Eni S.p.A. (ENI) Earnings Call Transcript & Summary

Good afternoon, and welcome to Eni's capital market update. It is real pleasure to see you here at our technological lab in Marzano. This is one of our seven research centers where we develop our technologies, it reform our businesses and continues to improve our operations. Today, we will set out our update 4-year plan and discuss how in a complex and changing market Eni maximize its opportunities. In the presentation, we will go through the following main topics. A distinctive strategy addressing the challenges and opportunities of the energy market. Business performance is an prospects arising from organic investment and a disciplined investment approach and focus divestment that will materially lower our net CapEx with respect to the previous plan and an improved distribution policy with higher payout, enhanced upside and raised dividend. In the plan, we are focused on fully realizing the value of our traditional businesses and skills and at the same time, fast tracking development and -- of new high-growth and valuable activities related to the energy transition. Energy transition is irreversible. The complexity of this transformation raises many questions about the future mix of technologies, the role of geopolitics in the pace of change, how and when it will be executed in the different geographies and most importantly, how all of this can be affordable from an economic standpoint. For sure, there will not be a single answer valid for all to manage the energy transition. Therefore, we need an adaptive strategy that aims at different objectives of security, affordability and decarbonization and which develops levers and business models that are tailored to the different countries and industries and most crucially is economically sustainable. Our approach is pragmatic and technologically neutral, pursuing a mix of solution prioritized on the basis of limited timing and deployment costs. Its an approach progressively shared by policymakers consensus that spans from the increased supply of gas renewables replacing more and meeting energy sources in developing countries and improving their energy availability to the deployment of low and Zero Carbon technologies in OECD countries, echoing our rapid build-out of Plenitude and our industry-leading positions in biofuels and CCS US. Such an order preserves the competitiveness of the existing economic and industrial systems and support current and future energy demand, while developing innovative technologies and optionality like Fusion, capable of shaping the energy system of the future. Our approach to the energy transition results in a more profitable and diversified and more resilient training. In fact, we are differentiating our sources of cash and lowering our risks while expanding into new areas of growth. Our exploration capacity and technological expertise generate a broad range of opportunities. This then demands a high level of discipline in spending coupled with a growing portfolio management focus. The combination of selective investment and timely and appropriate divestments help us to speed up the execution of our strategy, manage risk and optimize capital and returns and thereby secure value. In our key upstream business, we are maximizing flexibility and agility in our development projects, as already proved by our good results and short time to market. The gas component will grow its role in upstream, where we expect a return on capital that will be consistent with double-digit plus. It will also expand our trading opportunities through GGP, a business with virtually no requirement for invested capital that will grow in size and flexibility, enhancing the returns further. In addition, new forms of energy will see an even more sizable growth, both in activity and earnings from transition-related businesses. This display high growth and attractive returns on investment. The return on capital employed is already 15% for any live. And by the end of the decade, we expect it to rise to around 10% for Plenitude as it is revenue scale up and CapEx for growth will stabilize. There are also two future segments under rapid mature ratio, where we have a leadership position, and we add value. CCS, which allow us to exploit the existing assets to reduce emission from hard-to-abate activities and biochemicals where no amount is at the forefront of research on innovating natural products. CCS will grow in accordance with business models that combine in some cases, regulated returns and a related merchant component with expected returns on invested capital of around 10%. Novamont, on the other hand, is a market potential that leads us to project a significant growth and return of around 15% by the end of the planned period. In many cases, these transition-related businesses have a presence in OECD countries and the ability to repurpose existing facilities through a circular economy concept. We are seizing industrial potential provided by the energy transition with a distinctive organizational and financial model. Growth in new businesses determines the need to apply managerial and financial focus to activate and have different characteristics in terms of frequency and size of investment decision, geographies involved or acquire a bigger role of market here. But above all, it is from an economic and financial perspective, that the potential trade-off emerges between continuing with more traditional businesses that generate high free cash flows but also reduced growth profile or investing into energy transition, high-growth sectors where we can generate significant value and command high multiples by which we demand capital. Our satellite model reduces the capital of [ absorption ] by new businesses, preserving the free cash flow from traditional asset for the benefit of shareholders' distribution. Indeed, we can develop emerging activities autonomously, usually with third-party funding, accessing new pools of allying capital and thereby highlighting value creation. The recent sale of Plenitude stake, for example, is the first step to support further investment and it highlighted the value already generated in this business but not reflected in any [ multiple ]. We intend to replicate this model for any live for our Novamont biochemicals activity and for CCS. At the same time, a satellite structure can also be applied in some upstream geographies to access operational and financial synergies, maximize growth potential and, of course, free up more capital for the rest of the portfolio. Var and Zohr are very successful examples of business combinations that have allowed us to fuel upstream growth under a dedicated and focused management structure in Norway and Angola. Similar opportunities are under evaluation in other geographies. Our satellite businesses in 2023, accounted for around EUR 4 billion of adjusted EBIT and provided us with EUR 2.3 billion of dividend. Natural resources, we continue to be a dynamic and material value and cash generator for any, while delivering progressive decarbonization, we have followed an organic strategy to develop our activities, leveraging our highly distinctive exploration and market-leading fast track development to grow over the plan. We are expanding our existing trading activities so as to participate in the full gas value chain. And we are using existing infrastructure and depleted fields to capture and store CO2 both for ourselves and as a service for others. The considerable optionality and flexibility of new projects also allow us to unlock value earlier and to derisk investment via an increased relevance of portfolio management, in line with the track record already established by our dual exploration model. Exploration is a core high return activity for our upstream business. To secure full realization of the value potential means being strategic about how and where we expect and doing so at the significant equity levels. This then allows us to accelerate valorization, reduce the time to market to start up and retain the option of part divestment. Penny has developed a unique model that maximizes the time to value of our exploration. Over the past 15 years, we have made discoveries of over 16 billion barrels of resources at a unit cost of $1.20. Over the past 10 years, we have put into production, 70% of our discoveries and at the same time, we have cashed in around EUR 10 billion via the dual exploration model. We have progressively shifted our focus to near-field exploration to further reduce the time to production. Cote d'Ivoire discoveries in Congo, in Egypt, in Cyprus and Indonesia are clear examples of this approach. In this plan, we will invest more than EUR 1.5 billion in exploration. We will continue to be strategic distinctive material engine of value creation for Eni. Time to market is the second key feature of our upstream strategy. How our last two major startups are evidence of our fast-track model in action. Our floating LNG project in Congo started only 12 months after FID, benefiting from the use of already existing facilities and the more advanced technologies. In Cote d'Ivoire, we have used a similar approach with the refurbishment of an existing ship modernized and upgraded to start the first phase with 18 months optimizing both cost and time. Our model is based on paralyzing the execution of the different development phases. The use of reconversion of existing assets and a phased development that reduces upfront investment and allows us to learn more about the reservoir behavior. This can only be achievable with the distinctive in-house resources and technology expertise, which we developed in R&D apps like the one we are in today. In terms of production, we see underlying growth over the plan at 3% to 4% before disposals in line with the 2023 plan. The main start-ups foreseen in the plan are those related to the Phase 2 of Baleine Cote d'Ivoire, the ramp-up of activities in Congo where the arrival of the second floating unit is expected and the development of the structures, A&E in Libya and different projects in Indonesia, consolidating Southern hubs as well as the development of a new northern hub around the discovery of Ghana. The new project under development will have an average internal rate of return higher than 20%, helped by the fast time to market and will contribute to a cash flow per barrel growth of more than 30% in the planned period. Fast Track development and dilution of stakes through M&A, will work synergistically to bring forward positive cash flows and manage our overall cash exposure. Thanks also to our dual exploration model and mature asset disposal, we will keep the net CapEx related to our upstream business to around EUR 5 billion a year with a reported production growth after divestment of around 2%. 2022 and '23 were impressive years for GGP. We successfully managed price volatility and financial risks emerging from the cutting of Russian supply. We were instrumental in securing replacement sources from gas to meet customer needs. We demonstrated the capability to add material value and extract margin from the supply of equity gas. And we transformed GGP's role by playing across the entire value chain, focusing on commercialization and valorization of equity gas. In the context of a lower macro scenario with a reduced level of volatility for gas. We are conservative in our planning to the outlook. We expect to deliver EUR 100 million per year of pro forma EBIT at the same debt we set out last year. However, current markets remain highly sensitive to geopolitical tensions, supply issues, weather and demand effects. In this context, we have clearly demonstrated that we have the supply portfolio, the infrastructure access and expertise to generate significant upside to over EUR 1 billion. Moving to CCS. Carbon capture and storage is a crucial technology in the decarbonization of industrial customers. In particular, in hard-to-abate sectors and hence, for the success of the transition itself. Indeed, its role has been recognized by the most relevant international organizations, such as the IEA, IPCC, IRENA and more recently by the UN's decarbonization policies. For any CCS represent an opportunity to reduce our net emissions but also to generate value creating a new transition linked business. We have developed a distinctive approach, thanks to our large inventory of depleted reservoirs and through our technical and commercial know-how we can play the role of transport and storage operator and for large industrial hub, the cluster orchestrator. We have established a leadership position, particularly in the U.K. and in Italy. And we are further expanding in North Africa, the Netherlands and in the North Sea. Our unrisked portfolio of opportunities is of the order of 3 giga ton of gross storage capacity. Our goal is to reach a CO2 injection capacity of more than 15 million tons per year by 2030 and to progressively rise to around 40 million after 2030, exceeding 60 million in the long term. In the U.K., our high net project is the most advanced. In October, we signed heads of terms with the government defining the key terms related to the economic model and the remuneration of the investment for the transportation and storage on a regulated asset-based mechanism. We plan to sanction the project in 2024 simultaneously with that of the meters. Ravenna CCS Phase 1 will start up this year with the Phase 2 expansion schedule for starting up in 2027, and capacity rising to 4 million tons per year. Further expansion could take this facility up to 16 million tons in the 2030s. CCS is ideally also suited at the appropriate time to a satellite type structure, with both strategic investors and as a vehicle for equity investors announcing returns to Eni. Energy evolution integrates a number of businesses that drive the transition and reposition Eni towards higher growth and better evaluation. Enilive, Plenitude in biochemicals, specifically Novamont, provide a portfolio of business solutions to help customers to cut emissions and as we have already said, there are ideal candidates for our satellite model. Enilive is rapidly developing multi-energy, multi-services strategy to generate value in the sustainable mobility space. Our biorefining activities are evolving into high-performing, high returning and globally relevant business, thanks to our early mover status, scientific know-how and a vertically integrated approach. We recently sanctioned our third bioconversion at Livorno and a fourth is currently under study. We are also expanding our global footprint, building on our JV with PBF at Chalmette, we are developing projects with Petronas and [ Euglena ] in Malaysia and with LG Chem in South Korea. Both are scheduled for FID this year and in operation by 2026. Our target is to rise biorefinery's capacity to over 3 million tonnes per year by 2026 and to over 5 million tons by 2030, about a 20% growth rate. Demand for sustainable aviation fuel will be supported both by regulation and by voluntary demand. Against this backdrop, we are accelerating production of SAF from our assets, and we expect to have more than 1 million-ton staff optionality by 2026, twice our previous goal with the potential to double by 2030. In parallel, we are progressing our unique vertically integrated feedstock strategy with 700,000 ton production of novel vegetable oil from agribusiness that will grow to account for over 35% of our Italian throughput by 2027. This ensures as an economic and reliable vegetable oil supply source. We are also investing in pretreatment technology to capture further margin. Enilive is integrated along the value chain with the sales of mobility products and services to retail, wholesale on worldwide cargo market. In retail, we see major transformational opportunities building on our network of around 5,300 service stations in Europe and we are evolving the traditional retail outlets into mobility apps to provide a wider experience. We are expanding our network with 300 premium stations in strategic areas, implementing a full redesign. As retail represents a significant captive market for our sustainable fuels, we plan to sell HVO in over 1,000 stations by the end of 2024, nearly doubling sales in just 1 year. We are also progressively rolling out other alternative energy carriers such as biomethane and electricity throughout the plan, helping our customers in the decarbonization journey. And we are expanding our non-oil offering for which we target a contribution to EBIT of about 40% by the end of the plan. Thanks to the combination of biorefining throughput tripling by the end of the plan versus 2023. Our focus on premium products and a steady contribution from marketing we target a 20% growth rate in pro forma EBITDA to over EUR 1.6 billion by 2027. Our conservative approach at this early stage of development leaves further upside to EBITDA in the plan as the agri lab cost structure normalizes, leading to a 20% to 30% cost advantage against comparable feedstock. Enilive is organically sell finances through the plan with disciplined CapEx of EUR 0.5 billion per annum of which 65% is targeted to growth. The growth and return opportunity in Enilive warranted premium multiple versus the traditional businesses. It is therefore ideally suited to follow the same pathway as Plenitude in attracting aligned capital to support growth and give visibility to the value created. Now Versalis. In 2023, Versalis has been materially impacted by the global chemical market scenario and the particular challenges of Europe. Our commitment is to accelerate the restructuring of this business to align the integration with a growing new bio-based chemical platforms and 2023 was also a catalyst year as in October, we completed the acquisition of the remaining shares of Novomont, taking full control of these world leaders in the production of bioplastic and biochemicals. So we are transforming and repositioning Versalis leveraging the new platforms focused on specialized products, biobased chemistry and circularity solutions, where we can compete with a leading acquisition. Within the context of the plan, the price is significant. The target EBITDA breakeven in 2025 and positive EBIT in 2026 represent an improvement of over EUR 600 million to the group. I would emphasize that work underway in the transformation of our traditional refining to our biorefining represent a good precedent in how we can reposition in a competitive business, leveraging our innovation and technological capabilities. At the breakout, you will have the opportunity to meet with management and go through their plans in more detail. And now Plenitude. Plenitude continues delivering its outstanding operational growth. By the end of 2023, installed renewables reached 3 gigawatt, almost 10x the figure of end 2022. We plan to grow capacity further increasing to 4 gigawatt in 2024 and more than doubling to over 8 gigawatts by 2027. This growth is supported by a solid pipeline in excess of 20 gigawatt, well diversified in different technologies and geographies of which 2 gigawatt is under execution, 4 gigawatts of high medium maturity and 15 gigawatt low maturities. In 2023, we also grew charging points by 46% and expected to double them by 2027. Plenitude integrated business model is a critical and differentiating quality. The combination of renewables and around -- and about 10 million car clients provide valuable internal hedging as seen in 2022 and 2023 in 2 highly challenging years. Plenitude e-mobility growth, we also leverage Enilive stations while also continue developing partnership with car manufacturers and large-scale retail across Europe. Value creation in our operating performance is also evident in our financial results. In 2023, full year pro forma EBITDA totaled above EUR 900 million. This is EUR 200 million ahead of our initial projection. We expect EUR 1 billion of pro forma EBITDA in 2024, and then doubling to EUR 2 billion by 2027. Higher growth is supported by organic investment over the planned period, averaging around EUR 1.4 billion a year, of which 70% goes to renewables. In December, we reached an important milestone with the investment of EUR 0.6 billion by energy infrastructure partners, which closed last week. The deal confirms enterprise value build at above EUR 10 billion, providing a healthful benchmark as we move towards our plan of an IPO. The growing materiality of Plenitude to the Eni group requires understanding its different risk profile, return on capital employed during the growing phase, EBITDA multiples and debt capacity. All elements that differ from other businesses of Eni. These elements, together with the other financial targets of our plan and they announced that distribution policy will be described by Francesco to whom I leave the floor. Please Francesco.

Thank you, Claudio, and good afternoon. Eni financial framework support the execution of a strategy that builds businesses with complementary risk and return profile, increases resilience and flexibility across the cycle and delivers value to the shareholders. Looking to the next 4-year plan, the context is a more cautiously framed scenario. We assume $80 barrel for oil EUR 30 to EUR 35 per megawatt hour for gas in Europe and an average $5.4 for barrel of our Southern Europe refining margin. In 2024, we expect to generate around EUR 13.5 billion in cash from operation. Over the course of the plan, we also expect to grow cash flow from operation in a constant scenario by around 30% or over EUR 4 billion. This stands a growth rate we set out in the previous plan. The growth in operating cash flow is delivered from all segments. It is worth highlighting that our two main transition businesses of Plenitude and Enilive will account for 20% of the cash flow from operation. Growth during the plan period, emphasizing the emerging high-quality diversification, we see at Eni. As we will continue to rightsize the corporate structure in the context of our strategic evolution and satellite model, we also expect to deliver EUR 1.8 billion of savings and simplification benefits over the plan. As we have highlighted, we find ourselves in a situation of real depth of investment opportunity. For this reason, we have to be and we will be highly selective in project sanctioning. On portfolio, we don't require acquisition and we can instead gather partners to support our projects. In the Upstream, we will leverage our well consolidated model of dual exploration by reducing our equity and anticipating cash flow. We made significant discovery, for instance, in Ivory Coast, Cyprus, Indonesia and Congo, which all hold the potential for this type of equity dilution we have successfully performed in the past. This divestment activity is in addition to the continuing management of the assets, such as our 2023 sales of assets in Congo already completed and Nigeria. At the same time, we are also looking at growth from the new transition businesses that are essentially self-funded with the dilution of minority stake or IPO valorization if market condition will be favorable. Following the successful dilution of Plenitude that we completed at the beginning of March, we expected to speed up in the valuation at each of the four main business related to the transition, capturing the real multiples appropriate to their activities. Our disciplined investment approach and the quality of our portfolio means that now we see our gross investment at EUR 35 billion, less than EUR 9 billion per year and EUR 2 billion lower than the previous plan. But our overall CapEx absorption will be materially lower in this plan. In fact, with the more active divestment and value realization we have described before, we expect an overall net CapEx of EUR 27 billion, an average of EUR 7 billion per year more than 20% lower than last year plan. In addition, we have uncommitted CapEx in 2024 of 15% of the budget, and this rises by around 20% of the budget in each of the subsequent years. Our distribution policy confirms the progressive growth in shareholder value related to our strategy. In the past 2 years, we have distributed almost EUR 11 billion, a historical record for Eni, approximating to 20% of the current market cap and we expect to continue at a high level in the coming years. Our model is to continue to rank distribution as a top priority to a percentage of operating cash flow, a transparent link to our business performance. Today, we are announcing that we are enhancing our payout, which will now target a distribution around 30%, 35% of cash flow from operation compared with the previous 25%, 30%. We will allocate an amount to the dividend and the rest as a buyback, the variable component. For the 2024 dividend, we propose an increase by over 6% to EUR 1 per share from the previous EUR 0.94 per share, paid all in quarterly installments. On the buyback, following approval [ adversely ] in May, we expect based on the 2024 scenario to repurchase EUR 1.1 billion. This is a flexible tool with higher exposure to the upside. In fact, similar to 2023, we can confirm that in lower-than-planned scenario, we will seek business outperformance and use financial flexibility to deliver the target buyback. While in the case of better-than-planned cash flow from operation outcomes, we will now allocate up to 60% of incremental cash to our buyback. This is a material improvement versus last year. When we indicated 35% of incremental cash allocated as an upside. As an example, at $90 barrel benefiting from the top end of the announced payout the buyback would amount to EUR 2 billion. Overall, during the planned period and that our scenario, we are planning to buy back above EUR 6.5 billion of our share reducing the share count by 13%, a continuous and material improvement of the return for our shareholders. In conclusion, we are keeping our distribution policy highly competitive implying at the current share price, a distribution yield of 9%. Our investment and distribution plans are made in the context of maintaining balance sheet strength and flexibility. During the planned period, our cash flow from operations will average over EUR 15 billion per year, and net CapEx will average around EUR 7 billion, implying a free cash flow that materially covers our distribution and enhance balance sheet strength. Our goal is to preserve Eni as a strong investment grade credit. This means leverage will range between 15% to 25% as we seek to balance a fundamentally conservative capital structure with flexibility and advanced cost of capital. To emphasize this point, the average cost of our net debt thanks to good return on our liquidity was 0.8% in 2023, and we expect it to be around 1.5% through 2024. For this reason, we took the opportunity to advance our strategy, completing important strategic acquisition in a particularly favorable period in terms of net borrowing cost. And we see leverage falling back towards the low end of the indicated range by the end of the plan. Furthermore, it is also worth noting the role of Plenitude in our debt composition. Plenitude financial model and risk profile lends itself to higher gearing than would be typical at an oil and gas company. At the end of 2023, its net debt stood at EUR 2.2 billion and we expect it to target debt levels at around 2x to 3x EBITDA, in line with the [ onus ] for such businesses. In context, Eni ex-Plenitude leverage was around 3% point lower at the end of 2023. While by 2027, that figure will be around 5 percentage point lower. And these are the key highlights of our financial plan. Now I will return the floor to Claudio for his final remarks.

Thank you, Francesco. In conclusion, I would like to highlight the key feature of our 4-year plans and particularly the improvement in comparison with the previous plan. We are embracing the challenges created by the energy transition with a strategy that addresses each element of the trilemma. We have a distinctive and accretive strategy, supported by strong organic investment performance and focused M&A. We are executing on our deep portfolio of opportunities in a disciplined manner. Its quality enables us to reduced the gross CapEx in the plan by EUR 2 billion versus last year. We have considerable scope to anticipate value in high equity projects, introduce a line capital in satellite and address our tail. We see net M&A contribution, contributing EUR 8 billion over the plan, cutting net -- cutting average annual net CapEx to EUR 7 billion. Growth in our traditional upstream and from our new transition businesses is exceptionally strong. Over the 4-year plan, we will grow CFFO by 30% with the material contribution of the new businesses. During the plan, the 20% of CFFO growth will come from the emerging high-value, high multiple businesses, well defined in our satellite structure. All economic and financial KPIs demonstrate progress and robustness with a compelling trend of value growth, upside leverage and resilient downside. This enabled us to make substantial improvement to our distribution policy. We are raising our payout commitment. The associated dividend and materially increase the upside participation. Our investment, we also mean that Eni at the end of the plan is bigger and more profitable through high-performing upstream and the new material transition-related businesses. Our growth is coupled with material reduction in emissions. Since 2018, we have cut our upstream net scope 1 and 2 emissions by around 40% and the methane emission by more than 60%. In the past 12 months, we have made significant strategic steps that give us increased confidence in the path we are taking. We have made the organic and M&A investment, continued building technological know-hows created the organizational structures and delivered a new portfolio of new transition linked businesses. Ultimately, it is evident that energy transition can only become real if it creates material and sustainable returns and enables new forms of profitable business, and that is what we are doing. Thank you for your attention, and now we are ready with the team to answer your question.

Good afternoon, everybody. I'm looking out to see -- I did promise to ask someone who didn't get Martin. We'll start with Martin.

Two questions, which are somewhat connected. Can you talk a little bit more about the $8 billion of disposals and also how that relates to the difference in the upstream growth guidance, the 3% to 4% versus the 2% reported. Is it as simple as saying EUR 8 billion of disposals lowest the reported growth rate and given that this is such a large amount, can you talk a little bit about sort of where the EUR 8 billion sort of plan came from? And then finally, it's only 2 years ago that we talked about the balance sheet being 10% geared now we're talking sort of 15% to 20% despite $8 billion of disposals. I'm sure there must be a spreadsheet that makes it all work. But can you say a few things about that?

Yes. I can say something about the first question about the EUR 8 billion. So the EUR 8 billion is not coming just through the upstream, it's coming from the upstream. And when you talk about upstream, we talk about tails. So we talk about marginal fields or some cleanup in our asset base. Then we have the other -- the other satellite company that we created where we are looking for strategic partners like what happened with Plenitude, for example, that gave some additional contribution to the EUR 8 billion. At the end, when we talk about the EUR 8 billion and reported production 3% and 4% after the plan of disposal we go to 2% is because we are cutting about 1,000 barrels per day, something like that. Our marginal field and tails in our asset base in order to reduce cost and to be more efficient also because we have a big optionality. We found a lot of exploration, where we find a lot of exploration with a high percentage. So we have tails, and we have also dual exploration. So I said that where we have to start new development, new CapEx. So we have also an advantage in terms of reducing the CapEx because we are going to reduce the stake this year in asset where we have now 90%, 85%, 90%, sometimes 100% of the asset sold.

About the comparison on the leverage trend. You are clearly comparing to different macro environment. So the 10% to 20% that we described a pair of years ago or even last year was an environment where the price of gas were materially higher. There was also a higher assumption related to oil, if you remember last year. So I think that if you remove this component related to the scenario, the implicit raise of the leverage would have been 13%. While once you add back the benefit of the disposal and comparing the period '23, '26, this benefit is substantially adding or recovering between 7 to 8-point percentage Therefore, the impact of the 5% that you now see in terms of the range is substantially the contribution on the impact of the overall macro, partially offset by the disposal and the new plan of M&A.

Christyan.

Congratulations on an excellent presentation. Two questions interlinked first, around your crude oil growth. I know you've given the BOE growth target. Can you unpack that in terms of your oil volume or give an indication and also sort of the key milestones in terms of delivery of that volume growth? And then segue into the second question, which is regarding your cash return targets around the macro assumptions you make. Have I missed something? Or is the second order gone down in terms of cash flow relative to oil price sensitivity because the assumptions you make or you provided seems to me is this an implicit downgrade relative to what you can generate through the volume growth. So I guess the question is, how has your sensitivity changed on your cash flow relative to your macro assumptions? And if you can walk us through that, so we can be confident that there is upside, as you highlight in your presentation.

Okay. On the second question, eventually for the oil production will be -- Clearly, the sensitivity is related to the situation of the overall situation and the portfolio that you have at the time of the 4-year plan. This portfolio is moving continuously, is moving continuous because you have new startup. You have different contributions from oil and gas. You see a growing contribution from gas eventually condensate. And you have different ages or period of the phases of PSV, so once you look at this kind of sensitivity, this is the reason we update this range of sensitivity, you have to consider all these factors. As you can see, we are now in a situation where it is a quite material upside in terms of dollar per barrel effect in terms of cash flow from operation, but this is partially a bit lower than in the past because the gas component is growing, and therefore, this is reflected in a different sensitivity metrics. And clearly, also, there are some PSA mechanism. Or also, we have to remind this the contribution of the satellites because if I move out Var and Azule and these metrics are not reflected because Var and Azule are paying back dividend. So this is an element that is additionally contributing to the dilution or the lower impact that you are mentioning.

I see a doubt in your face. It's clear, It's not exactly what responding to your question.

I understand the portfolio is a relatively high cost in the context of the macro assumptions you said. It's just trying to understand the oily piece of your portfolio, the quality of that oil relative to the BOE -- and how does that work relative to movements in oil price? Because again, like I said, the cash flow that you provided is certainly less than our numbers at JPMorgan.

So let me give you some more color on the growth. The growth is mainly driven by a number of projects, which are the Ivory Coast, which is an oil project, very accretive, very lucrative. I would say, then Congo LNG, which is not just an LNG project, but it has also a component of oil. And then we have the Libya project, which is gas and Indonesia, which is a very rich gas project. So a lot of liquids. The growth in the underlying and then the nonorganic view is seeing an increase of the gas component with -- when I say gas, I'm including also the liquids associated with the gas. Yes, the condensate. And then if you -- and it's targeting the 60% towards the 2030 and then when you look at it from a -- I mean, a reported view, it's almost, I would say, equal the ratio that we will maintain from the beginning of the plan to the end of the plan.

Also say, Christyan, if you look, the EBIT sensitivity is obviously pre the satellites, so it doesn't include satellites, which are obviously oily -- and if you use the starting point the 13.5% and a pilot sensitivities from the 2023 performance, you're getting almost exactly to 13.5%. So we needed a starting point. It is consistent with the assumptions we put in whether those are the right assumptions or not, that's for you to decide.

Alex?

Henry Hill from Santander. Just a question about the situation in natural gas prices overall in Europe and in the U.S., we see this weakness in commodities, which are the implications for this business plan in terms of investment in LNG, natural gas in the upstream and also in Plenitude to all the investments in renewable plants that, of course, they are exposed to power prices.

So something that I ask maybe Cristian, where is Cristian? isn't there. So clearly, the -- we have a scenario, gas scenario. So all the possible impact all along the plan is already inside embedded in this presentation, in this 4-year plan. Clearly, we have different kind of situation. If you look at upstream production, we don't have a lot of production in Europe or we have production linked to domestic situation. So we sell production to the countries. Most of our production is out to the country and we have a contract. And we have a fixed price that is not depending on the market price, most of the time is domestic. So it's quite flat. Okay, is a floor. So it's defending our situation, but it's not really impacted all these macro scenarios. Obviously it's going down, down rest in a safe situation. Then we have GGP. GGP, as you saw last year, last year, we had -- we started with a very high price and the price went down. But in any case, GGP made very good result. Why? Because GGP is part of the business, GGP, a good part of the business of GGP rely on volatility on the differences and we have this kind of diversified asset because we have LNG that is growing. And so at the end of the plan, 80 million tons of contracted energy. And we have pipes where we can't really play on the volatility. So I think that our gas price is an average gas price also considering all the different analysts. I don't think that we can be really impacted downside. Clearly, we can be impacted upside if there is a big high price for volatility and also for the upstream, you want to say something else?

Difficult to add something, Carl, I would just say that we see 2024 and '25, still being very tight in terms of LNG and gas scenario because it's true that now we are coming from a mild winter, which actually left the storages in U.S. and also in Europe, fairly high. But if you look at the addition of LNG, new LNG coming in the next couple of years, you have hardly 5 million tonnes coming and part of it is actually also contingent due to sanctions. And on the other hand, though, we see an uptick of the Asian and a bit also European demand coming back on stream. So we think the next 1 or 2 will be still tight and volatile.

Irene Himona, Societe Generale. My first question is on your gross CapEx number. If you can talk around what sort of inflation or disinflation you're seeing in there? And then Francesco, you referred to EUR 1.8 billion of savings from simplification. I wasn't quite clear if that is OpEx alone or OpEx and CapEx? And then secondly, very quickly, going back to Russian gas. Last year, you spoke about replacing, I think, initially 50% of that and then rising to 80%. Where are we in that? And how should we think about the structure of these new contracts anything you can say on pricing for these new contracts versus the old Gazprom ones, please?

Yes, from Russia, that is easier, then we'll go through the inflation. So for Russia now, where we are in good position because the demand -- especially I'll talk about Europe, really, the demand is lower. We have big storage, the storage is at 65%. So -- And we -- if we go back and we make all the calculation now we are exceeding 80% of replacement clearly in a different way because that was one contract. Now we have different contracts, but the model changed completely because I think the older replacement has been made on more small quantity of 1.5 billion cubic meter per year with Qatar, the oil placement has been made using our gas, equity gas. Though we are in a different kind of situation before we are just buyers. Now we are producers so we can control much better the quantity and the contract is a contract with ourselves, most of the case. So market condition, clearly. So we are quite in a safe situation. If we -- if the demand come back to what we had in 2018, '19. So 420 billion cubic meter per year in Europe. Clearly, we are not 100%. We can reach 100% in 1 year, I think, for next winter. At this level of some maximum level of demand. But with lower demand, we can reach it faster.

With the cost inflation, the current scenario with the geopolitical instability, clearly, the persistence of a high level of activity globally and the merging of the major suppliers is bringing some inflation. Clearly, neither at the level of '22 versus 2021, which was 10% or '23 versus '22 which was 6%. We see an increase between 3% and 4%, which is embedded in our plan.

While coming to the question related to the cost and the savings of corporate -- these are mainly OpEx. There are some, let's say, CapEx related to ICT. But the great part of that is OpEx. We wanted to bring back the amount that we had in the past for this kind of, I'll say, running corporate in the range of EUR 1.5 billion, EUR 1.6 billion. We kept this relatively flat for a number of years. After COVID there was a doubling impact, there was a rebound following the reduction activity of 2020, 2021. And there was also the inflation component that added, let's say, a double-digit push for -- so we want to return to the normalized level.

Michele.

Michele Della Vigna from Goldman. First of all, congratulations on what is a very powerful industrial growth story, both in traditional and low carbon. I wanted to come back to your financial framework. It looks like you've been quite conservative in that you match the outflow and inflow of capital even before the disposals, more or less on your plan. I was wondering, especially given the very low valuation that you, like the rest of the oil and gas companies in Europe are trading at. Why not perhaps link some of the disposals with increased buybacks, taking advantage of such a low multiple in a very accretive way. And then the second question is a little bit more technical. On the carbon capture business, clearly, you're developing a very strong business of storage and transportation of CO2. I was wondering is the capture side as well something you're interested in to perhaps help some of the industries in Europe that don't really know how to do it themselves or how to finance it to add that extra piece of decarbonization and increase your business there?

So start from CCS, and then we talk about buyback and asset disposal. In this very center, we develop R&D also another center on the capture. So the capture is not normally in the U.K. business model, we are just in charge of storage, transportation storage. But as I said, we -- for big apps, we play a different role as an orchestrator. And because it's our specific know how the capture in refineries or in E&P to strip the CO2 or the sour gas. Clearly, we had the meters to use the best technology, but also to use. For us the best technologies, the technology they consume less energy because the most expensive part in the CCS is the capturing. So if we consider transportation storages, we can consider about between $15, $18, $19 per CO2 capture per tonne of CO2 capture then [ 40, 50, 60 ] depends or less. It depends on how it's reaching CO2, the gas is due to the capture. So we are working with R&D, and we help the meters, then for the first question. No, that would be an idea. But clearly, when we say that we have a level of EBIT and we are so good, we have different prices. So we perform better in our plan or there is some other events. For example, we sell or we said where we reach a better bottom line, a better result. I talk about the CFFO and not everything. We are going to share what the result, the upside is 60% for our shareholders and 40% for us. So there is inside our -- we can say, new policy because we are great, but also we changed because we remember that we talk about 35%. So that is another way to give an additional remuneration in different kind of situation. I don't consider that they cannot will link the disposal with other mechanism is not in the model that has been approved by the Board. It's possible idea.

I would like to integrate that we prefer to have a progression of dividend distribution related to the, let's say, underlying performance. The disposals are cycles could be -- could expand your return in a year or the following year, you will have the setback of that because the people will immediately, let's say, be a customer to a higher return that is not originated through the business, but it's related to a specific sale. So it is much better to create a real growth that is absorbed or recovered or balanced also through the disposal, but to ensure a consistent cash flow growth that is the origin of the distribution policy.

Anishaa.

I'm Anishaa Pattani from Barclays. So I have two questions. One, again, on buyback. You mentioned the potential upside to buybacks. So I wanted to sort of understand where exactly that comes from? Is it just linked to the fact that you could have changes in the macro environment? And then the second question was on chemicals. I wanted to know like how far along you are on the restructuring and transformation to reach the breakeven in 2025. And you mentioned on the slides, like participation in strong specialization in high-end markets. So could you specify what that is exactly?

For the upside, I'd say a few more than the expert, for sure, I want to say something. But the upside, as I said, is that we have on the base of our scenario, we have EBIT or we have a cash flow from operations, not EBIT cash flow from operation, EUR 13.5 billion, that is the cash flow from operations. So if we are performing better in terms of manage the business, we get better results or we have higher prices as an example that Francesco did during the presentation, the $90 much can give to our shareholders that are the condition is not M&A or divestment. That the condition because it's linked to the first line in the cash flow from operation. For the -- for Versalis to give some color, then we have the breakout, but you can maybe Adriano, that the CEO of Versalis can you give us some color about that?

So thanks for the question. On the trajectory of restructuring, we are going in line with our plan. In fact, we started already a few years ago with, for example, transformation few sites like Porto Marghera. We announced in November the shutdown also another site in Scotland in about last summer. And of course, is ongoing in term of efficiency, in term of restructuring, resizing a few sites, and of course, bringing fixed and variable cost reduction. Is something that you cannot do overnight. Of course, we are not waking up today, something that we start over the last few years, it takes time also to build the platform that enable the transformation. So over the last few years, we built a few platform. We acquired also some platform like Novomont example. But going back to the specific question on specialization. So that is one of the platform of the three platforms that we mentioned before that we want to grow, we want to diversify specific market linked to energy transition. So for example, wire and cable, like polyethylene for photovoltaic like in some case, a potential application for battery, specific composite for battery. So this is all the type of application we're looking on and we can do because we acquired a few years ago Finproject that is a compounding company, very integrated with our technology platform. So we have the raw material and also the solution offering to these markets.

In summary, the commitment of Adriano that is the CEO of Versalis is that during the plan is going to be breakeven by the end of the plan. He has a -- look at me because you're hiding yourself.

Because we are very squeeze.

You are taking commitment in front of everybody. So I repeat because it was looking to something else. But in summary, your commitment is for Versalis. In the next 2 years, we reached breakeven, buy the end of the plan, or in 3 years, I remember, you reach -- you have a positive EBIT.

Absolutely.

You can say to everybody that is a commitment. No, it's better to say from...

[indiscernible] EBITDA. Free cash flow 2027.

So we are not joking?

No, not at all.

Okay. Good. You can sit down now.

I feel a bit intimidated. Let's push off on the front row now and then we'll move back.

Can I just ask a couple of questions on Plenitude. Can you talk about the involvement of energy infrastructure partners? Was that a competitive process, were they chosen because they paid the most? Or do they bring something to the joint venture.

Yes, that is immediately they most the most.

Yes. Are they a partner that can add value to the business as kind of my question. And yes, but we'll probably leave it there. That's the best of the question.

So when we talk about the process, Francesco going to say more. Why them because they believe in the project. They believe in the company. They were able to cash out money to be part of this project. It's not a new project, but it's for us, not a new project. But from our side, we talk about planning to a satellite model. We put together clients, EV-charging point, renewables, solar, wind. We create a company now is working. The results are there. But we are discussing with them because they we present, they believed in the company, they already put money, they want to invest more to grow the company. When you see -- when you find for a partner and you find -- you look for a strategic partner. Strategic means that it's not just there to follow, not just there you have to drag it and you have -- is leaping and sometimes you want dividend finished. No they believe in this business, and they put money because they want to grow with us. So it's -- because we were not ready to set everybody because we want to invest, we want to grow. We selected them because we felt that there is a strong belief. It's not just a question of money because for us, Plenitude is a strategic project. It's not just a project. You want to say something about the price.

I think that we can say that there are other, let's say, potential buyers that were upset by the conclusion of this negotiation. So I think that this was a good win for us. I think it was also a discussion related to governance. It was the lengthy component of this negotiation. And I think that we will have, let's say, a balance of industrial competence and financial competence that will help Plenitude to perform even better in the future.

Just one but a quick follow-up. The debt, you mentioned the debt reconciliation. Is the debt of Plenitude recourse or nonrecourse?

This is a nonrecourse -- that is recourse in case consolidated within Eni. So it will be at the end, applying to the debt once it will be eventually consolidated in the future.

Come around and Biraj on his own there.

It's Biraj Borkhataria at RBC. So the first one is on the GGP guidance. So last year, you had really exceptional results for a few reasons. And I guess we can all take a view on volatility this year, and environment is quite different and so on. But the bit that's harder is the arbitrations. So is it implicitly in your guidance for 2024, are you not expecting much? Are you risking it very heavily. How should I think about that because they tend to come out of the blue and it's hard to see from my seat. And then the second question is just on the upstream sales. So that is -- one of the changes is the step-up in divestments in the Upstream and you've had some exploration success, but you've very consistently had some exploration success. So that's not really changed year-on-year. So -- could you give some comments on the sort of broader environment for M&A in that space? Because you see a lot of activity in the U.S., your larger peers are buying assets and you're talking about accelerating the sales. I would be interested in your perspective there.

Okay. So starting from the exploration -- dual exploration model, -- it's true that we made a lot of exploration discoveries. And you said that didn't change a lot because we made EUR 11 billion of selling -- so that means that for exploration with a big ad value because we derisked with the risk that is specifically for us, we derisk the asset, just the investment for exploration, then there is a big add value. So that is something that we did in the past and $11 billion not is a huge amount of money for a derisked without FID, without development, then we develop clearly. But that we do -- that is a part of our strategy. And it's not just an exploration, is a different kind of exploration because this exploration link is a near field. So linked to existing facility. It's an exploration that is not just derisked for a geological point of view but it's the exploration that is close to existing facilities. That means that is also the development as we demonstrated with several examples. It's fast. It's less expensive with high internal rate of returns. So we can find IOC, we can find a lot of NOC or state that want to join us as happened in the past and now it's happening now. So that is quite -- for the past record is quite credible project stuff. So that are something that we are finalizing also. And also, we expect to finalize something also in 2024 and are very good assets. And as we would spend for asset on that is not just a gas is rich gas or condensate or volatile oil, so very light oil with a quite premium. So there are really good -- from that point of view, we are in a very good shape. There is no particular issues. Sorry, then, your focus on...

Volatility gas.

You want to say on [ gas].

Yes. So in 2024, we don't expect any arbitration outcome. So the guidance is actually not affected by that. Instead, clearly, we have ongoing as usual renegotiation, renegotiation with our counterparts, which actually might also affect the guidance exactly to quantify the upside that Claudio was referring to. So the upside is also linked to volatility prices but also outcome of those discussions.

And I'd like to at about this point, that is true, there is no arbitration. But what I said at the very beginning that we are buying our gas. So we are on the value chain. So it's something that you can maybe -- you can see in the GGP, you can see in the upstream or then in planning to that at the end of the day. So the good stuff of this satellite model and the equity model where you are not just a buyer, you buy from a third party, you sell to a third party, you adjust in the middle with a small margin that you are on all the value chain. And you are in different places to optimize the result, the economic result at the corporate level.

We'll work our way back to Massimo on the back there, and then we'll come to Josh after that.

Massimo Bonisoli from Equita. One question on the bridge on your outlook for 2024 on cash flow from operations. it seems to me you have quite a good level of contingencies. I'm struggling a little bit on the bridge here. So I would like to know to understand better the contribution from Neptune in 2024, the exit of cash flow from the divested asset in Upstream. And maybe one word about contingency in the sense that last year, you improved cash flow from operation targets over the year at same scenario level. So maybe you have included some contingencies as well.

Yes. We do not provide all the details if you look for, sorry, but -- this is your job.

At the end of the year.

Anyway, just to give you a figure that is important in internal contribution, cash flow from operation 2023 versus 2024. Of that EUR 3 billion difference, EUR 2.7 billion is related to GGP. So substantially, what you are seeing is the impact of GGP plus that have last year also some one-off factors that helped is the scenario gas, SERM is a bit lower. So you see that there were -- and also oil was about $2, $3 lower. So the overall net comparison is related to scenario plus the GGP changes.

Massimo, I guarantee, if you run the oil price, the gas price scenario through it and adjust the GGP guidance, you'll get pretty much to what we number we've got as the base.

Josh?

It's Josh Stone from UBS. Two questions, please. First, just a clarification on your CapEx guidance. You've given the net CapEx number. But when it comes to running your business, I'm presuming you base everything on a gross CapEx basis, so just a point of clarification on that. And then second point, you made a comment about the satellite model driving simplification inside Eni. And just from where I sit, if you're sort of cutting out different parts of the business, different layers of management, that would strike me as something that's driving more complexity inside Eni. So where am I wrong on that?

So we plan between, just for simplification and complexity of the satellite model. Clearly, you have to make a balance strike understand between the cost and what is the advantages. Clearly, when we have the satellite, we are able to extract the value. If you look at the 10 -- more than EUR 10 billion or planning based on the strategic investor investment, Clearly, we were not able to start this kind of value. That's all these different companies gas retail, all the where in the big basket of any that was mainly valued through the E&P with 3x, 3.5x or more for a European company. If you're able to extract there, you have the big advantages. And then we -- for any live is more or less the same. But what are the other advantages that at the corporate level, we have R&D technology. So we can give -- we can give update like in the iPhone, the software. So we really -- we can enrich this company. Clearly, we must have true service contract or service agreements, sorry, links with them. They are a company where they continue -- we continue to feed because we are a shareholder, and we need to increase the value. So there is no additional cost that can pay these big advantages.

On the CapEx -- the gross CapEx, as we said, were in the past, were EUR 37 billion now are, let's say, in the range of EUR 35 billion. So it is a saving in the range of EUR 2 billion over the 4-year plan. And this is the gross CapEx element. Then what we said is the benefit of the M&A that reduced this overall amount by an additional EUR 8 billion, so almost EUR 2 billion per year.

Yes. So you're right, the top line is driven by the gross. Kim, on the back.

It's Kim Fustier from HSBC. I was wondering, how do you philosophically reconcile the dual exploration model with the fast-track approach. When you farm down an asset, in some cases, you lose control, and you might run into partner alignment issues. I think Mozambique was a good example of that. So I guess, going forward, would you look to sell down only minority stakes in immature projects? Or would you look to farm down closer to FID so that you don't run into those partner alignment issues. And then perhaps linked to that, could you provide an update on the Mozambique floating the second floating LNG project?

So what we have done in the past, what is the base? So the logic of our model is that we because we believe in our skills in exploration, we acquired 100% block, most of the time. And then we sell except Mozambique because we sell much more because we were in a development phase, but Zohr is a different case, for example, where we take -- we can hold 45%, 30%, 50%. So we all the operatorship. And that works in Angola, Block 1506 in Litchendjili or Block 12 in Congo, in Indonesia in many cases. Mozambique is quite different because we made a decision to reduce our share from 80% to 25%, 20%. Now we -- in the -- we have different kind of situation offshore, where we run with a higher share to go faster. But -- so -- and we have to consider that this joint venture was not -- so when we discover Mozambique was early 2010 before. But then we -- the joint venture has been constituted before the dual exploration model. So it's been consistent with the government, with us. So they put together different kind of factors. Our model is quite different. And then we started in 2012 with the dual exploration model. We acquired 100%, and then we farm out shares. So the issue is we run the business. what happened in different countries from Egypt to Algeria to Angola to Congo, to Indonesia or Mexico. We keep a share that allow us to have an operatorship and in any case, until the first production will remain positive free cash flow, we are never in a [indiscernible]. Mozambiques is a, we are evaluating -- we are already a PUD. We are evaluating the situation and also the partnership and the situation to understand when we can take the FID. We are not far from a full analysis of the plan of development, but I'm not now in the situation for that reason we didn't put [indiscernible] in our list of projects this year, when we can be ready to start in the second LNG.

I'm conscious we've run out of time. So I'm going to have to close up the Q&A now. We obviously got time to.

There's one question.

That's a lucky man.

Alessandro Pozzi Mediobanca. Two questions, if I can, John. The first one is on production. We were talking this morning about the need to cut emissions and that how it could impact production in the long term. And I think we started to see that already in Eni with the reported production growing by 2% post disposals. How should we think about production going into 2030? Is 2030 peak year for production or...

every year is peak here. Long time.

And yes, so how should we think about production evolving? And also on CCS, I think that is a candidate for a satellite model, and you already have an acquisition vehicle listed in London. What would be the perimeter of a potential independent company for CCS just with U.K. assets, with all assets, including Italy as well? If you can give us your thoughts on that?

Thank you. So the first question is for Guido -- question and answer for Guido and then Francesco CCS vehicle.

Yes. On production, I mean, this morning, you have seen about our model, and we have also a strong pipeline of project looking forward, which would enable us to have an underlying growth in the plan of the 3%, 4%, which then reduced to the 2% reported because of the M&A. So the -- beyond the plan, we plan to reach our peak around the 2030 and then plateauing with the gas component increasing over time. Of course, as we said this morning, we have a lot of flexibilities. And we have also to take in consideration what the society would ask in terms of what the trend should be. So within these boundaries, we will manage our strong inventory and multiple inventory of basically opportunities.

And in terms of CO2 intensity, how is that going to change post disposals?

It is going to improve as you see in the quality of our projects are mostly gas. So the intensity is lower. And so overall, the total intensity is going down while the production is going up in terms of volume.

For the CCS as also was presented, the idea is not to work just specifically in a country, but substantially to present a business model that is a global model. Clearly, there are -- Europe is on the -- also for our exposure is a region where we have more opportunity, not only U.K., but the Netherlands through the acquisition recently on [indiscernible] and in Italy. But we have also North Africa and potentially also some activity in Far East. So the idea is to have this overall global company that is able to present towards the order to abate industry, the solution to capture and provide the assets and the competence to put this CO2 capture within the storage.

When do you think you have critical mass to achieve to have an independent company in CCS?

Well, I think that clearly, the size we have already the potential of that. The complexity is related that you should have a framework and emitters around -- that are all aligned towards taking the FID and making this potential.

In any case, Francesco, what we said and what we know that in 2024 for Eni for the first one, so on the South West, we are going -- the meat were up in the metro there. We're going -- if they are going to sign the FID, so the former extention on the project, we are there. So we are ready. We here are ready -- we start now in a couple of months in Ravenna, and then we can grow in Ravenna. So that are the two ready. So the critical mass is there. The critical mass there.

Jump the gun. I'm going to have to cut it, I'm afraid. So we've run out of time on the... come back. Thank you everybody for your attendance. We've got the three breakout sessions later on, but before that, you get a drink and a bit of a rest. I know it's been quite intense. And then we will collect you up and take you to your breakout rooms. So that's how it will work. So thank you very much.

Thank you very much.