Eni expects to discover 2-3 billion boe over next 4 years

Eni SPA expects to report discoveries totaling 2-3 billion boe over the next 4 years, almost twice the amount in its previous 4-year plan, by drilling around 120 wells in more than 20 countries.

Eni SPA expects to report discoveries totaling 2-3 billion boe over the next 4 years, almost twice the amount in its previous 4-year plan, by drilling around 120 wells in more than 20 countries.

The drilling will be done despite a 10% reduction in exploration capital expenditures. Overall capex in Eni’s 2017-2020 strategic plan is expected to total €31.6 billion.

The 4-year plan is an 8% reduction at constant foreign exchange rates compared with the previous 4-year plan, mostly related to its upstream portfolio, project activity rescheduling, and contract renegotiations.

Eni says its portfolio flexibility, the success of its ongoing exploration strategy, synergies with existing assets, and contract renegotiations will enable the average breakeven price of new projects to be $30/bbl.

“We have always considered exploration to be the engine of our upstream business, which is based on conventional and nearfield plays,” explained Claudio Descalzi, Eni chief executive officer. “We operate the majority of our projects through high-equity stakes, which enables us to farm down assets in advance to bring forward cash generation.”

Eni's hydrocarbon production is expected to grow 3%/year across the 2017-2020 period, reached primarily by the ramp-up and startup of new projects and production optimization, which are expected to contribute around 850,000 boe/d in 2020.

“After 2 years of lower investment and fragile confidence across the global oil industry, we are forecasting a slow increase in oil prices up to $70/bbl by 2020,” said Descalzi.

“Nonetheless, we will remain disciplined, maintaining our capex cash neutrality below $45/bbl on average over the 4-year period,” he said. “Financial flexibility will help secure the sustainability of our remuneration policy as oil prices remain lower and enable us to capture upside should the economic environment improve.”

Uncommitted capex represents around 55% of the firm’s total investments in 2019-2020, giving it portfolio flexibility should the oil price scenario turn negative again in the future, Eni says. The firm’s new disposal program, meanwhile, targets €5-7 billion of asset sales primarily through the dilution of exploration assets.

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