30 July 2016, Sweetcrude, Abuja — The resurgence of violence in the Niger Delta has started to take its toll on oil and gas companies in Nigeria, as Eni disclosed that it lost 13,000 barrels of crude oil equivalent per day in the first half of 2016.
Chief Executive Officer of Eni, Claudio Descalzi told analysts that is a poor financial performance for the second quarter of 2016 was as a result of disruption in its production in Nigeria, among others.
According to him, Eni’s final group net loss of 446 million Euro in second quarter 2016, contrasts with a net profit of 498 million Euro in second quarter 2015, as low oil prices, a poor trading environment, a four-month shutdown at its southern Italian Val d’Agri oil field, and sabotage at Nigerian installations sapped earnings.
Descalzi, however, said it hoped to resume production at the southern Italy field within weeks.
The company’s adjusted operating profit in second quarter 2016 was 188 million euro, 88 percent less than its 1.55 billion Euro in the 2015 period – bringing it on a similar scale to Shell’s 93 per cent collapse in earnings reported July 28 which was also related to low prices and Nigerian disruption.
Eni oil and gas production fell by 2.2 percent to 1.715 million barrels of oil equivalent per day (boe/d), with liquids down 5.6 percent at 852,000 b/d although gas increased by 0.8 percent at 4.70 billion cubic feet per day (ft³/d).
Descalzi, however, disclosed that for the first half of 2016, output was up 0.5 percent at 1.734 million boe/d, arguing that production “beat expectations, offsetting the suspension of activity in Val d’Agri and the disruptions in Nigeria.”
According to him, realised second quarter prices were 27 percent lower for oil at $40.58/b and 33 percent less for gas at $3.11/1,0000 ft³ – an aggregate $29.30/boe, down 30 percent.
Descalzi told analysts that it is maintaining its full year 2016 production guidance at 1.76 million boe/d, noting that the new Egyptian Sooros gas field in which it and BP are partners is already producing 70,000 boe/d gross and ramping up, and that the giant Kashagan oil field in Kazakhstan will return to production this October.
The company said it has achieved five of its six main start-ups for 2016, including Norway’s Goliat oil field, and Egypt’s Nooros gas field (with BP) expected to produce 120,000 boe/d gross by end-2016.
Descalzi said that Eni is now drilling the fifth well on its giant Zohr field, in the southern part of the structure, having lately drilled wells 2, 3 and 4 but had not issued any update on Zohr resources, despite recent reports that the north of the structure — closer to Cyprus — looked better than the first forecast. Eni was the only company to have submitted bids for all 3 blocks , ahead of last week’s deadline, in Cyprus’ third offshore licensing round.
Asked about Coral floating LNG project in Mozambique, which has yet to get the green light, Eni’s operations chief Roberto Casula said that the final investment decision is targeted for fourth quarter 2016 and the process for reaching it is “well advanced”.
However, it’s worth recalling that Eni has already deferred FID on Coral by a year. Eni also insisted its case for a lower Dutch gas price from GasTerra isn’t over, despite an adverse arbitration ruling.
Upstream second quarter adjusted operating profits were 78 per cent lower at 355 million euros, while Eni’s gas and power division made an adjusted operating loss of 229 million euros compared with a small 31million euro profit in second quarter 2015, as its worldwide gas sales fell by six percent to 21.15 billion cubic meter (m³), of which just 8.63 billion m³ in Italy (down 18%). Eni sold more gas in northern Europe, but sales in Turkey and Spain also fell.
Eni said the poor result in that sector reflected lower one-off benefits from contract renegotiations and other non-recurring events, lower margins on commodity sales owing to an unfavourable trading environment, and competitive pressure.
Eni lost a long-running arbitration claim for €2bn covering 2012-15 against Dutch supplier GasTerra earlier this month, reducing any prospect for better earnings in 3Q. But 2Q refining adjusted operating profit was 49% higher at 156 million euros.