SNGN Romgaz SA (SNG) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to our Conference Call for discussing the financial results recorded by Romgaz Group in the First Quarter of 2022. After introducing the speakers, Mr. Razvan Popescu, CFO, will make an opening speech. Thereafter, the Q&A session will take place. Please be advised that this conference is being recorded for internal purposes. On behalf of the company, the following speakers attend this conference. Mr. Razvan Popescu, Chief Financial Officer; Mr. Radu Moldovan, Energy Trade Director; Mr. Marius Veza, Accounting Department Director; Mr. Ion Foidas, Production Department Director; Mr. Paunescu Octavian, Exploration Operations Director; Mr. Dan Cornea, Head of Investments, Project Management. Ms. Gabriela Tranbitas, Head of Financial Reporting and Accounting Methodologies; Mr. Marius Sabau, Head of Electricity Market Development and our Investor Relations Department. Now I would like to give the floor over to Mr. Razvan Popescu, who will open the conference call with an opening speech.

Good afternoon, and thank you. Good afternoon, ladies and gentlemen. Thank you for joining our conference call to discuss the Economic and Financial Results of the First Quarter of 2022. We released the quarterly report of the Romgaz Group at the end of last week, and this includes the presentation of our economic and financial performance and the consolidated, condensed internal financial statements. Also, a presentation of the group activities is available on our website in the Investors section. I would like to emphasize that some aspects regarding the gas market environment and also to highlight the group's operational and financial performance. Let me start with some aspects regarding the market context that have impacted the first quarter of this year, including the latest regulatory changes. According to our assessment, natural gas consumption in Romania decreased by 11% year-on-year. Nevertheless, imported gas volumes recorded an increase during this period and still accounted for about 22% of total consumption compared to around 18% in the first quarter of 2021. Still Romania enjoys a low degree of dependency on gas imports compared to other European countries. Wholesale average weighted gas prices on the remaining commodities exchange, both spot forward and balancing market continued their steep upward trend with an average price higher over 5x year-on-year in the first quarter of 2022 compared to the same period of last year. These prices are considered as out of the month of delivery or transactions concluded in this market segment. On the Central European Gas Hub, the reference price followed a similar trend in Q1, higher over 5x year-over-year. Regarding the gas sector regulation during the first quarter of 2022, the gas release program was still in force completely, that according to the National Authority for Energy Regulation order #143 and 4 for 2022, large gas producers had the obligation to offer 40% of the previous year's gas production on centralized market with a discount of at least 5% from the previous 60 days average price for the standardized products. It is important to mention the fact that the gas release program is no longer in force starting with the 1st of April as the government has issued an emergency ordinance #27 for 2022. So starting with the second quarter of 2022 and until the end of the first quarter of 2023, the ordinance in force gas prices for some categories of consumers like gas and electricity producers and final suppliers. Also, we want to note that gas volumes sold at regulated prices are to be exempt from the windfall tax and gas royalties will be competed at these prices instead of those of the Central European Gas Hub. Regarding the operational and financial performance recorded by Romgaz Group in the first 3 months, we can point out the following aspects. Natural gas production was reported at 1.31 billion cubic meters with a marginal adjustment of just 0.3% compared to the same period of 2021, but slightly above our annual budget. We continued our efficient measures to support production development. And here, I can mention only a few specific activities, such as optimization of gas production, extension of rehabilitation projects of the main mature gas fields, execution of workover operation in inactive or low productivity wells, completion of investment works to extend the production infrastructure and connection of new wells to this infrastructure. With respect to the investments in our gas production facilities, we completed work for surface facilities to stream into production of 4 wells and are in progress with surface facility for another 6 wells. We performed recompletion, reactivation and reverse for a number of 46 wells in this period. We continue to hold a significant position on the Romanian gas market. According to our estimate, we achieved a market share of 36% of total gas delivered in Romania, this impacted by higher importing volumes, as I stated a bit earlier, but improved our position to 46% in terms of consumption covered from domestic gas. Regarding gas served to third parties, volume decreased by 16.7% year-over-year in Q1 as a result of lower gas consumption in Romania. Nevertheless, total revenues from gas sold in the first quarter increased to RON 3.44 billion, over 3x higher compared to the same period of last year and that historical high due to significant increase in our average realized gas selling price that overcompensated for the volumes sold. Revenues from electricity added RON 321 million, almost 8x higher year-over-year as a result of a higher production and favorable prices in the gas market. Revenues from storage services increased 11% year-on-year to RON 88 million mainly due to higher revenues from capacity reservation and injection services. Overall, in the first quarter of this year, we succeeded to report total revenues of RON 3.93 billion, almost 3x higher year-on-year and at a quarterly record high for the group. On the expenses side, the major taxes, including the other expenses categories increased substantially. So the windfall profit tax has increased approximately 11x and the petroleum and UGS royalties increased over 5x year-on-year. Jointly, these 2 taxes accounted for almost 60% of total revenues and represented an expense of RON 2.3 billion in the first quarter compared to only RON 0.2 billion in the first quarter of 2021. Bottom line, we reported a record high net profit of around RON 980 million, higher by 111% compared to the same period of 2021. Profitability will continue to be strong as well, although unfavorably impacted by the higher tax expenses. We recorded an interest of -- earnings before interest tax deduction and amortization margin of 31.2% and an EBIT margin of 29% and a net profit margin of 25%. On the CapEx side, Romgaz Group invested a total amount of RON 108 million in Q1, focused 31% on geological exploration, 67% in equipment upgrade and 2% balance in the storage and electricity segment. Regarding the strategic development of our company, I would like to mention that the latest achievements are in line with the development strategy for 2021, 2030 that received a green light from our shareholders on November 4, 2021. Please note that our strategy includes important objectives, development of onshore blocks under construction, construction of new perimeters and exploitation of offshore gas in the Black Sea and the overall annual decline of the natural gas production below 2.5%. Production of sustainable energy and a 10% reduction of carbon, methane and other gas emissions. The most important point in our strategic development is a well-known project known as Neptune Deep. In this space, on the 3rd of May 2022, Romgaz has signed a share purchase agreement for the acquisition of all the shares issued by ExxonMobil Exploration & Production Romania Limited, a company that almost 50% of the acquired rights and obligation under the petroleum concession agreement the East area, the Deep Water Zone, I just mentioned. Legal adviser programs with Dentons and Suciu Popa and Asociatii in the law department and also results for the fiscal and financial and the diligent fiscal assistance. This represents the most important transaction performed in the energy sector in the past 30 years. Also for Romgaz, the transaction represents a milestone in the corporate transformation and development. We will significantly increase our natural gas production and consolidate our position as a top player on the Romanian and the European oil and gas markets. The FDA received a green light in the extraordinary general meeting of shareholders of Romgaz on April 28, and the completion of the transaction is subject to the procurement of the suspensive conditions in the agreement. The acquisition, as you know, will be partly financed through a credit facility in the amount of EUR 325 million that has already been signed by Romgaz on the 30th of March this year. We are implementing step-by-step our ambitious strategy that will ensure the development and the continuation of our company. In the end of this presentation, I would like to mention the approval of dividends to be paid this year on 28th of April. The shareholders meeting decided of a total gross dividend of RON 1.46 billion or a gross dividend per share of RON 3.8 to be paid to shareholders in the registry on 6th of July. Dividends will be distributed to shareholders also in July. With this, I would like to close our presentation, and thank you for your attention.

[Operator Instructions] Ms. Iuliana Ciopraga, if you turn on your microphone, then you can address your question.

There are a couple of questions. Can you hear me?

Yes, we can hear you.

I have a couple of questions. First on the price in the first quarter of this year. Based on my calculation, the price was close to RON 235 per megawatt. If you could confirm, somewhat close to this number, if you could confirm the number. And in the presentation a graph with how prices evolved in the first quarter. And if we look at that graph, prices were much higher than what we are seeing in the first quarter results. And it will be helpful if you could provide some explanations on that. Secondly, regarding deliveries and the drop in deliveries, we see that you stressed less from storage. Did you have less gassing storage? Could you provide some explanations why delivery dropped in the first quarter? That's kind of it for now.

So to start with your first question, yes, your calculations are close to what we have managed, but this is because we cannot think that our delivery just in Q1. There are a lot of historical contracts, especially the big historical contracts with big consumers and other municipalities that come from last year when the formula and the price were different. So we -- for us to sell everything on the BRM and to just be linked at the BRM is quite difficult. But yes, your assessment is correct, but this is something that Romgaz has to do because we also need the visibility and stability for our future cash flows. And having yearly contract, of course, if the price is upwards trending on the stock market or on the market, we cannot follow the price effect. And going back to the extraction and the deliveries we have informed the stock market, and we have informed our investors that gas that has not been delivered, is in storage, and it has not been extracted because of the high flexibility that was given because the -- our biggest consumer, some of our biggest consumer. And our biggest consumers is in solvency and due to a court ruling, we had to give that flexibility with them. They have not used all the flexibility, and we could not sell that gas because we needed to have it available if they would have used it. And also because of the gas release program that has been extended, as you know, by the end of the last year, and we have offered the quantities on the gas market, but they were not acquired by the market participants. So because of the flexibility that was given to both big consumers and municipalities, we have had a bit lower volumes that we have sold. But that gas is in storage and will be sold at a later date and is available for the extraction period of the next winter.

And can you disclose how much gas you have right now incurred. And how much you had at the end of the first quarter of last year.

[Foreign Language]

So the -- the information is probably on the program side. So we can come back later. We can talk later, if that's okay for you.

To summarize -- a follow-up question then, regarding prices, what should we expect for the following quarters? I mean, in the following quarter, the increase for sales the distributing should be lower, increased -- and we should expect prices to get closer to the ones from, [indiscernible] right?

Well not necessarily. In my view and because of the ordinance and the fact that the ordinance has allocated all our productions through to the consumers also the gas consumers and municipalities and the final consumer. I think there will be a disconnect from the BRM at the moment. And I think the BRM will have -- will be impacted and will have lower liquidity than we are expecting and we also see that the BRM should still be linked with the European Gas Hub. So I don't think the BRM and the prices that have been given in the ordinance will be the same or converged.

Right. Will you report them separately? I mean, will you report separately the volumes sold in ordinance Or it can get a bit more visibility going forward? And if you can -- do you have any estimate on where these volumes might be, these volumes or the end of your units.

Yes. So regarding the oil business, all the volumes available that Romgaz will have and -- will have during -- until the end of the ordinance have been already allocated. So any other volume that might become available during this time when we probably sold the market prices, but until then or -- we have seen, of course, we are doing our own calculations at the moment to see how the ordinance will impact our production. But of course, our deliveries have to be made in respect with the ordinance. But yes, we will probably come to the stock market and inform the stock market and all our shareholders on how this will impact in the future from just, let's say, of preliminary, we knew the impact for us is positive because, of course, the prices will not -- are exempt from the windfall tax and the royalties are made at the cap prices.

But is it -- can you detail what the volumes would be? And is it public information, what volumes should be?

[Foreign Language]

[Interpreted] So the information is not made publicly, but we can offer percentage how much of the quantity is offered on the DRP program.

I meant the ones from the ordinance -- from the ones that it needed to be sold at a fixed price.

[Interpreted] It's a bit difficult because it's not until the end of the year and it also covers the first quarter 2023. So I could give you a percentage, but it won't be exactly, I mean, from our production, but you would not be able to extract much from it because, of course, we have gas being sold from contracts that are coming from last year that are ending this year. And of course, this has been taken into consideration. So it's not something that you could extract and extrapolate because I know what you are thinking, but probably you may be able to extrapolate from that.

I can provide you an answer from Mr. Radu Moldovan. So there is around 32% of the total gas deliveries that is made according to government emergency ordinance for 2022. So this is 32% approximately, out of which 85% is for households and 15% for power plants.

Of total gas deliveries over which period over...

2022. The current year.

Only for the current year. So 32% of gas deliveries estimates for this year, including the first quarter of 2022.

For this year. Yes.

We have a hand raised from Irina Railean. In the meantime, we received written questions from Mr. Tamas Pletser. The first one is related to what is the current status with the Iernut power plant upgrade.

So at the moment, we have had a decent year ordinance that -- so we can also use for restarting the work. We are in active discussions with the previous entrepreneur that has started and are hoping to finish the power plant with. But at the same time, we have made every -- we have taken every measure to have the project in auction if that will not be possible. So we are actively working on both fronts, also trying to have it figured out how we can end it and how we can make the commercial terms for Romgaz, but nevertheless, we are committed in having it started. Also, we have included in the works different ways to start the power plant either to start it with 1 cycle or both cycles as one. So we have a different technical approaches that we can take. But I think that in the near future, we will announce the stock market on what the decision as the -- or exactly what the decision is.

The other question from Mr. Tamas Pletser. Also when will you close down the acquisition of Exxon's stake in Neptune?

Can you please repeat.

Yes. When will you close down the acquisition of Exxon's stake in Neptune?

Yes, we hope, as we have announced we have the acquisition to be completed by mid-year, that's not up to us. There are some substantive conditions in the FPA that, of course, are regulatory that we need to have in order for the national agency and resources. Also, we do have the decision from the Supreme Council of Defense on Romania and also need a government decision regarding the change of control. So we have done everything that we can. Regarding this, we are actively working in taking over all the assets of the company that we have bought including the personnel, the staff and everything that Exxon has been doing and all the know-how that comes along with this company. But ultimately, it is in the state decision to have everything ready for the completion.

Ms. Irina Railean will you try again to address the question.

Can you hear me now?

Yes. Yes, we can hear you.

First of all, a question on the ordinance 27, so 32%. It's -- just to make sure I understand correctly, it's out of deliveries for the entire 2022 year or is rate for the period starting this April to December?

It is for the entire year 2022. Mr. Radu Moldovan provided the answer in Romanian.

Okay. And any visibility for the first quarter of the 2023, I guess, little bit higher because probably you didn't manage to secure any or to sign any contracts for this period, but if you have any visibility for the first quarter of next year.

So according to Mr. Radu Moldovan, 80% from the gas quantities for the first quarter of 2023, our gas that is going to be sold under the government emergency ordinance 27 for 2022.

Okay. And the same split probably applies here for house calls and thermal power producers.

It's the same percentage. Yes, 85% and 15%.

Okay. Okay. And one update maybe on Caragele, if you have any update regarding this development. For example, how much of the current production comes from Caragele? And what could we expect in the future, we noted a special provision regarding deep onshore development in the current amendments to the offshore loan, if you could provide us any details regarding it, what should we expect in the future? How much -- how important is the coverage now for -- how much is the production comes to this project that will be very, very helpful.

We have stated also in our strategy, Caragele is a very important project. It has a strategic importance both for Romgaz and both for Romania. We are actively exploiting it at the low levels. So we have not taken at the moment and before that it will have to come to the offshore law or the -- let's say, it's probably a benefit that could come out of it. But if the law will be given in this respect, of course, we will have a look, but we are actively investing in Caragele at this moment. We are looking at having more buildings being done as soon as possible even in the first part of this year, and we have already production coming from Caragele. As an exact number, I think our production manager team can help. But yes, we are definitely looking at it as a strategic project that will complement the gas that we will probably be a bit flowing from TD. And we hope that from Caragele, let's say, the new and additional gas will flow much sooner.

Okay. And any idea of how much of the production right now comes from Caragele?

So production from Caragele is around 850,000 cubic meter per day.

And given that at this stage, it's -- or in the future you expect even higher flows from Caragele. Their role will be just to maintain the production decline or can we see a reverse in the production, the trend of production of an avenue. Can we see in the future, except from Neptune, of course, higher production volumes from onshore -- or will its role be just to maintain or mitigate the production decline of natural reserves.

In the near future from all the investment that we have made, we also have in the new wells that I have told you and the surface works that we have been doing, the improvement of the old wells, we're just -- so in the strategic -- in the strategy. And now the strategy is to try to keep production at a decrease of maximum 2.5%. We are hoping that this year, there will be no decrease. We are looking quite good in the first quarter. But of course, Caragele will probably come on top of this. It is not a science because we need to see exactly how much gas will flow, we will see how much wells will be successful, but the most probable, the production decrease will revert if this project is to be truly successful.

Okay. One more question regarding the depreciation and amortization that we saw or some lower figures this quarter, especially RON 47 million year-on-year decline in the upstream depreciation. If you could please explain us a little bit what happened there? And what should we expect such lower figures in the following quarters or was this just a one-off?

Depreciation in the Upstream segment is based on the current level of production. And on the reserves. Also on some of the producing assets were fully depreciated. So there's more depreciation on those assets.

Okay. It's just a ratio for production to reserves that reduced the amortization because production was broadly flat. That's why I was asking.

I don't have the information, but I will get back to you.

Okay. And regarding the reserves, do you have any updated figures I mean, I guess, I think the last -- let me figure here from 2017, if you have any updates regarding the current level of reserves or the level from the end of the year or this year?

Unfortunately, that is a classified information. So -- of course, we have the reserves continuously monitored. But right now, we are in the process of reevaluating all long gases reserves. And if and when that will conclude, we can inform the stock market. But of course, we cannot give any kind of classified information to the stock market at this point in time or information that has not been audited by the third party. We are in the process of audit as we speak.

We could see some figures probably in the next report this year, maybe.

Yes. Yes. I think during this year, we will see some figures.

And 1 last question regarding the current situation of the gas or general energy prices what do you think would be Romgaz role be to secure the energy supply in Romania, should we expect higher volumes of production in the following years? Or how do you see this situation I mean, is this an opportunity for Romgaz or how do you see this situation.

Of course, in this changing landscape and in this changing of environmental, geopolitical environment, we need to be extremely active. We need to be adaptable to say so, and we need to change and help the macro environmental situation. At this point, we are running with the full steam ahead. We are trying to put in production everything that we can. We are trying to speed up works, and we are trying to speed up drilling. But unfortunately, we are also being impacted by the problems in supply chain. We are having a lot of acquisitions that are going ahead a bit difficult because the suppliers are not able to find the raw materials so they can ship. So of course, we are encountering this high inflation as well. The rise in prices as well. So we are trying to mitigate all of this and we are trying to make, let's say, to have a better percentage of our investments that we have had during the past years. We definitely see a necessity of operating our production. We definitely see a necessity of continuing to be one of the biggest players in the gas market in Romania, and we are very committed in going forward with all of this.

We go on with another written question from Ms. Laura Simion. Can you disclose how much of 2022 production was already contracted?

The answer is provided by Mr. Radu Moldovan. It is -- all the gas quantities available until March 21, 2023, is already contracted.

Another written question from Juan Andre I have some questions regarding the production. First, please explain the 70% growth in power output. Are you still operating only 1, 200-megawatt unit? What to expect for the next quarters a similar growth pace?

No, this is just a one-off. Because at the beginning of last year, the year involvement had -- was made -- works. And we are still operating as with only 1 section. So it's nothing that should impact it full. But it's just, as I said, a one-off because of the operations on and off of the power plant that have been -- have not been very linear due to the very old age of the power plant. So we are always, let's say, exposed to the possibility of, let's say, any kind of technical difficulty. But we have great confidence in our team to keep everything up and running until the new power plant will be put into production.

There's a second question from Juan Andre. Please give us a clue on what are you -- on what are your expectations regarding gross production this year?

The answer is provided by Mr. Ion Foidas. It's approximately 5 billion cubic meter.

So we are trying to keep production at the same level as last year as we have had in the first quarter. So yes, deliveries has been lower due to what we have just stated before, but production has been kept at a similar level.

Another question from Ms. Juan Andre. Please confirm if my understanding was correct, only 32% of gross production refers to the cap prices under OG27. That's the question. Or 32% of 2022 production or 32% of April, December production?

No, it's production for the whole year. So for the first -- for the 2022, 32% of total production of year 2022. Because, of course, we had gas sold before the ordinance and contracts concluded before the ordinance was given also contract on the Romanian Stock Exchange. Also contracts on, of course, on the on the GRP and also bilateral contracts. That 32% that our Commercial Director is talking about was uncontracted quantities that were allocated. And of course, that will be a lot higher as he has stated earlier for the first quarter of 2023. Because we have had, of course, a lot lower allocation then.

We go on with another question from Mr. Kresak Eastman. The question relates to national gas consumption in Romania. You stated in your current results that Q1 2022 consumption was 44 terawatt hour, some 11% less than last year same period. Do you see or predict same pace of deterioration in consumption throughout the rest of the year?

[Interpreted] The answer is provided by Mr. Radu Moldovan, the gas consumption for 2022 is expected to be at least the same quantities as in 2021.

Ms. Juan Andre has another written question. Can you share with us some information regarding Neptune Deep numbers or otherwise, given disclosed figures, can you give us your take.

Numbers on what? Can be a bit more specific?

Another written question from Irina Railean. Could you detail the condition for the loan taken to finance the acquisition of Exxon regarding maturity interest rate currency.

Yes, they are all big pillars that have been informed to the -- stock market has been informed. They have all been, let's say, approved by our general shareholders meeting. I can disclose that the maturity is 5 years, I can disclose that there are absolutely no roles, except the Euribor plus the margins that we've negotiated with the financing bank. They will be paid quarterly, and the denomination is euro and it's EUR 325 million. That's all the information I can give at this time. There are no other obligations and there are absolutely no assets that have to be as collateral. So the loan is a very, very simple and general corporate loan with very, very good interest rates that, unfortunately, I cannot disclose. But given that it was, let's say, taken in August, and we have finalized that somewhere in September when inflation was not already creeping up and interest rates in the euro area were still very, very low and not impacted by it, and there was no indication that the Central European Bank will release rates. We can imagine the conditions are much better than the conditions we would have had today.

Coming back to the question from Juan Andre related to Neptune Deep numbers. There's an explanation related estimated resources production at plateau or maybe even something for expected OpEx or prices?

No this is -- it is too early at this moment to have this kind of discussion. We have only signed a couple of weeks back to the FPA that of course, as I said, the completion rests on the approvals that we will get from the National Supreme Council defense from -- and also from a government decision for the change of control. And only after that, we can have this type of discussion on specific numbers. Of course, we have -- the estimates, of course, we have all the, let's say, work that Exxon has done. And of course, we have both their estimates and OMVP's estimates as well. We have analyzed both of them, we have analyzed everything that was in the VBR at a point in time that has been analyzed also by -- under very, very strict conditions by our consultants. But at this point in time, I cannot give you any indication after we will be an integral part of the project and after we will have let's say, the proper communication channels with OMVP that will be the operator of the project. So I think this is a bit too early to give. And I think this type of questions may be asked after we have completed the acquisition.

We have another raised hand from Iuliana Ciopraga.

Regarding Euribor question, the interest rate on the loan is it fixed? You mentioned Euribor and then you mentioned you had very good connection. But is it Euribor plus margin, or is it fixed rate?

No, it's Euribor plus margin. Of course, just the margin is fixed. As you know the Euribor is negative at this point and is actually facing Romania cap rates of 0. So it will be just the margin and for Euribor surpassing the 0 threshold. But of course, it's a variable. If you take into account that the Euribor is variable. It's 3 months Euribor to be exact.

And regarding Caragele Deep. Can you discuss anything about reserves? Are they already included in the reserve in the latest report on reserves?

No. At this point, yes, of course, when we did the reserves. The reserves, they will probably be included in the in the audit, but that they have to be of course -- they have to be audited and we know that there has been a lot of circulation talks regarding that. So that's why we want to have that third party is doing the audit, doing a big -- the biggest auditor in the world that does this kind of reserve assessment, we wanted to be very, very clear, and we will inform the stock market when the time is well. But I cannot give you any type of speculation at this point, and I can give you a straight answer over this.

But we have for the region that is Euribor [indiscernible]. On the resources side, we included there 8 this year from the Caragele Deep tower and the information was given to the market at the moment.

But of course, and then we have done more, let's say, exploration will make -- we have done a lot more works that imply all of this, and we are waiting to see if our technicians with the auditor with what numbers they will build the service.

No, I was just wondering what the base for the whole and PCM is relatively low, and I was wondering what is there? And regarding -- one more thing regarding the reference price for royalties, there was a proposal to change that to exact price, if I remember correctly. Has anything happened with that?

Honestly, probably ordinance has, let's say, postponed any type of -- any such change because we -- of course, we have had a part for the National Agency for Mineral Resources, it made sense to do that. But at this point in time, having OG27, that surpass everything else, I think everything has been has been put on hold, but this is not something that I can answer. I think you should know, let's say, direct this question to the National Agency for Mineral Resources. So at this point in time, from my knowledge, there is nothing -- there hasn't been any change to that.

So I think -- and from your discussions with the government is there a plan to change the effective price? Or are there are no discussions on that point. This is applied for volumes for the ordinance. But going forward, what do we expect?

Yes, I think that is very, very focused on trying to have the ordinance effective as possible. And I think that it is just normal that the discussion is to be postponed. And we are hoping, of course, after, let's say, Q1 2023 to be able to have -- of course, as a producer we would like to have effective prices. But this is not that we can come up with a proposal. The government can come on, but definitely in the ballpark of the National Agency For Mineral Resources, and I cannot speak on behalf of them. So it's something that is out forward.

And I've seen also that salary, personnel costs were rather flat in the first quarter of this year compared to last year. What do we expect going forward?

Personnel cost?

Yes.

We're trying to have implemented our policy that is in accordance with the connected work contract. And we know the issues that there have been some leads and we've tried to digitalize a bit. We've try to have some processes a bit more digitalized. And also, we have not found the need to reinstate those positions that were left with people going into retirement. So I think it's a normal trend that should be kept by a company that wants to digitalize that it's hard to find manual labor. The manual labor is also not easy to find or so, let's say, attractive for younger people. We are having a lot of programs that are going on with universities, we have programs with the schools that we try to use scholarships to some students that are very interested in the energy market and in the gas market, we are trying to show the part of the company. And also, I think it's something that the company should develop on and the digitalization, I think it's one of the biggest and one of the most challenging things in the oil and gas industry when we are trying to have raw data, having been supplied in real time when as soon as possible to have, let's say, manual labor being reduced for, let's say, also the sake of the personnel and trying to have more automized processes. So this is, I think, it's a normal trend, not seeing the number go up.

We received another written question from Ms. Irina Railean. How much additional investment needs Caragele to unlock more volume?

I have spoken to my General Manager and in the near future, he will hold a press conference regarding Caragele where you will, let's say, address all these questions. It's not exact science. I mean, we have tried to have an investment strategy, and we know how much that investment strategy, especially for Caragele is. But of course, when we will start drilling then we need to see where and how we will hit gas and how low we will have to go and how deep we have to drill. It's something that we feel we will look together probably in a press conference -- we'll hold a press conference in the near future to address all the Caragele Deep questions.

And another written question from Mr. Kresak Eastman. We have seen many Romanian companies shares to be included in FTSE Russell emerging market index from previous frontier market. Do you predict that Romgaz could also be included in this index in the near-to-medium term or small free float and liquidity does not make this possible.

I mean it is a matter of liquidity. As you have said, and you are completely correct. We also have the list and the liquidity has not been great for the past year, but I think it's -- this is something that has happened to the whole oil and gas sector. Because this sector has been overlooked for the past 5 to 10 years because, of course, everyone was very interested in technology. Everyone is interested in the fact and different other, let's say, investments, but I think and looking also at our peers that are trading on other markets. I think that Romgaz has the opportunity to be included because right now, as our share price has gone up, of course, our capitalization has been gone up. And we have a trend where, I think, the second company under the first stock exchange at this time. So I think the whole -- and of course, the #1 company is the first. So I think the whole sector will benefit from this exposure at this time. So I think that, yes, it is a possibility that Romgaz will be included, and we are looking forward if that will happen.

[Operator Instructions] If there are no further question, we will conclude this conference call. Thank you very much for your questions and for your presence. If you need further information, please contact our Investor Relations team. The conference is now concluded. On behalf of Romgaz team, thank you for attending today's conference call. You may now disconnect. Goodbye, and thank you all. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]