Decarbonization strategy confirmed and long-term price scenario revised in light of market discontinuities due to Covid-19
Eni's CEO Claudio Descalzi commented: “We confirm our strategy aimed at making Eni a leader in decarbonisation, despite the far-reaching impacts that the COVID-19 pandemic is having on the economy and the group. Possible accelerations of the path are being evaluated. This will allow us to obtain a better balance of the portfolio, reducing its exposure to the volatility of hydrocarbon prices, and to combine the profitability and sustainability objectives that Eni has set itself. The scenario review, which took place four months after the start of the pandemic, projects our expectations on future prices and will be the new reference for the assessments on the allocation of our resources. "
Following the assessment of the current market discontinuities originating from the Covid-19 pandemic, Eni confirms the strategic lines presented in 2050 at the end of February, which will allow the group to become a leader in the supply of decarbonised products, actively contributing to the energy transition process and combining profitability and sustainability objectives. The developments linked to the spread of the COVID-19 pandemic have made the validity of the company's strategic path even more evident. The qualifying point of the strategy, as already communicated to the market, is the achievement of a target of 80% reduction in absolute GHG net emissions of all products by 2050, well beyond the 70% reduction threshold indicated by the IEA in the compatible scenario. with the objectives of the Paris Agreement. The ever more sustainable evolution of Eni's business model is then combined with the maintenance of rigorous financial discipline in investment policies and a solid group capital structure. After assessing the impacts of the COVID-19 pandemic on the reference macroeconomic and energy scenario, Eni has modified its market projections in response to some emerging trends. In particular, the forecast of hydrocarbon prices, the main driver of investment decisions and assessments of recoverability of the balance sheet values of fixed assets, are updated.
Review of the 2020-2024 scenario and long term
The new scenario adopted by Eni envisages a Brent price of 60 $ / barrel in real terms 2023 compared to the previous assumption of 70 $ / barrel. For the years 2020-2022, the price is expected to be 40, 48 and 55 $ / barrel respectively (previously 45, 55 and 70 $ / barrel). The price of gas at the PSV Italia spot market is expected to be 5,5 $ / mmBTU in 2023 compared to the previous 7,8 $ / mmBTU, for the years 2020-2022 it is expected to be 3,0, 4,6 and 5,2 respectively, 3,9 $ / mmBTU (previously 5,1, 7,3 and 5 $ / mmBTU). Long-term refining margins for the Mediterranean area are confirmed at just under $ XNUMX / barrel.
Budgetary effects of the scenario review
The verification of the recoverability of the book values of the fixed assets is still in progress and at the moment it is not possible for the management to definitively quantify the budgetary impact of the value adjustments due to the new price assumptions. To date, based on the information available and the current state of the valuation processes, in the second quarter management estimates that it will adjust the carrying values of non-current assets, including deferred tax assets, for a post-tax value of approximately 3,5 billion of Euros to which an approximate range of +/- 20% is applicable. The central value corresponds to a limited reduction, approximately 4%, of non-current assets.
The pre-tax value, estimated at € 2,8 billion, is attributable for € 2,0 billion to write-downs of upstream assets and for the rest to the refining sector. There are no write-downs of exploratory assets induced by the scenario review. The reduction in deferred tax assets of 0,7 billion Euros derives from the write-downs of tax losses net of the effects connected with the value adjustments of industrial assets. These charges in their final amount will be recognized in the consolidated accounts of the second quarter of 2020, which will be disclosed to the market on July 30th, and in the half-yearly report as of June 30th, which will be published indicatively in the first week of August upon completion of the limited review activities. by the auditor.