ENI Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 24, 2025
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Operator

Good afternoon, ladies and gentlemen, and welcome to Eni's twenty twenty five First Quarter Results Conference Call hosted by Mr. Francesco Gatti, Chief Transition and Financial Officer. For the duration of the call, you will be in listen only mode. I am now handing you over to your host to begin today's conference. Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Thank you. Good afternoon. Our February capital market update emphasized the speed and scale at which we have been progressing our strategy. Quarter one maintained the pace and recent events have confirmed why our clarity of strategic view and speed of action is so critical. We are creating value, leveraging our competitive strength in the Upstream, strengthening and diversifying the company, fixing and then performing activities, materially strengthening our balance sheet, all while offering a competitive and resilient return to investors.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Reviewing the important strategic highlights of the quarter and year to date. Growth is an important feature in our plan. In the Upstream, in March, John Kasper began production and will add 66,000 barrel per day of oil production at plateau four Var as it targets over 400,000 barrel per day by the fourth quarter. Kasberg is the first of the five major start up due this year with Valderix in Norway, Agogo and NGC in Angola plus Congo LNG Phase two to follow setting us up for a strong 2026. In the transition business, Plenitude has completed the construction of its 200 megawatt battery in Texas and acquired two forty five megawatt in its share of photovoltaic and storage in California.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

While Enilite began production of SAF at its new 400,000 ton per year facility at Gela in Sicily. We are also realizing significant value through the investment of Aligner Capital into our transition businesses and the valorization of our industry leading exploration activity via the dual model. We have closed the agreed increase in AP stake in Plenitude to 10% with an additional cash of $2.00 €9,000,000 at the March. We also closed the increase in KKR stake in Enel I to 30% with an additional cash in of $6.00 €1,000,000 in April. This followed the €2,970,000,000 we collected at the March.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Furthermore, we have received non binding offer for additional stakes in Plenitude that could take line investment to 25%, thirty %. We consider around 70% a majority in stake in both our major transition business as broadly the right level for the time being. In the Upstream, also in March, we announced a major dual exploration valorization with agreement to sell stakes in Balin in Cote D'Ivoire and Congo LNG in The Republic Of Congo to Vitol for a cash in of around $2,700,000,000 expected to complete later this year. Our satellite model is an important feature of our business and in the Upstream in February, we announced an MoU with Petronas to combine assets with a mixed component of growth and value in Indonesia and Malaysia. This is really a significant development for ENI creating a new and highly material regional satellite in an important part of the world with a strong partner and with the added opportunity of some cash valorization alongside.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

We expect it to move to a definitive agreement around the middle of this year with the completion before the end of twenty twenty five. Structural response in some of our legacy activities are also required as the energy evolves. The transformation of Versailles over the next four, five years is a major positive source of self help amounting to more than €1,000,000,000 per year EBIT improvement by 02/1930. We have positive news to report here as well with agreement reached with the institution and the unions on the details of our plan. We closed Brindisi the first of the remaining two steam crackers at the March and Priolo will be shut down before the end of this year.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Our strategy is designed to create a stronger, more profitable and more resilient company. Our first quarter results demonstrate this. Net income €1,400,000,000 is up around 60% quarter on quarter in a very similar scenario setting. Upstream production was in line with our expectation as 2024 divestment impacts work through seasonal factors play out and we weigh the positive impact of the start ups that will contribute to our full year expectation of around 1,700,000 barrel per day average. At the segment level, E and P pro form a EBIT of €3,300,000,000 almost offsetting lower crude and production year on year helped by lower expenses and efficiency gains as a benefit of portfolio upgrading.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

GDP results reflect the normal seasonal strength and were essentially in line with last year. Enilive and Planet reported pro form a results consistent with our full year expectations once respective seasonalities take into account. Enilive was impacted by the deterioration in the biofuel margins year on year and also lower biorefinery utilization albeit biorefinery EBITDA remained positive. This was partially offset by positive evolution of our marketing operation. Planning to record a 3% EBITDA improvement year over year supported by strong retail results and rising renewable generation.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

In our transformation activity, both refining and chemical were loss making. Refining results reflect with a weaker margin year on year and lower throughputs over the closure of Livorno plus the extended turnaround of San Lazaro in the quarter. Our continued losses in chemical reflect the challenging scenario in Europe that we consider to be a structural feature and confirm our action to restructure and transform this business. Cash flow before working capital of €3,400,000,000 in the quarter were consistent with our full year guidance of €13,000,000,000 a $75 barrel. The cash tax rate was around 30% in line with normal levels and dividend received were in line with associated net income.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

CapEx in the quarter was €1,900,000,000 a little below the run rate of €9,000,000,000 in the February guidance. Valorization and divestment proceed net of acquisition in the quarter totaled €3,000,000,000 and included cash in for our transition satellites. We repurchased €386,000,000 shares in this quarter completing our €2,000,000,000 20 20 4 program. We expect to begin the $20.25 euros 1,500,000,000.0 buyback program after the shareholder approval in May. Balance sheet leverage was 18%, four % lower than the full year the last quarter despite a weaker dollar adding one percentage point while our pro form a leverage incorporating agreed transactions still to close stood at 12%, an improvement of three percentage point from end twenty twenty four and the minimum in our history.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Volatility and simplicity is a recurring feature of this industry. Every two, three years we are impacted by an external event. So it is really normal course of business. Our company needs to be prepared and it should be to leverage the cyclical upswing. Given the current scenario, it is worth reviewing our balance sheet in a little more detail.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

In the past five quarters, we have announced over €9,000,000,000 in tail asset divestment, dual exploration valorization and align external investment into our transition oriented business. We have executed faster and for greater value than we and certainly the market expected moving quickly to lower our leverage. An additional element of protection is provided by our satellites. The model not only enable us to raise capital and self financing our growth, while highlighting the valuation multiples related to transition business or specific upstream geography such as Norway, but it also strengthens our resilience during downturn phases. On one hand, we are able to contain our leverage through targeted business valorization.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On the other, the availability of autonomous entities capable of containing price downturns with their own balance sheets allows us to secure more stable cash flow via dividends and hence we are less affected by market volatility. Our consolidated balance sheet is just about the strongest in our history. At the end of the quarter, we had over €28,000,000,000 financial asset and down draw committed lines and we have lengthened maturities by more than two years over the past two years. We estimated our net cost of net debt in 2025 will be below 1.5%. This position will enable us to continue to balance pursuing our strategy remaining resilient and flexible and deliver our returns to shareholders.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

When we discussed our plan and four year strategy, we emphasized the value in the consistency in our approach. We have also confirmed our dividend at €1.05 and the share buyback totaling €1,500,000,000 itself a minimum floor that we are committed to maintaining even under adverse market scenarios. And we need to be nimble and responsive to the changing condition. The work we have done on the balance sheet surpassed significantly, but there are also further measures we'll now begin to take to reinforce our financial position without compromising our medium long term objective of our investment proposition. We have identified over €2,000,000,000 of initial actions to enhance our free cash flow positions and lowering our cash neutrality by around $15 per barrel, including additional portfolio upside, selective CapEx rescheduling over the coming months, active working capital management aimed at enhancing cash recovery and structural cost optimization initiative.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Together these actions further enhance our financial position and derisk shareholder distribution. In summary, the additional financial trends we have introduced into E and I over the past year, the intrinsic resilience of the model we have built and the additional option and levers we are available mean we can maintain underlying strategy and also confirm the full distribution policy we have announced. With the current scenario headwinds, we are focused on delivering our underlying performance and leveraging our portfolio optionality to accept cash flow impacts and deliver our distribution commitments. We therefore can confirm our full year production outlook of 1,700,000 barrel per day. We also confirm our profitability guidance for GDP in Life and Plenitude.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

At our lower scenario assumption, we expect to generate €11,000,000,000 of cash flow from operation, a little better underlying than our sensitivities imply. We expect to offset this impact with the cash mitigation measure I described including net CapEx to below €6,000,000,000 Therefore, we can also confirm leverage between €0.15 0 point 2 euros in 2025 within the €0.1 and 0.2 plan range. We are very satisfied with our progress in 2025 year to date both on the strategic and financial sides. The macro scenario has deteriorated and is volatile and uncertain, but the action we are taking and flexibility we have mean we are in a position to resist its full impact. We can therefore advance our strategy and deliver on our shareholder commitments.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

With that, I conclude my remarks and welcome any questions you may have.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thank you, Francesco. We will now open to questions. Francesco is joined by any top management, and we will attempt to get around to answer all the questions you may have. As a courtesy to everybody who participates, can we keep it to two questions? And then hopefully, can get through everybody in the time allocated.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

We're going to start with the first question. It comes from Alejandro Vigil at Santander. Alejandro?

Alejandro Vigil
Head of European Integrated Energy Equity Research at Santander

Thank you, John, and thank you, Francesco for taking my questions and congratulations for the beat in this first quarter. The two questions I have is one about the guidance production, the 1,700,000 barrels per day. Your thoughts about the discussions about Kazakhstan OPEC plus quotas and if you think there is some risk coming from this situation. And the second question is about Any Life and the outlook for margins. Thank you for these spreads that you have added to the release.

Alejandro Vigil
Head of European Integrated Energy Equity Research at Santander

I think it's very useful. But I'm very interested in the outlook for the margin evolution in the coming quarters in Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

I leave the floor to Guido Brusco for the first answer and Stefano Ballista for the one related to 2019.

Guido Brusco
COO of Global Natural Resources & GM at Eni

Well, as far as concerned the production outlook, as you know, we have as anticipated also by Francesco, we have five significant start up, two in Angola, Two in Norway and one in Congo. So our production will grow over time to hit the guidance we gave. For Kazakhstan, so far, neither the operator of the asset nor the shareholder and the contracting company have been engaged by the authority for any production cuts?

Stefano Ballista
CEO at Enilive

Yes. Thank you for the question. Talking about biofuel view, well first of all this is a year of oversupply. This is something well known. Rough number is about €2,000,000 oversupply demand versus supply.

Stefano Ballista
CEO at Enilive

In the first quarter, we saw demand expected growth demand and then we will deep dive a little bit not coming yet. And reason is that actually players have the whole year to satisfy some obligation. And second reason actually there are some uncertainties in U. S. That we expect to be clearly defined moving forward.

Stefano Ballista
CEO at Enilive

On demand, it's worth to highlight that the sustainable aviation fuel 2% target for EU pretty much in this first half didn't come through. It is expected for the second half and reason pretty much are to fall, the chance to get to satisfy the demand in the whole year. And second, logistic facility to be in place. About U. S, it's relevant to highlight that low carbon fuel standard target of an increased GAG reduction to 30% at the beginning of the year expected April 1 has been delayed given to technical, let me say, request from the Office of Administrative Law of California.

Stefano Ballista
CEO at Enilive

And now it is expected well, until some weeks ago, it was September. Now it's expected July given Carbo already gave a review of these technical aspects. So overall, we see a path of margin increasing thanks to this rebalancing pathway we are viewing. I have to say clearly, it's very relevant that we focus on value not on volume. This is a clear strategic approach on an oversupply market.

Stefano Ballista
CEO at Enilive

This is what we are doing. We are definitely focused on value even reducing in some case volume. The more the system will move in that direction the better is going to be the improvement trajectory we are seeing and foreseeing.

Alejandro Vigil
Head of European Integrated Energy Equity Research at Santander

Thank you.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks Alejandro. The next question is from Biraj Bhakataria at RBC. Biraj.

Biraj Borkhataria
Biraj Borkhataria
Global Head, Energy Transition Research at RBC Capital Markets

Hi, thanks for taking my questions. Francesca, you touched on, obviously, the strength of the balance sheet and the progress you've made there, which is obviously now looking in good shape. I was wondering, we've obviously seen the environment deteriorate a little bit more. You've touched on some of the smaller changes you've made to your kind of capital program. But I guess the question is, what will you need see price wise or signal wise to adjust your activities more materially there?

Biraj Borkhataria
Biraj Borkhataria
Global Head, Energy Transition Research at RBC Capital Markets

And then just a follow-up for Stefano on Sustained Aviation. In late March, there was a joint statement from your customers, the airlines, arguing about concerns on availability and then the cost of SAF suggesting these mandates were not realistic or achievable. So I just wanted your thoughts on whether it's is it reasonable or realistic to assume that these mandates could be relaxed this year? Or do you expect policymakers to hold firm there? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Yes. About the CapEx and the reaction to the price signals. Clearly, we think that at the end of the day, once there is a deterioration of the scenario, you have the old opportunity substantially to use different levers that you, let's say, prioritize in term of effectiveness, in term also on impacts in future trends of the company and the target that the company has given. For this reason, we have you have seen that we have announced this €2,000,000,000 of improvement in cash that is for around one half or around one half is related to CapEx and cost improvement, So shifting certain investment postponing or extending the execution of certain activity efficiency. There is also a natural trend related to a lower market scenario that will implying a lower cost in executing the activity.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

And the remaining part is related split half and half between a portfolio improvement and the working capital effectiveness or a new action in term of valorization of working capital or stocks and managing this activity. This give us more flexibility for a worsening scenario in case it will be necessary. I would say that there is no special or strict rules what is the price that will imply a change in our CapEx profile. Clearly, if there is a further deterioration of the scenario, we will continue to apply even more low lever, including the one that you were referring CapEx, but also other activity that we can expedite and will contribute to cash even in a lower scenario. So I don't have a specific answer.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

What I can say there is flexibility in our plan even to adjust to lower prices. Then I leave to Stefano.

Stefano Ballista
CEO at Enilive

Yes. Thank you, Francesco. And thanks for the question actually. Well, answer is no. We actually don't think there is any chance to let's say not having in place this target.

Stefano Ballista
CEO at Enilive

This is a mandatory target 2% within the end of the year. And actually if you don't fulfill it there are going to be carryover of the target next year and a penalty as well. Let me add just a couple of comments on the topic as a whole. Actually, SAF capacity, it's in place in Europe. And not only Europe actually, we have also some capacity in U.

Stefano Ballista
CEO at Enilive

S. And in China as well. In Europe, just to make an example, we got Jela with up to 400,000 ton per year and we just start up production beginning of this year. So the current mandate of 2% that equal about 1,000,000, one point two as capacity to be definitely fulfilled. So this is the first comment.

Stefano Ballista
CEO at Enilive

Second comment, the target is on fuel supplier actually not on airlines. And even the matter of logistic actually it's not there because for a transition period you can fulfill the mandate in a single airport. You don't need to be physically blending a biojet in each airport. This give a lot of let's say flexibility in having it done. And then let me say as last comment, probably in term of target, I would have a little bit different perspective.

Stefano Ballista
CEO at Enilive

Now we got 2% in place up to 2,030 and then 6%. So it's three times just from one year to another. In order to have, let's say, a proper development of the investments, actually would be a proper approach to get to sort of step up along the way. In that way, you can, let's say, have a balanced approach between supply and demand. So there is I mean space to work together with airlines to couple with the energy transition and the GHG reduction targets in an effective and efficient way.

Biraj Borkhataria
Biraj Borkhataria
Global Head, Energy Transition Research at RBC Capital Markets

Okay. Thank you very much.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Biraj. The next questions come from Josh Stone at UBS. Josh, are you on the line?

Joshua Stone
Joshua Stone
Head - European Energy & Equity Research at UBS Group

Hi, John and good afternoon. I have two questions, please. One, wanted to come back and talk about asset sales. Maybe just talk about how confident you are in closing your sale to Vitol and maybe just characterize the market for selling assets. You talked about some nonbinding office of Plenitude.

Joshua Stone
Joshua Stone
Head - European Energy & Equity Research at UBS Group

Are there still live discussions happening there? And how are you thinking about that? Is it better to sell now or maybe even wait for higher values? Maybe if you could just talk about Plenitude and what you're thinking on that. And then the second question on Namibia.

Joshua Stone
Joshua Stone
Head - European Energy & Equity Research at UBS Group

There was some news last week that you hit hydrocarbons at your latest well. I think that's about two from two. So maybe you can just talk about the next steps and what you can share so far, what you've learned about from your campaign there? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Thank you. The first very fast. Clearly, asset sales, we are extremely confident, first of all, because we have already cashed in an additional 600,000,000 in early April and April 11. That is the amount that is related to the top up of the 5% on the Any Life KKR deal. And then we are working on this planning to potential transaction 15%, twenty %.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

The nonbinding offer are there. There is, I would say, a strong competition pressure. I don't see any, let's say, loss of valuation under the current market also because this is clearly a deal that has a long term perspective and also eventually will be helped by a reduction or expectation of lower interest rate in the future. On the deal on Africa, West Africa with Withal, we are all the documents ready, signed and we are just waiting for the various approval that are required in this activity. There is no mark provision that will impede to proceed.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

So I would say that almost 90%, ninety five % of our plan is already in our end or with very positive perception of its execution. In terms of Namibia, I leave now to Guido to provide all the updates.

Guido Brusco
COO of Global Natural Resources & GM at Eni

Your question was quite timely. As we just released a few minutes ago a press release where we confirmed the discovery in Namibia. The well successfully penetrated the target and the reservoir is showing good petrophysical properties, no water oil, no water contact. We made an intensive acquisition campaign, wireline logins, hydrocarbon samples, sidewall cores. And in addition to that, we made also a well test, and we achieved a flow rate in excess of 11,000 barrel of oil per day, which was surface constrained.

Guido Brusco
COO of Global Natural Resources & GM at Eni

The oil is a light oil and with limited associated gas and very low high net gas. So very positive, very interesting. More assessment and more analysis, of course, will have to be made. So the well will be temporarily plugged and abandoned and the rig will be released and then we assess the full size. We'll assess with the operator and the other partner the full size of the discovery.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Guido. Thanks, Josh. Good timing on that question. So we're now going to move on to one second, Giacomo, Giacomo Romero at Jefferies. Giacomo, are you there?

Giacomo Romeo
Energy Analyst at Jefferies & Company Inc

Yes. Thank you. And can I just thank you as well for incremental disclosures in this quarter's reports? Are very much welcome. Two questions for me.

Giacomo Romeo
Energy Analyst at Jefferies & Company Inc

First one on the buyback. Today, you reconfirmed the €1,500,000,000 buyback at the lower macro scenario. This effectively stretches your CFFO payout at the upper end of your new range of a new policy. What happens if the macro deteriorates further? Are you comfortable going above that 40% payout, Francesco?

Giacomo Romeo
Energy Analyst at Jefferies & Company Inc

And second question is on the agreement, the MOU you signed with the YPF on LNG in Argentina. Can you talk a bit on the attractiveness of Argentina And will you consider integrating these upstream and looking for assets there? Or are you happy just we were just happy with the share in the project?

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Yes. Thank you. I will reply to the first question, then I leave back to Guido for the Argentinian questions. About the buyback, you know that once we set our distribution policy and the amount starting level for the buyback, we set that in a way that will be a floor. And therefore, we are going to execute.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

This clearly, we give the reference in term of percentage of cash flow distribution, but we have all delivered to keep this distribution policy and buyback affordable in our balance sheet because there is a lot of other tools that are not just the percentage of cash flow from operation, but also the capability as we are seeing in this maneuver to balance this distribution also with free cash flow improvement in term of portfolio or in term of working capital. And clearly, the leverage level is another factor that have to be considered whilst you have to manage the flotation of the price. So I think there is no issue at all on confirming this €1,500,000,000 even in a lower scenario. Clearly, eventually, you could accelerate or slow down a bit the pace of buyback, but this is part of the normal activity that we are able to execute within the almost one year of the buyback plan. I leave now to Guido for the YPF deal.

Guido Brusco
COO of Global Natural Resources & GM at Eni

Yes. The Vaca Muerta Basin, as you know, is the second world largest shale gas field. And the Argentina LNG project is an integrated project from the upstream up to the midstream and the export of the LNG. This is as the objective to hit more than 30,000,000 tonnes per annum by the early two thousand and thirty. It has different phases, three phases, which will be run-in parallel.

Guido Brusco
COO of Global Natural Resources & GM at Eni

ENI and YPF has signed an MoU to execute one of these three phases, which would reach a total of 12,000,000 tonnes per annum. We are joining YPF, who has a very strong and deep country knowledge on the unconventional upstream of Vaca Muerta. They are operating this asset from decades, So they know pretty well the subsurface and the all development and operation activities. While on our side, Zi and I, we are recognized as a fast track and low cost project operator. And we would bring our experience and leadership, particularly on floating LNG projects.

Guido Brusco
COO of Global Natural Resources & GM at Eni

We are looking at this Argentina LNG project and full value chain to complement our portfolio of LNG and also to reach our strategic target of 20,000,000 tonnes per annum. And we think that the combination of the expertise of YPF on the upstream of Vaca Muerta and the expertise of ENI on the midstream floating LNG will set this venture for success.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Guido. Thanks, Giacomo. We're going to move now to Matt Smith of Bank of America. Matt, are you there?

Matthew Smith
Matthew Smith
Analyst at Bank of America

Hi, there. Good afternoon. Thanks for taking my questions. The first, I wanted to come back to the sort of CapEx cuts that you sort of laid out today. And you've sort of listed optimization and postponements of projects as one of the sources, the reduction in CapEx.

Matthew Smith
Matthew Smith
Analyst at Bank of America

I just wanted to understand sort of which projects we are specifically referring to. And I guess my broader question was if the current commodity price scenario was to extend into next year, would any of these projects not be postponed, but be canceled? So that'd be the first question. And then the second one, I wanted to come back to Namibia, if I could, noting the information that you put out on the latest well today. I mean, given you have had additional time in the lab with the first discovery, I just wondered if you could compare or contrast the correct read that the second discovery has better characteristics than the first?

Matthew Smith
Matthew Smith
Analyst at Bank of America

Or what additional color could you give us there, please? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On the CapEx, on the capital optimization, there is no major project that we can point out specifically. It's a broader activity, some exploration activities, some production optimization activity related to the EV charging activity related eventually to the rebranding of our stations service station. So it is a spread around activity with marginal impact on a specific project. So you shouldn't expect any delay on the key and most important projects. About Namibia, if we don't

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

want to answer.

Guido Brusco
COO of Global Natural Resources & GM at Eni

About Namibia is too premature to make as I said that mean, I spoke about it just a few minutes ago, we need to assess the full size of the discovery. It's really premature. We just finished the well testing. We are still in a phase where we have to do some work.

Guido Brusco
COO of Global Natural Resources & GM at Eni

And I would also recommend to refer to the operator to get more insights and information on the discovery itself.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thank you. Thanks, Matt. We're going to move now to Alessandro Pozzi. Alessandro? Alessandro, are you there?

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Okay. We're going to move on now. Alessandro, if you want to come back on, you can. We can move now to Michele de la Vignette at Goldman Sachs. Michele?

Michele Della Vigna
Michele Della Vigna
Managing Director at Goldman Sachs

Thank you, John, and congratulations on the strong results. Two questions, if I may. First, I wanted to understand with the new Cypress gas development, when you expected production to come through? And if you thought that could effectively revive exports from Damietta and effectively make Egypt once again an exporting country of LNG? And then secondly, on the Indonesia, Malaysia combination, I see you continue to progress the negotiations there.

Michele Della Vigna
Michele Della Vigna
Managing Director at Goldman Sachs

I was wondering if you expect any kind of cash contribution for that deal or if it's likely to be a pure effectively combination of assets? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On the Indonesia Malaysia, clearly, can tell you what is the experience that we have in this kind of combination. Once you set up the new entity, the new company, you clearly design also not only the business plan with the investment and the different or a relative ratio between the parties, but it also a financial plan that is a result of the addition of this kind of asset and therefore the capability for the new entity to leverage on this asset for more financial capability. And therefore there is generally a contribution that is related to the possibility to have certain dividend upfront that will help to generate cash more cash than in a stand alone situation. And then on Cyprus, if we don't

Guido Brusco
COO of Global Natural Resources & GM at Eni

On Cyprus, we are working for an FID within the year with the partner and the two host government. It will be a subsea tieback to the Egyptian facilities. So we expect an execution time between two and two point five a year from the FID. So if we will be able to make an FID by the end of this year, production may come sometime between Q4 twenty twenty seven, Q1 '20 '20 '8. Of course, to have Egypt again as a net exporter, a few more things has to happen.

Guido Brusco
COO of Global Natural Resources & GM at Eni

There is a growing confidence on the ability of Egypt to kick out more investment. They are continuing to pay their outstanding receivables. So there is more activity in general, not just from E and I, but also from other operator. And there is also, again, a restart of the journey on the increase of the capacity of renewables, which will free up more gas for export. So the combination of these two things together with the new development and the Cyprus gas may set Egypt again in a couple of years as a net exporter again.

Guido Brusco
COO of Global Natural Resources & GM at Eni

But this is not just linked to the Cyprus gas.

Michele Della Vigna
Michele Della Vigna
Managing Director at Goldman Sachs

Thank you.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Michele. We found Alessandro. So Alessandro, if you're on, you can ask your questions. Thanks.

Alessandro Pozzi
OIl & Gas Analyst at Mediobanca

Thank you. Thank you for taking the questions. I have two. I think the first one is on the cost saving initiatives of €2,000,000,000 over €2,000,000,000 part is CapEx. I think there is other large initiatives regarding working capital

Alessandro Pozzi
OIl & Gas Analyst at Mediobanca

I was wondering if you can give us maybe more colors on those as well. And with regards to Argentina, I was wondering what is the level of Argentina, investments that you're planning to make over the next few years and whether potentially you're looking to invest in upstream, I guess so, and the type of maybe production levels that you expect from the country when Phase one will be online? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

About the cash initiative, I mentioned before, almost more than €1,000,000,000 is related to the CapEx and cost improvement. CapEx, as we said, are mainly related to postponement of certain activity that could be a standard without major impacts on big projects, but just related to certain activity that could be, let's say, executed in a longer time. In term of cost, there will be a natural reduction in term of cost also related to the lower scenario. And we do expect that there is also benefit from the portfolio activity of the remaining €1,000,000,000 that we said. There is almost half, so around the €500,000,000 is related to the portfolio improvement in term of less cash out and better value on the potential cash in.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

And on the other side, the remaining part is related to the cash initiatives that are management of working capital. This is a maximum I can describe you. If you want to describe Argentina, Guido?

Guido Brusco
COO of Global Natural Resources & GM at Eni

Yes. I mean Argentina is an integrated project. So basically, we will be all along the value chain from the upstream to midstream balanced ideally, so having the same equity in both sides. The project, of course, is in a very early stage, but the Phase three, the phase that we are assessing with YPF of 12,000,000 tons per annum will have cost in the region of $20,000,000,000 of course, from I I'm including old cost from upstream to the transportation to the midstream and liquefaction.

Alessandro Pozzi
OIl & Gas Analyst at Mediobanca

And is that included in your full year CapEx guidance or is it on top?

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

We are speaking about of MoU that is still to be clearly designed, defined and with a lot of activity that have to be fine tuned later on. So it's not yet included.

Alessandro Pozzi
OIl & Gas Analyst at Mediobanca

Thank you.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Alessandro. We're now going to move to Peter Low at Redburn. Peter?

Peter Low
Partner, Co-head of Energy Research at Redburn Atlantic

Hi, yes, thanks. The first question was just on the tax rate in the quarter, a bit lower than we expected. Can you perhaps just outline what was driving that? And then maybe what we should expect for the rest of the year? Will it kind of return to that 50% to 55% range?

Peter Low
Partner, Co-head of Energy Research at Redburn Atlantic

And then the second question was just on production in the quarter, particularly gas. There's quite a large sequential step down. I think you called out disposals in the release, but I thought those were more a bit more oil weighted. So I just wanted to check, was there anything like maintenance or turnarounds kind of impacting that gas number in the quarter? Thanks.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Yeah. About the tax rate, clearly, tax rate in this quarter was positively impacted by the structure of the results. It's a quarter where you have the benefit of contribution from GDP, from planet to the for the power. And this is lowering for generally to say higher price both of oil and gas. So from the geographies of even of upstream that has a lower tax rate.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

So this quarter is a quarter that of a tax rate that you could generally expect once there is this mix of contributors. The trend for the year in a scenario that we lowered in term of mainly of oil prices we'll see this tax rate increasing towards the upper end of the expectation. 55% could be a rough estimate where you could see the results coming. So clearly, the quarter is will contribute, but we do expect an increase in the coming months because the price of oil that we are designing or are planning is lower and the contribution of the lower tax rate businesses will be less impactful. And then I leave for the gas.

Guido Brusco
COO of Global Natural Resources & GM at Eni

For the gas and for production in general, if we compare with the I mean sequentially quarter four with quarter one, the decrease is essentially driven by lower entitlement in some country where we have gas production, some PSA effect in Libya, Indonesia and Algeria and some M and A impact in U. S.

Peter Low
Partner, Co-head of Energy Research at Redburn Atlantic

Thank

Peter Low
Partner, Co-head of Energy Research at Redburn Atlantic

you.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

you, Peter. I'm now going to move to Irene Hipmona at Bernstein. Irene?

Irene Himona
Managing Director - Oil & Gas at Bernstein

Yes. Thank you. Good afternoon. First, a quick question on cash flow. From your announced recent disposals, how much would you expect to close and book in the second quarter, please?

Irene Himona
Managing Director - Oil & Gas at Bernstein

And then secondly, on E and P. Your underlying per barrel EBIT margin has improved sequentially quite a lot given it was a similar oil price environment. You have indicated that around half of your planned disposals in the full year plan is from upstream. So my question is, can we anticipate that as you continue high grading the portfolio, that unit margin improvement can continue further? And of course, it is structural.

Irene Himona
Managing Director - Oil & Gas at Bernstein

So presumably also your oil price sensitivity may change over time? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On the disposal side, on this quarter, second quarter, we have already cashed in €600,000,000 that are related to the KKR deal. We are potentially expecting the closing of the West African deal, but that could slip also to the third quarter, taking into account of the different authorities that have to be involved and therefore, it's something that we could expect during the summer, let's say. And we do expect clearly that we are able to proceed to the next step for the Plenetub deal. So this will not clearly a cash in date, but will be in this quarter potentially a conclusion of the tender activity that we are executing.

Guido Brusco
COO of Global Natural Resources & GM at Eni

Yeah. I mean the improvement of the EBIT per barrel and cash flow per barrel as we anticipated also in our Centimeters capital market update is structural as we are high grading our portfolio, developing, I mean, value barrel and disposing lower value barrel. So it's a structural phenomenon, which over time should continue, of course.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks Irene for your questions.

Irene Himona
Managing Director - Oil & Gas at Bernstein

Thank you.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks. We're going to move to Henry Tarr at Berenberg. Henry? Henry, are you there?

Operator

Mr. Tarr, your line is open.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Okay. Well, Henry, if you can reconnect and we can come around to your question. But we'll move now to Paul Redman at BNP. Paul?

Paul Redman
Vice President Energy Equity Research at Exane

Hi, John and team.

Paul Redman
Vice President Energy Equity Research at Exane

Thank you

Paul Redman
Vice President Energy Equity Research at Exane

very much for your time. Two quick questions from me. First flow is on the cash flow mitigation chart. We've got a bunch of buckets here. I just wanted to work out if any of these are structural reductions or whether these are one off impacts that we could see a reverse impact in 2026?

Paul Redman
Vice President Energy Equity Research at Exane

And secondly, just to look at the refining business, it's a second sequential loss for that business. Just trying to work out your outlook for the year for that business. Do we expect any change in margins, any changes in utilization rates as we go through 2025? Thank you very much.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On the cash initiative, these are clearly structural because except for the few delays that we mentioned that are spread around between executing certain activity, the branding or finalize station or EV charge, so certain special activity. All the rest are related to factoring. Working capital management, that means substantially something that is not absorbed during the year, and the cost reduction that, as we said also, is related to the improvement and also the scenario that we are facing that clearly has a lower cost of energy overall. So I think these are clearly structural changes and structural improvement, including the portfolio variation that we mentioned in term of higher valorization or higher stake. The refinery, I think that Pino or yes, please.

Giuseppe Ricci
Chief Operating Officer of Industrial Transformation at Eni

Yes. Thanks, Francesco. About the refining losses in the first quarter, this is due to the drop of the CERM, the margin. And the fact that we had during the quarter the start of the maintenance in Taranto refinery and then offset in FCC of San Lazaro. What we expect is to increase the refinery utilization in the starting from the second quarter.

Giuseppe Ricci
Chief Operating Officer of Industrial Transformation at Eni

And while we expect that the margin will remain slightly better than today, but not so bullish last like last year.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Pino. Henry, I think we've got you back. Henry?

Henry Tarr
Director - Co-Head of Energy & Environment Research at Barenberg

Thanks for taking the question. So two questions. Just to come back to AnyLive.

Henry Tarr
Director - Co-Head of Energy & Environment Research at Barenberg

Is the

Henry Tarr
Director - Co-Head of Energy & Environment Research at Barenberg

contribution from the margins from the Straight Bio side Or are you essentially making all of the money on the marketing side rather than the actual manufacturing of the fuel is the first question. And then the second is just on the cash flow. So lease interest payments, is Q1 a good run rate for the rest of the year at sort of €370,000,000 ish? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

I leave to Stefano for the first question and then I come back to the second one.

Stefano Ballista
CEO at Enilive

Yeah. Thank you for the question. Yeah, the contribution margin it's positive. It's slightly positive clearly related to the scenario. As I mentioned before, we definitely focus on value and not on volume.

Stefano Ballista
CEO at Enilive

So we prefer to avoid production that is not going to be accretive in term of value. I have to add actually that the integrated approach that characterize any live give us the chance to let's say optimize margin thanks to our captive market. And this is going to give an extra contribution compared let me say to the pure market value.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On the lease impact over the let's say, year, I would expect an increase during the year, clearly, also because there are some certain startup of initiative and projects that will attract additional lease. So this quarter is, let's say, a proxy, but it's still a bit light towards what is the running rate during the next quarters.

Biraj Borkhataria
Biraj Borkhataria
Global Head, Energy Transition Research at RBC Capital Markets

Okay. Thanks, Francesca.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Henry. We're going to move to Matt Lofting at JPMorgan. Matt?

Matthew Lofting
Matthew Lofting
Energy Equity Research Analyst, Executive Director at JP Morgan

Thanks all for taking the questions. Firstly, I just wanted to come back to the capital allocation changes that Annie made this morning and particularly to gross CapEx. It looks like you sort of effectively put through the lower part of a 5% to 10% reduction in full year gross CapEx versus what you outlined in Feb. If you aggregate everything up, can you just sort of share a sense of how much of that is activity related versus sort of finding underlying efficiency measures? And then secondly, following up on the comments earlier on refining.

Matthew Lofting
Matthew Lofting
Energy Equity Research Analyst, Executive Director at JP Morgan

If you take refining and Vesalis combined, I mean, clearly still a challenging Q1. Is there any signs more recently of any improvement in margins to the degree that you're seeing some degree of lower feedstock costs, particularly perhaps through any higher cost assets, which perhaps have most or more to benefit? Thanks.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On the CapEx reduction, as I mentioned, it mainly is the postponement of activity. There is also a component that we mentioned about improving the reduction of on amount. If you wanted to have a split in the range of €500 6 hundred million we are referring, you could say that 200,000,000 to $250,000,000 is related to the postponement of the activity and the rest is structural variation related also. You have to consider that we have contingency in our plan. Part of the activity that we present has already an implicit impact of possibility to manage flotation.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

So it is not a magic solution that we have, but sometimes it's just a matter to execute and to implement the contingency that we have inside. Then I leave to Adriano and to Pino for the answer about

Adriano Alfani
CEO at Versalis

the the chemical side in term of demand, we expect a slightly improvement in line with the seasonality because normally the second quarter is better than Q1. But to be honest, the scenario is still on the trough of the cycle in term of demand. For sure, we expect an improvement in term of cost of utilities because virgin NAFTA is expected to reduce. Right now in the second quarter, we expect also a lower TTF in term of gas and we know that we are very we consume quite a lot of energy for the chemical sector. So we expect an improvement in thermal margin for the rest of the year on the chemical side.

Adriano Alfani
CEO at Versalis

And I leave Pino for the refinery.

Peter Low
Partner, Co-head of Energy Research at Redburn Atlantic

Yes. The refining side, we expect a slightly improvement in the margin in the mid part of the year, mainly due to the driving season, but not so far. In complexity, the refining margin, we expect that remain not so bullish because of the market that is quite stable.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Pino. We're going to now move and thank you everybody for respecting the two questions. We're getting through this nice and quickly. So we're going to move to Massimo Bonasoli at Equitas. Massimo?

Massimo Bonisoli
Financial Analyst at EQUITA SIM

Good afternoon. Thank you. And two clarification question for me. The first on the €2,000,000,000 mitigating initiatives. Could you give us a broader time frame for the savings to be realized and the eventual one off costs associated with the savings?

Massimo Bonisoli
Financial Analyst at EQUITA SIM

The second question on the outlook for GGP. You mentioned the upside of over €1,000,000,000 Could you shed some light on the market condition needed to improve the guidance and to renegotiate the contract versus current conditions? Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

Alar, first of all, the €2,000,000,000 is a free cash flow impact. It means that it is executed within the year and completed within the year. So there are actions that are, let's say, captured immediately. So the postponement of activity in line with the execution of that activity, the possibility to have certain savings that we mentioned about the lower scenario, the portfolio improvement, etcetera, is something that are already generating the result. Clearly, it requires also the time for executing the project.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

You have to consider that the economic benefit is higher than the cash flow benefit because clearly the economic cut will be or the improvement is something that has a higher value, but that clearly is captured within the twelve months that are ending within December. On the, yes, scenario in the gas Yeah.

Cristian Signoretto
Director - Global Gas & LNG Portfolio at Eni

So talking about the upside case for GDP, you pointed out two elements, are actually the ones that we also are pursuing. One is the renegotiation and negotiation of our supply and sales contracts. This is as you know a feature a normal feature of the business. We have a few, discussion ongoing. And I would say that probably the summer will be the period in which we might see some of those completing.

Cristian Signoretto
Director - Global Gas & LNG Portfolio at Eni

And so I mean depending on the outcome of those discussions this could have some value unlock. In terms of market condition, we are fairly let's say, defended from the downside risk of flat price. We have some upside linked to clearly flat price increase instead. And the other elements that actually we like in terms of producing more value is spreads and volatility.

Cristian Signoretto
Director - Global Gas & LNG Portfolio at Eni

So

Cristian Signoretto
Director - Global Gas & LNG Portfolio at Eni

geographical spreads, oil hub spreads, summer winter spreads those are part of the volatility that if those happens we will be able to capture.

Massimo Bonisoli
Financial Analyst at EQUITA SIM

Thank you.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Thanks, Massimo. Thanks, Christian. We go we're the last two, so we're going to move first to Kim Fustier at HSBC. Kim?

Kim Fustier
Kim Fustier
Analyst at HSBC

Hi, good afternoon and thanks for taking my questions. I had two, please. First on Venezuela, could you comment on any impact on your operations and your ability to lift crude cargoes and the revocation of export licenses and secondary tariffs on the country? And then lastly, just a quick housekeeping question. You've cashed at about €3,000,000,000 in the first quarter from the sale of Enulife to KKR, but we can't actually see the disposal proceeds in the cash flow statement.

Kim Fustier
Kim Fustier
Analyst at HSBC

So if you could point to where we're supposed to look at that would be helpful. Thank you.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

On Venezuela, Guido.

Guido Brusco
COO of Global Natural Resources & GM at Eni

Yes. No, Venezuela, as you know, we have essentially gas production. We produce gas for domestic market and to feed the gas fired power plant for civil consumption. And we have been paid in the past by in kind essentially.

Guido Brusco
COO of Global Natural Resources & GM at Eni

So now we are engaging The U. S. Authorities to find ways to be paid, but at the same time be compliant with the new regime imposed by U. S. And we are confident that by the year end, we'll find a way to honor our commitment towards the population and honor also the compliance with The U.

Guido Brusco
COO of Global Natural Resources & GM at Eni

S. Sanctions.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

Kim, I'll come back to you on the cash flow statement and the structure. The cash is in there, but it's not straightforward. So I can do that for you. But we'll do that offline if that's okay.

Kim Fustier
Kim Fustier
Analyst at HSBC

Thanks.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

We can move now to the last question, which is Lydia Rainforth at Barclays. Lydia?

Lydia Rainforth
MD & Energy and Energy Transition Equity Research at Barclays Corporate & Investment Bank

Thank you, John, and good afternoon. Two final questions, if I could. The first one, these are both big picture, given where the balance sheet is and it's much stronger than it was even a year ago, but in previous downturns, it does give you a more privileged position into how you respond to volatility than in the past. So I'm just actually asking you to reflect on that. Does having that strength of balance sheet impact how you think about how you respond?

Lydia Rainforth
MD & Energy and Energy Transition Equity Research at Barclays Corporate & Investment Bank

And is there opportunities that it opens up? And then secondly, I hear everything you say about the cash management, the mitigation measures that you're putting in place. And hopefully, when you start the buyback, it actually helps the relative share price performance even further. But given where the share price is, do you ever start thinking about we can lean into the balance sheet a bit more and buy back even more shares just given where the share price actually is? Thanks.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

In terms of clearly on the leverage and the privilege to have probably to be the unique company inside the peer group that probably will be will reduce its leverage the current quarters or in coming quarters, thanks to the execution of our strategy that is already anticipating potential downturn and has a structural robustness in its structure. I think that will give us the opportunity to manage the volatility. Volatility is in the current market is that one day you have a drop by 5%, then there is a rebound of 2%, three %. There is another tweet and a lot of things are counter tweet. It's very difficult to understand what where are the fundamentals and where are the psychology of the market.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

So this strong balance sheet will give us the opportunity to select the best levers in order not to impact to harm to match our strategy execution, to have different opportunities, clearly, execute whatever we like and also to keep some additional levers out for the bad times, if these bad times will come out. So this is clearly something that for us is a unique time we had and is a great chance to be effective, but clearly also to be vigilant on what is going on and not, let's say, to rely on a positive expectation, a positive scenario. In term of buyback, you know that we are approving the buyback under the with policy that we have presented during the next AGM. Then we started to buy and we will see also the time when the condition will have and we will execute, but I cannot anticipate what is the pace of execution because clearly this is part of the rule of the game. There is a clear advantage or interest in buying back at a lower price.

Francesco Gattei
Chief Transition & Financial Officer, COO and GM at Eni

That is a normal logic. I think that we have ended. I don't know if John, do you have something else to conclude?

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

We have Francesco. That's all the questions done. Thank you everybody for attending the call. Thank you for your questions. Thank you for the speed and directness we got through that.

Jon Rigby
Head of Investor Relations and Strategic Analysis at Eni

I think they worked very well. So wishing you a happy end of the week. Good luck for next week, and speak to you soon. Thanks a lot. Bye.

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ENI Q1 2025
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