Eni SpA (E) reported adjusted first quarter 2011 earnings per ADR of $1.67 (61 Euro cents per share), breezing past the Zacks Consensus Estimate at $1.12. The quarter’s earnings were 21% above $1.38 per ADR (50 Euro cents per share) earned in the year-earlier quarter.

Total revenue jumped 15.6% to €29.01 billion ($39.65 billion) in the quarter from the year-ago revenue of €25.09 billion ($34.291 billion).

The quarterly performance was driven by strong oil and gas prices, better product margins, and solid onshore construction and offshore drilling activities.

Operational Performance

Total liquids and gas production in the quarter was 1,684 thousand barrels of oil equivalent per day (MBoe/d), down 8.6% year over year, mainly due to the shutdown of operations at several Libya fields and GreenStream pipeline activity because of the political turmoil.

Liquids production in the quarter was 899 thousand barrels per day (MBbl/d), down 11.1% from the year-ago level of 1,011 MBbl/d. Natural gas production declined 5.6% at 4,356 million cubic feet per day (MMcf/d), reflecting less production from Libya, partly offset by strong contributions from Nigeria, Congo and Egypt.

The company’s gas sales during the quarter were 32.33 billion cubic meters (Bcm), up 6.0% year over year, attributable mainly to better business in the Italian market.


As of March 31, 2011, the company had cash and cash equivalents of €1.92 billion ($2.62 billion) and long-term debt (including current portions) of €21.27 billion ($29.07 billion).  The debt-to-capitalization ratio stood at approximately 27.6%.

In the reported quarter, net cash generated by operating activities amounted to €4.19 billion ($5.73 billion). Capital expenditure was €2.87 billion ($3.92 billion) in the quarter. 


With the expected strengthening of the global economic scenario along with production ramp up in the existing fields of Nigeria, Egypt, Angola and the United Kingdom, we believe that Eni offers ample long-term visibility into profitability in the coming quarters.

However, we are concerned about Eni’s refining business as its underlying fundamentals are still weak and political disturbances in Middle East will likely suppress the company’s production. Immense competition from peers such as Statoil ASA (STO) is also a threat to the company. Our long-term Neutral recommendation remains unchanged at this stage. Eni currently holds a Zacks #3 Rank, which translates into a Hold rating.

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