Eni says European oil refining not profitable in long term (NYSE:E)

Eni (NYSE:E) closed -3.6% in U.S. trading Friday after the Italian oil and gas producer reported Q4 adjusted net profit of €1.64B (~$1.8B), matching analyst consensus expectations but declining by more than a third from the year-earlier quarter.

Q4 adjusted EBIT fell 27% Y/Y to €3.75B but above the €2.68B consensus estimate, while sales from operations fell 22% to €24.62B, below €26.78B consensus.

Eni’s (E) natural gas business posted a Q4 profit of €677M, well ahead of the €477.2M analyst consensus, “driven by an optimized natural gas and LNG portfolio and contract renegotiation benefits.”

The company’s refining and chemicals unit reported a surprise adjusted operating loss of €87M, compared with the average analyst estimate for a profit of €182.8M, as “negative trends” in the sector reduced margins by ~40% Y/Y.

On Eni’s (E) post-earnings conference call, the top refining executive said the company does not expect European oil refining will remain profitable in the long term given the high cost of energy, reinforcing the case for its move into biofuels.

CEO Claudio Descalzi said Egypt is continuing to pay energy firms despite many difficulties from the conflict in Gaza.

RBC Capital’s Biraj Borkhataria called the results “neutral” given the lack of prior guidance, adding that some investors may “consider the underlying results disappointing” due to potential one-off effects from arbitration proceeds.

Despite the Q4 miss, “we would highlight that results today confirm Eni’s improved delivery: The company has met or exceeded all the key guidance items provided at last year’s CMD,” Jefferies analysts said, which “increases our confidence on the company’s ability to deliver also on its longer-term growth targets.”