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 August 2013
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): )
TABLE OF CONTENTS
Interim Consolidated Report as of June 30, 2013
Press Release dated August 13, 2013
Press Release dated August 29, 2013
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: Antonio Cristodoro | ||||
Title: | Head of Corporate Secretary's Staff Office | |||
Date: August 31, 2013
Blank page
Eni Interim Consolidated Report / Highlights
Results > In the first half of 2013, adjusted net profit amounted to euro 1.96 billion decreasing by 46%1 or by 35.9% net of losses incurred by the Engineering & Construction segment, due to a lower operating performance (down 43%1 or down 33.3% excluding Saipem losses) reflecting declining Brent prices and ongoing difficult conditions in mid and downstream sectors.
Net cash generated by operating activities of euro 4.75 billion and cash from disposals of euro 2.47 billion were used to fund financing requirements associated with capital expenditure (euro 5.93 billion), mainly focused on the development of hydrocarbon reserves and dividend payments of euro 2.17 billion. Net borrowings as of June 30, 2013 increased by euro 0.98 billion from December 31, 2012 to euro 16.49 billion.
Ratio of net borrowings to shareholders equity including minority interest leverage was 0.27 at June 30, 2013.
Interim dividend > In light of the financial results achieved for the first half of 2013 and managements expectations for full-year results, the interim dividend proposal to the Board of Directors on September 19, 2013, will amount to euro 0.55 per share (euro 0.54 per share in 2012). The interim dividend is payable on September 26, 2013, with September 23, 2013 being the ex dividend date.
Divestment of an interest in Eni East Africa > In July 2013, Eni and China National Petroleum Corporation (CNPC) closed the sale of 28.57% share capital of the subsidiary Eni East Africa, which currently owns a 70% interest in Area 4 offshore Mozambique, for an agreed price equal to $4,210 million, integrated for contractual balances provided until the date of closing. CNPC indirectly acquires, through its 28.57% equity investment in Eni East Africa, a 20% interest in Area 4, while Eni will retain a 50% interest through the remaining stake in Eni East Africa. CNPCs entrance into Area 4 is a strategic improvement for the project because of the standing of the company in the upstream and downstream sectors worldwide.
Liquids and gas production > In the first half of 2013, liquid and gas production was 1.624 million boe/d, representing a decrease of 2.7% due to force majeure events in Nigeria, particularly significant, and in Libya, and by the disposals made in 2012, while it was partially helped by the restart of the Elgin-Franklin field in the UK, which was offline in 2012. When excluding these impacts, production was unchanged for the first half of 2013, driven by new field start-up sand continuing production ramp-ups, partly offset by planned facility downtimes and mature fields decline.
Start-ups > In line with production plans the following projects have been started up: MLE-CAFC (Enis interest 75%) and El Merk (Enis interest 12.25%) in Algeria, liquefaction plant Angola LNG (13.6%), the offshore Abo- Phase 3 project in Nigeria, giant heavy oil field Junin 5 (Eni s interest 40%) in Venezuela, and Skuld (Enis interest 11.5%) in Norway.
Exploration successes > Main exploration results occurred in Mozambique, Egypt, Angola, Congo, Ghana and Pakistan adding 950 million boe of fresh resources to the Companys resource base, with unit exploration cost of 1.1 $/boe.
Natural gas sales > First half sales of gas were 49.26 bcm, decreasing by 3% from the first half of 2012. Excluding the divestment of Galp, sales decreased by 0.7% driven by poor demand in the wake of
__________________________
(1) Calculated excluding Snams contribution to Group results. This is the result of Snam transactions with Eni included in the continuing operations results of the first half 2012 according to IFRS 5. Adjusted operating profit and adjusted net profit are not provided by IFRS.
- 4 -
Eni Interim Consolidated Report / Highlights
the downturn and strong competitive pressure. Sales in Italy held well (up 1.9%) in spite of a weak power generation segment.
Safety > In the first half of 2013 the injury frequency rates relating to employees and contractors progressed in their positive trends when compared to the first half of 2012 (down 38.6% for contractors and down 46.7 for employees) as well as to the full year 2012. The Company prosecuted in the communication and training program "Eni in safety" aimed at reducing the injury frequency related to behavioral factors, the first injury cause. The first half of 2013 saw also the continuation of the "zero fatalities" project with the objective to deal incisively with the critical issue of fatalities.
Snam divestment > On May 9, 2013, Eni divested to institutional investors 395,253,345 shares equal to 11.69% of the share capital of Snam SpA, for a total consideration of euro 1,458.5 million. Following the placement Eni has completed the divestment of its interest in Snam with the residual interest of 8.54% in Snam underlying the euro 1,250 million convertible bond due on January 2016.
Galp divestment > On May 31, 2013, Eni divested to institutional investors 55,452,341 ordinary shares, corresponding to approximately 6.7% of the share capital of Galp Energia SGPS SA for a total consideration of euro 677.6 million. As of June 30, 2013, Eni retains a 16.34% interest in Galp, of which 8% underlying the approximately euro 1,028 million exchangeable bond due on November 2015 and 8.34% subject to certain pre-emption rights or options exercisable by Amorim Energia.
Business developments > The North Caspian Operating Co Consortium (Eni share 16.81%) that operates the development of the Kashagan field is currently focused on completing the Experimental Program. In June 2013, the onshore treatment plant in Bolashak came on line; in July operational testing activities started at offshore production facilities. Production start-up is expected in the next weeks. Security remains the priority of the Consortium throughout the whole process to achieve first oil.
In June 2013, Eni and Rosneft completed a strategic cooperation agreement for operating offshore exploration activities off the Russian section of the Barents Sea (Fedynsky and Central Barents licenses) where seismic surveys have been started, and the Russian section of the Black Sea (Western Cernomorsky license).
In June 2013, following an international licensing round Eni was awarded the operatorship with an ownership interest of 40% in the PL 717, PL 712 and PL 716 licenses and the ownership interest of 30% in the PL 714 exploration license in the Norwegian section of the Barents Sea.
- 5 -
Eni Interim Consolidated Report / Highlights
Financial highlights * | |||
i | i |
i | First half |
2012 |
(euro million) |
2012 |
2013 |
127,220 | Net sales from operations - continuing operations | 63,203 | 59,276 | |||||
15,071 | Operating profit - continuing operations | 9,340 | 5,293 | |||||
19,798 | Adjusted operating profit - continuing operations (a) | 10,458 | 5,660 | |||||
7,790 | Net profit (b) | 3,844 | 1,818 | |||||
4,200 | Net profit - continuing operations (b) | 3,700 | 1,818 | |||||
3,590 | Net profit - discontinued operations (b) | 144 | ||||||
7,130 | Adjusted net profit - continuing operations (a) | 3,833 | 1,961 | |||||
12,356 | Net cash provided by operating activities - continuing operations | 8,340 | 4,752 | |||||
12,761 | Capital expenditure - continuing operations | 5,647 | 5,931 | |||||
139,878 | Total assets at period end | 150,675 | 137,585 | |||||
62,558 | Shareholders' equity including non-controlling interest at period end | 63,514 | 61,845 | |||||
15,511 | Net borrowings at period end | 26,909 | 16,492 | |||||
78,069 | Net capital employed at period end | 90,423 | 78,337 | |||||
18,34 | Share price at period end | (euro) | 16,78 | 15,78 | ||||
3,622.8 | Number of shares outstanding at period end | (million) | 3,622.7 | 3,622.8 |
* Pertaining to continuing operations. Following the divestment plan of the Regulated Businesses in Italy, results of Snam are represented as discontinued operations throughout this Interim Consolidated Report. |
(a) For a detailed explanation of adjusted (net and operating) profits, that exclude inventory holding gain/loss and special items, see paragraph "Reconciliation of reported operating profit and reported net profit to results on an adjusted basis". |
(b) Profit attributable to Eni's shareholders. |
Summary financial data ** | |||
i | i |
i | First half |
2012 |
2012 |
2013 |
Net profit - continuing operations | ||||||||
1.16 | - per share (a) | (euro) | 1.02 | 0.50 | ||||
2.98 | - per ADR (a) (b) | (USD) | 2.64 | 1.31 | ||||
Adjusted net profit - continuing operations | ||||||||
1.97 | - per share (a) | (euro) | 1.06 | 0.54 | ||||
5.06 | - per ADR (a) (b) | (USD) | 2.75 | 1.42 | ||||
10.1 | Return On Average Capital Employed (ROACE) adjusted | n. d. | 7.0 | |||||
13.6 | Return On Average Equity | 6.2 | 3.1 | |||||
0.25 | Leverage | 0.42 | 0.27 | |||||
11.9 | Coverage | 14.6 | 8.8 | |||||
1.4 | Current ratio | 1.2 | 1.4 | |||||
79.8 | Debt coverage | 31.3 | 28.8 | |||||
** See "Glossary" for indicators explanation. |
(a) Fully diluted. Ratio of net profit and average number of shares outstanding in the period. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by ECB for the period presented. |
(b) One American Depositary Receipt (ADR) is equal to two Eni ordinary shares. |
- 6 -
Eni Interim Consolidated Report / Highlights
Operating and sustainability data | |||
i | i |
i | First half |
2012 |
2012 |
2013 |
77,838 | Employees at period end | (number) | 73,844 | 81,084 | ||||
12,860 | of which - women | 12,559 | 13,283 | |||||
51,194 | of which - outside Italy | 46,814 | 54,509 | |||||
18.9 | Female managers | (%) | 18.7 | 19.0 |
0.57 | Employees injury frequency rate | (No. of accidents per million hours worked) | 0.62 | 0.38 |
0.45 | Contractors injury frequency rate | 0.55 | 0.29 | |||||
1.10 | Fatality index | 0.93 | 0.95 | |||||
3,856 | Oil spills due to operations in the environment | (barrels) | 668 | 1,123 | ||||
52.49 | GHG emission | (mmtonnes CO2 eq) | 26.32 | 24.06 | ||||
211 | R&D expenditures (a) | (euro million) | 82 | 88 | ||||
Exploration & Production | ||||||||
1,701 | Production of hydrocarbons | (kboe/d) | 1,669 | 1,624 | ||||
882 | - Liquids | (kbbl/d) | 861 | 832 | ||||
4,501 | - Natural gas | (mmcf/d) | 4,437 | 4,350 | ||||
598.7 | Production sold | (mmboe) | 293.8 | 276.1 | ||||
Gas & Power | ||||||||
95.32 | Worldwide gas sales (b) | (bcm) | 50.76 | 49.26 | ||||
34.78 | - in Italy | 18.67 | 19.03 | |||||
60.54 | - outside Italy | 32.09 | 30.23 | |||||
Refining & Marketing | ||||||||
30.01 | Refinery throughputs on own account | (mmtonnes) | 14.27 | 13.76 | ||||
10.87 | Retail sales of petroleum products in Europe | 5.27 | 4.82 | |||||
2,064 | Average throughput of service stations in Europe | (kliters) | 1,079 | 1,003 | ||||
Versalis | ||||||||
6,090 | Production | (ktonnes) | 3,114 | 3,025 | ||||
3,953 | Sales of petrochemical products | 2,170 | 1,988 | |||||
66.7 | Average utilization rare | (%) | 66.0 | 68.0 | ||||
Engineering & Construction | ||||||||
13,391 | Orders acquired | (euro million) | 6,303 | 7,151 | ||||
19,739 | Order backlog at period end | 20,323 | 21,704 | |||||
(a) Net of general and administrative costs. |
(b) Includes Exploration & Production natural gas sales amounting to 1.34 bcm (1.30 and 2.73 bcm in the first half of 2012 and in the year 2012, respectively). |
- 7 -
Eni Interim Consolidated Report / Operating review
Exploration & Production |
Key performance indicators | |||
i | i |
i | First half |
2012 |
2012 |
2013 |
0.28 | Employees injury frequency rate | (No. of accidents per million of worked hours) | 0.31 | 0.06 | ||||
0.36 | Contractors injury frequency rate | 0.43 | 0.33 | |||||
0.81 | Fatality index | (No. of fatalities per 100 million of worked hours) | 0.80 | - | ||||
35,881 | Net sales from operations (a) | (euro million) | 17,896 | 15,618 | ||||
18,470 | Operating profit | 9,552 | 7,436 | |||||
18,537 | Adjusted operating profit | 9,334 | 7,408 | |||||
7,426 | Adjusted net profit | 3,708 | 3,111 | |||||
10,307 | Capital expenditure | 4,455 | 4,893 | |||||
Average realizations (b) | ||||||||
102.58 | - Liquids | ($/bbl) | 106.53 | 97.60 | ||||
7.12 | - Natural gas | ($/mcf) | 7.15 | 7.27 | ||||
73.39 | - Hydrocarbons | ($/boe) | 75.10 | 70.33 | ||||
Production of hydrocarbons (b) | ||||||||
882 | - Liquids | (kbbl/d) | 861 | 832 | ||||
4,501 | - Natural gas | (mmcf/d) | 4,437 | 4,350 | ||||
1,701 | - Hydrocarbons | (kboe/d) | 1,669 | 1,624 | ||||
11,304 | Employees at period end | (units) | 10,729 | 11,904 | ||||
7,371 | of which: outside Italy | 6,919 | 7,901 | |||||
3,093 | Oil spills due to operations in the environment | (bbl) | 614 | 972 | ||||
8,384 | Oil spills from sabotage and terrorism | 5,458 | 1,128 | |||||
28.46 | Direct GHG emissions | (mmtonnes CO2 eq) | 13.96 | 13.34 | ||||
9.46 | of which: from flaring | 4.88 | 5.01 | |||||
(a) Before elimination of intragroup sales. |
(b) Includes Enis share of equity-accounted entities. |
Mineral right
portfolio and exploration activities
As of June 30, 2013, Enis mineral right
portfolio consisted of 1,045 exclusive or shared rights for
exploration and development in 42 countries on five continents
for a total acreage of 286,465 square kilometers net to Eni of
which developed acreage was 40,240 square kilometers and
undeveloped acreage was 246,225 square kilometers.
In the first half of 2013, changes in total net acreage mainly
derived from: (i) new leases in the Republic of Cyprus, Norway,
Russia and Vietnam for a total acreage of approximately 43,000
square kilometers; and (ii) total relinquishment of leases mainly
in Angola, Egypt, the United States and Timor Leste, covering
approximately 5,000 square kilometers.
In the first half of 2013, a total of 28 new exploratory wells
were drilled (15 of which represented Enis share), as
compared to 33 exploratory wells drilled in the first half of
2012 (19 of which represented Enis share).
- 8 -
Eni Interim Consolidated Report / Operating review
Oil and natural gas interests | |||
December 31, 2012 | June 30, 2013 | ||
Total net acreage (a) | Number of interests | Gross developed acreage (a) (b) | Gross undeveloped acreage (a) | Total gross acreage (a) | Net developed acreage (a) (b) | Net undeveloped acreage (a) | Total net acreage (a) | |||||||||
EUROPE | 27,423 | 293 | 17,007 | 42,055 | 59,062 | 11,087 | 27,166 | 38,253 | ||||||||
Italy | 17,556 | 149 | 10,663 | 10,766 | 21,429 | 8,948 | 8,293 | 17,241 | ||||||||
Rest of Europe | 9,867 | 144 | 6,344 | 31,289 | 37,633 | 2,139 | 18,873 | 21,012 | ||||||||
Cyprus | 3 | 12,523 | 12,523 | 10,018 | 10,018 | |||||||||||
Croatia | 987 | 2 | 1,975 | 1,975 | 987 | 987 | ||||||||||
Norway | 2,676 | 58 | 2,264 | 9,347 | 11,611 | 346 | 3,453 | 3,799 | ||||||||
Poland | 1,968 | 3 | 1,968 | 1,968 | 1,968 | 1,968 | ||||||||||
United Kingdom | 914 | 63 | 2,055 | 531 | 2,586 | 776 | 119 | 895 | ||||||||
Ukraine | 1,941 | 12 | 50 | 3,840 | 3,890 | 30 | 1,911 | 1,941 | ||||||||
Other Countries | 1,381 | 3 | 3,080 | 3,080 | 1,404 | 1,404 | ||||||||||
AFRICA | 142,796 | 280 | 63,945 | 184,769 | 248,714 | 19,835 | 119,031 | 138,866 | ||||||||
North Africa | 21,390 | 117 | 31,859 | 16,341 | 48,200 | 14,020 | 6,982 | 21,002 | ||||||||
Algeria | 1,232 | 42 | 2,582 | 966 | 3,548 | 1,050 | 137 | 1,187 | ||||||||
Egypt | 4,590 | 54 | 4,866 | 6,687 | 11,553 | 1,746 | 2,501 | 4,247 | ||||||||
Libya | 13,294 | 10 | 17,947 | 8,688 | 26,635 | 8,950 | 4,344 | 13,294 | ||||||||
Tunisia | 2,274 | 11 | 6,464 | 6,464 | 2,274 | 2,274 | ||||||||||
Sub-Saharan Africa | 121,406 | 163 | 32,086 | 168,428 | 200,514 | 5,815 | 112,049 | 117,864 | ||||||||
Angola | 6,079 | 72 | 4,803 | 16,826 | 21,629 | 636 | 3,835 | 4,471 | ||||||||
Congo | 5,035 | 27 | 1,835 | 7,681 | 9,516 | 1,017 | 4,008 | 5,025 | ||||||||
Democratic Republic of Congo | 263 | 1 | 478 | 478 | 263 | 263 | ||||||||||
Gabon | 7,615 | 6 | 7,615 | 7,615 | 7,615 | 7,615 | ||||||||||
Ghana | 1,885 | 2 | 5,144 | 5,144 | 1,885 | 1,885 | ||||||||||
Kenya | 35,724 | 3 | 35,724 | 35,724 | 35,724 | 35,724 | ||||||||||
Liberia | 2,036 | 3 | 8,145 | 8,145 | 2,036 | 2,036 | ||||||||||
Mozambique | 9,069 | 1 | 10,207 | 10,207 | 7,145 | 7,145 | ||||||||||
Nigeria | 7,646 | 41 | 25,448 | 10,838 | 36,286 | 4,162 | 3,484 | 7,646 | ||||||||
Togo | 6,192 | 2 | 6,192 | 6,192 | 6,192 | 6,192 | ||||||||||
Other Countries | 39,862 | 5 | 59,578 | 59,578 | 39,862 | 39,862 | ||||||||||
ASIA | 58,042 | 78 | 16,608 | 182,873 | 199,481 | 5,581 | 81,748 | 87,329 | ||||||||
Kazakhstan | 869 | 6 | 324 | 4,609 | 4,933 | 95 | 774 | 869 | ||||||||
Rest of Asia | 57,173 | 72 | 16,284 | 178,264 | 194,548 | 5,486 | 80,974 | 86,460 | ||||||||
China | 10,495 | 11 | 200 | 10,456 | 10,656 | 39 | 10,456 | 10,495 | ||||||||
India | 6,208 | 11 | 206 | 16,546 | 16,752 | 109 | 6,099 | 6,208 | ||||||||
Indonesia | 19,734 | 13 | 1,735 | 28,490 | 30,225 | 656 | 19,188 | 19,844 | ||||||||
Iran | 820 | 4 | 1,456 | 1,456 | 820 | 820 | ||||||||||
Iraq | 352 | 1 | 1,074 | 1,074 | 352 | 352 | ||||||||||
Pakistan | 10,533 | 19 | 7,911 | 20,210 | 28,121 | 2,281 | 8,055 | 10,336 | ||||||||
Russia | 1,469 | 7 | 3,502 | 64,086 | 67,588 | 1,029 | 21,301 | 22,330 | ||||||||
Timor Leste | 4,118 | 1 | 2,310 | 2,310 | 1,848 | 1,848 | ||||||||||
Turkmenistan | 200 | 1 | 200 | 200 | 200 | 200 | ||||||||||
Vietnam | 3 | 21,566 | 21,566 | 10,783 | 10,783 | |||||||||||
Other Countries | 3,244 | 1 | 14,600 | 14,600 | 3,244 | 3,244 | ||||||||||
AMERICA | 9,075 | 381 | 4,478 | 13,668 | 18,146 | 3,028 | 5,636 | 8,664 | ||||||||
Ecuador | 1,985 | 1 | 1,985 | 1,985 | 1,985 | 1,985 | ||||||||||
Trinidad & Tobago | 66 | 1 | 382 | 382 | 66 | 66 | ||||||||||
United States | 4,632 | 365 | 1,733 | 5,694 | 7,427 | 879 | 3,342 | 4,221 | ||||||||
Venezuela | 1,066 | 6 | 378 | 2,427 | 2,805 | 98 | 968 | 1,066 | ||||||||
Other Countries | 1,326 | 8 | 5,547 | 5,547 | 1,326 | 1,326 | ||||||||||
AUSTRALIA AND OCEANIA | 13,834 | 13 | 1,140 | 21,774 | 22,914 | 709 | 12,644 | 13,353 | ||||||||
Australia | 13,796 | 13 | 1,140 | 21,774 | 22,914 | 709 | 12,644 | 13,353 | ||||||||
Other Countries | 38 | |||||||||||||||
Total | 251,170 | 1,045 | 103,178 | 445,139 | 548,317 | 40,240 | 246,225 | 286,465 |
(a) Square kilometers.
(b) Developed acreage refers to those leases in which at least a
portion of the area is in production or encompasses proved
developed reserves.
Oil and gas
production
In the first half of 2013, Enis liquids and gas
production was 1,624 kboe/d, down 2.7% from the same period of
2012. Performance was affected by force majeure events in
Nigeria, particularly significant, and in Libya and by the
disposals made in 2012 relating to the divestment of a 10%
interest in the Karachaganak field and the Galp transaction,
while it was partly helped by the restart of the Elgin-Franklin
field (Enis interest 21.87%, operated by another oil major)
in the UK, which was offline in 2012
- 9 -
Eni Interim Consolidated Report / Operating review
due to an accident. When excluding these impacts, production
for the first half of 2013 was unchanged driven by new field
start-ups and continuing production ramp-up mainly in Russia,
Algeria, Angola and Egypt, partly offset by planned facility
downtime, mainly in Kazakhstan and in the North Sea, and mature
field declines. The share of oil and natural gas produced outside
Italy was 89% in the first half of 2013.
In the first half of 2013, liquids production (832 kbbl/d)
decreased by 29 kbbl/d, down 3.4%, due to lower production in
Nigeria, planned facility downtimes as well as mature field
declines. These negatives were partly offset by start
ups/ramp-ups mainly in Egypt, Russia and Angola, and higher
production in Iraq.
Natural gas production (4,350 mmcf/d) decreased by 87 mmcf/d from
the first half of 2012 (down 2.4%). Lower production in Nigeria
and mature field declines were partly offset by the contribution
of the start-ups/ramp-ups of the period mainly in Russia, Algeria
and Angola.
Oil and gas production sold amounted to 276.1 mmboe. The 17.8
mmboe difference over production (293.9 mmboe) reflected mainly
volumes of natural gas consumed in operations.
Hydrocarbons production (a) (b) |
First half |
2012 |
(kboe/d) |
2012 |
2013 |
Change |
% Ch. |
|||||
189 | Italy | 188 | 181 | (7 | ) | (3.7 | ) | |||||||
178 | Rest of Europe | 190 | 154 | (36 | ) | (18.9 | ) | |||||||
586 | North Africa | 571 | 576 | 5 | 0.9 | |||||||||
345 | Sub-Saharan Africa | 334 | 317 | (17 | ) | (5.1 | ) | |||||||
102 | Kazakhstan | 108 | 104 | (4 | ) | (3.7 | ) | |||||||
129 | Rest of Asia | 120 | 145 | 25 | 20.8 | |||||||||
135 | America | 119 | 115 | (4 | ) | (3.4 | ) | |||||||
37 | Australia and Oceania | 39 | 32 | (7 | ) | (17.9 | ) | |||||||
1,701 | 1,669 | 1,624 | (45 | ) | (2.7 | ) | ||||||||
598.7 | Production sold | (mmboe) | 293.8 | 276.1 | (17.7 | ) | (6.0 | ) | ||||||
Liquids production (a) |
First half |
2012 |
(kbbl/d) |
2012 |
2013 |
Change |
% Ch. |
|||||
63 | Italy | 65 | 65 | |||||||||
95 | Rest of Europe | 101 | 77 | (24 | ) | (23.8 | ) | |||||
271 | North Africa | 258 | 257 | (1 | ) | (0.4 | ) | |||||
247 | Sub-Saharan Africa | 244 | 239 | (5 | ) | (2.0 | ) | |||||
61 | Kazakhstan | 65 | 64 | (1 | ) | (1.5 | ) | |||||
44 | Rest of Asia | 39 | 51 | 12 | 30.8 | |||||||
83 | America | 67 | 68 | 1 | 1.5 | |||||||
18 | Australia and Oceania | 22 | 11 | (11 | ) | (50.0 | ) | |||||
882 | 861 | 832 | (29 | ) | (3.4 | ) | ||||||
Natural gas production (a) (b) |
First half |
2012 |
(mmcf/d) |
2012 |
2013 |
Change |
% Ch. |
|||||
695 | Italy | 675 | 637 | (38 | ) | (5.6 | ) | |||||
459 | Rest of Europe | 484 | 423 | (61 | ) | (12.6 | ) | |||||
1,733 | North Africa | 1,716 | 1,753 | 37 | 2.2 | |||||||
539 | Sub-Saharan Africa | 494 | 433 | (61 | ) | (12.3 | ) | |||||
222 | Kazakhstan | 242 | 216 | (26 | ) | (10.7 | ) | |||||
468 | Rest of Asia | 445 | 519 | 74 | 16.6 | |||||||
284 | America | 287 | 258 | (29 | ) | (10.1 | ) | |||||
101 | Australia and Oceania | 94 | 111 | 17 | 18.1 | |||||||
4,501 | 4,437 | 4,350 | (87 | ) | (2.4 | ) | ||||||
(a) Includes Enis share of
equity-accounted entities.
(b) Includes volumes of gas consumed in operation (415 and 342
mmcf/d in the first half 2013 and 2012, respectively and 383
mmcf/d in 2012).
- 10 -
Eni Interim Consolidated Report / Operating review
Main exploration and
development projects |
Italy |
In the Val dAgri concession (Enis interest 60.77%)
the development plan is ongoing as agreed with the Basilicata
Region in 1998. The construction of a new gas treatment unit
progressed with a production target capacity of 104 kbbl/d.
Other main development activities concerned: (i) the maintenance
and production optimization at the Annamaria, Angela Angelina,
Cervia, and Rospo fields in the Adriatic offshore, the Trecate
field in the Po Valley as well as the Tresauro, Gela and Ragusa
fields in Sicily; (ii) the upgrading of compression and
hydrocarbon treatment facilities at the production platform of
the Barbara field; and (iii) the start-up of development projects
for the Elettra and Fauzia fields in the Adriatic offshore.
Rest of Europe |
Norway Eni was awarded the operatorship and a
40% interest in the PL 717, PL 712 and PL 716 exploration
licenses and a 30% stake in the PL 714 license in the Barents
Sea.
In March 2013, the Skuld field (Enis interest 11.5%)
started up with a production of approximately 30 kboe/d
(approximately 4 kboe/d net to Eni).
Development activities have been progressing at the Goliat field
(Eni operator with a 65% interest) in the Barents Sea. Start-up
is expected in 2014.
Other ongoing activities aimed at maintaining and optimizing
production at the Ekofisk field (Enis interest 12.39%) by
means of drilling of infilling wells, the development of the
South Area, upgrading of existing facilities and optimization of
water injection.
United Kingdom Within its strategy of portfolio
optimization, Eni continued the divestment program of
development/production assets in the Country. The sale of
Kinnoull and of five exploration assets was completed. The
completion date for the other assets is expected in the second
half of 2013.
Main development activities concerned: (i) the construction of
production and treatment facilities at the gas and condensates
Jasmine field (Enis interest 33%). Start-up is expected by
the end of 2013; and (ii) the construction of production
platforms and linkage to nearby treatment facilities at the West
Franklin field (Enis interest 21.87%). Start-up is expected
in 2014.
North Africa |
Algeria Production started at the MLE-CAFC
project (Enis interest 75%). A natural gas treatment plant
started operations with a production and export capacity of
approximately 320 mmcf/d of gas, 15 kbbl/d of oil and condensates
and 12 kbbl/d of LPG. Four export pipelines link it to the
national grid system.
The MLE-CAFC project targets a production plateau of
approximately 33 kboe/d net to Eni by 2016.
In the first half of 2013, production started at the El Merk
field (Enis interest 12.25%) with the construction of a gas
treatment plant for approximately 600 mmcf/d, two oil trains for
65 kbbl/d each and three export pipelines linked to the local
network. Production peak of 18 kboe/d net to Eni is expected in
2015.
Egypt Exploration activities yielded
positive results with the Rosa North-1X oil discovery in the
Meleiha development lease (Enis interest 56%). The
development plan provides for the drilling of a new well in 2013.
Expected production for the year is 5 kbbl/d, leveraging on the
production facilities in the area.
In the first half of 2013, Eni was awarded the operatorship and a
100% interest in an exploration block in deep waters in the
Eastern Mediterranean Sea.
Development activities concerned: (i) infilling activities at the
Belayim (Enis interest 100%), Denise (Enis interest
50%) and Tuna (Enis interest 50%) fields to optimize the
recovery of their mineral potential; (ii) development drilling at
the Emry Deep (Enis interest 56%) discovery and at the Seth
field (Enis interest 50%); and (iii) development program of
the DEKA field (Enis interest 50%).
- 11 -
Eni Interim Consolidated Report / Operating review
Sub-Saharan Africa |
Angola The LNG plant managed by the Angola LNG
consortium (Enis interest 13.6%) started up and delivered
its first cargo in June 2013. The plant envisages the development
of 10,594 bcf of gas in 30 years.
Development activities progressed at: (i) the West Hub in Block
15/06, with start-up expected in the fourth quarter of 2014; (ii)
the second phase of Kizomba satellites in the Development Area of
former Block 15 (Enis interest 20%). The project provides
for the linkage of three additional discoveries to the existing
FPSO. Start-up is expected in 2015; (iii) the Mafumeira field in
Area A of Block 0 (Enis interest 9.8%) with installation of
production and treatment platforms and underwater linkage.
Start-up is expected in 2015; and (iv) the Lianzi field in Block
14 KA/IMI (Enis interest 10%) through the linkage to the
existing production facilities. Start-up is expected in 2015.
Congo Exploration activities yielded positive
results in offshore block Marine XII (Eni operator with a 65%
interest) with the oil and gas discovery and the appraisal
activity in the Nene Marine field.
Activities on the MBoundi field (Eni operator with an 83%
interest) moved forward with the application of Eni advanced
recovery techniques and a design to monetize associated gas
within the activities aimed at zero gas flaring by 2013. Gas is
sold under long-term contracts to power plants in the area
including the CEC Centrale Electrique du Congo (Eni's interest
20%) with a 300 MW generation capacity. These facilities will
also receive in the future gas from the offshore discoveries of
the Marine XII permit.
Mozambique In July 2013, Eni and China National
Petroleum Corporation (CNPC) closed the sale of 28.57% share
capital of the subsidiary Eni East Africa, which currently owns
70% interest in Area 4 in the offshore of Mozambique, for an
agreed price equal to $4,210 million, integrated for contractual
balances provided until the date of closing. CNPC indirectly
acquires, through its 28.57% equity investment in Eni East
Africa, a 20% interest in Area 4, offshore Mozambique, while Eni
will retain the 50% interest through the remaining stake in Eni
East Africa. CNPCs entrance into Area 4 is strategically
significant for the project because of the worldwide importance
of the company in the upstream and downstream sectors. In
addition, the planned activities of the Joint Study Agreement
progressed to develop the promising shale gas block located in
the Sichuan Basin in China.
In the first half of 2013, new exploration successes were
recorded with the Coral 3 and Mamba South 3 delineation wells
with an improvement in the estimated mineral potential up to 80
Tcf of gas in place. Eni plans to drill a new exploration well to
estimate the mineral potential of the deeper southern section of
Area 4.
Leveraging on Enis cooperation model, the construction of a
gas fired power plant for domestic consumption is being planned
with the support of the Mozambican government.
Nigeria In Block OML 125 (Eni operator with an
85% interest) the Abo-Phase 3 project has been started-up. This
project was sanctioned in late 2012.
In blocks OMLs 60, 61, 62 and 63 (Eni operator with a 20%
interest), activities progressed to support gas production to
feed the Bonny liquefaction plant. The flowstation at Ogbainbiri
is nearing completion. This facility will process natural gas
production from the Ogbainbiri and Tuomo fields to ensure
additional volumes of approximately 210 mmcf/d to the Bonny
liquefaction plant. Start-up is expected before the end of 2013.
In block OML 28 (Enis interest 5%) the integrated oil and
natural gas project in the Gbaran-Ubie area progressed with the
drilling campaign. The development plan provides for the
construction of a Central Processing Facility (CPF) with
treatment capacity of approximately 1 bcf/d of gas and 120 kbbl/d
of liquids in order to feed gas to the Bonny liquefaction plant.
Development activity continued at the Forkados-Yokri field
(Enis interest 5%). The project includes the drilling of 24
producing wells, the upgrading of existing flowstations and the
construction of transport facilities. Start-up is expected in
2014. Planned activity progressed at the Bonga NW field in block
OML 118 (Enis interest 12.5%) with the drilling and the
completion of producing and infilling wells. Start-up is expected
in 2014.
- 12 -
Eni Interim Consolidated Report / Operating review
Kazakhstan |
Kashagan The North Caspian Operating Company
Consortium (NCOC) BV (Enis interest 16.81%) that operates
the development of the Kashagan field is currently focused on
completing the Experimental Program. In June 2013, the onshore
treatment plant in Bolashak came on line; in July operational
testing activities started at offshore production facilities.
Production start-up is expected by the next weeks. Security
remains the priority of the Consortium throughout the whole
process to achieve the first oil.
The Phase 1 (Experimental Program) is targeting an initial
production capacity of 150 kbbl/d; by 2014 a second treatment
train and compression facilities for gas re-injection will be
completed and put online enabling to increase the production
capacity up to 370 kbbl/d. The partners are planning to further
increase available production capacity up to 450 kbbl/d by
installing additional gas compression capacity for re-injection
in the reservoir. The partners submitted the scheme of this
additional phase to the relevant Kazakh Authorities and sanction
is expected in 2013 to start-up with the FEED phase.
Rest of Asia |
Iraq In July 2013, Eni signed with the national oil company South Oil Company and the Iraqi Ministry of Oil an amendment to the technical service contract for the development of the Zubair oil field (Enis interest 32.8%). The agreement sets a new production target of 850 kbbl/d compared to the previous target of 1.2 mmbbl/d and extends the duration of the technical service contract for an additional five years, until 2035.
Russia Development activities continued at the
Samburgskoye field (Enis interest 29.4%) in the
Yamal-Nenets region in Siberia, started in 2012. Completion is
expected in 2015 with a production peak of 146 kboe/d (43 kboe/d
net to Eni) in 2016.
Development activities continued at the Urengoiskoye sanctioned
project (Enis interest 29.4%). Start-up is expected in
2014.
Seismic operations started at the Fedynsky and Central Barents
license areas (Enis interest 33.33%), located in the
Russian offshore in the Barents Sea. Seismic surveys will be
executed in compliance with Russian legal environmental
requirements.
America |
United States In March 2013, Eni was awarded
five offshore blocks located in the Mississippi Canyon and Desoto
Canyon areas in the Gulf of Mexico.
Phase 1 of the development plan of the Heidelberg field
(Enis interest 12.5%) in the deep offshore of the Gulf of
Mexico has been sanctioned. The project includes the drilling of
5 producing wells and the installation of a producing platform.
Start-up is expected in the second half of 2016 with a production
of approximately 9 kboe/d net to Eni.
Development activities in the Gulf of Mexico mainly concerned:
(i) drilling and completion activities at the Hadrian South
(Enis interest 30%), Lucius/Hadrian North (Enis
interest 5.4%) and St. Malo (Enis interest 1.25%) fields;
(ii) infilling activities at the producing operated Appaloosa
(Enis interest 100%), Longhorn (Enis interest 75%),
Pegasus (Enis interest 58%) fields and at the producing
non-operated Front Runner field (Enis interest 37.5%); and
(iii) maintenance of the pipeline linking to the Corral
production platform.
Planned drilling activities continued at the Nikaitchuq (Eni
operator with a 100% interest) and Oooguruk (Enis interest
30%) fields in Alaska.
Venezuela In March 2013, production started up at the giant Junin 5 field (Enis interest 40%) with 35 bbbl of certified heavy oil in place, located in the Orinoco oil belt. Early production of the first phase is expected at plateau of 75 kbbl/d in 2015, targeting a long-term production plateau of 240 kbbl/d to be reached by 2018. The project provides also for the construction of a refinery with a capacity of approximately 350 kbbl/d. Eni agreed to finance part of PDVSAs development costs for the early production phase and engineering activities of the refinery plant up to $1.74 billion.
- 13 -
Eni Interim Consolidated Report / Operating review
The sanctioned development plan progressed at the Perla gas discovery, located in the Cardon IV block (Enis interest 35%), in the Gulf of Venezuela. The early production phase includes the utilization of the already successfully drilled discovery/appraisal wells and the installation of production platforms linked by pipelines to the onshore treatment plant. Target production of approximately 300 mmcf/d is expected in 2015. The development program will continue with the drilling of additional wells and the upgrading of treatment facilities to reach a production plateau of approximately 1,200 mmcf/d.
Capital
expenditure
Capital expenditure of the Exploration &
Production Division (euro 4,893 million) concerned development of
oil and gas reserves (euro 3,907 million) directed mainly outside
Italy, in particular in Norway, the United States, Angola, Congo,
Kazakhstan and Nigeria. Development expenditure in Italy
concerned the well drilling program and facility upgrading in the
Val dAgri concession as well as sidetrack and workover in
mature fields.
About 97% of exploration expenditure that amounted to euro 944
million was directed outside Italy in particular to Mozambique,
Togo, Congo, Angola and China as well as the acquisition of new
licenses in the Republic of Cyprus and in Vietnam. In Italy,
exploration activities were directed mainly to the Adriatic
offshore, Val dAgri and Po Valley.
Capital expenditure |
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
795 | Italy | 357 | 393 | 36 | 10.1 | |||||||
2,162 | Rest of Europe | 967 | 1,139 | 172 | 17.8 | |||||||
1,474 | North Africa | 612 | 388 | (224 | ) | (36.6 | ) | |||||
3,129 | Sub-Saharan Africa | 1,347 | 1,606 | 259 | 19.2 | |||||||
720 | Kazakhstan | 341 | 324 | (17 | ) | (5.0 | ) | |||||
874 | Rest of Asia | 311 | 527 | 216 | 69.5 | |||||||
1,043 | America | 508 | 481 | (27 | ) | (5.3 | ) | |||||
110 | Australia and Oceania | 12 | 35 | 23 | .. | |||||||
10,307 | 4,455 | 4,893 | 438 | 9.8 | ||||||||
- 14 -
Eni Interim Consolidated Report / Operating review
Gas & Power |
Key performance indicators | |||
i | i |
i | First half |
2012 |
2012 |
2013 |
1.84 | Employees injury frequency rate | (No. of accidents per million of worked hours) | 1.77 | 1.06 | |||||||
3.64 | Contractors injury frequency rate | 5.24 | 1.49 | ||||||||
36,200 | Net sales from operations (a) | (euro million) | 19,993 | 17,362 | |||||||
(3,219 | ) | Operating profit | (641 | ) | (559 | ) | |||||
356 | Adjusted operating profit | 618 | (663 | ) | |||||||
47 | Marketing | 434 | (761 | ) | |||||||
309 | International transport | 184 | 98 | ||||||||
473 | Adjusted net profit | 625 | (371 | ) | |||||||
1,316 | EBITDA pro-forma adjusted | 1,186 | (300 | ) | |||||||
858 | Marketing | 921 | (471 | ) | |||||||
458 | International transport | 265 | 171 | ||||||||
225 | Capital expenditure | 85 | 85 | ||||||||
95.32 | Worldwide gas sales (b) | (bcm) | 50.76 | 49.26 | |||||||
34.78 | - in Italy | 18.67 | 19.03 | ||||||||
60.54 | - international | 32.09 | 30.23 | ||||||||
42.58 | Electricity sold | (TWh) | 21.91 | 17.85 | |||||||
4,752 | Employees at period end | (units) | 4,746 | 4,199 | |||||||
12.70 | Direct GHG emissions | (mmtonnes CO2 eq) | 6.62 | 5.54 | |||||||
(a) Before elimination of intragroup sales. |
(b) Include volumes marketed by the Exploration & Production Division of 1.34 bcm (1.30 and 2.73 bcm in the first half and full year of 2012). |
Marketing |
Natural gas |
Supply of natural gas
In the first half of 2013, Enis consolidated
subsidiaries supplied 44.25 bcm of natural gas, representing a
decrease of 1.82 bcm, or 4% from the first half of 2012.
Gas volumes supplied outside Italy (40.57 bcm from consolidated
companies), imported in Italy or sold outside Italy, represented
approximately 92% of total supplies, a decrease of 1.76 bcm, or
4.2%, from the first half of 2012 mainly reflecting lower volumes
purchased in all markets, in particular from Algeria (down 3.77
bcm) and Norway (down 1.72 bcm), with the exception of Russia (up
6.14 bcm).
Supplies in Italy (3.68 bcm) were basically stable (down 0.06 bcm
from the first half of 2012).
- 15 -
Eni Interim Consolidated Report / Operating review
Supply of natural gas |
First half |
2012 |
(bcm) |
2012 |
2013 |
Change |
% Ch. |
|||||
7.55 | Italy | 3.74 | 3.68 | (0.06 | ) | (1.6 | ) | ||||||||
19.83 | Russia | 8.88 | 15.02 | 6.14 | 69.1 | ||||||||||
14.45 | Algeria (including LNG) | 8.66 | 4.89 | (3.77 | ) | (43.5 | ) | ||||||||
6.55 | Libya | 3.20 | 3.09 | (0.11 | ) | (3.4 | ) | ||||||||
11.97 | Netherlands | 7.50 | 6.86 | (0.64 | ) | (8.5 | ) | ||||||||
12.13 | Norway | 6.74 | 5.02 | (1.72 | ) | (25.5 | ) | ||||||||
3.20 | United Kingdom | 1.66 | 1.44 | (0.22 | ) | (13.3 | ) | ||||||||
0.61 | Hungary | 0.31 | 0.29 | (0.02 | ) | (6.5 | ) | ||||||||
2.88 | Qatar (LNG) | 1.49 | 1.49 | ||||||||||||
5.43 | Other supplies of natural gas | 2.97 | 1.72 | (1.25 | ) | (42.1 | ) | ||||||||
2.14 | Other supplies of LNG | 0.92 | 0.75 | (0.17 | ) | (18.5 | ) | ||||||||
79.19 | Outside Italy | 42.33 | 40.57 | (1.76 | ) | (4.2 | ) | ||||||||
86.74 | TOTAL SUPPLIES OF ENI'S CONSOLIDATED SUBSIDIARIES | 46.07 | 44.25 | (1.82 | ) | (4.0 | ) | ||||||||
(1.35 | ) | Offtake from (input to) storage | (1.17 | ) | 0.80 | 1.97 | .. | ||||||||
(0.28 | ) | Network losses, measurement differences and other changes | (0.13 | ) | (0.07 | ) | 0.06 | .. | |||||||
85.11 | AVAILABLE FOR SALE BY ENI'S CONSOLIDATED SUBSIDIARIES | 44.77 | 44.98 | 0.21 | 0.5 | ||||||||||
7.48 | Available for sale by Eni's affiliates | 4.69 | 2.94 | (1.75 | ) | (37.3 | ) | ||||||||
2.73 | E&P volumes | 1.30 | 1.34 | 0.04 | 3.1 | ||||||||||
95.32 | TOTAL AVAILABLE FOR SALE | 50.76 | 49.26 | (1.50 | ) | (3.0 | ) | ||||||||
Sales of natural gas
Sales of natural gas for the first half of 2013 were
49.26 bcm, a decrease of 1.50 bcm from the first half of 2012,
down 3%, due to weak demand impacted by the downturn and growing
competitive pressure. Sales included Enis own consumption,
Enis share of sales made by equity-accounted entities and
upstream sales in Europe and in the Gulf of Mexico. When
excluding Galp sales, as the company is no longer an affiliate of
Eni due to the termination of shareholders agreements, sales
declined only by 0.7%.
Gas sales by entity |
First half |
2012 |
(bcm) |
2012 |
2013 |
Change |
% Ch. |
|||||
84.30 | Total sales of subsidiaries | 44.42 | 44.35 | (0.07 | ) | (0.2 | ) | |||||
34.66 | Italy (including own consumption) | 18.60 | 18.96 | 0.36 | 1.9 | |||||||
44.57 | Rest of Europe | 23.34 | 22.50 | (0.84 | ) | (3.6 | ) | |||||
5.07 | Outside Europe | 2.48 | 2.89 | 0.41 | 16.5 | |||||||
8.29 | Total sales of Eni's affiliates (net to Eni) | 5.04 | 3.57 | (1.47 | ) | (29.2 | ) | |||||
0.12 | Italy | 0.07 | 0.07 | .. | ||||||||
6.45 | Rest of Europe | 4.10 | 2.70 | (1.40 | ) | (34.1 | ) | |||||
1.72 | Outside Europe | 0.87 | 0.80 | (0.07 | ) | (8.0 | ) | |||||
2.73 | E&P in Europe and in the Gulf of Mexico | 1.30 | 1.34 | 0.04 | 3.1 | |||||||
95.32 | WORLDWIDE GAS SALES | 50.76 | 49.26 | (1.50 | ) | (3.0 | ) | |||||
Sales volumes in the Italian market amounted to 19.03 bcm, an
increase of 0.36 bcm, or 1.9%, from the first half of 2012. This
was mainly due to higher sales on spot markets and at certain
Italian exchanges (up 0.69 bcm) and higher sales to wholesalers
(up 0.60 bcm) due to efficient commercial policies and the
recovery of clients. This increase was offset in part by lower
supplies to the power generation segment (down 0.24 bcm) and
industrials (down 0.17 bcm) due to lower demand for electricity
and competition from renewable sources and coal.
Sales to importers in Italy grew significantly (up 1.46 bcm) due
to the recovered availability of Libyan gas.
Sales in Europe decreased by 3.70 bcm, down 14%, affected by the
performance of the Iberian Peninsula (down 1.26 bcm) due to the
exclusion of Galp sales following the termination of affiliation.
Net of these factors sales in Europe declined by 10.2% due to
declines in Benelux (down 1.25 bcm) driven by lower
- 16 -
Eni Interim Consolidated Report / Operating review
hub sales and Turkey (down 0.50 bcm) due to lower withdrawals
from Botas. The opposite trend was recorded in sales in
Germany/Austria (up 0.13 bcm) the effective performance of
commercial initiatives.
Sales on markets outside Europe were on a positive trend (up 0.34
bcm) due to higher LNG sales in particular in Japan and
Argentina.
Gas sales by market |
First half |
2012 |
(bcm) |
2012 |
2013 |
Change |
% Ch. |
|||||
34.78 | ITALY | 18.67 | 19.03 | 0.36 | 1.9 | |||||||
4.65 | Wholesalers | 2.47 | 3.07 | 0.60 | 24.3 | |||||||
7.52 | Italian gas exchange and spot markets | 3.95 | 4.64 | 0.69 | 17.5 | |||||||
6.93 | Industries | 3.51 | 3.34 | (0.17 | ) | (4.8 | ) | |||||
0.81 | Medium-sized enterprises and services | 0.51 | 0.57 | 0.06 | 11.8 | |||||||
2.55 | Power generation | 1.26 | 1.02 | (0.24 | ) | (19.0 | ) | |||||
5.89 | Residential | 3.63 | 3.54 | (0.09 | ) | (2.5 | ) | |||||
6.43 | Own consumption | 3.34 | 2.85 | (0.49 | ) | (14.7 | ) | |||||
60.54 | INTERNATIONAL SALES | 32.09 | 30.23 | (1.86 | ) | (5.8 | ) | |||||
51.02 | Rest of Europe | 27.44 | 25.20 | (2.24 | ) | (8.2 | ) | |||||
2.73 | Importers in Italy | 1.02 | 2.48 | 1.46 | 143.1 | |||||||
48.29 | European markets | 26.42 | 22.72 | (3.70 | ) | (14.0 | ) | |||||
6.29 | Iberian Peninsula | 3.68 | 2.42 | (1.26 | ) | (34.2 | ) | |||||
7.78 | Germany/Austria | 4.35 | 4.48 | 0.13 | 3.0 | |||||||
10.31 | Benelux | 6.04 | 4.79 | (1.25 | ) | (20.7 | ) | |||||
2.02 | Hungary | 1.24 | 1.09 | (0.15 | ) | (12.1 | ) | |||||
4.75 | UK | 1.86 | 1.86 | |||||||||
7.22 | Turkey | 3.75 | 3.25 | (0.50 | ) | (13.3 | ) | |||||
8.36 | France | 4.55 | 4.36 | (0.19 | ) | (4.2 | ) | |||||
1.56 | Other | 0.95 | 0.47 | (0.48 | ) | (50.5 | ) | |||||
6.79 | Extra European markets | 3.35 | 3.69 | 0.34 | 10.1 | |||||||
2.73 | E&P in Europe and in the Gulf of Mexico | 1.30 | 1.34 | 0.04 | 3.1 | |||||||
95.32 | WORLDWIDE GAS SALES | 50.76 | 49.26 | (1.50 | ) | (3.0 | ) | |||||
Power |
Availability of electricity
Enis power generation activity is conducted in
the Ferrera Erbognone, Ravenna, Livorno, Taranto, Mantova,
Brindisi, Ferrara and in Bolgiano plants, as well as in certain
photovoltaic sites in Italy.
In the first half of 2013, power generation was 11.14 TWh, down
2.13 TWh, or 16.1% from the first half of 2012, mainly due to
lower production in particular at the Ferrara and Mantova plants
due to a sharp fall in demand.
As of June 30, 2013, installed operational capacity was 5.3 GW
(5.3 GW at December 31, 2012).
Electricity trading declined (down 1.93 TWh) due to lower
purchases related to the decline in demand.
Power sales
In the first half of 2013 electricity sales of 17.85
TWh were directed to the free market (79%), the Italian power
exchange (8%), industrial sites (9%) and others (4%).
Compared with the first half of 2012, electricity sales were down
by 4.06 TWh, or 18.5%, due to weakness in electricity demand.
Volumes traded on the Italian power exchange were down by 2.03
TWh from the first half of 2012. Sales to wholesalers also
declined and offset the increase of sales to retail customers.
- 17 -
Eni Interim Consolidated Report / Operating review
First half |
2012 |
2012 |
2013 |
Change |
% Ch. |
||||||
5,206 | Purchases of natural gas | (mmcm) | 2,640 | 2,271 | (369 | ) | (14.0 | ) | ||||||
462 | Purchases of other fuels | (ktoe) | 253 | 235 | (18 | ) | (7.1 | ) | ||||||
25.67 | Power generation | (TWh) | 13.27 | 11.14 | (2.13 | ) | (16.1 | ) | ||||||
12,603 | Steam | (ktonnes) | 7,517 | 5,343 | (2,174 | ) | (28.9 | ) | ||||||
Availability of electricity |
First half |
2012 |
(TWh) |
2012 |
2013 |
Change |
% Ch. |
|||||
25.67 | Power generation | 13.27 | 11.14 | (2.13 | ) | (16.1 | ) | |||||
16.91 | Trading of electricity (a) | 8.64 | 6.71 | (1.93 | ) | (22.3 | ) | |||||
42.58 | 21.91 | 17.85 | (4.06 | ) | (18.5 | ) | ||||||
31.84 | Free market | 16.08 | 14.07 | (2.01 | ) | (12.5 | ) | |||||
6.10 | Italian Exchange for electricity | 3.47 | 1.44 | (2.03 | ) | (58.5 | ) | |||||
3.30 | Industrial plants | 1.65 | 1.63 | (0.02 | ) | (1.2 | ) | |||||
1.34 | Other (a) | 0.71 | 0.71 | |||||||||
42.58 | Power sales | 21.91 | 17.85 | (4.06 | ) | (18.5 | ) | |||||
(a) Includes positive and negative imbalances.
Capital expenditure
In the first half of 2013, capital expenditure
totaled euro 85 million and mainly related to completion of
upgrading and other initiatives to improve flexibility of the
combined cycle power plants (euro 43 million) and gas marketing
initiatives (euro 33 million).
Capital expenditure |
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
212 | Marketing | 78 | 76 | (2 | ) | (2.6 | ) | |||||
13 | International transport | 7 | 9 | 2 | 28.6 | |||||||
225 | 85 | 85 | ||||||||||
- 18 -
Eni Interim Consolidated Report / Operating review
Refining & Marketing |
Key performance indicators | |||
i | i |
i | First half |
2012 |
2012 |
2013 |
1.08 | Employees injury frequency rate | (No. of accidents per million of worked hours) | 0.91 | 0.31 | |||||||
2.32 | Contractors injury frequency rate | 2.74 | 0.75 | ||||||||
62,656 | Net sales from operations (a) | (euro million) | 29,501 | 29,728 | |||||||
(1,296 | ) | Operating profit | (674 | ) | (557 | ) | |||||
(321 | ) | Adjusted operating profit | (366 | ) | (326 | ) | |||||
(179 | ) | Adjusted net profit | (253 | ) | (191 | ) | |||||
842 | Capital expenditure | 290 | 210 | ||||||||
30.01 | Refinery throughputs on own account | (mmtonnes) | 14.27 | 13.76 | |||||||
61 | Conversion index | (%) | 61 | 64 | |||||||
767 | Balanced capacity of refineries | (kbbl/d) | 767 | 767 | |||||||
10.87 | Retail sales of petroleum products in Europe | (mmtonnes) | 5.27 | 4.82 | |||||||
6,384 | Service stations in Europe at period end | (units) | 6,372 | 6,337 | |||||||
2,064 | Average throughput per service station in Europe | (kliters) | 1,003 | 910 | |||||||
1.48 | Retail efficiency index | (%) | 1.64 | 1.38 | |||||||
7,125 | Employees at period end | (units) | 7,333 | 6,953 | |||||||
6.03 | Direct GHG emissions | (mmtonnes CO2 eq) | 3.09 | 2.43 | |||||||
16.99 | SOx emissions (sulphur oxide) | (ktonnes SO2 eq) | 10.19 | 4.87 | |||||||
(a) Before elimination of intragroup sales. |
Refining
In the first half of 2013, refining throughputs on own
account in Italy and outside Italy were 13.76 mmtonnes, down 0.51
mmtonnes from the first half of 2012, or 3.6%. Volumes processed
in Italy (down 3%) registered a decline from the same period of
2012 due to the upset at the Sannazzaro plant, scheduled
standstills at Gela where two production lines were shut down in
June 2012 and the topping plant which was temporarily stopped in
June 2013. These negative impacts were offset in part by
increased throughputs at the Venice plant after the standstills
of 2012.
Outside Italy, Enis refining throughputs declined by 0.15
mmtonnes (down 6.1%) in particular in Germany for planned
standstills at the Schwedt refinery and in the Czech Republic for
the same reason at Ceska Rafinerska.
Total throughputs at wholly-owned refineries (9.59 mmtonnes)
declined by 0.25 mmtonnes, down 2.5%, from the first half of
2012, resulting in a 67% utilization rate, declining from the
same period of last year as a consequence of negative market
trends.
Approximately 22.1% of volumes of processed crude were supplied
by Enis Exploration & Production segment (down 7.2
percentage points from 29.3% in the first half of 2012)
corresponding to a lower volume of approximately 360 ktonnes.
- 19 -
Eni Interim Consolidated Report / Operating review
Availability of refined products |
First half |
2012 |
(mmtonnes) |
2012 |
2013 |
Change |
% Ch. |
|||||
ITALY | |||||||||||||||
20.84 | At wholly-owned refineries | 9.84 | 9.59 | (0.25 | ) | (2.5 | ) | ||||||||
(0.47 | ) | Less input on account of third parties | (0.22 | ) | (0.31 | ) | (0.09 | ) | (40.9 | ) | |||||
4.52 | At affiliated refineries | 2.19 | 2.17 | (0.02 | ) | (0.9 | ) | ||||||||
24.89 | Refinery throughputs on own account | 11.81 | 11.45 | (0.36 | ) | (3.0 | ) | ||||||||
(1.34 | ) | Consumption and losses | (0.66 | ) | (0.60 | ) | 0.06 | 9.1 | |||||||
23.55 | Products available for sale | 11.15 | 10.85 | (0.30 | ) | (2.7 | ) | ||||||||
3.35 | Purchases of refined products and change in inventories | 2.20 | 2.09 | (0.11 | ) | (5.0 | ) | ||||||||
(2.36 | ) | Products transferred to operations outside Italy | (1.21 | ) | (1.50 | ) | (0.29 | ) | (24.0 | ) | |||||
(0.75 | ) | Consumption for power generation | (0.39 | ) | (0.28 | ) | 0.11 | 29.0 | |||||||
23.79 | Sales of products | 11.75 | 11.16 | (0.59 | ) | (5.0 | ) | ||||||||
OUTSIDE ITALY | |||||||||||||||
5.12 | Refinery throughputs on own account | 2.46 | 2.31 | (0.15 | ) | (6.1 | ) | ||||||||
(0.23 | ) | Consumption and losses | (0.11 | ) | (0.10 | ) | 0.01 | 9.1 | |||||||
4.89 | Products available for sale | 2.35 | 2.21 | (0.14 | ) | (6.0 | ) | ||||||||
17.29 | Purchases of refined products and change in inventories | 7.46 | 6.21 | (1.25 | ) | (16.8 | ) | ||||||||
2.36 | Products transferred from Italian operations | 1.21 | 1.50 | 0.29 | 24.0 | ||||||||||
24.54 | Sales of products | 11.02 | 9.92 | (1.10 | ) | (10.0 | ) | ||||||||
30.01 | Refinery throughputs on own account | 14.27 | 13.76 | (0.51 | ) | (3.6 | ) | ||||||||
6.39 | of which: refinery throughputs of equity crude on own account | 3.14 | 2.78 | (0.36 | ) | (11.5 | ) | ||||||||
48.33 | Total sales of refined products | 22.77 | 21.08 | (1.69 | ) | (7.4 | ) | ||||||||
36.56 | Crude oil sales | 17.03 | 18.47 | 1.44 | 8.5 | ||||||||||
84.89 | TOTAL SALES | 39.80 | 39.55 | (0.25 | ) | (0.6 | ) | ||||||||
Marketing of refined
products
In the first half of 2013, sales volumes of
refined products (21.08 mmtonnes) were down 1.69 mmtonnes from
the first half of 2012, or 7.4%, mainly due to lower sales
outside Italy to oil companies and in Italy.
Product sales in Italy and outside Italy by market |
First half |
2012 |
(mmtonnes) |
2012 |
2013 |
Change |
% Ch. |
|||||
7.83 | Retail | 3.79 | 3.36 | (0.43 | ) | (11.3 | ) | ||||||
8.62 | Wholesale | 4.24 | 3.94 | (0.30 | ) | (7.1 | ) | ||||||
1.26 | Chemicals | 0.68 | 0.63 | (0.06 | ) | (8.1 | ) | ||||||
6.08 | Other sales | 3.04 | 3.24 | 0.20 | 6.7 | ||||||||
23.79 | Sales in Italy | 11.75 | 11.17 | (0.58 | ) | (4.9 | ) | ||||||
3.04 | Retail rest of Europe | 1.48 | 1.46 | (0.02 | ) | (1.4 | ) | ||||||
3.96 | Wholesale rest of Europe | 1.92 | 2.02 | 0.10 | 5.2 | ||||||||
0.42 | Wholesale outside Italy | 0.21 | 0.21 | ||||||||||
17.12 | Other sales | 7.41 | 6.22 | (1.19 | ) | (16.1 | ) | ||||||
24.54 | Sales outside Italy | 11.02 | 9.91 | (1.11 | ) | (10.1 | ) | ||||||
48.33 | TOTAL SALES OF REFINED PRODUCTS | 22.77 | 21.08 | (1.69 | ) | (7.4 | ) | ||||||
Retail sales in Italy
In the first half of 2013, retail sales in Italy of
3.36 mmtonnes decreased by approximately 430 ktonnes, down 11.3%,
driven by lower consumption of gasoil and gasoline. Enis
retail market share for the first half of 2013 was 28.6%, down
two percentage points from the corresponding period of 2012
(30.6%) that had benefited of the impact of the promotional
campaign "riparti con eni" from June.
At June 30, 2013, Enis retail network in Italy consisted of
4,729 service stations, 51 less than at December 31, 2012 (4,780
service stations), resulting from the negative balance of
acquisitions/releases of lease concessions and the closing of
service stations with low throughput (79 units) and the opening
of 28 new service stations.
- 20 -
Eni Interim Consolidated Report / Operating review
With reference to the promotional initiative
"you&eni", the loyalty program for customers
launched in February 2010 for a five year period, the cards that
made at least one transaction in the period were approximately
2.4 million at June 30, 2013 of which 0.5 million where
represented by the new consumer payment cards launched at the
beginning of 2013. Volumes sold to customers cumulating points on
their card were approximately 40% of total throughputs (net of
"iperself" sales that do not allow to accumulate
points).
Average throughput (839 kliters) decreased by approximately 119
kliters from the first half of 2012 (959 kliters), with a higher
decline than domestic fuel consumption (down 12.5%) due to
increased competitive pressure.
Retail sales in the Rest of Europe
Retail sales in the rest of Europe of approximately
1.46 mmtonnes were down 1.4% (approximately 20 ktonnes). Volume
additions in Austria and Slovenia were offset by decreases in
other European countries due to declining demand.
At June 30, 2013, Enis retail network in the rest of Europe
consisted of 1,608 units, an increase of 4 units from December
31, 2012 (1,604 service stations) due to the positive balance of
acquisitions /releases of lease concessions.
Average throughput (1,117 kliters) decreased by approximately 16
kliters from the first half of 2012 (1,133 kliters).
Wholesale and other sales
Wholesale sales in Italy (3.94 mmtonnes) declined by
approximately 300 ktonnes, down 7.1%, mainly due to lower sales
of gasoil and fuel oil due to a decline in demand from industrial
customers. Average market share in the first half of 2013 was
28.8% (29% in the corresponding period of 2012).
Supplies of feedstock to the petrochemical industry (0.63
mmtonnes) declined by 8.1% related to lower feedstock supplies
due to lower demand from industrial customers.Wholesale sales in
the rest of Europe were 2.02 mmtonnes increasing by 5.2% from the
first half of 2012.
Other sales (9.46 mmtonnes) decreased by 0.99 mmtonnes, or 9.4%,
mainly due to lower sales volumes to oil companies.
Capital expenditure
In the first half of 2013, capital expenditure in
the Refining & Marketing Division amounted to euro 210
million and regarded mainly: (i) refining, supply and logistics
in Italy and outside Italy (euro 163 million), with projects
designed to improve the conversion rate and flexibility of
refineries, in particular the Sannazzaro refinery, as well as
expenditures on health, safety and environmental upgrades; (ii)
upgrade and rebranding of the refined product retail network in
Italy (euro 28 million) and in the rest of Europe (euro 19
million). Expenditures on health, safety and the environment
amounted to euro 51 million.
Capital expenditure |
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
622 | Refinery, supply and logistics | 243 | 163 | (80 | ) | (32.9 | ) | |||||
220 | Marketing | 47 | 47 | |||||||||
842 | 290 | 210 | (80 | ) | (27.6 | ) | ||||||
- 21 -
Eni Interim Consolidated Report / Operating review
Versalis |
Key performance indicators | |||
i | i |
i | First half |
2012 |
2012 |
2013 |
0.76 | Employees injury frequency rate | (No. of accidents per million of worked hours) | 0.43 | 1.07 | |||||||
1.66 | Contractors injury frequency rate | 1.85 | 0.33 | ||||||||
6,418 | Net sales from operations (a) | (euro million) | 3,241 | 3,063 | |||||||
3,050 | Intermediates | 1,479 | 1,418 | ||||||||
3,188 | Polymers | 1,660 | 1,524 | ||||||||
180 | Other sales | 102 | 121 | ||||||||
(681 | ) | Operating profit | (229 | ) | (278 | ) | |||||
(483 | ) | Adjusted operating profit | (194 | ) | (145 | ) | |||||
(395 | ) | Adjusted net profit | (143 | ) | (136 | ) | |||||
172 | Capital expenditure | 66 | 111 | ||||||||
6,090 | Production | (ktonnes) | 3,114 | 3,025 | |||||||
3,953 | Sales of petrochemical products | 1,988 | 1,968 | ||||||||
66.7 | Average plant utilization rate | (%) | 68.7 | 67.7 | |||||||
5,668 | Employees at period end | (units) | 5,711 | 5,701 | |||||||
3.69 | Direct GHG emissions | (mmtonnes CO2 eq) | 1.87 | 1.95 | |||||||
2.19 | SOx emissions (sulphur oxide) | (ktonnes SO2 eq) | 1.20 | 0.78 | |||||||
(a) Before elimination of intragroup sales. |
Sales -
production - prices
In the first half of 2013 sales of petrochemical
products (1,968 ktonnes) were broadly in line with the first half
of 2012 (down 20 ktonnes, or 1%) mainly due to a substantial
decrease in demand reflecting the current economic downturn.
Declines in elastomers (down 14.6%) due to the sharp drop in
demand on reference markets, phenol/derivatives (down 14.3%) for
the planned downtime at the Mantova plant, and styrene (down 3%)
were almost completely offset by higher volumes of olefins and
polyethylene (up 6% and 3.3%, respectively).
Average unit sales prices were lower (down 4.2%) from the first
half of 2012, with different trends for the various businesses:
in monomers olefins declined, while in aromatics an increase was
registered in benzene (up 13.5%) and derivatives (up 6%). Among
polymers, styrene prices increased and polyethylene was stable
while elastomer prices were affected by the relevant decline in
demand of the tyre and automotive industry in Europe.
Petrochemical production (3,025 ktonnes) decreased by 89 ktonnes
from the first half of 2012, or 2.9%. Main decreases were
registered in elastomers (down 15.7%) affected by the downturn of
the automotive sector and, at a lower extent, in styrene (down
6%) and polyethylene (down 3.4%). Production of intermediates was
basically stable.
The main decreases in production were registered at the Ravenna
plant (down 15%) due to lower produced volumes of rubber and for
the planned downtime of the butadiene plant, at Dunkerque (down
9.6%) and Mantova (down 8.8%) due to the planned downtime of the
phenol/derivative line. These reductions were partly offset by
higher production at Sarroch (up 24.8%) benefiting from the
planned standstill of the previous year and Priolo (up 20.4%,)
due to the lower activity registered in the first half of 2012 to
reduce polyethylene stocks, and Ragusa (up 12.6%).
- 22 -
Eni Interim Consolidated Report / Operating review
Nominal production capacity decreased from the first half of 2012 due to rationalization measures, with an average plant utilization rate, calculated on nominal capacity of 67.7% (68.7% in the first half of 2012).
Product availability |
First half |
2012 |
(ktonnes) |
2012 |
2013 |
Change |
% Ch. |
|||||
4,112 | Intermediates | 1,813 | 1,808 | (5 | ) | (0.3 | ) | ||||||||
1,978 | Polymers | 1,301 | 1,217 | (84 | ) | (6.5 | ) | ||||||||
6,090 | Production | 3,114 | 3,025 | (89 | ) | (2.9 | ) | ||||||||
(2,545 | ) | Consumption and losses | (1,325 | ) | (1,224 | ) | 101 | (7.6 | ) | ||||||
408 | Purchases and change in inventories | 199 | 167 | (32 | ) | (16.1 | ) | ||||||||
3,953 | 1,988 | 1,968 | (20 | ) | (1.0 | ) | |||||||||
Business trends
Intermediates
Intermediates revenues (euro 1,418 million) were down by euro 61
million from the first half of 2012 (down 4.1%) due to decreasing
average unit prices with different trends in the various
segments. In olefins sales volumes of ethylene increased (up
24.4%) reflecting higher availability of products following the
downtime of a competitor in France in a context of stable prices.
In aromatics, benzene volumes declined (down 13.4%), with price
increasing by 13.5%, while xylene volumes increased by 9% with
stable average prices. Revenues from derivatives declined,
despite a 6% increase in average prices and reported lower
volumes of phenol/derivatives (down 14.3%) due to the April
planned downtime.
Intermediates production (1,808 ktonnes) was in line with the first half of 2012 (down by 5 ktonnes; or 0.3%). The effects of lower production of derivatives (down 12.5%) due in particular to the multi-year downtime planned at Mantova were basically offset by higher production of aromatics (up 8.3%). Olefin volumes were stable.
Polymers
Polymers revenues (euro 1,524 million) decreased by
euro 136 million from the first half of 2012 (down 8.2%) due to
average unit prices decreasing by 17.5% and lower elastomers
sales volumes (down 14.6%) due to the relevant decrease in demand
from the tyre and automotive industry. This negative performance
was partly offset by higher revenues for styrene and polyethylene
(up 3.7% and 2.8%, respectively) that followed a positive trend
in particular in the second quarter of 2013.
Polymers production (1,217 ktonnes) decreased by 84 ktonnes from the first half of 2012 (down 6.5%) mainly due to lower production volumes of elastomers at the Ravenna and Ferrara plants, at the Brindisi plant due to planned downtime of the polyethylene line and at the Gela plant due to lower production of the related refinery.
Capital expenditure
In the first half of 2013 capital expenditure
amounted to euro 111 million (euro 66 million in the first half
of 2012) and regarded mainly: (i) plant upgrades (euro 57
million); (ii) environmental protection, safety and environmental
regulations (euro 27 million); (iii) upkeeping of plants (euro 14
million); (iv) maintenance and savings (euro 7 million).
- 23 -
Eni Interim Consolidated Report / Operating review
Engineering & Construction |
Key performance indicators | |||
i | i |
i | First half |
2012 |
2012 |
2013 |
0.54 | Employee injury frequency rate | (No. of accidents per million of worked hours) | 0.63 | 0.46 | |||||
0.17 | Contractors injury frequency rate | 0.20 | 0.09 | ||||||
0.93 | Fatality index | (No. of fatalities per 100 million of worked hours) | 1.23 | 1.93 | |||||
12,771 | Net sales from operations (a) | (euro million) | 6,013 | 4,999 | |||||
1,442 | Operating profit | 745 | (478 | ) | |||||
1,474 | Adjusted operating profit | 767 | (476 | ) | |||||
1,111 | Adjusted net profit | 553 | (519 | ) | |||||
1,011 | Capital expenditure | 546 | 490 | ||||||
13,391 | Orders acquired | (euro million) | 6,303 | 7,151 | |||||
19,739 | Order backlog | 20,323 | 21,704 | ||||||
43,387 | Employees at period end | (units) | 39,801 | 46,323 | |||||
89.2 | Employees outside Italy | (%) | 86.1 | 89.3 | |||||
1.54 | Direct GHG emissions | (mmtonnes CO2 eq) | 0.74 | 0.76 | |||||
(a) Before elimination of intragroup sales. |
Activity of the period
In the first half of 2013, the main orders acquired related
mainly to:
- an EPCI contract on behalf of Total Upstream Nigeria Ltd for
the development of the Egina field in Nigeria that includes
engineering, procurement, fabrication, installation and
pre-commissioning of underwater pipelines for oil production and
gas export with flexible jumpers and umbilicals;
- an EPC contract for Star Refinery AS for the construction of
the Socar refinery in Turkey that entails engineering,
procurement and construction of a refinery and three mooring and
offloading structures for oil, near the Petkim Petrochemical
complex;
- an EPC contract on behalf of Dangote Fertilizer Ltd for a new
ammonia and urea production complex to be built in the Edo State,
Nigeria. The scope of work encompasses engineering, procurement
and construction of two twin production trains and related
utilities and off-site facilities;
- an EPIC contract for ExxonMobil in Angola for the construction
of underwater structures at the Soyo and Ambriz yards. The
contract entails engineering, procurement fabrication and
installation of mooring and offloading structures for oil
production and water injection with rigid jumpers and other
underwater facilities;
- a contract on behalf of Burullus Gas Co for the development of
the West Delta Deep Marine Phase IXa Project about 90 kilometers
off the Mediterranean Coast of Egypt. The scope of work
encompasses installation of subsea facilities (in water depths up
to 850 meters) in the West Delta Deep Marine Concession, where
Saipem already successfully performed earlier subsea development
phases;
- a contract on behalf of Cardon IV, a 50/50 joint-venture
between Eni and Repsol, for the transportation and installation
of a hub platform and two satellite platforms, a 30-inch diameter
and 67-kilometer long offshore export pipeline, and other infield
cables in the Gulf of Venezuela related to the Perla EP Project.
- 24 -
Eni Interim Consolidated Report / Operating review
Marine activities will be performed mainly by the Saipem 3000 and Castoro 7 vessels.
Orders acquired in the first half of 2013 amounted to euro 7,151 million, of these projects to be carried out outside Italy represented 95%, while orders from Eni companies amounted to 16% of the total. Order backlog was euro 21,704 million at June 30, 2013 (euro 19,739 million at December 31, 2012). Projects to be carried out outside Italy represented 91% of the total order backlog, while orders from Eni companies amounted to 15% of the total.
Orders acquired |
First half |
2012 | (euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
13,391 | 6,303 | 7,151 | 848 | 13.5 | ||||||||
7,477 | Engineering & Construction Offshore | 4,229 | 4,155 | (74 | ) | (1.7 | ) | |||||
3,972 | Engineering & Construction Onshore | 1,416 | 1,956 | 540 | 38.1 | |||||||
1,025 | Offshore drilling | 405 | 913 | 508 | .. | |||||||
917 | Onshore drilling | 253 | 127 | (126 | ) | (49.8 | ) | |||||
of which: | ||||||||||||
631 | - Eni | 427 | 1,134 | 707 | .. | |||||||
12,760 | - Third parties | 5,876 | 6,017 | 141 | 2.4 | |||||||
of which: | ||||||||||||
485 | - Italy | 352 | 364 | 12 | 3.4 | |||||||
12,906 | - Outside Italy | 5,951 | 6,787 | 836 | 14.0 | |||||||
Order backlog |
Dec. 31, 2012 | (euro million) |
June 30, 2012 |
June 30, 2013 |
Change |
% Ch. |
|||||
19,739 | 20,323 | 21,704 | 1,381 | 6.8 | ||||||||
8,721 | Engineering & Construction Offshore | 8,311 | 10,666 | 2,355 | 28.3 | |||||||
6,701 | Engineering & Construction Onshore | 8,005 | 6,656 | (1,349 | ) | (16.9 | ) | |||||
3,238 | Offshore drilling | 3,197 | 3,543 | 346 | 10.8 | |||||||
1,079 | Onshore drilling | 810 | 839 | 29 | 3.6 | |||||||
of which: | ||||||||||||
2,526 | - Eni | 2,758 | 3,213 | 455 | 16.5 | |||||||
17,213 | - Third parties | 17,565 | 18,491 | 926 | 5.3 | |||||||
of which: | ||||||||||||
1,719 | - Italy | 1,890 | 1,852 | (38 | ) | (2.0 | ) | |||||
18,020 | - Outside Italy | 18,433 | 19,852 | 1,419 | 7.7 | |||||||
Capital expenditure
In the first half of 2013, capital expenditure
amounted to euro 490 million and mainly regarded: (i) the
construction of a new pipelayer, the progression of the
construction of a new fabrication yard in Brazil and upkeep
works, in the Engineering & Construction Offshore business;
(ii) equipment and structures acquisition related to Canada base,
in the Engineering & Construction Onshore business; (iii)
upkeep and upgrading of the current asset base, in the Drilling
Offshore business; (iv) new plants and the upgrading of asset
base.
Capital expenditure |
First half |
2012 | (euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
505 | Engineering & Construction Offshore | 258 | 202 | (56 | ) | (21.7 | ) | |||||
66 | Engineering & Construction Onshore | 14 | 84 | 70 | .. | |||||||
281 | Offshore drilling | 199 | 124 | (75 | ) | (37.7 | ) | |||||
120 | Onshore drilling | 63 | 62 | (1 | ) | (1.6 | ) | |||||
39 | Other expenditure | 12 | 18 | 6 | 50.0 | |||||||
1,011 | 546 | 490 | (56 | ) | (10.3 | ) | ||||||
- 25 -
Eni Interim Consolidated Report / Financial review and other information
Profit and loss account1
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
127,220 | Net sales from operations | 63,203 | 59,276 | (3,927 | ) | (6.2 | ) | ||||||||
1,546 | Other income and revenues | 751 | 370 | (381 | ) | (50.7 | ) | ||||||||
(99,976 | ) | Operating expenses | (48,501 | ) | (49,716 | ) | (1,215 | ) | (2.5 | ) | |||||
(158 | ) | Other operating income (expense) | (372 | ) | (10 | ) | 362 | 97.3 | |||||||
(13,561 | ) | Depreciation, depletion, amortization and impairments | (5,741 | ) | (4,627 | ) | 1,114 | 19.4 | |||||||
15,071 | Operating profit | 9,340 | 5,293 | (4,047 | ) | (43.3 | ) | ||||||||
(1,347 | ) | Finance income (expense) | (641 | ) | (601 | ) | 40 | 6.2 | |||||||
2,881 | Net income from investments | 1,394 | 674 | (720 | ) | (51.6 | ) | ||||||||
16,605 | Profit before income taxes | 10,093 | 5,366 | (4,727 | ) | (46.8 | ) | ||||||||
(11,661 | ) | Income taxes | (6,054 | ) | (3,928 | ) | 2,126 | 35.1 | |||||||
70.2 | Tax rate (%) | 60.0 | 73.2 | 13.2 | |||||||||||
4,944 | Net profit - continuing operations | 4,039 | 1,438 | (2,601 | ) | (64.4 | ) | ||||||||
3,732 | Net profit - discontinued operations | 259 | (259 | ) | .. | ||||||||||
8,676 | Net profit | 4,298 | 1,438 | (2,860 | ) | (66.5 | ) | ||||||||
Attributable to: | |||||||||||||||
7,790 | Eni's shareholders: | 3,844 | 1,818 | (2,026 | ) | (52.7 | ) | ||||||||
4,200 | - continuing operations | 3,700 | 1,818 | (1,882 | ) | (50.9 | ) | ||||||||
3,590 | - discontinued operations | 144 | (144 | ) | .. | ||||||||||
886 | Non-controlling interest: | 454 | (380 | ) | (834 | ) | .. | ||||||||
744 | - continuing operations | 339 | (380 | ) | (719 | ) | .. | ||||||||
142 | - discontinued operations | 115 | (115 | ) | .. | ||||||||||
Net profit
In the first half of 2013, net profit attributable
to Enis shareholders was euro 1,818 million, a decrease
of euro 1,882 million, down by 50.9% from the first half of 2012.
Operating profit decreased by 43.3% from the first half of 2012
reflecting marketing and operating difficulties at Saipem which
translated into operating losses, and a decline in crude oil
prices. Net income from investments declined by euro 720 million,
reflecting the circumstance that the first half of 2012 results
recorded an extraordinary gain at Enis interest in Galp
(euro 835 million). Furthermore, net profit was negatively
impacted by a thirteen percentage point increase in tax rate, due
to a higher contribution of profit before income taxes in the
Exploration & Production segment which is subject to a larger
fiscal take than other Groups businesses and to the fact
that the Company could not recognize any tax-loss carryforward at
Saipem.
Adjusted net profit
The Group adjusted net profit attributable to
Enis shareholders amounted to euro 1,961 million, down
by euro 1,872 million from the first half of 2012 (down 48.8%).
Excluding Snams contribution to continuing operations in
the first half of 2012, the decline in the first half of 2013
adjusted net profit was 46.3%, lowering to 35.9% also excluding
losses in the Engineering & Construction segment.
Adjusted net profit was calculated by excluding an inventory
holding loss which amounted to euro 210 million and special gains
of euro 67 million, net of exchange rate derivative instruments
reclassified in operating profit as they mainly related to
derivative transactions entered into to manage exposure to the
exchange
(1) Changes in Group results for the first half of 2013 are calculated with respect to results earned by the Groups continuing operations in the first half of 2012 considering that at the time Snam was consolidated in the Group accounts and reported as discontinued operations based on IFRS 5. In the circumstances of discontinued operations, the International Financial Reporting Standards require that the profits earned by continuing and discontinued operations are those deriving from transactions external to the Group. Therefore, profits earned by the discontinued operations, in this case the Snam operations, on sales to the continuing operations are eliminated on consolidation from the discontinued operations and attributed to the continuing operations and vice versa. This representation does not indicate the profits earned by continuing or Snam operations, as if they were standalone entities, for past periods or likely to be earned in future periods. Results attributable to individual segments are not affected by this representation as reported at the paragraph "Reconciliation of reported operating profit and reported net profit to results on an adjusted basis".
- 26 -
Eni Interim Consolidated Report / Financial review and other information
rate risk implicit in commodity pricing formulas (a loss of euro 71 million), which resulted in a net positive adjustment of euro 143 million.
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
4,200 | Net profit attributable to Eni's shareholders - continuing operations | 3,700 | 1,818 | (1,882 | ) | (50.9 | ) | ||||||||
(23 | ) | Exclusion of inventory holding (gains) losses | (70 | ) | 210 | ||||||||||
2,953 | Exclusion of special items | 203 | (67 | ) | |||||||||||
7,130 | Adjusted net profit attributable to Eni's shareholders - continuing operations (a) | 3,833 | 1,961 | (1,872 | ) | (48.8 | ) | ||||||||
(a) For a detailed explanation of adjusted operating profit and net profit see paragraph "Reconciliation of reported operating and net profit to results on an adjusted basis".
Special items in operating profit (net charges of euro
31 million) mainly regarded:
(i) the reversal of unutilized provisions accounted for in
previous periods reflecting extraordinary charges net of
environmental provisions and redundancy incentives;
(ii) minor impairment losses recorded at certain oil&gas
properties (euro 39 million being the overall effect) and to
write down compliance and stay-in-business capital expenditures
incurred in the period at certain assets which were impaired in
previous reporting period (euro 41 million);
(iii) net gains on the disposal of certain non strategic upstream
assets in the Exploration & Production Division amounting to
euro 65 million;
(iv) commodity derivatives recognized through profit as lacking
the formal criteria for hedge accounting (euro 54 million);
(v) exchange rate differences and exchange rate derivative
instruments reclassified as operating items (losses of euro 71
million).
Non-operating special items included mainly the gains on the divestment of 8% of the share capital in Galp amounting to euro 95 million, of which euro 65 million related to the reversal of the evaluation reserve, and on the divestment of 11.69% of the share capital in Snam amounting to euro 75 million, of which euro 8 million related to the reversal of the evaluation reserve.
The breakdown of adjusted net profit by Division is shown in the table below:
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
7,426 | Exploration & Production | 3,708 | 3,111 | (597 | ) | (16.1 | ) | ||||||||
473 | Gas & Power | 625 | (371 | ) | (996 | ) | .. | ||||||||
(179 | ) | Refining & Marketing | (253 | ) | (191 | ) | 62 | 24.5 | |||||||
(395 | ) | Versalis | (143 | ) | (136 | ) | 7 | 4.9 | |||||||
1,111 | Engineering & Construction | 553 | (519 | ) | (1,072 | ) | .. | ||||||||
(247 | ) | Other activities | (123 | ) | (113 | ) | 10 | 8.1 | |||||||
(976 | ) | Corporate and financial companies | (646 | ) | (278 | ) | 368 | 57.0 | |||||||
661 | Impact of unrealized intragroup profit elimination (a) | 451 | 78 | (373 | ) | ||||||||||
7,874 | Adjusted net profit - continuing operations | 4,172 | 1,581 | (2,591 | ) | (62.1 | ) | ||||||||
of which attributable to: | |||||||||||||||
744 | - Non-controlling interest | 339 | (380 | ) | (719 | ) | .. | ||||||||
7,130 | - Eni's shareholders | 3,833 | 1,961 | (1,872 | ) | (48.8 | ) | ||||||||
(a) This item concerned mainly intragroup sales of commodities, services and capital goods recorded in the assets of the purchasing business segment as of end of the period.
The 48.8% reduction in adjusted net profit reflected
lower results mainly reported by the following Divisions:
- Exploration & Production (down by euro 597 million,
or 16.1%) driven by lower adjusted operating profit (down by euro
1,926 million, or 20.6%) due to reduced hydrocarbon realizations
in dollar terms (down 6.4% on average), lower sold production,
and to a lesser extent, negative foreign currency translation
effects. These negatives were partly offset by a lower adjusted
tax rate (down by approximately 2 percentage points) due to a
reduced share of taxable profit reported in countries with higher
taxation;
- Gas & Power (down euro 996 million) due to the
results reported by the Marketing business declining by
approximately euro 1.2 billion from the first half of 2012 when
it was reported an operating profit driven by the economic
benefits of the renegotiation of gas supply contracts, certain of
which with retroactive effects to the beginning of 2011. In
addition to this, the drivers of the decline were falling selling
margins due to lower selling prices, shrinking electricity
margins, lower volumes sold due to weak demand in Italy
- 27 -
Eni Interim Consolidated Report / Financial review and other information
and Europe as well as increasing competition, the effects of
which were partly offset by the renegotiations of the supply
contracts, some of which are still pending necessarily delaying
the recognition of the associated economic effects, and an
ongoing recovery at Libyan supplies;
- Engineering & Construction (down euro 1,072 million)
which reported losses reflecting marketing and operating
difficulties that led management to revise the margin estimates
at certain large contracts under completion, in particular for
the construction of onshore industrial complexes, against the
backdrop of a deteriorating trading environment for the onshore
and offshore construction businesses due to lower level of
activities driven by current macroeconomic uncertainties.
Those declines were marginally offset by small improvements
reported by:
- Refining & Marketing with net losses reduced by euro
62 million (from euro -253 million in the first half of 2012 to
euro -191 million in the first half of 2013) due to a better
adjusted operating loss (down by euro 40 million) benefiting from
a less unfavorable refining scenario mainly in the first quarter
of 2013, partly offset by weak demand for refined products.
Results also benefited from higher results of equity accounted
entities;
- Versalis with net losses reduced by euro 7 million (from
euro -143 million in the first half of 2012 to euro -136 million
in the first half of 2013), reflecting lower marketed volumes due
to weak commodity demand impacted by the current economic
downturn as well as declining benchmark cracking margins, the
effects of which were more than offset by cost efficiencies and a
temporary recovery in the pricing environment recorded in the
first quarter of 2013.
In the first half of 2013, Groups results were achieved in a trading environment characterized by lowering hydrocarbon realizations with a 5.2% decrease of the marker Brent crude price from the first half of 2012. Refining margins showed a 10% decrease from the same period of the previous year, in an extremely volatile trading environment, due to the structural weakness of the refining business adversely impacted by overcapacity, declining demand and high oil-based feedstock costs. In addition narrowing differentials between light and heavy crudes and high cost of oil-linked energy utilities reduced the conversion premium. Spot gas prices in Europe recovered from the level achieved in the first half of 2012 (up 16.8%), although they did not absorb the oil linked long-term supply costs. Pricing competition has been intense taking into account minimum off-take obligations in gas purchase take-or-pay contracts and reduced sales opportunities which led to continued margin pressure. Results were negatively impacted by the depreciation of the US dollar over the euro (down 1.3%).
First half |
2012 |
|
2012 |
2013 |
% Ch. |
||||
111.58 | Average price of Brent dated crude oil (a) | 113.34 | 107.50 | (5.2 | ) | ||||
1.285 | Average EUR/USD exchange rate (b) | 1.296 | 1.313 | 1.3 | |||||
86.83 | Average price in euro of Brent dated crude oil | 87.45 | 81.87 | (6.4 | ) | ||||
4.83 | Average European refining margin (c) | 4.41 | 3.97 | (10.0 | ) | ||||
4.94 | Average European refining margin Brent/Ural (c) | 4.79 | 4.03 | (15.9 | ) | ||||
3.76 | Average European refining margin in euro | 3.40 | 3.02 | (11.2 | ) | ||||
9.48 | Price of NBP gas (d) | 9.21 | 10.76 | 16.8 | |||||
0.6 | Euribor - three-month euro rate (%) | 0.9 | 0.2 | (77.8 | ) | ||||
0.4 | Libor - three-month dollar rate (%) | 0.5 | 0.3 | (40.0 | ) | ||||
(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.
(d) In USD per million BTU (British Thermal Unit). Source:
Platts Oilgram.
- 28 -
Eni Interim Consolidated Report / Financial review and other information
Analysis of profit and loss account items
Net sales from operations
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
35,881 | Exploration & Production | 17,896 | 15,618 | (2,278 | ) | (12.7 | ) | ||||||||
36,200 | Gas & Power | 19,993 | 17,362 | (2,631 | ) | (13.2 | ) | ||||||||
62,656 | Refining & Marketing | 29,501 | 29,728 | 227 | 0.8 | ||||||||||
6,418 | Versalis | 3,241 | 3,063 | (178 | ) | (5.5 | ) | ||||||||
12,771 | Engineering & Construction | 6,013 | 4,999 | (1,014 | ) | (16.9 | ) | ||||||||
119 | Other activities | 61 | 48 | (13 | ) | (21.3 | ) | ||||||||
1,369 | Corporate and financial companies | 664 | 680 | 16 | 2.4 | ||||||||||
(75 | ) | Impact of unrealized intragroup profit elimination | (171 | ) | (27 | ) | 144 | ||||||||
(28,119 | ) | Consolidation adjustment | (13,995 | ) | (12,195 | ) | 1,800 | ||||||||
127,220 | 63,203 | 59,276 | (3,927 | ) | (6.2 | ) | |||||||||
In the first half of 2013, Enis net sales from operations (euro 59,276 million) decreased by euro 3,927 million from the first half of 2012 (or down 6.2%) primarily reflecting lower hydrocarbon prices, declines in production and sales, as well as a lower level of activities in the Engineering & Construction segment.
Operating expenses
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
95,363 | Purchases, services and other | 46,249 | 47,149 | 900 | 1.9 | ||||||||||
1,154 | of which: - other special item | 107 | (21 | ) | |||||||||||
4,613 | Payroll and related costs | 2,252 | 2,567 | 315 | 14.0 | ||||||||||
64 | of which: - provision for redundancy incentives | 55 | 19 | ||||||||||||
99,976 | 48,501 | 49,716 | 1,215 | 2.5 | |||||||||||
Operating expenses (euro 49,716 million) increased by
euro 1,215 million from the first half of 2012, up 2.5%, due to
extra operating expenses recorded on certain orders in the
Engineering & Construction segment and the fact that expenses
in the first half of 2012 benefited from: (i) the elimination
upon consolidation of the intercompany costs incurred by
continuing operations vs. Snam due to the accounting of the
discontinued operations; and (ii) the renegotiation of certain
gas supply contracts with retroactive effect to the beginning of
2011. These negatives were partly offset by lower supply costs of
oil, gas and petrochemical feedstock reflecting trends in the
energy trading environment.
Payroll and related costs increased by euro 315 million,
or 14%, from the first half of 2012 mainly due to an increased
average number of employees outside Italy.
Depreciation, depletion, amortization and impairments
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
7,988 | Exploration & Production | 3,827 | 3,812 | (15 | ) | (0.4 | ) | ||||||||
405 | Gas & Power | 205 | 161 | (44 | ) | (21.5 | ) | ||||||||
331 | Refining & Marketing | 165 | 151 | (14 | ) | (8.5 | ) | ||||||||
90 | Versalis | 43 | 42 | (1 | ) | (2.3 | ) | ||||||||
683 | Engineering & Construction | 316 | 356 | 40 | 12.7 | ||||||||||
1 | Other activities | ||||||||||||||
65 | Corporate and financial companies | 33 | 30 | (3 | ) | (9.1 | ) | ||||||||
(25 | ) | Impact of unrealized intragroup profit elimination | (12 | ) | (13 | ) | (1 | ) | |||||||
9,538 | Total depreciation, depletion and amortization | 4,577 | 4,539 | (38 | ) | (0.8 | ) | ||||||||
4,023 | Impairments | 1,164 | 88 | (1,076 | ) | (92.4 | ) | ||||||||
13,561 | 5,741 | 4,627 | (1,114 | ) | (19.4 | ) | |||||||||
Depreciation, depletion and amortization (euro 4,539 million) were broadly in line with the first half of 2012 (down 0.8%). The increase recorded in the Engineering & Construction business (up euro 40 million, or 12.7%) was due to new vessels and rigs which were brought into operation.
- 29 -
Eni Interim Consolidated Report / Financial review and other information
Impairment charges of euro 88 million mainly regarded
oil&gas properties in the Exploration & Production (euro
39 million) as well as compliance and stay-in-business capital
expenditure incurred in the period at certain assets which were
impaired in previous reporting periods in the Refining &
Marketing Division (euro 41 million). The reduction of euro 1,076
million from the first half of 2012 is due to the circumstance
that in the first half of 2012 impairments included significant
impairment charges of goodwill allocated to the European Market
cash generating unit in the Gas & Power Division, impairment
losses of refining plants as well as oil&gas properties in
the Exploration & Production Division.
The breakdown of impairment charges by Division is shown in the
table below:
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
547 | Exploration & Production | 91 | 39 | (52 | ) | (57.1 | ) | ||||||||
2,494 | Gas & Power | 849 | (849 | ) | .. | ||||||||||
843 | Refining & Marketing | 193 | 41 | (152 | ) | (78.8 | ) | ||||||||
112 | Versalis | 8 | 6 | (2 | ) | (25.0 | ) | ||||||||
25 | Engineering & Construction | 21 | (21 | ) | .. | ||||||||||
2 | Other activities | 2 | 2 | ||||||||||||
4,023 | 1,164 | 88 | (1,076 | ) | (92.4 | ) | |||||||||
Operating profit
The breakdown of the reported operating profit by Division is
provided below:
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
18,470 | Exploration & Production | 9,552 | 7,436 | (2,116 | ) | (22.2 | ) | ||||||||
(3,219 | ) | Gas & Power | (641 | ) | (559 | ) | 82 | 12.8 | |||||||
(1,296 | ) | Refining & Marketing | (674 | ) | (557 | ) | 117 | 17.4 | |||||||
(681 | ) | Versalis | (229 | ) | (278 | ) | (49 | ) | (21.4 | ) | |||||
1,442 | Engineering & Construction | 745 | (478 | ) | (1,223 | ) | .. | ||||||||
(300 | ) | Other activities | (145 | ) | (193 | ) | (48 | ) | (33.1 | ) | |||||
(341 | ) | Corporate and financial companies | (185 | ) | (154 | ) | 31 | 16.8 | |||||||
996 | Impact of unrealized intragroup profit elimination | 917 | 76 | (841 | ) | ||||||||||
15,071 | Operating profit | 9,340 | 5,293 | (4,047 | ) | (43.3 | ) | ||||||||
Adjusted operating profit
The breakdown of the adjusted operating profit by Division is
provided below:
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
15,071 | Operating profit - continuing operations | 9,340 | 5,293 | (4,047 | ) | (43.3 | ) | ||||||||
(17 | ) | Exclusion of inventory holding (gains) losses | (86 | ) | 336 | ||||||||||
4,744 | Exclusion of special items | 1,204 | 31 | ||||||||||||
19,798 | Adjusted operating profit - continuing operations | 10,458 | 5,660 | (4,798 | ) | (45.9 | ) | ||||||||
Breakdown by Division: | |||||||||||||||
18,537 | Exploration & Production | 9,334 | 7,408 | (1,926 | ) | (20.6 | ) | ||||||||
356 | Gas & Power | 618 | (663 | ) | (1,281 | ) | .. | ||||||||
(321 | ) | Refining & Marketing | (366 | ) | (326 | ) | 40 | 10.9 | |||||||
(483 | ) | Versalis | (194 | ) | (145 | ) | 49 | 25.3 | |||||||
1,474 | Engineering & Construction | 767 | (476 | ) | (1,243 | ) | .. | ||||||||
(222 | ) | Other activities | (102 | ) | (107 | ) | (5 | ) | (4.9 | ) | |||||
(325 | ) | Corporate and financial companies | (179 | ) | (158 | ) | 21 | 11.7 | |||||||
782 | Impact of unrealized intragroup profit elimination and other consolidation adjustment | 580 | 127 | (453 | ) | ||||||||||
19,798 | 10,458 | 5,660 | (4,798 | ) | (45.9 | ) | |||||||||
In the first half of 2013, Enis adjusted operating
profit amounted to euro 5,660 million, a decrease of euro
4,798 million from the same period of the previous year (down
45.9%). Adjusted operating profit is calculated by excluding an
inventory holding loss of euro 336 million and special charges of
euro 31 million.
The decrease was mainly due to a weaker operating performance
recorded by the following Divisions:
- Exploration & Production (down euro 1,926 million,
or 20.6%) due to lower dollar realizations on hydrocarbons (down
6.4% on average) reflecting lower Brent prices ($107.5 per barrel
in the first half of
- 30 -
Eni Interim Consolidated Report / Financial review and other information
2013, down 5.2% from the first half of 2012), lower production
sold and the negative effect of the appreciation of the euro over
the dollar (up 1.3%);
- Gas & Power (down euro 1,281 million) reflecting the
operating loss reported by the Marketing activity driven by
sharply lower sale prices in Italy, lower volumes sold reflecting
a weak gas demand, a downward trend in electricity sale margins
and increasing competitive pressures. In addition, the first half
of 2012 benefited from certain price revisions at long-term
supply contracts which were retroactive to the beginning of 2011.
These negatives were partly offset by the renegotiations of
supply contracts, some of which are still pending, necessarily
delaying the recognition of the associated economic effects, as
well as an ongoing recovery at Libyan supplies.
The International transport business reported a lower operating
performance, down by 46.2%;
- Engineering & Construction (down euro 1,243 million)
reflecting marketing and operating difficulties that led
management to revise the margin estimates for certain large
contracts under completion in particular for the construction of
onshore industrial complexes, against the backdrop of a
deteriorating trading environment for the onshore and offshore
construction businesses due to a lower level of activities driven
by current macroeconomic uncertainties.
Excluding Snams contribution to continuing operations in the first half of 2012 and netting out losses in the Engineering & Construction segment, the Group operating profit would have declined by 33.3% in the first half of 2013.
Finance income (expense)
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
||||
(929 | ) | Finance income (expense) related to net borrowings | (505 | ) | (400 | ) | 105 | |||||
(980 | ) | - Finance expense on short and long-term debt | (529 | ) | (456 | ) | 73 | |||||
27 | - Net interest due to banks | 12 | 24 | 12 | ||||||||
24 | - Net income from receivables and securities for non-financing operating activities | 12 | 32 | 20 | ||||||||
(251 | ) | Income (expense) on derivative financial instruments | (200 | ) | (19 | ) | 181 | |||||
(137 | ) | - Derivatives on exchange rate | (141 | ) | (17 | ) | 124 | |||||
(88 | ) | - Derivatives on interest rate | (59 | ) | 30 | 89 | ||||||
(26 | ) | - Derivatives on securities | (32 | ) | (32 | ) | ||||||
131 | Exchange differences, net | 151 | (89 | ) | (240 | ) | ||||||
(448 | ) | Other finance income (expense) | (157 | ) | (172 | ) | (15 | ) | ||||
69 | - Net income from receivables and securities for financing operating activities | 35 | (43 | ) | (78 | ) | ||||||
(308 | ) | - Finance expense due to the passage of time (accretion discount) | (172 | ) | (132 | ) | 40 | |||||
(209 | ) | - Other | (20 | ) | 3 | 23 | ||||||
(1,497 | ) | (711 | ) | (680 | ) | 31 | ||||||
150 | Finance expense capitalized | 70 | 79 | 9 | ||||||||
(1,347 | ) | (641 | ) | (601 | ) | 40 | ||||||
In the first half of 2013, net finance expense decreased by euro 40 million to euro 601 million from the first half of 2012, mainly due to lower finance charges (up by euro 105 million) driven by lower interest cots on the Group borrowings on the back of favorable trends in key market benchmarks and gains recognized in connection with fair value evaluation through profit of certain derivative instruments on interest rates (up by euro 89 million) which did not meet the formal criteria to be designated as hedges under IFRS. Negative exchange differences net (down euro 240 million) were partly offset by lower losses on exchange rate derivatives (up euro 124 million) recognized through profit as lacking the formal criteria for hedge accounting.
- 31 -
Eni Interim Consolidated Report / Financial review and other information
Net income from investments
The table below sets forth the breakdown of net income
from investments by Division:
First
half 2013 (euro million) |
Exploration & Production |
Gas & Power |
Refining & Marketing |
Engineering & Construction |
Other segments |
Group |
||||||
Share of gains (losses) from equity-accounted investments | 78 | 86 | 15 | 11 | 13 | 203 | ||||||
Dividends | 204 | 35 | 67 | 306 | ||||||||
Gains on disposal | 4 | 97 | 101 | |||||||||
Other income (expense), net | 1 | 21 | 42 | 64 | ||||||||
283 | 86 | 75 | 11 | 219 | 674 | |||||||
In the first half of 2013, net income from investments
amounted to euro 674 million and related to: (i) Enis share
of profit of entities accounted for under the equity-accounting
method (euro 203 million), mainly in the Gas & Power and
Exploration & Production Divisions; (ii) dividends received
from entities accounted for at cost (euro 306 million), mainly
relating to Nigeria LNG Ltd; (iii) extraordinary gains on the
disposal of Enis interest in Snam (euro 75 million) and
Galp (euro 95 million).
The table below sets forth a breakdown of net income/loss from
investments for the first half of 2013:
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
||||
278 | Share of gains (losses) from equity-accounted investments | 342 | 203 | (139 | ) | |||||||
431 | Dividends | 156 | 306 | 150 | ||||||||
349 | Gains on disposal | 8 | 101 | 93 | ||||||||
1,823 | Other income (expense), net | 888 | 64 | (824 | ) | |||||||
2,881 | 1,394 | 674 | (720 | ) | ||||||||
The reduction of euro 720 million from the first half of 2012 related to the extraordinary gain (euro 835 million) recorded in the first half of 2012 on Enis shareholding in Galp due to the capital increase made by Galps subsidiary Petrogal whereby a new shareholder, Sinopec, subscribed for its share of the capital increase by contributing a cash amount which was in excess of the net book value of the interest acquired.
Income taxes
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
||||
Profit before income taxes | ||||||||||||
(723 | ) | Italy | 550 | (1,131 | ) | (1,681 | ) | |||||
17,328 | Outside Italy | 9,543 | 6,497 | (3,046 | ) | |||||||
16,605 | 10,093 | 5,366 | (4,727 | ) | ||||||||
Income taxes | ||||||||||||
945 | Italy | 298 | (155 | ) | (453 | ) | ||||||
10,716 | Outside Italy | 5,756 | 4,083 | (1,673 | ) | |||||||
11,661 | 6,054 | 3,928 | (2,126 | ) | ||||||||
Tax rate (%) | ||||||||||||
.. | Italy | 54.2 | .. | .. | ||||||||
61.8 | Outside Italy | 60.3 | 62.8 | 2.5 | ||||||||
70.2 | 60.0 | 73.2 | 13.2 | |||||||||
In the first half of 2013, income taxes were euro 3,928
million, down by euro 2,126 million, compared to the first half
of 2012.
The reported tax rate increased by 13.2 percentage points due to
a higher share of taxable profit reported by subsidiaries in the
Exploration & Production Division operating outside Italy
which incurred higher-than average tax rate, as well as to the
fact that the Company could not recognize any tax-loss
carryforward for Saipem losses.
Adjusted tax rate, calculated as ratio of income taxes to net
profit before taxes on an adjusted basis, was 72%, increasing
from the first half of 2012 (58.8% in the first half of 2012),
reflecting the same drivers described above.
Non-controlling interest
Non-controlling interests share of loss was euro
380 million and mainly related to Saipem SpA.
- 32 -
Eni Interim Consolidated Report / Financial review and other information
Divisional performance2
Exploration & Production
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
18,470 | Operating profit | 9,552 | 7,436 | (2,116 | ) | (22.2 | ) | ||||||||||
67 | Exclusion of special items: | (218 | ) | (28 | ) | ||||||||||||
550 | - asset impairments | 91 | 39 | ||||||||||||||
(542 | ) | - gains on disposal of assets | (351 | ) | (65 | ) | |||||||||||
6 | - provision for redundancy incentives | 8 | 10 | ||||||||||||||
7 | - risk provisions | ||||||||||||||||
1 | - commodity derivatives | 1 | |||||||||||||||
(9 | ) | - exchange rate differences and derivatives | (14 | ) | (9 | ) | |||||||||||
54 | - other | 47 | (3 | ) | |||||||||||||
18,537 | Adjusted operating profit | 9,334 | 7,408 | (1,926 | ) | (20.6 | ) | ||||||||||
(264 | ) | Net financial income (expense) (a) | (136 | ) | (125 | ) | 11 | ||||||||||
436 | Net income (expense) from investments (a) | 242 | 283 | 41 | |||||||||||||
(11,283 | ) | Income taxes (a) | (5,732 | ) | (4,455 | ) | 1,277 | ||||||||||
60.3 | Tax rate (%) | 60.7 | 58.9 | (1.8 | ) | ||||||||||||
7,426 | Adjusted net profit | 3,708 | 3,111 | (597 | ) | (16.1 | ) | ||||||||||
Results also include: | |||||||||||||||||
8,535 | - amortization and depreciation | 3,918 | 3,851 | (67 | ) | (1.7 | ) | ||||||||||
of which: | |||||||||||||||||
1,835 | exploration expenditures | 903 | 891 | (12 | ) | (1.3 | ) | ||||||||||
1,457 | - amortization of exploratory drilling expenditures and other | 691 | 730 | 39 | 5.6 | ||||||||||||
378 | - amortization of geological and geophysical exploration expenses | 212 | 161 | (51 | ) | (24.1 | ) | ||||||||||
Average hydrocarbons realizations | |||||||||||||||||
102.58 | Liquids (b) | ($/bbl) | 106.53 | 97.60 | (8.93 | ) | (8.4 | ) | |||||||||
7.12 | Natural gas | ($/mcf) | 7.15 | 7.27 | 0.12 | 1.7 | |||||||||||
73.39 | Hydrocarbons | ($/boe) | 75.10 | 70.33 | (4.77 | ) | (6.4 | ) | |||||||||
(a) Excluding special items.
(b) Includes condensates.
In the first half of 2013, the Exploration & Production Division recorded an adjusted operating profit of euro 7,408 million, decreasing by euro 1,926 million from the first half of 2012 or 20.6% due to lower dollar realizations of oil products (down 8.4%) following the downward trends in the benchmark Brent crude (107.5 $/bbl in the first half of 2013, down 5.2% from the same period a year ago) and a decline in production sale volumes as well as the appreciation of the euro over the dollar (up 1.3%) in the conversion of results of affiliates with the dollar as functional currency.
Special items excluded from adjusted operating profit amounted to a net gain of euro 28 million mainly related to net gains on disposals recorded on certain non strategic assets and impairment losses.
Adjusted net profit decreased by euro 597 million to euro 3,111 million (down 16.1%) from the first half of 2012 due to lower operating performance partly offset by a 1.8 percentage points decline in adjusted tax rate due to a lower share of taxable profit reported in countries with higher taxation.
(2) For a detailed explanation of adjusted operating profit and net profit see the paragraph "Reconciliation of reported operating profit and reported net profit to results on an adjusted basis".
- 33 -
Eni Interim Consolidated Report / Financial review and other information
Gas & Power
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
(3,219 | ) | Operating profit | (641 | ) | (559 | ) | 82 | 12.8 | |||||||
163 | Exclusion of inventory holding (gains) losses | 127 | (33 | ) | |||||||||||
3,412 | Exclusion of special items: | 1,132 | (71 | ) | |||||||||||
(2 | ) | - environmental provisions | (3 | ) | |||||||||||
2,494 | - asset impairments | 849 | |||||||||||||
(3 | ) | - gains on disposals of assets | (1 | ) | |||||||||||
831 | - risk provisions | 77 | (102 | ) | |||||||||||
5 | - provisions for redundancy incentives | 4 | 1 | ||||||||||||
- commodity derivatives | 54 | ||||||||||||||
(51 | ) | - exchange rate differences and derivatives | 200 | (39 | ) | ||||||||||
138 | - other | 6 | 15 | ||||||||||||
356 | Adjusted operating profit | 618 | (663 | ) | (1,281 | ) | .. | ||||||||
47 | Marketing | 434 | (761 | ) | (1,195 | ) | .. | ||||||||
309 | International transport | 184 | 98 | (86 | ) | (46.7 | ) | ||||||||
29 | Net finance income (expense) (a) | 8 | 11 | 3 | |||||||||||
261 | Net income (expense) from investments (a) | 187 | 86 | (101 | ) | ||||||||||
(173 | ) | Income taxes (a) | (188 | ) | 195 | 383 | |||||||||
26.8 | Tax rate (%) | 23.1 | .. | ||||||||||||
473 | Adjusted net profit | 625 | (371 | ) | (996 | ) | .. | ||||||||
(a) Excluding special items.
In the first half of 2013, the Gas & Power Division reported an adjusted operating loss of euro 663 million as compared to a euro 618 million profit recorded in the first half of 2012. The Marketing business reported an adjusted operating loss of euro 761 million with a decline of approximately euro 1.2 billion from the first half of 2012 which have been driven by sharply lower sale prices in Italy, lower volumes sold reflecting a weak gas demand, a downward trend in electricity sale margins and increasing competitive pressures. Furthermore, the first half of 2012 benefited from certain price revisions at long-term supply contracts which were retroactive to the beginning of 2011. These negatives were partly offset by the benefits associated with the renegotiations of supply contracts, some of which are still pending necessarily delaying the recognition of the associated economic effects, as well as an ongoing recovery in Libyan supplies. International transport results declined by 46.7%.
Adjusted operating loss excludes special items of euro 71 million relating mainly to commodity derivatives (euro 54 million) and the reporting within operating income of exchange rate differences and derivatives entered to hedge exchange rate risks in commodity pricing formulas (a gain of euro 39 million) as well as the reversal of unutilized provisions accounted for in previous periods reflecting extraordinary charges (euro 102 million).
Adjusted net loss for the first half of 2013 was euro 371 million, an increase of euro 996 million from the first half of 2012 due to a lower operating performance and lower income from investment due to the divestment of Galp.
Other performance indicators
Follows a breakdown of the pro-forma adjusted EBITDA
by business:
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
1,316 | Pro-forma EBITDA adjusted | 1,186 | (300 | ) | (1,486 | ) | .. | ||||||||
858 | Marketing | 921 | (471 | ) | (1,392 | ) | .. | ||||||||
458 | International transport | 265 | 171 | (94 | ) | (35.5 | ) | ||||||||
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization charges) on an adjusted basis is calculated by adding amortization and depreciation charges to adjusted operating profit, which is also modified to take into account the impact associated with certain derivatives instruments as detailed below. This performance indicator includes the adjusted EBITDA of Enis wholly owned subsidiaries and
- 34 -
Eni Interim Consolidated Report / Financial review and other information
Enis share of adjusted EBITDA generated by certain associates which are accounted for under the equity method for IFRS purposes. Management believes that the EBITDA pro-forma adjusted is an important alternative measure to assess the performance of Enis Gas & Power Division, taking into account evidence that this Division is comparable to European utilities in the gas and power generation sector. This measure is provided in order to assist investors and financial analysts in assessing the divisional performance of Eni Gas & Power, as compared to its European peers, as EBITDA is widely used as the main performance indicator for utilities. The EBITDA pro-forma adjusted is a non-GAAP measure under IFRS.
Refining & Marketing
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
(1,296 | ) | Operating profit | (674 | ) | (557 | ) | 117 | 17.4 | |||||||
(29 | ) | Exclusion of inventory holding (gains) losses | 106 | 195 | |||||||||||
1,004 | Exclusion of special items: | 202 | 36 | ||||||||||||
40 | - environmental provisions | 7 | 16 | ||||||||||||
846 | - asset impairments | 193 | 41 | ||||||||||||
5 | - gains on disposal of assets | 1 | (2 | ) | |||||||||||
49 | - risk provisions | (13 | ) | ||||||||||||
19 | - provisions for redundancy incentives | 24 | 4 | ||||||||||||
- commodity derivatives | (2 | ) | |||||||||||||
(8 | ) | - exchange rate differences and derivatives | (15 | ) | (19 | ) | |||||||||
53 | - other | 5 | (2 | ) | |||||||||||
(321 | ) | Adjusted operating profit | (366 | ) | (326 | ) | 40 | 10.9 | |||||||
(11 | ) | Net finance income (expense) (a) | (6 | ) | (2 | ) | 4 | ||||||||
63 | Net income (expenses) from investments (a) | 17 | 50 | 33 | |||||||||||
90 | Income taxes (a) | 102 | 87 | (15 | ) | ||||||||||
.. | Tax rate (%) | .. | .. | ||||||||||||
(179 | ) | Adjusted net profit | (253 | ) | (191 | ) | 62 | 24.5 | |||||||
(a) Excluding special items.
In the first half of 2013, the Refining & Marketing
division reported an adjusted operating loss amounting to
euro 326 million reflecting weak refining margins due to poor
industry fundamentals and reduced demand. As compared to the same
period a year ago loss improved by euro 40 million or 10.9% due
to a better refining scenario in the first quarter of 2013 and
efficiency enhancement measures. In the first half of 2013 the
scenario was characterized by shrinking price differentials
between light and heavy crudes dragging down the profitability at
Enis complex refineries.
Marketing results declined reflecting the decrease in sales
dragged down by lower demand for fuels and mounting competitive
pressures.
Special charges excluded from adjusted operating loss amounted to euro 36 million and mainly related to impairment charges (euro 41 million) which were incurred to write down compliance and stay-in-business capital expenditure incurred in the period at certain assets which were impaired in previous reporting periods, environmental charges (euro 16 million) and the reclassification to operating income of exchange rate differences and derivatives incurred in the management of exchange rate risk included in pricing formulas for commodities (euro 19 million).
Adjusted net loss was euro 191 million, an improvement of euro 62 million from the first half of 2012 mainly due to a lower loss and improved results of equity-accounted entities.
- 35 -
Eni Interim Consolidated Report / Financial review and other information
Versalis
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
(681 | ) | Operating profit | (229 | ) | (278 | ) | (49 | ) | (21.4 | ) | |||||
63 | Exclusion of inventory holding (gains) losses | 18 | 123 | ||||||||||||
135 | Exclusion of special items: | 17 | 10 | ||||||||||||
- environmental provisions | 1 | 2 | |||||||||||||
18 | - risk provisions | 4 | |||||||||||||
112 | - asset impairments | 8 | 6 | ||||||||||||
1 | - gains on disposal of assets | ||||||||||||||
14 | - provisions for redundancy incentives | 9 | 1 | ||||||||||||
1 | - commodity derivates | 1 | |||||||||||||
(11 | ) | - exchange rate differences and derivatives | (1 | ) | (4 | ) | |||||||||
(483 | ) | Adjusted operating profit | (194 | ) | (145 | ) | 49 | 25.3 | |||||||
(3 | ) | Net finance income (expense) (a) | (2 | ) | (1 | ) | 1 | ||||||||
2 | Net income (expenses) from investments (a) | 1 | (1 | ) | (2 | ) | |||||||||
89 | Income taxes (a) | 52 | 11 | (41 | ) | ||||||||||
(395 | ) | Adjusted net profit | (143 | ) | (136 | ) | 7 | 4.9 | |||||||
(a) Excluding special items.
In the first half of 2013, Versalis reported an adjusted operating loss of euro 145 million, reducing by euro 49 million from the first half of 2012. The loss was driven by lowering sales volumes due to weak demand for commodities in the wake of the downturn and declining margins led by the benchmark margin on cracking. This dynamic was offset by cost reductions and a temporary improvement in the pricing environment in the fist quarter of 2013.
Special charges excluded from adjusted operating loss of euro 10 million related mainly to the write-off of expenditures incurred in the period relating to marginal business lines which were impaired in previous reporting periods due to lack of profitability prospects as well as provisions for risks and redundancy incentives.
Adjusted net loss of euro 136 million, improved by euro 7 million in the first half of 2012.
Engineering & Construction
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
1,442 | Operating profit | 745 | (478 | ) | (1,223 | ) | .. | ||||||||
32 | Exclusion of special items: | 22 | 2 | ||||||||||||
25 | - asset impairments | 21 | |||||||||||||
3 | - gains on disposal of assets | 1 | 1 | ||||||||||||
7 | - provisions for redundancy incentives | 1 | |||||||||||||
(3 | ) | - commodity derivatives | (1 | ) | 1 | ||||||||||
1,474 | Adjusted operating profit | 767 | (476 | ) | (1,243 | ) | .. | ||||||||
(7 | ) | Net finance income (expense) (a) | (4 | ) | (2 | ) | 2 | ||||||||
55 | Net income (expenses) from investments (a) | 22 | 11 | (11 | ) | ||||||||||
(411 | ) | Income taxes (a) | (232 | ) | (52 | ) | 180 | ||||||||
27.0 | Tax rate (%) | 29.6 | .. | ||||||||||||
1,111 | Adjusted net profit | 553 | (519 | ) | (1,072 | ) | .. | ||||||||
(a) Excluding special items.
The Engineering & Construction segment reported an adjusted operating loss amounting to euro 476 million, down by euro 1,243 million from the first half of 2012. This decline reflected marketing and operating difficulties that led management to revise the margin estimates for certain large contracts under completion in particular for the construction of onshore industrial complexes, against the backdrop of a deteriorating trading environment for the onshore and offshore construction businesses due to a lower level of activities driven by current macroeconomic uncertainties.
The magnitude of adjusted net loss was similar to the one registered on operating basis (minus euro 519 million in the first half) in the absence of any tax-loss carry forward.
- 36 -
Eni Interim Consolidated Report / Financial review and other information
Other activities3
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
(300 | ) | Operating profit | (145 | ) | (193 | ) | (48 | ) | (33.1 | ) | |||||
78 | Exclusion of special items: | 43 | 86 | ||||||||||||
25 | - environmental provisions | 34 | 36 | ||||||||||||
2 | - asset impairments | 2 | 2 | ||||||||||||
(12 | ) | - gains on disposals of assets | (11 | ) | |||||||||||
35 | - risk provisions | 4 | 23 | ||||||||||||
2 | - provisions for redundancy incentives | 1 | 1 | ||||||||||||
26 | - other | 13 | 24 | ||||||||||||
(222 | ) | Adjusted operating profit | (102 | ) | (107 | ) | (5 | ) | (4.9 | ) | |||||
(24 | ) | Net financial income (expense) (a) | (21 | ) | (6 | ) | 15 | ||||||||
(1 | ) | Net income (expense) from investments (a) | |||||||||||||
Income taxes (a) (b) | |||||||||||||||
(247 | ) | Adjusted net profit | (123 | ) | (113 | ) | 10 | 8.1 | |||||||
(a) Excluding special items.
(b) Deferred tax assets relating to Syndal losses are recognized
by the parent company Eni SpA based on intercompany agreements
which regulate the Italian consolidated accounts for tax
purposes.
Corporate and financial companies
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
(341 | ) | Operating profit | (185 | ) | (154 | ) | 31 | 16.8 | |||||||
16 | Exclusion of special items: | 6 | (4 | ) | |||||||||||
11 | - provisions for redundancy incentives | 8 | 2 | ||||||||||||
5 | - risk provisions | ||||||||||||||
- other | (2 | ) | (6 | ) | |||||||||||
(325 | ) | Adjusted operating profit | (179 | ) | (158 | ) | 21 | 11.7 | |||||||
(865 | ) | Net financial income (expense) (a) | (649 | ) | (357 | ) | 292 | ||||||||
99 | Net income (expense) from investments (a) | 43 | 43 | ||||||||||||
115 | Income taxes (a) | 182 | 194 | 12 | |||||||||||
(976 | ) | Adjusted net profit | (646 | ) | (278 | ) | 368 | 57.0 | |||||||
(a) Excluding special items.
(3) Not including Snam results.
- 37 -
Eni Interim Consolidated Report / Financial review and other information
NON-GAAP measures
Reconciliation of
reported operating profit and reported 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,
special items and, in determining the business segments
adjusted results, finance charges on finance debt and interest
income. The adjusted operating profit of each business segment
reports gains and losses on derivative financial instruments
entered into to manage exposure to movements in foreign currency
exchange rates which impact industrial margins and translation of
commercial payables and receivables. Accordingly also currency
translation effects recorded through profit and loss are reported
within business segments adjusted operating profit. The
taxation effect of the items excluded from adjusted operating or
net profit is determined based on the specific rate of taxes
applicable to each of them. The Italian statutory tax rate is
applied to finance charges and income (38% is applied to charges
recorded by companies in the energy sector, whilst a tax rate of
27.5% is applied to all other companies). Adjusted operating
profit and adjusted net profit are non-GAAP financial measures
under either IFRS, or US GAAP. Management includes them in order
to facilitate a comparison of base business performance across
periods, and to allow financial analysts to evaluate Enis
trading performance on the basis of their forecasting models.
The following is a description of items that 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 significant income or
charges pertaining to either: (i) infrequent or unusual events
and transactions, being identified as non-recurring items under
such circumstances; (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; or (iii) exchange
rate differences and derivatives relating to industrial
activities and commercial payables and receivables, particularly
exchange rate derivatives to manage commodity pricing formulas
which are quoted in a currency other than the functional
currency. Those items are reclassified in operating profit with a
corresponding adjustment to net finance charges, notwithstanding
the handling of foreign currency exchange risks is made centrally
by netting off naturally-occurring opposite positions and then
dealing with any residual risk exposure in the exchange rate
market. 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. Also, special
items include gains and losses on re-measurement at fair value of
certain non hedging commodity derivatives, including the
ineffective portion of cash flow hedges and certain derivatives
financial instruments embedded in the pricing formula of
long-term gas supply agreements of the Exploration &
Production Division.
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.
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.
- 38 -
Eni Interim Consolidated Report / Financial review and other information
First
half 2013
|
Exploration
& Production |
Gas & Power |
Refining &
Marketing |
Versalis |
Engineering
& Construction |
Corporate and
financial companies |
Other activities |
Impact of
unrealized intragroup profit elimination |
Group |
|||||||||
Reported operating profit | 7,436 | (559 | ) | (557 | ) | (278 | ) | (478 | ) | (154 | ) | (193 | ) | 76 | 5,293 | ||||||||||||
Exclusion of inventory holding (gains) losses | (33 | ) | 195 | 123 | 51 | 336 | |||||||||||||||||||||
Exclusion of special items: | |||||||||||||||||||||||||||
- environmental charges | 16 | 2 | 36 | 54 | |||||||||||||||||||||||
- asset impairments | 39 | 41 | 6 | 2 | 88 | ||||||||||||||||||||||
- gains on disposal of assets | (65 | ) | (2 | ) | 1 | (66 | ) | ||||||||||||||||||||
- risk provisions | (102 | ) | 4 | 23 | (75 | ) | |||||||||||||||||||||
- provision for redundancy incentives | 10 | 1 | 4 | 1 | 2 | 1 | 19 | ||||||||||||||||||||
- commodity derivatives | 54 | (2 | ) | 1 | 1 | 54 | |||||||||||||||||||||
- exchange rate differences and derivatives | (9 | ) | (39 | ) | (19 | ) | (4 | ) | (71 | ) | |||||||||||||||||
- other | (3 | ) | 15 | (2 | ) | (6 | ) | 24 | 28 | ||||||||||||||||||
Special items of operating profit | (28 | ) | (71 | ) | 36 | 10 | 2 | (4 | ) | 86 | 31 | ||||||||||||||||
Adjusted operating profit | 7,408 | (663 | ) | (326 | ) | (145 | ) | (476 | ) | (158 | ) | (107 | ) | 127 | 5,660 | ||||||||||||
Net finance (expense) income (a) | (125 | ) | 11 | (2 | ) | (1 | ) | (2 | ) | (357 | ) | (6 | ) | (482 | ) | ||||||||||||
Net income (expense) from investments (a) | 283 | 86 | 50 | (1 | ) | 11 | 43 | 472 | |||||||||||||||||||
Income taxes (a) | (4,455 | ) | 195 | 87 | 11 | (52 | ) | 194 | (49 | ) | (4,069 | ) | |||||||||||||||
Tax rate (%) | 58.9 | 72.0 | |||||||||||||||||||||||||
Adjusted net profit | 3,111 | (371 | ) | (191 | ) | (136 | ) | (519 | ) | (278 | ) | (113 | ) | 78 | 1,581 | ||||||||||||
of which attributable to: | |||||||||||||||||||||||||||
- non-controlling interest | (380 | ) | |||||||||||||||||||||||||
- Enis shareholders | 1,961 | ||||||||||||||||||||||||||
Reported net profit attributable to Enis shareholders | 1,818 | ||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 210 | ||||||||||||||||||||||||||
Exclusion of special items | (67 | ) | |||||||||||||||||||||||||
Adjusted net profit attributable to Enis shareholders | 1,961 | ||||||||||||||||||||||||||
(a) Excluding special items.
- 39 -
Eni Interim Consolidated Report / Financial review and other information
First half 2012 | Other
activities (a) |
Discontinued
operations |
Continuing
operations |
|||||||||||||||||||||||||
(euro million) | Exploration
& Production |
Gas & Power (a) |
Refining &
Marketing |
Versalis |
Engineering
& Construction |
Corporate and
financial companies |
Snam |
Other activities |
Impact of
unrealized intragroup profit elimination |
Group |
Snam |
Consolidation
adjustments |
TOTAL |
|||||||||||||||
Reported operating profit | 9,552 | (641 | ) | (674 | ) | (229 | ) | 745 | (185 | ) | 1,076 | (145 | ) | 421 | 9,920 | (1,076 | ) | 496 | (580 | ) | 9,340 | |||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 127 | 106 | 18 | (337 | ) | (86 | ) | (86 | ) | |||||||||||||||||||||||||||||||||
Exclusion of special items: | ||||||||||||||||||||||||||||||||||||||||||
- environmental charges | (3 | ) | 7 | 1 | 11 | 34 | 50 | (11 | ) | (11 | ) | 39 | ||||||||||||||||||||||||||||||
- asset impairments | 91 | 849 | 193 | 8 | 21 | 2 | 1,164 | 1,164 | ||||||||||||||||||||||||||||||||||
- gains on disposal of assets | (351 | ) | (1 | ) | 1 | 1 | (3 | ) | (11 | ) | (364 | ) | 3 | 3 | (361 | ) | ||||||||||||||||||||||||||
- risk provisions | 77 | (13 | ) | 4 | 68 | 68 | ||||||||||||||||||||||||||||||||||||
-
provision for redundancy incentives |
8 | 4 | 24 | 9 | 1 | 8 | 1 | 1 | 56 | (1 | ) | (1 | ) | 55 | ||||||||||||||||||||||||||||
- commodity derivatives | 1 | (1 | ) | |||||||||||||||||||||||||||||||||||||||
-
exchange differences and derivatives |
(14 | ) | 200 | (15 | ) | (1 | ) | 170 | 170 | |||||||||||||||||||||||||||||||||
- other | 47 | 6 | 5 | (2 | ) | 13 | 69 | 69 | ||||||||||||||||||||||||||||||||||
Special items of operating profit | (218 | ) | 1,132 | 202 | 17 | 22 | 6 | 9 | 43 | 1,213 | (9 | ) | (9 | ) | 1,204 | |||||||||||||||||||||||||||
Adjusted operating profit | 9,334 | 618 | (366 | ) | (194 | ) | 767 | (179 | ) | 1,085 | (102 | ) | 84 | 11,047 | (1,085 | ) | 496 | (589 | ) | 10,458 | ||||||||||||||||||||||
Net finance (expense) income (b) | (136 | ) | 8 | (6 | ) | (2 | ) | (4 | ) | (649 | ) | 7 | (21 | ) | (803 | ) | (7 | ) | (7 | ) | (810 | ) | ||||||||||||||||||||
Net income (expense) from investments (b) | 242 | 187 | 17 | 1 | 22 | 23 | 492 | (23 | ) | (23 | ) | 469 | ||||||||||||||||||||||||||||||
Income taxes (b) | (5,732 | ) | (188 | ) | 102 | 52 | (232 | ) | 182 | (446 | ) | (37 | ) | (6,299 | ) | 446 | (92 | ) | 354 | (5,945 | ) | |||||||||||||||||||||
Tax rate (%) | 60.7 | 23.1 | .. | 29.6 | 40.0 | 58.7 | 58.8 | |||||||||||||||||||||||||||||||||||
Adjusted net profit | 3,708 | 625 | (253 | ) | (143 | ) | 553 | (646 | ) | 669 | (123 | ) | 47 | 4,437 | (669 | ) | 404 | (265 | ) | 4,172 | ||||||||||||||||||||||
of which attributable to: | ||||||||||||||||||||||||||||||||||||||||||
- non-controlling interest | 454 | (115 | ) | 339 | ||||||||||||||||||||||||||||||||||||||
- Enis shareholders | 3,983 | (150 | ) | 3,833 | ||||||||||||||||||||||||||||||||||||||
Reported net profit attributable to Enis shareholders | 3,844 | (144 | ) | 3,700 | ||||||||||||||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (70 | ) | (70 | ) | ||||||||||||||||||||||||||||||||||||||
Exclusion of special items | 209 | (6 | ) | 203 | ||||||||||||||||||||||||||||||||||||||
Adjusted net profit attributable to Enis shareholders | 3,983 | (150 | ) | 3,833 | ||||||||||||||||||||||||||||||||||||||
(a) Following the announced
divestment plan, Snam results are reclassified from "Gas
& Power" sector to "Other activities " and
accounted as discontinued operations.
(b) Excluding special items.
- 40 -
Eni Interim Consolidated Report / Financial review and other information
2012 | Other
activities (a) |
Discontinued
operations |
Continuing
operations |
|||||||||||||||||||||||||
(euro million) | Exploration
& Production |
Gas & Power (a) |
Refining &
Marketing |
Versalis |
Engineering
& Construction |
Corporate and
financial companies |
Snam |
Other activities |
Impact of
unrealized intragroup profit elimination |
Group |
Snam |
Consolidation
adjustments |
TOTAL |
|||||||||||||||
Reported operating profit | 18,470 | (3,219 | ) | (1,296 | ) | (681 | ) | 1,442 | (341 | ) | 1,679 | (300 | ) | 208 | 15,962 | (1,679 | ) | 788 | (891 | ) | 15,071 | |||||||||||||||||||||
Exclusion of inventory holding (gains) losses | 163 | (29 | ) | 63 | (214 | ) | (17 | ) | (17 | ) | ||||||||||||||||||||||||||||||||
Exclusion of special items: | ||||||||||||||||||||||||||||||||||||||||||
- environmental charges | (2 | ) | 40 | 71 | 25 | 134 | (71 | ) | (71 | ) | 63 | |||||||||||||||||||||||||||||||
- asset impairments | 550 | 2,494 | 846 | 112 | 25 | 2 | 4,029 | 4,029 | ||||||||||||||||||||||||||||||||||
- gains on disposal of assets | (542 | ) | (3 | ) | 5 | 1 | 3 | (22 | ) | (12 | ) | (570 | ) | 22 | 22 | (548 | ) | |||||||||||||||||||||||||
- risk provisions | 7 | 831 | 49 | 18 | 5 | 35 | 945 | 945 | ||||||||||||||||||||||||||||||||||
- provisions for redundancy incentives |
6 | 5 | 19 | 14 | 7 | 11 | 2 | 2 | 66 | (2 | ) | (2 | ) | 64 | ||||||||||||||||||||||||||||
- commodity derivatives | 1 | 1 | (3 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||
- exchange rate differences and derivatives |
(9 | ) | (51 | ) | (8 | ) | (11 | ) | (79 | ) | (79 | ) | ||||||||||||||||||||||||||||||
- other | 54 | 138 | 53 | 26 | 271 | 271 | ||||||||||||||||||||||||||||||||||||
Special items of operating profit | 67 | 3,412 | 1,004 | 135 | 32 | 16 | 51 | 78 | 4,795 | (51 | ) | (51 | ) | 4,744 | ||||||||||||||||||||||||||||
Adjusted operating profit | 18,537 | 356 | (321 | ) | (483 | ) | 1,474 | (325 | ) | 1,730 | (222 | ) | (6 | ) | 20,740 | (1,730 | ) | 788 | (942 | ) | 19,798 | |||||||||||||||||||||
Net finance (expense) income (b) | (264 | ) | 29 | (11 | ) | (3 | ) | (7 | ) | (865 | ) | (54 | ) | (24 | ) | (1,199 | ) | 54 | 54 | (1,145 | ) | |||||||||||||||||||||
Net income from investments (b) | 436 | 261 | 63 | 2 | 55 | 99 | 38 | (1 | ) | 953 | (38 | ) | (38 | ) | 915 | |||||||||||||||||||||||||||
Income taxes (b) | (11,283 | ) | (173 | ) | 90 | 89 | (411 | ) | 115 | (712 | ) | 2 | (12,283 | ) | 712 | (123 | ) | 589 | (11,694 | ) | ||||||||||||||||||||||
Tax rate (%) | 60.3 | 26.8 | .. | 27.0 | 41.5 | 59.9 | 59.8 | |||||||||||||||||||||||||||||||||||
Adjusted net profit | 7,426 | 473 | (179 | ) | (395 | ) | 1,111 | (976 | ) | 1,002 | (247 | ) | (4 | ) | 8,211 | (1,002 | ) | 665 | (337 | ) | 7,874 | |||||||||||||||||||||
of which attributable to: | ||||||||||||||||||||||||||||||||||||||||||
- non-controlling interest | 886 | (142 | ) | 744 | ||||||||||||||||||||||||||||||||||||||
- Eni's shareholders | 7,325 | (195 | ) | 7,130 | ||||||||||||||||||||||||||||||||||||||
Reported net profit attributable to Eni's shareholders | 7,790 | (3,590 | ) | 4,200 | ||||||||||||||||||||||||||||||||||||||
Exclusion of inventory holding (gains) losses | (23 | ) | (23 | ) | ||||||||||||||||||||||||||||||||||||||
Exclusion of special items | (442 | ) | 3,395 | 2,953 | ||||||||||||||||||||||||||||||||||||||
Adjusted net profit attributable to Eni's shareholders | 7,325 | (195 | ) | 7,130 | ||||||||||||||||||||||||||||||||||||||
(a) Following the divestment, Snam results are
reclassified from "Gas & Power" sector to
"Other activities" and accounted as discontinued
operations.
(b) Excluding special items.
- 41 -
Eni Interim Consolidated Report / Financial review and other information
Breakdown of special items
First half |
2012 |
(euro million) |
2012 |
2013 |
|||
4,795 | Special items of operating profit | 1,213 | 31 | ||||||
134 | - environmental charges | 50 | 54 | ||||||
4,029 | - assets impairments | 1,164 | 88 | ||||||
(570 | ) | - gains on disposal of assets | (364 | ) | (66 | ) | |||
945 | - risk provisions | 68 | (75 | ) | |||||
66 | - provisions for redundancy incentives | 56 | 19 | ||||||
(1 | ) | - commodity derivatives | 54 | ||||||
(79 | ) | - exchange rate differences and derivatives | 170 | (71 | ) | ||||
271 | - other | 69 | 28 | ||||||
202 | Net finance (income) expense | (169 | ) | 119 | |||||
of which: | |||||||||
79 | - exchange rate differences and derivatives | (170 | ) | 71 | |||||
(5,408 | ) | Net income from investments | (897 | ) | (202 | ) | |||
of which: | |||||||||
(2,354 | ) | gains on disposal of assets | (7 | ) | (174 | ) | |||
(311 | ) | of which: Galp | (95 | ) | |||||
(2,019 | ) | of which: Snam | (75 | ) | |||||
(3,151 | ) | gains on investment revaluation | (835 | ) | |||||
(1,700 | ) | of which: Galp | (835 | ) | |||||
(1,451 | ) | of which: Snam | |||||||
156 | impairments | ||||||||
(31 | ) | Income taxes | 62 | (15 | ) | ||||
of which: | |||||||||
803 | - deferred tax liabilities on Italian subsidiaries | ||||||||
147 | - re-allocation of tax impact on Eni SpA dividends and other special items | 16 | 90 | ||||||
(981 | ) | - taxes on special items of operating profit | 46 | (105 | ) | ||||
(442 | ) | Total special items of net profit | 209 | (67 | ) | ||||
Breakdown of impairments
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
||||
2,679 | Asset impairment | 315 | 136 | (179 | ) | |||||||
1,347 | Goodwill impairment | 849 | (849 | ) | ||||||||
(3 | ) | Revaluations | (48 | ) | (48 | ) | ||||||
4,023 | Sub total | 1,164 | 88 | (1,076 | ) | |||||||
6 | Impairment of losses on receivables related to non-recurring activities | |||||||||||
4,029 | Impairments | 1,164 | 88 | (1,076 | ) | |||||||
- 42 -
Eni Interim Consolidated Report / Financial review and other information
Summarized Group Balance Sheet
The 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 (a)
(euro million) |
Dec. 31, 2012 |
June 30, 2013 |
Change |
|||
Fixed assets | |||||||||
Property, plant and equipment | 63,466 | 64,441 | 975 | ||||||
Inventories - Compulsory stock | 2,538 | 2,359 | (179 | ) | |||||
Intangible assets | 4,487 | 4,533 | 46 | ||||||
Equity-accounted investments and other investments | 9,347 | 7,337 | (2,010 | ) | |||||
Receivables and securities held for operating purposes | 1,457 | 1,474 | 17 | ||||||
Net payables related to capital expenditure | (1,142 | ) | (1,274 | ) | (132 | ) | |||
80,153 | 78,870 | (1,283 | ) | ||||||
Net working capital | |||||||||
Inventories | 8,496 | 8,035 | (461 | ) | |||||
Trade receivables | 19,966 | 20,324 | 358 | ||||||
Trade payables | (14,993 | ) | (13,200 | ) | 1,793 | ||||
Tax payables and provisions for net deferred tax liabilities | (3,204 | ) | (3,064 | ) | 140 | ||||
Provisions | (13,603 | ) | (13,180 | ) | 423 | ||||
Other current assets and liabilities | 2,473 | 1,845 | (628 | ) | |||||
(865 | ) | 760 | 1,625 | ||||||
Provisions for employee post-retirement benefits | (1,374 | ) | (1,400 | ) | (26 | ) | |||
Assets held for sale including related liabilities | 155 | 107 | (48 | ) | |||||
CAPITAL EMPLOYED, NET | 78,069 | 78,337 | 268 | ||||||
Eni shareholders' equity | 59,060 | 58,977 | (83 | ) | |||||
Non-controlling interest | 3,498 | 2,868 | (630 | ) | |||||
Shareholders equity | 62,558 | 61,845 | (713 | ) | |||||
Net borrowings | 15,511 | 16,492 | 981 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 78,069 | 78,337 | 268 | ||||||
(a) For a reconciliation to the statutory statement of cash flow see the paragraph "Reconciliation of Summarized Group Balance Sheet and Statement of Cash Flows to Statutory Schemes".
Fixed assets
Fixed assets amounted to euro 78,870 million,
representing a decrease of euro 1,283 million from December 31,
2012, reflecting the reduction of the line-item "Equity
accounted investments and other investments" following the
disposal of Snam and Galp and of depreciation, depletion,
amortization and impairment charges (euro 4,627 million). These
declines were partly offset by capital expenditure incurred in
the period (euro 5,931 million).
Net working capital
Net working capital amounted to euro 760 million,
representing an increase of euro 1,625 million mainly due to an
increased imbalance between trade payables and receivables (up by
euro 2,151 million.) This also reflected a lower amount of trade
receivables transferred to financial institutions, and the
utilization of acquired provisions (down by euro 423 million).
Additionally, the reduction in "Inventories" (down euro
461 million) was driven by the effect of declining prices for
hydrocarbons in the evaluation of stocks at the weighted-average
cost for inventory accounting.
Assets held for sale including related
liabilities
Net assets held for sale including related liabilities
(euro 107 million) referred to non strategic assets in the
Exploration & Production, Gas & Power and Refining &
Marketing Divisions.
- 43 -
Eni Interim Consolidated Report / Financial review and other information
Leverage and net borrowings
Leverage is a measure used by management to assess the Companys level of indebtedness. It is calculated as a ratio of net borrowings which is calculated by excluding cash and cash equivalents and certain very liquid assets from financial debt to shareholders equity, including non-controlling interest. Management periodically reviews 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 a benchmarking analysis with industry standards.
(euro million) |
Dec. 31, 2012 |
June 30, 2013 |
Change |
|||
Total debt: | 24,463 | 24,575 | 112 | ||||||
- Short-term debt | 5,184 | 5,731 | 547 | ||||||
- Long-term debt | 19,279 | 18,844 | (435 | ) | |||||
Cash and cash equivalents | (7,765 | ) | (7,850 | ) | (85 | ) | |||
Securities held for non-operating purposes | (34 | ) | (11 | ) | 23 | ||||
Financing receivables for non-operating purposes | (1,153 | ) | (222 | ) | 931 | ||||
Net borrowings | 15,511 | 16,492 | 981 | ||||||
Shareholders' equity including non-controlling interest | 62,558 | 61,845 | (713 | ) | |||||
Leverage | 0.25 | 0.27 | 0.02 | ||||||
Net borrowings as of June 30, 2013, amounted to euro 16,492 million and increased by euro 981 million from December 31, 2012, due to payment of the balance of Eni dividends for 2012 and requirements for capital expenditure and investments and a lower amount of trade receivables transferred to financing institutions (down by euro 335 million), partly offset by cash flows from operations and gains on the divestment of Snam and Galp.
Total debt amounted to euro 24,575 million, of which euro 5,731 million were short-term (including the portion of long-term debt due within 12 months equal to euro 2,827 million) and euro 18,844 million were long-term.
The ratio of net borrowings to shareholders equity including non-controlling interest leverage was 0.27 at June 30, 2013 (0.25 as of December 31, 2012).
Comprehensive income
(euro million) |
|
First half |
2012 |
2013 |
|||
Net profit | 4,298 | 1,438 | ||||
Other items of comprehensive income: | ||||||
Other comprehensive income to be reclassified to profit or loss in subsequent periods | ||||||
Foreign currency translation differences | 1,147 | 156 | ||||
Fair value evaluation of Eni's interest in Galp and Snam | (100 | ) | ||||
Change in the fair value of cash flow hedging derivatives | (25 | ) | 3 | |||
Change in the fair value of available-for-sale securities | 8 | (2 | ) | |||
Share of "Other comprehensive income" on equity-accounted entities | 8 | 2 | ||||
Taxation | 8 | |||||
1,146 | 59 | |||||
Total comprehensive income | 5,444 | 1,497 | ||||
Attributable to: | ||||||
- Eni's shareholders | 4,962 | 1,889 | ||||
- Non-controlling interest | 482 | (392 | ) | |||
- 44 -
Eni Interim Consolidated Report / Financial review and other information
Changes in shareholders equity
(euro million)
Shareholders equity at December 31, 2012 | 62,558 | |||||
Total comprehensive income | 1,497 | |||||
Dividends distributed to Enis shareholders | (1,956 | ) | ||||
Dividends distributed by consolidated subsidiaries | (214 | ) | ||||
Non-controlling interest due to changes in consolidation | (14 | ) | ||||
Acquisition of non-controlling interest relating to Tigaz Zrt | (26 | ) | ||||
Total changes | (713 | ) | ||||
Shareholders equity at June 30, 2013 | 61,845 | |||||
Attributable to: | ||||||
- Eni's shareholders | 58,977 | |||||
- Non-controlling interest | 2,868 | |||||
Shareholders equity including non-controlling interest was euro 61,845 million, representing a decrease of euro 713 million from December 31, 2012. This was due to comprehensive income for the period (euro 1,497 million) as a result of net profit (euro 1,438 million) and foreign currency translation differences (euro 156 million), more than offset by dividend payments to Enis shareholders and other changes for euro 2,210 million (being the balance dividend for the full year 2012 to Enis shareholders of euro 1,956 million and including dividends paid to non-controlling interest of Saipem and other subsidiaries).
- 45 -
Eni Interim Consolidated Report / Financial review and other information
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 enables investors to understand the link existing between changes in cash and cash equivalents (deriving from the statutory cash flows statement) and in net borrowings (deriving from the summarized cash flow statement) that occurred from the beginning of the period to the end of period. The measure enabling such a link is represented by the 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) change 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. The free cash flow is a non-GAAP measure of financial performance.
Summarized Group Cash Flow Statement (a)
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
||||
4,944 | Net profit - continuing operations | 4,039 | 1,438 | (2,601 | ) | |||||||
Adjustments to reconcile net profit to net cash provided by operating activities: | ||||||||||||
11,349 | - depreciation, depletion and amortization and other non-monetary items | 4,515 | 4,614 | 99 | ||||||||
(875 | ) | - net gains on disposal of assets | (370 | ) | (168 | ) | 202 | |||||
11,925 | - dividends, interest, taxes and other changes | 6,270 | 3,926 | (2,344 | ) | |||||||
(3,373 | ) | Changes in working capital related to operations | (293 | ) | (23 | ) | 270 | |||||
(11,614 | ) | Dividends received, taxes paid, interest (paid) received during the period | (5,821 | ) | (5,035 | ) | 786 | |||||
12,356 | Net cash provided by operating activities - continuing operations | 8,340 | 4,752 | (3,588 | ) | |||||||
15 | Net cash provided by operating activities - discontinued operations | 82 | (82 | ) | ||||||||
12,371 | Net cash provided by operating activities | 8,422 | 4,752 | (3,670 | ) | |||||||
(12,761 | ) | Capital expenditure - continuing operations | (5,647 | ) | (5,931 | ) | (284 | ) | ||||
(756 | ) | Capital expenditure - discontinued operations | (493 | ) | 493 | |||||||
(13,517 | ) | Capital expenditure | (6,140 | ) | (5,931 | ) | 209 | |||||
(569 | ) | Investments and purchase of consolidated subsidiaries and businesses | (306 | ) | (176 | ) | 130 | |||||
6,014 | Disposals | 774 | 2,465 | 1,691 | ||||||||
(136 | ) | Other cash flow related to capital expenditure, investments and disposals | (574 | ) | 36 | 610 | ||||||
4,163 | Free cash flow | 2,176 | 1,146 | (1,030 | ) | |||||||
(83 | ) | Borrowings (repayment) of debt related to financing activities (b) | (336 | ) | 954 | 1,290 | ||||||
5,947 | Changes in short and long-term financial debt | 3,577 | 211 | (3,366 | ) | |||||||
(3,746 | ) | Dividends paid and changes in non-controlling interests and reserves | (2,280 | ) | (2,192 | ) | 88 | |||||
(16 | ) | Effect of changes in consolidation and exchange differences | 3 | (34 | ) | (37 | ) | |||||
6,265 | NET CASH FLOW FOR THE PERIOD | 3,140 | 85 | (3,055 | ) | |||||||
Changes in net borrowings
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
||||
4,163 | Free cash flow | 2,176 | 1,146 | (1,030 | ) | |||||||
(2 | ) | Net borrowings of acquired companies | (2 | ) | (6 | ) | (4 | ) | ||||
12,446 | Net borrowings of divested companies | (3 | ) | 3 | ||||||||
(340 | ) | Exchange differences on net borrowings and other changes | 1,232 | 71 | (1,161 | ) | ||||||
(3,746 | ) | Dividends paid and changes in non-controlling interest and reserves | (2,280 | ) | (2,192 | ) | 88 | |||||
12,521 | CHANGE IN NET BORROWINGS | 1,123 | (981 | ) | (2,104 | ) | ||||||
(a) For a reconciliation
to the statutory statement of cash flow see the paragraph
"Reconciliation of Summarized Group Balance Sheet
and Statement of Cash Flow to Statutory Schemes". (b) This item includes investments in certain financial instruments not related to operations (securities, escrow accounts) to absorb temporary surpluses of cash or as a part of our ordinary management of financing activities. Due to their nature and the circumstance that they are very liquid, these financial instruments are netted against finance debt in determining net borrowings. Cash flows of such investments/disposals were as follows: |
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
||||
Financing investments: | ||||||||||||
- securities | ||||||||||||
(1,131 | ) | - financing receivables | (350 | ) | (142 | ) | 208 | |||||
(1,131 | ) | (350 | ) | (142 | ) | 208 | ||||||
Disposal of financing investments: | ||||||||||||
4 | - securities | 7 | 22 | 15 | ||||||||
1,044 | - financing receivables | 7 | 1,074 | 1,067 | ||||||||
1,048 | 14 | 1,096 | 1,082 | |||||||||
(83 | ) | Cash flows of financial investments not related to operation | (336 | ) | 954 | 1,290 | ||||||
- 46 - |
Eni Interim Consolidated Report / Financial review and other information
Net cash provided by operating activities amounting to
euro 4,752 million and cash generated from disposals of euro
2,465 million partly funded cash outflows relating to capital
expenditure totaling euro 5,931 million and investments (euro 176
million) and dividend payments and other changes amounting to
euro 2,192 million (euro 1,956 million of which related to the
balance dividend paid to Enis shareholders). The remaining
part (euro 211 million) related to other dividend payments to
non-controlled interests, mainly from Saipem. These flows
increased the Groups net debt by euro 981 million from
December 31, 2012.
Net cash provided by operating activities was negatively affected
by fewer receivables, which were due beyond the end of the
reporting period, being transferred to financing institutions
compared to the amount transferred at the end of the previous
reporting period (down by euro 335 million; from euro 2,203
million as of December 2012 to euro 1,868 million as of June 30,
2013).
Proceeds from disposals largely related to the divestment of the 11.69% interest in the share capital of Snam (euro 1,459 million), the 8% interest in the share capital of Galp (euro 810 million) and other non strategic assets in the Exploration & Production Division.
Capital expenditure
First half |
2012 |
(euro million) |
2012 |
2013 |
Change |
% Ch. |
|||||
10,307 | Exploration & Production | 4,455 | 4,893 | 438 | 9.8 | ||||||||||
43 | - acquisition of proved and unproved properties | 27 | |||||||||||||
1,850 | - exploration | 826 | 944 | ||||||||||||
8,304 | - development | 3,568 | 3,907 | ||||||||||||
110 | - other expenditure | 34 | 42 | ||||||||||||
225 | Gas & Power | 85 | 85 | ||||||||||||
212 | - marketing | 78 | 76 | ||||||||||||
13 | - international transport | 7 | 9 | ||||||||||||
842 | Refining & Marketing | 290 | 210 | (80 | ) | (27.6 | ) | ||||||||
622 | - refining, supply and logistics | 243 | 163 | ||||||||||||
220 | - marketing | 47 | 47 | ||||||||||||
172 | Versalis | 66 | 111 | 45 | 68.2 | ||||||||||
1,011 | Engineering & Construction | 546 | 490 | (56 | ) | (10.3 | ) | ||||||||
14 | Other activities | 8 | 5 | (3 | ) | (37.5 | ) | ||||||||
152 | Corporate and financial companies | 54 | 107 | 53 | 98.1 | ||||||||||
38 | Impact of unrealized intragroup profit elimination | 143 | 30 | (113 | ) | ||||||||||
12,761 | Capital expenditure - continuing operations | 5,647 | 5,931 | 284 | 5.0 | ||||||||||
756 | Capital expenditure - discontinued operations | 493 | (493 | ) | .. | ||||||||||
13,517 | Capital expenditure | 6,140 | 5,931 | (209 | ) | (3.4 | ) | ||||||||
In the first half of 2013, capital expenditure amounting
to euro 5,931 million related mainly to:
- development activities deployed mainly in Norway, the United
States, Angola, Italy, Congo, Kazakhstan and Nigeria, and
exploratory activities of which 97% was spent outside Italy,
primarily in Mozambique, Togo, Congo, Angola and China as well as
acquisition of new licenses in the Republic of Cyprus and in
Vietnam;
- upgrading of the fleet used in the Engineering &
Construction segment (euro 490 million);
- refining, supply and logistics with projects designed to
improve the conversion rate and flexibility of refineries (euro
163 million), as well as realization and upgrading of the refined
product retail network in Italy and the rest of Europe (euro 47
million);
- initiatives to improve flexibility of the combined cycle power
plants (euro 43 million).
- 47 -
Eni Interim Consolidated Report / Financial review and other information
Reconciliation of Summarized Group Balance Sheet and Statement of Cash Flows to Statutory Schemes
Summarized Group Balance Sheet
(euro million) | Dec. 31, 2012 | June 30, 2013 | ||
Items of
Summarized Group Balance Sheet (where not expressly indicated, the item derives directly from the statutory scheme) |
Notes to the condensed consolidated interim 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 | 63,466 | 64,441 | ||||||||||||
Inventories - Compulsory stock | 2,538 | 2,359 | ||||||||||||
Intangible assets | 4,487 | 4,533 | ||||||||||||
Equity-accounted investments and other investments | 9,347 | 7,337 | ||||||||||||
Receivables and securities held for operating activities | (see note 5 and note 11) | 1,457 | 1,474 | |||||||||||
Net payables related to capital expenditure, made up of: | (1,142 | ) | (1,274 | ) | ||||||||||
- receivables related to capital expenditure/disposals | (see note 5) | 209 | 212 | |||||||||||
- receivables related to capital expenditure/disposals | (see note 13) | 752 | 720 | |||||||||||
- payables related to capital expenditure | (see note 15) | (2,103 | ) | (2,206 | ) | |||||||||
Total fixed assets | 80,153 | 78,870 | ||||||||||||
Net working capital | ||||||||||||||
Inventories | 8,496 | 8,035 | ||||||||||||
Trade receivables | (see note 5) | 19,966 | 20,324 | |||||||||||
Trade payables | (see note 15) | (14,993 | ) | (13,200 | ) | |||||||||
Tax payables and provisions for net deferred tax liabilities, made up of: | (3,204 | ) | (3,064 | ) | ||||||||||
- income tax payables | (1,622 | ) | (1,066 | ) | ||||||||||
- other tax payables | (2,162 | ) | (2,860 | ) | ||||||||||
- deferred tax liabilities | (6,740 | ) | (6,775 | ) | ||||||||||
- other tax liabilities | (see note 21) | (1 | ) | |||||||||||
- current tax assets | 771 | 758 | ||||||||||||
- other current tax assets | 1,230 | 1,045 | ||||||||||||
- deferred tax assets | 5,027 | 5,485 | ||||||||||||
- other tax assets | (see note 13) | 293 | 349 | |||||||||||
Provisions | (13,603 | ) | (13,180 | ) | ||||||||||
Other current assets and liabilities: | 2,473 | 1,845 | ||||||||||||
- securities held for operating purposes | (see note 4) | 201 | 202 | |||||||||||
- receivables for operating purposes | (see note 5) | 440 | 472 | |||||||||||
- other receivables | (see note 5) | 6,751 | 7,107 | |||||||||||
- other (current) assets | 1,624 | 1,391 | ||||||||||||
- other receivables and other assets | (see note 13) | 3,355 | 2,772 | |||||||||||
- advances, other payables | (see note 15) | (6,485 | ) | (6,937 | ) | |||||||||
- other (current) liabilities | (1,437 | ) | (1,221 | ) | ||||||||||
- other payables and other liabilities | (see note 21) | (1,976 | ) | (1,941 | ) | |||||||||
Total net working capital | (865 | ) | 760 | |||||||||||
Provisions for employee post-retirement benefits | (1,374 | ) | (1,400 | ) | ||||||||||
Discontinued operations and assets held for sale including related liabilities | 155 | 107 | ||||||||||||
made up of: | ||||||||||||||
- assets held for sale | 516 | 486 | ||||||||||||
- liabilities related to assets held for sale | (361 | ) | (379 | ) | ||||||||||
CAPITAL EMPLOYED, NET | 78,069 | 78,337 | ||||||||||||
Shareholders' equity including non-controlling interest | 62,558 | 61,845 | ||||||||||||
Net borrowings | ||||||||||||||
Total debt, made up of: | 24,463 | 24,575 | ||||||||||||
- long-term debt | 19,279 | 18,844 | ||||||||||||
- current portion of long-term debt | 2,961 | 2,827 | ||||||||||||
- short-term financial liabilities | 2,223 | 2,904 | ||||||||||||
less: | ||||||||||||||
Cash and cash equivalents | (7,765 | ) | (7,850 | ) | ||||||||||
Securities held for non-operating purposes | (see note 4) | (34 | ) | (11 | ) | |||||||||
Financing receivables for non-operating purposes | (see note 5) | (1,153 | ) | (222 | ) | |||||||||
Total net borrowings (a) | 15,511 | 16,492 | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 78,069 | 78,337 | ||||||||||||
(a) For details on net borrowings see also note 18 to the condensed consolidated interim financial statements.
- 48 -
Eni Interim Consolidated Report / Financial review and other information
Summarized Group Cash Flow Statement
(euro million) | First half 2012 | First half 2013 | ||
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 | 4,039 | 1,438 | ||||||||||
Adjustments to reconcile net profit to net cash provided by operating activities: | ||||||||||||
Depreciation, depletion and amortization and other non-monetary items | 4,515 | 4,614 | ||||||||||
- depreciation, depletion and amortization | 4,577 | 4,539 | ||||||||||
- impairment of tangible and intangible assets, net | 1,164 | 88 | ||||||||||
- share of profit (loss) of equity-accounted investments | (342 | ) | (203 | ) | ||||||||
- other net changes | (898 | ) | 175 | |||||||||
- net changes in the provisions for employee benefits | 14 | 15 | ||||||||||
Net gains on disposal of assets | (370 | ) | (168 | ) | ||||||||
Dividends, interest, income taxes and other changes | 6,270 | 3,926 | ||||||||||
- dividend income | (156 | ) | (306 | ) | ||||||||
- interest income | (48 | ) | (67 | ) | ||||||||
- interest expense | 420 | 371 | ||||||||||
- income taxes | 6,054 | 3,928 | ||||||||||
Changes in working capital related to operations | (293 | ) | (23 | ) | ||||||||
- inventory | (621 | ) | 660 | |||||||||
- trade receivables | 605 | (382 | ) | |||||||||
- trade payables | (1,098 | ) | (1,812 | ) | ||||||||
- provisions for contingencies | 331 | (298 | ) | |||||||||
- other assets and liabilities | 490 | 1,809 | ||||||||||
Dividends received, taxes paid, interest (paid) received during the period | (5,821 | ) | (5,035 | ) | ||||||||
- dividend received | 474 | 409 | ||||||||||
- interest received | 25 | 58 | ||||||||||
- interest paid | (542 | ) | (693 | ) | ||||||||
- income taxes paid, net of tax receivables received | (5,778 | ) | (4,809 | ) | ||||||||
Net cash provided by operating activities - continuing operations | 8,340 | 4,752 | ||||||||||
Net cash provided by operating activities - discontinued operations | 82 | |||||||||||
Net cash provided by operating activities | 8,422 | 4,752 | ||||||||||
Capital expenditure | (6,140 | ) | (5,931 | ) | ||||||||
- tangible assets | (5,086 | ) | (4,886 | ) | ||||||||
- intangible assets | (1,054 | ) | (1,045 | ) | ||||||||
Investments and purchase of consolidated subsidiaries and businesses | (306 | ) | (176 | ) | ||||||||
- investments | (128 | ) | (148 | ) | ||||||||
- consolidated subsidiaries and businesses | (178 | ) | (28 | ) | ||||||||
Disposals | 774 | 2,465 | ||||||||||
- tangible assets | 727 | 186 | ||||||||||
- intangible assets | 30 | 4 | ||||||||||
- changes in consolidated subsidiaries and businesses | (2 | ) | ||||||||||
- investments | 19 | 2,275 | ||||||||||
Other cash flow related to capital expenditure, investments and disposals | (574 | ) | 36 | |||||||||
- securities | (18 | ) | ||||||||||
- financing receivables | (608 | ) | (524 | ) | ||||||||
- change in payables and receivables relating to investments and capitalized depreciation | (305 | ) | 139 | |||||||||
reclassification: purchase of securities and financing receivables for non-operating purposes | 350 | 142 | ||||||||||
- disposal of securities | 32 | 27 | ||||||||||
- disposal of financing receivables | 332 | 1,315 | ||||||||||
- change in payables and receivables | (361 | ) | 51 | |||||||||
reclassification: disposal of securities and financing receivables held for non-operating purposes | (14 | ) | (1,096 | ) | ||||||||
Free cash flow | 2,176 | 1,146 | ||||||||||
- 49 -
Eni Interim Consolidated Report / Financial review and other information
Continued Summarized Group Cash Flow Statement
(euro million) | First half 2012 | First half 2013 | ||
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 | ||||||
Free cash flow | 2,176 | 1,146 | ||||||||||
Borrowings (repayment) of debt related to financing activities | (336 | ) | 954 | |||||||||
reclassification: purchase of securities and financing receivables held for non-operating purposes | (350 | ) | (142 | ) | ||||||||
reclassification: disposal of securities and financing receivables held for non-operating purposes | 14 | 1,096 | ||||||||||
Changes in short and long-term finance debt | 3,577 | 211 | ||||||||||
- proceeds from long-term finance debt | 4,812 | 2,594 | ||||||||||
- payments of long-term finance debt | (681 | ) | (3,253 | ) | ||||||||
- increase (decrease) in short-term finance debt | (554 | ) | 870 | |||||||||
Dividends paid and changes in non-controlling interest and reserves | (2,280 | ) | (2,192 | ) | ||||||||
- net capital contributions/payments by/to non-controlling interest | ||||||||||||
- dividends paid by Eni to shareholders | (1,884 | ) | (1,956 | ) | ||||||||
- dividends paid to non-controlling interest | (414 | ) | (211 | ) | ||||||||
- acquisition of additional interest in consolidated subsidiaries | (4 | ) | (25 | ) | ||||||||
- treasury shares sold by consolidated subsidiaries | 22 | |||||||||||
Effect of exchange differences on cash and cash equivalents | 9 | (19 | ) | |||||||||
Effect of changes in consolidation area (inclusion/exclusion of significant/insignificant subsidiaries) | (6 | ) | (15 | ) | ||||||||
NET CASH FLOW FOR THE PERIOD | 3,140 | 85 | ||||||||||
- 50 -
Eni Interim Consolidated Report / Financial review and other information
Risk factors and uncertainties
Foreword
The main risks that the Company is facing and actively monitoring and managing are: (i) the market risk deriving from exposure to fluctuations in commodity prices, interest rates, foreign currency exchange rates; (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 operations may not be available; (iv) the Country risk in the upstream business; (v) operational risks; (vi) risks of the competitive environment, particularly in the natural gas market; (vii) the specific risks of the exploration and production of hydrocarbons. Management of financial risks is based on guidelines issued centrally aiming at adapting and coordinating Eni policies on financial risks matters ("Guidelines on financial risks management and control"). The basis of this policy is the pooled and integrated management of commodity risks and the development of asset backed trading activities for optimizing Enis exposure to such risks.
Market risk
Market risk is the possibility that changes in currency
exchange rates, interest rates or commodity prices will adversely
affect the value of the Groups financial assets,
liabilities or expected future cash flows. The Company actively
manages market risk in accordance with a set of policies and
guidelines that provide a centralized model of handling finance,
treasury and risk management operations based on the
Companys departments of operational finance: the parent
companys (Eni SpA) finance department, Eni Finance
International, Eni Finance USA and Banque Eni, which is subject
to certain bank regulatory restrictions preventing the
Groups exposure to concentrations of credit risk, and Eni
Trading & Shipping, that is in charge to execute certain
activities relating to commodity derivatives. In particular Eni
SpA and Eni Finance International manage subsidiaries
financing requirements in and outside Italy, respectively,
covering funding requirements and using available surpluses. All
transactions concerning currencies and derivative contracts on
interest rates and currencies are managed by the parent company,
including the negotiation of emission trading certificates. The
commodity risk of each business unit (Enis Divisions or
subsidiaries) is pooled and managed by the Midstream Department,
while Eni Trading & Shipping executes the negotiation of
commodity derivatives. Eni uses derivative financial instruments
(derivatives) in order to minimize exposure to market risks
related to fluctuations in exchange rates relating to those
transactions denominated in a currency other than the functional
currency (the Euro) and interest rates, as well as to optimize
exposure to commodity prices fluctuations taking into account the
currency in which commodities are quoted.
The framework defined by Enis policies and guidelines
prescribes that measurement and control of market risk be
performed on the basis of maximum tolerable levels of risk
exposure defined in terms of limits of stop loss, which expresses
the maximum tolerable amount of losses associated with a certain
portfolio of assets over a pre-defined time horizon, or in
accordance with value at risk techniques. These techniques make a
statistical assessment of the market risk on the Groups
activity, i.e. potential gain or loss in fair values, due to
changes in market conditions taking account of the correlation
existing among changes in fair value of existing instruments.
Enis finance department defines the maximum tolerable
levels of risk exposure to changes in interest rates and foreign
currency exchange rates in terms of value at risk, pooling Group
companies risk positions.
- 51 -
Eni Interim Consolidated Report / Financial review and other information
Enis calculation and measurement techniques for interest
rate and foreign currency exchange rate risks are in accordance
with banking standards, as established by the Basel Committee for
bank activities surveillance. Tolerable levels of risk are based
on a conservative approach, considering the industrial nature of
the company. Enis guidelines prescribe that Eni Group
companies minimize such kinds of market risks by transferring
risk exposure to the parent company finance department.
Enis guidelines define rules to manage the commodity risk
aiming at optimizing core activities and pursuing preset targets
of stabilizing industrial and commercial margins. The maximum
tolerable level of risk exposure is defined in terms of value at
risk and stop loss in connection with exposure deriving from
commercial activities and from Asset Backed Trading activities as
well as exposure deriving from proprietary trading executed by
the subsidiary Eni Trading & Shipping. Internal mandates to
manage the commodity risk provide for a mechanism of allocation
of the Group maximum tolerable risk level to each business unit.
In this framework, Eni Trading & Shipping, in addition to
managing risk exposure associated with its own commercial
activity and proprietary trading, pools the Midstream Department
requests for negotiating commodity derivatives and execute them
on the marketplace.
Following the cash inflow from the disposal of the Snam group,
Eni decided to retain a cash reserve according to the provisions
of the financial plan on the safeguard of assets, cash
availability and optimization of return from strategic cash. The
management of strategic cash represents for Eni a new type of
market risk, i.e. the price risk of strategic cash. This type of
risk is part of the management of strategic cash pursued through
transactions on own risk in view of optimizing financial returns,
while respecting authorized risk levels, safeguarding the
Companys assets and retaining quick access to liquidity.
The four different market risks, whose management and control
have been summarized above, are described below.
Exchange rate risk
Exchange rate risk derives from the fact that
Enis operations are conducted in currencies other than the
euro (mainly the US dollar). Revenues and expenses denominated in
foreign currencies may be significantly affected by exchange
rates fluctuations due to conversion differences on single
transactions arising from the time lag existing between execution
and definition of relevant contractual terms (economic risk) and
conversion of foreign currency-denominated trade and financing
payables and receivables (transactional risk). Exchange rate
fluctuations affect the Groups reported results and net
equity as financial statements of subsidiaries denominated in
currencies other than the euro are translated from their
functional currency into euro. Generally, an appreciation of the
US dollar versus the euro has a positive impact on Enis
results of operations, and vice versa. Enis foreign
exchange risk management policy is to minimize transactional
exposures arising from foreign currency movements and to optimize
exposures arising from commodity risk. Eni does not undertake any
hedging activity for risks deriving from the translation of
foreign currency denominated profits or assets and liabilities of
subsidiaries which prepare financial statements in a currency
other than the euro, except for single transactions to be
evaluated on a case-by-case basis. Effective management of
exchange rate risk is performed within Enis central finance
department which pools Group companies positions, hedging
the Group net exposure through the use of certain derivatives,
such as currency swaps, forwards and options. Such derivatives
are evaluated at fair value on the basis of market prices
provided by specialized info-providers. Changes in fair value of
those derivatives are normally recognized through profit and loss
as they do not meet the formal criteria to be recognized as
hedges in accordance with IAS 39. The VaR techniques are based on
variance/covariance simulation models and are used to monitor the
risk exposure arising from possible future changes in market
values over a 24-hour period within a 99% confidence level and a
20-day holding period.
- 52 -
Eni Interim Consolidated Report / Financial review and other information
Interest rate risk
Changes in interest rates affect the market value of
financial assets and liabilities of the company and the level of
finance charges. Enis interest rate risk management policy
is to minimize risk with the aim to achieve financial structure
objectives defined and approved in the managements finance
plans. Borrowing requirements of Group companies are pooled by
the Groups central finance department in order to manage
net positions and the funding of portfolio developments
consistently with managements plans while maintaining a
level of risk exposure within prescribed limits. Eni enters into
interest rate derivative transactions, in particular interest
rate swaps, to effectively manage the balance between fixed and
floating rate debt. Such derivatives are evaluated at fair value
on the basis of market prices provided from specialized sources.
Changes in fair value of those derivatives are normally
recognized through the profit and loss account as they do not
meet the formal criteria to be accounted for under the hedge
accounting method in accordance with IAS 39. 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 price risk |
Enis results of operations are affected by changes in the prices of commodities. A decrease in oil and gas prices generally has a negative impact on Enis results of operations and vice versa, and may jeopardize the achievement of the financial targets preset in the Companys plans and budget. The commodity price risk arise in connection with the following exposures: |
- | the strategic exposure. Exposure to that kind of risks does not undergo any systematic hedging or managing activities due to a strategic decision made by the Company, except for extraordinary business or market conditions. Therefore, internal risk policies and guidelines do not foresee any mandate to manage, or any maximum tolerable level of risk exposure. To date, exposures to the strategic risk are identified by Enis Board of Directors as part of the strategic decision-making process. Those exposures are those associated, among others, with plans for the commercial development of proved and unproved oil and gas reserves, long-term gas supply contracts for the portion not balanced by ongoing or highly probable sale contracts, and refining margins; | |
- | the commercial exposure. This may arise from underlying commodity prices set in contractual arrangements with third parties as part of day-to-day industrial and commercial activities. Also this kind of exposure may arise in connection with highly-probable future transactions, not being exposure of strategic nature. This kind of exposure undergoes systematic risk management and is subject to thresholds of maximum tolerable levels of risk exposure defined in terms of stop loss or in accordance with value at risk techniques; | |
- | trading exposure (Asset Backed and proprietary trading) relating to commodity contracts entered by the corporate trading department which executes the negotiation of these instruments, performed on the basis of a systematic risk management and subject to thresholds of maximum tolerable levels of risk exposure (Var, Stop Loss, as well as limits in terms of volumes). |
Eni manages exposure to commodity price
risk arising in normal trading and commercial activities
in view of achieving stable industrial and commercial
margins. The commodity risk and the exposure to commodity
prices fluctuations embedded in commodities quoted in
currencies other than the euro at each business unit
(Enis Divisions or subsidiaries) is pooled and
managed by the Portfolio Management unit of the
Mid-Stream department for commodities, and by Enis
finance department for exchange rate requirements. The
Mid-Stream department manages business units risk
exposures to commodities, pooling and optimizing Group
companies exposures and hedging net exposures on
the trading venues through the Trading unit of Eni
Trading & Shipping. In order to manage commodity price risk, Eni uses derivatives traded on the organized markets of ICE and NYMEX (futures) and derivatives traded over the counter (swaps, forward, contracts for differences and options) with the underlying commodities being crude oil, refined products or electricity. Such derivatives are evaluated 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. |
- 53 -
Eni Interim Consolidated Report / Financial review and other information
Changes in fair value of those derivatives are normally recognized through the profit and loss account as they do not meet the formal criteria to be recognized as hedges in accordance with IAS 39. 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.
The following table shows amounts in terms of value at risk, recorded in the first half of 2013 (compared with the full year 2012) relating to interest rate and exchange rate risks in the first section, and commodity risk in the second section.
(Exchange and Value at Risk - parametric method variance/covariance; holding period: 20 days; confidence level: 99%)
2012 |
First half 2013 |
||
(euro million) | High |
Low |
Avg. |
At period end |
High |
Low |
Avg. |
At period end |
||||||||
Interest rate (a) | 8.69 | 1.41 | 3.13 | 1.88 | 3.67 | 1.81 | 2.25 | 3.59 | ||||||||
Exchange rate (a) | 1.16 | 0.12 | 0.43 | 0.19 | 0.35 | 0.10 | 0.16 | 0.17 | ||||||||
(a) Value at risk deriving from interest and exchange rates exposures include the following finance department: Eni Corporate Treasury Department, Eni Finance International, Banque Eni and Eni Finance USA.
(Value at Risk - Historic simulation method; holding period: 1 day; confidence level: 95%)
2012 (c) |
First half 2013 |
||
(euro million) | High |
Low |
Avg. |
At period end |
High |
Low |
Avg. |
At period end |
||||||||
Portfolio Management Department (a) | 84.2 | 35.65 | 59.61 | 40.99 | 64.17 | 36.59 | 47.12 | 55.05 | ||||||||
Trading Department (b) | 5.88 | 1.11 | 2.80 | 1.24 | 7.50 | 1.36 | 4.28 | 3.50 | ||||||||
(a) Refers to the Midstream Division (managing operations of the R&M and G&P Divisions), Versalis, Eni Trading & Shipping BV (Amsterdam) and certain subsidiaries outside Italy of operational Divisions.
(b) Proprietary trading activity both on commodity and financial derivative instruments is managed by Eni Trading & Shipping SpA (London-Bruxelles-Singapore) and by ET&S Inc (Singapore).
(c) Values for the year 2012 have been reclassified to be comparable with the first half of 2013 values.
Price risk of the strategic liquidity
Market risk deriving from liquidity management is identified
as the possibility that changes in prices of financial
instruments (bonds, money market instruments and mutual funds)
would impact the value of these instruments when evaluated at
fair value.
In order to manage the investment activity of the strategic
liquidity, Eni defined a specific investment policy with aims and
constraints in terms of financial activities and operational
boundaries, as well as governance guidelines regulating
management and control systems.
The setting up and maintenance of a reserve of liquidity is mainly aimed to: |
a) | Guarantee of financial flexibility. Liquidity should allow Eni Group to fund any extraordinary need (such as difficulty in access to credit, exogenous shock, macroeconomic environment, as well as merger and acquisitions). | |
b) | Maintain/improve the current credit rating by strengthening balance sheet structure, as well as the concurrent availability of a liquidity reserve which will meet the requirements of rating agencies. |
Strategic liquidity management is regulated in terms of Value at Risk (measured on the basis of a historical simulation technique, with a one-day holding period and a 99% confidence level), Stop Loss and other operating limits in terms of concentration, duration, ratings, liquidity and instruments to invest on. Financial leverage or short selling are not allowed. Activities in terms of strategic liquidity management will start by the second half of the year.
- 54 -
Eni Interim Consolidated Report / Financial review and other information
Credit risk
Credit risk is the potential exposure of the Group to losses in case counterparties fail to perform or pay amounts due. The Group manages differently credit risk depending on whether credit risk arises from exposure to financial counterparties or to customers relating to outstanding receivables. Individual business units and Enis corporate financial and accounting units are responsible for managing credit risk arising in the normal course of the business. The Group has established formal credit systems and processes to ensure that before trading with a new counterpart can start, its creditworthiness is assessed. Also credit litigation and receivable collection activities are assessed. Enis corporate units define directions and methods for quantifying and controlling customers reliability. With regard to risk arising from financial counterparties deriving from current and strategic use of liquidity, Eni has established guidelines prior to entering into cash management and derivative contracts to assess the counterpartys financial soundness and rating in view of optimizing the risk profile of financial activities while pursuing operational targets. Maximum limits of risk exposure are set in terms of maximum amounts of credit exposures for categories of counterparties as defined by the Companys Board of Directors taking into account the credit ratings provided by primary credit rating agencies on the marketplace. Credit risk arising from financial counterparties is managed by the Group operating finance department, including Enis subsidiary Eni Trading & Shipping which specifically engages in commodity derivatives transactions and by Group companies and Divisions, only in the case of physical transactions with financial counterparties consistently with the Group centralized finance model. Eligible financial counterparties are closely monitored to check exposures against limits assigned to each counterparties on a daily basis.
Liquidity risk
Liquidity risk is the risk that suitable sources of funding
for the Group may not be available, or the Group is unable to
sell its assets on the marketplace in order to meet short-term
finance requirements and to settle obligations. Such a situation
would negatively impact Group results as it would result in the
Company incurring higher borrowing expenses to meet its
obligations or under the worst of conditions the inability of the
Company to continue as a going concern. As part of its financial
planning process, Eni manages the liquidity risk by targeting
such a capital structure as to allow the Company to maintain a
level of liquidity adequate to the Groups needs, optimizing
the opportunity cost of maintaining liquidity reserves also
achieving an efficient balance in terms of maturity and
composition of finance debt.
The Group capital structure is set according to the
Companys industrial targets and within the limits
established by the Companys Board of Directors who is
responsible for prescribing the maximum ratio of debt to total
equity and minimum ratio of medium and long-term debt to total
debt as well as fixed rate medium and long-term debt to total
medium and long-term debt.
In spite of ongoing tough credit market conditions resulting in
higher spreads to borrowers, the Company has succeeded in
maintaining access to a wide range of funding at competitive
rates through the capital markets and financing institutions.
Following the disposal of Snam and other assets, Enis
financial structure changed both in terms of total amount and
composition compared to the latest years and, for the first time,
is in line with the financial structure of its peers. The Group
can count now on large cash position. Management believes that
this cash position will allow the Company to increase efficiency
and flexibility in funding and spending, in respect of the target
of ensuring financing business requirements.
The minimization of liquidity risks, intended as stabilization of
Enis financial structure in terms of composition and cost,
is a strategic driver of the next 4-year Financial Plan.
Enis financial policies are designed to achieve the
following targets: (a) ensuring adequate funds to cover
short-term obligations and reimbursement of long-term debt due;
(b) maintaining an adequate level of financial flexibility to
support Enis development plans; (c) attaining a sound
balance between duration and composition of the finance debt; (d)
maintaining a large cash reserve.
- 55 -
Eni Interim Consolidated Report / Financial review and other information
The cash reserve will be commeasured in order to: (i)
establish a liquidity buffer which is set in proportion to the
amount of borrowings due in the next two years, so as to reduce
the refinancing needs, allowing the Company to be financially
independent also in case of negative trends in the trading
environment; (ii) increase the level of liquidity to face
possible extraordinary needs and catch contingent investment
opportunities, at the same time, reducing committed borrowing
facilities available in 2012; (iii) increase the flexibility of
the Companys financial structure considering lingering
uncertainties in the credit markets, in a similar way as the
policies adopted by the peer group companies. The liquidity
reserve will be employed with a short-term profile, favoring
investments with very low risk profile.
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.
Eni has in place a program for the issuance of Euro Medium Term
Notes up to euro 15 billion, of which about euro 12.3 billion
were drawn as of June 30, 2013. The Group has credit ratings of A
and A-1 respectively for long and short-term debt assigned by
Standard & Poors and A3 and P-2 assigned by
Moodys; the outlook is negative in both ratings. Enis
credit rating is linked in addition to the Companys
industrial fundamentals and trends in the trading environment to
the sovereign credit rating of Italy. On the basis of the
methodologies used by Standard & Poors and
Moodys, a potential downgrade of Italys credit rating
may trigger a potential knock-on effect on the credit rating of
Italian issuers such as Eni and make it more likely that the
credit rating of the notes or other debt instruments issued by
the Company could be downgraded. Eni, through the constant
monitoring of the international economic environment and
continuing dialogue with financial investors and rating agencies,
believes to be ready to perceive emerging critical issues
screened by the financial community and to be able to react
quickly to any changes in the financial and the global
macroeconomic environment and implement the necessary actions to
mitigate such risks, coherently with Company strategies.
At June 30, 2013, Eni maintained short-term committed and
uncommitted unused borrowing facilities of euro 11.83 billion, of
which euro 2.24 billion were committed, and long-term committed
borrowing facilities of euro 3.8 billion which were completely
undrawn at the balance sheet date. These facilities bore interest
rates and fees for unused facilities that reflected prevailing
market conditions.
In January 2013, as part of the divestment process of its
interest in Snam Eni placed a euro 1,250 million aggregate
principal amount of senior, unsecured bonds, exchangeable into
ordinary shares of Snam.
In July 2013, in order to catch ongoing favorable market
conditions, Eni issued a bond addressed to institutional
investors for a total amount of euro 1 billion, at fixed rate.
The tables below summarize the Group main contractual obligations
(undiscounted) for finance debt repayments, including expected
payments for interest charges, and trade and other payables
maturities outstanding at period end.
Current and non-current finance debt |
Maturity year | ||
(euro million) | 2013 |
2014 |
2015 |
2016 |
2017 |
2018 and thereafter |
Total |
|||||||
Total debt | 4,051 | 2,476 | 3,306 | 3,529 | 3,031 | 8,012 | 24,405 | |||||||
Fair value of derivative instruments | 756 | 97 | 132 | 2 | 8 | 48 | 1,043 | |||||||
4,807 | 2,573 | 3,438 | 3,531 | 3,039 | 8,060 | 25,448 | ||||||||
Interest on finance debt | 380 | 711 | 612 | 552 | 459 | 1,460 | 4,174 | |||||||
Guarantees to banks | 273 | 273 | ||||||||||||
Trade and other payables |
Maturity year | ||
(euro million) | 2013 | 2014 and thereafter | Total | |||
Trade payables | 13,200 | 13,200 | ||||
Advances, other payables | 9,143 | 56 | 9,199 | |||
22,343 | 56 | 22,399 | ||||
- 56 -
Eni Interim Consolidated Report / Financial review and other information
The Group has in place a number of contractual obligations arising in the normal course of business. To meet these commitments, the Group will have to make payments to third parties. The Companys main obligations pertain to take-or-pay clauses contained in the Companys gas supply contracts or shipping arrangements, whereby the Company obligations consist of off-taking minimum quantities of product or service or, in case of failure, paying the corresponding cash amount that entitles the Company the right to off-take the product or the service in future years. Future obligations in connection with these contracts were calculated by applying the forecasted prices of energy or services included in the four-year business plan approved by the Companys Board of Directors. The table below summarizes the Group principal contractual obligations as of the balance sheet date, shown on an undiscounted basis.
Expected payments by period under contractual obligations and commercial commitments |
Maturity year | ||
(euro million) | 2013 |
2014 |
2015 |
2016 |
2017 |
2018 and thereafter |
Total |
|||||||
Operating lease obligations (1) | 433 | 584 | 370 | 263 | 197 | 452 | 2,299 | |||||||
Decommissioning liabilities (2) | 184 | 43 | 156 | 273 | 483 | 13,352 | 14,491 | |||||||
Environmental liabilities (3) | 186 | 370 | 263 | 159 | 9 | 743 | 1,730 | |||||||
Purchase obligations (4) | 11,288 | 19,347 | 19,635 | 17,966 | 16,865 | 177,325 | 262,426 | |||||||
- Gas | ||||||||||||||
Natural gas to be purchased in connection with take-or-pay contracts | 9,620 | 17,462 | 18,027 | 16,472 | 15,411 | 169,180 | 246,172 | |||||||
Natural gas to be transported in connection with ship-or-pay contracts | 873 | 1,386 | 1,326 | 1,224 | 1,194 | 5,685 | 11,688 | |||||||
- Other take-or-pay and ship-or-pay obligations | 82 | 158 | 152 | 146 | 136 | 846 | 1,520 | |||||||
- Other purchase obligations (5) | 713 | 341 | 130 | 124 | 124 | 1,614 | 3,046 | |||||||
Other obligations | 4 | 3 | 3 | 3 | 3 | 122 | 138 | |||||||
Memorandum of intent relating to Val dAgri | 4 | 3 | 3 | 3 | 3 | 122 | 138 | |||||||
12,095 | 20,347 | 20,427 | 18,664 | 17,557 | 191,994 | 281,084 | ||||||||
(1) Operating leases primarily regarded assets
for drilling activities, time charter and long term rentals of
vessels, lands, service stations and office buildings. Such
leases did not include renewal options. There are no significant
restrictions provided by these operating leases which limit the
ability of the Company to pay dividend, use assets or to take on
new borrowings.
(2) Represents the estimated future costs for the decommissioning
of oil and natural gas production facilities at the end of the
producing lives of fields, well-plugging, abandonment and site
restoration.
(3) Environmental liabilities do not include the environmental
charge amounting to euro 1,109 million for the proposal to the
Ministry for the Environment to enter into a global transaction
related to nine sites of national interest because the dates of
payment cannot reasonably be estimated.
(4) Represents any agreement to purchase goods or services that
is enforceable and legally binding and that specifies all
significant terms.
(5) Includes arrangements to purchase capacity entitlements at
certain re-gasification facilities in the US of euro 2,073
million.
In the next four years Eni plans to make capital expenditures of euro 56.8 billion. The table below summarizes Enis capital expenditures commitments for property, plant and equipment and capital projects. Capital expenditures are considered to be committed when the project has received the appropriate level of internal management approval. At this stage, procurement contracts to execute those projects have already been awarded or are being awarded to third parties. The amounts shown in the table below include euro 600 million of committed expenditures to execute certain environmental projects.
Capital expenditure commitments |
Maturity year | ||
(euro million) | 2013 |
2014 |
2015 |
2016 |
2017 and thereafter | Total | ||||||
Committed on major projects | 6,718 | 7,680 | 6,897 | 3,991 | 11,839 | 37,125 | ||||||
Other committed projects | 6,940 | 3,782 | 1,584 | 1,100 | 8,496 | 21,902 | ||||||
13,658 | 11,462 | 8,481 | 5,091 | 20,335 | 59,027 | |||||||
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. At December 31, 2012, approximately 80% 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.
- 57 -
Eni Interim Consolidated Report / Financial review and other information
In 2012, approximately 59% of Enis domestic supply of
natural gas came from such Countries. Developments in the
political framework, economic crisis, social unrest can
compromise temporarily or permanently Enis ability to
operate or to economically operate in such Countries, and to have
access to oil and gas reserves.
Further risks associated with activities in those Countries are
represented by: (i) lack of well established and reliable legal
systems and uncertainties surrounding enforcement of contractual
rights; (ii) unfavorable developments in laws and regulations
leading to expropriation of Enis titles and mineral assets,
changes in unilateral contractual clauses reducing the value of
Enis assets; (iii) restrictions on exploration, production,
imports and exports; (iv) tax or royalty increases; (v) civil and
social unrest leading to sabotages, acts of violence and
incidents; and (vi) difficulties in awarding international
suppliers in critical operating environments. While the
occurrence of these events is unpredictable, the occurrence of
any such risks could have a material adverse impact on Enis
financial condition and results of operations. Eni periodically
monitors political, social and economic risks of approximately 60
Countries where it has invested, or, with regard to upstream
projects evaluation, where Eni is planning to invest in order to
assess returns of single projects based also on the evaluation of
each Countrys risk profile. In recent years, unfavorable
developments in the regulatory framework, mainly regarding tax
issues, have been implemented or announced also in EU Countries
and in North America.
As of December 31, 2012, approximately 30% of the Companys proved oil&gas reserves were located in North Africa. In the course of 2011, several North Africa and Middle Eastern oil producing Countries experienced an extreme level of political instability, commonly known as "Arab Spring", which has resulted in changes in governments, unrest and internal conflicts and consequential economic disruptions. The stability of the socio-political framework in those Countries still represents an area of concern involving risks and uncertainties for the foreseeable future; particularly the internal situation in Egypt seems to be complex, even though the Company has not experienced any disruption to its producing activities in the Country.
During the first half of 2013, Enis performance in Libya was negatively impacted due to force majeure events reflecting ongoing instability in the socio-political context of the Country. It is worth mentioning that Eni is currently engaged in the recovery of the its full production plateau at its producing assets in the Country, following the internal conflict of 2011 that forced the Company to shutdown almost all its producing facilities including gas exports for a period of about 8 months with a material impact on production volumes and operating results of that period. In the first half of 2013 Enis facilities in Libya produced 247 kboe/d, in line with the first half of 2012.
In addition to the above-mentioned issues, there are
geopolitical risks related to relationships of Western countries
with certain countries in the Middle East which are targeted by
US and EU sanctions. Enis presence in Iran has become
marginal, and is related to the final commissioning and handover
of a project to the Iranian partners (the Darquain project).
Management believes that this residual industrial activity in
Iran and the import of Iranian crudes with the sole scope of
being reimbursed of its past investment in the Country do not
constitute violations of and therefore are not sanctionable under
US laws or EU regulations targeting Iran and any persons doing
business in Iran or with Iranian counterparties.
Risks associated with evolution in the regulatory framework
For more information on risks associated with evolution in the regulatory framework see the Annual Report 2012.
Operational risk
Operational risks could arise from the inadequacy or dysfunction of Company processes. The main operational risks are those related to exploration and production of oil and natural gas as well as operation and HSE. For a detailed description of risks associated with the exploration and production of oil and natural gas see the Annual Report 2012.
- 58 -
Eni Interim Consolidated Report / Financial review and other information
Operational risks and related HSE risks
The nature of the Groups operations in Italy and abroad
in the exploration, development and production of hydrocarbons,
refining and fuel and other inflammable materials transportation
and petrochemical productions exposes us to a wide range of
health, safety, and environmental risks. The causes could be
accidents, technical failure, malfunctioning, explosions, fires;
oil and gas spills, pollutants emissions, toxic emissions, marine
collisions (see the paragraph "Specific risks associated
with the exploration and production of oil and natural gas"
above). The scope of these risks is influenced by the geographic
range, operational diversity, the presence of environmentally
sensitive locations and technical complexity of industrial
activities. For these reason activities in the oil and gas sector
are subject to the respect of severe laws to preserve the
environment, health and security which are applicable in the
various jurisdiction where Eni operates, including legislations
that apply International agreements. Environmental laws impose
various restrictions and prohibitions, entail the control and
respect of limits to the emissions of pollutant substances that
can be released in air, water and soil, limiting gas flaring and
venting, prescribing the correct management of waste. In addition
operators are subject to increasingly stringent and rigorous
obligations in relation to prevention and integral reduction of
pollution. Costs associated with the respect of the above
mentioned environmental legislation represent a significant cost
for the company in the present and future years. Breach of
environmental, health and safety laws exposes employees to
criminal and civil liabilities and in the case of violation of
certain rules regarding safety on the workplace also companies
can be liable as provided for by a general EU rule on businesses
liability due to negligent or willful conduct on part of their
employees as adopted in Italy with Law Decree No. 231/2001.
Furthermore Legislative Decree No. 121/2011 extended the
liability of the Company to crimes against the environment
committed by its employees.
Eni believes it has adopted effective and reliable management
systems, security standards and operational practices designed to
ensure full compliance with environmental regulation and uphold
operation, environment, employees and community integrity that
are involved in the industrial activities of the Group. In any
case the potential risk of damaging events also of serious
consequences is unavoidable. The occurrence of any such risks
could have a consequent material adverse impact on the Group
business, results of operations, cash flow, liquidity, future
prospects and reputation.
Environmental laws also require the Company to remediate and
clean-up the environmental impacts on soil and waters caused by
industrial activities or accidents. The Company is particularly
exposed to the risk of environmental liabilities in Italy where
the vast majority of the Group industrial installations other
than oil&gas wells are localized. Such liabilities may also
arise as the Group engaged in a number of metallurgical and
chemical activities in Italy that were subsequently divested,
closed, liquidated or shut down. Eni balance sheet includes the
provisions related to future expenses to be incurred in relation
to obligations existing at the balance sheet date to clean-up and
remediate certain areas contaminated by industrial activities in
previous years and the amount of which could have been reliably
estimated. Management believes that it is possible that in the
future Eni may incur significant environmental liabilities in
addition to amounts already accrued in the balance sheet due to
the detection of new contaminations, results of ongoing and
future sites reviews basing on actual and perspective
legislation, outcome of ongoing criminal and civil proceedings
and other risk factors ( see the paragraph "Regulation on
environmental matters ", Note 34 to the Condensed
Consolidated Financial Statements). Eni performs activities of
hydrocarbon exploration, development and production trough
drilling and other wells operations in complex ecosystems such as
the Gulf of Mexico, the Caspian sea and the Arctic in the Barents
Sea where an accident or an oil spill could cause serious
consequences to the environment and local communities. At those
locations Eni adopts operating practices and mitigation measures
aimed at reducing the probability of occurrence of risks with
impacts on environment and people.
For the main HSE regulation and operating systems adopted for the
management of risk see the paragraph below.
The respect for biodiversity, safeguard of ecosystems, efficient
use of natural resources constitutes a basic element for the
hydrocarbon exploration and production activities, in geographic
areas where these conditions could limit the license
operatorship.
- 59 -
Eni Interim Consolidated Report / Financial review and other information
Eni defined a number of monitoring instruments in order to
mitigate the above mentioned risks on the issues related to
climate change, water resources and biodiversity, as well as the
evaluation of emerging risks. The company is also active member
of International work groups (OGP and IPIECA) with the objective
to define the operating guidelines to favor the reduction of the
environmental and social footprint of oil & gas activities.
In particular Eni has joined in 2013 a task force of IPIECA (the
global oil and gas industry association for environmental and
social issues) on adaptation to climate change established with
the aim to favor the exchange of knowledge and the creation of
synergies among oil&gas companies in the implementation of
strategies for adaptation to climate change. The increase in
frequency and intensity of extreme climate events such as
hurricanes, draught and floods is generating increasing
risks for industrial plants, the environment and populations in
the areas affected by these phenomena (e.g. North Africa, the
Arctic, the Gulf of Mexico). Adaptation strategies range from the
choice of new engineering solutions to contracting ad hoc
insurance policies, from the definition of specific emergency
management procedures to the implementation of new methods for
using natural resources. In particular with the aim of estimating
environmental risks, Eni is also applying methods for forecasting
the impact of climate change (Aqueduct) and risks concerning
draughts, floods, cyclones, etc., or the legal and regulation
environment (Maplecroft) and participates in groups active in the
implementation of millennium goals in particular dedicated to the
issues of water and energy. These activities provide useful
information for the evaluation of financial risks.
Standard practice in the protection of the environment consists
in controlling and restricting the types, quantities and
concentration of various substances that can be released into the
environment and on discharges to surface and subsurface water, as
well as habitat conservation and related ecosystem, in addition
to careful and tight prevention and integrated reduction of
pollution. Eni adopted systems of environmental management that
ensure legislation compliance, continuous improvement of
environmental performance and efficiency of performer actions in
terms of preventions and reduction of possible environmental
impacts and implementation of a rigid control.
The critical issues related to environment, health and
communities are emerging not only in new context for Eni, but
also in those where the company performs long established
industrial activities; the focus on these aspects is evident in
the new legislation that could impose stricter limits to
industrial activities with potential economic and employment
effects and potential risk of sanction or requests of repayment.
In recent years authorities have been evaluating more and more
preventively the potential impact on local communities of the new
and ongoing industrial activities in order to activate the
necessary preventive actions already in the stage of planning and
authorization. In the absence of updated regulations in Italy Eni
has developed a methodology for the evaluation of the health
impact (VIS) to apply to its own industrial sites in case of
requests from relevant authorities.
European laws on the classification, production, sale, import and
use of chemicals has evolved in the past few years and has become
integrated following the approval of two directives, CE No.
1907/2006 called REACH (Registration, Evaluation, Authorization
and Restriction of Chemicals) and CE No. 1272/2008 called CLP
(Classification, Labelling and Packaging). These two rulings,
assuming full force in 2018, introduced new obligations with a
relevant organizational impact on Enis activities, in
particular in relations with customers, suppliers and
contractors. In addition, the lack of respect of the relevant
legislation implies heavy criminal and civil sanctions, and/or
the suspension of the production and marketing.
The constant application, control and updating of activities for
industrial health takes place with reference to international
guidelines for the improvement of work environments and processes
adopting the best practices that become available with the
progress of knowledge on the mitigation of risks on the
workplace.
On July 2012, the EU Council approved the 2012/18/EU Directive of
July 4, 2012 concerning the risk of serious accidents connected
with the handling of noxious substances and intended to
substitute the 96/82/CE Directive. Under the new terms member
states will have to adopt new laws for the control of serious
accidents related to certain dangerous substances from June 1,
2015. The directive provides for a new classification of
substances in the light of the most recent European regulations,
the opportunity to
- 60 -
Eni Interim Consolidated Report / Financial review and other information
modulate the application of the directive according to the
actual danger of the substances, the increase in information to
be supplied to relevant authorities and the general public.
As concerns the protection of health and safety in the workplace,
Italian laws stress the importance of organizational and
management models that exempt companies from administrative
responsibility in case of breach of laws concerning health and
safety on the workplace. Eni made the adoption of such systems
mandatory in all its companies that have high HSE risk levels.
Enis strategies and actions for health, safety and
environment are implemented according to the companys
policies (issued in April 2011) and are included in a new HSE
Management System Guideline (MSG). The process described in the
MSG is based on the principle of precaution in order to reach the
maximum efficacy in preventing, managing and controlling risks in
HSE. The MSG is a single tool shared by the whole Eni Group and
spelling roles and responsibilities of the various organizational
levels, organizing all the activities required in HSE processes
and their interaction with other processes while disseminating
shared methods and criteria across Eni. The procedure is 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.
The integrated management system of health, safety and
environmental matters is supported by the adoption of a
continuous process of identification, evaluation and mitigation
of risks in all the Divisions and companies of the Eni Group
adopting management systems that keep account of specific
operations and aim at the constant improvement of processes and
plants. Eni is targeting to achieve total certification of its
plants under OHSAS 18001 and ISO 14001. The plan for the
completion of the site with significant HSE risk certification is
expected to be concluded within 2013.
The system for monitoring HSE risks is based on the monitoring of
HSE indicators at quarterly, semi-annual and annual intervals and
on an audit plan performed on all the industrial sites consisting
of:
- technical audits aimed at verifying the existence of adequate
management systems, their proper application, adequacy,
consistency and compliance with Enis HSE management model,
Ethical Code and Model 231;
- audits for the confirmation/renewal of certification performed
annually by external certifying entities;
- control of compliance with existing HSE regulations;
- specific audits on relevant issues (e.g. following events/
accidents/reported failures).
The codification of all operational stages of industrial
processes allows to achieve more and more often a reduction in
the risk of human fault in handling plants operations. Accidents
which occurred in the past few years in the industry drive Eni to
pay greater attention to process safety and asset integrity, also
by means of activities aimed at increasing the awareness of
middle management and a widespread dissemination of assessment
tools and process audit plans.
Operating emergencies that may have an adverse impact on assets,
people and the environment are managed by the business units at
each industrial site. These units manage the HSE risk in a
systematic way that involves having emergency response plans in
place with a number of corrective actions to be taken that might
possibly minimize any damage to people or the environment in the
event of an accident. In this field, Eni issued a relevant action
plan against the sabotage phenomena on Nigerian pipelines trough
the activation o research projects such as the
"Anti-intrusion innovative technologies deployment"
aimed at develop new technologies for the contrast and reduction
of "oil thefts".
A pilot action (Thermal Desorption) is also underway to evaluate
the option of accelerating the clean up of areas affected by
spills.
In the case of extraordinary events, Divisions/entities are
assisted by Eni Unit of Crisis to deal with the emergency with
the help of a team which has the necessary training and skills to
coordinate in a timely and efficient manner resources and
facilities.
- 61 -
Eni Interim Consolidated Report / Financial review and other information
In addition to the Companys system for monitoring,
managing and responding to HSE risks and issues which has been
adopted by all Group subsidiaries, Eni has entered into insurance
arrangements through its shareholding in the Oil Insurance Ltd
and with other insurance partners in order to limit possible
economic impacts associated with damages to both third parties
and the environment occurring in case of both onshore and
offshore incidents. Covered liabilities vary depending on the
nature and type of circumstances; however underlying amounts
represent significant shares of the plafond granted by insuring
companies. In particular, in the case of oil spills and other
environmental damage, current insurance policies cover costs of
cleaning up and remediating polluted sites, damage to third
parties and containment of physical damage up to $1.1 billion for
offshore events and $1.5 billion for onshore plants (refineries).
These are complemented by insurance policies that cover owners,
operators and renters of vessels with the following maximum
amounts: $1 billion for the fleet owned by the subsidiary LNG
Shipping in the Gas & Power segment and FPSOs used by the
Exploration & Production segment for developing offshore
fields; $500 million for time charters.
Following the 2010 incident at the Macondo well in the Gulf of
Mexico the US Government and other governments have adopted more
stringent regulations, particularly relating to exploration and
production of hydrocarbons. At European level, on June 12, 2013
the EU issued Directive 2013/30/EU on the safety of offshore
oil&gas operations that substitutes all previous local
regulations providing a single European law.
The new provisions apply to all existing and future fixed and
mobile offshore installations for production and drilling.
The granting of licenses for offshore oil and gas operations is
subject to the assessment of the technical and financial
capability of the applicant to cover liabilities deriving from
major accidents. The operator will submit a report on major
hazards for each relevant phase of the life cycle of the
installation. Member States will appoint a competent authority
carrying out regulatory activities for safety and the environment
independent from licensing authorities. Public participation is
guaranteed on the possible effects of offshore operations on the
environment.
In order to achieve the highest security standards of our
operations in the Gulf of Mexico, we entered a consortium led by
Helix that worked at the containment of the oil spill at the
Macondo well. The Helix Fast Response System (HFRS) performs
certain activities associated with underwater containment of
erupting wells, evacuation of hydrocarbon on the sea surface,
storage and transport to the coastline. In a consortium with
other major oil companies, Eni activated an agreement with Wild
Well Control for the use of global subsea well containment
equipment that can be carried by plane to any region where Eni
deep water operations are underway.
Following the accident at the Macondo field, oil companies set up
a number of Joint Industry Projects (JIP) on oil spill response.
Eni is an active member of JIP promoted by OGP and IPIECA and in
collaboration with other oil companies. Eni is developing own
patented technologies aimed at reducing accident risk and to
accelerate the recovery of eventual oil spill in the sea. These
projects have the objective to enlarge the oil company knowledge,
on antipollution strategies in consideration of the marine
ecosystems where they operate, to reinforce the relationship
between the operators and promote, also between institutions, the
optimization of techniques and a more rational use of pollutants
elements.
In addition Eni signed a Memorandum of Understanding con Regional
Marine Pollution Emergency Response Centre for the Mediterranean
Sea (REMPEC) and Department of Merchant Shipping of Cyprus (DMS)
for collaboration to the project "Mediterranean Decision
Support System for Marine Safety (MEDESS-4MS), of 3 years
duration until February 2015, aimed at reinforcing the marine
security through risks and impacts of oil spills mitigation in
Mediterranean Area.
With Legislative Decree No. 128 on June 29, 2010, Italian
Authorities passed legislation, that introduced certain
restrictions to activities for exploring and producing
hydrocarbons, without affecting titles for conducting oil and gas
operation at that date. Article 6, line 16 of this decree has
been partly amended by Article 35 of Legislative Decree No. 83 of
June 22, 2012. The new law excludes from the prohibition of
exploration and production the marine concession beyond 12 miles
from the coastline for which request
- 62 -
Eni Interim Consolidated Report / Financial review and other information
had already been filed at the date of introduction of Legislative Decree 128/2010. Following the incident at the Macondo well, European Authorities started discussing a new version of a regulation for offshore exploration and production of oil and gas aimed at unifying the European attitude to these activities and substituting existing national laws.
Risks and uncertainties associated with the competitive environment in the European natural gas market
Management expects the outlook in the European gas sector to
remain unfavorable due to continuing demand weakness and
oversupplies, against the backdrop of the economic downturn. In
the first half of 2013 gas consumption continued to decline
driven by a slowdown in industrial activity and a slump in the
thermoelectric segment due to lower industrial requirements and
inter-fuel competition in firing power generation as gas was
displaced by continuing growth in renewables and a shift to coal
due to cost advantages also reflecting lower costs to acquire
emission allowances. Against these ongoing trends, management has
revised downwardly its estimates for gas demand: it is now
assumed a decline of 5% and 1% in Italy and Europe respectively
for the full year 2013 compared to the previous year level; the
consumption volumes projected at the end of 2016 are lower by
6-7% compared to the assumptions made in the industrial plan
2013-2016 which have been reflected in the annual report 2012. It
is worth mentioning that the projected levels of European gas
demand for 2016 are significantly lower than the pre-crisis
levels registered in 2008 as a result of weak fundamentals.
In the latest years competitive dynamics and the economics in the
European gas sector have structurally changed reflecting reduced
sales opportunities due to lower gas demand and a massive
oversupply that has occurred on the European marketplace. The
latter was fuelled by the shale gas revolution in the United
States that has redirected global LNG supplies towards the
European market, and major pipeline upgrades for importing
natural gas from Algeria and Russia which have been commissioned
in the years before the start of the downturn. Spot gas prices
supported by very liquid European hubs have become the prevailing
benchmark for bilateral selling contracts between gas marketing
companies and customers; spot prices have progressively replaced
pricing formulas indexed to the price of hydrocarbons. In spite
of the fact that worldwide LNG surplus has been partly absorbed
by growing energy needs in Asia, spot prices in Europe have been
affected by continuing weak trends in demand and rising
competitive pressure leading to unrelenting price softness. On
the other side of the equation, European gas intermediaries has
seen their profit margins squeezed by rising trends in the costs
of gas supplies that have remained indexed to the price of oil
and its derivatives, as provided by pricing formulas in long-term
supply contracts. Furthermore, minimum off-take obligations in
connection with such take-or-pay, long-term gas supply contracts
and the necessity to minimize the associated financial exposition
have forced gas operators to compete more aggressively on pricing
in consideration of a shrinking gas market, thus amplifying the
negative effects of the downturn on selling prices and
profitability (see next paragraph on risks related to take-or-pay
contracts).
Final clients, especially large and well-established ones, have
benefited from the ongoing market trends and large availability
of spot gas to achieve more favorable pricing and flexibility
conditions.
In the first half of 2013 prices to industrial and thermoelectric
accounts at the Italian market posted an unprecedented decline,
falling below the levels at the continental hubs due to ongoing
oversupplies and the downturn. In the meantime, regulatory
authorities have begun reviewing the indexation mechanism in
pricing to the residential sector across Europe (see Regulatory
risks below). These drivers determined the continuing erosion of
natural gas margins and consequently progressively lower
profitability at Enis marketing activity that reported a
loss of euro 663 million in the first half of 2013 mainly due to
declining selling prices in Italy.
Management expects the fundamentals in the gas sector to remain
weak in the remainder of the year and in the next two/three years
assuming a slow recovery in demand due to macroeconomic
headwinds, ongoing oversupplies and strong competition, as the
oil-linked cost of gas supplies is projected to remain sustained.
Those trends represent risk factors to the Companys gas
marketing business, with expected negative impacts on future
results of operations and cash flow also considering the
take-or-pay
- 63 -
Eni Interim Consolidated Report / Financial review and other information
obligations provided by the companys long-term supply
contracts (see below). Against this scenario management is
planning to renegotiate pricing and other conditions of the
Companys long-term supply contracts, which is the main
driver to recover profitability and preserve cash generation. In
fact, take-or-pay supply contracts include revisions clauses
allowing the counterparties to renegotiate the economic terms and
other conditions periodically in relation to the changes in the
market and scenario. Consequently management is seeking to
renegotiate with all the Companys main gas suppliers in
order to increase exposure to spot prices in the indexation
mechanism in the pricing formulas of gas supplied and to reduce
minimum take obligations. The outcome of those renegotiations is
uncertain about both the amount of the economic benefits which
will eventually be achieved and the timing of recognition in
profit. Furthermore in case counterparties fail to arrange
revised contractual terms, ongoing supply contracts provide a
chance to each of them to recur to an arbitration proceeding for
a definition of the commercial transaction. This adds to the
level of uncertainty surrounding those renegotiations.
Considering also ongoing price renegotiations with Eni clients,
results of Gas Marketing activities are subject to an increasing
rate of volatility and unpredictability. In the first half of
2013 management achieved to renegotiate certain long-tem
contracts getting certain economic benefits and increased
operational flexibility.
In spite of a worsened gas demand outlook and falling prices in
the Italian market, in preparing the financial report for the
fist half of 2013 management still supports its projections of
operating results and cash flow of the gas marketing business
which have been assumed in the industrial plan 2013-2016 and in
the accounting estimated made in the annual report as of December
31, 2012.
Current negative trends in the gas scenario may impair the
Companys ability to fulfill its minimum off-take
obligations in connection with its take-or-pay, long-term gas
supply contracts
In order to secure long-term access to gas availability,
particularly with a view of supplying the Italian gas market, Eni
has signed a number of long-term gas supply contracts with key
producing Countries that supply the European gas markets. These
contracts have been ensuring approximately 80 bcm/y of gas
availability from 2010 (including the Distrigas portfolio of
supplies and excluding Enis other subsidiaries and
affiliates) with a residual life of approximately 15 years and a
pricing mechanism that indexes the cost of gas to the price of
crude oil and its derivatives (gasoil, fuel oil, etc.). These
contracts contain take-or-pay clauses whereby the Company is
required to off-take minimum predetermined volumes of gas in each
year of the contractual term or, in case of failure, to pay the
whole price, or a fraction of that price, applied to uncollected
volumes up to the minimum contractual quantity. The take-or-pay
clause entitles the Company to off-take pre-paid volumes of gas
in subsequent years during the period of contract execution.
Amounts of cash pre-payments and time schedules for off-taking
pre-paid gas vary from contract to contract. Generally speaking,
cash pre-payments are calculated on the basis of the energy
prices current in the year of non-fulfillment with the balance
due in the year when the gas is actually collected. Amounts of
pre-payments range from 10 to 100 percent of the full price. The
right to off-take pre-paid gas expires within a ten year term in
some contracts or remains in place until contract expiration in
other arrangements. In addition, rights to collect pre-paid gas
in future years can be exercised provided that the Company has
fulfilled its minimum take obligation in a given year and within
the limit of the maximum annual quantity that can be collected in
each contractual year. In this case, Eni pays the residual price
calculating it as the percentage that complements 100%, based on
the arithmetical average of monthly base prices current in the
year of the off-take. Similar considerations apply to ship-or-pay
contractual obligations. In case Eni fails to off-take the
contractual minimum amounts in a given year, it will be exposed
to a price risk in the future, because the purchase price Eni
will ultimately be required to pay is based on prices prevailing
after the date on which the off-take obligation arose. In
addition, Eni is subject to the risk of not being able to dispose
of pre-paid volumes. Management believes that the weak industry
outlook weighed down by declining demand and large gas
availability on the marketplace, the possible evolution of
sector-specific regulation and strong competitive pressures
represent risk factors to the Companys ability to fulfill
its minimum take obligations associated with its long-term supply
contracts and the related financial exposure. From the beginning
of the downturn in the gas European market up to date, Eni has
incurred the take-or-pay clause as the
- 64 -
Eni Interim Consolidated Report / Financial review and other information
Company off-took lower volumes than its minimum take obligations accumulating deferred costs for an amount of euro 2.13 billion (net of limited amounts of volume make-up) paying almost entirely the associated cash advances to its gas suppliers. Considering the Companys outlook for its sales volumes which are anticipated to decline in 2013 and to grow at a modest pace in the subsequent years, management is planning to adopt the adequate initiatives to mitigate the financial exposure risk related to take-or-pay obligations mainly in the domestic market where the expected volume of demand is lower in comparison with the minimum contracted supplies which Italian gas intermediaries are obliged to fulfill. The initiatives to mitigate the take-or-pay risk include the likely benefits expected from contract renegotiations which may temporarily reduce the annual minimum take, more flexible off-take conditions such as change in the delivery point or the possibility to replace supplies via pipeline with equivalent volumes of LNG. Based on the Companys selling programs and higher flexibility already achieved or to be achieved through the abovementioned renegotiations, management believes that it is likely that in the next four year plan 2013-2016 Eni will manage to fulfill its minimum take obligations associated with its supply contracts thus minimizing the risk on liquidity. These projections could be subject to the risks of further contraction in demand or total addressable market. As to the deferred costs stated in the balance sheet, based on managements outlook for gas demand and supplies in Europe, and projections for sales volumes and unit margins in future years, the Company believes that the pre-paid volumes of gas due to the incurrence of the take-or-pay clause will be off-taken in the long period in accordance to contractual terms thus recovering the cash advances paid to suppliers.
Risks associated with sector-specific regulations in Italy
With respect to the information provided in the 2012 annual
report, an important regulatory development has occurred in the
first half of 2013. This relates to the implementation of a new
tariff regime for Italian residential clients who are entitled to
be safeguarded in accordance with current regulations. In fact,
those clients, which mainly include households and residential
customers, have the right to obtain gas from their suppliers at a
regulated tariff set by the Authority for Electricity and Gas
(AEEG). Clients who are eligible to the tariff mechanism set by
the AEEG are residential clients who did not opt for choosing a
supplier at the opening of the market (including those who
consume less than 200,000 cm per year and residential buildings)
and also include all customers consuming less than 50,000 cm per
year and certain public services (for example hospitals and other
social security facilities). With Resolution No. 196 effective
from October 1, 2013, the AEEG reformulated the pricing mechanism
of gas supplies to those customers by providing a full indexation
of the raw material cost component of the tariff to spot prices
vs. the previous regime that provided a mix between an oil-based
indexation and spot prices. The new tariff regime intends to
partially offset the negative impact to be born by wholesalers by
introducing a pricing component intended to cover the risks and
costs of the supplies to wholesalers. Furthermore, it has been
provided a stability mechanism whereby a wholesaler part of a
long-term, take-or-pay gas supply contract may opt for being
reimbursed of the negative difference between the oil-linked
costs of gas supplies and spot prices in the next two thermal
years following the new regime implementation. Conversely, in
case spot prices fall below the oil-linked cost of gas supplies
in the following two thermal years, the same wholesaler is
obliged to refund customers of the difference. This stability
mechanism needs a further regulatory act to be implemented by the
AEEG.
The new tariff regime has substantially reduced the tariff
components intended to cover storage and transportation costs.
Finally, it also introduced a pricing component intended to
remunerate certain marketing costs incurred by retail operators,
including administrative and retention costs, losses incurred due
to customer default and a return on capital employed.
Based on management expectations, the Company had already
factored in its financial projections and accounting evaluations
the estimated negative impacts of this new tariff regime in the
annual report 2012.
Similarly other regulatory authorities in European Countries
where Eni is present issued certain rules aimed at introducing a
hub component in the pricing formulas related to the retail
segment as well as measures to boost liquidity and
competitiveness in the gas market.
- 65 -
Eni Interim Consolidated Report / Financial review and other information
Risks associated with the cyclicality of the oil and gas
sector
Enis results of operations and cash flow, mainly in the
Exploration & Production Division, are greatly impacted by
trends in oil and gas prices. Generally speaking, an increase in
oil prices positively impact Enis consolidated operating
result; vice versa in case of a decline in oil prices. The same
applies to gas prices. In the first half of 2013, the price of
the Brent crude marker averaged $107 a barrel, representing a
decline of 5% from the first half of 2012 due to soft demand
reflecting weak economic grow and well-supplied oil markets. In
the same period, gas prices registered a slight recovery both in
the USA and in Europe, in spite of weak fundamentals.
Volatile oil prices impact the performance of the Companys
business units in different ways. Also, trends in oil prices are
a key variable in preparing the Companys investment plans.
The Companys main capital projects to develop reserves
normally require lengthy and complex activities for assessing all
the technical and commercial aspects and developing and marketing
the reserves. As a consequence, return rates of such projects are
exposed to the volatility of oil and gas prices which may be
substantially lower with respect to prices assumed when the
investment decision was made, resulting in lower rates of return.
The Company, like other players in the industry, assesses its oil
& gas projects based on long-term scenarios for oil prices,
which reflect managements best assumptions about the
underlying fundamentals of global demand and supply. This
approach supports the achievement of the expected returns on
capital projects through the swings of the oil & gas cycle.
For the 2013-2016 four year-period Eni assumed a long term price
of $90 a barrel (real terms 2016). In this context the company
approved a capital expenditure plan amounting to euro 56.8
billion, 83% relating to exploration and development of oil and
gas reserves, with an increase of 6% in comparison with previous
plan due to higher expenses for a number of upstream projects
that will contribute to production increase after the plan
timeline (Mozambique, Venezuela, Nigeria and Indonesia).
Volatile oil prices represent an uncertainty factor in view of
achieving the Companys operating targets of production
growth and reserve replacement due to the relevant amount of
Production Sharing Agreements in Enis portfolio. Under such
contracts, the Company is entitled to receive a portion of the
production, the sale of which should cover expenditures incurred
and earn the Company a share of profit. Accordingly, the higher
the reference prices for crude oil used to determine production
and reserve entitlements, the lower the number of barrels to
cover the same dollar amounts hence the amounts of booked
production and reserves; and vice versa. The Company currently
estimates that production entitlements in its PSAs decreases on
average by approximately 1,000 bbl/d for a $1 increase in oil
prices. The impact of price effects on the Companys
production entitlements was immaterial in the first half of 2013.
This sensitivity analysis relates to the existing Eni portfolio
and might vary in the future.
In the Gas & Power Division, rising oil prices represent a
risk to the profitability of gas sales as supplies are mainly
indexed to the cost of oil and certain refined products, while
selling prices particularly in the business segments in Europe
and Italy are predominantly linked to certain market benchmarks
quoted at continental hubs. In the current trading environment,
spot prices at those hubs are particularly depressed due to
oversupply conditions and weak demand. In addition, the Italian
Authority for Electricity and Gas and other regulatory
authorities in European countries may limit the ability of the
Company to pass cost increases onto selling prices in supplies to
residential customers and small businesses as those authorities
set the indexation mechanism of the raw material cost in selling
formulas to those customers. (For further details see Gas &
Power Division specific-sector risks discussed above).
The Refining & Marketing and the Petrochemical Divisions are
also exposed to movements in oil prices and the speed at which
the prices of refined products and petrochemical products adjust
to reflect changes in the cost of oil-based feedstock. Normally,
a time lag occurs between movements in oil prices and those of
refined and petrochemical products. As a consequence, in a period
of rapidly escalating feedstock costs, margins on refined and
petrochemical products are negatively affected in the short-term.
In the first half of 2013, the Refining & Marketing segment
continued to incur operating losses in a context of volatile
margins, benefiting only partially form a decline in crude oil
prices (the first half loss improved by 12% from the first half
of 2012). The persistence of weak industry fundamentals on the
back of overcapacity and declining fuel consumption squeezed
refining margins which were below break-even in the first half of
2013. In addition, compressed price differentials between sour
and sweet crude
- 66 -
Eni Interim Consolidated Report / Financial review and other information
impaired the profitability at Enis complex refineries.
Looking forward, management expects a depressed trading
environment in the foreseeable future due to macroeconomic
headwinds and until ongoing rationalization measures of refining
capacity begin eating into the current imbalances between demand
and supplies of refined products.
Marketing of refined products in Italy was negatively affected by
a steep decline in demand for fuels and excess product
availability that led operators to compete aggressively on
pricing. Management expects continuing weak trends in demand in
the remainder of the year due to the prospects of a sluggish
economic recovery, mainly in Italy.
Management is pursuing optimization actions at refineries also
leveraging on the start of the EST technology-based conversion
unit, efficiency improvements (fixed and logistic costs,
energetic consumption), selected capital expenditures and a
number of initiatives in the marketing segment aimed at
mitigating the scenario volatility and the cyclicality of the
business in order to recover profitability as fast as possible.
In addition to volatile costs of oil-based feedstock, Enis
Chemical operations are exposed to the cyclicality of demand due
to the commoditized nature of Enis product portfolio and
underlying weaknesses in the industry plagued by low-entry
barriers, excess capacity and intense competitive pressure.
In the first half of 2013, Enis Chemical business reported
improved results by cutting operating losses by 25% due to
favorable trends in the costs of oil-based feedstock. However,
the business prospects over the short-to-medium term remain
uncertain due to macroeconomic headwinds and competitive
developments. To cope with the structural challenges of the
Companys Chemical business, management decided to implement
a strategic shift targeting to restore the economic equilibrium
of Versalis over the medium-term. This new strategy features a
gradual reduction of the exposure to loss-making, commoditized
businesses while growing the Companys presence in niche
productions, particularly elastomers and styrene, which showed a
good resilience during the downturn, international expansion as
well as starting innovative productions in the field of
biochemistry. An example in point is the launch of the
"green chemistry" project at the Porto Torres plant
which envisages restructuring an old plant into a modern facility
to produce bio-plastics for which attractive growth rates are
seen. This project will be executed through a joint-venture with
Novamont and is expected to start with the initial production of
bio-plastic as early as in 2014.
The Engineering & Construction segment is exposed to the
volatility of the oil cycle considering that oil companies tend
to reduce capital expenditures and reschedule exploration and
development projects during a downturn. In addition macroeconomic
uncertainties may induce operators to postpone final investment
decision and time schedule for the construction of industrial
complexes. The business has adopted a strategy intended to
progressively reduce its exposure to the more volatile segments
of the industry by leveraging on portfolio diversification and
seeking to expand in the segment of large upstream projects in
frontier areas and complex environments with an important
technological content that are traditionally less exposed to the
cyclical nature of this market. However, 2013 will be a difficult
year as the Companys Engineering & Construction segment
forecasts to report a loss for the full year driven by a general
slowdown in business activities and due to the revision of
profitability estimates made at certain important contracts under
completion owing to commercial and operating issues. This trend
will impact the business unit E&C onshore and offshore. In
spite of the sharp contraction in the results expected for 2013,
management still believes that the business retains excellent
long-term perspectives leveraging on a technologically advanced
fleet of drilling and construction vessels, personnel competence,
local content and competitive positioning. Based on these
drivers, management intends to rebuild a robust orders backlog
with improved profitability also through a revamped commercial
strategy intended to apply strict selection to new order
acquisitions.
- 67 -
Eni Interim Consolidated Report / Financial review and other information
Outlook
The outlook for 2013 features risks and uncertainties that will weigh on the global economic recovery, namely the prolonged downturn in the Eurozone. The price of crude oil is supported by ongoing geopolitical risks, while fundamentals have been weakening as global supplies are forecast to slightly outpace demand. Management expects continued weak conditions in the European gas, refining and marketing of fuels and chemical sectors. Demand for energy commodities is anticipated to shrink due to economic stagnation and unit margins will be exposed to competitive pressure in an extremely volatile environment. In this scenario, the recovery of profitability in the Gas & Power and Refining & Marketing Divisions and Versalis will depend mainly on management actions to optimize operations and improve the cost position.
Management expects the key production and sales trends of Eni
businesses to be as follows:
- production of liquids and natural gas: full-year
production is expected to remain in line with 2012, under the
assumption that the impact of extraordinary events on production
in Nigeria and Libya in the second half of 2013 will remain at
the same level as in the first half of the year. The start-up of
major projects, such as those in Algeria, Angola and Kazakhstan,
and production ramp-up at fields started in 2012, in particular
in Egypt, will more than offset these events, mature field
declines and the effect of 2012 asset disposals;
- gas sales: natural gas sales are expected to decrease
compared to 2012 (95.39 bcm in 2012, including consolidated sales
and Enis share of joint ventures) mainly due to the
divestment of Galp and the use of the flexibility achieved
through the renegotiation of long-term supply contracts;
- refining throughputs on Enis account: processed
volumes are expected to decline from 2012 (30.01 million tonnes
in 2012), reflecting an ongoing industry downturn and the planned
shut down of the Venice plant to start the Green Refinery
project. These negatives are expected to be partly offset by the
start-up of the new EST technology conversion plant at
Sannazzaro;
- retail sales of refined products in Italy and the Rest of
Europe: management foresees retail sales volumes to decline
from 2012 (10.87 million tonnes, 2012 total) due to an expected
contraction in domestic demand, increasing competitive pressure
and factoring in the effect of the "riparti con eni"
marketing campaign which was executed in the summer of 2012. The
expected fall in domestic retail volumes will be only partially
absorbed by increased sales in the Rest of Europe;
- Engineering & Construction: this segment is expected
to report a substantial reduction in the full year 2013 results.
In 2013, management expects a capital budget broadly in line with 2012 (euro 12.76 billion in capital expenditure and euro 0.57 billion in financial investments in 2012, excluding Snam investments). In 2013, the company will be focused on the development of hydrocarbon reserves in Sub-Saharan and North Africa, Norway, the United States, Iraq, Kazakhstan and Venezuela, exploration projects in Sub-Saharan Africa, Norway, Egypt, the United States and emerging areas, as well as optimization and selective growth initiatives in other sectors, the start-up of the Green Refinery works in Venice, and elastomers and bio-technologies in the Chemical sector. Assuming a Brent price of $104 a barrel on average for the full year 2013, the ratio of net borrowings to total equity leverage is projected to slightly improve from the level achieved at the end of 2012, due to cash flows from operations and portfolio management.
- 68 -
Eni Interim Consolidated Report / Other information
Consob proceedings
Following the issue by Saipem SpA of its press release of
January 29, 2013, in which it revised its 2012 earnings guidance
and its outlook for 2013, Saipem received a communication from
Consob dated January 31, 2013 asking it to describe the process
of evaluation and the considerations that led to the decision to
issue the press release in question, to describe the information
and data used to arrive at the revision of its guidance for 2012
profits and 2013 revenues and profits and of its forecasts for
2014.
Subsequently, in a letter dated February 1, 2013, Consob
announced the commencement of an inspection at Saipem pursuant to
Article 187-octies, paragraph 3 of Legislative Decree No.
58 of February 24, 1998 with the purpose of gathering documents
and information regarding the preparation of the press release,
and the handling of price-sensitive information.
Then, with letters dated February 8 and 25, 2013, Consob
requested Saipem to transmit additional information regarding the
variations between the last business plan approved prior to
January 29, 2013 and the new 2013-2016 business plan. Saipem
furnished the requested documentation and information.
Furthermore, following a profit warning relating to prospective
earnings for 2013 issued by Saipem on June 14, 2013, on June 19,
2013 Consob requested Saipem to furnish updated information and
particularly, to illustrate Saipems contractual
relationships with Sonatrach and the drivers underlying the
Companys revision of the profitability estimates and the
works and projects involved. Saipem furnished the requested
documentation and information on July 1, 2013.
On June 19, 2013 Consob communicated to Saipem that it has
initiated a proceeding to review potential issues of compliance
of Saipems 2012 consolidated and separated financial
statements with accounting standard IAS 11 (Construction
contracts).
Consobs communication relates to the accounting for eight
projects, seven of which were in progress at December 31, 2012.
With respect to five out of such eight projects, Saipem
announced, in its profit warning issued on June 14, 2013, a
change in accounting estimates leading to a loss of approximately
euro 500 million to be recognized in 2013; Consob indicated that
the accounting impact may, instead, have been required to be
recognized in 2012. Eni too made those recognitions in its
consolidated financial accounts for the first half of 2013.
For the other three projects, Consob indicates that an increase
of 2012 costs/losses of about euro 130 million may need to be
recorded which Saipem did not recognize in its 2012 financial
statements. Saipem believes that there were not in place any
conditions to recognize such higher costs neither in 2012
financial statements nor in the financial accounts for the first
half of 2013.
Saipem continues to believe that the evaluations made for the
2012 financial statements were appropriate, and on July 30, 2013
approved the Financial Report for the first half of 2013 without
restating the opening balances at January 1, 2013.
Saipem intends to present to Consob, within the due date, its
counterarguments to the remarks advanced by Consob regarding
Saipems 2012 financial statements. In case Consob rejects
the counterarguments that Saipem will present, Consob may require
a restatement of Saipems 2012 financial statements and, to
that end, may bring its challenge before an Italian court.
Transaction with related parties
In the ordinary course of its business Eni and its controlled entities enter into transactions with related parties regarding essentially the exchange of goods, provision of services and financing with joint ventures, associates and non-consolidated subsidiaries as well as the exchange of goods and provision of services with entities directly and indirectly owned or controlled by the Italian Government. Transactions with related parties were conducted in the interest of Eni companies and on an arms length basis.
- 69 -
Eni Interim Consolidated Report / Other information
Under current applicable laws and regulations, Eni adopted internal procedures guaranteeing transparency and substantial and formal fairness of all transactions with related parties, performed by Eni or its subsidiaries. Twice a year each member of the Board of Directors and Board of Statutory Auditors shall declare any transaction he or she entered with Eni SpA or its subsidiaries, and in any case he or she shall timely inform the CEO (or the Chairman, in the case of interests on the part of the CEO) of each transaction that the company plans to carry out and in which those member may have an interest; the CEO (or Chairman) shall inform other Directors and the Board of Statutory Auditors.
Note 42 to the Consolidated Financial Statements illustrates amounts related to commercial, financial and other transactions entered into with related parties and describes relevant operations as well as the economic and financial impacts on the balance sheet, the profit and loss and the statement of cash flows. Companies subject to Enis management and coordination as per Article 2497 of the Italian Civil Code indicate the effect, motives and reasons and interests to be discussed when relevant management decisions are made that are influenced by their controlling entity in the paragraph: "Relations with controlling entity and with companies subject to its management and coordination".
In case of atypical or unusual transactions1 the company shall disclose a description of said transaction, the effects it produces on its economic and financial position and, in case of transactions within the group and with related parties also the interest of the company at the time of the finalization of said transaction.
Continuing listing standards provided by Article No. 36 of Italian exchanges regulation (adopted with Consob Decision No. 16191/2007 as amended) about issuers that control subsidiaries incorporated or regulated in accordance with laws of extra-EU Countries
Certain provisions have been enacted regulating continuing Italian listing standards of issuers controlling subsidiaries that are incorporated or regulated in accordance with laws of extra-EU Countries, also having a material impact on the Consolidated Financial Statements of the parent company.
Regarding the aforementioned provisions, the Company discloses that: |
- | as of June 30, 2013, the provisions of Article No. 36 of Italian exchanges regulation in accordance with Italian continuing listing standards apply to Enis subsidiaries Burren Energy (Bermuda) Ltd, Eni Congo SA, Eni Norge AS, Eni Petroleum Co Inc, NAOC-Nigerian Agip Oil Co Ltd, Nigerian Agip Exploration Ltd, Burren Energy (Congo) Ltd, Eni Finance USA Inc, Eni Trading & Shipping Inc and Eni Canada Holding Ltd; | |
- | the Company has already adopted adequate procedures to ensure full compliance with the regulation. |
Branches
In accordance with Article No. 2428 of the Italian Civil Code,
it is hereby stated that Eni has the following branches:
San Donato Milanese (MI) - Via Emilia, 1;
San Donato Milanese (MI) - Piazza Vanoni, 1.
Subsequent events
Subsequent business developments are described in the operating review of each of Enis business segments.
(1) According to Consob communication No. DEM/6064293 of July 28, 2006, "atypical or unusual transactions are those transactions that can give rise to doubts about the completeness and adequacy of financial information, conflicts of interest, protection of equity and non controlling interests due to the importance/relevance of involved counterparties, object of the transaction, mode of determination of transfer prices and timing of events (nearing the closing of accounting periods).
- 70 -
The glossary of oil and gas terms is available on Enis web page at the address eni.com. Below is a selection of the most frequently used terms.
Financial terms
- Dividend Yield Measures the return on a share based on dividends for the year. Calculated as the ratio of dividends per share of the year and the average reference price of shares in the last month of the year. Generally, companies tend to keep a constant dividend yield, as shareholders compare this indicator with the yield of other shares or other financial instruments (e.g. bonds).
- Leverage Is a measure of a companys debt, calculated as the ratio between net financial debt and shareholders equity, including minority interests.
- ROACE Return On Average Capital Employed Is the return on average capital invested, calculated as the ratio between net income before minority interests, plus net financial charges on net financial debt, less the related tax effect and net average capital employed.
- Coverage Financial discipline ratio, calculated as the ratio between operating profit and net finance charges.
- Current ratio Measures the capability of the company to repay short-term debt, calculated as the ratio between current assets and current liabilities.
- Debt coverage Rating companies use the debt coverage ratio to evaluate debt sustainability. It is calculated as the ratio between net cash provided by operating activities and net borrowings, less cash and cash-equivalents, Securities held for non-operating purposes and financing receivables for non operating purposes.
- Profit per boe Measures the return per oil and natural gas barrel produced. It is calculated as the ratio between Results of operations from E&P activities (as defined by FASB Extractive Activities - Oil & Gas Topic 932) and production sold.
- Opex per boe Measures efficiency in the oil&gas development activities, calculated as the ratio between operating costs (as defined by FASB Extractive Activities - Oil & Gas Topic 932) and production sold.
- Cash flow per boe Represents cash flow per each boe of hydrocarbon produced, less non-monetary items. Calculated as the ratio between Results of operations from E&P activities, net of depreciation, depletion, amortization and impairment and exploration expenses (as defined by FASB Extractive Activities - Oil & Gas Topic 932) and volumes of oil and gas produced.
- Finding & Development cost per boe Represents Finding & Development cost per boe of new proved or possible reserves. It is calculated as the overall amount of exploration and development expenditure, the consideration for the acquisition of possible and probable reserves as well as additions of proved reserves deriving from improved recovery, extensions, discoveries and revisions of previous estimates (as defined by FASB Extractive Activities - Oil & Gas Topic 932).
- 71 -
Eni Interim Consolidated Report / Glossary
Oil and natural gas activities
- Average reserve life index Ratio between the amount of reserves at the end of the year and total production for the year.
- Barrel Volume unit corresponding to 159 liters. A barrel of oil corresponds to about 0.137 metric tons.
- Boe (Barrel of Oil Equivalent) Is used as a standard unit measure for oil and natural gas. From July 1, 2012, Eni has updated the conversion rate of gas to 5,492 cubic feet of gas equals 1 barrel of oil (it was 5, 550 cubic feet of gas per barrel in previous reporting periods).
- Carbon Capture and Storage (CCS) Technique of CO2 capture and storage through an integrated process that involves: (i) capture of CO2 associated with large combustion plants, power generation plants, industrial point sources, as well as natural gas fields; (ii) transport to the storage sites, generally via pipeline; and (iii) sequestration in geological sites on land or under the sea floor.
- Concession contracts Contracts currently applied mainly in Western Countries regulating relationships between States and oil companies with regards to hydrocarbon exploration and production. The company holding the mining concession has an exclusive on mining activities and for this reason it acquires a right on hydrocarbons 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.
- Contingent resources Amounts of oil and gas estimated at a given date that are potentially recoverable by means of development projects that are not considered commercially recoverable due to one or more contingency.
- Conversion Refinery process allowing the transformation of heavy fractions into lighter fractions. Conversion processes are cracking, visbreaking, coking, the gasification of refinery residues, etc. The ration of overall treatment capacity of these plants and that of primary crude fractioning plants is the conversion rate of a refinery. Flexible refineries have higher rates and higher profitability.
- 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 a certain degree, to their original shape, once the stress ceases to be applied. The main synthetic elastomers are polybutadiene (BR), styrene-butadiene rubber (SBR), ethylenepropylene rubber (EPR), thermoplastic rubber (TPR) and nitrylic rubber (NBR).
- Emissions of NMVOC (Non Methane Volatile Organic Compounds) Total direct emissions of hydrocarbons, hydrocarbons substitutes (e.g. mercaptans) and oxygenated hydrocarbons (e.g. MTBE) that evaporate at normal temperature. They include LPG and exclude methane. Main sources are fugitive emissions from storage tanks and pipelines in industrial plants and deposits, distribution networks, flaring (often incomplete), venting, etc.
- Emissions of NOx (Nitrogen Oxides) Total direct emissions of nitrogen oxides deriving from combustion processes in air. They include NOx emissions from flaring activities, sulphur recovery processes, FCC regeneration, etc. They include NO and NO2 emissions and exclude N2O emissions.
- 72 -
Eni Interim Consolidated Report / Glossary
- Emissions of SOx (Sulphur Oxides) Total direct emissions of sulphur oxides including SO2 and SO3 emissions. Main sources are combustion plants, diesel engines (including maritime engines), gas flaring (if the gas contains H2S), sulphur recovery processes, FCC regeneration, etc.
- 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 the underwater wellheads to the treatment, storage and offloading systems onboard by means of risers from the seabed.
- Green House Gases (GHG) Gases in the atmosphere, transparent to solar radiation, can consistently trap infrared radiation emitted by the earths surface, atmosphere and clouds. The six relevant greenhouse gases covered by the Kyoto Protocol are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6). GHGs absorb and emit radiation at specific wavelengths within the range of infrared radiation determining the so called greenhouse phenomenon and the related increase of earths average temperature.
- 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.
- 73 -
Eni Interim Consolidated Report / Glossary
- 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.
- Oil spills Discharge of oil or oil products from refining or oil waste occurring in the normal course of operations (when accidental) or deriving from actions intended to hinder operations of business units or from sabotage by organized groups (when due to sabotage or terrorism).
- 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 Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.
- Probable reserves Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.
- Production Sharing Agreement Contract in use in non OECD 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 oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from know reservoirs, and under existing economic conditions. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.
- Reserves Quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project. Reserves can be: (i) developed reserves quantities of oil and gas anticipated to be through installed extraction equipment and infrastructure operational at the time of the reserves estimate; (ii) undeveloped reserves: oil and gas expected to be recovered from new wells, facilities and operating methods.
- 74 -
Eni Interim Consolidated Report / Glossary
- 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 Companys 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 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 purchase 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.
- 75 -
blank page
- 76 -
Eni Condensed consolidated interim financial statements / Consolidated Financial Statements |
Balance sheet
December 31, 2012 |
June 30, 2013 |
|||
(euro million) | Note |
|
Total amount |
of which with related parties |
|
Total amount |
|
of which with related parties |
||
ASSETS | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | 7,765 | 7,850 | ||||||||||||
Other financial assets available for sale | (4) | 235 | 213 | |||||||||||
Trade and other receivables | (5) | 28,747 | 2,714 | 28,679 | 1,873 | |||||||||
Inventories | (6) | 8,496 | 8,035 | |||||||||||
Current tax assets | 771 | 758 | ||||||||||||
Other current tax assets | 1,230 | 1,045 | ||||||||||||
Other current assets | (7) | 1,624 | 8 | 1,391 | 61 | |||||||||
48,868 | 47,971 | |||||||||||||
Non-current assets | ||||||||||||||
Property, plant and equipment | (8) | 63,466 | 64,441 | |||||||||||
Inventory - compulsory stock | 2,538 | 2,359 | ||||||||||||
Intangible assets | (9) | 4,487 | 4,533 | |||||||||||
Equity-accounted investments | (10) | 4,262 | 4,518 | |||||||||||
Other investments | (10) | 5,085 | 2,819 | |||||||||||
Other financial assets | (11) | 1,229 | 642 | 1,132 | 591 | |||||||||
Deferred tax assets | (12) | 5,027 | 5,485 | |||||||||||
Other non-current receivables | (13) | 4,400 | 43 | 3,841 | 41 | |||||||||
90,494 | 89,128 | |||||||||||||
Assets held for sale | (22) | 516 | 486 | |||||||||||
TOTAL ASSETS | 139,878 | 137,585 | ||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Current liabilities | ||||||||||||||
Short-term debt | (14) | 2,223 | 403 | 2,904 | 534 | |||||||||
Current portion of long-term debt | (18) | 2,961 | 2,827 | |||||||||||
Trade and other payables | (15) | 23,581 | 1,616 | 22,343 | 1,641 | |||||||||
Income taxes payable | (16) | 1,622 | 1,066 | |||||||||||
Other taxes payable | 2,162 | 2,860 | ||||||||||||
Other current liabilities | (17) | 1,437 | 6 | 1,221 | 13 | |||||||||
33,986 | 33,221 | |||||||||||||
Non-current liabilities | ||||||||||||||
Long-term debt | (18) | 19,279 | 18,844 | |||||||||||
Provisions for contingencies | (19) | 13,603 | 13,180 | |||||||||||
Provisions for employee benefits | 1,374 | 1,400 | ||||||||||||
Deferred tax liabilities | (20) | 6,740 | 6,775 | |||||||||||
Other non-current liabilities | (21) | 1,977 | 16 | 1,941 | 21 | |||||||||
42,973 | 42,140 | |||||||||||||
Liabilities directly associated with assets held for sale | (22) | 361 | 379 | |||||||||||
TOTAL LIABILITIES | 77,320 | 75,740 | ||||||||||||
SHAREHOLDERS' EQUITY | (23) | |||||||||||||
Non-controlling interest | 3,498 | 2,868 | ||||||||||||
Eni shareholders' equity | ||||||||||||||
Share capital | 4,005 | 4,005 | ||||||||||||
Reserve related to cash flow hedging derivatives net of tax effect | (16 | ) | (15 | ) | ||||||||||
Other reserves | 49,438 | 53,370 | ||||||||||||
Treasury shares | (201 | ) | (201 | ) | ||||||||||
Interim dividend | (1,956 | ) | ||||||||||||
Net profit | 7,790 | 1,818 | ||||||||||||
Total Eni shareholders' equity | 59,060 | 58,977 | ||||||||||||
TOTAL SHAREHOLDERS' EQUITY | 62,558 | 61,845 | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 139,878 | 137,585 |
- 78 -
Eni Condensed consolidated interim financial statements / Consolidated Financial Statements |
Profit and loss account
First half 2012 | First half 2013 | |||
(euro million) | Note |
|
Total amount |
|
of which with related parties |
|
Total amount |
|
of which with related parties |
|
REVENUES | ||||||||||||||
Net sales from operations | (26) | 63,203 | 1,835 | 59,276 | 1,992 | |||||||||
Other income and revenues | 751 | 26 | 370 | 10 | ||||||||||
63,954 | 59,646 | |||||||||||||
OPERATING EXPENSES | (27) | |||||||||||||
Purchases, services and other | 46,249 | 2,996 | 47,149 | 4,177 | ||||||||||
Payroll and related costs | 2,252 | 11 | 2,567 | 7 | ||||||||||
OTHER OPERATING (EXPENSE) INCOME | (372 | ) | 8 | (10 | ) | 10 | ||||||||
DEPRECIATION, DEPLETION, AMORTIZATION AND IMPAIRMENTS | 5,741 | 4,627 | ||||||||||||
OPERATING PROFIT | 9,340 | 5,293 | ||||||||||||
FINANCE INCOME (EXPENSE) | (28) | |||||||||||||
Finance income | 6,210 | 22 | 3,227 | 27 | ||||||||||
Finance expense | (6,651 | ) | (2 | ) | (3,809 | ) | (56 | ) | ||||||
Derivative financial instruments | (200 | ) | (19 | ) | ||||||||||
(641 | ) | (601 | ) | |||||||||||
INCOME (EXPENSE) FROM INVESTMENTS | (29) | |||||||||||||
Share of profit (loss) of equity-accounted investments | 342 | 203 | ||||||||||||
Other gain (loss) from investments | 1,052 | 471 | ||||||||||||
1,394 | 674 | |||||||||||||
PROFIT BEFORE INCOME TAXES | 10,093 | 5,366 | ||||||||||||
Income taxes | (30) | (6,054 | ) | (3,928 | ) | |||||||||
Net profit for the period - Continuing operations | 4,039 | 1,438 | ||||||||||||
Net profit for the period - Discontinued operations | 259 | 127 | ||||||||||||
Net profit for the period | 4,298 | 1,438 | ||||||||||||
Attributable to Eni | ||||||||||||||
Continuing operations | 3,700 | 1,818 | ||||||||||||
Discontinued operations | 144 | |||||||||||||
3,844 | 1,818 | |||||||||||||
Attributable to non-controlling interest | ||||||||||||||
Continuing operations | 339 | (380 | ) | |||||||||||
Discontinued operations | 115 | |||||||||||||
454 | (380 | ) | ||||||||||||
Earnings per share attributable to Eni (euro per share) | (31) | |||||||||||||
Basic | 1.06 | 0.50 | ||||||||||||
Diluted | 1.06 | 0.50 | ||||||||||||
Earnings per share - Continuing operations (euro per share) | (31) | |||||||||||||
Basic | 1.02 | 0.50 | ||||||||||||
Diluted | 1.02 | 0.50 |
- 79 -
Eni Condensed consolidated interim financial statements / Consolidated Financial Statements |
Statement of comprehensive income
(euro million) | Note | First half 2012 | First half 2013 |
Net profit for the period | 4,298 | 1,438 | ||||||
Other items of comprehensive income | ||||||||
Other comprehensive income to be reclassified to profit or loss in subsequent periods | ||||||||
Foreign currency translation differences | 1,147 | 156 | ||||||
Change in the fair value of investments net of reversal | (23) | (100 | ) | |||||
Change in the fair value of available-for-sale financial instruments | (23) | 8 | (2 | ) | ||||
Change in the fair value of cash flow hedging derivatives | (23) | (25 | ) | 3 | ||||
Share of "Other comprehensive income" on equity-accounted entities | (23) | 8 | 2 | |||||
Taxation | (23) | 8 | ||||||
Total other items of comprehensive income | 1,146 | 59 | ||||||
Total comprehensive incomeat | 5,444 | 1,497 | ||||||
Attributable to | ||||||||
Eni | 4,962 | 1,889 | ||||||
Non-controlling interest | 482 | (392 | ) | |||||
5,444 | 1,497 |
- 80 -
Eni Condensed consolidated interim financial statements / Consolidated Financial Statements |
Statements of changes in shareholders equity
Eni shareholders equity |
||
(euro million) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance at December 31, 2011 | 4,005 | 959 | 6,753 | 49 | (8 | ) | 1,421 | 1,539 | (6,753 | ) | 42,531 | (1,884 | ) | 6,860 | 55,472 | 4,921 | 60,393 | |||||||||||||||||||||||||
Changes in accounting principles (IAS 19) | (52 | ) | (52 | ) | (9 | ) | (61 | ) | ||||||||||||||||||||||||||||||||||
Balance at January 1, 2012 | 4,005 | 959 | 6,753 | 49 | (8 | ) | 1,421 | 1,539 | (6,753 | ) | 42,479 | (1,884 | ) | 6,860 | 55,420 | 4,912 | 60,332 | |||||||||||||||||||||||||
Net profit for the first half of 2012 | 3,844 | 3,844 | 454 | 4,298 | ||||||||||||||||||||||||||||||||||||||
Other items of comprehensive income | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income to be reclassified to profit or loss in subsequent periods | ||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation differences | 1,120 | 1,120 | 27 | 1,147 | ||||||||||||||||||||||||||||||||||||||
Change in the fair value of available-for-sale financial instruments net of the tax effect | 7 | 7 | 7 | |||||||||||||||||||||||||||||||||||||||
Change in the fair value of cash flow hedge derivatives net of the tax effect | (16 | ) | (16 | ) | (16 | ) | ||||||||||||||||||||||||||||||||||||
Share of "Other comprehensive income" on equity-accounted entities | 7 | 7 | 1 | 8 | ||||||||||||||||||||||||||||||||||||||
(16 | ) | 7 | 7 | 1,120 | 1,118 | 28 | 1,146 | |||||||||||||||||||||||||||||||||||
Comprehensive income for the period | (16 | ) | 7 | 7 | 1,120 | 3,844 | 4,962 | 482 | 5,444 | |||||||||||||||||||||||||||||||||
Transactions with shareholders | ||||||||||||||||||||||||||||||||||||||||||
Dividend distribution of Eni SpA (euro 0.52 per share in settlement of 2011 interim dividend of euro 0.52 per share) | 1,884 | (3,768 | ) | (1,884 | ) | (1,884 | ) | |||||||||||||||||||||||||||||||||||
Dividend distribution of other companies | (391 | ) | (391 | ) | ||||||||||||||||||||||||||||||||||||||
Allocation of 2011 net profit | 3,092 | (3,092 | ) | |||||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling interest relating to Altergaz SA | (4 | ) | (4 | ) | 2 | (2 | ) | |||||||||||||||||||||||||||||||||||
Treasury shares sold following the exercise of stock options exercised by Eni managers | (1 | ) | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||||||||||
Treasury shares sold following the exercise of stock options by Saipem managers | 6 | 6 | 16 | 22 | ||||||||||||||||||||||||||||||||||||||
(1 | ) | 2 | 1 | 3,093 | 1,884 | (6,860 | ) | (1,881 | ) | (373 | ) | (2,254 | ) | |||||||||||||||||||||||||||||
Other changes in shareholders equity | ||||||||||||||||||||||||||||||||||||||||||
Other changes | (2 | ) | (6 | ) | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||
(2 | ) | (6 | ) | (8 | ) | (8 | ) | |||||||||||||||||||||||||||||||||||
Balance at June 30, 2012 | 4,005 | 959 | 6,752 | 33 | (1 | ) | 1,428 | 2,659 | (6,752 | ) | 45,566 | 3,844 | 58,493 | 5,021 | 63,514 | |||||||||||||||||||||||||||
Net profit for the second half of 2012 | 3,946 | 3,946 | 432 | 4,378 | ||||||||||||||||||||||||||||||||||||||
Other items of comprehensive income | ||||||||||||||||||||||||||||||||||||||||||
Items not to be reclassified to profit or loss in subsequent periods | ||||||||||||||||||||||||||||||||||||||||||
Revaluations of defined benefit plans net of tax effect | (87 | ) | (87 | ) | (10 | ) | (97 | ) | ||||||||||||||||||||||||||||||||||
Share of "Other comprehensive income" on equity-accounted entities in relation to revaluations of defined benefit plans net of tax effect | (1 | ) | (1 | ) | 2 | 1 | ||||||||||||||||||||||||||||||||||||
(88 | ) | (88 | ) | (8 | ) | (96 | ) | |||||||||||||||||||||||||||||||||||
Other comprehensive income to be reclassified to profit or loss in subsequent periods | ||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation differences | (1,717 | ) | (104 | ) | (1,821 | ) | (44 | ) | (1,865 | ) | ||||||||||||||||||||||||||||||||
Change in the fair value of investments net of tax effect | 138 | 138 | 138 | |||||||||||||||||||||||||||||||||||||||
Change in the fair value of available-for-sale financial instruments net of the tax effect | 7 | 7 | 7 | |||||||||||||||||||||||||||||||||||||||
Change in the fair value of cash flow hedge derivatives net of the tax effect | (49 | ) | (49 | ) | (49 | ) | ||||||||||||||||||||||||||||||||||||
Share of "Other comprehensive income" on equity-accounted entities | 1 | 1 | (2 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||
(49 | ) | 145 | 1 | (1,717 | ) | (104 | ) | (1,724 | ) | (46 | ) | (1,770 | ) |
Comprehensive income for the period | (49 | ) | 145 | (87 | ) | (1,717 | ) | (104 | ) | 3,946 | 2,134 | 378 | 2,512 |
- 81 -
Eni Condensed consolidated interim financial statements / Consolidated Financial Statements |
continued Statements of changes in shareholders equity
Eni shareholders equity |
||
(euro million) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Comprehensive income for the period | (49 | ) | 145 | (87 | ) | (1,717 | ) | (104 | ) | 3,946 | 2,134 | 378 | 2,512 | |||||||||||||||||||||||||||||
Transactions with shareholders | ||||||||||||||||||||||||||||||||||||||||||
Interim dividend distribution of Eni SpA (euro 0.54 per share) | (1,956 | ) | (1,956 | ) | (1,956 | ) | ||||||||||||||||||||||||||||||||||||
Dividend distribution of other companies | (295 | ) | (295 | ) | ||||||||||||||||||||||||||||||||||||||
Effect related to the sale of Snam SpA | 371 | 371 | (1,602 | ) | (1,231 | ) | ||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling interest relating to Altergaz SA and Tigáz Zrt | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||||||||||||
Treasury shares sold following the exercise of stock options by Saipem managers | 1 | 1 | 6 | 7 | ||||||||||||||||||||||||||||||||||||||
1 | 371 | (1,956 | ) | (1,584 | ) | (1,896 | ) | (3,480 | ) | |||||||||||||||||||||||||||||||||
Other changes in shareholders equity | ||||||||||||||||||||||||||||||||||||||||||
Elimination of treasury shares | (6,551 | ) | 6,551 | |||||||||||||||||||||||||||||||||||||||
Reconstitution of the reserve for treasury share | 6,000 | (6,000 | ) | |||||||||||||||||||||||||||||||||||||||
Stock option expired | (7 | ) | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||||||||||
Other changes | (1,138 | ) | 1,162 | 24 | (5 | ) | 19 | |||||||||||||||||||||||||||||||||||
(551 | ) | (1,138 | ) | 6,551 | (4,845 | ) | 17 | (5 | ) | 12 |
Balance at December 31, 2012 | (23) | 4,005 | 959 | 6,201 | (16 | ) | 144 | 204 | 942 | (201 | ) | 40,988 | (1,956 | ) | 7,790 | 59,060 | 3,498 | 62,558 | |||||||||||||||||||||||||
Net profit for the first half of 2013 | 1,818 | 1,818 | (380 | ) | 1,438 | ||||||||||||||||||||||||||||||||||||||
Other items of comprehensive income | |||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income to be reclassified to profit or loss in subsequent periods | |||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation differences | 153 | 15 | 168 | (12 | ) | 156 | |||||||||||||||||||||||||||||||||||||
Change in the fair value of investments net of tax effect | (23) | (98 | ) | (98 | ) | (98 | ) | ||||||||||||||||||||||||||||||||||||
Change in the fair value of available-for-sale financial instruments net of the tax effect | (23) | (2 | ) | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||||||
Change in the fair value of cash flow hedge derivatives net of the tax effect | (23) | 1 | 1 | 1 | |||||||||||||||||||||||||||||||||||||||
Share of "Other comprehensive income" on equity-accounted entities | (23) | 2 | 2 | 2 | |||||||||||||||||||||||||||||||||||||||
1 | (100 | ) | 2 | 153 | 15 | 71 | (12 | ) | 59 | ||||||||||||||||||||||||||||||||||
Comprehensive income for the period | 1 | (100 | ) | 2 | 153 | 15 | 1,818 | 1,889 | (392 | ) | 1,497 | ||||||||||||||||||||||||||||||||
Transactions with shareholders | |||||||||||||||||||||||||||||||||||||||||||
Dividend distribution of Eni SpA (euro 0.54 per share in settlement of 2012 interim dividend of euro 0.54 per share) | (829 | ) | 1,956 | (3,083 | ) | (1,956 | ) | (1,956 | ) | ||||||||||||||||||||||||||||||||||
Dividend distribution of other companies | (214 | ) | (214 | ) | |||||||||||||||||||||||||||||||||||||||
Allocation of 2012 net profit | 4,707 | (4,707 | ) | ||||||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling interest relating to Tigáz Zrt | 5 | 5 | (31 | ) | (26 | ) | |||||||||||||||||||||||||||||||||||||
5 | 3,878 | 1,956 | (7,790 | ) | (1,951 | ) | (245 | ) | (2,196 | ) | |||||||||||||||||||||||||||||||||
Other changes in shareholders equity | |||||||||||||||||||||||||||||||||||||||||||
Exclusion from the consolidation of Distribudora de Gas de Cuyana SA and Inversora de Gas de Cuyana SA following loss of control | (14 | ) | (14 | ) | |||||||||||||||||||||||||||||||||||||||
Elimination of intercompany profit between companies with different Group interest | (23 | ) | (23 | ) | 23 | ||||||||||||||||||||||||||||||||||||||
Other changes | 2 | 2 | (2 | ) | |||||||||||||||||||||||||||||||||||||||
(21 | ) | (21 | ) | 7 | (14 | ) | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2013 | (23) | 4,005 | 959 | 6,201 | (15 | ) | 44 | 211 | 1,095 | (201 | ) | 44,860 | 1,818 | 58,977 | 2,868 | 61,845 |
- 82 -
Eni Condensed consolidated interim financial statements / Consolidated Financial Statements |
Statement of cash flows
(euro million) | Note | First half 2012 | First half 2013 | |||
Net profit of the period - Continuing operations | 4,039 | 1,438 | ||||||||||||
Adjustments to reconcile net profit to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization | (27) | 4,577 | 4,539 | |||||||||||
Impairments of tangible and intangible assets, net | (27) | 1,164 | 88 | |||||||||||
Share of (profit) loss of equity-accounted investments | (29) | (342 | ) | (203 | ) | |||||||||
Gain on disposal of assets, net | (370 | ) | (168 | ) | ||||||||||
Dividend income | (29) | (156 | ) | (306 | ) | |||||||||
Interest income | (48 | ) | (67 | ) | ||||||||||
Interest expense | 420 | 371 | ||||||||||||
Income taxes | (30) | 6,054 | 3,928 | |||||||||||
Other changes | (898 | ) | 175 | |||||||||||
Changes in working capital: | ||||||||||||||
- inventories | (621 | ) | 660 | |||||||||||
- trade receivables | 605 | (382 | ) | |||||||||||
- trade payables | (1,098 | ) | (1,812 | ) | ||||||||||
- provisions for contingencies | 331 | (298 | ) | |||||||||||
- other assets and liabilities | 490 | 1,809 | ||||||||||||
Cash flow from changes in working capital | (293 | ) | (23 | ) | ||||||||||
Change in the provisions for employee benefits | 14 | 15 | ||||||||||||
Dividends received | 474 | 409 | ||||||||||||
Interest received | 25 | 58 | ||||||||||||
Interest paid | (542 | ) | (693 | ) | ||||||||||
Income taxes paid, net of tax receivables received | (5,778 | ) | (4,809 | ) | ||||||||||
Net cash provided by operating activities - Continuing operations | 8,340 | 4,752 | ||||||||||||
Net cash provided by operating activities - Discontinued operations | 82 | |||||||||||||
Net cash provided by operating activities | 8,422 | 4,752 | ||||||||||||
- of which with related parties | (33) | (712 | ) | (1,648 | ) | |||||||||
Investing activities: | ||||||||||||||
- tangible assets | (8) | (5,086 | ) | (4,886 | ) | |||||||||
- intangible assets | (9) | (1,054 | ) | (1,045 | ) | |||||||||
- consolidated subsidiaries and businesses | (178 | ) | (28 | ) | ||||||||||
- investments | (10) | (128 | ) | (148 | ) | |||||||||
- securities | (18 | ) | ||||||||||||
- financing receivables | (608 | ) | (524 | ) | ||||||||||
- change in payables and receivables in relation to investing activities and capitalized depreciation | (305 | ) | 139 | |||||||||||
Cash flow from investing activities | (7,359 | ) | (6,510 | ) | ||||||||||
Disposals: | ||||||||||||||
- tangible assets | 727 | 186 | ||||||||||||
- intangible assets | 30 | 4 | ||||||||||||
- consolidated subsidiaries and businesses | (2 | ) | ||||||||||||
- investments | 19 | 2,275 | ||||||||||||
- securities | 32 | 27 | ||||||||||||
- financing receivables | 332 | 1,315 | ||||||||||||
- change in payables and receivables in relation to disposals | (361 | ) | 51 | |||||||||||
Cash flow from disposals | 777 | 3,858 | ||||||||||||
Net cash used in investing activities | (6,582 | ) | (2,652 | ) | ||||||||||
- of which with related parties | (33) | (666 | ) | 326 |
- 83 -
Eni Condensed consolidated interim financial statements / Consolidated Financial Statements |
continued Statement of cash flows
(euro million) | Note | First half 2012 | First half 2013 | |||
Proceeds from long-term debt | 4,812 | 2,594 | ||||||
Repayments of long-term debt | (681 | ) | (3,253 | ) | ||||
Increase (decrease) in short-term debt | (554 | ) | 870 | |||||
3,577 | 211 | |||||||
Net acquisition of treasury shares different from Eni SpA | 22 | |||||||
Acquisition of additional interests in consolidated subsidiaries | (4 | ) | (25 | ) | ||||
Dividends paid to Eni's shareholders | (1,884 | ) | (1,956 | ) | ||||
Dividends paid to non-controlling interest | (414 | ) | (211 | ) | ||||
Net cash used in financing activities | 1,297 | (1,981 | ) | |||||
- of which with related parties | (33) | 17 | 128 | |||||
Effect of change in consolidation (inclusion/exclusion of significant/insignificant subsidiaries) | (6 | ) | (15 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents and other changes | 9 | (19 | ) | |||||
Net cash flow for the period | 3,140 | 85 | ||||||
Cash and cash equivalents - beginning of period | 1,500 | 7,765 | ||||||
Cash and cash equivalents - end of period | 4,640 | 7,850 |
- 84 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Notes to the Consolidated Financial Statements 1 Basis of presentation The Condensed Consolidated Interim Financial
Statements of Eni Group have been prepared in accordance
with IAS 34 "Interim Financial Reporting". The
statements are the same adopted in the Annual Report
2012, with the exception of the statement of
comprehensive income where, as required by the new
version of IAS 1 "Presentation of Financial
Statements", the line items of other comprehensive
income are grouped into those that, in accordance with
applicable IFRSs, can be reclassified subsequently to
profit and loss account (the so called reclassification
adjustments) and those that can not. |
amounting to, respectively:
(i) a decrease of equity as of January 1, 2012 of euro
123 million and euro 61 million; (ii) a decrease of
equity as of December 31, 2012 of euro 269 million and
euro 155 million, of which euro 149 million and euro 96
million related to the 2012 actuarial gains and losses
recognized in other comprehensive income. The effect on
2012 interim results was immaterial. The presentation of
net interest on defined benefit plans within the
"net interest expense or income" line item,
previously presented within the payroll cost, determined
an increase of 2012 interim operating profit of euro 23
million. Moreover, starting from January 1, 2013, IFRS 13 "Fair Value Measurement" (endorsed by Commission Regulation No. 1255/2012 of December 11, 2012) is effective. The standard defines a framework for fair value measurements, required or permitted by other IFRSs, and the required disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset (or paid to transfer a liability) in an orderly transaction between market participants at the measurement date. The application of this standard has had no significant impact. The report includes selected explanatory notes. Current income taxes have been calculated based on the estimated taxable profit of the interim period. Current tax assets and liabilities have been measured at the amount expected to be paid to/recovered from the tax authorities, using tax laws that have been enacted or substantively enacted by the end of the reporting period and the tax rates estimated on an annual basis. The Condensed Consolidated Interim Financial Statements at June 30, 2013, were approved by Enis Board of Directors on July 31, 2013. A limited review has been carried out by the independent auditor Reconta Ernst & Young SpA; a limited review is significantly less in scope than an audit performed in accordance with the generally accepted auditing standards. Amounts in the financial statements and in the notes are expressed in millions of euros (euro million). 2 Principles of consolidation For a description of the accounting estimates used see the Annual Report 2012. |
- 85 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
3 Recent
accounting principles As regards the recent
accounting principles, in addition to those indicated in
the Annual Report 2012, the main pronouncements issued by
IASB and IFRIC and not yet been endorsed by European
Union are indicated hereinafter. |
disclosure of information
requiring: (i) the recoverable amount of individual
assets or cash-generating units for which an impairment
loss has been recognized or reversed during the period;
and (ii) additional disclosures if recoverable amount is
based on fair value less costs of disposal. The
amendments to IAS 36 shall be applied for annual periods
beginning on or after January 1, 2014. On June 27, 2013, the IASB issued the amendment to IAS 39 "Novation of derivatives and continuation of hedge accounting". According to this amendment, an entity shall not discontinue hedge accounting in case of novation of the derivative, as a consequence of laws or regulations, which implies that an original counterparty is replaced by a central counterparty. The amendments to IAS 39 shall be applied for annual periods beginning on or after January 1, 2014. Eni is currently reviewing these principles and interpretations to determine the likely impact on the Groups results. |
- 86 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Current
assets
4 Other financial assets available for sale
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Securities held for operating purposes | ||||
Listed bonds issued by sovereign states | 174 | 175 | ||
Listed securities issued by financial institutions | 22 | 27 | ||
Non-quoted securities | 5 | |||
201 | 202 | |||
Securities held for non-operating purposes | ||||
Listed bonds issued by sovereign states | 13 | 5 | ||
Listed securities issued by financial institutions | 21 | 6 | ||
34 | 11 | |||
Total | 235 | 213 |
At June 30, 2013 and December 31, 2012, no financial assets
were held for trading.
At June 30, 2013, bonds issued by sovereign states amounted to
euro 180 million (euro 187 million at December 31, 2012). A
break-down by country is presented below:
Nominal
value (euro million) |
Fair
value (euro million) |
Nominal rate of return (%) | Maturity date | Rating - Moody's | Rating - S&P | |||||||
Fixed rate bonds | ||||||||||||
Belgium | 27 | 30 | from 2.88 to 4.25 | from 2014 to 2021 | Aa3 | AA | ||||||
Portugal | 24 | 23 | from 3.35 to 5.45 | from 2013 to 2019 | Ba3 | BB | ||||||
Italy | 20 | 21 | from 2.50 to 4.25 | from 2013 to 2015 | Baa2 | BBB+ | ||||||
Slovakia | 13 | 15 | from 3.50 to 4.90 | from 2014 to 2017 | A2 | A | ||||||
Spain | 14 | 14 | from 3.15 to 4.10 | from 2014 to 2018 | Baa3 | BBB- | ||||||
Ireland | 13 | 13 | from 4.40 to 4.50 | from 2019 to 2020 | Ba1 | BBB+ | ||||||
Austria | 12 | 13 | from 3.40 to 3.50 | from 2014 to 2015 | Aaa | AA+ | ||||||
Netherlands | 12 | 12 | from 4.00 to 4.25 | from 2013 to 2016 | Aaa | AAA | ||||||
United States of America | 12 | 12 | from 1.75 to 3.13 | from 2014 to 2019 | Aaa | AA+ | ||||||
Germany | 10 | 10 | from 3.25 to 4.25 | from 2014 to 2015 | Aaa | AAA | ||||||
France | 5 | 5 | 4.00 | 2014 | Aa1 | AA+ | ||||||
Slovenia | 5 | 5 | 4.38 | 2014 | Ba1 | A- | ||||||
Finland | 1 | 2 | 1.25 | 2015 | Aaa | AAA | ||||||
Floating rate bonds | ||||||||||||
Italy | 5 | 5 | 2013 | Baa2 | BBB+ | |||||||
Total | 173 | 180 |
Securities amounting to euro 33 million (euro 48 million at
December 31, 2012) were issued by financial institutions with a
rating ranging from Aaa to B2 (Moodys) and from AAA to B+
(S&P).
Securities held for operating purposes of euro 202 million (euro
201 million at December 31, 2012) were designated to hedge the
loss provisions of the Groups insurance company Eni
Insurance Ltd (euro 196 million at December 31, 2012).
Gain and losses on fair value evaluation of securities are
provided in note 23 Shareholders equity.
The fair value of securities was calculated basing on quoted
market prices.
- 87 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
5 Trade and other receivables
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Trade receivables | 19,966 | 20,324 | ||
Financing receivables: | ||||
- for operating purposes - short term | 440 | 472 | ||
- for operating purposes - current portion of long-term receivables | 228 | 342 | ||
- for non-operating purposes | 1,153 | 222 | ||
1,821 | 1,036 | |||
Other receivables: | ||||
- from disposals | 209 | 212 | ||
- other | 6,751 | 7,107 | ||
6,960 | 7,319 | |||
28,747 | 28,679 |
Trade receivables at June 30, 2013, increased by euro 358
million from the prior year balance sheet date, mainly in the
Refining & Marketing segment (up euro 676 million), the
Exploration & Production segment (up euro 141 million) and
the Versalis segment (up euro 121 million). Such increase was
partially offset by the decrease in the Gas & Power segment
(down euro 570 million).
Trade receivables are stated net of the valuation allowance for
doubtful accounts:
(euro million) | December 31, 2012 |
Additions |
Deductions |
Other changes |
June 30, 2013 |
|||||
Trade receivables | 1,056 | 166 | (38 | ) | 6 | 1,190 | |||||
Financing receivables | 6 | 55 | 61 | ||||||||
Other receivables | 574 | 2 | (7 | ) | 5 | 574 | |||||
1,636 | 223 | (45 | ) | 11 | 1,825 |
Additions and deductions to the allowance reserve for doubtful
accounts amounted to euro 166 million and euro 38 million,
respectively, and primarily related to the Gas & Power
segment (euro 130 million and euro 30 million, respectively).
In the first half of 2013, Eni had in place transactions to
transfer to factoring institutions certain trade receivables
without recourse due by June 30, 2013 for euro 1,720 million of
which trade receivables amounting to euro 1,347 million were
transferred without notification (euro 2,054 million at December
31, 2012, of which without notification for euro 1,709 million,
due in 2013). Transferred receivables mainly related to the
Refining & Marketing segment (euro 1,007 million), the Gas
& Power segment (euro 590 million), the Versalis segment
(euro 87 million) and the Engineering & Construction segment
(euro 36 million). Following the contractual arrangements with
the financing institutions, Eni collects the transferred
receivables and transfers the collected amounts to those
institutions. Furthermore, the Engineering & Construction
segment transferred without notification certain trade
receivables without recourse due by June 30, 2013 for euro 148
million through Enis subsidiary Serfactoring SpA (euro 149
million at December 31, 2012, due in 2013).
Trade receivables of the Exploration & Production segment
included receivables for oil and gas supply to Egyptian
State-owned companies amounting to euro 583 million due as of
June 30, 2013. In order to reduce the outstanding amounts,
negotiations and contacts are ongoing with the State
companies top management and the local authorities, in a
context of enduring relationships with the counterparts.
Financing receivables held for operating purposes of euro 814
million (euro 668 million at December 31, 2012) mainly related to
financing granted to unconsolidated subsidiaries, joint ventures
and associates to cover capital expenditure requirements for euro
428 million for executing industrial projects (euro 351 million
at December 31, 2012) and cash deposits to hedge the loss
provision made by Eni Insurance Ltd for euro 319 million (euro
280 million at December 31, 2012).
Financing receivables not related to operating activities
amounted to euro 222 million (euro 1,153 million at December 31,
2012) and primarily related to: (i) restricted deposits in escrow
for euro 163 million held by Eni Trading & Shipping SpA (euro
93 million at December 31, 2012), of which euro 143 million with
Citigroup Global Markets Ltd and euro 20 million with commercial
counterparts relating to derivatives transactions; (ii)
restricted
- 88 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
deposits in escrow of receivables of the Engineering &
Construction segment for euro 40 million (euro 25 million at
December 31, 2012). The decrease in financing receivables not
related to operating purposes of euro 931 million was primarily
related to: (i) the collection of receivables from Cassa Depositi
e Prestiti for euro 883 million as settlement of the total
consideration of euro 3,517 million relating to the divestment of
1,013,619,522 ordinary shares of Snam SpA; (ii) the collection of
the residual receivables from Snam for euro 141 million.
Receivables related to divesting activities of euro 212 million
(euro 209 million at December 31, 2012) included the current
portion of receivables relating to the divestment of a 1.71%
interest in the Kashagan project for euro 119 million and to the
divestment of a 3.25% interest in the Karachaganak project (equal
to Enis 10% interest) to the Kazakh partner KazMunaiGas for
euro 83 million. A description of both transactions is reported
in note 13 Other non-current receivables.
Other receivables of euro 7,107 million (euro 6,751 million at
December 31, 2012) included receivables for euro 486 million
(euro 481 million at December 31, 2012) relating to the recovery
of costs incurred to develop an oil&gas project in the
Exploration & Production segment that is currently undergoing
arbitration procedure. Receivables related to advances for
take-or-pay clauses for euro 333 million were fully recovered
during the first half of 2013.
Receivables with related parties are described in note 33
Transactions with related parties.
Because of the short-term maturity and conditions of remuneration
of trade receivables, the fair value approximated the carrying
amount.
6 Inventories
December 31, 2012 |
June 30, 2013 |
|||
(euro million) |
Crude oil, gas and petroleum products |
Chemical products |
Work in progress |
Other |
Total |
Crude oil, gas and petroleum products |
Chemical products |
Work in progress |
Other |
Total |
||||||||||
Raw and auxiliary materials and consumables | 948 | 190 | 1,748 | 2,886 | 664 | 180 | 1,890 | 2,734 | ||||||||||||
Products being processed and semi-finished products | 133 | 15 | 1 | 149 | 137 | 9 | 1 | 147 | ||||||||||||
Work in progress | 1,595 | 1,595 | 1,615 | 1,615 | ||||||||||||||||
Finished products and goods | 2,912 | 891 | 63 | 3,866 | 2,601 | 863 | 75 | 3,539 | ||||||||||||
3,993 | 1,096 | 1,595 | 1,812 | 8,496 | 3,402 | 1,052 | 1,615 | 1,966 | 8,035 |
Changes in inventories and in loss provisions were as follows:
(euro million) | Carrying amount at the beginning of the year | Changes | New or increased provisions | Deductions | Changes in the scope of consolidation | Currency translation differences | Other changes | Carrying amount at the end of the period | ||||||||
December 31, 2012 | |||||||||||||||||||||||
Gross carrying amount | 7,761 | 1,158 | (226 | ) | (18 | ) | (9 | ) | 8,666 | ||||||||||||||
Loss provision | (186 | ) | (58 | ) | 64 | 10 | 1 | (1 | ) | (170 | ) | ||||||||||||
Net carrying amount | 7,575 | 1,158 | (58 | ) | 64 | (216 | ) | (17 | ) | (10 | ) | 8,496 | |||||||||||
June 30, 2013 | |||||||||||||||||||||||
Gross carrying amount | 8,666 | (436 | ) | (39 | ) | 1 | 8,192 | ||||||||||||||||
Loss provision | (170 | ) | (88 | ) | 101 | (157 | ) | ||||||||||||||||
Net carrying amount | 8,496 | (436 | ) | (88 | ) | 101 | (39 | ) | 1 | 8,035 |
Changes of the period amounting to euro 436 million were recorded in the Refining & Marketing segment for euro 440 million. Additions and deductions in loss provisions amounted to euro 88 million and euro 101 million,
- 89 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
respectively, and primarily related to the Refining & Marketing segment (euro 77 million and euro 80 million, respectively).
7 Other current assets
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Fair value of non-hedging and trading derivatives | 916 | 721 | ||
Fair value of fair value hedge derivatives | 58 | |||
Fair value of cash flow hedge derivatives | 31 | 10 | ||
Other current assets | 677 | 602 | ||
1,624 | 1,391 |
Derivative fair values were estimated on the basis of market
quotations provided by primary info-provider or, alternatively,
appropriate valuation methods commonly used on the marketplace.
Fair values of non-hedging and trading derivatives of euro 721
million (euro 916 million at December 31, 2012) consisted of: (i)
euro 416 million (euro 564 million at December 31, 2012) of
derivatives that failed to meet the formal criteria to be
designated as hedges under IFRS because they were entered into in
order to manage net exposures to movements in foreign currencies,
interest rates or commodity prices. Therefore, such derivatives
were not related to specific trade or financing transactions;
(ii) euro 305 million (euro 352 million at December 31, 2012)
related to commodity derivatives entered by the Gas & Power
segment for trading purposes in order to optimize the value of
the Groups assets (gas supply contracts, capacity
entitlements, storage sites) through strategies of asset-backed
trading, as well as proprietary trading.
The fair value of fair value hedge derivatives amounted to euro
58 million and pertained to derivatives entered into in order to
hedge certain contracts with future pricing for the sale and
purchase of oil products.
Fair value of cash flow hedge derivatives of euro 10 million
(euro 31 million at December 31, 2012) pertained to the Gas &
Power segment. These derivatives were entered into to hedge
variability in future cash flows associated with highly probable
future sale transactions of gas or electricity or on already
contracted sales due to different indexation mechanism of supply
costs versus selling prices. A similar scheme applies to exchange
rate hedging derivatives. Negative fair value of contracts
expiring by June 30, 2014 is disclosed in note 17 Other
current liabilities; positive and negative fair value of
contracts expiring beyond June 30, 2014 is disclosed in note 13
Other non-current receivables and in note 21 Other
non-current liabilities. The effects of the evaluation at fair
value of cash flow hedge derivatives are given in note 23
Shareholders equity and in note 27 Operating
expenses.
As of December 31, 2012, other assets included prepayments that
were made to gas suppliers upon triggering the take-or-pay clause
provided by the relevant long-term supply arrangements (euro 129
million). Such amount was fully recovered during the first half
of 2013.
Transactions with related parties are described in note 33
Transactions with related parties.
- 90 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Non-current assets
8 Property, plant and equipment
(euro million) | Gross book amount at December 31, 2012 | Provisions for depreciation and impairments at December 31, 2012 | Net book amount at December 31, 2012 | Additions | Depreciation | Impairment losses | Currency translation differences | Other changes | Net book amount at June 30, 2013 | Gross book amount at June 30, 2013 | Provisions for depreciation and impairments at June 30, 2013 | |||||||||||
Property, plant and equipment | 143,297 | 79,831 | 63,466 | 4,886 | (3,531) | (136) | (216) | (28) | 64,441 | 147,589 | 83,148 |
A break-down of capital expenditures made in the first half of 2013 by segment is provided below:
(euro million) | First half 2012 |
First half 2013 |
|
Exploration & Production | 3,613 | 3,922 | ||
Gas & Power | 58 | 56 | ||
Refining & Marketing | 288 | 207 | ||
Versalis | 66 | 110 | ||
Engineering & Construction | 540 | 484 | ||
Corporate and financial companies | 19 | 72 | ||
Other activities - Snam | 350 | |||
Other segments | 8 | 5 | ||
Elimination of intragroup profits | 144 | 30 | ||
5,086 | 4,886 |
With the exceptions of the refining business, management did
not identify any indications that assets may be impaired within
the Groups operating segments. Management based its
findings by observing the latest forward prices for energy
commodities prevailing in the market place for the future
four-year period as of the date of preparation of the 2013 Interim
Report and comparing them with the forward prices at the 2012 Annual
Report; management also confirmed its previous assumptions of a
long-term price for the benchmark Brent crude oil at 90
dollars/barrel (in real terms). Therefore, management carried out
the impairment review of the recoverability of the carrying
amounts of tangible assets: (i) in the refining business where in
spite of a significant decline in forward refining margins over
the next four-year projection, the carrying amounts of refineries
were aligned to their values-in-use; (ii) a sample of oil&gas
Cash Generating Units, selected according to the criteria of
relevance (book value, allocation of unproved mineral interests,
headroom between the book value and the value in use at the date
of the annual report, etc.) which covered about 50% of the assets
of the Exploration & Production segment, for which management
tested reserves revisions, changes in projected expenditures and
modifications at petroleum contracts. The management, also in
this case, confirmed the carrying amounts, with the exception of
an oil asset in Italy which has been impaired for euro 86 million
following negative revisions of the reserves. Furthermore, an oil
asset in the USA impaired in 2012 has been reversed up as a
result of a more favorable tax regime for oil productions (euro
47 million reported in other changes).
For the criteria adopted by Eni in identifying the Group Cash
Generating Unit (CGU) and reviewing the recoverability of
carrying amounts, see note 14 Property, plant and
equipment of the consolidated financial statements of the
Financial Report 2012. In preparing the Interim Report 2013,
management maintained unchanged from the Annual Report 2012 the
estimation of the post-tax rate for discounting the future cash
flows of the CGUs equal to the weighted average cost of the
capital to Eni, adjusted to factor in risks specific to each
country of activity (WACC adjusted), ranging from 7.2% to 13.0%.
The confirmation of these amounts in respect to 2012 is due to
the projection of reduced financial parameters in the Eni WACC
due to lowered expectations for the risk premium on Italian
sovereign bonds and a decline in the cost of borrowings to the
Group due to observed trends in the benchmark market rates, which
were partly offset by the assumption of an higher incidence of
the Group's equity in the financial structure approved by the
Board
- 91 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
of Directors. In addition, in the first half of 2013 it has
been recorded marginal impairment losses at tangible assets (euro
50 million) and regarded security, compliance and
stay-in-business expenditures made at certain refineries,
petrochemical plants and other company sites which were
completely written off in prior years and for which it was
confirmed the absence of profitability prospects.
Other changes of euro 28 million comprised the initial
recognition and change in estimates of the costs for dismantling
and site restoration of the Exploration & Production segment
(euro 42 million), a reclassification to assets held for sale of
(euro 24 million), and, as increase, reversals of impairments
(euro 48 million).
Unproved mineral interests included in tangible assets in
progress and advances are presented below:
(euro million) | Book amount at December 31, 2012 |
Reclassification to Proved Mineral Interest |
Other changes and currency translation differences |
Book amount at June 30, 2013 |
||||
Congo | 1,254 | 12 | 1,266 | ||||||
Nigeria | 743 | 7 | 750 | ||||||
Turkmenistan | 516 | 4 | 520 | ||||||
Algeria | 355 | 3 | 358 | ||||||
USA | 146 | (2 | ) | 1 | 145 | ||||
India | 22 | 22 | |||||||
Others | 29 | (1 | ) | 28 | |||||
3,065 | (3 | ) | 27 | 3,089 |
Contractual commitments related to the purchase of property, plant and equipment are included in section "Risk factors and uncertainties" of the "Operating and Financial Review".
9 Intangible assets
(euro million) | Gross book amount at December 31, 2012 | Provisions for amortization and impairments at December 31, 2012 | Net book amount at December 31, 2012 | Additions | Amortization | Changes in the scope of consolidation | Currency translation differences | Other changes | Net book amount at June 30, 2013 | Gross book amount at June 30, 2013 | Provisions for amortization and impairments at June 30, 2013 | |||||||||||
Intangible assets with finite useful lives | 8,880 | 6,854 | 2,026 | 1,045 | (1,012 | ) | 3 | (14 | ) | 2,048 | 9,616 | 7,568 | ||||||||||||
Intangible assets with indefinite useful lives | ||||||||||||||||||||||||
Goodwill | 2,461 | 24 | 2,485 | |||||||||||||||||||||
4,487 | 1,045 | (1,012 | ) | 24 | 3 | (14 | ) | 4,533 |
Capital expenditures of euro 1,045 million (euro 1,054 million
in the first half of 2012) included exploration drilling
expenditures of the Exploration & Production segment which
were fully amortized as incurred for euro 765 million (euro 825
million in the first half of 2012) and license acquisition costs
of euro 179 million (euro 1 million in the first half of 2012)
primarily related to acquisitions of new exploration acreage in
Cyprus and Vietnam. Amortization of euro 1,012 million (euro
1,083 million in the first half of 2012) included the
amortization of license acquisition costs for euro 126 million
(euro 78 million in the first half of 2012).
Change in the scope of consolidation of intangible assets with
indefinite useful lives of euro 24 million comprised the 100%
acquisition of ASA Trade SpA, a company marketing gas in Tuscany.
- 92 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
The carrying amount of goodwill at the end of the period was euro 2,485 million (euro 2,461 million at December 31, 2012) net of cumulative impairments amounting to euro 2,066 million (euro 2,075 million at December 31, 2012). The break-down of goodwill by operating segment is as follows:
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Gas & Power | 1,286 | 1,309 | ||
Engineering & Construction | 750 | 749 | ||
Exploration & Production | 265 | 267 | ||
Refining & Marketing | 160 | 160 | ||
2,461 | 2,485 |
Goodwill acquired through business combinations has been
allocated to the cash generating units ("CGUs") that
are expected to benefit from the synergies of the acquisition.
Goodwill has been allocated to the following CGUs.
Gas & Power segment
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Domestic gas market | 767 | 791 | ||
Foreign gas market | 519 | 518 | ||
- of which European market | 511 | 511 | ||
1,286 | 1,309 |
In the Gas & Power segment, the CGUs consist of commercial
business units whose cash flows are interdependent and,
therefore, jointly benefit of business combination synergies.
Goodwill allocated to the CGU domestic gas market was recognized
upon the buy-out of the former Italgas SpA minorities in 2003
through a public offering (euro 706 million). This CGU engages in
supplying gas to residential customers and small businesses.
Goodwill allocated to the CGU European Market was mainly
recognized in prior reporting periods upon purchase price
allocations in the business combinations involving Distrigas NV
(now Eni Gas & Power NV) in Belgium and other smaller
entities (Altergaz SA, now Eni Gas & Power France SA in
France, Nuon Belgium NV, now merged in Eni Gas & Power NV,
and Nuon Power Generation Walloon NV, now Eni Power Generation
NV). The CGU European Market comprises gas marketing activities
managed by the companies acquired and gas marketing activities
managed directly or indirectly by the Gas & Power Division of
the parent company Eni SpA (North-West Europe area, France,
Germany, Benelux, United Kingdom, Switzerland and Austria). Those
business units jointly benefited from business combination
synergies.
In preparing the interim report 2013, also considering the
ongoing renegotiations of the Companys long-term purchase
contracts, management confirmed the impairment indicators used
for the impairment test purposes as of December 31, 2012, in
particular, the latest forward prices and spreads for gas and
electricity prevailing in the market place for the future
four-year period and current trends in other variables (volumes
and market shares). Therefore, the book value of the CGU European
gas market, including the goodwill, is aligned to the recoverable
amount. The excess of the recoverable amount of the CGU domestic
gas market over its carrying amount including the allocated
portion of goodwill (headroom) amounting to euro 549 million
would be reduced to zero, on the basis of the sensitivity
analysis performed for the Annual Report 2012, under each of the
following alternative hypothesis: (i) a decrease of 32.3% on
average in the projected commercial margins; (ii) a decrease of
32.3% on average in the projected sales volumes; (iii) an
increase of 8.2 percentage points in the discount rate; and (iv)
a negative nominal growth rate of 13.2%. The recoverable amount
of the CGU and the relevant sensitivity analysis were calculated
solely on the basis of retail margins, thus excluding wholesale
and business client margins (industrial, thermoelectric and
others).
- 93 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Engineering & Construction segment
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Offshore E&C | 415 | 415 | ||
Onshore E&C | 316 | 315 | ||
Other | 19 | 19 | ||
750 | 749 |
The segment goodwill of euro 749 million was mainly recognized following the acquisition of Bouygues Offshore SA, now Saipem SA (euro 710 million) and allocated to the CGUs E&C Offshore and E&C Onshore. Management reviewed the recoverability of the carrying amounts at those CGUs, including allocated goodwill, considering a deteriorating outlook in the construction services market and the revision of margin estimates made at important contracts whereby management revised the business profitability forecast for 2013. The key assumptions adopted for assessing the recoverable amounts of the CGUs related to operating results, the discount rate and the growth rates adopted to determine the terminal value. Information on operating results and cash flow was collected from the four-year-plan approved in January 2013 by the Companys top management. The plan has been updated to reflect the worsening of some main projects in progress and to take into account of the update of the results expected for the second half of 2013. The terminal value was estimated by using a perpetual nominal growth rate of 2% applied to the normalized cash flow of the last year in the four-year plan. Value in use of both CGUs was assessed by discounting the associated post-tax cash flows at a post-tax rate of 7.8% (unchanged from 2012) which corresponds to the pre-tax rate of 10.0% and 10.9% for the E&C Offshore business unit and the E&C Onshore one respectively (9.9% and 10.7%, respectively, in 2012). The impairment review performed confirmed the recoverability of the carrying amounts of both those CGUs, including the allocated portions of goodwill. The headroom of the E&C Offshore business unit of euro 3,584 million would be reduced to zero under each of the following alternative changes in the above mentioned assumptions: (i) a decrease of 47% in the operating result at each of the periods included in the four-year plan, including the perpetuity operating result; (ii) an increase of about 5 percentage points in the discount rate; and (iii) a negative real long-term growth rate. Changes in each of the assumptions that would cause the headroom of the E&C Onshore business unit of euro 3,882 million to be reduced to zero are greater than those applicable to the E&C Offshore construction CGU described above.
10 Investments
(euro million) | Net book amount at December 31, 2012 |
Additions |
Divestments and reimbursements |
Share of profit (loss) of equity-accounted investments |
Deduction for dividends |
Currency translation differences |
Other changes |
Net book amount at June 30, 2013 |
||||||||
Equity-accounted investments | 4,262 | 148 | (1) | 198 | (158) | 25 | 44 | 4,518 | |||||||||
Other investments | 5,085 | (2,173) | 2 | (95 | ) | 2,819 | |||||||||||
9,347 | 148 | (2,174) | 198 | (158) | 27 | (51 | ) | 7,337 |
Additions in investments accounted for using the equity method
of euro 148 million mainly related to a capital contribution made
to Angola LNG Ltd (euro 48 million) which is currently engaged in
building a liquefaction plant in order to monetize Enis gas
reserves in that country (Enis interest in the project
being 13.6%) and to a capital contribution made to Novamont SpA
(euro 41 million) in relation to the "Green Chemistry"
project at the Porto Torres plant.
Divestments and reimbursements of euro 2,174 million are stated
net of gains on disposals (euro 101 million) and essentially
related to the sale of the 11.69% of the share capital of Snam
SpA for euro 1,392 million and the 8% of Galp Energia SGPS SA for
euro 780 million.
On May 9, 2013, Eni completed the sale of 395,253,345 shares
equal to 11.69% of share capital of Snam SpA. The offering,
carried out through an accelerated bookbuilding aimed at Italian
and international
- 94 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
institutional investors, was priced at euro 3.69 per share for
a total consideration amounting to euro 1,459 million. The gain
registered in profit and loss account amounted to euro 67
million. Following the placement, Eni holds 288,683,602 shares
equal to 8.54% of the share capital of Snam which are underlying
the euro 1,250 million convertible bond, issued on January 18,
2013 and due on January 18, 2016.
On May 31, 2013, Eni completed the placement of 55,452,341
ordinary shares, corresponding to approximately 6.7% of the share
capital of Galp Energia SGPS SA. The Offering, carried out
through an accelerated bookbuilding procedure aimed at qualified
institutional investors, was priced at euro 12.22 per share for a
total consideration amounting to euro 678 million. The gain
registered in profit and loss account amounted to euro 26
million. As of June 30, 2013, Eni holds 16.34% of Galp's
outstanding share capital, of which 8% underlying the
exchangeable (approximately euro 1,028 million) bond issued on
November 30, 2012 and due on November 30, 2015 and 8.34% subject
to pre-emptive rights or option exercisable by Amorim Energia.
Share of profit of equity-accounted investments of euro 198
million primarily referred to Unión Fenosa Gas SA (euro 32
million), United Gas Derivatives Co (euro 31 million), Blue
Stream pipeline Co BV (euro 26 million), CARDÓN IV SA (euro 24
million), PetroSucre SA (euro 22 million), Unimar Llc (euro 15
million) and Eni BTC Ltd (euro 14 million).
Deductions for dividend distribution of euro 158 million
primarily related to PetroSucre SA (euro 50 million), United Gas
Derivatives Co (euro 35 million), Ceska Refinerska AS (euro 22
million) and Unimar Llc (euro 11 million).
Currency translation differences of euro 27 million were
primarily related to translation of entities accounts denominated
in US dollar (euro 28 million).
Other changes in equity-accounted investments of euro 51 million
primarily comprised for euro 58 million expenses relating to the
fair value evaluation of the financial investments in Snam SpA
and Galp Energia SGPS SA of which euro 32 million were reported
through profit as expenses from investments in application of the
fair value option provided by IAS 39 as relating to the shares
underlying convertible bonds and incomes for euro 21 million
relating to the revaluation of Ceska Refinerska AS.
11 Other financial assets
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Receivables for financing operating activities | 1,160 | 1,051 | ||
Securities held for operating purposes | 69 | 81 | ||
1,229 | 1,132 |
Receivables for financing operating activities are stated net
of the valuation allowance for doubtful accounts of euro 35
million (euro 30 million at December 31, 2012).
Operating financing receivables of euro 1,051 million (euro 1,160
million at December 31, 2012) primarily pertained to loans
granted by the Exploration & Production segment (euro 534
million), the Gas & Power segment (euro 377 million) and the
Refining & Marketing segment (euro 94 million). Financing
receivables granted to unconsolidated subsidiaries, joint
ventures and associates amounted to euro 591 million.
- 95 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Securities of euro 81 million (euro 69 million at December 31, 2012), designated as held-to-maturity investments, are listed bonds issued by sovereign states (euro 73 million) and by the European Investment Bank (euro 8 million). The following table analyses securities per issuing entity:
Amortized cost (euro million) |
Nominal value (euro million) |
Fair value (euro million) |
Nominal rate of return (%) | Maturity date | Rating - Moody's | Rating - S&P | ||||||||
Sovereign states | ||||||||||||||
Fixed rate bonds | ||||||||||||||
Italy | 20 | 21 | 21 | from 3.50 to 4.75 | from 2013 to 2021 | Baa2 | BBB+ | |||||||
Slovenia | 11 | 11 | 11 | from 3.42 to 4.88 | from 2013 to 2014 | Ba1 | A- | |||||||
Spain | 3 | 3 | 3 | 3.00 | 2015 | Baa3 | BBB- | |||||||
Slovakia | 2 | 2 | 2 | 1.33 | 2015 | A2 | A | |||||||
Floating rate bonds | ||||||||||||||
Italy | 15 | 15 | 15 | from 2014 to 2016 | Baa2 | BBB+ | ||||||||
Spain | 10 | 10 | 10 | from 2014 to 2015 | Baa3 | BBB- | ||||||||
Belgium | 7 | 7 | 7 | 2016 | Aa3 | AA | ||||||||
France | 5 | 5 | 5 | 2014 | Aa1 | AA+ | ||||||||
Total sovereign states | 73 | 74 | 74 | |||||||||||
European Investment Bank | 8 | 8 | 7 | from 2016 to 2018 | Aaa | AAA | ||||||||
81 | 82 | 81 |
The valuation at fair value of receivables for financing
operating activities of euro 1,092 million has been determined
based on the present value of expected future cash flows
discounted at rates ranging from 0.5% to 3.6% (0.4% and 3.3% at
December 31, 2012). The valuation at fair value of financial
securities has resulted in marginal effects. The fair value of
securities was derived from quoted market prices.
Receivables with related parties are described in note 33
Transactions with related parties.
12 Deferred tax assets
Deferred tax assets are stated net of amounts of deferred tax liabilities that can be offset for euro 3,271 million (euro 3,630 million at December 31, 2012).
(euro million) | Amount at December 31, 2012 | Net additions | Currency translation differences | Other changes | Amount at June 30, 2013 | |||||
5,027 | 244 | (39) | 253 | 5,485 |
Deferred tax assets related to the parent company Eni SpA and
other Italian subsidiaries which were part of the consolidated
accounts for Italian tax purposes were recorded on the operating
losses of the reporting period and the recognition of deferred
deductible costs within the limits of the amounts expected to be
recovered in future years based on expected future taxable
income. The forecasts for future taxable income are those adopted
in the 2012 Annual Report.
Deferred tax liabilities are described in note 20 Deferred
tax liabilities.
Income taxes are described in note 30 Income tax expense.
- 96 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
13 Other non-current receivables
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Current tax assets | 293 | 349 | ||
Receivables related to disposals | 752 | 720 | ||
Other receivables | 361 | 211 | ||
Fair value of non-hedging derivatives | 429 | 238 | ||
Fair value of cash flow hedging derivative instruments | 2 | 2 | ||
Other asset | 2,563 | 2,321 | ||
4,400 | 3,841 |
Receivables originated from divestments amounted
to euro 720 million (euro 752 million at December 31, 2012) and
comprised: (i) the residual outstanding amount of euro 241
million recognized following the compensation agreed with the
Republic of Venezuela for the expropriated Dación oilfield in
2006. The receivable accrues interests at market conditions as
the collection has been fractionated in installments. As agreed
by the parties, the reimbursement can be made in kind through
equivalent assignment of volumes of crude oil. In 2012, the
reimbursement amounted to euro 71 million ($92 million).
Negotiations for further compensations are ongoing; (ii) the
long-term portion of a receivable of euro 234 million related to
the divestment of the 1.71% interest in the Kashagan project to
the local partner KazMunaiGas on the basis of the agreements
defined with the international partners of the North Caspian Sea
PSA and the Kazakh government, which became effective from
January 1, 2008. The reimbursement of the receivable is provided
for in three annual installments commencing from the date of the
production start-up which is expected in the coming weeks. The
receivable accrues interest income at market rates. The
short-term portion is disclosed in note 5 Trade and other
receivables; (iii) the long-term portion of a receivable of euro
90 million related to the divestment of the 3.25% interest in the
Karachaganak project (equal to the Enis 10% interest) to
the Kazakh partner KazMunaiGas as part of an agreement reached in
December 2011 between the Contracting Companies of the Final
Production Sharing Agreement (FPSA) and Kazakh Authorities which
settled disputes on the recovery of the costs incurred by the
International Consortium to develop the field, as well as a
certain tax claims. The agreement, effective from June 28, 2012,
entailed a net cash consideration to Eni, to be paid in cash in
three years through monthly installments starting from July 2012.
The receivable accrues interest income at market rates. In the
first half of 2013, reimbursements amounted to euro 46 million.
The short-term portion is disclosed in note 5 Trade and
other receivables.
Derivative fair values are calculated basing on market quotations
provided by primary info-provider or, alternatively, appropriate
valuation techniques generally adopted in the marketplace.
Fair values of non-hedging derivatives of euro 238 million (euro
429 million at December 31, 2012) consisted of derivatives that
did not meet the formal criteria to be designated as hedges under
IFRS because they were entered into in order to manage net
exposures to foreign currency exchange rates, interest rates and
commodity prices. Therefore, such derivatives did not relate to
specific trade or financing transactions.
Fair values of cash flow hedge derivatives of euro 2 million
(same amount as of December 31, 2012) related to the Gas &
Power segment. These derivatives were designated to hedge
exchange rate and commodity risk exposures as described in note 7
Other current assets. Fair value related to the contracts
expiring beyond 2014 is disclosed in note 21 Other
non-current liabilities; fair value related to the contracts
expiring by June 30, 2014 is disclosed in note 7 Other
current assets and in note 13 Other current liabilities.
The effects of fair value evaluation of cash flow hedges are
disclosed in note 23 Shareholders equity and note 27
Operating expenses.
Other non-current asset of euro 2,321 million (euro 2,563 million
at December 31, 2012) mainly included prepayments for which the
Company plans to off-take the prepaid quantities beyond the term
of 12 months amounting to euro 2,130 million (euro 2,367 million
at December 31, 2012) that were made to gas suppliers upon
triggering the take-or-pay clause provided by the relevant
long-term supply arrangements. The decrease related to
collections of prepaid gas quantities following the renegotiation
of long-term contracts. Prepayments are forecast to be used in
the long-term. In accordance to those arrangements, the Company
is contractually required to off-take minimum annual quantities
of gas, or in case of failure is held to pay the whole price or a
fraction of it for the uncollected volumes up to the minimum
annual quantity. The Company is entitled to off-take the pre-paid
volumes in future years alongside the contract execution, for
- 97 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
its entire duration or a shorter term as the case may be.
These deferred costs, which are substantially equivalent to a
receivable in-kind, are stated at the purchase cost or the net
realizable value, whichever is lower. Prior-years
impairment losses are reversed up to the purchase cost, whenever
market conditions indicate that impairment no longer exits or may
have decreased. The amount of pre-paid volumes reflects ongoing
difficult market condition in the European gas sector due to weak
demand and strong competitive pressures fuelled by oversupplies.
These trends prevented Eni from fulfilling its minimum take
obligations associated with its gas supply contracts. Management
expects to recover those pre-paid volumes in the long term
leveraging on already achieved or expected benefits from the
renegotiation of the Company long-term, take-or-pay supply
contracts in terms of achieving an improved competitiveness of
the Companys cost position and a reduction in minimum take
quantities to be collected and increased operational flexibility
(i.e. changes in delivery points and LNG supplies in place of
those by pipeline), including no renewal of expiring long-term
contracts. Management believes that other factors will contribute
to the Companys plans to recover these pre-paid volumes
over the long-term, including: (i) the assumption of a recovery
in long-term gas demand; (ii) a projected sales expansion in
target European markets and Italy supported by effective and
innovative marketing policies and the Companys
strengthening market leadership.
Receivables with related parties are described in note 33
Transactions with related parties.
- 98 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Current liabilities
14 Short-term debt
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Banks | 253 | 306 | ||
Commercial papers | 1,481 | 1,932 | ||
Other financial institutions | 489 | 666 | ||
2,223 | 2,904 |
The increase in short-term debt of euro 681
million included net assumptions for euro 870 million, partially
offset by currency translation differences for euro 196 million.
Commercial papers of euro 1,932 million were issued by the
Groups financial subsidiaries Eni Finance USA Inc (euro
1,614 million) and Eni Finance International SA (euro 318
million).
At June 30, 2013, Eni had undrawn committed and uncommitted
borrowing facilities amounting to euro 2,442 million and euro
9,389 million, respectively (euro 1,241 million and euro 10,932
million at December 31, 2012). Those facilities bore interest
rates reflecting prevailing conditions on the marketplace.
Charges for unutilized facilities were immaterial.
At June 30, 2013, Eni did not report any default on covenants or
other contractual provisions in relation to borrowing facilities.
Because of the short-term maturity and conditions of remuneration
of short-term debts, the fair value approximated the carrying
amount.
Payables due to related parties are described in note 33
Transactions with related parties.
15 Trade and other payables
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Trade payables | 14,993 | 13,200 | ||
Advances | 2,247 | 2,857 | ||
Other payables: | ||||
- related to capital expenditures | 2,103 | 2,206 | ||
- others | 4,238 | 4,080 | ||
6,341 | 6,286 | |||
23,581 | 22,343 |
The decrease in trade receivables for euro 1,793 million
primarily related to the Gas & Power segment (euro 857
million), the Refining & Marketing segment (euro 385 million)
and the Engineering & Construction segment (euro 267
million).
Other payables of euro 4,080 million (euro 4,238 million at
December 31, 2012) included payables due to gas suppliers for
euro 542 million (same amount as of December 31, 2012) relating
to the triggering of the take-or-pay clause provided by the
relevant supply arrangements. More information is provided in
note 13 Other non-current receivables.
Payables to related parties are described in note 33
Transactions with related parties.
Because of the short-term maturity and conditions of remuneration
of trade payables, the fair value approximated the carrying
amount.
- 99 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
16 Income taxes payable
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Italian subsidiaries | 156 | 100 | ||
Foreign subsidiaries | 1,466 | 966 | ||
1,622 | 1,066 |
The decrease in income taxes payable for euro 500
million primarily related to the foreign companies of the
Exploration & Production segment (euro 498 million).
Income tax expenses are described in note 30 Income taxes.
17 Other current liabilities
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Fair value of non-hedging and trading derivatives | 888 | 739 | ||
Fair value of cash flow hedging derivatives | 32 | 16 | ||
Fair value of fair value hedging derivatives | 5 | 1 | ||
Other liabilities | 512 | 465 | ||
1,437 | 1,221 |
Derivative fair values were estimated on the basis of market
quotations provided by primary info-provider or, alternatively,
appropriate valuation techniques commonly used on the
marketplace.
Fair values of non-hedging and trading derivatives of euro 739
million (euro 888 million at December 31, 2012) consisted of: (i)
euro 462 million (euro 538 million at December 31, 2012) of
derivatives that did not meet the formal criteria to be
designated as hedges under IFRS because they were entered into in
order to manage net exposures to movements in foreign currencies,
interest rates or commodity prices. Therefore, such derivatives
were not related to specific trade or financing transactions;
(ii) euro 273 million (euro 349 million at December 31, 2012)
related to commodity derivatives entered by the Gas & Power
segment for trading purposes in order to optimize the value of
the Groups assets (gas supply contracts, capacity
entitlements, storage sites) through strategies of asset-backed
trading, as well as proprietary trading; (iii) euro 4 million
(euro 1 million at December 31, 2012) of derivatives embedded in
the pricing formulas of certain long-term supply contracts of gas
in the Exploration & Production segment.
The fair value of cash flow hedge derivatives amounted to euro 16
million (euro 32 million at December 31, 2012) and essentially
pertained to the Gas & Power segment (euro 14 million). Those
derivatives were designated to hedge exchange rate and commodity
risk exposures as described in note 7 Other current
receivables. Fair value of contracts expiring by end of June 30,
2014 is disclosed in note 7 Other current assets; fair
value of contracts expiring beyond June 30, 2014 is disclosed in
note 21 Other non-current liabilities and in note 13
Other non-current receivables. The effects of the
evaluation at fair value of cash flow hedge derivatives are
disclosed in note 23 Shareholders equity and in note
27 Operating expenses.
The fair value of fair value hedge derivatives amounted to euro 1
million (euro 5 million at December 31, 2012) and pertained to
derivatives entered into in order to hedge certain contracts with
future pricing for the sale and purchase of oil products.
As of December 31, 2012, other current liabilities included
advances that were cashed in from gas customers who off-took
lower volumes than the contractual minimum take provided by the
relevant long-term supply contract (euro 142 million). Such
amount was fully recovered during the first half of 2013.
Transactions with related parties are described in note 33
Transactions with related parties.
- 100 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Non-current liabilities
18 Long-term debt and current maturities of long-term debt
December 31, 2012 |
June 30, 2013 |
|||
i | i | i |
(euro million) | i | Long-term portion |
i |
Short-term portion |
i |
Total |
i |
Long-term portion |
i |
Short-term portion |
i |
Total |
i | i |
Banks | 3,103 | 913 | 4,016 | 2,851 | 1,112 | 3,963 | ||||||
Ordinary bonds | 14,818 | 2,006 | 16,824 | 13,445 | 1,667 | 15,112 | ||||||
Convertible bonds | 990 | 990 | 2,221 | 5 | 2,226 | |||||||
Other financial institutions | 368 | 42 | 410 | 327 | 43 | 370 | ||||||
19,279 | 2,961 | 22,240 | 18,844 | 2,827 | 21,671 |
Long-term debt and current maturities of long-term debt of
euro 21,671 million (euro 22,240 million at December 31, 2012)
decreased of euro 569 million as a consequence of the balance of
new proceeds (euro 2,594 million) and repayments (euro 3,253
million). Such decrease was partially offset by currency
translation differences relating to foreign subsidiaries and debt
denominated in foreign currency recorded by euro-reporting
subsidiaries for euro 74 million.
Eni entered into long-term borrowing facilities with the European
Investment Bank. These borrowing facilities are subject to the
maintenance of certain financial ratios based on Enis
Consolidated Financial Statements or a minimum level of credit
rating. According to the agreements, should the Company lose the
minimum credit rating, new guarantees would be required to be
agreed upon with the European Investment Bank. In addition, Eni
entered into long and medium term facilities with Citibank Europe
Plc providing for conditions similar to those applied by the
European Investment Bank. At June 30, 2013 and December 31, 2012,
debts subjected to restrictive covenants amounted to euro 1,902
million and euro 1,994 million, respectively. A possible
non-compliance with those covenants would be immaterial to the
Companys ability to finance its operations. As of the
balance sheet date, Eni was in compliance with those covenants.
Ordinary bonds of euro 15,112 million (euro 16,824 million at
December 31, 2012) consisted of bonds issued within the Euro
Medium Term Notes Program for a total of euro 10,811 million and
other bonds for a total of euro 4,301 million.
- 101 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
The following table provides a break-down of bonds by issuing entity, maturity date, interest rate and currency as of June 30, 2013:
i | i | Amount |
i |
Discount on bond issue and accrued expense |
i |
Total |
i |
Currency |
i | Maturity |
i | Rate % |
i | i | i | i | i | i | i | i | i | i | i |
(euro million) | i | i | i | i | i | i | i | i | i | from |
i |
to |
i |
from |
i |
to |
Issuing entity | |||||||||||||||||
Euro Medium Term Notes | |||||||||||||||||
Eni SpA | 1,500 | 41 | 1,541 | EUR | 2019 | 4.125 | |||||||||||
Eni SpA | 1,500 | 26 | 1,526 | EUR | 2016 | 5.000 | |||||||||||
Eni SpA | 1,250 | 32 | 1,282 | EUR | 2014 | 5.875 | |||||||||||
Eni SpA | 1,250 | 30 | 1,280 | EUR | 2017 | 4.750 | |||||||||||
Eni SpA | 1,000 | 37 | 1,037 | EUR | 2020 | 4.000 | |||||||||||
Eni SpA | 1,000 | 12 | 1,012 | EUR | 2020 | 4.250 | |||||||||||
Eni SpA | 1,000 | 11 | 1,011 | EUR | 2018 | 3.500 | |||||||||||
Eni SpA | 750 | (4 | ) | 746 | EUR | 2019 | 3.750 | ||||||||||
Eni Finance International SA | 525 | 8 | 533 | GBP | 2018 | 2021 | 4.750 | 6.125 | |||||||||
Eni Finance International SA | 370 | 2 | 372 | EUR | 2017 | 2032 | 3.750 | 5.600 | |||||||||
Eni Finance International SA | 278 | 2 | 280 | YEN | 2014 | 2037 | 1.530 | 2.810 | |||||||||
Eni Finance International SA | 172 | 3 | 175 | USD | 2014 | 2015 | 4.450 | 4.800 | |||||||||
Eni Finance International SA | 16 | 16 | EUR | 2015 | variable | ||||||||||||
10,611 | 200 | 10,811 | |||||||||||||||
Other bonds | |||||||||||||||||
Eni SpA | 1,109 | 26 | 1,135 | EUR | 2017 | 4.875 | |||||||||||
Eni SpA | 1,000 | 34 | 1,034 | EUR | 2015 | 4.000 | |||||||||||
Eni SpA | 1,000 | 1 | 1,001 | EUR | 2015 | variable | |||||||||||
Eni SpA | 344 | 2 | 346 | USD | 2020 | 4.150 | |||||||||||
Eni SpA | 268 | 268 | USD | 2040 | 5.700 | ||||||||||||
Eni SpA | 215 | (1 | ) | 214 | EUR | 2017 | variable | ||||||||||
Eni USA Inc | 306 | (3 | ) | 303 | USD | 2027 | 7.300 | ||||||||||
4,242 | 59 | 4,301 | |||||||||||||||
14,853 | 259 | 15,112 |
Ordinary bonds maturing within 18 months (euro 1,360 million)
were issued by Eni SpA (euro 1,282 million) and Eni Finance
International SA (euro 78 million). During the first half of
2013, Eni did not issue new bonds.
The following table provides a break-down of convertible bonds by
issuing entity, maturity date, interest rate and currency as of
June 30, 2013:
(euro million) | i | Amount |
i |
Discount on bond issue and accrued expense |
i |
Total |
i |
Currency |
i |
Maturity |
i |
Rate % |
i | i |
Issuing entity | ||||||||||||
Eni SpA | 1,250 | (22) | 1,228 | EUR | 2016 | 0.625 | ||||||
Eni SpA | 1,028 | (30) | 998 | EUR | 2015 | 0.250 | ||||||
2,278 | (52) | 2,226 |
The convertible bond amounting to euro 1,228 million (nominal value of euro 1,250 million) is exchangeable into ordinary shares of Snam SpA. Underlying the exchangeable bond are approximately 288.7 million ordinary shares, corresponding to approximately 8.54% of the current outstanding share capital of Snam at a strike price of approximately euro 4.33 a share, representing a 20% premium to market prices current at the date of the issuance.
- 102 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
The convertible bond amounting to euro 998 million (nominal
value of euro 1,028 million) is exchangeable into ordinary shares
of Galp Energia SGPS SA. Underlying the exchangeable bond are
approximately 66.3 million ordinary shares of Galp, corresponding
to approximately 8% of the current outstanding share capital of
Galp at a strike price of approximately euro 15.50 a share,
representing a 35% premium to market prices current at the date
of the issuance.
Convertible bonds of both issues are stated at amortized cost,
while the call option embedded in the bonds is measured at fair
value through profit. Changes in fair value of the shares
underlying the bonds were reported through profit as opposed to
equity based on the fair value option provided by IAS 39 from
inception.
As of June 30, 2013, Eni had undrawn long-term committed
borrowing facilities of euro 3,798 million (euro 6,928 million at
December 31, 2012). Those facilities bore interest rates
reflecting prevailing conditions on the marketplace; charges for
unutilized facilities were immaterial.
Eni has in place a program for the issuance of Euro Medium Term
Notes up to euro 15 billion, of which about euro 10.6 billion
were drawn as of June 30, 2013. The Group has credit ratings of
A3 and P-2 for long and short-term debt respectively, outlook
negative, assigned by Moodys and A and A-1 for long and
short-term debt, respectively, assigned by Standard &
Poors. The rating assigned by Standard & Poor's is
being reviewed for a possible downgrade.
Fair value of long-term debt, including the current portion of
long-term debt amounted to euro 23,809 million (euro 24,937
million at December 31, 2012):
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Ordinary bonds | 19,239 | 17,006 | ||
Convertible bonds | 1,059 | 2,333 | ||
Banks | 4,171 | 4,062 | ||
Other financial institutions | 468 | 408 | ||
24,937 | 23,809 |
Fair value was calculated by discounting the expected future
cash flows at discount rates ranging from 0.5% to 3.6% (0.4% and
3.3% at December 31, 2012). The fair value of convertible bonds
was determined on the basis of the market quotation.
As of June 30, 2013, Eni did not pledge restricted deposits as
collateral against its borrowings.
Analysis of net borrowings
The analysis of net borrowings, as defined in the
"Financial Review", was as follows:
(euro million) | December 31, 2012 |
June 30, 2013 |
||
i | i | Current |
i |
Non-current |
i |
Total |
i |
Current |
i |
Non-current |
i |
Total |
A. Cash and cash equivalents | 7,765 | 7,765 | 7,850 | 7,850 | ||||||||||
B. Available-for-sale securities | 34 | 34 | 11 | 11 | ||||||||||
C. Liquidity (A+B) | 7,799 | 7,799 | 7,861 | 7,861 | ||||||||||
D. Financing receivables | 1,153 | 1,153 | 222 | 222 | ||||||||||
E. Short-term liabilities towards banks | 253 | 253 | 306 | 306 | ||||||||||
F. Long-term liabilities towards banks | 913 | 3,103 | 4,016 | 1,112 | 2,851 | 3,963 | ||||||||
G. Bonds | 2,006 | 15,808 | 17,814 | 1,672 | 15,666 | 17,338 | ||||||||
H. Short-term liabilities towards related parties | 403 | 403 | 534 | 534 | ||||||||||
I. Other short-term liabilities | 1,567 | 1,567 | 2,064 | 2,064 | ||||||||||
L. Other long-term liabilities | 42 | 368 | 410 | 43 | 327 | 370 | ||||||||
M. Total borrowings (E+F+G+H+I+L) | 5,184 | 19,279 | 24,463 | 5,731 | 18,844 | 24,575 | ||||||||
N. Net borrowings (M-C-D) | (3,768 | ) | 19,279 | 15,511 | (2,352 | ) | 18,844 | 16,492 |
- 103 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
19 Provisions for contingencies
(euro million) | Carrying amount at December 31, 2012 |
New or increased provisions |
Initial recognition and changes in estimates |
Accretion discount |
Reversal of utilized provisions |
Reversal of unutilized provisions |
Currency translation differences |
Other changes |
Carrying amount at June 30, 2013 |
|||||||||
Provision for site restoration, abandonment and social projects | 7,407 | (48) | 122 | (132) | (91 | ) | 13 | 7,271 | ||||||||||||
Provision for environmental risks | 2,928 | 60 | 6 | (88) | (5) | (1 | ) | (13 | ) | 2,887 | ||||||||||
Provision for legal proceedings and price revisions | 1,419 | 495 | (661) | (145) | 2 | (3 | ) | 1,107 | ||||||||||||
Provision for taxes | 395 | 91 | (8) | 2 | (50 | ) | 430 | |||||||||||||
Loss adjustments and actuarial provisions for Eni's insurance companies | 343 | 20 | (65) | 1 | 299 | |||||||||||||||
Provision for redundancy incentives | 202 | 4 | 1 | 207 | ||||||||||||||||
Provision for losses on investments | 194 | 4 | (12) | 1 | (11 | ) | 176 | |||||||||||||
Provision for long-term construction contracts | 52 | 92 | (11) | 133 | ||||||||||||||||
Provision for OIL insurance cover | 106 | 5 | 111 | |||||||||||||||||
Provision for onerous contracts | 54 | (30) | 24 | |||||||||||||||||
Provisions for the supply of goods | 24 | 24 | ||||||||||||||||||
Other (*) | 479 | 82 | (49) | (7) | (3 | ) | 9 | 511 | ||||||||||||
13,603 | 844 | (48) | 132 | (1,044) | (169) | (90 | ) | (48 | ) | 13,180 |
(*) Each individual amount included herein was lower than euro 50 million.
Main changes in provisions for contingencies regarded: (i)
provisions for legal proceedings and sale price revisions in
relation of new provisions and reversals of utilized and
unutilized provisions of the period; (ii) new provisions for
long-term construction contracts in the Engineering &
Construction in relation to expected future losses on certain
contracts being completed.
Accretion discount relating to provisions for site restoration,
abandonment and social projects referred to the Exploration &
Production segment and comprised the effects deriving from the
increase in the long-term interest rate of US dollar.
20 Deferred tax liabilities
Deferred tax liabilities were recognized net of the amounts of deferred tax assets which can be offset for euro 3,271 million (euro 3,630 million at December 31, 2012).
(euro million) | Amount at December 31, 2012 |
Net additions |
Currency translation differences |
Other changes |
Amount at June 30, 2013 |
|||||
6,740 | (141) | (85) | 261 | 6,775 |
Deferred tax assets and liabilities consisted of the following:
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Deferred tax liabilities | 10,370 | 10,046 | ||||
Deferred tax assets available for offset | (3,630 | ) | (3,271 | ) | ||
6,740 | 6,775 | |||||
Deferred tax assets not available for offset | (5,027 | ) | (5,485 | ) | ||
1,713 | 1,290 |
- 104 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
21 Other non-current liabilities
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Fair value of non-hedging derivatives | 271 | 281 | ||
Fair value of cash flow hedging derivatives | 13 | 6 | ||
Other payables due to tax authorities | 1 | |||
Other payables | 57 | 56 | ||
Other liabilities | 1,635 | 1,598 | ||
1,977 | 1,941 |
Derivative fair values were estimated on the basis of market
quotations provided by primary info-provider or, alternatively,
appropriate valuation techniques commonly used on the
marketplace.
Fair values of non-hedging derivatives of euro 281 million (euro
271 million at December 31, 2012) consisted of: (i) euro 154
million (euro 198 million at December 31, 2012) of derivatives
that did not meet the formal criteria to be designated as hedges
under IFRS because they were entered into in order to manage net
business exposures to foreign currency exchange rates, interest
rates or commodity prices. Therefore, such derivatives were not
related to specific trade or financing transactions; (ii) euro 59
million related to the call option embedded in the bonds
exchangeable into Snam ordinary shares (further information is
disclosed in note 18 Long-term debt and current portion of
long-term debt); (iii) euro 58 million (euro 60 million at
December 31, 2012) related to the call option embedded in the
bonds exchangeable into Galp ordinary shares (further information
is disclosed in note 18 Long-term debt and current portion
of long-term debt); (iv) euro 10 million (euro 13 million at
December 31, 2012) related to derivatives embedded in the pricing
formulas of long-term gas supply contracts in the Exploration
& Production segment.
Fair value of cash flow hedge derivatives amounted to euro 6
million (euro 13 million at December 31, 2012) and pertained to
the Gas & Power segment. Those derivatives were designated to
hedge exchange rate and commodity risk exposures as described in
note 7 Other current assets. Fair value of contracts
expiring beyond June 30, 2014 is disclosed in note 13
Other non-current receivables; fair value of contracts expiring
by June 30, 2014 is disclosed in note 17 Other current
liabilities and in note 7 Other current assets. The
effects of fair value evaluation of cash flow hedge derivatives
are disclosed in note 23 Shareholders equity and in
note 27 Operating expenses.
Other liabilities of euro 1,598 million (euro 1,635 million at
December 31, 2012) comprised advances received from Suez
following a long-term agreement for supplying natural gas and
electricity of euro 922 million (euro 968 million at December 31,
2012) and advances relating to amounts of gas of euro 370 million
(euro 380 million at December 31, 2012) which were off-taken
below the minimum take for the year by certain of Enis
clients, reflecting take-or-pay clauses contained in the
long-term sale contracts. Management believes that the underlying
gas volumes will be off-taken beyond the twelve-month time
horizon.
Liabilities with related parties are described in note 33
Transactions with related parties.
22 Assets held for sale and liabilities directly associated with assets held for sale
Assets held for sale and liabilities directly associated with assets held for sale of euro 486 million and euro 379 million essentially pertained to non-strategic assets in the Exploration & Production segment (euro 337 million and euro 354 million, respectively), to Finpipe GIE, a company that owns the natural gas transmission network in Belgium leased to the company Fluxys (euro 66 million and euro 25 million, respectively) and to the investment in Super Octanos CA pertaining to the Refining & Marketing segment (euro 52 million). During the course of the first half of 2013, Eni concluded the disposal of non-strategic assets of the Exploration & Production segment for a book value of euro 125 million (102 million British pound).
- 105 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
23 Shareholders equity
Non-controlling interest
(euro million) | Net profit |
Shareholders' equity |
||
First half 2012 |
First half 2013 |
December 31, 2012 |
June 30, 2013 |
|||||
Saipem SpA | 223 | (376 | ) | 3,216 | 2,639 | |||||
Società EniPower Ferrara Srl | 7 | 5 | 87 | 91 | ||||||
Snam SpA | 228 | |||||||||
Others | (4 | ) | (9 | ) | 195 | 138 | ||||
454 | (380 | ) | 3,498 | 2,868 |
Eni shareholders equity
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Share capital | 4,005 | 4,005 | ||||
Legal reserve | 959 | 959 | ||||
Reserve for treasury shares | 6,201 | 6,201 | ||||
Reserve related to the fair value of cash flow hedging derivatives net of the tax effect | (16 | ) | (15 | ) | ||
Reserve related to the fair value of available-for-sale financial instruments net of the tax effect | 144 | 44 | ||||
Other reserves | 204 | 211 | ||||
Cumulative currency translation differences | 942 | 1,095 | ||||
Treasury shares | (201 | ) | (201 | ) | ||
Retained earnings | 40,988 | 44,860 | ||||
Interim dividend | (1,956 | ) | ||||
Net profit for the period | 7,790 | 1,818 | ||||
59,060 | 58,977 |
Share capital
At June 30, 2013, the parent companys issued share capital
consisted of euro 4,005,358,876 represented by 3,634,185,330
ordinary shares without nominal value (same amounts as of
December 31, 2012).
On May 10, 2013, Enis Shareholders Meeting declared:
(i) to distribute a dividend of euro 0.54 a share, with the
exclusion of treasury shares held at the ex-dividend date, in
full settlement of the 2012 dividend of euro 1.08 a share, of
which euro 0.54 a share paid as interim dividend. The balance was
paid on May 23, 2013, to shareholders on the register on May 20,
2013, record date May 23; (ii) to cancel, for the portion not yet
implemented as of the date of the Shareholders Meeting, the
authorization for the Board of Directors to acquire treasury
shares as resolved at the Shareholders Meeting of July 16,
2012; (iii) to authorize the Board of Directors to purchase on
the Mercato Telematico Azionario in one or more
transactions and in any case within 18 months from the date of
the resolution up to a maximum number of 363,000,000
ordinary Eni shares, for a price of no less than euro 1,102
million and not more than the official price reported by the
Borsa Italiana for the shares on the trading day prior to each
individual transaction, plus 5%, and in any case up to a total
amount of euro 6,000 million, in accordance with the procedures
established in the Rules of the Markets organized and managed by
Borsa Italiana SpA. In order to respect the limit envisaged in
the third paragraph of Article 2357 of the Italian Civil Code,
the number of shares to be acquired and the relative amount shall
take into account the number and amount of Eni shares already
held in the portfolio.
Legal reserve
This reserve represents earnings restricted from the payment
of dividends pursuant to Article 2430 of the Italian Civil Code.
The legal reserve has reached the maximum amount required by the
Italian Law.
- 106 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Reserve for available-for-sale financial instruments and
cash flow hedging derivatives net of the related tax effect
The valuation at fair value of available-for-sale financial
instruments and cash flow hedging derivatives, net of the related
tax effect, consisted of the following:
Available-for-sale financial instruments |
Cash flow hedging derivatives |
Total |
||||
(euro million) | i | Gross reserve |
i |
Deferred tax liabilities |
i |
Net reserve |
i |
Gross reserve |
i |
Deferred tax liabilities |
i |
Net reserve |
i |
Gross reserve |
i |
Deferred tax liabilities |
i |
Net reserve |
Reserve as of December 31, 2012 | 148 | (4 | ) | 144 | (25 | ) | 9 | (16 | ) | 123 | 5 | 128 | |||||||||||||||
Changes of the period | (29 | ) | (29 | ) | (4 | ) | 1 | (3 | ) | (33 | ) | 1 | (32 | ) | |||||||||||||
Amount recognized in the profit and loss account | (73 | ) | 2 | (71 | ) | 7 | (3 | ) | 4 | (66 | ) | (1 | ) | (67 | ) | ||||||||||||
Reserve as of June 30, 2013 | 46 | (2 | ) | 44 | (22 | ) | 7 | (15 | ) | 24 | 5 | 29 |
Reserve for available-for-sale financial instruments of euro 44 million (euro 144 million at December 31, 2012), net of the related tax effect, comprised the fair value valuation of the residual interests in Galp Energia SGPS SA for euro 40 million and other securities for euro 4 million.
Other reserves |
Other reserves amounted to euro 211 million (euro 204 million at December 31, 2012) and related to: |
- | a reserve of euro 247 million represented an increase in Enis shareholders equity associated with a business combination under common control, whereby the parent company Eni SpA divested its subsidiary Snamprogetti SpA to Saipem SpA at a price higher than the book value of the interest transferred thus decreasing for an equal amount the non-controlling interest (same amount as of December 31, 2012); | |
- | a reserve of euro 157 million deriving from Eni SpAs equity (same amount as of December 31, 2012); | |
- | a reserve of euro 18 million related to the sale of treasury shares to Saipem managers upon exercise of stock options (same amount as of December 31, 2012); | |
- | a negative reserve of euro 6 million represented the impact on Enis shareholders equity associated with the acquisition of a non-controlling interest of 46.57% in the subsidiary Tigáz Zrt (euro 1 million at December 31, 2012); | |
- | a negative reserve of euro 124 million represented the impact on Enis shareholders equity associated with the acquisition of a non-controlling interest of 45.86% in the subsidiary Altergaz SA, now Eni Gas & Power France SA (same amount as of December 31, 2012); | |
- | a negative reserve of euro 87 million related to the revaluation of defined benefit plans, net of tax effect (same amount as of December 31, 2012); | |
- | a negative reserve of euro 5 million related to the share of "Other comprehensive income" on equity-accounted entities (negative for euro 7 million at December 31, 2012); | |
- | a negative reserve euro 1 million related to the share of "Other comprehensive income" on equity-accounted entities in relation to revaluations of defined benefit plans (same amount as of December 31, 2012). |
24 Other information
Main acquisitions
ASA Trade SpA
In March 2013, Eni finalized the purchase of a 100% interest
in ASA Trade SpA, a company marketing gas in Tuscany. The
allocation of the purchase cost of euro 29 million to assets and
liabilities was made on a preliminary basis.
- 107 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
The final allocation of the purchase costs is disclosed below:
ASA Trade SpA | ||
(euro million) | Carrying value | Fair value | ||
Current assets | 27 | 27 | ||
Goodwill | 24 | |||
Other non-current assets | 3 | 3 | ||
Assets acquired | 30 | 54 | ||
Current liabilities | 25 | 25 | ||
Liabilities acquired | 25 | 25 | ||
Eni's shareholders equity | 5 | 29 |
Net sales from operations and the net profit for the 2012 were as follows:
ASA Trade SpA | ||
(euro million) | 2012 | |
Net sales from operations | 53 | |
Net profit | 3 | |
Supplemental cash flow information
(euro million) | First half 2012 |
First half 2013 |
||
Effect of investment of companies included in consolidation and businesses | ||||||
Current assets | 108 | 26 | ||||
Non-current assets | 171 | 27 | ||||
Net borrowings | 46 | (5 | ) | |||
Current and non-current liabilities | (99 | ) | (19 | ) | ||
Net effect of investments | 226 | 29 | ||||
Purchase price | 226 | 29 | ||||
less: | ||||||
Cash and cash equivalents | (48 | ) | (1 | ) | ||
Cash flow on investments | 178 | 28 | ||||
Effect of disposal of consolidated subsidiaries and businesses | ||||||
Current assets | 1 | |||||
Non-current assets | 1 | |||||
Net borrowings | 5 | |||||
Current and non-current liabilities | (8 | ) | ||||
Net effect of disposals | (1 | ) | ||||
Gain on disposal | 2 | |||||
Non-controlling interest | (1 | ) | ||||
Selling price | ||||||
less: | ||||||
Cash and cash equivalents | (2 | ) | ||||
Cash flow on disposals | (2 | ) |
Investments in the first half of 2013 referred to the acquisition of ASA Trade SpA. Investments in the first half of 2012 referred to the acquisition of Nuon Belgium NV (now merged in Eni Gas & Power NV) and Nuon Power Generation Walloon NV (now Eni Power Generation NV) and to an acquisition of a business. Disposals in the first half of 2012 referred to the sale to third parties of the 100% stake of Star Gulf FZ Co and the divestment of the control stake (50%) of SAIRUS Llc.
- 108 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
25 Guarantees, commitments and risks
Guarantees
The amount of guarantees remained unchanged from the Annual
Report 2012.
Commitments and risks
The amount of commitments and risks remained unchanged from
the Annual Report 2012.
Managing companys risks
The main risks that the Company is facing and actively
monitoring and managing are described in the section "Risk
factors and uncertainties" of the "Financial
Review".
Fair value of financial instruments |
The classification of financial assets and liabilities, measured at fair value in the balance sheet, is provided according to the fair value hierarchy defined on the basis of the relevance of the inputs used in the measurement process. In particular, on the basis of the features of the inputs used in making the measurements, the fair value hierarchy shall have the following levels: |
(a) | Level 1: quoted prices (unadjusted) in active markets for identical financial assets or liabilities; | |
(b) | Level 2: measurements based on the basis of inputs, other than quoted prices above, which, for assets and liabilities that have to be measured, can be observed directly (e.g. prices) or indirectly (e.g. deriving from prices); | |
(c) | Level 3: inputs not based on observable market data. |
Financial instruments measured at fair value in the balance sheet as of June 30, 2013, were classified as follows: (i) level 1, "Other financial assets available for sale", "Non-hedging derivatives - Future" and "Other investments" valued at fair value; and (ii) level 2, derivative instruments different from "Future" included in "Other current assets", "Other non-current assets", "Other current liabilities" and "Other non-current liabilities". During the first half of 2013, no transfers were done between the different hierarchy levels of fair value. |
Legal Proceedings
Eni is a party to a number of civil actions and
administrative arbitral and other judicial proceedings arising in
the ordinary course of business.
The following is a summary of the most significant proceedings
currently pending for which significant developments occurred in
the first half of 2013 with respect to the situation reported in
the Annual Report 2012, including new proceedings and settled
proceedings. 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 cannot be estimated reliably.
1. Environment
(i) Syndial SpA (former EniChem SpA) - Summon for alleged
environmental damage caused by DDT pollution in the Lake Maggiore
- Prosecuting body: Ministry for the Environment. In May
2003, the Ministry for the Environment summoned Syndial (former
EniChem) to obtain a sentence condemning the Eni subsidiary to
compensate an alleged environmental damage caused by the activity
of the Pieve Vergonte plant in the years 1990 through 1996. With
a temporarily executive sentence dated July 3, 2008, the District
Court of Turin sentenced the subsidiary Syndial SpA to compensate
environmental damages amounting to euro 1,833.5 million, plus
legal interests that accrue from the filing of the decision.
Syndial and Eni technical-legal consultants have considered the
decision and the amount of the compensation to be without factual
and legal basis and have concluded that a negative outcome of
this
- 109 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
proceeding is unlikely. Particularly, Eni and its subsidiary deem the amount of the environmental damage to be absolutely wholly groundless as the sentence has been considered to lack sufficient elements to support such a material amount of the liability charged to Eni and its subsidiary with respect to the volume of pollutants ascertained by the Italian Environmental Minister. Based on these technical-legal advices also supported by external accounting consultants, in the Annual Report 2008 no provisions have been made against the proceeding. In July 2009, Syndial filed an appeal against the abovementioned sentence, and consequently the proceeding would continue before a second degree court. In the hearing of June 15, 2012, before the Second Degree Court of Turin, the Minister of the Environment, formalized trough the Board of State Lawyers its decision to not execute the sentence until a final verdict on the whole matter is reached. The second degree court requested a technical appraisal of the matter which is due to be filed no later than November 15, 2013. In compliance with the requirements of the CTU, Syndial filed its initial appraisal on June 7, 2013, while ISPRA filed its own appraisal on June 27, 2013. On July 10, 2013, the CTU filed a "draft technical appraisal" which, preliminary, resulted in favor of Syndial because agrees with the techniques and the projects provided for by the company for both the inland and external areas (Lake Maggiore, Torrente Marmazza, etc.). If properly implemented, these measures will be capable to remediate the environmental damage in accordance with the EU directive. Furthermore an administrative proceeding is ongoing regarding certain environmental works to clean-up and make safe the Pieve Vergonte site. Syndial filed an appeal against certain prescriptions of the Ministry of the Environment relating to the modes of executing the clean-up of soil and groundwater and extension of the scope of work to other nearby areas. The Administrative Court of the Piemonte Region rejected part of the Syndial appeal. A Syndial filed a counterclaim before a higher degree administrative court.
2. Court inquiries and of Other Regulatory
Authorities
(i) TSKJ Consortium Investigations by US, Italian, and other
Authorities. Snamprogetti Netherlands BV has a 25%
participation in the TSKJ Consortium companies. The remaining
participations are held in equal shares of 25% by KBR, Technip,
and JGC. Beginning in 1994 the TSKJ Consortium was involved in
the construction of natural gas liquefaction facilities at Bonny
Island in Nigeria. Snamprogetti SpA, the holding company of
Snamprogetti Netherlands BV, was a wholly owned subsidiary of Eni
until February 2006, when an agreement was entered into for the
sale of Snamprogetti to Saipem SpA and Snamprogetti was merged
into Saipem as of October 1, 2008. Eni holds a 43% participation
in Saipem. In connection with the sale of Snamprogetti to Saipem,
Eni agreed to indemnify Saipem for a variety of matters,
including potential losses and charges resulting from the
investigations into the TSKJ matter referred to below, even in
relation to Snamprogetti subsidiaries. In recent years the
proceeding was settled with the US Authorities and certain
Nigerian Authorities, which had been investing into the matter.
The proceeding in Italy: the events under
investigation covered the period since 1994 and also concerned
the period of time subsequent to the June 8, 2001, enactment of
Italian Legislative Decree No. 231 concerning the liability of
legal entities. The proceeding set by the Public Prosecutor of
Milan investigated Eni SpA and Saipem SpA for liability of legal
entities arising from offences involving alleged international
corruption charged to former managers of Snamprogetti SpA. The
Public Prosecutor of Milan requested Eni SpA and Saipem SpA to be
debarred from activities involving directly or indirectly
any agreement with the Nigerian National Petroleum
Corporation and its subsidiaries. In particular, the Public
Prosecutor claimed the inadequacy and violation of the
organizational, management and control model adopted to prevent
those offences charged to people subject to direction and
supervision. Subsequently, the Public Prosecutor of Milan, with
respect to the guarantee payment amounting to euro 24,530,580
even in the interest of Saipem SpA, renounced to contest the
decision of rejection of precautionary measures of
disqualification for Eni SpA and Saipem SpA. The charged crimes
involved alleged corruptive events that have occurred in Nigeria
after July 31, 2004. It is also stated the aggravating
circumstance that Snamprogetti SpA reported a relevant profit
(estimated at approximately $65 million). The Public Prosecutor
requested five former employees of Snamprogetti SpA (now Saipem)
and Saipem SpA (as legal entity incorporating Snamprogetti) to
stand trial. In the course of the proceeding, the Court dismissed
the case with respect to the position of the individuals who were
acting as plaintiffs for the expiration of the statute of
limitations while the proceeding continued for Saipem SpA.
Afterwards, the Court condemned Saipem SpA to pay a fine
amounting to euro 600,000 and the disgorgement of the guarantee
payment of euro 24,530,580, made by Snamprogetti Netherlands BV.
Saipem will file an appeal against the sentence issued by the
First Instance Court.
- 110 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
(ii) Gas metering. With the proceeding No. 11183/06 the
Public Prosecutor at the Court of Milan accused Eni, certain top
managers of Eni and of the Group companies of alleged breaches of
the Italian Criminal Law, starting from 2003, regarding the use
of instruments for measuring gas, in relation to the payments of
excise duties and the billing of clients as well as relations
with the Supervisory Authorities. The allegation regards,
interalia, the offense contemplated by Legislative Decree of June
8, 2001, No. 231, which establishes the liability of the legal
entity for crimes committed by its employee in the interests of
such legal entity, or to its advantage. Accordingly, notice of
the commencement of investigations was served upon Eni Group
companies (Eni, Snam Rete Gas and Italgas) as well as third party
companies. During the years, various sub-proceedings had been
dismissed from the main proceeding. To date, all these
proceedings were closed without consequences for Eni and its
managers.
On December 20, 2010, as a result of a further dismissal of
judicial position from the main proceeding concerning "Gas
metering excise", the Public Prosecutor of Milan notified to
nine employees and former employees of Eni (in particular
belonging to the Gas & Power Division) the conclusion of the
investigation related to the crime under the provisions of
Article No. 40 (violations pertaining to recognition and payment
of the excise on mineral oils) of Legislative Decree No. 504 of
October 26, 1995. The deed also disputed certain violations
pertaining to subtraction of taxable amounts and missed payments
of excise taxes on natural gas amounting to euro 0.47 billion and
euro 1.3 billion, respectively. The Duty Authority of Milan,
responsible for the collection of dodged taxes, considering the
documentation filed by Eni, reduced the amount initially claimed
by the Public Prosecutor to euro 114 million of dodged taxes. The
Duty Authority also stated that it would reassess that amount
considering further evidence arising from the criminal
proceeding. The Judge for Preliminary Hearing resolved to dismiss
the criminal proceeding against all defendants because the fact
did not constitute an offence. The Public Prosecutor filed an
appeal against this decision before the Third Instance Court. On
July 3, 2013, the Third Instance Court rejected all the claims
made by the Public Prosecutor. Also in this case, the decision of
the Judge for Preliminary Hearing to dismiss the proceeding
against all the defendants became final.
(iii) Algeria - Corruption investigation. Authorities
in Italy and in other countries are investigating allegations of
corrupt payments in connection with the award of certain
contracts to Saipem. On February 4, 2011, Eni received from the
Public Prosecutor of Milan information request pursuant to
Article 248 of the Italian Code of Criminal Procedure. The
notification was then forwarded to Enis subsidiary Saipem
SpA since this matter is primarily in its area of responsibility.
The request related to allegations of international corruption
and pertained to certain activities performed by Saipem Group
companies in Algeria (in particular the contract between Saipem
and Sonatrach relating to the construction of the GK3 gas
pipeline and the contract between Galsi, Saipem and Technip
relating to the engineering of the ground section of a gas
pipeline). The crime of international corruption is among the
offenses contemplated by Legislative Decree of June 8, 2001, No.
231, relating to corporate responsibility for crimes committed by
employees. Saipem promptly began to collect documentation in
response to the requests of the Public Prosecutor. The documents
were produced on February 16, 2011. Eni also filed documentation
relating to the MLE project (in which the Enis Exploration
& Production Division participates), with respect to which
investigations in Algeria are ongoing. On November 22, 2012, the
Public Prosecutor of Milan served Saipem a notice stating that it
had commenced an investigation for alleged liability of the
Company for international corruption in accordance to Article 25,
second and third paragraph of Legislative Decree No. 231/2001.
Furthermore the prosecutor requested the production of certain
documents relating to certain activities in Algeria.
Subsequently, on November 30, 2012, Saipem was served a notice of
seizure, then, on December 18, 2012, a request for documentation
and finally, on January 16, 2013, a search warrant was issued, in
order to acquire further documentation in particular relating to
certain intermediary contracts and sub-contracts entered into by
Saipem in connection with its Algerian business. On February 7,
2013, on mandate from the Public Prosecutor of Milan, the Italian
financial police visited Enis headquarters in Rome and San
Donato Milanese and executed searches and seized documents
relating to Saipems activity in Algeria. On the same
occasion, Eni was served a notice that an investigation had
commenced in accordance with Article 25, third and fourth
paragraph of Legislative Decree No. 231/2001 with respect to Eni,
Enis CEO, Enis former CFO, and another senior
- 111 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
manager. The investigation relates to alleged corruption
which, according to the Public Prosecutor, had occurred with
regard to certain contracts awarded to Saipem in Algeria up until
March 2010.
The former CEO and the former COO of the business unit
Engineering & Construction of Saipem, as well as other Saipem
employees and former employees are under investigation. Saipem
has promptly undertaken management and administrative changes,
irrespective of any liability that might result from the
investigations. Saipem has commenced an internal investigation in
relation to the contracts in question with the support of
external advisors; such internal investigation is conducted in
agreement with the statutory bodies deputed to the Companys
control and the Italian Public Prosecutor has been informed of
this internal investigation. Saipem provided Eni the report
prepared by its consultants and, as a listed company in Italy,
has made its own disclosures to the market. Saipem is cooperating
with the Italian Judicial Authority and is conveying to the
Italian prosecutors the results of its internal investigation. In
addition, Saipem has commenced a review aimed at verifying the
correct application of internal procedures and controls relating
to anti-corruption and prevention of illicit activities, with the
assistance of external consultants.
Moreover, Saipems Board resolved to initiate legal action
to protect the interests of the Company against certain former
employees and suppliers, reserving any further action if
additional elements emerge.
With the assistance of external advisors, Eni is conducting its
own internal investigation. Eni so far has completed the review
of the documents seized by the Milan Public Prosecutor and the
analysis of Enis internal procurement and vendor records
and has not found any evidence that Eni had intermediary or any
other contractual arrangements with the third parties under
investigation. The above mentioned proceeding has been unitized
in Italy with another proceeding relating to certain Enis
activities performed in Iraq and Kazakhstan. Investigations are
also ongoing in Algeria where the bank accounts of a
Saipems subsidiary, Saipem Contracting Algérie SpA, have
been blocked by the Algerian Authorities with a balance
equivalent to euro 83 million at current exchange rates. Those
bank accounts related to two ongoing projects in Algeria.
In August 2012, a notice of investigation was served to Saipem
Contracting Algérie SpA. Saipem Contracting Algérie SpA is
alleged to have taken advantage of the authority or influence of
representatives of a government owned industrial and trading
company in order to inflate prices in relation to contracts
awarded by said company. On January 30, 2013, the Judicial
Authority in Algeria ordered Saipems Algerian subsidiary to
stand trial and reaffirmed the blockage of the above mentioned
bank accounts. Saipem Contracting Algérie SpA has lodged an
appeal against this decision before the Supreme Court. On March
24, 2013, relevant authorities executed searches on Saipem
Contracting Algérie SpA headquarters. Furthermore, Saipem is
being investigated by the Judicial Authority in Algeria for
alleged corrupt payments. Other searches and seizure of evidence
and documents were executed at Saipem Contracting Algérie
relating to the above mentioned investigation.
(iv) Iraq - Kazakhstan. A criminal proceeding is pending before the Public Prosecutor of Milan in relation to alleged crimes of international corruption involving Enis activities in Kazakhstan regarding the management of the Karachaganak plant and the Kashagan project, as well as handling of assignment procedures of work contracts by Agip KCO. The crime of "international corruption" is sanctioned, in accordance to the Italian criminal code, by Legislative Decree June 8, 2001, No. 231, which holds legal entities liable for the crimes committed by their employees on their behalf. The Company has filed the documents collected and is fully collaborating with the Public Prosecutor. A number of managers and a former manager are involved in the investigation. The above mentioned proceeding has been reunified with another (the so-called "Iraq proceeding") regarding a parallel proceeding related to Enis activities in Iraq, disclosed in the following paragraphs. On June 21, 2011, Eni Zubair SpA and Saipem SpA in Fano (Italy) were notified that a search warrant had been issued to search the offices and homes of certain employees of the Group and of certain third parties. In particular the homes and offices of an employee of Eni Zubair and a manager of Saipem were searched by the Authorities. The accusation is of criminal conspiracy and corruption in relation with the activity of Eni Zubair in Iraq and of Saipem in the "Jurassic" project in Kuwait. The Public Prosecutor of Milan has associated Eni Zubair, Eni and Saipem with the accusations as a result of the alleged illicit actions of their employees. Eni considers those employees to have breached the Companys Code of Ethics. The Eni Zubair employee resigned and the Company, accepting the resignation, reserved the right to take action against the individual to defend its interests and subsequently commenced a legal action against the other persons mentioned in the seizure act. Notwithstanding that the Eni Group companies appear to be offended parties in respect of the illicit conduct under investigation associated with
- 112 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
these accusations, Eni SpA and Saipem SpA also received, at the same time the search warrant was issued, a notification pursuant to the Legislative Decree No. 231/2001. Eni SpA was notified by the Public Prosecutor of a request of extension of the preliminary investigations that has led up to the involvement of another employee as well as other suppliers in the proceeding. Eni performed a review of the whole matter also with the support of an external consulting firm which issued its final appraisal report on July 25, 2012. According to the opinion of its legal team, the Companys watch structure and Internal control committee, Saipem too commenced through its Internal Audit department an internal review about the project with the support of an external consultant. The Public Prosecutor of Milan requested Eni SpA to be debarred for one year and six months from performing any industrial activities involving the production sharing contract of 1997 with the Republic of Kazakhstan and in the subsequent administrative or commercial arrangements, or the prosecution of the mentioned activities under the supervision of a commissioner pursuant to article 15 of the Legislative Decree No. 231 of 2001. In the hearing of May 29, 2012, Eni legal team has filed a defensive memorandum; in August 1, 2012, the Public Prosecutor filed further documentation supporting the request of precautionary measures. After the hearing of November 14, 2012, the decision of the Judge for Preliminary Investigation is still pending. Following the defensive memorandum filed by Eni, the judge set a new hearing for July 10, 2013. After the hearing, on July 19, 2013 was communicated to Eni the filing of the decision. The Judge for Preliminary Investigation rejected the request for precautionary measures requested by the Public Prosecutor of Milan, because considered groundless.
(v) Libya. On June 10, 2011, Eni received by the US SEC a formal judicial request of collection and presentation of documents (subpoena) related to Eni s activity in Libya from 2008 until now. The subpoena is related to an ongoing investigation without further clarifications or specific alleged violations in connection to "certain illicit payments to Libyan officials" possibly violating the US Foreign Corruption Practice Act. At the end of December 2011, Eni received a request for the collection of further documentation aiming at integrating the subpoena previously received. Documentation and information requested have been collected by the relevant company functions and then forwarded to the US SEC. Following a number of contacts with the US SEC, in a meeting on October 16, 2012, Eni legal team provided additional documentations and clarifications. On April 29, 2013, the US SEC communicated to Eni the closing of the investigations on Eni's activities in Libya without further claims or other observations.
(vi) Inquiries in relation to alleged anticompetitive agreements in the area of elastomers - Prosecuting Body: European Commission. On November 29, 2006, the European Commission ascertaining anticompetitive agreements in the field of BR and ESBR elastomers fined Eni and its subsidiary Versalis SpA (former Polimeri Europa SpA) for an amount of euro 272.25 million. Eni and its subsidiary filed claims against this decision before the European Court of First Instance in February 2007. On July 13, 2011, the First Instance Court filed the decision to reduce the above mentioned fine to the amount of euro 181.5 million. In particular the Court annulled the increase of the fine related to the aggravating circumstance of recidivism. The companies involved in the decision and the European Commission filed a claim before the European Court of Justice. In addition the European Commission communicated to the decision to start an inquiry for the determination of a new sanction. The Company filed an appeal against this decision. On March 1, 2013, the Commission communicated to Eni and Versalis the commencement of a new proceeding for a new evaluation of the existence of the requirement for the application of an increased fine based on the aggravating circumstance of recidivism. In August 2007, with respect to the above mentioned decision of the European Commission, Eni submitted a request for a negative ascertainment with the Court of Milan aimed at proving the non-existence of alleged damages suffered by tire BR/SBR manufacturers. The Court of Milan declared the appeal inadmissible. Eni appealed against the Courts sentence. This appeal is still pending. In December 2012, the First Instance Court of the European Union reduced to euro 106 million the fine imposed to Eni and its subsidiary Polimeri Europa from the original amount of euro 132.16 million sanctioned on December 5, 2007, relating to alleged anti competitive practices in the in CR elastomers sector, with other chemical companies, in violation of Article 81 of EC Treaty and of Article 53 of SEE agreement. In March 2013, Eni and Versalis have appealed against this decision before the EU Court of Justice in order to obtain the complete annulment of the economic sanction. Also the European Commission has appealed against the decision. Pending the decision, Eni accrued a provision with respect to this proceeding.
- 113 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
3. Tax Proceedings
(i) Enis subsidiary in Indonesia. A tax proceeding is pending against Enis subsidiary Lasmo Sanga Sanga Ltd as the Tax Administration of Indonesia has questioned the application of a tax rate of 10% on the profit earned by the local branch of Enis subsidiary for fiscal years 2002 through 2009. Enis subsidiary, which is resident in the UK for tax purposes, believes that the 10% tax rate is warranted by the current treaty for the avoidance of double taxation. On the contrary, the Tax Administration of Indonesia has claimed the application of the local tax rate of 20%. The greater taxes due in accordance to the latter rate have been disbursed amounting to $134 million including interest expense. Enis subsidiary has filed an appeal claiming the opening of an amicable procedure to settle the matter and avoid bearing a tax regime not in compliance with the UK/Indonesia treaty. Eni accrued a provision with respect to this proceeding.
- 114 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
26 Revenues
The following is a summary of the main components of
"Revenues". For more information about changes in
revenues, see "Financial Review".
Net sales from operations were as follows:
(euro million) | First half 2012 |
First half 2013 |
||
Net sales from operations | 62,388 | 59,298 | ||||
Change in contract work in progress | 815 | (22 | ) | |||
63,203 | 59,276 | |||||
Net sales from operations were stated net of the following items:
(euro million) | First half 2012 |
First half 2013 |
||
Excise taxes | 6,513 | 6,010 | ||
Exchanges of oil sales (excluding excise taxes) | 1,064 | 822 | ||
Services billed to joint venture partners | 1,941 | 2,189 | ||
Sales to service station managers for sales billed to holders of credit cards | 1,007 | 968 | ||
10,525 | 9,989 |
Net sales from operations by industry segment are disclosed in
note 32 Information by industry segment.
Net sales from operations with related parties are disclosed in
note 33 Transactions with related parties.
27 Operating expenses
The following is a summary of the main components of "Operating expenses". For more information about changes in operating expenses, see "Financial Review".
Purchase, services and other
(euro million) | First half 2012 |
First half 2013 |
||
Production costs - raw, ancillary and consumable materials and goods | 36,899 | 36,043 | ||||
Production costs - services | 7,081 | 8,876 | ||||
Operating leases and other | 1,714 | 1,699 | ||||
Net provisions for contingencies | 472 | 172 | ||||
Other expenses | 404 | 551 | ||||
46,570 | 47,341 | |||||
less: | ||||||
- capitalized direct costs associated with self-constructed assets | (321 | ) | (192 | ) | ||
46,249 | 47,149 |
Services included brokerage fees related to Engineering &
Construction segment for euro 2 million (euro 3 million in the
first half of 2012).
New or increased risk provisions net of reversal of unused
provisions amounted to euro 172 million (euro 472 million in the
first half of 2012) and mainly regarded long-term construction
contracts for euro 92 million (euro 13 million in the first half
of 2012) and environmental risks for euro 55 million (euro 40
million in the first half of 2012), contract penalties and
litigations for euro 61 million (euro 335 million in the first
half of 2012). More information is provided in note 19
Provisions.
- 115 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Payroll and related costs
(euro million) | First half 2012 |
First half 2013 |
||
Payroll and related cost | 2,362 | 2,682 | ||||
less: | ||||||
- capitalized direct costs associated with self-constructed assets | (110 | ) | (115 | ) | ||
2,252 | 2,567 |
Stock-based compensation
In 2009, Eni suspended the incentive plan based on the stock
option assignment to managers of Eni and its subsidiaries as
defined in Article 2359 of the Italian Civil Code. No significant
changes were made to these plans as they were described in the
Annual Report 2012.
Average number of employees
The Group average number and break-down of employees by
category is reported below:
(number) | First half 2012 |
First half 2013 |
||
Senior managers | 1,460 | 1,460 | ||
Junior managers | 12,816 | 13,380 | ||
Employees | 36,434 | 38,907 | ||
Workers | 22,499 | 25,714 | ||
73,209 | 79,461 |
The average number of employees was calculated as the average between the number of employees at the beginning and end of the period. The average number of senior managers included managers employed and operating in foreign Countries, whose position is comparable to a senior manager status.
Other operating income (loss)
(euro million) | First half 2012 |
First half 2013 |
||
Net loss on non-hedging and trading derivatives | (367 | ) | (68 | ) | ||
Net loss on cash flow hedging derivatives | (5 | ) | (4 | ) | ||
Net income on fair value hedging derivatives | 62 | |||||
(372 | ) | (10 | ) |
Net loss on trading and non-hedging derivatives related to:
(i) gains and losses on fair value measurement and settlement of
commodity derivatives entered by the Gas & Power segment for
trading purposes in order to optimize the value of the
Groups assets (gas supply contracts, capacity entitlements,
storage sites) through strategies of asset-backed trading, as
well as proprietary trading (net gain of euro 28 million); (ii)
gains and losses on fair value measurement and settlement of
commodity derivatives which could not be elected for hedge
accounting under IFRS because they related to net exposure to
commodity risk (net loss of euro 97 million); (iii) fair value
evaluation at certain derivatives embedded in the pricing
formulas of long-term gas supply contracts in the Exploration
& Production segment (net gain of euro 1 million).
Net loss on cash flow hedging derivatives related to the
ineffective portion of the hedging relationship which was
recognized through profit and loss in the Gas & Power
segment.
Net loss on fair value hedging derivatives related to derivatives
entered into in order to hedge certain contracts with future
pricing for the sale and purchase of oil products.
Operating expenses with related parties are reported in note 33
Transactions with related parties.
- 116 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Depreciation, depletion, amortization and impairments
(euro million) | First half 2012 |
First half 2013 |
||
Depreciation, depletion and amortization | 4,580 | 4,543 | ||||
Impairments | 1,166 | 136 | ||||
less: | ||||||
- revaluations | (2 | ) | (48 | ) | ||
- capitalized direct costs associated with self-constructed assets | (3 | ) | (4 | ) | ||
5,741 | 4,627 |
28 Finance income (expense)
(euro million) | First half 2012 |
First half 2013 |
||
Finance income (expense) | ||||||
Finance income | 6,210 | 3,227 | ||||
Finance expense | (6,651 | ) | (3,809 | ) | ||
(441 | ) | (582 | ) | |||
Gain (loss) on derivative financial instruments | (200 | ) | (19 | ) | ||
(641 | ) | (601 | ) |
The break-down of net finance gains or losses is provided below:
(euro million) | First half 2012 |
First half 2013 |
||
Finance income (expense) related to net borrowings | ||||||
Interest and other finance expense on ordinary bonds | (352 | ) | (364 | ) | ||
Interest due to banks and other financial institutions | (177 | ) | (92 | ) | ||
Interest from banks | 12 | 24 | ||||
Interest and other income on financing receivables and securities held for non-operating purposes | 12 | 32 | ||||
(505 | ) | (400 | ) | |||
Exchange differences | ||||||
Positive exchange differences | 6,123 | 3,090 | ||||
Negative exchange differences | (5,972 | ) | (3,179 | ) | ||
151 | (89 | ) | ||||
Other finance income (expense) | ||||||
Capitalized finance expense | 70 | 79 | ||||
Interest and other income (expense) on financing receivables and securities held for operating purposes | 35 | (43 | ) | |||
Finance expense due to passage of time (accretion discount) (a) | (172 | ) | (132 | ) | ||
Other finance income (expense), net | (20 | ) | 3 | |||
(87 | ) | (93 | ) | |||
(441 | ) | (582 | ) |
(a) The item related to the increase in provisions for contingencies that are shown at present value in non-current liabilities.
Derivative financial instruments consisted of the following:
(euro million) | First half 2012 |
First half 2013 |
||
Derivatives on exchange rate | (141 | ) | (18 | ) | ||
Derivatives on interest rate | (59 | ) | 30 | |||
Options | (31 | ) | ||||
(200 | ) | (19 | ) |
Net loss from derivatives of euro 19 million (net loss of euro 200 million in the first half of 2012) was recognized in connection with fair value valuation of certain derivatives which lacked the formal criteria to be treated in accordance with hedge accounting under IFRS as they were entered into for amounts equal to the net exposure to exchange rate risk and interest rate risk, and as such, they cannot be referred to specific trade or financing transactions. Exchange rate derivatives were entered into in order to manage exposures to foreign currency exchange rates arising from the pricing formulas of commodities in the Gas & Power
- 117 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
segment. The lack of formal requirements to qualify these
derivatives as hedges under IFRS also entailed the recognition in
profit or loss of currency translation differences on assets and
liabilities denominated in currencies other than functional
currency, as this effect cannot be offset by changes in the fair
value of the related instruments. Net loss on options of euro 31
million related to the measurement at fair value of the options
embedded in the bonds convertible into ordinary shares of Galp
Energia SGPS SA (income of euro 2 million) and Snam SpA (loss of
euro 33 million). More information is provided in note 18
Long-term debt and current maturities of long-term debt.
More information is provided in note 33 Transactions with
related parties.
29 Income (expense) from investments
Share of profit (loss) of equity-accounted investments
(euro million) | First half 2012 |
First half 2013 |
||
Share of profit of equity-accounted investments | 357 | 240 | ||||
Share of loss of equity-accounted investments | (20 | ) | (42 | ) | ||
Decreases (increases) in provisions for losses on investments | 5 | 5 | ||||
342 | 203 |
More information is provided in note 10 Equity-accounted investments.
Other gain (loss) from investments
(euro million) | First half 2012 |
First half 2013 |
||
Dividends | 156 | 306 | ||
Gains on disposals, net | 8 | 101 | ||
Other income, net | 888 | 64 | ||
1,052 | 471 |
Dividend income for euro 306 million primarily related to the
Nigeria LNG Ltd (euro 199 million), Snam SpA (euro 43 million)
and Galp Energia SGPS SA (euro 23 million).
Net gains on disposals for the first half 2013 amounted to euro
101 million and related to the divestment of the 11.69% of the
share capital of Snam SpA for euro 67 million, the 8% of the
share capital of Galp SGPS SA for euro 30 million and the 50% of
the share capital of Bronberger & Kessler un Gilg &
Schweiger GmbH & Co KG for euro 4 million.
In the first half of 2013, other net income of euro 64 million
related to: (i) the reversal of the reserve related to the fair
value evaluation following the sale of the 8% of the share
capital of Galp Energia SGPS SA and the 11.69% of the share
capital of Snam SpA (euro 65 million and euro 8 million,
respectively); (ii) a revaluation of Ceska Refinerska AS (euro 21
million); (iii) the remeasurement at market fair value at the
date of the interim report 2013 of 288.7 million shares of Snam
SpA and 66.3 million of Galp Energia SGPS SA underlying
convertible bonds issued by Snam on January 18, 2013 and by Galp
on November 30, 2012 and for which was applied the fair value
option (loss for euro 6 million and euro 26 million,
respectively). In the first half of 2012, other net income of
euro 888 million related to an extraordinary income of euro 835
million recognized in connection with a capital increase made by
Galps subsidiary Petrogal whereby a new shareholder
subscribed its share by contributing a cash amount fairly in
excess of the net book value of the interest acquired.
- 118 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
30 Income taxes
(euro million) | First half 2012 |
First half 2013 |
||
Current taxes: | ||||||
- Italian subsidiaries | 361 | 280 | ||||
- foreign subsidiaries | 5,445 | 4,033 | ||||
5,806 | 4,313 | |||||
Net deferred taxes: | ||||||
- Italian subsidiaries | 58 | (492 | ) | |||
- foreign subsidiaries | 190 | 107 | ||||
248 | (385 | ) | ||||
6,054 | 3,928 |
The effective tax rate was 73.2% (60.0% in the first half of 2012) compared with a statutory tax rate of 44.4% (43.0% in the first half of 2012). This was calculated by applying the Italian statutory tax rate on corporate profit of 38.0%1 and a 3.9% corporate tax rate applicable to the net value of production as provided for by Italian laws. This difference is the consequence of the impact of the net profit reported by the foreign companies of the Exploration & Production segment which are subjected to a higher tax rate in respect to the Italian statutory tax rate.
31 Earnings per share
Basic earnings per ordinary share are calculated by dividing
net profit for the period attributable to Enis shareholders
by the weighted average number of ordinary shares issued and
outstanding during the period, excluding treasury shares. The
average number of ordinary shares used for the calculation of the
basic earnings per share outstanding for the first half of 2012
and 2013, was 3,622,731,494 and 3,622,797,043, respectively.
Diluted earnings per share are calculated by dividing net profit
for the period attributable to Enis shareholders by the
weighted average number of shares fully-diluted including shares
outstanding in the period, excluding treasury shares, including
the number of potential shares outstanding in connection with
stock-based compensation plans.
As of June 30, 2012 and 2013, there are no treasury shares that
could be potentially issued and, therefore, the weighted-average
number of shares used in the calculation of the basic earnings
coincides to the weighted-average number of shares used in the
calculation of diluted earnings.
First half 2012 |
First half 2013 |
|||
Average number of shares used for the calculation of the basic and diluted earnings per share | 3,622,731,494 | 3,622,797,043 | ||||
Enis net profit | (euro million) | 3,844 | 1,818 | |||
Basic earning per share | (euro per share) | 1.06 | 0.50 | |||
Diluted earning per share | (euro per share) | 1.06 | 0.50 | |||
Enis net profit - Continuing operations | (euro million) | 3,700 | 1,818 | |||
Basic earning per share | (euro per share) | 1.02 | 0.50 | |||
Diluted earning per share | (euro per share) | 1.02 | 0.50 | |||
Enis net profit - Discontinued operations | (euro million) | 144 | ||||
Basic earning per share | (euro per share) | 0.04 | ||||
Diluted earning per share | (euro per share) | 0.04 |
(1) Includes a 5.5 percentage points supplemental tax rate on taxable profit of energy companies in Italy (whose primary activity is the production and marketing of hydrocarbons and electricity and with annual revenues in excess of euro 25 million) effective from January 1, 2008 and further increases of 1 percentage point effective from January 1, 2009, pursuant to the Law Decree No. 112/2008 (converted into Law No. 133/2008) and 4 percentage points effective from January 1, 2011, pursuant the Law Decree No. 138/2011 (converted into Law No. 148/2011) which enlarged the scope of application to include renewable energy companies and gas transport and distribution companies.
- 119 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
32 Information by industry segment
Other activities | Discontinued operations | ||||
(euro million) | Exploration
& Production |
Gas & Power |
Refining &
Marketing |
Versalis |
Engineering
& Construction |
Corporate and
financial companies |
Snam |
Others |
Intragroup
profits |
Total |
Snam |
Intragroup
eliminations |
Continuing
operations |
|||||||||||||
First half 2012 | ||||||||||||||||||||||||||||||||||||
Net sales from operations (a) | 17,896 | 19,993 | 29,501 | 3,241 | 6,013 | 664 | 1,791 | 61 | (171 | ) | ||||||||||||||||||||||||||
Less: intersegment sales | (10,087 | ) | (1,167 | ) | (1,535 | ) | (182 | ) | (405 | ) | (602 | ) | (938 | ) | (17 | ) | ||||||||||||||||||||
Net sales to customers | 7,809 | 18,826 | 27,966 | 3,059 | 5,608 | 62 | 853 | 44 | (171 | ) | 64,056 | (853 | ) | 63,203 | ||||||||||||||||||||||
Operating profit | 9,552 | (641 | ) | (674 | ) | (229 | ) | 745 | (185 | ) | 1,076 | (145 | ) | 421 | 9,920 | (1,076 | ) | 496 | 9,340 | |||||||||||||||||
Provisions for contingencies | 37 | 273 | 12 | 1 | 17 | 96 | 13 | 36 | 485 | (13 | ) | 472 | ||||||||||||||||||||||||
Depreciation, amortization and impairments | 3,918 | 1,054 | 358 | 51 | 337 | 33 | 284 | 2 | (12 | ) | 6,025 | (284 | ) | 5,741 | ||||||||||||||||||||||
Share of profit (loss) of equity-accounted investments | 112 | 180 | 26 | 22 | 23 | 2 | 365 | (23 | ) | 342 | ||||||||||||||||||||||||||
Identifiable assets (b) | 59,105 | 17,303 | 14,265 | 3,362 | 14,422 | 823 | 18,568 | 460 | (468 | ) | 127,840 | |||||||||||||||||||||||||
Unallocated assets | 22,835 | |||||||||||||||||||||||||||||||||||
Equity-accounted investments | 2,462 | 2,132 | 873 | 36 | 164 | 842 | 375 | 36 | 6,920 | (375 | ) | 6,545 | ||||||||||||||||||||||||
Identifiable liabilities (c) | 14,387 | 7,598 | 6,238 | 696 | 5,378 | 1,462 | 2,624 | 2,990 | 116 | 41,489 | ||||||||||||||||||||||||||
Unallocated liabilities | 45,672 | |||||||||||||||||||||||||||||||||||
Capital expenditures | 4,455 | 85 | 290 | 66 | 546 | 54 | 493 | 8 | 143 | 6,140 | ||||||||||||||||||||||||||
First half 2013 | ||||||||||||||||||||||||||||||||||||
Net sales from operations (a) | 15,618 | 17,362 | 29,728 | 3,063 | 4,999 | 680 | 48 | (27 | ) | |||||||||||||||||||||||||||
Less: intersegment sales | (8,718 | ) | (644 | ) | (1,579 | ) | (150 | ) | (459 | ) | (622 | ) | (23 | ) | ||||||||||||||||||||||
Net sales to customers | 6,900 | 16,718 | 28,149 | 2,913 | 4,540 | 58 | 25 | (27 | ) | 59,276 | 59,276 | |||||||||||||||||||||||||
Operating profit | 7,436 | (559 | ) | (557 | ) | (278 | ) | (478 | ) | (154 | ) | (193 | ) | 76 | 5,293 | 5,293 | ||||||||||||||||||||
Provisions for contingencies | 34 | (57 | ) | 19 | 7 | 87 | 30 | 61 | (9 | ) | 172 | 172 | ||||||||||||||||||||||||
Depreciation, amortization and impairments | 3,851 | 161 | 192 | 48 | 356 | 30 | 2 | (13 | ) | 4,627 | 4,627 | |||||||||||||||||||||||||
Share of profit (loss) of equity-accounted investments | 78 | 86 | 15 | (1 | ) | 11 | 7 | 7 | 203 | 203 | ||||||||||||||||||||||||||
Identifiable assets (b) | 60,628 | 18,482 | 14,765 | 3,311 | 14,584 | 1,019 | 299 | (683 | ) | 112,405 | ||||||||||||||||||||||||||
Unallocated assets | 25,180 | |||||||||||||||||||||||||||||||||||
Equity-accounted investments | 2,216 | 1,639 | 301 | 127 | 185 | 14 | 36 | 4,518 | ||||||||||||||||||||||||||||
Identifiable liabilities (c) | 15,807 | 8,899 | 6,216 | 678 | 5,807 | 1,472 | 2,817 | (13 | ) | 41,683 | ||||||||||||||||||||||||||
Unallocated liabilities | 34,057 | |||||||||||||||||||||||||||||||||||
Capital expenditures | 4,893 | 85 | 210 | 111 | 490 | 107 | 5 | 30 | 5,931 |
(a) Before elimination of intersegment sales.
(b) Includes assets directly associated with the generation of
operating profit.
(c) Includes liabilities directly associated with the generation
of operating profit.
Environmental provisions incurred by Eni SpA due to
intercompany guarantees on behalf of Syndial have been reported
within the segment reporting unit "Other activities".
Intersegment revenues are conducted on an arms length
basis.
- 120 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
33 Transactions with related parties
In the ordinary course of its business Eni enters into transactions regarding: |
(a) | exchanges of goods, provision of services and financing with joint ventures, associates and non-consolidated subsidiaries; | |
(b) | exchanges of goods and provision of services with entities controlled by the Italian Government; | |
(c) | contributions to entities with a non-company form with the aim to develop solidarity, culture and research initiatives. In particular these related to: (i) Eni Foundation established by Eni as a non-profit entity with the aim of pursuing exclusively solidarity initiatives in the fields of social assistance, health, education, culture and environment as well as research and development; (ii) Eni Enrico Mattei Foundation established by Eni with the aim of enhancing, through studies, research and training initiatives, knowledge in the fields of economics, energy and environment, both at the national and international level. |
Transactions with related parties were conducted in the interest of Eni companies and, with exception of those with entities with the aim to develop solidarity, culture and research initiatives, on arms length basis. |
- 121 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Trade and other transactions with related parties
(euro million) | December 31, 2012 |
First half 2012 |
||
Costs |
Revenues |
||||
Name | Receivables and other assets |
Payables and other liabilities |
Guarantees |
Goods |
Services |
Other |
Goods |
Services |
Other |
Other operating (expense) income |
||||||||||
Continuing operations | ||||||||||||||||||||
Joint ventures and associates | ||||||||||||||||||||
Agiba Petroleum Co | 3 | 67 | 47 | |||||||||||||||||
Azienda Energia e Servizi Torino SpA | 60 | |||||||||||||||||||
Blue Stream Pipeline Co BV | 3 | 11 | 83 | |||||||||||||||||
Bronberger & Kessler und Gilg & Schweiger GmbH & Co KG | 9 | 44 | ||||||||||||||||||
CEPAV (Consorzio Eni per l'Alta Velocità) Uno | 66 | 19 | 6,122 | 1 | 5 | |||||||||||||||
CEPAV (Consorzio Eni per l'Alta Velocità) Due | 51 | 51 | 2 | 8 | ||||||||||||||||
EnBW Eni Verwaltungsgesellschaft mbH | 60 | 116 | ||||||||||||||||||
Gaz de Bordeaux SAS | 55 | |||||||||||||||||||
GreenStream BV | 9 | 21 | 68 | 1 | ||||||||||||||||
InAgip doo | 54 | 10 | 8 | 1 | ||||||||||||||||
Karachaganak Petroleum Operating BV | 28 | 56 | 655 | 114 | 1 | 2 | ||||||||||||||
KWANDA - Suporte Logistico Lda | 54 | 1 | 4 | |||||||||||||||||
Mellitah Oil & Gas BV | 7 | 47 | 76 | 4 | ||||||||||||||||
Petrobel Belayim Petroleum Co | 31 | 328 | 286 | 1 | 49 | |||||||||||||||
Raffineria di Milazzo ScpA | 20 | 9 | 322 | 192 | 5 | |||||||||||||||
Saipon Snc | 112 | 42 | 1 | |||||||||||||||||
Unión Fenosa Gas SA | 2 | 3 | 57 | 23 | ||||||||||||||||
Other (*) | 174 | 85 | 51 | 84 | 101 | 139 | 37 | 7 | ||||||||||||
683 | 708 | 6,272 | 739 | 1,168 | 1 | 570 | 117 | 7 | ||||||||||||
Unconsolidated entities controlled by Eni | ||||||||||||||||||||
Agip Kazakhstan North Caspian Operating Co NV | 236 | 172 | 290 | 483 | 2 | |||||||||||||||
Eni BTC Ltd | 154 | |||||||||||||||||||
Industria Siciliana Acido Fosforico - ISAF SpA (in liquidation) | 54 | 3 | 5 | |||||||||||||||||
Other (*) | 14 | 59 | 6 | 4 | 24 | 1 | 13 | 5 | 5 | |||||||||||
304 | 234 | 160 | 4 | 314 | 1 | 13 | 488 | 12 | ||||||||||||
987 | 942 | 6,432 | 743 | 1,482 | 2 | 583 | 605 | 19 | ||||||||||||
Entities controlled by the Government | ||||||||||||||||||||
Enel group | 16 | 8 | 3 | 225 | 43 | 48 | ||||||||||||||
Finmeccanica group | 30 | 50 | 6 | 19 | 12 | |||||||||||||||
Snam group | 182 | 482 | 46 | |||||||||||||||||
GSE - Gestore Servizi Energetici | 86 | 66 | 344 | 12 | 412 | 5 | ||||||||||||||
Terna group | 47 | 61 | 70 | 53 | 6 | 45 | 31 | 7 | 8 | |||||||||||
Other entities controlled by the Government (*) | 42 | 28 | 19 | 12 | 51 | |||||||||||||||
403 | 695 | 46 | 423 | 316 | 30 | 563 | 84 | 7 | 8 | |||||||||||
Pension funds | 1 | 11 | ||||||||||||||||||
1,390 | 1,638 | 6,478 | 1,166 | 1,809 | 32 | 1,146 | 689 | 26 | 8 | |||||||||||
Discontinued operations | ||||||||||||||||||||
Joint ventures and associates | ||||||||||||||||||||
Other (*) | 2 | |||||||||||||||||||
2 | ||||||||||||||||||||
Entities controlled by the Government | ||||||||||||||||||||
Enel group | 85 | 211 | ||||||||||||||||||
Other entities controlled by the Government (*) | 1 | |||||||||||||||||||
86 | 211 | |||||||||||||||||||
86 | 213 | |||||||||||||||||||
1,390 | 1,638 | 6,478 | 1,166 | 1,895 | 32 | 1,146 | 902 | 26 | 8 |
(*) Each individual amount included herein was lower than euro 50 million.
- 122 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
(euro million) | June 30, 2013 |
First half 2013 |
||
Costs |
Revenues |
|||||||
Name | Receivables and other assets |
Payables and other liabilities |
Guarantees |
Goods |
Services |
Other |
Goods |
Services |
Other |
Other operating (expense) income |
||||||||||
Continuing operations | |||||||||||||||||||||
Joint ventures and associates | |||||||||||||||||||||
Agiba Petroleum Co | 3 | 37 | 55 | ||||||||||||||||||
Blue Stream Pipeline Co BV | 8 | 54 | |||||||||||||||||||
CEPAV (Consorzio Eni per l'Alta Velocità) Uno | 61 | 19 | 6,122 | 3 | 15 | ||||||||||||||||
CEPAV (Consorzio Eni per l'Alta Velocità) Due | 48 | 82 | 29 | 71 | |||||||||||||||||
EnBW Eni Verwaltungsgesellschaft mbH | 7 | 196 | |||||||||||||||||||
GreenStream BV | 7 | 23 | 65 | 1 | |||||||||||||||||
InAgip doo | 51 | 12 | 2 | 14 | |||||||||||||||||
Karachaganak Petroleum Operating BV | 30 | 221 | 571 | 127 | 7 | 7 | |||||||||||||||
KWANDA - Suporte Logistico Lda | 52 | 4 | 1 | 4 | |||||||||||||||||
Mellitah Oil & Gas BV | 7 | 11 | 9 | 65 | 1 | ||||||||||||||||
Petrobel Belayim Petroleum Co | 28 | 225 | 275 | 14 | |||||||||||||||||
Petromar Lda | 71 | 14 | 44 | 5 | 30 | ||||||||||||||||
PetroSucre SA | 54 | 1 | |||||||||||||||||||
Raffineria di Milazzo ScpA | 25 | 17 | 165 | 3 | 104 | 3 | |||||||||||||||
Saipon Snc | 86 | 42 | |||||||||||||||||||
Unión Fenosa Gas Comercializadora SA | 20 | 129 | |||||||||||||||||||
Unión Fenosa Gas SA | 5 | 6 | 57 | 16 | 16 | ||||||||||||||||
Other (*) | 122 | 69 | 6 | 46 | 121 | 3 | 99 | 21 | 3 | ||||||||||||
677 | 748 | 6,271 | 628 | 995 | 13 | 544 | 168 | 3 | |||||||||||||
Unconsolidated entities controlled by Eni | |||||||||||||||||||||
Agip Kazakhstan North Caspian Operating Co NV | 193 | 164 | 254 | 21 | 357 | 2 | |||||||||||||||
Eni BTC Ltd | 155 | ||||||||||||||||||||
Industria Siciliana Acido Fosforico - ISAF SpA (in liquidation) | 54 | 1 | 4 | 1 | |||||||||||||||||
Nigerian Agip CPFA Ltd | 52 | ||||||||||||||||||||
Other (*) | 12 | 16 | 3 | 2 | 21 | 7 | 1 | 3 | |||||||||||||
259 | 233 | 162 | 2 | 275 | 21 | 7 | 359 | 5 | |||||||||||||
936 | 981 | 6,433 | 630 | 1,270 | 34 | 551 | 527 | 8 | |||||||||||||
Entities controlled by the Government | |||||||||||||||||||||
Enel group | 90 | 23 | 3 | 418 | 10 | 65 | (1 | ) | |||||||||||||
Snam group | 264 | 357 | 16 | 48 | 1,102 | 385 | 138 | ||||||||||||||
GSE - Gestore Servizi Energetici | 134 | 171 | 430 | 33 | 186 | 11 | 1 | ||||||||||||||
Terna group | 60 | 63 | 60 | 71 | 9 | 65 | 24 | 1 | 11 | ||||||||||||
Other entities controlled by the Government (*) | 53 | 79 | 4 | 53 | 28 | 2 | |||||||||||||||
601 | 693 | 16 | 545 | 1,644 | 42 | 674 | 240 | 2 | 10 | ||||||||||||
Pension funds and foundations | 1 | 2 | 17 | ||||||||||||||||||
1,537 | 1,675 | 6,449 | 1,175 | 2,916 | 93 | 1,225 | 767 | 10 | 10 |
(*) Each individual amount included herein was lower than euro 50 million.
Most significant transactions with joint ventures, associates and non-consolidated subsidiaries concerned: |
- | sale of natural gas to EnBW Eni Verwaltungsgesellschaft mbH; | |
- | provisions of specialized services in upstream activities and Enis share of expenses incurred to develop oil fields from Agiba Petroleum Co, Agip Kazakhstan North Caspian Operating Co NV, Karachaganak Petroleum Operating BV, Mellitah Oil & Gas BV, Petrobel Belayim Petroleum Co and, only for Karachaganak Petroleum Operating BV, purchase of oil products and for Agip Kazakhstan North Caspian Operating Co NV, provisions of services by the Engineering & Construction segment; services charged to Enis associates are invoiced on the basis of incurred costs; | |
- | payments of refining services to Raffineria di Milazzo ScpA in relation to incurred costs and supply of oil products on the basis of prices referred to the quotations on international oil markets, as they would be conducted on an arms length basis; | |
- | acquisition of natural gas transport services outside Italy from Blue Stream Pipeline Co BV and GreenStream BV; | |
- | transactions related to the planning and the construction of the tracks for high speed/high capacity trains from Milan to Bologna with CEPAV (Consorzio Eni per lAlta Velocità) Uno and related guarantees; | |
- | transactions related to the planning and the construction of the tracks for high speed/high capacity trains from Milan to Verona with CEPAV (Consorzio Eni per lAlta Velocità) Due; |
- 123 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
- | transactions with InAgip doo related to the redetermination of the interest in an offshore field located in the Adriatic Sea; | |
- | guarantees issued on behalf Saipon Snc in relation to contractual commitments related to the execution of project planning and realization; | |
- | planning, construction and technical assistance to support by KWANDA - Suporte Logistico Lda and Petromar Lda; | |
- | dividends receivables to be cashed in from PetroSucre SA; | |
- | performance guarantees given on behalf of Unión Fenosa Gas SA in relation to contractual commitments related to the results of operations and sales of LNG; | |
- | supply of natural gas to Unión Fenosa Gas Comercializadora SA; | |
- | guarantees issued in relation to the construction of an oil pipeline on behalf of Eni BTC Ltd; | |
- | services for the environmental restoration to Industria Siciliana Acido Fosforico - ISAF SpA (in liquidation); | |
- | debt due to Nigerian Agip CPFA Ltd for contribution to the pension fund of Nigerian companies. | |
The most significant transactions with entities controlled by the Italian Government concerned: | ||
- | sale of fuel oil and the sale and purchase of electricity and the acquisition of electricity transmission service and fair value of derivative financial instruments with Enel group; | |
- | acquisition of natural gas transportation, distribution and storage services from Snam group on the basis of tariffs set by the Authority for Electricity and Gas; | |
- | supply of natural gas to Snam group on the basis of prices referred to the quotations of the main energy commodities, as they would be conducted on an arms length basis; | |
- | sale and purchase of electricity and green certificates with GSE - Gestore Servizi Energetici; | |
- | sale and purchase of electricity, the acquisition of domestic electricity transmission service and the fair value of derivative financial instruments included in the prices of electricity related to sale/purchase transactions with Terna group. | |
Transactions with pension funds and foundation concerned: | ||
- | provisions to pension funds for euro 7 million; | |
- | contributions to Eni Foundation for euro 10 million and to Eni Enrico Mattei Foundation for euro 2 million. |
- 124 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Financing transactions with related parties
(euro million) | December 31, 2012 |
First half 2012 |
||
Name | Receivables |
Payables |
Guarantees |
Charges |
Gains |
|||||
Continuing operations | ||||||||||
Joint ventures and associates | ||||||||||
Bayernoil Raffineriegesellschaft mbH | 94 | 1 | ||||||||
Blue Stream Pipeline Co BV | 291 | 657 | 1 | 2 | ||||||
CARDÓN IV SA | 80 | |||||||||
CEPAV (Consorzio Eni per l'Alta Velocità) Due | 84 | |||||||||
GreenStream BV | 453 | 14 | ||||||||
Raffineria di Milazzo ScpA | 40 | 75 | 1 | |||||||
Société Centrale Electrique du Congo SA | 92 | |||||||||
Transmediterranean Pipeline Co Ltd | 82 | 3 | ||||||||
Other (*) | 94 | 63 | 12 | 1 | ||||||
935 | 354 | 828 | 2 | 21 | ||||||
Unconsolidated entities controlled by Eni | ||||||||||
Other (*) | 58 | 49 | 1 | 1 | ||||||
58 | 49 | 1 | 1 | |||||||
Entities controlled by the Government | ||||||||||
Cassa Depositi e Prestiti group | 883 | |||||||||
Snam group | 141 | |||||||||
1,024 | ||||||||||
2,017 | 403 | 829 | 2 | 22 |
(*) Each individual amount included herein was lower than euro 50 million.
(euro million) | June 30, 2013 |
First half 2013 |
||
Name | Receivables |
Payables |
Guarantees |
Charges |
Gains |
|||||
Continuing operations | ||||||||||
Joint ventures and associates | ||||||||||
Bayernoil Raffineriegesellschaft mbH | 90 | |||||||||
Blue Stream Pipeline Co BV | 296 | 662 | 1 | |||||||
CARDÓN IV SA | 133 | 4 | ||||||||
CEPAV (Consorzio Eni per l'Alta Velocità) Due | 158 | |||||||||
GreenStream BV | 437 | 1 | 13 | |||||||
Raffineria di Milazzo ScpA | 60 | 68 | 1 | |||||||
Société Centrale Electrique du Congo SA | 92 | 5 | ||||||||
Transmediterranean Pipeline Co Ltd | 66 | 1 | ||||||||
Unión Fenosa Gas SA | 138 | |||||||||
Other (*) | 88 | 38 | 55 | 4 | ||||||
966 | 473 | 893 | 56 | 23 | ||||||
Unconsolidated entities controlled by Eni | ||||||||||
Other (*) | 63 | 61 | 1 | 1 | ||||||
63 | 61 | 1 | 1 | |||||||
Entities controlled by the Government | ||||||||||
Cassa Depositi e Prestiti group | 3 | |||||||||
3 | ||||||||||
1,029 | 534 | 894 | 56 | 27 |
(*) Each individual amount included herein was lower than euro 50 million.
- 125 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Most significant transactions with joint ventures, associates and non-consolidated subsidiaries concerned: |
- | bank debt guarantees issued on behalf of Blue Stream Pipeline Co BV, CEPAV (Consorzio Eni per lAlta Velocità) Due and Raffineria di Milazzo ScpA; | |
- | financing loans granted to Bayernoil Raffineriegesellschaft mbH for capital expenditures in refining plants, to CARDÓN IV SA for the exploration and development activities of a gas field and to Société Centrale Electrique du Congo SA for the construction of an electric plant in Congo; | |
- | the financing of the construction of natural gas transmission facilities and transport services with GreenStream BV and Transmediterranean Pipeline Co Ltd; | |
- | a cash deposit at Enis financial companies on behalf of Blue Stream Pipeline Co BV and Unión Fenosa Gas SA; | |
- | income from Cassa Depositi e Prestiti group for interests on the remaining receivable relating to the sale of 30% interest less one share of Snam SpA. |
Impact of transactions and positions with related parties on the balance sheet, profit and loss account and statement of cash flows
The impact of transactions and positions with related parties on the balance sheet consisted of the following:
(euro million) | December 31, 2012 |
June 30, 2013 |
||
Total |
Related parties |
Impact % |
Total |
Related parties |
Impact % |
|||||||
Trade and other receivables | 28,747 | 2,714 | 9.44 | 28,679 | 1,873 | 6.53 | ||||||
Other current assets | 1,624 | 8 | 0.49 | 1,391 | 61 | 4.39 | ||||||
Other non-current financial assets | 1,229 | 642 | 52.24 | 1,132 | 591 | 52.21 | ||||||
Other non-current assets | 4,400 | 43 | 0.98 | 3,841 | 41 | 1.07 | ||||||
Current financial liabilities | 2,223 | 403 | 18.13 | 2,904 | 534 | 18.39 | ||||||
Trade and other payables | 23,581 | 1,616 | 6.85 | 22,343 | 1,641 | 7.34 | ||||||
Other current liabilities | 1,437 | 6 | 0.42 | 1,221 | 13 | 1.06 | ||||||
Other non-current liabilities | 1,977 | 16 | 0.81 | 1,941 | 21 | 1.08 |
The impact of transactions with related parties on the profit and loss accounts consisted of the following:
(euro million) | First half 2012 |
First half 2013 |
||
Total |
Related parties |
Impact % |
Total |
Related parties |
Impact % |
|||||||
Continuing operations | ||||||||||||||
Net sales from operations | 63,203 | 1,835 | 2.90 | 59,276 | 1,992 | 3.36 | ||||||||
Other income and revenues | 751 | 26 | 3.46 | 370 | 10 | 2.70 | ||||||||
Purchases, services and other | 46,249 | 2,996 | 6.48 | 47,149 | 4,177 | 8.86 | ||||||||
Payroll and related costs | 2,252 | 11 | 0.49 | 2,567 | 7 | 0.27 | ||||||||
Other operating income (expense) | (372 | ) | 8 | .. | (10 | ) | 10 | .. | ||||||
Financial income | 6,210 | 22 | 0.35 | 3,227 | 27 | 0.84 | ||||||||
Financial expense | 6,651 | 2 | 0.03 | 3,809 | 56 | 1.47 | ||||||||
Discontinued operations | ||||||||||||||
Total revenues | 1,311 | 213 | 16.25 | |||||||||||
Operating expenses | 731 | 86 | 11.76 |
Transactions with related parties were part of the ordinary course of Enis business and were mainly conducted on an arms length basis.
- 126 -
Eni Condensed consolidated interim financial statements / Notes to the Consolidated Financial Statements |
Main cash flows with related parties are provided below:
(euro million) | First half 2012 |
First half 2013 |
||
Revenues and other income | 1,861 | 2,002 | ||||
Costs and other expenses | (2,436 | ) | (3,666 | ) | ||
Other operating income (loss) | 8 | 10 | ||||
Net change in trade and other receivables and liabilities | (291 | ) | 35 | |||
Net interests | 20 | (29 | ) | |||
Net cash provided from operating activities - Continuing operations | (838 | ) | (1,648 | ) | ||
Net cash provided from operating activities - Discontinued operations | 126 | |||||
Net cash provided from operating activities | (712 | ) | (1,648 | ) | ||
Capital expenditures in tangible and intangible assets | (571 | ) | (518 | ) | ||
Change in accounts payable in relation to investments/divestments | (117 | ) | (150 | ) | ||
Change in financial receivables | 22 | 994 | ||||
Net cash used in investing activities | (666 | ) | 326 | |||
Change in financial liabilities | 17 | 128 | ||||
Net cash used in financing activities | 17 | 128 | ||||
Total financial flows to related parties | (1,361 | ) | (1,194 | ) |
The impact of cash flows with related parties consisted of the following:
(euro million) | First half 2012 |
First half 2013 |
||
Total |
Related parties |
Impact % |
Total |
Related parties |
Impact % |
|||||||
Cash provided from operating activities | 8,422 | (712 | ) | .. | 4,752 | (1,648 | ) | .. | ||||||||
Cash used in investing activities | (6,582 | ) | (666 | ) | 10.12 | (2,652 | ) | 326 | .. | |||||||
Cash used in financing activities | 1,297 | 17 | 1.31 | (1,981 | ) | 128 | .. |
34 Significant non-recurring events and operations
In the first half of 2012 and 2013, no non-recurring events and operations were reported.
35 Positions or transactions deriving from atypical and/or unusual operations
In the first half of 2012 and 2013, no transactions deriving from atypical and/or unusual operations were reported.
36 Subsequent events
In July 2013, Eni and China National Petroleum Corporation (CNPC) closed the sale of 28.57% of the share capital of the subsidiary Eni East Africa, which currently owns 70% interest in Area 4, for an agreed price equal to $4,210 million, adjusted for contractual balances provided until the date of closing. CNPC indirectly acquires, through its 28.57% equity investment in Eni East Africa, a 20% interest in Area 4, while Eni will retain the 50% interest through the remaining stake in Eni East Africa. CNPCs entrance into Area 4 is strategically significant for the project because of the worldwide importance of the company in the upstream and downstream sectors. In addition, the planned activities of the Joint Study Agreement progressed to develop the promising shale gas block located in the Sichuan Basin in China.
- 127 -
Eni Condensed consolidated interim financial statements / List of Eni's subsidiaries |
List of Enis subsidiaries for the first half 2013
Subsidiary | Country of incorporation | Eni's share of net profit % | ||
EXPLORATION & PRODUCTION | ||||
Eni Angola SpA | Italy | 100.00 | ||
Eni East Africa SpA | Italy | 100.00 | ||
Eni Mediterranea Idrocarburi SpA | Italy | 100.00 | ||
Eni Mozambico SpA | Italy | 100.00 | ||
Eni Timor Leste SpA | Italy | 100.00 | ||
Eni West Africa SpA | Italy | 100.00 | ||
Eni Zubair SpA | Italy | 100.00 | ||
Ieoc SpA | Italy | 100.00 | ||
Società Adriatica Idrocarburi SpA | Italy | 100.00 | ||
Società Ionica Gas SpA | Italy | 100.00 | ||
Società Oleodotti Meridionali - SOM SpA | Italy | 70.00 | ||
Società Petrolifera Italiana SpA | Italy | 99.96 | ||
Tecnomare - Società per lo Sviluppo delle Tecnologie Marine SpA | Italy | 100.00 | ||
Agip Caspian Sea BV | Netherlands | 100.00 | ||
Agip Energy and Natural Resources (Nigeria) Ltd | Nigeria | 100.00 | ||
Agip Karachaganak BV | Netherlands | 100.00 | ||
Agip Oil Ecuador BV | Netherlands | 100.00 | ||
Burren Energy (Bermuda) Ltd | Bermuda | 100.00 | ||
Burren Energy (Services) Ltd | United Kingdom | 100.00 | ||
Burren Energy Congo Ltd | British Virgin Islands | 100.00 | ||
Burren Energy India Ltd | United Kingdom | 100.00 | ||
Burren Energy Ltd | Cyprus | 100.00 | ||
Burren Energy Plc | United Kingdom | 100.00 | ||
Burren Resources Petroleum Ltd | Bermuda | 100.00 | ||
Burren Shakti Ltd | Bermuda | 100.00 | ||
Eni AEP Ltd | United Kingdom | 100.00 | ||
Eni Algeria Exploration BV | Netherlands | 100.00 | ||
Eni Algeria Ltd Sàrl | Luxembourg | 100.00 | ||
Eni Algeria Production BV | Netherlands | 100.00 | ||
Eni Ambalat Ltd | United Kingdom | 100.00 | ||
Eni America Ltd | United States of America | 100.00 | ||
Eni Angola Exploration BV | Netherlands | 100.00 | ||
Eni Angola Production BV | Netherlands | 100.00 | ||
Eni Arguni I Ltd | United Kingdom | 100.00 | ||
Eni Australia BV | Netherlands | 100.00 | ||
Eni Australia Ltd | United Kingdom | 100.00 | ||
Eni BB Petroleum Inc | United States of America | 100.00 | ||
Eni Bukat Ltd | United Kingdom | 100.00 | ||
Eni Bulungan BV | Netherlands | 100.00 | ||
Eni Canada Holding Ltd | Canada | 100.00 | ||
Eni CBM Ltd | United Kingdom | 100.00 | ||
Eni China BV | Netherlands | 100.00 | ||
Eni Congo SA | Republic of the Congo | 100.00 | ||
Eni Croatia BV | Netherlands | 100.00 | ||
Eni Cyprus Ltd | Cyprus | 100.00 | ||
Eni Dación BV | Netherlands | 100.00 | ||
Eni Denmark BV | Netherlands | 100.00 | ||
Eni East Sepinggan Ltd | United Kingdom | 100.00 | ||
Eni Elgin/Franklin Ltd | United Kingdom | 100.00 | ||
Eni Energy Russia BV | Netherlands | 100.00 | ||
Eni Engineering E&P Ltd | United Kingdom | 100.00 | ||
Eni Exploration & Production Holding BV | Netherlands | 100.00 | ||
Eni Gabon SA | Gabon | 99.96 | ||
Eni Ganal Ltd | United Kingdom | 100.00 | ||
Eni Gas & Power LNG Australia BV | Netherlands | 100.00 | ||
Eni Ghana Exploration and Production Ltd | Ghana | 100.00 | ||
Eni Hewett Ltd | United Kingdom | 100.00 | ||
Eni India Ltd | United Kingdom | 100.00 | ||
Eni Indonesia Ltd | United Kingdom | 100.00 | ||
Eni International NA NV Sàrl | Luxembourg | 100.00 | ||
Eni International Resources Ltd | United Kingdom | 100.00 | ||
Eni Investments Plc | United Kingdom | 100.00 | ||
Eni Iran BV | Netherlands | 100.00 | ||
Eni Iraq BV | Netherlands | 100.00 | ||
Eni Ireland BV | Netherlands | 100.00 |
- 128 -
Eni Condensed consolidated interim financial statements / List of Eni's subsidiaries |
Subsidiary | Country of incorporation | Eni's share of net profit % | ||
Eni JPDA 03-13 Ltd | United Kingdom | 100.00 | ||
Eni JPDA 06-105 Pty Ltd | Australia | 100.00 | ||
Eni JPDA 11-106 BV | Netherlands | 100.00 | ||
Eni Kenya BV | Netherlands | 100.00 | ||
Eni Krueng Mane Ltd | United Kingdom | 100.00 | ||
Eni Lasmo Plc | United Kingdom | 100.00 | ||
Eni Liberia BV | Netherlands | 100.00 | ||
Eni LNS Ltd | United Kingdom | 100.00 | ||
Eni Mali BV | Netherlands | 100.00 | ||
Eni Marketing Inc | United States of America | 100.00 | ||
Eni Middle East BV | Netherlands | 100.00 | ||
Eni Middle East Ltd | United Kingdom | 100.00 | ||
Eni MOG Ltd (in liquidation) | United Kingdom | 100.00 | ||
Eni Muara Bakau BV | Netherlands | 100.00 | ||
Eni Norge AS | Norway | 100.00 | ||
Eni North Africa BV | Netherlands | 100.00 | ||
Eni North Ganal Ltd | United Kingdom | 100.00 | ||
Eni Oil & Gas Inc | United States of America | 100.00 | ||
Eni Oil Algeria Ltd | United Kingdom | 100.00 | ||
Eni Oil Holdings BV | Netherlands | 100.00 | ||
Eni Pakistan (M) Ltd Sàrl | Luxembourg | 100.00 | ||
Eni Pakistan Ltd | United Kingdom | 100.00 | ||
Eni Papalang Ltd | United Kingdom | 100.00 | ||
Eni Petroleum Co Inc | United States of America | 100.00 | ||
Eni Petroleum US Llc | United States of America | 100.00 | ||
Eni Polska spólka z ograniczona odpowiedzialnoscia | Poland | 100.00 | ||
Eni Popodi Ltd | United Kingdom | 100.00 | ||
Eni Rapak Ltd | United Kingdom | 100.00 | ||
Eni RD Congo SPRL | Democratic Republic of the Congo | 100.00 | ||
Eni South Salawati Ltd | United Kingdom | 100.00 | ||
Eni TNS Ltd | United Kingdom | 100.00 | ||
Eni Togo BV | Netherlands | 100.00 | ||
Eni Transportation Ltd | United Kingdom | 100.00 | ||
Eni Trinidad and Tobago Ltd | Trinidad & Tobago | 100.00 | ||
Eni Tunisia BV | Netherlands | 100.00 | ||
Eni UHL Ltd | United Kingdom | 100.00 | ||
Eni UK Holding Plc | United Kingdom | 100.00 | ||
Eni UK Ltd | United Kingdom | 100.00 | ||
Eni UKCS Ltd | United Kingdom | 100.00 | ||
Eni Ukraine Holdings BV | Netherlands | 100.00 | ||
Eni Ukraine Llc | Ukraine | 100.00 | ||
Eni ULT Ltd | United Kingdom | 100.00 | ||
Eni ULX Ltd | United Kingdom | 100.00 | ||
Eni US Operating Co Inc | United States of America | 100.00 | ||
Eni USA Gas Marketing Llc | United States of America | 100.00 | ||
Eni USA Inc | United States of America | 100.00 | ||
Eni Venezuela BV | Netherlands | 100.00 | ||
Eni Vietnam BV | Netherlands | 100.00 | ||
Eni West Timor Ltd | United Kingdom | 100.00 | ||
First Calgary Petroleums LP | United States of America | 100.00 | ||
First Calgary Petroleums Partner Co ULC | Canada | 100.00 | ||
Hindustan Oil Exploration Co Ltd | India | 47.18 | ||
Ieoc Exploration BV | Netherlands | 100.00 | ||
Ieoc Production BV | Netherlands | 100.00 | ||
Lasmo Sanga Sanga Ltd | Bermuda | 100.00 | ||
Nigerian Agip Exploration Ltd | Nigeria | 100.00 | ||
Nigerian Agip Oil Co Ltd | Nigeria | 100.00 | ||
OOO 'Eni Energhia' | Russia | 100.00 | ||
GAS & POWER | ||||
ASA Trade SpA | Italy | 100.00 | ||
EniPower Mantova SpA | Italy | 86.50 | ||
EniPower SpA | Italy | 100.00 | ||
LNG Shipping SpA | Italy | 100.00 | ||
Società EniPower Ferrara Srl | Italy | 51.00 | ||
Trans Tunisian Pipeline Co SpA (former Trans Tunisian Pipeline Co Ltd) | Italy | 100.00 |
- 129 -
Eni Condensed consolidated interim financial statements / List of Eni's subsidiaries |
Subsidiary | Country of incorporation | Eni's share of net profit % | ||
Adriaplin Podjetje za distribucijo zemeljskega plina doo Ljubljana | Slovenia | 51.00 | ||
Distrigas LNG Shipping SA | Belgium | 100.00 | ||
Eni G&P France BV | Netherlands | 100.00 | ||
Eni G&P Trading BV | Netherlands | 100.00 | ||
Eni Gas & Power France SA | France | 99.80 | ||
Eni Gas & Power GmbH | Germany | 100.00 | ||
Eni Gas & Power NV | Belgium | 100.00 | ||
Eni Gas Transport Services SA (in liquidation) | Switzerland | 100.00 | ||
Eni Power Generation NV | Belgium | 100.00 | ||
Eni Wind Belgium NV | Belgium | 100.00 | ||
Finpipe GIE | Belgium | 63.33 | ||
Société de Service du Gazoduc Transtunisien SA - Sergaz SA | Tunisia | 66.67 | ||
Société pour la Construction du Gazoduc Transtunisien SA - Scogat SA | Tunisia | 100.00 | ||
Tigáz Tiszántúli Gázszolgáltató Zártkörûen Mûködõ Részvénytársaság | Hungary | 97.01 | ||
Tigáz-Dso Földgázelosztó kft | Hungary | 97.01 | ||
REFINING & MARKETING | ||||
Costiero Gas Livorno SpA | Italy | 65.00 | ||
Ecofuel SpA | Italy | 100.00 | ||
Eni Fuel Centrosud SpA | Italy | 100.00 | ||
Eni Fuel Nord SpA | Italy | 100.00 | ||
Eni Rete oil&nonoil SpA | Italy | 100.00 | ||
Eni Trading & Shipping SpA | Italy | 100.00 | ||
Petrolig Srl | Italy | 70.00 | ||
Petroven Srl | Italy | 68.00 | ||
Raffineria di Gela SpA | Italy | 100.00 | ||
Eni Austria GmbH | Austria | 100.00 | ||
Eni Benelux BV | Netherlands | 100.00 | ||
Eni Ceská Republika Sro | Czech Republic | 100.00 | ||
Eni Deutschland GmbH | Germany | 100.00 | ||
Eni Ecuador SA | Ecuador | 100.00 | ||
Eni France Sàrl | France | 100.00 | ||
Eni Hungaria Zrt | Hungary | 100.00 | ||
Eni Iberia SLU | Spain | 100.00 | ||
Eni Marketing Austria GmbH | Austria | 100.00 | ||
Eni Mineralölhandel GmbH | Austria | 100.00 | ||
Eni Romania Srl | Romania | 100.00 | ||
Eni Schmiertechnik GmbH | Germany | 100.00 | ||
Eni Slovenija doo | Slovenia | 100.00 | ||
Eni Slovensko Spol Sro | Slovakia | 100.00 | ||
Eni Suisse SA | Switzerland | 100.00 | ||
Eni Trading & Shipping BV | Netherlands | 100.00 | ||
Eni Trading & Shipping Inc | United States of America | 100.00 | ||
Eni USA R&M Co Inc | United States of America | 100.00 | ||
Esain SA | Ecuador | 100.00 | ||
VERSALIS | ||||
Versalis SpA | Italy | 100.00 | ||
Dunastyr Polisztirolgyártó Zártkoruen Mukodo Részvénytársaság | Hungary | 100.00 | ||
Eni Chemicals Trading (Shanghai) Co Ltd | China | 100.00 | ||
Polimeri Europa France SAS | France | 100.00 | ||
Polimeri Europa GmbH | Germany | 100.00 | ||
Polimeri Europa UK Ltd | United Kingdom | 100.00 | ||
Versalis International SA | Belgium | 100.00 | ||
Versalis Pacific Trading (Shanghai) Co Ltd | China | 100.00 |
- 130 -
Eni Condensed consolidated interim financial statements / List of Eni's subsidiaries |
Subsidiary | Country of incorporation | Eni's share of net profit % | ||
ENGINEERING & CONSTRUCTION | ||||
Denuke Scarl | Italy | 23.71 | ||
Saipem SpA | Italy | 43.12 | ||
Servizi Energia Italia SpA | Italy | 43.12 | ||
SnamprogettiChiyoda SAS di Saipem SpA | Italy | 43.07 | ||
Andromeda Consultoria Tecnica e Representações Ltda | Brazil | 43.12 | ||
Boscongo SA | Republic of the Congo | 43.12 | ||
Construction Saipem Canada Inc | Canada | 43.12 | ||
ER SAI Caspian Contractor Llc | Kazakhstan | 21.56 | ||
ERS - Equipment Rental & Services BV | Netherlands | 43.12 | ||
ERSAI Marine Llc | Kazakhstan | 21.56 | ||
Global Petroprojects Services AG | Switzerland | 43.12 | ||
Moss Maritime AS | Norway | 43.12 | ||
Moss Maritime Inc | United States of America | 43.12 | ||
North Caspian Service Co | Kazakhstan | 43.12 | ||
Petrex SA | Peru | 43.12 | ||
Professional Training Center Llc | Kazakhstan | 21.56 | ||
PT Saipem Indonesia | Indonesia | 43.12 | ||
Saigut SA de Cv | Mexico | 43.12 | ||
Saimexicana SA de Cv | Mexico | 43.12 | ||
Saipem (Beijing) Technical Services Co Ltd | China | 43.12 | ||
Saipem (Malaysia) Sdn Bhd | Malaysia | 17.84 | ||
Saipem (Nigeria) Ltd | Nigeria | 38.55 | ||
Saipem (Portugal) Comércio Marítimo, Sociedade Unipessoal Lda | Portugal | 43.12 | ||
Saipem America Inc | United States of America | 43.12 | ||
Saipem Asia Sdn Bhd | Malaysia | 43.12 | ||
Saipem Australia Pty Ltd | Australia | 43.12 | ||
Saipem Canada Inc (former Snamprogetti Canada Inc) | Canada | 43.12 | ||
Saipem Contracting (Nigeria) Ltd | Nigeria | 42.23 | ||
Saipem Contracting Algérie SpA | Algeria | 43.12 | ||
Saipem Contracting Netherlands BV | Netherlands | 43.12 | ||
Saipem do Brasil Serviçõs de Petroleo Ltda | Brazil | 43.12 | ||
Saipem Drilling Co Private Ltd | India | 43.12 | ||
Saipem Drilling Norway AS | Norway | 43.12 | ||
Saipem India Projects Ltd | India | 43.12 | ||
Saipem Ingenieria y Construcciones SLU | Spain | 43.12 | ||
Saipem International BV | Netherlands | 43.12 | ||
Saipem Libya Llc - SA.LI.CO. Llc | Libya | 43.12 | ||
Saipem Ltd | United Kingdom | 43.12 | ||
Saipem Luxembourg SA | Luxembourg | 43.12 | ||
Saipem Maritime Asset Management Luxembourg Sàrl | Luxembourg | 43.12 | ||
Saipem Mediteran Usluge doo (in liquidation) | Croatia | 43.12 | ||
Saipem Misr for Petroleum Services SAE | Egypt | 43.12 | ||
Saipem Norge AS | Norway | 43.12 | ||
Saipem Offshore Norway AS | Norway | 43.12 | ||
Saipem SA | France | 43.12 | ||
Saipem Services México SA de Cv | Mexico | 43.12 | ||
Saipem Services SA | Belgium | 43.12 | ||
Saipem Singapore Pte Ltd | Singapore | 43.12 | ||
Saipem UK Ltd (in liquidation) | United Kingdom | 43.12 | ||
Saipem Ukraine Llc | Ukraine | 43.12 | ||
Sajer Iraq Co for Petroleum Services Trading General Contracting & Transport Llc | Iraq | 25.87 | ||
Saudi Arabian Saipem Ltd | Saudi Arabia | 25.87 | ||
Sigurd Rück AG | Switzerland | 43.12 | ||
Snamprogetti Engineering & Contracting Co Ltd | Saudi Arabia | 30.18 | ||
Snamprogetti Engineering BV | Netherlands | 43.12 | ||
Snamprogetti Ltd (in liquidation) | United Kingdom | 43.12 | ||
Snamprogetti Lummus Gas Ltd | Malta | 42.69 | ||
Snamprogetti Netherlands BV | Netherlands | 43.12 | ||
Snamprogetti Romania Srl | Romania | 43.12 | ||
Snamprogetti Saudi Arabia Co Ltd Llc | Saudi Arabia | 43.12 | ||
Sofresid Engineering SA | France | 43.11 | ||
Sofresid SA | France | 43.12 | ||
Sonsub International Pty Ltd | Australia | 43.12 |
- 131 -
Eni Condensed consolidated interim financial statements / List of Eni's subsidiaries |
Subsidiary | Country of incorporation | Eni's share of net profit % | ||
OTHER ACTIVITIES | ||||
Ing. Luigi Conti Vecchi SpA | Italy | 100.00 | ||
Syndial SpA - Attività Diversificate | Italy | 100.00 | ||
CORPORATE AND FINANCIAL COMPANIES | ||||
Agenzia Giornalistica Italia SpA | Italy | 100.00 | ||
Eni Adfin SpA | Italy | 99.63 | ||
Eni Corporate University SpA | Italy | 100.00 | ||
EniServizi SpA | Italy | 100.00 | ||
Serfactoring SpA | Italy | 48.82 | ||
Servizi Aerei SpA | Italy | 100.00 | ||
Banque Eni SA | Belgium | 100.00 | ||
Eni Finance International SA | Belgium | 100.00 | ||
Eni Finance USA Inc | United States of America | 100.00 | ||
Eni Insurance Ltd | Ireland | 100.00 | ||
Eni International BV | Netherlands | 100.00 |
- 132 -
Certification pursuant to rule
154-bis paragraph 5 of the Legislative Decree No.
58/1998 (Testo Unico della Finanza)
1. | The
undersigned Paolo Scaroni and Massimo Mondazzi, in their
respective role as Chief Executive Officer and officer
responsible for the preparation of financial reports of
Eni, also pursuant to rule 154-bis, paragraphs 3
and 4 of Legislative Decree No. 58 of February 24, 1998,
hereby certify that internal controls over financial
reporting in place for the preparation of the condensed
consolidated interim financial statements as of June 30,
2013 and during the period covered by the report, were: |
|||
2. | Internal controls over financial reporting in place for the preparation of the 2013 condensed consolidated interim financial statements have been defined and the evaluation of their effectiveness has been assessed based on principles and methodologies adopted by Eni in accordance with the Internal Control-Integrated Framework Model issued by the Committee of Sponsoring Organizations of the Treadway Commission, which represents an internationally-accepted framework for the internal control system. To the end of the present certification, the certifying officers have considered the disclosure published on page 69 in the paragraph other information about Enis subsidiary Saipem, which is consolidated on a line-by-line basis in Enis first half report of 2013 being a controlled entity of Eni. |
|||
3. | In addition, we certify that: | |||
3.1 | These condensed consolidated interim financial statements as of June 30, 2013: | |||
a) | have been prepared in accordance with applicable international accounting standards recognised by the European Community pursuant to Regulation (CE) No. 1606/2002 of the European Parliament and European Council of July 19, 2002; |
|||
b) | orrespond to the information in the accounting books and entries; | |||
c) | fairly and truly represent the financial position, the performance and the cash flows of the issuer and the companies included in the scope of consolidation as of, and for, the period presented in this report. |
|||
3.2 | The interim operating and financial review includes a reliable analysis of the material events occurred during the first half of 2013 and their impact on condensed consolidated interim financial statements, as well as a description of the main risks and uncertainties for the second half of the year. The interim operating and financial review contains a reliable analysis of the disclosure on significant related-partly transactions. |
July 31, 2013
/s/ Paolo Scaroni Paolo Scaroni Chief Executive Officer |
/s/ Massimo Mondazzi Massimo Mondazzi Chief Financial Officer |
- 133 -
Report of Independent Auditors
- 134 -
Paolo Scaroni meets Armando Guebuza in Mozambique
Changara, August 13, 2013 - The President of the
Republic of Mozambique, Armando Guebuza, and Enis CEO,
Paolo Scaroni, met today in Changara, mineral district of Tete
Province in western Mozambique, to discuss Enis ongoing
activities and projects in the country.
During the meeting, Paolo Scaroni, along with Claudio Descalzi,
COO of Eni E&P, updated the President of the Republic on the
progress of ongoing strategic projects . The tax agreement with
the Mozambican authorities relating to the sale of 28.57% of Eni
East Africas shares to China National Petroleum Corp (CNPC)
was also announced. The agreement enables the payment, as at
August 23, of 400 million U.S. dollars and the construction of a
75 MW power plant in Cabo Delgado province.
During the visit, Enis sustainability initiatives in
Mozambique were also discussed. Enis support of
Mozambiques infrastructure development, including the
reconstruction of the coastal road between Palma and Pemba, along
with training, childcare, health and maternity initiatives were
also discussed.
Eni is the operator of Area 4 with a 50% participating interest.
The other partners of the joint venture are CNPC (20%),
GalpEnergia (10%), KOGAS (10%) and ENH (10%).
Company Contacts:
Press Office: Tel. +39.0252031875 -
+39.0659822030
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +39. 800 11 22 34 56
Switchboard: +39-0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Web site: www.eni.com
Venezuelas Minister of Petroleum, Rafael Ramirez, meets Enis CEO, Paolo Scaroni
Caracas, August 29, 2013 - Rafael Ramirez,
Venezuelas Minister of Petroleum, and Paolo Scaroni, CEO of
Eni, met in Caracas to discuss activities and joint projects in
Venezuela.
During the meeting, Mr. Scaroni along with Claudio Descalzi, COO
of Eni E&P, shared with Minister Ramirez the progress and
future activities of development of projects related to the Perla
super-giant field project, one of the largest gas fields
discovered in recent years, and the Junín-5 heavy oil field
project.
In particular, PDVSA and Eni agreed to create a new mixed
enterprise (PDVSA 60%, Eni 40%) to exploit Perlas
condensate reserves (approximately 170 million barrels).
Eni has been present in Venezuela since 1998. The company
participated in the development of the heavy oil block Junín-5
located in the Orinoco oil belt, where production begun in March.
The Junín-5 block has a capacity of 35 billion barrels of
oil (boe) equivalent certificates in place and is jointly
operated by two mixed enterprises formed by PDVSA (60%) and Eni
(40%): PetroJunín, for the development and production, and Petro
Bicentenario for the construction and operation of a refinery in
the Jose Industrial Complex, with a 350,000 barrels per day
capacity.
In Venezuela Eni is also co-operator of Cardón IV, the operating
company which manages the Perla super-giant gas field, which has
reserves of gas in place estimated to be approximately 17
Trillion cubic feet (Tcf), or 3.1 billion barrels of oil
equivalent. Perla shareholders, following the entry of PDVSA in
the project, will be PDVSA (35%), Eni (32.5%) and Repsol (32.5%).
Eni also holds a participating interest in Petrosucre, the
operating company of the Corocoro offshore field (PDVSA 74%, Eni
26%), with a net production of approximately 10,000 barrels of
oil per day.
Company Contacts:
Press Office: Tel. +39.0252031875 -
+39.0659822030
Freephone for shareholders (from Italy): 800940924
Freephone for shareholders (from abroad): +39. 800 11 22 34 56
Switchboard: +39-0659821
ufficio.stampa@eni.com
segreteriasocietaria.azionisti@eni.com
investor.relations@eni.com
Web site: www.eni.com