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

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

Good afternoon, ladies and gentlemen, and thank you for joining us. We'll have a presentation followed by a Q&A session. Christina Verchere, Chief Executive Officer, will provide the key highlights about the macroeconomic and regulatory environment, our Q4 operational performance and the 2030 strategy execution. 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 our performance for the fourth quarter of 2023. Please let me first draw 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 fourth quarter of 2023. Brent price decreased by 3% versus the previous quarter and by 5% year-on-year and average $84 per barrel. This evolution was the result of concerns on softening global demand and rising crude inventories, partly counterbalanced by concerns on the escalating conflict in the Middle East. OMV Petrom indicator refining margin reached $10.79 per barrel in the fourth quarter, 43% lower year-on-year as a result of lower product spreads, mainly for diesel, gasoline and jet. European spot gas prices declined year-on-year, reflecting the weaker demand and the high storage levels. At an average of EUR 40 per megawatt hour, the CEGH price was down by 60% from the very high levels in the fourth quarter of 2022, but was up by 17% quarter-on-quarter. Gas prices on the Romanian centralized market had a similar trend with day-ahead prices lower by 59% year-on-year to an average of EUR 38 per megawatt hour. Base load electricity prices in Romania, in Euro terms, decreased by 57% from the high levels recorded in the fourth quarter of 2022 and by 4% quarter-on-quarter to an average of EUR 96 per megawatt hour. The average CO2 price decreased year-on-year by 2% to EUR 76 per tonne. Moving to the Romanian macroeconomic environment, the latest available data shows that in the third quarter of 2023, GDP increased by 2.9% year-on-year. According to the European Commission's latest estimates from November, 2023 GDP growth is expected to be 2.2%, while for 2024, the GDP is forecasted to grow by 3.1%. Both figures are well above the estimates for the EU average of 0.6% in 2023 and 1.3% in 2024. The consumer price index for the month of December 2023 versus December 2022 was 6.6%, on a downward trend. Looking at the Romanian energy sector in the fourth quarter of 2023, the demand for all our products increased year-on-year based on our internal estimates. The demand for retail fuels increased in the fourth quarter by around 3% year-on-year driven by lower prices, while the commercial market demand increased by 2% year-on-year, supported by the expansion of road construction activities. Gas demand increased by 8% year-on-year, reflecting increases in industrial offtake as well as higher gas to buyer assumption. Power demand was marginally higher year-on-year, while domestic power production increased by 2%, Romania being a net export of power in the fourth quarter. Power production from renewables, gas and hydro had a significantly higher contribution to the generation mix, nuclear power slightly decreased while coal-based power significantly decreased year-on-year. It has been almost 2 years since the Romanian government implemented measures to address the high gas and power prices, regulations that will be in place until March 2025. In the fourth quarter of 2023, around 80% of our gas portfolio was subject to regulations, while all our electricity sales in Romania were subject to some form of regulation or taxation. As announced in our previous call in October last year, a set of fiscal measures were adopted in order to reduce the high budget deficit. The main provision impacting our company was an additional tax of 0.5% on revenues for companies operating in the oil and gas sector applicable in 2024 and 2025. We estimate the yearly impact on OMV Petrom's financials to be less than RON 250 million for the next 2 years and lower thereafter. However, the exact fiscal burden can only be assessed only after authorities provide clarifications regarding this legislation. Also, an Emergency Ordinance introducing higher royalty rates for oil and gas was adopted by the Romanian government in October last year. Based on our current understanding, these new rates apply prospectively to future concession agreements, thus we expect no impact in the short term. Romania already has one of the highest effective tax rates for hydrocarbon production in Europe. As previously mentioned, we need a stable and competitive fiscal and regulatory framework in order to implement our future investment plans. On Slide 6, we present the key highlights for the quarter when we had robust performance in the context of weaker market fundamentals compared to the fourth quarter of 2022. At RON 2.2 billion, our fourth quarter Clean CCS Operating Result was 9% higher year-on-year. For the full year, the Clean CCS Operating Result was almost RON 8.5 billion, 30% down year-on-year, still the second best performance in our history. Our operating cash flow in the fourth quarter of 2023 increased by 15% year-on-year and reached RON 2 billion, supported by an improved working capital position. The Clean CCS return on average capital employed remained robust at 27 percentage points. In Exploration and Production, the result reflects the lower oil and gas prices and lower hydrocarbon production over the period. The result in Refining and Marketing reflects lower refining margin and refining utilization, partly offset by higher sales channel margins. In Gas and Power, the power activity was particularly strong with the highest quarterly net electrical output in the history of the Brazi power plant. Based on the preliminary financial results for 2023, the Executive Board proposes for the 2023 financial year a base dividend per share of RON 0.0413, 10% higher year-on-year. We also intend to announce a special dividend later this year. Alina will provide more details on this. During the fourth quarter, we have further focused on delivering on our 3 strategic pillars, and I will go into more details on the progress made in 2023 later on. On HSSE, the total recordable injury rate for the year 2023 was 0.5. Moreover, we further continue our efforts to reduce greenhouse gas intensity with projects in all 3 business segments. Our preliminary estimate in terms of GHG intensity point to around 11% decrease versus the base year of 2019. On Slide 7, I would like to present our operational performance, and I will start with Exploration and Production. Hydrocarbon production came in above expectations and decreased by almost 7%, reflecting the natural decline in the main fields and the effect of planned maintenance activities, partly offset by the contribution of new wealth and workovers. For the full year 2023, production was 113,000 barrels of oil equivalent per day, slightly less than a 5% decline year-on-year and above expectations. Production cost per barrel of oil equivalent increased year-on-year by 33% to $17.85, mainly due to higher services and materials costs, lower volumes available for sale and unfavorable ForEx. In Refining and Marketing, the refining utilization rate was 95%, reflecting a planned slowdown of the Petrobrazi refinery in December. Total refined product sales volumes slightly increased year-on-year with retail sales broadly flat and nonretail sales volumes 3% higher year-on-year. In Gas and Power, total gas sales volumes were stable year-on-year with higher end users and Brazi power plant offtake -- offset by reduced volumes to wholesalers. For the full year, our total gas sales volumes were 1% higher year-on-year in the context of a 6% decrease in overall Romanian gas consumption. The Brazi power plant generated a new record high net electrical output reaching 1.7 terawatt hours. This was 16% up year-on-year and represented 12% of Romania's generation mix, the highest quarterly contribution to the national power security of supply since the start of operations in 2012. Moving now to Slide 8. Total CapEx increased 32% year-on-year to RON 4.7 billion in 2023. In Exploration and Production, we finalized the drilling of 45 new wells and sidetracks, including 3 exploration wells, and we performed almost 500 workover jobs. Moreover, we increased investments in Neptun Deep after taking the final investment decision in June. In Refining and Marketing, almost RON 2 billion of investments were mostly dedicated to the major plant turnaround at our Petrobrazi refinery, coke drum replacement as well as ongoing projects such as a new crude oil tank and new aromatic complex. In Gas and Power, most investments were allocated for the planned maintenance shutdown at the Brazi power plant, the longest since the plant started operations in 2012. For 2024, we plan to further increase our organic CapEx to RON 6.5 billion. In Exploration and Production, we expect investments of RON 4.7 billion, of which around half is to be directed to the Neptun Deep project. We also plan to drill around 40 new wells and sidetracks and perform up to 500 workovers. In Refining and Marketing, the CapEx will be directed to ongoing projects, such as the new aromatic unit in Petrobrazi, but also to new projects such as the sustainable aviation fuel and hydrotreated vegetable oil production unit. There will also be CapEx associated with the closing of our M&A transactions of low- and zero-carbon projects that would bring total CapEx to around RON 8 billion. Ladies and gentlemen, 2023 was a turning point in our company's transformation journey, in line with our Strategy 2030 launched at the end of 2021. In our strategic pillar, Grow regional gas, we made significant progress on our Neptun Deep project. After taking the final investment decision in June, we signed a EUR 1.6 billion contract with Saipem for the offshore facilities. In December, we announced the signing of an agreement for the Transocean Barents semisubmersible drilling rig for a minimum period of 1.5 years at an estimated value of EUR 325 million. Moreover, a contract of approximately EUR 140 million were signed with Halliburton for integrated drilling services. More than 80% of the execution agreements have been awarded, and we are focusing on finalizing awarding of the main contracts, permitting activities, the start of construction and preparations to spud the first well in 2025. Regarding our strategic pillar, Transition to low and zero carbon, we made significant progress on many fronts and particularly in electrification. We have been busy building our renewable power portfolio. Firstly, following the signing of the financing contracts to build 4 photovoltaic parks of 450 megawatts with CE Oltenia, the public tendering of the EPCC contract was launched. Secondly, the transaction to purchase 710 megawatts of installed capacity of photovoltaic power projects in Teleorman County in Romania is expected to be completed this year and the parks to become operational 18 to 24 months later. And most recently at the beginning of 2024, we announced a new partnership to acquire a 50% stake in approximately 1 gigawatt of capacity of renewable projects in Romania, out of which 950 megawatts is of wind and 50 megawatts of photovoltaic capacity. The projects will be further developed, built and operated in partnership with Renovatio. Through this newly formed partnership, we plan gross investments of approximately EUR 1.3 billion, including project financing by 2027. On alternative mobility, around 270 fast and ultrafast charging points were installed by the end of 2023. We also accessed an EU grant for further expanding our EV charging network, thus contributing to the creation of a corridor of fast-charging stations in our existing retail network. The total investment in Romania for this project is estimated approximately EUR 32 million, of which approximately EUR 12 million will be provided from EU funds. As announced at the beginning of 2024, we will fully acquire Renovatio Asset Management, the owner of Romania's leading EV charging network with more than 400 operational EV charging points in Romania and plans to increase to approximately 650 by 2026. Thus, by the end of 2024, our ambition is to reach around 1,000 fast and ultra-fast charging points, accelerating our Strategy 2030 target. In addition, we are also delivering on our commitment to offer attractive shareholder returns. In 2023, we paid record high dividends, in total amount of RON 5.1 billion. This translated in a total dividend yield of almost 20%. And together with the share price appreciation of 37% over the year, led to a total shareholder return of 56%. Before handing over to Alina, please let me share with you that we plan to provide an update of our strategy execution later this year.

Thank you, Christina, and good afternoon also from my side. I will continue the presentation with Slide 11, starting with some highlights on the income statement with focus on the development of the fourth quarter of 2023. Sales decreased by 40% year-on-year, following lower commodity prices and lower sales of electricity and natural gas. Clean Operating Results in Exploration and Production stood at RON 0.9 billion, lower than RON 1.1 billion in the fourth quarter of 2022. This was driven by lower oil and gas prices, lower sales volumes, higher production costs and unfavorable FX effect due to weaker U.S. dollar versus RON, partly offset by lower E&P taxation. Clean CCS Operating Result in Refining and Marketing reached RON 729 million, 15% lower year-on-year mainly due to lower refining margin and refinery utilization. Clean Operating Results in Gas and Power was RON 514 million in the context of steep decrease of gas and power pricing. This result was still higher than RON 132 million in the fourth quarter of 2022, as the previous year was affected by a provision for risks related to gas and power taxation. The clean consolidation line stood at RON 122 million in the fourth quarter of 2023 as a result of lowered margins and quantities of crude oil and oil products in stock. Consequently, the group Clean CCS Operating Result increased by 9% year-on-year to RON 2.2 billion. For the fourth quarter of 2023, we recorded inventory holding losses of RON 32 million, mainly reflecting the decrease of crude prices over the quarter. For comparison, in the fourth quarter of 2022, we recorded inventory holding losses of RON 126 million. For the fourth quarter of 2023, we also recorded net special charges of RON 250 million, driven mainly by the net temporary effects from forward power contracts. For comparison, in the fourth quarter of 2022, the net special charges of RON 823 million were related mainly to net impairment in Exploration and Production, partially offset by net temporary gains from forward power contracts in the Gas and Power segment. The Clean CSS net income attributable to stockholders increased by 11% year-on-year to RON 2.1 billion. The fourth quarter of 2023 reflected also an impact from solidarity contribution of RON 375 million presented as a separate line in the consolidated income statement below the operating results line. This contribution is treated as special item in the computation of the Clean CCS net income. The reported net income attributable to stockholders increased by 29% year-on-year to RON 1.5 billion. Let me go on to Slide 12, which shows the major building blocks for the development of the Clean CCS Operating Result. I will start with Exploration and Production. The market effect deviation of RON 143 million reflects the negative effect of lower oil and gas prices, more than compensated by the positive effect of low E&P taxes. For gas, the taxes paid in the fourth quarter of 2023 reflected higher regulatory sales quantities, which are exempted from over-taxation. The operational effects had a negative deviation year-on-year, mainly due to lower hydrocarbon sales and higher production cost. In downstream, the negative market effect in Refining and Marketing reflects the lower refining margin driven by the lower product spreads. Operational effects were positive due to higher retail and commercial margins and an improved performance in the nonfuel business margin. In Gas and Power, the gas business had a good contribution, even if lower year-on-year with stable sales volumes. The steeply declining prices impacted the realized margins both on equity and third-party gas, especially on transactions outside Romania. The excellent power business result reflected the record high net electrical output and transactions concluded outside Romania. We have to mention that the result recorded in the fourth quarter of 2022 was also affected by a provision for risks related to sector-specific taxation. On Slide 13, I would like to continue with the highlights regarding our cash flow statement. In the fourth quarter of 2023, the operating cash flow was RON 2 billion, 15% higher year-on-year, supported by a strong management of working capital. Working capital changes led to a cash outflow of RON 279 million compared to a cash outflow of RON 904 million in the fourth quarter of 2022. Our net payment for investing activities amounted to RON 1.1 billion, higher by 24% year-on-year. This was due to increased capital expenditure, including advanced payments for Neptun Deep project following FID and also investment in government bonds and treasury bills. Last year, we also distributed special dividends for the second year in a row amounting to RON 2.8 billion. Special dividends have been paid starting October 19, 2023. The net cash position, including lease, decreased to RON 12.6 billion at the end of 2023 versus RON 13.5 billion at the end of 2022. Moving now to Slide 14. Back in December 2021, we reinforced our dividend policy with a stronger commitment by announcing our intention to increase our base dividend per share by 5% to 10% per annum over the Strategy 2030 cycle. We, the OMV Petrom Executive Board, are committed to deliver the competitive shareholder return also by paying an attractive dividend. Consequently, based on 2023 preliminary results, we are now proposing a base dividend per share of RON 0.0413 for the third time in a row, 10% higher year-on-year, being again at the high end of the range stated in our dividend guidance. We believe that this proposal is competitive among regional peers from the perspective of a base dividend yield, which stands at 7.2%. The proposed dividend is subject to the approval of the Supervisory Board and General Meeting of Shareholders, which will take place in April. In addition, and again, for the third year in a row, we announced this morning that we are planning to propose another special dividend this year. Let me conclude our presentation with the outlook on Slide 15. We expect Brent oil price in 2024 to be around $80 per barrel. For the year 2025 and 2026, we expect an average oil price between $70 and $75 per barrel. Our hydrocarbon production in 2024 is expected to be above 106,000 barrels of oil equivalent per day, considering no divestments. For the year 2025-2026, our hydrocarbon production is estimated to be around 100,000 barrels of oil equivalent per day, excluding divestments. We expect inflationary pressure on our costs to persist throughout the year, and we see the production cost at above $16 per barrel of oil equivalent for the year 2024 and below $16 per barrel on average for 2025 and 2026 on the basis of cost and portfolio optimization program started. In Refining and Marketing, we currently estimate an average refining margin at around $10 per barrel in 2024 and a similar level also for 2025 and 2026 on average. The refinery utilization rate is estimated to be above 95% in 2024 as well as in '25 and '26. As Christina mentioned earlier, 2024 organic CapEx is expected to be around RON 6.5 billion in 2024. Of this amount, approximately RON 4.7 billion will be dedicated to E&P, thereof around half for Neptun Deep. Approximately RON 1.4 billion will go to Refining and Marketing and about RON 0.3 billion to Gas and Power. Additional investments for the announced low and zero carbon M&A transactions will bring total CapEx to around RON 8 billion. For 2025 and 2026, we expect a similar CapEx of RON 8 billion on average. As we prepare to enter the most intensive investment period in our company's history, we reiterate that investments require predictable and stable regulatory and fiscal environment. In 2024, we expect a marginally positive free cash flow before dividends, driven by strong operational performance offset to a large extent by significantly higher investments. We estimate demand for retail fuel products, gas and power in Romania to be slightly above 2023. We expect total refined product sales and retail fuel sales to be higher year-on-year. Our total gas sales volumes are envisaged to decrease mainly on lower supply, both from equity and third parties. The net electrical output is expected to be higher year-on-year, reflecting a shorter planned Brazi power plant outage compared to 2023. To summarize, year 2024 is expected to be a year of projects execution, with significantly higher capital expenditure being supported by our strong operational performance. With this, I close our presentation, and thank you for your attention. We are now available for your questions.

[Operator Instructions] We will now take the first question from Oleg Galbur from Raiffeisen Bank International.

I have several. The first one I have is about actually last year's CapEx. Could you please help us understand where is the difference between the initial guidance of RON 6 billion and the realized CapEx of RON 4.7 billion coming from? Were there some projects, for example, which were moved to 2024, or there are other reasons behind it? My second question is on the 2024 CapEx guidance. Could you please provide the split of the RON 1.5 billion CapEx allocated for M&A so that we can have a better understanding and know how to book it or record it in our financial models? And lastly, on special dividend. I was hoping you can tell us when should we expect the announcement of the special dividend and what are the key parameters which will determine its amount?

Thank you very much. Alina, I think these look like good questions for you.

Thank you. Thank you, Oleg. I am happy to take your questions. So I'll start with the first one. Indeed, the last year -- we are below last year's guidance on CapEx, I am referring to 2023. And this is because we had some delays in scheduling on our renewable projects. We have a partnership with CE Oltenia. The financing agreements have been signed a bit later than planned and then we moved on into the tendering, also taking a bit more time. So it is, like you signaled, we are talking here about some movements from 2023 to 2024. Now, if we refer to 2024 guidance, indeed, we go now with a much higher CapEx. So we have -- if we include the inorganic part, a 70% increase in CapEx versus previous year, which has a RON 1.5 billion for M&A. We cannot disclose more at this stage than this is primarily in connection with the announced M&A transaction. That's all we can give around the CapEx guidance at this stage for 2024 M&A part. Moving to the third question on special dividend. So we did our calculation and we have decided that, yes, we can go for third year in a row with an increase of 10% on the base dividend. This is clearly driven by the strong operational performance, but also around a market environment and more clarity around our CapEx plans. Therefore, looking at our balance sheet, looking also and considering that we know now much better, we have more than 80% of the contract signed also for Neptun, so we have much more clarity around CapEx as well. We consider that we are in a position to announce again special dividend this year in 2024. We did not decide when. That's why we are saying in 2024. So we don't have a decision when exactly. With regards to the parameters, what we will do? We will look on next months how the market environment will be and our performance in this market environment. And also, we'll look at our peers. We are committed to deliver a competitive shareholder return, competitive dividend yield. So we look on what's going on in the market and we hope we will be able to offer competitive overall dividend, base plus special. I hope I answered your question.

We will take our next question from Tamas Pletser from Erste Group Research.

I've got 3 questions. First of all, the current regulatory regime, do you see any chances that the current regulation of selling natural gas and electricity towards households may change before the original date, which is March 2025? I just ask because what I see now that your profitability of selling natural gas, for example, towards households is significantly better than selling this natural gas on the free market. So do you see any chances that the current regulatory regime may change before this date? That would be my first question. And my second question is, what are your target capacities in photovoltaic power generation and in wind energy based on your plans? And finally, I didn't catch you what, Alina, you said about this project, which CapEx slipped from '23 to '24. Could you just repeat that, please?

Alina, do you want to just quickly wrap on that one? This is a CE Oltenia project, yes.

Oltenia, okay.

Yes. It was related to Oltenia. Generally, photovoltaic renewable projects have been delayed. And the main one with Oltenia that has been delayed from '23 to '24.

This is Franck Neel from G&P. Yes. Good afternoon, Tamas. So, to your first question on regulatory, I mean, it's a good question, but I have to say it doesn't depend on us what will change, so we will follow the regulation. I think what we communicate to the authorities is we should start to work on the -- after March 2025, we should start as -- between the industry and the regulator and the authorities to start to think about how we could move to a liberalized market from March 2025. Now there are some -- yes, in the press some article mentioning potential change before March 2025. I have to say the market price today is not really below the cap price. So if you think about the RON 150 per megawatt hour or EUR 30 per megawatt hour, you are referring, I suppose, in your question is rather in line with the market price. So we are not expecting a change on this cap, potentially could be a change on the overall tariff for the household, but we don't see that at the moment. But let's see, we have to follow the regulation. Of course, we'll have to adapt on that. And on your second question around the capacity PV, so of course, we have to close some of the M&A that we have announced at the beginning of the year. So we signed now we have to close. There is the 450 megawatt of CE Oltenia, which will be 50-50 with our partner, CE Oltenia. We have the 710 megawatts in Teleorman, where we are expecting a closing also this year. And we have about 100 megawatts of other projects which are Petrom project of PV. And we expect, if everything on the closing goes well, already produced by the end of 2024 between 80 megawatt of PV already in operation. So that will be an objective, but still a lot of closing to do this year, but will be an exciting year in terms of closing and passing FID on all these different projects.

Maybe just to add a little bit to that. Obviously, as Franck said, him and his team have been very busy building a stronger portfolio and we see that, obviously, this is acceleration, given what the market opportunities have provided us. With regards to your question on sort of targets on capacity, we're going to provide an update on our strategy execution later in the year and we'll touch on that then, if that's all right, Tamas. Thank you for your question.

We will take our next question from Ioana Andrei from Alpha Bank, Romania.

I was wondering if you can tell us a little bit more on the regulated gas sales expected for 2024. Do you expect them to be maintained at similar levels with 2023? And my second question, if you could please give us a little bit more on what to expect from the low and zero operations? Basically, what I was wondering, what are your expectations in terms of EBIT over the next years from this business line?

Thank you, Ioana. Franck will take your first question with regards to regulated gas sales in 2024.

Ioana, thank you for your question. In fact, we'll know the numbers quite soon. I think it's the regulator and Transgaz should confirm in February the final number. We are waiting for 2 things. In fact, the allocation for the regulated market, but also the storage obligation for -- how we calculate the storage obligations for the different operators. So, that's, I think, too important. In terms of forecast, I think we expect to be a bit slightly below than last year, mainly because there's still a lot of gas in storage and the demand has been a bit below than last year. Now let's see, it depends on what the suppliers will request from the producer. But I will say slightly below what our forecast is.

When it comes to low and zero operations, this is at the beginning, they will start with small impact because, of course, we need to build the portfolio. And also, a lot of knowledge that we need to gain over the years. When it comes to the second part of the decade, we indicated with our strategy, somewhere around 15% of our EBIT will be coming from low and zero carbon, but at the beginning in the first years, we do not expect something significant coming from that.

We will take our next question from Iuliana Ciopraga from Wood & Company.

Actually, I want a bit of clarifications regarding the CapEx and this RON 1.5 billion for this year and actually, the reason why you increased CapEx for the following years. So this RON 1.5 billion, I guess, this is the EUR 350 million for Renovatio deal and the portfolio of wind capacity in the following years. And I guess that RON 1.5 billion includes also the Teleorman, right, deal? And then going forward, can you provide some color why CapEx was raised as well? I think that's it. And one more regarding peers. You're mentioning peers that you will be looking at peers -- what peers are doing when it comes to dividends. When you talk about peers, what are you referring to? Local peers? Oil and gas players?

Thanks. Alina, would you like?

Yes, yes. Thank you, Iuliana. So referring to CapEx, so the M&A CapEx, I think, was your question. So we said we work primarily to announced M&A deals. Basically, what we have announced is the Renovatio deal and also we announced the Teleorman transaction that we did. So now we don't provide a split of how much, but both of them will have some impact in 2024, that would bring this RON 1.5 billion together. This is the main part, and there are other small things but most of it is coming from these ones. And when it comes to peers, we talk about -- so when it comes to '25, '26 and the level of CapEx of RON 8 billion, '24, '25, '26, of course, in all these years, we have Neptun being in the most intensive investment period. If we refer to Neptun, also here a bit of an indication, we estimate the cash outflow for Neptun RON 500 million to RON 600 million every year in these 3 years. I mean, to have in mind, of course, most of it will be in CapEx. It could be some amount also in advances to be reflected from accounting perspective, but most of it would be CapEx. So Neptun is an important part and then all the efforts we do on energy transition, but also our traditional business will continue towards attract investments as well.

What I was actually referring to was mainly the increase. I mean you were guiding before towards the CapEx of somewhere around RON 7 billion in 2024, 2025. Now actually, I was more asking about 2025, why you're increasing that from RON 7 billion to RON 8 billion?

For 2024, we guided together with [indiscernible] RON 8 billion, and we stay with around RON 8 billion in '25 to '26 as well, driven by a combination of Neptun, energy transition and traditional CapEx, which we had in the past. When it comes to the dividend -- to the peers for the dividend, what we look, we look at generally European oil and gas companies. On our Slide 14 from the presentation, you have also the name, if you want to know exactly which company.

We will take our next question from Oleg Galbur from Raiffeisen Bank International.

I have a follow-up question on your '25-'26 guidance and specifically about your production guidance. If I look at the numbers, I understand that in both years or in this period, '25-'26, you expect a lower decline rate in comparison to '24 and '23 and I was wondering why is that?

Franck?

Yes. Thank you for this question. Basically, we're looking on an increasing activity in the workover as well. There is an increase in the activity in the drilling as a result of the 3D seismic, which was shooted in the previous years, which is increasing the prospectivities in the blocks, which we are operating. And, yes, it's not considering any divestment.

So the number you guide does not include any new production coming on stream?

Sorry, say it again?

The numbers you guide does not include any new fields coming on stream?

No.

Okay. Because it's interesting that in actually lower or less favorable oil price environment that you guide for this year, you plan to increase the workovers in order to achieve a lower decline rate. This is what I was trying to put -- these 2 developments I was trying to correlate, and that's why I asked.

I think what we would say is more geology driven as opposed to price driven.

[Operator Instructions] If there are no more questions, I want to thank you again. It looks like Iuliana has a follow-up. Please, Iuliana?

Contribution from e-mobility and what this generates right now and what do you expect going forward?

Hi Iuliana, could you maybe just repeat because we didn't hear at the start of your question, so we just came in partway. If you could say it again, that would be helpful.

Sure. Sure. I was wondering about e-mobility. What's the current contribution, profitability and what we expect from this segment going forward?

I would underline part of -- Radu from my side. I would underline part of Alina's answered earlier, saying that for the moment, the profitability or the contribution of the results is relatively limited because we are at the beginning of stepping into the new fields and growing that portfolio of business. And as said, for the previous year and this year, it's a relatively limited contribution to the overall results. In the second decade, we expect seeing more relevant numbers contributing to our results.

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. Goodbye.

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