Page 5 - Euroil Week 44 2020

EurOil COMMENTARY EurOil

The Antwerp refinery,
Total’s largest in
Europe. Many majors
suffered downstream,
as weak fuel demand
more than offset low
crude prices.

Operating cash flow, excluding Gulf of Mex- at 1.72-1.74mn boepd, however, projecting that
ico oil spill payments, held firm at $5.3bn in output would reach around 2mn boepd in 2023.
Q3 2020, compared with $6.5bn a year ago. BP Refining, marketing and chemicals earnings
also cleared $0.5bn from its net debt over the plummeted 86% y/y to €21mn in Q3 2020, as its
three months, lowering it to $40.4bn. Its gear- refining margins shrank by 90%. The bright spot
ing dropped to 31.4% from 32.7% in the second was Eni’s global gas and LNG segment, which
quarter. CFO Murray Auchincloss said the target achieved an adjusted operating profit of €63mn,
was to reduce net debt to $35bn. versus €69mn a year earlier.
The company plans to achieve this with “In a marketing environment that remains
divestments. It has already completed or agreed challenging, we are continuing to successfully
deals covering half of its 2025 target for asset dis- mitigate the negative impact of the crisis and
posals of $25bn. But some of the proceeds will go making progress with our decarbonisation strat-
towards building up BP’s renewables business, as egy,” CEO Claudio Descalzi commented. “We
part of its clean energy pivot announced earlier achieved excellent results during the quarter,
this year. clearly exceeding market expectations.”
BP CEO Bernard Looney and other top Eni is well-positioned to handle the mar-
executives fleshed out this strategy, which calls ket turmoil, the CEO told investors, thanks to
for a 40% cut in hydrocarbon output and 20-fold its €17.4bn in liquidity and its strong adjusted
increase in renewables capacity by 2030, in a cash flow, which amounted €1.77bn in Q3 2020,
series of presentations in late September. But down 31% y/y. The company achieved this with
investors were not convinced, if the subsequent cuts to capital spending and other expenditure.
drop in BP’s share price to a 25-year low was any- Eni’s capex was down 53% y/y at €889mn
thing to go by. during Q3 2020, and down 44% in the first nine
BP is meanwhile targeting $2.5bn in annual months of the year. Its capex for the year is set at
cost savings by the end of 2021. It says it is on €5.2bn, down from €7.7bn in 2019. The compa-
track to meet its $12bn limit for capital expend- ny’s leverage has remained below 30%.
iture in 2020, down from a $15.2bn spend in the Eni is in advanced discussions to shed €1bn
previous year. Its 2021 forecast is $13-15bn. of assets by the end of the year, it said, including
its gas assets in Australia.
Eni “Faced with a crisis of unprecedented pro-
Italy’s Eni likewise achieved quarter-on-quarter portions, Eni has demonstrated great resilience
improvements in Q3 2020, but its numbers were and flexibility,” Descalzi continued. “In light of
much weaker than a year earlier. these results, we look forward to a recovery in
The company swung to an adjusted net loss demand, whilst continuing to pursue our energy
of €153mn ($179mn) in the period, versus a transition programme.”
€776mn profit in Q3 2019, blaming the result on Eni has also set out a strategy for moving away
weak demand. Its operating profit amounted to from oil and gas and towards cleaner energy
€537mn, down 75% y/y. types, although it is less ambitious than BP’s. It
Unlike BP, Eni’s upstream and downstream aims to expand its renewables capacity to more
businesses were equally weak. Adjusted operat- than 55 GW by 2050, while converting its refin-
ing profit from exploration and production was eries to biofuels. But announcing the strategy in
down 76% y/y at €515mn, on weaker prices and February, the company said it still saw oil and gas
a 10% drop in production to 1.7mn boepd. Eni production rising 3.5% annually between now
blamed the output decline on the various effects and 2025, although it will shift even more from
of the COVID-19 pandemic as well as OPEC+ oil to gas.
cuts and reduced gas demand, especially in Eni introduced a new dividend policy in July,
Egypt. ending fixed payments and introduced a floor
Eni kept its full-year guidance for production sum with a progressive component based on oil

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