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 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 second quarter operational performance, as well as our progress in terms of strategy. Alina Popa, Chief Financial Officer, will give you more details on our financial performance and a brief outlook. Afterwards, the 2 members together with Cristian Hubati, the member responsible for E&P and Franck Neel EB member responsible for Gas & Power will be available to answer your questions. We recommend you to register for the Q&A session during the presentation by pressing star 1, 1 on your telephone key pad. You can also register during the Q&A session itself. I'm now handing over to Christina.

Good afternoon, ladies and gentlemen, and a warm welcome to our conference call that will take you through our performance in the second quarter of 2024. 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 second quarter of 2024. Brent price closed at a similar level with the previous quarter, as concerns related to the conflict in the Middle East were partially offset by bearish sentiment from revised demand expectations. Brent quotation averaged $85 per barrel for the second quarter; a 9% increase year-on-year. OMV Petrom indicator refining margin reached $9.60 per barrel in the second quarter, 14% lower year-on-year, as products' quotations did not keep pace with the increase in crude oil prices. European spot gas prices increased during the quarter, despite high gas storage levels, due to supply concerns around the major supplier, Norway. At an average of EUR 32 per megawatt-hour, the CEGH price was down by 14% year-on-year, however was up 14% quarter-on-quarter. Gas prices on the Romanian centralized market remained broadly flat quarter-on-quarter, with day-ahead prices of around EUR 26 per megawatt-hour; 25% lower year-on-year. Base load electricity prices in Romania increased by 8% quarter-on-quarter to an average of EUR 80 per megawatt-hour, but decreased by 11% year-on-year. The average CO2 price increased over the quarter, the first time in over a year. This was due to higher hub gas prices, start of the compliance period and some increase in industrial demand. The average price was still 21% down from a high base in the second quarter of last year. Moving to the Romanian macroeconomic environment, the latest available data shows that, in the first quarter of 2024, GDP increased by 2.2% year-on-year. According to the IMF's latest estimates from April, 2024 GDP growth is expected to be 2.8%, while for 2025 is forecasted to grow by 3.6%. Both figures are well above the estimates for the EU average, of 1.2% in 2024 and 1.8% in 2025. The consumer price index for the month of June 2024 versus June 2023 was 4.9%, on a downward trend compared to spikes in January and February 2024. Looking at the Romanian energy sector in the second quarter of 2024, the demand for all our products was mixed, based on our internal estimates. The demand for retail fuels increased in the second quarter by around 4% year-on-year, mainly driven by warm weather, car park increases and higher disposable income. Commercial demand was up by 23% year-on-year, supported by a strong increase in road construction activities as well as higher jet demand. Gas demand decreased by around 11% year-on-year, with warm weather impacting households and small and medium enterprises consumption, partially offset by increased industrial consumption, as well as higher gas to power offtake. Power demand was slightly lower year-on-year, while domestic production significantly decreased, by 19% year-on-year, Romania being a net importer of power in the second quarter. Power production from gas and solar sources had a significantly higher year-on-year contribution to the generation mix, while hydro, coal, wind and nuclear power decreased year-on-year. As a brief reminder, in the context of gas and power market prices returning to pre-crisis levels, the government took the first steps towards liberalizing the markets through Ordinance 32. Starting in April 2024, the cap price for gas sold to households and heat producers for households was reduced from RON 150 per megawatt-hour to RON 120 per megawatt-hour, applicable until the end of 2024. Moreover, 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 lowered to RON 400 per megawatt-hour for monthly allocations. The threshold for power over taxation is also lowered to the same price level. In addition, the CO2 costs for future deliveries are no longer recoverable from the Romanian state. For both gas and power, the margin allowed for trading activities in Romania was increased from 2% to 10%. Our current estimate of the negative net impact of the regulatory changes for OMV Petrom Group financials for April to December this year is high double digit million euro. Although we support the steps towards liberalization, these must be in the context of a competitive and predictable fiscal framework. For the interim period until full liberalization, which will take place in April next year, the level of taxes on power producers is very high. On Slide 6, we present the key highlights for the quarter, when we had robust performance in the context of lower gas and power prices, partly offset by higher utilization of our downstream assets compared to the second quarter of 2023. At RON 1.4 billion, our second quarter Clean CCS Operating Result was 15% lower year-on-year. Our operating cash flow in the second quarter of 2024 reached RON 1.1 billion, 156% higher year-on-year. The Clean CCS return on average capital employed remained robust at almost 24 percentage points. In Exploration and Production, the result reflects the lower gas prices and declining hydrocarbon production over the period. The result in Refining and Marketing reflects strong performance in our sales channels and excellent refinery utilization, partly offset by lower refining margins and additional tax on revenues. As a reminder, in the second quarter of 2023, Petrobrazi refinery underwent a planned turnaround of 8 weeks, after 5 years of operations without major planned shutdowns. In Gas and Power, the result reflects decreased prices and margins and a negative effect of regulatory changes. Our gas business result was impacted by reduced gas sales volumes, as we maintained focus on value over volume in the context of higher storage obligation, while our power business result was affected by changes in legislation. During the second quarter, we have further focused on delivering on our 3 strategic directions. In our strategic pillar Grow regional gas, our Neptun Deep project is progressing as planned. In May, we cut the first steel for the platform topsides in Indonesia. And in the third quarter we plan to cut the first steel for the platform jacket in Italy. We remain on schedule for drilling the first well in 2025 and first gas in 2027. We are also making significant progress in our strategic pillar Transition to Low and Zero Carbon. In June, we took the final investment decision for a new SAF/HVO plant in our Petrobrazi refinery, thus becoming the first major producer of renewable fuels in the region by 2028. At the end of June we announced that we have secured the feedstock for the SAF and HVO production in Petrobrazi refinery starting 2028. At least 50% of the contracted quantity of vegetable oil under the supply contract with Expur will come from Romania, thus ensuring a sustainable flow throughout the entire supply chain, from production to product placement on the local market. In renewable power, in June we announced that we will expand our partnership with Renovatio with a new acquisition of 50% stake in renewable energy projects amounting to 130 megawatt-hour. Thus, the transactions announced during the past 2 years with CE Oltenia, Jantzen, and Renovatio add up to a portfolio of solar and wind power of more than 2 gigawatts, including partnerships. On alternative mobility, after closing the acquisition of Renovatio network at the end of May, we are well on track to reach around 1,000 fast and ultra-fast charging points by the end of this year, positioning OMV Petrom as the largest player in e-mobility in Romania. We have already secured EU financing for part of our projects and intend to access further EU funds, whenever available. Last week, the General Meeting of Shareholders approved the distribution of a special dividend of RON 0.03 per share. The payment will be made starting from the 3rd of September. On HSSE, the Total Recordable Injury Rate for the rolling period July 2023 to June 2024 was 0.35. Moreover, we continued our efforts to reduce greenhouse gas intensity with projects in all 3 business segments. Based on our preliminary data, the GHG intensity in the second 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 3%, reflecting the natural decline in the main fields, partly offset by good results from workover jobs and new wells. Production cost per barrel of oil equivalent increased year-on-year by 1% to $15.62, due to the combined effect of lower volumes available for sale, favorable ForEx and broadly flat costs, with lower costs for energy, materials and services offset by higher personnel costs. In Refining and Marketing, we had an excellent refinery utilization rate of 98%. Total refined product sales volumes increased by 24% year-on-year given the low base in non-retail due to last year's turnaround, with retail sales up 5% year-on-year supported by higher demand. In Gas and Power, total gas sales volumes were 18% lower year-on-year, in the context of the higher storage obligation and less attractive supply opportunities. The Brazi power plant generated 0.5 terawatt-hour in the second quarter, covering a 5% share in Romania's generation mix. Moving now to Slide 8, total CAPEX in the first half of 2024 slightly increased year-on-year to RON 2.4 billion. In Exploration and Production, we increased investments in the Neptun Deep project, which is currently in the execution phase. Moreover, we finalized the drilling of 14 new wells and sidetracks and we performed more than 270 workover jobs. In Refining and Marketing, around RON 0.6 billion of investments were mostly dedicated to the refining business, for major projects such as the new aromatic complex, sulphur acid gas treatment plant and the new SAF/HVO unit, and also to retail, for the acquisition of Renovatio's charging points network. For the full year 2024, we broadly maintain our guidance provided in February of up to RON 6.5 billion of organic CAPEX, almost 40% higher compared to last year. There will also be CapEx associated with the closing of our M&A transactions for low and 0 carbon projects, that would bring the total CapEx to up to RON 8 billion. Please let me now hand over to Alina for more details on the financial results of the second quarter of 2024.

Thank you, Christina, and good afternoon also from my side. I will continue the presentation with Slide 10, starting with some highlights on the income statement, with focus on the developments of the second quarter of 2024. Sales increased by 4% year-on-year, mainly supported by higher sales of petroleum products, and higher sales volumes of electricity. This was partially offset by the impact of lower prices and sales volumes of natural gas as well as lower prices of electricity. Clean operating result in Exploration and Production was RON 0.8 billion, 29% lower year-on-year. This was driven by the lower gas prices, lower sales volumes, higher depreciation and exploration expenses, partly offset by lower E&P gas taxation and higher oil prices. Clean CCS operating result in Refining and Marketing reached RON 0.7 billion, 5x higher year-on-year, as the previous year reflected the planned refinery turnaround. This year evolution reflects excellent sales channels and supply result, offsetting the impact from the lower refining margin. Clean operating result in Gas and Power was negative, at minus RON 51 million, on lower result in both Gas and Power business lines, due to market developments and regulatory changes. The clean consolidation line was minus RON 108 million in the second quarter of 2024, mainly as a result of significant gas volumes injected into storage linked to increased storage obligation. Consequently, the Group Clean CCS operating result decreased by 15% year-on-year to RON 1.4 billion. For the second quarter of 2024, we recorded inventory holding losses of minus RON 4 million, compared with minus RON 30 million in the second quarter of 2023. For the second quarter of 2024, we also recorded net special income of RON 46 million, compared to net special charges of minus RIB 25 million recorded in the second 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 19% year-on-year to RON 1.2 billion. Let me go on to Slide 11, 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 54 million reflects the negative effect of lower gas prices, compensated by the increase in oil price and the lower E&P gas taxes. The latter is due to the tax-exempted quantities used in the Brazi power plant and the volumes put in storage for which overtaxation is due when the gas is sold. The operational effects had a negative deviation year-on-year, mainly due to lower hydrocarbon sales volumes, higher depreciation and higher exploration costs. In downstream, the negative market effect in Refining and Marketing reflects the lower refining margin. Operational effects were positive year-on-year, reflecting last year's turnaround, as well as excellent performance in sales channels, supply and non-fuel business. In Gas and Power, we recorded lower results in both gas and power business lines, impacted by market developments and regulatory changes. The result in the second quarter of last year was positively influenced by the reversal of a provision for risks assessed by the group in the area of sector specific taxation. The 0.5% tax on revenue introduced starting January, amounted to around RON 56 million, mostly booked in the Refining and Marketing segment. On Slide 12, I would like to continue with the highlights regarding our cash flow statement. In the second quarter of 2024, the cash generated from operating activities before net working capital movements and solidarity contribution was 37% higher year-on-year, at RON 1.9 billion. Working capital changes led to a cash inflow of RON 372 million in the second quarter of 2024, compared to RON 494 million in the second quarter of 2023. The solidarity contribution paid in the second quarter of this year, due for fiscal year 2023, was RON 1.2 billion, compared to RON 1.5 billion in the previous year. Consequently, the operating cash flow in the second quarter of 2024 amounted to RON 1.1 billion, compared to RON 412 million in the previous year. Our net payments for investing activities amounted to RON 0.7 billion, lower by 56% year-on-year. This reflects an increase of cash outflows for capital expenditures of 23% year-on-year, offset by inflows from investments in government bonds. The net cash position including leases decreased to RON 12.1 billion at the end of June 2024 versus RON 13.2 billion at the end of the second quarter of 2023. Our record high base dividends for the financial year 2023, amounting to RON 2.6 billion, were paid starting June 5, 2024. We also remind you that the special dividends, in amount of RON 1.9 billion, will be paid starting September 3. Let me move to Outlook, on Slide 13. And I will refer only to the guidance for this year, as the guidance for 2025-2026 from our Capital Market Day in June remains unchanged. We expect Brent oil price in 2024 to remain around $85 per barrel. Our hydrocarbon production in 2024 is expected to be above 106,000 barrels of oil equivalent per day, considering no divestments and reflecting the maintenance activities planned in the second half of the year. We expect inflationary pressure on our costs to persist throughout the year and we see the production cost at around $16 per barrel of oil equivalent for the year 2024. In Refining and Marketing, we currently estimate an average refining margin of around $10 per barrel in 2024 and a refinery utilization rate above 95%. As Christina mentioned earlier, we broadly maintain our CapEx guidance. Organic CapEx will ramp up in the second half of the year and is expected to be up to RON 6.5 billion in 2024. Additional investments for the announced M&A transactions would bring total CapEx to up to 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, and power in Romania to be above 2023, while gas demand to be stable year-on-year. 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. 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 take our first question, and the question comes from the line of Ioana Andrei from Alpha Bank Romania.

I have a couple of questions. First, regarding the gas storage obligation, you've mentioned an increase in the gas storage obligation. Is this a one-off due to current regulatory framework? Or should we consider a higher storage obligations further on as well? And if you could tell us what is the storage obligation for the full year? And second, I have a question regarding the renewables pipeline. You've mentioned the portfolio of 2 gigawatts including partnerships. How much of the 2 gigawatts are attributable to Petrom? And can you give us a time line regarding when we should see the additional megawatts being commissioned.

Franck, I think.

So good afternoon, Ioana, it's Franck speaking. On your gas storage obligations, so we have around 5 terawatt hour obligation this year. We had about 2.1 terawatt hour last year. The increase is linked also -- I mean it's an obligation. It's also linked to good news is we increased our portfolio between last year versus this year. So we should see it also in this spirit. It's linked. This obligation is linked also to the EU-regulaton due to the Russian gas crisis to have 90% of the storage filled by the end of the storage season. This will terminate at the end of this gas year. So that should not -- this obligation, we should not repeat next year. Now we will look at our storage based on our cost or portfolio for the next year and based also on the summer/winter portfolio. That would be our strategy. I hope I answer your question. Now on the -- our portfolio, and we say we have about 2 gigawatt of portfolio. So we have 1.1 gigawatt with Renovatio, which was in the press already announced, and we are now hopefully period, we will close very soon for one of the assets, the one with the company. We are developing our own asset also, we have issued a sub project, which we -- it's a project on our own land, 89 megawatts. So that's something where we are going to announce very soon the EPC contract for this PV plant. We have a partnership with Oltenia, which is 450 megawatt as such is on 50%, 50%. And then we have Teleorman, which is a 710 megawatt PV, where we are 100% OMV Petrom.

And regarding with the time line, when we should see this megawatt in function?

Time line. So all the projects will have a different maturity, but most of the power should come online in 2027, some in 2026 and some late 2027 maybe beginning 2028. Not all of the projects have passed FID yet. So I think it's -- but that's our forecast.

We will now take the next question from Laura Simion from BRD-GSG.

I have 2 questions. One, if you had any power sales on March this quarter. And the second, regarding the royalties and the windfall tax that you paid in the second quarter. And in addition to that, just a confirmation, I remember you said in the previous call that you have an official point of view from the Ministry of Finance regarding the applicability of the new royalties that are not applicable to current concessions?

Yes. So on the power sales on matches, so we -- last year, in December last year, there was a combined sign with [ Vestem ] as part of this regulation for sales after the 1st of April -- for the full year, I would say, which cover about 50% of power plant. Q1 was much higher because we -- the legislation, we run near 80% of our output through matches in Q2, much lower because, first of all, we had the shutdown. And then we didn't have additional contract. So due to the change in [ registration ] now it's not an obligation. It's up to us to decide if we want to sell more on matches or not. So we just fulfill the contract signed in December last year. That's our expectation until the end of the year that we will just fulfill the volume, which was contracted in December last year.

Moving now to your next question on royalty. So royalties of Q2 that we paid for Q2 2024 were approximately RON 190 million. In addition, it is covered both crude oil and gas. In addition to this, we had supplemented tax on gas, around RON 75 million. If the question was referring to the principles applicable for the royalties calculation. As mentioned before, we apply the royalties according to our concession agreement, which are basically the ones previously in the row. The changes in the royalty rates in our -- we apply to new concession agreement or to the concession agreements that do not have stipulated royalties in such agreements. Ministry of Finance publicly declared so that we refer to a public declaration from Ministry of Finance in this respect. What happened in the meantime in Q2, actually, there was a change in legislation, which was approved by Romanian Parliament and by Romanian President, which clarified even further. Now it's very clear that new royalty rates are applicable for new concessions or for those concessions that do not have the royalty rate stipulated, which is a very important clarification for stability clauses of such agreements.

[Operator Instructions] We will now take the next question from Daniela Mandru from Swiss Capital.

I have several questions. I will start with the more simple one. First, for the E&P segment, could you let us know what are the regulated gas volumes for the following quarters? I mean Q3, Q4 and Q1 2025 regulated gas volume.

Daniela, I'll kindly ask you to address all 3 questions at once and then --

Okay. Good. I have more, but -- okay, more than 3. Now the following question refers to G&P segment. What is the power production estimate for the full year 2024? What were the nonequity power sales in Q1 and Q2, 2024? On average, how much power does the group sales on the balancing market annually? And how many CO2 certificates were bought in the first quarter of the year? I have more, but I will stop here.

Okay. I will take your question on the gas sales on the regulated medium. So for Q3 last year, which was 1 terawatt hour; for Q4, 2.3 terawatt hour; for Q1, 2.6 terawatt hour. And to give you maybe for the full year 2024, we expect 7.9 terawatt hour Q1 '26 -- '25, sorry, maybe to be clear, 2.6 terawatt versus 2.9, Q1 2024. So full year 2024, 7.9 terawatt hour versus 2023, 10.4 terawatt hours. So we see a decrease in terms of demand on this segment as such.

And for the first quarter of next year, I understood well, 2.9.

2.6 versus 2.9. For production, we didn't disclose the number, but what we say our expectation because it will really depend on the market, but we expect to be higher than last year. So that's our forecast.

Yes. But here, I want to insist a little bit. I've seen your budget, we have a quantity of 5.9 terawatts to be sold this year. For me, it looks a little bit higher if I'm looking at what happened in the first half of the year. So that's why I asked probably will be below this figure below 6 terawatts.

Yes, because -- in fact, it's linked to your next question about nonequity power because we have also [indiscernible] our so let's say, around 2 terawatt hour of nonequity sales of power.

In the first quarter, 2 terawatts.

No, no, Full year, full year.

Full year.

What was the last question?

On the balancing market, on average, how much the group does sell. So on average, in order for us--

Yes. It's not necessarily a volume which is important. I think it's more our market share in this balancing. And we are looking around, let's say, in the last years, between 10% and 15%. We have some peak at 20% depending on the -- if there is a lot of water available, if there's a drop, we tend to be more 20%. If it lots of water, we are more than 10%. So you imagine, we are competing against hydro on that, on this market of balancing. But it's -- our market share is between 10% and 20% depending on the situation and the weather, especially.

Daniela, your last question related to CO2 certificate, is that okay? So just a bit of a reminder for the total ETS estimated emissions for 2024, that are to be submitted by September 2025, we have approximately 3.2 million tonnes of CO2. And out of this, 0.5 -- now 500,000 are allocated for free, mostly in the refinery. The rest are to be purchased. That's our big picture, so to say. With regards to your specific question, how much we purchased in this year. We had some small spot acquisitions, really small 15,000 certificates, and we have some forward acquisitions, about 1 million certificates, half of them will delivery this year, towards the end of this year and half in the later years.

And now if I have more questions, can I follow up if it is more time remains?

Yes, Daniela, sure. If not you can send us the question [indiscernible] Investor Relations, and we will answer everything, no problem.

We will now take the next question and the question comes from Oleg Galbur from Raiffeisen Bank International.

The first one is, could you please provide more granularity on the loss reported by the G&P segment? While I understand that the operating loss was mainly due to the legislative changes, but it would be helpful to understand how much of earnings decline was triggered by legislation and how much was due to other factors such as volumes, for example? Also, would you tell us what shall we expect in the next 2 quarters in terms of G&P earnings? Secondly, could you help us assess the cost impacts of higher storage obligations this year? And are those costs booked in the E&P or G&P segments? And lastly, do you plan any divestments of oil and gas assets this year? And if yes, what could be the impact on your full year production guidance of more than 106 KBOE per day?

Franck, maybe you take the first 3 questions.

Yes. On the quarter for Gas & Power. So first of all, there is a large part which is linked to the reversal of a provision if you compare to last year, to last quarter to this quarter. And so that's quite significant. Then there is the CO2 that we are not able to recover on what has been contracted forward from 1st of April until the end of the year. In fact, a bit follow up on your question on that, and we say it's a high double-digit impact for the full year as such. In terms of -- so that's mainly for power, so 2 main impact, the CO2 difficult -- the lack of recovery and this reversal. In term of the quarter, last year, we didn't really produce. We were on shut down most of the quarter. So it's -- believe it's linked to regulation and this reversal, not into operation as such. And the rest is linked to gas activity and the high storage obligations. So we had to store 55% more than last year. But it's -- yes, it's a cost. It's borne by Gas & Power, but we will have some, of course, benefit looking forward in Q4 and Q1 when we are going to withdraw the gas and be able to get the spread between summer winter. So there will be some benefit, an increase of benefit versus last year due to the volume as such. On the forecast for the rest of the year, I think we -- Q3 will be still, I think, better than Q2 because the power plant will run, of course, a full quarter. Even if you still have the CO2 impact. But I think we're still difficult because of this regulation. So we expect to be lower than the last year Q3. And Q4, again, Q4, it really depends on the winter temperature, how would be the price in Q4 and the demand in Q4, but we expect again to be lower than last year due to the change of regulation, but much better, of course, in Q2 and Q3 were impacted in general in Gas & Power due to the storage obligation.

And thank you for the question, Oleg. With regard to the divestment plan for 2024. No, we don't have any plans for the divestment for 2024.

We will now take the next question from Tamas Pletser from Erste Group.

Actually, Oleg asked exactly the same question I wanted to ask just maybe a follow-up over here. Do you expect this regulation to change in favor of you from the beginning of next year? Especially I'm referring to the CO2 cost, which you -- now you cannot recover. So do you expect that cost item to be recoverable from the beginning of next year?

Hi Tamas, and nice to hear about you. Looking at forward this regulation finished at the end of this year. And we have no forward position for next year. So we don't expect any negative impact anymore from this regulation for next year.

Maybe just to clarify, it's not like we will recover next year after Q1 next year, we'll have free market. So we are not in a position to have this situation.

Yes. But even for Q1, we don't have a forward position. Q1 future, we don't have a forward position.

But you are generally looking for a positive change afterwards. If there is a free market, you probably have more chance to pass this cost to the prices.

Of course, we have a positive change. But I think also what we have seen this summer is government realized that the importance of the gas asset to be able to maintain the network to maintain the frequency and the voltage on the network. And I think our message is you need this type of asset to run. So we make sure that we have an incentive to run on the market. And I think that's -- definitely, we have been the difficult last 2 months in terms of supply demand in Romania.

[Operator Instructions] We will now take the next question from Daniela Mandru from Swiss Capital.

Regarding the low-end 0 carbon operating profit. I know previously, when you announced first time the strategy 2030, you said that by that time, the operating profit from this segment will be around 15% of EUR 1.5 billion estimated for that year. You keep the estimate?

Yes, sorry. Yes, we are in our strategy update, we keep the estimate of about 15%, maybe a little bit higher coming from our low-end 0 carbon by the end of the decade.

But you are aware that is more than RON 1 billion. So that's why I'm asking because from your IR, I received this feedback that my estimate for this segment by 2030 are too high. So that's why I wanted to check with you again. Okay, understood. Now regarding -- still regarding the Strategy 2030 last time, I don't know, I had some technical problems. I wasn't able to clarify some points from that strategy. What I noticed, but also the other analysts noticed that your estimate for Brent for power prices are relatively high versus what the consensus is now regarding the Brent price regarding the power price. For example, for the Brent price, Bloomberg quoted, it's around $72.70 per barrel, why you are coming with an $80 per barrel. What source did you use for this estimate? And what justifies this relative optimism? That would be the question. And this question applies also to your power price estimates. The [indiscernible] power future curve indicates a level of around EUR 60 per megawatt while you are coming with EUR 90, a range with EUR 90, EUR 120 per megawatt. I understand that you also plan to sell on the balancing market where the prices are very high. But still, the price, it's much above what the future curves indicate for the power prices. That would be the questions related to the estimates for 2030. And the other question in regard to the OpEx estimates, E&P OpEx estimate for 2030. I made a simple computation. You said that you estimate $8 per BOE. But at that time, 44% of the group's hydrocarbon production will come from Neptun Deep gas. And the remaining was of 56% will come from current operations for simply still at put a 50-50. That 50% of $3 per BOE, 1.5 BOE will come from Neptun Deep, the rest of $6.5 per BOE representing 50% of the current operation will come from the current operation, of course. That would imply that you estimate that your OpEx estimate for 2030 from the current operation will be around $30 per BOE, but right now it's $16 per BOE. And probably the trend is upward, not downward. So how do you plan to achieve this reduction?

Thank you for the question. Alina is going to take your prices question, and Cristian your OpEx question.

Now with regards to the prices. So we have a market intelligence team that is analyzing basically supply and demand perspective on the long term and also they look into geopolitical context and so on. So this was done. We also compared ourselves with peers, with market expert agencies and so on. And at that time, which was approximately May this year, we were in line with everybody based on all the analysis I have seen. Of course, in our industry, we are very much used to volatility that is changing in Q1. It can be in an either situation. And we don't rely to the maximum extreme on these prices. We always test and we tested our strategy for the downside scenario, and our strategy is robust and then maintains it depletions but also in a downside scenario. And that's, I believe, most important. Otherwise, we publish the activities, and we are resilient with our integrated business model in any volatility we might face over the next 6, 7 years. With regard to Power is coming to the -- I mean, same principle apply. It's -- and if we defer to the, why we see them so high, we expect a significant growth in electrification, which we believe should drive on the medium, long term prices up on the power side.

Yes. On the other side, the others are saying that also the renewables will increase significantly, so that will reduce the debt anyway. These are estimates for the long term, nobody knows what will happen yes?

Dana, it's also a base load price we are talking about here. So it's not a capture price ratio. It's for renewable. It's a base load price. And today, you have a spread between Germany and Romania, quite big, it's nearly EUR 30. When you look at next month, for example, next quarter, we have EUR 30 spread between 3-0 between Germany and Romania. So we see also with the present market.

With regard to the OpEx, thank you for the question. So basically, we are looking to where would the OpEx cost per barrel in the range of USD 6 per barrel in the next future till Neptun is coming onstream, and this will be done through a very strict cost development. And we're installing different program in place for that and as well very strong management of the deferments and the declines. So we are optimizing all our shutdowns to -- in order to bring ultimate performance also from there.

So basically, you are expecting the OpEx from current operations decline significantly. I've computed exactly because I can send you my excel, it's very simple. But basically, you are expecting your OpEx from current operations to decline by compounded annual growth rate of around 6%, while the inflation over the period, it's around 3% -- and I was.

If you can send us the calculation, it sounds high, what you just said, but please send it to our Investor Relations and we'll come back to you. 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 the IR 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.