Eni SpA (E), Italy's biggest oil and natural gas company by volume, estimated Friday that hydrocarbon output growth will outstrip that of its peers, a forecast it hopes will quell investor alarm over its dividend policy.
Eni SpA (E),
Italy
's
biggest oil and natural gas company by volume, estimated Friday that
hydrocarbon output growth will outstrip that of its peers, a forecast it hopes
will quell investor alarm over its dividend policy.
State-controlled Eni, like its peers, is focusing its upstream attention on harder-to-get
oil to boost reserves as hydrocarbon-rich countries limit access and output
declines at older fields. Its new four-year plan estimates average annual
hydrocarbon output growth at more than 2.5% a year through 2013 and 2% through
2016.
Eni expects to reap the benefits of entering some of the world's most
challenging oil assets, including Kazakhstan's Kashagan project, Venezuela's
Junin 5 heavy oil field and Iraq's Zubair one.
Despite the bullish production outlook, investors have grown concerned over
Eni's dividend policy. Last month's announcement of a 23% dividend cut for 2009
earnings startled investors, and Friday Eni signaled to shareholders that its
dividend policy will be cautious, indicating payouts will rise from 2011 in
line with inflation in the industrialized world, presuming oil prices are
around $65 a barrel.
"In real terms that means a flat dividend," said Roberto Mascarello,
an analyst with Kepler Capital Markets. "The market was expecting a more
aggressive policy."
At 1328 GMT, shares were down EUR0.25, or 1.4%, at EUR17.54, underperforming
Italy
's
benchmark FTSE Mib Index' gain of 0.9%.
Eni "decided to give precedent to production growth versus dividends and
the market didn't like this," said Gianmaria Bergantino, a fund manager at
Bank Insinger de Beuafort NV in
Rome
.
"Eni confirms its strategic priorities of delivering robust long-term
hydrocarbon production growth superior to the average growth of its
peers," the company said in a statement.
Last month, BP PLC (BP) said it expects its oil and gas output to be lower in
2010 than 2009, but to resume growth in 2011 in line with the company's target
of a 1%-2% annual increase. Total SA (TOT) forecasts 2% annual growth between
2009-2014.
Output will likely top 2 million barrels of oil equivalent a day in 2013, and
growth will be based on organic development rather than acquisitions, Eni said.
This year's hydrocarbon production is likely to be in line with last year's
1.769 million barrels of oil equivalent, Eni said.
The plan for 2010 to 2013 forecasts investments of EUR52.8 billion, about 8%
more than the capital expenditure budget in the firm's 2009-2012 plan.
The new investments will be made entirely in the exploration and production
area, with a particular focus on
Iraq
and
Venezuela
. Eni
will take 41 new fields onstream in the next four years, resulting in about
560,000 barrels of oil equivalent a day.
"I think the new plan is solid as it focuses on oil projects," said
fund manager Bergantino, who added he is now buying Eni shares, having not
owned any before the plan.
The Rome-based company also said it is targeting cost reductions of EUR2.4
billion by 2013, marking a 20% increase in the savings target from last year's
strategic plan.
It also aims to boost its international gas sales by more than 3% a year,
reaching 118 billion cubic meters by 2013 and a market share in
Europe
of
more than 22% that year.
Eni is slated to present the growth plan for 2010 to 2013 Friday in
Milan
at
1300 GMT.
fund RREEF.
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