Eni production growth takes sting out of Saipem writedown

(Adds CEO comments, details)

By Stephen Jewkes and Oleg Vukmanovic

MILAN, July 30 (Reuters) - Italian oil and gas group Eni (Swiss: ENI.SW - news) raised its production targets for the year on Thursday, boosting its shares after second-quarter net profit slumped due to lower oil prices and a heavy loss at subsidiary Saipem (Amsterdam: QG6.AS - news) .

Oil and gas production is targeted to rise more than 7 percent this year, up from a previous 5 percent target, helped by output in Venezuela, Norway, the United States, Angola and Republic of Congo, and expectations of higher volumes in Libya.

The Italian major posted a 10.7 percent rise in output in the second quarter grew 10.7 percent.

"Upstream growth is there and it's steadily going all right. Saipem (Other OTC: SAPMY - news) aside, the group is well positioned," said Jason Kenney, oil and gas analyst at Santander.

Oil company profits are taking a battering from falling crude prices and weak demand. Anglo-Dutch major Shell (LSE: RDSB.L - news) on Thursday said it would axe 6,500 jobs and step up spending cuts, responding to extended low prices which contributed to a 37 percent drop in second-quarter profit.

Eni (NYSE: E - news) said adjusted net profit in the second quarter fell 84 percent to 139 million euros ($153 million).

Stripping out the Saipem effect, adjusted net profit was 448 million euros, below a 480 million euro Reuters consensus. On Tuesday, Saipem reported a quarterly adjusted operating loss of 738 million euros after heavy writedowns as part of a turnaround plan.

Eni continues to pursue selling down its 43 percent stake in Saipem as part of plans to shift more than $5 billion of the oil contractor's debt off its books.

"Our target is to deconsolidate the debt and we're working on that," Descalzi said.

The CEO singled out steady cashflow generation as the company's key achievement despite crude oil prices halving over the past year. It generated $5.68 billion in the first half, in line with a year ago.

Eni, which earlier this year became the first large oil company to cut its dividend after the slump in oil prices, said it would pay an interim dividend of 0.4 euros per share.

IRAN-GAZING

Eni, the biggest foreign producer in Africa, is focusing increasingly on the bread and butter business of finding oil and gas under Descalzi's stewardship despite plans to cut group investments by 14 percent for the year.

With Iran looking set to return to global oil markets following a nuclear deal struck this month, the CEO played down the chance of making any imminent investments given belt-tightening across the oil industry.

"At the moment the industry is cutting 30 percent of investments, but in 2-3 years this cut will impact the imbalance between demand and supply ... in the future we will need Iranian production," Descalzi said.

Iran needs investments over $100 billion if it is to resume strong production rates quickly, he said. Eni has a deal with Iran to recoup its previous investments in the country in barrels of oil.

At 1302 GMT Eni shares were up 2 percent, while the European oil and gas sector was up 2.53 percent.

($1 = 0.9127 euros) (Editing by David Clarke and David Evans)