(Alliance News) - The USD4.9 billion acquisition of Neptune Energy Group by Eni Spa and subsidiary Vår Energi ASA -- expected to close by the first quarter of 2024 -- will bring some benefits to the Italian blue chip, as explained by the latter on Friday.

First of all, as of December 31, 2022, 2P reserves amounted to about 484 million barrels of oil equivalent, of which about 386 million refer to the Eni perimeter and of which about 80 percent related to natural gas. The transaction corresponds to an acquisition cost of 2P reserves of USD10.1 per barrel of oil equivalent. There is, in addition, significant additional potential related to contingent resources.

Then, for the year ended Dec. 31, 2022, Neptune reported revenues of about USD1.22 billion and Ebitdax of about USD0.95 billion for Neptune Global Business.

On the benefit side for Eni and its subsidiary, the transaction will bring about 130,000 boe per day of additional production to the portfolios of both companies. Eni estimates that the transaction will add more than 100,000 boe per day of low-emission production to its portfolio over the period 2024-2026, of which more than 70 percent will be natural gas, up from the 53 percent share achieved by Eni in 2022, almost all of which will be able to supply OECD markets via pipeline or LNG.

Eni expects to generate synergies in terms of structural and industrial costs of more than USD500 million and further upside in terms of cost reductions, including finance, exploration and development activities, including CCUS, and midstream activities.

On the financial side, the transaction will enable immediate upside in earnings and CFFO per share and will be positive in terms of free cashflow. The deal is also consistent with the 2023-2026 plan presented in February, with particular reference to the positive net contribution of EUR1 billion from portfolio assets over the period, total Capex of EUR37 billion, leverage between 10 percent and 20 percent, and average annual production growth rate of 3-4 percent over the 2023-2026 period, mainly through organic investments as well as the net impact of high-profile portfolio assets.

"Eni will thus integrate new assets that will bring additional value, while divesting from others as part of a rationalization and simplification of its portfolio."

Eni CEO Claudio Descalzi said, "Through this transaction, Eni acquires a high-quality, low-carbon portfolio with exceptional complementarity at the strategic and operational levels. We believe gas is a crucial bridging energy source for the global energy transition and are committed to increasing our share of natural gas production to 60 percent by 2030. Neptune will contribute mainly gas resources to our portfolio."

"In addition, the geographic and operational overlap is striking: it increases the size of Vår Energi, a company in which Eni holds a majority stake; it brings increased gas production and additional CCUS opportunities in the North Sea; it consolidates Eni's position as the leading international company in Algeria, a key gas supplier to European markets; and it increases Eni's presence in offshore Indonesia, with supplies to the Bontang LNG plant and domestic markets. In addition, we expect these additional gas volumes to secure further optimization opportunities for Eni's GGP business."

"The transaction will add about 4 billion cubic meters of gas to be delivered to European consumers. Another crucial aspect of the transaction is the low cost of new supplies and the increased cash flow it brings to Eni. This supports our commitment to delivering an attractive and robust dividend and the buyback program to support the distribution of 25-30% of the CFFO to our shareholders. The nature and challenges of the energy transition require a focused response, and this transaction particularly highlights two important aspects of Eni's financial strategy: the flexibility and optionality that our high liquidity and low leverage provide, and our innovative satellite model that helps access dedicated capital."

Eni's stock is down 1.3 percent at EUR12.72 per share.

By Giuseppe Fabio Ciccomascolo, Alliance News senior reporter

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