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Supplemental oil and gas information (unaudited)

The following information pursuant to “International Financial Reporting Standards” (IFRS) is presented in accordance with FASB Extractive Activities - oil&gas (Topic 932). Amounts related to minority interests are not significant.

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Capitalized costs

Capitalized costs represent the total expenditures for proved and unproved mineral interests and related support equipment and facilities utilized in oil and gas exploration and production activities, together with related accumulated depreciation, depletion and amortization.

Capitalized costs by geographical area

Costs incurred

Costs incurred represent amounts both capitalized and expensed in connection with oil and gas producing activities.

Costs incurred by geographical area

Results of operations from oil and gas producing activities

Results of operations from oil and gas producing activities represent only those revenues and expenses directly associated with such activities, including operating overheads. These amounts do not include any allocation of interest expense or general corporate overhead and, therefore, are not necessarily indicative of the contributions to consolidated net earnings of Eni. Related income taxes are computed by applying the local income tax rates to the pre-tax income from producing activities. Eni is a party to certain Production Sharing Agreements (PSAs), whereby a portion of Eni’s share of oil and gas production is withheld and sold by its joint venture partners which are state owned entities, with proceeds being remitted to the state in satisfaction of Eni’s PSA related tax liabilities. Revenue and income taxes include such taxes owed by Eni but paid by state-owned entities out of Eni’s share of oil and gas production.

Results of operations from oil and gas producing activities by geographical area

Oil and natural gas reserves

Eni’s criteria concerning evaluation and classification of proved developed and undeveloped reserves follow Regulation S-X 4-10 of the U.S. Securities and Exchange Commission and have been disclosed in accordance with FASB Extractive Activities - oil&gas (Topic 932).

Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. In 2012, the average price for the marker Brent crude oil was $111 per barrel. Net proved reserves exclude interests and royalties owned by others. Proved reserves are classified as either developed or undeveloped. Developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well. Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

Since 1991, Eni has requested qualified independent oil engineering companies to carry out an independent evaluation 21 of part of its proved reserves on a rotational basis. The description of qualifications of the person primarily responsible of the reserve audit is included in the third party audit report.

In the preparation of their reports, independent evaluators rely, without independent verification, upon data furnished by Eni with respect to property interest, production, current cost of operation and development, sale agreements, prices and other factual information and data that were accepted as represented by the independent evaluators. These data, equally used by Eni in its internal process, include logs, directional surveys, core and PVT (Pressure Volume Temperature) analysis, maps, oil/gas/water production/injection data of wells, reservoir studies and technical analysis relevant to field performance, long-term development plans, future capital and operating costs. In order to calculate the economic value of Eni equity reserves, actual prices applicable to hydrocarbon sales, price adjustments required by applicable contractual arrangements, and other pertinent information are provided. In 2012, Ryder Scott Company and DeGolyer and MacNaughton 22 provided an independent evaluation of almost 33% of Eni’s total proved reserves as of December 31, 2012 23, confirming, as in previous years, the reasonableness of Eni’s internal evaluations. In the three year period from 2010 to 2012, 92% of Eni’s total proved reserves were subject to independent evaluation. As of December 31, 2012, the principal properties not subjected to independent evaluation in the last three years are Bouri and Bu Attifel (Libia) and M’Boundi (Congo).

Eni operates under Production Sharing Agreements, PSAs, in several of the foreign jurisdictions where it has oil and gas exploration and production activities. Reserves of oil and natural gas to which Eni is entitled under PSA arrangements are shown in accordance with Eni’s economic interest in the volumes of oil and natural gas estimated to be recoverable in future years. Such reserves include estimated quantities allocated to Eni for recovery of costs, income taxes owed by Eni but settled by its joint venture partners (which are state-owned entities) out of Eni’s share of production and Eni’s net equity share after cost recovery. Proved oil and gas reserves associated with PSAs represented 55%, 49% and 47% of total proved reserves as of December 31, 2010, 2011 and 2012, respectively, on an oil-equivalent basis. Similar effects as PSAs apply to service and “buy-back” contracts; proved reserves associated with such contracts represented 3%, 1% and 2% of total proved reserves on an oil-equivalent basis as of December 31, 2010, 2011 and 2012, respectively.

Oil and gas reserve quantities include: (i) oil and natural gas quantities in excess of cost recovery which the company has an obligation to purchase under certain PSAs with governments or authorities, whereby the company serves as producer of reserves. Reserve volumes associated with oil and gas deriving from such obligation represent 0.6%, 0.8% and 1.1% of total proved reserves as of December 31, 2010, 2011 and 2012, respectively, on an oil equivalent basis; (ii) volumes of natural gas used for own consumption; (iii) the quantities of hydrocarbons related to the Angola LNG plant.

Numerous uncertainties are inherent in estimating quantities of proved reserves, in projecting future productions and development expenditures. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and evaluation. The results of drilling, testing and production after the date of the estimate may require substantial upward or downward revisions. In addition, changes in oil and natural gas prices have an effect on the quantities of Eni’s proved reserves since estimates of reserves are based on prices and costs relevant to the date when such estimates are made. Consequently, the evaluation of reserves could also significantly differ from actual oil and natural gas volumes that will be produced.

The following table presents yearly changes in estimated proved reserves, developed and undeveloped, of crude oil (including condensate and natural gas liquids) and natural gas as of December 31, 2010, 2011 and 2012.

  1. From 1991 to 2002 DeGolyer and McNaughton, from 2003 also Ryder Scott.
  2. The reports of independent engineers are available on Eni website eni.com, section Publications/Annual Report 2012.
  3. Including reserves of equity-accounted entities.

Crude oil (including condensate and natural gas liquids)

Natural Gas

Standardized measure of discounted future net cash flows

Estimated future cash inflows represent the revenues that would be received from production and are determined by applying year-end the average prices during the years ended.

Future price changes are considered only to the extent provided by contractual arrangements. Estimated future development and production costs are determined by estimating the expenditures to be incurred in developing and producing the proved reserves at the end of the year. Neither the effects of price and cost escalations nor expected future changes in technology and operating practices have been considered.

The standardized measure is calculated as the excess of future cash inflows from proved reserves less future costs of producing and developing the reserves, future income taxes and a yearly 10% discount factor.

Future production costs include the estimated expenditures related to the production of proved reserves plus any production taxes without consideration of future inflation. Future development costs include the estimated costs of drilling development wells and installation of production facilities, plus the net costs associated with dismantlement and abandonment of wells and facilities, under the assumption that year-end costs continue without considering future inflation. Future income taxes were calculated in accordance with the tax laws of the Countries in which Eni operates.

The standardized measure of discounted future net cash flows, related to the preceding proved oil and gas reserves, is calculated in accordance with the requirements of FASB Extractive Activities - oil&gas (Topic 932). The standardized measure does not purport to reflect realizable values or fair market value of Eni’s proved reserves. An estimate of fair value would also take into account, among other things, hydrocarbon resources other than proved reserves, anticipated changes in future prices and costs and a discount factor representative of the risks inherent in the oil and gas exploration and production activity.

The standardized measure of discounted future net cash flows by geographical area

Changes in standardized measure of discounted future net cash flows

Changes in standardized measure of discounted future net cash flows for the years ended December 31, 2010, 2011 and 2012, are as follows:

(€ million)
Consolidated
subsidiaries
Equity-
accounted
entities
Total
Standardized measure of discounted future net cash flows at December 31, 2009 31,500 257 31,757
Increase (decrease):
- sales, net of production costs (22,194) (243) (22,437)
- net changes in sales and transfer prices, net of production costs 24,415 406 24,821
- extensions, discoveries and improved recovery, net of future production and development costs 1,926 1,409 3,335
- changes in estimated future development and abandonment costs (6,464) (386) (6,850)
- development costs incurred during the period that reduced future development costs 8,520 368 8,888
- revisions of quantity estimates 12,600 143 12,743
- accretion of discount 6,519 53 6,572
- net change in income taxes (11,802) (1,115) (12,917)
- purchase of reserves in-place
- sale of reserves in-place (177) (177)
- changes in production rates (timing) and other 1,234 191 1,425
Net increase (decrease) 14,577 826 15,403
Standardized measure of discounted future net cash flows at December 31, 2010 46,077 1,083 47,160
Increase (decrease):
- sales, net of production costs (23,744) (300) (24,044)
- net changes in sales and transfer prices, net of production costs 40,961 442 41,403
- extensions, discoveries and improved recovery, net of future production and development costs 1,580 2,457 4,037
- changes in estimated future development and abandonment costs (3,890) (392) (4,282)
- development costs incurred during the period that reduced future development costs 7,301 866 8,167
- revisions of quantity estimates 1,337 (87) 1,250
- accretion of discount 8,640 235 8,875
- net change in income taxes (17,067) (1,678) (18,745)
- purchase of reserves in-place 37 10 47
- sale of reserves in-place (146) (146)
- changes in production rates (timing) and other 1,152 24 1,176
Net increase (decrease) 16,161 1,577 17,738
Standardized measure of discounted future net cash flows at December 31, 2011 62,238 2,660 64,898
Increase (decrease):
- sales, net of production costs (28,595) (325) (28,920)
- net changes in sales and transfer prices, net of production costs 2,264 (56) 2,208
- extensions, discoveries and improved recovery, net of future production and development costs 4,868 812 5,680
- changes in estimated future development and abandonment costs (3,802) (357) (4,159)
- development costs incurred during the period that reduced future development costs 8,199 409 8,608
- revisions of quantity estimates 3,725 824 4,549
- accretion of discount 12,527 477 13,004
- net change in income taxes 2,207 (830) 1,377
- purchase of reserves in-place
- sale of reserves in-place (1,509) (615) (2,124)
- changes in production rates (timing) and other (830) (53) (883)
Net increase (decrease) (946) 286 (660)
Standardized measure of discounted future net cash flows at December 31, 2012 61,292 2,946 64,238

Eni S.p.a. - Registered Head Office
Piazzaie Enrico Mattei, 1
00144 Roma

Branches
Via Emilia, 1
e Piazza Ezio Vanoni, 1
20097 - San Donato Milanese (MI)

VAT number
n. 00905811006

Company share capital
€ 4.005.358.876,00 paid up.

Rome Company Register
Tax Identification Number. 00484960588

Mission
We are a major integrated energy company, committed to growth in the activities of finding, producing, transporting, transforming and marketing oil and gas. Eni men and women have a passion for challenges, continuous improvement, excellence and particularly value people, the environment and integrity.