Italian oil giant Eni has been selling non-core assets in an effort to raise cash, but that might not be enough to fuel growth and maintain the company's dividend policy. That grim news could result in the sale of strategic assets, according to press reports.
Eni (E) is one of the most highly leveraged companies among Europe's major oil firms and slashed its dividend to 0.15 euros per share from 0.50 euros per share in July. The only other European oil company to reduce its dividend this year is Spain's Repsol. Lower crude prices have weighed on Eni's bottom line this year, with profits tumbling 59% through the first nine months of 2009. The dwindling profits come in the face of a rising debt-to-equity ratio which rested at 42% at the end of September, up from 38% a year earlier.
Analysts view 2010 as a critical year for Eni and the company is trying to sell oil and gas assets in Italy and the North Sea to raise cash, though interested buyers appear to be few and far between. According to Reuters, Eni was considering the sale of its TAG natural gas pipeline, which transports natural gas to Italy from Russia. Eni is Europe's largest wholesale gas supplier.
Even with its cash problems, Eni has continued to make debt-backed acquisitions, including the $1.5 billion purchase of some assets in Uganda in November. Analysts say Eni isn't likely to consider a dilutive share offering to raise cash because that would dilute Italy's stake in the company and Italy is suffering from a cash crunch of its own.