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Eni earnings plunge on weak European demand

Wednesday - 8/1/2012, 2:33pm  ET

AP Business Writer

MILAN (AP) - Italian energy company Eni saw its second-quarter net profit plunge 82 percent largely on the back of weak European demand for gas despite a sharp increase in production from Libya.

However, Eni raised its interim dividend by nearly 4 percent to 54 euro cents on confidence that planned investments in exploration and production will help the company meet its targets.

Eni also announced Wednesday a key new natural gas discovery in Mozambique, raising the company's find in the area to as much as 70 trillion cubic feet of gas. The natural gas discovery in Mozambique is the biggest in the company's history.

Eni said net profit was (EURO)227 million ($279 million), compared with (EURO)1.25 billion a year earlier. It said the drop reflected a (EURO)1.1 billion writedown on its European gas units as well as the tough European environment.

Eni CEO Paolo Scaroni told analysts that the company is "facing challenging market conditions in gas and power in Italy and Europe." Eni is forecasting that the economic crisis will continue to pressure demand in Italy through the rest of the year.

Helping to offset Eni's difficulties in Europe was a "rapid recovery" of Libyan output, Scaroni said.

Oil and gas production in the quarter grew nearly 11 percent in the quarter to 1.647 million barrels of oil equivalent a day last year, when fighting in Libya halted production.

That helped Eni's overall second-quarter revenues to rise 25 percent to (EURO)30 billion from (EURO)24 billion.

For the first half, earnings were flat at (EURO)3.84 billion compared with (EURO)3.81 billion in 2011.

The company has made progress in disposing of its noncore businesses, which Scaroni said would create more value for shareholders.

Eni approved the sale of 30 percent less one share of its holding in the Snam natural gas network for (EURO)3.5 billion ($4.35 billion) to a government-controlled agency under terms mandated by Premier Mario Monti's government.

Monti specified the spinoff of Snam from Eni to increase competition. Eni has sold a further 5 percent share to institutional investors and Scaroni said it was in discussions with potential investors for its remaining stake.

Eni shares closed down 0.24 percent at (EURO)16.80.

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