Good afternoon, ladies and gentlemen, ELCA, and welcome to Eni's 2014 First Quarter Results Conference Call, hosted by Masci Lombondazzi, Chief Financial Officer. For the duration of the call, you will be in a listen only mode. I'm now handing you over to Joft to begin today's conference. Thank you.
Good afternoon, ladies and gentlemen, and welcome to our Q3 results. Before I take you through the financial results, let me give you a summary of the main highlights of the quarter. Reported E and P production was flat versus the previous quarter. However, when taking into account the sale of our assets in Siberia that occurred at the end of last year, production was up more than 2.5%. In exploration, we continue to record material successes, enlarging our resource base and increasing portfolio optionality.
During the quarter, total discoveries, mainly oil, amounted to 200,000,000 barrels. In line with our budget, the unit exploration cost was $2 per barrel. In Gas and Power, Q1 results benefited from the negotiation on Norwegian Gas Supply Contract. Those retroactive effects, which will be cashed in during the Q2, more than offset the backdrop of declining demand, weak prices and a very mild winter. We continue to improve our performance in Brazilian segments, such as LNG and new structured products.
Our refining and chemicals businesses were materially affected by a very weak scenario with lower demand and depressed margins. At the corporate level, we continued with our divestment program, selling a further 7% of Galp. Cash for this transaction will be accounted for in the Q2. And now on to our results. The market scenario was overall weaker than the corresponding period of last year.
Brent averaged $108 per barrel, down 4%. Refining margins were dramatically depressed, posting a 52 percent reduction when compared to the Q1 of 2013. And finally, the euro kept on appreciating, averaging $1.37 over the quarter. Looking at the overall results, adjusted operating profit was €3,490,000,000 down 7% versus last year. I will go through each component in the coming slides.
Adjusted net profit was down 14%, also due to a 3 percentage points increase in tax rate versus the Q1 of 2013, as a larger share of taxable income was generated by exploration and production subsidiaries exposed to a higher tax rate. Turning now to the results of each business. TNT first. When netting the effect of the 1% over the same quarter of last year. Continuing ramp ups of production, mainly in UK and Algeria, offset mature feed declines.
Compared to the previous quarter, production was up more than 2.5% or around 40,000 barrels per day, principally due to the resumption of the wafer field in Libya was closure as weighted heavily on 4 quarters performance. However, with renewed protests currently affecting WAFA and bunkering activity continuing in Nigeria, we confirm the guidance of a flat 2014 production profile. E and P adjusted operating profit was €3,450,000,000 down almost 14%, mainly driven by lower oil prices and by the appreciation of the euro against the dollar. Turning now to Gas and Power. Adjusted EBITDA was EUR 241,000,000 as compared to a loss of €211,000,000 in Q1 2013.
The positive effect of the negotiation with Statoil was partially compensated by lower margins and reduced sales of gas and electricity, down 11.3% and 9.9%, respectively, due to structural demand headwinds and the persisting condition of oversupply in European market. Notwithstanding the weaker market environment, we confirm our previous guidance for the full year reported EBIT in line with 2013. The refining and marketing division reported an adjusted operating loss of 223,000,000 which was $89,000,000 worse than the corresponding period of 2013. The negative result was due to a sharp reduction in European benchmark refining margins caused by a persisting excess of capacity, weaker demand for oil products and increasing competitive pressure. Refining throughputs declined by 15.5% due to the planned shutdown of banks currently under conversion into a green refinery and maintenance activities at other sites.
Overall, sales declined 5% year on year, mainly driven by sharply lower gas sorry, the sales of gas oil and gasoline in Italy, only partially compensated by increased sales in Europe. And finally, the other businesses. Versalis reported an adjusted operating loss of $89,000,000 a 41% deterioration from the Q1 of 2013, reflecting the continuing weakness in commodity demand and increased competition from Asian producers. The Engineering and Construction segment reported an adjusted operating profit of €128,000,000 down by 30 7% from the Q1 of 2013. Other activities in corporate posted an aggregated loss of €120 6,000,000 versus a loss of €137,000,000 last year.
Turning now to the debt. Net cash generated by operating activities amounted to EUR 2,200,000,000 It has been negatively affected by the increase in Saipem's working capital for more than EUR 850,000,000 expected to be more than recovered before year's end. In addition, this performance does not reflect the benefit from the Spectraler negotiation that will be cashed in during the Q2. Our disposal program contributed with €2,200,000,000 following the sale of Arctic Russian fields, of which we received consideration at the beginning of this year. A further €700,000,000 related to the sale of 7% of Galp will be accounted for during the Q2.
Capital expenditure amounted to €2,800,000,000 dollars out of which 83 percent in the E and P sector. As a result, net financial debt at the end of March was down 1 point €2,000,000,000 resulting in a leverage of 22%. Both on CapEx and leverage, we confirm our guidance for the full year. Thank you for your attention. And now I'd like to answer your questions together with Claudio, Marco and Daniel that are here together with me.
Ladies and gentlemen, Q and A session is now open. Thank you. First question comes from Mr. Oswald Klee from Sanford Bernstein. Mr.
Kleehn, please.
Yes. Hi, good afternoon. I guess I'll start with the obvious question about cash again. And if you could provide us with some details or updated details about what's happening with the project. My second question was actually on Mozambique.
There has been some talk from Anadarko through the quarter about selling that gas on a Henry Hub and oil linked pricing mechanism. I wonder if that's something that you would also consider for your Mozambique LNG asset going forward. Thank you.
Thank you for your question. First, we talk about cash again. As we said during the start of this presentation, at the beginning of the year, with the first results of the investigation, we started a very intensive repair works on the pipeline. Following the results of the investigation of the gas pipeline in the onshore and transition zone and the oil line that finished in end of March, when the operator gave out the result, was quite clear that the situation was worse than what we consider with the first result of the investigation. So the most likely situation is to replace the 2 pipeline as NCC, the operator and the minister has said in the last week.
The operator, meanwhile, while investigating, we also started a beauty contest and tendering on the pipeline and also on the spreads to be rated only the cap solution. So we think to have from the operator in June a final situation on the cost, on timing and on the timing on the project. It's clear that as we said already at the beginning of the year, we didn't consider any production or a marginal production in 2014. So 2013, in terms of guidance, no production will not be affected. And looking forward, for the 2016, we're going to have still the results.
So already put some contingency to cover a possible lack of production in 20.58. Other details on cash again, you can say that all the lab tests that we run-in 3 different labs independently in U. K, in France and Italy certified that the material we use, the carbon steel, for the pipeline was aggregated and was in line for the cash again conditions, fluid conditions. And the problem is related to some spot hardness point in the pipeline, but mainly in the welding. So that is the issue.
And for the future, we are working with the suppliers, with the contractor, with the manufacturers to be sure that we don't have this kind of problem in the future again. For Mozambique, for Mozambique, I think that you asked about for more about the commercial issue. We are really working hard and with good results in the commercial side, a lot of interest. But we don't really prefer than disclose any kind of formal or any kind of detail on what we are discussing with our buyers for clearly for competition issues. So what I can say that there are a lot of interest.
And by the end of the year, we will be ready to sign the sales contracts for Mozambique gas.
Thank you, Claudio. Is it possible to be more specific on that contingency or the assumed numbers you have for volumes for Kashagan in 2015?
What I can say at the moment, Mabir, will be more clear and precise in the Q2. I think that is we are going to have a lack of production about between $50,000 $60,000 a day that, first, we're considering our contingency planning for 20 15. But second, we had some good results in terms of discoveries, discovery that we can fast track in Nigeria, in Congo, in Egypt. So above this contingency that we considered in our plan, we had some we have this new production, new discoveries that will give a strong health and contribution to replace this possible lack of production.
Very clear. Thank you.
Next question comes from Mr. Tipan Jotlingan from Nomura International. Mr. Jotringham, please.
Yes. Hi. Good afternoon, gentlemen. A number of questions, please. Just on the other big flagship project for yourselves, can you just talk about timelines on Mongolia if you're still on track for a start up later this year?
Secondly, just you mentioned the Congo, if you could perhaps give us a little bit more color there in terms of the progress around the exploration and appraisal program on Nene Marine. And then thirdly, just on gas, an 11% decrease in volumes. Could you talk about the shape you see in terms of demand for the rest of this year, please? Thank you.
So thank you. First, we talk about Goliad. So Gorgias, we are in progress with the commissioning. And our plan our plan is still to be able to finalize at least arrive at a commissioning level of about remaining the 500,000 an hour before selling away. And the plan is still we are working still to add this selling way on the FPSO by June.
So what are the conditions to sell various FPSO? The first is to achieve these targets of about 700,000 man hours. And the second one is to add a float hotel in Norway in the Barents Sea by the end of October. So that is something that we are working on because at the moment, it's not easy to find a barge for this period, but we are still working on it. Contractually, we have 2 options.
We have the first window already contracted for the Sowerway in June and we have the 2nd window at the end of the year in January. So what is the difference? The difference is that if I Sowerway in June, I arrive in location in mid October, then I have to finalize the position. If the branch is not there, I can use the second window in January, but if I sell away in January, I will sell away FPSO completed, serialized internal completion. So as soon as we reach the allocation that should be in February, March, the ramp up will be faster.
So the 2 situation, the 2 windows have practically a few months of differences in terms of startup. So that means that the lack of production for 2015, considering the 2nd region, will be marginal. And as we said before, already covered, as cash again by the contingency and by the additional production. 2nd point, Congo. So for the main in line with what I said, we want to use what we have found last year to rapidly get a first production, we are working on 2 different parts.
The first one is to get an early production, if possible, that is quite new in 2014. And we are in the right track. We want to start production is initial production, then grow up our production in 2015, but we really had a first production to test the reservoir. The last well was very good. We had a production of 5,000 barrels per day without any kind of stimulation or without any, say, natural flow, and that is really the good news.
And this well, the Net 3 not only gave us a very strong positive news in terms of production, but also increased their reserves in the field. So we go ahead with this early production. We go ahead with the full field production that, as we said, we'd like to add in production in 2016. So we are going to ramp up until 2016 and then start the full production. In parallel, we have to drill out the 2 wells to test additional potentiality in the field because we have other 2 structure that we have to understand if they are connected or not connected with good dimension.
And we think we have a possible additional potential of about 800,000,000 barrels. So that is an additional good news. We are going to drill these 2 wells in 2014 and I think beginning in 2015. The third question on gas, Mark.
Thank you, Tito. On the gas demand, we've seen a fall quarter on quarter of 18% in Italy. So the Italian market has been 21 0.5 BCM versus 26.2 in the Q1 of 2013. So our loss of 11% is actually a gain in market share. But I'd just like to take this question to make a comment that we don't use volume that much as a reference because the volume guidance on gas in the moment when we have a liquid PSV hub is no longer that relevant as a guidance.
I think what Massimo said earlier is what is relevant in the declining demand. We're able to confirm the guidance we've given in February of replicating the 2013 results in 2014. In terms of where the decline was, I think the power has deteriorated significantly, and the weather has been a lot warmer on the residential sales.
Next question comes from Ms. Irene Himona from Societe Generale. Ms. Himona, please.
Yes, thank you. Good afternoon, gentlemen. I had a couple of questions. So firstly, in the quarter, you had quite a material working capital cash outflow, EUR 1,700,000,000 negative working capital. Can you talk a little bit about what caused that?
And would you expect it to reverse over the rest of the year? Or any comment you can make on that would be helpful. And then secondly, given the widening losses in Q1 in both R and M and Chemicals, Should we assume that we end up for the full year with bigger losses than in 2014? Is that what your guidance states at present? Thank you.
Okay, Irene. So first, your question about the working capital. Yes, it's true. We specify significant deterioration in our working capital that's amounted to €1,700,000,000 in the Q1. And it has been due significantly by, as I said, the SIFIM working capital increase as commented by the company itself due mainly to a lack of down payment in the Q1 plus some credits that has been mature in some contracts that are expected to cash in the remaining part of the year.
So we are relying upon the forecast made by the company that will revert more than revert this cash absorption in the Q1. 2nd, I would like to remind you that we accrued the agreement with Statoil that will be cashed after the Q1. So that's another very, very relevant element to justify the increase in working capital. And third, we factored a less receivable due to the decrease expected in the net debt at the end of the quarter. So having said that, our forecast is to see a significant decrease in working capital by year end.
On Refining Arena, I think it's obviously very much driven by the refining margin assumption. Looking at the forward curves this year, including the Q1 actual, we can expect an outlook to be in line with 2013, where we have on the upside some of the cost reduction initiatives that we've initiated, some of the capacity reductions that we've initiated with Venice. And we have on the downside some maintenance in the Q1 that we expect to recover. So I think at the same scenario of last year, we should expect a very similar result.
Okay. Thank you very much.
Daniella, do you want to comment on the chemical side as well?
Please, yes. Sure.
I was going to say that the chemical side is expecting an improvement versus last year. The fact that we made it in the quarter 1 at gross results compared to last year is particularly due to the licensing business and the way that we account the basically profitability on some of the licensing that we did last year. We are anyway acting on reducing capacities in line with other people like the closure of height for the elastomer business is our reaction to the shortage of demand in Europe particularly and continue to reposition our assets and products internationally where demand and profitability is in a better shape. We have also made an important agreement with Eleventh Renewables to finish the reconversion of the Marghera site, which was the last of the 3 clinical sites we will need to address this year.
Okay. Thank you very much.
Next question comes from Ms. Lydia Rainforth from Barclays. Ms. Rainforth, please.
Thank you and good afternoon, gentlemen. A couple of questions if I could. Firstly, on Libya, can you give us some updates as to what is what you're seeing within the country at the moment? And then secondly, Claudio, can I just invite you to talk through what your priorities will be when you take on your sort of new role as we start coming to May?
Thank you for your question. About Bolivia, in Libya, the situation is still really volatile. In the Q1, we were able to perform quite well in line with our guidance because we produced about $250,000 a average. The situation now after March is a little bit worse because Wafaa has been shutting and now shutting for about 4 weeks. And their production is declining at 170,000 barrels per day.
So the situation in Libya is still volatile. We think to we can we have some contingency, so we can use our contingency to compensate this rack of production in Wafaa. It's clear that we cannot compensate for all the year. We are working hard with the national oil company and with the authority to find a way to start again WAFSA. We don't have any major problem.
We don't have at all problem of our facilities. So that is a good point. It's just a way that they close shutting the valves. That is the first question. For the second question, you can appreciate that we are here to talk about the Q1, and I've said to start answering to questions about the future.
First of all, after my takeovers that will be in May. And second, also after having the possibility to talk about my priorities with my Board. And after that, I will be ready to talk about the future. Thank you.
Perfect. Thank you.
Next question comes from Mr. Michele della Vigna from Goldman Sachs. Mr. Della Vigna, please.
Good afternoon, Claudio. First of all, congratulations on your new role. I was wondering if I could ask you two things. The first one is how you're progressing in terms of your West African pre salt exploration. Clearly, Como has been a huge success.
I was wondering what are you looking at next. And then finally, whether you could give us an update of some of the key FIDs that you intend to take over the next 12 months?
So pre salt, we are still really engaging the pre salt exploration. As you know, we are drilling with Agabamba pre salt target in the Block B4, which is in shallow water, but it's still quite good. We are finalized drilling in Angola, in the same amount of imported work. And we are just reviewing the results. And I hope and I think that very soon, we're going to issue a press release on the results.
And we are continuing also other activity on the onshore result in Congo and also in, I would say, in Angola. So we are I think that we can say that we are going to drill additional 6 wells this year on the result. The inspiration, we are in track to reach our target of 800,000,000 barrels discovered. We already discovered 200, practically, oil, only oil. At a very interesting exploration unit cost of $2 per barrel.
So exploration so far so good. For the main FID for 2014 and 2015, we have the OSTP project in Ghana. Then we have also in Italy, Argo Caso Per, that is a very important gas field in Italy. Then we have Indonesia, Jao. And also in Indonesia, project that is not operated by us but by Chevron, the IDD project that we hope to be able to sanction this year.
And as I told you before, we have the reproduction on NNA in Congo that we want really to start as soon as possible. And in 2018, we have to sanction also the full field of Namib. Then we have okay, we have also the block in Mozambique. We have in Mozambique, the block 4 and the CORA. We have to sanction by the end of the year.
And Baresalam, Kunin and Bogosat West. That are the major projects that we're going to sanction.
Thank you.
Next question comes from Mr. Adolf Thomas from Credit Suisse. Mr. Adolf, please.
Hi, thanks for taking my questions. I've got a few questions. Firstly, on Mozambique and the FLNG, there's still a few regulatory things that needs to be sorted out like the petroleum law. But could you perhaps talk about how you think the FLNG will be treated from a tax perspective in terms of will it be ring fenced? And also just following on your earlier comments just now on FID, so your base case is the FID, the offshore first before the onshore.
Can you perhaps talk about what your base case is for FID on the onshore part of Mozambique? That's on Mozambique. Another question just briefly on Iraq and Zubair. What's the point of sticking around? I mean isn't that really distracting you for more interesting projects in your portfolio?
And finally, I didn't quite hear you well earlier on. Could you again say what you have assumed in terms of production or cash flow from Kazakhstan for 2015? Thank you.
Thank you. Thank you for your questions. So for Mozambique, I have 2, as I said, we have 2 projects in parallel. For Cora so for Cora, we don't have any discussion ongoing engagements on the viscosity or any I can because for Cora, the FPL and the 4th technology will be inside the E and P contract. So it will be treated as a cost gas, cost gas in the P and C contract.
So we are now discussing this specific issue, and that is the good news. Also for the onshore, what we were discussing is mainly the fixed instability because they're listing loiters in the car, practically covering all the different points or all different aspects of the project and talking about the LNG onshore. And we are discussing we are. 1st of all, we want to be this existing law could be confirmed for our big investment. And second, it is very important to have a fiscal stability all along the project life.
And that is the main discussion. There is the engagement with the authorities, the different authorities started last year with Anadarko at each level. And it's clear that for the onshore and geyser, one of the main conditions precedent to add the FID. We think with the discussion, we have the authority that we'll be able to have a final document approved and valid in by the end of the year. Dubai, Iraq.
So we said that we can use back our resources. And sometimes I think the same that our engagement in Iraq was a strategic move. We're moving in Iraq not just for the Bayer, but we thought we're still thinking that Iraq is a really important oil country and gas, but mainly oil country. The situation must improve in the future. There are lots of interesting opportunity, not only in terms of brownfield, but also greenfield.
It's clear that we are suffering some bureaucracy and some slowdown in our action. At the end of the year, now we got the approval for all the full field developments that's through which we have to produce $850,000 per day. We had approval of the POD. We had approval of the 3 out of the main 5 contracts. We are still discussing the remaining contracts on the gas plant and all the drilling and all the water supply.
I'm confident the exposure there's no exposure. We practically invested 1 equity, dollars 1,900,000,000 we recall already $1,700,000,000 or $1,600,000,000 So we don't have any exposure because every 3 months, we are able to recover to the cost or even through selling our investment. At the moment, we are still there. We are still there. We are discussing.
I think that in the last 4 months, the situation improved. I think I saw I see that as a long term investment for the future. And it's clear that in the next year, we are going to see and understand if the right investments or the wrong one, and we are going to take a decision. At the moment, we are still there. We are increasing our production.
We are really engaged, and we are getting good results. So cash again, the question was IRs, the cash flow for 2,915, okay? This question, what I can tell you that from a production point of view, I can say that we are we will be able to compensate the lack of production of cash again to our contingency and to, as I alluded to, through the new projects that we'll we'll put in production. From a cash point of view, I think that we are quite sure to compensate the lack of cash flow. So confirming our guidance for the next couple of years, as you remember, we gave the guidance for the 2 years, 'fifteen and 'fifteen.
And we are quite sure because we are going to we already have a a recap plan, we are going to accelerate the divestment. Remember that we presented a plan of divestment of $9,000,000,000 in the full year. So we are going to accelerate our divestment, especially in the exploration phase or also in other area of the all the activities to be able to compensate and confirm our growth in terms of cash flow.
Perfect. Thank you very much.
Next question comes from Mr. John Rigby from UBS. Mr. Rigby, please.
Thank you. Thanks for taking my question. Two questions. The first, I'm sorry to label the point on cash again. Claudia, can you just walk me through the logistics of the pipeline and you may correct me, that you can only lay pipe onshore during the winter.
And I'm assuming, and you may correct me that you can only lay pipe in the offshore during the summer. So I guess you now become quite dependent upon hitting various weather windows. I just wonder whether you could talk to me or sorry, seasonal windows, I wonder whether you could talk to me about that. I guess that gives us some idea about the actual effective replacement of the infrastructure. And then just to go on to the gas side, obviously, you've now completed the 1st round of negotiations and renegotiations successfully.
I wonder whether you're able to let me know, 1, to what degree your portfolio is now linked to hub pricing? And secondly, so the time line you now expect in terms of the second round of renegotiations to get you to the point that you need to be? Thanks.
Kash again. I think I'm not in the position not to really enter in the details of the logistics or the phasing of the project. It's clear that we are going to use what we did I hope in a different way in 2004, 2005 in that we are laid down in the group season in the offshore and we laid down in the cold season for the onshore. So we have the possibility and the flexibility to lay down. It's clear that the main issue is to save the budget, the spread availability with the season.
So what we are doing now is really rushing on the areas, finding out the 2 barge. We already found 1 barge that is available, and we already identified the second one. And that will be very critical in terms of season, as you said. For the pipe supply, I think it's quite it's different. There are some different possibilities in order to are using the 28 inches with the longitudinal weld.
And we are also starting the possibility to have a seamless pipeline that are different size, 20 inches instead of 28. And it's much easier to add and with less problem in terms of H2S. So we are starting and we are moving in parallel. I mean, we are starting the different possibility on each pipes kind of pipe, and we are engaging the supplier. So we are ready with we are the operator is ready with supported by the co venture with different deck cuts.
Priority in finding out the barges and priority in selecting the different option in terminal piping. So that's what I can tell you now.
John, it's Marco. Thanks for your question. Absolutely, we do look at this in terms of round 1 and round 2. We have completed the round 1. You can assume that the Statoil is hub linked, that a big part of the VEGASTERRA is hub linked, that our Italian equity is hub linked.
The others remain oil linked. The big outstanding for this year is Gazprom, where we start from an okay agreement. But as you know, the hub, since we last spoke in February, has deteriorated another 15%. And so all these oil linked contracts need a rather deep second round. Nothing has changed from in terms of our intention to bring all these contracts in line with market, and we will need, as we said before, 2014 and part of 2015 to achieve that target.
SonaTrek will start in October this year, as we said previously. So these are the 2 big outstanding efforts ahead. In terms of where we are with Gazprom, I think it's very much business as usual. We talk regularly, and we hope to bring this contract in line with, let's say, new market base in the coming months.
Right. Is the issue with, I guess, Russia particularly, but any of the others that insist on continuing oil link that you have to come up with a way of sort of almost artificially creating a price mechanism that gets you to mimic the hub price, but has an oil linked calculation. Is that the complication on this?
I wouldn't say so. I think we're happy to take oil exposure so long as the absolute level is in line with the hub. Now the hub having collapsed recently doesn't help in the sense that we need to go back and readjust that pricing mechanism. The pricing mechanism is quite simple. And we have, as with other suppliers in Gazprom's case, the ability to trigger an arbitration, which is very straightforward in case we don't get to the right price.
It's actually a simpler discussion because it's just about a number, which is the discount on the current formula. So the effort right now is just to fix the contract number and bring it in line with the market.
Thank you.
Next question comes from Mr. Giuseppe Rebuccini from Vedantis Equities. Mr. Rebuccini, please.
Good afternoon, gentlemen. I've got 3 questions. 2 again on cash again. The first is if you can give us a broad range of the incremental cost for fixing the problem with the pipelines as long as you have some estimates today. And today?
And the second is if you have any possibility to recover part of the cost from insurance or part of it from the contractor doing the welding in this case? And if you can confirm which was in particular or which were the contractors involved in this activity? And the third question is, if you can remind us us about your guidance for the tax rate for 2014? Thank you.
And Karsh again. The first question, as I said before, we don't have a scale from the operator a cost guidance or cost estimation and timing. We have some idea, but because the operator and NCC and they not they have to disclose and present officially to the first party to the ministry. These figures, I think that we have to wait until June to know exactly about cost. In terms of cost recoverability, from a contractual point of view, you know that all costs incurred after the 1st October after the 1st October without reaching the KCP are not recoverable.
From an assurance point of view from any other kind of view, we cannot disclose and talk about that because they are called we don't want to create any prejudice to the party involved. So that is an issue where I can't say anything at the moment. Okay.
And as far as the tax rate for 2014, I can confirm that our expectation is to have a tax rate of around 66 percent, well in line with what we experienced in 2015.
Thank you.
No more questions at the moment. Thank you. Next question comes from Mr. Alastair Syme from Citi. Mr.
Syme, please.
Good afternoon, everybody. A couple of questions. Marco, or maybe it was a question for Massimo. On the gas business, given the losses in that business, are you building up some sort of tax credits that as that business returns into profitability that you can help offset? Secondly, Claudia, can I ask about the E and P cash flows?
If you look at unit cash flows over the last couple of years, they look to be de zeroed and they've come down around 8% from where they were in 2012. Is that just a loss of high margin production or is there something else going on there? And finally, can you just quantify exactly what the level of contingency is that you have built into your forecast?
So can you repeat the last question because we can talk a bit aloud because we are not able to hear you. Can you repeat the last question?
The last question was how much contingency is built into your forecast? I think you maybe previously given some numbers for 2014.
So about the losses generated by the fiscal losses generated by the gas losses in Italy, I would say that you know that we used to assess the overall losses in Italy that come from refinery plus gas, compensated by the income generated by the E and P. So there is an overall assessment that they made year by year based on the forecast, and we accrue only the taxes that we estimate we can recover in the next year. So that's the size we perform year by year on this respect.
So you still don't really have the big stockpile of accruals? No, I would say no.
So the second question about the cash flow. I think that is talking about the cash flow considering rising forecast and full price, our cash flow per barrel is always above $30 per barrel. That is our figure at the moment. So I don't see any reduction. And as we said, what we see in the future, considering our guidance, this caused this cash flow per barrel to increase.
So there is no drop in the cash flow per barrel. Contingency, contingency, while we talk about contingency at the chart presentation, and we had some high contingencies for the 1st couple of years. So about $100,000 per day average, the first 2014 and something not far from that figure also for 2015. Then we are going to decrease because we have much projects coming in 2016 and 'seventeen. So that is how the figures.
So 90,000
Okay. Yes. It's $90 per barrel, yes.
Okay. Thank you very much.
Thank you.
There are no more questions at the moment. The control room confirm there are no questions.