Eni cuts output target, slashes 2020 capex 30% over COVID-19

Italy's Eni on Friday lowered its production guidance for 2020 and announced at least a 30% cut in planned capex for 2020 and 2021, in response to the collapse in oil prices and the economic impact of the coronavirus pandemic.

The Rome-based major said it expects oil and production to average between 1.75 million–1.80 million b/d of oil equivalent in 2020, down from initial forecasts of around 1.9 million boe/d for the year.

Eni said it will also cut Eur2.3 billion from 2020 capex, 30% lower than the initial targets, and anticipates further reductions of 30%-35% lower than original plans in 2021.

"[The lower production guidance] is due to capex curtailments, COVID-19 effects, a lower global gas demand also impacted by the pandemic effects and finally extension of force majeure in Libya for the entire first half of the year," Eni said in a quarter earnings statement.

The new production guidance for 2020 does not take into account the possible impacts of the recently announced OPEC+ cuts totalling 9.7 million b/d that are to be implemented on a "field-by-field basis," it said.

Eni's capex cuts will be focused in the exploration and production segment with the "re-phasing" of some projects. However, the projects are "expected to resume quickly once market fundamentals improve, thus recovering any lost production volumes," it said.

Eni is planning three oil and gas field startups in 2020 along with seven FIDs, four of which are in the UAE. Mozambique's giant Rovuma LNG development is also on the cards.

The company could also pare back drilling on the 2.5 billion boe of resources it is targeting with exploration wells over the next three years and slow its downstream projects.

Halting share buybacks --which Eni has announced-- and cutting dividends are other key levers.

For the first quarter of 2020, Eni reported average production of 1.77 million boe/d, 3.6% lower than the first quarter of 2019.

The company reported adjusted net earnings of Eur59 million for the period, down from Eur992 million in the year-ago period on sharply weaker prices, lower production and the negative impacts associated with the COVID-19 crisis.

Eni reported a Eur2.93 billion net loss for the period, from a profit of Eur1.1 billion in the first quarter of 2019, reflecting major price-related writedowns of its oil and gas inventories.