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Unformatted text preview: 1 Case Twelve Eni SpA: Building an International Energy Major i February 15, 2003 marked the 50 th anniversary of the founding of Eni S.p.A.Italys largest company and the worlds seventh biggest public petroleum company 1 and the beginning of Vittorio Mincatos fifth full year as Chief Executive Officer. Under Mincatos leadership, Eni had experienced a period of continuous transition and development based upon a strategy of growth of the core energy business. The results were impressive. Between 1998 and 2003, Enis revenues and hydrocarbon production had both grown by more than half, operating income had more than doubled, and Enis share price appreciation had been greater than any other oil major. The first two months of 2003 saw no slackening of pace for Mincato. During January and February 2003, Eni finalized its acquisitions of Fortum Petroleum, a Norwegian oil and gas company, for 1.1 billion euros and for the 56% of Italgas, an Italian gas distribution company that it did not already own. In January, Eni also purchased a service station network in Spain and four Hungarian gas distribution companies. However, Mincatos main preoccupation was Enis corporate plan for the next four years. On January 29 th , Mincato and his senior executives presented Enis strategic plans to the investment community in London. During the next two weeks the roadshow visited the financial centers of Europe and America. Mincato envisaged the next four years building upon the achievements of the previous four. The centerpiece of Enis strategy for 2004-2007 was continued upstream growth. During 1999-2002, Enis oil and gas production had grown faster than most other majors. The target for the next four years, was production growth of 5% per annum. Increased upstream output would be supported by downstream expansionespecially in the European gas market. As a result, Eni would build its position as one of the worlds leading vertically-integrated natural gas companies. At the same time, Eni would continue to reduce its investment in chemicals and other non-core businesses. Mincato was well aware that Enis position as one of the worlds most profitable and fastest growing energy majors was vulnerable to the challenges of a complex and turbulent business environment. High energy prices were a major contributor to Enis stellar financial performance. The price of oil remained vulnerable increased supplies from Iran, Iraq, and the former Soviet Union, while massive investments in liquefied natural gas (LNG) threatened to depress European gas prices. Any major slowdown in the world economy would also undermine energy prices. Longer term, concern over the environment impact of fossil fuels represented an additional source of uncertainty. Relative to its peers, Eni lacked massive size and the international scope of the new supermajorsExxon Mobil, BP-Amoco, TotalFinaElf, and ChevronTexacocreated during the merger wave of 1996-2001. Mincato was determined to avoid large scale mergers and acquisitions: "We've merger wave of 1996-2001....
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This note was uploaded on 01/19/2012 for the course N.A N./A taught by Professor N/a during the Spring '11 term at UPenn.
- Spring '11