After discovering 15.2 trillion cubic feet of natural gas off the coast of Mozambique last month, Eni
Spend, spend, spend
On top of its initiative to develop Mozambique's natural gas, Eni has also committed $20 billion to develop the Zubair oil field in Iraq. Working with Occidental Petroleum
Debt, debt, debt
Still, $70 billion is a lot to think about. Eni's net borrowings are up this quarter, which is a perfect segue to its debt picture.
Operating Cash Flow
Return on Assets
Royal Dutch Shell
Source: Yahoo! Finance. Dollar figures in billions. MRQ = most recent quarter, TTM = trailing 12 months.
It's hard not to be in awe of ExxonMobil's stats here -- 10.3% debt to equity is simply magnificent. Eni's debt, on the other hand, makes me nervous, even if it's a case of short-term pain for long-term gain.
Eni is selling pipelines in Europe. Divesting assets is a great way for the company to get some of its debt under control.
Eni also recently joined Shell and Total in divesting their stake in two Nigerian onshore oil fields. Oil and gas operations in Nigeria have been increasingly victimized of late, as frustrated citizens attack pipelines and steal oil. It's a smart move, but unless Eni is proactive about operating differently in East Africa, the company will face the same problems.
CEO Paolo Scaroni met with the president of Mozambique, Armando Guebuza, to discuss plans for developing the gas assets and the effect it will have on the country. Mozambique is one of the poorest countries in the world and can certainly benefit from this project, provided it doesn't turn into another Nigeria.
Foolish bottom line
Eni is investing heavily in two plays that could be incredibly lucrative in the future. Investors should carefully monitor the progress of these investments, however, because both opportunities are located in regions of high political risk.
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