By Francesca Landini
ROME (Reuters) -Italian energy group Eni pledged to return more cash to investors after reporting record profit last year and defended its strategy to shift its hydrocarbon production towards gas.
However, shares in Eni fell as much as 5% with investors taking profit on the stock after bumper results in 2022 were underpinned by an unprecedented spike in gas and oil prices due to the war in Ukraine.
Presenting its 2023-2026 strategy, the group said it would raise its 2023 dividend by 7% and buy back shares worth 2.2 billion euros ($2.3 billion).
Eni said earlier on Thursday that its adjusted net profit rose to 13.3 billion euros in 2022, the highest in over a decade, but the stock market reaction focused on a weaker exploration and production performance in the last quarter.
Oil and gas production will grow between 3% and 4% on average every year to 2026 and then remain pretty stable until 2030, the company said. The share of gas production will raise to 60% by 2030.
“Gas is the only hydrocarbon that can accompany energy transition,” CEO Claudio Descalzi said, adding that the negative consequences of the war in Ukraine were exacerbated by the lack of investments in gas in the past years.
“We are in this situation because (in the past) we thought we could avoid to have gas,” Descalzi said.
As a rule for the medium-term, Eni pledged to return to investors between 25% and 30% of its cash flow for operations (CFFO) through a combination of dividend and share buybacks.
In upside scenarios, the company expects to apply a figure of 35% of incremental CFFO for distribution.
“The 25-30% is a floor for investor remuneration,” Eni Chief Financial Officer Francesco Gattei said.
Until now the remuneration policy of Eni was linked directly to the price of Brent crude oil and not to the cash flow.
Under its new strategy plan, Eni will generate a CFFO before working capital of over 17 billion euros in 2023 and of over 69 billion euros in total by 2026.
PLAN A FOR PLENITUDE
Emission reduction targets indicated last year were confirmed, with the group aiming to reaching net zero emissions by 2050.
Eni said it would grow its green businesses and indicated that its renewable and retail unit Plenitude was expected to reach a core profit of 1.8 billion euros by 2026, three times its 2022 level.
“We don’t have a plan B for Plenitude, we have two plan As,” Descalzi said, adding that Eni could both list the subsidiary and sell a stake to a partner to extract value from the unit.
Eni had to freeze its plans to list the subsidiary last year due to volatile financial markets.
This year capital expenditures will be around 9.5 billion euros and 37 billion euros over the plan, up 15% in U.S. dollar terms versus the outlook provided last year. Low and zero carbon spending will be around 25% of the total.
The group expects operating profit to fall to 13 billion euros this year after adjusted EBIT was 20.4 billion euros in 2022.
($1 = 0.9426 euros)
(Reporting by Francesca Landini, editing by Gianluca Semeraro and Keith Weir)
