Eni's Strategic Share Buybacks and Long-Term Value Creation

Eni's recent share buyback program, announced in May 2025, represents a bold commitment to shareholder value creation. With a target of repurchasing up to 315 million shares (10% of its share capital) for a total of €1.5 billion, potentially expanding to €3.5 billion if cash flow exceeds expectations, the initiative underscores the company's confidence in its financial resilience and strategic flexibility Eni launches the new share buyback program^[1]. By early September 2025, Eni had already executed €760 million in repurchases, acquiring 53.7 million shares—1.71% of its total capital Eni Completes Treasury Share Buyback in Early September 2025^[4]. This aggressive capital return strategy is not merely a short-term tactic but a calculated move to optimize equity structure, enhance earnings per share (EPS), and strengthen long-term profitability.

Financial Rationale: Boosting EPS and ROE

Share buybacks are a proven mechanism for increasing EPS by reducing the number of outstanding shares. Eni's program, which aims to cancel repurchased shares by July 2026, will directly lower the denominator in the EPS calculation. For context, Eni's 2024 EPS fell to $1.71 from $3.03 in 2023, reflecting volatile oil prices and macroeconomic headwinds Eni SpA EPS - Earnings per Share 2010-2025^[5]. By shrinking its share count, Eni can mitigate such declines and amplify the impact of stable or growing net profits. According to a report by Reuters, the company's 2025 net profit dropped 11% year-on-year, yet it maintained its buyback commitment, signaling a prioritization of shareholder returns over short-term earnings volatility Eni reassures investors over buyback as oil outlook^[2].

The impact on return on equity (ROE) is equally compelling. By allocating capital to repurchases instead of reinvesting in lower-return projects, Eni reduces its equity base while maintaining or growing net income. This dual effect—shrinking equity and stable earnings—typically elevates ROE. For instance, Eni's 2024 operating profit of €5,238 million and net profit of €2,624 million occurred against a backdrop of declining oil prices Key Figures - Eni Annual Report 2024^[6]. The buyback program, combined with a 5% dividend increase to €1.05 per share, ensures that a larger portion of cash flow (35–40% of CFFO) is directed toward shareholders, thereby enhancing capital efficiency Eni to Boost Dividend, Share Buybacks and Grow Underlying Production^[3].

Strategic Allocation and Flexibility

Eni's buyback program is designed to be dynamic, scaling with cash flow performance. The €3.5 billion upper limit—triggered if CFFO exceeds expectations—provides a buffer against market volatility while aligning with the company's broader capital allocation framework. As stated by Eni's management, this approach balances reinvestment in core operations with disciplined shareholder returns Eni to Boost Dividend, Share Buybacks and Grow Underlying Production^[3]. For example, the company reduced 2025 capex to below €6 billion (down from €6.5 billion–€7 billion) to fund the buyback, demonstrating a willingness to trade short-term growth for immediate value creation Eni Keeps Buybacks by Cutting Capex and Costs Amid Oil Price Slide^[7]. This flexibility is critical in an industry where cash flow is inherently cyclical.

Risks and Trade-offs

While the buyback program bolsters EPS and ROE, it is not without risks. Critics argue that aggressive repurchases could strain liquidity if oil prices remain depressed or geopolitical uncertainties disrupt supply chains. Eni has mitigated this risk by revising its 2025 Brent price assumption to $65 per barrel from $75, reflecting a cautious outlook Eni Keeps Buybacks by Cutting Capex and Costs Amid Oil Price Slide^[7]. Additionally, the company's net debt has decreased, providing a financial cushion. However, sustained capex cuts—such as the €2 billion in cost-saving measures—could hinder long-term growth, particularly in high-potential regions like Southeast Asia, where Eni's joint venture with PETRONAS is expected to drive production Eni to Boost Dividend, Share Buybacks and Grow Underlying Production^[3].

Another concern is the potential for over-leveraging. While Eni's debt-to-EBITDA ratio remains within acceptable limits, the €3.5 billion buyback could pressure liquidity if cash flow falls short of projections. Morningstar analysts note that Eni's ability to maintain its dividend and buyback program hinges on its low cash breakeven point and asset portfolio's resilience Eni Plans to Increase Shareholder Returns, Grow Underlying Production^[8].

Conclusion: A Calculated Bet on Shareholder Value

Eni's share buyback program is a strategic lever to enhance shareholder value in a challenging energy landscape. By prioritizing EPS growth and ROE optimization, the company is positioning itself to reward investors even amid macroeconomic headwinds. However, the success of this strategy depends on its ability to balance short-term returns with long-term reinvestment. For investors, the key takeaway is that Eni's buybacks are not a panacea but a calculated component of a broader capital allocation framework. As the program unfolds, monitoring its impact on capex, debt metrics, and production growth will be critical to assessing its long-term viability.