* Proposes raising 2014 dividend to 1.12 euros from 1.10
* Cuts annual output growth target by 1 pct to 3 pct over
* Says could sell stake in Mozambique Area 4 gas field
* Aims to raise cashflow
* Cuts spending plans for next four years by 5 pct
By Sarah Young and Giancarlo Navach
LONDON, Feb 13 Italy's Eni said it
would increase payouts to investors and reduce spending over the
next four years, despite cutting its annual forecast for output
growth, falling in behind Europe's other big oil firms on
dividends and costs.
To help fund the growing dividend, Eni also flagged a
possible further stake sale in huge gas fields it has found off
the coast of Mozambique, as it said it would target asset
disposals of 9 billion euros ($12.3 billion) over four years.
Like other big oil companies, Eni is facing calls from
investors to control spending and return spare cash as they
worry about rising costs and returns if oil prices drop.
Italy's biggest listed company said on Thursday it was
targeting a dividend of 1.12 euros ($1.52) a share on 2014
earnings - having just lifted it to 1.10 euros in 2013 from 1.08
Announcing its strategy for 2014 to 2017, Eni also said it
planned to cut capital expenditure by 5 percent from an earlier
plan and target substantially higher operating cashflow
"The 5 percent capital expenditure reduction is the main
takeaway for me, which combined with the step up in cashflow
provides clear line of sight for investors on dividend growth,"
Bernstein analyst Oswald Clint said.
On the New York Stock Exchange, Eni was trading up 1.2 pct
at $46.34 while in Milan the stock earlier closed at 16.98
euros, down 0.2 percent
The higher dividend and larger cash flow targets came
despite the company's downgrade to annual production growth.
Eni cut its target for output growth to 3 percent a year
between 2014 and 2017, lower than a previous forecast of more
than 4 percent out to 2016, to reflect output disruption in
Nigeria and Libya, and falling gas demand.
Cuts to capital spending and higher dividends have also been
announced by Eni's larger rivals Royal Dutch Shell and
Total, during a fourth quarter results season that has
seen big oil companies across Europe and the U.S. fail to lift
profits and pledge to sell assets.
Chief executive Paolo Scaroni said the company was
considering reducing its stake in the Area 4 gas field in
Mozambique to 35 percent from the current 50 percent after
companies expressed interest.
"We will analyse potential buyers. We are looking for a
potential partner who is also a buyer of gas, possibly in the
region," he told reporters at a press conference in London.
Last year Eni sold a 20 percent stake in the gas-rich
offshore field to Chinese oil company CNPC in a $4.21 billion
Eni said it was targeting cash flow of about 15 billion
euros this year and next and 17 billion over the two years after
that, up from 11 billion euros in 2013, fuelled by the capital
spending cut and disposals.
Capital spending over the next four years would now come in
at 54 billion euros, 5 percent lower than the previous plan.
At 9 billion euros, the value of disposals planned by the
world's No. 6 oil major over the next three years lags the 12.9
billion worth of sales from 2012 and 2013, which included
proceeds of 2.2 billion euros from its investment in Arctic
SMALL PROFITABILITY, HUGE BUREAUCRACY
Production setbacks in Nigeria and Libya, countries where it
does not expect a pick-up in output until next year, have
hindered the company, but Scaroni said Eni was also frustrated
with progress in Iraq.
Eni wants to invest more to lift output there, but is being
thwarted by bureaucracy, he said.
"We are asking ourselves, is it worth it? Is it worth it to
stay in Iraq with all these problems, small profitability, huge
bureaucracy," he said, adding that he had also spoken to the
"Either you remove the obstacles or we remove ourselves out
of the country," he said he told them.
Halted output at the vast Kashagan oilfield in Kazakhstan
has also affected Eni's production. It said it believed
production would regain the level expected originally in 2015.
Eni's fourth quarter adjusted operating profit, announced
earlier on Thursday, fell by 29 percent to 3.52 billion euros,
hit by the production setbacks and a strengthening of the euro.
The company said the outlook was tough and it expected gas
sales, refining volumes and retail sales to fall slightly this
year as economic weakness persists at home and in Europe.
Eni also said on Thursday that it had made a large oil and
gas discovery off the coast of Congo, which Equita analysts said
could be worth one billion euros.