UPDATE 2-Eni announces big gas discovery off Mozambique

Wed Aug 1, 2012 5:41am EDT

* Eni makes makes "new and important" gas find

* Output growth in 2012 underpinned by Libya

* Q2 adj net 1.46 bln euros vs consensus 1.542 bln

* Interim dividend rises to 0.54 euros

By Stephen Jewkes

MILAN, Aug 1 (Reuters) - Italian oil and gas group Eni said on Wednesday it had made a "new and important" natural gas discovery at its bumper Mamba field off Mozambique.

State-controlled Eni, the world's sixth-biggest international oil group, also said it expected output for the year to increase but only thanks to a recovery of production in Libya which is expected to return to pre-war levels by year end.

Libya, which previously accounted for some 15 percent of its output, will offset delays at important start-ups, the shutdown of the Elgin-Franklin platform in the North Sea, and the rapid rise in sabotage and thefts in Nigeria, Eni said.

Eni, one of the largest foreign oil and gas producers in Africa, said the new discovery at its Mozambique field would take gas in place to an estimated 1.974 billion cubic metres.

Over the past year, Eni has dispelled some concern about its profitability and long-term growth potential by sealing a deal with Russia's Rosneft and scoring exploration successes in Norway and, notably, in Mozambique.

"There was some disappointment on the upstream performance, but that's more than offset by the enthusiasm for new discoveries like Mozambique," said Jason Kenney, an analyst with Santander.

The Mamba field in Mozambique is Eni's biggest gas discovery as operator. The group has 70 percent of the find and is prepared to bring partners on board to help fund the estimated $50 billion it will take to bring it to production.

"There was a real buzz in the offices when the discovery was announced last year. It was clear from the start it was a major discovery," a source close to the company told Reuters.

Key projects in Africa represent some 55 percent of Eni's volumes, the highest proportion of any big oil major.

State-controlled Eni is in the process of selling its controlling stake in gas grid operator Snam in a deal that could raise around 7 billion euros in cash and remove 11 billion euros in debt from its balance sheet.

The group, which is also selling a 33 percent stake in Portugal's GALP, intends to use the cash to cut its debt to better focus on oil and gas production.

"Eni will be transformed by the sale of Snam and the strengthening of its balance sheet," Kenney said.

MARKET MISS

Eni missed expectations when it reported an underlying adjusted net profit in the second quarter of 1.46 billion euros, undermined by weakness in its gas marketing and refining divisions as well as higher exploration costs. That compared to a Reuters poll of nine analysts that had forecast an average of 1.542 billion euros.

At 0830 GMT Eni shares were up 0.42 percent while the European oil and gas sector was up 0.02 percent.

"It reported a loss of 369 million euros at its gas and power division which is worse than last year's result even though it includes benefits from its renegotiation of gas contracts," a Milan-based analyst said.

The group renegotiated its long-term gas supply contracts with Russia's Gazprom in March with retroactive effect for 2011.

Eni said it would offer an interim dividend of 0.54 euros compared to 0.52 euros a year earlier. The group's policy envisages a rise in its dividend in line with OECD inflation.

Eni has excluded any extraordinary dividend relating to the sell down of its Snam stake but some analysts have said the company could sweeten its dividend policy further down the line.

"Through the divestment of our stakes in Snam and Galp our balance sheet will be transformed, securing our capacity to finance robust long-term growth in any market environment. Our confidence in Eni's outlook underpins my proposal of an interim dividend of 0.54 euros per share," Eni CEO Paolo Scaroni said.