Eni Eyes New Oil and Gas Spin-Offs

Reuters, May 13, 2024

Italian energy group Eni (ENI.MI) could spin off stakes in high-potential oil and gas projects, including in Indonesia and Ivory Coast, to help finance their development while focusing more capital on low-carbon activities, company sources said.

Such deals would expand veteran CEO Claudio Descalzi's strategy to split some of Eni's operations into separate entities, or satellites, to raise money and tap investors such as private equity firms and infrastructure funds.

The carve-outs allow investors focused on oil and gas but uninterested in low-carbon activities - or vice versa - to be more precise about where they put their money.

"The satellite model is an approach we have built to have additional funding sources to keep together the need to meet demand for traditional products, while also developing new, greener products," Chief Financial Officer Francesco Gattei told Reuters.

Eni in recent years has created a retail and renewable unit, Plenitude, in which it sold a stake to an infrastructure fund, and a biofuel division, Enilive, in which Descalzi recently said it is considering selling a minority stake.

The divisions wrapped together assets scattered inside the Milan-based group, with dedicated management teams and separate balance sheets. Eni aims to list both to raise further financing for their growth.

The strategy - a unique approach among oil and gas majors seeking to branch out into renewables - is aimed at showing investors the potential of early-stage businesses that struggle to compete with the returns of traditional oil and gas operations, Gattei told Reuters.

It has also spun out fossil fuel operations. Last month, Eni agreed to combine its British North Sea oil and gas operations with Ithaca Energy (ITH.L) in exchange for a 38.5% stake in the company.

The deal, valued at nearly $1 billion, allows Eni to cut capital spending while receiving potential dividends from Ithaca.

Gattei said the group was considering doing something similar for other exploration and production projects needing large investments. Company sources pointed to Ivory Coast and Indonesia as potential candidates.

In Indonesia, the group aims to create a gas hub following a find at Geng North-1 and the consolidation of other upstream assets acquired from Chevron (CVX.N) and through its acquisition of Neptune Energy.

In Ivory Coast, it made a major offshore discovery in March, and is also producing oil and gas at the giant Baleine field.

(Reporting by Ron Bousso; Editing by Jan Harvey)

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