Italy’s oil and gas company Eni sees Q2 profits drop on Libyan disruptions

MILAN – Eni SpA, Italy’s largest natural gas and oil company, on Friday reported that second quarter profits slid 31 per cent due to production shutdowns in Libya, which has descended into civil war.

Net profit in the three months that ended June 30 was €1.25 billion ($1.78 billion), down from €1.82 billion in the same period a year earlier.

“The main feature impacting Eni’s results in the first half of 2011 was the disruption in supply of oil and gas from Libya, which affected all of our business activities,” CEO Paolo Scaroni said in a statement.

Shares in the company fell 2 per cent to €15.07 in early trading in a broadly lower market.

Oil and gas production was down 15 per cent in the second quarter, to 1.489 million barrels of oil equivalent. Gas and oil production has been mostly halted since February due to conflict in the northern African country.

The company evacuated all of its personnel in March, but said no damage has been reported to the plants and pipelines.

“Eni is technically able to resume the gas output at a level similar to the pre-crisis flows in 2010 once the situation has returned to normal,” the company said in a statement.

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The results also suffered from the higher cost of securing new natural gas supplies to help make up for the shortage in Libya. Eni shut off its natural gas pipeline from Libya after the conflict began – which also had the impact of decreasing sales to shippers that import gas to Italy by 74 per cent in the second quarter.

Eni continues to produce natural gas at Libya’s Wafa field, but only at a rate of 50,000 barrels of oil equivalent a day to generate electricity for the Libyan people. That’s down from an estimated oil and gas production of 280 thousands barrels a day.

Excluding Libya, production was down 2 per cent in the quarter, and 1 per cent in the first half, due mostly to planned down time at plants, particularly in Italy.

Eni said profitability in exploration and production improved. It put four new fields into production in the United States, Congo and Italy.

The company forecast 2011 will be “characterized by a certain degree of uncertainty and volatility” due to the financial crisis and the Libyan conflict. Eni said it was assuming an average oil price of $115 a barrel for the year – the current price is around $97.

It forecasts a decline in production of liquid and natural gas, due mostly to Libya, but is planning to raise production at new fields in the United States, Australia, Egypt, Italy and Algeria.

Worldwide gas sales, however, are expected to grow as Eni expects to replace Libyan supplies with other sources in its portfolio.

Eni said it expected solid full year results, and proposed a dividend of €0.52 a share. Eni paid €0.50 in 2010.