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Eni confirms 2019 growth target despite lower Q1 volumes

London — Italian oil major Eni confirmed plans Wednesday to grow its oil and gas production by an average of 2.5% this year, despite the loss of a production contract in Libya and mature field declines denting output in the first quarter.

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Eni's reported hydrocarbon production in the first quarter of 2019 averaged 1.83 million b/d of oil equivalent, down 1.9% on the year, due mainly to the loss of its Intisar gas field contract in Libya last June.

But production growth this year will be fueled by the continued volume ramp-up at Egypt's Zohr and Kazakstan's Kashagan fields, as well as planned startups offshore Mexico, in Egypt, Algeria and at the Trestakk project in Norway, the company said.

"Production growth versus 2018 will accelerate from the third quarter of 2019, after the maintenance activities concentrated in the second quarter of 2019 [at the Kashagan and Goliat fields]," Eni said in an earnings statement.

Assuming an average Brent oil price of $62/b and net of portfolio transactions, Eni said it sees its upstream volumes growing by 2.5% this year as a result.

Eni, which has made a string of large oil and gas finds in recent years, is targeting oil and gas production growth averaging 3.5% per year over the next four years, with 18 major startups adding about 660,000 boe/d.

The Rome-based producer said it expects its LNG contracted volumes this year to be "in line" with 2018 levels of 8.8 million mt/year.

EARNINGS MISS

Eni, the first of the global oil majors to report Q1 earnings, saw its adjusted net earnings rise 1.4% in the first quarter from the year-ago period to Eur992 million.

The result came in below consensus analysts' forecasts of $1.05 billion for the quarter, however, and Eni's shares were 1.6% lower in mid-afternoon European trading.

The company said it generated a cash flow of Eur3.42 billion ($3.83 billion) in the first quarter, up 8% and Eur1.5 billion higher than the investments for the period of around Eur1.9 billion.

On breakeven cash flow, Eni said it expects to cover organic capital expenditure and the dividends at a Brent price of $55/b this year.

REFINING MARGINS SQUEEZE

Downstream, Eni said it expects its refinery breakeven margin to hit $3.50/b at the end of 2019, pushed higher by widening differentials between light Brent crude benchmark and high-sulfur content crudes.

In the first quarter, Eni's reference refining margin was $3.40/b, unchanged from the previous quarter but up by 14% from the year-ago quarter level of $3/b.

Eni posted a Eur9 million adjusted loss for its refining segment in the first quarter due to the rising cost of high-sulfur crudes as OPEC production cuts continue to crimp their supply.

"Management responded to this negative trend by reducing throughputs, making changes to refinery set-up, advancing planned maintenance at cracking units and implementing other optimizations," Eni said.

As a result, Eni's refining crude throughputs slipped by 14% on the year to 5.35 million mt.

-- Robert Perkins, robert.perkins@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com