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Eni (E) Shares Dip 3.4% Despite Reporting Q1 Earnings Beat

Eni SpA E shares have declined 3.4% since it reported better-than-expected first-quarter 2023 earnings on Apr 28. The downward price movement can be attributed to the company’s unsatisfactory upstream production and declining year-over-year revenues. This is an indicator of the company’s operating weakness.

Eni reported first-quarter adjusted earnings from continuing operations of $1.85 per American Depository Receipt (“ADR”), beating the Zacks Consensus Estimate of $1.39. However, the bottom line declined from the year-ago quarter’s $2.04 per ADR.

Total quarterly revenues of $29,372 million declined from $33,764 million a year ago.

Better-than-expected quarterly earnings resulted from an increase in refinery throughput volumes. The positives were partially offset by a decline in oil and gas production, and lower average realized commodity prices.

Eni SpA Price, Consensus and EPS Surprise

 

Eni SpA Price, Consensus and EPS Surprise
Eni SpA Price, Consensus and EPS Surprise

Eni SpA price-consensus-eps-surprise-chart | Eni SpA Quote

Operational Performance

The company operates through four business segments — Exploration & Production, Global Gas & LNG Portfolio, Refining & Marketing and Chemicals, and Plenitude & Power.

Exploration & Production

The total oil and gas production in the first quarter was 1,656 thousand barrels of oil equivalent per day (MBoe/d), down marginally from 1,662 MBoe/d recorded in the prior-year quarter.

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Liquids’ production was 780 thousand barrels per day (MBbl/d), flat with the year-ago quarter’s figure. Natural gas production declined 1% year over year to 4,608 million cubic feet per day.

The average realized price of liquids was $72.86 per barrel, down 22% from the $93.98 reported a year ago. The realized natural gas price was $8.06 per thousand cubic feet, down 11% from $9.04 a year ago.

Lower liquid and natural gas production hurt the company’s Exploration & Production segment. The segment reported a profit of €2,789 million, declining from the €4,381 million recorded in the March-end quarter of 2023.

Global Gas & LNG Portfolio

Eni’s worldwide natural gas sales in the March-end quarter were 14.84 billion cubic meters (bcm), down 19% year over year.

The integrated energy major’s Global Gas & LNG Portfolio business segment reported an adjusted operating profit of €1,372 million, significantly up from the year-ago profit of €931 million. The upside was primarily driven by optimization and trading activities for capturing value from price movements and spread differentials.

Refining & Marketing and Chemicals

For the March-end quarter, total refinery throughputs were recorded at 6.71 million tons (mmtons), up 10.5% year over year. Petrochemical product sales declined 33% year over year to 0.76 mmtons in the first quarter of 2023.

For the quarter under review, the segment reported an adjusted operating profit of €154 million, turning around from the loss of €91 million in the year-ago quarter primarily due to increased production in the Refining and Marketing segment.

Plenitude & Power

Retail gas sales managed by Plenitude declined 15% year over year to 2.91 bcm. Power sales in the open market declined 10% year over year.

From Plenitude & Power, the company reported a profit of €186 million, reflecting a 1% year-over-year increase.

Financials

As of Mar 31, Eni had long-term debt of €20,491 million, and cash and cash equivalents of €10,146 million. Its debt to capitalization was 32.6%.

For the reported quarter, net cash generated by operating activities amounted to €2,982 million. Capital expenditure totaled €2,119 million.

Outlook

For 2023, Eni reiterated its total hydrocarbon production guidance of 1.63-1.67 MBoe/d, indicating an increase from the 1.61 MBoe/d reported in 2022. The company expects to discover exploration resources of 700 MBoe this year.

The integrated energy major disclosed its capital expenditure budget of €9.2 billion for the year, lower than the original guidance of €9.5 billion.

Zacks Rank & Stocks to Consider

Equinor currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enterprise Products Partners LP EPD reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, which beat the Zacks Consensus Estimate of 62 cents. This was primarily due to higher contributions from the Natural Gas Pipelines & Services business.

In the first quarter, Enterprise Products generated an adjusted free cash flow of $1,347 million against a negative free cash flow of $1,618 million in the year-ago quarter. EPD recorded a distributable cash flow of $863 million in the same time frame.

Dril-Quip, Inc. DRQ reported a first-quarter 2023 adjusted loss of 1 cent per share, narrower than the Zacks Consensus Estimate of a loss of 2 cents. This was due to improved performances of key offshore markets and some reemerging areas.

For 2023, Dril-Quip expects product booking growth of 10-20%. The company reported net bookings of $53.5 million for the first quarter. Backlog rose 6% year over year due to an increase in product bookings following improved market conditions.

Motor fuel retailer Murphy USA Inc. MUSA announced first-quarter 2023 earnings per share of $4.80, which beat the Zacks Consensus Estimate of $4.06. The outperformance can be attributed to higher volumes and retail fuel contribution.

MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.

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