Eni CEO shake-up puts Saipem on block in exploration gambit
By Oleg Vukmanovic and Stephen Jewkes MILAN (Reuters) - Eni on Thursday laid out plans to sell assets, including a multi-billion dollar stake in oil service firm Saipem, and downsize its ailing refinery business to help fund its transformation into a leaner oil and gas outfit. In a strategy update, new Chief Executive Claudio Descalzi said he would axe "useless activity" and runaway costs as part of a major shake-up at the Italian major which is looking to save over 1.7 billion euros by 2018. Top of the list is cutting refining capacity in Italy by half, exploring options to sell all or part of its $5 billion dollar stake in Saipem and shedding up to 20 percent of its giant Rovuma gas field in Mozambique. "We like Saipem but it's not core to be in a contractor company ... It's more a strategic move for us than a need for cash," Descalzi said during his presentation in London. Earlier in July sources told Reuters Eni's new management planned to press on with the sale of a stake in Saipem so it could focus on the more lucrative business of finding oil and gas. Proceeds from the group's planned 11 billion euros of disposals will be used to accelerate its makeover into a slimmer exploration and production (E&P) player focused on reserve growth in sub-Saharan Africa and Asia as it targets an annual output growth of 3 percent. In Mozambique, Eni expects to take a final investment decision on its Rovuma gas field and several floating LNG production plants later this year, Descalzi and other Eni executives said at the meeting. State-controlled Eni holds a 50 percent stake in Mozambique's Area 4 field, part of the Rovuma basin, which contains reserves of around 90 trillion cubic feet (tcf). MISSED Earlier on Thursday, Eni posted a 50 percent rise in net profit but missed second-quarter forecasts for oil and gas output due mainly to unrest in Libya which has traditionally accounted for some 15 percent of its production. The company, which expects lower gas sales for the year, said the Libyan crisis drove a rare 12.6 percent drop in profit in its exploration and production business. That strategy was on show earlier when Eni announced a potential new 500 million barrels of oil equivalent gas discovery offshore Gabon, where it has stepped up exploration. "The reorganisation under way shows E&P will continue to be the jewel in the crown of Eni in the future," said Nicolo Sartori, energy analyst at the Institute for International Affairs in Rome. "But the focus on E&P also means diversifying geographically to spread risk, in particular into Asia and non-conventional markets," he said. Eni, Africa's biggest foreign oil producer, is slowly shifting focus away from the north to sub-Saharan nations, where new finds in Mozambique, Congo and Ghana offer steadier returns. It is also pursuing opportunities in Asia and earlier announced a production sharing agreement in Myanmar. Descalzi, former head of the E&P division, faces growing investor calls to address Eni's over-reliance on a handful of unstable producers in places such as Egypt and Libya. Oil theft also put the brakes on output in Nigeria, analysts say. In the second quarter Eni said its adjusted net profit was 0.87 billion euros, below a Reuters analyst sounding of eight analysts of 1.012 billion euros ($1.36 billion). The positive impact from gas contract renegotiations, especially with Russia's Gazprom, and a better performance from Saipem helped offset weakness at the exploration and production division. The E&P division saw a drop in operating profit to 2.981 billion euro, Eni said, while confirming it expected hydrocarbon output for the year to be substantially in line with 2013. ($1 = 0.7465 Euros)
