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 e-mail. 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 events.

Good afternoon, ladies and gentlemen, and thank you for joining us. We will 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 first quarter operational results as well as our sustainability performance. Alina Popa, Chief Financial Officer; will give you more details on our financial results and the brief outlook. Afterwards, they 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 first quarter of 2024. Please let me 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 first quarter of 2024. Brent price increased by 12% during the quarter to around $87 per barrel. This evolution was a result of concerns on the escalating conflict in the Middle East, bullish sentiment on revised demand expectation and the materialization of OPEC+ production cuts in the first quarter extended into the second quarter. Brent quotation averaged $83 per barrel for the first quarter; a 2% increase year-on-year. OMV Petrom indicator refining margin reached $12.56 per barrel in the first quarter, 24% lower year-on-year as a result of lower product spreads, mainly for diesel and gasoline. European spot gas prices declined, mainly driven by high gas storage levels and a mild winter in Europe. At an average of EUR 28 per megawatt hour, the CEGH price was down by almost 50% year-on-year and almost 30% quarter-on-quarter. Gas prices on the Romanian centralized market had a similar trend with day-ahead prices lower by 50% year-on-year to an average of EUR 27 per megawatt hour. Base load electricity prices in Romania decreased by 43% and by 24% quarter-on-quarter to an average of EUR 74 per megawatt hour. The average CO2 price decreased year-on-year by 32% to EUR 59 per ton due to additional allowances available in the market in the context of RePowerEU plan. Moving to the Romanian macroeconomic environment. The latest available data shows that in the fourth quarter of 2023, GDP increased by 1.1% year-on-year. According to the European Commission's latest estimates from February, 2024 GDP growth is expected to be 2.9%, while for 2025 is forecasted to grow by 3.2%, both figures are well above the estimates for the EU average of 0.9% in 2024 and 1.7% in 2025. The consumer price index for the month of March 2024 versus March 2023 was 6.6% on a downward trend compared to the spikes in January and February 2024. Looking at the Romanian energy sector. In the first quarter of 2024, the demand for all our products increased year-on-year based on our internal estimates. The demand for retail fuels increased in the first quarter by around 6% year-on-year, driven by mild weather, car park increase and higher disposable income. The commercial demand increased by 3% year-on-year, supported by an increase in road construction activities as well as higher jet demand. Gas demand increased by around 6% year-on-year on higher gas to power consumption as well as fertilizer restarts, partially offset by warmer weather. Power demand was 2% higher year-on-year, while domestic power production slightly decreased, Romania being a net exporter of power in the first quarter. Power production from gas and solar had a significantly higher contribution to the generation mix, coal, wind and hydropower decreased while nuclear power was stable year-on-year. It has been 2 years since the Romanian government implemented measures to address the high gas and power prices at that time. In March 2024, in the context of gas and power market prices returning to precrisis levels, the government took the first steps towards liberalizing the market through ordinance 32, applicable starting April 2024. On the gas side, the Ordinance reduced the cap price for gas sold to households and heat producers for households from RON 150 per megawatt hour to RON 120 per megawatt hour, applicable until the end of 2024. In addition, the regulated supply component was increased from RON 12 per megawatt hour as regular supplier and RON 13.5 per megawatt hour supply of last resort to RON 15 per megawatt hour for both. And the gas price used for power production is no longer capped at RON 100 per megawatt hour. On the power side, the centralized mechanism for Power acquisition became voluntary and applicable until year-end while the price was lower to RON 400 per megawatt hour for monthly allocations. The threshold for power overtaxation is also lowered to the same price level. In addition, CO2 costs for future deliveries are no longer recoverable. For both gas and power, the margin for trading activities in Romania was increased from 2% to 10%. The preliminary negative net impact of regulatory changes on OMV Petrom's financials for April to December this year is estimated at mid-double-digit million euro. Going forward, we will optimize our gas and power sales strategy considering the new regulatory environment. As mentioned before, we support free market principles with a competitive fiscal framework. In the first quarter of 2024, around 86% of our gas portfolio was subject to regulations while the majority of our electricity sales in Romania were subject to some form of regulation or taxation. 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 first quarter of 2023. RON 1.8 billion, our first quarter Clean CCS Operating result was 16% lower year-on-year. This result is above our last 5 years average for a first quarter and was supported by our integrated business model and recovering market demand across all our products. Our operating cash flow in the first quarter of 2024 reached RON 3 billion, 36% lower year-on-year. The Clean CCS return on average capital employed remained robust at 25 percentage points. In exploration production, the result reflects the lower gas prices and the declining hydrocarbon production over the period. The result in Refining & Marketing reflected lower refining and marketing margins and refinery utilization as well as additional tax on revenues. In Gas & Power, as the result is the first quarter -- the result in the first quarter of the last year reflected excellent gas storage margins, which did not materialize again in this quarter. During the first quarter, we have further focus on delivering on our three strategic directions. In our strategic pillar, Grow regional gas, our Neptun Deep project is progressing as planned. We are also making significant progress in our strategic pillar, Transition to Low and Zero Carbon. We received clearance from the Romanian authorities for our announced renewable power and e-mobility M&A transactions with Renovatio. In February, we announced the signing of the financing contracts through the National Recovery and Resilience Plan for two green hydrogen production projects at Petrobrazi refinery with a total capacity of 55 megawatts. The total investment is estimated at EUR 150 million with a maximum amount of EU funding of EUR 50 million. On alternative mobility, around 290 fast and ultrafast charging points were installed by the end of March 2024. Our ambition is to reach around 1,000 fast and ultrafast charging points by the end of 2024, including the charging points to be taken over after closing the Renovatio transaction. In the first quarter, we also received the green light from the Romanian authorities to proceed with the announced acquisition of the 50% stake in Respira Verde, the leading company in the collection of used cooking oil in Romania. Thus, we are taking an important step to ensure access to a reliable source of raw materials to produce biofuels. On HSSE, the total recordable injury rate for the rolling period April 2023 to March 2024 was [ 0.4 ]. Moreover, we further continue our efforts to reduce greenhouse gas intensity with projects in all three business segments. Based on our preliminary data, the GHG intensity in the first quarter decreased year-on-year in all 3 divisions, reflecting our ongoing initiatives to reduce carbon emissions. On Slide 7, I would like to present our operational performance, and I will start with Exploration and Production. Hydrocarbon production decreased by 4%, reflecting the natural decline in the main fields, partly offset by good results from new wells and workover jobs. Production cost per barrel of oil equivalent increased year-on-year by 10% to $15.91 mainly due to higher personnel and service costs as well as lower volumes available for sale, partly countered by lower cost for energy and materials. In Refining & Marketing, the refining utilization rate was 93%, reflecting short unplanned plant outages and supply constraints. However, utilization was above the European average of around 80%. The Total refined product sales volumes increased by 4% year-on-year, with retail sales up 7% year-on-year on the back of strong market demand. In Gas & Power, total gas sales volumes were 4% lower year-on-year with higher sales to end users and Brazi power plant offtake, while volumes sold to wholesalers were lower. The Brazi power plant generated a record high net electrical let output for a first quarter, reaching 1.8 terawatt hour (sic) [ 1.6 terawatt hour ] covering a 10% share in Romania's generation mix. Moving now to Slide 8. Total CapEx in the first quarter of 2024 slightly increased year-on-year to RON 972 million. In Exploration and Production, we increased investments in the Neptun Deep project, which entered the execution phase. Moreover, we finalized the drilling of 7 new wells and sidetracks, and we performed around 140 workover jobs. In Refining & Marketing, around RON 155 million of investments were mostly dedicated to the refining business for major projects such as the new aromatic complex, sulfur acid gas treatment plant and the new SAF/HVO unit. In the full year 2024, we maintain our guidance provided in February of RON 6.5 billion on organic CapEx, a 38% increase compared to last year. There will also be CapEx associated with closing of our M&A transactions of low and zero carbon projects that would bring total CapEx to around RON 8 billion. Yesterday, we published our sustainability report for 2023, and I'm happy to share with you our progress in terms of sustainability. Our sustainability framework is built around three pillars: Environment, Social and Governance, with a clear commitment to run responsible operations, foster people and communities and leverage innovation and digitalization. On our journey to reach Net Zero operations by 2050, we aim for a 30% reduction in the carbon emissions from our operations by 2030 versus 2019. Last year, we decreased our Scope 1 and 2 carbon intensity by 11% versus the 2019 baseline. In addition, we reduced our methane emissions intensity by 72%, progressing towards our target of less than 0.2% by 2030. We remain extremely proud of our social contribution. Last year, more than EUR 40 million went into projects tailored to supporting education, focusing on environmental protection and improving the health care system, including the projects supported by the OMV Petrom Foundation. The remuneration policy for the Executive Board members placed a strong emphasis on sustainability performance, including ESG-related key performance indicators. I want to highlight that our efforts to increase performance and disclosure in terms of ESG were recognized by some of the biggest and most credible ESG rating agencies globally. In 2023, we maintained the scores received from ESG rating agencies and we were included for the first time in the FTSE4Good Index. OMV Petrom was also included in the Sustainalytics' top-rated ESG companies list and maintained Silver supplier status with Ecovadis. On a strategic level, we will be providing an update on our 2030 strategy execution in a detailed dedicated webcast on the 19th of June. Please let me now hand over to Alina for more details on the financial results of the first quarter of 2024.

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 first quarter of 2024. Sales decreased by 10% year-on-year, impacted by lower prices for natural gas and electricity as well as lower gas sales volumes. This was partly offset by higher sales volumes of electricity and refined products. Clean operating result in Exploration and Production stood at RON 0.7 billion lower than the RON 1 billion in the first quarter of 2023. This was driven by the lower gas prices, lower sales volumes, higher depreciation and impairments as well as increased production costs, partly offset by lower E&P taxation. Clean CCS operating result in Refining and Marketing reached RON 484 million, 21% lower year-on-year, mainly due to lower refining and marketing margins as well as additional tax on revenues. Clean Operating results in Gas & Power was RON 433 million, 40% lower than the result recorded in the first quarter of last year which was achieved in a different context, supported by the higher market prices and excellent storage margins. The clean consolidation line stood at RON 151 million in the first quarter of 2024 mainly as a result of gas extraction from storage. Consequently, the Group Clean CCS operating result decreased by 16% year-on-year to RON 1.8 billion. For the first quarter of 2024, we recorded inventory holding gains of RON 23 million, mainly reflecting the increase of crude prices over the quarter. For comparison, in the first quarter of 2023, we recorded inventory holding losses of RON 122 million. For the first quarter of 2024, we also recorded net special charges of RON 193 million compared to net special charges of RON 356 million recorded in the first quarter of 2023 in both quarters, mainly driven by the net temporary effects from forward contracts for power and CO2. The Clean CCS net income attributable to stockholders decreased by 18% 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 results. I will start with Exploration and Production. The market effect deviation of RON 48 million reflects the increase in oil price and the negative effect of lower gas prices compensated by the positive effect of lower E&P taxes. For gas, the taxes paid in the first quarter of 2024 reflected higher quantities used in Brazi power plant, which are exempted from overtaxation. The operational effects had a negative deviation year-on-year, mainly due to lower hydrocarbon sales, higher depreciation and impairment and higher production costs. 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 sales volumes and an improved performance for the non-fuel business. In Gas & Power, the Gas business had a good contribution, even if lower compared to last year's first quarter, which benefited from higher market prices and excellent storage margins. The decline in market prices impacted realized margins, especially on transactions concluded outside Romania. The strong power business result was built on excellent Brazi power plant production, a record high level for the first quarter. In addition, higher margins from the ancillary services and balancing markets were achieved while margins from transactions concluded outside Romania were lower. The 5% (sic) [ 0.5% ] tax on revenue introduced starting January was in total amount of around RON 54 million and affected mainly the Refining and Marketing results. On Slide 13, I would like to continue with the highlights regarding our cash flow statement. In the first quarter of 2024, the cash generated from operating activities before net working capital movements was flat year-on-year at RON 2.9 billion. Working capital changes led to cash inflow of RON 124 million in the first quarter of 2024 compared to a cash inflow of RON 1.7 billion in the first quarter of 2023, the latter being achieved in the context of steep decline in commodity prices. Consequently, the operating cash flow in the first quarter of 2024 amounted to RON 3 billion, 36% lower year-on-year. Our net payments for investing activities amounted to RON 1.1 billion, lower by 20% year-on-year. This reflects an increase of 9% year-on-year of cash outflows for capital expenditures, offset by inflows from investments in government bonds. The net cash position, including leases, decreased to RON 14.4 billion at the end of March 2024 versus RON 16.7 billion at the end of the first quarter of 2023. Our record high base dividend for the financial year 2023 amounting to RON 2.6 billion will be paid starting June 5, 2024. We also remind you that the solidarity contribution for the year 2023 in amount of RON 2.7 billion will be paid in June. Let me conclude our presentation with the outlook on Slide 14. And I will refer only to the guidance for this year, as commodity prices for 2025, 2026 are currently under review. We expect Brent oil price in 2024 to be around $85 per barrel, revised up from $80 per barrel previously. Our Hydrocarbon production in 2024 is expected to be above 106,000 barrels of oil equivalent per day, considering no divestments. As a reminder, we have the planned maintenance activities scheduled as usual in the second half of the year. We expect inflationary pressure on our cost to persist throughout the year, and we see the production cost at above $16 per barrel of oil equivalent for the year 2024. In Refining & Marketing, we currently estimate an average refining margins of around $10 per barrel in 2024, a refinery utilization rate is estimated to be above 95%. As Christina mentioned earlier, we maintain our CapEx guidance. Organic CapEx will ramp up in the second half of the year and is expected to be around RON 6.5 billion in 2024. Additional investments for the announced M&A transactions will bring total CapEx to around RON 8 billion. In 2024, we expect a positive free cash flow before dividends, but lower year-on-year 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 both 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 shutdown of the Brazi power plant, which is planned to be for full capacity in April and half capacity in May. With this, I close our presentation, and thank you for your attention. We are now available for your questions.

Thank you, Alina, [Operator Instructions] We will now take our first question from the line of Laura Simion from BRD GSG.

Good afternoon. Thank you for the presentation. I have a couple of questions related to this quarter's results and then a more general one. So regarding the OpEx per barrel for this quarter is about 11% higher on a quarterly basis. I know the production was also a bit higher, but what else is behind the -- [ in handy ] because I was expecting a production cost in line with the last quarter of 2023. And then about the additional tax on revenues, why is it calculated only for R&M? And where is it reflected in the P&L?

Okay, please go ahead. If you have further questions, address them all at once. .

Okay. If you could give us more details about the pilot project for Green Hydrogen and Petrobrazi? And how do you see it developing further on? And about the investments you announced the projects in renewables. If you have a number of how much you added production will you all have from these projects once they are all the -- in production. And if this will imply also a change in strategy on your power business.

Laura, thank you very much for your questions. I will take your first question on OpEx per barrel and Alina will talk to you about taxes with regards to Refining and Marketing. You're right, we have had an 11% increase in our OpEx per barrel for the first quarter, we're getting around $15.91. And we do hold to the full year being just above the $16 range. The main driver at this point, Laura, is personnel costs. Obviously, as you may know, the inflation in wages has been quite high. in Romania overall and then general inflation across all parts of our sectors as well in that. So mainly inflationary driven is showing up in our personnel costs, we assure we are working hard to look at opportunities to take our cost down but also to take our production up as well.

Okay. I will continue, Laura, with the second question. So the new tax is 0.5% is applicable starting this year for 2 years? We calculated on a quarterly basis for the entire Petrom S.A, the value for first quarter was approximately RON 54 million for Petrom Group, it is covered -- this number covers Petrom S.A and also OMV Petrom Marketing. It does not affect only R&M. It affects all the segments. The reason for the biggest amount being in Refining and Marketing is triggered by the fact that Refining and Marketing has the portion from Petrom S.A allocated to Refining and Marketing, but also the portion related to OMV Petrom Marketing. That's why approximately RON 35 million out of RON 54 million is going to R&M. For the full year, we keep our initial estimation that we announced beginning of the year that the impact will be less than RON 250 million for the full year 2024.

Thank you. With regards to the Green Hydrogen projects that we announced, the financing with regards to -- from the National Company resilience plan. These are not pilot projects. These are projects to put 55 megawatts of hydrogen, green hydrogen capacity into the -- sorry, into the refinery. It has a few key aspects of the [indiscernible]. Obviously, it will help to reduce the scope of the CO2 emissions from our products, particularly in the production of HVO and SAF, will ensure compliance with the regulations that we have in place and I see it will enable a lower cost of green hydrogen that we will need, that will replace it from a third-party supplier overall. So these are the main attributes with regards to this project. On the investments in the renewable, yes, you are right. We have quickly succeeded -- surpassed our target that we had put out in place for that. If I would just say one thing, Laura, we announced that on the 19th of June, we will have our 2030 strategy update, and maybe we hold that to give more details at that point in time. So -- and we look forward to you being able to join us at that call. Thank you.

Your next question comes from Ioana Andrei from Alpha Bank Romania.

I have a couple of questions. First, if you could tell us a little bit more on the Georgia exit decision. What does it mean for Petrom. And do you have any update on Bulgaria offshore project? Second, I have a follow-up question regarding the new royalties quotas. Are the new higher quotas applicable to Petrom concessions or Neptun Deep. I know there has been a discussion on this, but I would like to know if you have any update on this. And third, I would like to know what are the quotas that by NERA are for the gas sold at the regulated price. And if they remain in place even if the market falls below market prices fall below the RON 120-per megawatt. And what about the power market? If March is not longer mandatory, does it actually mean that if prices fall below the RON 400 oil volumes will be sold on the free market?

Thank you, Ioana. I will take your first two questions on Georgia and Bulgaria, and Alina maybe can take the next question. So yes, we have announced that following several unsuccessful attempts to actually get to partner for the exploration of the offshore Block two in Georgia, and we have decided to withdraw from the license, and we're under this process right now. It's quite common normally that you would have a partner in this kind of activity. It's a form of derisking and we've been unable to secure partners and we have chosen to exit from that activity. Maybe on the flip side, when we come to Bulgaria, we have -- you may have seen that we have recently and are in the process of taking operatorship of the Han Asparuh block from TotalEnergies, and we are in the process and pursuing continuing exploration activity in that license. So we continue to see, particularly on the western part of the Black Sea significant potential, and we are keen to pursue that.

I will continue with the next question. So what was related to the royalties I can confirm that, in our view, the new royalty rate applies for new concessions, consequently for both our existing concessions onshore and offshore, but also for Neptun. We do not see this applicable. That's why we did not calculate the royalties for the Q1 with a higher rate. This has been confirmed by the Minister of Finance in the public statements as well. And otherwise, there is no other development here. With regards to NERA regulated prices. So what we see is that for Q1 2024, the quantities for households and district heating customers. are at approximately 2.9 terawatt hour for Q1 versus 4.2 terawatt hour in Q1 last year. And also, similarly, for full year 2024, we have an estimation of 7.9 terawatt hour versus 10.4 terawatt hour last year. So these quantities are lower on the basis of lower production on one hand, but also on lower demand for households. I think your question was what if the quantities and actually will be lower than this if the volumes to households and the district heating companies will be actually lower, this will lead to higher volumes to be sold on GRP on the gas release program. If we move similarly to market that I can confirm your understanding that if market -- if the price will be below market price of RON 400 per megawatt then we will basically sell everything on the free market.

Okay. But this year remains in place also for the gas side, if the prices are lower, actually you sell it on the free market or...

It will be up to the customers. The customer can choose to go in the free market, but then we will have the GRP obligation. So we will be obliged to sell because in the GRP obligation, the quantities for households and district heating are being deducted. So the regulator is trying to ensure that the market will have enough liquidity via this GRP mechanism. But what we you pointing basically, what -- I mean, I think if we go a bit higher level, we see clear steps was the regulation. We see markets -- regulated markets moving to the market prices going down in line with market prices. We see shortening of the dead lines to end of this year. So the Romanian market for Gas & Power is moving to a free market started to move towards the free markets with these changes.

But for the GRP obligation, right now, do you have to sell it at a 5% discount versus market price? Or what is the...

There is a price formula according to the GRP. It's a formula given by the legislation, which takes into consideration the recent prices.

Okay. And GRP obligation is only for 2024? Or is -- what is the information on the GRP program right now?

To my knowledge, for 2024.

Your next question comes from the line of Tamas Pletser Petter from Erste Group.

I got two questions. First of all, regarding these regulatory changes you said during the presentation on Slide 5. How -- what is your estimate? How does it impact on your profitability of all these changes? And do you expect the -- I mean, you said that the market moves now to the free market again. Do you expect that the next round of changes up to the first quarter 2025 would result that Romania would be, again, a fully liberalized market of both gas and power? Or can we expect some further steps to that direction? That will be my first question. And my second question is regarding these acquisitions you announced in the renewable energy. I think during the presentation, you mentioned RON 1.5 billion remain the CapEx for M&A, is these two acquisitions? Are these two acquisitions actually cover this one in the RON 1.5 billion? Or do you expect some more M&A to include into this figure?

Thanks, Tamas, and thank you for joining us. Alina will cover the regulatory changes and your questions with regards to CapEx.

Hello Tamas, from my side. So with regards to the impact, it is not easy to isolate how much is the impact coming from changing the regulation because yes, what regulation does. It's really decreasing the regulated prices in line with the market. But nevertheless, trying to do that, we ended up with an estimation of these changes being approximately mid-double-digit million euro. And the main impact is coming from non-recoverability of the CO2 for quantities to be sold on market contracts. And because this is not longer recoverable, the CO2 not recoverable for the new quantity sold on market. That is the main impact there.

Okay. So I should follow that two items. Okay.

Yes. That's -- otherwise, with regards to the general comment, we see first steps towards the regulation. So it's not yet a free market, but we see a clear step in that direction. With regards to the CapEx for acquisitions, indeed, we have an estimation of RON 1.5 billion CapEx for M&A. But what is important is to understand this is -- especially the one announced beginning of January. It's 50%-50% partnership, which means it's a nonconsolidated subsidiary. And also, we mentioned at that time that this will be -- this will take also external financing. So the CapEx overall for the project is significantly higher as announced at that time, but the impact on our CapEx is just a 50% share of the equity portion of that company. So that's the value. And that's mainly the RON 1.5 billion is related to this what we announced already. There is a little bit of contingency for other potential things, but most of it is for what we have announced.

And sorry, what is this JV exactly, what of the two you mentioned?

It's the -- we have announced the beginning of January, the partnership with Renovatio. This is -- I think third of January is the press release you can search for it.

This is the one which takes most of the CapEx, although you said that 50% of the equity is covered from your CapEx?

Yes.

[Operator Instructions] Your next question comes from the line of Oleg Galbur from Raiffeisen Bank International.

Two questions, if I may. The first one refers to your guidance for the oil and gas production. Looking at the first quarter development, the 6% decline this year seems rather cautious and also implies sharp decreases in the coming quarters. So could you help us understand what is the driver behind this 6% decline that you guide for the full year. Is it related to some maintenance works? And if yes, when do you expect them to implement, et cetera? Also a split on the expected decline by oil and gas would be very helpful. Secondly, could you explain why the windfall tax paid in first quarter increased in comparison to the fourth quarter? I was having difficulties in [ comparison ] the number, especially when taking into consideration the lower gas prices in the first quarter of this year? And also according to my calculation, the volume sold to nonregulated consumers went down. So a bit of more color would be very helpful here as well.

Could you just repeat the start of your second question? We just -- the line wasn't so clear.

Okay. I was asking about the windfall tax paid in the first quarter, which went up quarter-on-quarter despite the fact that gas prices were lower and also according to my calculation, the volumes sold to nonregulated consumers went down quarter-on-quarter.

Thank you. I will take your first question on production. So yes, in the first quarter, we had a good production performance slightly better than expected with just a minus 4% decline year-on-year. I think it's pretty even between oil and gas in the first quarter. And yes, at this point in time, absolutely, we hold to our expectations to be above 106,000 barrels of oil equivalent a day for the full year. The thing I would just point out that you're absolutely right Oleg, it is in the second half of the year that we have the maintenance activity that's occurred. And you saw that actually the same as last year as well. So in the second half of the year, we have for maintenance. So we would expect a higher decline rate in the second half of the year. But yes, it was a good strong start to the year.

Oleg, I go to the second question. Indeed, the windfall tax, it's lower than last year and not higher than last year. So I don't know where you saw that. But its lower as we had the Brazi power plant and also working full capacity and also we had regulated quantities. So we have lower also influenced by the prices as well we have lower windfall tax for gas.

I was comparing to the fourth quarter to the last quarter of 2023, not year-over-year.

Okay. Okay. Okay. By comparison with last quarter, it was -- yes, indeed, that was slightly increased -- slight increase are not that significantly increased with -- I will have to look up what was the main reason for that...

Okay. But basically, there was no change in the regulation probably its only due to some...

It was no change in the regulation. No, no, no.

Okay. Okay. Probably it was driven by quantities sold to nonregulated consumers. That would be my assumption.

Yes, you are right. That can be the only ones, yes.

Yes. And Christina, just to come back to the first question. Would you be able to provide a split by oil and gas, are they expected decline for the full year?

We expect gas to be a bit more than oil, but let us come back to you on that one.

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

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