Italy’s oil giant, Eni yesterday (Thursday) signaled that its production outlook for 2020 is holding up reasonably well but announced capital spending cuts of €2.6 billion, mainly in its upstream business due to the collapse in oil prices and the impact of the coronavirus pandemic.
The company said in its quarterly earnings that it expects oil and gas production to average 1.71 million-1.76 million barrels a day, b/d of oil equivalent this year from 1.75 million-1.80 million barreels of oil equivalent, mboe/d estimated in April.
Eni said this is “due to capex curtailments in response to the COVID-19 crisis, a lower global gas demand also impacted by the pandemic effects and finally extension of force majeure in Libya for the FY 2020.”
That comes after Eni announced hydrocarbon production of 1.74 million boe/d in the first half, down 5.1 per cent, pointing to lower gas demand, mainly in Egypt, and lower volumes in Libya being mitigated by positive performances in Angola, Nigeria, Kazakhstan and Mexico.
Eni highlighted the start-up of oil production at the Agogo field in Angola, the oil discovery in the Saasken exploration prospect in Mexico, a gas and condensate discovery in the exploration prospect Mahani-1, onshore the Sharjah Emirate in the UAE, and 17 exploration licenses in the Norwegian Continental Shelf. The company earlier in July also announced gas and oil discoveries in Egypt.
Eni’s planned capital spending is about 35 per cent lower than the original budget for 2020 and 30 per cent lower for 2021, with Eur2.4 billion in anticipated cuts next year.
The curtailments are “almost fully focused on the E&P segment,” Eni noted.
The firm’s CEO Claudio Descalzi said operational cost cutting of €1.4 billion both this year and next will also put the company in better shape given “great signs of uncertainty still to come.”
The energy major added that following positive trends recorded in the oil market in June and July, “Eni is assuming a gradual recovery in global consumption of hydrocarbons and power in the second half of the year.”
Eni reported an adjusted net loss of €714 million in the second quarter, which was better than many analysts had expected but nevertheless indicates the dramatic impact the pandemic has had on the business.