(Recasts, adds CEO comment from strategy presentation, outlook)
By Oleg Vukmanovic and Stephen Jewkes
MILAN, July 31 Eni on Thursday laid out
plans to sell assets, including a multi-billion dollar stake in
oil service firm Saipem, and downsize its ailing refinery
business to help fund its transformation into a leaner oil and
In a strategy update, new Chief Executive Claudio Descalzi
said he would axe "useless activity" and runaway costs as part
of a major shake-up at the Italian major which is looking to
save over 1.7 billion euros by 2018.
Top of the list is cutting refining capacity in Italy by
half, exploring options to sell all or part of its $5 billion
dollar stake in Saipem and shedding up to 20 percent
of its giant Rovuma gas field in Mozambique.
"We like Saipem but it's not core to be in a contractor
company ... It's more a strategic move for us than a need for
cash," Descalzi said during his presentation in London.
Earlier in July sources told Reuters Eni's new management
planned to press on with the sale of a stake in Saipem so it
could focus on the more lucrative business of finding oil and
Proceeds from the group's planned 11 billion euros of
disposals will be used to accelerate its makeover into a slimmer
exploration and production (E&P) player focused on reserve
growth in sub-Saharan Africa and Asia as it targets an annual
output growth of 3 percent.
In Mozambique, Eni expects to take a final investment
decision on its Rovuma gas field and several floating LNG
production plants later this year, Descalzi and other Eni
executives said at the meeting.
State-controlled Eni holds a 50 percent stake in
Mozambique's Area 4 field, part of the Rovuma basin, which
contains reserves of around 90 trillion cubic feet (tcf).
Earlier on Thursday, Eni posted a 50 percent rise in net
profit but missed second-quarter forecasts for oil and gas
output due mainly to unrest in Libya which has traditionally
accounted for some 15 percent of its production.
The company, which expects lower gas sales for the year,
said the Libyan crisis drove a rare 12.6 percent drop in profit
in its exploration and production business.
That strategy was on show earlier when Eni announced a
potential new 500 million barrels of oil equivalent gas
discovery offshore Gabon, where it has stepped up exploration.
"The reorganisation under way shows E&P will continue to be
the jewel in the crown of Eni in the future," said Nicolo
Sartori, energy analyst at the Institute for International
Affairs in Rome.
"But the focus on E&P also means diversifying geographically
to spread risk, in particular into Asia and non-conventional
markets," he said.
Eni, Africa's biggest foreign oil producer, is slowly
shifting focus away from the north to sub-Saharan nations, where
new finds in Mozambique, Congo and Ghana offer steadier returns.
It is also pursuing opportunities in Asia and earlier announced
a production sharing agreement in Myanmar.
Descalzi, former head of the E&P division, faces growing
investor calls to address Eni's over-reliance on a handful of
unstable producers in places such as Egypt and Libya. Oil theft
also put the brakes on output in Nigeria, analysts say.
In the second quarter Eni said its adjusted net profit was
0.87 billion euros, below a Reuters analyst sounding of eight
analysts of 1.012 billion euros ($1.36 billion).
The positive impact from gas contract renegotiations,
especially with Russia's Gazprom, and a better
performance from Saipem helped offset weakness at the
exploration and production division.
The E&P division saw a drop in operating profit to 2.981
billion euro, Eni said, while confirming it expected hydrocarbon
output for the year to be substantially in line with 2013.
($1 = 0.7465 Euros)
(Reporting by Stephen Jewkes and Oleg Vukmanovic Editing by
Jeremy Gaunt and Robin Pomeroy)