Eni Targets Raising 4B Euros From Upstream Asset Sales

Eni SpA E, an Italian energy giant, is set to raise more than €4 billion (approximately $4.3 billion) through the sale of assets in its global upstream business. This move is part of a broader strategy to sell €8 billion in assets over the next three years, as reported by Bloomberg on Monday.

The asset sales are expected to include operations in Indonesia and Cyprus, among other locations. Under the leadership of CEO Claudio Descalzi, Eni's strategy involves a dual approach to divestments. This includes selling smaller projects that might attract local buyers and considering the sale of stakes in some of its major projects. This strategy is designed to streamline the company's operations and enhance its financial flexibility.

The company has not yet made a public statement on this. However, it had previously indicated a desire to gradually reduce its involvement in hydrocarbon-related activities to finance its transition toward more sustainable energy sources. Descalzi's strategy, known as the satellite model, involves separating divisions and partnering with external investors with the long-term goal of listing these entities. This approach is set to include businesses like Plenitude, a renewables specialist, and Enilive, which focuses on biorefining and mobility.

Among the specific assets under consideration, Eni could raise between €850 million and €1 billion from selling its Alaskan assets to U.S.-based Hilcorp. A similar amount could be raised through the sale of a 30% stake in Eni's operations in the Ivory Coast, according to the report.

Upstream activities, which involve identifying, extracting, and producing oil and gas, are targeted to account for more than half of Eni's planned asset disposals, according to the company's latest business plan. Additionally, Eni is contemplating a reorganization of its upstream activities within Italy, potentially consolidating them into a single unit. This reorganization is still under discussion, and no final decisions have been made yet.

Eni's aggressive asset disposal plan highlights the company's commitment to its energy transition goals while balancing financial stability. The outcome of these disposals and reorganization efforts will be crucial for Eni's future in the evolving global energy landscape.

Zacks Rank & Key Picks

E currently has a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Hess Corporation HES, Sunoco LP SUN and SM Energy Company SM. While Hess and Sunoco currently sport a Zacks Rank #1 (Strong Buy) each, SM Energy carries a Zacks Rank #2 (Buy).

Hess is a leading oil and natural gas exploration and production company that made several world-class oil discoveries in the Stabroek Block, located off the coast of Guyana. The company is currently in the process of being acquired by supermajor Chevron in an all-stock deal worth $53 billion. The merger will likely result in the creation of an energy behemoth with a massive portfolio of producing assets. 

The Zacks Consensus Estimate for HES' 2024 EPS is pegged at $10.28. The company has a Zacks Style Score of B for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes over 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company's attractive oil and gas investments should create long-term value for shareholders.

The Zacks Consensus Estimate for SM's 2024 EPS is pegged at $6.69. The company has a Zacks Style Score of B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.

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