Eni S.p.A. Signals Confidence With Strong 2026 Outlook

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 painted a largely upbeat picture, with management balancing robust strategic and financial progress against a handful of short‑term headwinds. Strong exploration results, higher cash flow guidance, disciplined CapEx and a sharply enhanced buyback plan underpinned a confident tone, even as refinery downtime, working capital swings and cost inflation weighed on the first quarter.

Strong Pro Forma EBIT and Operating Cash Flow

Eni reported pro forma EBIT of €3.5 billion in the first quarter of 2026, demonstrating resilient profitability despite operational hiccups in the downstream. Cash flow from operations reached €2.9 billion, showing that the core business continues to generate substantial liquidity even with adverse working capital movements.

Healthy Balance Sheet and Low Gearing

The group highlighted a solid financial position, with pro forma gearing at 15% for the quarter, reinforcing balance‑sheet strength. On an adjusted basis, gearing would fall to around 12% once the planned deconsolidation of Plenitude’s roughly €2.6 billion of net debt is fully reflected.

Exceptional Exploration Success (~1 Billion BOE)

Exploration delivered a standout start to 2026, adding around 1 billion barrels of oil equivalent across seven countries and validating Eni’s upstream strategy. Major finds such as Algaita, Murene South‑1/Calao, offshore Libya, Denise in Egypt and Geliga and Gula in Indonesia are largely close to existing infrastructure, offering attractive, faster‑to‑market volumes.

Production Growth and New Start‑Ups

The exploration and production division posted 9% year‑on‑year output growth, underpinned by key start‑ups like NGC in Angola and the first LNG export from Congo’s second LNG train. Management also pointed to visible production growth out to 2030, suggesting a durable pipeline of new projects in the coming years.

Upgraded Cash Flow and Distribution Outlook

Eni significantly upgraded its 2026 cash flow from operations guidance before working capital to €13.8 billion, a 20% increase from the previous €11.5 billion estimate. Backed by this stronger outlook, the company plans to almost double its share buyback to about €2.8 billion, setting this as a floor for 2026 pending shareholder approval.

Transition and Renewables Momentum

Transition businesses maintained momentum, with Q1 pro forma EBITDA of €0.52 billion in line with a €2.4 billion full‑year target, indicating steady progress. Plenitude’s gross EBITDA is expected to rise about 20% to €1.3 billion, while Enilive aims for €1.1 billion, up 16% year‑on‑year, supported by the post‑quarter acquisition of Acea Energy.

CapEx Discipline

Capital spending remained tightly controlled, with Q1 CapEx at €1.9 billion, consistent with a full‑year budget of around €7 billion. Net CapEx was broadly equal to gross, implying limited portfolio transactions in the period and underscoring management’s emphasis on disciplined investment.

Operational and Strategic Milestones

The quarter saw progress on several strategic fronts, including final investment decisions on Geng North and Gehem in Indonesia and advancing two new biorefineries at Sannazzaro and Priolo. Eni also moved ahead with reorganizing and deconsolidating Plenitude and announced the sale of a 10% stake in the Baleine field in Ivory Coast to SOCAR.

Tax and Cash Tax Rate Consistent with Guidance

The company reported a tax rate of 42%, in line with its guidance and reflective of its global portfolio mix and fiscal regimes. Cash taxes came in around 25%, offering investors clarity on the gap between accounting and cash tax and supporting visibility on net cash generation.

Shareholder Returns and Capital Management

Eni continued to prioritize shareholder returns, paying its third quarterly dividend for 2025 in March and repurchasing €280 million of shares in the quarter. Since the end of 2021, the company has reduced its share count by 17%, amplifying per‑share metrics and reinforcing its capital‑return credentials.

Downstream/Refinery Underperformance in Q1

Downstream operations were hampered by extensive planned maintenance and turnarounds in refineries and biorefineries during the first quarter, which dragged on earnings. Reduced utilization meant Eni captured less of the favorable refining backdrop, though management stressed that this impact should fade as plants return to normal operations.

Working Capital Drag from Market Spike

Sharp commodity price increases in March triggered a sizeable negative working capital swing, temporarily depressing reported cash flow. Management expects this effect to unwind over the next few quarters, framing the drag as timing‑related rather than structural to the business.

GGP Volatility and Moderate Q1 Result

Global gas and LNG portfolio results were tempered by volatile markets, with pro forma EBIT of €0.3 billion in the quarter. This outcome is broadly consistent with Eni’s full‑year EBIT guidance of €1.3 billion for the segment, indicating limited near‑term upside but also no major deviation from plan.

Cost Inflation and Service Market Tightness

Management acknowledged rising cost pressures linked to geopolitics, logistics and insurance, which are pushing upstream costs up by an estimated 4–7%. While the company is working to offset these through efficiency and portfolio choices, the tighter services market poses a potential headwind to margins.

Chemical Business Exposure to Feedstock/Utility Costs

The Versalis chemicals unit remained challenged by higher feedstock and utility costs, underscoring its cyclical exposure to energy markets. Transformation initiatives delivered roughly €100 million of benefits but were largely offset by around €85 million of adverse scenario effects, highlighting the need for continued restructuring.

Middle East Disruption and Volume Impact

Disruption to Middle Eastern volumes in March affected both exploration and production and the broader market backdrop, prompting higher price assumptions. While the region represents only about 3% of Eni’s production, the associated market volatility influenced planning assumptions and underscores geographic risk.

Non-Commercial Well in Libya

Exploration risk surfaced in Libya, where one deepwater well was deemed non‑commercial despite the overall success of the drilling programme. Management framed this as part of the normal risk‑reward profile of exploration, with the broader portfolio of recent discoveries more than compensating for isolated dry holes.

Venezuela Receivables and Recovery Uncertainty

Eni highlighted outstanding receivables from Venezuela of approximately $2.3 billion, with an estimated realizable value nearer $1 billion, reflecting conservative assumptions. Recovery is expected to depend on negotiated mechanisms tied to future developments, leaving a degree of uncertainty around timing and ultimate cash inflow.

Affordability Concerns for SAF and Biofuels

In its energy transition businesses, the company flagged affordability concerns around sustainable aviation fuel, which is around 40% more expensive than conventional jet fuel. This cost gap could create friction with airline customers even as mandates and rising demand support long‑term market growth for SAF and biofuels.

Unclosed M&A and Timing Uncertainty

Several key transactions, including the Baleine stake sale and the Plenitude reorganization, remained pending at quarter‑end and are expected to impact net debt and gearing once completed. Management cautioned that timing of these closings introduces some variability in near‑term metrics, though the strategic direction is clearly defined.

Forward-Looking Guidance and Outlook

Looking ahead to 2026, Eni raised its macro assumptions to Brent at $83 per barrel, TTF at €50 per megawatt hour and refining margins at $8 per barrel, underpinning stronger cash generation. The company now targets pre‑working‑capital cash flow from operations of €13.8 billion, E&P production growth of 3–4%, GGP EBIT of €1.3 billion and transition EBITDA of €2.4 billion, supporting a sizeable €2.8 billion buyback plan.

Eni’s earnings call portrayed a company balancing near‑term operational noise with robust long‑term fundamentals and enhanced capital returns. Strong exploration success, disciplined spending, a healthier balance sheet and a bigger cash‑return commitment are likely to resonate with investors, even as they monitor refining recovery, cost inflation and the execution of strategic transactions.