Italian energy group Eni said on Thursday it was raising the top end of its distribution range for the next five years and would pay an extraordinary dividend if energy prices exceed its forecast.
The state-controlled company pledged to distribute 100 per cent of additional cash flow through an extra dividend if annual average Brent exceeds $90 per barrel or gas prices or refining margins rise by 50 per cent compared with Eni's current expectations.
The conflict in Iran has triggered a more-than-40 per cent rise in Brent to above $100 per barrel, and without a resumption of oil and liquefied natural gas traffic through the Strait of Hormuz analysts see no significant easing of energy prices.
The impact of the disruptions in Hormuz on Eni's activities has so far been "not so big", Chief Executive Claudio Descalzi said in an analyst call, adding that the group has no tankers stranded in the region.
In its updated strategy, the company said it would increase its distribution payment to 35-45 per cent of cash flow from operations (CFFO) in 2026-2030, from a previous 35-40 per cent.
This will translate this year into a five per cent increase of its dividend and a share buyback of at least 1.5 billion euros ($1.73 billion), it said.
The new targets are founded on growth in reported hydrocarbon production envisaged at three to four per cent per year through 2030.
This will be generated by a wide range of projects including an upstream joint venture with Petronas in the Far East, and the development of LNG operations in Mozambique and Congo.
In addition, Eni said it expects to approve a major LNG project in Argentina this year, partnering with Buenos Aires-based YPF and Abu Dhabi's XRG.
"The bulk of our hydrocarbon output growth will be on LNG," said Guido Brusco, the group's chief operating officer for natural resources.
Descalzi said Eni would be, "significantly more cash generative by 2030," thanks partly to "continued cost reduction and performance improvements across our other businesses."
CFFO is expected to reach around 17 billion euros by 2030, the company said.
The debt-to-equity ratio, or gearing, will remain in a range of 10-15 per cent, after declining last year to 14 per cent.
Investments over the period plan are expected to average less than six billion euros per year, about two billion lower than under the previous strategy, thanks to efficiency gains and the deconsolidation of some activities.
Eni said it was taking its retail and renewable energy unit Plenitude off its balance sheet through a shareholding reorganisation and a new governance structure.
The transaction, on which Eni was advised by Mediobanca, involves a non-proportional capital increase of around 1.5 billion euros, of which at least 1.0 billion is expected to be provided by asset manager Ares, already an investor in the unit.
Following the capital increase, Eni will have a equity stake of close to 65 per cent in Plenitude.
(Reporting by Francesca Landini, editing by Gavin Jones)
