 | 151 | ||||||||||
Congo | 45 | 67 | 75 | 72 | 69 | 75 | 68 | 72 | 65 | 65 | ||||||||||
Gabon | 1 | 3 | 3 | 2 | 2 | 2 | 1 | |||||||||||||
North Sea | 114 | 112 | 116 | 124 | 204 | 213 | 235 | 203 | 179 | 178 | ||||||||||
Norway | 45 | 47 | 52 | 65 | 70 | 74 | 105 | 102 | 96 | 98 | ||||||||||
United Kingdom | 69 | 65 | 64 | 59 | 134 | 139 | 130 | 101 | 83 | 80 | ||||||||||
Rest of World | 38 | 34 | 47 | 108 | 137 | 148 | 176 | 205 | 228 | 171 | ||||||||||
Venezuela | 39 | 42 | 54 | 67 | 61 | 15 | ||||||||||||||
Kazakhstan | 16 | 12 | 19 | 27 | 23 | 32 | 41 | 54 | 64 | 64 | ||||||||||
United States | 6 | 4 | 5 | 38 | 26 | 29 | 25 | 25 | 19 | 21 | ||||||||||
Australia | 14 | 21 | 21 | 18 | ||||||||||||||||
Ecuador | 2 | 22 | 25 | 22 | 21 | 19 | 17 | 15 | ||||||||||||
Iran | 3 | 9 | 9 | 35 | 29 | |||||||||||||||
China | 13 | 12 | 14 | 14 | 12 | 10 | 7 | 5 | 7 | 6 | ||||||||||
Indonesia | 6 | 5 | 5 | 4 | 3 | 2 | ||||||||||||||
Pakistan | 1 | 1 | 1 | |||||||||||||||||
Qatar | 3 | 6 | 7 | 7 | 6 | 5 | ||||||||||||||
Total outside Italy | 541 | 553 | 586 | 672 | 788 | 835 | 897 | 954 | 1,025 | 1,000 | ||||||||||
646 | 653 | 674 | 748 | 857 | 921 | 981 | 1,034 | 1,111 | 1,079 |
- 36 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Natural gas production by country (1) | (mmcf/d) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 1,677.5 | 1,649.2 | 1,515.0 | 1,440.9 | 1,338.4 | 1,289.0 | 1,211.3 | 1,098.3 | 1,002.9 | 907.6 | ||||||||||||
North Africa | 98.9 | 134.2 | 279.0 | 455.6 | 515.7 | 589.8 | 586.3 | 681.6 | 988.8 | 1,299.6 | ||||||||||||
Egypt | 98.9 | 134.2 | 279.0 | 445.0 | 480.3 | 550.9 | 550.9 | 607.4 | 706.3 | 812.3 | ||||||||||||
Libya | 17.7 | 21.2 | 10.6 | 45.9 | 254.3 | 452.0 | ||||||||||||||||
Algeria | 7.1 | 17.7 | 14.1 | 21.2 | ||||||||||||||||||
Tunisia | 10.6 | 17.7 | 17.7 | 17.7 | 10.6 | 14.1 | 14.1 | |||||||||||||||
West Africa | 17.7 | 10.6 | 24.7 | 63.6 | 81.2 | 88.3 | 137.7 | 176.6 | 190.7 | 282.5 | ||||||||||||
Nigeria | 17.7 | 10.6 | 24.7 | 63.6 | 81.2 | 88.3 | 137.7 | 155.4 | 165.9 | 247.2 | ||||||||||||
Angola | 10.6 | 17.7 | 24.7 | |||||||||||||||||||
Congo | 10.6 | 7.1 | 10.6 | |||||||||||||||||||
North Sea | 229.5 | 254.2 | 218.9 | 254.3 | 487.3 | 550.9 | 639.2 | 603.9 | 600.4 | 596.8 | ||||||||||||
United Kingdom | 127.1 | 183.6 | 180.1 | 197.8 | 395.5 | 423.8 | 416.7 | 360.2 | 243.7 | 353.1 | ||||||||||||
Norway | 102.4 | 70.6 | 38.8 | 56.5 | 81.2 | 116.5 | 215.4 | 236.6 | 356.7 | 243.7 | ||||||||||||
Netherlands | 10.6 | 10.6 | 7.1 | 7.1 | ||||||||||||||||||
Rest of World | 91.8 | 127.2 | 173.0 | 279.0 | 497.9 | 628.6 | 752.2 | 826.3 | 812.3 | 879.3 | ||||||||||||
Pakistan | 10.6 | 38.8 | 162.4 | 257.5 | 275.5 | 289.6 | ||||||||||||||||
Kazakhstan | 63.6 | 102.4 | 134.2 | 109.5 | 151.9 | 162.4 | 194.2 | 222.5 | 229.5 | |||||||||||||
Indonesia | 236.6 | 226.0 | 208.4 | 173.0 | 137.7 | 116.5 | ||||||||||||||||
United States | 91.8 | 63.6 | 70.6 | 134.2 | 116.5 | 173.0 | 134.2 | 109.5 | 74.2 | 63.6 | ||||||||||||
Trinidad & Tobago | 10.6 | 56.5 | 56.5 | 56.5 | 53.0 | |||||||||||||||||
Croatia | 10.6 | 24.7 | 28.3 | 28.3 | 35.3 | 42.4 | 67.1 | |||||||||||||||
Australia | 3.5 | 49.4 | ||||||||||||||||||||
China | 10.66 | |||||||||||||||||||||
Total outside Italy | 437.9 | 526.2 | 695.6 | 1,052.5 | 1,582.1 | 1,857.6 | 2,115.4 | 2,288.4 | 2,592.2 | 3,058.3 | ||||||||||||
2,115.4 | 2,175.4 | 2,210.6 | 2,493.4 | 2,920.5 | 3,146.6 | 3,326.7 | 3,386.7 | 3,595.1 | 3,965.9 |
(1) | Includes natural gas consumed in operations (283, 247, 212 mmcf/d, in 2006, 2005 and 2004, respectively). |
- 37 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Hydrocarbon production by country (1) | (kboe/d) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 403 | 394 | 358 | 333 | 308 | 316 | 300 | 271 | 261 | 238 | ||||||||||||
North Africa | 229 | 236 | 269 | 306 | 317 | 354 | 351 | 380 | 480 | 555 | ||||||||||||
Egypt | 92 | 111 | 157 | 189 | 180 | 192 | 187 | 200 | 213 | 227 | ||||||||||||
Libya | 103 | 92 | 80 | 82 | 87 | 83 | 84 | 97 | 164 | 222 | ||||||||||||
Algeria | 20 | 19 | 18 | 21 | 35 | 65 | 66 | 68 | 88 | 91 | ||||||||||||
Tunisia | 14 | 14 | 14 | 14 | 15 | 14 | 14 | 15 | 15 | 15 | ||||||||||||
West Africa | 180 | 196 | 206 | 224 | 233 | 237 | 260 | 316 | 343 | 372 | ||||||||||||
Nigeria | 80 | 70 | 69 | 86 | 98 | 98 | 132 | 161 | 152 | 149 | ||||||||||||
Angola | 55 | 58 | 59 | 63 | 64 | 62 | 58 | 80 | 124 | 156 | ||||||||||||
Congo | 45 | 67 | 75 | 72 | 69 | 75 | 68 | 74 | 67 | 67 | ||||||||||||
Gabon | 1 | 3 | 3 | 2 | 2 | 2 | 1 | |||||||||||||||
North Sea | 155 | 156 | 154 | 168 | 288 | 308 | 345 | 308 | 283 | 282 | ||||||||||||
United Kingdom | 92 | 97 | 95 | 93 | 202 | 212 | 202 | 164 | 145 | 142 | ||||||||||||
Norway | 63 | 59 | 59 | 75 | 84 | 94 | 142 | 143 | 138 | 140 | ||||||||||||
Netherlands | 2 | 2 | 1 | 1 | ||||||||||||||||||
Rest of World | 54 | 56 | 77 | 156 | 223 | 257 | 306 | 349 | 370 | 323 | ||||||||||||
Kazakhstan | 16 | 23 | 37 | 50 | 42 | 58 | 69 | 88 | 102 | 103 | ||||||||||||
Venezuela | 39 | 42 | 54 | 67 | 61 | 15 | ||||||||||||||||
Pakistan | 4 | 7 | 28 | 46 | 49 | 51 | ||||||||||||||||
United States | 22 | 15 | 17 | 61 | 46 | 59 | 48 | 44 | 33 | 32 | ||||||||||||
Indonesia | 47 | 44 | 41 | 34 | 27 | 23 | ||||||||||||||||
Australia | 14 | 21 | 22 | 26 | ||||||||||||||||||
Ecuador | 2 | 22 | 25 | 22 | 21 | 19 | 17 | 15 | ||||||||||||||
Trinidad & Tobago | 2 | 10 | 10 | 10 | 9 | |||||||||||||||||
Iran | 3 | 9 | 9 | 35 | 29 | |||||||||||||||||
Croatia | 2 | 2 | 5 | 5 | 6 | 7 | 12 | |||||||||||||||
China | 13 | 12 | 14 | 14 | 12 | 10 | 7 | 5 | 7 | 8 | ||||||||||||
Qatar | 3 | 6 | 7 | 7 | 6 | 5 | ||||||||||||||||
Total outside Italy | 618 | 644 | 706 | 854 | 1,061 | 1,156 | 1,262 | 1,353 | 1,476 | 1,532 | ||||||||||||
1,021 | 1,038 | 1,064 | 1,187 | 1,369 | 1,472 | 1.562 | 1,624 | 1,737 | 1,770 |
(1) | Includes natural gas consumed in operations (283, 247, 212 mmcf/d in 2006, 2005 and 2004, respectively). |
- 38 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Hydrocarbon production sold | (mmboe) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Hydrocarbon production | 372.5 | 378.8 | 388.4 | 434.5 | 499.7 | 537.3 | 570 | 594.6 | 634.2 | 645.9 | ||||||||||||||||||||||
Over/under lifting and change in inventories | (1.4 | ) | (3.3 | ) | (1.5 | ) | (1.9 | ) | (3.1 | ) | (4.0 | ) | (4.3 | ) | (4.2 | ) | (3.1 | ) | (2.4 | ) | ||||||||||||
Withdrawals from (input to) natural gas storage | (1.0 | ) | 6.9 | 6.7 | (4.6 | ) | 9.1 | (1.8 | ) | |||||||||||||||||||||||
Own consumption of gas | (6.0 | ) | (8.4 | ) | (9.5 | ) | (13.9 | ) | (16.2 | ) | (18.4 | ) | ||||||||||||||||||||
Hydrocarbon production sold | 370.1 | 382.4 | 393.6 | 428.0 | 499.7 | 523.1 | 556.2 | 576.5 | 614.9 | 625.1 | ||||||||||||||||||||||
oil | (mmbbl) | 234.3 | 234.86 | 244.53 | 272.45 | 310.69 | 333.40 | 354.10 | 375.40 | 402.60 | 391.07 | |||||||||||||||||||||
- of which to R&M Division | 89.30 | 93.79 | 202.29 | 214.42 | 216.38 | 242.89 | 247.87 | 260.83 | 267.37 | 267.84 | ||||||||||||||||||||||
natural gas | (bcm) | 21.69 | 23.58 | 23.89 | 25.03 | 30.50 | 30.68 | 32.73 | 32.89 | 34.53 | 38.05 | |||||||||||||||||||||
- of which to G&P Division | 16.87 | 17.76 | 16.24 | 13.70 | 14.39 | 13.69 | 14.07 | 13.16 | 10.67 | 15.11 |
- 39 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Principal oil and natural gas interests at December 31, 2006 |
Commencement of operations |
Number of interests |
Gross exploration and development acreage (1) |
Net exploration and development acreage (1) |
Net development acreage (1) |
Type of fields/ surface |
Number of producing fields |
Number of other fields |
Italy | 1926 | 171 | 28,508 | 22,496 | 12,743 | Onshore/Offshore | 90 | 89 | ||||||||
Outside Italy | 858 | 673,631 | 362,723 | 35,530 | Onshore/Offshore | 365 | 174 | |||||||||
North Africa | ||||||||||||||||
Algeria | 1981 | 36 | 12,739 | 3,456 | 861 | Onshore | 26 | 12 | ||||||||
Egypt | 1954 | 53 | 23,214 | 13,901 | 2,401 | Onshore/Offshore | 37 | 30 | ||||||||
Libya | 1959 | 17 | 39,569 | 34,113 | 12,783 | Onshore/Offshore | 11 | 15 | ||||||||
Tunisia | 1961 | 14 | 6,464 | 2,274 | 1,223 | Onshore/Offshore | 13 | 4 | ||||||||
120 | 81,986 | 53,744 | 17,268 | 87 | 61 | |||||||||||
West Africa | ||||||||||||||||
Angola | 1980 | 49 | 18,776 | 3,275 | 1,099 | Offshore | 39 | 30 | ||||||||
Congo | 1968 | 20 | 9,797 | 4,169 | 880 | Offshore | 17 | 7 | ||||||||
Nigeria | 1962 | 49 | 43,215 | 7,356 | 5,715 | Onshore/Offshore | 122 | 23 | ||||||||
118 | 71,788 | 14,800 | 7,694 | 178 | 60 | |||||||||||
North Sea | ||||||||||||||||
Norway | 1965 | 47 | 18,851 | 7,077 | 123 | Offshore | 9 | 6 | ||||||||
United Kingdom | 1964 | 75 | 5,860 | 1,328 | 688 | Offshore | 33 | 13 | ||||||||
122 | 24,711 | 8,405 | 811 | 42 | 19 | |||||||||||
Rest of World | ||||||||||||||||
Australia | 2001 | 13 | 24,143 | 19,910 | 2,279 | Offshore | 2 | 1 | ||||||||
Brazil | 1999 | 3 | 2,948 | 2,802 | Offshore | |||||||||||
China | 1983 | 4 | 866 | 181 | 103 | Offshore | 9 | 4 | ||||||||
Croatia | 1996 | 3 | 6,056 | 3,028 | 987 | Offshore | 5 | 5 | ||||||||
East Timor | 2006 | 5 | 12,224 | 12,224 | Offshore | 5 | 5 | |||||||||
Ecuador | 1988 | 1 | 2,000 | 2,000 | 2,000 | Onshore | 1 | 1 | ||||||||
India | 2005 | 2 | 14,445 | 5,698 | Onshore/Offshore | |||||||||||
Indonesia | 2001 | 13 | 28,438 | 16,301 | 656 | Onshore/Offshore | 7 | 8 | ||||||||
Iran | 1957 | 4 | 1,456 | 820 | 820 | Onshore/Offshore | 4 | |||||||||
Kazakhstan | 1995 | 6 | 4,934 | 960 | 489 | Onshore/Offshore | 1 | 5 | ||||||||
Pakistan | 2000 | 18 | 29,790 | 20,965 | 615 | Onshore/Offshore | 6 | 1 | ||||||||
Saudi Arabia | 2004 | 1 | 51,687 | 25,844 | Onshore | |||||||||||
Trinidad & Tobago | 1970 | 1 | 382 | 66 | 66 | Offshore | 3 | 2 | ||||||||
United States | 1968 | 391 | 7,803 | 3,758 | 560 | Onshore/Offshore | 20 | 5 | ||||||||
Venezuela | 1998 | 4 | 1,958 | 790 | 66 | Offshore | 1 | |||||||||
469 | 189,130 | 115,347 | 8,641 | 58 | 33 | |||||||||||
Other countries | 9 | 6,311 | 1,240 | 1,116 | Offshore | 1 | ||||||||||
Other countries with onlyexploration activity | 20 | 299,705 | 169,187 | Onshore/Offshore | ||||||||||||
Total | 1,029 | 702,139 | 385,219 | 48,273 | 455 | 263 |
(1) | Square kilometers. |
- 40 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Exploration wells | (unit) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Wells drilled | 127 | 121 | 60 | 95 | 110 | 120 | 105 | 66 | 52 | 68 | ||||||||||||
Outside Italy | 98 | 82 | 43 | 75 | 99 | 111 | 97 | 60 | 50 | 64 | ||||||||||||
Italy | 29 | 39 | 17 | 20 | 11 | 9 | 8 | 6 | 2 | 4 | ||||||||||||
Wells drilled (net to Eni) | 74 | 66 | 29 | 47 | 47 | 52 | 43 | 30 | 22 | 36 | ||||||||||||
Outside Italy | 52 | 35 | 16 | 30 | 37 | 45 | 36 | 26 | 20 | 32 | ||||||||||||
Italy | 22 | 31 | 13 | 17 | 10 | 7 | 7 | 4 | 2 | 4 | ||||||||||||
SEC Criteria | ||||||||||||||||||||||
Wells drilled | 95 | 122 | 65 | 72 | 85 | 83 | 107 | 71 | 56 | 61 | ||||||||||||
Total successful wells | 39 | 54 | 32 | 24 | 31 | 32 | 50 | 37 | 22 | 26 | ||||||||||||
Total success rate | (%) | 41.1 | 44.3 | 49.2 | 33.3 | 36.5 | 38.6 | 46.7 | 52.1 | 39.3 | 42.6 | |||||||||||
Wells drilled (net to Eni) | 62 | 68 | 31 | 40 | 40 | 43 | 47 | 32 | 24 | 32 | ||||||||||||
Total successful wells (net to Eni) | 27 | 32 | 12 | 12 | 13 | 17 | 22 | 19 | 12 | 16 | ||||||||||||
Total success rate (net to Eni) | (%) | 43.3 | 47.0 | 38.0 | 30.6 | 31.3 | 39.1 | 45.7 | 57.3 | 47.4 | 49.2 |
Reserve life index | (year) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 11.5 | 10.2 | 10.7 | 11.7 | 10.9 | 10.8 | 9.0 | 8.8 | 9.2 | 9.3 | ||||||||||||
North Africa | 18 | 19.3 | 18.6 | 17.5 | 18.4 | 15.8 | 15.9 | 15.5 | 11.7 | 10.0 | ||||||||||||
West Africa | 12.8 | 12.4 | 14.6 | 13.3 | 13.4 | 14.8 | 13.9 | 11.7 | 10.2 | 8.3 | ||||||||||||
North Sea | 11 | 11.7 | 12.0 | 11.4 | 8.4 | 7.4 | 7.2 | 7.2 | 7.3 | 6.6 | ||||||||||||
Rest of World | 19.7 | 20.9 | 16.8 | 15.6 | 18.0 | 17.1 | 18.1 | 16.1 | 13.9 | 15.1 | ||||||||||||
13.6 | 13.4 | 14 | 14 | 13.7 | 13.2 | 12.7 | 12.1 | 10.8 | 10.0 |
Reserve replacement ratio (1) | (%) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 106 | 53 | 30 | 26 | 39 | - | - | - | 77 | 28 | ||||||||||||
North Africa | 229 | 277 | 265 | 172 | 267 | 30 | 93 | 168 | 60 | 95 | ||||||||||||
West Africa | 107 | 179 | 312 | 132 | 151 | 273 | 138 | 128 | 42 | .. | ||||||||||||
North Sea | 120 | 119 | 113 | 185 | 271 | 53 | 168 | 6 | 53 | 26 | ||||||||||||
Rest of World | 1,410 | 245 | 196 | 825 | 818 | 324 | 396 | 124 | .. | 18 | ||||||||||||
207 | 147 | 171 | 210 | 282 | 119 | 142 | 91 | 40 | 38 |
(1) | All sources. |
- 41 -
ENI FACT BOOK / EXPLORATION & PRODUCTION - MAIN DATA
Economic indicators per boe | (USD/boe) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Revenues | 19.02 | 13.68 | 16.95 | 24.67 | 21.52 | 22.07 | 24.82 | 31.22 | 41.97 | 49.68 | ||||||||||||
Lifting cost (1) | 3.98 | 3.56 | 3.64 | 3.75 | 4.02 | 3.87 | 4.09 | 4,8 | 5.45 | 5.62 | ||||||||||||
Income | 3.86 | 0.13 | 4.11 | 7.86 | 5.48 | 5.08 | 5.95 | 8.87 | 12.2 | 14.97 | ||||||||||||
Exploration cost (three-year average) - discovery cost (2) | 1.67 | 1.78 | 1.77 | 1.7 | 1.55 | 1.38 | 1.21 | 1.21 | 1.67 | 2.86 | ||||||||||||
Finding and development cost (three-year average) (3) | 4.72 | 5.16 | 5.43 | 5.35 | 5.33 | 5.67 | 6.53 | 7.26 | 10.72 | 13.87 |
(1) | Ratio of production costs (incurred for well and facilities maintenance and royalties) and volumes produced. | |
(2) | Exploration cost for each boe of new reserves discovered or proved is calculated as ratio of costs incurred with respect to exploration activity and purchase of unproved property to additions to proved reserves related to improved recovery, extensions and new discoveries and revisions of previous estimates. Starting in 2001 averages were calculated excluding purchase costs of unproved property of Lasmo in 2001 and of Fortum Petroleum in 2003. | |
(3) | Finding and development cost for each boe of new reserves discovered or proved is calculated as ratio of costs with respect to exploration and development activities and purchase of unproved property to additions to proved reserves related to improved recovery, extensions and new discoveries and revisions of previous estimates. In order to allow for an homogeneous comparison the following adjustments were carried out: (i) averages for the 2001-2005 period were calculated with the exclusion of the purchase cost of unproved property of Lasmo (purchased in 2001) and Fortum Petroleum (purchased in 2003); (ii) averages for the 2002-2006 period were calculated with the exclusion of development costs related to Iranian buy-back contracts; (iii) averages in the 2003-2006 period were calculated with the exclusion of estimated costs for asset retirement obligations. Following the Statement of Financial Accounting Standard No. 143 - Accounting for Asset Retirement Obligations - these costs are capitalized when the related capital expenditure is incurred; further adjustments of previous estimates are recognized whenever an estimate needs to be updated. |
Capital expenditure | (million euro) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Exploration | 677 | 755 | 636 | 811 | 757 | 902 | 635 | 499 | 656 | 1,348 | ||||||||||||
Italy | 178 | 191 | 132 | 156 | 80 | 66 | 59 | 51 | 38 | 128 | ||||||||||||
Outside Italy | 499 | 564 | 504 | 655 | 677 | 836 | 576 | 448 | 618 | 1,220 | ||||||||||||
Acquisition of proved and unproved property | 95 | 103 | 752 | 416 | 67 | 317 | 30 | 301 | 152 | |||||||||||||
Italy | 48 | 54 | 13 | 139 | ||||||||||||||||||
Outside Italy | 47 | 103 | 698 | 416 | 54 | 317 | 30 | 301 | 13 | |||||||||||||
Development and capital goods | 1,550 | 2,024 | 1,880 | 2,312 | 3,452 | 4,396 | 5,016 | 4,354 | 4,008 | 3,703 | ||||||||||||
Italy | 581 | 507 | 435 | 543 | 600 | 442 | 469 | 390 | 414 | 409 | ||||||||||||
Outside Italy | 969 | 1,517 | 1,445 | 1,769 | 2,852 | 3,954 | 4,547 | 3,964 | 3,594 | 3,294 | ||||||||||||
2,322 | 2,882 | 3,268 | 3,539 | 4,276 | 5,615 | 5,681 | 4,853 | 4,965 | 5,203 |
- 42 -
ENI FACT BOOK / GAS & POWER
Key performance indicators | 2004 |
2005 |
2006 |
Net sales from operations (a) | (million euro) |
17,302 |
22,969 |
28,368 |
||||||
Operating profit | 3,428 |
3,321 |
3,802 |
|||||||
Adjusted operating profit | 3,448 |
3,531 |
3,882 |
|||||||
Adjusted net profit | 2,290 |
2,552 |
2,862 |
|||||||
Capital expenditure | 1,451 |
1,152 |
1,174 |
|||||||
Adjusted capital employed, net | 18,383 |
18,898 |
18,864 |
|||||||
ROACE adjusted | (%) |
12.6 |
13.7 |
15.1 |
||||||
Worldwide gas sales | (bcm) |
87.03 |
94.21 |
97.48 |
||||||
Total gas sales in Europe | 85.32 |
92.50 |
95.97 |
|||||||
- G&P division sales | 80.62 |
87.99 |
91.90 |
|||||||
- Upstream sales (b) | 4.70 |
4.51 |
4.07 |
|||||||
Customers in Italy | (million units) |
5.95 |
6.02 |
6.54 |
||||||
Gas volumes transported in Italy | (bcm) |
80.41 |
85.10 |
87.99 |
||||||
Electricity production sold | (terawatthour) |
13.85 |
22.77 |
24.82 |
||||||
Employees at year end | (units) |
12,843 |
12,324 |
12,074 |
(a) | Before elimination of intersegment sales. | ||
(b) | Does not included Enis share of sales made by Nigeria LNG (Enis share 10.4%) in Europe amounting to 1.30, 1.31 and 1.55 bcm in 2004, 2005 and 2006 respectively. | ||
- 43 -
ENI FACT BOOK / GAS & POWER - STRATEGIES
STRATEGIES
Eni Gas & Power division covers all phases of the gas value
chain: supply, transport, distribution and marketing, resulting
in a fully integrated business model. A significant installed
power generation capacity enables Eni to extract further value
from gas, diversifying its commercial outlets.
The main feature of the Gas & Power division is its ability
to generate a steady stream of earnings and cash flow, leveraging
on its unparalleled asset base. Eni boasts market leadership in
Europe owing to a solid competitive position thanks to gas
availability under long-term supply contracts and equity gas,
access to infrastructure, long-term relationships with key
producing countries, market knowledge and a wide portfolio of
clients. These assets provide Eni with a solid platform for
growth. Integration with upstream operations provides the Group
with the ability to monetize its equity gas reserves and to
pursue opportunities arising in the gas market. Enis key
target for its Gas & Power division is to generate a free
cash flow1 level of euro 2.1 billion in 2010,
resulting in a 3% average rate of growth from 2006.
The strategic guidelines to attain this target are as follows:
Grow international sales;
Maintain strength in domestic market;
Effectively manage relationships with strategic suppliers;
Increase operational effectiveness; and
Develop marketing of LNG aiming also at monetizing equity reserves.
(1) | Cash flow provided by operating activities less cash outflows for investing activities. |
- 44 -
ENI FACT BOOK / GAS & POWER - HIGHLIGHTS
2006
Highlights In November 2006, Eni and Gazprom signed a broad strategic agreement. This agreement strengthens a long term partnership between the two companies and represents a fundamental step towards the security of energy supplies to Italy. Key features of this deal are the extension of the duration of Gazprom gas supply contracts to Eni until 2035, further strengthening Enis supply portfolio and the pursuing of joint initiatives in the upstream sector. Gazprom is expected to enter the Italian market by selling volumes of gas starting in 2007. Gazprom will obtain the availability of such volumes by means of a corresponding reduction in volumes previously supplied to Eni. The Gas & Power business confirmed its ability to generate strong and stable performances. The adjusted net profit rose euro 310 million to euro 2,862 million compared to 2005 (up 12.1%) reflecting primarily higher selling margins on natural gas sales in a favorable market scenario, a lower impact of Resolution No. 248/2004 of the Italian Authority for Electricity and Gas, a growth in natural gas volumes sold, volumes transported for the coming on line of the GreenStream gasline and electricity production sold. Return on average capital employed was 15.1% on an adjusted basis in 2006 (13.7% in 2005). |
Capital expenditure totaled
euro 1,174 million and related essentially to development
and maintenance of Enis transport and distribution
networks in Italy, the finalization of the upgrading plan
of electricity generation capacity and the start up of
the upgrading plan of import gaslines. Natural gas sales were up approximately 4% to 97.48 bcm primarily reflecting a growth in sales in a number of target European markets (up approximately 16% in particular in Turkey, Germany/Austria, France) also for the build-up of supplies of natural gas from Libya, partly offset by a decrease in sales in Italy due to mild weather conditions in the fourth quarter of the year. Electricity production sold was 24.82 terawatthour, up 9% from 2005, due to new generation capacity coming on stream. As a part of its development strategy of the natural gas distribution and sale businesses by means of regional alliances, Eni and its local authority partners defined the Toscana project with the establishment of a regional distribution company managed by Eni and boasting 1.6 million users and a regional selling company controlled by Eni boasting 600 k clients and 1.1 bcm of annual sales. |
- 45 -
ENI FACT BOOK / GAS & POWER - THE GAS SYSTEM
THE
GAS SYSTEM The gas supply, transport and marketing sector is experiencing far-reaching developments due to the increasing role of gas in satisfying global energy needs. Key reasons driving gas demand trends are: (i) continuing improvements in technologies applicable to all phases of the natural gas chain capable of reducing distances between production sites and consumption areas (LNG, GTL - gas to liquids, TAP - high pressure transport); (ii) the large amount of gas reserves; (iii) the higher environmental compatibility of natural gas as compared to other hydrocarbons in particular in the generation of electricity, along with expected increasingly tight regulations on emissions mainly due to the implementation of the Kyoto protocol; (iv) the increasingly wide adoption of the combined cycle as elective technology in power generation, based on lower investment costs, higher efficiency and lower emissions than other fuel based technologies; (v) economic, demographic and social development. In Europe (OECD) demand for gas is expected to grow by 40% by 2020 at an average annual rate of 2-3%, reflecting wider use of gas in power generation and new demand from the fastest growing countries. The relationship of developments and dynamics of demand and supply of natural gas forces operators in this business to adopt an international approach in planning flows of available supplies and uses, targeting long-term strategies in order to be able to adapt to the changes induced by the evolution of competition, for which an upgrading of infrastructure will prove crucial. A growing portion of European gas requirements is expected to be satisfied by imports via gasline, mainly from Russia, Algeria, Norway and Libya, taking account of the expected decline in European gas reserves. LNG will play an increasingly important role in satisfying European needs, with an expected 10% annual growth rate over the next four years. |
The Italian natural gas
market, third in size in Europe after the UK and Germany,
is part of the structural change ongoing in Europe which
will lead to the creation of a single energy market. In
this context, Italy will be able to exploit is geographic
location both as concerns the internal European market
and the Mediterranean area. In 2006 gas consumption in Italy amounted to 84.4 bcm, down 2.2% from 2005; about 87% of gas requirements were met through imports and 13% was covered by domestic production. Eni expects natural gas consumption in Italy to increase with a compound average growth rate of about 2.5% over the next ten years, hitting approximately 106 bcm in 2015, mainly driven by an increased use in power generation, expected to outpace demand growth in other sectors, such as large industrial users, residential space heating in households and services, commercial and small businesses. Growing gas needs will be met by an increase in imported volumes, which will be supported by significant capital expenditure plans to build new or upgrade existing infrastructure, either under construction or announced. |
- 46 -
ENI FACT BOOK / GAS & POWER - ACTIVITIES
Activities 1. Marketing and supply of gas Overview In 2006, Enis worldwide gas sales were 97.48 bcm (including upstream sales) up 3.27 bcm from 2005, or approximately 4%. In the medium term, Eni plans to increase worldwide sales targeting a volume of 105 bcm by 2010, corresponding to a 2.5% average growth rate over the 2007-2010 four-year period. To enhance its leadership on European markets, Eni will leverage on its strengths represented by gas availability both as equity gas and under long-term purchase contracts, operational flexibility ensured by the access to a wide-reaching transport network, regasification terminals and logistic assets, a large portfolio of clients and market knowledge. |
1.1 Marketing in
Italy MARKET In 2006 Enis gas sales in Italy amounted to 57.09 bcm (including own consumption2), down 1.7% from 2005 due mainly to mild climate conditions in the fourth quarter of the year. This decline was partly offset by an increase in own consumption for power generation. The Italian market includes three groups of clients: industrial, residential and power generation users; they are further grouped as follows: (i) large industrial clients and power generation utilities directly linked to the national and the regional natural gas networks; (ii) the retail market which is composed of residential and commercial clients (households, commercial users, hospitals, schools, etc.), and small businesses located in urban centers supplied by wholesalers through low pressure distribution networks; and (iii) wholesalers, mainly local selling companies and distributors of natural |
(2) | In accordance with Article 19, paragraph 4 of Legislative Decree No. 164/2000 the volumes of natural gas consumed in own operations by a company or its subsidiaries are excluded from the calculation of ceilings for sales to end customers and for volumes input into the Italian network to be sold in Italy. |
- 47 -
ENI FACT BOOK / GAS & POWER - ACTIVITIES
gas for automotive use
purchasing natural gas to sell it to final clients. |
of pricing and quality of
services, and boosted by the expected development of the
combined offer of gas and electricity (dual
offer). Eni targets sales volumes of at least 50 bcm in 2010. This target takes account of the expected increase in competitive pressure due to new supplies coming on the Italian gas market in view of the implementation of the upgrading plans of the import infrastructure to Italy, already underway or announced. In fact, import capacity is expected to increase by approximately 21 bcm by 2010, of these 13 bcm pertain to Enis ongoing upgrading program of its import infrastructure from Russia and Algeria (see International transport activity, below). Compliance with market limits imposed by Italian sector-specific regulation, in terms of both volumes intake into the national network and sales volumes, will be assured through the optimal allocation of Enis gas availability from supply contracts and equity production between sales in Italy and in the rest of Europe, and the use of gas in Enis power generation plants, leveraging also on the expected increase in demand. |
Gas in Italy |
2005 | 2006 | |||
(bcm) | Volumes sold | Market share (%) | Volumes sold | Market share (%) | Ch.% 2006 vs 2005 | ||||||||
Italy to third parties | 52.54 | 61.0 | 50.96 | 60.4 | (3.0 | ) | |||||||
Wholesalers | 12.05 | 14.0 | 11.54 | 13.7 | (4.2 | ) | |||||||
Gas release | 1.95 | 2.00 | 2.6 | ||||||||||
Industries | 13.07 | 15.2 | 13.33 | 15.8 | 2.0 | ||||||||
Power generation | 17.6 | 20.4 | 16.67 | 19.8 | (5.3 | ) | |||||||
Residential | 7.87 | 9.1 | 7.42 | 8.8 | (5.7 | ) | |||||||
Own consumption | 5.54 | 6.13 | 10.6 | ||||||||||
TOTAL SALES IN ITALY | 58.08 | 67.4 | 57.09 | 67.6 | (1.7 | ) | |||||||
Gas demand | 86.2 | 84.4 |
MARKETING POLICY Eni intends to implement a marketing policy more focused on value creation for its clients than in previous years, leveraging on its established know-how on pricing, personalization of services, and brand awareness. In future years, Enis marketing effort will be supported by developing an integrated offer of gas and electricity (dual offer), targeting mainly the middle and retail markets. The dual offer is expected to reap the benefits deriving from scale and integration, enabling in particular to achieve significant synergies from the integration of processes to acquire and manage clients. |
Eni will devote particular
attention to developing the retail market where Eni is
leader with 6.5 million of clients, located in the most
important urban centers in Italy, served through
different contact channels. Broadly speaking, the commercial offer envisages:
|
- 48 -
ENI FACT BOOK / GAS & POWER - ACTIVITIES
Dedicated to the different types of clients, Contact
Centers provide information, consultancy and assistance
on contracts and the administration and regulation
aspects while supporting the commercial offer. The
Internet site provides wider scope for interaction and
represents a true on-line office where clients can
perform all administrative functions and receive
information on services and other relevant issues. |
DEVELOPMENT PROJECTS Eni intends to strengthen its presence on the retail market through a strategy based on regional alliances with public and private partners. As part of this, Eni and its local municipal partners implemented the Toscana project, with the establishment of Toscana Energia Clienti by merging Enis selling activities and those of its local municipal partners. This new entity, controlled by Eni with a 79.22% interest, engages in selling natural gas on a regional base, boasting 600,000 clients and 1.1 bcm/y sales in 147 municipalities. This project also concerned distribution activities with the establishment of Toscana Energia SpA (Enis interest 48.72%) by merging Enis and its partners activities in gas distribution. This new entity is managed by Eni who deploys the role of industrial partner with relevant operating and management responsibilities. 1.2 Marketing in the rest of Europe In 2006 gas sales in the rest of Europe were 34.81 bcm, up 4.90 bcm or approximately 16% from 2005. Eni intends to strengthen its leadership in European gas markets, targeting sales volumes of approximately 53.3 bcm in 2010, equal to an average organic growth rate of 11% per year. |
Worldwide gas sales | (bcm) | 2004 | 2005 | 2006 | ||||
Markets of the rest of Europe | 26.84 | 29.91 | 34.81 | |||||
Importers to Italy | 10.96 | 11.53 | 14.10 | |||||
Iberian Peninsula | 3.59 | 4.59 | 5.24 | |||||
Germany-Austria | 3.96 | 4.23 | 4.72 | |||||
Turkey | 1.60 | 2.46 | 3.68 | |||||
Hungary-Slovenia-Greece | 3.46 | 3.53 | 3.26 | |||||
North Europe | 2.93 | 2.74 | 2.64 | |||||
France | 0.15 | 0.65 | 1.07 | |||||
Other | 0.19 | 0.18 | 0.10 | |||||
Markets extra Europe | 1.71 | 1.71 | 1.51 | |||||
Upstream (1) | 4.70 | 4.51 | 4.07 | |||||
International gas sales | 33.25 | 36.13 | 40.39 | |||||
Italy | 53.78 | 58.08 | 57.09 | |||||
Worldwide gas sales | 87.03 | 94.21 | 97.48 |
(1) | Does not include Enis share of sales made by Nigeria LNG (Enis share 10.4%) in Europe amounting to 1.30, 1.31 and 1.55 bcm in 2004, 2005 and 2006, respectively. |
- 49 -
ENI FACT BOOK / GAS & POWER - ACTIVITIES
A review of Enis presence in key European markets and commercial objectives at 2010 is presented below. |
France Eni sells natural gas to industrial clients and wholesalers. Eni is pursuing an aggressive marketing policy to gain market share, in particular in the segment of small businesses which presents good profitability and development perspectives. In the medium term, Eni expects to grow its current 1.1 bcm sales level at a 47% annual average growth rate, compared to an expected 3% average growth rate of market consumption, targeting volumes of approximately 5 bcm in 2010, equal to a 9% market share. Germany Eni is present on the German natural gas market through its affiliate GVS (Gasversorgung Süddeutschland GmbH - Eni 50%) which sold approximately 6.4 bcm in 2006, and with a direct commercial structure. In the medium term, Eni plans to significantly increase its sales to the business segment, leveraging on the pursuit of new opportunities arising from the ongoing liberalization process. The objective is to sell more than 7.5 bcm in 2010, equal to a 7% market share. IBERIAN PENINSULA Gas demand growth in the Iberian Peninsula is expected to outpace average European growth. Portugal Eni operates on the Portuguese market through its affiliate Galp Energia (Enis interest 33.34%) which |
sold approximately 5 bcm in
2006 (1.65 bcm being Enis share). In the medium term, Galps sales are expected to grow at an 8% average rate, targeting 6.3 bcm (2.1 Enis share) in 2010. Spain Eni operates in the Spanish gas market through Unión Fenosa Gas (Enis interest 50%) engaged in natural gas supply and sale to final users and to power generation utilities. In 2006 gas sales of Unión Fenosa Gas in Europe amounted to 4.34 bcm (2.17 bcm Enis share). Unión Fenosa Gas is engaged in LNG through an 80% interest in the Damietta liquefaction plant, on the Egyptian coast (see below), and through a 7.36% interest in a liquefaction plant in Oman, completed in 2005; in addition, it holds interests in the Sagunto (Valencia) and El Ferrol (Galicia) regasification plants, with a 42.5% (21.25% Enis interest) and 18.9% interest (9.45% Enis interest), respectively. Eni targets to increase its sales in the Iberian Peninsula from the current 5.2 bcm level to approximately 8.5 bcm by 2010 (13% average growth rate), mainly as a result of growing sales of Unión Fenosa Gas and the development of direct sales, in particular to the Spanish power generation segment, supplied mainly by means of LNG from Nigeria. |
- 50 -
ENI FACT BOOK / GAS & POWER - ACTIVITIES
UK/Northern Europe Eni through North Sea Gas & Power unit of its subsidiary Eni UK Ltd sells equity gas produced at Enis fields in the North Sea and operates in the main continental natural gas hubs (NBP, Zeebrugge, TTF). Eni plans to grow volumes sold on the UK/North European markets from the current 2.64 bcm level to approximately 8 bcm by 2010, with a 32% average annual growth rate. In particular a significant increase is expected in spot sales on the Zeebrugge hub (from 0.2 bcm in 2006 to 4.2 bcm in 2010). |
In the UK, gas sales through
North Sea Gas&Power are expected to grow from 2.5 bcm
in 2006 to 3.8 bcm in 2010, equal to a 3% market share. Turkey Eni sells gas supplied from Russia and transported via the Blue Stream underwater pipeline. In 2006 sales amounted to 3.68 bcm. Leveraging on the expected demand growth, Eni plans to increase sales up to 6.4 bcm by 2010, equal to an 18% market share. |
1.3 Supply Eni enjoys a competitive advantage represented by its wide and diversified availability of natural gas both from equity production and from its unrivaled portfolio of long term purchase contracts with major producing countries, also boasting a direct upstream presence in 8 out of 10 gas supplying countries. Our diversified supply portfolio insulates us from the risk of being heavily dependent on a single source of supplies; in fact, none of Enis suppliers weighs for more than 25% of Eni current gas needs. In addition, the development of LNG projects will further strengthen the diversification of Enis supplies and their integration with upstream operations. In 2006, Enis requirements for natural gas were met for over 92% with supplies from foreign countries (mainly Algeria, Russia, the Netherlands and Norway) and the remaining part was covered by equity gas. |
The strategic agreement with Gazprom, signed in November 2006, marks a fundamental step in enhancing security and flexibility of Enis gas supplies over the medium and long term. Based on this agreement, the duration of our long-term supply contracts increases from 14 to approximately 23 years and, when these contracts are fully operational in 2010, Eni will be able to purchase approximately 62.4 bcm/y (Russia 23.5, Algeria 21.5, the Netherlands 9.8, Norway 6, and Nigeria - LNG 1.6) to cope with rising demand according to our sales expansion plans in Europe. Furthermore, Eni can leverage on the flexibility of its contractual structure in order to capture market opportunities, also taking account of Enis availability of an integrated system for transport and logistics. |
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ENI FACT BOOK / GAS & POWER - ACTIVITIES
An effective management of
relationships with strategic countries supplying natural
gas and the preservation of satisfactory long term
relations continue to be priorities in running our gas
business owing to the strategic clout of the security,
diversification, and flexibility of supplies. 2. Infrastructure Overview Eni can access the widest network of infrastructure for transport and storage of natural gas in Europe which favored by its integration allows to link key consumption basins in Europe with the main producing areas (North Africa, Russia and the North Sea). In Italy Eni owns almost all the national gasline network and a relevant system of local distribution networks servicing retail markets. The availability of regasification capacity in Italy and the Iberian Peninsula coupled with storage sites guarantees a high level of operating flexibility. These assets represent a significant competitive advantage. With the aim of increasing diversification and safety of supplies and to cope with demand growth, Eni defined a massive plan for the upgrade of import infrastructure from Russia, Algeria and Libya, of regasification capacity and of national transport and distribution networks through capital expenditure of approximately euro 5.8 billion planned for the next four years. 2.1 International transport activities Eni owns transportation rights in a network of international high pressure pipelines for a total of over 4,300 kilometers allowing the import to Italy of natural gas produced in Russia, Algeria, the North Sea and Libya, in particular:
|
|
(3) | Transit capacity is the maximum daily capacity entering in different access points of a trunkline and carried to the next trunkline. |
- 52 -
ENI FACT BOOK / GAS & POWER - ACTIVITIES
Eni holds a 50% interest in the Blue Stream underwater pipeline linking the Russian and Turkish coast of the Black Sea that started operations in 2002. Laid at a record depth of over 2,150 meters, this 774-kilometer long pipeline with two lines and a transmission capacity of 49 mmcm/d, will transport 16 bcm/y (Enis share 8 billion) | of Russian natural gas in 2010. The gasline includes a compression station at Dzhubga on the Russian coast of the Black Sea, made up of six turbocompressors and six measurement lines as well as an internally fired power plant. |
Considering the planned upgrade of the TAG and TTPC pipelines, the current import capacity from Libya through the Greenstream pipeline (8 bcm/year), from 2009 a total of about 21 bcm/y | of new imports of natural gas will be available totally destined to third parties under non-discriminating procedures, in most cases already concluded (17.7 bcm sold on the market). |
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ENI FACT BOOK / GAS & POWER - ACTIVITIES
2.2 Italian
transport network Eni, through Snam Rete Gas, a company listed on the Italian Stock Exchange, in which Eni holds a 50.04% interest, owns almost completely the Italian natural gas transport network as well as the only regasification terminal operating in Italy. Under Legislative Decree No. 164/2000 concerning the opening up of the natural gas market in Italy, transport activities are regulated by the Authority for Electricity and Gas which determines the methods for calculating tariffs and fixing the return on capital employed. This makes transport a low risk business capable of delivering stable performance in the long period. Enis network extends for 30,889 kilometers and comprises: (i) a national transport network extending over 8,497 kilometers, made up of high pressure trunklines mainly with a large diameter, which carry natural gas from the entry points to the system import lines, storage sites and main Italian natural gas fields to the linking points with the regional transport network. The national network includes also some interregional lines reaching important markets; (ii) a regional transport network extending over 22,410 kilometers, made up of smaller lines and allowing the transport of natural gas to industries, power stations and local distribution companies of the various local areas served. The major pipelines interconnected with import trunklines that are part of Enis national network are: for natural gas imported from Algeria:
for natural gas imported from Libya:
|
for natural gas imported
from Russia:
|
(4) | Transport capacity is related to October 1, the first day of a thermal year. |
- 54 -
ENI FACT BOOK / GAS & POWER - ACTIVITIES
for natural gas imported
from the Netherlands and Norway:
for natural gas coming from the Panigaglia LNG terminal:
In 2006, Enis national network of owned
pipelines increased by 177 kilometers due to changes to
existing lines (87 kilometers) and extensions of the
regional network (90 kilometers). |
Enis main assets in
LNG are: Italy Eni owns the only regasification terminal operating in Italy at Panigaglia (Liguria). At full capacity, this terminal can input 3.5 billion cubic meters/year into the Italian transport network. In 2006 a total of 3.12 bcm of natural gas were input in the national network, of these 52% were owned by Eni. Eni plans to build a new regasification terminal located off the Adriatic coast (with a 50% interest) and to increase the capacity of the Panigaglia plant. These two projects are expected to upgrade the import capacity to Italy by 8 and 4.5 bcm/y, respectively, when fully operational. The planned start-up is expected by 2013 and 2014, respectively. The capital expenditure earmarked for the offshore regasification project amounts to approximately euro 800 million (of these euro 400 million for the 50% interest in the offshore regasification plant and euro 359 million for Panigaglia). Egypt Eni, through its interest in Unión Fenosa Gas, owns a 40% stake in the Damietta liquefaction plant producing approximately 5 mmtonnes/y of LNG equal to a feedstock of 7.6 bcm/y of natural gas. In June 2006, the partners of the project (Unión Fenosa Gas, the Spanish-Egyptian company SEGAS an affiliate of Unión Fenosa Gas, State owned Egyptian companies EGAS and EGPC, and oil producers Eni and BP) defined terms and conditions for doubling the plant capacity by means of another treatment train. Expected capital expenditure amounts to approximately $1.5 billion with start-up expected between 2010 and 2011. In order to market its share of natural gas, Eni intends also to build two gas tanker ships with a capacity of 155 kcm each. Spain In April 2006, the Sagunto regasification plant with a capacity of 6.7 bcm/y started operations near Valencia. Eni through Unión Fenosa Gas holds a 21.25% interest in this plant. At present, Enis share of regasification capacity amounts to 1.6 bcm/y of gas. A capacity upgrading plan has been sanctioned targeting a 0.8 bcm/y capacity increase by 2009. Relevant works started in the second half of 2006. Eni through Unión Fenosa Gas also holds a 9.5% interest in the El Ferrol regasification plant, located in Galicia, under construction and expected to be completed by the first half of 2007, targeting a treatment capacity of approximately 3.6 bcm/y, 0.4 bcm/y being Enis share. |
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ENI FACT BOOK / GAS & POWER - ACTIVITIES
USA Eni is entitled to a share of the initial planned capacity of the Cameron regasification terminal under construction in Louisiana, and expected to start operations in 2008-2009. The 6 bcm/y capacity represents approximately 40% of the initial capacity of the plant (15.5 bcm/y). This transaction will enable Eni to sell part of its gas reserves in the United States. In order to support supplies to this plant, in February 2007 Eni signed an agreement with Nigeria LNG Ltd, operating the Bonny LNG plant in Nigeria, to purchase 1.375 mmtonnes/y of LNG, equivalent to 2 bcm/y of gas for a twenty-year period, gas deriving from the upgrade of the Bonny liquefaction plant (7 trains) expected for 2012. Eni also signed a memorandum of intent with Brass LNG for the purchase of 1.67 mmtonnes/y equivalent to 2.3 bcm/y, of LNG. 2.4 Distribution activities Distribution involves the delivery of natural gas to residential and commercial consumers in urban centers through low pressure networks. Eni, through its 100% subsidiary Italgas and other subsidiaries, is engaged in the distribution activity in Italy serving 1,317 |
municipalities through a low
pressure network consisting of approximately 49,000
kilometers of pipelines supplying 5.6 million customers. Under Legislative Decree No. 164/2000 concerning the opening up of the natural gas market in Italy, distribution activities are regulated by the Authority for Electricity and Gas which determines the methods for calculating tariffs and fixing the return on capital employed. This makes distribution a low risk business capable of delivering stable performance in the long period. The management of networks is entrusted to natural gas companies by local Authorities exclusively under bid procedures. Concessions existing at the coming into force of Legislative Decree No. 164/2000 and awarded with a bid procedure expire on December 31, 2012; all other concession expire on December 31, 2007 (with an optional three-year extension under certain conditions). Eni intends to optimize its concession portfolio maintaining its current size in terms of end users served by focusing on development initiatives in core areas and promoting local alliances aimed at supporting sale activities on retail markets. |
Distribution Italy | 2004 | 2005 | 2006 |
Volumes distributed | (bcm) | 8.14 | 8.65 | 7.54 | ||||
to Eni | 7.73 | 8.13 | 6.90 | |||||
to third parties | 0.41 | 0.52 | 0.64 | |||||
Installed network | (km) | 46,954 | 48,146 | 48,724 | ||||
Active meters | (no. of users) | 5,418,262 | 5,838,085 | 5,550,700 | ||||
Municipalities served | 1,227 | 1,282 | 1,317 |
For the next four years Eni defined a capital expenditure plan of approximately euro 0.8 billion for the | development and maintenance of distribution networks and for the purchase of interests in distribution networks. |
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ENI FACT BOOK / GAS & POWER - ACTIVITIES
3.
Power Generation Eni engages in power generation activities in its power stations at Ferrera Erbognone, Ravenna, Livorno, Taranto, Mantova, Brindisi and Ferrara. In 2006, electricity production sold was 24.82 TWh, up 2.05 TWh or 9% as compared to 2005. Increased production reflected the ramp-up of the Brindisi plant. Total installed capacity was 4.9 GW at December 31, 2006. By 2010 Eni intends to complete its plan for expanding power generation capacity, targeted at an installed capacity of 5.5 GW fully operational in 2010 with production amounting to 31 TWh, corresponding to approximately 8% of electricity generated in Italy at that date. When fully operational, natural gas volumes |
supplied will amount to 6
bcm/y from Enis diversified supply portfolio.
Planned capital expenditure amounts to approximately euro
2.4 billion, of these works for euro 2 billion have
already been completed. The development plan is underway at Ferrara (Enis interest 51%), where in partnership with EGL Luxembourg (a company belonging to Swiss group EGL) construction of two new 390 MW combined cycle units is underway. This will bring installed capacity to 840 MW (two CGT for a total of 780 MW in addition to the existing 60 MW units) with start-up expected in 2007. Eni has also planned the installation of a new 240 megawatt combined cycle unit located in Taranto (current capacity 75 megawatt). |
New installed generation
capacity uses the combined cycle gas fired technology
(CCGT), ensuring a high level of efficiency and low
environmental impact. In particular, management estimates that for a given amount of energy (electricity and heat) produced, the use of the CCGT technology on a production of 30 TWh reduces emissions of carbon dioxide by approximately 11 mmtonnes, as compared to emissions using conventional power generation technology5. |
Restructuring of
power generation activities and dual offer In 2006 the G&P division launched a restructuring plan of its power generation activities, which provides for the transfer of electricity marketing activities from EniPower, the company that had managed them since its establishment, to the division starting in 2007. This will allow an integrated management of Enis gas-electricity portfolio and to develop a combined electricity/gas offer to customers. Power generation activities will remain at EniPower. |
(5) | Eni power plants in operation and under construction employ the combined cycle technology, the most efficient technology currently available for power generation, with 12% higher efficiency than the most upstead coal-fired plants and lower polluting emissions per kWh produced. |
- 57 -
ENI FACT BOOK / GAS & POWER - MAIN DATA
Supply of natural gas | (bcm) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 16.81 | 17.70 | 16.16 | 13.64 | 14.62 | 12.67 | 12.16 | 11.30 | 10.73 | 10.21 | ||||||||||||||||||||
Russia for Italy | 13.75 | 16.69 | 19.09 | 21.03 | 19.51 | 18.62 | 18.92 | 20.62 | 21.03 | 21.30 | ||||||||||||||||||||
Russia for Turkey | 0.63 | 1.60 | 2.47 | 3.68 | ||||||||||||||||||||||||||
Algeria | 16.02 | 16.83 | 20.40 | 21.56 | 18.39 | 16.35 | 16.53 | 18.86 | 19.58 | 18.84 | ||||||||||||||||||||
Netherlands | 5.00 | 3.02 | 2.87 | 6.09 | 7.00 | 7.55 | 7.41 | 8.45 | 8.29 | 10.28 | ||||||||||||||||||||
Norway | 1.10 | 4.83 | 5.44 | 5.74 | 5.78 | 5.92 | ||||||||||||||||||||||||
Hungary | 2.79 | 2.73 | 2.67 | 2.67 | 3.11 | 3.05 | 3.56 | 3.57 | 3.63 | 3.28 | ||||||||||||||||||||
United Kingdom | 1.48 | 1.98 | 1.76 | 2.28 | 2.50 | |||||||||||||||||||||||||
Libya | 0.55 | 3.84 | 6.63 | |||||||||||||||||||||||||||
Croatia | 0.31 | 0.65 | 0.35 | 0.43 | 0.86 | |||||||||||||||||||||||||
Algeria (LNG) | 1.89 | 1.99 | 2.06 | 2.01 | 1.79 | 1.92 | 1.98 | 1.27 | 1.45 | 1.58 | ||||||||||||||||||||
Others (LNG) | 0.30 | 0.72 | 0.70 | 0.69 | 1.57 | |||||||||||||||||||||||||
Other supplies Europe | 0.01 | 0.01 | 0.01 | 0.02 | 0.03 | 0.03 | 0.04 | 0.12 | 1.18 | 1.85 | ||||||||||||||||||||
Outside Europe | 0.94 | 0.96 | 0.96 | 1.14 | 1.20 | 1.18 | 0.77 | |||||||||||||||||||||||
Outside Italy | 39.46 | 41.27 | 47.10 | 54.32 | 51.89 | 55.40 | 59.00 | 64.79 | 71.83 | 79.06 | ||||||||||||||||||||
Total supply | 56.27 | 58.97 | 63.26 | 67.96 | 66.51 | 68.07 | 71.16 | 76.09 | 82.56 | 89.27 | ||||||||||||||||||||
Offtake from (input to) storage | (2.43 | ) | 0.13 | (1.43 | ) | 0.84 | 0.93 | 0.84 | (3.01 | ) | ||||||||||||||||||||
Network losses and measurement differences | (0.33 | ) | (0.56 | ) | (0.34 | ) | (0.90 | ) | (0.92 | ) | (0.50 | ) | (0.61 | ) | (0.53 | ) | (0.78 | ) | (0.50 | ) | ||||||||||
Available for sale of Enis own companies | 55.94 | 58.41 | 62.92 | 64.63 | 65.72 | 66.14 | 71.39 | 76.49 | 82.62 | 85.76 | ||||||||||||||||||||
Available for sale of Enis affiliates | 0.13 | 0.16 | 0.16 | 0.87 | 1.38 | 2.40 | 6.94 | 5.84 | 7.08 | 7.65 | ||||||||||||||||||||
Total available for sale G&P | 56.07 | 58.57 | 63.08 | 65.50 | 67.10 | 68.54 | 78.33 | 82.33 | 89.70 | 93.41 |
Gas sales | (bcm) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 53.10 | 55.62 | 60.19 | 57.82 | 56.74 | 50.43 | 50.86 | 50.08 | 52.47 | 50.94 | ||||||||||||||||||||
Wholesalers (selling companies) | 19.97 | 21.59 | 22.68 | 20.68 | 21.09 | 17.02 | 15.36 | 13.87 | 12.05 | 11.54 | ||||||||||||||||||||
Gas release | 0.54 | 1.95 | 2.00 | |||||||||||||||||||||||||||
End customers | 33.13 | 34.03 | 37.51 | 37.14 | 35.65 | 33.41 | 35.50 | 35.67 | 38.47 | 37.40 | ||||||||||||||||||||
Industries | 17.02 | 17.11 | 17.84 | 18.37 | 18.53 | 14.43 | 13.17 | 12.39 | 13.07 | 13.33 | ||||||||||||||||||||
Power generation | 10.14 | 10.47 | 13.01 | 12.27 | 12.21 | 12.48 | 15.03 | 15.92 | 17.60 | 16.67 | ||||||||||||||||||||
Residential | 5.97 | 6.45 | 6.66 | 6.50 | 4.91 | 6.50 | 7.30 | 7.36 | 7.80 | 7.40 | ||||||||||||||||||||
Rest of Europe | 2.84 | 2.79 | 2.73 | 3.90 | 6.05 | 12.77 | 17.54 | 21.54 | 23.44 | 27.93 | ||||||||||||||||||||
Outside Europe | 0.91 | 0.93 | 0.92 | 1.09 | 1.17 | 1.17 | 0.76 | |||||||||||||||||||||||
Total sales to third parties | 55.94 | 58.41 | 62.92 | 62.63 | 63.72 | 64.12 | 69.49 | 72.79 | 77.08 | 79.63 | ||||||||||||||||||||
Own consumption | 2.00 | 2.00 | 2.02 | 1.90 | 3.70 | 5.54 | 6.13 | |||||||||||||||||||||||
Total sales to third parties and own consumption | 55.94 | 58.41 | 62.92 | 64.63 | 65.72 | 66.14 | 71.39 | 76.49 | 82.62 | 85.76 | ||||||||||||||||||||
Sales of natural gas of Enis affiliates (net to Eni) | 0.13 | 0.16 | 0.16 | 0.87 | 1.38 | 2.40 | 6.94 | 5.84 | 7.08 | 7.65 | ||||||||||||||||||||
Italy | 0.07 | 0.02 | ||||||||||||||||||||||||||||
Rest of Europe | 0.41 | 0.93 | 1.93 | 6.23 | 5.30 | 6.47 | 6.88 | |||||||||||||||||||||||
Outside Europe | 0.13 | 0.16 | 0.16 | 0.46 | 0.45 | 0.47 | 0.71 | 0.54 | 0.54 | 0.75 | ||||||||||||||||||||
Total sales and own consumption G&P | 56.07 | 58.57 | 63.08 | 65.50 | 67.10 | 68.54 | 78.33 | 82.33 | 89.70 | 93.41 |
Gas volumes transported in Italy (1) |
(bcm) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Eni | 53.14 | 55.69 | 59.67 | 63.73 | 58.17 | 54.56 | 51.74 | 52.15 | 54.88 | 57.09 | ||||||||||||||||||||
On behalf of third parties | 4.35 | 6.07 | 6.90 | 9.45 | 11.41 | 19.11 | 24.63 | 28.26 | 30.22 | 30.90 | ||||||||||||||||||||
Enel | 2.48 | 4.04 | 4.50 | 6.27 | 6.28 | 8.28 | 9.18 | 9.25 | 9.90 | 9.67 | ||||||||||||||||||||
Edison Gas | 1.27 | 1.52 | 2.10 | 2.98 | 4.61 | 7.49 | 8.00 | 7.78 | 8.80 | |||||||||||||||||||||
Others | 1.87 | 0.76 | 0.88 | 1.08 | 2.15 | 6.22 | 7.96 | 11.01 | 12.54 | 12.43 | ||||||||||||||||||||
57.49 | 61.76 | 66.57 | 73.18 | 69.58 | 74.40 | 76.37 | 80.41 | 85.10 | 87.99 |
(1) | Include amounts destined to domestic storage. |
- 58 -
ENI FACT BOOK / GAS & POWER - MAIN DATA
Transport infrastructure |
Route | Length of main line |
Lines |
Diameter |
Pressure min-max |
Transport capacity |
Transit capacity |
Compression stations |
|||||||
Italy | ||||||||||||||
Mazara del Vallo-Minerbio (under upgrading) | 1,540 |
2/3 |
48/42 |
75 |
87.0 |
7 |
||||||||
Tarvisio-Sergnano-Minerbio (under upgrading) | 445 |
2/3 |
56/48/42/36/34 |
58/70 |
84.4 |
2 |
||||||||
Passo Gries-Mortara | 177 |
2 |
48/34 |
54/75 |
57.5 |
1 |
||||||||
Outside Italy (1) (2) | ||||||||||||||
TENP (Bocholtz-Wallbach) | 500 |
2 |
36/38/40 |
69.6 |
47.3 |
4 |
||||||||
Transitgas (Rodersdorf-Lostorf) | 165 |
1+1 71 km |
36/48 |
76 |
61.0 |
1 |
||||||||
TAG (Baumgarten-Tarvisio) (under upgrading) (3) | 380 |
3 |
36/38/40/42 |
101.3 |
93.5 |
3 |
||||||||
TTPC (Oued Saf Saf-Cap Bon) | 371 |
2 |
48 |
82.3 |
81.2 |
3 |
||||||||
TMPC (Cap Bon-Mazara del Vallo) | 155 |
5 |
20/26 |
100.5 |
100.5 |
|||||||||
Greenstream (Mellitah-Gela) (4) | 520 |
1 |
32 |
24.4 |
24.4 |
1 |
||||||||
Blue Stream (Beregovaya-Samsun) (4) | 391 |
1+1 383 km |
24 |
49.0 |
49.0 |
1 |
(1) | As of December 31, 2006. | |
(2) | Capacity is related to standard conditions: pressure 1.01325 bar; temperature 288.15 K. | |
(3) | As of January 1, 2007. | |
(4) | Data relate to full operation of the transport system. |
Transport capacity includes both transit
capacity and maximum daily volumes of natural gas destined to
local markets and withdrawn at various points along the pipeline.
Transit capacity is the maximum daily volume of natural gas which
is input at various entry points along the pipeline and
transported to the next pipeline.
EniPower power stations |
Power stations | Installed |
Installed |
Full installed |
Effective/ |
Fuel |
|||||
Brindisi | 1.3 |
1.5 |
1.3 |
2006 |
gas |
|||||
Ferrera Erbognone | 1.0 |
1.0 |
1.0 |
2004 |
gas/syngas |
|||||
Livorno | 0.2 |
0.2 |
0.2 |
2000 |
gas |
|||||
Mantova | 0.8 |
0.9 |
0.8 |
2005 |
gas |
|||||
Ravenna | 1.0 |
1.1 |
1.0 |
2004 |
gas |
|||||
Taranto | 0.1 |
0.1 |
0.4 |
2000-2009 |
gas |
|||||
Ferrara | 0.1 |
0.1 |
0.8 |
2007 |
gas |
|||||
4.5 |
4.9 |
5.5 |
Full installed capacity net of standstill of obsolete plants.
Power generation | 2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Purchases | ||||||||||||||||
Natural gas | (mmcm) |
827 |
784 |
819 |
940 |
2,617 |
4,384 |
4,775 | ||||||||
Other fuels | (ktoe) |
842 |
936 |
885 |
847 |
695 |
563 |
616 | ||||||||
- of which cracking steam | 89 |
96 |
136 |
|||||||||||||
Sales | ||||||||||||||||
Electricity production sold | (TWh) |
4.77 |
4.99 |
5.00 |
5.55 |
13.85 |
22.77 |
24.82 | ||||||||
Electricity trading | (TWh) |
1.56 |
1.74 |
3.10 |
3.10 |
4.79 |
6.21 | |||||||||
Steam production sold | (ktonnes) |
9,535 |
10,025 |
9,302 |
9,303 |
10,040 |
10,660 |
10.287 | ||||||||
Installed generation capacity | (GW) |
1.0 |
1.0 |
1.0 |
1.9 |
3.3 |
4.5 |
4.9 |
- 59 -
ENI FACT BOOK / REFINING & MARKETING
Key performance indicators | 2004 |
2005 |
2006 |
Net sales from operations (a) | (million euro) | 26,089 |
33,732 |
38,210 |
||||||
Operating profit | 1,080 |
1,857 |
319 |
|||||||
Adjusted operating profit | 923 |
1,214 |
790 |
|||||||
Adjusted net profit | 674 |
945 |
629 |
|||||||
Capital expenditure | 693 |
656 |
645 |
|||||||
Adjusted capital employed, net | 4,835 |
5,326 |
5,766 |
|||||||
ROACE adjusted | (%) | 13.0 |
18.2 |
10.7 |
||||||
Refining throughputs on own account | (mmtonnes) | 37.69 |
38.79 |
38.04 |
||||||
Refining throughputs of wholly-owned refineries | 26.75 |
27.34 |
27.17 |
|||||||
Balanced capacity of wholly-owned refineries | (kbbl/d) | 524 |
524 |
534 |
||||||
Balanced capacity utilization rate | (%) | 100 |
100 |
100 |
||||||
Retail sales of petroleum products on Agip branded network in Europe | (mmtonnes) | 12.35 |
12.42 |
12.48 |
||||||
Agip branded service stations in Europe at period end | (units) | 6,225 |
6,282 |
6,294 |
||||||
Average throughput of Agip branded service stations in Europe | (kliters) | 2,488 |
2,479 |
2,470 |
||||||
Employees at year end | (units) | 9,224 |
8,894 |
9,437 |
(a) | Before elimination of intersegment sales. |
- 60 -
ENI FACT BOOK / REFINING & MARKETING - STRATEGIES
STRATEGIES
Eni is leader in the refining business and in the marketing of
refined products in Italy and holds solid competitive positions
in selected European countries. Enis refining and marketing
operations are efficiently integrated to maximize cost
efficiencies and deliver appreciable returns on capital employed.
The integration with upstream operations represents a further
competitive advantage. Enis key medium term objective in
its downstream oil business is to enhance profitability. The
strategic guidelines to attain this objective are the following:
Enhance Enis refining system by means of a focused investment program;
Improve profitability and qualitative standards of the Italian retail network;
Grow retail sales in selected markets in the rest of Europe; and
Pursue higher levels of operational efficiency.
In the next four years the implementation of these strategies will be supported by a capital expenditure program of approximately euro 4.3 billion, focused on upgrading refineries, through an increase of primary balanced refining and conversion capacity and of refineries flexibility and efficiency, with the objective to strengthen Enis role of leading player in the Mediterranean area, targeting a leadership position in Europe, and enhancing Enis competitive position in marketing in Italy and in selected European markets.
- 61 -
ENI FACT BOOK / REFINING & MARKETING - HIGHLIGHTS
2006
Highlights In 2006, adjusted net profit was down euro 316 million to euro 629 million, or 33.4%, mainly due to a decline in refining margins as a result of a weak trading environment and to lower results from marketing in Italy. Enis realized refining margins recorded a better trend than market reference margins reflecting Enis refineries capacity to process heavy crudes which are discounted as compared to the Brent crude market benchmark, thus resulting in a higher profitability of the heavy barrel. Return on average capital employed adjusted was 10.7%, down from 2005 (18.2%). Capital expenditure totaled euro 645 million and mainly related to projects aimed at improving flexibility and yields of refineries and upgrading the retail network in Italy and in the rest of Europe. Refining throughputs on own account in Italy and outside Italy (38.04 mmtonnes) declined by 750 ktonnes from 2005, down 1.9%, mainly owing to longer unplanned maintenance standstills, particularly at third party refineries (Priolo), while wholly-owned refineries achieved stable processing levels. Total refinery intake amounted to 39.56 mmtonnes, of which 35 in Italy, with full balanced capacity utilization. |
Retail sales of refined
products in Italy (8.66 mmtonnes) declined 1% from 2005
mainly due to competitive pressure. This decrease was
more than offset by a growth in retail volumes marketed
in the rest of Europe (3.82 mmtonnes, up 4.1%), mainly in
Germany and Spain. Sales on the wholesale market in Italy (10.06 mmtonnes) were down 4% due primarily to a decline registered in the fourth quarter owing to the impact of mild weather conditions. This decline was partially offset by a growth in volumes marketed on wholesale markets in the rest of Europe (4.6 mmtonnes, up 2.2%) in particular in Germany and Spain. |
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ENI FACT BOOK / REFINING & MARKETING - ACTIVITIES
Activities 1. Refining Eni owns five refineries in Italy and interests in refineries located in Italy, Germany and the Czech Republic with a total refining capacity (balanced with conversion capacity) of approximately 35.5 million tonnes (equal to 710 kbbl/d) and a conversion index of 57%. Enis wholly owned refineries in Italy have a balanced capacity of 26.7 mmtonnes (equal to 534 kbbl/d), with a 58.9% conversion rate. In 2006 refining throughputs on own account in Italy and outside Italy were 38.04 mmtonnes; total throughputs on wholly owned refineries were 27.17 mmtonnes (on own account and for third parties), with full balanced capacity utilization. In the medium term, Eni forecasts the refining environment to be featured by the following trends: (i) global imbalances in the availability of products among macro geographic areas; (ii) a low adequacy of existing refining assets to process heavy and non conventional feedstock against a backdrop of persisting high spreads between light/sweet and heavy/sour crude qualities; (iii) an imbalance of existing refining assets towards higher yields in gasoline and fuel oil in contrast with rising demand for middle distillates; |
and (iv) increasingly tight environmental and product quality regulations which make the upgrading of existing refining assets a critical issues. Against this backdrop, Eni plans to enhance the profitability of its refining business, capturing opportunities arising from current market trends by implementing a large investment program of approximately euro 3 billion in the next four years. Principal planned actions are to: (i) increase primary and conversion capacity, targeting a complexity index higher than 57%, in view of boosting middle distillate yields, including petrochemical feedstock, and extracting value from equity crude, the availability of which is expected to increase in the Mediterranean basin over the medium term; (ii) improve refinery flexibility in order to optimize processed feedstock and capture market opportunities arising from an expected increasing availability of heavy/sour crude which can be purchased at a discount in the marketplace; (iii) achieve high-quality products responsive to expected demand trends and the evolution of product specifications provided for by increasingly tight European standards in term of emissions and environmental preservation; (iv) strengthen vertical integration with upstream and petrochemical operations; and (v) enhance operational efficiency of refineries, targeting in particular a higher level of energy efficiency. |
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ENI FACT BOOK / REFINING & MARKETING - ACTIVITIES
ITALY Enis refining system in Italy is composed of five wholly owned refineries and a 50% interest in the Milazzo refinery in Sicily. Each of Enis refineries in Italy has operating and strategic features that aim at maximizing the value associated to the asset structure, the geographic positioning with respect to markets and the integration with Enis other activities. SANNAZZARO: with a balanced primary refining capacity of 170 kbbl/d and an equivalent conversion index of 46.2% is one of the most efficient refineries in Europe. Located in the Po Valley, it supplies mainly markets in North-Western Italy and Switzerland. The high degree of flexibility of this refinery allows it to process a wide range of oils, such as CPC Blend crude oil from the Caspian Sea carried through the CPC pipeline, the Bonga crude from Nigeria and oil from Enis Villafortuna field. From a logistical standpoint this refinery is located along the route of the Central Europe Pipeline, which links the Genova terminal with French speaking Switzerland. |
This refinery contains two
primary distillation plants and a vacuum unit. Conversion
is obtained through a fluid catalytic cracker (FCC1),
an HDCK middle distillate conversion unit and a
visbreaking thermal conversion unit. Two catalytic
reforming plants, an isomerization plant, an alkylation
plant, an MTBE plant and three desulphurization plants
for middle distillates and one for naphtha from cracking
complete the production cycle. In 2006, Eni completed a
gasification facility using the heavy residue from
visbreaking (tar) to produce syngas to feed the nearby
EniPower power station at Ferrera Erbognone. Eni plans to upgrade this refinery, targeting to transform it into a world class plant. In particular, in the next four years, Eni plans to build:
|
(1) | Conversion plant where vacuum feedstock undergoes cracking at high pressure and moderate temperature thus producing mostly high quality gasoline. This kind of plant guarantees high operating flexibility to the refinery. |
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ENI FACT BOOK / REFINING & MARKETING - ACTIVITIES
Eni is currently evaluating the building of a plant employing Eni Slurry Technology (see Innovative technologies, below) with a 23 kbbl/d capacity for the processing of extra heavy crudes and tar sands producing higher quality products, in particular diesel fuel, and reducing the yield of fuel oil to zero. TARANTO: with a balanced primary
refining capacity of 110 kbbl/d and an equivalent
conversion index of 61.1%, can process a wide range of
crudes and semi-finished products with great operational
flexibility. It mainly produces fuels for automotive use
and residential heating purposes for the southern Italian
markets. Besides its primary distillation plants, this
refinery contains a flash vacuum unit, two plants for the
desulphurization of middle distillates, a reforming unit,
an isomerization unit and conversion plants such as: a
two-stage thermal conversion plant (visbreaking/thermal
cracking) and an RHU conversion plant, that allows to
convert high sulphur content residues into valuable
products and cracking feedstocks. It processes most of
the oil produced in Enis Val dAgri fields
carried to Taranto through the Monte Alpi pipeline (in
2006 a total of 3.157 mmtonnes of this oil were
processed). |
(see Logistics,
below), in particular a pipeline for transporting virgin
naphtha to Eni petrochemical plant at Brindisi. The
objective is to expand the consumption area covered by
the refinery to Campania. Start-up is expected in
2009/2010. This development and upgrading plan will enable Eni to better employ national and Caspian equity crude and give more flexibility to this refinery, optimizing the use of the conversion plants and increasing throughput from 6 to 10 mmtonnes/y (100-180 kbbl/d). GELA: with a balanced primary refining capacity of 100 kbbl/d and an equivalent conversion index of 143.5% represents an upstream integrated pole with the production of heavy crudes obtained from nearby Eni fields offshore and onshore Sicily, while downstream it is integrated with Enis nearby petrochemical plants. Located on the southern coast of Sicily, it manufactures fuels for automotive use and residential heating purposes, as well as petrochemical feedstocks. Its high conversion level allows it to minimize the yield of fuel oil and semi-finished products. Besides its primary distillation plants, this refinery contains the following plants: an FCC unit with go-finer for the upgrading of feedstocks and two coking plants for the vacuum conversion of heavy residues. All these plants are integrated in order to process heavy residues and feedstocks and manufacture valuable products. It also contains two reforming units, an alkilation unit, an MTBE unit and plants for desulphurization of gasoil and naphtha from cracking. The power plant of this refinery also contains modern residue and exhaust fume treatment plants which allow the complex to comply with the most exacting environmental standards. An upgrade of the Gela refinery will be implemented by means of an upgrade of topping capacity to enable higher intakes (approximately 1 mmtonnes/y) and of feedstock flexibility. In addition, actions to improve energy efficiency, renewal of facilities for gasoline production, and the upgrade of utilities and the logistic reorganization of the site are planned. LIVORNO: with a balanced primary refining capacity of 84 kbbl/d and an equivalent conversion index of 11.4%, manufactures mainly gasolines, fuel oil for bunkering, specialty products and lubricant bases. |
(2) | Topping (also called atmospheric distillation) represents the first stage of primary distillation of crude aimed at separating products thanks to the different boiling temperatures of the hydrocarbons contained in crude. |
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ENI FACT BOOK / REFINING & MARKETING - ACTIVITIES
Besides its primary
distillation plants, this refinery contains a vacuum
unit, a reformer unit, an isomerization plant, two
desulphurization units for middle distillates and two
lubricant manufacturing lines. Its pipeline links with
the local harbor and with the Florence storage sites by
means of two pipelines optimizing intake, handling and
distribution of products. PORTO MARGHERA: with a balanced primary refining capacity of 70 kbbl/d and an equivalent conversion index of 22.8%, supplies mainly markets in north-eastern Italy, Austria, Slovenia and, at a lower extent, Croatia. Besides its primary distillation plants with vacuum plants, this refinery contains a reformer plant, an isomerization plant, two gasoil desulphurization units and a two-stage thermal conversion plant (visbreaking/thermal cracking) for increasing yields of valuable products. The plant upgrading project, subject to the extension of the refining license, concerns the construction of a new hydrocracker with a 24 kbbl/d capacity and upgrades of utilities. The objective is to increase intake (up 1.4 mmtonnes/y, to approximately 5.5 mmtonnes when fully operational), the improvement of flexibility in processed feedstocks, the increase in middle distillates produced (up 0.7 mmtonnes) in an area characterized by structural diesel fuel deficit, and higher energy efficiency. REST OF EUROPE In Germany Eni holds an 8.3% interest in the SCHWEDT refinery and a 20% interest in BAYERNOIL, an integrated pole that includes the Ingolstadt, Vohburg and Neustadt refineries. Enis refining capacity in Germany amounts to approximately 70 kbbl/d. Enis share of the production of the three integrated refineries and of the Schwedt refinery is mainly used to supply Enis distribution network in Bavaria and Eastern Germany. Eni plans to restructure the Bayernoil refining pole, by building a new hydrocracker with a capacity of approximately 2 mmtonnes/y, revamping other assets (in particular a reformer and a hydrofiner) and shutting-down a topping unit. Eni holds a 16.33% interest in CESKA RAFINERSKA which owns and manages two refineries, Kralupy and Litvinov, in the Czech Republic. Enis share of refining capacity amounts to 27 kbbl/d. 2. Logistics Eni is leader in storage and transport of petroleum products in Italy with its logistical integrated |
infrastructure consisting of
12 directly managed storage sites and a network of
petroleum product pipelines. Eni holds interests in five joint entities established by partnering the major Italian operators. These are located in Vado Ligure-Genova (Petrolig), Arquata Scrivia (Sigemi), Venice (Petroven), Ravenna (Petra) and Trieste (DCT) and aim at reducing logistic costs, and increasing efficiency. Eni operates in the transport of oil and refined products: (i) on land through a pipeline network of leased and owned pipelines extending over 3,210 kilometers (1,513 kilometers are wholly owned by Eni); (ii) by sea through spot and long-term lease contracts of tanker ships. For the distribution of refined products to retail and wholesale markets, Eni owns a fleet of tanker trucks and manages third-party owned vehicles. In the medium-term, Eni plans to enhance the relationship between its logistic and refining operations by implementing an integrated logistic model (hub model) designed to centralize handling of products flows on a single platform enabling real time monitoring. In the next four years, Eni plans to invest approximately euro 0.6 billion directed in particular to the implementation of the Taranto logistic project intended to support the refinerys development plan: a new diesel fuel and gasoline storage site will be built in Campania and three pipelines will be laid, two of which linking the refinery to the storage site and the other one to transport virgin naphtha to Enis petrochemical complex in Brindisi. The objective of this plan is to eliminate the transport of refined products by sea to Naples. 3. Marketing RETAIL SALES In retail distribution Eni intends to enhance its leadership on the Italian retail market, improving outlets and service quality standards and targeting a strong product differentiation and customer-oriented promotional initiatives. In the rest of Europe, Eni will selectively grow its market share, targeting a strengthening of its competitive positioning in selected markets, leveraging on synergies achievable thanks to the geographic location of its production and logistic assets and on strong brand awareness. |
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ENI FACT BOOK / REFINING & MARKETING - ACTIVITIES
ITALY Eni is leader in the retail marketing of refined product under its Agip brand. At December 31, 2006, Enis retail distribution network consisted of 4,356 Agip branded service stations with sales amounting approximately to 11 billion liters (8.66 mmtonnes) with an average throughput of 2.46 mml and a 29.3% market share. Eni intends to strengthen its competitive positioning in Italy by introducing new outlet formats in line with European standards of quality and services, increasing premium products sales and differentiating promotional offers in order to retain the various segments of clients. A strong focus will be devoted to pursue high levels of operating efficiency. In the next four years, Eni plans to invest approximately euro 0.75 billion in the upgrading of its network, targeting to build and acquire new service stations, highgrade/restructure existing ones, and to adequate them to applicable environmental standards and regulations. By 2010, Eni expects to have a retail network |
composed of approximately
4,360 service stations with an average throughput of
approximately 2.7 bl per outlet. As for premium price products, Eni intends to enhance its Blu fuel line of products by launching a new diesel fuel with high environmental quality and engine performance. In 2006, sales of BluDiesel a high performance virtually sulphur free diesel fuel that improves engine performance on the Agip branded network amounted to approximately 840 bl (760 mmtonnes), a decline of 14.8% from 2005 due mainly to the increasingly high sensitivity of consumers to the price of fuels in light of their remarkable increase in the year. At 2006 year-end, service stations marketing BluDiesel were 4,061 (about 4,000 at 2005 year-end) corresponding to approximately 93% of Enis Agip branded network. Retail volumes of BluSuper a high performance and low environmental impact gasoline amounted to about 114 mml (98 ktonnes), down 9% from 2005, |
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ENI FACT BOOK / REFINING & MARKETING - ACTIVITIES
showing a trend similar to
the one of BluDiesel. At 2006 year-end, service stations
marketing BluSuper were 2,316 (about 1,719 at December
31, 2005) corresponding to approximately 53% of
Enis network. In January 2006 Eni started the experimental marketing of Ad-Blue®, a water solution containing urea for technologically advanced heavy duty vehicles. This additive, compatible with the new characteristics of most trucks built in Europe, reacts with exhaust gases reducing emissions and consumption and improving engine performance. In 2006 Eni continued its Do-It-Yourself campaign which enables customers accessing self-service outlets with an electronic card to obtain price discounts or gifts (under agreements with Vodafone and Coop) in proportion to the total amount of purchased fuel. Further bonuses are offered to the most faithful customers. At year-end the number of active cards was about 3.9 million; turnover on cards increased by 3% from 2005. The amount of fuel purchased with cards was approximately 39% of all fuels marketed on Agip branded service stations joining the campaign, corresponding to about 31% of total Agip throughput. You&Agip In March 2007, Eni launched its You&Agip promotional campaign designed to boost customer loyalty to the Agip brand. It is an innovative formula intended to outperform traditional loyalty programmes for motorists, mainly by cancelling the usual time limits, as it is set to last for the next three years until December 31, 2009. Furthermore, the list of prizes will be kept constantly updated thanks to the high numbers of partners joining the initiative. Just to mention a few qualifying features of the You&Agip programme, customers can decide how to accumulate points, when to spend them and what kind of reward to choose. Points can be accumulated not only by buying fuels, but also by buying all the other services and wares sold at AgipCafè outlets. In 2006, Eni continued the initiative of the European Multicard Routex paying card addressed to professional transport (transporters and car fleets) with sales of 1.5 bl (up 4.7% from 2005), and the number of customers provided with this card increased by about 2,000 to 52,000 users at year end. Multicard is used internationally and is part of the international Routex consortium, made up by Agip, Aral, BP, OMV and Statoil. Eni continued the development of its non oil-retail activities aimed at promoting the development of its network in line with European standards, such as the diffusion of self-service facilities, high-tech car care systems and services to customers, in particular 1,000 cafè |
and fast food outlets as
well as innovative commercial outlets. To this end Eni
owns master franchisor rights with exclusive rights for
the oil sector for the Pans & Co brand, a
leader in quality fast food outlets. Enis network
contains 13 Pans & Co outlets and 32 McDonalds
outlets both on ordinary and motorway assets. In 2006, a total of 70 new affiliations were added to the AgipCafè® branded outlets and by year end a total of 340 franchises. Moreover, 9 new convenience stores under the SpazioAgip® brand name were opened, thus reaching a total of 23 locations. Also 45 new car-wash facilities were opened on Agip owned service stations, thus reaching a total of 715 units. In particular the travellers who stop at Agip branded stations along the motorways can access a wide range of services: AgipCafè, lAngolo del Buongustaio, SpazioAgip, RistorAgip, BabyRoom and special rest areas dedicated to motor homes. Eni has also developed the AgipTruck Point, large-format specialized service stations for heavy duty vehicles where facilities have been created for truck drivers such as secure parking and IT services. In the next four years Eni intends to continue the development of its non-oil activities and expects to provide 57% of its Agip branded network with these facilities by 2010 (53% in 2006). REST OF EUROPE In 2006, retail volumes of fuels marketed in the rest of Europe totalled 4.8 bl (3.82 mmtonnes). At December 31, 2006, Enis retail marketing network outside Italy was represented by 1,938 service stations with an average throughput of 2.5 mml. The areas where Enis presence is significant are South-Central Germany with a 4.4% market share, Spain with 3.2%, Austria with 7.2%, Switzerland with 5.8% and South-Western France with 1.2% on national base. In recent years, Eni s strategy focused on selectively growing its market share, also by means of acquisition of assets, in European areas with interesting profitability perspectives mainly in Central-Eastern Europe (in particular Southern Germany, Austria, the Czech Republic and Hungary) in South-Eastern France and the Iberian Peninsula. In pursuing such growth, Eni has been able to reap synergies deriving from said areas being close to Enis production and logistic facilities. Over the past five years, retail volumes of refined products marketed in the rest of Europe have grown more than 50% (equal to a 9% compound average growth rate). By 2010 Eni expects to market approximately 5.6 bl. Growth in volumes will be achieved through acquisitions, leasing and construction of new service stations with high quality standards, |
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ENI FACT BOOK / REFINING & MARKETING - ACTIVITIES
automation and throughput,
also leveraging on marketing campaigns aimed at enhancing
the Agip brand perception on markets. By 2010 Eni plans to have a network of approximately 2,180 service stations with an average throughput of 2.6 bl. Non-oil activities in the rest of Europe are carried out under the CiaoAgip brand name in 1,158 service stations, of these 328 are in Germany and 169 in France with a 60% coverage of the network and the virtually complete coverage of owned stations. MultiEnergy The attention paid to environmental considerations led to the construction of Multienergy service stations that are equipped with solar panels able to provide all the energy necessary for their functioning and that sell a full range of fuels with a significant environmental value. The inauguration of the Agip MultiEnergy service station at the Infraserv Höchst industrial park in Germany, marks the conclusion of the first phase of the Zero Regio project, which has the support of the European Commission, for the construction of an innovative multifuel station for the supply and trial of zero emission vehicles fuelled with hydrogen. 4. Other businesses Wholesale marketing and other sales Eni markets gasoline and other fuels on wholesale markets, including diesel fuel for automotive use and for heating purposes, for agricultural vehicles and for vessels, gasoline and fuel oil. Major customers are wholesalers, agricultural users, manufacturing industries, public utilities and transports. Eni provides its customers with its expertise in the area of fuels with a wide range of products that cover all market requirements. Along with traditional products provided with the high quality Eni standard, there is also an innovative low environmental impact line, which includes AdvanceDiesel especially targeted for heavy duty public and private transports. Customer care and product distribution is supported by a widespread commercial and logistical organization present all over Italy and articulated in local marketing offices and a network of agents and concessionaires. In 2006 volumes marketed on wholesale markets in Italy, which excludes the Avio and Bunker businesses, were 8.22 mmtonnes down 610 ktonnes from 2005, or 7%, due mainly to a decline in domestic consumption related to mild weather conditions in the fourth quarter of the year. |
Sales volumes on wholesale
markets outside Italy were 4.27 mmtonnes, up
approximately 100 ktonnes from 2005, or 2.6%, reflecting
mainly higher sales in Germany and Spain. Eni also markets jet fuel directly at 38 airports, of which 27 in Italy. In 2006, these sales amounted to 2.18 mmtonnes (of which 1.84 mmtonnes in Italy) up approximately 200 ktonnes. Eni is active also in the international market of bunkering, marketing marine fuel in 38 ports, of which 23 in Italy. In 2006 marine fuel sales were 1.9 mmtonnes (1.24 in Italy) increasing 100 ktonnes. Other sales were 22.09 mmtonnes of which 19.48 mmtonnes referred to sales to oil companies and traders, and 2.61 mmtonnes supplies to the petrochemical sector. LPG In Italy Eni is leader in LPG production, marketing and sale with 589 ktonnes sold for heating and automotive use (under the Agip brand and wholesale) equal to an 18% market share. Additional 350 ktonnes of LPG were marketed through other channels mainly to oil companies and traders. LPG activities in Italy are supported by direct production, availability from 11 bottling plants and a number of owned storage sites in addition to products imported at coastal storage sites located in Livorno, Naples and Ravenna. Lubricants Eni operates 8 (owned and co-owned) blending plants, in Italy, Europe, North and South America, Africa and the Far East which manufacture finished and fatty lubricants. With a wide range of products composed of over 650 different blends, Eni masters international state-of-the-art know-how for the formulation of products for vehicles (engine oil, special fluids and transmission oils) and industries (lubricants for hydraulic systems, industrial machinery and metal processing). In Italy Eni is a leader in the manufacture and sale of lubricant bases. Base oils are manufactured primarily at its refinery in Livorno. Eni also owns one facility for the production of additives and solvents in Robassomero. In 2006, retail and wholesale sales in Italy amounted to 136 ktonnes with a 24.9% market share. Eni also sold approximately 4 ktonnes of special products (white oils, transformer oil and anti-freeze fluids). Outside Italy sales amounted to approximately 102 ktonnes, of these about 50% were registered in Europe (mainly Germany, Netherlands and Spain). |
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ENI FACT BOOK / REFINING & MARKETING - MAIN DATA
Refining system in 2006 |
Ownership share |
Conversion equivalent |
Primary balanced refining
capacity share |
Primary balanced refining
capacity total |
Fluid catalytic cracking
FCC |
Residue Conversion |
Go-Finer |
Mild Hydro- cracking/
Hydro- cracking |
Visbreaking/ Thermal
Cracking |
Coking |
Wholly-owned refineries | 58.9 | 534 | 534 | 69 | 21 | 36 | 29 | 65 | 47 | |||||||||||
Italy | ||||||||||||||||||||
Sannazzaro | 100 | 46.2 | 170 | 170 | 34 | 29 | 28 | |||||||||||||
Gela | 100 | 143.5 | 100 | 100 | 35 | 36 | 47 | |||||||||||||
Taranto | 100 | 61.1 | 110 | 110 | 21 | 35 | ||||||||||||||
Livorno | 100 | 11.4 | 84 | 84 | ||||||||||||||||
Porto Marghera | 100 | 22.8 | 70 | 70 | 22 | |||||||||||||||
Partially owned refineries (1) | 50.9 | 177 | 804 | 172 | 24 | 27 | 55 | 96 | ||||||||||||
Italy | ||||||||||||||||||||
Milazzo | 50 | 72.3 | 80 | 160 | 41 | 24 | 33 | |||||||||||||
Germany | ||||||||||||||||||||
Ingolstadt/Vohburg/Neustadt
(Bayernoil) |
20 | 32.6 | 52 | 258 | 58 | 33 | ||||||||||||||
Schwedt | 8.33 | 41.8 | 19 | 223 | 49 | 27 | 49 | |||||||||||||
Czech Republic | ||||||||||||||||||||
Kralupy/Litvinov (Ceska Rafinerska) |
16.3 | 28.8 | 27 | 163 | 24 | 22 | 14 | |||||||||||||
Total Refineries | 57.0 | 711 | 1,338 | 241 | 45 | 63 | 84 | 181 | 47 |
(1) | Capacity of conversion plants is 100%. |
Refining capacity | 1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Balanced capacity at period end (1) | (kbbl/d) | 853 | 859 | 859 | 859 | 814 | 654 | 681 | 681 | 701 | 711 | |||||||||||
Balanced capacity of wholly-owned refineries at period end | 664 | 664 | 664 | 664 | 664 | 504 | 504 | 504 | 524 | 534 | ||||||||||||
Processing at wholly-owned refineries | 621 | 681 | 640 | 659 | 645 | 501 | 502 | 535 | 547 | 543 | ||||||||||||
Balanced capacity utilization of wholly-owned refineries | (%) | 94 | 103 | 96 | 99 | 97 | 99 | 100 | 100 | 100 | 100 |
Petroleum products availability | (mmtonnes) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | ||||||||||||||||||||||||||||||
Refinery intake in wholly-owned refineries | 31.10 | 34.05 | 32.00 | 32.93 | 32.24 | 30.09 | 25.09 | 26.75 | 27.34 | 27.17 | ||||||||||||||||||||
Refinery intake for third parties | (3.50 | ) | (3.24 | ) | (2.78 | ) | (3.41 | ) | (1.45 | ) | (1.88 | ) | (1.72 | ) | (1.50 | ) | (1.70 | ) | (1.53 | ) | ||||||||||
Refinery intake in non-owned refineries | 8.00 | 7.90 | 8.08 | 8.41 | 5.92 | 6.27 | 8.43 | 8.10 | 8.58 | 7.71 | ||||||||||||||||||||
Consumption and losses | (2.00 | ) | (1.94 | ) | (2.07 | ) | (2.11 | ) | (1.95 | ) | (1.91 | ) | (1.64 | ) | (1.64 | ) | (1.87 | ) | (1.45 | ) | ||||||||||
Products available | 33.60 | 36.77 | 35.23 | 35.82 | 34.76 | 32.57 | 30.16 | 31.71 | 32.35 | 31.90 | ||||||||||||||||||||
Purchases of finished products and change in inventories | 6.75 | 5.74 | 5.45 | 4.30 | 5.19 | 6.27 | 5.86 | 5.07 | 4.85 | 4.45 | ||||||||||||||||||||
Finished products transferred to foreign cycle | (4.20 | ) | (6.51 | ) | (5.23 | ) | (4.58 | ) | (4.96 | ) | (5.56 | ) | (5.19 | ) | (5.03 | ) | (5.82 | ) | (5.35 | ) | ||||||||||
Consumption for power generation | (1.74 | ) | (1.07 | ) | (1.06 | ) | (1.09 | ) | (1.10 | ) | ||||||||||||||||||||
Sales | 36.15 | 36.00 | 35.45 | 35.54 | 34.99 | 31.54 | 29.76 | 30.69 | 30.29 | 29.90 | ||||||||||||||||||||
Outside Italy | ||||||||||||||||||||||||||||||
Products available | 2.80 | 3.33 | 3.08 | 3.07 | 3.02 | 2.98 | 3.36 | 4.04 | 4.33 | 4.37 | ||||||||||||||||||||
Purchases of finished products and change in inventories | 8.45 | 8.35 | 8.06 | 10.27 | 10.27 | 12.16 | 12.12 | 13.78 | 11.19 | 11.51 | ||||||||||||||||||||
Finished products transferred from Italian cycle | 4.20 | 6.51 | 5.23 | 4.58 | 4.96 | 5.56 | 5.19 | 5.03 | 5.82 | 5.35 | ||||||||||||||||||||
Sales | 15.45 | 18.19 | 16.37 | 17.92 | 18.25 | 20.70 | 20.67 | 22.85 | 21.34 | 21.23 | ||||||||||||||||||||
Sales in Italy and outside Italy | 51.60 | 54.19 | 51.82 | 53.46 | 53.24 | 52.24 | 50.43 | 53.54 | 51.63 | 51.13 |
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ENI FACT BOOK / REFINING & MARKETING - MAIN DATA
Petroleum products sales in Italy and outside Italy | (mmtonnes) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Retail marketing | 12.09 | 12.02 | 11.85 | 11.57 | 11.64 | 11.14 | 10.99 | 10.93 | 10.05 | 8.66 | ||||||||||||
Wholesale marketing | 11.3 | 11.73 | 11.42 | 11.1 | 11.24 | 10.64 | 10.35 | 10.7 | 10.48 | 10.06 | ||||||||||||
23.39 | 23.75 | 23.27 | 22.67 | 22.88 | 21.78 | 21.34 | 21.63 | 20.53 | 18.72 | |||||||||||||
Petrochemicals | 5.97 | 5.75 | 5.38 | 4.93 | 4.23 | 3.82 | 2.79 | 3.05 | 3.07 | 2.61 | ||||||||||||
Other sales (1) | 6.79 | 6.5 | 6.8 | 7.94 | 7.88 | 5.94 | 5.63 | 6.01 | 6.69 | 8.57 | ||||||||||||
Sales in Italy | 36.15 | 36 | 35.45 | 35.54 | 34.99 | 31.54 | 29.76 | 30.69 | 30.29 | 29.90 | ||||||||||||
Retail marketing rest of Europe | 2.25 | 2.35 | 2.36 | 2.35 | 2.47 | 2.57 | 3.02 | 3.47 | 3.67 | 3.82 | ||||||||||||
Retail marketing Africa and Brazil | 0.68 | 1.11 | 1.55 | 1.43 | 1.71 | 1.44 | 1.18 | 0.57 | ||||||||||||||
2.93 | 3.46 | 3.91 | 3.78 | 4.18 | 4.01 | 4.2 | 4.04 | 3.67 | 3.82 | |||||||||||||
Wholesale marketing outside Italy | 6.17 | 6.2 | 6.4 | 5.46 | 5.55 | 5.65 | 6.01 | 5.3 | 4.50 | 4.60 | ||||||||||||
9.1 | 9.66 | 10.31 | 9.24 | 9.73 | 9.66 | 10.21 | 9.34 | 8.17 | 8.42 | |||||||||||||
Other sales (1) | 6.35 | 8.53 | 6.06 | 8.68 | 8.52 | 11.04 | 10.46 | 13.51 | 13.17 | 12.81 | ||||||||||||
Sales outside Italy | 15.45 | 18.19 | 16.37 | 17.92 | 18.25 | 20.7 | 20.67 | 22.85 | 21.34 | 21.23 | ||||||||||||
51.6 | 54.19 | 51.82 | 53.46 | 53.24 | 52.24 | 50.43 | 53.54 | 51.63 | 51.13 |
(1) | Includes bunkering consumption for power production (until 2001) and sales to oil companies. From 2002, includes also sales of MTBE. |
Retail and wholesale sales by product in Italy and outside Italy | (ktonnes) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | ||||||||||||||||||||||
Retail sales | 12.09 | 12.37 | 11.85 | 11.57 | 11.64 | 11.14 | 10.99 | 10.93 | 10.05 | 8.66 | ||||||||||||
Gasoline | 7.68 | 7.76 | 7.23 | 6.74 | 6.53 | 5.98 | 5.49 | 5.09 | 4.35 | 3.38 | ||||||||||||
Gasoil | 3.92 | 4.12 | 4.22 | 4.43 | 4.74 | 4.83 | 5.23 | 5.61 | 5.49 | 5.09 | ||||||||||||
LPG | 0.45 | 0.46 | 0.37 | 0.38 | 0.35 | 0.31 | 0.26 | 0.22 | 0.20 | 0.18 | ||||||||||||
Lubricants | 0.04 | 0.03 | 0.03 | 0.02 | 0.02 | 0.02 | 0.01 | 0.01 | 0.01 | 0.01 | ||||||||||||
Wholesale sales | 11.30 | 11.38 | 11.42 | 11.10 | 11.24 | 10.64 | 10.35 | 10.70 | 10.48 | 10.06 | ||||||||||||
Gasoil | 4.82 | 4.95 | 5.01 | 4.85 | 5.12 | 4.88 | 4.78 | 4.89 | 4.86 | 4.60 | ||||||||||||
Fuel oil | 2.64 | 2.56 | 2.25 | 2.15 | 2.12 | 2.05 | 1.66 | 1.80 | 1.50 | 1.27 | ||||||||||||
LPG | 0.55 | 0.50 | 0.50 | 0.48 | 0.48 | 0.46 | 0.45 | 0.46 | 0.46 | 0.41 | ||||||||||||
Gasoline | 0.13 | 0.08 | 0.24 | 0.21 | 0.17 | 0.16 | 0.17 | 0.15 | 0.16 | 0.15 | ||||||||||||
Lubricants | 0.17 | 0.16 | 0.15 | 0.16 | 0.15 | 0.14 | 0.13 | 0.13 | 0.13 | 0.13 | ||||||||||||
Other | 2.99 | 3.14 | 3.27 | 3.25 | 3.20 | 2.94 | 3.16 | 3.27 | 3.37 | 3.50 | ||||||||||||
Outside Italy (retail + wholesale) | ||||||||||||||||||||||
Gasoline | 2.28 | 2.28 | 2.39 | 2.16 | 2.39 | 2.27 | 2.37 | 2.32 | 2.14 | 2.06 | ||||||||||||
Gasoil | 3.49 | 3.83 | 4.01 | 3.92 | 4.30 | 4.49 | 5.10 | 4.96 | 4.71 | 4.90 | ||||||||||||
Jet fuel | 0.52 | 0.35 | 0.43 | 0.47 | 0.43 | 0.39 | 0.39 | 0.47 | 0.34 | 0.34 | ||||||||||||
Fuel oil | 0.38 | 0.33 | 0.26 | 0.26 | 0.22 | 0.21 | 0.20 | 0.15 | 0.12 | 0.23 | ||||||||||||
Lubricants | 0.15 | 0.11 | 0.12 | 0.13 | 0.11 | 0.13 | 0.16 | 0.11 | 0.10 | 0.10 | ||||||||||||
LPG | 1.71 | 1.79 | 1.86 | 1.86 | 1.82 | 1.78 | 1.72 | 1.09 | 0.44 | 0.46 | ||||||||||||
Other | 0.57 | 0.98 | 1.25 | 1.14 | 0.47 | 0.41 | 0.27 | 0.24 | 0.32 | 0.33 | ||||||||||||
Total | 9.10 | 9.66 | 10.31 | 9.94 | 9.73 | 9.67 | 10.21 | 9.34 | 8.17 | 8.42 |
- 71 -
ENI FACT BOOK / REFINING & MARKETING - MAIN DATA
Number of service stations | (units) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 10,615 | 9,828 | 9,425 | 9,045 | 8,351 | 7,710 | 7,290 | 7,244 | 4,349 | 4,356 | ||||||||||||
ordinary stations: | 10,345 | 9,563 | 9,160 | 8,783 | 8,157 | 7,546 | 7,134 | 7,097 | 4,204 | 3,194 | ||||||||||||
- Agip brand | 6,519 | 6,044 | 5,772 | 5,561 | 5,374 | 4,954 | 4,215 | 4,186 | 4,204 | 3,194 | ||||||||||||
- IP brand | 3,826 | 3,519 | 3,388 | 3,222 | 2,783 | 2,592 | 2,919 | 2,911 | ||||||||||||||
highway stations: | 270 | 265 | 265 | 262 | 194 | 164 | 156 | 147 | 145 | 142 | ||||||||||||
- Agip brand | 192 | 189 | 189 | 189 | 152 | 127 | 146 | 143 | 145 | 142 | ||||||||||||
- IP brand | 78 | 76 | 76 | 73 | 42 | 37 | 10 | 4 | ||||||||||||||
Outside Italy | 2,141 | 3,156 | 3,064 | 3,040 | 3,356 | 3,052 | 3,357 | 1,896 | 1,933 | 1,938 | ||||||||||||
Central Europe | 1,112 | 1,081 | 1,044 | 1,007 | 988 | 1,013 | 1,230 | 1,309 | 1,318 | 1,329 | ||||||||||||
Iberian Peninsula | 186 | 192 | 200 | 201 | 202 | 198 | 357 | 356 | 373 | 358 | ||||||||||||
Eastern Europe | 121 | 142 | 145 | 165 | 185 | 223 | 226 | 231 | 242 | 251 | ||||||||||||
Africa | 722 | 685 | 593 | 262 | 262 | |||||||||||||||||
Latin America | 1,056 | 1,082 | 1,405 | 1,719 | 1,618 | 1,544 | ||||||||||||||||
12,756 | 12,984 | 12,489 | 12,085 | 11,707 | 10,762 | 10,647 | 9,140 | 6,282 | 6,294 |
Average throughput | (kl/number of service stations) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Italy | 1,405 | 1,475 | 1,530 | 1,565 | 1,643 | 1,707 | 1,813 | 1,863 | 1,770 | 2,463 | ||||||||||||
Rest of Europe | 2,042 | 2,141 | 2,200 | 2,210 | 2,303 | 2,276 | 2,378 | 2,393 | 2,426 | 2,486 | ||||||||||||
Brazil | 1,122 | 1,074 | 856 | 914 | 967 | 942 | ||||||||||||||||
Africa | 926 | 1,080 | 1,079 | 1,515 | 1,943 | |||||||||||||||||
Average throughput outside Italy | 1,753 | 1,661 | 1,586 | 1,524 | 1,563 | 1,585 | 1,671 | 2,393 | 2,426 | 2,486 | ||||||||||||
Average throughput | 1,463 | 1,512 | 1,543 | 1,555 | 1,621 | 1,674 | 1,771 | 1,970 | 1,926 | |||||||||||||
Average throughput Agip branded network | 1,522 | 1,560 | 1,606 | 1,615 | 1,685 | 1,861 | 2,109 | 2,488 | 2,479 | 2,470 | ||||||||||||
Italy | 1,450 | 1,519 | 1,616 | 1,662 | 1,757 | 2,014 | 2,410 | 2,527 | 2,509 | 2,463 | ||||||||||||
Outside Italy | 1,753 | 1,662 | 1,586 | 1,524 | 1,563 | 1,585 | 1,671 | 2,393 | 2,427 | 2,486 |
Market shares in Italy | (%) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Retail | 43.4 | 41.7 | 41.0 | 40.2 | 39.7 | 37.5 | 36.6 | 36.3 | 29.7 | 29.3 | ||||||||||||
Gasoline | 43.9 | 42.4 | 41.4 | 40.6 | 40.1 | 37.7 | 36.2 | 35.5 | 27.5 | 27.2 | ||||||||||||
Gasoil | 43.3 | 42.3 | 41.7 | 41.3 | 40.9 | 38.6 | 38.4 | 38.2 | 32.3 | 31.6 | ||||||||||||
LPG (automotive) | 37.7 | 27.9 | 28.3 | 26.6 | 25.4 | 23.8 | 22.0 | 20.0 | 17.9 | 18.1 | ||||||||||||
Wholesale | 23.1 | 23.3 | 24.4 | 24.0 | 25.6 | 23.9 | 24.1 | 27.0 | 28.0 | 26.9 | ||||||||||||
Gasoil | 35.5 | 35.5 | 35.0 | 34.5 | 35.4 | 34.7 | 33.1 | 33.0 | 32.8 | 31.2 | ||||||||||||
Fuel oil | 11.0 | 10.8 | 11.6 | 12.9 | 14.9 | 13.3 | 12.6 | 17.7 | 17.9 | 15.2 | ||||||||||||
Domestic market share | 30.5 | 30.1 | 30.9 | 30.4 | 31.5 | 29.5 | 29.5 | 31.3 | 29.0 | 28.2 | ||||||||||||
Total market share (retail + wholesale) | ||||||||||||||||||||||
Gasoline | 43.9 | 43.6 | 42.2 | 41.3 | 40,8 | 38.3 | 36,8 | 36.0 | 28.2 | 27.8 | ||||||||||||
Gasoil | 38.6 | 38.5 | 38.0 | 37.6 | 38.1 | 36.8 | 35.9 | 35.9 | 32.8 | 31.7 | ||||||||||||
LPG | 29.8 | 24.8 | 22.9 | 22.0 | 22.0 | 20.9 | 19.4 | 19.1 | 18.8 | 18.0 |
Retail market shares outside Italy | (%) |
|
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Central Europe | ||||||||||||||||||||
Austria | 8.1 | 7.7 | 7.1 | 7.7 | 8.1 | 8.2 | 8.0 | 7.4 | 7.2 | |||||||||||
Switzerland | 6.4 | 6.6 | 6.8 | 6.4 | 6.0 | 5.7 | 5.7 | 5.7 | 5.8 | |||||||||||
Germany | 2.6 | 2.6 | 2.6 | 2.7 | 2.6 | 3.1 | 3.8 | 4.1 | 4.4 | |||||||||||
France | 0.4 | 0.4 | 0.4 | 0.6 | 0.8 | 1.1 | 1.2 | 1.1 | 1.2 | |||||||||||
Eastern Europe | ||||||||||||||||||||
Hungary | 4.5 | 4.3 | 4.1 | 4.5 | 6.1 | 6.7 | 6.4 | 6.0 | 6.3 | |||||||||||
Czech Republic | 4.2 | 4.3 | 4.3 | 4.3 | 5.7 | 4.9 | 5.2 | 5.5 | 5.9 | |||||||||||
Romania | 1 | 0.9 | 1 | 1.1 | 1.1 | 0.9 | .. | .. | .. | |||||||||||
Slovenia | 1.0 | 1.3 | 1.7 | |||||||||||||||||
Iberian Peninsula | ||||||||||||||||||||
Spain | 1.7 | 1.7 | 1.8 | 1.6 | 1.6 | 2.2 | 3.0 | 3.1 | 3.2 | |||||||||||
Portugal | 2.1 | 2 | 1.7 | 1.6 | 1.5 | 0.9 | 1.0 | 0.9 | 0.7 |
- 72 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION
Key performance indicators | 2004 |
2005 |
2006 |
Net sales from operations (a) | (million euro) |
5,696 |
5,733 |
6,979 |
||||||
Operating profit | 203 |
307 |
505 |
|||||||
Adjusted operating profit | 215 |
314 |
508 |
|||||||
Adjusted net profit | 252 |
328 |
400 |
|||||||
Capital expenditure | 186 |
349 |
591 |
|||||||
ROACE adjusted | (%) | 10.5 |
12.0 |
12.8 |
||||||
Orders acquired: | (million euro) | 5,784 |
8,395 |
11,172 |
||||||
- Offshore construction | 2,867 | 3,096 | 3,681 | |||||||
- Onshore construction | 2,535 | 4,720 | 4,923 | |||||||
- Offshore drilling | 107 | 367 | 2,230 | |||||||
- Onshore drilling | 275 | 21 | 338 | |||||||
Order backlog: | 8,521 |
10,122 |
13,191 |
|||||||
- Offshore construction | 3,420 | 3,721 | 4,283 | |||||||
- Onshore construction | 4,488 | 5,721 | 6,285 | |||||||
- Offshore drilling | 317 | 382 | 2,247 | |||||||
- Onshore drilling | 296 | 298 | 376 | |||||||
Employees at year end | (unit) |
25,819 |
28,684 |
30,902 |
(a) | Before elimination of intersegment sales. | ||
- 73 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION
STRATEGIES
Eni operates in engineering, oilfield services and construction
both offshore and onshore through Saipem, a company listed on the
Italian Stock Exchange (Enis interest 43%). Saipem boasts a
strong competitive position in the relevant markets thanks to
technological and operational skills, engineering and project
management capabilities and ability to operate in complex
environments, owing also to the integration with Snamprogetti.
Leveraging on these strengths and rising demand for drilling
equipment and oilfield services, Saipem intends to carry out the
following fundamental strategies:
Consolidate its competitive positioning in the field of large offshore and onshore projects for the development of hydrocarbon fields;
Develop its presence in the strategic field of gas monetization and heavy crude upgrading, including expansion in floating LNG treatment systems for liquefaction and regasification of LNG;
Intensify efficiency improvement actions in all its activities, in particular by reducing supply and execution costs while maintaining a high utilization rate of equipment and improving its flexible structure in order to reduce the impact of possible negative cycles; and
Support Enis investment plans.
In order to carry out these strategies, Saipem expects to invest approximately euro 3.5 billion to further expand the geographical reach and operational features of its world-class fleet over the next four years.
2006
Highlights Adjusted net profit was euro 400 million, up euro 72 million from a year ago or 22%, reflecting a better operating performance against the backdrop of favorable trends in the demand for oilfield services. Return on average capital employed calculated on an adjusted basis was 12.8% in 2006, up 12% from 2005. Orders acquired amounted to euro 11,172 million, up euro 2,777 million from 2005 (+33.1%), in particular in onshore activities. |
Order backlog was euro
13,191 million at December 31, 2006 (euro 10,122 million
at December 31, 2005). In February 2007, a contract for the construction of a new pipelayer has been signed. The unit, with a carrying capacity of 25 ktonnes and a lifting capacity of 600 tonnes by means of crane, will be manufactured in China. |
- 74 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION - BUSINESS AREAS
Dimensions: Length: 198 m Breadth: 87 m Depth to main deck: 45 m Transit draft: 10.5 m Operational draft: 27.5 m Dynamic positioning: DP (AAA) Lloyds Register; IPD 3 R.I.Na.; Class 3 Norwegian Maritime Directorate notations. Power plant: total power plant 70,000 kW, 10,000 Volt; 12 diesel generators on heavy fuels divided in 4 fire segregated engine rooms; classified UMS. Ballast system: computer controlled system with simultaneous capabilities comprising 4 x 6,000 t/h ballast pumps, fully redundant. |
Lifting facilities main crane: 2 twin S 7000 model fully revolving bow mounted Amhoist cranes; main blocks tandem lift: 14,000 t; main block single lift: 7,000 t revolving at 40 m rad./41 m; tieback 6,000 t revolving at 45 m rad./50 m. Lowering capability to 450 m below sea level. Whip hook: 120 t revolving at 150 m rad. J-Lay system: pipe diameter range from 4 to 32; main laying tension system 525 t with tensioners, up to 2,000 t with friction clamps; laying tower angle 90º-110º; number of welding stations: 1; pipe storage capacity up to 6,000 t. Maximum laying depth: 3,000 m. | Dimensions: Length overall: 152 m Breadth: 65 m Depth to main deck: 29.8 m Operational draft: 7.8-15.5 m Deck load capacity: up to 3,600 t Propulsion/positioning system: number of thrusters: 4 azimuthal variable pitch. Thruster capacity: 2,060 kW/37 t thrust. Pipe tensioning system: type of tensioners: Remacut DC electric; tensioner capacity: 3 x 110 t each; pipe diameter capacity: up 60. Pipe abandonment/retrieval system: type of winch: Tesmec DC electric; winch capacity: 300 t constant tension. Cranes/pipe handling system: number of cranes: 2 fully revolving; crane type: deck mounted; crane capacity: 60 t with 50 m boom. Maximum laying depth: 1,150 m. |
- 75 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION - BUSINESS AREAS
Business
areas Offshore
construction |
In 2006, revenues were euro
3,033 million accounting for 43% of total revenues. This
business delivered a gross margin of euro 366 million,
corresponding to 55% of total gross margin, higher than
the euro 296 million result reported in 2005. This
increase reflected higher activity in the Caspian region
and Nigeria. Among the major orders acquired in 2006 were:
|
Dimensions: Length overall: 148.5 m Breadth overall: 54.9 m Depth to main deck: 2.8 m Maximum deck load: 5,700 t Pipelay equipment: 3 x 75 t tensioners, 11 work stations (welding, x-ray and field joint coating). Double jointing system with 8 work stations. Above water tie-in capability (optional). Dual lay welding line and ramp (optional). Abandonment and recovery winch: 275 t. Lifting facilities: fitted with 4 revolving pedestal cranes (1 x 318 t and 3 x 37 t) mounted at each corner of the main deck for pipe handling and general lifting. Pipe handling davits may also be mounted on the main deck to facilitate above water tie-ins. S-lay technique. Pipe diameter: max 60. Maximum laying depth: 600 m. |
Dimensions: Length overall: 156 m Breadth: 30 m Operational draft: 12.4 m Displacement: 26,608 t at operating draft Payload: 4,300 t at 7.40 draft Dynamic Positioning: Dynpos Autro, Dynpos Autr, 2 DGPS, 2 Lras HIPAP - 2,500 m interfaces available for Taut Wire, Artemis, Fan Beam. Lifting capabilities: main crane AMClyde KPT660: main hook SWL: 600 t at 30 m, 300 t at 55 m; auxiliary cranes: 2 Liebherr CBO3100-50 Litronic SWL 50 t at 20 m, SWL 30 t at 38 m; 2 Liebherr RL-S 20/20 Litronic; starboard side fixed boom SWL 20 t at 20 m, portside telescopic boom SWL 15 t at 16 m. Pipelay equipment: 5 work stations + one in option; rigid pipe: 4 pipes string J-lay tower system, SWL 320 t, 3,000 m w.d., max. o.d. 22; flexible pipe: laying through Gutter and 3 x retractable four tracks tensioners total SWL 270 t, max. i.d. 17. Assembly station has openings to allow the passage of 4 x 3 x 6 m special items. |
- 76 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION - BUSINESS AREAS
Offshore
construction Saipem operates in the construction of plants for hydrocarbon production (separation, stabilization, collection of hydrocarbons, pumping stations, water injection) and treatment (removal and recovery of sulphur dioxide and carbon dioxide, fractioning of gaseous liquids, recovery of condensates) and in the installation of large onshore transport systems (pipelines, compression stations, terminals). Saipem intends to capture opportunities arising from expected increasing demand from oil majors, by leveraging on its solid competitive position and integration with Snamprogetti engineering capabilities. In 2006, revenues were euro 3,333 million accounting for 48% of total revenues. Gross margin came in at euro 147 million as compared to euro 73 million in 2005. This increase reflected higher activity levels related essentially to the start-up of certain large projects acquired in 2005. |
Among the major orders
acquired in 2006 were:
|
Dimensions: Hull length: 60.8 m Beam: 56.5 m Depth: 6.7 m Length of legs (including footing): 126.1 m Operating performance: Drilling depth: 6,500 m Water depth max: 90 m Variable load: 1,500 t |
Dimensions: Length overall: 228 m Breadth, moulded: 42 m Depth, moulded: 19 m Operating draft: 12 m Displacement: 96,455 t Variable load: over 20,000 t Oil storage capacity: 140,000 bbl Operating performance: Drilling depth: 9,200 m Water depth max: 3,000 m |
- 77 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION - BUSINESS AREAS
Offshore
drilling Saipem provides offshore drilling services to oil companies mainly in West Africa, the North Sea and the Mediterranean Sea. It boasts significant market positions in the most complex segments of deep and ultra-deep offshore leveraging on the outstanding technical features of its drilling platforms and vessels, capable of drilling holes at a maximum depth of 9,200 meters. Demand for drilling services is expected to increase in future years reflecting exploratory plans of oil majors, leading to a substantial rise in tariffs due to equipment shortage. In view of this, Saipem is planning to built a new drilling rig capable of reaching a 10,000 meter drilling depth. In 2006, revenues were euro 365 million accounting for 5% of total revenues. Gross margin amounted to euro 119 million as compared to euro 65 million in 2005. |
This increase was supported
by higher tariffs for the Scarabeo 3 and Scarabeo 5
semi-submersible platforms and higher activity levels of
the Perro Negro 5 jack-up and Scarabeo 4 semi-submersible
platform. The most significant contracts awarded during the period include:
|
Dimensions: Pontoon length: 111 m Pontoon breadth: 14.3 m Pontoon height: 9.5 m Main hull length: 80.8 m Main hull breadth: 68.8 m Main hull depth: 7.3 m Operating performance: Dynamic assisted mooring up to 900 m w.d. Dynamic positioned mode up to 2,000 m w.d. Maximum drilling depth: 9,000 m Water depth max: 2,000 m 4,300 t variable deck load in all conditions, under the most stringent codes. |
Dimensions: Displacement: 38,100 t Main deck width: 61.3 m Main deck length 77.5 m Main deck depth: 4.5 m Variable deck load: 4,000 t Operating performance: Drilling depth W/5 DP: 25,000 ft Drilling depth: 8,000 m Water depth max: 1,500 m Positioning system: automatic thruster assisted 8 leg mooring system. |
- 78 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION - BUSINESS AREAS
Onshore
drilling Saipem operates in this area as main contractor for the major international oil companies executing its activity mainly in Saudi Arabia, North Africa and Peru, where it can leverage on its knowledge of markets, long-term relations with customers and integration with other business areas. |
In 2006, revenues were euro
248 million accounting for 4% of total revenues. Gross
margin amounted to euro 38 million as compared to euro 26
million in 2005, reflecting a higher activity level. The contracts awarded during the period amounted to euro 338 million. |
- 79 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION
Main operating data |
|
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Offshore pipelines laid | (km) | 1,610 | 2,009 | 979 | 276 | 781 | 1,798 | 1,409 | 1,634 | 883 | 1,514 | |||||||||||
Onshore pipelines laid | (km) | 1,221 | 873 | 1,303 | 483 | 552 | 687 | 612 | 465 | 1,005 | 871 | |||||||||||
Offshore structures installed | (tonne) | 108,745 | 65,331 | 111,164 | 57,087 | 73,028 | 55,960 | 118,211 | 172,664 | 134,602 | 120,453 | |||||||||||
Onshore structures installed | (tonne) | 36,024 | 30,514 | 30,767 | 13,000 | 18,120 | 30,060 | 29,930 | 15,888 | 7,112 | 5,242 | |||||||||||
Offshore drilling | (km) | 99 | 94 | 88 | 96 | 125 | 129 | 130 | 114 | 126 | ||||||||||||
Onshore drilling | (km) | 178 | 167 | 63 | 147 | 190 | 348 | 386 | 455 | 548 | 599 | |||||||||||
Offshore wells drilled | (unit) | 25 | 52 | 53 | 50 | 36 | 50 | 59 | 59 | 67 | 75 | |||||||||||
Onshore wells drilled | (unit) | 43 | 78 | 30 | 44 | 55 | 100 | 119 | 150 | 213 | 236 |
Construction vessels |
Name | Type | Laying technique |
Transport/lifting capability |
Maximum laying depth |
Pipelaying maximum |
|||||
Castoro 2 | Derrick/lay barge | 1,000 |
60 |
|||||||
Castoro 6 | Semi-submersible large diameter pipelay vessel | S |
300 |
1,150 |
60 |
|||||
Castoro 8 | Crane and pipelay vessel | S |
2,177 |
600 |
60 |
|||||
Castoro 9 | Launching/cargo barge | 5,000 |
||||||||
Castoro 10 | Trench/pipelay barge | 300 |
40 |
|||||||
Castoro XI | Launching/cargo barge | 15,000 |
||||||||
Crawler | Derrick/lay barge | 540 |
48 |
|||||||
Saipem 3000 | Multipurpose monohull crane, DP (J, S, reel-lay) and lifting vessel | Reel, J, S |
2,200 |
3,000 |
6 |
|||||
S. 42 | Launching/cargo barge | 8,000 |
||||||||
S. 44 | Launching/cargo barge | 30,000 |
||||||||
S. 45 | Launching/cargo barge | 20,000 |
||||||||
Saipem 7000 | Semi-submersible crane and pipelaying (J-lay) DP vessel | J |
14,000 |
3,000 |
32 |
|||||
Semac 1 | Semi-submersible pipelay barge | S |
318 |
600 |
58 |
|||||
BAR Protector | DP dive support vessel | |||||||||
Saibos FDS | Multipurpose monohull dynamically positioned crane and pipelay (J-lay) vessel for the development of hydrocarbon fields in deep water | J |
600 |
3,000 |
22 |
|||||
Saibos 230 | Mobile crane barge for small-diameter pipelaying | |||||||||
Saibos 103 | Launching/cargo barge | |||||||||
BOS 600 | Launching/cargo barge | 30,000 |
||||||||
BOS 355 | Crane and pipelay vessel | 540 |
48 |
|||||||
C12 | Pipelay vessel | 1.4 |
40 |
|||||||
Trenching barge | Trench/cargo barge | 1.4 |
40 |
|||||||
ERSAI 1 | Crane vessel | 1,600 |
- 80 -
ENI FACT BOOK / ENGINEERING & CONSTRUCTION
Drilling vessels |
Name | Type | Drilling plant | Maximum depth (m) |
Drilling maximum (m) |
Other | Crew number maximum (unit) | ||||||
Perro Negro 2 | Self elevating, triangular mobile drilling unit (Jack up) | Oilwell E 2000 | 90 | 6,500 | Heliport provided | 112 | ||||||
Perro Negro 3 | Self elevating cantilever drilling platform (Jack up) | Ideco E 2100 | 90 | 6,000 | Heliport provided | 87 | ||||||
Perro Negro 4 | Self elevating drilling platform (Jack up) | National 110 UE | 45 | 5,000 | Heliport provided | 60 | ||||||
Perro Negro 5 | Self elevating drilling platform (Jack up) | National 1320 UE | 90 | 6,500 | Heliport provided | 72 | ||||||
Scarabeo 3 | Semi-submersible drilling platform helped propulsion system | National 1625 DE | 550 | 7,600 | Heliport provided | 90 | ||||||
Scarabeo 4 | Semi-submersible drilling platform helped propulsion system | National 1625 DE | 550 | 7,600 | Heliport provided | 90 | ||||||
Scarabeo 5 | Semi-submersible drilling platform helped propulsion system | Emsco C 3 | 1,900 | 8,000 | Heliport provided | 100 | ||||||
Scarabeo 6 | Semi-submersible drilling platform helped propulsion system | Oilwell E 3000 | 500 | 7,600 | Heliport provided | 91 | ||||||
Scarabeo 7 | Semi-submersible drilling platform helped propulsion system | Wirth SH 3000 EG | 1,500 | 8,000 | Heliport provided | 107 | ||||||
Saipem 10000 | Ultra deep water drillship, self propelled, dynamic positioning | Wirth GH 4500 EG | 3,000 | 9,200 | Oil storage capacity: 140,000 bbl; heliport provided | 160 |
- 81 -
ENI FACT BOOK / TECHNOLOGICAL INNOVATION
Technological innovation
Enis commitment to
technological research and innovation underscores a
fundamental belief that technology is key to increase our
competitive advantage over the long term and promoting
sustainable growth. Future global challenges require
ingenuity and commitment: from the environmental and
climate issues to the increasingly difficult access to
hydrocarbon reserves large, but mainly controlled by
producing countries; from the identification of relevant
discontinuities in the production of energy from
renewable sources to the optimization of production
processes up to solution of problems existing in
countries where Eni has been present for a long time or
where it recently entered. Eni is conducting research aimed primarily at reducing the costs of finding and recovering hydrocarbons, upgrading heavy oils, monetizing stranded gas and protecting the environment. Over the next four years Eni intends to invest 1.5 billion euros to support its research and development (R&D) strategy. More specifically, Enis main R&D fields regard:
|
Referring to environmental
protection, Eni intends to develop the Along with
Petroleum program aimed at identifying and
developing research projects on the most advanced aspects
of large scale use of renewable energy sources and energy
efficiency. In particular, Eni expects to devote a great
deal of focus on the fields of the mitigation of the
greenhouse effect, through the capture and geological
sequestration of carbon dioxide, the bio-fuels, the
photovoltaic, the solar energy and the hydrogen
production by renewable sources. In 2006 Eni invested euro 222 million (204 in 2005), of these 39% were directed to the Exploration & Production segment, 32% to the Refining & Marketing segment, 22% to the Petrochemical segment and 7% to the Engineering & Construction segment. At December 31, 2006, a total of 1,160 persons were employed in research and development activities. In 2006 a total of 39 applications for patents were filed. A description of the main technologies under development or currently applied is provided below. Main technological innovation projects Advanced Drilling Systems and Well Testing Eni developed significant industrial applications of innovative technologies enabling to drill highly complex wells with greater operating efficiency. The Geosteering project developed by Eni in joint venture with Shell aims at the development of technologies capable of providing geological information on not yet drilled layers, (around the scalpel up to the surface) while drilling. |
- 82 -
ENI FACT BOOK / TECHNOLOGICAL INNOVATION
In the first six months of
2006, various down hole prototypes have been made and in
the second half of the year the technology was tested in
a well. Testing is expected to continue until the first
half of 2007. Referring to drilling activities, some new technologies have been tested:
|
|
- 83 -
ENI FACT BOOK / TECHNOLOGICAL INNOVATION
In 2006 in cooperation with
IFP/Axens, Eni completed the technology handbook for this
proprietary technology for the conversion of gas to
liquids via Fischer-Tropsch synthesis and the basic
engineering of a 37 kbbl/d industrial unit. In 2007 some issues will be addressed regarding the risks of the transition to the subsequent industrial scale:
|
Conversion of
heavy crude and fractions into light products Testing continued at the Taranto demonstration plant of Enis proprietary technology EST, a process of catalytic hydroconversion in the slurry phase of non conventional crude, extra heavy crude and refining residues that allows to convert asphaltenes (the hard fraction of heavy crude) totally into naphtha, kerosene, diesel fuel. In particular, a four-month test period has been carried out using a residue from a Canadian tar sand, confirming expected conversion yields and performance stability. In 2007 Eni plans to complete the collection of information for designing and building its first industrial plant. |
- 84 -
ENI FACT BOOK / TECHNOLOGICAL INNOVATION
Taranto demonstration plant of Enis proprietary technology EST SCT-CPO Project (Short Contact Time -
Catalytic Partial Oxidation)
The TAP technology is expected to allow a decrease in the consumption of natural gas used in compressor stations. |
In 2006 testing continued on
two infrastructures:
After completing the pressure test on these two pilot
portions, a test spreading a cracking on one of them has
been scheduled.
|
- 85 -
ENI FACT BOOK / TECHNOLOGICAL INNOVATION
Reformulation
of fuels and lubricants Eni continued its program to improve its Blue fuel line of products (BluDiesel and BluSuper). It also started a new phase of its clean diesel fuel program aiming at identifying the optimal formula for a diesel fuel with high performance and low particulate emissions using as benchmark GTL Fischer-Tropsch diesel oil (obtained from the conversion of natural gas into liquids - GTL project). Research activities will be conducted on the design of refining facilities for producing this product. A process of hydro-dearomatization of certain refining feedstock with a high content of aromatics (e.g. the light cycle oil produced by fluid catalytic crackers) is being developed. A double-function, proprietary catalyst has been developed able to reduce hydrogen consumption and certain by-products. The project is progressing on a pilot scale. Monitoring on the mock-up distribution of the ADBlue in the Agip corner sale, at Assago Ovest (MI) continued. The ADBlue (Water solution with urea at 32.5%) can be used to remove nitrogen oxide (NOx) |
from exahaust gas of Diesel
commercial motors with catalytic disposal for the
selective reduction of NOx (Selective
Catalytic Reactor). Bio fuel and heavy crude conversion: deal with Petrobras As part of the development of technologies aiming at the enhancement of fuel quality and at the conversion of heavy crude and fractions into light products, in March 2007 Eni signed an agreement with Petrobras, the worlds leading company in the large-scale production of bio-ethanol. The two partners will combine their proprietary technologies to jointly develop projects for the production of bio-fuels in other countries. In addition, they will study joint projects to assess the application of the Eni Slurry Technology (EST) in Brazil in the framework of a broader partnership involving both upstream and downstream joint initiatives. |
- 86 -
ENI FACT BOOK / FINANCIAL DATA
Result of operations | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Net sales from operations | 31,359 | 28,341 | 31,008 | 47,938 | 49,272 | 47,922 | 51,487 | 57,545 | 73,728 | 86,105 | ||||||||||||||||||||
Other income and revenues | 616 | 727 | 952 | 905 | 921 | 1,080 | 913 | 1,377 | 798 | 783 | ||||||||||||||||||||
Total revenues | 31,975 | 29,068 | 31,960 | 48,843 | 50,193 | 49,002 | 52,400 | 58,922 | 74,526 | 86,888 | ||||||||||||||||||||
Purchases, services and other | (19,811 | ) | (18,033 | ) | (20,000 | ) | (31,442 | ) | (32,110 | ) | (31,893 | ) | (34,566 | ) | (38,347 | ) | (48,567 | ) | (57,490 | ) | ||||||||||
Payroll and related costs | (3,051 | ) | (2,917 | ) | (2,782 | ) | (2,786 | ) | (2,927 | ) | (3,103 | ) | (3,166 | ) | (3,245 | ) | (3,351 | ) | (3,650 | ) | ||||||||||
Total operating costs | (22,862 | ) | (20,950 | ) | (22,782 | ) | (34,228 | ) | (35,037 | ) | (34,996 | ) | (37,732 | ) | (41,592 | ) | (51,918 | ) | (61,140 | ) | ||||||||||
Depreciation, amortization and writedowns | (3,768 | ) | (4,308 | ) | (3,698 | ) | (3,843 | ) | (4,843 | ) | (5,504 | ) | (5,151 | ) | (4,931 | ) | (5,781 | ) | (6,421 | ) | ||||||||||
Operating profit | 5,345 | 3,810 | 5,480 | 10,772 | 10,313 | 8,502 | 9,517 | 12,399 | 16,827 | 19,327 | ||||||||||||||||||||
Net financial (expense) income | (229 | ) | (41 | ) | 10 | 64 | (295 | ) | (167 | ) | (154 | ) | (156 | ) | (366 | ) | 161 | |||||||||||||
Net (expense) income from investments | 59 | 396 | 89 | 33 | (7 | ) | 43 | (17 | ) | 820 | 914 | 903 | ||||||||||||||||||
Net extraordinary (expense) income | (198 | ) | (245 | ) | (528 | ) | (512 | ) | 1,737 | (29 | ) | 49 | ||||||||||||||||||
Profit before income taxes | 4,977 | 3,920 | 5,051 | 10,357 | 11,748 | 8,349 | 9,395 | 13,063 | 17,375 | 20,391 | ||||||||||||||||||||
Income taxes | (2,254 | ) | (1,450 | ) | (2,054 | ) | (4,335 | ) | (3,529 | ) | (3,127 | ) | (3,241 | ) | (5,522 | ) | (8,128 | ) | (10,568 | ) | ||||||||||
Tax rate (%) | 45.3 | 37.0 | 40.7 | 42.1 | 30.0 | 37.5 | 34.5 | 42.3 | 46.8 | 51,8 | ||||||||||||||||||||
Net profit pertaining to: | 2,723 | 2,470 | 2,997 | 6,022 | 8,219 | 5,222 | 6,154 | 7,541 | 9,247 | 9,823 | ||||||||||||||||||||
- Eni | 2,643 | 2,328 | 2,857 | 5,771 | 7,751 | 4,593 | 5,585 | 7,059 | 8,788 | 9,217 | ||||||||||||||||||||
- Minority interest | 80 | 142 | 140 | 251 | 468 | 629 | 569 | 482 | 459 | 606 | ||||||||||||||||||||
Enis profit | 2,643 | 2,328 | 2,857 | 5,771 | 7,751 | 4,593 | 5,585 | 7,059 | 8,788 | 9,217 | ||||||||||||||||||||
Exclusion of inventory holding (gains) loss | (281 | ) | (759 | ) | 33 | |||||||||||||||||||||||||
Exclusion of special items: | (1,994 | ) | 330 | (489 | ) | (133 | ) | 1,222 | 1,162 | |||||||||||||||||||||
- non-recurring (income) charges | 5 | 290 | 239 | |||||||||||||||||||||||||||
- other special charges | (138 | ) | 932 | 923 | ||||||||||||||||||||||||||
Enis adjusted net profit | 5,757 | 4,923 | 5,096 | 6,645 | 9,251 | 10,412 |
- 87 -
ENI FACT BOOK / FINANCIAL DATA
Balance sheet (at December 31) | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Fixed assets | ||||||||||||||||||||||||||||||
Property, plant and equipment, net | 20,641 | 20,871 | 23,074 | 26,797 | 33,851 | 33,693 | 36,360 | 40,586 | 45,013 | 44,312 | ||||||||||||||||||||
Other tangible assets | 629 | |||||||||||||||||||||||||||||
Compulsory stock | 1,386 | 2,194 | 1,827 | |||||||||||||||||||||||||||
Intangible assets, net | 1,689 | 1,776 | 2,175 | 2,391 | 2,850 | 3,175 | 3,610 | 3,313 | 3,194 | 3,753 | ||||||||||||||||||||
Investments | 1,482 | 1,382 | 1,446 | 4,223 | 2,740 | 2,797 | 3,160 | 3,685 | 4,311 | 4,246 | ||||||||||||||||||||
Accounts receivable financing and securities related to operations | 1,352 | 1,453 | 1,670 | 1,659 | 1,630 | 1,408 | 983 | 695 | 775 | 557 | ||||||||||||||||||||
Net accounts payable in relation to investments | (738 | ) | (746 | ) | (717 | ) | (825 | ) | (657 | ) | (870 | ) | (1,018 | ) | (888 | ) | (1,196 | ) | (1,090 | ) | ||||||||||
24,426 | 24,736 | 27,648 | 34,245 | 40,414 | 40,203 | 43,095 | 48,777 | 54,291 | 54,234 | |||||||||||||||||||||
Net working capital | ||||||||||||||||||||||||||||||
Inventories | 2,629 | 2,442 | 2,626 | 3,120 | 3,014 | 3,200 | 3,293 | 2,847 | 3,563 | 4,752 | ||||||||||||||||||||
Trade accounts receivable | 6,448 | 6,076 | 7,486 | 9,186 | 9,346 | 9,090 | 9,772 | 10,525 | 14,101 | 15,230 | ||||||||||||||||||||
Trade accounts payable | (3,508 | ) | (3,517 | ) | (4,200 | ) | (4,903 | ) | (5,081 | ) | (5,579 | ) | (5,950 | ) | (5,837 | ) | (8,170 | ) | (10,528 | ) | ||||||||||
Tax liabilities | (3,704 | ) | (3,083 | ) | (4,219 | ) | (5,629 | ) | (4,173 | ) | (2,978 | ) | (2,532 | ) | (3,056 | ) | (4,857 | ) | (5,396 | ) | ||||||||||
Reserve for contingencies | (3,106 | ) | (3,246 | ) | (3,735 | ) | (5,702 | ) | (5,377 | ) | (5,522 | ) | (5,708 | ) | (5,736 | ) | (7,679 | ) | (8,614 | ) | ||||||||||
Other operating assets (liabilities) | 1,614 | 1,408 | 821 | (602 | ) | 1,636 | 1,585 | 446 | (555 | ) | (526 | ) | (641 | ) | ||||||||||||||||
373 | 80 | (1,221 | ) | (1,973 | ) | (635 | ) | (204 | ) | (679 | ) | (1,812 | ) | (3,568 | ) | (5,197 | ) | |||||||||||||
Employee termination indemnitiesand other benefits | (505 | ) | (356 | ) | (411 | ) | (457 | ) | (486 | ) | (507 | ) | (555 | ) | (982 | ) | (1,031 | ) | (1,071 | ) | ||||||||||
Capital employed, net | 24,294 | 24,460 | 26,016 | 31,815 | 39,293 | 39,492 | 41,861 | 45,983 | 49,692 | 47,966 | ||||||||||||||||||||
Shareholders equity (1) | 15,324 | 16,156 | 18,398 | 22,401 | 27,483 | 26,257 | 26,696 | 32,374 | 36,868 | 39,029 | ||||||||||||||||||||
Minority interests | 920 | 1,234 | 1,351 | 1,672 | 1,706 | 2,094 | 1,622 | 3,166 | 2,349 | 2,170 | ||||||||||||||||||||
16,244 | 17,390 | 19,749 | 24,073 | 29,189 | 28,351 | 28,318 | 35,540 | 39,217 | 41,199 | |||||||||||||||||||||
Net borrowings | 8,050 | 7,070 | 6,267 | 7,742 | 10,104 | 11,141 | 13,543 | 10,443 | 10,475 | 6,767 | ||||||||||||||||||||
Total liabilities and shareholders equity | 24,294 | 24,460 | 26,016 | 31,815 | 39,293 | 39,492 | 41,861 | 45,983 | 49,692 | 47,966 |
(1) | Net of own shares in portfolio. |
- 88 -
ENI FACT BOOK / FINANCIAL DATA
Cash flow statement and
change in net borrowings |
Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Net profit | 2,723 | 2,470 | 2,997 | 6,022 | 8,220 | 5,222 | 6,154 | 7,541 | 9,247 | 9,823 | |||||||||||||||||||||
as adjusted: | |||||||||||||||||||||||||||||||
- | amortization and depreciation and other non-monetary items | 4,056 | 4,468 | 3,869 | 4,307 | 4,841 | 5,682 | 5,493 | 5,092 | 6,518 | 5,753 | ||||||||||||||||||||
- | net gains on disposal of assets | (185 | ) | (443 | ) | (60 | ) | (82 | ) | (170 | ) | (152 | ) | (35 | ) | (793 | ) | (220 | ) | (59 | ) | ||||||||||
- | dividends, interest, extraordinary income (expense) and income taxes | 2,706 | 1,743 | 2,618 | 4,990 | 2,164 | 3,305 | 3,268 | 5,740 | 8,471 | 10,435 | ||||||||||||||||||||
Cash generated from operating profit before changes in working capital | 9,300 | 8,238 | 9,424 | 15,237 | 15,055 | 14,057 | 14,880 | 17,580 | 24,016 | 25,952 | |||||||||||||||||||||
Changes in working capital related to operations | (268 | ) | 785 | (660 | ) | (1,592 | ) | (206 | ) | (510 | ) | (465 | ) | (909 | ) | (2,422 | ) | (1,024 | ) | ||||||||||||
Dividends received, taxes paid,interest and extraordinary income/expense (paid) received during the year | (2,517 | ) | (2,159 | ) | (516 | ) | (3,062 | ) | (6,765 | ) | (2,969 | ) | (3,588 | ) | (4,171 | ) | (6,658 | ) | (7,927 | ) | |||||||||||
Net cash provided by operating activities | 6,515 | 6,864 | 8,248 | 10,583 | 8,084 | 10,578 | 10,827 | 12,500 | 14,936 | 17,001 | |||||||||||||||||||||
Capital expenditure | (4,169 | ) | (5,152 | ) | (5,483 | ) | (5,431 | ) | (6,606 | ) | (8,048 | ) | (8,802 | ) | (7,499 | ) | (7,414 | ) | (7,833 | ) | |||||||||||
Acquisitions/investment in associates | (153 | ) | (407 | ) | (114 | ) | (3,483 | ) | (3,082 | ) | (1,315 | ) | (985 | ) | (316 | ) | (127 | ) | (95 | ) | |||||||||||
Disposals | 363 | 371 | 295 | 277 | 2,114 | 935 | 650 | 1,547 | 542 | 328 | |||||||||||||||||||||
Other cash flow related to capital expenditure, investments and disposals | (9 | ) | (118 | ) | (446 | ) | (69 | ) | (40 | ) | (319 | ) | 1,110 | 97 | 293 | 361 | |||||||||||||||
Free cash flow | 2,547 | 1,558 | 2,500 | 1,877 | 470 | 1,831 | 2,800 | 6,329 | 8,230 | 9,762 | |||||||||||||||||||||
Borrowings (repayment) of debt related to financing activities | 66 | 2,019 | (433 | ) | 111 | 994 | (1,171 | ) | 1,400 | 211 | (109 | ) | 216 | ||||||||||||||||||
Changes in short and long-term finance debt | (1,121 | ) | (3,715 | ) | (294 | ) | 121 | (490 | ) | 3,736 | 1,629 | (3,743 | ) | (540 | ) | (682 | ) | ||||||||||||||
Dividends paid and changes in minority interests and reserves | (999 | ) | (645 | ) | (1,311 | ) | (2,118 | ) | (950 | ) | (3,846 | ) | (5,933 | ) | (3,175 | ) | (7,284 | ) | (6,443 | ) | |||||||||||
Change in consolidation area and exchange differences | 67 | (24 | ) | (29 | ) | 41 | 38 | (64 | ) | (107 | ) | (55 | ) | 33 | (201 | ) | |||||||||||||||
NET CASH FLOW FOR THE PERIOD | 560 | (807 | ) | 433 | 32 | 62 | 486 | (211 | (433 | ) | 330 | 2,652 |
Free cash flow | 2,547 | 1,558 | 2,500 | 1,877 | 470 | 1,831 | 2,800 | 6,329 | 8,230 | 9,762 | ||||||||||||||||||||
Net borrowings of acquired companies | 1 | (6 | ) | (901 | ) | (1,582 | ) | (51 | ) | (692 | ) | (19 | ) | |||||||||||||||||
Net borrowings of divested companies | 174 | 30 | 3 | 20 | 185 | 39 | 1 | 190 | 21 | 1 | ||||||||||||||||||||
Exchange differences on net borrowings and other changes | (213 | ) | 43 | (389 | ) | (353 | ) | (312 | ) | 990 | 1,422 | (64 | (980 | ) | 388 | |||||||||||||||
Dividends paid and changes in minority interests and reserves | (999 | ) | (645 | ) | (1,311 | ) | (2,118 | ) | (950 | ) | (3,846 | ) | (5,933 | ) | (3,175 | ) | (7,284 | ) | (6,443 | ) | ||||||||||
CHANGE IN NET BORROWINGS | 1,510 | 980 | 803 | (1,475 | ) | (2,189 | ) | (1,037 | ) | (2,402 | ) | 3,280 | (32 | ) | 3,708 |
- 89 -
ENI FACT BOOK / FINANCIAL DATA
Net sales from operations | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Exploration & Production | 6,897 | 5,206 | 6,840 | 12,308 | 13,960 | 12,877 | 12,746 | 15,346 | 22,531 | 27,173 | ||||||||||||||||||||
Gas & Power | 9,985 | 9,625 | 9,900 | 14,427 | 16,098 | 15,297 | 16,067 | 17,302 | 22,969 | 28,368 | ||||||||||||||||||||
Refining & Marketing | 11,834 | 10,374 | 14,415 | 25,462 | 22,083 | 21,546 | 22,148 | 26,089 | 33,732 | 38,210 | ||||||||||||||||||||
Petrochemicals | 4,985 | 4,048 | 4,096 | 6,018 | 5,108 | 4,516 | 4,487 | 5,331 | 6,255 | 6,823 | ||||||||||||||||||||
Engineering & Construction | 2,890 | 3,348 | 2,988 | 2,146 | 3,114 | 4,546 | 6,306 | 5,696 | 5,733 | 6,979 | ||||||||||||||||||||
Other activities | 417 | 552 | 555 | 608 | 695 | 1,449 | 1,178 | 1,279 | 863 | 823 | ||||||||||||||||||||
Corporate and financial companies | 586 | 700 | 851 | 1,239 | 1,174 | |||||||||||||||||||||||||
Activities to be divested | 464 | 253 | 83 | |||||||||||||||||||||||||||
Consolidation adjustment | (6,113 | ) | (5,065 | ) | (7,869 | ) | (13,031 | ) | (11,786 | ) | (12,895 | ) | (12,145 | ) | (14,349 | ) | (19,594 | ) | (23,445 | ) | ||||||||||
31,359 | 28,341 | 31,008 | 47,938 | 49,272 | 47,922 | 51,487 | 57,545 | 73,728 | 86,105 |
Net sales to customers | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Exploration & Production | 3,254 | 2,300 | 1,228 | 2,924 | 5,530 | 4,082 | 4,278 | 5,130 | 7,770 | 8,728 | ||||||||||||||||||||
Gas & Power | 9,563 | 9,272 | 9,532 | 13,714 | 15,430 | 14,674 | 15,617 | 16,809 | 22,397 | 27,617 | ||||||||||||||||||||
Refining & Marketing | 10,861 | 9,626 | 13,542 | 23,913 | 20,881 | 20,509 | 21,527 | 25,336 | 32,640 | 36,910 | ||||||||||||||||||||
Petrochemicals | 4,640 | 3,787 | 3,777 | 5,448 | 4,637 | 3,770 | 4,049 | 4,832 | 5,572 | 6,156 | ||||||||||||||||||||
Engineering & Construction | 2,450 | 2,938 | 2,689 | 1,762 | 2,605 | 4,067 | 5,409 | 4,793 | 4,808 | 6,208 | ||||||||||||||||||||
Other activities | 129 | 166 | 157 | 177 | 89 | 701 | 445 | 525 | 317 | 303 | ||||||||||||||||||||
Corporate and financial companies | 100 | 119 | 162 | 120 | 224 | 183 | ||||||||||||||||||||||||
Activities to be divested | 462 | 252 | 83 | |||||||||||||||||||||||||||
31,359 | 28,341 | 31,008 | 47,938 | 49,272 | 47,922 | 51,487 | 57,545 | 73,728 | 86,105 |
Net sales by geographic area of destination |
Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Italy | 19,914 | 18,059 | 18,813 | 27,184 | 27,591 | 23,797 | 25,491 | 27,100 | 32,846 | 36,343 | ||||||||||||||||||||
Other EU countries | 4,182 | 3,339 | 4,191 | 6,944 | 8,226 | 8,974 | 10,785 | 13,095 | 19,601 | 23,949 | ||||||||||||||||||||
Rest of Europe | 1,785 | 1,737 | 1,551 | 2,711 | 3,136 | 4,188 | 3,303 | 3,769 | 5,123 | 6,975 | ||||||||||||||||||||
Africa | 1,167 | 1,160 | 1,496 | 2,083 | 2,180 | 2,478 | 5,854 | 4,148 | 5,259 | 5,949 | ||||||||||||||||||||
Americas | 2,334 | 2,432 | 3,148 | 6,034 | 6,169 | 5,317 | 2,778 | 5,790 | 6,103 | 6,250 | ||||||||||||||||||||
Asia | 1,958 | 1,596 | 1,795 | 2,959 | 1,949 | 3,154 | 3,245 | 3,088 | 4,399 | 5,595 | ||||||||||||||||||||
Other areas | 19 | 18 | 14 | 23 | 21 | 14 | 31 | 555 | 397 | 1,044 | ||||||||||||||||||||
Total outside Italy | 11,445 | 10,282 | 12,195 | 20,754 | 21,681 | 24,125 | 25,996 | 30,445 | 40,882 | 49,762 | ||||||||||||||||||||
31,359 | 28,341 | 31,008 | 47,938 | 49,272 | 47,922 | 51,487 | 57,545 | 73,728 | 86,105 |
- 90 -
ENI FACT BOOK / FINANCIAL DATA
Purchases, services and other | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Production costs - raw, ancillary and consumable material | 13,415 | 11,038 | 13,189 | 23,691 | 23,993 | 22,658 | 24,087 | 27,010 | 35,318 | 44,661 | ||||||||||||||||||||
Production costs - services | 5,330 | 6,173 | 6,035 | 6,513 | 7,507 | 8,614 | 10,431 | 9,148 | 9,405 | 10,015 | ||||||||||||||||||||
Lease, rental and royalty expenses | 1,155 | 1,048 | 941 | 1,203 | 1,242 | 1,454 | 1,407 | 1,609 | 1,929 | 1,903 | ||||||||||||||||||||
Net provisions to reserves for contingencies | 553 | 1,643 | 767 | |||||||||||||||||||||||||||
Other expenses | 1,239 | 1,232 | 1,022 | 1,581 | 1,302 | 1,575 | 1,423 | 1,066 | 1,100 | 1,089 | ||||||||||||||||||||
less: | ||||||||||||||||||||||||||||||
capitalized direct costs associated with self-constructed assets | (716 | ) | (805 | ) | (563 | ) | (616 | ) | (745 | ) | (842 | ) | (1,277 | ) | (1,039 | ) | (828 | ) | (945 | ) | ||||||||||
services billed to joint venture partners | (612 | ) | (653 | ) | (624 | ) | (867 | ) | (1,189 | ) | (1,566 | ) | (1,505 | ) | ||||||||||||||||
19,811 | 18,033 | 20,000 | 31,442 | 32,110 | 31,893 | 34,566 | 38,347 | 48,567 | 57,490 |
Payroll and related costs | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Wages and salaries | 2,226 | 2,234 | 2,134 | 2,175 | 2,271 | 2,441 | 2,412 | 2,402 | 2,484 | 2,630 | ||||||||||||||||||||
Social security contributions | 725 | 651 | 621 | 627 | 602 | 650 | 693 | 658 | 662 | 691 | ||||||||||||||||||||
Contributions to defined benefit plans | 145 | 137 | 137 | 128 | 126 | 136 | 157 | 118 | 126 | 230 | ||||||||||||||||||||
Other costs | 147 | 85 | 73 | 57 | 83 | 119 | 91 | 218 | 255 | 305 | ||||||||||||||||||||
less: | ||||||||||||||||||||||||||||||
revenues related to personnel costs | (39 | ) | (36 | ) | (33 | ) | (40 | ) | (51 | ) | (53 | ) | (26 | ) | ||||||||||||||||
capitalized direct costs associated with self-constructed assets | (153 | ) | (154 | ) | (150 | ) | (161 | ) | (180 | ) | (190 | ) | (161 | ) | (151 | (176 | ) | (206 | ) | |||||||||||
3,051 | 2,917 | 2,782 | 2,786 | 2,851 | 3,103 | 3,166 | 3,245 | 3,351 | 3,650 |
- 91 -
ENI FACT BOOK / FINANCIAL DATA
Depreciation,
amortization and impairments |
Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Exploration & Production | 1,810 | 1,897 | 1,654 | 2,364 | 3,163 | 3,552 | 3,133 | 3,047 | 3,945 | 4,646 | ||||||||||||||||||||
Gas & Power | 994 | 1,033 | 1,045 | 474 | 500 | 417 | 533 | 637 | 684 | 687 | ||||||||||||||||||||
Refining & Marketing | 420 | 459 | 476 | 502 | 508 | 490 | 493 | 465 | 462 | 434 | ||||||||||||||||||||
Petrochemicals | 259 | 251 | 284 | 273 | 323 | 125 | 125 | 114 | 118 | 124 | ||||||||||||||||||||
Engineering & Construction | 87 | 107 | 109 | 144 | 203 | 267 | 271 | 184 | 176 | 195 | ||||||||||||||||||||
Other activities | 30 | 30 | 24 | 31 | 46 | 48 | 51 | 45 | 16 | 6 | ||||||||||||||||||||
Corporate and financial companies | 63 | 104 | 106 | 112 | 70 | |||||||||||||||||||||||||
Activities to be divested | 10 | 1 | ||||||||||||||||||||||||||||
Unrealized profit in inventory | (4 | ) | (9 | ) | ||||||||||||||||||||||||||
Total depreciation and amortization | 3,610 | 3,778 | 3,592 | 3,788 | 4,743 | 4,962 | 4,710 | 4,598 | 5,509 | 6,153 | ||||||||||||||||||||
Impairments | 158 | 530 | 106 | 55 | 100 | 542 | 441 | 333 | 272 | 268 | ||||||||||||||||||||
3,768 | 4,308 | 3,698 | 3,843 | 4,843 | 5,504 | 5,151 | 4,931 | 5,781 | 6,421 |
Operating profit by division | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Exploration & Production | 2,590 | 594 | 2,834 | 6,603 | 5,984 | 5,175 | 5,746 | 8,185 | 12,592 | 15,580 | ||||||||||||||||||||
Gas & Power | 2,012 | 2,513 | 2,580 | 3,178 | 3,672 | 3,244 | 3,627 | 3,428 | 3,321 | 3,802 | ||||||||||||||||||||
Refining & Marketing | 578 | 730 | 478 | 986 | 985 | 321 | 583 | 1,080 | 1,857 | 319 | ||||||||||||||||||||
Petrochemicals | 187 | (362 | ) | 4 | (415 | ) | (126 | ) | (176 | ) | 320 | 202 | 172 | |||||||||||||||||
Engineering & Construction | 169 | 198 | 149 | 144 | 255 | 298 | 311 | 203 | 307 | 505 | ||||||||||||||||||||
Other activities | (214 | ) | (293 | ) | (395 | ) | (934 | ) | (622 | ) | ||||||||||||||||||||
Corporate and financial companies | (138 | ) | (168 | ) | (199 | ) | (143 | ) | (168 | ) | (196 | ) | (281 | ) | (363 | ) | (377 | ) | (296 | ) | ||||||||||
Activities to be divested | (53 | ) | (57 | ) | ||||||||||||||||||||||||||
Unrealized profit in inventory (1) | (59 | ) | (141 | ) | (133 | ) | ||||||||||||||||||||||||
5,345 | 3,810 | 5,480 | 10,772 | 10,313 | 8,502 | 9,517 | 12,399 | 16,827 | 19,327 |
(1) | Unrealized profit in inventory concerned intersegment sales of goods and services recorded within assets of the purchasing division as of end of the period. |
- 92 -
ENI FACT BOOK / FINANCIAL DATA
RECONCILIATION OF REPORTED OPERATING PROFIT
AND NET PROFIT TO RESULTS ON AN ADJUSTED BASIS
Management evaluates Group
and business performance on the basis of adjusted
operating profit and adjusted net profit, which are
arrived at by excluding inventory holding gains or losses
and special items. Further, finance charges on finance
debt, interest income, charges or income deriving from
the fair value evaluation of derivative financial
instruments held for trading purposes, and exchange rate
differences are excluded when determining adjusted net
profit of each business segment. Taxation effect of such items excluded from adjusted net profit is determined based on the specific rate of taxes applicable to each item, with the exception of finance charges or income, to which the Italian statutory tax rate of 33% is applied. Adjusted operating profit and adjusted net profit are non-GAAP financial measures under either IFRS, or U.S. GAAP. Management includes them to facilitate comparison of base business performance across periods and allow financial analysts to evaluate Enis trading performance on the basis of their forecasting models. In addition, management uses segmental adjusted net profit when calculating return on average capital employed (ROACE) by each business segment. The following is a description of items which are excluded from the calculation of adjusted results. Inventory holding gain or loss is the difference between the cost of sales of the volumes sold in the period based on the cost of supplies of the same period and the cost of sales of the volumes sold in the period calculated using the weighted-average cost method of inventory accounting. Special items include certain relevant income or charges pertaining to either: (i) infrequent or unusual events and transactions, being identified as non- |
recurring items under such
circumstances; or (ii) certain events or transactions
which are not considered to be representative of the
ordinary course of business, as in the case of
environmental provisions, restructuring charges, asset
impairments or write ups and gains or losses on
divestments even though they occurred in past exercises
or are likely to occur in future ones. As provided for in Decision No. 15519 of July 27, 2006 of the Italian market regulator (CONSOB), non recurring material income or charges are to be clearly reported in the managements discussion and financial tables. Finance charges or income related to net borrowings excluded from the adjusted net profit of business segments are comprised of interest charges on finance debt and interest income earned on cash and cash equivalents not related to operations. In addition the effect of the fair value evaluation of derivative financial instruments held for trading purposes and exchange rate differences are excluded from the adjusted net profit of business segments. Therefore, the adjusted net profit of business segments includes finance charges or income deriving from certain segment-operated assets, i.e., interest income on certain receivable financing and securities related to operations and finance charges pertaining to the accretion of certain provisions recorded on a discounted basis (as in the case of asset retirement obligations in the Exploration and Production division). Finance charges or interest income and related taxation effects, excluded from the adjusted net profit of the business segments are allocated on the aggregate Corporate and financial companies. For a reconciliation of adjusted operating profit and adjusted net profit to reported operating profit and net profit see tables below. |
- 93 -
ENI FACT BOOK / FINANCIAL DATA
2001 | Italian GAAP |
(million euro) | E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 5,984 |
3,672 |
985 |
(415 |
) | 255 |
(168 |
) | 10,313 |
|||||||||||||||||||
Exclusion special items: | ||||||||||||||||||||||||||||
- impairments | 88 |
3 |
9 |
100 |
200 |
|||||||||||||||||||||||
- | gain from decrease in inventory |
|
(31 | ) | (31 |
) | ||||||||||||||||||||||
Special items of operating profit | 88 |
3 |
9 |
69 |
169 |
|||||||||||||||||||||||
Adjusted operating profit | 6,072 |
3,675 |
994 |
(346 |
) | 255 |
(168 |
) | 10,482 |
|||||||||||||||||||
Eni's net profit | 7,751 |
|||||||||||||||||||||||||||
Exclusion special items: | (1,994 |
) | ||||||||||||||||||||||||||
Eni's adjusted net profit | 5,757 |
2002 | Italian GAAP |
(million euro) | E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 5,175 |
3,244 |
321 |
(126 |
) | 298 |
(214 |
) | (196 |
) | 8,502 |
|||||||||||||||||
Exclusion special items: | ||||||||||||||||||||||||||||
- impairments | 332 |
95 |
4 |
105 |
6 |
542 |
||||||||||||||||||||||
- | environmental tax Sicilia Region | 86 |
86 |
|||||||||||||||||||||||||
- | gains on disposal of assets | (92 |
) | (92 |
) | |||||||||||||||||||||||
- | inventory holding (gains) losses | (13 |
) | (27 |
) | (40 |
) | |||||||||||||||||||||
- | (costs) gains from preceding years | 13 |
(74 |
) | (61 |
) | ||||||||||||||||||||||
- other | 22 |
22 |
||||||||||||||||||||||||||
Special items of operating profit | 253 |
129 |
(9 |
) | 78 |
6 |
457 |
|||||||||||||||||||||
Adjusted operating profit | 5,428 |
3,373 |
312 |
(48 |
) | 298 |
(208 |
) | (196 |
) | 8,959 |
|||||||||||||||||
Eni's net profit | 4,593 |
|||||||||||||||||||||||||||
Exclusion special items | 330 |
|||||||||||||||||||||||||||
Eni's djusted net profit | 4,923 |
- 94 -
ENI FACT BOOK / FINANCIAL DATA
2003 | Italian GAAP |
(million euro) | E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 5,746 |
3,627 |
583 |
(176 |
) | 311 |
(293 |
) | (281 |
) | 9,517 |
||||||||||||||||
Exclusion special items of operating profit: | |||||||||||||||||||||||||||
- impairments | 227 |
34 |
1 |
122 |
57 |
441 |
|||||||||||||||||||||
Special items of operating profit | 227 |
34 |
1 |
122 |
|
57 |
|
|
441 |
||||||||||||||||||
Adjusted operating profit | 5,973 |
3,661 |
584 |
(54 |
) | 311 |
(236 |
) | (281 |
) |
|
9,958 |
|||||||||||||||
Eni's net profit | 5,585 |
||||||||||||||||||||||||||
Exclusion special items | (489 |
) | |||||||||||||||||||||||||
Adjusted net profit | 5,096 |
2004 | IFRS |
(million euro) | E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 8,185 | 3,428 | 1,080 | 320 | 203 | (395 | ) | (346 | ) | (59 | ) | 12,399 | |||||||||||||||
Exclusion of inventory holdings (gains) losses | (12 | ) | (393 | ) | (43 | ) | (448 | ) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) | 5 | 5 | |||||||||||||||||||||||||
Other special charges: | 17 | 27 | 236 | (14 | ) | 12 | 172 | 176 | 626 |
- | environmental charges | 5 | 142 | 84 | 72 | 303 | ||||||||||||||||||||||
- | assets impairments | 287 | 6 | 21 | 3 | 19 | 336 | |||||||||||||||||||||
- | gains on disposal of assets | (320 | ) | (320 | ) | |||||||||||||||||||||||
- | provisions to the reserve for contingencies | 29 | 18 | 77 | 3 | 1 | 15 | 143 | ||||||||||||||||||||
- | increase insurance charges | 91 | 91 | |||||||||||||||||||||||||
- | provision for redundancy incentives | 2 | 10 | 20 | 6 | 10 | 6 | 11 | 65 | |||||||||||||||||||
- | other | 19 | (12 | ) | (24 | ) | (26 | ) | 1 | 48 | 2 | 8 |
Special items of operating profit | 17 | 32 | 236 | (14 | ) | 12 | 172 | 176 | 631 | ||||||||||||||||||
Adjusted operating profit | 8,202 | 3,448 | 923 | 263 | 215 | (223 | ) | (187 | ) | (59 | ) | 12,582 | |||||||||||||||
Net financial (expense) income (*) | (85 | ) | 31 | 5 | (107 | ) | (156 | ) | |||||||||||||||||||
Net income from investments (*) | 9 | 215 | 96 | 2 | 118 | 4 | (14 | ) | 430 | ||||||||||||||||||
Income taxes (*) | (4,093 | ) | (1,404 | ) | (350 | ) | (23 | ) | (81 | ) | (22 | ) | 222 | 22 | (5,729 | ) | |||||||||||
Tax rate (%) | 50.4 | 38.0 | 34.2 | 44.6 | |||||||||||||||||||||||
Adjusted net profit | 4,033 | 2,290 | 674 | 242 | 252 | (241 | ) | (86 | ) | (37 | ) | 7,127 | |||||||||||||||
of which: |
- | net profit of minorities | 482 | ||||||||||||||||||||||||||
- | adjusted net profit pertaining to Eni | 6,645 |
Reported net profit pertaining to Eni | 7,059 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (281 | ) | |||||||||||||||||||||||||
Exclusion of special items | (133 | ) |
- | non-recurring (income) charges | 5 | ||||||||||||||||||||||||||
- | other special charges | (138 | ) |
Adjusted net profit pertaining to Eni | 6,645 |
(*) | Excludes special items. |
- 95 -
ENI FACT BOOK / FINANCIAL DATA
2005 | IFRS |
(million euro) | E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 12,592 | 3,321 | 1,857 | 202 | 307 | (934) | (377) | (141) | 16,827 | |||||||||||||||||||
Exclusion of inventory holding (gains) losses | (127 | ) | (1,064 | ) | (19 | ) | (1,210 | ) | ||||||||||||||||||||
Exclusion of special items | ||||||||||||||||||||||||||||
of which: | ||||||||||||||||||||||||||||
Non-recurring (income) charges | 290 | 290 | ||||||||||||||||||||||||||
Other special charges: | 311 | 47 | 421 | 78 | 7 | 638 | 149 | 1,651 | ||||||||||||||||||||
- environmental charges | 31 | 337 | 413 | 54 | 835 | |||||||||||||||||||||||
- assets impairments | 247 | 1 | 5 | 29 | 4 | 75 | 2 | 363 | ||||||||||||||||||||
- | provisions to the reserve for contingencies | 39 | 36 | 126 | 201 | |||||||||||||||||||||||
- | increase insurance charges | 57 | 6 | 30 | 17 | 4 | 64 | 178 | ||||||||||||||||||||
- | provision for redundancy incentives | 7 | 8 | 22 | 4 | 3 | 6 | 29 | 79 | |||||||||||||||||||
- other | 1 | (12 | ) | 14 | (5 | ) | ||||||||||||||||||||||
Special items of operating profit | 311 | 337 | 421 | 78 | 7 | 638 | 149 | 1,941 | ||||||||||||||||||||
Adjusted operating profit | 12,903 | 3,531 | 1,214 | 261 | 314 | (296 | ) | (228 | ) | (141 | ) | 17,558 | ||||||||||||||||
Net financial (expense) income (*) | (80 | ) | 37 | (296 | ) | (339 | ) | |||||||||||||||||||||
Net income from investments (*) | 10 | 370 | 231 | 3 | 141 | (1 | ) | 23 | 777 | |||||||||||||||||||
Income taxes (*) | (6,647 | ) | (1,386 | ) | (500 | ) | (37 | ) | (127 | ) | 359 | 52 | (8,286 | ) | ||||||||||||||
Tax rate (%) | 51.8 | 35.2 | 34.6 | 46.0 | ||||||||||||||||||||||||
Adjusted net profit | 6,186 | 2,552 | 945 | 227 | 328 | (297 | ) | (142 | ) | (89 | ) | 9,710 | ||||||||||||||||
of which: | ||||||||||||||||||||||||||||
- net profit of minorities | 459 | |||||||||||||||||||||||||||
- Enis adjusted net profit | 9,251 | |||||||||||||||||||||||||||
Enis reported net profit | 8,788 | |||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (759 | ) | ||||||||||||||||||||||||||
Exclusion of special items | 1,222 | |||||||||||||||||||||||||||
- | non-recurring (income) charges | 290 | ||||||||||||||||||||||||||
- | other special charges | 932 | ||||||||||||||||||||||||||
Enis adjusted net profit | 9,251 |
(*) | Excludes special items. |
- 96 -
ENI FACT BOOK / FINANCIAL DATA
2006 | IFRS |
(million euro) | E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 15,580 | 3,802 | 319 | 172 | 505 | (622 | ) | (296 | ) | (133 | ) | 19,327 | ||||||||||||||||
Exclusion of inventory holding (gains) losses | (67 | ) | 215 | (60 | ) | 88 | ||||||||||||||||||||||
Exclusion of special items | ||||||||||||||||||||||||||||
of which: | ||||||||||||||||||||||||||||
Non-recurring (income) charges | 55 | 109 | 13 | 62 | 239 | |||||||||||||||||||||||
Other special charges: | 183 | 92 | 147 | 94 | 3 | 261 | 56 | 836 | ||||||||||||||||||||
- environmental charges | 44 | 111 | 126 | 11 | 292 | |||||||||||||||||||||||
- assets impairments | 231 | 51 | 14 | 50 | 1 | 22 | 369 | |||||||||||||||||||||
- | gains on disposal of assets | (61 | ) | (61 | ) | |||||||||||||||||||||||
- | provisions to the reserve for contingencies | 8 | 31 | 75 | 114 | |||||||||||||||||||||||
- | provisions for redundancy incentives | 13 | 37 | 47 | 19 | 2 | 17 | 43 | 178 | |||||||||||||||||||
- other | (40 | ) | (33 | ) | (6 | ) | 21 | 2 | (56 | ) | ||||||||||||||||||
Special items of operating profit | 183 | 147 | 256 | 107 | 3 | 323 | 56 | 1,075 | ||||||||||||||||||||
Adjusted operating profit | 15,763 | 3,882 | 790 | 219 | 508 | (299 | ) | (240 | ) | (133 | ) | 20,490 | ||||||||||||||||
Net financial (expense) income (*) | (59 | ) | 16 | (7 | ) | 205 | 155 | |||||||||||||||||||||
Net income from investments (*) | 85 | 489 | 184 | 2 | 66 | 5 | 831 | |||||||||||||||||||||
Income taxes (*) | (8,510 | ) | (1,525 | ) | (345 | ) | (47 | ) | (174 | ) | 89 | 54 | (10,458 | ) | ||||||||||||||
Tax rate (%) | 53.9 | 34.8 | 35.4 | 48.7 | ||||||||||||||||||||||||
Adjusted net profit | 7,279 | 2,862 | 629 | 174 | 400 | (301 | ) | 54 | (79 | ) | 11,018 | |||||||||||||||||
of which: | ||||||||||||||||||||||||||||
- net profit of minorities | 606 | |||||||||||||||||||||||||||
- Enis adjusted net profit | 10,412 | |||||||||||||||||||||||||||
Enis reported net profit | 9,217 | |||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 33 | |||||||||||||||||||||||||||
Exclusion of special items | 1,162 | |||||||||||||||||||||||||||
- | non-recurring (income) charges | 239 | ||||||||||||||||||||||||||
- | other special charges | 923 | ||||||||||||||||||||||||||
Enis adjusted net profit | 10,412 |
(*) | Excludes special items. |
- 97 -
ENI FACT BOOK / FINANCIAL DATA
Adjusted operating profit by division | Italian GAAP |
IFRS |
||
(million euro) | 2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Exploration & Production | 6,072 | 5,428 | 5,973 | 8,202 | 12,903 | 15,763 | ||||||||||||
Gas & Power | 3,675 | 3,373 | 3,661 | 3,448 | 3,531 | 3,882 | ||||||||||||
Refining & Marketing | 963 | 312 | 584 | 923 | 1,214 | 790 | ||||||||||||
Petrochemicals | (315 | ) | (48 | ) | (54 | ) | 263 | 261 | 219 | |||||||||
Engineering & Construction | 255 | 298 | 311 | 215 | 314 | 508 | ||||||||||||
Other activities | (208 | ) | (236 | ) | (223 | ) | (296 | ) | (299 | ) | ||||||||
Corporate and financial companies | (168 | ) | (196 | ) | (281 | ) | (187 | ) | (228 | ) | (240 | ) | ||||||
Unrealized profit in inventory | (59 | ) | (141 | ) | (133 | ) | ||||||||||||
10,482 | 8,959 | 9,958 | 12,582 | 17,558 | 20,490 |
Adjusted net profit by division | 2004 |
2005 |
2006 |
(million euro) | ||||||||||||||||||
Exploration & Production | 4,033 | 6,186 | 7,279 | |||||||||||||||
Gas & Power | 2,290 | 2,552 | 2,862 | |||||||||||||||
Refining & Marketing | 674 | 945 | 629 | |||||||||||||||
Petrochemicals | 242 | 227 | 174 | |||||||||||||||
Engineering & Construction | 252 | 328 | 400 | |||||||||||||||
Other activities | (241 | ) | (297 | ) | (301 | ) | ||||||||||||
Corporate and financial companies | (86 | ) | (142 | ) | 54 | |||||||||||||
Unrealized profit in inventory | (37 | ) | (89 | ) | (79 | ) | ||||||||||||
6,645 | 9,251 | 10,412 |
Analysis of special items | 2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
(million euro) | ||||||||||||||||||
Non recurring (income) charges | 5 | 290 | 239 | |||||||||||||||
Other special charges: | 169 | 457 | 441 | 626 | 1,651 | 836 | ||||||||||||
environmental charges | 303 | 835 | 292 | |||||||||||||||
asset impairments | 542 | 442 | 336 | 363 | 369 | |||||||||||||
gains on disposal of assets | (92 | ) | (320 | ) | (61 | ) | ||||||||||||
provisions to the reserve for contingencies | 234 | 379 | 114 | |||||||||||||||
of which: | ||||||||||||||||||
increase insurance charges | 178 | |||||||||||||||||
provision for redundancy incentives | 65 | 79 | 178 | |||||||||||||||
other | (31 | ) | 7 | 8 | (5 | ) | (56 | ) | ||||||||||
Special items of operating profit | 169 | 457 | 441 | 631 | 1,941 | 1,075 | ||||||||||||
Net financial (expense) income | 27 | (6 | ) | |||||||||||||||
Net income from investments | 82 | 36 | (390 | ) | (137 | ) | (72 | ) | ||||||||||
of which: | ||||||||||||||||||
gain on the disposal of Italiana Petroli (IP) | (132 | ) | ||||||||||||||||
gain on Galp Energia SGPS SA (disposal assets Rede Electrica National) | (73 | ) | ||||||||||||||||
gain on the disposal of shares of Snam Rete Gas SpA | (308 | ) | ||||||||||||||||
Income taxes | (1,737 | ) | 29 | (49 | ) | |||||||||||||
of which: | ||||||||||||||||||
supplemental tax rate UK | 91 | |||||||||||||||||
windfall tax Algeria | 179 | |||||||||||||||||
legal proceeding in Venezuela | 77 | |||||||||||||||||
Total special items of net profit | (1,994 | ) | 330 | (489 | ) | (133 | ) | 1,222 | 1,162 |
- 98 -
ENI FACT BOOK / FINANCIAL DATA
Net financial (expense) income | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Exchange gain (loss), net | 33 | 49 | (27 | ) | 165 | (10 | ) | (30 | ) | 169 | (152 | ) | ||||||||||||||||||
Interest and other net financial income | 579 | 485 | 339 | 501 | 539 | 512 | 436 | 2 | 74 | 215 | ||||||||||||||||||||
Securities gains | 246 | 176 | 197 | 116 | 95 | 44 | 34 | 31 | 36 | 51 | ||||||||||||||||||||
Interest and other financial expense | (1,125 | ) | (790 | ) | (556 | ) | (791 | ) | (978 | ) | (738 | ) | (710 | ) | (316 | ) | (309 | ) | (336 | ) | ||||||||||
Financial expense due to the passage of time | (109 | ) | (109 | ) | (116 | ) | ||||||||||||||||||||||||
Income (expense) on derivatives | 34 | (386 | ) | 383 | ||||||||||||||||||||||||||
less: | ||||||||||||||||||||||||||||||
interest capitalized | 38 | 39 | 57 | 73 | 49 | 43 | 86 | 202 | 159 | 116 | ||||||||||||||||||||
(262 | ) | (41 | ) | 10 | 64 | (305 | ) | (169 | ) | (154 | ) | (156 | ) | (366 | ) | 161 | ||||||||||||||
of which income on receivables related to operations and tax credits | 197 | 195 | 254 | 201 | 170 | 122 | 116 | 91 | 99 | 114 |
Income (expense on) from investments | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Income from equity investments | 91 | 68 | 108 | 147 | 158 | 184 | 189 | 401 | 770 | 887 | ||||||||||||||||||||
Writedown of investments | (213 | ) | (143 | ) | (101 | ) | (178 | ) | (282 | ) | (245 | ) | (278 | ) | (69 | ) | (33 | ) | (36 | ) | ||||||||||
Gains on sales | 135 | 401 | 17 | 19 | 76 | 55 | 39 | 130 | 179 | 25 | ||||||||||||||||||||
Losses on sales | (1 | ) | (8 | ) | (7 | ) | ||||||||||||||||||||||||
Dividends | 42 | 67 | 63 | 44 | 40 | 32 | 22 | 72 | 33 | 98 | ||||||||||||||||||||
Provision for losses | (56 | ) | ||||||||||||||||||||||||||||
Other income (expense) net | 4 | 3 | 2 | 1 | 1 | 17 | 11 | 287 | (27 | ) | (8 | ) | ||||||||||||||||||
59 | 396 | 89 | 33 | (7 | ) | 43 | (17 | ) | 820 | 914 | 903 |
Fixed assets (at period end) | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Fixed assets, gross | ||||||||||||||||||||||||||||||
Exploration & Production | 17,633 | 18,878 | 23,329 | 28,220 | 38,667 | 38,534 | 38,811 | 40,322 | 49,129 | 49,002 | ||||||||||||||||||||
Gas & Power | 14,513 | 14,997 | 15,579 | 16,881 | 15,867 | 16,467 | 18,926 | 20,680 | 21,517 | 22,277 | ||||||||||||||||||||
Refining & Marketing | 7,852 | 8,316 | 8,620 | 8,854 | 9,083 | 8,172 | 8,652 | 8,947 | 9,420 | 11,273 | ||||||||||||||||||||
Petrochemicals | 4,163 | 4,356 | 4,611 | 4,618 | 5,862 | 4,169 | 4,266 | 4,311 | 4,402 | 4,380 | ||||||||||||||||||||
Engineering & Construction | 1,614 | 1,898 | 2,336 | 2,564 | 2,805 | 3,447 | 3,531 | 3,524 | 3,878 | 4,363 | ||||||||||||||||||||
Other activities | 227 | 239 | 202 | 224 | 241 | 2,472 | 2,403 | 2,300 | 1,999 | 1,967 | ||||||||||||||||||||
Corporate and financial companies | 132 | 149 | 194 | 453 | 321 | |||||||||||||||||||||||||
Activities to be divested | 424 | 340 | ||||||||||||||||||||||||||||
Unrealized profit in inventory | (88 | ) | (128 | ) | ||||||||||||||||||||||||||
46,426 | 49,024 | 54,677 | 61,361 | 72,525 | 73,393 | 76,738 | 80,278 | 90,710 | 93,455 | |||||||||||||||||||||
Fixed assets, net | ||||||||||||||||||||||||||||||
Exploration & Production | 7,651 | 7,790 | 10,155 | 13,113 | 20,728 | 19,862 | 20,338 | 20,761 | 24,485 | 23,002 | ||||||||||||||||||||
Gas & Power | 6,624 | 6,419 | 6,142 | 7,068 | 6,598 | 7,191 | 9,500 | 13,235 | 13,760 | 14,067 | ||||||||||||||||||||
Refining & Marketing | 3,409 | 3,566 | 3,472 | 3,393 | 3,332 | 3,097 | 3,170 | 3,361 | 3,556 | 3,791 | ||||||||||||||||||||
Petrochemicals | 2,076 | 2,071 | 1,958 | 1,759 | 1,626 | 1,285 | 1,181 | 1,181 | 1,139 | 1,072 | ||||||||||||||||||||
Engineering & Construction | 718 | 919 | 1,257 | 1,370 | 1,467 | 1,758 | 1,741 | 1,646 | 1,847 | 2,225 | ||||||||||||||||||||
Other activities | 97 | 104 | 90 | 94 | 100 | 418 | 338 | 293 | 117 | 93 | ||||||||||||||||||||
Corporate and financial companies | 82 | 92 | 109 | 193 | 176 | |||||||||||||||||||||||||
Activities to be divested | 66 | 2 | ||||||||||||||||||||||||||||
Unrealized profit in inventory | (84 | ) | (114 | ) | ||||||||||||||||||||||||||
20,641 | 20,871 | 23,074 | 26,797 | 33,851 | 33,693 | 36,360 | 40,586 | 45,013 | 44,312 |
- 99 -
ENI FACT BOOK / FINANCIAL DATA
Capital expenditure by division | Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Exploration & Production | 2,322 | 2,882 | 3,268 | 3,539 | 4,276 | 5,615 | 5,681 | 4,853 | 4,965 | 5,203 | ||||||||||||||||||||
Gas & Power | 882 | 921 | 906 | 794 | 1,065 | 1,315 | 1,760 | 1,451 | 1,152 | 1,174 | ||||||||||||||||||||
Refining & Marketing | 495 | 586 | 524 | 533 | 496 | 550 | 730 | 693 | 656 | 645 | ||||||||||||||||||||
Petrochemicals | 180 | 331 | 289 | 265 | 390 | 145 | 141 | 148 | 112 | 99 | ||||||||||||||||||||
Engineering & Construction | 237 | 354 | 425 | 245 | 304 | 233 | 278 | 186 | 349 | 591 | ||||||||||||||||||||
Other activities | 34 | 61 | 55 | 55 | 75 | 119 | 70 | 49 | 48 | 72 | ||||||||||||||||||||
Corporate and financial companies | 71 | 142 | 119 | 132 | 88 | |||||||||||||||||||||||||
Activities to be divested | 19 | 17 | 16 | (39 | ) | |||||||||||||||||||||||||
4,169 | 5,152 | 5,483 | 5,431 | 6,606 | 8,048 | 8,802 | 7,499 | 7,414 | 7,833 |
Capital expenditure by geographic area of origin |
Italian GAAP |
IFRS |
||
(million euro) |
|
|
1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Italy | 2,246 | 2,535 | 2,238 | 2,206 | 2,436 | 2,396 | 2,708 | 2,655 | 2,442 | 2,529 | ||||||||||||||||||||
Other European Union countries | 478 | 439 | 320 | 439 | 595 | 567 | 1,067 | 337 | 545 | 713 | ||||||||||||||||||||
Rest of Europe | 306 | 465 | 390 | 283 | 249 | 284 | 302 | 387 | 415 | 436 | ||||||||||||||||||||
Africa | 904 | 1,103 | 1,159 | 1,186 | 1,405 | 2,497 | 3,026 | 2,622 | 2,233 | 2,419 | ||||||||||||||||||||
Americas | 144 | 261 | 1,095 | 753 | 923 | 721 | 369 | 357 | 507 | 572 | ||||||||||||||||||||
Asia | 90 | 345 | 280 | 562 | 923 | 1,333 | 795 | 1,066 | 1,181 | 1,032 | ||||||||||||||||||||
Other areas | 1 | 4 | 1 | 2 | 75 | 250 | 535 | 75 | 91 | 132 | ||||||||||||||||||||
Total outside Italy | 1,923 | 2,617 | 3,245 | 3,225 | 4,170 | 5,652 | 6,094 | 4,844 | 4,972 | 5,304 | ||||||||||||||||||||
4,169 | 5,152 | 5,483 | 5,431 | 6,606 | 8,048 | 8,802 | 7,499 | 7,414 | 7,833 |
Investments | 2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
Total investments | 4,384 | 4,664 | 1,366 | 4,255 | 316 | 146 | 95 | |||||||||
Lasmo Plc | 100% | 1,225 | 4,128 | |||||||||||||
British-Borneo | 100% | 1,263 | ||||||||||||||
Galp | 33.34% | 964 | ||||||||||||||
Natural gas distribution company in Argentina | minority stake | 216 | ||||||||||||||
Natural gas distribution company in Greece | minority stake | 192 | ||||||||||||||
Polimeri Europa SpA | 50% | 204 | ||||||||||||||
Bouygues Offshore | 100% | 906 | ||||||||||||||
GVS (1) | 50% | 352 | ||||||||||||||
Italgas SpA | 56% | 2,569 | ||||||||||||||
Fortum Petroleum | 100% | 909 | ||||||||||||||
Unión Fenosa Gas SA | 50% | 442 | ||||||||||||||
Natural gas distribution company in Italy | minority stake | 44 | 6 | 46 | ||||||||||||
Natural gas production company in Italy | 100% | 91 |
(1) | Of this euro 89 million paid by Eni and euro 263 million through net borrowings of non-consolidated subsidiaries. |
- 100 -
ENI FACT BOOK / FINANCIAL DATA
Net borrowings |
(at period
end) (million euro) |
Debt and bonds |
Cash |
Securities not related to operations |
Accounts receivable financing not related to operations |
Other, net |
Total |
1997 | ||||||||||||||||||
Short-term | 7,924 |
(1,586 |
) | (2,204 |
) | (1,180 |
) | (5 |
) | 2,949 |
||||||||
Long-term | 5,347 |
(156 |
) | (91 |
) | 1 |
5,101 |
|||||||||||
13,271 |
(1,586 |
) | (2,360 |
) | (1,271 |
) | (4 |
) | 8,050 |
|||||||||
1998 | ||||||||||||||||||
Short-term | 4,948 |
(779 |
) | (1,119 |
) | (389 |
) | (6 |
) | 2,655 |
||||||||
Long-term | 4,517 |
(85 |
) | (17 |
) | 4,415 |
||||||||||||
9,465 |
(779 |
) | (1,204 |
) | (389 |
) | (23 |
) | 7,070 |
|||||||||
1999 | ||||||||||||||||||
Short-term | 4,764 |
(1,212 |
) | (1,645 |
) | (343 |
) | 26 |
1,590 |
|||||||||
Long-term | 4,787 |
(85 |
) | (25 |
) | 4,677 |
||||||||||||
9,551 |
(1,212 |
) | (1,730 |
) | (343 |
) | 1 |
6,267 |
||||||||||
2000 | ||||||||||||||||||
Short-term | 5,928 |
(1,244 |
) | (1,432 |
) | (550 |
) | (50 |
) | 2,652 |
||||||||
Long-term | 5,116 |
(24 |
) | (2 |
) | 5,090 |
||||||||||||
11,044 |
(1,244 |
) | (1,456 |
) | (550 |
) | (52 |
) | 7,742 |
|||||||||
2001 | ||||||||||||||||||
Short-term | 6,464 |
(1,305 |
) | (940 |
) | (74 |
) | (29 |
) | 4,116 |
||||||||
Long-term | 6,084 |
(312 |
) | 5,772 |
||||||||||||||
12,819 |
(1,360 |
) | (1,252 |
) | (74 |
) | (29 |
) | 10,104 |
|||||||||
2002 | ||||||||||||||||||
Short-term | 8,870 |
(1,791 |
) | (730 |
) | (1,465 |
) | (3 |
) | 4,881 |
||||||||
Long-term | 6,550 |
(290 |
) | 6,260 |
||||||||||||||
15,420 |
(1,791 |
) | (1,020 |
) | (1,465 |
) | (3 |
) | 11,141 |
|||||||||
2003 | ||||||||||||||||||
Short-term | 7,918 |
(1,580 |
) | (792 |
) | (32 |
) | (65 |
) | 5,449 |
||||||||
Long-term | 8,336 |
(2 |
) | (240 |
) | 8,094 |
||||||||||||
16,254 |
(1,580 |
) | (794 |
) | (272 |
) | (65 |
) | 13,543 |
|||||||||
2004 | ||||||||||||||||||
Short-term | 5,077 |
(1,003 |
) | (792 |
) | (11 |
) | (194 |
) | 3,077 |
||||||||
Long-term | 7,607 |
(1 |
) | (240 |
) | 7,366 |
||||||||||||
12,684 |
(1,003 |
) | (793 |
) | (251 |
) | (194 |
) | 10,443 |
|||||||||
2005 | ||||||||||||||||||
Short-term | 5,345 |
(1,333 |
) | (903 |
) | (12 |
) | 3,097 |
||||||||||
Long-term | 7,653 |
(28 |
) | (247 |
) | 7,378 |
||||||||||||
12,998 |
(1,333 |
) | (931 |
) | (259 |
) | 10,475 |
2006 | ||||||||||||||||||
Short-term | 4,324 | (3,985 | ) | (552 | ) | (143 | ) | (356 | ) | |||||||||
Long-term | 7,375 | (252 | ) | 7,123 | ||||||||||||||
11,699 | (3,985 | ) | (552 | ) | (395 | ) | 6,767 |
- 101 -
ENI FACT BOOK / EMPLOYEES
Employees
Number of employees at year end | 1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
(units) | ||||||||||||||||||||||
Exploration & Production | Italy | 5,912 | 5,444 | 5,294 | 5,014 | 4,495 | 4,617 | 4,555 | 4,539 | 5,027 | 5,273 | |||||||||||
Outside Italy | 2,666 | 2,726 | 2,479 | 2,727 | 3,038 | 3,098 | 2,937 | 2,938 | 3,003 | 3,063 | ||||||||||||
8,578 | 8,170 | 7,773 | 7,741 | 7,533 | 7,715 | 7,492 | 7,477 | 8,030 | 8,336 | |||||||||||||
Gas & Power | Italy | 14,474 | 13,977 | 13,669 | 13,175 | 11,704 | 10,852 | 10,302 | 10,216 | 9,733 | 9,602 | |||||||||||
Outside Italy | 3,432 | 3,132 | 2,806 | 2,925 | 2,582 | 2,465 | 2,680 | 2,627 | 2,591 | 2,472 | ||||||||||||
17,906 | 17,109 | 16,475 | 16,100 | 14,286 | 13,317 | 12,982 | 12,843 | 12,324 | 12,074 | |||||||||||||
Refining & Marketing | Italy | 11,543 | 11,176 | 10,341 | 9,760 | 8,638 | 7,332 | 6,882 | 6,879 | 6,680 | 7,196 | |||||||||||
Outside Italy | 6,897 | 7,230 | 6,720 | 6,370 | 6,534 | 6,425 | 6,395 | 2,345 | 2,214 | 2,241 | ||||||||||||
18,440 | 18,406 | 17,061 | 16,130 | 15,172 | 13,757 | 13,277 | 9,224 | 8,894 | 9,437 | |||||||||||||
Petrochemicals | Italy | 14,354 | 12,957 | 12,596 | 11,573 | 10,910 | 5,744 | 5,585 | 5,237 | 5,164 | 4,948 | |||||||||||
Outside Italy | 1,653 | 1,370 | 1,312 | 1,284 | 1,569 | 1,514 | 1,465 | 1,328 | 1,298 | 1,077 | ||||||||||||
16,007 | 14,327 | 13,908 | 12,857 | 12,479 | 7,258 | 7,050 | 6,565 | 6,462 | 6,025 | |||||||||||||
Engineering & Construction | ||||||||||||||||||||||
Oilfield Services and Construction |
Italy | 2,925 | 2,832 | 2,648 | 2,326 | 2,279 | 2,255 | 2,423 | 2,490 | 5,799 | 6,164 | |||||||||||
Outside Italy | 8,086 | 9,682 | 7,359 | 7,560 | 12,881 | 22,770 | 18,036 | 18,890 | 22,885 | 24,738 | ||||||||||||
11,011 | 12,514 | 10,007 | 9,886 | 15,160 | 25,025 | 20,459 | 21,380 | 28,684 | 30,902 | |||||||||||||
Engineering | Italy | 3,402 | 3,376 | 3,328 | 3,102 | 3,001 | 3,055 | 3,433 | 3,544 | |||||||||||||
Outside Italy | 411 | 393 | 378 | 330 | 417 | 633 | 1,580 | 1,349 | ||||||||||||||
3,787 | 3,721 | 3,480 | 3,331 | 3,472 | 4,066 | 5,124 | 4,439 | |||||||||||||||
Other activities | Italy | 2,834 | 3,527 | 3,247 | 3,841 | 4,255 | 6,347 | 6,367 | 4,959 | 2,636 | 2,219 | |||||||||||
Outside Italy | 94 | 69 | 72 | 83 | 48 | 13 | 13 | 24 | ||||||||||||||
2,928 | 3,596 | 3,319 | 3,924 | 4,303 | 6,360 | 6,380 | 4,983 | 2,636 | 2,219 | |||||||||||||
Corporate and financial companies | Italy | 3,107 | 2,577 | 3,351 | 5,153 | 4,363 | ||||||||||||||||
Outside Italy | 50 | 80 | 86 | 75 | 216 | |||||||||||||||||
3,157 | 2,657 | 3,437 | 5,228 | 4,579 | ||||||||||||||||||
Activities to be divested | Italy | 1,521 | 1,063 | |||||||||||||||||||
Outside Italy | ||||||||||||||||||||||
1,521 | 1,063 | |||||||||||||||||||||
Total employees at year end | Italy | 56,939 | 54,304 | 50,897 | 48,690 | 45,336 | 43,687 | 42,235 | 40,761 | 40,192 | 39,765 | |||||||||||
Outside Italy | 23,239 | 24,602 | 21,126 | 21,279 | 27,069 | 36,968 | 33,186 | 29,587 | 32,066 | 33,807 | ||||||||||||
80,178 | 78,906 | 72,023 | 69,969 | 72,405 | 80,655 | 75,421 | 70,348 | 72,258 | 73,572 | |||||||||||||
of which senior managers | 1,992 | 1,941 | 1,788 | 1,683 | 1,438 | 1,537 | 1,733 | 1,764 | 1,748 | 1,604 |
- 102 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Supplemental oil and gas information
OIL AND NATURAL GAS RESERVES Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under technical, contractual, economic and operating conditions existing at the time. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions. Net proved reserves exclude royalties and interests owned by others. Proved developed oil and gas reserves are proved reserves that can be estimated to be recovered through existing wells with existing equipment and operating methods.Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. Additional oil and gas reserves expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing natural forces and mechanisms of primary recovery are included as proved developed reserves only after testing by a pilot project or after the operation of an installed program has confirmed, through production response, that increased recovery will be achieved. Enis proved reserves have been estimated on the basis of the applicable U.S. Securities & Exchange Commission regulation, Rule 4-10 of Regulation S-X and its interpretations and have been disclosed in accordance with Statement of Financial Accounting Standard No. 69. The estimates of proved reserves, developed and undeveloped for years ended December 31, 2003, 2004, 2005 and 2006 are based on data prepared by Eni. Since 1991, Eni has requested qualified independent oil engineering companies carry out an independent evaluation1 of its proved reserves on a rotational basis. In particular a total of 1.4 billion boe of proved reserves, or about 21% of Enis total proved reserves at December 31, 2006, have been evaluated. The results of this independent evaluation confirmed Enis evaluations, as in previous years. In the 2004-2006 three-year period, 76% of Enis total proved reserves were subject to independent evaluations. Eni operates under Production Sharing Agreements, (PSAs), in several of the foreign jurisdictions where it has oil and gas exploration and production activities. Reserves of oil and natural gas to which Eni is entitled under PSA arrangements are shown in accordance with Enis economic interest in the volumes of oil and natural gas estimated to be recoverable |
in future years. Such
reserves include estimated quantities allocated to Eni
for recovery of costs, income taxes owed by Eni but
settled by its joint venture partners (which are
state-owned entities) out of Enis share of
production and Enis net equity share after cost
recovery. Proved oil and gas reserves associated with
PSAs represented 51%, 48% and 53% of total proved
reserves as of year-end 2004, 2005 and 2006,
respectively, on an oil-equivalent basis. A similar
scheme to PSAs applies to Service and
Buy-Back contracts; proved reserves
associated with such contracts represented 3%, 2% and 2%
of total proved reserves on an oil-equivalent basis as of
year-end 2004, 2005 and 2006, respectively. Oil and gas reserve quantities include: (i) oil and natural gas quantities in excess to cost recovery which the company has an obligation to purchase under certain PSAs with governments or authorities whereby the company serves as producer of reserves. In accordance with SFAS No. 69, paragraph 13, reserve volumes associated with such oil and gas quantities represented 1.4%, 1.7% and 1.1% of total proved reserves as of year-end 2004, 2005 and 2006 respectively, on an oil-equivalent basis; (ii) volumes of natural gas used for own consumption and (iii) volumes of natural gas held in certain Eni storage fields in Italy. Proved reserves attributable to these fields include: (a) the residual natural gas volumes of the reservoirs and (b) natural gas volumes from other Eni fields input into these reservoirs in subsequent periods. Proved reserves do not include volumes owned by or acquired from third parties. Gas withdrawn from storage is produced and thereby detracted from proved reserves when sold. Numerous uncertainties are inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. Results of drilling, testing and production after the date of the estimate may require substantial upward or downward revision. In addition, changes in oil and natural gas prices have an effect on the quantities of Enis proved reserves since estimates of reserves are based on prices and costs relative to the date when such estimates are made. Reserve estimates are also subject to revision as prices fluctuate due to the cost recovery feature under certain PSAs. The following table presents yearly changes by geographical area in estimated proved reserves, developed and undeveloped, of crude oil (including condensate and natural gas liquids) and natural gas for the years 2004, 2005 and 2006. |
(1) | From 1991 to 2002 to DeGolyer and MacNaughton, from 2003 also to Ryder Scott Company. |
- 103 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Proved hydrocarbon reserves (1) |
(mmboe) | Italy (2) |
North Africa |
West Africa |
North Sea |
Rest of World |
Proved reserves of subsidiaries |
Proved reserves of affiliates and joint ventures |
Total |
Reserves at December 31, 1996 | 1,637 |
1,420 |
847 |
643 |
128 |
4,675 |
||||||||||||||||||
Purchase of minerals in place | 37 |
1 |
254 |
292 |
||||||||||||||||||||
Revisions of previous estimates | 31 |
77 |
46 |
24 |
25 |
203 |
||||||||||||||||||
Improved recovery | 1 |
2 |
14 |
17 |
||||||||||||||||||||
Extensions and discoveries | 83 |
117 |
24 |
44 |
5 |
273 |
||||||||||||||||||
Production | (142 |
) | (85 |
) | (67 |
) | (59 |
) | (20 |
) | (373 |
) | ||||||||||||
Sales of minerals in place | (1 |
) | (11 |
) | (2 |
) | (14 |
) | ||||||||||||||||
Reserves at December 31, 1997 | 1,646 |
1,530 |
852 |
655 |
390 |
5,073 |
||||||||||||||||||
Purchase of minerals in place | ||||||||||||||||||||||||
Revisions of previous estimates | 13 |
126 |
65 |
41 |
(24 |
) | 221 |
|||||||||||||||||
Improved recovery | 17 |
17 |
||||||||||||||||||||||
Extensions and discoveries | 68 |
118 |
49 |
27 |
73 |
335 |
||||||||||||||||||
Production | (153 |
) | (88 |
) | (73 |
) | (57 |
) | (20 |
) | (391 |
) | ||||||||||||
Sales of minerals in place | ||||||||||||||||||||||||
Reserves at December 31, 1998 | 1,574 |
1,686 |
910 |
666 |
419 |
5,255 |
||||||||||||||||||
Purchase of minerals in place | 6 |
17 |
5 |
93 |
121 |
|||||||||||||||||||
Revisions of previous estimates | 24 |
208 |
48 |
28 |
(1 |
) | 307 |
|||||||||||||||||
Improved recovery | 3 |
3 |
||||||||||||||||||||||
Extensions and discoveries | 11 |
37 |
180 |
1 |
14 |
243 |
||||||||||||||||||
Production | (138 |
) | (99 |
) | (74 |
) | (54 |
) | (30 |
) | (395 |
) | ||||||||||||
Sales of minerals in place | ||||||||||||||||||||||||
Reserves at December 31, 1999 | 1,477 |
1,849 |
1,067 |
646 |
495 |
5,534 |
||||||||||||||||||
Purchase of minerals in place | 3 |
12 |
80 |
159 |
254 |
|||||||||||||||||||
Revisions of previous estimates | 15 |
86 |
56 |
32 |
231 |
419 |
||||||||||||||||||
Improved recovery | 3 |
9 |
12 |
|||||||||||||||||||||
Extensions and discoveries | 16 |
100 |
32 |
3 |
69 |
220 |
||||||||||||||||||
Production | (119 |
) | (111 |
) | (83 |
) | (62 |
) | (56 |
) | (430 |
) | ||||||||||||
Sales of minerals in place | (1 |
) | (1 |
) | ||||||||||||||||||||
Reserves at December 31, 2000 | 1,389 |
1,929 |
1,093 |
700 |
897 |
6,008 |
||||||||||||||||||
Purchase of minerals in place | 3 |
118 |
206 |
437 |
764 |
|||||||||||||||||||
Revisions of previous estimates | 22 |
171 |
93 |
63 |
166 |
515 |
||||||||||||||||||
Improved recovery | 11 |
16 |
6 |
33 |
||||||||||||||||||||
Extensions and discoveries | 21 |
8 |
24 |
9 |
58 |
120 |
||||||||||||||||||
Production | (120 |
) | (115 |
) | (86 |
) | (104 |
) | (81 |
) | (506 |
) | ||||||||||||
Sales of minerals in place | (4 |
) | (1 |
) | (5 |
) | ||||||||||||||||||
Reserves at December 31, 2001 | 1,315 |
2,122 |
1,136 |
879 |
1,477 |
6,929 |
||||||||||||||||||
Purchase of minerals in place | 27 |
12 |
39 |
|||||||||||||||||||||
Revisions of previous estimates | 5 |
14 |
113 |
24 |
181 |
337 |
||||||||||||||||||
Improved recovery | 14 |
1 |
15 |
|||||||||||||||||||||
Extensions and discoveries | 29 |
12 |
124 |
31 |
142 |
338 |
||||||||||||||||||
Production | (111 |
) | (129 |
) | (87 |
) | (112 |
) | (93 |
) | (532 |
) | ||||||||||||
Sales of minerals in place | (39 |
) | (24 |
) | (33 |
) | (96 |
) | ||||||||||||||||
Reserves at December 31, 2002 | 1,199 |
2,033 |
1,287 |
825 |
1,686 |
7,030 |
Purchase of minerals in place | 2 |
159 |
1 |
162 |
||||||||||||||||||||
Revisions of previous estimates | (116 |
) | 29 |
89 |
77 |
208 |
287 |
|||||||||||||||||
Improved recovery | 15 |
16 |
31 |
|||||||||||||||||||||
Extensions and discoveries | 22 |
74 |
27 |
232 |
355 |
|||||||||||||||||||
Production | (111 |
) | (127 |
) | (95 |
) | (126 |
) | (111 |
) | (570 |
) | ||||||||||||
Sales of minerals in place | (23 |
) | (23 |
) |
- 104 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Proved hydrocarbon reserves (1) |
(mmboe) | Italy (2) |
North Africa |
West Africa |
North Sea |
Rest of World |
Proved reserves of subsidiaries |
Proved reserves of affiliates and joint ventures |
Total |
Reserves at December 31, 2003 | 996 | 2,024 | 1,324 | 911 | 2,017 | 7,272 | 7,272 | |||||||||||||||||
Revisions of previous estimates | 127 | 69 | 29 | 2 | 227 | 227 | ||||||||||||||||||
Improved recovery | 11 | 50 | 4 | 65 | 65 | |||||||||||||||||||
Extensions and discoveries | 8 | 94 | 34 | 10 | 183 | 329 | 329 | |||||||||||||||||
Production | (101 | ) | (137 | ) | (116 | ) | (112 | ) | (128 | ) | (594 | ) | (594 | ) | ||||||||||
Sales of minerals in place | (13 | ) | (2 | ) | (4 | ) | (36 | ) | (26 | ) | (81 | ) | (81 | ) | ||||||||||
2004 reconciliation referring to reserves of affiliates and joint venture | (30 | ) | (9 | ) | (25 | ) | (64 | ) | 64 |
Reserves at December 31, 2004 | 890 |
2,087 |
1,348 |
807 |
2,022 |
7,154 |
64 |
7,218 |
||||||||||||||||
Purchase of minerals in place | 13 |
|
8 |
|
85 |
106 |
106 |
|||||||||||||||||
Revisions of previous estimates | 59 |
35 |
(48 |
) | 25 |
(151 |
) | (80 |
) | (18 |
) | (98 |
) | |||||||||||
Improved recovery |
|
44 |
30 |
|
15 |
89 |
89 |
|||||||||||||||||
Extensions and discoveries |
|
33 |
67 |
30 |
26 |
156 |
156 |
|||||||||||||||||
Production | (94 |
) | (173 |
) | (126 |
) | (104 |
) | (132 |
) | (629 |
) | (5 |
) | (634 |
) | ||||||||
Sales of minerals in place |
|
|
|
|
|
|
|
|||||||||||||||||
Reserves at December 31, 2005 | 868 |
2,026 |
1,279 |
758 |
1,865 |
6,796 |
41 |
6,837 |
Purchase of minerals in place | 1 | 1 | 1 | |||||||||||||||||||||
Revisions of previous estimates | 21 | 88 | (79 | ) | 28 | 92 | 151 | 151 | ||||||||||||||||
Improved recovery | 49 | 41 | 14 | 104 | 1 | 105 | ||||||||||||||||||
Extensions and discoveries | 3 | 55 | 16 | 86 | 161 | 161 | ||||||||||||||||||
Production | (87 | ) | (201 | ) | (135 | ) | (103 | ) | (114 | ) | (640 | ) | (6 | ) | (646 | ) | ||||||||
Sales of minerals in place | (3 | ) | (170 | ) | (173 | ) | (173 | ) | ||||||||||||||||
Reserves at December 31, 2006 | 805 | 2,018 | 1,122 | 682 | 1,773 | 6,400 | 36 | 6,436 |
Proved developed hydrocarbon reserves (1) |
Reserves at December 31, 1996 | 1,069 |
761 |
458 |
468 |
72 |
2,828 |
||||||||||||||||||
Reserves at December 31, 1997 | 1,018 |
734 |
454 |
423 |
73 |
2,702 |
||||||||||||||||||
Reserves at December 31, 1998 | 914 |
778 |
476 |
460 |
102 |
2,730 |
||||||||||||||||||
Reserves at December 31, 1999 | 921 |
796 |
586 |
416 |
202 |
2,921 |
||||||||||||||||||
Reserves at December 31, 2000 | 860 |
824 |
590 |
443 |
301 |
2,995 |
||||||||||||||||||
Reserves at December 31, 2001 | 825 |
875 |
640 |
773 |
654 |
3,767 |
||||||||||||||||||
Reserves at December 31, 2002 | 774 |
797 |
703 |
724 |
705 |
3,703 |
||||||||||||||||||
Reserves at December 31, 2003 | 702 |
806 |
710 |
822 |
1,190 |
4,230 |
||||||||||||||||||
Reserves at December 31, 2004 | 671 |
961 |
749 |
707 |
1,212 |
4,300 |
||||||||||||||||||
Reserves at December 31, 2005 | 620 |
1,230 |
793 |
611 |
1,021 |
4,275 |
31 |
4,306 |
Reserves at December 31, 2006 | 562 | 1,242 | 798 | 571 | 859 | 4,032 | 27 | 4,059 |
(1) | The conversion coefficient is 1 cm of natural gas = 0.00615 barrels of oil. | |
(2) | Data at December 31, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005 and 2006 include 144.2, 139.4, 134.8, 139.8, 129.9, 139, 133.2, 128.4, 132.4 and 131.2 million boe of natural gas in storage in Italy, respectively. |
- 105 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Proved oil reserves (1) |
(million barrels) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Proved reserves of subsidiaries |
Proved reserves of affiliates and joint ventures |
Total |
Reserves at December 31, 1996 | 316 |
953 |
720 |
416 |
79 |
2,484 |
||||||||||||||||||
Purchase of minerals in place | 254 |
254 |
||||||||||||||||||||||
Revisions of previous estimates | 20 |
76 |
47 |
23 |
21 |
187 |
||||||||||||||||||
Improved recovery | 1 |
2 |
12 |
15 |
||||||||||||||||||||
Extensions and discoveries | 61 |
34 |
24 |
26 |
5 |
150 |
||||||||||||||||||
Production | (37 |
) | (78 |
) | (65 |
) | (43 |
) | (14 |
) | (237 |
) | ||||||||||||
Sales of minerals in place | (1 |
) | (6 |
) | (2 |
) | (9 |
) | ||||||||||||||||
Reserves at December 31, 1997 | 360 |
985 |
728 |
428 |
343 |
2,844 |
||||||||||||||||||
Purchase of minerals in place | ||||||||||||||||||||||||
Revisions of previous estimates | (20 |
) | 86 |
78 |
38 |
(25 |
) | 157 |
||||||||||||||||
Improved recovery | 17 |
17 |
||||||||||||||||||||||
Extensions and discoveries | 25 |
31 |
39 |
9 |
104 |
|||||||||||||||||||
Production | (36 |
) | (78 |
) | (72 |
) | (42 |
) | (13 |
) | (241 |
) | ||||||||||||
Sales of minerals in place | ||||||||||||||||||||||||
Reserves at December 31, 1998 | 329 |
1,024 |
790 |
433 |
305 |
2,881 |
||||||||||||||||||
Purchase of minerals in place | 6 |
13 |
1 |
79 |
99 |
|||||||||||||||||||
Revisions of previous estimates | 20 |
107 |
52 |
22 |
44 |
245 |
||||||||||||||||||
Improved recovery | 3 |
3 |
||||||||||||||||||||||
Extensions and discoveries | 5 |
8 |
126 |
2 |
11 |
152 |
||||||||||||||||||
Production | (32 |
) | (81 |
) | (71 |
) | (41 |
) | (18 |
) | (243 |
) | ||||||||||||
Sales of minerals in place | ||||||||||||||||||||||||
Reserves at December 31, 1999 | 328 |
1,071 |
900 |
417 |
421 |
3,137 |
||||||||||||||||||
Purchase of minerals in place | 3 |
12 |
46 |
133 |
194 |
|||||||||||||||||||
Revisions of previous estimates | (13 |
) | 42 |
59 |
36 |
166 |
290 |
|||||||||||||||||
Improved recovery | 2 |
9 |
11 |
|||||||||||||||||||||
Extensions and discoveries | 9 |
6 |
32 |
1 |
17 |
65 |
||||||||||||||||||
Production | (28 |
) | (84 |
) | (78 |
) | (45 |
) | (39 |
) | (274 |
) | ||||||||||||
Sales of minerals in place | (1 |
) | (1 |
) | ||||||||||||||||||||
Reserves at December 31, 2000 | 296 |
1,039 |
934 |
455 |
698 |
3,422 |
||||||||||||||||||
Purchase of minerals in place | 118 |
120 |
248 |
486 |
||||||||||||||||||||
Revisions of previous estimates | 29 |
79 |
91 |
37 |
20 |
256 |
||||||||||||||||||
Improved recovery | 11 |
16 |
6 |
33 |
||||||||||||||||||||
Extensions and discoveries | 9 |
8 |
21 |
8 |
24 |
70 |
||||||||||||||||||
Production | (25 |
) | (84 |
) | (81 |
) | (74 |
) | (50 |
) | (314 |
) | ||||||||||||
Sales of minerals in place | (5 |
) | (5 |
) | ||||||||||||||||||||
Reserves at December 31, 2001 | 309 |
1,171 |
976 |
552 |
940 |
3,948 |
||||||||||||||||||
Purchase of minerals in place | 13 |
12 |
25 |
|||||||||||||||||||||
Revisions of previous estimates | 2 |
(31 |
) | 112 |
4 |
(33 |
) | 54 |
||||||||||||||||
Improved recovery | 14 |
1 |
15 |
|||||||||||||||||||||
Extensions and discoveries | 11 |
10 |
14 |
18 |
104 |
157 |
||||||||||||||||||
Production | (30 |
) | (92 |
) | (81 |
) | (77 |
) | (54 |
) | (334 |
) | ||||||||||||
Sales of minerals in place | (37 |
) | (12 |
) | (33 |
) | (82 |
) | ||||||||||||||||
Reserves at December 31, 2002 | 255 |
1,072 |
1,022 |
498 |
936 |
3,783 |
Purchase of minerals in place | 86 |
86 |
||||||||||||||||||||||
Revisions of previous estimates | 21 |
51 |
59 |
52 |
153 |
336 |
||||||||||||||||||
Improved recovery | 15 |
16 |
31 |
|||||||||||||||||||||
Extensions and discoveries | 6 |
32 |
28 |
214 |
280 |
|||||||||||||||||||
Production | (30 |
) | (90 |
) | (87 |
) | (86 |
) | (64 |
) | (357 |
) | ||||||||||||
Sales of minerals in place | (21 |
) | (21 |
) |
- 106 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Proved oil reserves (1) |
(million barrels) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Proved reserves of subsidiaries |
Proved reserves of affiliates and joint ventures |
Total |
Reserves at December 31, 2003 | 252 |
1,080 |
1,038 |
529 |
1,239 |
4,138 |
||||||||||||||||||
Revisions of previous estimates | (1 |
) | (22 |
) | 44 |
12 |
(18 |
) | 15 |
|||||||||||||||
Improved recovery | 11 |
48 |
4 |
63 |
||||||||||||||||||||
Extensions and discoveries | 4 |
20 |
34 |
4 |
144 |
206 |
||||||||||||||||||
Production | (30 |
) | (94 |
) | (104 |
) | (74 |
) | (75 |
) | (377 |
) | ||||||||||||
Sales of minerals in place | (2 |
) | (4 |
) | (25 |
) | (6 |
) | (37 |
) | ||||||||||||||
Reserves at December 31, 2004 | 225 |
967 |
1,047 |
450 |
1,283 |
3,972 |
36 |
4,008 |
||||||||||||||||
Purchase of minerals in place | 2 |
6 |
47 |
55 |
55 |
|||||||||||||||||||
Revisions of previous estimates | 33 |
36 |
(47 |
) | 27 |
(88 |
) | (39 |
) | (9 |
) | (48 |
) | |||||||||||
Improved recovery | 43 |
29 |
15 |
87 |
87 |
|||||||||||||||||||
Extensions and discoveries | 26 |
14 |
21 |
16 |
77 |
77 |
||||||||||||||||||
Production | (32 |
) | (111 |
) | (113 |
) | (65 |
) | (83 |
) | (404 |
) | (2 |
) | (406 |
) | ||||||||
Sales of minerals in place |
|
|
||||||||||||||||||||||
Reserves at December 31, 2005 | 228 |
961 |
936 |
433 |
1,19 |
3,748 |
25 |
3,773 |
Purchase of minerals in place | ||||||||||||||||||||||||
Revisions of previous estimates | 15 | 61 | (85 | ) | 20 | 53 | 64 | 1 | 65 | |||||||||||||||
Improved recovery | 49 | 41 | 14 | 104 | 1 | 105 | ||||||||||||||||||
Extensions and discoveries | 30 | 11 | 62 | 103 | 103 | |||||||||||||||||||
Production | (28 | ) | (119 | ) | (117 | ) | (65 | ) | (61 | ) | (390 | ) | (3 | ) | (393 | ) | ||||||||
Sales of minerals in place | (2 | ) | (170 | ) | (172 | ) | (172 | ) | ||||||||||||||||
Reserves at December 31, 2006 | 215 | 982 | 786 | 386 | 1,088 | 3,457 | 24 | 3,481 |
Proved developed oil reserves |
Reserves at December 31, 1996 | 222 |
712 |
433 |
306 |
43 |
1,716 |
||||||||||||||||||
Reserves at December 31, 1997 | 226 |
680 |
429 |
287 |
50 |
1,672 |
||||||||||||||||||
Reserves at December 31, 1998 | 180 |
689 |
452 |
315 |
70 |
1,706 |
||||||||||||||||||
Reserves at December 31, 1999 | 172 |
681 |
473 |
276 |
148 |
1,750 |
||||||||||||||||||
Reserves at December 31, 2000 | 144 |
650 |
487 |
303 |
189 |
1,773 |
||||||||||||||||||
Reserves at December 31, 2001 | 171 |
685 |
539 |
476 |
443 |
2,314 |
||||||||||||||||||
Reserves at December 31, 2002 | 168 |
610 |
554 |
426 |
483 |
2,241 |
||||||||||||||||||
Reserves at December 31, 2003 | 173 |
640 |
560 |
464 |
610 |
2,447 |
||||||||||||||||||
Reserves at December 31, 2004 | 174 |
655 |
588 |
386 |
668 |
2,471 |
||||||||||||||||||
Reserves at December 31, 2005 | 149 |
697 |
568 |
353 |
564 |
2,331 |
19 |
2,350 |
Reserves at December 31, 2006 | 136 | 713 | 546 | 329 | 402 | 2,126 | 18 | 2,144 |
(1) | Including condensates and natural gas liquids. |
- 107 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Proved natural gas reserves |
(billion cubic feet) | Italy (1) |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated subsidiaries |
Total joint ventures and affiliates |
Total |
Reserves at December 31, 1996 | 7,402 | 2,704 | 736 | 1,316 | 286 | 12,444 | 12,444 | |||||||||||||||||
Purchase of minerals in place | 208 | 4 | 212 | 212 | ||||||||||||||||||||
Revisions of previous estimates | 64 | 9 | (7 | ) | 3 | 22 | 91 | 91 | ||||||||||||||||
Improved recovery | 14 | 14 | 14 | |||||||||||||||||||||
Extensions and discoveries | 127 | 478 | 103 | 708 | 708 | |||||||||||||||||||
Production | (594 | ) | (41 | ) | (8 | ) | (95 | ) | (34 | ) | (772 | ) | (772 | ) | ||||||||||
Sales of minerals in place | (29 | ) | (29 | ) | (29 | ) | ||||||||||||||||||
Reserves at December 31, 1997 | 7,207 | 3,154 | 721 | 1,312 | 274 | 12,668 | 12,668 | |||||||||||||||||
Revisions of previous estimates | 187 | 230 | (76 | ) | 21 | 3 | 365 | 365 | ||||||||||||||||
Extensions and discoveries | 242 | 504 | 58 | 104 | 425 | 1,333 | 1,333 | |||||||||||||||||
Production | (659 | ) | (54 | ) | (7 | ) | (88 | ) | (43 | ) | (851 | ) | (851 | ) | ||||||||||
Reserves at December 31, 1998 | 6,977 | 3,834 | 696 | 1,349 | 659 | 13,515 | 13,515 | |||||||||||||||||
Purchase of minerals in place | 22 | 81 | 123 | 123 | ||||||||||||||||||||
Revisions of previous estimates | 22 | 585 | (28 | ) | 37 | (261 | ) | 355 | 355 | |||||||||||||||
Extensions and discoveries | 33 | 171 | 308 | 2 | 13 | 527 | 527 | |||||||||||||||||
Production | (594 | ) | (105 | ) | (12 | ) | (79 | ) | (65 | ) | (855 | ) | (855 | ) | ||||||||||
Reserves at December 31, 1999 | 6,439 | 4,504 | 964 | 1,331 | 427 | 13,665 | 13,665 | |||||||||||||||||
Purchase of minerals in place | 195 | 150 | 345 | 345 | ||||||||||||||||||||
Revisions of previous estimates | 156 | 255 | (19 | ) | (23 | ) | 379 | 748 | 748 | |||||||||||||||
Improved recovery | 2 | 2 | 2 | |||||||||||||||||||||
Extensions and discoveries | 40 | 546 | 8 | 299 | 893 | 893 | ||||||||||||||||||
Production | (510 | ) | (155 | ) | (23 | ) | (93 | ) | (100 | ) | (881 | ) | (881 | ) | ||||||||||
Reserves at December 31, 2000 | 6,125 | 5,152 | 922 | 1,418 | 1,155 | 14,772 | 14,772 | |||||||||||||||||
Purchase of minerals in place | 17 | 501 | 1,093 | 1,611 | 1,611 | |||||||||||||||||||
Revisions of previous estimates | (37 | ) | 539 | 12 | 148 | 833 | 1,495 | 1,495 | ||||||||||||||||
Extensions and discoveries | 66 | 1 | 18 | 4 | 202 | 291 | 291 | |||||||||||||||||
Production (2) | (531 | ) | (183 | ) | (27 | ) | (175 | ) | (177 | ) | (1,093 | ) | (1,093 | ) | ||||||||||
Sales of minerals in place | (4 | ) | (4 | ) | (4 | ) | ||||||||||||||||||
Reserves at December 31, 2001 | 5,640 | 5,509 | 925 | 1,892 | 3,106 | 17,072 | 17,072 | |||||||||||||||||
Purchase of minerals in place | 87 | 87 | 87 | |||||||||||||||||||||
Revisions of previous estimates | 21 | 257 | 8 | 115 | 1,238 | 1,639 | 1,639 | |||||||||||||||||
Extensions and discoveries | 105 | 9 | 636 | 74 | 223 | 1,047 | 1,047 | |||||||||||||||||
Production (2) | (456 | ) | (212 | ) | (36 | ) | (201 | ) | (228 | ) | (1,133 | ) | (1,133 | ) | ||||||||||
Sales of minerals in place | (15 | ) | (68 | ) | (83 | ) | (83 | ) | ||||||||||||||||
Reserves at December 31, 2002 | 5,295 | 5,563 | 4,533 | 4,899 | 4,339 | 18,629 | 18,629 | |||||||||||||||||
Purchase of minerals in place | 10 | 425 | 8 | 443 | 443 | |||||||||||||||||||
Revisions of previous estimates | (768 | ) | (123 | ) | 172 | 139 | 325 | (255 | ) | (255 | ) | |||||||||||||
Extensions and discoveries | 84 | 242 | 100 | 426 | 426 | |||||||||||||||||||
Production (2) | (455 | ) | (215 | ) | (49 | ) | (229 | ) | (276 | ) | (1,224 | ) | (1,224 | ) | ||||||||||
Sales of minerals in place | (11 | ) | (11 | ) | (11 | ) | ||||||||||||||||||
Reserves at December 31, 2003 | 4,166 | 5,467 | 1,656 | 2,223 | 4,496 | 18,008 | 18,008 | |||||||||||||||||
Revisions of previous estimates | 105 | 814 | 129 | 75 | 84 | 1,207 | 1,207 | |||||||||||||||||
Improved recovery | 10 | 10 | 10 | |||||||||||||||||||||
Extensions and discoveries | 29 | 420 | 38 | 222 | 709 | 709 | ||||||||||||||||||
Production (2) | (409 | ) | (247 | ) | (66 | ) | (220 | ) | (303 | ) | (1,245 | ) | (1,245 | ) | ||||||||||
Sales of minerals in place | (73 | ) | (1 | ) | (65 | ) | (115 | ) | (254 | ) | (254 | ) | ||||||||||||
Reclassification 2004 affiliates and joint ventures data | (21 | ) | (2 | ) | (134 | ) | (157 | ) | 157 |
- 108 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Proved natural gas reserves |
(billion cubic feet) | Italy (1) |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated subsidiaries |
Total joint ventures and affiliates |
Total |
Reserves at December 31, 2004 | 3,818 | 6,432 | 1,727 | 2,051 | 4,250 | 18,278 | 157 | 18,435 | ||||||||||||||||
Purchase of minerals in place | 63 | 8 | 222 | 293 | 293 | |||||||||||||||||||
Revisions of previous estimates | 159 | (6 | ) | (9 | ) | (18 | ) | (368 | ) | (242 | ) | (47 | ) | (289 | ) | |||||||||
Improved recovery | 11 | 11 | 11 | |||||||||||||||||||||
Extensions and discoveries | 1 | 37 | 309 | 50 | 56 | 453 | (20 | ) | 433 | |||||||||||||||
Production (2) | (365 | ) | (357 | ) | (70 | ) | (219 | ) | (281 | ) | (1,292 | ) | (1,292 | ) | ||||||||||
Reserves at December 31, 2005 | 3,676 | 6,117 | 1,965 | 1,864 | 3,879 | 17,501 | 90 | 17,591 | ||||||||||||||||
Purchase of minerals in place | 4 | 4 | 4 | |||||||||||||||||||||
Revisions of previous estimates | 36 | 154 | 31 | 53 | 230 | 504 | (7 | ) | 497 | |||||||||||||||
Extensions and discoveries | 19 | 146 | 34 | 1 | 132 | 332 | 332 | |||||||||||||||||
Production (2) | (340 | ) | (471 | ) | (103 | ) | (218 | ) | (305 | ) | (1,437 | ) | (15 | ) | (1,451 | ) | ||||||||
Sales of minerals in place | (7 | ) | (7 | ) | (7 | ) | ||||||||||||||||||
Reserves at December 31, 2006 | 3,391 | 5,946 | 1,927 | 1,697 | 3,936 | 16,897 | 68 | 16,965 |
Proved developed natural gas reserves |
Reserves at December 31, 1997 | 4,442 | 312 | 144 | 790 | 132 | 5,820 | 5,820 | |||||||||||||||||
Reserves at December 31, 1998 | 4,115 | 516 | 137 | 838 | 184 | 5,790 | 5,790 | |||||||||||||||||
Reserves at December 31, 1999 | 4,201 | 668 | 653 | 811 | 311 | 6,644 | 6,644 | |||||||||||||||||
Reserves at December 31, 2000 | 4,012 | 1,009 | 595 | 810 | 649 | 7,075 | 7,075 | |||||||||||||||||
Reserves at December 31, 2001 | 3,665 | 1,103 | 584 | 1,721 | 1,221 | 8,294 | 8,294 | |||||||||||||||||
Reserves at December 31, 2002 | 3,397 | 1,084 | 863 | 1,727 | 1,283 | 8,354 | 8,354 | |||||||||||||||||
Reserves at December 31, 2003 | 2,966 | 962 | 866 | 2,075 | 3,355 | 10,224 | 10,225 | |||||||||||||||||
Reserves at December 31, 2004 | 2,850 | 1,760 | 924 | 1,845 | 3,122 | 10,501 | 10,501 | |||||||||||||||||
Reserves at December 31, 2005 | 2,704 | 3,060 | 1,289 | 1,484 | 2,622 | 11,159 | 70 | 11,229 | ||||||||||||||||
Reserves at December 31, 2006 | 2,449 | 3,042 | 1,447 | 1,395 | 2,616 | 10,949 | 48 | 10,997 |
(1) | Including 808, 782, 756, 783, 728, 779, 747, 737, 760 and 754 billion cubic feet of natural gas held in storage at December 31, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005 and 2006 respectively. | |
(2) | Starting from 2001 include volumes consumed in operations (34, 47, 53, 80, 93 and 103 billion cubic feet in 2001, 2002, 2003, 2004, 2005 and 2006, respectively). |
- 109 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Results of operations from oil and gas producing activities (1) |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total joint venture and affiliates |
Total |
Year ended December 31, 1997 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 2,701 |
781 |
56 |
7 |
3,545 |
|||||||||||||
sales to unaffiliated entities | 57 |
464 |
994 |
874 |
258 |
2,647 |
||||||||||||
2,758 |
1,245 |
1,050 |
874 |
265 |
6,192 |
|||||||||||||
Production costs | (306 |
) | (393 |
) | (316 |
) | (231 |
) | (58 |
) | (1,304 |
) | ||||||
Exploration expenses | (151 |
) | (133 |
) | (63 |
) | (33 |
) | (97 |
) | (477 |
) | ||||||
Depreciation, amortization and writedowns | (452 |
) | (273 |
) | (214 |
) | (422 |
) | (88 |
) | (1,449 |
) | ||||||
Other income (expense) | (133 |
) | (19 |
) | (70 |
) | 6 |
24 |
(192 |
) | ||||||||
Pretax income from producing activities | 1,716 |
427 |
387 |
194 |
46 |
2,770 |
||||||||||||
Estimated income taxes | (915 |
) | (225 |
) | (263 |
) | (99 |
) | (12 |
) | (1,514 |
) | ||||||
Results of operations from E&P activities | 801 |
202 |
124 |
95 |
34 |
1,256 |
||||||||||||
Year ended December 31, 1998 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 2,216 |
573 |
20 |
3 |
2,812 |
|||||||||||||
sales to unaffiliated entities | 57 |
256 |
711 |
674 |
185 |
1,883 |
||||||||||||
2,273 |
830 |
732 |
674 |
186 |
4,695 |
|||||||||||||
Production costs | (329 |
) | (364 |
) | (254 |
) | (211 |
) | (50 |
) | (1,208 |
) | ||||||
Exploration expenses | (154 |
) | (95 |
) | (105 |
) | (35 |
) | (86 |
) | (475 |
) | ||||||
Depreciation, amortization and writedowns | (787 |
) | (254 |
) | (512 |
) | (517 |
) | (92 |
) | (2,162 |
) | ||||||
Other income (expense) | (98 |
) | (21 |
) | (102 |
) | (10 |
) | (51 |
) | (282 |
) | ||||||
Pretax income from producing activities | 905 |
95 |
(241 |
) | (99 |
) | (91 |
) | 568 |
|||||||||
Estimated income taxes | (382 |
) | (58 |
) | (74 |
) | (7 |
) | (1 |
) | (522 |
) | ||||||
Results of operations from E&P activities | 523 |
37 |
(316 |
) | (106 |
) | (92 |
) | 46 |
|||||||||
Year ended December 31, 1999 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 1,919 |
958 |
1,075 |
650 |
138 |
4,740 |
||||||||||||
sales to unaffiliated entities | 499 |
506 |
81 |
205 |
222 |
1,513 |
||||||||||||
2,418 |
1,464 |
1,156 |
855 |
360 |
6,253 |
|||||||||||||
Production costs | (352 |
) | (370 |
) | (353 |
) | (199 |
) | (52 |
) | (1,326 |
) | ||||||
Exploration expenses | (120 |
) | (69 |
) | (61 |
) | (39 |
) | (83 |
) | (372 |
) | ||||||
Depreciation, amortization and writedowns | (462 |
) | (316 |
) | (253 |
) | (336 |
) | (81 |
) | (1,448 |
) | ||||||
Other income (expense) | (183 |
) | (99 |
) | (91 |
) | 3 |
(77 |
) | (447 |
) | |||||||
Pretax income from producing activities | 1,301 |
610 |
398 |
284 |
67 |
2,660 |
||||||||||||
Estimated income taxes | (542 |
) | (254 |
) | (219 |
) | (110 |
) | (19 |
) | (1,144 |
) | ||||||
Results of operations from E&P activities | 759 |
356 |
179 |
174 |
48 |
1,516 |
||||||||||||
Year ended December 31, 2000 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 3,336 |
1,748 |
2,114 |
1,205 |
531 |
8,934 |
||||||||||||
sales to unaffiliated entities | 136 |
1,134 |
190 |
373 |
660 |
2,493 |
||||||||||||
3,472 |
2,882 |
2,304 |
1,578 |
1,191 |
11,427 |
|||||||||||||
Production costs | (399 |
) | (459 |
) | (517 |
) | (238 |
) | (125 |
) | (1,738 |
) | ||||||
Exploration expenses | (192 |
) | (84 |
) | (60 |
) | (45 |
) | (180 |
) | (561 |
) | ||||||
Depreciation, amortization and writedowns | (407 |
) | (393 |
) | (327 |
) | (358 |
) | (375 |
) | (1,860 |
) | ||||||
Other income (expense) | (30 |
) | (196 |
) | (132 |
) | (55 |
) | (117 |
) | (530 |
) | ||||||
Pretax income from producing activities | 2,444 |
1,750 |
1,268 |
882 |
394 |
6,738 |
||||||||||||
Estimated income taxes | (986 |
) | (877 |
) | (678 |
) | (479 |
) | (78 |
) | (3,098 |
) | ||||||
Results of operations from E&P activities | 1,458 |
873 |
590 |
403 |
316 |
3,640 |
- 110 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Results of operations from oil and gas producing activities (1) |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total joint venture and affiliates |
Total |
Year ended December 31, 2001 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 3,160 |
1,440 |
1,807 |
1,265 |
322 |
7,994 |
||||||||||||
sales to unaffiliated entities | 140 |
1,181 |
169 |
1,250 |
1,271 |
4,011 |
||||||||||||
3,300 |
2,621 |
1,976 |
2,515 |
1,593 |
12,005 |
|||||||||||||
Operating expenses | (327 |
) | (337 |
) | (221 |
) | (495 |
) | (270 |
) | (1,650 |
) | ||||||
Production taxes | (152 |
) | (124 |
) | (256 |
) | (27 |
) | (36 |
) | (595 |
) | ||||||
Exploration expenses | (77 |
) | (104 |
) | (70 |
) | (51 |
) | (326 |
) | (628 |
) | ||||||
Depreciation, amortization and writedowns | (474 |
) | (417 |
) | (315 |
) | (704 |
) | (612 |
) | (2,522 |
) | ||||||
Other income (expense) | (87 |
) | (129 |
) | (129 |
) | (79 |
) | (214 |
) | (638 |
) | ||||||
Pretax income from producing activities | 2,183 |
1,510 |
985 |
1,159 |
135 |
5,972 |
||||||||||||
Estimated income taxes | (877 |
) | (605 |
) | (628 |
) | (672 |
) | (136 |
) | (2,918 |
) | ||||||
Results of operations from E&P activities | 1,306 |
905 |
357 |
487 |
(1 |
) | 3,054 |
|||||||||||
Year ended December 31, 2002 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 2,871 |
1,673 |
1,856 |
1,748 |
281 |
8,429 |
||||||||||||
sales to unaffiliated entities | 253 |
1,226 |
186 |
695 |
1,414 |
3,774 |
||||||||||||
3,124 |
2,899 |
2,042 |
2,443 |
1,695 |
12,203 |
|||||||||||||
Operating expenses | (218 |
) | (352 |
) | (317 |
) | (490 |
) | (237 |
) | (1,614 |
) | ||||||
Production taxes | (138 |
) | (110 |
) | (210 |
) | (20 |
) | (47 |
) | (525 |
) | ||||||
Exploration expenses | (80 |
) | (71 |
) | (116 |
) | (117 |
) | (294 |
) | (678 |
) | ||||||
Depreciation, amortization and writedowns | (528 |
) | (532 |
) | (390 |
) | (863 |
) | (758 |
) | (3,071 |
) | ||||||
Other income (expense) | (258 |
) | (186 |
) | (122 |
) | (47 |
) | (183 |
) | (796 |
) | ||||||
Pretax income from producing activities | 1,902 |
1,648 |
887 |
906 |
176 |
5,519 |
||||||||||||
Estimated income taxes | (751 |
) | (852 |
) | (578 |
) | (445 |
) | (83 |
) | (2,709 |
) | ||||||
Results of operations from E&P activities | 1,151 |
796 |
309 |
461 |
93 |
2,810 |
||||||||||||
Year ended December 31, 2003 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 2,609 |
1,469 |
1,946 |
1,913 |
345 |
8,282 |
||||||||||||
sales to unaffiliated entities | 153 |
1,188 |
164 |
822 |
1,595 |
3,922 |
||||||||||||
2,762 |
2,657 |
2,110 |
2,735 |
1,940 |
12,204 |
|||||||||||||
Operating expenses | (222 |
) | (316 |
) | (283 |
) | (446 |
) | (235 |
) | (1,502 |
) | ||||||
Production taxes | (136 |
) | (97 |
) | (235 |
) | (11 |
) | (79 |
) | (558 |
) | ||||||
Exploration expenses | (89 |
) | (70 |
) | (113 |
) | (96 |
) | (276 |
) | (644 |
) | ||||||
Depreciation, amortization and writedowns | (458 |
) | (420 |
) | (377 |
) | (759 |
) | (734 |
) | (2,748 |
) | ||||||
Other income (expense) | (170 |
) | (264 |
) | (121 |
) | 14 |
(289 |
) | (830 |
) | |||||||
Accretion of discount (SFAS 143) (2) | (37 |
) | (5 |
) | (14 |
) | (42 |
) | (4 |
) | (102 |
) | ||||||
Pretax income from producing activities | 1,650 |
1,485 |
967 |
1,395 |
323 |
5,820 |
||||||||||||
Estimated income taxes | (629 |
) | (788 |
) | (617 |
) | (750 |
) | (111 |
) | (2,895 |
) | ||||||
Results of operations from E&P activities | 1,021 |
697 |
350 |
645 |
212 |
2,925 |
- 111 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Results of operations from oil and gas producing activities (1) |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total joint venture and affiliates |
Total |
Year ended December 31, 2004 | ||||||||||||||||||
Revenues: | ||||||||||||||||||
sales and transfers to affiliates | 2,633 |
1,868 |
2,762 |
2,083 |
508 |
9,854 |
||||||||||||
sales to unaffiliated entities | 148 |
1,364 |
306 |
709 |
2,086 |
4,613 |
||||||||||||
2,781 |
3,232 |
3,068 |
2,792 |
2,594 |
14,467 |
|||||||||||||
Operating expenses | (223 |
) | (292 |
) | (322 |
) | (405 |
) | (289 |
) | (1,531 |
) | ||||||
Production taxes | (118 |
) | (91 |
) | (379 |
) | (13 |
) | (163 |
) | (764 |
) | ||||||
Exploration expenses | (57 |
) | (47 |
) | (71 |
) | (93 |
) | (155 |
) | (423 |
) | ||||||
Depreciation, amortization and writedowns | (489 |
) | (437 |
) | (482 |
) | (687 |
) | (849 |
) | (2,944 |
) | ||||||
Other income (expense) | (98 |
) | (368 |
) | (216 |
) | 97 |
(208 |
) | (793 |
) | |||||||
Accretion of discount (SFAS 143) (2) | (37 |
) | (5 |
) | (17 |
) | (15 |
) | (6 |
) | (80 |
) | ||||||
Pretax income from producing activities | 1,759 |
1,992 |
1,581 |
1,676 |
924 |
7,932 |
||||||||||||
Estimated income taxes | (632 |
) | (994 |
) | (945 |
) | (948 |
) | (305 |
) | (3,824 |
) | ||||||
Results of operations from E&P activities | 1,127 |
998 |
636 |
728 |
619 |
4,108 |
Year ended December 31, 2005 | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||
sales and transfers to affiliates | 3,133 | 2,813 | 4,252 | 2,707 | 828 | 13,733 | |||||||||||||||
sales to unaffiliated entities | 161 | 2,579 | 394 | 889 | 2,883 | 106 | 7,012 | ||||||||||||||
3,294 | 5,392 | 4,646 | 3,596 | 3,711 | 106 | 20,745 | |||||||||||||||
Operating expenses | (261 | ) | (390 | ) | (363 | ) | (417 | ) | (338 | ) | (16 | ) | (1,785 | ) | |||||||
Production taxes | (157 | ) | (98 | ) | (513 | ) | (15 | ) | (207 | ) | (3 | ) | (993 | ) | |||||||
Exploration expenses | (32 | ) | (59 | ) | (38 | ) | (125 | ) | (181 | ) | (30 | ) | (465 | ) | |||||||
Depreciation, amortization and writedowns | (512 | ) | (711 | ) | (632 | ) | (710 | ) | (1,007 | ) | (58 | ) | (3,630 | ) | |||||||
Other income (expense) | (205 | ) | (400 | ) | (176 | ) | 55 | (251 | ) | 7 | (970 | ) | |||||||||
Accretion of discount (SFAS 143) (2) | (45 | ) | (9 | ) | (15 | ) | (31 | ) | (6 | ) | (106 | ) | |||||||||
Pretax income from producing activities | 2,082 | 3,725 | 2,909 | 2,353 | 1,721 | 6 | 12,796 | ||||||||||||||
Estimated income taxes | (762 | ) | (2,197 | ) | (1,818 | ) | (1,386 | ) | (580 | ) | (19 | ) | (6,762 | ) | |||||||
Results of operations from E&P activities | 1,320 | 1,528 | 1,091 | 967 | 1,141 | (13 | ) | 6,034 | |||||||||||||
Year ended December 31, 2006 | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||
sales and transfers to affiliates | 3,601 | 4,185 | 4,817 | 3,295 | 973 | 16,871 | |||||||||||||||
sales to unaffiliated entities | 184 | 3,012 | 967 | 983 | 2,594 | 120 | 7,860 | ||||||||||||||
3,785 | 7,197 | 5,784 | 4,278 | 3,567 | 120 | 24,731 | |||||||||||||||
Operating expenses | (249 | ) | (496 | ) | (475 | ) | (481 | ) | (338 | ) | (18 | ) | (2,057 | ) | |||||||
Production taxes | (181 | ) | (95 | ) | (475 | ) | (82 | ) | (3 | ) | (836 | ) | |||||||||
Exploration expenses | (70 | ) | (101 | ) | (90 | ) | (100 | ) | (193 | ) | (9 | ) | (563 | ) | |||||||
Depreciation, amortization and writedowns | (454 | ) | (869 | ) | (778 | ) | (755 | ) | (1,015 | ) | (42 | ) | (3,913 | ) | |||||||
Other income (expense) | (287 | ) | (569 | ) | (195 | ) | 44 | (343 | ) | 7 | (1,343 | ) | |||||||||
Accretion of discount (SFAS 143) (2) | (34 | ) | (12 | ) | (12 | ) | (40 | ) | (14 | ) | (112 | ) | |||||||||
Pretax income from producing activities | 2,510 | 5,055 | 3,759 | 2,946 | 1,582 | 55 | 15,907 | ||||||||||||||
Estimated income taxes | (928 | ) | (2,979 | ) | (2,094 | ) | (1,821 | ) | (600 | ) | (31 | ) | (8,453 | ) | |||||||
Results of operations from E&P activities | 1,582 | 2,076 | 1,665 | 1,125 | 982 | 24 | 7,454 |
(1) | Results of
operations from oil and gas producing activities,
including services for the modulation of gas supply due
to seasonal swings in demand, represent only those
revenues and expenses directly associated with Enis
oil and gas production. These amounts do not include any allocation of interest expense or corporate overhead and, therefore, are not necessarily indicative of the contributions to consolidated net earnings of Eni. Such income taxes have been calculated by applying the tax rate of the country where Eni operates to the pretax income from exploration and production activities. Revenues and income taxes include taxes due in PSAs where Enis tax liability is paid by the State Company on behalf of Eni. |
|
(2) | Represents the financial effect of the passage of time relating to Enis future asset retirement obligations pursuant to SFAS 143 Accounting for asset retirement obligations. |
- 112 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Capitalized costs (1) |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total joint venture and affiliates |
Total |
At December 31, 1997 | ||||||||||||||||||
Proved mineral interests | 5,393 |
4,166 |
3,734 |
3,270 |
763 |
17,326 |
||||||||||||
Unproved mineral interests | 7 |
188 |
58 |
253 |
||||||||||||||
Support equipment and facilities | 427 |
15 |
139 |
105 |
17 |
703 |
||||||||||||
Incomplete wells and other | 991 |
236 |
321 |
494 |
36 |
2,078 |
||||||||||||
Gross capitalized costs | 6,811 |
4,424 |
4,382 |
3,869 |
874 |
20,360 |
||||||||||||
Accumulated depreciation, depletion and amortization | (3,584 |
) | (2,267 |
) | (2,357 |
) | (1,725 |
) | (475 |
) | (10,408 |
) | ||||||
Net capitalized costs | 3,227 |
2,157 |
2,025 |
2,144 |
399 |
9,952 |
||||||||||||
At December 31, 1998 | ||||||||||||||||||
Proved mineral interests | 5,794 |
4,258 |
3,963 |
3,446 |
794 |
18,255 |
||||||||||||
Unproved mineral interests | 14 |
177 |
127 |
318 |
||||||||||||||
Support equipment and facilities | 451 |
23 |
142 |
95 |
14 |
725 |
||||||||||||
Incomplete wells and other | 1,172 |
342 |
234 |
651 |
194 |
2,593 |
||||||||||||
Gross capitalized costs | 7,417 |
4,637 |
4,516 |
4,192 |
1,129 |
21,891 |
||||||||||||
Accumulated depreciation, depletion and amortization | (4,272 |
) | (2,395 |
) | (2,689 |
) | (2,078 |
) | (500 |
) | (11,934 |
) | ||||||
Net capitalized costs | 3,145 |
2,242 |
1,827 |
2,114 |
629 |
9,957 |
||||||||||||
At December 31, 1999 | ||||||||||||||||||
Proved mineral interests | 6,255 |
5,480 |
5,117 |
4,299 |
1,529 |
22,680 |
||||||||||||
Unproved mineral interests | 2 |
130 |
230 |
381 |
743 |
|||||||||||||
Support equipment and facilities | 487 |
29 |
179 |
149 |
18 |
862 |
||||||||||||
Incomplete wells and other | 1,077 |
337 |
181 |
649 |
414 |
2,658 |
||||||||||||
Gross capitalized costs | 7,821 |
5,976 |
5,707 |
5,097 |
2,342 |
26,943 |
||||||||||||
Accumulated depreciation, depletion and amortization | (4,609 |
) | (3,095 |
) | (3,393 |
) | (2,610 |
) | (663 |
) | (14,370 |
) | ||||||
Net capitalized costs | 3,212 |
2,881 |
2,314 |
2,487 |
1,679 |
12,573 |
||||||||||||
At December 31, 2000 | ||||||||||||||||||
Proved mineral interests | 6,509 |
6,339 |
5,885 |
5,395 |
3,009 |
27,137 |
||||||||||||
Unproved mineral interests | 175 |
281 |
101 |
646 |
1,203 |
|||||||||||||
Support equipment and facilities | 241 |
30 |
170 |
49 |
28 |
518 |
||||||||||||
Incomplete wells and other | 1,195 |
413 |
316 |
547 |
688 |
3,159 |
||||||||||||
Gross capitalized costs | 7,945 |
6,957 |
6,652 |
6,092 |
4,371 |
32,017 |
||||||||||||
Accumulated depreciation, depletion and amortization | (4,669 |
) | (3,718 |
) | (3,935 |
) | (2,893 |
) | (1,081 |
) | (16,296 |
) | ||||||
Net capitalized costs | 3,276 |
3,239 |
2,717 |
3,199 |
3,290 |
15,721 |
||||||||||||
At December 31, 2001 | ||||||||||||||||||
Proved mineral interests | 7,645 |
7,624 |
6,723 |
7,986 |
5,382 |
35,360 |
||||||||||||
Unproved mineral interests | 672 |
238 |
811 |
1,913 |
3,634 |
|||||||||||||
Support equipment and facilities | 295 |
56 |
191 |
52 |
47 |
641 |
||||||||||||
Incomplete wells and other | 845 |
508 |
501 |
225 |
1,718 |
3,797 |
||||||||||||
Gross capitalized costs | 8,785 |
8,860 |
7,653 |
9,074 |
9,060 |
43,432 |
||||||||||||
Accumulated depreciation, depletion and amortization | (5,109 |
) | (4,333 |
) | (4,378 |
) | (3,612 |
) | (1,894 |
) | (19,326 |
) | ||||||
Net capitalized costs | 3,676 |
4,527 |
3,275 |
5,462 |
7,166 |
24,106 |
At December 31, 2002 | ||||||||||||||||||
Proved mineral interests | 8,030 |
6,782 |
6,377 |
8,112 |
5,638 |
34,939 |
||||||||||||
Unproved mineral interests | 527 |
130 |
684 |
1,593 |
2,934 |
|||||||||||||
Support equipment and facilities | 251 |
43 |
174 |
49 |
51 |
568 |
||||||||||||
Incomplete wells and other | 773 |
889 |
795 |
147 |
1,958 |
4,562 |
||||||||||||
Gross capitalized costs | 9,054 |
8,241 |
7,476 |
8,992 |
9,240 |
43,003 |
||||||||||||
Accumulated depreciation, depletion and amortization | (5,427 |
) | (4,090 |
) | (4,048 |
) | (4,192 |
) | (2,262 |
) | (20,019 |
) | ||||||
Net capitalized costs | 3,627 |
4,151 |
3,428 |
4,800 |
6,978 |
22,984 |
- 113 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Capitalized costs (1) |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total joint venture and affiliates |
Total |
At December 31, 2003 | ||||||||||||||||||
Proved mineral interests | 8,766 |
6,103 |
6,141 |
8,291 |
6,389 |
35,690 |
||||||||||||
Unproved mineral interests | 329 |
83 |
696 |
1,272 |
2,380 |
|||||||||||||
Support equipment and facilities | 262 |
594 |
208 |
32 |
51 |
1,147 |
||||||||||||
Incomplete wells and other | 826 |
1,254 |
1,098 |
223 |
1,413 |
4,814 |
||||||||||||
Gross capitalized costs | 9,854 |
8,280 |
7,530 |
9,242 |
9,125 |
44,031 |
||||||||||||
Accumulated depreciation, depletion and amortization | (6,186 |
) | (3,799 |
) | (3,785 |
) | (4,252 |
) | (2,657 |
) | (20,679 |
) | ||||||
Net capitalized costs | 3,668 |
4,481 |
3,745 |
4,990 |
6,468 |
23,352 |
||||||||||||
At December 31, 2004 | ||||||||||||||||||
Proved mineral interests | 9,056 |
7,192 |
6,288 |
7,198 |
7,698 |
37,432 |
||||||||||||
Unproved mineral interests | 272 |
70 |
561 |
1,103 |
2,006 |
|||||||||||||
Support equipment and facilities | 252 |
1,056 |
209 |
33 |
75 |
1,625 |
||||||||||||
Incomplete wells and other | 662 |
468 |
1,038 |
397 |
882 |
3,447 |
||||||||||||
Gross capitalized costs | 9,970 |
8,988 |
7,605 |
8,189 |
9,758 |
44,510 |
||||||||||||
Accumulated depreciation, depletion and amortization | (6,416 |
) | (3,887 |
) | (3,907 |
) | (3,733 |
) | (3,252 |
) | (21,195 |
) | ||||||
Net capitalized costs | 3,554 |
5,101 |
3,698 |
4,456 |
6,506 |
23,315 |
||||||||||||
At December 31, 2005 | |||||||||||||||||||||
Proved mineral interests | 9,756 | 9,321 | 8,733 | 8,350 | 9,463 | 435 | 46,058 | ||||||||||||||
Unproved mineral interests | 33 | 197 | 134 | 413 | 1,265 | 55 | 2,097 | ||||||||||||||
Support equipment and facilities | 253 | 1,385 | 272 | 33 | 93 | 9 | 2,045 | ||||||||||||||
Incomplete wells and other | 657 | 638 | 728 | 221 | 1,895 | 53 | 4,192 | ||||||||||||||
Gross capitalized costs | 10,699 | 11,541 | 9,867 | 9,017 | 12,716 | 552 | 54,392 | ||||||||||||||
Accumulated depreciation, depletion and amortization | (6,888 | ) | (5,113 | ) | (5,193 | ) | (4,619 | ) | (4,697 | ) | (316 | ) | (26,826 | ) | |||||||
Net capitalized costs | 3,811 | 6,428 | 4,674 | 4,398 | 8,019 | 236 | 27,566 | ||||||||||||||
At December 31, 2006 | |||||||||||||||||||||
Proved mineral interests | 10,780 | 9,335 | 8,476 | 8,790 | 9,424 | 436 | 47,241 | ||||||||||||||
Unproved mineral interests | 33 | 132 | 385 | 460 | 1,106 | 35 | 2,151 | ||||||||||||||
Support equipment and facilities | 287 | 1,238 | 451 | 33 | 98 | 8 | 2,115 | ||||||||||||||
Incomplete wells and other | 655 | 599 | 812 | 300 | 2,248 | 51 | 4,665 | ||||||||||||||
Gross capitalized costs | 11,755 | 11,304 | 10,124 | 9,583 | 12,876 | 530 | 56,172 | ||||||||||||||
Accumulated depreciation, depletion and amortization | (7,184 | ) | (5,403 | ) | (5,402 | ) | (5,345 | ) | (5,187 | ) | (311 | ) | (28,832 | ) | |||||||
Net capitalized costs | 4,571 | 5,901 | 4,722 | 4,238 | 7,689 | 219 | 27,340 |
(1) | Capitalized costs represent the total expenditure for proved and unproved mineral interests and related support equipment and facilities utilized in oil and gas exploration and production activities, together with related accumulated depreciation, depletion and amortization. |
- 114 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Costs incurred (1) |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates |
Total |
Year ended December 31, 1997 | ||||||||||||||||
Proved property acquisitions | 48 | 5 | 4 | 2 | 59 | 59 | ||||||||||
Unproved property acquisitions | 5 | 16 | 15 | 36 | 36 | |||||||||||
Exploration | 278 | 236 | 112 | 51 | 99 | 776 | 776 | |||||||||
Development | 558 | 212 | 288 | 394 | 66 | 1,518 | 1,518 | |||||||||
Costs incurred | 884 | 458 | 420 | 445 | 182 | 2,389 | 2,389 | |||||||||
Year ended December 31, 1998 | ||||||||||||||||
Proved property acquisitions | 27 | 9 | 67 | 103 | 103 | 103 | ||||||||||
Unproved property acquisitions | 12 | 82 | 94 | 94 | 94 | |||||||||||
Exploration | 303 | 171 | 150 | 51 | 112 | 786 | 786 | |||||||||
Development | 488 | 353 | 367 | 583 | 197 | 1,988 | 1,988 | |||||||||
Costs incurred | 791 | 563 | 526 | 634 | 458 | 2,971 | 2,971 | |||||||||
Year ended December 31, 1999 | ||||||||||||||||
Proved property acquisitions | 54 | 102 | 9 | 380 | 545 | 545 | ||||||||||
Unproved property acquisitions | 2 | 102 | 34 | 234 | 372 | 372 | ||||||||||
Exploration | 194 | 92 | 87 | 44 | 121 | 538 | 538 | |||||||||
Development | 433 | 356 | 357 | 400 | 318 | 1,864 | 1,864 | |||||||||
Costs incurred | 683 | 652 | 487 | 444 | 1,053 | 3,319 | 3,319 | |||||||||
Year ended December 31, 2000 | ||||||||||||||||
Proved property acquisitions | 8 | 32 | 443 | 880 | 1,363 | 1,363 | 1,363 | |||||||||
Unproved property acquisitions | 30 | 11 | 67 | 149 | 257 | 257 | 257 | |||||||||
Exploration | 155 | 151 | 174 | 86 | 326 | 892 | 892 | |||||||||
Development | 567 | 415 | 372 | 346 | 617 | 2,317 | 2,317 | |||||||||
Costs incurred | 722 | 604 | 589 | 942 | 1,972 | 4,829 | 4,829 | |||||||||
Year ended December 31, 2001 | ||||||||||||||||
Proved property acquisitions | 14 | 503 | 1,411 | 1,254 | 3,182 | 3,182 | ||||||||||
Unproved property acquisitions | 438 | 495 | 704 | 1,637 | 1,637 | 1,637 | ||||||||||
Exploration | 89 | 139 | 97 | 166 | 598 | 1,089 | 1,089 | |||||||||
Development | 600 | 498 | 698 | 328 | 1,337 | 3,461 | 3,461 | |||||||||
Costs incurred | 703 | 1,578 | 795 | 2,400 | 3,893 | 9,369 | 9,369 | |||||||||
Year ended December 31, 2002 | ||||||||||||||||
Proved property acquisitions | 104 | 24 | 128 | 128 | 128 | |||||||||||
Unproved property acquisitions | 22 | 167 | 189 | 189 | 189 | |||||||||||
Exploration | 69 | 116 | 203 | 84 | 430 | 902 | 902 | |||||||||
Development | 440 | 724 | 986 | 316 | 1,622 | 4,088 | 4,088 | |||||||||
Costs incurred | 509 | 840 | 1,189 | 526 | 2,243 | 5,307 | 5,307 | |||||||||
Year ended December 31, 2003 | ||||||||||||||||
Proved property acquisitions | 308 | 8 | 316 | 316 | 316 | |||||||||||
Unproved property acquisitions | 125 | 6 | 131 | 131 | 131 | |||||||||||
Exploration | 67 | 80 | 138 | 125 | 243 | 653 | 653 | |||||||||
Development (2) | 449 | 1,106 | 1,268 | 286 | 1,454 | 4,563 | 4,563 | |||||||||
Costs incurred | 516 | 1,186 | 1,406 | 844 | 1,711 | 5,663 | 5,663 | |||||||||
Year ended December 31, 2004 | ||||||||||||||||
Proved property acquisitions | ||||||||||||||||
Unproved property acquisitions | ||||||||||||||||
Exploration | 64 | 104 | 71 | 66 | 194 | 499 | 499 | |||||||||
Development (2) | 431 | 965 | 881 | 391 | 1,407 | 4,075 | 4,075 | |||||||||
Costs incurred | 495 | 1,069 | 952 | 457 | 1,601 | 4,574 | 4,574 |
- 115 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Costs incurred (1) |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates |
Total |
Year ended December 31, 2005 | ||||||||||||||||
Proved property acquisitions | 19 | 16 | 99 | 134 | 134 | |||||||||||
Unproved property acquisitions | 13 | 44 | 99 | 156 | 156 | |||||||||||
Exploration | 45 | 153 | 75 | 127 | 264 | 664 | 18 | 682 | ||||||||
Development (2) | 644 | 960 | 909 | 528 | 1,396 | 4,437 | 31 | 4,468 | ||||||||
Costs incurred | 721 | 1,113 | 1,044 | 655 | 1,858 | 5,391 | 49 | 5,440 | ||||||||
Year ended December 31, 2006 | ||||||||||||||||
Proved property acquisitions | 139 | 10 | 149 | 149 | ||||||||||||
Unproved property acquisitions | 3 | 3 | 3 | |||||||||||||
Exploration | 128 | 270 | 471 | 174 | 305 | 1,348 | 26 | 1,374 | ||||||||
Development (2) | 1,120 | 893 | 963 | 538 | 1,365 | 4,879 | 31 | 4,910 | ||||||||
Costs incurred | 1,387 | 1,173 | 1,434 | 712 | 1,673 | 6,379 | 57 | 6,436 |
(1) | Costs incurred represent amounts both capitalized and expensed as incurred in connection with oil and gas producing activities. | |
(2) | Includes euro 84 million, euro 233 million, euro 588 million and euro 1,241 million of costs capitalized during 2003, 2004, 2005 and 2006 for assets retirement obligations pursuant to SFAS 143 Accounting for asset retirement obligations. |
- 116 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
Estimated future cash
inflows represent the revenues that would be received
from production and are determined by applying year-end
prices of oil and gas to the estimated future production
of proved reserves. Future price changes are considered
only to extent provided by contractual arrangements.
Estimated future development and production costs are
determined by estimating the expenditures to be incurred
in developing and producing the proved reserves at the
end of the year. Neither the effects of price and cost
escalations nor expected future changes in technology and
operating practices have been considered. The standardized measure is calculated as the excess of future cash inflows from proved reserves less future costs of producing and developing the reserves, future income taxes and a yearly 10% discount factor. Future cash flows as of December 31, 2004, 2005 and 2006 include amounts that Enis Gas & Power segment and other gas companies correspond for storages services, required to support market demand flexibility needs. |
Future production costs
include the estimated expenditures related to the
production of proved reserves plus any production taxes
without consideration of future inflation. Future
development costs include the estimated costs of drilling
development wells and installation of production
facilities, plus the net costs associated with
dismantlement and abandonment of wells and facilities,
under the assumption that year-end costs continue without
considering future inflation. Future income taxes were
calculated in accordance with the tax laws of the
countries in which Eni operates. The standardized measure of discounted future net cash flows, related to the preceding proved oil and gas reserves, is calculated in accordance with the requirements of Statement of Financial Accounting Standard No. 69. The standardized measure does not purport to reflect realizable values or fair market value of Enis proved reserves. An estimate of fair value would also take into account, among other things, the expected recovery of reserves in excess of proved reserves, anticipated changes in future prices and costs and a discount factor representative of the risks inherent in producing oil and gas. |
- 117 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Standardized measure of discounted future net cash flows |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated | Total joint venture and affiliates |
Total |
At December 31, 1997 | ||||||||||||||||||
Future cash inflows | 27,586 |
20,370 |
10,989 |
9,407 |
4,895 |
73,247 |
||||||||||||
Future production costs | (3,585 |
) | (6,994 |
) | (3,440 |
) | (2,674 |
) | (1,257 |
) | (17,950 |
) | ||||||
Future development and abandonment costs | (2,489 |
) | (3,742 |
) | (1,318 |
) | (1,237 |
) | (1,183 |
) | (9,969 |
) | ||||||
Future net inflows before income taxes | 21,512 |
9,634 |
6,231 |
5,496 |
2,455 |
45,328 |
||||||||||||
Future income taxes | (7,998 |
) | (2,615 |
) | (3,526 |
) | (2,290 |
) | (625 |
) | (17,054 |
) | ||||||
Future net cash flows | 13,514 |
7,019 |
2,705 |
3,206 |
1,830 |
28,274 |
||||||||||||
10% discount | (5,024 |
) | (3,979 |
) | (1,009 |
) | (1,028 |
) | (1,116 |
) | (12,156 |
) | ||||||
Standardized measure of discounted future net cash flows | 8,490 |
3,040 |
1,696 |
2,178 |
714 |
16,118 |
||||||||||||
At December 31, 1998 | ||||||||||||||||||
Future cash inflows | 18,312 |
13,676 |
7,111 |
6,792 |
2,600 |
48,491 |
||||||||||||
Future production costs | (3,134 |
) | (6,196 |
) | (2,978 |
) | (2,700 |
) | (836 |
) | (15,844 |
) | ||||||
Future development and abandonment costs | (2,544 |
) | (3,704 |
) | (1,207 |
) | (895 |
) | (972 |
) | (9,322 |
) | ||||||
Future net inflows before income taxes | 12,634 |
3,776 |
2,926 |
3,197 |
792 |
23,325 |
||||||||||||
Future income taxes | (4,489 |
) | (749 |
) | (1,198 |
) | (1,062 |
) | (192 |
) | (7,690 |
) | ||||||
Future net cash flows | 8,145 |
3,027 |
1,728 |
2,135 |
600 |
15,635 |
||||||||||||
10% discount | (2,858 |
) | (2,027 |
) | (650 |
) | (608 |
) | (433 |
) | (6,576 |
) | ||||||
Standardized measure of discounted future net cash flows | 5,287 |
1,000 |
1,078 |
1,527 |
167 |
9,059 |
||||||||||||
At December 31, 1999 | ||||||||||||||||||
Future cash inflows | 29,900 |
34,457 |
21,177 |
12,831 |
9,181 |
107,546 |
||||||||||||
Future production costs | (3,972 |
) | (7,782 |
) | (5,212 |
) | (3,528 |
) | (1,375 |
) | (21,869 |
) | ||||||
Future development and abandonment costs | (2,264 |
) | (4,584 |
) | (2,711 |
) | (893 |
) | (1,731 |
) | (12,183 |
) | ||||||
Future net inflows before income taxes | 23,664 |
22,091 |
13,254 |
8,410 |
6,075 |
73,494 |
||||||||||||
Future income taxes | (9,168 |
) | (10,662 |
) | (8,012 |
) | (4,006 |
) | (1,594 |
) | (33,442 |
) | ||||||
Future net cash flows | 14,496 |
11,429 |
5,242 |
4,404 |
4,481 |
40,052 |
||||||||||||
10% discount | (5,618 |
) | (5,886 |
) | (2,238 |
) | (1,269 |
) | (2,288 |
) | (17,299 |
) | ||||||
Standardized measure of discounted future net cash flows | 8,878 |
5,543 |
3,004 |
3,135 |
2,193 |
22,753 |
||||||||||||
At December 31, 2000 | ||||||||||||||||||
Future cash inflows | 50,505 |
39,551 |
22,057 |
16,761 |
17,778 |
146,652 |
||||||||||||
Future production costs | (6,310 |
) | (9,770 |
) | (5,875 |
) | (3,349 |
) | (2,999 |
) | (28,303 |
) | ||||||
Future development and abandonment costs | (2,310 |
) | (4,981 |
) | (2,708 |
) | (860 |
) | (2,504 |
) | (13,363 |
) | ||||||
Future net inflows before income taxes | 41,885 |
24,800 |
13,474 |
12,552 |
12,275 |
104,986 |
||||||||||||
Future income taxes | (15,627 |
) | (11,524 |
) | (7,938 |
) | (6,365 |
) | (2,835 |
) | (44,289 |
) | ||||||
Future net cash flows | 26,258 |
13,276 |
5,536 |
6,187 |
9,440 |
60,697 |
||||||||||||
10% discount | (12,203 |
) | (7,146 |
) | (2,370 |
) | (1,867 |
) | (4,410 |
) | (27,996 |
) | ||||||
Standardized measure of discounted future net cash flows | 14,055 |
6,130 |
3,166 |
4,320 |
5,030 |
32,701 |
||||||||||||
At December 31, 2001 | ||||||||||||||||||
Future cash inflows | 32,310 |
37,780 |
20,154 |
17,444 |
20,715 |
128,403 |
||||||||||||
Future production costs | (5,344 |
) | (10,941 |
) | (5,779 |
) | (4,466 |
) | (5,073 |
) | (31,603 |
) | ||||||
Future development and abandonment costs | (2,577 |
) | (5,284 |
) | (3,194 |
) | (1,593 |
) | (2,607 |
) | (15,255 |
) | ||||||
Future net inflows before income taxes | 24,389 |
21,555 |
11,181 |
11,385 |
13,035 |
81,545 |
||||||||||||
Future income taxes | (8,918 |
) | (9,258 |
) | (6,374 |
) | (5,584 |
) | (3,119 |
) | (33,253 |
) | ||||||
Future net cash flows | 15,471 |
12,297 |
4,807 |
5,801 |
9,916 |
48,292 |
||||||||||||
10% discount | (6,925 |
) | (6,612 |
) | (1,992 |
) | (1,611 |
) | (4,381 |
) | (21,521 |
) | ||||||
Standardized measure of discounted future net cash flows | 8,546 |
5,685 |
2,815 |
4,190 |
5,535 |
26,771 |
- 118 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
continues Standardized measure of discounted future net cash flows |
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated | Total joint venture and affiliates |
Total |
At December 31, 2002 | ||||||||||||||||||
Future cash inflows | 32,809 |
41,797 |
29,242 |
19,645 |
26,500 |
149,993 |
||||||||||||
Future production costs | (4,367 |
) | (10,354 |
) | (6,795 |
) | (4,748 |
) | (4,310 |
) | (30,574 |
) | ||||||
Future development and abandonment costs | (2,755 |
) | (3,880 |
) | (2,706 |
) | (1,523 |
) | (2,459 |
) | (13,323 |
) | ||||||
Future net inflows before income taxes | 25,687 |
27,563 |
19,741 |
13,374 |
19,731 |
106,096 |
||||||||||||
Future income taxes | (8,885 |
) | (12,164 |
) | (11,320 |
) | (7,598 |
) | (5,593 |
) | (45,560 |
) | ||||||
Future net cash flows | 16,802 |
15,399 |
8,421 |
5,776 |
14,138 |
60,536 |
||||||||||||
10% discount | (7,471 |
) | (7,411 |
) | (3,534 |
) | (1,577 |
) | (6,063 |
) | (26,056 |
) | ||||||
Standardized measure of discounted future net cash flows | 9,331 |
7,988 |
4,887 |
4,199 |
8,075 |
34,480 |
||||||||||||
At December 31, 2003 | ||||||||||||||||||
Future cash inflows | 24,641 |
36,484 |
25,074 |
19,590 |
28,505 |
134,294 |
||||||||||||
Future production costs | (3,879 |
) | (7,868 |
) | (5,847 |
) | (5,458 |
) | (4,763 |
) | (27,815 |
) | ||||||
Future development and abandonment costs | (2,080 |
) | (3,762 |
) | (2,005 |
) | (1,084 |
) | (2,575 |
) | (11,506 |
) | ||||||
Future net inflows before income taxes | 18,682 |
24,854 |
17,222 |
13,048 |
21,167 |
94,973 |
||||||||||||
Future income taxes | (6,113 |
) | (10,296 |
) | (8,979 |
) | (7,614 |
) | (6,073 |
) | (39,075 |
) | ||||||
Future net cash flows | 12,569 |
14,558 |
8,243 |
5,434 |
15,094 |
55,898 |
||||||||||||
10% discount | (5,056 |
) | (6,646 |
) | (3,130 |
) | (1,872 |
) | (7,930 |
) | (24,634 |
) | ||||||
Standardized measure of discounted future net cash flows | 7,513 |
7,912 |
5,113 |
3,562 |
7,164 |
31,264 |
||||||||||||
At December 31, 2004 | ||||||||||||||||||||||||
Future cash inflows | 28,582 | 40,373 | 28,395 | 20,435 | 32,619 | 150,404 | 150,404 | |||||||||||||||||
Future production costs | (3,635 | ) | (7,237 | ) | (6,664 | ) | (5,082 | ) | (4,858 | ) | (27,476 | ) | (27,476 | ) | ||||||||||
Future development and abandonment costs | (2,210 | ) | (4,073 | ) | (1,873 | ) | (1,419 | ) | (2,873 | ) | (12,448 | ) | (12,448 | ) | ||||||||||
Future net inflows before income taxes | 22,737 | 29,063 | 19,858 | 13,934 | 24,888 | 110,480 | 110,480 | |||||||||||||||||
Future income taxes | (7,599 | ) | (11,487 | ) | (10,949 | ) | (8,824 | ) | (6,736 | ) | (45,595 | ) | (45,595 | ) | ||||||||||
Future net cash flows | 15,138 | 17,576 | 8,909 | 5,110 | 18,152 | 64,885 | 64,885 | |||||||||||||||||
10% discount | (6,006 | ) | (7,592 | ) | (3,267 | ) | (1,350 | ) | (9,412 | ) | (27,627 | ) | (27,627 | ) | ||||||||||
Standardized measure of discounted future net cash flows | 9,132 | 9,984 | 5,642 | 3,760 | 8,740 | 37,258 | 37,258 | |||||||||||||||||
At December 31, 2005 | ||||||||||||||||||||||||
Future cash inflows | 36,203 | 66,100 | 45,952 | 30,835 | 50,590 | 229,680 | 1,055 | 230,735 | ||||||||||||||||
Future production costs | (4,609 | ) | (10,030 | ) | (9,604 | ) | (5,632 | ) | (6,399 | ) | (36,274 | ) | (226 | ) | (36,500 | ) | ||||||||
Future development and abandonment costs | (2,936 | ) | (3,960 | ) | (2,594 | ) | (1,774 | ) | (4,059 | ) | (15,323 | ) | (89 | ) | (15,412 | ) | ||||||||
Future net inflows before income taxes | 28,658 | 52,110 | 33,754 | 23,429 | 40,132 | 178,083 | 740 | 178,823 | ||||||||||||||||
Future income taxes | (9,890 | ) | (22,744 | ) | (21,056 | ) | (15,225 | ) | (12,097 | ) | (81,012 | ) | (187 | ) | (81,199 | ) | ||||||||
Future net cash flows | 18,768 | 29,366 | 12,698 | 8,204 | 28,035 | 97,071 | 553 | 97,624 | ||||||||||||||||
10% discount | (7,643 | ) | (12,095 | ) | (4,122 | ) | (2,155 | ) | (15,705 | ) | (41,720 | ) | (182 | ) | (41,902 | ) | ||||||||
Standardized measure of discounted future net cash flows consolidated | 11,125 | 17,271 | 8,576 | 6,049 | 12,330 | 55,351 | 371 | 55,722 | ||||||||||||||||
At December 31, 2006 | ||||||||||||||||||||||||
Future cash inflows | 43,495 | 64,381 | 34,935 | 24,821 | 48,591 | 216,223 | 1,038 | 217,261 | ||||||||||||||||
Future production costs | (6,086 | ) | (9,707 | ) | (8,028 | ) | (6,426 | ) | (5,915 | ) | (36,162 | ) | (224 | ) | (36,386 | ) | ||||||||
Future development and abandonment costs | (6,739 | ) | (5,383 | ) | (2,865 | ) | (2,265 | ) | (4,576 | ) | (21,828 | ) | (79 | ) | (21,907 | ) | ||||||||
Future net inflows before income taxes | 30,670 | 49,291 | 24,042 | 16,130 | 38,100 | 158,233 | 735 | 158,968 | ||||||||||||||||
Future income taxes | (10,838 | ) | 24,639 | (14,141 | ) | (10,901 | ) | (11,473 | ) | (71,992 | ) | (227 | ) | (72,219 | ) | |||||||||
Future net cash flows | 19,832 | 24,652 | 9,901 | 5,229 | 26,627 | 86,241 | 508 | 86,749 | ||||||||||||||||
10% discount | (11,493 | ) | (10,631 | ) | (2,994 | ) | (1,392 | ) | (16,504 | ) | (43,014 | ) | (154 | ) | (43,168 | ) | ||||||||
Standardized measure of discounted future net cash flows consolidated | 8,339 | 14,021 | 6,907 | 3,837 | 10,123 | 43,227 | 354 | 43,581 |
- 119 -
ENI FACT BOOK / SUPPLEMENTAL OIL AND GAS INFORMATION
Changes in standardized measure of discounted future net cash flows |
(million euro) | 1997 |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
Beginning of year | 15,438 | 16,118 | 9,059 | 22,753 | 32,701 | 26,771 | 34,480 | 31,264 | 37,258 | 55,722 | ||||||||||||||||||||
Reclassification 2004 affiliates and joint ventures data | (357 | ) | (371 | ) | ||||||||||||||||||||||||||
Beginning of year consolidated | 15,438 | 16,118 | 9,059 | 22,753 | 32,701 | 26,771 | 34,480 | 31,264 | 36,901 | 55,351 |
Increase (Decrease): | |||||||||||||||||||||||||||||||
sales, net of production costs | (4,888 | ) | (3,486 | ) | (4,927 | ) | (9,689 | ) | (9,760 | ) | (10,064 | ) | (10,144 | ) | (12,172 | ) | (17,880 | ) | (21,739 | ) | |||||||||||
net changes in sales and transfer prices, net of production costs | (5,034 | ) | (10,384 | ) | 23,334 | 11,889 | (16,754 | ) | 18,936 | (1,050 | ) | 13,031 | 33,372 | 4,097 | |||||||||||||||||
extensions, discoveries and improved recovery net of future production and development costs | 1,112 | 666 | 1,144 | 1,623 | 1,027 | 1,810 | 1,855 | 2,806 | 3,527 | 3,629 | |||||||||||||||||||||
changes in estimated future development and abandonment costs | (1,005 | ) | (642 | ) | (1,570 | ) | (1,061 | ) | (2,527 | ) | (2,697 | ) | (3,576 | ) | (3,437 | ) | (3,654 | ) | (6,964 | ) | |||||||||||
development costs incurred during the period that reduced future development costs | 1,375 | 1,803 | 1,746 | 2,125 | 3,342 | 4,287 | 4,864 | 4,229 | 3,865 | 3,558 | |||||||||||||||||||||
revisions of quantity estimates | 1,229 | 688 | 2,054 | 2,736 | 3,397 | 1,715 | 2,348 | 1,658 | 47 | 383 | |||||||||||||||||||||
accretion of discount | 2,997 | 2,494 | 1,362 | 4,226 | 5,628 | 4,279 | 5,585 | 5,328 | 6,573 | 9,489 | |||||||||||||||||||||
net change in income taxes | 4,773 | 4,819 | (12,702 | ) | (4,102 | ) | 5,618 | (9,318 | ) | 105 | (4,805 | ) | (17,327 | ) | 3,060 | ||||||||||||||||
purchase of reserves in place | 520 | 1,032 | 3,052 | 4,443 | 387 | 1,488 | 977 | 10 | |||||||||||||||||||||||
sale of reserves in place | (80 | ) | (1 | ) | (7 | ) | (34 | ) | (646 | ) | (222 | ) | (727 | ) | (1,252 | ) | |||||||||||||||
changes in production rates (timing) and other | (319 | ) | (3,017 | ) | 2,222 | (844 | ) | (310 | ) | (980 | ) | (4,469 | ) | 83 | 8,950 | (6,395 | ) |
End of year consolidated | 16,118 | 9,059 | 22,753 | 32,701 | 26,771 | 34,480 | 31,264 | 37,258 | 55,351 | 43,227 | ||||||||||||||||||||
End of year affiliates and joint ventures | 371 | 354 | ||||||||||||||||||||||||||||
End of year | 16,118 | 9,059 | 22,753 | 32,701 | 26,771 | 34,480 | 31,264 | 37,258 | 55,722 | 43,581 |
- 120 -
ENI FACT BOOK / ENERGY CONVERSION TABLE
Energy conversion table
Oil |
(average reference density 32.35 °API, relative density 0.8636) |
1 barrel | (bbl) |
158.987 |
l oil (1) | 0.159 |
m3 oil | 162.602 |
m3 gas | 5,742 |
ft3 gas | |||||||
5,800,000 |
btu |
|||||||||||||||
1 barrel/d | (bbl/d) |
~50 |
t/year | |||||||||||||
1 cubic meter | (m3) |
1,000 |
l oil | 6.29 |
bbl | 1,033 |
m3 gas | 36,481 |
ft3 gas | |||||||
1 tonne oil equivalent | (toe) |
1,160.49 |
l oil | 7.299 |
bbl | 1.161 |
m3 oil | 1,187 |
m3 gas | 41,911 |
ft3 gas |
Gas |
1 cubic meter | (m3) |
0.976 |
l oil | 0.00615 |
bbl | 35,314.67 |
btu | 35.315 |
ft3 gas | |||||||
1,000 cubic feet | (ft3) |
27.637 |
l oil | 0.1742 |
bbl | 1,000,000 |
btu | 27.317 |
m3 gas | 0.02386 |
toe | |||||
1,000,000 british thermal unit | (btu) |
27.4 |
l oil | 0.17 |
bbl | 0.027 |
m3 oil | 28.3 |
m3 gas | 1,000 |
ft3 gas | |||||
1 tonne LNG | (tLNG) |
1.2 |
toe | 8.9 |
bbl | 52,000,000 |
btu | 52,000 |
ft3 gas | |||||||
1,400 |
m3 gas |
Electricity |
1 megawatthour=1,000 kWh | (MWh) |
93.532 |
l oil | 0.5883 |
bbl | 0.0955 |
m3 oil | 96.621 |
m3 gas | 3,412.14 |
ft3 gas | |||||
1 teraJoule | (TJ) |
25,981.45 |
l oil | 163.42 |
bbl | 25.9814 |
m3 oil | 26,839.46 |
m3 gas | 947,826.7 |
ft3 gas | |||||
1,000,000 kilocalories | (kcal) |
108.8 |
l oil | 0.68 |
bbl | 0.109 |
m3 oil | 112.4 |
m3 gas | 3,968.3 |
ft3 gas |
(1) | l oil: liters of oil. |
Conversion of mass |
kilogram |
pound |
metric ton |
|||
kg | 1 |
2.2046 |
0.001 |
||
lb | 0.4536 |
1 |
0.0004536 |
||
t | 1,000 |
22,046 |
1 |
Conversion of length |
meter |
inch |
foot |
yard |
||
m | 1 |
39.37 |
3.281 |
1.093 |
|
in | 0.0254 |
1 |
0.0833 |
0.0278 |
|
ft | 0.3048 |
12 |
1 |
0.3333 |
|
yd | 0.9144 |
36 |
3 |
1 |
Conversion of volumes |
cubic foot |
barrel |
liter |
cubic meter |
||
ft3 | 1 |
0.1781 |
28.32 |
0.02832 |
|
bbl | 5.615 |
1 |
159 |
0.158984 |
|
l | 0.035311 |
0.0063 |
1 |
0.001 |
|
m3 | 35.3107 |
6.2898 |
103 |
1 |
- 121 -
Quarterly information
Main financial data (1) |
|
|
|
2002 |
2003 |
|||
I quarter |
II quarter |
III quarter |
IV quarter |
I quarter |
II quarter |
III quarter |
IV quarter |
Net sales from operations | 12,705 | 11,199 | 10,795 | 13,223 | 47,922 | 14,359 | 11,578 | 11,916 | 13,634 | 51,487 | ||||||||||||||||||||
Operating income: | 2,700 | 1,875 | 1,854 | 2,073 | 8,502 | 3,333 | 1,779 | 1,897 | 2,508 | 9,517 | ||||||||||||||||||||
Exploration & Production | 1,287 | 1,228 | 1,327 | 1,333 | 5,175 | 1,735 | 1,175 | 1,457 | 1,379 | 5,746 | ||||||||||||||||||||
Gas & Power | 1,426 | 577 | 375 | 866 | 3,244 | 1,529 | 539 | 390 | 1,169 | 3,627 | ||||||||||||||||||||
Refining & Marketing | 62 | 60 | 122 | 77 | 321 | 117 | 208 | 151 | 107 | 583 | ||||||||||||||||||||
Petrochemicals | (68 | ) | 31 | 50 | (139 | ) | (126 | ) | (17 | ) | (34 | ) | (63 | ) | (62 | ) | (176 | ) | ||||||||||||
Engineering & Construction | 86 | 73 | 73 | 66 | 298 | 60 | 79 | 81 | 91 | 311 | ||||||||||||||||||||
Other activities | (45 | ) | (57 | ) | (72 | ) | (40 | ) | (214 | ) | (33 | ) | (130 | ) | (58 | ) | (72 | ) | (293 | ) | ||||||||||
Corporate and financial companies | (48 | ) | (37 | ) | (21 | ) | (90 | ) | (196 | ) | (58 | ) | (58 | ) | (61 | ) | (104 | ) | (281 | ) | ||||||||||
Unrealized profit in inventory | ||||||||||||||||||||||||||||||
Net income | 1,328 | 879 | 921 | 1,411 | 4,539 | 2,006 | 1,084 | 955 | 1,540 | 5,585 | ||||||||||||||||||||
Capital expenditure | 1,541 | 1,919 | 1,872 | 2,716 | 8,048 | 1,735 | 2,235 | 2,145 | 2,687 | 8,802 | ||||||||||||||||||||
Investments | 196 | 22 | 952 | 196 | 1,366 | 3,512 | 54 | 537 | 152 | 4,255 | ||||||||||||||||||||
Net borrowings at period end | 6,713 | 8,486 | 9,272 | 11,141 | 11,141 | 11,708 | 12,795 | 13,044 | 13,543 | 13,543 |
|
||
2004 |
2005 |
|||
I quarter |
II quarter |
III quarter |
IV quarter |
I quarter |
II quarter |
III quarter |
IV quarter |
Net sales from operations | 14,545 |
13,293 |
13,517 |
16,190 |
57,545 |
17,445 |
16,665 |
18,121 |
21,506 |
73,728 |
||||||||||||||||||||
Operating income: | 3,212 |
2,649 |
2,987 |
3,551 |
12,399 |
4,450 |
3,711 |
4,270 |
4,396 |
16,827 |
||||||||||||||||||||
Exploration & Production | 1,665 |
1,828 |
2,439 |
2,253 |
8,185 |
2,567 |
2,776 |
3,682 |
3,567 |
12,592 |
||||||||||||||||||||
Gas & Power | 1,551 |
566 |
433 |
878 |
3,428 |
1,563 |
592 |
525 |
641 |
3,321 |
||||||||||||||||||||
Refining & Marketing | 125 |
301 |
317 |
337 |
1,080 |
269 |
596 |
663 |
329 |
1,857 |
||||||||||||||||||||
Petrochemicals | 5 |
62 |
89 |
164 |
320 |
158 |
58 |
(51 |
) | 37 |
202 |
|||||||||||||||||||
Oilfield Services Construction and Engineering | 60 |
55 |
46 |
42 |
203 |
65 |
53 |
60 |
129 |
307 |
||||||||||||||||||||
Other activities | (96 |
) | (122 |
) | (93 |
) | (84 |
) | (395 |
) | (62 |
) | (197 |
) | (378 |
) | (297 |
) | (934 |
) | ||||||||||
Corporate and financial companies | (49 |
) | (62 |
) | (179 |
) | (73 |
) | (363 |
) | (53 |
) | (158 |
) | (125 |
) | (41 |
) | (377 |
) | ||||||||||
Unrealized profit in inventory | (49 |
) | 21 |
(65 |
) | 34 |
(59 |
) | (57 |
) | (9 |
) | (106 |
) | 31 |
(141 |
) | |||||||||||||
Net income | 2,001 |
1,364 |
1,585 |
2,109 |
7,059 |
2,445 |
1,898 |
2,340 |
2,105 |
8,788 |
||||||||||||||||||||
Capital expenditure | 1,729 |
2,030 |
1,745 |
1,995 |
7,499 |
1,474 |
1,732 |
1,744 |
2,464 |
7,414 |
||||||||||||||||||||
Investments | 25 |
45 |
81 |
165 |
316 |
23 |
25 | 38 |
85 |
146 |
||||||||||||||||||||
Net borrowings at period end | 11,612 |
13,116 |
11,522 |
10,443 |
10,443 |
8,022 |
9,411 |
6,354 |
10,475 |
10,475 |
|
||
2006 |
||
I quarter |
II quarter |
III quarter |
IV quarter |
Net sales from operations | 23,584 | 20,739 | 20,366 | 21,416 | 86,105 | ||||||||||
Operating income: | 5,595 | 4,947 | 4,828 | 3,957 | 19,327 | ||||||||||
Exploration & Production | 4,303 | 4,095 | 4,041 | 3,141 | 15,580 | ||||||||||
Gas & Power | 1,199 | 708 | 592 | 1,303 | 3,802 | ||||||||||
Refining & Marketing | 89 | 366 | 250 | (386 | ) | 319 | |||||||||
Petrochemicals | 39 | 30 | 31 | 72 | 172 | ||||||||||
Engineering & Construction | 83 | 128 | 145 | 149 | 505 | ||||||||||
Other activities | (65 | ) | (151 | ) | (185 | ) | (221 | ) | (622 | ) | |||||
Corporate and financial companies | (51 | ) | (91 | ) | (65 | ) | (89 | ) | (296 | ) | |||||
Unrealized profit in inventory | (2 | ) | (138 | ) | 19 | (12 | ) | (133 | ) | ||||||
Net income | 2,974 | 2,301 | 2,422 | 1,520 | 9,217 | ||||||||||
Capital expenditure | 1,340 | 1,714 | 1,835 | 2,944 | 7,833 | ||||||||||
Investments | 19 | 38 | 19 | 19 | 95 | ||||||||||
Net borrowings at period end | 6,291 | 6,394 | 3,850 | 6,767 | 6,767 |
(1) | Quarterly data are unaudited. |
Key market indicator |
|
||
I quarter |
II quarter |
III quarter |
IV quarter |
Average price of Brent dated crude oil (1) | 21.14 |
25.04 |
26.95 |
26.78 |
24.98 |
||||||||||
Average EUR/USD exchange rate | 0.876 |
0.919 |
0.984 |
1.000 |
0.946 |
||||||||||
Average price in euro of Brent dated crude oil (2) | 24.13 |
27.25 |
27.39 |
26.78 |
26.41 |
||||||||||
Average European refining margins (3) | 0.21 |
0.73 |
0.75 |
1.49 |
0.80 |
||||||||||
Euribor % | 3.4 |
3.4 |
3.4 |
3.1 |
3.3 |
|
2004 |
|||
I quarter |
II quarter |
III quarter |
IV quarter |
I quarter |
II quarter |
III quarter |
IV quarter |
Average price of Brent dated crude oil (1) | 31.51 |
26.03 |
28.41 |
29.42 |
28.84 |
31.95 |
36.36 |
41.54 |
44.00 |
38.46 |
||||||||||||||||||||
Average EUR/USD exchange rate | 1.073 |
1.136 |
1.124 |
1.189 |
1.131 |
1.250 |
1.204 |
1.222 |
1.296 |
1.244 |
||||||||||||||||||||
Average price in euro of Brent dated crude oil (2) | 29.36 |
22.90 |
25.26 |
24.74 |
25.50 |
25.56 |
29.37 |
33.99 |
33.95 |
30.72 |
||||||||||||||||||||
Average European refining margins (3) | 3.81 |
2.17 |
2.28 |
2.34 |
2.65 |
2.21 |
5.26 |
4.28 |
5.75 |
4.35 |
||||||||||||||||||||
Euribor % | 2.7 |
2.4 |
2.1 |
2.2 |
2.3 |
2.1 |
2.1 |
2.1 |
2.2 |
2.1 |
|
2006 |
|||
I quarter |
II quarter |
III quarter |
IV quarter |
I quarter |
II quarter |
III quarter |
IV quarter |
Average price of Brent dated crude oil (1) | 47.50 | 51.59 | 61.54 | 56.90 | 54.38 | 61.75 | 69.62 | 69.49 | 59.68 | 65.14 | ||||||||||||||||||||
Average EUR/USD exchange rate | 1.311 | 1.260 | 1.220 | 1.189 | 1.244 | 1.202 | 1.256 | 1.274 | 1.290 | 1.256 | ||||||||||||||||||||
Average price in euro of Brent dated crude oil (2) | 36.23 | 40.94 | 50.44 | 47.86 | 43.71 | 51.37 | 55.43 | 54.55 | 46.26 | 51.86 | ||||||||||||||||||||
Average European refining margins (3) | 4.26 | 6.78 | 7.02 | 5.05 | 5.78 | 2.95 | 5.77 | 4.27 | 2.18 | 3.79 | ||||||||||||||||||||
Euribor % | 2.1 | 2.1 | 2.1 | 2.3 | 2.2 | 2.6 | 2.9 | 3.2 | 3.6 | 3.1 |
(1) | In USD/barrel. Source: Platts Oilgram. | |
(2) | Eni calculation. | |
(3) | In US dollars per barrel FOB Mediterranean Brent crude. From 1995 lead-free gasoline. Eni elaborations on Platts Oilgram data. |
- 122 -
Main operating data |
|
||
2002 |
||
I quarter |
II quarter |
III quarter |
IV quarter |
Daily production of oil (kbbls/d) | 910 |
927 |
908 |
939 |
921 |
||||||||||
Daily production of natural gas (kboe/d) | 531 |
541 |
543 |
588 |
551 |
||||||||||
Daily production of hydrocarbons (kboe/d) | 1,441 |
1,468 |
1,451 |
1,527 |
1,472 |
||||||||||
Italy | 311 |
315 |
320 |
316 |
316 |
||||||||||
North Africa | 330 |
349 |
360 |
376 |
354 |
||||||||||
West Africa | 237 |
238 |
240 |
235 |
237 |
||||||||||
North Sea | 313 |
313 |
271 |
337 |
308 |
||||||||||
Rest of World | 250 |
253 |
260 |
263 |
257 |
||||||||||
Production sold (mmboe) | 132.8 |
123.3 |
124.7 |
142.5 |
523.3 |
||||||||||
Sales of natural gas to third parties (bcm) | 21.88 |
12.75 |
11.28 |
18.21 |
64.12 |
||||||||||
Own consumption of natural gas (bcm) | 0.51 |
0.5 |
0.5 |
0.51 |
2.02 |
||||||||||
Sales to third parties and own consumption (bcm) | 22.39 |
13.25 |
11.78 |
18.72 |
66.14 |
||||||||||
Sales of natural gas of Enis affiliates (net to Eni) (bcm) | 2.4 |
||||||||||||||
Total sales and own consumption of natural gas (bcm) | 22.39 |
13.25 |
11.78 |
18.72 |
68.54 |
||||||||||
Volumes transported on behalf of third parties in Italy (bcm) | 4.55 |
4.79 |
4.94 |
5.56 |
19.84 |
||||||||||
Electricity sales (TWh) | 1.37 |
1.24 |
1.06 |
1.34 |
5.01 |
||||||||||
Sales of refined products (mmtonnes): | 12.22 |
13.42 |
13.2 |
13.18 |
52.24 |
||||||||||
Retail sales in Italy | 2.67 |
2.81 |
2.87 |
2.79 |
11.14 |
||||||||||
Wholesale sales in Italy | 2.66 |
2.54 |
2.55 |
2.89 |
10.64 |
||||||||||
Retail sales outside Italy | 0.96 |
1.05 |
1 |
1 |
4.01 |
||||||||||
- Rest of Europe | 0.58 |
0.64 |
0.69 |
0.66 |
2.57 |
||||||||||
- Africa and Brazil | 0.38 |
0.41 |
0.31 |
0.34 |
1.44 |
||||||||||
Wholesale sales outside Italy | 1.29 |
1.32 |
1.59 |
1.45 |
5.65 |
||||||||||
Other sales | 4.7 |
5.75 |
5.25 |
5.1 |
20.8 |
|
IFRS |
|||
2003 |
2004 |
|||
I quarter |
II quarter |
III quarter |
IV quarter |
I quarter |
II quarter |
III quarter |
IV quarter |
Daily production of oil (kbbls/d) | 925 |
978 |
985 |
1,035 |
981 |
1,016 |
1,026 |
1,003 |
1,090 |
1,034 |
||||||||||||||||||||
Daily production of natural gas (kboe/d) | 573 |
578 |
571 |
602 |
581 |
612 |
595 |
542 |
614 |
590 |
||||||||||||||||||||
Daily production of hydrocarbons (kboe/d) | 1,498 |
1,556 |
1,556 |
1,637 |
1,562 |
1,628 |
1,621 |
1,545 |
1,704 |
1,624 |
||||||||||||||||||||
Italy | 310 |
302 |
295 |
293 |
300 |
278 |
263 |
271 |
272 |
271 |
||||||||||||||||||||
North Africa | 333 |
343 |
357 |
369 |
351 |
367 |
374 |
367 |
411 |
380 |
||||||||||||||||||||
West Africa | 235 |
262 |
265 |
278 |
260 |
301 |
302 |
320 |
339 |
316 |
||||||||||||||||||||
North Sea | 367 |
349 |
317 |
348 |
345 |
334 |
335 |
258 |
306 |
308 |
||||||||||||||||||||
Rest of World | 253 |
300 |
322 |
349 |
306 |
348 |
347 |
329 |
376 |
349 |
||||||||||||||||||||
Production sold (mmboe) | 128.6 |
138.7 |
141.2 |
147.7 |
556.2 |
143.4 |
141.7 |
138.5 |
152.9 |
576.5 |
||||||||||||||||||||
Sales of natural gas to third parties (bcm) | 23.54 |
13.79 |
11.84 |
20.32 |
69.49 |
24.78 |
15.15 |
12.68 |
20.18 |
72.79 |
||||||||||||||||||||
Own consumption of natural gas (bcm) | 0.51 |
0.39 |
0.4 |
0.6 |
1.9 |
0.81 |
0.87 |
0.97 |
1.05 |
3.7 |
||||||||||||||||||||
Sales to third parties and own consumption (bcm) | 24.05 |
14.18 |
12.24 |
20.92 |
71.39 |
25.59 |
16.02 |
13.65 |
21.23 |
76.49 |
||||||||||||||||||||
Sales of natural gas of Enis affiliates (net to Eni) (bcm) | 1.16 |
2.18 |
1.42 |
2.18 |
6.94 |
2.06 |
1.59 |
1.52 |
2.15 |
7.32 |
||||||||||||||||||||
Total sales and own consumption of natural gas (bcm) | 25.21 |
16.36 |
13.66 |
23.1 |
78.33 |
27.65 |
17.61 |
15.17 |
23.38 |
83.81 |
||||||||||||||||||||
Volumes transported on behalf of third parties in Italy (bcm) | 5.9 |
6.28 |
5.87 |
6.58 |
24.63 |
6.89 |
7.2 |
6.7 |
7.47 |
28.26 |
||||||||||||||||||||
Electricity sales (TWh) | 1.26 |
1.25 |
1.16 |
1.88 |
5.55 |
2.51 |
3.57 |
3.56 |
4.21 |
13.85 |
||||||||||||||||||||
Sales of refined products (mmtonnes): | 11.82 |
12.5 |
12.32 |
13.27 |
50.43 |
12.73 |
14.34 |
13.04 |
13.43 |
53.54 |
||||||||||||||||||||
Retail sales in Italy | 2.57 |
2.81 |
2.84 |
2.77 |
10.99 |
2.55 |
2.78 |
2.83 |
2.77 |
10.93 |
||||||||||||||||||||
Wholesale sales in Italy | 2.5 |
2.48 |
2.45 |
2.92 |
10.35 |
2.56 |
2.58 |
2.65 |
2.91 |
10.7 |
||||||||||||||||||||
Retail sales outside Italy | 0.88 |
1.02 |
1.18 |
1.12 |
4.2 |
1.08 |
1.15 |
0.93 |
0.88 |
4.04 |
||||||||||||||||||||
- Rest of Europe | 0.61 |
0.72 |
0.88 |
0.81 |
3.02 |
0.8 |
0.86 |
0.93 |
0.88 |
3.47 |
||||||||||||||||||||
- Africa and Brazil | 0.27 |
0.3 |
0.3 |
0.31 |
1.18 |
0.28 |
0.29 |
0.57 |
||||||||||||||||||||||
Wholesale sales outside Italy | 1.44 |
1.57 |
1.55 |
1.45 |
6.01 |
1.39 |
1.65 |
1.1 |
1.16 |
5.3 |
||||||||||||||||||||
Other sales | 4.56 |
4.75 |
4.43 |
5.14 |
18.88 |
5.15 |
6.18 |
5.53 |
5.71 |
22.57 |
IFRS |
||
2005 |
2006 |
|||
I quarter |
II quarter |
III quarter |
IV quarter |
I quarter |
II quarter |
III quarter |
IV quarter |
Daily production of oil (kbbls/d) | 1,100 | 1,107 | 1,106 | 1,132 | 1,111 | 1,143 | 1,056 | 1,041 | 1,079 | 1,079 | ||||||||||
Daily production of natural gas (kboe/d) | 603 | 618 | 609 | 674 | 626 | 684 | 692 | 668 | 718 | 690 | ||||||||||
Daily production of hydrocarbons (kboe/d) | 1,703 | 1,725 | 1,715 | 1,806 | 1,737 | 1,827 | 1,748 | 1,709 | 1,796 | 1,770 | ||||||||||
Italy | 265 | 268 | 256 | 254 | 261 | 247 | 237 | 235 | 232 | 238 | ||||||||||
North Africa | 432 | 465 | 502 | 522 | 480 | 541 | 555 | 554 | 571 | 555 | ||||||||||
West Africa | 327 | 326 | 347 | 372 | 343 | 382 | 368 | 365 | 372 | 372 | ||||||||||
North Sea | 290 | 286 | 265 | 291 | 283 | 298 | 284 | 254 | 291 | 282 | ||||||||||
Rest of World | 389 | 380 | 345 | 367 | 370 | 359 | 304 | 301 | 330 | 323 | ||||||||||
Production sold (mm boe) | 148.0 | 153.4 | 152.5 | 161.0 | 614.9 | 159.5 | 154.1 | 152.3 | 159.2 | 625.1 | ||||||||||
Sales of natural gas to third parties (bcm) | 24.55 | 15.65 | 13.95 | 22.93 | 77.08 | 26.20 | 16.11 | 14.97 | 22.35 | 79.63 | ||||||||||
Own consumption of natural gas (bcm) | 1.25 | 1.34 | 1.48 | 1.47 | 5.54 | 1.47 | 1.61 | 1.50 | 1.55 | 6.13 | ||||||||||
Sales to third parties and own consumption (bcm) | 25.80 | 16.99 | 15.43 | 24.40 | 82.62 | 27.67 | 17.72 | 16.47 | 23.90 | 85.76 | ||||||||||
Sales of natural gas of Enis affiliates (net to Eni) (bcm) | 2.27 | 1.53 | 1.23 | 2.05 | 7.08 | 2.41 | 1.65 | 1.62 | 1.97 | 7.65 | ||||||||||
Total sales and own consumption of natural gas (bcm) | 28.07 | 18.52 | 16.66 | 26.45 | 89.70 | 30.08 | 19.37 | 18.09 | 25.87 | 93.41 | ||||||||||
Volumes transported on behalf of third parties in Italy (bcm) | 8.34 | 7.99 | 6.59 | 7.30 | 30.22 | 8.77 | 7.72 | 6.93 | 7.48 | 30.90 | ||||||||||
Electricity sales (TWh) | 4.98 | 5.57 | 6.15 | 6.07 | 22.77 | 6.42 | 6.00 | 6.33 | 6.07 | 24.82 | ||||||||||
Sales of refined products (mmtonnes): | 12.30 | 12.51 | 13.16 | 13.66 | 51.63 | 12.32 | 12.55 | 13.09 | 13.17 | 51.13 | ||||||||||
Retail sales in Italy | 2.52 | 2.70 | 2.63 | 2.20 | 10.05 | 2.06 | 2.20 | 2.24 | 2.16 | 8.66 | ||||||||||
Wholesale sales in Italy | 2.53 | 2.54 | 2.58 | 2.83 | 10.48 | 2.54 | 2.48 | 2.46 | 2.58 | 10.06 | ||||||||||
Retail sales outside Italy | 0.83 | 0.94 | 0.99 | 0.91 | 3.67 | 0.87 | 0.95 | 1.03 | 0.97 | 3.82 | ||||||||||
- Rest of Europe | 0.83 | 0.94 | 0.99 | 0.91 | 3.67 | 0.87 | 0.95 | 1.03 | 0.97 | 3.82 | ||||||||||
- Africa and Brazil | ||||||||||||||||||||
Wholesale sales outside Italy | 1.10 | 1.06 | 1.14 | 1.20 | 4.50 | 1.13 | 1.15 | 1.17 | 1.15 | 4.60 | ||||||||||
Other sales | 5.32 | 5.27 | 5.82 | 6.52 | 22.93 | 5.72 | 5.77 | 6.19 | 6.31 | 23.99 |
- 123 -
Società per Azioni Headquarters: Rome, Piazzale Enrico Mattei, 1 Capital Stock: euro 4,005,358,876 fully paid Tax identification number 00484960588 Branches: San Donato Milanese (MI) - Via Emilia, 1 San Donato Milanese (MI) - Piazza Ezio Vanoni, 1 |
|
Investor Relations |
Phase I of the massive Kashagan development project is progressing toward completion with expected start-up by the end of 2010. This project intended to produce up to 13 billion barrels of recoverable reserves will demonstrate again Enis ability to deliver in spite of the complexity of tasks and the harshness of environmental conditions. Pictured on the cover is a floating production hub for collecting oil and natural gas from artificial, satellite islands. After an early stage treatment, oil is expected to be transported onshore for further purification and exportation.
Countries of activity | ||
EUROPE Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, Netherlands, Norway, Principality of Monaco, Portugal, Romania, Slovakia, Slovenia, Spain, Switzerland, Turkey, United Kingdom CIS Azerbaijan, Georgia, Kazakhstan, Russia, Turkmenistan AFRICA Algeria, Angola, Cameroon, Chad, Congo, Côte dIvoire, Egypt, Gabon, Libya, Mali, Morocco, Mozambique, Nigeria, Tunisia MIDDLE EAST Iran, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates CENTRAL ASIA India, Pakistan SOUTH EAST ASIA AND OCEANIA Australia, China, East Timor, Indonesia, Malaysia, Papua-New Guinea, Thailand AMERICAS Argentina, Brazil, Canada, Ecuador, Mexico, Peru, Trinidad & Tobago, United States, Venezuela |
Eni SpA is the parent
company of the Eni Group of companies. Unless otherwise
stated, the text does not distinguish between the
activities and operations of the parent company and those
of its subsidiaries. The Exploration & Production Division (E&P) is engaged in exploration, development and production activities mainly in Italy, in North and West Africa, in the Caspian Region, in the Gulf of Mexico and in Kazakhstan. The Gas & Power Division (G&P) conducts gas marketing, supply, transport and distribution activities and power generation activity mainly in Italy and in Europe. The Refining & Marketing Division (R&M) is engaged in the refining and marketing of petroleum products activities mainly in Italy and Central and West Europe. The Engineering & Construction Division (E&C) is engaged in the execution of large offshore projects for the oil industry, including subsea pipelaying and construction of production platforms, FPSO units and relevant facilities, drilling services, and the construction of plants in the oil and petrochemical industries. The term shareholder in this report means, unless the context otherwise requires, investors in the equity capital of Eni SpA, both direct and/or indirect. For definitions of certain financial and operating term see Frequently used terms section, on page 71. Eni in 2006 report comprises the description of the business, a synthesis of the managements discussion and analysis of financial condition and results of operations and certain other company information from Enis Annual Report for the year ended 31 December 2006. It does not contain sufficient information to allow as full an understanding of financial results, operating performances and business developments of Eni as Eni 2006 Annual Report. It is not deemed to be filed or submitted with any Italian or US market or other regulatory authorities. You may obtain a copy of Eni in 2006 and Eni 2006 Annual Report on request, free of charge (see the request form on Enis web site - www.eni.it - under the section Documents Download>Reports). Eni in 2006 and Eni 2006 Annual Report may be downloaded from Enis web site under the section Investor relations>Reports. |
This report contains certain
forward-looking statements particularly those regarding
capital expenditure, development and management of oil
and gas resources, dividends, share repurchases,
allocation of future cash flow from operations, future
operating performance, gearing, targets of production and
sale growth, new markets, and the progress and timing of
projects. By their nature, forward-looking statements
involve risks and uncertainties because they relate to
events and depend on circumstances that will or may occur
in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the timing of bringing new fields on stream; managements ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply; demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; development and use of new technology; changes in public expectations and other changes in business conditions; the actions of competitors and other factors discussed elsewhere in this document. As Eni shares, in the form of ADRs, are listed on the New York Stock Exchange (NYSE), an annual report on Form 20-F will be filed with the US Securities and Exchange Commission in accordance with the US Securities Exchange Act of 1934. When filed, hard copies may be obtained free of charge (see the request form on Enis web site www.eni.it under the section Documents Download>Reports). Eni discloses on its Annual Report significant ways in which its corporate governance practices differ from those mandated for US companies under NYSE listing standards. Eni shares are traded on the Italian Stock Exchange (Mercato Telematico Azionario) and on the New York Stock Exchange (NYSE) under the ticker E. |
MISSION
We are a major integrated energy company, committed to growth in the activities of finding, producing, transporting, transforming and marketing oil and gas. Eni men and women have a passion for challenges, continuous improvement, excellence and particularly value people, the environment and integrity
ENI IN 2006 / TO OUR SHAREHOLDERS
To our Shareholders
Roberto Poli Chairman |
Paolo Scaroni CEO |
2006 was a
remarkable year for Eni in terms of both financial
performance and operational accomplishments. Our earnings and cash flow were the highest in our history, driven by continued improvements in performance and consistent execution of our strategy in a broadly favorable trading environment. In particular, we maintained pleasing production growth despite the impact of disruption in Venezuela, achieved several exploration successes, secured access to promising new acreage and further expanded our global natural gas business. On top of that, we struck a landmark agreement with Gazprom which extends our gas contracts to 2035 and opens up new opportunities for upstream expansion in Russia. Financial performance Our reported net profit of euro 9.2 billion in 2006 was the highest in the history of the Company. Adjusted net profit rose 12.5% to euro 10.4 billion, representing a return on average capital employed of 22.7%. Net cash generated by operating activities totalled euro 17 billion, allowing us to finance capital expenditure of euro 7.8 billion and to reduce our debt/equity ratio to 0.16. Those strong results enabled us to propose a dividend of euro 1.25 per share to our Annual General Shareholders Meeting, up 14% compared to 2005 (euro 1.10 per share), of which euro 0.60 was paid as an interim dividend in October 2006. During the year, we purchased a total of 53.1 million of our own shares for euro 1.2 billion, bringing the total cash returned to shareholders for the year to euro 5.8 billion. Our total shareholder return was 14.8%, making this the fifth year running that we have outperformed our peer group. |
Sustaining growth and shareholder return Growth is at the heart of our strategic priorities. A strong pipeline of projects and investment opportunities will enable us to achieve our ambitious short and long-term growth targets. Over the next four years, we will invest euro 44.6 billion in our businesses to ensure our continued growth, also beyond 2010. This investment program, the largest ever in Enis history, will be carried out with tight financial discipline. The projected free cash flow in 2010 will allow us to sustain the current flow of dividends in real terms, even with a scenario of 40 $/bl Brent. Among Enis business divisions, EXPLORATION & PRODUCTION showed the strongest growth. In 2006, the divisions adjusted net profit increased by 17.7% to euro 7.3 billion. Oil and gas production rose by approximately 2% to 1.77 million boepd. This increase was entirely organic and was achieved despite the negative impact of the unilateral termination of the Dación contract in Venezuela and the adverse entitlement effects in PSAs and buyback contracts due to higher oil prices. Excluding the effect of higher oil prices on PSAs and the termination of the Dación contract, organic production growth was close to an impressive 6%. We are committed to maintaining strong organic production growth. The company targets a production level of 2 million boepd by 2010, with an average growth rate of approximately 3% per year. Exploration activity reaped substantial results in 2006, reaching an average success rate of 49% and adding 152,000 sq km of net acreage, 99% operated. Over the medium term, we are committed |
- 3 -
ENI IN 2006 / TO OUR SHAREHOLDERS
to replacing more than 100%
of produced reserves. Development activities are progressing in many fields around the world, including Kashagan, where we expect higher capex and a longer timetable. However, we have also been able to confirm that the field is capable of higher production levels than previously thought. We are progressing with the global expansion of the LNG business as a way to monetize our large gas reserve base. Major steps taken in 2006 include the start-up of train five at the Bonny liquefaction plant in Nigeria, where a sixth train will commence operations in 2008, and the signing of a framework agreement for doubling the capacity of the Damietta liquefaction plant in Egypt by 2010. The growth options we are presently pursuing with our partner Gazprom could potentially enable us to accelerate the achievement of our growth targets. In GAS & POWER, our strong and integrated position in Europe generates stable and robust earnings and cash flows. Adjusted net profit for the year rose by 12.1% to euro 2.9 billion, supported by an approximately 16% increase in volumes sold in Europe (excluding Italy) to 35 bcm (excluding gas sold by E&P of 4 bcm). This result was achieved despite stiff competition and mild weather. Our strategy is based on growing our market share in key European markets, preserving our domestic natural gas business and effectively managing our regulated business. European natural gas demand is forecast to grow steadily in the future, resulting in a cumulative increase of around 45% by 2020 (2.4% per annum). This, coupled with the decline of Europes internal production, means that our continent will become more and more reliant on external supplies to fulfill its gas needs. In this context, Eni is poised to further strengthen its market leadership by leveraging on an unparalleled portfolio of assets in terms of infrastructure, availability of gas both equity and purchased under long term supply contracts long-standing relationships with natural gas producing countries, market knowledge and a large customer base. The recent alliance with Gazprom marks a new milestone in our relationship with the largest natural gas producer in the world, and will enable us to reinforce our competitive profile. By 2010 we are committed to selling more than |
105 bcm of gas worldwide,
with sales outside Italy expected to grow at an average
rate of 10% per year. Our REFINING & MARKETING division reported an adjusted net profit of euro 629 million, which was 33.4% lower than in 2005 due to the weak refining margin environment, the appreciation of the euro against the dollar and the impact of higher levels of planned maintenance activity. Looking forward, several trends are emerging in the refining landscape: the adoption of increasingly strict environmental standards, global imbalances in product availability (especially a deficit of diesel fuel in Europe), a relative abundance of heavy crude and the desire to increase efficiency. These are the key drivers of our strategy. In Refining, Eni will increase its capital expenditure to enhance the refinery conversion rate in order to meet future product quality requirements, produce higher-value products and chemical feedstocks, lower operating costs and increase refinery flexibility in processing low-quality crude oils. In Marketing, we aim to extract full value from our retail business in Italy through a selective investment program, customer-focused marketing initiatives, effective differentiation of pricing, an improved premium-products offer, and operating efficiencies. In managing our PETROCHEMICAL operations, which reported an adjusted net profit of euro 174 million for 2006, we remain committed to improving efficiency and selectively developing those plants with sufficient scale and a favorable geographic location. Capital expenditure will be focussed on implementing de-bottlenecking projects, enhancing the efficiency and flexibility of plants in areas of excellence (styrenes and elastomers) and maintaining high standards of health, safety, security and environmental performance. In ENGINEERING & CONSTRUCTION, adjusted net profit rose by 22% to euro 400 million, reflecting the strong competitive position held by Saipem, also as a result of the integration of Snamprogetti. To cope with rising demand for drilling equipment and oilfield services, Saipem is planning to further expand the geographical reach and operational features of its world-class fleet. Our relentless commitment to technological research and innovation underscores a fundamental belief that technology is key to increasing our competitive |
- 4 -
ENI IN 2006 / TO OUR SHAREHOLDERS
advantage over the long term and promoting sustainable growth. We are conducting research aimed primarily at reducing the costs of finding and recovering hydrocarbons, upgrading heavy oils, monetizing stranded gas and protecting the environment. In particular we are moving forward on our breakthrough technologies: EST (Eni Slurry Technology) for the full exploitation of the heavy barrel, TAP (gas transportation at high pressure) and GTL (gas-to-liquids) for gas monetization. | Sustainable development 2006 marks the first year in which Eni has published a Sustainability Report to communicate more effectively with stakeholders. We now have a more coherent approach to sustainability, and are even more committed to managing and developing your company in a responsible and accountable way. Among the various initiatives, our focus is on reducing greenhouse gas emissions from industrial processes and developing projects to economically exploit flared gas. In conclusion, 2006 was a very good year for Eni. As well as delivering impressive results, we have worked to create future growth opportunities in all our divisions. We are confident that we can continue to deliver industry-leading growth and superior shareholder returns. |
March 29, 2007
In representation of the Board of Directors
Chairman | Chief Executive Officer and General Manager |
- 5 -
ENI IN 2006 / PROFILE OF THE YEAR
FINANCIAL HIGHLIGHTS | 2004 |
2005 |
2006 |
|||
(euro million, unless otherwise specified) |
Net sales from operations | 57,545 |
73,728 |
86,105 |
|||||
Operating profit | 12,399 |
16,827 |
19,327 |
|||||
Adjusted operating profit | 12,582 |
17,558 |
20,490 |
|||||
Eni's net profit | 7,059 |
8,788 |
9,217 |
|||||
Eni's adjusted net profit | 6,645 |
9,251 |
10,412 |
|||||
Net cash provided by operating activities | 12,500 |
14,936 |
17,001 |
|||||
Capital expenditure | 7,499 |
7,414 |
7,833 |
|||||
Dividends to Eni shareholders relating to the year (a) | 3,384 |
4,086 |
4,594 |
|||||
Cash dividends to Eni shareholders | 2,828 |
5,070 |
4,610 |
|||||
Common stock purchases (gross) | 70 |
1,034 |
1,241 |
|||||
Research and development costs | 257 |
204 |
222 |
|||||
Total assets at year end | 72,853 |
83,850 |
88,312 |
|||||
Total debt at year end | 12,684 |
12,998 |
11,699 |
|||||
Shareholders equity including minority interest at year end | 35,540 |
39,217 |
41,199 |
|||||
Net borrowings at year end | 10,443 |
10,475 |
6,767 |
|||||
Net capital employed at year end | 45,983 |
49,692 |
47,966 |
|||||
Return On Average Capital Employed (ROACE) |
|
|
|
|
||||
- reported | (%) |
16.6 |
19.5 |
20.3 |
||||
- adjusted | (%) |
15.9 |
20.5 |
22.7 |
||||
Leverage | 0.29 | 0.27 | 0.16 |
(a) | Amounts due on the payment of the balance of 2006 dividend are estimated. |
- 7 -
ENI IN 2006 / PROFILE OF THE YEAR
SHAREHOLDER INFORMATION | 2004 |
2005 |
2006 |
|||
Eni's net profit: | |||||||||
- per share (a) | (euro) |
1.87 |
2.34 |
2.49 |
|||||
- per ADR (b) | (US$) |
4.66 |
5.81 |
6.26 |
|||||
Eni's adjusted net profit: | |||||||||
- per share (a) | (euro) |
1.76 |
2.46 |
2.81 |
|||||
- per ADR (b) | (US$) |
4.38 |
6.12 |
7.07 |
|||||
Dividend pertaining to the year: | |||||||||
- per share | (euro) |
0.90 |
1.10 |
1.25 |
|||||
- per ADR (b) | (US$) |
2.24 |
2.74 |
3.14 |
|||||
Annual dividend per share growth | (%) |
20.0 |
22.2 |
13.6 |
|||||
Pay-out | (%) |
48 |
46 |
50 |
|||||
Dividend yield (c) | (%) |
4.9 |
4.7 |
5.0 |
|||||
Share price at year end | (euro) |
18.42 |
23.43 |
25.48 |
|||||
Cash dividend to net profit | (%) |
40 |
58 |
50 |
|||||
Cash dividend to Free Cash Flow (FCF) | (%) |
45 |
62 |
47 |
|||||
Total shareholder return (TSR) | (%) |
28.5 |
35.3 |
14.8 |
|||||
Number of shares outstanding: | |||||||||
- at year end | (million) |
3,770.0 |
3,727.3 |
3,680.4 |
|||||
- average (fully diluted) | (million) |
3,774.9 |
3,763.4 |
3,701.3 |
|||||
Market capitalization (d) | (euro billion) |
69.4 |
87.3 |
93.8 |
|||||
Market quotations for common stock on the Mercato Telematico Azionario (MTA - "Telematico") | |||||||||
High | (euro) |
18.75 |
24.96 |
25.73 |
|||||
Low | (euro) |
14.72 |
17.93 |
21.82 |
|||||
Average daily close | (euro) |
16.94 |
21.60 |
23.83 |
|||||
Year-end close | (euro) |
18.42 |
23.43 |
25.48 |
|||||
Market quotations for ADR on the New York Stock Exchange (e) | |||||||||
High | (US$) |
126.45 |
151.35 |
67.69 |
|||||
Low | (US$) |
92.35 |
118.50 |
54.65 |
|||||
Average daily close | (US$) |
105.60 |
134.02 |
59.97 |
|||||
Year-end close | (US$) |
125.84 |
139.46 |
67.28 |
|||||
Average daily traded volumes | (million of shares) |
20.0 |
28.5 |
26.2 |
|||||
Value | (euro million) |
338.7 |
620.7 |
619.1 |
(a) | Fully diluted. Ratio of net profit and average number of shares outstanding in the year. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented. | |
(b) | One ADR (American Depositary Receipt) is equal to two Eni ordinary shares. | |
(c) | Ratio of dividend for the period and average price of Eni shares in December. | |
(d) | Number of outstanding shares by references price at year end. | |
(e) | Effective January 10, 2006 a 5:2 stock split was made. |
- 8 -
ENI IN 2006 / PROFILE OF THE YEAR
The Eni share
- 9 -
ENI IN 2006 / PROFILE OF THE YEAR
VOLUMES SUMMARY | 2004 |
2005 |
2006 |
|||
Exploration & Production | ||||||||
Net proved reserves of hydrocarbons (at 31 December) | (mmboe) |
7,218 |
6,837 |
6,436 |
||||
- Liquids | (mmbbl) |
4,008 |
3,773 |
3,481 |
||||
- Natural gas | (bcf) |
18,435 |
17,591 |
16,965 |
||||
Average reserve life index | (year) |
12.1 |
10.8 |
10.0 |
||||
Production of hydrocarbons | (kboe/d) |
1,624 |
1,737 |
1,770 |
||||
- Liquids | (kbbl/d) |
1,034 |
1,111 |
1,079 |
||||
- Natural gas | (mmcf/d) |
3,387 |
3,595 |
3,966 |
||||
Gas & Power | ||||||||
Worldwide gas sales | (bcm) |
87.03 |
94.21 |
97.48 |
||||
Total gas sales in Europe | (bcm) |
85.32 |
92.50 |
95.97 |
||||
- G&P division sales | (bcm) |
80.62 |
87.99 |
91.90 |
||||
- Upstream sales (a) | (bcm) |
4.70 |
4.51 |
4.07 |
||||
Customers in Italy | (million) |
5.95 |
6.02 |
6.54 |
||||
Gas volumes transported in Italy | (bcm) |
80.41 |
85.10 |
87.99 |
||||
Electricity production sold | (TWh) |
13.85 |
22.77 |
24.82 |
||||
Refining & Marketing | ||||||||
Refining throughputs on own account | (mmtonnes) |
37.69 |
38.79 |
38.04 |
||||
Refining throughputs of wholly-owned refineries | (mmtonnes) |
26.75 |
27.34 |
27.17 |
||||
Balanced capacity of wholly-owned refineries | (kbbl/d) |
504 |
524 |
534 |
||||
Balanced capacity utilization rate | (%) |
100 |
100 |
100 |
||||
Sales of petroleum products on Agip branded network in Europe | (mmtonnes) |
12.35 |
12.42 |
12.48 |
||||
Agip branded service stations in Europe at period end | (units) |
6,225 |
6,282 |
6,294 |
||||
Average throughput of Agip branded network in Europe | (kliters/y) |
2,488 |
2,479 |
2,470 |
||||
Engineering & Construction | ||||||||
Orders acquired | (euro million) |
5,784 |
8,395 |
11,172 |
||||
Order backlog at period end | (euro million) |
8,521 |
10,122 |
13,191 |
||||
Employees at period end | (units) |
70,348 |
72,258 |
73,572 |
(a) | Does not include Enis share of Nigerian LNG (Eni 10.4%) sales in Europe amounting to 1.30; 1.31; 1.55 bcm; in 2004, 2005 and 2006, respectively. |
- 10 -
ENI IN 2006 / PROFILE OF THE YEAR
Eni at a glance
Eni is a major integrated energy company, committed to growth in
the activities of finding, producing, transporting, transforming
and marketing oil and gas.
In Exploration & Production, Eni boasts strong positions in
some of the fastest growing oil and gas basins in the world such
as the Caspian Region, North and West Africa. The quality of our
assets, long-standing relationships with key host countries, and
a strong pipeline of capital projects and investment
opportunities will enable Eni to deliver industry-leading growth
in both the short and the long term.
Eni Gas & Power division covers all phases of the gas value
chain: supply, transport, distribution and marketing, resulting
in a fully integrated business model. A significant installed
power generation capacity enables Eni to extract further value
from gas, diversifying its commercial outlets. The main feature
of the Gas & Power division is its ability to generate a
steady stream of earnings and cash flow, leveraging on its
unparalleled asset base. Eni boasts market leadership in Europe
owing to a unique competitive position thanks to gas availability
under long-term supply contracts and equity gas, access to
infrastructure, long-term relationships with key producing
countries, market knowledge and a wide portfolio of clients.
These assets provide Eni with a solid platform for growth.
Integration with upstream operations provides the Group with the
ability to monetize its equity gas reserves and to pursue
opportunities arising in the gas market.
Eni is leader in the refining business and in the marketing of
refined products in Italy and holds solid positions in the
marketing of refined products in selected European countries.
Enis refining and marketing operations are efficiently
integrated valuable logistic assets, so as to maximize cost
efficiencies and deliver appreciable returns on capital employed.
Integration of Eni refineries with upstream operations further
strengthens the competitive position of the Refining &
Marketing division.
Its strong presence in engineering and oilfield services provides
Eni with the necessary competence and expertise, coupled with
access to engineering skills and technologies, to design and
execute world scale projects, representing a key element
supporting Eni growth and innovation plans.
This business mix is unique among integrated oil and gas
companies. The relevant weight of the downstream gas business
gives Eni a stable, robust stream of earnings and cash flow,
virtually independent of energy price movements, thus
counterbalancing the fluctuations of the oil cycle and the higher
riskiness of the upstream business.
The same applies to the downstream oil business.
- 11 -
ENI IN 2006 / PROFILE OF THE YEAR
Enis key objectives
are to deliver superior growth and attractive shareholder returns
over the long term.
Enis strategy is consistent with these goals and is based
on the following guidelines:
- leverage on its asset portfolio and execution capabilities;
- allocate the cash generated from operations to capital
expenditure, driving long-term organic growth, and to an
attractive and sustainable flow of dividends;
- use cash in excess of capital expenditure and dividend needs to
continue the programme of share repurchase and to maintain a
solid financial structure;
- apply tight financial discipline to investment decisions;
- continue to improve operating efficiency and effectiveness;
- manage risks;
- devote significant resources to technological innovation in
order to create and maintain competitive advantages;
- promote the sustainability of the business model.
Over the next four years, Eni will implement the largest capital
expenditure program in its history by investing euro 44.6 billion
in its businesses to support continued growth, also beyond 2010.
The ability to generate robust cash flow from operations will
enable Eni to finance its capital expenditure plans and to
sustain the distribution of dividends to shareholders.
Since 2000, we have returned approximately euro 27 billion to our
shareholders through dividends and repurchase of own shares. Of
that, approximately 80% has been distributed to shareholders via
dividends, which have been hiked by an impressive 200% over this
period. At the same time, we invested approximately euro 66
billion in capital expenditure and acquisitions in order to boost
growth in all our businesses, achieving in particular a 50%
increase in daily oil and gas production (or a compound annual
growth rate of approximately 7%). Meanwhile, we have managed to
maintain a healthy balance sheet thanks to our impressive cash
flow generation, totaling euro 85 billion; a further euro 7
billion was generated by divesting non strategic assets and
businesses. Finally, thanks to the repurchase of our own shares,
we have reduced the number of shares outstanding by approximately
8%, boosting earnings per share by the same amount.
- 12 -
Development of the Kashagan field offshore Kazakhstan. Pictured above is a floating production hub for collecting oil and natural gas from artificial satellite islands. After an early stage treatment, oil is transported onshore for further purification and exportation.
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) |
15,346 |
22,531 |
27,173 |
||||
Operating profit | 8,185 |
12,592 |
15,580 |
|||||
Adjusted operating profit | 8,202 |
12,903 |
15,763 |
|||||
Adjusted net profit | 4,033 |
6,186 |
7,279 |
|||||
Capital expenditure | 4,853 |
4,965 |
5,203 |
|||||
of which: exploration (b) | 499 |
656 |
1,348 |
|||||
Capital employed, net | 17,937 |
20,206 |
18,590 |
|||||
ROACE adjusted | (%) |
22.7 |
32.4 |
37.5 |
||||
Average realizations | ||||||||
- Liquids | ($/bbl) |
34.73 |
49.09 |
60.09 |
||||
- Natural gas | ($/mmcf) |
3.89 |
4.49 |
5.29 |
||||
- Total hydrocarbons | ($/boe) |
30.40 |
41.06 |
48.87 |
||||
Production | ||||||||
- Liquids | (kbbl/d) |
1,034 |
1,111 |
1,079 |
||||
- Natural gas | (mmcf/d) |
3,387 |
3,595 |
3,966 |
||||
- Total hydrocarbons | (kboe/d) |
1,624 |
1,737 |
1,770 |
||||
Net proved reserves | ||||||||
- Liquids | (mmbbl) |
4,008 |
3,773 |
3,481 |
||||
- Natural gas | (bcf) |
18,435 |
17,591 |
16,965 |
||||
- Total hydrocarbons | (mmboe) |
7,218 |
6,837 |
6,436 |
||||
Reserve life index | (year) |
12.1 |
10.8 |
10.0 |
||||
Proved reserve replacement ratio | (%) |
105 |
23 |
65 |
||||
Employees at year end | (unit) |
7,477 |
8,030 |
8,336 |
||||
(a) | Before elimination of intersegment sales. | |
(b) | Includes exploration bonus. |
- 14 -
ENI IN 2006 / EXPLORATION & PRODUCTION
STRATEGIES
In Exploration & Production, Eni boasts strong
positions in some of the fastest growing oil and gas basins in
the world such
as the Caspian Region, North and West Africa. The quality of our
assets, long-standing relationships with key host countries,
and a strong pipeline of capital projects and investment
opportunities will enable Eni to deliver industry-leading growth
in both the short and the long term. Consistent with this goal,
strategies for our global exploration, development and production
operations have remained basically unchanged for many years to
date and feature as follows:
In order to carry out these fundamental strategies, Eni intends to invest approximately euro 30.6 billion addressed to exploration initiatives and reserve development over the next four-year period frame. 2006 HIGHLIGHTS In February 2007, Eni purchased exploration and
production onshore activities operated by Maurel &
Prom in Congo, entailing a cash consideration of $1.4
billion. This deal is consistent with Enis strategy
of purchasing proved and unproved reserves and producing
assets in legacy countries where Eni can achieve
synergies leveraging on own competencies and the
availability of facilities. This transaction is subject
to approval by the Congolese authorities. |
Net proved reserves at December 31, 2006 stood at 6.44
bboe (down 6% compared with December 31, 2005),
representing 10 years of remaining production at the
current rate. Organic proved additions, as calculated by
applying a year-end Brent price of $58.925 per barrel,
replaced 65% of production. Assuming Brent is constant at
$40 per barrel when determining entitlements in PSAs, the
three-year average proved reserve replacement ratio would
be 106%. |
- 15 -
ENI IN 2006 / EXPLORATION & PRODUCTION
Algeria, the principal producing fields operated by Eni are located in the Bir Rebaa area in the South-Eastern desert.
Maintain strong production growth Enis strategy is to build on its strong position in some of the worlds most attractive oil and gas basins to deliver industry leading production growth. We plan to accomplish this by applying the most cost-effective technologies and operations management systems to each and every asset to maximize the commercial recovery of hydrocarbons. Enis assets are well balanced between mature producing fields and fields that are at the early stages of their producing cycles with significant opportunities for growth. Mature areas include mainland and offshore Italy, the North Sea and certain basins in Egypt. Growing areas include Libya, offshore and onshore West Africa, the Caspian Sea and the Nile Delta. Eni expects contributions from the latter to boost production growth to 2010 and beyond. |
Eni continually invests in
its existing asset base to increase resource recovery,
maximize profitability, and extend field life. New
production volumes are generated through workovers,
drilling of new wells, and projectimplementation. In
2006, Eni invested euro 3.6 billion to develop new
reserves and to maximize resource recovery from existing
fields. In the next four years, Eni plans to invest
approximately euro 22.5 billion evenly allocatedto
initiatives intended to counteract mature field decline,
fuel medium-term growth and support growth beyond 2010. Several fields/projects were started up during 2006. Among the key start-ups are: (i) the Benguela/Belize and Lobito/Tomboco fields in Block 14 (Enis interest 20%), holding recoverable reserves of approximately 460 mmbbl. Peak production at 158 kbbl/d (20 net to Eni) is expected in 2009 upon completion of the drilling |
- 16 -
ENI IN 2006 / EXPLORATION & PRODUCTION
program; (ii) the fifth
train as a part of the development of the Bonny
liquefaction plant (Enis interest 10.4%) in
Nigeria, increasing plant capacity to 17 mmtonnes/y of
LNG (812 bcf/y of feed gas); (iii) the gas phase of the
Bayu-Undan field (Enis interest 12.04%) in
Australia, starting supplies to the Darwin plant with
liquefaction capacity of 3.5 mmtonnes/y of LNG. Peak
production at 160 kboe/d (18 net to Eni) is expected in
2008. PRODUCTION VOLUMES OUTLOOK In 2006, oil and gas production averaged 1,770 kboe/d, up 33 kboe from 2005 or 1.9%, despite; (i) the impact of the loss of production at the Dación oil field in Venezuela (down 46 kboe/d) as a consequence of the unilateral cancellation of the relevant service contract by the Venezuelan state oil company PDVSA; and (ii) adverse entitlement effects (down 21 kboe/d) in PSAs and buy-back contracts due to higher oil prices. Production growth was driven by a remarkable increase in gas production mainly in Libya, Egypt, Nigeria, Australia and Croatia; oil production increased in Angola and Libya. Organic growth was partially offset by mature field |
declines and production
outages in Nigeria due to social unrest. The share of
production outside Italy was 87% (85% in 2005). In the medium term, Eni expects to deliver a 3% compound average growth rate from 2007 to 2010, targeting a production level in excess of 2 mmboe/d by 2010. In subsequent years and up to 2013, Eni projects an annual growth rate of 3%. This goal will be achieved entirely through organic growth mainly in our key producing basins of North and West Africa and the Caspian region, leveraging on Enis unique position and solid relationships with many of the fastest growing producing countries in the world and on its strong pipeline of capital projects and investment opportunities. In greater detail, production growth will be fed by means of:
Enis future production profiles are based on a long-term Brent price assumption of 40 $/bbl in real terms. Actual production volumes will vary from year to year due to the timing of individual project start-ups, operational outages, reservoir performance, regulatory changes, asset sales, severe weather events, price effects under production sharing contracts, and other factors. |
Val dAgri field Southern Italy. Producing since 1999, Val dAgri exemplifies a long-life field within Enis asset portfolio. In 2006 this field produced 82 kboe/d net to Eni on average, and is expected to deliver a solid production plateau over the next several years thanks to continued development.
- 17 -
ENI IN 2006 / EXPLORATION & PRODUCTION
Ensure medium to long-term business
sustainability by focusing on reserve replacement Eni intends to pay special attention to reserve replacement in order to ensure the medium to long-term sustainability of its business. In pursuing this goal, Eni intends to:
As of December 31, 2006, Enis portfolio of
mineral rights consisted of 1,029 exclusive or shared
rights for exploration and development in 36 countries on
five continents for a total net acreage of 385,219 square
kilometers. Of these, 48,273 square kilometers concerned
production and development. This geographically and
geologically diverse, high-quality portfolio balances
risks and rewards to deliver both near-term and long-term
production growth. |
GROWING THE RESOURCE
BASE The success of Enis approach is demonstrated by its ability in replacing produced reserves. Between 2003 and 2006, exploration reserves discovered were approximately 700 mmboe on average a year for a cumulative amount of 2.8 bboe, higher than our cumulative production over the same period. Positive contributions came from both legacy countries such as Nigeria, Angola, Egypt and Kazakhstan and new frontier areas such as the Barents Sea and the ultra-deep waters of the Gulf of Mexico. At 25 bboe, our solid resource base will secure 38 years of production at current rates. Under SEC reporting standards, proved reserves at 2006 year-end were 6.4 billion boe, representing a life index of 10 years. In the 2004-2006 period, considering adverse entitlement impacts in certain PSAs and buy-back contracts resulting from higher oil prices and assuming Brent constant at $40 per barrel when determining entitlements in PSAs, we would have replaced on average 106% of production through organic additions. On the other hand, contractual terms of PSAs providing for a cost oil with a favorable cap, while affecting the reported reserve replacement ratio, allow a strong acceleration of investment recovery under a higher price environment, thus enabling a reduction in payout time and a significant improvement in the rate of return of relevant projects. For 2006 only, by applying the year-end price of 58.925 $/bbl, organic additions for the year came in at 417 mmboe with a reserve replacement ratio of 65%. |
- 18 -
ENI IN 2006 / EXPLORATION & PRODUCTION
EXPLORATION
OPPORTUNITIES Exploration activities will play a crucial role in enlarging Enis resource base in order to fuel new production, and in securing access to new opportunities. In light of this, management will devote a great deal of focus and effort to exploration. In 2006, Eni more than doubled its investment in exploration from the previous year, resulting in a total of 68 wells drilled with an SEC exploration success of 43%, and approximately 152,000 square kilometers of new acreage acquired. In the next four years, management plans to invest on average approximately euro 1.1 billion per year in exploration activities, resulting in a cumulative euro 4.4 billion that is substantially higher (+51%) than the previous four-year plan (2006-2009). The cornerstones of Enis exploration strategy are:
In 2006, as part of its exploration strategy, Eni was successful in capturing 12 new opportunities spanning from new, untested exploration plays to well established plays or already-discovered resources, for a total acreage of about 152,000 square kilometers net to Eni, of these 99% as operator. In fact, management intends to concentrate investments in well established areas of presence where availability of production facilities, |
existing competencies and long-term relationships with host countries will enable Eni to readily put in production discovered resources, reducing the time to market and capturing synergies. On the other hand, Eni expects to selectively pursue high risk/high reward opportunities arising from expansion in areas with high mineral potential. Finally, portfolio renewal will be completed, bearing in mind that approximately 70% of total acreage has been renewed over the last three years. |
- 19 -
ENI IN 2006 / EXPLORATION & PRODUCTION
Developing new projects to fuel future growth Eni has a strong pipeline of development projects that will contribute to the medium and long-term growth of its oil and gas production. Approximately 20 of these projects are among the top 100 projects worldwide. Eni expects an evolution in the type of oil and gas resources from which it will be producing and in the physical conditions in which it will be operating. Many new developments will be located in more challenging |
environments, continuing to require innovations in technology. Our new long life projects, integrated LNG projects and new start ups will boost Eni production growth over the medium and long term. Overall, start ups expected in future years will add approximately 450 kboe/d to 2010 production and 700 kboe/d to 2013 production. New production will come from both legacy countries and new regions as well as from mature basins and new high potential ones. |
EIGHT
MAJOR PROJECTS Mondo Block 15 - Angola (Eni 20%) The Mondo deepwater oil field contains gross recoverable reserves of 278 mmbbl. Recovery of oil will be achieved with the installation of an FPSO vessel with a treatment capacity of 100 kbbl/d. Production is expected to start in the first quarter 2008, peaking at 18 kbbl/d net to Eni in 2009. Saxi/Batuque Block 15 -Angola (Eni 20%) The Saxi/Batuque deepwater oil field contains gross recoverable reserves of 305 mmbbl. Recovery of oil will be achieved with the installation of an FPSO vessel with a treatment capacity of 100 kbbl/d. Production is expected to start in the second quarter 2008, peaking at 18 kbbl/d net to Eni in 2009. |
- 20 -
ENI IN 2006 / EXPLORATION & PRODUCTION
Landana-Tombua Block
14 - Angola (Eni 20%) The Landana and Tombua deepwater oil fields contain gross recoverable reserves of 322 mmbbl. The development projects scope includes installation of a Compliant Piled Tower (CPT) with a capacity of 120,000 bbl/d and linkage of a part of producing wells to existing facilities at the nearby Benguela/Belize fields. Production is expected to peak at 130 kbbl/d (23 net to Eni) in 2010 upon completion of the drilling program. In 2006, a single well started production through facilities in place as outlined. |
Blacktip Block
WA-279-P - Australia (Eni 100% Op.) The offshore Blacktip gas and liquids field contains gross recoverable reserves of 140 mmbbl and is located in the Bonaparte basin at a water depth of 50 meters about 100 kilometers off the north-western Australian coast. Gas production is expected to be transferred to a |
treatment plant onshore with
a capacity of 46 bcf/y. Start-up is expected at the beginning of 2009. Under a 25-year agreement signed with Darwin Power & Water Utility Co, a total amount of 706 bcf of natural gas is expected to be supplied with an option for further volume increases. |
El Merk Synergy
project - Algeria Leveraging on expected synergies with the development of reserves in Block 208, 212, 405a and 404, this project provides for the construction of a central production facility which will produce stabilized oil, condensates and NGL with an initial production level of at 144 kboe/d (19 net to Eni) in 2010. In 2006, 85% of basic engineering work was completed. |
- 21 -
ENI IN 2006 / EXPLORATION & PRODUCTION
Karachaganak -
Kazakhstan (Eni 32.5% Co-op.) This large liquid and gas field located onshore Kazakhstan holds recoverable reserves of 3.6 bboe. It represents an example of a long life field. Liquid production is treated at the Karachaganak Processing Complex with a capacity of 150 kboe/d. Two-thirds of liquid volumes are exported to western markets via pipeline; residual liquid and gas volumes are sold on local Russian markets. In 2006, production of this field net to Eni was 103 kboe/d. Development activities planned aim at maintaining current liquid production plateau. In 2006 upgrading of liquid treatment facilities was sanctioned envisaging the construction of a fourth unit. Such new capacity is expected to increase the export of production volumes which were previously marketed on local Russian markets, resulting in an enhancement of price realizations. In addition, management is evaluating the development of gas reserves by means of finalizing relevant sale contracts with Kazakh and Russian companies, also entailing, if contracts are finalized, the construction of a gas treatment plant. Kashagan - Kazakhstan (Eni 18.5% Op.) |
will be mostly used as fuel
for the production plants. The remaining amounts will be marketed. Production start-up is currently scheduled for the third quarter of 2010 as compared to an initial forecast indicating a start-up in 2008, due also to the need on part of Eni to perform certain studies to define measures intended to enhance the overall level of safety and operability of facilities. As a result of said reconfiguration completed by year-end, the onshore design has been confirmed, while certain enhancements have been identified offshore which do not alter the original development concept. These enhancements are expected to be included in the development plan and implemented. Estimated capital expenditure to reach the 300 kbbl/d production level targeted in the first development phase stands currently at $19 billion, representing a remarkable increase over the approved budget of $10.3 billion in real terms 2007, sanctioned in 2004. This cost increase was driven by: (i) a cost increase of materials and services driven by sector-specific inflation and a negative impact due to a weakening US dollar; (ii) an underestimation of costs to conduct offshore operations in shallow/ultra shallow waters where the Kashagan field is located due to a lack of benchmarks, also reflecting technical and logistic issues and environmental constraints; (iii) the enhancements to the original layout of offshore facilities. Based on the high level of productivity yielded by the first three development wells, management currently expects a full field production plateau of 1.5 mmboe/d, representing a 25% increase from the original target envisaged by the development plan. In addition, over |
- 22 -
ENI IN 2006 / EXPLORATION & PRODUCTION
the long term management
expects to exploit the huge mineral potential of Kashagan
satellite discoveries, including Kalamkas and Kairan,
which are currently undergoing an intense appraisal
campaign. To date this campaign has resulted in a 100% success rate, fostering high expectations on future developments of Kashagan satellites. The Consortium is currently assessing various options to export production to international markets, including: (i) use of existing infrastructure, such as the Caspian Pipeline Consortium pipeline and the Atyrau-Samara pipeline; and (ii) construction of new infrastructure. The latter comprises both laying a pipeline connecting the Kashagan production center at Bolashak to the Baku-Tbilisi-Cehyan pipeline (BTC-Enis interest 5%, corresponding to the right to transport up to 50 kbbl/d), and construction of a pipeline designed to bypass the Turkish Straits of Bosphorus and Dardanelles, enabling delivery of oil produced in the Caspian region to the Ceyhan commercial hub on the Mediterranean coast. |
This new infrastructure is
expected to be 550-kilometers long with a maximum
transport capacity of 1.5 mmbbl/d of oil, corresponding
to approximately 75 mmtonnes/y, and will represent a more
efficient and environment-friendly alternative compared
to the option of transporting oil by ship through the
Turkish Straits of Bosphorus and Dardanelles. Following
award of the relevant license to the Turkish company
Çalik Enerji, partnering Eni in this initiative (both
with a 50% stake), engineering activities started in the
second half of 2006. Taurt - Egypt (Eni 50%) The offshore Taurt gas field contains gross recoverable reserves of 930 bcf and is located in the Nile Delta at a water depth of 105 meters. The development plan provides for the drilling of seven wells which are expected to be linked to existing onshore treatment facilities at West Harbour. Production plateau is targeted at 46 mmcf/d net to Eni, in 2008. |
Libya - Mellitah treatment plant. The Western Libyan Gas Project is the first major project to valorize the natural gas produced in Libya through export to and marketing in Europe. Production from Bahr Essalam and Wafa fields is processed at the onshore Mellitah plant.
- 23 -
ENI IN 2006 / EXPLORATION & PRODUCTION
Develop in LNG Eni operates its gas business as an integrated portfolio in order to fully extract value from the gas chain and monetize its large gas reserves. Liquefied Natural Gas is a key part of this strategy. Eni intends to build a global LNG business, aiming at:
|
Net liquefaction capacity in
2006 was 321 bcf, mainly concentrated in Nigeria and
Egypt, and is expected to expand to 343 bcf in 2010 and
in excess of 509 bcf in 2012 by means of developing
capacity at the Bonny liquefaction plant, building the
new Brass plant in Nigeria, and implementing the
expansion plan of the Damietta LNG plant in Egypt. LNG sales are expected to grow from 127 bcf in 2006 to166 bcf in 2010; equity gas supplies to LNG plants of 162 bcf in 2006 are expected to increase up to 233 bcf in 2010. |
- 24 -
ENI IN 2006 / EXPLORATION & PRODUCTION
Three major LNG projects Brass LNG - Nigeria (Eni 17%) Eni holds a 17% interest in Brass LNG Ltd which will implement building plans of a liquefaction plant near the existing Brass oil terminal (Enis interest 20%) on the Nigerian coast. This plant is expected to start operations in 2011 at an initial treatment capacity of 487 bcf/y on two trains, corresponding to a production of 10 million tonnes/y of LNG. Supplies to this plant will come from associated gas of nearby producing fields and through development of gas reserves of Blocks OML 60 and 61 (Eni operator with a 20% interest). When fully operational, equity gas volumes supplied to this plant will reach 170 mmcf/d (30 kboe/d).
Damietta LNG - Egypt (Eni 40%) |
Bonny LNG 6th & 7th train - Nigeria (Eni
10.4%) |
- 25 -
The interconnection point at Gela (Sicily) where the GreenStream gasline carrying gas from Libyan fields links to Enis Italian natural gas transport network.
Enis unparalleled portfolio of gas assets deeply integrated with upstream operations is a key contributor to Groups earnings and cash flow.
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) |
17,302 |
22,969 |
28,368 |
||||
Operating profit | 3,428 |
3,321 |
3,802 |
|||||
Adjusted operating profit | 3,448 |
3,531 |
3,882 |
|||||
Adjusted net profit | 2,290 |
2,552 |
2,862 |
|||||
Capital expenditure | 1,451 |
1,152 |
1,174 |
|||||
Adjusted capital employed, net | 18,383 |
18,898 |
18,864 |
|||||
ROACE adjusted | (%) |
12.6 |
13.7 |
15.1 |
||||
Worldwide gas sales | (bcm) |
87.03 |
94.21 |
97.48 |
||||
Total gas sales in Europe | 85.32 |
92.50 |
95.97 |
|||||
- G&P division sales | 80.62 |
87.99 |
91.90 |
|||||
- Upstream sales (b) | 4.70 |
4.51 |
4.07 |
|||||
Customers in Italy | (million units) |
5.95 |
6.02 |
6.54 |
||||
Gas volumes transported in Italy | (bcm) |
80.41 |
85.10 |
87.99 |
||||
Electricity production sold | (terawatthour) |
13.85 |
22.77 |
24.82 |
||||
Employees at year end | (units) |
12,843 |
12,324 |
12,074 |
||||
(a) | Before elimination of intersegment sales. | |
(b) | Does not included Enis share of sales made by Nigeria LNG (Enis share 10.4%) in Europe amounting to 1.30, 1.31 and 1.55 bcm in 2004, 2005 and 2006 respectively. |
- 26 -
ENI IN 2006 / GAS & POWER
STRATEGIES Enis Gas & Power division covers all phases of the gas value chain: supply, transport, distribution and marketing, resulting in a fully integrated business model. A significant installed power generation capacity enables Eni to extract further value from gas, diversifying its commercial outlets. The main feature of the Gas & Power division is its ability to generate a steady stream of earnings and cash flow leveraging on its unparalleled asset base. Eni boasts market leadership in Europe owing to a unique competitive position thanks to |
gas availability under
long-term supply contracts and equity gas, access to
infrastructure, long-term relationships with key
producing countries, market knowledge and a wide
portfolio of clients. These assets provide Eni with a
solid platform for growth. Integration with upstream
operations provides the Group with the ability to
monetize its equity gas reserves and to pursue
opportunities arising in the gas market. Enis key target for its Gas & Power division is to generate free cash flow1 of euro 2.1 billion in 2010, resulting in a 3% average growth rate from 2006. The strategic guidelines to attain this target are as follows: |
|
2006
HIGHLIGHTS In November 2006, Eni and Gazprom signed a broad strategic agreement. This agreement strengthens a long term partnership between the two companies and represents a fundamental step towards ensuring the security of energy supplies to Italy. Key features of this deal are the extension of the duration of Gazprom |
gas supply contracts to Eni until 2035, further strengthening Enis supply portfolio, and the pursuing of joint initiatives in the upstream sector. Gazprom is expected to enter the Italian market by selling volumes of gas starting in 2007. Gazprom will obtain the availability of such volumes by means of a corresponding reduction in volumes previously supplied to Eni. |
(1) | Cash flow provided by operating activities less cashoutflows for investing activities. |
- 27 -
ENI IN 2006 / GAS & POWER
In 2006 the Gas & Power
business confirmed its ability to generate strong and
stable performances. The adjusted net profit rose by euro
310 million to euro 2,862 million from 2005 (up 12.1%)
reflecting primarily higher selling margins on natural
gas sales, a lower impact of sector specific regulation,
and a growth in gas volumes sold. Operating cash flow stood at euro 3.1 billion, resulting in euro 1.9 billion of free cash flow generation after taking account of capital expenditure requirements and changes in working capital. Natural gas sales were up approximately 4% to 97.48 bcm driven primarily by a 16% growth in sales in a number of target European markets (mainly in Turkey, Germany/Austria, France) owing also to a build-up of supplies of natural gas from Libya. Volumes decreased in Italy due to mild weather conditions in the fourth quarter of the year. Electricity production sold was 24.82 TWh, up 9%; installed capacity totalled 4.6 GW at year-end. Clients served increased by approximately 0.52 million to 6.54 million. |
Capital expenditure totalled
euro 1,174 million and related essentially to development
and maintenance of Enis transport and distribution
networks in Italy, the finalization of the upgrading plan
of electricity generation capacity, and the start up of
the upgrading plan of import gaslines. Return on average capital employed was 15.1% in 2006 (13.7% in 2005). Marketing of natural gas MARKET POSITION Eni is leader in the highly attractive European gas sales market, with a market share of around 18% in 2006. Since the inception of the domestic liberalization process in 2000, Eni has targeted several European consumption areas to pursue growth options beyond its legacy Italian market. This strategy is paying off. Presently, Eni boasts a solid presence in virtually all European markets, including Spain, Germany, Turkey, the United Kingdom, France and Portugal, and is poised to further strengthen its market leadership. In fact, with European natural gas demand forecast to grow steadily in the future, resulting in a cumulative increase of around 45% by 2020 (or 2.4% per annum), and internal production on a declining trend, Europe will increasingly rely upon gas imports to fulfill its gas needs. In such a context, Eni is expected to grow its market share and sales leveraging on its strong competitive position and an unparalleled array of assets in terms of gas availability of both equity gas and purchased gas under long term supply contracts with key producing countries, operating flexibility ensured by an extensive and integrated international transport network, regasification terminals, storage facilities, a large client base, and market knowledge. The recently signed deal with strategic partner Gazprom markedly improves Enis competitive profile. In Italy, despite increasingly stiff competition spurred by the liberalization process and the regulatory activity |
ADJUSTED OPERATING PROFIT | (million euro) | 2004 |
2005 |
2006 |
|||
Marketing and distribution | 1,827 |
1,777 |
2,062 |
|||
Transport in Italy | 1,164 |
1,162 |
1,087 |
|||
Transport outside Italy | 396 |
448 |
579 |
|||
Power generation | 61 |
144 |
154 |
|||
3,448 |
3,531 |
3,882 |
- 28 -
ENI IN 2006 / GAS & POWER
of independent authorities, Eni has managed to preserve its market share and marketing margins and intends to keep on doing the same in the future, leveraging on expected gas demand growth and an enhanced commercial policy. The levers of Enis marketing action in Italy will be to focus on most profitable clients, improve the quality of services, deploy a commercial offer tailored on client needs, pursue client loyalty and retention, and finally develop a combined offer of gas and electricity in order to reap the benefits of scale and integration. These actions will be coupled with an intense program to boost operational efficiency, targeting a significant reduction of cost to serve by 2010. Our strong brand recognition, long-standing customer relationships, market understanding and large client base will support our marketing efforts. |
WORLDWIDE GAS SALES | (bcm) | 2004 |
2005 |
2006 |
|||
Markets in the rest of Europe | 26.84 | 29.91 | 34.81 | |||
Importers to Italy | 10.96 | 11.53 | 14.10 | |||
Iberian Peninsula | 3.59 | 4.59 | 5.24 | |||
Germany-Austria | 3.96 | 4.23 | 4.72 | |||
Turkey | 1.60 | 2.46 | 3.68 | |||
Hungary-Slovenia-Greece | 3.46 | 3.53 | 3.26 | |||
North Europe | 2.93 | 2.74 | 2.64 | |||
France | 0.15 | 0.65 | 1.07 | |||
Other | 0.19 | 0.18 | 0.10 | |||
Markets extra Europe | 1.71 | 1.71 | 1.51 | |||
Upstream (1) | 4.70 | 4.51 | 4.07 | |||
International gas sales | 33.25 | 36.13 | 40.39 | |||
Italy | 53.78 | 58.08 | 57.09 | |||
Worldwide gas sales | 87.03 | 94.21 | 97.48 |
(1) | Does not include Eni's share of sales made by Nigeria LNG (Eni's share 10.4%) in Europe amounting to 1.30, 1.31 and 1.55 bcm in 2004, 2005 and 2006, respectively. |
VOLUMES OUTLOOK In 2006, Enis worldwide gas sales grew approximately 4% to 97.48 bcm, up 3.27 bcm from 2005. In Italy, in an increasingly competitive environment, gas sales declined 0.99 bcm to 57.09 bcm, down 1.7%, owing also to lower supplies to power generation, wholesalers and residential clients as a result of mild weather conditions in the fourth quarter. |
Gas sales in the rest of Europe rose by approximately 16% to 34.81 bcm, up 4.90 bcm, reflecting increases registered in sales under long-term supply contracts to importers to Italy (up 2.57 bcm), also due to reaching full supplies from Enis Libyan fields, and a growth in sales to the Turkish market via the Blue Stream gasline (up 1.22 bcm), and to the Iberian Peninsula, Austro/German and French markets (up 0.65, 0.49, and 0.42 bcm, respectively). |
- 29 -
ENI IN 2006 / GAS & POWER
In the medium term, Eni
plans to increase worldwide sales targeting a volume of
105 bcm by 2010, corresponding to a 2.5% average growth
rate over the 2007-2010 four-year period. This increase
will be driven by an expected 10% average organic growth
rate in sales in the rest of Europe to 53.3 bcm. In
Italy, Eni expects to sell approximately 50 bcm by 2010,
or 46% of the total. In particular, Eni expects to boost sales in target European markets, leveraging mainly on sale expansion in:
|
|
Supply of gas In the context of rising gas demand and increasingly tight European markets, Eni enjoys a very strong position owing to an unrivaled supply portfolio and access to a wide-reaching infrastructure network. Our availability of natural gas is ensured from both equity production from onshore and offshore fields located in Europe (mainland and offshore Italy, the North Sea and offshore Croatia) or in adjacent basins (Libya via gasline and Egypt/Nigeria via LNG), and long term purchase contracts with major producing countries serving Europe, boasting a direct upstream presence in 8 out of 10 of our gas supplying countries. Our diversified supply portfolio insulates us from the |
risk of being heavily
dependent on a single source of supplies; in fact, none
of Enis suppliers weighs for more than 25% in
Enis current gas needs. In addition, our strong
pipeline of LNG projects will further strengthen
diversification of Enis supplies and integration
with upstream operations. Against this backdrop, the recently signed agreement with strategic partner Gazprom marks a fundamental step in enhancing the security and flexibility of Enis gas supplies over the medium and long term. Based on this agreement, the duration of our long-term supply contracts increases from 14 to approximately 23 years and, when these contracts are fully operational in 2010, Eni will be able to purchase approximately 62.4 bcm/y to cope with rising demand. |
- 30 -
ENI IN 2006 / GAS & POWER
Infrastructure Eni owns the largest European transport and storage infrastructure system, enabling Eni to carry gas from producing countries or its upstream fields to core European markets. Vital to this system are:
|
In the medium term, Eni plans to invest approximately euro 5.8 billion in order to upgrade both its international and national infrastructure, in view to improve the level of supply diversification and security also to cope with expected growth in demand. A major part of this capital expenditure will be directed to the upgrading of import trunklines from Russia, Algeria and Libya, the national transport and distribution networks, and regasification capacity. |
INTERNATIONAL
TRANSPORT Enis INTERNATIONAL TRANSPORT system consists of transport rights on an approximately 4,300-kilometer long network of high pressure pipes connecting production areas in Russia, North and West Africa, and the North Sea to Italy, crossing key European markets. Through its 50%-owned Blue Stream, a 774-kilometer long underwater gasline, Eni is able to supply the fast-growing Turkish market. Enis international transport network will undergo a major upgrading plan in order to boost transport capacity of trunklines carrying gas from Algeria, Russia, and Libya; in particular: |
TTPC - The transport capacity of the TTPC gasline from Algeria is expected to be increased by 6.5 bcm/y of which a 3.2 bcm/y portion is planned to come on line on April 1, 2008, and a 3.3 bcm/y portion on October 1, 2008. Capital expenditure is expected at euro 450 million. When the upgrade is fully operational, the gasline will deploy a transport capacity of 33.5 bcm/y. A corresponding capacity on the TMPC downstream gasline is already available. TMPC crosses underwater the Sicily channel. |
- 31 -
ENI IN 2006 / GAS & POWER
TAG - The
transport capacity of the TAG gasline from Russia is
expected to increase by 6.5 bcm/y coming on line on
October 1, 2008. Expected capital expenditure amounts to
euro 253 million (Enis share is 94%). When the upgrade is online, the gasline transport capacity will be 44 bcm/y. GreenStream - Eni plans to upgrade this import gasline from Libya in order to monetize additional reserves of gas. This project targets a 3 bcm/y capacity expansion |
expected to come on line by
2011, with an expenditure of approximately euro 80
million. Taking into account the full capacity of the GreenStream gasline from Libya currently in place (8 bcm/y), Eni expects to bring on the market approximately 21 bcm/y of new import capacity, when ongoing plans for upgrading the TTPC and TAG gaslines are fully operational in 2009. This new capacity has been or is being allocated to third parties via open bid procedures. |
Turkey; the Blue Stream underwater pipeline, laid at a record depth of over 2,150 meters, links the Russian and Turkish coast of the Black Sea. Started up in 2002, this two-line infrastructure has a transport capacity of 49 mmcm/d. When fully operational in 2010, it will deliver 16 bcm/y (Enis share 8 bcm) to the Turkish market.
DOMESTIC TRANSPORT
AND DISTRIBUTION Enis DOMESTIC TRANSPORT business is a fully regulated activity with a low risk profile, generating stable earnings and operating cash flow. In fact, transport tariffs and return on capital employed are set by an independent regulator. Enis network extends for 30,889 kilometers covering virtually the entire Italian transport network and comprises high pressure trunklines and medium pressure regional transport networks carrying natural gas from entry points to the system import lines, storage sites and Italian natural gas fields to delivery points in correspondence of large industrial complexes, power generation utilities, and local distribution companies serving residential and commercial areas. In the medium term, Eni plans to upgrade its domestic transport network in order to match transport capacity to the expected increase in import capacity. Due to regulatory mechanisms, these capital projects bear preset rate of returns, thus contributing to reduce the risk profile of Enis capital expenditure plan. We also plan to boost earnings of this regulated activity by continued efforts in improving operational efficiency. |
Eni is leader in the Italian
natural gas distribution business, counting on the
availability of an extensive grid of low pressure
gaslines for the delivery of natural gas to approximately
6 million clients in the main urban areas of Italy.
Clients include both residential users and small
businesses and commercial clients. In the distribution business, Eni will focus on improving efficiency and reaping economies of scale, while at the same time enhancing the quality of service. As in the case of the transport activity, distribution is a fully regulated business sporting a preset return on capital employed. LNG Eni intends to strengthen its integrated LNG business on a global scale, aiming at further diversifying its supply sources, improving operational flexibility, and monetizing its large equity gas reserves. Due to our strong presence in both upstream and downstream operations, we boast a global position in LNG which is well balanced in terms of gas availability, and both liquefaction and regasification capacity. We expect LNG to play an increasingly important role |
- 32 -
ENI IN 2006 / GAS & POWER
in fulfilling worldwide gas
requirements, with forecast growth rates in the range of
10% over the medium term. Enis main LNG assets are located in:
|
|
Power generation Enis natural gas business is integrated downstream with the production of electricity to further extract value from the gas chain. Started in 2000, Enis plan for the expansion of its power generation capacity has been substantially completed by the end of 2006, with approximately 90% of the 5.5 gigawatt target new capacity already on stream. New plants built in existing Eni sites are based on cogeneration, an efficient, environmental-friendly technology that enables low operating costs and lower carbondioxide emissions as compared to other hydrocarbon-based technologies. In 2006, electricity production sold was 24.82 TWh, up 9% over 2005, reflecting the ramp-up of new capacity. In 2010, when target capacity is fully on line, production is expected to reach 30 TWh, corresponding to over 10% of electricity generated in Italy at that date, consuming approximately 6 bcm/year of gas from Enis supply portfolio. |
|
- 33 -
Following restructuring of its Italian retail operations, Enis network currently consists of 4,356 service stations. The majority of these are large-scale, efficient outlets, providing clients a wide range of products and services in addition to fuel.
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) | 26,089 |
33,732 |
38,210 |
||||
Operating profit | 1,080 |
1,857 |
319 |
|||||
Adjusted operating profit | 923 |
1,214 |
790 |
|||||
Adjusted net profit | 674 |
945 |
629 |
|||||
Capital expenditure | 693 |
656 |
645 |
|||||
Adjusted capital employed, net | 4,835 |
5,326 |
5,766 |
|||||
ROACE adjusted | (%) | 13.0 |
18.2 |
10.7 |
||||
Refining throughputs on own account | (mmtonnes) | 37.69 |
38.79 |
38.04 |
||||
Refining throughputs of wholly-owned refineries | 26.75 |
27.34 |
27.17 |
|||||
Balanced capacity of wholly-owned refineries | (kbbl/d) | 504 |
524 |
534 |
||||
Balanced capacity utilization rate | (%) | 100 |
100 |
100 |
||||
Retail sales of petroleum products on Agip branded network in Europe | (mmtonnes) | 12.35 |
12.42 |
12.48 |
||||
Agip branded service stations in Europe at period end | (units) | 6,225 |
6,282 |
6,294 |
||||
- Italy | 4,329 | 4,394 | 1,938 | |||||
- Outside Italy | 1,896 | 1,933 | 2,470 | |||||
Average throughput of Agip branded service stations in Europe | (kliters) | 2,488 |
2,479 |
2,470 |
||||
Employees at year end | (units) | 9,224 |
8,894 |
9,437 |
||||
(a) | Before elimination of intersegment sales. |
- 34 -
ENI IN 2006 / REFINING & MARKETING
STRATEGIES
Eni is leader in the refining business and in the marketing of
refined products in Italy and holds solid positions in the
marketing of refined products in selected European countries.
Enis refining and marketing operations are efficiently
integrated to maximize cost efficiencies and deliver appreciable
returns on capital employed. The integration of Eni refineries
with upstream operations further strengthens the competitive
positioning of the Refining & Marketing Division.
Enis key medium term objective in its downstream oil
business is to improve profitability. The strategic guidelines to
attain this objective are the following:
Enhance Enis refining system by means of a focused investment programme;
Improve profitability and qualitative standards of the Italian retail network;
Grow retail sales in selected markets in the rest of Europe; and
Pursue higher levels of operational efficiency.
In the medium term the implementation of these strategies will be supported by a capital expenditure programme of approximately euro 4.3 billion, focused on upgrading refineries, mainly by increasing primary balanced refining and conversion capacity, and refineries flexibility and efficiency, improving logistic assets, and highgrading the network. Management intends to strengthen market leadership in refining in the Mediterranean area, targeting also leadership positions in Europe, and to boost the competitive position of marketing in Italy and in selected European areas.
2006
HIGHLIGHTS In 2006, adjusted net profit was down euro 316 million to euro 629 million, or 33.4%, mainly due to a decline in refining margins as a result of a weak trading environment. Enis realized refining margins recorded a better trend than market reference margins reflecting Enis refinery capacity to process heavy crudes which are discounted as compared to the Brent crude market benchmark, thus resulting in a higher profitability of the heavy barrel. Return on average capital employed was 10.7% on an adjusted basis, declining from 2005 (18.2% in 2005). Capital expenditure totaled euro 645 million and mainly related to projects aimed at improving flexibility and yields of refineries and upgrading the retail network in Italy and in the rest of Europe. Refining throughputs on own account in Italy and outside Italy (38.04 mmtonnes) declined by 0.75 mmtonnes from 2005, down 1.9%, due mainly to lower volumes at third party refineries, while wholly-owned refineries achieved stable processing levels. |
- 35 -
ENI IN 2006 / REFINING & MARKETING
Retail sales of refined
products in Italy (8.66 mmtonnes) declined 1% from 2005
mainly due to competitive pressure. This decrease was
more than offset by a growth in retail volumes marketed
in the rest of Europe (3.82 mmtonnes, up 4.1%), mainly in
Germany and Spain. Sales on the wholesale market in Italy (10.06 mmtonnes) were down 4% reflecting primarily the impact of mild weather conditions in the fourth quarter. This decline was partially offset by a growth in volumes marketed on wholesale markets in the rest of Europe (4.6 mmtonnes, up 2.2%), in particular in Germany and Spain. Refining Eni is leader in the refining business in Italy. Eni owns five refineries in Italy and a 50% interest in the Milazzo refinery, in Sicily, and interests in refineries in Germany and the Czech Republic with a total refining capacity (balanced with conversion capacity1) of approximately 35.5 mmtonnes (equal to 710 bbl/day). In 2006, refining throughputs on own account in Italy and outside Italy were 38.04 mmtonnes, down 0.75 mmtonnes from 2005, or 1.9% due mainly to lower throughputs at third parties refineries. Refining throughputs at own refineries were stable. In particular, refining throughputs increased at the Venice, Gela and Taranto refineries and decreased at the Sannazzaro, and Livorno refineries due to maintenance activity. In April, a new unit for heavy residue gasification started operating at the Sannazzaro refinery. Total throughputs on wholly-owned refineries (27.17 mmtonnes) decreased 0.17 mmtonnes from 2005, down 0.6%; balanced capacity of refineries was fully utilized. Thanks to the continuous upgrading of its manufacturing process, Enis refining system can boast a high level of efficiency, flexibility and product quality. At 57%, the conversion index2 of Enis refineries compares well with an European average of approximately 33% and enables Eni to extract value from heavy sour grades of the crude feedstock (around 60% of our processed volumes in 2006) which can be purchased with a discount over light/sweet quality crudes like Brent. High levels of conversion capacity and flexibility enable Eni to:
|
|
(1) | It refers to the maximum amount of feedstock that can be processed in certain dedicated facilities of a refinery to obtain finished products. |
(2) | It is a ratio of capacity of conversion facilities to primary distillation capacity. The higher the ratio, the higher is the capacity of a refinery to obtain high value products from the heavy residue of primary distillation. Conversion facilities include catalytic crackers, fluid catalytic crackers, hydrocrackers, visbreaking units, and coking units. |
- 36 -
ENI IN 2006 / REFINING & MARKETING
In the medium term, Eni
expects certain trends in demand and supply to shape
refiners investment decisions and strategies,
namely the adoption of increasingly strict environmental
standards, global imbalances in product availability
(especially a deficit of diesel fuel in Europe), a
relative abundance of heavy crude and a striving to
increase efficiency. Against this backdrop, Eni plans to boost the profitability of its refining business, capturing market opportunities by means of a focused investment programme, entailing an expenditure of approximately euro 3 billion over the next four years. Main capital projects will be directed to: (i) increase primary and conversion capacity, targeting a complexity index higher than 57%, in view of boosting middle distillate yields, including petrochemical feedstock, and extracting value from equity crude, the availability of which is expected to increase in the Mediterranean basin over the medium term; (ii) improve refinery flexibility in order to optimize processed feedstock and capture market opportunities arising from an expected increasing availability of heavy/sour crude; (iii) achieve high-quality products responsive to expected demand trends and the evolution of product specifications provided for by increasingly tight European standards in term of emissions and environmental preservation; and (iv) enhance operational efficiency of refineries, targeting in particular a higher level of energy efficiency. |
Key projects of refining upgrading Enis plans to revamp its refining system are expected to improve the overall quality of all its assets. In particular, key projects will be implemented at Enis largest refineries of Sannazzaro and Taranto. SANNAZZARO - A medium-term high-grading plan for this asset envisages the construction of a new hydrocracking unit and a new deasphalting unit in order to improve operational flexibility, yields of valuable products, and refinery economics. Expected start-up of these new facilities is by end 2008. Conversion capacity is targeted to increase significantly (from the current 46.2% to a planned 63%), resulting in the production of an additional 1 mmtonnes/y of high-quality middle distillates, mainly diesel fuel and jet-fuel. This refinery is already one of the most efficient in Europe thanks to its conversion facilities including a fluid catalytic cracker, an HDCK middle distillate conversion unit and a visbreaking thermal conversion unit, as well as certain desulphurization facilities enabling the processing of a wide range of crudes from Russia, Africa and Asia, including the Caspian Sea area. This refinery is also integrated with the production of electricity by means of its gasification unit producing syngas to be used as feed gas for the nearby Eni power station at Ferrera Erbognone. |
- 37 -
ENI IN 2006 / REFINING & MARKETING
TARANTO - A medium-term
high-grading plan for this asset envisages:
With a current conversion rate of 61.1%, Taranto is
one of the top performers among Enis refineries
thanks in particular to the availability of a two-stage
thermal conversion plant (visbreaking/thermal cracking)
and an RHU conversion plant allowing conversion of high
sulphur content residues into valuable fuels and
feedstock for Enis petrochemical plants. It
processes most of the oil produced in Enis Val
dAgri fields carried to Taranto through the Monte
Alpi pipeline. |
projects enabling us to
reduce energy consumption by approximately 90 ktoe/y when
fully operational, resulting in a cut in carbon-dioxide
emissions in the range of 270 ktonnes/y. Supplies of
electricity and steam to Enis refineries come from
Enis power generation plants using highly
efficient, combined cycle gas fired technologies, thus
further strengthening Group synergies and reducing
carbon-dioxide emissions. A strong focus is also
dedicated to adopting the best practices and the highest
standards of environmental protection and in pursuing an
eco-friendly relationship with the territory as witnessed
by the large amount of resources allocated to this issue
(on average approximately 22% of capital expenditure of
the R&M division over the last three years).
|
ENI'S REFINING SYSTEM IN 2006 | Conversion
equivalent |
Primary
balanced refining capacity Eni share |
Throughput |
|||
Wholly owned refineries | 26.84 |
29.91 |
34.81 |
|||
Italy | ||||||
- Sannazzaro | 46.2 |
170 |
162 |
|||
- Gela | 143.5 |
100 |
97 |
|||
- Taranto | 61.1 |
110 |
119 |
|||
- Livorno | 11.4 |
84 |
80 |
|||
- Porto Marghera | 22.8 |
70 |
85 |
|||
Partially owned refineries (a) | 50.9 |
177 |
218 |
|||
Total refineries | 57.0 |
711 |
761 |
(a) | Milazzo (Italy), Bayernoil (Germany) and the Ceska Rafinerska (Czech Republic). |
- 38 -
ENI IN 2006 / REFINING & MARKETING
An example of this approach
is represented by the Refinars Project at the Sannazzaro
Refinery, where the adoption of avant-garde technology
for the de-sulfuring of the combustion fumes from the
fluid catalytic cracking process has resulted in emission
levels well below the standards provided for by
applicable regulations. Enis refineries in Italy have production systems fully compliant with standards provided for by the ISO 14001 International Certification; the Taranto, Venice, and Livorno refineries are also compliant with the stricter Environmental Management & Audit Scheme (EMAS) requirements recognized by the European Union. Logistics Eni is leader in the activities of storage and transport of petroleum products in Italy. Our logistical integrated infrastructure contributes in a significant way to an efficient management of downstream operations, ensuring a cost-effective product handling from our refineries to our commercial businesses, including marketing, wholesale, aviation and marine. Enis logistic operations are supported by 12 directly managed storage sites, a network of pipelines extending over 3,210 kilometers, and a fleet of tanker trucks. In the medium-term, Eni plans to upgrade its logistic system in line with a planned upgrade of refineries, and to further improve efficiency by implementing an integrated logistic platform according to a hub model, designed to centralize handling of product flows, further supporting the efficient integration of refinery and marketing operations. |
Marketing Eni is leader in the marketing of refined products in Italy and boasts important market shares in selected European areas where it can be supported by Italian production facilities and logistic infrastructure so as to maximize synergies. Popular in the Italian market, the Agip brand is well established in Europe and acknowledged by customers as a guarantee of service and quality. Enis strategy in marketing is focused on extracting full value from its network by means of a selected investment programme and efficiency improvement actions. In particular, management intends to:
Over the medium term, Eni plans to grow sales both in
Italy and in the rest of Europe, targeting a combined
volume of 17.4 billion liters by 2010 from 15.8 in 2006,
corresponding to an average annual growth rate of 2.4%,
and to match European best practice in terms of
efficiency and service level. |
- 39 -
ENI IN 2006 / REFINING & MARKETING
You&Agip In March 2007, Eni launched its You&Agip promotional campaign designed to boost customer loyalty to the Agip brand. It is an innovative formula intended to outperform traditional loyalty programmes for motorists, mainly by cancelling the usual time limits, as it is set to last for the next three years until December 31, 2009. Furthermore, the list of prizes will be kept constantly updated thanks to the high number of partners joining the initiative. The defining features of the You&Agip programme include giving customers the freedom how to accumulate points, when to spend them and what kind of reward to choose. Points can be accumulated not only by buying fuel, but also by buying all the other services and products sold at AgipCafè outlets. |
REST OF EUROPE In recent
years, Enis strategy has focused on selectively
growing its market share by means of the acquisition of
assets in European areas with interesting profitability
perspectives, mainly in Central-Eastern Europe (in
particular Southern Germany, Austria, the Czech Republic
and Hungary) in South-Eastern France and the Iberian
Peninsula. In pursuing such growth, Eni has been able to
reap synergies leveraging on the proximity of target
areas to Enis production and logistic facilities.
Over the last five years, retail volumes of refined
products marketed in the rest of Europe have grown more
than 50% (equal to a compound average growth rate of 9%).
In 2006, retail sales were 3.82 mmtonnes, up 150 ktonnes from 2005, or 4.1%, particularly in Germany, Spain and Austria due to the ramp-up of new stations purchased or built with higher throughput than the average level of Enis network, while a few less efficient outlets were divested. Currently, Enis network in Europe consists of approximately 1,938 outlets with continental standards of service and quality. The main countries where Eni is present are: South-Central Germany with a 4.4% market share, Spain with 3.2%, Austria with 7.2%, Switzerland with 5.8% and South-Western France with 1.2% on national base. In the medium term, Eni will continue to deploy its strategy of selectively growing its market share. |
Wholesale Eni sells gasolines and fuels: diesel fuel for automotiveuse and for heating purposes, for agricultural vehicles and for vessels, gasolines and fuel oil. Major customers are wholesalers, the agricultural and manufacturing industries, public utilities and transports. In 2006 Enis wholesale sales in Italy were 10.06 mmtonnes, down 0.42 mmtonnes from 2005, or 4%, reflecting mainly a decline in domestic consumption related to mild weather conditions in the fourth quarter of the year, with higher temperatures than the seasonal average. Sales on wholesale markets outside Italy (4.60 mmtonnes) increased 100 ktonnes, or 2.2%, mainly due to higher sales of diesel fuel in Germany and Spain. |
- 40 -
ENI IN 2006 / REFINING & MARKETING
MULTIENERGY Enis constant attention to the environment has led to the construction of MultiEnergy stations that are equipped with solar panels able to provide all the energy necessary for the functioning of the service station, also providing environmentally-friendly fuels. The inauguration of the Agip MultiEnergy service station at the Infraserv Höchst industrial park in Germany marks the conclusion of the first phase of the Zero Regio project, supported by the European Commission, for the realization of an innovative multifuel station supplying zero emission vehicles fuelled by hydrogen. |
AGIP BRANDED NETWORK | 2004 |
2005 |
2006 |
|||
Retail sales (mmtonnes) | 12.35 |
12.42 |
12.48 |
|||
Italy | 8.88 |
8.75 |
8.66 |
|||
Rest of Europe | 3.47 |
3.67 |
3.82 |
|||
Average throughput (kliters/no. service station) | 2,488 |
2,479 |
2,470 |
|||
Italy | 2,527 |
2,509 |
2,463 |
|||
Rest of Europe | 2,393 |
2,427 |
2,486 |
|||
Numbers of service stations at year end | 6,225 |
6,282 |
6,294 |
|||
Italy | 4,329 |
4,349 |
4,356 |
|||
Rest of Europe | 1,896 |
1,933 |
1,938 |
Other businesses Eni is a leader in the manufacture, distribution and sale of LPG, lubricants and lubricant bases in Italy, leveraging on its high technology production plants and on its high-quality products. LPG - In 2006 Eni sold 589 ktonnes of LPG in Italy for heating and automotive use (under the Agip brand and wholesale), with an 18% market share. Additional 350 ktonnes of LPG were sold through other channels mainly to oil companies and traders. |
LUBRICANTS - Eni operates 8
(owned and co-owned) blending plants, in Italy, Europe,
North and South America, Africa and the Far East
producing a range of over 650 different blends. Eni masters international state-of-the-art know-how for the formulation of products for vehicles (engine oil, special fluids and transmission oils) and industries (lubricants for hydraulic systems, industrial machinery and metal processing). In 2006, retail and wholesale sales in Italy amounted to 133 ktonnes with a 23.9% market share. |
- 41 -
The semi-submersible platform Scarabeo 7 continued operations on the Erha field in Nigeria on behalf of ExxonMobil, as a part of a three-year contract.
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) |
5,696 |
5,733 |
6,979 |
||||
Operating profit | 203 |
307 |
505 |
|||||
Adjusted operating profit | 215 |
314 |
508 |
|||||
Adjusted net profit | 252 |
328 |
400 |
|||||
Capital expenditure | 186 |
349 |
591 |
|||||
ROACE adjusted | (%) | 10.5 |
12.0 |
12.8 |
||||
Orders acquired: | (million euro) | 5,784 |
8,395 |
11,172 |
||||
- Offshore construction | 2,867 | 3,096 | 3,681 | |||||
- Onshore construction | 2,535 | 4,720 | 4,923 | |||||
- Offshore drilling | 107 | 367 | 2,230 | |||||
- Onshore drilling | 275 | 212 | 338 | |||||
Order backlog: | 8,521 |
10,122 |
13,191 |
|||||
- Offshore construction | 3,420 | 3,721 | 4,283 | |||||
- Onshore construction | 4,488 | 5,721 | 6,285 | |||||
- Offshore drilling | 317 | 382 | 2,247 | |||||
- Onshore drilling | 296 | 298 | 376 | |||||
Employees at year end | (unit) |
25,819 |
28,684 |
30,902 |
||||
(a) | Before elimination of intersegment sales. |
- 42 -
ENI IN 2006 / ENGINEERING & CONSTRUCTION
STRATEGIES
Eni operates in engineering, oilfield services and construction
both offshore and onshore through Saipem, a company listed on the
Italian Stock Exchange (Enis interest is 43%). Saipem
boasts a strong competitive position in the relevant markets
thanks to technological and operational skills, engineering and
project management capabilities and ability to operate in complex
environments, owing also to the integration with Snamprogetti.
Leveraging on these strengths and rising demand for drilling
equipment and oilfield services, Saipem intends to carry out the
following fundamental strategies:
consolidate its competitive positioning in the field of large offshore and onshore projects for the development of hydrocarbon fields;
develop its presence in the strategic field of gas monetization and heavy crude upgrading, including expansion in floating LNG treatment systems for liquefaction and regasification of LNG;
intensify efficiency improvement actions in all its activities, in particular by reducing supply and execution costs while maintaining a high utilization rate of equipment and improving its flexible structure in order to reduce the impact of possible negative cycles; and
support Enis investment plans.
In order to carry out these strategies, Saipem expects to invest approximately euro 3.5 billion to further expand the geographical reach and operational features of its world-class fleet over the next four years.
2006 HIGHLIGHTS
Adjusted net profit was euro 400 million, up euro 72 million from
a year ago or 22%, reflecting a better operating performance
against the backdrop of favorable trends in the demand for
oilfield services.
Return on average capital employed calculated on an adjusted
basis was 12.8% in 2006, up 12% from 2005.
Orders acquired amounted to euro 11,172 million, up euro 2,777
million from 2005 (+33.1%), in particular in onshore activities.
Order backlog was euro 13,191 million at December 31, 2006 (euro
10,122 million at December 31, 2005).
In the second half of the year, the semi-submersible pipelayer Saipem 7000 was engaged in the execution of various activities in the North Sea, including decommissioning of certain facilities and installation of pipelines and sub-sea facilities.
- 43 -
ENI IN 2006 / ENGINEERING & CONSTRUCTION
Business areas OFFSHORE CONSTRUCTION Saipem has gained a sound competitive positioning in the market of large, complex projects for the development of offshore hydrocarbon fields leveraging on its technical and operational skills, supported by a world-class fleet, the ability to operate in complex environments, and engineering and project management capabilities acquired on the market over recent years. Saipem intends to enhance its market share by means of strengthening its EPIC oriented business model and its relationships with major oil companies and NOCs. Higher levels of profitability are expected to be achieved through outsourcing certain engineering and building activities to low cost centers. Investments will be focused on constantly upgrading and improving |
technical characteristics
and capabilities of Saipems world-class fleet, and
to build local construction centers. In 2006, revenues were euro 3,033 million accounting for 43% of total revenues. This business delivered a gross margin of euro 366 million, corresponding to 55% of total gross margin, higher than the euro 296 million result reported in 2005. This increase reflected higher activity in the Caspian region and Nigeria. Among the major orders acquired in 2006 were:
|
The deep-water drilling ship Saipem 10000 continued to carry out drilling operations on behalf of Total Exploration & Production Angola, as a part a two-year contract.
- 44 -
ENI IN 2006 / ENGINEERING & CONSTRUCTION
ONSHORE CONSTRUCTION |
Among the major orders
acquired in 2006 were:
OFFSHORE DRILLING |
- 45 -
ENI IN 2006 / ENGINEERING & CONSTRUCTION
In 2006, revenues were euro
365 million accounting for 5% of total revenues. Gross
margin amounted to euro 119 million as compared to euro
65 million in 2005. This increase was supported by higher
tariffs for the Scarabeo 3 and Scarabeo 5
semi-submersible platforms and higher activity levels of
the Perro Negro 5 jack-up and Scarabeo 4 semi-submersible
platform. The most significant contracts awarded during the period include:
ONSHORE DRILLING |
Capital expenditure In 2006, capital expenditure in the Engineering and Construction segment (euro 591 million) concerned: (i) the conversion of the Margaux tanker ship into an FPSO vessel that will operate in Brazil on the Golfinho 1 field; (ii) maintenance and upgrading of equipment; (iii) fabrication and installation of facilities in the offshore phase of the Kashagan project in Kazakhstan. Over the next four-year period, Saipem plans to invest approximately euro 3.5 billion directed to further upgrade its world-class fleet and to build local construction centers in order to strengthen relationship with key host countries, including Kazakhstan, Angola and Nigeria. New vessels which are planned to start operation in the next four years include a drilling rig as outlined above and a pipelayer designed to perform tasks in extreme environments. |
- 46 -
ENI IN 2006 / GROUP RESULTS FOR THE YEAR
Group results for the year Trading environment Enis results from operations and the year to year comparability of its financial results are affected by a number of external factors which exist in the industry environment, including changes in oil, natural gas and refined products prices, industry-wide movements in refining and petrochemical margins and fluctuations in exchange rates and interest rates. Changes in weather conditions from year to year can influence demand for natural gas and some petroleum products for heating, thus affecting results of operations of the natural gas business and, to a lesser extent, of the refining and marketing business. The trading environment was broadly favorable in 2006 with Brent crude oil prices close to $60/bl, up 19.8% compared to 2005. Natural gas margins increased in 2006 compared to 2005, reflecting |
a favorable trading
environment and a softer impact of sector specific
regulation in Italy. These positives were partially
offset by declining refining margins, which were down by
34.4% compared to 2005. The euro appreciated by 1% over the dollar. Petrochemical product margins decreased in 2006 as compared to 2005, essentially due to higher purchase costs of oil-based feedstocks not being completely transferred to selling prices. |
TRADING ENVIRONMENT INDICATORS | 2004 |
2005 |
2006 |
Average price of Brent dated crude oil (a) | 38.22 |
54.38 | 65.14 |
|||||
Average EUR/USD exchange rate (b) | 1.244 |
1.244 | 1.256 |
|||||
Average price in euro of Brent dated crude oil | 30.72 |
43.71 | 51.86 |
|||||
Average European refining margin (c) | 4.35 |
5.78 | 3.79 |
|||||
Average European refining margin in euro | 3.50 |
4.65 | 3.02 |
|||||
Euribor - three-month euro rate | (%) |
2.1 |
2.2 | 3.1 |
||||
Libor - three-month dollar rate | (%) |
1.6 |
3.5 | 5.2 |
(a) | In US per barrel. Source: Platts Oilgram. | |
(b) | Source: BCE. | |
(c) | In US per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platts Oilgram data. |
RESULTS FOR THE YEAR |
2004 |
(million euro) | 2005 |
2006 |
Change |
% Ch. |
||||||||||
7,059 |
Eni's net profit | 8,788 |
9,217 |
429 |
4.9 |
||||||||||
(281 |
) | Exclusion of inventory holding (gains) losses | (759 |
) | 33 |
792 |
|||||||||
(133 |
) | Exclusion of special items: | 1,222 |
1,162 |
(60 |
) | |||||||||
5 |
- non recurring items | 290 |
239 |
(51 |
) | ||||||||||
(138 |
) | - other special items | 932 |
923 |
(9 |
) | |||||||||
6,645 |
Eni's adjusted net profit | 9,251 |
10,412 |
1,161 |
12.5 |
In 2006 Eni delivered record
net profit, up 4.9% from 2005 to euro 9,217
million; on an adjusted base net profit was up 12.5% to
euro 10,412 million (which excludes an inventory holding
loss of euro 33 million and special charges of euro 1,162
million). This increase was driven by continued improvements in performance and consistent execution of Enis strategy, in a broadly favorable trading environment. |
Special charges for the year were principally related to asset impairments, impacting mainly assets in the Exploration & Production division, environmental provisions, redundancy incentives, risk provisions with respect to certain fines imposed by certain regulatory and antitrust authorities and a deferred tax charge, reflecting the windfall tax levied by the Algerian Government and the supplemental tax rate in the UK. |
- 48 -
ENI IN 2006 / GROUP RESULTS FOR THE YEAR
Total Shareholder
Return for the year came in at 14.8%, one of the
highest in the industry. Return on average capital employed (ROACE) calculated on an adjusted basis for the twelve-month |
period ending December 31,
2006 was 22.7% (20.5% in 2005). The break-down of adjusted net profit by division is shown in the table below: |
ADJUSTED NET PROFIT BY DIVISION |
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | ||||||||||||
4,033 | Exploration & Production | 6,186 | 7,279 | 1,093 | 17.7 | ||||||||||||
2,290 | Gas & Power | 2,552 | 2,862 | 310 | 12.1 | ||||||||||||
674 | Refining & Marketing | 945 | 629 | (316 | ) | (33.4 | ) | ||||||||||
242 | Petrochemical | 227 | 174 | (53 | ) | (23.3 | ) | ||||||||||
252 | Engineering & Construction | 328 | 400 | 72 | 22.0 | ||||||||||||
(241 | ) | Other activities | (297 | ) | (301 | ) | (4 | ) | (1.3 | ) | |||||||
(86 | ) | Corporate and financial companies | (142 | ) | 54 | 196 | .. | ||||||||||
(37 | ) | Unrealized profit in inventory (a) | (89 | ) | (79 | ) | 10 | 11.2 | |||||||||
7,127 | Adjusted net profit | 9,710 | 11,018 | 1,308 | 13.5 | ||||||||||||
of which: | |||||||||||||||||
482 | minority interest | 459 | 606 | 147 | 32.0 | ||||||||||||
6,645 | Enis adjusted net profit | 9,251 | 10,412 | 1,161 | 12.5 |
(a) | Unrealized
profit in inventory concerned intragroup sales of goods
and services recorded in the assets of the purchasing
division as of end of the period. |
|
From January 1, 2006 Enis subsidiaries operating in diversified sectors (such as real estate services, insurance and financing intermediation, R&D and training services) are reported in the Corporate and financing companies aggregate with exception of Tecnomare which is reported in the Exploration & Production division (previously all these diversified activities were reported in the Other activities aggregate). The Other activities aggregate includes only Syndial SpA, a subsidiary which runs minor petrochemical activities and reclamation and decommissioning activities pertaining to certain businesses which Eni exited in past years. In order to allow for comparison, 2005 data has been reclassified accordingly; 2004 data has not been reclassified. |
The Group adjusted net
profit for the year was supported by the increase
reported in the:
|
These increases were partly offset by lower adjusted net profit reported in the Refining & Marketing division (down euro 316 million, or 33.4%), due to a poor operating performance (down euro 424 million) dragged down by a weak refining environment, the appreciation of the euro over the dollar and the impact of a higher level of planned maintenance activity at refineries. Divisional results were also adversely impacted by the weaker performance of marketing activities in Italy due to lower sales as a consequence of the mild weather conditions of the fourth quarter. |
- 49 -
ENI IN 2006 / GROUP RESULTS FOR THE YEAR
CAPITAL
EXPENDITURE 2006 capital expenditure amounted to euro 7,833 million, of which 89.7% related to the Exploration & Production, Gas & Power and Refining & Marketing divisions. Capital expenditure was primarily related to: (i) the development of oil and gas reserves (euro 3,629 million) in particular in Kazakhstan, Angola, Egypt and Italy and exploration projects (euro 1,348 million) particularly in Angola, Egypt, Norway, Nigeria, the Gulf of Mexico and Italy, including also the acquisition of 152,000 square kilometers of new acreage (99% operated by Eni); (ii) the upgrading and maintenance of Enis natural gas transport and distribution networks in Italy (euro 785 million); (iii) ongoing construction of combined cycle power plants (euro 5,229 million); (iv) projects aimed at improving flexibility and yields of refineries (euro 376 million), including the start-up of construction of a new hydrocracking unit at the Sannazzaro refinery, |
and the upgrading of the refined product distribution network in Italy and in the rest of Europe (euro 223 million); and (v) the construction of a new FPSO unit and upgrading of the fleet and logistic centers in the Engineering & Construction division (euro 591 million). |
CAPITAL EXPENDITURE BY DIVISION: |
2004 |
(million euro) | 2005 |
2006 |
Change |
% Ch. |
||||||||||||
4,853 |
Exploration & Production | 4,965 |
5,203 |
238 |
4.8 |
||||||||||||
1,451 |
Gas & Power | 1,152 |
1,174 |
22 |
1.9 |
||||||||||||
693 |
Refining & Marketing | 656 |
645 |
(11 |
) | (1.7 |
) | ||||||||||
148 |
Petrochemical | 112 |
99 |
(13 |
) | (11.6 |
) | ||||||||||
186 |
Engineering & Construction | 349 |
591 |
242 |
69.3 |
||||||||||||
49 |
Other activities | 48 |
72 |
24 |
50.0 |
||||||||||||
119 |
Corporate and financial companies | 132 |
88 |
(44 |
) | (33.3 |
) | ||||||||||
Unrealized profit in inventory | (39 |
) | (39 |
) | .. |
||||||||||||
7,499 |
7,414 |
7,833 |
419 |
5.7 |
NET CASH
PROVIDED BY OPERATING ACTIVITIES Net cash provided by operating activities came in at euro 17,001 million. These cash flow enabled us to finance: (i) capital expenditure and investments for euro 7,928 million; (ii) dividend payments amounting to euro 4,832 million; (iii) the repurchase of own shares for euro 1,241 million. Cash from divestments (euro 329 million) and currency translation effects (approximately euro 650 million) also contributed to the reduction in net borrowings. NET BORROWINGS Net borrowings at December 31, 2006 were euro 6,767 million, representing a decrease of euro 3,708 million from December 31, 2005 due mainly to cash inflow generated by operating activities (euro 17,001 million). Currency translation effects also contributed to the reduction in net borrowings. Debts and bonds |
- 50 -
ENI IN 2006 / GROUP RESULTS FOR THE YEAR
amounted to euro 11,699
million, of which euro 4,324 million were short-term
(including the portion of long-term debt due within
twelve months for euro 890 million) and euro 7,375
million were long-term. At December 31, 2006, leverage was 0.16, compared to 0.27 at December 31, 2005. DIVIDENDS AND SHARE REPURCHASES In 2006 total cash dividends to Eni shareholders amounted to euro 4,610 million (euro 5,070 million in 2005) of which euro 2,400 million pertained to the payment of the balance of the dividend for fiscal year 2005 and euro 2,210 million pertained to the payment of an interim dividend (euro 0.60 per share) for fiscal year 2006 paid in October 2006. On May 23-24, 2007, Annual General Meeting is convened to approve a unit dividend of euro 1.25 per share for fiscal year 2006 as proposed by Enis Board of Directors. This dividend proposal represents an increase of 13.6% compared to the unit dividend paid for fiscal year 2005 (euro 1.10 per share). If the proposal is approved by shareholders, in June Eni will pay a balance of euro 0.65 per share for fiscal year 2006. |
From January 1 to December
31, 2006 a total of 53.13 million own shares were
purchased at a cost of euro 1,241 million (on average
euro 23.35 per share). From the beginning of the share
buy-back plan (September 1, 2000), Eni has purchase 335
million of its own shares, equal to 8.36% of outstanding
capital stock, at a total cost of euro 5,512 million
(representing an average cost of euro 16.45 per share). In future, management plans to distribute significant amounts of cash to shareholders through an attractive and sustainable flow of dividends. Management also plans to continue paying dividends on an interim basis. Cash in excess (i.e. cash available after funding growth, paying dividend and maintaining a stable financial structure) will be returned to shareholders via continuing repurchase of own shares. |
- 51 -
ENI IN 2006 / COMMITMENT TO SUSTAINABLE DEVELOPMENT
Commitment to sustainable development
SUSTAINABLE DEVELOPMENT: PERFORMANCE DATA | 2004 |
2005 |
2006 |
Employees in Italy at year-end | (units) | 41,331 |
40,192 |
39,765 |
||||
of which women | 6,792 |
6,977 |
7,124 |
|||||
Employees outside Italy at year-end | (units) | 30,186 |
32,066 |
33,807 |
||||
of which women | 3,347 |
3,578 |
3,660 |
|||||
Employees in research and development activities (at year-end) | (units) | 1,470 |
1,420 |
1,160 |
||||
Injury frequency rate (accidents per million hours worked) | (number) | 4.47 |
3.17 |
3.07 |
||||
Injury severity rate (day of absence per thousand hours worked) | (number) | 0.11 |
0.10 |
0.09 |
||||
Number of oil spills | (number) | 226 |
335 |
139 |
||||
Volumes of oil spilt | (barrels) | 7,814 |
6,908 |
6,151 |
||||
GHG emissions | (MtCO2eq) | 58.41 |
61.74 |
59.34 |
||||
Applications for patents | (number) | 60 |
26 |
39 |
||||
Research and development costs | (million euro) | 257 |
204 |
222 |
||||
Cost incurred for safety | (million euro) | 292 |
391 |
394 |
||||
Environmental expenditure | (million euro) | 802 |
1,080 |
1,165 |
A strong commitment to sustainable development, involving each aspect of the business ranging from empowering people, to caring for the environment, developing communities, and technological innovation, has always stood at the heart of Enis strategies. In 2006, this commitment was confirmed and empowered. Eni is engaged in improving the sustainability of its business model over the time by means of strengthening the relationship with its stakeholders, improving social performance and increasing the value of intangible assets. Sustainability objectives are expected to become an integral part of its management, planning and development | processes. In light of this,
for the first time in its history, Eni addressed in its
industrial planning the key challenges and commitments it
is expected to cope with in future years, as described in
the table below. 2006 marks the first year in which Eni has published a Sustainability Report to communicate more effectively with stakeholders. We now have a more coherent approach to sustainability, and are even more committed to managing and developing our company in a responsible and accountable way. More detailed information on Enis commitment to sustainability is given on Enis website in the section Sustainability and in the Report on Sustainability. |
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ENI IN 2006 / COMMITMENT TO SUSTAINABLE DEVELOPMENT
Sustainability issues | Challenge | Enis commitment |
Corporate governance |
Increasing focus on transparency and sustainability of corporate governance models and processes |
|
People | Increasing competition to hire and retain qualified personnel and need to empower local resources, at the same time protecting their health and ensuring high standard of workplace safety |
|
Environmental responsibility | Satisfying growing energy needs, while at the same time reducing emissions and the impact on ecosystems |
|
Innovation | Strategic role of innovation in ensuring a sustainable use of energy sources |
|
Territory and communities | Expectations for local community involvement and support |
|
Human resources and organization In Enis view, all men and women working within its global organization represent an asset to be safeguarded and enhanced with the utmost care, in the conviction that a highly-motivated, talented and well trained workforce is key to the creation of sustainable value in the long term. Enis main objectives for its human resources are:
|
|
- 54 -
ENI IN 2006 / COMMITMENT TO SUSTAINABLE DEVELOPMENT
MANAGEMENT AND DEVELOPMENT OF HUMAN
RESOURCES |
(232 senior managers, 6,822
middle managers and senior staff, 12,180 employees and
6,192 workers) for a total of 90,319 participations. INDUSTRIAL RELATIONS Industrial relations within a consolidated and structured system represented an efficient and consistent support to Enis strategic choices and to the completion of reorganization processes underway. Internationally, Eni continued its dialogue with workers unions in specific forums such as the European Works Council. Enis Multicultural Training Project, which takes place every year in a different country with the cooperation of members of the EWC, held training courses in France addressed to 300 employees of Saipem SA. This course was awarded the first prize Etica&Impresa at the end of 2006. HEALTH Activities for the protection of health aim at improving general work conditions and are developed according to three main principles:
Eni has a network of 307 own health care centers
located in its main operating areas of these 217 are
located outside Italy. A set of international agreements
with the best local and international health centers
guarantees efficient service and timely reactions to
emergencies.
|
- 55 -
ENI IN 2006 / COMMITMENT TO SUSTAINABLE DEVELOPMENT
In 2006, safety indicators
have continued to improve, confirming a trend in place
for many years to date. Both the injury frequency and
severity rates hit historical lows: the former is
calculated as ratio of injuries per million hours worked
and was 3.07, down 3% from 2005; the latter is calculated
as ratio of lost working days per thousand hours worked
and was 0.09, down 10% from 2005. In 2006, Eni spent
approximately euro 390 million mainly in facilities to
improve safety levels, safety current measures, research
and development and training. Responsibility towards the environment OUTLOOK The current focus on global environmental issues spurred by an increasingly tight regulatory framework and socio-political debate stimulates companies to devote a strong commitment to both local and worldwide environmental matters beyond the simple compliance with applicable rules and regulations. In addition, the current operating context is characterized by increasing risk aversion, due to the progressive internalization of environmental externalities and also the growing participation of local stakeholders in decision making processes. Companies are therefore required to be more transparent on their environmental performance, as they are subject to careful scrutiny by stakeholders. In all its activities, Eni is actively committed to reducing its environmental footprint, decreasing its energy and water consumption, reducing local pollution of air, water and soil as well as waste production and reclaiming discontinued industrial sites. Special attention is paid to the protection |
of biodiversity. To this
end, in 2006 Eni spent approximately euro 1.2 billion to
preserve the environment and to support reclamation and
remediation activities. RATIONAL USE OF NATURAL RESOURCES We manage natural resources aiming at their rational and sustainable use and conservation throughout all Enis operations. Coping with risks of climate change Eni has been devoting a great deal of effort to mitigate risks of climate change by reducing GHG emissions and energy consumption through a global strategy of carbon management aiming at:
Along these guidelines, Eni has been achieving such environmental results as to be featured as a low carbon dioxide emission company. |
- 56 -
ENI IN 2006 / COMMITMENT TO SUSTAINABLE DEVELOPMENT
Water preservation |
MANAGING OPERATIONAL RISKS The broad scope of Enis activities involves a wide range of operational risks such as those of explosion, fire or leakage of toxic products, production of non biodegradable waste. All these events could possibly damage or even destroy plants, facilities, equipment and other property, cause injury or even death to persons or cause environmental damage. Eni adopted the most stringent guidelines for the evaluation and management of health, safety and environmental (HSE) risks, with the objective of protecting Enis employees, contractors and clients, the populations involved in its activity, the environment and being in compliance with local and international rules and regulations. Enis guidelines prescribe the adoption of international best practices in setting internal principles, standards and solutions. An ongoing process for identifying, evaluating and managing HSE risks is at the hearth of HSE operations in each phase of the business activity and is performed through the adoption of procedures tailored on the peculiarities of each business and industrial site. HSE risks are effectively managed through an integrated management system designed along the principles set in Enis Model of HSE operations. This is a general procedure to be applied in all its operating sites, based on an annual cycle of planning, implementation, control, review of results and definition of new objectives. The model is directed towards the prevention of risks, the systematic monitoring and control of HSE performance in a continuous improvement cycle subject also to audits by internal and independent experts. Any environmental emergency is managed by business units locally with their own organization under preset reaction plans to foreseeable events aimed at limiting damage and at activating adequate responses. Eni has two emergency rooms (at Milan and Rome) provided with real time monitoring systems for the collection of data on georeferenced maps for all Eni sites and logistics worldwide. Mathematical models are in place to assess dimension, temporal development and other consequences of certain catastrophic events and to enable a real-time planning of first-aid interventions to help mitigate consequences. In addition to its own emergency teams, Eni entered international agreements in order to maximize its ability to react in all its operating sites. |
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ENI IN 2006 / COMMITMENT TO SUSTAINABLE DEVELOPMENT
Community involvement Eni operates in over 70 countries respecting the human rights of populations, their territory and the environment, contributing to improving the quality of life and the socio-economic development of the communities where it is present. This commitment is the basis of entrepreneurial behaviors based on the respect for ethnic, social or cultural diversity of the various communities with which Eni interacts. The search for integration with varied social and cultural situations is part of Enis tradition. In order to favor a proper integration Eni:
Enis main interventions for the protection and development of local communities concern:
|
Innovation Our relentless commitment to technological research and innovation underscores a fundamental belief that technology is a key to increasing our competitive advantage over the long term and promoting sustainable growth. All the global challenges in future years require ingenuity and commitment: from the environmental and climate emergencies to the increasingly difficult access to hydrocarbon reserves; from the identification of discontinuities in the production of energy from renewable sources to the optimization of production processes up to the solution of problems existing in countries where Eni has been present for a long time or where it recently entered. We are conducting research aimed primarily at reducing the costs of finding and recovering hydrocarbons, upgrading heavy oils, monetizing stranded gas and protecting the environment. In the next four-year period, we plan to devote a significant amount of resources to research and development activities in the range of euro 1,5 billion in order to support our strategy in innovation. In 2006, Eni invested euro 222 million in research and development (euro 204 million in 2005). Of these 39% was directed to the Exploration & Production segment, 32% to the Refining & Marketing segment, 22% to the Petrochemical segment and 7% to the Engineering and Construction segment. In particular we moved forward on our breakthrough technologies: EST (Eni Slurry Technology) for the full exploitation of the heavy barrel, TAP (gas transportation at high pressure) and GTL (gas-to-liquids) for gas monetization, and GHG project as described below. Conversion of heavy crudes and fractions into light products (EST) Testing of this technology progressed at the Taranto demonstration plant. This proprietary technology is based on a process of catalytic hydroconversion in the slurry phase of non conventional crudes, extra heavy crudes and refining residues enabling it to fully convert asphaltenes (the hard fraction of heavy crudes) into naphtha, kerosene, diesel fuel. In 2007, Eni plans to complete the collection of information for designing and building its first industrial plant. |
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ENI IN 2006 / COMMITMENT TO SUSTAINABLE DEVELOPMENT
Gas to liquids
project (GTL) In 2006, with the cooperation of IFP/Axens, Eni completed preparation of a technology handbook for this proprietary technology aiming at conversion of gas to liquids via Fischer-Tropsch synthesis and the basic engineering for a 37 kbbl/d industrial unit. GHG Project (Green House Gases) |
A technical feasibility
study of the geological sequestration of carbon dioxide
has been completed and in 2007 Eni expects to start
testing this project in a field. Natural gas high pressure transport (TAP) The TAP project aims to develop an advanced long distance, high capacity, high pressure and high grade solutions for gas transport targeting:
The TAP technology is expected to allow a decrease in
gas consumption of compressor stations. |
- 59 -
ENI IN 2006 / FINANCIAL INFORMATION
Financial Information
SUMMARY OF ACCOUNTING POLICIES AND
PRACTICES
Eni prepares its consolidated financial statements in accordance
with the International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB) and
adopted by the European Commission.
The consolidated financial statements of Eni include accounts of
the parent company Eni SpA and of all Italian and foreign
significant subsidiaries in which Eni directly or indirectly
holds the majority of voting rights or is otherwise able to
exercise control as in the case of de facto
controlled entities. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain
rewards from its activities. Insignificant subsidiaries, jointly
controlled entities, and other entities in which the group is in
a position to exercise a significant influence through
participation in the financial and operating policy decisions of
the investee are generally accounted for under the equity method
of accounting.
Revenues from sales of crude oil, natural gas,
petroleum and petrochemical products are recognized when the
products are delivered and title passes to the customer. Revenue
recognition in the Engineering & Construction division is
based on the stage of completion of contracts as measured on the
cost-to-cost basis applied to contractual revenues.
Stock-based compensation to employees is
recognized in the profit and loss account based on the fair value
of grants awarded to the employee; the portion relevant to the
year is calculated pro rata over the vesting period of relevant
grants.
Eni enters into various derivative financial transactions to
manage exposures to certain market risks, including foreign
currency exchange rate risks, interest rate risks and commodity
risks. From January 1, 2005, such derivative financial
instruments are assets and liabilities recognized at fair value
starting on the date on which a derivative contract is entered
into and are subsequently reassessed at fair value. Derivatives
are designated as hedges when the hedging relationship between
the hedged item or transaction and the hedging instrument is
highly effective and formally documented. Changes in the fair
value of hedging derivatives are recognized: (i) for fair value
hedges, hedging the exposure to changes in the fair value of a
recognized asset or liability, in the profit and loss account;
(ii) for cash flow hedges, hedging exposure to variability in
cash flows, the effective portion is recognized directly in
equity, while the ineffective portion in the profit and loss
account; subsequently amounts taken to equity are transferred to
the profit and loss account when the hedged transaction occurs.
Changes in fair value of derivatives held for trading purposes,
i.e. derivatives for which the hedging relationship is not
formally documented or is ineffective, are recognized in the
profit and loss account. Eni does not enter into derivative
transactions on a speculative basis.
Inventories of crude oil, natural gas and oil
products are stated at the lower of cost and net realizable
value. Cost is determined based on the weighted-average cost
method. Contract work in progress is recorded on the basis of
contractual considerations by reference to the stage of
completion of a contract measured on a cost-to-cost basis.
Property, plant and equipment and intangible
assets are stated at cost less accumulated depreciation
and accumulated, losses impairment. Depreciation, depletion and
amortization of oil and gas properties (capitalized costs
incurred to obtain access to proved reserves and to provide
facilities for extracting, gathering and storing oil and gas) is
calculated based on the Unit-Of-Production (UOP) method on proved
reserves or proved developed reserves. Exploratory costs (costs
associated with exploratory activities for oil and gas producing
properties) are capitalized and fully amortized as incurred.
Other tangible assets and intangibles with a defined useful life
are amortized systematically, based on the straight-line method.
Goodwill and intangibles lacking a defined useful life are not
amortized but are reviewed periodically for impairment. Eni
assesses its property, plant and equipment and intangible assets,
including goodwill, for possible impairment if there are events
or changes in circumstances that indicate that the carrying
values of the assets are not recoverable.
- 61 -
ENI IN 2006 / FINANCIAL INFORMATION
Such indicators include
changes in the Groups business plans, changes in commodity
prices leading to unprofitable performance and, for oil and gas
properties, significant downward revisions of estimated proved
reserve quantities.
Asset retirement obligations, that may be
incurred for the dismantling and removal of assets and the
reclamation of sites, are evaluated estimating the costs to be
incurred when the asset is retired. Future estimated costs are
discounted when the settlement date is in a long-time horizon in
order to reflect the time value of money. Initial estimate is
reviewed periodically to reflect changes in circumstances and
other factors surrounding the estimate, including the discount
rates. The company recognizes material provisions for asset
retirement in the upstream business. No significant asset
retirement obligations associated with any legal obligations to
retire refining, marketing and transportation (downstream) and
chemical long-lived assets are generally recognized, as
indeterminate settlement dates for the asset retirement prevent
estimation of the fair value of the associated asset retirement
obligation.
Provisions, including environmental liabilities,
are recognized when the group has a present obligation (legal or
constructive) as a result of a past event, when is probable that
an outflow of resources embodying economic benefit will be
required to settle the obligation, and when the obligation can be
reliably estimated. The initial estimate to settle the obligation
is discounted when the effect of the time value of money is
material. The estimate is reviewed periodically to take account
of changes in costs expected to be incurred to settle the
obligation and other factors, including changes in the discount
rates.
Eni is a party to a number of legal proceedings
arising in the ordinary course of business. Although Enis
management does not currently expect a material adverse effect on
Enis financial position and results of operations on the
basis of information available to date and taking account of
existing provisions, there can be no assurance that in the future
Eni will not incur material charges in connection with pending
litigations as new information becomes available and new
developments may occur. For further information about pending
litigations, see Legal proceedings, note 25 to the
consolidated financial statements of Enis Annual Report
2006.
The preparation of consolidated financial statements requires
management to apply accounting methods and policies that are
based on difficult or subjective judgments, estimates based on
past experience and assumptions determined to be reasonable and
realistic based on the related circumstances. The application of
these estimates and assumptions, particularly those affecting
estimates of proved reserves, asset impairments and contingent
liabilities, affects the reported amounts of assets and
liabilities and the disclosure of contingent assets and
liabilities at the balance sheet date and the reported amounts of
income and expenses during the reporting period. Actual results
may differ from these estimates given the uncertainty surrounding
the assumptions and conditions upon which estimates are based.
For further information regarding accounting policies and
practices, see Evaluation criteria and Use of
accounting estimates in the Notes to the consolidated
financial statements of Enis Annual Report 2006.
- 62 -
ENI IN 2006 / FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS
PROFIT AND LOSS ACCOUNT | (million euro) | 2004 | 2005 | 2006 |
Profit and loss account | |||||||||
Revenues | |||||||||
Net sales from operations | 57,545 | 73,728 | 86,105 | ||||||
Other income and revenues | 1,377 | 798 | 783 | ||||||
Total revenues | 58,922 | 74,526 | 86,888 | ||||||
Operating expenses | |||||||||
Purchases. services and other | (38,347 | ) | (48,567 | ) | (57,490 | ) | |||
- of which significant non recurring events and operations | 5 | (290 | ) | (239 | ) | ||||
Payroll and related costs | (3,245 | ) | (3,351 | ) | (3,650 | ) | |||
Total operating expenses | (41,592 | ) | (51,918 | ) | (61,140 | ) | |||
Depreciation, amortization and impairments | (4,931 | ) | (5,781 | ) | (6,421 | ) | |||
OPERATING PROFIT | 12,399 | 16,827 | 19,327 | ||||||
Financial income | 2,589 | 3,131 | 4,132 | ||||||
Financial expense | (2,745 | ) | (3,497 | ) | (3,971 | ) | |||
Financial income (expense) | (156 | ) | (366 | ) | 161 | ||||
Effects of investments accounted for using the equity method | 332 | 737 | 795 | ||||||
Other income (expense) from investments | 488 | 177 | 108 | ||||||
Income (expense) from investments | 820 | 914 | 903 | ||||||
PROFIT BEFORE INCOME TAXES | 13,063 | 17,375 | 20,391 | ||||||
Income taxes | (5,522 | ) | (8,128 | ) | (10,568 | ) | |||
NET PROFIT | 7,541 | 9,247 | 9,823 | ||||||
Pertaining to: | |||||||||
- Eni | 7,059 | 8,788 | 9,217 | ||||||
- minority interest | 482 | 459 | 606 |
- 63 -
ENI IN 2006 / FINANCIAL INFORMATION
BALANCE SHEET | (million euro) | Dec. 31, 2004 | Dec. 31, 2005 | Dec. 31, 2006 |
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | 1,003 | 1,333 | 3,985 | ||||||
Other financial assets for trading or available for sale | 1,266 | 1,368 | 972 | ||||||
Trade and other receivables | 13,734 | 17,902 | 18,799 | ||||||
Inventories | 2,847 | 3,563 | 4,752 | ||||||
Income tax receivables | 674 | 697 | 658 | ||||||
Other current assets | 588 | 369 | 855 | ||||||
Total current assets | 20,112 | 25,232 | 30,021 | ||||||
Non-current assets | |||||||||
Property, plant and equipment | 40,586 | 45,013 | 44,312 | ||||||
Other tangible assets | 629 | ||||||||
Inventories - compulsory stock | 1,386 | 2,194 | 1,827 | ||||||
Intangible assets | 3,313 | 3,194 | 3,753 | ||||||
Investments accounted for using the equity method | 3,156 | 3,890 | 3,886 | ||||||
Other investments | 529 | 421 | 360 | ||||||
Other financial assets | 936 | 1,050 | 805 | ||||||
Deferred tax assets | 1,827 | 1,861 | 1,725 | ||||||
Other non-current assets | 1,008 | 995 | 994 | ||||||
Total non-current assets | 52,741 | 58,618 | 58,291 | ||||||
TOTAL ASSETS | 72,853 | 83,850 | 88,312 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY | |||||||||
Current liabilities | |||||||||
Short-term financial liabilities | 4,150 | 4,612 | 3,400 | ||||||
Current portion of long-term debt | 927 | 733 | 890 | ||||||
Trade and other payables | 10,533 | 13,095 | 15,995 | ||||||
Taxes payable | 2,498 | 3,430 | 2,830 | ||||||
Other current liabilities | 505 | 613 | 634 | ||||||
Total current liabilities | 18,613 | 22,483 | 23,749 | ||||||
Non-current liabilities | |||||||||
Long-term debt | 7,607 | 7,653 | 7,409 | ||||||
Provisions for contingencies | 5,736 | 7,679 | 8,614 | ||||||
Provisions for employee benefits | 982 | 1,031 | 1,071 | ||||||
Deferred tax liabilities | 3,948 | 4,890 | 5,852 | ||||||
Other non-current liabilities | 427 | 897 | 418 | ||||||
Total non-current liabilities | 18,700 | 22,150 | 23,364 | ||||||
TOTAL LIABILITIES | 37,313 | 44,633 | 47,113 | ||||||
(million euro) |
Dec. 31, 2004 | Dec. 31, 2005 | Dec. 31, 2006 | ||||||
Shareholders equity | |||||||||
Minority interests | 3,166 | 2,349 | 2,170 | ||||||
Shareholders equity: | |||||||||
Share capital: 4,005,358,876 fully paid shares nominal value euro 1 each (the same amount as of December 31, 2005) | 4,004 | 4,005 | 4,005 | ||||||
Share premium | |||||||||
Other reserves | 9,629 | 10,910 | 6,013 | ||||||
Retained earnings | 14,911 | 17,381 | 25,168 | ||||||
Net profit | 7,059 | 8,788 | 9,217 | ||||||
Treasury shares | (3,229 | ) | (4,216 | ) | (5,374 | ) | |||
Total Eni Shareholders equity | 32,374 | 36,868 | 39,029 | ||||||
TOTAL SHAREHOLDERS EQUITY | 35,540 | 39,217 | 41,199 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | 72,853 | 83,850 | 88,312 |
- 64 -
ENI IN 2006 / FINANCIAL INFORMATION
STATEMENTS OF CASH FLOW | (million euro) | 2004 | 2005 | 2006 |
Net profit of the year | 7,541 | 9,247 | 9,823 | ||||||
Depreciation and amortization | 4,598 | 5,509 | 6,153 | ||||||
Revaluations, net | 27 | (288 | ) | (386 | ) | ||||
Net change in provisions for contingencies | 418 | 1,279 | (86 | ) | |||||
Net change in the provisions for employee benefits | 49 | 18 | 72 | ||||||
Gain on disposal of assets, net | (793 | ) | (220 | ) | (59 | ) | |||
Dividend income | (72 | ) | (33 | ) | (98 | ) | |||
Interest income | (198 | ) | (214 | ) | (387 | ) | |||
Interest expense | 567 | 654 | 346 | ||||||
Exchange differences | (79 | ) | (64 | ) | 6 | ||||
Income taxes | 5,522 | 8,128 | 10,568 | ||||||
Cash generated from operating profit before changes in working capital | 17,580 | 24,016 | 25,952 | ||||||
(Increase) decrease: | |||||||||
- inventories | (355 | ) | (1,402 | ) | (953 | ) | |||
- trade and other receivables | (1,241 | ) | (4,413 | ) | (1,952 | ) | |||
- other assets | 43 | 351 | (315 | ) | |||||
- trade and other payables | 727 | 3,030 | 2,146 | ||||||
- other liabilities | (83 | ) | 12 | 50 | |||||
Cash from operations | 16,671 | 21,594 | 24,928 | ||||||
Dividends received | 394 | 366 | 848 | ||||||
Interest received | 167 | 214 | 395 | ||||||
Interest paid | (533 | ) | (619 | ) | (294 | ) | |||
Income taxes paid | (4,199 | ) | (6,619 | ) | (8,876 | ) | |||
NET CASH PROVIDED FROM OPERATING ACTIVITIES | 12,500 | 14,936 | 17,001 | ||||||
Investments: | |||||||||
- tangible assets | (6,785 | ) | (6,558 | ) | (6,138 | ) | |||
- intangible assets | (714 | ) | (856 | ) | (1,695 | ) | |||
- consolidated subsidiaries and businesses | (73 | ) | (46 | ) | |||||
- investments | (316 | ) | (54 | ) | (42 | ) | |||
- securities | (675 | ) | (464 | ) | (49 | ) | |||
- financing receivables | (470 | ) | (683 | ) | (516 | ) | |||
- change in payables and receivables in relation to investments and capitalized depreciation | (13 | ) | 149 | (26 | ) | ||||
Cash flow from investments | (8,973 | ) | (8,539 | ) | (8,512 | ) | |||
Disposals: | |||||||||
- tangible assets | 279 | 99 | 237 | ||||||
- intangible assets | 13 | 13 | 12 | ||||||
- consolidated subsidiaries and businesses | 538 | 252 | 8 | ||||||
- investments | 61 | 178 | 36 | ||||||
- securities | 659 | 369 | 382 | ||||||
- financing receivables | 808 | 804 | 794 | ||||||
- change in payables and receivables in relation to disposals | (1 | ) | 9 | (8 | ) | ||||
Cash flow from disposals | 2,357 | 1,724 | 1,461 | ||||||
Net cash used in investing activities (*) | (6,616 | ) | (6,815 | ) | (7,051 | ) | |||
Proceeds from long-term debt | 1,229 | 2,755 | 2,888 | ||||||
Payments of long-term debt | (797 | ) | (2,978 | ) | (2,621 | ) | |||
Reductions of short-term debt | (4,175 | ) | (317 | ) | (949 | ) | |||
(3,743 | ) | (540 | ) | (682 | ) | ||||
Net capital contributions by/to minority shareholders | 1 | 24 | 22 | ||||||
Net repurchase of shares by Eni subsidiaries | (22 | ) | (30 | ) | (477 | ) | |||
Acquisitions of additional interests in consolidated subsidiaries | 643 | (3 | ) | (7 | ) | ||||
Sale of additional interests in consolidated subsidiaries | 35 | ||||||||
Dividends to shareholders | (3,076 | ) | (6,288 | ) | (4,832 | ) | |||
- of which to Eni shareholders | (2,828 | ) | (5,070 | ) | (4,610 | ) | |||
Net repurchase of Eni shares | (65 | ) | (987 | ) | (1,156 | ) | |||
Net cash used in financing activities | (6,262 | ) | (7,824 | ) | (7,097 | ) | |||
Effect of change in consolidation | 12 | (38 | ) | (4 | ) | ||||
Effect of exchange differences | (67 | ) | 71 | (197 | ) | ||||
Net cash flow for the period | (433 | ) | 330 | 2,652 | |||||
Cash and cash equivalent at beginning of the year | 1,436 | 1,003 | 1,333 | ||||||
Cash and cash equivalent at end of the year | 1,003 | 1,333 | 3,985 |
(*) | Net cash used in investing activities includes some investments which Eni, due to their nature (temporary cash investments or carried on in order to optimize management of treasury operations) are considered as a reduction of net borrowings as defined in the "Financial Review" in the "Report of the Directors". |
- 65 -
ENI IN 2006 / FINANCIAL INFORMATION
NON-GAAP MEASURES
Reconciliation of reported operating profit and net
profit to results on an adjusted basis
Management evaluates Group and business performance on the basis
of adjusted operating profit and adjusted net profit, which are
arrived at by excluding inventory holding gains or losses and
special items. Further, finance charges on finance debt, interest
income, charges or income deriving from the fair value evaluation
of derivative financial instruments held for trading purposes,
and exchange rate differences are excluded when determining
adjusted net profit of each business segment.
The taxation effect of such items excluded from adjusted net
profit is determined based on the specific rate of taxes
applicable to each item, with the exception for finance charges
or income, to which the Italian statutory tax rate of 33% is
applied.
Adjusted operating profit and adjusted net profit are non-GAAP
financial measures under either IFRS, or U.S. GAAP. Management
includes them to facilitate comparison of base business
performance across periods and allow financial analysts to
evaluate Enis trading performance on the basis of their
forecasting models. In addition, management uses segmental
adjusted net profit when calculating return on average capital
employed (ROACE) by each business segment.
The following is a description of items which are excluded from
the calculation of adjusted results.
Inventory holding gain or loss is the difference between the cost
of sales of the volumes sold in the period based on the cost of
supplies of the same period and the cost of sales of the volumes
sold calculated using the weighted-average cost method of
inventory accounting.
Special items include certain relevant income or charges
pertaining to either: (i) infrequent or unusual events and
transactions, being identified as non-recurring items under such
circumstances; or (ii) certain events or transactions which are
not considered to be representative of the ordinary course of
business, as in the case of environmental provisions,
restructuring charges, asset impairments or write ups and gains
or losses on divestments even though they occurred in past
periods or are likely to occur in future ones. As provided for in
Decision No. 15519 of July 27, 2006 of the Italian market
regulator (CONSOB), non recurring material income or charges are
to be clearly reported in the managements discussion and
financial tables.
Finance charges or income related to net borrowings excluded from
the adjusted net profit of business segments are comprised of
interest charges on finance debt and interest income earned on
cash and cash equivalents not related to operations. In addition
the effect of the fair value evaluation of derivative financial
instruments held for trading purposes and exchange rate
differences are excluded from the adjusted net profit of business
segments. Therefore, the adjusted net profit of business segments
includes finance charge or income deriving from certain
segment-operated assets, i.e., interest income on certain
receivable financing and securities related to operations and
finance charge pertaining to the accretion of certain provisions
recorded on a discounted basis (as in the case of the asset
retirement obligations in the Exploration & Production
division).
Finance charges or interest income and related taxation effects
excluded from the adjusted net profit of the business segments
are allocated on the aggregate Corporate and financial companies.
For a reconciliation of adjusted operating profit and adjusted
net profit to reported operating profit and reported net profit
see tables below.
- 66 -
ENI IN 2006 / FINANCIAL INFORMATION
(million euro)
2006 |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 15,580 |
3,802 |
319 |
172 |
505 |
(622 |
) | (296 |
) | (133 |
) | 19,327 |
|||||||||||||||
Exclusion of inventory holding (gains) losses | (67 |
) | 215 |
(60 |
) | 88 |
|||||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 55 |
109 |
13 |
62 |
239 |
||||||||||||||||||||||
Other special charges: | 183 |
92 |
147 |
94 |
3 |
261 |
56 |
836 |
|||||||||||||||||||
environmental charges | 44 |
111 |
126 |
11 |
292 |
||||||||||||||||||||||
asset impairments | 231 |
51 |
14 |
50 |
1 |
22 |
369 |
||||||||||||||||||||
gains on disposal of assets | (61 |
) | (61 |
) | |||||||||||||||||||||||
provisions
to the reserve for contingencies |
8 |
31 |
75 |
114 |
|||||||||||||||||||||||
provision for
redundancy incentives |
13 |
37 |
47 |
19 |
2 |
17 |
43 |
178 |
|||||||||||||||||||
other | (40 |
) | (33 |
) | (6 |
) | 21 |
2 |
(56 |
) | |||||||||||||||||
Special items of operating profit | 183 |
147 |
256 |
107 |
3 |
323 |
56 |
1,075 |
|||||||||||||||||||
Adjusted operating profit | 15,763 |
3,882 |
790 |
219 |
508 |
(299 |
) | (240 |
) | (133 |
) | 20,490 |
|||||||||||||||
Net financial (expense) income (*) | (59 |
) | 16 |
(7 |
) | 205 |
155 |
||||||||||||||||||||
Net income from investments (*) | 85 |
489 |
184 |
2 |
66 |
5 |
831 |
||||||||||||||||||||
Income taxes (*) | (8,510 |
) | (1,525 |
) | (345 |
) | (47 |
) | (174 |
) | 89 |
54 |
(10,458 |
) | |||||||||||||
Tax rate (%) | 53.9 |
34.8 |
35.4 |
48.7 |
|||||||||||||||||||||||
Adjusted net profit | 7,279 |
2,862 |
629 |
174 |
400 |
(301 |
) | 54 |
(79 |
) | 11,018 |
||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 606 |
||||||||||||||||||||||||||
- Enis adjusted net profit | 10,412 |
||||||||||||||||||||||||||
Enis reported net profit | 9,217 |
||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 33 |
||||||||||||||||||||||||||
Exclusion of special items | 1,162 |
||||||||||||||||||||||||||
- Non-recurring (income) charges | 239 |
||||||||||||||||||||||||||
- Other special charges | 923 |
||||||||||||||||||||||||||
Enis adjusted net profit | 10,412 |
(*) | Excludes special items. |
- 67 -
ENI IN 2006 / FINANCIAL INFORMATION
(million euro)
2005 |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 12,592 |
3,321 |
1,857 |
202 |
307 |
(934 |
) | (377 |
) | (141 |
) | 16,827 |
|||||||||||||||
Exclusion of inventory holding (gains) losses | (127 |
) | (1,064 |
) | (19 |
) | (1,210 |
) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 290 |
290 |
|||||||||||||||||||||||||
Other special charges: | 311 |
47 |
421 |
78 |
7 |
638 |
149 |
1,651 |
|||||||||||||||||||
environmental charges | 31 |
337 |
413 |
54 |
835 |
||||||||||||||||||||||
asset impairments | 247 |
1 |
5 |
29 |
4 |
75 |
2 |
363 |
|||||||||||||||||||
provisions to the
reserve for contingencies |
39 |
36 |
126 |
201 |
|||||||||||||||||||||||
increase insurance charges | 57 |
6 |
30 |
17 |
4 |
64 |
178 |
||||||||||||||||||||
provision for
redundancy incentives |
7 |
8 |
22 |
4 |
3 |
6 |
29 |
79 |
|||||||||||||||||||
other | 1 |
(12 |
) | (8 |
) | 14 |
(5 |
) | |||||||||||||||||||
Special items of operating profit | 311 |
337 |
421 |
78 |
7 |
638 |
149 |
1,941 |
|||||||||||||||||||
Adjusted operating profit | 12,903 |
3,531 |
1,214 |
261 |
314 |
(296 |
) | (228 |
) | (141 |
) | 17,558 |
|||||||||||||||
Net financial (expense) income (*) | (80 |
) | 37 |
(296 |
) | (339 |
) | ||||||||||||||||||||
Net income from investments (*) | 10 |
370 |
231 |
3 |
141 |
(1 |
) | 23 |
777 |
||||||||||||||||||
Income taxes (*) | (6,647 |
) | (1,386 |
) | (500 |
) | (37 |
) | (127 |
) | 359 |
52 |
(8,286 |
) | |||||||||||||
Tax rate (%) | 51.8 |
35.2 |
34.6 |
46.0 |
|||||||||||||||||||||||
Adjusted net profit | 6,186 |
2,552 |
945 |
227 |
328 |
(297 |
) | (142 |
) | (89 |
) | 9,710 |
|||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 459 |
||||||||||||||||||||||||||
- Enis adjusted net profit | 9,251 |
||||||||||||||||||||||||||
Enis reported net profit | 8,788 |
||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (759 |
) | |||||||||||||||||||||||||
Exclusion of special items | 1,222 |
||||||||||||||||||||||||||
- Non-recurring (income) charges | 290 |
||||||||||||||||||||||||||
- Other special charges | 932 |
||||||||||||||||||||||||||
Enis adjusted net profit | 9,251 |
(*) | Excludes special items. |
- 68 -
ENI IN 2006 / FINANCIAL INFORMATION
(million euro)
2004 |
E&P |
G&P |
R&M |
Petrochemicals |
E&C |
Other activities |
Corporate and financial companies |
Unrealized profit in inventory |
Group |
Reported operating profit | 8,185 |
3,428 |
1,080 |
320 |
203 |
(395 |
) | (346 |
) | (59 |
) | 12,399 |
|||||||||||||||
Exclusion of inventory holding (gains) losses | (12 |
) | (393 |
) | (43 |
) | (448 |
) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 5 |
5 |
|||||||||||||||||||||||||
Other special charges: | 17 |
27 |
236 |
(14 |
) | 12 |
172 |
176 |
626 |
||||||||||||||||||
environmental charges | 5 |
142 |
84 |
72 |
303 |
||||||||||||||||||||||
asset impairments | 287 |
6 |
21 |
3 |
19 |
336 |
|||||||||||||||||||||
gains on disposal of assets | (320 |
) | (320 |
) | |||||||||||||||||||||||
provisions to the
reserve for contingencies |
29 |
18 |
77 |
3 |
1 |
15 |
143 |
||||||||||||||||||||
increase insurance charges | 91 |
91 |
|||||||||||||||||||||||||
provision for
redundancy incentives |
2 |
10 |
20 |
6 |
10 |
6 |
11 |
65 |
|||||||||||||||||||
other | 19 |
(12 |
) | (24 |
) | (26 |
) | 1 |
48 |
2 |
8 |
||||||||||||||||
Special items of operating profit | 17 |
32 |
236 |
(14 |
12 |
172 |
176 |
631 |
|||||||||||||||||||
Adjusted operating profit | 8,202 |
3,448 |
923 |
263 |
215 |
(223 |
) | (187 |
) | (59 |
) | 12,582 |
|||||||||||||||
Net financial (expense) income (*) | (85 |
) | 31 |
5 |
(107 |
) | (156 |
) | |||||||||||||||||||
Net income from investments (*) | 9 |
215 |
96 |
2 |
118 |
4 |
(14 |
) | 430 |
||||||||||||||||||
Income taxes (*) | (4,093 |
) | (1,404 |
) | (350 |
) | (23 |
) | (81 |
) | (22 |
) | 222 |
22 |
(5,729 |
) | |||||||||||
Tax rate (%) | 50.4 |
38.0 |
34.2 |
44.6 |
|||||||||||||||||||||||
Adjusted net profit | 4,033 |
2,290 |
674 |
242 |
252 |
(241 |
) | (88 |
) | (37 |
) | 7,127 |
|||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 482 |
||||||||||||||||||||||||||
- Enis adjusted net profit | 6,645 |
||||||||||||||||||||||||||
Enis reported net profit | 7,059 |
||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (281 |
) | |||||||||||||||||||||||||
Exclusion of special items | (133 |
) | |||||||||||||||||||||||||
- Non-recurring (income) charges | 5 |
||||||||||||||||||||||||||
- Other special charges | (138 |
) | |||||||||||||||||||||||||
Enis adjusted net profit | 6,645 |
(*) | Excludes special items. |
- 69 -
ENI IN 2006 / FINANCIAL INFORMATION
(million euro)
ANALYSIS OF SPECIAL ITEMS |
2004 | 2005 | 2006 | Change | |||||||||
5 | Non-recurring (income) charges | 290 | 239 | (51 | ) | |||||||
626 | Other special charges: | 1,651 | 836 | (815 | ) | |||||||
303 | environmental charges | 835 | 292 | (543 | ) | |||||||
336 | asset impairments | 363 | 369 | 6 | ||||||||
(320 | ) | gains on disposal of assets | (61 | ) | (61 | ) | ||||||
234 | provisions to the reserve for contingencies | 379 | 114 | (265 | ) | |||||||
of which: increase insurance charges | 178 | (178 | ) | |||||||||
65 | provisions for redundancy incentives | 79 | 178 | 99 | ||||||||
8 | other | (5 | ) | (56 | ) | (51 | ) | |||||
631 | Special items of operating profit | 1,941 | 1,075 | (866 | ) | |||||||
Net financial (expense) income | 27 | (6 | ) | (33 | ) | |||||||
(390 | ) | Net income from investments | (137 | ) | (72 | ) | 65 | |||||
of which: | ||||||||||||
gain on the disposal of Italiana Petroli (IP) | (132 | ) | 132 | |||||||||
gain on Galp Energia SGPS SA (disposal assets Rede Electrica National) | (73 | ) | (73 | ) | ||||||||
(308 | ) | gain on the disposal of shares of Snam Rete Gas SpA | ||||||||||
(374 | ) | Income taxes | (609 | ) | 165 | 774 | ||||||
of which: | ||||||||||||
supplemental tax rate UK | 91 | 91 | ||||||||||
windfall tax Algeria | 179 | 179 | ||||||||||
legal proceeding in Venezuela | 77 | 77 | ||||||||||
(133 | ) | Total special items of net profit | 1,222 | 1,162 | (60 | ) |
- 70 -
ENI IN 2006 / FREQUENTLY USED TERMS
Frequently Used Terms
For a reconciliation of Summarized Group Balance Sheet and
Summarized Group Cash Flow Statement with the corresponding
statutory tables see Enis 2006 Annual Report,
Reconciliation of Summarized Group Balance Sheet and Statement Of
Cash Flows to statutory schemes pages 77-80.
SUMMARIZED GROUP BALANCE
SHEET
Summarized Group Balance Sheet aggregates the amount of assets
and liabilities derived from the statutory balance sheet in
accordance with functional criteria which consider the enterprise
conventionally divided into the three fundamental areas focusing
on resource investments, operations and financing. Management
believes that this summarized group balance sheet is useful
information in assisting investors to assess Enis capital
structure and to analyze its sources of funds and investments in
fixed assets and working capital. Management uses the Summarized
Group Balance Sheet to calculate key ratios such as return on
capital employed (ROACE) and the proportion of net borrowings to
shareholders equity (leverage) intended to evaluate whether
Enis financing structure is sound and well-balanced.
SUMMARIZED GROUP BALANCE SHEET | (million euro) | Dec. 31, 2004 | Dec. 31, 2005 | Dec. 31, 2006 |
Fixed assets | |||||||||
Property, plant and equipment, net | 40,586 |
45,013 |
44,312 |
||||||
Other tangible assets | 629 |
||||||||
Inventories - compulsory stock | 1,386 |
2,194 |
1,827 |
||||||
Intangible assets, net | 3,313 |
3,194 |
3,753 |
||||||
Investments, net | 3,685 |
4,311 |
4,246 |
||||||
Accounts receivable financing and securities related to operations | 695 |
775 |
557 |
||||||
Net accounts payable in relation to capital expenditure | (888 |
) | (1,196 |
) | (1,090 |
) | |||
48,777 |
54,291 |
54,234 |
|||||||
Net working capital | |||||||||
Inventories | 2,847 |
3,563 |
4,752 |
||||||
Trade accounts receivable | 10,525 |
14,101 |
15,230 |
||||||
Trade accounts payable | (5,837 |
) | (8,170 |
) | (10,528 |
) | |||
Taxes payable and reserve for net deferred income tax liabilities | (3,056 |
) | (4,857 |
) | (5,396 |
) | |||
Reserve for contingencies | (5,736 |
) | (7,679 |
) | (8,614 |
) | |||
Other operating assets and liabilities (a) | (555 |
) | (526 |
) | (641 |
) | |||
(1,812 |
) | (3,568 |
) | (5,197 |
) | ||||
Employee termination indemnities and other benefits | (982 |
) | (1,031 |
) | (1,071 |
) | |||
Capital employed, net | 45,983 |
49,692 |
47,966 |
||||||
Shareholders equity including minority interests | 35,540 |
39,217 |
41,199 |
||||||
Net borrowings | 10,443 |
10,475 |
6,767 |
||||||
Total liabilities and shareholders equity | 45,983 |
49,692 |
47,966 |
(a) | Include operating financing receivables and securities related to operations for euro 249 million (euro 492 million and euro 261 million at December 31, 2005 and September 30, 2006, respectively) and securities covering technical reserves of Padana Assicurazioni SpA for euro 417 million (euro 453 million and euro 550 million at December 31, 2005 and September 30, 2006, respectively). |
NET BORROWINGS AND LEVERAGE
Eni evaluates its financial condition by reference to net
borrowings, which is the measure of total finance debt
less: cash, cash equivalents and certain very liquid investments
not related to operations, including among others non-operating
financing receivables and securities not related to operations.
Non-operating financing receivables consist of amounts due to
Enis financing subsidiaries from banks and other financing
institutions and amounts due to other subsidiaries from banks for
investing purposes and deposits in escrow. Securities not related
to operations consist primarily of government and corporate
securities.
- 71 -
ENI IN 2006 / FREQUENTLY USED TERMS
Leverage is
a measure of a companys level of indebtedness, calculated
as the ratio between net borrowings which is calculated by
excluding cash and cash equivalents and certain very liquid
assets from financial debt, and shareholders equity,
including minority interests. Management makes use of leverage in
order to assess the soundness and efficiency of the Group balance
sheet in terms of optimal mix between net borrowings and net
equity, and to carry out benchmark analysis with industry
standards.
In the medium term, management plans to maintain a strong
financial structure targeting a level of leverage up to 0.40.
LEVERAGE (NET BORROWINGS ÷ EQUITY) | (million euro) | Dec. 31, 2004 | Dec. 31, 2005 | Dec. 31, 2006 |
Debts and bonds | 12,684 | 12,998 | 11,699 | ||||||
Cash and cash equivalents | (1,003 | ) | (1,333 | ) | (3,985 | ) | |||
Securities not related to operations | (793 | ) | (931 | ) | (552 | ) | |||
Non-operating financing receivables | (251 | ) | (259 | ) | (395 | ) | |||
Other items | (194 | ) | |||||||
Net borrowings | 10,443 | 10,475 | 6,767 | ||||||
Shareholders equity including minority interest | 35,540 | 39,217 | 41,199 | ||||||
Leverage | 0.29 | 0.27 | 0.16 |
SUMMARIZED GROUP CASH FLOW STATEMENT AND CHANGE
IN NET BORROWINGS
Enis Summarized Group Cash Flow Statement derives from the
statutory statement of cash flows. It allows to create a link
between changes in cash and cash equivalents (deriving from the
statutory cash flows statement) occurred from the beginning of
period to the end of period and changes in net borrowings
(deriving from the summarized cash flow statement) occurred from
the beginning of period to the end of period. The measure
enabling to make such a link is represented by free cash flow
which is the cash in excess of capital expenditure needs.
Starting from free cash flow it is possible to determine either:
(i) changes in cash and cash equivalents for the period by
adding/deducting cash flows relating to financing
debts/receivables (issuance/repayment of debt and receivables
related to financing activities), shareholders equity
(dividends paid, net repurchase of own shares, capital issuance)
and the effect of changes in consolidation and of exchange
differences; (ii) changes in net borrowings for the period by
adding/deducting cash flows relating to shareholders equity
and the effect of changes in consolidation and of exchange
differences.
SUMMARIZED GROUP CASH FLOW STATEMENT | (million euro) | 2004 | 2005 | 2006 |
Net profit | 7,541 | 9,247 | 9,823 | ||||||
Adjustments to reconcile to cash generated from operating profit before changes in working capital: | |||||||||
- amortization and depreciation and other non monetary items | 5,092 | 6,518 | 5,753 | ||||||
- net gains on disposal of assets | (793 | ) | (220 | ) | (59 | ) | |||
- dividends, interest, taxes and other changes | 5,740 | 8,471 | 10,435 | ||||||
Cash generated from operating profit before changes in working capital | 17,580 | 24,016 | 25,952 | ||||||
Changes in working capital related to operations | (909 | ) | (2,422 | ) | (1,024 | ) | |||
Dividends received, taxes paid, interest (paid) received | (4,171 | ) | (6,658 | ) | (7,927 | ) | |||
Net cash provided by operating activities | 12,500 | 14,936 | 17,001 | ||||||
Capital expenditure | (7,499 | ) | (7,414 | ) | (7,833 | ) | |||
Investments | (316 | ) | (127 | ) | (95 | ) | |||
Disposals | 1,547 | 542 | 328 | ||||||
Other cash flow related to capital expenditure, investments and disposals | 97 | 293 | 361 |
- 72 -
ENI IN 2006 / FREQUENTLY USED TERMS
continued SUMMARIZED GROUP CASH FLOW STATEMENT
(million euro) |
2004 | 2005 | 2006 | ||||||
Free cash flow | 6,329 | 8,230 | 9,762 | ||||||
Borrowings (repayment) of debt related to financing activities | 211 | (109 | ) | 216 | |||||
Changes in short and long-term financial debt | (3,743 | ) | (540 | ) | (682 | ) | |||
Dividends paid and changes in minority interests and reserves | (3,175 | ) | (7,284 | ) | (6,443 | ) | |||
Effect of changes in consolidation and exchange differences | (55 | ) | 33 | (201 | ) | ||||
NET CASH FLOW FOR THE PERIOD | (433 | ) | 330 | 2,652 | |||||
(million euro) |
2004 | 2005 | 2006 | ||||||
Change in net borrowings | |||||||||
Free cash flow | 6,329 | 8,230 | 9,762 | ||||||
Net borrowings of acquired companies | (19 | ) | |||||||
Net borrowings of divested companies | 190 | 21 | 1 | ||||||
Exchange differences on net borrowings and other changes | (64 | ) | (980 | ) | 388 | ||||
Dividends paid and changes in minority interests and reserves | (3,175 | ) | (7,284 | ) | (6,443 | ) | |||
CHANGE IN NET BORROWINGS | 3,280 | (32 | ) | 3,708 |
ROACE
Return on Average Capital Employed for the Group, on an adjusted
basis is the return on Group average capital invested, calculated
as the ratio between net adjusted profit before minority
interests, plus net finance charges on net borrowings, less the
related tax effect and net average capital employed. The tax rate
applied on finance charges is the Italian statutory tax rate of
33%. The capital invested as of period-end used for the
calculation of net average capital invested is obtained by
deducting inventory gains or losses as of in the period,
rectified from the related tax effect.
ROACE by business segment is determined as the ratio between
adjusted net profit and net average capital invested pertaining
to each business segment and rectifying the net capital invested
as of period-end, from net inventory gains or losses (after
applying the business segment specific tax rate).
ROACE | (million euro) | 2004 | 2005 | 2006 |
Adjusted net profit | 7,127 | 9,710 | 11,018 | ||||||
Exclusion of after tax finance expenses/interest income | 115 | 42 | 46 | ||||||
Adjusted net profit unlevered | 7,242 | 9,752 | 11,064 | ||||||
Capital employed, net: | |||||||||
- at the beginning of the year | 45,240 | 45,983 | 49,692 | ||||||
- at the year end | 45,724 | 48,933 | 47,999 | ||||||
Average capital employed, net | 45,482 | 47,458 | 48,846 | ||||||
ROACE (%) | 15.9 | 20.5 | 22.7 |
TSR (Total Shareholder Return)
Measures the total return of a share calculated on a yearly
basis, based on the change in price from the beginning to the end
of year, and dividends distributed and reinvested at the
ex-dividend date.
- 73 -
ENI IN 2006 / FREQUENTLY USED TERMS
PRODUCTION
SHARING AGREEMENTS (PSA)
In PSAs the national oil company awards the execution of
exploration and production activities to the international oil
company (contractor). The contractor bears the mineral and
financial risk of the initiative and, when successful, recovers
capital expenditure and costs incurred in the year (cost oil) by
means of a share of production. This production share varies
along with international oil prices. In certain PSAs changes in
international oil prices affect also the share of production to
which the contractor is entitled in order to remunerate its
capital invested (profit oil) after costs incurred are repaid by
cost oil. A similar scheme applies to buy-back contracts.
POSSIBLE RESERVES
Amounts of hydrocarbons that have a lower degree of certainty
than probable reserves and are estimated with lower certainty,
for which it is not possible to foresee production.
PROBABLE RESERVES
Amounts of hydrocarbons that are probably, but not certainly,
expected to be extracted. They are estimated based on known
geological conditions, similar characteristics of rock deposits
and the interpretation of geophysical data. Further uncertainty
elements may concern: (i) the extension or other features of the
field; (ii) economic viability of extraction based on the terms
of the development project; (iii) existence and adequacy of
transmission infrastructure and/or markets; (iv) the regulatory
framework.
PROVED RESERVES
Proved reserves are estimated volumes of crude oil, natural gas
and gas condensates, liquids and associated substances which are
expected to be retrieved from deposits and used commercially, at
the economic and technical conditions applicable at the time of
the estimate and according to current legislation. Proved
reserves include: (i) proved developed reserves: amounts of
hydrocarbons that are expected to be retrieved through existing
wells, facilities and operating methods; (ii) non developed
proved reserves: amounts of hydrocarbons that are expected to be
retrieved following new drilling, facilities and operating
methods. On these amounts the company has already defined a clear
development expenditure program which is expression of the
companys determination.
RECOVERABLE RESERVES
Amounts of hydrocarbons included in different categories of
reserves (proved, probable and possible), without considering
their different degree of uncertainty.
RESERVE REPLACEMENT RATIO
Measure of the reserves produced replaced by proved reserves.
Indicates the companys ability to add new reserves through
exploration and purchase of property. A rate higher than 100%
indicates that more reserves were added than produced in the
period. The ratio should be averaged on a three-year period in
order to reduce the distortion deriving from the purchase of
property or upstream assets, the revision of previous estimates,
enhanced recovery, improvement in recovery rates and changes in
the value of reserves in PSAs due to changes in
international oil prices.
RESERVE LIFE INDEX
Ratio between the amount of reserves at the end of the year and
total production for the year.
ABBREVIATIONS |
bboe |
|
billion barrel of oil equivalent |
|||
bbl | = |
barrels | ||||
mmcf | = |
million cubic feet | kbbl | = |
thousand barrels | |
bcf | = |
billion cubic feet | mmbbl | = |
million barrels | |
mmcm | = |
million cubic meters | bbbl | = |
billion barrels | |
bcm | = |
billion cubic meters | mmtonnes | = |
million tonnes | |
boe | = |
barrel of oil equivalent | ktonnes | = |
thousand tonnes | |
kboe | = |
thousand barrel of oil equivalent | /d | = |
per day | |
mmboe | = |
million barrel of oil equivalent | /y | = |
per year |
- 74 -
ENI IN 2006 / FREQUENTLY USED TERMS
RECONCILIATION OF NET PROFIT AND
SHAREHOLDERS EQUITY DETERMINED UNDER IFRS TO U.S. GAAP
The following is a summary of the significant adjustments to net
profit for 2004, 2005 and 2006 and to shareholders equity
as of December 31, 2004, 2005 and 2006 that would be required if
U.S. GAAP had been applied instead of IFRS in the consolidated
financial statements.
(million euro) |
2004 | 2005 | 2006 | ||||||
Net profit pertaining to Eni according to the Financial Statements prepared under IFRS | 7,059 | 8,788 | 9,217 | ||||||
Items increasing (decreasing) reported net profit: | |||||||||
A. effect of the differences related to companies consolidated under IFRS but carried at equity method under U.S. GAAP | (1 | ) | (1 | ) | |||||
B. successful-efforts accounting | (82 | ) | 47 | 359 | |||||
C. elimination of assets impairments and revaluations | 5 | 36 | |||||||
D. deferred income taxes | (21 | ) | (279 | ) | (120 | ) | |||
E. assets associated to the acquisition of a company (portfolio of clients) | (5 | ) | (5 | ) | (5 | ) | |||
F. valuation of inventories | (316 | ) | (956 | ) | 267 | ||||
Gain on disposal of Snamprogetti SpA to Saipem Projects SpA | 252 | ||||||||
Effect of the difference between IFRS and U.S. GAAP on investments accounted for using the equity method | 34 | 12 | 1 | ||||||
Other adjustments | (280 | ) | (3 | ) | (4 | ) | |||
Effect of U.S. GAAP adjustments on minority interest (a) | 8 | (21 | ) | 3 | |||||
Net adjustment | (658 | ) | (1,205 | ) | 788 | ||||
Net profit in accordance with U.S. GAAP | 6,401 | 7,583 | 10,005 | ||||||
Basic profit per share (b) | 1.70 | 2.02 | 2.71 | ||||||
Diluted profit per share (b) | 1.70 | 2.01 | 2.70 | ||||||
Basic profit per ADS (based on two shares per ADS) (b) | 3.39 | 4.03 | 5.41 | ||||||
Diluted profit per ADS (based on two shares per ADS) (b) | 3.39 | 4.03 | 5.41 |
(a) | Adjustment to account for minority interest portion of differences A through F, which include 100% of differences between IFRS and U.S. GAAP on less than wholly- owned subsidiaries. | |
(b) | Amounts in euro. |
(million euro) |
Dec. 31, 2005 | Dec. 31, 2006 | |||||||
Shareholders equity pertaining to Eni according to the Financial Statements prepared under IFRS | 36,868 | 39,029 | |||||||
Items increasing (decreasing) reported shareholders equity: (a) | |||||||||
A. effect of the differences related to companies consolidated under IFRS but carried at equity method under U.S. GAAP | 37 | 33 | |||||||
B. successful-efforts accounting | 2,504 | 2,672 | |||||||
C. elimination of assets impairments and revaluations | 230 | 311 | |||||||
D. deferred income taxes | (3,415 | ) | (3,495 | ) | |||||
E. goodwill | 811 | 786 | |||||||
E. assets associated with the acquisition of a company (portfolio of clients) | (16 | ) | (22 | ) | |||||
F. valuation of inventories | (2,036 | ) | (1,769 | ) | |||||
G. provisions for employees benefits | (32 | ) | |||||||
Effect of the difference between IFRS and U.S. GAAP on investments accounted for using the equity method | 173 | 169 | |||||||
Other adjustments | 2 | ||||||||
Effect of U.S. GAAP adjustments on minority interest (b) | (31 | ) | (28 | ) | |||||
Net adjustment | (1,743 | ) | (1,373 | ) | |||||
Shareholders equity in accordance with U.S. GAAP | 35,125 | 37,656 |
(a) | Items increasing (decreasing) reported shareholders equity of foreign companies are translated into euro at the exchange rate prevailing at the end of each period. | |
(b) | Adjustment to account for minority interest portion of differences A through G, which include 100% of differences between IFRS and U.S. GAAP on less than wholly-owned subsidiaries. |
- 75 -
ENI IN 2006 / DIRECTORS AND OFFICERS
Directors and Officers
Enis Board of Directors
1 |
2 |
3 | 4 | 5 |
1. Roberto Poli
- Chairman Roberto Poli was appointed Chairman of Eni SpA in May 2002. He is currently President of Poli e Associati SpA, a consulting firm for corporate finance, mergers, acquisitions and reorganizations. From 1966 to 1998 he was Professor of Business Finance at the Università Cattolica of Milan. He is a partner of one of the most important firms for corporate finance and legal affairs. He is a non executive director in important companies such as Fininvest SpA, Mondadori SpA, Merloni Termosanitari SpA and G.D. SpA. He has been an advisor for extraordinary finance operations for some of the most important companies in Italy. He has also been Chairman of Rizzoli-Corriere della Sera SpA and Publitalia SpA. 2. Paolo Scaroni - Group Chief Executive Officer and General Manager Paolo Scaroni obtained an economics degree from Milans Bocconi University in 1969 and an MBA from Columbia Business School in 1973. For a year following business school, he was an associate at McKinsey & Company. From 1973 until 1985, he held a series of positions with Saint Gobain, culminating with his appointment as President of the Saint Gobain flat glass division. In 1985, Paolo Scaroni became CEO of Techint. During his time at Techint, he was also Vice President of Falck and executive Vice President of SIV, a joint venture between Techint and Pilkington plc. He joined Pilkington in 1996 and was group CEO until May 2002. From May 2002 to June 2005 he was CEO of Enel, Italys leading electricity utility. Paolo Scaroni is a member of the Board of Il Sole 24 Ore and of Teatro alla Scala. He is a member of the Supervisory Board of ABN AMRO Bank N.V. (Amsterdam), member of the Board of Overseers of Columbia Business School (New York) and member of the Board of Veolia Environnement (Paris). He was Chairman of Alliance Unichem plc. (UK) from 2005 to July 2006. |
3. Alberto Clô Alberto Clô is a professor of Industrial Economy at the University of Bologna and was Minister of Industry and Minister of Foreign Trade ad interim in 1995 and 1996. During the Italian presidency of the European Union he was chairman of the Council of Ministers of Industry and Energy of the European Union. In 1996 he was awarded the title of Cavaliere di Gran Croce al Merito of the Republic of Italy. He is a Member of the Board of Directors of ASM Brescia SpA, De Longhi SpA, Italcementi SpA and Società Autostrade SpA. 4. Renzo Costi Renzo Costi is an attorney and consultant. He served as a magistrate from 1964 to 1968 and is currently professor of commercial company law at the University of Bologna. He was founder, and currently is co-editor, of the magazines Giurisprudenza Commerciale, Banca Impresa e Società and Banca, Borsa e titoli di credito. He is a member of the Board of Directors of Editrice Il Mulino SpA. 5. Dario Fruscio Dario Fruscio is a chartered accountant, public auditor and consultant; he is currently Professor of Economics and Management at the University of Pavia and taught at the Accademia Nazionale della Guardia di Finanza of Bergamo. He is Chairman of Italia Turismo SpA. |
- 76 -
ENI IN 2006 / DIRECTORS AND OFFICERS
6 |
7 |
8 | 9 |
6. Marco Pinto Marco Pinto is a magistrate and notary and has previously held various positions as a civil and administrative judge. Since December 2004 he has been professor of the Higher School of Economics and Finance. In 1994 he held the position of Legal Counsel and head of Legislative Department of the Ministry of Foreign Trade and the Ministry of Economics and Finance. From December 2004 to April 2005 he was head of the staff of the Vice President of the Council of Ministers. Since June 2005 he has been Deputy Head of the staff of the Minister of Economics and Finance. 7. Marco Reboa Marco Reboa is a chartered accountant and auditor. He is professor of law at the Libero Istituto Universitario Carlo Cattaneo in Castellanza and author of essays on corporate governance, economic evaluation and financial statements. He is the editor of "Rivista dei Dottori Commercialisti" and is a professional advisor in Milan. He is a member of the Board of Directors of Seat PG SpA, Interpump SpA, IMMSI SpA and Intesa Private Banking SpA. He is Chairman of the Board of Statutory Auditors of Luxottica Group SpA. |
8. Mario Resca Mario Resca is Chairman of Italia Zuccheri SpA (formerly Eridania SpA), National Board member of U.P.A. (the Italian Advertisers' Association) and Confimprese. He is non executive Director of Mondadori SpA and special manager of the Cirio Del Monte Group, under special management. In 1974 he was appointed director of Biondi Finanziaria (Fiat Group) and from 1976 to 1991 he was partner of Egon Zehnder. In this period the was appointed director of Lancôme Italia and of companies belonging to the Rizzoli-Corriere della Sera Group and Versace Group. He also served as Chairman of Sambonet SpA, Kenwood Italia SpA and was a founding partner of Eric Salmon & Partners. 9. Pierluigi Scibetta Pierluigi Scibetta is a chartered accountant and auditor and has been appointed director and auditor of a number of public bodies and companies. In 2003 he was appointed director of the Istituto Superiore per la previdenza e la sicurezza sul lavoro and of the Gestore del Mercato Elettrico SpA. In 2004, he was appointed director of Nucleco SpA. He is a professor of Environmental Economics at the University of Perugia. |
Board Committees Internal Control Committee: Marco Reboa - Chairman, Alberto Clô, Renzo Costi, Marco Pinto and Pierluigi Scibetta. Compensation Committee: Mario Resca - Chairman, Renzo Costi, Marco Pinto and Pierluigi Scibetta. |
International Oil Committee: Alberto Clô - Chairman, Renzo Costi, Dario Fruscio, Marco Reboa and Paolo Scaroni. |
- 77 -
ENI IN 2006 / DIRECTORS AND OFFICERS
Group Officers Paolo Scaroni Chief Executive Officer and General Manager of the parent company Marco Mangiagalli Chief Financial Officer Stefano Lucchini Senior Vice President for Public Affairs and Communication Massimo Mantovani Senior Vice President for Legal Affairs Rita Marino Senior Vice President for Internal Audit Leonardo Maugeri Senior Vice President for Strategies and Development Sergio Polito Senior Vice President for Procurement Salvatore Sardo Senior Vice President for Human Resources & Business Services Roberto Ulissi Senior Vice President for Corporate Affairs and Governance Raffaella Leone Executive Assistant to the Chief Executive Officer Eni Divisions Officers EXPLORATION
& PRODUCTION |
F. Arisi Rota Senior Vice President for Exploration Umberto Vergine Senior Vice President for North Sea, Americas, Australasia, Russia Stephen Prendergast Coordinator LNG Development Team GAS & POWER REFINING &
MARKETING ENGINEERING
& CONSTRUCTION |
Board of Statutory Auditors 1. Paolo Andrea Colombo - Chairman Statutory Auditors 2. Filippo Duodo 3. Edoardo Grisolia 4. Riccardo Perotta 5. Giorgio Silva |
External Auditors PricewaterhouseCoopers SpA |
- 78 -
ENI IN 2006 / DIRECTORS AND OFFICERS
Remuneration Remuneration earned for 2006 by members of the Board of Directors, General Managers and other managers with strategic responsibilities is reported in the table below. |
Remuneration earned by managers who held a position in 2006 for a fraction of the year is reported too. |
(thousand euro)
Name | Position (1) |
Emoluments for service at Eni SpA |
Non-cash benefits |
Bonuses and other incentives (2) |
Salaries and other elements |
Total |
BOARD OF DIRECTORS |
Roberto Poli | Chairman |
765 |
15 |
415 |
1,195 |
||||
Paolo Scaroni | CEO |
430 |
62 |
834 |
(3) | 1,014 |
2,340 |
||
Alberto Clô | Non-executive | Director |
134 |
10 |
144 |
||||
Renzo Costi | Non-executive | Director |
130 |
10 |
140 |
||||
Dario Fruscio | Non-executive | Director |
124 |
10 |
134 |
||||
Marco Pinto | Non-executive | Director |
130 |
10 |
140 |
||||
Mario Resca | Non-executive | Director |
128 |
10 |
138 |
||||
Marco Reboa | Non-executive | Director |
134 |
10 |
144 |
||||
Pierluigi Scibetta | Non-executive | Director |
130 |
10 |
140 |
||||
GENERAL MANAGERS |
Stefano Cao | Exploration & Production |
643 |
966 | 1,609 |
||||
Domenico Dispenza | Gas & Power |
386 |
669 | 1,055 |
||||
Angelo Taraborrelli | Refining & Marketing |
400 |
645 | 1,045 |
||||
Other managers with strategic responsibilities (4) | 1,932 |
7,846 |
(5) | 9,778 |
(1) | The term of position ends with the General Shareholders' Meeting approving financial statements for the year ending December 31, 2007. | |
(2) | Based on performance achieved in 2005. | |
(3) | Amount accrued related to the period of duration of the task from June 1 to December 31, 2005. | |
(4) | Managers, who during the year, have been members of the Eni Steering Committee with the CEO and the General Managers of Eni divisions (nine managers). | |
(5) | Includes also indemnities paid upon termination of employment contract. |
Follows a description of
each element of remuneration:
|
|
- 79 -
ENI IN 2006 / DIRECTORS AND OFFICERS
Long-term incentive schemes |
operating efficiency goals,
and stock option awards based on the achievement of
certain targets of total shareholder return. This scheme
has a structure intended to balance monetary and
stock-based components of the remuneration, as well as to
link economic and operating performance to share
performance in the long term. Deferred bonus This leg of the long-term incentive scheme envisages a basic bonus paid after three years according to a variable amount equal to a percentage ranging from 0 to 170% of the amount established for the target performance in relation to the performances achieved in a three-year period as approved by the Board of Directors. Performances are measured in terms of achievement of annual EBITDA targets preset for the 2006-2008 period, as assessed by comparing actual results with set targets under a constant trading environment for each year. The following table sets out the basic bonus awarded in the year 2006 to the CEO and to the General Managers of Enis Divisions, and the total amount awarded to other managers with strategic responsibilities. |
(thousand euro)
NAME | DEFERRED BONUS AWARDED |
|
Paolo Scaroni | CEO | 787 |
Stefano Cao | General Manager of the E&P Division | 468 |
Domenico Dispenza | General Manager of the G&P Division | 328 |
Angelo Taraborrelli | General Manager of the R&M Division | 307 |
Other managers with strategic responsibilities (1) | 1,293 |
(1) | No. 6 managers. |
- 80 -
ENI IN 2006 / DIRECTORS AND OFFICERS
Stock option plan Eni offers managers of Eni Group companies holding positions of significant responsibility for achieving profitability or strategic targets, the opportunity to acquire a shareholding in the company as an element of remuneration through the award of options for purchasing Enis treasury shares. Differently from previous schemes, the 2006-2008 stock option plan introduced a performance condition upon which options can be exercised. At the end of each vesting period with a three-year duration, the Board of Directors determines the number of exercisable options, in a percentage ranging from 0% to 100% of the total amount awarded for each year of the plan, depending on the performance of Eni shares measured in terms of Total Shareholders Return as compared to that achieved |
by a panel of major
international oil companies in terms of capitalization.
On July 27, 2006, the Board of Directors approved: (i)
the award pertaining to 2006 within the three-year period
covered by the plan; (ii) its rule; and (iii) the
criteria to be followed in the identification of eligible
managers. Under this plan, 7,050,000 options were awarded
pertaining to 2006 with a strike price equal to euro
23.119. At December 31, 2006, a total of 15,290,400 options were outstanding for the purchase of an equal amount of ordinary shares nominal value euro 1 of Eni SpA, carrying an average strike price of euro 21.022. The following is a summary of stock option activity for the years 2005 and 2006: |
2005 |
2006 |
|||
(euro) | Number of shares | Weighted average exercise price | Market price (a) | Number of shares | Weighted average exercise price | Market price (a) |
Options as of January 1 | 11,789,00 | 15.111 | 18.461 | 13,379,600 | 17.705 | 23.460 | ||||||||||||
New options granted | 4,818,500 | 22.512 | 22.512 | 7,050,000 | 23.119 | 23.119 | ||||||||||||
Options exercised in the period | (3,106,400 | ) | 15.364 | 22.485 | (4,943,200 | ) | 15.111 | 23.511 | ||||||||||
Options cancelled in the period | (121,500 | ) | 16.530 | 23.100 | (196,000 | ) | 19.119 | 23.797 | ||||||||||
Options outstanding as of December 31 | 13,379,600 | 17.705 | 23.460 | 15,290,400 | 21.022 | 25.520 | ||||||||||||
of which exercisable at December 31 | 1,540,600 | 16.104 | 23.460 | 1,622,900 | 16.190 | 25.520 |
(a) | Market price relating to new rights assigned, rights exercised in the period and rights cancelled in the period corresponds to the average market value (arithmetic average of official prices recorded on Mercato Telematico Azionario in the month preceding: (i) the date of assignment; (ii) the date of the recording in the securities account of the managers to whom the options have been assigned; (iii) the date of the unilateral termination of employment for rights cancelled). Market price of shares referring to options as of the beginning and the end of the year, is the price recorded at December 31. |
- 81 -
ENI IN 2006 / DIRECTORS AND OFFICERS
The fair value of stock options granted during the years ended December 31, 2005, and 2006 of euro 3.33 and euro 2.89 respectively, was calculated applying the Black-Scholes method. | The following table presents the amount of stock options awarded to Enis CEO, General Managers and other managers with strategic responsibilities. |
CEO | General Manager E&P Division | General Manager G&P Division | General Manager R&M Division | Other managers with strategic responsibilities (1) | ||||||
Paolo Scaroni | Stefano Cao | Domenico Dispenza (2) | Angelo Taraborrelli | |||||||
Options outstanding at the beginning of the period: | ||||||||||||||||
- number of options | 699,000 | 201,500 | 43,000 | 269,500 | (3) | 123,000 | 686,500 | |||||||||
- average exercise price | (euro) | 22.509 | 17.920 | 14.171 | 3.988 | 18.308 | 18.208 | |||||||||
- average maturity in months | 91 | 82 | 64 | 85 | 83 | 79 | ||||||||||
Options granted during the period: | ||||||||||||||||
- number of options | 681,000 | (4) | 175,500 | 122,500 | - | 115,000 | 552,500 | |||||||||
- average exercise price | (euro) | 23.100 | 23.100 | 23.100 | - | 23.100 | 23.100 | |||||||||
- average maturity in months | 72 | 72 | 72 | - | 72 | 72 | ||||||||||
Options exercised at the end of the period: | ||||||||||||||||
- number of options | - | 62,500 | 28,500 | - | - | 312,500 | ||||||||||
- average exercise price | (euro) | - | 13.743 | 13.743 | - | - | 16.478 | |||||||||
- average market price at date of exercise | (euro) | - | 23.341 | 24.095 | - | - | 23.256 | |||||||||
Options outstanding at the end of the period: | ||||||||||||||||
- number of options | 1,380,000 | 314,500 | 137,000 | 269,500 | 238,000 | 926,500 | ||||||||||
- average exercise price | (euro) | 22.801 | 21.641 | 22.244 | 3.988 | 20.624 | 21.709 | |||||||||
- average maturity in months | 73 | 70 | 65 | 73 | 68 | 69 | ||||||||||
(1) | No. 9 managers. | |
(2) | Appointed on January 1, 2006. | |
(3) | Options on Snam Rete Gas shares: assigned by the company to Domenico Dispenza who held the position of Chairman of Snam Rete Gas until December 23, 2005. | |
(4) | The assignment to the CEO has been integrated by a deferred bonus linked to the market performance of Eni shares, to be paid after a three year period and corresponding to 96,000 options with a strike price of euro 23.100 and a vesting period of three years. |
Overall remuneration of
key management personnel On the whole, remuneration of persons responsible of key positions in planning, direction and control functions of Eni Group companies, including executive |
and non-executive directors, General Managers and other managers holding strategic responsibilities1 amounted to euro 23 million for 2006. The break-down is as follows |
(million euro) | 2006 |
Fees and salaries | 16 |
Post employment benefits | 1 |
Other long-term benefits | 3 |
Fair value stock grants/options | 3 |
23 |
(1) | These managers together with the CEO and the General Managers are permanent members of Enis Steering Committee. |
- 82 -
ENI IN 2006 / INVESTORS INFORMATION
Investor Information ANNUAL GENERAL MEETING The 2007 Annual General Shareholders Meeting is convened on May 23-24, 2007, on first and second call respectively, in Rome at one of Enis headquarters, Via del Serafico, 89/91, at 10:00 am (CET). A notice convening the meeting is published on April 14, 2007, on the Official Gazette of the Republic of Italy and can be found at eni.it>Press Room>Notice in newspaper. Beneficial Owners of ADRs, listed on the New York Stock Exchange, each ADR representing two Eni ordinary shares, who are recorded in Eni ADRs register of JPMorgan Chase Bank, N.A. by May 4, 2007 will be entitled to participate in the Meeting or to exercise votes by mail, after having complied with the deposit and registration requirements. Beneficial Owners who have taken advantage of Proxy Vote or Vote by Mail options are entitled to assist at the Meeting upon written request to be made to JPMorgan Chase Bank, N.A., ADRs Depositary. Eni SpAs Corporate Secretary is available for any further information Shareholders may need at the toll-free number 800 940 924 (for calls from abroad Italy: 80011223456) or fax number + 39 0659822233. The Notice and the documentation regarding the Shareholders Meeting will be available on www.eni.it and may be requested by e-mail at segreteriasocietaria.azionisti@eni.it or by calling the above-mentioned toll-free numbers. |
DIVIDENDS Eni announces dividends on its ordinary shares in terms of euro. In the Annual General Meeting, shareholders approve the dividend proposal made by the Board. For the fiscal year 2006, the Board proposed a dividend of euro 1.25 per share. Eni paid an interim dividend for fiscal year 2006 amounting to euro 0.60 per share to shares on the register at the ex-dividend date (October 23, 2006). Following shareholders approval, the balance of euro 0.65 to the amount proposed by the Board is scheduled for June 21, 2007 (being the ex-dividend date June 18, 2007). Holders of ADRs will receive euro 1.30 per ADR, payable on June 28, 2007 to ADR holders as of the June 20, 2007 record date. Eni intends to continue paying interim dividends in the future. Following Italian tax laws in force from January 1, 2004, dividends do not entitle to a tax credit and are either subject to a withholding tax or partially cumulated to the receivers taxable income, depending on the receiver fiscal status. Holders of ADRs receive their dividends in US dollars. The rate of exchange used to determine the amount in dollars is equal to the official rate recorded on the date of dividend payment in Italy (June 21). On ADR payment date, JPMorgan Chase Bank, N.A. pays the dividend less the amount of withholding tax under Italian law (currently 27%) to all Depository Trust Company Participants, representing payment of Eni SpAs gross dividend. Under a convention between the United States of America and Italy for the Avoidance of Double Taxation (Treaty), US residents who hold less than 10% of the Company, as defined in the Treaty, can effectively reduce the tax liability on dividends, from 27% to 15%. By submitting to JPMorgan Chase Bank, NA (JPMorgan) certain required documents with respect to each dividend payment, US holders of ADRs will enable the Italian Depositary bank and JPMorgan as ADR Depositary to pay the dividend at the reduced withholding tax rate of 15%. US shareholders can obtain relevant documents as well as a complete instruction packet to benefit from this tax relief by contacting Enis Corporate Secretary or JPMorgan - Globe Tax Services at 1-800-929-5484. |
- 83 -
ENI IN 2006 / INVESTORS INFORMATION
1. Annual Report
2006 (www.eni.it/Investor
Relations>Reports) a comprehensive report on
Enis activities and results for the year. 2. Fact Book 2006 (www.eni.it/Investor Relations>Reports), a report on Enis businesses, strategies, objectives and development projects. 3. Sustainability Report 2006 (www.eni.it/Sustainability>Enis Documents) provides readers with a thorough presentation of Enis commitment to the global sustainability issue. It describes the main interactions of Enis activities on human resources, the environment, communities and the territory, focusing on improvement targets and results achieved. 4. The World Oil and Gas Review (www.eni.it/Publications>Economic and Energy Analyses) provides economic and energy historical series of the World Energy and Economic Atlas. Readers can use and aggregate individual statistics. The review is available in both full and abridged versions, and downloadable as a pdf file. Requests for printed copies should be made to: worldoil&gasreview@eni.it 5. Code of Practice (www.eni.it/Publications>Corporate Responsibility). Information regarding Enis Corporate Governance guidelines as well as Enis By-laws and charts of the Boards Committees can be found in www.eni.it/The Company>Corporate Governance. These and other Eni publications are available on Enis internet site www.eni.it, in the section Documents Download. Shareholders may receive a hard copy of Enis publications, free of charge, by filling in the request form found in the section Documents Download or through an email request addressed to segreteriasocietaria.azionisti@eni.it or to investor.relations@eni.it. Any other information relevant to shareholders and investors can be found at Enis website under the Investor Relations section. |
FINANCIAL CALENDAR The dates of the Board of Directors Meetings to be held during 2007 in order to approve/review the Companys financial accounts are the following: |
|
|
May 10, 2007 |
Related press releases are normally issued on the following day the event. |
- 84 -
Società per Azioni Headquarters: Rome, Piazzale Enrico Mattei, 1 Capital stock: euro 4,005,358,876 fully paid Tax identification number 00484960588 Branches: San Donato Milanese (MI) - Via Emilia, 1 San Donato Milanese (MI) - Piazza Ezio Vanoni, 1 |
|
CONTACTS Investor
Relations |
Report on the first quarter
of 2007
Contents
1
Statistic recap 2
Basis of presentation Financial review
3
Profit and loss account and divisional highlights 5
Analysis of profit and loss account items 11
Summarized group balance sheet 16
Summarized cash flow statement and change in net borrowings 17
Capital expenditure 20 Post closing events 22
Outlook for 2007 Operating results by division
23
Exploration & Production 25
Gas & Power 29
Refining & Marketing 31
Petrochemicals 32
Engineering & Construction Non-GAAP measures
34
Reconciliation of reported operating profit and net profit to results on an adjusted basis
ENI REPORT ON THE FIRST QUARTER OF 2007
STATISTIC RECAP
Summary financial data | ||||
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
21,416 | Net sales from operations | 23,584 | 21,913 | (1,671 | ) | (7.1 | ) | |||||||||
3,957 | Operating profit | 5,595 | 5,105 | (490 | ) | (8.8 | ) | |||||||||
4,776 | Adjusted operating profit (a) | 5,533 | 5,253 | (280 | ) | (5.1 | ) | |||||||||
1,520 | Net profit (b) | 2,974 | 2,588 | (386 | ) | (13.0 | ) | |||||||||
0.41 | - per ordinary share (euro) (c) | 0.80 | 0.70 | (0.10 | ) | (12.5 | ) | |||||||||
1.06 | - per ADR ($) (b) (c) | 1.92 | 1.83 | (0.09 | ) | (4.7 | ) | |||||||||
2,355 | Adjusted net profit (a) (b) | 2,954 | 2,680 | (274 | ) | (9.3 | ) | |||||||||
0.64 | - per ordinary share (euro) (b) | 0.79 | 0.73 | (0.06 | ) | (7.6 | ) | |||||||||
1.65 | per ADR ($) (b) (c) | 1.90 | 1.91 | 0.01 | 0.5 | |||||||||||
1,778 | Net cash provided by operating activities | 5,863 | 5,563 | (300 | ) | (5.1 | ) | |||||||||
2,944 | Capital expenditure | 1,340 | 2,013 | 673 | 50.2 |
(a) | For a detailed explanation of adjusted operating profit and adjusted net profit see page 34. | |
(b) | Profit attributable to Eni shareholders. | |
(c) | Fully diluted. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented. | |
(d) | One ADR (American Depositary Receipt) is equal to two Eni ordinary shares. |
Key market indicators |
Fourth Quarter |
First Quarter |
|||
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
59.68 | Average price of Brent dated crude oil (a) | 61.75 | 57.75 | (4.00 | ) | (6.5 | ) | |||||||||
1.290 | Average EUR/USD exchange rate (b) | 1.202 | 1.310 | 0.108 | 9.0 | |||||||||||
46.26 | Average price in euro of Brent dated crude oil | 51.37 | 44.08 | (7.29 | ) | (14.2 | ) | |||||||||
2.18 | Average European refining margin (c) | 2.95 | 3.06 | 0.11 | 3.7 | |||||||||||
1.69 | Average European refining margin in euro | 2.45 | 2.34 | (0.11 | ) | (4.5 | ) | |||||||||
3.6 | Euribor - three month rate (%) | 2.6 | 3.8 | 1.2 | 46.2 | |||||||||||
5.3 | Libor - three month dollar rate (%) | 4.7 | 5.3 | 0.6 | 12.8 |
(1) | In USD per barrel. Source: Platts Oilgram. | |
(2) | Source: ECB. | |
(3) | In USD per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platts Oilgram data. |
Summary operating data | ||||
Fourth Quarter |
First Quarter |
|||
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
1,796 | Production of hydrocarbons (a) | (kboe/d) | 1,827 | 1,734 | (93 | ) | (5.1 | ) | ||||||||
1,079 | Liquids | (kbbl/d) | 1,143 | 1,030 | (113 | ) | (9.9 | ) | ||||||||
4,132 | Natural gas (a) | (mmcf/d) | 3,920 | 4,061 | 141 | 3.6 | ||||||||||
26.93 | Worldwide gas sales | (bcm) | 31.20 | 28.14 | (3.06 | ) | (9.8 | ) | ||||||||
1.06 | of which: upstream sales in Europe | 1.12 | 1.07 | (0.05 | ) | (4.5 | ) | |||||||||
7.79 | Electricity sold | (TWh) | 7.73 | 7.61 | (0.12 | ) | (1.6 | ) | ||||||||
3.13 | Retail sales of refined products in Europe | (mmtonnes) | 2.93 | 2.88 | (0.05 | ) | (1.7 | ) | ||||||||
1,323 | Petrochemical product sales | (ktonnes) | 1,411 | 1,417 | 6 | 0.4 |
(1) | Includes own consumption of natural gas (51 kboe/d in the first quarter of 2007, 48 kboe/d in the first quarter of 2006 and 50 kboe/d in the fourth quarter of 2006). |
- 1 -
ENI REPORT ON THE FIRST QUARTER OF 2007
BASIS
OF PRESENTATION Enis accounts at March 30, 2007, unaudited, have been prepared in accordance with the criteria defined by the Commissione Nazionale per le Società e la Borsa (CONSOB) in its regulation for companies listed on the Italian Stock Exchange. Financial information relating to the profit and loss account are presented for the first quarter of 2007 and for the first and fourth quarter of 2006. Financial information relating to balance sheet data are presented at March 31, 2007, March 31, 2006 and December 31, 2006. Tables are comparable with those of 2006 financial statements and first half report. Enis accounts at March 31, 2007 have been prepared in accordance with the evaluation and measurement criteria contained in the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure set forth in Article 6 of the European Regulation (CE) No. 1606/2002 of the European Parliament and European Council of July 19, 2002. Non-GAAP financial measures disclosed throughout this report are accompanied by explanatory notes and tables to help investors to gain a full understanding of said measures in line with guidance provided for by recommendation CESR/05-178b. |
Disclaimer This report contains certain forward-looking statements, in particular in the Outlook section those regarding capital expenditure, dividends, share repurchases, allocation of future cash flow from operations, future operating performance, gearing, targets of production and sale growth, new markets, and the progress and timing of projects. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including the timing of bringing new fields on stream; managements ability in carrying out industrial plans and in succeeding in commercial transactions; future levels of industry product supply, demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; development and use of new technology; changes in public expectations and other changes in business conditions; the actions of competitors. Due to the seasonality in demand for natural gas and certain refined products and the changes in a number of external factors affecting Enis operations, such as prices and margins of hydrocarbons and refined products, Enis results of operations and changes in average net borrowings for the first quarter of the year cannot be extrapolated for the full year. |
- 2 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Financial review
PROFIT AND LOSS ACCOUNT AND
DIVISIONAL HIGHLIGHTS
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
21,416 | Net sales from operations | 23,584 | 21,913 | (1,671 | ) | (7.1 | ) | ||||||||
302 | Other income and revenues | 209 | 281 | 72 | 34.4 | ||||||||||
(15,874 | ) | Operating expenses | (16,739 | ) | (15,462 | ) | 1,277 | 7.6 | |||||||
(182 | ) | of which non-recurring items | |||||||||||||
(1,887 | ) | Depreciation, amortization and impairments | (1,459 | ) | (1,627 | ) | (168 | ) | (11.5 | ) | |||||
3,957 | Operating profit | 5,595 | 5,105 | (490 | ) | (8.8 | ) | ||||||||
52 | Net financial income (expense) | 42 | (133 | ) | (175 | ) | .. | ||||||||
157 | Net income from investments | 240 | 202 | (38 | ) | (15.8 | ) | ||||||||
4,166 | Profit before income taxes | 5,877 | 5,174 | (703 | ) | (12.0 | ) | ||||||||
(2,468 | ) | Income taxes | (2,747 | ) | (2,431 | ) | 316 | 11.5 | |||||||
59.2 | Tax rate (%) | 46.7 | 47.0 | 0.3 | |||||||||||
1,698 | Net profit | 3,130 | 2,743 | (387 | ) | (12.4 | ) | ||||||||
pertaining to: | |||||||||||||||
1,520 | - Eni | 2,974 | 2,588 | (386 | ) | (13.0 | ) | ||||||||
178 | - minority interest | 156 | 155 | (1 | ) | (0.6 | ) |
Enis net profit for the first quarter of 2007 was euro 2,588 million, down euro 386 million from the first quarter of 2006, or 13.0%, due essentially to a lower operating performance (down euro 490 million, or 8.8%) as result of a decline in the Exploration & Production division, partially offset by a | positive performance delivered by Enis downstream and the Engineering & Construction businesses. This reduction in net profit was also due to higher net financial expenses mainly owing to losses on the fair value evaluation of certain financial derivative instruments. |
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
1,520 | Net profit pertaining to Eni | 2,974 | 2,588 | (386 | ) | (13.0 | ) | ||||||||
213 | Exclusion of inventory holding (gain) loss | (59 | ) | 97 | 156 | ||||||||||
622 | Exclusion of special items: | 39 | (5 | ) | (44 | ) | |||||||||
of which: | |||||||||||||||
184 | - non-recurring items | ||||||||||||||
438 | - other special items | 39 | (5 | ) | (44 | ) | |||||||||
2,355 | Eni's adjusted net profit (a) | 2,954 | 2,680 | (274 | ) | (9.3 | ) |
(a) | For a definition and reconciliation of reported operating profit and reported net profit to adjusted results, which exclude inventory holding gains/losses and special items, Reconciliation of reported operating profit and net profit to results on an adjusted basis page 34. |
Enis adjusted
net profit amounted to euro 2,680 million, down
9.3% from the first quarter 2006. Adjusted net profit is
arrived at by excluding an inventory holding loss of euro
97 million and special income of euro 5 million net. Special charges concerned essentially environmental charges and employee redundancy incentives, offset by a gain from the settlement reached by Syndial and Dow |
Chemical on some contractual
issues pending between the two companies. Return on Average Capital Employed (ROACE) calculated on an adjusted basis for the twelve-month period ending March 31, 2007 was 22.7% (21.8% for the twelve-month period ending March 31, 2006). |
- 3 -
ENI REPORT ON THE FIRST QUARTER OF 2007
The trading environment was affected by lower oil prices with Brent crude prices averaging $57.75 per barrel, down 6.5% compared to the first quarter of 2006, and the appreciation of the euro over the dollar (up 9.0%). These negatives were partially offset by: (i) favorable trends in | energy and exchange rate parameters used in determining purchase and selling prices of natural gas; (ii) an increase in refining margins on the Brent crude marker (up 3.7%), and (iii) higher sales margins on petrochemical products. |
The following table sets forth adjusted net profit1 by division:
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
1,304 | Exploration & Production | 2,095 | 1,409 | (686 | ) | (32.7 | ) | ||||||||
873 | Gas & Power | 879 | 1,159 | 280 | 31.9 | ||||||||||
115 | Refining & Marketing | 86 | 113 | 27 | 31.4 | ||||||||||
141 | Petrochemical | 16 | 79 | 63 | 393.8 | ||||||||||
131 | Engineering & Construction | 87 | 145 | 58 | 66.7 | ||||||||||
(85 | ) | Other activities | (58 | ) | (50 | ) | 8 | (13.8 | ) | ||||||
57 | Corporate and financial companies | 6 | (86 | ) | (92 | ) | .. | ||||||||
(3 | ) | Impact of unrealized profit in inventory (a) | (1 | ) | 66 | 67 | .. | ||||||||
2,533 | 3,110 | 2,835 | (275 | ) | (8.8 | ) | |||||||||
of which: | |||||||||||||||
178 | Net profit of minorities | 156 | 155 | 1 | (0.6 | ) | |||||||||
2,355 | Eni's adjusted net profit | 2,954 | 2,680 | (274 | ) | (9.3 | ) |
(a) | Unrealized profit in inventory concerned intra-group sales of goods and services recorded at period end in the equity of the purchasing business segment. |
The decline in the Group
adjusted net profit was owed to the reduction of adjusted
net profit registered in the Exploration &
Production division (down euro 686 million or
32.7%), due to a weaker operating performance (down euro
1,119 million or 26.3%) which was adversely impacted by
the appreciation of the euro over the dollar (up 9.0%), a
decline in production sold (down 9.5 mmboe/d), lower oil
realizations in dollars (oil down 3.3%), and higher
exploration expenses. The decline in the adjusted net profit of the Exploration & Production division was partly offset by a higher adjusted net profit reported in the divisions: - Gas & Power (up euro 280 million or 31.9%), as a result of an improved operating performance (up euro 480 million or 40%) reflecting higher natural gas selling margins supported mainly by a favorable trading environment, relating in particular to trends in the euro vs dollar exchange rate. This divisional performance |
benefited also from a
positive evolution of the regulatory framework in Italy.
These positives were partly offset by lower natural gas
sales (down 2.87 bcm or 10.4%) hurt by lower European gas
demand due to the unusually mild weather conditions
registered in the first quarter 2007; - Refining & Marketing (up euro 27 million or 31.4%), reflecting an improved refining performance boosted by higher processed volumes and better yields also in light of lower maintenance shutdowns; - Petrochemical (up euro 63 million, or 393.8%), due to an improved operating performance (up euro 99 million) reflecting a recovery in product selling margins; - Engineering & Construction (up euro 58 million, or 66.7%) reflecting an improved operating performance (up euro 98 million) against the backdrop of favorable demand trends in oilfield services. |
(1) | For a definition and reconciliation of reported operating profit and reported net profit to adjusted results, which exclude inventory holding gains/losses and special items, Reconciliation of reported operating profit and net profit to results on an adjusted basis page 32. |
- 4 -
ENI REPORT ON THE FIRST QUARTER OF 2007
ANALYSIS OF PROFIT AND LOSS ACCOUNT ITEMS
Net sales from operations
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
6,152 | Exploration & Production | 7,412 | 6,361 | (1,051 | ) | (14.2 | ) | ||||||||
8,170 | Gas & Power | 9,134 | 8,543 | (591 | ) | (6.5 | ) | ||||||||
8,579 | Refining & Marketing | 9,280 | 7,943 | (1,337 | ) | (14.4 | ) | ||||||||
1,740 | Petrochemical | 1,728 | 1,674 | (54 | ) | (3.1 | ) | ||||||||
1,969 | Engineering & Construction | 1,310 | 1,962 | 652 | 49.8 | ||||||||||
161 | Other activities | 214 | 57 | (157 | ) | (73.4 | ) | ||||||||
345 | Corporate and financial companies | 307 | 282 | (25 | ) | (8.1 | ) | ||||||||
(5,700 | ) | Consolidation adjustment | (5,801 | ) | (4,909 | ) | 892 | ||||||||
21,416 | 23,584 | 21,913 | (1,671 | ) | (7.1 | ) |
Enis net sales
from operations (revenues) for the first quarter
of 2007 (euro 21,913 million) were down euro 1,671
million, a 7.1% decline from the first quarter of 2006,
primarily reflecting the impact of the appreciation of
the euro versus the dollar (up 9%) and the decline in oil
prices, as well as sold production of hydrocarbons and
natural gas sales. These negative factors were offset in
part by higher activity levels in the Engineering &
Construction segment and higher gas prices. Revenues generated by the Exploration & Production segment (euro 6,361 million) declined by euro 1,051 million, down 14.2%, essentially due to the impact of the appreciation of the euro versus the dollar and the decline in oil realizations in dollars (down 3.3%) and lower hydrocarbon production sold (down 9.5 million boe). These factors were offset in part by higher gas prices (up 1.3%). Revenues generated by the Gas & Power segment (euro 8,543 million) declined by euro 591 million, down 6.5%, essentially due to lower natural gas volumes sold by consolidated subsidiaries (down 2.87 billion cubic meters or 10.4%) and lower volumes transported and distributed as a consequence of an unusually mild winter. |
These negative factors were
offset in part by increased natural gas prices, related
in particular to trends of energy parameters to which gas
prices are contractually indexed. Revenues generated by the Refining & Marketing segment (euro 7,943 million) declined by euro 1,337 million, down 14.4%, essentially due to lower international prices for oil and refined products and the effect of the appreciation of the euro over the dollar. An additional negative factor was the decline in volumes marketed on retail and wholesale markets in Italy (down 410 ktonnes, or 8%) related to the competitive pressure and a mild winter that reduced the demand for heating oil. Revenues generated by the Petrochemical segment (euro 1,674 million) were substantially stable from the first quarter of 2006. Net sales from operations generated by the Engineering & Construction segment (euro 1,962 million) increased by euro 652 million, up 49.8%, due to increased activity levels in the Offshore and Onshore construction business. |
- 5 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Revenues by geographic area
|
(million euro) |
First quarter |
||
|
2006 |
2007 |
Change |
% Ch. |
Italy | 11,118 | 9,711 | (1,407 | ) | (12.7 | ) | ||||||
Rest of European Union | 5,528 | 5,146 | (382 | ) | (6.9 | ) | ||||||
Rest of Europe | 2,118 | 1,808 | (310 | ) | (14.6 | ) | ||||||
Americas | 1,479 | 1,326 | (153 | ) | (10.3 | ) | ||||||
Asia | 1,339 | 1,678 | 339 | 25.3 | ||||||||
Africa | 1,768 | 2,048 | 280 | 15.8 | ||||||||
Other areas | 234 | 196 | (38 | ) | (16.2 | ) | ||||||
Total outside Italy | 12,466 | 12,202 | (264 | ) | (2.1 | ) | ||||||
23,584 | 21,913 | (1,671 | ) | (7.1 | ) |
Operating expenses
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
14,897 | Purchases, services and other | 15,912 | 14,584 | (1,328 | ) | (8.3 | ) | ||||||||
of which: | |||||||||||||||
184 | - non-recurring items | ||||||||||||||
115 | - other special items | 5 | 17 | 12 | |||||||||||
977 | Payroll and related costs | 827 | 878 | 51 | 6.2 | ||||||||||
of which: | |||||||||||||||
101 | - provision for redundancy incentives | 24 | 10 | (14 | ) | ||||||||||
15,874 | 16,739 | 15,462 | (1,277 | ) | (7.6 | ) |
Operating expenses for the first quarter of 2007 (euro 15,462 million) declined by euro 1,277 million from the first quarter of 2006, down 7.6%, essentially due to: (i) lower prices for oil-based and petrochemical feedstocks and for natural gas reflecting an appreciation of the euro versus the dollar; (ii) lower supplies of natural gas in line with lower sales and the fact that in the first quarter of 2006 higher gas supplies costs were recorded due to a climatic emergency; (iii) lower costs for refinery maintenance activity. | Labor costs (euro 878 million) increased by euro 51 million, up 6.2%, due mainly to an increase in unit labor cost in Italy and outside Italy and an increase in the average number of employees outside Italy in the Engineering & Construction segment related to higher activity levels. |
Employees
|
(units) |
Dec. 31, 2006 |
Mar. 31, 2007 |
Change |
% Ch. |
Exploration & Production | 8,336 | 8,432 | 96 | 1.2 | ||||||||
Gas & Power | 12,074 | 11,957 | (117 | ) | (1.0 | ) | ||||||
Refining & Marketing | 9,437 | 9,384 | (53 | ) | (0.6 | ) | ||||||
Petrochemical | 6,025 | 6,876 | 851 | 14.1 | ||||||||
Engineering & Construction | 30,902 | 31,661 | 759 | 2.5 | ||||||||
Other activities | 2,219 | 1,447 | (772 | ) | (34.8 | ) | ||||||
Corporate and financial companies | 4,579 | 4,775 | 196 | 4.3 | ||||||||
73,572 | 74,532 | 960 | 1.3 |
- 6 -
ENI REPORT ON THE FIRST QUARTER OF 2007
As of March 31, 2007,
employees were 74,532, with an increase of 960 employees
from December 31, 2006, up 1.3%. Employees in Italy were 39,878. The 113 employee increase was related mainly to the positive balance of hiring and dismissals (79 employees) related to changes in consolidation. |
In the first quarter of 2007
a total of 540 employees were hired, of these 375 on
open-end contracts and 461 employees were dismissed (of
these 281 employees on open-end contracts). Outside Italy employees were 34,654, with a 847 employee increase mainly concerning fixed-term workers in the Engineering & Construction segment. |
Depreciation, amortization and impairments
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
1,418 | Exploration & Production | 1,095 | 1,240 | 145 | 13.2 | ||||||||||
185 | Gas & Power | 162 | 166 | 4 | 2.5 | ||||||||||
101 | Refining & Marketing | 110 | 108 | (2 | ) | (1.8 | ) | ||||||||
33 | Petrochemical | 31 | 31 | ||||||||||||
56 | Engineering & Construction | 38 | 63 | 25 | 65.8 | ||||||||||
2 | Other activities | 2 | 1 | (1 | ) | (50.0 | ) | ||||||||
21 | Corporate and financial companies | 19 | 16 | (3 | ) | (15.8 | ) | ||||||||
(7 | ) | Impact of unrealized profit in inventory | (1 | ) | (1 | ) | |||||||||
1,809 | Total depreciation and amortization | 1,456 | 1,624 | 168 | 11.5 | ||||||||||
78 | Impairments | 3 | 3 | ||||||||||||
1,887 | 1,459 | 1,627 | 168 | 11.5 |
Depreciation and amortization charges (euro 1,624 million) increased by euro 168 million, up 11.5%, mainly in the Exploration & Production segment (euro 145 million) related to higher exploration costs and higher amortization | charges for site restoration and abandonment costs related to a revision of cost estimates carried out when closing 2006 accounts. |
- 7 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Operating profit
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
% Ch. |
3,957 | Operating profit | 5,595 | 5,105 | (490 | ) | (8.8 | ) | ||||||||
341 | Exclusion of inventory holding (gains) losses | (94 | ) | 155 | 249 | ||||||||||
478 | Exclusion of special items: | 32 | (7 | ) | (39 | ) | |||||||||
of which: | |||||||||||||||
184 | - non-recurring items | ||||||||||||||
294 | - other special items | 32 | (7 | ) | (39 | ) | |||||||||
4,776 | Adjusted operating profit | 5,533 | 5,253 | (280 | ) | (5.1 | ) | ||||||||
Break down by division: | |||||||||||||||
3,195 | Exploration & Production | 4,251 | 3,132 | (1,119 | ) | (26.3 | ) | ||||||||
1,269 | Gas & Power | 1,203 | 1,683 | 480 | 39.9 | ||||||||||
148 | Refining & Marketing | 89 | 120 | 31 | 34.8 | ||||||||||
154 | Petrochemical | 23 | 122 | 99 | 430.4 | ||||||||||
152 | Engineering & Construction | 78 | 176 | 98 | 125.6 | ||||||||||
(77 | ) | Other activities | (63 | ) | (50 | ) | 13 | 20.6 | |||||||
(53 | ) | Corporate and financial companies | (46 | ) | (35 | ) | 11 | 23.9 | |||||||
(12 | ) | Effect of unrealized profit in inventory | (2 | ) | 105 | 107 | .. | ||||||||
4,776 | 5,533 | 5,253 | (280 | ) | (5.1 | ) |
Adjusted operating
profit was euro 5,523 million, down 5.1% from a
year ago. Adjusted net profit is arrived at by excluding
an inventory holding loss of euro 155 million and special
income of euro 7 million net. The main factors affecting
this decline were the operating performance of the Exploration
& Production division (down euro 1,119
million from the first quarter 2006, or 26.3%), due
primarily to the 9% appreciation of the euro versus the
dollar, lower production sold (down 9.5 mmboe), lower oil
realizations in dollars (down 3.3%) and higher expenses
incurred in connection with exploratory activity. These declines were partly offset by an increase in adjusted operating profit in the following segments: (i) Gas & Power (up euro 480 million or 39.9%), reflecting primarily increased natural gas selling margins mainly owing to a favorable trading environment, relating in particular to trends in the euro vs dollar exchange rate. |
A favorable evolution of the regulatory framework in Italy also supported operating profit. These positives were partly offset by a decline in natural gas sales (down 2.87 bcm, or 10.4%) due to lower European gas demand as a consequence of the unusually mild weather conditions of the first quarter 2007, partly offset by a growth in sales in certain target markets in the rest of Europe; (ii) Petrochemical (up euro 99 million or 430.4%) related to an increase in selling margins; (iii) Engineering & Construction (up euro 98 million or 125.6%) due to a positive trend in the market for oilfield services; (iv) Refining & Marketing (up euro 31 million or 34.8%) reflecting primarily a better operating performance delivered by the refining activity, which was boosted by higher processed volumes and better yields also in light of lower maintenance shutdowns. |
- 8 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Net financial
expense In the first quarter of 2007 net financial expense (euro 133 million) increased by euro 175 million from the first quarter of 2006. This increase was due to: (i) losses recognized on the fair value evaluation of certain financial derivatives instruments recorded in the profit and loss account instead of being recognized in connection with related assets, liabilities and commitments because these instruments do not meet the formal criteria to |
lbe assessed as hedge under IFRS, including the time value component of certain cash flow hedges Eni entered into to hedge risk on commodities in the quarter (see comment to net working capital below); (ii) the impact of higher interest rates on euro (Euribor up 1.2 percentage points) and dollar loans (Libor up 0.6 percentage points), offset in part by a decline in average net borrowings. |
Net income from investments
First Quarter 2007 |
(million euro) |
Exploration & Production | Gas & Power | Refining & Marketing | Engineering & Construction | Group |
Effect of the application of the equity method of accounting | 9 | 114 | 36 | 26 | 185 | ||||||||||
Dividends | 3 | 1 | 15 | 19 | |||||||||||
Other income (losses) from investments | (2 | ) | (2 | ) | |||||||||||
10 | 115 | 51 | 26 | 202 |
Net income from investments in the first quarter of 2007 amounted to euro 202 million and concerned essentially: (i) Enis share of income of affiliates accounted for with the equity method of accounting (euro 185 million), in particular in the Gas & Power, Refining & Marketing and | Engineering &
Construction division; (ii) dividends received by
affiliates accounted for at cost (euro 19 million). The comparison with the first quarter 2006 data is shown in the table below: |
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
|||||
164 | Effect of the application of the equity method of accounting | 187 | 185 | (2 | ) | |||||||
4 | Dividends | 27 | 19 | (8 | ) | |||||||
(3 | ) | Net gains on disposal | 18 | (1 | ) | |||||||
(8 | ) | Other income (losses) from investments | 8 | (2 | ) | (1 | ) | |||||
157 | 240 | 202 | (38 | ) |
The euro 38 million decrease in net income from investments was due essentially to lower results reported by | certain affiliates engaged in natural gas distribution in Italy, due to mild weather conditions. |
- 9 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Income taxes
Fourth Quarter |
(million euro) |
First Quarter |
||
2006 |
2006 |
2007 |
Change |
|||||
Profit before income taxes | ||||||||||||
1,105 | Italy | 1,903 | 2,007 | 104 | ||||||||
3,061 | Outside Italy | 3,974 | 3,167 | (807 | ) | |||||||
4,166 | 5,877 | 5,174 | (703 | ) | ||||||||
Income taxes | ||||||||||||
480 | Italy | 729 | 792 | 63 | ||||||||
1,988 | Outside Italy | 2,018 | 1,639 | (379 | ) | |||||||
2,468 | 2,747 | 2,431 | (316 | ) | ||||||||
Tax rate (%) | ||||||||||||
43.4 | Italy | 38.3 | 39.5 | 1.2 | ||||||||
64.9 | Outside Italy | 50.8 | 51.8 | 1.0 | ||||||||
59.2 | 46.7 | 47.0 | 0.3 |
Income taxes
were euro 2,431 million, down euro 316 million, or 11.5%,
due primarily to lower income before taxes (down euro 703
million). The 47% Group tax rate is substantially in line
with that of the first quarter of 2006. Adjusted tax rate, obtained from the ratio of taxes and profit before taxes net of inventory holding gains (losses) and special charges was 46.7% (46.5% in the first quarter of 2006). |
Minority interests Minority interests were euro 155 million and concerned primarily Snam Rete Gas SpA (euro 69 million) and Saipem (euro 78 million). |
- 10 -
ENI REPORT ON THE FIRST QUARTER OF 2007
SUMMARIZED GROUP BALANCE SHEET
Summarized group balance
sheet aggregates the amount of assets and liabilities
derived from the statutory balance sheet in accordance
with functional criteria which consider the enterprise
conventionally divided into the three fundamental areas
focusing on resource investments, operations and
financing. Management believes that this summarized group balance sheet is useful information in assisting investors to |
assess Eni's capital
structure and to analyze its sources of funds and
investments in fixed assets and working capital. Management uses the summarized group balance sheet to calculate key ratios such as return on capital employed (ROACE) and the proportion of net borrowings to shareholders' equity (leverage) intended to evaluate whether Eni's financing structure is sound and well-balanced. |
Summarized group balance sheet (a) |
(million euro) |
Dec. 31, 2006 | Mar. 31, 2007 | Change | |||
Fixed assets | |||||||||
Property, plant and equipment, net | 44,312 | 44,435 | 123 | ||||||
Other tangible assets | 629 | 622 | (7 | ) | |||||
Inventories - compulsory stock | 1,827 | 1,711 | (116 | ) | |||||
Intangible assets, net | 3,753 | 3,885 | 132 | ||||||
Investments, net | 4,246 | 4,373 | 127 | ||||||
Accounts receivable financing and securities related to operations | 557 | 515 | (42 | ) | |||||
Net accounts payable in relation to capital expenditure | (1,090 | ) | (897 | ) | 193 | ||||
54,234 | 54,644 | 410 | |||||||
Net working capital | |||||||||
Inventories | 4,752 | 4,888 | 136 | ||||||
Trade accounts receivable | 15,230 | 15,006 | (224 | ) | |||||
Trade accounts payable | (10,528 | ) | (9,692 | ) | 836 | ||||
Taxes payable and reserve for net deferred income tax liabilities | (5,396 | ) | (7,306 | ) | (1,910 | ) | |||
Reserve for contingencies | (8,614 | ) | (8,335 | ) | 279 | ||||
Other operating assets and liabilities (b) | 641 | (1,230 | ) | (589 | ) | ||||
(5,197 | ) | (6,669 | ) | (1,472 | ) | ||||
Employee termination indemnities and other benefits | (1,071 | ) | (1,032 | ) | 39 | ||||
Capital employed, net | 47,966 | 46,943 | (1,023 | ) | |||||
Shareholders' equity including minority interests | 41,199 | 43,091 | 1,892 | ||||||
Net borrowings | 6,767 | 3,852 | (2,915 | ) | |||||
Total liabilities and shareholders' equity | 47,966 | 46,943 | (1,023 | ) |
(a) | For a reconciliation with the corresponding statutory tables see Enis 2006 Annual Report, Reconciliation of Summarized Group Balance Sheet to statutory schemes pages 77-78. | |
(b) | Include operating financing receivables and securities related to operations for euro 220 million (euro 249 million at December 31, 2006) and securities covering technical reserves of Enis insurance activities for euro 451 million (euro 417 million at December 31, 2006). |
The appreciation of the euro over other currencies, in particular the dollar (at March 31, 2007 the EUR/USD exchange rate was 1.332 as compared to 1.317 at December 31, 2006, up 1.1%) determined with respect to year-end 2006 an estimated decrease in the book value of net capital employed of approximately euro 300 million, in net equity of approximately euro 250 million | and in net borrowings of
approximately euro 50 million as a result of currency
conversions at March 31, 2007. At March 31, 2007, net capital employed totalled euro 46,943 million, representing a decrease of euro 1,023 million from December 31, 2006. |
- 11 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Fixed assets totalled
euro 54,644 million, representing an increase of euro 410
million from December 31, 2006 (euro 54,234 million).
Capital expenditure for the period (euro 2,013 million)
was offset in part by provisions for depreciation,
amortization and impairments (euro 1,627 million) and the
effect of the appreciation of the euro over the dollar in
the translation of financial statements of subsidiaries
operating with currencies other than the euro. Other assets included, for a book value of $829 million (corresponding to euro 622 million at the March 31, 2007 EUR/USD exchange rate), the assets related to the service contract for oil activities in the Dación area of the Venezuelan branch of Eni's subsidiary Eni Dación BV. With effective date April 1, 2006, the Venezuelan State oil company Petróleos de Venezuela SA (PDVSA) unilaterally terminated the Operating Service Agreement (OSA) governing activities at the Dación oil field where Eni acted as a contractor, holding a 100% working interest. As a consequence, starting on the same date, operations at the Dación oil field are conducted by PDVSA. Eni proposed to PDVSA to agree on terms in order to recover the fair value of its Dación assets. On November 2006, based on the bilateral investments treaty in place between the Netherlands and Venezuela (the Treaty), Eni commenced a proceeding before an International Centre for Settlement of Investment Disputes (ICSID) Tribunal (i.e., a tribunal acting under the auspices of the ICSID Convention and being competent pursuant to the Treaty) to claim its rights. Despite this action, Eni is still ready to negotiate a solution with PDVSA to obtain a fair compensation for its assets. Based on the opinion of its legal consultants, Eni believes to be entitled to a compensation for such expropriation in an amount equal to the market value of the OSA before the expropriation took place. The market value of the OSA depends upon its expected profits. In accordance with established international practice, Eni has calculated the OSAs market value using the discounted cash flow method, based on Enis interest in the expected future hydrocarbon production and associated capital expenditures and operating costs, and applying to the projected cash flow a discount rate reflecting Enis cost of capital as well as the specific risk of concerned activities. Independent evaluations carried out by a primary petroleum consulting firm fully support Enis internal evaluation. The estimated net present value of Enis interest in the Dación |
field, as calculated by Eni,
is higher than the net book value of the Dación assets
which consequently have not been impaired. In accordance
with the ICSID Convention, a judgement by the ICSID
Tribunal awarding compensation to Eni would be binding
upon the parties and immediately enforceable as if it
were a final judgement of a court of each of the States
that have ratified the ICSID Convention. The ICSID
Convention was ratified in 143 States. Accordingly, if
Venezuela fails to comply with the award and to pay the
compensation, Eni could take steps to enforce the award
against commercial assets of the Venezuelan Government
almost anywhere those may be located (subject to national
law provisions on sovereign immunity). At March 31, 2007, net working capital totalled euro 6,669 million, representing a decrease of euro 1,472 million from December 31, 2006 mainly due to: (i) higher taxes payable and an increase in reserves for taxation related to taxes due for the period and the fact that excise taxes on oil products marketed in Italy in the first 15 days of December are settled within the end of this month, instead of being paid in the following month as in the rest of the year; (ii) the increase in Other operating liabilities related to a euro 575 million loss recognized on the fair value evaluation of certain financial derivative instruments. The Group entered into such transactions in order to hedge cash flow expected in the 2008-2011 period from the sale of approximately 2% of Enis proved hydrocarbon reserves as of 2006 year-end in connection with its purchase of proved and unproved property onshore in Congo (from the French company Maurel & Prom) and in the Gulf of Mexico (from the US company Dominion) finalized in February and April 2007, respectively. In light of this, Eni put in place certain forward sale contracts at a fixed price and call and put options with the same date of exercise. These options can be exercised in presence of crude oil market prices higher or lower compared with contractual prices. This treatment does not apply to the time value component arising from market price fluctuations within the range provided by these call and put options which is recognized in the profit and loss account under the item net financial expenses because the hedging relationship is ineffective. The share of the Exploration & Production, Gas & Power and Refining & Marketing divisions on net capital employed was 89% (90% at December 31, 2006). |
- 12 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Return On Average Capital Employed (ROACE)
Return on Average Capital Employed for the Group, on an adjusted basis is the return on the Group average capital invested, calculated as the ratio between net adjusted profit before minority interest, plus net finance charges on net borrowings net of the related tax effect, and net average capital employed. The tax rate applied on finance charges is the Italian statutory tax rate of 33%. The capital invested as of period-end used for the calculation of net average capital invested is | obtained by deducting
inventory holding gains or losses for the period, net of
the related tax effect. ROACE by business segment is determined as the ratio between adjusted net profit and net average capital invested pertaining to each business segment, adjusting net capital invested as of period-end by net inventory gains or losses (net of the related tax effect based on each business segment specific tax rate). |
Calculated on a 12-month period ending on (million euro) | Exploration & | Gas & | Refining & | Group | ||||
March 31, 2007 | Production | Power | Marketing | |||||
Adjusted net profit | 6,593 | 3,142 | 656 | 10,743 | |||||
Exclusion of after-tax finance expenses/interest income | 50 | ||||||||
Adjusted net profit unlevered | 6,593 | 3,142 | 656 | 10,793 | |||||
Capital employed, net | |||||||||
- at the beginning of period | 19,702 | 17,656 | 5,556 | 47,843 | |||||
- at the end of period | 17,143 | 18,985 | 5,830 | 47,132 | |||||
Average capital employed, net | 18,423 | 18,321 | 5,693 | 47,488 | |||||
ROACE adjusted (%) | 35.8 | 17.2 | 11.5 | 22.7 |
Calculated on a 12-month period ending on (million euro) | Exploration & | Gas & | Refining & | Group | ||||
March 31, 2006 | Production | Power | Marketing | |||||
Adjusted net profit | 6,931 | 2,427 | 908 | 10,303 | |||||
Exclusion of after-tax finance expenses/interest income | (80 | ) | |||||||
Adjusted net profit unlevered | 6,931 | 2,427 | 908 | 10,223 | |||||
Capital employed, net | |||||||||
- at the beginning of period | 18,708 | 18,283 | 4,247 | 46,623 | |||||
- at the end of period | 19,702 | 17,590 | 4,950 | 47,147 | |||||
Average capital employed, net | 19,205 | 17,937 | 4,599 | 46,885 | |||||
ROACE adjusted (%) | 36.1 | 13.5 | 19.7 | 21.8 |
Calculated on a 12-month period ending on (million euro) | Exploration & | Gas & | Refining & | Group | ||||
December 31, 2006 | Production | Power | Marketing | |||||
Adjusted net profit | 7,279 | 2,862 | 629 | 11,018 | |||||
Exclusion of after-tax finance expenses/interest income | 46 | ||||||||
Adjusted net profit unlevered | 7,279 | 2,862 | 629 | 11,064 | |||||
Capital employed, net | |||||||||
- at the beginning of period | 20,206 | 18,978 | 5,993 | 49,692 | |||||
- at the end of period | 18,590 | 18,864 | 5,766 | 47,999 | |||||
Average capital employed, net | 19,398 | 18,921 | 5,880 | 48,846 | |||||
ROACE adjusted (%) | 37.5 | 15.1 | 10.7 | 22.7 |
- 13 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Net borrowings and leverage
Leverage is a measure of a company's level of indebtedness, calculated as the ratio between net borrowings which is calculated by excluding cash and cash equivalents and certain very liquid assets from financial debt and shareholders' equity, including minority interests. Management makes use of leverage in order to assess the soundness and efficiency of the Group balance | sheet in terms of optimal mix between net borrowings and net equity, and to carry out benchmark analysis with industry standards. In the medium term, management plans to maintain a strong financial structure targeting a level of leverage up to 0.40. |
(million euro) |
Dec. 31, 2006 | Mar. 31, 2007 | Change | |||
Total debt | 11,699 | 16,470 | 4,771 | ||||||
- Short-term debt | 4,290 | 9,670 | 5,380 | ||||||
- Long-term debt | 7,409 | 6,800 | (609 | ) | |||||
Cash and cash equivalents | (3,985 | ) | (6,670 | ) | (2,738 | ) | |||
Securities not related to operations | (552 | ) | (270 | ) | 282 | ||||
Non-operating financing receivables | (395 | ) | (5,625 | ) | (5,230 | ) | |||
Net borrowings | 6,767 | 3,852 | (2,915 | ) | |||||
Shareholders' equity including minority interest | 41,199 | 43,091 | 1,892 | ||||||
Leverage | 0.16 | 0.09 | (0.07 | ) |
Net borrowings at March 31,
2007 were euro 3,852 million, representing a decrease of
euro 2,915 million from December 31, 2006 due mainly to
cash inflow generated by operating activities (euro 5,563
million). Total debt amounted to euro 16,470 million, of which euro 9,670 million were short-term (including the portion of long-term debt due within 12 months for euro 870 million) and euro 6,800 million were long-term. Short-term finance debt increased by euro 5,380 million compared with December 31, 2006. This increase was due to the need to collect the necessary funds to participate in a bid to |
purchase ex-Yukos gas assets
(see Post closing events). Eni made recourse
to undrawn borrowing facilities. These funds were placed
in escrow resulting in a corresponding increase of
non-operating receivables financing, with a neutral
impact on net borrowings as of the end of the period. At March 31, 2007, leverage ratio between net borrowings and shareholders' equity was 0.09, compared with 0.16 at December 31, 2006. |
- 14 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Changes in shareholders' equity
(million euro) |
Shareholders' equity at December 31, 2006 | 41,199 | ||||
Net profit | 2,743 | ||||
Reserve for cash flow hedges | (301 | ) | |||
Shares repurchased | (203 | ) | |||
Issue of ordinary share capital for employee share incentive schemes | 8 | ||||
Dividends paid by consolidated subsidiaries to shareholders | (3 | ) | |||
Effect on equity of the shares repurchased by consolidated subsidiaries (Snam Rete Gas/Saipem) | (140 | ) | |||
Exchange differences from translation of financial statements denominated in currencies other than the euro | (223 | ) | |||
Other changes | 11 | ||||
Total changes | 1,892 | ||||
Shareholders' equity at March 31, 2007 | 43,091 |
Shareholders equity at March 31, 2007 (euro 43,091 million) increased by euro 1,892 million from December 31, 2006, due essentially to net profit (euro 2,743 million) whose effects were offset in part by losses in cash flow | hedges taken to reserve (euro 301 million net to the related tax effect)2, the purchase of own shares and currency translation effects. |
(2) | For further details see comment to net working capital. |
- 15 -
ENI REPORT ON THE FIRST QUARTER OF 2007
SUMMARIZED CASH FLOW STATEMENT AND CHANGE IN NET BORROWINGS
Eni's summarized group cash flow statement derives from the statutory statement of cash flows. It allows to create a link between changes in cash and cash equivalents (deriving from the statutory cash flows statement) occurred from the beginning of period to the end of period and changes in net borrowings (deriving from the summarized cash flow statement) occurred from the beginning of period to the end of period. The measure enabling to make such a link is represented by free cash flow which is the cash in excess of capital expenditure needs. Starting from free cash flow it is | possible to determine either: (i) changes in cash and cash equivalents for the period by adding/deducting cash flows relating to financing debts/receivables (issuance/repayment of debt and receivables related to financing activities), shareholders' equity (dividends paid, net repurchase of own shares, capital issuance) and the effect of changes in consolidation and of exchange rate differences; (ii) changes in net borrowings for the period by adding/deducting cash flows relating to shareholders' equity and the effect of changes in consolidation and of exchange rate differences. |
Summarized Group Cash Flow Statement (a)
Fourth Quarter |
First Quarter |
2006 |
(million euro) |
2006 |
2007 |
% Ch. |
||||
1,698 | Net profit | 3,130 | 2,743 | (387 | ) | |||||||||
adjustments to reconcile to cash generated from operating profit before changes in working capital: | ||||||||||||||
1,568 | - amortization and depreciation and other non-monetary items | 1,321 | 1,251 | (70 | ) | |||||||||
(4 | ) | - net gains on disposal of assets | (63 | ) | (14 | ) | 49 | |||||||
2,314 | - dividends, interest, taxes and other changes | 2,843 | 2,397 | (446 | ) | |||||||||
5,576 | Cash generated from operating profit before changes in working capital | 7,231 | 6,377 | (854 | ) | |||||||||
(847 | ) | Changes in working capital related to operations | 131 | 445 | 314 | |||||||||
(2,951 | ) | Dividends received, taxes paid, interest (paid) received | (1,499 | ) | (1,259 | ) | 240 | |||||||
1,778 | Net cash provided by operating activities | 5,863 | 5,563 | (300 | ) | |||||||||
(2,944 | ) | Capital expenditure | (1,340 | ) | (2,013 | ) | (673 | ) | ||||||
(19 | ) | Investments | (19 | ) | (10 | ) | 9 | |||||||
201 | Disposals | 85 | 12 | (73 | ) | |||||||||
407 | Other cash flow related to capital expenditure, investments and disposals | (108 | ) | (152 | ) | (44 | ) | |||||||
(577 | ) | Free cash flow | 4,481 | 3,400 | (1,081 | ) | ||||||||
(247 | ) | Borrowings (repayment) of debt related to financing activities | 380 | (5,035 | ) | (5,415 | ) | |||||||
839 | Changes in short and long-term financial debt | (1,851 | ) | 4,887 | 6,738 | |||||||||
(2,412 | ) | Dividends paid and changes in minority interests and reserves | (356 | ) | (445 | ) | (89 | ) | ||||||
(77 | ) | Effect of changes in consolidation and exchange differences | (30 | ) | (69 | ) | (39 | ) | ||||||
(2,474 | ) | NET CASH FLOW FOR THE PERIOD | 2,624 | 2,738 | 114 |
Change in net borrowings
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
(577 | ) | Free cash flow | 4,481 | 3,400 | (1,081 | ) | ||||||||
Net borrowings of acquired companies | ||||||||||||||
Net borrowings of divested companies | 46 | (46 | ) | |||||||||||
72 | Exchange differences on net borrowings and other changes | 13 | (40 | ) | (53 | ) | ||||||||
(2,412 | ) | Dividends paid and changes in minority interests and reserves | (356 | ) | (445 | ) | (89 | ) | ||||||
(2,917 | ) | CHANGE IN NET BORROWINGS | 4,184 | 2,915 | (1,269 | ) |
(a) | For a reconciliation with the corresponding statutory tables see Enis 2006 Annual Report, Reconciliation of Cash Flows to statutory schemes pages 79-80. |
- 16 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Net cash provided by operating activities came in at euro 5,563 million, allowing to cover financial requirements for capital expenditure for euro 2,013 million, the repurchase of own shares for euro 203 million by Eni SpA and for euro 242 million by Snam Rete Gas SpA and Saipem SpA, and to reduce net borrowings by euro 2,915 million. | From January 1 to March 31, 2007 a total of 8.52 million Eni shares were purchased by the company for a total cost of euro 203 million (representing an average cost of euro 23.847 per share). Since the inception of the share buy-back programme (September 1, 2000), Eni has repurchased 344 million shares, equal to 8.58% of its share capital, at a total cost of euro 5,716 million (representing an average cost of euro 16.638 per share). |
CAPITAL EXPENDITURE
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
1,937 | Exploration & Production | 961 | 1,366 | 405 | 42.1 | ||||||||||
453 | Gas & Power | 151 | 221 | 70 | 46.4 | ||||||||||
272 | Refining & Marketing | 95 | 134 | 39 | 41.1 | ||||||||||
47 | Petrochemical | 10 | 14 | 4 | 40.0 | ||||||||||
188 | Engineering & Construction | 97 | 248 | 151 | .. | ||||||||||
38 | Other activities | 3 | 14 | 11 | .. | ||||||||||
48 | Corporate and financial companies | 23 | 16 | (7 | ) | (30.4 | ) | ||||||||
(39 | ) | Impact of unrealized profit in inventory | |||||||||||||
2,944 | 1,340 | 2,013 | 673 | 50.2 |
In the first quarter of 2007 capital expenditure amounted to euro 2,013 million, of which 85.5% related to the | Exploration & Production, Gas & Power and Refining & Marketing divisions. |
Exploration & Production
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
139 | Acquisitions of proved and unproved property | 73 | 73 | .. | ||||||||||
139 | Italy | .. | ||||||||||||
North Africa | 5 | 5 | .. | |||||||||||
West Africa | .. | |||||||||||||
Rest of world | 68 | 68 | .. | |||||||||||
706 | Exploration | 173 | 373 | 200 | .. | |||||||||
38 | Italy | 23 | 34 | 11 | 47.8 | |||||||||
91 | North Africa | 48 | 83 | 25 | 72.9 | |||||||||
366 | West Africa | 47 | 68 | 21 | 44.7 | |||||||||
75 | North Sea | 15 | 75 | 60 | .. | |||||||||
136 | Rest of world | 40 | 113 | 73 | .. | |||||||||
1,056 | Development | 777 | 909 | 132 | 17.0 | |||||||||
133 | Italy | 85 | 107 | 22 | 25.9 | |||||||||
209 | North Africa | 140 | 188 | 48 | 34.3 | |||||||||
294 | West Africa | 138 | 266 | 128 | 92.8 | |||||||||
121 | North Sea | 94 | 89 | (5 | ) | (5.3 | ) | |||||||
299 | Rest of world | 320 | 259 | (61 | ) | (19.1 | ) | |||||||
36 | Other | 11 | 11 | .. | ||||||||||
1,937 | 961 | 1,366 | 405 | 42.1 |
- 17 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Capital expenditure of the Exploration & Production segment (euro 1,366 million) concerned essentially development directed mainly outside Italy, in particular Kazakhstan, Egypt, Angola and Congo. Development expenditure in Italy concerned in particular the continuation of work for well drilling, plant and infrastructure in Val dAgri and sidetrack and infilling work in mature areas. About 91% of exploration expenditure was directed outside Italy in particular Norway, Nigeria, Egypt, the United States and Indonesia. In Italy essentially the offshore | of Sicily. Acquisition of
proved and unproved property essentially concerned the
70% of total expenditure for the Nikaitchuq oilfield in
Alaska, in which Eni reached the 100% ownership. As compared to the first quarter of 2006, capital expenditure increased by euro 405 million, up 42.1%, due in particular to the increase in development expenditure in Congo, Egypt and Angola, the increase in exploration expenditure in Norway, Indonesia, the United States and Nigeria, and the acquisition of reserves. |
Gas & Power
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
397 | Italy | 140 | 154 | 14 | 10.0 | |||||||||
56 | Outside Italy | 11 | 67 | 56 | .. | |||||||||
453 | 151 | 221 | 70 | 46.4 | ||||||||||
22 | Market | 7 | 5 | (2 | ) | (28.6 | ) | |||||||
Italy | .. | |||||||||||||
22 | Outside Italy | 7 | 5 | (2 | ) | (28.6 | ) | |||||||
54 | Distribution | 27 | 25 | (2 | ) | (7.4 | ) | |||||||
287 | Transport | 91 | 144 | 53 | 58.2 | |||||||||
253 | Italy | 87 | 82 | (5 | ) | (5.7 | ) | |||||||
34 | Outside Italy | 4 | 62 | 58 | .. | |||||||||
90 | Power generation | 26 | 47 | 21 | 80.8 | |||||||||
453 | 151 | 221 | 70 | 46.4 |
Capital expenditure in the Gas & Power segment totalled euro 221 million and related essentially to: (i) development and maintenance of Enis primary transmission network in Italy (euro 82 million); (ii) the import pipeline upgrade (euro 62 million); (iii) the continuation of the construction of combined cycle power plants (euro 47 million) in particular at Ferrara; (iv) development and maintenance of Enis natural gas distribution network in Italy (euro 25 million). | The euro 70 million increase from the first quarter of 2006 (up 46.4%) was due essentially to the import pipeline upgrade. |
- 18 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Refining & Marketing
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
241 | Italy | 79 | 123 | 44 | 55.7 | |||||||||
31 | Outside Italy | 16 | 11 | (5 | ) | (31.3 | ) | |||||||
272 | 95 | 134 | 39 | 41.1 | ||||||||||
139 | Refining, Supply and Logistics | 67 | 104 | 55.2 | ||||||||||
139 | Italy | 67 | 104 | 37 | 55.2 | |||||||||
90 | Marketing | 25 | 30 | 5 | 20.0 | |||||||||
59 | Italy | 9 | 19 | 10 | .. | |||||||||
31 | Outside Italy | 16 | 11 | (5 | ) | (31.3 | ) | |||||||
43 | Other activities | 3 | (3 | ) | .. | |||||||||
272 | 95 | 134 | 39 | 41.1 |
Capital expenditure in the Refining & Marketing segment amounted to euro 134 million and concerned: (i) refining, supply and logistics in Italy (euro 104 million), in particular actions for improving flexibility and yields of refineries, among which the construction of a new hydrocracking unit at the Sannazzaro refinery; (ii) the upgrade of the distribution network in Italy (euro 19 million); (iii) the upgrade of the refined product distribution network and the purchase of service stations in the rest of Europe (euro 11 million). | Engineering &
Construction Capital expenditure in the Engineering & Construction segment amounted to euro 248 million and concerned: (i) conversion of two tanker ships into FPSO vessels that will operate in Brazil on the Golfinho 2 field and in Angola; (ii) startup of construction of a new rig and a new pipelayer. |
- 19 -
ENI REPORT ON THE FIRST QUARTER OF 2007
POST CLOSING EVENTS
Upstream asset
acquisition in the Gulf of Mexico On April 30, 2007 Eni agreed to acquire the Gulf of Mexico upstream activity of Dominion, one of the major American energy companies, listed on the New York Stock Exchange at the agreed price equal to US $4,757 million inclusive of exploration assets for US $680 million. The transaction includes production, development and exploration assets located in deepwater Gulf of Mexico. The acquisition will increase Enis equity production in the Gulf of Mexico from the current 36 kboepd to more than 110 kboepd in the second half of 2007 and the proved and probable equity reserves by 222 million boe, at an implied cost per barrel of US $18.40. In the 2007-2010 period, production from the acquired assets is expected to average more than 75 kboepd. In addition, Eni will further enhance its portfolio in the Gulf of Mexico thanks to new leases with significant exploration potential; approximately 60% of these leases are operated. The transaction is subject to government approvals, 30 days notice to holders of certain preferential rights to purchase (which apply to less than 5% of total reserves), and to other customary conditions precedent. Closing is expected on July 2, 2007. Yukos assets acquisition On April 4, 2007 Eni, through the partnership in EniNeftegaz (60% Eni, 40% Enel SpA) acquired Lot 2 in the Yukos liquidation procedure for a total price of $5.83 billion. Lot 2 includes: 100% of OAO Arctic Gas Company, 100% of ZAO Urengoil Inc and 100% of OAO Neftegaztechnologia. These three companies own 5 gas and condensate fields and parts of other fields in the Yamal Nenets (YNAO) region, the worlds largest gas producing region. Together they have large oil and gas reserves. |
Eni and Enel have offered
Gazprom an option to acquire a 51% interest in these
assets within two years. In the event that Gazprom
exercises its call option, the assets will be operated
through a joint venture between Eni and Gazprom which
will have access to Enis most advanced
technologies. Lot 2 includes also various minor assets that will be sold or liquidated and 20% of OAO Gazprom Neft which will be wholly owned by Eni. Eni offered Gazprom an option to acquire a 20% interest in OAO Gazprom Neft within two years, at a total price of $3.7 billion, in addition to financial expenses related to the acquisition. These agreements are an additional step in implementing the strategic Partnership between Eni and Gazprom signed in November 2006, under which the two companies established an alliance to develop upstream, midstream and downstream energy projects inside and outside of Russia. Acquisition of the retail station network in the Czech Republic, Slovakia and Hungary On April 27, 2007 Eni and ExxonMobil Central Europe Holding GmbH signed an agreement for the sale of shares of Esso spol sro (Esso Czechia), Esso Slovensko spol sro (Esso Slovakia) and ExxonMobil Hungary Kft to Eni. The agreement, subject to the approval of the relevant authorities, includes ExxonMobil's retail station network in the three countries, totaling 102 stations and its aviation business at the Prague and Bratislava airports. Additionally, the lubricants business conducted in these countries by ExxonMobil Petroleum and Chemical, is included in the transaction. |
- 20 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Acquisition of
70% and of the operatorship of the Nikaitchuq Field in
Alaska On April 11, 2007 Eni acquired 70% and the operatorship of the Nikaitchuq field, located on-offshore in the North Slope of Alaska. Eni, which already owned a 30% stake in the field, now retains the 100% working interest. Eni acquired the additional interest and operatorship as the result of an agreement with Kerr-McGee Oil and Gas Corporation, a wholly-owned subsidiary of Anadarko Petroleum Corporation. Nikaitchuq would be the first development project operated by Eni in Alaska. Successful appraisal drilling has been completed, confirming the potential viability of the development project. Plans for a phased development are currently being evaluated with the target of sanctioning the project by year end, and first oil to flow by the end of 2009. The Nikaitchuq project comprises the drilling of approximately 80 wells, out of which 32 are located onshore and the remaining from an offshore artificial island. All wells will then be tied back to a production facility located at Oliktok Point to reach a production of 40 kboe/d. Total investment will amount to approximately $900 million. |
Memorandum of
Understanding for the acquisition of an interest in
Angola LNG Ltd On April 2, 2007 Eni and Sonangol signed a Memorandum of Understanding for the acquisition of a 13.6% stake in Angola LNG Limited Consortium (A-LNG). This company is responsible for the construction of an LNG plant in Soyo, 300 km North Luanda, with a yearly capacity of 5 mmtonnes. Upon completion of this agreement, Angola LNG Limiteds shareholding structure will be as follows: Sonangol 22.8%, Chevron 36.4%, Eni 13.6%, Total 13.6% and BP 13.6%. The project, for a total investment of approximately $4 billion, has been approved by the Angolan Government and Parliament. It envisages, for 28 years, the development of 220 bcm of gas, the production of 128 mmtonnes of LNG, 104 mmbbl of condensate and 257 mmbbl of LPG. The LNG will be directed to the United States market and will be delivered to the re-gasification plant of Pascagoula, in the Gulf of Mexico, in which Eni, following this agreement, will acquire re-gasification capacity of 5 bcm/y. |
- 21 -
ENI REPORT ON THE FIRST QUARTER OF 2007
OUTLOOK FOR 2007
The outlook for Eni in 2007
remains positive, with key business trends for the year
as follows:
|
In 2007 management expects
Enis capital expenditure on
exploration and capital projects to amount to
approximately euro 10.5 billion, representing a 34%
increase over 2006. Approximately 86% of this capital
expenditure programme is expected to be deployed in the
Exploration & Production, Gas & Power and
Refining & Marketing divisions. Furthermore,
acquisitions of assets and interests amounting to euro
9.2 billion are forecast in the year, mainly related to:
(i) the already closed transaction for the purchase of
ex-Yukos assets; (ii) the other transactions whose
closing is foreseen by the end of the year, including the
purchase of upstream assets in the Gulf of Mexico and
Congo, and a retail station network in the
Central-Eastern Europe. Assuming Gazprom exercises its
call options to purchase a 20% interest in OAO Gazprom
Neft and a 51% interest in ex-Yukos gas assets from Eni,
net cash outflows used in investing activities will
decrease to euro 16.2 billion. On the basis of the expected cash outflows for this capital expenditure and acquisition program, and shareholders remuneration, also assuming a $55/barrel scenario for the Brent crude oil, Eni foresees a leverage ranging from 0.3 to 0.4 by the end of the year, depending on the exercise of the above mentioned call options by Gazprom. |
- 22 -
ENI REPORT ON THE FIRST QUARTER OF 2007
OPERATING RESULTS BY DIVISION
Exploration & Production
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
Results | 2006 |
2007 |
Change |
% Ch. |
|||||
6,152 | Net sales from operations | 7,412 | 6,361 | (1,051 | ) | (14.2 | ) | ||||||||||
3,141 | Operating profit | 4,308 | 3,132 | (1,176 | ) | (27.3 | ) | ||||||||||
54 | Exclusion of special items: | (57 | ) | 57 | |||||||||||||
51 | - asset impairments | ||||||||||||||||
(7 | ) | - gains on disposal of assets | (57 | ) | 57 | ||||||||||||
10 | - provision for redundancy incentives | ||||||||||||||||
3,195 | Adjusted operating profit | 4,251 | 3,132 | (1,119 | ) | (26.3 | ) | ||||||||||
(22 | ) | Net financial incomes (expenses) (a) | (17 | ) | (35 | ) | (18 | ) | |||||||||
(18) | Net income (expenses) from investments (a) | 10 | 10 | ||||||||||||||
(1,851 | ) | Income taxes (a) | (2,149 | ) | (1,698 | ) | 451 | ||||||||||
58.7 | Tax rate | (%) | 50.6 | 54.7 | 4.1 | ||||||||||||
1,304 | Adjusted net profit | 2,095 | 1,409 | (686 | ) | (32.7 | ) | ||||||||||
Results also include: | |||||||||||||||||
1,418 | - amortizations and depreciations | 1,095 | 1,240 | 145 | 13.2 | ||||||||||||
419 | - of which amortizations of exploration expenditure | 187 | 375 | 188 | .. | ||||||||||||
1,937 | Capital expenditure | 961 | 1,366 | 404 | 42.1 | ||||||||||||
Production (b) | |||||||||||||||||
1,079 | Liquids (c) | (kbbl/d) | 1,143 | 1,030 | (113 | ) | (9.9 | ) | |||||||||
4,132 | Natural gas | (mmcf/d) | 3,920 | 4,061 | 141 | 3.6 | |||||||||||
1,796 | Total hydrocarbons | (kboe/d) | 1,827 | 1,734 | (93 | ) | (5.1 | ) | |||||||||
Average realizations | |||||||||||||||||
54.85 | Liquids (c) | ($/bbl) | 56.27 | 54.39 | (1.88 | ) | (3.3 | ) | |||||||||
5.39 | Natural gas | ($/mmcf) | 5.23 | 2.30 | 0.07 | 1.3 | |||||||||||
45.53 | Total hydrocarbons | ($/boe) | 46.71 | 45.12 | (1.59 | ) | (3.40 | ) | |||||||||
Average oil market prices | |||||||||||||||||
59.68 | Brent dated | ($/bbl) | 61.75 | 57.75 | (4.00 | ) | (6.5 | ) | |||||||||
46.26 | Brent dated | (euro/bbl) | 51.37 | 44.08 | (7.29 | ) | (14.2 | ) | |||||||||
59.94 | West Texas Intermediate | ($/bbl) | 63.29 | 57.99 | (5.30 | ) | (8.4 | ) | |||||||||
235.20 | Gas Henry Hub | ($/kmc) | 271.90 | 266.60 | (5.30 | ) | (1.9 | ) |
(a) | Excluding special items. | |
(b) | Includes Eni's share of production of equity-accounted entities. | |
(c) | Includes condensates. |
Results Adjusted operating profit for the first quarter of 2007 was euro 3,132 million, a decrease of euro 1,119 million from the first quarter 2006, or 26.3%, due primarily to: (i) the adverse impact of approximately euro 300 million resulting from the appreciation of the euro versus the dollar; (ii) lower production sold, down 9.5 mmboe; (iii) lower oil realizations in dollars (down 3.3%), partly offset by higher gas prices (up 1.3%); (iv) higher expenses incurred |
in connection with exploratory activity (euro 188 million; euro 218 on a constant exchange rate basis); (v) higher production costs and amortization/depreciation charges, reflecting also the impact of sector-specific inflation. |
- 23 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Production
Daily production of hydrocarbons by
region
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
1,796 | Daily production of oil and natural gas (a) | (kboe/d) | 1,827 | 1,734 | (93 | ) | (5.1 | ) | |||||||||
232 | Italy | 247 | 223 | (24 | ) | (9.7 | ) | ||||||||||
571 | North Africa | 541 | 566 | 25 | 4.6 | ||||||||||||
372 | West Africa | 382 | 337 | (45 | ) | (11.8 | ) | ||||||||||
291 | North Sea | 298 | 287 | (11 | ) | (3.7 | ) | ||||||||||
330 | Rest of World | 359 | 321 | (38 | ) | (10.6 | ) | ||||||||||
159.2 | Oil and natural gas production sold (a) | (mmboe) | 159.5 | 150.1 | (9.4 | ) | (5.9 | ) |
Daily production of liquids by region
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
1,079 | Production of liquids (a) | (kbbl/d) | 1,143 | 1,030 | (113 | ) | (9.9 | ) | |||||||||
80 | Italy | 82 | 77 | (5 | ) | (6.1 | ) | ||||||||||
334 | North Africa | 325 | 328 | 3 | 0.9 | ||||||||||||
315 | West Africa | 339 | 288 | (51 | ) | (15.0 | ) | ||||||||||
181 | North Sea | 188 | 170 | (18 | ) | (9.6 | ) | ||||||||||
169 | Rest of World | 209 | 167 | (42 | ) | (20.1 | ) |
Daily production of natural gas by region
Fourth Quarter |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
4,132 | Production of natural gas (a) | (mmcf/d) | 3,920 | 4,061 | 141 | 3.6 | |||||||||||
883 | Italy | 954 | 848 | (106 | ) | (11.1 | ) | ||||||||||
1,377 | North Africa | 1,236 | 1,377 | 141 | 11.4 | ||||||||||||
318 | West Africa | 247 | 283 | 36 | 14.6 | ||||||||||||
636 | North Sea | 636 | 671 | 35 | 5.5 | ||||||||||||
918 | Rest of World | 847 | 882 | 35 | 4.1 |
(a) | Includes Eni's share of production of equity-accounted entities. |
Oil and natural gas production in the first quarter 2007 averaged 1,734 kboe/d, a decrease of 93 kboe/d from the same period of the previous year (down 5.1%). This reduction was due primarily to the unilateral cancellation of the Dación field service contract by the Venezuelan state company PDVSA with effect from April 1, 2006 (down 60 kboe/d) and social unrest in Nigeria. Factoring in these effects, oil and natural gas production level was in line with the first quarter 2006. Production increases were achieved mainly in Libya, Kazakhstan and | the Gulf of Mexico
offsetting mature field declines mainly in Italy and
facility shutdown. Daily production of oil and condensates (1,030 kbbl) decreased by 113 kbbl, or 9.9% from the first quarter of 2006. Production decreases were reported mainly in Venezuela and Nigeria due to the above mentioned causes and in the United Kingdom due to a technical problem occurred in the Elgin/Franklin field (Enis interest 21.87%) and ordinary maintenance shutdowns at other |
- 24 -
ENI REPORT ON THE FIRST QUARTER OF 2007
facilities. In Italy a few technical problems occurred at the FPSO operating the Aquila field. Main increases were registered in Kazakhstan due to maintenance actions on facilities performed in the first quarter of 2006, and the United States due to the resumption of full activity at plants damaged by hurricanes in the second half of 2005. | Daily production of natural gas for the first quarter (4,061 mmcf/d) increased by 141 mmcf, or 3.6% mainly as a result of the build-up of the Bahr Essalam field offshore Libya, full operations at the fifth train of the Bonny LNG plant in Nigeria, a better performance of Norways largest fields, and full production of Bayu Undan gas field offshore Australia. Gas production in Italy decreased due to mature field declines. |
Gas & Power
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
Results | 2006 |
2007 |
Change |
% Ch. |
|||||
8,170 | Net sales from operations | 9,134 | 8,543 | (591 | ) | (6.5 | ) | ||||||||
1,303 | Operating profit | 1,199 | 1,641 | 442 | 36.9 | ||||||||||
(41 | ) | Exclusion of inventory holding (gains) losses | (30 | ) | 40 | 70 | |||||||||
7 | Exclusion of special items: | 34 | 2 | (32 | ) | ||||||||||
of which: | |||||||||||||||
Non-recurring items | |||||||||||||||
7 | Other special items | 34 | 2 | (32 | ) | ||||||||||
2 | - environmental provision | 20 | (20 | ) | |||||||||||
15 | - provisions for redundancy incentives | 14 | 2 | (12 | ) | ||||||||||
(10 | ) | - other | |||||||||||||
1,269 | Adjusted operating profit | 1,203 | 1,683 | 480 | 39.9 | ||||||||||
832 | Market and Distribution | 705 | 1,177 | 472 | 67.0 | ||||||||||
286 | Transport in Italy | 305 | 286 | (19 | ) | (6.2 | ) | ||||||||
144 | Transport outside Italy | 154 | 163 | 9 | 5.8 | ||||||||||
7 | Power generation (a) | 39 | 57 | 18 | 46.2 | ||||||||||
(1 | ) | Net financial incomes (expenses) (b) | 6 | 3 | (3 | ) | |||||||||
97 | Net income (expenses) from investments (b) | 137 | 115 | (22 | ) | ||||||||||
(492 | ) | Income taxes (b) | (467 | ) | (642 | ) | (175 | ) | |||||||
36.0 | Tax rate (%) | 34.7 | 35.6 | 0.9 | |||||||||||
873 | Adjusted net profit | 879 | 1,159 | 280 | 31.9 | ||||||||||
453 | Capital expenditure | 151 | 221 | 70 | 46.4 |
(a) | Starting on January 1, 2007, results from marketing of electricity have been included in results from market and distribution activities following an internal reorganization. As a consequence of this, electricity generation activity conducted by EniPower subsidiary comprises only results from production of electricity. Prior quarter results have not been restated. | |
(b) | Excluding special items. |
Results The adjusted operating profit of the Gas & Power division totalled euro 1,683 million, up euro 480 million or 39.9% from the first quarter of 2006, reflecting primarily: (i) increased natural gas selling margins mainly owing to a favorable trading environment reflecting in particular the effect of the euro/dollar exchange rate; (ii) a favorable evolution of the regulatory framework in Italy. This reflected the enactment of Resolution No. 79/2007 by the Authority for Electricity and Gas implementing a new setup of the indexation mechanism of the raw material cost component in supplies to residential and commercial |
users related to the period
from January 1, 2005 to June 30, 2006. Following this,
Eni has partially or totally reversed provisions accrued
in the accounts for 2005 and the first half of 2006;
(iii) the fact that higher purchase costs were incurred
in the first quarter of 2006, owing to a climatic
emergency for the winter time 2005-2006. These positives were partly offset by a decline in natural gas sales of affiliates (down 2.87 bcm, or 10.4%) due to lower European gas demand as a consequence of the unusually mild weather conditions of the first quarter of 2007, partly offset by a growth in sales in certain target |
- 25 -
ENI REPORT ON THE FIRST QUARTER OF 2007
markets in the Rest of
Europe. Lower gas demand negatively affected the
operating performance of transport activities in Italy
and volumes distributed on low pressure networks. Sales
volumes of electricity decreased by 0.12 TWh, or 1.6%. Special charges for the quarter referred to redundancy incentives (euro 2 million). |
The adjusted net profit was euro 1,159 million up euro 280 million, or 31.9%, reflecting the increased adjusted operating profit, offset in part lower results reported by certain affiliates engaged in natural gas distribution in Italy, due to mild weather conditions. |
Sales
Fourth Quarter |
(bcm) |
First Quarter |
2006 |
Natural gas sales | 2006 |
2007 |
Change |
% Ch. |
|||||
14.09 | Italy to third parties (*) | 17.47 | 15.41 | (2.06 | ) | (11.8 | ) | ||||||||||
3.45 | Wholesalers (selling companies) | 5.06 | 4.62 | (0.44 | ) | (8.7 | ) | ||||||||||
0.56 | Gas release | 0.59 | 0.49 | (0.10 | ) | (16.9 | ) | ||||||||||
10.08 | End Customers | 11.82 | 10.30 | (1.52 | ) | (12.9 | ) | ||||||||||
3.50 | Industries | 3.80 | 3.33 | (0.47 | ) | (12.4 | ) | ||||||||||
4.30 | Power generation | 4.27 | 3.93 | (0.34 | ) | (8.0 | ) | ||||||||||
2.28 | Residential | 3.75 | 3.04 | (0.71 | ) | (18.9 | ) | ||||||||||
1.55 | Own consumption (*) | 1.47 | 1.39 | (0.08 | ) | (5.4 | ) | ||||||||||
8.14 | Rest of Europe (*) | 8.57 | 7.90 | (0.67 | ) | (7.8 | ) | ||||||||||
0.12 | Outside Europe | 0.16 | 0.10 | (0.06 | ) | (37.5 | ) | ||||||||||
23.90 | Total sales to third parties and own consumption | 27.67 | 24.80 | (2.87 | ) | (10.4 | ) | ||||||||||
1.97 | Sales of natural gas of Eni's affiliates (net to Eni) | 2.41 | 2.27 | (0.14 | ) | (5.8 | ) | ||||||||||
0.01 | Italy (*) | 0.01 | 0.01 | ||||||||||||||
1.83 | Rest of Europe (*) | 2.33 | 2.10 | (0.23 | ) | (9.9 | ) | ||||||||||
0.13 | Outside Europe | 0.07 | 0.16 | 0.09 | ) | 128.6 | |||||||||||
25.87 | Total sales and own consumption (G&P) | 30.08 | 27.07 | (3.01 | ) | (10.0 | ) | ||||||||||
1.06 | Upstream in Europe | 1.12 | 1.07 | (0.05 | ) | (4.5 | ) | ||||||||||
26.93 | Worldwide gas sales | 31.20 | 28.14 | (3.06 | ) | (9.8 | ) | ||||||||||
26.68 | Gas sales in Europe | 30.97 | 27.88 | (3.09 | ) | (10.0 | ) | ||||||||||
25.62 | G&P in Europe (*) | 29.85 | 26.81 | (3.04 | ) | (10.2 | ) | ||||||||||
1.06 | Upstream in Europe | 1.12 | 1.07 | (0.05 | ) | (4.5 | ) | ||||||||||
22.45 | Gas volumes transported in Italy | (bcm) | 24.89 | 23.51 | (1.38 | ) | (5.5 | ) | |||||||||
14.97 | Eni | 8.77 | 15.55 | 6.78 | 77.3 | ||||||||||||
7.48 | On behalf of third parties | 16.12 | 7.96 | (8.16 | ) | (50.6 | ) | ||||||||||
7.79 | Electricity sold | (TWh) | 7.73 | 7.61 | (0.12 | ) | (1.6 | ) |
(*) | Market segments with asterisk merge into "G&P in Europe". |
- 26 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Natural gas sales for the
first quarter of 2007 amounted to 28.14 bcm, including
own consumption and sales by affiliates and upstream
sales in Europe, with a decrease of 3.06 bcm from the
first quarter of 2006, or 9.8%. This decline was impacted
by lower seasonal gas sales due to an unusually mild
winter. In an increasingly competitive market, sales in the Italian market were 15.41 bcm with a decrease of 2.06 bcm, or 11.8%. All market segments posted sale volumes declines from the first quarter of 2006: sales to residential users were down by 0.71 bcm; sales to industrial users were down by 0.47 bcm; sales to wholesalers were down by 0.44 bcm; sales to power generation were down by 0.34 bcm. Sales under the gas release1 program (0.49 bcm) declined by 0.1 bcm. Own consumption (1.38 bcm) declined by 0.08 bcm due to lower supplies to EniPower. Gas sales in the Rest of Europe were 7.9 bcm with a decrease of 0.67 bcm, or 7.8%, due to: (i) lower sales under long-term supply contracts to Italian importers (down 0.75 bcm), despite the full production of natural gas from the Libyan fields; (ii) lower sales in the Hungarian market (down 0.49 bcm). These decreases were partly offset by increases in the supplies to the Turkish (up 0.34 bcm) and Spanish (up 0.18 bcm) markets. |
Sales of subsidiaries
outside Europe (0.1 bcm) declined by 0.06 bcm due to
lower supplies to the Argentinean market. Natural gas sales of Enis affiliates in the rest of Europe (net to Eni and net of Enis supplies) amounted to 2.1 bcm, a 0.23 bcm decline related in particular to: (i) GVS (Enis interest 50%) with 0.93 bcm; (ii) Unión Fenosa Gas (Enis interest 50%) with 0.57 bcm. Natural gas sales of Enis affiliates outside Europe (net to Eni and net of Enis supplies) amounted to 0.16 bcm, a 0.23 bcm decline related in particular to Unión Fenosa Gas (Enis interest 50%) with 0.13 bcm. Eni transported 23.51 bcm of natural gas in Italy, a decrease of 1.38 bcm from the first quarter of 2006, down 5.5%, due to a decline in domestic demand. Volumes transported on behalf of third parties declined by 0.81 bcm, those transported on behalf of Eni declined by 0.57 bcm. Sales of electricity (7.61 TWh) declined by 0.12 TWh, or 1.6%. |
(1) | In June 2004 Eni agreed with the Antitrust Authority to sell a total volume of 9.2 billion cubic meters of natural gas (2.3 billion cubic meters/year) in the four thermal years from October 1, 2004 to September 30, 2008 at the Tarvisio entry point into the Italian network. |
- 27 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Resolution No.
79/2007 of the Authority for Electricity and Gas
Revision of the economic conditions of supplies in
the January 1, 2005 to March 31, 2007 period and criteria
for their updating. Following the cancellation of Resolution No. 248/2004 by the Council of State for formal flaws, on March 29, 2007 the Authority for Electricity and Gas published Resolution No. 79/2007 after concluding a consultation procedure with gas operators. This Resolution organizes in a single document all the changes applied to the determination and updating of economic conditions for natural gas supplies. In particular with this Resolution the Authority: (i) confirmed the indexation mechanism for the raw material cost component contained in Resolution No. 248/2004 and the changes introduced to this mechanism by Resolution No. 134/06 starting on July 1, 2006; (ii) waiving this provision, it reviewed the updating of the raw material cost component for 2005 reaching incremental values equal to those deriving |
from the application of the indexation criteria of Resolution No. 195/02; this cancels the negative impact of Resolution No. 248/2004 on Enis 2005 accounts; (iii) decided that selling companies, only for wholesale purchase/sale contracts entered after January 1, 2005 and valid in the January 1, 2006-June 30, 2006 period, offer their customers new contractual conditions consistent with the new indexation mechanism before June 4, 20072 , and inform the Authority, before June 29, 20072, together with their wholesaler that they have complied with this requirement. Selling companies complying with this requirement will be entitled to 50% of the difference between the updating of the raw material cost component under the new mechanism and the more favorable one under Resolution No. 195/2002 applied to volumes consumed by customers under the 200 kcm threshold. This Resolution determined the total or partial redundancy of liabilities accrued in Enis accounts for 2005 and 2006 that have been consequently reversed. |
(2) | Dates changes by Resolution No. 101/2007 of the Authority for Electricity and Gas. |
- 28 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Refining & Marketing
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
Results | 2006 |
2007 |
Change |
% Ch. |
|||||
8,579 | Net sales from operations | 9,280 | 7,943 | (1,337 | ) | (14.4 | ) | ||||||||||
(386 | ) | Operating profit | 89 | (10 | ) | (99 | ) | .. | |||||||||
386 | Exclusion of inventory holding (gains) losses | (47 | ) | 112 | 159 | ||||||||||||
148 | Exclusion of special items: | 47 | 18 | (29 | ) | ||||||||||||
of which: | |||||||||||||||||
109 | Non-recurring items | ||||||||||||||||
39 | Other special items | 47 | 18 | (29 | ) | ||||||||||||
13 | - asset impairments | ||||||||||||||||
27 | - environmental provisions | 44 | 17 | (27 | ) | ||||||||||||
30 | - provisions for redundancy incentives | 5 | 1 | (4 | ) | ||||||||||||
4 | - provision to the reserve for contingencies | 1 | (1 | ) | |||||||||||||
(35 | ) | - other | (3 | ) | 3 | ||||||||||||
148 | Adjusted operating profit | 89 | 120 | 31 | 34.8 | ||||||||||||
31 | Net income (expenses) from investments (a) | 47 | 51 | 4 | 8.5 | ||||||||||||
(64 | ) | Income taxes (a) | (50 | ) | (58 | ) | (8 | ) | 16.0 | ||||||||
35.8 | Tax rate (%) | 36.8 | 33.9 | (2.9 | ) | ||||||||||||
115 | Adjusted net profit | 86 | 113 | 27 | 31.4 | ||||||||||||
272 | Capital expenditure | 95 | 134 | 39 | 41.1 | ||||||||||||
Global indicator refining margin | |||||||||||||||||
2.18 | Brent | ($/bbl) | 2.95 | 3.06 | 0.11 | 3.7 | |||||||||||
1.69 | Brent | (euro/bbl) | 2.45 | 2.34 | (0.11 | ) | (4.5 | ) | |||||||||
4.87 | Ural | ($/bbl) | 5.76 | 6.07 | 0.31 | 5.4 |
(a) | Excluding special items. |
Results The Refining & Marketing division reported an adjusted operating profit of euro 120 million, representing an increase of euro 31 million from the first quarter of 2006, or 34.8%. This increase reflected primarily a better operating performance delivered by the refining activity, which was boosted by higher processed volumes and better yields also in light of lower maintenance shutdowns. The benefit of higher refining margins (margins on Brent crude oil were up 0.11 dollar/bbl, or 3.7%) was more than offset by the negative impact of the euro appreciation over the dollar. Marketing activities in Italy reported a lower operating profit due |
mainly to lower retail
margins and a decline in wholesale volumes as a
consequence of lower heating oil demand in Italy, in
particular from the power generation sector caused by an
unusually mild winter. The adjusted net profit was euro 113 million, up euro 27 million, or 31.4%, due to the improved operating performance. Special charges excluded from the adjusted operating profit for the first quarter of 2007 were euro 18 million, reflecting environmental provisions and provisions for redundancy incentives. |
- 29 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Throughputs and sales
Fourth Quarter |
(mmtonnes) |
First Quarter |
2006 |
Refining throughputs and sales | 2006 |
2007 |
Change |
% Ch. |
|||||
9.05 | Refining throughputs on own account Italy | 7.49 | 7.86 | 0.37 | 4.9 | ||||||||||||
1.20 | Refining throughputs on own account rest of Europe | 1.12 | 1.14 | 0.02 | 1.8 | ||||||||||||
7.36 | Refining throughputs of wholly-owned refineries | 5.86 | 6.67 | 0.81 | 13.8 | ||||||||||||
100 | Utilization rate of balanced capacity | (%) | 100 | 100 | |||||||||||||
2.16 | Retail sales Italy | 2.06 | 1.98 | (0.08 | ) | (3.9 | ) | ||||||||||
0.97 | Retail sales rest of Europe | 0.87 | 0.90 | 0.03 | 3.4 | ||||||||||||
3.13 | Sub-total retail sales | 2.93 | 2.88 | (0.05 | ) | (1.7 | ) | ||||||||||
2.93 | Wholesale Italy | 2.94 | 2.61 | (0.33 | ) | (11.2 | ) | ||||||||||
1.06 | Wholesale rest of Europe | 1.03 | 1.05 | 0.02 | 1.9 | ||||||||||||
0.10 | Wholesale rest of World | 0.10 | 0.13 | 0.03 | 30.0 | ||||||||||||
5.96 | Other sales | 5.32 | 5.67 | 0.35 | 6.6 | ||||||||||||
13.18 | Sales | 12.32 | 12.34 | 0.02 | 0.2 | ||||||||||||
Refined product sales by region | (mmtonnes) | ||||||||||||||||
7.71 | Italy | 7.55 | 7.30 | (0.25 | ) | (3.3 | ) | ||||||||||
2.03 | Rest of Europe | 1.90 | 1.95 | 0.05 | 2.6 | ||||||||||||
3.44 | Rest of World | 2.87 | 3.09 | 0.22 | 7.7 |
Refining throughputs on
Enis own account increased by 390 ktonnes from the
first quarter of 2006, to 9 mmtonnes, or 4.5%. This
increase was due to higher volumes processed at the in
Livorno and Venice refineries also reflecting lower
maintenance shutdowns, partly offset by the expiration of
a processing contract at the Priolo refinery owned by a
third party and lower throughputs at the Gela and Taranto
refineries due to planned maintenance shutdowns. The wholly-owned refineries throughputs increased by 0.81 mmtonnes from the first quarter of 2006, to 6.67 mmtonnes, or 13.8%, mainly in the Livorno, Taranto and Porto Marghera refineries. The wholly-owned refinery utilization rate was 100% based on utilization rates of refinery balanced capacity. Sales of refined products increased by 20 ktonnes from the first quarter of 2006, to 12.34 mmtonnes, or 0.2%, due to: (i) higher volumes sold to oil companies and traders in Italy, partly offset by lower volumes sold to the petrochemical sector reflecting the expiration of a processing contract at the Priolo refinery (overall up 350 ktonnes); and (ii) higher sales on both the retail and wholesale markets in the Rest of Europe (up 50 ktonnes). These positives were partly offset by a decline in both the retail and wholesale markets in Italy (down 410 ktonnes) due to the impact of mild weather in the first quarter 2007 and competitive pressure. |
Sales of refined products on
the retail market in Italy decreased by 80 ktonnes from
the first quarter of 2006, to 1.98 mmtonnes, or 3.9%,
primarily due to competitive pressure and lower demand.
Retail market share in Italy declined by 1 percentage
point from 29.3% in the first quarter of 2006 to 28.3%.
Average throughput (0.56 mmliters in the first quarter of
2007) declined by approximately 20 kliters from the same
period in 2006. Sales on the retail market in the Rest of Europe increased by 30 ktonnes from the first quarter of 2006, to 0.9 mmtonnes, or 3.4%, mainly in Spain. Market share outside Italy grew slightly from 3.1% in the first quarter of 2006 to 3.2% in the first quarter of 2007. Average throughput (0.58 mmliters in the first quarter of 2007) increased by approximately 20 kliters from the same period in 2006. Sales on wholesale markets in Italy decreased by 330 ktonnes from the first quarter of 2006, to 2.61 mmtonnes, due to lower demand for heating products in particular from the power generation sector caused by unusually milder weather. Sales on wholesale markets in the Rest of Europe increased by 20 ktonnes, to 1.05 mmtonnes, primarily reflecting the increase in sales in the Czech Republic. |
- 30 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Petrochemicals
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
Results | 2006 |
2007 |
Change |
% Ch. |
|||||
1,740 | Net sales from operations | 1,728 | 1,674 | (54 | ) | (3.1 | ) | ||||||||||
72 | Operating profit | 39 | 115 | 76 | .. | ||||||||||||
(4 | ) | Exclusion of inventory holding (gains) losses | (17 | ) | 3 | 20 | |||||||||||
86 | Exclusion of special items: | 1 | 4 | 3 | |||||||||||||
of which: | |||||||||||||||||
13 | Non-recurring items | ||||||||||||||||
73 | Other special items | 1 | 4 | 3 | |||||||||||||
50 | - asset impairments | ||||||||||||||||
14 | - provisions for redundancy incentives | 4 | 4 | ||||||||||||||
11 | - provision to the reserve for contingencies | 2 | (2 | ) | |||||||||||||
(2 | ) | - other | (1 | ) | 1 | ||||||||||||
154 | Adjusted operating profit | 23 | 122 | 99 | .. | ||||||||||||
1 | Net income (expenses) from investments (a) | ||||||||||||||||
(14 | ) | Income taxes (a) | (7 | ) | (43 | ) | (36 | ) | |||||||||
141 | Adjusted net profit | 16 | 79 | 63 | .. | ||||||||||||
47 | Capital expenditure | 10 | 14 | 4 | 40.0 |
Results Adjusted operating profit in the first quarter of 2007 amounted to euro 122 million increasing by euro 99 million from the first quarter of 2006 due mainly to higher selling margins, essentially the cracker margin and to a lower extent the aromatics business. |
Special charges in the first quarter concerned essentially redundancy incentives. |
Production and sales
Fourth Quarter |
(ktonnes) |
First Quarter |
2006 |
2006 |
2007 |
Change |
% Ch. |
||||||
1,789 | Production | 1,915 | 2,227 | 312 | 16.3 | ||||||||||||
1,323 | Sales of petrochemical products | 1,411 | 1,417 | 6 | 0.4 | ||||||||||||
781 | Basic petrochemicals | 758 | 771 | 13 | 1.7 | ||||||||||||
226 | Styrene and elastomers | 261 | 272 | 11 | 4.2 | ||||||||||||
316 | Polyethylene | 392 | 374 | (18 | ) | (4.6 | ) |
Sales of petrochemical products (1,417 ktonnes) were stable from the first quarter of 2006, due essentially to higher sales of (i) olefins (up 8.1%) due to higher availability of ethylene (up 15.2%) and polypropylene (up 5.5%) due to the purchase by Syndial of the Porto Torres plant; (ii) styrene (up 4.7%) due to a positive demand, in particular for ABS/SAN (up 100%). Declines concerned: (i) intermediates (down 8.4%) due to lower product availability, in particular cycloexanone (down 17.5%) and acetone (down 11.9%); (ii) aromatics (down 4.8%) related in particular to xylene (down 13.3%), due to a different setup of the Priolo plant | following the accident
occurred in the nearby refinery in the second quarter of
2006; (iii) polyethylene (down 4.6%) due to lower LDPE
(down 7.3%) and LLDPE (down 6.3%) sales due to an
unusually high demand in the first months of 2006
resulting from the build-up of inventories. Petrochemical production (2,227 ktonnes) increased by 312 ktonnes from the first quarter of 2006, up 16.3% due to the consolidation of operations at Porto Torres (up 282 ktonnes). Excluding this effect production increased by 30 ktonnes (up 2%) due in particular to the growth registered at the Sarroch, Ravenna and Brindisi plants. |
- 31 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Engineering & Construction
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
Results | 2006 |
2007 |
Change |
% Ch. |
|||||
1,969 | Net sales from operations | 1,310 | 1,962 | 652 | 49.8 | ||||||||||||
149 | Operating profit | 78 | 176 | 98 | .. | ||||||||||||
3 | Exclusion of special items: | ||||||||||||||||
1 | - asset impairments | ||||||||||||||||
2 | - provisions for redundancy incentives | ||||||||||||||||
152 | Adjusted operating profit | 78 | 176 | 98 | .. | ||||||||||||
47 | Net income (expenses) from investments (a) | 41 | 26 | (15 | ) | ||||||||||||
(68 | ) | Income taxes (a) | (32 | ) | (57 | ) | (25 | ) | |||||||||
131 | Adjusted net profit | 87 | 145 | 58 | 66.7 | ||||||||||||
188 | Capital expenditure | 97 | 248 | 151 | .. |
(a) | Excluding special items. |
Results Adjusted operating profit for the first quarter of 2007 was euro 176 million, up euro 98 million from the first quarter of 2006 due to a better operating performance in all business areas, in particular in the Offshore and Onshore construction areas due to higher activity levels and margins. |
Exploration & Production, Gas & Power and Refining & Marketing divisions. |
Orders
(million euro) |
First Quarter |
|
2006 |
2007 |
Change |
% Ch. |
|||||
Orders acquired | 1,310 | 2,368 | 1,058 | 80.8 | ||||||||
Offshore construction | 308 | 1,065 | 757 | 245.8 | ||||||||
Onshore construction | 839 | 1,177 | 338 | 40.3 | ||||||||
Offshore drilling | 105 | 72 | (33 | ) | (31.4 | ) | ||||||
Onshore drilling | 58 | 54 | (4 | ) | (6.9 | ) | ||||||
of which: | ||||||||||||
- Eni | 223 | 445 | 222 | 99.6 | ||||||||
- third parties | 1,087 | 1,923 | 836 | 76.9 | ||||||||
of which: | ||||||||||||
- Italy | 112 | 71 | (41 | ) | (36.6 | ) | ||||||
- Outside Italy | 1,196 | 2,297 | 1,099 | 91.7 |
Dec. 31, 2006 |
Mar. 31, 2007 |
Change |
% Ch. |
|||||
Order backlog | 13,191 | 13,268 | 77 | 0.6 | ||||||||
Offshore construction | 4,283 | 4,404 | 121 | 2.8 | ||||||||
Onshore construction | 6,285 | 6,284 | (1 | ) | ||||||||
Offshore drilling | 2,247 | 2,221 | (26 | ) | (1.2 | ) | ||||||
Onshore drilling | 376 | 359 | (17 | ) | (4.5 | ) | ||||||
of which: | ||||||||||||
- Eni | 2,602 | 2,853 | 251 | 9.6 | ||||||||
- third parties | 10,589 | 10,415 | (174 | ) | (1.6 | ) | ||||||
of which: | ||||||||||||
- Italy | 1,280 | 1,168 | (112 | ) | (8.8 | ) | ||||||
- Outside Italy | 11,911 | 12,100 | 189 | 1.6 |
- 32 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Other activities
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
Results | 2006 |
2007 |
Change |
% Ch. |
|||||
161 | Net sales from operations | 214 | 57 | (15 | ) | (73.4 | ) | ||||||||||
(221 | ) | Operating profit | (65 | ) | (16 | ) | 49 | 75.4 | |||||||||
144 | Exclusion of special items: | 2 | (34 | ) | (36 | ) | |||||||||||
of which: | |||||||||||||||||
62 | Non-recurring items | ||||||||||||||||
82 | Other special items | 2 | (34 | ) | (36 | ) | |||||||||||
62 | - environmental provisions | ||||||||||||||||
12 | - asset impairments | 3 | 3 | ||||||||||||||
1 | - provisions for redundancy incentives | ||||||||||||||||
7 | - other | (1 | ) | (37 | ) | (36 | ) | ||||||||||
(77 | ) | Adjusted operating profit | (63 | ) | (50 | ) | 13 | 20.6 | |||||||||
(7 | ) | Net financial incomes (expenses) (a) | |||||||||||||||
(1 | ) | Net income (expenses) from investments (a) | 5 | (5 | ) | ||||||||||||
(85 | ) | Adjusted net profit | (58 | ) | (50 | ) | 8 | 13.8 | |||||||||
38 | Capital expenditure | 3 | 14 | 11 | .. |
(a) | Excluding special items. |
Adjusted net loss of euro 50
million is essentially in line with the first quarter of
2006. Special charges excluded from net losses of euro 34 million |
related in particular to the settlement reached by Syndial and Dow Chemical on some contractual issues pending between the two companies. |
Corporate and financial companies
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
Results | 2006 |
2007 |
Change |
% Ch. |
|||||
345 | Net sales from operations | 307 | 282 | (25 | ) | (8.1 | ) | ||||||||||
(89 | ) | Operating profit | (51 | ) | (38 | ) | 13 | 25.5 | |||||||||
36 | Exclusion of special items: | 5 | 3 | (2 | ) | ||||||||||||
29 | - provisions for redundancy incentives | 5 | 3 | (2 | ) | ||||||||||||
11 | - environmental provisions | ||||||||||||||||
(4 | ) | - other | |||||||||||||||
(53 | ) | Adjusted operating profit | (46 | ) | (35 | ) | 11 | 23.9 | |||||||||
87 | Net financial incomes (expenses) (a) | 53 | (101 | ) | (154 | ) | |||||||||||
1 | Net income (expenses) from investments (a) | ||||||||||||||||
22 | Income taxes (a) | (1 | ) | 50 | 51 | ||||||||||||
57 | Adjusted net profit | 6 | (86 | ) | (92 | ) | .. | ||||||||||
48 | Capital expenditure | 23 | 16 | (7 | ) | (30.4 | ) |
(a) | Excluding special items. |
Adjusted net loss of euro 86 million increased by euro 92 million from the first quarter of 2006 due to losses recognized on the fair value evaluation of certain financial derivatives instruments recorded in the profit and loss account instead of being recognized in connection with related assets, liabilities and commitments | because these instruments do
not meet the formal criteria to be assessed as contracts
hedges under IFRS including the time value component. This negative was partly offset by a lower operating loss (down euro 11 million). |
- 33 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Non-GAAP measures
RECONCILIATION OF REPORTED OPERATING PROFIT AND NET PROFIT TO RESULTS ON AN ADJUSTED BASIS
Management evaluates Group
and business performance on the basis of adjusted
operating profit and adjusted net profit, which are
arrived at by excluding inventory holding gains or losses
and special items. Further, finance charges on finance
debt, interest income, charges or income deriving from
the fair value evaluation of derivative financial
instruments held for trading purposes, and exchange rate
differences are excluded when determining adjusted net
profit of each business segment. The taxation effect of such items excluded from adjusted net profit is determined based on the specific rate of taxes applicable to each item, with the exception of finance charges or income, to which the Italian statutory tax rate of 33% is applied. Adjusted operating profit and adjusted net profit are non-GAAP financial measures under either IFRS, or U.S. GAAP. Management includes them to facilitate comparison of base business performance across periods and allow financial analysts to evaluate Enis trading performance on the basis of their forecasting models. In addition, management uses segmental adjusted net profit when calculating return on average capital employed (ROACE) by each business segment. The following is a description of items which are excluded from the calculation of adjusted results. Inventory holding gain or loss is the difference between the cost of sales of the volumes sold in the period based on the cost of supplies of the same period and the cost of sales of the volumes sold calculated using the weighted average cost method of inventory accounting. Special items include certain relevant income or charges pertaining to either: (i) infrequent or unusual events and transactions, being identified as non-recurring items |
under such circumstances; or
(ii) certain events or transactions which are not
considered to be representative of the ordinary course of
business, as in the case of environmental provisions,
restructuring charges, asset impairments or write-ups and
gains or losses on divestments even though they occurred
in past periods or are likely to occur in future ones. As
provided for in Decision No. 15519 of July 27, 2006 of
the Italian market regulator (CONSOB), non-recurring
material income or charges are to be clearly reported in
the managements discussion and financial tables. Finance charges or income related to net borrowings excluded from the adjusted net profit of business segments are comprised of interest charges on finance debt and interest income earned on cash and cash equivalents not related to operations. In addition, gains or losses on the fair value evaluation of derivative financial instruments held for trading purposes and exchange rate differences are excluded from the adjusted net profit of business segments. Therefore, the adjusted net profit of business segments includes finance charges or income deriving from certain segment-operated assets, i.e., interest income on certain receivables financing and securities related to operations and finance charges pertaining to the accretion of certain provisions recorded on a discounted basis (as in the case of the asset retirement obligations in the Exploration & Production division). Finance charges or interest income and related taxation effects excluded from the adjusted net profit of the business segments are allocated on the aggregate Corporate and financial companies. For a reconciliation of adjusted operating profit and adjusted net profit to reported operating profit and reported net profit see tables below. |
- 34 -
ENI REPORT ON THE FIRST QUARTER OF 2007
First Quarter 2007
(million euro) | E&P |
G&P |
R&M |
Petrochemical |
E&C |
Other activities |
Corporate and financial companies |
Impact of |
Group |
|||||||||
Reported operating profit | 3,132 | 1,641 | (10 | ) | 115 | 176 | (16 | ) | (38 | ) | 105 | 5,105 | |||||||||||||||
Exclusion of inventory holding (gains) losses | 40 | 112 | 3 | 155 | |||||||||||||||||||||||
Exclusion of special items: | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | |||||||||||||||||||||||||||
Other special (income) charges: | 2 | 18 | 4 | (34 | ) | 3 | (7 | ) | |||||||||||||||||||
environmental charges | 17 | 17 | |||||||||||||||||||||||||
asset impairments | 3 | 3 | |||||||||||||||||||||||||
provision for redundancy incentives | 2 | 1 | 4 | 3 | 10 | ||||||||||||||||||||||
other | (37 | ) | (37 | ) | |||||||||||||||||||||||
Special items of operating profit | 2 | 18 | 4 | (34 | ) | 3 | (7 | ) | |||||||||||||||||||
Adjusted operating profit | 3,132 | 1,683 | 120 | 122 | 176 | (50 | ) | (35 | ) | 105 | 5,253 | ||||||||||||||||
Net financial (expense) income (*) | (35 | ) | 3 | (101 | ) | (133 | ) | ||||||||||||||||||||
Net income from investments (*) | 10 | 115 | 51 | 26 | 202 | ||||||||||||||||||||||
Income taxes (*) | (1,698 | ) | (642 | ) | (58 | ) | (43 | ) | (57 | ) | 50 | (39 | ) | (2,487 | ) | ||||||||||||
Tax rate (%) | 54.7 | 35.6 | 33.9 | 46.7 | |||||||||||||||||||||||
Adjusted net profit | 1,409 | 1,159 | 113 | 79 | 145 | (50 | ) | (86 | ) | 66 | 2,835 | ||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 155 | ||||||||||||||||||||||||||
- Eni's adjusted net profit | 2,680 | ||||||||||||||||||||||||||
Eni's reported net profit | 2,588 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 97 | ||||||||||||||||||||||||||
Exclusion of special items | (5 | ) | |||||||||||||||||||||||||
- non-recurring (income) charges | |||||||||||||||||||||||||||
- other special (income) charges | (5 | ) | |||||||||||||||||||||||||
Eni's adjusted net profit | 2,680 |
(*) | Excluding special items. |
- 35 -
ENI REPORT ON THE FIRST QUARTER OF 2007
First Quarter 2006
(million euro) | E&P |
G&P |
R&M |
Petrochemical |
E&C |
Other activities |
Corporate and financial companies |
Impact of |
Group |
|||||||||
(million euro) |
Reported operating profit | 4,308 | 1,199 | 89 | 39 | 78 | (65 | ) | (51 | ) | (2 | ) | 5,595 | |||||||||||||||
Exclusion of inventory holding (gains) losses | (30 | ) | (47 | ) | (17 | ) | (94 | ) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | |||||||||||||||||||||||||||
Other special (income) charges: | (57 | ) | 34 | 47 | 1 | 2 | 5 | 32 | |||||||||||||||||||
environmental charges | 20 | 44 | 64 | ||||||||||||||||||||||||
asset impairments | 3 | 3 | |||||||||||||||||||||||||
gains on disposal of assets | (57 | ) | (57 | ) | |||||||||||||||||||||||
provisions to the reserve for contingencies | 1 | 2 | 3 | ||||||||||||||||||||||||
provision for redundancy incentives | 14 | 5 | 5 | 24 | |||||||||||||||||||||||
other | (3 | ) | (1 | ) | (1 | ) | (5 | ) | |||||||||||||||||||
Special items of operating profit | (57 | ) | 34 | 47 | 1 | 2 | 5 | 32 | |||||||||||||||||||
Adjusted operating profit | 4,251 | 1,203 | 89 | 23 | 78 | (63 | ) | (46 | ) | (2 | ) | 5,533 | |||||||||||||||
Net financial (expense) income (*) | (17 | ) | 6 | 53 | 42 | ||||||||||||||||||||||
Net income from investments (*) | 10 | 137 | 47 | 41 | 5 | 240 | |||||||||||||||||||||
Income taxes (*) | (2,149 | ) | (467 | ) | (50 | ) | (7 | ) | (32 | ) | (1 | ) | 1 | (2,705 | ) | ||||||||||||
Tax rate (%) | 50.6 | 34.7 | 36.8 | 46.5 | |||||||||||||||||||||||
Adjusted net profit | 2,095 | 879 | 86 | 16 | 87 | (58 | ) | 6 | (1 | ) | 3,110 | ||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 156 | ||||||||||||||||||||||||||
- Eni's adjusted net profit | 2,954 | ||||||||||||||||||||||||||
Eni's reported net profit | 2,974 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (59 | ) | |||||||||||||||||||||||||
Exclusion of special items | 39 | ||||||||||||||||||||||||||
- non-recurring (income) charges | |||||||||||||||||||||||||||
- other special (income) charges | 39 | ||||||||||||||||||||||||||
Eni's adjusted net profit | 2,954 |
(*) | Excluding special items. |
- 36 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Fourth Quarter 2006
(million euro) | E&P |
G&P |
R&M |
Petrochemical |
E&C |
Other activities |
Corporate and financial companies |
Impact of |
Group |
|||||||||
Reported operating profit | 3,141 | 1,303 | (386 | ) | 72 | 149 | (221 | ) | (89 | ) | (12 | ) | 3,957 | ||||||||||||||
Exclusion of inventory holding (gains) losses | (41 | ) | 386 | (4 | ) | 341 | |||||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 109 | 13 | 62 | 184 | |||||||||||||||||||||||
Other special (income) charges: | 54 | 7 | 39 | 73 | 3 | 82 | 36 | 294 | |||||||||||||||||||
environmental charges | 2 | 27 | 62 | 11 | 102 | ||||||||||||||||||||||
asset impairments | 51 | 13 | 50 | 1 | 12 | 127 | |||||||||||||||||||||
gains on disposal of assets | (7 | ) | (7 | ) | |||||||||||||||||||||||
provisions to the reserve for contingencies | 4 | 11 | 15 | ||||||||||||||||||||||||
provision for redundancy incentives | 10 | 15 | 30 | 14 | 2 | 1 | 29 | 101 | |||||||||||||||||||
other | (10 | ) | (35 | ) | (2 | ) | 7 | (4 | ) | (44 | ) | ||||||||||||||||
Special items of operating profit | 54 | 7 | 148 | 86 | 3 | 144 | 36 | 478 | |||||||||||||||||||
Adjusted operating profit | 3,195 | 1,269 | 148 | 154 | 152 | (77 | ) | (53 | ) | (12 | ) | 4,776 | |||||||||||||||
Net financial (expense) income (*) | (22 | ) | (1 | ) | (7 | ) | 87 | 57 | |||||||||||||||||||
Net income from investments (*) | (18 | ) | 97 | 31 | 1 | 47 | (1 | ) | 1 | 158 | |||||||||||||||||
Income taxes (*) | (1,851 | ) | (492 | ) | (64 | ) | (14 | ) | (68 | ) | 22 | 9 | (2,458 | ) | |||||||||||||
Tax rate (%) | 58.7 | 36.0 | 35.8 | 49.2 | |||||||||||||||||||||||
Adjusted net profit | 1,304 | 873 | 115 | 141 | 131 | (85 | ) | 57 | (3 | ) | 2,533 | ||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 178 | ||||||||||||||||||||||||||
- Eni's adjusted net profit | 2,355 | ||||||||||||||||||||||||||
Eni's reported net profit | 1,520 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 213 | ||||||||||||||||||||||||||
Exclusion of special items | 622 | ||||||||||||||||||||||||||
- non-recurring (income) charges | 184 | ||||||||||||||||||||||||||
- other special (income) charges | 438 | ||||||||||||||||||||||||||
Eni's adjusted net profit | 2,355 |
(*) | Excluding special items. |
- 37 -
ENI REPORT ON THE FIRST QUARTER OF 2007
Breakdown of special charges
Fourth Quarter |
(million euro) |
First Quarter |
2006 |
2006 |
2007 |
% Ch. |
|||||
184 | Non-recurring (income) charges | |||||||||||||
294 | Other special charges: | 32 | (7 | ) | (39 | ) | ||||||||
102 | environmental charges | 64 | 17 | (47 | ) | |||||||||
127 | asset impairments | 3 | 3 | |||||||||||
(7 | ) | gains on disposal of assets | (57 | ) | 57 | |||||||||
15 | provisions to the reserve for contingencies | 3 | (3 | ) | ||||||||||
101 | provision for redundancy incentives | 24 | 10 | (14 | ) | |||||||||
(44 | ) | other | (5 | ) | (37 | ) | (32 | ) | ||||||
478 | Special items of operating profit | 32 | (7 | ) | (39 | ) | ||||||||
5 | Net financial (expense) income | |||||||||||||
1 | Net income from investments | |||||||||||||
of which: | ||||||||||||||
(73 | ) | gain on Galp Energia SGPS SA (disposal of gas assets to Rede Electrica National) | ||||||||||||
138 | Income taxes | 7 | 2 | (5 | ) | |||||||||
of which: | ||||||||||||||
179 | wind-fall tax Algeria | |||||||||||||
2 | legal proceeding in Venezuela | 38 | (38 | ) | ||||||||||
622 | Total special items of net profit | 39 | (5 | ) | (44 | ) |
- 38 -
Società
per Azioni |
|
Investor
Relations |
MISSION
We are a major integrated energy company, committed to growth in the activities of finding, producing, transporting, transforming and marketing oil and gas. Eni men and women have a passion for challenges, continuous improvement, excellence and particularly value people, the environment and integrity
Countries of activity
EUROPE
Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark,
France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg,
Malta, Netherlands, Norway, Principality of Monaco, Portugal,
Romania, Slovakia, Slovenia, Spain, Switzerland, Turkey, United
Kingdom
CIS
Azerbaijan, Georgia, Kazakhstan, Russia, Turkmenistan
AFRICA
Algeria, Angola, Cameroon, Chad, Congo, Cote dIvoire,
Egypt, Gabon, Libya, Mali, Morocco, Mozambique, Nigeria, Tunisia
MIDDLE EAST
Iran, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates
CENTRAL ASIA
India, Pakistan
SOUTH EAST ASIA AND OCEANIA
Australia, China, East Timor, Indonesia, Malaysia, Papua-New
Guinea, Thailand
AMERICAS
Argentina, Brazil, Canada, Ecuador, Mexico, Peru, Trinidad &
Tobago, United States, Venezuela
Ordinary Shareholders Meeting of May 23 and 24, 2007
The notice convening the meeting was
published on the
Gazzetta Ufficiale of the Republic of Italy
No. 44, section II of April 14, 2007 page 1 to 5
This annual report includes the report of Enis Board of
Directors and
Enis consolidated financial statements for the year ended
December 31,
2006, which have been prepared under the International Financial
Reporting Standards (IFRS), as adopted by the European Union.
Disclaimer
This annual report contains certain forward-looking statements in
particular under the section Outlook regarding
capital expenditure, development and management of oil and gas
resources, dividends, share repurchases, allocation of future
cash flow from operations, future operating performance, gearing,
targets of production and sale growth, new markets, and the
progress and timing of projects. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that will or may occur in the
future.
Actual results may differ from those expressed in such
statements, depending on a variety of factors, including the
timing of bringing new fields on stream; managements
ability in carrying out industrial plans and in succeeding in
commercial transactions; future levels of industry product
supply; demand and pricing; operational problems; general
economic conditions; political stability and economic growth in
relevant areas of the world; changes in laws and governmental
regulations; development and use of new technology; changes in
public expectations and other changes in business conditions; the
actions of competitors and other factors discussed elsewhere in
this document.
Report of the Directors |
4 | Profile of the year | ||
8 | Letter to Shareholders | |||
Operating Review | ||||
12 | Exploration & Production | |||
31 | Gas & Power | |||
42 | Refining & Marketing | |||
48 | Petrochemical | |||
51 | Engineering & Construction | |||
54 | Financial Review | |||
82 | Other Information | |||
84 | Corporate Governance | |||
110 | Commitment to sustainable development | |||
126 |
Glossary | |||
Consolidated Financial Statements | ||||
129 | Report of Independent Auditors | |||
133 | Balance sheet | |||
134 | Profit and loss account | |||
135 | Statements of changes in shareholders equity | |||
137 | Statements of cash flow | |||
140 | Basis of presentation and accounting principles | |||
151 |
Notes to the Consolidated Fnancial Statements | |||
209 | Adjustment of the Consolidated Financial Statements to U.S. GAAP | |||
214 | Additional financial statement disclosures required by U.S. GAAP and the SEC | |||
ENI ANNUAL REPORT / PROFILE OF THE YEAR
Profile of the year | ||
Results In 2006 Eni
delivered record earnings, up 4.9% from 2005 to euro 9.2
billion; on an adjusted base, earnings were up 12.5% to
euro 10.4 billion. This result was driven by continued
improvements in performance and consistent execution of
Enis strategy, in a broadly favorable trading
environment. Dividend 2006 record earnings and cash flow, along with a sound balance sheet structure, allow a dividend distribution of euro 1.25 per share, up 13.6% from 2005 (euro 1.10 per share in 2005). Included in this annual payment is euro 0.60 per share already distributed as interim dividend in October 2006. Pay-out stands at 50%. |
Oil and natural gas
production Oil and natural gas production for the year averaged 1.77 mmboe/d, up 1.9% compared with 2005. This included the loss of production at the Venezuelan Dación oilfield (down 46 kbbl/d) and lower entitlements in certain Production Sharing Agreements (PSAs) and buy-back contracts (down 21 kbbl/d) due to higher oil and gas prices. Eni delivered its 3% production growth rate based on a $55 per barrel scenario, as announced in the 2006 quarterly production outlook. Libya, Angola and Egypt were the main growth areas. Proved oil and natural gas reserves Net proved reserves at December 31, 2006 stood at 6.44 bboe (down 6% compared with December 31, 2005), representing 10 years of remaining production at the current rate. Organic proved additions, as calculated by applying a year-end Brent price of $58.93 per barrel, replaced 65% of production. Assuming Brent is constant at $40 per barrel when determining entitlements in PSAs, the three-year average proved reserve replacement ratio would be 106%. |
4
ENI ANNUAL REPORT / PROFILE OF THE YEAR
Natural gas sales Natural
gas sales were up approximately 4% to 97.48 bcm due
primarily to the growth in sales in a number of target
European markets (up approximately 16% in particular in
Turkey, Germany/Austria and France) also for the build-up
of supplies of natural gas from Libya, partly offset by a
decrease in sales in Italy due to mild weather conditions
in the fourth quarter of the year. Strategic agreement with Gazprom In November 2006, Eni and Gazprom signed a broad
strategic agreement. This alliance sets up a long term
partnership enabling the two companies to launch joint
projects in the mid- and downstream gas sector, in the
upstream and in technological cooperation. |
Expansion strategy:
purchase of oil producing and exploratory assets in Congo In
February 2007, Eni defined a deal with the French company
Maurel & Prom to acquire producing assets and
exploration licenses located onshore in Congo, entailing
a cash consideration of $1.4 billion. Exploration activity In 2006, Eni invested euro 1,348 million in
exploratory activities, up 106% from 2005, executing a
huge exploration campaign leading to the completion of 68
exploratory wells (36 net to Eni) with a commercial rate
of success of 43% (49% net to Eni). |
5
ENI ANNUAL REPORT / PROFILE OF THE YEAR
Selected consolidated financial data | 2004 |
2005 |
2006 |
|||
(euro million) |
Net sales from operations | 57,545 |
73,728 |
86,105 |
|||||
Operating profit | 12,399 |
16,827 |
19,327 |
|||||
Adjusted operating profit | 12,582 |
17,558 |
20,490 |
|||||
Net profit | 7,059 |
8,788 |
9,217 |
|||||
Adjusted net profit | 6,645 |
9,251 |
10,412 |
|||||
Cash flow from operations | 12,500 |
14,936 |
17,001 |
|||||
Capital expenditure | 7,499 |
7,414 |
7,833 |
|||||
Dividends pertaining to the year (a) | 3,384 |
4,086 |
4,594 |
|||||
Cash dividends | 2,828 |
5,070 |
4,610 |
|||||
Common stock purchases (gross) | 70 |
1,034 |
1,241 |
|||||
Research and development costs | 257 |
204 |
222 |
|||||
Total assets at year end | 72,853 |
83,850 |
88,312 |
|||||
Debts and bonds at year end | 12,684 |
12,998 |
11,699 |
|||||
Shareholders equity including minority interest at year end | 35,540 |
39,217 |
41,199 |
|||||
Net borrowings at year end | 10,443 |
10,475 |
6,767 |
|||||
Net capital employed at year end | 45,983 |
49,692 |
47,966 |
|||||
Share price at year end | (euro) |
18.42 |
23.43 |
25.48 |
||||
Number of shares outstanding at year end | (million) |
3,770.0 |
3,727.3 |
3,680.4 |
||||
Market capitalization (b) | (billion euro) |
69.4 |
87.3 |
93.8 |
(a) | Amounts due on the payment of the balance of 2006 dividend are estimated. | |
(b) | Number of outstanding shares by reference price at period end. |
Key financial ratios | 2004 |
2005 |
2006 |
|||
Profit | ||||||||
- per share (a) | (euro) |
1.87 |
2.34 |
2.49 |
||||
- per ADS (b) | ($) |
4.66 |
5.81 |
6.26 |
||||
Adjusted net profit | ||||||||
- per share (a) | (euro) |
1.76 |
2.46 |
2.81 |
||||
- per ADS (b) | ($) |
4.38 |
6.12 |
7.07 |
||||
Return On Average Capital Employed (ROACE) | ||||||||
- reported | (%) |
16.6 |
19.5 |
20.3 |
||||
- adjusted | (%) |
15.9 |
20.5 |
22.7 |
||||
Leverage | 0.29 |
0.27 |
0.16 |
|||||
Dividend pertaining to the year | (euro per share) |
0.90 |
1.10 |
1.25 |
||||
Pay-out | (%) |
48 |
46 |
50 |
||||
Total shareholder return (TSR) | (%) |
28.5 |
35.3 |
14.8 |
||||
Dividend yield (c) | (%) |
4.9 |
4.7 |
5.0 |
(a) | Fully diluted. Ratio of net profit and average number of shares outstanding in the year. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented. | |
(b) | One American Depository Share is equal to two Eni ordinary shares. | |
(c) | Ratio of dividend for the period and average price of Eni shares in December. |
Trading environment indicators | 2004 |
2005 |
2006 |
|||
Average price of Brent dated crude oil (a) | 38.22 |
54.38 | 65.14 |
|||||
Average EUR/USD exchange rate (b) | 1.244 |
1.244 | 1.256 |
|||||
Average price in euro of Brent dated crude oil | 30.72 |
43.71 | 51.86 |
|||||
Average European refining margin (c) | 4.35 |
5.78 | 3.79 |
|||||
Average European refining margin in euro | 3.50 |
4.65 | 3.02 |
|||||
Euribor - three-month euro rate | (%) |
2.1 |
2.2 | 3.1 |
||||
Libor - three-month dollar rate | (%) |
1.6 |
3.5 | 5.2 |
(a) | In US per barrel. Source: Platts Oilgram. | |
(b) | Source: BCE. | |
(c) | In US per barrel FOB Mediterranean Brent dated crude oil. Source: Eni calculations based on Platts Oilgram data. |
6
ENI ANNUAL REPORT / PROFILE OF THE YEAR
Selected operating data | 2004 |
2005 |
2006 |
|||
Exploration & Production | ||||||||
Net proved reserves of hydrocarbons (at December 31) | (mmboe) |
7,218 |
6,837 |
6,436 |
||||
- Liquids | (mmbbl) |
4,008 |
3,773 |
3,481 |
||||
- Natural gas | (bcf) |
18,435 |
17,591 |
16,965 |
||||
Average reserve life index | (year) |
12.1 |
10.8 |
10.0 |
||||
Production of hydrocarbons | (kboe/d) |
1,624 |
1,737 |
1,770 |
||||
- Liquids | (kbbl/d) |
1,034 |
1,111 |
1,079 |
||||
- Natural gas | (mmcf/d) |
3,387 |
3,595 |
3,966 |
||||
Gas & Power | ||||||||
Worldwide gas sales | (bcm) |
87.03 |
94.21 |
97.48 |
||||
Total gas sales in Europe | (bcm) |
85.32 |
92.50 |
95.97 |
||||
- G&P division sales | (bcm) |
80.62 |
87.99 |
91.90 |
||||
- Upstream sales (a) | (bcm) |
4.70 |
4.51 |
4.07 |
||||
Customers in Italy | (million) |
5.95 |
6.02 |
6.54 |
||||
Gas volumes transported in Italy | (bcm) |
80.41 |
85.10 |
87.99 |
||||
Electricity production sold | (TWh) |
13.85 |
22.77 |
24.82 |
||||
Refining & Marketing | ||||||||
Refining throughputs on own account | (mm tonnes) |
37.69 |
38.79 |
38.04 |
||||
Refining throughputs of wholly-owned refineries | (mm tonnes) |
26.75 |
27.34 |
27.17 |
||||
Balanced capacity of wholly-owned refineries | (kbbl/d) |
504 |
524 |
534 |
||||
Balanced capacity utilization rate | (%) |
100 |
100 |
100 |
||||
Sales of petroleum products on Agip branded network in Europe | (mm tonnes) |
12.35 |
12.42 |
12.48 |
||||
Agip branded service stations in Europe at period end | (units) |
6,225 |
6,282 |
6,294 |
||||
Average throughput of Agip branded network in Europe | (k liters/y) |
2,488 |
2,479 |
2,470 |
||||
Petrochemical | ||||||||
Production | (k ton) |
7,118 |
7,282 |
7,072 |
||||
Sales | (k ton) |
5,187 |
5,376 |
5,276 |
||||
Average capacity utilization rate | (%) |
75.2 |
78.4 |
76.4 |
||||
Engineering & Construction | ||||||||
Orders acquired | (euro million) |
5,784 |
8,395 |
11,172 |
||||
Order backlog at period end | (euro million) |
8,521 |
10,122 |
13,191 |
||||
Employees at period end | (units) |
70,348 |
72,258 |
73,572 |
||||
(a) | Does not include Enis share of Nigerian LNG (Eni 10.4%) sales in Europe amounting to 1.30; 1.31; 1.55 bcm; in 2004, 2005 and 2006, respectively. |
7
ENI ANNUAL REPORT / LETTER TO SHAREHOLDERS
Enis Board of Directors
Roberto Poli Chairman |
Paolo Scaroni CEO |
To our
Shareholders 2006 was a remarkable year for Eni in terms of both financial performance and operational accomplishments Our earnings and cash flow were the highest in our history, driven by continued improvements in performance and consistent execution of our strategy in a broadly favourable trading environment. In particular, we maintained pleasing production growth despite the impact of disruption in Venezuela, achieved several exploration successes, secured access to promising new acreage and further expanded our global natural gas business. On top of that, we struck a landmark agreement with Gazprom which extends our gas contracts to 2035 and opens up new opportunities for upstream expansion in Russia. Financial performance Our reported net profit of euro 9.2 billion in 2006 was the highest in the history of the Company. Adjusted net profit rose 12.5% to euro 10.4 billion, representing a return on average capital employed of 22.7%. Net cash generated by operating activities totalled euro 17 billion, allowing us to finance capital expenditure of euro 7.8 billion and to reduce our debt/equity ratio to 0.16. Those strong results enabled us to propose a dividend of euro 1.25 per share to our Annual General Shareholders Meeting, up 14% |
compared to 2005 (euro 1.10
per share), of which euro 0.60 was paid as an interim
dividend in October 2006. During the year, we purchased a
total of 53.1 million of our own shares for euro 1.2
billion, bringing the total cash returned to shareholders
for the year to euro 5.8 billion. Our total shareholder
return was 14.8%, making this the fifth year running that
we have outperformed our peer group. Sustaining growth and shareholder return Growth is at the heart of our strategic priorities. A strong pipeline of projects and investment opportunities will enable us to achieve our ambitious short and long-term growth targets. Over the next four years, we will invest euro 44.6 billion in our businesses to ensure our continued growth, also beyond 2010. This investment program, the largest ever in Enis history, will be carried out with tight financial discipline. The projected free cash flow in 2010 will allow us to sustain the current flow of dividends in real terms, even with a scenario of 40$/bl Brent. Among Enis business divisions, EXPLORATION & PRODUCTION showed the strongest growth. In 2006, the divisions adjusted net profit increased by 17.7% to euro 7.3 billion. Oil and gas production rose by approximately 2% to 1.77 million boepd. This increase was entirely organic and was achieved despite the negative impact of the unilateral |
8
ENI ANNUAL REPORT / LETTER TO SHAREHOLDERS
Alberto Clô Director |
Renzo Costi Director |
Dario Fruscio Director |
Marco Pinto Director |
termination of the Dación
contract in Venezuela and the adverse entitlement effects
in PSAs and buyback contracts due to higher oil prices.
Excluding the effect of higher oil prices on PSAs and the
termination of the Dación contract, organic production
growth was close to an impressive 6%. We are committed to
maintaining strong organic production growth. The company targets a production level of 2 million boepd by 2010, with an average growth rate of approximately 3% per year. Exploration activity reaped substantial results in 2006, reaching an average success rate of 49% and adding 152,000 sq km of net acreage, 99% operated. Over the medium term, we are committed to replacing more than 100% of produced reserves. Development activities are progressing in many fields around the world, including Kashagan, where we expect higher capex and a longer timetable. However, we have also been able to confirm that the field is capable of higher production levels than previously thought. We are progressing with the global expansion of the LNG business as a way to monetize our large gas reserve base. Major steps taken in 2006 include the start-up of train five at the Bonny liquefaction plant in Nigeria, where a sixth train will commence operations in 2008, and the signing of a framework agreement for doubling the capacity of the Damietta liquefaction plant in Egypt by 2010. |
The growth options we are
presently pursuing with our partner Gazprom could
potentially enable us to accelerate the achievement of
our growth targets. In GAS & POWER, our strong and integrated position in Europe generates stable and robust earnings and cash flows. Adjusted net profit for the year rose by 12.1% to euro 2.9 billion, supported by an approximately 16% increase in volumes sold in Europe (excluding Italy) to 35 bcm (excluding gas sold by E&P of 4 bcm). This result was achieved despite stiff competition and mild weather. Our strategy is based on growing our market share in key European markets, preserving our domestic natural gas business and effectively managing our regulated business. European natural gas demand is forecast to grow steadily in the future, resulting in a cumulative increase of around 45% by 2020 (2.4% per annum). This, coupled with the decline of Europes internal production, means that our continent will become more and more reliant on external supplies to fulfil its gas needs. In this context, Eni is poised to further strengthen its market leadership by leveraging on an unparalleled portfolio of assets in terms of infrastructure, availability of gas both equity and purchased under long term supply contracts long-standing relationships with natural gas producing countries, market knowledge and a large customer base. The recent alliance with Gazprom marks a new milestone in our relationship with the largest natural |
9
ENI ANNUAL REPORT / LETTER TO SHAREHOLDERS
Marco Reboa Director |
Mario Resca Director |
Pierluigi Scibetta Director |
gas producer in the world,
and will enable us to reinforce our competitive profile. By 2010 we are committed to selling more than 105 bcm of gas worldwide, with sales outside Italy expected to grow at an average rate of 10% per year. Our REFINING & MARKETING division reported an adjusted net profit of euro 629 million, which was 33.4% lower than in 2005 due to the weak refining margin environment, the appreciation of the euro against the dollar and the impact of higher levels of planned maintenance activity. Looking forward, several trends are emerging in the refining landscape: the adoption of increasingly strict environmental standards, global imbalances in product availability (especially a deficit of diesel fuel in Europe), a relative abundance of heavy crude and the desire to increase efficiency. These are the key drivers of our strategy. In Refining, Eni will increase its capital expenditure to enhance the refinery conversion rate in order to meet future product quality requirements, produce higher-value products and chemical feedstocks, lower operating costs and increase refinery flexibility in processing low-quality crude oils. In Marketing, we aim to extract full value from our retail business in Italy through a selective investment program, customer-focused marketing initiatives, effective differentiation of pricing, an improved premium-products offer, and operating efficiencies. |
In managing our PETROCHEMICAL
operations, which reported an adjusted net profit of euro
174 million for 2006, we remain committed to improving
efficiency and selectively developing those plants with
sufficient scale and a favourable geographic location. Capital expenditure will be focussed on implementing de-bottlenecking projects, enhancing the efficiency and flexibility of plants in areas of excellence (styrenes and elastomers) and maintaining high standards of health, safety, security and environmental performance. In ENGINEERING & CONSTRUCTION, adjusted net profit rose by 22% to euro 400 million, reflecting the strong competitive position held by Saipem, also as a result of the integration of Snamprogetti. To cope with rising demand for drilling equipment and oilfield services, Saipem is planning to further expand the geographical reach and operational features of its world-class fleet. Our relentless commitment to technological research and innovation underscores a fundamental belief that technology is key to increasing our competitive advantage over the long term and promoting sustainable growth. We are conducting research aimed primarily at reducing the costs of finding and recovering hydrocarbons, upgrading heavy oils, monetizing stranded gas and protecting the environment. In particular we are moving forward on our breakthrough technologies: EST (Eni Slurry Technology) for the full exploitation of the heavy barrel, TAP (gas transportation at high pressure) and GTL (gas-to-liquids) for gas monetization. |
10
ENI ANNUAL REPORT / LETTER TO SHAREHOLDERS
Sustainable
development 2006 marks the first year in which Eni has published a Sustainability Report to communicate more effectively with stakeholders. We now have a more coherent approach to sustainability, and are even more committed to managing and developing your company in a responsible and accountable way. Among the various initiatives, our focus is on reducing greenhouse |
gas emissions from
industrial processes and developing projects to
economically exploit flared gas. In conclusion, 2006 was a very good year for Eni. As well as delivering impressive results, we have worked to create future growth opportunities in all our divisions. We are confident that we can continue to deliver industry-leading growth and superior shareholder returns. |
March 29, 2007
In representation of the Board of Directors
Chairman | Chief Executive Officer and General Manager |
BOARD OF DIRECTORS (1) | BOARD OF STATUTORY AUDITORS (7) | |
Chairman | Chairman | |
Roberto Poli (2) | Paolo Andrea Colombo | |
Chief Executive Officer | Statutory Auditors | |
Paolo Scaroni (3) | Filippo Duodo, Edoardo Grisolia, Riccardo Perotta, Giorgio Silva | |
Directors | Alternate Auditors | |
Alberto Clô, Renzo Costi, Dario Fruscio, Marco Pinto, Marco Reboa, Mario Resca, Pierluigi Scibetta | Francesco Bilotti, Massimo Gentile | |
GENERAL MANAGERS | MAGISTRATE OF THE COURT OF ACCOUNTS | |
Exploration & Production Division | DELEGATED TO THE FINANCIAL CONTROL OF ENI | |
Stefano Cao (4) | Lucio Todaro Marescotti (8) | |
Gas & Power Division | Alternate | |
Domenico Dispenza (5) | Angelo Antonio Parente (9) | |
Refining & Marketing Division | External Auditors (10) | |
Angelo Taraborelli (6) | PricewaterhouseCoopers SpA |
The composition and powers of the Internal Control Committee, Compensation Committee and International Oil Committee are presented in the section Corporate Governance in the Report of the Directors.
(1) | Appointed by the Shareholders Meeting held on May 27, 2005 for a three-year period. The Board of Directors expires at the date of approval of the financial statements for the 2007 financial year. | |
(2) | Appointed by the Shareholders Meeting held on May 27, 2005. | |
(3) | Powers conferred by the Board of Directors on June 1, 2005. | |
(4) | Appointed by the Board of Directors on November 14, 2000. | |
(5) | Appointed by the Board of Directors on December 14, 2005, effective from January 1, 2006. | |
(6) | Appointed by the Board of Directors on April 14, 2004. | |
(7) | Appointed by the Shareholders Meeting held on May 27, 2005 for a three-year period, expiring at the date of approval ot the financial statements for the 2007 financial year. | |
(8) | Duties assigned by resolution of the Governing Council of the Court of Accounts on July 19-20, 2006. | |
(9) | Duties assigned by resolution of the Governing Council of the Court of Accounts on May 27-28, 2003. | |
(10) | Appointed by the Shareholders Meeting of May 28, 2004 for the 2004-2006 three year term. |
11
ENI ANNUAL REPORT / OPERATING REVIEW
|
Key performance indicators | 2004 |
2005 |
2006 (a) |
|||
Net sales from operations (b) | (million euro) |
15,346 |
22,531 |
27,173 |
||||
Operating profit | 8,185 |
12,592 |
15,580 |
|||||
Adjusted operating profit | 8,202 |
12,903 |
15,763 |
|||||
Adjusted net profit | 4,033 |
6,186 |
7,279 |
|||||
Capital expenditure | 4,853 |
4,965 |
5,203 |
|||||
of which: exploration (c) | 499 |
656 |
1,348 |
|||||
Capital employed, net | 17,937 |
20,206 |
18,590 |
|||||
ROACE adjusted | (%) |
22.7 |
32.4 |
37.5 |
||||
Average realizations | ||||||||
- Liquids | ($/bbl) |
34.73 |
49.09 |
60.09 |
||||
- Natural gas | ($/mmcf) |
3.89 |
4.49 |
5.29 |
||||
- Total hydrocarbons | ($/boe) |
30.40 |
41.06 |
48.87 |
||||
Production | ||||||||
- Liquids | (kbbl/d) |
1,034 |
1,111 |
1,079 |
||||
- Natural gas | (mmcf/d) |
3,387 |
3,595 |
3,966 |
||||
- Total hydrocarbons | (kboe/d) |
1,624 |
1,737 |
1,770 |
||||
Net proved reserves | ||||||||
- Liquids | (mmbbl) |
4,008 |
3,773 |
3,481 |
||||
- Natural gas | (bcf) |
18,435 |
17,591 |
16,965 |
||||
- Total hydrocarbons | (mmboe) |
7,218 |
6,837 |
6,436 |
||||
Reserve life index | (year) |
12.1 |
10.8 |
10.0 |
||||
Proved reserve replacement ratio | (%) |
105 |
23 |
65 |
||||
Employees at year end | (unit) |
7,477 |
8,030 |
8,336 |
||||
(a) | Starting January 1, 2005, Eni's subsidiary Tecnomare has been reported within the Exploration & Production segment. In previous years, it was reported within the aggregate "Other activities". | |
(b) | Before elimination of intersegment sales. | |
(c) | Includes exploration bonus. |
12
ENI ANNUAL REPORT / OPERATING REVIEW
Acquisition of operated assets in Congo
On February 2007, Eni purchased exploration and production
onshore activities operated by Maurel & Prom in Congo,
entailing a cash consideration of $1.4 billion. This deal is
consistent with Enis strategy of purchasing proved and
unproved reserves and producing assets in legacy countries where
Eni can achieve synergies leveraging on own competencies and the
availability of facilities. This transaction is subject to
approval by the Congolese authorities
Financial results
Adjusted net profit was euro 7,279 million, up euro 1,093
million from a year ago (+17.7%), reflecting an enhanced
operating profit as a result of higher oil and natural gas
realization in dollars combined with increased production volumes
sold. These positives were offset in part by higher operating
costs and a higher adjusted tax rate
Return on average capital employed calculated on an adjusted basis was 37.5% in 2006, higher that in 2005 (32.4%)
In 2006, price differentials between equity realizations and the price of the Brent crude marker were equal to minus $3.63 per barrel, improving from 2005 levels, as a result of appreciation on the market of oil produced in Angola and higher realizations recorded on Kazakh oil. Natural gas prices increased in virtually all areas, reflecting higher prices for oil and products
Eni invested euro 3.6 billion in the development of oil and natural gas reserves, in particular in Kazakhstan, Angola, Egypt and Italy, and euro 1.4 billion (up 106% compared with 2005) in exploration activities, in particular in Angola, Egypt, Nigeria, the Norwegian offshore and the Gulf of Mexico
Production
Oil and natural gas production for the year averaged 1.77
mmboe/d, up 1.9% from 2005. This included the loss of production
at the Venezuelan Dación oilfield and lower entitlements in
certain Production Sharing Agreements (PSAs) and buy-back
contracts1 due to higher oil and gas prices. Eni
delivered its 3% production growth rate based on a $55 per barrel
scenario, as announced in the 2006 quarterly production outlook
Production increases were driven primarily by start-ups/full production of large gas projects in Libya (achievement of full production at the Bahr Essalam field in the Western Libyan Gas Project), Nigeria (start-up of trains 4 and 5 of the Bonny LNG plant), Egypt (development of offshore reserves in the Nile Delta), Australia (start-up of the gas phase of the Bayu-Undan field), Croatia (start-up of the Ika, Ida and Ivana C-K fields) and liquid production growth in Angola and Libya
In the medium term, Eni expects to deliver a 3% compound average growth rate from 2007 to 2010, targeting a production level in excess of 2 mmboe/d by 2010
(1) | For a definition of PSA and buy-back contracts see "Glossary" below. |
13
ENI ANNUAL REPORT / OPERATING REVIEW
Net proved reserves
Net proved reserves at December 31, 2006 stood at 6.44
bboe (down 6% compared with December 31, 2005), representing 10
years of remaining production at the current rate. Organic proved
additions, as calculated by applying a year-end Brent price of
$58.93 per barrel, replaced 65% of production. Assuming Brent is
constant at $40 per barrel when determining entitlements in PSAs,
the three-year average proved reserve replacement ratio would be
106%
In the medium term, management expects Eni s reserve replacement ratio to be supported by the high mineral potential of assets located in core areas such as the Caspian Sea, West and North Africa
Exploration activities and renewal of
mineral right portfolio
Eni carried out several hydrocarbon discoveries, mainly in
Indonesia, Egypt, Kazakhstan, Norway, Nigeria, United Kingdom,
the Gulf of Mexico, Italy, Angola and Congo. A total of 68
exploratory wells were completed (35.9% net to Eni), with a
commercial rate of success of 43% (49% net to Eni). Other 26
wells are in progress as of year-end
Enis exploration portfolio was strengthened through acquisition of assets in both core areas such as Angola, Alaska, Brazil, Congo, Egypt, Nigeria, Norway, Pakistan, the Gulf of Mexico and new countries/areas with a high mineral potential such as Mali, Mozambique and East Timor. Gross acquired acreage extends for approximately 259,000 square kilometers (152,000 net to Eni, 99% operated)
Reserves Reserve Governance The Company has adopted comprehensive classification criteria for proved, proved developed and proved undeveloped oil and gas reserves in accordance with applicable U.S. Securities and Exchange Commission (SEC) regulations, as provided for in Regulation S-X, Rule 4-10. Proved oil and gas reserves are the estimated quantities that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions. Engineering estimates of the Companys oil and gas reserves are inherently uncertain. Although authoritative guidelines exist regarding engineering criteria that have to be met before estimated oil and gas reserves can be designated as proved, the accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. Consequently, the estimated proved reserves of oil and natural gas may be subject to future revision and upward and downward revisions may be made to the initial booking of reserves |
due to analysis of new
information concerning production, reservoir performance,
commercial factors, acquisition and divestment activity
and additional reservoir development activity. Field resources will only be categorized as proved reserves when all criteria for the attribution of proved status has been met, including technical, economic and commercial criteria. Proved reserves to which Eni is entitled under concession contracts are determined by applying Enis share of production to total proved reserves of the contractual area, in respect of the duration of the relevant mineral right that normally coincides with the duration over which a field can be produced economically. Proved reserves to which Eni is entitled under Production Sharing Agreements or buy-back contracts are calculated so that the sale of production entitlements should cover expenses incurred by the Group to develop a field (cost oil) and on the profit oil set contractually. A similar scheme applies to buy-back and service contracts. In a high oil price environment, the volume of entitlements necessary to cover the same amount of expenses is lower. Eni has always exercised rigorous control over the booking process of proved reserves. The Reserve |
14
ENI ANNUAL REPORT / OPERATING REVIEW
Department of the
Exploration & Production division, reporting directly
to the General Manager, is entrusted with the task of
continuously updating the Companys guidelines
concerning reserve evaluation and monitoring the periodic
quantification process. Company guidelines have been
reviewed by DeGolyer and MacNaughton (D&M), an
independent petroleum engineers company which has
declared their compliance with applicable SEC rules.
D&M has also stated that the company guidelines
regulate situations for which the SEC rules are less
precise, providing a reasonable interpretation in line
with the generally accepted practices in international
markets. Eni estimates its proved reserves on the basis of the mentioned guidelines, also when participating in |
exploration and production activities operated by other entities. The process for evaluating reserves involves: (i) business unit managers (geographic units) and Local Reserve Evaluators (LRE), who perform the evaluation and classification of technical reserves (production profiles, capital expenditure, operating costs and costs related to asset retirement obligations); (ii) geographic area managers at head offices checking evaluations carried out by business unit managers; (iii) the Reserve Department, providing independent reviews of the fairness and correctness of classifications carried out by business units, who also aggregates worldwide reserve data and calculates equity volumes. Moreover, the Reserve Department has the following responsibilities: to ensure the periodic certification | |
process of reserves, to
perform economic evaluation of reserves and to
continuously update the Company guidelines on reserves
evaluation and classification. All personnel involved in the process of reserve evaluation are knowledgeable on SEC guidelines for proved reserves classification and have professional abilities adequate to the complexity of the task, expressing their judgment independently and respectful of professional ethics. Since 1991, Eni has employed qualified independent petroleum engineers companies to perform independent evaluations2 of its proved reserves on a |
rotational basis. In particular, in 2006, a total of 1.4 billion boe of proved reserves was evaluated, representing 21% of Enis total proved reserves at December 31, 2006. Outcomes of these independent evaluations confirmed Enis evaluations, as they did in previous years. During the 2004-2006 three year period, independent evaluations covered 76% of Enis total proved reserves. Further information on reserves is provided in Note 35 to Eni consolidated financial statements Supplemental oil and gas information for the exploration and production activities Oil and natural gas reserves. |
(2) | From 1991 to 2002, DeGolyer and MacNaughton; from 2003, also Ryder Scott. |
15
ENI ANNUAL REPORT / OPERATING REVIEW
Algeria: Drilling unit |
Evolution of proved
reserves Enis net proved reserves of oil and natural gas at December 31, 2006 totaled 6,436 mmboe (oil and condensates 3,481 mmbbl; natural gas 2,955 mmboe). These reserves are located in Italy (12% of Enis total proved reserves); North Africa (32%; in particular in Libya, Egypt and Algeria); West Africa (17%; in particular in Nigeria and Angola); the North Sea (11%; Norway and the United Kingdom) and Rest of World (28%; in particular in Kazakhstan, Pakistan, Australia and Ecuador). At December 31, 2006, proved reserves associated with PSAs represented 53% of total proved reserves (48% as at December 31, 2005). Proved reserves associated with service and buy-back contracts represented 2% of all proved reserves at December 31, 2006 (2% at December 31, 2005). Additions to proved reserves booked in 2006 were 417 mmboe deriving from: (i) extensions and discoveries (161 mmboe), in particular in Kazakhstan, Algeria, |
Egypt, Trinidad & Tobago
and Libya; (ii) improved recovery (105 mmboe), in
particular in Egypt, Angola, Algeria, Kazakhstan and
Nigeria; (iii) revisions of previous estimates (up 151
mmboe) related to upward revisions registered in
Kazakhstan, Libya and Egypt, offset in part by downward
revisions in Nigeria and Ecuador. The unilateral cancellation of the service contract for the Dación oilfield by the Venezuelan state oil company PDVSA determined a decrease in Enis proved reserves of 170 mmbbl (see Venezuela below). In 2006 Enis proved reserves replacement ratio was 65% (38% all sources, including the loss of proved reserves at the Venezuelan Dación oilfield and other disposals) representing 10 years of remaining production at the current rate (10.8 as at December 31, 2005). Considering the adverse entitlement impact in certain PSAs and buy-back contracts resulting from higher oil prices (Brent price was $58.925 per barrel at December 31, 2005) and assuming Brent constant at |
Evolution of proved reserves in the year | (million boe) |
|
Net proved reserves at December 31, 2005 | 6,837 |
|||||
Revisions, extensions and discoveries and improved recovery | 417 |
|||||
Production for the year | (646 |
) | (229 |
) | ||
6,608 |
||||||
Purchase of proved property | (2 |
) | ||||
Unilateral cancellation by PDVSA of the contract concerning the Dación field | (170 | ) | ||||
Net proved reserves at December 31, 2006 | 6,436 |
16
ENI ANNUAL REPORT / OPERATING REVIEW
$40 per barrel when
determining entitlements in PSAs, the three-year average
proved reserve replacement ratio would be 106%. At December 31, 2006, Enis proved developed reserves stood at 4,059 mmboe (oil and condensates 2,144 mmbbl, natural gas 1,915 mmboe) or 63% of total proved reserves (63% at December 31, 2005). |
Mineral right
portfolio and exploration activities As of December 31, 2006, Enis mineral right portfolio consisted of 1,029 exclusive or shared rights for exploration and development in 36 countries on five continents for a total net acreage of 385,219 square kilometers (266,000 at December 31, 2005). Of these, 48,273 square kilometers concerned production and development (55,098 at December 31, 2005). Outside Italy net acreage (362,723 square kilometers) increased by 120,775 square kilometers mainly due to the acquisition of assets after international bid procedures in Angola, Australia, Brazil, Congo, Egypt, Morocco, Nigeria, Norway, Pakistan and the United States, as well as in the new countries/areas of Mali, Mozambique and East Timor. In Italy, net acreage (22,496 square kilometers) declined by 1,557 square kilometers due to releases. In 2006, a total of 68 new exploratory wells were drilled (35.9 of which represented Enis share), as compared to 52 exploratory wells completed in 2005 (21.8 of which represented Enis share). Overall commercial success rate was 43% (49% net to Eni) as compared to 39.3% (47.4% net to Eni) in 2005. |
Net proved hydrocarbon reserves (a) (b) |
Liquids | Natural gas | Hydrocarbons | Liquids | Natural gas | Hydrocarbons | Liquids | Natural gas | Hydrocarbons | Change |
|||||||||||||
(mmbbl) | (bcf) | (mmboe) | (mmbbl) | (bcf) | (mmboe) | (mmbbl) | (bcf) | (mmboe) | Ch. |
% |
2004 | 2005 | 2006 | 2006 vs 2005 | |||||
Italy | 225 |
3,818 |
890 |
228 |
3,676 |
868 |
215 |
3,391 |
805 |
(63 |
) | (7.3 |
) | |||||||||||
North Africa | 993 |
6,453 |
2,117 |
979 |
6,132 |
2,047 |
998 |
5,963 |
2,037 |
(10 |
) | (0.5 |
) | |||||||||||
West Africa | 1,056 |
1,729 |
1,357 |
942 |
1,967 |
1,285 |
793 |
1,929 |
1,129 |
(156 |
) | (12.1 |
) | |||||||||||
North Sea | 450 |
2,051 |
807 |
433 |
1,864 |
758 |
386 |
1,697 |
682 |
(76 |
) | (10.0 |
) | |||||||||||
Rest of World | 1,284 |
4,384 |
2,047 |
1,191 |
3,952 |
1,879 |
1,089 |
3,985 |
1,783 |
(96 |
) | (5.1 |
) | |||||||||||
Total | 4,008 |
18,435 |
7,218 |
3,773 |
17,591 |
6,837 |
3,481 |
16,965 |
6,436 |
(401 |
) | (5.9 |
) | |||||||||||
(a) | The conversion rate of natural gas from cubic feet to boe is 1,000 cubic feet = 0.1742 barrels of oil. | |
(b) | Includes Eni's share of proved reserves of equity-accounted entities (36 mmboe in 2006). |
17
ENI ANNUAL REPORT / OPERATING REVIEW
Production In 2006 oil and gas production averaged 1,770 kboe/d, up 32 kboe from 2005 or 1.9%, despite the impact of the production loss in the Dación oil field in Venezuela (down 46 kboe/d) and of adverse entitlement effects (down 21 kboe/d) in PSAs and buy-back contracts due to higher oil prices. Libya, Egypt, Nigeria, Australia and Croatia were the main growth areas in natural gas, while oil production increased in Angola and Libya. Declines in production were attributable to mature fields and technical problems in Nigeria due to social |
unrest.
Production outside Italy covered 87% of the total (85% in
2005). |
Hydrocarbon production (a) (b) |
Liquids | Natural gas | Hydrocarbons | Liquids | Natural gas | Hydrocarbons | Liquids | Natural gas | Hydrocarbons | Change |
|||||||||||||
(kbbl/d) | (mmcf/d) | (kboe/d) | (kbbl/d) | (mmcf/d) | (kboe/d) | (kbbl/d) | (mmcf/d) | (kboe/d) | Ch. |
% |
2004 | 2005 | 2006 | 2006 vs 2005 | |||||
Italy | 80 |
1,098.3 |
271 |
86 |
1,002.9 |
261 |
79 |
907.6 |
238 |
(23 |
) | (8.8 |
) | |||||||||||
North Africa | 261 |
681.6 |
380 |
308 |
988.8 |
480 |
329 |
1,299.6 |
555 |
75 |
15.6 |
|||||||||||||
Egypt | 94 |
607.4 |
200 |
90 |
706.3 |
213 |
85 |
812.3 |
227 |
14 |
6.6 |
|||||||||||||
Libya | 89 |
45.9 |
97 |
120 |
254.3 |
164 |
144 |
452.0 |
222 |
58 |
35.4 |
|||||||||||||
Algeria | 86 |
17.7 |
88 |
86 |
14.1 |
88 |
88 |
21.2 |
91 |
3 |
3.4 |
|||||||||||||
Tunisia | 12 |
10.6 |
15 |
12 |
14.1 |
15 |
12 |
14.1 |
15 |
|||||||||||||||
West Africa | 285 |
176.6 |
316 |
310 |
190.7 |
343 |
322 |
282.5 |
372 |
29 |
8.5 |
|||||||||||||
Nigeria | 134 |
155.4 |
161 |
123 |
165.9 |
152 |
106 |
247.2 |
149 |
(3 |
) | (2.0 |
) | |||||||||||
Angola | 78 |
10.6 |
80 |
122 |
17.7 |
124 |
151 |
24.7 |
156 |
32 |
25.8 |
|||||||||||||
Congo | 72 |
10.6 |
74 |
65 |
7.1 |
67 |
65 |
10.6 |
67 |
|||||||||||||||
Gabon | 1 |
1 |
||||||||||||||||||||||
North Sea | 203 |
603.9 |
308 |
179 |
600.4 |
283 |
178 |
596.8 |
282 |
(1 |
) | (0.4 |
) | |||||||||||
Norway | 102 |
236.6 |
143 |
96 |
243.7 |
138 |
98 |
243.7 |
140 |
2 |
1.4 |
|||||||||||||
United Kingdom | 101 |
360.2 |
164 |
83 |
356.7 |
145 |
80 |
353.1 |
142 |
(3 |
) | (2.1 |
) | |||||||||||
Netherlands | 7.1 |
1 |
||||||||||||||||||||||
Rest of world | 205 |
826.3 |
349 |
228 |
812.3 |
370 |
171 |
879.3 |
323 |
(47 |
) | (12.7 |
) | |||||||||||
Australia | 21 |
21 |
21 |
3.5 |
22 |
18 |
49.4 |
26 |
4 |
18.2 |
||||||||||||||
China | 5 |
5 |
7 |
7 |
6 |
10.6 |
8 |
1 |
14.3 |
|||||||||||||||
Croatia | 35.3 |
6 |
42.4 |
7 |
67.1 |
12 |
5 |
71.4 |
||||||||||||||||
Ecuador | 19 |
19 |
17 |
17 |
15 |
15 |
(2 |
) | (11.8 |
) | ||||||||||||||
Indonesia | 4 |
173.0 |
34 |
3 |
137.7 |
27 |
2 |
116.5 |
23 |
(4 |
) | (14.8 |
) | |||||||||||
Iran | 9 |
9 |
35 |
35 |
29 |
29 |
(6 |
) | (17.1 |
) | ||||||||||||||
Kazakhstan | 54 |
194.2 |
88 |
64 |
222.5 |
102 |
64 |
229.5 |
103 |
1 |
1.0 |
|||||||||||||
Pakistan | 1 |
257.8 |
46 |
1 |
275.5 |
49 |
1 |
289.6 |
51 |
2 |
4.1 |
|||||||||||||
United States | 25 |
109.5 |
44 |
19 |
74.2 |
33 |
21 |
63.6 |
32 |
(1 |
) | (3.0 |
) | |||||||||||
Trinidad & Tobago | 56.5 |
10 |
56.5 |
10 |
53.0 |
9 |
(1 |
) | (10.0 |
) | ||||||||||||||
Venezuela | 67 |
67 |
61 |
61 |
15 |
15 |
(46 |
) | (75.4 |
) | ||||||||||||||
Total | 1,034 |
3,386.7 |
1,624 |
1,111 |
3,595.1 |
1,737 |
1,079 |
3,965.9 |
1,770 |
33 |
1.9 |
|||||||||||||
(a) | Includes natural gas consumed in operations (283, 247, 212 mmcf/d, in 2006, 2005 and 2004, respectively). | |
(b) | Includes Eni's share of production of equity-accounted entities. |
18
ENI ANNUAL REPORT / OPERATING REVIEW
field (Eni's interest
23.3%). Production decreased in Venezuela, Nigeria,
despite obtaining full production at the Bonga field in
OML 118 permit (Eni's interest 12.5%) and Italy due to
technical problems occurred at the FPSO unit in the
Aquila field and to production declines of mature fields.
Daily production of natural gas for the year (3,962 mmcf/d) increased mainly in: (i) Libya, due to the reaching of full production at the Bahr Essalam offshore field (Eni's interest 50%); (ii) Egypt, for full production/start-up of the Barboni, Baltim North, and Anshuga fields and the increase in the number of production wells at the el Temsah 4 platform in the offshore of the Nile Delta and increased supplies to the Damietta liquefaction plant (Eni's interest 40%); (iii) Nigeria, due to increased supplies to the Bonny LNG plant (Eni's interest 10.4%) related to the start-up of trains 4 and 5; (iv) Australia, due to the start-up of supplies to the Darwin liquefaction plant linked to the Bayu Undan liquid and gas field (Eni's interest 12.04%); (v) Croatia, due to the start-up of the Ika, Ida and Ivana C-K fields (Eni's interest 50%) in the Adriatic offshore. These increases were offset in part by a decline registered in Italy resulting from the production decline of mature fields. Oil and gas production sold amounted to 625.1 mmboe. The 20.8 mmboe difference over production (645.9 mmboe) reflected volumes of gas consumed in operations (18.4 mmboe). Approximately 68% of oil and condensate production sold (391.1 mmbbl) was destined to Enis Refining & Marketing segment; 40% of natural gas production sold (1,346 bcf) was destined to Enis Gas & Power segment.
|
19
ENI ANNUAL REPORT / OPERATING REVIEW
Egypt: Abu Rudeis field, Production unit |
Algerian law; (ii) the ROM
and ZEA Integrated Development project (Enis
interest 100% and 75%, respectively), aiming at
developing reserves recently confirmed by the appraisal
work by means of water re-injection to support pressure
in field. Peak production is expected at 21 kbbl/d (12
net to Eni) in 2010; (iii) El Merk Synergy project with
start-up expected in 2010. Leveraging on synergies with
the development of reserves in Block 208, 212, 405a and
404, the project provides for the construction of a
central facility which will produce stabilized oil,
condensates and NGL with an initial level of production
at 144 kboe/d (19 net to Eni) in 2010. In 2006, 85% of
basic engineering work was completed. Algeria is currently reviewing the fiscal regime applicable to oil companies. With regard to the legislative text already enacted, fiscal terms applicable to existing PSAs to which foreign oil companies are parties have not been directly modified. Nevertheless, Sonatrach, the State oil company is currently bearing higher taxation on behalf of foreign oil companies. On this basis, Sonatrach intends to renegotiate the economic terms of certain PSAs to which Eni or other Eni co-venture partners are party. According to Sonatrach, renegotiation of contractual terms is necessary in order to restore the initial economics of such contracts. At present, management is not able to foresee the final outcome of such renegotiations. In addition, the Algerian parliament with the Decree No. 06-440 of December 2, 2006 enacted the procedure, the application framework and the calculation methodology of a windfall tax charged to foreign oil companies as approved by the local Government. Effective August 1, 2006, said windfall tax applies to the extent that oil prices exceed $30 per |
barrel and
foresees rates ranging from 5 to 50% depending on the
share of production to which a foreign company is
entitled and the contractual scheme in force with
Sonatrach. In 2006, the application of such tax entailed
higher current taxation and a deferred tax charge for a
total of euro 328 million impacting Enis accounts. |
20
ENI ANNUAL REPORT / OPERATING REVIEW
in October 2006. Peak
production is expected at 17.7 mmcf/d net to Eni. This
and other ongoing development activities aim at
maintaining the current gas production level of 459
mmcf/d net to Eni; (ii) in the Ras el Barr concession
(Enis interest 50%), engineering activities are
underway for the development of gas reserves in the
offshore Taurt field. This project provides for the
drilling of seven wells which are expected to be linked
to existing onshore treatment facilities. Production is
expected to start in 2008. A second development step of the Hapy field was completed. Ongoing development activities aim at maintaining the current gas production level of 177 mmcf/d net to Eni; (iii) in the el Temsah concession (Eni operator with a 50% interest), gas and condensates production started at the Temsah NW 2 platform. Ongoing development activities aim at reaching peak production of 111 kboe/d (33 net to Eni) in 2008. Main projects include the development of reserves at the Denise field and its satellites through existing facilities at Denise A installed on the TNW 2 platform. As part of the expansion plan of the Damietta LNG plant, Eni and its partners signed a framework agreement in June 2006 for doubling the capacity of the Damietta liquefaction plant by means of the construction of a second train with a treatment capacity of 268 bcf/y of gas corresponding to approximately 5 mmtonnes/y of LNG for a twenty-year period starting in 2010. This project is expected to support the ramp-up of Enis natural gas production in the Nile Delta, targeting supplies of 88 bcf/y. Eni is currently supplying 53 bcf/y to the first train for a twenty-year period. Libya Main discoveries for the year were in: a) offshore Block NC 41, the T1 discovery well showed the presence of oil at a depth of 2,800 meters; b) onshore concession 82-10 (Enis interest 50%), the KK4-82/ST3 discovery well showed the presence of oil at a depth of 5,000 meters. As part of the Western Libyan Gas project (Enis interest 50%), less than one year after the start-up of the |
offshore
Bahr Essalam field located in the NC-41 permit, drilling
activity was completed with 26 production wells linked to
the Sabratha platform. Production from Bahr Essalam and
Wafa fields is processed at the onshore Mellitah plant on
three trains fully operational in 2006. Export of natural
gas leverages on the GreenStream gasline, delivering 240
bcf in 2006. This gasline is expected to become fully
operational in 2007, exporting some 283 bcf (equal to 77
mmcf/d) supplied to third parties on the Italian natural
gas market under long term contracts. In addition, 71 bcf
of production gas per year will be sold on the Libyan
market. The El Feel field (Enis interest 33%)
reached peak production at 150 kbbl/d supported by
available processing capacity at the Mellitah plant. |
21
ENI ANNUAL REPORT / OPERATING REVIEW
WEST AFRICA Angola Main discoveries for the year were in: a) the development concessions deriving from former Block 15 (Enis interest 20%), the Tchihumba 2 appraisal well confirmed the presence of oil at a depth of about 3,000 meters; b) Block 14K/A IMI unit (Enis interest 11.5%), where the Lianzi discovery was made, appraisal activities conducted in the area confirmed the presence of hydrocarbon layers at a depth over 3,000 meters; c) offshore Block 14 (Enis interest 20%), the Lucapa 1 discovery well found oil and natural gas at a depth of about 1,200 meters. In May 2006, following an international bid procedure, Eni was awarded the role of operator in the exploration license of offshore Block 15/06 (Enis interest 35%). This Block is located in an area with great exploration potential, covering a gross acreage of approximately 3,000 square kilometers. The exploration plan envisages drilling of eight wells during a five-year period and an option for extending the license period over a further three-year period and the drilling of three additional wells. In November 2006, Eni signed the relevant Production Sharing Contract (PSC) with the State oil company Sonangol. In 2006, production started at Benguela/Belize and Lobito/Tomboco fields in Block 14 (Enis interest 20%), in January and June, respectively. Joint development of these fields was performed by installing a compliant piled tower provided with treatment facilities for Benguela/Belize and an underwater connection to this tower for Lobito/Tomboco. Peak production at 158 kbbl/d (20 net to Eni) is expected in 2009 upon completion of the drilling program. Development of the Banzala oil field in Block 0 in Cabinda (Enis interest 9.8%) moved forward with the installation of a production platform and drilling of producing and water injection wells. Production is expected to start in the first quarter of 2007 and to peak at 27 kbbl/d (3 net to Eni) in 2009. An intense campaign to develop reserves in Block 15 (Enis interest 20%) is underway: (i) in March 2006, development of the Mondo and Saxi/Batuque oil fields started as part of Phase C of the development of reserves in the Kizomba deep offshore area. A common development strategy is expected to be deployed in both projects, envisaging the installation of an FPSO vessel. Production is expected to start in the first quarter and in second quarter of 2008, respectively. Peak production at 100 kbbl/d (18 net to Eni) is expected in both projects in 2009; (ii) in December 2006, development of the Marimba oil field started with the drilling of producing wells which will be connected to existing facilities |
|
22
ENI ANNUAL REPORT / OPERATING REVIEW
Nigeria: Drilling unit |
The transaction is subject
to approval by the Congolese authorities. In May 2006, Eni signed a Protocole dAccord to exploit natural gas reserves in the Marine XII permit, in order to ensure supplies to a power station. In February 2007, Eni signed an agreement providing for a swap of interests in exploration blocks located in India and in Congo. Within this agreement, Eni acquired a 34% interest in the MN-DWN-2002/1 block, located off the coast of Eastern India, covering an acreage of approximately 10,000 square kilometers at a maximum water depth of over 2,000 meters. The MN-DWN-2002/1 block lies in a high mineral potential basin where significant oil and gas discoveries have already been made. Enis partner in this initiative (ONGC Videsh, an Indian oil company) acquired a 20% interest in the Mer Très Profonde Nord exploration block (Eni operator with a 60% interest), located off the coast of Congo from Eni. In June 2006, the offshore Litanzi field (Enis interest 35%) started production, peaking at 4 kboe/d (1.4 net to Eni). Development activities at the Awa Palouku and Ikalou-Ikalou Sud field are underway. Production is expected to start in 2008 peaking at 13 kboe/d net to Eni in 2009. Nigeria Several successful appraisal wells were drilled in the year: a) in OML 118 offshore block (Enis interest 12.5%) with the Bonga North 2 well, drilled at a depth of 3,560 meters; b) in OML 120 offshore block (Enis interest 40%) with the Oyo 2 Dir well, drilled at a depth of 1,700 meters; c) in OPL 219 block (Enis interest 12.5%), with the Bolia 4 well drilled at a depth of 3,600 meters; d) in the OML 28 (Enis interest 5%) with the Kolo Creek 39 well. |
The
Forcados/Yokri oil and gas fields (Enis interest
5%) are currently under development offshore and onshore
the Niger Delta. Development is expected to be completed
in 2007 as a part of the integrated project aiming at
providing natural gas supplies to the Bonny liquefaction
plant. Offshore production facilities have been
installed. The onshore project provides for the upgrading
of the Okri and North/South Bank flowstations and the
realization of a gas compressor plant. |
23
ENI ANNUAL REPORT / OPERATING REVIEW
North Sea: Saipem 7000 |
In March 2007, Eni obtained
the role of operator with a 48% interest in the OPL 135
permit. The exploration plan envisages research for and
development of oil and natural gas reserves in the
proximity of existing facilities and the Kwale/Okpai
power station where Eni is operator. NORTH SEA Norway Main discoveries for the year were: a) in the Prospecting License 229 (Eni operator with a 65% interest), three appraisal wells of the Goliath discovery confirmed the presence of hydrocarbons at a depth between 1,017 and 1,853 meters; b) in the Prospecting License 128 (Enis interest 11.5%), a gas formation was discovered at a depth of 3,000 meters; c) in the Prospecting License 134 (Enis interest 30%), an appraisal well of the Morvin discovery confirmed the presence of oil at a depth between 4,600 and 4,900 meters. In February 2006, following an international bid procedure, Eni was awarded offshore Block 6607/11-122D (Enis interest 20%) in the Halten Terrace basin, near the Maruk discovery (Eni operator with a 20% interest,) covering a gross acreage of 7 square kilometers. In March 2006, following an international bid procedure, Eni was awarded offshore Blocks 7124/6, 7125/4 and 5 in the Prospecting License 393 (Enis interest 30%), covering a gross acreage of 525 square kilometers, in the Barents Sea. Exploration plans envisage the drilling of a well in the first three years of the license. In September 2006, Eni purchased further interests in two exploration licenses off the coast of Norway: (i) in the Prospecting License 221 (Enis interest 30%) where the Victoria gas discovery is located, representing a technological challenge due to the high pressure and |
high
temperature conditions of the reservoir; (ii) in the
Prospecting License 264 (Enis interest 40%) where
the Hvitveis gas discovery is located. |
24
ENI ANNUAL REPORT / OPERATING REVIEW
United States (Gulf of Mexico): The Allegheny production platform Production at 12 kboe/d (2.2 net to Eni) is expected to start in the first half of 2007. REST OF WORLD Australia In offshore Block WA-25-L (Eni operator with a 65% interest), the Woollybutt-5 appraisal well confirmed the presence of oil at a depth of 2,865 meters. In June 2006, development started at the offshore Blacktip gas and liquids field (Enis interest 100%) located in the WA-279-P Block at a water depth of 50 meters in the Bonaparte basin, south of the Australian coast. This project envisages the installation of a production platform approximately 100 kilometers from the mainland and construction of an onshore treatment plant with a capacity of 46 bcf/y. Start-up is expected in January 2009. Under a 25-year agreement signed with the Darwin Power & Water Utility Co, a total amount of 706 bcf of natural gas is expected to be supplied with an option for further volume increases. In February 2006, the first shipment of LNG was delivered to two Japanese operators from the Darwin liquefaction plant with a capacity of 3.5 mmtonnes/y of LNG (equivalent to approximately 173 bcf/y of natural gas). This plant is linked by means of a 500-kilometer long pipeline to the liquids and gas Bayu Undan field located at a water depth of 80 meters in permits JPDA 03-12 and JPDA 03-13 in the waters of the international cooperation zone between Australia and East Timor (Enis interest 12.04%). Brazil In January 2006, following an international bid procedure, Eni was awarded a six-year exploration license in Block BM Cal-14, acting as operator. Gross acreage extends over approximately 700 square kilometers in the deep waters of the Camamu-Almada basin. In November 2006, following an international bid, |
Eni was
awarded offshore Block S-M-857 (Enis interest
100%), covering a gross acreage of 700 square kilometers,
in the deep waters of the Santos basin. The assignation
of blocks has not yet been completed. |
25
ENI ANNUAL REPORT / OPERATING REVIEW
indicating a start-up in
2008, due also to the need on part of Eni to perform
certain studies to define measures intended to enhance
the overall level of safety and operability of
facilities. As a result of said reconfiguration completed
by year-end, the onshore design has been confirmed, while
certain enhancements have been identified offshore which
do not alter the original development concept. These
enhancements are expected to be included in the
development plan and implemented. Estimated capital
expenditure to reach the 300 kbbl/d production target in
first development phase stands currently at $19 billion,
representing a remarkable increase over the approved
budget of $10.3 billion in real terms 2007, sanctioned in
2004. This cost increase was driven by: (i) a cost
increase of materials and services driven by
sector-specific inflation and a negative impact due to a
weakening US dollar; (ii) an underestimation of costs to
conduct offshore operations in shallow/ultra shallow
waters where the Kashagan field is located due to a lack
of benchmarks, also reflecting technical and logistic
issues and environmental constraints; (iii) the
enhancements to the original layout of offshore
facilities. Based on the high level of productivity
yielded by the first three development wells, management
currently expects a full field production plateau of 1.5
mmbl/d, representing a 25% increase from the original
target envisaged by the development plan. Evaluation activities of the discoveries made in the contractual area covered by the North Caspian Sea PSA made some good progress. A first appraisal well of the Kairan discovery was successfully drilled. Drilling of a second appraisal well of the Kalamkas discovery yielded productive results that emphasize the good productivity of the reservoir and a much larger extension of said discovery as compared to the initial estimate. At the Karachaganak field (Eni co-operator with a 32.5% interest), good well performance and high yields of gas treatment and injection plants allowed: (i) to ship an average of 43,900 bbl/d net to Eni to the terminal of the North Caspian Pipeline Consortium at Novorossiysk on the Black Sea; (ii) to sell approximately 78 bcf of natural gas, net to Eni, in Russia. In July 2006, a first cargo of oil was delivered to Odessa and Primorsk via the Atyrau-Samara pipeline, marking the start-up of the Baltic route for the export of production to Western markets. Maintenance activities have been continuing targeting the support of the current liquid production plateau. During the year, new wells were drilled and an upgrading of liquid treatment facilities was sanctioned envisaging the construction of a fourth unit. Such new capacity is expected to increase export of production volumes |
which were
previously marketed on local Russian markets, resulting
in an enhancement of prices realizations. |
26
ENI ANNUAL REPORT / OPERATING REVIEW
United States (Gulf of Mexico): The Allegheny production platform |
In January 2006, the
development plan of the offshore Oooguruk field in the
Beaufort Sea started. Production is expected to start at
the end of 2007 with production peaking at 17 kboe/d
(over 5 net to Eni) in 2010. Drilling activities in
Nikaitchuq field (Enis interest 30%), located in
the Beaufort Sea, are underway. Turkey In June 2006, construction licenses for the Samsun-Ceyhan pipeline were assigned to the Turkish company Çalik Enerji, partnering Eni in this initiative (both with a 50% stake). This pipeline is expected to bypass the Turkish Straits of Bosphorus and Dardanelles, enabling delivery of oil produced in the Caspian region to the Ceyhan commercial hub on the Mediterranean coast. This new infrastructure will be 550 kilometer long with a maximum transport capacity of 1.5 mmbbl/d of oil, corresponding to approximately 75 mmtonnes/y and will represent a more efficient and environment friendly alternative as compared to the option of transporting oil by ship through the Bosphorus and Dardanelles straits. Construction activities started in second half of 2006. Venezuela In January 2006, following an international bid procedure, Eni was awarded a thirty year long exploration license for the Cardon IV Block (Enis interest 50%) in joint venture with an international oil company. This Block is part of the Rafael Urdaneta project for the development of natural gas reserves in an area of about 30,000 square kilometres in the Gulf of Venezuela. In May 2006, a first development phase of the Corocoro field in Gulf of Paria West Block (Enis interest 26%) started with some drilling work. A second development phase is expected to be designed based on the results achieved in the first one as regards well production rate and field performance under water and gas injection. |
Production
is expected to start in 2007. |
27
ENI ANNUAL REPORT / OPERATING REVIEW
of Enis interest in
the Dación field, as calculated by Eni, is higher than
the net book value of the Dación assets which
consequently have not been impaired. In accordance with
the ICSID Convention, a judgement by the ICSID Tribunal
awarding compensation to Eni would be binding upon the
parties and immediately enforceable as if it were a final
judgement of a court of each of the States that have
ratified the ICSID Convention. The ICSID Convention was
ratified in 143 States. Accordingly, if Venezuela fails
to comply with the award and to pay the compensation, Eni
could take steps to enforce the award against commercial
assets of the Venezuelan Government almost anywhere those
may be located (subject to national law provisions on
sovereign immunity). In 2005 and in the first quarter of
2006, oil production from the Dación field averaged
approximately 60 kbbl/d and booked reserves at December
31, 2005 amounted to 175 mmbbl. On February 26, 2007, the President of Venezuela enacted a decree providing for the transformation of certain strategic partnerships operating in the petroleum region of Orinoco (Faja) and certain agreements to conduct risk shared exploration activities into a regime of empresa mixta within six months from publication of said decree. Under the new regime, a company incorporated under the law of Venezuela is expected to be entitled to relevant mineral rights and to conduct petroleum operations. A stake of at least 60% in the capital of such company is expected to be held by an affiliate of PDVSA, preferably Corporación Venezuelana de Petróleo. Such decree could impact Enis activities in Venezuela, as Eni s subsidiary Eni Venezuela |
BV holds a
stake in a joint venture operating the Gulf of Paria West
Block, located in the Orinoco delta as outlined above.
However, management is currently unable to assess such
impact, as terms and conditions regulating the
participation of foreign companies to an empresa
mixta have not yet been agreed upon. |
Capital expenditure | (million euro) |
2004 |
2005 |
2006 |
Change |
% Ch. |
||||||
Acquisition of proved and unproved property | 301 |
152 |
(149 |
) | (49.5 |
) | ||||||
Italy | 139 |
|||||||||||
North Africa | 10 |
|||||||||||
West Africa | 60 |
|||||||||||
Rest of World | 241 |
3 |
||||||||||
Exploration | 499 |
656 |
1,348 |
692 |
105.5 |
|||||||
Italy | 51 |
38 |
128 |
90 |
.. |
|||||||
North Africa | 90 |
153 |
270 |
117 |
76.5 |
|||||||
West Africa | 70 |
75 |
471 |
396 |
.. |
|||||||
North Sea | 66 |
126 |
174 |
48 |
38.1 |
|||||||
Rest of World | 222 |
264 |
305 |
41 |
15.5 |
|||||||
Development | 4,310 |
3,952 |
3,629 |
(323 |
) | (8.2 |
) | |||||
Italy | 378 |
411 |
403 |
(8 |
) | (1.9 |
) | |||||
North Africa | 1,358 |
1,007 |
701 |
(306 |
) | (30.4 |
) | |||||
West Africa | 865 |
889 |
864 |
(25 |
) | (2.8 |
) | |||||
North Sea | 338 |
385 |
406 |
21 |
5.5 |
|||||||
Rest of World | 1,371 |
1,260 |
1,255 |
(5 |
) | (0.4 |
) | |||||
Other | 44 |
56 |
74 |
18 |
32.1 |
|||||||
4,853 |
4,965 |
5,203 |
238 |
4.8 |
||||||||
28
ENI ANNUAL REPORT / OPERATING REVIEW
Development of onshore gas
fields is nearing completion at: (i) Tea, Arnica, Lavanda
in the Adriatic offshore where start-up of production is
expected in 2007. In 2006, a production platform and
linkage facilities have been installed; (ii) Candela,
where start-up is expected in 2007; (iii) certain gas
fields in Sicily: Pizzo Tamburino, scheduled for the
second half of 2007 with expected production of 0.5
kboe/d, Samperi 1, which started in 2006 with a
production peak of approximately 1 kboe/d, and recovery
of additional reserves of Fiumetto concession, where
start-up is expected in the first half of 2007 peaking at
600 boe/d. Capital expenditure In 2006, capital expenditure of the Exploration & Production segment amounted to euro 5,203 million and concerned mainly development expenditure, directed mainly outside Italy, in particular in Kazakhstan, Angola and Egypt. Development expenditure in Italy concerned in particular the continuation of drilling development wells, the completion of work for plant and infrastructure in Val dAgri and sidetrack and infilling actions in mature areas. Exploration expenditure, of which 90% was directed outside Italy, concerned in particular Angola, Egypt, Norway, Nigeria and the Gulf of Mexico. In Italy exploration concerned essentially the offshore of Sicily, the Po Valley and the Adriatic Sea. |
As compared
to 2005, capital expenditure increased by euro 238
million, up 4.8%, due to the increase in exploration
expenditure mainly in Egypt and Nigeria. These effects
were offset in part by lower development expenditure
resulting essentially from the completion of relevant
projects in Libya (Bahr Essalam), Nigeria (trains 4 and 5
of the Bonny LNG plant) and the purchase of an additional
1.85% interest in the Kashagan field in the first half of
2005 (euro 169 million). |
2004 |
2005 |
2006 |
||||
Available capacity | ||||||||
Modulation and mineral | (bcm) |
7.5 |
7.5 |
8.4 |
||||
- share utilized by Eni | (%) |
47 |
44 |
54 |
||||
Strategic | (bcm) |
5.1 |
5.1 |
5.1 |
||||
Total customers | (units) |
39 |
44 |
38 |
||||
Customers of modulation and mineral services | (units) |
29 |
35 |
38 |
||||
Regulatory
framework Storage code With Resolution No. 220/06, the Italian Authority for Electricity and Gas approved the storage code proposed by Stoccaggi Gas Italia on the basis of the framework and criteria established by Resolution No.119/05 (Adoption of guarantees for free access to natural gas storage services, duties of subjects operating storage activities and rules for the preparation of a storage code). This code disciplines access to and provision of storage services during normal operational conditions, regulates procedures for conferring storage capacities, |
fulfilment
of obligations concerning operating programming and fees
to be charged to customers. |
29
ENI ANNUAL REPORT / OPERATING REVIEW
The modulation storage
service is finalized to satisfy daily, seasonal and eloinare demand peak modulation
needs. Final clients consuming less than 200,000 cm on an
annual basis are entitled to a priority when satisfying
their modulation requirements. To that end, the storage
company makes available its capacity for space, injection
and offtake on an annual basis in accordance with its
storage code. The mineral storage service is finalized to allow natural gas producers to perform their activity under optimal operating conditions, according to criteria determined by the Ministry of Economic Development. The strategic storage service is destined to satisfy certain obligations of natural gas importers from countries not belonging to the EU in accordance with Art. 3 of Legistlative Decree No. 164/2000. The relevant storage capacity dedicated to this service is determined by the Ministry of Economic Development. Determination of tariffs According to Resolution No. 50/06 of the Italian Authority for Electricity and Gas (Criteria for the determination of tariffs for natural gas storage services), the storage company calculates revenues for the determination of unit tariffs for storage services by adding the following cost elements: i) a return on the capital employed by the storage company equal to 7.1% (8.33% in the first regulated period). The Resolution confirmed the mechanisms for the evaluation of net capital employed established in the prior regulatory period; ii) technical and economic depreciation charges; iii) operating costs. |
In the years
following the first year of the new regulated period,
reference revenues are updated to take account of
variations of capital employed and the impact of the
indexation of depreciation charges and operating costs to
consumer price inflation lowered by a preset rate of
productivity recovery. |
30
ENI ANNUAL REPORT / OPERATING REVIEW
|
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) |
17,302 |
22,969 |
28,368 |
||||
Operating profit | 3,428 |
3,321 |
3,802 |
|||||
Adjusted operating profit | 3,448 |
3,531 |
3,882 |
|||||
Adjusted net profit | 2,290 |
2,552 |
2,862 |
|||||
Capital expenditure | 1,451 |
1,152 |
1,174 |
|||||
Adjusted capital employed, net | 18,383 |
18,898 |
18,864 |
|||||
ROACE adjusted | (%) |
12.6 |
13.7 |
15.1 |
||||
Worldwide gas sales | (bcm) |
87.03 |
94.21 |
97.48 |
||||
Total gas sales in Europe | 85.32 |
92.50 |
95.97 |
|||||
- G&P division sales | 80.62 |
87.99 |
91.90 |
|||||
- Upstream sales (b) | 4.70 |
4.51 |
4.07 |
|||||
Customers in Italy | (million units) |
5.95 |
6.02 |
6.54 |
||||
Gas volumes transported in Italy | (bcm) |
80.41 |
85.10 |
87.99 |
||||
Electricity production sold | (terawatthour) |
13.85 |
22.77 |
24.82 |
||||
Employees at year end | (units) |
12,843 |
12,324 |
12,074 |
||||
(a) | Before elimination of intersegment sales. | |
(b) | Does not included Enis share of sales made by Nigeria LNG (Enis share 10.4%) in Europe amounting to 1.30, 1.31 and 1.55 bcm in 2004, 2005 and 2006 respectively. |
Strategic
agreement with Gazprom
In November 2006, Eni and Gazprom signed a broad strategic
agreement. This agreement strengthens a long term partnership
between the two companies and represents a fundamental step
towards the security of energy supplies to Italy. Key features of
this deal are the extension of the duration of Gazprom gas supply
contracts to Eni until 2035, further strengthening Enis
supply portfolio and the pursuing of joint initiatives in the
upstream sector. Gazprom is expected to enter the Italian market
by selling volumes of gas starting in 2007. Gazprom will obtain
the availability of such volumes by means of a corresponding
reduction in volumes previously supplied to Eni
31
ENI ANNUAL REPORT / OPERATING REVIEW
Financial results
The Gas & Power business confirmed its ability to
generate strong and stable performances. The adjusted net profit
rose euro 310 million to euro 2,862 million compared to 2005 (up
12.1%) reflecting primarily higher selling margins on natural gas
sales, a lower impact of Resolution No. 248/2004 of the Italian
Authority for Electricity and Gas, a growth in natural gas
volumes sold, volumes transported for the coming on line of the
GreenStream gasline and electricity production sold
Return on average capital employed was 15.1% on an adjusted basis in 2006 (13.7% in 2005)
Capital expenditure totalled euro 1,174 million and related essentially to development and maintenance of Enis transport and distribution networks in Italy, the finalization of the upgrading plan of electricity generation capacity and the start up of the upgrading plan of import gaslines
Operating results
Natural gas sales were up approximately 4% to 97.48 bcm
primarily reflecting a growth in sales in a number of target
European markets (up approximately 16% in particular in Turkey,
Germany/Austria, France) also for the build-up of supplies of
natural gas from Libya, partly offset by a decrease in sales in
Italy due to mild weather conditions in the fourth quarter of the
year
Electricity production sold was 24.82 terawatthour, up 9% compared with 2005 reflecting the ramp-up of new production capacity
Other developments
As a part of its development strategy of the natural gas
distribution and sale businesses by means of regional alliances,
Eni and its local authority partners defined the Toscana project
with the establishment of a regional distribution company,
managed by Eni and boasting 1.6 million users and a regional
selling company controlled by Eni boasting 600 thousand clients
and 1.1 billion cubic meters of annual sales
NATURAL
GAS Supply of natural gas In 2006, Enis Gas & Power segment supplied 89.27 bcm of natural gas, with an increase of 6.71 bcm from 2005, up 8.1%. Natural gas volumes supplied outside Italy (79.06 bcm) represented 89% of total supplies of fully consolidated subsidiaries (87% in 2005) with a 7.23 bcm increase from 2005 (up 10.1%), primarily reflecting the reaching of full volumes of supplies from Libyan fields (up 2.79 bcm), higher purchases from the Netherlands (up 1.99 bcm), from Russia to the Turkish market (up 1.21 bcm) and via LNG (1.01 bcm). In addition, supplies from Croatia increased (up 0.43 bcm) due to the ramp-up of new production from Eni-operated natural gas fields in the Adriatic offshore. The main declines concerned purchases from Algeria (down 0.74 bcm) and extra Europe supplies. Supplies in Italy (10.21 bcm) declined by 0.52 bcm, down 4.8%, from 2005, due to a production decline of Enis natural gas fields. |
32
ENI ANNUAL REPORT / OPERATING REVIEW
In 2006, natural gas volumes
input to storage deposits owned by Stoccaggi Gas in Italy
and Gaz de France in French territory and in Austria were
3.01 bcm, compared to net offtakes of 0.84 bcm in 2005. TAKE-OR-PAY In order to meet the medium and long-term demand for natural gas, in particular in the Italian market, Eni entered into long-term purchase contracts with producing countries. Specifically, following the strategic agreement with Gazprom signed on November 14, 2006, effective from February 1, 2007, Eni extended the duration of its gas supply contracts with Gazprom until 2035, bringing the residual average life of its supply portfolio to approximately 23 years. Existing contracts, which in general contain take-or-pay clauses, will ensure a total of approximately 62.4 bcm/y of natural gas by 2010. Despite the fact that an increasing portion of natural gas volumes purchased under said contracts has been sold outside Italy, management believes that in the long term unfavorable trends in the Italian demand and supply for natural gas, also due to the possible implementation of all publicly announced plans for the construction of new supply infrastructure, and |
the evolution of Italian
regulations of the natural gas sector, represent risk
factors to the fulfilment of Enis obligations in
connection with its take-or-pay supply contracts. Sales of natural gas Natural gas sales (97.48 bcm, including own consumption, Enis share of affiliates sales and upstream sales in Europe) were up 3.27 bcm from 2005, or about 4%, due to higher sales in the rest of Europe (4.9 bcm, up approximately 16%), higher supplies of natural gas to Enis wholly-owned subsidiary EniPower for power generation (up 0.59 bcm, or 10.6%), offset in part by lower sales by fully consolidated subsidiaries in Italy (down 1.53 bcm, or 2.9%). In an increasingly competitive market, natural gas sales of fully consolidated subsidiaries in Italy (50.94 bcm) declined by 1.53 bcm from 2005, due to lower supplies related to mild weather conditions in the fourth quarter, negatively affecting sales volumes to the power generation segment (down 0.93 bcm), wholesalers (down 0.51 bcm) and residential and commercial users (down 0.4 bcm) , offset in part by higher sales to the industrial sector (up 0.26 bcm). Sales under the so-called gas release1 (2 bcm) increased by 0.05 bcm from 2005. |
(1) | In June 2004 Eni agreed with the Antitrust Authority to sell a total volume of 9.2 bcm of natural gas (2.3 bcm) in the four thermal years from October 1, 2004 to September 30, 2008 at the Tarvisio entry point into the Italian network. |
Supply of natural gas | (bcm) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Italy | 11.30 |
10.73 |
10.21 |
(0.52 |
) | (4.8 |
) | ||||||||
Russia for Italy | 20.62 |
21.03 |
21.3 |
0.27 |
1.3 |
||||||||||
Russia for Turkey | 1.60 |
2.47 |
3.68 |
1.21 |
49.0 |
||||||||||
Algeria | 18.86 |
19.58 |
18.84 |
(0.74 |
) | (3.8 |
) | ||||||||
Netherlands | 8.45 |
8.29 |
10.28 |
1.99 |
24.0 |
||||||||||
Norway | 5.74 |
5.78 |
5.92 |
0.14 |
2.4 |
||||||||||
Hungary | 3.56 |
3.63 |
3.28 |
(0.35 |
) | (9.6 |
) | ||||||||
Libya | 0.55 |
3.84 |
6.63 |
2.79 |
72.7 |
||||||||||
Croatia | 0.35 |
0.43 |
0.86 |
0.43 |
100.0 |
||||||||||
United Kingdom | 1.76 |
2.28 |
2.5 |
0.22 |
9.6 |
||||||||||
Algeria (LNG) | 1.27 |
1.45 |
1.58 |
0.13 |
9.0 |
||||||||||
Others (LNG) | 0.70 |
0.69 |
1.57 |
0.88 |
.. |
||||||||||
Other supplies Europe | 0.12 |
1.18 |
1.85 |
0.67 |
56.8 |
||||||||||
Outside Europe | 1.21 |
1.18 |
0.77 |
(0.41 |
) | (34.7 |
) | ||||||||
Outside Italy | 64.79 |
71.83 |
79.06 |
7.23 |
10.1 |
||||||||||
Total supplies | 76.09 |
82.56 |
89.27 |
6.71 |
8.1 |
||||||||||
Offtake from (input to) storage | 0.93 |
0.84 |
(3.01 |
) | (3.85 |
) | .. |
||||||||
Network losses and measurement differences | (0.53 |
) | (0.78 |
) | (0.50 |
) | 0.28 |
(35.9 |
) | ||||||
Available for sale of Eni's own companies | 76.49 |
82.62 |
85.76 |
3.14 |
3.8 |
||||||||||
Available for sale of Eni's affiliates | 5.84 |
7.08 |
7.65 |
0.57 |
8.1 |
||||||||||
Total available for sale | 82.33 |
89.70 |
93.41 |
3.71 |
4.1 |
||||||||||
33
ENI ANNUAL REPORT / OPERATING REVIEW
Own consumption2
was 6.13 bcm, up 0.59 bcm or 10.6%, reflecting primarily
higher supplies to EniPower due to the coming on stream
of new generation capacity. In 2006, natural gas sales of fully consolidated subsidiaries in the rest of Europe increased by 4.49 bcm to 27.93, or 19.2%, reflecting a growth in: (i) sales under long-term supply contracts to Italian importers (up 2.57 bcm) for the progressive reaching of full supplies from Libyan fields; (ii) supplies to the Turkish market (up 1.22 bcm); (iii) Germany and Austria (up 0.84 bcm) essentially due to increased spot sales to Gaz de France and higher supplies to other industrial operators and wholesalers; (iv) France (up 0.42 bcm) relating to higher supplies to industrial operators. These increases were partly offset by a decrease in sales in Hungary (down 0.29 bcm) and Northern Europe (down 0.1 bcm). Sales of natural gas by Enis affiliates in the rest of Europe, net to Eni and net of Enis supplies, amounted to 6.88 bcm, up 0.4 bcm with Unión Fenosa Gas posting the major increase, and concerned: (i) GVS (Enis interest 50%) with 2.94 bcm; (ii) Unión Fenosa Gas |
||
(Enis interest 50%) with 2.17 bcm; and (iii) Galp Energia (Enis interest 33.34%) with 1.65 bcm. |
(2) | In accordance with Article 19, paragraph 4 of Legislative Decree No. 164/2000, the volumes of natural gas consumed in operations by a company or its subsidiaries are excluded from the calculation of ceilings for sales to end customers and from volumes input into the Italian network to be sold in Italy. |
Natural gas sales | (bcm) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Italy (*) | 50.08 |
52.47 |
50.94 |
(1.53 |
) | (2.9 |
) | ||||||||
Wholesalers (selling companies) | 13.87 |
12.05 |
11.54 |
(0.51 |
) | (4.2 |
) | ||||||||
Gas release | 0.54 |
1.95 |
2 |
0.05 |
2.6 |
||||||||||
End customers | 35.67 |
38.47 |
37.40 |
(1.07 |
) | (2.8 |
) | ||||||||
Industries | 12.39 |
13.07 |
13.33 |
0.26 |
2.0 |
||||||||||
Power generation | 15.92 |
17.6 |
16.67 |
(0.93 |
) | (5.3 |
) | ||||||||
Residential | 7.36 |
7.8 |
7.4 |
(0.40 |
) | (5.1 |
) | ||||||||
Own consumption (*) | 3.7 |
5.54 |
6.13 |
0.59 |
10.6 |
||||||||||
Rest of Europe (*) | 21.54 |
23.44 |
27.93 |
4.49 |
19.2 |
||||||||||
Outside Europe | 1.17 |
1.17 |
0.76 |
(0.41 |
) | (35.0 |
) | ||||||||
Total sales to third parties and own consumption | 76.49 |
82.62 |
85.76 |
3.14 |
3.8 |
||||||||||
Sales of natural gas of Enis affiliates (net to Eni) | 5.84 |
7.08 |
7.65 |
0.57 |
8.1 |
||||||||||
Italy (*) | 0.07 |
0.02 |
(0.05 |
) | (71.4 |
) | |||||||||
Rest of Europe (*) | 5.3 |
6.47 |
6.88 |
0.41 |
6.3 |
||||||||||
Outside Europe | 0.54 |
0.54 |
0.75 |
0.21 |
38.9 |
||||||||||
Total sales and own consumption (G&P) | 82.33 |
89.7 |
93.41 |
3.71 |
4.1 |
||||||||||
Upstream in Europe (a) | 4.7 |
4.51 |
4.07 |
(0.44 |
) | (9.8 |
) | ||||||||
Worldwide | 87.03 |
94.21 |
97.48 |
3.27 |
3.5 |
||||||||||
Gas sales in Europe | 85.32 |
92.5 |
95.97 |
3.47 |
3.8 |
||||||||||
G&P in Europe (*) | 80.62 |
87.99 |
91.9 |
3.91 |
4.4 |
||||||||||
Upstream in Europe (a) | 4.7 |
4.51 |
4.07 |
(0.44 |
) | (9.8 |
) | ||||||||
(*) | Market sectors denoted with an asterisk are included in "G&P in Europe". | |
(a) | Does not include Eni's share of sales made by Nigeria LNG (Eni's share 10.4%) in Europe amounting to 1.30, 1.31 and 1.55 bcm in 2004, 2005 and 2006, respectively. |
34
ENI ANNUAL REPORT / OPERATING REVIEW
Unión Fenosa Gas sold 0.45
bcm in international markets, in particular in Japan
(0.27 bcm) and South Korea (0.09 bcm), as new market
opportunities arose allowing to optimize selling margins. Transport and regasification of natural gas In 2006, volumes of natural gas input in the national grid (87.99 bcm) increased by 2.89 bcm from 2005, up 3.4%, primarily reflecting higher volumes input to storage. Eni transported 30.9 bcm of natural gas on behalf of third parties in Italy, up 0.68 bcm from 2005, or 2.3%. In 2006, the LNG terminal in Panigaglia (La Spezia) regasified 3.13 bcm of natural gas (2.49 bcm in 2005), discharging 96 tanker ships (79 in 2005). The increase |
in volumes regasified
reflected a higher availability of LNG on the market. Development projects LNG Egypt Eni, through its interest in Unión Fenosa Gas, owns a 40% stake in the Damietta liquefaction plant producing approximately 5 mmtonnes/y of LNG equal to a feedstock of 7.6 bcm/y of natural gas. In June 2006, the partners of the project (Unión Fenosa Gas, the Spanish-Egyptian company SEGAS an affiliate of Unión Fenosa Gas, State owned Egyptian companies EGAS and EGPC, and oil producers Eni and BP) defined terms and conditions for doubling the plant capacity by means of another treatment train. Expected capital expenditure amounts to |
Gas volumes transported (a) | (bcm) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Eni | 52.15 |
54.88 |
57.09 |
2.21 |
4.0 |
||||||||||
On behalf of third parties | 28.26 |
30.22 |
30.9 |
0.68 |
2.3 |
||||||||||
Enel | 9.25 |
9.9 |
9.67 |
(0.23 |
) | (2.3 |
) | ||||||||
Edison Gas | 8.00 |
7.78 |
8.8 |
1.02 |
13.1 |
||||||||||
Others | 11.01 |
12.54 |
12.43 |
(0.11 |
) | (0.9 |
) | ||||||||
80.41 |
85.1 |
87.99 |
2.89 |
3.4 |
|||||||||||
(a) | Include amounts destined to domestic storage. |
approximately $1.5 billion;
start-up is expected by 2010. For further information
about the upstream section of the project see
Exploration & Production - Main exploration and
development projects. The project also foresees the construction of two tankers each with a capacity of 155,000 cm. LNG Spain In April 2006, the Sagunto regasification plant with a capacity of 6.7 bcm/y started operations near Valencia. Eni, through Unión Fenosa Gas, holds a 21.25% interest in this plant. At present, Enis share of regasification capacity amounts to 1.6 bcm/y of gas. A capacity upgrading plan has been sanctioned targeting a 0.8 bcm/y capacity increase by 2009. Relevant works started in the second half of 2006. Eni through Unión Fenosa Gas also holds a 9.5% interest in the El Ferrol regasification plant, located in Galicia, under construction and expected to be completed by the first half of 2007, targeting a treatment capacity of approximately 3.6 bcm/y, 0.4 bcm/y being Enis share. Marketing actions in Germany and France In 2006, Eni began to supply the German company Wingas under a long-term contract, envisaging 1.2 |
bcm/y of natural gas. The
gas is delivered at Eynatten at the German-Belgian
border. Marketing activities targeting an increase in natural gas sales in Germany and the pursuit of new opportunities arising from the ongoing liberalization process have been started. In 2006, Eni started direct sales of natural gas in the French market with a new branch in Paris. New industrial and wholesaler clients were acquired; sales for the year hit the 1 bcm level. Supplies to the French company EDF ramped up, in execution of the long term supply contract signed in July 2005. Galp On March 29, 2006, an eight-year agreement among Galp partners became effective addressing the joint management of the company. Galp partners include Eni, Amorim Energia (a privately held Portuguese company in which Sonangol, the national oil company of Angola, holds a minority stake), Rede Electrica Nacional (REN), and Caixa Geral de Depositos (a primary Portuguese financial institution). On September 26, 2006, in accordance with the |
35
ENI ANNUAL REPORT / OPERATING REVIEW
Italy (Gela): GreenStream - Gas terminal |
agreement, Galps
regulated activities comprising a high pressure network,
storage sites and a regasification terminal located in
Sines were spinned-off and sold to REN which exited Galp
capital on October 18, 2006. On October 24, 2006, the Portuguese State divested part of its stake in Galp through an IPO. At the same time, Galp shares were registered on the national Portuguese stock exchange. The shareholders of Galp post-IPO are: Eni (33.34%), Amorim Energia (33.34%), the Portuguese State (7.00%), Iberdrola (4%), Caixa (1%) and Setgas (0.04%); floating shares represent 21.28 % of the share capital. Upgrade of import gaslines Eni started implementing the upgrading plan of the natural gas import gaslines TTPC from Algeria and TAG from Russia. TTPC - Algeria The transport capacity of the TTPC gasline from Algeria is expected to be increased by 6.5 bcm/y of which a 3.2 bcm/y portion is planned to come on line on April 1, 2008, and a 3.3 bcm/y portion on October 1, 2008. Capital expenditure is expected at euro 450 million, increasing the amount initially budgeted in 2005 due to cost overruns and revisions of the engineering of the project. When the upgrading is fully operational, the gasline will deploy a transport capacity of 33.5 bcm/y. A corresponding capacity on the TMPC downstream gasline is already available. TMPC crosses underwater the Sicily channel. The first portion of the TTPC upgrade was assigned to third parties in November 2005. |
The procedure to assign the
second portion was closed in February 2007. TAG - Russia The transport capacity of the TAG gasline from Russia is expected to increase by 6.5 bcm/y coming on line on October 1, 2008. Expected capital expenditure amounts to euro 253 million; Enis share of this expenditure is 94%. A 3.2 bcm portion of the upgrade was assigned to third parties in February 2006 and the procedure assigning the residual portion has been defined. At the beginning of 2007, a previously implemented upgrade of this gasline came on line in order to allow the build up of the fourth supply contract from Russia. As a result, the gasline transport capacity increased from 33 to 37 bcm/y. The ongoing upgrading plan is expected to increase the gasline transport capacity to 44 bcm/y by 2009. GreenStream - Libya Eni plans to upgrade the GreenStream import gasline from Libya in order to expand volumes input in the national transport network by 3 bcm/y. Said upgrade is expected to come on line by 2011 and to entail an expenditure of euro 84 million. When the ongoing plan of upgrading the TTPC and TAG gasline is fully operational and taking into account the full capacity of the GreenStream gasline from Libya currently in place (8 bcm/y), a total of approximately 21 bcm/y of new import capacity will be available to third parties on the basis of non-discriminating procedures of allocation (17.7 bcm of this new capacity have already been allocated to third parties). |
36
ENI ANNUAL REPORT / OPERATING REVIEW
Italy (Panigaglia): Regasification terminal Regasification terminal |
long-term supply contract.
In 2007, Eni expects to reduce its supplies from Gazprom
by 1 bcm, and Gazprom to sell approximately 1 bcm under
this scheme. ii) Upstream Eni and Gazprom have identified major projects (companies and assets) in Russia and outside Russia that will be jointly pursued by the two partners. Eni and Gazprom have agreed to work with each other on an exclusive basis on these projects, which are expected to be finalized by the end of 2007. iii) Technological cooperation and development Eni and Gazprom will sign specific agreements in the following areas:
Agreement between Eni and Nigeria LNG |
37
ENI ANNUAL REPORT / OPERATING REVIEW
As a part of the agreement,
Toscana Energia SpA (Enis interest 48.72%) was
established upon contribution in-kind of the
partners stakes in the distribution companies
Fiorentina Gas and Toscana Gas. The local authorities partners of Toscana Energia SpA hold the responsibility for strategic decisions and control, while Eni maintains operating and management responsibilities, being the industrial partner of the initiative. In addition, this agreement provides for Fiorentina Gas Clienti SpA (Enis interest 100%) to be merged into Toscana Gas Clienti SpA (Enis interest 46.1%, Tuscan municipalities 53.9%), resulting in the establishment of a regional selling company under Enis control (79.22%), re-named Toscana Energia Clienti and boasting 600 thousand clients and sale volumes of 1.1 bcm/y in 147 Tuscan municipalities. The Italian Antitrust Authority authorized this transaction on July 20, 2006. The merger deed was defined on February 22, 2007, effective from March 1, 2007. Restructuring power activities and launching of Dual Offer In 2006, the G&P division started a project aiming at revamping the power generation business. Under this project, the G&P division is expected to conduct directly the marketing activity of electricity, previously conducted by EniPower, starting in 2007. This scheme will allow the integrated management of marketing activities of gas and electricity and the development of a joint-offer of natural gas and electricity to customers.
Determination of reference prices for non
eligible customers at December 31, 2002 - Resolutions No.
248/2004 and 134/2006 of the Italian Authority for
Electricity and Gas |
were liberalized by Law No.
239/2004 (in particular the sale of natural gas). Said
regulatory powers enable the Authority to preserve
competition and protect final clients. Based on these
considerations and on the uncertainty of the efficacy of
decisions implementing Resolution No. 248/2004 (among
these No. 298/2005, No. 65/2006 and No. 134/2006)
Enis management prepared its consolidated financial
statements for 2006 by assessing the impact of the
regulatory regime based on the indexation mechanism set
out by Resolution No. 248/2004. This treatment was
consistent with the one adopted in the preparation of
quarterly and semi-annual accounts for 2006. In addition,
Eni began to renegotiate the terms of supply contracts
with its wholesale customers as provided for by
Resolution No. 134/2006, which obliged Italian
wholesalers to offer final clients new pricing terms
which take into account the revision of the indexation
mechanism of the raw material component as introduced by
Resolution No. 248/2004. This provision applies only to
wholesale contracts closed after the entry into force of
Resolution No. 248/2004. The provision accrued in the 2005 consolidated financial statements as an estimate of the impact of the indexation mechanism of Resolution No. 248/2004 in 2005 was deemed partially redundant as a result of the provisions of Resolution No. 134/2006. In fact, Resolution No. 134/2006 granted to companies complying with the renegotiation requirement an amount corresponding to 50% of the difference between the updating of the cost of raw materials calculated under Resolution No. 284/2005 and that calculated under the previous regime (under Resolution No. 195/2002) for the 2005 fiscal year as well as 50% of the variable compensation component in wholesale contracts. For further information on this matter see Enis Report on the First Half of 2006 - Operating Review - Gas & Power - Regulation - Determination of reference prices for non eligible customers at December 31, 2002 - Resolutions No. 248/2004 and No. 134/2006 of the Italian Authority for Electricity and Gas. With Resolution No. 12/2007 of January 23, 2007, the Italian Authority for Electricity and Gas started a procedure to adopt a new indexation mechanism of the cost of raw material effective retroactively as of January 1, 2005. On March 1, 2007, the Authority published a consultative document. Opening of an inquiry on prices from the Italian Authority for Electricity and Gas With Resolution No. 226/2006 of October 21, 2006, |
38
ENI ANNUAL REPORT / OPERATING REVIEW
Italy: Control room of the Ferrera Erbognone EniPower station. |
the Italian Authority for
Electricity and Gas closed a formal inquiry against Eni
that commenced with Resolution No. 107/2005, stating that
Eni allegedly failed to comply with an obligation to
transmit certain pieces of information regarding
Enis natural gas import contracts to the Authority.
Therefore, the Authority fined Eni by an amount of euro
10 million. In spite of the circumstance that Eni spontaneously transmitted the requested pieces of information, the Authority objected to the fact that Eni delayed the fulfilment of its obligation to transmit said information, resulting in a behaviour in breach of the rules requiring the establishment of information flows intended to allow the Authority to perform its tasks. Eni filed a claim against the Authoritys decision before the Regional Administrative Court of Lombardy. For further information on this matter see Enis Report on the First Half of 2006 - Operating Review - Gas & Power - Regulation - Opening of an inquiry on prices from the Authority for Electricity and Gas. Eni accrued a provision for this matter. Inquiry of the Italian Authority for Electricity and Gas on behaviors of operators selling natural gas to end customers With Resolution No. 235/06 of November 6, 2006, the Italian Authority for Electricity and Gas closed the inquiry that started in October 2005, on the commercial behavior of companies selling natural gas to end customers located in urban centers (residential, services, commercial activities and small enterprises) aiming at acquiring new customers or re-acquiring customers transferred to other sellers, with particular reference to hurdles posed by companies to customers wishing to leave one distributor or to the entry of competitors on the market. In its final report, |
the Authority confirmed the
existence of certain critical points about the real level
of competition within this market segment and proposed
different options to complete and adjust the regulatory
framework in order to overcome acknowledged deficiencies.
Resolution No. 137/2002 of the Italian Authority for Electricity and Gas - Access to transport services and Network Code of Snam Rete Gas The Italian Authority for Electricity and Gas, with Resolution No. 137/2002, defined the criteria for regulating access to national natural gas transport networks, in particular the issue of priority. Eni filed a claim against this decision with the Regional Administrative Court of Lombardy that was partially accepted with the Courts resolution on December 2004. The Authority filed a claim against this decision with the Council of State and informed Eni on February 19, 2004. The hearing for the discussion of this case has not yet been scheduled. Legislative Decree No. 164/2000 Legislative Decree No. 164/2000 imposed thresholds to operators until December 31, 2010 in relation to a percentage share of domestic consumption set as follows: (i) 75%, from January 1, 2002, for imported or domestically produced natural gas volumes input in the domestic transmission network destined to sales; this percentage decreases by 2 percentage points per year until it reaches 61% in 2009; (ii) 50% from January 1, 2003 for sales to final customers. These ceilings are calculated net of volumes consumed in operations and |
39
ENI ANNUAL REPORT / OPERATING REVIEW
in the case of sales also
net of losses. The decree also provides for periodic
controls of the respect of said ceilings. This control is
performed each year by the Italian Antitrust Authority by
comparing the allowed three-year average percent share of
domestic consumption for both input volumes and sales
volumes with the one actually achieved by each operator.
In particular, 2006 closes the third three-year regulated
period for natural gas volumes input in the domestic
transmission network, for which the allowed percentage
was 69% of domestic consumption of natural gas, and the
second three-year regulated period for sales volumes.
Enis presence on the Italian market complied with
said limits.
|
underway. This will bring
installed capacity to 840 megawatt and with start-up is
expected in the second half of 2007. Moreover, Eni has
planned the installation of a new 240 megawatt combined
cycle unit located in Taranto (current capacity 75
megawatt). New installed generation capacity uses the combined cycle gas fired technology (CCGT), ensuring a high level of efficiency and low environmental impact. In particular, management estimates that for a given amount of energy (electricity and heat) produced, the use of the CCGT technology on a production of 30 terawatthour reduces emissions of carbon dioxide by approximately 11 million tonnes, as compared to emissions using conventional power generation technology. In 2006, electricity production sold was 24.82 terawatthour, up 2.05 terawatthour or 9% as compared to 2005. Increased production reflected the ramp-up of the three combined cycle units at the Brindisi plant entering full commercial operation since September 2006 (up approximately 3 terawatthour) and of the two combined cycle units at the Mantova plant fully operational in 2006 (up 0.9 terawatthour). These increases were offset in part by the standstill of the Ravenna power plant (down 0.85 terawatthour) due to maintenance activity. Eni also purchased 6.21 terawatthour from third parties in and outside Italy. Sales of steam amounted to 10,287 million tonnes, down 3.5% from 2005. Approximately 55% of sales were directed to end users, 28% to the Electricity Exchange, 8% to GRTN/Terna (under CIP 6/92 contracts and imbalances in input) and 9% to wholesalers. All the steam produced was sold to end users. |
2004 | 2005 | 2006 | Change | % Ch. | ||||||||
Purchases | |||||||||||||||||
Natural gas | (mmcm) |
2,617 |
4,384 |
4,775 |
391 |
8.9 |
|||||||||||
Other fuels | (ktoe) |
784 |
659 |
616 |
(43 |
) | (6.5 |
) | |||||||||
Include cracking steam | 89 |
96 |
136 |
||||||||||||||
Sales | |||||||||||||||||
Electricity production sold | (terawatthour) |
13.85 |
22.77 |
24.82 |
2.05 |
9.0 |
|||||||||||
Electricity trading | (terawatthour) |
3.1 |
4.79 |
6.21 |
1.42 |
29.6 |
|||||||||||
Steam | (ktonnes) |
10,040 |
10,660 |
10,287 |
(373 |
) | (3.5 |
) | |||||||||
40
ENI ANNUAL REPORT / OPERATING REVIEW
Capital
expenditure Capital expenditure in the Gas & Power segment totaled euro 1,174 million and related essentially to:(i) development and maintenance of Enis primary transport network in Italy (euro 627 million); (ii) the continuation of the construction of combined cycle |
power plants (euro 229 million), in particular at the Ferrara and Brindisi sites; (iii) development and maintenance of Enis natural gas distribution network in Italy (euro 158 million). |
Capital expenditure | (million euro) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Italy | 1,236 |
1,066 |
1,014 |
(52 |
) | (4.9 |
) | ||||||||
Outside Italy | 215 |
86 |
160 |
74 |
86.0 |
||||||||||
1,451 |
1,152 |
1,174 |
22 |
1.9 |
|||||||||||
Market | 56 |
40 |
63 |
23 |
57.5 |
||||||||||
Italy | 36 |
2 |
0 |
(2 |
) | (100.0 |
) | ||||||||
Outside Italy | 20 |
38 |
63 |
25 |
65.8 |
||||||||||
Distribution | 187 |
182 |
158 |
(24 |
) | (13.2 |
) | ||||||||
Transport | 757 |
691 |
724 |
33 |
4.8 |
||||||||||
Italy | 562 |
643 |
627 |
(16 |
) | (2.5 |
) | ||||||||
Outside Italy | 195 |
48 |
97 |
49 |
102.1 |
||||||||||
Power generation | 451 |
239 |
229 |
(10 |
) | (4.2 |
) | ||||||||
1,451 |
1,152 |
1,174 |
22 |
1.9 |
|||||||||||
41
ENI ANNUAL REPORT / OPERATING REVIEW
|
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) | 26,089 |
33,732 |
38,210 |
||||
Operating profit | 1,080 |
1,857 |
319 |
|||||
Adjusted operating profit | 923 |
1,214 |
790 |
|||||
Adjusted net profit | 674 |
945 |
629 |
|||||
Capital expenditure | 693 |
656 |
645 |
|||||
Adjusted capital employed, net | 4,835 |
5,326 |
5,766 |
|||||
ROACE adjusted | (%) | 13.0 |
18.2 |
10.7 |
||||
Refining throughputs on own account | (mmtonnes) | 37.69 |
38.79 |
38.04 |
||||
Refining throughputs of wholly-owned refineries | 26.75 |
27.34 |
27.17 |
|||||
Balanced capacity of wholly-owned refineries | (kbbl/d) | 504 |
524 |
534 |
||||
Balanced capacity utilization rate | (%) | 100 |
100 |
100 |
||||
Retail sales of petroleum products on Agip branded network in Europe | (mmtonnes) | 12.35 |
12.42 |
12.48 |
||||
Agip branded service stations in Europe at period end | (units) | 6,225 |
6,282 |
6,294 |
||||
Average throughput of Agip branded service stations in Europe | (kliters) | 2,488 |
2,479 |
2,470 |
||||
Employees at year end | (units) | 9,224 |
8,894 |
9,437 |
||||
(a) | Before elimination of intersegment sales. |
Financial results
In 2006, adjusted net profit was down euro 316 million to
euro 629 million, or 33.4%, mainly due to a decline in refining
margins as a result of a weak trading environment
Enis realized refining margins recorded a better trend than market reference margins reflecting Enis refinery capacity to process heavy crudes which are discounted as compared to the Brent crude market benchmark, thus resulting in a higher profitability of the heavy barrel
42
ENI ANNUAL REPORT / OPERATING REVIEW
Return on average capital employed was 10.7% on an adjusted basis, declining from 2005 (18.2% in 2005)
Capital expenditure totalled euro 645 million and mainly related to projects aimed at improving flexibility and yields of refineries and upgrading the refined product retail network in Italy and in the rest of Europe
Operating results
Refining throughputs on own account in Italy and outside
Italy (38.04 mmtonnes) declined by 0.75 mmtonnes from 2005, down
1.9%, due mainly to higher maintenance standstills, particularly
at third party refineries, while wholly-owned refineries achieved
stable processing levels
Retail sales of refined products in Italy (8.66 mmtonnes) declined 1% from 2005 mainly due to competitive pressure. This decrease was more than offset by a growth in retail volumes marketed in the rest of Europe (3.82 mmtonnes, up 4.1%), mainly in Germany and Spain
Sales on the wholesale market in Italy (10.06 mmtonnes) were down 4% due primarily to the decline registered in the fourth quarter due to the impact of mild weather conditions. This decline was partially offset by a growth in volumes marketed on wholesale markets in the rest of Europe (4.6 mmtonnes, up 2.2%), in particular in Germany and Spain
Supply and trading In 2006, a total of 65.70 mmtonnes of oil were purchased (66.48 mm in 2005), of which 36.81 mmtonnes from Enis Exploration & Production1 segment, 18.16 mmtonnes under long-term contracts with producing countries and 10.73 mmtonnes on the spot market. Some 21% of oil purchased came from West Africa, 21% from North Africa, 18% from countries of the former Soviet Union, 14% from the Middle East, |
14% from the North Sea, 7% from Italy and 5% from other areas. Some 30.66 mmtonnes were traded, down 1.3% from 2005. In addition, 3.18 mmtonnes of intermediate products were purchased (3.58 in 2005) to be used as feedstock in conversion plants and 16 mmtonnes of refined products (16.21 in 2005) were purchased to be sold on markets outside Italy (11.48 mmtonnes) and on the Italian market (4.52 mmtonnes) as a complement to own production. |
(1) | The Refining & Marketing segment purchased approximately two-thirds of the Exploration & Production segments oil and condensate production and resold on the market those crudes and condensates that are not suited for processing in its own refineries due to their characteristics or geographic area. |
Supply of oil | (mmtonnes) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Production outside Italy | 31.7 | 32.86 | 32.76 | (0.10 | ) | (0.3 | ) | ||||||||
Production in Italy | 4.03 | 4.44 | 4.05 | (0.39 | ) | (8.8 | ) | ||||||||
Total production | 35.73 | 37.30 | 36.81 | (0.49 | ) | (1.3 | ) | ||||||||
Spot markets | 11.42 | 14.33 | 10.73 | (3.60 | ) | (25.1 | ) | ||||||||
Long-term contracts | 19.9 | 14.85 | 18.16 | 3.31 | 22.3 | ||||||||||
67.05 | 66.48 | 65.70 | (0.78 | ) | (1.2 | ) | |||||||||
43
ENI ANNUAL REPORT / OPERATING REVIEW
Refining In 2006, refining throughputs on own account in Italy and outside Italy were 38.04 mmtonnes, down 0.75 mmtonnes from 2005, or 1.9%, owing to lower throughputs on third party refineries as a consequence of an accident occurred at the Priolo refinery and a maintenance standstill at the Milazzo refinery (Enis interest 50%). Refining throughputs on own account were stable. In particular, refining throughputs increased at the Venice, Gela and Taranto refineries and decreased at the Sannazzaro refinery due to a maintenance standstill of the catalytic cracking unit and the visbreaking unit, and at the Livorno refinery due to general maintenance activity. In April, a new unit for heavy residue gasification started operating at the Sannazzaro refinery. Total throughputs on wholly-owned refineries (27.17 mmtonnes) decreased 0.17 mmtonnes from 2005, down 0.6%; balanced capacity of refineries was fully utilized. Approximately 35.9% of volumes of processed oil was supplied by Enis Exploration & Production segment (32.3% in 2005), representing a three percentage point increase from 2005. Incremental volumes of some 1.1 mmtonnes of equity oil processed related to higher supplies of heavy oil from Nigeria (due to the start-up of the Bonga field) and from Sicily, against a reduction of supplies of the Libyan Bu-Attifel oil processed at Priolo. Distribution of refined products In 2006, sales volumes of refined products (51.13 mmtonnes) were down 500 ktonnes from 2005, or 1%, mainly due to lower wholesale volumes (down |
||
320 ktonnes) as a
consequence of mild weather conditions in the last part
of the year adversely affecting heating products sales.
In addition, lower volumes were supplied to the
petrochemical sector (down 460 ktonnes) owing to the
technical accident that occurred at the Priolo refinery.
These declines were offset in part by higher sales to oil
companies and traders and by a growth in retail sales on
the Agip branded network in Italy and outside Italy (up
60 ktonnes). The impact of the Italiana Petroli (IP) divestment, effective September 1, 2005 (1.3 mmtonnes), was partly offset by supply of fuels to the same company under a five-year contract signed concurrently with the divestment. |
Petroleum products availability | (mmtonnes) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Italy | |||||||||||||||
Refinery intake in wholly-owned refineries | 26.75 |
27.34 |
27.17 |
(0.17 |
) | (0.6 |
) | ||||||||
Refinery intake for third parties | (1.50 |
) | (1.70 |
) | (1.53 |
) | 0.17 |
(10.0 |
) | ||||||
Refinery intake in non-owned refineries | 8.10 |
8.58 |
7.71 |
(0.87 |
) | (10.1 |
) | ||||||||
Consumption and losses | (1.64 |
) | (1.87 |
) | (1.45 |
) | 0.42 |
(22.5 |
) | ||||||
Products available | 31.71 |
32.35 |
31.90 |
(0.45 |
) | (1.4 |
) | ||||||||
Purchases of finished products and change in inventories | 5.07 |
4.85 |
4.45 |
(0.40 |
) | (8.2 |
) | ||||||||
Finished products transferred to foreign cycle | (5.03 |
) | (5.82 |
) | (5.35 |
) | 0.47 |
(8.1 |
) | ||||||
Consumption for power generation | (1.06 |
) | (1.09 |
) | (1.10 |
) | (0.01 |
) | (0.9 |
) | |||||
Products sold | 30.69 |
30.29 |
29.90 |
(0.39 |
) | (1.3 |
) | ||||||||
Outside Italy | |||||||||||||||
Products available | 4.04 |
4.33 |
4.37 |
0.04 |
0.9 |
||||||||||
Purchases of finished products and change in inventories | 13.78 |
11.19 |
11.51 |
0.32 |
2.9 |
||||||||||
Finished products transferred from Italian cycle | 5.03 |
5.82 |
5.35 |
(0.47 |
) | (8.1 |
) | ||||||||
Products sold | 22.85 |
21.34 |
21.23 |
(0.11 |
) | (0.5 |
) | ||||||||
Sales in Italy and outside Italy | 53.54 |
51.63 |
51.13 |
(0.50 |
) | (1.0 |
) | ||||||||
44
ENI ANNUAL REPORT / OPERATING REVIEW
Sales of refined products in Italy and outside Italy | (mmtonnes) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Retail marketing | 10.93 |
10.05 |
8.66 |
(1.39 |
) | (13.8 |
) | ||||||||
- Agip brand | 8.88 |
8.75 |
8.66 |
(0.09 |
) | (1.0 |
) | ||||||||
- IP brand | 2.05 |
1.30 |
(1.30 |
) | (100.0 |
) | |||||||||
Wholesale marketing | 10.7 |
10.48 |
10.06 |
(0.42 |
) | (4.0 |
) | ||||||||
Petrochemical | 3.05 |
3.07 |
2.61 |
(0.46 |
) | (15.0 |
) | ||||||||
Other sales (a) | 6.01 |
6.69 |
8.57 |
1.88 |
28.1 |
||||||||||
Sales in Italy | 30.69 |
30.29 |
29.90 |
(0.39 |
) | (1.3 |
) | ||||||||
Retail marketing rest of Europe | 3.47 |
3.67 |
3.82 |
0.15 |
4.1 |
||||||||||
Retail marketing Africa and Brazil | 0.57 |
||||||||||||||
Wholesale marketing outside Italy | 5.30 |
4.50 |
4.60 |
0.10 |
2.2 |
||||||||||
of which wholesale marketing rest of Europe | 3.94 |
4.10 |
4.19 |
0.09 |
2.2 |
||||||||||
Other sales (a) | 13.51 |
13.17 |
12.81 |
(0.36 |
) | (2.7 |
) | ||||||||
Sales outside Italy | 22.85 |
21.34 |
21.23 |
(0.11 |
) | (0.5 |
) | ||||||||
53.54 |
51.63 |
51.13 |
(0.50 |
) | (1.0 |
) | |||||||||
(a) | Includes bunkering, sales to oil companies and MTBE sales. |
Retail sales in
Italy Retail volumes of refined products marketed on the Italian network (8.66 mmtonnes) were down 1.39 mmtonnes from 2005, or 13.8% mainly due to the IP divestment as outlined above. Retail volumes marketed on the Agip branded network (8.66 mmtonnes) decreased of some 90 ktonnes, down 1%, due to a higher competitive pressure. This decline essentially concerned gasoline and BluDiesel, following a pattern aligned with national consumption trends. Market share of the Agip branded network was down 0.4 percentage points from 29.7% to 29.3% in 2006; average throughput in terms of gasoline and diesel fuel was 2,463 kliters, down 1.8% from 2005. At December 31, 2006, Enis retail distribution network in Italy consisted of 4,356 service stations, seven more than at December 31, 2005 (4,349 units), resulting from the opening of new service stations (20 units) and the positive balance of acquisitions/releases of lease concessions (11 units), offset in part by the closing of service stations with low throughput (21 units) and the release of 3 service stations under highway concessions. Retail volumes of BluDiesel a high performance and low environmental impact diesel fuel amounted to about 726 ktonnes (840 mmliters), down 14.8% from 2005, mainly due to an increasingly high sensitivity of consumers to retail prices of fuels in light of their escalation that pushed prices to historical peaks. At year-end, virtually all Agip branded service stations marketed BluDiesel (about 4,061 equal to 93%). Retail volumes of BluSuper a high performance and low environmental impact gasoline amounted to |
about 98 ktonnes (114 mm
liters), down 9% from 2005, showing a trend similar to
the one of BluDiesel. At year-end, service stations
marketing BluSuper totaled 2,316 (1,719 at December 31,
2005) corresponding to approximately 53% of Enis
network. In 2006, Eni continued its Do-It-Yourself campaign which allows participating customers to obtain discounts or gifts (under agreements with Vodafone and Coop) in proportion to volumes of fuel purchased at self-service outlets, charged on an electronic card. Further bonuses are offered to the most faithful customers. At year-end, the number of active cards was approximately 3.9 million; turnover on cards increased by 3% from 2005. Volumes of fuel marketed under this initiative represented some 39% of total volumes |
45
ENI ANNUAL REPORT / OPERATING REVIEW
Italy: Storage unit. |
marketed on the Agip branded
outlets joining the campaign, and some 31% of overall
volumes marketed on the Agip network. Retail sales outside Italy In recent years, Enis strategy focused on selectively growing its market share, by means of acquisition of assets in European areas with interesting profitability perspectives, mainly in Central-Eastern Europe (in particular Southern Germany, Austria, the Czech Republic and Hungary), in South-Eastern France and the Iberian Peninsula. In pursuing such growth, Eni has been able to reap synergies in these areas facilitated by their proximity to Enis production and logistic facilities. Over the last five years, retail volumes of refined products marketed in the rest of Europe have grown more than 50% (equal to a compound average growth rate of 9%). In 2006, retail sales were 3.82 mmtonnes, up 150 ktonnes from 2005, or 4.1%, particularly in Germany, Spain and Austria due to the ramp-up of new stations purchased or built with higher throughput than the average level of Enis network, while a few less efficient outlets were dismissed. Volume growth was driven primarily by increased sales of diesel fuel and LPG, while gasoline volumes declined. At December 31, 2006, Enis retail distribution network |
in the rest of Europe
consisted of 1,938 units, an increase of five units from
December 31, 2005. The networks evolution was as
follows: (i) 31 service stations were acquired in Austria
and France; (ii) 24 new outlets were opened in Spain and
Austria; (iii) 46 low throughput service stations were
closed in Spain and France; (iv) a negative balance of
acquisitions/releases of lease concessions (down four
units) was recorded, with negative changes in Portugal
and Germany, positive ones in France and Spain. Average
throughput (2,486 kliters) was up 2.4%. Wholesale and other sales Sales volumes on wholesale markets in Italy (10.06 mmtonnes) were down 0.42 mmtonnes from 2005, or 4%, reflecting mainly a decline in domestic consumption related to mild weather conditions in the fourth quarter of the year, with higher temperatures than the seasonal average. This decline mainly involved heating oil and fuel oil, as sales of the latter were also negatively impacted by a process of progressive substitution of fuel oil by natural gas as feedstock for power plants. Instead, jet fuel volumes increased from a year ago reflecting a recovery in the airline industry. Sales on wholesale markets outside Italy (4.60 mmtonnes) increased 100 ktonnes, or 2.2%, mainly due to higher sales of diesel fuel in Germany and Spain. |
46
ENI ANNUAL REPORT / OPERATING REVIEW
Other sales (21.38 mmtonnes)
increased by 1.52 mmtonnes, or 7.7%, mainly due to
supplies to IP (up 1.3 mmtonnes) despite its divestment
in September 2005, and to sales to oil companies and
traders (up 220 ktonnes). Supplies of feedstock to the petrochemical industry (2.61 mmtonnes) declined by 460 ktonnes as a consequence of an accident that occurred at the Priolo refinery where Eni had a processing contract to produce feedstock for its nearby petrochemical complex. This agreement expired on December 31, 2006. |
Capital
expenditure In 2006, capital expenditure in the Refining & Marketing segment amounted to euro 645 million and concerned: (i) refining, supply and logistics (euro 376 million) in Italy, aiming at improving flexibility and yields of refineries, in particular the start-up of construction of a new hydrocracking unit at the Sannazzaro refinery; (ii) upgrade and restructuring of the retail network in Italy (euro 125 million), including construction of new outlets; (iii) upgrade of the retail network in the rest of Europe (euro 98 million), including purchase and realization of new outlets, and, to a lesser extent, restructuring of existing ones. |
Capital expenditure | (million euro) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Italy | 625 |
585 |
547 |
(38 |
) | (6.5 |
) | ||||||||
Outside Italy | 68 |
71 |
98 |
27 |
38.0 |
||||||||||
693 |
656 |
645 |
(11 |
) | (1.7 |
) | |||||||||
Refining, supply and logistics | 420 |
349 |
376 |
27 |
7.7 |
||||||||||
Italy | 420 |
349 |
376 |
27 |
7.7 |
||||||||||
Marketing | 232 |
225 |
223 |
(2 |
) | (0.9 |
) | ||||||||
Italy | 164 |
154 |
125 |
(29 |
) | (18.8 |
) | ||||||||
Outside Italy | 68 |
71 |
98 |
27 |
38.0 |
||||||||||
Other activities | 41 |
82 |
46 |
(36 |
) | (43.9 |
) | ||||||||
693 |
656 |
645 |
(11 |
) | (1.7 |
) | |||||||||
47
ENI ANNUAL REPORT / OPERATING REVIEW
|
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) |
5,331 |
6,255 |
6,823 |
||||
Operating profit | 320 |
202 |
172 |
|||||
Adjusted operating profit | 263 |
261 |
219 |
|||||
Adjusted net profit | 242 |
227 |
174 |
|||||
Capital expenditure | 148 |
112 |
99 |
|||||
Production | (ktonnes) |
7,118 |
7,282 |
7,072 |
||||
Sales of petrochemical products | 5,187 |
5,376 |
5,276 |
|||||
Average plant utilization rate | (%) |
75.2 |
78.4 |
76.4 |
||||
Employees at year end | (units) |
6,565 |
6,462 |
6,025 |
||||
(a) | Before elimination of intersegment sales. |
Adjusted net profit was euro 174 million, down euro 53 million from a year ago, or 23.3%, due to a poor operating performance dragged down by a weak petrochemical environment in the first half of 2006
Sales of petrochemical products were 5,276 ktonnes, down 100 ktonnes from last year, or 1.9%, due to a lower product availability as a consequence of the outage of the Priolo cracker owing to an accident that occurred at the nearby refinery, negatively impacting the entire production cycle
Petrochemical production volumes were 7,072 ktonnes, down 209 ktonnes from 2005, or 2.9%, mainly due to the outage of the Priolo cracker and related plants
48
ENI ANNUAL REPORT / OPERATING REVIEW
Sales -
production - prices In 2006, sales of petrochemical products (5,276 ktonnes) decreased by 100 ktonnes from 2005, down 1.9%. Main declines concerned: (i) basic petrochemicals (down 4.6%), due to lower product availability as a consequence of the outage of the Priolo cracker due to an accident occurred at the nearby refinery; (ii) elastomers (down 2.3%), due to a slow recovery of the Ferrara and Ravenna plant performance after maintenance activities carried out in the first half of the year; (iii) intermediates (down 10.4%), due to a weak demand. These negatives were offset in part by increased sales of polyethylene (up 3.2%) and aromatics (in particular, xylenes up 4.8%) reflecting good market conditions. Production (7,072 ktonnes) declined by 209 ktonnes from 2005, down 2.9%, in particular in elastomers, polyethylene and basic petrochemicals, where lower production due to the standstill of the Priolo cracker was offset in part by higher production at the Porto Marghera, Sarroch and Dunkerque plants. Styrene |
production also increased
reflecting poor performance in 2005 affected by plant
outages and technical issues. Nominal production capacity was in line with 2005. Rising nominal capacity in a few crackers was offset in part by the outage of the Priolo cracker and related plants. Average plant utilization rate calculated on nominal capacity declined by 2 percentage points from 78.4% to 76.4%, mainly due to lower production volumes. Approximately 35.2% of total production was directed to Enis own productions cycle (35.8% in 2005). Oil-based feedstock supplied by Enis Refining & Marketing Division covered 10% of requirements (23% in 2005). Prices of Enis main petrochemical products increased on average by 12%; all business areas posted increases. The most relevant increases were registered in: (i) olefins (up 16.5%), in particular ethylene and propylene; (ii) aromatics (up 19.6%), in particular xylenes; (iii) polyethylene (up 12%) with increases in all products; (iv) styrenes (up 8.2%), in particular styrene and polystyrenes; (v) elastomers (up 4.2%), in particular BR and TPR rubbers. |
Product availability | (ktonnes) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Basic petrochemicals | 4,236 | 4,450 | 4,275 | (175 | ) | (3.9 | ) | ||||||||
Styrene and elastomers | 1,606 | 1,523 | 1,545 | 22 | 1.4 | ||||||||||
Polyethylene | 1,276 | 1,309 | 1,252 | (57 | ) | (4.4 | ) | ||||||||
Production | 7,118 | 7,282 | 7,072 | (210 | ) | (2.9 | ) | ||||||||
Consumption of monomers | (2,616 | ) | (2,606 | ) | (2,488 | ) | 118 | (4.5 | ) | ||||||
Purchases and change in inventories | 685 | 700 | 692 | (8 | ) | (1.1 | ) | ||||||||
5,187 | 5,376 | 5,276 | (100 | ) | (1.9 | ) | |||||||||
Sales | (ktonnes) | 2004 | 2005 | 2006 | Change | % Ch. | ||||||
Basic petrochemicals | 2,766 | 3,022 | 2,882 | (140 | ) | (4.6 | ) | ||||||||
Styrene and elastomers | 1,038 | 1,003 | 1,000 | (3 | ) | (0.3 | ) | ||||||||
Polyethylene | 1,383 | 1,351 | 1,394 | 43 | 3.2 | ||||||||||
5,187 | 5,376 | 5,276 | (100 | ) | (1.9 | ) | |||||||||
49
ENI ANNUAL REPORT / OPERATING REVIEW
Business
areas Basic petrochemicals Sales of basic petrochemicals of 2,882 ktonnes declined by 256 ktonnes from 2005, down 4.6%, mainly due to the outage of the Priolo cracker. Declines were registered in olefins (down 1.5%), intermediates (down 10.4%) and benzene (down 23%). Increasing sales in xylene (up 4.8%) and ethylene (up 3.2%) reflected higher product availability at other plants. Basic petrochemical production (4,275 ktonnes) decreased by 175 ktonnes, down 3.9%. Lower production resulting from the Priolo cracker outage was offset in part by higher production at the Porto Marghera and Dunkerque. Styrene and elastomers Styrene sales (587 ktonnes) were slightly higher from 2005 (up 1.1%). Increasing sales in styrene reflected higher production availability. Declines were registered in compact polystyrene (down 1.5%) due to a lack of feedstock owing to the outage of the Priolo cracker and in ABS/SAN due to the outage of the EniPower power station with a negative impact on the Mantova plant. Elastomers sales (413 ktonnes) increased by 1.2% from 2005 excluding the impact of the shutdown of the Champagnier plant in the second half of 2005. Increases concerned all products, with the exception of BR rubbers (down 8%) due to a maintenance standstill of the Ravenna Neocis plant. |
Styrene production (1,088
ktonnes) increased by 3.8% reflecting mainly technical
issues and a maintenance standstill that occurred at the
Mantova plant in 2005. Elastomer production (457 ktonnes) decreased by 1.3% excluding the impact of the shutdown of the Champagnier plant, due to a weak demand in BR (down 8.5%) and SBR (down 3.6%) rubbers. Production volumes of other rubbers increased in line with trends registered in demand. Polyethylene Polyethylene sales (1,394 ktonnes) were up 43 ktonnes or 3.2%, from 2005, reflecting positive market conditions for LLPDE (up 9.3%) and HPDE (up 1.5%). These increases were offset by a decline in EVA (down 3.7%) due to certain technical issues at the Oberhausen plant. Production (1,252 ktonnes) declined by 57 ktonnes, or 4.4%, mainly due to the standstill of the Priolo cracker and related plants. Capital expenditure In 2006, capital expenditure (euro 99 million; euro 112 million in 2005) concerned efforts in upkeeping (euro 32 million), improving plant efficiency and streamlining (euro 32 million), environmental protection, safety and environmental regulation compliance (euro 23 million) and extraordinary and periodic maintenance (euro 12 million). |
50
ENI ANNUAL REPORT / OPERATING REVIEW
|
Key performance indicators | 2004 |
2005 |
2006 |
|||
Net sales from operations (a) | (million euro) |
5,696 |
5,733 |
6,979 |
||||
Operating profit | 203 |
307 |
505 |
|||||
Adjusted operating profit | 215 |
314 |
508 |
|||||
Adjusted net profit | 252 |
328 |
400 |
|||||
Capital expenditure | 186 |
349 |
591 |
|||||
ROACE adjusted | (%) | 10.5 |
12.0 |
12.8 |
||||
Orders acquired | 5,784 |
8,395 |
11,172 |
|||||
Order backlog | 8,521 |
10,122 |
13,191 |
|||||
Employees at year end | (units) |
25,819 |
28,684 |
30,902 |
||||
(a) | Before elimination of intersegment sales. |
Adjusted net profit was euro 400 million, up euro 72 million from a year ago or 22%, reflecting a better operating performance against the backdrop of favourable trends in the demand for oilfield services
Return on average capital employed calculated on an adjusted basis was 12.8% in 2006, up 12% from 2005
Orders acquired amounted to euro 11,172 million, up euro 2,777 million from 2005 (+33.1%), in particular in onshore activities
Order backlog was euro 13,191 million at December 31, 2006 (euro 10,122 million at December 31, 2005)
51
ENI ANNUAL REPORT / OPERATING REVIEW
Activity for
the year Among the main orders acquired in 2006 were:
|
Orders acquired amounted to euro 11,172 million, of
these projects to be carried out outside Italy
represented 91%, while orders from Eni companies amounted
to 24% of the total. Enis order backlog was euro
13,191 million at December 31, 2006 (euro 10,122 million
at December 31, 2005). Projects to be carried out outside
Italy represented 90% of the total order backlog, while
orders from Eni companies amounted to 20% of the total. |
(million euro) | 2005 | Full year 2006 | Change | % Ch. | ||||||||
Orders acquired (a) | 8,395 |
11,172 |
2,777 |
33.1 |
||||
Offshore construction | 3,096 |
3,681 |
585 |
18.9 |
||||
Onshore construction | 4,720 |
4,923 |
203 |
4.3 |
||||
Offshore drilling | 367 |
2,230 |
1,863 |
.. |
||||
Onshore drilling | 212 |
338 |
126 |
59.4 |
||||
of which: | ||||||||
- Eni | 887 |
2,692 |
1,805 |
.. |
||||
- Third parties | 7,508 |
8,480 |
972 |
12.9 |
||||
of which: | ||||||||
- Italy | 858 |
1,050 |
192 |
22.4 |
||||
- Outside Italy | 7,537 |
10,122 |
2,585 |
34.3 |
||||
(million euro) | Dec. 31, 2005 | Dec. 31, 2006 | Change | % Ch. | ||||||||
Order backlog (a) | 10,122 |
13,191 |
3,069 |
30.3 |
||||
Offshore construction | 3,721 |
4,283 |
562 |
15.1 |
||||
Onshore construction | 5,721 |
6,285 |
564 |
9.9 |
||||
Offshore drilling | 382 |
2,247 |
1,865 |
.. |
||||
Onshore drilling | 298 |
376 |
78 |
26.2 |
||||
of which: | ||||||||
- Eni | 695 |
2,602 |
1,907 |
.. |
||||
- Third parties | 9,427 |
10,589 |
1,162 |
12.3 |
||||
of which: | ||||||||
- Italy | 1,209 |
1,280 |
71 |
5.9 |
||||
- Outside Italy | 8,913 |
11,911 |
2,998 |
33.6 |
||||
(a) | Includes the Bonny project for euro 28 million in orders acquired and euro 101 million in order backlog. |
52
ENI ANNUAL REPORT / OPERATING REVIEW
Capital
expenditure In 2006, capital expenditure in the Engineering & Construction segment (euro 591 million) concerned: (i) the conversion of the Margaux tanker ship into an FPSO vessel that will operate in Brazil on the Golfinho 1 field; (ii) maintenance and upgrading of equipment; (iii) fabrication and installation of facilities in the offshore phase of the Kashagan project in Kazakhstan. CEPAV Uno and CEPAV Due Eni holds interests in the CEPAV Uno (50.36%) and CEPAV Due (52%) consortia that in 1991 signed two contracts with TAV SpA for the construction of two railway tracks for high speed/high capacity trains from Milan to Bologna (under construction) and from Milan to Verona (in the design phase). With regard to the project for the construction of the line from Milan to Bologna, an Addendum to the contract between CEPAV Uno and TAV was signed on June 27, 2003, redefining certain terms and conditions of the contract. Subsequently, the CEPAV Uno consortium requested a time extension for the completion of works and an additional payment amounting to euro 800 million. CEPAV Uno and TAV failed to solve this dispute amicably, |
and on April 27, 2006, CEPAV
Uno notified TAV a request for arbitration as provided
for under terms of the contract. At the end of 2006, the
CEPAV Uno consortium had completed works corresponding to
75% of the total contractual price. With regard to the project for the construction of the tracks from Milan to Verona, in December 2004, CEPAV Due presented the final project, prepared in accordance with Law No. 443/2001 on the basis of the preliminary project approved by an Italian governmental authority (CIPE). As concerns the arbitration procedure requested by CEPAV Due against TAV for the recognition of damage related to TAVs belated completion of its tasks, in January 2007, the arbitration committee came to a partial decision in support of CEPAV Due confirming the recovery of higher incurred costs for design activities. A technical survey is underway to establish a final evaluation of the compensation as requested by the arbitration committee. A law decree revoking the framework contract for the construction of the Milan-Verona line is due to be published. Rights of the Consortium to recover costs incurred up to date for design activities are expected to be preserved. |
(million euro) | 2005 | 2006 | Change | % Ch. | ||||||||
Offshore construction | 262 |
390 |
128 |
48.9 |
||||
Onshore construction | 20 |
53 |
33 |
165.0 |
||||
Offshore drilling | 46 |
101 |
55 |
119.6 |
||||
Onshore drilling | 13 |
36 |
23 |
176.9 |
||||
Other | 8 |
11 |
3 |
37.5 |
||||
Capital expenditure | 349 |
591 |
242 |
69.3 |
||||
53
ENI ANNUAL REPORT / FINANCIAL REVIEW
Financial Review
Profit and Loss Account
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
57,545 |
Net sales from operations | 73,728 |
86,105 |
12,377 |
16.8 |
||||||||||
1,377 |
Other income and revenues | 798 |
783 |
(15 |
) | (1.9 |
) | ||||||||
(41,592 |
) | Operating expenses | (51,918 |
) | (61,140 |
) | (9,222 |
) | (17.8 |
) | |||||
5 |
of which non recurring items | (290 |
) | (239 |
) | 51 |
|||||||||
(4,931 |
) | Depreciation, amortization and impairments | (5,781 |
) | (6,421 |
) | (640 |
) | (11.1 |
) | |||||
12,399 |
Operating profit | 16,827 |
19,327 |
2,500 |
14.9 |
||||||||||
(156 |
) | Net financial income (expense) | (366 |
) | 161 |
527 |
.. |
||||||||
820 |
Net income from investments | 914 |
903 |
(11 |
) | (1.2 |
) | ||||||||
13,063 |
Profit before income taxes | 17,375 |
20,391 |
3,016 |
17.4 |
||||||||||
(5,522 |
) | Income taxes | (8,128 |
) | (10,568 |
) | (2,440 |
) | (30.0 |
) | |||||
42.3 |
Tax rate (%) | 46.8 |
51.8 |
5.0 |
|||||||||||
7,541 |
Net profit | 9,247 |
9,823 |
576 |
6.2 |
||||||||||
Pertaining to: | |||||||||||||||
7,059 |
- Eni | 8,788 |
9,217 |
429 |
4.9 |
||||||||||
482 |
- minority interest | 459 |
606 |
147 |
32.0 |
||||||||||
Eni's net profit for 2006 was a record euro 9,217 million, up euro 429 million compared to 2005, or 4.9%. This increase reflected a better operating performance (up euro 2,500 million, or 14.9%), partially offset by a higher Group tax rate, which rose from 46.8% to 51.8%. The increase in the Group tax rate was recorded mainly in the Exploration & Production division due to: (i) the Algerian windfall tax on upstream earnings effective as from August 1, 2006 (with an overall impact of euro 328 million, of which euro 149 million pertaining to taxation for | the period and euro 179 million pertaining to the deferred tax impact); (ii) an increase in the supplemental tax rate implemented by the British Government, applicable to profit before taxes earned by operations in the North Sea, effective as from January 1, 2006, affecting both current taxation and deferred tax liabilities (with an overall impact of euro 198 million of which euro 107 million, pertaining to taxation for the period and euro 91 million pertaining to the deferred tax impact). |
54
ENI ANNUAL REPORT / FINANCIAL REVIEW
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
7,059 |
Enis net profit | 8,788 |
9,217 |
429 |
4.9 |
||||||||||
(281 |
) | Exclusion of inventory holding (gains) losses | (759 |
) | 33 |
792 |
|||||||||
(133 |
) | Exclusion of special items: | 1,222 |
1,162 |
(60 |
) | |||||||||
5 |
- non recurring items | 290 |
239 |
(51 |
) | ||||||||||
(138 |
) | - other special items | 932 |
923 |
(9 |
) | |||||||||
6,645 |
Enis adjusted net profit (a) | 9,251 |
10,412 |
1,161 |
12.5 |
||||||||||
(a) | For a definition and reconciliation of reported operating profit and reported net profit to adjusted results, which exclude inventory holding gains/losses and special items, see the paragraph Reconciliation of reported operating profit and net profit to results on an adjusted basis pages 66. |
Eni's adjusted net
profit for the year was up 12.5% to euro 10,412
million. Adjusted net profit is calculated by excluding
an inventory holding loss of euro 33 million and special
charges of euro 1,162 million (both amounts are net of
the related fiscal effect). Special charges for the year were principally related to asset impairments, impacting mainly assets in the Exploration & Production division, environmental provisions, redundancy incentives, risk provisions with respect to certain fines imposed by certain regulatory and antitrust authorities and a deferred tax charge, reflecting the windfall tax levied by the Algerian Government and the supplemental tax rate in the UK, as mentioned above. |
Return on average
capital employed (ROACE) calculated on an
adjusted basis for the twelve-month period ending
December 31, 2006 was 22.7% (20.5% in 2005). Eni's results benefited from a favorable trading environment, with a higher Brent crude oil price (up 19.8% from 2005) and higher selling margins on petrochemical products. These positives were partially offset by declining refining margins (margin on Brent was down 34.4%). Selling margins on natural gas were underpinned by a favorable trading environment. The euro appreciated by 1% over the dollar. |
The break-down of adjusted net profit by division1 is shown in the table below:
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
4,033 |
Exploration & Production | 6,186 |
7,279 |
1,093 |
17.7 |
||||||||||
2,290 |
Gas & Power | 2,552 |
2,862 |
310 |
12.1 |
||||||||||
674 |
Refining & Marketing | 945 |
629 |
(316 |
) | (33.4 |
) | ||||||||
242 |
Petrolchemicals | 227 |
174 |
(53 |
) | (23.3 |
) | ||||||||
252 |
Engineering & Construction | 328 |
400 |
72 |
22.0 |
||||||||||
(241 |
) | Other activities | (297 |
) | (301 |
) | (4 |
) | (1.3 |
) | |||||
(86 |
) | Corporate and financial companies | (142 |
) | 54 |
196 |
.. |
||||||||
(37 |
) | Unrealized profit in inventory (a) | (89 |
) | (79 |
) | 10 |
11.2 |
|||||||
7,127 |
9,710 |
11,018 |
1,308 |
13.5 |
|||||||||||
of which: | |||||||||||||||
482 |
minority interest | 459 |
606 |
147 |
32.0 |
||||||||||
6,645 |
Enis adjusted net profit | 9,251 |
10,412 |
1,161 |
12.5 |
||||||||||
(a) | Unrealized profit in inventory concerned intragroup sales of goods and services recorded in the assets of the purchasing division as of end of the period. |
From January 1, 2006 Enis subsidiaries operating in diversified sectors (such as real estate services, insurance and financing intermediation, R&D and training services) are reported in the aggregate Corporate and financing companies with the exception of Tecnomare which is reported in the Exploration & Production division (previously all these diversified activities were reported in the aggregate Other activities). The Other activities aggregate includes only Syndial SpA, a subsidiary which runs minor petrochemical activities and reclamation and decommissioning activities pertaining to certain businesses which Eni exited in past years. In order to allow for comparison, 2005 data has been reclassified accordingly; 2004 data has not been reclassified.
(1) | For a definition and calculation method of adjusted net profit by division, see paragraph Reconciliation of reported operating profit and net profit to results on an adjusted basis page 66. |
55
ENI ANNUAL REPORT / FINANCIAL REVIEW
The Group adjusted net
profit for the year was supported by the increase
reported in the:
|
These increases were partly offset by lower adjusted
net profit reported in the Refining &
Marketing division (down euro 316 million, or
33.4%), due to a poor operating performance (down euro
424 million) dragged down by a weak refining environment,
the appreciation of the euro over the dollar and the
impact of a higher level of planned maintenance activity
at refineries. |
56
ENI ANNUAL REPORT / FINANCIAL REVIEW
Analysis of profit and loss account items
Net sales from operations
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
15,346 |
Exploration & Production | 22,531 |
27,173 |
4,642 |
20.6 |
||||||||||
17,302 |
Gas & Power | 22,969 |
28,368 |
5,399 |
23.5 |
||||||||||
26,089 |
Refining & Marketing | 33,732 |
38,210 |
4,478 |
13.3 |
||||||||||
5,331 |
Petrochemicals | 6,255 |
6,823 |
568 |
9.1 |
||||||||||
5,696 |
Engineering & Construction | 5,733 |
6,979 |
1,246 |
21.7 |
||||||||||
1,279 |
Other activities | 863 |
823 |
(40 |
) | (4.6 |
) | ||||||||
851 |
Corporate and financial companies | 1,239 |
1,174 |
(65 |
) | (5.2 |
) | ||||||||
(14,349 |
) | Consolidation adjustment | (19,594 |
) | (23,445 |
) | (3,851 |
) | .. |
||||||
57,545 |
73,728 |
86,105 |
12,377 |
16.8 |
|||||||||||
Eni's net sales from
operations (revenues) for 2006 were euro 86,105
million, up euro 12,377 million from 2005, or 16.8%,
primarily reflecting higher product prices in all of
Eni's main operating segments, higher volumes sold of
hydrocarbons and natural gas and higher activity levels
in the Engineering & Construction division, offset in
part by the negative impact of the appreciation of the
euro versus the dollar (up 1%). Revenues generated by the Exploration & Production division were euro 27,173 million, up euro 4,642 million, or 20.6%, primarily reflecting higher realizations in dollars (oil up 22.4%, natural gas up 17.8%) and higher oil and gas production sold (up 10.2 mmboe). These positives were partially offset by the appreciation of the euro over the dollar. Revenues generated by the Gas & Power division were euro 28,368 million, up euro 5,399 million, or 23.5%, primarily reflecting increased natural gas prices related in |
particular to a favorable
trading environment, higher natural gas volumes sold by
consolidated subsidiaries (up 3.14 bcm, or 3.8%) and
higher electricity production sold (up 2.05 TWh, or 9%). Revenues generated by the Refining & Marketing division were euro 38,210 million, up euro 4,478 million, or 13.3%, primarily reflecting higher international prices for oil and refined products. Revenues generated by the Petrochemical division were euro 6,823 million, up euro 568 million, or 9.1%, primarily reflecting an increase in average selling prices. Revenues generated by the Engineering & Construction division were euro 6,979 million, up euro 1,246 million, or 21.7%, primarily reflecting higher activity levels in the Offshore and Onshore construction businesses and a higher utilization rate of vessels and higher tariffs in the Offshore Drilling area. |
Other income and revenues
The analysis of Other income and revenues is shown in the table
below:
2004 | (million euro) | 2005 | 2006 | Change | ||||
407 |
Gains on divestments of tangible and intangible assets | 71 |
100 |
29 |
||||||||
93 |
Income from rentals | 102 |
98 |
(4 |
) | |||||||
43 |
Income from contractual obligations | 114 |
61 |
(53 |
) | |||||||
87 |
Income from damage payments | 89 |
40 |
(49 |
) | |||||||
61 |
Gains on commodity derivative financial contracts | |||||||||||
686 |
Other income (*) | 422 |
484 |
62 |
||||||||
1,377 |
798 |
783 |
(15 |
) | ||||||||
(*) | Each amount in this line item is less than euro 25 million. |
57
ENI ANNUAL REPORT / FINANCIAL REVIEW
Operating expenses
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
38,347 |
Purchases, services and other | 48,567 |
57,490 |
8,923 |
18.4 |
||||||||||
of which: | |||||||||||||||
5 |
- non-recurring items | 290 |
239 |
(51 |
) | ||||||||||
298 |
- other special items | 1,300 |
390 |
(910 |
) | ||||||||||
3,245 |
Payroll and related costs | 3,351 |
3,650 |
299 |
8.9 |
||||||||||
of which: | |||||||||||||||
65 |
- provision for redundancy incentives | 79 |
178 |
99 |
|||||||||||
41,592 |
51,918 |
61,140 |
9,222 |
17.8 |
|||||||||||
Operating expenses
for 2006 (euro 61,140 million) were up euro 9,222 million
from 2005, or 17.8%, reflecting primarily: (i) higher
prices for oil-based and petrochemical feedstocks and for
natural gas, affected also by higher charges related to
the climatic emergency of the first quarter of 2006; (ii)
higher operating costs in the Exploration &
Production division, in particular the increase in
operating costs resulted from the higher share of
development projects in hostile environments and
reflected sector-specific inflation; (iii) higher costs
for refinery maintenance. These negative factors were
offset in part by the impact of the appreciation of the
euro over the dollar. Operating expenses include non recurring charges of euro 239 million in 2006 related essentially to a provision related to fines imposed by certain antitrust and regulatory authorities; in 2005 non-recurring charges of euro 290 million concerned a provision related to a fine levied by the Italian Antitrust Authority. |
Other special charges
included in operating costs in 2006 (euro 390 million)
related to environmental provisions (euro 292 million),
in particular in Syndial and in the Refining &
Marketing division; in 2005 other special items of euro
1,300 million concerned essentially environmental
provisions (euro 835 million) recorded in particular in
Syndial and in the Refining & Marketing division, and
provisions to the risk reserve (euro 379 million) related
in particular to insurance charges deriving from the
extra premium due for 2005 and for the next five years
(assuming normal accident rates) related to the
participation of Eni to Oil Insurance Ltd. These higher
charges took account of the exceptionally high rate of
accidents which occurred in the 2004-2005 two year
period. Labor costs (euro 3,650 million) were up euro 299 million, or 8.9%, reflecting primarily higher redundancy incentives (up euro 99 million), ordinary wage trends and higher average workforce outside Italy, in particular in the Engineering & Construction division, partly offset by a reduction in average workforce in Italy. |
Depreciation, amortization and impairments
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
3,047 |
Exploration & Production | 3,945 |
4,646 |
701 |
17.8 |
||||||||||
637 |
Gas & Power | 684 |
687 |
3 |
0.4 |
||||||||||
465 |
Refining & Marketing | 462 |
434 |
(28 |
) | (6.1 |
) | ||||||||
114 |
Petrochemical | 118 |
124 |
6 |
5.1 |
||||||||||
184 |
Engineering & Construction | 176 |
195 |
19 |
10.8 |
||||||||||
45 |
Other activities | 16 |
6 |
(10 |
) | (62.5 |
) | ||||||||
106 |
Corporate and financial companies | 112 |
70 |
(42 |
) | (37.5 |
) | ||||||||
Unrealized profit in inventory | (4 |
) | (9 |
) | (5 |
) | .. |
||||||||
4,598 |
Total depreciation and amortization | 5,509 |
6,153 |
644 |
11.7 |
||||||||||
333 |
Impairments | 272 |
268 |
(4 |
) | (1.5 |
) | ||||||||
4,931 |
5,781 |
6,421 |
640 |
11.1 |
|||||||||||
In 2006 depreciation and amortization charges (euro 6,153 million) were up euro 644 million, or 11.7%, from 2005 mainly in the Exploration & Production division (euro 701 million) reflecting primarily higher exploration expenditure and | increased development costs incurred for developing new fields and maintaining production levels in mature fields combined with the effects of higher production. |
58
ENI ANNUAL REPORT / FINANCIAL REVIEW
Impairments (euro 268 million) concerned essentially mineral assets in the Exploration & Production division, | intangible assets in the Gas & Power division and tangible assets in the Petrochemical division. |
Operating profit
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
12,399 |
Operating profit | 16,827 |
19,327 |
2,500 |
14.9 |
||||||||||
(448 |
) | Exclusion of inventory holding (gains) losses | (1,210 |
) | 88 |
1,298 |
|||||||||
631 |
Exclusion of special items: | 1,941 |
1,075 |
(866 |
) | ||||||||||
of which: | |||||||||||||||
5 |
- non-recurring items | 290 |
239 |
(51 |
) | ||||||||||
626 |
- other special items | 1,651 |
836 |
(815 |
) | ||||||||||
12,582 |
Adjusted operating profit | 17,558 |
20,490 |
2,932 |
16.7 |
||||||||||
Break-down by division: | |||||||||||||||
8,202 |
Exploration & Production | 12,903 |
15,763 |
2,860 |
22.2 |
||||||||||
3,448 |
Gas & Power | 3,531 |
3,882 |
351 |
9.9 |
||||||||||
923 |
Refining & Marketing | 1,214 |
790 |
(424 |
) | (34.9 |
) | ||||||||
263 |
Petrochemicals | 261 |
219 |
(42 |
) | (16.1 |
) | ||||||||
215 |
Engineering & Construction | 314 |
508 |
194 |
61.8 |
||||||||||
(223 |
) | Other activities | (296 |
) | (299 |
) | (3 |
) | (1.0 |
) | |||||
(187 |
) | Corporate and financial companies | (228 |
) | (240 |
) | (12 |
) | (5.3 |
) | |||||
(59 |
) | Unrealized profit in inventory | (141 |
) | (133 |
) | 8 |
.. |
|||||||
12,582 |
17,558 |
20,490 |
2,932 |
16.7 |
|||||||||||
Adjusted operating profit, excluding an inventory holding loss of euro 88 million and special charges of euro 1,075 million, amounted to euro 20,490 million, an increase of euro 2,932 million from 2005 (up 16.7%), related in particular to: (i) the Exploration & Production division (up euro 2,860 million, or 22.2%), reflecting higher realizations and higher production sold (up 10.2 mmboe, or 1.7%), partly offset by higher operating costs and amortization charges and increased exploration expenses; (ii) the Gas & Power division (up euro 351 million, or 9.9%) due to higher natural gas selling | margins, a softer impact of
Resolution No. 248/2004 of the Authority for Electricity
and Gas and higher sales of consolidated companies (up
3.14 bcm, or 3.8%); (iii) the Engineering &
Construction division (up euro 194 million, or 61.8%) due
to a positive performance against the backdrop of
favorable oil services markets. These increases were offset in part by the decline of the Refining & Marketing division (down euro 424 million, or 34.9%) due to a negative refining trading environment and the impact of longer standstills of refineries due to planned maintenance. |
Net financial income
(million euro) | 2005 | 2006 | Change | |||||
Income (expense) on derivatives | (386 | ) | 383 | 769 | |||||
Exchange differences, net | 169 | (152 | ) | (321 | ) | ||||
Net interest due to banks | 60 | 194 | 134 | ||||||
Financial expense on short and long-term debt | (420 | ) | (462 | ) | (42 | ) | |||
Financial expense due to the passage of time | (109 | ) | (116 | ) | (7 | ) | |||
Other financial income and expense, net | 161 | 198 | 37 | ||||||
(525 | ) | 45 | 570 | ||||||
Financial expense capitalized | 159 | 116 | (43 | ) | |||||
(366 | ) | 161 | 527 | ||||||
59
ENI ANNUAL REPORT / FINANCIAL REVIEW
2006 net financial income (euro 161 billion) was up euro 527 million from 2005 when net financial charges of euro 366 were recorded. The increase reflected: (i) the positive change in the fair value evaluation of financial derivative instruments recorded in the profit and loss account instead of being recognized in connection with related assets, liabilities and commitments because | Eni's financial derivative instruments do not meet the formal criteria to be assessed as hedging instruments under IFRS; (ii) higher interest income deriving from a higher average availability of cash and cash equivalents offset in part by the impact of higher interest rates on dollar loans (Libor up 1.7 percentage points) and on euro loans (Euribor up 0.9 percentage points). |
Net income from investments
The table below sets forth 2006 break-down of net income from
investments by division:
(million euro) | Exploration & Production | Gas & Power | Refining & Marketing | Engineering & Construction | Group | ||||||
Effect of the application of the equity method of accounting | 28 | 509 | 194 | 66 | 795 | ||||||||||
Dividends | 68 | 3 | 26 | 98 | |||||||||||
Net gains on disposal | (6 | ) | 21 | 18 | |||||||||||
Other income (losses) from investments | (5 | ) | (7 | ) | (8 | ) | |||||||||
85 | 526 | 220 | 66 | 903 | |||||||||||
Net income from investments in 2006 were euro 903 million and concerned primarily: (i) Eni's share of income of affiliates accounted for with the equity method (euro 795 million), in particular affiliates in the Gas & Power and Refining & Marketing divisions. The effects of the equity method of accounting include the gain | (euro 73 million net to Eni) recorded by Galp Energia SGPS SA on the sale of regulated assets in the natural gas business to Rede Eléctrica Nacional, classified as special; (ii) dividends received by affiliates accounted for at cost (euro 98 million, of which euro 57 million related to Nigeria LNG); (iii) net gains on disposal (euro 18 million). |
The comparison with 2005 data is shown in the table below:
2004 | (million euro) | 2005 | 2006 | Change | ||||
332 | Effect of the application of the equity method of accounting | 737 | 795 | 58 | ||||||||
72 | Dividends | 33 | 98 | 65 | ||||||||
129 | Net gains on disposal | 171 | 18 | (153 | ) | |||||||
287 | Other income (losses) from investments | (27 | ) | (8 | ) | 19 | ||||||
820 | 914 | 903 | (11 | ) | ||||||||
The euro 11 million decrease in net income from investments from 2005 was due essentially to lower gains related in particular to the recording in 2005 of the gain on the sale of Italiana Petroli SpA (euro 132 million), whose effects were offset in part by improved | results of operations of affiliates in the Gas & Power division, in particular Unión Fenosa Gas SA and Blue Stream Pipeline Co BV and higher dividends distributed by Nigeria LNG. |
60
ENI ANNUAL REPORT / FINANCIAL REVIEW
Income taxes
(million euro) | 2005 | 2006 | Change | |||||
Profit before income taxes | |||||||||
Italy | 5,779 | 5,566 | (213 | ) | |||||
Outside Italy | 11,596 | 14,825 | 3,229 | ||||||
17,375 | 20,391 | 3,016 | |||||||
Income taxes | |||||||||
Italy | 2,206 | 2,237 | 31 | ||||||
Outside Italy | 5,922 | 8,331 | 2,409 | ||||||
8,128 | 10,568 | 2,440 | |||||||
Tax rate (%) | |||||||||
Italy | 38.2 | 40.2 | 2.0 | ||||||
Outside Italy | 51.1 | 56.2 | 5.1 | ||||||
46.8 | 51.8 | 5.0 | |||||||
Income taxes were euro 10,568 million, up euro 2,440 million from 2005 and reflected primarily higher income before taxes (euro 3,016 million). The 5 percentage point increase in statutory tax rate (from 46.8 to 51.8%) related mainly to: (i) the introduction of a windfall tax on upstream earnings in Algeria effective as from August 1, 2006 (with an overall impact of euro 328 million, of which euro 149 million pertaining to taxation for the period and euro 179 million pertaining to the deferred tax impact); (ii) an increase in the supplemental tax rate implemented by the British Government, applicable to profit before taxes earned by operations in the North Sea, effective as from the | beginning of the year,
affecting both current taxation and deferred tax (with an
overall impact of euro 198 million, of which euro 107
million pertaining to taxation for the period and euro 91
million pertaining to the deferred tax impact); (iii)
provisions for the settlement of a tax claim in
Venezuela. Adjusted tax rate, which is calculated by
excluding special charges, was 48.7% (46% in 2005). Minority interest Minority interest were euro 606 million and concerned primarily Snam Rete Gas SpA (euro 287 million) and Saipem (euro 311 million). |
Divisional performance
Exploration & Production
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
8,185 |
Operating profit | 12,592 |
15,580 |
2,988 |
23.7 |
||||||||||
17 |
Exclusion of special items: | 311 |
183 |
(128 |
) | ||||||||||
287 |
- asset impairments | 247 |
231 |
(16 |
) | ||||||||||
(320 |
) | - gains on disposal of assets | (61 |
) | (61 |
) | |||||||||
2 |
- provision for redundancy incentives | 7 |
13 |
6 |
|||||||||||
29 |
- provision to the reserve for contingencies | 57 |
(57 |
) | |||||||||||
19 |
- other | ||||||||||||||
8,202 |
Adjusted operating profit | 12,903 |
15,763 |
2,860 |
22.2 |
||||||||||
(85 |
) | Net financial expense (a) | (80 |
) | (59 |
) | 21 |
||||||||
9 |
Net income from investments (a) | 10 |
85 |
75 |
|||||||||||
(4,093 |
) | Income taxes (a) | (6,647 |
) | (8,510 |
) | (1,863 |
) | |||||||
50.4 |
Tax rate (%) | 51.8 |
53.9 |
2.1 |
|||||||||||
4,033 |
Adjusted net profit | 6,186 |
7,279 |
1,093 |
17.7 |
||||||||||
Results also include: | |||||||||||||||
3,334 |
- amortizations and depreciations | 4,101 |
4,776 |
675 |
16.5 |
||||||||||
563 |
- of which amortizations of exploration expenditure | 618 |
1,075 |
457 |
73.9 |
||||||||||
(a) | Excludes special items. |
61
ENI ANNUAL REPORT / FINANCIAL REVIEW
The adjusted
operating profit for the year was euro 15,763
million, up euro 2,860 million from one year ago,
reflecting higher realizations in dollars (oil up 22.4%,
natural gas up 17.8) combined with higher sold production
volumes (up 10.2 mmboe or 1.7%). This enhanced operating performance was partly offset by: (i) increased production costs and amortization charges related in particular to the higher cost of developing new fields and maintaining production levels at mature fields and sector specific inflation; (ii) an increased exploration expense; (iii) the effect of the appreciation of the euro over the dollar (approximately euro 155 million). |
This enhanced operating
performance was partly offset by an increase in the adjusted
tax rate (up 2.1% from 51.8% to 53.9%),
resulting in a euro 1.093 million increase (or 17.7%) in
the adjusted net profit for the year. Special charges excluded from the adjusted operating profit were euro 183 million and reflected mineral asset impairments offset in part by gains on the disposal of mineral assets. Special charges excluded from the adjusted net profit also include the deferred tax impact of the windfall tax in Algeria, the supplemental tax rate applicable to profit earned in the North Sea enacted by the British Government and a charge for the settlement of a taxation proceeding against a Venezuelan authority for a combined amount of euro 342 million. |
Gas & Power
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
3,428 |
Operating profit | 3,321 |
3,802 |
481 |
14.5 |
||||||||||
(12 |
) | Exclusion of inventory holding (gains) losses | (127 |
) | (67 |
) | 60 |
||||||||
32 |
Exclusion of special items | 337 |
147 |
(190 |
) | ||||||||||
5 |
of which: non-recurring items | 290 |
55 |
(235 |
) | ||||||||||
27 |
Other special items | 47 |
92 |
45 |
|||||||||||
6 |
- asset impairments | 1 |
51 |
50 |
|||||||||||
5 |
- environmental provisions | 31 |
44 |
13 |
|||||||||||
10 |
- provisions for redundancy incentives | 8 |
37 |
29 |
|||||||||||
18 |
- provision to the reserve for contingencies | 6 |
(6 |
) | |||||||||||
(12 |
) | - other | 1 |
(40 |
) | (41 |
) | ||||||||
3,448 |
Adjusted operating profit | 3,531 |
3,882 |
351 |
9.9 |
||||||||||
1,827 |
Market and Distribution | 1,777 |
2,062 |
285 |
16.0 |
||||||||||
1,164 |
Transport in Italy | 1,162 |
1,087 |
(75 |
) | (6.5 |
) | ||||||||
396 |
Transport outside Italy | 448 |
579 |
131 |
29.2 |
||||||||||
61 |
Power generation | 144 |
154 |
10 |
6.9 |
||||||||||
31 |
Net financial expense (a) | 37 |
16 |
(21 |
) | ||||||||||
215 |
Net income from investments (a) | 370 |
489 |
119 |
|||||||||||
(1,404 |
) | Income taxes (a) | (1,386 |
) | (1,525 |
) | (139 |
) | |||||||
38.0 |
Tax rate (%) | 35.2 |
34.8 |
(0.4 |
) | ||||||||||
2,290 |
Adjusted net profit | 2,552 |
2,862 |
310 |
12.1 |
||||||||||
(a) | Excludes special items. |
The adjusted operating profit of the Gas & Power division rose by euro 351 million or 9.9% to euro 3,882 million, primarily reflecting: (i) higher selling margins on natural gas against the backdrop of a favorable trading environment; (ii) a lower impact of the tariff regime implemented by the Authority for Electricity and Gas with Resolution No. 248/2004; (iii) a growth in natural gas sales by consolidated subsidiaries (up 3.14 | bcm, or 3.8%), in volumes transported outside Italy due to the coming on line of volumes transported through the Greenstream gasline from Libya, and in electricity production sold (up 2.05 TWh, or 9%). These positives were partly offset by a lower operating result from transportation activities in Italy due to the tariff regime enacted by the Authority for Electricity and Gas with Resolution No. 166/2005 and a lower operating result |
62
ENI ANNUAL REPORT / FINANCIAL REVIEW
from distribution activities
due to lower volumes. In addition, higher purchase costs were incurred in the first quarter of the year, owing to a climatic emergency. Full year adjusted net profit of euro 2,862 million increased by euro 310 million from 2005 (up 12.1%) and also benefited from the improved performance of certain equity-accounted entities. Special charges for the full year recorded in the operating profit (euro 147 million) included certain non recurring |
charges pertaining to fines imposed by the Authority for Electricity and Gas, and impairments of certain intangible assets, environmental charges and provisions for redundancy incentives. Special charges excluded from the adjusted net profit also include Eni's share of a gain recorded by the equity-accounted Galp on the sale of certain regulated gas assets. |
Refining & Marketing
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
1,080 |
Operating profit | 1,857 |
319 |
(1,538 |
) | (82.8 |
) | ||||||||
(393 |
) | Exclusion of inventory holding (gains) losses | (1,064 |
) | 215 |
1,279 |
|||||||||
236 |
Exclusion of special items | 421 |
256 |
(165 |
) | ||||||||||
of which: non-recurring items | 109 |
109 |
|||||||||||||
236 |
Other special items | 421 |
147 |
(274 |
) | ||||||||||
21 |
- impairments | 5 |
14 |
9 |
|||||||||||
142 |
- environmental charges | 337 |
111 |
(226 |
) | ||||||||||
20 |
- provision for redundancy incentives | 22 |
47 |
25 |
|||||||||||
77 |
- provision to the reserve for contingencies | 39 |
8 |
(31 |
) | ||||||||||
- increase insurance charges | 30 |
(30 |
) | ||||||||||||
(24 |
) | - other | (12 |
) | (33 |
) | (21 |
) | |||||||
923 |
Adjusted operating profit | 1,214 |
790 |
(424 |
) | (34.9 |
) | ||||||||
5 |
Net financial expense (a) | ||||||||||||||
96 |
Net income from investments (a) | 231 |
184 |
(47 |
) | ||||||||||
(350 |
) | Income taxes (a) | (500 |
) | (345 |
) | 155 |
||||||||
34.2 |
Tax rate (%) | 35.6 |
35.4 |
0.8 |
|||||||||||
674 |
Adjusted net profit | 945 |
629 |
(316 |
) | (33.4 |
) | ||||||||
(a) | Excludes special items. |
The adjusted operating profit for 2006 was euro 790 million, down euro 424 million, or 34.9%, from 2005 reflecting primarily: (i) lower realized refining margins reflecting the unfavorable trading environment and the appreciation of the euro versus the dollar, combined with the impact of longer refinery standstills due to planned maintenance partly offset by the higher profitability of processed crudes; (ii) a decline in the operating performance of Italian marketing activities due to lower volumes sold which were negatively affected by the mild weather conditions registered in the fourth quarter and the | divestment of Italiana
Petroli carried out in September 2005. On the positive
side, marketing activities in the rest of Europe
performed well as a result of higher retail margins and
higher volumes sold. The adjusted net profit for 2006 was euro 629 million, down euro 316 million, or 33.4%, from 2005, reflecting primarily a decrease in operating profit. Special charges excluded from the adjusted operating profit were euro 256 million, reflecting primarily the impact of a non-recurring charge related to a fine imposed by the Italian Antitrust Authority, and environmental provisions and provisions for redundancy incentives. |
63
ENI ANNUAL REPORT / FINANCIAL REVIEW
Petrochemical
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
320 |
Operating profit | 202 |
172 |
(30 |
) | (14.9 |
) | ||||||||
(43 |
) | Exclusion of inventory holding (gains) losses | (19 |
) | (60 |
) | (41 |
) | |||||||
(14 |
) | Exclusion of special items | 78 |
107 |
29 |
||||||||||
of which: non-recurring items | 13 |
13 |
|||||||||||||
(14 |
) | Other special items | 78 |
94 |
16 |
||||||||||
3 |
- impairments | 29 |
50 |
21 |
|||||||||||
6 |
- provision for redudancy incentives | 4 |
19 |
15 |
|||||||||||
3 |
- provision to the reserve for contingencies | 36 |
31 |
(5 |
) | ||||||||||
- increase insurance charges | 17 |
(17 |
) | ||||||||||||
(26 |
) | - other | (8 |
) | (6 |
) | 2 |
||||||||
263 |
Adjusted operating profit | 261 |
219 |
(42 |
) | (16.1 |
) | ||||||||
2 |
Net income from investments (a) | 3 |
2 |
(1 |
) | ||||||||||
(23 |
) | Income taxes (a) | (37 |
) | (47 |
) | (10 |
) | |||||||
242 |
Adjusted net profit | 227 |
174 |
(53 |
) | (23.3 |
) | ||||||||
(a) | Excludes special items. |
Adjusted operating profit was euro 219 million, down euro 42 million, or 16.1%, from a year ago, due to lower selling margins on products recorded in the first half of the year. This decline affected all businesses with the exception of polyethylene, owing to increases in the cost of oil-based feedstocks not transferred to selling prices. Results for the year were also negatively impacted by the accident occurred at the Priolo refinery in April resulting in lower | product availability. These
negative factors were offset in part by the positive
effect of Eni's sales mix along with an improved
industrial and commercial performance. Special charges excluded from the adjusted operating profit were euro 107 million, reflecting primarily asset impairments, the impact of a non-recurring charge related to a fine imposed by an European antitrust authority, and provisions for risks and redundancy incentives. |
Engineering & Construction
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
203 |
Operating profit | 307 |
505 |
198 |
64.5 |
||||||||||
12 |
Exclusion of special items: | 7 |
3 |
(4 |
) | ||||||||||
10 |
- provision for redudancy incentives | 3 |
2 |
(1 |
) | ||||||||||
- impairments | 4 |
1 |
(3 |
) | |||||||||||
1 |
- provision to the reserve for contingencies | ||||||||||||||
1 |
- other | ||||||||||||||
215 |
Adjusted operating profit | 314 |
508 |
194 |
61.8 |
||||||||||
118 |
Net income from investments (a) | 141 |
66 |
(75 |
) | ||||||||||
(81 |
) | Income taxes (a) | (127 |
) | (174 |
) | (47 |
) | |||||||
252 |
Adjusted net profit | 328 |
400 |
72 |
22.0 |
||||||||||
(a) | Excludes special items. |
Adjusted operating
profit for 2006 was euro 508 million, up euro
194 million (up 61.8%) from 2005. This increase was recorded in particular in the following areas: (i) Offshore, due to higher activity in the Caspian region and Nigeria; (ii) Offshore Drilling, due to higher tariffs for the Scarabeo 3 and Scarabeo 5 semi-submersible platforms and higher activity levels |
of the Perro Negro 5 jack-up
and Scarabeo 4 semi-submersible platform; (iii) Onshore
due to higher activity related essentially to the
start-up of some large projects acquired in 2005. Adjusted net profit of euro 400 million increased by euro 72 million from 2005 (up 22%) due to an enhanced operating performance, offset in part by losses of affiliates. |
64
ENI ANNUAL REPORT / FINANCIAL REVIEW
Other activities
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
(395 |
) | Operating profit | (934 |
) | (622 |
) | 312 |
33.4 |
|||||||
172 |
Exclusion of special items | 638 |
323 |
(315 |
) | ||||||||||
of which: non-recurring items | 62 |
62 |
|||||||||||||
172 |
Other special items | 638 |
261 |
(377 |
) | ||||||||||
84 |
- environmental charges | 413 |
126 |
(287 |
) | ||||||||||
15 |
- provision to the reserve for contingencies | 130 |
75 |
(55 |
) | ||||||||||
19 |
- impairments | 75 |
22 |
(53 |
) | ||||||||||
6 |
- provision for redudancy incentives | 6 |
17 |
11 |
|||||||||||
48 |
- other | 14 |
21 |
7 |
|||||||||||
(223 |
) | Adjusted operating profit | (296 |
) | (299 |
) | (3 |
) | (1.0 |
) | |||||
Net financial expense (a) | (7 |
) | (7 |
) | |||||||||||
4 |
Net income from investments (a) | (1 |
) | 5 |
6 |
||||||||||
(22 |
) | Income taxes (a) | |||||||||||||
(241 |
) | Adjusted net profit | (297 |
) | (301 |
) | (4 |
) | (1.3 |
) | |||||
(a) | Excludes special items. |
In 2006 Syndial reported an adjusted
operating loss of euro 299 million, in line with
the previous year. Special charges excluded from the adjusted operating profit totalled euro 323 million (euro 638 million in 2005), |
reflecting primarily environmental charges and provisions for risks, and the impact of a non-recurring charge related to a fine imposed by the European antitrust authority. |
Corporate and financial companies
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
(363 |
) | Operating profit | (377 |
) | (296 |
) | 81 |
21.5 |
|||||||
176 |
Exclusion of special items: | 149 |
56 |
(93 |
) | ||||||||||
11 |
- provision for redudancy incentives | 29 |
43 |
14 |
|||||||||||
91 |
- provision to the reserve for contingencies | 64 |
11 |
(53 |
) | ||||||||||
72 |
- environmental charges | 54 |
(54 |
) | |||||||||||
- impairments | 2 |
(2 |
) | ||||||||||||
2 |
- other | 2 |
|||||||||||||
(187 |
) | Adjusted operating profit | (228 |
) | (240 |
) | (12 |
) | (5.3 |
) | |||||
(107 |
) | Net financial expense (a) | (296 |
) | 205 |
501 |
|||||||||
(14 |
) | Net income from investments (a) | 23 |
(23 |
) | ||||||||||
222 |
Income taxes (a) | 359 |
89 |
(270 |
) | ||||||||||
(86 |
) | Adjusted net profit | (142 |
) | 54 |
196 |
.. |
||||||||
(a) | Excludes special items. |
The aggregate Corporate and financial companies reported an adjusted operating loss of euro 240 million (euro 228 million in 2005) which excludes special charges of euro 56 million (euro 149 million in 2005) related mainly to provision for redundancy incentives. | Adjusted net profit of euro 54 million increased by euro 196 million from 2005 due to a better financing performance reflecting the positive change in the fair value evaluation of financial derivative instruments and higher interest income deriving from a higher average availability of cash and cash equivalents. |
65
ENI ANNUAL REPORT / FINANCIAL REVIEW
NON-GAAP Measures
Reconciliation of reported operating profit and
net profit to results on an adjusted basis
Management evaluates Group and business performance on the basis
of adjusted operating profit and adjusted net profit, which are
arrived at by excluding inventory holding gains or losses and
special items. Further, finance charges on finance debt, interest
income, charges or income deriving from the fair value evaluation
of derivative financial instruments held for trading purposes,
and exchange rate differences are excluded when determining
adjusted net profit of each business segment.
Taxation effect of such items excluded from adjusted net profit
is determined based on the specific rate of taxes applicable to
each item, with the exception of finance charges or income, to
which the Italian statutory tax rate of 33% is applied.
Adjusted operating profit and adjusted net profit are non-GAAP
financial measures under either IFRS, or U.S. GAAP. Management
includes them to facilitate comparison of base business
performance across periods and allow financial analysts to
evaluate Enis trading performance on the basis of their
forecasting models. In addition, management uses segmental
adjusted net profit when calculating return on average capital
employed (ROACE) by each business segment.
The following is a description of items which are excluded from
the calculation of adjusted results.
Inventory holding gain or loss is the difference between the cost
of sales of the volumes sold in the period based on the cost of
supplies of the same period and the cost of sales of the volumes
sold in the period calculated using the weighted-average cost
method of inventory accounting.
Special items include certain relevant income or charges
pertaining to either: (i) infrequent or unusual events and
transactions, being identified as non-recurring items under such
circumstances; or (ii) certain events or transactions which are
not considered to be representative of the ordinary course of
business, as in the case of environmental provisions,
restructuring charges, asset impairments or write ups and gains
or losses on divestments even though they occurred in past
exercises or are likely to occur in future ones. As provided for
in Decision No. 15519 of July 27, 2006 of the Italian market
regulator (CONSOB), non recurring material income or charges are
to be clearly reported in the managements discussion and
financial tables.
Finance charges or income related to net borrowings excluded from
the adjusted net profit of business segments are comprised of
interest charges on finance debt and interest income earned on
cash and cash equivalents not related to operations. In addition
the effect of the fair value evaluation of derivative financial
instruments held for trading purposes and exchange rate
differences are excluded from the adjusted net profit of business
segments. Therefore, the adjusted net profit of business segments
includes finance charges or income deriving from certain
segment-operated assets, i.e., interest income on
certain receivable financing and securities related to operations
and finance charges pertaining to the accretion of certain
provisions recorded on a discounted basis (as in the case of
asset retirement obligations in the Exploration and Production
division).
Finance charges or interest income and related taxation effects,
excluded from the adjusted net profit of the business segments
are allocated on the aggregate Corporate and financial companies.
For a reconciliation of adjusted operating profit and adjusted
net profit to reported operating profit and net profit see tables
below.
66
ENI ANNUAL REPORT / FINANCIAL REVIEW
2006
(million euro) | E&P | G&P | R&M | Petrochemical | E&C | Other activities | Corporate and financial companies | Unrealized profit in inventory | Group | |||||||||
Reported operating profit | 15,580 |
3,802 |
319 |
172 |
505 |
(622 |
) | (296 |
) | (133 |
) | 19,327 |
|||||||||||||||
Exclusion of inventory holding (gains) losses | (67 |
) | 215 |
(60 |
) | 88 |
|||||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 55 |
109 |
13 |
62 |
239 |
||||||||||||||||||||||
Other special charges: | 183 |
92 |
147 |
94 |
3 |
261 |
56 |
836 |
|||||||||||||||||||
environmental charges | 44 |
111 |
126 |
11 |
292 |
||||||||||||||||||||||
asset impairments | 231 |
51 |
14 |
50 |
1 |
22 |
369 |
||||||||||||||||||||
gains on disposal of assets | (61 |
) | (61 |
) | |||||||||||||||||||||||
provisions to the reserve for contingencies | 8 |
31 |
75 |
114 |
|||||||||||||||||||||||
provision for redundancy incentives | 13 |
37 |
47 |
19 |
2 |
17 |
43 |
178 |
|||||||||||||||||||
other | (40 |
) | (33 |
) | (6 |
) | 21 |
2 |
(56 |
) | |||||||||||||||||
Special items of operating profit | 183 |
147 |
256 |
107 |
3 |
323 |
56 |
1,075 |
|||||||||||||||||||
Adjusted operating profit | 15,763 |
3,882 |
790 |
219 |
508 |
(299 |
) | (240 |
) | (133 |
) | 20,490 |
|||||||||||||||
Net financial (expense) income (*) | (59 |
) | 16 |
(7 |
) | 205 |
155 |
||||||||||||||||||||
Net income from investments (*) | 85 |
489 |
184 |
2 |
66 |
5 |
831 |
||||||||||||||||||||
Income taxes (*) | (8,510 |
) | (1,525 |
) | (345 |
) | (47 |
) | (174 |
) | 89 |
54 |
(10,458 |
) | |||||||||||||
Tax rate (%) | 53.9 |
34.8 |
35.4 |
48.7 |
|||||||||||||||||||||||
Adjusted net profit | 7,279 |
2,862 |
629 |
174 |
400 |
(301 |
) | 54 |
(79 |
) | 11,018 |
||||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 606 |
||||||||||||||||||||||||||
- Enis adjusted net profit | 10,412 |
||||||||||||||||||||||||||
Enis reported net profit | 9,217 |
||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 33 |
||||||||||||||||||||||||||
Exclusion of special items | 1,162 |
||||||||||||||||||||||||||
Non-recurring (income) charges | 239 |
||||||||||||||||||||||||||
Other special charges | 923 |
||||||||||||||||||||||||||
Enis adjusted net profit | 10,412 |
(*) | Excludes special items. |
67
ENI ANNUAL REPORT / FINANCIAL REVIEW
2005
(million euro) | E&P | G&P | R&M | Petrochemical | E&C | Other activities | Corporate and financial companies | Unrealized profit in inventory | Group | |||||||||
Reported operating profit | 12,592 |
3,321 |
1,857 |
202 |
307 |
(934 |
) | (377 |
) | (141 |
) | 16,827 |
|||||||||||||||
Exclusion of inventory holding (gains) losses | (127 |
) | (1,064 |
) | (19 |
) | (1,210 |
) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 290 |
290 |
|||||||||||||||||||||||||
Other special charges: | 311 |
47 |
421 |
78 |
7 |
638 |
149 |
1,651 |
|||||||||||||||||||
environmental charges | 31 |
337 |
413 |
54 |
835 |
||||||||||||||||||||||
asset impairments | 247 |
1 |
5 |
29 |
4 |
75 |
2 |
363 |
|||||||||||||||||||
provisions to the reserve for contingencies | 39 |
36 |
126 |
201 |
|||||||||||||||||||||||
increase insurance charges | 57 |
6 |
30 |
17 |
4 |
64 |
178 |
||||||||||||||||||||
provision for redundancy incentives | 7 |
8 |
22 |
4 |
3 |
6 |
29 |
79 |
|||||||||||||||||||
other | 1 |
(12 |
) | (8 |
) | 14 |
(5 |
) | |||||||||||||||||||
Special items of operating profit | 311 |
337 |
421 |
78 |
7 |
638 |
149 |
1,941 |
|||||||||||||||||||
Adjusted operating profit | 12,903 |
3,531 |
1,214 |
261 |
314 |
(296 |
) | (228 |
) | (141 |
) | 17,558 |
|||||||||||||||
Net financial (expense) income (*) | (80 |
) | 37 |
(296 |
) | (339 |
) | ||||||||||||||||||||
Net income from investments (*) | 10 |
370 |
231 |
3 |
141 |
(1 |
) | 23 |
777 |
||||||||||||||||||
Income taxes (*) | (6,647 |
) | (1,386 |
) | (500 |
) | (37 |
) | (127 |
) | 359 |
52 |
(8,286 |
) | |||||||||||||
Tax rate (%) | 51.8 |
35.2 |
34.6 |
46.0 |
|||||||||||||||||||||||
Adjusted net profit | 6,186 |
2,552 |
945 |
227 |
328 |
(297 |
) | (142 |
) | (89 |
) | 9,710 |
|||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 459 |
||||||||||||||||||||||||||
- Enis adjusted net profit | 9,251 |
||||||||||||||||||||||||||
Enis reported net profit | 8,788 |
||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (759 |
) | |||||||||||||||||||||||||
Exclusion of special items | 1,222 |
||||||||||||||||||||||||||
Non-recurring (income) charges | 290 |
||||||||||||||||||||||||||
Other special charges | 932 |
||||||||||||||||||||||||||
Enis adjusted net profit | 9,251 |
(*) | Excludes special items. |
68
ENI ANNUAL REPORT / FINANCIAL REVIEW
2004
(million euro) | E&P | G&P | R&M | Petrochemical | E&C | Other activities | Corporate and financial companies | Unrealized profit in inventory | Group | |||||||||
Reported operating profit | 8,185 |
3,428 |
1,080 |
320 |
203 |
(395 |
) | (346 |
) | (59 |
) | 12,399 |
|||||||||||||||
Exclusion of inventory holding (gains) losses | (12 |
) | (393 |
) | (43 |
) | (448 |
) | |||||||||||||||||||
Exclusion of special items | |||||||||||||||||||||||||||
of which: | |||||||||||||||||||||||||||
Non-recurring (income) charges | 5 |
5 |
|||||||||||||||||||||||||
Other special charges: | 17 |
27 |
236 |
(14 |
) | 12 |
172 |
176 |
626 |
||||||||||||||||||
environmental charges | 5 |
142 |
84 |
72 |
303 |
||||||||||||||||||||||
asset impairments | 287 |
6 |
21 |
3 |
19 |
336 |
|||||||||||||||||||||
gains on disposal of assets | (320 |
) | (320 |
) | |||||||||||||||||||||||
provisions to the reserve for contingencies | 29 |
18 |
77 |
3 |
1 |
15 |
143 |
||||||||||||||||||||
increase insurance charges | 91 |
91 |
|||||||||||||||||||||||||
provision for redundancy incentives | 2 |
10 |
20 |
6 |
10 |
6 |
11 |
65 |
|||||||||||||||||||
other | 19 |
(12 |
) | (24 |
) | (26 |
) | 1 |
48 |
2 |
8 |
||||||||||||||||
Special items of operating profit | 17 |
32 |
236 |
(14 |
) | 12 |
172 |
176 |
631 |
||||||||||||||||||
Adjusted operating profit | 8,202 |
3,448 |
923 |
263 |
215 |
(223 |
) | (187 |
) | (59 |
) | 12,582 |
|||||||||||||||
Net financial (expense) income (*) | (85 |
) | 31 |
5 |
(107 |
) | (156 |
) | |||||||||||||||||||
Net income from investments (*) | 9 |
215 |
96 |
2 |
118 |
4 |
(14 |
) | 430 |
||||||||||||||||||
Income taxes (*) | 4,093 |
(1,404 |
) | (350 |
) | (23 |
) | (81 |
) | (22 |
) | 222 |
22 |
(5,729 |
) | ||||||||||||
Tax rate (%) | 50.4 |
38.0 |
34.2 |
44.6 |
|||||||||||||||||||||||
Adjusted net profit | 4,033 |
2,290 |
674 |
242 |
252 |
(241 |
) | (88 |
) | (37 |
) | 7,127 |
|||||||||||||||
of which: | |||||||||||||||||||||||||||
- net profit of minorities | 482 |
||||||||||||||||||||||||||
- Enis adjusted net profit | 6,645 |
||||||||||||||||||||||||||
Enis reported net profit | 7,059 |
||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (281 |
) | |||||||||||||||||||||||||
Exclusion of special items | (133 |
) | |||||||||||||||||||||||||
Non-recurring (income) charges | 5 |
||||||||||||||||||||||||||
Other special charges | (138 |
) | |||||||||||||||||||||||||
Enis adjusted net profit | 6,645 |
(*) | Excludes special items. |
69
ENI ANNUAL REPORT / FINANCIAL REVIEW
Analysis of special items
2004 | (million euro) | 2005 | 2006 | Change | ||||
5 | Non-recurring (income) charges | 290 | 239 | (51 | ) | |||||||
626 | Other special charges: | 1,651 | 836 | (815 | ) | |||||||
303 | environmental charges | 835 | 292 | (543 | ) | |||||||
336 | asset impairments | 363 | 369 | 6 | ||||||||
(320 | ) | gains on disposal of assets | (61 | ) | (61 | ) | ||||||
234 | provisions to the reserve for contingencies | 379 | 114 | (265 | ) | |||||||
of which: | ||||||||||||
91 | increase insurance charges | 178 | (178 | ) | ||||||||
65 | provisions for redundancy incentives | 79 | 178 | 99 | ||||||||
8 | other | (5 | ) | (56 | ) | (51 | ) | |||||
631 | Special items of operating profit | 1,941 | 1,075 | (866 | ) | |||||||
Net financial (expense) income | 27 | (6 | ) | (33 | ) | |||||||
(390 | ) | Net income from investments | (137 | ) | (72 | ) | 65 | |||||
of which: | ||||||||||||
gain on the disposal of Italiana Petroli (IP) | (132 | ) | 132 | |||||||||
gain on Galp Energia SGPS SA (disposal assets Rede Electrica National) | (73 | ) | (73 | ) | ||||||||
(308 | ) | gain on the disposal of shares of Snam Rete Gas SpA | ||||||||||
(374 | ) | Income taxes | (609 | ) | 165 | 774 | ||||||
of which: | ||||||||||||
supplemental tax rate UK | 91 | 91 | ||||||||||
windfall tax Algeria | 179 | 179 | ||||||||||
legal proceeding in Venezuela | 77 | 77 | ||||||||||
(133 | ) | Total special items of net profit | 1,222 | 1,162 | (60 | ) | ||||||
70
ENI ANNUAL REPORT / FINANCIAL REVIEW
Summarized Group Balance Sheet
Summarized group balance sheet aggregates the amount of assets and liabilities derived from the statutory balance sheet in accordance with functional criteria which consider the enterprise conventionally divided into the three fundamental areas focusing on resource investments, operations and financing. Management believes that this summarized group balance sheet is useful information in assisting investors | to assess Eni's capital structure and to analyze its sources of funds and investments in fixed assets and working capital. Management uses the summarized group balance sheet to calculate key ratios such as return on capital employed (ROACE) and the proportion of net borrowings to shareholders' equity (leverage) intended to evaluate whether Eni's financing structure is sound and well-balanced. |
Summarized Group Balance Sheet (a)
(million euro) | Dec. 31, 2005 |
Sep. 30, 2006 |
Dec. 31, 2006 |
Change vs Dec. 31, 2005 |
Change vs |
|||||
Fixed assets | |||||||||||||||
Property, plant and equipment, net | 45,013 | 43,408 | 44,312 | (701 | ) | 904 | |||||||||
Other tangible assets | 656 | 629 | 629 | (27 | ) | ||||||||||
Inventories - compulsory stock | 2,194 | 1,962 | 1,827 | (367 | ) | (135 | ) | ||||||||
Intangible assets, net | 3,194 | 3,285 | 3,753 | 559 | 468 | ||||||||||
Investments, net | 4,311 | 4,234 | 4,246 | (65 | ) | 12 | |||||||||
Accounts receivable financing and securities related to operations | 775 | 640 | 557 | (218 | ) | (83 | ) | ||||||||
Net accounts payable in relation to capital expenditure | (1,196 | ) | (912 | ) | (1,090 | ) | 106 | (178 | ) | ||||||
54,291 | 53,273 | 54,234 | (57 | ) | 961 | ||||||||||
Net working capital | |||||||||||||||
Inventories | 3,563 | 4,440 | 4,752 | 1,189 | 312 | ||||||||||
Trade accounts receivable | 14,101 | 12,858 | 15,230 | 1,129 | 2,372 | ||||||||||
Trade accounts payable | (8,170 | ) | (8,136 | ) | (10,528 | ) | (2,358 | ) | (2,392 | ) | |||||
Taxes payable and reserve for net deferred income tax liabilities | (4,857 | ) | (6,867 | ) | (5,396 | ) | (539 | ) | 1,471 | ||||||
Reserve for contingencies | (7,679 | ) | (7,741 | ) | (8,614 | ) | (935 | ) | (873 | ) | |||||
Other operating assets and liabilities (b) | (526 | ) | (553 | ) | (641 | ) | (115 | ) | (88 | ) | |||||
(3,568 | ) | (5,999 | ) | (5,197 | ) | (1,629 | ) | 802 | |||||||
Employee termination indemnities and other benefits | (1,031 | ) | (1,054 | ) | (1,071 | ) | (40 | ) | (17 | ) | |||||
Capital employed, net | 49,692 | 46,220 | 47,966 | (1,726 | ) | 1,746 | |||||||||
Shareholders equity including minority interests | 39,217 | 42,370 | 41,199 | 1,982 | (1,171 | ) | |||||||||
Net borrowings | 10,475 | 3,850 | 6,767 | (3,708 | ) | 2,917 | |||||||||
Total liabilities and shareholders equity | 49,692 | 46,220 | 47,966 | (1,726 | ) | 1,746 | |||||||||
(a) | For a reconciliation to the statutory balance sheet see paragraph Reconciliation of Summarized Group Balance Sheet and Statement of Cash Flows to statutory schemes pages 77 and 78. | |
(b) | Include operating financing receivables and securities related to operations for euro 249 million (euro 492 million and euro 261 million at December 31, 2005 and September 30, 2006, respectively) and securities covering technical reserves of Padana Assicurazioni SpA for euro 417 million (euro 453 million and euro 550 million at December 31, 2005 and September 30, 2006, respectively). |
The appreciation of the euro over other currencies, in particular the dollar (at December 31, 2006 the EUR/USD exchange rate was 1.317 as compared to 1.180 at December 31, 2005, up 11.6%) determined with respect to year-end 2006, an estimated decrease in the book value of net capital employed of approximately euro 2,200 million, in net equity of approximately euro 1,550 million and in net borrowings of approximately euro 650 million as a result of currency conversions at December 31, 2006. | At December 31, 2006, net
capital employed totaled euro 47,966 million,
representing a decrease of euro 1,726 million from
December 31, 2005. Fixed assets (euro 54,234 million) are substantially in line with December 31, 2005 (euro 54,291 million). Provisions for depreciation, amortization and impairments (euro 6,421 million) and the effect of the appreciation of the euro over the dollar in the translation of financial statements of subsidiaries operating with currencies other than the euro (euro 2,200 million) offset capital expenditure for the |
71
ENI ANNUAL REPORT / FINANCIAL REVIEW
period (euro 7,833 million).
Property, plant and equipment (euro 44,312 million) were
primarily related to the Exploration & Production
(51.9%), Gas & Power (31.7%) and Refining &
Marketing (8.6%) segments. Provisions for depreciation,
amortization and writedowns (euro 49,143 million)
represented 52.6% of gross property, plant and equipment
(50.4% at December 31, 2005). Other assets included, for a book value of $829 million (corresponding to euro 629 million at the year end EUR/USD exchange rate), the assets related to the service contract for mining activities in the Dación area of the Venezuelan branch of Eni's subsidiary Eni Dación BV. With effective date April 1, 2006, the Venezuelan State oil company Petróleos de Venezuela SA (PDVSA) unilaterally terminated the Operating Service Agreement (OSA) governing activities at the Dación oil field where Eni acted as a contractor, holding a 100% working interest. As a consequence, starting on the same day, operations at the Dación oil field are conducted by PDVSA. Eni proposed to PDVSA to agree on terms in order to recover the fair value of its Dación assets. On November 2006, Eni commenced a proceeding before an International Centre for Settlement of Investment Disputes (ICSID) Tribunal (i.e. a tribunal acting under the auspices of the ICSID Convention and being competent pursuant to the Treaty) to claim its rights. In fact, a bilateral investments treaty is in place between the Netherlands and Venezuela (the Treaty), Despite this action, Eni is still ready to negotiate a solution with PDVSA to obtain a fair compensation for its assets. Based on the opinion of its legal consultants, Eni believes to be entitled to a compensation for such expropriation in an amount equal to the market value of the OSA before the expropriation took place. The market value of the OSA depends upon its expected profits. In accordance with established international practice, Eni has calculated the OSAs market value using the discounted cash flow method, based on Enis interest in the expected future hydrocarbon production and associated capital |
expenditures and operating
costs, and applying to the projected cash flow a discount
rate reflecting Enis cost of capital as well as the
specific risk of concerned activities. Independent
evaluations carried out by a primary petroleum consulting
firm fully support Enis internal evaluation. The
estimated net present value of Enis interest in the
Dación field, as calculated by Eni, is higher than the
net book value of the Dación assets which consequently
have not been impaired. In accordance with the ICSID
Convention, a judgement by the ICSID Tribunal awarding
compensation to Eni would be binding upon the parties and
immediately enforceable as if it were a final judgement
of a court of each of the States that have ratified the
ICSID Convention. The ICSID Convention was ratified in
143 States. Accordingly, if Venezuela fails to comply
with the award and to pay the compensation, Eni could
take steps to enforce the award against commercial assets
of the Venezuelan Government almost anywhere those may be
located (subject to national law provisions on sovereign
immunity). At December 31, 2006, net working capital totaled euro 5,197 million, representing a decrease of euro 1,629 million from December 31, 2005 mainly due to: (i) an increase in taxes payable and the reserve for net deferred tax liabilities, reflecting primarily the recording of deferred tax liabilities for the period; (ii) an increase in the reserve for contingencies, due to the evaluation review of the site restoration and abandonment reserve (in particular in the Exploration & Production division), the risk provisions with respect to certain fines imposed by certain regulatory and antitrust authorities, environmental charges and provision for redundancy incentives. Commercial working capital (inventories and trade accounts receivable/payable) was substantially in line with the value recorded in 2005. The share of the Exploration & Production, Gas & Power and Refining & Marketing divisions on net capital employed was 89.9% (90.9% at December 31, 2005). |
Return On Average Capital Employed (ROACE)
Return on Average Capital Employed for the Group, on an adjusted basis is the return on Group average capital invested, calculated as the ratio between net adjusted profit before minority interests, plus net finance charges on net borrowings, less the related tax effect and net average capital employed. The tax rate applied on finance charges is the Italian statutory tax rate of 33%. The capital invested as of period-end used for the calculation of net average | capital invested is obtained by deducting inventory gains or losses as of in the period, rectified from the related tax effect. ROACE by business segment is determined as the ratio between adjusted net profit and net average capital invested pertaining to each business segment and rectifying the net capital invested as of period-end, from net inventory gains or losses (after applying the business segment specific tax rate). |
72
ENI ANNUAL REPORT / FINANCIAL REVIEW
2006 | (million euro) | Exploration & Production | Gas & Power | Refining & Marketing | Group | ||||
Adjusted net profit | 7,279 |
2,862 |
629 |
11,018 |
||||
Exclusion of after-tax finance expenses/interest income | - |
- |
- |
46 |
||||
Adjusted net profit unlevered | 7,279 |
2,862 |
629 |
11,064 |
||||
Capital employed, net: | ||||||||
- at the beginning of period | 20,206 |
18,978 |
5,993 |
49,692 |
||||
- at the end of period | 18,590 |
18,864 |
5,766 |
47,999 |
||||
Average capital employed, net | 19,398 |
18,921 |
5,880 |
48,846 |
||||
ROACE (%) | 37.5 |
15.1 |
10.7 |
22.7 |
||||
2005 | (million euro) | Exploration & Production | Gas & Power | Refining & Marketing | Group | ||||
Adjusted net profit | 6,186 |
2,552 |
945 |
9,710 |
||||
Exclusion of after-tax finance expenses/interest income | - |
- |
- |
42 |
||||
Adjusted net profit unlevered | 6,186 |
2,552 |
945 |
9,752 |
||||
Capital employed, net: | ||||||||
- at the beginning of period | 17,954 |
18,387 |
5,081 |
45,983 |
||||
- at the end of period | 20,206 |
18,898 |
5,326 |
48,933 |
||||
Average capital employed, net | 19,080 |
18,643 |
5,204 |
47,458 |
||||
ROACE (%) | 32.4 |
13.7 |
18.2 |
20.5 |
||||
2004 | (million euro) | Exploration & Production | Gas & Power | Refining & Marketing | Group | ||||
Adjusted net profit | 4,033 |
2,290 |
674 |
7,127 |
||||
Exclusion of after-tax finance expenses/interest income | - |
- |
- |
115 |
||||
Adjusted net profit unlevered | 4,033 |
2,290 |
674 |
7,242 |
||||
Capital employed, net: | ||||||||
- at the beginning of period | 17,635 |
18,017 |
5,536 |
45,240 |
||||
- at the end of period | 17,937 |
18,383 |
4,835 |
45,724 |
||||
Average capital employed, net | 17,786 |
18,200 |
5,186 |
45,482 |
||||
ROACE (%) | 22.7 |
12.6 |
13.0 |
15.9 |
||||
Net borrowings and leverage
Leverage is a measure of a company's level of indebtedness, calculated as the ratio between net borrowings which is calculated by excluding cash and cash equivalents and certain very liquid assets from financial debt and shareholders' equity, including minority interests. Management makes use of leverage in order to assess the soundness and efficiency of the | Group balance sheet in terms
of optimal mix between net borrowings and net equity, and
to carry out benchmark analysis with industry standards. In the medium term, management plans to maintain a strong financial structure targeting a level of leverage up to 0.40. |
(million euro) |
Dec. 31, 2005 |
Sep. 30, 2006 |
Dec. 31, 2006 |
Change vs Dec. 31, 2005 |
Change vs |
|||||
Debts and bonds | 12,998 | 11,006 | 11,699 | (1,299 | ) | 693 | |||||||||
Cash and cash equivalents | (1,333 | ) | (6,459 | ) | (3,985 | ) | (2,652 | ) | 2,474 | ||||||
Securities not related to operations | (931 | ) | (418 | ) | (552 | ) | 379 | (134 | ) | ||||||
Non-operating financing receivables | (259 | ) | (279 | ) | (395 | ) | (136 | ) | (116 | ) | |||||
Net borrowings | 10,475 | 3,850 | 6,767 | (3,708 | ) | 2,917 | |||||||||
Shareholders equity including minority interest | 39,217 | 42,370 | 41,199 | 1,982 | (1,171 | ) | |||||||||
Leverage | 0.27 | 0.09 | 0.16 | (0.11 | ) | 0.07 | |||||||||
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ENI ANNUAL REPORT / FINANCIAL REVIEW
Net borrowings at December 31, 2006 were euro 6,767 million, representing a decrease of euro 3,708 million from December 31, 2005 due mainly to cash inflow generated by operating activities (euro 17,001 million). Currency translation effects also contributed to the reduction in net borrowings. Debts and bonds amounted to euro 11,699 million, of which euro 4,290 million were short-term (including the portion of long-term debt due within 12 months for euro 890 million) and euro 7,409 million were long-term. | At December 31, 2006,
leverage was 0.16, compared with 0.27 at December 31,
2005. Net borrowings increased by euro 2,917 million from September 30, 2006 (euro 3,850 million) as cash inflow generated by operating activities (euro 1,780 million) partially covered the financial requirements for capital expenditure and investments amounting to euro 2,963 million, the payment of an interim dividend for fiscal year 2006 by the parent company Eni SpA (euro 2,210 million) and the repurchase of own shares for euro 105 million. |
Changes in shareholders equity
(million euro)
Shareholders equity including minority interest at December 31, 2005 | 39,217 | ||||
Net profit for the period | 9,823 | ||||
Dividends to shareholders | (4,610 | ) | |||
Shares repurchased | (1,241 | ) | |||
Issue of ordinary share capital for employee share schemes | 85 | ||||
Dividends paid by consolidated subsidiaries | (222 | ) | |||
Effect on equity of the shares repurchased by consolidated subsidiaries (Snam Rete Gas/Saipem) | (306 | ) | |||
Exchange differences from translation of financial statements denominated in currencies other than the euro | (1,537 | ) | |||
Other changes | (10 | ) | |||
Total changes | 1,982 | ||||
Shareholders equity including minority interest at December 31, 2006 | 41,199 |
Shareholders equity at December 31, 2006 (euro 41,199 million) was up euro 1,982 million from December 31, 2005, due primarily to net profit before minority | interest (euro 9,823 million), offset in part by the payment of Eni's 2005 dividends, the purchase of own shares and currency translation effects. |
Summarized cash flow statement and change in net borrowings
Eni's summarized group cash flow statement derives from the statutory statement of cash flows. It allows to create a link between changes in cash and cash equivalents (deriving from the statutory cash flows statement) occurred from the beginning of period to the end of period and changes in net borrowings (deriving from the summarized cash flow statement) occurred from the beginning of period to the end of period. The measure enabling to make such a link is represented by free cash flow which is the cash in | excess of capital expenditure needs. Starting from free cash flow it is possible to determine either: (i) changes in cash and cash equivalents for the period by adding/deducting cash flows relating to financing debts/receivables (issuance/repayment of debt and receivables related to financing activities), shareholders' equity (dividends paid, net repurchase of own shares, capital issuance) and the effect of changes in consolidation and of exchange differences; (ii) changes in net borrowings for the period by adding/deducting cash flows relating to shareholders' equity and the effect of changes in consolidation and of exchange differences. |
74
ENI ANNUAL REPORT / FINANCIAL REVIEW
Summarized Group Cash Flow Statement (a)
2004 | (million euro) | 2005 | 2006 | Change | ||||
7,541 | Net profit | 9,247 | 9,823 | 576 | ||||||||
Adjustments to reconcile to cash generated from operating income before changes in working capital: | ||||||||||||
5,092 | - amortization and depreciation and other non-monetary items | 6,518 | 5,753 | (765 | ) | |||||||
(793 | ) | - net gains on disposal of assets | (220 | ) | (59 | ) | 161 | |||||
5,740 | - dividends, interest, taxes and other changes | 8,471 | 10,435 | 1,964 | ||||||||
17,580 | Cash generated from operating profit before changes in working capital | 24,016 | 25,952 | 1,936 | ||||||||
(909 | ) | Changes in working capital related to operations | (2,422 | ) | (1,024 | ) | 1,398 | |||||
(4,171 | ) | Dividends received, taxes paid, interest (paid) received | (6,658 | ) | (7,927 | ) | (1,269 | ) | ||||
12,500 | Net cash provided by operating activities | 14,936 | 17,001 | 2,065 | ||||||||
(7,499 | ) | Capital expenditure | (7,414 | ) | (7,833 | ) | (419 | ) | ||||
(316 | ) | Investments | (127 | ) | (95 | ) | 32 | |||||
1,547 | Disposals | 542 | 328 | (214 | ) | |||||||
97 | Other cash flow related to capital expenditure, investments and disposals | 293 | 361 | 68 | ||||||||
6,329 | Free cash flow | 8,230 | 9,762 | 1,532 | ||||||||
211 | Borrowings (repayment) of debt related to financing activities | (109 | ) | 216 | 325 | |||||||
(3,743 | ) | Changes in short and long-term financial debt | (540 | ) | (682 | ) | (142 | ) | ||||
(3,175 | ) | Dividends paid and changes in minority interests and reserves | (7,284 | ) | (6,443 | ) | 841 | |||||
(55 | ) | Effect of changes in consolidation and exchange differences | 33 | (201 | ) | (234 | ) | |||||
(433 | ) | NET CASH FLOW FOR THE PERIOD | 330 | 2,652 | 2,322 |
2004 | (million euro) | 2005 | 2006 | Change | ||||
Change in net borrowings | ||||||||||||
6,329 | Free cash flow | 8,230 | 9,762 | 1,532 | ||||||||
Net borrowings of acquired companies | (19 | ) | 19 | |||||||||
190 | Net borrowings of divested companies | 21 | 1 | (20 | ) | |||||||
(64 | ) | Exchange differences on net borrowings and other changes | (980 | ) | 388 | 1,368 | ||||||
(3,175 | ) | Dividends paid and changes in minority interests and reserves | (7,284 | ) | (6,443 | ) | 841 | |||||
3,280 | CHANGE IN NET BORROWINGS | (32 | ) | 3,708 | 3,740 |
(a) | For a reconciliation to the statutory Statement of Cash Flows see paragraph Reconciliation of Summarized Group Balance Sheet and Statement of Cash Flows to statutory schemes pages 79 and 80. |
Cash generated by operating activities came in at euro 17,001 million allowing to cover: (i) financial requirements for capital expenditure and investments for euro 7,928 million; (ii) dividend payments amounting to euro 4,832 million, of which euro 2,400 million pertained to the payment of the balance of the dividend for fiscal year 2005 and euro 2,210 million pertained to the payment of an interim dividend for fiscal year 2006 by the parent company Eni SpA. Snam Rete Gas and Saipem also distributed dividends amounting to euro 207 million and (iii) the repurchase of own shares for euro 1,241 million by Eni SpA and for euro 477 million by Snam Rete Gas SpA and Saipem SpA; and along with | cash from
divestments (euro 329 million), including net borrowings
transferred of euro 1 million (approximately euro 650
million) and currency translation effects to
reduce net borrowings by euro 3,710 million. From January 1, to December 31, 2006 a total of 53.13 million Eni shares were purchased by the company for a total cost of euro 1,241 million (representing an average cost of euro 23.35 per share). Since the inception of the share buy-back program on September 1, 2000 Eni has repurchased 335 million shares, equal to 8.36% of its share capital, at a total cost of euro 5,512 million (representing an average cost of euro 16.45 per share). |
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ENI ANNUAL REPORT / FINANCIAL REVIEW
Capital expenditure
2004 | (million euro) | 2005 | 2006 | Change | % Ch. | |||||
4,853 | Exploration & Production | 4,965 | 5,203 | 238 | 4.8 | ||||||||||
1,451 | Gas & Power | 1,152 | 1,174 | 22 | 1.9 | ||||||||||
693 | Refining & Marketing | 656 | 645 | (11 | ) | (1.7 | ) | ||||||||
148 | Petrochemical | 112 | 99 | (13 | ) | (11.6 | ) | ||||||||
186 | Engineering & Construction | 349 | 591 | 242 | 69.3 | ||||||||||
49 | Other activities | 48 | 72 | 24 | 50.0 | ||||||||||
119 | Corporate and financial companies | 132 | 88 | (44 | ) | (33.3 | ) | ||||||||
Unrealized profit in inventory | (39 | ) | (39 | ) | .. | ||||||||||
7,499 | 7,414 | 7,833 | 419 | 5.7 |
Capital expenditure amounted
to euro 7,833 million, of which 89.7% related to the
Exploration & Production, Gas & Power and
Refining & Marketing divisions. Capital expenditure was primarily related to:
|
Dividends paid and changes in minority
interests and reserves (euro 6,443 million)
related mainly to dividend distribution for fiscal year
2005 of euro 2,400 million and the payment of an interim
dividend of euro 2,210 million carried out by Eni SpA,
the payment of dividends by Snam Rete Gas SpA (euro 161
million), Saipem SpA (euro 46 million) and other
consolidated subsidiaries (euro 14 million) and the
repurchase of own shares. |
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ENI ANNUAL REPORT / FINANCIAL REVIEW
Reconciliation of summarized Group balance sheet and statement of cash flows to statutory schemes
Summarized Group Balance Sheet
(million euro) | December 31, 2005 | December 31, 2006 | ||
Items
of Summarized Group Balance Sheet (where not expressly indicated, the item derives directly from the statutory scheme) |
Notes to
the Consolidated Financial Statements |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
|||||
Fixed assets | ||||||||||||||
Property, plant and equipment, net | 45,013 | 44,312 | ||||||||||||
Other assets | 629 | |||||||||||||
Compulsory stock | 2,194 | 1,827 | ||||||||||||
Intangible assets, net | 3,194 | 3,753 | ||||||||||||
Investments accounted for with the equity method and other investments | 4,311 | 4,246 | ||||||||||||
Accounts receivable financing and securities related to operations | (see note 12 "Other financial assets" and note 3 "Trade and other receivables") | 775 | 557 | |||||||||||
Net accounts payable in relation to capital expenditure, made up of: | (1,196 | ) | (1,090 | ) | ||||||||||
- accounts receivable related to capital expenditure/divestments | (see note 3 "Trade and other receivables") | 60 | 100 | |||||||||||
- accounts receivable related to capital expenditure/divestments | (see note 14 "Other non-current assets") | 39 | 2 | |||||||||||
- accounts payable related to capital expenditure | (see note 16 "Trade and other payables") | (698 | ) | (1,166 | ) | |||||||||
- accounts payable related to capital expenditure | (see note 23 "Other non-current liabilities") | (597 | ) | (26 | ) | |||||||||
Total fixed assets | 54,291 | 54,234 | ||||||||||||
Working capital, net | ||||||||||||||
Inventories | 3,563 | 4,752 | ||||||||||||
Trade accounts receivable | (see note 3 "Trade and other receivables") | 14,101 | 15,230 | |||||||||||
Trade accounts payable | (see note 16 "Trade and other payables") | (8,170 | ) | (10,528 | ) | |||||||||
Taxes payable and reserve for net deferred income tax liabilities, made up of: | (4,857 | ) | (5,396 | ) | ||||||||||
- income tax payables | (3,430 | ) | (2,830 | ) | ||||||||||
- deferred tax liabilities | (4,890 | ) | (5,852 | ) | ||||||||||
- income tax receivables | 697 | 658 | ||||||||||||
- deferred tax assets | 1,861 | 1,725 | ||||||||||||
- other tax receivables | (see note 14 "Other non-current assets") | 905 | 903 | |||||||||||
Reserve for contingencies | (7,679 | ) | (8,614 | ) | ||||||||||
Other operating assets (liabilities), made up of: | (526 | ) | (641 | ) | ||||||||||
- securities related to operations | (see note 2 " Other financial assets for trading or available for sale") | 465 | 420 | |||||||||||
- accounts receivable financing related to operations | (see note 3 "Trade and other receivables") | 480 | 242 | |||||||||||
- other receivables | (see note 3 "Trade and other receivables") | 3,249 | 3,080 | |||||||||||
- other (current) assets | 369 | 855 | ||||||||||||
- other receivables and other assets | (see note 14 "Other non-current assets") | 51 | 89 | |||||||||||
- advances, other payables | (see note 16 "Trade and other payables") | (4,227 | ) | (4,301 | ) | |||||||||
- other (current) liabilities | (613 | ) | (634 | ) | ||||||||||
- other payables and other liabilities | (see note 23 "Other non-current liabilities") | (300 | ) | (392 | ) | |||||||||
Total working capital, net | (3,568 | ) | (5,197 | ) | ||||||||||
Employee termination indemnities and other benefits | (1,031 | ) | (1,071 | ) | ||||||||||
Capital employed, net | 49,692 | 47,966 |
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ENI ANNUAL REPORT / FINANCIAL REVIEW
continued Summarized Group Balance Sheet
(million euro) | December 31, 2005 | December 31, 2006 | ||
Items
of Summarized Group Balance Sheet (where not expressly indicated, the item derives directly from the statutory scheme) |
Notes to
the Consolidated Financial Statements |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Capital employed, net | 49,692 | 47,966 | ||||||||||||
Shareholders equity including minority interests | 39,217 | 41,199 | ||||||||||||
Net borrowings | ||||||||||||||
Debts and bonds, made up of: | 12,998 | 11,699 | ||||||||||||
- long-term debt | 7,653 | 7,409 | ||||||||||||
- current portion of long-term debt | 733 | 890 | ||||||||||||
- current financial liabilities | 4,612 | 3,400 | ||||||||||||
Less: | ||||||||||||||
Cash and cash equivalents | (1,333 | ) | (3,985 | ) | ||||||||||
Securities not related to operations, made up of: | (931 | ) | (552 | ) | ||||||||||
- other financial assets for trading or available for sale held for non-operating purposes | (see note 2 "Other financial assets for trading or available for sale") | (903 | ) | (552 | ) | |||||||||
- other financial assets for non-operating purposes | (see note 12 "Other financial assets") | (28 | ) | |||||||||||
Non-operating financing receivables, made up of: | (259 | ) | (395 | ) | ||||||||||
- trade receivables for non-operating purposes | (see note 3 "Trade and other receivables") | (12 | ) | (143 | ) | |||||||||
- financial assets made for non-operating purposes | (see note 12 "Other financial assets") | (247 | ) | (252 | ) | |||||||||
Total net borrowings (a) | 10,475 | 6,767 | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | 49,692 | 47,966 |
(a) | For details on net borrowings see also note n. 19. |
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ENI ANNUAL REPORT / FINANCIAL REVIEW
Summarized Group Cash Flow Statement
(million euro) | 2005 | 2006 | ||
Items
of Summarized Cash Flow Statement and confluence/reclassification of items in the statutory scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Partial amounts from statutory scheme |
Amounts of the summarized Group scheme |
Net profit | 9,247 | 9,823 | ||||||||||
Adjustments to reconcile to cash generated from operating income before changes in working capital: | ||||||||||||
- amortization and depreciation and other non monetary items | 6,518 | 5,753 | ||||||||||
. amortization and depreciation | 5,509 | 6,153 | ||||||||||
. writedowns (revaluations) net | (288 | ) | (386 | ) | ||||||||
. net change in the reserve for contingencies | 1,279 | (86 | ) | |||||||||
. net change in the reserve for employee benefit | 18 | 72 | ||||||||||
- gain on disposal of assets | (220 | ) | (59 | ) | ||||||||
- dividends, interest, extraordinary income (expense) | 8,471 | 10,435 | ||||||||||
. dividend income | (33 | ) | (98 | ) | ||||||||
. interest income | (214 | ) | (387 | ) | ||||||||
. interest expense | 654 | 346 | ||||||||||
. exchange differences | (64 | ) | 6 | |||||||||
. current and deferred income taxes | 8,128 | 10,568 | ||||||||||
Cash generated from operating income before changes in working capital | 24,016 | 25,952 | ||||||||||
Changes in working capital related to operations: | (2,422 | ) | (1,024 | ) | ||||||||
- inventories | (1,402 | ) | (953 | ) | ||||||||
- accounts receivable | (4,413 | ) | (1,952 | ) | ||||||||
- other asstes | 351 | (315 | ) | |||||||||
- trade and other accounts payable | 3,030 | 2,146 | ||||||||||
- other liabilities | 12 | 50 | ||||||||||
Dividends received, taxes paid, interest (paid) received: | (6,658 | ) | (7,927 | ) | ||||||||
- dividends received, taxes paid, interest (paid) received | 366 | 848 | ||||||||||
- interest received | 214 | 395 | ||||||||||
- interest paid | (619 | ) | (294 | ) | ||||||||
- income taxes paid | (6,619 | ) | (8,876 | ) | ||||||||
Net cash provided by operating activities | 14,936 | 17,001 | ||||||||||
Capital expenditure: | (7,414 | ) | (7,833 | ) | ||||||||
- intangible assets | (6,558 | ) | (6,138 | ) | ||||||||
- intangible assets | (856 | ) | (1,695 | ) | ||||||||
Investments: | (127 | ) | (95 | ) | ||||||||
- consolidated subsidiaries and businesses | (73 | ) | (46 | ) | ||||||||
- investments | (54 | ) | (42 | ) | ||||||||
- acquisition of additional interests in subsidiaries | (7 | ) | ||||||||||
Disposals: | 542 | 328 | ||||||||||
- tangible assets | 99 | 237 | ||||||||||
- intangible assets | 13 | 12 | ||||||||||
- consolidated subsidiaries and businesses | 252 | 8 | ||||||||||
- investments | 178 | 36 | ||||||||||
- sale of interests in consolidated subsidiaries | 35 | |||||||||||
Other cash flow related to capital expenditure, investments and disposals: | 293 | 361 | ||||||||||
- securities | (464 | ) | (49 | ) | ||||||||
- financing receivables | (683 | ) | (516 | ) | ||||||||
- change in accounts payable and receivable in relation to investment and capitalized depreciation | 149 | (26 | ) | |||||||||
- reclassification: purchase of securities and financing receivables non related to operations | 231 | 178 | ||||||||||
- sale of securities | 369 | 382 | ||||||||||
- sale of financing receivables | 804 | 794 | ||||||||||
- change in accounts receivable in relation to disposals | 9 | (8 | ) | |||||||||
- reclassification: sale of securities and financing receivables non related to operations | (122 | ) | (394 | ) | ||||||||
Free cash flow | 8,230 | 9,762 |
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ENI ANNUAL REPORT / FINANCIAL REVIEW
continued Summarized Group Cash Flow Statement
(million euro) | 2005 | 2006 | ||
Items
of Summarized Cash Flow Statement and confluence/reclassification of items in the statutory scheme |
Partial amount from statutory scheme |
Amounts of the summarized Group scheme |
Partial amount from statutory scheme |
Amounts of the summarized Group scheme |
Free cash flow | 8,230 | 9,762 | ||||||||||
Borrowings (repayment) of debt related to financing activities: | (109 | ) | 216 | |||||||||
- reclassification: purchase of securities and financing receivables non-related to operations | (231 | ) | (178 | ) | ||||||||
- reclassification: sale of securities and financing receivables non-related to operations | 122 | 394 | ||||||||||
Changes in short and long-term financial debt: | (540 | ) | (682 | ) | ||||||||
- proceeds from long-term debt | 2,755 | 2,888 | ||||||||||
- payments of long-term debt | (2,978 | ) | (2,621 | ) | ||||||||
- reduction of short-term debt | (317 | ) | (949 | ) | ||||||||
Dividends paid and changes in minority interests and reserves: | (7,284 | ) | (6,443 | ) | ||||||||
- capital contributions/payments by/to minority shareholders | 24 | 22 | ||||||||||
- sale (acquisition) of additional interests in subsidiaries | (33 | ) | (477 | ) | ||||||||
- dividends to shareholders | (6,288 | ) | (4,832 | ) | ||||||||
- shares repurchased, net | (987 | ) | (1,156 | ) | ||||||||
Effect of changes in consolidation and exchange differences: | 33 | (201 | ) | |||||||||
- effect of changes in consolidation | (38 | ) | (4 | ) | ||||||||
- effect of exchange differences | 71 | (197 | ) | |||||||||
Net cash flow for the period | 330 | 2,652 |
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ENI ANNUAL REPORT / FINANCIAL REVIEW
Reconciliation of net profit and shareholders equity of the parent company Eni SpA to consolidated net profit and shareholders equity
Net profit | Shareholders equity | |||
(euro million) | 2005 | 2006 | Dec. 31, 2005 | Dec. 31, 2006 | ||||
As recorded in Eni SpA's Financial Statements | 6,042 | 5,821 | 26,872 | 26,935 | ||||||||
Difference between the equity value of individual accounts of consolidated subsidiaries with respect to the corresponding book value in consolidated accounts | 2,718 | 3,837 | 13,701 | 16,153 | ||||||||
Consolidation adjustments: | ||||||||||||
- difference between purchase cost and underlying book value of net equity | (44 | ) | (52 | ) | 1,902 | 1,138 | ||||||
- elimination of tax adjustments and compliance with group accounting policies | 863 | 612 | (1,528 | ) | (1,451 | ) | ||||||
- elimination of unrealized intercompany profits | (40 | ) | (207 | ) | (2,677 | ) | (2,878 | ) | ||||
- deferred taxation | (313 | ) | (195 | ) | 849 | 1,244 | ||||||
- other adjustments | 21 | 7 | 98 | 58 | ||||||||
9,247 | 9,823 | 39,217 | 41,199 | |||||||||
Minority interest | (459 | ) | (606 | ) | (2,349 | ) | (2,170 | ) | ||||
As recorded in Consolidated Financial Statements | 8,788 | 9,217 | 36,868 | 39,029 |
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ENI ANNUAL REPORT / OTHER INFORMATION
Other Information
Court
inquiries The Milan Public Prosecutor is inquiring into contracts awarded by Enis subsidiary EniPower and on supplies from other companies to EniPower. The media has widely covered these inquiries. It emerged that illicit payments were made by EniPower suppliers to a manager of EniPower who was immediately dismissed. The Court presented EniPower (commissioning entity) and Snamprogetti (contractor of engineering and procurement services) with notices of process in accordance with existing laws regulating administrative responsibility of companies (Legislative Decree No. 231/2001). In its meeting of August 10, 2004, Enis Board of Directors examined the above mentioned situation and Enis CEO approved the creation of a task force in charge of verifying the compliance with Group procedures regarding the terms and conditions for the signing of supply contracts by EniPower and Snamprogetti and the subsequent execution of works. The Board also advised divisions and departments of Eni to fully cooperate in every respect with the Court. From the inquiries performed, no default in the organization emerged, nor deficiencies in internal control systems. External experts have performed inquiries with regard to certain specific aspects. In accordance with its transparency and firmness guidelines, Eni will take the necessary steps in acting as plaintiff in the expected legal action in order to recover any damage that could have been caused to Eni by the illicit behavior of its suppliers and of their and Eni employees. In the meantime, preliminary investigations have found that both EniPower and Snamprogetti are not to be considered defendants in accordance with existing |
laws regulating
administrative responsibility of companies (Legislative
Decree No. 231/2001). An investigation is pending regarding two former Eni managers who were allegedly bribed by third parties in order to favor the closing of certain transactions with two oil product trading companies. Within such investigation, on March 10, 2005, the public prosecutor of Rome notified Eni two judicial measures for the seizure of documentation concerning Enis transactions with said companies. Eni is acting as plaintiff in this proceeding. TSKJ Consortium - Investigations of SEC and other Authorities In June 2004 the U.S. Securities and Exchange Commission (SEC) notified a request of collaboration on a voluntary basis to Eni, which Eni promptly carried out, in order to obtain information regarding the TSKJ consortium in relation to the construction of natural gas liquefaction facilities at Bonny Island in Nigeria. The TSKJ consortium is formed by Snamprogetti (Eni 43.54%) with a 25% interest and, for the remaining part, by subsidiaries of Halliburton/KBR, Technip and JGC. The SEC investigations concern alleged improper payments made by the TSKJ consortium to certain public officials. Enis subsidiary Snamprogetti is conducting its own investigations on those alleged improper payments. Other authorities are currently investigating this matter. Eni and its subsidiary Snamprogetti are currently providing documentation and information to the SEC and other authorities, providing the necessary support. |
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ENI ANNUAL REPORT / OTHER INFORMATION
Subsequent
events Main subsequent events are reported in the Operating Review above. Business trends The outlook for Eni in 2007 remains positive, with key business trends for the year as follows:
|
In 2007, management expects to increase capital
expenditure from the 2006 level (euro 7.83 billion). |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
Corporate Governance
Code of
Conduct The Board of Directors of Eni has deemed it appropriate to provide a clear definition of the value system that Eni recognizes, accepts and upholds and the responsibilities that Eni assumes within its Group and externally in order to ensure that all Group activities are conducted in compliance with laws, in a context of fair competition, with honesty, integrity, correctness and in good faith, respecting the legitimate interests of shareholders, employees, suppliers, customers, commercial and financial partners and the communities where Eni operates. All those working for Eni, without exception or distinction, are committed to observing these principles within their function and responsibility and to ensure that others observe them. The belief of working for the advantage of Eni is not a justification for behaviours contrary to such principles. These values are stated in a Code of Conduct whose observance by employees is evaluated by the Board of Directors, based on the annual report of the Guarantor for the Code of Conduct. The Code of Conduct is published on Enis website www.eni.it. Self-discipline Code In its meeting of January 20, 2000, Enis Board of Directors resolved to adopt the first Self-discipline Code of Listed Companies published by Borsa Italiana SpA and underscored how Enis organizational model is essentially in line with the principles expounded in the Code, as well as with related recommendations issued by Consob. In its meeting of December 13, 2006, the Board of Directors decided to conform to the Code of Conduct |
for listed companies, as
issued by Borsa Italiana in March 2006 (Borsa
Italiana Code) by adopting an Eni Code (the
Code). The Eni Code is based on the Borsa
Italiana Code and adapts certain recommendations of the
Borsa Italiana Code to the specific circumstances of Eni,
clarifying certain others which resulted in a further
improvement of Enis corporate governance. The aim
of the Code is to clearly and fully disclose Enis
corporate governance system. The Code takes into consideration the fact that Eni is a parent company, is not controlled by any other company and in the light of the recent provisions of the companies law reform is not subject to direction and co-ordination by any Italian or foreign entity (company or body); hence, all the principles expounded in the Borsa Italiana Code not consistent with this status have been adjusted to avoid misunderstanding among Enis shareholders and stakeholders. Similarly, the By-Laws currently in force foresee a traditional administration and control model (removing the possibility to adopt a one-tier or a two-tier model of management and control system as foreseen in the Borsa Italiana Code), the separation of the positions held by the Chairman and the CEO (making the appointment of a lead independent director unnecessary), and specific rules on the appointment and composition of the Board of Directors and of the Board of Statutory Auditors. The Eni Code directly makes specific choices where the Borsa Italiana Code leaves this option to listed companies, making further amendments unnecessary and guaranteeing more transparency and |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
understanding (i.e.,
the choice not to re-allocate or modify the Boards
internal committees functions, the choice to entrust
internal control responsibilities to only one managerial
position, to require the internal control manager to
refer to the CEO and the choice not to entrust internal
auditing activities to third parties). Certain principles regarding Shareholders Meetings duties proposed by the Borsa Italiana Code were merely indicated or suggested by the Board of Directors that cannot inpose decisions to the Shareholders' Meeting. All this notwithstanding, the Board is committed to ensure that the Shareholders and the Shareholders Meeting focus a fair deal of attention on such issues, or otherwise promote integrations to Eni By-laws. Certain generic recommendations of the Borsa Italiana Code have been specified in the Eni Code, in particular criteria regarding the independence of directors by clearly wording the definition of supplementary remuneration, which jeopardizes the independence requirement, and the meaning of close relatives. The Eni Code establishes certain principles that enhance the level of governance suggested by the Borsa Italiana Code; in particular:
|
The Board of Statutory Auditors was invited to
expressly agree to the provisions of the Borsa Italiana
Code on the Board of Statutory Auditors, and promptly
adhered during their December 13, 2006 meeting.
In its meeting of March 16, 2007, the Board of
Directors implementing the prescriptions of the Code and
with the positive opinion of the Internal Control
Committee, entrusted the Internal Audit Manager as
manager delegated for the Internal control. * * * |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
Enis corporate
governance model, therefore, complies with the provisions
of the Borsa Italiana Code and foresees certain
provisions intended to improve the level of corporate
governance. In relation to the compliance with the
recommendations of the Code, the only items still to be
implemented, but currently under realization, deal
essentially with:
* * * In accordance with the requirements and indications of
Borsa Italiana SpA, in particular, the Guidelines
for the preparation of the yearly report on corporate
governance of February 12, 2003, follows
information on Enis corporate governance system.
The Guide to the preparation of the report on
corporate governance published by Assonime and
Emittenti Titoli SpA in March 2004 has also been taken
into account in preparing this report. |
The Board of
Directors Competencies On June 1, 2005, the Board of Directors appointed Mr. Paolo Scaroni as Chief Executive Officer and delegated all necessary powers for the administration of the Company to him, with the exception of those powers that cannot be delegated in accordance with current legislation (Article 2381 of the Italian Civil Code) and those retained by the Board of Directors (as amended by the Board of Directors in its meeting of October 11, 2005). As mentioned above, in its meeting of December 13, 2006, the Board of Directors modified these resolutions in order to update their contents to the Codes prescriptions, implement a more effective coordination with the By-laws and entrust the Board of Directors with a central role in the Groups sustainability policies. The Board, in accordance to these rules, retained the following powers, in addition to those that cannot be delegated under applicable laws: 1. Establishes the Company and Group Corporate Governance system and rules. In particular, after consulting the Internal Control Committee, the Board approves the rules that ensure the substantial and procedural transparency and correctness of the transactions carried out with related parties and those in which a director holds an interest, on his behalf or on behalf of third parties. The Board adopts a procedure for the management and disclosure to third parties of documents and information concerning the Company, having special regard to price sensitive information. 2. Establishes among its members one or more committees with proposing and consulting functions, appoints their members, establishes their responsibilities, determines their compensation and approves their regulations. 3. Appoints and revokes the powers of the Chief Executive Officer and the Chairman; establishes the terms, limits and operating methods of the exercise of such powers and determines the compensation related to the powers, on the basis of proposals from the Compensation Committee and after consulting the Board of Statutory Auditors. The Board may issue instructions to the Chief Executive Officer and the Chairman and reserve to itself any operations that pertain to its powers. 4. Establishes the guidelines of the organizational, administrative and accounting structure of the Company, of the most important controlled subsidiaries and of the Group; evaluates the adequacy of the organizational, administrative and accounting structure set up by the Chief Executive Officer in particular with regard to the management of conflicts of interest. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
5. Establishes, in
particular, based on the recommendations of the Internal
Control Committee, the guidelines of the internal control
system, in order to ensure the identification,
measurement, management and monitoring of the main risks
faced by the Company and its subsidiaries. Evaluates the
adequacy, effectiveness and effective functioning of the
internal control system managed by the Chief Executive
Officer on an annual basis. 6. Establishes, based on the recommendation of the Chief Executive Officer, Company and Group strategies and objectives, including sustainability policies. Examines and approves the Companys and Groups strategic, operational and financial plans and the strategic agreements to be signed by the Company. 7. Examines and approves annual budgets for Enis Divisions and the Company, as well as the Groups consolidated budget. 8. Evaluates and approves interim quarterly and half-yearly reports, as per current regulations. Evaluates and approves the sustainability report, submitted also to the Shareholders Meeting. 9. Receives from Board members with powers, at every Board meeting or at least every two months, reports informing the Board of activities carried out in exercising the powers attributed as well as updates on activities carried out by the Group and on atypical or unusual transactions or transactions with related parties that were not previously submitted to the evaluation and approval of the Board. 10. Receives half-year updates on the Board Committees activities. 11. Evaluates the general performance of the company and the Group, on the basis of information received from Board members with powers, with particular attention to situations of conflicts of interest and compares results achieved as contained in the annual report and interim financial statements, as per current regulations with the budget. 12. Evaluates and approves any transaction executed by the Company and its subsidiaries that have a significant economic, patrimonial and/or financial impact, with particular attention to situations in which Board members hold an interest on their own behalf or on behalf of third parties, and to related parties transactions. The Board ensures the principle of operational autonomy with specific regard to the listed companies of the Eni Group. |
Transactions with a
significant economic, patrimonial and/or financial impact
include the following: a) acquisition and sale of shares, companies, branches of companies, and properties, capital contributions in kind, mergers and de-mergers exceeding euro 50 million, notwithstanding Article 23.2 of the By-laws; b) investments in fixed assets exceeding euro 100 million, or less if of particular strategic importance or particularly risky; c) any exploration initiatives and portfolio operations in the E&P sector in new areas; d) sale and purchase of goods and services other than investments, for an amount exceeding euro 1 billion or a duration exceeding twenty years; e) financing to non-controlled companies: i) for amounts exceeding euro 50 million or, ii) in any case, if the amount is not proportionate to the interest held; f) issuing by the Company of personal and real guarantees to non-controlled companies: i) for amounts exceeding euro 200 million, if in the interest of the Company or of Eni subsidiaries, or ii) in any case, if the guarantees are issued in the interest of non-controlled companies and the amount is not proportionate to the interest held. In order to issue the guarantees indicated in section i) of letter f), if the amount is between euro 100 million and euro 200 million, the Board confers powers to the Chief Executive Officer and the Chairman, to be exercised jointly in case of urgency. 13. Appoints and revokes, on recommendation of the Chief Executive Officer and in agreement with the Chairman, the General Managers of Divisions and attributes powers to them. 14. Appoints and revokes, on recommendation of the Chief Executive Officer and in agreement with the Chairman, and with the approval of the Board of Statutory Auditors, the Manager charged with preparing the Company's financial reports as per Legislative Decree No. 58/1998 delegating to him adequate powers and resources. 15. Appoints and revokes, on recommendation of the Chief Executive Officer and in agreement with the Chairman, after consulting the Internal Control Committee, the person in charge of internal control and determines his/her compensation in line with the Companys remuneration policies. 16. Ensures a person is identified as responsible for handling the relationships with the Shareholders. 17. Establishes, on the basis of the proposals received from the Compensation Committee, the criteria for top management compensation and implements the stock incentive plans approved by the Shareholders Meeting. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
18. Examines and decides on
proposals submitted by the Chief Executive Officer with
respect to voting powers and to the appointment of
members of the management and control bodies of the most
important controlled subsidiaries. With specific regard
to the shareholders meetings of listed companies of
the Eni Group, the Board ensures the observance of the
Corporate Governance Rules regarding the
shareholders meetings. 19. Prepares the proposals to be submitted to the Shareholders' Meetings. 20. Examines and resolves on other matters that the Chief Executive Officer deems appropriate to submit to the Board because of their importance and sensitivity. Pursuant to Article 23.2 of the By-laws, the Board resolves on: mergers by incorporation and proportional demergers of at least 90% directly owned subsidiaries; establishment and winding up of branches; amendments to the By-laws in order to comply with applicable legislation. On June 1, 2005, the Board of Directors entrusted the Chairman with powers to conduct strategic international relations, pursuant to Article 23.1 of Enis By-laws. In accordance with Article 27 of Enis By-laws, the Chairman chairs Shareholders Meetings and oversees the implementation of decisions made by it. Appointment In accordance with Article 17 of Enis By-laws, the Board of Directors is made up of three to nine members. The Shareholders Meeting determines the number within said limits. As per Article 6, paragraph 2, letter d) of Enis By-laws the Minister for Economy and Finance, in agreement with the Minister of Economic Development, may appoint one member of the Board without voting rights in addition to those appointed by the Shareholders Meeting. The Minister for Economy and Finance chose not to appoint such member. The Board of Directors presently in office is made up of nine members appointed by the Shareholders Meeting of May 27, 2005, for a three-year term; their mandate expires with the Meeting convened to approve financial statements for fiscal year 2007. The appointment of the Board of Directors calls for a list vote. Shareholders representing at least 1% of voting shares, alone or together with other shareholders, and the Board of Directors have the right to present lists for the appointment of directors. Each shareholder can present or participate in presenting only one list. |
Companies controlling a
shareholder and companies controlled by the same entity
are forbidden from presenting or otherwise concurring to
the presentation of additional lists. Lists are to be filed at Enis headquarters at least ten days before the date set for the Shareholders Meeting on first call (20 days in case of the Board of Directors presenting a list) and published in national newspapers. Lists must include statements in which each candidate attests the possession of the honorability and independence requirements as provided for by the applicable legislation and Enis By-laws. A professional curriculum of each candidate is recommended. Composition The current Board of Directors is formed by the Chairman, Roberto Poli, the CEO, Paolo Scaroni, and directors, Alberto Clô, Renzo Costi, Dario Fruscio, Marco Pinto, Marco Reboa, Mario Resca, and Pierluigi Scibetta. Roberto Poli, Paolo Scaroni, Dario Fruscio, Marco Pinto, Mario Resca and Pierluigi Scibetta were candidates included in the list of the Ministry of Economy and Finance; Alberto Clô, Renzo Costi and Marco Reboa were in the list presented by institutional investors coordinated by Fineco Asset Management SpA. Since June 1, 2006, the Secretary of the Board of Directors is Roberto Ulissi, the Groups senior vice president for Corporate Affairs and Governance. Positions held in other Boards Based on information received, follows information on positions held in other Boards of Directors or Boards of Statutory Auditors of companies listed in regulated markets also outside Italy, financial, banking or insurance or large companies by members of Enis Board of Directors. The professional curriculum of Directors is available on Enis website. ROBERTO POLI Board member of Mondadori SpA, Fininvest SpA, Merloni Termosanitari SpA e G.D. SpA. PAOLO SCARONI Board member of Il Sole 24 Ore and Il Teatro alla Scala. Member of the Supervisory Board of ABN AMRO Bank, Board member of the Columbia Universitys Business School and Veolia Enviroment (Paris). ALBERTO CLÔ Independent Board member of ASM Brescia SpA, Società Autostrade SpA, Italcementi SpA and De Longhi SpA. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
RENZO COSTI Board member of Editrice Il Mulino SpA. DARIO FRUSCIO Chairman of Italia Turismo SpA. MARCO REBOA Board member of Seat PG SpA, Interpump Group SpA, IMMSI SpA and, among others Intesa Private Banking SpA. Chairman of the Board of Statutory Auditors of Luxottica Group SpA. MARIO RESCA Chairman of Italia Zuccheri SpA, Board member of Mondadori SpA, Special manager of the Cirio Del Monte Group, under special management. PIERLUIGI SCIBETTA Board member of Nucleco SpA, Istituto Superiore per la Previdenza e la Sicurezza del Lavoro (I.S.P.E.S.L.), Gestore del Mercato Elettrico SpA and of Ente per le nuove tecnologie, l'energia e l'ambiente - ENEA. Boards opinion on the matter of the admissible number of positions held by directors in other companies In its meeting of December 13, 2006, the Board of Directors expressed its opinion on the matter of the admissible number of positions held by directors in other companies, as required by Enis Self-discipline Code:
All the positions held in Enis subsidiaries are
excluded for the purposes described above. |
On the basis of available
information, Enis directors comply with these
limits on the number of positions held in other
companies. Independence and honorability Legislative Decree No. 58 of February 24, 1998 (TUF), as amended by Legislative Decree No. 303 of December 29, 2006 states that at least two members in a Board composed by more than seven members must possess the independence requirements provided for Statutory Auditors of listed companies. Article 17.3 of Enis By-laws states that at least three Board members shall have the independence requirement, in case the Board is made up by more than five members. This rule actually increases the number of independent directors in Enis Board. Enis Code foresees further independence requirements, in line with the ones provided by the Borsa Italiana Code. On February 22, 2007, Enis Board of Directors, in accordance with the provisions of Enis By-laws and Code, determined that six out of its nine members are independent, specifically: non-executive Directors Alberto Clô, Renzo Costi, Dario Fruscio, Marco Reboa, Mario Resca and Pierluigi Scibetta. Renzo Costi was confirmed to be independent notwithstanding his permanence as board member for a period longer than nine years, due to the fact that he has been nominated by minority shareholders (specifically institutional investors) and has demonstrated ethical and professional qualities and independence when expressing his opinion during this period. The Board of Statutory Auditors verified the proper application of criteria and procedures adopted by the Board to evaluate the independence of its members. In accordance with the TUF, implemented in Article 17.3 of Enis By-laws, the Directors and General Managers of listed companies shall possess the honorability requirements prescribed for statutory auditors. On February 22, 2007, the Board of Directors verified that all its members possess the honorability requirements. In accordance with Article 17.3 of Enis By-laws, should the independence and honorability requirements be impaired or cease or the minimum number of independent Directors diminish below the threshold set by Enis By-laws, the Board declares the termination of office of the member lacking said requirements and provides for his substitution. Meetings and functioning In 2006, the Board of Directors met 16 times (21 in 2005) for an average duration of three hours. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
The general public is
informed, with advance notice, of: (i) the dates of
meetings convened for the approval of annual,
semi-annual, preliminary and interim accounts; (ii) the
dates of meetings convened to announce the amount of
interim dividends and final dividends, and related
ex-dividend and payment dates, and (iii) the dates of the
general Shareholders Meeting approving the annual
financial statements. The financial calendar is available on Enis website. In its meeting of June 1, 2005, the Board of Directors defined the rules for the calling of its meetings; in particular, the Chairman convenes Board meetings, and, in agreement with the CEO, defines agenda items. Notice is sent to the Directors, Statutory Auditors and the Magistrate of the Court of Accounts, by mail, fax, or e-mail within five days of the meetings date, at least 24 hours in advance in case of urgency. Enis By-laws allow meetings to be held by video or teleconference. Board members, Statutory Auditors and the Magistrate of the Court of Accounts receive in advance adequate and thorough information on all issues subject to Board evaluation and resolutions, except when confidentiality is deemed necessary. During meetings directors can meet managers of Eni and its subsidiaries in order to obtain information on specific matters of the agenda items. In 2006, on average 85% of Board members participated to Board meetings and 84% of independent non-executive Board members. In the attached table, the percentage of attendance of each member of the Board to the Board of Directors and Board committees meetings is presented. On September 21, 2006, the Board of Directors meeting was held on the Sabratha platform, off the Libyan coast, to allow non-executive directors to increase their knowledge on how Enis businesses operate. Until this date, non-executive and independent members have always met in presence of the other members of the Board; Enis By-laws allow them to decide whether it is necessary to hold meetings attended exclusively by non-executive and independent members. Board self evaluation The Board of Directors performed its first evaluation of size, composition and functioning of the Board itself, in accordance with Enis and Borsa Italiana Codes. In accordance with Enis Code, the Board of Directors has received support by a specialized consulting firm, Egon Zehnder, to guarantee the objectiveness of its evaluations. Egon Zehnders work was focused on: a) gaining insight on the level of functioning and efficiency of the Board; |
b) identifying areas of
improvement or weakness in the functionality and
efficiency of the Board. Consultants performed an
in-depth interview of each member and analyzed the
quantitative and qualitative aspects of all the
information obtained. The results of the interviews performed by Egon Zehnder were presented to the Board of Directors, being present the Board of Statutory Auditors. In its meeting of February 22, 2007, the Board reviewed the findings of the consultant and judged the size, composition and functioning of the Board and of the committees of the Board to be substantially positive. This conclusion shared by the consultant. The main qualifying items underlined by the Board of Directors are: the open and direct discussion during the meetings; the respect for the contribution of each member; a constructive approach on part of all Board members to reach consensual solutions; the completeness, transparency and timeliness of information prepared by the CEO for Board meetings, and of explanations provided by the CEO during the meetings in order to allow the Board to perform its role being well informed and aware of the issues on the agenda. All Directors have agreed on the personal contribution of each member to the optimization of the reviews made by the Board, thus allowing the Board to fully benefit from the different skills and professional backgrounds of each member, resulting in a more informed and consensual influence on the resolutions of the Board. The Directors also agreed upon holding informal meetings to gain more insight on specific managerial and business matters, in order to better perform assigned duties. Remuneration Board members emoluments are determined by the Shareholders Meeting, while the emoluments of the Chairman and CEO, in relation to the powers attributed to them, are determined by the Board of Directors, based on proposals of the Compensation Committee and after consultation with the Board of Statutory Auditors. On May 27, 2005 the Shareholders Meeting resolved to determine the annual emolument of the Chairman in euro 265,000 and of Board members in euro 115,000. It also resolved a bonus up to a maximum of euro 80,000 for the Chairman and euro 20,000 for each Board member. The amount of the bonus is determined in accordance with the performance of Eni shares in the reference year as compared with the performance of the seven largest international oil companies for market capitalization. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
The share performance takes
account of the dividend paid. Said bonus amounts to euro
80,000 or euro 40,000, and euro 20,000 or euro 10,000 for
the Chairman and each Board member, respectively,
depending on whether the performance of Eni shares is
rated first or second, or third or fourth in the
reference year, respectively. No bonus is paid in case
Eni scores a position lower than the fourth one. In the meeting of June 21, 2006, the Board verified that Eni rated third in the mentioned positioning in 2005. In the meeting of July 27, 2006, the Board of Directors, as proposed by the Compensation Committee and advised by the Board of Statutory Auditors, determined an additional element of remuneration for the Board members holding positions in Boards committees, with the exclusion of the Chairman and CEO. Said fee amounts to euro 30,000, and euro 20,000 for the position of chairman of a committee and of member of a committee, respectively. This amount decreases to euro 27,000 and euro 18,000 in case a member holds positions in more than one committee. The remuneration of the Chairman is made up of both a fixed emolument and a variable part in relation to the powers delegated to him by the Board. The remuneration of the CEO, the general managers and other managers with strategic responsibilities1 is made up by a salary, a bonus, and a long term incentive. The CEO also earns a fixed emolument and a variable part in relation to the powers delegated to him by the Board. The salary of the three General Managers of Eni divisions and of other key managers is defined considering the position held and their specific responsibilities, taking into account the compensation level adopted by domestic and worldwide companies (in oil and gas, industrial and service sectors) and aligning it on a yearly base considering individual performance and career progression. The variable part of the remuneration is paid yearly, based on the achievement of specific financial, operational and strategic targets and of individual performance goals pertaining to each business or functional unit. The variable part of the Chairmans and CEOs remuneration is determined based on the achievement of specific company objectives. The variable part paid in 2006 was determined based on the achievement of Enis target for 2005 as approved by the Board of Directors on proposal of the Compensation Committee and defined consistently |
with the targets of the
strategic plan and yearly budget. Said targets include a
set level of cash flow from operations (with a 40%
weight), profitability (30%) and divisional operating
performance (30%). Results achieved have been assessed
assuming a constant trading environment and have been
verified by the Compensation Committee and approved by
the Board of Directors. Based on these results, a
variable amount equal to 125% of the target level was
determined, within an interval ranging from 85% to 130%
of said target level. In March 2006, the Board of Directors approved a new long-term incentive plan for senior managers of Eni and its subsidiaries (excluding listed subsidiaries), as proposed by the Compensation Committee. This new scheme is intended to motivate more effectively and retain managers, linking incentives to targets and performance achieved in a tighter way than previous incentives schemes. This new incentive scheme applies to the 2006-2008 three year period and is composed of a deferred monetary incentive, linked to the achievement of certain business growth and operating efficiency goals, replacing the previous stock grant plan, and of a stock option incentive focused on the achievement of certain targets of total shareholder return. This stock-based incentive was approved by the General Shareholders Meeting of May 25, 2006. This scheme has a structure that balances the monetary and stock-based components of the remuneration, as well as links economic and operating performance to share performance in the long term. The deferred monetary incentive assigned in 2006 is paid after three years from the assignment depending on the achievement of the annual EBITDA targets preset for the 2006-2008 period. Results in terms of EBITDA are assessed by comparing actual results with set targets under a constant trading environment for each year. Stock options assigned in 2006 can be exercised after three years from the assignment in a percentage depending on the performance of Eni shares measured in terms of Total Shareholder Return2 as compared to that achieved by a panel of major international oil companies over the 2006-2008 three-year period (see below). At the end of the three year period, the results of the long term incentive plan are analyzed by the Compensation Committee and approved by the Board of Directors. The CEO, being the General Manager of the company, |
(1) | These managers together with the CEO and the General Managers are permanent members of Enis Management Committee. | |
(2) | For a definition of TSR see Glossary. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
is entitled to take part to both legs of this scheme, adding also a deferred bonus linked to the increase in the Eni share price, to be paid after three years (see the paragraph Stock options and other share-based compensation, below). | Follows the breakdown of the 2006 remuneration of the Chairman, the CEO, the divisional General Mangers and other managers with strategic responsibilities taking account of the fixed and variable components paid in the year, and the assigned long term incentive: |
(%) |
|
Chairman |
CEO |
Divisional General Managers |
Other managers with strategic responsibilities |
|||||
Fixed remuneration | 65 | 32 | 38 | 41 | ||||
Variable remuneration (linked to performance) | 35 | 18 | (*) | 26 | 26 | |||
Long term incentive (linked to performance) (**) | - | 50 | 36 | 33 | ||||
Total | 100 | 100 | 100 | 100 |
(*) | Determined on the actual period of office from June 1, 2005. |
(**) | Evaluation of the deferred bonus (discounted) and the fair value of stock options assigned for target results. For the CEO, the deferred bonus comprises also the deferred bonus linked to the market performance of Eni shares. |
Enis
Shareholders Meeting of May 25, 2006, determined to
extend to all Board Directors and to Statutory Auditors
the insurance against professional risks included in
agreements for Eni managers. This insurance reflects
market terms and standard conditions. Remuneration earned by members of the Board of Directors, Statutory Auditors, General Managers, and other managers with strategic responsibilities Pursuant to Article 78 of Consob Decision No. 11971 of May 14, 1999, and to its subsequent modifications, remuneration earned by members of the Board of Directors, Statutory Auditors, General Managers and other managers with strategic responsibilities is reported in the table below. Remuneration earned by managers who held a position in 2006 for a fraction of the year is reported too. Pursuant to Consob decisions:
|
|
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
(thousand euro) | ||||||||||||||||
Name | Position |
Term of office |
Expiry date of the position (1) |
Emoluments |
Non-cash benefits |
Bonuses and other incentives (2) |
Salaries and |
Total |
||||||||
Board of Directors | |||||||||||||||||||
Roberto Poli | Chairman | 01.01-12.31 | 05.30.08 | 765 | 15 | 415 | 1,195 | ||||||||||||
Paolo Scaroni | CEO | 01.01-12.31 | 05.30.08 | 430 | 62 | 834 | (3) | 1,014 | 2,340 | ||||||||||
Alberto Clô | Director | 01.01-12.31 | 05.30.08 | 134 | 10 | 144 | |||||||||||||
Renzo Costi | Director | 01.01-12.31 | 05.30.08 | 130 | 10 | 140 | |||||||||||||
Dario Fruscio | Director | 01.01-12.31 | 05.30.08 | 124 | 10 | 134 | |||||||||||||
Marco Pinto | Director | 01.01-12.31 | 05.30.08 | 130 | 10 | 140 | |||||||||||||
Mario Resca | Director | 01.01-12.31 | 05.30.08 | 128 | 10 | 138 | |||||||||||||
Marco Reboa | Director | 01.01-12.31 | 05.30.08 | 134 | 10 | 144 | |||||||||||||
Pierluigi Scibetta | Director | 01.01-12.31 | 05.30.08 | 130 | 10 | 140 | |||||||||||||
Board of Statutory Auditors | |||||||||||||||||||
Paolo Andrea Colombo | Chairman | 01.01-12.31 | 05.30.08 | 115 | 89 | (4) | 204 | ||||||||||||
Filippo Duodo | Auditor | 01.01-12.31 | 05.30.08 | 80 | 55 | (5) | 135 | ||||||||||||
Edoardo Grisolia (6) | Auditor | 01.01-12.31 | 05.30.08 | 80 | 80 | ||||||||||||||
Riccardo Perotta | Auditor | 01.01-12.31 | 05.30.08 | 80 | 63 | (7) | 143 | ||||||||||||
Giorgio Silva | Auditor | 01.01-12.31 | 05.30.08 | 80 | 44 | (8) | 124 | ||||||||||||
General Managers | |||||||||||||||||||
Stefano Cao | Exploration & Production | 01.01-12.31 | 643 | 966 | 1,609 | ||||||||||||||
Domenico Dispenza | Gas & Power | 01.01-12.31 | 386 | 669 | 1,055 | ||||||||||||||
Angelo Taraborrelli | Refining & Marketing | 01.01-12.31 | 400 | 645 | 1,045 | ||||||||||||||
2,540 | 77 | 2,748 | 3,565 | 8,910 | |||||||||||||||
Other managers with strategic responsibilities (9) | 1,932 | 7,846 | (10) | 9,778 |
(1) | Office ends with the Meeting approving financial statements for the year ending December 31, 2007. | |
(2) | Based on performance achieved in 2005. | |
(3) | Amount accrued for the duration of office from June 1 to December 31, 2005. | |
(4) | Includes the compensation obtained as Chairman of the Board of Statutory Auditors of Saipem and EniServizi. | |
(5) | Includes the compensation obtained as Statutory Auditor in Snamprogetti SpA, Chairman of the Board of Statutory Auditors of CEPAV Uno and CEPAV Due. | |
(6) | Compensation for the service is paid to the Ministry of Economy and Finance. | |
(7) | Includes the compensation obtained as Chairman of the Board of Statutory Auditors of Snam Rete Gas and as Statutory Auditor in Enifin SpA. | |
(8) | Includes the compensation obtained as Statutory Auditor in Snamprogetti SpA and as Chairman of the Board of Statutory Auditors of TSKJ Italia Srl. | |
(9) | Managers, who during the year with the CEO and the General Managers of Eni divisions, have been members of Enis Steering Committee (nine managers). |
(10) | Also Includes indemnities paid upon termination of employment contract. |
Deferred bonus
awarded to the CEO, the General Managers and managers
with strategic responsibilities The deferred bonus plan approved for the 2006-2008 three-year period envisages a basic bonus paid after three years according to a variable amount equal to a percentage ranging from 0 to 170% of the amount |
established for the target
performance in relation to the performances achieved in a
three-year period as approved by the Board of Directors. The following table sets out the basic bonus awarded in the year 2006 to the CEO and to the General Managers of Enis Divisions, and the total amount awarded to other managers with strategic responsibilities. |
(thousand euro)
Name | Deferred bonus awarded | |||
Paolo Scaroni | CEO | 787 | ||
Stefano Cao | General Manager of the E&P Division | 468 | ||
Domenico Dispenza | General Manager of the G&P Division | 328 | ||
Angelo Taraborrelli | General Manager of the R&M Division | 307 | ||
Other managers with strategic responsibilities (1) | 1,293 |
(1) | No. 6 managers. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
Stock options and
other share-based compensation STOCK GRANTS With the aim of improving motivation and loyalty of the managers of Eni SpA and its subsidiaries as defined in Article 2359 of the Civil Code through the linking of compensation to the attainment of preset individual and corporate objectives, making management participate in corporate risk and motivating them towards the creation of shareholder value and increasing at the same time their contribution to the management of the Company, in 2003 Eni started a stock grant scheme envisaging the offering of its own shares purchased under its buy back program (treasury shares) for no consideration to those managers of Eni |
who achieve corporate and
individual objectives. Said scheme applied to the three
year-period 2003-2005. Assignment vested within 45 days
after the end of the third year from the date of the
offer. Under this stock grant plan, on December 31, 2006, a total of 1,873,600 grants were outstanding for the assignment of an equal amount of treasury shares (equal to 0.05% of capital stock) pertaining to 2003, 2004 and 2005 assignments as follows: (i) a total of 2.500 grants (fair value euro 11.20 per share) related to 2003, (ii) a total of 798,700 grants (fair value euro 14.57 per share) related to 2004 and (iii) a total of 1,072,400 grants (fair value euro 20.08 per share) related to 2005. The following is a summary of stock grant activity for the years 2005 and 2006: |
2005 |
2006 |
|||
(euro) | Number of shares |
Market price in euro (a) |
Number of shares |
Market price in euro (a) |
Stock grants as of January 1 | 3,112,200 | 18.461 | 3,127,200 | 23.460 | ||||||||
New rights granted | 1,303,400 | 21.336 | - | - | ||||||||
Rights exercised in the period | (1,273,500 | ) | 23.097 | (1,236,400 | ) | 23.933 | ||||||
Rights cancelled in the period | (14,900 | ) | 22.390 | (17,200 | ) | 23.338 | ||||||
Stock grants outstanding of December 31 | 3,127,200 | 23.460 | 1,873,600 | 25.520 | ||||||||
of which exercisable at December 31 | 38,700 | 23.460 | 156,700 | 25.520 |
(a) | Market price relating to new rights granted, rights exercised in the period and rights cancelled in the period corresponds to the average market value (arithmetic average of official prices recorded on Mercato Telematico Azionario in the month preceding: (i) the date of the resolution of the Board of Directors regarding the stock grants assignment; (ii) the date of the recording in the grantee's securities account of the emission/transfer of the shares granted; (iii) the date of the unilateral termination of employment for rights cancelled) weighted with the number of shares. Market price of stock grants at the beginning and at the end of the year is the price recorded at December 31. |
The following table presents the amount of stock grants awarded to Enis CEO, General Managers and other managers with strategic responsibilities. |
Grants outstanding at beginning of the period |
Grants exercised during the period |
Grants outstanding at end of the period |
||||||
Name |
Number of grants |
Average maturity in months |
Number of grants |
Average market price at date of exercise |
Number of grants |
Average maturity in months |
||||||||
Paolo Scaroni | CEO | - | - | - | - | - | - | |||||||||||||
Stefano Cao | General Manager of the E&P Division | 43,700 | 21 | 14,700 | 24.117 | 29,000 | 15 | |||||||||||||
Domenico Dispenza (1) | General Manager | 12,100 | 14 | 6,300 | 24.117 | 5,800 | 8 | |||||||||||||
of the G&P Division | 53,900 | (2) | 25 | - | - | 53,900 | (2) | 13 | ||||||||||||
Angelo Taraborrelli | General Manager of the R&M Division | 28,100 | 24 | 6,300 | 24.117 | 21,800 | 17 | |||||||||||||
Other managers with strategic responsibilities (3) | 111,400 | 21 | 60,500 | 23.478 | 50,900 | 15 |
(1) | Appointed on January 1, 2006. |
(2) | Snam Rete Gas' shares. These grants have been assigned by Snam Rete Gas to Domenico Dispenza who was Chairman of Snam Rete Gas until December 23, 2005. |
(3) | No. 5 managers. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
STOCK OPTIONS Eni offers managers of Eni SpA and its subsidiaries as defined in the Article 2359 of the Civil Code holding positions of significant responsibility for achieving profitability or strategic targets, the opportunity to acquire a shareholding in the company as an element of remuneration through the award of options for purchasing Eni treasury shares. On May 25, 2006, the Sharehoders Meeting approved the 2006-2008 stock option plan and authorized the Board of Directors to make available a maximum amount of 30 million treasury shares (equal to 0.749% of the share capital) for the stock option plan. This stock option plan foresees three annual awards. Unlike previous schemes, the 2006-2008 stock option plan introduced a performance condition upon which options can be exercised. At the end of each vesting period with a three-year duration, the Board of Directors determines the number of exercisable options, in a percentage ranging from 0% to 100% of the total amount awarded for each year of the plan, depending on the performance of Eni shares measured in terms of Total Shareholder Return as compared to that achieved by a panel of major international oil companies in terms of capitalization. On July 27, 2006, the Board of Directors approved: |
(i) the award pertaining to
2006 within the three-year period covered by the plan;
(ii) its regulation; and (iii) the criteria to be
followed in the identification of managers to whom the
option will be assigned. The Board of Directors delegated
to the CEO the task to identify eligible managers by the
end of each year covered by the plan. Under this plan,
7,050,000 options were awarded pertaining to 2006 with a
strike price of euro 23.119. Previous stock option plans
provided that grantees had the right to purchase treasury
shares in a 1 to 1 ratio after three years from the
award, with a strike price calculated as the arithmetic
average of official prices registered on the Mercato
Telematico Azionario in the month preceding award or, if
greater, as the average carrying cost of treasury shares
held by Eni as of the date preceding the award. At December 31, 2006, a total of 15,290,400 options were outstanding for the purchase of an equal amount of ordinary shares nominal value euro 1 of Eni SpA, carrying an average strike price of euro 21.022. The weighted-average remaining contractual life of options outstanding at December 31, 2003, 2004, 2005 and 2006 was 4.6 years, 5.6 years, 6.6 years and 5.6 years, respectively. The following is a summary of stock option activity for the years 2005 and 2006: |
2005 |
2006 |
|||
(euro) | Number of shares | Weighted average exercise price | Market price (a) | Number of shares | Weighted average exercise price | Market price (a) | ||||||
Options as of January 1 | 11,789,00 | 15.111 | 18.461 | 13,379,600 | 17.705 | 23.460 | ||||||||||||
New options granted | 4,818,500 | 22.512 | 22.512 | 7,050,000 | 23.119 | 23.119 | ||||||||||||
Options exercised in the period | (3,106,400 | ) | 15.364 | 22.485 | (4,943,200 | ) | 15.111 | 23.511 | ||||||||||
Options cancelled in the period | (121,500 | ) | 16.530 | 23.100 | (196,000 | ) | 19.119 | 23.797 | ||||||||||
Options outstanding as of December 31 | 13,379,600 | 17.705 | 23.460 | 15,290,400 | 21.022 | 25.520 | ||||||||||||
of which exercisable at December 31 | 1,540,600 | 16.104 | 23.460 | 1,622,900 | 16.190 | 25.520 | ||||||||||||
(a) | Market price relating to new rights assigned, rights exercised in the period and rights cancelled in the period corresponds to the average market value (arithmetic average of official prices recorded on Mercato Telematico Azionario in the month preceding: (i) the date of assignment; (ii) the date of the recording in the securities account of the managers to whom the options have been assigned; (iii) the date of the unilateral termination of employment for rights cancelled). Market price of shares referring to options as of the beginning and the end of the year, is the price recorded at December 31. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
The fair value of stock options granted during the years ended December 31, 2003, 2004, 2005, 2006 of euro 1.50, euro 2.01, euro 3.33 and euro 2.89 respectively, was calculated | applying the Black-Scholes method using the following assumptions: |
2003 |
2004 |
2005 |
2006 |
|||||
Risk free interest rate | (%) |
3.16 |
3.21 |
2.51 |
4 |
|||||
Expected life | (years) |
8 |
8 |
8 |
6 |
|||||
Expected volatility | (%) |
22 |
19 |
21 |
16.8 |
|||||
Expected dividends | (%) |
5.35 |
4.5 |
3.98 |
5.26 |
|||||
The following table presents the amount of stock options awarded to Enis CEO, General Managers and other managers with strategic responsibilities. |
CEO | General Manager E&P Division | General Manager G&P Division | General Manager R&M Division | Other managers with strategic responsibilities (1) | ||||||
Paolo Scaroni | Stefano Cao | Domenico Dispenza (2) | Angelo Taraborrelli | |||||||
Options outstanding at the beginning of the period: | ||||||||||||||||
- number of options | 699,000 | 201,500 | 43,000 | 269,500 | (3) | 123,000 | 686,500 | |||||||||
- average exercise price | (euro) | 22.509 | 17.920 | 14.171 | 3.988 | 18.308 | 18.208 | |||||||||
- average maturity in months | 91 | 82 | 64 | 85 | 83 | 79 | ||||||||||
Options granted during the period | ||||||||||||||||
- number of options | 681,000 | (4) | 175,500 | 122,500 | - | 115,000 | 552,500 | |||||||||
- average exercise price | (euro) | 23.100 | 23.100 | 23.100 | - | 23.100 | 23.100 | |||||||||
- average maturity in months | 72 | 72 | 72 | - | 72 | 72 | ||||||||||
Options exercised at the end of the period | ||||||||||||||||
- number of options | - | 62,500 | 28,500 | - | - | 312,500 | ||||||||||
- average exercise price | (euro) | - | 13.743 | 13.743 | - | - | 16.478 | |||||||||
- average market price at date of exercise | (euro) | - | 23.341 | 24.095 | - | - | 23.256 | |||||||||
Options outstanding at the end of the period | ||||||||||||||||
- number of options | 1,380,000 | 314,500 | 137,000 | 269,500 | 238,000 | 926,500 | ||||||||||
- average exercise price | (euro) | 22.801 | 21.641 | 22.244 | 3.988 | 20.624 | 21.709 | |||||||||
- average maturity in months | 73 | 70 | 65 | 73 | 68 | 69 | ||||||||||
(1) | No. 9 managers. | |
(2) | Appointed on January 1, 2006. | |
(3) | Options on Snam Rete Gas shares: assigned by the company to Domenico Dispenza who held the position of Chairman of Snam Rete Gas until December 23, 2005. | |
(4) | The assignment to the CEO has been integrated by a deferred bonus linked to the market performance of Eni shares, to be paid after a three year period and corresponding to 96,000 options with a strike price of euro 23.100 and a vesting period of three years. |
Overall remuneration
of key management personnel On the whole, remuneration of persons responsible of key positions in planning, direction and control functions of Eni Group companies, including executive and non-executive directors, general managers and |
other managers holding strategic responsibilities amounted to euro 23 million for 2006 consisting of: (i) fees and salaries for euro 16 million; (ii) post-employment benefits for euro 1 million; (iii) other long term benefits for euro 3 million; and (iv) fair value of stock grant/option for euro 3 million. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
Board
Committees The Board has instituted three committees with proposal and advisory functions. Their composition, tasks and functioning are defined by the Board of Directors in respect of the criteria established by the Eni Code. They are: a) the Internal Control Committee, b) the Compensation Committee and c) the International Oil Committee, composed almost exclusively of independent Directors. In its meeting of June 1, 2005, the Board appointed the following directors as members of the Committees: Internal Control Committee: Marco Reboa (Chairman, independent), Alberto Clô (independent), Renzo Costi (independent), Marco Pinto (non-executive) and Pierluigi Scibetta (independent); Compensation Committee: Mario Resca (Chairman, independent), Renzo Costi (independent), Marco Pinto (non-executive) and Pierluigi Scibetta (independent); International Oil Committee: Alberto Clô (Chairman, independent), Paolo Scaroni (CEO), Dario Fruscio (independent) and Marco Reboa (independent). The Code, in line with the Borsa Italiana Code, suggests the creation of a Nominating Committee. The Board of Directors has not formed this Committee in consideration of the shareholding characteristics of Eni. Internal Control Committee The Internal Control Committee is entrusted with advisory and consulting tasks in respect of the Board in the area of monitoring general management issues. In the course of 2006, the Internal Control Committee met 15 times, with an average participation of 80% of its members, and reviewed the following: (i) the 2006 audit plan prepared by Eni, Saipem and Snam Rete Gas internal audit functions and their progress; (ii) findings and results from Enis internal auditing interventions; (iii) initiatives undertaken and effects of measures applied in order to eliminate the weaknesses highlighted by Enis Internal Audit department; (iv) the essential features of the 2005 financial statements, making suggestions intended to improve the level of disclosure throgh meetings with top level representatives of administrative functions of the main Eni subsidiaries, chairmen of boards of statutory auditors and responsible partners from external audit companies; (v) Enis 2006 draft Half Year Report; (vi) the Recommendations on the internal accounting control system presented on 2004 financial statements by the external audit company; (vii) the external audit |
company reports on
Facts and circumstances of interest in the
governance activity; (viii) the situation of
appointments of external auditors of main group
companies, the recognition of costs incurred and the
observations contained in the reports of external
auditors pertaining to the financial statements of
Enis subsidiaries; (ix) the proposal to integrate
the task of Enis external auditors, to also include
the certification of Enis internal control system,
under Section 404 of the Sarbanes-Oxley Act (SOA) for
fiscal year 2006, and the proposal extending the task of
the external auditor currently in charge to audit the
financial statements of Group companies and to certify
the Group internal control system over financial
reporting as well as all other admissible tasks for the
2007-2009 period; (x) the report on the implementation of
SOA activities; (xi) the report presented by the Watch
Structure established as required by Legislative Decree
No. 231/2001; (xii) the general aspects of rules on
recommendations received by Eni, which also include
confidential or anonymous recommendations, issued also in
respect of the Sarbanes-Oxley Act, and the periodic
reports concerning the received recommendations; (xiii)
the new organizational structure and the tasks of Eni
Internal Audit function; (xiv) the reorganization of the
Group supply activities; (xv) issues on hydrocarbon
reserves and relevant classification criteria, also
including accounting issues; (xvi) appointments of
consultants and legal counsellors supporting the Company
on legal matters for the 2005-2006 two year period;
(xvii) antitrust procedures and the recognition of the
relevant provisions to the risk reserve; (xviii) the
reports on additional information submitted to the SEC
and accounting treatment of the merger of Enifin with the
parent company Eni; (xix) the report on Eni
administrative and accounting organization to be
submitted to the Board of Directors. The Internal Audit Manager is the secretary of the Committee. In its meeting of March 16, 2007, the Board of Directors, as proposed by the CEO, in agreement with the Chairman and after asking the Internal Control Committee for its opinion, entrusted the Internal Audit Manager as manager delegated for the internal control. Compensation Committee The Compensation Committee, established by the Board of Directors in 1996, is entrusted with proposing tasks with respect to the Board on the matters of compensation of the Chairman and CEO as well as of the Board Committees members, and following the indications of the CEO, on the following: (i) stock-based incentive plans; (ii) the definition of the |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
criteria for the
compensation of top managers of the Group; (iii) the
setting of objectives and the evaluation of results of
performance and incentive plans. In 2006, the Compensation Committee met nine times with an average participation of 96% of its members, and accomplished the following: (i) verified functions and tasks of the Committee, defined by the new regulation approved by the Board of Directors in June 2005 (available on Enis website), in accordance with the national and international corporate governance principles, confirming their substantial alignment with international and national standards; (ii) examined the objectives of the 2006 performance and incentive plan and appraised 2005 results, to be submitted to the Board of Directors for approval; (iii) examined the revised long-term incentive system for managers, and drafted a proposal based on which the Board of Directors requested the Shareholders Meetings approval of the 2006-2008 stock option plan and the authorization to use treasury shares for servicing the stock option plan; (iv) examined the issue of the insurance against professional risks included in agreements for Eni managers, extended to Directors and Statutory Auditors, as approved by the Board of Directors in its meeting of March 30, 2006, and the issue of the insurance against managerial risks, on which the Shareholders Meetings approval has been requested; (v) examined the Chairman variable compensation and drafted a proposal for determining the variable part of the remuneration of the Chairman and CEO based on 2005 performance to be submitted to the Board of Directors; (vi) examined the benchmarks for top management remuneration, the criteria of the annual remuneration policy, as well as the implementation of incentive plans for the year and in the long-term in order to draft a proposal to submit to the Board of Directors; (vii) examined the compensation to be attributed to the Directors, related to functions and activities performed in their role as members of the Committees established by the Board, in order to draft a proposal approved by the Board of Directors meeting of July 27, 2006; (viii) examined the impact of the new stock-based incentive scheme on CEO compensation, and drafted an integration proposal in order to maintain the incentive level established in 2005, to be submitted to the Board of Directors (see Stock options and other share-based compensation). In 2006, the Committee appointed external consultants to acquire analysis and advice on its specific matters. |
International Oil
Committee The International Oil Committee is entrusted with the monitoring of trends in oil markets and the study of their aspects. In 2006 the International Oil Committee met five times with a 75% participation of its members. The first meeting concerned trends and conditions of the oil and gas industry, as well as the key variables of the energy scenarios for Enis four-year strategic plan. The other meetings concerned the analysis of worldwide energy market prospects to 2020, to identify the main issues and challenges to be addressed in Eni Master Plan a key document in the planning process defining Eni industrial strategies. In particular, the meetings dealt with: (i) worldwide energy consumption trends to 2020 discussed in two meetings aimed at identifying fundamentals, underlying assumptions and possible uncertainties in consumption trends in the most important world areas; (ii) a survey of the supply of natural gas in the world and (iii) a survey of the worldwide oil supply, highlighting hydrocarbons and infrastructure development trends, in relation to the industrial and market trends in the next 15 years. Board of Statutory Auditors and other control entities Board of Statutory Auditors The Board of Statutory Auditors, in accordance with Legislative Decree No. 58/1998 (TUF), monitors: (i) the respect of laws and of Enis memorandum of association; (ii) the respect of the principles of proper administration; (iii) the adequacy of the companys organizational structure, for the parts covered by the Board's responsibility, of its internal control system and administration and accounting systems as well as the reliability of the latter in fairly representing the management of the company; (iv) the adequacy of instructions conveyed by the parent company to its subsidiaries according to Article 114, paragraph 2 of the above mentioned decree; (v) the actual implementation of corporate governance rules foreseen by the codes of conduct prepared by market regulators and the associations the company belongs to, that the company publicly declares to respect. In accordance with the Eni Code, in line with the Borsa Italiana Code, the Board of Statutory Auditors monitors the independence of the external auditing firm, verifying both the compliance with the provisions of applicable laws and regulations governing the matter, and the nature and extent of services other than the accounting |
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control provided to Eni by
the auditing firm and the entities belonging to its
network. According to the TUF (as amended by Legislative Decree No. 303/2006), the Board of Statutory Auditors drafts a proposal regarding the appointment of the external auditors and their fee to be submitted to the Shareholders Meeting for approval. The Board of Directors, in its meeting of March 22, 2005, in accordance with the provision of the SEC Rule 10A-3 for non-US companies listed on US stock exchanges, elected the Board of Statutory Auditors to fulfill the role of the audit committee in US companies under the Sarbanes-Oxley Act and SEC rules, within the limits set by Italian legislation from June 1, 2005. On June 15, 2005, the Board of Statutory Auditors approved the regulation for carrying out the functions attributed to the audit committee under US laws. This regulation is published on Enis website. Composition and appointment The Board of Statutory Auditors is comprised of five auditors and two alternate auditors, appointed by the Shareholders Meeting for a three-year term. On May 27, 2005, Enis Shareholders Meeting appointed the following statutory auditors for a three-year period and however until the Shareholders Meeting approving financial statements for fiscal year 2007: Paolo Andrea Colombo (Chairman), Filippo Duodo, Edoardo Grisolia, Riccardo Perotta and Giorgio Silva. Francesco Bilotti and Massimo Gentile are alternate auditors. A curriculum of these auditors is published on Enis website. The same Meeting also determined the yearly compensation of the Chairman of the Board of Statutory Auditors and each Auditor amounting to euro 115,000 and euro 80,000 respectively. Paolo Andrea Colombo, Filippo Duodo, Edoardo Grisolia and Francesco Bilotti were candidates in the list presented by the Ministry of Economy and Finance; Riccardo Perotta, Giorgio Silva and Massimo Gentile were candidates in the list presented by institutional investors coordinated by Fineco Asset Management SpA. Statutory Auditors are appointed in accordance with Enis By-laws with a list vote; at least two auditors and one substitute are chosen from minority candidates. According to Article 28.2 of Enis By-laws, as revised by the Shareholders Meeting of May 25, 2006, to implement the provision of Law No. 262 of December 28, 2005 (law on the protection of savings), the Shareholders Meeting elects Chairman of the Board of Statutory Auditors a member elected from a list other than the one obtaining the majority of votes; this prescription will be applied in the next Board election. The lists of candidates include declarations made by |
the candidates on the
possession of independence and expertise requirements
prescribed by applicable regulation and a professional
resume of each candidate, must be filed at the
companys headquarters at least 10 days before the
date of the Shareholders Meeting on first call and
are published in national newspapers. Expertise and independence In accordance with the TUF, Statutory Auditors have to possess the specific requirements of independence, and the professional and honorability requirements as prescribed by a regulation of the Minister of Justice. As also reported in the Code, the Statutory Auditors shall act with autonomy and independence also vis-à-vis the shareholders who elected them. As for professional qualifications of the candidates, Article 28 of Enis By-laws, in line with the said Decree of the Minister of Justice, foresees that the professional requirements can also be acquired with at least three years of professional experience or by teaching business law, business administration and finance, as well as at least a three year experience in a managerial position in geological or engineering businesses. Enis auditors are all chartered auditors. Article 28 of Enis By-laws also prohibits the appointment as statutory auditor of persons that are statutory auditors or members of the supervisory board or members of the management control committee of at least five companies with registered securities in regulated markets not subsidiaries of Eni SpA. In case such persons are elected, their task is terminated. This prescription should be replaced by a Consob regulation defining the maximum allowed number of appointments of a statutory auditor in line with the TUF. In its meeting of March 16, 2007, the Board of Statutory Auditors verified that all its members complied with the independence criteria prescribed by the rules of the Eni Code intended to ensure the Statutory Auditors possession of required independence after their appointment, also based on the criteria defined by the Code for the members of the Board of Directors. Meetings and functioning Statutory auditors receive information on all issues on the agenda of the Board of Directors at the same time as the Directors. In line with the provisions of the Eni Code, an Auditor who has an interest, either own or on behalf of third parties, in a certain transaction of the issuer, shall inform the Board of Directors and the other Auditors. In 2006, the Board met 20 times with an average participation of 88% of its members. |
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The table attached at the
end of this section indicates, the percentage of
participation of each auditor to the Board of Auditors
meetings. Further Auditors' appointments Based on information received, information on positions held by the members of Enis Board of Statutory Auditors in other Boards of Directors and Boards of Statutory Auditors of listed companies, also abroad, financial, banking, insurance or large companies is provided below. The curriculum of each Auditor is available on Enis website. PAOLO ANDREA COLOMBO Chairman of Sintesi SpA, independent Director of Mediaset SpA, Interbanca SpA, Iniziative Gestione Investimenti SpA, RCS Quotidiani SpA, SIAS SpA, Director of Versace SpA. Chairman of the Board of Statutory Auditors of Ansaldo STS and Saipem SpA. Auditor of Aviva SpA, Lottomatica SpA and Sirti SpA. FILIPPO DUODO Chairman of the Board of Statutory Auditors of Banca Meridiana SpA. Auditor of Benetton Group SpA. RICCARDO PEROTTA Chairman of the Board of Statutory Auditors of Snam Rete Gas SpA and Gewiss SpA, Auditor of ECS International Italia SpA. GIORGIO SILVA Auditor of Luxottica SpA and RCS Mediagroup SpA. External Auditors As provided for by Italian law, the auditing of financial statements is entrusted to external auditors registered on the register held by Consob. The external auditor is appointed by the Shareholders Meeting. Enis external auditor, PricewaterhouseCoopers SpA, was appointed by the Shareholders Meeting of May 28, 2004 for a three-year term ending with the Meeting approving financial statements for 2006. Financial statements of Eni subsidiaries are audited, mainly by PricewaterhouseCoopers. In order to express its opinion on Enis consolidated financial statements PricewaterhouseCoopers took the responsibility of the audit activities performed by other auditors on certain Eni fully consolidated subsidiaries representing, however, a negligible part of Enis consolidated assets and revenues. Enis external auditor and the companies belonging to its network are not to be entrusted with tasks not pertaining to audit activities, except for rare and |
motivated cases for tasks
not prohibited by Consob and the Sarbanes-Oxley
Act subject to authorization by Enis Board
of Statutory Auditors and to approval by the Board of
Directors of Eni Group companies upon favorable opinion
of their Board of Statutory Auditors. Enis Board of
Statutory Auditors must be informed of all tasks
entrusted to external auditors by Eni Group companies. Other auditing The accounts of the parent company Eni SpA are subject also to the review of the Italian Court of Accounts. The relevant activity is performed by the Magistrate delegated to control, Lucio Todaro Marescotti (alternate Magistrate Angelo Antonio Parente), replacing Luigi Schiavello, as decided on July 19-20, 2006, by the Governing Council of the Italian Court of Accounts. The Magistrate delegated to control attends the meetings of the Board of Directors, the Board of Statutory Auditors and the Internal Control Committee. Internal controls Eni is aware that financial information plays a crucial role in the creation and maintenance of satisfying relationships between the company and its increasingly wide area of stakeholders, and contributes, as well as the group performance, to the creation of value for the shareholders. Eni is also aware that investors rely on Eni managers and employees respecting procedures and rules of the companys internal control system. In this area a special relevance is attribuited to Enis Code of Conduct that identifies the fundamental values for the deployment of Eni activities in the formal and substantial legitimacy of behavior of its employees at any organizational level, the transparency of accounts and disclosure, and the spreading of a control oriented attitude. The Board of Directors evaluates the consistency of the internal control system with the company structure and characteristics. The CEO monitors the functionality of the internal control system, supported by the manager in charge of the internal control and by the Internal Audit department. In particular, the Board of Directors is assisted by the Internal Control Committee in the performance of the tasks related to: (i) defining the guidelines for the companys internal control system intended to ensure that the main company risks are correctly identified, measured, managed and monitored, also determining whether such risks are compatible with a sound and a correct management of the company; (ii) annually evaluating the suitability, effectiveness and |
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efficient operation of the
internal control system; (iii) disclosing the key
elements of the internal control system, and evaluating
its overall adequacy in the annual report on corporate
governance. In performing those tasks, the Board of
Directors refers to available conceptual models and
domestic and international best practices. Special
attention is paid to organization and management models
adopted according to Legislative Decree No. 231/2001 and
to the Code of Conduct. In line with these principles, Eni adopted regulations for the preparation of financial statements of the Group companies and the collection of information necessary for timely and fair disclosure in quarterly and yearly reports in accordance with generally accepted rules and accounting standards, ensuring also uniformity of behavior, an essential element for the provision of proper financial information on the Group. With the aim of ensuring the effective and correct enactment of such rules, principles and standards and of general rules governing processes for information to be recorded, processed, summarized and reported, Eni adopted an internal control system designed with the aim of providing investors and markets with fair, complete and timely information. Eni internal control system has been designed in accordance with the provisions of the Sarbanes-Oxley Act of 2002 (SOA) which Eni has to comply with as its securities are listed on the New York Stock Exchange. Such control system was designed in accordance with two fundamental principles:
The objectives of the internal control system have been defined consistently with applicable provisions of US rules distinguishing two systemic components:
Disclosure controls and procedures are defined as controls and other procedures of the company that are designed to ensure that information required to be disclosed by the company in its reports is collected and communicated to Eni management, including Enis CEO and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. |
Internal control over
financial reporting is a process designed to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles. Enis internal control over financial reporting has been designed to be consistent with the Internal Control-Integrated Framework created and published by the Committee of Sponsoring Organizations of the Treadway Commission and comprises five interrelated components: control environment, risk assessment, control activities, information and communication, and monitoring. Such components in relation to their own features operate at entity level (Group, business segment, divisions, subsidiary) and/or at a process level, including both operational and financial administration process (transaction, evaluation processes and closing the books). The key objective of internal control over financial reporting is to mitigate risks due to negligence and risks of fraud, significantly impacting financial statements. In addition, a specific risk assessment has been performed on fraud risks, and from this anti-fraud measures and controls have been designed. Management has developed its own assessment procedures to evaluate the design of Enis internal control over financial reporting and its operating effectiveness. To that end, management has implemented ongoing monitoring activities entrusted to managers who are responsible of conducting primary processes or activities, and separate evaluations have been entrusted to Enis Internal Audit department. This department operates according to a preset plan of interventions defining scope and objectives of each intervention. Outcomes from all monitoring activities are reported periodically in order to ascertain the state of Enis internal control over financial reporting. All levels of Enis organizational structure are involved in this reporting process. A primary role in Enis internal control over financial reporting is played by the Internal Audit department, directly reporting to the CEO and to the Board of Statutory Auditors in its quality of audit committee under the SOA. The Internal Audit Manager, in his/her role as responsible for internal control activities, reports to the CEO, to Enis Internal Control Committee and to the Board of Statutory Auditors. Among the tasks entrusted to the Internal Audit department are: (i) to ensure implementation of the following activities: vigilance activity as required by Legislative Decree No. 231/2001; separate evaluations as required by the SOA, |
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operational, financial,
information technology and fraud auditing activities on
behalf of Eni divisions and Enis fully-owned
subsidiaries lacking their own Internal Audit
departments; (ii) to update Enis system for
identifying, classifying and assessing risk areas in
order to plan control activities; (iii) to implement
planned and non-planned control activities, and to
identify possible gaps with respect to adopted conceptual
models, also making proposals on corrective measures and
monitoring subsequent follow-up activities; (iv) to
maintain relationships with external auditors; (v) to
maintain relationships with and ensure information flows
to the Watch Structure, the Internal Control Committee
and the Board of Statutory Auditors; (vi) to ensure the
management of the recommendations received by Eni, also
under an anonymous form, during the internal preliminary
investigations and supporting the entrusted company
bodies in their evaluation process, always in full
compliance with Eni procedures. The integrated auditing plan and the outcomes of the activities performed are evaluated by the Internal Control Committee, the Board of Statutory Auditors, and the Watch Structure within the boundaries of the matters covered by Legislative Decree No. 231/2001. The Internal Audit department and the external auditors have complete access to data, information and documentation which can support the performance of auditing activities. Legislative Decree No. 231/2001 In its meetings of December 15, 2003 and January 28, 2004 the Board of Directors approved a Model for organization, management and control according to Legislative Decree No. 231/2001 and established a Watch Structure. Legislative Decree No. 231/2001 states the administrative responsibility of entities such as companies and partnerships, according to Article 11 of Law No. 300 of September 29, 2000. The principles of the 231 model are published on Enis website. The criteria for the preparation of this model are those included in a guidebook prepared by Confindustria (the Italian association of industrial companies) as verified by the Ministry of Justice as required by the same Decree. The model was transmitted to all Group companies for application. Transactions in which a director has an interest and transactions with related parties In accordance with the TUF and with Article 23.3 of Enis By-laws, the Directors shall timely inform the Board of Statutory Auditors on transactions in which they have an interest. |
During each Board of
Directors meeting, the Chairman expressly asks the
Directors to declare any of their potential interest in
transactions on the agenda. The Eni Code, in accordance with the Borsa Italiana Code, foresees the adoption, by the Board of Directors, of measures ensuring that transactions in which a director has an interest, directly or on behalf of third parties, and all transactions carried out with related parties, are performed in a transparent way and meet criteria of substantial and procedural fairness. In addition, the Eni Code foresees a specific opinion of the Internal Control Committee on the rules adopted by the Board of Directors. Preparation of a procedure regarding transactions with related parties is underway; however its finalization is stalling due to the circumstance that Italian listed companies are awaiting the emission on part of Consob of certain guidelines that Article 2391-bis of the Civil Code assigns to Consob. Pending the emission of such guidelines, Enis internal rules provide that transactions with related parties be submitted to the Board of Directors, even though of amounts lower than the materiality threshold set for the transactions to be approved by the Board; The Board of Directors resolution defining the powers of the Board itself points out the needs to pay particular attention to those situations in which a director has an interest and to transactions with related parties. Moreover, Eni is committed to observing principles as defined in the Borsa Italiana Code regarding such persons holding significant positions in the share capital of listed companies and in particular respecting their managerial autonomy. In the ordinary course of its business, Eni enters into transactions concerning the exchange of goods, provision of services and financing with related parties as defined by IAS 24. These include non consolidated subsidiaries and affiliates as well other companies owned or controlled by the Italian Government. All such transactions are conducted on an arms length basis and in the interest of Eni Group companies. Enis Directors, General Managers and managers with strategic responsibilities disclose every six months any transactions with Eni SpA and its subsidiaries that require disclosure under IAS 24. Amounts and types of trade and financial transactions with related parties and their impact on consolidated earnings and cash flow, and on the Groups assets and financial condition are reported in Note 33 to the consolidated financial statements. |
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Significant
differences in corporate governance practices as per
Section 303A.11 of the New York Stock Exchange Listed
Company Manual Corporate governance As discussed above, Enis organizational structure follows the traditional Italian model of companies which provides for two main separate corporate bodies, the Board of Directors and the Board of Statutory Auditors to whom management and monitoring duties are respectively entrusted. This model differs from the U.S. unitary model which provides for the Board of Directors as the sole corporate body responsible for management and for audit committee established within the same Board for monitoring. Below is a description of the most significant differences between corporate governance practices followed by U.S. domestic companies under the NYSE standards and those followed by Eni. INDEPENDENT DIRECTORS NYSE Standards Under NYSE standards listed U.S. companies Boards must have a majority of independent directors. A director qualifies as independent when the Board affirmatively determines that such director does not have a material relationship with the listed company (and its subsidiaries), either directly, or indirectly. In particular, a director may not deemed independent if he/she or an immediate family member has a certain specific relationship with the issuer, its auditors or companies that have material business relationships with the issuer (e.g., he/she is an employee of the issuer or a partner of the auditor). In addition, a director cannot be considered independent in the three-year cooling-off period following the termination of any relationship that compromised a directors independence. Eni Standards In Italy, the Borsa Italiana Code recommends that the Board of Directors includes an adequate number of independent non-executive directors "in the sense that they do not maintain, nor have recently maintained, directly or indirectly, any business relationships with the issuer or persons linked to the issuer, of such a significance as to influence their autonomous judgement". The directors independence shall be periodically assessed by the Board of Directors. The results of the assessments of the Board shall be communicated to the market. The Board of Directors shall evaluate the independence of its non-executive members having regard more to the contents than to the form and keeping in mind that a director usually does not appear independent in the |
following events, to be
considered merely as an example and not limited to: a) if he/she controls, directly or indirectly, the issuer also through subsidiaries, trustees or through a third party, or is able to exercise over the issuer dominant influence, or participates in a shareholders agreement through which one or more persons may exercise a control or considerable influence over the issuer; b) if he/she is, or has been in the preceding three fiscal years, a relevant representative of the issuer, of a subsidiary having strategic relevance or of a company under common control with the issuer, or of a company or entity controlling the issuer or able to exercise over the same a considerable influence, also jointly with others through a shareholders agreement; c) if he/she has, or had in the preceding fiscal year, directly or indirectly (e.g., through subsidiaries or companies of which he/she is a significant representative, or in the capacity of partner of a professional firm or of a consulting company) a significant commercial, financial or professional relationship: - with the issuer, one of its subsidiaries, or any of its significant representatives; - with a subject who, jointly with others through a shareholders agreement, controls the issuer, or in case of a company or an entity with the relevant significant representatives; - or is, or has been in the preceding three fiscal years, an employee of the abovementioned subjects; d) if he/she receives, or has received in the preceding three fiscal years, from the issuer or a subsidiary or holding company of the issuer, a significant additional remuneration compared to the fixed remuneration of non-executive director of the issuer, including the participation in incentive plans linked to the companys performance, including stock option plans; e) if he/she was a director of the issuer for more than nine years in the last 12 years; f) if he/she is vested with the office of executive director in another company in which an executive director of the issuer holds the office of director; g) if he/she is shareholder or quotaholder or director of a legal entity belonging to the same network as the company appointed for the accounting audit of the issuer; h) if he/she is a close relative of a person who is in any of the positions listed in the above paragraphs. The Eni Code foresees further independence requirements, in line with the ones provided by the |
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Borsa Italiana Code. In its
meeting of February 22, 2007, Enis Board of
Directors judged that six out of eight of its
non-executive members comply with the independence
standards, set by the Eni Code. Non-executive Director
Marco Pinto is an employee of the Ministry of Economy and
Finance. MEETINGS OF NON EXECUTIVE DIRECTORS NYSE Standards Non-executive directors, including those who are not independent, must meet at regularly scheduled executive sessions without management. In addition, if the group of non-executive directors includes directors who are not independent, independent directors should meet separately at least once a year. Eni Standards Neither Enis non-executive directors nor Enis independent directors must meet separately,under the Codes corporate governance rules. AUDIT COMMITTEE NYSE Standards Listed U.S. companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Securities Exchange Act of 1934 and that complies with the further provisions of the Sarbanes-Oxley Act and of Section 303A.07 of the NYSE Listed Company Manual. Eni Standards In its meeting of March 22, 2005, Enis Board of Directors, making use of the exemption provided by Rule 10A-3 for non-U.S. private issuers, has identified the Board of Statutory Auditors as the body that, starting from June 1, 2005, is performing the functions required by the SEC rules and the Sarbanes-Oxley Act to be performed by the audit committees of non-U.S. companies listed on the NYSE (see paragraph Board of Statutory Auditors earlier). Under Section 303A.07 of the NYSE listed Company Manual audit committees of U.S. companies have further functions and responsibilities which are not mandatory for non-U.S. private issuers and which therefore are not included in the list of functions shown in the paragraph referenced above. NOMINATING/CORPORATE GOVERNANCE COMMITTEE NYSE standards U.S. listed companies must have a nominating/corporate governance committee (or equivalent body) composed entirely of independent directors that are entrusted, among others, with the responsibility to identify individuals qualified to become board members and to select or recommend director nominees for submission to the Shareholders Meeting, as well as to develop and recommend to the Board of Directors a set of corporate governance guidelines. |
Eni Standards This
provision is not applicable to non-U.S. private issuers.
The Code allows listed companies to have within the Board
of Directors a committee for directors nominees
proposals, above all when the Board of Directors detects
difficulties in the shareholders submission of
nominees proposals, as could happen in publicly owned
companies. Eni has not set up a nominating committee,
considering the nature of its shareholding as well as the
circumstance that, under Enis By-laws, directors
are appointed by the Shareholders Meeting based on
lists presented by shareholders or by the Board of
Directors. The shareholders The Shareholders Meeting During meetings, shareholders can request information on issues in the agenda. Information is provided within the limits of confidentiality, taking account of applicable rules regulating the matter of price sensitive information. With the aim of facilitating the attendance of shareholders, calls for meetings are published in Italian and foreign newspapers, Enis By-laws allow vote by correspondence and the collection of powers of attorney in Articles 13 and 14. On December 4, 1998, Eni approved a regulation for its meetings, available on Enis website, in order to guarantee an efficient deployment of meetings, in particular the right of each shareholder to express his opinion on the items in the agenda. The Shareholders Meeting held on May 25, 2006, in order to align Enis By-laws to the prescriptions of the TUF regulating the protection of investors, modified the By-laws stating that all the shareholders representing also with others, at least 1/40 of the share capital, can ask to add items to the agenda, within five days of the publication of the convening notice. Enis shareholders Eni SpAs share capital at December 31, 2006, amounted to euro 4,005,358,876 fully paid and was represented by 4,005,358,876 ordinary shares, at a nominal value euro 1 each. Shares are not divisible and give right to one vote. Shareholders can exercise the rights provided by the law. In accordance with Article 6 of Enis By-laws, no shareholder, excepted the Italian Government, can directly or indirectly own more than 3% of Eni SpAs share capital; the shares held above this limit do not allow to exercise the rights exceeding the 3% threshold. In 1995 Eni issued a sponsored ADR (American Depositary Receipts) program directed to U.S. |
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investors. One ADR is equal to two Eni ordinary shares; ADRs are listed on the New York Stock Exchange. Based on information available and received in accordance with Consob Decision | No. 11971/1999, as of December 31, 2006, shareholders holding more than 2% of Enis share capital were the following: |
Shareholders | Shares held | % of capital | ||
Ministry of Economy and Finance | 813,443,277 | 20.31 | ||
Cassa Depositi e Prestiti SpA | 400,288,338 | 9.99 | ||
Eni SpA (own shares) | 324,959,866 | 8.11 | ||
Shareholders by area | ||||||
Shareholders | Number of shareholders | Number of shares | % of capital (1) | |||
Italy | 337,133 | 2,499,529,005 | 62.40 | |||
UK and Ireland | 1,160 | 208,488,751 | 5.21 | |||
Other EU | 4,270 | 511,666,488 | 12.77 | |||
USA and Canada | 1,848 | 327,231,932 | 8.17 | |||
Rest of world | 1,387 | 146,093,376 | 3.65 | |||
Own shares at the dividend date | 312,264,429 | 7.80 | ||||
Other | 84,895 | .. | ||||
Total | 345,798 | 4,005,358,876 | 100.00 | |||
(1) | At the dividend payment date, June 22, 2006 (ex-dividend date was June 19, 2006). |
Shareholders by amount of shares held | ||||||
Shareholders | Number of shareholders | Number of shares | % of capital (1) | |||
>10% | 1 | 813,443,277 | 20.31 | |||
3%-10 | 1 | 400,288,338 | 9.99 | |||
2%-3% (2) | 1 | 93,040,000 | 2.32 | |||
1%-2% | 8 | 510,288,948 | 12.74 | |||
0.5%-1% | 9 | 218,486,106 | 5.46 | |||
0.3%-0.5% | 15 | 238,443,980 | 5.95 | |||
0.1%-0.3% | 56 | 377,681,072 | 9.43 | |||
= 0.1% | 345,707 | 1,041,337,831 | 26.00 | |||
Own shares at the dividend date | 312,264,429 | 7.80 | ||||
Other | 84,895 | .. | ||||
Total | 345,798 | 4,005,358,876 | 100.00 | |||
(1) | At the dividend payment date June 22, 2006 (ex-dividend date was June 19, 2006). | |
(2) | Shareholder Banca Intesa informed that it reduced its interest from 2.32 to 0.57%. |
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Special powers of
the State - golden share Under Article 6.1 of Enis By-laws only the Italian State can hold shares representing more than 3% of Enis share capital. Enis By-laws in Article 6.2 attribute to the Minister for Economy and Finance, in agreement with the Minister of Economic Development, the following special powers to be used in compliance with the criteria indicated in the Decree of the President of the Council of Ministers of June 10, 2004: (a) opposition with respect to the acquisition of material shareholdings representing 3% of the share capital of Eni SpA having the right to vote at ordinary Shareholders Meetings. Such opposition is required to be expressed within 10 days of the date of the notice to be filed by the Board of Directors at the time a request is made for registration in the Shareholder register, should the transaction be considered prejudicial to vital interests of the State; (b) opposition with respect to the subscription of shareholders agreements or other arrangements (as defined by Article 122 of Legislative Decree No. 58 of February 24, 1998) whereby 3% or more of the share capital of Eni SpA having the right to vote at ordinary Shareholders Meetings is involved; (c) veto power duly motivated by the case of prejudice to the interests of the State with respect to shareholders resolutions to dissolve Eni SpA, to transfer the business, to merger or to demerger, to transfer the registered office of Eni SpA outside Italy, to change the corporate purposes or to amend or modify any of the special powers described in this section; (d) appointment of a Board member without voting right. Law No. 266 of December 23, 2005 (Budget Law) in Article 1, paragraphs 381 to 384 in order to favor the process of privatization of and the diffusion among the public of shareholdings in companies in which the State holds significant stakes, introduced the option to include in the by-laws of listed companies formerly entirely owned by the State, as in the case of Eni SpA, regulations providing the issuance of shares and securities also at par value with the right to vote at ordinary and extraordinary Shareholders Meetings in favor of one or more shareholders identified also in terms of the number of shares held. The introduction of these norms in Enis By-laws, subject to approval by the EU, will entail the cancellation of the 3% threshold to individual shareholdings, except for the State, as contained in Article 6.2 of Enis By-laws. Enis By-laws modifications Legislative Decree No. 303/2006 introduced changes to the law on protection of savings. In the meeting of March 29, 2007, the Board of Directors convened the |
Shareholders Meeting
also in extraordinary session, to approve the changes to
Enis By-laws, that align the by-laws to the said
Decree. Adjustments introduced by the law on protection of savings had already been adopted by the May 25, 2006 Shareholders Meeting. Shareholder and investor relations In concert with the launch of its privatization process, Eni adopted a communication policy, confirmed by the Code of Conduct, aimed at promoting an ongoing dialogue with institutional investors, shareholders and the markets to ensure systematic dissemination of exhaustive complete, transparent, selective and prompt information on its activities, with the sole limitation imposed by the confidential nature of certain information. Information made available to investors, markets and the press is provided in the form of press releases, regular meetings with institutional investors and the financial community and the press, in addition to general documentation released and constantly updated on Enis website. Relations with individual investors, institutional investors, shareholders and the press are handled by dedicated Eni departments. Relations with investors and financial analysts are held by the Investor Relations manager. Information is available on Enis website and can be requested by sending an email to investor.relations@eni.it. Relations with the press are held by the press manager. Relations with shareholders are held by the Corporate Secretary office. Information is available on Enis website and can be requested by sending an email to segreteriasocietaria.azionisti@eni.it or calling the toll-free number 800.940.924 (Outside Italy 800.11.22.3456). Information regarding periodic reports and major events/transactions are promptly made available to the public, and are also published on Enis website. A specific section of Enis site contains all press releases, procedures concerning corporate governance, presentations provided in meetings with the press and financial analysts, notices to shareholders and bond holders and information concerning shareholders and bond holders meetings, including proceeds thereof. Documents available to the public are mailed on request free of charge. Handling of company information On February 28, 2006, Enis Board of Directors updated the Procedure for the disclosure of information to the market concerning Group |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
activities approved on
December 18, 2002 and published on Enis website.
The procedure acknowledges Consob guidelines and the
Guidelines for information to the market
issued in June 2002 by the Ref Forum on company
information and those included in the laws implementing
the European directive on market abuse, defines the
requirements for disclosure to the public of price
sensitive events (materiality, clarity, homogeneity,
information symmetry, consistency and timeliness) and the
information flows for acquiring data from Group companies
and providing adequate and timely information to the
Board and the market on price sensitive events. It also
contains sanctions applied in case of violation of its
rules in accordance with the crimes identified and
sanctioned by the new law on the protection of savings. Enis Code of Conduct defines confidentiality duties upheld by Group employees relating to the treatment of sensitive information. Directors and Auditors ensure the confidentiality of documents and information acquired during their tasks and respect the procedure defined by Eni for the treatment of information and for the and the disclosure of information to the market. Register of the persons having access to privileged information On February 28, 2006, the Board of Directors approved a procedure concerning the creation and updating a register of persons with a right to access privileged information at Eni, as provided for by Article 115-bis of Legislative Decree No. 58 of February 24, 1998. The procedure implementing Consob Decision on listed issuing companies, states: (i) terms and procedures for the recording and possible cancellation of the persons that, due to their professional activity or functions performed on behalf of Eni, have access to privileged information; (ii) terms and procedures of information of said persons of their recording or cancellation and relevant reasons. The procedure is in force from April 1, 2006 and was updated on September 29, 2006 to take into account the Consob position expressed on March 28, 2006. The procedure is published on Eni's website. |
Internal Dealing * * * Follow the tables included in the Handbook for the preparation of the report on corporate governance issued by Assonime and Emittente Titoli SpA in March 2004. |
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ENI ANNUAL REPORT / CORPORATE GOVERNANCE
Structure of the Board of Directors and its Committees | ||||||
Board of Directors |
Internal Control |
Compensation |
International Oil |
|||
Members |
executive |
non executive |
independent |
% attendance |
other appointments (1) |
members |
% attendance |
members |
% attendance |
members |
% attendance |
|||||||||||||
Chairman | |||||||||||||||||||||||
Roberto Poli | X |
|
100 |
4 |
|||||||||||||||||||
CEO | |||||||||||||||||||||||
Paolo Scaroni | X |
100 |
4 |
X |
40 |
||||||||||||||||||
Directors | |||||||||||||||||||||||
Alberto Clô (*) | X |
X |
94 |
4 |
X |
87 |
X |
100 |
|||||||||||||||
Renzo Costi (*) | X |
X |
69 |
X |
67 |
X |
100 |
||||||||||||||||
Dario Fruscio | X |
X |
56 |
X |
60 |
||||||||||||||||||
Marco Pinto | X |
81 |
X |
60 |
X |
78 |
|||||||||||||||||
Marco Reboa (*) | X |
X |
100 |
5 |
X |
100 |
X |
100 |
|||||||||||||||
Mario Resca | X |
X |
81 |
3 |
X |
100 |
|||||||||||||||||
Pierluigi Scibetta | X |
X |
81 |
1 |
X |
87 |
X |
100 |
Number of meetings in 2006 | 16 |
15 |
9 |
5 |
(1) | Appointments as director or statutory auditor in other listed companies, also outside Italy, in financial, banking, insurance or large companies. | |
(*) | Appointed by the minority list. | |
The Self-discipline Code foresees the possibility to form, within the Board, a Committee for the proposal of Directors nomination especially when cases the Board of Directors notices the difficulty of the shareholders in organizing the prosposal for the appointment, as being in listed companies". The Board of Directors has not formed this Committee in consideration of the shareholding characteristics of Eni. |
Board of Statutory Auditors |
Members | % attendance |
% attendance |
Number of other |
|||||
Chairman | ||||||
Paolo Andrea Colombo | 100 |
94 |
6 |
|||
Auditors | ||||||
Filippo Duodo | 55 |
81 |
1 |
|||
Edoardo Grisolia | 65 |
63 |
||||
Riccardo Perotta (*) | 95 |
88 |
3 |
|||
Giorgio Silva (*) | 95 |
100 |
2 | |||
Number of meetings in 2006 | 20 |
16 |
(1) | Appointments as director or statutory auditor in other listed company, also outside Italy, or in financial, banking, insurance or large companies. | |
(*) | Appointed by the minority list. |
For presenting a list shareholder or group of shareholders must hold at least 1% of voting shares in an ordinary Shareholders' Meeting. |
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Other information to be disclosed under the Self-discipline Code (required by to the Self Discipline Code published by Borsa Italiana in 2002) |
Yes |
No |
|||
System of delegated powers and transactions with related parties | ||||
The Board of Directors delegated powers defining: | ||||
a) limitations | X |
|||
b) exercise | X |
|||
c) periodicity of information | X |
|||
The Board of Directors reserved examination and approval of relevant transactions (including transactions with related parties) | X |
|||
The Board of Directors defined guidelines for identifying relevant transactions | X |
|||
Such guidelines are described in the report | X |
|||
The Board of Directors defined procedures for examination and approval of transactions with related parties | X (*) |
|||
Such procedures are described in the report | X (*) |
|||
Procedures for the latest appointment of Directors and Statutory Auditors | ||||
Lists of candidate directors were deposited at least 10 before the date set for appointment | X |
|||
Lists were accompanied by sufficient information on candidates | X |
|||
Candidates to the role of director disclosed information that qualified them as independent | X |
|||
Lists of candidate auditors were deposited at least 10 before the date set for appointment | X |
|||
Lists were accompanied by sufficient information on candidates | X |
|||
Meetings | ||||
The company approved regulations of meetings | X |
|||
The regulations are attached to the report (indication of where to find it online is provided) | X |
|||
Internal Control | ||||
The company appointed persons responsible for internal control | X |
|||
Such persons do not report to managers of operating divisions | X |
Internal office responsible of internal control (art. 9.3 of the code) | Internal Audit |
|||
Investor relations | ||||
The company appointed an investor relations manager | X |
Information on investor relations manager (telephone, address, e-mail) and unit | Investor Relations (**) |
(*) | Procedures will be prepared after the pubblication by Consob of the general principles as per Article 2391-bis of the Civil Code introduced by Legislative Decree No. 310 of December 28, 2004. | |
(**) | Eni SpA - Piazza Vanoni, 1 - San Donato Milanese (Milan) 20097 Italy - Tel. 02 52051651 - Fax 02 52031929. |
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Commitment to sustainable development
INTRODUCTION
In keeping with its
tradition and leveraging on its track record with the
values it consolidated in the course of time and on the
skills and passion of the persons working for it, Eni
confirmed and renewed its commitment to sustainable
development which touches upon various aspects of its
activities: from the enhancement of persons to the
respect for the environment, to the development of local
communities, to technological innovation. These are
priorities for all companies, but the more so for a large
international company operating in a business where a
good management of resources and social and environmental
issues is one of the keys for success. Eni is committed to promoting the sustainability of its results in time and to widening its relations with its stakeholders, improving corporate performance and increasing the value of intangible assets. Enis business model will therefore be adjusted in order to guarantee that the goal of sustainability becomes an integral part of its management and development processes. Assigning value to its experience, in 2006, Eni introduced the issue of sustainability as a tool for management and integrated communication. It therefore started a specific project that was carried out by various organizational units and determined the creation of a unit specifically dedicated to sustainability. In its meeting of February 22, 2007 Enis Board of Directors discussed and approved the strategic guidelines of its 2007-2010 Strategic Plan where it identified the main challenges and commitments in the area of sustainability in the next years. For the first time this year, Enis reporting system includes a Sustainability Report, which will be published along with this Annual Report and is available in the Sustainability and Investor Relations sections of Enis website (www.eni.it). |
Since 2001, in the field of
human rights, Eni has been supporting the United
Nations initiative Global Compact which aims at
promoting policies and practices oriented to
sustainability by means of the sharing and application of
ten basic principles in the fields of human rights,
workplace standards, protection of the environment, fight
against corruption. Challenges and commitments As concerns the various areas impacted by sustainability, Eni identified the main challenges that oil & gas companies will have to face in future years and defined its commitment to the attainment of sustainable development. Governance and stakeholder engagement To the greater attention paid to the transparency and sustainability of its governance model and processes Eni responded by committing itself to:
Persons |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
responded by committing
itself to:
Environmental responsibility
Innovation
Territory and communities
|
Stakeholder engagement
During its preparation the guide has been tested as
working document at some operating sites (Kashagan,
Karachagansk, Australia, Norway). |
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HUMAN RESOURCES AND ORGANIZATION
To Eni the persons working in its production system represent a wealth to be safeguarded and enhanced with careful career paths. This path, made up of accurate development and training initiatives customized to roles and persons, along with the respect of shared ethical values, represents a key factor for the creation of sustainable value in the long term. Enis main objectives for its human resources are: to guarantee safety and health of all employees and contractors; to plan initiatives for the management and development of human resources, orienting personal development and growth consistently with the evolution of business; to attract the best resources at domestic and international level through intense links with universities and research centers and actively contributing to the training of young generations; to develop and share know-how through the systematization and dissemination of knowledge and the best international corporate practices; to manage human resources internationally with homogenous tools respecting local regulations and cultures; to obtain excellent results in industrial relations at domestic and | international level; to
achieve maximum efficacy in internal communication,
engagement and training. More detailed information on the management of human resources is found on Enis website in the area Sustainability and in the Report on Sustainability. Employees and labour costs At December 31, 2006, Enis employees totaled 73,572, with an increase of 1,314 employees from December 31, 2005, or 1.8%, reflecting a 1,741 increase in employees hired and working outside Italy and a decline of 427 employees hired in Italy. Employees hired in Italy were 39,765 (54% of all Group employees). Of these, 36,881 were working in Italy, 2,697 outside Italy and 187 on board of vessels, with a 427 unit decline from 2005; of these 41 persons left the group due to changes in consolidation. The process of improvement in the quality mix of employees continued in 2006 with the hiring of 2,208 persons, of which 722 with open-end contracts. A total |
Employees at year-end | (units) |
2004 | 2005 | 2006 | Change | % Ch. | ||||||
Exploration & Production | 7,477 | 8,030 | 8,336 | 306 | 3.8 | ||||||||||
Gas & Power | 12,843 | 12,324 | 12,074 | (250 | ) | (2.0 | ) | ||||||||
Refining & Marketing | 9,224 | 8,894 | 9,437 | 543 | 6.1 | ||||||||||
Petrochemical | 6,565 | 6,462 | 6,025 | (437 | ) | (6.8 | ) | ||||||||
Engineering & Construction | 25,819 | 28,684 | 30,902 | 2,218 | 7.7 | ||||||||||
Other activities | 4,983 | 2,636 | 2,219 | (417 | ) | (15.8 | ) | ||||||||
Corporate and financial companies | 3,437 | 5,228 | 4,579 | (649 | ) | (12.4 | ) | ||||||||
70,348 | 72,258 | 73,572 | 1,314 | 1.8 | |||||||||||
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
of 1,486 persons were hired
with this type of contract and with apprenticeship
contracts, most of them with university qualifications
(824 persons of which 532 are engineers) and 632 persons
with a high school diploma. During the year 2,599 persons
left their job at Eni, of these 1,960 had an open-end
contract and 639 a fixed-term contract. |
organizational set-up of
companies, full compliance of control processes and
systems with laws and regulations. Management
and development |
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In 2006, expenditure for
training outside Italy amounted to euro 34.6 million. A
total of 1,131,530 training hours (2% higher than in
2005) were provided to a total of 8,091 employees (208
senior managers, 2,604 middle managers and senior staff,
3,585 employees and 1,694 workers) for a total of 28,487
participations. Eni Corporate University, in its role of group company covering the fields of personnel selection, training and knowledge management aimed at matching the quality of Enis human resources with the companys strategies, covering the whole knowledge cycle from the planning of requirements to the construction of integrated academic curricula in cooperation with universities in Italy, up to the selection of new talents and their training during their professional lives. In 2006, ECU prepared a thorough survey of the issue of knowledge management in Enis business units and prepared a Plan for the development of Enis knowledge system 2007-2008. In early 2007, Eni celebrated the 50th anniversary of the establishment of the Scuola Mattei operating in research and post-graduate training. The integration of energy and the environment and an international faculty and students are the key features of the school. From its foundation in 1957, the school trained nearly 2,500 young talents, of these 55% came from nearly 100 countries of the world. It recently created three new curricula directed to about 100 students from Italy and the rest of the world. Industrial relations Industrial relations within a consolidated and structured system represented an efficient and consistent support to Enis strategic choices and to the completion of reorganization processes underway. With Italian workers unions, Eni defined the renewal of collective contracts (for the segments of energy and oil and chemicals) expired in late 2005. As for the collective contract for the gas-water segment, also expired at the end of 2005, negotiations between workers unions and companies organizations are underway. Internationally, Eni continued its dialogue with workers unions in specific forums such as the European Works Council. Enis Multicultural Training Project, which takes place every year in a different country with the cooperation of members of the EWC, held training courses in France addressed to 300 employees of Saipem SA. This course was awarded the first prize Etica&Impresa at the end of 2006. |
Health Activities for the protection of health aim at improving general work conditions and are developed according to three main principles:
Eni has a network of 307 own health care centers
located in its main operating areas of these 217 centers
are outside Italy and are managed by expatriate and local
staff (415 doctors and 442 paramedics). A set of
international agreements with the best local and
international health centers guarantees efficient service
and timely reactions to emergencies.
|
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
Enis Guide on the evaluation and mitigation of
risks published in 2004 by the HSE department describes
the methods applied in the identification of dangers,
evaluation and mitigation of risks associated to plants,
processes, transportation means, workplaces, chemical
substances and products used, produced and marketed.
|
In 2006, safety indicators improved from 2005. The injury frequency rate was 3.07, down 3%, and the injury severity rate was 0.09, down 10% from 2005. |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
RESPONSIBILITY TOWARDS THE ENVIRONMENT
Reference
scenario The attention currently paid to the relevant issues of environmental sustainability and the corresponding regulatory developments at international level stimulate companies to engage beyond the simple compliance both as concerns locally and globally critical situations. The precautionary principle that informs current regulations requires that the actions taken by industrial companies to reduce their environmental footprint privilege the preventive approach to the remediation of damage done. In addition, the current operating context is characterized by increasing avoidance of risks thus posing stricter constraints to the freedom of operations, due to the progressive internalization of environmental externalities and also for the growing participation of local stakeholders to decision making processes. Companies are therefore required to |
be more transparent on their
environmental performance, as they are subject to careful
scrutiny by stakeholders. In all its activities, Eni is
actively committed to reducing its environmental
footprint, decreasing its energy and water consumption,
reducing local pollution of air, water and soils as well
as waste production and to reclaiming discontinued
industrial sites. Special attention is paid to the
protection of biodiversity. More detailed information on the reduction of the environmental footprint is found on Enis website in the area Sustainability and in the Report on Sustainability. Rational use of natural resources The management of natural resources is aimed at a rational and sustainable use of these resources and their protection in all Enis operations. |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
The application of the best
available technologies for the control of emissions into
the atmosphere is one of the pillars of the current
environmental regulations (IPPC/AIA, Italian
environmental Law No. 152/06) and finds a responsible
partner in Eni that strives to reduce the impact of its
production processes on the environment. In this light, Eni approved capital expenditure for the technological improvement of the treatment of waste fluids, combustion in gas turbines and devices for the reduction of effluents applicable in combined cycle plants for the production of electricity, the control and monitoring of emissions from plant components and transport of fuels. The implementation directives for the management of waters concern the reduction in pure water consumption by developing recycling opportunities and the minimization of water discharge that in many instances is obtained at levels higher than those required by applicable laws. Eni made capital expenditure aimed at the adoption of integrated production cycles with a limited and combined use of water, at the construction of water treatment plants with the most updated technologies and at the construction of monitoring systems capable of providing periodic control of the most significant parameters. The protection of soils and ground waters is a very relevant aspect for the environment. Great attention is paid to it at the organizational and economic level. For years, Eni has been carrying out numerous programs for the protection of soils and the reclamation of soils and ground waters. Enis business units are provided with an internal organization that takes care of management and technical aspects, making recourse to highly qualified external professionals to carry on their reclaiming activities. Eni is also active in the area of waste produced by its industrial units with the aim of reducing its generation |
and improving its final
destination by increasing recycling and recovery and
reducing incineration and landfilling. Oil Spill Production, handling and transport of oil products can give rise to spills of variable size. In order to protect the areas where it operates, Eni defined responsibilities and operating modes aimed at reducing the negative impact of oil spills. Tools available include the recourse to external professionals and/or international organizations. In 2006, a total of 139 oil spills were registered for a total of 6,150 bbl of oil spilled. Biodiversity Eni considers biodiversity an integral element of sustainable development and is engaged in the impact evaluation of its exploration and production activities both onshore and offshore. This engagement takes the form of supporting conservation projects on land and in the sea and of organizing actions that raise attention for biodiversity. The most relevant current projects are addressed to:
|
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
THE FUTURE OF ENERGY AND INNOVATION
The future of
energy The global energy scenario is complex and worries are widespread regarding the future of energy. The debate on the constant increase in energy consumption and the dreaded exhaustion of oil reserves often masked the real criticalities of the current energy system (insufficient capital expenditure in the Nineties, crisis due to overproduction, bottlenecks and inadequacy of refining systems, waste and inefficiency in energy use in industrial countries). Despite these events, hydrocarbons will continue to dominate the energy scenario in the next decades and to represent the most important and strategic energy source. Eni, a company active in oil and gas, will continue to deploy its activities in order to meet energy requirements. At the current state of knowledge, Eni believes that the massive use of fossil fuels can contribute to climate change and is therefore actively engaged in favor of a responsible use of energy and the protection of the environment. Enis growth model is sustainable development, and in particular, Eni is committed to mitigating the effects of climate change due to greenhouse gas emissions. New partnership models and access to oil reserves Partnerships with producing countries, infrastructure and innovation will play a basic role in guaranteeing the security of supplies, which is the main criticality of the world energy system. In fact, at the current state of knowledge, total recoverable hydrocarbon reserves amount to approximately 5,000 billion barrels and will allow to meet energy requirements for over 100 years. International oil companies such as Eni, however, have |
access to less than 20% of
proved hydrocarbon reserves, which are mainly controlled
by national oil companies. IOCs resources available
for capital expenditure are limited and represent new
economic and technological challenges in particular in
the new frontiers of conventional hydrocarbons (e.g.,
production from fields in ultra deep waters) and non
conventional hydrocarbons (such as the extraction of
hydrocarbons from tar sands and extra heavy oils). Eni is
engaged in maintaining high rates of production growth
while guaranteeing the sustainability of its business in
the medium- to long-term through the integral replacement
of reserves produced. Enis activities are oriented
to the exploration of basins located in Africa, the
Barents Sea, the Middle East and the Gulf of Mexico and
to the development of fields with extended productive
life in West Africa, North Africa and Kazakhstan. The evaluation of new expansion opportunities in the field of non conventional oils and the goal of increasing the reserve replacement ratio are pursued by increasing activities and capital expenditure in R&D and innovation and paying great attention to the impact of such projects on the environment and local communities. In this context, Eni is constantly engaged in improving its models of cooperation with producing countries in order to overcome the current criticalities of the global energy system. Enis strategy of cooperation with producing countries will be characterized by a dialogue with partners. Eni is ready to promote new strategic alliances with producing countries based on the joint development of integrated projects aimed at reaching |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
the targets of energy and
economic development set by each country. This
perspective translates into a renewed commitment to
develop innovative and fair partnerships and cooperation
modes. In this light, Eni and the Russian company Gazprom entered into a significant strategic agreement in 2006 that will provide Italy with a relevant share of its natural gas requirements until 2035. A description of the main features of this agreement and its impact on Italys energy requirement is found in the Operating Review - Gas & Power and on Enis website in the area Sustainability. Actions for mitigating the risks of climate change The issues of energy safety and climate change, with the related greenhouse gas emissions, are the central issues of the development of energy systems. Eni defined and adopted a carbon management strategy with the following goals:
|
Along these guidelines Eni achieved results that mark
it as a low (direct and indirect) CO2 emission
company. |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
North Sea and of its long
term supply contracts with large producers such as
Gazprom, Sonatrach, Gasunie and Statoil. In the area of natural gas development, in addition to the mentioned agreement with Gazprom, Eni also entered an agreement for the expansion of the Damietta liquefaction plant in Egypt and signed a shareholders agreement for the construction of a liquefaction terminal at Brass, Nigeria. These agreements are especially relevant keeping into account Enis interest for developing liquefied natural gas and set the premises for an optimal use of new fields in Egypt and for Enis natural gas reserves in Nigeria. Innovation Technological innovation represents a cornerstone of Enis strategies. All the great strategic challenges of the next years and decades require imagination and creativity: from the environmental and climate emergencies to the more and more difficult access to hydrocarbon reserves large, but mainly controlled by producing countries; from the identification of relevant discontinuities in the production of energy from renewable sources to the optimization of production processes up to the solution of problems existing in countries where Eni has been present for a long time or where it recently entered. In order to attain these goals in 2006 Eni has deeply revised the organization of its R&D activities. On August 1, 2006 EniTecnologie was merged into Eni. The resources dedicated to research have been assigned to the various divisions according to the existing knowledge and current projects. Divisions have become directly responsible for R&D activities of up-mid-downstream oil and gas (including the environmental ones affecting their segments) and of their budgeting. At the same time the Strategies and Development Department of of Eni Corporate has been entrusted with the task of defining strategic guidelines for technological innovation at group level, of playing a controlling and monitoring role on projects and activities and of developing research in the field of new energy technologies. This department also directly manages the Along with petroleum program, aimed at identifying and developing research projects on the most advanced aspects of renewable energy sources and energy efficiency. In its meeting of November 23, 2006, Enis Board of Directors discussed and approved the strategic |
guidelines included in the
R&D Master Plan which identifies the main challenges
that the energy sector will have to face in future years,
the strategic priorities and the innovation objectives to
support them. In 2006, Eni invested euro 222 million in research and development (euro 204 million in 2005), of these 39% were directed to the Exploration & Production segment, 32% to the Refining & Marketing segment, 22% to the Petrochemical segment and 7% to the Engineering & Construction segment. At December 31, 2006, a total of 1,160 persons were employed in research and development activities. In 2006 a total of 39 applications for patents were filed (26 in 2005). Among the initiatives undertaken, projects have been started in the area of production and marketing of new generation biofuels to be sold on the market in a few years. More detailed information on innovation is found on Enis website (www.eni.it) in the area Activities and Strategies and in the Report on Sustainability. Main initiatives in innovation in 2006 E&P Division Numeric and High Resolution Geophysical Prospecting Techniques The development of the simulator of oil systems Steam 3D has been completed. It allows to describe the evolution of complex geological structures in time. The first applications on the field allow to reduce exploration risk and to improve the geo-mechanical description of the field. Development continued of the proprietary CRS technology (3D Common Reflection Surface Stack) that aims at allowing prospecting in areas characterized by low seismic response. Advanced Drilling Systems and Well Testing The Geosteering project developed by Eni in joint venture with Shell aims at the development of technologies capable of providing geological information on not yet drilled strata (around the scalpel up to the surface) while drilling. In the first six months of 2006, various downhole prototypes have been prepared and in the second half of the year the technology was tested in the well. Testing will continue until the first half of 2007. |
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Sulphur management In 2006, the integrated research program Sulphur and H2S management in E&P operations related to the treatment of natural gas with high H2S content has been completed. An innovative proprietary system called Concrete Wall has been developed for the massive storage of sulphur and H2S bulk removal. In 2007 demonstration units for the treatment and storage of sulphur will be developed along with the study the behavior of materials in very sour environments and under extreme pressure and temperature conditions. Gas to liquids project (GTL) In 2006, with the cooperation of IFP/Axens, Eni completed the technology handbook for this proprietary technology for the conversion of gas to liquids via Fischer-Tropsch synthesis and the plan for a 37 kbbl/d industrial unit. Conversion of heavy crudes and fractions into light products (in cooperation with the R&M Division) Testing continued at the Taranto demonstration plant of Enis proprietary technology EST, a process of catalytic hydroconversion in the slurry phase of non conventional crudes, extra heavy crudes and refining residues that allows to convert asphaltenes (the hard fraction of heavy crudes) totally into naphtha, kerosene, diesel fuel. In 2007 Eni plans to complete the collection of information for designing and building its first industrial plant. SCT-CPO Project (Short Contact Time - Partial Catalytic Oxidation) (in cooperation with the R&M Division) At the Milazzo research center, SCT-CPO (partial catalytic oxidation with short contact time of liquid and gaseous hydrocarbons) technology has been validated on the pilot scale for producing hydrogen at competitive costs, also in medium to small sized plants with higher flexibility as compared to refinery feedstocks. In 2007, Eni plans to complete the collection of information for designing and building its first industrial plant. GHG Project (Green House Gases) (in cooperation with the R&M Division) Work continued on the integrated Green House Gases research program, aimed at verifying the industrial feasibility of the geological sequestration of CO2 in depleted fields and salty aquifers. The technical |
feasibility study of the
geological sequestration of CO2 has been
completed and in 2007, Eni expects to start testing in
the field. G&P Division Natural gas high pressure transport (TAP) The TAP project will contribute to developing the most advanced long distance, high capacity, high pressure and high grade solutions with relevant targets related to:
The TAP technology is expected to allow a decrease in
the consumption of natural gas used in compressor
stations. Other projects
|
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Polimeri Europa An ABS plant was modified in order to allow the production of new ABS (acrylonitryle-butadiene-styrene) polymers for the segment of injection moulding and also to increase ABS production capacity for the extrusion area. A plant has been modified to increase production capacity of high impact resistance polystyrene and a new range of products in this area is being consolidated. A new type of expandable polystyrene with very low pentane content has been produced. Test production has been started of new innovative kinds of polybutadiene and styrene butadiene copolymer for the tyre segment, that is expected to be industrialized. Two new grade of styrene isoprene copolymers have been consolidated at industrial level for the segment of hot melt adhesives. Two new grades of styrene butadiene copolymers have been tested in an industrial plant for the compounding application in the segment of hot melt adhesives. The first industrial testing of an ethylene propylene copolymer has been successful. New co-polymers of ethylene have been produced by means catalytic Ziegler/Natta system for injection moulding and for the following specialist application segments: bioriented films, high performance film cast and medium density lamination. Corporate In addition to the preparation of the R&D Master Plan, corporate activities were focused on the definition of research projects in the field of solar energy conversion and manufacture of new generation biofuels, that are due to start in 2007.
|
ethnic, social or cultural
diversity of the various communities with which Eni
interacts. The search for integration with varied social and cultural situations is part of Enis tradition. In order to favor a proper integration Eni:
Enis main interventions for the protection and development of local communities concern:
More detailed information on such initiatives is found on Enis website in the section Sustainability and in the Report on Sustainability. |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
RISK MANAGEMENT
Foreword The main risks identified and managed by Eni are the following: (i) market risks deriving from the exposure to the fluctuations of interest rates, of exchange rates between the euro and the US dollar and the other currencies used by the company, as well as the volatility of commodity prices; (ii) the credit risk deriving from the possible default of a counterparty; (iii) the liquidity risk deriving from the risk that suitable sources of funding for the Groups business activities may not be available; (iv) the operation risk deriving from the occurrence of accidents, malfunctioning, failures with damage to persons and the environment affecting operating and financial results; (v) the country risk in oil & gas activities. Market risk |
in interest rates and
exchange rates and to manage exposure to commodity prices
fluctuations, Eni enters into various transactions using
derivative financial instruments (derivatives).
Derivatives are contracts whose value is derived from one
or more underlying financial instruments, indices or
prices that are defined in the contract. The group also
trades derivatives in conjunction with these risk
management activities. Eni does not enter into derivative
transactions on a speculative basis. The framework defined by Enis guidelines prescribes that measurement and control of market risk are to be performed on the basis of maximum acceptable levels of risk exposure defined in accordance with value-at-risk techniques. These techniques make a statistical assessment of the market risk, i.e., potential gain or loss in fair values. Enis guidelines prescribe that Enis subsidiaries use such market risk exposure policies as to minimize market risk. Tolerable market risk exposure is set at the Group level within the central finance department which pools all risk positions of the Group. Calculation and measurement techniques followed by Eni in accordance with established banking standards (such standards are established by the Basel Committee). However, the tolerable level of risk adopted by Eni is more conservative than the recommended one. Enis guidelines prescribe that the exposure to risk from fluctuations in commodity prices is to be managed in a way as to support the effectiveness of operations and to pursue set objectives of industrial margins. Risk exposure within trading activities is defined within maximum levels of value-at-risk attributed at each |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
business unit, with the
central function managing hedging request. Strategic risk
exposure is monitored in terms of value-at-risk, albeit
not being hedged in a systematic way. Exchange rate risk Interest rate risk Commodity risk |
underlying commodities being
crude oil, refined products or electricity. Such
derivatives are recognized at fair value on the basis of
market prices provided from specialized sources or absent
market prices, on the basis of estimates provided by
brokers or suitable evaluation techniques. Value-at-risk
deriving from commodity exposure is measured daily on the
basis of a historical simulation technique, with a 99%
confidence level and a one-day holding period. Credit risk Liquidity risk |
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ENI ANNUAL REPORT / COMMITMENT TO SUSTAINABLE DEVELOPMENT
an adequate structure of
borrowing facilities (particularly the availability of
committed borrowings facilities) and the maintenance of
cash reserves. Country risk Operation risk |
evaluation and management of
health, safety and environmental (HSE) risks, with the
objective of protecting Enis employees, contractors
and clients the populations involved in its activity and
the environment and being in compliance with local and
international rules and regulations. Enis
guidelines prescribe the adoption of international best
practices in setting internal principles, standards and
solutions. An ongoing process for identifying, evaluating
and managing HSE risks is at the hearth of HSE operations
in each phase of the business activity and is performed
through the adoption of procedures tailored on the
peculiarities of each business and industrial site. HSE risks are effectively managed through an integrated management system designed along the principles set in Enis Model of HSE operations. This is a general procedure to be applied in all operating sites, based on an annual cycle of planning, implementation, control, review of results and definition of new objectives. The model is directed towards the prevention of risks, the systematic monitoring and control of HSE performance in a continuous improvement cycle, also subject to audits by internal and independent experts. Any environmental emergency is managed by business units locally with their own organization under preset reaction plans to foreseeable events aimed at limiting damage and at activating adequate responses. Eni has two emergency rooms (in Milan and Rome) provided with real-time monitoring systems for the collection of data on georeferenced maps for all Eni sites and logistics worldwide. Meteorologic equipment is in place to assess dimension, temporal development and other consequences of certain catastrophic events and to enable a real-time planning of first-aid interventions to help mitigate consequences. In addition to its own emergency teams, Eni entered international agreements in order to maximize its ability to react in all its operating sites. |
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ENI ANNUAL REPORT / GLOSSARY
Glossary The glossary of oil and gas terms is available on Enis web page at the address www.eni.it. Below is a selection of the most frequently used terms. FINANCIAL TERMS |
extracted, against the
payment of royalties to the State on production and taxes
on oil revenues. Condensates These are light hydrocarbons produced along with gas, that condense to a liquid state at normal temperature and pressure for surface production facilities. Deep waters Waters deeper than 200 meters. Development Drilling and other post-exploration activities aimed at the production of oil and gas. Elastomers (or Rubber) Polymers, either natural or synthetic, which, unlike plastic, when stress is applied, return to their original shape, to a certain degree, once the stress ceases to be applied. The main synthetic elastomers are polybutadiene (BR), styrene-butadiene rubbers (SBR), ethylene-propylene rubbers (EPR), thermoplastic rubbers (TPR) and nitrylic rubbers (NBR). Enhanced recovery Techniques used to increase or stretch over time the production of wells. EPC (Engineering, Procurement, Construction) A contract typical of onshore construction of large plants in which the contractor supplies engineering, procurement and construction of the plant. The contract is defined turnkey when the plant is supplied for start-up. EPIC (Engineering, Procurement, Installation, Commissioning) A contract typical of offshore construction of complex projects (such as the installation of production platforms or FPSO systems) in which the global or main contractor, usually a company or a consortium of companies, supplies engineering, procurement, construction of plant and infrastructure, transport to the site and all preparatory activities for the start-up of plants. Exploration Oil and natural gas exploration that includes land surveys, geological and geophysical studies, seismic data gathering and analysis, and well drilling. FPSO vessel Floating, Production, Storage and Offloading system made up of a large capacity oil tanker including a large hydrocarbon treatment plant. This system, moored at the bow in order to maintain a geostationary position, is in fact a temporary fixed platform linking by means of risers |
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ENI ANNUAL REPORT / GLOSSARY
from the seabed the
underwater wellheads to the treatment, storage and
offloading systems onboard. Infilling wells Infilling wells are wells drilled in a producing area in order to improve the recovery of hydrocarbons from the field and to maintain and/or increase production levels. LNG Liquefied Natural Gas obtained through the cooling of natural gas to minus 160 °C at normal pressure. The gas is liquefied to allow transportation from the place of extraction to the sites at which it is transformed and consumed. One ton of LNG corresponds to 1,400 cubic meters of gas. LPG Liquefied Petroleum Gas, a mix of light petroleum fractions, gaseous at normal pressure and easily liquefied at room temperature through limited compression. Mineral Potential (Potentially recoverable hydrocarbon volumes) Estimated recoverable volumes which cannot be defined as reserves due to a number of reasons, such as the temporary lack of viable markets, a possible commercial recovery dependent on the development of new technologies, or for their location in accumulations yet to be developed or where evaluation of known accumulations is still at an early stage. Mineral Storage Volumes of natural gas required for allowing optimal operation of natural gas fields in Italy for technical and economic reasons. Modulation Storage Volumes of natural gas required for meeting hourly, daily and seasonal swings of demand. Natural gas liquids Liquid or liquefied hydrocarbons recovered from natural gas through separation equipment or natural gas treatment plants. Propane, normal-butane and isobutane, isopentane and pentane plus, that used to be defined natural gasoline, are natural gas liquids. Network Code A code containing norms and regulations for access to, management and operation of natural gas pipelines. Offshore/Onshore The term offshore indicates a portion of open sea and, by induction, the activities carried out in such area, while onshore refers to land operations. |
Olefins (or
Alkenes) Hydrocarbons that are particularly active
chemically, used for this reason as raw materials in the
synthesis of intermediate products and of polymers. Over/Underlifting Agreements stipulated between partners regulate the right of each to its share in the production of a set period of time. Amounts different from the agreed ones determine temporary over/underlifting situations. Possible reserves Amounts of hydrocarbons that have a lower degree of certainty than probable reserves and are estimated with lower certainty, for which it is not possible to foresee production. Probable reserves Amounts of hydrocarbons that are probably, but not certainly, expected to be extracted. They are estimated based on known geological conditions, similar characteristics of rock deposits and the interpretation of geophysical data. Further uncertainty elements may concern: (i) the extension or other features of the field; (ii) economic viability of extraction based on the terms of the development project; (iii) existence and adequacy of transmission infrastructure and/or markets; (iv) the regulatory framework. Production Sharing Agreement Contract in use in non OECD area countries, regulating relationships between States and oil companies with regard to the exploration and production of hydrocarbons. The mining concession is assigned to the national oil company jointly with the foreign oil company who has exclusive right to perform exploration, development and production activities and can enter agreements with other local or international entities. In this type of contract the national oil company assigns to the international contractor the task of performing exploration and production with the contractors equipment and financial resources. Exploration risks are borne by the contractor and production is divided into two portions: cost oil is used to recover costs borne by the contractor, profit oil is divided between contractor and national company according to variable schemes and represents the profit deriving from exploration and production. Further terms and conditions may vary from one country to the other. Proved reserves Proved reserves are estimated volumes of crude oil, natural gas and gas condensates, liquids and associated substances which are expected to be |
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ENI ANNUAL REPORT / GLOSSARY
retrieved from deposits and
used commercially, at the economic and technical
conditions applicable at the time of the estimate and
according to current legislation. Proved reserves
include: (i) proved developed reserves: amounts of
hydrocarbons that are expected to be retrieved through
existing wells, facilities and operating methods; (ii)
non developed proved reserves: amounts of hydrocarbons
that are expected to be retrieved following new drilling,
facilities and operating methods. On these amounts the
company has already defined a clear development
expenditure program which is expression of the
companys determination. Recoverable reserves Amounts of hydrocarbons included in different categories of reserves (proved, probable and possible), without considering their different degree of uncertainty. Reserve replacement ratio Measure of the reserves produced replaced by proved reserves. Indicates the companys ability to add new reserves through exploration and purchase of property. A rate higher than 100% indicates that more reserves were added than produced in the period. The ratio should be averaged on a three-year period in order to reduce the distortion deriving from the purchase of proved property, the revision of previous estimates, enhanced recovery, improvement in recovery rates and changes in the value of reserves in PSAs due to changes in international oil prices. Management also calculates this ratio by excluding the effect of the purchase of proved property in order to better assess the underlying performance of the Company s operations. Ship-or-pay Clause included in natural gas transportation contracts according to which the customer for which the transportation is carried out is bound to pay for the transportation of the gas also in case the gas is not transported. Strategic Storage Volumes of natural gas required for covering lack or reduction of supplies from extra-European sources or crises in the natural gas system. |
Swap In the
gas sector, the swap term is referred to a buy/sell
contract between some counterparties and is generally
aimed to the optimization of transport costs and
respective commitments in purchasing and supplying. Take-or-pay Clause included in natural gas transportation contracts according to which the purchaser is bound to pay the contractual price or a fraction of such price for a minimum quantity of the gas set in the contract also in case it is not collected by the customer. The customer has the option of collecting the gas paid and not delivered at a price equal to the residual fraction of the price set in the contract in subsequent contract years. Upstream/Downstream The term upstream refers to all hydrocarbon exploration and production activities. The term downstream includes all activities inherent to the oil sector that are downstream of exploration and production activities. Wholesale sales Domestic sales of refined products to wholesalers/distributors (mainly gasoil), public administrations and end consumers, such as industrial plants, power stations (fuel oil), airlines (jet fuel), transport companies, big buildings and households. They do not include distribution through the service station network, marine bunkering, sales to oil and petrochemical companies, importers and international organizations. Workover Intervention on a well for performing significant maintenance and substitution of basic equipment for the collection and transport to the surface of liquids contained in a field.
|
mmcf | = | million cubic feet |
bcf | = | billion cubic feet |
mmcm | = | million cubic meters |
bcm | = | billion cubic meters |
boe | = | barrel of oil equivalent |
kboe | = | thousand barrel of oil equivalent |
mmboe | = | million barrel of oil equivalent |
bboe | = | billion barrel of oil equivalent |
bbl | = | barrels |
kbbl | = | thousand barrels |
mmbbl | = | million barrels |
bbbl | = | billion barrels |
mmtonnes | = | million tonnes |
ktonnes | = | thousand tonnes |
/d | = | per day |
/y | = | per year |
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ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors
129
BLANK PAGE
130
Consolidated Financial
Statements
131
BLANK PAGE
132
ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
Balance sheet
Dec. 31, 2005 | Dec. 31, 2006 | |||
(million euro) | Note | Total amount | of which with related parties | Total amount | of which with related parties | |||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalent | (1) | 1,333 | 3,985 | |||||||||
Other financial assets held for trading or available for sale | (2) | 1,368 | 972 | |||||||||
Trade and other receivables | (3) | 17,902 | 1,344 | 18,799 | 1,027 | |||||||
Inventories | (4) | 3,563 | 4,752 | |||||||||
Current tax assets | (5) | 697 | 658 | |||||||||
Other current assets | (6) | 369 | 855 | |||||||||
Total current assets | 25,232 | 30,021 | ||||||||||
Non-current assets | ||||||||||||
Property, plant and equipment | (7) | 45,013 | 44,312 | |||||||||
Other assets | (8) | 629 | ||||||||||
Inventories - Compulsory stock | (9) | 2,194 | 1,827 | |||||||||
Intangible assets | (10) | 3,194 | 3,753 | |||||||||
Investments accounted for using the equity method | (11) | 3,890 | 3,886 | |||||||||
Other investments | (11) | 421 | 360 | |||||||||
Other financial assets | (12) | 1,050 | 258 | 805 | 136 | |||||||
Deferred tax assets | (13) | 1,861 | 1,725 | |||||||||
Other non-current receivables | (14) | 995 | 994 | |||||||||
Total non-current assets | 58,618 | 58,291 | ||||||||||
TOTAL ASSETS | 83,850 | 88,312 | ||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Short-term financial liabilities | (15) | 4,612 | 152 | 3,400 | 92 | |||||||
Current portion of long-term debt | (19) | 733 | 890 | |||||||||
Trade and other payables | (16) | 13,095 | 1,164 | 15,995 | 961 | |||||||
Taxes payable | (17) | 3,430 | 2,830 | |||||||||
Other current liabilities | (18) | 613 | 634 | |||||||||
Total current liabilities | 22,483 | 23,749 | ||||||||||
Non-current liabilities | ||||||||||||
Long-term debt | (19) | 7,653 | 7,409 | |||||||||
Provisions for contingencies | (20) | 7,679 | 8,614 | |||||||||
Provisions for employee benefits | (21) | 1,031 | 1,071 | |||||||||
Deferred tax liabilities | (22) | 4,890 | 5,852 | |||||||||
Other non-current liabilities | (23) | 897 | 418 | 56 | ||||||||
Total non-current liabilities | 22,150 | 23,364 | ||||||||||
TOTAL LIABILITIES | 44,633 | 47,113 | ||||||||||
SHAREHOLDERS EQUITY | (24) | |||||||||||
Minority interests | 2,349 | 2,170 | ||||||||||
Shareholders equity: | ||||||||||||
Share capital: 4,005,358,876 fully paid shares with nominal value euro 1 each (same amount as of December 31, 2005) | 4,005 | 4,005 | ||||||||||
Share premium | ||||||||||||
Other reserves | 10,910 | 6,013 | ||||||||||
Retained earnings | 17,381 | 25,168 | ||||||||||
Net profit | 8,788 | 9,217 | ||||||||||
Treasury shares | (4,216 | ) | (5,374 | ) | ||||||||
Total Eni shareholders equity | 36,868 | 39,029 | ||||||||||
TOTAL SHAREHOLDERS EQUITY | 39,217 | 41,199 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | 83,850 | 88,312 | ||||||||||
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ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
Profit and loss account
2005 | 2006 | |||
(million euro) | Note | Total amount | of which with related parties | Total amount | of which with related parties | |||||
REVENUES | (26) | |||||||||||
Net sales from operations | 73,728 | 4,535 | 86,105 | 3,974 | ||||||||
Other income and revenues | 798 | 783 | ||||||||||
Total revenues | 74,526 | 86,888 | ||||||||||
OPERATING EXPENSES | (27) | |||||||||||
Purchases, services and other | 48,567 | 3,429 | 57,490 | 2,720 | ||||||||
- of which significant non recurring events and operations | (34) | 290 | 239 | |||||||||
Payroll and related costs | 3,351 | 3,650 | ||||||||||
Depreciation, amortization and impairments | 5,781 | 6,421 | ||||||||||
OPERATING PROFIT | 16,827 | 19,327 | ||||||||||
FINANCIAL INCOME (EXPENSE) | (28) | |||||||||||
Financial income | 3,131 | 72 | 4,132 | 58 | ||||||||
Financial expense | (3,497 | ) | (3,971 | ) | ||||||||
(366 | ) | 161 | ||||||||||
Income (expense) from investments | (29) | |||||||||||
Effects of investments accounted for using the equity method | 737 | 795 | ||||||||||
Other income (expense) from investments | 177 | 108 | ||||||||||
914 | 903 | |||||||||||
PROFIT BEFORE INCOME TAXES | 17,375 | 20,391 | ||||||||||
Income taxes | (30) | (8,128 | ) | (10,568 | ) | |||||||
Net profit | 9,247 | 9,823 | ||||||||||
Pertaining to: | ||||||||||||
- Eni | 8,788 | 9,217 | ||||||||||
- minority interest | (24) | 459 | 606 | |||||||||
9,247 | 9,823 | |||||||||||
Earnings per share pertaining to Eni (euro per share) | (31) | |||||||||||
- basic | 2.34 | 2.49 | ||||||||||
- diluted | 2.34 | 2.49 | ||||||||||
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ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
Statements of changes in shareholders equity
Eni shareholders equity |
||
(million euro) | Share capital |
Legal reserve of Eni SpA |
Reserve for treasury shares |
Other reserves |
Cumulative translation exchange differences reserve |
Treasury shares |
Retained earnings |
Interim dividend |
Net profit for the year |
Total |
Minority interests |
Total shareholders equity |
||||||||||||
Balance at December 31, 2004 | 4,004 | 959 | 5,392 | 3,965 | (687 | ) | (3,229 | ) | 14,911 | 7,059 | 32,374 | 3,166 | 35,540 | |||||||||||||||||||||||
Changes in accounting principles (IAS 32 and 39) | 13 | (40 | ) | (27 | ) | 12 | (15 | ) | ||||||||||||||||||||||||||||
Adjusted balance at January 1, 2005 | 4,004 | 959 | 5,392 | 3,978 | (687 | ) | (3,229 | ) | 14,871 | 7,059 | 32,347 | 3,178 | 35,525 | |||||||||||||||||||||||
Net profit of the year (note 24) | 8,788 | 8,788 | 459 | 9,247 | ||||||||||||||||||||||||||||||||
Net income (expense) directly recognized in equity: | ||||||||||||||||||||||||||||||||||||
Change in the fair value of financial assets for trading (note 24) | 6 | 6 | 6 | |||||||||||||||||||||||||||||||||
Change in the fair value of cash flow hedge derivatives (note 24) | 16 | 16 | 16 | |||||||||||||||||||||||||||||||||
Exchange differences from translation of financial statements denominated in currencies other than the euro | 1,497 | 1,497 | 15 | 1,512 | ||||||||||||||||||||||||||||||||
22 | 1,497 | 1,519 | 15 | 1,534 | ||||||||||||||||||||||||||||||||
Total (expense) income of the year | 22 | 1,497 | 8,788 | 10,307 | 474 | 10,781 | ||||||||||||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||
Dividend distribution of Eni SpA (euro 0.90 per share) | (3,384 | ) | (3,384 | ) | (3,384 | ) | ||||||||||||||||||||||||||||||
Interim dividend (euro 0.45 per share) | (1,686 | ) | (1,686 | ) | (1,686 | ) | ||||||||||||||||||||||||||||||
Dividend distribution of other companies | (1,218 | ) | (1,218 | ) | ||||||||||||||||||||||||||||||||
Allocation of 2004 residual net profit | 1,300 | 2,375 | (3,675 | ) | ||||||||||||||||||||||||||||||||
Shares repurchased | (1,034 | ) | (1,034 | ) | (1,034 | ) | ||||||||||||||||||||||||||||||
Shares issued under stock grant plans | 1 | (1 | ) | |||||||||||||||||||||||||||||||||
Treasury shares sold under incentive plans for Eni managers | (47 | ) | 47 | 47 | 47 | 47 | ||||||||||||||||||||||||||||||
1 | (47 | ) | 1,346 | (987 | ) | 2,375 | (1,686 | ) | (7,059 | ) | (6,057 | ) | (1,218 | ) | (7,275 | ) | ||||||||||||||||||||
Other changes in shareholders equity | ||||||||||||||||||||||||||||||||||||
Cost related to stock options | 5 | 5 | 5 | |||||||||||||||||||||||||||||||||
Sale of consolidated companies | (40 | ) | (40 | ) | ||||||||||||||||||||||||||||||||
Exchange differences arising on the distribution of dividends and other changes | 131 | 135 | 266 | (45 | ) | 221 | ||||||||||||||||||||||||||||||
5 | 131 | 135 | 271 | (85 | ) | 186 | ||||||||||||||||||||||||||||||
Balance at December 31, 2005 (note 24) | 4,005 | 959 | 5,345 | 5,351 | 941 | (4,216 | ) | 17,381 | (1,686 | ) | 8,788 | 36,868 | 2,349 | 39,217 | ||||||||||||||||||||||
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ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
Statements of changes in shareholders equity (continued)
Eni shareholders equity |
||
(million euro) | Share capital |
Legal reserve of Eni SpA |
Reserve for treasury shares |
Other reserves |
Cumulative translation exchange differences reserve |
Treasury shares |
Retained earnings |
Interim dividend |
Net profit for the year |
Total |
Minority interests |
Total shareholders equity |
||||||||||||
Balance at December 31, 2005 (note 24) | 4,005 | 959 | 5,345 | 5,351 | 941 | (4,216 | ) | 17,381 | (1,686 | ) | 8,788 | 36,868 | 2,349 | 39,217 | ||||||||||||||||||||||
Net profit of the year (note 24) | 9,217 | 9,217 | 606 | 9,823 | ||||||||||||||||||||||||||||||||
Net income (expense) directly recognized in equity: | ||||||||||||||||||||||||||||||||||||
Change in the fair value of financial assets for trading (note 24) | (13 | ) | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||||
Change in the fair value of cash flow hedge derivatives (note 24) | (15 | ) | (15 | ) | (15 | ) | ||||||||||||||||||||||||||||||
Exchange differences from translation of financial statements denominated in currencies other than the euro | (1,266 | ) | (1,266 | ) | (29 | ) | (1,295 | ) | ||||||||||||||||||||||||||||
(28 | ) | (1,266 | ) | (1,294 | ) | (29 | ) | (1,323 | ) | |||||||||||||||||||||||||||
Total (expense) income of the year | (28 | ) | (1,266 | ) | 9,217 | 7,923 | 577 | 8,500 | ||||||||||||||||||||||||||||
Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||
Dividend distribution of Eni SpA (euro 0.65 per share in settlement of 2005) interim dividend of euro 0.45 per share) (note 24) | 1,686 | (4,086 | ) | (2,400 | ) | (2,400 | ) | |||||||||||||||||||||||||||||
Dividend distribution of Eni SpA (euro 0.60 per share) (note 24) | (2,210 | ) | (2,210 | ) | (2,210 | ) | ||||||||||||||||||||||||||||||
Dividend distribution of other companies | (222 | ) | (222 | ) | ||||||||||||||||||||||||||||||||
Payments by minority shareholders | 22 | 22 | ||||||||||||||||||||||||||||||||||
Allocation of 2005 net profit | 4,702 | (4,702 | ) | |||||||||||||||||||||||||||||||||
Authorization to shares repurchase (note 24) | 2,000 | (2,000 | ) | |||||||||||||||||||||||||||||||||
Shares repurchased (note 24) | (1,241 | ) | (1,241 | ) | (1,241 | ) | ||||||||||||||||||||||||||||||
Treasury shares sold under incentive plans for Eni managers (note 24) | (85 | ) | 54 | 85 | 21 | 75 | 75 | |||||||||||||||||||||||||||||
Difference between the book value and strike price of stock options exercised by Eni managers | 7 | 7 | 7 | |||||||||||||||||||||||||||||||||
1,915 | 54 | (1,156 | ) | 2,730 | (524 | ) | (8,788 | ) | (5,769 | ) | (200 | ) | (5,969 | ) | ||||||||||||||||||||||
Other changes in shareholders equity: | ||||||||||||||||||||||||||||||||||||
Sale of Snamprogetti SpA to Saipem Projects SpA | 247 | 247 | (247 | ) | ||||||||||||||||||||||||||||||||
Net effect related to the purchase of treasury shares by Saipem SpA and Snam Rete Gas SpA | (306 | ) | (306 | ) | ||||||||||||||||||||||||||||||||
Purchase and sale of consolidated companies to third parties | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||||||
Cost related to stock options | 14 | 14 | 14 | |||||||||||||||||||||||||||||||||
Reclassification of reserves of Eni SpA | 2 | (5,224 | ) | (2 | ) | 5,224 | ||||||||||||||||||||||||||||||
Exchange differences arising on the distribution of dividends and other changes | (73 | ) | (181 | ) | (254 | ) | 2 | (252 | ) | |||||||||||||||||||||||||||
2 | (4,977 | ) | (73 | ) | (2 | ) | 5,057 | 7 | (556 | ) | (549 | ) | ||||||||||||||||||||||||
Balance at December 31, 2006 (note 24) | 4,005 | 959 | 7,262 | 400 | (398 | ) | (5,374 | ) | 25,168 | (2,210 | ) | 9,217 | 39,029 | 2,170 | 41,199 | |||||||||||||||||||||
136
ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
Statements of cash flow
(million euro) | Note |
2005 |
2006 |
|||
Net profit of the year | 9,247 | 9,823 | ||||||
Depreciation and amortization | (27) | 5,509 | 6,153 | |||||
Revaluations, net | (288 | ) | (386 | ) | ||||
Net change in the provisions for contingencies | 1,279 | (86 | ) | |||||
Net change in the provisions for employee benefits | 18 | 72 | ||||||
Gain on disposal of assets, net | (220 | ) | (59 | ) | ||||
Dividend income | (29) | (33 | ) | (98 | ) | |||
Interest income | (214 | ) | (387 | ) | ||||
Interest expense | 654 | 346 | ||||||
Exchange differences | (64 | ) | 6 | |||||
Income taxes | (30) | 8,128 | 10,568 | |||||
Cash generated from operating profit before changes in working capital | 24,016 | 25,952 | ||||||
(Increase) decrease: | ||||||||
- inventories | (1,402 | ) | (953 | ) | ||||
- trade and other receivables | (4,413 | ) | (1,952 | ) | ||||
- other assets | 351 | (315 | ) | |||||
- trade and other payables | 3,030 | 2,146 | ||||||
- other liabilities | 12 | 50 | ||||||
Cash from operations | 21,594 | 24,928 | ||||||
Dividends received | 366 | 848 | ||||||
Interest received | 214 | 395 | ||||||
Interest paid | (619 | ) | (294 | ) | ||||
Income taxes paid | (6,619 | ) | (8,876 | ) | ||||
Net cash provided from operating activities | 14,936 | 17,001 | ||||||
- of which with related parties | (33) | 1,230 | 2,206 | |||||
Investments: | ||||||||
- tangible assets | (7) | (6,558 | ) | (6,138 | ) | |||
- intangible assets | (10) | (856 | ) | (1,695 | ) | |||
- consolidated subsidiaries and businesses | (73 | ) | (46 | ) | ||||
- investments | (11) | (54 | ) | (42 | ) | |||
- securities | (464 | ) | (49 | ) | ||||
- financing receivables | (683 | ) | (516 | ) | ||||
- change in payables and receivables in relation | ||||||||
to investments and capitalized depreciation | 149 | (26 | ) | |||||
Cash flow from investments | (8,539 | ) | (8,512 | ) | ||||
Disposals: | ||||||||
- tangible assets | 99 | 237 | ||||||
- intangible assets | 13 | 12 | ||||||
- consolidated subsidiaries and businesses | 252 | 8 | ||||||
- investments | 178 | 36 | ||||||
- securities | 369 | 382 | ||||||
- financing receivables | 804 | 794 | ||||||
- change in payables and receivables in relation to disposals | 9 | (8 | ) | |||||
Cash flow from disposals | 1,724 | 1,461 | ||||||
Net cash used in investing activities (*) | (6,815 | ) | (7,051 | ) | ||||
- of which with related parties | (33) | (160 | ) | (686 | ) | |||
137
ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
Statements of cash flow (continued)
(million euro) | Note |
2005 |
2006 |
|||
Proceeds from long-term debt | 2,755 | 2,888 | ||||||
Payments of long-term debt | (2,978 | ) | (2,621 | ) | ||||
Reductions of short-term debt | (317 | ) | (949 | ) | ||||
(540 | ) | (682 | ) | |||||
Net capital contributions by minority shareholders | 24 | 22 | ||||||
Net acquisition of treasury shares different from Eni SpA | (30 | ) | (477 | ) | ||||
Acquisition of additional interests in consolidated subsidiaries | (3 | ) | (7 | ) | ||||
Sale of additional interests in consolidated subsidiaries | 35 | |||||||
Dividends to minority shareholders | (6,288 | ) | (4,832 | ) | ||||
Net purchase of treasury shares | (987 | ) | (1,156 | ) | ||||
Net cash used in financing activities | (7,824 | ) | (7,097 | ) | ||||
- of which with related parties | (33) | 23 | (57 | ) | ||||
Effect of changes in consolidation | (38 | ) | (4 | ) | ||||
Effect of exchange differences | 71 | (197 | ) | |||||
Net cash flow for the period | 330 | 2,652 | ||||||
Cash and cash equivalent at beginning of the year | (1) | 1,003 | 1,333 | |||||
Cash and cash equivalent at end of the year | (1) | 1,333 | 3,985 | |||||
(*) | Net cash used in investing activities includes some investments which Eni, due to their nature (temporary cash investments or carried out in order to optimize management of treasury operations) are considered as a reduction in net borrowings as defined in the "Financial Review" in the "Report of the Directors". Cash flow of such investments are as follows: | |
(million euro) |
|
2005 |
2006 |
|||
Financing investments: | ||||||
- securities | (186 | ) | (44 | ) | ||
- financing receivables | (45 | ) | (134 | ) | ||
(231 | ) | (178 | ) | |||
Disposal of financing investments: | ||||||
- securities | 60 | 340 | ||||
- financing receivables | 62 | 54 | ||||
122 | 394 | |||||
Net cash flows from financing activities | (109 | ) | 216 | |||
138
ENI ANNUAL REPORT 2006 / CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CASH FLOW INFORMATION
(million euro) |
|
2005 |
2006 |
|||
Effect of investment of companies included in consolidation and businesses | ||||||
Current assets | 68 | |||||
Non-current assets | 122 | 130 | ||||
Net borrowings | (19 | ) | 53 | |||
Current and non-current liabilities | (22 | ) | (92 | ) | ||
Net effect of investments | 81 | 159 | ||||
Sale of unconsolidated subsidiaries | (60 | ) | ||||
Fair value of the participations held before the acquisition of control | (8 | ) | ||||
Purchase price | 73 | 99 | ||||
less: | ||||||
Cash and cash equivalent | (53 | ) | ||||
Cash flow on investments | 73 | 46 | ||||
Effect of disposal of consolidated subsidiaries and businesses | ||||||
Current assets | 204 | 9 | ||||
Non-current assets | 189 | 1 | ||||
Net borrowings | 42 | (1 | ) | |||
Current and non-current liabilities | (217 | ) | (4 | ) | ||
Net effect of disposals | 218 | 5 | ||||
Gain on disposals | 140 | 3 | ||||
Minority interest | (43 | ) | ||||
Selling price | 315 | 8 | ||||
less: | ||||||
Cash and cash equivalent | (63 | ) | ||||
Cash flow on disposal | 252 | 8 | ||||
Transactions that did not produce cash
flows
Acquisition of equity investments in exchange of businesses:
(million euro) |
|
2005 |
2006 |
|||
Effect of business contributions | ||||||
Current assets | 2 | 23 | ||||
Non-current assets | 17 | 213 | ||||
Net borrowings | (44 | ) | ||||
Long-term and short-term liabilities | (1 | ) | (53 | ) | ||
Net effect of contributions | 18 | 139 | ||||
Minority interest | (36 | ) | ||||
Gain on contributions | 18 | |||||
Acquisition of investments | 18 | 121 | ||||
139
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Basis of presentation
The Consolidated Financial Statements of Eni have been prepared
in accordance with IFRS issued by the International Accounting
Standards Board (IASB) and adopted by the European Commission
following the procedure contained in Article 6 of the EC
Regulation No. 1606/2002 of the European Parliament and Council
of July 19, 2002 and in accordance with Article 9 of Legislative
Decree No. 38/2005. For hydrocarbon exploration and production,
accounting policies followed at an international level have been
applied, with particular reference to amortization according to
the Unit-Of-Production method, buy-back contracts and Production
Sharing Agreements.
The Consolidated Financial Statements have been prepared by
applying the cost method except for items that under IFRS must be
recognized at fair value as described in the evaluation criteria.
The Consolidated Financial Statements include the statutory
accounts of Eni SpA and of all Italian and foreign companies in
which Eni SpA holds the right to directly or indirectly exercise
control, determine financial and management decisions and obtain
economic and financial benefits.
Insignificant subsidiaries are not included in the scope of
consolidation. A subsidiary is considered insignificant when it
does not exceed two of these limits: (i) total assets or
liabilities: euro 3,125 thousand; (ii) total revenues: euro 6,250
thousand; (iii) average number of employees: 50 units. Moreover,
companies for which consolidation does not produce significant
economic and financial effects are not included in the scope of
consolidation. Such companies generally represent subsidiaries
that work on account of other companies as the sole operator in
the management of upstream oil contracts; these companies are
financed on a proportional basis according to budgets approved,
by the companies involved in the project, to which the company
periodically reports costs and receipts deriving from the
contract. Costs and revenues and other operating data
(production, reserves, etc.) of the project, as well as the
obligations arising from the project, are recognized
proportionally in the Financial Statements of the companies
involved. The effects of these exclusions are not material1.
Subsidiaries excluded from consolidation, joint ventures,
associates and other interests are accounted for as described
below under item Financial fixed assets.
Financial Statements of consolidated companies are audited by
auditing companies that examine and certify the information
required to be disclosed when preparing the consolidated
financial statement.
Considering their materiality, amounts of the financial
statements and related disclosures are expressed in millions of
euro.
Principles of consolidation
Interests in companies included in the
scope of consolidation
Assets and liabilities, expense and income related to fully
consolidated companies are wholly incorporated into the
Consolidated Financial Statements; the book value of these
interests is eliminated against the corresponding fraction of the
shareholders equity of the companies owned, attributing to
each item of the balance sheet the current value at the date of
acquisition of control. Any positive residual difference as
regards to the acquisition cost is recognized as
Goodwill. Negative residual differences are charged
against the profit and loss account.
Any positive residual difference between cost for the acquisition
of the share that exceed the control (minorities acquisition) and
corresponding fraction of shareholders equity acquired is
recognized as Goodwill.
Gains or losses on the sale of shares in consolidated
subsidiaries are recorded in the profit and loss account for the
amount corresponding to the difference between proceeds from the
sale and divested portion of net equity sold.
Fractions of shareholders equity and net profit of minority
interest are recognized under specific items in the Financial
Statements. Minority interest is determined based on the current
value attributed to assets and liabilities at the date of the
acquisition of control, excluding any related goodwill.
Inter-company transactions
Income deriving from inter-company transactions unrealized
towards third parties is eliminated. Receivables, payables,
revenues and costs, guarantees, commitments and risks among
consolidated companies are eliminated as well. Inter-company
losses are not eliminated, since they reflect an actual decrease
in the value of divested assets.
(1) | According to the requirements of the framework of international accounting standards, information is material if its omission or misstatement can influence the economic decisions that users make on the basis of the financial statements. |
140
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Foreign currency
translation
Financial Statements of consolidated companies denominated in
currencies other than the euro are converted into euro applying
exchange rates prevailing at the year end to assets and
liabilities, the historical exchange rates to equity accounts and
the average rates for the period to profit and loss account
(source: Ufficio Italiano Cambi).
Exchange rate differences from the conversion deriving from the
application of different exchange rates for assets and
liabilities, shareholders equity and profit and loss
account are recognized under the item Other reserves
within shareholders equity for the portion relating to the
Group and under the item Minority interest for the
portion related to minority shareholders. The exchange rate
differences reserve is charged to the profit and loss account
when the investments are sold or the capital employed is repaid.
Financial Statements of foreign subsidiaries which are translated
into euro are denominated in the functional currencies of the
country where the enterprise operates. The US dollar is the
prevalent functional currency for the enterprises that do not
adopt the euro.
Evaluation criteria
The most significant evaluation criteria used for the preparation
of the Consolidated Financial Statements are shown below.
Current assets
Financial assets held for trading and financial assets available
for sale are stated at fair value; economic effects are charged
to the profit and loss account item Financial Income
(Expense) and under shareholders equity within
Other reserves. In the last case, changes in fair
value recognized under shareholders equity are charged to
the profit and loss account when they are impaired or realized.
The fair value of financial instruments is represented by market
quotations or, in their absence, by the value resulting from the
adoption of suitable financial valuation models which take into
account all the factors adopted by the market operators and the
prices obtained in similar actual transactions in the market.
When the conditions for the purchase or sale of financial assets
provide for the settlement of the transaction and the delivery of
the assets within a given number of days determined by entities
controlling the market or by agreements (e.g., purchase
of securities on regulated markets), the transaction is entered
at the date of settlement.
Receivables are stated at their amortized cost (see item
Financial fixed assets below).
Transferred financial assets are eliminated when the transaction,
together with the cash flows deriving from it, leads to the
substantial transfer of all risks and benefits associated to the
property.
Inventories, excluding contract work in progress and including
compulsory stocks, are stated at the lower of purchase or
production cost and net realizable value represented by the
proceeds the company expects to collect from the sale of the
inventories in the normal course of business.
The cost of inventories of hydrocarbons (crude oil, condensates
and natural gas) and petroleum products is determined by applying
the weighted-average cost method on a three-month basis; the cost
of inventories of the Petrochemical segment is determined by
applying the weighted-average cost on an annual basis.
Contract work in progress is recorded on the basis of contractual
considerations by reference to the stage of completion of a
contract measured on a cost-to-cost basis. Advances are deducted
from inventories within the limits of contractual considerations;
any excess of such advances over the value of the work performed
is recorded as a liability. Losses related to construction
contracts are accrued for once the company becomes aware of such
losses. Contract work in progress not yet invoiced, whose payment
is agreed in a foreign currency, is translated to euro using the
current exchange rates at year end and effects are charged in the
profit and loss account.
Hedging instruments are described in the section Derivative
Instruments.
141
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Non-current assets
Property, plant and equipment2
Tangible assets, including investment properties, are recognized
using the cost model and stated at their purchase or production
cost including ancillary costs which can be directly attributed
to them as required to make the asset ready for use. In addition,
when a substantial amount of time is required to make the asset
ready for use, the purchase price or production cost includes the
financial expenses incurred that would have theoretically been
saved if the investment had not been made.
In the case of current obligations for the dismantling and
removal of assets and the reclamation of sites, the carrying
value includes, with a corresponding entry to a specific
provision, the estimated (discounted) costs to be borne at the
moment the asset is retired. Revisions of estimates for these
provisions, for the passage of time and for changes in the
discount rate are recognized under Provisions for
contingencies3.
No revaluation is made even in application of specific laws.
Assets carried under financial leasing or concerning arrangements
that does not take the legal form of a financial lease but
produce a substantive transfer of risks and rewards of ownership,
are recognized at fair value, net of taxes due from the lessor
or, if lower, at the amount of future minimum lease payments, and
are included within the tangible assets, with a corresponding
entry to the financial payable to the lessor, and depreciated
using the criteria detailed below. When the renewal is not
reasonably certain, assets carried under financial leasing are
depreciated over the period of the lease if shorter than the
useful life of the asset.
Renewals, improvements and transformations which extend asset
lives are capitalized.
Tangible assets, commencing on the date when they begin or should
begin to be used, are depreciated systematically based on the
straight-line method over the duration of their useful life taken
as an estimate of the period for which the assets will be used by
the company. When tangible asset are comprised of more than one
significant element with different useful lives, the depreciation
is carried out for each component. The amount to be depreciated
is represented by the book value reduced by the presumable net
realizable value at the end of the useful life, if it is
significant and can be reasonably determined. Land is not
depreciated, even if purchased together with a building. Tangible
assets held for sales are not depreciated but are valued at the
lower of the book value and fair value less costs of disposal.
Assets that can be used free of charge are depreciated over the
shorter term of the duration of the concession and the useful
life of the asset.
The costs for the substitution of identifiable components in
complex assets are capitalized and depreciated over their useful
life; the residual book value of the component that has been
substituted is charged to the profit and loss account. Ordinary
maintenance and repair costs are expensed when incurred.
When events occur that lead to a presumable reduction in the book
value of tangible assets, their recoverability is checked by
comparing their book value with the realizable value, represented
by the greater of fair value less costs of disposal and value in
use. In the absence of a binding sales agreement, fair value is
estimated on the basis of market values, recent transactions, or
the best available information that shows the proceeds that the
company could reasonably expect to collect from the disposal of
asset. Value in use is determined by discounting the expected
cash flows deriving from the use of the asset and, if significant
and reasonably determinable, the cash flows deriving from its
disposal at the end of its useful life, net of disposal costs.
Cash flows are determined on the basis of reasonable and
documented assumptions that represent the best estimate of the
future economic conditions during the residual useful life of the
asset, giving more importance to independent assumptions.
Discounting is carried out at a rate that takes into account the
implicit risk in the sectors where the entity operates. Valuation
is carried out for each single asset or, if the realizable value
of a single asset cannot be determined, for the smallest
identifiable group of assets that generates independent cash
inflows from their continuous use, the so called cash
generating unit. When the reasons for their impairment
cease to exist, Eni reverses previously recorded impairment
charges and records as income of an asset revaluation in the
profit and loss account for the relevant year. This asset
revaluation is the lower of the fair value and the book value
increased by the amount of previously incurred impairments net of
related amortization that would have been made if the impairment
had not been made.
(2) | Recognition and evaluation criteria of exploration and production activities are described in the section Exploration and production activities below. | |
(3) | The company recognizes material provisions for the retirement of assets in the Exploration & Production business. No significant asset retirement obligations associated with any legal obligations to retire refining, marketing and transportation (downstream) and chemical long-lived assets generally are recognized, as indeterminate settlement dates for the asset retirements prevented estimation of the fair value of the associated asset retirement obligation. The company performs periodic reviews of its downstream and chemical long-lived assets for any changes in facts and circumstances that might require recognition of a retirement obligation. |
142
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets
Intangible assets include assets which lack identifiable physical
qualities, controlled by the company and able to produce future
economic benefits, and goodwill acquired in business
combinations. An asset is classified as intangible when the
management is able to distinguish it clearly from goodwill. This
condition is normally met when: (i) the intangible asset can be
traced back to a legal or contractual right, or (ii) the asset is
separable, i.e., can be sold, transferred, licensed, rented or
exchanged, either individually or as an integral part of other
assets. An entity controls an asset if it has the power to obtain
the future economic benefits flowing from the underlying resource
and to restrict the access of others to those benefits.
Intangible assets are stated at cost as determined with the
criteria used for tangible assets. No revaluation is made even in
application of specific laws.
Intangible assets with a defined useful life are amortized
systematically over the duration of their useful life taken as an
estimate of the period for which the assets will be used by the
company; the recoverability of their book value is checked using
the criteria described in the section Tangible
Assets.
Goodwill and other intangible assets with an indefinite useful
life are not amortized. The recoverability of their carrying
value is checked at least annually and whenever events or changes
in circumstances indicate that the carrying value may not be
recoverable. With reference to goodwill, this check is performed
at the level of the smallest aggregate on which the company,
directly or indirectly, evaluates the return on the capital
expenditure that included said goodwill. When the carrying amount
of the cash generating unit, including goodwill attributed
thereto, exceeds the cash generating unit's recoverable amount,
the difference is recognized as impairment and it is primarily
charged against goodwill up to its amount; any amount in excess
is charged on a pro-rata basis against the book value of the
assets that form the cash generating unit. Impairment charges
against goodwill are not revalued. Negative goodwill is
recognized in the profit and loss account.
Costs of technological development activities are capitalized
when: (i) the cost attributable to the intangible asset can be
reasonably determined; (ii) there is the intention, availability
of funding and technical capacity to make the asset available for
use or sale; and (iii) it can be shown that the asset is able to
produce future economic benefits.
Exploration and production activities4
ACQUISITION OF MINERAL RIGHTS
Costs associated with the acquisition of mineral rights are
capitalized in connection with the assets acquired (such as
exploratory potential, probable and possible reserves and proved
reserves). When the acquisition is related to a set of
exploratory potential and reserves, the cost is allocated to the
different assets acquired on the basis of the value of the
relevant discounted cash flows.
Expenditure for the exploratory potential, represented by the
costs for the acquisition of the exploration permits and for the
extension of existing permits, is recognized under
Intangible Assets and is amortized on a straight-line
basis over the period of the exploration as contractually
established. If the exploration is abandoned, the residual
expenditure is charged to the profit and loss account.
Acquisition costs for proved reserves and for possible and
probable reserves are recognized in the balance sheet as assets.
Costs associated with proved reserves are amortized on a Unit of
Production (UoP) basis, as detailed in the section
Development, considering both developed and
undeveloped reserves. Expenditures associated with possible and
probable reserves are not amortized until classified as proved
reserves; in case of a negative result, the costs are charged to
the profit and loss account.
EXPLORATION
Costs associated with exploratory activities for oil and gas
producing properties incurred both before and after the
acquisition of mineral rights (such as acquisition of seismic
data from third parties, test wells and geophysical surveys) are
capitalized, to reflect their nature of investment and amortized
in full when incurred.
DEVELOPMENT
Development costs are those costs incurred to obtain access to
proved reserves and to provide facilities for extracting,
gathering and storing oil and gas. They are then capitalized and
amortized generally on a UoP basis, as their useful life is
closely related to the availability of feasible reserves. This
method provides for residual costs at the end of each quarter to
be amortized through a rate representing the ratio between the
volumes extracted during the quarter and the proved developed
reserves existing at the end of the quarter, increased by the
volumes extracted during the quarter. This method is applied with
reference to the smallest aggregate representing a direct
correlation between investment and proved developed reserves.
(4) | International accounting principles do not establish specific criteria for hydrocarbon exploration and production activities. Eni continues to use existing accounting policies for exploration and evaluation assets previously applied before the introduction of IFRS, as permitted by IFRS 6 Exploration for and evaluation of mineral resources. |
143
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Costs related to unsuccessful development wells
or damaged wells are expensed immediately as losses on disposal.
Impairments and reversal of impairments of development costs are
made on the same basis as those for tangible assets.
PRODUCTION
Production costs are those costs incurred to operate and maintain
wells and field equipment and are expensed as incurred.
PRODUCTION SHARING AGREEMENTS AND BUY-BACK CONTRACTS
Revenues and oil and gas reserves related to Production Sharing
Agreements and buy-back contracts are settled on the basis of
contractual clauses related to the repayment of costs incurred
following the exploration, development and operating activities
(cost oil) and to the relevant amount of realized productions
(profit oil).
RETIREMENT
Costs expected to be incurred with respect to the retirement of a
well, including costs associated with removal of production
facilities, dismantlement and site restoration, are capitalized
and amortized on a UOP basis, consistent with the policy
described under Tangible Assets.
Grants
Grants related to assets are recorded as a reduction of purchase
price or production cost of the related assets when there is
reasonable assurance that all the required conditions attached to
them, agreed upon with governmental entities, have been met.
Grants not related to capital expenditure are recognized in the
profit and loss account.
Financial fixed assets
INVESTMENTS
Investments in subsidiaries excluded from consolidation, joint
ventures and associates are accounted for using the equity
method. If it does not result in a misrepresentation of the
companys financial condition and consolidated results,
subsidiaries, joint ventures and associates excluded from
consolidation may be accounted for at cost, adjusted for
impairment losses. When the reasons for their impairment cease to
exist, investments accounted for at cost are revalued within the
limit of the impairment made and their effects are charged to the
profit and loss account item Other income (expense) from
investments.
Other investments are recognized at their fair value and their
effects are included in shareholders equity under
Other reserves; this reserve is charged to the profit
and loss account when it is impaired or realized. When fair value
cannot be reasonably ascertained, investments are accounted for
at cost, adjusted for impairment losses; impairment losses may
not be revalued.
The risk deriving from losses exceeding shareholders equity
is recognized in a specific provision to the extent the parent
company is required to fulfill legal or implicit obligations
towards the subsidiary or to cover its losses.
RECEIVABLES AND FINANCIAL ASSETS TO BE HELD TO MATURITY
Receivables and financial assets that must be held to maturity
are stated at cost represented by the fair value of the initial
exchanged amount adjusted to take into account direct external
costs related to the transaction (e.g., fees of agents or
consultants, etc.). The initial carrying value is then corrected
to take into account capital repayments, impairments and
amortization of the difference between the reimbursement value
and the initial carrying value; amortization is carried out on
the basis of the effective internal rate of return represented by
the rate that equalizes, at the moment of the initial
revaluation, the current value of expected cash flows to the
initial carrying value (so-called amortized cost method). Any
impairment is recognized by comparing the carrying value with the
present value of the expected cash flows discounted at the
effective interest rate defined at the initial recognition. The
economic effects of the valuation according to the amortized cost
method are charged to Financial income (expense).
Financial liabilities
Debt is carried at amortized cost (see item Financial fixed
assets above).
Provisions for contingencies
Provisions for contingencies concern risks and charges of a
definite nature and whose existence is certain or probable but
for which at year end the amount or date of occurrence remains
uncertain. Provisions are made when: (i) there is a current
obligation,
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
either legal or implicit, deriving from a past
event; (ii) it is probable that the fulfillment of that
obligation will result in an outflow of resources embodying
economic benefits; and (iii) the amount of the obligation can be
reliably estimated. Provisions are stated at the value that
represents the best estimate of the amount that the company would
reasonably pay to fulfill the obligation or to transfer it to
third parties at year end. When the financial effect of time is
significant and the payment date of the obligations can be
reasonably estimated, the provisions are discounted back at the
companys average rate of indebtedness. The increase in the
provision due to the passing of time is charged to the profit and
loss account in the item Financial Income (Expense).
When the liability regards a tangible asset (e.g., site
restoration and abandonment), the provision is stated with a
corresponding entry to the asset to which it refers; profit and
loss account charge is made with the amortization process.
Costs that the company expects to bear in order to carry out
restructuring plans are recognized in the year in which the
company formally defines the plan and the interested parties have
developed the reasonable expectation that the restructuring will
happen.
Provisions are periodically updated to show the variations of
estimates of costs, production times and actuarial rates; the
estimated revisions to the provisions are recognized in the same
profit and loss account item that had previously held the
provision, or, when the liability regards tangible assets (i.e.,
site restoration and abandonment) with a corresponding entry to
the assets to which they refer.
In the Notes to the Consolidated Financial Statements the
following potential liabilities are described: (i) possible, but
not probable obligations deriving from past events, whose
existence will be confirmed only when one or more future events
beyond the companys control occur; and (ii) current
obligations deriving from past events whose amount cannot be
reasonably estimated or whose fulfillment will probably not
result in an outflow of resources embodying economic benefits.
Employee benefits
Post-employment benefit plans are defined on the
basis of plans, including those unformalized, that due to their
terms defined contributions or defined benefits. In the first
case, the companys obligation, which consists of making
payments to the State or a trust or a fund, is determined on the
basis of contributions due.
The liabilities related to defined benefit plans5, net
of any plan assets, are determined on the basis of actuarial
assumptions and charged on accrual basis during the employment
period required to obtain the benefits; the evaluation of
liabilities is made by independent actuaries.
The actuarial gains and losses of defined benefit plans, deriving
from a change in the actuarial assumptions used or from a change
in the conditions of the plan, are charged to the profit and loss
account, proportionally through the residual average working life
of the employees participating to the plan, in the limits of the
share of the discounted profit/loss not charged beforehand, that
exceeds the greater of 10% of the fair value
of liabilities and 10% of the fair value of the plan
assets (corridor method).
Obligations for long-term benefits are determined by adopting
actuarial assumptions; the effect of changes in actuarial
assumptions or a change in the characteristics of the benefit are
charged to the profit or loss in their
entirety.
Treasury shares
Treasury shares are recorded at cost and as a
reduction of shareholders equity. Gains following
subsequent sales are recorded as an increase in
shareholders equity.
Revenues and costs
Revenues from sales of products and services
rendered are recognized upon transfer of risks and rewards
associated to ownership or upon
settlement of the transaction. In particular, revenues are
recognized:
for crude oil, generally upon shipment;
for natural gas, when natural gas is delivered to the customer;
for petroleum products sold to retail distribution networks, generally upon delivery to the service stations, whereas all other sales are generally recognized upon shipment;
for petrochemical products and other products, generally upon shipment.
(5) | Given the uncertainties related to their payment date, employees termination indemnities are considered as a defined benefit plan. |
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenues are recognized upon shipment when, at
that date, the risks of loss are transferred to the acquirer.
Revenues from the sale of crude oil and natural gas produced in
properties in which Eni has an interest together with other
producers are recognized on the basis of Enis working
interest in those properties (entitlement method). Differences
between Enis net working interest volume and actual
production volumes are recognized at current prices at period
end.
Income related to partially rendered services are recognized with
respect to the accrued revenues, if it is possible to reasonably
determine the state of completion and there are no relevant
uncertainties concerning the amounts and the existence of the
revenue and related costs; otherwise it is recognized within the
limits of the recoverable costs incurred.
Revenues accrued in the period related to construction contracts
are recognized on the basis of contractual revenues by reference
to the stage of completion of a contract measured on the
cost-to-cost basis. Requests of additional revenues, deriving
from a change in the scope of the work, are included in the total
amount of revenues when it is probable that the customer will
approve the variation and the related amount; claims deriving for
instance from additional costs incurred for reasons attributable
to the client are included in the total amount of revenues when
it is probable that the counterpart will accept them.
Revenues are stated net of returns, discounts, rebates and
bonuses, as well as directly related taxation. Exchanges of goods
and services with similar nature and value do not give rise to
revenues and costs as they do not represent sale transactions.
Costs are recognized when the related goods and services are
sold, consumed or allocated, or when their future useful lives
cannot be determined. Costs related to the amount of emissions,
determined on the basis of the average prices of the main
European markets at the end of the period, are reported in
relation to the amount of the carbon dioxide emissions that
exceed the amount assigned; revenues related to the amount of
emissions are reported when are recognized following the sale.
Operating lease payments are recognized in the profit and loss
account over the length of the contract.
Labor costs include stock grants and stock options granted to
managers, consistent with their actual remunerative nature. The
cost is determined based on the fair value of the rights awarded
to the employee at the date of the award and it is not subject to
subsequent adjustments; the portion on an accrual basis is
calculated pro rata over the period to which the incentive refers
(vesting period)6. The fair value of stock grants is
represented by the current value of the shares at the date of the
award, reduced by the current value of the expected dividends in
the vesting period. The fair value of stock options is the value
of the option calculated with appropriate valuation techniques
that take into account the exercise conditions, current price of
the shares, expected volatility and the risk-free interest rate.
The fair value of the stock grants and stock options is shown as
a contra-entry to Other reserves.
The costs for the acquisition of new knowledge or discoveries,
the study of products or alternative processes, new techniques or
models, the planning and construction of prototypes or, in any
case, costs borne for other scientific research activities or
technological development, which do not satisfy conditions for
the recognition in the balance sheet, are generally considered
current costs and expensed as incurred.
Exchange rate differences
Revenues and costs concerning transactions in currencies other
than the functional currency are stated at the exchange rate on
the date that the transaction is completed.
Monetary assets and liabilities in currencies other than the
functional currency are converted by applying the year end
exchange rate and the effect is stated in the profit and loss
account. Non-monetary assets and liabilities in currencies other
than functional currency valued at cost are stated at the initial
exchange rate; when they are evaluated at recoverable value or
realizable value, the exchange rate applied is that of the day of
recognition.
Dividends
Dividends are recognized at the date of the general
shareholders meeting in which they were declared, except
when the sale of shares before the ex-dividend date is certain.
Income taxes
Current income taxes are determined on the basis of estimated
taxable income; the estimated liability is recognized in the item
Income tax liabilities. Current tax assets and
liabilities are measured at the amount expected to be paid to
(recovered from) the tax authorities, using the tax rates (and
tax laws) that have been enacted or substantively enacted at the
balance sheet date.
(6) | For stock grants, the period between the date of the award and the date of assignation of stock; for stock options, the period between the date of the award and the date on which the option can be exercised. |
146
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets or liabilities are provided
on temporary differences arising between the carrying amounts of
the assets and liabilities in the Financial Statements and their
tax bases. Deferred tax assets are recognized when their
realization is considered probable.
Deferred tax assets and liabilities are recorded under
non-current assets and liabilities and are offset at a single
entity level if related to offsettable taxes. The balance of the
offset, if positive, is recognized in the item Deferred tax
assets; if negative, in the item Deferred tax
liabilities. When the results of transactions are
recognized directly in the shareholders equity, current
taxes, deferred tax assets and liabilities are also charged to
the shareholders equity.
Derivatives
Derivatives, including embedded derivatives which are separated
from the host contract, are assets and liabilities recognized at
their fair value which is estimated by using the criteria
described in the section Current Assets.
Derivatives are classified as hedging instruments when the
relationship between the derivative and the subject of the hedge
is formally documented and the effectiveness of the hedge is high
and is checked periodically. When hedging instruments cover the
risk of variation of the fair value of the hedged item (fair
value hedge, e.g., hedging of the variability on the
fair value of fixed interest rate assets/liabilities), the
derivatives are stated at fair value and the effects charged to
the profit and loss account. Hedged items are consistently
adjusted to reflect the variability of fair value associated with
the hedged risk. When derivatives hedge the cash flow variation
risk of the hedged item (cash flow hedge, e.g., hedging
the variability on the cash flows of assets/liabilities as a
result of the fluctuations of exchange rate), changes in the fair
value of the derivatives, considered effective, are initially
stated in net equity and then recognized in the profit and loss
account consistently with the economic effects produced by the
hedged transaction. The changes in the fair value of derivatives
that do not meet the conditions required to qualify as hedging
instruments are shown in the profit and loss account.
Financial statements
Assets and liabilities of the balance sheet are classified as
current and non-current. Items of the profit and loss account are
presented by nature.
Statements of changes in shareholders' equity present profit and
loss for the year and other changes of the shareholders' equity.
Statements of cash flows are presented using the indirect method,
whereby net profit is adjusted for the effects of transactions of
a non-cash nature.
Changes in accounting principles
Since 2006, Eni applies: (i) the requirements of IFRIC 4
Determining whether an arrangement contains a lease
that provides guidance for determining whether arrangements that
do not take the legal form of a lease but which convey rights to
use assets in return for a payment or series of payments should
be treated as a lease; (ii) the amendments to IAS 39
Financial instruments: recognition and measurement
that are related to: (a) the possibility to qualify as hedging
instruments, in relation to cash flow hedge operations on
exchange rate risk realting to inter-company transactions
expected and with a high probability, on condition that these
transactions are denominated in a functional currency other than
the currency of the entity that carries out the operation and the
exposure to the exchange rate risk has a potential effect on
consolidated profit and loss account; (b) the recognition and
measurement of financial guarantees that are recorded when they
are issued as a liability valued at market value and then, in
relation to the execution risk, at the greater of the best
estimate of the charge to be sustained to fulfill the obligation
and the initial amount reduced by premiums collected; (iii) the
requirements of IFRIC 5 Rights to interests arising from
decommissioning, restoration and environmental funds that
provide guidance for determining the recognition and measurement
for the contribution to funds established to finance
decommissioning that have the following features: (a) the assets
are held and administered by a separate legal entity; and (b)
contributors right to access the assets of the fund is
restricted.
The contributor recognizes its obligation to pay separately
decommissioning costs as a liability and its interest in the
fund. In the case that the interest means having control, having
joint control or significant influence over the fund, the entity
contributor must recognize the interest in the fund as an
investment in a subsidiary, associate or joint venture.
The adoption of these principles did not generate a material
effect.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Use of accounting
estimates
The preparation of these consolidated financial statements
requires Management to apply accounting estimates that are based
on complex or subjective judgments, estimates based on past
experience and assumptions determined to be reasonable and
realistic considering the information available at the date of
the estimate. The application of these estimates and assumptions
affects the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the balance
sheet date and the reported amounts of income and expenses during
the reporting period. Actual results may differ from these
estimates given the uncertainty surrounding the assumptions and
conditions upon which the estimates are based. Summarized below
are the critical accounting estimates that require the more
subjective judgment of our management. Such assumptions or
estimates regard the effects of matters that are inherently
uncertain and for which changes in conditions may significantly
affect future results.
Oil and gas activities
Engineering estimates of the Companys oil and gas reserves
are inherently uncertain. Proved reserves are the estimated
volumes of crude oil, natural gas and gas condensates, liquids
and associated substances which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions. Although there are authoritative guidelines regarding
the engineering criteria that must be met before estimated oil
and gas reserves can be designated as proved, the
accuracy of any reserve estimate is a function of the quality of
available data and engineering and geological interpretation and
judgment.
Field reserves will only be categorized as proved when all the
criteria for attribution of proved status have been met. At this stage, all booked reserves will
be categorized as proved undeveloped. Volumes will subsequently
be recategorized from proved undeveloped to proved developed as a
consequence of development activity. The first proved developed
bookings will occur at the point of first oil or gas production.
Major development projects typically take one to four years from
the time of initial booking to the start of production.
Adjustments may be made to booked reserves due to production,
reservoir performance, commercial factors, acquisition and
divestment activity and additional reservoir development
activity. In particular, changes in oil and natural gas prices
could impact the amount of Enis proved reserves as regards
the initial estimate and, in the case of Production Sharing
Agreements and buy-back contracts, the share of production and
reserves to which Eni is entitled. Accordingly, the estimated
reserves could be materially different from the quantities of oil
and natural gas that ultimately will be recovered.
Oil and natural gas reserves have a direct impact on certain
amounts reported in the Financial Statements. Estimated proved
reserves are used in determining depreciation and depletion
expenses and impairment expense. Depreciation rates on oil and
gas assets using the UOP basis are determined from the ratio
between the amount of hydrocarbons extracted in the quarter and
proved developed reserves existing at the end of the quarter
increased by the amounts extracted during the quarter. Assuming
all other variables are held constant, an increase in estimated
proved developed reserves decreases depreciation, depletion and
amortization expense. On the contrary, a decrease in estimated
proved developed reserves increases depreciation, depletion and
amortization expense. In addition, estimated proved reserves are
used to calculate future cash flows from oil and gas properties,
which serve as an indicator in determining whether a property
impairment is to be carried out or not. The larger the volumes of
estimated reserves, the less likely the property is impaired.
Impairment of Assets
Eni assesses its tangible and
intangible assets, including goodwill, for possible impairment if
there are events or changes in circumstances that indicate that
the carrying values of the assets are not recoverable. Such
indicators include changes in the Groups business plans,
changes in commodity prices leading to unprofitable performance
and, for oil and gas properties, significant downward revisions
of estimated proved reserve quantities. Determination as to
whether and how much an asset is impaired involves management
estimates on highly uncertain matters such as future commodity
prices, the effects of inflation and technology improvements on
operating expenses, production profiles and the outlook for
global or regional market supply and demand conditions for crude
oil, natural gas, commodity chemicals and refined products.
The amount of an impairment loss is determined by comparing the
book value of an asset with its recoverable amount. The
recoverable amount is the greater of fair value net of disposal
costs and value in use. The estimated value in use is based on
the present values of expected future cash flows net of disposal
costs. The expected future cash flows used for impairment reviews
are based on judgmental assessments of future production volumes,
prices and costs, considering available information at the date
of review and are discounted by using a rate related to the
activity involved.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For oil and natural gas properties, the expected
future cash flows are estimated based on developed and
non-developed proved reserves including, among other elements,
production taxes and the costs to be incurred for the reserves
yet to be developed. The estimated future level of production is
based on assumptions on: future commodity prices, lifting and
development costs, field decline rates, market demand and supply,
economic regulatory climates and other factors.
Goodwill and other intangible assets with indefinite useful life
are not amortized but they are checked at least annually to
determine whether their carrying amount is recoverable and in any
case, when trigger events arise that would lead the entity to
assume the value of an asset is impaired. In particular, goodwill
impairment is based on the determination of the fair value of
each cash generating unit to which goodwill can be attributed on
a reasonable and consistent basis. A cash generating unit is the
smallest aggregate on which the company, directly or indirectly,
evaluates the return on the capital expenditure. If the fair
value of a cash generating unit is lower than the carrying
amount, goodwill attributed to that cash generating unit is
impaired up to that difference; if the carrying amount of
goodwill is less than the amount of impairment, assets of the
cash generating unit are impaired on a pro-rata basis for the
residual difference.
Asset Retirement Obligations
Obligations related to the removal of tangible equipment and the
restoration of land or seabeds require significant estimates in
calculating the amount of the obligation and determining the
amount required to be recorded in the Consolidated Financial
Statements. Estimating future asset removal costs is difficult
and requires management to make estimates and judgments due to
the fact that most removal obligations will come to term many
years into the future and contracts and regulations are often
unclear as to what constitutes removal. Asset removal
technologies and costs are constantly changing, as well as
political, environmental, safety and public relations
considerations. The subjectivity of these estimates is also
increased by the accounting method used that requires entities to
record the fair value of a liability for an asset retirement
obligations in the period when it is incurred (typically, at the
time, the asset is installed at the production location). When
liabilities are initially recorded, the related fixed assets are
increased by an equal corresponding amount. The liabilities are
increased with the passage of time (interest accretion) and any
change of the estimates following the modification of future cash
flows and discount rate is adopted. The recognized asset
retirement obligations are based upon future retirement cost
estimates and incorporate many assumptions such as: expected
recoverable quantities of crude oil and natural gas, abandonment
time, future inflation rates and the risk-free rate of interest
adjusted for the Companys credit costs.
Business Combinations
Accounting for the acquisition of a business requires the
allocation of the purchase price to most assets and liabilities
acquired at fair value. Any positive residual difference is
recognized as Goodwill. Negative residual differences
are charged against the profit and loss account. Management uses
all available information to make these fair value determinations
and, for major business acquisitions, typically engages an
independent appraisal firm to assist in the fair value
determination of the acquired assets and liabilities.
Environmental Liabilities
Together with other companies in the industries in which it
operates, Eni is subject to numerous EU, national, regional and
local environmental laws and regulations concerning its oil and
gas operations, productions and other activities, including
legislation that implements international conventions or
protocols. Environmental costs are recognized when it becomes
probable that a liability has been incurred and the amount can be
reasonably estimated.
Although management, considering the actions already taken,
insurance policies to cover environmental risks and provision for
risks accrued, does not expect any material adverse effect on
Enis consolidated results of operations and financial
position as a result of such laws and regulations, there can be
no assurance that there will not be a material adverse impact on
Enis consolidated results of operations and financial
position due to: (i) the possibility of a yet unknown
contamination; (ii) the results of the ongoing surveys and other
possible effects of statements required by Decree No. 471/1999 of
the Ministry of Environment concerning the remediation of
contaminated sites; (iii) the possible effect of future
environmental legislation and rules; (iv) the effect of possible
technological changes relating to future remediation; and (v) the
possibility of litigation and the difficulty of determining
Enis liability, if any, as against other potentially
responsible parties with respect to such litigation and the
possible insurance recoveries.
149
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Employees benefits
Defined benefit plans and other long term benefits are evaluated
with reference to uncertain events and based upon actuarial
assumptions including among others discount rates, expected rates
of return on plan assets, expected rates of salary increases,
medical cost trend rates, estimated retirement dates, mortality
rates.
The significant assumptions used to account for pensions and
other post-retirement benefits are determined as follows: (i)
discount and inflation rates reflect the rates at which benefits
could be effectively settled, taking into account the duration of
the obligation. Indications used in selecting the discount rate
include rates of annuity contracts and rates of return on high
quality fixed-income investments (such as government bonds). The
inflation rates reflect market conditions observed country by
country; (ii) the future salary levels of the individual
employees are determined including an estimate of future changes
attributed to general price levels (consistent with inflation
rate assumptions), productivity, seniority and
promotion; (iii) healthcare cost trend assumptions reflect
an estimate of the actual future changes in the cost of the
healthcare related benefits provided to the plan participants and
are based on past and current healthcare cost trends including
healthcare inflation, changes in healthcare utilization and
changes in health status of the participants; (iv) demographic
assumptions such as mortality, disability and turnover reflect
the best estimate of these future events for the individual
employees involved, based principally on available actuarial
data; (v) determination of expected rates of return on assets is
made through compound averaging. For each plan, the distribution
of investments among bonds, equities and cash and their specific
average expected rate of return is taken into account.
Differences between expected and actual costs and between the
expected return and the actual return on plan assets routinely
occur and are called actuarial gains and losses.
Eni applies the corridor method to amortize its actuarial losses
and gains. This method amortizes on a pro-rata basis the net
cumulative actuarial gains and losses, unrecognized at the end of
the previous reporting period, that exceed 10% of the greater of
(i) the present value of the defined benefit obligation and (ii)
the fair value of plan assets, over the average expected
remaining working lives of the employees participating in the
plan.
Additionally, obligations for other long term benefits are
determined by adopting actuarial assumptions; the effect of
changes in actuarial assumptions or a change in the
characteristics of the benefit are taken to profit or loss in
their entirety.
Contingencies
In addition to accruing the estimated costs for environmental
liabilities, asset retirement obligations and employees benefits,
Eni accrues for all contingencies that are both probable and
estimable. These other contingencies are primarily related to
litigation and tax issues. Determining appropriate amounts for
accrual is a complex estimation process that includes subjective
judgments.
Revenue recognition in the Engineering & Construction
segment
Revenue recognition in the Engineering &
Construction business segment is based on the stage of completion
of a contract as measured on the cost-to-cost basis applied to
contractual revenues. Use of the stage of completion method
requires estimates of future gross profit on a contract by
contract basis. The future gross profit represents the profit
remaining after deducting costs attributable to the contract from
revenues provided for in the contract. The estimate of future
gross profit is based on a complex estimation process, that
includes identification of risks related to geographical region,
market conditions in that region and any assessment that it is
necessary to estimate with sufficient precision the total future
costs as well as the expected timetable. Requests of additional
incomes, deriving from a change in the scope of the work, are
included in the total amount of revenues when it is probable that
the customer will approve the variation and the related amount;
claims deriving for instance from additional costs incurred for
reasons attributable to the client are included in the total
amount of revenues when it is probable that the counterpart will
accept them.
Recent accounting principles
With Regulation No. 108/2006 issued on January 11, 2006 the
European Commission approved IFRS 7 Financial instruments:
disclosures. IFRS 7 establishes the disclosures to be provided regarding financial instruments and
the exposure and management of financial risks. The requirements
of IFRS 7 include some disclosures currently required
by IAS 32 Financial instruments: exposures and
additional disclosures. IFRS 7 went into effect on January
1, 2007.
Eni is presently analyzing this statements and, at the moment,
cannot determine if adoption of this tandard will have a
significant effect on Enis Consolidated Financial
Statements.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the
Consolidated Financial Statements
Current activities
1 Cash and cash equivalent
Cash and cash equivalent of euro 3,985 million (euro 1,333
million at December 31, 2005) include financing receivables
originally due within 90 days for euro 240 million (euro 122
million at December 31, 2005) and consist of deposits with
financial institutions with a notice of over 48 hours.
2 Other financial assets held for trading or
available for sale
Other financial assets held for trading or available for
sale of euro 972 million (euro 1,368 million at December 31,
2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Securities held for operating purposes: | |||||
- listed Italian treasury bonds | 361 | 329 | |||
- listed securities issued by Italian and foreign merchant banks | 92 | 80 | |||
- non-quoted securities | 12 | 11 | |||
465 | 420 | ||||
Securities held for non-operating purposes: | |||||
- listed Italian treasury bonds | 727 | 508 | |||
- listed securities issued by Italian and foreign merchant banks | 151 | 40 | |||
- non-quoted securities | 25 | 4 | |||
903 | 552 | ||||
1,368 | 972 | ||||
Securities of euro 972 million (euro 1,368 million at December
31, 2005) are available for sale. The decrease of euro 396
million primarily concerns sales made by the financial company
Enifin SpA (euro 303 million) and the effect of the sale of Sofid
Sim SpA (euro 90 million). At December 31, 2005 and December 31,
2006 Eni did not own financial assets held for trading.
The effects of the valuation at fair value of securities consist
of the following:
(million euro) | Dec. 31, 2005 | Increase | Realization to the profit and loss account | Dec. 31, 2006 | ||||
Fair value | 27 | 2 | (21 | ) | 8 | |||||||
Deferred tax liabilities | 8 | (6 | ) | 2 | ||||||||
Other reserves of shareholders equity | 19 | 2 | (15 | ) | 6 | |||||||
The realization of the fair value to the profit and loss account of euro 21 million and of the related deferred tax liabilities of euro 6 million concern the expiring of securities of Padana Assicurazioni SpA. Securities held for operating purposes of euro 420 million (euro 465 million at December 31, 2005) concern securities covering technical reserves of Padana Assicurazioni SpA for euro 417 million (euro 453 million at December 31, 2005).
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Trade and other receivables
Trade and other receivables of euro 18,799 million (euro 17,902
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Trade receivables | 14,101 | 15,230 | ||
Financing receivables: | ||||
- for operating purposes - short-term | 480 | 242 | ||
- for operating purposes - current portion of long term receivables | 4 | |||
- for non-operating purposes | 12 | 143 | ||
492 | 389 | |||
Other receivables | ||||
- from disposals | 60 | 100 | ||
- other | 3,249 | 3,080 | ||
3,309 | 3,180 | |||
17,902 | 18,799 | |||
Receivables are recorded net of the allowance for impairment losses of euro 874 million (euro 891 million at December 31, 2005):
(million euro) | Value at Dec. 31, 2005 |
Additions |
Deductions |
Other changes |
Value at Dec. 31, 2006 |
|||||
Trade receivables | 643 | 129 | (77 | ) | (108 | ) | 587 | ||||||||
Other receivables | 248 | 78 | (7 | ) | (32 | ) | 287 | ||||||||
891 | 207 | (84 | ) | (140 | ) | 874 | |||||||||
Trade receivables of euro 15,230 million increased by euro
1,129 million. This increase primarily relates to the Exploration
& Production segment (euro 1,391 million) and the Engineering
& Construction segment (euro 832 million); such increase was
partially offset by the decrease of the Refining & Marketing
segment (euro 302 million) and the Gas & Power segment (euro
292 million) and includes the exchange rate differences due to
the translation of financial statements prepared in currencies
other than the euro for euro 263 million. Trade receivables
include advances paid as a guarantee on contract work in progress
for euro 70 million (euro 101 million at December 31, 2005).
Financing receivables made for operating purposes of euro 246
million (euro 480 million at December 31, 2005) concern
concessions, primarily, to unconsolidated subsidiaries, joint
ventures and affiliates. The decrease of euro 234 million
primarily concern the repayment of funding given to Trans Austria
Gasleitung GmbH (euro 292 million).
Other receivables of euro 3,180 million (euro 3,309 million at
December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Accounts receivable from: | ||||
- joint venture operators in exploration and production | 1,123 | 1,376 | ||
- Italian governmental entities | 228 | 266 | ||
- insurance companies | 539 | 223 | ||
1,890 | 1,865 | |||
Receivables relating to factoring operations | 324 | 191 | ||
Prepayments for services | 259 | 440 | ||
Other receivables | 836 | 684 | ||
3,309 | 3,180 | |||
152
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Receivables relating to factoring operations for euro 191
million (euro 324 million at December 31, 2005) relate to
Serfactoring SpA and essentially concern advances for factoring
operations with recourse and receivables for factoring operations
without recourse.
Receivables with related parties are described in Note 33 -
Transactions with related parties.
4 Inventories
Inventories of euro 4,752 million (euro 3,563 million at December
31, 2005) consist of the following:
Dec. 31, 2005 |
Dec. 31, 2006 |
|||
(million euro) |
Crude oil, gas and petroleum products |
Chemical products |
Work in progress long-term contracts |
Other |
Total |
Crude oil, gas and petroleum products |
Chemical products |
Work in progress long-term contracts |
Other |
Total |
||||||||||
Raw and auxiliary materials and consumables | 210 | 217 | 645 | 1,072 | 436 | 258 | 682 | 1,376 | ||||||||||||
Products being processed and semi finished products | 59 | 18 | 1 | 78 | 43 | 20 | 8 | 71 | ||||||||||||
Work in progress long-term contracts | 418 | 418 | 353 | 353 | ||||||||||||||||
Finished products and goods | 1,222 | 572 | 20 | 1,814 | 2,063 | 536 | 62 | 2,661 | ||||||||||||
Advances | 181 | 181 | 1 | 287 | 3 | 291 | ||||||||||||||
1,491 | 807 | 599 | 666 | 3,563 | 2,543 | 814 | 640 | 755 | 4,752 | |||||||||||
Inventories are net of the valuation allowance of euro 92 million (euro 93 million at December 31, 2005):
(million euro) | Value at Dec. 31, 2005 |
Additions |
Deductions |
Other changes |
Value at Dec. 31, 2006 |
|||||
93 | 19 | (14 | ) | (6 | ) | 92 |
Work in progress long-term contracts of euro 353
million (euro 418 million at December 31, 2005) are net of the
payments received corresponding to contractual amount of the work
performed of euro 5,237 million (euro 5,180 million at December
31, 2005).
5 Current tax assets
Current tax assets of euro 658 million (euro 697 million at
December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Italian tax | 422 | 394 | ||
Foreign tax | 275 | 264 | ||
697 | 658 | |||
Current tax assets of euro 658 million (euro 697 million at December 31, 2005) concern value added tax credits for euro 303 million (euro 406 million at December 31, 2005), income tax receivables of euro 116 million (euro 127 million at December 31, 2005) and excise taxes customs duties natural gas and customs expenses for euro 86 million (euro 60 million at December 31, 2005).
153
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Other assets
Other assets of euro 855 million (euro 369 million at December
31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Fair value of non-hedging derivatives | 117 | 569 | ||
Fair value of cash flow hedge derivatives | 32 | 37 | ||
Fair value of fair value hedge derivatives | 1 | |||
Other assets | 220 | 248 | ||
369 | 855 | |||
Fair value of non hedging derivative contracts of euro 569 million (euro 117 million at December 31, 2005) consists of the following:
Dec. 31, 2005 |
Dec. 31, 2006 |
|||
(million euro) | Fair Value | Commitments | Fair Value | Commitments | ||||
Non-hedging derivatives on exchange rate | ||||||||
Interest Currency Swap | 58 | 1,277 | 137 | 1,400 | ||||
Currency swap | 15 | 2,378 | 46 | 5,502 | ||||
Other | 26 | 42 | ||||||
73 | 3,681 | 183 | 6,944 | |||||
Non-hedging derivatives on interest rate | ||||||||
Interest Rate Swap | 14 | 1,281 | 66 | 3,393 | ||||
14 | 1,281 | 66 | 3,393 | |||||
Non-hedging derivatives on commodities | ||||||||
Over the counter | 21 | 394 | 35 | 262 | ||||
Other | 9 | 11 | 285 | 851 | ||||
30 | 405 | 320 | 1,113 | |||||
117 | 5,367 | 569 | 11,450 | |||||
Fair value of cash flow hedge derivative contracts of euro 37
million concerns commitments for euro 421 million and relates to
future sales of crude oil of the Exploration & Production
segment.
Cash flow hedge derivative contracts at December 31, 2005
relating to the purchase of electricity expired during 2006 and the effect was charged to the profit
and loss account.
Information about the risk of hedged items and to Eni's hedging
policy is included in Note 25 - Guarantees, commitments and risks
- Management of risks.
154
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Non-current activities
7 Property, plant and equipment
Tangible assets of euro 44,312 million (euro 45,013 million at
December 31, 2005) consist of the following:
(million euro) | Net value at the beginning of the year | Investments | Depreciations | Impairments | Exchange rate differences | Other changes | Net value at the end of the year | Gross value at the end of the year | Provisions for amortization and impairments | |||||||||
Dec. 31, 2005 | |||||||||||||||||||||||||||
Land | 197 | 5 | (4 | ) | 175 | 373 | 421 | 48 | |||||||||||||||||||
Buildings | 1,578 | 41 | (108 | ) | (8 | ) | 12 | (62 | ) | 1,453 | 3,152 | 1,699 | |||||||||||||||
Plant and machinery | 30,849 | 2,443 | (4,240 | ) | (192 | ) | 1,827 | 5,881 | 36,568 | 77,806 | 41,238 | ||||||||||||||||
Industrial and commercial equipment | 422 | 113 | (126 | ) | 10 | (47 | ) | 372 | 1,623 | 1,251 | |||||||||||||||||
Other assets | 329 | 65 | (102 | ) | 12 | 14 | 318 | 1,182 | 864 | ||||||||||||||||||
Tangible assets in progress and advances | 7,211 | 3,891 | (60 | ) | 590 | (5,703 | ) | 5,929 | 6,526 | 597 | |||||||||||||||||
40,586 | 6,558 | (4,576 | ) | (264 | ) | 2,451 | 258 | 45,013 | 90,710 | 45,697 | |||||||||||||||||
Dec. 31, 2006 | |||||||||||||||||||||||||||
Land | 373 | 16 | (3 | ) | 57 | 443 | 483 | 40 | |||||||||||||||||||
Buildings | 1,453 | 81 | (113 | ) | (12 | ) | (5 | ) | 38 | 1,442 | 3,236 | 1,794 | |||||||||||||||
Plant and machinery | 36,568 | 1,858 | (4,510 | ) | (197 | ) | (1,586 | ) | 3,240 | 35,373 | 79,873 | 44,500 | |||||||||||||||
Industrial and commercial equipment | 372 | 130 | (120 | ) | (6 | ) | 50 | 426 | 1,659 | 1,233 | |||||||||||||||||
Other assets | 318 | 82 | (78 | ) | (1 | ) | (9 | ) | 16 | 328 | 1,382 | 1,054 | |||||||||||||||
Tangible assets in progress and advances | 5,929 | 3,971 | (18 | ) | (364 | ) | (3,218 | ) | 6,300 | 6,822 | 522 | ||||||||||||||||
45,013 | 6,138 | (4,821 | ) | (231 | ) | (1,970 | ) | 183 | 44,312 | 93,455 | 49,143 | ||||||||||||||||
Capital expenditures of euro 6,138 million (euro 6,558 million
at December 31, 2005) primarily relate to the Exploration &
Production segment (euro 3,678 million), the Gas & Power
segment (euro 1,051 million), the Refining & Marketing
segment (euro 632 million) and to the Engineering &
Construction segment (euro 584 million). Capital expenditures
include financial expenses for euro 116 million (euro 159 million
at December 31, 2005) and are essentially related to the
Exploration & Production segment (euro 70 million), the Gas
& Power segment (euro 24 million) and the Refining &
Marketing segment (euro 19 million). The interest rate used for
the capitalization of financial expense was between 3.3% and 5.4%
(2.2% and 6.1% at December 31, 2005).
The depreciation rates used are as follows:
(%) | |||||||||
Buildings | 2 |
- |
10 |
||||||
Plant and machinery | 2 |
- |
10 |
||||||
Industrial and commercial equipment | 4 |
- |
33 |
||||||
Other assets | 6 |
- |
33 |
Exchange rate differences due to the translation of financial
statements prepared in currencies other than the euro of euro
1,970 million relate to companies whose functional currency is
the U.S. dollar (euro 1,913 million).
Impairments of euro 231 million concern primarily mineral assets
of the Exploration & Production segment (euro 129 million)
and petrochemical assets of the Petrochemical segment (euro 65
million) and of Syndial SpA (euro 22 million). The recoverable
amount considered in determining the impairment was calculated by
discounting the future cash flows using discount rates included
between 7.6% and 11.2%.
Other changes of euro 183 million primarily concern the initial
recognition and revision of the estimate of costs for dismantling
and restoration of sites for euro 1,157 million essentially
related to the Exploration & Production segment (euro 1,153
million).
155
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
This increase was partially offset by the reclassification to
"Other assets" of tangible assets related to the
service contract governing mineral activities in the Dación area
owned by the Venezuelan controlled branch Eni Dación BV for euro
629 million, the sale of tangible assets for euro 197 million, of
which euro 158 million relating to mineral assets of the
Exploration & Production segment and the change in scope of
consolidation of euro 66 million essentially following the sale
of Fiorentina Gas SpA (euro 157 million) and the acquisition of
Siciliana Gas SpA (euro 91 million).
The gross carrying amount of fully depreciated property, plant
and equipment that is still in use amount to euro 12,187 million
and primarily concerns refineries and storage sites of the
Refining & Marketing segment (euro 4,507 million), the gas
transportation network of Snam Rete Gas SpA (euro 3,486 million),
and petrochemical plants of the Petrochemical segment (euro 1,911
million) and Syndial SpA (euro 1,682 million).
At December 31, 2005, tangible assets were pledged for euro 54
million primarily as collateral on debt incurred by Eni (euro 475
million at December 31, 2005). The decrease of euro 421 million
essentially concerns the extinguishment of guarantees given (euro
418 million).
Government grants recorded as decrease of property, plant and
equipment amount to euro 1,067 million (euro 965 million at
December 31, 2005).
Assets acquired under financial lease amount to euro 89 million
and concern for euro 39 million FPSO ships used by the
Exploration & Production segment as support for oil
production and treatment activities and for euro 36 million a
drilling platform of the Engineering & Construction segment.
Property, plant and equipment by segment
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Property, plant and equipment, gross: | ||||||
- Exploration & Production | 49,129 | 49,002 | ||||
- Gas & Power | 21,517 | 22,277 | ||||
- Refining & Marketing | 9,420 | 11,273 | ||||
- Petrochemical | 4,402 | 4,380 | ||||
- Engineering & Construction | 3,878 | 4,363 | ||||
- Other activities | 1,999 | 1,967 | ||||
- Corporate and financial companies | 453 | 321 | ||||
- Elimination of intra-group profits | (88 | ) | (128 | ) | ||
90,710 | 93,455 | |||||
Accumulated depreciation, amortization and writedowns: | ||||||
- Exploration & Production | 24,644 | 26,000 | ||||
- Gas & Power | 7,757 | 8,210 | ||||
- Refining & Marketing | 5,864 | 7,482 | ||||
- Petrochemical | 3,263 | 3,308 | ||||
- Engineering & Construction | 2,031 | 2,138 | ||||
- Other activities | 1,882 | 1,874 | ||||
- Corporate and financial companies | 260 | 145 | ||||
- Elimination of intra-group profits | (4 | ) | (14 | ) | ||
45,697 | 49,143 | |||||
Property, plant and equipment, net: | ||||||
- Exploration & Production | 24,485 | 23,002 | ||||
- Gas & Power | 13,760 | 14,067 | ||||
- Refining & Marketing | 3,556 | 3,791 | ||||
- Petrochemical | 1,139 | 1,072 | ||||
- Engineering & Construction | 1,847 | 2,225 | ||||
- Other activities | 117 | 93 | ||||
- Corporate and financial companies | 193 | 176 | ||||
- Elimination of intra-group profits | (84 | ) | (114 | ) | ||
45,013 | 44,312 | |||||
156
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 Other
assets
Other assets of euro 629 million concern the tangible
assets related to the service contract governing mineral
activities in the Dación area and owned by the Venezuelan
controlled branch Eni Dación BV. Additional information is
included in Note 25 - Guarantees, commitments and risks - Other
commitments and risks.
9 Inventories - Compulsory stock
Inventories - compulsory stocks of euro 1,827 million (euro 2,194
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Crude oil and petroleum products | 2,037 |
1,670 |
||||
Natural gas | 157 |
157 |
||||
2,194 |
1,827 |
Compulsory stocks, are primarily held by Italian companies
(euro 2,057 and euro 1,688 million at December 31, 2005 and at
December 31, 2006, respectively) and represent certain minimum
quantities required by Italian law.
10 Intangible assets
Intangible assets of euro 3,753 million (euro 3,194 million at
December 31, 2005) consist of the following:
(million euro) | Net value at the beginning of the year |
Investments |
Amortization |
Other changes |
Net value at the end of the year |
Gross value at the end of the year |
Provisions for amortization |
|||||||
Dec. 31, 2005 | |||||||||||||||||||||
Intangible assets with a definite life | |||||||||||||||||||||
- Costs for research of mineral resources | 107 | 699 | (683 | ) | 41 | 164 | 1,059 | 895 | |||||||||||||
- Industrial patent rights and intellectual property rights | 174 | 37 | (122 | ) | 48 | 137 | 1,056 | 919 | |||||||||||||
- Concessions, licenses, trademarks and similar items | 816 | 31 | (101 | ) | 746 | 2,205 | 1,459 | ||||||||||||||
- Intangible assets in progress and advances | 59 | 74 | (57 | ) | 76 | 81 | 5 | ||||||||||||||
- Other intangible assets | 224 | 13 | (30 | ) | (50 | ) | 157 | 470 | 313 | ||||||||||||
1,380 | 854 | (936 | ) | (18 | ) | 1,280 | 4,871 | 3,591 | |||||||||||||
Intangible assets with a indefinite life | |||||||||||||||||||||
- Goodwill | 1,933 | 2 | (21 | ) | 1,914 | ||||||||||||||||
3,313 | 856 | (936 | ) | (39 | ) | 3,194 | |||||||||||||||
Dec. 31, 2006 | |||||||||||||||||||||
Intangible assets with a definite life | |||||||||||||||||||||
- Costs for research of mineral resources | 164 | 1,337 | (1,102 | ) | 10 | 409 | 1,290 | 881 | |||||||||||||
- Industrial patent rights and intellectual property rights | 137 | 31 | (97 | ) | 41 | 112 | 1,113 | 1,001 | |||||||||||||
- Concessions, licenses, trademarks and similar items | 746 | 168 | (110 | ) | 52 | 856 | 2,417 | 1,561 | |||||||||||||
- Intangible assets in progress and advances | 76 | 146 | (71 | ) | 151 | 156 | 5 | ||||||||||||||
- Other intangible assets | 157 | 13 | (26 | ) | (3 | ) | 141 | 457 | 316 | ||||||||||||
1,280 | 1,695 | (1,335 | ) | 29 | 1,669 | 5,433 | 3,764 | ||||||||||||||
Intangible assets with a indefinite life | |||||||||||||||||||||
- Goodwill | 1,914 | 170 | 2,084 | ||||||||||||||||||
3,194 | 1,695 | (1,335 | ) | 199 | 3,753 | ||||||||||||||||
Costs for research of mineral resources for euro 409 million concern the purchase of mineral rights (euro 404 million). This item also includes exploration expenditures amortized in full in the period incurred for euro 1,028 million (euro 565 million at December 31, 2005).
157
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Concessions, licenses, trademarks and similar items for euro
856 million primarily concern the transport rights for natural
gas imported from Algeria (euro 572 million) and concessions for
mineral exploration (euro 223 million). Other intangible assets
with a definite life of euro 141 million include royalties for
the use of licenses by Polimeri Europa SpA (euro 81 million) and
the estimated expenditures for social projects to be incurred
following contractual commitments with the Basilicata Region
related to mineral development programs in Val dAgri (euro
26 million).
The depreciation rates used are as follows:
(%) | |||||||||
Costs for research and development | 10 |
- |
33 |
||||||
Industrial patent rights and intellectual property rights | 20 |
- |
33 |
||||||
Concessions, licenses, trademarks and similar items | 7 |
- |
33 |
||||||
Other intangible assets | 4 |
- |
25 |
The gross carrying amount of fully depreciated intangible
assets still in use amount to euro 767 million.
Other changes of intangible assets with a definite life of euro
29 million include negative exchange rate differences due to the
translation of financial statements prepared in currencies other
than the euro of euro 28 million.
Goodwill for euro 2,084 million concerns essentially the
Engineering & Construction segment (euro 828 million, of
which euro 805 million relates to the purchase of Bouygues
Offshore SA, now Saipem SA), the Gas & Power segment (euro
982 million, of which euro 757 million relates to the public
offering of Italgas SpA shares in 2003), the Exploration &
Production segment (euro 225 million, of which euro 220 million
relates to the purchase of Lasmo Plc, now Eni Lasmo Plc) and the
Refining & Marketing segment (euro 46 million).
In order to determine the recoverable amount, goodwill related to
the acquisition of Bouygues Offshore SA and Italgas SpA has been
allocated to the following cash generating units:
(million euro) | Dec. 31, 2006 |
|
Bouygues Offshore SA | |||
Offshore constructions | 403 |
||
Onshore constructions | 165 |
||
LNG | 159 |
||
MMO - Maintenance Modification and Operation | 78 |
||
805 |
|||
Italgas SpA | |||
Domestic gas market | 706 |
||
Foreign gas market | 51 |
||
757 |
The recoverable amount of cash generating units is determined
based on expected cash flows estimated using the market
assumptions of Enis 2007-2010 Strategic Plan and discounted
at rates included between 4.7% and 14.3%. For the years not
included in the strategic market assumptions, Eni has used an
incremental rate included between 0% and 2%. Key assumptions are
based on past experience and take into account the current level
of interest rates.
Other changes related to goodwill of euro 170 million concern the
allocation to goodwill of the difference between the price paid
by Snam Rete Gas SpA and Saipem SpA for the purchase of treasury
shares and the corresponding portion of shareholders equity
acquired following the increase of Enis interest (euro 171
million) and the change in scope of consolidation related to the
acquisition of 50% of Siciliana Gas SpA (euro 23 million). Such
increase was partially offset by the decrease in the impairment
of goodwill allocated to Tigaz Zrt following its acquisition by
Italgas SpA (euro 46 million). The impairment of goodwill
allocated to Tigaz Zrt was made following the application of the
new Hungarian tariff regime, in force from 2006, and was
determined on the basis of the new estimate of future cash flows,
discounted by using a rate of 6.3%.
158
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11 Investments
Investments accounted for using the equity method
Investments accounted for using the equity method of euro 3,886
million (euro 3,890 million at December 31, 2005) consist of the
following:
(million euro) | Value at the beginning of the year | Acquisitions and subscriptions | Gain from the valuation of investments accounted for using the equity method | Loss from the valuation of investments accounted for using the equity method | Deduction for dividends | Exchange rate differences | Other changes | Value at the end of the year | ||||||||
Dec. 31, 2005 | ||||||||||||||||||||||||
Investments in unconsolidated subsidiaries | 109 | 30 | 6 | (2 | ) | (3 | ) | 10 | (4 | ) | 146 | |||||||||||||
Investments in joint ventures | 1,946 | 12 | 375 | (27 | ) | (202 | ) | 98 | 182 | 2,384 | ||||||||||||||
Investments in affiliates | 1,101 | 6 | 389 | (4 | ) | (96 | ) | 34 | (70 | ) | 1,360 | |||||||||||||
3,156 | 48 | 770 | (33 | ) | (301 | ) | 142 | 108 | 3,890 | |||||||||||||||
Dec. 31, 2006 | ||||||||||||||||||||||||
Investments in unconsolidated subsidiaries | 146 | 4 | 15 | (8 | ) | (8 | ) | (6 | ) | 1 | 144 | |||||||||||||
Investments in joint ventures | 2,322 | 33 | 516 | (26 | ) | (302 | ) | (79 | ) | 42 | 2,506 | |||||||||||||
Investments in affiliates | 1,422 | 1 | 356 | (2 | ) | (440 | ) | (31 | ) | (70 | ) | 1,236 | ||||||||||||
3,890 | 38 | 887 | (36 | ) | (750 | ) | (116 | ) | (27 | ) | 3,886 | |||||||||||||
Acquisitions and subscriptions for euro 38 million concern
mainly the subscriptions of capital increase of Enirepsa Gas Ltd
(euro 23 million) and Saipem Triune Engineering Private Ltd (euro
8 million). Gains from the valuation of investments using the
equity method of euro 887 million primarily relate to Galp
Energia SGPS SA (euro 250 million), Unión Fenosa Gas SA (euro
181 million), EnBw Eni Verwaltungsgesellschaft mbH (euro 64
million), Blue Stream Pipeline Co BV (euro 44 million),
Supermetanol CA (euro 43 million), United Gas Derivatives Co
(euro 39 million), Trans Austria Gasleitung GmbH (euro 36
million), Lipardiz-Construção de Estruturas Maritimas Lda (euro
31 million) and Gaztransport et Technigaz SAS (euro 28 million).
Losses from the valuation of investments using the equity method
of euro 36 million primarily relate to Enirepsa Ltd (euro 21
million). Deduction following the distribution of dividends of
euro 750 million primarily relates to Galp Energia SGPS SA (euro
364 million), Unión Fenosa Gas SA (euro 128 million), Trans
Austria Gasleitung GmbH (euro 43 million), United Gas Derivatives
Co (euro 33 million) and Supermetanol CA (euro 32 million).
Other changes of euro 27 million concern the inclusion in
consolidation of Siciliana Gas SpA following the acquisition of
the remaining 50% interest from ESPI - Ente Siciliano per la
Promozione Industriale (in liquidation) (euro 60 million) and, as
an increase, the contribution of Fiorentina Gas SpA to Toscana
Energia SpA (euro 67 million).
159
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The net carrying value of euro 3,886 million (euro 3,890 million at December 31, 2005) concerns the following companies:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Net value |
Enis interest % |
Net value |
Enis interest % |
|||||
Unconsolidated subsidiaries: | ||||||||
- Eni Btc Ltd | 55 | 100.00 | 46 | 100.00 | ||||
- Others (*) | 91 | 98 | ||||||
146 | 144 | |||||||
Joint ventures: | ||||||||
- Unión Fenosa Gas SA | 459 | 50.00 | 503 | 50.00 | ||||
- Blue Stream Pipeline Co BV | 280 | 50.00 | 293 | 50.00 | ||||
- EnBW - Eni Verwaltungsgesellschaft mbH | 168 | 50.00 | 234 | 50.00 | ||||
- Raffineria di Milazzo ScpA | 172 | 50.00 | 171 | 50.00 | ||||
- Azienda Energia e Servizi Torino SpA | 165 | 49.00 | 165 | 49.00 | ||||
- Eteria Parohis Aeriou Thessalonikis AE | 152 | 49.00 | 157 | 49.00 | ||||
- Toscana Energia SpA | 111 | 48.72 | ||||||
- Super Octanos CA | 113 | 49.00 | 97 | 49.00 | ||||
- Lipardiz-Construção de Estruturas Maritimas Lda | 66 | 50.00 | 97 | 50.00 | ||||
- Supermetanol CA | 88 | 34.51 | 90 | 34.51 | ||||
- Trans Austria Gasleitung GmbH | 88 | 89.00 | 81 | 89.00 | ||||
- Haldor Topsøe AS | 62 | 50.00 | 71 | 50.00 | ||||
- Unimar Llc | 84 | 50.00 | 70 | 50.00 | ||||
- FPSO Mystras - Produção de Petroleo Lda | 73 | 50.00 | 63 | 50.00 | ||||
- Transmediterranean Pipeline Co Ltd | 63 | 50.00 | 50 | 50.00 | ||||
- Eteria Parohis Aeriou Thessalias AE | 39 | 49.00 | 46 | 49.00 | ||||
- Saibos Akogep Snc | 38 | 70.00 | 38 | 70.00 | ||||
- Transitgas AG | 32 | 46.00 | 31 | 46.00 | ||||
- CMS&A Wll | 31 | 20.00 | 27 | 20.00 | ||||
- Siciliana Gas SpA | 60 | 50.00 | ||||||
- Toscana Gas SpA | 55 | 46.10 | ||||||
- Others (*) | 96 | 111 | ||||||
2,384 | 2,506 | |||||||
Affiliates: | ||||||||
- Galp Energia SGPS SA | 896 | 33.34 | 782 | 33.34 | ||||
- United Gas Derivatives Co | 128 | 33.33 | 117 | 33.33 | ||||
- Fertilizantes Nitrogenados de Oriente CEC | 92 | 20.00 | 88 | 20.00 | ||||
- Acam Gas SpA | 45 | 49.00 | 45 | 49.00 | ||||
- Distribuidora de Gas del Centro SA | 41 | 31.35 | 37 | 31.35 | ||||
- Gaztransport et Technigaz SAS | 20 | 30.00 | 29 | 30.00 | ||||
- Others (*) | 138 | 138 | ||||||
1,360 | 1,236 | |||||||
3,890 | 3,886 | |||||||
(*) | Each individual amount included herein does not exceed euro 25 million. |
The net value of investments in unconsolidated subsidiaries,
joint ventures and affiliates includes the differences between
purchase price and Enis equity in investments of euro 576
million. Such differences relate to Unión Fenosa Gas SA (euro
195 million), EnBW Eni Verwaltungsgesellschaft mbH (euro 178
million), Galp Energia SGPS SA (euro 107 million) and Azienda
Energia e Servizi Torino SpA (euro 69 million).
Provisions for losses related to investments accounted for using
the equity method of euro 154 million, included in the provisions
for contingencies, relate primarily to Polimeri Europa
Elastomères France SA (euro 50 million), Charville - Consultores
e Serviços Lda (euro 37 million), Industria Siciliana Acido
Fosforico - ISAF (in liquidation) (euro 31 million) and
Geopromtrans Llc (euro 19 million).
160
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other investments
Other investments of euro 360 million (euro 421 million at
December 31, 2005) consist of the following:
(million euro) | Net value at the beginning of the year | Acquisition and subscriptions | Exchange rate differences | Other changes | Net value at the end of the year | Gross value at the end of the year | Accumulated impairment charges | |||||||
Dec. 31, 2005 | |||||||||||||||||||||
Investments in unconsolidated subsidiaries | 78 | 1 | (38 | ) | 41 | 68 | 27 | ||||||||||||||
Investments in affiliates | 107 | (98 | ) | 9 | 9 | ||||||||||||||||
Other investments | 344 | 23 | 41 | (37 | ) | 371 | 375 | 4 | |||||||||||||
529 | 24 | 41 | (173 | ) | 421 | 452 | 31 | ||||||||||||||
Dec. 31, 2006 | |||||||||||||||||||||
Investments in unconsolidated subsidiaries | 41 | (20 | ) | 21 | 49 | 28 | |||||||||||||||
Investments in affiliates | 9 | 9 | 10 | 1 | |||||||||||||||||
Other investments | 371 | 4 | (31 | ) | (14 | ) | 330 | 332 | 2 | ||||||||||||
421 | 4 | (31 | ) | (34 | ) | 360 | 391 | 31 | |||||||||||||
Investments in unconsolidated subsidiaries and affiliates are
valued at cost net of impairment losses. Other investments are
essentially valued at cost adjusted for impairment losses, due to
the fact that the fair value cannot be reliably determined.
The net carrying amount of Other investments of euro 360 million
(euro 421 million at December 31, 2005) concerns the following
companies:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Net value |
Enis interest % |
Net value |
Enis interest % |
|||||
Unconsolidated subsidiaries (*) | 41 | 21 | ||||||
Affiliates | 9 | 9 | ||||||
Other investments: | ||||||||
- Darwin LNG Pty Ltd | 126 | 12.04 | 108 | 12.04 | ||||
- Nigeria LNG Ltd | 100 | 10.40 | 90 | 10.40 | ||||
- Ceska Rafinerska AS | 35 | 16.33 | 31 | 16.33 | ||||
- Others (*) | 110 | 101 | ||||||
371 | 330 | |||||||
421 | 360 | |||||||
(*) | Each individual amount included herein does not exceed euro 25 million. |
Provisions for losses related to Other investments of euro 30 million, included in the provisions for contingencies, relate primarily to Caspian Pipeline Consortium R - Closed Joint Stock Co (euro 27 million).
161
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other information about investments
The following are the amounts, according to Enis
interest, from the last available Financial Statements of
unconsolidated subsidiaries, joint ventures and affiliates:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Unconsolidated subsidiaries |
Joint Ventures |
Affiliates |
Unconsolidated subsidiaries |
Joint Ventures |
Affiliates |
|||||||
Total assets | 1,404 | 7,423 | 2,763 | 1,315 | 7,906 | 2,998 | |||||||
Total liabilities | 1,263 | 5,161 | 1,295 | 1,182 | 5,466 | 1,753 | |||||||
Net sales from operations | 63 | 4,617 | 1,560 | 71 | 5,536 | 4,905 | |||||||
Operating profit | (1 | ) | 609 | 176 | (1 | ) | 790 | 454 | |||||
Net profit | (2 | ) | 328 | 371 | 3 | 465 | 351 | ||||||
Total assets and total liabilities relating to
unconsolidated companies of euro 1,315 and euro 1,182 million
(euro 1,404 and euro 1,263 million at December 31, 2005) concern
for euro 900 and euro 900 million (euro 1,004 and euro 1,004
million at December 31, 2005) companies for which consolidation
does not produce significant effects.
12 Other financial assets
Other financial receivables of euro 805 million (euro 1,050
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Financial receivables | ||||
- for operating purposes | 754 | 532 | ||
- for non-operating purposes | 247 | 252 | ||
1,001 | 784 | |||
Securities | ||||
- for operating purposes | 21 | 21 | ||
- for non-operating purposes | 28 | |||
49 | 21 | |||
1,050 | 805 | |||
Financial receivables are presented net of the allowance for
impairment losses of euro 24 million (euro 25 million at December
31, 2005).
Operating financial receivables of euro 532 million (euro 754
million at December 31, 2005) primarily concern loans made by the
Exploration & Production segment (euro 372 million) and Gas
& Power segment (euro 81 million). The decrease of euro 222
million concerns exchange rate differences due to the translation
of financial statements prepared in currencies other than the
euro for euro 61 million. Non-operating financial receivables of
euro 252 million (euro 247 million at December 31, 2005) concern
a fixed deposit of euro 246 million held by Eni Lasmo Plc as a
guarantee of a debt issue (euro 241 million at December 31,
2005).
Receivables in currency other than the euro amount to euro 693
million (euro 845 million at December 31, 2005).
Receivables due beyond five years amount to euro 396 million
(euro 625 million at December 31, 2005).
Securities for euro 21 million (euro 49 million at December 31,
2005) are considered held-to-maturity investments and concern
securities issued by the Italian Government (euro 22 million at
December 31, 2005).
Securities have a maturity within five years.
The fair value evaluation of other financial assets did not have
any significant effect.
162
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13 Deferred tax assets
Deferred tax assets of euro 1,725 million (euro 1,861 million at
December 31, 2005) are presented net of deferred tax liabilities
for which Eni possesses the legal right of offset for euro 4,028
million (euro 3,347 million at December 31, 2005).
(million euro) | Value at Dec. 31, 2005 |
Additions |
Deductions |
Exchange rate differences |
Other changes |
Value at Dec. 31, 2006 |
||||||
1,861 |
1,299 |
(1,036 |
) | (169 |
) | (230 |
) | 1,725 |
Other changes of euro 230 million primarily concern the
offset, for each company, of deferred tax assets with deferred
tax liabilities (euro 318 million).
Deferred tax assets are described in Note 22 - Deferred tax
liabilities.
14 Other non-current receivables
Other non-current receivables of euro 994 million (euro 995
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Tax receivables from: | ||||
- Italian tax authorities | ||||
. income tax credits | 508 | 501 | ||
. interest on tax credits | 309 | 322 | ||
. value added tax (VAT) | 37 | 37 | ||
. other | 7 | 13 | ||
861 | 873 | |||
- foreign tax authorities | 44 | 30 | ||
905 | 903 | |||
Other receivables: | ||||
- in relation to disposals | 39 | 2 | ||
- others | 40 | 83 | ||
79 | 85 | |||
Other non-current receivables | 11 | 6 | ||
995 | 994 | |||
163
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Current liabilities
15 Current financial liabilities
Current financial liabilities of euro 3,400 million (euro 4,612
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Banks | 3,894 |
3,178 |
||||
Financial liabilities represented by commercial papers | 60 |
|
||||
Other financing institutions | 658 |
222 |
||||
4,612 |
3,400 |
The decrease in current financial liabilities of euro 1,212
million is primarily due to the balance of repayments
and new assumptions of liabilities (euro 802 million) and
to exchange rate differences related to the translation of
financial statements prepared in currencies other than the euro
(euro 473 million).
Current financial liabilities by currency are
denominated as follows:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Euro | 4,029 |
3,119 |
||||
US Dollar | 323 |
161 |
||||
Other currencies | 260 |
120 |
||||
4,612 |
3,400 |
In fiscal year 2006, the weighted average interest rate of
short term debts amounts to 3.9% (2.8% in fiscal year 2005).
At December 31, 2006 Eni has unused committed and uncommitted
borrowing facilities amounting respectively to euro 5,896 million
and euro 6,523 million, respectively (euro
5,855 million and euro 4,783 million at December 31, 2005).
Interest rates of these contracts reflect market conditions and
the charges for non-use are not material.
16 Trade and other payables
Trade and other payables of euro 15,995 million (euro 13,095
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Trade payables | 8,170 | 10,528 | ||
Advances | 1,184 | 1,362 | ||
Other payables: | ||||
- in relation to investments | 698 | 1,166 | ||
- others | 3,043 | 2,939 | ||
3,741 | 4,105 | |||
13,095 | 15,995 | |||
Trade payables of euro 10,528 million increased by euro 2,358
million. Such increase primarily concerns the Exploration &
Production segment (euro 1,353 million), Engineering &
Construction segment (euro 424 million), Refining & Marketing
segment (euro 262 million) and Gas & Power segment (euro 194
million) and includes exchange rate differences related to the
translation of financial statements prepared in currencies other
than the euro for euro 181 million.
Advances of euro 1,362 million (euro 1,184 million at December
31, 2005) concern payments received in excess of the value of the
work in progress performed for euro 884 million (euro 550 million
at December 31, 2005), advances on contract work in progress for
euro 197 million (euro 309 million at December 31, 2005) and
other advances for euro 281 million (euro 325 million at December
31, 2005). Advances on contract work in progress concern the
Engineering & Construction segment.
164
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other payables of euro 4,105 million (euro 3,741 million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Payables due to: | ||||
- joint venture operators in exploration and production activities | 1,264 | 1,146 | ||
- suppliers in relation to investments | 951 | 923 | ||
- social security entities | 229 | 339 | ||
- employees | 314 | 336 | ||
- non-financial governmental entities | 313 | 274 | ||
3,071 | 3,018 | |||
Cautionary deposit | 6 | 2 | ||
Other payables | 664 | 1,085 | ||
3,741 | 4,105 | |||
Payables with related parties are described in Note 33 - Transactions with related parties.
17 Taxes payable
Taxes payable of euro 2,830 million (euro 3,430 million at
December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Income taxes payable | 1,742 |
1,640 |
||||
Customs and excise duties | 896 |
683 |
||||
Other | 792 |
507 |
||||
3,430 |
2,830 |
Taxes payable of euro 1,640 million (euro 1,742 million at
December 31, 2005) concern Italian companies for euro 158 million
and foreign companies for euro 1,482 million (euro 234 million
and euro 1,508 million at December 31, 2005, respectively). The
decrease of euro 102 million includes exchange rate differences
related to the translation of financial statements prepared in
currencies other than the euro (euro 70 million).
18 Other current liabilities
Other current liabilities of euro 634 million (euro 613 million
at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Fair value of non-hedging derivatives | 378 | 395 |
||||
Fair value of cash flow hedge derivatives | 5 | 40 |
||||
Other liabilities | 230 |
199 |
||||
613 |
634 |
165
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of non-hedging derivative contracts of euro 395 million (euro 378 million at December 31, 2005) consists of the following:
Dec. 31, 2005 |
Dec. 31, 2006 |
|||
(million euro) | Fair Value | Commitments | Fair Value | Commitments | ||||
Non-hedging derivatives on exchange rates | ||||||||
Currency Swap | 139 | 6,370 | 11 | 1,291 | ||||
Interest Currency Swap | 73 | 2,316 | 19 | 257 | ||||
Other | 2 | 57 | 2 | 70 | ||||
214 | 8,743 | 32 | 1,618 | |||||
Non-hedging derivatives on interest rates | ||||||||
Interest Rate Swap | 101 | 5,145 | 30 | 2,122 | ||||
101 | 5,145 | 30 | 2,122 | |||||
Non-hedging derivatives on commodities | ||||||||
Over the counter | 21 | 323 | 52 | 635 | ||||
Other | 42 | 94 | 281 | 930 | ||||
63 | 417 | 333 | 1,565 | |||||
378 | 14,305 | 395 | 5,305 | |||||
Fair value of cash flow hedge derivatives of euro 40 million
concerns commitments for euro 529 million related to future sales
of crude oil by the Exploration & Production segment. Cash
flow hedge derivatives on exchange rate at December 31, 2005 were
closed in 2006 with the effects charged to the profit and loss
account.
Information concerning the hedged risks and the hedging policies
is shown in Note 25 - Guarantees, commitments and risks - Risk
management.
Non-current liabilities
19 Long term debt and current portion of long term
debt
Long term debt and the current portion of long term debt,
including the related expiration dates, are as follows:
(million euro) |
December 31 | Long-term maturity | ||||
Type of debt instrument |
Maturity range |
2005 |
2006 |
Current maturity 2007 |
2008 |
2009 |
2010 |
2011 |
After |
Total |
||||||||||
Banks: | ||||||||||||||||||||
- ordinary loans | 2007-2019 | 2,174 | 2,298 | 127 | 310 | 448 | 348 | 88 | 977 | 2,171 | ||||||||||
- interest rate assigned loans | 2007-2013 | 45 | 13 | 4 | 3 | 2 | 2 | 1 | 1 | 9 | ||||||||||
- other financing | 2006 | 3 | ||||||||||||||||||
2,222 | 2,311 | 131 | 313 | 450 | 350 | 89 | 978 | 2,180 | ||||||||||||
Ordinary bonds | 2007-2027 | 5,339 | 5,097 | 685 | 475 | 127 | 946 | 179 | 2,685 | 4,412 | ||||||||||
Other financing institutions | 2007-2019 | 825 | 891 | 74 | 403 | 26 | 29 | 129 | 230 | 817 | ||||||||||
8,386 | 8,299 | 890 | 1,191 | 603 | 1,325 | 397 | 3,893 | 7,409 | ||||||||||||
Long term debt including the current portion of long-term debt of euro 8,299 million (euro 8,386 million at December 31, 2005) decreased by euro 87 million. Such decrease is primarily due to the balance of payments and new subscriptions of liabilities of euro 7 million and to the effect of exchange rate differences on the translation of financial statements prepared in currencies other than the euro and exchange rate differences on the alignment to the year end exchange rate of debts denominated in currencies other than the functional currency for a total of euro 124 million.
166
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Liabilities towards other financing institutions of euro 891 million included euro 56 million of finance lease transactions. The residual debt, represented by the sum of discounted future lease payments applying the effective interest rate, interests and the total of future lease payments, including the related expiration dates, are as follows:
Maturity range | |||
(million euro) | Within 12 months | Between one and five years | After five years | Total | ||||
Residual debt | 14 | 33 | 9 | 56 | ||||
Interests | 7 | 11 | 7 | 25 | ||||
Undiscounted value of future lease payments | 21 | 44 | 16 | 81 | ||||
Eni entered into financing arrangements with the European
Investment Bank, relating to a bank debt that requires it to maintain certain financial ratios
generally based on Enis Consolidated Financial Statements
or of a rating not inferior to A- (S&P) and A3 (Moodys). At
December 31, 2005 and December 31, 2006, the amount of short and
long term debt subject to restrictive covenants was euro 1,258
million and euro 1,131 million, respectively. In addition, Saipem
SpA entered into financing arrangements with banks for euro 75
million (euro 275 million at December 31, 2005), that require it to maintain certain financial ratios
generally based on Saipems Consolidated Financial
Statements. Eni and Saipem are in compliance with the covenants
contained in these financing arrangements.
Bonds for euro 5,097 million concern bonds issued within the Euro
Medium Term Notes Program for a total of euro 4,424 million and
other bonds for a total of euro 673 million.
Bonds as of at December 31, 2006, including the issuing entity,
the expiration dates and interest rates, by currency, are as
follows:
Amount |
Discount on bond issue and accrued expense |
Total |
Value |
Maturity |
% rate |
|||||||
(million euro) | from |
to |
from |
to |
||||||||||||
Issuing entity | |||||||||||||||||
Euro Medium Term Notes: | |||||||||||||||||
- Eni SpA | 1,500 | 42 | 1,542 | Euro | 2013 | 4.625 | |||||||||||
- Eni Coordination Center SA | 1,027 | 19 | 1,046 | British pound | 2007 | 2019 | 4.875 | 5.250 | |||||||||
- Eni Coordination Center SA | 520 | 5 | 525 | Euro | 2007 | 2015 | variable | ||||||||||
- Eni SpA | 500 | 16 | 516 | Euro | 2010 | 6.125 | |||||||||||
- Eni Coordination Center SA | 277 | 5 | 282 | Euro | 2008 | 2024 | 2.876 | 5.050 | |||||||||
- Eni Coordination Center SA | 193 | 4 | 197 | U.S. dollar | 2013 | 2015 | 4.450 | 4.800 | |||||||||
- Eni Coordination Center SA | 167 | 167 | Japanese yen | 2008 | 2021 | 0.810 | 2.320 | ||||||||||
- Eni Coordination Center SA | 103 | 103 | U.S. dollar | 2007 | 2013 | variable | |||||||||||
- Eni Coordination Center SA | 32 | 32 | Swiss franc | 2010 | 2.043 | ||||||||||||
- Eni Coordination Center SA | 14 | 14 | Swiss franc | 2007 | variable | ||||||||||||
4,333 | 91 | 4,424 | |||||||||||||||
Other bonds: | |||||||||||||||||
- Eni USA Inc | 304 | 3 | 307 | U.S. dollar | 2027 | 7.300 | |||||||||||
- Eni Lasmo Plc (*) | 224 | (11 | ) | 213 | British pound | 2009 | 10.375 | ||||||||||
- Eni USA Inc | 152 | 1 | 153 | U.S. dollar | 2007 | 6.750 | |||||||||||
680 | (7 | ) | 673 | ||||||||||||||
5,013 | 84 | 5,097 | |||||||||||||||
(*) | The bond is guaranteed by a fixed deposit recorded under non-current financial assets (euro 246 million). |
167
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Bonds due within 18 months amount to euro 787 million and
concern Eni Coordination Center SA (euro 634 million) and Eni USA
Inc (euro 153 million). In 2006, Eni issued bonds for euro 219
million through Eni Coordination Center SA.
Long-term debt and the current portion of long term debt,
including the weighted average interest rates, by currency, are
as follows:
Dec. 31, 2005 |
Average rate |
Dec. 31, 2006 |
Average rate |
|||||
Euro | 5,344 | 3.6 | 5,566 | 4.0 | ||||
U.S. dollar | 1,709 | 7.0 | 1,261 | 7.8 | ||||
British pound | 1,082 | 5.3 | 1,259 | 5.9 | ||||
Japanese yen | 153 | 1.4 | 167 | 1.4 | ||||
Swiss franc | 98 | 2.6 | 46 | 2.0 | ||||
8,386 | 8,299 | |||||||
At December 31, 2006 Eni has unused committed long term
borrowing facilities amounting to euro 520 million (euro 1,070
million at December 31, 2005). Interest rates on these contracts
are at market conditions and the charges for non-use are not
material.
Fair value of long-term debt, including the current portion of
long term debt, amounts to euro 8,415 million (euro 8,732 million
at December 31, 2005) and consists of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Ordinary Bonds | 5,633 | 5,239 | ||
Banks | 2,222 | 2,311 | ||
Other financing institutions | 877 | 865 | ||
8,732 | 8,415 | |||
The fair value was calculated by discounting the future cash
flows using rates between 3.6% and 5.6% (2.8% and 5.0% at
December 31, 2005). Financial liabilities for euro 231 million
are guaranteed by mortgages and liens on tangible assets of
consolidated companies and by pledges on securities and fixed
deposits (euro 251 million at December 31, 2005).
Net borrowings, as defined in the "Financial Review" in
the "Report of the Directors", consist of the
following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Current |
Non-current |
Total |
Current |
Non-current |
Total |
|||||||
A. Cash | 1,211 | 1,211 | 3,745 | 3,745 | |||||||||
B. Cash equivalent | 122 | 122 | 240 | 240 | |||||||||
C. Available for sale securities and held-to-maturity securities | 903 | 28 | 931 | 552 | 552 | ||||||||
D. Liquidity (A+B+C) | 2,236 | 28 | 2,264 | 4,537 | 4,537 | ||||||||
E. Financial Receivables | 12 | 247 | 259 | 143 | 252 | 395 | |||||||
F. Short-term financial liabilities towards banks | 3,894 | 3,894 | 3,178 | 3,178 | |||||||||
G. Long-term financial liabilities towards banks | 296 | 1,926 | 2,222 | 131 | 2,180 | 2,311 | |||||||
H. Bonds | 391 | 4,948 | 5,339 | 685 | 4,412 | 5,097 | |||||||
I. Short-term financial liabilities towards related parties | 222 | 222 | 92 | 92 | |||||||||
L. Long-term financial liabilities towards related parties | 18 | 18 | 16 | 16 | |||||||||
M. Other short-term financial liabilities | 496 | 496 | 130 | 130 | |||||||||
N. Other long-term financial liabilities | 46 | 761 | 807 | 74 | 801 | 875 | |||||||
O. Total borrowings (F+G+H+I+L+M+N) | 5,345 | 7,653 | 12,998 | 4,290 | 7,409 | 11,699 | |||||||
P. Net borrowings (O-D-E) | 3,097 | 7,378 | 10,475 | (390 | ) | 7,157 | 6,767 | ||||||
168
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Available for sale securities and held-to-maturity securities
of euro 552 million (euro 931 million at December 31, 2005) are
made for non-operating purposes. The item does not include
available for sale securities and held-to-maturity securities
made for operating purposes of euro 441 million (euro 486 million
at December 31, 2005) and primarily concern securities for
covering technical reserves of Padana Assicurazioni SpA for euro
417 million (euro 453 million at December 31, 2005).
Financial receivables of euro 395 million (euro 259 million at
December 31, 2005) are made for non-operating purposes. The item
does not include financial receivables made for operating
purposes of euro 246 million (euro 480 million at December 31,
2005), of which euro 241 million (euro 475 million at December
31, 2005) given to consolidated subsidiaries, joint ventures and
affiliates primarily for the completion of industrial plans. Non
current financial receivables of euro 252 million (euro 247
million at December 31, 2005) concern for euro 246 million a
fixed deposit held by Eni Lasmo Plc as a guarantee on a debt
issue (euro 241 million at December 31, 2005).
20 Provisions for contingencies
Provisions for contingencies of euro 8,614 million (euro 7,679
million at December 31, 2005) consist of the following:
(million euro) | Value at Dec. 31, 2005 |
Additions |
Deductions |
Other changes |
Value at Dec. 31, 2006 |
|||||
Provisions for site restoration and abandonment | 2,648 | 1,345 | (188 | ) | (81 | ) | 3,724 | |||||
Provisions for environmental risks | 2,103 | 272 | (430 | ) | (40 | ) | 1,905 | |||||
Provisions for contract penalties and disputes | 534 | 174 | (62 | ) | 8 | 654 | ||||||
Loss adjustments and actuarial provisions for Enis insurance companies | 707 | 8 | (127 | ) | (23 | ) | 565 | |||||
Provisions for taxes | 309 | 48 | (98 | ) | (38 | ) | 221 | |||||
Provisions for losses related to investments | 85 | 65 | (9 | ) | 43 | 184 | ||||||
Provisions for revision of selling prices | 321 | 104 | (253 | ) | 172 | |||||||
Provisions for restructuring or decommissioning | 195 | 35 | (73 | ) | 157 | |||||||
Provisions for OIL insurance | 127 | (19 | ) | 108 | ||||||||
Provisions for onerous contracts | 80 | 55 | (35 | ) | 100 | |||||||
Provisions for promotions and gifts | 52 | 44 | (46 | ) | 50 | |||||||
Other (*) | 518 | 518 | (177 | ) | (85 | ) | 774 | |||||
7,679 | 2,668 | (1,517 | ) | (216 | ) | 8,614 | ||||||
(*) | Each individual amount included herein does not exceed euro 50 million. |
Provisions for site restoration and abandonment of euro 3,724
million represent primarily the estimated costs for
well-plugging, abandonment and site restoration (euro 3,664
million). The increase of euro 1,345 million includes amounts
recorded on initial recognition and changes to the estimates of
dismantling and restoration of sites recognized as a balancing
entry to the asset to which they refer (euro 1,240 million) and
financial expense due to the passage of time charged to the
profit and loss account (euro 105 million). The discount rates
used range between 4.0% and 5.9%. Other changes of euro 81
million include exchange rate differences on the translation of
financial statements prepared in currencies other than the euro
for euro 102 million.
Provisions for environmental risks of euro 1,905 million
represent, primarily, the estimated costs of remediation in
accordance with existing laws and regulations, of active
production facilities for Syndial SpA (euro 1,295 million), the
Refining & Marketing segment (euro 346 million), the
Corporate and financial companies segment, relating to guarantees
issued in relation to properties sold (euro 117 million) and the
Gas & Power segment (euro 78 million). Provisions in 2006 of
euro 272 million primarily related to Syndial SpA (euro 125
million) and the Refining & Marketing segment (euro 79
million) and include additions due to the passage of time for
euro 8 million. Deductions of euro 430 million primarily concern
Syndial SpA (euro 225 million) and the Refining & Marketing
segment (euro 146 million) and include deductions not
corresponding to cash expenditures for euro 16 million.
Provisions for contract penalties and disputes of euro 654
million primarily include charges expected on contract penalties
and general disputes. These provisions are stated on the basis of
Enis best estimate of the expected probable liability.
Provisions in 2006 for euro 174 million primarily related to
Syndial SpA (euro 80 million) and the Gas & Power segment
(euro 63 million). Deductions of euro 62 million include
deductions not corresponding to cash expenditures for euro 25
million.
169
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Loss adjustments and actuarial provisions for Enis
insurance companies of euro 565 million represent the liabilities
accrued for claims on insurance policies underwritten by Padana
Assicurazioni SpA. Deductions of euro 127 million concern
deductions not corresponding to cash expenditures as regards to
the reported accidents.
Provisions for taxes of euro 221 million primarily include
charges for unsettled tax claims related to uncertain
applications of the tax regulation for foreign companies of the
Exploration & Production segment (euro 176 million). The
decrease of euro 98 million concerns deductions not corresponding
to cash expenditures for euro 32 million. Other changes of euro
38 million include the exchange rate differences on the
translation of financial statements prepared in currencies other
than the euro for euro 25 million.
Provisions for losses on investments of euro 184 million
represent losses incurred to date in excess of the carrying value
of investments (see Note 11 - Investments).
Provisions for the revision of selling prices of euro 172 million
primarily concern the provision for the estimated adverse impact
of the application of Resolution No. 248/2004
of the Italian Authority for Electricity and Gas affecting the
parameters for upgrading the raw material component in price
formulas for end users (euro 139 million). Deductions of euro 253
million concern deductions not corresponding to cash expenditures
for euro 141 million primarily related to the adoption of the new
tariffs regime introduced by Resolution
No.134/2006 of the Italian Authority for Electricity and
Gas (euro 139 million).
Provisions for restructuring or decommissioning of production
facilities of euro 157 million mainly represent the estimated
costs related to divestments and facilities shutdown
in the Refining & Marketing segment (euro 124
million). Deductions of euro 73 million concern deductions not
corresponding to cash expenditures for euro 17 million.
Provisions for OIL insurance of euro 108 million include the
provisions related to the increase in charges to be paid within
the next 5 years, due by Eni for its participation in the mutual
insurance of Oil Insurance Ltd, following the increased number of
accidents that occurred in 2004 and 2005.
Provisions for onerous contracts of euro 100 million essentially
concern Syndial SpA and relate to contracts for which the
termination or execution costs exceed the benefits arising from
that contract.
Provisions for promotions and gifts of
euro 50 million concern the provisions of the Refining &
Marketing segment in relation to promotions directed towards the
attainment of an increase on sales volumes on the Agip branded
network and intended for service station
managers, for truckers and motorists that perform the fuel
fill-up at the "Isole Fai da Te".
Deductions of the other provisions for euro 177 million include
deductions not corresponding to cash expenditures for euro 85
million, of wich euro 20 million concern provisions for long term
construction contracts.
21 Provisions for employee benefits
Provisions for employee benefits of euro 1,071 million (euro
1,031 million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
TFR | 577 | 608 | ||
Pensions plans | 318 | 268 | ||
Supplementary medical reserve for Eni managers (FISDE) | 99 | 100 | ||
Other benefits | 37 | 95 | ||
1,031 | 1,071 | |||
Provisions for indemnities upon termination of employment
essentially concern the provisions accrued by Italian companies
for employee termination indemnities ("TFR"), regulated
by Article 2120 of the Italian Civil Code. The indemnity is paid
out as capital and is determined by the total of the provisions
set aside, calculated in consideration of the employees
compensation during the service period, and revalued until
retirement. Provisions to TFR, considered for the determination
of liabilities and costs, are net of the amounts paid to pension
funds.
Effective from January 1, 2007 the Budget Law for 2007 and
related decrees introduce material changes to the TFR regulation;
these changes include the possibility for employees to choose the
allocation of their TFR entitlement between a pension fund or
having it remain in the company (in which case the company will
transfer the future TFR obligation to INPS, the Italian state
social security entity). At present there are uncertainties in
interpretation regarding the recent changes in regulations.
Furthermore, there is additional uncertainty arising from the
revised regulations in respect to actuarial calculations on
already accrued TFR provisions since it is currently not possible
to predict employees choices regarding their allocation of
the TFR entitlement (employees choice shall be made before
June 30, 2007). Given this level of uncertainty, there has been
no change made, which may result from the new regulations, to the
amount of the TFR obligation recorded as at December 31, 2006.
Pension funds concern defined benefit plans of foreign companies
located, primarily, in the United Kingdom, Nigeria and Germany.
Benefits consist of a return on capital determined on the basis
of the length of service and the compensation paid in the last
year of service or an average annual compensation paid in a
determined period preceding the retirement.
170
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The supplementary medical reserve for Eni managers (FISDE) is
calculated on the basis of the contributions paid by the company
for retired managers.
Other benefits primarily concern Jubilee awards and the deferred
monetary incentive plan. Jubilee awards are benefits due
following the attainment of a minimum period of service and, for
the Italian companies, consist of an in-kind remuneration.
Deferred monetary incentive plan reflects the estimate of the
variable compensation dependent on the Companys performance
that will be paid in 2009 to Eni managers who reach individual
defined objectives.
The value of employee benefits, estimated by applying actuarial
techniques, consists of the following:
Foreign pension plans | ||
(million euro) | TFR |
Gross liability |
Plan asset |
FISDE |
Other benefits |
Total |
||||||
2005 | ||||||||||||||||||
Current value of benefit liabilities and plan assets at beginning of year | 577 | 576 | (257 | ) | 106 | 32 | 1,034 | |||||||||||
Current cost | 59 | 18 | 2 | 3 | 82 | |||||||||||||
Interest cost | 25 | 30 | 5 | 1 | 61 | |||||||||||||
Expected return on plan assets | (16 | ) | (16 | ) | ||||||||||||||
Employees contributions | 1 | (46 | ) | (45 | ) | |||||||||||||
Actuarial gains/losses | 47 | 66 | (24 | ) | (11 | ) | 5 | 83 | ||||||||||
Benefits paid | (49 | ) | (19 | ) | 11 | (6 | ) | (4 | ) | (67 | ) | |||||||
Amendments | 3 | 3 | ||||||||||||||||
Curtailments or settlements | (6 | ) | (5 | ) | (11 | ) | ||||||||||||
Exchange rate differences and other changes | 87 | (27 | ) | 60 | ||||||||||||||
Current value of benefit liabilities and plan assets at end of year | 653 | 757 | (359 | ) | 96 | 37 | 1,184 | |||||||||||
2006 | ||||||||||||||||||
Current value of benefit liabilities and plan assets at beginning of year | 653 | 757 | (359 | ) | 96 | 37 | 1,184 | |||||||||||
Current cost | 99 | 18 | 2 | 48 | 167 | |||||||||||||
Interest cost | 22 | 28 | 3 | 6 | 59 | |||||||||||||
Expected return on plan assets | (24 | ) | (24 | ) | ||||||||||||||
Employees contributions | (3 | ) | (88 | ) | (91 | ) | ||||||||||||
Actuarial gains/losses | (67 | ) | (2 | ) | (3 | ) | (5 | ) | 6 | (71 | ) | |||||||
Benefits paid | (94 | ) | (16 | ) | 12 | (5 | ) | (2 | ) | (105 | ) | |||||||
Amendments | 2 | 2 | ||||||||||||||||
Curtailments and settlements | (7 | ) | 6 | (1 | ) | |||||||||||||
Exchange rate differences and other changes | 1 | (6 | ) | 16 | 11 | |||||||||||||
Current value of benefit liabilities and plan assets at end of year | 614 | 771 | (440 | ) | 91 | 95 | 1,131 | |||||||||||
Gross liability for employee benefits of foreign pension plans
of euro 771 million (euro 757 million at December 31, 2005)
includes liabilities of joint ventures operating in exploration
and production activities for euro 130 million and euro 112
million at December 31, 2005 and 2006, respectively; a receivable
was recorded against such liability.
Funds for other benefits of euro 95 million (euro 37 million at
December 31, 2005) concern primarily Jubilee awards for euro 44
million (euro 29 million at December 31, 2005) and the deferred
monetary incentive plan for euro 37 million.
171
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Changes in plan assets and benefit obligations related to provisions for employee benefits consist of the following:
TFR | Foreign pension plans | FISDE | Other benefits | |||||
(million euro) | Dec. 31, 2005 | Dec. 31, 2006 | Dec. 31, 2005 | Dec. 31, 2006 | Dec. 31, 2005 | Dec. 31, 2006 | Dec. 31, 2005 | Dec. 31, 2006 | ||||||||
Current value of benefit obligations with plan assets at end of year | 757 | 771 | ||||||||||||||||||
Current value of plan assets | (359 | ) | (440 | ) | ||||||||||||||||
Net current value of benefit obligations with plan assets | 398 | 331 | ||||||||||||||||||
Current value of benefit obligations without plan assets at end of year | 653 | 614 | 96 | 91 | 37 | 95 | ||||||||||||||
Actuarial gains/losses not recognized | (76 | ) | (6 | ) | (71 | ) | (63 | ) | 3 | 9 | ||||||||||
Past service cost not recognized | (9 | ) | ||||||||||||||||||
Net liabilities recognized in provisions for employee benefits | 577 | 608 | 318 | 268 | 99 | 100 | 37 | 95 | ||||||||||||
Costs for employee benefits recognized in the income statement consist of the following:
(million euro) | TFR |
Foreign pension plans |
FISDE |
Other benefits |
Total |
|||||
2005 | ||||||||||||
Current cost | 59 | 18 | 2 | 3 | 82 | |||||||
Interest cost | 25 | 30 | 5 | 1 | 61 | |||||||
Expected return on plan assets | (16 | ) | (16 | ) | ||||||||
Amortization of actuarial gains/losses | 6 | 6 | ||||||||||
Effect of curtailments and settlements | (6 | ) | (5 | ) | (11 | ) | ||||||
Other costs | 3 | 1 | 4 | |||||||||
78 | 30 | 7 | 11 | 126 | ||||||||
2006 | ||||||||||||
Current cost | 99 | 18 | 2 | 48 | 167 | |||||||
Interest cost | 22 | 28 | 3 | 6 | 59 | |||||||
Expected return on plan assets | (24 | ) | (24 | ) | ||||||||
Amortization of actuarial gains/losses | 2 | 21 | 5 | 28 | ||||||||
Effect of curtailments and settlements | (1 | ) | (1 | ) | ||||||||
Other costs | 1 | 1 | ||||||||||
124 | 42 | 5 | 59 | 230 | ||||||||
172
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The main actuarial assumptions used in the evalution of benefit obligations at year end in the estimate of costs for employee benefits expected for 2007 consist of the following:
(%) | TFR |
Foreign pension plans |
FISDE |
Other benefits |
||||
2005 | ||||||||
Discount rate | 4.0 | 4.5-7.3 | 4.3 | 4.5-4.7 | ||||
Expected return rate on plan assets | 7.2 | |||||||
Rate of compensation increase | 2.7-4.5 | 3.0-5.8 | 3.5 | |||||
Rate of price inflation | 2.0 | 2.0-4.9 | 2.0 | 2.3-2.4 | ||||
2006 | ||||||||
Discount rate | 4.3 | 3.0-13.0 | 4.5 | 4.0-4.3 | ||||
Expected return rate on plan assets | 3.5-13.0 | |||||||
Rate of compensation increase | 2.7-4.0 | 2.0-12.0 | 2.7-4.5 | |||||
Rate of price inflation | 2.0 | 1.0-10.0 | 2.0 | 2.0-2.5 | ||||
With regards to Italian plans, demographic tables prepared by Ragioneria Generale dello Stato (RG48) were used. The expected return rate of plan assets has been determined with reference to the ratings expressed in regulated markets.
Foreign plan assets consist of the following:
(%) | Plan assets |
Expected return |
||
Dec. 31, 2006 |
Securities | 18.6 | 5.4-7.6 | ||
Bonds | 60.3 | 2.6-9.4 | ||
Real estate | 0.9 | 5-13 | ||
Other | 20.2 | 2-13 | ||
Total | 100.0 | |||
The effective return of plan assets amounts to euro 27 million
(euro 40 million at December 31, 2005).
With reference to medical plans, the effects deriving from a 1%
change in the actuarial assumptions of the costs concerning
medical consist of the following:
(million euro) | 1% Increase |
1% Decrease |
||
Impact on the current costs and interest costs | 6 | 4 | ||
Impact on net benefit obligation | 103 | 83 | ||
The amount of the contributions expected to be paid to the
defined contribution plans for 2007 amounts to euro 68 million.
The analysis of the changes in net actuarial liabilities for the
previous fiscal year deriving from the non-correspondence of the
actuarial assumptions adopted in the previous fiscal year with
the effective values recorded at the closing of the current
fiscal year consists of the following:
(million euro) | TFR |
Foreign pension plans |
FISDE |
Other benefits |
||||
2005 | ||||||||||
Impact on net benefit obligation | 47 | 59 | (11 | ) | ||||||
Impact on plan assets | 24 | |||||||||
2006 | ||||||||||
Impact on net benefit obligation | (19 | ) | 13 | (4 | ) | 4 | ||||
Impact on plan assets | 3 | |||||||||
173
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 Deferred tax liabilities
Deferred tax liabilities of euro 5,852 million (euro 4,890
million at December 31, 2005) are net of deferred tax assets for
which Eni possesses the legal right of offset.
(million euro) | Value at Dec. 31, 2005 |
Additions |
Deductions |
Exchange rate differences |
Other changes |
Value at Dec. 31, 2006 |
||||||
4,890 |
2,231 |
(676 |
) | (379 |
) | (214 |
) | 5,852 |
Other changes of euro 214 million include the set-off, for
each company, of deferred tax assets and deferred tax liabilities
for euro 318 million.
Deferred tax liabilities consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Deferred income taxes | 8,237 |
9,880 |
||||
Deferred income taxes available for offset | (3,347 |
) | (4,028 |
) | ||
4,890 |
5,852 |
|||||
Deferred income taxes not available for offset | (1,861 |
) | (1,725 |
) | ||
Net deferred tax liabilities | 3,029 |
4,127 |
The most significant temporary differences giving rise to net deferred tax liabilities are the following:
(million euro) | Value at Dec. 31, 2005 |
Additions |
Deductions |
Exchange rate differences |
Other changes |
Value at Dec. 31, 2006 |
||||||
Deferred tax liabilities: | ||||||||||||||||||
- accelerated tax depreciation | 5,855 | 1,412 | (414 | ) | (330 | ) | 328 | 6,851 | ||||||||||
- application of the weighted average cost method in evaluation of inventories | 649 | 28 | (108 | ) | 80 | 649 | ||||||||||||
- site restoration and abandonment (tangible and intagible assets) | 349 | 130 | (36 | ) | (18 | ) | 258 | 683 | ||||||||||
- capitalized interest expense | 245 | 2 | (20 | ) | 5 | 232 | ||||||||||||
- other | 1,139 | 659 | (98 | ) | (40 | ) | (195 | ) | 1,465 | |||||||||
8,237 | 2,231 | (676 | ) | (388 | ) | 476 | 9,880 | |||||||||||
Deferred tax assets: | ||||||||||||||||||
- assets revaluation as per Law No. 342/2000 and No. 448/2001 | (1,096 | ) | 78 | 1 | (1,017 | ) | ||||||||||||
- site restoration and abandonment (provisions for contingencies) | (1,038 | ) | (190 | ) | 38 | 41 | (347 | ) | (1,496 | ) | ||||||||
- depreciation and amortization | (868 | ) | (125 | ) | 201 | 85 | (37 | ) | (744 | ) | ||||||||
- accruals for impairment losses and provisions for contingencies | (839 | ) | (329 | ) | 244 | 1 | (77 | ) | (1,000 | ) | ||||||||
- tax loss carry forwards | (160 | ) | (10 | ) | 96 | 10 | (19 | ) | (83 | ) | ||||||||
- other | (1,207 | ) | (645 | ) | 379 | 35 | 25 | (1,413 | ) | |||||||||
(5,208 | ) | (1,299 | ) | 1,036 | 172 | (454 | ) | (5,753 | ) | |||||||||
Net deferred tax liabilities | 3,029 | 932 | 360 | (216 | ) | 22 | 4,127 | |||||||||||
Deferred tax assets are recognized to the extent that expected
future fiscal profits are considered sufficient for the
utilization of these assets.
Under Italian fiscal laws, tax losses can be carried forward in
the five subsequent periods, excepting losses suffered in the
first three periods of life of the company that they can be
carried forward without limit. Tax losses of foreign companies
can be carried forward on average for more than five periods and
for a considerable part they can be carried forward without
limit. Tax recovery corresponds to a tax rate of 33% for Italian
companies and to an average tax rate of 29.8% for foreign
companies.
174
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Tax losses amount to euro 1,579 million and may be used within the following periods:
(million euro) | Italian |
Foreign |
||
2007 | 4 | 17 | ||
2008 | 14 | 19 | ||
2009 | 13 | 13 | ||
2010 | 15 | |||
2011 | 37 | |||
after 2011 | 53 | |||
without limit | 13 | 1,381 | ||
44 | 1,535 | |||
Tax losses for which utilization is expected amount to euro 278 million and essentially concern foreign companies (euro 252 million); the related deferred tax assets amount to euro 83 million and concern for euro 75 million foreign companies. No deferred tax liabilities have been recognized in relation to the reserves of consolidated subsidiaries because such reserves are not expected to be distributed (euro 160 million).
23 Other non-current liabilities
Other non-current liabilities of euro 418 million (euro 897
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Payables related to capital expenditures | 597 | 26 | ||||
Other payables | 170 | 207 | ||||
Other liabilities | 130 | 185 | ||||
897 | 418 | |||||
24 Shareholders equity
Minority interest
Minority interest in net profit and shareholders
equity relate to the following consolidated subsidiaries:
(million euro) | Net profit |
Shareholders equity |
||
2005 |
2006 |
Dec. 31, 2005 |
Dec. 31, 2006 |
|||||
Snam Rete Gas SpA | 321 | 287 | 1,158 | 1,004 | ||||||||
Saipem SpA | 115 | 303 | 915 | 879 | ||||||||
Tigáz Tiszántúli Gázszolgáltató Részvénytársaság | 6 | 82 | 79 | |||||||||
Others | 17 | 16 | 194 | 208 | ||||||||
459 | 606 | 2,349 | 2,170 | |||||||||
175
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Eni shareholders equity
(million euro) | Value at |
Value at |
||
Share capital | 4,005 | 4,005 | ||||
Legal reserve | 959 | 959 | ||||
Reserve for treasury shares | 5,345 | 7,262 | ||||
Treasury shares | (4,216 | ) | (5,374 | ) |
Cumulative translation adjustment reserve | 941 | (398 | ) |
Other reserves | 5,351 | 400 | ||||
Retained earnings | 17,381 | 25,168 | ||||
Net profit for the period | 8,788 | 9,217 | ||||
Interim dividend | (1,686 | ) | (2,210 | ) | ||
36,868 | 39,029 | |||||
Share capital
At December 31, 2006 Eni SpA had 4,005,358,876 shares
(nominal value euro 1 each) fully paid (the same amount as of
December 31, 2005).
On May 25, 2006 Enis Shareholders Meeting decided a
dividend distribution of euro 0.65 per share, with the exclusion
of treasury shares held at the ex-dividend date, in full
settlement of the 2005 dividend of euro 0.45 per share. The
balance was made available for payment on June 22, 2006 and the
ex-dividend date was June 19, 2006.
Legal reserve
The legal reserve of Eni SpA represents earnings
restricted from the payment of dividends pursuant to Article 2430
of the Italian Civil Code.
Cumulative translation exchange differences reserve
The cumulative translation adjustment reserve represents
exchange differences due to the translation of financial
statements prepared in currencies other than the euro.
Reserve for treasury shares
The reserve for treasury shares represents the reserve
destined to purchase shares in accordance with the decisions of
Enis Shareholders Meetings. The amount of euro 7,262
million (euro 5,345 million at December 31, 2005) includes
treasury shares purchased. The increase of euro 1,917 million
primarily concerns the reclassification of euro 2,000 million
following Enis Shareholders Meeting decision of May 25,
2006 and, as a decrease, the sale and grant of treasury shares to
Group managers following stock option and stock grant plans for
euro 85 million.
Treasury shares purchased
Treasury shares purchased amount to euro 5,374 million (euro
4,216 million at December 31, 2005) and consist of 324,959,866
ordinary shares at a nominal value of euro 1 owned by Eni SpA
(278,013,975 ordinary shares at a nominal value of euro 1 euro at
December 31, 2005). Treasury shares of euro 839 million (euro 237
million at December 31, 2005), are represented by 40,114,000
shares (17,428,300 shares at December 31, 2005) and are destined
to the 2002-2005 and 2006-2008 stock option plans (38,240,400
shares) and the 2003-2005 stock grant plan (1,873,600 shares).
176
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The increase of 22,685,700 shares consists of the following:
Stock option |
Stock grant |
Total |
||||
Number of shares at December 31, 2005 | 14,004,500 | 3,423,800 | 17,428,300 | ||||||
- rights granted for 2006-2008 stock option plan | 30,000,000 | 30,000,000 | |||||||
- rights not granted for 2003-2005 stock grant plans and 2002-2005 stock option plan | (624,900 | ) | (296,600 | ) | (921,500 | ) | |||
- rights exercised | (4,943,200 | ) | (1,236,400 | ) | (6,179,600 | ) | |||
- rights cancelled | (196,000 | ) | (17,200 | ) | (213,200 | ) | |||
Number of shares at December 31, 2006 | 38,240,400 | 1,873,600 | 40,114,000 | ||||||
At December 31, 2006, options and grants outstanding were 15,290,400 shares and 1,873,600 shares, respectively. Options refer to the 2002 stock plan for 238,000 shares with an exercise price of euro 15.216 per share, to the 2003 stock plan for 779,900 shares with an exercise price of euro 13.743 per share, to the 2004 stock plan for 3,108,500 shares with an exercise price of euro 16.576 euro per share, to the 2005 stock plan for 4,184,000 shares with an exercise price of euro 22.512 per share and to the 2006 stock plan for 6,980,000 shares with an weighted average exercise price of euro 23.119 per share.
Information about commitments related to stock grant and stock option plans is included in Note 27 - Operating expenses.
Other reserves
Other reserves of euro 400 million (euro 5,351 million
at December 31, 2005) refer to a reserve constituted following
the sale by Eni SpA of Snamprogetti SpA to Saipem Projects SpA
for euro 247 million, to Eni SpAs equity reserve for euro
146 million and for euro 7 million to the reserve for the
valuation at fair value of securities available for sale and cash
flow hedge derivatives. The decrease in other reserves
essentially refers to the reclassification of euro 4,951 million
from Eni's distributable reserve to retained earnings (euro 5,224
million).
The valuation at fair value of securities available for sale and cash flow hedge derivatives consists of the following:
Security available for sale | Cash flow hedge derivatives | Total | ||||
(million euro) | Gross Reserve | Deferred Tax liabilities | Net Reserve | Gross Reserve | Deferred Tax liabilities | Net Reserve | Gross Reserve | Deferred Tax liabilities | Net Reserve | |||||||||
Reserve as of January 1, 2005 | 19 | (6 | ) | 13 | 19 | (6 | ) | 13 | |||||||||||||||||||
Changes of the year | 8 | (2 | ) | 6 | 27 | (11 | ) | 16 | 35 | (13 | ) | 22 | |||||||||||||||
Reserve as of December 1, 2005 | 27 | (8 | ) | 19 | 27 | (11 | ) | 16 | 54 | (19 | ) | 35 | |||||||||||||||
Changes of the year | 2 | 2 | 1 | 1 | 3 | 3 | |||||||||||||||||||||
Amount recognized in the | |||||||||||||||||||||||||||
profit and loss account | (21 | ) | 6 | (15 | ) | (27 | ) | 11 | (16 | ) | (48 | ) | 17 | (31 | ) | ||||||||||||
Reserve as of December 31, 2006 | 8 | (2 | ) | 6 | 1 | 1 | 9 | (2 | ) | 7 | |||||||||||||||||
Interim Dividend
Interim dividend of euro 2,210 million concerns the
interim dividend for the year 2006 of euro 0.60 per share, as
decided by the Board of Directors in accordance with Article
2433-bis, paragraph 5 of the Italian Civil Code; the
dividend was made available for payment on October 26, 2006.
Distributable reserves
At December 31, 2006 Eni shareholders equity
included distributable reserves for approximately euro 32,000
million, a portion of which is subjected to taxation upon
distribution. Deferred tax liabilities have been recorded in
relation to the reserves expected to be distributed (euro 40
million).
177
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of statutory net profit and shareholders equity to consolidated net profit and shareholders equity
(million euro) | Net profit |
Shareholders equity |
||
2005 |
2006 |
Dec. 31, 2005 |
Dec. 31, 2006 |
|||||
As recorded in Eni SpAs Financial Statements (Italian GAAP) | 6,042 | 5,821 | 26,872 | 26,935 | ||||||||
Difference between the equity value and result of consolidated | ||||||||||||
companies and the equity value and result of consolidated | ||||||||||||
companies as accounted for in Eni SpA Financial Statements | 2,718 | 3,823 | 13,701 | 16,136 | ||||||||
Consolidation adjustments: | ||||||||||||
- difference between cost and underlying value of equity | (44 | ) | (52 | ) | 1,902 | 1,138 | ||||||
- elimination of tax adjustments and compliance with accounting policies | 863 | 627 | (1,528 | ) | (1,435 | ) | ||||||
- elimination of unrealized intercompany profits | (40 | ) | (237 | ) | (2,677 | ) | (2,907 | ) | ||||
- deferred taxation | (313 | ) | (195 | ) | 849 | 1,244 | ||||||
- other adjustments | 21 | 36 | 98 | 88 | ||||||||
9,247 | 9,823 | 39,217 | 41,199 | |||||||||
Minority interest | (459 | ) | (606 | ) | (2,349 | ) | (2,170 | ) | ||||
As recorded in Consolidated Financial Statements (IFRS) | 8,788 | 9,217 | 36,868 | 39,029 | ||||||||
178
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25 Guarantees, commitments and
risks
Guarantees
Guarantees of euro 14,384 million (euro 12,862 million at
December 31, 2005) consisted of the following:
Dec. 31, 2005 |
Dec. 31, 2006 |
|||
(million euro) |
Unsecured guarantees |
Other guarantees |
Secured guarantees |
Total |
Unsecured guarantees |
Other guarantees |
Secured guarantees |
Total |
||||||||
Consolidated companies | 5,839 | 5,839 | 6,539 | 6,539 | ||||||||||||
Unconsolidated subsidiaries | 4 | 203 | 207 | 3 | 294 | 297 | ||||||||||
Affiliated companies and Joint Ventures | 4,900 | 1,772 | 40 | 6,712 | 5,682 | 1,735 | 7,417 | |||||||||
Others | 64 | 40 | 104 | 79 | 52 | 131 | ||||||||||
4,968 | 7,854 | 40 | 12,862 | 5,764 | 8,620 | 14,384 | ||||||||||
Guarantees given on behalf of consolidated companies of euro
6,539 million (euro 5,839 million at December 31, 2005) consist
primarily of: (i) guarantees given to third parties relating to
bid bonds and performance bonds for euro 3,467 million (euro
3,057 million at December 31, 2005), of which euro 2,726 million
related to the Engineering & Construction segment (euro 2,397
million at December 31, 2005). The increase of euro 410 million
primarily concerns the increase in the order backlog and the
start of new works of the Engineering & Construction segment;
(ii) VAT recoverable from tax authorities for euro 1,393 million
(euro 1,386 million at December 31, 2005); (iii) insurance risk
for euro 246 million reinsured by Eni (euro 298 million at
December 31, 2005). At December 31, 2006 the underlying
commitment covered by such guarantees was euro 6,160 million
(euro 5,491 million at December 31, 2005).
Unsecured guarantees and other guarantees given on behalf of
unconsolidated subsidiaries of euro 297 million (euro 207 million
at December 31, 2005) consist of unsecured guarantees, letters of
patronage and other guarantees given to commissioning entities
relating to bid bonds and performance bonds for euro 288 million
(euro 165 million at December 31, 2005). At December 31, 2006,
the underlying commitment covered by such guarantees was euro 204
million (euro 145 million at December 31, 2005).
Unsecured guarantees, other guarantees and secured guarantees
given on behalf of joint ventures and affiliated companies of
euro 7,417 million (euro 6,712 million at December 31, 2005)
primarily concern: (i) a guarantee of euro 5,654 million (euro
4,894 million at December 31, 2005) given by Eni SpA to Treno
Alta Velocità - TAV - SpA for the proper and timely completion
of a project relating to the Milan-Bologna train link by the
Consorzio Eni per lAlta Velocità - Cepav Uno; consortium
members, excluding unconsolidated subsidiaries, gave Eni
liability of surety letters and bank guarantees amounting to 10%
of their respective portion of the work; (ii) unsecured
guarantees, letters of patronage and other guarantees given to
banks in relation to loans and lines of credit received for euro
1,214 million (euro 1,360 million at December 31, 2005), of which
euro 756 million related to a contract released by Snam SpA (now
merged into Eni SpA) on behalf of Blue Stream Pipeline Co BV (Eni
50%) to a consortium of international financing institutions
(euro 844 million at December 31, 2005). At December 31, 2006,
the underlying commitment covered by such guarantees was euro
2,470 million (euro 2,938 million at December 31, 2005).
Other guarantees given on behalf of third parties of euro 131
million (euro 104 million at December 31, 2005) consist primarily
of guarantees given by Eni SpA to banks and other financing
institutions in relation to loans and lines of credit for euro 87
million on behalf of minor investments or companies sold (euro 92
million at December 31, 2005). At December 31, 2006 the
underlying commitment covered by such guarantees was euro 121
million (euro 75 million at December 31, 2005).
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Commitments and contingencies
Commitments and contingencies of euro 1,545 million (euro 1,655
million at December 31, 2005) consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Commitments | ||||
Purchase of assets | 219 | 9 | ||
Other | 220 | 207 | ||
439 | 216 | |||
Risks | 1,216 | 1,329 | ||
1,655 | 1,545 | |||
Obligations for purchase and sales of assets of euro 9 million
decreased by euro 210 million. Such decrease was due to: (i) the
extinguishment of the placement on the market of securities
managed by Sofid Sim SpA. This company sold Italian Government
bonds to investors and simultaneously entered into interest rate
swaps with such investors wherein it received the rate of
interest on such Italian Government bonds and paid a floating
rate of interest linked to Euribor. Such investors could sell
their securities back to Sofid Sim SpA at any time at par value
plus related interest with the simultaneous cancellation of the
related swaps (euro 116 million). The operation ended on January
1, 2006 following the expiry of the government bonds; (ii) to the
acquisition from ESPI - Ente Siciliano per la Promozione
Industriale (in liquidation) of 50% of the capital share of
Siciliana Gas SpA and 1 share of Siciliana Gas Vendite SpA (euro
98 million).
Other commitments of euro 207 million (euro 220 million at
December 31, 2005) are essentially related to a memorandum of
intent signed with the Basilicata Region, whereby Eni has agreed
to invest, also on account of Shell Italia E&P SpA, euro 181
million in the future in connection with Enis development
plan of oil fields in Val dAgri (euro 193 million at
December 31, 2005).
Risks of euro 1,329 million (euro 1,216 million at December 31,
2005) primarily concern potential risks associated with the value
of assets of third parties under the custody of Eni for euro 918
million (euro 794 million at December 31, 2005) and contractual
assurances given to acquirors of certain investments and
businesses of Eni for euro 393 million (euro 402 million at
December 31, 2005).
Risk management
FOREWORD
The main risks identified and managed by Eni are the following:
(i) market risks deriving from the exposure to the fluctuations
of interest rates, exchange rates between the euro and the US
dollar and other currencies used by the company, as well as the
volatility of commodity prices;
(ii) the credit risk deriving from the possible default of a
counterparty;
(iii) the liquidity risk deriving from the risk that suitable
sources of funding for the Groups business activities may
not be available;
(iv) country risk in oil & gas activities;
(v) the operation risk deriving from the occurrence of accidents,
malfunctioning, failures with damage to persons and the
environment affecting operating and financial results.
MARKET RISK
Market risk is the possibility that changes in currency exchange
rates, interest rates or oil, natural gas and power prices will
adversely affect the value of the groups financial assets,
liabilities or expected future cash flows. Their management
follows a set of guidelines and procedures that concentrate the
treasury function in two captive finance companies operating in
the Italian and international financial markets. In particular,
the finance company operating on the domestic market (Enifin)
manages all the transactions concerning currencies and derivative
financial contracts. Commodity risk is managed by each business
unit while Enifin manages the negotiation of hedging derivatives.
Starting on January 1, 2007, this task is being performed by Eni
SpA following the incorporation of Enifin.
In order to minimize market risks related to changes in interest
rates and exchange rates and to manage exposure to commodity
prices fluctuations, Eni enters into various transactions using
derivative financial instruments (derivatives). Derivatives are
contracts whose value is derived from one or more underlying
financial instrument, index or price that are defined in the
contract. The group also trades derivatives in conjunction with
these risk management activities. Eni does not enter into
derivative transactions on a speculative basis.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The control framework defined by Eni s guidelines
prescribes that measurement and control of the market risk are to
be performed on the basis of maximum acceptable levels of risk
exposure defined in accordance with value-at-risk techniques.
These techniques make a statistical assessment of the market
risk, i.e., potential gain or loss in fair values.
Enis guidelines prescribe that Enis subsidiaries use
such market risk exposure policies as to minimize market risk.
Tolerable market risk exposure is set at the Group level within
the central finance department which pools all risk positions of
the Group. Calculation and measurement techniques followed by Eni
are in accordance with established banking standards (such
standards are established by the Basel Committee). However, the
tolerable level of risk adopted by Eni is more conservative than
the recommended one.
Enis guidelines prescribe that the exposure to risk from
fluctuations in commodity prices is to be managed in a way as to
maximize the value of the Group oil and gas production and sales
volumes and to pursue set objectives of industrial margins. Risk
exposure within trading activities is defined within maximum
levels of value-at-risk attributed at each business unit, with
the central function managing hedging request. Strategic risk
exposure is monitored in terms of value-at-risk, albeit being not
hedged in a systematic way.
EXCHANGE RATE RISK
Exchange rate risk derives from the fact that Enis
operations are conducted in currencies other than the euro (in
particular the US dollar) and with the time lag existing between
the recording of costs and revenues denominated in currencies
other than the functional currency and the actual time of the
relevant monetary transaction (transaction exchange rate risk).
Generally speaking, an appreciation of the US dollar versus the
euro generally has a positive impact on Enis results of
operations, and vice versa. Effective management of exchange rate
risk is performed at the Group level, within the central finance
department which matches contrarian positions of the Group
operating subsidiaries and hedges net positions using derivatives
(such as currency swaps, forwards and options). Such derivatives
are recognized at fair value on the basis of market prices
provided from specialized sources. Value-at-risk deriving from
currency exposure is measured daily on the basis of a
variance/covariance model, with a 99% confidence level and a
20-day holding period. The transaction currency risk on certain
strategic holdings is deemed to be immaterial.
INTEREST RATE RISK
Variations in interest rates affect the market value of financial
assets and liabilities of the company and the level of financial
changes. Eni uses interest rate derivatives; such interest rate
swaps and interest cross currency swaps are used to effectively
manage the balance between fixed and floating rate debt. Such
derivatives are recognized at fair value on the basis of market
prices provided from specialized sources. Value-at-risk deriving
from interest rate exposure is measured daily on the basis of a
variance/covariance model, with a 99% confidence level and a
20-day holding period.
COMMODITY RISK
Enis results of operations are affected by changes in the
prices of commodities. A decrease in oil, gas and product prices
generally has a negative impact on Enis results of
operations, and vice versa. In order to hedge commodity risk, Eni
uses derivatives traded on the organized markets of ICE and NYMEX
(futures and options) and derivatives traded over-the-counter
(swaps, forwards and contracts for differences, with the
underlying commodities being crude oil, refined products or
electricity). Such derivatives are recognized at fair value on
the basis of market prices provided from specialized sources or
absent market prices, on the basis of estimates provided by
brokers or suitable evaluation techniques. Value-at-risk deriving
from commodity exposure is measured daily on the basis of a
historical simulation technique, with a 95% confidence level and
a one-day holding period.
CREDIT RISK
Credit risk is the potential exposure of the Group to loss in the
event of non-performance by a counterparty. The credit risk
arising from the Groups normal commercial operations is
controlled by individual operating units within Group-approved
guidelines. The monitoring activity of credit risk exposure is
performed at the Group level according to set guidelines and
measurement techniques. In particular credit risk exposure to
large clients and multi-business clients is monitored at the
Group level on the basis of score cards quantifying risk levels.
Enis guidelines define the characteristics of persons
eligible to be counterparty of Eni in derivative contracts and
cash management transactions. Eni constantly updates a list of
eligible persons that includes highly credit-rated institutions.
Eni has not experienced material non-performance by any
counterparty. As of December 31, 2005 and December 31, 2006, Eni
has no significant concentrations at credit risk.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
LIQUIDITY RISK
Liquidity risk is the risk that suitable sources of funding for
the Groups business activities may not be available. The
group has long-term debt ratings of AA and Aa2, assigned
respectively by Standard & Poors and Moodys. The
group has access to a wide range of funding at competitive rates
through capital markets and banks and coordinates relationships
with banks, borrowing requirements, foreign exchange requirements
and cash management centrally.
At present, the Group believes it has access to sufficient
funding and has also both committed and uncommitted borrowing
facilities to meet currently foreseeable borrowing requirements.
Effective management of the liquidity risk has the objective of
ensuring the availability of adequate funding to meet short term
requirements and due obligations as well as the objective of
ensuring a sufficient level of flexibility in order to fund the
development plans of the Groups businesses. This implies
the adoption of a strategy to pursue an adequate structure of
borrowing facilities (particularly the availability of committed
borrowings facilities) and the maintenance of cash reserves.
COUNTRY RISK
Substantial portions of Enis hydrocarbons reserves are
located in countries outside the EU and North America, certain of
which may be politically or economically less stable than EU or
North American countries. At December 31, 2006, approximately 70%
of Enis proved hydrocarbons reserves were located in such
countries. Similarly, a substantial portion of Enis natural
gas supplies comes from countries outside the EU and North
America. In 2006, approximately 60% of Enis domestic supply
of natural gas came from such countries. Negative developments in
the economic and political framework of these countries can
temporarily or permanently compromise Enis ability to
operate economically and to gain access to oil and natural gas
reserves.
Eni constantly monitors the political, social and economic risk
of the approximately 60 countries where it has invested or
intends to invest with special attention to the evaluation of
upstream investments. Country risks are mitigated by means of
appropriate guidelines for risk management that Eni defined in
its procedure for project risk assessment and management.
OPERATION RISK
The broad scope of Enis activities involves a wide range of
operational risks such as those of explosion, fire or leakage of
toxic products, and production of non biodegradable waste. All
these events could possibly damage or even destroy plants,
facilities, equipment and other property, cause injury or even
death to persons or cause environmental damage.
Eni adopted the most stringent guidelines for the evaluation and
management of health, safety and environmental (HSE) risks, with
the objective of protecting Enis employees, contractors and
clients, the populations involved in its activity, the
environment and being in compliance with local and international
rules and regulations. Enis guidelines prescribe the
adoption of international best practices in setting internal
principles, standards and solutions. An ongoing process for
identifying, evaluating and managing HSE risks is at the heart of
HSE operations in each phase of the business activity and is
performed through the adoption of procedures tailored to the
peculiarities of each business and industrial site.
HSE risks are effectively managed through an integrated
management system designed along the principles set in Enis
Model of HSE operations. This is a general procedure to be
applied in all its operating sites, based on an annual cycle of
planning, implementation, control, review of results and
definition of new objectives. The model is directed towards the
prevention of risks and a systematic monitoring and control of
HSE performance in a continuous improvement cycle that is also
subject to audits by internal and independent experts. Any
environmental emergency is managed by business units locally with
their own organization under preset reaction plans to foreseeable
events aimed at limiting damage and at activating adequate
responses.
Eni has two emergency rooms (in Milan and Rome) furnished with
real time monitoring systems for the collection of data on
georeferenced maps for all Eni sites and logistics worldwide.
Meteorological equipment is in place to assess dimension,
temporal development and other consequences of certain
catastrophic events and to enable a real-time planning of
first-aid interventions to help mitigate consequences. In
addition to its own emergency teams, Eni entered international
agreements in order to maximize its ability to react in all its
operating sites.
Legal Proceedings
Eni is a party to a number of civil actions and administrative
proceedings arising in the ordinary course of business. Based on
information available to date, and taking the existing risk
provisions into account, Eni believes that the foregoing will not
have an adverse effect on Enis Consolidated Financial
Statements.
The following is a description of the most significant
proceedings currently pending; unless otherwise indicated below,
no provisions have been made for these legal proceedings as Eni
believes that negative outcomes are not probable or because the
amount of the provision can not be estimated reliably.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Environment
1.1 Criminal Proceedings
ENI SPA
(i) | Subsidence. In relation to the investigations concerning a subsidence phenomenon allegedly caused by hydrocarbon exploration and extraction activities, following the decision of the Court of Rovigo, the Nucleo Operativo Ecologico dei Carabinieri of Venice placed under preliminary seizure the Naomi/Pandora field and producing platform in 2002 and the Dosso degli Angeli field in 2004. Eni believes it has always acted in full compliance with existing laws under the required authorizations. Taking into account the observations of the consultants of the Court of Rovigo on which the public prosecutor based his case, Eni constituted an independent and interdisciplinary scientific commission, composed of prominent and highly qualified international experts of subsidence caused by hydrocarbon exploration and extraction activities, with the aim of verifying the size and effects and any appropriate actions to reduce or to neutralize any subsidence phenomenon in the Ravenna and North Adriatic area both on land and in the sea. This commission produced a study which denies the possibility for any risk for human health and for damage to the environment. It also states that no example is known anywhere in the world of accidents that caused harm to the public safety caused by subsidence induced by hydrocarbon production. The study also shows that Eni employs the most advanced techniques for the monitoring, measuring and control of the soil. This proceeding is in the first level hearing stage. The Veneto Region, the Ente Parco della Provincia del Po, the Province of Ferrara, the Province of Venice, the City of Venice, the City of Comacchio, the Province of Rovigo and two private entities have been acting as plaintiffs. Eni was accepted as a defendant in order to claim its own civil responsibilities. Parties are awaiting a decision from the Italian Supreme Court as to whether this proceeding has to take place before the Court of Rovigo or the Court of Adria. | |
(ii) | Alleged damage. In 2002, the public prosecutor of Gela started a criminal investigation in order to ascertain alleged damage caused by emissions of the Gela plant, owned by Polimeri Europa SpA, Syndial SpA (former EniChem SpA) and Raffineria di Gela SpA. | |
(iii) | Negligent fire in the refinery of Gela. In June 2002, in connection with a fire at the refinery of Gela, a criminal investigation began concerning negligent fire, environmental crimes and crimes against natural beauty. | |
(iv) | Investigation of the quality of ground water in the area of the refinery of Gela. In 2002, the public prosecutor of Gela started a criminal investigation concerning the refinery of Gela to ascertain the quality of ground water in the area of the refinery. Eni is charged of having breached environmental rules concerning the pollution of water and soil and of illegal disposal of liquid and solid waste materials. | |
(v) | Intentional poisoning (Priolo). In March 2002, the public prosecutor of Siracusa started an investigation concerning the activity of the refinery of Priolo in order to ascertain whether infiltrations of refinery products into the deep water-bearing stratum used for human consumption purposes in the Priolo area had occurred. The Court entrusted a company specialized in such field with the task of verifying the cause, origin and extension of the alleged infiltration. For protective purposes, remedial actions have been taken in order to: (i) create safety measures and clean-up of the polluted area; (ii) reallocate wells for drinking water in an area farther from and higher than the industrial site; and (iii) install a purification system for drinkable water. These actions are moving towards completion. | |
(vi) | Negligent fire (Priolo). The public prosecutor of Siracusa started an investigation against certain Eni managers who were previously in charge of conducting operations at the Priolo refinery (Eni divested this asset in 2002) in order to ascertain whether they acted with negligence in connection with a fire that occurred at the Priolo plants on April 30 and May 1-2, 2006. Preliminary investigations have almost been completed. |
ENIPOWER SPA
(i) | Unauthorized waste management activities. In 2004 the public prosecutor of Rovigo started an investigation for alleged crimes related to unauthorized waste management activities in Loreo relating to the samples of soil used during the construction of the new EniPower power station in Mantova. The prosecutor requested the CEO of EniPower and the managing director of the Mantova plant at the time of the alleged crime to stand trial. | |
(ii) | Air emissions. The Prosecutor of Mantova started an investigation against two managers of the Mantova plant in connection with air emissions by the new power plant. |
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
POLIMERI EUROPA SPA
Violation of environmental regulations
on waste management. Before the Court of Gela a
criminal action took place relating to the alleged violation of
environmental regulations on waste management concerning the ACN
plant and the disposal of FOK residue deriving from the steam
cracking process. Defendants were found guilty and a damage
payment in first instance to an environmental association acting
as plaintiff was required to be made. The amount of said damage
payment is immaterial. The sentence was passed to the Civil Court
for the quantification of any further damage and claim. Eni
appealed the Courts sentence.
RAFFINERIA DI GELA SPA
Soil and sea pollution. In
1999, the public prosecutor of Gela started an investigation in
order to ascertain alleged soil and sea pollution caused by the
discharge of pollutants by Enis Gela refinery. Three
environmental organizations are acting as plaintiffs and have
requested damage payment for euro 551 million.
With a decision of February 20, 2007, the Court of Gela dismissed
these allegations.
SYNDIAL SPA (FORMER ENICHEM SPA)
Criminal action started by the public
prosecutor of Brindisi. In 2000, the public
prosecutor of Brindisi started a criminal action against 68
persons who are employees or former employees of companies that
owned and managed plants for the manufacture of dichloroethane,
vinyl chloride monomer and vinyl polychloride from the early
1960s to date, some of which were managed by EniChem from 1983 to
1993. At the end of the preliminary investigation, the public
prosecutor asked for the dismissal of the case in respect of the
employees and the managers of EniChem. Plaintiffs presented
oppositions and the prosecutor confirmed his request for
dismissal of the case, rejecting such oppositions.
1.2 Civil and administrative proceedings
(i) | Pollution caused by the activity of the Mantova plant. In 1992, the Ministry of Environment summoned EniChem SpA and Montecatini SpA before the Court of Brescia. The Ministry requested, primarily, environmental remediation for the alleged pollution caused by the activity of the Mantova plant from 1976 until 1990, and provisionally, in case there was no possibility to remediate, the payment of environmental damages. EniChem acquired the Mantova plant in June 1989, as part of the Enimont deal. Parties agreed upon that Edison SpA would hold Eni harmless or pay compensatory damage for any damage caused to third parties by plant operations before Montedisons sale, even if damage would manifests itself later. Parties agreed on a settlement by which Edison quantified the damage to be paid that also covers Syndial. The proceeding continues for the settlement of alleged damage pertaining to the residual 1989-1990 period. | |
(ii) | Summon before the Court of Venice for environmental damages caused to the lagoon of Venice by the Porto Marghera plants. On December 13, 2002, EniChem SpA, jointly with Ambiente SpA (now merged into Syndial SpA) and European Vinyls Corporation Italia SpA, was summoned before the Court of Venice by the Province of Venice. The province requested compensation for environmental damages that were not quantified, caused to the lagoon of Venice by the Porto Marghera plants, which were already the subject of two previous criminal proceedings against employees and managers of the defendants. In a related action, European Vinyls Corporation Italia presented an action for recourse against EniChem and Ambiente. Parties are waiting for the decision on the instances of the preliminary investigation. | |
(iii) | Claim of
environmental damages, caused by industrial activities in
the area of Crotone, commenced by the President of the
Regional Council of Calabria. On April 14, 2003,
the President of the Regional Council of Calabria, as
Delegated Commissioner for Environmental Emergency in the
Calabria Region, started an action against EniChem SpA
related to environmental damages for approximately euro
129 million and damages for euro 250 million (plus
interest and compensation) in connection with loss of
income and damage to property allegedly caused by
Pertusola Sud SpA activities (merged into EniChem) in the
area of Crotone. In addition, the Province of Crotone is
acting as plaintiff, claiming environmental damages for
euro 300 million. The judge has yet to decide on the
legitimacy of the Delegated Commissioner for
Environmental Emergency in the Calabria Region to act on
behalf of the Calabria Region. On October 21, 2004,
Syndial was convened before the Court of Milan by the
Calabria Region which is seeking to obtain a condemnation
of Syndial for a damage payment, should the office of the
Delegated Commissioner for Environmental Emergency in the
Calabria Region cease during this proceeding. The
Calabria Region requested damage payment amounting to
euro 800 million as already requested by the Delegated
Commissioner for environmental emergency in the Calabria
Region in the proceeding started in 2003. This new
proceeding is in the preliminary investigation stage. On February 28, 2006, the Council of Ministers, Ministry for the Environment and Delegated Commissioner for environmental emergency in the Calabria Region represented by the State Lawyer requested Syndial to appear before the Court of Milan in order to obtain the ascertainment, quantification and payment of damage (in the form of land, air and water pollution and therefore of |
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the general condition of the population) caused by the operations of Pertusola Sud SpA in the Municipality of Crotone and in surrounding municipalities. The local authorities requested the ascertainment of Syndials responsibility as concerns expenses borne and to be borne for the cleanup and reclamation of sites, currently quantified at euro 129 million. This proceeding concerns the same matter and damage claim as the proceedings started by the Delegated Commissioner for environmental emergency in the Calabria Region and the Calabria Region against Syndial in 2003 and 2004, respectively. | ||
(iv) | Summon for the ascertainment of responsibility in the pollution of soil at Paderno Dugnano. In 2004, Sitindustrie SpA, which in 1996 purchased a plant in Paderno Dugnano from Enirisorse (now merged into Syndial SpA), summoned Syndial SpA before the Court of Milan, requesting to establish the Syndial SpAs responsibility in the alleged pollution of soil around the plant and to require it to pay environmental damage necessary for remediation. The Tribunal of Milan rejected the plaintiffs request with a sentence released on June 10, 2006. The deadline to appeal the Tribunal sentence is November 1, 2007. | |
(v) | Summon for the ascertainment of responsibility in the pollution of soil at Pieve Vergonte. In October 2004, Sitindustrie SpA commenced an analogous proceeding against Syndial concerning the plant for the manufacture of products in copper and copper alloy in Pieve Vergonte. | |
(vi) | Summon for
environmental damage caused by DDT pollution in Lake
Maggiore. A proceeding is pending before the
Court of Turin by which the Minister of the Environment
summoned Syndial SpA and requested environmental damage
for euro 2,396 million in relation to alleged DDT
pollution of Lake Maggiore caused by the Pieve Vergonte
plant. On March 1, 2006, the State Lawyer in an attempt
to settle the case proposed Syndial to pay 10% of this
claim corresponding to euro 239 million. This settlement
attempt failed. The Italian Ministry enacted a ministerial decree providing for the: (i) upgrading of a hydraulic barrier to protect the site; (ii) presentation of a project for the environmental remediation of Lake Maggiore. Syndial opposed this decree before an Administrative Court. |
|
(vii) | Action started by the Municipality of Carrara for the remediation and reestablishment of previous environmental conditions at the Avenza site and payment of the environmental damage. The Municipality of Carrara started an action before the Court of Genova requesting Syndial SpA to remediate and reestablish previous environmental conditions at the Avenza site and the payment of certain environmental damage which cannot be cleaned up plus further damage of various genre (i.e., damage to the natural beauty of this site). This request is related to an accident that occurred in 1984, as a consequence of which EniChem Agricoltura SpA (later merged into Syndial SpA), at the time owner of the site, carried out safety and remediation works. The Ministry of the Environment joined the action and requested environmental damage payment from a minimum of euro 53.5 million to a maximum of euro 93.3 million to be broken down among the various companies that ran the plant in the past. In fact, Syndial summoned Rumianca SpA, Sir Finanziaria SpA and Sogemo SpA, who ran the plant in previous years, in order to be guaranteed. A report made by an independent expert charged by the Judge was filed with the Court. The findings of this report quantify the residual environmental damage at euro 15 million. A final decision on this proceeding is pending. | |
(viii) | Ministry for the Environment - Augusta harbor. The Italian Ministry for the Environment with variuos administrative acts ordered companies running plants in the petrochemical site of Priolo to perform safety and environmental remediation works in the Augusta harbor. Companies involved include Eni subsidiaries Polimeri Europa and Syndial. Pollution has been detected in this area primarily due to a high mercury concentration which is allegedly attributed to the industrial activity of the Priolo petrochemical site. Polimeri Europa opposed said administrative acts, objecting in particular the way by which remediation works have been designed and information on concentration of pollutants have been gathered. |
2. Other judicial or arbitration proceedings
SYNDIAL SPA (FORMER ENICHEM SPA)
(i) | Serfactoring: disposal of receivables. In 1991, Agrifactoring SpA commenced proceedings against Serfactoring SpA, a company 49% owned by Sofid SpA which is controlled by Eni SpA. The claim relates to an amount receivable of euro 182 million for fertilizer sales (plus interest and compensation for inflation), originally owed by Federconsorzi to EniChem Agricoltura SpA (later Agricoltura SpA - in liquidation), and Terni Industrie Chimiche SpA (merged into Agricoltura SpA - in liquidation), that has been merged into EniChem SpA (now Syndial SpA). Such receivables were transferred by Agricoltura and Terni Industrie Chimiche to Serfactoring, which appointed Agrifactoring as its agent to collect payments. Agrifactoring guaranteed to pay the amount of such receivables to Serfactoring, regardless of whether or not it received payment on the due date. Following payment by Agrifactoring to Serfactoring, Agrifactoring was placed in liquidation and the liquidator of Agrifactoring commenced proceedings in 1991 against Serfactoring to recover such payments (equal to euro 182 million) made to Serfactoring based on the claim that the foregoing guarantee became invalid when Federconsorzi was itself placed in |
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liquidation. Agricoltura and Terni Industrie Chimiche brought counterclaims against Agrifactoring (in liquidation) for damages amounting to euro 97 million relating to acts carried out by Agrifactoring SpA as agent. The amount of these counterclaims has subsequently been reduced to euro 46 million following partial payment of the original receivables by the liquidator of Federconsorzi and various setoffs. These proceedings, which have all been joined, were decided with a partial judgment, deposited on February 24, 2004; the request of Agrifactoring has been rejected and the company has been ordered to pay the sum requested by Serfactoring and damages in favor of Agricoltura, to be determined following the decision. Agrifactoring appealed this partial decision, requesting in particular the annulment of the first step judgment, the reimbursement of euro 180 million from Serfactoring along with the rejection of all its claims and the payment of all proceeding expenses. The hearing of the pending appeal was set for March 16, 2007 but was rescheduled to October 27, 2007 upon request of Agrifactoring. The judge of the Court of Rome, responsible for the determination of the amount of damages to be paid to Serfactoring and Agricoltura decided on May 18, 2005 to suspend this determination until the publication of the decision of the Court of Appeals. On argument, Serfactoring and Syndial requested that the Court of Cassation cancel the suspension and return the case to its original court. | ||
(ii) | Breach of a preliminary agreement for the purchase of an industrial area in Ravenna. In 2002, EniChem SpA was summoned by ICR Intermedi Chimici di Ravenna Srl before the Court of Milan in relation to a breach of a preliminary agreement for the purchase of an industrial area in Ravenna. ICR requested payment of compensatory damage for approximately euro 46 million, of which euro 3 million are compensatory damage and euro 43 million are for loss of income. With a sentence of October 11, 2005, the Court rejected ICRs request and ordered that ICR pay all proceeding expenses. ICR filed a claim against this decision, reducing its original claim to euro 8 million. A final decision is pending. |
3. Antitrust, EU Proceedings, Actions of the Italian Authority for Electricity and Gas and of Other Regulatory Authorities
3.1 Antitrust
ENI SPA
(i) | Abuse of dominant position of Snam verified by the AGCM. In March 1999, the Italian Antitrust Authority ("AGCM") concluded its investigation started in 1997 and: (i) verified that Snam SpA (merged in Eni SpA in 2002) abused its dominant position in the market for the transportation and primary distribution of natural gas relating to the transportation and distribution tariffs applied to third parties and the access of third parties to infrastructure; (ii) fined Snam euro 2 million; and (iii) ordered a review of these practices relating to such abuses. Snam believes it has complied with existing legislation and appealed the decision with the Regional Administrative Court of Lazio requesting its suspension. On May 26, 1999, stating that these decisions are against Law No. 9/1991 and the European Directive 98/30/EC, this Court granted the suspension of the decision. The Authority did not appeal this decision. The decision on the merit of this dispute is still pending before the same Administrative Court. | |
(ii) | Inquiry of the AGCM
on jet fuel. With a decision of December 9,
2004, the Italian Antitrust Authority commenced an
inquiry on the distribution of jet fuel against six oil
companies operating in Italy, including Eni and certain
entities jointly controlled by said oil companies engaged
in the storing and loading of jet fuel in the Rome
Fiumicino, Milan Linate and Milan Malpensa airports. The
inquiry intends to ascertain the existence of alleged
restrictions to competition as said oil companies would
agree to divide among themselves the supplies to
airlines. On December 22, 2005, the Authority notified
the preliminary results of the inquiry concerning: (i)
information flows to said oil companies related to the
functioning of the jointly-controlled entities engaging
in the storage and uploading of jet fuel; (ii) barriers
to the entrance of new competitors in the capital of such
entities operating the activities of storing and loading;
and (iii) the price of jet fuel which is deemed to be
higher than on other European markets. On June 20, 2006, the Authority notified the final decision of this proceeding to Eni and fined Eni by an amount of euro 117 million. The Authority fined other oil companies involved in this matter. Eni filed an opposition against this decision before an administrative court and suspended the payment of this fine. On January 29, 2007, the Regional Administrative Court of Lazio accepted only partially the opposition made by Eni and annulled part of the decision of the Authority. In particular, a measure providing for the involved oil companies to cease their joint participation in the capital of the entities operating the activities of storing and loading jet fuel was annulled. Eni accrued a provision with respect to this proceeding. |
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(iii) | Formal assessment started by the Commission of the European Communities for the evaluation of alleged participation to activities limiting competition in the field of paraffin. On April 28, 2005, the Commission of the European Communities started a formal assessment to evaluate the alleged participation of Eni and its subsidiaries to |
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activities limiting competition in the field of paraffin. The alleged violation of competition would have consisted in: (i) the determination of and increase in prices; (ii) the subdivision of customers; and (iii) exchange of trade secrets, such as production capacity and sales volumes. Subsequently, the Commission requested information on Enis activities in the field of paraffins and certain documentation acquired by the Commission during an inspection. Eni filed the requested information. | ||
(iv) | Notification to Eni Petroleum Co Inc of a subpoena by the Department of Justice of the United States of America - Antitrust Division and request of information and documents relating to activities in the field of wax and of a deposition. On April 28, 2005, the Department of Justice of the United States of America - Antitrust Division, notified Eni Petroleum Co Inc of a subpoena requesting information and documents relating to activities in the field of wax to be filed before June 20, 2005 and a deposition on the same date. The Company informed the department that it does not produce nor import wax in the United States of America. | |
(v) | Inquiry started by the AGCM concerning an alleged abuse of dominant position in the use of the total continuous regasification capacity of GNL. On November 18, 2005, the Italian Antitrust Authority notified Eni and its subsidiary GNL Italia the opening of an inquiry, in accordance with Article 14 of Law No. 287/1990, concerning an alleged abuse of dominant position in the assignment and use of the total continuous regasification capacity of the Panigaglia terminal (owned by GNL Italia) during thermal years 2002-2003 and 2003-2004, as already reported by an inquiry of the Italian Authority for Electricity and Gas on the same matter as the inquiry of the Antitrust Authority. The Authority for Electricity and Gas closed its inquiry by signalling the fact to the Antitrust Authority. In a later communication Eni was informed that the inquiry has been extended also to thermal year 2004-2005 and to Snam Rete Gas which is the parent company of GNL Italia SpA. On September 25, 2006, the Antitrust Authority sent Eni the findings of its inquiry. Subsequently, Eni presented the Antitrust Authority certain commitments based on Article 14-ter of Law No. 287/1990. On November 23, 2006, the Antitrust Authority resolved to publish such commitments effective the following day. On March 6, 2007, the Antitrust Authority resolved to accept Enis commitments and to close the inquiry without recognizing any charge to Eni and imposing any fine whatsoever. Eni is committed to perform a gas release amounting to 4 billion cubic meters in a two-year period, starting on October 1, 2007. | |
(vi) | Ascertainment by the
European Commission of the level of competition in the
European natural gas market. As part of its
activities to ascertain the level of competition in the
European natural gas market, with decision No.
C(2006)1920/1 of May 5, 2006, the European Commission
informed Eni on May 16, 2006 that Eni and its
subsidiaries were subject to an inquiry under Article 20,
paragraph 4 of the European Regulation No. 1/2003 of the
Council in order to verify the possible existence of any
business conducts breaching European rules in terms of
competition and intended to prevent access to the Italian
natural gas wholesale market and to subdivide the market
among few operators in the activity of supply and
transport of natural gas. Officials from the European Commission conducted inspections at headquarters of Eni and of certain Eni subsidiaries and collected documents. Similar actions have been performed by the Commission also against the main operators in natural gas in Germany, France, Austria and Belgium. |
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(vii) | TTPC. In April 2006, Eni filed a claim before the Regional Administrative Court of Lazio against the decision of the Italian Antitrust Authority of February 15, 2006 stating that Enis behaviour pertaining to implementations of plans for the upgrading of the TTPC pipeline for importing natural gas from Algeria represented an abuse of dominant position under Article 82 of the European Treaty and fined Eni. The initial fine amounted to euro 390 million and was reduced to euro 290 million in consideration of Enis commitment to perform actions favoring competition among which the upgrading of said gasline. Eni accrued a provision with respect to this proceeding. With a decision filed on November 29, 2006, the Regional Administrative Court of Lazio partially accepted Enis claim, annulling such part of the Authoritys decision where the fine was quantified. Eni is waiting for the filing of the motivations of the Court decision to ascertain the impact of said decision. Pending this development, the payment of the fine has been voluntarily suspended. | |
(viii) | Inquiry of the AGCM in relation to collusive mechanisms for the pricing of automotive fuels distributed on the retail market. With a decision of January 18, 2007, the Italian Antitrust Authority opened an inquiry to ascertain the existence of a possible agreement to limit competition in the field of pricing of automotive fuels distributed on the retail market in Italy in violation of Article 81 of the EC Treaty. This inquiry concerns eight oil companies, among which Eni. According to the Authority, said companies would have been putting in place collusive mechanisms intended to influence the pricing of automotive fuels distributed on the retail market by way of a continuing exchange of informative flows since 2004.With decision of January 18, 2007, the Italian Antitrust Authority opened an inquiry to ascertain the existence of a possible agreement limit competition in the field of pricing of automotive fuels distributed on the retail market in Italy in violation of Article 81 of the EC Treaty. This inquiry concerns eight oil companies, among which Eni. According to the Authority, said companies would have been putting in place collusive mechanisms intended to influence the pricing of automotive fuels distributed on the retail market by way of a continuing exchange of information flows since 2004. |
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
POLIMERI EUROPA SPA AND SYNDIAL SPA
Inquiries in relation to alleged anti-competitive agreements in
the area of elastomers. In December 2002, inquiries were
commenced concerning alleged anti-competitive agreements in the
area of elastomers. These inquiries were commenced concurrently
by European and U.S. authorities. The first product under
scrutiny was EP(D)M: the European Commission submitted to
inspection the manufacturing companies of that product, among
which Polimeri Europa SpA and Syndial and requested information
from those two companies and to their parent company, Eni SpA.
After the inquiries the Commission decided to open a procedure
for violation of competition laws and notified Eni, Polimeri
Europa and Syndial the relevant charges to that effect on March
8, 2005. At a hearing held on July 27, 2005 the two companies
presented memoranda and confirmed their position. Eni and its
subsidiaries are waiting for a decision on part of the European
Commission.
EP(D)M manufacture is also under scrutiny in the United States,
where the Department of Justice of San Francisco requested
information and documents to Polimeri Europa Americas Inc, a U.S.
subsidiary of Polimeri Europa and to its deputy chairman and
sales manager. Class actions were filed claiming damages in
relation to the alleged violation. On July 2005, Syndial signed a
settlement agreement for the civil class action which entails the
payment of approximately $3.2 million, approved by the federal
court. The investigation was also extended to the following
products: NBR, CR, BR, SSBR and SBR. The European Commission
started an investigation regarding BR, SBR, SSBR. On January 26,
2005, the European Commission dropped the charges in relation to
SSBR. Investigations regarding BR, SBR and EPDM led to the
notification of relevant charges. A hearing took place before the
European Commission. On July 26, 2006, the European Commission
notified the dismissal of the EPDM matter to Eni. Regarding the
other two products BR and SBR, on November 29, 2006, the
Commission fined a number of European operators, among which Eni,
an amount of euro 519 million based on the charge of having
established a trust in the field of synthetic rubber production.
Eni and its subsidiary Polimeri Europa were fined by an overall
amount of euro 272.25 million. Eni and its subsidiary are
preparing an appeal against this decision claiming in particular
the existence of the infringing behavior and the amount of the
fine, and the fact that Eni is accountable for the behavior of
its subsidiaries.
With regard to NBR, an inquiry is underway in Europe and the
U.S., where class actions have also been started. On the federal
level, the class action was abandoned by the plaintiffs. The
federal judge has yet to acknowledge this abandonment. With
regard to CR, as part of an investigation carried out in the
U.S., Syndial entered into a plea agreement with the Department
of Justice pursuant to which Syndial would agree to pay a fine of
$9 million, while the Department of Justice would agree that it
will not bring further criminal charges against Syndial or
against its affiliated companies. On June 27, 2005 the plea
agreement was approved. As regards CR, the civil class action was
closed with a settlement agreement approved by the federal judge
on July 8, 2005 whereby the company will pay $5 million.
Eni recorded a provision for these matters.
3.2 Regulation
Inquiry of the Italian Authority for Electricity and
Gas regarding the use of storage capacity conferred in years
2004-2005 and 2005-2006. With Decision No. 37 of
February 23, 2006, the Italian Authority for Electricity and Gas
commenced an inquiry on a few natural gas selling companies,
among which Eni, in order to possibly impose a fine or an
administrative sanction regarding the use of storage capacity
conferred in years 2004-2005 and 2005-2006.
For the 2004-2005 thermal year and for the period from October 1,
2005 to December 31, 2005, the Authority for Electricity and Gas
supposed that given the weather of the period, the use of
modulation storage capacity was featured by a higher volume of
off takes with respect to the volume which would have been
necessary to satisfy the commercial requirements for which the
storage company entitled Eni to a priority in the conferral of
storage capacity. According to the Authority for Electricity and
Gas, such situation was in contrast with applicable regulation.
Eni presented an articulated and documented memorandum to claim
the thesis of the Authority for Electricity and Gas regarding the
alleged non compliance of Eni's behavior with regulation in
force, also taking account of the circumstances under which
excess off takes occurred and the subsequent authorization of the
Ministry for Economic Development to use the strategic storage
for the thermal year 2004-2005. With Decision No. 281/2006 of
December 6, 2006, the Authority for Electricity and Gas closed
said inquiry and fined Eni by euro 90 million of which euro 45
million pertaining to the thermal year 2004-2005 and euro 45
million to the thermal year 2005-2006 as a consequence of Eni
having violated regulation in force pertaining to the priorities
in the conferral of storage capacity.
Eni plans to pay the amount of this fine pertaining to the
thermal year 2004-2005 in accordance to a reduced form as
provided by Law No. 689/1981and to appeal Decision No. 281/2006
of the Authority for Electricity and Gas before the Regional
Administrative Court of Lombardia requesting the Tribunal: (i)
for the first thermal year, to ascertain whether Eni is
legitimate to pay in a reduced form or, in case Eni is not
legitimate to do so, to annul the fine; (ii) for the second
thermal year, to annul the fine. Eni accrued a provision for this
proceeding.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
STOCCAGGI GAS ITALIA SPA
Tariffs. With Decision No. 26 of February 27, 2002, the
Italian Authority for Electricity and Gas determined tariff
criteria for modulation, mineral and strategic storage services
for the period from April 1, 2002 to March 31, 2006 and effective
retroactively from June 21, 2000. On March 18, 2002 Stoccaggi Gas
Italia SpA (Stogit) filed its proposal of tariff for modulation,
mineral and strategic storage for the first regulated period.
With Decision No. 49 of March 26, 2002, the Authority for
Electricity and Gas repealed Stogits proposal and defined
tariffs for the first regulated period. Stogit applied the tariff
determined by the two decisions, but filed an appeal against both
decisions with the Regional Administrative Court of Lombardia
requesting their cancellation. With a decision dated September
29, 2003, that court rejected the appeal presented by Stogit.
Stogit filed an appeal to the Council of State against the
sentence which was rejected by the Council of State on January 6,
2006.
DISTRIBUIDORA DE GAS CUYANA SA
Formal investigation of the agency entrusted with the regulation
of the natural gas market in Argentina ("Enargas").
The agency entrusted with the regulation of the natural gas
market in Argentina ("Enargas") started a formal
investigation on some operators, among these Distribuidora de Gas
Cuyana SA, a company controlled by Eni. Enargas stated that the
company improperly applied calculated conversion factors to
volumes of natural gas invoiced to customers and requested the
company to apply the conversion factors imposed by local
regulations from the date of the default notification (March 31,
2004) without prejudice to any damage payment and fines that may
be decided after closing the investigation. On April 27, 2004,
Distribuidora de Gas Cuyana presented a defense memorandum to
Enargas, without prejudice to any possible appeal. On April 28,
2006, the Company filed a formal request for examining the
documents used as evidence of the alleged violation.
4. Tax Proceedings
ENI SPA
With a decree dated December 6, 2000, the Lombardia
Region decided that natural gas used for electricity generation
is subject to an additional regional excise tax in relation to
which Snam SpA (merged into Eni SpA in 2002) should substitute
for the tax authorities in its collection from customers. Given
interpretive uncertainties, the same decree provides the terms
within which distributing companies are expected to pay this
excise tax without paying any penalty. Snam SpA and the other
distributing companies of Eni believe that natural gas used for
electricity generation is not subject to this additional excise
tax. For this reason, an official interpretation was requested
from the Ministry of Finance and Economy. With a decision of May
29, 2001, the Ministry confirmed that this additional excise tax
cannot be applied. The Region decided not to revoke its decree
and Snam took appropriate legal action. On the basis of action
carried out by Snam, the Council of State decided on March 18,
2002 that the jurisdiction of the Administrative court did not
apply to this case. In case the Region should request payment,
Eni will challenge this request in the relevant Court. The
Lombardia Region decided with regional Law No. 27/2001 that no
additional tax is due from January 1, 2002 onwards, but still
requested the payment of taxes due before that date. The action
for the recognition of such taxes bears a five-year term.
Consequently, the exercise of such action expires on July 16,
2007.
With a formal assessment presented by the Municipality of Pineto
(Teramo), Eni SpA has been accused of not having paid a municipal
tax on real estate for the period from 1993 to 1998 on four oil
platforms located in the Adriatic Sea territorial waters in front
of the coast of Pineto. Eni was requested to pay a total of
approximately euro 17 million including interest and a fine for
lacking payment and tax declaration. Eni filed a claim against
this request stating that the sea where the platforms are located
is not part of the municipal territory and the tax application as
requested by the municipality lacked objective fundamentals. The
claim has been accepted in the first two degrees of judgment at
the Provincial and Regional Tax Commissions. But the Court of
Cassation cancelled both judgments declaring that a municipality
can consider requesting a tax on real estate also in the sea
facing its territory and with a decision of February 21, 2005
sent the proceeding to another section of the Regional Tax
Commission in order to judge on the other reasons opposed by Eni.
On December 28, 2005, the Municipality of Pineto presented the
same request for the same platforms for the years 1999 to 2004.
The total amount requested from Eni is euro 24 million. Eni filed
a claim against this request.
SNAM RETE GAS SPA
Environmental tax of the Sicilia Region upon the owners of
primary pipelines. With Regional Law No. 2 of March 26,
2002, the Sicilia Region introduced an environmental tax upon the
owners of primary pipelines in Sicily (i.e., pipelines operating
at a maximum pressure of over 24 bar). The tax was payable as of
April 2002. In order
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to protect its interests, Snam Rete Gas filed a claim with the European Commission, aimed at opening a proceeding against the Italian Government and the Tax Commission of Palermo. The Authority for Electricity and Gas, although acknowledging that the tax burden is an operating cost for the transport activity, subjected inclusion of the environment tax in tariffs to the final ruling on its legitimacy by relevant authorities. With the ruling of December 20, 2002, the Court judged the tax at variance with European rules. In December 2002, Snam Rete Gas suspended payments based on the above Court ruling. Payments effected until November 2002 totaled euro 86.1 million. In January 2003, the Sicilia Region filed an appeal with the Council of State against the ruling of the Regional Administrative Court of Lombardia for the part that states the variance of the regional law with European rules. On December 16, 2003, the European Commission judged the tax instituted by the Republic of Italy, through the Sicilia Region, to be contrary to European rules and to the cooperation agreement between the European Economic Community and the Peoples Democratic Republic of Algeria; the European Commission also stated that such environmental tax is in contrast with the common customs tariff because it modifies the equality of customs expenses on commodities imported from third countries and could create a deviation in trade with such countries and a distortion in access and competition rules. The Commission with its opinion presented on July 7, 2004 formally requested Italy to cancel the tax. The Italian Government was ordered to conform within two months from receipt of the opinion. As it did not conform, on December 20, 2004 the European Commission passed the case to the Court of Justice requesting a ruling. With a decision dated January 5, 2004, and confirmed on March 4, 2005 by the Regional Tax Commission, the Provincial Tax Commission of Palermo declared the environmental tax of the Sicilia Region illegitimate because it is contrary to European rules and therefore accepted Snam Rete Gass claim for the repayment of the first installment of euro 10.8 million, already paid to the Sicilia Region in April 2002. On May 4, 2004, the Sicilia Region repaid the first installment. As for the seven remaining installments paid after April 2002 (euro 75.3 million), the Provincial Tax Commission of Palermo with decision of January 5, 2005 confirmed the illegitimacy of the tax condemning the Region to repay the cashed amounts and accrued interest to Snam Rete Gas. The Sicilia Region presented recourse against said decision before the Regional Tax Commission at Palermo on April 15, 2005. The relevant hearing was held on April 5, 2006. On January 17, 2007, decisions were filed pertaining to four out of seven recourses presented by the Sicilia Region; each of said recourses corresponds to an installment of the tax paid by Snam Rete Gas. Said decisions rejected the recourses presented by the Sicilia Region. Snam Rete Gas expects similar developments with regard to residual recourses.
AGIP KARACHAGANAK BV
Claims concerning unpaid taxes and relevant payment of interest
and penalties. In July 2004, relevant Kazakh authorities
informed Agip Karachaganak BV and Agip Karachaganak Petroleum
Operating BV, shareholder and operator of the Karachaganak
contract, respectively, on the final outcome of the tax audits
performed for fiscal years 2000 to 2003. Claims by the Kazakh
authorities concern unpaid taxes for a total of $43 million, net
to Eni, and the anticipated offsetting of VAT credits for $140
million, net to Eni, as well as the payment of interest and
penalties for a total of $128 million. Both companies filed a
counterclaim. With an agreement reached on November 18, 2004, the
original amounts were reduced to $26 million net to Eni that
includes taxes, surcharges and interest. Meetings continue
regarding residual matters. Eni recorded a provision for this
matter.
5. Settled Proceedings
RAFFINERIA DI GELA SPA
With a sentence released in July 2006, the Court of Gela
ascertained that certain alleged crimes pertaining to the
emissions of the refinery had become extinct due to the statute
of limitations. In relation to such alleged crimes, the Court of
Gela summoned the legal representatives of the company for events
that have occurred since 1997. The Municipality of Gela, the
Province of Caltanissetta and others acted as plaintiff in this
proceeding, requesting the payment of compensatory damages for a
total of euro 878 million.
SYNDIAL SPA
Personal cautionary measures against some employees of the Priolo
plant issued by the Court of Siracusa concerning illicit
management relating to waste activities. On January 16,
2003, the Court of Siracusa issued personal cautionary measures
against several employees of the Priolo plant owned by EniChem
SpA and Polimeri Europa SpA, within judicial investigations
pertaining to an illicit management relating to the production,
disposal and treatment of liquid and solid waste materials
resulting in an illicit income from the savings arising from the
non compliance with rules regulating waste activities. Polimeri
Europa and EniChem acted as plaintiffs. Findings of the
preliminary investigations were notified to involved persons,
confirming accusations. During the
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
preliminary investigations, traces of mercury were found in the sea. The public prosecutor of Siracusa started an inquiry for ascertaining the conditions of sediments and marine fauna in the bay of Augusta. According to the prosecutor, mercury was spilled into the sea and poisoned the marine fauna and therefore resulted in fetal malformations and abortions due to the consumption of contaminated seafood fished in this area. The chlorine soda plant, built in the late 1950s was contributed in-kind to Syndial in 1989 when the Enimont joint venture was formed. It was therefore proved that Enis employees held no responsibility for the crimes of which they were charged. On March 15, 2006, the judge for preliminary investigations decided the dismissal of the case against Syndial employees, accepting the request made by the prosecutor.
SYNDIAL SPA (FORMER ENICHEM SPA)
In 1997, an action was commenced before the Court of
Venice concerning the criminal charges brought by the Venice
public prosecutor for alleged mismanagement of the Porto Marghera
plant starting in the 1970s until 1995 and for the alleged
pollution and health damage resulting there from. Defendants
included certain employees of Eni which have managed the Porto
Marghera plant since the beginning of the eighties. On November
2, 2001, the Court of Venice acquitted all defendants. The appeal
against the decision was presented by the public prosecutor, the
state attorney on behalf of the Ministry of Environment and the
Council of Ministers, five public entities, 12 associations and
other entities and 48 individual persons. On December 15, 2004
the Venice Court of Appeals confirmed the preceding judgment,
changing only some marginal parts. As concerns some defendants,
the Venice Court of Appeals decided not to proceed due to the
statute of limitations for some crimes, while it confirmed the
preceding judgment for the other matters. On May 19, 2006, the
Court of Final Instance, before which plaintiffs appealed the
decision of the Venice Court of Appeals, acquitted all defendants
stating that pollution and mismanagement of the plant occurred
before the 1980s and consequently Eni and its employees could not
be deemed responsible. In January 2006, Eni settled this matter
with the Council of Ministers and the Ministry for the
Environment paying an amount of euro 40 million. Under terms of
the settlement, the latter will abstain from recourse to the
Court of Final Instance and will not act on any other
environmental damage concerning the management of Porto Marghera
until the date of the settlement. Eni already recorded a
provision for this matter which was sufficient to cover the
amount of the settlement.
ENI DACIÓN BV
In August 2005, the internal revenue service of Venezuela served
four formal assessment on income taxes to Eni Dación BV for the
years 2001 to 2004 that, by excluding the deductibility of
certain costs: (i) annul the losses recorded for the periods
amounting to a total of bolivar 910 billion (corresponding to
$425 million); (ii) determine for the same periods a taxable
income amounting to a total of bolivar 115 billion (corresponding
to $54 million); and (iii) request a tax amounting to bolivar 52
billion (corresponding to $24 million) determined by applying a
50% tax rate rather than the 34% rate applied to other companies
performing activities analogous to those of Eni Dación BV. In
particular, it excluded the deductibility of: (i) interest
charges due to other Eni Group companies that provided loans
denominated in U.S. dollars; and (ii) exchange rate losses
recorded in the financial statements and related to such loans
resulting from the devaluation of the Venezuelan currency. The
formal assessments served have a preliminary nature and do not
request immediate payment nor do they specify the amount of a
fine (from 10 to 250%) and of interest (average rate for the
period approximately 23%). Eni Dación filed a claim for the
cancellation of the assessment. In the 2005 accounts, Eni
recorded a specific provision for this matter. In April 2006, the
appeal was rejected and the final tax assessment was issued. The
final tax assessment: (i) substantially confirmed the preliminary
assessments, although reducing the originally assessed income tax
liability to bolivar 39 billion ($18 million); and (ii) imposed
fines and late payment interests of bolivar 109 billion ($51
million). Eni Dación BV presented a further administrative
appeal before the expiration of the time limit for filing a
judicial tax appeal, thereby obtaining a reduction of the overall
amount from bolivar 148 billion ($69 million) to bolivar 52
billion ($24 million) including taxes in the amount of bolivar
12.5 billion ($6 million) and fines and late payment interest in
the amount of bolivar 39.5 billion ($18 million). In order to
avoid further charges deriving from the increase of the
corresponding fines and late payment interest, Eni Dación BV
paid the newly assessed amount in May 2006, thereby reaching a
settlement. Consistently, Eni Dación BV filed an integrative
income tax return for year 2005, considering the new tax bases
for years 2001 to 2004, and paid accordingly bolivar 128 billion
($60 million) of income taxes and bolivar 4.4 billion ($2
million) of fines and late payment interest.
Other risks and commitments
In order to meet the medium and long-term demand of natural gas,
in particular in the Italian market, Eni entered into long-term
purchase contracts with producing countries. Specifically,
following the strategic agreement with Gazprom signed on November
14, 2006, effective from February 1, 2007, Eni extended the
duration of its gas supply contracts with Gazprom until 2035,
bringing the residual average life of its supply portfolio to
approximately 23 years. Existing contracts, which in general
contain take-or-pay clauses, will ensure a total of approximately
62.4 bcm/y of natural gas by 2010.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Despite the fact that an increasing portion of natural gas
volumes purchased under such contracts has been sold outside
Italy, management believes that in the long term, unfavorable
trends in the Italian demand and supply for natural gas, also due
to the possible implementation of all publicy announced plans for
the construction of new supply infrastructure, and the evolution
of Italian regulations of the natural gas sector, represent risk
factors to the fullfilment of Eni's obligations in connection
with its take-or-pay supply contracts.
Parent company guarantees given relating to contractual
commitments for hydrocarbon exploration and production
activities, quantified on the basis of the capital expenditures
to be made, amount to euro 4,911 million (euro 5,052 million at
December 31, 2005).
With effective date April 1, 2006, the Venezuelan State oil
company Petróleos de Venezuela SA (PDVSA) unilaterally
terminated the Operating Service Agreement (OSA) governing
activities at the Dación oil field where Eni acted as a
contractor, holding a 100% working interest. As a consequence,
starting on the same day, operations at the Dación oil field are
conducted by PDVSA. Eni proposed to PDVSA to agree on terms in
order to recover the fair value of its Dación assets. On
November 2006, Eni commenced proceeding before an International
Centre for Settlement of Investment Disputes (ICSID) Tribunal
(i.e., a tribunal acting under the auspices of the ICSID
Convention and being competent pursuant to the Treaty) to claim
its rights. In fact, a bilateral investments treaty is in place
between The Netherlands and Venezuela (the "Treaty").
Despite this action, Eni is still ready to negotiate a solution
with PDVSA to obtain a fair compensation for its assets. Based on
the opinion of its legal consultants, Eni believes to be entitled
to a compensation for such expropriation in an amount equal to
the market value of the OSA before the expropriation took place.
The market value of the OSA depends upon its expected profits. In
accordance with established international practice, Eni has
calculated the OSAs market value using the discounted cash
flow method, based on Enis interest in the expected future
hydrocarbon production and associated capital expenditures and
operating costs, and applying to the projected cash flow a
discount rate reflecting Enis cost of capital as well as
the specific risk of concerned activities. Independent
evaluations carried out by a primary petroleum consulting firm
fully support Enis internal evaluation. The estimated net
present value of Enis interest in the Dación field, as
calculated by Eni, is higher than the net book value of the
Dación assets amounting to $829 million (equal to euro 629
million based on the EUR/US$ exchange rate as of December 31,
2006) which consequently have not been impaired. In accordance
with the ICSID Convention, a judgement by the ICSID Tribunal
awarding compensation to Eni would be binding upon the parties
and immediately enforceable as if it were a final judgement of a
court of each of the States that have ratified the ICSID
Convention. The ICSID Convention was ratified in 143 States.
Accordingly, if Venezuela fails to comply with the award and to
pay the compensation, Eni could take steps to enforce the award
against commercial assets of the Venezuelan Government almost
anywhere those may be located (subject to national law provisions
on sovereign immunity). In 2005 and 2006, oil production from the
Dación field averaged approximately 60 kbbl/d and booked
reserves at December 31, 2005 amounted to 175 million of barrels.
Under the convention signed on October 15,
1991 by TAV SpA and CEPAV Due, Eni committed to guarantee the
execution of design and construction of the works assigned to the
CEPAV Consortium (to which it is a party) and guaranteed to TAV
the correct and timely execution of all obligations indicated in
the convention in a subsequent integration deed and in any
further addendum or change or integration to the same. The
regulation of CEPAV Due contains the same obligations and
guarantees contained in the CEPAV Uno agreement.
A guarantee for euro 253 million to Cameron LNG provided on
behalf of Eni USA Gas Marketing Llc (Eni Petroleum Co Incs
interest 100%) for the regasification contract entered into on
August 1, 2005. This guarantee is subject to a suspension clause
and will come into force when the regasification service starts
in a period included between October 1, 2008 and June 30, 2009.
Non-quantifiable risks related to contractual assurances given to
acquirers of investments against certain unforeseeable
liabilities attributable to tax, state welfare contributions and
environmental matters applicable to periods during which such
investments were owned by Eni. Eni believes such matters will not
have a material adverse effect on its Consolidated Financial
Statements.
Assets under concession arrangements
Eni operates under concession arrangements mainly in the
Exploration & Production segment and in some activities of
the Gas & Power segment and the Refining & Marketing
segment. In the Exploration & Production segment contractual
clauses governing mineral concessions, licenses and exploration
permits regulate the access of Eni to hydrocarbon reserves. Such
clauses can differ in each country. In particular, mineral
concessions, licenses and permits are granted by the legal owners
and, generally, entered into with government entities, State oil
companies and, in some legal contexts, private owners. As a
compensation for mineral concessions, Eni pays royalties and
taxes in accordance with local tax legislation. Eni sustains all
the operation risks and costs related to the production and
development activities and is entitled to the productions
realized. In Product Sharing Agreements and in buy-back
contracts, realized productions are defined on the basis of
contractual agreements drawn up with State oil companies which
hold the concessions. Such contractual agreements regulate the
recovery of costs incurred for the exploration, development and
operating activities (cost oil) and give entitlement to the own
portion of the realized productions (profit oil). With reference
to natural gas storage in Italy, the activity is conducted on the
basis of concessions with a duration that
192
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
does not exceed a twenty years length and it is granted by the Ministry of Productive Activities to subjects that comply with legislation requirements and that can demonstrate to be able to conduct a storage program that meets the public interest in accordance with applicable laws. In the Gas & Power segment the gas distribution activity is primarily conducted on the basis of concessions granted by local public entities. At the expiry date of the concession, a compensation is provided, defined by using criteria of business appraisal, to the outgoing operator following the sale of its own gas distribution network. Service tariffs for distribution are defined on the basis of a method established by the Authority for Electricity and Gas. Legislative Decree No. 164/2000 provides the granting of distribution services exclusively by tender, with a maximum lenght of 12 years. In the Refining & Marketing segment several service stations and other auxiliary assets of the distribution service are located in the motorway areas and they are granted by the motorway concession operators following a public tender for the sub-concession of the supplying of oil products distribution service and other auxiliary services. Such assets are amortized over the length of the concession (generally, 5 years for Italy). In exchange of the granting of the services described above, Eni provides to the motorway companies fixed and variable royalties on the basis of quantities sold. At the end of the concession period, the uncharged devolution of non-removable assets is generally provided.
Environmental regulations
Together with other companies in the industries in which it
operates, Eni is subject to numerous EU, national, regional and
local environmental laws and regulations concerning its oil and
gas operations, products and other activities, including
legislation that implements international conventions or
protocols. In particular, these laws and regulations require the
acquisition of a permit before drilling for hydrocarbons may
commence, restrict the types, quantities and concentration of
various substances that can be released into the environment in
connection with exploration, drilling and production activities,
limit or prohibit drilling activities on certain protected areas,
and impose criminal or civil liabilities for pollution resulting
from oil, natural gas, refining and petrochemical operations.
These laws and regulations may also restrict emissions and
discharges to surface and subsurface water resulting from the
operation of natural gas processing plants, petrochemicals
plants, refineries, pipeline systems and other facilities that
Eni owns. In addition, Enis operations are subject to laws
and regulations relating to the generation, handling,
transportation, storage, disposal and treatment of waste
materials. Environmental laws and regulations have a substantial
impact on Enis operations. Some risk of environmental costs
and liabilities is inherent in particular operations and products
of Eni, as it is with other companies engaged in similar
businesses, and there can be no assurance that material costs and
liabilities will not be incurred. Although management,
considering the actions already taken with the insurance policies
to cover environmental risks and the provision for risks accrued,
does not currently expect any material adverse effect upon
Enis consolidated financial statements as a result of its
compliance with such laws and regulations, there can be no
assurance that there will not be a material adverse impact on
Enis consolidated financial statements due to: (i) the
possibility of as yet unknown contamination; (ii) the results of
the ongoing surveys and the other possible effects of statements
required by Decree No. 471/1999 of the Ministry of the
Environment; (iii) the possible effect of future environmental
legislation and rules; (iv) the effect of possible technological
changes relating to future remediation; (v) the possibility of
litigation and the difficulty of determining Enis
liability, if any, as against other potentially responsible
parties with respect to such litigation and the possible
insurance recoveries.
Emission trading
Legislative Decree No. 216 of April 4, 2006 implemented
the Emission Trading Directive 2003/87/EC concerning greenhouse
gas emissions and Directive 2004/101/EC concerning the use of
carbon credits deriving from projects for the reduction of
emissions based on the flexible mechanisms devised by the Kyoto
Protocol. This European emission trading scheme has been in force
since January 1, 2005, and on this matter, on February 24, 2006,
the Ministry of the Environment published a decree defining
emission permits for the 2005-2007 period. In particular, Eni was
assigned permits corresponding to 65.2 million tonnes of carbon
dioxide (of which 22.4 for 2005, 21.4 for 2006 and 21.4 for
2007). Following the realization of projects for the reduction of
emissions, in particular related to the cogeneration of
electricity and steam through high efficiency combined cycles in
refineries and petrochemical sites, emissions of carbon dioxide
from Enis plants were lower than permits assigned in 2006.
193
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26 Revenues
The following is a summary of the main components of
"Revenues". More information about changes in revenues
is included in the "Financial review" of the
"Report of the Directors".
Net sales from operations are as follows:
(million euro) | 2005 |
2006 |
||
Net sales from operations | 73,679 | 85,957 | ||||
Change in contract work in progress | 49 | 148 | ||||
73,728 | 86,105 | |||||
Net sales from operations are net of the following items:
(million euro) | 2005 |
2006 |
||
Excise tax | 14,140 | 13,762 | ||||
Exchanges of oil sales (excluding excise tax) | 2,487 | 2,750 | ||||
Exchanges of other products | 108 | 127 | ||||
Sales to service station managers for sales billed to holders of credit card | 1,326 | 1,453 | ||||
Services billed to joint venture partners | 1,331 | 1,385 | ||||
19,392 | 19,477 | |||||
Net sales from operations by industry segment and
geographic area of destination are presented in Note 32 -
Information by industry segment and geographic financial
information.
Other income and revenues
Other income and revenues are as follows:
(million euro) | 2005 |
2006 |
||
Gains from sale of assets | 71 | 100 | ||||
Lease and rental income | 102 | 98 | ||||
Contract penalties and other trade revenues | 114 | 61 | ||||
Compensation for damages | 89 | 40 | ||||
Other proceeds (*) | 422 | 484 | ||||
798 | 783 | |||||
(*) | Each individual amount included herein does not exceed euro 25 million. |
27 Operating expenses
The following is a summary of the main components of
"Operating expenses". More information about changes in
operating expenses is included in the "Financial
review" of the "Report of the Directors".
Purchases, services and other
Purchases, services and other include the following:
(million euro) | 2005 |
2006 |
||
Production costs - raw, ancillary and consumable materials and goods | 35,318 | 44,661 | ||||
Production costs - services | 9,405 | 10,015 | ||||
Operating leases and other | 1,929 | 1,903 | ||||
Net provisions for contingencies | 1,643 | 767 | ||||
Other expenses | 1,100 | 1,089 | ||||
49,395 | 58,435 | |||||
less: | ||||||
- capitalized direct costs associated with self-constructed assets - tangible assets | (704 | ) | (809 | ) | ||
- capitalized direct costs associated with self-constructed assets - intangible assets | (124 | ) | (136 | ) | ||
48,567 | 57,490 | |||||
194
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Production costs - services include brokerage fees for euro 39
million (euro 24 million at 2005).
Costs for research and development that do not meet the
requirements to be capitalized amount to euro 219 million (euro
202 million in 2005).
Operating leases and other for euro 1,903 million (euro 1,929 million at December 31, 2005) include operating leases for euro 860 million (euro 777 million at December 31, 2005) and royalties on hydrocarbons extracted for euro 823 million (euro 965 million in 2005). Future minimum lease payments expected to be received under non-cancellable operating leases are as follows:
(million euro) | 2006 |
|
To be paid: | |||
whithin 1 year | 594 | ||
between 2 and 5 years | 1,474 | ||
beyond 5 years | 762 | ||
2,830 | |||
Operating leases at December 31, 2006 primarily concern time charter and long-term rentals, lands, service stations and office buildings. Such leases do not include renewal options. There are no significant restrictions on operating leases imposed to Eni for dividend distribution, availability of assets and possibility to assume additional debt.
Provisions for contingencies are net of deductions not
corresponding to cash expenditures of euro 767 million (euro
1,643 million at December 31, 2005) and concern in particular
provisions for environmental risks for euro 248 million (euro 515
million in the 2005), provisions for contract penalties and
disputes for euro 149 million (euro 336 million in the 2005),
provisions for onerous contracts for euro 55 million (euro 71
million at December 31, 2005) and provisions for prize promotion
for euro 44 million (euro 50 million at December 31, 2005). More
information is included in Note 20 - Provisions for
contingencies.
Payroll and related costs
Payroll and related costs are as follows:
(million euro) | 2005 |
2006 |
||
Wages and salaries | 2,484 | 2,630 | ||||
Social security contributions | 662 | 691 | ||||
Cost related to defined benefits plans and defined contributions plans | 126 | 230 | ||||
Other costs | 255 | 305 | ||||
3,527 | 3,856 | |||||
less: | ||||||
- capitalized direct costs associated with self-constructed assets - tangible assets | (143 | ) | (161 | ) | ||
- capitalized direct costs associated with self-constructed assets - intangible assets | (33 | ) | (45 | ) | ||
3,351 | 3,650 | |||||
195
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Costs related to defined benefits plans are described in Note
21 - Provisions for employee benefits.
The average number of employees of the companies included in the
scope of consolidation by type was as follows:
(units) | 2005 |
2006 |
||
Senior managers | 1,754 | 1,676 | ||||
Junior managers | 10,747 | 11,142 | ||||
Employees | 34,457 | 34,671 | ||||
Workers | 24,345 | 25,426 | ||||
71,303 | 72,915 | |||||
The average number of employees is calculated as
half of the total of the number of employees at the beginning and
end of the period. The average number of senior managers includes
managers employed and operating in foreign countries, whose
position is comparable to a senior manager status.
Stock compensation
STOCK GRANTS
With the aim of improving motivation and loyalty of the managers
of Eni SpA and its subsidiaries as defined in Article 2359 of the
Civil Code7, linking compensation to the attainment of
preset individual and corporate objectives, making management
participate in corporate risk and motivating them towards the
creation of shareholder value and at the same increasing time
their contribution to the management of the Company, Eni offers
its own shares for purchase through its buy-back program
(treasury shares) for no consideration to those managers of Eni
who have achieved corporate and individual objectives.
Assignments vest within 45 days after the end of the third year
from the date of the offer.
At December 31, 2006, a total of 1,873,600 of ordinary shares
with a nominal value of euro 1 per share were outstanding and
concerned the 2003 stock grant plan for a total of 2,500 shares
with a fair value of euro 11.20 per share, the 2004 stock grant
plan for a total of 798,700 shares with a fair value of euro
14.57 per share and the 2005 stock grant plan for a total of
1,072,400 shares with a fair value of euro 20.08 per share.
Changes in the 2003, 2004 and 2005 stock grant plans consist of
the following (regarding stock grants, no exercise prices are
provided for):
2005 |
2006 |
|||
Number of shares | Market price (a) (euro) | Number of shares | Market price (a) (euro) | |||||
Stock grants as of January 1 | 3,112,200 | 18.461 | 3,127,200 | 23.460 | ||||||
New rights granted | 1,303,400 | 21.336 | ||||||||
Rights exercised in the period | (1,273,500 | ) | 23.097 | (1,236,400 | ) | 23.933 | ||||
Rights cancelled in the period | (14,900 | ) | 22.390 | (17,200 | ) | 23.338 | ||||
Stock grants outstanding as of December 31 | 3,127,200 | 23.460 | 1,873,600 | 25.520 | ||||||
of which exercisable at December 31 | 38,700 | 23.460 | 156,700 | 25.520 | ||||||
(a) | Market price relating to new rights granted, rights exercised in the period and rights cancelled in the period corresponds to the average market value (arithmetic average of official prices recorded on Mercato Telematico Azionario in the month preceding: (i) the date of the Board of Directors resolution regarding the stock grants assignment; (ii) the date on which the emission/transfer of the shares granted were recorded in the grantees securities account; (iii) the date of the unilateral termination of employment for rights cancelled), weighted with the number of shares. Market price of stock grants at the beginning and end of the year is the price recorded at December 31. |
STOCK OPTIONS
With the aim of improving motivation and loyalty of the managers
of Eni SpA and its subsidiaries as defined in Article 2359 of the
Civil Code8 that hold significant positions of
managerial responsibility or that are considered strategic
managers for the Group, Eni approved stock compensation plans
that provide the assignment for no consideration of rights to
purchase Eni treasury shares (options).
(7) | Does not include listed subsidiaries, which have their own stock grant plans. |
(8) | Does not include listed subsidiaries, which have their own stock grant plans. |
196
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2002-2004 AND 2005 PLANS
Stock options provide the right to purchase treasury shares with
a 1 to 1 ratio after the end of the third year from the date
ofthe grant (vesting period) and for a maximum period of five
years, with a price calculated as the arithmetic average of
official prices registered on the Mercato Telematico Azionario in
the month preceding assignment or (starting from 2003), if
greater, as the average cost of treasury shares registered in the
day preceding the assignment (strike price).
2006-2008 PLAN
The 2006-2008 stock option plan introduced a performance
condition for the exercise of the options. At the end of each
three-year period (vesting period) from the assignment, the Board
of Directors will determine a number of exercisable options, at a
rate included between 0 and 100, in relation to the Total
Shareholders Return (TSR) of Enis shares compared to
the TSR of the six largest international oil companies for
capitalization. Options can be exercised after three years from
the date of the grant (vesting period) and for a maximum period
of three years, with a price calculated as the arithmetic average
of official prices registered on the Mercato Telematico Azionario
in the month preceding the assignment (strike price).
The arithmetic average of such prices, weighted with the number
of shares assigned, amounts to euro 23.119 per share.
At December 31, 2006, a total of 15,290,400 options were
offered for the purchase of 15,290,400 Eni SpA ordinary shares at
a nominal value of euro 1. Options refer to the 2002 stock plan
for 238,000 shares with an exercise price of euro 15.216 per
share, to the 2003 stock plan for 779,900 shares with an exercise
price of euro 13.743 per share, to the 2004 stock plan for
3,108,500 shares with an exercise price of euro 16.576 per share,
to the 2005 stock plan for 4,184,000 shares with an exercise
price of euro 22.512 per share and to the 2006 stock plan for
6,980,000 shares with an exercise price of euro 23.119 euro per
share.
At December 31, 2006 the weighted-average remaining contractual
life of the plans at December 2002, 2003, 2004, 2005 and 2006 was
3 years and 7 months, 4 years and 7 months, 5 years and 7 months,
6 years and 7 months and 5 years and 7 months, respectively.
Changes in stock option plans in 2005 and 2006 consist of the
following:
2005 |
2006 |
|||
Number of shares | Weighted average exercise price (euro) | Market price (a) (euro) | Number of shares | Weighted average exercise price (euro) | Market price (a) (euro) | |||||||
Options as of January 1 | 11,789,000 | 15.111 | 18.461 | 13,379,600 | 17.705 | 23.460 | ||||||||
New options granted | 4,818,500 | 22.512 | 22.512 | 7,050,000 | 23.119 | 23.119 | ||||||||
Options exercised in the period | (3,106,400 | ) | 15.364 | 22.485 | (4,943,200 | ) | 15.111 | 23.511 | ||||||
Options cancelled in the period | (121,500 | ) | 16.530 | 23.100 | (196,000 | ) | 19.119 | 23.797 | ||||||
Options outstanding as of December 31 | 13,379,600 | 17.705 | 23.460 | 15,290,400 | 21.022 | 25.520 | ||||||||
of which exercisable at December 31 | 1,540,600 | 16.104 | 23.460 | 1,622,900 | 16.190 | 25.520 | ||||||||
(a) | Market price relating to new rights granted, rights exercised in the period and rights cancelled in the period corresponds to the average market value (arithmetic average of official prices recorded on Mercato Telematico Azionario in the month preceding: (i) the date of the Board of Directors resolution regarding the stock grants assignment; (ii) the date in which the emission/transfer of the shares granted was recorded in the grantees securities account; (iii) the date in which the unilateral termination of employment for rights was cancelled, weighted with the number of shares. Market price of stock grants at the beginning and end of the year is the price recorded at December 31. |
The fair value of stock options granted during the years 2002, 2003, 2004, 2005 and 2006 was euro 5.39, euro 1.50, euro 2.01, euro 3.33 respectively, and the weighted average of euro 2.89 per share was calculated applying the following assumptions:
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||
Risk-free interest rate | (%) | 3.5 | 3.2 | 3.2 | 2.5 | 4.0 | ||||||
Expected life | (years) | 8 | 8 | 8 | 8 | 6 | ||||||
Expected volatility | (%) | 43 | 22 | 19 | 21 | 17 | ||||||
Expected dividends | (%) | 4.5 | 5.4 | 4.5 | 4.0 | 5.3 | ||||||
197
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Compensation of key management personnel
Compensation of persons responsible for key positions in
planning, direction and control functions of Eni Group companies,
including executive and non-executive officers, general managers
and manager with strategic responsibility (key management
personnel) amounted to euro 15 and euro 23 million for 2005 and
2006, respectively, and consisted of the following:
(million euro) | 2005 |
2006 |
||
Wages and salaries | 11 | 16 | ||||
Post-employment benefits | 1 | 1 | ||||
Other long term benefits | 3 | |||||
Indemnities due upon termination of employment | 1 | |||||
Stock grant/option | 2 | 3 | ||||
15 | 23 | |||||
Compensation of Directors, Statutory
Auditors and General Managers
Compensation of Directors, Statutory Auditors and General
Managers amount to euro 19.2 million and euro 8.7 million in 2005
and 2006, respectively. Compensation of Statutory Auditors
amounted to euro 0.785 and euro 0.686 million in 2005 and 2006,
respectively. Compensation of Directors, Statutory Auditors and
General Managers include emoluments and all other salary and
social security compensations due for the function of manager or
statutory auditor performed by Eni SpA or other companies
included in the scope of consolidation, that are a cost for Eni.
Depreciation, amortization and impairments
Depreciation, amortization and impairments consist of the
following:
(million euro) | 2005 |
2006 |
||
Depreciation and amortization: | ||||||
- tangible assets | 4,576 | 4,821 | ||||
- intangible assets | 936 | 1,335 | ||||
5,512 | 6,156 | |||||
Impairments: | ||||||
- tangible assets | 264 | 231 | ||||
- intangible assets | 8 | 54 | ||||
272 | 285 | |||||
less: | ||||||
- direct costs associated with self-constructed assets | (17 | ) | ||||
- capitalized direct costs associated with self-constructed assets - tangible assets | (2 | ) | (2 | ) | ||
- capitalized direct costs associated with self-constructed assets - intangible assets | (1 | ) | (1 | ) | ||
5,781 | 6,421 | |||||
28 Financial income (expense)
Financial income (expense) consists of the following:
(million euro) | 2005 |
2006 |
||
Income (expense) on derivatives | (386 | ) | 383 | |||
Net income from financial receivables | 95 | 130 | ||||
Financial expense capitalized | 159 | 116 | ||||
Net interest due to banks | (38 | ) | 79 | |||
Net income from securities | 36 | 51 | ||||
Interest on tax credits | 17 | 17 | ||||
Financial expense due to the passage of time (a) | (109 | ) | (116 | ) | ||
Exchange differences, net | 169 | (152 | ) | |||
Interest and other financial expense on ordinary bonds | (265 | ) | (247 | ) | ||
Other financial expense, net | (44 | ) | (100 | ) | ||
(366 | ) | 161 | ||||
(a) | The item concerns the increase in provisions for contingencies that are indicated at an actualized value in non-current liabilities. |
198
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Income (expense) on derivatives consist of the following:
(million euro) | 2005 |
2006 |
||
Derivatives on exchange rate | (85 | ) | 313 | |||
Derivatives on interest rate | (138 | ) | 61 | |||
Derivatives on commodities | (163 | ) | 9 | |||
(386 | ) | 383 | ||||
The increase in income (expense) from derivatives
of euro 769 million is primarily due to the application of IAS 39
which requires that derivatives be stated at fair value and the
effects charged to the profit and loss account, instead of being
connected with the economic effects of the hedged transactions.
Such derivatives, in fact, do not meet the conditions required by
IFRS to be qualified as hedging instruments. In addition, the
decrease in net exchange differences of euro 321 million is
primarily due to the application of IAS 39, due to the fact that
the effect of the translation at period end of assets and
liabilities denominated in currencies other than the functional
currency is not compensated by the effect of the translation at
period end of the commitments for derivatives contracts.
29 Income (expense) from investments
Effects of investments accounted for using the equity
method
Effects of investments accounted for using the equity method
consist of the following:
(million euro) | 2005 |
2006 |
||
Gains from investments accounted for using the equity method | 770 | 887 | ||||
Losses from investments accounted for using the equity method | (33 | ) | (36 | ) | ||
Provisions for losses | (56 | ) | ||||
737 | 795 | |||||
More information about gains and losses from
investments accounted for using the equity method is presented in
Note 11 - Investments.
Other income (expense) from investments
Other income (expense) from investments consists of the
following:
(million euro) | 2005 |
2006 |
||
Dividends | 33 | 98 | ||||
Gains on disposals | 179 | 25 | ||||
Losses on disposals | (8 | ) | (7 | ) | ||
Other income (expense), net | (27 | ) | (8 | ) | ||
177 | 108 | |||||
Dividends of euro 98 million primarily concern Nigeria LNG Ltd
(euro 56 million).
Gains on disposals of euro 25 million primarily concern the sale
of Fiorentina Gas SpA and Toscana Gas SpA (euro 16 million).
Gains on disposals relating to the year 2005 of euro 179 million
concern the sale of 100% of the share capital of Italiana Petroli
SpA (euro 132 million).
199
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30 Income tax expense
Income tax expense consists of the following:
(million euro) | 2005 |
2006 |
||
Current taxes: | ||||||
- Italian subsidiaries | 1,872 | 2,007 | ||||
- foreign subsidiaries of the Exploration & Production segment | 5,116 | 6,740 | ||||
- foreign subsidiaries | 373 | 529 | ||||
7,361 | 9,276 | |||||
Less: | ||||||
- tax credits on dividend distributions not offset with current tax payment | (34 | ) | ||||
7,327 | 9,276 | |||||
Net deferred taxes: | ||||||
- Italian subsidiaries | 334 | 230 | ||||
- foreign subsidiaries of the Exploration & Production segment | 464 | 1,095 | ||||
- foreign subsidiaries | 3 | (33 | ) | |||
801 | 1,292 | |||||
8,128 | 10,568 | |||||
Current taxes of the year relate to Italian companies for euro
2,007 million and concern Ires for euro 1,570 and Irap for euro
374 million and foreign taxes for euro 63 million.
The effective tax rate was 51.8% (46.8% in 2005) compared with a
statutory tax rate of 37.9% calculated by applying a 33% tax rate
(Ires) to profit before income taxes and 4.25% tax rate (Irap) to
the net value of production as provided for by Italian laws.
The difference between the statutory and effective tax rate is
due to the following factors:
(%) | 2005 |
2006 |
||
Statutory tax rate | 38.1 | 37.9 | ||||
Items increasing (decreasing) statutory tax rate: | ||||||
- higher foreign subsidiaries tax rate | 8.8 | 13.6 | ||||
- permanent differences | 0.8 | 0.2 | ||||
- other | (0.9 | ) | 0.1 | |||
8.7 | 13.9 | |||||
46.8 | 51.8 | |||||
The increase in the tax rate of foreign subsidiaries of 4.8%
essentially concerns the Eploration & Production segment
(4.5%) and includes the effects deriving from the application of
the windfall tax introduced by the Algerian government effective
from August 1, 2006 (1.6%), a supplemental tax rate introduced by
the government of the United Kingdom relating to the North Sea
production effective from January 1, 2006 (1.0%) and the increase
and the different allocation by country of profit before income
taxes (1.9%).
Permanent differences in 2006 mainly concern the nondeductibility
from taxable income of costs relating to fines of the Italian
Antitrust Authority (0.4%).
Permanent differences in 2005 mainly concern the nondeductibility
from taxable income of the increase in provisions for
contingencies following the fine imposed on February 15, 2006 by
the Italian Antitrust Authority to Eni SpA (0.6%).
31 Earnings per share
Basic earnings per share is calculated by dividing "Net
profit" of the year by the weighted-average number of shares
issued and outstanding during the year, excluding treasury
shares.
The average number of shares used for the calculation of the
basic earnings per share was 3,758,519,603 and 3,698,201,896 in
2005 and 2006, respectively.
Diluted earnings per share is calculated by dividing "Net
profit" of the year by the weighted-average number of shares
issued and outstanding during the year, excluding treasury
shares, including shares that could be issued potentially.
At December 31, 2005 and December 31, 2006, shares that could be
issued potentially concern essentially shares granted under stock
grant and stock option plans. The average number of shares used
for the calculation of the diluted earnings per share was
3,763,375,140 and 3,701,262,557 in 2005 and 2006, respectively.
200
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of the average number of shares used for the calculation of the basic and diluted earning per share is as follows:
(million euro) | 2005 |
2006 |
||
Average number of shares used for the calculation of the basic earnings per share | 3,758,519,603 | 3,698,201,896 | ||||
Number of potential shares following stock grant plans | 2,268,265 | 1,070,676 | ||||
Number of potential shares following stock options plans | 2,587,272 | 1,989,985 | ||||
Average number of shares used for the calculation of the diluted earnings per share | 3,763,375,140 | 3,701,262,557 | ||||
Enis net profit | (million euro) | 8,788 | 9,217 | |||
Basic earning per share | (euro per share) | 2.34 | 2.49 | |||
Diluted earning per share | (euro per share) | 2.34 | 2.49 | |||
32 Information by industry segment
and geographic financial information
Information by industry segment9
(million euro) |
Exploration & Production |
Gas & Power |
Refining & Marketing |
Petrochemicals |
Engineering & Construction |
Other activities |
Corporate and financial companies |
Elimination |
Total |
|||||||||
2005 | |||||||||||||||||||||||||||
Net sales from operations (a) | 22,531 | 22,969 | 33,732 | 6,255 | 5,733 | 863 | 1,239 | ||||||||||||||||||||
Less: intersegment sales | (14,761 | ) | (572 | ) | (1,092 | ) | (683 | ) | (925 | ) | (546 | ) | (1,015 | ) | |||||||||||||
Net sales to customers | 7,770 | 22,397 | 32,640 | 5,572 | 4,808 | 317 | 224 | 73,728 | |||||||||||||||||||
Operating profit | 12,592 | 3,321 | 1,857 | 202 | 307 | (934 | ) | (377 | ) | (141 | ) | 16,827 | |||||||||||||||
Provisions for contingencies | 50 | 703 | 420 | 47 | 32 | 284 | 107 | 1,643 | |||||||||||||||||||
Depreciation, amortization and writedowns | 4,101 | 685 | 467 | 147 | 180 | 91 | 114 | (4 | ) | 5,781 | |||||||||||||||||
Effects of investments accounted for using the equity method | 14 | 359 | 221 | 3 | 140 | 737 | |||||||||||||||||||||
Identifiable assets (b) | 29,010 | 21,928 | 11,787 | 2,905 | 5,248 | 438 | 1,523 | (534 | ) | 72,305 | |||||||||||||||||
Investments accounted for using the equity method | 292 | 2,155 | 936 | 19 | 457 | 31 | 3,890 | ||||||||||||||||||||
Identifiable liabilities (c) | 6,785 | 5,097 | 4,542 | 702 | 3,204 | 2,070 | 2,131 | 24,531 | |||||||||||||||||||
Capital expenditures | 4,965 | 1,152 | 656 | 112 | 349 | 48 | 132 | 7,414 | |||||||||||||||||||
2006 | |||||||||||||||||||||||||||
Net sales from operations (a) | 27,173 | 28,368 | 38,210 | 6,823 | 6,979 | 823 | 1,174 | ||||||||||||||||||||
Less: intersegment sales | (18,445 | ) | (751 | ) | (1,300 | ) | (667 | ) | (771 | ) | (520 | ) | (991 | ) | |||||||||||||
Net sales to customers | 8,728 | 27,617 | 36,910 | 6,156 | 6,208 | 303 | 183 | 86,105 | |||||||||||||||||||
Operating profit | 15,580 | 3,802 | 319 | 172 | 505 | (622 | ) | (296 | ) | (133 | ) | 19,327 | |||||||||||||||
Provisions for contingencies | 153 | 197 | 264 | 30 | (13 | ) | 236 | (100 | ) | 767 | |||||||||||||||||
Depreciation, amortization and writedowns | 4,776 | 738 | 447 | 174 | 196 | 28 | 71 | (9 | ) | 6,421 | |||||||||||||||||
Effects of investments accounted for using the equity method | 28 | 509 | 194 | 2 | 66 | (4 | ) | 795 | |||||||||||||||||||
Identifiable assets (b) | 29,720 | 23,500 | 11,359 | 2,984 | 6,362 | 344 | 1,023 | (666 | ) | 74,626 | |||||||||||||||||
Investments accounted for using the equity method | 258 | 2,214 | 874 | 11 | 483 | 46 | 3,886 | ||||||||||||||||||||
Identifiable liabilities (c) | 9,119 | 5,284 | 4,712 | 806 | 3,869 | 1,940 | 1,619 | 27,349 | |||||||||||||||||||
Capital expenditures | 5,203 | 1,174 | 645 | 99 | 591 | 72 | 88 | (39 | ) | 7,833 | |||||||||||||||||
(a) | Before elimination of intersegment sales. | |
(b) | Includes assets directly related to the generation of operating profit. | |
(c) | Includes liabilities directly related to the generation of operating profit. |
Intersegment sales are conducted on an arms length basis.
(9) | Operating profit (loss) by industry segment for 2005 have been reclassified on the basis of the new subdivision within segments. This reclassification concerns the Exploration & Production, Other activities and Corporate and financial companies segments. |
201
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Geographic financial information
ASSETS AND INVESTMENTS BY GEOGRAPHIC AREA OF ORIGIN
(million euro) | Italy |
Other EU |
Rest of Europe |
Americas |
Asia |
Africa |
Other areas |
Total |
||||||||||
2005 | ||||||||||||||||
Identifiable assets (a) | 38,229 | 8,768 | 3,085 | 2,670 | 5,864 | 13,445 | 244 | 72,305 | ||||||||
Capital expenditures | 2,442 | 545 | 415 | 507 | 1,181 | 2,233 | 91 | 7,414 | ||||||||
2006 | ||||||||||||||||
Identifiable assets (a) | 37,339 | 10,037 | 3,200 | 2,987 | 6,341 | 14,190 | 532 | 74,626 | ||||||||
Capital expenditures | 2,529 | 713 | 436 | 572 | 1,032 | 2,419 | 132 | 7,833 | ||||||||
(a) | Includes assets directly related to the generation of operating profit. |
SALES FROM OPERATIONS BY GEOGRAPHIC AREA OF DESTINATION
(million euro) | 2005 |
2006 |
||
Italy | 32,846 | 36,343 | ||||
Other European Union | 19,601 | 23,949 | ||||
Rest of Europe | 5,123 | 6,975 | ||||
Americas | 6,103 | 6,250 | ||||
Asia | 4,399 | 5,595 | ||||
Africa | 5,259 | 5,949 | ||||
Other areas | 397 | 1,044 | ||||
73,728 | 86,105 | |||||
33 Transactions with related
parties
In the ordinary course of its business, Eni enters into
transactions concerning the exchange of goods, provision of
services and financing with joint ventures, affiliated companies
and non-consolidated subsidiaries as well as with entities
directly and indirectly owned or controlled by the Government.
All such transactions are mainly conducted on an arms
length basis in the interest of Eni companies.
The following is a description of trade and financing
transactions with related parties.
202
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Trade and other transactions
Trade and other transactions in the 2005 consisted of
the following:
(million euro) | Dec. 31, 2005 |
2005 |
||
Costs |
Revenues |
||
Name | Receivables |
Payables |
Guarantees |
Goods |
Services |
Goods |
Services |
|||||||
Joint ventures and affiliated companies | ||||||||||||||
ASG Scarl | 13 | 66 | 72 | 173 | 6 | |||||||||
Azienda Energia e Servizi Torino SpA | 2 | 24 | 56 | 2 | ||||||||||
Bayernoil Raffineriegesellshaft mbH | 49 | 1 | 814 | |||||||||||
Bernhard Rosa Inh. Ingeborg Plöchinger GmbH | 10 | 172 | ||||||||||||
Blue Stream Pipeline Co BV | 45 | 12 | 177 | 4 | ||||||||||
Bronberger & Kessler und Gilg & Schweiger GmbH | 12 | 207 | ||||||||||||
Cam Petroli Srl | 85 | 593 | ||||||||||||
CEPAV (Consorzio Eni per lAlta Velocità) Uno | 105 | 107 | 4,894 | 411 | ||||||||||
Eni Gas BV | 16 | 149 | 47 | |||||||||||
Eni Oil Co Ltd | 84 | 50 | ||||||||||||
Fox Energy SpA | 22 | 4 | 240 | |||||||||||
Gruppo Distribuzione Petroli Srl | 22 | 89 | ||||||||||||
Karachaganak Petroleum Operating BV | 13 | 46 | 6 | 99 | 4 | |||||||||
Mangrove Gas Netherlands BV | 55 | |||||||||||||
Modena Scarl | 2 | 12 | 61 | 56 | 1 | 1 | ||||||||
Petrobel Belayim Petroleum Co | 138 | 248 | ||||||||||||
Promgas SpA | 44 | 45 | 307 | 355 | ||||||||||
Raffineria di Milazzo ScpA | 10 | 10 | 204 | 94 | ||||||||||
Rodano Consortile Scarl | 2 | 20 | 80 | 2 | ||||||||||
RPCO Enterprises Ltd | 55 | |||||||||||||
Supermetanol CA | 8 | 65 | ||||||||||||
Super Octanos CA | 1 | 14 | 265 | |||||||||||
Toscana Energia Clienti SpA | 46 | 118 | ||||||||||||
Trans Austria Gasleitung GmbH | 43 | 55 | 43 | 143 | 47 | |||||||||
Transitgas AG | 7 | 64 | ||||||||||||
Transmediterranean Pipeline Co Ltd | 4 | 88 | 1 | |||||||||||
Unión Fenosa Gas SA | 4 | 4 | 62 | 79 | 16 | 2 | ||||||||
Other (*) | 101 | 86 | 112 | 69 | 157 | 147 | 67 | |||||||
598 | 940 | 5,312 | 838 | 2,456 | 2,032 | 547 | ||||||||
Unconsolidated subsidiaries | ||||||||||||||
Agip Kazakhstan North Caspian Operating Co NV | 4 | 152 | 5 | 19 | 28 | |||||||||
Eni BTC Ltd | 165 | |||||||||||||
Other (*) | 44 | 48 | 8 | 1 | 31 | 15 | 9 | |||||||
48 | 200 | 173 | 6 | 50 | 15 | 37 | ||||||||
646 | 1,140 | 5,485 | 844 | 2,506 | 2,047 | 584 | ||||||||
Entities owned or controlled by the Italian Government | ||||||||||||||
Alitalia | 20 | 276 | ||||||||||||
Enel | 187 | 5 | 12 | 10 | 1,180 | 333 | ||||||||
Other (*) | 20 | 19 | 57 | 103 | 12 | |||||||||
227 | 24 | 12 | 67 | 1,559 | 345 | |||||||||
873 | 1,164 | 5,485 | 856 | 2,573 | 3,606 | 929 | ||||||||
(*) | Each individual amount included herein does not exceed euro 50 million. |
203
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Trade and other transactions in 2006 consisted of the following:
(million euro) | Dec. 31, 2006 |
2006 |
||
Costs |
Revenues |
||
Name | Receivables |
Payables |
Guarantees |
Goods |
Services |
Goods |
Services |
|||||||
Joint ventures and affiliated companies | ||||||||||||||
ASG Scarl | 7 | 40 | 80 | 88 | 1 | 1 | ||||||||
Azienda Energia e Servizi Torino SpA | 1 | 22 | 64 | 1 | 1 | |||||||||
Bernhard Rosa Inh. Ingeborg Plöchinger GmbH | 10 | 96 | ||||||||||||
Blue Stream Pipeline Co BV | 34 | 19 | 193 | 1 | ||||||||||
Bronberger & Kessler und Gilg & Schweiger GmbH | 11 | 113 | ||||||||||||
Cam Petroli Srl | 103 | 310 | ||||||||||||
CEPAV (Consorzio Eni per lAlta Velocità) Uno | 87 | 87 | 5,654 | 16 | 2 | 304 | ||||||||
Charville - Consultores e Serviços Lda | 7 | 85 | 4 | 11 | ||||||||||
Eni Gas BV | 28 | 90 | 7 | 72 | 8 | 2 | ||||||||
Eni Oil Co Ltd | 5 | 96 | 59 | |||||||||||
Fox Energy SpA | 35 | 125 | ||||||||||||
Gasversorgung Süddeutschland GmbH | 14 | 1 | 123 | 19 | ||||||||||
Gruppo Distribuzione Petroli Srl | 19 | 54 | ||||||||||||
Karachaganak Petroleum Operating BV | 23 | 70 | 29 | 129 | 7 | |||||||||
Mangrove Gas Netherlands BV | 1 | 52 | ||||||||||||
Petrobel Belayim Petroleum Co | 3 | 181 | ||||||||||||
Promgas SpA | 44 | 39 | 375 | 419 | ||||||||||
Raffineria di Milazzo ScpA | 9 | 12 | 237 | 109 | ||||||||||
Rodano Consortile Scarl | 3 | 14 | 54 | 1 | ||||||||||
Rpco Enterprises Ltd | 13 | 104 | 12 | |||||||||||
Supermetanol CA | 13 | 91 | ||||||||||||
Super Octanos CA | 13 | 257 | ||||||||||||
Trans Austria Gasleitung GmbH | 7 | 78 | 53 | 138 | 56 | |||||||||
Transitgas AG | 8 | 64 | ||||||||||||
Transmediterranean Pipeline Co Ltd | 7 | 80 | ||||||||||||
Unión Fenosa Gas SA | 1 | 7 | 61 | 93 | 7 | |||||||||
Other (*) | 72 | 169 | 168 | 75 | 188 | 119 | 66 | |||||||
533 | 788 | 6,204 | 996 | 1,557 | 1,482 | 481 | ||||||||
Unconsolidated subsidiaries | ||||||||||||||
Agip Kazakhstan North Caspian Operating Co NV | 27 | 132 | 18 | 16 | 57 | |||||||||
Eni BTC Ltd | 185 | |||||||||||||
Eni Timor Leste SpA | 102 | |||||||||||||
Other (*) | 20 | 30 | 8 | 1 | 4 | 8 | 4 | |||||||
47 | 162 | 295 | 19 | 20 | 8 | 61 | ||||||||
580 | 950 | 6,499 | 1,015 | 1,577 | 1,490 | 542 | ||||||||
Entities owned or controlled by the Italian Government | ||||||||||||||
Alitalia | 12 | 354 | ||||||||||||
Enel | 162 | 42 | 47 | 33 | 1,068 | 383 | ||||||||
Other (*) | 42 | 29 | 4 | 44 | 136 | 1 | ||||||||
216 | 71 | 51 | 77 | 1,558 | 384 | |||||||||
796 | 1,021 | 6,499 | 1,066 | 1,654 | 3,048 | 926 | ||||||||
(*) | Each individual amount included herein does not exceed euro 50 million. |
204
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Engineering, construction and maintenance services are
acquired on an arms length basis from the Cosmi Holding
Group, related to Eni through a member of the Board of Directors,
for a total of approximately euro 18 million and euro 13 million
in 2005 and 2006, respectively.
Most significant transactions concern:
Financing transactions
Financing transactions in 2005 are as follows:
(million euro) | Dec. 31, 2005 |
2005 |
||
Name | Receivables |
Payables |
Guarantees |
Charges |
Gains |
|||||
Joint ventures and affiliated companies | ||||||||||
Blue Stream Pipeline Co BV | 15 | 887 | ||||||||
Raffineria di Milazzo ScpA | 72 | |||||||||
Spanish Egyptian Gas Co SAE | 360 | |||||||||
Trans Austria Gasleitung GmbH | 386 | 12 | ||||||||
Transmediterranean Pipeline Co Ltd | 190 | 11 | ||||||||
Other (*) | 74 | 125 | 81 | 27 | 47 | |||||
650 | 140 | 1,400 | 27 | 70 | ||||||
Unconsolidated subsidiaries | ||||||||||
Other (*) | 79 | 30 | 34 | 1 | 2 | |||||
79 | 30 | 34 | 1 | 2 | ||||||
729 | 170 | 1,434 | 28 | 72 | ||||||
(*) | Each individual amount included herein does not exceed euro 50 million. |
205
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financing transactions in 2006 are as follows:
(million euro) | Dec. 31, 2006 |
2006 |
||
Name | Receivables |
Payables |
Guarantees |
Charges |
Gains |
|||||
Joint ventures and affiliated companies | ||||||||||
Blue Stream Pipeline Co BV | 3 | 794 | 4 | 26 | ||||||
Raffineria di Milazzo ScpA | 57 | |||||||||
Spanish Egyptian Gas Co SAE | 323 | |||||||||
Trans Austria Gasleitung GmbH | 41 | 6 | ||||||||
Transmediterranean Pipeline Co Ltd | 147 | 11 | ||||||||
Other (*) | 88 | 81 | 39 | 13 | 11 | |||||
276 | 84 | 1,213 | 17 | 54 | ||||||
Unconsolidated subsidiaries | ||||||||||
Other (*) | 95 | 25 | 2 | 1 | 4 | |||||
95 | 25 | 2 | 1 | 4 | ||||||
371 | 109 | 1,215 | 18 | 58 |
(*) | Each individual amount included herein does not exceed euro 50 million. |
Most significant transactions in 2006 included:
Impact of transactions and positions with related
parties on the balance sheet, net profit and cash flows
The impact of transactions and positions with related
parties on the balance sheet, net profit and financial flows
consists of the following:
Dec. 31, 2005 |
Dec. 31, 2006 |
|||
(million euro) | Total | Related parties | Impact % | Total | Related parties | Impact % | ||||||
Trade and other receivables | 17,902 | 1,344 | 7.51 | 18,799 | 1,027 | 5.46 | ||||||||||||
Other current assets | 369 | 855 | 4 | 0.47 | ||||||||||||||
Other non-current financial assets | 1,050 | 258 | 24.57 | 805 | 136 | 16.89 | ||||||||||||
Current financial liabilities | 4,612 | 152 | 3.30 | 3,400 | 92 | 2.71 | ||||||||||||
Trade and other payables | 13,095 | 1,164 | 8.89 | 15,995 | 961 | 6.01 | ||||||||||||
Other liabilities | 613 | 634 | 4 | 0.63 | ||||||||||||||
Long-term debt and current portion of long-term debt | 8,386 | 18 | 0.21 | 8,299 | 17 | 0.20 | ||||||||||||
Other non-current liabilities | 897 | 418 | 56 | 13.40 | ||||||||||||||
206
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The impact of transactions with related parties on the profit and loss accounts consists of the following:
Dec. 31, 2005 |
Dec. 31, 2006 |
|||
(million euro) | Total | Related parties | Impact % | Total | Related parties | Impact % | ||||||
Net sales from operations | 73,728 | 4,535 | 6.15 | 86,105 | 3,974 | 4.62 | ||||||||||||
Purchases, services and other | 48,567 | 3,429 | 7.06 | 57,490 | 2,720 | 4.73 | ||||||||||||
Financial income | 3,131 | 72 | 2.30 | 4,132 | 58 | 1.40 | ||||||||||||
Financial expense | 3,497 | 28 | 0.80 | 3,971 | 18 | 0.45 | ||||||||||||
Transactions with related parties concern the ordinary course
of Enis business and are mainly conducted on an arms
length basis.
Main cash flows with related parties are as
follows:
(million euro) | 2005 |
2006 |
||
Revenues and other income | 4,535 | 3,974 | ||||
Costs and other expenses | (3,429 | ) | (2,720 | ) | ||
Net change in trade and other receivables and payables | (221 | ) | 162 | |||
Dividends and net interests | 345 | 790 | ||||
Net cash provided from operating activities | 1,230 | 2,206 | ||||
Capital expenditures in tangible and intangible assets | (474 | ) | (733 | ) | ||
Investments | (30 | ) | (20 | ) | ||
Change in accounts payable in relation to investments | 342 | (276 | ) | |||
Change in financial receivables | 2 | 343 | ||||
Net cash used in investing activities | (160 | ) | (686 | ) | ||
Change in financial liabilities | 23 | (57 | ) | |||
Net cash used in financing activities | 23 | (57 | ) | |||
Total financial flows to related parties | 1,093 | 1,463 | ||||
The impact of cash flows with related parties consists of the following:
2005 |
2006 |
|||
(million euro) | Total | Related parties | Impact % | Total | Related parties | Impact % | ||||||
Cash provided from operating activities | 14,936 | 1,230 | 8.24 | 17,001 | 2,206 | 12.98 | ||||||||||||
Cash used in investing activities | (6,815 | ) | (160 | ) | 2.35 | (7,051 | ) | (686 | ) | 9.73 | ||||||||
Cash used in financing activities | (7,824 | ) | 23 | .. | (7,097 | ) | (57 | ) | 0.80 | |||||||||
207
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34 Significant non recurring events and
operations
Non recurring charges consist of the following:
(million euro) | 2005 |
2006 |
||
Italian Antitrust fines | (290 | ) | (184 | ) | ||
Italian Authority for Electricity and Gas fines | (55 | ) | ||||
(290 | ) | (239 | ) | |||
The Italian Antitrust fines of 2006 consist of: (i) a fine
imposed by the Italian Antitrust Authority following the
proceeding on supplies of jet fuel (euro 109 million); (ii)
inquiries concerning alleged anti-competitive agreements in the
area of elastomers (euro 75 million). The fine imposed by the
Authority for Electricity and Gas concerns an inquiry relating to
the use of storage capacity in thermal year 2005-2006 (euro 45
million) and an inquiry relating to an information requirement on
natural gas supplying prices (euro 10 million). The antitrust
fine for 2005 concerns a fine imposed by the Italian Antitrust
Authority on February 15, 2006 relating
to an abuse of dominant position following the behaviors of Trans
Tunisian Pipeline Co Ltd (TTPC). More information is included in
Note 25 - Guarantees, commitments and risks - Legal proceedings -
Antitrust - TTPC.
35 Positions or transactions deriving from
atypical and/or unusual operations
In 2005 and in 2006 no positions or transactions deriving
from atypical and/or unusual operations were reported.
208
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36 Adjustment of the Consolidated Financial
Statements to U.S. GAAP
As its shares are listed on the New York Stock Exchange, Eni
files an Annual Report (Form 20-F) with the Securities and
Exchange Commission (SEC). The Annual Report (Form 20-F) includes
the adjustment of the Consolidated Financial Statements to U.S.
GAAP. The following information is necessary to reconcile the
Italian consolidated annual report for 2006 to generally accepted
accounting principles in the United States (U.S. GAAP).
Summary of significant differences between IFRS and
U.S. GAAP
Enis Financial Statements at December 31, 2006
have been prepared in accordance with International Financial
Reporting Standards (IFRS)10 adopted by the European
Commission, which differ in certain aspects from U.S. GAAP. A
description of the significant differences and their effects on
net profit and shareholders equity is set forth in the
following notes.
A) CONSOLIDATION POLICY
Enis consolidation policy is described under
"Principles of consolidation" of the Notes to the
Consolidated Financial Statements. In particular, under IFRS, the
consolidated financial statements include also companies in which
Eni holds less than 50% of the voting rights, but over which it
exercises control in shareholders meetings.
Under U.S. GAAP, investments of less than 50% are accounted for
by applying the equity method. Under U.S. GAAP, Saipem SpA and
its subsidiaries are excluded from consolidation and are
accounted for under the equity method. Under IFRS, Eni exercises
control of Saipem SpA also without holding the majority of voting
rights (43.54%) exercisable in shareholders' meetings. During
2006 Saipem Projects SpA (100% Saipem SpA) acquired from Eni SpA
100% of Snamprogetti SpA that, as a result, has been excluded
from consolidation; for U.S. GAAP purposes the gain on this sale
was recognized in the profit and loss account.
B) EXPLORATION & PRODUCTION ACTIVITIES
Exploration
Consistent with IFRS, the international specific criteria have
been applied for hydrocarbons exploration and production
activities. In particular, exploration costs, including
successful exploratory wells, are recorded as intangible assets
and are amortized in full in the period incurred (i.e., expensed
as incurred for financial reporting purposes). Costs for the
acquisition of exploration permits and for the extension of
existing permits, are capitalized and amortized over the expected
period of benefit.
Under U.S. GAAP, costs relating to exploratory wells are
initially capitalized as "incomplete wells and other"
until it is determined if commercial quantities of reserves have
been discovered ("successful efforts method"). After
completion of drilling and evaluation of the well, the
capitalized costs are either charged to expense or reclassified
as part of Enis proved mineral interests. Costs of
exploratory wells that have found commercially producible
quantities of reserves that cannot be classified as proved remain
capitalized after the completion of drilling if: (i) such wells
have found a sufficient quantity of reserves to justify
completion as a producing wells; (ii) the enterprise is making
sufficient progress assessing the reserves and the economic and
operating viability of the project. If either condition is not
met or if an enterprise obtains information that raises
substantial doubt about the economic or operational viability of
the project, the exploratory well is assumed to be impaired, and
its costs, net of any salvage value, are charged to expense.
Capitalized well costs related to proved properties are amortized
over proved developed reserves on the basis of units of
production. Other exploration costs, including geological and
geophysical surveys, are expensed when incurred.
Development
Development costs are those costs incurred to obtain access to
proved reserves and to provide facilities for extracting,
treating, gathering and storing oil and gas. Costs to operate and
maintain wells and field equipment are expensed as incurred.
Under IFRS, costs of unsuccessful development wells are expensed
immediately as loss on disposal. Costs of successful development
wells are capitalized and amortized using the unit-of-production
method.
Under U.S. GAAP, costs of productive wells and development dry
holes, both tangible and intangible, are capitalized and
amortized using the unit-of-production method.
C) VALUATION OF ASSETS AND SUBSEQUENT REVALUATION
Both IFRS and U.S. GAAP require that recoverability of carrying
value of tangible and intangible assets with a definite useful
life is checked using similar criteria, with the exception of the
following aspects.
Under IFRS, in order to determine whether an impairment exists,
the book value of an asset is compared with its recoverable
amount which is represented by the greater of fair value, net of
disposal costs and value in use which is calculated by
(10) | There are no relevant differences between the accounting principles approved by the European Commission and the ones issued by IASB. |
209
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
discounting estimated cash flows arising from the use of the
asset and its sale at the end of its useful life. Impairment
losses of assets different from goodwill are reversed when the
situation giving rise to an impairment ceases to exist.
Under U.S. GAAP, the recoverability of the value of an asset used
in the production process is first checked by comparing the
carrying amount with the sum of undiscounted cash flows expected
from use of the asset and its disposal at the end of its useful
life. Only if the result of this first check is negative does the
entity write the asset down using discounted future cash flows.
Under U.S. GAAP reversals of impairment losses are not permitted.
D) DEFERRED TAX ASSETS AND LIABILITIES
Under IFRS, taxes payable relating to certain potential
distributions from shareholders equity or upon liquidation
of a company are accrued only to the extent such distributions
are planned.
Under U.S. GAAP, deferred tax liabilities are recognized
regardless of expected distribution of dividends or the disposal
of investments. However, U.S. GAAP does not require the accrual
of deferred taxes when the investment is a foreign subsidiary and
there is sufficient evidence that profits will remain permanently
invested in the entity.
The adjustment included in Note 37 - Reconciliation of net profit
and shareholders equity determined under IFRS to U.S. GAAP,
concerns the recognition of deferred taxes on shareholders
equity regardless of its expected distribution and it is measured
taking into account the exception provided for foreign
subsidiaries. This adjustment includes also deferred tax assets
and liabilities on other adjustments to U.S. GAAP.
E) INTANGIBLE ASSETS
Under U.S. GAAP, intangible assets include the recording,
separately from goodwill, of assets acquired in or following
business combinations arising from legal or contractual rights
regardless of their ability to be transferred and of other assets
owned by the entity that can be transferred individually or
together with other assets and liabilities. If such intangible
assets have definite lives they are amortized by the straight
line method over their useful lives.
IFRS are consistent with U.S. GAAP. However, considering that in
the first application of IFRS, Eni has decided not to restate
business combinations, the value of the intangible assets
described is recorded in the item "Goodwill".
Both under U.S. GAAP and IFRS, goodwill and intangible assets
with an indefinite useful life are not amortized; these assets
are subject to a yearly evaluation in order to define the
relevant impairment if needed. Such accounting principles have
been adopted starting from January 1, 2002 for U.S. GAAP and
January 1, 2004 for IFRS. The adjustments for the reconciliation
of shareholders' equity included in Note 37 - Reconciliation of
net profit and shareholders equity determined under IFRS to
U.S. GAAP, concern the reversal of the amortization of goodwill
for the years 2002 and 2003.
F) INVENTORIES
Under U.S. GAAP, crude oil, petroleum products and natural gas
inventories are calculated using the LIFO method.
Under IFRS the LIFO method is not permitted.
G) PROVISIONS FOR EMPLOYEE BENEFITS
Both under U.S. GAAP and IFRS liabilities related to defined
benefit plans and long-term employee benefits are determined by
adopting actuarial assumptions. The application of the corridor
approach is allowed. Under the corridor approach the actuarial
gains and losses of defined benefit plans, deriving from a change
in the actuarial assumptions used or from a change in the
conditions of the plan, are charged to the profit and loss
account, proportionally through the residual average working life
of the employees participating to the plan, in the limits of the
share of the discounted profit/loss not charged beforehand, that
exceeds the greater of 10% of liabilities and 10% of the fair
value of the plan assets.
Under IFRS, following the application of the corridor approach,
the liability for employee benefits is recognised in the caption
"Provisions for employee benefits" and excludes
actuarial incomes and losses not charged to the profit and loss
account. Plan assets are measured on the basis of their expected
return.
Under U.S. GAAP plan assets are measured on the basis of their
effective return. The actuarial liability recognized in the
balance sheet includes the total amount of incomes and losses
deriving from changes in actuarial assumptions; changes of
liabilities relating to actuarial incomes and losses not
accounted in the profit and loss account are recognized, net of
the related deferred tax effect with a corresponding entry to the
item of the shareholders equity "Other comprehensive
income".11 In the following periods, the
actuarial incomes and losses "suspended" in other
comprehensive income are recognised in the profit and loss
account according to the corridor method.
(11) | The difference between IFRS and U.S. GAAP takes into consideration the adoption of SFAS 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS 158); the effects of the adoption of SFAS 158 are described in the paragraph Changes in accounting principles. |
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37 Reconciliation of net profit
and shareholders equity determined under IFRS to U.S. GAAP
The following is a summary of the significant adjustments to net
profit of 2004, 2005 and 2006 and to shareholders equity as
of December 31, 2005 and as of December 31, 2006 that would be
required if U.S. GAAP had been applied instead of IFRS in the
Consolidated Financial Statements.
(million euro) | 2004 | 2005 |
2006 |
|||
Net profit pertaining to Eni according to the Financial Statements prepared under IFRS | 7,059 | 8,788 | 9,217 | ||||||
Items increasing (decreasing) reported net profit: | |||||||||
A. effect of the differences related to companies consolidated under IFRS but carried at the equity method under U.S. GAAP | (1 | ) | (1 | ) | |||||
B. successful-efforts accounting | (82 | ) | 47 | 359 | |||||
C. elimination of assets impairments and revaluations | 5 | 36 | |||||||
D. deferred income taxes | (21 | ) | (279 | ) | (120 | ) | |||
E. assets associated to the acquisition of a company (portfolio of clients) | (5 | ) | (5 | ) | (5 | ) | |||
F. valuation of inventories | (316 | ) | (956 | ) | 267 | ||||
Gain on sale of Snamprogetti SpA to Saipem Projects SpA | 252 | ||||||||
Effect of the difference between IFRS and U.S. GAAP on investments accounted for using the equity method | 34 | 12 | 1 | ||||||
Other adjustments | (280 | ) | (3 | ) | (4 | ) | |||
Effect of U.S. GAAP adjustments on minority interest (a) | 8 | (21 | ) | 3 | |||||
Net adjustment | (658 | ) | (1,205 | ) | 788 | ||||
Net profit in accordance with U.S. GAAP | 6,401 | 7,583 | 10,005 | ||||||
Basic profit per share (b) | 1.70 | 2.02 | 2.71 | ||||||
Diluted profit per share (b) | 1.70 | 2.01 | 2.70 | ||||||
Basic profit per ADS (based on two shares per ADS) (b) | 3.39 | 4.03 | 5.41 | ||||||
Diluted profit per ADS (based on two shares per ADS) (b) | 3.39 | 4.03 | 5.41 | ||||||
(a) | Adjustment to account for minority interest portion of differences A through F, which include 100% of differences between IFRS and U.S. GAAP on less than wholly-owned subsidiaries. | |
(b) | Amounts in euro. |
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Shareholders equity pertaining to Eni according to the Financial Statements prepared under IFRS | 36,868 | 39,029 | ||||
Items increasing (decreasing) reported shareholders equity (a): | ||||||
A. effect of the differences related to companies consolidated under IFRS but carried at the equity method under U.S. GAAP | 37 | 33 | ||||
B. successful-efforts accounting | 2,504 | 2,672 | ||||
C. elimination of assets impairments and revaluations | 230 | 311 | ||||
D. deferred income taxes | (3,415 | ) | (3,495 | ) | ||
E. goodwill | 811 | 786 | ||||
E. assets associated with the acquisition of a company (portfolio of clients) | (16 | ) | (22 | ) | ||
F. valuation of inventories | (2,036 | ) | (1,769 | ) | ||
G. provisions for employees benefits | (32 | ) | ||||
Effect of the difference between IFRS and U.S. GAAP on investments accounted for using the equity method | 173 | 169 | ||||
Other adjustments | 2 | |||||
Effect of U.S. GAAP adjustments on minority interest (b) | (31 | ) | (28 | ) | ||
Net adjustment | (1,743 | ) | (1,373 | ) | ||
Shareholders equity in accordance with U.S. GAAP | 35,125 | 37,656 | ||||
(a) | Items increasing (decreasing) reported shareholders equity of foreign companies are translated into euro at the exchange rate prevailing at the end of each period. | |
(b) | Adjustment to account for minority interest portion of differences A through G, which include 100% of differences between IFRS and U.S. GAAP on less than wholly-owned subsidiaries. |
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets, if determined under U.S. GAAP would have been as follows:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalent | 1,121 | 3,685 | ||||
Other financial assets for trading or available for sale | 1,484 | 970 | ||||
Trade and other receivables | 17,971 | 18,568 | ||||
Inventories | 1,929 | 2,721 | ||||
Current tax assets | 575 | 447 | ||||
Other current assets | 387 | 877 | ||||
Total current assets | 23,467 | 27,268 | ||||
Non-current assets | ||||||
Property, plant and equipment | 43,868 | 42,924 | ||||
Other assets | 629 | |||||
Inventories - compulsory stock | 1,462 | 1,273 | ||||
Intangible assets | 5,244 | 6,057 | ||||
Investments accounted for using the equity method | 4,589 | 4,305 | ||||
Other investments | 416 | 353 | ||||
Other financial assets | 1,105 | 860 | ||||
Deferred tax assets | 1,847 | 1,145 | ||||
Other non-current receivables | 979 | 992 | ||||
Total non-current assets | 59,510 | 58,538 | ||||
TOTAL ASSETS | 82,977 | 85,806 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||
Current liabilities | ||||||
Current financial liabilities | 4,916 | 4,032 | ||||
Current portion of long-term debt | 809 | 890 | ||||
Trade and other payables | 11,552 | 13,201 | ||||
Taxes payable | 3,296 | 2,671 | ||||
Other current liabilities | 648 | 720 | ||||
Total current liabilities | 21,221 | 21,514 | ||||
Non-current liabilities | ||||||
Long-term debt | 7,229 | 6,646 | ||||
Provisions for contingencies | 7,615 | 8,553 | ||||
Provisions for employee benefits | 939 | 937 | ||||
Deferred tax liabilities | 8,370 | 8,762 | ||||
Other non-current liabilities | 1,015 | 417 | ||||
Total non-current liabilities | 25,168 | 25,315 | ||||
TOTAL LIABILITIES | 46,389 | 46,829 | ||||
SHAREHOLDERS EQUITY | ||||||
Minority interests | 1,463 | 1,321 | ||||
Eni shareholders equity: | ||||||
Share capital: 4,005,358,876 fully paid shares nominal value euro 1 each (the same amount as of December 31, 2005) | 4,005 | 4,005 | ||||
Other reserves | 27,753 | 29,020 | ||||
Net profit | 7,583 | 10,005 | ||||
Treasury shares | (4,216 | ) | (5,374 | ) | ||
Eni shareholders equity | 35,125 | 37,656 | ||||
Total shareholders equity | 36,588 | 38,977 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | 82,977 | 85,806 | ||||
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Property, plant and equipment determined under U.S. GAAP consist of the following:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Property, plant and equipment, gross: | ||||||
- Exploration & Production | 47,891 | 47,852 | ||||
- Gas & Power | 21,514 | 22,304 | ||||
- Refining & Marketing | 9,059 | 10,939 | ||||
- Petrochemical | 3,923 | 3,940 | ||||
- Engineering & Construction | 72 | |||||
- Other activities | 1,175 | 1,105 | ||||
- Corporate and financial companies | 441 | 321 | ||||
- Elimination of intra-group profits | (88 | ) | (56 | ) | ||
83,987 | 86,405 | |||||
Accumulated depreciation and amortization: | ||||||
- Exploration & Production | 22,790 | 24,265 | ||||
- Gas & Power | 7,754 | 8,204 | ||||
- Refining & Marketing | 5,503 | 7,111 | ||||
- Petrochemical | 2,715 | 2,751 | ||||
- Engineering & Construction | 56 | |||||
- Other activities | 1,060 | 1,012 | ||||
- Corporate and financial companies | 245 | 144 | ||||
- Elimination of intra-group profits | (4 | ) | (6 | ) | ||
40,119 | 43,481 | |||||
Property, plant and equipment, net: | ||||||
- Exploration & Production | 25,101 | 23,587 | ||||
- Gas & Power | 13,760 | 14,100 | ||||
- Refining & Marketing | 3,556 | 3,828 | ||||
- Petrochemical | 1,208 | 1,189 | ||||
- Engineering & Construction | 16 | |||||
- Other activities | 115 | 93 | ||||
- Corporate and financial companies | 196 | 177 | ||||
- Elimination of intra-group profits | (84 | ) | (50 | ) | ||
43,868 | 42,924 | |||||
Property, plant and equipment by segment as at December 31,
2005 have been reclassified on the basis of the new subdivision
within segments. These reclassification concern Exploration &
Production, Other activities and Corporate and financial
companies.
Operating profit (loss) by industry segment and profit before
income taxes, as determined under U.S. GAAP, would have been as
follows:
(million euro) | 2004 | 2005 |
2006 |
|||
Operating profit (loss) by industry segment | |||||||||
Exploration & Production | 7,963 | 12,690 | 15,784 | ||||||
Gas & Power | 3,371 | 3,237 | 3,681 | ||||||
Refining & Marketing | 811 | 881 | 605 | ||||||
Petrochemical | 281 | 202 | 216 | ||||||
Engineering & Construction | (52 | ) | 1 | ||||||
Other activities | (406 | ) | (967 | ) | (622 | ) | |||
Corporate and financial companies | (229 | ) | (375 | ) | (296 | ) | |||
Elimination of intra-group profits | (141 | ) | (23 | ) | |||||
11,739 | 15,528 | 19,345 | |||||||
Net profit before income taxes | 12,324 | 16,281 | 20,784 | ||||||
Operating profit (loss) by industry segment for the periods 2004 and 2005 have been reclassified on the basis of the new subdivision within segments. These reclassification concern Exploration & Production, Other activities and Corporate and financial companies.
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38 Additional financial statement disclosures
required by U.S. GAAP and the SEC
Charges related to asset retirement obligations (SFAS
143)
Changes in provisions for asset retirement obligations during the
year were:
(million euro) | 2004 | 2005 |
2006 |
|||
Provision for asset retirement obligations as of January 1 | 1,950 | 1,959 | 2,646 | ||||||
New obligations incurred during the year | 193 | 311 | 12 | ||||||
Accretion discount | 80 | 106 | 112 | ||||||
Revisions of previous estimates | 40 | 277 | 1,229 | ||||||
Spending on existing obligations | (32 | ) | (107 | ) | (112 | ) | |||
Property dispositions | (234 | ) | |||||||
Foreign currency translation | (36 | ) | 110 | (101 | ) | ||||
Other adjustments | (2 | ) | (10 | ) | (16 | ) | |||
Provision for asset retirement obligations as of December 31 | 1,959 | 2,646 | 3,770 | ||||||
Income taxes in accordance with U.S. GAAP
The following information is presented according to
Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". Domestic and foreign
components of pre-tax income were as follows:
(million euro) | 2004 | 2005 |
2006 |
|||
Domestic | 5,468 | 4,727 | 6,190 | ||||||
Foreign | 6,856 | 11,554 | 14,594 | ||||||
12,324 | 16,281 | 20,784 | |||||||
Income taxes were as follows:
(million euro) | 2004 | 2005 |
2006 |
|||
Current | 4,470 | 7,217 | 9,130 | ||||||
Deferred | 1,112 | 1,116 | 1,354 | ||||||
5,582 | 8,333 | 10,484 | |||||||
The reconciliation of income taxes calculated under Italian tax regulation by applying a 33% rate (Ires - national corporate income tax) to pre-tax income and a 4.25% rate (Irap - regional income tax) to net value of production as provided for by Italian laws, to the income taxes recorded on a U.S. GAAP basis is as follows:
(million euro) | 2004 | 2005 |
2006 |
|||
Income before tax in accordance with U.S. GAAP | 12,324 | 16,281 | 20,784 | ||||||
Italian statutory tax rate (state and local) (%) | 38.3 | 37.9 | 37.6 | ||||||
Expected income tax provision in accordance with U.S. GAAP at Italian statutory tax rate | 4,714 | 6,176 | 7,812 | ||||||
Effect of items increasing (decreasing) the Italian statutory tax rate: | |||||||||
- increase (decrease) in tax effect of foreign operations | 835 | 1,946 | 2,770 | ||||||
- taxes on distributable reserves | 446 | 252 | 11 | ||||||
- permanent differences | (143 | ) | 131 | (75 | ) | ||||
- revaluation of deferred tax assets | (218 | ) | (52 | ) | (20 | ) | |||
- benefits deriving from the application of favorable tax laws | (8 | ) | (11 | ) | (14 | ) | |||
- other | (44 | ) | (109 | ) | |||||
5,582 | 8,333 | 10,484 | |||||||
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NET DEFERRED TAX LIABILITIES
The most significant temporary differences giving rise to net
deferred tax liabilities were as follows:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Deferred tax liabilities: | ||||||
- accelerated depreciation | 6,006 | 6,932 | ||||
- distributable reserves subject to taxes in case of distribution | 3,212 | 3,223 | ||||
- asset retirement costs | 376 | 724 | ||||
- successful efforts method accounting | 690 | 522 | ||||
- excess cost paid for the acquisition of consolidated investments | 485 | 431 | ||||
- capitalization of interest expense | 245 | 232 | ||||
- provisions for uncollectible receivables | 84 | 85 | ||||
- provisions for contingencies | 50 | 47 | ||||
- gains taxable in the future | 34 | 23 | ||||
- other | 775 | 805 | ||||
11,957 | 13,024 | |||||
Deferred tax assets: | ||||||
- accruals for impairment losses on receivables and contingencies | (1,949 | ) | (2,555 | ) | ||
- revaluation of assets in accordance with Law No. 342/2000 and No. 448/2001 | (1,186 | ) | (1,028 | ) | ||
- depreciation and amortization of assets | (904 | ) | (749 | ) | ||
- tax losses carryforwards | (510 | ) | (337 | ) | ||
- impairment losses on assets and inventories | (135 | ) | (120 | ) | ||
- expense on investments | (237 | ) | (67 | ) | ||
- other | (1,062 | ) | (927 | ) | ||
(5,983 | ) | (5,783 | ) | |||
Less: | ||||||
- valuation allowance | 549 | 376 | ||||
(5,434 | ) | (5,407 | ) | |||
Net deferred tax liabilities | 6,523 | 7,617 | ||||
The valuation allowance relates to deferred tax assets of euro 376 million (euro 549 million at December 31, 2005) of consolidated companies whose expected future fiscal profits are not considered sufficient for the utilization of these assets.
TAX LOSSES CARRYFORWARDS
The difference in tax losses carryforwards between IFRS and U.S.
GAAP relates to the companies which are consolidated under IFRS
(see Note 22 - Deferred tax liabilities), but excluded from
consolidation according to U.S. GAAP.
Investments
At December 31, 2005 and 2006, investments accounted for under
the equity method of euro 4,589 million and euro 4,305 million,
respectively, included shares of Saipem SpA, which is listed on
the Italian Stock Exchange. The following information includes
its fair value:
Number of Eni shares |
Equity ratio |
Share price |
Market value |
|||||
December 31, 2005 | ||||||||||||
Saipem SpA | 189,423,307 |
43.26 |
13.79 |
2,613 |
||||||||
December 31, 2006 | ||||||||||||
Saipem SpA | 189,423,307 |
43.54 |
19.71 |
3,734 |
In 2004, 2005 and 2006, Saipem SpA was included in the consolidation under IFRS, while, under U.S. GAAP, it is valued under the equity method. Information about Saipem SpA and its subsidiaries (as indicated in Saipem consolidated financial statements),
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
that include SnamProgetti SpA acquired by Saipem in 2006 (see Note 36 - Reconciliation of net profit and shareholders equity determined under IFRS to U.S. GAAP - A), representing a 100% share of the companies, is as follows:
(million euro) | Dec. 31, 2005 |
Dec. 31, 2006 |
||
Total assets | 5,968 | 9,531 | ||||
- current | 3,101 | 6,087 | ||||
- non current | 2,867 | 3,444 | ||||
Total liabilities | 4,325 | 7,946 | ||||
- current | 3,633 | 6,664 | ||||
- non current | 692 | 1,282 | ||||
(million euro) | 2004 | 2005 |
2006 |
|||
Net sales from operations | 4,306 | 4,528 | 7,517 | ||||||
Operating profit | 328 | 365 | 599 | ||||||
Net profit | 235 | 255 | 384 | ||||||
Concentrations and certain significant
estimates
The following information is presented according to Statement of
Position 94-6 "Disclosures of Certain Significant Risks and
Uncertainties".
NATURE OF OPERATIONS
Eni is an integrated energy company operating in the oil and gas,
electricity generation, petrochemicals and oilfield services and
engineering industries.
EXPLORATION & PRODUCTION:
through its Exploration & Production Division and
subsidiaries, Eni engages in hydrocarbon exploration and
production in Italy, North Africa (Algeria, Egypt, Libya and
Tunisia), West Africa (Angola, Congo and Nigeria), the North Sea
(Norway and the United Kingdom), Latin America (Venezuela), the
former Soviet Union countries (mainly Kazakhstan), the United
States (Gulf of Mexico and Alaska) and Asia (mainly Saudi Arabia,
China, India, Indonesia, Iran and Pakistan). In 2005
approximately 68% of oil production sold was supplied to
Enis Refining & Marketing segment and approximately 40%
of natural gas production sold was supplied to Enis Gas
& Power segment.
Eni owns a storage system, made up by eight depleted fields,
which is used for the modulation of supply in accordance with
seasonal swings in demand (natural gas is stored in the summer
and used in the winter), as strategic reserve to ensure supply
and to support domestic production through mineral storage.
Storage assets are owned by Stoccaggi Gas Italia (Eni 100%), a
company constituted in accordance with Law Decree No. 164/2000
that introduced laws for the liberalization of the Italian
natural gas market.
GAS & POWER:
Econstituted by ni is engaged in the supply, transmission and
sale of natural gas in Italy and outside Italy through its Gas
& Power Division, which was the incorporation of Snam SpA
into Eni SpA in 2002, and through certain subsidiaries.
Approximately 92% of total purchases are purchased from foreign
sources (primarily Algeria, Russia, The Netherlands and Norway)
under long-term contracts, which contain take-or-pay provisions,
and transported to Italy through a network of over 4,300
kilometers of international pipelines of which Eni owns the
transmission rights. The remaining purchases in Italy are
obtained principally from domestic gas produced by Enis
Exploration & Production segment. Through an approximately
30,800-kilometer long network (corresponding approximately to 96%
of the Italian domestic natural gas network), Eni supplies
natural gas to residential and commercial users (civil market),
industrial users and the power generation segment. Snam Rete Gas
(Eni 53.39%), that was constituted in accordance with Law Decree
No. 164/2000, owns the pipelines network used by Eni. Snam Rete
Gas, a company listed on the Italian Stock Exchange, engages in
natural gas transportation activities also for other operators of
the segment. Following the merging of Italgas Più, Eni supplies
natural gas directly to approximately five million customers in
the residential and commercial segment. Through Italgas (Eni
100%), Eni is engaged in domestic distribution of natural gas in
Italy through an approximately 48,000-kilometer long network.
Eni is engaged in distribution and sale of natural gas to
residential and commercial customers outside Italy, in Argentina
through Distribuidora de Gas Cuyana, in Hungary through Tigáz
and in Slovenia through Adriaplin.
Legislative Decree No.164/2000 introduced laws for the
liberalization of the Italian natural gas market with great
impact on Enis activities, as the company is present in all
the phases of the natural gas chain. The most important aspects
of the decree are the following:
- total free market after 2003;
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ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- until December 31, 2010 the imposition of thresholds to
operators in relation to a percentage share of domestic
consumption set as follows: (i) 75%, by January 1, 2002, for
imported or domestically produced natural gas volumes introduced
in the domestic transmission network in order to sell it. This
percentage decreases by two percentage points per year until it
reaches 61% in 2009; (ii) 50% from January 1, 2003 for sales to
final customers. These ceilings are calculated net of own
consumption and, in case of sales, also net of losses. In 2006
Enis presence in the Italian natural gas market was in
accordance with the above limitations;
- tariffs for transport infrastructure, storage, use of LNG
terminals and distribution networks are set by the Authority for
Electricity and Gas;
- third parties are allowed to access natural gas infrastructure
according to set conditions.
Eni through EniPower SpA (Eni 100%) and subsidiaries is engaged
in managing Enis electricity business at the power plants
located in the Ferrera Erbognone, Ravenna, Livorno, Taranto,
Mantova, Brindisi and Ferrara industrial sites with installed
capacity of 4.5 gigawatts and a production sold of 24.82
terawatthours. The demand for gas and fuel oils of
EniPowers stations is met by Eni supplies.
REFINING & MARKETING: Eni, through its Refining & Marketing Division, which was constituted by the incorporation of AgipPetroli SpA in Eni SpA in 2002 and certain subsidiaries, engages in petroleum refining and marketing activities primarily in Italy and Europe. Eni is the largest refiner of petroleum products in Italy in terms of overall refining capacity. Approximately 56% of crude oil sold is purchased from Enis Exploration & Production segment, the rest is purchased from producing countries pursuant to purchase contracts (28%) and in spot markets (16%). Approximately 58% of the purchased crude oil is refined. 35.9% of oil refined derives from the production of Enis Exploration & Production segment.
PETROCHEMICALS:
through Polimeri Europa SpA and subsidiaries (Eni 100%), Eni
engages in manufacturing of olefins, aromatics, intermediate
products, styrene and elastomers. Enis petrochemicals
production is concentrated in Italy, the other operations being
primarily in Western Europe. Approximately 23% of the oil-based
feedstock requirements used by petrochemical plants are supplied
by Enis Refining & Marketing segment.
ENGINEERING & CONSTRUCTION:
through Saipem SpA (Eni 43%), a company listed on the
ItalianStock Exchange, and its subsidiaries, Eni is engaged in
construction and drilling services to customers in the oil and
gas industries and is a provider of engineering and project
management services to customers in the oil and gas and
petrochemical industries. At December 31, 2006, 20% of the order
backlog related to orders from Eni Group companies.
Accounting for suspended well costs
Effective January 1, 2005 Eni adopted Position FAS 19-1 (FSP
19-1), "Accounting for Suspended Well Costs". FSP 19-1
amended Statement of Financial Accounting Standards No. 19 (FAS
19) "Financial Accounting and Reporting by Oil and Gas
Producing Companies". Following adoption of FSP 19-1, Eni
temporarily capitalized exploratory drilling costs pending
determination of whether the well has found proved reserves if
both of the following conditions are met: (a) the well has found
a sufficient quantity of reserves to justify, if appropriate, its
completion as a producing well; and (b) the enterprise is making
sufficient progress assessing the reserves and the economic and
operating viability of the project. If either condition is not
met or if an enterprise obtains information that raises
substantial doubt about the economic or operational viability of
the project, the exploratory well would be assumed to be
impaired, and its costs, net of any salvage value, would be
charged to expense. FSP 19-1 provided a number of indicators
needing to be present to demonstrate sufficient progress was
being made in assessing the reserves and economic viability of
the project. Among these indicators are: (i) costs are being
incurred to assess the reserves and their potential development;
(ii) existence (or active negotiations) of sales contracts with
customers for oil and natural gas; and (iii) existence of firm
plans, established timetables or contractual commitments, which
may include seismic testing and drilling of additional
exploratory wells. The disclosures and discussion below address
those suggested in FSP 19-1.
217
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table reflects the net changes in capitalized exploratory well costs during 2006 and 2005:
(million euro) | 2005 |
2006 |
||
Capitalized exploratory well costs as at January 1 | 513 | 551 | ||||
Addition pending determination of proved reserves | 128 | 384 | ||||
Amount previously capitalized expended during the year | (96 | ) | (64 | ) | ||
Reclassification to wells, facilities and equipment based on the determination of proved reserves | (67 | ) | (45 | ) | ||
Property dispositions | (1 | ) | (3 | ) | ||
Foreign exchange changes | 74 | (71 | ) | |||
Capitalized exploratory well costs as at December 31 | 551 | 752 | ||||
The following table provides an analysis of capitalized exploratory well costs based on the date the drilling was completed:
2005 | 2006 | |||
million euro | No. of Enis Net Wells | million euro | No. of Enis Net Wells | |||||
< 1 year | 148 | 9.35 | 360 | 15.54 | ||||
1 to 3 years | 323 | 24.09 | 272 | 13.71 | ||||
3 to 8 years | 80 | 5.53 | 120 | 11.27 | ||||
551 | 38.97 | 752 | 40.52 | |||||
The following table provides capitalized exploratory well costs and the related Enis net well divided by category of projects:
2005 | 2006 | |||
million euro | No. of Enis Net Wells | million euro | No. of Enis Net Wells | |||||
Project with wells drilled in the past 12 months | 148 | 9.35 | 360 | 15.54 | ||||
Project with recent or planned exploratory activity | 344 | 21.21 | 307 | 15.18 | ||||
Project with exploration activities already underway or firmly planned: | ||||||||
- future exploration drilling | 159 | 9.37 | 186 | 9.79 | ||||
- other exploratory activities | 185 | 11.84 | 121 | 5.39 | ||||
Project with completed exploratory activity | 59 | 8.41 | 85 | 9.80 | ||||
Project progressing towards commercialization/sanctioning | 45 | 6.22 | 63 | 7.00 | ||||
Project waiting finalization of development facilities | 14 | 2.19 | 22 | 2.80 | ||||
Total/Number of wells at the year end | 551 | 38.97 | 752 | 40.52 | ||||
At the end of 2006 of the euro 752 million of exploratory suspended costs, approximately euro 360 million related to the 15.54 Enis net wells for which the drilling was completed in one year or less. Of the remaining euro 392 million, related to the 24.98 Enis net wells suspended for more than one year since the completion of drilling, 78% was associated with projects for which exploration activity is still ongoing.
218
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Changes in accounting principles
On September 2005, the Emerging Issues Task
Force ("EITF") issued Issue No. 04-13 ("EITF
04-13"), "Accounting for Purchases and Sales of
Inventory with the Same Counterparty." The EITF concluded
that inventory purchases and sales transactions with the same
counterparty should be combined for accounting purposes if they
were entered into in contemplation of each other. The EITF
provided indicators to be considered for purposes of determining
whether such transactions are entered into in contemplation of
each other. Guidance was also provided on the circumstances under
which non-monetary exchanges of inventory within the same line of
business should be recognized at fair value. EITF 04-13 became
effective in reporting periods beginning after March 15, 2006.
Eni adopted EITF 04-13 starting from April 1, 2006. The adoption
of EITF 04-13 did not have material effect on Enis
Consolidated Financial Statements according to U.S. GAAP.
Effective January 1, 2006, the Company adopted SFAS No. 123-R,
"Share-Based Payment" ("SFAS 123R"), using
the modified prospective method. SFAS 123R establishes the
accounting for equity instruments exchanged for employee
services. Under SFAS 123R, share-based compensation cost is
measured at the grant date based on the calculated fair value of
the award. The expense is recognized over the employees
requisite service period, generally the vesting period of the
award. SFAS 123R also requires the related excess tax benefit
received upon exercise of stock options or vesting of restricted
stock, if any, to be reflected in the statement of cash flows as
a financing activity rather than an operating activity. The
adoption of this standard did not have material effect on
Enis Consolidated Financial Statements according to U.S.
GAAP.
As of December 31, 2006, Eni applies SFAS 158 which requires that
the provision for employees benefits equals the total actuarial
liability and therefore includes the total amount of incomes and
losses resulting from changes in actuarial assumptions. Actuarial
incomes and losses not accounted in the profit and loss account
are recognized, net of the related fiscal effect, with a
corresponding entry to the item of the shareholders equity
"Other comprehensive income". In the following periods,
the actuarial profits and losses "suspended" in other
comprehensive income are recognized in the profits and loss
account according to the corridor method.
The effect of the adoption of SFAS 158 consist in the following:
(million euro) | |||
Net actuarial losses at December 31, 2005 | 128 | ||
Net actuarial losses recognized in 2006 profit and loss account | (28 | ) | |
Change in net actuarial losses | (65 | ) | |
Change in consolidation | (3 | ) | |
Net actuarial losses at December 31, 2006 | 32 | ||
Actuarial losses expected to be recognized in profit and loss account during 2007 amount to euro 3 million.
Recent accounting principles
On June 2006, FASB issued Interpretation No. 48
"Accounting for uncertainty in income taxes" (FIN 48)
that prescribes criteria for recognition and measurement of
entitys tax benefits ("tax positions") which
present uncertainty regards of being realized. The requirements
of FIN 48 prescribes that an entity shall recognize in financial
statements defined tax positions only when it is considered
"more likely than not" that their positive effects will
be realized. The value of the tax position that shall be
recognized in financial statements is measured at the largest
amount of benefit that is greater than 50% likely of being
realized.
Any differences between tax positions taken in a tax return and
amounts recognized in the financial statements represent
liabilities to be recognized in the balance sheet. FIN 48 is
effective starting from January 1, 2007.
On September 2006, FASB issued Statement of Financial Accounting
Standard n. 157 "Fair value measurement" (SFAS 157).
SFAS 157 establishes a framework that applies when U.S. GAAP
require fair value measurements of asset and liabilities.
According to SFAS 157, fair value is measured mainly on the
assumptions used by market participants rather than entity
internal assumptions. The use of entity internal assumptions is
allowed only for situations in which there are no information
readily available on the market; therefore, in this circumstance,
the entity adapts its internal assumptions to those used by
market participants. SFAS 157 establishes a fair value
"hierarchy" articulated on three levels according to
the different quality of input used in the measurement. SFAS 157
is effective starting from 2008.
On February 2007, FASB issued Statement of Financial Accounting
Standard No. 159 "The Fair Value option for Financial Assets
and Financial Liabilities - Including an Amendment of FASB
Statement No. 115" (SFAS 159). SFAS 159, in order to permit
consistent measurement of assets and liabilities connected,
reducing volatility of financial results, provides the option to
evaluate certain financial and non financial asset and
liabilities at fair value (fair value option). The decision of
apply fair value option is irrevocable. SFAS 159 is effective
starting from 2008.
Eni presently is analyzing the new accounting principles and, at
the moment, cannot determine if their adoption will have a
significant effect on Enis Consolidated Financial
Statements according to U.S. GAAP.
219
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Supplemental oil and gas information (unaudited)
The following information is presented in accordance
with Statement of Financial Accounting Standards No. 69
"Disclosures about Oil & Gas Producing Activities".
Amounts related to minority interests are not significant.
CAPITALIZED COSTS
Capitalized costs represent the total expenditures for proved and
unproved mineral interests and related support equipment and
facilities utilized in oil and gas exploration and production
activities, together with related accumulated depreciation,
depletion and amortization. Capitalized costs by geographical
area consist of the following:
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates (b) | Total | ||||||||
December 31, 2005 | ||||||||||||||||||||||||
Proved mineral interests (a) | 9,756 | 9,321 | 8,733 | 8,350 | 9,463 | 45,623 | 435 | 46,058 | ||||||||||||||||
Unproved mineral interests | 33 | 197 | 134 | 413 | 1,265 | 2,042 | 55 | 2,097 | ||||||||||||||||
Support equipment and facilities | 253 | 1,385 | 272 | 33 | 93 | 2,036 | 9 | 2,045 | ||||||||||||||||
Incomplete wells and other | 657 | 638 | 728 | 221 | 1,895 | 4,139 | 53 | 4,192 | ||||||||||||||||
Gross Capitalized Costs | 10,699 | 11,541 | 9,867 | 9,017 | 12,716 | 53,840 | 552 | 54,392 | ||||||||||||||||
Accumulated depreciation, depletion and amortization | (6,888 | ) | (5,113 | ) | (5,193 | ) | (4,619 | ) | (4,697 | ) | (26,510 | ) | (316 | ) | (26,826 | ) | ||||||||
Net Capitalized Costs | 3,811 | 6,428 | 4,674 | 4,398 | 8,019 | 27,330 | 236 | 27,566 | ||||||||||||||||
December 31, 2006 | ||||||||||||||||||||||||
Proved mineral interests (a) | 10,780 | 9,335 | 8,476 | 8,790 | 9,424 | 46,805 | 436 | 47,241 | ||||||||||||||||
Unproved mineral interests | 33 | 132 | 385 | 460 | 1,106 | 2,116 | 35 | 2,151 | ||||||||||||||||
Support equipment and facilities | 287 | 1,238 | 451 | 33 | 98 | 2,107 | 8 | 2,115 | ||||||||||||||||
Incomplete wells and other | 655 | 599 | 812 | 300 | 2,248 | 4,614 | 51 | 4,665 | ||||||||||||||||
Gross Capitalized Costs | 11,755 | 11,304 | 10,124 | 9,583 | 12,876 | 55,642 | 530 | 56,172 | ||||||||||||||||
Accumulated depreciation, depletion and amortization | (7,184 | ) | (5,403 | ) | (5,402 | ) | (5,345 | ) | (5,187 | ) | (28,521 | ) | (311 | ) | (28,832 | ) | ||||||||
Net Capitalized Costs | 4,571 | 5,901 | 4,722 | 4,238 | 7,689 | 27,121 | 219 | 27,340 | ||||||||||||||||
(a) | Includes capitalized costs for wells and facilities related to proved reserves. | |
(b) | Starting from 2005 are included data related to joint venture and affiliates accounted under the equity method. |
COSTS INCURRED
Costs incurred represent amounts both capitalized and expensed in
connection with oil and gas producing activities. Cost incurred
by geographical area consist of the following:
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates (b) | Total | ||||||||
2004 | ||||||||||||||||||||||||
Exploration | 64 | 104 | 71 | 66 | 194 | 499 | 499 | |||||||||||||||||
Development (a) | 431 | 965 | 881 | 391 | 1,407 | 4,075 | 4,075 | |||||||||||||||||
Total costs incurred | 495 | 1,069 | 952 | 457 | 1,601 | 4,574 | 4,574 | |||||||||||||||||
2005 | ||||||||||||||||||||||||
Proved property acquisitions | 19 | 16 | 99 | 134 | 134 | |||||||||||||||||||
Unproved property acquisitions | 13 | 44 | 99 | 156 | 156 | |||||||||||||||||||
Exploration | 45 | 153 | 75 | 127 | 264 | 664 | 18 | 682 | ||||||||||||||||
Development (a) | 644 | 960 | 909 | 528 | 1,396 | 4,437 | 31 | 4,468 | ||||||||||||||||
Total costs incurred | 721 | 1,113 | 1,044 | 655 | 1,858 | 5,391 | 49 | 5,440 | ||||||||||||||||
2006 | ||||||||||||||||||||||||
Proved property acquisitions | 139 | 10 | 149 | 149 | ||||||||||||||||||||
Unproved property acquisitions | 3 | 3 | 3 | |||||||||||||||||||||
Exploration | 128 | 270 | 471 | 174 | 305 | 1,348 | 26 | 1,374 | ||||||||||||||||
Development (a) | 1,120 | 893 | 963 | 538 | 1,365 | 4,879 | 31 | 4,910 | ||||||||||||||||
Total costs incurred | 1,387 | 1,173 | 1,434 | 712 | 1,673 | 6,379 | 57 | 6,436 | ||||||||||||||||
(a) | Includes for assets retirement obligations pursuant to SFAS 143 "Accounting for asset retirement obligations" euro 233 million of costs capitalized during 2004, euro 588 million for 2005 and euro 1,241 million for 2006. | |
(b) | Starting from 2005 are included data related to joint venture and affiliates accounted under the equity method. |
220
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING
ACTIVITIES
Results of operations from oil and gas producing activities,
including gas storage services used to modulate the seasonal
variation of demand, represent only those revenues and expenses
directly associated to such activities including operating
overheads. These amounts do not include any allocation of
interest expense or general corporate overhead and, therefore,
are not necessarily indicative of the contributions to
consolidated net earnings of Eni. Related income taxes are
computed by applying the local income tax rates to the pre-tax
income from producing activities. Eni is a party to certain
Production Sharing Agreements (PSAs) whereby a portion of
Enis share of oil and gas production is withheld and sold
by its joint venture partners which are state-owned entities,
with proceeds being remitted to the state in satisfaction of
Enis PSA-related tax liabilities. Revenue and income taxes
include such taxes owed by Eni but paid by state-owned entities
out of Enis share of oil and gas production. Results of
operations from oil and gas producing activities by geographical
area consist af the following:
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates (b) | Total | ||||||||
2004 | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Sales to consolidated entities | 2,633 | 1,868 | 2,762 | 2,083 | 508 | 9,854 | 9,854 | |||||||||||||||||
Sales to third parties | 148 | 1,364 | 306 | 709 | 2,086 | 4,613 | 4,613 | |||||||||||||||||
Total revenues | 2,781 | 3,232 | 3,068 | 2,792 | 2,594 | 14,467 | 14,467 | |||||||||||||||||
Operations costs | (223 | ) | (292 | ) | (322 | ) | (405 | ) | (289 | ) | (1,531 | ) | (1,531 | ) | ||||||||||
Production taxes | (118 | ) | (91 | ) | (379 | ) | (13 | ) | (163 | ) | (764 | ) | (764 | ) | ||||||||||
Exploration expenses | (57 | ) | (47 | ) | (71 | ) | (93 | ) | (155 | ) | (423 | ) | (423 | ) | ||||||||||
D.D. & A. and Provision for abandonment (a) | (489 | ) | (437 | ) | (482 | ) | (687 | ) | (849 | ) | (2,944 | ) | (2,944 | ) | ||||||||||
Other income and (expenses) | (98 | ) | (368 | ) | (216 | ) | 97 | (208 | ) | (793 | ) | (793 | ) | |||||||||||
Accretion discount (SFAS 143) | (37 | ) | (5 | ) | (17 | ) | (15 | ) | (6 | ) | (80 | ) | (80 | ) | ||||||||||
Pretax income from producing activities | 1,759 | 1,992 | 1,581 | 1,676 | 924 | 7,932 | 7,932 | |||||||||||||||||
Income taxes | (632 | ) | (994 | ) | (945 | ) | (948 | ) | (305 | ) | (3,824 | ) | (3,824 | ) | ||||||||||
Results of operations from E&P activities | 1,127 | 998 | 636 | 728 | 619 | 4,108 | 4,108 | |||||||||||||||||
2005 | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Sales to consolidated entities | 3,133 | 2,813 | 4,252 | 2,707 | 828 | 13,733 | 13,733 | |||||||||||||||||
Sales to third parties | 161 | 2,579 | 394 | 889 | 2,883 | 6,906 | 106 | 7,012 | ||||||||||||||||
Total revenues | 3,294 | 5,392 | 4,646 | 3,596 | 3,711 | 20,639 | 106 | 20,745 | ||||||||||||||||
Operations costs | (261 | ) | (390 | ) | (363 | ) | (417 | ) | (338 | ) | (1,769 | ) | (16 | ) | (1,785 | ) | ||||||||
Production taxes | (157 | ) | (98 | ) | (513 | ) | (15 | ) | (207 | ) | (990 | ) | (3 | ) | (993 | ) | ||||||||
Exploration expenses | (32 | ) | (59 | ) | (38 | ) | (125 | ) | (181 | ) | (435 | ) | (30 | ) | (465 | ) | ||||||||
D.D. & A. and Provision for abandonment (a) | (512 | ) | (711 | ) | (632 | ) | (710 | ) | (1,007 | ) | (3,572 | ) | (58 | ) | (3,630 | ) | ||||||||
Other income and (expenses) | (205 | ) | (400 | ) | (176 | ) | 55 | (251 | ) | (977 | ) | 7 | (970 | ) | ||||||||||
Accretion discount (SFAS 143) | (45 | ) | (9 | ) | (15 | ) | (31 | ) | (6 | ) | (106 | ) | (106 | ) | ||||||||||
Pretax income from producing activities | 2,082 | 3,725 | 2,909 | 2,353 | 1,721 | 12,790 | 6 | 12,796 | ||||||||||||||||
Income taxes | (762 | ) | (2,197 | ) | (1,818 | ) | (1,386 | ) | (580 | ) | (6,743 | ) | (19 | ) | (6,762 | ) | ||||||||
Total results of operations from E&P activities | 1,320 | 1,528 | 1,091 | 967 | 1,141 | 6,047 | (13 | ) | 6,034 | |||||||||||||||
2006 | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Sales to consolidated entities | 3,601 | 4,185 | 4,817 | 3,295 | 973 | 16,871 | 16,871 | |||||||||||||||||
Sales to third parties | 184 | 3012 | 967 | 983 | 2,594 | 7,740 | 120 | 7,860 | ||||||||||||||||
Total revenues | 3,785 | 7,197 | 5,784 | 4,278 | 3,567 | 24,611 | 120 | 24,731 | ||||||||||||||||
Operations costs | (249 | ) | (496 | ) | (475 | ) | (481 | ) | (338 | ) | (2,039 | ) | (18 | ) | (2,057 | ) | ||||||||
Production taxes | (181 | ) | (95 | ) | (475 | ) | (82 | ) | (833 | ) | (3 | ) | (836 | ) | ||||||||||
Exploration expenses | (70 | ) | (101 | ) | (90 | ) | (100 | ) | (193 | ) | (554 | ) | (9 | ) | (563 | ) | ||||||||
D.D. & A. and Provision for abandonment (a) | (454 | ) | (869 | ) | (778 | ) | (755 | ) | (1,015 | ) | (3,871 | ) | (42 | ) | (3,913 | ) | ||||||||
Other income and (expenses) | (287 | ) | (569 | ) | (195 | ) | 44 | (343 | ) | (1,350 | ) | 7 | (1,343 | ) | ||||||||||
Accretion discount (SFAS 143) | (34 | ) | (12 | ) | (12 | ) | (40 | ) | (14 | ) | (112 | ) | (112 | ) | ||||||||||
Pretax income from producing activities | 2,510 | 5,055 | 3,759 | 2,946 | 1,582 | 15,852 | 55 | 15,907 | ||||||||||||||||
Income taxes | (928 | ) | (2,979 | ) | (2,094 | ) | (1,821 | ) | (600 | ) | (8,422 | ) | (31 | ) | (8,453 | ) | ||||||||
Results of operations from E&P activities | 1,582 | 2,076 | 1,665 | 1,125 | 982 | 7,430 | 24 | 7,454 | ||||||||||||||||
(a) | Includes asset impairments amounting to euro 300 million for 2004, euro 147 million for 2005 and euro 134 million for 2006. | |
(b) | Starting from 2005 are included data related to affiliates and joint ventures evaluated with equity method. |
221
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OIL AND NATURAL GAS RESERVES
Proved oil and gas reserves are the estimated quantities of crude
oil, natural gas and natural gas liquids which geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under
technical, contractual, economic and operating conditions
existing at the time. Prices include consideration of changes in
existing prices provided only by contractual arrangements, but
not on escalations based upon future conditions.
Net proved reserves exclude royalties and interests owned by
others.
Proved developed oil and gas reserves are proved reserves that
can be estimated to be recovered through existing wells with
existing equipment and operating methods.
Proved undeveloped oil and gas reserves are reserves that are
expected to be recovered from new wells on undrilled acreage, or
from existing wells where a relatively major expenditure is
required for completion.
Additional oil and gas reserves expected to be obtained through
the application of fluid injection or other improved recovery
techniques for supplementing natural forces and mechanisms of
primary recovery are included as proved developed reserves only
after testing by a pilot project or after the operation of an
installed program has confirmed, through production response,
that increased recovery will be achieved.
Enis proved reserves have been estimated on the basis of
the applicable U.S. Securities & Exchange Commission
regulation, Rule 4-10 of Regulation S-X and its interpretations
and have been disclosed in accordance with Statement of Financial
Accounting Standard No. 69. The estimates of proved reserves,
developed and undeveloped for years ended December 31, 2003,
2004, 2005 and 2006 are based on data prepared by Eni. Since
1991, Eni has requested qualified independent oil engineering
companies carry out an independent evaluation12 of its
proved reserves on a rotational basis. In particular a total of
1.4 billion boe of proved reserves, or about 21% of Enis
total proved reserves at December 31, 2006, have been evaluated.
The results of this independent evaluation confirmed Enis
evaluations, as in previous years. In the 2004-2006 three-year
period, 76% of Enis total proved reserves were subject to
independent evaluations.
Eni operates under Production Sharing Agreements, (PSAs), in
several of the foreign jurisdictions where it has oil and gas
exploration and production activities. Reserves of oil and
natural gas to which Eni is entitled under PSA arrangements are
shown in accordance with Enis economic interest in the
volumes of oil and natural gas estimated to be recoverable in
future years. Such reserves include estimated quantities
allocated to Eni for recovery of costs, income taxes owed by Eni
but settled by its joint venture partners (which are state-owned
entities) out of Enis share of production and Enis
net equity share after cost recovery.
Proved oil and gas reserves associated with PSAs represented 51%,
48% and 53% of total proved reserves as of year-end 2004, 2005
and 2006, respectively, on an oil-equivalent basis.
A similar scheme to PSAs applies to Service and
"Buy-Back" contracts; proved reserves associated with
such contracts represented 3%, 2% and 2% of total proved reserves
on an oil-equivalent basis as of year-end 2004, 2005 and 2006,
respectively.
Oil and gas reserve quantities include: (i) oil and natural gas
quantities in excess to cost recovery which the company has an
obligation to purchase under certain PSAs with governments or
authorities whereby the company serves as producer of reserves.
In accordance with SFAS No. 69, paragraph 13, reserve volumes
associated with such oil and gas quantities represented 1.4%,
1.7% and 1.1% of total proved reserves as of year-end 2004, 2005
and 2006 respectively, on an oil-equivalent basis; (ii) volumes
of natural gas used for own consumption and (iii) volumes of
natural gas held in certain Eni storage fields in Italy. Proved
reserves attributable to these fields include: (a) the residual
natural gas volumes of the reservoirs and (b) natural gas volumes
from other Eni fields input into these reservoirs in subsequent
periods. Proved reserves do not include volumes owned by or
acquired from third parties. Gas withdrawn from storage is
produced and thereby detracted from proved reserves when sold.
Numerous uncertainties are inherent in estimating quantities of
proved reserves and in projecting future rates of production and
timing of development expenditures. The accuracy of any reserve
estimate is a function of the quality of available data and
engineering and geological interpretation and judgment. Results
of drilling, testing and production after the date of the
estimate may require substantial upward or downward revision. In
addition, changes in oil and natural gas prices have an effect on
the quantities of Enis proved reserves since estimates of
reserves are based on prices and costs relative to the date when
such estimates are made. Reserve estimates are also subject to
revision as prices fluctuate due to the cost recovery feature
under certain PSAs.
The following table presents yearly changes by geographical area
in estimated proved reserves, developed and undeveloped, of crude
oil (including condensate and natural gas liquids) and natural
gas for the years 2004, 2005 and 2006.
(12) | From 1991 to 2002 to DeGolyer and MacNaughton, from 2003 also to Ryder Scott Company. |
222
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CRUDE OIL (INCLUDING CONDENSATES AND NATURAL GAS LIQUIDS)
(million barrels)
Proved Oil Reserves | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates (a) | Total | ||||||||
Reserves at December 31, 2003 | 252 | 1,080 | 1,038 | 529 | 1,239 | 4,138 | 4,138 | |||||||||||||||||
Revisions of Previous Estimates | (1 | ) | (22 | ) | 44 | 12 | (18 | ) | 15 | 15 | ||||||||||||||
Improved Recovery | 11 | 48 | 4 | 63 | 63 | |||||||||||||||||||
Extensions and Discoveries | 4 | 20 | 34 | 4 | 144 | 206 | 206 | |||||||||||||||||
Production | (30 | ) | (94 | ) | (104 | ) | (74 | ) | (75 | ) | (377 | ) | (377 | ) | ||||||||||
Sales of Minerals in Place | (2 | ) | (4 | ) | (25 | ) | (6 | ) | (37 | ) | (37 | ) | ||||||||||||
Reclassification 2004 joint ventures and affiliates | (26 | ) | (9 | ) | (1 | ) | (36 | ) | 36 | |||||||||||||||
Reserves at December 31, 2004 | 225 | 967 | 1,047 | 450 | 1,283 | 3,972 | 36 | 4,008 | ||||||||||||||||
Purchase of Minerals in Place | 2 | 6 | 47 | 55 | 55 | |||||||||||||||||||
Revisions of Previous Estimates | 33 | 36 | (47 | ) | 27 | (88 | ) | (39 | ) | (9 | ) | (48 | ) | |||||||||||
Improved Recovery | 43 | 29 | 15 | 87 | 87 | |||||||||||||||||||
Extensions and Discoveries | 26 | 14 | 21 | 16 | 77 | 77 | ||||||||||||||||||
Production | (32 | ) | (111 | ) | (113 | ) | (65 | ) | (83 | ) | (404 | ) | (2 | ) | (406 | ) | ||||||||
Sales of Minerals in Place | ||||||||||||||||||||||||
Reserves at December 31, 2005 | 228 | 961 | 936 | 433 | 1,190 | 3,748 | 25 | 3,773 | ||||||||||||||||
Revisions of Previous Estimates (b) | 15 | 61 | (85 | ) | 20 | 53 | 64 | 1 | 65 | |||||||||||||||
Improved Recovery | 49 | 41 | 14 | 104 | 1 | 105 | ||||||||||||||||||
Extensions and Discoveries | 30 | 11 | 62 | 103 | 103 | |||||||||||||||||||
Production | (28 | ) | (119 | ) | (117 | ) | (65 | ) | (61 | ) | (390 | ) | (3 | ) | (393 | ) | ||||||||
Sales of Minerals in Place (c) | (2 | ) | (170 | ) | (172 | ) | (172 | ) | ||||||||||||||||
Reserves at December 31, 2006 | 215 | 982 | 786 | 386 | 1,088 | 3,457 | 24 | 3,481 | ||||||||||||||||
(million barrels)
Proved Developed Oil Reserves | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates | Total | ||||||||
Reserves at December 31, 2003 | 173 | 640 | 560 | 464 | 610 | 2,447 | 2,447 | |||||||||||||||||
Reserves at December 31, 2004 | 174 | 655 | 588 | 386 | 668 | 2,471 | 2,471 | |||||||||||||||||
Reserves at December 31, 2005 | 149 | 697 | 568 | 353 | 564 | 2,331 | 19 | 2,350 | ||||||||||||||||
Reserves at December 31, 2006 | 136 | 713 | 546 | 329 | 402 | 2,126 | 18 | 2,144 | ||||||||||||||||
(a) | Starting from 2005 are included data related to joint venture and affiliates accounted under the equity method. | |
(b) | Includes the effect of Eni share redetermination in the Val dAgri concession in Italy. | |
(c) | Includes 170 million barrels related to unilateral termination of OSA by PDVSA for Dación field. |
223
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NATURAL GAS
(billion cubic feet)
Proved Natural Gas Reserves | Italy (a) |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates (b) | Total | ||||||||
Reserves at December 31, 2003 | 4,166 | 5,467 | 1,656 | 2,223 | 4,496 | 18,008 | 18,008 | |||||||||||||||||
Revisions of Previous Estimates | 105 | 814 | 129 | 75 | 84 | 1,207 | 1,207 | |||||||||||||||||
Improved Recovery | 10 | 10 | 10 | |||||||||||||||||||||
Extensions and Discoveries | 29 | 420 | 38 | 222 | 709 | 709 | ||||||||||||||||||
Production | (409 | ) | (247 | ) | (66 | ) | (220 | ) | (303 | ) | (1,245 | ) | (1,245 | ) | ||||||||||
Sales of Minerals in Place | (73 | ) | (1 | ) | (65 | ) | (115 | ) | (254 | ) | (254 | ) | ||||||||||||
Reclassification 2004 joint ventures and afffiliates | (21 | ) | (2 | ) | (134 | ) | (157 | ) | 157 | |||||||||||||||
Reserves at December 31, 2004 | 3,818 | 6,432 | 1,727 | 2,051 | 4,250 | 18,278 | 157 | 18,435 | ||||||||||||||||
Purchase of Minerals in Place | 63 | 8 | 222 | 293 | 293 | |||||||||||||||||||
Revisions of Previous Estimates | 159 | (6 | ) | (9 | ) | (18 | ) | (368 | ) | (242 | ) | (47 | ) | (289 | ) | |||||||||
Improved Recovery | 11 | 11 | 11 | |||||||||||||||||||||
Extensions and Discoveries | 1 | 37 | 309 | 50 | 56 | 453 | (20 | ) | 433 | |||||||||||||||
Production | (365 | ) | (357 | ) | (70 | ) | (219 | ) | (281 | ) | (1,292 | ) | (1,292 | ) | ||||||||||
Sales of Minerals in Place | ||||||||||||||||||||||||
Reserves at December 31, 2005 | 3,676 | 6,117 | 1,965 | 1,864 | 3,879 | 17,501 | 90 | 17,591 | ||||||||||||||||
Purchase of Minerals in Place | 4 | 4 | 4 | |||||||||||||||||||||
Revisions of Previous Estimates | 36 | 154 | 31 | 53 | 230 | 504 | (7 | ) | 497 | |||||||||||||||
Extensions and Discoveries | 19 | 146 | 34 | 1 | 132 | 332 | 332 | |||||||||||||||||
Production | (340 | ) | (471 | ) | (103 | ) | (218 | ) | (305 | ) | (1,437 | ) | (15 | ) | (1,452 | ) | ||||||||
Sales of Minerals in Place | (7 | ) | (7 | ) | (7 | ) | ||||||||||||||||||
Reserves at December 31, 2006 | 3,391 | 5,946 | 1,927 | 1,697 | 3,936 | 16,897 | 68 | 16,965 | ||||||||||||||||
(billion cubic feet)
Proved Developed Natural Gas Reserves | Italy (a) |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates | Total | ||||||||
Reserves at December 31, 2003 | 2,966 | 962 | 866 | 2,075 | 3,355 | 10,224 | 10,224 | |||||||||||||||||
Reserves at December 31, 2004 | 2,850 | 1,760 | 924 | 1,845 | 3,122 | 10,501 | 10,501 | |||||||||||||||||
Reserves at December 31, 2005 | 2,704 | 3,060 | 1,289 | 1,484 | 2,622 | 11,159 | 70 | 11,229 | ||||||||||||||||
Reserves at December 31, 2006 | 2,449 | 3,042 | 1,447 | 1,395 | 2,616 | 10,949 | 48 | 10,997 | ||||||||||||||||
(a) | Including approximately 747, 737, 760 and 754 billions of cubic feet of natural gas held in storage at December 31, 2003, 2004, 2005 and 2006 respectively. | |
(b) | Starting from 2005 are included data related to joint venture and affiliates accounted under the equity method. |
224
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
Estimated future cash inflows represent the revenues that would
be received from production and are determined by applying
year-end prices of oil and gas to the estimated future production
of proved reserves. Future price changes are considered only to
extent provided by contractual arrangements. Estimated future
development and production costs are determined by estimating the
expenditures to be incurred in developing and producing the
proved reserves at the end of the year. Neither the effects of
price and cost escalations nor expected future changes in
technology and operating practices have been considered.
The standardized measure is calculated as the excess of future
cash inflows from proved reserves less future costs of producing
and developing the reserves, future income taxes and a yearly 10%
discount factor.
Future cash flows as of December 31, 2004, 2005 and 2006 include
amounts that Enis Gas & Power segment and other gas
companies correspond for storages services, required to support
market demand flexibility needs.
Future production costs include the estimated expenditures
related to the production of proved reserves plus any production
taxes without consideration of future inflation. Future
development costs include the estimated costs of drilling
development wells and installation of production facilities, plus
the net costs associated with dismantlement and abandonment of
wells and facilities, under the assumption that year-end costs
continue without considering future inflation. Future income
taxes were calculated in accordance with the tax laws of the
countries in which Eni operates.
The standardized measure of discounted future net cash flows,
related to the preceding proved oil and gas reserves, is
calculated in accordance with the requirements of Statement of
Financial Accounting Standard No. 69. The standardized measure
does not purport to reflect realizable values or fair market
value of Enis proved reserves. An estimate of fair value
would also take into account, among other things, the expected
recovery of reserves in excess of proved reserves, anticipated
changes in future prices and costs and a discount factor
representative of the risks inherent in producing oil and gas.
225
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Standardized measure of discounted future net cash flows by geographical area consist of the following:
(million euro) | Italy |
North Africa |
West Africa |
North Sea |
Rest of World |
Total consolidated |
Total joint venture and affiliates (a) | Total | ||||||||
At December 31, 2004 | ||||||||||||||||||||||||
Future cash inflows | 28,582 | 40,373 | 28,395 | 20,435 | 32,619 | 150,404 | 150,404 | |||||||||||||||||
Future production costs | (3,635 | ) | (7,237 | ) | (6,664 | ) | (5,082 | ) | (4,858 | ) | (27,476 | ) | (27,476 | ) | ||||||||||
Future development and abandonment costs | (2,210 | ) | (4,073 | ) | (1,873 | ) | (1,419 | ) | (2,873 | ) | (12,448 | ) | (12,448 | ) | ||||||||||
Future net inflow before income tax | 22,737 | 29,063 | 19,858 | 13,934 | 24,888 | 110,480 | 110,480 | |||||||||||||||||
Future income tax | (7,599 | ) | (11,487 | ) | (10,949 | ) | (8,824 | ) | (6,736 | ) | (45,595 | ) | (45,595 | ) | ||||||||||
Future net cash flows | 15,138 | 17,576 | 8,909 | 5,110 | 18,152 | 64,885 | 64,885 | |||||||||||||||||
10 % discount factor | (6,006 | ) | (7,592 | ) | (3,267 | ) | (1,350 | ) | (9,412 | ) | (27,627 | ) | (27,627 | ) | ||||||||||
Standardized measure of discounted future net cash flows | 9,132 | 9,984 | 5,642 | 3,760 | 8,740 | 37,258 | 37,258 | |||||||||||||||||
At December 31, 2005 | ||||||||||||||||||||||||
Future cash inflows | 36,203 | 66,100 | 45,952 | 30,835 | 50,590 | 229,680 | 1,055 | 230,735 | ||||||||||||||||
Future production costs | (4,609 | ) | (10,030 | ) | (9,604 | ) | (5,632 | ) | (6,399 | ) | (36,274 | ) | (226 | ) | (36,500 | ) | ||||||||
Future development and abandonment costs | (2,936 | ) | (3,960 | ) | (2,594 | ) | (1,774 | ) | (4,059 | ) | (15,323 | ) | (89 | ) | (15,412 | ) | ||||||||
Future net inflow before income tax | 28,658 | 52,110 | 33,754 | 23,429 | 40,132 | 178,083 | 740 | 178,823 | ||||||||||||||||
Future income tax | (9,890 | ) | (22,744 | ) | (21,056 | ) | (15,225 | ) | (12,097 | ) | (81,012 | ) | (187 | ) | (81,199 | ) | ||||||||
Future net cash flows | 18,768 | 29,366 | 12,698 | 8,204 | 28,035 | 97,071 | 553 | 97,624 | ||||||||||||||||
10 % discount factor | (7,643 | ) | (12,095 | ) | (4,122 | ) | (2,155 | ) | (15,705 | ) | (41,720 | ) | (182 | ) | (41,902 | ) | ||||||||
Standardized measure of discounted future net cash flows | 11,125 | 17,271 | 8,576 | 6,049 | 12,330 | 55,351 | 371 | 55,722 | ||||||||||||||||
At December 31, 2006 | ||||||||||||||||||||||||
Future cash inflows | 43,495 | 64,381 | 34,935 | 24,821 | 48,591 | 216,223 | 1,038 | 217,261 | ||||||||||||||||
Future production costs | (6,086 | ) | (9,707 | ) | (8,028 | ) | (6,426 | ) | (5,915 | ) | (36,162 | ) | (224 | ) | (36,386 | ) | ||||||||
Future development and abandonment costs | (6,739 | ) | (5,383 | ) | (2,865 | ) | (2,265 | ) | (4,576 | (21,828 | ) | (79 | ) | (21,907 | ) | |||||||||
Future net inflow before income tax | 30,670 | 49,291 | 24,042 | 16,130 | 38,100 | 158,233 | 735 | 158,968 | ||||||||||||||||
Future income tax | (10,838 | ) | (24,639 | ) | (14,141 | ) | (10,901 | ) | (11,473 | ) | (71,992 | ) | (227 | ) | (72,219 | ) | ||||||||
Future net cash flows | 19,832 | 24,652 | 9,901 | 5,229 | 26,627 | 86,241 | 508 | 86,749 | ||||||||||||||||
10 % discount factor | (11,493 | ) | (10,631 | ) | (2,994 | ) | (1,392 | ) | (16,504 | ) | (43,014 | ) | (154 | ) | (43,168 | ) | ||||||||
Standardized measure of discounted future net cash flows | 8,339 | 14,021 | 6,907 | 3,837 | 10,123 | 43,227 | 354 | 43,581 | ||||||||||||||||
(a) | Starting from 2005 are included data related to affiliates and joint ventures evaluated with equity method. |
226
ENI ANNUAL REPORT 2006 / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH
FLOWS
Changes in standardized measure of discounted future net cash
flows for the years 2004, 2005 and 2006.
(million euro) | 2004 |
2005 |
2006 |
|||
Beginning of year | 31,264 | 37,258 | 55,722 | ||||||
Beginning of year joint venture and affiliates data | (357 | ) | (371 | ) | |||||
Beginning of year consolidated | 31,264 | 36,901 | 55,351 | ||||||
Increase (Decrease): | |||||||||
- sales, net of production costs | (12,172 | ) | (17,880 | ) | (21,739 | ) | |||
- net changes in sales and transfer prices, net of production costs | 13,031 | 33,372 | 4,097 | ||||||
- extensions, discoveries and improved recovery, net of future production and development costs | 2,806 | 3,527 | 3,629 | ||||||
- abandonment costs | (3,437 | ) | (3,654 | ) | (6,964 | ) | |||
- future development costs | 4,229 | 3,865 | 3,558 | ||||||
- revisions of quantity estimates | 1,658 | 47 | 383 | ||||||
- accretion of discount | 5,328 | 6,573 | 9,489 | ||||||
- net change in income taxes | (4,805 | ) | (17,327 | ) | 3,060 | ||||
- purchase of reserves in-place | 977 | 10 | |||||||
- sale of reserves in-place | (727 | ) | (1,252 | ) | |||||
- changes in production rates (timing) and other | 83 | 8,950 | (6,395 | ) | |||||
Net increase (decrease) | 5,994 | 18,450 | (12,124 | ) | |||||
Standardized measure of discounted future net cash flows consolidated | 37,258 | 55,351 | 43,227 | ||||||
Standardized measure of discounted future net cash flows joint ventures and affiliates (a) | 371 | 354 | |||||||
Standardized measure of discounted future cash flows | 37,258 | 55,722 | 43,581 | ||||||
(a) | Starting from 2005 are included data related to affiliates and joint ventures evaluated with equity method. |
227
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Società per Azioni Headquarters: Rome, Piazzale Enrico Mattei, 1 Capital Stock: euro 4,005,358,876 fully paid Tax identification number 00484960588 Branches: San Donato Milanese (MI) - Via Emilia, 1 San Donato Milanese (MI) - Piazza Ezio Vanoni, 1 |
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