Executive Summary / Key Takeaways

• Eni is executing a profound strategic transformation, leveraging its unique satellite model to drive efficient growth in both traditional upstream and new energy transition businesses, significantly enhancing its portfolio and financial strength.
• The company's technological differentiators in floating LNG, advanced biorefining (processing 100% waste/residues), and cost-effective Carbon Capture, Utilization, and Storage (CCUS) are foundational to its competitive advantage and long-term value creation.
• Strong financial performance in the first half of 2025, including robust cash flow generation and historically low pro forma leverage of 10%, underscores the effectiveness of its strategy and portfolio high-grading initiatives.
• Eni's outlook is positive, with an upwardly revised 2025 CFFO guidance of €11.5 billion and significant growth projected for its transition businesses, supported by a confirmed and potentially enhanced share buyback program.
• Key risks include ongoing volatility in energy markets and the challenging European chemical sector, which Eni is actively addressing through a comprehensive restructuring and transformation plan for Versalis.

Eni's Strategic Transformation: A New Energy Paradigm

Eni S.p.A. is undergoing a significant strategic evolution, repositioning itself as an integrated energy company adept at navigating the complexities of the global energy transition. This transformation is rooted in a clear strategic intent: to deliver efficient, competitive growth across its upstream portfolio while simultaneously building new, competitively advantaged energy businesses focused on decarbonization. The company's journey, which began over a decade ago with the conversion of refining operations into biorefineries, has culminated in the creation of distinct, high-value entities like Enilive and Plenitude, alongside a robust upstream segment. This dual-pronged approach, underpinned by a unique "satellite model," is designed to unlock value, support investment, and strengthen its balance sheet, which now stands at historically low leverage levels.

The company operates within a dynamic competitive landscape, facing off against integrated energy majors such as TotalEnergies SE (TTE), BP p.l.c. (BP), Shell plc (SHEL), and ExxonMobil Corporation (XOM). Eni's market positioning is characterized by a balanced portfolio across energy types, emphasizing integrated projects that span traditional and new energy solutions. While competitors like ExxonMobil excel in raw production scale and TotalEnergies in aggressive low-carbon investments, Eni differentiates itself through its operational resilience, integrated strategies, and a strong focus on proprietary technologies that enhance efficiency and sustainability.

Technological Edge: The Foundation of Eni's Competitive Moat

Eni's strategic pivot is deeply intertwined with its technological prowess, which forms a critical competitive advantage. The company's core differentiated technologies span several key areas:

• Floating LNG (FLNG) Leadership: Eni is a leader in floating LNG, a technology that provides a unique opportunity to unlock vast resources in associated gas or from deepwater discoveries located far from shore. This capability allows for faster time-to-market and more flexible deployment compared to traditional onshore LNG facilities, offering a significant operational and capital efficiency benefit.
• Advanced Biorefining: Enilive's biorefineries are state-of-the-art, capable of processing 100% waste and residues. This feedstock flexibility is crucial, allowing for shifts between Sustainable Aviation Fuel (SAF) and Hydrotreated Vegetable Oil (HVO) production based on market demand and value pools. For instance, Enilive's new facility at Gela began SAF production with a capacity of 400,000 tons per year. This technological edge enables Eni to optimize margins even in volatile biofuel markets and positions it favorably against competitors who may rely on less versatile or sustainable feedstock sources.
• Cost-Effective Carbon Capture, Utilization, and Storage (CCUS): Eni's CCUS technology is designed for high efficiency and leverages existing infrastructure. The Ravenna project in Italy, for example, has demonstrated the ability to capture over 90% of CO2 emitted by upstream plants, with peaks of 96%, even from low-concentration streams. This approach, utilizing depleted reservoirs and existing wells and platforms, significantly reduces the capital intensity of CCUS projects. This offers a materially lower operating cost compared to developing entirely new infrastructure, providing a distinct advantage in decarbonizing hard-to-abate industries. The company aims for over 15 million tonnes of capacity by 2030, growing to over 40 million tonnes in the 2030s.

These technological differentiators contribute directly to Eni's competitive moat, enhancing its financial performance through lower costs, better margins, and a stronger market position in sustainability-driven projects. The company's R&D initiatives are focused on continuously improving these capabilities, ensuring that its technological leadership translates into sustained long-term growth and shareholder value.

Upstream and LNG: The Engine of Growth

Eni's upstream segment remains a key engine of organic growth, driven by an industry-leading exploration program and active portfolio management. In the first half of 2025, the company discovered approximately 600 million barrels of oil equivalent of new resources across Namibia, Ivory Coast, and Norway. This exploration success feeds a robust pipeline of organic production start-ups and ramp-ups. Key projects like Johan Castberg (March 2025) and Balder X (June 2025) in Norway, along with Agogo NGC in Angola and the second floating LNG in Congo (both expected in H2 2025), are set to significantly boost production. The Q2 2025 production stood at 1.67 million barrels per day, in line with guidance.

A significant strategic move is the formation of upstream satellites, exemplified by the combination with Petronas in Indonesia and Malaysia. This joint venture, formalized in June 2025 and targeted for completion by year-end, will create a leading regional player with 19 blocks, targeting gross production of over 300,000 barrels per day at closing and potentially exceeding 500,000 barrels per day in 4-5 years. This partnership leverages over 10 billion barrels of estimated unrisked resources and plans for at least 10 high-impact wells over the next three years. Similarly, the agreement with YPF (YPF) for the Argentina LNG project aims for a 12 million-tonne per year floating LNG facility, with an estimated cost of $20 billion for Eni's phase, further solidifying its integrated LNG strategy.

The Global Gas & LNG Portfolio (GGP) continues to deliver strong results, with its full-year 2025 pro forma EBIT now expected to be around €1 billion, an upside from original guidance. This performance is attributed to successful contract renegotiations and effective trading in volatile global LNG markets, where Eni's asset and logistics positioning provide a competitive edge.

Transition Businesses: Diversifying Returns and Unlocking Value

Eni's commitment to the energy transition is most evident in the rapid growth and valorization of its dedicated transition businesses: Enilive, Plenitude, and the emerging CCUS segment. These businesses are designed to build new, complementary, and competitively advantaged energy solutions related to end-product decarbonization.

Enilive, focused on sustainable mobility, saw an EBITDA improvement in Q2 2025, with strong marketing contributions and a recovery in biospreads expected in the latter half of the year. The business is expanding its biorefining footprint, with four additional projects in the pipeline, including two in Asia, following the conversion of Sannazzaro. The sanctioning of new biorefineries in Malaysia and South Korea, alongside the upcoming construction at Livorno, underscores this growth. KKR's (KKR) investment, topping up its stake to 30% in Enilive with a €601 million investment in April 2025 (following €2.96 billion in March), highlights the attractive valuation of this integrated business. Enilive's EBITDA is projected to nearly triple between 2024 and 2030.

Plenitude, Eni's renewables and retail energy arm, continues its strong growth trajectory. Q2 2025 saw a 12% increase in pro forma EBIT year-over-year, driven by robust retail performance and expanding renewable generation. The company is on track to grow its renewable capacity by over 30% year-on-year to over 5.5 gigawatts net by the end of 2025. Strategic moves like the binding offer for Acea Energia in June 2025 are expected to expand its customer base by over 10%. Ares' (ARES) €2 billion investment for a 20% stake values Plenitude at approximately €12 billion enterprise value, further validating its growth potential. Plenitude's EBITDA is also expected to nearly triple between 2024 and 2030.

The CCUS business is rapidly emerging as a new satellite. An exclusivity agreement with GIP for a 49.99% stake in CCUS activities, expected to close in H2 2025, follows the financial close with the U.K. government on the Liverpool Bay project. This segment is not capital-intensive, leveraging existing facilities and depleted reservoirs, with capital needs expected to be met primarily through project financing.

Industrial Transformation: Addressing Legacy Challenges

Eni is proactively addressing underperforming legacy assets through strategic industrial transformation, particularly within its Versalis (Chemicals) and Refining segments.

Versalis remains a significant loss-making segment, reflecting the challenging economic environment in the European chemical sector. However, Q2 2025 showed a quarter-on-quarter improvement, and a comprehensive transformation plan is underway. This plan involves accelerating actions, including the closure of the Brindisi steam cracker in March 2025 and Priolo in July 2025, ahead of schedule. These closures are anticipated to generate €90-100 million in positive effects in H2 2025, with a full annual impact of €250 million from H2 2026. The strategy aims for a nearly €1 billion EBIT turnaround and free cash flow breakeven by 2028, supported by a €2 billion investment over five years to shift the portfolio towards high-value specialties, biochemistry, and the circular economy. This transformation will see the portfolio shift from 30% specialties (2023-2024 average) to 65% specialties after the plan's completion.

Refining operations improved in Q2 2025 due to better margins, despite some downtime. The company's strategy to reduce its exposure to the European refining market through biorefining conversions and diversification has proven effective, allowing it to maintain positive results even in periods of very low margins. Refining margins saw a "sudden increase" from late June/early July 2025, with expectations for this situation to persist for several months due to low product storage and high gas oil crack spreads.

Financial Performance and Shareholder Returns

Eni's financial strategy is designed to disclose value, support investment, and contribute to a robust balance sheet. Cash flows before working capital for Q2 2025 were €2.8 billion, bringing the first half total to €6.2 billion, demonstrating efficient cash conversion.

Gross CapEx year-to-date stood at €3.9 billion, and the company is on track to meet its lowered full-year guidance of under €8.5 billion, with net CapEx projected to be below €6 billion, aided by strategic investments like Ares' in Plenitude and upstream valorizations.

The company has successfully executed on its cash initiatives, realizing €1 billion of the €2 billion announced in Q1 2025, with an additional €1 billion identified for capture by year-end, bringing the total benefit to €3 billion. These initiatives are primarily structural, focusing on working capital management, factoring, and cost reductions. Net debt decreased by €2 billion quarter-on-quarter to €10.2 billion, resulting in a leverage of 19%. Pro forma leverage, considering outstanding valorizations, reached a historic low of 10%. Eni aims to maintain its pro forma leverage between 15% and 20% in 2025, a range considered wide and conservative, potentially allowing for leverage towards the lower end.

Shareholder returns remain a top priority. Eni repurchased €0.66 billion in shares during the first half of 2025, with €0.3 billion allocated to the 2025 program, confirmed for completion in Q1 2026. The company's strong balance sheet and operational momentum provide the flexibility to consider further enhancements to its distribution policy.

Outlook and Risks

Eni's outlook is characterized by continued strategic execution and anticipated growth. The company now expects its 2025 CFFO to be €11.5 billion, an increase of €0.5 billion from its Q1 outlook and €0.5 billion higher on an underlying basis than its original guidance. Full-year production is expected to be around 1.7 million barrels per day, with Q3 production anticipated between 1.7 million and 1.72 million barrels per day, accounting for seasonal maintenance. New renewable power generation capacity is projected to reach over 5.5 gigawatts by year-end 2025. The company anticipates a positive second half of 2025 and an even more promising 2026, built on a larger, diversified, and more valuable asset base. Eni expects to grow CFFO by approximately 40% by 2030 and materially improve its return on capital employed.

Despite this positive outlook, Eni acknowledges several risks. The chemical sector in Europe faces a "lack of meaningful economic recovery," with a "grim outlook" for 2025, necessitating the aggressive transformation plan for Versalis. Market volatility, particularly in LNG and biofuel markets, remains a factor, though Eni's integrated value chain and trading capabilities help mitigate these impacts. Geopolitical risks in regions like Libya and Venezuela also present potential operational challenges, which the company is actively managing through ongoing engagements with authorities and project execution.

Conclusion

Eni's strategic transformation, marked by its innovative satellite model and a relentless focus on both upstream optimization and new energy transition businesses, positions the company for sustainable growth and enhanced shareholder returns. The company's technological leadership in floating LNG, advanced biorefining, and cost-effective CCUS provides a robust competitive moat, driving efficiency and value creation in a rapidly evolving energy landscape. Strong financial performance, characterized by robust cash flow generation and historically low leverage, underscores the effectiveness of its strategic execution.

Looking ahead, Eni's upwardly revised CFFO guidance for 2025 and the ambitious growth targets for its transition businesses signal a compelling investment thesis. While challenges in the European chemical sector and broader market volatility persist, Eni's proactive restructuring initiatives and diversified portfolio demonstrate resilience. The company's commitment to a competitive and progressive distribution policy, supported by its strengthening balance sheet and operational momentum, reinforces its appeal to discerning investors seeking attractive and resilient returns in the dynamic energy sector.