ENI (Milan:ENI) Q1 2024 Earnings Call

0:00 Thank you. Good afternoon and welcome to any Q1 2024 results conference call. Our first quarter is an excellent result. We have reported pro forma EBIT of €4.1 billion and cash flow from operations of €3.9 billion. Production growth in our upstream of 5% and excellent contribution from our transition business of AnyLive and Plenitude meant that we substantially resisted the overall deterioration in this scenario. The continuing excellent cash conversion and CapEx discipline also meant that balance gearing remained comfortable within our range, despite completing on Netrun and the 2023 share buyback program in this quarter.

0:53 I will analyze our results in more detail shortly, but these slides also emphasize how busy we continue to be in actions to invest to upgrade and transform our company. I wanted to highlight a few items in the Year to Date because they provide helpful context for our strategic progress. In January, we completed the purchase of Neptune. The transaction is highly synergistic and it has already delivered very material value to Eni, with significant upside in Indonesia and new optionality in UK, as we will see later. With the Neptune deal, following on from Chalmette and Novamon last year, we have concluded the phase of inorganic positioning in new platform for growth. and we enter into a different cycle characterized by the valorization of these new business lines and by the dilution of exploration discovery.

1:52 As a first step in this new phase, in March we completed the €600 million equity investment by energy infrastructure partners into plenitude. This is an important proof point for our satellite strategy, introducing aligned capital from a valuable partner, supporting the future growth of the business and confirming the value created. At the same time, we are organically expanding our growth opportunities. In March, we announced the Calao discovery of shore ivory coast. This is another major high equity discovery with a potential resource of between 1 to 1.5 billion of oil equivalent. It follows our discovery of baleine in the county in 2022 and the discovery of over 16 billion barrels of oil equivalent over the past 15 years, translating to organic production growth plus over $10 billion of cash via the dual exploration actions over the past 10 years.

2:54 We strongly believe in value created via the drill bit and we continue to reinforce our technical competencies paired with the most advanced technological solution. In this regard, in January, we began the construction of HP C6 supercomputer that will raise ENI back to the top five computing system in the world, with a computing power of over 600 petaflops, nine times bigger than our current one. Finally, we have just announced the agreement to combine our UK EMP activities with those of Hitaka Energy, creating a new satellite inside the ENI universe. We believe that the hydrocarbon potential of the UKCS remain relevant, and we have immediate leverage on our enhanced UK portfolio after the acquisition of Neptune to further reinforce our long-term positioning in this country. It is a well-understood model based on complementary portfolio and technical capabilities, and one successfully followed at VAR and Azul, where the right combination generates significant top-line operating financial and fiscal synergies.

4:13 Just before going into the first quarter numbers in more detail, here is a recap of the key industrial message from our capital market update in March. We now have a complementary portfolio of high-quality businesses that align with the transition and the dilemma. ones that integrate across the company, that leverage any strength in technology focus and early mover status, and which, crucially, together offer the prospect of sustained growth. We see 13% CAGR in cash flow from operation per share in a flat scenario, among the highest in our peer group, and a progressive diversification and improved quality in our sources of cash.

4:59 Our strategy will make Eni a larger and more profitable company at the end of our current plan and beyond. Our distinctive industrial approach is supported by a robust financial framework that balances the use of cash flow for shareholder returns with reinvestment for growth and the balance sheet. Our satellite model helps to appropriately align capital location and provide investors with visibility on the performance and valuation of activity with very different financial profiles. Ultimately, transition will only be real if it creates material and sustainable returns and profitable business. Moving to the quarter, the next three slides provide analysis of today's results.

5:47 We recorded an excellent quarter for production with impact of the Neptune acquisition, the ramp-up of Ivory Coast and Norway, and good performance in Libya. This production performance helps to mitigate the weaker gas price. GGP results are down year-on-year versus an exceptional quarter for trading and optimization in the first quarter 2023, and also down versus the last quarter of 2023, which saw the benefit of the arbitration procedure. However, the Q1 result is in line with our expectation, given seasonal strength but low market volatility. You will have seen we have re-segmented Enelive and Plenitude together to highlight their importance, together as material growth business for Eni in the changing energy market.

6:41 An important theme of this quarter is growth. I mentioned hydrocarbon production up 5% year-on-year. But in these transition businesses, it is really significant. Bio-throughputs have more than doubled. Renewable energy generation is up 12%. And quarter-end capacity up 30% year-on-year, while charging points are up 33%. And we are also progressing the regulatory framework for our CCS program. Our more traditional downstream businesses are now grouped together with refining showing improved utilization and capturing the quarter-over-quarter improvement in the refining margins.

7:27 Versalis was again loss-making, albeit an improvement over the last quarter, of the quarter number four of last year. But recall, we set out our plans at the capital market date in March to restructure and transform our chemical operation, and you should expect more on this as we go through the year. We have demonstrated good cash conversion once again, and this will drive an higher distribution as we indicated it would be in March. With a strong first quarter delivery and the prospect of improved macro conditions versus the plan, we are raising our guidance for cash flow from operation.

8:12 We are now seeing cash flow from operation for the full year in excess of 14 billion euro. Incidentally, Marking to Market, based on a snapshot of the market this week, would generate even a higher figure. As we set out in March, our distribution commitment is to share up to 60% of additional cash flow above plan with our investors via the buyback. Therefore, we are raising the 2024 buyback by 45% to €1.6 billion from 1.1, with the continuing commitment to revisit in each of the remaining quarters to update on expected financial performance and the associated distribution. Our aim is that, at a minimum, we deliver the underlying business performance we target and ensure we capture the available upside from the scenario.

9:05 Our shareholder meeting on 15 May will consider the proposal to authorise our new buyback programme up to a maximum of €3.5 billion. Our normal practice will be to begin repurchases shortly after this authorisation. If authorised our 2024 dividend on €1 per share paid quarterly will start in September. Our capex in the first quarter of 2 billion euro was in line with a full year figure of around 9 billion. Take into account this period is historically lighter on spending. Similarly, we confirm that our major strategic inorganic acquisition have been completed, and we are making good progress in our target of a front-end loaded net 8 billion cash in over the four-year plan period, which will result in net capex of 7 to 8 billion in 2024.

10:00 In the annex, you will see also the bridge to net debt with leverage of 23% at the end of March, which remains well within our guided range despite the portfolio cash out and the completion of the 2023 buyback. Turning back to the proposed combination of our UK EMP operation with Ithaca, let's take a more detailed view. You are familiar with our use of satellite structure at VAR and Azul. In the upstream, we use the satellite structure to build scale, realize synergies, increase in-air field exploration development potential, and matching complementary cash flow profile and efficiently access capital market.

10:45 With Ithaca, we tick all of the boxes. With the addition of Netlun and now Ithaca, we are moving from a mature and quite marginal position in the UK to a leading status in terms of production of over 100,000 barrels per day and resources. Quite clearly, the UK has its challenges, but we are confident we are now in a position to access considerable operating and cost energy, critical for business success in a mature basin, give ourselves significant optionality, and helping to provide additional supply while addressing emissions. Together with our existing activity in CCS, which were also boosted with the Neptune purchase, and our participation in the giant Dogger Bank wind farm development, we are establishing ourselves as a significant participant in the UK energy industry, as it grows and decarbonises.

11:46 Reviewing our guidance versus Mars, we have increased confidence in upstream production. Underlying profitability at GGP, AnyLive and Plenitude are all confirmed. So, with a more positive scenario, we have raised 2024 guidance for both group pro forma EBIT and cash flow from operation in excess of 14 billion euro each. With that in mind, we can also confirm our gearing guidance and raise the expected buyback for the year by 45% to 1.6 billion euro, evidencing our commitment to share upside with our shareholders by means of a clear, attractive distribution policy.

12:31 Finally, I can provide some guidance for Q2. We expect production to be lower sequentially, reflecting seasonal maintenance impacts and any divestment we conclude. In line with typical seasonal pattern reflecting current trading environment, we expect Q2 results from GGP to be lower than Q1. For plenitude, we expect a solid Q2 performance in retail, albeit with lower seasonal volume as well as a renewable contribution that continues to reflect recent capacity growth. We anticipate the utilization rate in our conventional refineries to be down sequentially because of planned maintenance, while biorefinery availability is expected to remain steady at around 90%.

13:16 We scope to capture higher seasonal demand in marketing. To conclude, we are very pleased with our progress at the outset of 2024, demonstrating evidence of delivering against all our key objectives, and we can see continued positive momentum across the remainder of this year. We are also pleased to be able to materially raise the shareholder distribution for the year while continuing to grow a larger and more profitable ENI. This concludes my review of the quarter. Along with any top management, I am ready to answer your questions. This is the Coruscall conference operator.

14:01 We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star N1 at this time. We will pause for a moment as participants are joining the queue. The first question is from Josh Stone with UBS. Please go ahead.

14:36 Hi, good afternoon, Francesca, and thanks for the presentation. Two questions, please. Firstly, your net debt was up sharply in the quarter, and you've given a helpful Looking forward, clearly it will come down. You've got some disposals to get away. You're probably working half the releases. But question more about timing. When do you expect to see the benefits of these things to come down? Will it be this year, later this year? Will it start next year? Just help us understand the progression of net debt. That'd be great. Thank you. Secondly, on Ithaca, congratulations on agreeing the merger. We've got another satellite soon to go up into orbit. I guess the question is, at what point do we think you reach critical mass on these satellites? Acknowledging we've still got plenitude, any live, many other potentially to come.

15:25 Will you continue to be active in this strategy elsewhere in the portfolio? Are there other things you're looking at as potential satellites? Thank you. On the timing of the net debt reduction, clearly this quarter is the quarter where we are summing up the two major elements of raising the net debt for the year. These two major elements clearly are related to the acquisition of Neptune. That is, between the amount we cashed out and the debt acquired is around 2.5 billion. On the other side, this quarter, as you have seen, is also seasonally and traditionally impacted by working capital effect.

16:11 So these two elements together are in excess of 5% percentage point of impact. And clearly, by having disposal, having a progression in the timing of cash-in, we will be able to return to the range that we would like to be after a phase of, let's say, a number of acquisitions. Just to give you a flavor, in the last... 15 months with the acquisition, as mentioned, of Neptune, the one of Chalmette, Novamont, and also some renewables, the overall amount that we have, let's say, expanded, there was in excess of $5 billion. So that is around the 10% point of leverage.

17:01 now we are entering the following phase the following phase is a phase of valorization is a phase of dual exploration model application and therefore let's say benefiting and is clearly also will will will collect additional sources from the tail asset that you are going to sell so this is i would say is a progress that you will see during the coming quarters already starting from the second quarter and clearly speeding up during the rest of the year. This is something that is completely in line and also we have good evidence of the start of the, even at the start of this year, of the quality of this portfolio that we are putting for valorization in the market.

17:46 about the itaka and the satellites clearly satellites has already proved has already proved to be material if you look what was our position in var before in norway sorry before the the start of our and the even the the situation or the position that we have both in plenitude in any live and in angola you see that there is a strong growth. So the satellites help you to focus, to cash in, to fuel your growth, and that you collect more tools to use, as we did, for example, with VARA, to use this currency, if you are speaking about listed entities, eventually also for doing M&A opportunity or capturing M&A opportunity. So the materiality of the satellites is evident, will continue to grow in all these four. Clearly, Ithaca is adding to this list. We are thinking too few others, but clearly still early stage to speak about, but clearly this is a model that will have still some additional bullet to be shoot.

19:03 Got it. Thank you. The next question is from Giacomo Romel with Jefferies. Please go ahead.

19:16 Yes, thank you. The first question is on GGP. What you reported today is about 40% of the target you have for the year. At the time of the CMD, you clearly said that the guidance was based on market conditions that you were seeing back then. Just wondering, it seems that these conditions have somewhat improved, not just the flat price, but also in general volatility around spreads. Can you confirm that you're actually seeing these improvements and do you expect PSV to be a healthy premium during the summer on the back of the trend of Italian gas storage. The second question is still relatively close to GDP and just thinking about what we have from the Egyptian government about the outlook of importing LNG this summer, 8 to 10 cargoes. Just wondering what this means in your mind for the overall outlook for LNG exports out of Egypt for the year.

20:19 I will leave the answers to Christian Signoretto, head of GGP.

20:23 Yeah, so thanks for the question. So when it comes to the target, so yeah, in the first quarter, we have realized 40% of the base case target that we have set during the capital market update. I think this is a bit usual in the sense that usually, you know, for a seasonal reason, I mean, the Q1 is always the strongest Q quarter of GGP also in the past. So I'd say in terms of volatility, well, the first quarter actually was pretty much in line with what we expected during the capital market update. So that means that we are still looking forward for the next nine months to see more volatility and more opportunities to be spread and captured in the market. And also the guidance, the upper part of the guidance is also linked to some renegotiations that we have ongoing, and so in the next nine months we will be trying to close them down and get the upside that we were looking for.

21:26 When it comes to Egypt, yeah, clearly the first quarter of this year we have seen a steep reduction of export capacity from Egypt due to the supply and demand imbalance and the Middle East situation. This summer, the country expects to bring LNG from outside. We think that the next winter season could be another window of opportunity for export some LNG cargoes. Clearly, not many vis-à-vis the past, but given the strong seasonal demand and supply balance of Egypt, we still think that there is a window of opportunity for the next winter to be exporting some cargoes.

22:14 Thank you. The next question is from Matt Smith with Bank of America. Please go ahead.

22:23 Hi there. Good afternoon. Thank you for taking my questions. A couple from me. I think that the first one going back to sort of net debt and also timing, I guess there's, you know, thank you for the gross capex guidance for the year. And I suppose, like you've alluded to, there's a bit of a gap that still remains between the net capex guidance and the gross capex guidance for 2024. So I suppose my question is, how confident are you on delivering these disposal proceeds in the year? And I suppose the question is really, how important is that completing that timing to you in terms of hitting the net capex guidance? in 2024 versus the wider four-year plan and against a backdrop of, I'm sure, looking to maximize value. So a question on confidence over timing on the disposals. And then the second question back to GGP, but less so on volatility, more so your opinions on the fundamentals of the European gas market. I think some investors have been surprised by how well prices have held up in Europe, so just your reflections and also if you had any thoughts on how European gas demand has evolved, that might be useful, please.

23:41 In terms of the confidence of the deals, of the disposal, we are extremely confident. We are working with already in a number of dossiers that are in advanced stage. We have already, let's say, we are in many cases or in a few cases already in a substantial in final discussions. And therefore, we are very, very close. We are working on different, let's say, terms with other dossier. But for us, in any case, everything is related to the proper value. So we are not, let's say, rushing and we are forced to sell because we target a reduction specifically. We want to do good deals. I think that we proved in the past years to be extremely effective, and we were also extremely effective in, let's say, concluding the real closing, the actual closing of the deal after the announcement, and this also will be the case for the coming deals.

24:45 About the situation of the European fundamental of gas, I'll give back the floor to Christian.

24:51 Yeah, so thanks for the question. If you remember, I mean, during our capital market update, we have commented about the fact that we see still a very finely balanced market for Europe and actually for the world in the next at least 12 to 18 months. And, you know, this actually is the case because, I mean, we are seeing in Asia and especially in China a pickup in the demand. In the first three months, we have seen 17% of LNG growth in that area, in China. And it's true that demand in Europe has not been very robust because of the weather. But if you look at the fundamentals, we are seeing some, you know, pick up in the industrial demand recovery.

25:37 We have seen also countries like Egypt, as we said before, flipping from being exporter to being importer and that actually, you know, give another, let's say, store into the balance of the LNG market. Freeport is out of, is actually, they have two trains out of, for maintenance. So let's say, you know, a few million ton of LNG can change, really can change the balance of the market. Again, we think that the summer will be still volatile because of this situation. Clearly also the geopolitical situation can add on to that. We know also that there is uncertainty about the end of the Russian transit in Ukraine by the end of this year.

26:24 So we feel that the next 12 months could be still interesting and volatile from a market perspective. The next question is from Alessandro Pozzi with Mediobanca. Please go ahead.

26:50 Good afternoon. Two questions for me. On AnyLive, I noticed that the biorefining throughput has increased materially well above 90%. And I'm not sure whether that was driven by a redetermination of the effective capacity, but I was wondering if you can maybe give us some color on the increase in throughput there. The second question is on the tax rate and income from associates in the EMP. Clean the EMP is having more equity accounted volumes and I was wondering whether that will have an effect on the group tax rates and also overall whether the income from investments in ENP will be lumpy going forward, whether there will be more quotas or quotas where dividends are going to be richer compared to other quotas.

27:49 That's all for me. Thank you. I leave the first question to Stefano Ballista, that should be on the phone.

28:00 Yes, Stefano. Okay. Yeah, the utilization rate got a significant step up. We are around 94% with Gela and Venice even a little bit higher. Main reasons are twofold. First, we didn't get any maintenance, any planned maintenance in this period. And actually, second, we are getting in place our operational excellence program that is... step by step improving overall operating performance. So this quarter we got, I would say, the full results of this effort with pretty much no issue at all. And that's the level of utilization rate we have in place.

28:42 What throughput do you expect for the year in terms of utilization rate?

28:48 Let's see, average utilization rate, including planned maintenance, It's about 85-90%. Next quarter is expected to be around 90%, even a little bit higher, given low number of planned maintenance. Thank you. About the tax rate, the main difference on the tax rate is related to the mix of production, countries, gas pricing, because this is versus last year a major factor of difference, more than the contribution from associates. So that is margin is not explaining the tax rate change.

29:33 In terms of distribution and dividend, We have different distribution policy between the various associates and these are spread relatively steady during the quarters. And in terms of tax rate at the group level for 24, should we assume a little bit below 50%? Yeah, clearly related to the price assumption that you are showing. Thank you very much. The next question is from Biraji Borshakara with Royal Bank of Canada. Please go ahead. Hi, thanks for taking my question. The first one is just to follow up on Egypt. I was wondering if you could just give a bit more sort of broader perspective on your activities in the country. Obviously, it's an important one for you and I.

30:26 It doesn't look like the receivable balance has moved this quarter, but could you just talk about whether you are looking to shift your activity levels up or down, given the situation's ongoing. And then the second question is on divestments and the gross and net capex. You've talked to the net capex figure at the CMD, and I guess there's two parts of that. There's the upstream, which arguably is a bit more straightforward, and then there's a satellite portion with the various transactions that are going on. But when you farm down Things like Plenitude, where the new partners are recapitalizing the entity. Do you count that as in your divestment targets? Because I guess from the outside, you don't actually receive the cash on that front. So I'm trying to understand how you're accounting for the various different things that are going on, because there's a lot of corporate transactions you're planning to do.

31:18 Thank you. First of all, I answer on this. Clearly, once I receive the cash from outside partner in Planetary Live, I consolidated the cash. Exactly, I fully consolidated the debt of the company. So that is a reduction in our, let's say, cash imbalance. So by definition, I will take into account all that. I'm surprised by this kind of comment. In terms of Egypt, I can confirm that the overview is in line. It was substantially not, let's say, impacted in the quarter, and I leave the floor to Guido Brusco, the head of natural resources, for the description or the feedback related to the activity in the country.

32:12 Given the size of operation in activity, of course, we still have some limited in-field activity and production optimization projects. We have clearly slowed down a little bit the exploration, but overall, we are running our activity as per the plan and as we expected to carry out over this year. So no big changes other than some slowdown on exploration activity. Understood. Thank you both. The next question is from Henry Carr with Bernberg.

33:02 Go ahead. Hi, and thanks for taking my question. Two. One is just on the share buyback uplift. I guess the increase comes from the higher scenario and so the lift to your cash flow estimates. But if you could just sort of talk through how you got to the 1.6, that would be great. And then I guess the current guidance is if cash flow is better than the $14 billion, is it an incremental 60% of the incremental that will come through into the buyback? That's the first question. And then just on the second question, you mentioned the supercomputer.

33:49 that you're investing in, what sort of an edge do you think it gives you through the reservoir modeling and exploration side? Thank you. Okay, in terms of the updated guidance of the BIBEC, clearly this is a mix of two elements. One is the strategic execution. If you have seen production performance, the growth in the renewables and any live, the downtime of the biorefineries Even the performance, clearly, that we have already accumulated in the traditional refineries, all these are facts that are behind our work.

34:35 the past month, the past quarter. So we have already cashed this advantage in the past month. And the other element clearly is the scenario. The scenario that we designed at the beginning of the year was a scenario where the price of oil was 80. The price of oil today, year to date, has practically four months already occurred, is 85, almost 85. The gas in Europe, as we discussed before, is much stronger than expected. CERN proved to be extremely resilient. So I think that that proves that the energy environment is more supportive. There is also a geopolitical risk that had with the Iranian events of the past weeks some additional factors to be bullish, and clearly we are quite confident that the performance that we have seen so far is continuing.

35:39 So I would say that there is a contribution of internal and external factors. On the supercomputer, I will leave it to Guido Brusco for the comment.

35:54 I mean, the supercomputer is just one element of our competitive advantage, together with, of course, the technology, which is our proprietary algorithm, which helps our staff to better understand the geological and the reservoir modeling and, of course, the skill set of our people. We have teams. We always trusted in the exploration as an engine for growth of the company. We never dismiss the through-the-cycle people, and we maintain the knowledge capability in the company. So the supercomputer is a big enabler, of course, but, I mean, the high computational capacity without the right skill set and without the algorithm which would... drive this computational capacity towards something meaningful wouldn't explain completely our competitive edge.

37:06 Okay, thanks. Is there a capex number that you've given for the computer itself? Is it material or not really? It is around 40, 50 million, so not particularly expensive. Sorry, 140,140,140.

37:27 Great. Thank you very much. The next question is from Irene Haimona with Berenstain. Please go ahead.

37:37 Thank you. Good afternoon, Francesco. My first question on any live, if you can talk a little bit about the performance of marketing within that in the quarter and also as you step up your biorefining throughput. Are you seeing a corresponding step up in the agri-feedstocks, where I think you aim to be sort of 30%, 35% integrated? And then the second question, if we go back to the asset disposal plan, the $8 billion over four years, which really, to take you back to pre-Neptune, I guess we are at Neptune, so it's really $10 billion over four years. You said at the beginning in your prepared remarks that the dual exploration model has delivered 10 billion in 15 years, I think.

38:28 So how confident are you in 10 billion over four years, basically? Thank you. First of all, then I will let the answer related to the marketing and to the agri-feedstock to other people. About the disposal, that 10 billion actually were accumulated in less than five years, because where 2013 and 2018, if you remember, we clearly, we showed that this overall disposal plan over the last 10 years, because we associated to the amount of discovery. that we did over the 10 years. But if you remember, the Mozambique deal and the Doar deals were substantially concluded between 2013 and 2018.

39:15 or just a small portion at the end in 2019. So in four years, five years. Clearly now we are even more confident because at the end of the day we are working on a larger set of opportunities that are coming from the traditional upstream but also through the new satellites. So I believe that that five years in order to execute a plan of disposal as the one that we mentioned in the capital market day is absolutely achievable. I then leave the floor to Stefano Ballista for the marketing and then to Guido for the agri-field stock.

39:59 Yes, thank you, Francesco. Marketing, we got a very good performance in this first quarter. Two false main reasons. The first one is related to a very good contribution from the wholesale business. This is coming from a revised strategy focused on the optimal trade-off between volume and margins. Contribution got fully realized this quarter as well. And second point on retail performance, it's good. We manage in a very peculiar way the optimal pricing strategy per cluster, and then we start to get increased results from non-oil activities.

40:45 On the integration and the feedstock, I mean the 30% is of course at a regime, so when we mentioned this level of integration was at the back end of the plan. As you know, we have quite an exciting ramp-up of production over time. Just two years ago, we were producing a few thousand tons of oil, vegetable oil. Last year, we produced around 40, and this year, 100. So you can see the the scale of the ramp-up. We have currently projects in nine countries, Kenya, Congo, Ivory Coast, Mozambique, Angola, Rwanda, Kazakhstan, Vietnam, Italy, and more countries.

41:42 We are adding more countries over time, which provides us a kind of diversification by geography and by kind of feedstock, which makes us more confident on our ability to deliver those volumes at the end of the plan.

42:05 Thank you very much. The next question is from Peter Lowe with Redburn Atlantic. Please go ahead.

42:15 Thanks. The first question was on the plenitude result. Pro forma EBITDA did double Q&Q and you're already a third of the way to the full year guidance of a billion euros. Can you perhaps give a bit more color on what's driving that improvement and whether there are any seasonal or one-off effects in there? I'm just trying to gauge whether you're kind of running ahead of plan there. And then another question on the biorefining business. How do you see margins evolving for the rest of this year? In the U.S., it looks like they're still quite weak, but we have less visibility as to what's happening in Europe. Thanks. Yes, the first question, plenitude, to Stefano Goberti. They said they had a plenitude. And then again to Stefano Ballista.

42:59 Peter, the first quarter 2024 was a good quarter for us, but we are taking advantage of what we have done so far also last year. So putting in production our renewable capacity and also we see good result in our retail utility, both in Italy, where we maintain good marginality and also abroad where we are recovering marginality. because the market conditions are better off compared to prior period where the regulator put in place a measure to protect the vulnerable clients. So now better prices, better market conditions, we could do our job clearly better. So there is no, let's say, one-off element in our result. It's just putting together our activity and then getting the results.

43:50 Yeah, on margin, 2024 is a transitional year both in Europe and in the US. This is well known. It's given from, let's say, macro dynamics, supply and demand. Main reason is Sweden change of mandates. We expect, in any case, increasing margin in the second half of the year in Europe for two main reasons. First, we got the approval from Holland of the new mandates, it gets to around 30% in terms of energy content. This means an upside of about 400,000 tons per year. And given current market size, this is pretty much 10% of increase. That's the first comment. The second one, there is ongoing an anti-dumping procedure related to, let's say, flows from Far East.

44:43 And this could revise the market dynamics and market competition with a significant effect on margin. Looking forward on the following year, of course, we have a big change related to the refuel aviation and to the deployment of the Red 3 that has been approved, but each state will have 18 months to get it deployed. So it's going to be effective from the following year. Last comment on US, again, let's say similar expectation. More focused on 2025, we are waiting for the final approval of the revised target from the CARB related to the GHG reduction for California. Rumors are talking of an increased step up already in 2025.

45:29 Initially, it was expected 5% increase. Now, there is a chance to have between even 7% and 9%. This will drive a significant step up in terms of demand and in terms of market dynamics. Thank you. Welcome. The next question is from Michele Della Vigna with Goldman Sachs. Please go ahead.

45:55 Thank you very much and congratulations on the higher buyback. Two questions, if I may. The first one is on LNG. You're probably negotiating some long-term contracts for some of your new projects, including Congo, the second floating LNG in Mozambique. And I was wondering how you're finding the appetite to sign long-term contracts at this time, and if the shape still looks more or less as 12% to 13% of rent prices. And then second, I wanted to come back a little bit to your buyback framework. It's very clear how you're distributing to shareholders 60% of the extra cash flow from the initial forecast you made at the capital market state. But I was wondering if perhaps it wouldn't be worth also considering some of the value from the proceeds you're getting from some of your high margin businesses as part of something that you may want to share with investors in the form of buyback.

46:52 Thank you, Francesco. The first on the buyback and then I leave to Guido Christian the answer related to the LNG market. On the buyback, we prefer to associate or to link our distribution policy to the strategic evolution of the company in terms clearly of cash flow distribution, higher distribution in case of upside, etc. It's clear that once you proceed with the overall rebalance from the point of view of leverage, from the point of view of the portfolio activity, then you have a different configuration of your asset, of your setup, and therefore you could think to a policy that will, let's say, support a distribution in terms of cash flow from operation with different percentages.

47:51 But we don't want to consider some one-off element of distribution related to the portfolio. Portfolio is an element that was used for designing the ENI or any setup of today will be, again, an element to fine-tune the value or exiting certain mature assets or extracting the cash flow, anticipated cash flow from exploration. But this clearly is a part of a broader strategic view where the distribution is an element connected to the cash flow from operation.

48:38 And then I leave to Guido for the LNG. Michele, in following my comment when we were discussing the fourth quarter result, we still see appetite. And, I mean, at that time we were commenting some results of some of our bids. We have now more data indicating that there is appetite, particularly in the Far East, where... there is interest to sign long-term contracts. Clearly, this is based on the view of those players on the growth of the economies and also the pace of the phase-out of the coal in the energy mix of that part of the world.

49:32 Thank you. The next question is from Alastair Scheim with CK. Please go ahead. Hi, thanks. Francesca, apologies if I missed this at the capital markets table. Can you explain on Plenitude what was behind the reduction in equity that was sold to EIP for 9% to 7.6% at close? Is it something to do with the amount of debt that was put into the business? And then my second question was, you know, you press... It reports how you've sold down a little bit of Gasher and Abu Dhabi. You've gone from 25% to 10%. Can you just explain what's driving this change? And you haven't disclosed the price, but maybe you can give us some sort of broad context as we look at the deleverage question. Thank you.

50:25 Yes, about the plenitude deal, if you remember, the EP had, let's say, they presented an initial offer with an option to increase, and they raised that option for a certain amount that is not covering the overall full option. Clearly, it has nothing to do with us. It's a decision by the potential buyer. Discussions are going on and still continuing on potential upside of this stake. but is something that is related to the funding capability of the buyer and from their point of view of the willingness to proceed with an higher stake. About the gas in Abu Dhabi, I leave to Guido.

51:09 About the reduction on the participating interest in the project Island Gas, let me start from the very beginning. So this project started in, I mean, 2018-19, we started to look at this project. Then there was the COVID. We re-looked into the project. And then, by then, our pipeline of projects, thanks to the discoveries made and other opportunities that came across, basically, expanded quite significantly. At the moment, we have a few of them running. We have a project in Ivory Coast. We have a project in Congo LNG. We have a project in Libya.

51:56 and coming projects in Indonesia, Mozambique. So we had to, I mean, relook at our capital allocation in the upstream project and rebalance allocation, both geographically and also by the type of commodity. That was the reason of the rebalancing of the participating interest in the island gas project. And can you say if there's much value or is it more about the Ford CapEx allocation?

52:33 It was more about the CapEx allocation that was driving us to, I mean, to be, I would say, more balanced. Thank you very much. Next question is from Lydia Rainford. with Barclays. Please go ahead. Thank you and good afternoon. Two questions, if I could, please. On Vesalis, can you just walk us through what steps get taken over the course of 2024? I know you're looking at sort of EBITDA unusual by sort of even in 2025, but obviously there's quite a lot of work to do there. So I just want to work through what steps we might see in 2024. And then secondly, if I could come back to the Ithaca transaction, Just going through the details, they've talked about the $500 million potential dividend payout for this year. Is it a cash flow accretive event for E&I?

53:36 That is a good transaction. Thank you. I leave the floor to Adriano, and then I will return back for the answer on it again. Thanks, Livia, for the question. As we communicate in the Capital Market Day in March, the transformation of Versailles' journey is not a one-quarter journey, but is a four-year journey and probably will take a few more, as we said. Quarter over quarter, I mean, we are constantly increasing our efficiency in term of cost reduction. And this is something that we have been able to do already in part in Q1, but it's not all coming in a quarter. We continue to accelerate the transformation of the company in order to build a platform.

54:25 And this is the reason why, although it was not in Q1, but in April, we announced the acquisition of another compounding company, the Technofilm, that will enable to specialize in the end user market. Of course, we have a strong discipline like we always have done in the past, but we are accelerating the CapEx reduction, especially not at all the reduction on HSE and asset integrity that remain our first priority, but on business that generate less margin. So we are perfectly on trajectory with what we announced in Capital Market Day, but the progress are quarter on quarter, not in one single quarter.

55:10 About the Ithaca, the distribution policy that was designed with this target of 500 million is partially accretive versus our standalone case. We have already included this in our plan. So the answer is yes. Perfect. Thank you. The next question is from Kim with HSBC. Please go ahead. Hi, good afternoon. Thanks for taking my questions. Just another follow-up, please, on the Ithaca combination. I guess the implied consideration paid by Ithaca seems to imply quite a large discount to the fair value of your UK assets. And I'm also a little surprised that there was no adjustment to the initial 38% to 39% range, despite quite a big slide that we've seen in Ithaca's share price in the past four weeks.

56:06 Maybe could you talk a little bit about how the final valuation was derived in that context? And secondly, could you talk a little bit about the impact, the potential impact of re-imposition of U.S. sanctions in Venezuela on your activities? Thank you. On the Itaca deal, clearly we negotiated the deal over a number of months. I think that is, let's say, the reference of a price level that is on a daily basis shifting and moving is not the proper way to assess a long-term strategic deal that is based on cash flow expectation, on re-rating expectation, on synergies, and upside.

56:56 So the 38.5% is the result of all this assumption and not the effect of a daily trading. I would like also to add that we have a 200 or more improvement in terms of, let's say, value, net book value. So the deal is generating, let's say, re-rating in the range of 200 million versus what we have in our accounting. For Venezuela, I leave to Guido.

57:31 GUIDO GARCIA- Well, on Venezuela, We are recording an increase in the trend of lifting equity over time in the last quarter. And despite the GL44 being removed, we still expect to continue this positive trend of cargo assignment. I mean, the GL44 has not been renewed, but is still in place the so-called ad hoc comfort procedure that the U.S. authorities could provide to recover credit, which in our case, being the gas production very necessary for the country, has always been granted in the past.

58:30 Thank you. The next question is from Alejandro Vidio with Santander.

58:39 Yes, hello. Thank you for taking my questions. Just one question about the CCS, your CCS strategy. When are you expecting the first FID of the projects and the potential size of the investment? Thank you. Guido.

58:55 On the CCS, our broad strategy is, I mean, we consider CCS one of the lever of the decarbonization and the net zero, the global net zero. We are currently running a project in Italy, in Ravenna, phase one of a bigger project, which we expect to to start up in the, I mean, within the quarter, the quarter two. Then we have a phase two. The size of this phase two is four million ton per annum. We expect to make an FID in 2025 and start up the injection before 2030. Equally in UK we have a, a project in the Liverpool Bay area called INET.

59:51 We have already negotiated recently an end of agreement for the economic license, and we expect to receive the full economic license by the Q3 and make a cluster FID together with a group of emitters by the end of the year and start reinjection also before 2030. We also have a project like, I mean, we also have another project in UK, in the northeast of London. And the size of this, I mean, the size of the investment for this project, I'm talking about the phase two of Ravenna and INET, in the transport and storage segment only is between 1.7 to 1.8 billion euros.

1:00:54 Gross. Thank you. Next question is from Massimo Bonisoli with Equica. Please, go ahead.

1:01:05 Good afternoon. Two follow-up questions remaining. The first on plenitude. Given the very strong performance in first quarter, the implied guidance for the remaining nine months would be down year-on-year, if I calculated it correctly, since your renewable generation should be up year-on-year. Could you shed some light on the assumptions behind the guidance? Maybe you kept a good level of contingencies there. The second follow-up on the buyback, could you comment on the speed of the buyback that should be executed on a monthly basis? Thank you.

1:01:43 Thank you, Massimo. The guidance is confirmed at 1 billion euro of EBITDA. Of course, we are going ahead well with our progress in the strategy, so you're right. We have 3 gigawatts of installed capacity, and we are working on 2 gigawatts of installation in 36 different projects across the our operation areas. And also in retail, we are doing good progress in our strategy and performance, especially in Europe. So for the time being, everything has been doing well, and we promise one billion. We target this one billion. On the buyback, you know that we start the buyback as soon as we receive the approval by the AGM.

1:02:32 It can last up to the following year, up to the month of, let's say, March and April of the next year. That is the period we are looking at, and clearly it will depend on the evolution of the business, of the scenario, but you have to consider as a preliminary estimate this, let's say, 10-month period as a reference. Very clear. Thank you. The next question is from Bertrand Hody with Kepler Shipper. Please go ahead.

1:03:06 Yes. Hello. One question left. It's on Ivory Coast. Can you give us a bit more color on the Calhoun discovery and the optionality behind that discovery? And the student was on a different block from from Berlin. So what's the next step on Calhoun or more broadly, on the Ivory Coast exploration program going forward. Thank you. Aldo Napolitano, Head of Exploration, then Guido will give the broader view on Ivory Coast.

1:03:54 Yes, thank you. Yes, the Kalau discovery is a new discovery. It's a discovery in a different play than Balen, so we think we So we have demonstrated that there are many options, actually, in Ivory Coast in terms of exploration. So new plays like the one of Balen or a traditional play, if you like, in the case of a play, I mean, so geologic theme, in the case of Callao, that is coming from the experience that we have done also in neighbouring basins there. So we have exported the experience that we had there. So we believe there are opportunities. So you have seen, I guess, in the case of Balenso, we have got also acreage adhesion to the discovery itself.

1:04:52 We have some more acreage also around Kalao. We will work on defining new opportunities. For what concerns Calau itself, it's quite a large hydrocarbon accumulation that we require some appraisal activity. So we are working on different scenarios for development, depending on what will be the final results from the data that we will acquire. So I leave it to Guido to complete.

1:05:23 Yeah, so this is Calhoun, the new discovery. And on Balen, we are running full steam now with the phase two of the project, which would come on stream by the end of the year with an additional production of about 40,000 barrels of oil, which would add to the 20,000 plus, 22,000, 23,000 barrels, which is the current, production of the phase one, which is largely exceeding the initial expectation. So once the phase two will come on stream, we'll have an overall production for oil between 60,000 and 70,000 barrels of oil per day and gas production of about 70 million standard cubic feet per day. While we are executing the phase two, we are in the feed procurement phase for the phase three.

1:06:25 where we expect in the, I would say, by beginning of 2025 to make a decision on an investment. This will be an FPSO, a standalone FPSO. and would bring the total production of oil to 150 plus thousand barrels per day and gas to 200 million standard cubic feet per day. Thank you. I think that we have completed the call. I would like to thank you for all the questions. And clearly, we will leave you if you have any additional requests to be in contact with our investor relations team for all the additional information that you look for. Bye. Thank you.