Eni S.P.A. Lifts 2026 Outlook After Strong Exploration

Eni S.P.A. ((E)) has held its Q1 earnings call. Read on for the main highlights of the call.

Eni’s latest earnings call struck an upbeat tone, as management highlighted strong exploration success, solid profitability and an upgraded cash flow and buyback outlook. Near‑term drags from refinery maintenance, working capital swings and cost inflation tempered the picture, but the company framed these as manageable bumps in an otherwise improving trajectory.

Robust Profitability and Cash Generation

Eni reported pro forma EBIT of €3.5 billion and cash flow from operations of €2.9 billion in Q1 2026, underscoring resilient earnings despite market volatility and operational headwinds. Management stressed that many negative factors, including working capital and maintenance, should ease as the year progresses.

Balance Sheet Strength and Deleveraging

The group’s pro forma gearing stood at 15% for the quarter, falling to about 12% on an adjusted basis when assuming the full effect of Plenitude’s deconsolidation. Around €2.6 billion of Plenitude net debt is expected to drop off once that transaction is completed, reinforcing financial flexibility.

Exploration Breakthroughs Add ~1 Billion BOE

Eni declared an exceptional start to 2026 in exploration, adding roughly 1 billion barrels of oil equivalent of new resources across seven countries. Large finds such as Algaita, Murene South‑1/Calao, Libya offshore gas, Denise, Geliga and Gula are mostly near existing infrastructure, enabling quicker and cheaper development.

Production Growth and New Project Start‑Ups

Exploration and production delivered a 9% year‑on‑year rise in output, supported by new volumes from Angola’s NGC and the second Congo LNG train. Management pointed to a clear pipeline of projects that supports visible production growth through 2030, anchoring long‑term cash generation.

Stronger Cash Flow Outlook and Bigger Buybacks

The company lifted its 2026 cash flow from operations guidance before working capital to €13.8 billion, up 20% from its March estimate of €11.5 billion. Backed by this improved outlook, Eni plans to raise its share buyback to about €2.8 billion for 2026, nearly doubling the prior level.

Energy Transition and Renewables Momentum

Transition businesses posted Q1 pro forma EBITDA of €0.52 billion, in line with a full‑year target of €2.4 billion, signaling steady progress. Plenitude and Enilive are expected to deliver strong growth in 2026 EBITDA, with Plenitude boosted by the Acea Energy acquisition closed after the quarter.

CapEx Discipline Supports Returns

Capital spending was €1.9 billion in Q1, consistent with a full‑year plan of roughly €7 billion, and net CapEx was broadly equal to gross, reflecting limited portfolio churn. Management emphasized strict capital discipline as a key lever to protect returns amid cost inflation and market uncertainty.

Strategic Projects and Portfolio Moves

Eni advanced major final investment decisions at Geng North and Gehem in Indonesia, while pushing ahead with the reorganization and deconsolidation of Plenitude. It is also developing two new biorefineries in Italy and agreed to sell a 10% stake in the Baleine project in Ivory Coast to SOCAR.

Tax Profile Aligned with Guidance

The reported tax rate for the quarter was 42%, in line with management’s guidance, providing predictability for investors modeling net earnings. The cash tax rate is expected to hover around 25%, supporting solid cash conversion from operating profits.

Dividend, Buybacks and Shrinking Share Count

Eni paid its third quarterly dividend referencing 2025 in March and repurchased €280 million of shares during the quarter. Since the end of 2021, the company has cut its share count by 17%, amplifying the impact of future distributions on remaining shareholders.

Refinery Maintenance Weighs on Downstream

Downstream and biorefineries underperformed in Q1 as major planned maintenance and turnarounds reduced plant utilization. This limited Eni’s ability to capture strong market margins in the period, though these headwinds should fade as units return to normal operation.

Working Capital Hit from Price Spike

A sharp rise in commodity prices in March drove a sizable negative working capital effect on Q1 cash flow, temporarily depressing reported cash generation. Management expects much of this working capital drag to unwind over the coming quarters as markets stabilize.

Gas and Power Volatility Caps Upside

Global gas and power (GGP) delivered pro forma EBIT of €0.3 billion in the quarter, reflecting a volatile trading environment. While this is consistent with full‑year guidance of €1.3 billion, it suggests only moderate upside from this segment near term.

Cost Inflation and Margin Pressure

Management flagged short‑term cost inflation tied to geopolitics, logistics and insurance, with upstream costs trending about 4–7% higher. These pressures could squeeze margins if not offset, but Eni aims to counter them through capital discipline, efficiency and portfolio optimization.

Chemicals Restructuring Amid High Input Costs

Versalis and the broader chemical business faced higher feedstock and utility costs, partially offsetting benefits from ongoing transformation efforts. Restructuring delivered around €100 million of gains but these were eroded by about €85 million of adverse market effects, pointing to more work ahead.

Geopolitical Disruptions and Exploration Risk

Disruptions to Middle East volumes in March, covering roughly 3% of Eni’s production, contributed to market volatility and higher price assumptions. The company also reported a non‑commercial deepwater well in Libya, a reminder of inherent exploration risk despite overall strong results.

Venezuela Exposure and Recovery Uncertainty

Eni holds outstanding receivables from Venezuela of about $2.3 billion, with current estimates implying a realized value closer to $1 billion. Recovery mechanisms are being negotiated and linked to future developments, but the timing and scale of cash recovery remain uncertain.

Challenges for SAF and Biofuels Economics

Management highlighted affordability concerns around sustainable aviation fuel, which currently costs roughly 40% more than conventional jet fuel. While mandates and demand are growing, this cost gap could create friction for airlines and may require policy or technological support.

M&A Pipeline and Timing Risk

Several announced transactions, including the Baleine stake sale and the Plenitude reorganization, had not closed by quarter‑end, leaving some metrics in flux. Once completed, these deals will affect net debt, cash flow and gearing, but the exact timing remains uncertain.

Upgraded Guidance and 2026 Outlook

For 2026, Eni now assumes Brent at $83 per barrel, European gas at €50 per MWh and refining margins of $8 per barrel, all higher than prior forecasts. On this basis it guides to €13.8 billion of pre‑working‑capital operating cash flow, 3–4% E&P growth, €1.3 billion GGP EBIT and stronger earnings from Plenitude and Enilive, underpinning the enlarged buyback.

Overall, Eni’s call painted a picture of a company leveraging exploration success and disciplined spending to upgrade cash flow and shareholder returns. While execution risks from geopolitics, cost inflation and pending deals linger, the tone was confident and the medium‑term outlook meaningfully stronger than just a few months ago.