OMV Petrom S.A. (SNP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the OMV Petrom earnings call. Today's presentation will last around 30 minutes and will be recorded. By now, you should have received the presentation by e-mail. The slides and the speech are also available online on www.omvpetrom.com in the Investors section. This also includes the cautionary statement regarding forward-looking statements. Now let me hand over to Simona Crutu, Manager of Investor Relations and the stakeholder engagement department, who moderate the event.

Good afternoon, ladies and gentlemen, and thank you for joining us. Welcome to presentation followed by Q&A session. Christina Verchere, Chief Executive Officer, will provide the key highlights about the macroeconomic and regulatory environment, the second quarter operational performance as well as our sustainability strategy. Alina Popa, Chief Financial Officer, will give you more details on our financial performance and the brief outlook. Afterwards, all executive board members will be available to answer your questions. [Operator Instructions] I'm now handing over to Christina.

Good afternoon, ladies and gentlemen, and a warm welcome from my side. Thank you for joining our call. It is a real pleasure to present to you today on the Petrom's performance for the second quarter of 2023. Please let me first bring your attention to our legal disclaimer, which you can read in detail on Slide 2. Let me start by taking a look at the evolution of commodity prices in the second quarter of 2023. Brent price continued its decline in the second quarter and averaged $70 per barrel lower by 4% versus the previous quarter. In a year-on-year comparison, the average price was down by 31%. OMV Petrom indicator refining margin reached $11.17 per barrel in the second quarter, lower by more than $17 compared to the record high value for the second quarter of 2022, driven by a decrease in product spreads, mainly for diesel gasoline and jet. In the natural gas market, European spot prices fell in the first 2 months of the quarter due to weak demand and strong energy flows. In June, European hub prices rebounded on the back of maintenance outages in Norway. At an average of EUR 38 per megawatt hour, the set price was down by 63% year-on-year and by 33% quarter-on-quarter. Following the trend in European prices, gas prices on the Romanian centralized market also decreased with day-ahead prices lower by 65% year-on-year to an average of EUR 35 per megawatt hour. Baseload electricity prices in Romania, in euro terms, decreased by 56% from a high level recorded in the second quarter of 2022 and by 30% quarter-on-quarter. The average CO2 price remained at a record high value of EUR 80 per tonne recorded in the previous quarter. Moving to the Romanian macroeconomic environment, the latest available data shows that in the first quarter of 2023, GDP increased by 2.8% year-on-year. It's mostly supported by services and construction. In May, the European Commission revised upwards its estimates for 2023 GDP growth to 3.2% from 2.5%. For 2024, the GDP growth estimate was also increased to 3.5% from the previous forecast of 3%. Romania's economy is set to continue its growth supported by private consumption growth and a resilient labor market. Yet, the growth will be slower than in 2022 due to persistent inflation, type financing conditions and low economic growth in Romania's trading partner countries. The consumer price impact for the month of June 2023 versus June 2022 was 10.3% on a downward trend in line with expectations. For 2023, the National Bank of Romania estimates a gradual decrease of the inflation rate, more significant in the second half with an average of 7% for the full year. Looking at the Romanian energy sector in the second quarter of 2023 in the context of still high energy prices and inflation concerns, the demand for gas or power fairly decreased, while the demand for retail fuels increased. More precisely, demand for retail fuels increased by around 7% year-on-year as a result of the low base effect from 2022, while the commercial market demand increased by 3% year-on-year. Jet demand was higher by 8% year-on-year due to increasing number of flights. According to our internal estimates, GAAP demand decreased by 12% year-on-year, reflecting mainly the brand power plant outage and reduced overall industrial gas uptake. Power demand was lower by 7% year-on-year, while domestic power production increased by 5%, Romania being a net export of power in the second quarter. Power production from Hydro had a significantly higher contribution to the generation mix, need to have also increase while gas and coal significantly decreased with renewables being relatively flat year-on-year. It's been more than 1 year since the Romanian government has managed to address the high gas and power prices in place between April 2022 and March 2025. These have also impacted the second quarter of 2023 with almost 80% of our gas portfolio is subject to the regulations, a level that we expect to be maintained for the full year of 2023. When it comes to electricity, all our sales in Romania were subject to some form of regulated taxation in the second quarter. The government emergency ordinance 186/2022 which transfer inter Romania legislation to EU regulation for a temporary solidarity contribution was amended and transformed into Law 119 in May 2023. This law introduced the obligation paying for 2022 and 2023, a contribution of RON 350 for each China crude oil process for companies that produce and refine crude oil. Alina will detail later the implications on our financials. As mentioned previously, frequent regulatory interventions for volatility and instability for the market participants and increased risk of market dysfunctions, including risk filing and security supply. While price caps may support demand there, it is disincentive for investments in energy efficiency projects and send distorted signals to the market. Therefore, we reiterate our belief that free market principles are fundamental for investments, and that intervention should be temporary in nature. On Slide 6, we present the key highlights of the quarter. Our operational performance this quarter reflected the major turnaround in affected by refinery and the brand power plant, both were planned but also prolonged. Our financial performance also reflected lower commodity prices, which are converting back to pre-energy prices levels. This was particularly -- this was partially compensated by the resilience of our business, including sales optimization measures as well as a continued focus on cost and working capital. Consequently, our current CCS operating results of RON 1.6 billion was lower by 58% year-on-year. Our operating cash flow decreased by 89% year-on-year to RON 0.4 billion on lower operational results but also due to the payment of the approximately RON 1.5 billion, solidarity contribution on refined crude oil for 2022 as I mentioned earlier. The clean CCS return on average capital employed remained robust at 31 percentage points. In Exploration and Production decreased result is mainly due to lower quality prices and sales volumes. The results in Refining & Marketing was lower by 88% year-on-year, driven by lower refining margins as well as the prolonged Petrobrazi plant turnarounds. In Gas and Power, the result was low by 42% and in the context of the Brazi full shutdown and a challenging market environment with the negative impact of legislation. We are further focused on delivering on our 3 strategic directions. I will detail later on the progress regarding the strategic pillars transition to low and zero carbon and grow regional gas. I will now refer only to our said strategic pillar optimizing our traditional business, where in partnership with Auchan, we reached 357 stores in Petrom brand and filling station at the end of June, and we aim to finalize the rollout of 400 stores by year-end. In June, we announced the discovery of new crude oil and natural gas resources in Romania, cumulative states, the discover deposits fold recoverable resources even 13 million barrels of oil equivalent. This is the result of our exploration strategy focused on near-field opportunities located close to existing infrastructure, which facilities, quick development, tie-ins and early production of new found resources. On the 27th of July, we announced, the Executive Board proposal for the distribution of a special dividend of RON 0.04 per share. This is subject to the approval of the Supervisory Board and subsequently by the General Meeting of Shareholders. Alina will provide more details on this. On HSSE, the total recordable injury rate for the roaming period July 2022 to June 2023 was 0.48. Moreover, we further continue our efforts to reduce GHG intensity with projects in all 3 business segments. On Slide 7, I would like to present our operational performance, and I will start with exploration and production. Hydrocarbon production decreased by 5%, reflecting the natural decline in the main fields and the effect of planned maintenance activities, partially offset by the contribution of new wealth and workovers. Production costs per barrel of oil equivalent increased by 41% year-on-year to a level of $15.40, reflecting increased costs, lower production available for sale and unfavorable foreign exchange. We also remind you that the cost in the second quarter of 2022 benefited from a positive effect of $2.10 per barrel oil equivalent one-off following a tax audit. In order to address cost inflation, we continue to focus measures for counteracting pressure coming from suppliers by intensifying our procurement activities while we further implement efficiency measures. In Refining & Marketing, the refinery utilization rate was 31%, reflecting the turnaround to Petrobrazi refinery initially planned for 42 days and prolonged by 2 weeks due to discovery maintenance. For July, the average refining utilization is above 80%, reflecting slow than initially estimated ramp-up and increasing in the last days to 95%. Total refined product sales volumes decreased by 10% year-on-year, mainly as a result of lower product availability due to the shutdown. As such, a decrease by 28% was reported by nonretail sales volumes, both export and commercial sales in Romania. However, our retail sales volumes were up by 5% due to higher demand. In Gas and Power, total gas sales volumes were down by 14% year-on-year as a result of no gas volumes consumed in the gas power plant. Gas volumes were rerouted to sold to third parties resulting in an increase of 8% year-on-year with much larger volumes of the household and district heating for household consumption as well as supplier of large resort customers. This is a major achievement of our sales team, especially in the context of an oversupplied market with declining margins. The Brazi power plant was in prolonged planned outage with its full capacity for the entire quarter, compared to only half of its capacity in April of 2022. Moving now to Slide 8. Total organic CapEx amounted to RON 2.4 billion in the first half of 2023, higher by 72% year-on-year. Almost half was directed to exploration production, where we finalized the drilling of 16 new wells and sidetracks, including 1 exploration well, and we performed more than 240 workover jobs. In Refining & Marketing, most of the RON 1.1 billion investments were dedicated to the major turnaroundd in our Petrobrazi refinery as well as ongoing projects such as coke drums replacement and new crude oil tank in new aromatic complex. In Gas and Power, most investments were allocated for the planned shutdown at Brazi power plant. For 2023, we maintain CapEx guidance of around RON 6 billion, higher by approximately 70% year-on-year with increased investments dedicated mainly to the Neptun Deep project, accelerated low and zero carbon projects as well as the Petrobrazi refinery turnaround and related tie-in projects. Ladies and gentlemen, the second quarter of 2023 saw some significant masters in implementing our strategy 2030 that was launched in December of 2021. I will start with our strategic pillars, growing regional gas. In June, we announced the final investment decision of our Neptun Deep project. And together with our photovoltaics, we submitted the field development plan to the regulator for endorsement. This trigger the start as the recognition of related 1P reserves in the second quarter. For the remaining of the year, we are focusing on awarding the main contracts in permitting following the endorsement of the field development plan by the regulator. Neptun Deep is crucial in securing our sustainable long-term growth by generating higher profitability that will specificate new investments and attractive shareholder returns. This project will bring a significant shift in our hydrogel portfolio by 2013, our gas production will be more than double compared to current levels and gas will reach a 70% weight in our total hydrocarbon production. Moving to our strategic pillar transition to low and zero carbon. Regarding our renewable portfolio in July, we continue to progress our partnership with Complexul Energetic Oltenia with the signing of the financing contracts for building four photovoltaic parks with accumulated capacity of 450 megawatts. The total investments needed development amounts to more than EUR 400 million, out of which 70% is to be financed through the modernization fund. In addition, we continue to grow our renewable power portfolio with funding in June of the contract approaches several power projects within installed capacity target of around 710 megawatts to be built in Teleorman county in Romania. The transaction is expected to be completed in the second quarter of 2022 and the parks to become operational 18 to 24 months later. This recent purchase supports the achievement of our strategic objective that have installed renewable power plants of at least 1 gigawatt by 2030, including through partnerships. On alternative mobility, 155 ultrafast charging points were installed by the end of June 2023. Our plane for 2023 is to reach around 240 charging points, both within our own filling station network and in other locations. As announced yesterday, we also accessed an EV grant for further expanding our EV charging network, thus contributing to the creation of a corridor of fast charging stations in our existing fuel stations. The total investment in this project is estimated at approximately EUR 40 million, of which approximately EUR 15 million will be provided from European funds through the Connecting Europe facility. In addition, we are also delivering on our commitment of attractive shareholder returns following the record high dividend paid last year. Yesterday, we announced the executive board proposal for the second special dividend. Together with the base dividend already paid this June, this will lead to a total dividend of RON 5.1 billion to be distributed in 2023 as last year's profit. More details will be provided by Alina shortly. We have a very active meeting with investors from various parts of the world to discuss our strategic plans and execution and to collect their feedback. The year-to-date improvement in our share price of more than 30% is significantly above our peers. We see this as a sign of confidence from investors in the performance of the firm and our progress in implementing our strategy. Please let me hand over to Alina, who will go into more details about the financials and outlook.

Thank you, Christina, and good afternoon also from my side. I will continue the presentation on Slide 11, starting with some highlights of the income statement, which focus on the development of the second quarter versus the similar period of 2022. Sales by 39% year-on-year, following lower commodity prices, lower sales volumes of petrol loan products and electricity. The decrease was only partially compensated by higher sales volumes of natural gas. Clean operating results in exploration and production decreased to RON 1.2 billion from RON 1.9 billion in the second quarter of last year. This was driven by the lower oil and gas prices, lower sales volumes higher production costs and unfavorable FX, stronger loan versus U.S. dollar, partly offset by lower E&P taxation and impairment. CCS operating results in refining and marketing decreased by 88% year-on-year, reaching RON 142 million due to lower refining margins and refinery utilization, partially offset by higher retail volumes and margins. Clean operating result in Gas and Power was lower by 42% year-on-year at RON 471 million in the context of a challenging market environment and significant regulatory and fiscal intervention. The result also reflects the prolonged Petrobrazi power plant outage. The clean consolidation line of minus RON 139 million in the second quarter of 2023 reflects mainly the increased quantities of the crude stocks as a result of the refinery turnaround as well as higher natural gas stocks due to the injection period. Consequently, the group clean CCS operating results decreased by 56% year-on-year to EUR 1.6 billion. For the second quarter of 2023, we recorded inventory holding losses of minus RON 30 million, mainly reflecting the decrease of crude prices over the quarter. For comparison, in the second quarter of last year, we recorded inventory porting case of RON 322 million. Net special charges of minus RON 25 million were also recorded in the second quarter of 2023. For comparison, in the second quarter of 2022, the net special charges of RON 450 million were related to mainly to temporary losses from ore contracts. CCS net income attributable to stockholders decreased by 51% year-on-year to RON 1.5 billion. As Christina mentioned before, the new legislation issued in May 22, introduced obligation to pay a solitary contribution for 2022 and 2023. Consequently, we reflected in the second quarter the solidity contribution on the defined crude oil in amount of RON 1.5 billion for full year 2022 and an amount of RON 498 million for the first half of 2023, presented as a separate line in the consolidated income statement below the operating results line. The solidarity contribution on refined but oil is stated as a special item in the computation of the clean CCS net income. Therefore, the reported net income attributable to stockholders was negative at RON 537 million. Let me go on to Slide 12, which shows the major building blocks for the development of a clean CCS operating result. Our started exploration in production where in operating results decreased to RON 1.2 billion. The market effect deviation of RON 433 million reflects the negative effect of lower oil and gas prices partly compensated by the positive effect of the lower E&P taxes. For gas, this year's debt, this reflected higher regulated sales quantities, which are accepted from overtaxation and for royalties are calculated as kept prices instead of set. The operational effects include mainly the negative volume deviation due to the 6% lower hydrocarbon fell, partly compensated by lower impairment. Looking at the lower chart, Refining & Marketing clean CCS operating results decreased by 88% compared to the second quarter of 2022. The negative market effect reflects the lower refining margin driven by the decrease in most product threats. Operational effects were negative due to the prolonged turnaround of the Petrobrazi refinery with a total negative impact in the result of RON 355 million, in the form of higher maintenance cost and margin loss. The result was also negatively impacted by an increase of the environmental provision of around RON 60 million. These were only partly compensated by the higher retail sales volumes and margins as well as an improved performance in the nonfuel business margin. In gas and power, the clean operating result decreased by 42% year-on-year. The contribution of the Gas business decreased being impacted by the lower margins realized on equity as and on transactions outside Romania, partly compensated by good margin from imported gas volumes. The Power business result increased supported by the good margins realized on transactions concluded outside Romania. The results also reflected the reversible provision for risks assessed by the group in the area of sector specific taxation. On Slide 13, I would like to continue with the highlights regarding our cash flow statement. In the second quarter of 2023, the operating cash flow was RON 412 million, lower by 89% year-on-year. This decrease reflects mainly the lower operating at higher tax on profit paid and also the payment of the solidarity contribution for 2022. With respect to the evolution of the net working capital in the second quarter of 2023, we reported a cash inflow of RON 0.5 billion compared to a cash outflow of RON 0.8 billion in the second quarter of 2022. The inflow in the second quarter of 2023 were mainly due to the decrease in trade receivables, largely in Gas & Power segment due to lower gas and power sales. Our net payment for investing activities amounted to RON 1.6 billion in the second quarter of 2023, higher by 117% year-on-year. Payments for investing activities refer to capital investment intangible and tangible assets amounting to RON 1 billion and payments for investments in other financial assets amounting to RON 0.6 billion. Our record high base dividend in the financial year 2022 amounting to RON 2.3 billion have been paid starting June 7, 2023. The net cash position, including leases increased to RON 13.2 billion at the end of the second quarter of 2023 versus RON 12.3 billion at the end of the second quarter of 2022. Let me continue our presentation with you on Slide 14. We expect Brent oil price in 2023 to be between 475 and $80 per barrel. Our hydrocarbon production 13 is expected to be around 110,000 barrels of oil equivalent per day, considering no divestment in 2023. We expect inflationary pressure on our cost to persist throughout the year. However, the stronger U.S. dollar may support the production cost estimated now at around $16 per barrel of oil equivalent for the year 2023. In refining and marketing, we currently estimate an average refining margin higher than $10 per barrel in 2023. The refinery utilization rate is estimated in 2023, considering the prolonged major refinery turnaround and slower ramp-up. As Christina mentioned earlier, CapEx is expected to be around RON 6 billion in 2023 of which RON 2.9 billion dedicated to E&P, including attended, RON 2.1 billion loans to RMM and the rest to Gas and Power division. In 2023, we expect a positive free cash flow before dividends, yet lower compared to the 2022 bank of RON 8.2 billion mainly due to higher investments in the payment solidarity contribution. We estimate demand for retail fuel products in Romania to be slightly above 2022. Demand for Gas and Power is expected to be significantly lower compared to the previous year. We expect total refined product sales to decline for 2 due to lower exports year-on-year, while our retail fuel sales are expected to slightly increase year-on-year. Our total gas sales volumes are envisage to decreased mainly from lower supply both from equity and third parties. With regards to Brazi power plant, the shutdown was prolonged until the first week of July due to findings identified during inspection. Therefore, net electrical output is expected to be lower year-on-year in the context of the longer than initially planned outage of drive Brazi power plant. For 2024, 2025, we maintained the -- for the time being, our guidance communicated in February. Moving now to Slide 15. As Christina mentioned, we have delivered on our strategy 2030 by progressing with our transformation for a low carbon future and also by delivering strong returns to our shareholders. In 2022, we increased our base dividend by 10% versus the one paid in the previous year and distributed our first special dividend. This year, we're already paid into a base dividend increased by another 10%. And yesterday, we announced our second special business. The special dividend proposal amounts to 0.045 per share and is subject to the approval of the Supervisory Board and the General Meeting of the shareholders. The total dividend yield, including both base and special dividend, will increase to 19.6% in 2023 from almost 16% last year. As you can see on the slide, this total dividend yield maintained us in a highly competitive position among our peers. This shows that we, the Executive Board of OMV Petrom are committed to deliver a competitive shareholder return also by paying an attractive dividend. With this, I close our presentation, and thank you for your attention. We are now available for your questions.

[Operator Instructions] And the first question comes from the line of Ioana Andrei from Alpha Bank Romania.

Can you hear me?

Yes, very well.

Great. My first question is regarding the special dividend. Obviously, it was very appreciated by investors. But I was wondering if you could give us a little bit more color on what is going to happen next year, considering the weaker results that are expected for this year? What am I asking is do you consider continuing with the special dividend proposal next year? And I have a second question regarding brash output. You mentioned lower output compared to 2022. Can you give us a little bit more clarity on what are your expectations? Because 2022 was considered a high output. So for this year, we are looking for something, I don't know, it's a terawatt reachable.

Okay. Thank you. Alina, maybe you want to be on the special dividends, and then Franck will set questions with regards to the power plant.

I'm happy that our announcement yesterday has been appreciated. We have a dividend policy, which basically says a progressive dividend base dividend every year. So our base dividend increases every year by 5% to 10%. And in addition, we have a dividend guidance, which is a special dividend can be also given at management discretion in a favorable market environment and providing that our CapEx plans are funded. So now if we the fact that we call it special is that it's not every year. But on the other hand, I cannot exclude it as well being next year in case the situation will be a favorable market environment that provided that our CapEx is funded.

Franck speaking for your second question. So yes, we restarted the gas power plant first week of July. So after 3 months of shutdown. It's running well. So very pleased with the start-up of the power point. It was the first time we opened a steam turbine, so it was quite after 10 years of operation. So it's always quite an event for a gas power plant. And indeed, we are expecting to deliver more than 4 terawatt hours, we are expecting 4.3 terawatt hour we see, at the moment, a very good demand on power due to the hot weather and the demand on the air conditioning for price, we expect for Q3 to go up than Q4 as well. So we expect the demand also even if Christina was mentioning, the demand is to be down versus last year. We think we see for the second half of the year, potential start the start of potential recovery, even if at the end of the year, will be think below last year in terms of demand. But I think the trend is going in a good action for the power demand [indiscernible]. So I bet, I hope it answer your question.

And the next question comes from the line of Iuliana Ciopraga from Wood and Company.

I have a number of questions. So first on the production side. You are keeping production guidance despite a decline below 5% in the first half of the year. do you expect the decline to accelerate in the second half? And secondly, on the cash inflow from changes to working capital, do you expect these positive inflow -- to continue this inflow of cash from our capital to continue in the quarters? And something on the OpEx per BOE. So you're now guiding for $16 per BOE for 2023. You were guiding before for $15, do you keep guidance for the following 2 years at $16 or you see a risk that OpEx would be higher in 2024, 2025 as well? And if I may one more. Regarding the cost of the refinery turnaround, you are estimating around 200 million impact, but the turnaround was prolonged by 2 weeks. Do you confirm the 200 million? Or was it a strong impact?

Thank you, Iuliana. Maybe we'd say that [indiscernible] will take your comments on your questions on production and on OpEx per barrel. And again, on your working capital and cash flow and then come back to [indiscernible] on the turnaround cost.

Yes, we're seeing the first half of the year that the decline is staying at However, at the end of the year, we're maintaining 110,000 Boe per day, which is year-on-year 8% basically and that's due to intensifying the efforts on the planned maintenance of our assets. With regard to the OpEx, yes, we are seeing the guidance for '16 for the year and that's due to the pressure from the suppliers as well as the fixed rates, is influencing us. And yes, an overall environment.

Alina, will continue with your third question on the cash flow in the positive inflow from net working capital. Now if we look what is the main impact is coming from receivables, so receivables going down as a consequence of sales going down as well and real seasonal receivables, so to call it 40 years of power. So this is a temporary effect. -- on 1 hand. On the other hand, we work a lot on our working capital measures. So we are very strict and we try to optimize the best we can working capital. So we'll try to keep it under control. But there is some seasonal effect, which we cannot continue to see in the next quarters.

Indeed, the first number that we have indicated as an impact of the turnaround was RON 200 million on the revised number, and this is -- this was reflecting the OpEx and gross margin. The revised number due to the long turnaround, it's RON 355 million.

And if I may, all this -- almost all of this was booked in the second quarter, right?

Yes.

That you said RON 355 million? Okay. Yes. And if I may, I didn't quite catch that on the production side. So you're intensifying efforts on I missed what you said, actually.

Trend maintenance activities on the main assets.

And is that something temporary? I mean, you're basically keeping guidance for the following years as well. So we should take that. I mean it does matter that to 5%, we should take what you -- what happened. What you're guiding for we should take those numbers basically. That's what we said we should understand because you did announce a discovery not long ago, I think almost a month ago, but you're still keeping the same production guidance. So I was kind of asking the positive impact from that announcement of new resources, but I don't really see it in your guidance now.

Indeed, we announced a discovery, but you know that the discoveries need to be motivated. The glass is in production already, but it's only one well. The others two are counting the tax end of the year. So year-on-year, as I said, we'll stay with around 8% decline, closing the year with 170,000 estimated average viewing for today.

And for the following year? 95 to 100 doesn't really account for the -- for any upside from this discovery or does it?

For the time being, we do not change our guidance, Iuliana. We will come back with this at the end of the year when we have our year-end results. We will present you the guidance for the next 2 years as well. For the time being, we keep it the same level as last year.

Now we'll take our next question. And the next question comes from the line Oleg Galbur from Raiffeisen Bank International.

I hope you continue well. I have 3 questions. The first one, very short, what was the impact of the Brazi power plant shutdown in the second quarter? If I remember correctly, initially, you estimated it some RON 150 million. Second question also relates to the GMP segment. You have again achieved very strong earnings despite the complete shutdown of Brit power plant. And in the last earnings call, Alina was able to provide more color on the earnings development in particular the development of the gas and power trading business. So maybe could you again say a few more words about what drove earnings in gas and power trading in the second quarter and perhaps also share your expectations for the current quarter? And lastly, on this solidarity tax, just a clarification. What is the estimated impact on the third and fourth quarter of this year? And am I right in presuming that the solidarity tax will be booked on a quarterly basis?

I think Franck will take on your first two questions with regards to the Brazi outage impact has a good performance EBIT in that context. And then Alina, with regard to the solidarity contribution impact in the second half of the year?

It's Franck speaking. For the brand shutdown, so we have an extension, which was not planned, of course, but from mid-May until end of June, plus the start up the first week of July. So the estimate was now moved from RON 150 million -- sorry, EUR 200 million. I think the good news compared to where we were in end of Q1, as we mitigate some of the potential losses due to the June extension, especially thanks to trading outside of Romania and to import electricity to compensate the lack of power from the last power plant. So that was one of a good achievement. And to come back to your second question was also, of course, the sale of gas because we had to in a depressed market, I would say, where the gas consumption in Media was quite low. We had to secure the sales of additional 1 terawatt hour of gas per month due to the Brazi power plant. And I think the team has done a very good job looking at the gas markets, not only from Romania, but from, I would say, all optimization and trading, we put in place last year from Greece to Hungary and Moldova, I think we have managed to secure opportunity in all this region, and I think that's continued in Q2, even in this current price demand on gas. The same on power. So we have been quite active on the Hungarian market on the power trading. And between the cross-border with Bulgaria and Serbia as well. So all this cross-border trade as benefit also the Q2 results. In terms of looking forward for Q3, so keep in mind that in Q2, we had a reversal of provision. So that has an impact, of course, in Q2 was on power, which we cannot, of course, up in Q3. But I will say we are quite bullish with Q3 in terms of gas and power. We've seen power plant running at a good [indiscernible], as I mentioned before, due to the power demand and power price going up. On gas, we have also secured some export contract, and from customers in Romania as well. So we see also a good increase of market share and good -- we secured from increase of volume compare to what we were forecasting at the beginning of the year. So good expectations, but I would say not necessarily well above Q2 because of this reversal of provision, but I would say good expectation for -- in the summer quarter where it's always more difficult for gas and power due to the gas demand and the fact we need to inject the gas in this direction.

And all from my side with regard to the solidarity tax, your assumption is for it. We will look it on a quarterly basis. And with regard to the calculation itself to you can take the refinery capacity of RON 4.5 million, 80% utilization and RON 350 per tonne. So that will give you the estimated number to be booked.

[Operator Instructions]

And the next question comes from the line of Laura Simion from BRD GSG.

I have just a couple of questions regarding the refinery turnaround. You mentioned the impacts were around EUR 355 million, but you also mentioned in the report some reassessment of some provisions. Could you give us an idea about the amount in the case? And what additional gain do you expect to the level of clean EBIT in R&M after this turnaround?

Alina will take on your question with regards to the provisions. And then on the clean EBIT, Alina will talk about. As we said, we don't tend to talk about the forecast of EBITDA going forward. So maybe I'll just do that for Alina, and rather would say we don't give an indication of the forward look on the results until obviously, we start with the trading update and the results in the third quarter. So maybe Radu will give you a little bit of an operational feel of what's going on in the refinery right now. Maybe that will give you an indication.

Okay. So the topic about provision, indeed, it's about environmental provision, which has been said the end of Q2. This is a normal IFRS treatment. IF37 requires when we have a legal obligation, Ativan and also future economic benefit to book provision. Environmental provision was in connection with the terminal, where we could go to documentation related to legal obligations and then also some additional cost for [indiscernible] environmental provision, all in all, RON 60 million in Q2 2023. And to say this is not in connection of the turnaround. Like nothing to do. It turnaround affected Q2 results to defining the market in but nothing to do with turnaround.

A lot of expect for the second half of the year, the final utilization goes high. So what was indicated so far in July average will be around 80%. But right now, we are operating on a 95% utilization rate, which is a high level for any standard. And as we have indicated in the earlier presentation, the fact that the refinery margin will be expected to be above 10% towards the end of the year. A solid quarter 3, of course, when we talk about the sales because we talk about the driving season and then, of course, a much lower demand. But otherwise, you should expect normal operation and normal performance for the second half of 2023.

So the turnaround was not for gaining some more efficient operations with just a normal turnaround in the business cycle?

I understand the question now. So turnaround is an important activity in the life cycle of a refinery, Why? Because it's ensuring a high utilization between the two cycles of the turnaround. So if we look back to the performance of our refinery in the previous years, you will already see quite a strong performance from this perspective, above the average European average as a reference. And in this turnaround beyond the ensuring high utilization in the cycles, we are as well going for several inspections, which are related to the permit that we need to obtain. And as were some authorizations, which are ensuring all this high expectations. And of course, the tie-in of the future -- all of the investments, which we'll do in future installations, which we are going to bring into the refinery in the next years, like, for example, the new Aromatic complex and other similar ones.

And the next question comes from the line of Iuliana Ciopraga from Wood & Company.

I also noticed something in case for investment as an investment in financial assets. Can you clarify what are those? I mean, is that something we should assimilate to cash these short-term securities that you bought? And how can you tell us what the total amount that we have invested in that because I don't think we can find it in the balance sheet separate?

Indeed, in the financial assets, current financial assets, you see an increase there. It's investment which we did in government bonds, treasury bills, RON 0.8 billion total as of June.

And the question comes from the line of Daniela Mandru-Petrovici from Swiss Capital.

Hello for the presentation. Now I have some questions related to GMP. Can you disclose the reflected amount -- the reversals of provision reflected on clean EBIT GMP? And the second one related to the same segment regards the power acquired from third parties in terms of quantities. And then if you can let us know what would be the amount of gas or the regulated prices estimated by you and partially communicated by the regulator for the full year? So I'm referring to the quantities of gas to be sold at regulated prices of RON 150 per megawatt hour.

Alina, we'll address your question with regards to provision reversal, and then Franck will cover the power from [indiscernible] as well as regulated by [indiscernible].

So with regards to reversal provision just to explain it a little bit in 2022, we have significant regulatory and fiscal changes, where we had a lot of unclarity. So at the end of the year, we booked some provisions where we were not sure about the treatment. We got clarified in the meantime and then is triggered to some reversal that we would be in Q2. indication for that we led double-digit million euro.

But this amount is reflected in clean GMP EBIT operating profit?

Yes, in clean, yes. When we booked it, we booked it together with taxation, it was not because it was part of the -- our interpretation of taxation and then when we reverse it will have to follow the same treatment as a clean item.

That explain a lot of your good results in the first quarter.

Indeed.

You should have started this deal.

Yes. We have explained it in the -- in our investor.

First, I realize I confused with the exchange rate before on the turnaround of Brazi impact. So maybe I will clarify for -- I forgot who asked the question, but the estimation at the end of Q1 for the extraction of the Brazi turnaround was EUR 30 million, I would say, in Euro to make sure not to make another mistake. Yes, it was like [indiscernible] question. So like EUR 30 million. And we are now having terminated the shutdown, we are at RON 17 million impact. So we reduced the impact quite significantl. Thanks to what I was mentioning -- sorry for the confusion on the numbers. In terms of your question for the gas to the regulated market, we -- our forecast for the full year is about 25% of our total sales. So that's to give you, I'd say, that RON 150 per megawatt hour. And for the sale of power outside of not outside, I would say all of the training we've done is around the trading, as I mentioned, is all the power sales we did in Q2 were linked to power trading because we are not running the power plant. So that was the full number was for the power trading.

Yes, but I don't know the number. So at least I didn't see it in the presentation. So -- because from my understanding, you bought power and so this for of course, but from third parties. The question is how much did you acquired in the second quarter of the year because I know the figure for the first quarter.

Yes. We don't provide this -- quite confidential.

SP1 Now we're going to take our next question. And the question comes from the line of Mandru-Petrovici from Wood & Company.

Sorry, actually asked that a last question. I have one more. So 25% of sales. For the full year, will gas sales are at regulated prices but sales from E&P or are you looking at sales for GMP? So sales to third parties at GMP level or total sales of gas from E&P. It's just a clarification.

Yes, total sales for Gas and Power because we are looking at the full sales. It's true [indiscernible]

Including internal?

Yes.

If there are no more questions, I want to thank you again for taking part in our conference call. For further information, please do not hesitate to contact our Investor Relations team. Until our next call, we wish you all the best. Good bye.

That concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.