Eni SpA reported second-quarter profit that missed analysts’ estimates, though production held steady and output-growth targets were confirmed.

Adjusted net income dropped 27% from a year earlier to 562 million euros ($626.5 million), falling well short of the 935.2 million-euro average estimate of analysts. Production slipped just 2%.

Key Insights

The profit figure reflects a lower operating performance and a “notably” higher tax rate year-on-year in the upstream business, said Jason Kenney, an analyst at Banco Santander.

While Eni is “an attractive way to play a constructive view on oil,” it needs some “clean quarters going forward, without one-offs causing weaker earnings or cash,” said RBC Europe analyst Biraj Borkhataria.

Higher taxation is a short-term headwind, according to Alessandro Pozzi of Mediobanca, who noted “the long-term investment case of Eni, supported by a more diverse upstream portfolio, with a reduced geopolitical risk and higher margin production.”

Share Reaction

Eni fell 1.3% in Milan trading to 14.16 euros.

Santander’s Kenney said a negative share reaction could be an opportunity to buy, as upstream prospects in the second half and continued exploration success buoy Eni’s value.

Know More

Net cash from operations rose 49% from a year earlier to 4.52 billion euros. That in part reflects an additional dividend paid by Var Energi, the Norwegian oil company majority-owned by Eni.

Production slid to 1.83 MMboed from 1.86 MMboed a year earlier, following a shutdown at the giant Kashagan field in Kazakhstan and maintenance in Norway.

Eni confirmed its 2019 target for output growth of 2% to 2.5%.

Source: www.worldoil.com