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

Good afternoon, ladies and gentlemen, and welcome to Eni's 2025 First Quarter Results Conference Call hosted by Mr. Francesco Gattei, Chief Transition and Financial Officer. [Operator Instructions] I am now handing you over to your host to begin today's conference. Thank you.

Thank you. Good afternoon. Our February capital market update emphasized the speed and scale at which we have been progressing our strategy. Quarter 1 maintained that pace and recent events have confirmed why our clarity of strategic view and speed of action is so critical. We are creating value, leveraging our competitive strength in the upstream, strengthening and diversifying the company, fixing and then performing activities, materially strengthening our balance sheet, all while offering a competitive and resilient return to investors. Reviewing the important strategic highlights of the quarter and year-to-date. Growth is an important feature in our plan. In the upstream, in March, Johan Castberg began production, and will add 66,000 barrels per day of oil production at plateau for Var, as it targets over 400,000 barrels per day by the fourth quarter. Castberg is the first of the 5 major start-ups due this year with Balder X in Norway, Agogo and NGC in Angola plus Congo LNG Phase 2 to follow, setting us up for a strong 2026. In the transition business, Plenitude has completed the construction of its 200-megawatt battery in Texas and acquired 245 megawatts in its share of photovoltaic and storage in California, while Enilive began production of SAF at its new 400,000 ton per year facility at Gela in Sicily. We are also realizing significant value through the investment of aligned capital into our transition businesses and the valorization of our industry-leading exploration activities via the dual model. We closed the agreed increase in EIP's stake in Plenitude to 10% with an additional cash of EUR 209 million at the end of March. We also closed the increase in KKR's stake in Enilive to 30% with an additional cash in of EUR 601 million in April. This followed the EUR 2.97 billion we collected at the beginning of March. Furthermore, we have received nonbinding offers for additional stakes in Plenitude that could take aligned investment to 25%, 30%. We consider around a 70% majority Eni stake in both our major transition business as broadly the right level for the time being. In the upstream, also in March, we announced a major dual exploration valorization with the agreement to sell stakes in Baleine, in Côte d'Ivoire and Congo LNG in the Republic of Congo to Vitol for a cash in of around $2.7 billion, expected complete later this year. Our satellite model is an important feature of our business. In the upstream in February, we announced an MOU with Petronas to combine assets with a mixed component of growth and value in Indonesia and Malaysia. This is a really significant development for Eni, creating a new and highly material regional satellite in an important part of the world with a strong partner and with the added opportunity of some cash valorization alongside. We expect to move to a definitive agreement around the middle of this year with the completion before the end of 2025. Structural responses in some of our legacy activities are also required as the energy evolves. The transformation of Versalis over the next 4, 5 years is a major positive source of self-help, amounting to more than EUR 1 billion per year EBIT improvement by 2030. We have positive news to report here as well with agreement reached with the institutions and the unions on the details of our plan. We closed Brindisi, the first of the remaining 2 steam crackers at the end of March, and Priolo will be shut down before the end of this year. Our strategy is designed to create a stronger, more profitable and more resilient company. Our first quarter results demonstrate this. Net income, EUR 1.4 billion is up around 60% quarter-on-quarter in a very similar scenario setting. Upstream production was in line with our expectation as 2024 divestment impacts work through, seasonal factors play out, and we await the positive impact of the startups that will contribute to our full year expectation of around 1.7 million barrel per day average. At the segment level, E&P pro forma EBIT of EUR 3.3 billion, almost offsetting lower crude and production year-on-year, helped by lower expenses and efficiency gains and the benefit of portfolio grading. GGP results reflect the normal seasonal strength and were essentially in line with last year. Enilive and Plenitude reported pro forma results consistent with our full year expectations once respective seasonality is taken into account. Enilive was impacted by the deterioration in the biofuel margins year-on-year and also lower biorefinery utilization, albeit biorefining EBITDA remained positive. This was partially offset by positive evolution of our marketing operation. Plenitude recorded a 3% EBITDA improvement year-over-year, supported by strong retail results and rising renewable generation. In our transformation activity, both refining and chemical were loss-making. Refining results reflected the weaker margin year-on-year and lower throughputs over the closure of Livorno plus the extended turnaround at Sannazzaro in the quarter. Our continued losses in Chemical reflect the challenging scenario in Europe that we consider to be a structural feature and confirm our action to restructure and transform this business. Cash flow before working capital of EUR 3.4 billion in the quarter were consistent with our full year guidance of EUR 13 billion at $75 a barrel. The cash tax rate was around 30%, in line with normal levels, and dividends received were in line with associated net income. CapEx in the quarter was EUR 1.9 billion, a little below the run rate of EUR 9 [ billion ] in the February guidance. Valorization and divestment proceeds net of acquisition in the quarter, totaled EUR 3 billion and included cash in for our transition satellites. We repurchased EUR 386 million shares in this quarter, completing our EUR 2 billion 2024 program. We expect to begin the 2025, EUR 1.5 billion buyback program after the shareholder approval in May. Balance sheet leverage was 18%, 4% lower than the last quarter despite a weaker dollar, adding 1 percentage point, while our pro forma leverage incorporating agreed transactions still to close, stood at 12%, an improvement of 3 percentage points from end 2024 and the minimum in our history. Volatility and cyclicity is a recurring feature of this industry. Every 2, 3 years, we are impacted by an external event. So it is really normal course of business. Our company needs to be prepared as it should be to leverage the cyclical upswing. Given the current scenario, it is worth reviewing our balance sheet in a little more detail. In the past 5 quarters, we have announced over EUR 9 billion in tail asset divestment dual exploration valorization and align external investment into our transition-oriented business. We have executed faster and for greater value than we and certainly the market expected, moving quickly to lower our leverage. An additional element of protection is provided by our satellites. The model not only enabled us to raise capital and self-financing our growth while highlighting the valuation multiples related to transition business or specific upstream geography such as Norway, but it also strengthens our resilience during downturn phases. On one hand, we are able to contain our leverage through targeted business valorization. On the other, the availability of autonomous entities capable of containing price downturns with their own balance sheets allows us to secure more stable cash flow via dividends and hence, we are less affected by market volatility. Our consolidated balance sheet is just about the strongest in our history. At the end of the quarter, we had over EUR 28 billion financial asset and undrawn committed lines, and we have lengthened maturities by more than 2 years over the past 2 years. We estimate that our net cost of net debt in 2025 will be below 1.5%. This position will enable us to continue to balance pursuing our strategy remaining resilient and flexible and deliver our returns to shareholders. When we discussed our plan and 4-year strategy, we emphasized the value in the consistency in our approach. We also confirmed our dividend at EUR 1.05 and the share buyback totaling EUR 1.5 billion itself a minimum floor that we are committed to maintaining even under adverse market scenarios. And we need to be nimble and responsive to the change in condition. The work we have done on the balance sheet help us as significantly, but there are also further measure we'll now begin to take to reinforce our financial position without compromising our medium, long-term objective of our investment proposition. We have identified over EUR 2 billion of initial actions to enhance our free cash flow positions and lowering our cash neutrality by around $15 per barrel, including additional portfolio upside, selective CapEx rescheduling over the coming months, active working capital management aimed at enhancing cash recovery and structural cost optimization initiative. Together, these actions further enhanced our financial position and derisk shareholder distribution. In summary, the additional financial trends we have introduced into Eni over the past year, the intrinsic resilience of the model we have built and the additional option and levers we are available mean we can maintain underlying strategy and also confirm the full distribution policy we have announced. With the current scenario headwinds, we are focused on delivering our underlying performance and leveraging our portfolio optionality to offset cash flow impacts and deliver our distribution commitments. We, therefore, can confirm our full year production outlook of 1.7 million barrels per day. We also confirm our profitability guidance for GGP, Enilive and Plenitude. At our lower scenario assumption, we expect to generate EUR 11 billion of cash flow from operations, a little better underlying than our sensitivities imply. We expect to offset this impact with the cash mitigation measure I described, including net CapEx to below EUR 6 billion. Therefore, we can also confirm leverage between 0.15, 0.2 in 2025 within the 0.1 and 0.2 plan range. We are very satisfied with our progress in 2025 year-to-date, both on the strategic and financial side. The macro scenario has deteriorated and is volatile and uncertain. But the action we are taking and flexibility, we have -- mean we are in a position to resist its full impact. We can, therefore, advance our strategy and deliver on our shareholder commitments. With that, I conclude my remarks and welcome any questions you may have.

Thank you, Francesco. We will now open to questions. Francesco is joined by any top management, and we will attempt to get around to answer all the questions you may have. As a courtesy to everybody who participates, can we keep it to 2 questions and then hopefully, we can get through everybody in the time allocated. We're going to start with the first question that comes from Alejandro Vigil at Santander. Alejandro?

Thank you, Jon, and thank you Francesco for taking my questions and congratulations for the bid in this first quarter. The 2 questions I have is, one, about the guidance of production, the 1.7 million barrels per day. Your thoughts about the discussions about Kazakhstan, OPEC+ quotas and if you think there is some risk coming from this situation? And the second question is about Enilive and the outlook for margins. Thank you for these spreads that you have added to the release. I think it's very useful. But I'm very interested in the outlook for the margin evolution in the coming quarters in Enilive.

I leave the floor to Guido Brusco for the first answer and Stefano Ballista for the one related to Enilive.

Well, as far as concerned, the production outlook, as you know, we have -- as anticipated also by Francesco, we have 5 significant start-up, 2 in Angola, 2 in Norway and 1 in Congo. So our production will grow over time to hit the guidance we gave. For Kazakhstan, so far, neither the operator of the asset nor the shareholder and the contracting company have been engaged by the authority for any production cuts.

Yes. Thank you for the question. Talking about biofuel view, first of all, this is a year of oversupply. This is something well known. Rough number is about 2 million oversupply -- demand versus supply. In the first quarter, we saw demand -- expected growth demand, and then we will deep dive a little bit, not coming yet. And reason is that actually players have the whole year to satisfy some obligation. And second reason, actually, there are some uncertainties in U.S. that we expect to be clearly defined moving forward. On demand, it's worth to highlight the sustainable aviation fuel 2% target for EU pretty much in this first half didn't come through. It is expected for the second half and reason pretty much are twofold, the chance to get to satisfy the demand in the whole year; and second, logistics facility to be in place. About U.S., it's relevant to highlight that low carbon fuel standard target of an increased GHG reduction to 30% at the beginning of the year, expected first of April has been delayed given to technical, let me say, a request from the office of administrative law of California. And now it is expected -- well, until some weeks ago, was beginning of September. Now it's expected beginning of July, given [indiscernible] already gave a review of these technical aspects. So overall, we see a path of margin increasing, thanks to this rebalancing pathway we are viewing. I have to say, clearly, it's very relevant that we focus on value, not on volume. This is a clear strategic approach on an oversupply market. This is what we are doing. We are definitely focused on value, even reducing in some case, volume. The more the system will move in that direction, the better is going to be the improvement trajectory we are seeing and foreseeing.

The next question is from Biraj Borkhataria at RBC. Biraj?

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

Yes. About the CapEx and the reaction to the price signals, clearly, we think that at the end of the day, once there is a deterioration in the scenario, you have all the opportunity substantially to use different levers that you, let's say, prioritize in terms of effectiveness, in terms also impacts in future trends of the company and the target that the company has given. For this reason, we have -- you've seen that we have announced this EUR 2 billion of improvement in cash that is around half is related to CapEx and cost improvement. So shifting certain investments, postponing or extending the execution of certain activity, efficiency. There is also a natural trend related to a lower market scenario that is implying lower cost in executing the activity. And the remaining part is related split half and half between a portfolio improvement and the working capital effectiveness or new action in terms of valorization of working capital or stocks and managing this activity. This gives us more flexibility for a worsening scenario in case it will be necessary. I would say that there is no special or strict rules, what is the price that will imply a change in our CapEx profile. Clearly, if there is a further deterioration of the scenario, we will continue to apply even more low lever, including the one that you are referring, CapEx, but also other activity that we can expedite and will contribute to cash even in a lower scenario. So I don't have a specific answer. What I can say there is flexibility in our plan even to adjust to lower prices. Then I leave to Stefano.

Yes. Thank you, Francesco. And thanks for the question, actually. Short answer is, no, we actually don't think there is any chance to, let's say, not having in place this target. This is a mandatory target 2% within the end of the year. And actually, if you don't fulfill it, they are going to be a carryover of the target next year and a penalty as well. Let me add just a couple of comments on the topic as a whole. Actually, SAF capacity is in place in Europe and not only in Europe, actually, we have also some capacity in U.S. and in China as well. In Europe, just to make an example, we got Gela with up to 400,000 ton per year, and we just started up production beginning of this year. So the current mandate of 2% that equal about 1 million, 1.2 million has capacity to be definitely fulfilled. So this is the first comment. Second comment, the target is on fuel supplier actually, not on airlines. And even the matter of logistics, actually, it's not there because for a transition period, you can fulfill the mandate in a single airport, you don't need to be physically blending biojet in each airport. This gives a lot of, let's say, flexibility in having it done. And then let me say as last comment, probably in terms of target, I would have a little bit different perspective. Now we got 2% in place up to 2030 and then 6%. So it's 3x just from one year to another. In order to have, let's say, a proper development of the investments, actually would be a proper approach to get a sort of step up along the way. And in that way, you can, let's say, have a balanced approach between supply and demand. So there is, I mean, space to work together with airlines to couple with the energy transition and the GHG reduction targets in an effective and efficient way.

The next questions come from Josh Stone at UBS. Josh, are you online?

I have 2 questions, please. One, I wanted to come back and talk about asset sales. Maybe just talk about how confident you are in closing your sale to Vitol and maybe just characterize the market for selling assets. You talked about some nonbinding offers for plenitude. Are there still live discussions happening there? And how are you thinking about that? Is it better to sell now or maybe even wait for higher value? Maybe if you could just talk about Plenitude and what you're thinking on that? And then the second question on Namibia. There was some news last week that you hit hydrocarbons at your latest well. I think that's now [ 2 from 2. ] So maybe you can just talk about the next steps and what you can share so far and what you've learned about from your campaign there?

Thank you. The first very fast, clearly, asset sales, we are extremely confident, first of all, because we've already cashed in an additional EUR 600 million in early April, 11th of April, that is the amount that is related to the top-up of the 5% on the Enilive KKR deal. And then we are working on this Plenitude potential transaction, 15%, 20%. The nonbinding offer are there. There is, I would say, a strong competition pressure. I don't see any, let's say, loss of valuation under the current market also because this is clearly a deal that has a long-term perspective and also eventually will be helped by a reduction or expectation of lower interest rate in the future. On the deal on Africa, West Africa with Vitol, we are -- all the documents already signed, and we are just waiting for the various approval that are required in this activity. There is no MAC provision that will impede to proceed. So I would say that almost 90%, 95% of our plan is already in our hand or with very positive perception of its execution. In terms of Namibia, I leave now to Guido to provide all the updates.

Your question was quite timely as we just released a few minutes ago, a press release where we confirmed the discovery in Namibia. The well successfully penetrated the target, and the reservoir is showing good petrophysical properties, no water, oil -- no water contact. We made an intensive acquisition campaign, wireline loggings, hydrocarbon samples, sidewall cores. And in addition to that, we made also a well test, and we achieved a floor rate in excess of 11,000 barrels of oil per day, which was surface constrained. The oil is a light oil and with limited associated gas and very low in [ unearth ] gas. So very positive, very interesting. More assessment and more analysis, of course, will have to be made. So the well will be temporarily plugged and abandoned and the rig will be released, and then we assess the full -- we'll assess with the operator and the other partner, the full size of the discovery.

Thanks, Guido. Thanks, Josh. Good timing on that question. So we're now going to move on to Giacomo Romeo at Jefferies. Giacomo, are you there?

Yes. And can I just -- thank you as well for the incremental disclosures in this quarter's reports. They are very much welcome. Two questions for me. First one on the buyback. Today, you reconfirmed the EUR 1.5 billion buyback at the lower macro scenario. This effectively stretches your CFFO payout at the upper end of your new range of new policy. What happens if the macro deteriorates further? Are you comfortable going above that 40% payout, Francesco? And second question is on the agreement, the MoU you signed with the YPF on LNG in Argentina. Can you talk a bit on the attractiveness of Argentina as potential LNG exporters? And will you consider integrating this upstream and looking for assets there? Or are you happy -- just happy with the share in the project?

Yes. Thank you. I will reply to the first question and then I leave back to Guido for the Argentinian questions. About the buyback, clearly, you know that once we set our distribution policy and the amount starting level for the buyback, we said that in a way that will be a floor. And therefore, we are going to execute. This, clearly, we give the reference in terms of percentage of cash flow distribution, but we have all delivered to keep this distribution policy and buyback affordable in our balance sheet because there is a lot of other tools that are not just a percentage of cash flow from operation, but also the capability as we are seeing in this maneuver to balance this distribution also with free cash flow improvement in terms of portfolio or in terms of working capital. And clearly, the leverage level is another factor that has to be considered whilst you have to manage the fluctuation of the price. So I think there is no issue at all on confirming this EUR 1.5 billion even in a lower scenario. Clearly, eventually, you could accelerate or slow down a bit at the pace of buyback, but this is part of the normal activity that we are able to execute within the almost 1 year of the buyback plan. I leave now to Guido for the YPF deal.

Yes. the Vaca Muerta basin, as you know, is the second world largest shale gas field and the Argentina LNG project is an integrated project from the upstream up to the midstream and the export of the LNG. This has the objective to hit more than 30 million tonnes per annum by the early 2030. It has different phases, 3 phases, which will be run in parallel. Eni and YPF has signed an MOU to execute one of these 3 phases, which would reach a total of 12 million tonnes per annum. We are joining YPF, who has a very strong and deep country knowledge on the unconventional upstream of Vaca Muerta. They are operating this asset from decades. So they know pretty well the subsurface and the all development and operation activities. While on our side, as Eni, we are recognized as a fast track and low-cost project operator, and we would bring our experience and leadership, particularly on floating LNG projects. We are looking at this Argentina LNG project and full value chain to complement our portfolio of LNG and also to reach our strategic target of 20 million tonnes per annum. And we think that the combination of the expertise of YPF on the upstream of Vaca Muerta and the expertise of Eni on the midstream floating LNG will set this venture for success.

Thanks, Guido. Thanks, Giacomo. We're going to move now to Matt Smith of Bank of America. Matt, are you there?

The first, I wanted to come back to the sort of CapEx cuts that you sort of laid out today, and you've sort of listed optimization and postponements of projects as one of the sort of sources of the reduction in CapEx. I just wanted to understand sort of which projects we are specifically referring to? And I guess my broader question was if the current commodity price scenario was to extend into next year, would any of these projects not be postponed, but actually be canceled? So that would be the first question. And then the second one, I wanted to come back to Namibia, if I could, noting the information that you put out on the latest well today. I mean, given you have had additional time in the lab with the first discovery, I just wondered if you could compare or contrast, is it the correct read that the second discovery has better characteristics than the first? Or what additional color could you give us there, please?

On the CapEx, on the capital optimization, there is no major project that we can point out specifically. It's a broader activity, some exploration activities, some production optimization activity related to the EV charging, activity related eventually to the rebranding of our stations -- service station. So it is a spread around activity with marginal impact on a specific project. So you shouldn't expect any delay on the key and most important projects. About Namibia, if Guido want to...

About Namibia is too premature to make -- as I said that -- I mean, when I spoke about it just a few minutes ago, we need to assess the full size of the discovery. It's really premature. We just finished the well testing. We are still in a phase where we have to do some work. And I would also recommend to refer to the operators to get more insights and information on the discovery itself.

Thank you. Thanks, Matt. We're going to move now to Alessandro Pozzi, Alessandro, are you there? Okay. We're going to move on now. Alessandro, if you want to come back on, you can. We can move now to Michele Della Vigna at Goldman Sachs. Michele?

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

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

On Cyprus working for an FID within the year with the partner and the [indiscernible] government. It will be a subsea tieback to the Egyptian facilities. So we expect an execution time between 2 and 2.5 year from the FID. So if we will be able to make an FID by the end of this year, production may come sometime between Q4 '27, Q1 '28. Of course, to have Egypt, again, as a net exporter, a few more things has to happen. There is a growing confidence on the ability of Egypt to kick out more investments. They are continuing to pay their outstanding receivables. So there is more activity in general, not just from Eni, but also from other operators. And there is also, again, a restart of the journey on the increase of the capacity of renewables, which will free up more gas for exports. So the combination of these 2 things together with the new development and the Cyprus gas may set Egypt again in a couple of years as a net exporter again, but this is not just linked to the Cyprus gas.

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

I have 2. I think the first one is on the cost-saving initiatives of EUR 2 billion -- over EUR 2 billion part is CapEx. I think there is other large initiatives regarding working capital and other costs. I was wondering if you can give us maybe more colors on those as well. And with regards to Argentina, I was wondering the -- what is the level of investments that you're planning to make over the next few years? And whether potentially you're looking to invest in upstream, I guess so, and the type of maybe production levels that you expect from the country when Phase 1 will be online?

About the cash initiative, I mentioned before, almost -- more than EUR 1 billion is related to the CapEx and cost improvement. CapEx, as we said, are mainly related to postponement of certain activity that could be a standard without major impacts on big projects, but just related to certain activity that could be, let's say, executed in a longer time. In terms of cost, there will be a natural reduction in terms of costs also related to the lower scenario. And we do expect that there is also a benefit from the portfolio activity of the remaining EUR 1 billion that we said, there is almost half, so around EUR 500 million is related to the portfolio improvement in terms of less cash out and better value on the potential cash in. And on the other side, the revenue part is related to the cash initiatives that are management of working capital. This is the maximum we can describe you. If you want to describe Argentina, Guido?

Yes. I mean Argentina is an integrated project. So basically, we will be all along the value chain from the upstream to midstream balanced ideally. So having the same equity in both sides. The project, of course, is in a very early stage, but the Phase 3, the phase that we are assessing with YPF of 12 million tonnes per annum will have cost in the region of $20 billion, of course, from -- I mean, I'm including all costs from upstream to the transportation to the midstream and the liquefaction.

And is that included in your full year CapEx guidance? Or is it on top?

We are speaking about an MOU that is still to be clearly designed, defined with a lot of activity that had to be fine-tuned later on. So it's not yet included.

Thanks, Alessandro. We're now going to move to Peter Low at Redburn. Peter?

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

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

For the gas -- and for production in general, if we compare with the -- I mean, sequentially, quarter 4 with quarter 1, the decrease is essentially driven by lower entitlement in some country where we have gas production, some PSA effect in Libya, Indonesia and Algeria, and some M&A impact in U.S.

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

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

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

Yes. The -- I mean, the improvement of the EBIT per barrel and cash flow per barrel, as we anticipated also in our Capital Market update is structural as we are high-grading our portfolio, developing, I mean, high-value barrel and disposing lower-value barrel. So it's a structural phenomenon, which over time should continue, of course.

Thank, Irene, for your questions. We're going to move to Henry Tarr at Berenberg. Henry, are you there? Okay. Henry, if you can reconnect, then we can come around to your question, but we'll move now to Paul Redman at BNP, Paul?

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

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

Yes. Thanks, Francesco. About the refining losses in the first quarter, this is due to the drop of the [indiscernible] the margin. And the fact that we added during the quarter, the start of the maintenance in Taranto refinery and that offset in FCC of Sannazzaro. What we expect is to increase the refinery utilization in the -- starting from the second quarter. And while we expect the margin will remain slightly better than today, but not so bullish last -- like last year.

Thanks, Pino. Henry, I think we've got you back, Henry?

So 2 questions. Just to come back to Enilive, is the contribution from the margins from the straight bio side positive at this point for you? Or are you essentially making all of the money on the marketing side rather than the actual manufacturing of the fuel is the first question. And then the second is just on the cash flow. So lease interest payments, is Q1 a good run rate for the rest of the year at sort of EUR 370 million-ish?

I leave to Stefano for the first question, and then I come back to the second one.

Yes. Thank you for the question. Yes, the contribution margin, it's positive, it's slightly positive, clearly related to the scenario. As I mentioned before, we definitely focus on value and not on volume. So we prefer to avoid production that is not going to be accretive in terms of value. I have to add actually that the integrated approach that characterize Enilive give us the chance to, let's say, optimize margin, thanks to our captive market. And this is going to give an extra contribution compared, let me say, to the pure market value.

On the lease impact over the, let's say, the year, I would expect an increase during the year, clearly, also because there are some certain start-up of initiatives and projects that will attract additional lease. So this quarter is, let's say, a proxy, but it's still a bit light towards what is the running rate during the next quarters.

Thanks, Henry. We're going to move to Matt Lofting at JPMorgan. Matt?

First, I just wanted to come back to the capital allocation changes that [indiscernible] made this morning and particularly the gross CapEx. It looks like you sort of effectively put through the lower part of the 5% to 10% reduction in full year gross CapEx versus what you outlined in Feb. If you aggregate everything up, can you just sort of share a sense of how much of that is activity related versus sort of finding underlying efficiency measures? And then secondly, following up on the comments earlier on refining, if you take refining in Versalis combined, I mean, clearly, still a challenge in Q1. Is there any signs more recently of any improvement in margins to the degree that you're seeing some degree of lower feedstock costs, particularly perhaps through any higher cost assets, which perhaps have most or more to benefit?

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

For the chemical side in terms of demand, we expect a slightly improvement in line with the seasonality because normally, the second quarter is better than Q1. But to be honest, the scenario is still on the trough of the cycle in terms of demand. For sure, we expect an improvement in terms of cost of utilities because virgin naphtha is expected to reduce. Right now, in the second quarter, we expect also a lower DTF in terms of gas, and we know that we are very -- we consume quite a lot of energy for the chemical sector. So we expect an improvement in terms of margin for the rest of the year on the chemical side. And I'll leave Pino for the refinery.

Yes. On the refining side, we expect a slightly improvement in the margin in the mid part of the year, mainly due to the driving season, but not so far. In complexity, the refining margin, we expect that remain not so bullish because of the market that is quite stable.

Thanks, Pino. We're going to now move and thank you, everybody, for respecting the 2 questions we're getting through this nice and quickly. So we're going to move to Massimo Bonisoli at Equitas. Massimo?

And 2 clarification questions for me. The first on the EUR 2 billion mitigating initiatives. Could you give us a broad time frame for the savings to be realized and the eventual one-off cost associated with the savings? The second question on the outlook for GGP. You mentioned the upside of over EUR 1 billion. Can you shed some light on the market condition needed to improve the guidance and to renegotiate the contract versus current conditions?

First of all, the EUR 2 billion is a free cash flow impact. It means that it's executed within the year and completed within the year. So there are actions that are, let's say, captured immediately. So the postponement of activity in line with the execution of that activity, the possibility to have certain savings that we mentioned about the lower scenario, the portfolio improvement, et cetera, is something that are already generating the results. Clearly, it requires also the time for executing the project, you have to consider that the economic benefit is higher than the cash flow benefit because clearly, the economic cut will be or the improvement is something that has a higher value, but that clearly is captured within the 12 months that are ending within December. On the gas scenario and the gas hedging...

So talking about the upside case for GGP, you pointed out to 2 elements, which are actually the ones that we also are pursuing. One is the renegotiation and negotiation of our supply and sales contracts. This is, as you know, a feature -- a normal feature of the business. We have a few discussions ongoing. And I would say that probably the summer will be the period in which we might see some of those completing. And so I mean, depending on the outcome of those discussions, this could have some value unlock. In terms of market condition, we are fairly, let's say, defended from the downside risk of flat price. We have some upside linked to clearly flat price increase instead. And the other elements that actually we like in terms of producing more value is spreads and volatility. So low geographical spreads, oil hub spreads, summer winter spreads. Those are part of the volatility that if those happens, we will be able to capture.

Thanks, Massimo. Thanks, Cristian. We go with the last 2. So we're going to move first to Kim Fustier at HSBC. Kim?

I had 2, please. First on Venezuela, could you comment on any impact on your operations and your ability to lift crude cargoes and the revocation of export licenses and secondary tariffs on the country? And then lastly, just a quick housekeeping question. You've cashed about EUR 3 billion in the first quarter from the sale of Enilive to KKR, but we can't actually see the disposal proceeds in the cash flow statement. So if you could point to where we're supposed to look at, that would be helpful.

On Venezuela, Guido?

Yes. No, Venezuela, as you know, we have essentially gas production. We produce gas for domestic market and to feed the gas-fired power plant for civil consumption. And we have been paid in the past by -- [indiscernible], essentially. So now we are engaging the U.S. authorities to find ways to be paid, but at the same time, be compliant with the new regime imposed by U.S. And we are confident that by the year-end, we'll find a way to honor our commitment towards the population and honor also the compliance with the U.S. sanctions.

And Kim, I'll come back to you on the cash flow statement and the structure. The cash is in there, but it's not straightforward. So I can do that for you, but we'll do that off-line, if that's okay. We can move now to the last question, which is Lydia Rainforth at Barclays. Lydia?

Two final questions, if I could. The first one, I mean, these are both big picture, but given where the balance sheet is, and it's much stronger than it was even a year ago, but in previous kind of downturns. It does give you a more privileged position into how you respond to volatility than in the past. So I'm just actually asking you to reflect on that. Does having that strength of the balance sheet impact how you think about how you respond and is there opportunities that it opens up? And then secondly, I hear everything you say about the cash management, the mitigation measures that you're putting in place. And hopefully, when you start the buyback, it actually helps the relative share price performance even further. But given where the share price is, do you ever start thinking about we can lean into the balance sheet a bit more and buy back even more shares, just given where the share price actually is?

In terms of -- clearly, on the leverage and the privilege to have -- probably to be the unique company inside the peer group that probably will be -- will reduce its leverage in the current quarter and coming quarters, thanks to the execution of a strategy that is already anticipating potential downturn and has a structural robustness in its structure. I think that will give us the opportunity to manage the volatility. The volatility in the current market is that one day, you have a drop by 5%, then there is a rebound of 2%, 3%. There is another tweet and a lot of things are counter to it. It's very difficult to understand what -- where are the fundamentals and where are the psychology of the market. So this strong balance sheet will give us the opportunity to select the best levers in order not to impact to match our strategy execution to have different opportunities, clearly, to execute whatever we like and also to keep some additional levers out for the bad times if these bad times will come out. So this is clearly something that for us is a unique time we had and it's a great chance to be effective, but clearly also to be vigilant on what is going on and not, let's say, to rely on a positive expectation, a positive scenario. In terms of buyback, you know that we are approving the buyback under the -- with the policy that we have presented during the next AGM. Then we'll start to buy, and we will see also the time when the condition will have, and we will execute, but I cannot anticipate what is the pace of execution because clearly, this is part of the rule of the game. There is a clear advantage or interest in buying back at a lower price. So that is a normal logic. I think that we have ended. I don't know if, Jon, do you have something else to conclude.?

We have, Francesco. That's all the questions done. Thank you, everybody, for attending the call. Thank you for your questions. Thank you for the speed and directness we got through that. I think they worked very well. So wishing you a happy end of the week. Good luck for next week and speak to you soon. Thanks a lot. Bye.