Good afternoon, ladies and gentlemen, and welcome to Annie's 2012 Second Quarter Results Conference Call, hosted by Paolo Scaroni, Chief Executive Officer and Alessandro Bernini, Chief Financial Officer. The duration of the call, you will be in listen only mode. However, at the end of the call, you have the opportunity to ask questions. I'm now handing you over to Jost to begin today's conference. Thank you.
Good afternoon, ladies and gentlemen, and welcome to our interim update and second quarter results conference call. Looking at the first half of twenty twelve, there are 3 main highlights that I would like to draw your attention to. Both these are positive strategic developments and one is a negative business trend. First, we have made a good start on our non core asset disposal program, unlocking value for shareholders, reducing debt and refocusing the business. Secondly, we have further built up the organic growth prospects of our E and P to a stream of truly exploration successes.
3rd, we are facing challenging market conditions in our Italian and European businesses with Gas and Power, Refining and Marketing and Chemicals buffeted by euro area headwinds. I will now take you through each of these points in a little more depth. Sandro will then present the financial performance in Q2. Let's look at Snam and Gulf. As for Snam, the disposal process is well underway.
Following the signing of the sale of 30% to cast a deposit at Prestige, we have placed a further 5% in the market, crystallizing value for our investors, reducing the overhang on Snam and confirming the market's appetite for this asset. For our remaining 20%, we are talking to potential investors. Depending on the evolution of these talks and market conditions, we will evaluate how best to progress on the disposal. Any transaction will take place following the closing of the Casa Deposit and PrestiTi deal expected in the autumn. With regards to Galp, we have recently executed the first step of our disposal process completing the sale of 5% to Amorim Energia for €14.25 per share and exited the company's shareholder pact.
They are now free to evaluate different options to extract value from our stake with flexibility and no time constraint. As a result of these two disposals by next year, Eni's business portfolio will look like that of its peers and net debt will fall by around €20,000,000,000 thinking our gearing below industry average. As a consequence, we will adjust the way we return cash to shareholders in line with industry practices, accompanying our dividend with the recently approved share buyback program. Let's now turn to the second highlight, exploration. For many years now, we have discovered around 1,000,000,000 BOE of new resources a year, well in excess of our average production of about 600,000,000, 700,000,000 BOE a year, providing fuel for future growth.
In the 1st 6 months of this year, through our discoveries and appraisals in the Barents Sea, Egypt and West Africa, we have discovered over 400,000,000 BOE. And on top of that, we have an extraordinary game changing success in Mozambique, which brings total new resources discovered by June 30 to 2,200,000,000 BOE. This number does not include the results of the 5th well in Mozambique announced today, which increases in gas in place to 60 Tcf. Of these, 40 Tcf are to unitize with Area 1 and 20 Tcf in structures, which are fully in our block. Following this success, we now estimate the overall potential of the discoveries in Area 4, 70 Tcf of gas in place.
We've also been working on our long term exploration prospects, securing new and promising acreage in the Norwegian and Russian currency, in the Black Sea, East Africa and in the Far East. Turning now to our operating performance. While in E and P, we see the benefit of rapid recovery of Libyan volumes, our Italian European businesses faced strong economic headwinds. In Gas and Power, gas demand continued to fall driven by the weak economy and the competitiveness of coal and renewables in power generation. For an idea of the impact this is having, normalized demand in the 1st 6 months of the year was 5% lower in Italy and 7% lower in key European countries year on year and as much as 13% 18% lower compared to the pre crisis first half of two thousand and eight.
This has prevented European oversupply from being absorbed spot prices from closing the gap with oil linked prices. In this context, we have leveraged on recent supplier negotiations to remain competitive and profitable. In the first half, our merchant business delivered a positive result even excluding one offs, of which the main one is the Gazprom extraordinary benefit. R and M is also suffering from unprecedented demand decline. Italian consumption of refined products was down by around 10% in the first half of the year, adding further pressure to Europe's structural refining overcapacity.
We are working to offset the negative market environment through cost cuts and temporary capacity reductions such as the partial closure of our Jela Refinery. Lastly, our chemicals unit, Versalis, almost broke even in Q2, volumes have been suffering from low demand and the rest of the year will remain challenging. In this context, we are making steady progress on our turnaround strategy with the closure of our Porto Torres cracker benefiting Versalis results by around €20,000,000 in the first half. Thank you for your attention. And we'll now hand you over to Sandro for an overview of Q2 financial results.
Thank you, Paolo, and good afternoon, ladies and gentlemen. In the Q2 of 2012, the market environment was broadly positive. Decline in bread the bran price, which averaged $108 a barrel in the quarter, down 8% year on year, was more than offset by the 11% appreciation of the dollar versus the euro compared to a year ago. The European refining scenario was also supported with an average Brent euro margin of $6.3 a barrel, almost a 3 fold increase from the Q2 of 2011. Turning now to our results.
You should note that following the announced divestment of Snam, the regulated businesses in Italy have been deconsolidated from Gas and Power results and represented in accordance with the applicable reporting standard precisely the IFRS 5. Consequently, margins generated by transaction between Snam and any group companies are considered as a part of the EBIT adjusted and net income adjusted from continuing operations, whilst margin generated by transaction between Snan and third parties have been classified as discontinuing operations. Same reporting standard has been applied also to Q2 2011 results in order to facilitate the year on year comparison. In the Q2 of 2012, adjusted operating profit from continuing operation was €4,240,000,000 up 14.2% from the Q2 of 2011. This result reflected a better operating performance by the exploration and production division due to the ongoing production recovery in Libya and organic growth.
In spite of continuing demand weakness and rising competitive pressure, the merchant business of the Gas and Power division reported operating losses in line with the Q2 of 2011, leveraging on an improved cost position due to the benefits of renegotiated supply contracts. On a similar note, reported stable losses in the face of a deteriorating trading environment. Adjusted net profit from continuing operation was €1,380,000,000 in line with a year ago. Better operating performance was offset by a higher consolidated tax rate from continuing operation, of approximately 4 percentage points. This was mainly due to the increased contribution of E and P, which has a higher than average tax rate.
Looking more closely at the E and P, In the Q2 of 2012, EME grew liquid and gas production by 10.6% to 1,647,000 BOE per day. This performance was mainly driven by the ongoing recovery in Libyan production and the start ups and ramp ups of the new fields in Russia, Australia and Egypt. These positives were partially offset by the shutdown of the Elgin Franklin field, increase in bunkering in Nigeria and mature field declines. In the Q2 of 2012, E and P reported an adjusted operating profit of €4,230,000,000 up by 10.8 percent, driven by increased daily production and the appreciation of the dollar versus the euro. Turning now to Gas and Power.
In the Q2 of 2012, E and E's worldwide natural gas sales declined by 3% to 19.6 Bcm. This decrease was mainly due to weaker demand and ongoing competitive pressure. Italy, volumes sold declined 8.3% in the quarter, with the Power Generation segment showing a double digit decline owing to the increasing competitiveness of coal and growing use of renewables. International sales, excluding volumes sold to shippers, increased by around 1%, benefiting from higher sales to retail growing in excess of 18% and the stronger LNG sales in premium far eastern markets. In terms of results, the Gas and Power division, which from this quarter includes just gas merchant, power and international transport, reported an adjusted operating loss of €369,000,000 compared to a loss of €314,000,000 in the Q2 of 2011.
Decline is mainly attributable to the lower results of international transport after the sale of assets in the second half of twenty eleven. Turning now to Gas and Power adjusted pro form a EBITDA. While overall losses widened slightly, the impact was entirely attributable to asset sales in international transport. Marketing profitability improved from the year earlier period with losses narrowing by $60,000,000 to 231,000,000 dollars owing to the improved results from associates. The refining and marketing business reported an adjusted operating loss of €144,000,000 €20,000,000 higher than in the previous period.
In refining, margins were impacted by shrinking differential between light and heavy crudes as well as higher expenses for oil fueled utilities. The negative trading environment and volatile margins were partially offset by efficiency enhancements, the optimization of plant setup and lower throughputs at the weakest refineries. The overall utilization index of our refineries is in line with the Q2 of 2011. Marketing results improved slightly, thanks to higher margin in wool sales as compared to the lows of the Q2 of 20 11. This was partly offset by lower sales volumes in the retail market due to declining fuel demand.
In the Q2 of 2012, the Chemical division reported an adjusted operating loss of €26,000,000 an improvement versus the Q2 of 2011 and more remarkably compared to the result achieved in the Q1 in spite of weaker commodity demand, but supported by the higher benchmark margin of cracking. The Engineering and Construction business reported a steady operating result at €388,000,000 up 2.6%. This trend reflected higher revenues and better margins on the works executed, mainly in the Engineering and Construction business unit. Other activities in corporate showed an aggregate loss of 100 and 57,000,000 versus €129,000,000 in the previous year, mainly due to higher insurance costs. Net cash generated by operating activities amount to €4,200,000,000 in the quarter.
Cash outflows in the quarter include the dividend payments of €2,300,000,000 which reflected the payment of the final 2011 dividend as well as dividends paid to Snam and certain minorities. Capital expenditure including Snam amounted to €3,300,000,000 and mainly relates to the continuing development of oil and gas reserves and the upgrading of rigs and offshore vessels in engineering and construction. We also completed the divestment for €729,000,000 including the back in of the Republic of Kazakhstan in Karajal and Akk and the disposal of oil in Nigeria. The change in net debt was positively impacted by other items, including the initial refinancing of an intercompany loan due by Snam for around €1,500,000,000 As a result, net financial debt at the 30 June 2012 was down €500,000,000 from March 31. Thank you for your attention.
And I now will hand you over to Paolo for his final remarks.
Thank you, Sandro. Looking forward to the rest of the year. In E and P, production levels will continue to suffer from 2 unexpected events, namely the closure of Elgin Franklin and the sharp increase in bunkering in Nigeria, which together reduced Q2 entitlements by over 30 1,000 BOE per day year on year. Net of this impact, we confirm previous guidance of approximately 10% production growth before price effects with better performance offsetting the shift of expected start ups in Angola and Algeria to the 2nd part of the year. In Gas and Power, by which we now mean our Gas Merchant, Power and International Transport Businesses, we confirm previous guidance of an improvement in operating profits compared to 2011.
On reported figures, much of this improvement will come from 1 offs items, of which the largest is the retroactive impact of the Gazprom renegotiation. In R and M, expect weak market conditions to continue, offsetting the benefit of increasing efficiency and operating improvements. Looking ahead, Endy is entering into a new era. Our balance sheet will be transformed by divestments, securing our capacity to finance long term projects in any market environment. We will continue to leverage on our exploration success to deliver organic production growth.
We will reward shareholders the remuneration policy, which guarantees a sustainable dividend and provides for further upside to buybacks. Thank you for your attention. Sandro and I, plus the heads of our main business units, will now be pleased to take your questions.
Thank you. First question comes from sorry, Mr. Sharman Nitin from JPMorgan. Mr. Nitin, please.
Afternoon, gentlemen. Two questions from my side. First one on Gas and Power. You've highlighted in detail the sort of challenging conditions you face for gas marketing business. But I was wondering despite the renegotiated contracts with North Africans Gazprom, the results are quite similar to Q2 in that business, obviously impacted by the trading environment.
But how should we be thinking about the outlook for this business for second half? And second one on Iraq, please update us on the pace of developments, how you're progressing on Zubair? Thank you.
So maybe on the first question, I will ask Humberto to answer to you. While on the second, Claudio will tell you something about Superior.
On the Gas and Power business, first of all, we let's talk about the demand that we expect to see the second half of the year. Also we expect to see a recovery in Europe than in Italy in the second half that will keep the overall figure in line with 2011. On top of that, we are confident of the activity that we are going to perform on our commercial businesses, We are certainly improving our performance both in Italy and also in Europe in the retail as well as in the business market.
Thanks, Florent, for that that we are progressing. And in line with the budget, we are producing about $200,000 to $250,000 from our equity at $110 per barrel is about 17,000, 18,000 barrels per day. We are working for the full field development. We are confident that by the end of the year, early next year, we can have the SAB for the full field. So we are progressing and so far.
Now let me just complete or maybe the answer that Humberto gave you was not really complete. Now as for the full year 2012, the guidance we give on our Gas and Power business defined as I defined before is a number reported better than last year, but a number excluding one offs worse than previous year.
Okay.
And I'm not going to disclose you the one offs, in particularly the benefits we get from the Gazprom retroactive activity. You
made you made it amply clear that you want to keep your dividends competitive and they'll be backed by buybacks. But is there any plan post SRG Sanam stake sale either to revisit the dividend policy or the base dividend, I. E, in 2013?
No, We certainly will revisit our dividend policy with our strategy presentation, which we will be holding sometime end of February beginning of March. There we will redefine our dividend policy. What I think I can tell you from now that we are not planning any special dividend.
Thank you. Very clear.
Next question come from Mr. Clint Oswald from Stanford Bernstein. Mr. Oswald, please.
Yes. Thank you very much. First question just on Galp. You talked about evaluating various options from this point onwards now that the shareholder agreement has finished. Can you just remind us what those are from your perspective?
Secondly, on the gas business again, given your sort of comments on the macro within that division, and I think you've spoken about having greater or the ability to talk more frequently with Russia, with Norway on supply. Would you expect to enact any further discussions with those suppliers through the rest of the year? And then just a small one on your some small it was small, but impairments in the U. S. And some reserve downward revisions.
I wonder if you could just say which assets those were? Thank you.
Okay. On the first and the third question, I think it would be Sandro. And on the second one, Ubert, you start Sandro week out.
Yes. Basically, with reference to 18% of the residual stake that we own in Galp, we have no limitation at all. We can have access to the wider range of disposal option, including market transactions, structured market transaction or as well as bilateral transaction with interested parties. And by the way, we have already ongoing discussions with some interested parties interested to buy a quite significant stake of our participation in Galp. It is still too early to predict when those discussion will arrive at the end.
But we are confident that before the closing of the Q3 results, the announcement of the Q3 result will be we can be we will be more precise about the timing and the strategy with respect to the residual portion we have in Galp. But basically, we have no limitation at all. We maintain only 5% for a 5%, Amorim maintains the right of forced refusal. But for the rest, we are free to do whatever we want. Then as far as the impairment, we have booked on as far as some E and P assets based in U.
S. Are concerned, the figure relating to those assets is really negligible because we are talking about something close to €90,000,000 or more or less nothing. And is the result the impairment was the result of some increased development cost as well as the deterioration in the gas market prices prevailing in the U. S. Market.
In relation to the long term contract renegotiation, we are currently involved in several discussion with some of our suppliers in order to guarantee continuously cost competitiveness in our portfolio. More precisely in 2012, this renegotiation will relate to a significant portion of our portfolio that is equivalent to 30% of its total volume. Besides 2011 and 2013, we are planning to reopen the renegotiation with other major supplier like Gazprom and Sonatrac.
That's very clear. Thank you.
Next question comes from Mr. Yazari Houtan from Bank of America. Mr. Houtan, please.
Hi, there. I just wanted to get an update with regards to following the success of the Mozambique exploration program. I just wanted to see where you've gotten to in terms of unitization and how you're thinking about your stake going forward from here? What would you be comfortable selling down to 40%, 30% or is 70% how you want to take this development forward? Thank you.
Okay. I will leave Claudio to give you some hints about what we think. Unitization first. We are continuing to talk and we are working with Anadarko. As we said previously, we exchange data and information and we are working on the future model of unitization and also on the plan of development.
So there's no big news. The work is in progress. For the future, as we said, the first objective is to analyze the exploration phase. So, as a clear view about our resources and about how to develop these resources with our partners and first with the government. And we are thinking about possible future strategic alliance on the area.
That's all. Thank you. Like you said, it is early days to give you more detail on this. Exploration first, Alliance is second.
Okay. Thank you.
Next question comes from Mr. John Rigby from UBS. Mr. Rigby, please.
Yes. Thank you. Two questions. The first is on the upstream. I noticed that there's so I think you mentioned and certainly you said in the release a couple of slips in projects that are affecting this year.
And I just wondered whether we could take the chance for Javier just to run through where you are on the key startups that run through maybe for the next 12 months, so I. E. For 20122013, so versus sort of visibility you provided for us at the start of the year. Second one is just going back to Mozambique. Once you finished the exploration phases you referenced, When you talk about strategic alliances, would that potentially involve some sort of monetization of what is a very large stake that you have or block 70%, which I guess to show value for what you've got on an early stage.
The last one, I think, is for Sandro is there's obviously a program in place for Snam to raise money externally and repay you back the cash that you've lent them. In terms of the next 6 months or 9 months, are you able to give some visibility on when you would expect you're receiving that cash and reflecting it on your balance sheet?
Okay. Claudio will give you an update on the start ups. Yes. Start ups, as we said this year, we experienced some delay in some start ups, especially in Angola and India and in Algeria and the MLE and CASK and also projects in Italy Aquila. So that is a delay.
We think that we will be able to start up this project by the end of this year. And that is the main delays for the rest of the period looking forward, I think that for talking about Russia, this is a big contributor in the next couple of years. We don't think that we have any delay. And the first project, Santoshka has been started 2, 3 months before the expectation. So it's good news from Russia.
The other project, Kashagan, we our expectation technically is always to start production by the end of this year. Practically all the new cap is finished and we are starting progress with the commissioning. And also we are in progress with handing over operatorship to Shell. So there is a huge process of checking and cross checking all the procedure of the 2 companies. And again, within that Angola and is on track.
Goliad, as we said, is confirmed first by the first by June, sorry, by the first half of twenty fourteen. So there is no bad news for Goliath. And the rest is on track. So the main issue are in 2012 for the project I sent.
Okay.
Okay. On Mozambique, let me add something on that. Now as you might have seen from our press release of today, we expect to have in total in our block 4 something in the region of 70 Tcf divided roughly 40, 45 be unitized with Block 1 in 2025, which would be totally under our control. By our, I mean, we will have 70% of it with our partners. Now, when we look at strategic alliances there, the first thing we are looking at that is the wishes of the Mozambican government, because whatever we do has to be approved by the government.
It has to be approved, let's say, really apart from a formal approval. It has to be really something that the government want us to do. It's such a changing thing for Mozambique, the discovery that this is the first thing we have in mind. Now the second one is, of course, gas utilization. There will be a lot of gas produced there.
It's nice to have as partner the clients for this gas at least partially. We have already Cogas with us. Cogas is already a potential client. We might be interested in looking for other side. Now the third point will be potentially monetization even if this is not really our priority.
Of course, know that these resources have a huge value and we will try to start the maximum value doing our activity. If there would be a partner, which fulfills the first two conditions, which is ready to pay, this will certainly be acceptable. Now on slum.
Well, John, as you know, we have already mentioned that Snam already started repaying their loans to any before the closing of the 30th June since they have already repaid EUR 1,500,000,000 within the end of June. Then in July, thanks to the proceeds generated by the placement of bonds on the institutional market, Snam has repaid an additional €1,000,000,000 totaling in aggregate so far €2,500,000,000 Then last Tuesday, Snam has secured proper financing with a club of banks, which have granted their support for an amount capable to repay entirely the outstanding loan. And now we are keeping with our former colleagues, but still friends, obviously, and we are defining with them a proper schedule. And I am confident that very soon within the end probably within the end of September, early October, the repayment of the entire outstanding position will take place.
Very good. Thank you.
Next question comes from Mr. Matt Lofting from Nomura. Mr. Lofting, please.
Hi, good afternoon. Thanks. Just one remaining question, please. I just wondered if in the context of the sort of the success in the first half of the year around resource additions, etcetera, that you talked through earlier, I wonder if you could sort of talk about some of the primary exploration prospects outside of Mozambique in the portfolio for the second half of the year and into next year? And in particular, sort of which of those you're most excited about?
Thanks.
Very good. So, exploration, what apart from Mozambique, we got a very good result in Norway, in Egypt, Nigeria, the U. S. And Angola. And that are the main country where we continue to drill wells also in the next 6 years.
We have 2 wells also in Indonesia because we have in July drilled very successful well in Indonesia. And we drill until now 38 wells. We have reached about 90 wells. So in that we can reach the target excluding Mozambique of about $1,000,000,000 more than $1,000,000,000 resources for exploration except Mozambique. And Indonesia, Angola, again, and Norway will be the main target.
Okay, thanks.
Next question
I had two questions, please. First, in the first half of the year, your DD and A charges were up quite substantially 22% year on year. I wonder if you can give us some guidance for full year depreciation and also for the tax rate? And secondly, as you mentioned, Paolo, with the Snam and Galp disposals, ENI clearly becomes a pure play, completely different risk profile. What sort of balance sheet gearing?
What leverage do you think is appropriate to this new portfolio? Thank you.
Okay. Well, I think that Sandro will answer the first question.
Yes. So more or less the D and A charges that the increase we have experienced over the first half of the year, you can maintain the same trend for the entire 2012, the entire all over the 2012 year. So more or less, we do not expect any major fluctuation in the second half of the year. As far as the leverage, we expect to maintain after the disposal of Snam and Galp will be completed. And so far, we expect it is reasonable to expect that the completion of those 2 extraordinary transaction will take place only in the 2013.
Then after the completion of those transaction, we believe we have not yet defined a precise leverage target. But our idea is to maintain leverage in line with the average of our peers group, which means something between 15% 20% in terms of debt to equity ratio.
Yes, 15% 20%. But even if we go down to 10%, we will feel perfectly at ease.
Thank you.
Next question comes from Mr. Rahim Karim from Barclays. Mr. Rahim, please.
Hi, good afternoon, gentlemen. A couple of questions, if I may. The first was just around the impact that you're seeing in terms of the downstream from the pricing discounting that you're offering in Italy and whether we should be looking out for anything in the course of the summer from that in the downstream? And the second question was just in terms of Venezuela. It wasn't among the countries that you talked about in the Upstream about medium term growth.
I was just wondering if there was any changes there that we should be looking out for in terms of your perception of risk in that country, especially ahead of the elections later this year?
Okay. Let me just touch on the first issue. Yes, you are right. We launched a major advertising campaign for a special discount we are offering during weekends to the Italian drivers. Let me just start by saying that this has been a great success.
We had our market share growing, lots of new clients coming to our service stations, good publicity. Certainly, our reputation in the country has been enhanced quite a lot. It's early days to tell you the total cost of this, but it will be a number, let's say, between €100,000,000 €200,000,000 depending upon how much column products we sell during the period. We will be the campaign started on the 16 June and will last until September 2 and then the campaign will stop. It is a kind of corporate investments, not just a refining marketing division investment.
Of course, it will improve the market share. It will improve the visibility of our service station. You might be aware that we are changing the name of our service station from Agik into Annie. This will help us on that. But in total, we expect to have a reputation reward for the company as a whole.
As far as Venezuela is concerned, well, of course, Venezuela, you quite correctly, you mentioned the fact that there will be election later this year. We continue on our path to make out of Venezuela one of our major countries. If I remember the number we expect by 2020 to produce in Venezuela 200,000 barrels a day. And therefore, it will be a major country for us. But of course, the big investments are in 2014.
So let's say, we will have time to see how the situation will develop in that country before taking major investment decisions.
Okay. Thank you.
No more questions at the moment. Next question comes from Ms. Cam Foustier from Credit Suisse. Ms. Foustier, please.
Hi, good afternoon, gentlemen. Just two questions, if I could. Actually, 2 for Claudio. The first one is on the Gulf of Mexico. I think you and your partner Exxon have 2 rigs operating at the moment on Hadrian.
And I was just wondering if you could talk about your expectations in terms of recoverable resources and the development time line there. And secondly, in terms of your latest developments on your global share portfolio, whether you have any recent drilling results in Ukraine or Poland that you're happy to share with us? Thank you.
Starting from the last question, we operate in Poland, Ukraine. So I think that I'm more comfortable talking about an asset that I operate. We are drilling we are drilling the 2nd well in Poland and we are analyzing the data. We have to drill a 3rd well in September and we think the start structuring and real production, test production by the end of the year. So we are still an inspirational price off phase.
In Ukraine, we've got some 9 blocks, very good blocks in term of shale gas. So that we are in the early stage from seismic and then start immediately drilling. That is on track and we are quite optimistic about that. On Adrian, honestly, I think that we are sharing, we are following the operatorship. We are quite optimistic about ASEAN.
We have additional resources. And I think that the plan of development, the future operation are well led by Exxon. I think that is one of the major discovery and one of the major projects in Gulf of Mexico for us.
Thank you. Next question comes from Mr. Alastair Main Citigroup. Mr. Main, please.
Yes, good afternoon. Can I just clarify, Matthew, what you're saying on the dividend? Is the EUR 0 point 54 considered to be the last dividend of ENI as it stands today? And that into next year, you kind of you're going to set a new policy for a new company? Or is the 0.54 a reference point to how you look at the dividend going forward?
I'm not sure I understood what your question, but
I guess, I'm saying are all bets off in the dividend as we come into next year? Are you sort
of starting on a quick year?
I want to be sure to have well understood since dividend is a quite sensitive question. Please ask it again.
My question is, are all bets off on the dividend to next year? Are you going to start with a clean sheet of paper and say, this is the new company.
No. We're not
going to have a cash generation, etcetera, etcetera. Or do we use the current dividend as a starting point to think about your payout?
No, we are not listen, we are not going to act with a clean piece of paper at all. We know exactly what is the dividend we pay today. We know what have been our promises in the past. And as usual, in the when we make the next presentation of our strategy, we want to ensure the market that the dividend will be sustainable during the plan. This will remain a point and we start from the $0.54 that we promised.
I'm going to bring to the Board on September, which make me think that quite likely the dividend for the full year will be in the region 1.08.
Can I ask why you felt the necessity in an environment of reasonable uncertainty to actually raise the dividend?
We are not raising the dividend. We are fulfilling on our promises because we said that our dividend will follow the OECD inflation. The OECD inflation will bring us to 1.07, but we didn't like the idea of paying a dividend, a half dividend of 53.5, so we brought it to 54, But this was the kind of reasoning, simply fulfilling on our promises.
Okay. Thank you very much.
Thank you.
Next question comes from Mr. Martin Raff from Morgan Stanley. Mr. Raff, please.
Hi. Hello. Good afternoon. I've got one more question that's loaded and asked already. But a question for Mrs.
Caloni. At the OPEC seminar, sort of a month or 2 ago, you made a presentation where you said about global gas prices that they were a puzzle wrapped in a mystery within an enigma or something along those lines? And from that perspective, it's actually not that easy to formulate a gas price to put in the sort of Mozambique model when you're going to discuss it with your partners out of the FID. And I was wondering if over the 2 months that have passed since whether you've formulated your thoughts on the right gas price assumption for the investment planning of that particular project, whether you formulate your thoughts on that perhaps a little bit more clearly and whether you're willing to share that with us.
Well, listen, I can see that you remember quite well the speech I gave in Houston a few months ago. Now the whole point I was making was at that time cash prices in the U. S. Were $2.5 per 1,000,000 btu. In Europe, we have 10,000,000 in the Far East, we have 18,000,000 and that this situation was not sustainable.
In particular, considering that the calories in the U. S, the color when you buy gas at $2.5 per medium bq, you are buying the calories at 15% the price of what you pay the calories coming from oil. This was the whole point I was making. Now having said that, you're right that this is a big enigma for our future, not for what happens next year, but for what happens in 2020, 2022, 2024. For every investment in gas, including Mozambique, variable what will be the price in 2020, 2022, 2024, 2025 is going to be the most difficult to define.
Now luckily, in the case of Mozambique, I have to say that the upstream cost of that gas is so low that almost in every scenario, Mozambique will be competitive. And therefore, we do not feel the pressure from that point of view. And we are sure that every potential partner will be very interested in entering into this venture due to the fact that the cost of gas in Mozambique is particularly low.
All right. Fair enough. Thank you.
Next question comes from Mr. Andrei Ascauri from Mediobanca. Mr. Ascauri, please.
Yes, good afternoon, everyone. A couple of questions from me. The first one is on South Stream. According to the Russian government, it seems that the project should fly in October, November this year. Are you comfortable with this indication?
And second point, what is the stake of CapEx from your side devoted to this project? And the second question, just a pure technical question on your accounting system. Should we see the split of continuing operation and discontinued operation also for the next couple of quarters? And third question, could you please repeat again what is your guidance on tax rate for the full year 2012 for the continuing operations? Thank you.
Okay. Sandro will answer the 2 accounting questions and we might either me or Roberto will answer that one on the South Stream.
Sorry. But you are right. We will maintain, let me say, unfortunately, the same accounting criteria also for the 3rd quarter and as well as for the entire 2012 results. So also by the end of September and by the end of the year, you will examine our numbers, our figures divided between continuing and discontinuing operation. Then effective from the Q1 2013, as NAM will definitively disappear from our consolidated figures.
And so I believe it will be more clear to understand our results.
Sorry, the consolidation of the debt, I suppose.
Correct. But the consolidation of the debt more than an accounting effect will be a substantial effect because we expect to recover our own money within the end of the year. So it is not a matter of the consolidation, but it is real reimbursement of the outstanding loan. And as far as tax rate is concerned, our guidance with reference to the continuing operation approximate 60% of taxable income.
Okay. Thank you.
Related to your question on Soundstream, we can confirm what other Soundstream partners have announced that there is an FID target by the end of this year. This, of course, is also depending on European authorization that for a partner like us is quite important. However, this FID will confirm the commitment of the parties to continue the development of the project in order to be ready to start with the subsequent execution.
And sorry, if I may, what is your planned CapEx for the entire project? It's possible to have this bigger?
Sorry, I missed your question.
The CapEx Sorry, I missed your question. The CapEx will
be around €10,000,000,000 €10,000,000,000 your stake?
Let's say, then there will be financing, Okay. In total here. No, in total, it will be $10,000,000,000 We expect to have roughly $3,000,000,000 of equity, which will have roughly 20%. 12%. In total, we expect to put as equity something like €600,000,000 €700,000,000
Okay. Thank you.
No more questions at the moment. Thank you. The conference room confirmed there are no more questions. Great. Thank you.
We'll be bringing
the conference to the phone. If there are
further questions later on, could you just get in touch on the Investor Relations number? Thank you. Ladies and gentlemen, the conference is over. Thank you for calling.