Italian oil company Eni sank to a loss during the second quarter of 2016 compared to a profit in a year-ago quarter due to lower oil prices.
In the second quarter of 2016, Eni reported an adjusted net loss of €0.29 billion ($322.2M), compared to adjusted net profit from continuing operations on a standalone basis of €0.51 billion ($566.6M) reported in the second quarter of 2015.
Eni contributed this result to lower operating performance and a lower than proportional reduction in the tax expense, mainly in the E&P segment, driven by the concentration of taxable profit in PSA contracts, which, although more resilient in a low-price environment, bear higher-than average rates of tax.
The company’s net loss from continuing operations was €446 million, down from €498 million net profit reported in the second quarter of 2015.
According to Eni’s results report on Friday, the structural weakness of the oil market, oversupply and overcapacity headwinds in the European gas and refining sectors have negatively affected the group’s performance, eroding results from operations and cash flow.
Net loss for the quarter was negatively impacted by the recognition of a net tax expense amounting to €569 million which reduction y-o-y was proportionally much lower than the reduction in pre-tax earnings.
In the second quarter of 2016, Eni’s hydrocarbon production was 1.715 million boe/d, 2.2% lower compared to the second quarter of 2015.
Eni said that during 2016 it will carry out a number of initiatives intended to reduce capital spending by 20% y-o-y on a constant exchange rate basis by re-phasing and rescheduling capital projects, being increasingly selective with exploration plays and renegotiating contracts for the supply of capital goods in order to cope with the slump in crude oil prices.
The company also stated that this capex optimization is not expected to negatively affect production growth, which is confirmed at an average growth rate of above 3% across the plan period.
Offshore Energy Today Staff