Italy’s Eni revealed its intention to cut investments and selling down stakes in oil and gas fields to help it prop up dividends and become a leaner exploration-driven player focusing on gas, according to its 2016-2019 business plan.
The state-controlled company said it would cut overall group capital spending by 21% and exploration budgets by 18%, while raising $7.9b from asset sales. It also plans $6.7b in cost cuts, more than 50% of which is expected to come from renegotiating contracts, Reuters reported. The cited amount is on top of $9b from asset sales announced last year, of which $7.8b have already been carried out, Nasdaq reported.
Italy’s company – largest by market value – said that most of the assets sale would be from stakes in recently discovered oil and gas fields. “The disposals will be mainly through the dilution of our stakes in recent and material discoveries,” Eni CEO, Claudio Descalzi, said, picking out its giant gas fields in Mozambique and Egypt as prime candidates.
Descalzi claimed that in recent years a 25% drop in exploration costs had not kept pace with a 75% fall in oil prices, pressuring explorers’ balance sheets.
Since taking the helm of Europe’s fourth-largest oil major by market capitalization in 2014, Descalzi has refocused Eni on finding more oil and gas, with a preference for projects that are of lower costs and faster to market. Since 2008, Eni has discovered 2.4 times what it actually produces, compared with a peer rate of just 0.3 times. “We think gas will be the future,” added Descalzi.