ENI GROUP RESULTS




  THE ENI SHARE
CONTENTS
LETTER TO SHAREHOLDERS




   PERFORMANCE REVIEW
PROFILE OF THE YEAR
BUSINESS REVIEW




COMMITMENT TO SUSTAINABL...
MISSION
2




        We are a major integrated energy company, committed to growth in the activities of finding, producing...
ENI IN 2008 LETTER TO SHAREHOLDERS         3




                                                                         ...
PERFORMANCE REVIEW
    2008 was an excellent year for Eni,
    both operationally and financially.
 We delivered on our tar...
PROFILE OF THE YEAR




FINANCIAL HIGHLIGHTS
 FINANCIAL HIGHLIGHTS                                                        ...
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                                         Kazakhstan - Kashagan field


    ...
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       STRATEGY                                                               enhanc...
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                                                                           RESULTS...
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     In spite of ongoing uncertainties in the energy markets, our              grow...
ENI IN 2008 PROFILE OF THE YEAR           11




 SHAREHOLDER INFORMATION                                                 ...
BUSINESS REVIEW
     EXPLORATION & PRODUCTION




KEY PERFORMANCE INDICATORS                                              ...
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                              Libya - Wafa field.


   ...
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     STRATEGIES

     Eni’s Exploration & Production busines...
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                                                         ...
ENI IN 2008 BUSINESS REVIEW / EXPLORATION & PRODUCTION
16




        PRODUCTION: 2008 AND OUTLOOK                        ...
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Eni in 2008

  1. 1. ENI GROUP RESULTS THE ENI SHARE
  2. 2. CONTENTS LETTER TO SHAREHOLDERS PERFORMANCE REVIEW PROFILE OF THE YEAR BUSINESS REVIEW COMMITMENT TO SUSTAINABLE DEVELOPMENT FINANCIAL REVIEW GROUP RESULTS FOR THE YEAR FINANCIAL INFORMATION DIRECTORS AND OFFICERS INVESTOR INFORMATION
  3. 3. MISSION 2 We are a major integrated energy company, committed to growth in the activities of finding, producing, transporting, transforming and marketing oil and gas. Eni men and women have a passion for challenges, continuous improvement, excellence and particularly value people, the environment and integrity. LETTER TO SHAREHOLDERS Roberto Poli Paolo Scaroni Chairman CEO Over the next four years, we will invest €48.8 billion, slightly less than 2008 was an excellent year for Eni, both operationally and financially. in the 2008-2011 plan. Despite deteriorating market conditions over the last four months of The projected free cash flow will allow us to maintain a dividend yield the year, we delivered on our targets, leveraging on the resilience of amongst the highest in the sector. our business portfolio to achieve sector-leading growth and distribute €5.7 billion to our shareholders. In Exploration & Production, we achieved an adjusted net profit of In 2008 we acquired Distrigas, gaining a strategic position in Belgium, €8 billion, up 23.4% compared to 2007, driven by production growth a key country in the European gas market due to its geographic and improved mix in a favourable oil price environment. This was location and its high level of interconnectivity with the Centre-North partially offset by the appreciation of the euro against the dollar and European transit gas networks. higher operating costs and amortisation charges. Finally, in 2008 Eni was recognised as the world’s most sustainable Oil and gas production totalled 1,797 kboe/day, up 3.5% from 2007 company in the oil and gas sector among the companies included in with an average Brent oil price of 97 $/bl (33.7% higher than 2007). Our the Dow Jones Sustainability Index. production growth was the highest in our peer group. Furthermore, Even in the current context of uncertain and volatile energy excluding the effect of higher prices on PSA contracts, we would have markets, we confirm our strategy of superior production growth and increased production by 5.6%. leadership in the European gas market. We will continue to invest in We achieved an all sources reserve replacement ratio of 135%, our long-term growth while maintaining a strong financial position resulting in a reserve life index of 10 years at December 31, 2008 (in and rewarding our shareholders with a dividend yield among the line with 2007). Over the course of the year, our exploration activities highest in our sector. led to the discovery of more than 1 billion boe. On October 31, 2008, Eni and its partners in the North Caspian Sea PSA FINANCIAL PERFORMANCE consortium signed the final agreement with the Kazakh authorities, Eni’s 2008 net profit was €8.8 billion. Adjusted net profit was €10.2 implementing the new contractual and governance framework of the billion, an increase of 7.7% compared to 2007, as a result of the Kashagan project. In the new operating model Eni, with a reduced stronger operating performance, partly offset by a higher tax rate. stake of 16.81%, is confirmed as the operator of phase one of the Return on average capital employed was 17.6%. project (the Experimental Program) and will retain operatorship of Record net cash generated from operating activities of €21.8 billion the onshore operations of phase 2 of the development plan. financed €18.9 billion of investments. Of this, €14.6 billion was On November 21, 2008, Eni closed the acquisition of First Calgary dedicated to organic growth projects, including exploration, and Petroleum Ltd, an oil and gas company with exploration and €4.3 billion to acquisitions. Our net debt to equity ratio at year end development activities in Algeria. was 38%. In the E&P division our strategy of delivering production growth is The results achieved in 2008 enable us to propose to the Annual focused on conventional activities and on high quality assets, located General Shareholders Meeting a dividend of €1.30 per share, of which largely in three low cost areas (Africa, OECD Countries and Central €0.65 was paid as an interim dividend in September 2008. This is in Asia/Russia), where we develop giant projects with scale benefits. line with our 2007 dividend. We target an average annual production increase of 3.5% in the 2009- 2012 plan and expect to maintain robust production growth of 3% SUSTAINING GROWTH AND SHAREHOLDER RETURNS a year in the following three years to 2015. In 2009, hydrocarbon Our strategic direction has not changed and growth continues to be production will exceed 1.8 million boe/d, based on a $43 per barrel our main priority. We will achieve our short and long-term growth Brent price scenario. In 2012, production will exceed 2.05 million targets through the development of our portfolio of quality projects boe/day based on a 55 $/bl price scenario. and by strengthening our leadership in the European gas market.
  4. 4. ENI IN 2008 LETTER TO SHAREHOLDERS 3 In Engineering & Construction, we reported an improved adjusted net In the next four years, more than 0.5 million boe/day of new production profit of €784 million (19.1% higher than in 2007) thanks to a better will come on stream, 85% of which is related to projects which will be operating performance driven by high efficiency and favourable profitable even with an oil price scenario below $45 per barrel. market conditions. Saipem is completing the expansion of its This growth strategy is based on organic development plans carried world-class fleet of construction and drilling vessels, consolidating out with a reserve replacement ratio of 130%. its leading position in the project management, engineering and construction activities within the oilfield services industry. In Gas & Power, we consolidated our leading position in Europe and generated 1.9 billion euro of free cash flow, confirming the stability In Petrochemicals we reported a loss at both operating and net of the division’s cash generation. Gas sales reached 104 billion cubic profit levels (-€375 million and -€306 million respectively) due meters, an increase of 5.3% (up 5.27 bcm) compared to 2007, mainly to the high costs of oil-based feedstock in the first three quarters reflecting the contribution of the acquisition of Distrigas. of the year and a steep decline in demand in the last quarter. Adjusted net profit for the year decreased by 9.7% to €2.65 billion, Our target is to preserve profitability even in an unfavourable largely due to a weaker operating performance. This was caused by scenario. We will improve efficiency, especially in our steam crackers, stronger competitive pressure, particularly impacting the Italian and selectively invest in areas where we have a competitive advantage market in the fourth quarter, and was partly offset by the increase in (styrenics and elastomers), also leveraging on our proprietary international sales. technologies. In October 2008, following the authorization from the European The efficiency programme launched in 2006 delivered almost 1 Commission, we closed the acquisition of the 57.243% majority billion in cost reductions by the end of 2008. We target another €1 stake in Distrigas SA from the French company Suez-Gaz de France. billion of cost reductions by 2012, bringing overall savings to around On December 30, 2008, Eni was granted authorization from the €2 billion by 2012, in real terms versus the 2005 baseline. Belgian market authorities to execute a mandatory tender offer on Furthermore, on February 12th 2009, we announced the restructuring the minorities of Distrigas. Our strategy is to further strengthen our leadership in the European of our regulated businesses in Italy, with the sale of our gas distribution gas market, where we hold a unique competitive position, thanks to and storage regulated activities to Snam Rete Gas. This deal will create our large and diversified gas supply portfolio and our direct access one of the major European operators in the regulated gas business to a vast infrastructure system and customer base. We will grow our and will enable us to extract significant synergies and unlock the international gas sales by an average of 7% a year, reaching total gas value of these assets for our shareholders. sales of 124 billion cubic meters by 2012 despite our reduced forecast for gas demand growth in Europe. SUSTAINABLE DEVELOPMENT We are very proud of having been selected as the leading oil and gas In Refining & Marketing we reported an adjusted net profit of €510 company in the Dow Jones Sustainability Index. million. This was 59.9% higher than in 2007 due to a better operating We will strive to improve the sustainability of our activities through performance and higher profits of equity-accounted entities, partly our commitment to: research and innovation, the development offset by increased income taxes. This result reflects higher margins of local communities, the protection of the environment and the in both refining and marketing. endorsement of higher health and safety standards. In conducting Marketing activities in Italy reported higher operating results due to a operations and in our relations with partners we uphold the recovery in selling margins and an increased market share in retail as protection and promotion of Human Rights. a result of effective marketing campaigns. Our strategy in R&M focuses on the selective strengthening of Eni confirms its commitment to Research and Innovation. We will our refining system, the improvement of quality standards in our focus on developing innovative technologies supporting our core marketing activities, and the widespread increase in operating businesses, leveraging on the industrial application of our proprietary efficiency. Overall, we target a €400 million EBIT increase by 2012, technologies, and on expanding our activities in renewables, also excluding scenario effects. In refining, we will increase our conversion thanks to cooperation agreements with primary academic and index to 65% and achieve a middle distillate yield of 45%, more than technology institutions. double the yield in gasoline. Three new hydrocrackers will come on stream in 2009 in the Sannazzaro, Taranto and Bayern Oil refineries. In People are our most important asset. In managing Human resources, marketing, we target an Italian market share increase to 32% through we are committed to implementing programs to improve leadership loyalty programmes and enhanced non-oil services. Abroad, we will skills, increase knowledge and promote international development. focus on three countries: Germany, Switzerland and Austria, where In conclusion, 2008 was another good year for Eni. The industry we enjoy significant advantages in terms of supply, logistics and brand is undoubtedly facing uncertain times, but we are well-placed to awareness. continue to deliver value to our shareholders, both in the short and the long term. March 13, 2009 In representation of the Board of Directors Chairman Chief Executive Officer
  5. 5. PERFORMANCE REVIEW 2008 was an excellent year for Eni, both operationally and financially. We delivered on our targets, leveraging on the resilience of our business portfolio to achieve sector leading growth.
  6. 6. PROFILE OF THE YEAR FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS 2006 2007 2008 (€ million, unless otherwise specified) Net sales from operations 86,105 87,256 108,148 Operating profit 19,327 18,868 18,641 Adjusted operating profit 20,490 18,986 21,793 Net profit pertaining to Eni 9,217 10,011 8,825 Adjusted net profit attributable to Eni 10,412 9,470 10,201 Net cash provided by operating activities 17,001 15,517 21,801 Capital and exploration expenditures 7,833 10,593 14,562 Acquisitions 95 9,909 4,305 Cash dividends to Eni shareholders 4,610 4,583 4,910 Research and development costs 222 208 217 Total assets at year end 88,312 101,560 116,590 Debts and bonds at year end 11,699 19,830 20,865 Shareholders’ equity including minority interests at year end 41,199 42,867 48,510 Net borrowings at year end 6,767 16,327 18,376 Net capital employed at year end 47,966 59,194 66,886 Return On Average Capital Employed (ROACE) - reported 20.3 20.5 15.7 (%) - adjusted 22.7 19.3 17.6 (%) Leverage 0.16 0.38 0.38 Our Gas & Power business being a utility-like business is able ENI AT A GLANCE to generate steady earnings and cash flows, which have proven to be very resilient through the commodity price cycles. The impact of the current economic slowdown on gas sales is BUSINESS PORTFOLIO mitigated by the Company’s strengthened leadership on the Eni is a major integrated energy company, committed to growth European gas market on the back of the Distrigas acquisition in the activities of finding, producing, transporting, transforming and the cash generation of the regulated businesses; and marketing oil and gas. Our Refining and Marketing business has a size that is The Company is ideally positioned to cope with industry challenges comparatively smaller than our peer group. This represents and the current economic downturn thanks to the resiliency of its an advantage during an economic downturn. We will leverage business portfolio. We have three major businesses: on our refining capabilities and focused presence in Italy and selected European markets to improve the profitability of the Our Exploration & Production business is well placed to business. withstand the low price environment due to its ability to deliver profitable growth with industry leading costs. This In addition, our strong presence in the engineering and oilfield reflects the business’s competitive advantages in terms of high services business provides the Company with the necessary exposure to low cost, fast growing areas, giant projects and competence and expertise, coupled with access to engineering conventional resources, as well as integration with our Gas & skills and technologies, to design and execute world scale Power operations. In the last couple of years, we have made a projects, representing a key element supporting Eni growth and number of synergic acquisitions that have strengthened our innovation plans. competitive profile in our core areas;
  7. 7. ENI IN 2008 PROFILE OF THE YEAR 7 Kazakhstan - Kashagan field The development plan of the Kashagan field provides for the construction of production plants located on artificial islands that will collect oil and natural gas from other satellite islands. Oil production will undergo a further treatment stage onshore and then be marketed. Natural gas will mostly be re-injected into the reservoir and used for power generation. First oil is expected late in 2012. This business profile is excellent, underpinned by the Company’s acting as an earnings stabilizer through the commodity cycles, diversity and operating and capital efficiency. The large cash- thus counterbalancing the higher volatility of the upstream generative gas downstream business is unique among oil majors, business. VOLUME SUMMARY 2006 2007 2008 Exploration & Production Estimated net proved reserves of hydrocarbons (at period end) 6,436 6,370 6,600 (mmboe) - Liquids 3,481 3,219 3,335 (mmbbl) - Natural gas 16,965 18,090 18,748 (bcf) Average reserve life index 10.0 10.0 10.0 (year) Production of hydrocarbons 1,770 1,736 1,797 (kboe/d) - Liquids 1,079 1,020 1,026 (kbbl/d) - Natural gas 3,964 4,114 4,424 (mmcf/d) Gas & Power Worldwide gas sales 98.10 98.96 104.23 (bcm) - of which E&P sales (a) 4.69 5.39 6.00 (bcm) LNG sales 9.9 11.7 12.0 (bcm) Customers in Italy 6.54 6.61 6.63 (million) Gas volumes transported in Italy 87.99 83.28 85.64 (bcm) Electricity sold 31.03 33.19 29.93 (TWh) Refining & Marketing Refining throughputs on own account 38.04 37.15 35.84 (mmtonnes) Conversion index 57 56 58 (%) Balanced capacity of refineries 711 748 737 (kbbl/d) Retail sales of petroleum products in Europe 12.48 12.65 12.67 (mmtonnes) Service stations in Europe at period end 6,294 6,441 5,956 (units) Average throughput of service stations in Europe 2,470 2,486 2,389 (kliters) Engineering & Construction Orders acquired 11,172 11,845 13,860 (€ million) Order backlog at period end 13,191 15,390 19,105 (€ million) 73,572 75,862 78,880 (units) Employees at period end (a) E&P sales include volumes marketed by the Exploration & Production division in Europe (4.07, 3.59, 3.36 bcm in 2006, 2007 and 2008 respectively) and in the Gulf of Mexico (0.62, 1.8 and 2.64 bcm in 2006, 2007 and 2008 respectively).
  8. 8. ENI IN 2008 PROFILE OF THE YEAR 8 STRATEGY enhancing product margins by promoting customer-oriented business policies and reducing the cost-to-serve, also leveraging In spite of the current downturn and volatile and uncertain energy long-standing relationship with key suppliers and partners to markets, our strategic direction has remained unchanged. obtain competitive contractual conditions. Eni’s priorities continue being the delivery of industry-leading growth and the creation of sustainable long-term shareholders’ value. We have retained a stable approach in managing our Preserve a solid financial structure Eni intends to preserve a solid capital structure targeting an businesses, which is consistent with their long-term nature. optimal mix between net borrowings and shareholders’ equity, Our investment decisions have always been made assuming a while at the same time, continuing to invest to fuel profitable conservative oil-price deck in the region of 50-60 US$ per barrel. growth and rewarding investors with superior dividend yields. This explains why our strategy is resilient even in the current Eni has been assigned high credit ratings by Standard & Poor’s challenging environment. (A-A) and Moody’s (Aa2) reflecting Eni’s ability to generate strong operating cash flows also in a low oil price environment, disciplined Eni’s strategy is consistent with the above-mentioned priorities approach to investments, capital efficiency and business strategy. and is based on the following pillars: As part of our financial framework, we retain a sufficient degree - Select the best capital and investment opportunities. of financial flexibility to pursue investment opportunities in the - Pursue capital and operating efficiency. marketplace. - Preserve a solid capital structure. - Manage risks. - Leverage research and innovation. Manage risks Eni has developed internal policies and guidelines aiming at - Apply the highest principles of business conduct. effectively identifying, assessing and managing risks in order - Promote the sustainability of the business model. to minimize their impact on the Company’s value. Our primary sources of risk are the nature and scope of our operations, the Select the best capital and investment opportunities trading environment and the geographic diversity of the business. The achievement of Eni’s growth targets is supported by a Firstly, we have adopted proven management systems to achieve disciplined and selective approach when making investment the highest operating standards to preserve the environment and decisions. Once an investment opportunity has been identified, it protect health and safety of our workers, third parties and the is carefully assessed based on our medium and long-tem scenario communities involved by our activity, ensuring at the same time for the macroeconomic environment and commodity prices that compliance with all applicable laws and regulations. has never deviated from what we see as long-term equilibrium Our integrated HSE management system encompasses a full prices. This scenario reflects our management’s view of the cycle of planning, executing, controlling and evaluating HSE fundamentals underlying the expected trends for oil and products performances of our operations so as to foster a continuing prices. The company selects and executes capital projects learning process to minimize risks. Secondly, we manage risks able to generate attractive returns and deliver shareholders deriving from the trading environment, including risks from the value. The same approach applies when acquiring an asset or a exposure to movements in commodity prices, interest rates and corporation. Acquisitions undergo a rigorous appraisal process foreign currency exchange rates, in a way to achieve a tolerable to test whether a deal is accretive to shareholders’ value and the level of exposure to potential losses in earnings or assets value strategic rationale i.e. fits with our existing asset portfolio. In 2008 in accordance with our conservative financial policies. During we spent some €4.3 billion to capture upstream and downstream the credit crunch, we have adopted additional measures and gas opportunities to strengthen our market leadership in Europe contingency plans to mitigate risks to the Group liquidity and our competitive position in upstream legacy areas. and counterparty’s risks. Finally, due to the scale and reach of our Company, we are exposed to unfavorable socio-political Pursue capital and operating efficiency developments in many of our countries of operations. While we Eni is committed to pursuing high levels of operating and capital acknowledge that certain risks are unavoidable, we are deeply efficiency. We attain this by applying industry best practices and convinced that establishing constructive relationships with host effective management systems to all of our operations, building countries’ institutions, representatives and communities is the on core competencies and continuously updating and improving best way to uphold profitable operations. internal processes, as in the case of energy-efficiency initiatives at our industrial plants and the achievement of standards of operational excellence in our upstream business. We have stepped Leverage research and innovation Meeting global energy needs requires us to develop new up efforts to streamline our organization by reducing decision- technologies designed to create sustainable competitive making levels and centralizing responsibilities over business advantages. We have consistently invested significant amounts of supporting processes to reap economies of scale resulting in resources in excess of €0.2 billion per year for many years to date significant savings due to our procurement and ICT optimization and we plan to step up our R&D efforts in the future by investing and rationalization. Integration across our businesses enables approximately 1 billion in the next four years. Eni to both pursue joint opportunities in the marketplace and We have successfully developed incremental innovations achieve synergies from the vertical and physical integration of our supporting our businesses’ competitive positions, while at facilities, so as to maximize value and returns from our assets. We the same time we have continued to make progress on our improve our profitability by implementing cost control initiatives,
  9. 9. ENI IN 2008 PROFILE OF THE YEAR 9 RESULTS AND TARGETS potentially break-trough technologies intended to monetize massive worldwide availability of stranded gas, and high-sulphur In recent years, we have delivered strongly on our strategy, content and non-conventional crude oils. creating value to our shareholders and growing our Company. Over a long-term perspective, we believe that our commitment We have increased our oil and gas production at an average in the fields of solar energy, reduction of GHG emissions and bio- rate of approximately 3% over the last five years to achieve 1.8 fuels could potentially result in huge rewards for the company. million barrels per day in 2008, outperforming the major oil companies. Our gas sales have grown at a 6% rate in the same period topping Apply the highest principles of business conduct The company has long recognized and upheld high business the 100 billion cubic meters mark in 2008 and confirming Eni standards in managing the Group’s activity on the belief that they as the market leader in Europe. Over the last five years, we have are an essential prerequisite for success. These standards are set in returned more than €25 billion to our shareholders through our Code of Ethics which is designed to provide all Eni employees dividends and repurchase of own shares. with guidelines for appropriate business conduct. Of that, approximately 85% has been distributed to shareholders Corporate governance, business integrity, honesty, accountability, via dividends. Unit dividends have been increased on average internal control and respect for human rights are the standards by 12% per annum over the period, while total shareholders’ underpinning Eni’s global reputation and ability to create return amounted to 10.4% on average, better than the shareholders’ value. worldwide stockmarket benchmark S&P500. In the last five years, we have invested approximately €48 Promote the sustainability of the business model Sustainable development is at the heart of Eni’s priorities. We billion in capital and exploratory projects in order to fuel wish to make a positive contribution to social and economic organic growth and a further €14 billion have been deployed development wherever we operate, strengthen the value of to capture opportunities in the marketplace by closing a our intangible assets and keep the trust of our stakeholders. To number of acquisitions that strengthened our competitive attain all these things, we have integrated sustainability targets position in our core upstream areas and in the European gas and actions into our management, planning and development market. processes. Our capital structure is solid with a ratio of net borrowings We are committed to empowering our people, preserving the to total equity at 0.38 thanks to our impressive cash flow environment, running our operations in a safe and reliable manner, generation, totaling €82 billion; a further €4.45 billion has respecting human rights, contributing to local development and been collected by divesting non strategic assets. increasing expenditures in research and innovation. On the back Looking forward, over the next four years, we plan to invest of our strong performance in every field of sustainability, we have €48.8 billion in our businesses to support continued organic been selected as the leading oil and gas company in the Dow growth, also beyond 2012. Jones Sustainability Index.
  10. 10. ENI IN 2008 PROFILE OF THE YEAR 10 In spite of ongoing uncertainties in the energy markets, our growth with an annual growth rate of 3% a year in the following investment program remains broadly unchanged with respect three years to 2015. In 2012 our production will exceed 2.05 to the previous industrial plan for the following reasons: million boe/day based on a 55 US$ per barrel price scenario. (i) adoption of prudent price assumptions when making In our Gas & Power division, we will grow our international gas sales investment decisions; by an average of 7% a year, enabling us to achieve total gas sales of (ii) a high-quality portfolio with a low break-even price; 124 billion cubic meters by 2012, despite our reduced forecast for (iii) expectations for a decrease in oilfield service rates and gas demand growth in Europe. purchase costs of materials and support equipment as a The ability to generate robust cash flow from operations will consequence of the current economic downturn; enable Eni to finance its capital expenditure plans and to sustain (iv) high exposure to regulated activities in the Italian gas sector the distribution of dividends to shareholders, while maintaining a which bear preset rates of return. Additionally, a significant solid balance sheet. Specifically, we expect that the projected free portion equalling to approximately 50% of Eni’s capital plan cash flow will allow us to ensure our shareholders a dividend yield has yet to be committed which ensures the Company a high amongst the highest in the sector. degree of flexibility in terms of capacity to reschedule capital Finally, the efficiency program launched in 2006 delivered almost expenditures should market conditions further deteriorate. €1 billion in cost reductions by the end of 2008. We target another €1 billion of cost reductions by 2012, bringing overall savings to We target an average annual production increase of 3.5% in the around €2 billion by 2012, in real terms versus the 2005 baseline. 2009-2012 period and expect to maintain robust production KEY MEDIUM-TERM TARGETS ANNOUNCED TO INVESTORS 2008 2012 E&P Daily production 1.8 million barrels/day >2.05 million barrels/day - c.a.g.r. 3.5% (Brent 55$/bl at 2012) 130% on average in the next four-year period (at our long-term Reserve replacement ratio 135% deck for Brent 57$/bl) G&P Worldwide gas sales 104 billion cubic meters 124 billion cubic meters; c.a.g.r. 7% in international sales EBITDA (a) €19 billion in 2008-2011 period €20 billion in 2009-2012 period R&M Refineries conversion index 57% 65% Retail market share in Italy 30.6% 32% EBIT €566 million +€400 million vs 2008, at a constant trading environment Cash allocation Capital expenditures €49.8 billion in 2008-2011 period €48.8 billion in 2009-2012 period Dividend yield 7.6% Among the highest in the industry ~€1.5 billion savings expected by 2011 ~€2 billion savings expected by 2012 Efficiency program (a) Cumulated.
  11. 11. ENI IN 2008 PROFILE OF THE YEAR 11 SHAREHOLDER INFORMATION 2006 2007 2008 Net profit pertaining to Eni: - per share (a) 2.49 2.73 2.43 (€) - per ADR (b) 6.26 7.49 7.15 (US$) Adjusted net profit pertaining to Eni: - per share (a) 2.81 2.58 2.80 (€) - per ADR (b) 7.07 7.07 8.24 (US$) Dividend - per share (c) 1.25 1.30 1.30 (€) - per ADR (b) 3.14 3.56 3.82 (US$) Annual dividend per share growth 13.6 4.0 0 (%) Pay-out 50 47 53 (%) Dividend yield (d) 5.0 5.3 7.6 (%) Total shareholder return (TSR) 14.8 3.2 (29.1) (%) Common stock purchases (gross) 1,241 680 778 (€ million) Number of shares outstanding: - at year end 3,680.4 3,656.8 3,622.4 (million of shares) - average (fully diluted) 3,701.3 3,669.2 3,638.9 (million of shares) Market capitalization (e) 93.8 91.6 60.6 (€ billion) Market quotations for common stock on the Mercato Telematico Azionario (MTA - “Telematico”) High 25.73 28.33 26.93 (€) Low 21.82 22.76 13.8 (€) Average daily close 23.83 25.10 21.43 (€) Year-end close 25.48 25.05 16.74 (€) Market quotations for ADR on the New York Stock Exchange High 67.69 78.29 84.14 (US$) Low 54.65 60.22 37.22 (US$) Average daily close 59.97 68.80 63.38 (US$) Year-end close 67.28 72.43 47.82 (US$) Average daily traded volumes 26.2 30.5 28.7 (million of shares) Value of traded volumes 619.1 773.1 610.4 (€ million) (a) Ratio of net profit to the average number of shares outstanding in the year, assuming dilution. Dollar amounts are converted on the basis of the average EUR/USD exchange rate quoted by the ECB for the periods presented. (b) One ADR (American Depositary Receipt) is equal to two Eni ordinary shares. (c) Dividend per share pertaining to the year. This dividend is paid in two tranches. An interim dividend is paid in the same year, as approved by the Board; the balance to the full year dividend is paid in the following calendar year (after approval by the Annual Shareholders’ Meeting). (d) Ratio of dividend for the period to the average price of the Eni shares recorded on the Italian Stock Exchange in December. (e) Number of outstanding shares by reference price at year end.
  12. 12. BUSINESS REVIEW EXPLORATION & PRODUCTION KEY PERFORMANCE INDICATORS 2006 2007 2008 Net sales from operations (a) 27,173 27,278 33,318 (€ million) Operating profit 15,580 13,788 16,415 Adjusted operating profit (b) 15,763 14,051 17,416 Exploration & Production 15,518 13,785 17,233 Storage Business 245 266 183 Adjusted net profit 7,279 6,491 8,008 Capital expenditures 5,203 6,625 9,545 of which: exploration expenditures (c) 1,348 1,659 1,918 storage 40 145 264 Adjusted capital employed, net 18,590 24,643 31,302 Adjusted ROACE 37.5 30.0 28.6 (%) Average realizations - Liquids 60.09 67.70 84.05 ($/bbl) - Natural gas 5.29 5.42 8.01 ($/mmcf) - Total hydrocarbons 48.87 53.17 68.13 ($/boe) Production (d) - Liquids 1,079 1,020 1,026 (kbbl/d) - Natural gas 3,964 4,114 4,424 (mmcf/d) - Total hydrocarbons 1,770 1,736 1,797 (kboe/d) Estimated net proved reserves (d) (e) - Liquids 3,481 3,219 3,335 (mmbbl) - Natural gas 16,965 18,090 18,748 (bcf) - Total hydrocarbons 6,436 6,370 6,600 (mmboe) Reserve life index 10.0 10.0 10.0 (year) Reserve replacement ratio of consolidated subsidiaries (SEC criteria) 38 38 136 (%) Reserve replacement ratio including equity-accounted entities (e) 38 90 135 (%) (a) Before elimination of intragroup sales. (b) From 2008, adjusted operating profit is reported for the “Exploration & Production” and “Storage” businesses, within the Exploration & Production division. Prior period data have been restated accordingly. (c) Includes exploration bonuses. (d) Includes Eni’s share of equity-accounted entities. (e) Includes a 30% stake of the reserves of the three equity-accounted Russian companies purchased in 2007 as part of a bid procedure for assets of bankrupt Yukos and participated by Eni with a 60% interest, considering that Gazprom exercises a call option to acquire a 51% interest in these companies so as to dilute Eni’s interest to 30%. Reserves of the 20% participated OAO Gazprom Neft were also excluded considering the call option attributed to Gazprom. 2008 HIGHLIGHTS of Understanding signed on January 14, 2008. First oil is Final Agreement for the development project of the Kashagan expected late in 2012. oilfield On October 31, 2008, all the international parties to the North Caspian Sea Production Sharing Agreement (NCSPSA) Portfolio developments consortium and the Kazakh authorities signed the final In the year we successfully executed a number of strategic agreement implementing the new contractual and governance acquisitions and deals that strengthen our competitive framework of the Kashagan project, based on the Memorandum position:
  13. 13. ENI IN 2008 BUSINESS REVIEW / EXPLORATION & PRODUCTION 13 Libya - Wafa field. The Western Libyan Gas Project is the first major project to valorise the natural gas produced in Libya trough export to and marketing in Europe. Production from Bahr Essalam and Wafa fields is processed at the onshore Mellitah plant. 2008 Performance - Completed the acquisition of entire share capital of the UK- Adjusted net profit for the full year was €8,008 million, an based oil company Burren Energy Plc. increase of €1,517 million from 2007 (up 23.4%) due to a better - Finalized an agreement with the British company Tullow Oil Ltd operating performance driven by higher realizations in dollars to purchase a 52% stake and the operatorship of fields in the and production growth, partially offset by rising operating costs Hewett Unit and relevant facilities in the North Sea. and higher amortization charges also associated with increased - Acquired all the common shares of First Calgary Petroleum exploration activities. Ltd, a Canadian oil and gas company with exploration and development activities in Algeria. Return on average capital employed calculated on an adjusted - Acquired control of the Indian company Hindustan Oil basis was 28.6% in 2008 (30% in 2007). Exploration Limited (Eni 47.18%) pursuant to the acquisition of Burren Energy Plc. Liquids and gas realizations for the full year increased on average - Finalized a major agreement in Libya for the extension of Eni’s by 28.1% in dollar terms from 2007, driven by the strong market mineral rights and the launch of gas and exploration projects. environment of the first nine months of the year. - Defined a cooperation agreement with the Republic of Congo Oil and natural gas production for the full year 2008 averaged the for the extraction of unconventional oil, the construction of a record level of 1,797 kboe/d, an increase of 61 kboe/d, or 3.5%, new power generation plant and the production of bio-diesel. from a year earlier. This improvement mainly benefited from the - Signed a Memorandum of Understanding with Sonangol assets acquired in the Gulf of Mexico, Congo and Turkmenistan, as for the definition of an integrated model of cooperation and well as continuing production ramp-up in Angola, Congo, Egypt, development. Pakistan and Venezuela. When excluding the impact of lower - Signed new strategic agreements with Petroleos de Venezuela entitlements in PSAs, production was up 5.6%. SA (PDVSA) for the definition of a plan to develop a field located in the Orinoco oil belt and the exploration and development of Estimated net proved reserves at December 31, 2008 were two offshore fields in the Caribbean Sea. 6.6 bboe, up 3.6% from 2007, determined based on a year- - Signed a partnership agreement with Papua New Guinea for the end Brent price of $36.55 per barrel. Additions for the year, exploration of oil and gas and identification of opportunities to including acquisitions and the divestment of a 1.71% stake in develop the Country’s resources. the Kashagan project, enabled the Company to replace 136% of production. - Finalized a Memorandum of Understanding with Colombia’s state oil company Ecopetrol to evaluate joint exploration Development expenditures were €6,429 million (up 38.5% from opportunities. 2007), in particular in the Gulf of Mexico, Kazakhstan, Italy, Nigeria, - Renewed the Memorandum of Understanding with Brazilian oil Egypt, Australia and Congo. company Petrobras for the evaluation of joint initiatives in the upstream and downstream sectors. In 2008, exploration expenditures amounted to €1,918 million - Signed a Memorandum of Understanding with state-owned (up 15.6% from 2007) to execute a very extensive campaign in company Qatar Petroleum International to target joint well established areas of presence. A total of 111 new exploratory investment opportunities in the exploration and production of wells were drilled (58.4 of which represented Eni’s share), in oil and gas. addition to 21 exploratory wells in progress at year end (12 net to - Awarded 32 exploration leases in the Gulf of Mexico close to Eni). The commercial success rate was 36.5% (43.4% net to Eni). certain of Eni’s producing fields as well as 18 exploration leases in Alaska. New exploratory acreage was added with an extension of approximately 57,000 square kilometers (net to Eni, 99% operated).
  14. 14. ENI IN 2008 BUSINESS REVIEW / EXPLORATION & PRODUCTION 14 STRATEGIES Eni’s Exploration & Production business boasts strong competitive Maintain strong production growth positions in a number of strategic oil and gas basins in the world, Ensure medium to long-term business sustainability by focusing on reserve replacement namely the Caspian Region, North and West Africa, the Gulf of Develop new projects to fuel future growth Mexico and Russia. A high-quality portfolio, integration with our Develop the LNG business Gas & Power business and long-standing relationships with key Implement cost reduction initiatives host countries will enable Eni to deliver industry-leading growth even in a low-price environment. Our excellent track record of successfully bringing on stream projects on time and budget In order to carry out these strategies, over the next four years and integrating acquired assets as well as operational excellence Eni intends to invest approximately €32.6 billion to fund organic underpins our ambitious production and reserve replacement growth and exploration initiatives; €1.8 billion of wich will be targets to 2012 and beyond. Consistently with these targets, our spent to build transport infrastructures and execute LNG projects strategic guidelines for the Exploration & Production division through equity-accounted entities. have remained basically unchanged in the years, as follows: that have strengthened our competitive position in legacy areas. MAINTAIN STRONG PRODUCTION GROWTH Our assets are well balanced between mature producing field Eni’s strategy is to deliver strong production growth leveraging and fields are at the early stages of their producing cycles with on a high-quality portfolio, geographically focused and resilient significant opportunities for growth. Development of new with one of the lowest break-even prices in the industry, large reserves and management of mature fields require a significant exposure to highly competitive giant projects where we are able to amount of capital expenditures. In 2008, Eni invested €6.4 billion reap economies of scale and a unique approach to business when on development activities. In the next four years, the Company dealing with our host countries partners. Over both the medium plans to invest approximately €26.9 billion evenly allocated among and the long-term our growth will derive from our assets mainly projects to fuel growth over the medium-term and long-term located in the three core regions of Africa, OECD countries and growth projects and projects designed to counteract mature field Central Asia/Russia where we can benefit from low lifting costs and declines. More importantly, a large share of those planned capital competitive time to market. These main areas will absorb more expenditures is either uncommitted or associated with sanctioned then 90% of our capital expenditures over the next four years and projects for which construction contracts have yet to be awarded. produce more than 90% of our output by 2012. This leaves us with the flexibility to reschedule construction and Our global oil and gas operations are conducted in 39 countries, procurement activities so as to benefit from ongoing downward including Italy, Egypt, Algeria, the United Kingdom, Norway, Angola, trends in rates of oilfield services and purchase costs of goods Congo, Nigeria, the United States, Kazakhstan and Russia. In 2008 and equipment. Additional cost control measures will address we successfully executed a number of acquisitions and agreements our ongoing operations. In the next four years, we expect that our initiatives will deliver significant cost reductions in our upstream operations in the range of €5 billion. STRENGHTEN OUR PORTFOLIO In 2008 we have continued capturing opportunities to strengthen our portfolio by focusing on highly synergic assets with significant upside potential, positioning the company to deliver growth and value over the coming years. We invested €2.5 billion (approximately €11 billion in the 2007-2008 period) on the execution of selective acquisitions in our core areas. We have acquired conventional assets characterized by fast “scale up” of production that will add 250 kboe/d in 2012 and a break- even price below $50 per barrel. On top of that, we have already identified material upsides, resulting in significant additions to our resource base and value creation. United Kingdom We completed the acquisition of UK-based oil company Burren Energy Plc, for a total cash consideration
  15. 15. ENI IN 2008 BUSINESS REVIEW / EXPLORATION & PRODUCTION 15 survey, over an extension of 1,790 square kilometers. Eni plans to amounting to approximately €2.4 billion (including Burren’s shares monetize the heavy oil by applying its EST (Eni Slurry Technology) purchased in 2007 for €0.6 billion). In 2008 production from proprietary technology intended to convert the heavy barrel Burren assets averaged 25 kbbl/d. Acquired proved and probable into high-quality light products. The agreement also comprises reserves are estimated to be approximately 214 mmboe at an the construction of a new 450 MW power generation plant (Eni’s average purchase cost of $13.5 per boe. This acquisition increased share 20%) to be fired with the associated natural gas from the our position in Congo and allowed us to enter Turkmenistan, a operated M’Boundi field and a partnership for the production new high potential area for the oil industry. Acquired assets also of bio-diesel. included a number of exploration licenses in Egypt and Yemen. Angola Eni signed a Memorandum of Understanding with India Eni acquired control of Indian company Hindustan Oil Sonangol for the definition of an integrated model of cooperation Exploration Limited (HOEC) following execution of a mandatory and development. The agreement covers onshore development tender offer on a 20% stake of the HOEC share capital. The activities and construction of facilities in Angola designed to mandatory offer was associated with Eni’s acquisition of a 27.18% monetize flaring gas as well as collaboration in the field of bio- of HOEC as part of the Burren deal. Assets acquired, located fuels. onshore in the Cambay Basin and offshore Chennai, include: (i) producing assets that are expected to reach a production plateau Venezuela Eni signed two strategic agreements with Petroleos of 10 kboe/d in 2010; (i) a number of fields where appraisal and de Venezuela SA (PDVSA): (i) one of these covers studies to development activities are underway. identify options for developing the Junin Block 5 located in the Orinoco oil belt. This block covering a gross acreage of 670 square United Kingdom Eni finalized an agreement with British company kilometers holds a resource potential estimated to be in excess of Tullow Oil to purchase a 52% stake and the operatorship of fields 2.5 bbbl of heavy oil. Once relevant studies have been performed in the Hewett Unit in the British section of the North Sea and and a development plan defined, a joint venture between PDVSA relevant facilities including the associated Bacton terminal. Eni and Eni will be established to execute the project. Eni intends to aims to upgrade certain depleted fields in the area so as to achieve contribute its experience and leading technology to the project a gas storage facility with a 177 bcf capacity to support seasonal in order to maximize the value of the heavy oil; (ii) the other upswings in gas demand in the UK. For this purpose, Eni intends to foresees an initiative to explore two offshore areas, Blanquilla and request a storage licence. Tortuga in the Caribbean Sea, both with a 20% interest over an area of 5,000 square kilometers. The prospective development of Algeria Eni acquired First Calgary Petroleum Ltd, a Canadian these areas will take place through an integrated LNG project. oil and gas company with exploration and development activities in Algeria. Cash consideration amounted to €605 Colombia Eni finalized two agreements with Colombia’s state oil million. Assets acquired include the operatorship of Block 405b company Ecopetrol: (i) a cooperation agreement for exploration with a 75% interest with resources in excess of 1.3 billion boe, assets in the Gulf of Mexico. Under the terms of the agreement, approximately half is gas. Production start-up is expected in Ecopetrol will invest approximately $220 million to acquire a 2011 with a projected production plateau of approximately 30 20-25% interest in five exploration wells due to be drilled before kboe/d net to Eni by 2012. 2012; (ii) a Memorandum of Understanding to evaluate joint exploration opportunities in Colombia and other South American Libya Eni finalized a strategic oil deal with the Libyan national oil countries as well as in Eni’s exploration portfolio. company based on the framework agreement of October 2007. This deal effective from January 1, 2008, extends the duration of Brazil Eni renewed the Memorandum of Understanding with Eni oil and gas properties until 2042 and 2047 respectively and lays Brazilian oil company Petrobras for pursuing joint initiatives in the foundations for a number of projects targeting development the upstream and downstream sectors, including production of the significant gas potential in the Country. This deal further and marketing of renewable fuels and possible options for the strengthens our competitive position in Libya and will enable valorisation of the natural gas reserves discovered by Eni offshore us to develop our long-life fields over the long-term though the Brazil. application of our advanced technologies for maximizing the recovery factor. Papua New Guinea We signed a partnership agreement with Papua We also signed a number of framework agreements with our New Guinea for the exploration of oil and gas and identification local partners as part of the Eni co-operation model that aims at of opportunities to develop the Country’s resources. Eni is also integrating sustainable activity in the territory with the traditional interested in opportunities in the fields of power generation and business of hydrocarbon exploration and production. alternative and existing renewable energies. Congo We defined a cooperation agreement with the Republic Qatar We signed a Memorandum of Understanding with state- of Congo for the extraction of unconventional oil from the owned company Qatar Petroleum International to target joint Tchikatanga and Tchikatanga-Makola oil sands deposits deemed investment opportunities in the exploration and production of to contain significant amounts of resources based on a recent oil and gas.
  16. 16. ENI IN 2008 BUSINESS REVIEW / EXPLORATION & PRODUCTION 16 PRODUCTION: 2008 AND OUTLOOK assets acquired in the Gulf of Mexico, Congo and Turkmenistan Oil and natural gas production for the full year 2008 averaged the (up 62 kboe/d), as well as continuing production ramp-up in record level of 1,797 kboe/d, an increase of 61 kboe/d, or 3.5%, Angola, Congo, Egypt, Pakistan and Venezuela. These positives from a year earlier. This improvement mainly benefited from the were partially offset by mature field declines as well as planned DAILY PRODUCTION OF OIL AND NATURAL GAS (a) (b) Change Liquids Natural gas Hydrocarbons Liquids Natural gas Hydrocarbons Liquids Natural gas Hydrocarbons % (kbbl/d) (mmcf/d) (kboe/d) (kbbl/d) (mmcf/d) (kboe/d) (kbbl/d) (mmcf/d) (kboe/d) Ch. 2006 2007 2008 2008 vs 2007 Italy 79 911.4 238 75 789.7 212 68 749.9 199 (13) (6.1) North Africa 329 1,299.1 555 337 1,474.2 594 338 1,761.6 645 51 8.6 Egypt 85 813.4 227 97 811.2 238 98 818.4 240 2 0.8 Libya 144 452.1 222 142 629.6 252 147 907.6 306 54 21.4 Algeria 88 19.4 91 85 18.8 88 80 18.5 83 (5) (5.7) Tunisia 12 14.2 15 13 14.6 16 13 17.1 16 West Africa 322 281.7 372 280 274.2 327 289 260.7 335 8 2.4 Nigeria 106 247.8 149 81 237.7 122 84 219.9 122 Angola 151 24.1 156 132 25.1 136 121 28.1 126 (10) (7.4) Congo 65 9.8 67 67 11.4 69 84 12.7 87 18 26.1 North Sea 178 597.0 282 157 594.7 261 140 558.0 237 (24) (9.2) Norway 98 245.2 140 90 271.1 137 83 264.8 129 (8) (5.8) United Kingdom 80 351.8 142 67 323.6 124 57 293.2 108 (16) (12.9) Caspian Area 64 227.6 103 70 237.9 112 81 244.7 123 11 9.8 Kazakhstan 64 227.6 103 70 237.9 112 69 244.7 111 (1) (0.9) Turkmenistan 12 12 12 .. Rest of the world 107 647.4 220 101 743.2 230 110 848.6 258 28 12.2 Australia 18 47.9 26 11 41.5 18 10 42.2 17 (1) (5.6) China 6 9.4 8 6 11.0 8 6 10.9 8 Croatia 66.8 12 52.5 9 68.7 12 3 33.3 Ecuador 15 15 16 16 16 16 Indonesia 2 118.1 23 2 105.4 20 2 99.7 20 Iran 29 29 26 26 28 28 2 7.7 Pakistan 1 289.2 51 1 292.5 52 1 315.6 56 4 7.7 Russia 2 2 (2) .. Trinidad & Tobago 51.7 9 58.9 10 54.6 9 (1) (10.0) United States 21 64.3 32 37 181.4 69 42 256.9 87 18 26.1 Venezuela 15 15 5 5 5 .. Total 1,079 3,964.2 1,770 1,020 4,113.9 1,736 1,026 4,423.5 1,797 61 3.5 (a) Includes production volumes of natural gas consumed in operations (281,296,286 mmcf/d in 2008, 2007, 2006 respectively). (b) Includes Eni’s share of production of equity accounted-entities.

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