By LIAM MOLONEY
ROME -- Italian oil major Eni on Friday said it expected 2012 to be challenging due to the continuing economic slowdown in the euro zone, and to face the possibility of worsening financial market conditions as it plans to boost its liquidity.
"The troubles on the financial markets are not over," said chief financial officer Alessandro Bernini on a conference call to comment on first-quarter results, explaining why Eni plans to pump up its financial firepower.
The extra liquidity would come from the loans Snam will pay back to Eni once the two companies are split as part of the Italian government's new rules to increase competition, and try to reduce the country's energy costs.
Snam used Eni to finance its debts but must repay Eni net debts of more 11 billion once the two companies part ways.
On the energy markets, Eni said gas demand is expected to be weak due to the economic slowdown and increasing competition from renewables. The Italian company has one of the biggest gas operations in Europe.
Eni's comments come as Standard & Poor's lowered its rating for Spain and as various key euro zone nations released weak economic data, indicating a bumpy ride for the region's economies.
"Against this backdrop, management expects ongoing margin pressures to continue in 2012 and reduced sales opportunities due to rising competition," the Rome-based company said in a statement.
Eni said it expects global gas sales in 2012 to be roughly in line with last year. The company said it aims to maximize as much as possible the benefits from its recent gas renegotiation deals with its biggest suppliers.
Adjusted net profit, which is closely watched by analysts because it excludes the value of oil inventories, rose 13% to 2.48 billion compared with a year earlier, ahead of an average forecast of 2.26 billion. Net sales from operations rose 16% to 33.48 billion over the period.
Kepler Capital Markers analyst Roberto Mascarello said the results were better than expected thanks to earnings from the exploration and production division, which were among the best ever reported by Eni, good volumes from Libya, and high crude prices.
As oil fields that are easier to tap start to dry up around the world, Western oil majors are turning to new regions that have previously been off limits.
Wednesday, Eni followed in the footsteps of ExxonMobil with the signing of a major offshore exploration deal with state oil company OAO Rosneft for acreage in Russian waters in the Barents and Black seas.
Eni chief executive Paolo Scaroni said the Rosneft deal would underpin the company's exploration opportunities for "many years to come" and further boost Eni's long-term growth prospects.
The Italian company said it expects 2012 hydrocarbon output to grow, compared with 2011, driven by the recovery in Libya, which is forecast to be back at pre-war output levels in the second half of the year.
Excluding the Libyan comeback, Eni estimates production growth to be "moderate."
Dow Jones Newswires