ENI (Milan:ENI) Q1 2025 Earnings Call

0:00 Good afternoon, ladies and gentlemen, and welcome to ENI's 2025 First Quarter Results Conference Call hosted by Mr. Francesco Gattei, Chief Transition and Financial Officer. For the duration of the call, you will be in listen-only mode. However, at the end of the call, you will have the opportunity to ask questions by pressing star and 1 on your telephone keypad. Should anyone need assistance during the conference call, they may signal an operator by pressing star and 0 on your telephone. I am now handing you over to your host to begin today's conference.

0:34 Thank you. Thank you. Good afternoon. Our February capital market update emphasized the speed and scale at which we had been progressing our strategy. Quarter 1 maintained that pace and recent events have confirmed why our clarity of strategic view and speed of action is so critical. We are creating value leveraging our competitive strengths in the upstream, strengthening and diversifying the company, fixing and then performing activities, materially strengthening our balance sheet, all while offering a competitive and resilient return to investors. Reviewing the important strategic highlights of the quarter and year-to-date.

1:21 Growth is an important feature in our plan. In the upstream, in March, John Kasperg began production and will add 66,000 barrels per day of oil production at Plateau Forvar, as it targets over 400,000 barrels per day by the fourth quarter. Kasperg is the first of the five major start-ups due this year, with Valderix in Norway, Agogo and NGC in Angola, plus Conger and GFA2 to follow, setting us up for a strong 2026. In the transition business, Plenitude has completed the construction of its 200 megawatt battery in Texas and acquired 245 megawatt in its share of photovoltaic and storage in California. While Enelight began production of SAF at its new 400,000 ton per year facility at Gela in Sicily.

2:12 We are also realizing significant value through the investment of eyeliner capital into our transition businesses and the valorization of our industry-leading exploration activity via the dual model. We have closed the agreed increase in AP stake in Plenitude to 10%, with an additional cash of €209 million at the end of March. We also closed the increase in KKR stake in Anilite to 30%, with an additional cash-in of €601 million in April. This followed the 2.97 billion we collected at the beginning of March. Furthermore, we have received non-binding offers for additional stakes in plenitude that could take aligned investment to 25-30%. We consider around 70% a majority any stake in both our major transition business as broadly the right level for the time being.

3:05 In the upstream, also in March, we announced a major dual exploration valorization with the agreement to sell stakes in Bahrain, in Côte d'Ivoire, and Congo LNG in the Republic of Congo to Vitol for a cash-in of around $2.7 billion, expected to complete later this year. Our satellite model is an important feature of our business and in the upstream in February we announced an MOU with Petronas to combine assets with a mixed component of growth and value in Indonesia and Malaysia. This is really a significant development for ENI, creating a new and highly material regional satellite in an important part of the world with a strong partner and with the added opportunity of some cash valorization alongside.

3:50 We expect to move to a definitive agreement around the middle of this year with the completion before the end of 2025. Structural response in some of our legacy activities are also required as the energy evolves. The transformation of Versailles over the next four or five years is a major positive source of self-help, amounting to more than €1 billion per year EBIT improvement by 2030. We have positive news to report here as well, with agreement reached with the institution and the unions on the details of our plan. We closed Brindisi, the first of the remaining two steam crackers at the end of March, and Priolo will be shut down before the end of this year. Our strategy is designed to create a stronger, more profitable, and more resilient company.

4:41 Our first quarter results demonstrate this. Net income 1.4 billion euro is up around 60% quarter on quarter in a very similar scenario setting. Upstream production was in line with our expectation as 2024 divestment impacts wore through, seasonal factors play out and we await the positive impact of the startups that will contribute to our full year expectation of around 1.7 million bar per day average. At the segment level, EMP performed an EBIT of €3.3 billion, almost offsetting lower crude and production year-on-year, helped by lower expenses and efficiency gains at the benefit of portfolio upgrading.

5:26 GGP results reflect the normal seasonal strength and were essentially in line with last year. An enlivened planning to the reported pro forma results, consistent with our full year expectations, once respective seasonalities take into account. Any lie was impacted by the deterioration in the biofuel margins year-on-year and also lower biorefinery utilization, albeit biorefining EBITDA remained positive. This was partially offset by positive evolution of our marketing operation. Plenitude recorded 3% EBITDA improvement year-over-year, supported by strong retail results and rising renewable generation. In our transformation activity, both refining and chemical were loss-making.

6:12 Refining results reflect the weaker margin year-on-year and lower throughputs over the closure of Livorno, plus the extended turnaround of San Nazaro in the quarter. Our continued losses in chemical reflect the challenging scenario in Europe that we consider to be a structural feature and confirm our action to restructure and transform this business. Cash flow before working capital of €3.4 billion in the quarter were consistent with our full year guidance of €13 billion, a $75 bar. The cash tax rate was around 30% in line with normal levels and dividend received were in line with associated net income. Cap is in the quarter was €1.9 billion, a little below the rate of €9 billion in the February guidance. Valorization and divestment proceed net of acquisition in the quarter, total €3 billion, and including cash-in for our transition satellites.

7:15 We repurchased €386 million shares in this quarter, completing our €2 billion 2024 program. We expect to begin the 2025 €1.5 billion buyback program after the shareholder approval in May. Balance sheet leverage was 18%, 4% lower than the last quarter, despite a weaker dollar, adding one percentage point, while our pro forma leverage, incorporating agreed transactions still to close, stood at 12%, an improvement of 3% percentage point from end 2024, and the minimum in our history.

8:02 Volatility and cyclicity is a recurring feature of this industry. Every two or three years we are impacted by an external event. So it is a really normal course of business. Our company needs to be prepared and it should be to leverage the cyclical upswing. Given the current scenario, it is worth reviewing our balance sheet in a little more detail. In the past five quarters, we have announced over €9 billion in tail asset divestment, dual exploration valorization, and aligned external investment into our transition-oriented business. We have executed faster and for greater value than we and certainly the market expected, moving quickly to lower our leverage. An additional element of protection is provided by our satellites. The model not only enables us to raise capital and self-finance our growth, while highlighting the valuation multiples related to transition business or specific upstream geography, such as Norway, but it also strengthens our resilience during downturn phases.

9:02 On one hand, we are able to contain our leverage through targeted business valorization. On the other, the availability of autonomous entities capable of containing price downturns with their own balance sheets allows us to secure more stable cash flow via dividends, and hence we are less affected by market volatility. Our consolidated balance sheet is just about the strongest in our history. At the end of the quarter, we had over 28 billion euro financial assets and down draw committed lines and we have lengthened maturities by more than two years over the past two years. We estimated our net cost of net debt in 2025 will be below 1.5%. This position will enable us to continue to balance, pursuing our strategy, remaining resilient and flexible, and deliver our returns to shareholders.

9:54 When we discussed our plan and four-year strategy, we emphasized the value in the consistency in our approach. We also confirmed our dividend at 1.05 euro and the share buyback totaling 1.5 billion euro, itself a minimum floor that we are committed to maintaining even under adverse market scenarios. And we need to be nimble and responsive to the changing conditions. The work we have done on the balance sheets has passed significantly, but there are also further measures we will now begin to take to reinforce our financial position without compromising our medium-long-term objective of our investment proposition. We have identified over €2 billion of initial actions to enhance our free cash flow positions and lowering our cash neutrality by around $15 per barrel, including additional portfolio upside, selected capital risk scheduling over the coming months, active working capital management aimed at enhancing cash recovery, and structural cost optimization initiative. Together, these actions further enhance our financial position and the risk shareholder distribution.

11:02 In summary, the additional financial trends we have introduced into ENI over the past year, the intrinsic resilience of the model we have built and the additional optional levers we are available mean we can maintain underlying strategy and also confirm the full distribution policy we have announced. With the current scenario headwinds, we are focused on delivering our underlying performance and leveraging our portfolio optionality to accept cash flow impacts and deliver our distribution commitments. We therefore can confirm our full year production outlook of 1.7 million barrels per day. We also confirm our profitability guidance for GGP, Inilive and Plenitude. At our lowered scenario assumption, we expect to generate €11 billion of cash flow from operation, a little better underlined than our sensitivities imply. We expect to set this impact with the cash mitigation measure I described, including net cap to below €6 billion.

12:05 Therefore, we can also confirm leverage between 0.15 and 0.2 in 2025, within the 0.1 and 0.2 plan range. We are very satisfied with our progress in 2025 year to date, both on the strategic and financial sides. The macro scenario has deteriorated, is volatile and uncertain, but the action we are taking and flexibility we have mean we are in a position to resist its full impact. We can therefore advance our strategy and deliver on our shareholder commitments. With that, I conclude my remarks and welcome any questions you may have. Thank you, Francesco. We will now open to questions.

12:53 Francesco is joined by any top management and we will attempt to get around to answer all the questions you may have. As a courtesy to everybody who participates, can we keep it to two questions and then hopefully we can get through everybody in the time allocated. We're going to start with the first question. It comes from Alejandro Vigil at Santander. Alejandro.

13:17 Thank you, John, and thank you, Francesco, for taking my questions and congratulations for the beat in this first quarter. The two questions I have is one about the guidance of production, the 1.7 million barrels per day, your thoughts about the discussions about Kazakhstan, OPEC plus quotas, and if you think there is some risk coming from this situation. And the second question is about any life, and the outlook for margins. Thank you for this spread that you have added to the release. I think it's very useful. But I'm very interested in the outlook for the margin evolution in the coming quarters in any life. Thank you.

14:00 I leave the floor to Guido Brusco for the first answer and Stefano Ballista for the one related to any life.

14:08 As far as concerns the production outlook, As you know, we have, as anticipated also by Francesco, we have five significant startups, two in Angola, two in Norway, and one in Congo. So our production will grow over time to hit the guidance we gave. For Kazakhstan, so far... neither the operator of the asset nor the shareholder and the contracting company have been engaged by the authority for any production cuts.

14:47 Yes, thank you for the question. Talking about biofuel view, First of all, this is a year of oversupply. This is something well known. Rough number is about 2 million oversupply, demand versus supply. In the first quarter, we saw Demand, expected growth demand, and we will deep dive a little bit, not coming yet. And reason is that actually players have the whole year to satisfy some obligation. And second reason, actually, there are some uncertainties in U.S. that we expect to be clearly defined moving forward.

15:34 On demand, it's worth to highlight that the sustainable aviation fuel 2% target for EU pretty much in this first half didn't come through. It is expected for the second half and reason pretty much are twofold. The chance to... get to satisfy the demand in the whole year. And second, logistic facility to be in place. About U.S., it's relevant to highlight that low carbon fuel standard target of an increased GHG reduction to 30% at the beginning of the year, expected 1st of April. has been delayed given to a technical, let me say, request from the Office of Administrative Law of California. And now it is expected, well, until some weeks ago, it was beginning of September.

16:22 Now it's expected beginning of July, given CARB already gave a review of these technical aspects. So overall, we see a path of margin increasing thanks to this rebalancing pathway we are viewing. I have to say clearly, it's very relevant that we focus on value, not on volume. This is a clear strategic approach on an oversupply market. This is what we are doing. We are definitely focused on value, even reducing in some cases volume. the more the system will move in that direction, the better is going to be the improvement trajectory we are seeing and foreseeing. Thank you.

17:07 Thanks, Alejandro. The next question is from Biraj Bagatari at RBC Biraj.

17:15 Hi, thanks for taking my questions. Francesco, you touched on, obviously, the strength of the balance sheet and the progress you've made there, which is obviously significant. now looking in good shape. I was wondering, we've obviously seen the environment deteriorate a little bit more. You've touched on some of the smaller changes you've made to your capital program. But I guess the question is, what will you need to see price-wise or signal-wise to adjust your activities more materially there? And then just to follow up for Stefano on sustainable aviation, in late March, there was a joint statement from your customers, the airlines, arguing about concerns on availability and then the cost of SAF and suggesting these mandates were not realistic or achievable. So I just wondered your thoughts on whether it's, is it reasonable or realistic to assume that these mandates could be relaxed this year, or do you expect policymakers to hold firm there?

18:13 Thank you.

18:15 Yes, about the capex and the reaction to the price signals. Clearly, we think that at the end of the day, once there is a deterioration of the scenario, you have all the opportunities, substantially, to use different levers. that you let's say prioritize in term of effectiveness in term also on impacts in in future in future trends of the of the company and the target that the company is as as given for this reason we have you've seen that we have announced this two billion of improvement in in cash that is uh Around an alpha is related to capex and cost improvement, so shifting certain investment, postponing or extending the execution of certain activity.

19:06 Efficiency, there is also a natural trend related to a lower market scenario that will imply a lower cost in executing the activity. And the remaining part is related to split half and half between a portfolio improvement and the working capital effectiveness or a new action in terms of valorization of working capital or stocks and managing this activity. This gives us more flexibility for a worsened scenario in case it will be necessary. I would say that there is no special or strict rules what is the price that will imply a change in our capex profile. Clearly, if there is a further deterioration of the scenario, we will continue to apply even more lever, including the one that you were referring, capex, but also other activity that we can expedite and will contribute to cash growth. even in a lower scenario. So I don't have a specific answer what I can say.

20:10 There is flexibility in our plan even to adjust to lower prices. Then I leave to Stefano.

20:17 Yes, thank you, Francesco. And thanks for the question, actually. Short answer is no. We actually don't think there is any chance to, let's say, not having in place this target. This is a mandatory target to present within the end of the year. And actually, if you don't fulfill it, there are going to be carryover of the target next year and a penalty as well. Let me add just a couple of comments on the topic as a whole. Actually, SAF capacity is in place in Europe, and not only in Europe, actually. We have also some capacity in the U.S. and in China as well. In Europe, just to make an example, we got Gela with up to 400K tons per year, and we just started up production beginning of this year.

21:03 So the current mandate of 2% that equal about a million, a million point two, has capacity to be definitely fulfilled. So this is the first comment. Second comment, the target is on fuel supplier, actually, not on airlines. And even the matter of logistic, actually, it's not there. Because for a transition period, you can fulfill the mandate in a single airport. You don't need to be physically blending biojet in each airport. This gives a lot of, let's say, flexibility in having it done. And then let me say as last comment, probably in terms of target, I would have a little bit different perspective. Now we've got 2% in place up to 2030 and then 6%.

21:50 So it's three times just from one year to another. In order to have, let's say, a proper development of the investments... actually would be a proper approach to get a sort of step up along the way. And in that way, you can, let's say, have a balanced approach between supply and demand. So there is, I mean, space to work together with airlines to couple with the energy transition and the GHG reduction targets in an effective and efficient way.

22:21 Thank you very much. Thanks, Baraj. The next questions come from Josh Stone at UBS. Josh, are you online?

22:31 Hi, John, and good afternoon. Two questions, please. One, I wanted to come back and talk about asset sales, maybe just talk about how confident you are in closing your sale to Vitol and maybe just characterize the market for selling assets. You talked about some non-binding offers for Plenitude. are there still light discussions happening there and how are you thinking about that? Is it better to sell now or maybe even wait for higher values? Maybe we could just talk about plenitude and what you're thinking on that. And then the second question on Namibia, there was some news last week that you hit hydrocarbons at your latest well. I think that's now two from two. So maybe you can just talk about the next steps and what you can share so far, what you've learned from your campaign there.

23:19 Thank you.

23:21 Thank you. The first, very fast, clearly asset sales. We are extremely confident, first of all, because... We have already cashed in an additional 600 in early April, in 11th of April. That is the amount that is related to the top up of the 5% on the AnyLive KKR deal. And then we are working on this plenitude potential transaction, 15-20%. The non-binding offers are there. There is, I would say, a strong competition pressure. I don't see any, let's say, loss of valuation under the current market, also because this is clearly a deal that has a long-term perspective and also eventually will be helped by a reduction or expectation of lower interest rate in the future.

24:09 On the deal on Africa, West Africa, we'll recall... We have all the documents ready, signed, and we are just waiting for the various approvals that are required in this activity. There is no MAC provision that will impede to proceed. So I would say that almost 90%, 95% of our plan is already approved. in our end or with very positive perception of his execution. In terms of Namibia, I leave now to Guido to provide all the updates.

24:38 Your question was quite timely. As we just released a few minutes ago a press release where we... confirmed that discovery in Namibia. The well successfully penetrated the target, and the reservoir is showing good petrophysical properties, no water contact. We made an intensive acquisition campaign, waterline logins, hydrocarbon samples, sidewall cores, and in addition to that, we made also a well test, and we achieved a a flow rate in excess of 11,000 barrels of oil per day, which was surface-constrained.

25:25 The oil is a light oil with limited associated gas and very low iron-earth gas. So very positive, very interesting. More assessment and more analysis, of course, will have to be made so the well will be temporarily plugged and abandoned and the rig will be released and then we assess the full size with the operator and the other partner the full size of the discovery. Thanks Guido. Thanks Josh. Good timing on that question.

26:13 So we're now going to move on to One second. Giacomo. Giacomo Romeo at Jefferies. Giacomo, are you there?

26:23 Yes. Thank you. And can I just thank you as well for the incremental disclosures in these quarters reports. They are very much welcome. Two questions for me. First one on... The buyback, today you reconfirmed the 1.5 billion buyback at the lower macro scenario. This effectively stretches your CFFO pay at the upper end of your new range, new policy. What happens if the macro deteriorates further? Are you comfortable going above that 40% payout, Francesco? And second question is... on the agreement you signed with the YPF on LNG in Argentina.

27:12 Can you talk a bit on the attractiveness of Argentina as potential LNG exporters? And will you consider integrating these upstream and looking for assets there? Or are you just happy with sharing in the project?

27:31 Yeah, thank you. I will reply to the first question, then I'll leave it back to Guido for the Argentinian questions. About the buyback, clearly you know that once we set our distribution policy and the amount, the starting level for the buyback, we set that in a way that will be a floor, and therefore we are going to execute... This clearly we give the reference in terms of percentage of cash flow distribution, but we have all delivered to keep this distribution policy and buyback affordable in our balance sheet because there is a lot of other tools that are not just the percentage of cash flow from operation, but also the capability as we are seeing today. in this manoeuvre to balance this distribution also with free cash flow improvement in terms of portfolio or in terms of working capital.

28:25 And clearly the leverage level is another factor that has to be considered once you have to manage the fluctuation of the price. So I think there is no issue at all on confirming this balance. 1.5 billion even in a lower scenario. Clearly, eventually you could accelerate or slow down a bit the pace of buyback, but this is part of the normal activity that we are able to execute within almost one year of the buyback plan. I leave now to Guido for the YPF deal.

28:56 Yeah, the Vaca Muerta Basin, as you know, is the second world's largest shale gas field, and the Argentina LNG project is an integrated project from the upstream up to the midstream and the export of the LNG. This is the objective to hit more than 30 million tonnes per annum by the early 2030, It has different phases, three phases, which will be run in parallel. ENI and YPF assigned an MOU to execute one of these three phases, which would reach a total of 12 million tons per annum.

29:43 We're joining YPF, who has a very strong and deep country knowledge on the unconventional and upstream of Vaca Muerta. They are operating this asset for decades, so they know pretty well the subsurface and all development and operation activities. While on our side, ZNI, we are recognized as a fast track and low cost project operator, and we would bring our experience and leadership particularly on floating LNG projects. We are looking at this Argentina LNG project and full value chain to complement our portfolio of LNG and also to reach our strategic target of 20 million tonnes per annum. And we think that the combination of the expertise of YPF on the upstream of Vaca Muerta and the expertise of ENI on the midstream floating LNG will set this venture for success.

30:56 Thanks, Guido. Thanks, Giacomo. We're going to move now to Matt Smith of Bank of America. Matt, are you there? Hi there. Good afternoon.

31:05 Thanks for taking my questions. The first, I wanted to come back to the sort of CapEx cuts that you sort of laid out today. And you've sort of listed optimization and postponement of projects as one of the sources of the reduction in CapEx. I just wanted to understand sort of which projects we are specifically referring to. And I guess my broader question was, you know, if the current commodity price scenario was to extend into next year, would any of these projects, you know, not be postponed, but be cancelled? So that'd be the first question. And then the second one, I wanted to come back to Namibia, if I could, you know, noting the information that you put out on the latest well today. I mean, given you have had additional time in the lab With the first discovery, I just wondered if you could compare or contrast.

31:56 Is it the correct read that the second discovery has better characteristics than the first, or what additional color could you give us there, please? Thank you.

32:05 On the CAPEX, on the capital optimisation, there is no major project that we can point out specifically. It's a broader activity, some exploration activity, some production optimisation activity related to the recharging activity, related eventually to the rebranding of our service station. So it is a spread around activity with marginal impact on a specific project. so you shouldn't expect any delay on the key and most important projects. About Namibia, if Guido wants to add something.

32:43 About Namibia, it's too premature to make, as I said, when I spoke about it just a few minutes ago, we need to assess the full size of the discovery. It's really premature. We just finished the world testing. We are still in a... in a phase where we have to do some work. And I would also recommend to refer to the operators to get more insights and information on the discovery itself. Thank you. Thanks, Matt. We're going to move now to Alessandro Pozzi. Alessandro? Alessandro, are you there?

33:31 Hmm. OK, we're going to move on now. Alessandro, if you want to come back on, you can. We can move now to Michele de la Viña at Goldman Sachs. Michele.

33:42 Thank you, John, and congratulations on the strong results. Two questions, if I may. First, I wanted to understand, with the new Cyprus gas development, when you expected production to come through and if you thought that could effectively revive exports from Damietta and effectively make Egypt once again an exporting country of LNG. And then secondly, on the Indonesia-Malaysia combination, I see you continue to progress the negotiations there. I was wondering if you expect any kind of cash contribution for that deal or if it's likely to be a pure effectively combination of assets. Thank you.

34:25 On the Indonesia-Malaysia, clearly I can tell you what is the experience that we have in this kind of combination. Once you set up the new entity, the new company, you clearly design not only the business plan with the investment and the different or relative ratio between the parties, but also a financial plan that is a result of the addition of this kind of asset to leverage on this asset for more financial capability. And therefore, there is generally a contribution that is related to the possibility to have certain dividend upfront that will help to generate more cash than in a standalone situation. And then on Cyprus...

35:14 On Cyprus...

35:15 We are working for an FID within the year with the partner and the two host governments. It will be a subsea tie back to the Egyptian facilities, so we expect an execution time between two and two and a half year from the FID. So if we will be able to make an FID by the end of this year, production may come sometime between Q4-27, Q1-28. Of course, to have Egypt again as a net exporter, a few more things has to happen. There is a growing confidence on the ability of Egypt to kick out more investment. They are continuing to pay their outstanding receivables, so there is more activity in general, not just from E&I but also from other operators.

36:20 And there is also, again, a restart of... the journey on the increase of the capacity of renewable, which will free up more gas for export. So the combination of these two things together with the new development and the Cyprus gas may set Egypt again in a couple of years as a net exporter again. But this is not just linked to the Cyprus gas.

36:59 Thank you. Thanks, Michele. We found Alessandro. So, Alessandro, if you're on, you can ask your questions. Thanks.

37:09 Thank you for taking the questions. I have two. I think the first one is on the cost-saving initiatives of over 2 billion parties, CAPEX. I think there is a other large initiatives regarding working capital and other costs. I was wondering if you can give us maybe more colors on those as well. And with regards to Argentina, I was wondering what is the level of investment that you're planning to make over the next few years? whether potentially you're looking to invest in upstream, I guess so, and the type of maybe production levels that you expect from the country when phase one will be online.

37:59 Thank you.

38:01 About the cash initiative I mentioned before, Almost more than 1 billion is related to the CAPEX and cost improvement. CAPEX, as we said, are mainly related to postponement of certain activity that could be extended without major impacts on a big project, but just related to certain activity that could be, let's say, executed in a longer time. In terms of cost, there will be a natural reduction in terms of cost, also related to the lower scenario. And we do expect that there is also benefit from the portfolio activity Of the remaining 1 billion that we said, there is almost half, so around 500 million is related to the portfolio improvement in terms of less cash out and better value on the potential cash in.

38:47 And on the other side, the remaining part is related to the cash initiatives that are management of working capital. This is the maximum I can describe you.

38:56 Thank you.

38:58 if you want to describe Argentina,

39:01 Guido? Yeah, I mean, Argentina is an integrated project, so basically we will be all along the value chain, from the upstream to midstream, balanced, ideally, so having the same equity in both sides. The project, of course, is in a very early stage, but the phase three, the phase that we are... assessing with YPF of 12 million tons per annum will have cost in the region of $20 billion. Of course, I'm including all costs from upstream to the transportation to the midstream and liquefaction.

39:52 Is that included in your four-year capital guidance or is it on top?

39:57 We are speaking about a MOU that is still to be clearly designed, defined, and with a lot of activity that has to be fine-tuned later on. So it's not yet included. Thank you. Thanks, Alessandro. We're now going to move to Peter Lowe at Redburn. Peter.

40:15 Hi, yeah, thanks. The first question was just on the tax rate in the quarter, a bit lower than we expected. Can you perhaps just outline what was driving that and then maybe what we should expect for the rest of the year? Will it kind of return to that 50% to 55% range? And then the second question was just on production in the quarter, particularly gas. There's quite a large sequential step down. I think you call out disposals in the release, but I thought those were a bit more oil-weighted. So I just wanted to check, was anything like maintenance or turnarounds kind of impacting that gas number in the quarter? Thanks.

40:53 Yeah, about the tax rate, clearly the tax rate in this quarter was positively impacted by the structure of the results. It's a quarter where you have the benefit of contribution from GDP, from plenty for the power. And this is lowering for generally, let's say, higher price, both of oil and gas. So from the geographies of even of upstream, that has a lower tax rate. So this quarter is a quarter of a tax rate that you could generally expect once there is this mix of contributors. The trend for the year in a scenario that we lowered in terms mainly of oil prices will see this tax rate increasing. Towards the upper end of the expectation, 55% could be a rough estimate where you could see the results coming. So clearly the quarter will contribute, but we do expect an increase in the coming months because the price of oil that we are designing or planning is lower and the contribution of the lower tax rate businesses will be less impactful.

42:06 And then I leave for the gas.

42:08 For the gas and for production in general, if we compare with the, I mean, sequentially quarter four with quarter one, the decrease is essentially driven by lower entitlement in some country where we have gas production, some PSA effect in Libya, Indonesia, and Algeria, and some M&A impact in U.S.,

42:36 Thank you. Thank you, Peter. I'm now going to move to Irene Himona at Bernstein. Irene?

42:48 Yes, thank you. Good afternoon. First, a quick question on cash flow. From your announced recent disposals, how much would you expect to close and book in the second quarter, please? And then secondly, on EMP, Your underlying per barrel EBIT margin has improved sequentially quite a lot, given it was a similar oil price environment. You have indicated that around half of your plan disposals in the four-year plan is from upstream. So my question is, can we anticipate that as you continue high grading the portfolio, that unit margin improvement is can continue further. And of course, it is structural. So presumably also your oil price sensitivity may change over time. Thank you.

43:43 On the disposal side, on this quarter and second quarter, we have already cashed in 600 million that are related to the KKR deal. We are potentially expecting the closing of the West African deal, but that could slip also to the third quarter, taking into account the different authorities that have to be involved, and therefore it's something that could expect during the summer, let's say. And we do expect clearly that we are able to to proceed to the next step for the plenitude deal. So this will not clearly be a cash-in date, but will be in this quarter potentially a conclusion of the tender activity that we are executing.

44:28 Yeah, I mean, the improvement of the EBIT per barrel and cash flow per barrel, as we anticipated also in our CM capital market update, is structural as we are high-grading our portfolio, developing high-value barrel and disposing lower-value barrel. So it's a structural phenomena which over time should continue, of course. Thanks, Irene, for your questions. Thank you. Thanks. We're going to move to Henry Tarr at Barenburg. Henry. Henry, are you there?

45:17 Okay. Mr. Tarr, your line is open. Okay, well, Henry, if you can reconnect and we can come around to your question, but we'll move now to Paul Redman at BNP. Paul.

45:33 Hi, John, and team, thank you very much for your time. Two questions from me. First flow is on the cash flow mitigation chart. And we've got a bunch of buckets here. I just wanted to work out if any of these are structural reductions or whether these are one-off impacts that we could see a reverse impact in 2026. And secondly, just to look at the refining business, it's the second sequential loss for that business. Just want to work out your outlook for the year for that business. Do we expect any change in margins, any changes in utilization rates as we go through 2025? Thank you very much.

46:08 On the cash initiative, these are clearly structural because except for the few delays that we mentioned that are spread around between executing certain activity, the cash branding of any light station or EV charge or certain special activity. All the rest are related to factoring. Working capital management, that means substantially something that is not absorbed during the year, and the cost reduction that, as we said, also is related to the improvement and also the scenario that we are facing that clearly has a lower cost of energy overall. So I think these are clearly structural changes and structural improvement, including... the portfolio variation that we mentioned in terms of higher valorization or higher stake.

46:59 The refinery, I think that Pino, or yes, please. Yes, thanks, Francesco. About the refining losses in the first quarter, this is due to the drop of the CERM, the margin, and the fact that we had during the quarter... the start of the maintenance in Taranto Refinery and then upset in FCC of San Nazaro. What we expect is to increase the refinery utilization starting from the second quarter. And while we expected the margin will remain slightly better than today, but not so bullish like last year. Thanks, Pino. Henry, I think we've got you back.

47:50 Henry? Thanks for taking the question. So two questions. Just to come back to any live, is the contribution from the margins from the straight bio side positive at this point for you, or are you essentially making all of the money on the marketing side rather than the actual manufacturing of the fuel is the first question. And then the second is just on the cash flow. So lease interest payments, is Q1 a good run rate for the rest of the year at sort of 370 million-ish? Thank you.

48:35 I leave to Stefano for the first question, then I come back to the second one.

48:39 Yeah, thank you for the question. Yeah, the contribution margin, it's positive, it's slightly positive, clearly related to the scenario. As I mentioned before, we definitely focus on value and not on volume, so we prefer to avoid production that is not going to be creative in terms of value. I have to add, actually, that the integrated approach that characterizes AnyLive gives us the chance to let's say, optimized margin thanks to our captive market. And this is going to give an extra contribution compared, let me say, to the pure market value.

49:11 On the lease impact over the year, I would expect an increase during the year, clearly, also because there are some certain startups of initiative and project that will attract additional lease. So this quarter... is, let's say, a proxy, but it's still a bit light towards what is the running rate during the next quarters. Okay. Thanks, Francesco. Thanks, Henry. We're going to move to Matt Lofting at J.P. Morgan. Matt. Thanks all for taking the questions. First, I just wanted to come back to the capital allocation changes that Annie made this morning, and particularly sort of gross capex. It looks like you sort of effectively put through the lower part of a 5% to 10% reduction in full-year gross capex versus what you outlined in Feb.

50:04 If you aggregate everything up, can you just sort of share a sense of how much of that is activity-related versus sort of finding underlying efficiency measures? And then secondly... following up on the comments earlier on refining, if you take refining in Vesalis combined, I mean, clearly still a challenging Q1. Is there any signs more recently of any improvement in margins to the degree that you're seeing some degree of lower feedstock costs, particularly perhaps through any higher cost assets, which perhaps have most or more to benefit? Thanks.

50:44 On the CapEx reduction, as I mentioned, it mainly is a postponement of activity. There is also a component that we mentioned about improving the reduction of an amount. If you want to have a split in the range of 500,600 million we are referring, you could say that 200,250 is related to the to the postponement of the activity and the rest is a structural variation. You have to consider that we have contingency in our plan. So part of the activity that we present has already an implicit impact or possibility to manage fruitation. So it is not a magic solution that we have, but sometimes it's just a matter to execute and to implement the contingency that we have inside. Then I leave to Adriano and to Pino for the answer about the...

51:32 For the chemical side, in terms of demand, we expect a slight improvement in line with the seasonality because normally the second quarter is better than Q1. But to be honest, the scenario is still on the trough of the cycle in terms of demand. For sure, we expect an improvement in terms of cost of utilities because virgin nafta is expected to reduce. Right now, in the second quarter, we expect also a lower TTF in terms of gas, and we know that we consume quite a lot of energy for the chemical sector, so we expect an improvement in thermal margin for the rest of the year on the chemical side. And I leave Pino for the refinery, yeah. Yes, on the refining side, we expect to slightly improve in the margin in the mid part of the year, mainly due to the driving season, but not so far.

52:32 In complexity, the refining margin, we expect that to remain not so bullish because of the market that is quite stable. Thanks, Pino. We're going to now move, and thank you, everybody, for respecting the two questions. We're getting through this nice and quickly. So we're going to move to Massimo Buonasoli at Equitas. Massimo?

53:03 Good afternoon. Thank you. And two clarification questions for me. The first on the 2 billion mitigating initiatives, could you give us a broad timeframe for the savings process? to be realized and eventually one of costs associated with the savings. The second question on the outlook for GGP. You mentioned the upside of over one billion. Can you shed some light on the market condition needed to improve the guidance and to renegotiate the contract versus current conditions? Thank you.

53:38 First of all, the two billion is A free cash flow impact, it means that it is executed within the year and completed within the year. So there are actions that are, let's say, captured immediately. So the postponement of activity in line with the execution of that activity, the possibility to have certain savings that we mentioned about the lower scenario, the portfolio improvement, et cetera, is something that are already generating the result. Clearly, it requires also the time for executing the project, You have to consider that the economic benefit is higher than the cash flow benefit, because clearly the economic cut will be, or the improvement, is something that has an higher value, but that clearly is cut within the 12 months that are ending within December.

54:27 Yes, scenario and the gas. Yeah. So talking about the upside case for GCP, you pointed out two elements which are actually the ones that we also are pursuing. One is the renegotiation and negotiation of our supply and sales contracts. This is, as you know, a feature, a normal feature of the business. We have a few rediscussions ongoing, and I would say that probably the summer will be the period in which we might see some of those completing. And so, I mean, depending on the outcome of those discussions, this could have some value unlock. In terms of market condition, we are fairly...

55:12 say, defended from the downside risk of flat price. We have some upside linked to clearly flat price increase instead. And the other elements that actually we like in terms of producing more value is spreads and volatility. So geographical spreads, oil hub spreads, summer-winter spreads, those are part of the volatility that, you know, if those happens, we will be able to capture. Thank you. Thanks, Massimo. Thanks, Christian. We're last two, so we're going to move first to Kim Fustier at HSBC. Kim.

55:55 Hi, good afternoon, and thanks for taking my questions. I have two, please. First on Venezuela, could you comment on any impact on your operations and your ability to lift crude cargo from the revocation of export licenses and secondary tariffs on the country? And then lastly, just a quick housekeeping question. You've cashed at about 3 billion euros in the first quarter from the sale of AnyLife to KKR, but we can't actually see the disposal proceeds in the cash flow statement. So if you could point to where we're supposed to look at, that would be helpful. Thank you.

56:27 On Venezuela, Guido. Venezuela, as you know, we have essentially gas production. We produce gas for domestic market and to feed the gas-fired power plant for civil consumption. And we have been paid in the past by in-kind, essentially. So now we are engaging the U.S. authorities to find ways to be paid, but at the same time be compliant with the with a new regime imposed by U.S. And we are confident that by the year end we'll find a way to honor our commitment towards the population and honor also the compliance with the U.S.

57:18 sanctions. And Kim, I'll come back to you on the cash flow statement and the structure. The cash is in there, but it's not straightforward, so I can do that for you. But we'll do that offline if that's okay. Thanks. We can move now to the last question, which is Lydia Rainforth at Barclays. Lydia. Thank you, John, and good afternoon. Two final questions, if I could. The first one, these are both big picture, but Given where the balance sheet is, and it's much stronger than it was even a year ago, but in previous downturns, it does give you a more privileged position into how you respond to volatility than in the past. So I'm just actually asking you to reflect on that.

58:05 Does having that strength of balance sheet impact how you think about how you respond? And is there opportunities that it opens up? And then secondly, I hear everything you say about the cash management, the mitigation measures that you're putting in place. And hopefully when you start the buyback, it actually helps the relative share price performance even further. But given where the share price is, do you ever start thinking about we can lean into the balance sheet a bit more and buy back even more shares, just given where the share price actually is? Thanks.

58:37 In terms of clearly on the leverage and the privilege to have probably to be the unique company inside the peer group that probably will reduce its leverage in the current quarters and coming quarters. So thanks to the execution of a strategy. that is already anticipating potential downturn and has a structural robustness in its structure. I think that will give us the opportunity to manage the volatility. The volatility in the current market is that one day you have a drop by 5%, then there is a rebound of 2%, 3%, there is another tweet, and a lot of things are counter-tweeted. It's very difficult to understand where are the fundamentals and where are the psychology of the market.

59:22 So this strong balance sheet will give us the opportunity to select the best levers in order not to impact, to harm too much our strategy execution. to have different opportunities, clearly, to execute whatever we like and also to keep some additional levers out for the bad times. These bad times will come out. So this is clearly something that for us is a unique time we had and is a great chance to be effective, but clearly also to be vigilant on what is going on and not, let's say, to rely on a positive expectation, a positive scenario. In terms of buyback, you know that we are approving the buyback with the policy that we have presented during the next AGM.

1:00:09 Then we will start to buy and we will see also the time when the condition will have and we will execute. But I cannot anticipate what is the pace of execution because clearly this is part of the rule of the game. There is a clear advantage or interest in buying back at a lower price. That is a normal logic. I think that we have ended. I don't know if, John, do you have something else to conclude? We have, Francesco. That's all the questions done. Thank you, everybody, for attending the call. Thank you for your questions. Thank you for the speed and directness we got through that. I think it worked very well. So wishing you a happy end to the week. Good luck for next week and speak to you soon. Thanks a lot. Bye.