Financial Position

Net cash generated by operating activities was €6,113 million in 4Q08, an increase of 148% from €2,468 million in 4Q07. In 2008, net cash provided by operating activities was €21,796 million including proceeds on advances received from the partner Suez (€1,552 million) and cash from divestments (€1,160 million).

As on December 31, 2008 net borrowings amounted to €18,376 million compared to €16,327 million as on December 31, 2007. The increase recorded in the quarter mainly related to capital expenditures for the period, the acquisition of the majority stake in Distrigaz SA and other assets (including the 100% stake of First Calgary Petroleum and a 52% stake in the Hewett Unit in the North Sea), as well as share repurchases.

As of December 31, 2008, fixed assets amounted to €74,444 million, representing an increase of €11,595 million from December 31, 2007. The increase reflected capital expenditures incurred in the year, the acquisition of assets and investments mainly related to the consolidation of Distrigaz SA (€2,932 million) and Burren Energy (€2,444 million) as well as the purchase of a number of assets (€1,471 million, including the 100% stake of First Calgary Petroleum, a 52% stake in the Hewett Unit in the North Sea and the full consolidation of Indian company Hindustan Oil Exploration Co.) and currency translation effects. These additions were partly offset by depreciation, depletion and amortization charges and impairment losses incurred in the year (€9,815 million).

Net working capital as of year-end 2008 was €6,622 million, a decline of €3,616 million from December 31, 2007. Shareholders’ equity including minority interest amounted to €48,567 million, an increase of €5,700 million from €42,867 million a year ago.

Return on average capital employed (ROACE) calculated on an adjusted basis for the twelve-month period ending December 31, 2008 was 17.6% (19.3% in 2007).

Capital Expenditure

Capital expenditures in the quarter were up 28.3% y-o-y to €4.69 billion mainly related to continuing development of oil and gas reserves and exploration activities, the upgrading of gas transportation infrastructure and the construction of rigs and offshore vessels in the Engineering & Construction division. In 2008, the company spent a total of €14,562 million toward capital expenditures.

For 2009, management expects slightly lower capital expenditures with respect to 2008 (€14.56 billion in 2008). Management expects activities over the course of the year to be focused on the development of oil and natural gas reserves, the upgrading of existing construction vessels and rigs, and the upgrading of natural gas transport infrastructures.

While maintaining the dividend at the expense of capex could give a short-term boost to the shares, one firm (J.P. Morgan) thinks ENI should prioritize its organic capex program over shareholder return. According to the firm, cutting upstream capex would most likely hurt the company’s volume growth prospects over the medium term.

Share Repurchases

During 2008, the company repurchased a total of 35.9 million shares at a cost of €778 million (on an average of €21.672 per share). Since the beginning of the share buyback plan in September 1, 2000, Eni repurchased 398.5 million of its own shares (equal to 9.95% of capital stock at issue) at a total cost of €6,971 million (for an average cost of €17.495 per share) representing 94.21% of the amount authorized by the shareholders’ meeting.

Dividend

In 2008, total cash dividends to Eni shareholders amounted to €4,910 million (€4,583 million in 2007) of which €2,551 million pertained to the payment of the balance of the dividend for fiscal year 2007 and €2,359 million pertained to the payment of an interim dividend (€0.65 per share) for fiscal year 2008.

On March 13, 2009, the Board of Directors of Eni resolved to propose at the Annual Shareholders’ Meeting the distribution of a dividend amounting to €1.30 per share (payout 53%). Taking into account an interim dividend of €0.65 per share paid in September 2008, a balance amounting to €0.65 per share (€1.30 per ADR) will be paid on May 21, 2009, on all outstanding shares on the register at the ex-dividend date of May 18, 2009. Holders of ADRs will receive €1.30 per ADR, payable on May 29, 2009, to ADR holders as of the May 20, 2009, record date.

Longhorn Phase II and Appaloosa Field in the Greater Longhorn Area (US Gulf of Mexico)

On January 26, 2009, Eni sanctioned two new development projects named Longhorn Phase II and Appaloosa field in the Greater Longhorn Area (US Gulf of Mexico). The Greater Longhorn Area lies in the region of central Mississippi Canyon (MC), approximately 60 miles offshore Louisiana and also includes the Eni-operated Corral Platform, previously known as Crystal Platform, and the Longhorn field currently under development.

The development of Longhorn Phase II, sanctioned by Eni in December 2008 with total investments of $112.9 million, provides for an additional sub-sea well that will be tied in to Corral Platform. Expected peak rate will range from 30 to 50 million standard cubic feet per day. The Longhorn gas development project, operated by Eni with a 75% interest and Nexen Petroleum USA Inc. with 25%, is located in MC Block 502 & 546 at a water depth of 2400'. Production at Longhorn is expected to start in July 2009.

The nearby Appaloosa Unit, entirely held by Eni, consists of MC Block 459, 460 and a portion of MC 503 & 504 in 2,800' of water. Appaloosa unit development was sanctioned in December 2008, with a total investment of $228.1 million. Oil processing capacity at Corral Platform will be upgraded to accommodate Appaloosa's first oil, which is expected to flow in January 2010 with a peak rate of 7,500 Bopd.