ENI S.p.A. 2026 Q3 Earnings Call

Thank you. Thank you. Good afternoon, and welcome to Eni Q3 conference call.

In this quarter, Eni has shown once again that this strategy is working and delivering outstanding results. We are driving distinctive, real asset-driven organic growth in both the upstream, expanding into new geographies with major projects and in our new businesses linked to the energy transition. At the same time, we are generating strong cash flow and bringing our debt down to its lowest level ever. As we grow, we want all our shareholders to share in the upside. That is why we combine our industrial strategy with a progressive distribution policy that has also reached a record level. Before describing our additional distribution, let me highlight the key milestone of this quarter and of 2026. Starting with upstream, where production growth is already sector-leading, propelled by our differentiated industrial, organic, technology-led capabilities.

We have already had a standout year for exploration, even when set against a decade-long track record of success. We've discovered resources of more than 1.2 billion barrels. Our technical rate of success is 80%, and our commercial rate is 70%. Really remarkable. But remarkable still is that this has been achieved with a discovery cost of below $1 per barrel. Strong execution of our strategy has enabled us to raise our full-year underlying production guidance to 6-7%. The growth primarily comes from Congo, Libya, Côte d'Ivoire, Mexico, Ghana, and from the business combination in Indonesia, Malaysia called Searah, and comes despite the complex operating environment in the Middle East and constraints on Kazakh export. And we are locking in future production growth with key FID this year of Baleine Phase 3 in Côte d'Ivoire, Kutai North and Gendalo Indonesia, Cronos in Cyprus, and Greater PAJ in Angola.

Nor is volume growth our single target. We are guided by value. Hence, through our dual exploration valorization in Côte d'Ivoire and Indonesia, we have raised around $2 billion of accelerated value. On top of that, we are working up an unprecedented level of access to discovered resources, employing our technology and fast-track development skills to mature opportunities in Venezuela and Argentina. Our two listed satellites are also adding new resources, with Vår Energi and Ithaca recently announcing acquisition, expanding their geographical footprint and deepening their resource base in Denmark and Canada, respectively. A proof point in their delivery of value is that both companies recently reached record market capitalization with an equity stake value for Eni now at around EUR 10.5 billion, almost doubling the original level. Our gas and LNG strategy is delivering tangible value already.

New LNG supply contracts signed in Indonesia and Cyprus for a total of up to 3.4 million tonnes per year strengthen the path towards our target of more than 20 million tonnes per year of LNG equity production by 2030 and support the increase of our 2026 full-year pro forma EBIT guidance to around EUR 1.5 billion. As to the CCUS business, this year we completed the installation of the new Douglas CCS platform in Liverpool Bay, the world's first purpose-built offshore platform dedicated to industrial-scale CO2 transportation and storage. We have also progressed the development of the Ravenna Phase 2 project, securing further support through the award of European Commission's Innovation Fund. It is worth looking at this in the context of our expanding and increasingly balanced global footprint. Exploration success has come in West Africa, Egypt, and Indonesia.

It is a mix of infrastructure-led in known plays and higher-impact discoveries, but all representing considerable value. We have built and strengthened four major growth hubs across the Far East, the Americas, Africa, and the Mediterranean, giving us a deep and diversified resource base. Projects sanctioned in FY 2026 will deliver at around 600,000 barrels per day of new production at 2030, underscoring the scale and quality of our development pipeline. This is a continuously evolving portfolio. New agreements and additional opportunities have been identified or implemented in 2026, contributing around 4.6 billion BOE of additional equity resource. Let me also take a moment to update in a bit more detail on our progress in Venezuela, where we appreciate things have been moving very quickly. In early September, we signed the new contractual regime that will govern the Junín 5 field for the next 25 years.

We have already submitted development plans to the Venezuelan authorities. Upon approval, we intend to quickly move forward to FID on phase one, which will add 200,000 barrel gross in 24 months. This could be before the end of this year. Further phases could then take full field production to a gross level of 1 million barrels per day. Also, earlier this year, we signed a sustainability agreement on Perla, giving Eni control of export and revenues from which we will pay our royalty and taxes while resuming payment for our gas. In addition, the agreement allows for some de-bottlenecking of production for the domestic market, while also defining a new expansion phase for future LNG export, roughly doubling production. It's important to emphasize our objective is to manage our free cash flow position over both Junín and Perla, carefully managing the net capital.

Phase development and timely farm-downs to manage the risk-reward are a fundamental feature of Eni's upstream strategy, as you know. Before going into more detail on our performance for the quarter, let's also cover transition. Providing further important balance to our company, we continue to capture value from our transition activities, where Enilive has reported record result this quarter, coming ahead of a year when we expected to add significant new biorefining capacity and bring in by year-end the benefits of our recent purchase of the marketing asset in Germany. At the end of the quarter, we have also completed the additional investment in Plenitude with Ares taking a larger share. This new structure will efficiently support the next phase of growth for Plenitude.

In fact, emphasizing our value creation, we now have market valuation implying a value of these two largest company in the transition business at a combining EUR 25 billion. Our satellite strategy is a key tool to our success in building new transition businesses without sacrificing investment into E&P. Turning now to Q3 results. These fully reflect our objective to grow Eni while simultaneously reducing risk and adding the optionality that comes with a low-geared balance sheet and delivering an attractive return to our shareholder. E&P reported production growth of 4.2%. Combined with a supportive market environment and a focus on efficient operation, we generated pro forma EBIT of EUR 4.6 billion. GGP pro forma EBIT of EUR 0.4 billion came without one-time benefits seen in Q2 2026, and was driven by strong gas and LNG optimization results. There were no one-off contract adjustment in the quarter.

In transition, Enilive and Plenitude together reported pro forma EBIT of EUR 0.7 billion, corresponding to 0.6 of pro forma EBIT, with Enilive benefiting from supporting biorefining margins, while Plenitude results were impacted by the current competitive environment in the retail space. Transformation saw Refining report a further recovery in utilization as the major turnaround activity was completed, meaning we were provided important supply to customers and were able to capture the strong market conditions. Versalis suffered from a reversal in the scenario from Q2, but the underlying performance remain on track towards its target of break-even in 2028. Contribution from associates reflect a full quarter of Searah, the business combination in the Far East. Our share of the ADNOC refinery returned to profitability.

The group tax rate of 32% reflect a tax rate of 35% in E&P, helped by high grading of production, a higher proportion of results in lower tax regimes, and the effect of the satellites, plus also the improved contribution from Enilive and Refining. We now expect a full-year charge of between 36% and 37%. Net income of EUR 2.8 billion was up 20% quarter-on-quarter, despite lower oil price and up 2.2 times year-on-year. CFFO before working capital effect was EUR 4.3 billion, broadly in line with Q2 despite lower crude oil prices and 30% up year-on-year. Capital expenditure of EUR 1.35 billion is consistent with the EUR 7 billion we have guided to, and consistent with our comments to expect a lower figure in the second half with the consolidation of Plenitude and the upstream activity in Indonesia.

The impact of the strong cash flow from operation generation, our disciplined net investment, and the consolidation of Plenitude debt, equivalent to EUR 2.75 billion, improved our balance sheet with a reported gearing now at 10%, the bottom end of the guided 10%-15% range, while pro forma gearing is at 9%, both levels representing a record minimum. The continuing improvement in our balance sheet metrics is also confirmed by a recent upgrade by Standard & Poor on our credit rating and its initiation of an investment-grade rating on Plenitude. For the full year 2026, we now seek cash flow from operation at EUR 16.5 billion, 43% above our initial guidance. This underpins our shareholder returns and covers the dividend, our first priority, by more than five times.

Our historically strong balance sheet position and excellent cash flow from operation allow us to confirm the raise in our share buyback and the announcement of a special dividend. Today, we are raising our 2026 share buyback to EUR 3.8 billion from EUR 3.4 billion, 2.5 times above the original guidance. Additionally, we can confirm we are declaring an exceptional dividend of EUR 1.3 billion with ex-dividend date on December 7, bringing our total cash dividend this year to EUR 4.4 billion, the highest level in our history. This represents a total payout of EUR 8.2 billion or 50% of cash flow from operation, equivalent to a yield on our share price of more than 11%. With this, I conclude my remarks on what I think you will agree was another excellent quarter, consistent with our view shared at Q2, that Eni is one of the strongest position in its history.