E » Topics » Lifting and development costs are trending up and this could reduce profit per BOE in the Exploration & Production segment

This excerpt taken from the E 20-F filed May 21, 2008.

Lifting and development costs are trending up and this could reduce profit per BOE in the Exploration & Production segment

Profits per BOE in the Exploration & Production segment are being affected by a steady rising trend in lifting and development costs as a result of a number of industry-wide operating factors, including: (i) the increasingly high percentage of complex development projects in our portfolio (such as those in deep and ultra deep waters and in harsh environments, such as with the Kashagan field). These projects in complex environments bear higher lifting and development costs as compared to development projects located onshore and in traditional environments; (ii) continuing increases in the purchase prices of raw materials and services due to sector-specific inflation; and (iii) an increasingly severe shortage of specialized resources (such as engineers and other valuable technicians) and critical equipment (such as drilling rigs) especially in remote areas, leading to project delays and cost overruns. Eni’s management expects this rising trend in lifting and development costs to continue in the foreseeable future, resulting in a continuing pressure on our profit margins per BOE.

This excerpt taken from the E 20-F filed Jun 20, 2007.

Lifting and development costs are trending up and this could reduce profit per BOE in the Exploration & Production segment

Profits per BOE in the Exploration & Production segment are being affected by a steady rising trend in lifting and development costs as a result of industry-wide operating factors: (i) the increasingly high percentage of complex development projects (such as those in deep and ultra deep waters and in harsh environments) which bear higher lifting and development costs as compared to development projects in traditional environments; (ii) continuing increases in the purchase prices of raw materials and services in connection with sector-specific inflation and a global economic recovery; and (iii) an increasingly severe shortage of specialized resources (such as engineers and other valuable technicians) and critical equipment (such as drilling rigs) especially in remote areas. Eni’s management expects this rising trend in lifting and development costs to continue, in the medium-term leading to a reduction in our profit margins per BOE. If the Company is not able to compensate for lower unit profits with increased production volumes, its results of operations and financial condition will be negatively impacted.

EXCERPTS ON THIS PAGE:

20-F
May 21, 2008
20-F
Jun 20, 2007
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